Prospectus
October 1,
2022, as revised January 23, 2023
⬛ |
|
Goldman
Sachs Defensive Equity ETF |
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 THE FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. AN INVESTMENT IN
THE FUND INVOLVES INVESTMENT RISKS, AND YOU MAY LOSE MONEY IN THE FUND.
Table of Contents
Goldman
Sachs Defensive Equity ETF—Summary
Ticker:
GDEF
Stock
Exchange: NYSE Arca
The
Goldman Sachs Defensive Equity ETF (the “Fund”) seeks long-term growth of
capital with lower volatility than equity markets.
|
|
|
|
|
| |
| |
FEES AND EXPENSES OF THE FUND |
|
| |
|
The
following table describes the fees and expenses that you may pay if you buy,
hold and sell Shares of the Fund. You may pay other fees, such as brokerage
commissions and other fees to financial intermediaries, which are not reflected
in the table and Example below.
|
|
|
| |
| |
Annual Fund
Operating Expenses |
|
|
| |
(expenses that you pay each
year as a percentage of the value of your
investment) |
|
|
| |
| |
Management
Fee |
|
|
0.55% |
|
Distribution
and Service (12b‑1) Fee |
|
|
0.00% |
|
Other
Expenses |
|
|
0.00% |
|
Total
Annual Fund Operating Expenses |
|
|
0.55% |
|
This
Example is intended to help you compare the cost of owning Shares of the Fund
with the cost of investing in other funds. The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
|
|
|
|
|
| |
1 Year |
|
3 Years |
|
5 Years |
|
10 Years |
$56 |
|
$176 |
|
$307 |
|
$689 |
The
Fund may pay transaction costs when it buys and sells securities or instruments
(i.e., “turns over” its portfolio). A
high rate of portfolio turnover may result in increased transaction costs,
including brokerage commissions, which must be borne by the Fund and its
shareholders, and is also likely to result in higher short-term capital gains
for taxable shareholders. These costs are not reflected in total annual fund
operating expenses or in the expense example above, but are reflected in the
Fund’s performance. The Fund’s portfolio turnover rate for the fiscal year ended
December 31, 2021 was 305% of the average value of its portfolio. However,
the Fund’s portfolio turnover rate is calculated without regard to transactions
involving certain short-term instruments or derivatives. If such transactions
were included in the calculation, the Fund would have a higher portfolio
turnover rate. The portfolio turnover rate shown is that of the predecessor fund
(as defined below).
|
|
|
|
|
| |
| |
PRINCIPAL INVESTMENT STRATEGIES |
|
| |
|
The
Fund invests, under normal circumstances, at least 80% of its net assets plus
any borrowings for investment purposes (measured at the time of purchase) (“Net
Assets”) in a diversified portfolio of equity investments in U.S. issuers with
public stock market capitalizations within the range of the market
capitalization of the S&P 500® Index at the time of
investment and other instruments with similar economic exposures. The Fund will
employ a “Put Spread Collar” overlay strategy whereby the Fund simultaneously
purchases a near‑the‑money put while selling (writing) an out‑of‑the‑money call
and put on the S&P 500® Index or other national or
regional stock market indices (or exchange-traded funds (“ETFs”) that seek to
track such an index).
The
Fund uses a variety of quantitative techniques, in combination with a
qualitative overlay, when selecting investments. The Fund may make investment
decisions that deviate from those generated by the Investment Adviser’s
proprietary models, at the discretion of the Investment Adviser. In addition,
the Investment Adviser may, in its discretion, make changes to its quantitative
techniques, or use other quantitative techniques that are based on the
Investment Adviser’s proprietary
research.
The
Fund constructs a Put Spread Collar by buying a put option on the S&P 500
Index at a higher strike price and writing (or selling) a put option on the same
index at a relatively lower strike price, resulting in what is known as a put
option spread, while
1
simultaneously
selling a S&P 500 Index call option. The difference between strike prices in
the put option spread is designed to provide the Fund with downside protection
to the extent of the difference between the strike prices of the near‑the‑money
put option bought and the out‑of‑the‑money put option
sold.
In
addition to the use of the Put Spread Collar strategy described above, the Fund
may use future contracts, primarily futures on indexes, options on futures, and
total return swaps to more effectively gain targeted equity exposure from its
cash positions and to hedge the Fund’s portfolio if it is unable to purchase or
write the necessary options for its overlay strategy. Derivative positions may
be listed or over‑the‑counter (“OTC”) and may or may not be centrally
cleared.
As
the seller of call options, the Fund will receive cash (the “premium”) from the
purchaser. If the purchaser exercises the option, the Fund pays the purchaser
the difference between the price of the index and the exercise price of the
option. Additionally, as the seller of put options, the Fund will also receive a
premium from the purchaser. If the purchaser exercises the option, the Fund pays
the purchaser the difference between the exercise price of the option and the
price of the index. The premium, the exercise price and the market price of the
index determine the gain or loss realized by the Fund as the seller of call and
put options.
During
periods in which the U.S. equity markets are generally unchanged or falling, a
diversified portfolio with limited downside protection from its put spread
collar strategy may outperform the same portfolio without such an options
strategy. However, in strong rising markets where the aggregate appreciation of
the underlying index exceeds the exercise price of the short call, a portfolio
with a put spread collar strategy could significantly underperform the same
portfolio without these options.
The
Fund’s investments in fixed income securities are limited to cash equivalents
(including money market funds) and U.S. Treasury
Securities.
The
Fund is an actively managed ETF, which is a fund that trades like other
publicly-traded securities. The Fund is not an index fund and does not seek to
replicate the performance of a specified index.
|
|
|
|
|
| |
| |
PRINCIPAL RISKS OF THE FUND |
|
| |
|
Loss of money is a risk of investing in the
Fund. An investment in the Fund is not a
bank deposit and is not insured or guaranteed by the Federal Deposit Insurance
Corporation (“FDIC”) or any government agency. 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. Investments in the Fund
involve substantial risks which prospective investors should consider carefully
before investing. The Fund’s principal risks are presented below in alphabetical
order, and not in the order of importance or potential
exposure.
Counterparty Risk. Many of the protections
afforded to cleared transactions, such as the security afforded by transacting
through a clearing house, might not be available in connection
with over the counter (“OTC”) transactions. Therefore, in those instances
in which the Fund enters
into uncleared OTC transactions, the Fund will be subject to
the risk that its direct counterparty will not perform its obligations under the
transactions and that the Fund will
sustain losses.
Derivatives Risk. The Fund’s use of
options, futures, forwards, swaps and other derivative instruments may
result in losses, including due to adverse market movements. These instruments,
which may pose risks in addition to and greater than those associated with
investing directly in securities, currencies or other assets and 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
its contractual obligations. 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.
Investment Style
Risk. Different investment styles (e.g., “growth”, “value” or “quantitative”)
tend to shift in and out of favor depending upon market and economic conditions
and investor sentiment. The Fund employs a “quantitative” style, and may
outperform or underperform other funds that invest in similar asset classes but
employ different investment
styles.
Large Shareholder
Risk. Certain shareholders, including other funds
advised by the Investment Adviser, may from time to time own a substantial
amount of the Fund’s Shares. In addition, a third party investor, the Investment
Adviser or an affiliate of the Investment Adviser, an authorized participant, a
lead market maker, or another entity (i.e., a seed investor) may invest in the Fund
and hold its investment solely to facilitate commencement of the Fund or to
facilitate the Fund’s achieving a specified size or scale. Any such investment
may be held for a limited period of time. There can be no assurance that any
large shareholder would not redeem its investment, that the size of the Fund
would be maintained at such levels or that the Fund would continue to meet
applicable listing requirements. Redemptions by large shareholders could have a
significant negative impact on the Fund, including on the Fund’s liquidity. In
addition, transactions by large shareholders may account for a large percentage
of the trading volume on NYSE Arca, Inc. (“NYSE Arca”) and may, therefore, have
a material upward or downward effect on the market price of the
Shares.
Management
Risk. A strategy used by the Investment Adviser may
fail to produce the intended results. The Investment Adviser attempts to execute
a complex strategy for the Fund using proprietary quantitative models.
Investments selected using these models
2
may
perform differently than expected as a result of the factors used in the models,
the weight placed on each factor, changes from the factors’ historical trends,
and technical issues in the construction and implementation of the models
(including, for example, data problems and/or software issues). There is no
guarantee that the Investment Adviser’s use of these quantitative models will
result in effective investment decisions for the Fund. Additionally, commonality
of holdings across quantitative money managers may amplify
losses.
Market
Risk. The value of the securities in which the 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 due to increasingly interconnected global economies and financial
markets. 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 significantly impact the Fund and its
investments.
Market Trading
Risk. The net asset value (“NAV”) of the Fund and the
value of your investment may fluctuate. Market prices of Shares may fluctuate,
in some cases significantly, in response to the Fund’s NAV, the intraday value
of the Fund’s holdings and supply and demand for Shares. The Fund faces numerous
market trading risks, including disruptions to creations and redemptions, the
existence of extreme market volatility or potential lack of an active trading
market for Shares. Any of these factors, among others, may result in Shares
trading at a significant premium or discount to NAV, which will be reflected in
the intraday bid/ask spreads and/or the closing price of Shares as compared to
NAV. In addition, because liquidity in certain underlying securities may
fluctuate, Shares may trade at a larger premium or discount to NAV than shares
of other kinds of ETFs. If a shareholder purchases Shares at a time when the
market price is at a premium to the NAV or sells Shares at a time when the
market price is at a discount to the NAV, the shareholder may pay more for, or
receive less than, the underlying value of the Shares, respectively.
Additionally, in stressed market conditions, the market for Shares may become
less liquid in response to deteriorating liquidity in the markets for the Fund’s
underlying portfolio holdings.
Options
Risk. Writing (selling) call
options limits the opportunity to profit from an increase in the market value of
stocks in exchange for up‑front cash (the premium) at the time of selling the
call options. Writing (selling) put options may obligate the Fund to buy a
stock at a price that exceeds its market value. In addition, the Fund risks
losing all or part of the cash (the premium) paid for purchasing put options.
The Fund’s options-based overlay strategy may not fully protect it against
market declines because the Fund will continue to bear the risk of a decline in
the value of its portfolio securities. Creations and redemptions of shares could
impact the results of the Fund’s options-based overlay strategy. Furthermore,
unusual market conditions or the lack of a ready market for any particular
option at a particular time may reduce the effectiveness of the Fund’s
options-based overlay
strategy.
Portfolio Turnover
Rate Risk. A high rate of portfolio turnover may
involve correspondingly greater expenses borne by the Fund and its shareholders,
and may also result in short-term capital gains taxable to shareholders, but
this risk is expected to be mitigated by in‑kind
redemptions.
Stock
Risk. Stock prices have historically risen and fallen
in periodic cycles. U.S. and foreign stock markets have experienced periods of
substantial price volatility in the past and may do so again in the
future.
Swaps
Risk. In a standard “swap” transaction, two parties
agree to exchange the returns, differentials in rates of return or some other
amount earned or realized on the “notional amount” of predetermined investments
or instruments, which may be adjusted for an interest factor. Swaps can involve
greater risks than direct investment in securities, because swaps may be
leveraged and subject to counterparty risk (e.g., the risk of a counterparty’s defaulting
on the obligation or bankruptcy), credit risk and pricing risk (i.e., swaps may be difficult to value). Swaps
may also be considered illiquid. It may not be possible for the Fund to
liquidate a swap position at an advantageous time or price, which may result in
significant losses.
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 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 any 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.
Valuation
Risk. The sale price the Fund could receive for a
security may differ from the Fund’s valuation of the security, particularly for
securities that trade in low volume or volatile markets or that are valued using
a fair value methodology. The Fund relies on various sources to calculate its
NAV. The information may be provided by third parties that are believed to be
reliable, but the information may not be accurate due to errors by such pricing
sources, technological issues or otherwise. NAV calculation may also be impacted
by operational risks arising from factors such as failures in systems and
technology.
3
The bar chart and
table below provide an indication of the risks of investing in the
Fund. Before the Fund commenced operations, the assets
of another investment company advised by the Investment
Adviser, Goldman Sachs Defensive Equity Fund (the “predecessor fund”), were
transferred to the Fund in a tax‑free reorganization on January 20,
2023. The Fund and the predecessor fund have identical investment objectives and
fundamental investment policies and have substantially similar investment
strategies. The performance of the predecessor fund has not been restated to
reflect the annual operating expenses of the Fund, which are lower than those of
the predecessor fund. Because the Fund has different fees and expenses than the
predecessor fund, the Fund would also have had different performance
results.
The bar chart and table show:
(a) changes in the performance of the Fund’s Shares (represented by the
performance of the predecessor fund’s Institutional Shares) from year
to year; and (b) how the average annual total returns of the Fund
(represented by the average annual total returns of the predecessor
fund’s Institutional Shares) compare to those of a broad-based
securities market index. The Fund’s (and the predecessor
fund’s) past performance, before and after taxes, is not necessarily an
indication of how the Fund will perform in the future. Updated
performance information is available at no cost at www.gsamfunds.com/performance
or by calling the appropriate phone number on the back cover of the
Prospectus.
Performance
reflects applicable fee waivers and/or expense limitations in effect during the
periods shown.
|
|
|
|
|
| |
| |
AVERAGE ANNUAL TOTAL RETURN |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
For the period ended
December 31, 2021 |
|
1 Year |
|
|
Since Inception |
|
|
Inception Date |
|
Institutional
Shares |
|
|
|
| |
|
|
| |
|
9/30/2020 |
|
Returns
Before Taxes |
|
|
14.24% |
|
|
|
13.06% |
|
|
|
| |
Returns
After Taxes on Distributions |
|
|
10.67% |
|
|
|
10.21% |
|
|
|
| |
Returns
After Taxes on Distributions and Sale of Fund Shares |
|
|
8.56% |
|
|
|
8.87% |
|
|
|
|
|
S&P
500 (TR, unhedged, USD) |
|
|
28.71% |
|
|
|
34.06% |
|
|
|
|
|
The after‑tax returns for
Institutional Shares will vary. After‑tax returns are
calculated using the historical highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after‑tax returns
depend on an investor’s tax situation and may differ from those shown. In
addition, the after‑tax returns shown are not relevant to investors who hold
Fund Shares through tax‑deferred arrangements such as 401(k) plans or individual
retirement accounts.
Goldman
Sachs Asset Management, L.P. is the investment adviser for the Fund (the
“Investment Adviser” or “GSAM”) and the predecessor fund.
Portfolio Managers: Raj Garigipati,
Managing Director; Oliver Bunn, Vice President; and Patrick Hartnett, Vice
President, have managed the Fund since January 2023. Mr. Bunn and Mr.
Hartnett were the predecessor fund’s portfolio managers since 2023 and 2022,
respectively.
4
|
|
|
|
|
| |
| |
BUYING AND SELLING FUND SHARES |
|
| |
|
Individual
Shares of the Fund may only be purchased and sold in secondary market
transactions through a broker or dealer at market price. Because Shares trade at
market prices, rather than NAV, Shares of the Fund may trade at a price greater
than NAV (i.e., a premium) or less than
NAV (i.e., a discount).
You
may incur costs attributable to the difference between the highest price a buyer
is willing to pay for Shares (bid) and the lowest price a seller is willing to
accept for Shares (ask) (the “bid‑ask spread”) when buying or selling Shares in
the secondary market.
Recent
information, including information about the Fund’s NAV, market price, premiums
and discounts, and bid‑ask spreads (when available), is included on the Fund’s
website at www.gsamfunds.com.
The
Fund’s distributions are taxable, and will be taxed as ordinary income or
capital gains, unless you are investing through a tax‑deferred arrangement, such
as a 401(k) plan or an individual retirement account. Investments through
tax‑deferred arrangements may become taxable upon withdrawal from such
arrangements.
|
|
|
|
|
| |
| |
PAYMENTS TO BROKER‑DEALERS AND OTHER FINANCIAL INTERMEDIARIES |
|
| |
|
If
you purchase Shares of the Fund through a broker-dealer or other financial
intermediary (such as a bank), GSAM or other related companies may pay the
intermediary for the sale of Fund Shares or related services. These payments may
create a conflict of interest by influencing the broker-dealer or other
intermediary and your salesperson to recommend the Fund over another investment.
