0000950123-11-102887.txt : 20120522 0000950123-11-102887.hdr.sgml : 20120522 20111213164346 ACCESSION NUMBER: 0000950123-11-102887 CONFORMED SUBMISSION TYPE: N-14 PUBLIC DOCUMENT COUNT: 21 FILED AS OF DATE: 20111213 DATE AS OF CHANGE: 20120206 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOLDMAN SACHS TRUST CENTRAL INDEX KEY: 0000822977 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-14 SEC ACT: 1933 Act SEC FILE NUMBER: 333-178469 FILM NUMBER: 111258921 BUSINESS ADDRESS: STREET 1: 71 SOUTH WACKER DRIVE STREET 2: C/O GOLDMAN SACHS & CO CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3126554400 MAIL ADDRESS: STREET 1: 200 WEST STREET CITY: NEW YORK STATE: NY ZIP: 10282 FORMER COMPANY: FORMER CONFORMED NAME: GOLDMAN SACHS SHORT INTERMEDIATE GOVERNMENT FUND DATE OF NAME CHANGE: 19910711 FORMER COMPANY: FORMER CONFORMED NAME: SHORT INTERMEDIATE GOVERNMENT FUND DATE OF NAME CHANGE: 19900104 CENTRAL INDEX KEY: 0000822977 S000036119 Goldman Sachs Rising Dividend Growth Fund C000110562 Class A CENTRAL INDEX KEY: 0001089860 S000000511 RISING DIVIDEND GROWTH FUND C000001393 RISING DIVIDEND GROWTH FUND - CLASS A ICRDX C000001394 RISING DIVIDEND GROWTH FUND - CLASS C ICRGX CENTRAL INDEX KEY: 0000822977 S000036119 Goldman Sachs Rising Dividend Growth Fund C000110564 Institutional CENTRAL INDEX KEY: 0001089860 S000000511 RISING DIVIDEND GROWTH FUND C000043338 Rising Dividend Growth Fund - Class I ICRIX N-14 1 e92936nv14.htm FORM N-14 nv14
As filed with the U.S. Securities and Exchange Commission on December 13, 2011
Securities Act File No. 333-                    
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Pre Effective Amendment No. o
Post Effective Amendment No. o
(Check appropriate box or boxes.)
 
GOLDMAN SACHS TRUST
(Exact Name of Registrant as Specified in Charter)
 
71 South Wacker Drive, Chicago, Illinois 60606
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, including Area Code (312) 655-4400
 
Peter V. Bonanno, Esq.
Goldman, Sachs & Co.
200 West Street
New York, New York 10282
(Name and Address of Agent for Service)
COPY TO:
Barry N. Hurwitz, Esq.
Toby R. Serkin, Esq.
Bingham McCutchen LLP
One Federal Street
Boston, Massachusetts 02110
 
Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement.
Title of Securities Being Registered:
 
 

 

 

Class A Shares and Institutional Shares of Goldman Sachs Rising Dividend Growth Fund
The Registrant has registered an indefinite amount of securities pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended; accordingly, no fee is payable herewith in reliance upon Section 24(f).
It is proposed that this filing will become effective on January 12, 2012 pursuant to Rule 488.

 

 

COMBINED PROXY STATEMENT
OF
RISING DIVIDEND GROWTH FUND

The address, telephone number and website of Rising Dividend Growth Fund is:

58 Riverwalk Boulevard, Building 2, Suite A
Ridgeland, South Carolina 29936
1-888-826-2520
www.dividendgrowthadvisors.com
 
 
AND

PROSPECTUS FOR
GOLDMAN SACHS RISING DIVIDEND GROWTH FUND

The address, telephone number and website of Goldman Sachs Rising Dividend Growth Fund is:

71 South Wacker Drive
Chicago, Illinois 60606
1-800-526-7384
www.goldmansachsfunds.com

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
SCHEDULED FOR FEBRUARY 23, 2012
 
To the Shareholders of Rising Dividend Growth Fund:
 
This is the formal agenda for your fund’s special shareholder meeting (the “meeting”). It tells you what matters will be voted on and the time and place of the meeting, in case you want to attend in person.
 
The meeting will be held at the offices of Dividend Growth Advisors, LLC, 58 Riverwalk Boulevard, Building 2, Suite A, Ridgeland, SC 29936 on February 23, 2012, at 1:00 p.m., Eastern Time, to consider the following:
 
  1.  A proposal to approve an Agreement and Plan of Reorganization providing for (i) the acquisition of all of the assets and the assumption of all of the liabilities of Rising Dividend Growth Fund, in exchange for shares of Goldman Sachs Rising Dividend Growth Fund to be distributed to the shareholders of Rising Dividend Growth Fund, and (ii) the subsequent liquidation and dissolution of Rising Dividend Growth Fund.
 
The persons named as proxies will vote in their discretion on any other business that may properly come before the meeting or any adjournments or postponements thereof.
 
The Proposal is further described in the attached combined Proxy Statement/Prospectus.
 
YOUR TRUSTEES RECOMMEND THAT YOU VOTE IN FAVOR OF THE PROPOSAL.
 
Shareholders of record as of the close of business on January 3, 2012 are entitled to vote at the meeting and any adjournments or postponements thereof.
 
By Order of the Board of Trustees,
 
Charles Troy Shaver, Jr.
President
 
Ridgeland, South Carolina
          , 2012
 
Whether or not you expect to attend the meeting, please vote promptly by completing and returning the enclosed proxy card and returning it in the accompanying postage-paid return envelope or by following the enclosed instructions to vote over the internet or by telephone. Your vote could be critical in allowing your Fund to hold its meeting as scheduled. If shareholders do not return their proxies in sufficient numbers, your Fund may be required to make additional solicitations.

 

COMBINED PROXY STATEMENT
OF
RISING DIVIDEND GROWTH FUND
(a series of DIVIDEND GROWTH TRUST)
 
The address, telephone number and website of Rising Dividend Growth Fund is:

58 Riverwalk Boulevard, Building 2, Suite A
Ridgeland, South Carolina 29936
1-888-826-2520
www.dividendgrowthadvisors.com
 
AND
 
PROSPECTUS FOR
GOLDMAN SACHS RISING DIVIDEND GROWTH FUND
(a series of GOLDMAN SACHS TRUST)
The address, telephone number and website of Goldman Sachs Rising Dividend Growth Fund is:
 
71 South Wacker Drive
Chicago, Illinois 60606
1-800-526-7384
www.goldmansachsfunds.com
 
Shares of Goldman Sachs Rising Dividend Growth Fund have not been approved or disapproved by the Securities and Exchange Commission (the “SEC”). The SEC has not passed on upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
 
An investment in either Rising Dividend Growth Fund or Goldman Sachs Rising Dividend Growth Fund (each sometimes referred to herein as a “Fund”) is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
 
This Proxy Statement/Prospectus sets forth information about Goldman Sachs Rising Dividend Growth Fund that an investor needs to know before investing. Please read this Proxy Statement/Prospectus carefully before investing and keep it for future reference.


1

 

 
INTRODUCTION
 
This combined proxy statement/prospectus, dated          , 2012 (the “Proxy Statement/Prospectus”), is being furnished to shareholders of Rising Dividend Growth Fund in connection with the solicitation by Dividend Growth Trust’s Board of Trustees (the “Board” or the “Trustees”) of proxies to be used at a special meeting of the shareholders of Rising Dividend Growth Fund to be held at the offices of Dividend Growth Advisors, LLC, 58 Riverwalk Boulevard, Building 2, Suite A, Ridgeland, SC 29936 on February 23, 2012, at 1:00 p.m., Eastern Time. The Proxy Statement/Prospectus is being mailed to shareholders of Rising Dividend Growth Fund on or about [          ], 2012.
 
The purpose of this Proxy Statement/Prospectus is to obtain shareholder approval to reorganize your fund into Goldman Sachs Rising Dividend Growth Fund. The Trustees recommend that you vote FOR this proposal.
 
Your fund is the sole series of Dividend Growth Trust, an open-end management investment company organized as a Delaware statutory trust. For purposes of the discussion of fund-level tax consequences below, references to your fund also include Dividend Growth Trust. Goldman Sachs Rising Dividend Growth Fund is a newly-organized series of Goldman Sachs Trust, an open-end management investment company organized as a Delaware statutory trust. Goldman Sachs Rising Dividend Growth Fund will commence operations upon consummation of the proposed reorganization.
 
The Proxy Statement/Prospectus contains information you should know before voting on the proposed Agreement and Plan of Reorganization (the “Plan”) that provides for the reorganization of your fund into Goldman Sachs Rising Dividend Growth Fund (the “Reorganization”). A copy of the Plan is attached to this Proxy Statement/Prospectus as Exhibit A. Shareholders should read this entire Proxy Statement/Prospectus, including the exhibits, carefully
 
The date of this Proxy Statement/Prospectus is          , 2012.
 
For more complete information about each Fund, please read the Fund’s Prospectus and Statement of Additional Information, as they may be amended and/or supplemented. Because Goldman Sachs Rising Dividend Growth Fund is newly-organized, its Prospectus and Statement of Additional Information are not yet effective. Each Fund’s Prospectus and Statement of Additional Information, and other additional information about each Fund, have been filed with the SEC (www.sec.gov) and are available upon request and without charge by calling the toll-free numbers shown below.
 
Where to Get More Information
 
       
 
     
       
Rising Dividend Growth Fund’s current prospectus and any applicable supplements.
    On file with the SEC (http://www.sec.gov) and available at no charge by calling: 1-888-826-2520 or on the Fund’s website (http://www.dividendgrowthadvisors.com).
Rising Dividend Growth Fund’s current statement of additional information and any applicable supplements.
    On file with the SEC (http://www.sec.gov) and available at no charge by calling: 1-888-826-2520 or on the Fund’s website (http://www.dividendgrowthadvisors.com).
Rising Dividend Growth Fund’s most recent annual report to shareholders.
    On file with the SEC (http://www.sec.gov) and available at no charge by calling: 1-888-826-2520 or on the Fund’s website (http://www.dividendgrowthadvisors.com).
A statement of additional information for this Proxy Statement/Prospectus, dated          , 2012 (the “SAI”). The SAI contains additional information about the Rising Dividend Growth Fund and Goldman Sachs Rising Dividend Growth Fund.
    On file with the SEC (http://www.sec.gov) and available at no charge by calling: 1-888-826-2520. The SAI is incorporated by reference into this Proxy Statement/Prospectus.
To ask questions about this Proxy Statement/Prospectus.
    Call Rising Dividend Growth Fund’s toll-free telephone number: (888) 826-2520.


2

 

Rising Dividend Growth Fund’s summary prospectus dated July 6, 2011 and prospectus and statement of additional information dated February 1, 2011, as supplemented, are incorporated by reference into this Proxy Statement/Prospectus.
 
Background to the Reorganization
 
Dividend Growth Advisors, LLC (“DGA”), a registered investment adviser, serves as Rising Dividend Growth Fund’s investment adviser. DGA recently informed the Dividend Growth Trust Board that DGA has agreed to sell its mutual fund management business to Goldman Sachs Asset Management, L.P. (“GSAM”). In connection with that transaction, DGA has recommended to the Dividend Growth Trust Board that Rising Dividend Growth Fund be reorganized into a similar mutual fund managed by GSAM and sub-advised by DGA.
 
Prior to making a recommendation to the Dividend Growth Trust Board, DGA conducted a comparative evaluation of GSAM and the Goldman Sachs family of funds, including (i) GSAM’s investment processes and capabilities, (ii) GSAM’s administrative capabilities, (iii) the other types of funds available as part of the Goldman Sachs family of funds, (iv) the compliance culture and infrastructure of GSAM and the Goldman Sachs family of funds, and (v) the reputation of GSAM and the Goldman Sachs family of funds in the marketplace. In addition, as noted above, GSAM will retain DGA to act as sub-adviser to Goldman Sachs Rising Dividend Growth Fund. Accordingly, it is expected that the current portfolio managers of Rising Dividend Growth Fund will continue to serve as portfolio managers of the combined Fund following the completion of the Reorganization utilizing substantially the same investment strategy as Rising Dividend Growth Fund’s current investment strategy.
 
The Dividend Growth Trust Board requested and received such information from GSAM and DGA as they determined to be necessary to evaluate the proposed Reorganization. At its meetings, the Dividend Growth Trust Board received and evaluated materials regarding GSAM and the Goldman Sachs family of funds, including the effect of the proposed Reorganization on the Rising Dividend Growth Fund’s shareholders, and the quality of the services offered by GSAM. In addition to these general factors, the Dividend Growth Trust Board also considered the factors discussed below in the context of the Reorganization. The Dividend Growth Trust Trustees who are not “interested persons” of Rising Dividend Growth Fund or the Goldman Sachs family of funds (the “Independent Dividend Growth Trust Trustees”) within the meaning of Section 2(a)(19) of the Investment Company Act of 1940, as amended (the “1940 Act”), were assisted in their consideration of the proposed Reorganization by fund counsel.
 
On December 9, 2011, the Dividend Growth Trust Board, including all of the Independent Dividend Growth Trust Trustees, unanimously voted to approve the Reorganization. In approving the Reorganization, the Dividend Growth Trust Board and the Independent Dividend Growth Trust Trustees determined that the Reorganization is in the best interests of Rising Dividend Growth Fund and the interests of existing shareholders of Rising Dividend Growth Fund will not be diluted as a result of the Reorganization. The Dividend Growth Trust Board, including the Independent Dividend Growth Trust Trustees, also considered and approved the terms and conditions of the Plan for the proposed Reorganization.
 
How Will the Reorganization Work?
 
  •  The Reorganization is scheduled to occur on or about February 27, 2012, but may occur on such later date as the parties may agree in writing (the “Closing Date”).
 
  •  Rising Dividend Growth Fund will transfer all of its assets to Goldman Sachs Rising Dividend Growth Fund and Goldman Sachs Rising Dividend Growth Fund will assume all of Rising Dividend Growth Fund’s liabilities (other than those liabilities specifically excluded under the Plan, if any). Rising Dividend Growth Fund then will be liquidated and terminated.
 
  •  Shareholders of Rising Dividend Growth Fund will receive shares of Goldman Sachs Rising Dividend Growth Fund in proportion to the relative net asset value of their share holdings of Rising Dividend Growth Fund on the Closing Date of the Reorganization. Therefore, on the Closing Date, shareholders of Rising Dividend Growth Fund will hold shares of Goldman Sachs Rising Dividend Growth Fund in amounts equal to the aggregate net asset value of the shares of the applicable class of shares of Rising Dividend Growth Fund that the shareholder held immediately prior to the Reorganization. Shareholders holding Class A


3

 

  Shares and Class C Shares of Rising Dividend Growth Fund will receive Class A Shares of Goldman Sachs Rising Dividend Growth Fund as a result of the Reorganization. Shareholders holding Class I Shares of Rising Dividend Growth Fund will receive Institutional Shares of Goldman Sachs Rising Dividend Growth Fund as a result of the Reorganization.
 
  •  No sales load, contingent deferred sales charge, commission, redemption fee or other transactional fee will be charged as a result of the Reorganization. After the Reorganization, for purposes of determining any contingent deferred sales charge, the same sales charge and schedule that applied to the shares of Rising Dividend Growth Fund will apply to the shares of Goldman Sachs Rising Dividend Growth Fund you receive in the Reorganization and the holding period for determining the contingent deferred sales charge will be calculated from the date the shares were initially issued by Rising Dividend Growth Fund. The contingent deferred sales charge applicable to certain purchases of Goldman Sachs Rising Dividend Growth Fund Class A Shares will be waived for the Goldman Sachs Rising Dividend Growth Fund Class A Shares received in the Reorganization.
 
  •  GSAM will act as investment adviser to Goldman Sachs Rising Dividend Growth Fund and DGA will act as sub-adviser to the Fund. Accordingly, it is expected that the current portfolio managers of Rising Dividend Growth Fund will continue to serve as portfolio managers of the combined Fund following the completion of the Reorganization.
 
  •  The exchange of Rising Dividend Growth Fund shares for Goldman Sachs Rising Dividend Growth Fund shares in the Reorganization is not expected to result in the recognition of income, gain or loss, for federal income tax purposes, by an exchanging shareholder. The Reorganization generally is not expected to result in the recognition of gain or loss for federal income tax purposes by your fund or Goldman Sachs Rising Dividend Growth Fund.
 
  •  If the Reorganization is approved by shareholders, Dividend Growth Trust will cease operations and will be terminated.
 
In addition to the Class A and Institutional Shares to be issued in the Reorganization, Goldman Sachs Rising Dividend Growth Fund also offers other classes of shares. This Proxy Statement/Prospectus relates only to Goldman Sachs Rising Dividend Growth Fund’s Class A and Institutional Shares to be issued to Rising Dividend Growth Fund shareholders in the Reorganization.
 
Why Do Your Fund’s Trustees Recommend the Reorganization?
 
In recommending the Reorganization, the Board of Trustees of Dividend Growth Trust, including all of the Independent Dividend Growth Trust Trustees, determined that the Reorganization is in the best interest of Rising Dividend Growth Fund and will not dilute the interests of shareholders of Rising Dividend Growth Fund. The Dividend Growth Trust Trustees believe that the proposed Reorganization offers a number of potential benefits. These potential benefits and considerations include the following:
 
  •  That DGA has agreed to sell its mutual fund management business to GSAM. DGA has recommended to the Dividend Growth Trust Board the proposed Reorganization.
 
  •  The fact that GSAM will retain DGA to act as sub-adviser to Goldman Sachs Rising Dividend Growth Fund. Accordingly, it is expected that the same investment personnel currently overseeing the portfolio management of Rising Dividend Growth Fund would continue to manage Goldman Sachs Rising Dividend Growth Fund following the consummation of the Reorganization. GSAM will oversee DGA as sub-adviser to Goldman Sachs Rising Dividend Growth Fund in accordance with the terms of the sub-advisory agreement between GSAM and DGA.
 
  •  The reputation, financial strength, resources and capabilities of GSAM and Goldman Sachs & Co.
 
  •  The investment objectives, policies and risks of Rising Dividend Growth Fund and their compatibility with those of Goldman Sachs Rising Dividend Growth Fund.


4

 

 
  •  The benefit to Rising Dividend Growth Fund by making it part of the larger Goldman Sachs family of funds, and the potential long-term economies that may result from the consummation of the Reorganization.
 
  •  The benefit of increased distribution capabilities which may result in asset growth over time and additional cost savings and scale advantages.
 
  •  That the management fee of Goldman Sachs Rising Dividend Growth Fund is the same as the management fee of Rising Dividend Growth Fund at current asset levels (0.75%), and has breakpoints that would reduce the Fund’s management fee if assets increase. GSAM, and not the Fund, will pay the sub-advisory fee payable to DGA.
 
  •  That the pro forma gross and net expense ratios of Class A and Institutional Shares of Goldman Sachs Rising Dividend Growth Fund are expected to be lower than the current gross and net expense ratios of Class A, Class C and Class I Shares of Rising Dividend Growth Fund.
 
  •  That no sales load, contingent deferred sales charge, commission, redemption fee or other transactional fee will be charged as a result of the Reorganization.
 
  •  That with respect to any future purchases of Class A Shares, the initial sales charge on Class A Shares of Goldman Sachs Rising Dividend Growth Fund (5.50%) is lower than the initial sales charge on Class A Shares of Rising Dividend Growth Fund (5.75%).
 
  •  The compliance culture and organization of GSAM, Goldman Sachs and Goldman Sachs Trust.
 
  •  The absence of a dilutive effect on interests of current shareholders of Rising Dividend Growth Fund.
 
  •  That the Reorganization is expected to qualify as a “reorganization” within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the “Code”), and therefore, that you will not recognize gain or loss for federal income tax purposes on the exchange of your Rising Dividend Growth Fund shares for shares of Goldman Sachs Rising Dividend Growth Fund.
 
The Dividend Growth Trust Board recommends that you vote in favor of the Reorganization.
 
What is GSAM?
 
Goldman Sachs Asset Management, L.P. (“GSAM”), 200 West Street, New York, New York 10282 has been registered as an investment adviser with the SEC since 1990 and is an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”). As of September 30, 2011, GSAM, including its investment advisory affiliates, had assets under management of $699.7 billion.
 
Who Bears the Expenses Associated with the Reorganization?
 
GSAM has agreed to pay all proxy and solicitation costs associated with each Fund’s participation in the Reorganization.
 
Will GSAM and DGA Benefit from the Reorganization?
 
GSAM will benefit from managing a larger pool of assets which will produce increased advisory fees. GSAM also is acquiring certain assets associated with DGA’s management business. In consideration for the acquisition of these assets from DGA and for certain covenants from DGA and its interest holders (including non-competition and non-solicitation agreements), GSAM has agreed to pay to DGA a purchase price of approximately $12.995 million. In addition, in connection with such asset purchase transaction, DGA is entering into a sub-advisory agreement with GSAM to serve as sub-adviser to Goldman Sachs Rising Dividend Growth Fund. DGA also is changing its name to [     ] in connection with the asset purchase transaction.
 
What are the Federal Income Tax Consequences of the Reorganization?
 
As a condition to the closing of the Reorganization, the Funds must receive an opinion of Bingham McCutchen LLP to the effect that the Reorganization will constitute a “reorganization” within the meaning of Section 368 of the


5

 

Code. Accordingly, subject to the limited exceptions described below under the heading “Tax Status of the Reorganization,” it is expected that neither you nor your fund will recognize gain or loss as a direct result of the Reorganization, and that the aggregate tax basis of the Goldman Sachs Rising Dividend Growth Fund shares that you receive in the Reorganization will be the same as the aggregate tax basis of the shares that you surrender in the Reorganization.
 
What Happens if the Reorganization is Not Approved?
 
If the required approval of shareholders of your fund is not obtained, the meeting may be adjourned as more fully described in this Proxy Statement/Prospectus. If the Reorganization is not approved, you will remain a shareholder of Rising Dividend Growth Fund and the Dividend Growth Trust Board will consider what further action may be appropriate.
 
Who is Eligible to Vote?
 
Shareholders of record of Rising Dividend Growth Fund on January 3, 2012 are entitled to attend and vote at the meeting or any adjourned meeting. All shareholders of Rising Dividend Growth Fund, regardless of the class of shares held, will vote together as a single class. Each share is entitled to one vote. Shares represented by properly executed proxies, unless revoked before or at the meeting, will be voted according to shareholders’ instructions. If you sign a proxy but do not fill in a vote, your shares will be voted to approve the Plan. If any other business comes before the meeting, your shares will be voted at the discretion of the persons named as proxies.


6

 

TABLE OF CONTENTS
 
         
    Page
 
INTRODUCTION
    2  
SUMMARY
    8  
OTHER IMPORTANT INFORMATION CONCERNING THE REORGANIZATION
    27  
CAPITALIZATION
    28  
TERMS OF THE AGREEMENT AND PLAN OF REORGANIZATION
    29  
TAX STATUS OF THE REORGANIZATION
    30  
VOTING RIGHTS AND REQUIRED VOTE
    32  
COMPARISON OF CHARTER DOCUMENTS OF DIVIDEND GROWTH TRUST AND GOLDMAN SACHS TRUST
    33  
FUNDAMENTAL AND NON-FUNDAMENTAL INVESTMENT POLICIES OF THE FUNDS
    35  
BUYING, SELLING AND EXCHANGING SHARES OF THE FUNDS
    40  
OTHER INVESTMENT POLICIES AND RISKS OF THE FUNDS
    45  
ADDITIONAL INFORMATION ABOUT GOLDMAN SACHS RISING DIVIDEND GROWTH FUND
    63  
ADDITIONAL INFORMATION ABOUT THE REORGANIZATION
    82  
FINANCIAL HIGHLIGHTS
    82  
INFORMATION CONCERNING THE MEETING
    82  
OWNERSHIP OF SHARES OF THE FUNDS
    84  
EXPERTS
    84  
AVAILABLE INFORMATION
    84  
EXHIBIT A — FORM OF AGREEMENT AND PLAN OF REORGANIZATION
    A-1  


7

 

RISING DIVIDEND GROWTH FUND
AND
GOLDMAN SACHS RISING DIVIDEND GROWTH FUND

SUMMARY
 
The following is a summary of more complete information appearing later in this Proxy Statement/Prospectus or incorporated herein. You should read carefully the entire Proxy Statement/Prospectus, including the form of Agreement and Plan of Reorganization attached as Exhibit A, because it contains details that are not in the summary.
 
If Proposal 1 is approved, your fund will be reorganized into Goldman Sachs Rising Dividend Growth Fund, a newly organized open-end fund that will commence operations upon consummation of the proposed Reorganization (Goldman Sachs Rising Dividend Growth Fund, together with Rising Dividend Growth Fund, the “Funds”), as described above.
 
Rising Dividend Growth Fund and Goldman Sachs Rising Dividend Growth Fund have substantially similar investment objectives, principal investment strategies and related risks. GSAM will act as investment adviser of the combined Fund and DGA will act as sub-adviser to the combined Fund following the Reorganization. In addition, it is expected that the current portfolio managers of Rising Dividend Growth Fund will continue to serve as portfolio managers of the combined Fund following the Reorganization.
 
Comparison of Rising Dividend Growth Fund with Goldman Sachs Rising Dividend Growth Fund
 
         
   
Rising Dividend Growth Fund
 
Goldman Sachs Rising Dividend Growth Fund
 
Investment Objective   The Fund seeks long term growth of capital and current income. The Fund’s investment objective is fundamental and may not be changed without shareholder vote.   The Fund seeks long term growth of capital and current income. The Fund’s investment objective is non-fundamental and may be changed without shareholder approval upon 60 days notice.
         
Primary Investments and Investment Strategies  
The Fund attempts to achieve its investment objective by investing in equity securities of domestic and foreign companies that have increased their dividend payments to shareholders for each of the past ten years or more.

Regardless of industry, the Fund invests at least 80% of its assets in equity securities of dividend paying domestic and foreign companies whose market capitalization is at least $500 million and that have increased their dividend payments to stockholders for each of the past ten years or more. The Fund is a growth and income fund with a long-term investment philosophy. Once a company’s stock is owned by the Fund, if the company does not increase its common stock dividend from one year to the next, the stock will be sold.
  
The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at the time of purchase) (“Net Assets”) in equity investments of dividend-paying U.S. and foreign companies with market capitalizations of at least $500 million.

The equity investments in which the Fund invests may include common and preferred stocks as well as master limited partnerships (“MLPs”) and real estate investment trusts (“REITs”). The Fund generally invests only in common and preferred stocks of companies (including REITs) that have increased dividend payments to stockholders for at least each of the past ten years. Once a company’s stock is purchased by the Fund, if the company does not increase its common stock dividend from one year to the next, the stock will generally be sold at such time as the portfolio managers determine appropriate.


8

 

         
   
Rising Dividend Growth Fund
 
Goldman Sachs Rising Dividend Growth Fund
 
    The Fund is non-diversified and normally concentrates its investments in a group of 25-50 of such companies.   Under normal circumstances, the Fund invests in up to approximately 50 companies. The Fund is “non-diversified” under the 1940 Act, and may invest more of its assets in fewer issuers than “diversified” mutual funds.
         
    Equity securities in which the Fund invests include common and preferred stocks as well as master limited partnerships (“MLPs”). Many MLPs operate pipelines transporting crude oil, natural gas and other petroleum products along with associated facilities. The Fund will limit its investment in MLPs to no more than 20% of its assets. The Fund may also invest in real estate investment trusts (“REITs”), other investment companies (including mutual funds and exchange-traded funds (“ETFs”)), and other investments consistent with its rising dividend philosophy.   The Fund will limit its investment in MLPs to no more than 20% of its Net Assets, at the time of purchase. The Fund’s MLP investments may not have increased dividend payments to partners for at least each of the past ten years. Many MLPs operate pipelines transporting crude oil, natural gas and other petroleum products along with associated facilities. The Fund’s equity investments may also include other investment companies (including mutual funds and exchange-traded funds (“ETFs”)), although such investments may not have increased dividend payments to shareholders for at least each of the past ten years.
         
        Rising Dividend Investment Philosophy
        The Fund’s portfolio management team believes that consistent earnings growth drives consistent dividend growth. Earnings provide the ability to pay and grow dividends. Over the long run, the team believes that consistent earnings will have a positive influence on the price performance of a stock. This is why the team begins with companies that have well-established records of consistent earnings and dividend growth.
        Under normal conditions, the team generally seeks to invest in companies that:
       
• Pay dividends at an increasing rate that averages approximately 10% per year over a 10-year trailing period
       
• Pay those dividends for a minimum of 10 consecutive years
       
• Are committed to distributing profits to shareholders
       
• Produce essential products and services that we need to live, such as water, food, energy and healthcare
       
• Are industry leaders, have strong brands and growing global exposure
       
• Demonstrate an ability to manage their business with consistent earnings growth in various economic cycles
        The Fund’s investments in MLPs and ETFs are not subject to the Fund’s 10-year/ 10% rising dividend philosophy.

9

 

         
   
Rising Dividend Growth Fund
 
Goldman Sachs Rising Dividend Growth Fund
 
        Buy Strategy
    Stocks are selected for the Fund by seeking companies with strong earnings growth potential and special emphasis will be placed on those companies that the Fund believes demonstrate:   Under normal conditions, the team selects stocks for the Fund by seeking companies with strong earnings growth potential, and generally places special emphasis on those companies that it believes demonstrate:
   
• Financial stability
 
• Financial stability
   
• Strong market position with solid pricing power
 
• Strong market position with solid pricing power
   
• Effective management leadership
 
• Effective management leadership
   
• Prominent brand recognition
 
• Prominent brand recognition
   
• Strong patent position
 
• Strong patent position
    Current income created by rising common stock dividends is an important consideration in selecting the Fund’s investments.   Current income created by rising common stock dividends is an important consideration in selecting the Fund’s investments.
         
        Sell Discipline
        Whenever a stock’s 10-year trailing dividend growth rate declines below 10% or a company fails to increase its dividend, the position is eliminated from the portfolio at such time as the portfolio managers determine appropriate.
         
        The team may also sell a security if the portfolio managers believe a company’s dividend payment is in jeopardy, its fundamentals are likely to deteriorate, its valuations become excessive, a better investment opportunity becomes available, or in order to meet shareholder redemptions.
         
Fixed Income Securities   The Fund may invest up to 20% of its total assets in fixed income securities. The Fund will purchase only those securities rated at the time of purchase within the highest grades assigned by Standard & Poor’s or Moody’s Investors, Service, Inc. (i.e., BBB or higher by Standard & Poor’s, Baa or higher by Moody’s).   The Fund may invest up to 20% of its total assets in fixed income securities, including non-investment grade fixed income securities (i.e., BB or lower by Standard & Poor’s, Ba or lower by Moody’s or have a comparable rating by another NRSRO at the time of investment).

10

 

         
   
Rising Dividend Growth Fund
 
Goldman Sachs Rising Dividend Growth Fund
 
Temporary Investments  
To respond to adverse market, economic, political or other conditions, the Fund may invest up to 100% of its assets in money market mutual funds and in U.S. short-term money market instruments as a temporary defensive measure. These instruments include:

•   Cash and cash equivalents

•   U.S. government securities

•   Certificates of deposit or other obligations of U.S. banks

•   Corporate debt obligations with remaining maturities of 12 months or less

•   Commercial paper

•   Demand and time deposits

•   Repurchase agreements

•   Bankers’ acceptances

To the extent that the Fund engages in a temporary, defensive strategy, it may not achieve its investment objective. Any percentage limitations with respect to the investment of assets of the Fund are applied at the time of purchase.
  The Fund may, from time to time, take temporary defensive positions in attempting to respond to adverse market, political or other conditions. For temporary defensive purposes, the Fund may invest a certain percentage of its Total Assets in securities issued or guaranteed by the U.S. government, its agencies, instrumentalities or sponsored enterprises (“U.S. Government Securities”), commercial paper rated at least A-2 by Standard & Poor’s Rating Group (“Standard & Poor’s”), P-2 by Moody’s Investors Service, Inc. (“Moody’s”) or having a comparable rating by another nationally recognized statistical rating organization (“NRSRO”) (or if unrated, determined by the sub-adviser to be of comparable 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, ETFs and other investment companies and cash items. When the Fund’s assets are invested in such instruments, the Fund may not be achieving its investment objective.
         
Portfolio Turnover   The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual operating expenses or in the example above, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 24.84% of the average value of its portfolio.   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, including brokerage commissions, which must be borne by the Fund and its shareholders, and is also likely to result in higher short-term capital gains for taxable shareholders. These costs are not reflected in the annual fund operating expenses or in the expense example, but are reflected in the Fund’s performance. The Fund is a newly-organized fund that will commence operations upon consummation of the proposed Reorganization, and therefore, does not have an historical portfolio turnover rate.
         
Investment Adviser   DGA   GSAM
         
Investment Sub-Adviser   None   DGA

11

 

         
   
Rising Dividend Growth Fund
 
Goldman Sachs Rising Dividend Growth Fund
 
Portfolio Management Team  
• Thomas Cameron, Portfolio Manager of the Fund since its inception in March 2004. Mr. Cameron served as the chief investment officer of DGA from 2003 to 2008 and is a director and founding member of DGA. Mr. Cameron has been managing portfolios using a rising dividend philosophy since 1979. From 1978 to 2000, Mr. Cameron served as vice president at Interstate Johnson Lane Brokerage in Charlotte, NC. Mr. Cameron served as a director of the Sovereign Investors Fund, which utilized the rising dividend philosophy, from 1979 until 1997. Mr. Cameron was also a founder of Cameron and Associates, a firm providing investment services to individuals, corporations, and institutional investors from July, 2000 through January, 2009. From June, 2000 until March, 2004, Mr. Cameron was a registered representative of ProEquities, Inc.

• Jere Estes, Portfolio Manager of the Fund since May 2004. Mr. Estes served as a portfolio consultant to the Fund prior to May 2004. Mr. Estes, currently Chief Investment Officer and Asst. Treasurer of Dividend Growth Trust, served as a consultant to DGA from 2003 until May of 2004. Since June of 2004, Mr. Estes has served as a Managing Director of DGA. From 1992 to 1999, Mr. Estes served as Vice President/Director of Research and Senior Portfolio Manager at Sovereign Asset Management in Bryn Mawr, PA. From June of 1999 until May of 2004, Mr. Estes served as Senior Vice President and Chief Investment Officer at Bryn Mawr Trust Company in Bryn Mawr, PA. Mr. Estes was also a registered representative of Investors Capital Corporation from June of 2004 until December of 2004.
  
• Thomas Cameron, Portfolio Manager, has managed the Fund since its inception and managed Rising Dividend Growth Fund since its inception in March 2004.

• Jere Estes, Portfolio Manager, has managed the Fund since its inception and managed Rising Dividend Growth Fund since May 2004.

• C. Troy Shaver, Jr., Portfolio Manager, has managed the Fund since its inception and managed Rising Dividend Growth Fund since February 2010.

• Ying Wang, CFA, Portfolio Manager, has managed the Fund since its inception and managed Rising Dividend Growth Fund since December 2011.

For information about the portfolio managers’ compensation, other accounts managed by the portfolio managers and the portfolio managers’ ownership of securities in the Fund, see the SAI.
         
   
• C. Troy Shaver, Jr., Portfolio Manager of the Fund since February 2010. Mr. Shaver has been the President, CEO and Chief Compliance Officer of DGA since its inception in 2003. From 2000 to 2004 Mr. Shaver was Vice Chairman/ President & Chief Executive Officer of GoldK, Inc./GoldK Investment Services, Inc. From 1996 to 2000 Mr. Shaver served as President of State Street Research Investment Services, Inc. Mr. Shaver is the President of Dividend Growth Trust.
   

12

 

         
   
Rising Dividend Growth Fund
 
Goldman Sachs Rising Dividend Growth Fund
 
   
• Ying Wang, CFA, Portfolio Manager of the Fund since December 2011. Ms. Wang is Director of Research for Dividend Growth Advisors, LLC. From 2008 to 2011, she was a Research Analyst and Senior Research Analyst at Dividend Growth Advisors, LLC. Ms. Wang received her MBA from Georgia Southern University in 2008 and is a Chartered Financial Analyst (CFA) affiliated member.

The Fund’s Statement of Additional Information provides additional information about each portfolio manager’s compensation, other accounts managed by each portfolio manager and each portfolio manager’s ownership of shares of the Fund, if any.
   
         
Fiscal Year End   September 30   August 31
         
Business   A non-diversified series of Dividend Growth Trust, an open-end management investment company organized as a Delaware statutory trust.   A non-diversified series of Goldman Sachs Trust, an open-end management investment company organized as a Delaware statutory trust.
         
Net Assets (as of September 30, 2011)   $134,233,614   None (The Fund is a newly-organized fund that will commence operations upon consummation of the proposed Reorganization).
 
Comparison of Principal Risks of Investing in the Funds
 
Because Rising Dividend Growth Fund and Goldman Sachs Rising Dividend Growth Fund have identical investment objectives and substantially similar investment strategies, they are subject to substantially similar principal risks:
 
Stock Risk — Stock prices have historically risen and fallen in periodic cycles. U.S. and foreign stock markets have experienced periods of substantial price volatility in the past and may do so again in the future.
 
Market Risk — The value of the securities in which a Fund invests may go up or down in response to the prospects of individual companies, particular industry sectors or governments and/or general economic conditions. Price changes may be temporary or last for extended periods. A Fund’s investments may be overweighted from time to time in one or more industry sectors or countries, which will increase the Fund’s exposure to risk of loss from adverse developments affecting those sectors or countries.
 
Investment Style Risk — Different investment styles tend to shift in and out of favor depending upon market and economic conditions and investor sentiment. A Fund may outperform or underperform other funds that invest in similar assets but employ different investment styles. Examples of different investment styles include growth and value investing. Growth stocks may be more volatile than other stocks because they are more sensitive to investor perceptions of the issuing company’s growth of earnings potential. Growth companies are often expected by investors to increase their earnings at a certain rate. When these expectations are not met, investors can punish the stocks inordinately even if earnings showed an absolute increase. Growth oriented funds will typically underperform when value investing is in favor.
 
Within the “growth” investment style, each Fund places an emphasis on companies with rising dividend payments, which may cause the Fund to underperform other funds that do not have the same strategy. Securities that pay high dividends, as a group, can fall out of favor with the market, causing such companies to

13

 

underperform companies that do not pay high dividends. Additionally, a sharp rise in interest rates or an economic downturn could cause a company to reduce or eliminate its dividend.
 
Non-Diversification Risk — Each Fund is non-diversified, which means it is permitted to invest a larger percentage of its assets in fewer issuers than a “diversified” mutual fund. As a result of the relatively small number of issuers in which each Fund generally invests, each Fund may be subject to greater risks than a more diversified fund. A change in the value of any single investment held by a Fund may affect the overall value of the Fund more than it would affect a diversified mutual fund that holds more investments. In particular, each Fund may be more susceptible to adverse developments affecting any single issuer held in its portfolio and may be more susceptible to greater losses because of these developments.
 
Foreign and Emerging Countries Risk — Foreign securities may be subject to risk of loss because of less foreign government regulation, less public information and less economic, political and social stability in the countries in which a Fund invests. Loss may also result from the imposition of exchange controls, confiscations and other government restrictions, or from problems in security registration or settlement and custody. Foreign risk also involves the risk of negative foreign currency rate fluctuations, which may cause the value of securities denominated in such foreign currency (or other instruments through which the Fund has exposure to foreign currencies) to decline in value. Currency exchange rates may fluctuate significantly over short periods of time. Foreign risks may be more pronounced when a Fund invests in issuers located in emerging countries.
 
Mid-Cap and Small-Cap Risk — The securities of mid-capitalization and small-capitalization companies involve greater risks than those associated with larger, more established companies and may be subject to more abrupt or erratic price movements. Securities of such issuers may lack sufficient market liquidity to enable the Fund to effect sales at an advantageous time or without a substantial drop in price. Both mid-capitalization and small-capitalization companies often have narrower markets and more limited managerial and financial resources than larger, more established companies. As a result, their performance can be more volatile and they face greater risk of business failure, which could increase the volatility of a Fund’s portfolio. Generally, the smaller the company size, the greater these risks become.
 
Master Limited Partnerships (“MLPs”) Risk — Investments in securities of MLPs involve risks that differ from investments in common stock, including risks related to limited control and limited rights to vote on matters affecting the MLP, risks related to potential conflicts of interest between the MLP and the MLP’s general partner, cash flow risks, dilution risks, risks related to the general partner’s right to require unit-holders to sell their common units at an undesirable time or price, and tax risks. Certain MLP securities may trade in lower volumes due to their smaller capitalizations. Accordingly, such MLPs may be subject to more abrupt or erratic price movements, may lack sufficient market liquidity to enable a Fund to effect sales at an advantageous time or without a substantial drop in price, and investment in such MLPs may restrict a Fund’s ability to take advantage of other investment opportunities. Master limited partnerships are generally considered interest-rate sensitive investments. During periods of interest rate volatility, these investments may not provide attractive returns.
 
To the extent a distribution received by a Fund from an MLP is treated as a return of capital, the Fund’s adjusted tax basis in the interests of the MLP may be reduced, which may increase the Fund’s tax liability. Moreover, a change in current tax law, or a change in the underlying business mix of a given MLP, could result in an MLP being treated as a corporation for U.S. federal income tax purposes, which could result in a reduction of the value of a Fund’s investment in the MLP and lower income to the Fund.
 
Real Estate Investment Trusts (“REITs”) Risk — REITs whose underlying properties are concentrated in a particular industry or geographic region are subject to risks affecting such industries and regions. The securities of REITs involve greater risks than those associated with larger, more established companies and may be subject to more abrupt or erratic price movements because of interest rate changes, economic conditions and other factors. REITs may also fail to qualify for tax free pass-through of income or may fail to maintain their exemptions from investment company registration. Securities of such issuers may lack sufficient market liquidity to enable a Fund to effect sales at an advantageous time or without a substantial drop in price.


14

 

Other Investment Companies Risk — By investing in other investment companies (including ETFs) indirectly through a Fund, investors will incur a proportionate share of the expenses of the other investment companies held by the Fund (including operating costs and investment management fees) in addition to the fees regularly borne by the Fund. In addition, a Fund will be affected by the investment policies, practices and performance of such investment companies in direct proportion to the amount of assets the Fund invests therein.
 
Management Risk — A strategy used by a Fund’s investment adviser or sub-adviser may fail to produce the intended results.
 
Credit/Default Risk — An issuer or guarantor of fixed income securities held by a Fund (which may have low credit ratings) may default on its obligation to pay interest and repay principal. Additionally, the credit quality of securities may deteriorate rapidly, which may impair a Fund’s liquidity and cause significant NAV deterioration. To the extent that a Fund invests in non-investment grade fixed income securities, these risks will be more pronounced.
 
Interest Rate Risk — When interest rates increase, fixed income securities held by a Fund will generally decline in value. Long-term fixed income securities will normally have more price volatility because of this risk than short-term fixed income securities.


15

 

The Funds’ Fees and Expenses
 
Shareholders of both Funds pay various fees and expenses, either directly or indirectly. The tables below show the fees and expenses that you would pay if you were to buy and hold shares of each Fund. The expenses in the tables appearing below for your Fund are based on the expenses of your Fund for the twelve-month period ended September 30, 2011. Goldman Sachs Rising Dividend Growth Fund is a newly-organized fund that will commence operations upon consummation of the proposed Reorganization and has no performance history. Therefore, the Fees and Expenses for Goldman Sachs Rising Dividend Growth Fund have been estimated using Goldman Sachs Rising Dividend Growth Fund’s proposed fees and estimated expenses assuming the Reorganization occurred on September 30, 2011. For financial statement purposes, Rising Dividend Growth Fund will be the accounting survivor of the Reorganization. As the accounting survivor, Rising Dividend Growth Fund’s operating history will be used for the Goldman Sachs Rising Dividend Growth Fund’s financial reporting purposes. The tables also show the pro forma expenses of the combined fund after giving effect to the Reorganization based on pro forma net assets as of September 30, 2011.
 
                                                   
                Combined
 		                  Combined
 		 
                Goldman
 		                  Goldman
 		 
          Goldman
 		    Sachs Rising
 		            Goldman
 		    Sachs Rising
 		 
    Rising
 		    Sachs Rising
 		    Dividend
 		      Rising
 		    Sachs Rising
 		    Dividend
 		 
    Dividend
 		    Dividend
 		    Growth Fund
 		      Dividend
 		    Dividend
 		    Growth Fund
 		 
    Growth Fund     Growth Fund     (Pro Forma)       Growth Fund     Growth Fund     (Pro Forma)  
    Class A     Class A     Class A       Class C*     Class A*     Class A*  
Shareholder transaction fees (paid directly from your investment)
                                                 
Maximum sales charge (load) imposed on purchases (as a percentage of offering price)
    5.75 %     5.50 %     5.50 %       None       None       None  
Maximum deferred sales charge (load) (as a percentage of the lower of original purchase price or sales proceeds)
    None (1)     None (6)     None (6)       1.00 %(5)     None (6)     None (6)
Redemption fee (as a percentage of amount redeemed within 60 days of purchase)
    1.00 %(2)     None       None         1.00 %(2)     None       None  
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)
                                                 
Management Fees
    0.75 %     0.75 %     0.75 %       0.75 %     0.75 %     0.75 %
Distribution and Service (12b-1) Fees
    0.40 %     0.25 %     0.25 %       1.00 %     0.25 %     0.25 %
Other Expenses
    0.53 %     0.51 %     0.51 %       0.53 %     0.51 %     0.51 %
Acquired Fund Fees and Expenses
    0.01 %(3)     — (7)     — (7)       0.01 %(3)     — (7)     — (7)
Total Annual Fund Operating Expenses
    1.69 %     1.51 %     1.51 %       2.29 %     1.51 %     1.51 %
                                                   
Expense Limitation
    (0.03 )%(4)     (0.31 )%(8)     (0.31 )%(8)       (0.03 )%(4)     (0.31 )%(8)     (0.31 )%(8)
Total Annual Fund Operating Expenses After Expense Limitation
    1.66 %     1.20 %     1.20 %       2.26 %     1.20 %     1.20 %
                                                   
 


16

 

                         
                Combined
 		 
                Goldman
 		 
          Goldman
 		    Sachs Rising
 		 
    Rising
 		    Sachs Rising
 		    Dividend
 		 
    Dividend
 		    Dividend
 		    Growth Fund
 		 
    Growth Fund     Growth Fund     (Pro Forma)  
    Class I     Institutional     Institutional  
 
Shareholder transaction fees (paid directly from your investment)
                       
Maximum sales charge (load) imposed on purchases (as a percentage of offering price)
    None       None       None  
Maximum deferred sales charge (load) (as a percentage of the lower of original purchase price or sales proceeds)
    None       None       None  
Redemption fee as a percentage of amount redeemed, if applicable
    None(2 )     None       None  
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)
                       
Management Fees
    0.75 %     0.75 %     0.75 %
Distribution and Service (12b-1) Fees
    0.00 %     0.00 %     0.00 %
Other Expenses
    0.53 %     0.36 %     0.36 %
Acquired Fund Fees and Expenses
    0.01 %(3)     — (7)     — (7)
Total Annual Fund Operating Expenses
    1.29 %     1.11 %     1.11 %
                         
Expense Limitation
    (0.03 )%(4)     (0.31 )%(8)     (0.31 )%(8)
Total Annual Fund Operating Expenses After Expense Limitation
    1.26 %     0.80 %     0.80 %
                         
                         
 
 
*  Shareholders holding Class C Shares of Rising Dividend Growth Fund will receive Class A Shares of Goldman Sachs Rising Dividend Growth Fund as a result of the Reorganization.
 
Footnotes to Rising Dividend Growth Fund Fees and Expenses:
 
(1) Although purchases of $1,000,000 or more of Class A Shares of Rising Dividend Growth Fund will not be subject to an up-front sales charge, a 1.00% contingent deferred sales charge will be assessed when such shares are sold within twelve months of their acquisition.
 
(2) A $15 fee will be assessed for any redemptions of Rising Dividend Growth Fund satisfied by wire payment. No comparable fee is assessed by Goldman Sachs Rising Dividend Growth Fund.
 
(3) Acquired Fund Fees and Expenses represent the underlying expense of investing in other investment companies (“Acquired Funds”). The operating expenses in this fee table for Rising Dividend Growth Fund will not correlate to the expense ratio in the Fund’s financial statements because the financial statements include only the direct operating expenses incurred by the Fund and not the indirect costs of investing in Acquired Funds.
 
(4) Total Annual Fund Operating Expenses (After Fee Waivers and Expense Reimbursements) reflect that DGA has contractually agreed to waive fees and/or pay certain expenses so that Net Annual Fund Operating Expenses of Rising Dividend Growth Fund (excluding Acquired Fund Fees and Expenses, brokerage and other investment-related costs, extraordinary expenses, and certain other fees) do not exceed 1.65% for Class A Shares, 2.25% for Class C Shares, and 1.25% for Class I Shares. Any fees waived or expenses paid by DGA are subject to repayment by the Fund within the following three years if the Fund is able to make the repayment without exceeding the expense limits in place when the fees were waived or expenses paid. This Expense Limitation Agreement will stay in place until January 31, 2012, although it may be terminated by Dividend Growth Trust at any time. It may be reviewed, modified or discontinued thereafter.
 
(5) The contingent deferred sales charge (“CDSC”) for Class C Shares of Rising Dividend Growth Fund applies to redemptions that occur within one year from the date of purchase of such shares. This CDSC is only applicable on Class C Shares that are redeemed in accounts that are established after March 1, 2010.
 
Footnotes to Goldman Sachs Rising Dividend Growth Fund Fees and Expenses:
 
(6) No sales charge is payable at the time of purchase of Class A Shares of Goldman Sachs Rising Dividend Growth Fund of $1 million or more, but a CDSC of 1% may be imposed in the event of certain redemptions within 18 months of purchase.
 
(7) Acquired Fund Fees and Expenses for Goldman Sachs Rising Dividend Growth Fund are estimated not to exceed 0.01% of the Fund’s average net assets for the current fiscal year.

17

 

(8) GSAM has agreed to reduce or limit “All Other Expenses” of Goldman Sachs Rising Dividend Growth Fund (excluding management fees, distribution and service fees, transfer agency fees and expenses, service fees, shareholder administration fees, taxes, interest, brokerage fees and litigation, indemnification, shareholder meeting and other extraordinary expenses exclusive of any custody and transfer agent fee credit reductions) to 0.064% of the Fund’s average daily net assets through at least one year from the Closing Date, and prior to such date, GSAM may not terminate the arrangements without the approval of the Board of Trustees.
 
Expense Example
 
This Example is intended to help you compare the cost of investing in each Fund. The Example assumes that you invest $10,000 in each Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year, and that each Fund’s operating expenses remain the same (except that the Example incorporates the applicable expense limitation arrangement for only the first year). Pro forma expenses are included assuming a Reorganization of the Funds. The examples are for comparison purposes only and are not a representation of either Fund’s actual expenses or returns, either past or future.
 
                         
            Combined
        Goldman
 		  Goldman Sachs
    Rising
 		  Sachs Rising
 		  Rising Dividend
    Dividend
 		  Dividend
 		  Growth Fund
Number of Years You Own Your Shares
  Growth Fund   Growth Fund   (Pro Forma)
 
Class A
                       
Year 1
  $ 734     $ 666     $ 666  
Year 3
  $ 1,074     $ 972     $ 972  
Year 5
  $ 1,437     $ 1,301     $ 1,301  
Year 10
  $ 2,456     $ 2,227     $ 2,227  
Class C — Assuming complete redemption at end of period*
                       
Year 1
  $ 329     $ —     $ —  
Year 3
  $ 712     $ —     $ —  
Year 5
  $ 1,222     $ —     $ —  
Year 10
  $ 2,623     $ —     $ —  
Class C — Assuming no redemption*
                       
Year 1
  $ 229     $ —     $ —  
Year 3
  $ 712     $ —     $ —  
Year 5
  $ 1,222     $ —     $ —  
Year 10
  $ 2,623     $ —     $ —  
Class I/Institutional
                       
Year 1
  $ 128     $ 82     $ 82  
Year 3
  $ 406     $ 322     $ 322  
Year 5
  $ 705     $ 582     $ 582  
Year 10
  $ 1,554     $ 1,324     $ 1,324  
 
 
*  Shareholders holding Class C Shares of Rising Dividend Growth Fund will receive Class A Shares of Goldman Sachs Rising Dividend Growth Fund as a result of the Reorganization.


18

 

The Funds’ Past Performance
 
Goldman Sachs Rising Dividend Growth Fund is a newly-organized fund that will commence operations upon consummation of the proposed Reorganization, and therefore, has no performance history. As accounting successor to Rising Dividend Growth Fund, Goldman Sachs Rising Dividend Growth Fund will assume the Rising Dividend Growth Fund’s historical performance after the consummation of the Reorganization.
 
The bar chart and table below provide an indication of the risks of investing in Rising Dividend Growth Fund by showing: (a) change in the performance of the Fund’s Class A Share from year to year; and (b) how the average annual total returns of the Fund’s Class A, Class C and Class I Shares compare to those of a broad-based securities market index. Goldman Sachs Rising Dividend Growth Fund has different fees and expenses and would, therefore, have had different performance results. Past performance, before and after taxes, is not necessarily an indication of how the Fund will perform in the future.
 
The bar chart (including “Best Quarter” and “Worst Quarter” information) does not reflect the sales loads applicable to Class A Shares. If the sales loads were reflected, returns would be less. Performance reflects expense limitations in effect.
 
Performance data for Rising Dividend Growth Fund is available on DGA’s website at www.dividendgrowthadvisors.com and/or by calling 1-888-826-2520.
 
Rising Dividend Growth Fund’s Annual Returns — Class A Shares
 
(CHART)
 
Rising Dividend Growth Fund Class A Shares’ highest quarterly return was 13.19% in the second quarter of 2009, and the lowest quarterly return was -14.74% in the fourth quarter of 2008.
 
The total return for Class A Shares of Rising Dividend Growth Fund for the period from January 1, 2011 through September 30, 2011 was -11.05%.


19

 

Average Annual Total Returns
(for periods ended December 31, 2010)
 
                         
Rising Dividend Growth Fund
  1 Year   5 Years   Since Inception
 
Class A Shares (Inception Date March 18, 2004)
                       
Returns Before Taxes
    11.93 %     6.01 %     6.10 %
Returns After Taxes on Distributions
    11.24 %     5.35 %     5.50 %
Returns After Taxes on Distributions and Sale of Fund Shares
    7.71 %     4.83 %     4.96 %
S&P 500 Composite Stock Index (reflects no deduction for fees, expenses or taxes)
    15.90 %     2.29 %     4.17 %
Class C Shares (Inception Date April 14, 2005)
                       
Returns Before Taxes
    18.49 %     6.73 %     6.69 %
S&P 500 Composite Stock Index (reflects no deduction for fees, expenses or taxes)
    15.90 %     2.29 %     3.53 %
Class I Shares (Inception Date January 29, 2007)
                       
Returns Before Taxes
    19.22 %     N/A       5.10 %
S&P 500 Composite Stock Index (reflects no deduction for fees, expenses or taxes)
    15.90 %     N/A       (0.85 )%
 
The after-tax returns are for Class A Shares only. The after-tax returns for Class C and Class I Shares will vary. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. In addition, the after-tax returns shown are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.


20

 

Classes of Shares, Fees and Expenses
 
         
   
Rising Dividend Growth Fund
 
Goldman Sachs Rising Dividend Growth Fund
 
Class A
Shares Sales
Charges and
Fees 		  Class A Shares have a maximum up front sales charge of 5.75% that you pay when you buy your shares. The front-end sales charge for the Class A Shares decreases with the amount you invest and is included in the offering price.   There is a maximum sales charge of 5.50% for Class A Shares of the Fund. The sales charge varies depending upon the amount you purchase. The current sales charges paid to Authorized Institutions for Class A Shares of the Fund is as follows:
 
                                     
        Sales
 		           
        Charge
 		           
        as % of
 		           
    Sales
 		  Net
 		      Sales
 		  Sales
    Charge
 		  Amount
 		  Amount of
 		  Charge as a
 		  Charge as a
    as % of
 		  Invested
 		  Purchase
 		  Percentage of
 		  Percentage of
    Offering
  in the
 		  (Including Sales
 		  Offering
 		  Net Amount
Amount Invested
  Price   Fund   Charge, if Any)   Price   Invested
 
less than $50,000
    5.75 %     6.10 %   less than $50,000     5.50 %     5.82 %
$50,000 but less than $100,000
    4.75 %     4.99 %   $50,000 but less than $100,000     4.75 %     4.99 %
$100,000 but less than $500,000
    3.75 %     3.90 %   $100,000 but less than $250,000     3.75 %     3.90 %
                    $250,000 but less than $500,000     2.75 %     2.83 %
$500,000 but less than $1,000,000
    2.75 %     2.83 %   $500,000 but less than $1,000,000     2.00 %     2.04 %
$1,000,000 or more
    0.00 %     N/A     $1,000,000 or more     0.00 %     0.00 %
 
         
    Although purchases of $1,000,000 or more will not be subject to an up-front sales charge, a 1.00% contingent deferred sales charge will be assessed when such shares are sold within twelve months of their acquisition.   No sales charge is payable at the time of purchase of Class A Shares of $1 million or more, but a CDSC of 1% may be imposed in the event of certain redemptions within 18 months after the beginning of the month in which the purchase was made.
    Under certain circumstances, the sales charge for Class A Shares may be waived. In addition, investors can reduce or eliminate sales charges on Class A Shares under certain conditions.   Class A Shares of the Fund may be sold at NAV without payment of any sales charge to certain enumerated individuals and entities.


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    The Fund has adopted a Class A Shares 12b-1 plan that allows the Fund to pay distribution fees for the sale and distribution of its shares. Because these fees are paid out of the Fund’s 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 sales charges.   The Trust has adopted a distribution and service plan (each a “Plan”) under which Class A Shares bear distribution and/or service fees paid to Goldman Sachs, some of which Goldman Sachs may pay to Authorized Institutions. These financial 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 Funds. 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.
         
         
    Class A Shares are subject to an annual 12b-1 fee of 0.40%, of which 0.25% are annual distribution fees and 0.15% are annual service fees paid to the distributor, dealers or others for providing personal services and maintaining shareholder accounts.   Under the Plan, Goldman Sachs is entitled to a monthly fee from the Fund for distribution services equal, on an annual basis, to 0.25% of the Fund’s average daily net assets attributed to Class A Shares. Because these fees are paid out of a Fund’s 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.
         
         
Class C Shares Sales Charges and Fees   Class C Shares have no up-front sales charge, so that the full amount of your purchase is invested in the Fund. Class C Shares are subject to a 1.00% contingent deferred sales charge if sold within 12 months of purchase. Class C Shares will automatically convert to Class A Shares seven (7) years after purchase of such Class C Shares, thus reducing future annual expenses.   Shareholders holding Class C Shares of Rising Dividend Growth Fund will receive Class A Shares of Goldman Sachs Rising Dividend Growth Fund as a result of the Reorganization. Please see Class A Sales Charges and Fees above.
    The Fund has adopted a Class C Shares 12b-1 plan that allows the Fund to pay distribution fees for the sale and distribution of its shares. Because these fees are paid out of the Fund’s 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 sales charges.    
    Class C Shares are subject to an annual 12b-1 fee of 1.00%, of which 0.75% are annual distribution fees and 0.25% are service fees paid to the distributor, dealers or others for providing personal services and maintaining shareholder accounts.    
         

22

 

         
Class I Shares and Institutional Shares Sales Charges and Fees   Class I Shares have no up front sales charge and no 12b-1 fee. In addition, Class I Shares have no contingent deferred sales charge and no redemption fee.   Institutional Shares are offered at net asset value with no front-end sales charge or CDSC. Institutional Shares pay no distribution or service fees.
         
         
Management Fees   Under the Advisory Agreement, the monthly compensation paid to DGA is accrued daily at an annual rate equal to 0.75% of the average daily net assets of the Fund.   As compensation for its services and its assumption of certain expenses, GSAM is entitled to the following fees, computed daily and payable monthly at the annual rate listed below (as a percentage of the Fund’s average daily net assets):
 
         
Contractual Rate
  Average Daily Net Assets  
 
0.75%
  First $ 1 Billion  
0.68%
  Next $ 1 Billion  
0.64%
  Next $ 3 Billion  
0.63%
  Next $ 3 Billion  
0.62%
  Over $ 8 Billion  
 
         
Fee Waiver
and
Expense
Limitations 		  DGA has contractually agreed to waive fees and/or reimburse Fund expenses excluding brokerage and other investment-related costs, “acquired fund fees and expenses” (as that term is defined in the Securities and Exchange Commission’s Form N-1A), interest, taxes, dues, fees and other charges of government and their agencies including the cost of qualifying the Fund’s shares for sales in any jurisdiction, extraordinary expenses such as litigation (including legal and audit fees and other costs in contemplation of or incident thereto) and indemnification and other expenses not incurred in the ordinary course of the Fund’s business (“Fund Operating Expenses”), so that Net Annual Fund Operating Expenses do not exceed 1.65% for Class A Shares, 2.25% for Class C Shares, and 1.25% for Class I Shares. The Expense Limitation Agreement currently is set to expire on January 31, 2012.  
GSAM may waive a portion of its management fee from time to time, and may discontinue or modify any such waivers in the future, consistent with the terms of any fee waiver arrangements in place.

GSAM has agreed to reduce or limit “Other Expenses” (excluding management fees, distribution and service fees, transfer agency fees and expenses, service fees, shareholder administration fees, taxes, interest, brokerage fees and litigation, indemnification, shareholder meeting and other extraordinary expenses exclusive of any custody or transfer agent fee credit reductions ) to 0.064% of average daily net assets through at least one year from the Closing Date, and prior to such date, GSAM may not terminate the arrangement without the approval of the Board of Trustees. The expense limitations may be modified or terminated by GSAM at its discretion and without shareholder approval after such date, although GSAM does not presently intend to do so.
    DGA is entitled to reimbursement of fees waived or Fund expenses paid under the terms of the Expense Limitation Agreement. Any fees waived or expenses paid by DGA are subject to repayment by the Fund within the following three years if the Fund is able to make the repayment without exceeding the expense limits in place when the fees were waived or expenses paid.    

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Sub-Advisory
Fees 		  N/A   As compensation for its services, DGA is entitled to a fee, payable by GSAM and computed daily and payable each calendar quarter, at the annual rate of [0.20%] of the average daily net assets of the Fund.
         
    A discussion regarding the basis for the Board of Trustees’ approval of the Investment Advisory Agreement of the Fund is available in the Fund’s annual report to shareholders for the year ended September 30, 2011.   Discussions regarding the basis for the Board of Trustees’ approval of the Management Agreement and the Sub-Advisory Agreement of the Fund in 2011 will be available in the Fund’s semi-annual report dated February 28, 2012.
 
For a comparison of the gross and net expenses of both Funds, please see the fee tables in “The Funds’ Fees and Expenses” section starting on page 16.

24

 

Reasons for the Proposed Reorganization
 
The Dividend Growth Trust Trustees believe that the proposed Reorganization is in the best interests of Rising Dividend Growth Fund and its shareholders. The Dividend Growth Trust Trustees considered the following matters, among others, in approving the Proposal.
 
First, DGA, the investment adviser to Rising Dividend Growth Fund, informed the Dividend Growth Trust Board that it has agreed to sell its mutual fund management business to GSAM, and that, in connection with that transaction DGA recommended that Rising Dividend Growth Fund be reorganized into a similar mutual fund managed by GSAM and sub-advised by DGA.
 
Second, the Dividend Growth Trust Board considered that the after the Reorganization, Rising Dividend Growth Fund shareholders would continue to be invested in substantially the same investment product as they have currently. The Dividend Growth Trust Board considered that the Funds have substantially similar investment objectives and principal investment strategies.
 
Third, the Dividend Growth Trust Board considered that GSAM will retain DGA to act as sub-adviser to Goldman Sachs Rising Dividend Growth Fund. Accordingly, the current portfolio managers of Rising Dividend Growth Fund will continue to serve as portfolio managers of the combined Fund following the completion of the Reorganization utilizing substantially the same investment strategy as Rising Dividend Growth Fund’s current investment strategy. GSAM will oversee DGA as sub-adviser to Goldman Sachs Rising Dividend Growth Fund in accordance with the terms of the sub-advisory agreement between GSAM and DGA.
 
Fourth, the Dividend Growth Trust Board considered that the pro forma gross expense ratios of the combined Fund’s Class A Shares and Institutional Shares are expected to be lower than the pro forma gross expense ratios of Rising Dividend Growth Fund’s Class A, Class C and Class I Shares. The pro forma gross expense ratios for the combined Fund’s Class A and Institutional Shares are anticipated to be 1.51% and 1.11%, respectively, and the historical gross expense ratios for Class A, Class C and Class I Shares of Rising Dividend Growth Fund are 1.69%, 2.29% and 1.29%, respectively. In addition, the broader distribution arrangements of Goldman Sachs Rising Dividend Growth Fund offer greater potential for further asset growth and further reduced per share expenses.
 
Fifth, the Dividend Growth Trust Board considered that the pro forma net expense ratios of the combined Fund’s Class A Shares and Institutional Shares are expected to be lower than the pro forma net expense ratios of Rising Dividend Growth Fund’s Class A, Class C and Class I Shares. The Dividend Growth Trust Board considered that GSAM has contractually agreed to limit ordinary operating expenses of the combined Fund to the extent required to reduce fund expenses to 1.20% and 0.80% of the average daily net assets attributable to Class A Shares and Institutional Shares, respectively. The Dividend Growth Trust Board noted that the historical net expense ratios for Class A, Class C and Class I Shares of Rising Dividend Growth Fund are 1.66%, 2.26% and 1.26%, respectively. Assuming the shareholders of Rising Dividend Growth Fund approve the Reorganization, the expense limitations described above will be in effect for the combined Fund for at least one year from the Closing Date. There can be no assurance that GSAM will extend the expense limitations beyond such time.
 
Sixth, the Dividend Growth Trust Board considered that the management fee of Goldman Sachs Rising Dividend Growth Fund is the same as the management fee of Rising Dividend Growth Fund at current asset levels (0.75%), and has breakpoints that would reduce the Fund’s management fee if assets increase.
 
Seventh, the Dividend Growth Trust Board considered that although DGA will manage the assets of Goldman Sachs Rising Dividend Growth Fund as its sub-adviser, GSAM will be responsible for the overall management of the Fund’s operations, including supervision of DGA’s compliance with the Fund’s investment guidelines and regulatory restrictions. The Board considered that the reputation, financial strength, resources and capabilities of GSAM could benefit Rising Dividend Growth Fund shareholders. As of September 30, 2011, GSAM, including its investment advisory affiliates, had assets under management of $699.7 billion. Shareholders of Rising Dividend Growth Fund would become part of a significantly larger family of funds that offers a more diverse array of investment options. As of September 30, 2011, the Goldman Sachs family of mutual funds offers over 96 funds, including domestic and international equity and fixed income that will be available to Rising Dividend Growth Fund shareholders through exchanges. In addition, the Board considered that GSAM has greater potential for increasing the size of the Fund due to GSAM’s experience in distributing mutual funds through a broader range of distribution channels than currently is available to Rising Dividend Growth Fund. Rising Dividend Growth Fund


25

 

may reduce the level of its operational expenses for administrative, compliance and portfolio management services if it becomes part of a larger mutual fund complex.
 
Eighth, the Dividend Growth Trust Board considered that the Reorganization is expected to qualify as a reorganization within the meaning of Section 368(a) of the Code and therefore shareholders will not recognize gain or loss for federal income tax purposes on the exchange of shares of Rising Dividend Growth Fund for corresponding shares of Goldman Sachs Rising Dividend Growth Fund. For more information, see “Tax Status of the Reorganization” on page 30 of this Proxy Statement/Prospectus.
 
The Dividend Growth Trust Board considered that GSAM has agreed to pay all proxy and solicitation costs associated with the Funds’ participation in the Reorganization.
 
The Dividend Growth Trust Board Trustees also considered that GSAM and DGA will benefit from the Reorganization. See “Will GSAM and DGA Benefit from the Reorganization?”
 
DIVIDEND GROWTH TRUST BOARD’S EVALUATION AND RECOMMENDATION
 
For the reasons described above, the Dividend Growth Trust Board, including the Independent Dividend Growth Trust Trustees, approved the Reorganization. In particular, the Trustees determined that the Reorganization is in the best interest of Rising Dividend Growth Fund and that the interests of Rising Dividend Growth Fund’s shareholders would not be diluted as a result of the Reorganization. Similarly, the Board of Trustees of Goldman Sachs Trust, including the Independent Trustees, approved the Reorganization. They also determined that the Reorganization is in the best interests of Goldman Sachs Rising Dividend Growth Fund.
 
The Dividend Growth Trust Trustees recommend that shareholders of your fund vote FOR the proposal to approve the Agreement and Plan of Reorganization.


26

 

 
OTHER IMPORTANT INFORMATION
CONCERNING THE REORGANIZATION
 
Portfolio Securities
 
If the Reorganization is effected, management will analyze and evaluate the portfolio securities of Rising Dividend Growth Fund being transferred to Goldman Sachs Rising Dividend Growth Fund. The extent and duration to which the portfolio securities of Rising Dividend Growth Fund will be maintained by Goldman Sachs Rising Dividend Growth Fund will be determined consistent with Goldman Sachs Rising Dividend Growth Fund’s investment objective and policies, any restrictions imposed by the Code and in the best interests of each of Goldman Sachs Rising Dividend Growth Fund’s shareholders (including former shareholders of Rising Dividend Growth Fund). Although it is not currently anticipated, it is possible that there may be dispositions of some of the portfolio securities of Goldman Sachs Rising Dividend Growth Fund following the Reorganization. Subject to market conditions at the time of any such disposition, the disposition of the portfolio securities by Goldman Sachs Rising Dividend Growth Fund may result in a capital gain or loss for Goldman Sachs Rising Dividend Growth Fund. The actual tax consequences of any disposition of portfolio securities will vary depending upon the specific security(ies) being sold and Goldman Sachs Rising Dividend Growth Fund’s ability to use any available tax loss carryforwards. The disposition of portfolio securities also may result in significant brokerage expense to Goldman Sachs Rising Dividend Growth Fund.
 
Tax Capital Loss Carryforwards
 
Federal income tax law permits a regulated investment company to carry forward its net capital losses for a period of up to eight taxable years. (Net capital losses that arise in a tax year beginning after December 22, 2010 will generally be able to be carried forward without limit.) Rising Dividend Growth Fund is presently entitled to net capital loss carryforwards for federal income tax purposes in the amount of $4,971,566, which expire in 2018. The Reorganization is not expected to affect the timing or usability of Rising Dividend Growth Fund’s capital loss carryforwards.
 
The ability of Goldman Sachs Rising Dividend Growth Fund to use capital losses to offset gains (even in the absence of a Reorganization) depends on factors other than loss limitations, such as the future realization of capital gains or losses.


27

 

 
CAPITALIZATION
 
The following table sets forth the capitalization of Rising Dividend Growth Fund as of September 30, 2011. Goldman Sachs Rising Dividend Growth Fund is a newly formed fund that will commence operations upon consummation of the proposed Reorganization. Therefore, Goldman Sachs Rising Dividend Growth Fund had no assets or shares outstanding as of September 30, 2011. The table also sets forth the pro forma combined capitalization of the combined fund as if the Reorganization had occurred on September 30, 2011. If the Reorganization is consummated, the net assets, net asset value per share and shares outstanding on the Closing Date will vary from the information below due to changes in the market value of the portfolio securities of Rising Dividend Growth Fund between September 30, 2011 and the Closing Date, changes in the amount of undistributed net investment income and net realized capital gains of Rising Dividend Growth Fund during that period resulting from income and distributions, and changes in the accrued liabilities of Rising Dividend Growth Fund during the same period.
 
                         
            Pro Forma
    Rising
 		  Goldman Sachs
 		  Goldman Sachs
    Dividend Growth
 		  Rising Dividend
 		  Rising Dividend
    Fund
 		  Growth Fund
 		  Growth Fund
    (September 30, 2011)   (September 30, 2011)   (September 30, 2011)
 
Net Assets
                       
Class A
  $ 66,336,112       —     $ 78,668,470  
Class C
  $ 12,332,358       —       — (1)
Class I/Institutional Shares
  $ 55,565,144       —     $ 55,565,144  
Total Net Assets of the Fund
  $ 134,233,614       N/A     $ 134,233,614  
Net Asset Value Per Share
                       
Class A
  $ 12.82       —     $ 12.82 (1)
Class C
  $ 12.97       —       — (1)
Class I/Institutional Shares
  $ 13.06       —     $ 13.06  
Shares Outstanding
                       
Class A
    5,175,667       —       6,137,629 (1)
Class C
    950,772       —       — (1)
Class I/Institutional Shares
    4,255,905       —       4,255,905  
 
 
(1) Shareholders holding Class C Shares of Rising Dividend Growth Fund will receive Class A Shares of Goldman Sachs Rising Dividend Growth Fund as a result of the Reorganization.
 
It is impossible to predict how many shares of Goldman Sachs Rising Dividend Growth Fund will actually be received and distributed by your fund on the Closing Date. The table should not be relied upon to determine the amount of Goldman Sachs Rising Dividend Growth Fund shares that will actually be received and distributed.


28

 

 
TERMS OF THE AGREEMENT AND PLAN OF REORGANIZATION
 
The Reorganization
 
  •  The Reorganization is scheduled to occur on or about February 27, 2012 but may occur on such later date as the parties may agree in writing. Rising Dividend Growth Fund will transfer all of its assets to Goldman Sachs Rising Dividend Growth Fund and Goldman Sachs Rising Dividend Growth Fund will assume all of Rising Dividend Growth Fund’s liabilities (other than those liabilities specifically excluded under the Agreement and Plan of Reorganization, if any). Rising Dividend Growth Fund then will be liquidated and terminated.
 
  •  Shareholders holding Class A of Rising Dividend Growth Fund will receive Class A Shares of Goldman Sachs Rising Dividend Growth Fund as a result of the Reorganization.
 
  •  Rising Dividend Growth Fund will convert Class C Shares to Class A Shares immediately prior to the closing of the Reorganization. Accordingly, those shareholders also will receive Class A Shares of Goldman Sachs Rising Dividend Growth Fund in the Reorganization.
 
  •  Shareholders holding Class I Shares of Rising Dividend Growth Fund will receive Institutional Shares of Goldman Sachs Rising Dividend Growth Fund as a result of the Reorganization.
 
  •  Shareholders of Rising Dividend Growth Fund will receive shares of Goldman Sachs Rising Dividend Growth Fund in proportion to the relative net asset value of their share holdings of Rising Dividend Growth Fund on the Closing Date of the Reorganization. Therefore, on the Closing Date, each Rising Dividend Growth Fund shareholder will hold shares of Goldman Sachs Rising Dividend Growth Fund in amounts equal to the aggregate net asset value of the shares of Rising Dividend Growth Fund that the shareholder held immediately prior to the Reorganization.
 
  •  No sales load, contingent deferred sales charge, commission, redemption fee or other transactional fee will be charged as a result of the Reorganization. After the Reorganization, for purposes of determining any contingent deferred sales charge, the same sales charge and schedule that applied to the shares of Rising Dividend Growth Fund will apply to the shares of Goldman Sachs Rising Dividend Growth Fund you receive in the Reorganization and the holding period for determining the contingent deferred sales charge will be calculated from the date the shares were initially issued by Rising Dividend Growth Fund. The contingent deferred sales charge applicable to certain purchases of Goldman Sachs Rising Dividend Growth Fund Class A Shares will be waived for the Goldman Sachs Rising Dividend Growth Fund Class A Shares received in the Reorganization.
 
  •  GSAM will act as investment adviser to Goldman Sachs Rising Dividend Growth Fund and DGA will act as sub-adviser to the Fund. Accordingly, it is expected that the current portfolio managers of Rising Dividend Growth Fund will continue to serve as portfolio managers of the combined Fund following the completion of the Reorganization.
 
  •  The Reorganization is not expected to result in income, gain or loss being recognized for federal income tax purposes by an exchanging shareholder or by your fund or Goldman Sachs Rising Dividend Growth Fund. The Reorganization will not take place unless both Funds involved in the Reorganization receive a tax opinion from Bingham McCutchen LLP, counsel to Goldman Sachs Trust, as described below under the heading “Tax Status of the Reorganization.”
 
  •  If the Reorganization is approved by the shareholders of Rising Dividend Growth Fund, Dividend Growth Trust will file with the SEC an application for deregistration on Form N-8F under the 1940 Act, and will cease to exist as an investment company when such application is approved.
 
Agreement and Plan of Reorganization
 
The shareholders of Rising Dividend Growth Fund are being asked to approve an Agreement and Plan of Reorganization substantially in the form attached as Exhibit A (the “Plan”). The description of the Plan contained


29

 

herein includes the material provisions of the Plan, but this description is qualified in its entirety by the attached copy.
 
Determination of Net Asset Value.  If the Reorganization is approved, Goldman Sachs Rising Dividend Growth Fund will issue to Rising Dividend Growth Fund the number of Goldman Sachs Rising Dividend Growth Fund shares, including fractional shares, of each class with an aggregate net asset value equal to the net asset value of Rising Dividend Growth Fund attributable to the corresponding class of Rising Dividend Growth Fund’s shares. The number of Goldman Sachs Rising Dividend Growth Fund shares to be issued (including fractional shares, if any) in exchange for Rising Dividend Growth Fund’s assets shall be determined, with respect to each class, by dividing Rising Dividend Growth Fund’s net asset value with respect to that class by the net asset value per share of the corresponding class of Goldman Sachs Rising Dividend Growth Fund. The number of full and fractional shares of Goldman Sachs Rising Dividend Growth Fund to be received by each corresponding Rising Dividend Growth Fund shareholder in the Reorganization will be equal in aggregate net asset value to the aggregate net asset value of the shares of Rising Dividend Growth Fund held by such shareholder on the Closing Date.
 
Conditions to Closing the Reorganization.  The obligation of each Fund to consummate the Reorganization is subject to the satisfaction of certain conditions, including the Fund’s performance of all of its obligations under the Plan, the receipt of certain documents and financial statements from Rising Dividend Growth Fund and the receipt of all consents, orders and permits necessary to consummate the Reorganization (see Sections 6, 7 and 8 of the Plan). The obligations of Goldman Sachs Rising Dividend Growth Fund and Rising Dividend Growth Fund are subject to the approval of the Plan by the necessary vote of the outstanding shares of Rising Dividend Growth Fund with respect to the Reorganization, in accordance with the provisions of Dividend Growth Trust’s Trust Instrument and by-laws. The Funds’ obligations are also subject to the receipt of a favorable opinion of Bingham McCutchen LLP as to the United States federal income tax consequences of the Reorganization (see Section 8.5 of the Plan).
 
Termination of the Plan.  The Dividend Growth Trust Board or the Board of Trustees of Goldman Sachs Trust may terminate the Plan (even if the shareholders of Rising Dividend Growth Fund have already approved it) at any time before the Closing Date, if such Board believes in good faith that proceeding with the Reorganization would no longer be in the best interests of the Fund’s shareholders. The Plan may also be terminated because of a material breach of any representation, warranty, covenant or agreement contained in the Plan to be performed at or prior to the Closing Date, because a condition to be fulfilled prior to the obligations of a party to the Plan has not been and reasonably appears will not and cannot be met, if the Reorganization has not occurred on or prior to June 30, 2012, and if the sub-advisory agreement between GSAM and DGA has not been approved in accordance with Section 15 of the 1940 Act and executed or is otherwise not in full force and effect on the Closing Date.
 
TAX STATUS OF THE REORGANIZATION
 
The Reorganization is conditioned upon the receipt by Dividend Growth Trust and Goldman Sachs Trust of an opinion from Bingham McCutchen LLP, counsel to Goldman Sachs Trust, substantially to the effect that, for federal income tax purposes:
 
  •  The transfer to Goldman Sachs Rising Dividend Growth Fund of all of Rising Dividend Growth Fund’s assets in exchange solely for the issuance of Goldman Sachs Rising Dividend Growth Fund shares to Rising Dividend Growth Fund and the assumption of all of Rising Dividend Growth Fund’s liabilities by Goldman Sachs Rising Dividend Growth Fund (other than those liabilities specifically excluded under the Plan, if any), followed by the distribution of Goldman Sachs Rising Dividend Growth Fund shares to the Rising Dividend Growth Fund shareholders in complete liquidation of Rising Dividend Growth Fund, will constitute a “reorganization” within the meaning of Section 368(a) of the Code, of the type described in Section 368(a)(1)(F) of the Code, and each of Dividend Growth Trust and Goldman Sachs Rising Dividend Growth Fund will be a “party to a reorganization” within the meaning of Section 368(b) of the Code;
 
  •  No gain or loss will be recognized by Dividend Growth Trust upon (1) the transfer of all of its assets to Goldman Sachs Rising Dividend Growth Fund as described above or (2) the distribution by Rising Dividend Growth Fund of Goldman Sachs Rising Dividend Growth Fund shares to Rising Dividend Growth Fund’s shareholders in complete liquidation of Rising Dividend Growth Fund, except for (A) any gain or loss that


30

 

  may be recognized on the transfer of “section 1256 contracts” as defined in Section 1256(b) of the Code, (B) any gain that may be recognized on the transfer of stock in a “passive foreign investment company” as defined in Section 1297(a) of the Code, and (C) any other gain or loss that may be required to be recognized upon the transfer of an asset of Rising Dividend Growth Fund regardless of whether such transfer would otherwise be a non-recognition transaction under the Code;
 
  •  The tax basis of each asset of Rising Dividend Growth Fund in the hands of Goldman Sachs Rising Dividend Growth Fund will be the same as the tax basis of that asset in the hands of Dividend Growth Trust immediately before the transfer of the asset, increased by the amount of gain (or decreased by the amount of loss), if any, recognized by Dividend Growth Trust on the transfer;
 
  •  The holding period of each asset of Rising Dividend Growth Fund in the hands of Goldman Sachs Rising Dividend Growth Fund, other than assets with respect to which gain or loss is required to be recognized, will include the period during which that asset was held by Rising Dividend Growth Fund (except where investment activities of Goldman Sachs Rising Dividend Growth Fund have the effect of reducing or eliminating the holding period with respect to an asset);
 
  •  No gain or loss will be recognized by Goldman Sachs Rising Dividend Growth Fund upon its receipt of Rising Dividend Growth Fund’s assets solely in exchange for shares of Goldman Sachs Rising Dividend Growth Fund and the assumption of Rising Dividend Growth Fund’s liabilities;
 
  •  No gain or loss will be recognized by Rising Dividend Growth Fund shareholders upon the exchange of their Rising Dividend Growth Fund shares for Goldman Sachs Rising Dividend Growth Fund shares as part of the Reorganization;
 
  •  The aggregate tax basis of Goldman Sachs Rising Dividend Growth Fund shares received by Rising Dividend Growth Fund shareholders in the Reorganization will be the same as the aggregate tax basis of the shares of Rising Dividend Growth Fund surrendered in exchange therefor; and
 
  •  Each Rising Dividend Growth Fund shareholder’s holding period for the Goldman Sachs Rising Dividend Growth Fund shares received in the Reorganization will include the holding period of the shares of Rising Dividend Growth Fund that were surrendered in exchange therefor, provided that the shareholder held the Rising Dividend Growth Fund shares as capital assets on the date of the exchange.
 
