| ⬛ | To change the bank wiring instructions designated in the current records of the Transfer Agent, you must send written instructions signed by an authorized person designated in the current records of the Transfer Agent. A Medallion signature guarantee may be required if you are requesting a redemption in conjunction with the change. |
| ⬛ | None of the Trust, the Investment Adviser or Goldman Sachs assumes any responsibility for the performance of your bank or Intermediary in the transfer process. If a problem with such performance arises, you should deal directly with your bank or Intermediary. |
By Check: You may elect to receive your redemption proceeds by check. Redemption proceeds paid by check will normally be mailed to the address of record within two business days (or such other times in accordance with the requirements of your Intermediary) following receipt of a properly executed redemption request except in certain circumstances (such as those set forth above with respect to wire transfer redemption requests). If you are selling shares you recently paid for by check or ACH, the Fund will pay you when your check or ACH has cleared, which may take up to 15 days.
What Else Do I Need To Know About Redemptions?
The following generally applies to redemption requests:
| ⬛ | Shares of the Fund continue to earn dividends up to, but not including, the date of settlement. |
| ⬛ | Additional documentation may be required when deemed appropriate by the Transfer Agent. A redemption request will not be in proper form until such additional documentation has been received. |
| ⬛ | Intermediaries are responsible for the timely transmittal of redemption requests by their customers to the Transfer Agent. In order to facilitate the timely transmittal of redemption requests, Intermediaries may set times by which they must receive redemption requests. Intermediaries may also require additional documentation from you. |
The Trust reserves the right to:
| ⬛ | Redeem your shares in the event your Intermediarys relationship with Goldman Sachs is terminated, and you do not transfer your account to another Intermediary or in the event that the Fund is no longer an option in your Employee Benefit Plan or no longer available through an Eligible Fee-Based Program. |
| ⬛ | Redeem your shares if your account balance is below the required Fund minimum. The Fund will not redeem your shares on this basis if the value of your account falls below the minimum account balance solely as a result of market conditions. The Fund will give you 60 days prior written notice to allow you to purchase sufficient additional shares of the Fund in order to avoid such redemption. Different rules may apply to investors who have established brokerage accounts with Goldman Sachs in accordance with the terms and conditions of their account agreements. |
| ⬛ | Subject to applicable law, redeem your shares in other circumstances determined by the Board of Trustees to be in the best interest of the Trust. |
| ⬛ | Pay redemptions by a distribution in-kind of securities (instead of cash). If you receive redemption proceeds in-kind, you should expect to incur transaction costs upon the disposition of those securities. In addition, if you receive redemption proceeds in-kind, you will be subject to market gains or losses upon the disposition of those securities. |
| ⬛ | Reinvest any amounts (e.g., dividends, distributions or redemption proceeds) which you have elected to receive by check should your check remain uncashed for more than 180 days. No interest will accrue on amounts represented by uncashed checks. Your check will be reinvested in your account at the NAV on the day of the reinvestment. When reinvested, those amounts are subject to the risk of loss like any Fund investment. If you elect to receive distributions in cash and a check remains uncashed for more than 180 days, your cash election may be changed automatically to reinvest and your future dividend and capital gains distributions will be reinvested in the Fund at the NAV as of the date of payment of the distribution. This provision may not apply to certain retirement or qualified accounts, accounts with a non-U.S. address or closed accounts. Your participation in a systematic withdrawal program may be terminated if a check remains uncashed. |
| ⬛ | Charge an additional fee in the event a redemption is made via wire transfer. |
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SHAREHOLDER GUIDE
The Fund typically expects to meet redemption requests by using holdings of cash or cash equivalents and/or proceeds from the sale of portfolio holdings. In addition, under stressed market conditions, as well as for other temporary or emergency purposes, the Fund may distribute redemption proceeds in-kind (instead of cash), access a line of credit or overdraft facility, or borrow through other sources to meet redemption requests.
None of the Trust, the Investment Adviser or Goldman Sachs will be responsible for any loss in an investors account or tax liability resulting from an involuntary redemption.
Can I Reinvest Redemption Proceeds In The Same Or Another Goldman Sachs Fund?
You may redeem shares of the Fund and reinvest a portion or all of the redemption proceeds in the same share class of another Goldman Sachs Fund at NAV, except with respect to Class T Shares or as provided below. To be eligible for this privilege, you must have held the shares you want to redeem for at least 30 days and you must reinvest the share proceeds within 90 days after you redeem. You should obtain and read the applicable prospectus before investing in any other Goldman Sachs Fund.
You may reinvest redemption proceeds as follows:
| ⬛ | If you redeem Class A Shares and then reinvest in Class A Shares as described above, your investment will be made into the relevant Goldman Sachs Fund at the public offering price, which may include a sales charge, unless a sales charge has previously been paid on the investment represented by the redeemed shares (i.e., the shares to be redeemed were originally issued in exchange or through the reinvestment privilege for shares on which a sales charge was paid), in which case the reinvestment will be made at NAV. |
| ⬛ | The reinvestment privilege may be exercised at any time in connection with transactions in which the proceeds are reinvested at NAV in a tax-sheltered Employee Benefit Plan. In other cases, the reinvestment privilege may be exercised once per year upon receipt of a written request. |
| ⬛ | You may be subject to tax as a result of a redemption. You should consult your tax adviser concerning the tax consequences of a redemption and reinvestment. |
Can I Exchange My Investment From One Goldman Sachs Fund To Another Goldman Sachs Fund?
You may exchange shares of a Goldman Sachs Fund at NAV for certain shares of another Goldman Sachs Fund without the imposition of an initial sales charge or CDSC, if applicable, at the time of exchange, except with respect to Class T Shares or as provided below. Exchanging Class T Shares of one Goldman Sachs Fund for Class T Shares of another Goldman Sachs Fund will result in the imposition of an additional sales charge. Redemption (including by exchange) of certain Goldman Sachs Funds offered in other prospectuses may, however, be subject to a redemption fee for shares that are held for either 30 or 60 days or less, subject to certain exceptions as described in those Goldman Sachs Funds prospectuses. The exchange privilege may be materially modified or withdrawn at any time upon 60 days written notice. You should contact your Intermediary to arrange for exchanges of shares of the Fund for shares of another Goldman Sachs Fund.
You should keep in mind the following factors when making or considering an exchange:
| ⬛ | You should obtain and carefully read the prospectus of the Goldman Sachs Fund you are acquiring before making an exchange. You should be aware that not all Goldman Sachs Funds may offer all share classes. |
| ⬛ | Currently, the Fund does not impose any charge for exchanges, except with respect to Class T Shares, although the Fund may impose a charge in the future. |
| ⬛ | Exchanges of Class A shares of a fund will be made into the relevant Goldman Sachs Fund at the public offering price, which may include a sales charge, unless a sales charge has previously been paid on the investment represented by the exchanged shares (i.e., the shares to be exchange were originally issued in exchange for shares on which a sales charge was paid), in which case the exchange will be made at NAV. |
| ⬛ | The exchanged shares of the new Goldman Sachs Fund may later be exchanged for shares of the same class of the original Fund held at the next determined NAV without the imposition of an initial sales charge (except Class T Shares) or CDSC (but subject to any applicable redemption fee). However, if additional shares of the new Goldman Sachs Fund were purchased after the initial exchange, and that Funds shares do not impose a sales charge or CDSC, then the applicable sales charge or CDSC of the original Funds shares will be imposed upon the exchange of those shares. |
| ⬛ | At the discretion of your Intermediary, your Class A Shares may be eligible for a one-time exchange for Class T Shares without the imposition of the applicable sales charge. |
| ⬛ | When you exchange shares subject to a CDSC, no CDSC will be charged at that time. However, for purposes of determining the amount of the CDSC applicable to the shares acquired in the exchange, the length of time you have owned the shares will be measured from the date you acquired the original shares subject to a CDSC, and the amount and terms of the CDSC will be those applicable to the original shares acquired and will not be affected by a subsequent exchange. |
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| ⬛ | Eligible investors may exchange certain classes of shares for another class of shares of the same Fund. For further information, contact your Intermediary. |
| ⬛ | All exchanges which represent an initial investment in a Goldman Sachs Fund must satisfy the minimum initial investment requirements of that Fund. This requirement may be waived at the discretion of the Trust. Exchanges into a Fund need not meet the traditional minimum investment requirements for that Fund if the entire balance of the original Fund account is exchanged. |
| ⬛ | Exchanges are available only in states where exchanges may be legally made. |
| ⬛ | It may be difficult to make telephone exchanges in times of unusual economic or market conditions. |
| ⬛ | Goldman Sachs and DST may use reasonable procedures described above in How To Sell SharesWhat Do I Need To Know About Telephone Redemption Requests? in an effort to prevent unauthorized or fraudulent telephone exchange requests. |
| ⬛ | Normally, a telephone exchange will be made only to an identically registered account. |
| ⬛ | Exchanges into Goldman Sachs Funds or certain share classes of Goldman Sachs Funds that are closed to new investors may be restricted. |
| ⬛ | Exchanges into the Fund from another Goldman Sachs Fund may be subject to any redemption fee imposed by the other Goldman Sachs Fund. |
For federal income tax purposes, an exchange from one Goldman Sachs Fund to another is treated as a redemption of the shares surrendered in the exchange, on which you may be subject to tax, followed by a purchase of shares received in the exchange. Exchanges within Employee Benefit Plan accounts will not result in capital gains or loss for federal or state income tax purposes. You should consult your tax adviser concerning the tax consequences of an exchange.
| SHAREHOLDER SERVICES |
Can I Arrange To Have Automatic Investments Made On A Regular Basis?
You may be able to make automatic investments in Class A and Class T Shares through your bank via ACH transfer or via bank draft or through your Intermediary each month. The minimum dollar amount for this service is $250 for the initial investment and $50 per month for additional investments. Forms for this option are available online at www.gsamfunds.com and from your Intermediary, or you may check the appropriate box on the account application.
Can My Distributions From The Fund Be Invested In Other Goldman Sachs Funds?
You may elect to cross-reinvest distributions paid by a Goldman Sachs Fund in shares of the same class of other Goldman Sachs Funds, except with respect to Class T Shares.
| ⬛ | Shares will be purchased at NAV. |
| ⬛ | You may elect cross-reinvestment into an identically registered account or a similarly registered account provided that at least one name on the account is registered identically. |
| ⬛ | You cannot make cross-reinvestments into a Goldman Sachs Fund unless that Funds minimum initial investment requirement is met. |
| ⬛ | You should obtain and read the prospectus of the Goldman Sachs Fund into which distributions are invested. |
Can I Arrange To Have Automatic Exchanges Made On A Regular Basis?