Ask your salesperson or visit your financial intermediary’s website for more
information.
5
Investment Management Approach
The
Goldman Sachs Defensive Equity ETF (the “Fund”) seeks long-term growth of
capital with lower volatility than equity markets. The Fund’s investment
objective may be changed without shareholder approval upon sixty days’ notice.
|
|
|
|
|
| |
| |
PRINCIPAL INVESTMENT STRATEGIES |
|
| |
|
The
Fund invests, under normal circumstances, at least 80% of its Net Assets in a
diversified portfolio of equity investments in U.S. issuers with public stock
market capitalizations within the range of the market capitalization of the
S&P 500® Index at the
time of investment and other instruments with similar economic exposures.
Shareholders will be provided with sixty days’ notice in the manner prescribed
by the SEC before any change in the Fund’s policy to invest at least 80% of its
Net Assets in the particular type of investment suggested by its name. The
S&P 500® Index is the
S&P Global Ratings’ 500 Composite Stock Price Index of 500 stocks, an
unmanaged index of common stock prices.
The
Fund will employ a “Put Spread Collar” overlay strategy whereby the Fund
simultaneously purchases a near‑the‑money put while selling (writing) an
out‑of‑the‑money call and put on the S&P 500® Index or other national or
regional stock market indices (or ETFs that seek to track such an index).
The
Fund uses a variety of quantitative techniques, in combination with a
qualitative overlay, when selecting investments. The Fund may make investment
decisions that deviate from those generated by the Investment Adviser’s
proprietary models, at the discretion of the Investment Adviser. In addition,
the Investment Adviser may, in its discretion, make changes to its quantitative
techniques, or use other quantitative techniques that are based on the
Investment Adviser’s proprietary research.
The
Fund constructs a Put Spread Collar by buying a put option on the S&P 500
Index at a higher strike price and writing (or selling) a put option on the same
index at a relatively lower strike price, resulting in what is known as a put
option spread, while simultaneously selling a S&P 500 Index call option. The
difference between strike prices in the put option spread is designed to provide
the Fund with downside protection to the extent of the difference between the
strike prices of the near‑the‑money put option bought and the out‑of‑the‑money
put option sold.
In
addition to the use of the Put Spread Collar strategy described above, the Fund
may use future contracts, primarily futures on indexes, options on futures, and
total return swaps to more effectively gain targeted equity exposure from its
cash positions and to hedge the Fund’s portfolio if it is unable to purchase or
write the necessary options for its overlay strategy. Derivative positions may
be listed or OTC and may or may not be centrally cleared.
As
the seller of call options, the Fund will receive the premium from the
purchaser. If the purchaser exercises the option, the Fund pays the purchaser
the difference between the price of the index and the exercise price of the
option. Additionally, as the seller of put options, the Fund will also receive a
premium from the purchaser. If the purchaser exercises the option, the Fund pays
the purchaser the difference between the exercise price of the option and the
price of the index. The premium, the exercise price and the market price of the
index determine the gain or loss realized by the Fund as the seller of call and
put options.
During
periods in which the U.S. equity markets are generally unchanged or falling, a
diversified portfolio with limited downside protection from its put spread
collar strategy may outperform the same portfolio without such an options
strategy. However, in strong rising markets where the aggregate appreciation of
the underlying index exceeds the exercise price of the short call, a portfolio
with a put spread collar strategy could significantly underperform the same
portfolio without these options.
The
Fund’s investments in fixed income securities are limited to cash equivalents
(including money market funds) and U.S. Treasury Securities.
The
Fund is an actively managed ETF, which is a fund that trades like other
publicly-traded securities. The Fund is not an index fund and does not seek to
replicate the performance of a specified index.
The
Fund may, from time to time, take temporary defensive positions that are
inconsistent with the Fund’s principal investment strategies in attempting to
respond to adverse market, political or other conditions. For temporary
defensive purposes, the Fund may 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 credit rating by another NRSRO (or if unrated,
determined by the Investment Adviser to be of
6
INVESTMENT
MANAGEMENT APPROACH
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, certain ETFs and other
investment companies providing similar investment exposures and cash items. Cash
items are not income-generating and, as a result, the Fund’s current yield may
be adversely affected during periods when such positions are held. Cash
positions may also subject the Fund to additional risks and costs, such as
increased exposure to the custodian bank holding the assets and any fees imposed
for large cash balances. When the Fund’s assets are invested in such
instruments, the Fund may not be achieving its investment objective.
|
|
|
|
|
| |
| |
OTHER INVESTMENT PRACTICES AND SECURITIES |
|
| |
|
Although
the Fund’s principal investment strategies are described in the Fund’s
Summary—Principal Investment Strategies and Investment Management
Approach—Principal Investment Strategies sections of the Prospectus, the
following tables identify some of the investment techniques that may (but are
not required to) be used by the Fund in seeking to achieve its investment
objective. The Fund may be subject to additional limitations on its investments
not shown here. Numbers in these tables show allowable usage only; for actual
usage, consult the Fund’s annual/semi-annual reports (when available). For more
information about these and other investment practices and securities, see
Appendix A. On each business day, before commencement of trading in Fund Shares
on NYSE Arca, the Fund will disclose on its website (http://www.gsamfunds.com)
the identities and quantities of the portfolio securities and other assets held
by the Fund that will form the basis for the Fund’s calculation of NAV at the
end of the business day. In addition, a description of the Fund’s policies and
procedures with respect to the disclosure of the Fund’s portfolio holdings is
available in the Fund’s Statement of Additional Information (“SAI”).
7
|
| |
10 |
|
Percent of total assets (including securities
lending collateral) (italic type) |
10 |
|
Percent of net assets (excluding borrowings for
investment purposes) (roman type) |
• |
|
No
specific percentage limitation on usage; limited only by the objective and
strategies of the Fund. |
|
| |
| |
|
|
Defensive Equity ETF |
Investment Practices |
|
|
| |
Borrowings |
|
331⁄3 |
| |
Credit,
Currency, Equity, Index, Interest Rate, Total Return and Mortgage Swaps
and Options on Swaps |
|
• |
| |
Cross
Hedging of Currencies |
|
• |
| |
Custodial
Receipts and Trust Certificates |
|
• |
| |
Equity
Swaps |
|
• |
| |
Foreign
Currency Transactions (including forward contracts)* |
|
• |
| |
Illiquid
Investments** |
|
15 |
| |
Interest
Rate Caps, Floors and Collars |
|
• |
| |
Investment
Company Securities (including ETFs)*** |
|
10 |
| |
Mortgage
Dollar Rolls |
|
• |
| |
Options
on Foreign Currencies1 |
|
• |
| |
Options
on Futures2 |
|
• |
| |
Options
on Securities and Securities Indices |
|
• |
| |
Options2 |
|
• |
| |
Preferred
Stock |
|
• |
| |
Repurchase
Agreements |
|
• |
| |
Reverse
Repurchase Agreements (for investment purposes) |
|
• |
| |
Securities
Lending |
|
331⁄3 |
| |
Short
Sales |
|
• |
| |
Unseasoned
Companies |
|
• |
| |
Warrants
and Stock Purchase Rights |
|
• |
| |
When-Issued
Securities and Forward Commitments |
|
• |
| |
|
* |
Limited by the amount the Fund may invest in
foreign securities. |
** |
Illiquid investments are any investments that
the 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
the Fund’s investments in other investment companies (including ETFs)
where a higher percentage limitation is permitted under the Investment
Company Act or rules, regulations or exemptive relief thereunder.
|
1 |
The Fund may purchase and sell call and put
options on foreign currencies. |
2 |
The Fund may sell call and put options and
purchase call and put options on securities and securities indices in
which they may invest. |
8
INVESTMENT
MANAGEMENT APPROACH
|
| |
10 |
|
Percent of net assets (excluding borrowings for
investment purposes) (roman type) |
• |
|
No
specific percentage limitation on usage; limited only by the objective and
strategies of the Fund. |
|
| |
| |
|
|
Defensive Equity ETF |
Investment Securities |
|
|
| |
American
Depository Receipts |
|
• |
| |
Asset-Backed
and Mortgage-Backed Securities1 |
|
• |
| |
Bank
Obligations1 |
|
20 |
| |
Commodity-Linked
Derivative Instruments3 |
|
• |
| |
Convertible
Securities4 |
|
• |
| |
Corporate
Debt Obligations1 |
|
• |
| |
Corporate
Debt Obligations and Trust Preferred Securities |
|
20 |
| |
Equity
Investments |
|
80+ |
| |
Emerging
Country Securities2 |
|
• |
| |
Fixed
Income Securities |
|
20 |
| |
Foreign
Government Securities1 |
|
• |
| |
Foreign
Securities2 |
|
• |
| |
Municipal
Securities1 |
|
• |
| |
Non‑Investment
Grade Fixed Income Securities5 |
|
• |
| |
Real
Estate Investment Trusts (“REITs”) |
|
• |
| |
Stripped
Mortgage-Backed Securities1 |
|
• |
| |
Structured
Securities (which may include equity-linked notes)6 |
|
• |
| |
Subsidiary
Shares |
|
• |
| |
Temporary
Investments |
|
• |
| |
U.S.
Government Securities1 |
|
• |
| |
Yield
Curve Options and Inverse Floating Rate Securities |
|
• |
| |
|
1 |
Limited by the amount the Fund invests in fixed
income securities and limited to cash equivalents only.
|
2 |
Limited by the amount the Fund may invest in
foreign securities. |
3 |
The Fund may invest in commodity-linked
derivative instruments only to the extent permissible under applicable law
then in effect or in reliance upon a private letter ruling from the IRS or
an opinion of counsel, or other applicable guidance or relief provided by
the IRS or other agencies. |
4 |
Convertible securities purchased by the Fund
use the same rating criteria for convertible and non‑convertible debt
securities. |
5 |
May be BB+ or lower by S&P Global Ratings
or Ba1 or lower by Moody’s or have a comparable credit rating by another
NRSRO at the time of investment. |
6 |
Structured securities are not subject to the
same minimum credit quality requirements as the Fund’s investments in
fixed income securities. |
9
Risks of the Fund
Loss
of money is a risk of investing in the Fund. 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. Investments
in the Fund involve substantial risks which prospective investors should
consider carefully before investing.
The
Fund is an actively managed ETF, which is a fund that trades like other
publicly-traded securities. The Fund is not an index fund and does not seek to
replicate the performance of a specified index.
|
| |
✓ |
|
Principal Risk |
• |
|
Additional Risk |
|
| |
| |
|
|
Defensive Equity ETF |
| |
Absence
of Active Market Risk |
|
• |
| |
Authorized
Participant Concentration Risk |
|
• |
| |
Counterparty
Risk |
|
✓ |
| |
Credit/Default
Risk |
|
• |
| |
Cybersecurity
Risk |
|
• |
| |
Derivatives
Risk |
|
✓ |
| |
Foreign
Risk |
|
• |
| |
Investment
Style Risk |
|
✓ |
| |
Large
Shareholder Risk |
|
✓ |
| |
Liquidity
Risk |
|
• |
| |
Management
Risk |
|
✓ |
| |
Market
Risk |
|
✓ |
| |
Market
Trading Risk |
|
✓ |
| |
Mid
Cap and Small Cap Risk |
|
• |
| |
NAV
Risk |
|
• |
| |
Options
Risk |
|
✓ |
| |
Portfolio
Turnover Rate |
|
✓ |
| |
Regulatory
(Volcker Rule) Risk |
|
• |
| |
REIT
Risk |
|
• |
| |
Secondary
Listing Risk |
|
• |
| |
Stock
Risk |
|
✓ |
| |
Swaps
Risk |
|
✓ |
| |
Trading
Issues Risk |
|
• |
| |
U.S.
Government Securities |
|
✓ |
| |
Valuation
Risk |
|
✓ |
| |
|
⬛ |
|
Absence of
Active Market Risk—There
can be no assurance that active trading markets for the Shares will
develop or be maintained by market makers or authorized participants, and
there are no obligations of market makers to make a market in the Fund’s
Shares or of authorized participants to submit purchase or redemption
orders for Creation Units. ALPS Distributors, Inc., the distributor of the
Shares (the “Distributor”), does not maintain a secondary market in the
Shares. |
Although
market makers will generally take advantage of differences between the NAV and
the trading price of Fund Shares through arbitrage opportunities, there is no
guarantee that they will do so. Decisions by market makers or authorized
participants to reduce their role or “step away” from market making or
creation/redemption activities in times of market stress could inhibit the
effectiveness of the arbitrage process in maintaining the relationship between
the underlying value of the Fund’s portfolio
10
RISKS
OF THE FUND
securities
and the Fund’s market price. This reduced effectiveness could result in Shares
trading at a discount to NAV and also in greater than normal intraday bid/ask
spreads for Shares. Market makers and authorized participants may be less
willing to create or redeem Fund Shares if there is a lack of an active market
for the Shares or its underlying investments, which may also contribute to the
Fund’s Shares trading at a premium or discount to NAV.
⬛ |
|
Authorized
Participant Concentration Risk—Only an authorized
participant may engage in creation or redemption transactions directly
with the Fund, and the Fund may have a limited number of financial
institutions that act as authorized participants. None of those authorized
participants is obligated to engage in creation and/or redemption
transactions. To the extent that those authorized participants exit the
business or are unable to or choose not to process creation and/or
redemption orders, and no other authorized participant is able to step
forward to create and redeem Shares, there may be a significantly
diminished trading market for Shares. As a result, Shares may trade at a
discount (or premium) to NAV and possibly face trading halts and/or
de‑listing. |
⬛ |
|
Counterparty
Risk—Many of the protections afforded to cleared
transactions, such as the security afforded by transacting through a
clearing house, might not be available in connection with certain OTC
transactions. Therefore, in those instances in which the Fund enters into
certain OTC transactions, the Fund will be subject to the risk that its
direct counterparty will not perform its obligations under the
transactions and that the Fund will sustain losses. However, recent
regulatory developments require margin on certain uncleared OTC
transactions which may reduce, but not eliminate, this risk.
|
⬛ |
|
Credit/Default
Risk—An issuer could exercise its right to pay principal on
an obligation held by the Fund 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.
|
⬛ |
|
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. |
⬛ |
|
Derivatives
Risk—The Fund’s use of derivatives and other 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
assets and 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. |
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, the Fund’s use of derivatives may increase or accelerate the
amount of taxes payable by shareholders.
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.
Many
of the protections afforded to cleared transactions, such as the security
afforded by transacting through a clearing house, might not be available in
connection with over‑the‑counter (“OTC”) transactions. Therefore, in those
instances in which the Fund enters into OTC transactions, the Fund will be
subject to the risk that its direct counterparty will not perform its
obligations under the transactions and that the Fund will sustain losses.
11
⬛ |
|
Foreign
Risk—When the Fund invests in foreign securities, it may be
subject to risk of loss not typically associated with U.S. issuers. Loss
may result because of more or less foreign government regulation; less
public information; less stringent investor protections; less stringent
accounting, corporate governance, financial reporting and disclosure
standards; less liquid, developed or efficient trading markets; greater
volatility; and less economic, political and social stability in the
countries in which the Fund invests. Loss may also result from, among
other things, deteriorating economic and business conditions in other
countries, including the United States, regional and global conflicts, the
imposition of sanctions, exchange controls (including repatriation
restrictions), foreign taxes, confiscation of assets and property, trade
restrictions (including tariffs), expropriations and other government
restrictions by the United States and other governments, higher
transaction costs, difficulty enforcing contractual obligations or from
problems in share registration, settlement or custody. The type and
severity of sanctions and other similar measures, including counter
sanctions and other retaliatory actions, that may be imposed could vary
broadly in scope, and their impact is impossible to predict. These types
of measures may include, but are not limited to, banning a sanctioned
country from global payment systems that facilitate cross-border payments,
restricting the settlement of securities transactions by certain
investors, and freezing the assets of particular countries, entities, or
persons. The imposition of sanctions and other similar measures could,
among other things, cause a decline in the value and/or liquidity of
securities issued by the sanctioned country or companies located in or
economically tied to the sanctioned country, downgrades in the credit
ratings of the sanctioned country or companies located in or economically
tied to the sanctioned country, devaluation of the sanctioned country’s
currency, and increased market volatility and disruption in the sanctioned
country and throughout the world. Sanctions and other similar measures
could limit or prevent the Fund from buying and selling securities (in the
sanctioned country and other markets), significantly delay or prevent the
settlement of securities transactions, and significantly impact the Fund’s
liquidity and performance. |
The
Fund or the Investment Adviser may determine not to invest in, or may limit its
overall investment in, a particular issuer, country or geographic region due to,
among other things, heightened risks regarding sanctions, repatriation
restrictions, confiscation of as‑sets and property, expropriation or
nationalization. Geopolitical developments, including ongoing region armed
conflict in Europe, in certain countries in which the Fund may invest have
caused, or may in the future cause, significant volatility in financial markets.