In rendering such opinion, counsel shall rely upon, among other things, certain facts, assumptions and representations of Dividend Growth Trust, on behalf of Rising Dividend Growth Fund, and of Goldman Sachs Trust, on behalf of Goldman Sachs Rising Dividend Growth Fund.
 
No tax ruling has been or will be received from the Internal Revenue Service (“IRS”) in connection with the Reorganization. An opinion of counsel is not binding on the IRS or a court, and no assurance can be given that the IRS would not assert, or a court would not sustain, a contrary position.
 
The foregoing discussion is very general. The foregoing consequences may not apply to certain classes of taxpayers who are subject to special circumstances, such as shareholders who are not citizens or residents of the United States, insurance companies, tax-exempt organizations, financial institutions, dealers in securities or foreign currencies, or persons who hold their shares as part of a straddle or conversion transaction. This discussion does not address any state, local or foreign tax consequences of the Reorganization. You should consult your tax adviser for the particular tax consequences to you of the transaction, including the applicability of any state, local or foreign tax laws.


31

 

 
VOTING RIGHTS AND REQUIRED VOTE
 
Each share of Rising Dividend Growth Fund is entitled to one vote. A quorum is required to conduct business at the meeting. One-third of the outstanding shares of Rising Dividend Growth Fund entitled to cast votes at the meeting constitutes a quorum; however, since the proposal must be approved by “a majority of the outstanding voting securities,” as defined under the 1940 Act, at least 50% of the outstanding shares must have submitted votes to approve the Proposal. For this purpose, a “majority of the outstanding shares of Rising Dividend Growth Fund” means the affirmative vote of the lesser of:
 
(1) 67% or more of the shares of Rising Dividend Growth Fund present at the meeting, if the holders of more than 50% of the outstanding shares of the Fund entitled to vote are present or represented by proxy, or
 
(2) more than 50% of the outstanding shares of Rising Dividend Growth Fund.
 
The table below shows how shares will be treated for the purposes of quorum and voting requirements.
 
         
Shares
 
Quorum
 
Voting
 
In General
  All shares “present” in person or by proxy are counted toward a quorum.   Shares “present” in person will be voted in person at the meeting. Shares present by proxy will be voted in accordance with instructions.
         
Signed Proxy with no Voting Instruction (other than Broker Non-Vote)
  Considered “present” at meeting for purposes of quorum.   Voted “for” the proposal.
         
Broker Non-Vote (where the underlying holder had not voted and the broker does not have discretionary authority to vote the shares)
  Considered “present” at meeting for purposes of quorum.   Broker non-votes do not count as a vote “for” the proposal and effectively result in a vote “against” the proposal.
         
Signed Proxy with Vote to Abstain
  Considered “present” at meeting for purposes of quorum.   Abstentions do not constitute a vote “for” the proposal and effectively result in a vote “against” the proposal.
 
If the required approval of shareholders is not obtained, the meeting may be adjourned as more fully described in this Proxy Statement/Prospectus, and Rising Dividend Growth Fund will continue to engage in business as a separate mutual fund and the Dividend Growth Trust Board will consider what further action may be appropriate.


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COMPARISON OF CHARTER DOCUMENTS OF DIVIDEND GROWTH TRUST
AND GOLDMAN SACHS TRUST
 
Each of Dividend Growth Trust and Goldman Sachs Trust is organized as a Delaware statutory trust. The operations of Dividend Growth Trust are governed by Dividend Growth Trust’s Trust Instrument and By-Laws. The operations of Goldman Sachs Trust are governed by Goldman Sachs Trust’s Agreement and Declaration of Trust and By-laws. The operations of both Dividend Growth Trust and Goldman Sachs Trust are also governed by applicable Delaware law and are subject to the provisions of the 1940 Act and the rules and regulations of the SEC thereunder. In general, the documents governing Dividend Growth Trust are similar to those documents governing Goldman Sachs Trust. The attributes of a share of beneficial interest of Dividend Growth Trust and Goldman Sachs Trust are also comparable. The following is a summary of certain provisions of, and principal differences between, Dividend Growth Trust and its Trust Instrument (the “Dividend Growth Trust Charter”), on the one hand, and Goldman Sachs Trust and its Declaration of Trust (the “Goldman Sachs Trust Charter”), on the other.
 
Trustees of Dividend Growth Trust and Goldman Sachs Trust.  Subject to the provisions of the Goldman Sachs Trust Charter, the operations of Goldman Sachs Trust are supervised by Goldman Sachs Trust’s Trustees and, subject to the provisions of the Dividend Growth Trust Charter, the operations of Dividend Growth Trust are supervised by the Dividend Growth Trust Trustees. The responsibilities, powers and fiduciary duties of the Goldman Sachs Trust Trustees are substantially the same as those of the Dividend Growth Trust Trustees. The Goldman Sachs Trust Charter permits the Board of Trustees to remove a Trustee with or without cause at any time by a written instrument signed by at least a majority of the then Trustees specifying the effective date of removal. The Dividend Growth Trust Charter provides that a Trustee may be retired or removed upon the unanimous written request of the remaining Trustees. Each charter provides that any Trustee may be removed at any meeting of shareholders by the vote of holders of shares of beneficial interest of two-thirds of the outstanding shares of the Trust at a meeting of the shareholders. The Dividend Growth Trust Charter provides that the Chairman of the Board of Trustees shall not be an interested person of the Trust or an officer of the Trust, whereas the Goldman Sachs Trust Charter provides that the Chairman may be the chief executive, financial and/or accounting officer of the Trust. However, the Chairman of the Goldman Sachs Trust currently is an Independent Trustee.
 
The Goldman Sachs Trust Charter provides that the Trustees may appoint separate Trustees with respect to one or more series or classes of the Goldman Sachs Trust’s shares (the “Series Trustees”). Series Trustees may, but are not required to, serve as Trustees of the Trust or any other series or class of the Trust. To the extent provided by the Trustees in the appointment of Series Trustees, the Series Trustees may have, to the exclusion of any other Trustees of the Trust, all the powers and authorities of Trustees under the Declaration of Trust with respect to such series or class, but may have no power or authority with respect to any other series or class. The Dividend Growth Trust Charter does not contain a similar provision regarding Series Trustees.
 
Liability and Indemnification of Dividend Growth Trust and Goldman Sachs Trust Trustees.  To protect the Trustees against certain liabilities, each charter provides that if the Trustees have exercised reasonable care and have acted under reasonable belief that their actions are in the best interests the Trust, the Trustees shall not be responsible or liable for any action or omission or for neglect or wrongdoing of them or any officer, agent, employee, investment adviser or independent contractor of the Trust; however, nothing in either charter protects a Trustee against any liability to the Trust or its shareholders to which he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office. In addition, each charter provides for indemnification of Trustees, officers, employees and agents of the Trust unless the recipient is adjudicated: (1) to be liable by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office; or (2) not to have acted in good faith in the reasonable belief that such person’s actions were in the best interest of the Trust.
 
Shareholder Liability.  Under Delaware law, shareholders generally are shielded from personal liability for the Trust’s debts or obligations to the same extent a shareholder is shielded from a corporation’s debts. Furthermore, each charter provides that shareholders are not personally liable for the acts or obligations of a Fund and requires a Fund to indemnify shareholders against liability arising solely from a shareholder’s ownership of shares in the Fund. In addition, notice of disclaimer of shareholder liability will normally be given in each agreement, obligation, or instrument entered into or executed by a Fund and/or Trust.


33

 

The Delaware Act permits a shareholder to bring a derivative action on behalf of the trust if the trustees refuse to do so, but that power can be restricted by such standards and restrictions as are set forth in the declaration of trust. The Goldman Sachs Trust Charter provides that a shareholder may bring a derivative action on behalf of the Trust only if the following conditions are met: (a) shareholders eligible to bring such derivative action under applicable Delaware law who hold at least 10% of the outstanding shares of the Trust, or 10% of the outstanding shares of the series or class to which such action relates, shall join in the request for the Trustees to commence such action; and (b) the Trustees must be afforded a reasonable amount of time to consider such shareholder request and to investigate the basis of such claim. The Trustees shall be entitled to retain counsel or other advisers in considering the merits of the request and shall require an undertaking by the shareholders making such request to reimburse the Trust for the expense of any such advisers in the event that the Trustees determine not to bring such action. The Dividend Growth Trust Charter does not contain a similar provision regarding derivative actions.
 
Voting Rights of Shareholders of Dividend Growth Trust and Goldman Sachs Trust.  Neither Dividend Growth Trust nor Goldman Sachs Trust is required to hold annual meetings of shareholders and Dividend Growth Trust and Goldman Sachs Trust do not intend to hold such meetings. In the event that a meeting of shareholders is held, each share of Dividend Growth Trust and Goldman Sachs Trust will be entitled, as determined by the applicable Trustees without the vote or consent of shareholders, either to one vote for each share or to one vote for each dollar of net asset value represented by such shares on all matters presented to shareholders including the election of Trustees (this method of voting being referred to as “dollar based voting”). However, to the extent required by the 1940 Act or otherwise determined by the Trustees, series and classes of Dividend Growth Trust and Goldman Sachs Trust will vote separately from each other. Shareholders of Dividend Growth Trust and Goldman Sachs Trust do not have cumulative voting rights in the election of Trustees. The Goldman Sachs Trust Charter provides that the shareholders have the power to, vote only with respect to: (1) the election of Goldman Sachs Trust Trustees to the extent and as provided therein; (2) the removal of Trustees as provided therein; (3) any matter required to be approved by the shareholders under the 1940 Act; (4) the termination of Goldman Sachs Trust under certain circumstances as provided therein; (5) certain amendments of the Goldman Sachs Trust Charter; and (6) with respect to such additional matters relating to Goldman Sachs Trust as may be required or authorized by law, the Goldman Sachs Trust Charter or the Goldman Sachs Trust By-laws or any registration of Goldman Sachs Trust with the SEC or any state, or as the Goldman Sachs Trust Trustees may consider desirable. Similarly, the Dividend Growth Trust Charter provides that the shareholders have the power to, vote only with respect to: (1) the election of Dividend Growth Trust Trustees to the extent and as provided therein; (2) the removal of Trustees as provided therein; (3) certain amendments of the Dividend Growth Trust Charter; and (4) with respect to such additional matters relating to Dividend Growth Trust as may be required or authorized by law, the Dividend Growth Trust Charter or the Dividend Growth Trust By-Laws or any registration of Dividend Growth Trust with the SEC or any state, or as the Dividend Growth Trust Trustees may consider desirable.
 
Except when a larger vote is required by law, each of the Dividend Growth Trust Charter and the Goldman Sachs Trust Charter requires representation in person or by proxy of one-third of the holders of shares entitled to vote to establish a quorum for the transaction of business at a meeting of shareholders. In addition, both the Dividend Growth Trust Charter and Goldman Sachs Trust Charter provide that, except when a larger vote is required by law, by the respective Dividend Growth Trust Charter or Goldman Sachs Trust Charter, or by the respective By-laws of Dividend Growth Trust or Goldman Sachs Trust, the holders of shares representing a majority of votes present and entitled to be cast at a shareholders’ meeting in person or by proxy on the matter shall decide that matter except that a plurality of votes cast shall elect a trustee.
 
Amendment of Charter Documents.  Both the Dividend Growth Trust Charter and Goldman Sachs Trust Charter permit the Dividend Growth Trust Trustees or the Goldman Sachs Trust Trustees, as applicable, to amend the respective charter documents without a shareholder vote. However, the Goldman Sachs Trust Charter provides that shareholders of the Trust have the right to vote on any amendment: (1) that would adversely affect the voting rights of shareholders; (2) that is required by law to be approved by shareholders; (3) that would amend the provisions of the charter regarding amendments thereto; or (4) that the Trustees determine to submit to shareholders. Similarly, the Dividend Growth Trust Charter provides that shareholders of the Trust have the right to vote on any amendment: (1) that would affect the voting rights of shareholders; (2) that is required by law to be approved by shareholders;


34

 

(3) that would amend the provisions of the charter regarding amendments thereto; or (4) that the Trustees determine to submit to shareholders.
 
Termination of Dividend Growth Trust/Goldman Sachs Trust and its Series or Classes.  The Goldman Sachs Trust Charter permits the termination of Goldman Sachs Trust or any series or class of Goldman Sachs Trust: (1) by a vote of a majority of the shares outstanding and entitled to vote of Goldman Sachs Trust or of each series to be affected; or (2) by a majority of the Goldman Sachs Trust Trustees without shareholder approval if the Goldman Sachs Trust Trustees determine, in their sole discretion, that such action is in the best interest of Goldman Sachs Trust, such series, such class or their shareholders. The Trustees may consider such factors as they, in their sole discretion, deem appropriate in making such determination, including (i) the inability of the Trust or any series or class to maintain its assets at an appropriate size; (ii) changes in laws or regulations governing the Trust, series, or class or affecting assets of the type in which it invests; or (iii) economic developments or trends having a significant adverse impact on the business or operations of the Trust or series. Similarly, the Dividend Growth Trust Charter provides that Dividend Growth Trust or any series may be terminated at any time by: (1) a vote of a majority of the shares of each series entitled to vote, voting separately by series; or (2) by the Dividend Growth Trust Trustees by written notice to shareholders. Any series or class may be terminated at any time by vote of a majority of the shares of such series or class entitled to vote or by the Trustees by written notice to the shareholders of such series or class.
 
Reorganization and Master/Feeder.  The Goldman Sachs Trust Charter authorizes the Trustees, without shareholder approval to the extent permitted by applicable law, to cause the Goldman Sachs Trust, or any series thereof, to merge or consolidate with any corporation, association, trust or other organization or sell or exchange all or substantially all of the property belonging to the Trust or any series thereof. In addition, the Trustees, without shareholder approval, may adopt a master-feeder structure by investing all or a portion of the assets of a series of the Trust in the securities of another open-end investment company with substantially the same investment objective, restrictions and policies. The Dividend Growth Trust Charter provides that to change the Trust’s form of organization, the Trustees may without shareholder approval to the extent permitted by applicable law, (i) cause the Trust to merge or consolidate with another open-end management investment company that will succeed to the Trust’s registration under the 1940 Act, (ii) cause the shares of the Trust to be exchanged pursuant to any state or federal statute to the extent permitted by law, (iii) sell the assets of the Trust in exchange for shares of another management investment company, or (iv) cause the Trust to incorporate under the laws of Delaware.
 
FUNDAMENTAL AND NON-FUNDAMENTAL INVESTMENT POLICIES OF THE FUNDS
 
Fundamental Policies
 
Each Fund has adopted certain fundamental investment policies which may not be changed without the affirmative vote of the holders of a “majority of the outstanding voting securities” (as defined in the 1940 Act) of the Fund. Under the 1940 Act, the vote of a majority of the outstanding voting securities means the affirmative vote of the lesser of (i) 67% or more of the shares of Rising Dividend Growth Fund represented at the meeting, if at least 50% of all outstanding shares of Rising Dividend Growth Fund are represented at the meeting, or (ii) 50% or more of the outstanding shares of Rising Dividend Growth Fund entitled to vote at the meeting. The following table lists the fundamental investment restrictions for Rising Dividend Growth Fund and Goldman Sachs Rising Dividend


35

 

Growth Fund. For a more complete discussion of each Fund’s other investment policies and fundamental and non-fundamental investment restrictions, please see the SAI.
 
         
   
Rising Dividend Growth Fund
 
Goldman Sachs Rising Dividend Growth Fund
 
Borrowing
  Except as otherwise stated in the Fund’s prospectus, the Fund may not borrow money, except to the extent permitted by the 1940 Act.   As a matter of fundamental policy, the Fund may not borrow money, except (a) the Fund, to the extent permitted by applicable law, may borrow from banks (as defined in the Act), other affiliated investment companies and other persons or through reverse repurchase agreements in amounts up to 331/3% of its total assets (including the amount borrowed), (b) the Fund may, to the extent permitted by applicable law, borrow up to an additional 5% of its total assets for temporary purposes, (c) the Fund may obtain such short-term credits as may be necessary for the clearance of purchases and sales of portfolio securities, (d) the Fund may purchase securities on margin to the extent permitted by applicable law and (e) the Fund may engage in transactions in mortgage dollar rolls which are accounted for as financings.
         
Underwriting
  Except as otherwise stated in the Fund’s prospectus, the Fund may not underwrite securities of other issuers, except insofar as the Fund may be deemed an underwriter under the 1933 Act when selling its own portfolio securities.   As a matter of fundamental policy, the Fund may not underwrite securities issued by others, except to the extent that the sale of portfolio securities by the Fund may be deemed to be an underwriting.
         
Real Estate
  Except as otherwise stated in the Fund’s prospectus, the Fund may not purchase or sell real estate, provided that liquid securities of companies which deal in real estate or interests therein would not be deemed to be an investment in real estate.   As a matter of fundamental policy, the Fund may not purchase, hold or deal in real estate, although a Fund may purchase and sell securities that are secured by real estate or interests therein, securities of real estate investment trusts and mortgage-related securities and may hold and sell real estate acquired by a Fund as a result of the ownership of securities.


36

 

         
   
Rising Dividend Growth Fund
 
Goldman Sachs Rising Dividend Growth Fund
 
Commodities
  Except as otherwise stated in the Fund’s prospectus, the Fund may not invest in commodities or commodity futures contracts, or invest in oil, gas or other mineral leases, or exploration or development programs, except for transactions in financial derivative contracts, such as forward currency contracts; financial futures contracts and options on financial futures contracts; options on securities and currencies.   As a matter of fundamental policy, the Fund may not invest in commodities or commodity contracts, except that the Fund may invest in currency and financial instruments and contracts that are commodities or commodity contracts.
         
Loans
  Except as otherwise stated in the Fund’s prospectus, the Fund may not make loans to other persons, except loans of securities not exceeding one-third of the Fund’s total assets. For purposes of this limitation, investments in debt obligations and transactions in repurchase agreements shall not be treated as loans.   As a matter of fundamental policy, the Fund may not make loans, except through (a) the purchase of debt obligations in accordance with the Fund’s investment objective and policies, (b) repurchase agreements with banks, brokers, dealers and other financial institutions, (c) loans of securities as permitted by applicable law, and (d) loans to affiliates of the Fund to the extent permitted by law.
         
Concentration
  Except as otherwise stated in the Fund’s prospectus, the Fund may not invest in the securities of any one industry (except securities issued or guaranteed by the U.S. government, its agencies and instrumentalities), if as a result more than 25% of the Fund’s total assets would be invested in the securities of such industry.   As a matter of fundamental policy, the Fund may not invest 25% or more of its total assets in the securities of one or more issuers conducting their principal business activities in the same industry (excluding the U.S. government or any of its agencies or instrumentalities).
         
Senior Securities
  Except as otherwise stated in the Fund’s prospectus, the Fund may not issue senior securities, except to the extent permitted by the 1940 Act.   As a matter of fundamental policy, the Fund may not issue senior securities to the extent such issuance would violate applicable law.

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Rising Dividend Growth Fund
 
Goldman Sachs Rising Dividend Growth Fund
 
Lending Portfolio Securities
 
The Fund may lend its portfolio securities, although it does not currently do so.

Loans of portfolio securities are secured by the delivery to the Fund of cash collateral, which may be invested in short-term debt securities and money market funds. The Fund may make loans only to broker-dealers who are members of the New York Stock Exchange (“NYSE”) or who have net capital of at least $10,000,000. Such loans will not be made against less than 100% cash collateral maintained at 100% of the market value (marked-to-market daily) of the loaned securities. Loans will be made only if the Fund can terminate the loan at any time. The above policy is fundamental, and may not be changed without shareholder approval.
   The Fund does not currently intend to lend its portfolio securities. This policy is not fundamental; therefore, the Fund may loan securities as permitted by applicable law in the future without obtaining shareholder approval.
         
Investment Objective
  The Fund’s investment objective is considered to be fundamental.   The Fund’s investment objective is not fundamental and may be changed without shareholder approval upon 60 days notice.

38

 

Non-Fundamental Policies
 
In addition to the fundamental policies mentioned above, each Fund has adopted the following non-fundamental policies which can be changed or amended by action of the Trustees of such Fund without approval of shareholders:
 
         
        Goldman Sachs Rising Dividend
   
Rising Dividend Growth Fund
 
Growth Fund
 
Illiquid Securities
  The Fund may not invest more than 15% of its net assets in illiquid securities. A security is illiquid if it cannot be sold in seven business days at a price approximately equal to the price at which the Fund is valuing the security. Restricted securities and repurchase agreements with maturities in excess of seven business days are subject to this 15% limitation.   The Fund may not invest more than 15% of the Fund’s net assets in illiquid investments including illiquid repurchase agreements with a notice or demand period of more than seven days, securities which are not readily marketable and restricted securities not eligible for resale pursuant to Rule 144A under the Securities Act of 1933 (the “1933 Act”).
         
Other Investment Companies
  The Fund may not invest in other open-end investment companies except to the extent allowed in the 1940 Act.   No stated limitation.
         
Investments for Purposes of Exercising Control
  The Fund may not invest in a company for the purpose of exercising control or management of the company.   The Fund may not invest in companies for the purpose of exercising control or management.
         
Purchases of Options on Securities
  The Fund may not write or purchase options in excess of 5% of the value of the Fund’s total net assets.   No stated limitation.
         
Purchases of Securities on Margin
  The Fund may not purchase securities on margin, except for such short-term credits as are necessary for the clearance of transactions.   As noted above, the Goldman Sachs Rising Dividend Growth Fund may purchase securities on margin to the extent permitted by applicable law.
Purchase of Securities if Borrowings Exceed a Stated Limit
  No stated limitation.   The Fund may not purchase additional securities if the Fund’s borrowings, as permitted by the Fund’s borrowing policy, exceed 5% of its net assets. (Mortgage dollar rolls are not subject to this limitation).
         
Short Sales of Securities
  No stated limitation.   The Fund may not make short sales of securities, except that a Fund may make short sales against the box.


39

 

 
BUYING, SELLING AND EXCHANGING SHARES OF THE FUNDS
 
The following is a comparison of how shareholders may buy, sell and exchange shares of the Rising Dividend Growth Fund and Goldman Sachs Rising Dividend Growth Fund and how each Fund determines its net asset value.
 
         
   
Rising Dividend Growth Fund
 
Goldman Sachs Rising Dividend Growth Fund
 
Buying Shares
  You can purchase shares of the Fund through broker-dealers or directly through the Fund’s transfer agent.   You may purchase shares of the Fund on any business day through certain brokers, registered advisers and other financial institutions (“Authorized Institutions”).
         
Minimum Initial
and Subsequent
Investments 		  You may buy shares of the Fund with an initial investment of $5,000 (or $1,000 for IRAs) or more. Additional investments may be made for as little as $250.   The minimum initial investment for Class A Shares is, generally, $1,000. The minimum initial investment for Institutional Shares is, generally, $10,000,000 for individual investors and $1,000,000 alone or in combination with other assets under the management of GSAM and its affiliates for certain other types of investors. There may be no minimum for initial purchases of Institutional Shares for certain retirement accounts.
         
      The minimum subsequent investment for Class A shareholders is $50, except for Employer Sponsored Benefit Plans, for which there is no minimum. There is no minimum subsequent investment for Institutional shareholders.
         
Maximum
Purchase
Amount 		  Class A and Class I are not subject to a maximum purchase amount. Class C Shares are not intended for purchases in excess of $250,000.   Class A and Institutional Shares are not subject to a maximum purchase amount.
         
Exchanging
Shares 		  The Fund does not have exchange privileges.   You may exchange shares of a Goldman Sachs Fund at NAV without the imposition of an initial sales charge or CDSC, if applicable, at the time of exchange for certain shares of another Goldman Sachs Fund. Redemption of shares (including by exchange) of certain Goldman Sachs Funds may, however, be subject to a redemption fee for shares that are held for either 30 or 60 days or less. The exchange privilege may be materially modified or withdrawn at any time upon 60 days written notice. You should contact your Authorized Institution to arrange for exchanges of shares of a Fund for shares of another Goldman Sachs Fund.
         
Selling Shares
  You may sell or “redeem” your shares on any day the NYSE is open, either directly through the Fund’s transfer agent or through your broker dealer or other financial intermediary. The price you receive will be the NAV next calculated after the Fund’s transfer agent receives your redemption request in good order (less redemption fees   You may redeem (sell) shares of the Fund on any business day through certain brokers, registered advisers and other financial institutions (“Authorized Institutions”).

You may arrange to take money out of your account by selling (redeeming) some or all of your shares through your Authorized
         


40

 

         
   
Rising Dividend Growth Fund
 
Goldman Sachs Rising Dividend Growth Fund
 
    and contingent deferred sales charges, if applicable).
 
In some circumstances, redemption requests must be in writing and bear signature guarantees. 		  Institution. Generally, the Fund will redeem its shares upon request on any business day at the NAV next determined after receipt of such request in proper form, subject to any applicable CDSC. Certain Authorized Institutions are authorized to accept redemption requests on behalf of the Funds.
         
      The Fund may transfer redemption proceeds to an account with your Authorized Institution. In the alternative, your Authorized Institution may request that redemption proceeds be sent to you by check or wire (if the wire instructions are designated in the current records of the Transfer Agent). Redemptions may be requested by your Authorized Institution in writing, by telephone or through an electronic trading platform.
     
 
In some circumstances, redemption requests must be in writing and bear signature guarantees.
         
Redemption Fee
  To discourage short-term trading, the Fund reserves the right to impose a 1.00% redemption fee on redemptions of Class A and Class C Shares within 60 days of acquisition. Redemption fees are not imposed on shares acquired through the reinvestment of dividends or capital gain distributions or involuntarily redeemed shares. Class I Shares are not subject to a redemption fee.   None.
         
Net Asset Value
  The price of the Fund’s shares is based on the net asset value (the “NAV”) plus any applicable front-end sales charge for Class A Shares (the “Offering Price”). The Fund calculates the NAV by adding the total market value of its investments and other assets, subtracting any liabilities and then dividing that figure by the total number of Fund shares outstanding (assets − liabilities/number of shares outstanding = NAV).   The price you pay when you buy shares is the Fund’s next determined NAV for a share class (as adjusted for any applicable sales charge) after the Fund receives your order in proper form. The price you receive when you sell shares is the Fund’s next determined NAV for a share class with the redemption proceeds reduced by any applicable charges (e.g., CDSCs) after the Fund receives your order in proper form. Each class calculates its NAV as follows:
         
     
NAV = (Value of Assets of the Class)
− (Liabilities of the Class)
 Number of Outstanding Shares of the Class
         
    The Fund’s investments are valued based on market value. However, in certain cases, such as when events occur after certain markets have closed, these prices may be unreliable and, therefore, be deemed to be unavailable. When the Fund believes a reported market price for a security does not reflect the   The Fund’s investments are valued based on market quotations, or if market quotations are not readily available, or if GSAM believes that such quotations do not accurately reflect fair value, the fair value of the Fund’s investments may be determined in good faith under procedures established by
         

41

 

         
   
Rising Dividend Growth Fund
 
Goldman Sachs Rising Dividend Growth Fund
 
    amount the Fund would receive on a current sale of that security, the Fund may substitute for the market price a fair-value estimate made according to methods approved by the Board of Trustees of the Trust. The Fund may also use these methods to value certain types of illiquid securities. Fair value pricing generally will be used if the exchange on which a portfolio security is traded closes early or if trading in a particular security was halted during the day and did not resume prior to the Fund’s net asset value calculation. The effect of using fair value pricing is that the Fund’s net asset value will be subject to the judgment of DGA, operating under procedures approved by the Board of Trustees of the Trust, instead of being determined by market prices. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the prices used by other mutual funds to calculate their net asset values. The Fund’s NAV is calculated at the close of regular trading of the New York Stock Exchange (the “NYSE”), which is normally 4 p.m. Eastern Time. If the Fund holds securities listed primarily on a foreign exchange that trades on days when the Fund is not open for business, the value of your shares may change on days that you cannot buy or sell shares.
 
If you pay a sales charge, your price will be the Fund’s offering price. When you buy shares at the offering price, the Fund deducts the appropriate sales charge and invests the rest in the Fund. If you qualify for a sales charge waiver, your price will be the Fund’s NAV.

Timing of Purchase and Sale Requests

All requests received in good order by the transfer agent before the close of the NYSE, typically 4:00 p.m. Eastern Time, will be executed the same day, at that day’s NAV. Orders received after the close of the NYSE will be executed the following day, at that day’s NAV. The Fund has authorized certain broker dealers and other financial institutions (including their designated intermediaries) to accept on its behalf purchase and sell orders. The Fund is deemed to have received an order when the authorized person or designee accepts the order and promptly transmits 		  the Board of Trustees.

To the extent the Fund invests in foreign equity securities, “fair value” prices are provided by an independent fair value service in accordance with the fair value procedures approved by the Board of Trustees. Fair value prices are used because many foreign markets operate at times that do not coincide with those of the major U.S. markets. Events that could affect the values of foreign portfolio holdings may occur between the close of the foreign market and the time of determining the NAV, and would not otherwise be reflected in the NAV. If the independent fair value service does not provide a fair value price for a particular security, or if the price provided does not meet the established criteria for the Fund, the Fund will price that security at the most recent closing price for that security on its principal exchange.

In addition, GSAM, consistent with its procedures and applicable regulatory guidance, may (but need not) determine to make an adjustment to the previous closing prices of either domestic or foreign securities in light of significant events, to reflect what it believes to be the fair value of the securities at the time of determining the Fund’s NAV. Significant events that could affect a large number of securities in a particular market may include, but are not limited to: situations relating to one or more single issuers in a market sector; significant fluctuations in U.S. or foreign markets; market dislocations; market disruptions or market closings; equipment failures; natural or man made disasters or acts of God; armed conflicts; governmental actions or other developments; as well as the same or similar events which may affect specific issuers or the securities markets even though not tied directly to the securities markets. Other significant events that could relate to a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; corporate announcements, including those relating to earnings, products and regulatory news; significant litigation; low trading volume; and trading limits or suspensions.

One effect of using an independent fair value

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Rising Dividend Growth Fund
 
Goldman Sachs Rising Dividend Growth Fund
 
    the order in good order to the Fund’s transfer agent, and the order is processed at the NAV next calculated thereafter. It is the responsibility of the broker-dealer or other financial institution to transmit orders promptly to the Fund’s transfer agent. Purchase and redemption orders are executed only on days when the NYSE is open for trading. The NYSE is closed on New Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas. If the NYSE closes early, the deadlines for purchase and redemption orders will be accelerated to the earlier closing time.   service and fair valuation may be to reduce stale pricing arbitrage opportunities presented by the pricing of Fund shares. However, it involves the risk that the values used by the Funds to price their investments may be different from those used by other investment companies and investors to price the same investments.

Investments in other registered mutual funds (if any) are valued based on the NAV of those mutual funds (which may use fair value pricing as discussed in their prospectuses).
 
Please note the following with respect to the price at which your transactions are processed:

•   NAV per share of each share class is generally calculated by the accounting agent on each business day as of the close of regular trading on the New York Stock Exchange (normally 4:00 p.m. New York time) or such other times as the New York Stock Exchange or NASDAQ market may officially close. Fund shares will generally not be priced on any day the New York Stock Exchange is closed.

• The Trust reserves the right to reprocess purchase (including dividend reinvestments), redemption and exchange transactions that were processed at a NAV that is subsequently adjusted, and to recover amounts from (or distribute amounts to) shareholders accordingly based on the official closing NAV, as adjusted.

• The Trust reserves the right to advance the time by which purchase and redemption orders must be received for same business day credit as otherwise permitted by the SEC.
         
      Consistent with industry practice, investment transactions not settling on the same day are recorded and factored into the Fund’s NAV on the business day following trade date (T+1). The use of T+1 accounting generally does not, but may, result in a NAV that differs materially from the NAV that would result if all transactions were reflected on their trade dates.
         
      Note: The time at which transactions and shares are priced and the time by which
         

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Rising Dividend Growth Fund
 
Goldman Sachs Rising Dividend Growth Fund
 
      orders must be received may be changed in case of an emergency or if regular trading on the New York Stock Exchange is stopped at a time other than its regularly scheduled closing time. In the event the New York Stock Exchange does not open for business, the Trust may, but is not required to, open one or more Funds for purchase, redemption and exchange transactions if the Federal Reserve wire payment system is open. To learn whether a Fund is open for business during this situation, please call the appropriate phone number located under “Available Information” in this Proxy Statement/Prospectus.
         
      Foreign securities may trade in their local markets on days the Fund is closed. As a result, if the Fund holds foreign securities, its NAV may be impacted on days when investors may not purchase or redeem Fund shares.

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OTHER INVESTMENT PRACTICES, SECURITIES AND RISKS OF THE FUNDS
 
As noted above, the Funds have substantially similar investment objectives and principal investment strategies and risks. This section provides further information on certain types of securities and investment techniques that may be used by each Fund, including their associated risks. The tables on the following pages identify some of the investment techniques that may (but are not required to) be used by each Fund in seeking to achieve its investment objectives, subject to the Fund’s investment objective and principal investment strategies and policies. Numbers in the tables show allowable usage only. The absence of a symbol in the tables for a particular investment practice or investment security indicates that the Fund has no specific policy with respect to that practice or security.
 
10 Percent of total assets (italic type)
 
10 Percent of net assets (excluding borrowings for investment purposes) (roman type)
 
  •  No specific percentage limitation on usage; limited only by the objectives and strategies of the Fund
 
— Not permitted
 
                 
    Rising Dividend
  Goldman Sachs Rising
Investment Practices
  Growth Fund   Dividend Growth Fund
 
Borrowings
    331/3 %     331/3 %
Cross Hedging of Currencies
            •   
Credit, Currency, Index, Interest Rate Total Return and Mortgage Swaps and Options on Swaps
            • *  
Custodial Receipts and Trust Certificates
            •   
Equity Swaps
            • *  
Foreign Currency Transactions
            •   
Futures Contracts and Options and Swaps on Futures Contracts (including index futures)
            •   
Investment Company Securities (including exchange-traded funds)
    10 %(1)     10 %(1)
Options on Foreign Currencies
            •  (2)
Options on Securities and Securities Indices
    •  (3)     •  (3)
Preferred Stock, Warrants and Stock Purchase Rights
            •   
Repurchase Agreements
    •        •   
Reverse Repurchase Agreements
    •        —  
Short Sales Against the Box
            25 %
Unseasoned Companies
            •   
When-Issued Securities and Forward Commitments
            •   
 
 
*  Limited to 15% of net assets (together with other illiquid securities) for all structured securities and all swap transactions that are not deemed liquid.
 
(1) This percentage limitation does not apply to the Fund’s investments in investment companies (including exchange traded funds) where a higher percentage limitation is permitted under the terms of an SEC exemptive order or SEC exemptive rule.
 
(2) Goldman Sachs Rising Dividend Growth Fund may purchase and sell call and put options on foreign currencies.
 
(3) The Fund may sell covered call and put options and purchase call and put options on securities and securities indices in which they may invest.


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10 Percent of total assets (italic type)
 
10 Percent of net assets (excluding borrowings for investment purposes) (roman type)
 
  •  No specific percentage limitation on usage; limited only by the objectives and strategies of the Fund
 
— Not permitted
 
                 
    Rising Dividend
  Goldman Sachs Rising
Investment Securities
  Growth Fund   Dividend Growth Fund
 
American, European and Global Depositary Receipts
    •       •  
Asset-Backed and Mortgage-Backed Securities
    • (4)     • (4)
Bank Obligations
    • (4)     • (4)
Convertible Securities
    •       • (5)
Corporate Debt Obligations
    • (4)     • (4)
Equity Investments
    80+ %     80+ %
Emerging Country Securities
    •       •  
Fixed Income Securities
    20 %(6)     20 %(7)
Foreign Securities
    •       •  
Initial Public Offerings (“IPOs”)
            •  
Master Limited Partnerships
    20 %     20 %
Non-Investment Grade Fixed Income Securities
    —       20 %(7)
Real Estate Investment Trusts (“REITs”)
    •       •  
Structured Securities (which may include equity linked notes)
            • *
Temporary Investments
    100 %     100 %
U.S. Government Securities
    • (4)     • (4)
 
*  Limited to 15% of net assets (together with other illiquid securities) for all structured securities and swap transactions that are not deemed liquid.
 
(4) Limited by the amount the Fund invests in fixed income securities.
 
(5) Goldman Sachs Rising Dividend Growth Fund uses the same rating criteria for convertible and non-convertible debt securities.
 
(6) Rising Dividend Growth Fund will purchase only those securities rated at the time of purchase within the highest grades assigned by Standard & Poor’s or Moody’s Investors, Service, Inc. (i.e., BBB or higher by Standard & Poor’s, Baa or higher by Moody’s).
 
(7) Goldman Sachs Rising Dividend Growth Fund may purchase securities rated at the time of purchase BB or lower by Standard & Poor’s, Ba or lower by Moody’s or have a comparable rating by another NRSRO at the time of investment.
 
Additional Information on Investment Strategies
 
Convertible Securities.  The Fund may invest in convertible securities. Convertible securities are preferred stock or debt obligations that are convertible into common stock. Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar quality. Convertible securities in which the Fund invests are subject to the same rating criteria as its other investments in fixed income securities. Convertible securities have both equity and fixed income risk characteristics. Like all fixed income securities, the value of convertible securities is susceptible to the risk of market losses attributable to changes in interest rates. Generally, the market value of convertible securities tends to decline as interest rates increase and, conversely, to increase as interest rates decline. However, when the market price of the common stock underlying a convertible security exceeds the conversion price of the convertible security, the convertible security tends to reflect the market price of the underlying common stock. As the market price of the underlying common stock declines, the convertible


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security, like a fixed income security, tends to trade increasingly on a yield basis, and thus may not decline in price to the same extent as the underlying common stock.
 
Foreign Currency Transactions.  The Fund may, to the extent consistent with its investment policies, purchase or sell foreign currencies on a cash basis or through forward contracts. A forward contract involves an obligation to purchase or sell a specific currency at a future date at a price set at the time of the contract. The Fund may engage in foreign currency transactions for hedging purposes and to seek to protect against anticipated changes in future foreign currency exchange rates. In addition, the Fund may enter into foreign currency transactions to seek a closer correlation between the Fund’s overall currency exposures and the currency exposures of the Fund’s performance benchmark. The Fund may also enter into such transactions to seek to increase total return, which is considered a speculative practice.
 
The Fund may also engage in cross-hedging by using forward contracts in a currency different from that in which the hedged security is denominated or quoted. The Fund may hold foreign currency received in connection with investments in foreign securities when, in the judgment of the sub-adviser, it would be beneficial to convert such currency into U.S. dollars at a later date (e.g., the sub-adviser may anticipate the foreign currency to appreciate against the U.S. dollar).
 
Currency exchange rates may fluctuate significantly over short periods of time, causing, along with other factors, the Fund’s NAV to fluctuate (when the Fund’s NAV fluctuates, the value of your shares may go up or down). Currency exchange rates also can be affected unpredictably by the intervention of U.S. or foreign governments or central banks, or the failure to intervene, or by currency controls or political developments in the United States or abroad.
 
The market in forward foreign currency exchange contracts, currency swaps and other privately negotiated currency instruments offers less protection against defaults by the other party to such instruments than is available for currency instruments traded on an exchange. Such contracts are subject to the risk that the counterparty to the contract will default on its obligations. Because these contracts are not guaranteed by an exchange or clearinghouse, a default on a contract would deprive the Fund of unrealized profits, transaction costs or the benefits of a currency hedge or could force the Fund to cover its purchase or sale commitments, if any, at the current market price.
 
As an investment company registered with the SEC, the Fund must “set aside” (often referred to as “asset segregation”) liquid assets, or engage in other appropriate measures to “cover” open positions with respect to its transactions in forward currency contracts.
 
Structured Securities.  The Fund may invest in structured securities. Structured securities are securities whose value is determined by reference to changes in the value of specific currencies, securities, interest rates, commodities, indices or other financial indicators (the “Reference”) or the relative change in two or more References. Investments in structured securities may provide exposure to certain securities or markets in situations where regulatory or other restrictions prevent direct investments in such issuers or markets.
 
The interest rate or the principal amount payable upon maturity or redemption may be increased or decreased depending upon changes in the applicable Reference. Structured securities may be positively or negatively indexed, so that appreciation of the Reference may produce an increase or decrease in the interest rate or value of the security at maturity. In addition, changes in the interest rates or the value of the security at maturity may be a multiple of changes in the value of the Reference, effectively leveraging the Fund’s investment so that small changes in the value of the Reference may result in disproportionate gains or losses to the Fund. Consequently, structured securities may present a greater degree of market risk than many types of securities and may be more volatile, less liquid and more difficult to price accurately than less complex securities. Structured securities are also subject to the risk that the issuer of the structured securities may fail to perform its contractual obligations. Certain issuers of structured products may be deemed to be investment companies as defined in the Investment Company Act. As a result, the Fund’s investments in structured securities may be subject to the limits applicable to investments in other investment companies.
 
Structured securities may include equity linked notes. An equity linked note is a note whose performance is tied to a single stock, a stock index or a basket of stocks. Equity linked notes combine the principal protection normally associated with fixed income investments with the potential for capital appreciation normally


47

 

associated with equity investments. Upon the maturity of the note, the holder generally receives a return of principal based on the capital appreciation of the linked securities. Depending on the terms of the note, equity linked notes may also have a “cap” or “floor” on the maximum principal amount to be repaid to holders, irrespective of the performance of the underlying linked securities. For example, a note may guarantee the repayment of the original principal amount invested (even if the underlying linked securities have negative performance during the note’s term), but may cap the maximum payment at maturity at a certain percentage of the issuance price or the return of the underlying linked securities. Alternatively, the note may not guarantee a full return on the original principal, but may offer a greater participation in any capital appreciation of the underlying linked securities. The terms of an equity linked note may also provide for periodic interest payments to holders at either a fixed or floating rate. The secondary market for equity linked notes may be limited, and the lack of liquidity in the secondary market may make these securities difficult to dispose of and to value. Equity linked notes will be considered equity securities for purposes of the Fund’s investment objective and policies.
 
REITs.  The Fund may invest in REITs. REITs are pooled investment vehicles that invest primarily in either real estate or real estate related loans. The value of a REIT is affected by changes in the value of the properties owned by the REIT or securing mortgage loans held by the REIT. REITs are dependent upon the ability of the REITs’ managers, and are subject to heavy cash flow dependency, default by borrowers and the qualification of the REITs under applicable regulatory requirements for favorable income tax treatment. REITs are also subject to risks generally associated with investments in real estate including possible declines in the value of real estate, general and local economic conditions, environmental problems and changes in interest rates. To the extent that assets underlying a REIT are concentrated geographically, by property type or in certain other respects, these risks may be heightened. The Fund will indirectly bear its proportionate share of any expenses, including management fees, paid by a REIT in which it invests.
 
Options on Securities, Securities Indices and Foreign Currencies.  A put option gives the purchaser of the option the right to sell, and the writer (seller) of the option the obligation to buy, the underlying instrument during the option period. A call option gives the purchaser of the option the right to buy, and the writer (seller) of the option the obligation to sell, the underlying instrument during the option period. The Fund may write (sell) covered call and put options and purchase put and call options on any securities in which the Fund may invest or on any securities index consisting of securities in which it may invest. The Fund may also, to the extent consistent with its investment policies, purchase and sell (write) put and call options on foreign currencies.
 
The writing and purchase of options is a highly specialized activity which involves special investment risks. Options may be used for either hedging or cross-hedging purposes, or to seek to increase total return (which is considered a speculative activity). The successful use of options depends in part on the ability of the investment adviser to anticipate future price fluctuations and the degree of correlation between the options and securities (or currency) markets. If the investment adviser is incorrect in its expectation of changes in market prices or determination of the correlation between the instruments or indices on which options are written and purchased and the instruments in the Fund’s investment portfolio, the Fund may incur losses that it would not otherwise incur. The use of options can also increase the Fund’s transaction costs. Options written or purchased by the Fund may be traded on either U.S. or foreign exchanges or over-the-counter. Foreign and over-the-counter options will present greater possibility of loss because of their greater illiquidity and credit risks.
 
In lieu of entering into “protective put” transactions, the Fund may engage in barrier options transactions as an alternative means to offset or hedge against a decline in the market value of the Fund’s securities. Barrier options are similar to standard options except that they become activated or are extinguished when the underlying asset reaches a predetermined level or barrier. “Down and out” barrier options are canceled or “knocked out” if the underlying asset falls to a pre-determined level. “Down and in” barrier options are activated or “knocked in” if the underlying asset falls to a pre-determined level. “Up and out” barrier options are extinguished or “knocked out” if the underlying asset rises to a predetermined level. “Up and in” barrier options are activated or “knocked in” if the underlying asset rises to a predetermined level. If the sub-adviser sets too high or too low a barrier, and the option is either extinguished or “knocked out” or the options are never activated or “knocked in,” the benefits to the Fund using a barrier option strategy may be limited and the costs associated with a barrier option strategy could be detrimental to the Fund’s performance. When writing an option, the Fund must “set aside” liquid assets, or engage in other appropriate measures to “cover” its obligation under the option contract.


48

 

Futures Contracts and Options and Swaps on Futures Contracts.  Futures contracts are standardized, exchange-traded contracts that provide for the sale or purchase of a specified financial instrument or currency at a future time at a specified price. An option on a futures contract gives the purchaser the right (and the writer of the option the obligation) to assume a position in a futures contract at a specified exercise price within a specified period of time. A swap on a futures contract provides an investor with the ability to gain economic exposure to a particular futures market, however, unlike a futures contract that is exchange-traded, a swap on a futures contract is an over-the-counter transaction. A futures contract may be based on particular securities, foreign currencies, securities indices and other financial instruments and indices. The Fund may engage in futures transactions on both U.S. and foreign exchanges.
 
The Fund may purchase and sell futures contracts, and purchase and write call and put options on futures contracts and enter into swaps on futures contracts, in order to seek to increase total return or to hedge against changes in interest rates, securities prices or, to the extent the Fund invests in foreign securities, currency exchange rates, or to otherwise manage its term structure, sector selections and duration in accordance with its investment objective and policies. The Fund may also enter into closing purchase and sale transactions with respect to such contracts and options. The Trust, on behalf of the Fund, has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act, and therefore is not subject to registration or regulation as a pool operator under that Act with respect to the Fund.
 
Futures contracts and related options and swaps present the following risks:
 
  •  While the Fund may benefit from the use of futures and options and swaps on futures, unanticipated changes in interest rates, securities prices or currency exchange rates may result in poorer overall performance than if the Fund had not entered into any futures contracts, options transactions or swaps.
 
  •  Because perfect correlation between a futures position and a portfolio position that is intended to be protected is impossible to achieve, the desired protection may not be obtained and the Fund may be exposed to additional risk of loss.
 
  •  The loss incurred by the Fund in entering into futures contracts and in writing call options and entering into swaps on futures is potentially unlimited and may exceed the amount of the premium received.
 
  •  Futures markets are highly volatile and the use of futures may increase the volatility of the Fund’s NAV.
 
  •  As a result of the low margin deposits normally required in futures trading, a relatively small price movement in a futures contract may result in substantial losses to the Fund.
 
  •  Futures contracts and options and swaps on futures may be illiquid, and exchanges may limit fluctuations in futures contract prices during a single day.
 
  •  Foreign exchanges may not provide the same protection as U.S. exchanges.
 
The Fund must “set aside” liquid assets, or engage in other appropriate measures to “cover” open positions with respect to its transactions in futures contracts and options and swaps on futures contracts. In the case of futures contracts that do not cash settle, for example, the Fund must set aside liquid assets equal to the full notional value of the futures contracts while the positions are open. With respect to futures contracts that do cash settle, however, a Fund is permitted to set aside liquid assets in an amount equal to the Fund’s daily marked-to-market net obligations (i.e., the Fund’s daily net liability) under the futures contracts, if any, rather than their full notional value. The Fund reserves the right to modify its asset segregation policies in the future to comply with any changes in the positions from time to time articulated by the SEC or its staff regarding asset segregation. By setting aside assets equal to only its net obligations under cash-settled futures contracts, the Fund will have the ability to employ leverage to a greater extent than if the Fund were required to segregate assets equal to the full notional amount of the futures contracts.
 
Equity Swaps.  The Fund may invest in equity swaps. Equity swaps allow the parties to a swap agreement to exchange the dividend income or other components of return on an equity investment (for example, a group of equity securities or an index) for a component of return on another non-equity or equity investment.
 
An equity swap may be used by the Fund to invest in a market without owning or taking physical custody of securities in circumstances in which direct investment may be restricted for legal reasons or is otherwise deemed


49

 

impractical or disadvantageous. Equity swaps are derivatives and their value can be very volatile. To the extent that the sub-adviser does not accurately analyze and predict the potential relative fluctuation of the components swapped with another party, the Fund may suffer a loss, which may be substantial. The value of some components of an equity swap (such as the dividends on a common stock) may also be sensitive to changes in interest rates. Furthermore, the Fund may suffer a loss if the counterparty defaults. Because equity swaps are normally illiquid, the Fund may be unable to terminate its obligations when desired. When entering into swap contracts, the Fund must “set aside” liquid assets, or engage in other appropriate measures to “cover” its obligation under the swap contract.
 
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 and yield to the Fund at the time of entering into the transaction. A forward commitment involves the entering into a contract to purchase or sell securities for a fixed price at a future date beyond the customary settlement period.
 
The purchase of securities on a when-issued or forward commitment basis involves a risk of loss if the value of the security to be purchased declines before the settlement date. Conversely, the sale of securities on a forward commitment basis involves the risk that the value of the securities sold may increase before the settlement date. Although the Fund will generally purchase securities on a when-issued or forward commitment basis with the intention of acquiring the securities for its portfolio, the Fund may dispose of when-issued securities or forward commitments prior to settlement if the sub-adviser deems it appropriate. When purchasing a security on a when-issued basis or entering into a forward commitment, the Fund must “set aside” liquid assets, or engage in other appropriate measures to “cover” its obligations.
 
Repurchase Agreements.  Repurchase agreements involve the purchase of securities subject to the seller’s agreement to repurchase them at a mutually agreed upon date and price. The Fund may enter into repurchase agreements with securities dealers and banks which furnish collateral at least equal in value or market price to the amount of their repurchase obligation.
 
If the other party or “seller” defaults, the Fund might suffer a loss to the extent that the proceeds from the sale of the underlying securities and other collateral held by the Fund are less than the repurchase price and the Fund’s costs associated with delay and enforcement of the repurchase agreement. In addition, in the event of bankruptcy of the seller, the Fund could suffer additional losses if a court determines that the Fund’s interest in the collateral is not enforceable.
 
The Fund, together with other registered investment companies having advisory agreements with the investment adviser, the sub-adviser or any of their 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.
 
Short Sales Against-the-Box.  The Fund may make short sales against-the-box. A short sale against-the-box means that at all times when a short position is open the Fund will own an equal amount of securities sold short, or securities convertible into or exchangeable for, without payment of any further consideration, an equal amount of the securities of the same issuer as the securities sold short.
 
Preferred Stock, Warrants and Stock Purchase Rights.  The Fund may invest in preferred stock, warrants and stock purchase rights (or “rights”). Preferred stocks are securities that represent an ownership interest providing the holder with claims on the issuer’s earnings and assets before common stock owners but after bond owners. Unlike debt securities, the obligations of an issuer of preferred stock, including dividend and other payment obligations, may not typically be accelerated by the holders of such preferred stock on the occurrence of an event of default or other non-compliance by the issuer of the preferred stock.
 
Warrants and other rights are options to buy a stated number of shares of common stock at a specified price at any time during the life of the warrant or right. The holders of warrants and rights have no voting rights, receive no dividends and have no rights with respect to the assets of the issuer.
 
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. These limitations include in


50

 

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 Fund’s 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 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 the 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 ETF’s shares may trade at a premium or a discount to their net asset value; (ii) an active trading market for an ETF’s 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.
 
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 and money market funds beyond the statutory limits described above. Some of those investment companies and money market funds may be funds for which the investment adviser the sub-adviser or any of their 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.
 
Unseasoned Companies.  The Fund may invest in companies which (together with their predecessors) have operated less than three years. The securities of such companies may have limited liquidity, which can result in their being priced higher or lower than might otherwise be the case. In addition, investments in unseasoned companies are more speculative and entail greater risk than investments in companies with an established operating record.
 
Corporate Debt Obligations.  Corporate debt obligations include bonds, notes, debentures, commercial paper and other obligations of corporations to pay interest and repay principal. The Fund may invest in corporate debt obligations issued by U.S. and certain non-U.S. issuers which issue securities denominated in the U.S. dollar (including Yankee and Euro obligations). In addition to obligations of corporations, corporate debt obligations include securities issued by banks and other financial institutions and supranational entities (i.e., the World Bank, the International Monetary Fund, etc.).
 
Bank Obligations.  The Fund may invest in obligations issued or guaranteed by U.S. or foreign banks. Bank obligations, including without limitation, time deposits, bankers’ acceptances and certificates of deposit, may be general obligations of the parent bank or may be limited to the issuing branch by the terms of the specific obligations or by government regulations. Banks are subject to extensive but different governmental regulations which may limit both the amount and types of loans which may be made and interest rates which may be charged. In addition, the profitability of the banking industry is largely dependent upon the availability and cost of funds for the purpose of financing lending operations under prevailing money market conditions. General economic conditions as well as exposure to credit losses arising from possible financial difficulties of borrowers play an important part in the operation of this industry.
 
U.S. Government Securities.  The Fund may invest in U.S. Government Securities. U.S. Government Securities include U.S. Treasury obligations and obligations issued or guaranteed by U.S. government agencies, instrumentalities or sponsored enterprises. U.S. Government Securities may be supported by (i) the full faith and


51

 

credit of the U.S. Treasury; (ii) the right of the issuer to borrow from the U.S. Treasury; (iii) the discretionary authority of the U.S. government to purchase certain obligations of the issuer; or (iv) only the credit of the issuer. U.S. Government Securities also include Treasury receipts, zero coupon bonds and other stripped U.S. Government Securities, where the interest and principal components are traded independently. U.S. Government Securities may also include Treasury inflation-protected securities whose principal value is periodically adjusted according to the rate of inflation.
 
U.S. Government Securities are deemed to include (a) 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 (b) 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.
 
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 provide financial support to U.S. government agencies, authorities, instrumentalities or sponsored enterprises if it is not obligated to do so by law.
 
Custodial Receipts and Trust Certificates.  The Fund may invest in custodial receipts and trust certificates representing interests in securities held by a custodian or trustee. The securities so held may include U.S. Government Securities or other types of securities in which the Fund may invest. The custodial receipts or trust certificates may evidence ownership of future interest payments, principal payments or both on the underlying securities, or, in some cases, the payment obligation of a third party that has entered into an interest rate swap or other arrangement with the custodian or trustee. For certain securities laws purposes, custodial receipts and trust certificates may not be considered obligations of the U.S. government or other issuer of the securities held by the custodian or trustee. If for tax purposes the Fund is not considered to be the owner of the underlying securities held in the custodial or trust account, the Fund may suffer adverse tax consequences. As a holder of custodial receipts and trust certificates, the Fund will bear its proportionate share of the fees and expenses charged to the custodial account or trust. The Fund may also invest in separately issued interests in custodial receipts and trust certificates.
 
Mortgage-Backed Securities.  The Fund may invest in mortgage-backed securities. Mortgage-backed securities represent direct or indirect participations in, or are collateralized by and payable from, mortgage loans secured by real property. Mortgage-backed securities can be backed by either fixed rate mortgage loans or adjustable rate mortgage loans, and may be issued by either a governmental or non-governmental entity. The value of some mortgage-backed securities may be particularly sensitive to changes in prevailing interest rates. The value of these securities may also fluctuate in response to the market’s perception of the creditworthiness of the issuers. Early repayment of principal on mortgage- or asset-backed securities may expose the Fund to the risk of earning a lower rate of return upon reinvestment of principal.
 
The Fund may invest in privately-issued mortgage pass-through securities that represent interests in pools of mortgage loans that are issued by trusts formed by originators of and institutional investors in mortgage loans (or represent interests in custodial arrangements administered by such institutions). These originators and institutions include commercial banks, savings and loans associations, credit unions, savings banks, mortgage bankers, insurance companies, investment banks or special purpose subsidiaries of the foregoing. The pools underlying privately-issued mortgage pass-through securities consist of mortgage loans secured by mortgages or deeds of trust creating a first lien on commercial, residential, residential multifamily and mixed residential/commercial properties. These mortgage-backed securities typically do not have the same credit standing as U.S. government guaranteed mortgage-backed securities.
 
Privately-issued mortgage pass-through securities generally offer a higher yield than similar securities issued by a government entity because of the absence of any direct or indirect government or agency payment guarantees. However, timely payment of interest and principal on mortgage loans in these pools may be supported by various other forms of insurance or guarantees, including individual loan, pool and hazard insurance, subordination and letters of credit. Such insurance and guarantees may be issued by private insurers, banks and mortgage poolers. There is no guarantee that private guarantors or insurers, if any, will meet their obligations. Mortgage-Backed Securities without insurance or guarantees may also be purchased by the Fund if they have the required rating from


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an NRSRO. Mortgage-Backed Securities issued by private organizations may not be readily marketable, may be more difficult to value accurately and may be more volatile than similar securities issued by a government entity.
 
Mortgage-backed securities may include multiple class securities, including collateralized mortgage obligations (“CMOs”) and Real Estate Mortgage Investment Conduit (“REMIC”) pass-through or participation certificates. A REMIC is a CMO that qualifies for special tax treatment and invests in certain mortgages principally secured by interests in real property and other permitted investments. CMOs provide an investor with a specified interest in the cash flow from a pool of underlying mortgages or of other mortgage-backed securities. CMOs are issued in multiple classes each with a specified fixed or floating interest rate and a final scheduled distribution rate. In many cases, payments of principal are applied to the CMO classes in the order of their respective stated maturities, so that no principal payments will be made on a CMO class until all other classes having an earlier stated maturity date are paid in full.
 
Sometimes, however, CMO classes are “parallel pay,” i.e., payments of principal are made to two or more classes concurrently. In some cases, CMOs may have the characteristics of a stripped mortgage-backed security whose price can be highly volatile. CMOs may exhibit more or less price volatility and interest rate risk than other types of mortgage-related obligations, and under certain interest rate and payment scenarios, the Fund may fail to recoup fully its investment in certain of these securities regardless of their credit quality.
 
Mortgaged-backed securities also include stripped mortgage-backed securities (“SMBS”), which are derivative multiple class mortgage-backed securities. SMBS are usually structured with two different classes: one that receives substantially all of the interest payments and the other that receives substantially all of the principal payments from a pool of mortgage loans. The market value of SMBS consisting entirely of principal payments generally is unusually volatile in response to changes in interest rates. The yields on SMBS that receive all or most of the interest from mortgage loans are generally higher than prevailing market yields on other mortgage-backed securities because their cash flow patterns are more volatile and there is a greater risk that the initial investment will not be fully recouped. Throughout 2008, the market for mortgage-backed securities began experiencing substantially, often dramatically, lower valuations and greatly reduced liquidity. Markets for other asset-backed securities have also been affected. These instruments are increasingly subject to liquidity constraints, price volatility, credit downgrades and unexpected increases in default rates and, therefore, may be more difficult to value and more difficult to dispose of than previously. These events may have an adverse effect on the Fund to the extent it invests in mortgage-backed or other fixed income securities or instruments affected by the volatility in the fixed income markets.
 
Asset-Backed Securities.  The Fund may invest in asset-backed securities. Asset-backed securities are securities whose principal and interest payments are collateralized by pools of assets such as auto loans, credit card receivables, leases, installment contracts and personal property. Asset-backed securities may also include home equity line of credit loans and other second-lien mortgages. Asset-backed securities are often subject to more rapid repayment than their stated maturity date would indicate as a result of the pass-through of prepayments of principal on the underlying loans. During periods of declining interest rates, prepayment of loans underlying asset-backed securities can be expected to accelerate. Accordingly, the Fund’s ability to maintain positions in such securities will be affected by reductions in the principal amount of such securities resulting from prepayments, and its ability to reinvest the returns of principal at comparable yields is subject to generally prevailing interest rates at that time. Asset-backed securities present credit risks that are not presented by mortgage-backed securities. This is because asset-backed securities generally do not have the benefit of a security interest in collateral that is comparable to mortgage assets. 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 obligations, there is the possibility that, in some cases, the Fund will be unable to possess and sell the underlying collateral and that the Fund’s recoveries on repossessed collateral may not be available to support payments on the securities. In the event of a default, the Fund may suffer a loss if it cannot sell collateral quickly and receive the amount it is owed. 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 the market’s perception of the creditworthiness of the issuers and market conditions impacting asset-backed securities more generally.


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Borrowings.  The Fund can borrow money from banks and other financial institutions in amounts not exceeding one-third of its total assets for temporary or emergency purposes. The Fund may not make additional investments if borrowings exceed 5% of its total assets.
 
Interest Rate Swaps, Mortgage Swaps, Credit Swaps, Currency Swaps, Total Return Swaps and Options on Swaps.  Interest rate swaps involve the exchange by the Fund with another party of their respective commitments to pay or receive interest, such as an exchange of fixed-rate payments for floating rate payments.
 
Mortgage swaps are similar to interest rate swaps in that they represent commitments to pay and receive interest. The notional principal amount, however, is tied to a reference pool or pools of mortgages. Credit swaps involve the receipt of floating or fixed rate payments in exchange for assuming potential credit losses on an underlying security. Credit swaps give one party to a transaction (the buyer of the credit swap) the right to dispose of or acquire an asset (or group of assets), or the right to receive a payment from the other party, upon the occurrence of specified credit events. Currency swaps involve the exchange of the parties’ respective rights to make or receive payments in specified currencies. Total return swaps give the Fund the right to receive the appreciation in the value of a specified security, index or other instrument in return for a fee paid to the counterparty, which will typically be an agreed upon interest rate. If the underlying asset in a total return swap declines in value over the term of the swap, the Fund may also be required to pay the dollar value of that decline to the counterparty. The Fund may also purchase and write (sell) options contracts on swaps, commonly referred to as swaptions. A swaption is an option to enter into a swap agreement. Like other types of options, the buyer of a swaption pays a non-refundable premium for the option and obtains the right, but not the obligation, to enter into an underlying swap on agreed-upon terms. The seller of a swaption, in exchange for the premium, becomes obligated (if the option is exercised) to enter into an underlying swap on agreed-upon terms.
 
The Fund may enter into the transactions described above for hedging purposes or to seek to increase total return. As an example, when the Fund is the buyer of a credit default swap (commonly known as buying protection), it may make periodic payments to the seller of the credit default swap to obtain protection against a credit default on a specified underlying asset (or group of assets). If a default occurs, the seller of a credit default swap may be required to pay the Fund the “notional value” of the credit default swap on a specified security (or group of securities). On the other hand, when the Fund is a seller of a credit default swap (commonly known as selling protection), in addition to the credit exposure the Fund has on the other assets held in its portfolio, the Fund is also subject to the credit exposure on the notional amount of the swap since, in the event of a credit default, the Fund may be required to pay the “notional value” of the credit default swap on a specified security (or group of securities) to the buyer of the credit default swap.
 
The use of interest rate, mortgage, credit, currency and total return swaps and options on swaps is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. If the sub-adviser is incorrect in its forecasts of market values, interest rates and currency exchange rates, or in its evaluation of the creditworthiness of swap counterparties and the issuers of the underlying assets, the investment performance of the Fund would be less favorable than it would have been if these investment techniques were not used. When entering into swap contracts, the Fund must “set aside” liquid assets, or engage in other appropriate measures to “cover” its obligation under the swap contract.
 
Additional Information on Investment Risks
 
General Portfolio Risks
 
The Fund will be subject to the risks associated with equity investments. “Equity investments” may include common stocks, preferred stocks, interests in real estate investment trusts, convertible debt obligations, convertible preferred stocks, equity interests in trusts, partnerships, joint ventures, limited liability companies and similar enterprises, warrants, stock purchase rights and synthetic and derivative instruments (such as swaps and futures contracts) that have economic characteristics similar to equity securities. In general, the values of equity investments fluctuate in response to the activities of individual companies and in response to general market and economic conditions. Accordingly, the values of the equity investments that the Fund holds may decline over short or extended periods. The stock markets tend to be cyclical, with periods when stock prices generally rise and periods when prices generally decline. This volatility means that the value of your investment in the Fund may increase or


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decrease. In recent years, certain stock markets have experienced substantial price volatility. To the extent the Fund’s net assets decrease or increase in the future due to price volatility or share redemption or purchase activity, the Fund’s expense ratio may correspondingly increase or decrease from the expense ratio disclosed in the Fund’s Prospectus.
 
To the extent that the Fund invests in fixed income securities, the Fund will also be subject to the risks associated with its fixed income securities. These risks include interest rate risk, credit/default risk and call/extension risk. In general, interest rate risk involves the risk that when interest rates decline, the market value of fixed income securities tends to increase (although many mortgage-related securities will have less potential than other debt securities for capital appreciation during periods of declining rates). Conversely, when interest rates increase, the market value of fixed income securities tends to decline. Credit/default risk involves the risk that an issuer or guarantor could default on its obligations, and the Fund will not recover its investment. Call risk and extension risk are normally present in mortgage-backed securities and asset-backed securities. For example, homeowners have the option to prepay their mortgages. Therefore, the duration of a security backed by home mortgages can either shorten (call risk) or lengthen (extension risk). In general, if interest rates on new mortgage loans fall sufficiently below the interest rates on existing outstanding mortgage loans, the rate of prepayment would be expected to increase. Conversely, if mortgage loan interest rates rise above the interest rates on existing outstanding mortgage loans, the rate of prepayment would be expected to decrease. In either case, a change in the prepayment rate can result in losses to investors. The same would be true of asset-backed securities such as securities backed by car loans.
 
Goldman Sachs Rising Dividend Growth Fund may invest in non-investment grade fixed income securities (commonly known as “junk bonds”), which are rated below investment grade (or determined to be of equivalent quality, if not rated) at the time of purchase and are therefore considered speculative. Because non-investment grade fixed income securities are issued by issuers with low credit ratings, they pose a greater risk of default than investment grade securities.
 
The sub-adviser will not consider the portfolio turnover rate a limiting factor in making investment decisions for the Fund. A high rate of portfolio turnover (100% or more) 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 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 Fund’s portfolio securities, excluding securities having a maturity at the date of purchase of one year or less.
 
The following sections provide 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 Fund’s SAI, which incorporated by reference and is available upon request. Among other things, the Fund’s SAI describes certain fundamental investment restrictions that cannot be changed without shareholder approval. You should note, however, that all investment objectives and all investment policies not specifically designated as fundamental are non-fundamental, and may be changed without shareholder approval. If there is a change in the Fund’s investment objective, you should consider whether the Fund remains an appropriate investment in light of your then current financial position and needs.
 
Other Portfolio Risks
 
Risks of Investing in Mid-Capitalization and Small Capitalization Companies.  The Fund may, to the extent consistent with its investment policies, invest in mid-and small-capitalization companies. Investments in mid- and small-capitalization companies involve greater risk and portfolio price volatility than investments in larger capitalization stocks. Among the reasons for the greater price volatility of these investments are the less certain growth prospects of smaller firms and the lower degree of liquidity in the markets for such securities. Mid- and small- capitalization companies may be thinly traded and may have to be sold at a discount from current market prices or in small lots over an extended period of time. In addition, these securities are subject to the risk that during certain periods the liquidity of particular issuers or industries, or all securities in particular investment categories, will shrink or disappear suddenly and without warning as a result of adverse economic or market conditions, or adverse investor perceptions whether or not accurate. Because of the lack of sufficient market liquidity, the Fund


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may incur losses because it will be required to effect sales at a disadvantageous time and only then at a substantial drop in price. Mid- and small-capitalization companies include “unseasoned” issuers that do not have an established financial history; often have limited product lines, markets or financial resources; may depend on or use a few key personnel for management; and may be susceptible to losses and risks of bankruptcy. Mid- and small-capitalization companies may be operating at a loss or have significant variations in operating results; may be engaged in a rapidly changing business with products subject to a substantial risk of obsolescence; may require substantial additional capital to support their operations, to finance expansion or to maintain their competitive position; and may have substantial borrowings or may otherwise have a weak financial condition. In addition, these companies may face intense competition, including competition from companies with greater financial resources, more extensive development, manufacturing, marketing, and other capabilities, and a larger number of qualified managerial and technical personnel. Transaction costs for these investments are often higher than those of larger capitalization companies. Investments in mid- and small-capitalization companies may be more difficult to price precisely than other types of securities because of their characteristics and lower trading volumes.
 
Risks of Investing in Master Limited Partnerships (“MLPs”) — Investments in securities of MLPs involve risks that differ from investments in common stock, including risks related to limited control and limited rights to vote on matters affecting the MLP, risks related to potential conflicts of interest between the MLP and the MLP’s general partner, cash flow risks, dilution risks and risks related to the general partner’s right to require unit-holders to sell their common units at an undesirable time or price. Certain MLP securities may trade in lower volumes due to their smaller capitalizations. Accordingly, such MLPs may be subject to more abrupt or erratic price movements, may lack sufficient market liquidity to enable the Fund to effect sales at an advantageous time or without a substantial drop in price, and investment in such MLPs may restrict the Fund’s ability to take advantage of other investment opportunities. Master limited partnerships are generally considered interest-rate sensitive investments. During periods of interest rate volatility, these investments may not provide attractive returns. Depending on the state of interest rates in general, the use of MLPs could enhance or harm the overall performance of the Fund.
 
MLPs are subject to various risks related to the underlying operating companies they control, including dependence upon specialized management skills and the risk that such companies may lack or have limited operating histories. The success of the Fund’s investments also will vary depending on the underlying industry represented by the MLP’s portfolio. The Fund must recognize income that it receives from underlying MLPs for tax purposes, even if the Fund does not receive cash distributions from the MLPs in an amount necessary to pay such tax liability. In addition, a percentage of a distribution received by the Fund as the holder of an MLP interest may be treated as a return of capital, which would reduce the Fund’s adjusted tax basis in the interests of the MLP, which will result in an increase in the amount of income or gain (or decrease in the amount of loss) that will be recognized by the Fund for tax purposes upon the sale of any such interests or upon subsequent distributions in respect of such interests.
 
MLPs do not pay U.S. federal income tax at the partnership level. Rather, each partner is allocated a share of the partnership’s income, gains, losses, deductions and expenses. A change in current tax law, or a change in the underlying business mix of a given MLP, could result in an MLP being treated as a corporation for U.S. federal income tax purposes, which would result in the MLP being required to pay U.S. federal income tax (as well as state and local income taxes) on its taxable income. The classification of an MLP as a corporation for U.S. federal income tax purposes would have the effect of reducing the amount of cash available for distribution by the MLP. If any MLP in which the Fund invests were treated as a corporation for U.S. federal income tax purposes, it could result in a reduction of the value of the Fund’s investment in the MLP and lower income to the Fund.
 
Risks of Foreign Investments.  The Fund may make foreign investments. Foreign investments involve special risks that are not typically associated with U.S. dollar denominated or quoted securities of U.S. issuers. Foreign investments may be affected by changes in currency rates, changes in foreign or U.S. laws or restrictions applicable to such investments and changes in exchange control regulations (e.g., currency blockage). A decline in the exchange rate of the currency (i.e., weakening of the currency against the U.S. dollar) in which a portfolio security is quoted or denominated relative to the U.S. dollar would reduce the value of the portfolio security. In addition, if the currency in which the Fund receives dividends, interest or other payments declines in value against the U.S. dollar before such income is distributed as dividends to shareholders or converted to U.S. dollars, the Fund may have to sell portfolio securities to obtain sufficient cash to pay such dividends.


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Brokerage commissions, custodial services and other costs relating to investment in international securities markets generally are more expensive than in the United States. In addition, clearance and settlement procedures may be different in foreign countries and, in certain markets, such procedures have been unable to keep pace with the volume of securities transactions, thus making it difficult to conduct such transactions.
 
Foreign issuers are not generally subject to uniform accounting, auditing and financial reporting standards comparable to those applicable to U.S. issuers. There may be less publicly available information about a foreign issuer than about a U.S. issuer. In addition, there is generally less government regulation of foreign markets, companies and securities dealers than in the United States, and the legal remedies for investors may be more limited than the remedies available in the United States. Foreign securities markets may have substantially less volume than U.S. securities markets and securities of many foreign issuers are less liquid and more volatile than securities of comparable domestic issuers. Furthermore, with respect to certain foreign countries, there is a possibility of nationalization, expropriation or confiscatory taxation, imposition of withholding or other taxes on dividend or interest payments (or, in some cases, capital gains distributions), limitations on the removal of funds or other assets from such countries, and risks of political or social instability or diplomatic developments which could adversely affect investments in those countries.
 
Concentration of the Fund’s assets in one or a few countries and currencies will subject the Fund, to greater risks than if the Fund’s assets were not geographically concentrated.
 
Investments in foreign securities may take the form of sponsored and unsponsored American Depositary Receipts (“ADRs”) and Global Depositary Receipts (“GDRs”), European Depositary Receipts (“EDRs”) or other similar instruments representing securities of foreign issuers. ADRs, GDRs and EDRs represent the right to receive securities of foreign issuers deposited in a bank or other depository. ADRs and certain GDRs are traded in the United States. GDRs may be traded in either the United States or in foreign markets. EDRs are traded primarily outside the United States. Prices of ADRs are quoted in U.S. dollars. EDRs and GDRs are not necessarily quoted in the same currency as the underlying security.
 
Risks of Sovereign Debt.  Investment in sovereign debt obligations by the Fund involves risks not present in debt obligations of corporate issuers. The issuer of the debt or the governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest when due in accordance with the terms of such debt, and the Fund may have limited recourse to compel payment in the event of a default. Periods of economic uncertainty may result in the volatility of market prices of sovereign debt, and in turn the Fund’s NAV, to a greater extent than the volatility inherent in debt obligations of U.S. issuers.
 
A sovereign debtor’s willingness or ability to repay principal and pay interest in a timely manner may be affected by, among other factors, its cash flow situation, the extent of its foreign currency reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor’s policy toward international lenders, and the political constraints to which a sovereign debtor may be subject.
 
Risks of Emerging Countries.  The Fund may invest in securities of issuers located in emerging countries. The risks of foreign investment are heightened when the issuer is located in an emerging country. Emerging countries are generally located in the Asia and Pacific regions, the Middle East, Eastern Europe, Central and South America and Africa. The Fund’s purchase and sale of portfolio securities in certain emerging countries may be constrained by limitations relating to daily changes in the prices of listed securities, periodic trading or settlement volume and/or limitations on aggregate holdings of foreign investors. Such limitations may be computed based on the aggregate trading volume by or holdings of the Fund, the investment adviser, the sub-adviser or their affiliates and respective clients and other service providers. The Fund may not be able to sell securities in circumstances where price, trading or settlement volume limitations have been reached.
 
Foreign investment in the securities markets of certain emerging countries is restricted or controlled to varying degrees which may limit investment in such countries or increase the administrative costs of such investments. For example, certain Asian countries require governmental approval prior to investments by foreign persons or limit investment by foreign persons to only a specified percentage of an issuer’s outstanding securities or a specific class of securities which may have less advantageous terms (including price) than securities of the issuer available for


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purchase by nationals. In addition, certain countries may restrict or prohibit investment opportunities in issuers or industries deemed important to national interests. Such restrictions may affect the market price, liquidity and rights of securities that may be purchased by the Fund. The repatriation of both investment income and capital from certain emerging countries is subject to restrictions such as the need for governmental consents. In situations where a country restricts direct investment in securities (which may occur in certain Asian and other countries), the Fund may invest in such countries through other investment funds in such countries.
 
Many emerging countries have experienced currency devaluations and substantial (and, in some cases, extremely high) rates of inflation. Other emerging countries have experienced economic recessions. These circumstances have had a negative effect on the economies and securities markets of such emerging countries. Economies in emerging countries generally are dependent heavily upon commodity prices and international trade and, accordingly, have been and may continue to be affected adversely by the economies of their trading partners, trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade.
 
Many emerging countries are subject to a substantial degree of economic, political and social instability. Governments of some emerging countries are authoritarian in nature or have been installed or removed as a result of military coups, while governments in other emerging countries have periodically used force to suppress civil dissent. Disparities of wealth, the pace and success of democratization, and ethnic, religious and racial disaffection, among other factors, have also led to social unrest, violence and/or labor unrest in some emerging countries. Unanticipated political or social developments may result in sudden and significant investment losses. Investing in emerging countries involves greater risk of loss due to expropriation, nationalization, confiscation of assets and property or the imposition of restrictions on foreign investments and on repatriation of capital invested. As an example, in the past, some Eastern European governments have expropriated substantial amounts of private property, and many claims of the property owners have never been fully settled. There is no assurance that similar expropriations will not recur in Eastern European or other countries.
 
The Fund’s investment in emerging countries may also be subject to withholding or other taxes, which may be significant and may reduce the return to the Fund from an investment in issuers in such countries.
 
Settlement procedures in emerging countries are frequently less developed and reliable than those in the United States and may involve the Fund’s delivery of securities before receipt of payment for their sale. In addition, significant delays may occur in certain markets in registering the transfer of securities. Settlement or registration problems may make it more difficult for the Fund to value its portfolio securities and could cause the Fund to miss attractive investment opportunities, to have a portion of its assets uninvested or to incur losses due to the failure of a counterparty to pay for securities the Fund has delivered or the Fund’s inability to complete its contractual obligations because of theft or other reasons.
 
The creditworthiness of the local securities firms used by the Fund in emerging countries may not be as sound as the creditworthiness of firms used in more developed countries. As a result, the Fund may be subject to a greater risk of loss if a securities firm defaults in the performance of its responsibilities.
 
The small size and inexperience of the securities markets in certain emerging countries and the limited volume of trading in securities in those countries may make the Fund’s investments in such countries less liquid and more volatile than investments in countries with more developed securities markets (such as the United States, Japan and most Western European countries). The Fund’s investments in emerging countries are subject to the risk that the liquidity of a particular investment, or investments generally, in such countries will shrink or disappear suddenly and without warning as a result of adverse economic, market or political conditions or adverse investor perceptions, whether or not accurate. Because of the lack of sufficient market liquidity, the Fund may incur losses because it will be required to effect sales at a disadvantageous time and only then at a substantial drop in price. Investments in emerging countries may be more difficult to value precisely because of the characteristics discussed above and lower trading volumes.
 
The Fund’s use of foreign currency management techniques in emerging countries may be limited. A significant portion of the Fund’s currency exposure in emerging countries may not be covered by these techniques.


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Foreign Custody Risk.  The Fund may hold foreign securities and cash with foreign banks, agents and securities depositories appointed by the Fund’s custodian (each a “Foreign Custodian”). Some Foreign Custodians may be recently organized or new to the foreign custody business. In some countries, Foreign Custodians may be subject to little or no regulatory oversight over or independent evaluation of their operations. Further, the laws of certain countries may place limitations on the Fund’s ability to recover its assets if a Foreign Custodian enters bankruptcy. Investments in emerging markets may be subject to even greater custody risks than investments in more developed markets. Custody services in emerging market countries are very often undeveloped and may be considerably less well regulated than in more developed countries, and thus may not afford the same level of investor protection as would apply in developed countries.
 
Risks of Derivative Investments.  The Fund may invest in derivative instruments including without limitation, options, futures, options on futures, swaps, structured securities and derivatives relating to foreign currency transactions. Investments in derivative instruments may be for both hedging and non-hedging purposes (that is, to seek to increase total return), although suitable derivative instruments may not always be available to the sub-adviser for these purposes. Losses from investments in derivative instruments can result from a lack of correlation between changes in the value of derivative instruments and the portfolio assets (if any) being hedged, the potential illiquidity of the markets for derivative instruments, the failure of the counterparty to perform its contractual obligations, or the risks arising from margin requirements and related leverage factors associated with such transactions. Losses may also arise if the Fund receives cash collateral under the transactions and some or all of that collateral is invested in the market. To the extent that cash collateral is so invested, such collateral will be subject to market depreciation or appreciation, and the Fund may be responsible for any loss that might result from its investment of the counterparty’s cash collateral. The use of these management techniques also involves the risk of loss if the sub-adviser is incorrect in its expectation of the timing or level of fluctuations in securities prices, interest rates or currency prices. Investments in derivative instruments may be harder to value, subject to greater volatility and more likely subject to changes in tax treatment than other investments. For these reasons, the sub-adviser’s attempts to hedge portfolio risks through the use of derivative instruments may not be successful, and the sub-adviser may choose not to hedge certain portfolio risks. Investing for non-hedging purposes is considered a speculative practice and presents even greater risk of loss.
 