You may elect to exchange automatically a specified dollar amount of Class A of the Fund for shares of the same class of other Goldman Sachs Funds.
| ⬛ | Shares will be purchased at NAV if a sales charge had been imposed on the initial purchase. |
| ⬛ | You may elect to exchange into an identically registered account or a similarly registered account provided that at least one name on the account is registered identically. |
| ⬛ | Shares subject to a CDSC acquired under this program may be subject to a CDSC at the time of redemption from the Goldman Sachs Fund into which the exchange is made depending upon the date and value of your original purchase. |
| ⬛ | Automatic exchanges are made monthly on the 15th day of each month or the first business day thereafter. |
| ⬛ | Minimum dollar amount: $50 per month. |
| ⬛ | You cannot make automatic exchanges into a Goldman Sachs Fund unless that Funds minimum initial investment requirement is met. |
| ⬛ | You should obtain and read the prospectus of the Goldman Sachs Fund into which automatic exchanges are made. |
| ⬛ | An exchange is considered a redemption and a purchase and therefore may be a taxable transaction. |
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SHAREHOLDER GUIDE
Can I Have Systematic Withdrawals Made On A Regular Basis?
You may redeem from your Class A or Class T Share account systematically via check or ACH transfer or through your Intermediary in any amount of $50 or more.
| ⬛ | It is normally undesirable to maintain a systematic withdrawal plan at the same time that you are purchasing additional Class T Shares because of the sales charges that are imposed on certain purchases of Class T Shares. |
| ⬛ | Checks are normally mailed within two business days after your selected systematic withdrawal date of either the 15th or 25th of the month. ACH payments may take up to three business days to post to your account after your selected systematic withdrawal date between, and including, the 3rd and 26th of the month. |
| ⬛ | Each systematic withdrawal is a redemption and therefore may be a taxable transaction. |
| ⬛ | The Fund reserves the right to limit redemptions of Class A Shares under the systematic withdrawal plan, on an annual basis, to 10% of the value of your Class A Shares. |
What Types Of Reports Will I Be Sent Regarding My Investment?
Intermediaries are responsible for providing any communication from the Fund to shareholders, including but not limited to, prospectuses, prospectus supplements, proxy materials and notices regarding the source of dividend payments under Section 19 of the Investment Company Act. They may charge additional fees not described in the Prospectus to their customers for such services.
 If your account is held through your Intermediary, you will receive this information from your Intermediary.
You will also receive an annual shareholder report containing audited financial statements and a semi-annual shareholder report. If you have consented to the delivery of a single copy of shareholder reports, prospectuses and other information to all shareholders who share the same mailing address with your account, you may revoke your consent at any time by contacting your Intermediary or Goldman Sachs Funds at the appropriate phone number or address found on the back cover of the Prospectus. The Fund will begin sending individual copies to you within 30 days after receipt of your revocation. If your account is held through an Intermediary, please contact the Intermediary to revoke your consent.
| DISTRIBUTION AND SERVICE FEES |
What Are The Different Distribution And/Or Service Fees Paid By The Funds Shares?
The Trust has adopted distribution and service plans (each a Plan) under which Class A and Class T Shares bear distribution and/or service fees paid to Goldman Sachs, some of which Goldman Sachs may pay to Intermediaries. Intermediaries seek distribution and/or servicing fee revenues to, among other things, offset the cost of servicing small and medium sized plan investors and providing information about the Fund. If the fees received by Goldman Sachs pursuant to the Plans exceed its expenses, Goldman Sachs may realize a profit from these arrangements. Goldman Sachs generally receives and pays the distribution and service fees on a quarterly basis.
Under the Plans, Goldman Sachs is entitled to a monthly fee for distribution services from the Fund of up to 0.25%, on an annual basis, of the Funds average daily net assets attributed to Class A and Class T Shares. Effective July 30, 2018, Goldman Sachs currently is only entitled to a monthly fee for distribution services of 0.15%, on an annual basis, of the Funds average daily net assets attributed to Class A Shares. Because these fees are paid out of the Funds assets on an ongoing basis, over time, these fees will increase the cost of your investment and may cost you more than paying other types of such charges.
The distribution fees are subject to the requirements of Rule 12b-1 under the Investment Company Act, and may be used (among other things) for:
| ⬛ | Compensation paid to and expenses incurred by Intermediaries, Goldman Sachs and their respective officers, employees and sales representatives; |
| ⬛ | Commissions paid to Intermediaries; |
| ⬛ | Allocable overhead; |
| ⬛ | Telephone and travel expenses; |
| ⬛ | Interest and other costs associated with the financing of such compensation and expenses; |
| ⬛ | Printing of prospectuses for prospective shareholders; |
| ⬛ | Preparation and distribution of sales literature or advertising of any type; and |
| ⬛ | All other expenses incurred in connection with activities primarily intended to result in the sale of Class A and Class T Shares. |
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Goldman Sachs normally begins accruing the annual 0.15% and 0.25% distribution fees for the Class A and Class T Shares, respectively, as ongoing commissions to Intermediaries immediately. Goldman Sachs generally pays the distribution fee on a quarterly basis.
| ADMINISTRATION SHARES ADMINISTRATION PLAN |
The Trust, on behalf of the Fund, has adopted an Administration Plan for Administration Shares and Preferred Shares, pursuant to which Goldman Sachs and certain Intermediaries are entitled to receive payments for their services from the Trust.
These payments are equal to 0.25% (annualized) for shareholder administration services of the average daily net assets of the Administration Shares of the Fund and 0.10% (annualized) for shareholder administration services of the average daily net assets of the Preferred Shares of the Fund that are attributable to or held in the name of Goldman Sachs or an Intermediary for its customers.
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As with any investment, you should consider how your investment in the Fund will be taxed. The tax information below is provided as general information. More tax information is available in the SAI. You should consult your tax adviser about the federal, state, local or foreign tax consequences of your investment in the Fund. Except as otherwise noted, the tax information provided assumes that you are a U.S. citizen or resident.
Unless your investment is through an Employee Benefit Plan or other tax-advantaged account, you should carefully consider the possible tax consequences of Fund distributions and the sale of your Fund shares.
| DISTRIBUTIONS |
The Fund contemplates declaring as dividends each year all or substantially all of its 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 Funds 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 Internal Revenue Code of 1986, as amended, the maximum individual rate applicable to long-term capital gains is generally either 15% or 20%, depending on whether the individuals income exceeds certain threshold amounts. The preferential rate described above also applies to certain qualifying dividend income, but Fund distributions will not qualify for that favorable treatment and also will not qualify for the corporate dividends received deduction because the Fund will be earning interest income rather than dividend income.
An additional 3.8% Medicare tax is imposed on certain net investment income (including ordinary dividends and capital gain distributions received from a 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 persons modified adjusted gross income (in the case of an individual) or adjusted gross income (in the case of an estate or trust) exceeds certain threshold amounts.
Although distributions are generally treated as taxable to you in the year they are paid, distributions declared in December but paid in January will be taxable as if they were paid in December. The Fund character and tax status of all distributions will be available to shareholders after the close of each calendar year.
If you buy shares of the Fund before it makes a distribution, the distribution will be taxable to you even though it may actually be a return of a portion of your investment. This is known as buying into a dividend.
To the extent that Fund distributions are attributable to interest on certain federal obligations or interest on obligations of your state of residence or its municipalities or authorities, they will in most cases be exempt from state and local income taxes.
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.
| SALES AND EXCHANGES |
Your sale of Fund shares is a taxable transaction for federal income tax purposes, and may also be subject to state and local taxes. For tax purposes, the exchange of your Fund shares for shares of a different Goldman Sachs Fund is the same as a sale. When you sell your shares, you will generally recognize a capital gain or loss in an amount equal to the difference between your adjusted tax basis in the shares and the amount received. Generally, this capital gain or loss will be long-term or short-term depending on whether your holding period for the shares 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 the Fund within a period of 61 days beginning 30 days before and ending 30 days after the shares are disposed of (such as pursuant to a dividend reinvestment in shares of the Fund). If disallowed, the loss will be reflected in an adjustment to the basis of the shares acquired.
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| OTHER INFORMATION |
When you open your account, you should provide your social security or tax identification number on your account application. By law, the Fund must withhold 24% of your taxable distributions and any redemption proceeds if you do not provide your correct Taxpayer Identification Number, or certify that it is correct, or if the Internal Revenue Service instructs the Fund to do so.
The Fund is required to report to you and the IRS annually on Form 1099-B not only the gross proceeds of Fund shares you sell or redeem but also, for shares purchased on or after January 1, 2012, their cost basis. Cost basis will be calculated using the Funds default method of average cost, unless you instruct the Fund to use a different methodology. If you would like to use the average cost method of calculation, no action is required. To elect an alternative method, you should contact Goldman Sachs Funds at the address or phone number on the back cover of the Prospectus. If your account is held with an Intermediary, contact your representative with respect to reporting of cost basis and available elections for your account.
You should carefully review the cost basis information provided by the Fund and make any additional basis, holding period or other adjustments that are required when reporting these amounts on your federal income tax returns.
Non-U.S. investors will generally be subject to U.S. withholding tax and may be subject to estate tax with respect to their Fund shares. Under a provision recently made permanent by Congress, 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.
The Fund is required to withhold U.S. tax (at a 30% rate) on payments of dividends and (effective January 1, 2019) redemption proceeds and certain capital gain dividends made to certain non-U.S. entities that fail to comply (or be deemed compliant) with extensive new 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 the Fund to enable the Fund to determine whether withholding is required.
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Additional Information on the Fund
This section provides further information on certain types of securities and investment techniques that may be used by the Fund, including their associated risks. Additional information is provided in the SAI, which is available upon request. Among other things, the SAI describes certain fundamental policies and investment restrictions that cannot be changed without shareholder approval. You should note, however, that 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 Funds investment objective, you should consider whether the Fund remains an appropriate investment in light of your then current financial position and needs. The Fund may purchase other types of securities or instruments similar to those described in this section if otherwise consistent with the Funds investment objective and policies.
A rising interest rate environment could cause the value of the Funds fixed income securities to decrease, and fixed income markets to experience increased volatility in addition to heightened levels of liquidity risk. Additionally, decreases in the value of fixed income securities could lead to increased shareholder redemptions, which could impair the Funds ability to achieve its investment objective. The risks associated with increasing interest rates are heightened given that interest rates are near historic lows, but may be expected to increase in the future with unpredictable effects on the markets and the Funds investments.
The Investment Adviser will not consider the portfolio turnover rate a limiting factor in making investment decisions for the Fund. A high rate of portfolio turnover involves correspondingly greater expenses which must be borne by the Fund and its shareholders, and is also likely to result in higher short-term capital gains taxable to certain shareholders. The portfolio turnover rate is calculated by dividing the lesser of the dollar amount of sales or purchases of portfolio securities by the average monthly value of the Funds portfolio securities, excluding securities having a maturity at the date of purchase of one year or less. See Financial Highlights in Appendix B for a statement of the Funds historical portfolio turnover rates.
The Fund has credit rating requirements for the securities it buys, which are applied at the time of purchase. 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. For this purpose, the Fund relies only on the ratings of the following NRSROs: Standard & Poors, Moodys and Fitch. Unrated securities may be purchased by the Fund if they are determined by the Investment Adviser to be of a credit quality consistent with the Funds credit rating requirements at the time of purchase. If a security satisfies the Funds credit rating requirement at the time of purchase and is subsequently downgraded below a minimum rating requirement, the Fund will not be required to dispose of such security. If a downgrade occurs, the Investment Adviser will consider what action, including the sale of such security, is in the best interests of the Fund and its shareholders.