For example, Brexit has resulted in ongoing market volatility and caused
additional market disruption on a global basis. The UK and the EU signed the
TCA, which is an agreement on the terms governing certain aspects of the EU’s
and UK’s relationship post Brexit. However, under the TCA, many aspects of the
EU-UK relationship remain subject to further negotiation. Although the full
effects of Brexit are unknown at this time, Brexit may continue to result in
fluctuations of exchange rates, increased illiquidity, inflation, and changes in
legal and regulatory regimes to which certain of the Fund’s assets are subject.
These and other geopolitical developments, including ongoing regional armed
conflict in Europe, could negatively impact the value of the Fund’s investments.
The
Fund’s investments in foreign securities may also be subject to foreign currency
risk, the risk of negative foreign currency rate fluctuations, which may cause
the value of securities denominated in such foreign currency (or other
instruments through which the Fund may have exposure to foreign currencies) to
decline in value. Currency exchange rates may fluctuate significantly over short
periods of time. Foreign risks will normally be greatest when the Fund invests
in securities of issuers located in emerging countries. For more information
about these risks, see Appendix A.
⬛ |
|
Investment
Style Risk—Different investment styles (e.g., “growth,” “value,” or
“quantitative”) tend to shift in and out of favor depending upon market
and economic conditions as well as investor sentiment. The Fund employs a
“quantitative” style, and the Fund may outperform or underperform other
funds that invest in similar asset classes but employ different investment
styles. |
⬛ |
|
Large
Shareholder Risk—Certain
large shareholders, including other funds advised by the Investment
Adviser, may from time to time own a substantial amount of the Fund’s
Shares. In addition, a third party investor, the Investment Adviser or an
affiliate of the Investment Adviser, an authorized participant, a lead
market maker, or another entity (i.e., a seed investor) may invest in the
Fund and hold its investment solely to facilitate commencement of the Fund
or to facilitate the Fund’s achieving a specified size or scale. Any such
investment may be held for a limited period of time. There can be no
assurance that any large shareholder would not redeem its investment.
Dispositions of a large number of Shares by these shareholders, which may
occur rapidly or unexpectedly, may adversely affect the Fund’s liquidity
and net assets to the extent such transactions are executed directly with
the Fund in the form of redemptions through an authorized participant,
rather than executed in the secondary market. To the extent effected in
cash, these redemptions may also force the Fund to sell portfolio
securities when it might not otherwise do so, which may negatively impact
the Fund’s NAV and increase the Fund’s brokerage costs. Such cash
redemptions may also accelerate the realization of taxable income to
shareholders, which could make investments in Shares less tax‑efficient
than an investment in an ETF that is able to effect redemptions in‑kind.
Similarly, large Fund share purchases through an authorized participant
may adversely affect the performance of the Fund to the extent that the
Fund is delayed in investing new cash or otherwise maintains a larger cash
position than it ordinarily would. To the extent these large shareholders
transact in Shares on the secondary market, such transactions may account
for a large percentage of the trading volume on the Exchange and may,
therefore, have a material upward or downward effect on the market price
of the Shares. |
12
RISKS
OF THE FUND
⬛ |
|
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 investments cannot
be readily sold at the desired time or price, the 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 the Fund’s value. |
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
the Fund engages in cash redemptions, then liquidity risk may also refer to the
risk that the 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, a redemption
request by a large shareholder (such as a seed investor) or other reasons. If
the Fund is forced to sell securities at an unfavorable time and/or under
unfavorable conditions, such sales may adversely affect the Fund’s NAV and
dilute remaining investors’ interests.
⬛ |
|
Management
Risk—A strategy used by the Investment Adviser may fail to
produce the intended results. |
⬛ |
|
Market
Risk—The value of the securities in which
the 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. The 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. The 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.
⬛ |
|
Market Trading
Risk—The NAV of the Fund and the value of your investment
may fluctuate. Market prices of Shares may fluctuate, in some cases
significantly, in response to the Fund’s NAV, the intraday value of the
Fund’s holdings and supply and demand for Shares. The Fund faces numerous
market trading risks, including disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of an active
trading market for Shares. If a shareholder purchases Shares at a time
when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may pay
more for, or receive less than, the underlying value of the Shares,
respectively. The Investment Adviser cannot predict whether Shares will
trade below, at or above their NAV. Price differences may be due, in large
part, to the fact that supply and demand forces at work in the secondary
trading market for Shares will be closely related to, but not identical
to, the same forces influencing the prices of the securities of the Fund’s
Index trading individually or in the aggregate at any point in time. While
the creation/redemption feature is designed to make it more likely that
the Fund’s Shares normally will trade on stock exchanges at prices close
to the Fund’s next calculated NAV, exchange prices are not expected to
correlate exactly with the Fund’s NAV due to timing reasons, supply and
demand imbalances, perception of unreliability of disclosed NAV, and other
factors. Any of these factors, among others, may result in Shares trading
at a significant premium or discount to NAV, which will be reflected in
the intraday bid/ask spreads and/or the closing price of Shares as
compared to NAV. During such periods, you may be unable to sell your
Shares or may incur significant losses if you sell your Shares.
Additionally, in stressed market conditions, the market for Shares may
become less liquid in response to deteriorating liquidity in the markets
for the Fund’s underlying portfolio holdings. There are various methods by
which investors can purchase and sell Shares and various orders that may
be placed. Investors should consult their financial intermediary before
purchasing or selling Shares of the Fund. |
An
investor that buys or sells Shares through a broker will likely incur a
brokerage commission or other charge imposed by the broker. In addition, the
market price of Shares, like other exchange-traded securities, includes a
“bid‑ask spread” (the difference between the price at which investors are
willing to buy Shares and the price at which investors are willing to sell
Shares). The bid‑ask spread will vary over time based on the Fund’s trading
volume and market liquidity and may increase as a result of a decrease in the
Fund’s trading volume, the spread of the Fund’s underlying securities, or market
liquidity. The bid‑ask spread may increase significantly in times of market
disruption, meaning that Shares may trade at a discount to the Fund’s NAV and
that discount is likely to be greatest during significant market volatility.
During such periods, you may be unable to sell your Shares or may incur
significant losses if you sell your Shares.
13
Shares
of the Fund, like other publicly-traded securities, may be sold short. Shares
are therefore subject to the risk of price decreases and increased volatility
associated with being sold short.
⬛ |
|
Mid‑Cap and
Small‑Cap Risk—The securities of mid‑capitalization and
small-capitalization companies involve greater risks than those associated
with larger, more established companies and may be subject to more abrupt
or erratic price movements. Securities of such issuers may lack sufficient
market liquidity to enable the Fund to effect sales at an advantageous
time or without a substantial drop in price. Both mid‑capitalization and
small-capitalization companies often have narrower markets and more
limited managerial and financial resources than larger, more established
companies. As a result, their performance can be more volatile and they
face greater risk of business failure, which could increase the volatility
of the Fund’s portfolio. Generally, the smaller the company size, the
greater these risks become. |
⬛ |
|
NAV
Risk—The net asset value of the Fund and the value of your
investment will fluctuate. |
⬛ |
|
Options
Risk—Writing (selling) call options limits the opportunity
to profit from an increase in the market value of stocks in exchange for
up‑front cash (the premium) at the time of selling the call options.
Writing (selling) put options may obligate the Fund to buy a stock at a
price that exceeds its market value. In addition, the Fund risks losing
all or part of the cash (the premium) paid for purchasing put options. The
Fund’s options-based overlay strategy may not fully protect it against
market declines because the Fund will continue to bear the risk of a
decline in the value of its portfolio securities. Creations and
redemptions of shares could impact the results of the Fund’s options-based
overlay strategy. Furthermore, unusual market conditions or the lack of a
ready market for any particular option at a particular time may reduce the
effectiveness of the Fund’s options-based overlay strategy.
|
⬛ |
|
Portfolio
Turnover Rate Risk—The Fund may engage in frequent trading
of portfolio securities to achieve its principal investment strategy. A
high rate of portfolio turnover may involve correspondingly greater
expenses borne by the Fund and its shareholders, and may also result in
short-term capital gains taxable to shareholders, but this risk is
expected to be mitigated by in‑kind redemptions.
|
⬛ |
|
Regulatory Risk
(Volcker Rule)—Section 619 of the Dodd-Frank Wall
Street Reform and Consumer Protection Act and the rules issued thereunder
(also known as the “Volcker Rule”) prohibit banking entities, such as The
Goldman Sachs Group, Inc. (“Goldman”) and its affiliates, including the
Investment Adviser, from engaging in certain trading activities involving
their own capital (also known as “proprietary trading”). These
prohibitions may include certain restrictions on the extent to which
Goldman and/or its affiliates may own shares of the Fund. If Goldman or
its affiliates own 25% or more of the outstanding shares of the Fund
longer than three years from the Fund’s launch date, the Fund may be
subject to these proprietary trading restrictions, which include
restrictions on the ability to purchase and sell securities on a short
term basis. Reducing the seed capital in the Fund to address these trading
restrictions may prevent the Fund from pursuing its investment objective,
may restrict the Fund’s activities and may prevent the Fund from retaining
enough capital to engage in certain investment strategies, which could
have a negative impact on the Fund’s performance. In addition, if Goldman
or its affiliates reduce their interest in the Fund, the Fund may be
subject to transaction costs, losses and adverse tax consequences and may
be forced to liquidate prematurely, among other things.
|
⬛ |
|
REIT
Risk—Investing in REITs involves certain unique risks in
addition to those risks associated with investing in the real estate
industry in general. REITs whose underlying properties are concentrated in
a particular industry or geographic region are also subject to risks
affecting such industries and regions. The securities of REITs involve
greater risks than those associated with larger, more established
companies and may be subject to more abrupt or erratic price movements
because of interest rate changes, economic conditions and other factors.
REITs may also fail to qualify for tax free pass-through of income or may
fail to maintain their exemptions from investment company registration.
Securities of such issuers may lack sufficient market liquidity to enable
the Fund to effect sales at an advantageous time or without a substantial
drop in price. |
⬛ |
|
Secondary
Listing Risk—The Fund’s Shares may be listed or
traded on U.S. and non‑U.S. stock exchanges other than the U.S. stock
exchange where the Fund’s primary listing is maintained. There can be no
assurance that the Fund’s Shares will continue to trade on any such stock
exchange or in any market or that the Fund’s Shares will continue to meet
the requirements for listing or trading on any exchange or in any market.
The Fund’s Shares may be less actively traded in certain markets than in
others, and investors are subject to the execution and settlement risks
and market standards of the market where they or their broker direct their
trades for execution. Certain information available to investors who trade
Fund Shares on a U.S. stock exchange during regular U.S. market hours may
not be available to investors who trade in other markets, which may result
in secondary market prices in such markets being less efficient. Shares of
the Fund may trade in the secondary market outside of the trading hours of
the Fund’s primary exchange. At such times, Shares may trade with more
significant premiums or discounts than might be experienced otherwise.
|
⬛ |
|
Stock
Risk—Stock prices have historically risen and fallen in
periodic cycles. U.S. and foreign stock markets have experienced periods
of substantial price volatility in the past and may do so again in the
future. Stock prices may fluctuate from time to time in response to the
activities of individual companies and in response to general market and
economic conditions. Individual companies may report poor results or be
negatively affected by industry and/or economic trends and developments,
and the stock prices of such companies may suffer a decline in response.
|
14
RISKS
OF THE FUND
⬛ |
|
Swaps
Risk—The use of swaps is a highly specialized activity which
involves investment techniques, risk analyses and tax planning different
from those associated with ordinary portfolio securities transactions. The
Fund’s transactions in swaps may be significant. These transactions can
result in sizeable realized and unrealized capital gains and losses
relative to the gains and losses from the Fund’s direct investments in
securities and short sales. |
Transactions
in swaps can involve greater risks than if the Fund had invested in securities
directly since, in addition to general market risks, swaps may be leveraged and
subject to illiquidity risk, counterparty risk, credit risk and pricing risk.
Regulators also may impose limits on an entity’s or group of entities’ positions
in certain swaps. However, certain risks are reduced (but not eliminated) if the
Fund invests in cleared swaps, which are transacted through futures commission
merchants (“FCMs”) and cleared through a clearinghouse that serves as a central
counterparty. Because uncleared, bilateral swap agreements are two‑party
contracts and because they may have terms of greater than seven days, these
swaps may be considered to be illiquid. Moreover, the Fund bears the risk of
loss of the amount expected to be received under a swap in the event of the
default or bankruptcy of a swap counterparty. Many swaps are complex and valued
subjectively. Swaps and other derivatives may also be subject to pricing or
“basis” risk, which exists when the price of a particular derivative diverges
from the price of corresponding cash market instruments. Under certain market
conditions it may not be economically feasible to initiate a transaction or
liquidate a position in time to avoid a loss or take advantage of an
opportunity. If a swap transaction is particularly large or if the relevant
market is illiquid, it may not be possible to initiate a transaction or
liquidate a position at an advantageous time or price, which may result in
significant losses.
The
value of swaps can be very volatile, and a variance in the degree of volatility
or in the direction of securities prices from the expectations of the Fund’s
Investment Adviser or Sub‑Adviser may produce significant losses in the Fund’s
investments in swaps. In addition, a perfect correlation between a swap and a
security position may be impossible to achieve. As a result, the Investment
Adviser’s or Sub‑Adviser’s use of swaps may not be effective in fulfilling the
Investment Adviser’s or Sub‑Adviser’s investment strategies and may contribute
to losses that would not have been incurred otherwise.
⬛ |
|
Trading Issues
Risk—Trading in ETF Shares on NYSE Arca may be halted due to
market conditions or for reasons that, in the view of the exchange, make
trading in ETF Shares inadvisable. In addition, trading in ETF Shares on
NYSE Arca is subject to trading halts caused by extraordinary market
volatility pursuant to NYSE Arca’s “circuit breaker” rules. If a trading
halt or unanticipated closing of the exchange occurs, a shareholder may be
unable to purchase or sell ETF Shares. There can be no assurance that the
requirements of NYSE Arca necessary to maintain the listing of the Fund
will continue to be met or will remain unchanged.
|
⬛ |
|
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 Fannie Mae, 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 any 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. U.S. Government
Securities include U.S. Treasury Securities. |
⬛ |
|
Valuation
Risk—The sale price the Fund could receive for a security
may differ from the Fund’s valuation of the security, particularly for
securities that trade in low volume or volatile markets or that are valued
using a fair value methodology. Because non‑U.S. exchanges may be open on
days when the Fund does not price its Shares, the value of foreign
securities or assets in the Fund’s portfolio may change on days when
investors will not be able to purchase or sell the Fund’s Shares. The Fund
relies on various sources to calculate its NAV. The information may be
provided by third parties that are believed to be reliable, but the
information may not be accurate due to errors by such pricing sources,
technological issues or otherwise. NAV calculation may also be impacted by
operational risks arising from factors such as failures in systems and
technology. |
More
information about the Fund’s portfolio securities and investment techniques, and
their 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.
15
Tax Advantaged Product Structure
Unlike
many conventional mutual funds which are only bought and sold at closing NAVs,
the Shares of the Fund, like Shares of certain other ETFs, have been designed to
be redeemed principally in‑kind in Creation Units at each day’s market close.
