Download Goldman Sachs Funds: Questions and Answers on Market Timing

This communication is for U.S. investors.
Goldman Sachs Funds:
Questions and Answers on Market Timing and Late Trading
1) Introduction and background
•
There has been widespread media coverage of the various industry-wide and
specific investigations being conducted by federal and state authorities concerning
market timing, late trading and other activities involving mutual funds.
•
According to media reports, these are industry-wide inquiries, and in the case of the
Securities and Exchange Commission informational requests have reportedly been
made broadly across all of the major fund companies and broker/dealers. Goldman
Sachs has received requests for information and we have been fully cooperating.
2) What steps has Goldman Sachs taken to reduce market timing in its mutual
funds?
•
All of our Funds other than money market funds (the “Funds”) are generally intended
for long-term investment purposes only. The Funds’ prospectuses disclose that the
Funds do not permit market timing or excessive trading. As such, Goldman Sachs
does not condone or authorize market timing or excessive short-term trading activity
in our Funds.
•
Goldman Sachs undertakes a variety of measures designed to detect and deter
disruptive trading practices, including market-timing activity in the Goldman Sachs
Funds, which we have had in place for a number of years. In light of these
measures, we have been able to detect, warn, and in certain instances, remove from
the Goldman Sachs Funds, shareholders who we believe engaged in market timing
or excessive short-term trading practices. As most of our Funds are sold through
intermediaries, we have also taken steps with respect to various intermediaries
where circumstances warranted.
•
Goldman Sachs also employs daily fair value pricing of securities in certain Funds in
part to reduce and discourage market timers and to reduce the opportunity of market
timers and traders to benefit from short-term trading strategies.
3) How does Goldman Sachs handle the matter of “late trading”?
•
Under the securities laws applicable to mutual funds, all orders to purchase or
redeem Fund shares must be received either by the Fund or by an authorized
intermediary no later than the Fund’s stated Net Asset Value (“NAV”) calculation time
in order for the transaction to be priced at that day’s NAV. The NAV calculation time
for most funds is 4 pm ET.
•
We do not permit, condone, or authorize late trading arrangements. As reported in
the media, under a “late trading arrangement,” a shareholder is permitted to submit
an order to a fund company or to an authorized intermediary after the fund’s NAV
calculation time and still receives that day’s NAV.
This communication is for U.S. investors
•
Intermediaries who sell our Funds must also comply with the requirement to price
shareholder transactions at the NAV next calculated after the receipt of the order
from the shareholder.
4) A word of caution
•
No Fund can possibly prevent market timing from occurring altogether. The Funds’
efforts can only limit the frequency with which market timers are able to trade in and out
of the Funds, and seek to prevent identified market timers from continuing to trade Fund
shares.
•
While we believe that we have in place reasonable measures to detect and deter
disruptive trading practices and comply with applicable regulatory and legal
requirements, we certainly can not predict the course that the existing inquiries and
areas of focus may take in the weeks and months to come, both within the industry
generally and specifically with respect to Goldman Sachs.
Prospectuses for the Goldman Sachs Funds, containing more complete information, may be obtained from your investment
st
professional or from Goldman Sachs Asset Management, 4900 Sears Tower, 51 Floor, Chicago, IL 60606. An investor should read
the prospectus carefully before investing or sending money.
Goldman, Sachs & Co. is the distributor of the Goldman Sachs Funds.
Copyright 2003 Goldman, Sachs & Co. All Rights Reserved. Date of First Use: 11/7/03. 03-1836