Liquidity Risk.  The Fund may invest to a greater degree in securities or instruments that trade in lower volumes and may make investments that are less liquid than other investments. Also, the Fund may make investments that may become less liquid in response to market developments or adverse investor perceptions. Investments that are illiquid or that trade in lower volumes may be more difficult to value. When there is no willing buyer and investments cannot be readily sold at the desired time or price, the Fund may have to accept a lower price or may not be able to sell the security or instrument at all. An inability to sell one or more portfolio positions can adversely affect the Fund’s value or prevent the Fund from being able to take advantage of other investment opportunities.
 
The Fund’s investments in non-investment grade fixed income securities, mid- and small-capitalization stocks, REITs and emerging country issuers will be especially subject to the risk that during certain periods the liquidity of particular issuers or industries, or all securities within particular investment categories, will shrink or disappear suddenly and without warning as a result of adverse economic, market or political events, or adverse investor perceptions, whether or not accurate.
 
Liquidity risk may also refer to the risk that the Fund will not be able to pay redemption proceeds within the time period stated in this Prospectus because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. Although the Fund reserves the right to meet redemption requests through in-kind distributions, to date the Fund has not paid redemptions in kind. While the Fund may pay redemptions in kind in the future, 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 Fund’s 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 Fund’s shares. Redemptions by these shareholders of their shares of the Fund may further increase the Fund’s liquidity risk and may impact the


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Fund’s NAV. 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.
 
Risks of Illiquid Securities.  The Fund may invest up to 15% of its net assets in illiquid securities which cannot be disposed of in seven days in the ordinary course of business at fair value. Illiquid securities in the Fund may invest include:
 
  •  Both domestic and foreign securities that are not readily marketable
 
  •  Certain stripped mortgage-backed securities
 
  •  Repurchase agreements and time deposits with a notice or demand period of more than seven days
 
  •  Certain over-the-counter options
 
  •  Certain structured securities and swap transactions
 
  •  Certain private investments in public equity (“PIPEs”)
 
  •  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 of 1933 (“144A Securities”).
 
Investing in 144A Securities may decrease the liquidity of the Fund’s portfolio to the extent that qualified institutional buyers become for a time uninterested in purchasing these restricted securities. The purchase price and subsequent valuation of restricted and illiquid securities normally reflect a discount, which may be significant, from the market price of comparable securities for which a liquid market exists.
 
Securities purchased by the Fund, particularly debt securities and over-the-counter traded securities, that are liquid at the time of purchase may subsequently become illiquid due to events relating to the issuer of the securities, markets events, economic conditions or investor perceptions. Domestic and foreign markets are becoming more and more complex and interrelated, so that events in one sector of the market or the economy, or in one geographical region, can reverberate and have negative consequences for other market, economic or regional sectors in a manner that may not be reasonably foreseen. With respect to over-the-counter traded securities, the continued viability of any over-the-counter secondary market depends on the continued willingness of dealers and other participants to purchase the securities.
 
If one or more securities in the Fund’s portfolio become illiquid, the Fund may exceed its 15 percent limitation in illiquid instruments. In the event that changes in the portfolio or other external events cause the investments in illiquid instruments to exceed 15 percent of the Fund’s net assets, the Fund must take steps to bring the aggregate amount of illiquid instruments back within the prescribed limitations as soon as reasonably practicable. This requirement would not force the Fund to liquidate any portfolio instrument where the Fund would suffer a loss on the sale of that instrument.
 
In cases where no clear indication of the value of the Fund’s portfolio instruments is available, the portfolio instruments will be valued at their fair value according to the valuation procedures approved by the Board of Trustees. These cases include, among others, situations where the secondary markets on which a security has previously been traded are no longer viable for lack of liquidity.
 
Credit/Default Risks.  Debt securities purchased by the Fund may include U.S. Government Securities and securities issued by foreign governments, domestic and foreign corporations, banks and other issuers. Some of these fixed income securities are described in the next section below. Further information is provided in the SAI.
 
Debt securities rated BBB or higher by Standard & Poor’s, or Baa or higher by Moody’s or having a comparable rating by another NRSRO are considered “investment grade.” Securities rated BBB or Baa are considered medium-grade obligations with speculative characteristics, and adverse economic conditions or changing circumstances may weaken their issuers’ capacity to pay interest and repay principal. A security will be deemed to have met a rating requirement if it receives the minimum required rating from at least one such rating organization even though it has been rated below the minimum rating by one or more other rating organizations, or if unrated by such rating organizations, the security is determined by the investment adviser to be of comparable credit quality. A security satisfies the Fund’s minimum rating requirement regardless of its relative ranking (for


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example, plus or minus) within a designated major rating category (for example, BBB or Baa). If a security satisfies the Fund’s minimum rating requirement at the time of purchase and is subsequently downgraded below that rating, the Fund will not be required to dispose of the security. If a downgrade occurs, the investment adviser will consider which action, including the sale of the security, is in the best interest of a Fund and its shareholders.
 
The Fund may invest in fixed income securities rated BB or Ba or below (or comparable unrated securities) which are commonly referred to as “junk bonds.” Junk bonds are considered speculative and may be questionable as to principal and interest payments. In some cases, junk bonds may be highly speculative, have poor prospects for reaching investment grade standing and be in default. As a result, investment in such bonds will present greater speculative risks than those associated with investment in investment grade bonds. Also, to the extent that the rating assigned to a security in the Fund’s portfolio is downgraded by a rating organization, the market price and liquidity of such security may be adversely affected.
 
Risks of Initial Public Offerings.  The Fund may invest in IPOs. An IPO is a company’s first offering of stock to the public. IPO risk is the risk that the market value of IPO shares will fluctuate considerably due to factors such as the absence of a prior public market, unseasoned trading, the small number of shares available for trading and limited information about the issuer. The purchase of IPO shares may involve high transaction costs. IPO shares are subject to market risk and liquidity risk. When the Fund’s asset base is small, a significant portion of the Fund’s performance could be attributable to investments in IPOs, because such investments would have a magnified impact on the Fund. As the Fund’s assets grow, the effect of the Fund’s investments in IPOs on the Fund’s performance probably will decline, which could reduce the Fund’s performance. Because of the price volatility of IPO shares, the Fund may choose to hold IPO shares for a very short period of time. This may increase the turnover of the Fund’s portfolio and may lead to increased expenses to the Fund, such as commissions and transaction costs. By selling IPO shares, the Fund may realize taxable gains it will subsequently distribute to shareholders. In addition, the market for IPO shares can be speculative and/or inactive for extended periods of time. There is no assurance that the Fund will be able to obtain allocable portions of IPO shares. The limited number of shares available for trading in some IPOs may make it more difficult for the Fund to buy or sell significant amounts of shares without an unfavorable impact on prevailing prices. Investors in IPO shares can be affected by substantial dilution in the value of their shares, by sales of additional shares and by concentration of control in existing management and principal shareholders.
 
Non-Diversification Risk.  The Fund is not diversified, which means it is permitted to invest a larger percentage of its assets in fewer issuers than a “diversified” mutual fund. As a result of the relatively small number of issuers in which the Fund generally invests, it may be subject to greater risks than a more diversified fund. A change in the value of any single investment held by the Fund may affect the overall value of the Fund more than it would affect a diversified mutual fund that holds more investments. In particular, the Fund may be more susceptible to adverse developments affecting any single issuer in the Fund and may be susceptible to greater losses because of these developments.
 
Temporary Investment Risks.  The Fund may, for temporary defensive purposes, invest a certain percentage of its total assets in:
 
  •  U.S. Government Securities
 
  •  Commercial paper rated at least A-2 by Standard & Poor’s, P-2 by Moody’s or having a comparable rating by another NRSRO
 
  •  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
 
  •  Exchange-traded funds
 
  •  Other investment companies
 
  •  Cash items


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When the Fund’s assets are invested in such instruments, the Fund may not be achieving its investment objective.
 
Risks of Large Shareholder Redemptions.  Certain funds, accounts, individuals or Goldman Sachs affiliates may from time to time own (beneficially or of record) or control a significant percentage of the Fund’s shares. Redemptions by these funds, accounts or individuals of their holdings in the Fund may impact the Fund’s liquidity and NAV. These redemptions may also force the Fund to sell securities, which may negatively impact the Fund’s brokerage and tax costs.
 
Geographic Risk.  Concentration of the investments of the Fund in issuers located in a particular country or region will subject the Fund, to a greater extent than if investments were less concentrated, to the risks of adverse securities markets, exchange rates and social, political, regulatory or economic events which may occur in that country or region.
 
NAV Risk.  The net asset value (“NAV”) of the Fund and the value of your investment may fluctuate.
 
Management Risk — A strategy used by the Fund’s investment adviser or sub-adviser may fail to produce the intended results.
 
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. Although many types of U.S. Government Securities that may be purchased by the Fund, such as those issued by the Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”) and Federal Home Loan Banks, may be chartered or sponsored by Acts of Congress, their securities are neither issued nor guaranteed by the United States 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 their legal right to support from the U.S. Treasury. It is possible that issuers of U.S. Government Securities will not have the funds to meet their payment obligations in the future. Fannie Mae and Freddie Mac have been operating under conservatorship, with the Federal Housing Finance Administration (“FHFA”) acting as their conservator, since September 2008. The entities are dependent upon the continued support of the U.S. Department of the Treasury and the FHFA in order to continue their business operations. These factors, among others, could affect the future status and role of Fannie Mae and Freddie Mac and the value of their debt and equity securities and the securities which they guarantee.


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ADDITIONAL INFORMATION ABOUT GOLDMAN SACHS RISING DIVIDEND GROWTH FUND
 
Investment Adviser
 
GSAM, 200 West Street, New York, New York 10282 has been registered as an investment adviser with the SEC since 1990 and is an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”). As of September 30, 2011, GSAM, including its investment advisory affiliates, had assets under management of $699.7 billion.
 
Pursuant to its Management agreement with the Fund, GSAM, directly or through a sub-adviser, is responsible for over seeing the Fund’s investment program.
 
GSAM also performs the following additional services for the Fund:
 
  •  Supervises all non-advisory operations of the Fund
 
  •  Provides personnel to perform necessary executive, administrative and clerical services to the Fund
 
  •  Arranges for the preparation of all required tax returns, reports to shareholders, prospectuses and statements of additional information and other reports filed with the SEC and other regulatory authorities
 
  •  Maintains the records of the Fund
 
  •  Provides office space and all necessary office equipment and services
 
  •  Supervises DGA, the sub-adviser of the Fund
 
GSAM is a subsidiary of The Goldman Sachs Group, Inc. and an affiliate of Goldman Sachs. Founded in 1869, Goldman Sachs Group, Inc. is a financial holding company and a leading global investment banking, securities and investment management firm. Goldman Sachs is a leader in developing portfolio strategies and in many fields of investing and financing, participating in financial markets worldwide and serving individuals, institutions, corporations and governments. Goldman Sachs is also among the principal market sources for current and thorough information on companies, industrial sectors, markets, economies and currencies, and trades and makes markets in a wide range of equity and debt securities 24 hours a day. The firm is headquartered in New York with offices in countries throughout the world. It has trading professionals throughout the United States, as well as in London, Frankfurt, Tokyo, Seoul, Sao Paulo and other major financial centers around the world. The active participation of Goldman Sachs in the world’s financial markets enhances its ability to identify attractive investments.
 
Investment Sub-Adviser
 
DGA, with offices at 58 Riverwalk Boulevard, Building 2, Suite A, Ridgeland, South Carolina 29936, serves as the Sub-Adviser to the Fund and provides the day-to-day advice regarding the Fund’s portfolio transactions. DGA makes the investment decisions for the Fund and places purchase and sale orders for the Fund’s portfolio transactions in U.S. and foreign markets. DGA, a South Carolina limited liability company, is a registered investment adviser founded in 2003. As of September 30, 2011, DGA had approximately $690 million in assets under management.
 
Distributor and Transfer Agent
 
Goldman Sachs, 200 West Street, New York, New York 10282, serves as the exclusive distributor (the “Distributor”) of the Fund’s shares. Goldman Sachs, 71 S. Wacker Drive, Chicago, Illinois 60606, also serves as the Fund’s transfer agent (the “Transfer Agent”) and, as such, performs various shareholder servicing functions.
 
For its transfer agency services, Goldman Sachs is entitled to receive a transfer agency fee equal, on an annualized basis, to 0.04% of average daily net assets with respect to the Institutional Shares and 0.19% of average daily net assets with respect to the Class A Shares.
 
From time to time, Goldman Sachs or any of its affiliates may purchase and hold shares of the Fund. Goldman Sachs and its affiliates reserve the right to redeem at any time some or all of the shares acquired for their own accounts.


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Administrator
 
GSAM provides various administrative, accounting and corporate secretarial services to the Goldman Sachs Rising Dividend Growth Fund. GSAM performs these administrative services for the Goldman Sachs Rising Dividend Growth Fund under its Management Agreement with the Goldman Sachs Rising Dividend Growth Fund.
 
Activities of Goldman Sachs and its Affiliates and Other Accounts Managed by Goldman Sachs
 
The involvement of GSAM, Goldman Sachs and their affiliates in the management of, or their interest in, other accounts and other activities of Goldman Sachs may present conflicts of interest with respect to the Fund or limit the Fund’s investment activities. Goldman Sachs is a worldwide full service investment banking, broker dealer, asset management and financial services organization and a major participant in global financial markets that provides a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and high-net-worth individuals. As such, it acts as an investor, investment banker, research provider, investment manager, financier, advisor, market maker, trader, prime broker, lender, agent and principal. In those and other capacities, Goldman Sachs purchases, sells and holds a broad array of investments, actively trades securities, derivatives, loans, commodities, currencies, credit default swaps, indices, baskets and other financial instruments and products for its own account or for the accounts of its customers and has other direct and indirect interests, in the global fixed income, currency, commodity, equity and other markets in which the Fund may directly and indirectly invest. Thus, it is likely that the Fund will have multiple business relationships with and will invest in, engage in transactions with, make voting decisions with respect to, or obtain services from entities for which Goldman Sachs performs or seeks to perform investment banking or other services. GSAM and/or certain of its affiliates are the managers of the Goldman Sachs Funds. GSAM and its affiliates earn fees from this and other relationships with the Fund. Although these fees are generally based on asset levels, the fees are not directly contingent on Fund performance, and Goldman Sachs would still receive significant compensation from the Fund even if shareholders lose money. Goldman Sachs and its affiliates engage in proprietary trading and advise accounts and funds which have investment objectives similar to those of the Fund and/or which engage in and compete for transactions in the same types of securities, currencies and instruments as the Fund. Goldman Sachs and its affiliates will not have any obligation to make available any information regarding their proprietary activities or strategies, or the activities or strategies used for other accounts managed by them, for the benefit of the management of the Fund. The results of the Fund’s investment activities, therefore, may differ from those of Goldman Sachs, its affiliates and other accounts managed by Goldman Sachs, and it is possible that the Fund could sustain losses during periods in which Goldman Sachs and its affiliates and other accounts achieve significant profits on their trading for proprietary or other accounts. In addition, the Fund may enter into transactions in which Goldman Sachs or its other clients have an adverse interest. For example, the Fund may take a long position in a security at the same time that Goldman Sachs or other accounts managed by GSAM take a short position in the same security (or vice versa). These and other transactions undertaken by Goldman Sachs, its affiliates or Goldman Sachs advised clients may; individually or in the aggregate adversely impact the Fund. Transactions by one or more Goldman Sachs-advised clients or GSAM may have the effect of diluting or otherwise disadvantaging the values, prices or investment strategies of the Fund. The Fund’s activities may be limited because of regulatory restrictions applicable to Goldman Sachs and its affiliates, and/or their internal policies designed to comply with such restrictions. As a global financial services firm, Goldman Sachs also provides a wide range of investment banking and financial services to issuers of securities and investors in securities. Goldman Sachs, its affiliates and others associated with it may create markets or specialize in, have positions in and affect transactions in, securities of issuers held by the Fund, and may also perform or seek to perform investment banking and financial services for those issuers. Goldman Sachs and its affiliates may have business relationships with and purchase or distribute or sell services or products from or to distributors, consultants or others who recommend the Fund or who engage in transactions with or for the Fund. For more information about conflicts of interest, see the SAI.
 
The Fund may make brokerage and other payments to Goldman Sachs and its affiliates in connection with the Fund’s portfolio investment transactions, in accordance with applicable law.


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Dividends
 
The Fund pays dividends from its investment income and distributions from net realized capital gains. You may choose to have dividends and distributions paid in:
 
  •  Cash
 
  •  Additional shares of the same class of the same Fund
 
  •  Shares of the same class of another Goldman Sachs Fund. Special restrictions may apply. See the SAI.
 
You may indicate your election on your Account Application. Any changes may be submitted in writing or via telephone, in some instances, to the Transfer Agent (either directly or through your Authorized Institution) at any time before the record date for a particular dividend or distribution. If you do not indicate any choice, your dividends and distributions will be reinvested automatically in the Fund. If cash dividends are elected with respect to the Fund’s quarterly net investment income dividends, then cash dividends must also be elected with respect to the net capital gains component, if any, of the Fund’s annual dividend and distribution payment.
 
The election to reinvest dividends and distributions in additional shares will not affect the tax treatment of such dividends and distributions, which will be treated as received by you and then used to purchase the shares.
 
Dividends from net investment income, are declared and paid quarterly, and distributions from net capital gains, if any, are declared and paid annually by the Fund.
 
From time to time a portion of the Fund’s dividends may constitute a return of capital for tax purposes, and/or may include amounts in excess of the Fund’s net investment income for the period calculated in accordance with good accounting practice.
 
When you purchase shares of the Fund, part of the NAV per share may be represented by undistributed income and/or realized gains that have previously been earned by the Fund. Therefore, subsequent distributions on such shares from such income and/or realized gains may be taxable to you even if the NAV of the shares is, as a result of the distributions, reduced below the cost of such shares and the distributions (or portions thereof) represent a return of a portion of the purchase price.


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Shareholder Guide
 
The following section describes the Class A and Institutional Shares that Goldman Sachs Rising Dividend Growth Fund will make available after the Reorganization is effected and how shareholders may buy and sell Fund shares. It also describes the Fund’s policies and procedures on excessive trading practices. After the Reorganization is effected, Goldman Sachs Rising Dividend Growth Fund also will offer other classes of shares that are not discussed in this Proxy Statement/Prospectus.
 
How to Buy Shares
 
Shares Offering
 
Shares of the Funds are continuously offered through the Distributor. In addition, certain Authorized Institutions (including certain banks, trust companies, brokers and investment advisers) may be authorized to accept, on behalf of the Fund, purchase and exchange orders and redemption requests placed by or on behalf of their customers, and if approved by the Fund, may designate other financial intermediaries to accept such orders.
 
The Fund and the Distributor will have the sole right to accept orders to purchase shares and reserve the right to reject any order in whole or in part.
 
How Can I Purchase Shares Of the Fund?
 
You may purchase shares of the Fund through Authorized Institutions. In order to make an initial investment in the Fund you must furnish to your Authorized Institution the information in the Account Application.
 
The decision as to which class to purchase depends on the amount you invest, the intended length of the investment and your personal situation. You should contact your Authorized Institution to discuss which share class option is right for you.
 
Note: Authorized Institutions may receive different compensation for selling different class shares.
 
To open an account, contact your Authorized Institution.
 
Customers of certain Authorized Institutions will normally give their purchase instructions to the Authorized Institution, and the Authorized Institution will, in turn, place purchase orders with Goldman Sachs. Authorized Institutions will set times by which purchase orders and payments must be received by them from their customers.
 
For purchases by check, the Fund will not accept checks drawn on foreign banks, third party checks, temporary checks, or cash or cash equivalents; e.g., cashier’s checks, official bank checks, money orders, travelers cheques or credit card checks. In limited situations involving the transfer of retirement assets, a Fund may accept cashier’s checks or official bank checks.
 
What Is My Minimum Investment In The Fund?
 
For each of your accounts investing in Class A Shares, the following investment minimums must be met:
 
                 
    Initial   Additional*
 
Regular Accounts
  $ 1,000     $ 50  
Employer Sponsored Benefit Plans
    No Minimum       No Minimum  
Uniform Gift/Transfer to Minors Accounts (UGMA/UTMA)
  $ 250     $ 50  
Individual Retirement Accounts and Coverdell ESAs
  $ 250     $ 50  
Automatic Investment Plan Accounts
  $ 250     $ 50  
 
 
*  No minimum additional investment requirements are imposed with respect to investors trading through intermediaries who aggregate shares in omnibus or similar accounts (e.g., retirement plan accounts, wrap program accounts or traditional brokerage house accounts).


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For Institutional Shares the following minimum investments apply:
 
       
Type of Investor
   
Minimum Investment
• Banks, trust companies or other depository institutions investing for their own account or on behalf of their clients
    $1,000,000 in Institutional Shares of a Fund alone or in combination with other assets under the management of GSAM and its affiliates
• State, county, city or any instrumentality, department, authority or agency thereof
     
• Corporations with at least $100 million in assets or in outstanding publicly traded securities
     
• “Wrap” account sponsors (provided they have an agreement covering the arrangement with GSAM)
     
• Registered investment advisers investing for accounts for which they receive asset-based fees
     
• Qualified non-profit organizations, charitable trusts, foundations and endowments
     
 
• Individual investors
    $10,000,000
• Accounts over which GSAM or its advisory affiliates have investment discretion
     
• Corporations with less than $100 million in assets or in outstanding publicly traded securities
     
 
• Section 401(k), profit sharing, money purchase pension, tax-sheltered annuity, defined benefit pension, or other employee benefit plans that are sponsored by one or more employers (including governmental or church employers) or employee organizations
    No minimum
 
The minimum investment requirement for Class A and Institutional Shares may be waived for current and former officers, partners, directors or employees of Goldman Sachs or any of its affiliates; any Trustee or officer of the Goldman Sachs Trust; brokerage or advisory clients of Goldman Sachs Private Wealth Management and accounts for which The Goldman Sachs Trust Company, N.A. acts in a fiduciary capacity (i.e., as agent or trustee); certain mutual fund “wrap” programs at the discretion of the Trust’s officers; and for other investors at the discretion of the Trust’s officers. No minimum amount is required for additional investments in such accounts.
 
What Should I Know When I Purchase Shares Through An Authorized Institution?
 
If shares of the Fund are held in a “street name” account (i.e., accounts maintained and serviced by your Authorized Institution), all recordkeeping, transaction processing and payments of distributions relating to your account will be performed by your Authorized Institution, and not by the Fund and its Transfer Agent. Since the Fund will have no record of your transactions, you should contact your Authorized Institution to purchase, redeem or exchange shares, to make changes in or give instructions concerning your account or to obtain information about your account. The transfer of shares in a “street name” account to an account with another dealer involves special procedures and may require you to obtain historical purchase information about the shares in the account from your Authorized Institution. If your Authorized Institution’s relationship with Goldman Sachs is terminated, and you do not transfer your account to another Authorized Institution, the Trust reserves the right to redeem your shares. The Trust will not be responsible for any loss in an investor’s account or tax liability resulting from a redemption.
 
Certain Authorized Institutions and other financial intermediaries may be authorized to accept, on behalf of the Trust, purchase, redemption and exchange orders placed by or on behalf of their customers, and if approved by the Trust, to designate other financial intermediaries to accept such orders. In these cases:
 
  •  The Fund will be deemed to have received an order that is in proper form when the order is accepted by an Authorized Institution or other financial intermediary on a business day, and the order will be priced at the Fund’s NAV per share (adjusted for any applicable sales charge) next determined after such acceptance.


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  •  Authorized Institutions and other financial intermediaries are responsible for transmitting accepted orders to the Funds within the time period agreed upon by them.
 
You should contact your Authorized Institution or financial intermediary to learn whether it is authorized to accept orders for the Trust.
 
Authorized Institutions that invest in shares on behalf of their customers may charge fees directly to their customer accounts in connection with their investments. You should contact your Authorized Institution for information regarding such charges, as these fees, if any, may affect the return such customers realize with respect to their investments.
 
GSAM, the Distributor and/or their affiliates may make payments or provide services to Authorized Institutions and other financial intermediaries (“Intermediaries”) to promote the sale, distribution and/or servicing of shares of the Fund and other Goldman Sachs Funds. These payments are made out of GSAM’s, Distributor’s and/or their affiliates’ own assets, and are not an additional charge to the Fund. The payments are in addition to the distribution and service fees, service fees and shareholder administration fees and sales charges described in this Prospectus. Such payments are intended to compensate Intermediaries for, among other things: marketing shares of the Fund and other Goldman Sachs Funds, which may consist of payments relating to the Fund’s inclusion on preferred or recommended fund lists or in certain sales programs sponsored by the Intermediaries; access to the Intermediaries’ registered representatives or salespersons, including at conferences and other meetings; assistance in training and education of personnel; marketing support; and/or other specified services intended to assist in the distribution and marketing of the Fund and other Goldman Sachs Funds. The payments may also, to the extent permitted by applicable regulations, contribute to various non-cash and cash incentive arrangements to promote the sale of shares, as well as sponsor various educational programs, sales contests and/or promotions. The payments by GSAM, Distributor and/or their affiliates, which are in addition to the fees paid for these services by the Fund, may also compensate Intermediaries for sub-accounting, sub-transfer agency, administrative and/or shareholder processing services. These additional payments may exceed amounts earned on these assets by GSAM, Distributor and/or their affiliates for the performance of these or similar services. The amount of these additional payments is normally not expected to exceed 0.50% (annualized) of the amount sold or invested through the Intermediaries. In addition, certain Intermediaries may have access to certain services from GSAM, Distributor and/or their affiliates, including research reports and economic analysis, and portfolio analysis tools. In certain cases, the Intermediary may not pay for these services. Please refer to the “Payments to Intermediaries” section of the SAI for more information about these payments and services.
 
The payments made by GSAM, Distributor and/or their affiliates and the services provided by an Intermediary may differ for different Intermediaries. The presence of these payments, receipt of these services and the basis on which an Intermediary compensates its registered representatives or salespersons may create an incentive for a particular Intermediary, registered representative or salesperson to highlight, feature or recommend Funds based, at least in part, on the level of compensation paid. You should contact your Authorized Institution or other financial intermediary for more information about the payments it receives and any potential conflicts of interest.
 
What Else Should I Know About Share Purchases?
 
The Trust reserves the right to:
 
  •  Refuse to open an account or require an Authorized Institution to refuse to open an account if you fail to (i) provide a Social Security Number or other taxpayer identification number; or (ii) certify that such number is correct (if required to do so under applicable law).
 
  •  Reject or restrict any purchase or exchange order by a particular purchaser (or group of related purchasers) for any reason in its discretion. Without limiting the foregoing, the Trust may reject or restrict purchase and exchange orders by a particular purchaser (or group of related purchasers) when a pattern of frequent purchases, sales or exchanges of shares of the Fund is evident, or if purchases, sales or exchanges are, or a subsequent redemption might be, of a size that would disrupt the management of the Fund.
 
  •  Close the Fund to new investors from time to time and reopen the Fund whenever it is deemed appropriate by GSAM.


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  •  Provide for, modify or waive the minimum investment requirements.
 
  •  Modify the manner in which shares are offered.
 
  •  Modify the sales charge rate applicable to future purchases of shares.
 
Generally, non-U.S. citizens and certain U.S. citizens residing outside the United States may not open an account with the Fund.
 
The Fund may allow you to purchase shares with securities instead of cash if consistent with the Fund’s investment policies and operations and if approved by GSAM.
 
Notwithstanding the foregoing, the Trust and Goldman Sachs reserve the right to reject or restrict purchase or exchange requests from any investor. The Trust and Goldman Sachs will not be liable for any loss resulting from rejected purchase or exchange orders.
 
Please be advised that abandoned or unclaimed property laws for certain states (to which your account may be subject) require financial organizations to transfer (escheat) unclaimed property (including shares of the Fund) to the appropriate state if no activity occurs in an account for a period of time specified by state law.
 
Customer Identification Program.  Federal law requires the Fund to obtain, verify and record identifying information, which will be reviewed solely for customer identification purposes, which may include the name, residential or business street address, date of birth (for an individual), Social Security Number or taxpayer identification number or other information, for each investor who opens an account directly with the Fund. Applications without the required information may not be accepted by the Fund. After accepting an application, to the extent permitted by applicable law or their customer identification program, the Funds reserve the right to: (i) place limits on transactions in any account until the identity of the investor is verified; (ii) refuse an investment in the Funds; or (iii) involuntarily redeem an investor’s shares and close an account in the event that the Fund are unable to verify an investor’s identity or obtain all required information. The Fund and its agents will not be responsible for any loss or tax liability in an investor’s account resulting from the investor’s delay in providing all required information or from closing an account and redeeming an investor’s shares pursuant to the customer identification program.
 
Common Questions Applicable to the Purchase of Class A Shares
 
What Is The Offering Price of Class A Shares?
 
The offering price of Class A Shares of the Fund is the next determined NAV per share plus an initial sales charge paid to Goldman Sachs at the time of purchase of shares.  The sales charge varies depending upon the amount you purchase. In some cases, described below, the initial sales charge may be eliminated altogether, and the offering price will be the NAV per share. The current sales charges and commissions paid to Authorized Institutions for Class A Shares of the Fund is as follows:
 
                         
        Sales Charge
 		  Maximum Dealer
    Sales Charge
 		  as Percentage of
 		  Allowance as
Amount of Purchase
 		  as Percentage of
 		  Net Amount
 		  Percentage of
(Including Sales Charge, if Any)
  Offering Price   Invested   Offering Price*
 
Less than $50,000
    5.50 %     5.82 %     5.00 %
$50,000 up to (but less than) $100,000
    4.75       4.99       4.00  
$100,000 up to (but less than) $250,000
    3.75       3.90       3.00  
$250,000 up to (but less than) $500,000
    2.75       2.83       2.25  
$500,000 up to (but less than) $1 million
    2.00       2.04       1.75  
$1 million or more
    0.00 **     0.00 **     ***  
 
 
* Dealer’s allowance may be changed periodically. During special promotions, the entire sales charge may be reallowed to Authorized Institutions. Authorized Institutions to whom substantially the entire sales charge is reallowed may be deemed to be “underwriters” under the Securities Act of 1933.


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** No sales charge is payable at the time of purchase of Class A Shares of $1 million or more, but a CDSC of 1% may be imposed in the event of certain redemptions within 18 months.
 
*** The Distributor may pay a one-time commission to Authorized Institutions who initiate or are responsible for purchases of $1 million or more of shares of the Funds equal to 1.00% of the amount under $3 million, 0.50% of the next $2 million, and 0.25% thereafter. In instances where an Authorized Institutions (including Goldman Sachs’ Private Wealth Management Unit) agrees to waive its receipt of the one-time commission described above, the CDSC on Class A Shares, generally, will be waived. The Distributor may also pay, with respect to all or a portion of the amount purchased, a commission in accordance with the foregoing schedule to Authorized Institutions who initiate or are responsible for purchases of $500,000 or more by certain Section 401(k), profit sharing, money purchase pension, tax-sheltered annuity, defined benefit pension, or other employee benefit plans (including health savings accounts) that are sponsored by one or more employers (including governmental or church employers) or employee organizations investing in the Funds which satisfy the criteria set forth below in “When Are Class A Shares Not Subject To A Sales Load?” or $1 million or more by certain “wrap” accounts. Purchases by such plans will be made at NAV with no initial sales charge, but if shares are redeemed within 18 months, a CDSC of 1% may be imposed upon the plan, the plan sponsor or the third-party administrator. In addition, Authorized Institutions will remit to the Distributor such payments received in connection with “wrap” accounts in the event that shares are redeemed within 18 months.
 
You should note that the actual sales charge that appears in your mutual fund transaction confirmation may differ slightly from the rate disclosed above in this Prospectus due to rounding calculations.
 
As indicated in the preceding chart, and as discussed further below and in the section titled “How Can The Sales Charge On Class A Shares Be Reduced?”, you may, under certain circumstances, be entitled to pay reduced sales charges on your purchases of Class A Shares or have those charges waived entirely. To take advantage of these discounts, your Authorized Institution or other financial intermediary must notify the Fund’s Transfer Agent at the time of your purchase order that a discount may apply to your current purchases. You may also be required to provide appropriate documentation to receive these discounts, including:
 
(i) Information or records regarding shares of the Fund or other Goldman Sachs Funds held in all accounts (e.g., retirement accounts) of the shareholder at the Authorized Institution or other financial intermediary;
 
(ii) Information or records regarding shares of the Fund or other Goldman Sachs Funds held in any account of the shareholder at another Authorized Institution or other financial intermediary; and
 
(iii) Information or records regarding shares of the Fundsor other Goldman Sachs Funds held at any Authorized Institution or other financial intermediary by related parties of the shareholder, such as members of the same family or household.
 
What Else Do I Need To Know About Class A Shares’ CDSC?
 
Purchases of $1 million or more of Class A Shares will be made at NAV with no initial sales charge. However, if you redeem shares within 18 months after the beginning of the month in which the purchase was made, a CDSC of 1% may be imposed. The CDSC may not be imposed if your Authorized Institution enters into an agreement with the Distributor to return all or an applicable prorated portion of its commission to the Distributor. The CDSC is waived on redemptions in certain circumstances. See “In What Situations May The CDSC On Class A Shares Be Waived Or Reduced?” below.
 
When Are Class A Shares Not Subject To A Sales Load?
 
Class A Shares of the Fund may be sold at NAV without payment of any sales charge to the following individuals and entities:
 
  •  Goldman Sachs, its affiliates or their respective officers, partners, directors or employees (including retired employees and former partners), any partnership of which Goldman Sachs is a general partner, any Trustee or officer of the Trust and designated family members of any of these individuals;
 
  •  Qualified employee benefit plans of Goldman Sachs;


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  •  Trustees or directors of investment companies for which Goldman Sachs or an affiliate acts as sponsor;
 
  •  Any employee or registered representative of any Authorized Institution or their respective spouses, children and parents;
 
  •  Banks, trust companies or other types of depository institutions;
 
  •  Any state, county or city, or any instrumentality, department, authority or agency thereof, which is prohibited by applicable investment laws from paying a sales charge or commission in connection with the purchase of shares of the Fund;
 
  •  Section 401(k), profit sharing, money purchase pension, tax-sheltered annuity, defined benefit pension, or other employee benefit plans (including health savings accounts) or SIMPLE plans that are sponsored by one or more employers (including governmental or church employers or employee organizations (“Employee Benefit Plans”) that:
 
  •  Buy shares of Goldman Sachs Funds worth $500,000 or more; or
 
  •  Have 100 or more eligible employees at the time of purchase; or
 
  •  Certify that they expect to have annual plan purchases of shares of Goldman Sachs Funds of $200,000 or more; or
 
  •  Are provided administrative services by certain third party administrators that have entered into a special service arrangement with Goldman Sachs relating to such plans; or
 
  •  Have at the time of purchase aggregate assets of at least $2,000,000.
 
  •  These requirements may be waived at the discretion of the Trust’s officers;
 
  •  Non-qualified pension plans sponsored by employers who also sponsor qualified plans that qualify for and invest in Goldman Sachs Funds at NAV without the payment of any sales charge;
 
  •  Insurance company separate accounts that make the Funds available as underlying investments in certain group annuity contracts;
 
  •  “Wrap” accounts for the benefit of clients of broker-dealers, financial institutions or financial planners, provided they have entered into an agreement with GSAM specifying aggregate minimums and certain operating policies and standards;
 
  •  Investment advisers investing for accounts for which they receive asset-based fees;
 
  •  Accounts over which GSAM or its advisory affiliates have investment discretion;
 
  •  Shareholders who roll over distributions from any tax-qualified Employee Benefit Plan or tax-sheltered annuity to an IRA which invests in the Goldman Sachs Funds if the tax-qualified Employee Benefit Plan or tax-sheltered annuity receives administrative services provided by certain third party administrators that have entered into a special service arrangement with Goldman Sachs relating to such plan or annuity;
 
  •  State sponsored 529 college savings plans; or
 
  •  Investors who qualify under other exemptions that are stated from time to time in the SAI.
 
You must certify eligibility for any of the above exemptions on your Account Application and notify your Authorized Institution and the Fund if you no longer are eligible for the exemption.
 
The Fund will grant you an exemption subject to confirmation of your entitlement by your Authorized Institution. You may be charged a fee by your Authorized Institution.
 
How Can The Sales Charge On Class A Shares Be Reduced?
 
  •  Right of Accumulation:  When buying Class A Shares in Goldman Sachs Funds, your current aggregate investment determines the initial sales load you pay. You may qualify for reduced sales charges when the current market value of holdings across Class A, Class B and/or Class C Shares, plus new purchases, reaches


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  $50,000 or more. Class A, Class B and/or Class C Shares of any of the Goldman Sachs Funds may be combined under the Right of Accumulation. If a Fund’s Transfer Agent is properly notified, the “Amount of Purchase” in the chart in the section “What Is The Offering Price of Class A Shares?” will be deemed to include all Class A, Class B and/or Class C Shares of the Goldman Sachs Funds that were held at the time of purchase by any of the following persons: (i) you, your spouse, your parents and your children; and (ii) any trustee, guardian or other fiduciary of a single trust estate or a single fiduciary account. This includes, for example, any Class A, Class B and/or Class C Shares held at a broker-dealer or other financial intermediary other than the one handling your current purchase. For purposes of applying the Right of Accumulation, shares of the Funds and any other Goldman Sachs Funds purchased by an existing client of Goldman Sachs Private Wealth Management or GS Ayco Holding LLC will be combined with Class A, Class B and/or Class C Shares and other assets held by all other Goldman Sachs Private Wealth Management accounts or accounts of GS Ayco Holding LLC, respectively. In addition, under some circumstances, Class A, Class B and/or Class C Shares of the Funds and Class A, Class B and/or Class C Shares of any other Goldman Sachs Fund purchased by partners, directors, officers or employees of certain organizations may be combined for the purpose of determining whether a purchase will qualify for the Right of Accumulation and, if qualifying, the applicable sales charge level. To qualify for a reduced sales load, you or your Authorized Institution must notify the Funds’ Transfer Agent at the time of investment that a quantity discount is applicable. If you do not notify your Authorized Institution at the time of your current purchase or a future purchase that you qualify for a quantity discount, you may not receive the benefit of a reduced sales charge that might otherwise apply. Use of this option is subject to a check of appropriate records.
 
In some circumstances, other Class A, Class B and/or Class C Shares may be aggregated with your current purchase under the Right of Accumulation as described in the SAI. For purposes of determining the “Amount of Purchase,” all Class A, Class B and/or Class C Shares currently held will be valued at their current market value.
 
  •  Statement of Intention:  You may obtain a reduced sales charge by means of a written Statement of Intention which expresses your non-binding commitment to invest (not counting reinvestments of dividends and distributions) in the aggregate $50,000 or more within a period of 13 months in Class A Shares of one or more of the Goldman Sachs Funds. Any investments you make during the period will receive the discounted sales load based on the full amount of your investment commitment. Purchases made during the previous 90 days may be included; however, capital appreciation does not apply toward these combined purchases. If the investment commitment of the Statement of Intention is not met prior to the expiration of the 13-month period, the entire amount will be subject to the higher applicable sales charge unless the failure to meet the investment commitment is due to the death of the investor. By selecting the Statement of Intention, you authorize the Transfer Agent to escrow and redeem Class A Shares in your account to pay this additional charge if the Statement of Intention is not met. You must, however, inform the Transfer Agent (either directly or through your Authorized Institution) that the Statement of Intention is in effect each time shares are purchased. Each purchase will be made at the public offering price applicable to a single transaction of the dollar amount specified on the Statement of Intention. The SAI has more information about the Statement of Intention, which you should read carefully.
 
How To Sell Shares
 
How Can I Sell Shares Of The Funds?
 
You may arrange to take money out of your account by selling (redeeming) some or all of your shares through your Authorized Institution. Generally, the Fund will redeem its shares upon request on any business day at the NAV next determined after receipt of such request in proper form, subject to any applicable CDSC. You should contact your Authorized Institution to discuss redemptions and redemption proceeds. Certain Authorized Institutions are authorized to accept redemption requests on behalf of the Funds as described under “Shares Offering.” The Fund may transfer redemption proceeds to an account with your Authorized Institution. In the alternative, your Authorized Institution may request that redemption proceeds be sent to you by check or wire (if the wire


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instructions are designated in the current records of the Transfer Agent). Redemptions may be requested by your Authorized Institution in writing, by telephone or through an electronic trading platform.
 
Generally, any redemption request that requires money to go to an account or address other than that designated in the current records of the Transfer Agent must be in writing and signed by an authorized person (a Medallion signature guarantee may be required). The written request may be confirmed by telephone with both the requesting party and the designated bank to verify instructions.
 
When Do I Need A Medallion Signature Guarantee To Redeem Shares?
 
A Medallion signature guarantee may be required if:
 
  •  A request is made in writing to redeem Class A Shares in an amount over $50,000 via check;
 
  •  You would like the redemption proceeds sent to an address that is not your address of record; or
 
  •  You would like the redemption proceeds sent to a domestic bank account that is not your bank account designated in the current records of the Transfer Agent.
 
A Medallion signature guarantee must be obtained from a bank, brokerage firm or other financial intermediary that is a member of an approved Medallion Guarantee Program or that is otherwise approved by the Trust. A notary public cannot provide a Medallion signature guarantee. Additional documentation may be required.
 
What Do I Need To Know About Telephone Redemption Requests?
 
The Trust, the Distributor and the Transfer Agent will not be liable for any loss or tax liability you may incur in the event that the Trust accepts unauthorized telephone redemption requests that the Trust reasonably believes to be genuine. The Trust may accept telephone redemption instructions from any person identifying himself or herself as the owner of an account or the owner’s registered representative where the owner has not declined in writing to use this service. Authorized Institutions may submit redemption requests by telephone. You risk possible losses if a telephone redemption is not authorized by you.
 
In an effort to prevent unauthorized or fraudulent redemption and exchange requests by telephone, Goldman Sachs and Boston Financial Data Services, Inc. (“BFDS”) each employ reasonable procedures specified by the Trust to confirm that such instructions are genuine. If reasonable procedures are not employed, the Trust may be liable for any loss due to unauthorized or fraudulent transactions. The following general policies are currently in effect:
 
  •  Telephone requests are recorded.
 
  •  Proceeds of telephone redemption requests will be sent to your address of record or authorized account designated in the current records of the Transfer Agent (unless you provide written instructions and a Medallion signature guarantee indicating another address or account).
 
  •  For the 30-day period following a change of address, telephone redemptions will only be filled by a wire transfer to the authorized account designated in the current records of the Transfer Agent (see immediately preceding bullet point). In order to receive the redemption by check during this time period, the redemption request must be in the form of a written, Medallion signature guaranteed letter.
 
  •  The telephone redemption option does not apply to shares held in a “street name” account. If your account is held in “street name,” you should contact your registered representative of record, who may make telephone redemptions on your behalf.
 
  •  The telephone redemption option may be modified or terminated at any time without prior notice.
 
  •  The Fund may redeem via check up to $50,000 in Class A Shares via telephone.


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Note: It may be difficult to make telephone redemptions in times of unusual economic or market conditions.
 
How Are Redemption Proceeds Paid?
 
By Wire:  You may arrange for your redemption proceeds to be paid as federal funds to an account with your Authorized Institution or to a domestic bank account designated in the current records of the Transfer Agent. In addition, redemption proceeds may be transmitted through an electronic trading platform to an account with your Authorized Institution. The following general policies govern wiring redemption proceeds:
 
  •  Redemption proceeds will normally be wired on the next business day in federal funds, but may be paid up to three business days following receipt of a properly executed wire transfer redemption request.
 
  •  Although redemption proceeds will normally be paid as described above, under certain circumstances, redemption requests or payments may be postponed or suspended as permitted under Section 22(e) of the Investment Company Act. Generally, under that section, redemption requests or payments may be postponed or suspended if (i) the New York Stock Exchange is closed for trading or trading is restricted; (ii) an emergency exists which makes the disposal of securities owned by a Fund or the fair determination of the value of the Fund’s net assets not reasonably practicable; or (iii) the SEC, by order, permits the suspension of the right of redemption.
 
  •  If you are selling shares you recently paid for by check or purchased by Automated Clearing House (“ACH”), the Fund will pay you when your check or ACH has cleared, which may take up to 15 days.
 
  •  If the Federal Reserve Bank is closed on the day that the redemption proceeds would ordinarily be wired, wiring the redemption proceeds may be delayed until the Federal Reserve Bank reopens.
 
  •  To change the bank 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.
 
  •  Neither the Trust nor Goldman Sachs assumes any responsibility for the performance of your bank or any other financial intermediary in the transfer process. If a problem with such performance arises, you should deal directly with your bank or any such financial intermediaries.
 
By Check:  A shareholder may elect in writing to receive redemption proceeds by check. Redemption proceeds paid by check will normally be mailed to the address of record within three business days of receipt of a properly executed redemption request. 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:
 
  •  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.
 
  •  Authorized Institutions 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, these Authorized Institutions may set times by which they must receive redemption requests. These Authorized Institutions may also require additional documentation from you.
 
The Trust reserves the right to:
 
  •  Redeem your shares in the event your Authorized Institution’s relationship with Goldman Sachs is terminated, and you do not transfer your account to another Authorized Institution with a relationship with Goldman Sachs or in the event that the Fund is no longer an option in your Retirement Plan or no longer available through your Eligible Fee-Based Program.


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  •  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.
 
  •  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.
 
  •  Reinvest any amounts (e.g., dividends, distributions or redemption proceeds) which you have elected to receive by check should your check be returned to the Fund as undeliverable or remain uncashed for six months. This provision may not apply to certain retirement or qualified accounts or to a closed account. Your participation in a systematic withdrawal program may be terminated if your checks remain uncashed. No interest will accrue on amounts represented by uncashed checks.
 
  •  Charge an additional fee in the event a redemption is made via wire transfer.
 
None of the Trust, GSAM, the sub-adviser, nor Goldman Sachs will be responsible for any loss in an investor’s account or tax liability resulting from a 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 (plus any additional amounts needed to round off purchases to the nearest full share) at NAV. 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 prospectuses before investing in any other Goldman Sachs Funds.
 
  •  If you pay a CDSC upon redemption of Class A Shares and then reinvest in Class A Shares of another Goldman Sachs Fund as described above, your account will be credited with the amount of the CDSC you paid. The reinvested shares will, however, continue to be subject to a CDSC. The holding period of the shares acquired through reinvestment will include the holding period of the redeemed shares for purposes of computing the CDSC payable upon a subsequent redemption.
 
  •  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 without the imposition of an initial sales charge or CDSC, if applicable, at the time of exchange for certain shares of another Goldman Sachs Fund. Redemption of shares (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. The exchange privilege may be materially modified or withdrawn at any time upon 60 days written notice. You should contact your Authorized Institution to arrange for exchanges of shares of a 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, although the Funds may impose a charge in the future.


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  •  The exchanged shares may later be exchanged for shares of the same class of the original Fund at the next determined NAV without the imposition of an initial sales charge or CDSC (but subject to any applicable redemption fee) if the amount in the Fund resulting from such exchanges is less than the largest amount on which you have previously paid the applicable sales charge.
 
  •  When you exchange shares subject to a CDSC, no CDSC will be charged at that time. For purposes of determining the amount of the applicable CDSC, 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 will not be affected by a subsequent exchange.
 
  •  Eligible investors may exchange certain classes of shares for another class of shares of the same Fund. For further information, contact your Authorized Institution.
 
  •  All exchanges which represent an initial investment in a Goldman Sachs Fund must satisfy the minimum initial investment requirement of that Fund. This requirement may be waived at the discretion of the Trust. Exchanges into a money market 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 BFDS may use reasonable procedures described under “What 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 Retirement 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 Shares through your bank via ACH transfer or bank draft 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 at www.goldmansachsfunds.com and from your Authorized Institution, or you may check the appropriate box on the Account Application.
 
Can My Dividends And Distributions From The Fund Be Invested In Other Goldman Sachs Funds?
 
You may elect to cross-reinvest dividends and capital gains distributions paid by a Goldman Sachs Fund in shares of the same class of other Goldman Sachs Funds.
 
  •  Shares will be purchased at NAV.
 
  •  You may elect cross-exchange into an identically registered account or a similarly registered account provided that at least one name on the account is registered identically.


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  •  You cannot make cross-reinvestments into a Goldman Sachs Fund unless that Fund’s minimum initial investment requirement is met.
 
  •  You should obtain and read the prospectus of the Fund into which dividends 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 Shares 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 cross-reinvestment 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 Fund’s minimum initial investment requirement is met.
 
  •  You should obtain and read the prospectus of the Goldman Sachs Fund into which automatic exchanges are made.
 
Can I Have Systematic Withdrawals Made On A Regular Basis?
 
You may redeem from your Class A Share account systematically via check or ACH transfer 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 A Shares because of the CDSCs that are imposed on certain redemptions of Class A 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 CDSC applicable to Class A Shares redeemed under the systematic withdrawal plan may be waived. The Fund reserves the right to limit such redemptions, on an annual basis, to 10% of the value of Class A Shares.
 
What Types of Reports Will I Be Sent Regarding My Investment?
 
Authorized Institutions and other financial intermediaries may provide varying arrangements for their clients to purchase and redeem Fund shares. In addition, Authorized Institutions and other financial intermediaries are responsible for providing to you any communication from the Fund to its 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 this Prospectus to their customers for such services.
 
You will be provided with a printed confirmation of each transaction in your account and a quarterly account statement if you invest in Class A Shares and a monthly account statement if you invest in Institutional Shares. If your account is held in “street name” (i.e., through your Authorized Institution), you will receive this information from your Authorized Institution.


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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 Goldman Sachs Funds at the appropriate phone number or address found under “Available Information” herein. The Fund will begin sending individual copies to you within 30 days after receipt of your revocation. If your account is held through an Authorized Institution, please contact the Authorized Institution to revoke your consent.
 
Distribution Services and Fees
 
What Are The Different Distribution And/Or Service Fees Paid By The Fund’s Shares?
 
The Trust has adopted a distribution and service plan (the “Plan”) under which Class A Shares bear distribution and/or service fees paid to Goldman Sachs, some of which Goldman Sachs may pay to Authorized Institutions. These financial 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 Plan 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 Plan, Goldman Sachs is entitled to a monthly fee from the Fund for distribution services equal, on an annual basis, to 0.25% of the Fund’s average daily net assets attributed to Class A Shares. Because these fees are paid out of the Fund’s 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 Authorized Institutions, Goldman Sachs and their respective officers, employees and sales representatives;
 
  •  Commissions paid to Authorized Institutions;
 
  •  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 Shares.
 
Goldman Sachs normally begins paying the annual 0.25% distribution fee for the Class A Shares as on ongoing commission to Authorized Institutions immediately. Goldman Sachs generally pays the distribution fee on a quarterly basis.
 
Restrictions on Excessive Trading Practices
 
Policies and Procedures on Excessive Trading Practices.  In accordance with the policy adopted by the Board of Trustees, the Trust discourages frequent purchases and redemptions of Fund shares and does not permit market timing or other excessive trading practices. Purchases and exchanges should be made with a view to longer-term investment purposes only that are consistent with the investment policies and practices of the respective Fund. Excessive, short-term (market timing) trading practices may disrupt portfolio management strategies, increase brokerage and administrative costs, harm Fund performance and result in dilution in the value of Fund shares held


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by longer-term shareholders. The Trust and Goldman Sachs reserve the right to reject or restrict purchase or exchange requests from any investor. The Trust and Goldman Sachs will not be liable for any loss resulting from rejected purchase or exchange orders. To minimize harm to the Trust and its shareholders (or Goldman Sachs), the Trust (or Goldman Sachs) will exercise this right if, in the Trust’s (or Goldman Sachs’) judgment, an investor has a history of excessive trading or if an investor’s trading, in the judgment of the Trust (or Goldman Sachs), has been or may be disruptive to the Fund. In making this judgment, trades executed in multiple accounts under common ownership or control may be considered together to the extent they can be identified. No waivers of the provisions of the policy established to detect and deter market timing and other excessive trading activity are permitted that would harm the Trust or its shareholders or would subordinate the interests of the Trust or its shareholders to those of Goldman Sachs or any affiliated person or associated person of Goldman Sachs.
 
To deter excessive shareholder trading, certain other Goldman Sachs Funds offered in other prospectuses impose a redemption fee on redemptions made within 30 days of purchase (60 days of purchase with respect to certain Goldman Sachs Funds offered in other prospectuses) subject to certain exceptions. As a further deterrent to excessive trading, many foreign equity securities held by the Funds are priced by an independent pricing service using fair valuation.
 
Pursuant to the policy adopted by the Board of Trustees of the Trust, Goldman Sachs has developed criteria that it uses to identify trading activity that may be excessive. Excessive trading activity in the Fund is measured by the number of “round trip” transactions in a shareholder’s account. A “round trip” includes a purchase or exchange into a Fund followed or preceded by a redemption or exchange out of the same Fund. If the Fund detects that a shareholder has completed two or more round trip transactions in a single Fund within a rolling 90-day period, the Fund may reject or restrict subsequent purchase or exchange orders by that shareholder permanently. In addition, the Fund may, in its sole discretion, permanently reject or restrict purchase or exchange orders by a shareholder if the Fund detects other trading activity that is deemed to be disruptive to the management of the Fund or otherwise harmful to the Fund. For purposes of these transaction surveillance procedures, the Fund may consider trading activity in multiple accounts under common ownership, control, or influence. A shareholder that has been restricted from participation in the Fund pursuant to this policy will be allowed to apply for re-entry after one year. A shareholder applying for re-entry must provide assurances acceptable to the Fund that the shareholder will not engage in excessive trading activities in the future.
 
Goldman Sachs may modify its surveillance procedures and criteria from time to time without prior notice regarding the detection of excessive trading or to address specific circumstances. Goldman Sachs will apply the criteria in a manner that, in Goldman Sachs’ judgment, will be uniform.
 
Fund shares may be held through omnibus arrangements maintained by financial intermediaries such as broker-dealers, investment advisers and insurance companies. In addition, Fund shares may be held in omnibus 401(k) plans, employee benefit plans, Eligible Fee-Based Programs and other group accounts. Omnibus accounts include multiple investors and such accounts typically provide the Fund with a net purchase or redemption request on any given day where the purchases and redemptions of Fund shares by the investors are netted against one another. The identity of individual investors whose purchase and redemption orders are aggregated are ordinarily not tracked by the Fund on a regular basis. A number of these intermediaries may not have the capability or may not be willing to apply the Fund’s market timing policies or any applicable redemption fee. While Goldman Sachs may monitor share turnover at the omnibus account level, the Fund’s ability to monitor and detect market timing by shareholders or apply any applicable redemption fee in these omnibus accounts may be limited in certain circumstances, and certain of these intermediaries may charge the Fund a fee for providing certain shareholder information requested as part of the Fund’s surveillance process. The netting effect makes it more difficult to identify, locate and eliminate market timing activities. In addition, those investors who engage in market timing and other excessive trading activities may employ a variety of techniques to avoid detection. There can be no assurance that the Fund and Goldman Sachs will be able to identify all those who trade excessively or employ a market timing strategy, and curtail their trading in every instance. If necessary, the Trust may prohibit additional purchases of Fund shares by a financial intermediary or by certain of the financial intermediary’s customers. Financial intermediaries may also monitor their customers’ trading activities in the Fund. The criteria used by financial intermediaries to monitor for excessive trading may differ from the criteria used by the Fund. If a financial intermediary fails to


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cooperate in the implementation or enforcement of the Trust’s excessive trading policies, the Trust may take certain actions including terminating the relationship.
 
Taxation
 
As with any investment, you should consider how your investment in the Fund will be taxed. The tax information below is provided as general information. More tax information is available in the SAI. You should consult your tax adviser about the federal, state, local or foreign tax consequences of your investment in the Fund. Except as otherwise noted, the tax information provided assumes that you are a U.S. citizen or resident.
 
Unless your investment is through an IRA or other tax-advantaged account, you should carefully consider the possible tax consequences of Fund distributions and the sale of your Fund shares.
 
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 Fund’s distributions attributable to net investment income and short-term capital gains are taxable to you as ordinary income, while any distributions of long-term capital gains are taxable as long-term capital gains, no matter how long you have owned your Fund shares.
 
Under current provisions of the Code, the maximum long-term capital gain tax rate applicable to individuals, estates, and trusts is 15%. Fund distributions to non-corporate shareholders attributable to dividends received by the Fund from U.S. and certain qualified foreign corporations will generally be taxed at the long-term capital gain rate, as long as certain other requirements are met. For these lower rates to apply, the non-corporate shareholder must own the relevant Fund shares for at least 61 days during the 121-day period beginning 60 days before the Fund’s ex-dividend date. The amount of the Fund’s distributions that would otherwise qualify for this favorable tax treatment will be reduced as a result of the Fund’s high portfolio turnover rate.
 
A sunset provision provides that the 15% long-term capital gain rate will increase to 20% and the taxation of dividends at the long-term capital gain rate will end after 2012.
 
Although distributions are generally treated as taxable to you in the year they are paid, distributions declared in October, November or December but paid in January are taxable as if they were paid in December. A percentage of the Fund’s dividends paid to corporate shareholders may be eligible for the corporate dividends-received deduction. Character and tax status of all distributions will be available to shareholders after the close of each calendar year.
 
The Fund may be subject to foreign withholding or other foreign taxes on income or gain from certain foreign securities. In general, the Fund may deduct these taxes in computing its taxable income.
 
If you buy shares of the Fund before it makes a distribution, the distribution will be taxable to you even though it may actually be a return of a portion of your investment. This is known as “buying into a dividend.”
 
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 is long-term or short-term depending on whether your holding period exceeds one year, except that any loss realized on shares held for six months or less will be treated as a long-term capital loss to the extent of any capital gain dividends that were received on the shares. Additionally, any loss realized on a sale, exchange or redemption of shares of the Fund may be disallowed under “wash sale” rules to the extent the shares disposed of are replaced with other shares of that Fund within a period of 61 days beginning 30 days before and ending 30 days after the shares are disposed of, such as pursuant to a dividend reinvestment in shares of that 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 Number or tax identification number on your Account Application. By law, the Fund must withhold 28% (currently scheduled to increase to 31% after 2012) 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 IRS instructs the Fund to do so.
 
Non-U.S. investors are generally to U.S. withholding tax and may be subject to U.S. estate tax. However, withholding is generally not required on properly designated distributions to non-U.S. investors of long-term capital gains. More information about U.S. taxation of non-U.S. investors is included in the SAI.
 
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 Fund’s 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 this Proxy Statement/Prospectus. If your account is held with an Authorized Institution, 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.


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ADDITIONAL INFORMATION ABOUT THE REORGANIZATION
 
Section 15(f) Safe Harbor
 
DGA and GSAM have agreed to use their commercially reasonable efforts to assure compliance with the conditions of Section 15(f) of the 1940 Act. Section 15(f) provides a non-exclusive safe harbor for an investment adviser or any affiliated persons thereof to receive any amount or benefit in connection with a sale of securities of, or any other interest in, such adviser which results in an assignment of an investment advisory contract with an investment company as long as two conditions are met. First, no “unfair burden” may be imposed on the investment company as a result of the transaction, or any express or implied terms, conditions or understandings applicable thereto. As defined in the 1940 Act, the term “unfair burden” includes any arrangement during the two-year period after the date on which such transaction occurs whereby the investment adviser (or predecessor or successor adviser) or any interested person of any such adviser receives or is entitled to receive any compensation, directly or indirectly, from the investment company or its security holders (other than fees for bona fide investment advisory or other services), or from any person in connection with the purchase or sale of securities or other property to, from or on behalf of the investment company (other than bona fide ordinary compensation as principal underwriter of the investment company). The Dividend Growth Trust Trustees were advised that DGA and GSAM were not aware of any circumstances relating to the Reorganization that might result in the imposition of such an “unfair burden” on Rising Dividend Growth Fund as a result of the transaction between GSAM and DGA. Second, during the three-year period immediately following the transaction, at least 75% of an investment company’s board of directors must not be “interested persons” of the investment adviser or the predecessor investment adviser within the meaning of the 1940 Act. The Goldman Sachs Trust Board of Trustees will satisfy this condition at the time of the Reorganization.
 
FINANCIAL HIGHLIGHTS
 
No financial highlights are provided for Goldman Sachs Rising Dividend Growth Fund because the Fund is newly organized and has not yet offered shares. For financial statement purposes, Rising Dividend Growth Fund will be the accounting survivor of the Reorganization. As the accounting survivor, Rising Dividend Growth Fund’s operating history will be used for Goldman Sachs Rising Dividend Growth Fund’s financial reporting purposes after the consummation of the Reorganization.
 
INFORMATION CONCERNING THE MEETING
 
Solicitation of Proxies
 
In addition to the mailing of these proxy materials, proxies may be solicited by telephone, by fax or in person by the Trustees, officers and employees of Rising Dividend Growth Fund, by personnel of Rising Dividend Growth Fund’s transfer agent, by personnel of GSAM or Goldman Sachs, or by broker-dealer firms. The Altman Group, a third party solicitation firm, has been retained to provide proxy solicitation services to your fund at a cost of approximately $27,000. GSAM will be responsible the costs of preparing and printing the Proxy Statement/Prospectus and the solicitation costs incurred in connection with the Reorganization.
 
Revoking Proxies
 
Each shareholder of your fund signing and returning a proxy has the power to revoke it at any time before it is exercised:
 
  •  By filing a written notice of revocation with your fund’s transfer agent, Huntington Asset Services, Inc., 2960 North Meridian Street, Suite 300, Indianapolis, Indiana 46208,
 
  •  By returning a duly executed proxy with a later date before the time of the meeting, or
 
  •  If a shareholder has executed a proxy but is present at the meeting and wishes to vote in person, by notifying the secretary of your fund (without complying with any formalities) at any time before it is voted.


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Being present at the meeting alone does not revoke a previously executed and returned proxy.
 
Outstanding Shares
 
Only shareholders of record on January 3, 2012 (the “record date”) are entitled to notice of and to vote at the meeting. As of the record date, the following shares of Rising Dividend Growth Fund were outstanding:
 
                 
    Shares Outstanding
 		   
Rising Dividend Growth Fund
  (as of January 3, 2012)    
 
Class A
    [          ]          
Class C
    [          ]          
Class I
    [          ]          
 
Other Business
 
Rising Dividend Growth Fund’s Board of Trustees knows of no business to be presented for consideration at the meeting other than Proposal 1. If other business is properly brought before the meeting, proxies will be voted according to the best judgment of the persons named as proxies.
 
Adjournments and Postponements
 
If, by the time scheduled for the meeting, a quorum of shareholders of Rising Dividend Growth Fund is not present or if a quorum is present but sufficient votes “for” the proposal have not been received, the persons named as proxies may propose an adjournment of the meeting to another date and time, and the meeting may be held as adjourned without further notice. Any such adjournment will require the affirmative vote of a majority of the votes cast in person or by proxy at the session of the meeting to be adjourned. The persons named as proxies will vote all proxies in favor of the adjournment that voted in favor of the proposal or that abstained. They will vote against such adjournment those proxies required to be voted against the proposal. Broker non-votes may, at the discretion of the proxies named therein, be voted in favor of adjournment. If the meeting is postponed, your fund will give notice of the postponed meeting to its shareholders.
 
Telephone and Internet Voting
 
In addition to soliciting proxies by mail, by fax or in person, Rising Dividend Growth Fund may also arrange to have votes recorded by telephone, the Internet or other electronic means. The voting procedures used in connection with such voting methods are designed to authenticate shareholders’ identities, to allow shareholders to authorize the voting of their shares in accordance with their instructions and to confirm that their instructions have been properly recorded. In the case of telephone voting, shareholders would be called at the phone number in the Rising Dividend Growth Fund’s account records and would be asked for their Social Security number or other identifying information. The shareholders would then be given an opportunity to authorize proxies to vote their shares at the meeting in accordance with their instructions. In the case of automated telephone and Internet voting, shareholders would be required to provide their identifying information and will receive a confirmation of their instructions by mail to ensure that each shareholder’s instructions have been recorded correctly.
 
Shareholders’ Proposals
 
Rising Dividend Growth Fund is not required, and does not intend, to hold meetings of shareholders each year. Instead, meetings will be held only when and if required. Any shareholders desiring to present a proposal for consideration at the next meeting for shareholders must submit the proposal in writing, so that it is received by Rising Dividend Growth Fund at 58 Riverwalk Boulevard, Building 2, Suite A, Ridgeland, South Carolina 29936 within a reasonable time before the meeting.
 
Appraisal Rights
 
If the Reorganization of Rising Dividend Growth Fund is approved at the meeting, shareholders of the Fund will not have the right to dissent and obtain payment of the fair value of their shares because the exercise of appraisal


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rights is subject to the forward pricing requirements of Rule 22c-1 under the 1940 Act, which supersede state law. Shareholders of Rising Dividend Growth Fund, however, have the right to redeem their Fund shares until the Closing Date of the Reorganization.
 
OWNERSHIP OF SHARES OF THE FUNDS
 
To the knowledge of Rising Dividend Growth Fund, as January 3, 2012, the following persons owned of record or beneficially 5% or more of the outstanding shares of the Fund:
 
             
Record Holder
  Share Class   Number of Shares   Percent of Class
    Class A        
    Class C        
    Class I        
 
Goldman Sachs Rising Dividend Growth Fund is a newly formed fund that will commence operations upon consummation of the proposed Reorganization. Therefore, Goldman Sachs Rising Dividend Growth Fund does not have any shares outstanding as of the date of this Proxy Statement/Prospectus.
 
EXPERTS
 
The financial highlights and financial statements of Rising Dividend Growth Fund for the past five fiscal years and any semi-annual period, as applicable, are incorporated by reference into this Proxy Statement/Prospectus. The financial highlights and financial statements of Rising Dividend Growth Fund for its most recent fiscal year end have been audited by BBD, LLP, an independent registered public accounting firm, as set forth in their reports thereon incorporated by reference into this registration statement. Such financial statements and financial highlights are incorporated by reference herein in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.
 
AVAILABLE INFORMATION
 
You can obtain more free information about a Fund from your investment firm or
 
With respect to Rising Dividend Growth Fund:
 
     
by writing to:
  Huntington Asset Services, Inc.
2960 N. Meridian St., Suite 300
Indianapolis, IN 59208
by calling:
  1-888-826-2520
 
The Fund’s statement of additional information and shareholder reports are available free of charge at: www.dividendgrowthadvisors.com


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With respect to Goldman Sachs Rising Dividend Growth Fund:
 
     
Class A Shares:
   
by writing to:
   
    Goldman Sachs Funds
P.O. Box 219711
Kansas City, MO 641219
     
by calling:
  1-800-526-7384
     
Institutional Shares
   
     
by writing to:
  Goldman Sachs Funds
P.O. Box 06050
Chicago, IL 60606
     
by calling:
  1-800-621-2550
 
Following the completion of the Reorganization, the Fund’s statement of additional information and (when available) shareholder reports will be available free of charge at: www.goldmansachsfunds.com.
 
Shareholder reports.  Annual and semiannual reports to shareholders, and quarterly reports filed with the SEC, provide information about each Fund’s investments. An annual report discusses market conditions and investment strategies that significantly affected a Fund’s performance during its last fiscal year.
 
Each Fund is subject to the informational requirements of the Securities Exchange Act of 1934, as amended and the 1940 Act and files reports, proxy statements and other information with the SEC. These reports, proxy statements and other information filed by the Funds and their predecessors can be inspected and copied (for a duplication fee) at the public reference facilities of the SEC at 100 F Street, N.E., Washington, D.C. Copies of these materials can also be obtained by mail from the Public Reference Branch, Office of Consumer Affairs and Information Services, SEC, Washington, D.C. 20549, at prescribed rates. In addition, copies of these documents may be viewed onscreen or downloaded from the SEC’s Internet site at http://www.sec.gov.


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EXHIBIT A — FORM OF AGREEMENT AND PLAN OF REORGANIZATION
 
Form of
 
Agreement And Plan Of Reorganization
 
This Agreement And Plan Of Reorganization (the “Agreement”) is made as of the [ • ] day of [ • ], [ • ], by and between Goldman Sachs Trust, a Delaware statutory trust (the “Acquiring Trust”), on behalf of its series Goldman Sachs Rising Dividend Growth Fund (the “Acquiring Fund”), with its principal place of business at 71 South Wacker Drive, Chicago, Illinois 60606, and Dividend Growth Trust, a Delaware statutory trust (the “Acquired Trust”), on behalf of its sole series Rising Dividend Growth Fund (the “Acquired Fund”), with its principal place of business at 58 Riverwalk Boulevard, Building 2, Suite A, Ridgeland, South Carolina 29936, and, solely for purposes of paragraph 9.2 hereof, Goldman Sachs Asset Management, L.P (“GSAM” or the “Acquiring Fund Adviser”). The Acquiring Fund and the Acquired Fund are sometimes referred to collectively herein as the “Funds” and individually as a “Fund.”
 
The (1) transfer of all of the assets of the Acquired Fund to the Acquiring Fund in exchange solely for (A) the issuance of Class A and Institutional Class shares of beneficial interest of the Acquiring Fund (collectively, the “Acquiring Fund Shares” and each, an “Acquiring Fund Share”) to the Acquired Fund, and (B) the assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund on the closing date of the Reorganization (the “Closing Date”), and (2) distribution by the Acquired Fund, on or promptly after the Closing Date as provided herein, of the Acquiring Fund Shares to the shareholders of the Acquired Fund in liquidation and dissolution of the Acquired Fund, all upon the terms and conditions hereinafter set forth in this Agreement (collectively, the “Reorganization”), are intended to constitute a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). This Agreement is intended to be and is adopted as a “plan of reorganization” within the meaning of Treasury Regulations Section 1.368-2(g).
 
Whereas, immediately prior to the Reorganization, Class C Shares of the Acquired Fund will be converted to Class A Shares of the Acquired Fund.
 
Whereas, each of the Acquired Fund and the Acquiring Fund is a series of an open-end management investment company registered pursuant to the Investment Company Act of 1940, as amended (the “Investment Company Act”).
 
Whereas, the Acquiring Fund is authorized to issue shares of beneficial interest.
 
Whereas, the Board of Trustees of the Acquired Trust and the Board of Trustees of the Acquiring Trust have determined that the Reorganization is in the best interests of the Acquired Fund shareholders and the Acquiring Fund shareholders, respectively, and is not dilutive of the interests of those shareholders.
 
Now, Therefore, in consideration of the premises of the covenants and agreements hereinafter set forth, the parties hereto covenant and agree as follows:
 
1.   Transfer Of Assets Of The Acquired Fund In Exchange For The Acquiring Fund Shares And Assumption Of The Assumed Liabilities; Liquidation And Termination Of The Acquired Fund.
 
1.1 Subject to the terms and conditions set forth herein and on the basis of the representations and warranties contained herein, the Acquired Fund will transfer all of its assets as set forth in Paragraph 1.2 hereof (the “Acquired Assets”) to the Acquiring Fund, free and clear of all liens and encumbrances and subject to no restrictions on the full transfer thereof (other than those arising under the Securities Act of 1933, as amended (the “Securities Act”)), and the Acquiring Fund agrees in exchange therefor: (i) to issue to the Acquired Fund the number of Acquiring Fund Shares, including fractional Acquiring Fund Shares, of each class with an aggregate net asset value (“NAV”) equal to the NAV of the Acquired Fund attributable to the corresponding class of the Acquired Fund’s shares, as determined in the manner set forth in Paragraphs 2.1 and 2.2 hereof; and (ii) to assume all of the liabilities and obligations of the Acquired Fund, whether accrued or contingent, known or unknown, existing at the Closing Date (collectively, the “Assumed Liabilities”). Such transactions shall take place at the Closing (as defined in Paragraph 3.1 below). For purposes of this Agreement, the Class A shares of the Acquired Fund correspond to the Class A shares of the Acquiring Fund, and the Class I shares of the Acquired Fund correspond to the Institutional


A-1

 

Class shares of the Acquiring Fund, and the term “Acquiring Fund Shares” should be read to include each such class of shares of the Acquiring Fund.
 
1.2 (a) The Acquired Assets shall consist of all of the Acquired Fund’s property, including, without limitation, all portfolio securities and instruments, dividends and interest receivables, cash, goodwill, contractual rights and choses in action of the Acquired Fund or the Acquired Trust in respect of the Acquired Fund, all other intangible property owned by the Acquired Fund, originals or copies of or access to all books and records of the Acquired Fund, and all other assets of the Acquired Fund on the Closing Date. The Acquiring Fund shall also be entitled to receive copies of or access to all records that the Acquired Trust is required to maintain under the Investment Company Act, and the rules of the Securities and Exchange Commission (the “Commission”) promulgated thereunder, or other applicable laws, to the extent such records pertain to the Acquired Fund.
 
(b) The Acquired Fund has provided the Acquiring Fund with a list of all of the Acquired Fund’s securities and other assets at least fifteen business days prior to the Closing Date. The Acquired Fund reserves the right to sell any of such securities or other assets before the Closing Date (except to the extent sales may be limited by representations of the Acquired Fund made in connection with the issuance of the tax opinion provided for in Paragraph 8.5 hereof) and agrees not to acquire any portfolio security that is not an eligible investment for, or that would violate an investment policy or restriction of, the Acquiring Fund. At least ten business days prior to the Closing Date, the Acquiring Fund will advise the Acquired Fund of any investments shown on the list of the Acquired Fund’s securities provided pursuant to this paragraph which the Acquiring Fund would not be permitted to hold (i) because such investments are not eligible investments for, or that would violate an investment policy or restriction of, the Acquiring Fund; (ii) under applicable law; or (iii) because the transfer of such investments would result in material operational or administrative difficulties to the Acquiring Fund or GSAM in connection with facilitating the orderly transition of the Fund’s assets. Under such circumstances, to the extent practicable, the Acquired Fund will, if requested by the Acquiring Fund and, to the extent permissible and consistent with its own investment objectives and policies and the fiduciary duties of the Acquired Fund’s investment adviser, sell such securities or other assets before the Closing Date.
 
1.3 The Acquired Fund will use its best efforts to discharge all of its known liabilities and obligations that are or will become due prior to the Closing. If prior to the Effective Time either party identifies a liability that the parties mutually agree should not be assumed by the Acquiring Fund, such liability shall be excluded from the Assumed Liabilities and shall be listed on a Schedule of Excluded Liabilities to be signed by the parties at Closing.
 
1.4 On or as soon after the Closing Date as is conveniently practicable (the “Liquidation Date”), the Acquired Trust shall liquidate the Acquired Fund and distribute pro rata to the Acquired Fund’s shareholders of record, determined as of the Valuation Time (the “Acquired Fund Shareholders”), the Acquiring Fund Shares received by the Acquired Fund pursuant to Paragraph 1.1 hereof. Each Acquired Fund Shareholder shall receive the number of full and fractional Acquiring Fund Shares of the class corresponding to the class of shares of beneficial interest in the Acquired Fund (the “Acquired Fund Shares”) held by such Acquired Fund Shareholder that have an aggregate NAV equal to the aggregate NAV of the Acquired Fund Shares held of record by such Acquired Fund Shareholder on the Closing Date. Such liquidation and distribution will be accomplished by the Acquired Trust instructing the Acquiring Trust to transfer the Acquiring Fund Shares then credited to the account of the Acquired Fund on the books of the Acquiring Fund to open accounts on the share records of the Acquiring Fund established and maintained by the Acquiring Fund’s transfer agent in the names of the Acquired Fund Shareholders and representing the respective pro rata number of the Acquiring Fund Shares due the Acquired Fund Shareholders. The Acquired Trust shall promptly provide the Acquiring Trust with evidence of such liquidation and distribution. All issued and outstanding Acquired Fund Shares will simultaneously be cancelled on the books of the Acquired Fund, and the Acquired Fund will be terminated as soon as reasonably practicable after such distribution, but in all events within six months after the Closing Date. The Acquiring Fund shall not issue certificates representing the Acquiring Fund Shares in connection with such exchange.
 
1.5 Ownership of Acquiring Fund Shares will be shown on the books of the Acquiring Fund’s transfer agent. Any certificates representing ownership of Acquired Fund Shares that remain outstanding on the Closing Date shall be deemed to be cancelled and shall no longer evidence ownership of Acquired Fund Shares.


A-2

 

1.6 Any transfer taxes payable upon issuance of Acquiring Fund Shares in a name other than the registered holder of the Acquired Fund Shares on the books of the Acquired Fund as of that time shall, as a condition of such issuance and transfer, be paid by the person to whom such Acquiring Fund Shares are to be issued and transferred.
 
1.7 Any reporting responsibility of the Acquired Trust with respect to the Acquired Fund, including, but not limited to, the responsibility for filing of regulatory reports, Tax Returns (as defined in Paragraph 4.1(h)(M) hereof), or other documents with the Commission, any state securities commissions, and any federal, state or local tax authorities or any other relevant regulatory authority, is and shall remain the responsibility of the Acquired Trust. The Acquired Trust agrees to file such regulatory reports, Tax Returns, and other documents on a timely basis, The Acquiring Trust shall fully cooperate with the Acquired Trust to the extent necessary for such reporting responsibilities to be discharged.
 
1.8 No sales load, contingent deferred sales charge, commission, redemption fee or other transactional fee will be charged as a result of the Reorganization. With respect to shares of the Acquired Fund, for purposes of determining any contingent deferred sales charge applicable to corresponding Acquiring Fund shares received as a result of the Reorganization, the same sales charge and schedule that applied to such Acquired Fund shares prior to the Reorganization will apply after the Reorganization and the holding period will be calculated from the date such Acquired Fund shares were initially issued by the Acquired Fund.
 
2.   Valuation
 
2.1 The NAV per share of each class of Acquiring Fund Shares and the NAV per share of each class of the Acquired Fund shall, in each case, be determined as of the close of regular trading on the New York Stock Exchange (generally, 4:00 p.m., Eastern time) on the business day preceding the Effective Time, or such earlier or later date and time as may be mutually agreed in writing by an authorized officer of each of the parties (the “Valuation Time”). The NAV of the Acquired Fund Shares and of the Acquiring Fund Shares shall be computed in the manner set forth in the Acquiring Trust’s Declaration of Trust or By-Laws and in the Acquiring Fund’s then-current prospectus and statement of additional information.
 
2.2 The number of shares of each class of Acquiring Fund Shares to be issued (including fractional shares, if any) in exchange for the Acquired Assets and the assumption of the Assumed Liabilities shall be determined by the Acquiring Fund Adviser by dividing the NAV of the Acquired Fund attributable to each class of Acquired Fund shares, as determined in accordance with Paragraph 2.1 hereof, by the NAV of each Acquiring Fund Share of the corresponding class, as determined in accordance with Paragraph 2.1 hereof.
 
2.3 The Acquiring Fund and the Acquired Fund shall cause the Acquiring Fund Adviser and Huntington Asset Services, Inc. (the “Acquired Fund Administrator”), respectively, to deliver a copy of its valuation report to the other party at the Closing. All computations of value shall be made by the Acquiring Fund Adviser and the Acquired Fund Administrator, in each case in accordance with its regular practice as pricing agent for the Acquiring Fund and the Acquired Fund, as applicable.
 
3.   Closing And Closing Date
 
3.1 The Closing Date shall be [ • ], or such earlier or later date as the parties may agree to in writing. All acts necessary to consummate the Reorganization (the “Closing”) shall be deemed to take place simultaneously immediately prior to the opening of business on [ • ], or on such other date as may be mutually agreed in writing by an authorized officer of each party (the “Effective Time”). The Closing shall be held at the offices of [ • ], or at such other place as the parties may agree.
 
3.2 Portfolio securities that are held other than in book-entry form in the name of Huntington National Bank (the “Acquired Fund Custodian”) as record holder for the Acquired Fund shall be presented by the Acquired Fund to State Street Bank and Trust Company (the “Acquiring Fund Custodian”) for examination no later than three business days preceding the Closing Date. The Acquired Trust, on behalf of the Acquired Fund, shall instruct the Acquired Fund Custodian to deliver any such portfolio securities that the Acquired Fund Custodian so holds at the Valuation Time to the Acquiring Fund Custodian for the account of the Acquiring Fund as of the Effective Time, duly endorsed in proper form for transfer, in such condition as to constitute good delivery thereof in accordance with


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the custom of brokers, and accompanied by all necessary federal and state stock transfer stamps or a check for the appropriate purchase price thereof. Portfolio securities held of record by the Acquired Fund Custodian in book-entry form on behalf of the Acquired Fund shall be delivered at the Effective Time by the Acquired Fund Custodian through the Depository Trust Company to the Acquiring Fund Custodian and by the Acquiring Fund Custodian recording the beneficial ownership thereof by the Acquiring Fund on the Acquiring Fund Custodian’s records. Any cash balances maintained by the Acquired Fund Custodian shall be delivered at the Effective Time by the Acquired Fund Custodian transmitting immediately available funds by wire transfer to the Acquiring Fund Custodian and the Acquiring Fund Custodian crediting such funds to the account of the Acquiring Fund.
 
3.3 The Acquiring Fund Custodian shall deliver at the Closing a certificate of an authorized officer stating that: (a) the Acquired Assets have been delivered in proper form to the Acquiring Fund as of the Effective Time, and (b) all necessary transfer taxes including all applicable federal and state stock transfer stamps, if any, have been paid, or provision for payment has been made in conjunction with the delivery of portfolio securities as part of the Acquired Assets.
 