These in‑kind arrangements are designed to mitigate adverse effects on the
Fund’s portfolio that could arise from frequent cash redemption transactions
that affect the NAV of the Fund. Moreover, in contrast to conventional mutual
funds, where frequent redemptions can have an adverse tax impact on taxable
shareholders because of the need to sell portfolio securities which, in turn,
may generate taxable gain, the in‑kind redemption mechanism of the Fund, as
applicable, to the extent used, generally is not expected to lead to a tax event
for shareholders whose Shares are not being redeemed. There is no guarantee that
these tax advantages will be realized or will materially reduce the amount of
taxable capital gains distributed by the Fund to shareholders.
16
Service Providers
|
| |
| |
Investment Adviser |
|
Fund |
Goldman
Sachs Asset Management L.P. |
|
Goldman Sachs Defensive Equity ETF |
200
West Street |
|
|
New
York, NY 10282 |
|
|
| |
|
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 & Co. LLC (“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 September 30, 2022, GSAM, including its investment advisory
affiliates, had assets under supervision of approximately $2.19 trillion.
The
Investment Adviser is responsible for the day‑to‑day management of 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, FCMs 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 with respect to
managing certain portfolio securities. In addition, the Investment Adviser has
access to proprietary tools 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 such services are not required to be performed by others pursuant
to the fund administration and accounting agreement, the custodian agreement,
the transfer agency agreement, distribution agreement or such other agreements
with service providers to the Fund that the Board has approved:
|
⬛ |
|
Supervises
non‑advisory operations of the Fund, including oversight of vendors hired
by the Fund, oversight of Fund liquidity and risk management, oversight of
regulatory inquiries and requests with respect to the Fund made to the
Investment Adviser, valuation and accounting oversight and oversight of
ongoing compliance with federal and state securities laws, tax
regulations, and other applicable law |
|
⬛ |
|
Provides
personnel to perform such executive, administrative and clerical services
as are reasonably necessary to provide effective administration of the
Fund |
|
⬛ |
|
Arranges
for: (a) the preparation of all required tax returns, (b) the
preparation and submission of reports to existing shareholders,
(c) the periodic updating of prospectuses and statements of
additional information and (d) the preparation of reports to be filed
with the SEC and other regulatory authorities |
|
⬛ |
|
Maintains
the records of the Fund |
|
⬛ |
|
Provides
office space and necessary office equipment and services for the
Investment Adviser |
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.
GSAM
may manage other funds, accounts, additional pooled vehicles and/or separate
accounts that have similar investment strategies to those of the Fund. These
funds, pooled vehicles or accounts may perform differently than the Fund despite
their similar strategies. Because the pooled vehicles may not be registered
under the Investment Company Act, they are subject to fewer regulatory
restraints than the Fund (e.g., fewer
trading constraints) and may employ strategies that are not subject to the same
constraints as the Fund.
GSAM
and/or its affiliates expect to make payments to one or more investors that
contribute seed capital to the Fund. Such payments may continue for a specified
period of time and/or until a specified dollar amount is reached. Those payments
will be
17
made
from the assets of GSAM and/or such affiliates (and not the Fund). Seed
investors may contribute all or a majority of the assets in the Fund. There is a
risk that such seed investors may redeem their investments in the Fund. As with
redemptions by other large shareholders, such redemptions could have a
significant negative impact on the Fund.
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
or sell at any time some or all of the Shares acquired for their own accounts.
|
|
|
|
|
| |
| |
MANAGEMENT FEE AND OTHER EXPENSES |
|
| |
|
Pursuant
to the Fund’s Management Agreement, as compensation for its services to the
Fund, the Investment Adviser is entitled to a management fee, computed daily and
payable monthly, at an annual rate listed below (as a percentage of the Fund’s
average daily net assets). Under the Management Agreement, the Investment
Adviser is responsible for substantially all the expenses of the Fund, excluding
payments under the Fund’s 12b‑1 plan (if any), interest expenses, taxes,
acquired fund fees and expenses, brokerage fees, costs of holding shareholder
meetings and litigation, indemnification and extraordinary expenses. The
effective management fee of the Fund (based on the management fee of the
predecessor fund) for the fiscal year ended December 31, 2021 is disclosed
below, as well as the management fee payable by the Fund.
|
| |
| |
|
| |
Fund |
|
Actual
Rate
For
the Fiscal
Year
Ended
December 31, 2021* |
|
Fee as
a Percentage of Average Daily Net
Assets |
Goldman
Sachs Defensive Equity ETF |
|
0.53% |
|
0.55% |
| |
| |
|
|
* |
The Actual Rate, which reflects the combined
management fees paid to GSAM by the Fund, 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
Fund invests, except those management fees it earns from the Fund’s investments
of cash collateral received in connection with securities lending transactions
in affiliated funds, 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.
A
discussion regarding the basis for the Board of Trustees’ approval of the
Management Agreement for the Goldman Sachs Defensive Equity ETF will be
available in the Fund’s first annual or semi-annual report following its launch.
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, oversight and
maintenance of allocations to index securities, selecting the composition of
creation and redemption baskets, general oversight of the implementation
processes and management of the Fund’s portfolio.
|
|
|
|
|
| |
|
|
| |
Name and Title |
|
Fund Responsibility |
|
Years Primarily Responsible |
|
Five Year Employment History |
Raj
Garigipati
Managing
Director |
|
Portfolio Manager— Defensive Equity
ETF |
|
Since 2023 |
|
Mr. Garigipati is the global head of the
ETF Portfolio Management team. He joined Quantitative Investment
Strategies (QIS) in 2011 as Chief Risk Officer and subsequently became
head of the ETF PM team in 2016. |
Oliver
Bunn
Vice
President |
|
Portfolio Manager— Defensive Equity
ETF |
|
Since 2023 |
|
Mr. Bunn is a portfolio manager and researcher
for the Alternative Investment Strategies (AIS) team within GSAM’s
Quantitative Investment Strategies (QIS) platform. He joined Goldman Sachs
in 2014. |
Patrick
Hartnett
Vice
President |
|
Portfolio Manager— Defensive Equity
ETF |
|
Since 2023 |
|
Mr. Hartnett is a portfolio manager on the
Quantitative Investment Strategies (QIS) Alternatives team within Goldman
Sachs Asset Management. He joined Goldman Sachs in 2019. Previously, he
worked at Jefferies and PNC bank. |
| |
| |
| |
|
For
information about portfolio manager compensation, other accounts managed by a
portfolio manager and portfolio manager ownership of securities in the Fund, see
the SAI.
18
SERVICE
PROVIDERS
ALPS
Distributors, Inc., 1290 Broadway, Suite 1000, Denver, Colorado 80203, serves as
the exclusive distributor of Creation Units of Shares of the Fund pursuant to a
“best efforts” arrangement as provided by a distribution agreement with the
Trust on behalf of the Fund. Shares of the Fund are offered and sold on a
continuous basis by the Distributor, acting as agent. The Distributor does not
maintain a secondary market in the Fund’s Shares.
|
|
|
|
|
| |
| |
TRANSFER AGENT, CUSTODIAN AND PROVIDER OF ADMINISTRATIVE SERVICES |
|
| |
|
The
Bank of New York Mellon (“BNYM”), 240 Greenwich Street, New York, New York
10286, serves as the Trust’s transfer and dividend disbursing agent. Under its
transfer agency agreement with the Trust, BNYM has undertaken with the Trust to
provide the following services with respect to the Fund: (i) perform and
facilitate the performance of purchases and redemptions of Creation Units,
(ii) prepare and transmit by means of Depository Trust Company’s (“DTC”)
book-entry system payments for dividends and distributions on or with respect to
the Shares declared by the Trust on behalf of the Fund, (iii) prepare and
deliver reports, information and documents as specified in the transfer agency
agreement, (iv) perform the customary services of a transfer agent and
dividend disbursing agent, and (v) render certain other miscellaneous
services as specified in the transfer agency agreement or as otherwise agreed
upon.
BNYM
is the custodian of the Trust’s portfolio securities and cash. The custodian of
the Trust may change from time to time. BNYM also maintains the Trust’s
accounting records. BNYM may appoint domestic and foreign sub‑custodians and use
depositories from time to time to hold securities and other instruments
purchased by the Trust in foreign countries and to hold cash and currencies for
the Trust.
BNYM
provides administrative services pursuant to a fund administration agreement
with the Trust (the “Fund Administration and Accounting Agreement”) pursuant to
which BNYM provides certain services, including, among others,
(i) preparation of certain shareholder reports and communications;
(ii) preparation of certain reports and filings with the SEC;
(iii) certain NAV computation services; and (iv) such other services
for the Trust as may be mutually agreed upon between the Trust and BNYM. For its
services under the Fund Administration and Accounting Agreement, BNYM receives
such fees based on a stated percentage of net assets as are agreed upon from
time to time between the parties. In addition, BNYM is reimbursed for reasonable
out‑of‑pocket expenses incurred in connection with the Fund Administration and
Accounting Agreement. In addition, an affiliate of BNYM will also provide
certain other services for the Trust, including, (i) providing foreign
exchange transaction services and (ii) executing trades in connection with
certain creation and redemption transactions effected partially in cash. For
these services, the BNYM affiliate will receive compensation based on levels
that are negotiated with the Trust and/or the Investment Adviser. BNYM also
provides certain middle office services to GSAM pursuant to a service agreement.
|
|
|
|
|
| |
| |
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 in which the Fund directly and
indirectly invests. 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
19
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.
The
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.
The
Fund’s Board of Trustees may approve a securities lending program where an
affiliate of the Investment Adviser is retained to serve as the securities
lending agent for the Fund to the extent that the Fund engages in the securities
lending program. For these services, the lending agent would receive a fee from
the Fund, including a fee based on the returns earned on the Fund’s investment
of the cash received as collateral for the loaned securities.
20
Distributions
The
Fund pays distributions from its investment income and from net realized capital
gains.
Distributions
from net investment income, if any, are normally declared and paid quarterly for
the Fund, and distributions from net capital gains, if any, are normally
declared and paid annually for the Fund. In addition the Fund may occasionally
make a distribution at a time when it is not normally made.
In
addition to the net investment income dividends paid quarterly, the 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”).
Dividends
and other distributions on Shares of the Fund are distributed on a pro rata
basis to beneficial owners of such Shares. Dividend payments are made through
Depository Trust Company (“DTC”) Participants and Indirect Participants (each as
described in the Book Entry section below) to beneficial owners then of record
with proceeds received from the Fund.
No
dividend reinvestment service is provided by the Fund. Broker-dealers may make
available the DTC book-entry dividend reinvestment service for use by beneficial
owners of the Fund for reinvestment of their dividend distributions. Beneficial
owners should contact their broker to determine the availability and costs of
the service and the details of participation therein. Brokers may require
beneficial owners to adhere to specific procedures and timetables. If this
service is available and used, dividend distributions of both income and
realized gains will be automatically reinvested in additional whole Shares of
the Fund purchased in the secondary market.
21
Shareholder Guide
|
|
|
|
|
| |
| |
BUYING AND SELLING SHARES |
|
| |
|
Shares
of the Fund may be acquired or redeemed directly from the Fund at NAV only in
Creation Units or multiples thereof, as discussed in the Creations and
Redemptions section of the Prospectus. Only an Authorized Participant (as
defined in the Creations and Redemptions section below) may engage in creation
or redemption transactions directly with the Fund. Once created, Shares of the
Fund generally trade in the secondary market in amounts less than a Creation
Unit.
Shares
of the Fund are expected to be listed for trading on a national securities
exchange during the trading day. Shares can be bought and sold throughout the
trading day at market price like Shares of other publicly traded companies.
However, there can be no guarantee that an active trading market will develop or
be maintained, or that the Fund Shares listing will continue or remain
unchanged. The Trust does not impose any minimum investment for Shares of the
Fund purchased on an exchange. Buying or selling the Fund’s Shares involves
certain costs that apply to all securities transactions. When buying or selling
Shares of the Fund through a financial intermediary, you may incur a brokerage
commission or other charges determined by your financial intermediary. Due to
these brokerage costs, if any, frequent trading may detract significantly from
investment returns. In addition, you may also incur the cost of the spread (the
difference between the bid price and the ask price). The commission is
frequently a fixed amount and may be a significant cost for investors seeking to
buy or sell small amounts of Shares. The spread varies over time for Shares of
the Fund based on its trading volume and market liquidity, and is generally less
if the Fund has more trading volume and market liquidity and more if the Fund
has less trading volume and market liquidity.
The
Fund’s primary listing exchange is NYSE Arca. NYSE Arca is open for trading
Monday through Friday and is closed on the following holidays: New Year’s Day,
Martin Luther King, Jr. Day, Presidents’ Day, Good Friday, Memorial Day,
Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day.
A
“business day” with respect to the Fund is each day the New York Stock Exchange,
NYSE Arca and the Trust are open and includes any day that the Fund is required
to be open under Section 22(e) of the Investment Company Act. Orders from
Authorized Participants to create or redeem Creation Units will only be accepted
on a business day. On days when NYSE Arca closes earlier than normal, the Fund
may require orders to create or redeem Creation Units to be placed earlier in
the day. See the SAI for more information.
The
Trust’s Board of Trustees has not adopted a policy of monitoring for frequent
purchases and redemptions of Fund Shares (“frequent trading”) that appear to
attempt to take advantage of potential arbitrage opportunities presented by a
lag between a change in the value of the Fund’s portfolio securities after the
close of the primary markets for the Fund’s portfolio securities and the
reflection of that change in the Fund’s NAV (“market timing”). The Trust
believes this is appropriate because ETFs, such as the Fund, are intended to be
attractive to arbitrageurs, as trading activity is critical to ensuring that the
market price of Fund Shares remains at or close to NAV. Since the Fund issues
and redeems Creation Units at NAV plus applicable transaction fees, and the
Fund’s Shares may be purchased and sold on NYSE Arca at prevailing market
prices, the risks of frequent trading are limited.
Section 12(d)(1)
of the Investment Company Act restricts investments by registered investment
companies and companies relying on Sections 3(c)(1) or 3(c)(7) of the Investment
Company Act in the securities of other investment companies. Registered
investment companies are permitted to invest in the Fund beyond the limits set
forth in Section 12(d)(1), subject to certain terms and conditions,
including that such investment companies enter into an agreement with the Trust.
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.
|
|
|
|
|
| |
| |
PAYMENTS TO BROKER‑DEALERS AND OTHER FINANCIAL INTERMEDIARIES |
|
| |
|
GSAM
and/or the Distributor (upon direction of the Fund) may make payments to
broker-dealers, registered investment advisers or other financial intermediaries
(each, a “Financial Intermediary”) related to activities that are designed to
make registered representatives, other professionals and individual investors
more knowledgeable about the Fund or for other activities, such as participation
in marketing activities and presentations, educational training programs, the
support or purchase of technology platforms/ software and/or reporting systems.
GSAM and/or the Distributor (upon direction of the Fund) may also make payments
to Financial Intermediaries for certain printing, publishing and mailing costs
associated with the Fund or materials relating to exchange-traded funds in
general and/or for the provision of analytical or other data to GSAM or its
affiliates relating to the sales
22
SHAREHOLDER
GUIDE
of
Fund Shares. In addition, GSAM and/or the Distributor may make payments to
Financial Intermediaries that make Fund Shares available to their clients or for
otherwise promoting the Fund, including through provision of consultative
services to GSAM or its affiliates relating to marketing of the Fund and/or sale
of Fund Shares and other Goldman Sachs Funds. Such payments, which may be
significant to the Financial Intermediary, are not made by the Fund. Rather,
such payments are made by GSAM and/or the Distributor from their own resources,
which may come directly or indirectly in part from management fees paid by the
Fund. Payments of this type are sometimes referred to as marketing support or
revenue-sharing payments. A Financial Intermediary may make decisions about
which investment options it recommends or makes available, or the level of
services provided, to its customers based on the marketing support payments it
is eligible to receive. Therefore, such payments to a Financial Intermediary
create conflicts of interest between the Financial Intermediary and its
customers and may cause the Financial Intermediary to recommend the Fund over
another investment. More information regarding these payments is contained in
the SAI. A shareholder should contact his or her Financial Intermediary’s
salesperson or other investment professional for more information regarding any
such payments the Financial Intermediary firm may receive from GSAM and/or the
Distributor.
