GSAM has launched Gross and Stable distribution share classes that will be made available on certain Portfolios in the UCITS-qualifying Luxembourg-domiciled Goldman Sachs Funds SICAV. We describe the new distribution share class types and the associated risks of each distribution policy.
Currently, our SICAV Portfolios typically only offer distribution share classes which pay out net investment income, which is calculated by taking the gross investment income and deducting management fees and operating expenses (i.e. net of fees). We will now also be offering “Gross” and “Stable” distribution share classes as detailed below:
Gross Distribution Shares are designed to pay out gross investment income prior to the deduction of management fees and operating expenses (i.e. gross of fees).
The result of this is that the management fees and operating expenses attributable to such share classes will effectively be deducted from capital. This will lead to an erosion of capital and will reduce future capital growth.
Stable Distribution Shares are designed to pay out a stable distribution to investors based on the projected level of annual gross investment income (i.e. gross of fees). The objective of such classes is to limit potential fluctuations in distribution rates over the course of the fiscal year.
The result of this is that the management fees and operating expenses attributable to such share classes will be effectively deducted from capital. This will lead to an erosion of capital and will reduce future capital growth.
For both Gross and Stable Distribution Shares, the management fees and operating expenses attributable to such share classes will be effectively deducted from capital. This will lead to an erosion of capital and will reduce future capital growth.
In addition, for Stable Distribution Shares, in the case that the pre-determined stable distribution rate is higher than the actual gross investment income for the period, the difference will be effectively deducted from capital. This may lead to a further erosion of capital and may further reduce future capital growth.
Please also refer to the diagrams on the next page which illustrate the differences between the existing net investment income distribution policy and those based on gross investment income.
The above diagram illustrates the impact that, if distributions are based on gross investment income, the management fees and operating expenses will be effectively charged to capital. This will lead to an erosion of capital and will reduce future capital growth.
The above diagram illustrates the impact that, if distributions are based on gross investment income, the management fees and operating expenses will be effectively charged to capital. This distribution strategy will lead to an erosion of capital and will increase future capital losses.
The above table illustrates that where there are fluctuations in the gross investment income that Stable Distribution Shares will aim to limit potential fluctuations in distribution rates over the course of the fiscal year.
As relates to Stable Distribution Shares, Investors should be aware that the pre-determined stable distribution levels may rise or fall in the short and/or long term depending on the income generated by the Portfolio's underlying investments. Whilst the objective of such share classes is to limit potential fluctuations in distribution rates over the course of the fiscal year there is no guarantee that this objective will be achieved or that these share classes will pay a distribution at all.
Distributions paid out of capital may also have different tax and other implications compared to distributions of income. We would recommend that investors consult their legal, tax or accounting advisor prior to investing in such share classes mentioned above. Goldman Sachs does not provide legal, tax or accounting advice. For further information with regards to share classes offered for the Fund investors are referred to the latest Prospectus and Fund Supplement.
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