U.S. Treasury Obligations and U.S. Government Securities. The Fund may invest in U.S. Treasury Obligations, which include, among other things, the separately traded principal and interest components of securities guaranteed or issued by the U.S. Treasury if such components are traded independently under the Separate Trading of Registered Interest and Principal of Securities program (STRIPS). U.S. Treasury Obligations may also include Treasury inflation-protected securities whose principal value is periodically adjusted according to the rate of inflation.
The Fund may also invest in other U.S. Government Securities. Unlike U.S. Treasury Obligations, U.S. Government Securities can be supported by either (i) the full faith and credit of the U.S. Treasury (such as the Government National Mortgage Association (Ginnie Mae)); (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 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. Government Securities also include zero coupon bonds.
The Fund may also invest in U.S. Treasury Obligations and certain U.S. Government Securities, the interest from which is generally exempt from state income taxation. Securities generally eligible for this exemption include those issued by the U.S. Treasury and certain agencies, authorities or instrumentalities of the U.S. Government, including the Federal Home Loan Banks, Federal Farm Credit Banks and Tennessee Valley Authority.
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U.S. Government Securities have historically involved little risk of loss of principal if held to maturity. However, no assurance can be given that the U.S. government will be able or willing to repay the principal or interest when due or provide financial support to U.S. Government agencies, authorities, instrumentalities or sponsored enterprises if it is not obligated to do so by law.
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.
If the Fund invests more than 25% of its total assets in bank obligations (whether foreign or domestic), it may be especially affected by favorable and adverse developments in or related to the banking industry. The activities of U.S. and most foreign banks are subject to comprehensive regulations which, in the case of U.S. regulations, have undergone substantial changes in the past decade. The enactment of new legislation or regulations, as well as changes in interpretation and enforcement of current laws, may affect the manner of operations and profitability of domestic and foreign banks. Significant developments in the U.S. banking industry have included increased competition from other types of financial institutions, increased acquisition activity and geographic expansion. Banks may be particularly susceptible to certain economic factors, such as interest rate changes and adverse developments in the real estate markets. Fiscal and monetary policy and general economic cycles can affect the availability and cost of funds, loan demand and asset quality and thereby impact the earnings and financial conditions of banks.
Commercial Paper. The Fund may invest in commercial paper, including variable amount master demand notes and asset-backed commercial paper. Commercial paper normally represents short-term unsecured promissory notes issued in bearer form by banks or bank holding companies, corporations, finance companies and other issuers. The commercial paper that may be purchased by the Fund consists of direct U.S. dollar-denominated obligations of domestic or foreign issuers. Asset-backed commercial paper is issued by a special purpose entity that is organized to issue the commercial paper and to purchase trade receivables or other financial assets. The credit quality of asset-backed commercial paper depends primarily on the quality of these assets and the level of any additional credit support.
Corporate Debt Obligations. The Fund may invest in 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 also invest in other short-term obligations issued or guaranteed by U.S. corporations, non-U.S. corporations or other entities.
Short-Term Obligations of Corporations or Other Entities. The Fund may invest in other short-term obligations, including master demand notes and short-term funding agreements payable in U.S. dollars and issued or guaranteed by U.S. corporations, foreign corporations or other entities. A master demand note permits the investment of varying amounts by the Fund under an agreement between the Fund and an issuer. The principal amount of a master demand note may be increased from time to time by the parties (subject to specified maximums) or decreased by the Fund or the issuer. A funding agreement is a contract between an issuer and a purchaser that obligates the issuer to pay a guaranteed rate of interest on a principal sum deposited by the purchaser. Funding agreements will also guarantee a stream of payments over time. A funding agreement has a fixed maturity date and may have either a fixed rate or variable interest rate that is based on an index and guaranteed for a set time period. Because there is normally no secondary market for these investments, funding agreements purchased by a Fund may be regarded as illiquid.
Repurchase Agreements. The Fund may enter into repurchase agreements with counterparties approved by the Investment Adviser pursuant to procedures approved by the Board of Trustees. Repurchase agreements are similar to collateralized loans, but are structured as a purchase of securities by the Fund, subject to the sellers agreement to repurchase the securities at a mutually agreed upon date and price. The difference between the original purchase price and the repurchase price is normally based on prevailing short-term interest rates. Under a repurchase agreement, the seller is required to furnish collateral at least equal in value or market price to the amount of the sellers repurchase obligation. The collateral may consist of any type of security (government or corporate) of any or no credit rating. Repurchase agreements involving obligations other than U.S. Government Securities may be subject to additional risks.
If the seller under a repurchase agreement defaults, the Fund could 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 Funds cost associated with delay and enforcement of the repurchase agreement. In addition, in the event of bankruptcy or insolvency proceedings concerning
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APPENDIX A
the seller, the Fund could suffer additional losses if the collateral held by the Fund is subject to a court stay that prevents the Fund from promptly selling the collateral. If this occurs, the Fund will bear the risk that the value of the collateral will decline below the repurchase price. Furthermore, the Fund could experience a loss if a court determines that the Funds interest in the collateral is not enforceable.
In evaluating whether to enter into a repurchase agreement, the Investment Adviser will carefully consider the creditworthiness of the seller. Distributions of the income from repurchase agreements will be taxable to the Funds shareholders. In addition, 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.
Asset-Backed and Receivables-Backed Securities. The Fund may invest in asset-backed and receivables-backed 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 and receivables-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 and receivables-backed securities can be expected to accelerate. Accordingly, the Funds 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. In addition, securities that are backed by credit card, automobile and similar types of receivables generally do not have the benefit of a security interest in collateral that is comparable in quality to mortgage assets. Some asset-backed securities have only a subordinated claim or security interest in collateral. If the issuer of an asset-backed security defaults on its payment obligation, there is the possibility that, in some cases, the Fund will be unable to possess and sell the underlying collateral and that the Funds 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. There is no guarantee that private guarantors, or insurers of an asset-backed security, if any, will meet their obligations. The value of some asset-backed securities may be particularly sensitive to changes in prevailing interest rates. 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.
Foreign Government Obligations and Foreign Risks. The Fund may invest in foreign government obligations. Foreign government obligations in which the Fund may invest are U.S. dollar-denominated obligations issued or guaranteed by a foreign government. Investments by the Fund in foreign securities, whether issued by a foreign government, bank, corporation or other issuer, may present a greater degree of risk than investments in securities of domestic issuers because of less publicly-available financial and other information, more or less securities regulation, potential imposition of foreign withholding and other taxes, war, expropriation or other adverse governmental actions. Foreign banks and their foreign branches are not regulated by U.S. banking authorities, and generally are not bound by the accounting, auditing and financial reporting standards applicable to U.S. banks. The legal remedies for investors may be more limited than the remedies available in the United States. In addition, changes in the exchange rate of a foreign currency relative to the U.S. dollar (e.g., weakening of the currency against the U.S. dollar) may adversely affect the ability of a foreign issuer to pay interest and repay principal on an obligation.
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 Funds foreign holdings or exposures.
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.
Municipal Obligations. The Fund may invest in municipal obligations. Municipal obligations are issued by or on behalf of states, territories and possessions of the United States and their political subdivisions, agencies, authorities and instrumentalities, and the District of Columbia. Municipal obligations in which a Fund may invest include fixed rate notes and similar debt instruments; variable and floating rate demand instruments; tax-exempt commercial paper; municipal bonds; and unrated notes, paper or other
37
instruments. Municipal obligations are generally subject to those risks associated with debt securities generally. In addition, the Fund may be more sensitive to adverse economic, business or political developments if it invests a substantial portion of its assets in the debt securities of similar projects (such as those relating to education, health care, housing, transportation, and utilities), industrial development bonds, or in particular types of municipal obligations (such as general obligation bonds, private activity bonds and moral obligation bonds).
The Fund may invest in municipal obligations issued by municipalities, including U.S. territories, commonwealths and possessions, that may be, or may become, subject to significant financial difficulties. Factors contributing to such difficulties may include: lower property tax collections as a result of lower home values, lower sales tax revenue as a result of reduced consumer spending, lower income tax revenue as a result of higher unemployment rates, and budgetary constraints of local, state and federal governments upon which issuers of municipal obligations may be relying for funding. Such obligations may be considered below investment grade or may be subject to future credit downgrades due to concerns over potential default, insolvency or bankruptcy on the part of their issuers or any credit support provider. During the recent economic downturn, several municipalities have, in fact, filed for bankruptcy protection or have indicated that they may seek bankruptcy protection in the future. A credit downgrade or other adverse news about an issuer or any credit support provider could impact the market value and liquidity of the securities and consequently could negatively affect the performance of the Fund.
Municipal Notes and Bonds. Municipal notes include tax anticipation notes (TANs), revenue anticipation notes (RANs), bond anticipation notes (BANs), tax and revenue anticipation notes (TRANs) and construction loan notes. Municipal bonds include general obligation bonds and revenue bonds. General obligation bonds are backed by the taxing power of the issuing municipality and are considered the safest type of municipal obligation. Revenue bonds are backed by the revenues of a project or facility such as the tolls from a government-owned toll bridge. Revenue bonds also include lease rental revenue bonds which are issued by a state or local authority for capital projects and are secured by annual lease payments from the state or locality sufficient to cover debt service on the authoritys obligations. Municipal bonds may be issued in a variety of forms, including commercial paper, tender option bonds and variable and floating rate securities.
Tender Option Bonds. A tender option bond is a municipal obligation (generally held pursuant to a custodial arrangement) having a relatively long maturity and bearing interest at a fixed rate higher than prevailing short-term, tax-exempt rates. The bond is typically issued in conjunction with the agreement of a third party, such as a bank, broker-dealer or other financial institution, pursuant to which the institution grants the security holder the option, at periodic intervals, to tender its securities to the institution. As consideration for providing the option, the financial institution receives periodic fees equal to the difference between the bonds fixed coupon rate and the rate, as determined by a remarketing or similar agent, that would cause the securities, coupled with the tender option, to trade at par on the date of such determination. Thus, after payment of this fee, the security holder effectively holds a demand obligation that bears interest at the prevailing short-term, tax-exempt rate. An institution will normally not be obligated to accept tendered bonds in the event of certain defaults or a significant downgrading in the credit rating assigned to the issuer of the bond. The tender option will be taken into account in determining the maturity of the tender option bonds and the Funds average portfolio maturity and average portfolio life. There is a risk that the Fund will not be considered the owner of a tender option bond for federal income tax purposes, and thus will not be entitled to treat such interest as exempt from federal income tax. Certain tender option bonds may be illiquid or may become illiquid as a result of a credit rating downgrade, a payment default or a disqualification from tax-exempt status.
Revenue Anticipation Warrants. Revenue Anticipation Warrants (RAWs) are issued in anticipation of the issuers receipt of revenues and present the risk that such revenues will be insufficient to satisfy the issuers payment obligations. The entire amount of principal and interest on RAWs is due at maturity. RAWs, including those with a maturity of more than two years, may also be repackaged as instruments which include a demand feature that permits the holder to sell the RAWs to a bank or other financial institution at a purchase price equal to par plus accrued interest on each interest rate reset date.