The
Fund generally calculates its NAV as follows:
|
| |
NAV = |
|
(Value
of Assets of the Fund)
–
(Liabilities of the Fund) |
| |
Number of
Outstanding Shares of the Fund |
The
Fund’s NAV per share is generally calculated by the Fund’s provider of
administrative services 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. The
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 provider of
administrative services is unable for other reasons to facilitate pricing of
individual securities or calculate the 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 the 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.
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 securities in light of significant events, to reflect
what it believes to be the fair value of the securities at the time of
determining the 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 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
23
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.
Fair
valuation involves the risk that the values used by the Fund to price its
investments may be different from those used by other investment companies and
investors to price the same investments.
Foreign
securities may trade in their local markets on days the Fund is closed. As a
result, if the Fund holds foreign securities, its NAV may be impacted on days
when investors may not purchase or sell Fund Shares on the secondary market or
purchase or redeem Creation Units through the Fund.
The
Fund relies on various sources to calculate its NAV. The ability of the Fund’s
provider of administrative services to calculate the NAV per share 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 the 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 the 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.
DTC
serves as securities depository for the Shares. (The Shares may be held only in
book-entry form; stock certificates will not be issued.) DTC, or its nominee, is
the record or registered owner of all outstanding Shares. Beneficial ownership
of Shares will be shown on the records of DTC or its participants (described
below). Beneficial owners of Shares are not entitled to have Shares registered
in their names, will not receive or be entitled to receive physical delivery of
certificates in definitive form and are not considered the registered holder
thereof. Accordingly, to exercise any rights of a holder of Shares, each
beneficial owner must rely on the procedures o£ (i) DTC; (ii) “DTC
Participants,” i.e., securities brokers
and dealers, banks, trust companies, clearing corporations and certain other
organizations, some of whom (and/or their representatives) own DTC; and (iii)
“Indirect Participants,” i.e., brokers,
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a DTC Participant, either directly or indirectly, through
which such beneficial owner holds its interests. The Trust understands that
under existing industry practice, in the event the Trust requests any action of
holders of Shares, or a beneficial owner desires to take any action that DTC, as
the record owner of all outstanding Shares, is entitled to take, DTC would
authorize the DTC Participants to take such action and that the DTC Participants
would authorize the Indirect Participants and beneficial owners acting through
such DTC Participants to take such action and would otherwise act upon the
instructions of beneficial owners owning through them. As described above, the
Trust recognizes DTC or its nominee as the owner of all Shares for all purposes.
|
|
|
|
|
| |
| |
CREATIONS AND REDEMPTIONS |
|
| |
|
Prior
to trading in the secondary market, Shares of the Fund are “created” at NAV by
market makers, large investors and institutions only in block‑size Creation
Units or multiples thereof. Each “creator” or “Authorized Participant” enters
into an authorized participant agreement with the Fund’s Distributor.
A
creation transaction, which is subject to acceptance by BNYM, as the Trust’s
transfer agent, generally takes place when an Authorized Participant deposits
into the Fund a designated portfolio of securities (including any portion of
such securities for which cash may be substituted) and a specified amount of
cash in exchange for a specified number of Creation Units.
Similarly,
Shares can be redeemed only in Creation Units, generally for a designated
portfolio of securities (including any portion of such securities for which cash
may be substituted) held by the Fund and a specified amount of cash. Except when
aggregated in Creation Units, Shares are not redeemable by the Fund.
The
prices at which creations and redemptions occur are based on the next
calculation of NAV after a creation or redemption order is received in an
acceptable form under the authorized participant agreement.
Please
note the following with respect to the price at which transactions are
processed:
|
⬛ |
|
NAV
per Share 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 |
24
SHAREHOLDER
GUIDE
|
Exchange or NASDAQ market may officially
close. Fund Shares will generally not be priced on any day the New York
Stock Exchange is closed. |
|
⬛ |
|
The
Trust reserves the right to reprocess creation and redemption transactions
that were processed at a NAV that is subsequently adjusted, and to recover
amounts from (or distribute amounts to) Authorized Participants
accordingly based on the official closing NAV, as adjusted.
|
|
⬛ |
|
The
Trust reserves the right to advance the time by which creation 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 the 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 is stopped at
a time other than its regularly scheduled closing time. In the event the New
York Stock Exchange does not open for business, the Trust may, but is not
required to, open the Fund for creation and redemption transactions if the
Federal Reserve wire payment system is open. To learn whether the Fund is open
for business during this situation, please call the appropriate phone number
located on the back cover of the Prospectus.
Only
an Authorized Participant may create or redeem Creation Units directly with the
Fund.
In
the event of a system failure or other interruption, including disruptions at
market makers or Authorized Participants, orders to purchase or redeem Creation
Units either may not be executed according to the Fund’s instructions or may not
be executed at all, or the Fund may not be able to place or change orders.
To
the extent the Fund engages in in‑kind transactions, the Fund intends to comply
with the U.S. federal securities laws in accepting securities for deposit and
satisfying redemptions with redemption securities by, among other means,
assuring that any securities accepted for deposit and any securities used to
satisfy redemption requests will be sold in transactions that would be exempt
from registration under the Securities Act of 1933, as amended (the “Securities
Act”). Further, an Authorized Participant that is not a “qualified institutional
buyer,” as such term is defined under Rule 144A of the Securities Act, will not
be able to receive restricted securities eligible for resale under Rule 144A.
Creations
and redemptions must be made through a firm that is either a member of the
Continuous Net Settlement System of the National Securities Clearing Corporation
or a DTC Participant and has executed an agreement with the Distributor with
respect to creations and redemptions of Creation Unit aggregations. Information
about the procedures regarding creation and redemption of Creation Units
(including the cut‑off times for receipt of creation and redemption orders) and
the applicable transaction fees is included in the Fund’s SAI.
25
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 IRA or other tax‑advantaged account, you should
carefully consider the possible tax consequences of Fund distributions and the
sale of your Fund Shares.
The
Fund contemplates declaring as dividends each year all or substantially all of
its taxable income. Distributions you receive from the Fund are generally
subject to federal income tax, and may also be subject to state or local taxes.
This is true whether you reinvest your distributions in additional Fund Shares
or receive them in cash. For federal tax purposes, the Fund’s distributions
attributable to net investment income and short-term capital gains are taxable
to you as ordinary income while distributions of 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. Fund distributions to
non‑corporate shareholders attributable to dividends received by the Fund from
U.S. and certain qualified foreign corporations will generally be taxed at the
long-term capital gain rate, as long as certain other requirements are met. For
these lower rates to apply, the non‑corporate shareholder must own their Fund
Shares for at least 61 days during the 121‑day period beginning 60 days before
the Fund’s ex‑dividend date. The amount of the Fund’s distributions that would
otherwise qualify for this favorable tax treatment will be reduced as a result
of the Fund’s securities lending activities or high portfolio turnover rate.
Distributions
in excess of the Fund’s current and accumulated earnings and profits are treated
as a tax‑free return of your investment to the extent of your basis in the
Shares, and generally as capital gain thereafter. A return of capital, which for
tax purposes is treated as a return of your investment, reduces your basis in
Shares, thus reducing any loss or increasing any gain on a subsequent taxable
disposition of Shares. A distribution will reduce the Fund’s NAV per share and
may be taxable to you as ordinary income or capital gain even though, from an
economic standpoint, the distribution may constitute a return of capital.
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.
The
Fund’s transactions in derivatives (such as futures contracts and swaps) will be
subject to special tax rules, the effect of which may be to accelerate income to
the Fund, defer losses to the Fund, cause adjustments in the holding periods of
the Fund’s securities and convert short-term capital losses into long-term
capital losses. These rules could therefore affect the amount, timing and
character of distributions to you. The Fund’s use of derivatives may result in
the Fund realizing more short-term capital gains and ordinary income subject to
tax at ordinary income tax rates than it would if it did not use derivatives.
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. A percentage of the Fund’s dividends
paid to corporate shareholders may be eligible for the corporate
dividends-received deduction. This percentage may, however, be reduced as a
result of the Fund’s securities lending activities or high portfolio turnover
rate. Character and tax status of all distributions will be available to
shareholders after the close of each calendar year.
The
Fund may be subject to foreign withholding or other foreign taxes on income or
gain from certain foreign securities. In general, the Fund may deduct these
taxes in computing its taxable income.
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.”
26
TAXATION
|
|
|
|
|
| |
| |
TAXES ON CREATIONS AND REDEMPTIONS OF CREATION UNITS |
|
| |
|
A
person who exchanges securities for Creation Units generally will recognize a
gain or loss. The gain or loss will be equal to the difference between the
market value of the Creation Units at the time of exchange and the sum of the
exchanger’s aggregate basis in the securities surrendered and the amount of any
cash paid for such Creation Units. A person who exchanges Creation Units for
securities will generally recognize a gain or loss equal to the difference
between the exchanger’s basis in the Creation Units and the sum of the aggregate
market value of the securities received. The Internal Revenue Service (the
“IRS”), however, may assert that a loss realized upon an exchange of primarily
securities for Creation Units cannot be deducted currently under the rules
governing “wash sales,” or on the basis that there has been no significant
change in economic position. Persons exchanging securities for Creation Units or
redeeming Creation Units should consult their own tax adviser with respect to
whether wash sale rules apply and when a loss might be deductible and the tax
treatment of any creation or redemption transaction.
Under
current U.S. federal income tax laws, any capital gain or loss realized upon a
redemption (or creation) of Creation Units is generally treated as long-term
capital gain or loss if the Shares (or securities surrendered) have been held
for more than one year and as a short-term capital gain or loss if the Shares
(or securities surrendered) have been held for one year or less.
Your
sale of Fund Shares is a taxable transaction for federal income tax purposes,
and may also be subject to state and local taxes. 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 one year, 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 long-term 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 other Shares of that Fund
within a period of 61 days beginning 30 days before and ending 30 days after the
date of disposition (such as pursuant to a dividend reinvestment in Shares of
the Fund). If disallowed, the loss will be reflected in an adjustment to the
basis of the Shares acquired.
You
may be subject to backup withholding at a rate of 24% with respect to taxable
distributions if you do not provide your correct taxpayer identification number,
or certify that it is correct, or if you have been notified by the IRS that you
are subject to backup withholding.
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. However, withholding is generally
not required on properly designated distributions to non‑U.S. investors of
long-term capital gains. 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 Fund. It is expected
that the Fund will generally make designations of short-term gains, to the
extent permitted, but the Fund does not intend to make designations of any
distributions attributable to interest income. Therefore, all distributions of
interest income will be subject to withholding when paid to non‑U.S. investors.
Withholding
of U.S. tax (at a 30% rate) is required with respect to payments of taxable
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 applicable withholding agent to determine whether withholding is
required.
Reporting
to you and the IRS is required annually on Form 1099‑B with respect to not only
the gross proceeds of Fund Shares you sell or redeem but also their cost basis.
Shareholders should contact their intermediaries with respect to reporting of
cost basis and available elections with respect to their accounts. You should
carefully review the cost basis information provided by the applicable
intermediary and make any additional basis, holding period or other adjustments
that are required when reporting these amounts on your federal income tax
returns.
27
Other Information
|
|
|
|
|
| |
| |
PREMIUM/DISCOUNT INFORMATION |
|
| |
|
The
Fund has not yet commenced operations as of the date of the prospectus and,
therefore, does not have information to report regarding how often the Shares of
the Fund traded on the Exchange at a price above NAV (i.e., a premium) or below NAV (i.e., a discount). When available, information
regarding how often Shares of the Fund traded on the Exchange at a premium or
discount during the most recently completed calendar year and the most recently
completed calendar quarter(s) since that year (or the life of the Fund, if
shorter) can be found at www.gsamfunds.com.
The
method by which Creation Units are created and traded may raise certain issues
under applicable securities laws. Because new Creation Units are issued and sold
by the Trust on an ongoing basis, a “distribution,” as such term is used in the
Securities Act, may occur at any point. Broker dealers and other persons are
cautioned that some activities on their part may, depending on the
circumstances, result in their being deemed participants in a distribution in a
manner which could render them statutory underwriters and subject them to the
prospectus delivery and liability provisions of the Securities Act.
For
example, a broker dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Units after placing an order with the
Distributor, breaks them down into constituent Shares, and sells such Shares
directly to customers, or if it chooses to couple the creation of a supply of
new Shares with an active selling effort involving solicitation of secondary
market demand for Shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker dealer or its client in
the particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a categorization
as an underwriter.
Broker
dealers who are not “underwriters” but are participating in a distribution (as
contrasted to ordinary secondary trading transactions), and thus dealing with
Shares that are part of an “unsold allotment” within the meaning of
Section 4(a)(3)(C) of the Securities Act, would be unable to take advantage
of the prospectus delivery exemption provided by Section 4(a)(3) of the
Securities Act. This is because the prospectus delivery exemption in
Section 4(a)(3) of the Securities Act is not available in respect of such
transactions as a result of Section 24(d) of the Investment Company Act. As
a result, broker dealer firms should note that dealers who are not underwriters
but are participating in a distribution (as contrasted with ordinary secondary
market transactions) and thus dealing with the Shares that are part of an
overallotment within the meaning of Section 4(a)(3)(A) of the Securities
Act would be unable to take advantage of the prospectus delivery exemption
provided by Section 4(a)(3) of the Securities Act. Firms that incur a
prospectus delivery obligation with respect to Shares are reminded that, under
Rule 153 of the Securities Act, a prospectus delivery obligation under
Section 5(b)(2) of the Securities Act owed to an exchange member in
connection with a sale on the Exchange is satisfied by the fact that the
prospectus is available at the Exchange upon request. The prospectus delivery
mechanism provided in Rule 153 is only available with respect to transactions on
an exchange.
In
addition, certain affiliates of the Fund and the Investment Adviser may purchase
and resell Fund Shares pursuant to the Prospectus.
|
|
|
|
|
| |
| |
DISTRIBUTION AND SERVICE PLAN |
|
| |
|
The
Board of Trustees of the Trust has adopted a distribution and service plan
(“Plan”) pursuant to Rule 12b‑1 under the Investment Company Act. Under the
Plan, the Fund is authorized to pay distribution fees in connection with the
sale and distribution of its Shares and pay service fees in connection with the
provision of ongoing services to shareholders of the Fund and the maintenance of
shareholder accounts in an amount up to 0.25% of its average daily net assets
each year.
No
Rule 12b‑1 fees are currently paid by the Fund, and there are no current plans
to impose these fees. However, in the event Rule 12b‑1 fees are charged in
the future, because these fees are paid out of the Fund’s assets on an ongoing
basis, these fees will increase the cost of your investment in the Fund. By
purchasing Shares subject to distribution fees and service fees, you may pay
more over time than you would by purchasing Shares with other types of sales
charge arrangements. Long-term shareholders may pay more than the economic
equivalent of the maximum front‑end sales charge permitted by the rules of
FINRA. The net income attributable to Shares will be reduced by the amount of
distribution fees and service fees and other expenses of the Fund.
28
Appendix A
Additional Information on Portfolio Risks,
Securities and Techniques
|
|
|
|
|
| |
| |
A. General Portfolio Risks |
|
| |
|
The
Fund will be subject to the risks associated with equity investments. “Equity
investments” may include common stocks, preferred stocks, interests in real
estate investment trusts (“REITs”), convertible debt obligations, convertible
preferred stocks, equity interests in trusts, partnerships, joint ventures,
limited liability companies and similar enterprises, other investment companies
(including ETFs), warrants, stock purchase rights and synthetic and derivative
instruments (such as swaps and futures contracts) that have economic
characteristics similar to equity securities. In general, the values of equity
investments fluctuate in response to the activities of individual companies and
in response to general market and economic conditions. Accordingly, the values
of the equity investments that the Fund holds may decline over short or extended
periods. The stock markets tend to be cyclical, with periods when stock prices
generally rise and periods when prices generally decline. This volatility means
that the value of your investment in the Fund may increase or decrease. In
recent years, certain stock markets have experienced substantial price
volatility. To the extent the 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.
To
the extent the Fund invests in pooled investment vehicles (including investment
companies and ETFs) and partnerships, the Fund will be affected by the
investment policies, practices and performances of such entities in direct
proportion to the amount of assets the Fund invests therein.