3.4 If immediately prior to the Valuation Time (a) the New York Stock Exchange is closed to trading or trading thereon shall be restricted or (b) trading or the reporting of trading on such exchange or elsewhere is disrupted so that accurate appraisal of the NAV of the Acquiring Fund Shares or the Acquired Fund pursuant to Paragraph 2.1 hereof is impracticable, the Closing Date, Valuation Time and Effective Time shall be postponed until the first business day after the day when trading shall have been fully resumed and reporting shall have been restored or such later date as may be mutually agreed in writing by an authorized officer of each party.
 
3.5 The Acquired Fund shall deliver at the Closing a list of the names, addresses, federal taxpayer identification numbers and backup withholding and nonresident alien withholding status and certificates of the Acquired Fund Shareholders and the number and percentage ownership of outstanding Acquired Fund Shares owned by each Acquired Fund Shareholder as of the Valuation Time, certified by the President or Vice President or a Secretary or Assistant Secretary of the Acquired Trust and its Treasurer, Secretary or other authorized officer (the “Shareholder List”) as being an accurate record of the information (a) provided by the Acquired Fund Shareholders, (b) provided by the Acquired Fund Custodian, or (c) derived from the Acquired Trust’s records by such officers or one of the Acquired Trust’s service providers. The Acquiring Fund shall issue and deliver to the Acquired Fund a confirmation evidencing the Acquiring Fund Shares to be credited at the Effective Time, or provide evidence satisfactory to the Acquired Fund that such Acquiring Fund Shares have been credited to the Acquired Fund’s account on the books of the Acquiring Fund. At the Closing, each party shall deliver to the other such bills of sale, checks, assignments, stock certificates, receipts or other documents as such other party or its counsel may reasonably request.
 
4.   Representations And Warranties
 
4.1 Except as set forth on Schedule 4.1 of this Agreement, the Acquired Trust, on behalf of the Acquired Fund, represents, warrants and covenants to the Acquiring Trust, on behalf of the Acquiring Fund, which representations, warranties and covenants will be true and correct on the date hereof and on the Closing Date as though made on and as of the Closing Date, as follows:
 
(a) The Acquired Fund is a series of the Acquired Trust. The Acquired Trust is a statutory trust validly existing and in good standing under the laws of the State of Delaware and has the power to own all of its properties and assets and, subject to approval by the Acquired Fund’s shareholders, to perform its obligations under this Agreement. The Acquired Fund is not required to qualify to do business in any jurisdiction in which it is not so qualified or where failure to qualify would subject it to any material liability or disability. The Acquired Fund has all necessary federal, state and local authorizations to own all of its properties and assets and to carry on its business as now being conducted;
 
(b) The Acquired Trust is a registered investment company classified as a management company of the open-end type, and its registration with the Commission as an investment company under the Investment Company Act is in full force and effect;


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(c) The Acquired Trust is not in violation of, and the execution and delivery of this Agreement and the performance of its obligations under this Agreement on behalf of the Acquired Fund will not result in a violation of, any provision of the Acquired Trust’s Trust Instrument or By-Laws or any material agreement, indenture, instrument, contract, lease or other undertaking with respect to the Acquired Fund to which the Acquired Trust, on behalf of the Acquired Fund, is a party or by which the Acquired Fund or any of its assets are bound;
 
(d) No litigation or administrative proceeding or investigation of or before any court or governmental body is currently pending or to its knowledge threatened against the Acquired Fund or any of the Acquired Fund’s properties or assets. The Acquired Trust knows of no facts which could reasonably be expected to form the basis for the institution of such proceedings. Neither the Acquired Trust nor the Acquired Fund is a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially adversely affects the Acquired Fund’s business or its ability to consummate the transactions contemplated herein or would be binding upon the Acquiring Fund as the successor to the Acquired Fund;
 
(e) Neither the Acquired Trust, on behalf of the Acquired Fund, nor the Acquired Fund has any material contracts or other commitments (other than this Agreement, agreements for the purchase and sale of securities or other permitted investments, and those contracts listed in Schedule 4.1(e)) which will not be terminated at or prior to the Closing Date and no such termination will result in liability to the Acquired Fund (or the Acquiring Fund);
 
(f) The statement of assets and liabilities of the Acquired Fund, the related statements of operations and changes in net assets, and the schedule of investments, and the notes thereto, as of and for the fiscal year ended September 30, 2011, have been audited by an independent registered public accounting firm retained by the Acquired Fund, are in accordance with generally accepted accounting principles (“GAAP”) consistently applied, and fairly reflect, in all material respects, the financial condition of the Acquired Fund as of such date and the results of its operations for the period then ended, and the Acquired Fund had no known liabilities of a material amount as of the date thereof, whether actual or contingent, other than those disclosed therein. The statement of assets and liabilities will be in accordance with GAAP consistently applied and will fairly reflect, in all material respects, the financial condition of the Acquired Fund as of such date and the results of its operations for the period then ended. No significant deficiency, material weakness, fraud, significant change or other factor that could significantly affect the internal controls of the Acquired Fund has been disclosed or is required to be disclosed in the Acquired Fund’s reports on Form N-CSR to enable the chief executive officer and chief financial officer or other officers of the Acquired Trust to make the certifications required by the Sarbanes-Oxley Act, and no deficiency, weakness, fraud, change, event or other factor exists with respect to the Acquired Fund that will be required to be disclosed in the Acquiring Fund’s Form N-CSR after the Closing Date;
 
(g) Since the most recent fiscal year end, except as specifically disclosed in the Acquired Fund’s prospectus or its statement of additional information as in effect on the date of this Agreement, there has not been any material adverse change in the Acquired Fund’s financial condition, assets, liabilities, business or prospects, or any incurrence by the Acquired Fund of indebtedness, except for normal contractual obligations incurred in the ordinary course of business or in connection with the settlement of purchases and sales of portfolio securities. For the purposes of this subparagraph (g) (but not for any other purpose of this Agreement), a decline in NAV per Acquired Fund Share arising out of its normal investment operations or a decline in market values of securities in the Acquired Fund’s portfolio or a decline in net assets of the Acquired Fund as a result of redemptions shall not constitute a material adverse change;
 
(h) (A) The Acquired Fund is the sole series of the Acquired Trust. For each period for which the Acquired Trust had more than one series, the Acquired Fund was a separate series of the Acquired Trust treated as a separate corporation from each other series of the Acquired Trust under Section 851(g) of the Code. For purposes of the remainder of this Paragraph 4.1(h) (but not for any other purpose of this Agreement), references to the Acquired Fund include the Acquired Trust, for periods during which the Acquired Fund is or has been the sole series of the Acquired Trust, and the Acquired Fund, for periods during which the Acquired Trust has had more than one series;


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(B) For each taxable year of its existence, the Acquired Fund has had in effect an election to be a regulated investment company under Subchapter M of the Code, has satisfied, and, for the current taxable year, expects to satisfy, all of the requirements of Subchapter M of the Code for treatment as a regulated investment company, and for each such taxable year, the Acquired Fund has been eligible to compute its federal income tax under Section 852 of the Code. The Acquired Fund will qualify as such as of the Closing Date and will satisfy the diversification requirements of Section 851(b)(3) of the Code without regard to the last sentence of Section 851(d)(1) of the Code. The Acquired Fund has not taken any action, caused any action to be taken, failed to take any action, or caused any failure to take any action which action or failure could cause the Acquired Fund to fail to qualify as a regulated investment company under the Code. The Acquired Fund does not and will not have any tax liability under Section 4982 of the Code for any period ending on or before the Closing Date. The Acquired Fund has no earnings or profits accumulated with respect to any taxable year in which the provisions of Subchapter M of the Code did not apply to the Acquired Fund. All dividends paid by the Acquired Fund at any time prior to the Closing Date have qualified or will qualify for the dividends-paid deduction as defined in Section 561 of the Code;
 
(C) Within the times and in the manner prescribed by law, the Acquired Fund has properly filed on a timely basis all Tax Returns (as defined below) that it was required to file, and all such Tax Returns were complete and accurate in all material respects. The Acquired Fund has not been informed by any jurisdiction that the jurisdiction believes that the Acquired Fund was required to file any Tax Return that was not filed and the Acquired Fund does not know of any basis upon which a jurisdiction could assert such a position;
 
(D) The Acquired Fund has timely paid, in the manner prescribed by law, all Taxes (as defined below) that were due and payable or that were claimed to be due;
 
(E) The Acquired Fund has not waived or extended any applicable statute of limitations relating to the assessment or collection of Taxes;
 
(F) The Acquired Fund has not been notified that any examinations of the Tax Returns of the Acquired Fund are currently in progress or threatened, and no deficiencies have been asserted or assessed against the Acquired Fund as a result of any audit by the Internal Revenue Service or any state, local or foreign taxing authority, and, to its knowledge, no such deficiency has been proposed or threatened;
 
(G) The Acquired Fund has no actual or potential liability for any Tax obligation of any taxpayer other than itself. The Acquired Fund is not and has never been a member of a group of corporations with which it has filed (or been required to file) consolidated, combined or unitary Tax Returns. The Acquired Fund is not a party to any Tax allocation, sharing, or indemnification agreement;
 
(H) The unpaid Taxes of the Acquired Fund for Tax periods through the Closing Date do not exceed the accruals and reserves for Taxes (excluding accruals and reserves for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the Statement of Assets and Liabilities, as defined in Paragraph 5.7 hereof, rather than in any notes thereto. All Taxes that the Acquired Fund is or was required by law to withhold or collect have been duly withheld or collected and, to the extent required, have been timely paid to the proper governmental agency;
 
(I) The Acquired Fund has delivered to the Acquiring Fund or made available to the Acquiring Fund complete and accurate copies of all Tax Returns of the Acquired Fund, together with all related examination reports and statements of deficiency for all periods not closed under the applicable statutes of limitations and complete and correct copies of all private letter rulings, revenue agent reports, information document requests, notices of proposed deficiencies, deficiency notices, protests, petitions, closing agreements, settlement agreements, pending ruling requests and any similar documents submitted by, received by or agreed to by or on behalf of the Acquired Fund. The Acquired Fund has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Section 6662 of the Code;
 
(J) The Acquired Fund has not undergone, has not agreed to undergo, and is not required to undergo (nor will it be required as a result of the transactions contemplated in this Agreement to undergo) a change in its method of accounting resulting in an adjustment to its taxable income pursuant to Section 481 of the Code. The


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Acquired Fund (including the Acquiring Fund as its successor) will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a taxable period ending on or prior to the Closing Date; (ii) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date; (iii) installment sale or open transaction disposition made on or prior to the Closing Date; or (iv) prepaid amount received on or prior to the Closing Date;
 
(K) There are (and as of immediately following the Closing there will be) no liens on the assets of the Acquired Fund relating to or attributable to Taxes, except for Taxes not yet due and payable;
 
(L) The Tax bases of the assets of the Acquired Fund are accurately reflected on the Acquired Fund’s Tax books and records; and
 
(M) For purposes of this Agreement, “Taxes” or “Tax” shall mean all taxes, charges, fees, duties, deficiencies, customs, levies or other similar assessments or liabilities, including without limitation income, gross receipts, ad valorem, premium, value-added, excise, real property, personal property, sales, use, transfer, withholding, employment, unemployment, insurance, social security, business license, business organization, environmental, workers compensation, payroll, profits, license, lease, service, service use, severance, stamp, occupation, windfall profits, customs, duties, franchise and other taxes imposed by the United States of America or any state, local or foreign government, or any agency thereof, or other political subdivision of the United States or any such government, and any interest, fines, penalties, assessments or additions to tax resulting from, attributable to or incurred in connection with any tax or any contest or dispute thereof; and “Tax Returns” shall mean all reports, returns, declarations, statements or other information required to be supplied to a governmental or regulatory authority or agency, in connection with Taxes and any associated schedules, attachments, work papers, or other information, including any attachments, produced in connection with such items, as well as any information returns required by any governmental or regulatory authority to be provided to any other person in connection with Taxes;
 
(i) All issued and outstanding Acquired Fund Shares are, and on the Closing Date will be, validly issued and outstanding, fully paid and non-assessable by the Acquired Trust. All of the issued and outstanding Acquired Fund Shares will, at the time of Closing, be held of record by the persons and in the amounts set forth in the Shareholder List delivered at the Closing pursuant to Paragraph 3.5 hereof. There are not outstanding any options, warrants or other rights to subscribe for or purchase any Acquired Fund Shares, nor is there outstanding any security convertible into any Acquired Fund Shares;
 
(j) At the Closing Date, the Acquired Fund will have good and marketable title to the Acquired Assets, and full right, power and authority to sell, assign, transfer and deliver the Acquired Assets to the Acquiring Fund, and, upon delivery and payment for the Acquired Assets, the Acquiring Fund will acquire good and marketable title thereto, free of any liens or other encumbrances and subject to no restrictions on the full transfer thereof, except such restrictions as might arise under the Securities Act and, as previously disclosed to the Acquiring Fund, such restrictions generally applicable to the Acquired Assets of the type being transferred in the ordinary course;
 
(k) The Acquired Trust has the trust power and authority, on behalf of the Acquired Fund, to enter into and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Acquired Trust’s Board of Trustees, and, subject to the approval of the Acquired Fund’s shareholders, assuming due authorization, execution and delivery by the Acquiring Trust, on behalf of the Acquiring Fund, this Agreement will constitute a valid and binding obligation of the Acquired Trust, on behalf of the Acquired Fund, enforceable in accordance with its terms, subject as to enforcement to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights and to general equity principles;
 
(l) The information to be furnished in writing by the Acquired Fund to the Acquiring Fund for use in applications for orders, registration statements, proxy materials and other documents which may be necessary in connection with the transactions contemplated hereby and any information necessary to compute the total


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return of the Acquired Fund shall be accurate and complete and shall comply in all material respects with federal securities and other laws and regulations applicable thereto or the requirements of any form for which its use is intended, and shall not contain any untrue statement of a material fact or omit to state a material fact necessary to make the information provided not misleading;
 
(m) The information included in the proxy statement (the “Proxy Statement”) forming part of the Acquiring Trust’s Registration Statement on Form N-14 filed in connection with this Agreement (the “Registration Statement”) that has been furnished by the Acquired Fund to the Acquiring Fund for inclusion in the Registration Statement or information included in the Registration Statement concerning the Acquired Trust or the Acquired Fund that has been reviewed by the Acquired Fund, on the effective date of that Registration Statement and on the Closing Date, will conform in all material respects to the applicable requirements of the Securities Act, the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Investment Company Act and the rules and regulations of the Commission promulgated thereunder, and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading;
 
(n) Upon the effectiveness of the Registration Statement, no consent, approval, authorization or order of any court or governmental authority is required for the consummation by the Acquired Fund of the transactions contemplated by this Agreement;
 
(o) All of the issued and outstanding Acquired Fund Shares have been offered for sale and sold in compliance in all material respects with all applicable federal and state securities laws;
 
(p) The current prospectus and statement of additional information of the Acquired Fund and each prospectus and statement of additional information of the Acquired Fund used during the five-year period ending on the date of this Agreement, and any amendments or supplements thereto, conform or conformed at the time of their distribution to the public in all material respects to the applicable requirements of the Securities Act and the Investment Company Act and the rules and regulations of the Commission thereunder and do not or did not as of their dates or the dates of their distribution to the public contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which such statements were made, not materially misleading;
 
(q) The Acquired Fund currently complies in all material respects with, and for the five-year period ending on the date of this Agreement, has complied in all material respects with, the requirements of, and the rules and regulations under, the Investment Company Act, the Securities Act, the Exchange Act, state “Blue Sky” laws and all other applicable federal and state laws or regulations. The Acquired Fund currently complies in all material respects with, and for the five-year period ending on the date of this Agreement has complied in all material respects with, all investment objectives, policies, guidelines and restrictions and any compliance procedures established by the Acquired Trust with respect to the Acquired Fund. All advertising and sales material used by the Acquired Fund complies in all material respects with, and for the five-year period ending on the date of this Agreement has complied in all material respects with, the applicable requirements of the Securities Act, the Investment Company Act, the rules and regulations of the Commission promulgated thereunder, and, to the extent applicable, the Conduct Rules of the Financial Industry Regulatory Authority (“FINRA”) and any applicable state regulatory authority. All registration statements, prospectuses, reports, proxy materials or other filings required to be made or filed with the Commission, FINRA or any state securities authorities by the Acquired Fund during the five-year period ending on the date of this Agreement have been duly filed and have been approved or declared effective, if such approval or declaration of effectiveness is required by law. Such registration statements, prospectuses, reports, proxy materials and other filings under the Securities Act, the Exchange Act and the Investment Company Act (i) are or were in compliance in all material respects with the requirements of all applicable statutes and the rules and regulations promulgated thereunder and (ii) do not or did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not false or misleading;


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(r) Neither the Acquired Fund nor, to the knowledge of the Acquired Trust, any “affiliated person” of the Acquired Fund has been convicted of any felony or misdemeanor, described in Section 9(a)(1) of the Investment Company Act, nor, to the knowledge of the Acquired Trust, has any affiliated person of the Acquired Fund been the subject, or presently is the subject, of any proceeding or investigation with respect to any disqualification that would be a basis for denial, suspension or revocation of registration as an investment adviser under Section 203(e) of the Investment Advisers Act of 1940, as amended (the “Investment Advisers Act”), or Rule 206(4)-4(b) thereunder or of a broker-dealer under Section 15 of the Exchange Act, or for disqualification as an investment adviser, employee, officer or director of an investment company under Section 9 of the Investment Company Act; and
 
(s) The tax representation certificate to be delivered by the Acquired Trust on behalf of the Acquired Fund to the Acquiring Trust and Bingham McCutchen LLP at the Closing pursuant to Paragraph 7.4 hereof (the “Acquired Trust Tax Representation Certificate”) will not on the Closing Date contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading; and
 
4.2 Except as set forth on Schedule 4.2 of this Agreement, the Acquiring Trust, on behalf of the Acquiring Fund, represents, warrants and covenants to the Acquired Trust, on behalf of the Acquired Fund, which representations, warranties and covenants will be true and correct on the date hereof and on the Closing Date as though made on and as of the Closing Date, as follows:
 
(a) The Acquiring Fund is a series of the Acquiring Trust. The Acquiring Fund has not commenced operations and will not do so until the Closing. The Acquiring Trust is a statutory trust duly organized, validly existing and in good standing under the laws of the State of Delaware. The Acquiring Trust has the power to own all of its properties and assets and to perform its obligations under this Agreement. The Acquiring Fund is not required to qualify to do business in any jurisdiction in which it is not so qualified or where failure to qualify would subject it to any material liability or disability. The Acquiring Fund has all necessary federal, state and local authorizations to own all of its properties and assets and to carry on its business as now being conducted;
 
(b) The Acquiring Trust is a registered investment company classified as a management company of the open-end type, and its registration with the Commission as an investment company under the Investment Company Act is in full force and effect;
 
(c) The Acquiring Trust’s registration statement on Form N-1A with respect to the Acquiring Fund that will be in effect on the Closing Date, and the prospectus and statement of additional information of the Acquiring Fund included therein, will conform in all material respects with the applicable requirements of the Securities Act and the Investment Company Act and the rules and regulations of the Commission thereunder, and will not as of the effective date thereof and will not as of the Closing Date contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading;
 
(d) The Registration Statement with respect to the Acquiring Fund, and any amendments or supplements thereto in effect on or prior to the Closing Date included in the Registration Statement (other than information furnished by the Acquired Fund for inclusion therein or information included therein concerning the Acquired Trust or the Acquired Fund that has been reviewed by the Acquired Fund, as covered by the Acquired Fund’s representation, warranty and covenant in Paragraph 4.1(m) hereof) will conform in all material respects to the applicable requirements of the Securities Act and the Investment Company Act and the rules and regulations of the Commission thereunder. Neither the Registration Statement nor the Proxy Statement (other than information furnished by the Acquired Fund for inclusion therein or information included therein concerning the Acquired Trust or the Acquired Fund that has been reviewed by the Acquired Fund, as covered by the Acquired Fund’s representation, warranty and covenant in Paragraph 4.1(m) hereof) will contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;
 
(e) The Acquiring Trust is not in violation of, and the execution and delivery of this Agreement and performance of its obligations under this Agreement on behalf of the Acquiring Fund will not result in a


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violation of, any provision of the Acquiring Trust’s Declaration of Trust or By-Laws or any material agreement, indenture, instrument, contract, lease or other undertaking with respect to the Acquiring Fund to which the Acquiring Trust is a party or by which the Acquiring Fund or any of its assets is bound;
 
(f) No litigation or administrative proceeding or investigation of or before any court or governmental body is currently pending or threatened against the Acquiring Fund or any of the Acquiring Fund’s properties or assets. The Acquiring Trust knows of no facts which could reasonably be expected to form the basis for the institution of such proceedings. Neither the Acquiring Trust nor the Acquiring Fund is a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially adversely affects the Acquiring Fund’s business or its ability to consummate the transactions contemplated herein;
 
(g) The Acquiring Fund is a newly-formed separate series of Acquiring Trust that, immediately after the Reorganization, will be treated as a separate corporation from each other series of the Acquiring Trust under Section 851(g) of the Code. Prior to the Closing Date, the Acquiring Fund will have no assets, liabilities or operations of any kind;
 
(h) The authorized capital of the Acquiring Fund consists of an unlimited number of shares of beneficial interest, no par value per share. As of the Closing Date, the Acquiring Fund will be authorized to issue an unlimited number of shares of beneficial interest, no par value per share. The Acquiring Fund Shares to be issued and delivered to the Acquired Fund for the account of the Acquired Fund Shareholders pursuant to the terms of this Agreement will have been duly authorized on the Closing Date and, when so issued and delivered, will be validly issued and outstanding, fully paid and non-assessable. The Acquiring Fund does not have outstanding any options, warrants or other rights to subscribe for or purchase any Acquiring Fund Shares, nor is there outstanding any security convertible into any Acquiring Fund Shares;
 
(i) Upon consummation of the Reorganization, all issued and outstanding Acquiring Fund Shares, including those Acquiring Fund Shares to be delivered by the Acquiring Fund in accordance with paragraph 1.4, will be validly issued and outstanding, fully paid and non-assessable and will have been offered for sale and sold in every state and the District of Columbia in compliance in all material respects with all applicable federal and state securities laws;
 
(j) The Acquiring Trust has the trust power and authority, on behalf of the Acquiring Fund, to enter into and perform its obligations under this Agreement. The execution, delivery and performance of this Agreement have been duly authorized by all necessary action on the part of the Acquiring Trust’s Board of Trustees, and, assuming due authorization, execution and delivery by the Acquired Trust, on behalf of the Acquired Fund, this Agreement will constitute a valid and binding obligation of the Acquiring Trust, on behalf of the Acquiring Fund, enforceable in accordance with its terms, subject as to enforcement to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights and to general equity principles;
 
(k) The information to be furnished in writing by the Acquiring Fund or the Acquiring Fund Adviser for use in applications for orders, registration statements, proxy materials and other documents which may be necessary in connection with the transactions contemplated hereby shall be accurate and complete in all material respects and shall comply in all material respects with federal securities and other laws and regulations applicable thereto or the requirements of any form for which its use is intended, and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the information provided not misleading;
 
(l) No consent, approval, authorization or order of or filing with any court or governmental authority is required for the execution of this Agreement or the consummation of the transactions contemplated by the Agreement by the Acquiring Fund, except for the registration of the Acquiring Fund Shares under the Securities Act and the Investment Company Act;
 
(m) Neither the Acquiring Fund nor, to the knowledge of the Acquiring Trust, any “affiliated person” of the Acquiring Fund has been convicted of any felony or misdemeanor, described in Section 9(a)(1) of the Investment Company Act, nor, to the knowledge of the Acquiring Trust, has any affiliated person of the Acquiring Fund been the subject, or presently is the subject, of any proceeding or investigation with respect to


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any disqualification that would be a basis for denial, suspension or revocation of registration as an investment adviser under Section 203(e) of the Investment Advisers Act or Rule 206(4)-4(b) thereunder or of a broker-dealer under Section 15 of the Exchange Act, or for disqualification as an investment adviser, employee, officer or director of an investment company under Section 9 of the Investment Company Act; and
 
(n) The tax representation certificate to be delivered by the Acquiring Trust on behalf of the Acquiring Fund to the Acquired Trust and Bingham McCutchen LLP at the Closing pursuant to Paragraph 6.3 hereof (the “Acquiring Trust Tax Representation Certificate”) will not on the Closing Date contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading.
 
5.   Covenants
 
5.1 The Acquired Fund will operate its business in the ordinary course of business between the date hereof and the Closing Date. It is understood that such ordinary course of business will include the declaration and payment of customary dividends and other distributions and any other dividends and other distributions necessary or advisable (except to the extent dividends or other distributions that are not customary may be limited by representations made in connection with the issuance of the tax opinion described in Paragraph 8.5 hereof), in each case payable either in cash or in additional shares.
 
5.2 The Acquired Trust will call and hold a special meeting of the Acquired Fund’s shareholders to consider approval of this Agreement and act upon the matters set forth in the Proxy Statement and to take all other action necessary to obtain approval of the transactions contemplated herein.
 
5.3 The Acquiring Fund will prepare the notice of meeting, form of proxy and Proxy Statement (collectively, “Proxy Materials”) to be used in connection with such meeting, and will promptly prepare and file with the Commission the Registration Statement. The Acquired Trust will provide the Acquiring Fund with information reasonably requested for the preparation of the Registration Statement in compliance with the Securities Act, the Exchange Act, and the Investment Company Act.
 
5.4 The Acquired Fund covenants that the Acquiring Fund Shares to be issued hereunder are not being acquired by the Acquired Fund for the purpose of making any distribution thereof other than in accordance with the terms of this Agreement.
 
5.5 The Acquired Fund will assist the Acquiring Fund in obtaining such information as the Acquiring Fund reasonably requires concerning the beneficial ownership of the Acquired Fund Shares.
 
5.6 Subject to the provisions of this Agreement, each Fund will take, or cause to be taken, all actions, and do or cause to be done, all things reasonably necessary, proper or advisable to consummate the transactions contemplated by this Agreement.
 
5.7 The Acquired Fund shall furnish to the Acquiring Fund as of the Closing Date a statement of assets and liabilities of the Acquired Fund as of the Closing Date (“Statement of Assets and Liabilities”) setting forth the NAV (as computed pursuant to Paragraph 2.1 hereof) of the Acquired Fund as of the Valuation Time, which statement shall be prepared in accordance with GAAP consistently applied and will fairly reflect, in all material respects, the financial condition of the Acquired Fund as of such date and shall be certified by the Acquired Trust’s Treasurer or Assistant Treasurer. As promptly as practicable, but in any case within 30 days after the Closing Date, the Acquired Trust shall furnish to the Acquiring Fund, in such form as is reasonably satisfactory to the Acquiring Fund, a statement of the earnings and profits of the Acquired Fund for federal income tax purposes, and of any capital loss carryovers and other items that will be carried over to the Acquiring Fund under the Code, which statement will be certified by the Treasurer or Assistant Treasurer of the Acquired Trust.
 
5.8 Neither Fund shall take any action that is inconsistent with the representations set forth herein or, with respect to the Acquired Fund, in the Acquired Trust Tax Representation Certificate and, with respect to the Acquiring Fund, the Acquiring Trust Tax Representation Certificate.
 
5.9 Unless otherwise required pursuant to a “determination” within the meaning of Section 1313(a) of the Code, the parties hereto shall treat and report the transactions contemplated hereby as a “reorganization” within the meaning of Section 368(a) of the Code, and shall not take any position inconsistent with such treatment.


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5.10 From and after the date of this Agreement and through the time of the Closing, neither Fund will knowingly take any action, cause any action to be taken, fail to take any action or cause any failure to take any action, which action or failure to act could prevent either Fund from qualifying for treatment as a regulated investment company under the provisions of Subchapter M of the Code, except for any action specifically contemplated by this Agreement. From and after the date of this Agreement and through the time of the Closing, the Acquired Fund shall use its reasonable best efforts to qualify for treatment as a regulated investment company under the provisions of Subchapter M of the Code.
 
5.11 Each Fund shall prepare, or cause to be prepared, all of its Tax Returns for any taxable periods that end on or before the Closing Date and shall timely file, or cause to be timely filed, all such Tax Returns. Each Fund shall make any payments of Taxes required to be made by it with respect to any such Tax Returns.
 
6.   Conditions Precedent To Obligations Of The Acquired Fund
 
The obligations of the Acquired Fund to complete the transactions provided for herein shall be, at its election, subject to the performance by the Acquiring Fund of all the obligations to be performed by it hereunder on or before the Closing Date, and, in addition thereto, the following further conditions, unless waived by the Acquired Fund in writing:
 
6.1 All representations and warranties by the Acquiring Trust on behalf of the Acquiring Fund contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date with the same force and effect as if made on and as of the Closing Date;
 
6.2 The Acquiring Trust shall have delivered to the Acquired Trust on the Closing Date a certificate of the Acquiring Trust on behalf of the Acquiring Fund executed in its name by its President or Vice President and its Treasurer or Assistant Treasurer, in form and substance satisfactory to the Acquired Trust and dated as of the Closing Date, to the effect that the representations and warranties of the Acquiring Trust made in this Agreement on behalf of the Acquiring Fund are true and correct in all material respects at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, that each of the conditions to Closing in this Article 6 has been met, and as to such other matters as the Acquired Trust shall reasonably request;
 
6.3 The Acquiring Trust on behalf of the Acquiring Fund shall have delivered to the Acquired Trust and Bingham McCutchen LLP an Acquiring Trust Tax Representation Certificate, satisfactory to Bingham McCutchen LLP, in a form mutually acceptable to the Acquiring Trust and the Acquired Trust, concerning certain tax-related matters;
 
6.4 The Acquired Trust shall have received at the Closing a favorable opinion as to the due authorization of this Agreement by the Acquiring Trust, on behalf of the Acquiring Fund, and related matters of Dechert LLP, dated as of the Closing Date, in a form satisfactory to the Acquired Trust, substantially to the effect that, based upon certain facts and certifications made by the Acquiring Trust, on behalf of the Acquiring Fund and its authorized officers: (a) the Acquiring Trust is validly existing and in good standing under the laws of the State of Delaware and has the power to carry on its business as described in the Acquiring Trust’s Declaration of Trust; (b) the Acquiring Trust, with respect to the Acquiring Fund, has the requisite power and authority to execute, deliver and perform its obligations under the Agreement; (c) the execution, delivery and performance of the Agreement by the Acquiring Trust, on behalf of the Acquiring Fund, have been duly authorized by all necessary action of the Acquiring Trust; (d) the execution, delivery and performance of the Agreement by the Acquiring Trust, on behalf of the Acquiring Fund, do not conflict with or result in a violation of (i) Acquiring Trust’s Declaration of Trust or By-Laws, or (ii) any statutory law, rule or regulation of the State of Delaware applicable to the Acquiring Trust; (e) the Agreement constitutes a legal, valid and binding agreement of the Acquiring Trust, on behalf of the Acquiring Fund, enforceable against the Acquiring Trust, on behalf of the Acquiring Fund, in accordance with its terms; provided that such counsel shall be entitled to state that it expresses no opinion with respect to the validity, binding effect or enforceability of any contractual provisions purporting to provide indemnification of any person for any claims, damages, liabilities or expenses which may be limited by any applicable federal or state securities laws or as a matter of public policy; (f) to the knowledge of such counsel, no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body of the State of Delaware having jurisdiction


A-12

 

over the Acquiring Trust is required for the execution, delivery and performance of the Agreement by the Acquiring Trust, on behalf of the Acquiring Fund; (g) to the knowledge of such counsel, all regulatory or court consents, authorizations, approvals, orders or filings required to be obtained or made by the Acquiring Trust, on behalf of the Acquiring Fund, under the federal laws of the United States with respect to the issuance of Acquiring Fund Shares by the Acquiring Fund in exchange solely for the transfer of the Acquired Assets and the assumption of the Assumed Liabilities pursuant to the Agreement, have been obtained or made; and (h) to the knowledge of such counsel, and without any independent investigation, other than as disclosed on the schedule provided by the Acquiring Trust pursuant to paragraph 4.2 of this Agreement, the Acquiring Fund is not subject to any litigation or administrative proceeding that could reasonably be expected to have a materially adverse effect on the operations of the Acquiring Fund. Such opinion may state that it is solely for the benefit of the Acquired Trust and the Acquired Trust Board. Such opinion may contain such assumptions and limitations as shall be in the opinion of Dechert LLP appropriate to render the opinions expressed therein; and
 
6.5 With respect to the Acquiring Fund, the Board of Trustees of the Acquiring Trust shall have determined that the Reorganization is in the best interests of the Acquiring Fund and, based upon such determination, shall have approved this Agreement and the transactions contemplated hereby.
 
7.   Conditions Precedent To Obligations Of The Acquiring Fund
 
The obligations of the Acquiring Fund to complete the transactions provided for herein shall be, at its election, subject to the performance by the Acquired Fund of all the obligations to be performed by it hereunder on or before the Closing Date and, in addition thereto, the following further conditions, unless waived by the Acquiring Fund in writing:
 
7.1 All representations and warranties of the Acquired Trust on behalf of the Acquired Fund contained in this Agreement shall be true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated by this Agreement, as of the Closing Date with the same force and effect as if made on and as of the Closing Date;
 
7.2 The Acquired Trust shall have delivered to the Acquiring Fund a Statement of Assets and Liabilities of the Acquired Fund as of the Closing Date pursuant to Paragraph 5.7 hereof, together with a list of its portfolio securities showing the federal income tax bases and holding periods of such securities, as of the Closing Date, certified by the Acquired Trust’s Treasurer or Assistant Treasurer;
 
7.3 The Acquired Trust shall have delivered to the Acquiring Trust on the Closing Date a certificate of the Acquired Trust on behalf of the Acquired Fund executed in its name by its President or Vice President and a Treasurer or Assistant Treasurer, in form and substance reasonably satisfactory to the Acquiring Trust and dated as of the Closing Date, to the effect that the representations and warranties of the Acquired Trust made in this Agreement on behalf of the Acquired Fund are true and correct in all material respects at and as of the Closing Date, except as they may be affected by the transactions contemplated by this Agreement, that each of the conditions to Closing in this Article 7 has been met, and as to such other matters as the Acquiring Trust shall reasonably request;
 
7.4 The Acquired Trust on behalf of the Acquired Fund shall have delivered to the Acquiring Trust and Bingham McCutchen LLP an Acquired Trust Tax Representation Certificate, satisfactory to Bingham McCutchen LLP, in a form mutually acceptable to the Acquired Trust and the Acquiring Trust, concerning certain tax-related matters;
 
7.5 The Acquiring Trust shall have received at the Closing a favorable opinion as to the due authorization of this Agreement by the Acquired Trust, on behalf of the Acquired Fund, and related matters of The Law Offices of John H. Lively & Associates, Inc., dated as of the Closing Date, in a form satisfactory to the Acquiring Trust, substantially to the effect that, based upon certain facts and certifications made by the Acquired Trust, on behalf of the Acquired Fund, and its authorized officers: (a) the Acquired Trust is validly existing and in good standing under the laws of the State of Delaware and has the power to carry on its business as described in the Acquired Trust’s Trust Instrument; (b) the Acquired Trust, with respect to the Acquired Fund, has the requisite power and authority to execute, deliver and perform its obligations under the Agreement; (c) the execution, delivery and performance of the Agreement by the Acquired Trust, on behalf of the Acquired Fund, have been duly authorized by all necessary


A-13

 

action of the Acquired Trust; (d) the execution, delivery and performance of the Agreement by the Acquired Trust, on behalf of the Acquired Fund, do not conflict with or result in a violation of (i) Acquired Trust’s Trust Instrument or By-Laws, or (ii) any statutory law, rule or regulation of the State of Delaware applicable to the Acquired Trust; (e) the Agreement constitutes a legal, valid and binding agreement of the Acquired Trust, on behalf of the Acquired Fund, enforceable against the Acquired Trust, on behalf of the Acquired Fund, in accordance with its terms; provided that such counsel shall be entitled to state that it expresses no opinion with respect to the validity, binding effect or enforceability of any contractual provisions purporting to provide indemnification of any person for any claims, damages, liabilities or expenses which may be limited by any applicable federal or state securities laws or as a matter of public policy; (f) to the knowledge of such counsel, no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body of the State of Delaware having jurisdiction over the Acquired Trust is required for the execution, delivery and performance of the Agreement by the Acquired Trust, on behalf of the Acquired Fund; (g) to the knowledge of such counsel, all regulatory or court consents, authorizations, approvals, orders or filings required to be obtained or made by the Acquired Trust, on behalf of the Acquired Fund, under the federal laws of the United States with respect to the transfer of the Acquired Assets for Acquiring Fund Shares and the assumption by the Acquiring Fund of the Assumed Liabilities pursuant to this Agreement have been obtained or made; and (h) to the knowledge of such counsel, and without any independent investigation, other than as disclosed on the schedule provided by the Acquired Trust pursuant to paragraph 4.1 of this Agreement, the Acquired Fund is not subject to any litigation or administrative proceeding that could reasonably be expected to have a materially adverse effect on the operations of the Acquired Fund. Such opinion may state that it is solely for the benefit of the Acquired Trust and the Acquired Trust Board. Such opinion may contain such assumptions and limitations as shall be in the opinion of The Law Offices of John H. Lively & Associates, Inc. appropriate to render the opinions expressed therein;
 
7.6 With respect to the Acquired Fund, the Board of Trustees of the Acquired Trust shall have determined that the Reorganization is in the best interests of the Acquired Fund and, based upon such determination, shall have approved this Agreement and the transactions contemplated hereby; and
 
7.7 For six (6) years after the Closing Date, GSAM shall maintain in effect the current level and scope of officers’ and trustees’, as applicable, liability insurance or a tail insurance policy of the same level or scope for the six (6) year period, in each case covering those persons who are covered by the Acquired Trust’s, officers’ and trustees’, as applicable, liability insurance policy as of the Closing Date; provided, that in no event shall GSAM be required to expend in any one year an amount in excess of 150% of the annual premium currently paid by the Acquired Trust for such insurance, and provided, further, that if the annual premiums of such insurance coverage exceed such amount, GSAM shall be obligated to obtain a policy with the greatest coverage available for a cost not exceeding such amount.
 
8.   Further Conditions Precedent
 
If any of the conditions set forth below does not exist on or before the Closing Date with respect to either party hereto, the other party to this Agreement shall, at its option, not be required to consummate the transactions contemplated by this Agreement:
 
8.1 This Agreement and the transactions contemplated herein shall have been approved by the requisite vote of the Acquired Fund’s shareholders in accordance with the provisions of the Acquired Trust’s Trust Instrument and By-Laws, and certified copies of the resolutions evidencing such approval by the Acquired Fund’s shareholders shall have been delivered by the Acquired Fund to the Acquiring Fund. Notwithstanding anything herein to the contrary, neither party hereto may waive the conditions set forth in this Paragraph 8.1;
 
8.2 On the Closing Date, no action, suit or other proceeding shall be pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with, this Agreement or the transactions contemplated herein;
 
8.3 All consents of other parties and all other consents, orders and permits of federal, state and local regulatory authorities (including those of the Commission and of state Blue Sky and securities authorities) deemed necessary by either party hereto to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where failure to obtain any such consent, order or permit would not involve a risk


A-14

 

of a material adverse effect on the assets or properties of either party hereto, provided that either party may waive any such conditions for itself;
 
8.4 The Registration Statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued and, to the knowledge of the parties hereto, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the Securities Act;
 
8.5 The parties shall have received an opinion of Bingham McCutchen LLP, dated the Closing Date, satisfactory to the Acquired Trust and the Acquiring Trust, substantially to the effect that, based upon certain facts, assumptions and representations, and upon certifications contained in the Acquiring Trust Tax Representation Certificate and the Acquired Trust Tax Representation Certificate, for federal income tax purposes, (i) the Reorganization will constitute a “reorganization” within the meaning of Section 368(a) of the Code, and each of the Acquired Trust and the Acquiring Fund will be a “party to a reorganization” within the meaning of Section 368(b) of the Code; (ii) no gain or loss will be recognized by the Acquired Trust on the transfer of the Acquired Assets to the Acquiring Fund solely in exchange for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the Assumed Liabilities, or upon the distribution of the Acquiring Fund Shares to the shareholders of the Acquired Fund, except for (A) gain or loss that may be recognized on the transfer of “section 1256 contracts” as defined in Section 1256(b) of the Code, (B) gain that may be recognized on the transfer of stock in a “passive foreign investment company” as defined in Section 1297(a) of the Code, and (C) any other gain or loss that may be required to be recognized upon the transfer of an Acquired Asset regardless of whether such transfer would otherwise be a non-recognition transaction under the Code; (iii) the tax basis in the hands of the Acquiring Fund of each Acquired Asset will be the same as the tax basis of such Acquired Asset in the hands of the Acquired Trust immediately prior to the transfer thereof, increased by the amount of gain (or decreased by the amount of loss), if any, recognized by the Acquired Trust on the transfer; (iv) the holding period of each Acquired Asset in the hands of the Acquiring Fund, other than assets with respect to which gain or loss is required to be recognized, will include in each instance the period during which such Acquired Asset was held by the Acquired Fund (except where investment activities of the Acquiring Fund have the effect of reducing or eliminating the holding period with respect to an Asset); (v) no gain or loss will be recognized by the Acquiring Fund upon its receipt of the Acquired Assets solely in exchange for Acquiring Fund Shares and the assumption of the Assumed Liabilities; (vi) no gain or loss will be recognized by the Acquired Fund Shareholders upon the exchange of their Acquired Fund Shares for Acquiring Fund Shares as part of the Reorganization; (vii) the aggregate tax basis of the Acquiring Fund Shares that each Acquired Fund Shareholder receives in the Reorganization will be the same as the aggregate tax basis of the Acquired Fund Shares exchanged therefor; (viii) each Acquired Fund Shareholder’s holding period for the Acquiring Fund Shares received in the Reorganization will include the period for which such shareholder held the Acquired Fund Shares exchanged therefor, provided that the Acquired Fund Shareholder held such Acquired Fund Shares as capital assets on the date of the exchange. Notwithstanding anything in this Agreement to the contrary, neither Fund may waive the condition set forth in this Paragraph 8.5.
 
9.   Brokerage Fees
 
9.1 Each party hereto represents and warrants to the other party hereto that there are no brokers or finders entitled to receive any payments in connection with the transactions provided for herein.
 
9.2 GSAM will pay the proxy solicitation, mailing, printing costs and costs and expenses relating to the meeting of shareholders of the Acquired Fund attributable to the Reorganization. Notwithstanding any of the foregoing, expenses will in any event be paid by the party directly incurring such expenses if and to the extent that the payment by another person of such expenses would result in the disqualification of such party as a “regulated investment company” within the meaning of Section 851 of the Code or would prevent the Reorganization from qualifying as a tax-free reorganization.
 
10.   Entire Agreement; Survival Of Warranties; Undertaking
 
10.1 The Acquiring Trust and the Acquired Trust each agrees that neither party has made any representation, warranty or covenant not set forth herein or referred to in Paragraphs 4.1 or 4.2 or Section 5 hereof and that this


A-15

 

Agreement constitutes the entire agreement between the parties with respect to the matters covered by this Agreement.
 
10.2 The covenants to be performed after the Closing by both the Acquiring Trust and the Acquired Trust shall survive the Closing. The representations, warranties and all other covenants contained in this Agreement or in any document delivered pursuant hereto or in connection herewith shall not survive the consummation of the transactions contemplated hereunder and shall terminate on the Closing.
 
11.   Termination
 
11.1 This Agreement may be terminated by the mutual agreement of the Acquiring Trust and the Acquired Trust. In addition, either party may at its option terminate this Agreement at or prior to the Closing Date:
 
(a) because of a material breach by the other of any representation, warranty, covenant or agreement contained herein to be performed at or prior to the Closing Date;
 
(b) because of a condition herein expressed to be precedent to the obligations of the terminating party which has not been met and which reasonably appears will not or cannot be met;
 
(c) by resolution of the Acquiring Trust’s Board of Trustees if circumstances should develop that, in the good faith opinion of such Board, make proceeding with the Agreement not in the best interests of the Acquiring Fund’s shareholders;
 
(d) by resolution of the Acquired Trust’s Board of Trustees if circumstances should develop that, in the good faith opinion of such Board, make proceeding with the Agreement not in the best interests of the Acquired Fund’s shareholders; or
 
(e) if the transactions contemplated by this Agreement shall not have occurred on or prior to June 30, 2012 or such other date as the parties may mutually agree upon in writing.
 
(f) if the Sub-Advisory Agreement between GSAM and Dividend Growth Advisors, LLC has not been approved in accordance with Section 15 of the Investment Company Act and executed or is otherwise not in full force and effect on the Closing Date.
 
11.2 In the event of any such termination, there shall be no liability for damages on the part of the Acquiring Fund, the Acquiring Trust, the Acquired Trust or the Acquired Fund, or the trustees or officers of the Acquired Trust, or the Acquiring Trust, but, subject to Paragraph 9.2 hereof, each party shall bear the expenses incurred by it incidental to the preparation and carrying out of this Agreement.
 
12.   Amendments
 
This Agreement may be amended, modified or supplemented in such manner as may be mutually agreed upon in writing by the authorized officers of the Acquired Trust and the Acquiring Trust; provided, however, that following the meeting of the Acquired Fund’s shareholders called by the Acquired Trust pursuant to Paragraph 5.2 of this Agreement, no such amendment may have the effect of changing the provisions regarding the method for determining the number of Acquiring Fund Shares to be received by the Acquired Fund Shareholders under this Agreement to their detriment without their further approval; provided that nothing contained in this Paragraph 12 shall be construed to prohibit the parties from amending this Agreement to change the Closing Date.
 
13.   Notices
 
Any notice, report, statement or demand required or permitted by any provisions of this Agreement shall be in writing and shall be given by prepaid telegraph, telecopy or certified mail addressed to the Acquired Trust, 58 Riverwalk Boulevard, Building 2, Suite A, Ridgeland, South Carolina 29936, Attention: Secretary, with copies to The Law Offices of John H. Lively & Associates, Inc., 2041 W. 141st Terrace, Suite 119, Leawood, KS 66224, Attention: John H. Lively, Esq., and to the Acquiring Trust, c/o Goldman Sachs Asset Management, 200 West Street, New York, NY 10282, Attention: Peter V. Bonanno, Esq., with copies to Bingham McCutchen LLP, One Federal Street, Boston, Massachusetts 02110, Attention: Barry N. Hurwitz, Esq.


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14.   Headings; Counterparts; Governing Law; Assignment
 
14.1 The article and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
 
14.2 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original.
 
14.3 This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to conflict of laws principles (other than 6 Delaware Code § 2708); provided that, in the case of any conflict between those laws and the federal securities laws, the latter shall govern.
 
14.4 This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by either party without the prior written consent of the other party hereto. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, or other entity, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement.
 
14.5 It is expressly agreed that the obligations of the Acquiring Trust and the Acquired Trust shall not be binding upon any of their respective trustees, shareholders, nominees, officers, agents or employees personally, but bind only to the property of the Acquiring Fund or the Acquired Fund, as the case may be, as provided in the Acquiring Trust’s Declaration of Trust and the Trust Instrument of the Acquired Trust, respectively. The execution and delivery of this Agreement have been authorized by the trustees of the Acquiring Trust and of the Acquired Trust and this Agreement has been executed by authorized officers of the Acquiring Trust and the Acquired Trust, acting as such, and neither such authorization by such trustees nor such execution and delivery by such officers shall be deemed to have been made by any of them individually or to imposed any liability on any of them personally, but shall bind only the property of the Acquiring Fund and the Acquired Fund, as the case may be, as provided in the Acquiring Trust’s Declaration of Trust and the Trust Instrument of the Acquired Trust, respectively.
 
[Signature page follows.]


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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of the date first set forth above by its duly authorized officer.
 
Dividend Growth Trust
on behalf of Rising Dividend Growth Fund
 
  By: 
Name:     
Title:
 
Goldman Sachs Trust
on behalf of Goldman Sachs Rising
Dividend Growth Fund
 
  By: 
Name:     
Title:


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Schedule 4.1


A-19

 

Schedule 4.2


A-20

 

GOLDMAN SACHS RISING DIVIDEND GROWTH FUND
(a series of Goldman Sachs Trust)
71 South Wacker Drive
Chicago, Illinois 60606
STATEMENT OF ADDITIONAL INFORMATION
[     ], 2012
This Statement of Additional Information (the “SAI”) is not a Prospectus. It should be read in conjunction with the related Proxy Statement and Prospectus (also dated [ ], 2012) which covers Class A and Institutional Shares of Goldman Sachs Rising Dividend Growth Fund to be issued in exchange for shares of Rising Dividend Growth Fund, a series of Dividend Growth Trust. Please retain this SAI for further reference. To obtain a copy of the Proxy Statement/Prospectus, free of charge, please write to the Goldman Sachs Funds at the address set forth above or call the Goldman Sachs Funds at 1-800-526-7384.

1

 

         
    Page  
    3  
    3  
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    4  
GROWTH FUND
      
INTRODUCTION
     4  
    4  
    5  
    39  
    41  
    56  
    62  
    75  
    77  
    79  
    82  
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    87  
    88  
    90  
    91  
    A-1  
    B-1  
    C-1  
    D-1  

2

 

INTRODUCTION
          This SAI is intended to supplement the information provided in a Proxy Statement and Prospectus dated [ ] 2012 (the “Proxy Statement and Prospectus”) relating specifically to (i) the proposed transfer of all of the assets and the assumption of all of the liabilities of Rising Dividend Growth Fund, in exchange for shares of Goldman Sachs Rising Dividend Growth Fund to be distributed to the shareholders of Rising Dividend Growth Fund, and (ii) the solicitation by Rising Dividend Growth Fund’s Board of Trustees of proxies to be used at a special meeting of the shareholders of Rising Dividend Growth Fund to be held on February 23, 2012. Goldman Sachs Rising Dividend Growth Fund is a newly-organized fund that will commence operations upon consummation of the proposed reorganization. Please retain this Statement of Additional Information for further reference.
DOCUMENTS INCORPORATED BY REFERENCE
          This Statement of Additional Information consists of these cover pages, additional information Regarding Goldman Sachs Rising Dividend Growth Fund and the following documents, each of which was filed electronically with the Securities and Exchange Commission (the “SEC”) and is incorporated by reference herein.
1. Rising Dividend Growth Fund’s Annual Report for the fiscal year ended September 30, 2011 (File Nos. 333-83951 and 811-09497) as filed with the Securities and Exchange Commission on December 8, 2011 (Accession No. 0001035449-11-000801) is incorporated herein by reference.
2. Rising Dividend Growth Fund’s Statement of Additional Information, dated February 1, 2011 (File Nos. 333-83951 and 811-09497) as filed with the Securities and Exchange Commission on January 28, 2011 (Accession No. 0001035449-11-000067), and supplemented on March 18, 2011 (Accession No. 0001035449-11-000212) and June 30, 2011 (Accession No. 0001035449-11-000438) is incorporated herein by reference.
PRO FORMA FINANCIAL STATEMENTS
          No pro forma financial statements have been prepared and included relating to the proposed reorganization of Rising Dividend Growth Fund into Goldman Sachs Rising Dividend Growth Fund because Goldman Sachs Rising Dividend Growth Fund is a newly-organized fund and does not have any assets or liabilities as of the date hereof.

3

 

ADDITIONAL INFORMATION ABOUT GOLDMAN SACHS RISING DIVIDEND GROWTH FUND
INTRODUCTION
          Goldman Sachs Trust (the “Trust”) is an open-end, management investment company. The Trust is organized as a Delaware statutory trust and was established by a Declaration of Trust dated January 28, 1997. The Trust is a successor to a Massachusetts business trust that was combined with the Trust on April 30, 1997. Goldman Sachs Rising Dividend Growth Fund (the “Fund”), a series of the Trust, is described in this SAI. The Fund is a newly-organized fund that will commence operations upon consummation of the proposed reorganization. The Fund is offering two classes of shares in connection with such reorganization: Class A and Institutional Shares. Following the consummation of the reorganization, the Fund also will offer three other classes of shares: Class C, Class R and Class IR Shares. Only Class A and Institutional Shares are discussed in this SAI. See “SHARES OF THE TRUST.”
          Goldman Sachs Asset Management, L.P. (“GSAM”), an affiliate of Goldman, Sachs & Co. (“Goldman Sachs”), serves as the investment adviser to the Fund (the “Investment Adviser”). Dividend Growth Advisors, LLC (“DGA”) serves as the sub-adviser to the Fund (the “Sub-Adviser”). Goldman Sachs serves as the Fund’s distributor and transfer agent. The Fund’s custodian is State Street Bank and Trust Company (“State Street”).
          The following information relates to and supplements the description of the Fund’s investment policies contained in the Proxy Statement/Prospectus. See the Proxy Statement/Prospectus for a more complete description of the Fund’s investment objectives and policies. Investing in the Fund entails certain risks, and there is no assurance that the Fund will achieve its objective. Capitalized terms used but not defined herein have the same meaning as in the Proxy Statement/Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
          The Fund has a distinct investment objective and policies. There can be no assurance that the Fund’s objective will be achieved. The Fund is a non-diversified open-end management company as defined in the Investment Company Act of 1940, as amended (the “Act”). The investment objective and policies of the Fund, and the associated risks of the Fund, are discussed in the Proxy Statement/Prospectus. All investment objectives and investment policies not specifically designated as fundamental may be changed without shareholder approval. However, to the extent required by U.S. Securities and Exchange Commission (“SEC”) regulations, shareholders will be provided with sixty (60) days’ notice in the manner prescribed by the SEC before any change in the Fund’s policy to invest at least 80% of its net assets plus any borrowings for investment purposes (measured at the time of purchase) in the particular type of investment suggested by its name. Additional information about the Fund, its policies, and the investment instruments it may hold, is provided below.
          The Fund’s share price will fluctuate with market, economic and, to the extent applicable, foreign exchange conditions, so that an investment in the Fund may be worth more or less when redeemed than when purchased. The Fund should not be relied upon as a complete investment program.
          The following discussion supplements the information in the Proxy Statement/Prospectus.
General Information Regarding The Fund
          The Sub-Adviser may purchase for the Fund common stocks, preferred stocks, interests in real estate investment trusts (“REITs”), convertible debt obligations, convertible preferred stocks, equity interests in trusts, partnerships, joint ventures, limited liability companies and similar enterprises, master limited partnerships (“MLPs”) shares of other investment companies (including exchange-traded funds (“ETFs”)), warrants, stock purchase rights and synthetic and derivative instruments that have economic characteristics similar to equity securities (“equity investments”). [The Sub-Adviser utilizes first-hand fundamental research, including visiting company facilities to assess operations and to meet decision-makers, in choosing a Fund’s securities. The Sub-Adviser may also use macro analysis of numerous economic and valuation variables to anticipate changes in company earnings and the overall investment climate.]
          The Fund invests, under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at the time of purchase) (“Net Assets”) in equity investments of dividend-paying U.S. and foreign companies with market capitalizations of at least $500 million. The equity investments in which the Fund invests may include common and preferred stocks as well as MLPs and REITs. The Fund generally invests only in common and preferred stocks of companies (including REITs) that have increased dividend payments to stockholders for at least each of the past ten years. Once a company’s stock is purchased by the Fund, if the company does not increase its common stock dividend from one year to the next, the stock will generally be sold at such time as the portfolio managers determine appropriate.

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          Under normal circumstances, the Fund invests in up to approximately 50 companies. The Fund will limit its investment in MLPs to no more than 20% of its Net Assets at the time of purchase. The Fund’s MLP investments may not have increased dividend payments to partners for at least each of the past ten years. Many MLPs operate pipelines transporting crude oil, natural gas and other petroleum products along with associated facilities. The Fund’s equity investments may also include other investment companies (including mutual funds and ETFs) although such investments may not have increased dividend payments to stockholders for at least each of the past ten years. The Fund may invest up to 20% of its total assets in fixed income securities, including non-investment grade fixed income securities.
          Current income created by rising common stock dividends is an important consideration in selecting the Fund’s investments.
          THE FUND IS “NON-DIVERSIFIED” UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (“INVESTMENT COMPANY ACT”), AND MAY INVEST MORE OF ITS ASSETS IN FEWER ISSUERS THAN “DIVERSIFIED” MUTUAL FUNDS.
          Rising Dividend Growth Investment Philosophy
          The Fund’s portfolio management team believes that consistent earnings growth drives consistent dividend growth. Earnings provide the ability to pay and grow dividends. Over the long run, the team believes that consistent earnings will have a positive influence on the price performance of a stock. This is why the team begins with companies that have well established records of consistent earnings and dividend growth.
          Under normal conditions, the team generally seeks to invest in companies that: pay dividends at an increasing rate that averages approximately 10% per year over a 10-year trailing period; pay those dividends for a minimum of 10 consecutive years; are committed to distributing profits to shareholders; produce essential products and services that we need to live, such as water, food, energy and healthcare; are industry leaders, have strong brands and growing global exposure; and demonstrate an ability to manage their business with consistent earnings growth in various economic cycles. The Fund’s investments in MLPs and ETFs are not subject to the Fund’s 10-year/10% rising dividend philosophy.
          Buy Strategy. Under normal conditions, the team selects stocks for the Fund by seeking companies with strong earnings growth potential, and generally places special emphasis on those companies that it believes demonstrate: financial stability; strong market position with solid pricing power; effective management leadership; prominent brand recognition; and strong patent position. Current income created by rising common stock dividends is an important consideration in selecting the Fund’s investments.
          Sell Discipline. Whenever a stock’s 10-year trailing dividend growth rate declines below 10% or a company fails to increase its dividend, the position is eliminated from the portfolio at such time as the portfolio managers determine appropriate. The team may also sell a security if the portfolio managers believe a company’s dividend payment is in jeopardy, its fundamentals are likely to deteriorate, its valuations become excessive, a better investment opportunity becomes available, or in order to meet shareholder redemptions.
DESCRIPTION OF INVESTMENT SECURITIES AND PRACTICES
Corporate Debt Obligations
          The Fund may, under normal market conditions, invest in corporate debt obligations, including obligations of industrial, utility and financial issuers. Corporate debt obligations include bonds, notes, debentures and other obligations of corporations to pay interest and repay principal. Corporate debt obligations are subject to the risk of an issuer’s inability to meet principal and interest payments on the obligations and may also be subject to price volatility due to such factors as market interest rates, market perception of the creditworthiness of the issuer and general market liquidity.
          Corporate debt obligations rated BBB or Baa are considered medium grade obligations with speculative characteristics, and adverse economic conditions or changing circumstances may weaken their issuers’ capacity to pay interest and repay principal. Medium to lower rated and comparable non-rated securities tend to offer higher yields than higher rated securities with the same maturities because the historical financial condition of the issuers of such securities may not have been as strong as that of other issuers. The price of corporate debt obligations will generally fluctuate in response to fluctuations in supply and demand for similarly rated securities. In addition, the price of corporate debt obligations will generally fluctuate in response to interest rate levels. Fluctuations in the

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prices of portfolio securities subsequent to their acquisition will not affect cash income from such securities but will be reflected in the Fund’s NAV. Because medium to lower rated securities generally involve greater risks of loss of income and principal than higher rated securities, investors should consider carefully the relative risks associated with investment in securities which carry medium to lower ratings and in comparable unrated securities. In addition to the risk of default, there are the related costs of recovery on defaulted issues. The Sub-Adviser will attempt to reduce these risks through portfolio diversification and by analysis of each issuer and its ability to make timely payments of income and principal, as well as broad economic trends and corporate developments.
          The Sub-Adviser employs its own credit research and analysis, which includes a study of an issuer’s existing debt, capital structure, ability to service debt and to pay dividends, the issuer’s sensitivity to economic conditions, its operating history and the current earnings trend. The Sub-Adviser continually monitors the investments in the Fund’s portfolio and evaluates whether to dispose of or to retain corporate debt obligations whose credit ratings or credit quality may have changed. If after its purchase, a portfolio security is assigned a lower rating or ceases to be rated, the Fund may continue to hold the security if the Sub-Adviser believes it is in the best interest of the Fund and its shareholders.
Commercial Paper and Other Short-Term Corporate Obligations
          The Fund may invest in commercial paper and other short-term obligations issued or guaranteed by U.S. corporations, non-U.S. corporations or other entities. Commercial paper represents short-term unsecured promissory notes issued in bearer form by banks or bank holding companies, corporations and finance companies.
U.S. Government Securities
          The Fund may invest in U.S. Government Securities. Some U.S. Government Securities (such as Treasury bills, notes and bonds, which differ only in their interest rates, maturities and times of issuance) are supported by the full faith and credit of the United States. Others, such as obligations issued or guaranteed by U.S. government agencies, instrumentalities or sponsored enterprises, are supported either by (i) the right of the issuer to borrow from the U.S. Treasury, (ii) the discretionary authority of the U.S. government to purchase certain obligations of the issuer or (iii) only the credit of the issuer. The U.S. government is under no legal obligation, in general, to purchase the obligations of its agencies, instrumentalities or sponsored enterprises. No assurance can be given that the U.S. government will provide financial support to the U.S. government agencies, instrumentalities or sponsored enterprises in the future.
          U.S. Government Securities include (to the extent consistent with the Act) securities for which the payment of principal and interest is backed by an irrevocable letter of credit issued by the U.S. government, or its agencies, instrumentalities or sponsored enterprises. U.S. Government Securities may also include (to the extent consistent with the Act) participations in loans made to foreign governments or their agencies that are guaranteed as to principal and interest by the U.S. government or its agencies, instrumentalities or sponsored enterprises. The secondary market for certain of these participations is extremely limited. In the absence of a suitable secondary market, such participations are regarded as illiquid.
          The Fund may also purchase U.S. Government Securities in private placements and may also invest in separately traded principal and interest components of securities guaranteed or issued by the U.S. Treasury that are traded independently under the separate trading of registered interest and principal of securities program (“STRIPS”). The Fund may also invest in zero coupon U.S. Treasury Securities and in zero coupon securities issued by financial institutions which represent a proportionate interest in underlying U.S. Treasury Securities. A zero coupon security pays no interest to its holder during its life and its value consists of the difference between its face value at maturity and its cost. The market prices of zero coupon securities generally are more volatile than the market prices of securities that pay interest periodically.
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

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government regulation. 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.
          Certificates of deposit are certificates evidencing the obligation of a bank to repay funds deposited with it for a specified period of time at a specified rate. Certificates of deposit are negotiable instruments and are similar to saving deposits but have a definite maturity and are evidenced by a certificate instead of a passbook entry. Banks are required to keep reserves against all certificates of deposit. Fixed time deposits are bank obligations payable at a stated maturity date and bearing interest at a fixed rate. Fixed time deposits may be withdrawn on the demand by the investor, but may be subject to early withdrawal penalties which vary depending upon market conditions and the remaining maturity of the obligation. The Fund may invest in deposits in U.S. and European banks satisfying the standards set forth above.
Zero Coupon Bonds
          The Fund’s investments in fixed income securities may include zero coupon bonds. Zero coupon bonds are debt obligations issued or purchased at a discount from face value. The discount approximates the total amount of interest the bonds would have accrued and compounded over the period until maturity. Zero coupon bonds do not require the periodic payment of interest. Such investments benefit the issuer by mitigating its need for cash to meet debt service but also require a higher rate of return to attract investors who are willing to defer receipt of such cash. Such investments may experience greater volatility in market value than debt obligations which provide for regular payments of interest. In addition, if an issuer of zero coupon bonds held by the Fund defaults, the Fund may obtain no return at all on its investment. The Fund will accrue income on such investments for each taxable year which (net of deductible expenses, if any) is distributable to shareholders and which, because no cash is generally received at the time of accrual, may require the liquidation of other portfolio securities to obtain sufficient cash to satisfy the Fund’s distribution obligations.
Variable and Floating Rate Securities
          The interest rates payable on certain fixed income securities in which the Fund may invest are not fixed and may fluctuate based upon changes in market rates. A variable rate obligation has an interest rate which is adjusted at pre-designated periods in response to changes in the market rate of interest on which the interest rate is based. Variable and floating rate obligations are less effective than fixed rate instruments at locking in a particular yield. Nevertheless, such obligations may fluctuate in value in response to interest rate changes if there is a delay between changes in market interest rates and the interest reset date for the obligation, or for other reasons.
Custodial Receipts and Trust Certificates
          The Fund may invest in custodial receipts and trust certificates, which may be underwritten by securities dealers or banks, representing interests in securities held by a custodian or trustee. The securities so held may include U.S. Government Securities, municipal securities or other types of securities in which the Fund may invest. The custodial receipts or trust certificates are underwritten by securities dealers or banks and may evidence ownership of future interest payments, principal payments or both on the underlying securities, or, in some cases, the payment obligation of a third party that has entered into an interest rate swap or other arrangement with the custodian or trustee. For certain securities laws purposes, custodial receipts and trust certificates may not be considered obligations of the U.S. government or other issuer of the securities held by the custodian or trustee. As a holder of custodial receipts and trust certificates, the Fund will bear its proportionate share of the fees and expenses charged to the custodial account or trust. The Fund may also invest in separately issued interests in custodial receipts and trust certificates.
          Although under the terms of a custodial receipt or trust certificate the Fund would be typically authorized to assert its rights directly against the issuer of the underlying obligation, the Fund could be required to assert through the custodian bank or trustee those rights as may exist against the underlying issuers. Thus, in the event an

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underlying issuer fails to pay principal and/or interest when due, the Fund may be subject to delays, expenses and risks that are greater than those that would have been involved if the Fund had purchased a direct obligation of the issuer. In addition, in the event that the trust or custodial account in which the underlying securities have been deposited is determined to be an association taxable as a corporation, instead of a non-taxable entity, the yield on the underlying securities would be reduced in recognition of any taxes paid.
          Certain custodial receipts and trust certificates may be synthetic or derivative instruments that have interest rates that reset inversely to changing short-term rates and/or have embedded interest rate floors and caps that require the issuer to pay an adjusted interest rate if market rates fall below or rise above a specified rate. Because some of these instruments represent relatively recent innovations, and the trading market for these instruments is less developed than the markets for traditional types of instruments, it is uncertain how these instruments will perform under different economic and interest-rate scenarios. Also, because these instruments may be leveraged, their market values may be more volatile than other types of fixed income instruments and may present greater potential for capital gain or loss. The possibility of default by an issuer or the issuer’s credit provider may be greater for these derivative instruments than for other types of instruments. In some cases, it may be difficult to determine the fair value of a derivative instrument because of a lack of reliable objective information and an established secondary market for some instruments may not exist. In many cases, the Internal Revenue Service (“IRS”) has not ruled on the tax treatment of the interest or payments received on the derivative instruments and, accordingly, purchases of such instruments are based on the opinion of counsel to the sponsors of the instruments.
Mortgage Loans and Mortgage-Backed Securities
          The Fund may invest in mortgage loans and mortgage pass-through securities and other securities representing an interest in or collateralized by adjustable and fixed rate mortgage loans (“Mortgage-Backed Securities”).
          Mortgage-Backed Securities are subject to both call risk and extension risk. Because of these risks, these securities can have significantly greater price and yield volatility than traditional fixed income securities.
General Characteristics of Mortgage Backed Securities.
          In general, each mortgage pool underlying Mortgage-Backed Securities consists of mortgage loans evidenced by promissory notes secured by first mortgages or first deeds of trust or other similar security instruments creating a first lien on owner occupied and non-owner occupied one-unit to four-unit residential properties, multi-family (i.e., five-units or more) properties, agricultural properties, commercial properties and mixed use properties (the “Mortgaged Properties”). The Mortgaged Properties may consist of detached individual dwelling units, multi-family dwelling units, individual condominiums, townhouses, duplexes, triplexes, fourplexes, row houses, individual units in planned unit developments, other attached dwelling units (“Residential Mortgaged Properties”) or commercial properties, such as office properties, retail properties, hospitality properties, industrial properties, healthcare related properties or other types of income producing real property (“Commercial Mortgaged Properties”). Residential Mortgaged Properties may also include residential investment properties and second homes. In addition, the Mortgage-Backed Securities which are residential mortgage-backed securities may also consist of mortgage loans evidenced by promissory notes secured entirely or in part by second priority mortgage liens on Residential Mortgaged Properties.
          The investment characteristics of adjustable and fixed rate Mortgage-Backed Securities differ from those of traditional fixed income securities. The major differences include the payment of interest and principal on Mortgage-Backed Securities on a more frequent (usually monthly) schedule, and the possibility that principal may be prepaid at any time due to prepayments on the underlying mortgage loans or other assets. These differences can result in significantly greater price and yield volatility than is the case with traditional fixed income securities. As a result, if the Fund purchases Mortgage-Backed Securities at a premium, a faster than expected prepayment rate will reduce both the market value and the yield to maturity from those which were anticipated. A prepayment rate that is slower than expected will have the opposite effect, increasing yield to maturity and market value. Conversely, if the Fund purchases Mortgage-Backed Securities at a discount, faster than expected prepayments will increase, while slower than expected prepayments will reduce yield to maturity and market value. To the extent that the Fund

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invests in Mortgage-Backed Securities, the Sub-Adviser may seek to manage these potential risks by investing in a variety of Mortgage-Backed Securities and by using certain hedging techniques.
          Prepayments on a pool of mortgage loans are influenced by changes in current interest rates and a variety of economic, geographic, social and other factors (such as changes in mortgagor housing needs, job transfers, unemployment, mortgagor equity in the mortgage properties and servicing decisions). The timing and level of prepayments cannot be predicted. A predominant factor affecting the prepayment rate on a pool of mortgage loans is the difference between the interest rates on outstanding mortgage loans and prevailing mortgage loan interest rates (giving consideration to the cost of any refinancing). Generally, prepayments on mortgage loans will increase during a period of falling mortgage interest rates and decrease during a period of rising mortgage interest rates. Accordingly, the amounts of prepayments available for reinvestment by the Fund are likely to be greater during a period of declining mortgage interest rates. If general interest rates decline, such prepayments are likely to be reinvested at lower interest rates than the Fund was earning on the mortgage-backed securities that were prepaid. Due to these factors, mortgage-backed securities may be less effective than U.S. Treasury and other types of debt securities of similar maturity at maintaining yields during periods of declining interest rates. Because the Fund’s investments in Mortgage-Backed Securities are interest-rate sensitive, the Fund’s performance will depend in part upon the ability of the Fund to anticipate and respond to fluctuations in market interest rates and to utilize appropriate strategies to maximize returns to the Fund, while attempting to minimize the associated risks to its investment capital. Prepayments may have a disproportionate effect on certain mortgage-backed securities and other multiple class pass-through securities, which are discussed below.
          The rate of interest paid on mortgage-backed securities is normally lower than the rate of interest paid on the mortgages included in the underlying pool due to (among other things) the fees paid to any servicer, special servicer and trustee for the trust fund which holds the mortgage pool, other costs and expenses of such trust fund, fees paid to any guarantor, such as Ginnie Mae (as defined below) or to any credit enhancers, mortgage pool insurers, bond insurers and/or hedge providers, and due to any yield retained by the issuer. Actual yield to the holder may vary from the coupon rate, even if adjustable, if the mortgage-backed securities are purchased or traded in the secondary market at a premium or discount. In addition, there is normally some delay between the time the issuer receives mortgage payments from the servicer and the time the issuer (or the trustee of the trust fund which holds the mortgage pool) makes the payments on the mortgage-backed securities, and this delay reduces the effective yield to the holder of such securities.
          The issuers of certain mortgage-backed obligations may elect to have the pool of mortgage loans (or indirect interests in mortgage loans) underlying the securities treated as a REMIC, which is subject to special federal income tax rules. A description of the types of mortgage loans and mortgage-backed securities in which the Fund may invest is provided below. The descriptions are general and summary in nature, and do not detail every possible variation of the types of securities that are permissible investments for the Fund.
          Certain General Characteristics of Mortgage Loans
          Adjustable Rate Mortgage Loans (“ARMs”). The Fund may invest in ARMs. ARMs generally provide for a fixed initial mortgage interest rate for a specified period of time. Thereafter, the interest rates (the “Mortgage Interest Rates”) may be subject to periodic adjustment based on changes in the applicable index rate (the “Index Rate”). The adjusted rate would be equal to the Index Rate plus a fixed percentage spread over the Index Rate established for each ARM at the time of its origination. ARMs allow the Fund to participate in increases in interest rates through periodic increases in the securities coupon rates. During periods of declining interest rates, coupon rates may readjust downward resulting in lower yields to the Fund.
          Adjustable interest rates can cause payment increases that some mortgagors may find difficult to make. However, certain ARMs may provide that the Mortgage Interest Rate may not be adjusted to a rate above an applicable lifetime maximum rate or below an applicable lifetime minimum rate for such ARM. Certain ARMs may also be subject to limitations on the maximum amount by which the Mortgage Interest Rate may adjust for any single adjustment period (the “Maximum Adjustment”). Other ARMs (“Negatively Amortizing ARMs”) may provide instead or as well for limitations on changes in the monthly payment on such ARMs. Limitations on monthly payments can result in monthly payments which are greater or less than the amount necessary to amortize a Negatively Amortizing ARM by its maturity at the Mortgage Interest Rate in effect in any particular month. In the

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event that a monthly payment is not sufficient to pay the interest accruing on a Negatively Amortizing ARM, any such excess interest is added to the principal balance of the loan, causing negative amortization, and will be repaid through future monthly payments. It may take borrowers under Negatively Amortizing ARMs longer periods of time to build up equity and may increase the likelihood of default by such borrowers. In the event that a monthly payment exceeds the sum of the interest accrued at the applicable Mortgage Interest Rate and the principal payment which would have been necessary to amortize the outstanding principal balance over the remaining term of the loan, the excess (or “accelerated amortization”) further reduces the principal balance of the ARM. Negatively Amortizing ARMs do not provide for the extension of their original maturity to accommodate changes in their Mortgage Interest Rate. As a result, unless there is a periodic recalculation of the payment amount (which there generally is), the final payment may be substantially larger than the other payments. After the expiration of the initial fixed rate period and upon the periodic recalculation of the payment to cause timely amortization of the related mortgage loan, the monthly payment on such mortgage loan may increase substantially which may, in turn, increase the risk of the borrower defaulting in respect of such mortgage loan. These limitations on periodic increases in interest rates and on changes in monthly payments protect borrowers from unlimited interest rate and payment increases, but may result in increased credit exposure and prepayment risks for lenders. When interest due on a mortgage loan is added to the principal balance of such mortgage loan, the related mortgaged property provides proportionately less security for the repayment of such mortgage loan. Therefore, if the related borrower defaults on such mortgage loan, there is a greater likelihood that a loss will be incurred upon any liquidation of the mortgaged property which secures such mortgage loan.
          ARMs also have the risk of prepayment. The rate of principal prepayments with respect to ARMs has fluctuated in recent years. The value of Mortgage-Backed Securities collateralized by ARMs is less likely to rise during periods of declining interest rates than the value of fixed-rate securities during such periods. Accordingly, ARMs may be subject to a greater rate of principal repayments in a declining interest rate environment resulting in lower yields to the Fund. For example, if prevailing interest rates fall significantly, ARMs could be subject to higher prepayment rates (than if prevailing interest rates remain constant or increase) because the availability of low fixed-rate mortgages may encourage mortgagors to refinance their ARMs to “lock-in” a fixed-rate mortgage. On the other hand, during periods of rising interest rates, the value of ARMs will lag behind changes in the market rate. ARMs are also typically subject to maximum increases and decreases in the interest rate adjustment which can be made on any one adjustment date, in any one year, or during the life of the security. In the event of dramatic increases or decreases in prevailing market interest rates, the value of the Fund’s investment in ARMs may fluctuate more substantially because these limits may prevent the security from fully adjusting its interest rate to the prevailing market rates. As with fixed-rate mortgages, ARM prepayment rates vary in both stable and changing interest rate environments.
          There are two main categories of indices which provide the basis for rate adjustments on ARMs: those based on U.S. Treasury securities and those derived from a calculated measure, such as a cost of funds index or a moving average of mortgage rates. Indices commonly used for this purpose include the one-year, three-year and five-year constant maturity Treasury rates, the three-month Treasury bill rate, the 180-day Treasury bill rate, rates on longer-term Treasury securities, the 11th District Federal Home Loan Bank Cost of Funds, the National Median Cost of Funds, the one-month, three-month, six-month or one-year London Interbank Offered Rate, the prime rate of a specific bank, or commercial paper rates. Some indices, such as the one-year constant maturity Treasury rate, closely mirror changes in market interest rate levels. Others, such as the 11th District Federal Home Loan Bank Cost of Funds index, tend to lag behind changes in market rate levels and tend to be somewhat less volatile. The degree of volatility in the market value of ARMs in the Fund’s portfolio and, therefore, in the net asset value of the Fund’s shares, will be a function of the length of the interest rate reset periods and the degree of volatility in the applicable indices.
          Fixed-Rate Mortgage Loans. Generally, fixed-rate mortgage loans included in mortgage pools (the “Fixed-Rate Mortgage Loans”) will bear simple interest at fixed annual rates and have original terms to maturity ranging from 5 to 40 years. Fixed-Rate Mortgage Loans generally provide for monthly payments of principal and interest in substantially equal installments for the term of the mortgage note in sufficient amounts to fully amortize principal by maturity, although certain Fixed-Rate Mortgage Loans provide for a large final “balloon” payment upon maturity.
          Certain Legal Considerations of Mortgage Loans. The following is a discussion of certain legal and regulatory aspects of the mortgage loans in which the Fund may invest. This discussion is not exhaustive, and does

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not address all of the legal or regulatory aspects affecting mortgage loans. These regulations may impair the ability of a mortgage lender to enforce its rights under the mortgage documents. These regulations may also adversely affect the Fund’s investments in Mortgage-Backed Securities (including those issued or guaranteed by the U.S. government, its agencies or instrumentalities) by delaying the Fund’s receipt of payments derived from principal or interest on mortgage loans affected by such regulations.
1.   Foreclosure. A foreclosure of a defaulted mortgage loan may be delayed due to compliance with statutory notice or service of process provisions, difficulties in locating necessary parties or legal challenges to the mortgagee’s right to foreclose. Depending upon market conditions, the ultimate proceeds of the sale of foreclosed property may not equal the amounts owed on the Mortgage-Backed Securities. Furthermore, courts in some cases have imposed general equitable principles upon foreclosure generally designed to relieve the borrower from the legal effect of default and have required lenders to undertake affirmative and expensive actions to determine the causes for the default and the likelihood of loan reinstatement.
 
2.   Rights of Redemption. In some states, after foreclosure of a mortgage loan, the borrower and foreclosed junior lienors are given a statutory period in which to redeem the property, which right may diminish the mortgagee’s ability to sell the property.
 
3.   Legislative Limitations. In addition to anti-deficiency and related legislation, numerous other federal and state statutory provisions, including the federal bankruptcy laws and state laws affording relief to debtors, may interfere with or affect the ability of a secured mortgage lender to enforce its security interest. For example, a bankruptcy court may grant the debtor a reasonable time to cure a default on a mortgage loan, including a payment default. The court in certain instances may also reduce the monthly payments due under such mortgage loan, change the rate of interest, reduce the principal balance of the loan to the then-current appraised value of the related mortgaged property, alter the mortgage loan repayment schedule and grant priority of certain liens over the lien of the mortgage loan. If a court relieves a borrower’s obligation to repay amounts otherwise due on a mortgage loan, the mortgage loan servicer will not be required to advance such amounts, and any loss may be borne by the holders of securities backed by such loans. In addition, numerous federal and state consumer protection laws impose penalties for failure to comply with specific requirements in connection with origination and servicing of mortgage loans.
 
4.   “Due-on-Sale” Provisions. Fixed-rate mortgage loans may contain a so-called “due-on-sale” clause permitting acceleration of the maturity of the mortgage loan if the borrower transfers the property. The Garn-St. Germain Depository Institutions Act of 1982 sets forth nine specific instances in which no mortgage lender covered by that Act may exercise a “due-on-sale” clause upon a transfer of property. The inability to enforce a “due-on-sale” clause or the lack of such a clause in mortgage loan documents may result in a mortgage loan being assumed by a purchaser of the property that bears an interest rate below the current market rate.
 
5.   Usury Laws. Some states prohibit charging interest on mortgage loans in excess of statutory limits. If such limits are exceeded, substantial penalties may be incurred and, in some cases, enforceability of the obligation to pay principal and interest may be affected.
 
