Goldman Sachs Asset Management Introduces Two International Tax-Managed Equity Funds
Reflects GSAM’s Continuing Focus on Serving Investor Retirement Needs
New York, February 20, 2008 – Goldman Sachs Asset Management (GSAM) announces the introduction of two new funds: the Goldman Sachs International Equity Dividend and Premium Fund (Class A: GIDAX) and the Goldman Sachs Structured International Tax-Managed Equity Fund (Class A: GATMX). Both Funds seek to provide attractive international tax-advantaged investing. The goal of the Goldman Sachs International Equity Dividend and Premium Fund, designed for retirees who may or may not outlive their assets, is to create an after-tax cash flow through returns that enjoy favorable tax treatment. Alternatively, the Goldman Sachs Structured International Tax-Managed Equity Fund, which targets individuals who are unlikely to outlive their assets and who plan to pass their estate along to family or charities, seeks to generate returns through price appreciation, which is not subject to current taxation. Both Funds are designed for investors looking for tax efficiencies in their taxable portfolios.
To seek to achieve their goal of tax efficiency, both Funds use similar strategies, including:
• Limiting portfolio turnover that may result in short-term capital gains
• Selling securities with a higher tax basis before those with a lower tax basis
• Realizing short-term losses to offset short-term and long-term capital gains
“GSAM’s creation of these two international equity funds specifically designed for retirement planning reflect our recognition of the much longer life spans that Americans are enjoying and our firm conviction that their investment needs must be met with the greater growth potential that stocks offer compared to bonds,” said Don Mulvihill, Managing Director and Product Manager for Tax-Efficient Strategies at GSAM. “The tax efficiency features built into these Funds leaves investors with the potential for greater possibilities of principal growth.”
GSAM’s Quantitative Equity Investment Team, which comprises nearly seventy professionals including strategists, portfolio managers, and research analysts, manages both Funds. Investors can choose from Class A and C shares, both of which have a $1,000 minimum investment requirement. The Funds also offer Institutional or Class I shares.
Goldman Sachs International Equity Dividend and Premium Fund
The Goldman Sachs International Equity Dividend and Premium Fund, a diversified fully invested fund, offers the growth potential of international large-cap stocks while seeking attractive cash flow. The Fund seeks to maximize total return with an emphasis on income. In seeking to generate an attractive yield, the portfolio management team will emphasize higher dividend-paying international stocks with industry and sector weights similar to the MSCI EAFE Index, the Fund’s benchmark.
“History has shown that equities, particularly dividend-paying stocks, are far more effective than bonds – a common investment choice of retirees – in staying ahead of inflation and meeting income or spending needs, given that income from most taxable bonds is subject to a maximum tax rate of 35% vs. the15% rate for dividends,” emphasized Mulvihill.
To further increase the portfolio’s cash flow potential, the portfolio management team will also regularly write call options against the MSCI EAFE Index. The goal of each call option will be to generate a premium that, when combined with the portfolio’s dividend yield, offers a more attractive after-tax cash flow to investors. In addition to generating cash flow, premiums received may help reduce the Fund’s price volatility, which is also expected to be relatively low given that, historically over time, high quality dividend-paying large-cap stocks have tended to be less volatile than mid-cap or small-cap stocks.
The Fund’s investment team will use proprietary quantitative investment techniques – including optimization tools, a risk model, and a transaction cost model – to identify a portfolio of stocks that it believes may enhance dividend yield while tracking the MSCI EAFE Index as closely as possible. The portfolio is expected to generally consist of between 300 - 400 different stocks.
Goldman Sachs Structured International Tax-Managed Equity Fund
The Goldman Sachs Structured International Tax-Managed Equity Fund seeks to provide long-term after-tax growth of capital through tax-sensitive participation in a broadly diversified portfolio of international equity securities. The Fund, whose benchmark is the MSCI EAFE Index, is designed for taxable accounts of investors seeking long-term growth of after-tax wealth. Since price appreciation is not subject to current taxation, it is the main tactic by way the Fund attempts to generate return.
“Over long periods of time with favorable market conditions, the benefits of capital gain deferral can be substantial, given the advantages of compound growth and the favorable 15% maximum tax rate on long-term capital gains,” notes Mr. Mulvihill. “For those investors concerned about passing along wealth to family or charities, this Fund is well suited as a core holding in a portfolio.”
In seeking to maximize the Fund’s expected return, GSAM’s Quantitative Equity Investment Team selects investments using a variety of quantitative or “structured” techniques along with fundamental research specific to GSAM’s proprietary quantitative process, which includes six fundamental themes.
Additionally, through internally integrated trading systems that are used to evaluate transaction fees in every decision, trading costs are kept to a minimum, which in turn serves as a risk-free source of added return.