Industrial Development Bonds. The Fund may invest in industrial development bonds (private activity bonds). Industrial development bonds are a specific type of revenue bond backed by the credit and security of a private user and therefore have more potential risk.
Other Municipal Obligation Policies. The Fund may invest 25% or more of the value of its total assets in municipal obligations which are related in such a way that an economic, business or political development or change affecting one municipal obligation would also affect the other municipal obligation. For example, the Fund may invest all of its assets in (i) municipal obligations the interest of which is paid solely from revenues from similar projects such as hospitals, electric utility systems, multi-family housing, nursing homes, commercial facilities (including hotels), steel companies or life care facilities; (ii) municipal obligations whose
38
APPENDIX A
issuers are in the same state; or (ii) industrial development obligations (except where the nongovernmental entities supplying the revenues from which such bonds or obligations are to be paid are in the same industry). The Funds investments in these municipal obligations will subject the Fund, to a greater extent, to the risks of adverse economic, business or political developments affecting the particular state, industry or other area of investment.
Municipal obligations may also include municipal leases, certificates of participation and moral obligation bonds. A municipal lease is an obligation issued by a state or local government to acquire equipment or facilities. Certificates of participation represent interests in municipal leases or other instruments, such as installment contracts. Moral obligation bonds are supported by the moral commitment but not the legal obligation of a state or municipality. Municipal leases, certificates of participation and moral obligation bonds present the risk that the state or municipality involved will not appropriate the monies to meet scheduled payments under these instruments.
Municipal obligations may be backed by letters of credit or other forms of credit enhancement issued by domestic banks or foreign banks which have a branch, agency or subsidiary in the United States or by other financial institutions such as insurance companies which may issue insurance policies with respect to municipal obligations. The credit quality of these banks, insurance companies and other financial institutions could, therefore, cause a loss to the Fund that invests in municipal obligations. The insurance companies exposure to securities involving sub-prime mortgages may cause insurer rating downgrade or insolvency, which may affect the prices and liquidity of municipal obligations insured by the insurance company. Letters of credit and other obligations of foreign banks and financial institutions may involve risks in addition to those of domestic obligations because of less publicly available financial and other information, less securities regulation, potential imposition of foreign withholding and other taxes, war, expropriation or other adverse governmental actions. Foreign banks and their foreign branches are not regulated by U.S. banking authorities and generally are not bound by the accounting, auditing and financial reporting standards applicable to U.S. banks.
In order to enhance the liquidity, stability or quality of a municipal obligation, the Fund may acquire the right to sell the obligation to another party at a guaranteed price and date.
In purchasing municipal obligations, the Fund intends to rely on opinions of bond counsel or counsel to the issuers for each issue as to the excludability of interest on such obligations from gross income for federal income tax purposes. The Fund will not undertake independent investigations concerning the tax-exempt status of such obligations, nor does it guarantee or represent that bond counsels opinions are correct. Bond counsels opinions will generally be based in part upon covenants by the issuers and related parties regarding continuing compliance with federal tax requirements. Tax laws contain numerous and complex requirements that must be satisfied on a continuing basis in order for bonds to be and remain tax-exempt. If the issuer of a bond or a user of a bond-financed facility fails to comply with such requirements at any time, interest on the bond could become taxable, retroactive to the date the obligation was issued.
Custodial Receipts. The Fund may invest in custodial receipts (including tender option bonds, see above for more information) representing interests in U.S. Government Securities, municipal obligations or other debt instruments held by a custodian or trustee. Custodial receipts evidence ownership of future interest payments, principal payments or both on notes or bonds issued or guaranteed as to principal or interest by the U.S. Government, its agencies, instrumentalities, political subdivisions or authorities, or by a state or local governmental body or authority, or by other types of issuers. For certain securities law purposes, custodial receipts are not considered obligations of the underlying issuers. In addition, if for tax purposes the Fund is not considered to be the owner of the underlying securities held in the custodial account, the Fund may suffer adverse tax consequences. As a holder of custodial receipts, the Fund will bear its proportionate share of the fees and expenses charged to the custodial account.
Other Investment Companies. The Fund may invest in securities of other investment companies, including ETFs, subject to statutory limitations prescribed by the Investment Company Act, or exemptive relief thereunder. These statutory limitations include in certain circumstances a prohibition on the Fund acquiring more than 3% of the voting shares of any other investment company, and a prohibition on investing more than 5% of the Funds total assets in securities of any one investment company or more than 10% of its total assets in securities of all investment companies. Many ETFs, however, have obtained exemptive relief from the SEC to permit unaffiliated funds to invest in the ETFs shares beyond these statutory limitations, subject to certain conditions and pursuant to a contractual arrangement between the ETFs and the investing funds. The Fund may rely on these exemptive orders to invest in unaffiliated ETFs.
The use of ETFs is intended to help the Fund match the total return of the particular market segments or indices represented by those ETFs, although that may not be the result. Most ETFs are passively managed investment companies whose shares are purchased and sold on a securities exchange. An ETF represents a portfolio of securities designed to track a particular market
39
segment or index. An investment in an ETF generally presents the same primary risks as an investment in a conventional fund (i.e., one that is not exchange-traded) that has the same investment objectives, strategies and policies. In addition, an ETF may fail to accurately track the market segment or index that underlies its investment objective. The price of an ETF can fluctuate, and a Fund could lose money investing in an ETF. Moreover, ETFs are subject to the following risks that do not apply to conventional funds: (i) the market price of the ETFs shares may trade at a premium or a discount to their NAV; (ii) an active trading market for an ETFs shares may not develop or be maintained; and (iii) there is no assurance that the requirements of the exchange necessary to maintain the listing of an ETF will continue to be met or remain unchanged.
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 beyond the statutory limits described above or otherwise. Some of those investment companies may be funds for which the Investment Adviser or any of its affiliates serves as investment adviser, administrator or distributor.
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.
Floating and Variable Rate Obligations. The Fund may purchase various floating and variable rate obligations, including tender option bonds. The value of these obligations is generally more stable than that of a fixed rate obligation in response to changes in interest rate levels. Under certain circumstances, the Fund may consider the maturity of a variable or floating rate obligation to be shorter than its ultimate stated maturity. The issuers or financial intermediaries providing demand features may support their ability to purchase the obligations by obtaining credit with liquidity supports. These may include lines of credit, which are conditional commitments to lend, and letters of credit, which will ordinarily be irrevocable, both of which may be issued by domestic banks or foreign banks. 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 institution.
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 obligations interest rate payment not being immediately impacted by a decline in interest rates.
Certain floating and variable rate obligations have an interest rate floor feature, which prevents the interest rate payable by the security from dropping below a specified level as compared to a reference interest rate (the reference rate), such as LIBOR. 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.
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 a 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
40
APPENDIX A
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. When purchasing a security on a when-issued basis or entering into a forward commitment, a Fund must identify on its books liquid assets, or engage in other appropriate measures, to cover its obligations.
Illiquid Securities. The Fund may invest up to 10% of its total assets (measured at the time of purchase) in illiquid securities (i.e., securities that cannot be sold or disposed of in seven days in the ordinary course of business at approximately the value ascribed to them by the Fund). Illiquid securities include:
| ⬛ | Both domestic and foreign securities that are not readily marketable |
| ⬛ | Certain municipal leases and participation interests |
| ⬛ | Repurchase agreements and time deposits with a notice or demand period of more than seven days |
| ⬛ | Certain restricted securities, unless it is determined, based upon a review of the trading markets for a specific restricted security, that such restricted security is liquid because it is so-called 4(2) commercial paper or is otherwise eligible for resale pursuant to Rule 144A under the Securities Act. |
Investing in restricted securities may decrease the liquidity of the Funds portfolio. Securities purchased by the Fund that are liquid at the time of purchase may subsequently become illiquid due to events relating to the issuer of the securities, market events, economic conditions or investor perception.
In cases where no clear indication of the value of the Funds 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 is no longer viable, due to its lack of liquidity. For more information on fair valuation, please see How To Buy SharesHow Are Shares Priced?
Borrowings. The Fund can borrow money from banks and other financial institutions in amounts not exceeding one-third of the Funds total assets (including the amount borrowed).
Downgraded Securities. After its purchase, a portfolio security may be assigned a lower rating or cease to be rated, which may affect the market value and liquidity of the security. If this occurs, a Fund may continue to hold the security if the Investment Adviser believes it is in the best interest of the Fund and its shareholders.
41
Financial Highlights
The financial highlights table is intended to help you understand the Funds financial performance for the last five years (or less if the Fund has been in operation for less than five years). Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions). Because Class T Shares of the Fund had not commenced operations as of the end of the Funds fiscal year, financial highlights are not available. The information has been audited by PricewaterhouseCoopers LLP, whose report, along with the Funds financial statements, is included in the Funds most recent annual report (available upon request).