6.   Recent Governmental Action, Legislation and Regulation. The rise in the rate of foreclosures of properties in certain states or localities has resulted in legislative, regulatory and enforcement action in such states or localities seeking to prevent or restrict foreclosures, particularly in respect of residential mortgage loans. Actions have also been brought against issuers and underwriters of residential mortgage-backed securities collateralized by such residential mortgage loans and investors in such residential mortgage-backed securities. Legislative or regulatory initiatives by federal, state or local legislative bodies or administrative agencies, if enacted or adopted, could delay foreclosure or the exercise of other remedies, provide new defenses to foreclosure, or otherwise impair the ability of the loan servicer to foreclose or realize on a defaulted residential mortgage loan included in a pool of residential mortgage loans backing such residential mortgage-backed securities. While the nature or extent of limitations on foreclosure or exercise of other remedies that may be enacted cannot be predicted, any such governmental actions that interfere with the foreclosure process could increase the costs of such foreclosures or exercise of other remedies in respect of residential mortgage loans which collateralize Mortgage-Backed Securities held by the

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    Fund, delay the timing or reduce the amount of recoveries on defaulted residential mortgage loans which collateralize Mortgage-Backed Securities held by the Fund, and consequently, could adversely impact the yields and distributions the Fund may receive in respect of its ownership of Mortgage-Backed Securities collateralized by residential mortgage loans. For example, the recently-enacted Helping Families Save Their Homes Act of 2009 authorized bankruptcy courts to assist bankrupt borrowers by restructuring residential mortgage loans secured by a lien on the borrower’s primary residence. Bankruptcy judges are permitted to reduce the interest rate of the bankrupt borrower’s residential mortgage loan, extend its term to maturity to up to 40 years or take other actions to reduce the borrower’s monthly payment. As a result, the value of, and the cash flows in respect of, the Mortgage-Backed Securities collateralized by these residential mortgage loans may be adversely impacted, and, as a consequence, the Fund’s investment in such Mortgage-Backed Securities could be adversely impacted. Other federal legislation, including the Home Affordability Modification Program (“HAMP”), encourages servicers to modify residential mortgage loans that are either already in default or are at risk of imminent default. Furthermore, HAMP provides incentives for servicers to modify residential mortgage loans that are contractually current. This program, as well other legislation and/or governmental intervention designed to protect consumers, may have an adverse impact on servicers of residential mortgage loans by increasing costs and expenses of these servicers while at the same time decreasing servicing cash flows. Such increased financial pressures may have a negative effect on the ability of servicers to pursue collection on residential mortgage loans that are experiencing increased delinquencies and defaults and to maximize recoveries on the sale of underlying residential mortgaged properties following foreclosure. Other legislative or regulatory actions include insulation of servicers from liability for modification of residential mortgage loans without regard to the terms of the applicable servicing agreements. The foregoing legislation and current and future governmental regulation activities may have the effect of reducing returns to the Fund to the extent it has invested in Mortgage-Backed Securities collateralized by these residential mortgage loans.
Mortgage Pass-Through Securities
          To the extent consistent with its investment policies, the Fund may invest in both government guaranteed and privately issued mortgage pass-through securities (“Mortgage Pass-Throughs”) that are fixed or adjustable rate Mortgage-Backed Securities which provide for monthly payments that are a “pass-through” of the monthly interest and principal payments (including any prepayments) made by the individual borrowers on the pooled mortgage loans, net of any fees or other amounts paid to any guarantor, administrator and/or servicer of the underlying mortgage loans. The seller or servicer of the underlying mortgage obligations will generally make representations and warranties to certificate-holders as to certain characteristics of the mortgage loans and as to the accuracy of certain information furnished to the trustee in respect of each such mortgage loan. Upon a breach of any representation or warranty that materially and adversely affects the interests of the related certificate-holders in a mortgage loan, the seller or servicer generally may be obligated either to cure the breach in all material respects, to repurchase the mortgage loan or, if the related agreement so provides, to substitute in its place a mortgage loan pursuant to the conditions set forth therein. Such a repurchase or substitution obligation may constitute the sole remedy available to the related certificate-holders or the trustee for the material breach of any such representation or warranty by the seller or servicer.
          The following discussion describes certain aspects of only a few of the wide variety of structures of Mortgage Pass-Throughs that are available or may be issued.
          General Description of Certificates. Mortgage Pass-Throughs may be issued in one or more classes of senior certificates and one or more classes of subordinate certificates. Each such class may bear a different pass-through rate. Generally, each certificate will evidence the specified interest of the holder thereof in the payments of principal or interest or both in respect of the mortgage pool comprising part of the trust fund for such certificates.
          Any class of certificates may also be divided into subclasses entitled to varying amounts of principal and interest. If a REMIC election has been made, certificates of such subclasses may be entitled to payments on the basis of a stated principal balance and stated interest rate, and payments among different subclasses may be made on a sequential, concurrent, pro rata or disproportionate basis, or any combination thereof. The stated interest rate on any such subclass of certificates may be a fixed rate or one which varies in direct or inverse relationship to an objective interest index.

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          Generally, each registered holder of a certificate will be entitled to receive its pro rata share of monthly distributions of all or a portion of principal of the underlying mortgage loans or of interest on the principal balances thereof, which accrues at the applicable mortgage pass-through rate, or both. The difference between the mortgage interest rate and the related mortgage pass-through rate (less the amount, if any, of retained yield) with respect to each mortgage loan will generally be paid to the servicer as a servicing fee. Because certain adjustable rate mortgage loans included in a mortgage pool may provide for deferred interest (i.e., negative amortization), the amount of interest actually paid by a mortgagor in any month may be less than the amount of interest accrued on the outstanding principal balance of the related mortgage loan during the relevant period at the applicable mortgage interest rate. In such event, the amount of interest that is treated as deferred interest will generally be added to the principal balance of the related mortgage loan and will be distributed pro rata to certificate-holders as principal of such mortgage loan when paid by the mortgagor in subsequent monthly payments or at maturity.
          Government Guaranteed Mortgage-Backed Securities. There are several types of government guaranteed Mortgage-Backed Securities currently available, including guaranteed mortgage pass-through certificates and multiple class securities, which include guaranteed Real Estate Mortgage Investment Conduit Certificates (“REMIC Certificates”), other collateralized mortgage obligations and stripped Mortgage-Backed Securities. The Fund is permitted to invest in other types of Mortgage-Backed Securities that may be available in the future to the extent consistent with its investment policies and objective.
          The Fund’s investments in Mortgage-Backed Securities may include securities issued or guaranteed by the U.S. Government or one of its agencies, authorities, instrumentalities or sponsored enterprises, such as the Government National Mortgage Association (“Ginnie Mae”), Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”). Ginnie Mae securities are backed by the full faith and credit of the U.S. Government, which means that the U.S. Government guarantees that the interest and principal will be paid when due. Fannie Mae and Freddie Mac securities are not backed by the full faith and credit of the U.S. Government. Fannie Mae and Freddie Mac have the ability to borrow from the U.S. Treasury, and as a result, they are generally viewed by the market as high quality securities with low credit risks. From time to time, proposals have been introduced before Congress for the purpose of restricting or eliminating federal sponsorship of Fannie Mae and Freddie Mac that issue guaranteed Mortgage-Backed Securities. The Trust cannot predict what legislation, if any, may be proposed in the future in Congress as regards such sponsorship or which proposals, if any, might be enacted. Such proposals, if enacted, might materially and adversely affect the availability of government guaranteed Mortgage-Backed Securities and the liquidity and value of the Fund’s portfolio.
          There is risk that the U.S. Government will not provide financial support to its agencies, authorities, instrumentalities or sponsored enterprises. The Fund may purchase U.S. Government Securities that are not backed by the full faith and credit of the U.S. Government, such as those issued by Fannie Mae and Freddie Mac. The maximum potential liability of the issuers of some U.S. Government Securities held by the Fund may greatly exceed such issuers’ current resources, including such issuers’ legal right to support from the U.S. Treasury. It is possible that these issuers will not have the funds to meet their payment obligations in the future.
          Below is a general discussion of certain types of guaranteed Mortgage-Backed Securities in which the Fund may invest.
          Ginnie Mae Certificates. Ginnie Mae is a wholly-owned corporate instrumentality of the United States. Ginnie Mae is authorized to guarantee the timely payment of the principal of and interest on certificates that are based on and backed by a pool of mortgage loans insured by the Federal Housing Administration (“FHA”), or guaranteed by the Veterans Administration (“VA”), or by pools of other eligible mortgage loans. In order to meet its obligations under any guaranty, Ginnie Mae is authorized to borrow from the United States Treasury in an unlimited amount. The National Housing Act provides that the full faith and credit of the U.S. Government is pledged to the timely payment of principal and interest by Ginnie Mae of amounts due on Ginnie Mae certificates.
          Fannie Mae Certificates. Fannie Mae is a stockholder-owned corporation chartered under an act of the United States Congress. Generally, Fannie Mae Certificates are issued and guaranteed by Fannie Mae and represent an undivided interest in a pool of mortgage loans (a “Pool”) formed by Fannie Mae. A Pool consists of residential mortgage loans either previously owned by Fannie Mae or purchased by it in connection with the formation of the Pool. The mortgage loans may be either conventional mortgage loans (i.e., not insured or guaranteed by any U.S.

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Government agency) or mortgage loans that are either insured by the FHA or guaranteed by the VA. However, the mortgage loans in Fannie Mae Pools are primarily conventional mortgage loans. The lenders originating and servicing the mortgage loans are subject to certain eligibility requirements established by Fannie Mae. Fannie Mae has certain contractual responsibilities. With respect to each Pool, Fannie Mae is obligated to distribute scheduled installments of principal and interest after Fannie Mae’s servicing and guaranty fee, whether or not received, to Certificate holders. Fannie Mae also is obligated to distribute to holders of Certificates an amount equal to the full principal balance of any foreclosed mortgage loan, whether or not such principal balance is actually recovered. The obligations of Fannie Mae under its guaranty of the Fannie Mae Certificates are obligations solely of Fannie Mae. See “Certain Additional Information with Respect to Freddie Mac and Fannie Mae” below.
          Freddie Mac Certificates. Freddie Mac is a publicly held U.S. Government sponsored enterprise. A principal activity of Freddie Mac currently is the purchase of first lien, conventional, residential and multifamily mortgage loans and participation interests in such mortgage loans and their resale in the form of mortgage securities, primarily Freddie Mac Certificates. A Freddie Mac Certificate represents a pro rata interest in a group of mortgage loans or participations in mortgage loans (a “Freddie Mac Certificate group”) purchased by Freddie Mac. Freddie Mac guarantees to each registered holder of a Freddie Mac Certificate the timely payment of interest at the rate provided for by such Freddie Mac Certificate (whether or not received on the underlying loans). Freddie Mac also guarantees to each registered Certificate holder ultimate collection of all principal of the related mortgage loans, without any offset or deduction, but does not, generally, guarantee the timely payment of scheduled principal. The obligations of Freddie Mac under its guaranty of Freddie Mac Certificates are obligations solely of Freddie Mac. See “Certain Additional Information with Respect to Freddie Mac and Fannie Mae” below.
          The mortgage loans underlying the Freddie Mac and Fannie Mae Certificates consist of adjustable rate or fixed-rate mortgage loans with original terms to maturity of up to forty years. These mortgage loans are usually secured by first liens on one-to-four-family residential properties or multi-family projects. Each mortgage loan must meet the applicable standards set forth in the law creating Freddie Mac or Fannie Mae. A Freddie Mac Certificate group may include whole loans, participation interests in whole loans, undivided interests in whole loans and participations comprising another Freddie Mac Certificate group.
          Conventional Mortgage Loans. The conventional mortgage loans underlying the Freddie Mac and Fannie Mae Certificates consist of adjustable rate or fixed-rate mortgage loans normally with original terms to maturity of between five and thirty years. Substantially all of these mortgage loans are secured by first liens on one- to four-family residential properties or multi-family projects. Each mortgage loan must meet the applicable standards set forth in the law creating Freddie Mac or Fannie Mae. A Freddie Mac Certificate group may include whole loans, participation interests in whole loans, undivided interests in whole loans and participations comprising another Freddie Mac Certificate group.
          Certain Additional Information with Respect to Freddie Mac and Fannie Mae. The volatility and disruption that impacted the capital and credit markets during late 2008 and into 2009 have led to increased market concerns about Freddie Mac’s and Fannie Mae’s ability to withstand future credit losses associated with securities held in their investment portfolios, and on which they provide guarantees, without the direct support of the federal government. On September 6, 2008, both Freddie Mac and Fannie Mae were placed under the conservatorship of the Federal Housing Finance Agency (“FHFA”). Under the plan of conservatorship, the FHFA has assumed control of, and generally has the power to direct, the operations of Freddie Mac and Fannie Mae, and is empowered to exercise all powers collectively held by their respective shareholders, directors and officers, including the power to (1) take over the assets of and operate Freddie Mac and Fannie Mae with all the powers of the shareholders, the directors, and the officers of Freddie Mac and Fannie Mae and conduct all business of Freddie Mac and Fannie Mae; (2) collect all obligations and money due to Freddie Mac and Fannie Mae; (3) perform all functions of Freddie Mac and Fannie Mae which are consistent with the conservator’s appointment; (4) preserve and conserve the assets and property of Freddie Mac and Fannie Mae; and (5) contract for assistance in fulfilling any function, activity, action or duty of the conservator. In addition, in connection with the actions taken by the FHFA, the U.S. Treasury Department (the “Treasury”) has entered into certain preferred stock purchase agreements with each of Freddie Mac and Fannie Mae which establish the Treasury as the holder of a new class of senior preferred stock in each of Freddie Mac and Fannie Mae, which stock was issued in connection with financial contributions from the Treasury to Freddie Mac and Fannie Mae. The conditions attached to the financial contribution made by the Treasury to Freddie Mac and Fannie Mae and the issuance of this senior preferred stock place significant

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restrictions on the activities of Freddie Mac and Fannie Mae. Freddie Mac and Fannie Mae must obtain the consent of the Treasury to, among other things, (i) make any payment to purchase or redeem its capital stock or pay any dividend other than in respect of the senior preferred stock to the Treasury, (ii) issue capital stock of any kind, (iii) terminate the conservatorship of the FHFA except in connection with a receivership, or (iv) increase its debt beyond certain specified levels. In addition, significant restrictions are placed on the maximum size of each of Freddie Mac’s and Fannie Mae’s respective portfolios of mortgages and Mortgage-Backed Securities, and the purchase agreements entered into by Freddie Mac and Fannie Mae provide that the maximum size of their portfolios of these assets must decrease by a specified percentage each year. On June 16, 2010, FHFA ordered Fannie Mae and Freddie Mac’s stock de-listed from the New York Stock Exchange (“NYSE”) after the price of common stock in Fannie Mae fell below the NYSE minimum average closing price of $1 for more than 30 days. The future status and role of Freddie Mac and Fannie Mae could be impacted by (among other things) the actions taken and restrictions placed on Freddie Mac and Fannie Mae by the FHFA in is role as conservator, the restrictions placed on Freddie Mac’s and Fannie Mae’s operations and activities as a result of the senior preferred stock investment made by the Treasury, market responses to developments at Freddie Mac and Fannie Mae, and future legislative and regulatory action that alters the operations, ownership, structure and/or mission of these institutions, each of which may, in turn, impact the value of, and cash flows on, any Mortgage-Backed Securities guaranteed by Freddie Mac and Fannie Mae, including any such Mortgage-Backed Securities held by the Fund.
          Privately Issued Mortgage-Backed Securities. The Fund may invest in privately issued Mortgage-Backed Securities. Privately issued Mortgage-Backed Securities are generally backed by pools of conventional (i.e., non-government guaranteed or insured) mortgage loans. The seller or servicer of the underlying mortgage obligations will generally make representations and warranties to certificate-holders as to certain characteristics of the mortgage loans and as to the accuracy of certain information furnished to the trustee in respect of each such mortgage loan. Upon a breach of any representation or warranty that materially and adversely affects the interests of the related certificate-holders in a mortgage loan, the seller or servicer generally will be obligated either to cure the breach in all material respects, to repurchase the mortgage loan or, if the related agreement so provides, to substitute in its place a mortgage loan pursuant to the conditions set forth therein. Such a repurchase or substitution obligation may constitute the sole remedy available to the related certificate-holders or the trustee for the material breach of any such representation or warranty by the seller or servicer.
          Ratings. The ratings assigned by a rating organization to Mortgage Pass-Throughs generally address the likelihood of the receipt of distributions on the underlying mortgage loans by the related certificate-holders under the agreements pursuant to which such certificates are issued. A rating organization’s ratings normally take into consideration the credit quality of the related mortgage pool, including any credit support providers, structural and legal aspects associated with such certificates, and the extent to which the payment stream on such mortgage pool is adequate to make payments required by such certificates. A rating organization’s ratings on such certificates do not, however, constitute a statement regarding frequency of prepayments on the related mortgage loans. In addition, the rating assigned by a rating organization to a certificate may not address the possibility that, in the event of the insolvency of the issuer of certificates where a subordinated interest was retained, the issuance and sale of the senior certificates may be recharacterized as a financing and, as a result of such recharacterization, payments on such certificates may be affected. A rating organization may downgrade or withdraw a rating assigned by it to any Mortgage Pass-Through at any time, and no assurance can be made that any ratings on any Mortgage Pass-Throughs included in the Fund will be maintained, or that if such ratings are assigned, they will not be downgraded or withdrawn by the assigning rating organization.
          Recently, rating agencies have placed on credit watch or downgraded the ratings previously assigned to a large number of mortgage-backed securities (which may include certain of the Mortgage-Backed Securities in which the Fund may have invested or may in the future be invested), and may continue to do so in the future. In the event that any Mortgage-Backed Security held by the Fund is placed on credit watch or downgraded, the value of such Mortgage-Backed Security may decline and the Fund may consequently experience losses in respect of such Mortgage-Backed Security.
          Credit Enhancement. Mortgage pools created by non-governmental issuers generally offer a higher yield than government and government-related pools because of the absence of direct or indirect government or agency payment guarantees. To lessen the effect of failures by obligors on underlying assets to make payments, Mortgage Pass-Throughs may contain elements of credit support. Credit support falls generally into two categories: (i) liquidity protection and (ii) protection against losses resulting from default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances, generally by the entity administering the pools of

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mortgages, the provision of a reserve fund, or a combination thereof, to ensure, subject to certain limitations, that scheduled payments on the underlying pool are made in a timely fashion. Protection against losses resulting from default ensures ultimate payment of the obligations on at least a portion of the assets in the pool. Such credit support can be provided by, among other things, payment guarantees, letters of credit, pool insurance, subordination, or any combination thereof.
          Subordination; Shifting of Interest; Reserve Fund. In order to achieve ratings on one or more classes of Mortgage Pass-Throughs, one or more classes of certificates may be subordinate certificates which provide that the rights of the subordinate certificate-holders to receive any or a specified portion of distributions with respect to the underlying mortgage loans may be subordinated to the rights of the senior certificate holders. If so structured, the subordination feature may be enhanced by distributing to the senior certificate-holders on certain distribution dates, as payment of principal, a specified percentage (which generally declines over time) of all principal payments received during the preceding prepayment period (“shifting interest credit enhancement”). This will have the effect of accelerating the amortization of the senior certificates while increasing the interest in the trust fund evidenced by the subordinate certificates. Increasing the interest of the subordinate certificates relative to that of the senior certificates is intended to preserve the availability of the subordination provided by the subordinate certificates. In addition, because the senior certificate-holders in a shifting interest credit enhancement structure are entitled to receive a percentage of principal prepayments which is greater than their proportionate interest in the trust fund, the rate of principal prepayments on the mortgage loans may have an even greater effect on the rate of principal payments and the amount of interest payments on, and the yield to maturity of, the senior certificates.
          In addition to providing for a preferential right of the senior certificate-holders to receive current distributions from the mortgage pool, a reserve fund may be established relating to such certificates (the “Reserve Fund”). The Reserve Fund may be created with an initial cash deposit by the originator or servicer and augmented by the retention of distributions otherwise available to the subordinate certificate-holders or by excess servicing fees until the Reserve Fund reaches a specified amount.
          The subordination feature, and any Reserve Fund, are intended to enhance the likelihood of timely receipt by senior certificate-holders of the full amount of scheduled monthly payments of principal and interest due to them and will protect the senior certificate-holders against certain losses; however, in certain circumstances the Reserve Fund could be depleted and temporary shortfalls could result. In the event that the Reserve Fund is depleted before the subordinated amount is reduced to zero, senior certificate-holders will nevertheless have a preferential right to receive current distributions from the mortgage pool to the extent of the then outstanding subordinated amount. Unless otherwise specified, until the subordinated amount is reduced to zero, on any distribution date any amount otherwise distributable to the subordinate certificates or, to the extent specified, in the Reserve Fund will generally be used to offset the amount of any losses realized with respect to the mortgage loans (“Realized Losses”). Realized Losses remaining after application of such amounts will generally be applied to reduce the ownership interest of the subordinate certificates in the mortgage pool. If the subordinated amount has been reduced to zero, Realized Losses generally will be allocated pro rata among all certificate-holders in proportion to their respective outstanding interests in the mortgage pool.
          Alternative Credit Enhancement. As an alternative, or in addition to the credit enhancement afforded by subordination, credit enhancement for Mortgage Pass-Throughs may be provided through bond insurers, or at the mortgage loan-level through mortgage insurance, hazard insurance, or through the deposit of cash, certificates of deposit, letters of credit, a limited guaranty or by such other methods as are acceptable to a rating agency. In certain circumstances, such as where credit enhancement is provided by bond insurers, guarantees or letters of credit, the security is subject to credit risk because of its exposure to the credit risk of an external credit enhancement provider.
          Voluntary Advances. Generally, in the event of delinquencies in payments on the mortgage loans underlying the Mortgage Pass-Throughs, the servicer may agree to make advances of cash for the benefit of certificate-holders, but generally will do so only to the extent that it determines such voluntary advances will be recoverable from future payments and collections on the mortgage loans or otherwise.
          Optional Termination. Generally, the servicer may, at its option with respect to any certificates, repurchase all of the underlying mortgage loans remaining outstanding at such time if at any time the aggregate outstanding

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principal balance of such mortgage loans is less than a specified percentage (generally 5-10%) of the aggregate outstanding principal balance of the mortgage loans as of the cut-off date specified with respect to such series.
          Multiple Class Mortgage-Backed Securities and Collateralized Mortgage Obligations. The Fund may invest in multiple class securities including collateralized mortgage obligations (“CMOs”) and REMIC Certificates. These securities may be issued by U.S. Government agencies, instrumentalities or sponsored enterprises such as Fannie Mae or Freddie Mac or by trusts formed by private originators of, or investors in, mortgage loans, including savings and loan associations, mortgage bankers, commercial banks, insurance companies, investment banks and special purpose subsidiaries of the foregoing. In general, CMOs are debt obligations of a legal entity that are collateralized by, and multiple class Mortgage-Backed Securities represent direct ownership interests in, a pool of mortgage loans or Mortgage-Backed Securities the payments on which are used to make payments on the CMOs or multiple class Mortgage-Backed Securities.
          Fannie Mae REMIC Certificates are issued and guaranteed as to timely distribution of principal and interest by Fannie Mae. In addition, Fannie Mae will be obligated to distribute the principal balance of each class of REMIC Certificates in full, whether or not sufficient funds are otherwise available.
          Freddie Mac guarantees the timely payment of interest on Freddie Mac REMIC Certificates and also guarantees the payment of principal as payments are required to be made on the underlying mortgage participation certificates (“PCs”). PCs represent undivided interests in specified level payment, residential mortgages or participations therein purchased by Freddie Mac and placed in a PC pool. With respect to principal payments on PCs, Freddie Mac generally guarantees ultimate collection of all principal of the related mortgage loans without offset or deduction but the receipt of the required payments may be delayed. Freddie Mac also guarantees timely payment of principal of certain PCs.
          CMOs and guaranteed REMIC Certificates issued by Fannie Mae and Freddie Mac are types of multiple class Mortgage-Backed Securities. The REMIC Certificates represent beneficial ownership interests in a REMIC trust, generally consisting of mortgage loans or Fannie Mae, Freddie Mac or Ginnie Mae guaranteed Mortgage-Backed Securities (the “Mortgage Assets”). The obligations of Fannie Mae or Freddie Mac under their respective guaranty of the REMIC Certificates are obligations solely of Fannie Mae or Freddie Mac, respectively. See “Certain Additional Information with Respect to Freddie Mac and Fannie Mae.”
          CMOs and REMIC Certificates are issued in multiple classes. Each class of CMOs or REMIC Certificates, often referred to as a “tranche,” is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Principal prepayments on the mortgage loans or the Mortgage Assets underlying the CMOs or REMIC Certificates may cause some or all of the classes of CMOs or REMIC Certificates to be retired substantially earlier than their final distribution dates. Generally, interest is paid or accrues on all classes of CMOs or REMIC Certificates on a monthly basis.
          The principal of and interest on the Mortgage Assets may be allocated among the several classes of CMOs or REMIC Certificates in various ways. In certain structures (known as “sequential pay” CMOs or REMIC Certificates), payments of principal, including any principal prepayments, on the Mortgage Assets generally are applied to the classes of CMOs or REMIC Certificates in the order of their respective final distribution dates. Thus, no payment of principal will be made on any class of sequential pay CMOs or REMIC Certificates until all other classes having an earlier final distribution date have been paid in full.
          Additional structures of CMOs and REMIC Certificates include, among others, “parallel pay” CMOs and REMIC Certificates. Parallel pay CMOs or REMIC Certificates are those which are structured to apply principal payments and prepayments of the Mortgage Assets to two or more classes concurrently on a proportionate or disproportionate basis. These simultaneous payments are taken into account in calculating the final distribution date of each class.
          A wide variety of REMIC Certificates may be issued in parallel pay or sequential pay structures. These securities include accrual certificates (also known as “Z-Bonds”), which only accrue interest at a specified rate until all other certificates having an earlier final distribution date have been retired and are converted thereafter to an interest-paying security, and planned amortization class (“PAC”) certificates, which are parallel pay REMIC

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Certificates that generally require that specified amounts of principal be applied on each payment date to one or more classes or REMIC Certificates (the “PAC Certificates”), even though all other principal payments and prepayments of the Mortgage Assets are then required to be applied to one or more other classes of the PAC Certificates. The scheduled principal payments for the PAC Certificates generally have the highest priority on each payment date after interest due has been paid to all classes entitled to receive interest currently. Shortfalls, if any, are added to the amount payable on the next payment date. The PAC Certificate payment schedule is taken into account in calculating the final distribution date of each class of PAC. In order to create PAC tranches, one or more tranches generally must be created that absorb most of the volatility in the underlying mortgage assets. These tranches tend to have market prices and yields that are much more volatile than other PAC classes.
          Commercial Mortgage-Backed Securities. Commercial mortgage-backed securities (“CMBS”). are a type of Mortgage Pass-Through that are primarily backed by a pool of commercial mortgage loans. The commercial mortgage loans are, in turn, generally secured by commercial mortgaged properties (such as office properties, retail properties, hospitality properties, industrial properties, healthcare related properties or other types of income producing real property). CMBS generally entitle the holders thereof to receive payments that depend primarily on the cash flow from a specified pool of commercial or multifamily mortgage loans. CMBS will be affected by payments, defaults, delinquencies and losses on the underlying mortgage loans. The underlying mortgage loans generally are secured by income producing properties such as office properties, retail properties, multifamily properties, manufactured housing, hospitality properties, industrial properties and self storage properties. Because issuers of CMBS have no significant assets other than the underlying commercial real estate loans and because of the significant credit risks inherent in the underlying collateral, credit risk is a correspondingly important consideration with respect to the related CMBS Securities. Certain of the mortgage loans underlying CMBS Securities constituting part of the collateral interests may be delinquent, in default or in foreclosure.
          Commercial real estate lending may expose a lender (and the related Mortgage-Backed Security) to a greater risk of loss than certain other forms of lending because it typically involves making larger loans to single borrowers or groups of related borrowers. In addition, in the case of certain commercial mortgage loans, repayment of loans secured by commercial and multifamily properties depends upon the ability of the related real estate project to generate income sufficient to pay debt service, operating expenses and leasing commissions and to make necessary repairs, tenant improvements and capital improvements, and in the case of loans that do not fully amortize over their terms, to retain sufficient value to permit the borrower to pay off the loan at maturity through a sale or refinancing of the mortgaged property. The net operating income from and value of any commercial property is subject to various risks, including changes in general or local economic conditions and/or specific industry segments; declines in real estate values; declines in rental or occupancy rates; increases in interest rates, real estate tax rates and other operating expenses; changes in governmental rules, regulations and fiscal policies; acts of God; terrorist threats and attacks and social unrest and civil disturbances. In addition, certain of the mortgaged properties securing the pools of commercial mortgage loans underlying CMBS may have a higher degree of geographic concentration in a few states or regions. Any deterioration in the real estate market or economy or adverse events in such states or regions, may increase the rate of delinquency and default experience (and as a consequence, losses) with respect to mortgage loans related to properties in such state or region. Pools of mortgaged properties securing the commercial mortgage loans underlying CMBS may also have a higher degree of concentration in certain types of commercial properties. Accordingly, such pools of mortgage loans represent higher exposure to risks particular to those types of commercial properties. Certain pools of commercial mortgage loans underlying CMBS consist of a fewer number of mortgage loans with outstanding balances that are larger than average. If a mortgage pool includes mortgage loans with larger than average balances, any realized losses on such mortgage loans could be more severe, relative to the size of the pool, than would be the case if the aggregate balance of the pool were distributed among a larger number of mortgage loans. Certain borrowers or affiliates thereof relating to certain of the commercial mortgage loans underlying CMBS may have had a history of bankruptcy. Certain mortgaged properties securing the commercial mortgage loans underlying CMBS may have been exposed to environmental conditions or circumstances. The ratings in respect of certain of the CMBS comprising the Mortgage-Backed Securities may have been withdrawn, reduced or placed on credit watch since issuance. In addition, losses and/or appraisal reductions may be allocated to certain of such CMBS and certain of the collateral or the assets underlying such collateral may be delinquent and/or may default from time to time.
          CMBS held by the Fund may be subordinated to one or more other classes of securities of the same series for purposes of, among other things, establishing payment priorities and offsetting losses and other shortfalls with

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respect to the related underlying mortgage loans. Realized losses in respect of the mortgage loans included in the CMBS pool and trust expenses generally will be allocated to the most subordinated class of securities of the related series. Accordingly, to the extent any CMBS is or becomes the most subordinated class of securities of the related series, any delinquency or default on any underlying mortgage loan may result in shortfalls, realized loss allocations or extensions of its weighted average life and will have a more immediate and disproportionate effect on the related CMBS than on a related more senior class of CMBS of the same series. Further, even if a class is not the most subordinate class of securities, there can be no assurance that the subordination offered to such class will be sufficient on any date to offset all losses or expenses incurred by the underlying trust. CMBS are typically not guaranteed or insured, and distributions on such CMBS generally will depend solely upon the amount and timing of payments and other collections on the related underlying commercial mortgage loans.
          Stripped Mortgage-Backed Securities. The Fund may invest in stripped mortgage-backed securities (“SMBS”), which are derivative multiclass mortgage securities, issued or guaranteed by the U.S. Government, its agencies or instrumentalities or non-governmental originators. SMBS are usually structured with two different classes: one that receives substantially all of the interest payments (the interest-only, or “IO” and/or the high coupon rate with relatively low principal amount, or “IOette”), and the other that receives substantially all of the principal payments (the principal-only, or “PO”), from a pool of mortgage loans.
          Certain SMBS may not be readily marketable and will be considered illiquid for purposes of the Fund’s limitation on investments in illiquid securities. The Sub-Adviser may determine that SMBS which are U.S. Government Securities are liquid for purposes of the Fund’s limitation on investments in illiquid securities. The market value of POs generally is unusually volatile in response to changes in interest rates. The yields on IOs and IOettes are generally higher than prevailing market yields on other Mortgage-Backed Securities because their cash flow patterns are more volatile and there is a greater risk that the initial investment will not be fully recouped. The Fund’s investment in SMBS may require the Fund to sell certain of its portfolio securities to generate sufficient cash to satisfy certain income distribution requirements.
Asset-Backed Securities
          The Fund may invest in asset-backed securities. Asset-backed securities represent participations in, or are secured by and payable from, assets such as motor vehicle installment sales, installment loan contracts, leases of various types of real and personal property, receivables from revolving credit (credit card) agreements and other categories of receivables. Such assets are securitized through the use of trusts and special purpose corporations. Payments or distributions of principal and interest may be guaranteed up to certain amounts and for a certain time period by a letter of credit or a pool insurance policy issued by a financial institution unaffiliated with the trust or corporation, or other credit enhancements may be present.
          Such securities are often subject to more rapid repayment than their stated maturity date would indicate as a result of the pass-through of prepayments of principal on the underlying loans. During periods of declining interest rates, prepayment of loans underlying asset-backed securities can be expected to accelerate. Accordingly, the Fund’s ability to maintain positions in such securities will be affected by reductions in the principal amount of such securities resulting from prepayments, and its ability to reinvest the returns of principal at comparable yields is subject to generally prevailing interest rates at that time. To the extent that the Fund invests in asset-backed securities, the values of the Fund’s portfolio securities will vary with changes in market interest rates generally and the differentials in yields among various kinds of asset-backed securities.
          Asset-backed securities present certain additional risks because asset-backed securities generally do not have the benefit of a security interest in collateral that is comparable to mortgage assets. Credit card receivables are generally unsecured and the debtors on such receivables are entitled to the protection of a number of state and federal consumer credit laws, many of which give such debtors the right to set-off certain amounts owed on the credit cards, thereby reducing the balance due. Automobile receivables generally are secured, but by automobiles rather than residential real property. Most issuers of automobile receivables permit the loan servicers to retain possession of the underlying obligations. If the servicer were to sell these obligations to another party, there is a risk that the purchaser would acquire an interest superior to that of the holders of the asset-backed securities. In addition, because of the large number of vehicles involved in a typical issuance and technical requirements under state laws,

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the trustee for the holders of the automobile receivables may not have a proper security interest in the underlying automobiles. Therefore, if the issuer of an asset-backed security defaults on its payment obligations, there is the possibility that, in some cases, the Fund will be unable to possess and sell the underlying collateral and that the Fund’s recoveries on repossessed collateral may not be available to support payments on these securities.
Recent Events Relating to the Mortgage- and Asset-Backed Securities Markets and the Overall Economy
          The recent and unprecedented disruption in the residential mortgage-backed securities market (and in particular, the “subprime” residential mortgage market), the broader mortgage-backed securities market and the asset-backed securities market have resulted (and continue to result) in downward price pressures and increasing foreclosures and defaults in residential and commercial real estate. Concerns over inflation, energy costs, geopolitical issues, the availability and cost of credit, the mortgage market and a depressed real estate market have contributed to increased volatility and diminished expectations for the economy and markets going forward, and have contributed to dramatic declines in the housing market, with falling home prices and increasing foreclosures and unemployment, and significant asset write-downs by financial institutions. These conditions have prompted a number of financial institutions to seek additional capital, to merge with other institutions and, in some cases, to fail or seek bankruptcy protection. Since 2008, the market for Mortgage-Backed Securities (as well as other asset-backed securities) has been particularly adversely impacted by, among other factors, the failure and subsequent sale of Bear, Stearns & Co. Inc. to J.P. Morgan Chase, the merger of Bank of America Corporation and Merrill Lynch & Co., the insolvency of Washington Mutual Inc., the failure and subsequent bankruptcy of Lehman Brothers Holdings, Inc., the extension of approximately $152 billion in emergency credit by the U.S. Department of the Treasury to American International Group Inc., and, as described above, the conservatorship and the control by the U.S. government of Freddie Mac and Fannie Mae. Furthermore, the global markets have seen an increase in volatility due to uncertainty surrounding the level and sustainability of sovereign debt of certain countries that are part of the European Union, including Greece, Spain, Portugal, Ireland and Italy, as well as the sustainability of the European Union itself. Recent concerns over the level and sustainability of the sovereign debt of the United States have aggravated this volatility. No assurance can be made that this uncertainty will not lead to further disruption of the credit markets in the United States or around the globe. These events, coupled with the general global economic downturn, have resulted in a substantial level of uncertainty in the financial markets, particularly with respect to mortgage-related investments.
          The continuation or worsening of this general economic downturn may lead to further declines in income from, or the value of, real estate, including the real estate which secures the Mortgage-Backed Securities held by the Fund. Additionally, a lack of credit liquidity, adjustments of mortgages to higher rates and decreases in the value of real property have occurred and may continue to occur or worsen, and potentially prevent borrowers from refinancing their mortgages, which may increase the likelihood of default on their mortgage loans. These economic conditions, coupled with high levels of real estate inventory and elevated incidence of underwater mortgages, may also adversely affect the amount of proceeds the holder of a mortgage loan or mortgage-backed securities (including the Mortgaged-Backed Securities in which the Fund may invest) would realize in the event of a foreclosure or other exercise of remedies. Moreover, even if such Mortgage-Backed Securities are performing as anticipated, the value of such securities in the secondary market may nevertheless fall or continue to fall as a result of deterioration in general market conditions for such Mortgage-Backed Securities or other asset-backed or structured products. Trading activity associated with market indices may also drive spreads on those indices wider than spreads on Mortgage-Backed Securities, thereby resulting in a decrease in value of such Mortgage-Backed Securities, including the Mortgage-Backed Securities owned by the Fund.
          The U.S. Government, the Federal Reserve, the Treasury, the Securities and Exchange Commission, the Federal Deposit Insurance Corporation and other governmental and regulatory bodies have recently taken or are considering taking actions to address the financial crisis. These actions include, but are not limited to, the enactment by the United States Congress of the “Dodd-Frank Wall Street Reform and Consumer Protection Act”, which was signed into law on July 21, 2010 and imposes a new regulatory framework over the U.S. financial services industry and the consumer credit markets in general, and proposed regulations by the Securities and Exchange Commission, which, if enacted, would significantly alter the manner in which asset-backed securities, including Mortgage-Backed Securities, are issued. Given the broad scope, sweeping nature, and relatively recent enactment of some of these regulatory measures, the potential impact they could have on any of the asset-backed or Mortgage-Backed Securities held by the Fund is unknown. There can be no assurance that these measures will not have an adverse effect on the value or marketability of any asset-backed or Mortgage-Backed Securities held by the Fund. Furthermore, no assurance can be made that the U.S. Government or any U.S. regulatory body (or other authority or regulatory body)

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will not continue to take further legislative or regulatory action in response to the economic crisis or otherwise, and the effect of such actions, if taken, cannot be known.
          Among its other provisions, the Dodd-Frank Act creates a liquidation framework under which the Federal Deposit Insurance Corporation (the “FDIC”), may be appointed as receiver following a “systemic risk determination” by the Secretary of Treasury (in consultation with the President) for the resolution of certain nonbank financial companies and other entities, defined as “covered financial companies”, and commonly referred to as “systemically important entities”, in the event such a company is in default or in danger of default and the resolution of such a company under other applicable law would have serious adverse effects on financial stability in the United States, and also for the resolution of certain of their subsidiaries. No assurances can be given that this new liquidation framework would not apply to the originators of asset-backed securities, including Mortgage-Backed Securities, or their respective subsidiaries, including the issuers and depositors of such securities, although the expectation embedded in the Dodd-Frank Act is that the framework will be invoked only very rarely. Recent guidance from the FDIC indicates that such new framework will largely be exercised in a manner consistent with the existing bankruptcy laws, which is the insolvency regime that would otherwise apply to the sponsors, depositors and issuing entities with respect to asset-backed securities, including Mortgage-Backed Securities. The application of such liquidation framework to such entities could result in decreases or delays in amounts paid on, and hence the market value of, the Mortgage-Backed or asset-backed securities that are owned by the Fund.
          Recently, delinquencies, defaults and losses on residential mortgage loans have increased substantially and may continue to increase, which may affect the performance of the Mortgage-Backed Securities in which the Fund may invest. Mortgage loans backing non-agency Mortgage-Backed Securities are more sensitive to economic factors that could affect the ability of borrowers to pay their obligations under the mortgage loans backing these securities. In addition, in recent months housing prices and appraisal values in many states and localities have declined or stopped appreciating. A continued decline or an extended flattening of those values may result in additional increases in delinquencies and losses on Mortgage-Backed Securities generally (including the Mortgaged-Backed Securities that the Fund may invest in as described above).
          The foregoing adverse changes in market conditions and regulatory climate may reduce the cash flow which the Fund, to the extent it invests in Mortgage-Backed Securities or other asset-backed securities, receives from such securities and increase the incidence and severity of credit events and losses in respect of such securities. In addition, interest rate spreads for Mortgage-Backed Securities have widened and are more volatile when compared to the recent past due to these adverse changes in market conditions. In the event that interest rate spreads for Mortgage-Backed Securities and other asset-backed securities widen following the purchase of such assets by the Fund, the market value of such securities is likely to decline and, in the case of a substantial spread widening, could decline by a substantial amount. Furthermore, these adverse changes in market conditions have resulted in reduced liquidity in the market for Mortgage-Backed Securities and other asset-backed securities (including the Mortgaged-Backed Securities and other asset-backed securities in which the Fund may invest) and increasing unwillingness by banks, financial institutions and investors to extend credit to servicers, originators and other participants in the market for Mortgage-Backed and other asset-backed securities. As a result, the liquidity and/or the market value of any Mortgage-Backed or asset-backed securities that are owned by the Fund may experience further declines after they are purchased by the Fund.
High Yield Securities
          The Fund may invest in bonds rated BB or below by Standard & Poor’s or Ba or below by Moody’s or comparable rated and unrated securities. These bonds are commonly referred to as “junk bonds,” are non-investment grade, and are considered speculative. The Fund may invest up to 20% of its total assets in non-investment grade, “high yield” securities. The ability of issuers of high yield securities to make principal and interest payments may be questionable because such issuers are often less creditworthy or are highly leveraged. High yield securities are also issued by governmental issuers that may have difficulty in making all scheduled interest and principal payments. In some cases, high yield securities may be highly speculative, have poor prospects for reaching investment grade standing and be in default. As a result, investment in such bonds will entail greater risks than those associated with investment in investment grade bonds (i.e., bonds rated AAA, AA, A or BBB by Standard and Poor’s or Aaa, Aa, A or Baa by Moody’s). Analysis of the creditworthiness of issuers of high yield securities may be more complex than analysis of issuers of higher quality debt securities, and the ability of the Fund to achieve its investment objective may, to the extent of its investments in high yield securities, be more dependent upon such creditworthiness analysis than would be the case if the Fund were investing in higher quality securities. See Appendix A for a description of the corporate bond and preferred stock ratings by Standard & Poor’s, Moody’s, Fitch, Inc. (“Fitch”) and Dominion Bond Rating Service Limited (“DBRS”).
          The market values of high yield, fixed income securities tend to reflect individual corporate or municipal developments to a greater extent than do those of higher rated securities, which react primarily to fluctuations in the general level of interest rates. Issuers of high yield securities that are highly leveraged may not be able to make use of more traditional methods of financing. Their ability to service debt obligations may be more adversely affected by economic downturns or their inability to meet specific projected business forecasts than would be the case for issuers of high-rated securities. Negative publicity about the junk bond market and investor perceptions regarding lower-rated securities, whether or not based on fundamental analysis, may depress the prices for high yield securities. In the lower quality segments of the fixed income securities market, changes in perceptions of issuers’ creditworthiness tend to occur more frequently and in a more pronounced manner than do changes in higher quality segments of the fixed income securities market, resulting in greater yield and price volatility. Another factor which

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causes fluctuations in the prices of high yield securities is the supply and demand for similarly rated securities. Fluctuations in the prices of portfolio securities subsequent to their acquisition will not affect cash income from such securities but will be reflected in the Fund’s net asset values.
          The risk of loss from default for the holders of high yield securities is significantly greater than is the case for holders of other debt securities because high yield securities are generally unsecured and are often subordinated to the rights of other creditors of the issuers of such securities. Investment by the Fund in already defaulted securities poses an additional risk of loss should nonpayment of principal and interest continue in respect of such securities. Even if such securities are held to maturity, recovery by the Fund of its initial investment and any anticipated income or appreciation is uncertain. In addition, the Fund may incur additional expenses to the extent that it is required to seek recovery relating to the default in the payment of principal or interest on such securities or otherwise protect its interests. The Fund may be required to liquidate other portfolio securities to satisfy annual distribution obligations of the Fund in respect of accrued interest income on securities which are subsequently written off, even though the Fund has not received any cash payments of such interest.
          The secondary market for high yield securities is concentrated in relatively few markets and is dominated by institutional investors, including mutual funds, insurance companies and other financial institutions. Accordingly, the secondary market for such securities is not as liquid as and is more volatile than the secondary market for higher-rated securities. In addition, the trading volume for high yield securities is generally lower than that of higher rated securities. The secondary market for high yield securities could contract under adverse market or economic conditions independent of any specific adverse changes in the condition of a particular issuer. These factors may have an adverse effect on the ability of the Fund to dispose of particular portfolio investments. Prices realized upon the sale of such lower rated or unrated securities, under these circumstances, may be less than the prices used in calculating the net asset values of the Fund. A less liquid secondary market also may make it more difficult for the Fund to obtain precise valuations of the high yield securities in its portfolio.
          The adoption of new legislation could adversely affect the secondary market for high yield securities and the financial condition of issuers of these securities. The form of any future legislation, and the probability of such legislation being enacted, is uncertain.
          Non-investment grade securities also present risks based on payment expectations. High yield securities frequently contain “call” or buy-back features which permit the issuer to call or repurchase the security from its holder. If an issuer exercises such a “call option” and redeems the security, the Fund may have to replace such security with a lower-yielding security, resulting in a decreased return for investors. In addition, if the Fund experiences net redemptions of its shares, it may be forced to sell its higher-rated securities, resulting in a decline in the overall credit quality of the portfolios of the Fund and increasing the exposure of the Fund to the risks of high yield securities.
          Credit ratings issued by credit rating agencies are designed to evaluate the safety of principal and interest payments of rated securities. They do not, however, evaluate the market value risk of high yield securities and, therefore, may not fully reflect the true risks of an investment. In addition, credit rating agencies may or may not make timely changes in a rating to reflect changes in the economy or in the conditions of the issuer that affect the market value of the security. Consequently, credit ratings are used only as a preliminary indicator of investment quality. Investments in non-investment grade and comparable unrated obligations will be more dependent on the Sub-Adviser’s credit analysis than would be the case with investments in investment-grade debt obligations. The Sub-Adviser employs its own credit research and analysis, which includes a study of an issuer’s existing debt, capital structure, ability to service debt and to pay dividends, sensitivity to economic conditions, operating history and current earnings trend. The Sub-Adviser continually monitors the investments in the portfolios of the Fund and evaluates whether to dispose of or to retain non-investment grade and comparable unrated securities whose credit ratings or credit quality may have changed. If after its purchase, a portfolio security is assigned a lower rating or ceases to be rated, the Fund may continue to hold the security if the Sub-Adviser believes it is in the best interest of the Fund and its shareholders.
Futures Contracts and Options on Futures Contracts

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          The Fund may purchase and sell futures contracts and may also purchase and write call and put options on futures contracts. The Fund may purchase and sell futures contracts based on various securities, securities indices, foreign currencies and other financial instruments and indices. The Fund may engage in futures and related options transactions in order to seek to increase total return or to hedge against changes in interest rates, securities prices or, to the extent the Fund invests in foreign securities, currency exchange rates, or to otherwise manage its term structure, sector selection and duration in accordance with its investment objective and policies. The Fund may also enter into closing purchase and sale transactions with respect to such contracts and options. The Trust, on behalf of the Fund, has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act and, therefore, is not subject to registration or regulation as a pool operator under that Act with respect to the Fund.
          Futures contracts entered into by the Fund have historically been traded on U.S. exchanges or boards of trade that are licensed and regulated by the Commodity Futures Trading Commission (the “CFTC”) or on foreign exchanges. More recently, certain futures may also be traded either over-the-counter or on trading facilities such as derivatives transaction execution facilities, exempt boards of trade or electronic trading facilities that are licensed and/or regulated to varying degrees by the CFTC. Also, certain single stock futures and narrow based security index futures may be traded either over-the-counter or on trading facilities such as contract markets, derivatives transaction execution facilities and electronic trading facilities that are licensed and/or regulated to varying degrees by both the CFTC and the SEC, or on foreign exchanges.
          Neither the CFTC, National Futures Association, SEC nor any domestic exchange regulates activities of any foreign exchange or boards of trade, including the execution, delivery and clearing of transactions, or has the power to compel enforcement of the rules of a foreign exchange or board of trade or any applicable foreign law. This is true even if the exchange is formally linked to a domestic market so that a position taken on the market may be liquidated by a transaction on another market. Moreover, such laws or regulations will vary depending on the foreign country in which the foreign futures or foreign options transaction occurs. For these reasons, the Fund’s investments in foreign futures or foreign options transactions may not be provided the same protections in respect of transactions on United States exchanges. In particular, persons who trade foreign futures or foreign options contracts may not be afforded certain of the protective measures provided by the Commodity Exchange Act, the CFTC’s regulations and the rules of the National Futures Association and any domestic exchange, including the right to use reparations proceedings before the CFTC and arbitration proceedings provided by the National Futures Association or any domestic futures exchange. Similarly, those persons may not have the protection of the United States securities laws.
          Futures Contracts. A futures contract may generally be described as an agreement between two parties to buy and sell particular financial instruments for an agreed price during a designated month (or to deliver the final cash settlement price, in the case of a contract relating to an index or otherwise not calling for physical delivery at the end of trading in the contract).
          When interest rates are rising or securities prices are falling, the Fund can seek through the sale of futures contracts to offset a decline in the value of its current portfolio securities. When interest rates are falling or securities prices are rising, the Fund, through the purchase of futures contracts, can attempt to secure better rates or prices than might later be available in the market when it effects anticipated purchases. Similarly, the Fund can purchase and sell futures contracts on a specified currency in order to seek to increase total return or to protect against changes in currency exchange rates. For example, the Fund can purchase futures contracts on foreign currency to establish the price in U.S. dollars of a security quoted or denominated in such currency that the Fund has acquired or expects to acquire. As another example, the Fund may enter into futures transactions to seek a closer correlation between the Fund’s overall currency exposures and the currency exposures of the Fund’s performance benchmark.
          Positions taken in the futures market are not normally held to maturity, but are instead liquidated through offsetting transactions which may result in a profit or a loss. While the Fund will usually liquidate futures contracts on securities or currency in this manner, the Fund may instead make or take delivery of the underlying securities or currency whenever it appears economically advantageous for the Fund to do so. A clearing corporation associated with the exchange on which futures are traded guarantees that, if still open, the sale or purchase will be performed on the settlement date.

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          Hedging Strategies Using Futures Contracts. Hedging, by use of futures contracts, seeks to establish with more certainty than would otherwise be possible the effective price, rate of return or currency exchange rate on portfolio securities or securities that the Fund owns or proposes to acquire. The Fund may, for example, take a “short” position in the futures market by selling futures contracts to seek to hedge against an anticipated rise in interest rates or a decline in market prices or foreign currency rates that would adversely affect the dollar value of the Fund’s portfolio securities. Similarly, the Fund may sell futures contracts on a currency in which its portfolio securities are quoted or denominated, or sell futures contracts on one currency to seek to hedge against fluctuations in the value of securities quoted or denominated in a different currency if there is an established historical pattern of correlation between the two currencies. If, in the opinion of the Sub-Adviser, there is a sufficient degree of correlation between price trends for the Fund’s portfolio securities and futures contracts based on other financial instruments, securities indices or other indices, the Fund may also enter into such futures contracts as part of a hedging strategy. Although under some circumstances prices of securities in the Fund’s portfolio may be more or less volatile than prices of such futures contracts, the Sub-Adviser will attempt to estimate the extent of this volatility difference based on historical patterns and compensate for any such differential by having the Fund enter into a greater or lesser number of futures contracts or by attempting to achieve only a partial hedge against price changes affecting the Fund’s portfolio securities. When hedging of this character is successful, any depreciation in the value of portfolio securities will be substantially offset by appreciation in the value of the futures position. On the other hand, any unanticipated appreciation in the value of the Fund’s portfolio securities would be substantially offset by a decline in the value of the futures position.
          On other occasions, the Fund may take a “long” position by purchasing such futures contracts. This may be done, for example, when the Fund anticipates the subsequent purchase of particular securities when it has the necessary cash, but expects the prices or currency exchange rates then available in the applicable market to be less favorable than prices or rates that are currently available.
          Options on Futures Contracts. The acquisition of put and call options on futures contracts will give the Fund the right (but not the obligation), for a specified price, to sell or to purchase, respectively, the underlying futures contract at any time during the option period. As the purchaser of an option on a futures contract, the Fund obtains the benefit of the futures position if prices move in a favorable direction but limits its risk of loss in the event of an unfavorable price movement to the loss of the premium and transaction costs.
          The writing of a call option on a futures contract generates a premium which may partially offset a decline in the value of the Fund’s assets. By writing a call option, the Fund becomes obligated, in exchange for the premium, to sell a futures contract if the option is exercised, which may have a value higher than the exercise price. The writing of a put option on a futures contract generates a premium, which may partially offset an increase in the price of securities that the Fund intends to purchase. However, the Fund becomes obligated (upon the exercise of the option) to purchase a futures contract if the option is exercised, which may have a value lower than the exercise price. Thus, the loss incurred by the Fund in writing options on futures is potentially unlimited and may exceed the amount of the premium received. The Fund will incur transaction costs in connection with the writing of options on futures.
          The holder or writer of an option on a futures contract may terminate its position by selling or purchasing an offsetting option on the same financial instrument. There is no guarantee that such closing transactions can be effected. The Fund’s ability to establish and close out positions on such options will be subject to the development and maintenance of a liquid market.
          Other Considerations. The Fund will engage in transactions in futures contracts and related options transactions only to the extent such transactions are consistent with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”) for maintaining its qualification as a regulated investment company for federal income tax purposes. Transactions in futures contracts and options on futures involve brokerage costs, require margin deposits and, in certain cases, require the Fund to segregate cash or liquid assets. The Fund may cover its transactions in futures contracts and related options through the segregation of cash or liquid assets or by other means, in any manner permitted by applicable law.
          While transactions in futures contracts and options on futures may reduce certain risks, such transactions themselves entail certain other risks. Thus, unanticipated changes in interest rates, securities prices or currency

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exchange rates may result in a poorer overall performance for the Fund than if it had not entered into any futures contracts or options transactions. When futures contracts and options are used for hedging purposes, perfect correlation between the Fund’s futures positions and portfolio positions may be impossible to achieve, particularly where futures contracts based on individual equity or corporate fixed income securities are currently not available. In the event of an imperfect correlation between a futures position and a portfolio position which is intended to be protected, the desired protection may not be obtained and the Fund may be exposed to risk of loss.
          In addition, it is not possible for the Fund to hedge fully or perfectly against currency fluctuations affecting the value of securities quoted or denominated in foreign currencies because the value of such securities is likely to fluctuate as a result of independent factors unrelated to currency fluctuations. The profitability of the Fund’s trading in futures depends upon the ability of the Sub-Adviser to analyze correctly the futures markets.
Options on Securities and Securities Indices
          Writing Covered Options. The Fund may write (sell) covered call and put options on any securities in which it may invest. A call option written by the Fund obligates that Fund to sell specified securities to the holder of the option at a specified price if the option is exercised on or before the expiration date. Depending upon the type of call option, the purchaser of a call option either (i) has the right to any appreciation in the value of the security over a fixed price (the “exercise price”) on a certain date in the future (the “expiration date”) or (ii) has the right to any appreciation in the value of the security over the exercise price at any time prior to the expiration of the option. If the purchaser does not exercise the option, the Fund pays the purchaser the difference between the price of the security and the exercise price of the option. The premium, the exercise price and the market value of the security determine the gain or loss realized by the Fund as the seller of the call option. The Fund can also repurchase the call option prior to the expiration date, ending its obligation. In this case, the cost of entering into closing purchase transactions will determine the gain or loss realized by the Fund. All call options written by the Fund are covered, which means that the Fund will own the securities subject to the option as long as the option is outstanding or the Fund will use the other methods described below. The Fund’s purpose in writing covered call options is to realize greater income than would be realized on portfolio securities transactions alone. However, the Fund may forego the opportunity to profit from an increase in the market price of the underlying security.
          A put option written by the Fund would obligate the Fund to purchase specified securities from the option holder at a specified price if, depending upon the type of put option, either (i) the option is exercised at any time on or before the expiration date or (ii) the option is exercised on the expiration date. All put options written by the Fund would be covered, which means that the Fund will segregate cash or liquid assets with a value at least equal to the exercise price of the put option (less any margin on deposit) or will use the other methods described below. The purpose of writing such options is to generate additional income for the Fund. However, in return for the option premium, the Fund accepts the risk that it may be required to purchase the underlying securities at a price in excess of the securities’ market value at the time of purchase.
          In the case of a call option, the option is “covered” if the Fund owns the instrument underlying the call or has an absolute and immediate right to acquire that instrument without additional cash consideration (or, if additional cash consideration is required, liquid assets in such amount are segregated) upon conversion or exchange of other instruments held by it. A call option is also covered if the Fund holds a call on the same instrument as the option written where the exercise price of the option held is (i) equal to or less than the exercise price of the option written, or (ii) greater than the exercise price of the option written provided the Fund segregates liquid assets in the amount of the difference. The Fund may also cover options on securities by segregating cash or liquid assets, as permitted by applicable law, with a value, when added to any margin on deposit, that is equal to the market value of the securities in the case of a call option. A put option is also covered if the Fund holds a put on the same instrument as the option written where the exercise price of the option held is (i) equal to or higher than the exercise price of the option written, or (ii) less than the exercise price of the option written provided the Fund segregates liquid assets in the amount of the difference.
          The Fund may also write (sell) covered call and put options on any securities index comprised of securities in which it may invest. Options on securities indices are similar to options on securities, except that the exercise of securities index options requires cash payments and does not involve the actual purchase or sale of securities. In

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addition, securities index options are designed to reflect price fluctuations in a group of securities or segment of the securities market rather than price fluctuations in a single security.
          The Fund may cover call options on a securities index by owning securities whose price changes are expected to be similar to those of the underlying index, or by having an absolute and immediate right to acquire such securities without additional cash consideration (or for additional consideration which has been segregated by the Fund) upon conversion or exchange of other securities in its portfolio. The Fund may also cover call and put options on a securities index by segregating cash or liquid assets, as permitted by applicable law, with a value, when added to any margin on deposit, that is equal to the market value of the underlying securities in the case of a call option, or the exercise price in the case of a put option, or by owning offsetting options as described above.
          The Fund may terminate its obligations under an exchange traded call or put option by purchasing an option identical to the one it has written. Obligations under over-the-counter options may be terminated only by entering into an offsetting transaction with the counterparty to such option. Such purchases are referred to as “closing purchase transactions.”
          Purchasing Options. The Fund may purchase put and call options on any securities in which it may invest or options on any securities index comprised of securities in which it may invest. The Fund may also, to the extent that it invests in foreign securities, purchase put and call options on foreign currencies. The Fund may also enter into closing sale transactions in order to realize gains or minimize losses on options it had purchased.
          The Fund may purchase call options in anticipation of an increase in the market value of securities of the type in which it may invest. The purchase of a call option would entitle the Fund, in return for the premium paid, to purchase specified securities at a specified price during the option period. The Fund would ordinarily realize a gain on the purchase of a call option if, during the option period, the value of such securities exceeded the sum of the exercise price, the premium paid and transaction costs; otherwise such the Fund would realize either no gain or a loss on the purchase of the call option.
          The Fund may purchase put options in anticipation of a decline in the market value of securities in its portfolio (“protective puts”) or in securities in which it may invest. The purchase of a put option would entitle the Fund, in exchange for the premium paid, to sell specified securities at a specified price during the option period. The purchase of protective puts is designed to offset or hedge against a decline in the market value of the Fund’s securities. Put options may also be purchased by the Fund for the purpose of affirmatively benefiting from a decline in the price of securities which it does not own. The Fund would ordinarily realize a gain if, during the option period, the value of the underlying securities decreased below the exercise price sufficiently to more than cover the premium and transaction costs; otherwise such the Fund would realize either no gain or a loss on the purchase of the put option. Gains and losses on the purchase of protective put options would tend to be offset by countervailing changes in the value of the underlying portfolio securities.
          The Fund would purchase put and call options on securities indices for the same purposes as it would purchase options on individual securities. For a description of options on securities indices, see “Writing Covered Options” above.
          Risks Associated with Options Transactions. There is no assurance that a liquid secondary market on an options exchange will exist for any particular exchange-traded option or at any particular time. If the Fund is unable to effect a closing purchase transaction with respect to covered options it has written, the Fund will not be able to sell the underlying securities or dispose of segregated assets until the options expire or are exercised. Similarly, if the Fund is unable to effect a closing sale transaction with respect to options it has purchased, it will have to exercise the options in order to realize any profit and will incur transaction costs upon the purchase or sale of underlying securities.
          Reasons for the absence of a liquid secondary market on an exchange include the following: (i) there may be insufficient trading interest in certain options; (ii) restrictions may be imposed by an exchange on opening or closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of options; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the facilities of an exchange or the Options Clearing Corporation may not at all times be adequate

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to handle current trading volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that exchange (or in that class or series of options) would cease to exist, although outstanding options on that exchange that had been issued by the Options Clearing Corporation as a result of trades on that exchange would continue to be exercisable in accordance with their terms.
          There can be no assurance that higher trading activity, order flow or other unforeseen events might, at times, render certain of the facilities of the Options Clearing Corporation or various exchanges inadequate. Such events have, in the past, resulted in the institution by an exchange of special procedures, such as trading rotations, restrictions on certain types of order or trading halts or suspensions with respect to one or more options. These special procedures may limit liquidity.
          The Fund may purchase and sell both options that are traded on U.S. and foreign exchanges and options traded over-the-counter with broker-dealers who make markets in these options. The ability to terminate over-the-counter options is more limited than with exchange-traded options and may involve the risk that broker-dealers participating in such transactions will not fulfill their obligations.
          Transactions by the Fund in options on securities and indices will be subject to limitations established by each of the exchanges, boards of trade or other trading facilities on which such options are traded governing the maximum number of options in each class which may be written or purchased by a single investor or group of investors acting in concert regardless of whether the options are written or purchased on the same or different exchanges, boards of trade or other trading facility or are held in one or more accounts or through one or more brokers. Thus, the number of options which the Fund may write or purchase may be affected by options written or purchased by other investment advisory clients of the Investment Adviser or Sub-Adviser. An exchange, board of trade or other trading facility may order the liquidation of positions found to be in excess of these limits, and it may impose certain other sanctions.
          The writing and purchase of options is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. The use of options to seek to increase total return involves the risk of loss if the Sub-Adviser is incorrect in its expectation of fluctuations in securities prices or interest rates. The successful use of options for hedging purposes also depends in part on the ability of the Sub-Adviser to correctly anticipate future price fluctuations and the degree of correlation between the options and securities (or currency) markets. If the Sub-Adviser is incorrect in its expectation of changes in securities prices or determination of the correlation between the securities or securities indices on which options are written and purchased and the securities in the Fund’s investment portfolio, the Fund may incur losses that it would not otherwise incur. The writing of options could increase the Fund’s portfolio turnover rate and, therefore, associated brokerage commissions or spreads.
Real Estate Investment Trusts
          The Fund may invest in shares of real estate investment trusts (“REITs”). REITs are pooled investment vehicles which invest primarily in real estate or real estate related loans. REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. Like regulated investment companies such as the Fund, REITs are not taxed on income distributed to shareholders provided they comply with certain requirements under the Code. The Fund will indirectly bear its proportionate share of any expenses paid by REITs in which it invests in addition to the expenses paid by the Fund.
          Investing in REITs involves certain unique risks. Equity REITs may be affected by changes in the value of the underlying property owned by such REITs, while mortgage REITs may be affected by the quality of any credit extended. REITs are dependent upon management skills, are not diversified (except to the extent the Code requires), and are subject to the risks of financing projects. REITs are subject to heavy cash flow dependency, default by borrowers, self-liquidation, and the possibilities of failing to qualify for the exemption from tax for distributed

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income under the Code and failing to maintain their exemptions from the Act. REITs (especially mortgage REITs) are also subject to interest rate risks.
Preferred Stock, Warrants and Stock Purchase Rights
          The Fund may invest in preferred stock, warrants and stock purchase rights (or “rights”). Preferred stocks are securities that represent an ownership interest providing the holder with claims on the issuer’s earnings and assets before common stock owners but after bond owners. Unlike debt securities, the obligations of an issuer of preferred stock, including dividend and other payment obligations, may not typically be accelerated by the holders of such preferred stock on the occurrence of an event of default (such as a covenant default or filing of a bankruptcy petition) or other non-compliance by the issuer with the terms of the preferred stock. Often, however, on the occurrence of any such event of default or non-compliance by the issuer, preferred stockholders will be entitled to gain representation on the issuer’s board of directors or increase their existing board representation. In addition, preferred stockholders may be granted voting rights with respect to certain issues on the occurrence of any event of default. Warrants and other rights are options that entitle the holder to buy equity securities at a specific price for a specific period of time. The Fund will invest in warrants and rights only if such equity securities are deemed appropriate by the Sub-Adviser for investment by the Fund. Warrants and rights have no voting rights, receive no dividends and have no rights with respect to the assets of the issuer.
Foreign Securities
          The Fund may invest in securities of foreign issuers.
          Investments in foreign securities may offer potential benefits not available from investments solely in U.S. dollar-denominated or quoted securities of domestic issuers. Such benefits may include the opportunity to invest in foreign issuers that appear, in the opinion of the Sub-Adviser, to offer the potential for better long term growth of capital and income than investments in U.S. securities, the opportunity to invest in foreign countries with economic policies or business cycles different from those of the United States and the opportunity to reduce fluctuations in portfolio value by taking advantage of foreign securities markets that do not necessarily move in a manner parallel to U.S. markets. Investing in the securities of foreign issuers also involves, however, certain special risks, including those discussed in the Fund’s Proxy Statement/Prospectus and those set forth below, which are not typically associated with investing in U.S. dollar-denominated securities or quoted securities of U.S. issuers.
          With any investment in foreign securities, there exist certain economic, political and social risks, including the risk of adverse political developments, nationalization, confiscation without fair compensation or war. Individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position. Investments in the securities of foreign issuers often involve currencies of foreign countries. Accordingly, the Fund that invests in foreign securities may be affected favorably or unfavorably by changes in currency rates and in exchange control regulations and may incur costs in connection with conversions between various currencies. The Fund may be subject to currency exposure independent of its securities positions. To the extent that the Fund is fully invested in foreign securities while also maintaining net currency positions, it may be exposed to greater combined risk.
          Currency exchange rates may fluctuate significantly over short periods of time. They generally are determined by the forces of supply and demand in the foreign exchange markets and the relative merits of investments in different countries, actual or anticipated changes in interest rates and other complex factors, as seen from an international perspective. Currency exchange rates also can be affected unpredictably by intervention by U.S. or foreign governments or central banks or the failure to intervene or by currency controls or political developments in the United States or abroad.
          Because foreign issuers generally are not subject to uniform accounting, auditing and financial reporting standards, practices and requirements comparable to those applicable to U.S. companies, there may be less publicly available information about a foreign company than about a U.S. company. Volume and liquidity in most foreign securities markets are less than in the United States and securities of many foreign companies are less liquid and more volatile than securities of comparable U.S. companies. The securities of foreign issuers may be listed on foreign securities exchanges or traded in foreign over-the-counter markets. Fixed commissions on foreign securities exchanges are generally higher than negotiated commissions on U.S. exchanges, although the Fund endeavors to achieve the most favorable net results on its portfolio transactions. There is generally less government supervision and regulation of foreign securities exchanges, brokers, dealers and listed and unlisted companies than in the United States, and the legal remedies for investors may be more limited than the remedies available in the United States.
          Foreign markets also have different clearance and settlement procedures, and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it

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difficult to conduct such transactions. Such delays in settlement could result in temporary periods when some of the Fund’s assets are uninvested and no return is earned on such assets. The inability of the Fund to make intended security purchases due to settlement problems could cause the Fund to miss attractive investment opportunities. Inability to dispose of portfolio securities due to settlement problems could result either in losses to the Fund due to subsequent declines in value of the portfolio securities or, if the Fund has entered into a contract to sell the securities, could result in possible liability to the purchaser. In addition, with respect to certain foreign countries, there is the possibility of expropriation or confiscatory taxation, limitations on the movement of funds and other assets between different countries, political or social instability, or diplomatic developments which could adversely affect the Fund’s investments in those countries. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position.
          Custodial and/or settlement systems in emerging markets countries may not be fully developed. To the extent the Fund invests in emerging markets, Fund assets that are traded in such markets and which have been entrusted to such sub-custodians in those markets may be exposed to risks for which the sub-custodian will have no liability.
          The Fund may invest in foreign securities which take the form of sponsored and unsponsored American Depositary Receipts (“ADRs”) and Global Depositary Receipts (“GDRs”) and may also invest in European Depositary Receipts (“EDRs”) or other similar instruments representing securities of foreign issuers (together, “Depositary Receipts”).
          ADRs represent the right to receive securities of foreign issuers deposited in a domestic bank or a correspondent bank. ADRs are traded on domestic exchanges or in the U.S. over-the-counter market and, generally, are in registered form. EDRs and GDRs are receipts evidencing an arrangement with a non-U.S. bank similar to that for ADRs and are designed for use in the non-U.S. securities markets. EDRs and GDRs are not necessarily quoted in the same currency as the underlying security.
          To the extent the Fund acquires Depositary Receipts through banks which do not have a contractual relationship with the foreign issuer of the security underlying the Depositary Receipts to issue and service such unsponsored Depositary Receipts, there may be an increased possibility that the Fund would not become aware of and be able to respond to corporate actions such as stock splits or rights offerings involving the foreign issuer in a timely manner. In addition, the lack of information may result in inefficiencies in the valuation of such instruments. Investment in Depositary Receipts does not eliminate all the risks inherent in investing in securities of non-U.S. issuers. The market value of Depositary Receipts is dependent upon the market value of the underlying securities and fluctuations in the relative value of the currencies in which the Depositary Receipts and the underlying securities are quoted. However, by investing in Depositary Receipts, such as ADRs, that are quoted in U.S. dollars, the Fund may avoid currency risks during the settlement period for purchases and sales.
          As described more fully below, the Fund may invest in countries with emerging economies or securities markets. Political and economic structures in many of such countries may be undergoing significant evolution and rapid development, and such countries may lack the social, political and economic stability characteristic of more developed countries. Certain of such countries have in the past failed to recognize private property rights and have at times nationalized or expropriated the assets of private companies. As a result, the risks described above, including the risks of nationalization or expropriation of assets, may be heightened. See “Investing in Emerging Countries” below.
          Foreign Government Obligations. Foreign government obligations include securities, instruments and obligations issued or guaranteed by a foreign government, its agencies, instrumentalities or sponsored enterprises. Investment in foreign government obligations can involve a high degree of risk. The governmental entity that controls the repayment of foreign government obligations may not be able or willing to repay the principal and/or interest when due in accordance with the terms of such debt. A governmental entity’s willingness or ability to repay principal and interest due in a timely manner may be affected by, among other factors, its cash flow situation, the extent of its foreign reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the governmental entity’s policy towards the International Monetary Fund and the political constraints to which a governmental entity may be subject. Governmental entities

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may also be dependent on expected disbursements from foreign governments, multilateral agencies and others abroad to reduce principal and interest on their debt. The commitment on the part of these governments, agencies and others to make such disbursements may be conditioned on a governmental entity’s implementation of economic reforms and/or economic performance and the timely service of such debtor’s obligations. Failure to implement such reforms, achieve such levels of economic performance or repay principal or interest when due may result in the cancellation of such third parties’ commitments to lend funds to the governmental entity, which may further impair such debtor’s ability or willingness to services its debts in a timely manner. Consequently, governmental entities may default on their debt. Holders of foreign government obligations (including the Fund) may be requested to participate in the rescheduling of such debt and to extend further loans to governmental agencies.
          Investing in Europe. The Fund may operate in euros and/ or may hold euros and/or euro-denominated bonds and other obligations. The euro requires participation of multiple sovereign states forming the Euro zone and is therefore sensitive to the credit, general economic and political position of each such state, including each state’s actual and intended ongoing engagement with and/or support for the other sovereign states then forming the European Union, in particular those within the Euro zone. Changes in these factors might materially adversely impact the value of securities that the Fund has invested in.
          Investing in Emerging Countries. The Fund may invest in equity and equity-related securities of foreign issuers, including emerging country issuers.
          The securities markets of emerging countries are less liquid and subject to greater price volatility, and have a smaller market capitalization, than the U.S. securities markets. In certain countries, there may be fewer publicly traded securities and the market may be dominated by a few issues or sectors. Issuers and securities markets in such countries are not subject to as extensive and frequent accounting, financial and other reporting requirements or as comprehensive government regulations as are issuers and securities markets in the U.S. In particular, the assets and profits appearing on the financial statements of emerging country issuers may not reflect their financial position or results of operations in the same manner as financial statements for U.S. issuers. Substantially less information may be publicly available about emerging country issuers than is available about issuers in the United States.
          Emerging country securities markets are typically marked by a high concentration of market capitalization and trading volume in a small number of issuers representing a limited number of industries, as well as a high concentration of ownership of such securities by a limited number of investors. The markets for securities in certain emerging countries are in the earliest stages of their development. Even the markets for relatively widely traded securities in emerging countries may not be able to absorb, without price disruptions, a significant increase in trading volume or trades of a size customarily undertaken by institutional investors in the securities markets of developed countries. The limited size of many of these securities markets can cause prices to be erratic for reasons apart from factors that affect the soundness and competitiveness of the securities issuers. For example, prices may be unduly influenced by traders who control large positions in these markets. Additionally, market making and arbitrage activities are generally less extensive in such markets, which may contribute to increased volatility and reduced liquidity of such markets. The limited liquidity of emerging country securities may also affect the Fund’s ability to accurately value its portfolio securities or to acquire or dispose of securities at the price and time it wishes to do so or in order to meet redemption requests.
          With respect to investments in certain emerging market countries, antiquated legal systems may have an adverse impact on the Fund. For example, while the potential liability of a shareholder in a U.S. corporation with respect to acts of the corporation is generally limited to the amount of the shareholder’s investment, the notion of limited liability is less clear in certain emerging market countries. Similarly, the rights of investors in emerging market companies may be more limited than those of shareholders of U.S. corporations.
          Transaction costs, including brokerage commissions or dealer mark-ups, in emerging countries may be higher than in the United States and other developed securities markets. In addition, existing laws and regulations are often inconsistently applied. As legal systems in emerging countries develop, foreign investors may be adversely affected by new or amended laws and regulations. In circumstances where adequate laws exist, it may not be possible to obtain swift and equitable enforcement of the law.

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          Foreign investment in the securities markets of certain emerging countries is restricted or controlled to varying degrees. These restrictions may limit the Fund’s investment in certain emerging countries and may increase the expenses of the Fund. Certain emerging countries require governmental approval prior to investments by foreign persons or limit investment by foreign persons to only a specified percentage of an issuer’s outstanding securities or a specific class of securities which may have less advantageous terms (including price) than securities of the company available for purchase by nationals. In addition, the repatriation of both investment income and capital from emerging countries may be subject to restrictions which require governmental consents or prohibit repatriation entirely for a period of time. Even where there is no outright restriction on repatriation of capital, the mechanics of repatriation may affect certain aspects of the operation of the Fund. The Fund may be required to establish special custodial or other arrangements before investing in certain emerging countries.
          Emerging countries may be subject to a substantially greater degree of economic, political and social instability and disruption than is the case in the United States, Japan and most Western European countries. This instability may result from, among other things, the following: (i) authoritarian governments or military involvement in political and economic decision making, including changes or attempted changes in governments through extra-constitutional means; (ii) popular unrest associated with demands for improved political, economic or social conditions; (iii) internal insurgencies; (iv) hostile relations with neighboring countries; (v) ethnic, religious and racial disaffection or conflict; and (vi) the absence of developed legal structures governing foreign private investments and private property. Such economic, political and social instability could disrupt the principal financial markets in which the Fund may invest and adversely affect the value of the Fund’s assets. The Fund’s investments can also be adversely affected by any increase in taxes or by political, economic or diplomatic developments.
          The Fund may seek investment opportunities within former “Eastern bloc” countries. Most of these countries had a centrally planned, socialist economy for a substantial period of time. The governments of many of these countries have more recently been implementing reforms directed at political and economic liberalization, including efforts to decentralize the economic decision-making process and move towards a market economy. However, business entities in Eastern European countries do not have an extended history of operating in a market-oriented economy, and the ultimate impact of these countries’ attempts to move toward more market-oriented economies is currently unclear. In addition, any change in the leadership or policies of these countries may halt the expansion of or reverse the liberalization of foreign investment policies now occurring and adversely affect existing investment opportunities.
          The economies of emerging countries may differ unfavorably from the U.S. economy in such respects as growth of gross domestic product, rate of inflation, capital reinvestment, resources, self-sufficiency and balance of payments. Many emerging countries have experienced in the past, and continue to experience, high rates of inflation. In certain countries inflation has at times accelerated rapidly to hyperinflationary levels, creating a negative interest rate environment and sharply eroding the value of outstanding financial assets in those countries. Other emerging countries, on the other hand, have recently experienced deflationary pressures and are in economic recessions. The economies of many emerging countries are heavily dependent upon international trade and are accordingly affected by protective trade barriers and the economic conditions of their trading partners. In addition, the economies of some emerging countries are vulnerable to weakness in world prices for their commodity exports.
          The Fund’s income and, in some cases, capital gains from foreign stocks and securities will be subject to applicable taxation in certain of the countries in which it invests, and treaties between the U.S. and such countries may not be available in some cases to reduce the otherwise applicable tax rates. See “TAXATION.”
          Foreign markets also have different clearance and settlement procedures, and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Such delays in settlement could result in temporary periods when a portion of the assets of the Fund remain un-invested and no return is earned on such assets. The inability of the Fund to make intended security purchases or sales due to settlement problems could result either in losses to the Fund due to subsequent declines in value of the portfolio securities or, if the Fund has entered into a contract to sell the securities, could result in possible liability to the purchaser.
Forward Foreign Currency Exchange Contracts.

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          The Fund may, to the extent consistent with investment policies, enter into forward foreign currency exchange contracts for hedging purposes and to seek to protect against anticipated changes in future foreign currency exchange rates. A forward foreign currency exchange contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are traded in the interbank market between currency traders (usually large commercial banks) and their customers. A forward contract generally has no deposit requirement, and no commissions are generally charged at any stage for trades.
          At the maturity of a forward contract the Fund may either accept or make delivery of the currency specified in the contract or, at or prior to maturity, enter into a closing transaction involving the purchase or sale of an offsetting contract. Closing transactions with respect to forward contracts are often, but not always, effected with the currency trader who is a party to the original forward contract.
          The Fund may enter into forward foreign currency exchange contracts in several circumstances. First, when the Fund enters into a contract for the purchase or sale of a security denominated or quoted in a foreign currency, or when the Fund anticipates the receipt in a foreign currency of dividend or interest payments on such a security which it holds, the Fund may desire to “lock in” the U.S. dollar price of the security or the U.S. dollar equivalent of such dividend or interest payment, as the case may be. By entering into a forward contract for the purchase or sale, for a fixed amount of dollars, of the amount of foreign currency involved in the underlying transactions, the Fund will attempt to protect itself against an adverse change in the relationship between the U.S. dollar and the subject foreign currency during the period between the date on which the security is purchased or sold, or on which the dividend or interest payment is declared, and the date on which such payments are made or received.
          Additionally, when the Sub-Adviser believes that the currency of a particular foreign country may suffer a substantial decline against the U.S. dollar, it may enter into a forward contract to sell, for a fixed amount of U.S. dollars, the amount of foreign currency approximating the value of some or all of the Fund’s portfolio securities quoted or denominated in such foreign currency. The precise matching of the forward contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date on which the contract is entered into and the date it matures. Using forward contracts to protect the value of the Fund’s portfolio securities against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange, which the Fund can achieve at some future point in time. The precise projection of short-term currency market movements is not possible, and short-term hedging provides a means of fixing the U.S. dollar value of only a portion of the Fund’s foreign assets.
          The Fund may engage in cross-hedging by using forward contracts in one currency to hedge against fluctuations in the value of securities quoted or denominated in a different currency. In addition, the Fund may enter into foreign currency transactions to seek a closer correlation between the Fund’s overall currency exposure and the currency exposure of the Fund’s performance benchmark.
          The Fund may also enter into forward contracts to seek to increase total return. Unless otherwise covered in accordance with applicable regulations, cash or liquid assets of the Fund will be segregated in an amount equal to the value of the Fund’s total assets committed to the consummation of forward foreign currency exchange contracts. If the value of the segregated assets declines, additional cash or liquid assets will be segregated so that the value of the assets will equal the amount of the Fund’s commitments with respect to such contracts.
          While the Fund may enter into forward contracts to reduce currency exchange rate risks, transactions in such contracts involve certain other risks. Thus, while the Fund may benefit from such transactions, unanticipated changes in currency prices may result in a poorer overall performance for the Fund than if it had not engaged in any such transactions. Moreover, there may be imperfect correlation between the Fund’s portfolio holdings of securities quoted or denominated in a particular currency and forward contracts entered into by the Fund. Such imperfect correlation may cause the Fund to sustain losses which will prevent the Fund from achieving a complete hedge or expose the Fund to risk of foreign exchange loss.