The
following sections provide further information on certain types of securities
and investment techniques that may be used by the Fund, including its associated
risks. To the extent the Fund purchases these securities and engages in these
investment techniques, the Fund will also be subject to these 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 the Fund’s investment objective,
you should consider whether that Fund remains an appropriate investment in light
of your then current financial position and needs.
Risks of Investing in
Mid‑Capitalization and Small-Capitalization
Companies. The Fund may, to the extent consistent with
its investment policies, invest in mid‑ and small-capitalization companies.
Investments in mid‑ and small-capitalization companies involve greater risk and
portfolio price volatility than investments in larger capitalization stocks.
Among the reasons for the greater price volatility of these investments are the
less certain growth prospects of smaller firms and the lower degree of liquidity
in the markets for such securities. Mid‑ and small-capitalization companies may
be thinly traded and may have to be sold at a discount from current market
prices or in small lots over an extended period of time. In addition, these
securities are subject to the risk that during certain periods the liquidity of
particular issuers or industries, or all securities in particular investment
categories, will shrink or disappear suddenly and without warning as a result of
adverse economic or market conditions, or adverse investor perceptions whether
or not accurate. Because of the lack of sufficient market liquidity, the Fund
may incur losses because it will be required to effect sales at a
disadvantageous time and only then at a substantial drop in price. Mid‑ and
small-capitalization companies include “unseasoned” issuers that do not have an
established financial history; often have limited product lines, markets or
financial resources; may depend on or use a few key personnel for management;
and may be susceptible to losses and risks of bankruptcy. Mid‑ and
small-capitalization companies may be operating at a loss or have significant
variations in operating results; may be engaged in a rapidly changing business
with products subject to a substantial risk of obsolescence; may require
substantial additional capital to support their operations, to finance expansion
or to maintain their competitive position; and may have substantial borrowings
or may otherwise have a weak financial condition. In addition, these companies
may face intense competition, including competition from companies with greater
financial resources, more extensive development, manufacturing, marketing, and
other capabilities, and a larger number of qualified managerial and technical
personnel. Transaction costs for these investments are often higher than those
of larger capitalization companies. Investments in mid‑ and small-capitalization
companies may be more difficult to price precisely than other types of
securities because of their characteristics and lower trading volumes.
29
Risks of Derivative
Investments. The Fund may invest in
derivative instruments, including without limitation, options, futures, options
on futures, forwards, participation notes, swaps, options on swaps, structured
securities and other derivatives relating to foreign currency transactions.
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 the Fund will be required to pay
additional margin or set aside additional collateral to maintain open derivative
positions and the risk of loss by the Fund of margin deposits in the event of
the bankruptcy or other similar insolvency with respect to a broker or
counterparty with whom the Fund has an open derivative position. Losses may also
arise if the Fund receives cash collateral under the transactions 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 the 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, the 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, currency prices 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.
Risks of Emerging
Countries. The Fund may invest in
securities of issuers located in emerging countries. The risks of foreign
investment are heightened when the issuer is located in an emerging country.
Emerging countries are generally located in Africa, Asia, the Middle East,
Eastern and Central Europe, and Central and South America. The Fund’s purchase
and sale of portfolio securities in certain emerging countries may be
constrained by limitations relating to daily changes in the prices of listed
securities, periodic trading or settlement volume and/or limitations on
aggregate holdings of foreign investors. Such limitations may be computed based
on the aggregate trading volume by or holdings of the Fund, the Investment
Adviser, its affiliates and their respective clients and other service
providers. The Fund may not be able to sell securities in circumstances where
price, trading or settlement volume limitations have been reached.
Foreign
investment in the securities markets of certain emerging countries is restricted
or controlled to varying degrees which may limit investment in such countries or
increase the administrative costs of such investments. For example, certain
Asian countries require governmental approval prior to investments by foreign
persons or limit investment by foreign persons to only a specified percentage of
an issuer’s outstanding securities or a specific class of securities which may
have less advantageous terms (including price) than securities of the issuer
available for purchase by nationals. In addition, certain countries may restrict
or prohibit investment opportunities in issuers or industries deemed important
to national interests. Such restrictions may affect the market price, liquidity
and rights of securities that may be purchased by the Fund. The repatriation of
investment income, capital or the proceeds of securities sales from certain
emerging countries is subject to restrictions such as the need for governmental
consents, which may make it difficult for the Fund to invest in such emerging
countries. The Fund could be adversely affected by delays in, or a refusal to
grant, any required governmental approval for such repatriation. In situations
where a country restricts direct investment in securities (which may occur in
certain Asian and other countries), the Fund may invest in such countries
through other investment funds in such countries.
Many
emerging countries have experienced currency devaluations and substantial (and,
in some cases, extremely high) rates of inflation. Other emerging countries have
experienced economic recessions. These circumstances have had a negative effect
on the economies and securities markets of such emerging countries. Economies in
emerging countries generally are dependent heavily upon commodity prices and
international trade and, accordingly, have been and may continue to be affected
adversely by the economies of their trading partners, trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which they
trade.
Many
emerging countries are subject to a substantial degree of economic, political
and social instability. Governments of some emerging countries are authoritarian
in nature or have been installed or removed as a result of military coups, while
governments in other emerging countries have periodically used force to suppress
civil dissent. Disparities of wealth, the pace and success of democratization,
and ethnic, religious and racial disaffection, among other factors, have also
led to social unrest, violence and/or labor unrest in some emerging countries.
Unanticipated political or social developments may result in sudden and
significant investment losses. Investing in emerging countries involves greater
risk of loss due to expropriation, nationalization, confiscation of assets and
property or the imposition of restrictions on foreign investments and on
repatriation of capital invested. As an example, in the past, some Eastern
European governments have expropriated substantial amounts of private property,
and many claims of the property owners have never been fully settled. There is
no assurance that similar expropriations will not occur in other countries.
30
APPENDIX
A
The
Fund’s investment in emerging countries may also be subject to withholding or
other taxes, which may be significant and may reduce the return to the Fund from
an investment in issuers in such countries.
Settlement
procedures in emerging countries are frequently less developed and reliable than
those in the United States and may involve the Fund’s delivery of securities
before receipt of payment for their sale. In addition, significant delays may
occur in certain markets in registering the transfer of securities. Settlement
or registration problems may make it more difficult for the Fund to value its
portfolio securities and could cause the Fund to miss attractive investment
opportunities, to have a portion of its assets uninvested or to incur losses due
to the failure of a counterparty to pay for securities the Fund has delivered or
the Fund’s inability to complete its contractual obligations because of theft or
other reasons.
The
creditworthiness of the local securities firms used by the Fund in emerging
countries may not be as sound as the creditworthiness of firms used in more
developed countries. As a result, the Fund may be subject to a greater risk of
loss if a securities firm defaults in the performance of its responsibilities.
The
small size and inexperience of the securities markets in certain emerging
countries and the limited volume of trading in securities in those countries may
make the Fund’s investments in such countries less liquid and more volatile than
investments in countries with more developed securities markets (such as the
United States, Japan and most Western European countries). The Fund’s
investments in emerging countries are subject to the risk that the liquidity of
a particular investment, or investments generally, in such countries will shrink
or disappear suddenly and without warning as a result of adverse economic,
market or political conditions or adverse investor perceptions, whether or not
accurate. Because of the lack of sufficient market liquidity, the Fund may incur
losses because it will be required to effect sales at a disadvantageous time and
only then at a substantial drop in price. Investments in emerging countries may
be more difficult to value precisely because of the characteristics discussed
above and lower trading volumes.
The
Fund’s use of foreign currency management techniques in emerging countries may
be limited. The Investment Adviser anticipates that a significant portion of the
Fund’s currency exposure in emerging countries may not be covered by those
techniques.
Risks of Illiquid
Investments. The 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 any investment that the 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 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 the 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 the Fund that are liquid at the time of purchase may subsequently
become illiquid. If one or more investments in the Fund’s portfolio become
illiquid, the Fund may exceed the 15 percent limitation in illiquid
investments. In the event that changes in the portfolio or other external events
cause the 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 the 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 the 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 “Shareholder
Guide—Net Asset Value.”
Risks of Foreign
Investment. The Fund may make foreign investments.
Foreign investments involve special risks that are not typically associated with
U.S. dollar denominated or quoted securities of U.S. issuers. Foreign
investments may be affected by changes in currency rates, changes in foreign or
U.S. laws or restrictions applicable to such investments and changes in exchange
control regulations (e.g., currency
blockage). A decline in the exchange rate of the currency (i.e., weakening of the currency against the
U.S. dollar) in which a portfolio security is quoted or denominated relative to
the U.S. dollar would reduce the value of the portfolio security. In addition,
if the currency in which the Fund receives dividends, interest or other payments
declines in value against the U.S. dollar before such income is distributed as
dividends to shareholders or converted to U.S. dollars, the Fund may have to
sell portfolio securities to obtain sufficient cash to pay such dividends.
31
Certain
foreign markets may rely heavily on particular industries or foreign capital and
are more vulnerable to diplomatic developments, the imposition of economic
sanctions against a particular country or countries, organizations, entities
and/or individuals, changes in international trading patterns, trade barriers,
and other protectionist or retaliatory measures. International trade barriers or
economic sanctions against foreign countries, organizations, entities and/or
individuals may adversely affect the Fund’s foreign holdings or exposures. The
type and severity of sanctions and other similar measures, including counter
sanctions and other retaliatory actions, that may be imposed could vary broadly
in scope, and their impact is impossible to predict. These types of measures may
include, but are not limited to, banning a sanctioned country from global
payment systems that facilitate cross-border payments, restricting the
settlement of securities transactions by certain investors, and freezing the
assets of particular countries, entities, or persons. The imposition of
sanctions and other similar measures could, among other things, cause a decline
in the value and/or liquidity of securities issued by the sanctioned country or
companies located in or economically tied to the sanctioned country, downgrades
in the credit ratings of the sanctioned country or companies located in or
economically tied to the sanctioned country, devaluation of the sanctioned
country’s currency, and increased market volatility and disruption in the
sanctioned country and throughout the world. Sanctions and other similar
measures could limit or prevent the Fund from buying and selling securities (in
the sanctioned country and other markets), significantly delay or prevent the
settlement of securities transactions, and significantly impact the Fund’s
liquidity and performance.
Brokerage
commissions, custodial services and other costs relating to investment in
international securities markets generally are more expensive than in the United
States. In addition, clearance and settlement procedures may be different in
foreign countries and, in certain markets, such procedures have been unable to
keep pace with the volume of securities transactions, thus making it difficult
to conduct such transactions.
Foreign
issuers are not generally subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to U.S. issuers. There may be
less publicly available information about a foreign issuer than about a U.S.
issuer. In addition, there is generally less government regulation of foreign
markets, companies and securities dealers than in the United States, and the
legal remedies for investors may be more limited than the remedies available in
the United States. Foreign securities markets may have substantially less volume
than U.S. securities markets and securities of many foreign issuers are less
liquid and more volatile than securities of comparable domestic issuers.
Furthermore, with respect to certain foreign countries, there is a possibility
of nationalization, expropriation or confiscatory taxation, imposition of
withholding or other taxes on dividend or interest payments (or, in some cases,
capital gains distributions), limitations on the removal of funds or other
assets from such countries, and risks of political or social instability or
diplomatic developments which could adversely affect investments in those
countries.
Certain
foreign investments may become less liquid in response to social, political or
market developments or adverse investor perceptions, or become illiquid after
purchase by the Fund, particularly during periods of market turmoil. Certain
foreign investments may become illiquid when, for instance, there are few, if
any, interested buyers and sellers or when dealers are unwilling to make a
market for certain securities. When the Fund holds illiquid investments, its
portfolio may be harder to value, especially in changing markets.
Concentration
of the Fund’s assets in one or a few countries and currencies will subject the
Fund to greater risks than if the Fund’s assets were not geographically
concentrated.
Investments
in foreign securities may take the form of sponsored and ADRs, GDRs, European
Depositary Receipts (“EDRs”) or other similar instruments representing
securities of foreign issuers. ADRs, GDRs and EDRs represent the right to
receive securities of foreign issuers deposited in a bank or other depository.
ADRs and certain GDRs are traded in the United States. GDRs may be traded in
either the United States or in foreign markets. EDRs are traded primarily
outside the United States. Prices of ADRs are quoted in U.S. dollars. EDRs and
GDRs are not necessarily quoted in the same currency as the underlying security.
Foreign Custody
Risk. Because the Fund may
invest in foreign securities, the Fund may hold such securities and cash with
foreign banks, agents and securities depositories appointed by the Fund’s
custodian (each a “Foreign Custodian”). Some Foreign Custodians may be recently
organized or new to the foreign custody business. In some countries, Foreign
Custodians may be subject to little or no regulatory oversight over or
independent evaluation of their operations. Further, the laws of certain
countries may place limitations on the Fund’s ability to recover its assets if a
Foreign Custodian enters bankruptcy. Investments in emerging markets may be
subject to even greater custody risks than investments in more developed
markets. Custody services in emerging market countries are very often
undeveloped and may be considerably less well regulated than in more developed
countries, and thus may not afford the same level of investor protection as
would apply in developed countries.
32
APPENDIX
A
Risks of Sovereign
Debt. Investment in sovereign
debt obligations by the Fund involves risks not present in debt obligations of
corporate issuers. The issuer of the debt or the governmental authorities that
control the repayment of the debt may be unable or unwilling to repay principal
or interest when due in accordance with the terms of such debt, and the Fund may
have limited recourse to compel payment in the event of a default. Periods of
economic uncertainty may result in the volatility of market prices of sovereign
debt, and in turn the Fund’s NAV, to a greater extent than the volatility
inherent in debt obligations of U.S. issuers.
A
sovereign debtor’s willingness or ability to repay principal and pay interest in
a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign currency reserves, the availability of
sufficient foreign exchange on the date a payment is due, the relative size of
the debt service burden to the economy as a whole, the sovereign debtor’s policy
toward international lenders, and the political constraints to which a sovereign
debtor may be subject.
Risks of Large
Shareholder Redemptions. Certain funds, accounts,
individuals or Goldman Sachs affiliates may from time to time own (beneficially
or of record) or control a significant percentage of the Fund’s shares.
Redemptions by these funds, accounts or individuals of their holdings in the
Fund may impact the Fund’s liquidity and NAV. These redemptions may also force
the Fund to sell securities, which may negatively impact the Fund’s brokerage
and tax costs.
Credit/Default
Risks. Debt securities purchased by the Fund may
include U.S. Government Securities (including zero coupon bonds) and securities
issued by foreign governments, domestic and foreign 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 Global Ratings, 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. For the purpose of determining compliance with any credit
rating requirement, the 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.
Therefore, a security will be deemed to have met a rating requirement if it
receives the minimum required rating from at least one such rating organization
even though it has been rated below the minimum rating by one or more other
rating organizations, or if unrated by such rating organizations, the security
is determined by the Investment Adviser to be of comparable credit quality.
A
security satisfies the 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 the Fund’s minimum
rating requirement at the time of purchase and is subsequently downgraded below
that rating, the Fund will not be required to dispose of the security. If a
downgrade occurs, the Investment Adviser will consider which action, including
the sale of the security, is in the best interest of the Fund and its
shareholders.
The
Fund may invest in fixed income securities rated BB+ or Ba1 or below (or
comparable unrated securities) which are commonly referred to as “junk bonds.”
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 the Fund’s portfolio is downgraded by a rating
organization, the market price and liquidity of such security may be adversely
affected.
Risks of Short
Selling. The Fund may engage in short selling. In these
transactions, the Fund sells a financial instrument it does not own in
anticipation of a decline in the market value of the instrument, then must
borrow the instrument to make delivery to the buyer. The Fund is obligated to
replace the financial instrument borrowed by purchasing it at the market price
at the time of replacement. The price at such time may be more or less than the
price at which the instrument was sold by the Fund, which may result in a loss
or gain, respectively. Unlike purchasing a financial instrument like a stock,
where potential losses are limited to the purchase price and there is no upside
limit on potential gain, short sales involve no cap on maximum losses, while
gains are limited to the price of the stock at the time of the short sale.