Goldman Sachs Funds, the mutual fund family of Goldman Sachs Asset Management (GSAM), offers individual and institutional investors a wide range of long-term investment choices more than 65 equity, fixed income and hybrid funds. The Family’s line of global products, created by 11 independent and distinct GSAM portfolio teams and supported by over 280 GSAM research professionals around the world, provides both core and satellite investments across asset classes, investment styles, investment approaches and geographical regions.
Goldman Sachs Asset Management is the asset management arm of The Goldman Sachs Group, Inc. (NYSE: GS), which manages more than $868 billion as of November 30, 2007. Goldman Sachs Asset Management has been providing discretionary investment advisory services since 1989 and has investment professionals in all major financial centers around the world. The company offers investment strategies across a broad range of asset classes to institutional and individual clients globally. Founded in 1869, Goldman Sachs is leading global investment banking, securities and investment management firm.
Goldman Sachs does not provide legal, tax or accounting advice. Any statement contained in this communication concerning U.S. tax matters is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties imposed on the relevant taxpayer. Prospective investors should obtain their own independent tax advice based on their particular circumstances.
To learn more about Goldman Sachs Funds, visit www.goldmansachsfunds.com. Prospectuses containing more complete information are available online, and may also be obtained from your authorized dealer or from Goldman, Sachs & Co. by calling 800-526-7384. Please consider a fund's objectives, risks, and charges and expenses, and read the prospectus carefully before investing. The prospectuses contain this and other information about the Funds.
The Structured International Tax-Managed Equity Fund invests primarily in international equity securities. The Fund is subject to market risk, which means that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular industry sectors and/or general economic conditions. Foreign and emerging market securities may be more volatile than investments in U.S. securities and will be subject to the risks of currency fluctuations and sudden economic or political developments. The Fund may invest in securities of any capitalization, including mid-cap and small-cap companies, which involve greater risks than those associated with larger, more established companies and may be subject to more abrupt or erratic price movements. Securities of such issuers may lack sufficient market liquidity to enable the Fund to effect sales at an advantageous time or without a substantial drop in price. The Fund uses both a variety of quantitative techniques and fundamental research when selecting investments which have the potential to maximize the Fund’s after tax return, and minimize capital gains and income distribution. No assurance can be offered that the Fund’s tax-managed strategies will reduce the amount of taxable income and capital gains distributed by the Fund to shareholders. The Fund is not suitable for IRAs or other tax-exempt or tax-deferred accounts. The Fund may make investments in derivative instruments, including options and financial futures. Derivative instruments may be illiquid, difficult to price, and leveraged, so that a small movement in the price of an underlying security may result in disproportionate losses to the Fund.
The Goldman Sachs International Equity Dividend and Premium Fund invests primarily in dividend-paying equity investments in companies that are organized outside the United States or whose securities are principally traded outside the United States. The Fund is subject to market risk, which means that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular industry sectors and/or general economic conditions. Foreign and emerging market securities may be more volatile than investments in U.S. securities and will be subject to the risks of currency fluctuations and sudden economic or political developments. At times, the Fund may be unable to sell certain of its portfolio securities without a substantial drop in price, if at all. The Fund is also subject to the risks associated with writing (selling) call options. Writing call options limits the opportunity to profit from an increase in the market value of stocks in exchange for up-front cash at the time of selling the call option. In a rising market, the Fund could significantly underperform the market. The Fund’s options strategies may not fully protect it against declines in the value of the market. The Fund uses both a variety of quantitative techniques and fundamental research when selecting investments which have the potential to maximize the Fund’s after tax return, and minimize capital gains and income distribution. No assurance can be offered that the Fund’s tax-managed strategies will reduce the amount of taxable income and capital gains distributed by the Fund to shareholders. The Fund may make investments in derivative instruments, including options and financial futures. Derivative instruments may be illiquid, difficult to price, and leveraged, so that a small movement in the price of an underlying security may result in disproportionate losses to the Fund.
The unmanaged MSCI EAFE Index (unhedged) is a market capitalization weighted composite of securities in 21 developed markets. The Index figures do not include any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index.
Opinions expressed are current opinions as of the date appearing in this material only. No part of this material may, without GSAM’s prior written consent, be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorized agent of the recipient.
Goldman, Sachs & Co., distributor of the Funds, is not a bank, and Fund shares distributed by Goldman, Sachs & Co. are neither deposits nor obligations of, nor endorsed, nor guaranteed by any bank or other insured depository institution, nor are they insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in the Funds involves risks, including possible loss of the principal amount invested.
Copyright © 2008 Goldman, Sachs & Co. All Rights Reserved. Date of First Use: February, 15, 2008. 5485. MF