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          Markets for trading foreign forward currency contracts offer less protection against defaults than is available when trading in currency instruments on an exchange. Forward contracts are subject to the risk that the counterparty to such contract will default on its obligations. Since a forward foreign currency exchange contract is not guaranteed by an exchange or clearinghouse, a default on the contract would deprive the Fund of unrealized profits, transaction costs or the benefits of a currency hedge or force the Fund to cover its purchase or sale commitments, if any, at the current market price. In addition, the institutions that deal in forward currency contracts are not required to continue to make markets in the currencies they trade and these markets can experience periods of illiquidity. The Fund will not enter into forward foreign currency exchange contracts, currency swaps or other privately negotiated currency instruments unless the credit quality of the unsecured senior debt or the claims-paying ability of the counterparty is considered to be investment grade by the Sub-Adviser. To the extent that a portion of the Fund’s total assets, adjusted to reflect the Fund’s net position after giving effect to currency transactions, is denominated or quoted in the currencies of foreign countries, the Fund will be more susceptible to the risk of adverse economic and political developments within those countries.
          Writing and Purchasing Currency Call and Put Options. The Fund may, to the extent that it invests in foreign securities, write and purchase put and call options on foreign currencies for the purpose of protecting against declines in the U.S. dollar value of foreign portfolio securities and against increases in the U.S. dollar cost of foreign securities to be acquired. As with other kinds of option transactions, however, the writing of an option on foreign currency will constitute only a partial hedge, up to the amount of the premium received. If and when the Fund seeks to close out an option, the Fund could be required to purchase or sell foreign currencies at disadvantageous exchange rates, thereby incurring losses. The purchase of an option on foreign currency may constitute an effective hedge against exchange rate fluctuations; however, in the event of exchange rate movements adverse to the Fund’s position, the Fund may forfeit the entire amount of the premium plus related transaction costs. Options on foreign currencies may be traded on U.S. and foreign exchanges or over-the-counter.
          Options on currency may also be used for cross-hedging purposes, which involves writing or purchasing options on one currency to seek to hedge against changes in exchange rates for a different currency with a pattern of correlation, or to seek to increase total return when the Sub-Adviser anticipates that the currency will appreciate or depreciate in value, but the securities quoted or denominated in that currency do not present attractive investment opportunities and are not included in the Fund’s portfolio.
          A call option written by the Fund obligates the Fund to sell a specified currency to the holder of the option at a specified price if the option is exercised before the expiration date. A put option written by the Fund would obligate the Fund to purchase a specified currency from the option holder at a specified price if the option is exercised before the expiration date. The writing of currency options involves a risk that the Fund will, upon exercise of the option, be required to sell currency subject to a call at a price that is less than the currency’s market value or be required to purchase currency subject to a put at a price that exceeds the currency’s market value. Written put and call options on foreign currencies may be covered in a manner similar to written put and call options on securities and securities indices described under “Writing Options” above.
          The Fund may terminate its obligations under a call or put option by purchasing an option identical to the one it has written. Such purchases are referred to as “closing purchase transactions.” The Fund may enter into closing sale transactions in order to realize gains or minimize losses on options purchased by the Fund.
          The Fund may purchase call options on foreign currency in anticipation of an increase in the U.S. dollar value of currency in which securities to be acquired by the Fund are quoted or denominated. The purchase of a call option would entitle the Fund, in return for the premium paid, to purchase specified currency at a specified price during the option period. The Fund would ordinarily realize a gain if, during the option period, the value of such currency exceeded the sum of the exercise price, the premium paid and transaction costs; otherwise the Fund would realize either no gain or a loss on the purchase of the call option.
          The Fund may purchase put options in anticipation of a decline in the U.S. dollar value of currency in which securities in its portfolio are quoted or denominated (“protective puts”). The purchase of a put option would entitle the Fund, in exchange for the premium paid, to sell specified currency at a specified price during the option period. The purchase of protective puts is usually designed to offset or hedge against a decline in the dollar value of the Fund’s portfolio securities due to currency exchange rate fluctuations. The Fund would ordinarily realize a gain

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if, during the option period, the value of the underlying currency decreased below the exercise price sufficiently to more than cover the premium and transaction costs; otherwise the Fund would realize either no gain or a loss on the purchase of the put option. Gains and losses on the purchase of protective put options would tend to be offset by countervailing changes in the value of underlying currency or portfolio securities.
          In addition to using options for the hedging purposes described above, the Fund may use options on currency to seek to increase total return. The Fund may write (sell) covered put and call options on any currency in order to realize greater income than would be realized on portfolio securities transactions alone. However, in writing covered call options for additional income, the Fund may forego the opportunity to profit from an increase in the market value of the underlying currency. Also, when writing put options, the Fund accept, in return for the option premium, the risk that they may be required to purchase the underlying currency at a price in excess of the currency’s market value at the time of purchase.
          Special Risks Associated with Options on Currency. An exchange-traded options position may be closed out only on an options exchange that provides a secondary market for an option of the same series. Although the Fund will generally purchase or write only those options for which there appears to be an active secondary market, there is no assurance that a liquid secondary market on an exchange will exist for any particular option, or at any particular time. For some options no secondary market on an exchange may exist. In such event, it might not be possible to effect closing transactions in particular options, with the result that the Fund would have to exercise its options in order to realize any profit and would incur transaction costs upon the sale of underlying securities pursuant to the exercise of put options. If the Fund as a covered call option writer is unable to effect a closing purchase transaction in a secondary market, it will not be able to sell the underlying currency (or security quoted or denominated in that currency), or dispose of the segregated assets, until the option expires or it delivers the underlying currency upon exercise.
          There is no assurance that higher than anticipated trading activity or other unforeseen events might not, at times, render certain of the facilities of the Options Clearing Corporation inadequate, and thereby result in the institution by an exchange of special procedures which may interfere with the timely execution of customers’ orders.
          The Fund may purchase and write over-the-counter options to the extent consistent with its limitation on investments in illiquid securities. Trading in over-the-counter options is subject to the risk that the other party will be unable or unwilling to close out options purchased or written by the Fund.
          The amount of the premiums, which the Fund may pay or receive, may be adversely affected as new or existing institutions, including other investment companies, engage in or increase their option purchasing and writing activities.
Index Swaps, Interest Rate Swaps, Mortgage Swaps, Credit Swaps, Currency Swaps, Total Return Swaps and Options on Swaps
          The Fund may enter into index, interest rate, mortgage, credit, currency and total return swaps for both hedging purposes and to seek to increase total return. The Fund may also purchase and write (sell) options contracts on swaps, commonly referred to as swaptions. Swap agreements are two party contracts entered into primarily by institutional investors. In a standard “swap” transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments, which may be adjusted for an interest factor. The gross returns to be exchanged or “swapped” between the parties are generally calculated with respect to a “notional amount,” i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency or security, or in a “basket” of securities representing a particular index. Currency swaps involve the exchange by the Fund with another party of their respective rights to make or receive payments in specified currencies. Interest rate swaps involve the exchange by the Fund with another party of their respective commitments to pay or receive interest, such as an exchange of fixed rate payments for floating rate payments. Mortgage swaps are similar to interest rate swaps in that they represent commitments to pay and receive interest. The notional principal amount, however, is tied to a reference pool or pools of mortgages. Index swaps involve the exchange by the Fund with another party of the respective amounts payable with respect to a notional principal amount at interest rates equal to two specified indices. Credit swaps involve the receipt of floating or fixed rate payments in exchange for assuming potential credit losses of an underlying security, or pool of securities. Credit swaps give one party to a transaction the right to dispose of or acquire an asset (or group of assets), or the right to receive from or make a payment to the other party, upon the occurrence of specified credit events. Total return swaps are contracts that obligate a party to pay or receive interest in exchange for the payment by the other party of the total return generated by a security, a basket of securities, an index or an index component. A swaption is an option to enter into a swap agreement. Like

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other types of options, the buyer of a swaption pays a non-refundable premium for the option and obtains the right, but not the obligation, to enter into an underlying swap on agreed-upon terms. The seller of a swaption, in exchange for the premium, becomes obligated (if the option is exercised) to enter into an underlying swap on agreed-upon terms.
          A great deal of flexibility is possible in the way swap transactions are structured. However, generally the Fund will enter into interest rate, total return, credit, mortgage and index swaps on a net basis, which means that the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. Interest rate, total return, credit, index and mortgage swaps do not normally involve the delivery of securities, other underlying assets or principal. Accordingly, the risk of loss with respect to interest rate, total return, credit, index and mortgage swaps is normally limited to the net amount of interest payments that the Fund is contractually obligated to make. If the other party to an interest rate, total return, credit, index or mortgage swap defaults, the Fund’s risk of loss consists of the net amount of interest payments that the Fund is contractually entitled to receive. In contrast, currency swaps usually involve the delivery of a gross payment stream in one designated currency in exchange for the gross payment stream in another designated currency. Therefore, the payment stream under a currency swap is subject to the risk that the other party to the swap will default on its contractual delivery obligations. To the extent that the Fund’s exposure in a transaction involving a swap or a swaption is covered by the segregation of cash or liquid assets or otherwise, the Fund, the Investment Adviser and Sub-Adviser believe that swaps do not constitute senior securities under the Act and, accordingly, will not treat them as being subject to the Fund’s borrowing restrictions.
          The Fund will not enter into transactions involving swaps unless the unsecured commercial paper, senior debt or claims paying ability of the other party thereto is considered to be investment grade by the Sub-Adviser.
          The use of swaps and swaptions is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. If the Sub-Adviser is incorrect in its forecasts of market values, credit quality, interest rates and currency exchange rates, the investment performance of the Fund would be less favorable than it would have been if this investment technique were not used.
          In addition, these transactions can involve greater risks than if the Fund had invested in the reference obligation directly because, in addition to general market risks, swaps are subject to illiquidity risk, counterparty risk, credit risk and pricing risk. Because they are two party contracts and because they may have terms of greater than seven days, swap transactions may be considered to be illiquid. Moreover, the Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap counterparty. Many swaps are complex and often valued subjectively. Swaps may be subject to pricing or “basis” risk, which exists when a particular swap becomes extraordinarily expensive relative to historical prices or the price of corresponding cash market instruments. Under certain market conditions it may not be economically feasible to imitate a transaction or liquidate a position in time to avoid a loss or take advantage of an opportunity. If a swap transaction is particularly large or if the relevant market is illiquid, it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price, which may result in significant losses.
          The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting both as principals and as agents utilizing standardized swap documentation. As a result, the swap market has become relatively liquid in comparison with the markets for other similar instruments which are traded in the interbank market. The Investment Adviser, under the supervision of the Board of Trustees, is responsible for determining and monitoring the liquidity of the Fund’s transactions in swaps and swaptions.
Convertible Securities
          The Fund may invest in convertible securities. Convertible securities are bonds, debentures, notes, preferred stocks or other securities that may be converted into or exchanged for a specified amount of common stock of the same or different issuer within a particular period of time at a specified price or formula. A convertible security entitles the holder to receive interest that is generally paid or accrued on debt or a dividend that is paid or accrued on preferred stock until the convertible security matures or is redeemed, converted or exchanged. Convertible securities have unique investment characteristics, in that they generally (i) have higher yields than common stocks, but lower yields than comparable non-convertible securities, (ii) are less subject to fluctuation in value than the underlying common stock due to their fixed income characteristics and (iii) provide the potential for capital appreciation if the market price of the underlying common stock increases.
          The value of a convertible security is a function of its “investment value” (determined by its yield in comparison with the yields of other securities of comparable maturity and quality that do not have a conversion privilege) and its “conversion value” (the security’s worth, at market value, if converted into the underlying common stock). The investment value of a convertible security is influenced by changes in interest rates, with investment value normally declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors may also have an effect on the convertible security’s investment value. The conversion value of a convertible security is determined by the market price of the underlying common stock. If the conversion value is low relative to the investment value, the price of the convertible security is governed principally by its investment value. To the extent the market price of the underlying common stock approaches or exceeds the conversion price, the price of the convertible security will be increasingly influenced by its conversion value. A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed income security.

35

 

          A convertible security may be subject to redemption at the option of the issuer at a price established in the convertible security’s governing instrument. If a convertible security held by the Fund is called for redemption, the Fund will be required to permit the issuer to redeem the security, convert it into the underlying common stock or sell it to a third party. Any of these actions could have an adverse effect on the Fund’s ability to achieve its investment objective, which, in turn, could result in losses to the Fund.
          In evaluating a convertible security, the Sub-Adviser will give primary emphasis to the attractiveness of the underlying common stock. Convertible debt securities are equity investments for purposes of the Fund’s investment policies.
Equity Swaps
          The Fund may enter into equity swap contracts to invest in a market without owning or taking physical custody of securities in various circumstances, including circumstances where direct investment in the securities is restricted for legal reasons or is otherwise impracticable. Equity swaps may also be used for hedging purposes or to seek to increase total return. The counterparty to an equity swap contract will typically be a bank, investment banking firm or broker/dealer. Equity swap contracts may be structured in different ways. For example, a counterparty may agree to pay the Fund the amount, if any, by which the notional amount of the equity swap contract would have increased in value had it been invested in particular stocks (or an index of stocks), plus the dividends that would have been received on those stocks. In these cases, the Fund may agree to pay to the counterparty a floating rate of interest on the notional amount of the equity swap contract plus the amount, if any, by which that notional amount would have decreased in value had it been invested in such stocks. Therefore, the return to the Fund on the equity swap contract should be the gain or loss on the notional amount plus dividends on the stocks less the interest paid by the Fund on the notional amount. In other cases, the counterparty and the Fund may each agree to pay the other the difference between the relative investment performances that would have been achieved if the notional amount of the equity swap contract had been invested in different stocks (or indices of stocks).
          The Fund will generally enter into equity swaps on a net basis, which means that the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. Payments may be made at the conclusion of an equity swap contract or periodically during its term. Equity swaps normally do not involve the delivery of securities or other underlying assets. Accordingly, the risk of loss with respect to equity swaps is normally limited to the net amount of payments that the Fund is contractually obligated to make. If the other party to an equity swap defaults, the Fund’s risk of loss consists of the net amount of payments that the Fund is contractually entitled to receive, if any. Inasmuch as these transactions are entered into for hedging purposes or are offset by segregated cash or liquid assets to cover the Fund’s exposure, the Fund, the Investment Adviser and Sub-Adviser believe that such transactions do not constitute senior securities under the Act and, accordingly, will not treat them as being subject to the Fund’s borrowing restrictions.
          The Fund will not enter into swap transactions unless the unsecured commercial paper, senior debt or claims paying ability of the other party thereto is considered to be investment grade by the Sub-Adviser. The Fund’s ability to enter into certain swap transactions may be limited by tax considerations.
When-Issued Securities and Forward Commitments

36

 

          The Fund may purchase securities on a when-issued basis or purchase or sell securities on a forward commitment basis beyond the customary settlement time. These transactions involve a commitment by the Fund to purchase or sell securities at a future date. The price of the underlying securities (usually expressed in terms of yield) and the date when the securities will be delivered and paid for (the settlement date) are fixed at the time the transaction is negotiated. When-issued purchases and forward commitment transactions are negotiated directly with the other party, and such commitments are not traded on exchanges. The Fund will generally purchase securities on a when-issued basis or purchase or sell securities on a forward commitment basis only with the intention of completing the transaction and actually purchasing or selling the securities. If deemed advisable as a matter of investment strategy, however, the Fund may dispose of or negotiate a commitment after entering into it. The Fund may also sell securities it has committed to purchase before those securities are delivered to the Fund on the settlement date. The Fund may realize a capital gain or loss in connection with these transactions. For purposes of determining the Fund’s duration, the maturity of when-issued or forward commitment securities will be calculated from the commitment date. The Fund is generally required to segregate, until three days prior to the settlement date, cash and liquid assets in an amount sufficient to meet the purchase price unless the Fund’s obligations are otherwise covered. Alternatively, the Fund may enter into offsetting contracts for the forward sale of other securities that it owns. Securities purchased or sold on a when-issued or forward commitment basis involve a risk of loss if the value of the security to be purchased declines prior to the settlement date or if the value of the security to be sold increases prior to the settlement date.
Investment in Unseasoned Companies
          The Fund may invest in companies (including predecessors) which have operated less than three years. The securities of such companies may have limited liquidity, which can result in their being priced higher or lower than might otherwise be the case. In addition, investments in unseasoned companies are more speculative and entail greater risk than do investments in companies with an established operating record.
Other Investment Companies
          The Fund may invest in securities of other investment companies, including ETFs. The Fund will indirectly bear its proportionate share of any management fees and other expenses paid by investment companies in which it invests, in addition to the management fees (and other expenses) paid by the Fund. The Fund’s investments in other investment companies are subject to statutory limitations prescribed by the Act, including in certain circumstances a prohibition on the Fund acquiring more that 3% of the voting shares of any other investment company, and a prohibition on investing more than 5% of the Fund’s total assets in securities of any one investment company or more than 10% of its total assets in the securities of all investment companies. Many ETFs, however, have obtained exemptive relief from the SEC to permit unaffiliated funds (such as the Fund) to invest in their shares beyond these statutory limits, subject to certain conditions and pursuant to contractual arrangements between the ETFs and the investing funds. The Fund may rely on these exemptive orders in investing in ETFs. Moreover, pursuant to an exemptive order obtained from the SEC or under an exemptive rule adopted by the SEC, the Fund may invest in investment companies and money market funds for which an Investment Adviser, or any of its affiliates, serves as investment adviser, administrator and/or distributor. However, to the extent that the Fund invests in a money market fund for which an Investment Adviser or any of its affiliates acts as investment adviser, the management fees payable by the Fund to the Investment Adviser will, to the extent required by the SEC, be reduced by an amount equal to the Fund’s proportionate share of the management fees paid by such money market fund to its investment adviser. 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. Additionally, to the extent that any Fund serves as an “underlying Fund” to another Goldman Sachs Fund, that Fund may invest a percentage of its assets in other investment companies if those investments are consistent with applicable law and/or exemptive orders obtained from the SEC.
          The Fund may purchase shares of investment companies investing primarily in foreign securities, including “country funds.” Country funds have portfolios consisting primarily of securities of issuers located in specified foreign countries or regions.

37

 

          ETFs are shares of unaffiliated investment companies issuing shares which are traded like traditional equity securities on a national stock exchange. An ETF represents a portfolio of securities, which is often designed to track a particular market segment or index. An investment in an ETF, like one in any investment company, carries the same risks as those of its underlying securities. An ETF may fail to accurately track the returns of the market segment or index that it is designed to track, and the price of an ETF’s shares may fluctuate or lose money. In addition, because they, unlike other investment companies, are traded on an exchange, ETFs are subject to the following risks: (i) the market price of the ETF’s shares may trade at a premium or discount to the ETF’s net asset value; (ii) an active trading market for an ETF may not develop or be maintained; and (iii) there is no assurance that the requirements of the exchange necessary to maintain the listing of the ETF will continue to be met or remain unchanged. In the event substantial market or other disruptions affecting ETFs should occur in the future, the liquidity and value of the Fund’s shares could also be substantially and adversely affected.
Repurchase Agreements
          The Fund may enter into repurchase agreements with banks, brokers and securities dealers which furnish collateral at least equal in value or market price to the amount of their repurchase obligation. A repurchase agreement is an arrangement under which the Fund purchases securities and the seller agrees to repurchase the securities within a particular time and at a specified price. Custody of the securities is maintained by the Fund’s custodian (or sub-custodian). The repurchase price may be higher than the purchase price, the difference being income to the Fund, or the purchase and repurchase prices may be the same, with interest at a stated rate due to the Fund together with the repurchase price on repurchase. In either case, the income to the Fund is unrelated to the interest rate on the security subject to the repurchase agreement.
          For purposes of the Act and generally for tax purposes, a repurchase agreement is deemed to be a loan from the Fund to the seller of the security. For other purposes, it is not always clear whether a court would consider the security purchased by the Fund subject to a repurchase agreement as being owned by the Fund or as being collateral for a loan by the Fund to the seller. In the event of commencement of bankruptcy or insolvency proceedings with respect to the seller of the security before repurchase of the security under a repurchase agreement, the Fund may encounter delay and incur costs before being able to sell the security. Such a delay may involve loss of interest or a decline in price of the security. If the court characterizes the transaction as a loan and the Fund has not perfected a security interest in the security, the Fund may be required to return the security to the seller’s estate and be treated as an unsecured creditor of the seller. As an unsecured creditor, the Fund would be at risk of losing some or all of the principal and interest involved in the transaction.
          Apart from the risk of bankruptcy or insolvency proceedings, there is also the risk that the seller may fail to repurchase the security. However, if the market value of the security subject to the repurchase agreement becomes less than the repurchase price (including accrued interest), the Fund will direct the seller of the security to deliver additional securities so that the market value of all securities subject to the repurchase agreement equals or exceeds the repurchase price. Certain repurchase agreements which provide for settlement in more than seven days can be liquidated before the nominal fixed term on seven days or less notice. Such repurchase agreements will be regarded as liquid instruments.
          The Fund, together with other registered investment companies having advisory agreements with the Investment Adviser or its affiliates, may transfer un-invested cash balances into a single joint account, the daily aggregate balance of which will be invested in one or more repurchase agreements.
Short Sales Against the Box
          The Fund may engage in short sales against the box. In a short sale, the seller sells a borrowed security and has a corresponding obligation to the lender to return the identical security. The seller does not immediately deliver the securities sold and is said to have a short position in those securities until delivery occurs. While a short sale is made by selling a security the seller does not own, a short sale is “against the box” to the extent that the seller contemporaneously owns or has the right to obtain, at no added cost, securities identical to those sold short. It may be entered into by the Fund, for example, to lock in a sales price for a security the Fund does not wish to sell immediately. If the Fund sells securities short against the box, it may protect itself from loss if the price of the securities declines in the future, but will lose the opportunity to profit on such securities if the price rises.
          If the Fund effects a short sale of securities at a time when it has an unrealized gain on the securities, it may be required to recognize that gain as if it had actually sold the securities (as a “constructive sale”) on the date it effects the short sale. However, such constructive sale treatment may not apply if the Fund closes out the short sale with securities other than the appreciated securities held at the time of the short sale and if certain other conditions are satisfied. Uncertainty regarding the tax consequences of effecting short sales may limit the extent to which the Fund may effect short sales.
Mortgage Dollar Rolls
          The Fund may enter into mortgage dollar rolls, in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar, but not identical securities on a specified future date. During the roll period, the Fund loses the right to receive principal and interest paid on the securities sold. However, the Fund would benefit to the extent of any difference between the price received for the securities sold and the lower forward price for the future purchase or fee income plus the interest earned on the cash proceeds of the securities sold until the settlement date of the forward purchase. All cash proceeds will be invested in instruments that are permissible investments for the Fund. The Fund will segregate until the settlement date cash or liquid assets, as permitted by applicable law, in an amount equal to its forward purchase price.
          Mortgage dollar rolls involve certain risks including the following: if the broker-dealer to whom the Fund sells the security becomes insolvent, the Fund’s right to purchase or repurchase the mortgage-related securities subject to the mortgage dollar roll may be restricted. Also, the instrument which the Fund is required to repurchase may be worth less than an instrument which the Fund originally held. Successful use of mortgage dollar rolls will depend upon the Sub-Adviser’s ability to manage the Fund’s interest rate and mortgage prepayments exposure. For these reasons, there is no assurance that mortgage dollar rolls can be successfully employed. The use of this technique may diminish the investment performance of the Fund compared with what such performance would have been without the use of mortgage dollar rolls.
Non-Diversified Status

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          Since the Fund is “non-diversified” under the Act, it is subject only to certain federal tax diversification requirements. Under federal tax laws, the Fund may, with respect to 50% of its total assets, invest up to 25% of its total assets in the securities of any issuer. With respect to the remaining 50% of the Fund’s total assets, (i) the Fund may not invest more than 5% of its total assets in the securities of any one issuer, and (ii) the Fund may not acquire more than 10% of the outstanding voting securities of any one issuer. These tests apply at the end of each quarter of the taxable year and are subject to certain conditions and limitations under the Code. These tests do not apply to investments in United States Government Securities and regulated investment companies.
Temporary Investments
          The Fund may, for temporary defensive purposes, invest a certain percentage of its total assets in: U.S. Government Securities; commercial paper rated at least A-2 by Standard & Poor’s, P-2 by Moody’s or having a comparable rating by another Nationally Recognized Statistical Rating Organization (“NRSRO”); 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 and other investment companies; and cash items. When the Fund’s assets are invested in such instruments, the Fund may not be achieving its investment objective.
Portfolio Turnover
          The Fund may engage in active short-term trading to benefit from price disparities among different issues of securities or among the markets for equity securities, or for other reasons. As a result of active management, it is anticipated that the portfolio turnover rate may vary greatly from year to year as well as within a particular year, and may be affected by changes in the holdings of specific issuers, changes in country and currency weightings, cash requirements for redemption of shares and by requirements which enable the Fund to receive favorable tax treatment. The Fund is not restricted by policy with regard to portfolio turnover and will make changes in its investment portfolio from time to time as business and economic conditions as well as market prices may dictate.
Special Note Regarding Market Events
          Events in the financial sector over the past several years have resulted in reduced liquidity in credit and fixed income markets and in an unusually high degree of volatility in the financial markets, both domestically and internationally. While entire markets have been impacted, issuers that have exposure to the real estate, mortgage and credit markets have been particularly affected. These events and the potential for continuing market turbulence may have an adverse effect on the Fund’s investments. It is uncertain how long these conditions will continue.
          The instability in the financial markets led the U.S. government to take a number of unprecedented actions designed to support certain financial institutions and certain segments of the financial markets. Federal, state, and foreign governments, regulatory agencies, and self -regulatory organizations may take actions that affect the regulation of the instruments in which the Fund invest, or the issuers of such instruments, in ways that are unforeseeable. Such legislation or regulation could limit or preclude the Fund’s ability to achieve its investment objectives.
          Governments or their agencies may also acquire distressed assets from financial institutions and acquire ownership interests in those institutions. The implications of government ownership and disposition of these assets are unclear, and such ownership or disposition may have positive or negative effects on the liquidity, valuation and performance of the Fund’s portfolio holdings.
INVESTMENT RESTRICTIONS
          The investment restrictions set forth below have been adopted by the Trust as fundamental policies that cannot be changed with respect to the Fund without the affirmative vote of the holders of a majority of the outstanding voting securities (as defined in the Act) of the Fund. The investment objective of the Fund and all other investment policies or practices of the Fund are considered by the Trust not to be fundamental and accordingly may be changed without shareholder approval. For purposes of the Act, “majority” of the outstanding voting securities means the lesser of (i) 67% or more of the shares of the Trust or the Fund present at a meeting, if the holders of

39

 

more than 50% of the outstanding shares of the Trust or the Fund are present or represented by proxy, or (ii) more than 50% of the shares of the Trust or the Fund.
               For purposes of the following limitations, any limitation which involves a maximum percentage shall not be considered violated unless an excess over the percentage occurs immediately after, and is caused by, an acquisition or encumbrance of securities or assets of, or borrowings by, the Fund. With respect to the Fund’s fundamental investment restriction number (3) below, asset coverage of at least 300% (as defined in the Act), inclusive of any amounts borrowed, must be maintained at all times.
               As a matter of fundamental policy, the Fund may not:
(1)   Invest 25% or more of its total assets in the securities of one or more issuers conducting their principal business activities in the same industry (excluding the U.S. government or any of its agencies or instrumentalities).
 
(2)   Borrow money, except (a) the Fund, to the extent permitted by applicable law, may borrow from banks (as defined in the Act), other affiliated investment companies and other persons or through reverse repurchase agreements in amounts up to 33 1/3% of its total assets (including the amount borrowed), (b) the Fund may, to the extent permitted by applicable law, borrow up to an additional 5% of its total assets for temporary purposes, (c) the Fund may obtain such short-term credits as may be necessary for the clearance of purchases and sales of portfolio securities, (d) the Fund may purchase securities on margin to the extent permitted by applicable law and (e) the Fund may engage in transactions in mortgage dollar rolls which are accounted for as financings.
          The following interpretation applies to, but is not part of, this fundamental policy: In determining whether a particular investment in portfolio instruments or participation in portfolio transactions is subject to this borrowing policy, the accounting treatment of such instrument or participation shall be considered, but shall not by itself be determinative. Whether a particular instrument or transaction constitutes a borrowing shall be determined by the Board, after consideration of all of the relevant circumstances.
(3)   Make loans, except through (a) the purchase of debt obligations in accordance with the Fund’s investment objective and policies, (b) repurchase agreements with banks, brokers, dealers and other financial institutions, (c) loans of securities as permitted by applicable law, and (d) loans to affiliates of the Fund to the extent permitted by law.
 
(4)   Underwrite securities issued by others, except to the extent that the sale of portfolio securities by the Fund may be deemed to be an underwriting.
 
(5)   Purchase, hold or deal in real estate, although the Fund may purchase and sell securities that are secured by real estate or interests therein, securities of real estate investment trusts and mortgage-related securities and may hold and sell real estate acquired by the Fund as a result of the ownership of securities.
 
(6)   Invest in commodities or commodity contracts, except that the Fund may invest in currency and financial instruments and contracts that are commodities or commodity contracts.
 
(7)   Issue senior securities to the extent such issuance would violate applicable law.
               The Fund may, notwithstanding any other fundamental investment restriction or policy, invest some or all of its assets in a single open-end investment company or series thereof with substantially the same fundamental investment objective, restrictions and policies as the Fund.
               In addition to the fundamental policies mentioned above, the Trustees have adopted the following non-fundamental policies which can be changed or amended by action of the Trustees without approval of shareholders. Again, for purposes of the following limitations, any limitation which involves a maximum percentage shall not be considered violated unless an excess over the percentage occurs immediately after, and is caused by, an acquisition of securities by the Fund.
               The Fund may not:

40

 

(a)   Invest in companies for the purpose of exercising control or management.
 
(b)   Invest more than 15% of the Fund’s net assets in illiquid investments including illiquid repurchase agreements with a notice or demand period of more than seven days, securities which are not readily marketable and restricted securities not eligible for resale pursuant to Rule 144A under the Securities Act of 1933 (the “1933 Act”).
 
(c)   Purchase additional securities if the Fund’s borrowings, as permitted by the Fund’s borrowing policy, exceed 5% of its net assets. (Mortgage dollar rolls are not subject to this limitation).
 
(d)   Make short sales of securities, except that the Fund may make short sales against the box.
TRUSTEES AND OFFICERS
The Trust’s Leadership Structure
          The business and affairs of the Fund are managed under the direction of the Board of Trustees (the “Board”), subject to the laws of the State of Delaware and the Trust’s Declaration of Trust. The Trustees are responsible for deciding matters of overall policy and reviewing the actions of the Trust’s service providers. The officers of the Trust conduct and supervise the Fund’s daily business operations. Trustees who are not deemed to be “interested persons” of the Trust as defined in the Act are referred to as “Independent Trustees.” Trustees who are deemed to be “interested persons” of the Trust are referred to as “Interested Trustees.” The Board is currently composed of seven Independent Trustees and two Interested Trustees. The Board has selected an Independent Trustee to act as Chairman, whose duties include presiding at meetings of the Board and acting as a focal point to address significant issues that may arise between regularly scheduled Board and Committee meetings. In the performance of the Chairman’s duties, the Chairman will consult with the other Independent Trustees and the Fund’s officers and legal counsel, as appropriate. The Chairman may perform other functions as requested by the Board from time to time.
          The Board meets as often as necessary to discharge its responsibilities. Currently, the Board conducts regular, in-person meetings at least six times a year, and holds special in-person or telephonic meetings as necessary to address specific issues that require attention prior to the next regularly scheduled meeting. In addition, the Independent Trustees meet at least annually to review, among other things, investment management agreements, distribution (Rule 12b-1) and/or service plans and related agreements, transfer agency agreements and certain other agreements providing for the compensation of Goldman Sachs and/or its affiliates by the Fund, and to consider such other matters as they deem appropriate.
          The Board has established six standing committees — Audit, Governance and Nominating, Compliance, Valuation, Dividend and Contract Review Committees. The Board may establish other committees, or nominate one or more Trustees to examine particular issues related to the Board’s oversight responsibilities, from time to time. Each Committee meets periodically to perform its delegated oversight functions and reports its findings and recommendations to the Board. For more information on the Committees, see the section “STANDING BOARD COMMITTEES,” below.
          The Trustees have determined that the Trust’s leadership structure is appropriate because it allows the Trustees to effectively perform their oversight responsibilities.
Trustees of the Trust
          Information pertaining to the Trustees of the Trust as of the date of this SAI is set forth below.

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Independent Trustees
        Term of       Number of    
        Office       Portfolios in    
        and       Fund   Other
Name,   Position(s)   Length of       Complex   Directorships
Address and   Held with   Time   Principal Occupation(s)   Overseen by   Held by
Age1   the Trust   Served2   During Past 5 Years   Trustee3   Trustee4
Ashok N. Bakhru
Age: 69
  Chairman of the Board of Trustees   Since 1996 (Trustee
since 1991) 		  President, ABN Associates (1994— 1996 and 1998—Present); Director, Apollo Investment Corporation (a business development company) (2008- Present); Member of Cornell University Council (1992—2004 and 2006— Present); Trustee, Scholarship America (1998—2005); Trustee, Institute for Higher Education Policy (2003—2008); Director, Private Equity Investors—III and IV (1998—2007), and Equity- Linked Investors II (April 2002— 2007).     102     Apollo Investment
Corporation (a
business
development
company)
 
                        
 
          Chairman of the Board of Trustees—Goldman Sachs Mutual Fund Complex.            

42

 

                         
Independent Trustees
        Term of       Number of    
        Office       Portfolios in    
        and       Fund   Other
Name,   Position(s)   Length of       Complex   Directorships
Address and   Held with   Time   Principal Occupation(s)   Overseen by   Held by
Age1   the Trust   Served2   During Past 5 Years   Trustee3   Trustee4
Donald C. Burke
Age: 51
  Trustee   Since 2010   Mr. Burke is retired (since 2010). He is a Director, Avista Corp. (2011-Present); and was formerly a Director, BlackRock Luxembourg and Cayman Funds (2006—2010); President and Chief Executive Officer, BlackRock U.S. Funds (2007—2009); Managing Director, BlackRock, Inc. (2006— 2009); Managing Director, Merrill Lynch Investment Managers, L.P. (“MLIM”) (2006); First Vice President, MLIM (1997—2005); Chief Financial Officer and Treasurer, MLIM U.S. Funds (1999—2006).     102     Avista Corp.
(an energy company)
 
                        
 
          Trustee—Goldman Sachs Mutual Fund Complex.            
 
                        
John P.
Coblentz, Jr.
Age: 70
  Trustee   Since 2003   Partner, Deloitte & Touche LLP (1975—2003); Director, Emerging Markets Group, Ltd. (2004—2006); and Director, Elderhostel, Inc. (2006—Present).     102     None
 
                        
 
          Trustee—Goldman Sachs Mutual Fund Complex.            
 
                        
Diana M. Daniels
Age: 62
  Trustee   Since 2007   Ms. Daniels is retired (since 2007). Formerly, she was Vice President, General Counsel and Secretary, The Washington Post Company (1991—2006). Ms. Daniels is a Vice Chairman of the Board of Trustees, Cornell University (2009—Present); Member, Advisory Board, Psychology Without Borders (international humanitarian aid organization) (since 2007), and former Member of the Legal Advisory Board, New York Stock Exchange (2003—2006) and of the Corporate Advisory Board, Standish Mellon Management Advisors (2006— 2007).     102     None
 
                        
 
          Trustee—Goldman Sachs Mutual Fund Complex.            

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Independent Trustees
        Term of       Number of    
        Office       Portfolios in    
        and       Fund   Other
Name,   Position(s)   Length of       Complex   Directorships
Address and   Held with   Time   Principal Occupation(s)   Overseen by   Held by
Age1   the Trust   Served2   During Past 5 Years   Trustee3   Trustee4
Joseph P. LoRusso
Age: 54
  Trustee   Since 2010   Mr. LoRusso is retired (since 2008). Formerly, he was President, Fidelity Investments Institutional Services Co. (“FIIS”) (2002—2008); Director, FIIS (2002—2008); Director, Fidelity Investments Institutional Operations Company (2003—2007); Executive Officer, Fidelity Distributors Corporation (2007—2008).     102     None
 
                        
 
          Trustee—Goldman Sachs Mutual Fund Complex.            
 
                        
Jessica Palmer
Age: 62
  Trustee   Since 2007   Ms. Palmer is retired (since 2006). Formerly, she was Consultant, Citigroup Human Resources Department (2007-2008); Managing Director, Citigroup Corporate and Investment Banking (previously, Salomon Smith Barney/Salomon Brothers) (1984—2006). Ms. Palmer was a Member of the Board of Trustees of Indian Mountain School (private elementary and secondary school) (2004—2009).     102     None
 
                        
 
          Trustee—Goldman Sachs Mutual Fund Complex.            
 
                        
Richard P. Strubel
Age: 72
  Trustee   Since 1987   Director, Cardean Learning Group (provider of educational services via the internet) (2003—2008); Trustee Emeritus, The University of Chicago (1987—Present).     102     The Northern Trust Mutual Fund Complex (58 Portfolios) (Chairman of the Board of Trustees); Gildan Activewear Inc. (a clothing marketing and manufacturing company)
 
                        
 
          Trustee—Goldman Sachs Mutual Fund Complex.            

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Interested Trustees
        Term of       Number of    
        Office       Portfolios in    
        and       Fund   Other
Name,   Position(s)   Length of       Complex   Directorships
Address and   Held with   Time   Principal Occupation(s)   Overseen by   Held by
Age1   the Trust   Served2   During Past 5 Years   Trustee3   Trustee4
James A. McNamara*
Age: 49
  President and Trustee   Since 2007   Managing Director, Goldman Sachs (December 1998—Present); Director of Institutional Fund Sales, GSAM (April 1998—December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993—April 1998).     102     None
 
                        
 
          President—Goldman Sachs Mutual Fund Complex (November 2007—Present); Senior Vice President—Goldman Sachs Mutual Fund Complex (May 2007—November 2007); and Vice President—Goldman Sachs Mutual Fund Complex (2001—2007).            
 
                        
 
          Trustee—Goldman Sachs Mutual Fund Complex (since November 2007 and December 2002—May 2004).            
 
                        
Alan A. Shuch*
Age: 62
  Trustee   Since 1990   Advisory Director—GSAM (May 1999—Present); Consultant to GSAM (December 1994—May 1999); and Limited Partner, Goldman Sachs (December 1994—May 1999).     102     None
 
                        
 
          Trustee—Goldman Sachs Mutual Fund Complex.            
 
*   These persons are considered to be “Interested Trustees” because they hold positions with Goldman Sachs and own securities issued by The Goldman Sachs Group, Inc. Each Interested Trustee holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
 
1   Each Trustee may be contacted by writing to the Trustee, c/o Goldman Sachs, 200 West Street, New York, New York, 10282, Attn: Peter V. Bonanno.
 
2   Each Trustee holds office for an indefinite term until the earliest of: (a) the election of his or her successor; (b) the date the Trustee resigns or is removed by the Board of Trustees or shareholders, in accordance with the Trust’s Declaration of Trust; (c) the conclusion of the first Board meeting held subsequent to the day the Trustee attains the age of 74 years (in accordance with the current resolutions of the Board of Trustees, which may be changed by the Trustees without shareholder vote); or (d) the termination of the Trust.
 
3   The Goldman Sachs Mutual Fund Complex consists of the Trust, Goldman Sachs Municipal Opportunity Fund, Goldman Sachs Credit Strategies Fund and Goldman Sachs Variable Insurance Trust. As of the date of this SAI, the Trust consisted of 88 portfolios (83 of which are currently offered to the public), Goldman Sachs Variable Insurance Trust consisted of 12 portfolios (11 of which are currently offered to the public), and the Goldman Sachs Municipal Opportunity Fund did not offer shares to the public.
 
4   This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies registered under the Act.
          The significance or relevance of a Trustee’s particular experience, qualifications, attributes and/or skills is considered by the Board on an individual basis. Experience, qualifications, attributes and/or skills common to all Trustees include the ability to critically review, evaluate and discuss information provided to them and to interact

45

 

effectively with the other Trustees and with representatives of the Investment Adviser and its affiliates, other service providers, legal counsel and the Fund’s independent registered public accounting firm, the capacity to address financial and legal issues and exercise reasonable business judgment, and a commitment to the representation of the interests of the Fund and its shareholders. The Governance and Nominating Committee’s charter contains certain other factors that are considered by the Governance and Nominating Committee in identifying and evaluating potential nominees to serve as Independent Trustees. Based on each Trustee’s experience, qualifications, attributes and/or skills, considered individually and with respect to the experience, qualifications attributes and/or skills of other Trustees, the Board has concluded that each Trustee should serve as a Trustee. Below is a brief discussion of the experience, qualifications, attributes and/or skills of each individual Trustee as of the date of this SAI that led the Board to conclude that such individual should serve as a Trustee.
          Ashok N. Bakhru. Mr. Bakhru has served as a Trustee since 1991 and Chairman of the Board since 1996. Mr. Bakhru serves as President of ABN Associates, a management and financial consulting firm, and is a Director of Apollo Investment Corporation, a business development company. Previously, Mr. Bakhru was the Chief Financial Officer, Chief Administrative Officer and Director of Coty Inc., a multinational cosmetics, fragrance and personal care company. Previously, Mr. Bakhru held several senior management positions at Scott Paper Company, a major manufacturer of paper products, including Senior Vice President and Chief Financial Officer. Mr. Bakhru also serves on the Governing Council of the Independent Directors Council and the Board of Governors of the Investment Company Institute. He also serves on the Advisory Board of BoardIQ, an investment publication. In addition, Mr. Bakhru has served as Director of Equity-Linked Investments II and Private Equity Investors III and IV, which are private equity partnerships based in New York City. Mr. Bakhru was also a Director of Arkwright Mutual Insurance Company. Based on the foregoing, Mr. Bakhru is experienced with financial and investment matters.
          Donald C. Burke. Mr. Burke has served as Trustee since 2010. Mr. Burke serves as a Director of Avista Corp., an energy company. Mr. Burke was a Managing Director of BlackRock, Inc., where he was President and Chief Executive Officer of BlackRock’s U.S. funds and a director and chairman of several offshore funds advised by BlackRock. As President and Chief Executive Officer of BlackRock’s U.S. funds, he was responsible for all accounting, tax and regulatory reporting requirements for over 300 open-end and closed-end BlackRock funds. Previously, he was a Managing Director, First Vice President and Vice President of Merrill Lynch Investment Managers, L.P. (“MLIM”), where he worked for 16 years prior to MLIM’s merger with BlackRock, and was instrumental in the integration of BlackRock’s and MLIM’s operating infrastructure following the merger. While at MLIM, he was Chief Financial Officer and Treasurer of MLIM’s U.S. funds and Head of Global Operations and Client Services, where he was responsible for the development and maintenance of MLIM’s operating infrastructure across the Americas, Europe and the Pacific Rim. He also developed controls for the MLIM U.S. funds’ financial statement certification process to comply with the Sarbanes-Oxley Act of 2002, worked with fund auditors in connection with the funds’ annual audits and established the department responsible for all tax issues impacting the MLIM U.S. funds. Previously, Mr. Burke was Tax Manager at Deloitte & Touche, where he was designated as one of the firm’s lead specialists in the investment company industry, and advised multinational corporations, partnerships, universities and high net worth individuals in tax matters. Based on the foregoing, Mr. Burke is experienced with accounting, financial and investment matters.
          John P. Coblentz, Jr. Mr. Coblentz has served as Trustee since 2003. Mr. Coblentz has been designated as the Board’s “audit committee financial expert” given his extensive accounting and finance experience. Mr. Coblentz was a partner with Deloitte & Touche LLP for 28 years. While at Deloitte & Touche LLP, Mr. Coblentz was lead partner responsible for all auditing and accounting services to a variety of large, global companies, a significant portion of which operated in the financial services industry. Mr. Coblentz was also the national managing partner for the firm’s risk management function, a member of the firm’s Management Committee and the first managing partner of the firm’s Financial Advisory Services practice, which brought together the firm’s mergers and acquisition services, forensic and dispute services, corporate finance, asset valuation and reorganization businesses under one management structure. He served as a member of the firm’s Board of Directors Mr. Coblentz also currently serves as a Director and chairman of the finance committee of Elderhostel, Inc., a not-for-profit organization. Based on the foregoing, Mr. Coblentz is experienced with accounting, financial and investment matters.
          Diana M. Daniels. Ms. Daniels has served as Trustee since 2007. Ms. Daniels also serves as Vice Chair of the Board of Trustees of Cornell University. Ms. Daniels held several senior management positions at The Washington Post Company and its subsidiaries, where she worked for 29 years. While at The Washington Post

46

 

Company, Ms. Daniels served as Vice Present, General Counsel, Secretary to the Board of Directors and Secretary to the Audit Committee. Previously, Ms. Daniels served as Vice President and General Counsel of Newsweek, Inc. Ms. Daniels has also served as a member of the Corporate Advisory Board of Standish Mellon Management Advisors and of the Legal Advisory Board of New York Stock Exchange. Ms. Daniels is also a member of the American Law Institute and of the Advisory Council of the Inter-American Press Association. Based on the foregoing, Ms. Daniels is experienced with legal, financial and investment matters.
          Joseph P. LoRusso. Mr. LoRusso has served as Trustee since 2010. Mr. LoRusso held a number of senior management positions at Fidelity Investments for over 15 years, where he was most recently President of Fidelity Investments Institutional Services Co. (“FIIS”). As President of FIIS, Mr. LoRusso oversaw the development, distribution and servicing of Fidelity’s investment and retirement products through various financial intermediaries. Previously, he served as President, Executive Vice President and Senior Vice President of Fidelity Institutional Retirement Services Co., where he helped establish Fidelity’s 401(k) business and built it into the largest in the U.S. In these positions, he oversaw sales, marketing, implementation, client services, operations and technology. Mr. LoRusso also served on Fidelity’s Executive Management Committee. Prior to his experience with Fidelity, he was Second Vice President in the Investment and Pension Group of John Hancock Mutual Life Insurance, where he had responsibility for developing and running the company’s 401(k) business. Previously, he worked at The Equitable (now a subsidiary of AXA Financial), where he was Product Manager of the company’s then-nascent 401(k) business, and at Arthur Andersen & Co. (now Accenture), as a Senior Consultant within the firm’s consulting practice. Based on the foregoing, Mr. LoRusso is experienced with financial and investment matters.
          Jessica Palmer. Ms. Palmer has served as Trustee since 2007. Ms. Palmer worked at Citigroup Corporate and Investment Banking (previously, Salomon Smith Barney/Salomon Brothers) for over 20 years, where she was a Managing Director. While at Citigroup Corporate and Investment Banking, Ms. Palmer was Head of Global Risk Management, Chair of the Global Commitment Committee, Co-Chair of International Investment Banking (New York) and Head of Fixed Income Capital Markets. Ms. Palmer was also a member of the Management Committee and Risk Management Operating Committee of Citigroup, Inc. Prior to that, Ms. Palmer was a Vice President at Goldman Sachs in its international corporate finance department. Ms. Palmer was also Assistant Vice President of the International Division at Wells Fargo Bank, N.A. Ms. Palmer was also a member of the Board of Trustees of a private elementary and secondary school. Based on the foregoing, Ms. Palmer is experienced with financial and investment matters.
          Richard P. Strubel. Mr. Strubel has served as Trustee since 1987. Mr. Strubel also serves as Chairman of the Northern Funds, a family of retail and institutional mutual funds managed by The Northern Trust Company. He also serves on the board of Gildan Activewear Inc., which is listed on the New York Stock Exchange (“NYSE”). Mr. Strubel was Vice-Chairman of the Board of Cardean Learning Group (formerly known as Unext), and previously served as Unext’s President and Chief Operating Officer. Mr. Strubel was Managing Director of Tandem Partners, Inc., a privately-held management services firm, and served as President and Chief Executive Officer of Microdot, Inc. Previously, Mr. Strubel served as President of Northwest Industries, then a NYSE-listed company, a conglomerate with various operating entities located around the country. Before joining Northwest, Mr. Strubel was an associate and later managing principal of Fry Consultants, a management consulting firm based in Chicago. Mr. Strubel is also a Trustee Emeritus of the University of Chicago, and is an adjunct professor at the University of Chicago Booth School of Business. Based on the foregoing, Mr. Strubel is experienced with financial and investment matters.
          James A. McNamara. Mr. McNamara has served as Trustee and President of the Trust since 2007 and has served as an officer of the Trust since 2001. Mr. McNamara is a Managing Director at Goldman Sachs. Mr. McNamara is currently head of Global Third Party Distribution at GSAM, where he was previously head of U.S. Third Party Distribution. Prior to that role, Mr. McNamara served as Director of Institutional Fund Sales. Prior to joining Goldman Sachs, Mr. McNamara was Vice President and Manager at Dreyfus Institutional Service Corporation. Based on the foregoing, Mr. McNamara is experienced with financial and investment matters.
          Alan A. Shuch. Mr. Shuch has served as a Trustee since 1990. Mr. Shuch is an Advisory Director to Goldman Sachs. Mr. Shuch serves on the Board of Trustees of a number of offshore funds managed by GSAM. He serves on GSAM’s Valuation and Brokerage Allocation Committees. Prior to retiring as a general partner of Goldman Sachs in 1994, Mr. Shuch was president and chief operating officer of GSAM which he founded in 1988.

47

 

Mr. Shuch joined the Goldman Sachs Fixed Income Division in 1976. He was instrumental in building Goldman Sachs’ Corporate Bond Department and served as co-head of the Global Fixed Income Sales and the High Yield Bond and Preferred Stock Departments. He headed the Portfolio Restructuring and Fixed Income Quantitative and Credit Research Departments. Mr. Shuch also served on a variety of firm-wide committees including the International Executive, New Product and Strategic Planning Committees and was a member of the Stone Street/Bridge Street Private Equity Board. Mr. Shuch serves on Wharton’s Graduate Executive Board. Based on the foregoing, Mr. Shuch is experienced with financial and investment matters.
Officers of the Trust
          Information pertaining to the officers of the Trust as of the date of this SAI is set forth below.
             
    Position(s)   Term of Office    
    Held With the   and Length of    
Name, Age And Address   Trust   Time Served1   Principal Occupation(s) During Past 5 Years
James A. McNamara
200 West Street
New York, NY 10282
Age: 49
  Trustee and President   Since 2007   Managing Director, Goldman Sachs (December 1998—Present); Director of Institutional Fund Sales, GSAM (April 1998—December 2000); and Senior Vice President and Manager, Dreyfus Institutional Service Corporation (January 1993—April 1998).
 
            
 
          President—Goldman Sachs Mutual Fund Complex (November 2007—Present); Senior Vice President—Goldman Sachs Mutual Fund Complex (May 2007—November 2007); and Vice President—Goldman Sachs Mutual Fund Complex (2001—2007).
 
            
 
          Trustee—Goldman Sachs Mutual Fund Complex (since November 2007—Present and December 2002—May 2004).
 
            
Scott McHugh
200 West Street
New York, NY 10282
Age: 40
  Treasurer and Senior Vice President   Since 2009   Vice President, Goldman Sachs (February 2007—Present); Assistant Treasurer of certain mutual funds administered by DWS Scudder (2005—2007); and Director (2005-2007), Vice President (2000-2005), Assistant Vice President (1998-2000), Deutsche Asset Management or its predecessor (1998—2007).
 
            
 
          Treasurer—Goldman Sachs Mutual Fund Complex (October 2009-Present); Senior Vice President—Goldman Sachs Mutual Fund Complex (November 2009-Present); and Assistant Treasurer—Goldman Sachs Mutual Fund Complex (May 2007-October 2009).
 
            
George F. Travers
30 Hudson Street
Jersey City, NJ 07302
Age: 43
  Senior Vice President and Principal Financial Officer   Since 2009   Managing Director, Goldman Sachs (2007-present); Managing Director, UBS Ag (2005-2007); and Partner, Deloitte & Touche LLP (1990-2005, partner from 2000-2005)
 
            
 
           Senior Vice President and Principal Financial Officer—Goldman Sachs Mutual Fund Complex.
 
            
Philip V. Giuca, Jr.
30 Hudson Street
Jersey City, NJ 07302
Age: 49
  Assistant Treasurer   Since 1997   Vice President, Goldman Sachs (May 1992—Present).

Assistant Treasurer — Goldman Sachs Mutual Fund Complex.

48

 

             
    Position(s)   Term of Office    
    Held With the   and Length of    
Name, Age And Address   Trust   Time Served1   Principal Occupation(s) During Past 5 Years
Peter Fortner
30 Hudson Street
Jersey City, NJ 07302
Age: 53
  Assistant Treasurer   Since 2000   Vice President, Goldman Sachs (July 2000—Present); Principal Financial Officer, Commerce Bank Mutual Fund Complex (2008-Present); Associate, Prudential Insurance Company of America (November 1985—June 2000); and Assistant Treasurer, certain closed-end funds administered by Prudential (1999—2000).
 
            
 
           Assistant Treasurer—Goldman Sachs Mutual Fund Complex.
 
            
Kenneth G. Curran
30 Hudson Street
Jersey City, NJ 07302
Age: 47
  Assistant Treasurer   Since 2001   Vice President, Goldman Sachs (November 1998—Present); and Senior Tax Manager, KPMG Peat Marwick (accountants) (August 1995—October 1998).
 
            
 
           Assistant Treasurer—Goldman Sachs Mutual Fund Complex.
 
            
Jesse Cole
71 South Wacker Drive
Chicago, IL 60606
Age: 48
  Vice President   Since 1998   Managing Director, Goldman Sachs (December 2006—Present); Vice President, GSAM (June 1998—Present); and Vice President, AIM Management Group, Inc. (investment adviser) (April 1996—June 1998).
 
            
 
           Vice President—Goldman Sachs Mutual Fund Complex.

49

 

             
    Position(s)   Term of Office    
    Held With the   and Length of    
Name, Age And Address   Trust   Time Served1   Principal Occupation(s) During Past 5 Years
Kerry K. Daniels
71 South Wacker Drive
Chicago, IL 60606
Age: 48
  Vice President   Since 2000   Manager, Financial Control — Shareholder Services, Goldman Sachs (1986—Present). Vice President—Goldman Sachs Mutual Fund Complex.
 
            
Mark Hancock
71 South Wacker Drive
Chicago, IL 60606
Age: 43
  Vice President   Since 2007   Managing Director, Goldman Sachs (November 2005—Present); Vice President, Goldman Sachs (August 2000—November 2005); Senior Vice President—Dreyfus Service Corp (1999—2000); and Vice President—Dreyfus Service Corp (1996—1999).
 
            
 
          Vice President—Goldman Sachs Mutual Fund Complex.
 
            
Jeffrey D. Matthes
30 Hudson Street
Jersey City, NJ 07302
Age: 42
  Vice President   Since 2007   Vice President, Goldman Sachs (December 2004—Present); and Associate, Goldman Sachs (December 2002—December 2004).

Vice President—Goldman Sachs Mutual Fund Complex.
 
            
Carlos W. Samuels
30 Hudson Street
Jersey City, NJ 07302
Age: 37
  Vice President   Since 2007   Vice President, Goldman Sachs (December 2007—Present); Associate, Goldman Sachs (December 2005—December 2007); Analyst, Goldman Sachs (January 2004—December 2005).
 
            
 
          Vice President—Goldman Sachs Mutual Fund Complex.
 
            
Miriam Cytryn
200 West Street
New York, NY 10282
Age: 53
  Vice President   Since 2008   Vice President, GSAM (2008-Present); Vice President of Divisional Management, Investment Management Division (2007-2008); Vice President and Chief of Staff, GSAM US Distribution (2003-2007); and Vice President of Employee Relations, Goldman Sachs (1996-2003).
 
            
 
          Vice President—Goldman Sachs Mutual Fund Complex.

50

 

             
    Position(s)   Term of Office    
    Held With the   and Length of    
Name, Age And Address   Trust   Time Served1   Principal Occupation(s) During Past 5 Years
Glen Casey
200 West Street
New York, NY 10282
Age: 47
  Vice President   Since 2008   Managing Director, Goldman Sachs (2007-Present); and Vice President, Goldman Sachs (1997-2007).

Vice President—Goldman Sachs Mutual Fund Complex.
 
            
Mark Heaney
Christchurch Court
10-15 Newgate Street
London, EC1A 7HD, UK
Age: 44
  Vice President   Since 2010   Executive Director, GSAM (May 2005 — Present); Director of Operations (UK and Ireland), Invesco Asset Management (May 2004 — March 2005); Global Head of Investment Administration, Invesco Asset Management (September 2001 — May 2004); Managing Director (Ireland), Invesco Asset Management (March 2000 — September 2001); Director of Investment Administration, Invesco Asset Management (December 1998 — March 2000).
 
            
 
          Vice President—Goldman Sachs Mutual Fund Complex.
 
            
Peter V. Bonanno
200 West Street
New York, NY 10282
Age: 44
  Secretary   Since 2003   Managing Director, Goldman Sachs (December 2006—Present); Associate General Counsel, Goldman Sachs (2002—Present); Vice President, Goldman Sachs (1999—2006); and Assistant General Counsel, Goldman Sachs (1999-2002).
 
            
 
          Secretary—Goldman Sachs Mutual Fund Complex (2006—Present); and Assistant Secretary—Goldman Sachs Mutual Fund Complex (2003—2006).
 
            
David Fishman
200 West Street
New York, NY 10282
Age: 47
  Assistant Secretary   Since 2001   Managing Director, Goldman Sachs (December 2001—Present); and Vice President, Goldman Sachs (1997—December 2001).

Assistant Secretary—Goldman Sachs Mutual Fund Complex.
 
            
Danny Burke
200 West Street
New York, NY 10282
Age: 49
  Assistant Secretary   Since 2001   Vice President, Goldman Sachs (1987—Present).

Assistant Secretary—Goldman Sachs Mutual Fund Complex.
 
            
George Djurasovic
200 West Street
New York, NY 10282
Age: 40
  Assistant Secretary   Since 2007   Vice President, Goldman Sachs (2005—Present); Associate General Counsel, Goldman Sachs (2006—Present); Assistant General Counsel, Goldman Sachs (2005—2006); Senior Counsel, TIAA — CREF (2004—2005); and Counsel, TIAA — CREF (2000—2004).
 
            
 
          Assistant Secretary—Goldman Sachs Mutual Fund Complex.

51

 

             
    Position(s)   Term of Office    
    Held With the   and Length of    
Name, Age And Address   Trust   Time Served1   Principal Occupation(s) During Past 5 Years
Patricia Meyer
200 West Street
New York, NY 10282
Age: 37
  Assistant Secretary   Since 2007   Vice President, Goldman Sachs (September 2006—Present); Associate General Counsel, Goldman Sachs (2009-Present); Assistant General Counsel, Goldman Sachs (September 2006 — December 2008); and Associate, Simpson Thacher & Bartlett LLP (2000—2006).
 
            
 
          Assistant Secretary—Goldman Sachs Mutual Fund Complex.
 
            
Mark T. Robertson
200 West Street New
York, NY 10282
Age: 35
  Assistant Secretary   Since 2007   Vice President, Goldman Sachs (April 2007—Present); Assistant General Counsel, Goldman Sachs (April 2007—Present); Associate, Fried, Frank, Harris, Shriver & Jacobson LLP (2004—2007); and Solicitor, Corrs Chambers Westgarth (2002—2003).
 
            
 
          Assistant Secretary—Goldman Sachs Mutual Fund Complex.
 
            
Deborah Farrell
30 Hudson Street
Jersey City, NJ 07302
Age: 40
  Assistant Secretary   Since 2007   Vice President, Goldman Sachs (2005—Present); Associate, Goldman Sachs (2001—2005); and Analyst, Goldman Sachs (1994—2005).
 
          Assistant Secretary—Goldman Sachs Mutual Fund Complex.
 
            
Patrick T. O’Callaghan
200 West Street
New York, NY 10282
Age: 39
  Assistant
Secretary 		  Since 2009   Vice President, Goldman Sachs (2000-Present); Associate, Goldman Sachs (1998-2000); Analyst, Goldman Sachs (1995-1998).

Assistant Secretary—Goldman Sachs Mutual Fund Complex.
 
            
James A. McCarthy
200 West Street
New York, NY 10282
Age: 47
  Assistant Secretary   Since 2009   Managing Director, Goldman Sachs (2003-Present); Vice President, Goldman Sachs (1996-2003); Portfolio Manager, Goldman Sachs (1995-1996).
 
            
 
          Assistant Secretary—Goldman Sachs Mutual Fund Complex.

52

 

             
    Position(s)   Term of Office    
    Held With the   and Length of    
Name, Age And Address   Trust   Time Served1   Principal Occupation(s) During Past 5 Years
Andrew Murphy
200 West Street
New York, NY 10282
Age: 39
  Assistant Secretary   Since 2010   Vice President, Goldman Sachs (April 2009-Present); Assistant General Counsel, Goldman Sachs (April 2009-Present); Attorney, Axiom Legal (2007-2009); Vice President and Counsel, AllianceBernstein, L.P. (2001-2007).
 
            
 
          Assistant Secretary—Goldman Sachs Mutual Fund Complex.
 
1   Officers hold office at the pleasure of the Board of Trustees or until their successors are duly elected and qualified. Each officer holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
Standing Board Committees
          The Audit Committee oversees the audit process and provides assistance to the Board with respect to fund accounting, tax compliance and financial statement matters. In performing its responsibilities, the Audit Committee selects and recommends annually to the Board, an independent registered public accounting firm to audit the books and records of the Trust for the ensuing year, and reviews with the firm the scope and results of each audit. All of the Independent Trustees serve on the Audit Committee. The Audit Committee held four meetings during the fiscal year ended August 31, 2011.
          The Governance and Nominating Committee has been established to: (i) assist the Board in matters involving mutual fund governance, which includes making recommendations to the Board with respect to the effectiveness of the Board in carrying out its responsibilities in governing the Fund and overseeing its management; (ii) select and nominate candidates for appointment or election to serve as Independent Trustees; and (iii) advise the Board of Trustees on ways to improve its effectiveness. All of the Independent Trustees serve on the Governance and Nominating Committee. The Governance and Nominating Committee held two meetings during the fiscal year ended August 31, 2011. As stated above, each Trustee holds office for an indefinite term until the occurrence of certain events. In filling Board vacancies, the Governance and Nominating Committee will consider nominees recommended by shareholders. Nominee recommendations should be submitted to the Trust at its mailing address stated in the Fund’s Proxy Statement/Prospectus and should be directed to the attention of the Goldman Sachs Trust Governance and Nominating Committee.
          The Compliance Committee has been established for the purpose of overseeing the compliance processes: (i) of the Fund; and (ii) insofar as they relate to services provided to the Fund, of the Fund’s investment adviser, distributor, administrator (if any), and transfer agent, except that compliance processes relating to the accounting and financial reporting processes, and certain related matters, are overseen by the Audit Committee. In addition, the Compliance Committee provides assistance to the Board with respect to compliance matters. The Compliance Committee met three times during the fiscal year ended August 31, 2011. All of the Independent Trustees serve on the Compliance Committee.
          The Valuation Committee is authorized to act for the Board in connection with the valuation of portfolio securities held by the Fund in accordance with the Trust’s Valuation Procedures. Messrs. McNamara and Shuch serve on the Valuation Committee, together with certain employees of GSAM who are not Trustees. The Valuation Committee met twelve times during the fiscal year ended August 31, 2011. The Valuation Committee reports periodically to the Board.
          The Dividend Committee is authorized, subject to the ratification of Trustees who are not members of the committee, to declare dividends and capital gain distributions consistent with the Fund’s Proxy

53

 

Statement/Prospectus. Messrs. McNamara and McHugh serve on the Dividend Committee. The Dividend Committee met twelve times during the fiscal year ended August 31, 2011.
          The Contract Review Committee has been established for the purpose of overseeing the processes of the Board for reviewing and monitoring performance under the Fund’s investment management, distribution, transfer agency and certain other agreements with the Fund’s Investment Adviser and its affiliates. The Contract Review Committee is also responsible for overseeing the Board’s processes for considering and reviewing performance under the operation of the Fund’s distribution, service and other plans, and any agreements related to the plans, whether or not such plans and agreements are adopted pursuant to Rule 12b-1 under the Act. The Contract Review Committee also provides appropriate assistance to the Board in connection with the Board’s approval, oversight and review of the Fund’s other service providers including, without limitation, the Fund’s custodian/accounting agent, sub-transfer agents, professional (legal and accounting) firms and printing firms. The Contract Review Committee met three times during the fiscal year ended August 31, 2011. All of the Independent Trustees serve on the Contract Review Committee.
Risk Oversight
          The Board is responsible for the oversight of the activities of the Fund, including oversight of risk management. Day-to-day risk management with respect to the Fund is the responsibility of GSAM or other service providers (depending on the nature of the risk), subject to supervision by GSAM. The risks of the Fund include, but are not limited to, investment risk, compliance risk, operational risk, reputational risk, credit risk and counterparty risk. Each of GSAM and the other service providers have their own independent interest in risk management and their policies and methods of risk management may differ from the Fund and each other’s in the setting of priorities, the resources available or the effectiveness of relevant controls. As a result, the Board recognizes that it is not possible to identify all of the risks that may affect the Fund or to develop processes and controls to eliminate or mitigate their occurrence or effects, and that some risks are simply beyond the control of the Fund or GSAM, its affiliates or other service providers.
          The Board effectuates its oversight role primarily through regular and special meetings of the Board and Board committees. In certain cases, risk management issues are specifically addressed in presentations and discussions. For example, GSAM has an independent dedicated Market Risk Group that assists GSAM in managing investment risk. Representatives from the Market Risk Group regularly meet with the Board to discuss their analysis and methodologies. In addition, investment risk is discussed in the context of regular presentations to the Board on Fund strategy and performance. Other types of risk are addressed as part of presentations on related topics (e.g. compliance policies) or in the context of presentations focused specifically on one or more risks. The Board also receives reports from GSAM management on operational risks, reputational risks and counterparty risks relating to the Fund.
          Board oversight of risk management is also performed by various Board committees. For example, the Audit Committee meets with both the Fund’s independent registered public accounting firm and the GSAM’s internal audit group to review risk controls in place that support the Fund as well as test results, and the Compliance Committee meets with the CCO and representatives of GSAM’s compliance group to review testing results of the Fund’s compliance policies and procedures and other compliance issues. Board oversight of risk is also performed as needed between meetings through communications between the GSAM and the Board. The Board may, at any time and in its discretion, change the manner in which it conducts risk oversight. The Board’s oversight role does not make the Board a guarantor of the Fund’s investments or activities.

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Trustee Ownership of Fund Shares
          The following table shows the dollar range of shares beneficially owned by each Trustee in the Fund and other portfolios of Goldman Sachs Trust and Goldman Sachs Variable Insurance Trust as of December 31, 2010, unless otherwise noted.
         
        Aggregate Dollar
        Range of Equity
        Securities in All
    Dollar Range of   Portfolios in Fund
    Equity Securities in   Complex Overseen By
Name of Trustee   the Fund(1)   Trustee(2)
Ashok N. Bakhru
  None   Over $100,000
Donald C. Burke
  None   Over $100,000
John P. Coblentz, Jr.
  None   Over $100,000
Diana M. Daniels
  None   Over $100,000
Joseph P. LoRusso
  None   Over $100,000
James A. McNamara
  None   Over $100,000
Jessica Palmer
  None   Over $100,000
Alan A. Shuch
  None   Over $100,000
Richard P. Strubel
  None   Over $100,000
 
1   Includes the value of shares beneficially owned by each Trustee in the Fund.
 
2   As of December 31, 2010, the Goldman Sachs Mutual Fund Complex consisted of the Trust, Goldman Sachs Municipal Opportunity Fund and Goldman Sachs Variable Insurance Trust. The Trust consisted of 77 portfolios, the Goldman Sachs Variable Insurance Trust consisted of 11 portfolios, and the Goldman Sachs Municipal Opportunity Fund did not offer shares to the public.
          As of the date of this SAI, the Trustees and Officers of the Trust as a group owned less than 1% of the outstanding shares of beneficial interest of the Fund.
Board Compensation
          Each Independent Trustee is compensated with a unitary annual fee for his or her services as a Trustee of the Trust and as a member of the Governance and Nominating Committee, Compliance Committee, Contract Review Committee, and Audit Committee in lieu of each Independent Trustee receiving an annual fee plus additional fees for each meeting attended. The Chairman and “audit committee financial expert” will continue to receive additional compensation for their services. The Independent Trustees are also reimbursed for travel expenses incurred in connection with attending such meetings. The Trust may also pay the incidental costs of a Trustee to attend training or other types of conferences relating to the investment company industry.
          The following tables set forth certain information with respect to the compensation of each Trustee of the Trust for the fiscal year ended August 31, 2011.

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Trustee Compensation
                     
    Aggregate   Pension or Retirement     Total Compensation  
    Compensation from the   Benefits Accrued as Part     From Fund Complex  
Name of Trustee   Fund*   of the Trust’s Expenses     (including the Fund)**  
Ashok N. Bakhru(1)
   —   $ 0       $387,866  
Donald C. Burke(2)
   —   $ 0       $243,579  
John P. Coblentz, Jr.(3)
   —   $ 0       $290,610  
Diana M. Daniels
   —   $ 0       $251,708  
Patrick T. Harker(4)
   —   $ 0       $  18,398  
Joseph P. LoRusso(2)
   —   $ 0       $243,579  
James A. McNamara(5)
   —   $ 0       —  
Jessica Palmer
   —   $ 0       $250,223  
Alan A. Shuch(5)
   —   $ 0       —  
Richard P. Strubel
   —   $ 0       $251,708  
 
*   The Fund had not commenced operations as of the date of this SAI. Under current compensation arrangements, it is estimated that the Trustees will receive the following compensation from the Fund for the fiscal year ended August 31, 2011: Mr. Bakhru, $3,279; Mr. Burke, $2,061; Mr. Coblentz, $2,352; Ms. Daniels, $2,132; Mr. Harker, $173; Mr. LoRusso, $2,061; Mr. McNamara, $0; Ms. Palmer, $2,119; Mr. Shuch $0; Mr. Strubel, $2,119.
 
**   Represents fees paid to each Trustee during the fiscal year ended August 31, 2011 from the Goldman Sachs Mutual Fund Complex. The Goldman Sachs Fund Complex consists of the Trust, Goldman Sachs Variable Insurance Trust, Goldman Sachs Credit Strategies Fund and Goldman Sachs Municipal Opportunity Fund. As of August 31, 2011, the Trust consisted of 85 portfolios (83 of which offered shares to the public), the Goldman Sachs Variable Insurance Trust consisted of 12 portfolios (11 of which offered shares to the public) and the Goldman Sachs Municipal Opportunity Fund did not offer shares to the public.
 
1   Includes compensation as Board Chairman.
 
2   Messrs. Burke and LoRusso were appointed to the Board effective August 19, 2010.
 
3   Includes compensation as “audit committee financial expert”, as defined in Item 3 of Form N-CSR.
 
4   Effective September 30, 2010, Mr. Harker resigned from the Board of Trustees.
 
5   Messrs. McNamara and Shuch are Interested Trustees, and, as such, receive no compensation from the Fund or the Goldman Sachs Mutual Fund Complex.
Miscellaneous
          Class A Shares of the Fund may be sold at net asset value (“NAV”) without payment of any sales charge to Goldman Sachs, its affiliates and their respective officers, partners, directors or employees (including retired employees and former partners), any partnership of which Goldman Sachs is a general partner, any Trustee or officer of the Trust and designated family members of any of the above individuals. These and the Fund’s other sales load waivers are due to the nature of the investors and/or the reduced sales effort and expense that are needed to obtain such investments.
          The Trust, the Investment Adviser, Sub-Adviser and principal underwriter have adopted codes of ethics under Rule 17j-1 of the Act that permit personnel subject to their particular codes of ethics to invest in securities, including securities that may be purchased or held by the Fund.
MANAGEMENT SERVICES
Investment Adviser and Sub-Adviser
          As stated in the Fund’s Proxy Statement/Prospectus, Goldman Sachs Asset Management, L.P. (“GSAM”), 200 West Street, New York, New York 10282 serves as Investment Adviser to the Fund. GSAM is a subsidiary of The Goldman Sachs Group, Inc. and an affiliate of Goldman Sachs. See the Fund’s Proxy Statement/Prospectus for a description of the Investment Adviser’s duties to the Fund.

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          Founded in 1869, Goldman Sachs Group, Inc. is a financial holding company and a leading global investment banking, securities and investment management firm. Goldman Sachs is a leader in developing portfolio strategies and in many fields of investing and financing, participating in financial markets worldwide and serving individuals, institutions, corporations and governments. Goldman Sachs is also among the principal market sources for current and thorough information on companies, industrial sectors, markets, economies and currencies, and trades and makes markets in a wide range of equity and debt securities 24 hours a day. The firm is headquartered in New York with offices in countries throughout the world. It has trading professionals throughout the United States, as well as in London, Frankfurt, Tokyo, Seoul, Sao Paulo and other major financial centers around the world. The active participation of Goldman Sachs in the world’s financial markets enhances its ability to identify attractive investments. Goldman Sachs has agreed to permit the Fund to use the name “Goldman Sachs” or a derivative thereof as part of the Fund’s name for as long as the Fund’s Management Agreement (as described below) is in effect.
          The Fund’s management agreement (the “Management Agreement”) provides that GSAM, directly or through a sub-adviser, is responsible for overseeing the Fund’s investment program. The Management Agreement provides that GSAM may render similar services to others so long as the services under the Management Agreement are not impaired thereby. The Fund’s Management Agreement was most recently approved by the Trustees of the Trust, including a majority of the Trustees of the Trust who are not parties to such agreement or “interested persons” (as such term is defined in the Act) of any party thereto (the “non-interested Trustees”), on October 13, 2011 with respect to the Fund. The management arrangements were last approved by the initial sole shareholder of the Fund prior to the Fund’s commencement of operations. A discussion regarding the Trustees’ basis for approving the Management Agreement in 2011 with respect to the Fund will be available in the Fund’s semi-annual report for the period ended February 28, 2012.
          The Management Agreement will remain in effect until June 30, 2012, and will continue in effect with respect to the Fund from year to year thereafter provided such continuance is specifically approved at least annually by (i) the vote of a majority of the Fund’s outstanding voting securities or a majority of the Trustees of the Trust, and (ii) the

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vote of a majority of the non-interested Trustees of the Trust, cast in person at a meeting called for the purpose of voting on such approval.
          The Management Agreement will terminate automatically if assigned (as defined in the Act). The Management Agreement is also terminable at any time without penalty by the Trustees of the Trust or by vote of a majority of the outstanding voting securities of the applicable Fund on 60 days’ written notice to the Investment Adviser or by the Investment Adviser on 60 days’ written notice to the Trust.
          Pursuant to the Management Agreement, the Investment Adviser is entitled to receive the fees set forth below, payable monthly based on the Fund’s average daily net assets.
Management Fee Annual Rate
0.75% on the first $1 billion
0.68% over $1 billion up to $2 billion
0.64% over $2 billion up to $5 billion
0.63% over $5 billion up to $8 billion
0.62% over $8 billion
          Since the Fund is newly-organized, it did not pay management fees during the last three fiscal years.
          In addition to overseeing the Fund’s investment program, under the Management Agreement, the Investment Adviser also performs the following additional services for the Fund: (i) selects the Fund’s sub-adviser and provides general oversight of the sub-adviser; (ii) supervises all non-advisory operations of the Fund, including oversight of vendors such as the custodian, administrator and auditors, oversight of Fund liquidity and risk management, oversight of regulatory inquiries and requests, valuation and accounting oversight and oversight of ongoing compliance with federal and state securities laws, tax regulations, and other applicable law; (iii) provides personnel to perform such executive, administrative and clerical services as are reasonably necessary to provide effective administration of the Fund; (iv) arranges for, at the Fund’s expense: (a) the preparation of all required tax returns, (b) the preparation and submission of reports to existing shareholders, (c) the periodic updating of prospectuses and statements of additional information and (d) the preparation of reports to be filed with the SEC and other regulatory authorities; (v) maintains the Fund’s records; (vi) provides office space and all necessary office equipment and services; and (vii) markets the Fund.
          Dividend Growth Advisors, LLC, with offices at 58 Riverwalk Boulevard, Building 2, Suite A, Ridgeland, South Carolina 29936, serves as the Sub-Adviser to the Fund. See the Fund’s Proxy Statement/Prospectus for a description of the Sub-Adviser’s duties to the Fund.
          The sub-advisory agreement between GSAM and the Sub-Adviser (the “Sub-Advisory Agreement”) will remain in effect until June 30, 2012, and will continue in effect with respect to the Fund from year to year thereafter provided such continuance is specifically approved at least annually by (i) the vote of a majority of the Fund’s outstanding voting securities or a majority of the Trustees of the Trust, and (ii) the vote of a majority of the non-interested Trustees of the Trust, cast in person at a meeting called for the purpose of voting on such approval. The Sub-Advisory
          The Sub-Advisory Agreement was approved by the Trustees of the Trust, including a majority of the non-interested Trustees. A discussion regarding the Board of Trustees’ basis for approving the Sub-Advisory Agreement in 2011 will be available in the Fund’s semi-annual report for the fiscal period ended February 28, 2012.
          The Sub-Advisory Agreement will terminate automatically if assigned (as defined in the Act). The Sub-Advisory Agreement is also terminable at any time without penalty by the Trustees of the Trust or by GSAM or by vote of a majority of the outstanding voting securities of the Fund on 60 days’ written notice to the Sub-Adviser and by the Sub-Adviser on 60 days’ written notice to the Trust and GSAM.
          For the services provided and expenses assumed under the Sub-Advisory Agreement, GSAM pays the Sub-Adviser a fee, computed daily and payable each calendar quarter, at the annual rate of [0.20%] of the average daily net assets of the Fund.
          Since the Fund is newly-organized, GSAM did not pay sub-advisory fees to the Sub-Adviser during the last three fiscal years.
Portfolio Managers — Other Accounts Managed by the Portfolio Managers
          The following tables disclose other accounts within each type of category listed below for which the portfolio managers are jointly and primarily responsible for day to day portfolio management, as of December 12, 2011.
                                                                                                 
    Number of Other Accounts Managed and Total Assets by Account   Number of Accounts and Total Assets for Which Advisory fee is
    Type   Performance Based
    Registered                                   Registered        
    Investment   Other Pooled                   Investment   Other Pooled    
    Companies   Investment Vehicles   Other Accounts   Companies   Investment Vehicles   Other Accounts
Name of   Number           Number           Number           Number           Number           Number    
Portfolio   of   Assets   of   Assets   of   Assets   of   Assets   of   Assets   of   Assets
Manager   Accounts   Managed   Accounts   Managed   Accounts   Managed   Accounts   Managed   Accounts   Managed   Accounts   Managed
Thomas Cameron
     0     $ 0       3     $ 23,824,875       115     $ 146,934,033       None       None       None       None       None       None  
Jere Estes
     0     $ 0       0     $ 0       11     $ 5,640,861       None       None       None       None       None       None  
C. Troy Shaver, Jr.
     0     $ 0       5     $ 24,549,612       277     $ 215,252,217       None       None       None       None       None       None  
Ying Wang
     0     $ 0       0     $ 0       0     $ 0       None       None       None       None       None       None  

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          Conflicts of Interest. The Investment Adviser’s portfolio managers are often responsible for managing the Fund as well as other accounts, including proprietary accounts, separate accounts and other pooled investment vehicles, such as unregistered hedge funds. A portfolio manager may manage a separate account or other pooled investment vehicle which may have materially higher fee arrangements than the Fund and may also have a performance-based fee. The side-by-side management of these funds may raise potential conflicts of interest relating to cross trading, the allocation of investment opportunities and the aggregation and allocation of trades.
          The Investment Adviser has a fiduciary responsibility to manage all client accounts in a fair and equitable manner. It seeks to provide best execution of all securities transactions and aggregate and then allocate securities to client accounts in a fair and timely manner. To this end, the Investment Adviser has developed policies and procedures designed to mitigate and manage the potential conflicts of interest that may arise from side-by-side management. In addition, the Investment Adviser and the Fund have adopted policies limiting the circumstances under which cross-trades may be effected between the Fund and another client account. The Investment Adviser conducts periodic reviews of trades for consistency with these policies. For more information about conflicts of interests that may arise in connection with the portfolio manager’s management of the Fund’s investments and the investments of other accounts, see “POTENTIAL CONFLICTS OF INTEREST - Potential Conflicts Relating to the Allocation of Investment Opportunities Among the Fund and Other Goldman Sachs Accounts and Potential Conflicts Relating to Goldman Sachs’ and the Investment Adviser’s Proprietary Activities and Activities on Behalf of Other Accounts.”
          With respect to the Sub-Adviser, when a portfolio manager has responsibility for managing more than one account, potential conflicts of interest may arise. Those conflicts include preferential treatment of one account over others in terms of allocation of resources or of investment opportunities. The Sub-Adviser has adopted policies and procedures designed to address these potential material conflicts. For instance, portfolio managers are normally responsible for all accounts within a certain investment discipline, and do not, absent special circumstances, differentiate among various accounts when allocating resources. In addition, the Sub-Adviser and its advisory affiliates use a system for allocating investment opportunities among portfolios that is designed to provide a fair and equitable allocation.
Portfolio Managers — Compensation
          Compensation for the Sub-Adviser’s portfolio managers is based on a fixed salary and quarterly bonuses based on the assets under management of certain investment accounts excluding the Fund. Salary adjustments generally occur annually in February.
Portfolio Managers — Portfolio Managers’ Ownership of Securities of the Fund
The Fund was not in operation prior to the date of this SAI. Consequently, the portfolio managers own no securities issued by the Fund.