The
Fund may, during the term of any short sale, withdraw the cash proceeds of such
short sale and use these cash proceeds to purchase additional securities or for
any other Fund purposes. Because cash proceeds are Fund assets which are
typically used to satisfy the collateral requirements for the short sale, the
reinvestment of these cash proceeds may require the Fund to post as collateral
other securities that it owns. If the Fund reinvests the cash proceeds, the Fund
might be required to post an amount greater than its net assets (but less than
its total assets) as collateral. For these or other reasons, the Fund might be
required to liquidate long and short positions at times that may be
disadvantageous to the Fund.
33
The
Fund may also enter into a short derivative position through a futures contract,
an option or swap agreement. Taking short positions involves leverage of the
Fund’s assets and presents various risks. If the price of the instrument or
market which the Fund has taken a short position on increases, then the Fund
will incur a loss equal to the increase in price from the time that the short
position was entered into plus any related interest payments or other fees.
Taking short positions involves the risk that losses may be disproportionate and
may exceed the amount invested.
The
Fund may also make short sales against the box, in which the Fund enters into a
short sale of a financial instrument which it owns or has the right to obtain at
no additional cost.
The
SEC and financial industry regulatory authorities in other countries have
imposed temporary prohibitions and restrictions on certain types of short sale
transactions. These prohibitions and restrictions, or the imposition of other
regulatory requirements on short selling in the future, could inhibit the
ability of the Investment Adviser to sell securities short on behalf of the
Fund.
Temporary Investment
Risks. The Fund may, for
temporary defensive purposes, invest a certain percentage of its total assets
in:
|
⬛ |
|
U.S.
Government Securities |
|
⬛ |
|
Commercial
paper rated at least A‑2 by S&P Global Ratings; 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 |
|
⬛ |
|
Non‑convertible
preferred stocks and non‑convertible corporate bonds with a remaining
maturity of less than one year |
|
⬛ |
|
ETFs
and other investment companies providing similar investment exposures
|
When
the Fund’s assets are invested in such instruments, the Fund may not be
achieving its investment objective.
|
|
|
|
|
| |
| |
C. Portfolio Securities and Techniques |
|
| |
|
This
section provides further information on certain types of securities and
investment techniques that may be used by the Fund, including its associated
risks.
The
Fund 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.
Convertible
Securities. The Fund may invest in
convertible securities. Convertible securities are preferred stock or debt
obligations that are convertible into common stock. Convertible securities
generally offer lower interest or dividend yields than nonconvertible 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
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.
Foreign Currency
Transactions. The Fund may, to the
extent consistent with its investment policies, purchase or sell foreign
currencies on a cash basis or through forward contracts. A forward contract
involves an obligation to purchase or sell a specific currency at a future date
at a price set at the time of the contract. The Fund may engage in foreign
currency transactions for hedging purposes and to seek to protect against
anticipated changes in future foreign currency exchange rates. In addition, the
Fund may enter into foreign currency transactions to seek a closer correlation
between the Fund’s overall currency exposures and the currency exposures of the
Fund’s performance benchmark.
The
Fund may also engage in cross-hedging by using forward contracts in a currency
different from that in which the hedged security is denominated or quoted. The
Fund may hold foreign currency received in connection with investments in
foreign securities when, in the judgment of the Investment Adviser, it would be
beneficial to convert such currency into U.S. dollars at a later date (e.g., the Investment Adviser may anticipate
the foreign currency to appreciate against the U.S. dollar).
34
APPENDIX
A
The
Fund may, from time to time, engage in non‑deliverable forward transactions to
manage currency risk or to gain exposure to a currency without purchasing
securities denominated in that currency. A non‑deliverable forward is a
transaction that represents an agreement between the Fund and a counterparty
(usually a commercial bank) to pay the other party the amount that it would cost
based on current market rates as of the termination date to buy or sell a
specified (notional) amount of a particular currency at an agreed upon foreign
exchange rate on an agreed upon future date. If the counterparty defaults, the
Fund will have contractual remedies pursuant to the agreement related to the
transaction, but the Fund may be delayed or prevented from obtaining payments
owed to it pursuant to non‑deliverable forward transactions. Such
non‑deliverable forward transactions will be settled in cash.
Currency
exchange rates may fluctuate significantly over short periods of time, causing,
along with other factors, the Fund’s NAV to fluctuate (when the Fund’s NAV
fluctuates, the value of your shares may go up or down). Currency exchange rates
also can be affected unpredictably by the intervention of U.S. or foreign
governments or central banks, or the failure to intervene, or by currency
controls or political developments in the United States or abroad.
Certain
forward foreign currency exchange contracts and other currency transactions are
not exchange traded or cleared. The market in such forward foreign currency
exchange contracts, currency swaps and other privately negotiated currency
instruments offers less protection against defaults by the other party to such
instruments than is available for currency instruments traded on an exchange.
Such contracts are subject to the risk that the counterparty to the contract
will default on its obligations. Because these contracts are not guaranteed by
an exchange or clearinghouse, a default on a contract would deprive the Fund of
unrealized profits, transaction costs or the benefits of a currency hedge or
could force the Fund to cover its purchase or sale commitments, if any, at the
current market price.
The
Fund is not required to post cash collateral with its counterparties in certain
foreign currency transactions. Accordingly, the Fund may remain more fully
invested (and more of the Fund’s assets may be subject to investment and market
risk) than if it were required to post collateral with its counterparties (which
is the case with certain transactions). Where the Fund’s counterparties are not
required to post cash collateral with the Fund, the Fund will be subject to
additional counterparty risk.
Commodity-linked
Derivative Instruments. In accordance with existing law
or in reliance upon an IRS private letter ruling or an opinion of counsel or
other applicable guidance or relief provided by the IRS or other agencies, the
Fund and its Subsidiaries (if applicable) may invest in commodity-linked
derivative instruments such as commodity-linked swaps, commodity index-linked
structured notes and other derivative instruments that provide exposure to the
investment returns of the commodity markets without direct investment in
physical commodities or commodities futures contracts. Commodity-linked swaps
are derivative instruments whereby the cash flows agreed upon between
counterparties are dependant upon the price of the underlying commodity or
commodity index over the life of the swap. The value of the swap will rise and
fall in response to changes in the underlying commodity or commodity index.
These swaps expose the Fund economically to movements in commodity prices. As
noted above under “Taxation,” the Fund’s ability to utilize commodity-linked
swaps as part of its investment strategy is limited to a maximum of
10 percent of its gross income. The Fund may also invest in
commodity-linked notes that pay a return linked to the performance of a
commodities index or basket of futures contracts with respect to all of the
commodities in an index. In some cases, the return is based on a multiple of the
performance of the relevant index or basket. Structured notes may be structured
by the issuer or the purchaser of the note. Structured notes are derivative debt
instruments with principal payments generally linked to the value of
commodities, commodity futures contracts or the performance of commodity indices
and interest and coupon payments pegged to a market-based interest rate, such as
LIBOR or a bank’s prime rate. The value of these notes will rise or fall in
response to changes in the underlying commodity or related index or investment.
The Fund may also take long and/or short positions in commodities by investing
in other investment companies, ETFs or other pooled investment vehicles, such as
commodity pools. Certain of these other investment vehicles may seek to provide
exposure to commodities without actually owning physical commodities, and may
therefore produce different results than they would through ownership of the
commodities. The Fund pursues its objective without directly investing in
commodities.
Commodities
are assets such as oil, gas, industrial and precious metals, livestock, and
agricultural or meat products, or other items that have tangible properties, as
compared to stocks or bonds, which are financial instruments. In choosing
investments, the Investment Adviser seeks to provide exposure to various
commodities and commodity sectors. The value of commodity-linked derivative
instruments may be affected by a variety of factors, including, but not limited
to, overall market movements and other factors affecting the value of particular
industries or commodities, such as weather, disease, embargoes, acts of war or
terrorism, or political and regulatory developments.
The
prices of commodity-linked derivative instruments may move in different
directions than investments in traditional equity and debt securities when the
value of those traditional securities is declining due to adverse economic
conditions. As an example,
35
during
periods of rising inflation, debt securities have historically tended to decline
in value due the general increase in prevailing interest rates. Conversely,
during those same periods of rising inflation, the prices of certain
commodities, such as oil and metals, have historically tended to increase. Of
course, there cannot be any guarantee that these investments will perform in
that manner in the future, and at certain times the price movements of
commodity-linked derivative instruments have been parallel to those of debt and
equity securities.
Commodities
have historically tended to increase and decrease in value during different
parts of the business cycle than financial assets. Nevertheless, at various
times, commodities prices may move in tandem with the prices of financial assets
and thus may not provide overall portfolio diversification benefits.
Under
favorable economic conditions, the Fund’s investments in commodity-linked
derivative instruments may be expected to underperform an investment in
traditional securities. Over the long term, the returns on such investments are
expected to exhibit low or negative correlation with stocks and bonds.
Structured
Securities. The Fund 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 the 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,
the Fund’s investments in structured securities may be subject to the limits
applicable to investments in other investment companies.
Structured
securities are considered hybrid instruments because they are derivative
instruments the value of which depends on, or is derived from or linked to, the
value of an underlying asset, interest rate index or commodity. Commodity-linked
notes are hybrid instruments because the principal and/or interest payments on
those notes is linked to the value of the individual commodities, futures
contracts or the performance of one or more commodity indices.
Structured
securities include, but are not limited to, equity linked notes. An equity
linked note is a note whose performance is tied to a single stock, a stock index
or a basket of stocks. Equity linked notes combine the principal protection
normally associated with fixed income investments with the potential for capital
appreciation normally associated with equity investments. Upon the maturity of
the note, the holder generally receives a return of principal based on the
capital appreciation of the linked securities. Depending on the terms of the
note, equity linked notes may also have a “cap” or “floor” on the maximum
principal amount to be repaid to holders, irrespective of the performance of the
underlying linked securities. For example, a note may guarantee the repayment of
the original principal amount invested (even if the underlying linked securities
have negative performance during the note’s term), but may cap the maximum
payment at maturity at a certain percentage of the issuance price or the return
of the underlying linked securities. Alternatively, the note may not guarantee a
full return on the original principal, but may offer a greater participation in
any capital appreciation of the underlying linked securities. The terms of an
equity linked note may also provide for periodic interest payments to holders at
either a fixed or floating rate. The secondary market for equity linked notes
may be limited, and the lack of liquidity in the secondary market may make these
securities difficult to dispose of and to value. Equity linked notes will be
considered equity securities for purposes of the Fund’s investment objective and
policies.
REITs. The Fund may invest in
REITs. REITs are pooled investment vehicles that invest primarily in either real
estate or real estate related loans. The value of a REIT is affected by changes
in the value of the properties owned by the REIT or securing mortgage loans held
by the REIT. REITs are dependent upon the ability of the REITs’ managers, and
are subject to heavy cash flow dependency, default by borrowers and the
qualification of the REITs under applicable regulatory requirements for
favorable income tax treatment. REITs are also subject to risks generally
associated with investments in real estate including possible declines in the
value of real estate, general and local economic conditions, environmental
problems and changes in interest rates. To the extent that assets underlying a
REIT are concentrated geographically, by property type or in certain other
respects, these
36
APPENDIX
A
risks
may be heightened. The Fund will indirectly bear its proportionate share of any
expenses, including management fees, paid by a REIT in which it invests.
Options on
Securities, Securities Indices and Foreign Currencies. A put option gives the
purchaser of the option the right to sell, and the writer (seller) of the option
the obligation to buy, the underlying instrument during the option period. A
call option gives the purchaser of the option the right to buy, and the writer
(seller) of the option the obligation to sell, the underlying instrument during
the option period. The Fund may write (sell) call and put options and purchase
call and put options, on any securities and other instruments in which it may
invest or any index consisting of securities or other instruments in which it
may invest. The Fund may also, to the extent consistent with its investment
policies, purchase and write (sell) put and call options on foreign currencies.
The
writing and purchase of options is a highly specialized activity which involves
special investment risks. Options may be used for either hedging or
cross-hedging purposes, or to seek to increase total return (which 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 (or currency) markets. If the
Investment Adviser is incorrect in its expectation of changes in market prices
or determination of the correlation between the instruments or indices on which
options are written and purchased and the instruments in the Fund’s investment
portfolio, the Fund may incur losses that it would not otherwise incur. The use
of options can also increase the Fund’s transaction costs. Options written or
purchased by the Fund may be traded on either U.S. or foreign exchanges or over
the counter. Foreign and over‑the‑counter options will present greater
possibility of loss because of their greater illiquidity and credit risks.
Equity
Swaps. The Fund may invest in
equity swaps. Equity swaps allow the parties to a swap agreement to exchange the
dividend income or other components of return on an equity investment (for
example, a group of equity securities or an index) for another payment stream.
An equity swap may be used by the Fund to invest in a market without owning or
taking physical custody of securities in circumstances in which direct
investment may be restricted for legal reasons or is otherwise deemed
impractical or disadvantageous.
The
value of swaps can be very volatile. To the extent that the Investment Adviser
does not accurately analyze and predict the potential relative fluctuation of
the components swapped with another party, or the creditworthiness of the
counterparty, the Fund may suffer a loss, which may be substantial. The value of
some components of a swap (such as the dividends on a common stock) may also be
sensitive to changes in interest rates. Furthermore, swaps may be illiquid, and
the Fund may be unable to terminate its obligations when desired.
Currently,
certain standardized swap transactions are subject to mandatory central
clearing. Although central clearing is expected to decrease counterparty risk
and increase liquidity compared to bilaterally negotiated swaps, central
clearing does not eliminate counterparty risk or illiquidity risk entirely.
Floating and Variable
Rate Obligations. The 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 of 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. The 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 effect 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 Fund,
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 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.
37
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 LIBOR or Secured Overnight Financing Rate (“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. At the end of 2021,
certain LIBORs were discontinued, but the most widely used LIBORs may continue
to be provided on a representative basis until June 30, 2023. The
unavailability or replacement of LIBOR may affect the value, liquidity or return
on certain Fund investments and may result in costs incurred in connection with
closing out positions and entering into new trades. Any pricing adjustments to
the Fund’s investments resulting from a substitute reference rate may also
adversely affect the Fund’s performance and/or NAV.
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.
Zero Coupon, Deferred
Interest, Pay‑In‑Kind and Capital Appreciation
Bonds. The Fund may invest in zero coupon bonds. The
Fund may also invest in 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.
Municipal
Securities. The Fund may invest in securities and
instruments issued by state and local government issuers. Municipal securities
in which the Fund may invest consist of bonds, notes, commercial paper and other
instruments (including participating interests in such securities) issued by or
on behalf of states, territories and possessions of the United States (including
the District of Columbia) and their political subdivisions, agencies or
instrumentalities. Such securities may pay fixed, variable or floating rates of
interest. 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 public 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 Fund may
invest include private activity bonds, municipal leases, certificates of
participation, pre‑funded municipal securities and auction rate securities.
Dividends paid by the Fund based on investments in municipal securities will be
taxable.
Mortgage-Backed
Securities. The Fund may invest in mortgage-backed
securities. Mortgage-backed securities represent direct or indirect
participations in, or are collateralized by and payable from, mortgage loans
secured by real property. Mortgage-backed securities can be backed by either
fixed rate mortgage loans or adjustable rate mortgage loans, and may be issued
by either a governmental or non‑governmental entity. Privately issued
mortgage-backed securities are normally structured with one or more types of
“credit enhancement.” However, these mortgage-backed securities typically do not
have the same credit standing as U.S. government guaranteed mortgage-backed
securities.
Mortgage-backed
securities may include multiple class securities, including collateralized
mortgage obligations (“CMOs”) and Real Estate Mortgage Investment Conduit
(“REMIC”) pass-through or participation certificates. A REMIC is a CMO that
qualifies for special tax treatment and invests in certain mortgages principally
secured by interests in real property and other permitted investments. CMOs
provide an investor with a specified interest in the cash flow from a pool of
underlying mortgages or of other mortgage-backed securities. CMOs are issued in
multiple classes each with a specified fixed or floating interest rate and a
final scheduled distribution rate. In many cases, payments of principal are
applied to the CMO classes in the order of their respective stated maturities,
so that no principal payments will be made on a CMO class until all other
classes having an earlier stated maturity date are paid in full.