| From investment operations |
Distributions to shareholders |
|||||||||||||||||||||||||||||
| Year - Share Class | Net asset |
Net investment income(a) |
Net realized and unrealized gain (loss) |
Total from investment operations |
From net investment income |
From net realized gains |
Total distributions |
|||||||||||||||||||||||
| FOR THE FISCAL YEARS ENDED MARCH 31, | ||||||||||||||||||||||||||||||
| 2018 - A | $ | 10.02 | $ | 0.14 | $ | (0.04 | ) | $ | 0.10 | $ | (0.11 | ) | $ | | (d) | $ | (0.11 | ) | ||||||||||||
| 2018 - Institutional | 10.02 | 0.15 | (0.01 | ) | 0.14 | (0.15 | ) | | (d) | (0.15 | ) | |||||||||||||||||||
| 2018 - Administration | 10.02 | 0.13 | (0.01 | ) | 0.12 | (0.12 | ) | | (d) | (0.12 | ) | |||||||||||||||||||
| 2018 - Preferred | 10.02 | 0.14 | | (e) | 0.14 | (0.14 | ) | | (d) | (0.14 | ) | |||||||||||||||||||
| 2018 - R6 (Commenced November 30, 2017) | 10.02 | 0.05 | | 0.05 | (0.05 | ) | | (d) | (0.05 | ) | ||||||||||||||||||||
| 2017 - A (Commenced October 31, 2016) | 10.01 | 0.03 | 0.01 | 0.04 | (0.03 | ) | | (d) | (0.03 | ) | ||||||||||||||||||||
| 2017 - Institutional | 10.00 | 0.11 | 0.01 | 0.12 | (0.10 | ) | | (d) | (0.10 | ) | ||||||||||||||||||||
| 2017 - Administration | 10.00 | 0.06 | 0.04 | 0.10 | (0.08 | ) | | (d) | (0.08 | ) | ||||||||||||||||||||
| 2017 - Preferred (Commenced October 31, 2016) | 10.01 | 0.04 | 0.01 | 0.05 | (0.04 | ) | | (d) | (0.04 | ) | ||||||||||||||||||||
| 2016 - Institutional | 10.00 | 0.06 | | (e) | 0.06 | (0.06 | ) | | (d) | (0.06 | ) | |||||||||||||||||||
| 2016 - Administration | 10.00 | 0.04 | | (e) | 0.04 | (0.04 | ) | | (d) | (0.04 | ) | |||||||||||||||||||
| 2015 - Institutional | 10.00 | 0.03 | 0.01 | 0.04 | (0.04 | ) | | (0.04 | ) | |||||||||||||||||||||
| 2015 - Administration | 10.00 | 0.01 | | (e) | 0.01 | (0.01 | ) | | (0.01 | ) | ||||||||||||||||||||
| FOR THE PERIOD ENDED MARCH 31, | ||||||||||||||||||||||||||||||
| 2014 - Institutional (Commenced February 28, 2014) | 10.00 | | (e) | | (e) | | | | | |||||||||||||||||||||
| 2014 - Administration (Commenced February 28, 2014) | 10.00 | | (e) | | (e) | | | | |
| (a) | Calculated based on the average shares outstanding methodology. |
| (b) | 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. Total returns would be reduced if a sales or redemption charge was taken into account. Returns do not reflect the impact of taxes to shareholder relating to Fund distributions or the redemption of Fund shares. Total returns for periods less than one full year are not annualized. |
| (c) | The Funds portfolio turnover rate is calculated in accordance with regulatory requirements, without regard to transactions involving short term investments. If such transactions were included, the Funds portfolio turnover rate may be higher. |
| (d) | Rounds to less than $0.01 per share. |
| (e) | Amount is less than $0.005 per share. |
| (f) | Annualized. |
42
APPENDIX B
| Net asset value, end of year |
Total return(b) |
Net assets, end of year (in 000s) |
Ratio of net expenses to average net assets |
Ratio of total expenses to average net assets |
Ratio of net investment income (loss) to average net assets |
Portfolio turnover rate(c) |
||||||||||||||||||||||||||||||||||
| $ | 10.01 | 1.04 | % | $ | 817 | 0.57 | % | 0.63 | % | 1.42 | % | 67 | % | |||||||||||||||||||||||||||
| 10.01 | 1.40 | 1,421,091 | 0.19 | 0.33 | 1.54 | 67 | ||||||||||||||||||||||||||||||||||
| 10.02 | 1.24 | 1,032 | 0.43 | 0.59 | 1.25 | 67 | ||||||||||||||||||||||||||||||||||
| 10.02 | 1.40 | 25 | 0.28 | 0.44 | 1.38 | 67 | ||||||||||||||||||||||||||||||||||
| 10.02 | 0.43 | 10 | 0.24 | (f) | 0.35 | (f) | 1.64 | (f) | 67 | |||||||||||||||||||||||||||||||
| 10.02 | 0.42 | 25 | 0.51 | (f) | 1.33 | (f) | 0.75 | (f) | 46 | |||||||||||||||||||||||||||||||
| 10.02 | 1.22 | 265,690 | 0.15 | 1.20 | 1.08 | 46 | ||||||||||||||||||||||||||||||||||
| 10.02 | 0.97 | 132 | 0.41 | 1.49 | 0.60 | 46 | ||||||||||||||||||||||||||||||||||
| 10.02 | 0.52 | 25 | 0.27 | (f) | 1.11 | (f) | 0.95 | (f) | 46 | |||||||||||||||||||||||||||||||
| 10.00 | 0.61 | 15,082 | 0.19 | 2.10 | 0.63 | 39 | ||||||||||||||||||||||||||||||||||
| 10.00 | 0.37 | 25 | 0.43 | 2.44 | 0.35 | 39 | ||||||||||||||||||||||||||||||||||
| 10.00 | 0.36 | 100,009 | 0.19 | 4.62 | 0.35 | 40 | ||||||||||||||||||||||||||||||||||
| 10.00 | 0.10 | 25 | 0.42 | 4.87 | 0.12 | 40 | ||||||||||||||||||||||||||||||||||
| 10.00 | | 9,976 | 0.19 | (f) | 4.30 | (f) | 0.10 | (f) | | |||||||||||||||||||||||||||||||
| 10.00 | | 25 | 0.44 | (f) | 4.55 | (f) | (0.15 | )(f) | |
43
Short-Term Conservative Income Fund Prospectus
| FOR MORE INFORMATION |
Annual/Semi-Annual Report
Additional information about the Funds investments will be available in the Funds annual and semi-annual reports to shareholders. In the Funds annual reports, you will find a discussion of the market conditions and investment strategies that significantly affected the Funds performance during the last fiscal year.
Statement of Additional Information
Additional information about the Fund and its policies is also available in the Funds SAI. The SAI is incorporated by reference into the Prospectus (i.e., is legally considered part of the Prospectus).
The Funds annual and semi-annual reports (when available) and the SAI are available free upon request by calling Goldman Sachs at 1-800-621-2550. You can also access and download the annual and semi-annual reports and the SAI at the Funds website: http://www.gsamfunds.com/mutualfunds.
From time to time, certain announcements and other information regarding the Fund may be found at www.gsamfunds.com/announcements-ind for individual investors or www.gsamfunds.com/announcements for advisers.
To obtain other information and for shareholder inquiries:
| Institutional, Administration, Preferred & Class R6 | Class A & T | |||
|
⬛ By telephone: |
1-800-621-2550 | 1-800-526-7384 | ||
| ⬛ By mail: |
Goldman Sachs Funds P.O. Box 06050 Chicago, Illinois 60606 |
Goldman Sachs Funds P.O. Box 21974 Kansas City, MO 64121 | ||
|
⬛ On the Internet: |
SEC EDGAR database http://www.sec.gov |
You may review and obtain copies of Fund documents (including the SAI) by visiting the SECs public reference room in Washington, D.C. You may also obtain copies of Fund documents, after paying a duplicating fee, by writing to the SECs Public Reference Section, Washington, D.C. 20549-1520 or by electronic request to<EMAIL_ADDRESS>Information on the operation of the public reference room may be obtained by calling the SEC at<PHONE_NUMBER>.
| STCIPRO-18 | The Funds investment company registration number is 811-05349. GSAM® is a registered service mark of Goldman Sachs & Co. LLC |
Prospectus
GOLDMAN SACHS SHORT-TERM CONSERVATIVE INCOME FUND
July 30, 2018
| ⬛ | Goldman Sachs Short-Term Conservative Income Fund |
| ∎ | Class P Shares: GMBPX |
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 INVOLVES INVESTMENT RISKS, AND YOU MAY LOSE MONEY IN THE FUND.
Goldman Sachs Short-Term Conservative Income FundSummary
Investment Objective
The Goldman Sachs Short-Term Conservative Income Fund (the Fund) seeks to generate current income and secondarily maintain an emphasis on preservation of capital and liquidity.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
| Class P | ||||
| Annual Fund Operating Expenses |
||||
| (expenses that you pay each year as a percentage of the value of your investment): | ||||
| Management Fees |
0.25% | |||
| Other Expenses1 |
0.07% | |||
| Total Annual Fund Operating Expenses |
0.32% | |||
| Fee Waiver and Expense Limitation2 |
(0.09)% | |||
| Total Annual Fund Operating Expenses After Fee Waiver and Expense Limitation |
0.23% |
| 1 | The Other Expenses for Class P Shares have been estimated to reflect expenses expected to be incurred during the current fiscal year. |
| 2 | The Investment Adviser has agreed to (i) waive a portion of its management fee in order to achieve an effective net management fee rate of 0.20% as an annual percentage of the Funds average daily net assets, and (ii) reduce or limit Other Expenses (excluding acquired fund fees and expenses, transfer agency fees and expenses, administration fees, taxes, interest, brokerage fees, expenses of shareholder meetings, litigation and indemnification, and extraordinary expenses) to 0.004% of the Funds average daily net assets. These arrangements will remain in effect through at least July 29, 2019. In addition, from July 30, 2018 through April 20, 2019, the Investment Adviser has agreed to waive a greater portion of its management fee in order to achieve an effective net management fee rate of 0.19% as an annual percentage of the Funds average daily net assets. Additionally, from July 30, 2018 through April 20, 2019, Goldman Sachs & Co. LLC (Goldman Sachs), the Funds transfer agent, has agreed to waive a portion of its transfer agency fee (a component of Other Expenses) equal to 0.02% as an annual percentage of the average daily net assets attributable to Class P Shares. The management fee waiver and the transfer agency fee waiver, each expiring April 20, 2019, are not reflected in the table above. If they had been reflected, from July 30, 2018 through April 20, 2019, the Total Annual Fund Operating Expenses After Fee Waiver and Expense Limitation for Class P Shares would have been 0.20%. The Investment Adviser and Goldman Sachs may not terminate any of the aforementioned fee waiver and expense limitation arrangements prior to the expiration of their respective terms without the approval of the Board of Trustees. |
Expense Example
This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in Class P Shares of the Fund for the time periods indicated and then redeem all of your Class P Shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Funds operating expenses remain the same. The Example incorporates the fee waiver and expense limitation arrangements expiring on July 29, 2019 for only the first year. (The additional management fee waiver and transfer agency fee waiver arrangements that expire prior to July 29, 2019 are not reflected in the Example.) 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 | |||||||||||||
| Class P Shares |
$ | 24 | $ | 94 | $ | 171 | $ | 397 | ||||||||
Portfolio Turnover
The Fund pays 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, 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 annual fund operating expenses or in the expense example above, but are reflected in the Funds performance. The Funds portfolio turnover for the fiscal year ended March 31, 2018 was 67% of the average value of its portfolio.
Principal Strategy
The Fund pursues its investment objective by investing in a broad range of high quality, U.S. dollar-denominated fixed income instruments, including obligations issued or guaranteed by the U.S. Government, its agencies, authorities, instrumentalities or sponsored
1
enterprises (U.S. Government Securities), obligations of U.S. banks, corporate notes, commercial paper and other short-term obligations of U.S. companies, certificates of deposit, states, municipalities and other entities, fixed and floating rate asset-backed securities and repurchase agreements. The Fund may also invest in U.S. dollar-denominated obligations issued or guaranteed by foreign banks, companies and governments or their agencies, authorities, instrumentalities or sponsored enterprises. The Fund will not invest in mortgage-backed securities or derivatives.
In pursuing the Funds investment objective, the Investment Adviser will seek to enhance the Funds return by identifying those high quality, U.S. dollar-denominated fixed income instruments that are within the maturity guidelines discussed below and that the Investment Adviser believes offer attractive yields relative to other similar securities, consistent with preservation of capital and liquidity.
The Fund will concentrate its investments in the financial services group of industries. Therefore, under normal circumstances, the Fund will invest more than 25% of its total assets in securities issued by companies in the financial services group of industries and repurchase agreements secured by such obligations. The Fund may, however, invest less than 25% of its total assets in this group of industries as a temporary defensive position.
The Funds benchmarks are the Bloomberg Barclays Short-Term Government/Corporate Index and the ICE BofAML 3-6 Month U.S. Treasury Bill Index.