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Distributor and Transfer Agent
          Goldman Sachs, 200 West Street, New York, New York 10282, serves as the exclusive distributor of shares of the Fund pursuant to a “best efforts” arrangement as provided by a distribution agreement with the Trust on behalf of the Fund. Shares of the Fund are offered and sold on a continuous basis by Goldman Sachs, acting as agent. Pursuant to the distribution agreement, after the Fund’s Prospectus and periodic reports have been prepared, set in type and mailed to shareholders, Goldman Sachs will pay for the printing and distribution of copies thereof used in connection with the offering to prospective investors. Goldman Sachs will also pay for other supplementary sales literature and advertising costs. Goldman Sachs may enter into sales agreements with certain investment dealers and other financial service firms (the “Authorized Dealers”) to solicit subscriptions for Class A Shares of the Fund. Goldman Sachs receives a portion of the sales charge imposed on the sale or, in certain cases, redemption of Class A Shares.
          Since the Fund is newly-organized, Goldman Sachs did not receive commissions on sales of Class A Shares during the last three fiscal years.
          Dealer Reallowances. Class A Shares of the Fund are sold subject to a front-end sales charge, as described in the Proxy Statement/Prospectus and in this SAI in the section “SHARES OF THE TRUST.” Goldman Sachs pays commissions to Authorized Dealers who sell Class A shares of the Fund in the form of a “reallowance” of all or a portion of the sales charge paid on the purchase of those shares. Goldman Sachs re-allows 5% of the Fund’s offering price with respect to purchases under $50,000.
          Dealer allowances may be changed periodically. During special promotions, the entire sales charge may be reallowed to Authorized Dealers. Authorized Dealers to whom substantially the entire sales charge is reallowed may be deemed to be “underwriters” under the Securities Act of 1933.
          Goldman Sachs, 71 South Wacker Drive, Chicago, IL 60606 serves as the Trust’s transfer and dividend disbursing agent. Under its transfer agency agreement with the Trust, Goldman Sachs has undertaken with the Trust with respect to the Fund to: (i) record the issuance, transfer and redemption of shares, (ii) provide purchase and redemption confirmations and quarterly statements, as well as certain other statements, (iii) provide certain information to the Trust’s custodian and the relevant sub-custodian in connection with redemptions, (iv) provide dividend crediting and certain disbursing agent services, (v) maintain shareholder accounts, (vi) provide certain state Blue Sky and other information, (vii) provide shareholders and certain regulatory authorities with tax-related information, (viii) respond to shareholder inquiries, and (ix) render certain other miscellaneous services. For its transfer agency services, Goldman Sachs is entitled to receive a transfer agency fee equal, on an annualized basis, to 0.04% of average daily net assets with respect to the Fund’s Institutional Shares and 0.19% of average daily net assets with respect to the Fund’s Class A Shares. Goldman Sachs may pay to certain intermediaries who perform transfer agent services to shareholders a networking or sub-transfer agent fee. These payments will be made from the transfer agency fees noted above and in the Fund’ Proxy Statement/Prospectus.
          Since the Fund is newly-organized, Goldman Sachs did not receive compensation for services rendered to the Trust by Goldman Sachs as transfer and dividend disbursing agent with respect to the Fund and the assumption by Goldman Sachs of the expenses related thereto during the last three fiscal years.
          The Trust’s distribution and transfer agency agreements each provide that Goldman Sachs may render similar services to others so long as the services Goldman Sachs provides thereunder are not impaired thereby. Such agreements also provide that the Trust will indemnify Goldman Sachs against certain liabilities.
Expenses
          The Trust, on behalf of the Fund, is responsible for the payment of the Fund’s expenses. The expenses include, without limitation, the fees payable to the Investment Adviser, the fees and expenses of the Trust’s custodian and subcustodians, transfer agent fees and expenses, pricing service fees and expenses, brokerage fees and commissions, filing fees for

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the registration or qualification of the Trust’s shares under federal or state securities laws, expenses of the organization of the Fund, fees and expenses incurred by the Trust in connection with membership in investment company organizations including, but not limited to, the Investment Company Institute, taxes, interest, costs of liability insurance, fidelity bonds or indemnification, any costs, expenses or losses arising out of any liability of, or claim for damages or other relief asserted against, the Trust for violation of any law, legal, tax and auditing fees and expenses (including the cost of legal and certain accounting services rendered by employees of Goldman Sachs or its affiliates with respect to the Trust), expenses of preparing and setting in type Prospectuses, SAIs, proxy material, reports and notices and the printing and distributing of the same to the Trust’s shareholders and regulatory authorities, any expenses assumed by the Fund pursuant to its distribution and service plans, compensation and expenses of its “non-interested” Trustees, the fees and expenses of pricing services, dividend expenses on short sales and extraordinary expenses, if any, incurred by the Trust. Except for fees and expenses under any distribution and service plan applicable to a particular class and transfer agency fees and expenses, all Fund expenses are borne on a non-class specific basis.
          The imposition of the Investment Adviser’s fees, as well as other operating expenses, will have the effect of reducing the total return to investors. From time to time, the Investment Adviser may waive receipt of its fees and/or voluntarily assume certain expenses of the Fund, which would have the effect of lowering the Fund’s overall expense ratio and increasing total return to investors at the time such amounts are waived or assumed, as the case may be.
          The Investment Adviser has agreed to reduce or limit certain “Other Expenses” of the Fund (excluding management fees, distribution and service fees, transfer agency fees and expenses, taxes, interest, brokerage fees, litigation, indemnification, shareholder proxy meetings and other extraordinary expenses exclusive of any custody and transfer agent fee credit reductions) to an annual percentage rate of 0.064% of the Fund’s average daily net assets through at least one year from the closing date of the reorganization.
          Such reductions or limits, if any, are calculated monthly on a cumulative basis during the Fund’s fiscal year and may be discontinued or modified by the applicable Investment Adviser in its discretion at any time. In addition, the Fund has entered into certain offset arrangements with the custodian and the transfer agent, which may result in a reduction in the Fund’s expenses.
          Fees and expenses borne by the Fund relating to legal counsel, registering shares of the Fund, holding meetings and communicating with shareholders may include an allocable portion of the cost of maintaining an internal legal and compliance department. The Fund may also bear an allocable portion of the Investment Adviser’s costs of performing certain accounting services not being provided by the Fund’s custodian.
Custodian and Sub-Custodians
          State Street, One Lincoln Street, Boston, MA 02111, is the custodian of the Fund’s portfolio securities and cash. State Street also maintains the Fund’s accounting records. State Street may appoint domestic and foreign sub-custodians and use depositories from time to time to hold certain securities and other instruments purchased by the Trust in foreign countries and to hold cash and currencies for the Trust.
Independent Registered Public Accounting Firm
          PricewaterhouseCoopers LLP, 125 High Street, Boston, MA 02110, is the Fund’s independent registered public accounting firm. In addition to audit services, PricewaterhouseCoopers LLP prepares the Fund’s federal and state tax returns, and provides assistance on certain non-audit matters.

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POTENTIAL CONFLICTS OF INTEREST
Summary
          The Goldman Sachs Group, Inc. is a worldwide, full-service investment banking, broker-dealer, asset management and financial services organization, and a major participant in global financial markets that provides a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and high-net-worth individuals. As such, it acts as an investor, investment banker, research provider, investment manager, investment adviser, financier, advisor, market maker, proprietary trader, prime broker, lender, agent and principal. In those and other capacities, The Goldman Sachs Group, Inc., the investment management division of Goldman Sachs, the Investment Adviser, and their affiliates, directors, partners, trustees, managers, members, officers and employees (collectively for purposes of this “POTENTIAL CONFLICTS OF INTEREST” section, “Goldman Sachs”) purchase, sell and hold a broad array of investments, actively trade securities, derivatives, loans, commodities, currencies, credit default swaps, indices, baskets and other financial instruments and products for their own accounts or for the accounts of their customers and will have other direct and indirect interests in the global fixed income, currency, commodity, equity, bank loan and other markets in which the Fund directly and indirectly invests.
          As described in the preceding paragraph, Goldman Sachs, including those personnel who may be involved in the management, sales, investment activities, business operations or distribution of the Fund, is engaged in businesses and has interests other than that of managing the Fund. The Fund will not be entitled to compensation related to such businesses. These activities and interests include potential multiple advisory, transactional, financial and other interests in securities, instruments and companies that may be directly or indirectly purchased or sold by the Fund or its service providers. These are considerations of which shareholders should be aware, and which may cause conflicts that could disadvantage the Fund. The following is a brief summary description of certain of these potential conflicts of interest:
  •   While the Investment Adviser will make decisions for the Fund in accordance with its obligation to manage the Fund appropriately, the fees, allocations, compensation and other benefits to Goldman Sachs (including benefits relating to business relationships of Goldman Sachs) arising from those decisions may be greater as a result of certain portfolio, investment, service provider or other decisions made by the Investment Adviser than they would have been had other decisions been made which also might have been appropriate for the Fund.
 
  •   Goldman Sachs, its sales personnel and other financial service providers may have conflicts associated with their promotion of the Fund or other dealings with the Fund that would create incentives for them to promote the Fund.
 
  •   Goldman Sachs and its personnel may receive greater compensation or greater profit in connection with the Fund than with an account advised by an unaffiliated investment adviser.
 
  •   Goldman Sachs may make payments to authorized dealers and other financial intermediaries from time to time to promote the Fund, other accounts managed by Goldman Sachs and other products. In addition to placement fees, sales loads, or similar distribution charges, such payments may be made out of Goldman Sachs’ assets or amounts payable to Goldman Sachs rather than as separately identified charges to the Fund.
 
  •   While the allocation of investment opportunities among Goldman Sachs, the Fund and other funds and accounts managed by the Investment Adviser may raise potential conflicts because of financial, investment or other interests of Goldman Sachs or its personnel, the Investment Adviser will make allocation decisions consistent with the interests of the Fund and the other funds and accounts and not solely based on such other interests.
 
  •   The Investment Adviser will give advice to and make investment decisions for the Fund as it believes is in the fiduciary interests of the Fund. Advice given to the Fund or investment decisions made for the Fund may differ from, and may conflict with, advice given or investment decisions made for Goldman Sachs or

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      other funds or accounts. For example, other funds or accounts managed by the Investment Adviser may sell short securities of an issuer in which the Fund has taken, or will take, a long position in the same securities. Actions taken with respect to Goldman Sachs or other funds or accounts may adversely impact the Fund, and actions taken by the Fund may benefit Goldman Sachs or other funds or accounts (including the Fund).
  •   The Investment Adviser may buy for the Fund securities or obligations of issuers in which Goldman Sachs or other funds or accounts have made, or are making, an investment in securities or obligations that are subordinate or senior to securities of the Fund. For example, the Fund may invest in debt securities of an issuer at the same time that Goldman Sachs or other funds or accounts are investing, or currently have an investment, in equity securities of the same issuer. To the extent that the issuer experiences financial or operational challenges which may impact the price of its securities and its ability to meet its obligations, decisions by Goldman Sachs (including the Investment Adviser) relating to what actions to be taken may also raise conflicts of interests and Goldman Sachs may take actions for certain accounts that have negative impacts on other advisory accounts.
 
  •   Goldman Sachs’ personnel may have varying levels of economic and other interests in accounts or products promoted or managed by such personnel as compared to other accounts or products promoted or managed by them.
 
  •   Goldman Sachs will be under no obligation to provide to the Fund, or effect transactions on behalf of the Fund in accordance with, any market or other information, analysis, technical models or research in its possession. Goldman Sachs may have information material to the management of the Fund and may not share that information with relevant personnel of the Investment Adviser.
 
  •   To the extent permitted by applicable law, the Fund may enter into transactions in which Goldman Sachs acts as principal, or in which Goldman Sachs acts on behalf of the Fund and the other parties to such transactions. Goldman Sachs will have potentially conflicting interests in connection with such transactions.
 
  •   Goldman Sachs may act as broker, dealer, agent, lender or otherwise for the Fund and will retain all commissions, fees and other compensation in connection therewith.
 
  •   Securities traded for the Fund may, but are not required to, be aggregated with trades for other funds or accounts managed by Goldman Sachs. When transactions are aggregated but it is not possible to receive the same price or execution on the entire volume of securities purchased or sold, the various prices may be averaged, and the Fund will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Fund.
 
  •   Products and services received by the Investment Adviser or its affiliates from brokers in connection with brokerage services provided to the Fund and other funds or accounts managed by Goldman Sachs may disproportionately benefit other of such funds and accounts based on the relative amounts of brokerage services provided to the Fund and such other funds and accounts.
 
  •   While the Investment Adviser will make proxy voting decisions as it believes appropriate and in accordance with the Investment Adviser’s policies designed to help avoid conflicts of interest, proxy voting decisions made by the Investment Adviser with respect to the Fund’s portfolio securities may also have the effect of favoring the interests of other clients or businesses of other divisions or units of Goldman Sachs.
 
  •   Regulatory restrictions (including relating to the aggregation of positions among different funds and accounts) and internal Goldman Sachs policies may restrict investment activities of the Fund. Information held by Goldman Sachs could have the effect of restricting investment activities of the Fund.
          Prospective investors should carefully review the following section of this document which more fully describes these and other potential conflicts of interest presented by Goldman Sachs’ other businesses and interests.

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          As a registered investment adviser under the Advisers Act, the Investment Adviser is required to file a Form ADV with the SEC. Form ADV contains information about assets under management, types of fee arrangements, types of investments, potential conflicts of interest, and other relevant information regarding the Investment Adviser. A copy of Part 1 of the Investment Adviser’s Form ADV is available on the SEC’s website (www.adviserinfo.sec.gov).
Potential Conflicts Relating to Other Activities of Goldman, Ancillary Benefits, Portfolio Decisions, the Sale of Fund Shares and the Allocation of Investment Opportunities
Goldman Sachs’ Other Activities May Have an Impact on the Fund
          The Investment Adviser makes decisions for the Fund in accordance with its obligations as the Investment Adviser of the Fund. However, Goldman Sachs’ other activities, individually or in the aggregate, may have a negative effect on the Fund. As a result of the various activities and interests of Goldman Sachs as described in the first paragraph under “Summary” above, it is likely that the Fund will have multiple business relationships with and will invest in, engage in transactions with, make voting decisions with respect to, or obtain services from entities for which Goldman Sachs performs or seeks to perform investment banking or other services. It is also likely that the Fund will undertake transactions in securities in which Goldman Sachs makes a market or otherwise has other direct or indirect interests. As a result, Goldman Sachs may take positions that are inconsistent with, or adverse to, the investment objectives of the Fund.
          Goldman Sachs conducts extensive broker-dealer, banking and other activities around the world and operates a business known as Goldman Sachs Security Services (“GSS”) which provides prime brokerage, administrative and other services to clients which may involve funds, markets and securities in which the Fund invests. These businesses will give GSS and many other parts of Goldman Sachs broad access to the current status of certain markets, investments and funds and detailed knowledge about fund operators. As a result of the activities described in this paragraph and the access and knowledge arising from those activities, parts of Goldman Sachs may be in possession of information in respect of markets, investments and funds, which, if known to the Investment Adviser, might cause the Investment Adviser to seek to dispose of, retain or increase interests in investments held by the Fund or acquire certain positions on behalf of the Fund. Goldman Sachs will be under no duty to make any such information available to the Investment Adviser or in particular the personnel of the Investment Adviser making investment decisions on behalf of the Fund.
Goldman Sachs May Derive Ancillary Benefits From Its Relationship With the Fund
          Goldman Sachs may derive ancillary benefits from providing investment advisory, distribution, transfer agency, administrative and other services to the Fund, and providing such services to the Fund may enhance Goldman Sachs’ relationships with various parties, facilitate additional business development, and enable Goldman Sachs to obtain additional business and generate additional revenue.
          In addition, Goldman Sachs may derive ancillary benefits from certain decisions made by the Investment Adviser. While the Investment Adviser will make decisions for the Fund in accordance with its obligations to manage the Fund appropriately, the fees, allocations, compensation and other benefits to Goldman Sachs (including benefits relating to business relationships of Goldman Sachs) arising from those decisions may be greater as a result of certain portfolio, investment, service provider or other decisions made by the Investment Adviser for the Fund than they would have been had other decisions been made which also might have been appropriate for the Fund. For example, the Investment Adviser may recommend to the Board that Goldman Sachs or an affiliate thereof provide administrative or other services to the Fund instead of hiring an unaffiliated administrator or other service provider, provided that such engagement is on market terms, as determined by the Fund or the Fund’s Board in its discretion.
Goldman Sachs’ Financial and Other Interests May Incentivize Goldman Sachs to Promote the Sale of Fund Shares
          Goldman Sachs, its personnel and other financial service providers have interests in promoting sales of shares of the Fund. With respect to both Goldman Sachs and its personnel, the remuneration and profitability relating to services to and sales of shares of the Fund or other products may be greater than the remuneration and

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profitability relating to services to and sales of other products that might be provided or offered. Goldman Sachs and its sales personnel may directly or indirectly receive a portion of the fees and commissions charged to the Fund or its shareholders.
          Goldman Sachs and its advisory or other personnel may also benefit from increased amounts of assets under management. Certain compensation earned by the Investment Adviser and Goldman Sachs, for example, may be based on Fund assets under management. These fees will be paid out of Fund assets before they are applied to make payments to Fund shareholders. Although these fees are generally based on asset levels, they are not directly contingent on Fund performance, and Goldman Sachs would still receive significant compensation even if shareholders lose money.
          Goldman Sachs and its personnel may receive greater compensation or greater profit in connection with the Fund than with an account advised by an unaffiliated investment adviser. Differentials in compensation may be related to the fact that Goldman Sachs may pay a portion of its advisory fee to the unaffiliated investment adviser, or to other compensation arrangements, including for portfolio management, brokerage transactions or account servicing. Any differential in compensation may create a financial incentive on the part of Goldman Sachs and its personnel to recommend the Fund over other accounts or products managed by unaffiliated investment advisers or to effect transactions differently in the Fund as compared to other accounts or products.
          In addition, one or more divisions of Goldman Sachs may refer certain investment opportunities to the Investment Adviser or otherwise provide services to, or enter into arrangements with, the Investment Adviser. In connection with such referrals, services or other arrangements involving one or more divisions of Goldman Sachs, such divisions may engage in sharing of fees or other compensation received by the Investment Adviser from the Fund.
Sales Incentives and Related Conflicts Arising from Goldman Sachs’ Financial and Other Relationships with Intermediaries
          Goldman Sachs may also have relationships with, and purchase, or distribute or sell, services or products from or to, distributors, consultants and others who recommend the Fund, or who engage in transactions with or for the Fund. For example, Goldman Sachs regularly participates in industry and consultant sponsored conferences and may purchase educational, data related or other services from consultants or other third parties that it deems to be of value to its personnel and its business. The products and services purchased from consultants may include, but are not limited to, those that help Goldman Sachs understand the consultant’s points of view on the investment management process. Consultants and other parties that provide consulting or other services or provide service platforms for employee benefit plans to potential investors in the Fund may receive fees from Goldman Sachs or the Fund in connection with the distribution of shares in the Fund or other Goldman Sachs products. For example, Goldman Sachs may enter into revenue or fee sharing arrangements with consultants, service providers, and other intermediaries relating to investments in mutual funds, collective trusts, or other products or services offered or managed by the Investment Adviser. Goldman Sachs may also pay a fee for membership in industry-wide or state and municipal organizations, and in connection with clients, consultants or otherwise, may participate in sponsoring conferences and educational forums for investment industry participants including, but not limited to, trustees, fiduciaries, consultants, administrators, state and municipal personnel and other clients. Goldman Sachs’ membership in such organizations and sponsorships allows Goldman Sachs to participate in these conferences and educational forums and helps Goldman Sachs interact with conference participants and to develop an understanding of the points of view and challenges of the conference participants, and to educate participants about industry issues.
          In addition, Goldman Sachs’ personnel, including employees of Goldman Sachs, may have board, advisory, brokerage or other relationships with issuers, distributors, consultants and others that may have investments in the Fund or that may recommend investments in the Fund or distribute the Fund. In addition, Goldman Sachs, including the Investment Adviser, may make charitable contributions to institutions, including those that have relationships with clients or personnel of clients. Personnel of Goldman Sachs may have board relationships with such charitable institutions. Personnel of Goldman Sachs may also make political contributions. As a result of the relationships and arrangements described in this paragraph, consultants, distributors and other parties may have conflicts associated with their promotion of the Fund or other dealings with the Fund that create incentives for them to promote the Fund or certain portfolio transactions.

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          To the extent permitted by applicable law, Goldman Sachs or the Fund may make payments to authorized dealers and other financial intermediaries (“Intermediaries”) from time to time to promote current or future accounts or funds managed or advised by Goldman Sachs (including the Investment Adviser) or in which Goldman Sachs (including the Investment Adviser) or its personnel have interests (collectively, the “Client/GS Accounts”), the Fund and other products. In addition to placement fees, sales loads or similar distribution charges, payments may be made out of Goldman Sachs’ assets, or amounts payable to Goldman Sachs rather than a separately identified charge to the Fund, Client/GS Accounts or other products. Such payments may compensate Intermediaries for, among other things: marketing the Fund, Client/GS Accounts and other products (which may consist of payments resulting in or relating to the inclusion of the Fund, Client/GS Accounts and other products on preferred or recommended fund lists or in certain sales programs from time to time sponsored by the Intermediaries); access to the Intermediaries’ registered representatives or salespersons, including at conferences and other meetings; assistance in training and education of personnel; fees for directing investors to the Fund, Client/GS Accounts and other products; “finders fees” or “referral fees” or other fees for providing assistance in promoting the Fund, Client/GS Accounts and other products (which may include promotion in communications with the Intermediaries’ customers, registered representatives and salespersons); and/or other specified services intended to assist in the distribution and marketing of the Fund, Client/GS Accounts and other products. Such payments may be a fixed dollar amount; may be based on the number of customer accounts maintained by an Intermediary; may be based on a percentage of the value of interests sold to, or held by, customers of the Intermediary involved; or may be calculated on another basis. The payments may also, to the extent permitted by applicable regulations, contribute to various non-cash and cash incentive arrangements to promote certain products, as well as sponsor various educational programs, sales contests and/or promotions. Furthermore, subject to applicable law, such payments may also pay for the travel expenses, meals, lodging and entertainment of Intermediaries and their salespersons and guests in connection with educational, sales and promotional programs. The additional payments by Goldman Sachs may also compensate Intermediaries for sub-accounting, administrative and/or shareholder processing or other investor services that are in addition to the fees paid for these services by such products.
          The payments made by Goldman Sachs or the Fund may be different for different Intermediaries. The payments may be negotiated based on a range of factors, including but not limited to, ability to attract and retain assets, target markets, customer relationships, quality of service and industry reputation. Payment arrangements may include breakpoints in compensation which provide that the percentage rate of compensation varies as the dollar value of the amount sold or invested through an Intermediary increases. The presence of these payments and the basis on which an Intermediary compensates its registered representatives or salespersons may create an incentive for a particular Intermediary, registered representative or salesperson to highlight, feature or recommend certain products based, at least in part, on the level of compensation paid.
Potential Conflicts Relating to the Allocation of Investment Opportunities Among the Fund and Other Goldman Sachs Accounts
          Goldman Sachs has potential conflicts in connection with the allocation of investments or transaction decisions for the Fund. For example, the Fund may be competing for investment opportunities with Client/GS Accounts. The Client/GS Accounts may provide greater fees or other compensation (including performance based fees), equity or other interests to Goldman Sachs (including the Investment Adviser).
          Goldman Sachs may manage or advise Client/GS Accounts that have investment objectives that are similar to those of the Fund and/or may seek to make investments in securities or other instruments, sectors or strategies in which the Fund may invest. This may create potential conflicts where there is limited availability or limited liquidity for those investments. For example, limited availability may exist, without limitation, in local and emerging markets, high yield securities, fixed income securities, regulated industries, small capitalization, and IPO/new issues. Transactions in investments by multiple Client/GS Accounts (including accounts in which Goldman Sachs and its personnel have an interest), other clients of Goldman Sachs or Goldman Sachs itself may have the effect of diluting or otherwise negatively affecting the values, prices or investment strategies associated with securities held by Client/GS Accounts, or the Fund, particularly, but not limited to, in small capitalization, emerging market or less liquid strategies. The Investment Adviser has developed policies and procedures that provide that it will allocate investment opportunities and make purchase and sale decisions among the Fund and other Client/GS Accounts in a

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manner that it considers, in its sole discretion and consistent with its fiduciary obligation to the Fund and Client/GS Account, to be reasonable.
          In many cases, these policies result in the pro rata allocation of limited opportunities across the Fund and Client/GS Accounts, but in many other cases the allocations reflect numerous other factors based upon the Investment Adviser’s good faith assessment of the best use of such limited opportunities relative to the objectives, limitation and requirements of the Fund and Client/GS Accounts and applying a variety of factors including those described below. The Investment Adviser seeks to treat all clients reasonably in light of all factors relevant to managing an account, and in some cases it is possible that the application of the factors described below may result in allocations in which certain accounts may receive an allocation when other accounts do not. Non-proportional allocation may occur more frequently in the fixed income portfolio management area than many active equity accounts, in many instances because multiple appropriate or substantially similar investments are available in fixed income strategies, as well as due to differences in benchmark factors, hedging strategies, or other reasons, but non-proportional allocations could also occur in other areas. The application of these factors as described below may result in allocations in which Goldman Sachs and Goldman Sachs employees may receive an allocation or an opportunity not allocated to other Client/GS Accounts or the Fund. Allocations may be based on numerous factors and may not always be pro rata based on assets managed.
          The Investment Adviser will make allocation related decisions with reference to numerous factors. These factors may include, without limitation, (i) account investment horizons, investment objectives and guidelines; (ii) different levels of investment for different strategies including sector oriented, concentrated new opportunities or other strategies; (iii) client-specific investment guidelines and restrictions including the ability to hedge through short sales or other techniques; (iv) the expected future capacity of the Fund or applicable Client/GS Accounts; (v) fully directed brokerage accounts; (vi) tax sensitivity of accounts; (vii) suitability requirements and the nature of investment opportunity; (viii) account turnover guidelines; (ix) cash and liquidity considerations, including without limitation, availability of cash for investment; (x) relative sizes and expected future sizes of applicable accounts; (xi) availability of other appropriate investment opportunities; and/or (xii) minimum denomination, minimum increments, de minimis threshold and round lot considerations. Suitability considerations can include without limitation (i) relative attractiveness of a security to different accounts; (ii) concentration of positions in an account; (iii) appropriateness of a security for the benchmark and benchmark sensitivity of an account; (iv) an account’s risk tolerance, risk parameters and strategy allocations; (v) use of the opportunity as a replacement for a security Goldman Sachs believes to be attractive for an account; (vi) considerations relating to hedging a position in a pair trade; and/or (vii) considerations related to giving a subset of accounts exposure to an industry. In addition, the fact that certain Goldman Sachs personnel are dedicated to one or more funds, accounts or clients, including the Fund, may be a factor in determining the allocation of opportunities sourced by such personnel. Reputational matters and other such considerations may also be considered. The application of these principles may cause performance dispersion over time. If the Fund does not receive allocations that perform well it will experience lower performance.
          During periods of unusual market conditions, the Investment Adviser may deviate from its normal trade allocation practices. For example, this may occur with respect to the management of unlevered and/or long-only funds or accounts that are typically managed on a side-by-side basis with levered and/or long-short funds or accounts. During such periods, the Investment Adviser will seek to exercise a disciplined process for determining its actions to appropriately balance the interests of all accounts, including the Fund, as it determines in its sole discretion.
          In addition to allocations of limited availability investments, Goldman Sachs may, from time to time, develop and implement new investment opportunities and/or trading strategies, and these strategies may not be employed in all accounts (including the Fund) or pro rata among the accounts where they are employed, even if the strategy is consistent with the objectives of all accounts. Goldman Sachs may make decisions based on such factors as strategic fit and other portfolio management considerations, including, without limitation, an account’s capacity for such strategy, the liquidity of the strategy and its underlying instruments, the account’s liquidity, the business risk of the strategy relative to the account’s overall portfolio make-up, and the lack of efficacy of, or return expectations from, the strategy for the account, and such other factors as Goldman Sachs deems relevant in its sole discretion. For example, such a determination may, but will not necessarily, include consideration of the fact that a particular strategy will not have a meaningful impact on an account given the overall size of the account, the limited availability of opportunities in the strategy and the availability of other strategies for the account.

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          Allocation decisions among accounts may be more or less advantageous to any one account or group of accounts. As a result of these allocation issues, the amount, timing, structuring or terms of an investment by the Fund may differ from, and performance may be lower than, investments and performance of other Client/GS Accounts.
          Notwithstanding anything in the foregoing, the Fund may or may not receive, but in any event will have no rights with respect to, opportunities sourced by Goldman Sachs businesses and affiliates. Such opportunities or any portion thereof may be offered to GS/Client Accounts, Goldman Sachs or affiliates thereof, all or certain investors of the Fund, or such other persons or entities as determined by Goldman Sachs in its sole discretion. The Fund will have no rights and will not receive any compensation related to such opportunities.
          The Investment Adviser and/or its affiliates manage accounts of clients of Goldman Sachs’ Private Wealth Management (“PWM”) business. Such PWM clients receive advice from Goldman Sachs by means of separate accounts (“PWM Separate Accounts”). With respect to the Fund, the Investment Adviser may follow a strategy that is expected to be similar over time to that delivered by the PWM Separate Accounts. The Fund and the PWM Separate Account Clients are subject to independent management and, given the independence in the implementation of advice to these accounts, there can be no warranty that such investment advice will be implemented simultaneously. Neither the Investment Adviser (in the case of the Fund) nor its affiliates (in the case of PWM Separate Accounts), will know when advice issued has been executed (if at all) and, if so, to what extent. While each will use reasonable endeavors to procure timely execution, it is possible that prior execution for or on behalf of the PWM Separate Accounts could adversely affect the prices and availability of the securities, currencies and instruments in which the Fund invests.
Other Potential Conflicts Relating to the Management of the Fund by the Investment Adviser
Potential Restrictions and Issues Relating to Information Held by Goldman Sachs
          As a result of informational barriers constructed between different divisions of Goldman Sachs, the Investment Adviser will generally not have access to information and may not consult with personnel in other areas of Goldman Sachs. Therefore, the Investment Adviser will generally not be able to manage the Fund with the benefit of information held by many other divisions of Goldman Sachs. From time to time and subject to the Investment Adviser’s policies and procedures regarding information barriers, the Investment Adviser may consult with personnel in other areas of Goldman Sachs, or with persons unaffiliated with Goldman Sachs, or may form investment policy committees comprised of such personnel. In certain circumstances, personnel of affiliates of the Investment Adviser may have input into, or make determinations regarding, portfolio management transactions for the Fund. The performance by such persons of obligations related to their consultation with personnel of the Investment Adviser could conflict with their areas of primary responsibility within Goldman Sachs or elsewhere. In connection with their activities with the Investment Adviser, such persons may receive information regarding the Investment Adviser’s proposed investment activities of the Fund that is not generally available to the public. There will be no obligation on the part of such persons to make available for use by the Fund any information or strategies known to them or developed in connection with their own client, proprietary or other activities. In addition, Goldman Sachs will be under no obligation to make available any research or analysis prior to its public dissemination.
          The Investment Adviser makes decisions for the Fund based on the Fund’s investment programs. The Investment Adviser from time to time may have access to certain fundamental analysis and proprietary technical models developed by Goldman Sachs and its personnel. Goldman Sachs will not be under any obligation, however, to effect transactions on behalf of the Fund in accordance with such analysis and models.
          In addition, Goldman Sachs has no obligation to seek information or to make available to or share with the Fund any information, investment strategies, opportunities or ideas known to Goldman Sachs personnel or developed or used in connection with other clients or activities. Goldman Sachs and certain of its personnel, including the Investment Adviser’s personnel or other Goldman Sachs personnel advising or otherwise providing services to the Fund, may be in possession of information not available to all Goldman Sachs personnel, and such personnel may act on the basis of such information in ways that have adverse effects on the Fund. The Fund or

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GS/Client Account could sustain losses during periods in which Goldman Sachs and its affiliates and other accounts achieve significant profits on their trading for proprietary or other accounts.
          From time to time, Goldman Sachs may come into possession of material, non-public information or other information that could limit the ability of the Fund to buy and sell investments. The investment flexibility of the Fund may be constrained as a consequence. The Investment Adviser generally is not permitted to obtain or use material non-public information in effecting purchases and sales in public securities transactions for the Fund.
Issues Relating to the Valuation of Assets by Multiple Divisions or Units Within Goldman Sachs
          Certain securities and other assets in which the Fund may invest may not have a readily ascertainable market value and will be valued by the Investment Adviser in accordance with the valuation guidelines described herein. Such securities and other assets may constitute a substantial portion of the Fund’s investments.
          The Investment Adviser may face a conflict of interest in valuing the securities or assets in the Fund’s portfolio that lack a readily ascertainable market value. Such valuations will affect the Investment Adviser’s compensation. The Investment Adviser will value such securities and other assets in accordance with the valuation policies described herein, however, the manner in which the Investment Adviser exercises its discretion with respect to valuation decisions will impact the valuation of Fund securities and, as a result, may adversely affect certain investors in the Fund and, conversely, may positively affect the Investment Adviser or its affiliates. In addition, the Investment Adviser may utilize third-party vendors to perform certain functions, and these vendors may have interests and incentives that differ from those of investors in the Fund.
          Various divisions and units within Goldman Sachs are required to value assets, including in connection with managing or advising Client/GS Accounts and in their capacity as a broker-dealer. These various divisions and units may share information regarding valuation techniques and models or other information relevant to the calculation of a specific asset or category of assets. Goldman Sachs does not, however, have any obligation to engage in such information sharing. Therefore, a division or unit of Goldman Sachs may value an identical asset differently than another division or unit of Goldman Sachs. This is particularly the case when an asset does not have a readily ascertainable market price and/or where one division or unit of Goldman Sachs has more recent and/or accurate information about the asset being valued.
Potential Conflicts Relating to Goldman Sachs’ and the Investment Adviser’s Proprietary Activities and Activities On Behalf of Other Accounts
          The results of the investment activities of the Fund may differ significantly from the results achieved by Goldman Sachs for its proprietary accounts and from the results achieved by Goldman Sachs for other Client/GS Accounts. The Investment Adviser will manage the Fund and the other Client/GS Accounts it manages in accordance with their respective investment objectives and guidelines. However, Goldman Sachs may give advice, and take action, with respect to any current or future Client/GS Accounts that may compete or conflict with the advice the Investment Adviser may give to the Fund, including with respect to the return of the investment, the timing or nature of action relating to the investment or method of exiting the investment.
          Transactions undertaken by Goldman Sachs or Client/GS Accounts may adversely impact the Fund. Goldman Sachs and one or more Client/GS Accounts may buy or sell positions while the Fund is undertaking the same or a differing, including potentially opposite, strategy, which could disadvantage the Fund. For example, the Fund may buy a security and Goldman Sachs or Client/GS Accounts may establish a short position in that same security or in similar securities. The subsequent short sale may result in impairment of the price of the security which the Fund holds. Conversely, the Fund may establish a short position in a security and Goldman Sachs or other Client/GS Accounts may buy that same security. The subsequent purchase may result in an increase of the price of the underlying position in the short sale exposure of the Fund and such increase in price would be to the Fund’s detriment. In addition, the Investment Adviser and other Goldman Sachs affiliates may manage funds or accounts, and Goldman Sachs may be invested in funds or accounts, that have similar investment objectives or portfolios to those of the Fund, and events occurring with respect to such funds or accounts could affect the performance of the Fund. For example, in the event that withdrawals of capital or performance losses results in such a fund or account de-leveraging its portfolio by selling securities, this could result in securities of the same issuer, strategy or

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type held by the Fund falling in value, which could have a material adverse effect on the Fund. Conflicts may also arise because portfolio decisions regarding the Fund may benefit Goldman Sachs or other Client/GS Accounts. For example, the sale of a long position or establishment of a short position by the Fund may impair the price of the same security sold short by (and therefore benefit) Goldman Sachs or other Client/GS Accounts, and the purchase of a security or covering of a short position in a security by the Fund may increase the price of the same security held by (and therefore benefit) Goldman Sachs or other Client/GS Accounts.
          In addition, transactions in investments by one or more Client/GS Accounts and Goldman Sachs may have the effect of diluting or otherwise disadvantaging the values, prices or investment strategies of the Fund, particularly, but not limited to, in small capitalization, emerging market or less liquid strategies. For example, this may occur when portfolio decisions regarding the Fund are based on research or other information that is also used to support portfolio decisions for other Client/GS Accounts. When Goldman Sachs or a Client/GS Account implements a portfolio decision or strategy ahead of, or contemporaneously with, similar portfolio decisions or strategies for the Fund (whether or not the portfolio decisions emanate from the same research analysis or other information), market impact, liquidity constraints, or other factors could result in the Fund receiving less favorable trading results and the costs of implementing such portfolio decisions or strategies could be increased or the Fund could otherwise be disadvantaged. Goldman Sachs may, in certain cases, elect to implement internal policies and procedures designed to limit such consequences to Client/GS Accounts, which may cause the Fund to be unable to engage in certain activities, including purchasing or disposing of securities, when it might otherwise be desirable for it to do so.
          The Investment Adviser may, but is not required to aggregate purchase or sale orders for the Fund with trades for other funds or accounts managed by Goldman Sachs, including Client/GS Accounts. When orders are aggregated for execution, it is possible that Goldman Sachs and Goldman Sachs employee interests will receive benefits from such transactions, even in limited capacity situations. While the Investment Adviser maintains policies and procedures that it believes are reasonably designed to deal with conflicts of interest that may arise in certain situations when purchase or sale orders for the Fund are aggregated for execution with orders for Client/GS Accounts, in some cases the Investment Adviser will make allocations to accounts in which Goldman Sachs and/or employees have an interest.
          The Investment Adviser has established a trade sequencing and rotation policy for certain U.S. equity client accounts (including the Fund) and “wrap fee” accounts. The Investment Adviser does not generally aggregate trades on behalf of wrap fee accounts at the present time. “Wrap fees” usually cover execution costs only when trades are placed with the sponsor of the account. Trades through different sponsors are generally not aggregated. The Investment Adviser may sequence and rotate trades among different client accounts in accordance with its policies and procedures as they are amended and updated from time to time. For example, the Investment Adviser may utilize an asset-based trade sequencing and rotation policy for determining the order in which trades for institutional and wrap accounts are placed. Under this policy, institutional and other accounts (including the Fund) may trade ahead or behind wrap accounts based generally on relative assets. In addition, a portfolio management team may provide instructions simultaneously regarding the placement of a trade in lieu of the rotation schedule if the trade represents a relatively small proportion of the average daily trading volume of the relevant security.
          The directors, officers and employees of Goldman Sachs, including the Investment Adviser, may buy and sell securities or other investments for their own accounts (including through investment funds managed by Goldman Sachs, including the Investment Adviser). As a result of differing trading and investment strategies or constraints, positions may be taken by directors, officers and employees that are the same, different from or made at different times than positions taken for the Fund. To reduce the possibility that the Fund will be materially adversely affected by the personal trading described above, each of the Fund and Goldman Sachs, as the Fund’s Investment Adviser and distributor, has established policies and procedures that restrict securities trading in the personal accounts of investment professionals and others who normally come into possession of information regarding the Fund’s portfolio transactions. Each of the Fund and Goldman Sachs, as the Fund’s Investment Adviser and distributor, has adopted a code of ethics (collectively, the “Codes of Ethics”) in compliance with Section 17(j) of the Act and monitoring procedures relating to certain personal securities transactions by personnel of the Investment Adviser which the Investment Adviser deems to involve potential conflicts involving such personnel, Client/GS Accounts managed by the Investment Adviser and the Fund. The Codes of Ethics require that personnel of the Investment Adviser comply with all applicable federal securities laws and with the fiduciary duties and anti-fraud

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rules to which the Investment Adviser is subject. The Codes of Ethics can be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-202-942-8090. The Codes of Ethics are also available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov. Copies may also be obtained after paying a duplicating fee by writing the SEC’s Public Reference Section, Washington, DC 20549-0102, or by electronic request to publicinfo@sec.gov.
          Clients of Goldman Sachs (including Client/GS Accounts) may have, as a result of receiving client reports or otherwise, access to information regarding the Investment Adviser’s transactions or views which may affect such clients’ transactions outside of accounts controlled by personnel of the Investment Adviser, and such transactions may negatively impact the performance of the Fund. The Fund may also be adversely affected by cash flows and market movements arising from purchase and sales transactions, as well as increases of capital in, and withdrawals of capital from, other Client/GS Accounts. These effects can be more pronounced in thinly traded and less liquid markets.
          The Investment Adviser’s management of the Fund may benefit Goldman Sachs. For example, the Fund may, subject to applicable law, invest directly or indirectly in the securities of companies affiliated with Goldman Sachs or which Goldman Sachs (or funds or accounts managed by Goldman Sachs and/or in which Goldman Sachs has an interest) has an equity, debt or other interest. In addition, to the extent permitted by applicable law, the Fund may engage in investment transactions which may result in other Client/GS Accounts being relieved of obligations or otherwise divesting of investments or cause the Fund to have to divest certain investments. The purchase, holding and sale of investments by the Fund may enhance the profitability of Goldman Sachs’ or other Client/GS Accounts’ own investments in and its activities with respect to such companies.
          Goldman Sachs and one or more Client/GS Accounts (including the Fund) may also invest in different classes of securities of the same issuer. As a result, Goldman Sachs and/or one or more Client/GS Accounts may pursue or enforce rights with respect to a particular issuer in which the Fund has invested, and those activities may have an adverse effect on the Fund. For example, if Goldman Sachs and/or a Client/GS Account holds debt securities of an issuer and the Fund holds equity securities of the same issuer, if the issuer experiences financial or operational challenges, Goldman Sachs and/or the Client/GS Account which holds the debt securities may seek a liquidation of the issuer, whereas the Fund which holds the equity securities may prefer a reorganization of the issuer. In addition, the Investment Adviser may also, in certain circumstances, pursue or enforce rights with respect to a particular issuer jointly on behalf of Goldman Sachs and/or one or more Client/GS Accounts, the Fund, or Goldman Sachs employees may work together to pursue or enforce such rights. The Fund may be negatively impacted by Goldman Sachs’ and other Client/GS Accounts’ activities, and transactions for the Fund may be impaired or effected at prices or terms that may be less favorable than would otherwise have been the case had Goldman Sachs and other Client/GS Accounts not pursued a particular course of action with respect to the issuer of the securities. In addition, in certain instances personnel of the Investment Adviser may obtain information about the issuer that would be material to the management of other Client/GS Accounts which could limit the ability of personnel of the Investment Adviser to buy or sell securities of the issuer on behalf of the Fund.
          Goldman Sachs (including its personnel or Client/GS Accounts) may purchase or sell Fund shares or securities held in the Fund’s portfolio at any time and without notice to Fund shareholders. If Goldman Sachs or a Client/GS Account becomes a holder of securities in an issuer in which the Fund has invested or of Fund shares, any actions that it takes in its capacity as security-holder, including voting and provision of consents, will not necessarily be aligned with the interests of the Fund or of other shareholders of the Fund.
          To the extent permitted by applicable law Goldman Sachs (including its personnel or Client/GS Accounts) may create, write, sell or issue, or act as placement agent or distributor of, derivative instruments with respect to the Fund or with respect to underlying securities, currencies or instruments of the Fund, or which may be otherwise based on or seek to replicate or hedge the performance of the Fund (collectively referred to as “Structured Investment Products”). The values of Structured Investment Products may be linked to the net asset value of the Fund and/or the values of the Fund’s investments. In connection with the Structured Investment Products and for hedging, re-balancing, investment and other purposes, to the extent permitted by applicable law, the Fund and/or Goldman Sachs (including its personnel or Client/GS Accounts) may (i) purchase or sell investments held by the Fund and/or Client/GS Accounts, (ii) purchase or sell shares in the Fund, or (iii) hold synthetic positions that seek to replicate or hedge the performance of the Fund, the Fund’s investments, a Client/GS Account or a Client/GS

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Account’s investments. Such positions may be significant and may differ from and/or be contra to the Fund’s or a Client/GS Account’s positions. These derivative-related activities, as well as such investment and redemption activities, including any activities taken in respect of the maintenance, adjustment or unwinding of any derivative-related positions in the future, may, individually or in the aggregate, have an adverse effect on the investment management of the Fund and the Fund’s positions (particularly in illiquid markets), flexibility, diversification strategies and on the amount of fees, expenses and other costs incurred directly or indirectly through the Fund by investors. Goldman Sachs or other Client/GS Accounts will have no obligation to take, refrain from taking or cease taking any action with respect to these activities based on the potential effect on the Fund, and may receive substantial returns on hedging or other activities while the value of the Fund’s investment declines.
          The structure or other characteristics of the derivative instruments (including the Structured Investment Products) may have an adverse effect on the Fund. For example, the derivative instruments could represent leveraged investments in the Fund, and the leveraged characteristics of such investments could make it more likely, due to events of default or otherwise, that there would be significant redemptions of interests from the Fund more quickly than might otherwise be the case. Goldman Sachs, acting in commercial capacities in connection with such derivative instruments, may in fact cause such a redemption. This may have an adverse effect on the investment management and positions, flexibility and diversification strategies of the Fund and on the amount of fees, expenses and other costs incurred directly or indirectly for the account of the Fund.
          Derivatives and investment related activities may be undertaken to achieve a variety of objectives, including: facilitating transactions for other Client/GS Accounts or counterparties with interests, objectives or directional views that are contrary to those of Fund shareholders; hedging the exposure of Goldman Sachs or other Client/GS Accounts to securities held in or related to the Fund’s portfolio or to Fund shares themselves; and enabling Goldman Sachs or other Client/GS Accounts to manage firmwide, business unit, product or other risks.
Potential Conflicts in Connection with Investments in Goldman Sachs Money Market Funds
          To the extent permitted by applicable law, the Fund may invest all or some of its short term cash investments in any money market fund advised or managed by Goldman Sachs. In connection with any such investments, the Fund, to the extent permitted by the Act, will pay its share of all expenses of a money market fund in which it invests which may result in the Fund bearing some additional expenses. All advisory, administrative, or Rule 12b- 1 fees applicable to the investment and the fees or allocations from the Fund will not be reduced thereby (i.e., there could be “double fees” involved in making any such investment, which would not arise in connection with an investor’s direct purchase of the underlying investments, because Goldman Sachs could receive fees with respect to both the management of the Fund and such money market fund). In such circumstances, as well as in all other circumstances in which Goldman Sachs receives any fees or other compensation in any form relating to the provision of services, no accounting or repayment to the Fund will be required.
Goldman Sachs May In-Source or Outsource
          Subject to applicable law, Goldman Sachs, including the Investment Adviser, may from time to time and without notice to investors in- source or outsource certain processes or functions in connection with a variety of services that it provides to the Fund in its administrative or other capacities. Such in-sourcing or outsourcing may give rise to additional conflicts of interest.
Potential Conflicts That May Arise When Goldman Sachs Acts in a Capacity Other Than Investment Adviser to the Fund
Potential Conflicts Relating to Principal and Cross Transactions
          To the extent permitted by applicable law, the Fund may enter into transactions and invest in futures, securities, currencies, swaps, options, forward contracts or other instruments in which Goldman Sachs acting as principal or on a proprietary basis for its customers, serves as the counterparty. To the extent permitted by applicable law, the Fund may also enter into “cross transactions” (i.e., where the Investment Adviser causes the Fund to buy securities from, or sell a security to, another client of the Investment Adviser or its affiliates) and “agency cross transactions” (i.e., where Goldman Sachs acts as a broker for, and receives a commission from, both the Fund on

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one side of the transaction and another account on the other side of the transaction in connection with the purchase or sale of securities). Goldman Sachs may have a potentially conflicting division of loyalties and responsibilities to both parties to a cross transaction or agency cross transaction. For example, in a cross transaction, the Investment Adviser or an affiliate will represent both the Fund on one side of a transaction and another account, including the Fund, on the other side of the transaction (including an account in which Goldman Sachs or its affiliates have a proprietary interest) in connection with the purchase of a security by the Fund. In addition, in an agency cross transaction, Goldman Sachs will act as broker and receive compensation or other payments from either or both parties, which could influence the decision of Goldman Sachs to cause the Fund to purchase such security. The Investment Adviser will ensure that any such cross transaction or agency cross transactions are effected on commercially reasonable market terms and in accordance with the Investment Adviser’s fiduciary duties to such entities.
Potential Conflicts That May Arise When Goldman Sachs Acts in a Capacity Other Than as Investment Adviser to the Fund
          To the extent permitted by applicable law, Goldman Sachs may act as broker, dealer, agent, lender, borrower or advisor or in other commercial capacities for the Fund or issuers of securities held by the Fund. It is anticipated that the commissions, mark-ups, mark-downs, financial advisory fees, underwriting and placement fees, sales fees, financing and commitment fees, brokerage fees, other fees, compensation or profits, rates, terms and conditions charged by Goldman Sachs will be in its view commercially reasonable, although Goldman Sachs, including its sales personnel, will have an interest in obtaining fees and other amounts that are favorable to Goldman Sachs and such sales personnel. The Fund may, to the extent permitted by applicable law, borrow funds from Goldman Sachs at rates and on other terms arranged with Goldman Sachs.
          Goldman Sachs may be entitled to compensation when it acts in capacities other than as the Investment Adviser, and the Fund will not be entitled to any such compensation. For example, Goldman Sachs (and its personnel and other distributors) will be entitled to retain fees and other amounts that it receives in connection with its service to the Fund as broker, dealer, agent, lender, advisor or in other commercial capacities and no accounting to the Fund or its shareholders will be required, and no fees or other compensation payable by the Fund or its shareholders will be reduced by reason of receipt by Goldman Sachs of any such fees or other amounts.
          When Goldman Sachs acts as broker, dealer, agent, lender or advisor or in other commercial capacities in relation to the Fund, Goldman Sachs may take commercial steps in its own interests, which may have an adverse effect on the Fund. For example, in connection with lending arrangements involving the Fund, Goldman Sachs may require repayment of all or part of a loan at any time or from time to time.
          As a result of Goldman Sachs’ various financial market activities, including acting as a research provider, investment advisor, market maker or principal investor, personnel in various businesses throughout Goldman Sachs may have and express research or investment views and make recommendations that are inconsistent with, or adverse to, the objectives of investors in Fund shares.
          The Fund will be required to establish business relationships with its counterparties based on its own credit standing. Goldman Sachs, including the Investment Adviser, will not have any obligation to allow its credit to be used in connection with the Fund’s establishment of their business relationships, nor is it expected that the Fund’s counterparties will rely on the credit of Goldman Sachs in evaluating the Fund’s creditworthiness.
Potential Conflicts in Connection with Brokerage Transactions and Proxy Voting
          To the extent permitted by applicable law, purchases and sales of securities for the Fund may be bunched or aggregated with orders for other Client/GS Accounts. The Investment Adviser and its affiliates, however, are not required to bunch or aggregate orders if portfolio management decisions for different accounts are made separately, or if they determine that bunching or aggregating is not practicable, or required with respect to involving client directed accounts.
          Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged, and the

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Fund will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Fund. In addition, under certain circumstances, the Fund will not be charged the same commission or commission equivalent rates in connection with a bunched or aggregated order. Without limitation, time zone differences, separate trading desks or portfolio management processes in a global organization may, among other factors, result in separate, non-aggregated executions.
          The Investment Adviser may select brokers (including, without limitation, affiliates of the Investment Adviser) that furnish the Investment Adviser, the Fund, other Client/GS Accounts or their affiliates or personnel, directly or through correspondent relationships, with proprietary research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance to the Investment Adviser in the investment decision-making process (including with respect to futures, fixed-price offerings and over-the-counter transactions). Such research or other services may include, to the extent permitted by law, research reports on companies, industries and securities; economic and financial data; financial publications; proxy analysis; trade industry seminars; computer databases; quotation equipment and services; and research- oriented computer hardware, software and other services and products. Research or other services obtained in this manner may be used in servicing the Fund and other Client/GS Accounts, including in connection with Client/GS Accounts other than those that pay commissions to the broker relating to the research or other service arrangements. To the extent permitted by applicable law, such products and services may disproportionately benefit other Client/GS Accounts relative to the Fund based on the amount of brokerage commissions paid by the Fund and such other Client/GS Accounts. For example, research or other services that are paid for through one client’s commissions may not be used in managing that client’s account. In addition, other Client/GS Accounts may receive the benefit, including disproportionate benefits, of economies of scale or price discounts in connection with products and services that may be provided to the Fund and to such other Client/GS Accounts. To the extent that the Investment Adviser uses soft dollars, it will not have to pay for those products and services itself. The Investment Adviser may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. To the extent that the Investment Adviser receives research on this basis, many of the same conflicts related to traditional soft dollars may exist. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Investment Adviser.
          The Investment Adviser may endeavor to execute trades through brokers who, pursuant to such arrangements, provide research or other services in order to ensure the continued receipt of research or other services the Investment Adviser believes are useful in its investment decision-making process. The Investment Adviser may from time to time choose not to engage in the above described arrangements to varying degrees.
          The Investment Adviser has adopted policies and procedures designed to prevent conflicts of interest from influencing proxy voting decisions that it makes on behalf of advisory clients, including the Fund, and to help ensure that such decisions are made in accordance with the Investment Adviser’s fiduciary obligations to its clients. Nevertheless, notwithstanding such proxy voting policies and procedures, actual proxy voting decisions of the Investment Adviser may have the effect of favoring the interests of other clients or businesses of other divisions or units of Goldman Sachs and/or its affiliates provided that the Investment Adviser believes such voting decisions to be in accordance with its fiduciary obligations. For a more detailed discussion of these policies and procedures, see the section of this SAI entitled “PROXY VOTING.”
Potential Regulatory Restrictions on Investment Adviser Activity
          From time to time, the activities of the Fund may be restricted because of regulatory or other requirements applicable to Goldman Sachs and/or its internal policies designed to comply with, limit the applicability of, or otherwise relate to such requirements. A client not advised by Goldman Sachs would not be subject to some of those considerations. There may be periods when the Investment Adviser may not initiate or recommend certain types of transactions, or may otherwise restrict or limit its advice in certain securities or instruments issued by or related to companies for which Goldman Sachs is performing investment banking, market making or other services or has proprietary positions. For example, when Goldman Sachs is engaged in an underwriting or other distribution of securities of, or advisory services for, a company, the Fund may be prohibited from or limited in purchasing or selling securities of that company. In addition, there may be certain investment opportunities, investment strategies or actions that Goldman Sachs will not undertake on behalf of the Fund in view of Goldman Sachs’ client or firm

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activities. For example, Goldman Sachs may determine that the Fund may be precluded from exercising certain rights that it may have as a creditor to a particular borrower. Certain activities and actions may be considered to result in reputational risk or disadvantage for the management of the Fund as well as for Goldman Sachs. The Fund may also be prohibited from participating in an auction or from otherwise investing in or purchasing certain assets, or from providing financing to a purchaser or potential purchaser if Goldman Sachs is representing the seller. Similar situations could arise if Goldman Sachs personnel serve as directors of companies the securities of which the Fund wishes to purchase or sell or if Goldman Sachs is representing or providing financing to another potential purchaser. The larger the Investment Adviser’s investment advisory business and Goldman Sachs’ businesses, the larger the potential that these restricted list policies will impact investment transactions. However, if permitted by applicable law, the Fund may purchase securities or instruments that are issued by such companies or are the subject of an underwriting, distribution, or advisory assignment by Goldman Sachs, or in cases in which Goldman Sachs personnel are directors or officers of the issuer.
          The investment activities of Goldman Sachs for its proprietary accounts and for Client/GS Accounts may also limit the investment strategies and rights of the Fund. For example, in regulated industries, in certain emerging or international markets, in corporate and regulatory ownership definitions, and in certain futures and derivative transactions, there may be limits on the aggregate amount of investment by affiliated investors that may not be exceeded without the grant of a license or other regulatory or corporate consent or, if exceeded, may cause Goldman Sachs, the Fund or other Client/GS Accounts to suffer disadvantages or business restrictions. If certain aggregate ownership thresholds are reached or certain transactions undertaken, the ability of the Investment Adviser on behalf of clients (including the Fund) to purchase or dispose of investments, or exercise rights or undertake business transactions, may be restricted by regulation or otherwise impaired. In addition, certain investments may be considered to result in reputational risk or disadvantage. As a result, the Investment Adviser on behalf of clients (including the Fund) may limit purchases, sell existing investments, or otherwise restrict or limit the exercise of rights (including voting rights) when the Investment Adviser, in its sole discretion, deems it appropriate.
PORTFOLIO TRANSACTIONS AND BROKERAGE
          The Sub-Adviser is responsible for decisions to buy and sell securities for the Fund, the selection of brokers and dealers to effect the transactions and the negotiation of brokerage commissions, if any. Purchases and sales of securities on a securities exchange are effected through brokers who charge a negotiated commission for their services. Increasingly, securities traded over-the-counter also involve the payment of negotiated brokerage commissions. Orders may be directed to any broker including, to the extent and in the manner permitted by applicable law, Goldman Sachs.
          In the over-the-counter market, most securities have historically traded on a “net” basis with dealers acting as principal for their own accounts without a stated commission, although the price of a security usually includes a profit to the dealer. In underwritten offerings, securities are purchased at a fixed price which includes an amount of compensation to the underwriter, generally referred to as the underwriter’s concession or discount. On occasion, certain money market instruments may be purchased directly from an issuer, in which case no commissions or discounts are paid.
          In placing orders for portfolio securities of the Fund, the Sub-Adviser is generally required to give primary consideration to obtaining the most favorable execution and net price available. This means that the Sub-Adviser will seek to execute each transaction at a price and commission, if any, which provides the most favorable total cost or proceeds reasonably attainable in the circumstances. As permitted by Section 28(e) of the Securities Exchange Act of 1934 (“Section 28(e)”), the Fund may pay a broker which provides brokerage and research services to the Fund an amount of disclosed commission in excess of the commission which another broker would have charged for effecting that transaction. Such practice is subject to a good faith determination that such commission is reasonable in light of the services provided and to such policies as the Trustees may adopt from time to time. While the Sub-Adviser generally seeks reasonably competitive spreads or commissions, the Fund will not necessarily be paying the lowest spread or commission available. Within the framework of this policy, the Sub-Adviser will consider research and investment services provided by brokers or dealers who effect or are parties to portfolio transactions of the Fund, the Sub-Adviser and its affiliates, or their other clients. Such research and investment services are those which brokerage houses customarily provide to institutional investors and include research reports on particular industries and companies; economic surveys and analyses; recommendations

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as to specific securities; research products including quotation equipment and computer related programs; advice concerning the value of securities, the advisability of investing in, purchasing or selling securities and the availability of securities or the purchasers or sellers of securities; analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy and performance of accounts; services relating to effecting securities transactions and functions incidental thereto (such as clearance and settlement); and other lawful and appropriate assistance to the Sub-Adviser in the performance of its decision-making responsibilities.
          Such services are used by the Sub-Adviser in connection with all of its investment activities, and some of such services obtained in connection with the execution of transactions for the Fund may be used in managing other investment accounts. Conversely, brokers furnishing such services may be selected for the execution of transactions of such other accounts, whose aggregate assets may be larger than those of the Fund’s, and the services furnished by such brokers may be used by the Sub-Adviser in providing management services for the Trust. The Sub-Adviser may also participate in so-called “commission sharing arrangements” and “client commission arrangements” under which the Sub-Adviser may execute transactions through a broker-dealer and request that the broker-dealer allocate a portion of the commissions or commission credits to another firm that provides research to the Sub-Adviser. The Sub-Adviser excludes from use under these arrangements those products and services that are not fully eligible under applicable law and regulatory interpretations—even as to the portion that would be eligible if accounted for separately.
          The research services received as part of commission sharing and client commission arrangements will comply with Section 28(e) and may be subject to different legal requirements in the jurisdictions in which the Sub-Adviser does business. Participating in commission sharing and client commission arrangements may enable the Sub-Adviser to consolidate payments for research through one or more channels using accumulated client commissions or credits from transactions executed through a particular broker-dealer to obtain research provided by other firms. Such arrangements also help to ensure the continued receipt of research services while facilitating best execution in the trading process. The Sub-Adviser believes such research services are useful in its investment decision-making process by, among other things, ensuring access to a variety of high quality research, access to individual analysts and availability of resources that the Sub-Adviser might not be provided access to absent such arrangements.
          On occasions when the Sub-Adviser deems the purchase or sale of a security to be in the best interest of the Fund as well as its other customers (including any other fund or other investment company or advisory account for which the Investment Adviser acts as investment adviser or sub-investment adviser), the Sub-Adviser, to the extent permitted by applicable laws and regulations, may aggregate the securities to be sold or purchased for the Fund with those to be sold or purchased for such other customers in order to obtain the best net price and most favorable execution under the circumstances. In such event, allocation of the securities so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Sub-Adviser in the manner it considers to be equitable and consistent with its fiduciary obligations to the Fund and such other customers. In some instances, this procedure may adversely affect the price and size of the position obtainable for the Fund.
          Commission rates in the U.S. are established pursuant to negotiations with the broker based on the quality and quantity of execution services provided by the broker in the light of generally prevailing rates. The allocation of orders among brokers and the commission rates paid are reviewed periodically by the Trustees. The amount of brokerage commissions paid by the Fund may vary substantially from year to year because of differences in shareholder purchase and redemption activity, portfolio turnover rates and other factors.
          The Fund may participate in a commission recapture program. Under the program, participating broker-dealers rebate a percentage of commissions earned on Fund portfolio transactions to the Fund from which the commissions were generated. The rebated commissions are expected to be treated as realized capital gains of the Fund.
          Subject to the above considerations, the Sub-Adviser may use Goldman Sachs or an affiliate as a broker for the Fund. In order for Goldman Sachs or an affiliate acting as agent to effect any portfolio transactions for the Fund, the commissions, fees or other remuneration received by Goldman Sachs or an affiliate must be reasonable and fair compared to the commissions, fees or other remuneration received by other brokers in connection with comparable transactions involving similar securities or futures contracts. Furthermore, the Trustees, including a majority of the Trustees who are not “interested” Trustees, have adopted procedures which are reasonably designed

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to provide that any commissions, fees or other remuneration paid to Goldman Sachs are consistent with the foregoing standard. Brokerage transactions with Goldman Sachs are also subject to such fiduciary standards as may be imposed upon Goldman Sachs by applicable law.
          Since the Fund is newly-organized, it did not pay brokerage commissions during the last three fiscal years.
NET ASSET VALUE
          In accordance with procedures adopted by the Trustees, the net asset value per share of each class of the Fund is calculated by determining the value of the net assets attributed to each class of the Fund and dividing by the number of outstanding shares of that class. All securities are valued on each Business Day as of the close of regular trading on the New York Stock Exchange (normally, but not always, 4:00 p.m. New York time) or such other time as the New York Stock Exchange or National Association of Securities Dealers Automated Quotations System (“NASDAQ”) market may officially close. The term “Business Day” means any day the New York Stock Exchange is open for trading, which is Monday through Friday except for holidays. The New York Stock Exchange is closed on the following holidays: New Year’s Day, Martin Luther King, Jr. Day, Washington’s Birthday (observed), Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas.
          The time at which transactions and shares are priced and the time by which orders must be received may be changed in case of an emergency or if regular trading on the New York Stock Exchange is stopped at a time other than 4:00 p.m. New York Time. The Trust reserves the right to reprocess purchase, redemption and exchange transactions that were initially processed at a net asset value other than the Fund’s official closing net asset value that is subsequently adjusted, and to recover amounts from (or distribute amounts to) shareholders based on the official closing net asset value. The Trust reserves the right to advance the time by which purchase and redemption orders must be received for same business day credit as otherwise permitted by the SEC. In addition, the Fund may compute its net asset value as of any time permitted pursuant to any exemption, order or statement of the SEC or its staff.
          Portfolio securities of the Fund for which accurate market quotations are readily available are valued as follows: (i) securities listed on any U.S. or foreign stock exchange or on NASDAQ will be valued at the last sale price, or the official closing price, on the exchange or system in which they are principally traded on the valuation date. If there is no sale on the valuation day, securities traded will be valued at the closing bid price, or if a closing bid price is not available, at either the exchange or system-defined close price on the exchange or system in which such securities are principally traded. If the relevant exchange or system has not closed by the above-mentioned time for determining the Fund’s net asset value, the securities will be valued at the last sale price or official closing price, or if not available at the bid price at the time the net asset value is determined; (ii) over-the-counter securities not quoted on NASDAQ will be valued at the last sale price on the valuation day or, if no sale occurs, at the last bid price at the time net asset value is determined; (iii) equity securities for which no prices are obtained under sections (i) or (ii) including those for which a pricing service supplies no exchange quotation or a quotation that is believed by the portfolio manager/trader to be inaccurate, will be valued at their fair value in accordance with procedures approved by the Board of Trustees; (iv) fixed income securities with the exception of short-term securities with remaining maturities of 60 days or less, will be valued using evaluated prices provided by a recognized pricing service (e.g., Interactive Data Corp., Reuters, etc.) or dealer-supplied bid quotations; (v) fixed income securities for which accurate market quotations are not readily available are valued by the Investment Adviser based on valuation models that take into account various factors such as spread and daily yield changes on government or other securities in the appropriate market (i.e. matrix pricing); (vi) short-term fixed income securities with a remaining maturity of 60 days or less are valued at amortized cost, which the Trustees have determined to approximate fair value; and (vii) all other instruments, including those for which a pricing service supplies no exchange quotation or a quotation that is believed by the portfolio

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manager/trader to be inaccurate, will be valued in accordance with the valuation procedures approved by the Board of Trustees.
          The value of all assets and liabilities expressed in foreign currencies will be converted into U.S. dollar values at current exchange rates of such currencies against U.S. dollars last quoted by any major bank or a pricing service. If such quotations are not available, the rate of exchange will be determined in good faith by or under procedures established by the Board of Trustees.
          Generally, trading in securities on European, Asian and Far Eastern securities exchanges and on over-the-counter markets in these regions is substantially completed at various times prior to the close of business on each Business Day in New York (i.e., a day on which the New York Stock Exchange is open for trading). In addition, European, Asian or Far Eastern securities trading generally or in a particular country or countries may not take place on all Business Days in New York. Furthermore, trading takes place in various foreign markets on days which are not Business Days in New York and days on which the Fund’s net asset values are not calculated. Such calculation does not take place contemporaneously with the determination of the prices of the majority of the portfolio securities used in such calculation. For investments in foreign equity securities, “fair value” prices are provided by an independent fair value service (if available), in accordance with the fair value procedures approved by the Trustees, and are intended to reflect more accurately the value of those securities at the time the Fund’s NAV is calculated. Fair value prices are used because many foreign markets operate at times that do not coincide with those of the major U.S. markets. Events that could affect the values of foreign portfolio holdings may occur between the close of the foreign market and the time of determining the NAV, and would not otherwise be reflected in the NAV. If the independent fair value service does not provide a fair value for a particular security or if the value does not meet the established criteria for the Fund, the most recent closing price for such a security on its principal exchange will generally be its fair value on such date.
          The Investment Adviser, consistent with its procedures and applicable regulatory guidance, may (but need not) determine to make an adjustment to the previous closing prices of either domestic or foreign securities in light of significant events, to reflect what it believes to be the fair value of the securities at the time of determining the Fund’s NAV. Significant events that could affect a large number of securities in a particular market may include, but are not limited to: situations relating to one or more single issuers in a market sector; significant fluctuations in U.S. or foreign markets; market dislocations; market disruptions or market closings; equipment failures; natural or man-made disasters or acts of God; armed conflicts; governmental actions or other developments; as well as the same or similar events which may affect specific issuers or the securities markets even though not tied directly to the securities markets. Other significant events that could relate to a single issuer may include, but are not limited to: corporate actions such as reorganizations, mergers and buy-outs; corporate announcements, including those relating to earnings, products and regulatory news; significant litigation; low trading volume; trading limits; or suspensions.
          The proceeds received by the Fund and each other series of the Trust from the issue or sale of its shares, and all net investment income, realized and unrealized gain and proceeds thereof, subject only to the rights of creditors, will be specifically allocated to such Fund or particular series and constitute the underlying assets of that Fund or series. The underlying assets of the Fund will be segregated on the books of account, and will be charged with the liabilities in respect of the Fund and with a share of the general liabilities of the Trust. Expenses of the Trust with respect to the Fund and the other series of the Trust are generally allocated in proportion to the net asset values of the respective Fund or series except where allocations of expenses can otherwise be fairly made.
Errors and Corrective Actions
          The Investment Adviser will report to the Board of Trustees any material breaches of investment objective, policies or restrictions and any material errors in the calculation of the NAV of the Fund or the processing of purchases and redemptions. Depending on the nature and size of an error, corrective action may or may not be required. Corrective action may involve a prospective correction of the NAV only, correction of any erroneous NAV and compensation to the Fund, or correction of any erroneous NAV, compensation to the Fund and reprocessing of individual shareholder transactions. The Trust’s policies on errors and corrective action limit or restrict when corrective action will be taken or when compensation to the Fund or its shareholders will be paid, and not all mistakes will result in compensable errors. As a result, neither the Fund nor its shareholders who purchase or redeem shares during periods in which errors accrue or occur may be compensated in connection with the resolution

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of an error. Shareholders will generally not be notified of the occurrence of a compensable error or the resolution thereof absent unusual circumstances.
          As discussed in more detail under “NET ASSET VALUE,” the Fund’s portfolio securities may be priced based on quotations for those securities provided by pricing services. There can be no guarantee that a quotation provided by a pricing service will be accurate.
SHARES OF THE TRUST
          The Fund is a series of Goldman Sachs Trust, a Delaware statutory trust established by an Agreement and Declaration of Trust dated January 28, 1997. The fiscal year end for the Fund is August 31.
          The Trustees have authority under the Trust’s Declaration of Trust to create and classify shares of beneficial interest in separate series, without further action by shareholders. The Trustees also have authority to classify and reclassify any series of shares into one or more classes of shares. As of the date of this SAI, the Trustees have classified the shares of the Fund into five classes: Institutional, Class A, Class C, Class IR and Class R. Additional series and classes may be added in the future. Only Class A and Institutional Shares of the Fund are being offering in connection with the reorganization of Rising Dividend Growth Fund into the Fund. Only Class A and Institutional Shares are discussed in this SAI.
          Each Institutional Share and Class A Share of the Fund represents a proportionate interest in the assets belonging to the applicable class of the Fund. All expenses of the Fund are borne at the same rate by each class of shares, except that fees under the Distribution and Service Plan (the “Plan”) are borne exclusively by Class A Shares and transfer agency fees and expenses are borne at different rates by different share classes. The Trustees may determine in the future that it is appropriate to allocate other expenses differently among classes of shares and may do so to the extent consistent with the rules of the SEC and positions of the IRS. Each class of shares may have different minimum investment requirements and be entitled to different shareholder services. With limited exceptions, shares of a class may only be exchanged for shares of the same or an equivalent class of another fund. See “Shareholder Guide” in the Proxy Statement/Prospectus and “OTHER INFORMATION REGARDING MAXIMUM SALES CHARGE, PURCHASES, REDEMPTIONS, EXCHANGES AND DIVIDENDS” below. In addition, the fees and expenses set forth below for each class may be subject to voluntary fee waivers or reimbursements, as discussed more fully in the Fund’s’ Proxy Statement/Prospectus.
          Institutional Shares may be purchased at net asset value without a sales charge for accounts in the name of an investor or institution that is not compensated by the Fund under a Plan for services provided to the institution’s customers.
          Class A Shares are sold, with an initial sales charge of up to 5.5%, through brokers and dealers who are members of the Financial Industry Regulatory Authority (“FINRA”) and certain other financial service firms that have sales agreements with Goldman Sachs. Class A Shares bear the cost of distribution and service fees at the aggregate rate of up to 0.25% of the average daily net assets of such Class A Shares of the Fund. With respect to Class A Shares, the distributor at its discretion may use compensation for distribution services paid under the Distribution and Service Plan for personal and account maintenance services and expenses so long as such total compensation under the Plan does not exceed the maximum cap on “service fees” imposed by FINRA.
          It is possible that an institution or its affiliate may offer different classes of shares (i.e., Institutional and Class A Shares) to its customers and thus receive different compensation with respect to different classes of shares of the Fund. Dividends paid by the Fund, if any, with respect to each class of shares will be calculated in the same manner, at the same time on the same day and will be the same amount, except for differences caused by the fact that the respective transfer agency and Plan fees relating to a particular class will be borne

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exclusively by that class. Similarly, the net asset value per share may differ depending upon the class of shares purchased.
          Certain aspects of the shares may be altered after advance notice to shareholders if it is deemed necessary in order to satisfy certain tax regulatory requirements.
          When issued for the consideration described in the Fund’s Prospectus, shares are fully paid and non-assessable. The Trustees may, however, cause shareholders, or shareholders of a particular series or class, to pay certain custodian, transfer agency, servicing or similar charges by setting off the same against declared but unpaid dividends or by reducing share ownership (or by both means). In the event of liquidation, shareholders are entitled to share pro rata in the net assets of the applicable class of the Fund available for distribution to such shareholders. All shares are freely transferable and have no preemptive, subscription or conversion rights. The Trustees may require shareholders to redeem Shares for any reason under terms set by the Trustees.
          The Act requires that where more than one series of shares exists, each series must be preferred over all other series in respect of assets specifically allocated to such series. In addition, Rule 18f-2 under the Act provides that any matter required to be submitted by the provisions of the Act or applicable state law, or otherwise, to the holders of the outstanding voting securities of an investment company such as the Trust shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding shares of each series affected by such matter. Rule 18f-2 further provides that a series shall be deemed to be affected by a matter unless the interests of each series in the matter are substantially identical or the matter does not affect any interest of such series. However, Rule 18f-2 exempts the selection of independent public accountants, the approval of principal distribution contracts and the election of trustees from the separate voting requirements of Rule 18f-2.
          The Trust is not required to hold annual meetings of shareholders and does not intend to hold such meetings. In the event that a meeting of shareholders is held, each share of the Trust will be entitled, as determined by the Trustees without the vote or consent of the shareholders, either to one vote for each share or to one vote for each dollar of net asset value represented by such share on all matters presented to shareholders including the election of Trustees (this method of voting being referred to as “dollar based voting”). However, to the extent required by the Act or otherwise determined by the Trustees, series and classes of the Trust will vote separately from each other. Shareholders of the Trust do not have cumulative voting rights in the election of Trustees. Meetings of shareholders of the Trust, or any series or class thereof, may be called by the Trustees, certain officers or upon the written request of holders of 10% or more of the shares entitled to vote at such meetings. The Trustees will call a special meeting of shareholders for the purpose of electing Trustees, if, at any time, less than a majority of Trustees holding office at the time were elected by shareholders. The shareholders of the Trust will have voting rights only with respect to the limited number of matters specified in the Declaration of Trust and such other matters as the Trustees may determine or may be required by law.
          The Declaration of Trust provides for indemnification of Trustees, officers, employees and agents of the Trust unless the recipient is adjudicated (i) to be liable by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office or (ii) not to have acted in good faith in the reasonable belief that such person’s actions were in the best interest of the Trust. The Declaration of Trust provides that, if any shareholder or former shareholder of any series is held personally liable solely by reason of being or having been a shareholder and not because of the shareholder’s acts or omissions or for some other reason, the shareholder or former shareholder (or the shareholder’s heirs, executors, administrators, legal representatives or general successors) shall be held harmless from and indemnified against all loss and expense arising from such liability. The Trust, acting on behalf of any affected series, must, upon request by such shareholder, assume the defense of any claim made against such shareholder for any act or obligation of the series and satisfy any judgment thereon from the assets of the series.
          The Declaration of Trust permits the termination of the Trust or of any series or class of the Trust (i) by a majority of the affected shareholders at a meeting of shareholders of the Trust, series or class; or (ii) by a majority of the Trustees without shareholder approval if the Trustees determine, in their sole discretion, that such action is in the best interest of the Trust, such series, such class or their respective shareholders. The Trustees may consider such factors as they, in their sole discretion, deem appropriate in making such determination, including (i) the inability of the Trust or any series or class to maintain its assets at an appropriate size; (ii) changes in laws or regulations

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governing the Trust, series, or class or affecting assets of the type in which it invests; or (iii) economic developments or trends having a significant adverse impact on the business or operations of the Trust or series.
          The Declaration of Trust authorizes the Trustees, without shareholder approval, to cause the Trust, or any series thereof, to merge or consolidate with any corporation, association, trust or other organization or sell or exchange all or substantially all of the property belonging to the Trust or any series thereof. In addition, the Trustees, without shareholder approval, may adopt a master-feeder structure by investing all or a portion of the assets of a series of the Trust in the securities of another open-end investment company with substantially the same investment objective, restrictions and policies.
          The Declaration of Trust permits the Trustees to amend the Declaration of Trust without a shareholder vote. However, shareholders of the Trust have the right to vote on any amendment (i) that would adversely affect the voting rights of shareholders; (ii) that is required by law to be approved by shareholders; (iii) that would amend the provisions of the Declaration of Trust regarding amendments and supplements thereto; or (iv) that the Trustees determine to submit to shareholders.
          The Trustees may appoint separate Trustees with respect to one or more series or classes of the Trust’s shares (the “Series Trustees”). Series Trustees may, but are not required to, serve as Trustees of the Trust or any other series or class of the Trust. To the extent provided by the Trustees in the appointment of Series Trustees, the Series Trustees may have, to the exclusion of any other Trustees of the Trust, all the powers and authorities of Trustees under the Declaration of Trust with respect to such Series or Class, but may have no power or authority with respect to any other series or class.
Shareholder and Trustee Liability
          Under Delaware Law, the shareholders of the Fund are not generally subject to liability for the debts or obligations of the Trust. Similarly, Delaware law provides that a series of the Trust will not be liable for the debts or obligations of any other series of the Trust. However, no similar statutory or other authority limiting statutory trust shareholder liability exists in other states. As a result, to the extent that a Delaware statutory trust or a shareholder is subject to the jurisdiction of courts of such other states, the courts may not apply Delaware law and may thereby subject the Delaware statutory trust shareholders to liability. To guard against this risk, the Declaration of Trust contains an express disclaimer of shareholder liability for acts or obligations of a series. Notice of such disclaimer will normally be given in each agreement, obligation or instrument entered into or executed by a series of the Trust. The Declaration of Trust provides for indemnification by the relevant series for all loss suffered by a shareholder as a result of an obligation of the series. The Declaration of Trust also provides that a series shall, upon request, assume the defense of any claim made against any shareholder for any act or obligation of the series and satisfy any judgment thereon. In view of the above, the risk of personal liability of shareholders of a Delaware statutory trust is remote.
          In addition to the requirements under Delaware law, the Declaration of Trust provides that shareholders of a series may bring a derivative action on behalf of the series only if the following conditions are met: (a) shareholders eligible to bring such derivative action under Delaware law who hold at least 10% of the outstanding shares of the series, or 10% of the outstanding shares of the class to which such action relates, shall join in the request for the Trustees to commence such action; and (b) the Trustees must be afforded a reasonable amount of time to consider such shareholder request and to investigate the basis of such claim. The Trustees will be entitled to retain counsel or other advisers in considering the merits of the request and may require an undertaking by the shareholders making such request to reimburse the series for the expense of any such advisers in the event that the Trustees determine not to bring such action.
          The Declaration of Trust further provides that the Trustees will not be liable for errors of judgment or mistakes of fact or law, but nothing in the Declaration of Trust protects a Trustee against liability to which he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office.
Principal Holders of Securities

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          Since the Fund is newly-offered, no shareholders owned more than 5% of any class of the Fund’s shares as of the date of this SAI.
TAXATION
          The following are certain additional U.S. federal income tax considerations generally affecting the Fund and the purchase, ownership and disposition of shares of the Fund that are not described in the Proxy Statement/Prospectus. The discussions below and in the Proxy Statement/Prospectus are only summaries and are not intended as substitutes for careful tax planning. They do not address special tax rules applicable to certain classes of investors, such as tax-exempt entities, insurance companies and financial institutions. Each prospective shareholder is urged to consult his or her own tax adviser with respect to the specific federal, state, local and foreign tax consequences of investing in the Fund. The summary is based on the laws in effect on the date of this SAI, which are subject to change.
Fund Taxation
          The Fund is treated as a separate taxable entity and has elected to be treated and intends to qualify for each taxable year as a regulated investment company under Subchapter M of Subtitle A, Chapter 1, of the Code.
          There are certain tax requirements that the Fund must follow if it is to avoid federal taxation. In its efforts to adhere to these requirements, the Fund may have to limit its investment activities in some types of instruments. Qualification as a regulated investment company under the Code requires, among other things, that (1) the Fund derive at least 90% of its gross income for each taxable year from dividends, interest, gains from the sale or other disposition of stocks or securities or foreign currencies, net income from qualified publicly traded partnerships or other income (including but not limited to gains from options, futures, and forward contracts) derived with respect to the Fund’s business of investing in stocks, securities or currencies (the “90% gross income test”); and (2) the Fund diversify its holdings so that, in general, at the close of each quarter of its taxable year, (a) at least 50% of the fair market value of the Fund’s total (gross) assets is comprised of cash, cash items, U.S. Government Securities, securities of other regulated investment companies and other securities limited in respect of any one issuer to an amount not greater in value than 5% of the value of the Fund’s total assets and to not more than 10% of the outstanding voting securities of such issuer, and (b) not more than 25% of the value of its total (gross) assets is invested in the securities of any one issuer (other than U.S. Government Securities and securities of other regulated investment companies), two or more issuers controlled by the Fund and engaged in the same, similar or related trades or businesses or certain publicly traded partnerships.
          For purposes of the 90% gross income test, income that the Fund earns from equity interests in certain entities that are not treated as corporations or as qualified publicly traded partnerships for U.S. federal income tax purposes (e.g., partnerships or trusts) will generally have the same character for the Fund as in the hands of such an entity; consequently, the Fund may be required to limit its equity investments in any such entities that earn fee income, rental income or other nonqualifying income. In addition, future Treasury regulations could provide that qualifying income under the 90% gross income test will not include gains from foreign currency transactions that are not directly related to the Fund’s principal business of investing in stock or securities or options and futures with respect to stock or securities. Using foreign currency positions or entering into foreign currency options, futures and forward or swap contracts for purposes other than hedging currency risk with respect to securities in the Fund’s portfolio or anticipated to be acquired may not qualify as “directly-related” under these tests.