Sometimes,
however, CMO classes are “parallel pay,” i.e., payments of principal are made to two or
more classes concurrently. In some cases, CMOs may have the characteristics of a
stripped mortgage-backed security whose price can be highly volatile. CMOs may
exhibit more or less price volatility and interest rate risk than other types of
mortgage-related obligations, and under certain interest rate and payment
scenarios, the Fund may fail to recoup fully its investment in certain of these
securities regardless of their credit quality.
Mortgaged-backed
securities also include stripped mortgage-backed securities (“SMBS”), which are
derivative multiple class mortgage-backed securities. SMBS are usually
structured with two different classes: one that receives substantially all of
the interest payments and the other that receives substantially all of the
principal payments from a pool of mortgage loans. The market
38
APPENDIX
A
value
of SMBS consisting entirely of principal payments generally is unusually
volatile in response to changes in interest rates. The yields on SMBS that
receive all or most of the interest from mortgage loans are generally higher
than prevailing market yields on other mortgage-backed securities because their
cash flow patterns are more volatile and there is a greater risk that the
initial investment will not be fully recouped.
Throughout
2008, the market for mortgage-backed securities began experiencing
substantially, often dramatically, lower valuations and greatly reduced
liquidity. Markets for other asset-backed securities have also been affected.
These instruments are increasingly subject to liquidity constraints, price
volatility, credit downgrades and unexpected increases in default rates and,
therefore, may be more difficult to value and more difficult to dispose of than
previously. These events may have an adverse effect on the Fund to the extent it
invests in mortgage-backed or other fixed income securities or instruments
affected by the volatility in the fixed income markets.
Asset-Backed
Securities. The Fund may invest in asset-backed
securities. Asset-backed securities are securities whose principal and interest
payments are collateralized by pools of assets such as auto loans, credit card
receivables, leases, installment contracts and personal property. Asset-backed
securities are often subject to more rapid repayment than their stated maturity
date would indicate as a result of the pass-through of 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, the 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.
Asset-backed securities present credit risks that are not presented by
mortgage-backed securities. This is because asset-backed securities generally do
not have the benefit of a security interest in collateral that is comparable to
mortgage assets. If the issuer of an asset-backed security defaults on its
payment obligations, there is the possibility that, in some cases, the Fund will
be unable to possess and sell the underlying collateral and that the Fund’s
recoveries on repossessed collateral may not be available to support payments on
the securities. In the event of a default, the Fund may suffer a loss if it
cannot sell collateral quickly and receive the amount it is owed. 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 market conditions impacting asset-backed securities more generally.
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 issuer 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, the Fund’s ability to achieve its
investment objective 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 the 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 the
Fund of its initial investment and any anticipated income or appreciation is
uncertain.
39
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 the 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 the Fund’s ability to dispose
of particular portfolio investments. A less liquid secondary market also may
make it more difficult for the 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.
Borrowings and
Reverse Repurchase Agreements. The Fund can borrow
money from banks and other financial institutions in amounts not exceeding
one‑third of its total assets (including the amount borrowed or received). The
Fund also may enter into reverse repurchase agreements.
Reverse
repurchase agreements involve the sale of securities held by the 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.
Borrowings
and reverse repurchase agreements involve leveraging. If the securities held by
the 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 the 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 the 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.
Mortgage Dollar
Rolls. The Fund may enter into mortgage dollar rolls. A
mortgage dollar roll involves the sale by the Fund of securities for delivery in
the current month. The Fund simultaneously contracts with the same counterparty
to repurchase substantially similar (same type, coupon and maturity) but not
identical securities on a specified future date. During the roll period, the
Fund loses the right to receive principal and interest paid on the securities
sold. However, the Fund benefits to the extent of any difference between
(a) the price received for the securities sold and (b) the lower
forward price for the future purchase and/or fee income plus the interest earned
on the cash proceeds of the securities sold. Unless the benefits of a mortgage
dollar roll exceed the income, capital appreciation and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as
part of the roll, the use of this technique will diminish the Fund’s
performance.
Successful
use of mortgage dollar rolls depends upon the Investment Adviser’s ability to
predict correctly interest rates and mortgage prepayments. If the Investment
Adviser is incorrect in its prediction, the Fund may experience a loss. The Fund
does not currently intend to enter into mortgage dollar rolls for financing and
do not treat them as borrowings.
Yield Curve
Options. The 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 on an underlying security remains constant, or if the
spread moves in a direction or to an extent which was not anticipated.
Interest Rate Swaps,
Mortgage Swaps, Credit Swaps, Currency Swaps, Index Swaps, Total Return Swaps,
Equity Swaps, Options on Swaps and Interest Rate Caps, Floors and
Collars. The
Fund may enter into swap transactions and option agreements, including interest
rate caps, floors and collars. Interest rate swaps involve the exchange by the
Fund with another party of
40
APPENDIX
A
their
respective commitments to pay or receive interest, such as an exchange of
fixed-rate payments for floating rate payments. Mortgage swaps are similar to
interest rate swaps in that they represent commitments to pay and receive
interest. The notional principal amount, however, is tied to a reference pool or
pools of mortgages. 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. Currency swaps involve the exchange of the parties’ respective rights to
make or receive payments in specified currencies. 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. Equity swaps allow the parties to a swap agreement to
exchange the dividend income or other components of return on an equity
investment (for example, a group of equity securities or an index) for another
payment stream. An equity swap may be used by the Fund to invest in a market
without owning or taking physical custody of securities in circumstances in
which direct investment may be restricted for legal reasons or is otherwise
deemed impractical or disadvantageous.
The
Fund 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 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 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.
The
Fund may enter into the transactions described above for hedging purposes or to
seek to increase total return. As an example, when the 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 a 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 the 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 default swap. The 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, index, total return and equity
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 the
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. The Fund may invest in securities of other
investment companies, including ETFs and money market funds, 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 the Fund’s total assets in securities of any one investment
company or more than 10% of total assets in securities of all investment
companies.
41
Subject
to applicable law and/or pursuant to an exemptive order obtained from the SEC or
under an exemptive rule adopted by the SEC, the 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 their 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
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 Fund does not expect to
do so in the foreseeable future, the 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.
Unseasoned
Companies. The Fund may invest in
companies which (together with their predecessors) have operated less than three
years. The securities of such companies may have limited liquidity, which can
result in their being priced higher or lower than might otherwise be the case.
In addition, investments in unseasoned companies are more speculative and entail
greater risk than do investments in companies with an established operating
record.
Corporate Debt
Obligations. Corporate debt obligations
include bonds, notes, debentures, commercial paper and other obligations of
corporations to pay interest and repay principal. The Fund may invest in
corporate debt obligations issued by U.S. and certain non‑U.S. issuers which
issue securities denominated in the U.S. dollar (including Yankee and Euro
obligations). In addition to obligations of corporations, corporate debt
obligations include securities issued by banks and other financial institutions
and supranational entities (i.e., the
World Bank, the International Monetary Fund, etc.).
Bank
Obligations. The Fund may invest in
obligations issued or guaranteed by U.S. or foreign banks. Bank obligations,
including without limitation, time deposits, bankers’ acceptances and
certificates of deposit, may be general obligations of the parent bank or may be
limited to the issuing branch by the terms of the specific obligations or by
government regulations. Banks are subject to extensive but different
governmental regulations which may limit both the amount and types of loans
which may be made and interest rates which may be charged. In addition, the
profitability of the banking industry is largely dependent upon the availability
and cost of funds for the purpose of financing lending operations under
prevailing money market conditions. General economic conditions as well as
exposure to credit losses arising from possible financial difficulties of
borrowers play an important part in the operation of this industry.
U.S. Government
Securities. The 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.
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, which are securities issued or guaranteed by the U.S.
Treasury where the payment of principal and interest is backed by the full faith
and credit of the U.S. government, 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
42
APPENDIX
A
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.
Preferred Stock,
Warrants and Stock Purchase Rights. The Fund may invest in
preferred stock, warrants and stock purchase rights (or “rights”). Preferred
stocks are securities that represent an ownership interest providing the holder
with claims on the issuer’s earnings and assets before common stock owners but
after bond owners. Unlike debt securities, the obligations of an issuer of
preferred stock, including dividend and other payment obligations, may not
typically be accelerated by the holders of such preferred stock on the
occurrence of an event of default or other non‑compliance by the issuer of the
preferred stock.
Warrants
and other rights are options to buy a stated number of shares of common stock at
a specified price at any time during the life of the warrant or right. The
holders of warrants and rights have no voting rights, receive no dividends and
have no rights with respect to the assets of the issuer.
Lending of Portfolio
Securities. The Fund may engage in
securities lending. Securities lending involves the lending of securities owned
by the Fund to financial institutions such as certain broker-dealers. The
borrowers are required to secure their loans continuously with cash, cash
equivalents, U.S. government securities or letters of credit in an amount at
least equal to the market value of the securities loaned. Cash collateral may be
invested by the Fund in short-term investments, including registered and
unregistered investment pools managed by the Investment Adviser or its
affiliates and from which the Investment Adviser or its affiliates may receive
fees. To the extent that cash collateral is so invested, such collateral will be
subject to market depreciation or appreciation, and the Fund will be responsible
for any loss that might result from its investment of the borrowers’ collateral.
If the Investment Adviser determines to make securities loans, the value of the
securities loaned may not exceed 33 1/3% of the value of the total assets of the
Fund (including the loan collateral). Loan collateral (including any investment
of that collateral) is not subject to the percentage limitations regarding the
Fund’s investments described elsewhere in the Prospectus.
The
Fund may lend its securities to increase its income. The Fund may, however,
experience delay in the recovery of its securities or incur a loss if the
institution with which it has engaged in a portfolio loan transaction breaches
its agreement with the Fund or its agent, or becomes insolvent.
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. The Fund may enter
into repurchase agreements with counterparties 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, the 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, the Fund could suffer
additional losses if a court determines that the Fund’s interest in the
collateral is not enforceable.
The
Fund, 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.
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, the
Fund may continue to hold the security if the Investment Adviser believes it is
in the best interest of the Fund and its shareholders.
Custodial Receipts
and Trust Certificates. The Fund may invest in
custodial receipts and trust certificates representing interests in securities
held by a custodian or trustee. The securities so held may include U.S.
Government Securities or other types of securities in which the Fund may invest.
The custodial receipts or trust certificates may evidence ownership of future
interest payments, principal payments or both on the underlying securities, or,
in some cases, the payment obligation of a third party that has entered into an
interest rate swap or other arrangement with the custodian or trustee. For
certain securities laws purposes, custodial receipts and trust certificates may
not be considered obligations of the U.S. government or other issuer of the
securities held by the custodian or trustee. If for tax purposes the Fund is not
considered to be the owner of the underlying securities held in the custodial or
trust account, the Fund may suffer adverse tax consequences. As a holder of
custodial receipts and trust certificates, the Fund will bear its proportionate
share of the fees and expenses charged to the custodial account or trust. The
Fund may also invest in separately issued interests in custodial receipts and
trust certificates.
43
Inverse Floating Rate
Securities. The Fund may invest in inverse floating
rate debt securities (“inverse floaters”). The interest rate on inverse floaters
resets in the opposite direction from the market rate of interest to which an
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.
When-Issued
Securities and Forward Commitments. The 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 the Fund will generally purchase securities
on a when-issued or forward commitment basis with the intention of acquiring the
securities for its portfolio, the Fund may dispose of when-issued securities or
forward commitments prior to settlement if the Investment Adviser deems it
appropriate.
44
Appendix B
Financial Highlights
The
financial highlights table is intended to help you understand the Fund’s
financial performance for the past five years. The financial highlights
information in the following table for the Fund’s Shares represents the
financial highlights of the predecessor fund’s Institutional Shares
for the fiscal periods indicated.
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 predecessor fund’s Institutional Shares
(assuming reinvestment of all dividends and distributions). The information for
the six months ended June 30, 2022, which has been derived from the
predecessor fund’s semi-annual financial statements included in the predecessor
fund’s semi-annual report, has not been audited. The information for the fiscal
year ended December 31, 2021, which has been derived from the predecessor
fund’s annual financial statements included in the predecessor fund’s annual
report, has been audited by PricewaterhouseCoopers LLP, whose report, along with
the predecessor fund’s financial statements, is included in the predecessor
fund’s annual report (available upon request). Effective February 1, 2023,
the Fund will change its fiscal year end from December 31 to August 31. No
information is provided for the Fund’s Shares, which were not offered
as of the date of the prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
Goldman Sachs Defensive Equity
Fund |
|
|
|
|
|
Institutional Shares |
|
|
|
|
|
Six Months Ended June 30, 2022
{Unaudited) |
|
|
Year Ended
December 31, 2021 |
|
|
Period Ended December 31, 2020(a) |
|
| |
Per Share
Data |
|
|
|
| |
|
|
| |
|
| |
|
|
|
| |
| |
Net
asset value, beginning of period |
|
$ |
10.72 |
|
|
$ |
10.19 |
|
|
$ |
10.00 |
|
|
|
|
| |
| |
Net investment income(b) |
|
|
0.03 |
|
|
|
0.06 |
|
|
|
0.02 |
|
|
|
|
| |
| |
Net
realized and unrealized gain (loss) |
|
|
(1.55 |
) |
|
|
1.39 |
|
|
|
0.19 |
|
|
|
|
| |
| |
Total
from investment operations |
|
|
(1.52 |
) |
|
|
1.45 |
|
|
|
0.21 |
|
|
|
|
| |
| |
Distributions to shareholders from net
investment income |
|
|
— |
|
|
|
(0.05 |
) |
|
|
(0.02 |
) |
|
|
|
| |
| |
Distributions
to shareholders from net realized gains |
|
|
— |
|
|
|
(0.87 |
) |
|
|
— |
(c) |
|
|
|
| |
| |
Total
distributions |
|
|
— |
|
|
|
(0.92 |
) |
|
|
(0.02 |
) |
|
|
|
| |
| |
Net
asset value, end of period |
|
$ |
9.20 |
|
|
$ |
10.72 |
|
|
$ |
510.19 |
|
|
|
|
| |
| |
Total return(d) |
|
|
(13.91 |
)% |
|
|
14.24 |
% |
|
|
2.11 |
% |
|
|
|
| |
| |
Ns asset, end of period (in 000s) |
|
$ |
4,963 |
|
|
$ |
6,283 |
|
|
$ |
5,201 |
|
|
|
|
| |
| |
Ratio of net expenses to average net
assets |
|
|
0.57 |
%(e) |
|
|
0.57 |
% |
|
|
0.57 |
%(e) |
|
|
|
| |
| |
Ratio of total expenses to average net
assets |
|
|
5.71 |
%(e) |
|
|
9.46 |
% |
|
|
10.45 |
%(e) |
|
|
|
| |
| |
Ratio of net investment income to
average net assets |
|
|
0.69 |
%(e) |
|
|
0.52 |
% |
|
|
0.84 |
%(e) |
|
|
|
| |
| |
Portfolio
turnover rate(f) |
|
|
88 |
% |
|
|
305 |
% |
|
|
26 |
% |
|
(a) |
Commenced operations on September 30, 2020.
|
|
(b) |
Calculated based on the average shares
outstanding methodology. |
|
(c) |
Rounds to 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. |
|
(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. |
45
[This
page intentionally left blank]
Goldman Sachs Defensive Equity ETF Prospectus
Annual/Semi-Annual Report
Additional
information about the Fund’s investments is or will be available in the Fund’s
annual and semi-annual reports to shareholders. In the Fund’s annual report 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 the SAI are available free upon
request by calling Goldman Sachs Funds at 1‑800‑621‑2550. You can also access
and download the annual and semi-annual reports and the SAI at the Fund’s
website: www.gsamfunds.com/ETFfunds.
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.
To
obtain other information and for shareholder inquiries:
|
|
|
| |
| |
Shareholders/Authorized
Participants |
|
Financial Advisors |
|
| |
⬛ By telephone: |
|
1‑800‑621‑2550 |
|
1‑800‑292‑4726 |
|
| |
⬛ By mail: |
|
Goldman Sachs Funds P.O. Box 806395
Chicago, IL 60680-4125 |
|
|
| |
⬛ 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].
|
|
|
| |
DEFETFPRO |
|
The
Trust’s investment company registration number is 811-23013.
GSAM® is a registered
service mark of Goldman Sachs & Co. LLC. |
|
|