Credit Quality Guidelines
The Fund will invest at least 85% of its total assets in securities (or the issuers of such securities) that are rated, at the time of purchase, in the highest short-term credit rating category by at least one nationally recognized statistical rating organization (NRSRO) (A-1, P-1, or F1 by Standard & Poors Ratings Services (Standard & Poors), Moodys Investors Service, Inc. (Moodys) or Fitch Ratings, Inc. (Fitch), respectively), or, if such securities only maintain long term ratings or are unrated, determined by the Investment Adviser to be of comparable credit quality at the time of purchase. The remainder of the Funds investments will carry a minimum short-term credit rating of A-2, P-2, or F2 by Standard & Poors, Moodys or Fitch, respectively, at the time of purchase, or, if such securities only maintain long term ratings or are unrated, determined by the Investment Adviser to be of comparable credit quality at the time of purchase. The Fund may also rely on the credit quality of a guarantee or demand feature in determining the credit quality of a security supported by the guarantee or demand feature.
Maturity Guidelines
Except for floating rate and variable rate securities, the Fund will invest in securities that have remaining maturities of two years or less at the time of purchase, with limited exceptions where a security has maturity shortening features (e.g., demand features). Floating rate and variable rate securities must have remaining maturities of three years or less at the time of purchase, with limited exceptions where a security has maturity shortening features (e.g., demand features). The Fund will maintain a dollar-weighted average portfolio maturity (WAM) that does not exceed approximately nine months and a dollar-weighted average portfolio life (WAL) that does not exceed approximately one year.
THE FUND IS NOT A MONEY MARKET FUND AND DOES NOT ATTEMPT TO MAINTAIN A STABLE NET ASSET VALUE.
Investment Philosophy
The Fund is managed to seek to generate current income and secondarily maintain an emphasis on preservation of capital and liquidity. The Investment Adviser follows a conservative, risk-managed investment process.
Global fixed income markets are constantly evolving and are highly diversewith a large number of countries, currencies, sectors, issuers and securities. We believe that inefficiencies in these complex markets cause bond prices to diverge from their fair value. To capitalize on these inefficiencies and generate consistent risk-adjusted performance, we believe it is critical to:
| ⬛ | Thoughtfully combine diversified sources of return by employing multiple strategies |
| ⬛ | Take a global perspective to uncover relative value opportunities |
| ⬛ | Employ focused specialist teams to identify short-term mispricings and incorporate long-term views |
| ⬛ | Emphasize a risk-aware approach as we view risk management as both an offensive and defensive tool |
| ⬛ | Build a strong team of skilled investors who excel on behalf of our clients |
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 other 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.
2
| ∎ | Asset-Backed and Receivables-Backed Securities Risk. The Fund may invest in asset-backed and receivables-backed 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 subject to certain additional risks, including extension risk (i.e., in periods of rising interest rates, issuers may pay principal later than expected) and prepayment risk (i.e., in periods of declining interest rates, issuers may pay principal more quickly than expected, causing the Fund to reinvest proceeds at lower prevailing interest rates). These risks are generally greater for longer-term asset-backed securities. Asset-backed securities are subject to various other risks, including the risk that private insurers fail to meet their obligations, the risk of unexpectedly high rates of default on the assets backing the securities and the risks associated with the nature and servicing of the assets backing the securities. Asset-backed securities may not have the benefit of a security interest in collateral comparable to that of mortgage assets, resulting in additional credit risk. |
| ∎ | Credit/Default Risk. An issuer or guarantor of fixed income securities or instruments held by the Fund, or a bank or other financial institution that has entered into a repurchase agreement with the Fund, may default on its obligation to pay interest and repay principal or default on any other obligation. Additionally, the credit quality of securities may deteriorate rapidly, which may impair the Funds liquidity and cause significant deterioration in net asset value (NAV). |
| ∎ | Financial Services Sector Risk. An adverse development in the financial services sector, including U.S. and foreign banks, broker-dealers, insurance companies, finance companies (e.g., automobile finance) and related asset-backed securities, may affect the value of the Funds investments more than if the Fund were not invested to such a degree in this sector. Companies in the financial services sector may be particularly susceptible to certain economic factors such as interest rate changes, fiscal, regulatory and monetary policy and general economic cycles. |
| ∎ | Floating and Variable Rate Obligations Risk. 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 obligations interest rate payment not being immediately impacted by a decline in interest rates. |
Certain floating and variable rate obligations have an interest rate floor feature, which prevents the interest rate payable by the security from dropping below a specified level as compared to a reference interest rate (the reference rate), such as LIBOR. 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.
| ∎ | Foreign Risk. Foreign securities may be subject to risk of loss because of more or less foreign government regulation, less public information and less economic, political and social stability in the countries in which the Fund invests. The imposition of exchange controls, sanctions, confiscations, trade restrictions (including tariffs) and other government restrictions by the United States and other governments, or from problems in share registration, settlement or custody, may also result in losses. In addition, the Fund will be subject to the risk that an issuer of non-U.S. sovereign debt or the governmental authorities that control the repayment of the debt may be unable or unwilling to repay the principal or interest when due. |
| ∎ | Industry Concentration Risk. The Fund concentrates its investments in the financial services group of industries, which has historically experienced substantial price volatility. This concentration subjects the Fund to greater risk of loss as a result of adverse economic, business, political, environmental or other developments than if its investments were diversified across different industries. |
| ∎ | Interest Rate Risk. When interest rates increase, fixed income securities or instruments held by the Fund will generally decline in value. Long-term fixed income securities or instruments will normally have more price volatility because of this risk than short-term fixed income securities or instruments. The risks associated with changing interest rates may have unpredictable effects on the markets and the Funds investments. Fluctuations in interest rates may also affect the liquidity of fixed income securities and instruments held by the Fund. |
| ∎ | Large Shareholder Transactions Risk. The Fund may experience adverse effects when certain large shareholders purchase or redeem large amounts of shares of the Fund. Such large shareholder redemptions may cause the Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Funds NAV and liquidity. Similarly, large Fund share purchases may adversely affect the Funds performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would. These transactions may also accelerate the realization of taxable income to shareholders if such sales of investments resulted in gains, and may also increase transaction costs. In addition, a large redemption could result in the Funds current expenses being allocated over a smaller asset base, leading to an increase in the Funds expense ratio. |
| ∎ | Liquidity Risk. The Fund may make investments that are illiquid or that may become less liquid in response to market developments or adverse investor perceptions. Illiquid investments may be more difficult to value. Liquidity risk may also refer to the risk that the Fund will not be able to pay redemption proceeds within the allowable time period because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. To meet redemption requests, the Fund may be |
3
| forced to sell securities at an unfavorable time and/or under unfavorable conditions. Liquidity risk may be the result of, among other things, the reduced number and capacity of traditional market participants to make a market in fixed income securities or the lack of an active market. The potential for liquidity risk may be magnified by a rising interest rate environment or other circumstances where investor redemptions from fixed income mutual funds may be higher than normal, potentially causing increased supply in the market due to selling activity. |
| ∎ | Market Risk. The market 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. |
| ∎ | Municipal Securities Risk. Municipal securities are subject to credit/default risk, interest rate risk and certain additional risks. The Fund may be more sensitive to adverse economic, business or political developments if it invests a substantial portion of its assets in the bonds of similar projects (such as those relating to education, health care, housing, transportation, and utilities), industrial development bonds, or in particular types of municipal securities (such as general obligation bonds, private activity bonds and moral obligation bonds). Generally, municipalities continue to experience difficulties in the current economic and political environment. |
| ∎ | NAV Risk. The net asset value of the Fund and the value of your investment will fluctuate. |
| ∎ | 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 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. |
Performance
The bar chart and table below provide an indication of the risks of investing in the Fund by showing: (a) changes in the performance of the Funds Institutional Shares from year to year; and (b) how the average annual total returns of the Funds Institutional Shares compare to those of certain broad-based securities market indices. The ICE BofAML 3-6 Month U.S. Treasury Bill Index shows how the Funds performance compares to short-term Treasury bills of about 90 to 180-day maturity. The Funds 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.
| TOTAL RETURN | CALENDAR YEAR (INSTITUTIONAL) | |
| The total return for Institutional Shares for the six-month period ended June 30, 2018 was 0.99%
Best Quarter Q1 17 +0.38%
Worst Quarter Q4 15 +0.08%
|
||
| AVERAGE ANNUAL TOTAL RETURN |
| For the period ended December 31, 2017 | 1 Year | Since Inception |
||||||
| Institutional Shares (Inception 2/28/14)* |
||||||||
| Returns Before Taxes |
1.44% | 0.84% | ||||||
| Returns After Taxes on Distributions |
0.86% | 0.50% | ||||||
| Returns After Taxes on Distributions and Sale of Fund Shares |
0.81% | 0.49% | ||||||
| Bloomberg Barclays Short-Term Government/Corporate Index |
0.98% | 0.57% | ||||||
| ICE BofAML 3-6 Month U.S. Treasury Bill Index |
0.85% | 0.38% |
| * | Returns are for a share class that is not presented that would have substantially similar annual returns because the shares are invested in the same portfolio of securities and the annual returns would differ only to the extent that the share classes do not have the same expenses. |
4
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 investors 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.
Portfolio Management
Goldman Sachs Asset Management, L.P. is the investment adviser for the Fund (the Investment Adviser or GSAM).
Portfolio Managers: Dave Fishman, Managing Director, Co-Head of Liquidity Solutions, has managed the Fund since 2014; and John Olivo, Managing Director, Global Head of Short Duration, has managed the Fund since 2016.
Buying and Selling Fund Shares
The Fund does not impose minimum purchase requirements for initial or subsequent investments in Class P Shares.
You may purchase and redeem (sell) Class P Shares of the Fund on any business day through the Goldman Sachs Private Wealth Management business unit, The Goldman Sachs Trust Company, N.A., The Goldman Sachs Trust Company of Delaware, The Ayco Company, L.P. or with certain intermediaries that are authorized to offer Class P Shares.
Tax Information
The Funds 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 the Fund through an intermediary that is authorized to offer Class P Shares, the Fund and/or its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your intermediarys website for more information.
5
Investment Management Approach
| INVESTMENT OBJECTIVE |
The Fund seeks to generate current income and secondarily maintain an emphasis on preservation of capital and liquidity.
The Funds investment objective may be changed without shareholder approval upon 60 days notice.
| PRINCIPAL INVESTMENT STRATEGIES |
The Fund pursues its investment objective by investing in a broad range of high quality, U.S. dollar-denominated fixed income instruments, including U.S. Government Securities, obligations of U.S. banks, corporate notes, commercial paper and other short-term obligations of U.S. companies, certificates of deposit, states, municipalities and other entities, fixed and floating rate asset-backed securities and repurchase agreements. The Fund may also invest in U.S. dollar-denominated obligations issued or guaranteed by foreign banks, companies and governments or their agencies, authorities, instrumentalities or sponsored enterprises. The Fund will not invest in mortgage-backed securities or derivatives.
In pursuing the Funds investment objective, the Investment Adviser will seek to enhance the Funds return by identifying those high grade, U.S. dollar-denominated fixed income instruments that are within the maturity guidelines discussed below and that the Investment Adviser believes offer attractive yields relative to other similar securities, consistent with preservation of capital and liquidity.
The Fund will concentrate its investments in the financial services group of industries. Therefore, under normal circumstances, the Fund will invest more than 25% of its total assets in securities issued by companies in the financial services group of industries and repurchase agreements secured by such obligations. The Fund may, however, invest less than 25% of its total assets in this group of industries as a temporary defensive position.
The Funds benchmarks are the Bloomberg Barclays Short-Term Government/Corporate Index and the ICE BofAML 3-6 Month U.S. Treasury Bill Index. The Bloomberg Barclays Short-Term Government/Corporate Index is an unmanaged index that measures the performance of government and corporate securities with less than one year remaining to maturity. The ICE BofAML 3-6 Month U.S. Treasury Bill Index measures total return on cash, including price and interest income, based on short-term government Treasury Bills of about 90- to 180-day maturity. The indices are unmanaged, does not incur fees or expenses, and cannot be invested in directly.
Credit Quality Guidelines
The Fund will invest at least 85% of its total assets in securities (or the issuers of such securities) that are rated, at the time of purchase, in the highest short-term credit rating category by at least one NRSRO (A-1, P-1, or F1 by Standard & Poors, Moodys or Fitch, respectively), or, if such securities only maintain long term ratings or are unrated, determined by the Investment Adviser to be of comparable credit quality at the time of purchase. The remainder of the Funds investments will carry a minimum short-term credit rating of A-2, P-2, or F2 by Standard & Poors, Moodys or Fitch, respectively, at the time of purchase, or, if such securities only maintain long term ratings or are unrated, determined by the Investment Adviser to be of comparable credit quality at the time of purchase. In addition, the Fund may rely on the credit quality of a guarantee or demand feature in determining the credit quality of a security supported by the guarantee or demand feature.
Maturity Guidelines
Except for floating rate and variable rate securities, the Fund will invest in securities that have remaining maturities of two years or less at the time of purchase, with limited exceptions where a security has maturity shortening features (e.g., demand features). Floating rate and variable rate securities must have remaining maturities of three years or less at the time of purchase, with limited exceptions where a security has maturity shortening features (e.g., demand features). The maturity of a security is generally the period remaining until the principal amount must unconditionally be paid, or in the case of a security called for redemption, the date on which the redemption payment must be made. For example, certain floating rate and variable rate securities may have remaining maturities exceeding three years if such securities provide for the Fund to recover the principal amount through a demand feature in three years or less.
6
INVESTMENT MANAGEMENT APPROACH
The Fund will maintain a WAM that does not exceed approximately nine months and a WAL that does not exceed approximately one year. The Funds WAM is an average of the effective maturities of all portfolio securities, weighted by each securitys percentage of market value. The Funds WAL is an average of the final maturities (or where applicable the date of demand) of all portfolio securities, weighted by each securitys percentage of market value. A securitys effective maturity represents the next interest rate reset date, demand date or prerefunded date. The Funds WAM and WAL are constantly revisited and adjusted as market conditions change. An overall strategy is developed by the Investment Adviser based on insights gained from weekly meetings with both Goldman Sachs economists and economists from outside the firm.
The Fund may, from time to time, take temporary defensive positions that are inconsistent with the Funds principal investment strategies in attempting to respond to adverse market, political or other conditions. For temporary defensive purposes, the Fund may invest up to 100% of its total assets in U.S. Government Securities, commercial paper rated at least A-2 by Standard & Poors, P-2 by Moodys, or having a comparable credit rating by another NRSRO (or if unrated, determined by the Investment Adviser to be of comparable credit quality), certificates of deposit, bankers acceptances, repurchase agreements, non-convertible preferred stocks and non-convertible corporate bonds with a remaining maturity of less than one year, certain exchange traded funds (ETFs) and other investment companies and cash items. Cash items are not income-generating and, as a result, the Funds 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 Funds assets are invested in such instruments, the Fund may not be achieving its investment objective.
THE FUND IS NOT A MONEY MARKET FUND AND DOES NOT ATTEMPT TO MAINTAIN A STABLE NET ASSET VALUE.
Investment Philosophy
Goldman Sachs Asset Management, L.P. (GSAM) serves as investment adviser to the Fund. GSAM is referred to in the Prospectus as the Investment Adviser.
The Fund is managed to seek to generate current income and secondarily maintain an emphasis on preservation of capital and liquidity. The Investment Adviser follows a conservative, risk-managed investment process.
Global fixed income markets are constantly evolving and are highly diversewith a large number of countries, currencies, sectors, issuers and securities. We believe that inefficiencies in these complex markets cause bond prices to diverge from their fair value. To capitalize on these inefficiencies and generate consistent risk-adjusted performance, we believe it is critical to:
| ⬛ | Thoughtfully combine diversified sources of return by employing multiple strategies |
| ⬛ | Take a global perspective to uncover relative value opportunities |
| ⬛ | Employ focused specialist teams to identify short-term mispricings and incorporate long-term views |
| ⬛ | Emphasize a risk-aware approach as we view risk management as both an offensive and defensive tool |
| ⬛ | Build a strong team of skilled investors who excel on behalf of our clients |
GSAM Fixed Income implements this overall philosophy through an investment process that is aimed at seeking to generate current income and secondarily maintain an emphasis on preservation of capital and liquidity by utilizing a diverse set of investment strategies and revolves around four key elements:
1. Developing a risk budgetLead portfolio managers (the Portfolio Team) are responsible for the overall results of the Fund. They set the strategic direction of the Fund by establishing a risk budget. The risk budget for the Fund is the range the portfolio managers will allow the Fund to deviate from its benchmark with respect to overall risk, in this Fund primarily through sector allocations, securities selection and, to a lesser extent, duration. Following careful analysis of risk and return objectives, they allocate the overall risk budget to each component strategy in an effort to optimize potential return and secondarily maintain an emphasis on preservation of capital and liquidity.
2. Generating investment views and strategiesOur Top-down and Bottom-up Strategy Teams (collectively, Strategy Teams) generate investment ideas within their areas of specialization. The Top-down Strategy Teams are responsible for Cross-Sector, Duration, Country, and Currency decisions and are deliberately small to ensure creativity and expedite decision-making and execution. Concurrently, Bottom-up Strategy Teams, comprised of sector specialists, formulate sub-sector allocation and security selection decisions. The Fund will only utilize Strategy Teams consistent with the Funds investment policies.
3. Constructing the portfoliosThe Portfolio and Strategy Teams construct the Funds portfolio through a collaborative process in which the Portfolio Team oversees the overall portfolio while the Strategy Teams actively manage the securities and strategies
7
within their areas of specialization. This process enables the Portfolio Team to build a diversified portfolio consisting of the ideas of the individual Strategy Teams, consistent with the Funds overall risk and return objectives.
4. Dynamic adjustments based on market conditionsAs market conditions change, the volatility and attractiveness of sectors and strategies can change as well. To optimize the Funds risk/return potential within its risk budget, the Portfolio Team dynamically adjusts the mix of top-down and bottom-up strategies in the Funds portfolio, consistent with the Funds investment policies. At the same time, the Strategy Teams adjust their strategies and security selections in an effort to optimize performance within their specialty areas.
Additional Fund Characteristics and Restrictions
| ⬛ | Portfolio Diversification: Diversification can help the Fund reduce the risks of investing. The Fund may not invest more than 5% of the value of its total assets at the time of purchase in the securities of any single issuer except that the Fund may invest up to 25% of the value of its total assets in the securities of a single issuer for up to three business days. These limitations do not apply to cash, certain repurchase agreements, U.S. Government Securities or securities of certain other investment companies. In addition, securities subject to certain unconditional guarantees are subject to different diversification requirements. |
| ⬛ | Portfolio Liquidity: The Fund must maintain a sufficient degree of liquidity necessary to meet reasonably foreseeable redemption requests. In addition, the Fund will hold at least 10% of its total assets in weekly liquid assets (consisting of cash, direct obligations of the U.S. Government, agency discount notes with remaining maturities of 60 days or less and securities that will mature or are subject to a demand feature that is exercisable and payable within five business days). The Fund may not acquire an illiquid security if, after the purchase, more than 10% of the Funds total assets would consist of illiquid assets. |
Determination of whether an investment is an eligible investment in which the Fund may invest will be made at the time of purchase. If an investment becomes no longer an eligible investment, because of, among other things, a rating downgrade or other action, the Investment Adviser shall not be obligated to dispose of such investment but may do so if, in its judgment, it is prudent to do so in light of the investment objectives of the Fund. Additional information about the Funds investment restrictions is located in the Statement of Additional Information (SAI).
References in the Prospectus to a benchmark are for informational purposes only, and unless otherwise noted are not an indication of how the Fund is managed.
| OTHER INVESTMENT PRACTICES AND SECURITIES |
Although the Funds principal investment strategies are described in the Funds SummaryPrincipal Strategy section of the Prospectus, the following table identifies some of the investment techniques that may (but are not required to) be used by the Fund in seeking to achieve its investment objective. Numbers in the table show allowable usage only; for actual usage, consult the Funds annual/semi-annual report (when available). For more information about these and other investment practices and securities, see Appendix A.
The Fund publishes on its website (http://www.gsamfunds.com) complete portfolio holdings for the Fund as of the end of each month subject to a five-day lag between the date of the information and the date on which the information is disclosed. The Fund also publishes its holdings on a weekly basis, with no lag required between the date of the information and the date on which the information is disclosed. This weekly holdings information will be available on the website until the next publish date. In addition, a description of the Funds policies and procedures with respect to the disclosure of the Funds portfolio holdings is available in the Funds SAI.
| ADDITIONAL PERFORMANCE INFORMATION |
Note that the Best Quarter and Worst Quarter figures shown in the Performance section of the Funds Summary section are applicable only to the time period covered by the bar chart.
These definitions apply to the after-tax returns shown in the Performance section of the Funds Summary section.
Average Annual Total Returns Before Taxes. These returns do not reflect taxes on distributions on the Funds Shares nor do they show how performance can be impacted by taxes when shares are redeemed (sold) by you.
Average Annual Total Returns After Taxes on Distributions. These returns assume that taxes are paid on distributions on the Funds Institutional Shares (i.e., dividends and capital gains) but do not reflect taxes that may be incurred upon redemption (sale) of the Institutional Shares at the end of the performance period.
8
INVESTMENT MANAGEMENT APPROACH
Average Annual Total Returns After Taxes on Distributions and Sale of Fund Shares. These returns reflect taxes paid on
distributions on the Funds Institutional Shares and taxes applicable when the shares are redeemed (sold).
Note on Tax Rates. The after-tax performance figures are calculated using the historically highest individual federal marginal
income tax rates at the time of the distributions and do not reflect state and local taxes. In calculating the federal income taxes due on redemptions, capital gains taxes resulting from a redemption are subtracted from the redemption proceeds and the tax benefits from capital losses resulting from the redemption are added to the redemption proceeds. Under certain circumstances, the addition of the tax benefits from capital losses resulting from redemptions may cause the Returns After Taxes on Distributions and Sale of Fund Shares to be greater than the Returns After Taxes on Distributions or even the Returns Before Taxes.
9
Investment Policies Matrix
| 10 | Percent of total assets (italic type) | |
| 10 | Percent of net assets (roman type) | |
| | No specific percentage limitation on usage; limited only by the objectives and strategies of the Fund |
| Short-Term Conservative Income Fund | ||
| American, European, and Global Depositary Receipts |
◾ | |
| Asset-Backed and Receivables-Backed Securities (including covered bonds) |
◾ | |
| Bank Obligations |
◾ | |
| Commercial Paper |
◾ | |
| Custodial Receipts |
◾ | |
| Floating and Variable Rate Obligations |
◾ | |
| Foreign Securities1 |
◾ | |
| Illiquid Investments* |
10 | |
| Investment Company Securities (including ETFs)2 |
10 | |
| Municipal Securities |
◾ | |
| Private Activity Bonds |
◾ | |
| Repurchase Agreements |
◾ | |
| Short-Term Obligations of Corporations and Other Entities |
◾ | |
| Securities rated A-1, P-1 or F13 |
85+ | |
| Securities rated A-2, P-2 or F23 |
15 | |
| Temporary Investments |
◾ | |
| Treasury Inflation Protected Securities |
◾ | |
| U.S. Government Securities |
◾ | |
| U.S. Treasury Obligations4 |
◾ | |
| When-Issued Securities and Forward Commitments |
◾ | |
| * | Illiquid investments are any investments which cannot be disposed of in seven days in the ordinary course of business at approximately the price at which the Fund values the instrument. |
| 1 | The Fund may invest in U.S. dollar-denominated obligations issued or guaranteed by foreign banks, companies and governments or their agencies, authorities, instrumentalities or sponsored enterprises. |
| 2 | This percentage limitation does not apply to the Funds investments in investment companies (including ETFs) where a higher percentage limitation is permitted under the terms of an SEC exemptive order or SEC exemptive rule. |
| 3 | The Fund may invest in unrated securities if the Investment Adviser determines that the securities are of comparable credit quality at the time of purchase. In addition, the Fund may rely on the credit quality of a guarantee or demand feature in determining the credit quality of a security supported by the guarantee or demand feature. |
| 4 | Issued or guaranteed by the U.S. Treasury. |
10
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 Fund should not be relied upon as a complete investment program. There can be no assurance that the Fund will achieve its investment objective.
| Risk Category | ||
| ✓ | Principal | |
| | Additional Risk |
| Short-Term Conservative Income Fund | ||
| Asset-Backed and Receivables-Backed Securities |
✓ | |
| Call/Prepayment |
| |
| Credit/Default |
✓ | |
| Extension |
| |
| Financial Services Sector |
✓ | |
| Floating and Variable Rate Obligations |
✓ | |
| Foreign |
✓ | |
| Industry Concentration |
✓ | |
| Interest Rate |
✓ | |
| Large Shareholder Transactions |
✓ | |
| Liquidity |
✓ | |
| Management |
| |
| Market |
✓ | |
| Municipal Securities |
✓ | |
| NAV |
✓ | |
| Sovereign Default |
||
| Economic |
| |
| Political |
| |
| Repayment |
| |
| U.S. Government Securities |
✓ | |
| ⬛ | Asset-Backed and Receivables-Backed Securities RiskThe Fund may invest in asset-backed and receivables-backed 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 subject to certain additional risks. Generally, rising interest rates tend to extend the duration of fixed rate asset-backed securities, making them more sensitive to changes in interest rates. As a result, in a period of rising interest rates, if the Fund holds asset-backed securities, it may exhibit additional volatility. This is known as extension risk. In addition, adjustable and fixed rate asset-backed securities are subject to prepayment risk. When interest rates decline, borrowers may pay off their principals sooner than expected. This can reduce the returns of the Fund because the Fund may have to reinvest that money at the lower prevailing interest rates. These risks are generally greater for longer-term asset-backed securities. |
The Funds investments in asset-backed securities are also subject to risks associated with the nature of the assets and the servicing of those assets. Asset-backed securities may not have the benefit of a security interest in collateral comparable to that of mortgage assets, resulting in additional credit risk.
| ⬛ | Call/Prepayment RiskAn issuer could exercise its right to pay principal on an obligation held by the Fund (such as an asset-backed security) earlier than expected. This may happen when there is a decline in interest rates, when credit spreads change, or when an issuers 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. This risk is generally greater for long-term obligations. |
| ⬛ | Credit/Default RiskAn issuer or guarantor of fixed income securities or instruments held by the Fund, or a bank or other financial institution that has entered into a repurchase agreement with the Fund, may default on its obligation to pay interest and repay |
11
| principal or default on any other obligation. Even if such an entity does not default on a payment, an instruments value may decline if the market believes that the entity has become less able or willing to make timely payments. The credit quality of the Funds portfolio securities or instruments may meet the Funds credit quality requirements at the time of purchase but then deteriorate thereafter, and such deterioration can occur rapidly. In certain instances, the downgrading or default of a single holding or guarantor of the Funds holding may impair the Funds liquidity and have the potential to cause significant deterioration in NAV. These risks are more pronounced in connection with the Funds investments in non-investment grade fixed income securities. |
| ⬛ | Extension RiskAn issuer could exercise its right to pay principal on an obligation held by the Fund (such as an asset-backed security) later than expected. This may happen when there is a rise in interest rates. Under these circumstances, the value of the obligation will decrease, and the Fund will also suffer from the inability to reinvest in higher yielding securities. This risk is generally greater for long-term obligations. |
| ⬛ | Financial Services Sector RiskAn adverse development in the financial services sector, including U.S. and foreign banks, broker-dealers, insurance companies, finance companies (e.g., automobile finance) and related asset-backed securities, may affect the value of the Funds investments more than if the Fund were not invested to such a degree in this sector. Companies in the financial services sector may be particularly susceptible to certain economic factors such as interest rate changes, fiscal, regulatory and monetary policy and general economic cycles. For example, deteriorating economic and business conditions can disproportionately impact companies in the financial services sector due to increased defaults on payments by borrowers. Moreover, political and regulatory changes can affect the operations and financial results of companies in the financial services sector, potentially imposing additional costs and expenses or restricting the types of business activities of these companies. |
| ⬛ | Floating and Variable Rate Obligations RiskFloating rate and variable rate obligations are debt instruments issued by companies or other entities with interest rates that reset periodically (typically, daily, monthly, quarterly, or semi-annually) in response to changes in the market rate of interest on which the interest rate is based. For floating and variable rate obligations, there may be a lag between an actual change in the underlying interest rate benchmark and the reset time for an interest payment of such an obligation, which could harm or benefit the Fund, depending on the interest rate environment or other circumstances. In a rising 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 obligations interest rate payment not being immediately impacted by a decline in interest rates. |
Certain floating and variable rate obligations have an interest rate floor feature, which prevents the interest rate payable by the security from dropping below a specified level as compared to a reference interest rate (the reference rate), such as LIBOR. 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.
| ⬛ | Foreign RiskWhen the Fund invests in foreign securities, it may be subject to risks of loss not typically associated with U.S. issuers. Loss may result because of more or less foreign government regulation, less public information, 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 exchange controls (including repatriation restrictions), sanctions, foreign taxes, confiscations, trade restrictions (including tariffs), expropriation 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. 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. |
| ⬛ | Industry Concentration RiskThe Fund concentrate its investments in the financial services group of industries, which has historically experienced substantial price volatility. Concentrating Fund investments in a limited number of issuers conducting business in the same industry or group of industries will subject the Fund to a greater risk of loss as a result of adverse economic, business, political, environmental or other developments than if its investments were diversified across different industries. |
| ⬛ | Interest Rate RiskWhen interest rates increase, securities or instruments held by the Fund (which may include inflation protected securities) will generally decline in value. Long-term fixed income securities or instruments will normally have more price volatility because of this risk than short-term fixed income securities or instruments. A wide variety of market factors can cause interest rates to rise, including central bank monetary policy, rising inflation and changes in general economic conditions. The risks associated with changing interest rates may have unpredictable effects on the markets and the Funds investments. Fluctuations in interest rates may also affect the liquidity of fixed income securities and instruments held by the Fund. |
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RISKS OF THE FUND
| ⬛ | Large Shareholder Transactions RiskThe Fund may experience adverse effects when certain large shareholders, such as other funds, institutional investors (including those trading by use of non-discretionary mathematical formulas), financial intermediaries (who may make investment decisions on behalf of underlying clients and/or include the Fund in their investment model), individuals, accounts and Goldman Sachs affiliates, purchase or redeem large amounts of shares of the Fund. Such large shareholder redemptions may cause the Fund to sell portfolio securities at times when it would not otherwise do so, which may negatively impact the Funds NAV and liquidity. Similarly, large Fund share purchases may adversely affect the Funds performance to the extent that the Fund is delayed in investing new cash and is required to maintain a larger cash position than it ordinarily would. These transactions may also accelerate the realization of taxable income to shareholders if such sales of investments resulted in gains, and may also increase transaction costs. In addition, a large redemption could result in the Funds current expenses being allocated over a smaller asset base, leading to an increase in the Funds expense ratio. |
| ⬛ | Liquidity RiskThe Fund may make investments that are illiquid or that may become less liquid in response to market developments or adverse investor perceptions. While the Fund endeavors to maintain a high level of liquidity in its portfolio, the liquidity of portfolio securities can deteriorate rapidly due to credit events affecting issuers or guarantors, such as a credit rating downgrade, or due to general market conditions and a lack of willing buyers. 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 Funds value or prevent the Fund from being able to take advantage of other investment opportunities. Investments that are illiquid or that trade in lower volumes may be more difficult to value. |
To the extent that the traditional dealer counterparties that engage in fixed income trading do not maintain inventories of bonds (which provide an important indication of their ability to make markets) that keep pace with the growth of the bond markets over time, relatively low levels of dealer inventories could lead to decreased liquidity and increased volatility in the fixed income markets. Additionally, market participants other than the Fund may attempt to sell fixed income holdings at the same time as the Fund, which could cause downward pricing pressure and contribute to illiquidity.
Liquidity risk may also refer to the risk that the Fund will not be able to pay redemption proceeds within the allowable time period because of unusual market conditions, an unusually high volume of redemption requests or other reasons. While the Fund reserves the right to meet redemption requests through in-kind distributions, the Fund may instead choose to raise cash to meet redemption requests through sales of portfolio securities or permissible borrowings. If the Fund is forced to sell securities at an unfavorable time and/or under unfavorable conditions, such sales may adversely affect the Funds NAV.
Certain shareholders, including clients or affiliates of the Investment Adviser and/or other funds managed by the Investment Adviser, may from time to time own or control a significant percentage of the Funds shares. These shareholders may include, for example, institutional investors, funds of funds, discretionary advisory clients, and other shareholders whose buy-sell decisions are controlled by a single decision maker. Redemptions by these shareholders of their shares of the Fund, or a high volume of redemption requests generally, may further increase the Funds liquidity risk and may impact the Funds NAV.
| ⬛ | Management RiskA strategy used by the Investment Adviser may fail to produce the intended results. |