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          The Fund generally intends to distribute for each taxable year to its shareholders all or substantially all of its investment company taxable income, net capital gain and any tax-exempt interest. Exchange control or other foreign laws, regulations or practices may restrict repatriation of investment income, capital or the proceeds of securities sales by foreign investors such as the Fund and may therefore make it more difficult for the Fund to satisfy the distribution requirements described above, as well as the excise tax distribution requirements described below. The Fund generally expects, however, to be able to obtain sufficient cash to satisfy those requirements from new investors, the sale of securities or other sources. If for any taxable year the Fund does not qualify as a regulated investment company, it will be taxed on all of its taxable income and net capital gain at corporate rates, and its distributions to shareholders will generally be taxable as ordinary dividends to the extent of its current and accumulated earnings and profits.
          If the Fund retains any net capital gain, the Fund may designate the retained amount as undistributed capital gains in a notice to its shareholders who (1) if subject to U.S. federal income tax on long-term capital gains, will be required to include in income for federal income tax purposes, as long-term capital gain, their shares of that undistributed amount, and (2) will be entitled to credit their proportionate shares of the tax paid by the Fund against their U.S. federal income tax liabilities, if any, and to claim refunds to the extent the credit exceeds those liabilities. For U.S. federal income tax purposes, the tax basis of shares owned by a shareholder of the Fund will be increased by the amount of any such undistributed net capital gain included in the shareholder’s gross income and decreased by the federal income tax paid by the Fund on that amount of net capital gain.
          To avoid a 4% federal excise tax, the Fund must distribute (or be deemed to have distributed) by December 31 of each calendar year at least 98% of its taxable ordinary income for the calendar year, at least 98.2% of the excess of its capital gains over its capital losses (generally computed on the basis of the one-year period ending on October 31 of such year), and all taxable ordinary income and the excess of capital gains over capital losses for all previous years that were not distributed for those years and on which the Fund paid no federal income tax. For federal income tax purposes, dividends declared by the Fund in October, November or December to shareholders of record on a specified date in such a month and paid during January of the following year are taxable to such shareholders, and deductible by the Fund, as if paid on December 31 of the year declared. The Fund anticipates that it will generally make timely distributions of income and capital gains in compliance with these requirements so that it will generally not be required to pay the excise tax.
          For federal income tax purposes, the Fund is generally permitted to carry forward indefinitely a net capital loss in any taxable year to offset its own capital gains, if any, during the years following the year of the loss. These amounts are available to be carried forward to offset future capital gains to the extent permitted by the Code and applicable tax regulations.
          Gains and losses on the sale, lapse, or other termination of options and futures contracts, options thereon and certain forward contracts (except certain foreign currency options, forward contracts and futures contracts) will generally be treated as capital gains and losses. Certain of the futures contracts, forward contracts and options held by the Fund will be required to be “marked-to-market” for federal tax purposes — that is, treated as having been sold at their fair market value on the last day of the Fund’s taxable year (or, for excise tax purposes, on the last day of the relevant period). These provisions may require the Fund to recognize income or gains without a concurrent receipt of cash. Any gain or loss recognized on actual or deemed sales of these futures contracts, forward contracts, or options will (except for certain foreign currency options, forward contracts, and futures contracts) be treated as 60% long-term capital gain or loss and 40% short-term capital gain or loss. As a result of certain hedging transactions entered into by the Fund, it may be required to defer the recognition of losses on futures contracts, forward contracts, and options or underlying securities or foreign currencies to the extent of any unrecognized gains on related positions held by the Fund, and the characterization of gains or losses as long-term or short-term may be changed. The tax provisions described in this paragraph may affect the amount, timing and character of the Fund’s distributions to shareholders. The application of certain requirements for qualification as a regulated investment company and the application of certain other tax rules may be unclear in some respects in connection with certain investment practices such as dollar rolls, or investments in certain derivatives, including interest rate swaps, floors, caps and collars, currency swaps, total return swaps, mortgage swaps, index swaps, forward contracts and structured notes. As a result, the Fund may therefore be required to limit its investments in such transactions and it is also possible that the IRS may not agree with the Fund’s tax treatment of such transactions. In addition, the tax treatment

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of derivatives, and certain other investments, may be affected by future legislation, Treasury Regulations and guidance issued by the IRS that could affect the timing, character and amount of the Fund’s income and gains and distributions to shareholders. Certain tax elections may be available to the Fund to mitigate some of the unfavorable consequences described in this paragraph.
          Section 988 of the Code contains special tax rules applicable to certain foreign currency transactions and instruments which may affect the amount, timing and character of income, gain or loss recognized by the Fund. Under these rules, foreign exchange gain or loss realized with respect to foreign currencies and certain futures and options thereon, foreign currency-denominated debt instruments, foreign currency forward contracts, and foreign currency-denominated payables and receivables will generally be treated as ordinary income or loss, although in some cases elections may be available that would alter this treatment. If a net foreign exchange loss treated as ordinary loss under Section 988 of the Code were to exceed the Fund’s investment company taxable income (computed without regard to that loss) for a taxable year, the resulting loss would not be deductible by the Fund or its shareholders in future years. Net loss, if any, from certain foreign currency transactions or instruments could exceed net investment income otherwise calculated for accounting purposes, with the result being either no dividends being paid or a portion of the Fund’s dividends being treated as a return of capital for tax purposes, nontaxable to the extent of a shareholder’s tax basis in his shares and, once such basis is exhausted, generally giving rise to capital gains.
          The Fund’s investments in certain structured securities or other securities bearing original issue discount or, if the Fund elects to include market discount in income currently, market discount, as well as any “marked-to- market” gain from certain options, futures or forward contracts, as described above, will in many cases cause the Fund to realize income or gain before the receipt of cash payments with respect to these securities or contracts. For the Fund to obtain cash to enable the Fund to distribute any such income or gain, to maintain its qualification as a regulated investment company and to avoid federal income and excise taxes, the Fund may be required to liquidate portfolio investments sooner than it might otherwise have done.
          Investments in lower-rated securities may present special tax issues for the Fund to the extent actual or anticipated defaults may be more likely with respect to those kinds of securities. Tax rules are not entirely clear about issues such as when an investor in such securities may cease to accrue interest, original issue discount, or market discount; when and to what extent deductions may be taken for bad debts or worthless securities; how payments received on obligations in default should be allocated between principal and income; and whether exchanges of debt obligations in a workout context are taxable. These and other issues will generally need to be addressed by the Fund, in the event it invests in such securities, so as to seek to eliminate or to minimize any adverse tax consequences.
          The Fund anticipates that it may be subject to foreign taxes on its income (possibly including, in some cases, capital gains) from foreign securities. Tax conventions between certain countries and the United States may reduce or eliminate such taxes in some cases. The Fund will not be eligible to elect to pass through foreign taxes to the shareholders but will be entitled to deduct such taxes in computing the amounts they are required to distribute.
          If the Fund acquires stock (including, under proposed regulations, an option to acquire stock such as is inherent in a convertible bond) in certain foreign corporations that receive at least 75% of their annual gross income from passive sources (such as interest, dividends, rents, royalties or capital gain) or hold at least 50% of their assets in investments producing such passive income (“passive foreign investment companies”), the Fund could be subject to federal income tax and additional interest charges on “excess distributions” received from such companies or gain from the sale of stock in such companies, even if all income or gain actually received by the Fund is timely distributed to its shareholders. The Fund will not be able to pass through to its shareholders any credit or deduction for such a tax. In some cases, elections may be available that will ameliorate these adverse tax consequences, but those elections will require the Fund to include each year certain amounts as income or gain (subject to the distribution requirements described above) without a concurrent receipt of cash. The Fund may attempt to limit and/or to manage its holdings in passive foreign investment companies to minimize its tax liability or maximize its return from these investments.

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          If the Fund invests in certain REITs or in REMIC residual interests, a portion of the Fund’s income may be classified as “excess inclusion income.” A shareholder that is otherwise not subject to tax may be taxable on their share of any such excess inclusion income as “unrelated business taxable income.” In addition, tax may be imposed on the Fund on the portion of any excess inclusion income allocable to any shareholders that are classified as disqualified organizations.
Medicare Tax
          For taxable years beginning after December 31, 2012, an additional 3.8% Medicare tax will be imposed on certain net investment income (including ordinary dividends and capital gain distributions received from the Fund and net gains from redemptions or other taxable dispositions of Fund shares) of US individuals, estates and trusts to the extent that such person’s “modified adjusted gross income” (in the case of an individual) or “adjusted gross income” (in the case of an estate or trust) exceeds a threshold amount.
Non-U.S. Shareholders
          The discussion above relates solely to U.S. federal income tax law as it applies to “U.S. persons” subject to tax under such law.
          Distributions to shareholders who, as to the United States, are not “U.S. persons,” (i.e., are nonresident aliens, foreign corporations, fiduciaries of foreign trusts or estates, foreign partnerships or other non-U.S. investors) generally will be subject to U.S. federal withholding tax at the rate of 30% on distributions treated as ordinary income unless the tax is reduced or eliminated pursuant to a tax treaty or the distributions are effectively connected with a U.S. trade or business of the shareholder; but distributions of net capital gain (the excess of any net long-term capital gains over any net short-term capital losses) including amounts retained by the Fund which are designated as undistributed capital gains, to such a non-U.S. shareholder will not be subject to U.S. federal income or withholding tax unless the distributions are effectively connected with the shareholder’s trade or business in the United States or, in the case of a shareholder who is a nonresident alien individual, the shareholder is present in the United States for 183 days or more during the taxable year and certain other conditions are met.
          Any capital gain realized by a non-U.S. shareholder upon a sale or redemption of shares of the Fund will not be subject to U.S. federal income or withholding tax unless the gain is effectively connected with the shareholder’s trade or business in the U.S., or in the case of a shareholder who is a nonresident alien individual, the shareholder is present in the U.S. for 183 days or more during the taxable year and certain other conditions are met.
          Non-U.S. persons who fail to furnish the Fund with the proper IRS Form W-8 (i.e., W-8BEN, W-8ECI, W-8IMY or W-8EXP), or an acceptable substitute, may be subject to backup withholding at a 28% (currently scheduled to increase to 31% after 2012) rate on dividends (including capital gain dividends) and on the proceeds of redemptions and exchanges.
          Also, non-U.S. shareholders of the Fund may be subject to U.S. estate tax with respect to their Fund shares.
          Effective January 1, 2013, the Fund will be required to withhold U.S. tax (at a 30% rate) on payments of dividends and redemption proceeds made to certain non-U.S. entities that fail to comply 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.
          Each shareholder who is not a U.S. person should consult his or her tax adviser regarding the U.S. and non-U.S. tax consequences of ownership of shares of, and receipt of distributions from, the Fund.
State and Local
          The Fund may be subject to state or local taxes in jurisdictions in which the Fund is deemed to be doing business. In addition, in those states or localities that impose income taxes, the treatment of the Fund and its shareholders under those jurisdictions’ tax laws may differ from the treatment under federal income tax laws, and investment in the Fund may have tax consequences for shareholders that are different from those of a direct investment in the Fund’s portfolio securities. Shareholders should consult their own tax advisers concerning state and local tax matters.
FINANCIAL STATEMENTS
          Since the Fund is newly-offered and has not yet offered shares, no financial statement information is provided for the Fund. The Fund will commence operations upon the proposed reorganization of the Rising Dividend Growth Fund, a series of Dividend Growth Trust (the "Predecessor Fund") into the Fund. As successor to the Predecessor Fund, the Fund will assume the Predecessor Fund’s historical performance after the consummation of the proposed reorganization. A copy of the Fund’s Annual Report (when available) may be obtained upon request and without charge by writing Goldman, Sachs & Co., P.O. Box 06050, Chicago, Illinois 60606 or by calling Goldman, Sachs & Co., at the telephone number on the back cover of the Fund’s Proxy Statement/Prospectus. The Annual Report for the fiscal period ending August 31, 2012 will become available to investors in October 2012.

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PROXY VOTING
          The Trust, on behalf of the Fund, has delegated the voting of portfolio securities to the Investment Adviser and the Sub-Adviser. The Sub-Adviser will vote portfolio securities on behalf of the Fund. The Sub-Adviser has adopted policies and procedures for the voting of proxies. The Sub-Adviser seeks to vote proxies in the best interests of its clients. The Sub-Adviser’s proxy voting guidelines are described in more detail in Appendix D of the SAI. The Investment Adviser has also adopted policies and procedures for the voting of proxies on behalf of client accounts for which the Investment Adviser has voting discretion. The Investment Adviser’s proxy voting guidelines are described in more detail in Appendix B of this SAI.

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          Information regarding how the Fund voted proxies (if any) relating to portfolio securities during the most recent 12-month period ended June 30 will be available on or through the Fund’s website at www.goldmansachsfunds.com and on the SEC’s website at www.sec.gov.
PAYMENTS TO INTERMEDIARIES
          The Investment Adviser, Distributor and/or their affiliates may make payments to Authorized Dealers, Authorized Institutions and other financial intermediaries (“Intermediaries”) from time to time to promote the sale, distribution and/or servicing of shares of the Fund. These payments (“Additional Payments”) are made out of the Investment Adviser’s, Distributor’s and/or their affiliates own assets, and are not an additional charge to the Fund or its shareholders. The Additional Payments are in addition to the distribution and service fees paid by the Fund described in the Fund’s Proxy Statement/Prospectus and this SAI, and are also in addition to the sales commissions payable to Intermediaries as set forth in the Proxy Statement/Prospectus.
          These Additional Payments are intended to compensate Intermediaries for, among other things: marketing shares of the Fund, which may consist of payments relating to Fund inclusion on preferred or recommended fund lists or in certain sales programs from time to time sponsored by the Intermediaries; access to the Intermediaries’ registered representatives or salespersons, including at conferences and other meetings; assistance in training and education of personnel; “finders” or “referral fees” for directing investors to the Fund; marketing support fees for providing assistance in promoting the sale of Fund shares (which may include promotions in communications with the Intermediaries’ customers, registered representatives and salespersons); and/or other specified services intended to assist in the distribution and marketing of the Fund. In addition, the Investment Adviser, Distributor and/or their affiliates may make Additional Payments (including through sub-transfer agency and networking agreements) for sub-accounting, administrative and/or shareholder processing services that are in addition to the transfer agent, shareholder administration, servicing and processing fees paid by the Fund. These payments may exceed amounts earned on these assets by the Investment Adviser, Distributor and/or their affiliates for the performance of these or similar services. The Additional Payments made by the Investment Adviser, Distributor and their affiliates may be a fixed dollar amount; may be based on the number of customer accounts maintained by an Intermediary; may be based on a percentage of the value of shares sold to, or held by, customers of the Intermediary involved; or may be calculated on another basis. Furthermore, the Investment Adviser, Distributor and/or their affiliates may, to the extent permitted by applicable regulations, contribute to various non-cash and cash incentive arrangements to promote the sale of shares, as well as sponsor various educational programs, sales contests and/or promotions. The Investment Adviser, Distributor and their affiliates may also pay for the travel expenses, meals, lodging and entertainment of Intermediaries and their salespersons and guests in connection with educational, sales and promotional programs subject to applicable FINRA regulations. The amount of these Additional Payments (excluding payments made through sub-transfer agency and networking agreements) is normally not expected to exceed 0.50% (annualized) of the amount sold or invested through the Intermediaries. The Additional Payments are negotiated based on a range of factors, including but not limited to, ability to attract and retain assets (including particular classes of Fund’s shares), target markets, customer relationships, quality of service and industry reputation. In addition, certain Intermediaries may have access to certain research and investment services from the Investment Adviser, Distributor and/or their affiliates. Such research and investment services (“Additional Services”) may include research reports, economic analysis, portfolio analysis tools, business planning services, certain marketing and investor education materials and strategic asset allocation modeling. The Intermediary may not pay for these products or services.
          The Additional Payments made by the Investment Adviser, Distributor and/or their affiliates or the Additional Services received by an Intermediary may be different for different Intermediaries and may vary with respect to the type of fund (e.g., equity, fund, fixed income fund, specialty fund, asset allocation portfolio or money market fund) sold by the Intermediary. In addition, the Additional Payment arrangements may include breakpoints in compensation which provide that the percentage rate of compensation varies as the dollar value of the amount sold or invested through an Intermediary increases. The presence of these Additional Payments or Additional Services, the varying fee structure and the basis on which an Intermediary compensates its registered representatives or salespersons may create an incentive for a particular Intermediary, registered representative or salesperson to highlight, feature or recommend the Fund based, at least in part, on the level of compensation paid.

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          For the fiscal year ended August 31, 2011, the Investment Adviser, Distributor and their affiliates made Additional Payments out of their own assets to approximately 128 Intermediaries. During the fiscal year ended August 31, 2011, the Investment Adviser, Distributor and their affiliates paid to Intermediaries approximately $104.1 million in Additional Payments (excluding payments made through sub-transfer agency and networking agreements) with respect to all of the funds of the Trust (including the Fund) and all of the funds in an affiliated investment company, Goldman Sachs Variable Insurance Trust.
          Shareholders should contact their Authorized Dealer or other Intermediary for more information about the Additional Payments or Additional Services they receive and any potential conflicts of interest. For additional questions, please contact Goldman Sachs Funds at 1-800-621-2550.
OTHER INFORMATION
Selective Disclosure of Portfolio Holdings
          The Board of Trustees of the Trust and the Investment Adviser have adopted a policy on selective disclosure of portfolio holdings in accordance with regulations that seek to ensure that disclosure of information about portfolio securities is in the best interest of Fund shareholders and to address the conflicts between the interests of Fund shareholders and its service providers. The policy provides that neither the Fund nor its Investment Adviser, Distributor or any agent, or any employee thereof (“Fund Representative”) will disclose the Fund’s portfolio holdings information to any person other than in accordance with the policy. For purposes of the policy, “portfolio holdings information” means the Fund’s actual portfolio holdings, as well as nonpublic information about its trading strategies or pending transactions. Under the policy, neither the Fund nor any Fund Representative may solicit or accept any compensation or other consideration in connection with the disclosure of portfolio holdings information. The Fund Representative may provide portfolio holdings information to third parties if such information has been included in the Fund’s public filings with the SEC or is disclosed on the Fund’s publicly accessible website. Information posted on the Fund’s website may be separately provided to any person commencing the day after it is first published on the Fund’s website.
          Portfolio holdings information that is not filed with the SEC or posted on the publicly available website may be provided to third parties only if the third party recipients are required to keep all portfolio holdings information confidential and are prohibited from trading on the information they receive. Disclosure to such third parties must be approved in advance by the Investment Adviser’s legal or compliance department. Disclosure to providers of auditing, custody, proxy voting and other similar services for the Fund, as well as rating and ranking organizations, will generally be permitted; however, information may be disclosed to other third parties (including, without limitation, individuals, institutional investors, and intermediaries that sell shares of the Fund,) only upon approval by the Fund’s Chief Compliance Officer, who must first determine that the Fund has a legitimate business purpose for doing so. In general, each recipient of non-public portfolio holdings information must sign a confidentiality and non-trading agreement, although this requirement will not apply when the recipient is otherwise subject to a duty of confidentiality. In accordance with the policy, the identity of those recipients who receive non-public portfolio holdings information on an ongoing basis is as follows: the Investment Adviser and its affiliates, the Fund’s independent registered public accounting firm, the Fund’s custodian- State Street, the Fund’s legal counsel- Dechert LLP, the Fund’s financial printer- RR Donnelley, and the Fund’s proxy voting service- ISS. In addition, certain fixed income funds of the Trust provide non-public portfolio holdings information to Standard & Poor’s Rating Services to allow such funds to be rated by it and certain equity funds provide non-public portfolio holdings information to FactSet, a provider of global financial and economic information. These entities are obligated to keep such information confidential. Third party providers of custodial or accounting services to the Fund may release non-public portfolio holdings information of the Fund only with the permission of Fund Representatives. From time to time portfolio holdings information may be provided to broker-dealers solely in connection with the Fund seeking portfolio securities trading suggestions. In providing this information reasonable precautions, including limitations on the scope of the portfolio holdings information disclosed, are taken to avoid any potential misuse of the disclosed information. All marketing materials prepared by the Trust’s principal underwriter are reviewed by Goldman Sachs’ Compliance department for consistency with the Trust’s portfolio holdings disclosure policy.

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          The Fund currently intends to publish on the Trust’s website (http://www.goldmansachsfunds.com) complete portfolio holdings for the Fund as of the end of each calendar quarter subject to a fifteen calendar day lag between the date of the information and the date on which the information is disclosed. In addition, the Fund intends to publish on its website month-end top ten holdings subject to a fifteen calendar day lag between the date of the information and the date on which the information is disclosed. The Fund may publish on the website complete portfolio holdings information more frequently if it has a legitimate business purpose for doing so.
          Under the policy, Fund Representatives will initially supply the Board of the Trustees with a list of third parties who receive portfolio holdings information pursuant to any ongoing arrangement. In addition, the Board is to receive information, on a quarterly basis, regarding any other disclosures of non-public portfolio holdings information that were permitted during the preceding quarter. In addition, the Board of Trustees is to approve at its meetings a list of Fund Representatives who are authorized to disclose portfolio holdings information under the policy. As of the date of this SAI only certain officers of the Trust as well as certain senior members of the compliance and legal groups of the Investment Adviser have been approved by the Board of Trustees to authorize disclosure of portfolio holdings information.
Miscellaneous
          The Fund will redeem shares solely in cash up to the lesser of $250,000 or 1% of the net asset value of the Fund during any 90-day period for any one shareholder. The Fund, however, reserves the right, in its sole discretion, to pay redemptions by a distribution in kind of securities (instead of cash) if (i) the redemption exceeds the lesser of $250,000 or 1% of the net asset value of the Fund at the time of redemption; or (ii) with respect to lesser redemption amounts, the redeeming shareholder requests in writing a distribution in-kind of securities instead of cash. The securities distributed in kind would be valued for this purpose using the same method employed in calculating the Fund’s net asset value per share. See “NET ASSET VALUE.” If a shareholder receives redemption proceeds in kind, the shareholder should expect to incur transaction costs upon the disposition of the securities received in the redemption.
          The right of a shareholder to redeem shares and the date of payment by the Fund may be suspended for more than seven days for any period during which the New York Stock Exchange is closed, other than the customary weekends or holidays, or when trading on such Exchange is restricted as determined by the SEC; or during any emergency, as determined by the SEC, as a result of which it is not reasonably practicable for the Fund to dispose of securities owned by it or fairly to determine the value of its net assets; or for such other period as the SEC may by order permit for the protection of shareholders of the Fund. (The Trust may also suspend or postpone the recordation of the transfer of shares upon the occurrence of any of the foregoing conditions.)
          As stated in the Proxy Statement/Prospectus, the Trust may authorize Authorized Institutions and Authorized Dealers that provide recordkeeping, reporting and processing services to their customers to accept on the Trust’s behalf purchase, redemption and exchange orders placed by or on behalf of their customers and, if approved by the Trust, to designate other intermediaries to accept such orders. These institutions may receive payments from the Trust or Goldman Sachs for their services. Certain Authorized Institutions or Authorized Dealers may enter into sub-transfer agency agreements with the Trust or Goldman Sachs with respect to their services.
          In the interest of economy and convenience, the Trust does not issue certificates representing the Fund’s shares. Instead, the Transfer Agent maintains a record of each shareholder’s ownership. Each shareholder receives confirmation of purchase and redemption orders from the Transfer Agent. Fund shares and any dividends and distributions paid by the Fund are reflected in account statements from the Transfer Agent.
Line of Credit
          The Fund intends to participate in a $580,000,000 committed, unsecured revolving line of credit facility together with other funds of the Trust and registered investment companies having management or investment advisory agreements with GSAM or its affiliates. Pursuant to the terms of this facility, the Fund and other borrowers may increase the credit amount by an additional $340,000,000, for a total of up to $920,000,000. This facility is to be used for temporary emergency purposes or to allow for an orderly liquidation of securities to meet redemption

89

 

requests. The interest rate on borrowings is based on the federal funds rate. The facility also requires a fee to be paid by the Fund based on the amount of the commitment that has not been utilized. Since the Fund is newly-organized, it did not have any borrowings under the facility during the most recent fiscal year.
Large Trade Notifications
          The Transfer Agent may from time to time receive notice that an Authorized Dealer or other financial intermediary has received an order for a large trade in the Fund’s shares. The Fund may determine to enter into portfolio transactions in anticipation of that order, even though the order will not be processed until the following business day. This practice provides for a closer correlation between the time shareholders place trade orders and the time the Fund enters into portfolio transactions based on those orders, and permits the Fund to be more fully invested in investment securities, in the case of purchase orders, and to more orderly liquidate its investment positions, in the case of redemption orders. On the other hand, the Authorized Dealer or other financial intermediary may not ultimately process the order. In this case, the Fund may be required to borrow assets to settle the portfolio transactions entered into in anticipation of that order, and would therefore incur borrowing costs. The Fund may also suffer investment losses on those portfolio transactions. Conversely, the Fund would benefit from any earnings and investment gains resulting from such portfolio transactions.
Corporate Actions
          From time to time, the issuer of a security held in the Fund’s portfolio may initiate a corporate action relating to that security. Corporate actions relating to equity securities may include, among others, an offer to purchase new shares, or to tender existing shares, of that security at a certain price. Corporate actions relating to debt securities may include, among others, an offer for early redemption of the debt security, or an offer to convert the debt security into stock. Certain corporate actions are voluntary, meaning that the Fund may only participate in the corporate action if it elects to do so in a timely fashion. Participation in certain corporate actions may enhance the value of the Fund’s investment portfolio. In cases where the Fund or its Investment Adviser receives sufficient advance notice of a voluntary corporate action, the Investment Adviser will exercise its discretion, in good faith, to determine whether the Fund will participate in that corporate action. If the Fund or its Investment Adviser does not receive sufficient advance notice of a voluntary corporate action, the Fund may not be able to timely elect to participate in that corporate action. Participation or lack of participation in a voluntary corporate action may result in a negative impact on the value of the Fund’s investment portfolio.
DISTRIBUTION AND SERVICE PLANS
(Class A Shares only)
          Distribution and Service Plan. As described in the Proxy Statement/Prospectus, the Trust has adopted, on behalf of Class A Shares of the Fund, a Distribution and Service Plan (the “Plan”). See “Shareholder Guide — Distribution and Service Fees” in the Proxy Statement/Prospectus. The distribution fees payable under the Plan are subject to Rule 12b-1 under the Act, and finance distribution and other services that are provided to investors in the Fund, and enable the Fund to offer investors the choice of investing in Class A Shares when investing in the Fund. In addition, distribution fees payable under the Plan may be used to assist the Fund in reaching and maintaining asset levels that are efficient for the Fund’s operations and investments.
          The Plan for Class A Shares of the Fund was most recently approved by a majority vote of the Trustees of the Trust, including a majority of the non-interested Trustees of the Trust who have no direct or indirect financial interest in the Plan, cast in person at a meeting called for the purpose of approving the Plan on October 20, 2011.
          The compensation for distribution services payable under the Plan to Goldman Sachs may not exceed 0.25% per annum of the Fund’s average daily net assets attributable to Class A Shares of the Fund. With respect to Class A Shares, the distributor at its discretion may use compensation for distribution services paid under the Plan for personal and account maintenance services and

90

 

expenses so long as such total compensation under the Plan does not exceed the maximum cap on “service fees” imposed by FINRA.
          The Plan is a compensation plan which provides for the payment of a specified fee without regard to the expenses actually incurred by Goldman Sachs. If such fee exceeds Goldman Sachs’ expenses, Goldman Sachs may realize a profit from these arrangements. The distribution fees received by Goldman Sachs under the Plan (and, as applicable, CDSC) on Class A Shares may be sold by Goldman Sachs as distributor to entities which provide financing for payments to Authorized Dealers in respect of sales of Class A Shares. To the extent such fees are not paid to such dealers, Goldman Sachs may retain such fees as compensation for its services and expenses of distributing the Fund’s Class A Shares.
          Under the Plan, Goldman Sachs, as distributor of the Fund’s Class A Shares, will provide to the Trustees of the Trust for their review, and the Trustees of the Trust will review at least quarterly, a written report of the services provided and amounts expended by Goldman Sachs under the Plan and the purposes for which such services were performed and expenditures were made.
          The Plan will remain in effect until June 30, 2012 and from year to year thereafter, provided that such continuance is approved annually by a majority vote of the Trustees of the Trust, including a majority of the non-interested Trustees of the Trust who have no direct or indirect financial interest in the Plan. The Plan may not be amended to increase materially the amount of distribution compensation described therein without approval of a majority of the outstanding shares of the affected share class, but may be amended without shareholder approval to increase materially the amount of non-distribution compensation. All material amendments of the Plan must also be approved by the Trustees of the Trust in the manner described above. The Plan may be terminated at any time as to the Fund without payment of any penalty by a vote of a majority of the non-interested Trustees of the Trust or by vote of a majority of the shares of the affected share class. If the Plan was terminated by the Trustees of the Trust and no successor plan was adopted, the Fund would cease to make payments to Goldman Sachs under the Plan and Goldman Sachs would be unable to recover the amount of any of its unreimbursed expenditures. So long as the Plan is in effect, the selection and nomination of non-interested Trustees of the Trust will be committed to the discretion of the non-interested Trustees of the Trust. The Trustees of the Trust have determined that in their judgment there is a reasonable likelihood that the Plan will benefit the Fund and its Class A Shareholders.
          Since the Fund is newly-organized, no distribution or service fees were paid by the Fund during the last three fiscal years.
          Since the fund is newly-organized, no expenses were incurred by Goldman Sachs during the last fiscal year in connection with distribution under the Class A Plan of the Fund.
OTHER INFORMATION REGARDING MAXIMUM SALES CHARGE, PURCHASES,
REDEMPTIONS, EXCHANGES AND DIVIDENDS
(Class A Shares Only)
          The following information supplements the information in the Proxy Statement/Prospectus under the captions “Shareholder Guide” and “Dividends.” Please see the Proxy Statement/Prospectus for more complete information.
Maximum Sales Charges
          Class A Shares of the Fund are sold with a maximum sales charge of 5.5%. Set forth below is an example of the method of computing the offering price of the Fund’s Class A Shares based on the net asset value of a share of the Fund’s predecessor as of September 30, 2011:

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                    Offering
    Net Asset   Maximum   Price to
    Value   Sales Charge   Public
Class A
   $ 12.82       5.5 %   $ 13.57  
          The actual sales charge that is paid by an investor on the purchase of Class A Shares may differ slightly from the sales charge listed above or in the Fund’s Proxy Statement/Prospectus due to rounding in the calculations. For example, the sales load disclosed above and in the Fund’s Proxy Statement/Prospectus is only shown to one decimal place (i.e., 5.5%). The actual sales charge that is paid by an investor will be rounded to two decimal places. As a result of such rounding in the calculations, the actual sales load paid by an investor may be somewhat greater (e.g., 5.53%) or somewhat lesser (e.g., 5.48%) than that listed above or in the Proxy Statement/Prospectus. Contact your financial advisor for further information.
Other Purchase Information/Sales Charge Waivers
          Class A Shares of the Fund may be sold at NAV without payment of any sales charge to state-sponsored 529 college savings plans. The sales charge waivers on the Fund’s shares are due to the nature of the investors involved and/or the reduced sales effort that is needed to obtain such investments.
          At the discretion of the Trust’s officers and in addition to the NAV purchases permitted in the Fund’s Prospectus, Class A Shares of the Fund may also be sold at NAV without payment of any sales charge for shares purchased through certain Section 401(k), profit sharing, money purchase pension, tax-sheltered annuity, defined benefit pension, or other employee benefit (including health savings accounts) or SIMPLE plans that are sponsored by one or more employers (including governmental or church employers) or employee organizations investing in the Fund.
          If shares of the Fund are held in an account with an Authorized Dealer, all recordkeeping, transaction processing and payments of distributions relating to the beneficial owner’s account will be performed by the Authorized Dealer, and not by the Fund and its Transfer Agent. Since the Fund will have no record of the beneficial owner’s transactions, a beneficial owner should contact the Authorized Dealer to purchase, redeem or exchange shares, to make changes in or give instructions concerning the account or to obtain information about the account. The transfer of shares in an account with an Authorized Institution to an account with another dealer or to an account directly with the Fund involves special procedures and will require the beneficial owner to obtain historical purchase information about the shares in the account from the Authorized Dealer.
Right of Accumulation (Class A)
          A Class A shareholder qualifies for cumulative quantity discounts if the current purchase price of the new investment plus the shareholder’s holdings of Class A or Class C Shares (acquired by purchase or exchange) of the Fund and Class A, Class B and/or Class C Shares of any other Goldman Sachs Fund total the requisite amount for receiving a discount. For example, if a shareholder owns shares with a current market value of $65,000 and purchases additional Class A Shares of any Goldman Sachs Fund with a purchase price of $45,000, the sales charge for the $45,000 purchase would be 3.75% (the rate applicable to a single purchase of $100,000 but less than $250,000). Class A and/or Class C Shares of the Fund and Class A, Class B and/or Class C Shares of any other Goldman Sachs Fund purchased (i) by an individual, his spouse, his parents and his children, and (ii) by a trustee, guardian or other fiduciary of a single trust estate or a single fiduciary account, will be combined for the purpose of determining whether a purchase will qualify for such right of accumulation and, if qualifying, the applicable sales charge level. For purposes of applying the right of accumulation, shares of the Fund and any other Goldman Sachs Fund purchased by an existing client of Goldman Sachs Wealth Management or GS Ayco Holding LLC will be combined with Class A, Class B and/or Class C Shares and other assets held by all other Goldman Sachs Wealth Management accounts or accounts of GS Ayco Holding LLC, respectively. In addition, Class A and/or Class C Shares of the Fund and Class A, Class B and/or Class C Shares of any other Goldman Sachs Fund purchased by partners, directors, officers or employees of the same business organization, groups of individuals represented by and investing on the recommendation of the same accounting firm, certain affinity groups or other similar organizations (collectively, “eligible persons”) may be combined for the purpose of determining whether a purchase will qualify for the right of accumulation and, if qualifying, the applicable sales charge level. This right of accumulation is subject to the following conditions: (i) the business organization’s, group’s or firm’s agreement to cooperate in the offering of the Fund’s shares to eligible persons; and (ii) notification to the Fund at the time of

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purchase that the investor is eligible for this right of accumulation. In addition, in connection with SIMPLE IRA accounts, cumulative quantity discounts are available on a per plan basis if (i) your employee has been assigned a cumulative discount number by Goldman Sachs; and (ii) your account, alone or in combination with the accounts of other plan participants also invested in Class A, Class B and/or Class C Shares of the Goldman Sachs Funds, totals the requisite aggregate amount as described in the Prospectus.
Statement of Intention (Class A)
          If a shareholder anticipates purchasing at least $50,000 of Class A Shares of the Fund alone or in combination with Class A Shares of any other Goldman Sachs Fund within a 13-month period, the shareholder may purchase shares of the Fund at a reduced sales charge by submitting a Statement of Intention (the “Statement”). Shares purchased pursuant to a Statement will be eligible for the same sales charge discount that would have been available if all of the purchases had been made at the same time. The shareholder or his Authorized Dealer must inform Goldman Sachs that the Statement is in effect each time shares are purchased. There is no obligation to purchase the full amount of shares indicated in the Statement. A shareholder may include the value of all Class A Shares on which a sales charge has previously been paid as an “accumulation credit” toward the completion of the Statement, but a price readjustment will be made only on Class A Shares purchased within ninety (90) days before submitting the Statement. The Statement authorizes the Transfer Agent to hold in escrow a sufficient number of shares which can be redeemed to make up any difference in the sales charge on the amount actually invested. For purposes of satisfying the amount specified on the Statement, the gross amount of each investment, exclusive of any appreciation on shares previously purchased, will be taken into account.
          The provisions applicable to the Statement, and the terms of the related escrow agreement, are set forth in Appendix C to this SAI.
Cross-Reinvestment of Dividends and Distributions
          Shareholders may receive dividends and distributions in additional shares of the same class of the Fund or they may elect to receive them in cash or shares of the same class of other mutual funds sponsored by Goldman Sachs (the “Goldman Sachs Funds”), or Service Shares of the Goldman Sachs Financial Square Prime Obligations Fund (“Prime Obligations Fund”), if they hold Class A Shares of a Fund, or Class C Shares of the Prime Obligations Fund, if they hold Class C Shares of a Fund.
          The Fund shareholder should obtain and read the prospectus relating to the other Goldman Sachs Fund or Prime Obligations Fund and its shares and consider its investment objective, policies and applicable fees before electing cross-reinvestment into that Fund. The election to cross-reinvest dividends and capital gain distributions will not affect the tax treatment of such dividends and distributions, which will be treated as received by the shareholder and then used to purchase shares of the acquired fund. Such reinvestment of dividends and distributions in shares of other Goldman Sachs Funds or Prime Obligations Fund is available only in states where such reinvestment may legally be made.
Automatic Exchange Program
          The Fund shareholder may elect to exchange automatically a specified dollar amount of shares of the Fund for shares of the same class or an equivalent class of another Goldman Sachs Fund provided the minimum initial investment requirement has been satisfied. The Fund shareholder should obtain and read the prospectus relating to any other Goldman Sachs Fund and its shares and consider its investment objective, policies and applicable fees and expenses before electing an automatic exchange into that Goldman Sachs Fund.

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Exchanges from Collective Investment Trusts to Goldman Sachs Funds
          The Investment Adviser manages a number of collective investment trusts that hold assets of 401(k) plans and other retirement plans (each, a “Collective Investment Trust”). An investor in a Collective Investment Trust (or an Intermediary acting on behalf of the investor) may elect to exchange some or all of the interests it holds in a Collective Investment Trust for shares of one or more of the Goldman Sachs Funds. Generally speaking, Rule 22c-1 under the Act requires a purchase order for shares of a Goldman Sachs Fund to be priced based on the current NAV of the Goldman Sachs Fund that is next calculated after receipt of the purchase order. A Goldman Sachs Fund will treat a purchase order component of an exchange from an investor in a Collective Investment Trust as being received in good order at the time it is communicated to an Intermediary or the Transfer Agent, if the amount of shares to be purchased is expressed as a percentage of the value of the investor’s interest in a designated Collective Investment Trust that it is contemporaneously redeeming (e.g., if the investor communicates a desire to exchange 100% of its interest in a Collective Investment Trust for shares of a Goldman Sachs Fund). The investor’s purchase price and the number of Goldman Sachs Fund shares it will acquire will therefore be calculated as of the pricing of the Collective Investment Trust on the day of the purchase order. Such an order will be deemed to be irrevocable as of the time the Goldman Sachs Fund’s NAV is next calculated after receipt of the purchase order. An investor should obtain and read the prospectus relating to any Goldman Sachs Fund and its shares and consider its investment objective, policies and applicable fees and expenses before electing an exchange into that Goldman Sachs Fund. For federal income tax purposes, an exchange of interests in a Collective Investment Trust for shares of a Goldman Sachs Fund may be subject to tax, and you should consult your tax adviser concerning the tax consequences of an exchange.
Systematic Withdrawal Plan
          A systematic withdrawal plan (the “Systematic Withdrawal Plan”) is available to shareholders of the Fund whose shares are worth at least $5,000. The Systematic Withdrawal Plan provides for monthly payments to the participating shareholder of any amount not less than $50.
          Dividends and capital gain distributions on shares held under the Systematic Withdrawal Plan are reinvested in additional full and fractional shares of the Fund at net asset value. The Transfer Agent acts as agent for the shareholder in redeeming sufficient full and fractional shares to provide the amount of the systematic withdrawal payment. The Systematic Withdrawal Plan may be terminated at any time. Goldman Sachs reserves the right to initiate a fee of up to $5 per withdrawal, upon thirty (30) days’ written notice to the shareholder. Withdrawal payments should not be considered to be dividends, yield or income. If periodic withdrawals continuously exceed new purchases and reinvested dividends and capital gains distributions, the shareholder’s original investment will be correspondingly reduced and ultimately exhausted. The maintenance of a withdrawal plan concurrently with purchases of additional Class A Shares would be disadvantageous because of the sales charge imposed on purchases of Class A Shares or the imposition of a CDSC on redemptions of Class A Shares. The CDSC applicable to Class A Shares redeemed under a systematic withdrawal plan may be waived. See “Shareholder Guide” in the Proxy Statement/Prospectus. In addition, each withdrawal constitutes a redemption of shares, and any gain or loss realized must be reported for federal and state income tax purposes. A shareholder should consult his or her own tax adviser with regard to the tax consequences of participating in the Systematic Withdrawal Plan. For further information or to request a Systematic Withdrawal Plan, please write or call the Transfer Agent.

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APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
Short-Term Credit Ratings
          A Standard & Poor’s short-term issue credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation having an original maturity of no more than 365 days. The following summarizes the rating categories used by Standard & Poor’s for short-term issues:
          “A-1” —A short-term obligation rated “A-1” is rated in the highest category by Standard & Poor’s. The obligor’s capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor’s capacity to meet its financial commitment on these obligations is extremely strong.
          “A-2” — short-term obligation rated “A-2” is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor’s capacity to meet its financial commitment on the obligation is satisfactory.
          “A-3” — A short-term obligation rated “A-3” exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
          “B” — A short-term obligation rated “B” is regarded as having significant speculative characteristics. Ratings of “B-1”, “B-2”, and “B-3” may be assigned to indicate finer distinctions within the “B” category. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.
          “B-1” — A short-term obligation rated “B-1” is regarded as having significant speculative characteristics, but the obligor has a relatively stronger capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors.
          “B-2” — A short-term obligation rated “B-2” is regarded as having significant speculative characteristics, and the obligor has an average speculative-grade capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors.
          “B-3” — A short-term obligation rated “B-3” is regarded as having significant speculative characteristics, and the obligor has a relatively weaker capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors.
          “C” — A short-term obligation rated “C” is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
          “D” — A short-term obligation rated “D” is in payment default. The “D” rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor’s believes that such payments will be made during such grace period. The “D” rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.
          Local Currency and Foreign Currency Risks — Country risk considerations are a standard part of Standard & Poor’s analysis for credit ratings on any issuer or issue. Currency of repayment is a key factor in this analysis. An obligor’s capacity to repay foreign currency obligations may be lower than its capacity to repay obligations in its local currency due to the sovereign government’s own relatively lower capacity to repay external versus domestic debt. These sovereign risk considerations are incorporated in the debt ratings assigned to specific issues. Foreign

A-1

 

Currency issuer ratings are also distinguished from local currency issuer ratings to identify those instances where sovereign risks make them different for the same issuer.
          Moody’s Investors Service (“Moody’s”) short-term ratings are opinions of the ability of issuers to honor short-term financial obligations. Ratings may be assigned to issuers, short-term programs or to individual short-term debt instruments. Such obligations generally have an original maturity not exceeding thirteen months, unless explicitly noted.
          Moody’s employs the following designations to indicate the relative repayment ability of rated issuers:
          “P-1” — Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.
          “P-2” — Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.
          “P-3” — Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations.
          “NP” — Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.
          Fitch, Inc. / Fitch Ratings Ltd. (“Fitch”) short-term ratings scale applies to foreign currency and local currency ratings. A short-term rating has a time horizon of less than 13 months for most obligations, or up to three years for U.S. public finance, in line with industry standards, to reflect unique risk characteristics of bond, tax, and revenue anticipation notes that are commonly issued with terms up to three years. Short-term ratings thus place greater emphasis on the liquidity necessary to meet financial commitments in a timely manner. The following summarizes the rating categories used by Fitch for short-term obligations:
          “F1” — Securities possess the highest credit quality. This designation indicates the strongest capacity for timely payment of financial commitments; may have an added “+” to denote any exceptionally strong credit feature.
          “F2” — Securities possess good credit quality. This designation indicates a satisfactory capacity for timely payment of financial commitments, but the margin of safety is not as great as in the case of the higher ratings.
          “F3” — Securities possess fair credit quality. This designation indicates that the capacity for timely payment of financial commitments is adequate; however, near term adverse changes could result in a reduction to non investment grade.
          “B” — Securities possess speculative credit quality. This designation indicates minimal capacity for timely payment of financial commitments, plus vulnerability to near term adverse changes in financial and economic conditions.
          “C” — Securities possess high default risk. Default is a real possibility. This designation indicates a capacity for meeting financial commitments which is solely reliant upon a sustained, favorable business and economic environment.
          “D” — Indicates an entity or sovereign that has defaulted on all of its financial obligations.
          “NR” — This designation indicates that Fitch does not publicly rate the associated issuer or issue.
          “WD” — This designation indicates that the rating has been withdrawn and is no longer maintained by Fitch.
          The following summarizes the ratings used by Dominion Bond Rating Service Limited (“DBRS”) for commercial paper and short-term debt:

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          “R-1 (high)” — Short-term debt rated “R-1 (high)” is of the highest credit quality, and indicates an entity possessing unquestioned ability to repay current liabilities as they fall due. Entities rated in this category normally maintain strong liquidity positions, conservative debt levels, and profitability that is both stable and above average. Companies achieving an “R-1 (high)” rating are normally leaders in structurally sound industry segments with proven track records, sustainable positive future results, and no substantial qualifying negative factors. Given the extremely tough definition DBRS has established for an “R-1 (high)”, few entities are strong enough to achieve this rating.
          “R-1 (middle)” — Short-term debt rated “R-1 (middle)” is of superior credit quality and, in most cases, ratings in this category differ from “R-1 (high)” credits by only a small degree. Given the extremely tough definition DBRS has established for the “R-1 (high)” category, entities rated “R-1 (middle)” are also considered strong credits, and typically exemplify above average strength in key areas of consideration for the timely repayment of short-term liabilities.
          “R-1 (low)” — Short-term debt rated “R-1 (low)” is of satisfactory credit quality. The overall strength and outlook for key liquidity, debt and profitability ratios are not normally as favorable as with higher rating categories, but these considerations are still respectable. Any qualifying negative factors that exist are considered manageable, and the entity is normally of sufficient size to have some influence in its industry.
          “R-2 (high)” — Short-term debt rated “R-2 (high)” is considered to be at the upper end of adequate credit quality. The ability to repay obligations as they mature remains acceptable, although the overall strength and outlook for key liquidity, debt, and profitability ratios is not as strong as credits rated in the “R-1 (low)” category. Relative to the latter category, other shortcomings often include areas such as stability, financial flexibility, and the relative size and market position of the entity within its industry.
          “R-2 (middle)” — Short-term debt rated “R-2 (middle)” is considered to be of adequate credit quality. Relative to the “R-2 (high)” category, entities rated “R-2 (middle)” typically have some combination of higher volatility, weaker debt or liquidity positions, lower future cash flow capabilities, or are negatively impacted by a weaker industry. Ratings in this category would be more vulnerable to adverse changes in financial and economic conditions.
          “R-2 (low)” — Short-term debt rated “R-2 (low)” is considered to be at the lower end of adequate credit quality, typically having some combination of challenges that are not acceptable for an “R-2 (middle)” credit. However, “R-2 (low)” ratings still display a level of credit strength that allows for a higher rating than the “R-3” category, with this distinction often reflecting the issuer’s liquidity profile.
          “R-3” — Short-term debt rated “R-3” is considered to be at the lowest end of adequate credit quality, one step up from being speculative. While not yet defined as speculative, the “R-3” category signifies that although repayment is still expected, the certainty of repayment could be impacted by a variety of possible adverse developments, many of which would be outside the issuer’s control. Entities in this area often have limited access to capital markets and may also have limitations in securing alternative sources of liquidity, particularly during periods of weak economic conditions.
          “R-4” — Short-term debt rated “R-4” is speculative. “R-4” credits tend to have weak liquidity and debt ratios, and the future trend of these ratios is also unclear. Due to its speculative nature, companies with “R-4” ratings would normally have very limited access to alternative sources of liquidity. Earnings and cash flow would typically be very unstable, and the level of overall profitability of the entity is also likely to be low. The industry environment may be weak, and strong negative qualifying factors are also likely to be present.
          “R-5” — Short-tern debt rated “R-5” is highly speculative. There is a reasonably high level of uncertainty as to the ability of the entity to repay the obligations on a continuing basis in the future, especially in periods of economic recession or industry adversity. In some cases, short term debt rated “R-5” may have challenges that if not corrected, could lead to default.

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          “D” — A security rated “D” implies the issuer has either not met a scheduled payment or the issuer has made it clear that it will be missing such a payment in the near future. In some cases, DBRS may not assign a “D” rating under a bankruptcy announcement scenario, as allowances for grace periods may exist in the underlying legal documentation. Once assigned, the “D” rating will continue as long as the missed payment continues to be in arrears, and until such time as the rating is discontinued or reinstated by DBRS.
Long-Term Credit Ratings
          The following summarizes the ratings used by Standard & Poor’s for long-term issues:
          “AAA” — An obligation rated “AAA” has the highest rating assigned by Standard & Poor’s. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.
          “AA” — An obligation rated “AA” differs from the highest-rated obligations only to a small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong.
          “A” — An obligation rated “A” is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong.
          “BBB” — An obligation rated “BBB” exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
          Obligations rated “BB,” “B,” “CCC,” “CC” and “C” are regarded as having significant speculative characteristics. “BB” indicates the least degree of speculation and “C” the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
          “BB” — An obligation rated “BB” is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.
          “B” — An obligation rated “B” is more vulnerable to nonpayment than obligations rated “BB,” but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation.
          “CCC” — An obligation rated “CCC” is currently vulnerable to nonpayment, and is dependent upon favorable business, financial and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.
          “CC” — An obligation rated “CC” is currently highly vulnerable to nonpayment.
          “C” — A “C” rating is assigned to obligations that are currently highly vulnerable to nonpayment, obligations that have payment arrearages allowed by the terms of the documents, or obligations of an issuer that is the subject of a bankruptcy petition or similar action which have not experienced a payment default. Among others, the ‘C’ rating may be assigned to subordinated debt, preferred stock or other obligations on which cash payments have been suspended in accordance with the instrument’s terms.
          “D” — An obligation rated “D” is in payment default. The “D” rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor’s believes that such payments will be made during such grace period. The “D” rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

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          Plus (+) or minus (-)— The ratings from “AA” to “CCC” may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.
          “NR” — This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that Standard & Poor’s does not rate a particular obligation as a matter of policy.
          Local Currency and Foreign Currency Risks — Country risk considerations are a standard part of Standard & Poor’s analysis for credit ratings on any issuer or issue. Currency of repayment is a key factor in this analysis. An obligor’s capacity to repay foreign currency obligations may be lower than its capacity to repay obligations in its local currency due to the sovereign government’s own relatively lower capacity to repay external versus domestic debt. These sovereign risk considerations are incorporated in the debt ratings assigned to specific issues. Foreign currency issuer ratings are also distinguished from local currency issuer ratings to identify those instances where sovereign risks make them different for the same issuer.
          The following summarizes the ratings used by Moody’s for long-term debt:
          “Aaa” — Obligations rated “Aaa” are judged to be of the highest quality, with minimal credit risk.
          “Aa” — Obligations rated “Aa” are judged to be of high quality and are subject to very low credit risk.
          “A” — Obligations rated “A” are considered upper-medium grade and are subject to low credit risk.
          “Baa” — Obligations rated “Baa” are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics.
          “Ba” — Obligations rated “Ba” are judged to have speculative elements and are subject to substantial credit risk.
          “B” — Obligations rated “B” are considered speculative and are subject to high credit risk.
          “Caa” — Obligations rated “Caa” are judged to be of poor standing and are subject to very high credit risk.
          “Ca” — Obligations rated “Ca” are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
          “C” — Obligations rated “C” are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest.
          Note: Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classification from “Aa” through “Caa.” The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.
          The following summarizes long-term ratings used by Fitch:
          “AAA” — Securities considered to be of the highest credit quality. “AAA” ratings denote the lowest expectation of credit risk. They are assigned only in case of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.
          “AA” — Securities considered to be of very high credit quality. “AA” ratings denote expectations of very low credit risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.
          “A” — Securities considered to be of high credit quality. “A” ratings denote expectations of low credit risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings.

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          “BBB” — Securities considered to be of good credit quality. “BBB” ratings indicate that there is currently expectations of low credit risk. The capacity for payment of financial commitments is considered adequate but adverse changes in circumstances and economic conditions are more likely to impair this capacity. This is the lowest investment grade category.
          “BB” — Securities considered to be speculative. “BB” ratings indicate that there is a possibility of credit risk developing, particularly as the result of adverse economic change over time; however, business or financial alternatives may be available to allow financial commitments to be met. Securities rated in this category are not investment grade.
          “B” — Securities considered to be highly speculative. For issuers and performing obligations, “B” ratings indicate that significant credit risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is contingent upon a sustained, favorable business and economic environment. For individual obligations, may indicate distressed or defaulted obligations with potential for extremely high recoveries. Such obligations would possess a Recovery Rating of “RR1” (outstanding).
          “CCC” — For issuers and performing obligations, default is a real possibility. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic conditions. For individual obligations, may indicate distressed or defaulted obligations with potential for average to superior levels of recovery. Differences in credit quality may be denoted by plus/minus distinctions. Such obligations typically would possess a Recovery Rating of “RR2” (superior), or “RR3” (good) or “RR4” (average).
          “CC” — For issuers and performing obligations, default of some kind appears probable. For individual obligations, may indicate distressed or defaulted obligations with a Recovery Rating of “RR4” (average) or “RR5” (below average).
          “C” — For issuers and performing obligations, default is imminent. For individual obligations, may indicate distressed or defaulted obligations with potential for below-average to poor recoveries. Such obligations would possess a Recovery Rating of “RR6” (poor).
          “RD” — Indicates an entity that has failed to make due payments (within the applicable grace period) on some but not all material financial obligations, but continues to honor other classes of obligations.
          “D” — Indicates an entity or sovereign that has defaulted on all of its financial obligations.
          Plus (+) or minus (-) may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the “AAA” category or to categories below “CCC”.
          “NR” — Denotes that Fitch does not publicly rate the associated issue or issuer.
          “WD” — Indicates that the rating has been withdrawn and is no longer maintained by Fitch.
          The following summarizes the ratings used by DBRS for long-term debt:
          “AAA” — Long-term debt rated “AAA” is of the highest credit quality, with exceptionally strong protection for the timely repayment of principal and interest. Earnings are considered stable, the structure of the industry in which the entity operates is strong, and the outlook for future profitability is favorable. There are few qualifying factors present that would detract from the performance of the entity. The strength of liquidity and coverage ratios is unquestioned and the entity has established a credible track record of superior performance. Given the extremely high standard that DBRS has set for this category, few entities are able to achieve a “AAA” rating.
          “AA” — Long-term debt rated “AA” is of superior credit quality, and protection of interest and principal is considered high. In many cases they differ from long-term debt rated “AAA” only to a small degree. Given the extremely restrictive definition DBRS has for the “AAA” category, entities rated “AA” are also considered to be

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strong credits, typically exemplifying above-average strength in key areas of consideration and unlikely to be significantly affected by reasonably foreseeable events.
          “A” — Long-term debt rated “A” is of satisfactory credit quality. Protection of interest and principal is still substantial, but the degree of strength is less than that of “AA” rated entities. While “A” is a respectable rating, entities in this category are considered to be more susceptible to adverse economic conditions and have greater cyclical tendencies than higher-rated securities.
          “BBB” — Long-term debt rated “BBB” is of adequate credit quality. Protection of interest and principal is considered acceptable, but the entity is fairly susceptible to adverse changes in financial and economic conditions, or there may be other adverse conditions present which reduce the strength of the entity and its rated securities.
          “BB” — Long-term debt rated “BB” is defined to be speculative and non-investment grade, where the degree of protection afforded interest and principal is uncertain, particularly during periods of economic recession. Entities in the “BB” range typically have limited access to capital markets and additional liquidity support. In many cases, deficiencies in critical mass, diversification, and competitive strength are additional negative considerations.
          “B” — Long-term debt rated “B” is considered highly speculative and there is a reasonably high level of uncertainty as to the ability of the entity to pay interest and principal on a continuing basis in the future, especially in periods of economic recession or industry adversity.
          “CCC”, CC” and “C” — Long-term debt rated in any of these categories is very highly speculative and is in danger of default of interest and principal. The degree of adverse elements present is more severe than long-term debt rated “B.” Long-term debt rated below “B” often have features which, if not remedied, may lead to default. In practice, there is little difference between these three categories, with “CC” and “C” normally used for lower ranking debt of companies for which the senior debt is rated in the “CCC” to “B” range.
          “D” — A security rated “D” implies the issuer has either not met a scheduled payment of interest or principal or that the issuer has made it clear that it will miss such a payment in the near future. In some cases, DBRS may not assign a “D” rating under a bankruptcy announcement scenario, as allowances for grace periods may exist in the underlying legal documentation. Once assigned, the “D” rating will continue as long as the missed payment continues to be in arrears, and until such time as the rating is discontinued or reinstated by DBRS.
          (“high”, “low”) — Each rating category is denoted by the subcategories “high” and “low”. The absence of either a “high” or “low” designation indicates the rating is in the “middle” of the category. The “AAA” and “D” categories do not utilize “high”, “middle”, and “low” as differential grades.
Municipal Note Ratings
          A Standard & Poor’s U.S. municipal note rating reflects the liquidity factors and market access risks unique to notes. Notes due in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. The following criteria will be used in making that assessment:
  •   Amortization schedule-the larger the final maturity relative to other maturities, the more likely it will be treated as a note; and
 
  •   Source of payment-the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note.
          Note rating symbols are as follows:
          “SP-1” — The issuers of these municipal notes exhibit a strong capacity to pay principal and interest. Those issues determined to possess a very strong capacity to pay debt service are given a plus (+) designation.
          “SP-2” — The issuers of these municipal notes exhibit a satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.

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          “SP-3” — The issuers of these municipal notes exhibit speculative capacity to pay principal and interest.
          Moody’s uses three rating categories for short-term municipal obligations that are considered investment grade. These ratings are designated as Municipal Investment Grade (“MIG”) and are divided into three levels — “MIG-1” through “MIG-3”. In addition, those short-term obligations that are of speculative quality are designated “SG”, or speculative grade. MIG ratings expire at the maturity of the obligation. The following summarizes the ratings used by Moody’s for these short-term obligations:
          “MIG-1” — This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing.
          “MIG-2” — This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group.
          “MIG-3” — This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established.
          “SG” — This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.
          In the case of variable rate demand obligations (“VRDOs”), a two-component rating is assigned; a long- or short-term debt rating and a demand obligation rating. The first element represents Moody’s evaluation of the degree of risk associated with scheduled principal and interest payments. The second element represents Moody’s evaluation of the degree of risk associated with the ability to receive purchase price upon demand (“demand feature”), using a variation of the MIG rating scale, the Variable Municipal Investment Grade or “VMIG” rating.
          When either the long- or short-term aspect of a VRDO is not rated, that piece is designated “NR”, e.g., “Aaa/NR” or “NR/VMIG-1”.
          VMIG rating expirations are a function of each issue’s specific structural or credit features.
          “VMIG-1” — This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.
          “VMIG-2” — This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.
          “VMIG-3” — This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.
          “SG” — This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have an investment grade short-term rating or may lack the structural and/or legal protections necessary to ensure the timely payment of purchase price upon demand.
          Fitch uses the same ratings for municipal securities as described above for other short-term credit ratings.
          About Credit Ratings
          A Standard & Poor’s issue credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration the

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creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The issue credit rating is not a recommendation to purchase, sell, or hold a financial obligation, inasmuch as it does not comment as to market price or suitability for a particular investor.
Moody’s credit ratings must be construed solely as statements of opinion and not as statements of fact or recommendations to purchase, sell or hold any securities.
Fitch’s credit ratings provide an opinion on the relative ability of an entity to meet financial commitments, such as interest, preferred dividends, repayment of principal, insurance claims or counterparty obligations. Fitch credit ratings are used by investors as indications of the likelihood of receiving their money back in accordance with the terms on which they invested. Fitch’s credit ratings cover the global spectrum of corporate, sovereign (including supranational and sub-national), financial, bank, insurance, municipal and other public finance entities and the securities or other obligations they issue, as well as structured finance securities backed by receivables or other financial assets.
DBRS credit ratings are not buy, hold or sell recommendations, but rather the result of qualitative and quantitative analysis focusing solely on the credit quality of the issuer and its underlying obligations.

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APPENDIX B
GSAM Proxy Voting Guidelines Summary
The following is a summary of the material GSAM Proxy Voting Guidelines (the “Guidelines”), which form the substantive basis of GSAM’s Policy on Proxy Voting for Client Accounts (“Policy”). As described in the main body of the Policy, one or more GSAM portfolio management teams may diverge from the Guidelines and a related Recommendation on any particular proxy vote or in connection with any individual investment decision in accordance with the override process described in the Policy.
         
US proxy items
        
1. Operational Items
  
2. Board of Directors
  
3. Executive and Director Compensation
  
4. Proxy Contests
  
5. Shareholder Rights and Defenses
  
6. Mergers and Corporate Restructurings
  
7. State of Incorporation
  
8. Capital Structure
  
9. Corporate Social Responsibility (CSR) Issues
  
 
        
International proxy items
        
1. Operational Items
  
2. Board of Directors
  
3. Compensation
  
4. Board Structure
  
5. Capital Structure
  
6. Other
  
7. Environmental, Climate Change and Social Issues
  
The following section is a summary of the Guidelines, which form the substantive basis of the Policy with respect to U.S. public equity investments.
1. Operational Items
Auditor Ratification
Vote FOR proposals to ratify auditors, unless any of the following apply within the last year:
  •   An auditor has a financial interest in or association with the company, and is therefore not independent;
 
  •   There is reason to believe that the independent auditor has rendered an opinion which is neither accurate nor indicative of the company’s financial position;
 
  •   Poor accounting practices are identified that rise to a serious level of concern, such as: fraud; misapplication of GAAP; or material weaknesses identified in Section 404 disclosures; or
 
  •   Fees for non-audit services are excessive.
Non-audit fees are excessive if:
  •   Non-audit fees exceed audit fees + audit-related fees + tax compliance/preparation fees.

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Vote CASE-BY-CASE on shareholder proposals asking companies to prohibit or limit their auditors from engaging in non-audit services taking into account issues that are consistent with SEC rules adopted to fulfill the mandate of Sarbanes Oxley such as an audit firm providing services that would impair its independence or the overall scope and disclosure of fees for all services done by the audit firm.
Vote CASE-BY-CASE on shareholder proposals asking for audit firm rotation, taking into account:
  •   The tenure of the audit firm;
 
  •   The length of rotation specified in the proposal;
 
  •   Any significant audit-related issues at the company;
 
  •   The number of Audit Committee meetings held each year;
 
  •   The number of financial experts serving on the committee;
 
  •   Whether the company has a periodic renewal process where the auditor is evaluated for both audit quality and competitive price; and
 
  •   Whether the auditors are being changed without explanation.
2. Board of Directors
Classification of Directors
Where applicable, the New York Stock Exchange or NASDAQ Listing Standards definition is to be used
to classify directors as insiders or affiliated outsiders. General definitions are as follows:
  •   Inside Director
  •   Employee of the company or one of its affiliates
 
  •   Among the five most highly paid individuals (excluding interim CEO)
 
  •   Listed as an officer as defined under Section 16 of the Securities and Exchange Act of 1934
 
  •   Current interim CEO
 
  •   Beneficial owner of more than 50 percent of the company’s voting power (this may be aggregated if voting power is distributed among more than one member of a defined group)
  •   Affiliated Outside Director
  •   Board attestation that an outside director is not independent
 
  •   Former CEO or other executive of the company within the last 3 years
 
  •   Former CEO or other executive of an acquired company within the past three years
  •   Independent Outside Director
  •   No material connection to the company other than a board seat
Additionally, GSAM will consider compensation committee interlocking directors to be affiliated (defined as CEOs who sit on each other’s compensation committees).
Voting on Director Nominees in Uncontested Elections
Vote on director nominees should be determined on a CASE-BY-CASE basis.
Vote AGAINST or WITHHOLD from individual directors who:
  •   Attend less than 75 percent of the board and committee meetings without a disclosed valid excuse for each of the last two years;
 
  •   Sit on more than six public company boards;
 
  •   Are CEOs of public companies who sit on the boards of more than two public companies besides their own—withhold only at their outside boards.
Other items considered for an AGAINST vote include specific concerns about the individual or the company, such as criminal

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wrongdoing or breach of fiduciary responsibilities, sanctions from government or authority, violations of laws and regulations, or other issues related to improper business practice.
In limited circumstances, we may vote AGAINST or WITHHOLD from all nominees of the board of directors (except from new nominees who should be considered on a CASE-BY-CASE basis and except as discussed below) if:
  •   The company’s poison pill has a dead-hand or modified dead-hand feature for two or more years. Vote against/withhold every year until this feature is removed; however, vote against the poison pill if there is one on the ballot with this feature rather than the director;
 
  •   The board adopts or renews a poison pill without shareholder approval, does not commit to putting it to shareholder vote within 12 months of adoption (or in the case of an newly public company, does not commit to put the pill to a shareholder vote within 12 months following the IPO), or reneges on a commitment to put the pill to a vote, and has not yet received a withhold/against recommendation for this issue;
 
  •   The board failed to act on takeover offers where the majority of the shareholders tendered their shares;
 
  •   If in an extreme situation the board lacks accountability and oversight, coupled with sustained poor performance relative to peers.
Vote AGAINST or WITHHOLD from Inside Directors and Affiliated Outside Directors (per the Classification of Directors above) when:
  •   The inside or affiliated outside director serves on the audit, compensation, or nominating (vote against affiliated directors only for nominating) committees;
 
  •   The company lacks an audit compensation, or nominating (vote against affiliated directors only for nominating) committee so that the full board functions as that committee and insiders are participating in voting on matters that independent committees should be voting on;
 
  •   The full board is less than majority independent (in this case withhold from affiliated outside directors); At controlled companies, GSAM will vote against the election of affiliated outsiders and nominees affiliated with the parent and will not vote against the executives of the issuer.
Vote AGAINST or WITHHOLD from members of the appropriate committee for the following reasons (or independent Chairman or lead director in cases of a classified board and members of appropriate committee are not up for reelection). Extreme cases may warrant a vote against the entire board.
  •   At the previous board election, any director received more than 50 percent withhold/against votes of the shares cast and the company has failed to address the underlying issue(s) that caused the high withhold/against vote (members of the Nominating or Governance Committees);
 
  •   The board failed to act on a shareholder proposal that received approval of the majority of shares cast for the previous two consecutive years (a management proposal with other than a FOR recommendation by management will not be considered as sufficient action taken); an adopted proposal that is substantially similar to the original shareholder proposal will be deemed sufficient; (members of the committee of the board that is responsible for the issue under consideration).
Vote AGAINST or WITHHOLD from the members of the Audit Committee if:
  •   The non-audit fees paid to the auditor are excessive;
 
  •   The company receives an adverse opinion on the company’s financial statements from its auditor; or
 
  •   There is persuasive evidence that the audit committee entered into an inappropriate indemnification agreement with its auditor that limits the ability of the company, or its shareholders, to pursue legitimate legal recourse against the audit firm.
Vote CASE-BY-CASE on members of the Audit Committee and/or the full board if poor accounting practices, which rise to a level of serious concern are identified, such as: fraud; misapplication of GAAP; and material weaknesses identified in Section 404 disclosures.

B-3

 

Examine the severity, breadth, chronological sequence and duration, as well as the company’s efforts at remediation or corrective actions in determining whether negative vote recommendations are warranted against the members of the Audit Committee who are responsible for the poor accounting practices, or the entire board.
See section 3 on executive and director compensation for reasons to withhold from members of the Compensation Committee.
Shareholder proposal regarding Independent Chair (Separate Chair/CEO)
Vote on a CASE-BY-CASE basis.
GSAM will generally recommend a vote AGAINST shareholder proposals requiring that the chairman’s position be filled by an independent director, if the company satisfies 3 of the 4 following criteria:
  •   Designated lead director, elected by and from the independent board members with clearly delineated and comprehensive duties;
 
  •   Two-thirds independent board;
 
  •   All independent key committees; or
 
  •   Established, disclosed governance guidelines.
Majority Vote Shareholder Proposals
GSAM will vote FOR proposals requesting that the board adopt majority voting in the election of directors provided it does not conflict with the state law where the company is incorporated.
GSAM also looks for companies to adopt a post-election policy outlining how the company will address the situation of a holdover director.
Cumulative Vote Shareholder Proposals
GSAM will generally support shareholder proposals to restore or provide cumulative voting unless:
  •   The company has adopted majority vote standard with a carve-out for plurality voting in situations where there are more nominees than seats, and a director resignation policy to address failed elections.
3. Executive and Director Compensation
Pay Practices
Good pay practices should align management’s interests with long-term shareholder value creation. Detailed disclosure of compensation criteria is required; proof that companies follow the criteria should be evident. Compensation practices should allow a company to attract and retain proven talent. Some examples of poor pay practices include: abnormally large bonus payouts without justifiable performance linkage or proper disclosure, egregious employment contracts, excessive severance and/or change in control provisions, repricing or replacing of underwater stock options/stock appreciation rights without prior shareholder approval, and excessive perquisites.
    If the company maintains problematic or poor pay practices, generally vote first:
  •   AGAINST Management Say on Pay (MSOP) Proposals or;
 
  •   AGAINST an equity-based incentive plan proposal if excessive non-performance-based equity awards are the major contributor to a pay-for-performance misalignment, then;
 
  •   If no MSOP or equity-based incentive plan proposal item is on the ballot, AGAINST/WITHHOLD on compensation committee members (or, in rare cases where the full board is deemed responsible, all directors including the CEO) in egregious situations.

B-4

 

Equity Compensation Plans
Vote CASE-BY-CASE on equity-based compensation plans. Reasons to vote AGAINST the equity plan could include any of the following factors:
  •   The plan is a vehicle for poor pay practices;
 
  •   The plan expressly permits the repricing of stock options/stock appreciation rights (SARs) without prior shareholder approval OR does not expressly prohibit the repricing without shareholder approval;
 
  •   The CEO is a participant in the proposed equity-based compensation plan and there is a disconnect between CEO pay and the company’s performance where over 50 percent of the year-over-year increase is attributed to equity awards;
 
  •   The company’s three year burn rate and Shareholder Value Transfer (SVT) calculations both materially exceed industry group metrics; or
 
  •   There is a long-term disconnect between CEO pay and the company’s total shareholder return in conjunction with the qualitative overlay as outlined in the policy guidelines OR the company has a poor record of compensation practices, which is highlighted either in analysis of the compensation plan or the evaluation of the election of directors.
Advisory Vote on Executive Compensation (Say-on-Pay, MSOP) Management Proposals
Vote CASE-BY-CASE on management proposals for an advisory vote on executive compensation. For U.S. companies, consider the following factors in the context of each company’s specific circumstances and the board’s disclosed rationale for its practices. In general two or more of the following in conjunction with a long-term pay-for-performance disconnect will warrant an AGAINST vote. If there is not a long-term pay for performance disconnect GSAM will look for multiple problematic factors to be present to warrant a vote against.
    Relative Considerations:
  •   Assessment of performance metrics relative to business strategy, as discussed and explained in the Compensation Discussion and Analysis (CD&A) section of a company’s proxy;
 
  •   Evaluation of peer groups used to set target pay or award opportunities;
 
  •   Alignment of long-term company performance and executive pay trends over time;
 
  •   Assessment of disparity between total pay of the CEO and other Named Executive Officers (NEOs).
    Design Considerations:
  •   Balance of fixed versus performance-driven pay;
 
  •   Assessment of excessive practices with respect to perks, severance packages, supplemental executive pension plans, and burn rates.
    Communication Considerations:
  •   Evaluation of information and board rationale provided in CD&A about how compensation is determined (e.g., why certain elements and pay targets are used, and specific incentive plan goals, especially retrospective goals);
 
      Assessment of board’s responsiveness to investor input and engagement on compensation issues (e.g., in responding to majority-supported shareholder proposals on executive pay topics).
    Other considerations include:
  •   Abnormally large bonus payouts without justifiable performance linkage or proper disclosure:
  •   Includes performance metrics that are changed, canceled, or replaced during the performance period without adequate explanation of the action and the link to performance
  •   Egregious employment contracts:
  •   Contracts containing multi-year guarantees for salary increases, non-performance based bonuses, and equity compensation.
  •   Excessive severance and/or change in control provisions:
  •   Change in control cash payments exceeding 3 times base salary plus target/average/last paid bonus;

B-5

 

  •   New or materially amended arrangements that provide for change-in-control payments without loss of job or substantial diminution of job duties (single-triggered),
 
  •   Excessive payments upon an executive’s termination in connection with performance failure;
 
  •   Liberal change in control definition in individual contracts or equity plans which could result in payments to executives without an actual change in control occurring
  •   Repricing or replacing of underwater stock options/stock appreciation rights without prior shareholder approval (including cash buyouts, option exchanges, and certain voluntary surrender of underwater options where shares surrendered may subsequently be re-granted).
  •   Excessive Perquisites:
  •   Perquisites for former and/or retired executives, such as lifetime benefits, car allowances, personal use of corporate aircraft, or other inappropriate arrangements
 
  •   Extraordinary relocation benefits (including home buyouts)
 
  •   Excessive amounts of perquisites compensation
The following reasons could warrant a vote AGAINST or WITHHOLD from the members of the Compensation Committee:
  •   Company has failed to address issues that led to an against vote in an MSOP;
 
  •   The company fails to submit one-time transfers of stock options to a shareholder vote;
 
  •   The company fails to fulfill the terms of a burn rate commitment they made to shareholders; or
 
  •   The company has backdated options.
Golden Parachutes
In cases where the golden parachute vote is incorporated into a company’s separate advisory vote on compensation MSOP), GSAM will incorporate the evaluation and could vote against the MSOP if we find problematic aspects to the Golden Parachutes. In general, the presence of two or more of the following factors could warrant a vote against:
  •   Recently adopted or materially amended agreements that include excise tax gross-up provisions (since prior annual meeting);
 
  •   Recently adopted or materially amended agreements that include modified single triggers (since prior annual meeting);
 
  •   Single trigger payments that will happen immediately upon a change in control, including cash payment and such items as the acceleration of performance-based equity despite the failure to achieve performance measures;
 
  •   Single-trigger vesting of equity based on a definition of change in control that requires only shareholder approval of the transaction (rather than consummation);
 
  •   Potentially excessive severance payments;
 
  •   Recent amendments or other changes that may make packages so attractive as to influence merger agreements that may not be in the best interests of shareholders;
 
  •   In the case of a substantial gross-up from pre-existing/grandfathered contract: the element that triggered the gross-up (i.e., option mega-grants at low point in stock price, unusual or outsized payments in cash or equity made or negotiated prior to the merger); or
 
  •   The company’s assertion that a proposed transaction is conditioned on shareholder approval of the golden parachute advisory vote.
Other Compensation Proposals and Policies
Employee Stock Purchase Plans—Non-Qualified Plans
Vote CASE-BY-CASE on nonqualified employee stock purchase plans. Vote FOR nonqualified employee stock purchase plans with all the following features:
  •   Broad-based participation (i.e., all employees of the company with the exclusion of individuals with 5 percent or more of beneficial ownership of the company);

B-6

 

  •   Limits on employee contribution, which may be a fixed dollar amount or expressed as a percent of base salary;
 
  •   Company matching contribution up to 25 percent of employee’s contribution, which is effectively a discount of 20 percent from market value; and
 
  •   No discount on the stock price on the date of purchase since there is a company matching contribution.
Vote AGAINST nonqualified employee stock purchase plans when any of the plan features do not meet the above criteria. If the company matching contribution exceeds 25 percent of employee’s contribution, evaluate the cost of the plan against its allowable cap.
Option Exchange Programs/Repricing Options
Vote CASE-BY-CASE on management proposals seeking approval to exchange/reprice options, taking into consideration:
  •   Historic trading patterns—the stock price should not be so volatile that the options are likely to be back “in-the-money” over the near term;
 
  •   Rationale for the re-pricing—was the stock price decline beyond management’s control?
 
  •   Is this a value-for-value exchange?
 
  •   Are surrendered stock options added back to the plan reserve?
 
  •   Option vesting—does the new option vest immediately or is there a black-out period?
 
  •   Term of the option—the term should remain the same as that of the replaced option;
 
  •   Exercise price—should be set at fair market or a premium to market;
 
  •   Participants—executive officers and directors should be excluded.
Vote FOR shareholder proposals to put option repricings to a shareholder vote.
Other Shareholder Proposals on Compensation
Advisory Vote on Executive Compensation (Frequency on Pay)
Vote for annual frequency if no management recommendation; otherwise, support two or three year frequency if a company has an independent compensation committee and no long-term pay for performance disconnect identified.
Golden Coffins/Executive Death Benefits
Generally vote FOR proposals calling on companies to adopt a policy of obtaining shareholder approval for any future agreements and corporate policies that could oblige the company to make payments or awards following the death of a senior executive in the form of unearned salary or bonuses, accelerated vesting or the continuation in force of unvested equity grants, perquisites and other payments or awards made in lieu of compensation. This would not apply to any benefit programs or equity plan proposals for which the broad-based employee population is eligible.
Stock retention holding period
Vote FOR Shareholder proposals asking for a policy requiring that senior executives retain a significant percentage of shares acquired through equity compensation programs if the policy allows retention for two years or less following the termination of their employment (through retirement or otherwise) and a holding threshold percentage of 50% or less.
Other factors to consider include:
  •   Whether the company has any holding period, retention ratio, or officer ownership requirements in place.

B-7

 

Elimination of accelerated vesting in the event of a change in control
Vote AGAINST shareholder proposals seeking a policy eliminating the accelerated vesting of time-based equity awards in the event of a change in control.
Tax Gross-Up Proposals
Generally vote FOR proposals asking companies to adopt a policy of not providing tax gross-up payments to executives, except where gross-ups are provided pursuant to a plan, policy, or arrangement applicable to management employees of the company, such as a relocation or expatriate tax equalization policy.
4. Proxy Contests
Voting for Director Nominees in Contested Elections
Vote CASE-BY-CASE on the election of directors in contested elections, considering the following factors:
  •   Long-term financial performance of the target company relative to its industry;
 
  •   Management’s track record;
 
  •   Background to the proxy contest;
 
  •   Qualifications of director nominees (both slates);
 
  •   Strategic plan of dissident slate and quality of critique against management;
 
  •   Likelihood that the proposed goals and objectives can be achieved (both slates);
 
  •   Stock ownership positions.
Reimbursing Proxy Solicitation Expenses
Vote CASE-BY-CASE on proposals to reimburse proxy solicitation expenses. When voting in conjunction with support of a dissident slate, vote FOR the reimbursement of all appropriate proxy solicitation expenses associated with the election.
Generally vote FOR shareholder proposals calling for the reimbursement of reasonable costs incurred in connection with nominating one or more candidates in a contested election where the following apply:
  •   The election of fewer than 50% of the directors to be elected is contested in the election;
 
  •   One or more of the dissident’s candidates is elected;
 
  •   Shareholders are not permitted to cumulate their votes for directors; and
 
  •   The election occurred, and the expenses were incurred, after the adoption of this bylaw.
5. Shareholders Rights & Defenses
Shareholder Ability to Act by Written Consent
Generally vote FOR shareholder proposals that provide shareholders with the ability to act by written consent, unless:
  •   The company already gives shareholders the right to call special meetings at a threshold of 25% or lower; and
 
  •   The company has a history of strong governance practices.
Shareholder Ability to Call Special Meetings
Generally vote FOR management proposals that provide shareholders with the ability to call special meetings.

B-8

 

Generally vote FOR shareholder proposals that provide shareholders with the ability to call special meetings at a threshold of 25% or lower if the company currently does not give shareholders the right to call special meetings. However, if a company already gives shareholders the right to call special meetings at a threshold of at least 25%, do not support shareholder proposals to further reduce the threshold.
Advance Notice Requirements for Shareholder Proposals/Nominations
Vote CASE-BY-CASE on advance notice proposals, giving support to proposals that allow shareholders to submit proposals/nominations reasonably close to the meeting date and within the broadest window possible, recognizing the need to allow sufficient notice for company, regulatory and shareholder review.
Poison Pills
Vote FOR shareholder proposals requesting that the company submit its poison pill to a shareholder vote or redeem it UNLESS the company has: (1) A shareholder-approved poison pill in place; or (2) the company has adopted a policy concerning the adoption of a pill in the future specifying that the board will only adopt a shareholder rights plan if either:
  •   Shareholders have approved the adoption of the plan; or
 
  •   The board, in exercising its fiduciary responsibilities, determines that it is in the best interest of shareholders under the circumstances to adopt a pill without the delay that would result from seeking stockholder approval (i.e., the “fiduciary out” provision). A poison pill adopted under this “fiduciary out” will be put to a shareholder ratification vote within 12 months of adoption or expire. If the pill is not approved by a majority of the votes cast on this issue, the plan will immediately terminate.
Vote FOR shareholder proposals calling for poison pills to be put to a vote within a time period of less than one year after adoption.
Vote CASE-BY-CASE on management proposals on poison pill ratification, focusing on the features of the shareholder rights plan. Rights plans should contain the following attributes:
  •   No lower than a 20% trigger, flip-in or flip-over;
 
  •   A term of no more than three years;
 
  •   No dead-hand, slow-hand, no-hand or similar feature that limits the ability of a future board to redeem the pill;
 
  •   Shareholder redemption feature (qualifying offer clause); if the board refuses to redeem the pill 90 days after a qualifying offer is announced, 25 percent or less of the shares may call a special meeting or seek a written consent to vote on rescinding the pill.
In addition, the rationale for adopting the pill should be thoroughly explained by the company. In examining the request for the pill, take into consideration the company’s existing governance structure, including: board independence, existing takeover defenses, and any problematic governance concerns.
For management proposals to adopt a poison pill for the stated purpose of preserving a company’s net operating losses (“NOL pills”), the following factors should be considered:
  •   the trigger (NOL pills generally have a trigger slightly below 5%);
 
  •   the value of the NOLs;
 
  •   the term;
 
  •   shareholder protection mechanisms (sunset provision, causing expiration of the pill upon exhaustion or expiration of NOLs); and
 
  •   other factors that may be applicable.

B-9

 

6. Mergers and Corporate Restructurings
Vote CASE-BY-CASE on mergers and acquisitions taking into account the following based on publicly available information:
  •   Valuation;
 
  •   Market reaction;
 
  •   Strategic rationale;
 
  •   Management’s track record of successful integration of historical acquisitions;
 
  •   Presence of conflicts of interest; and
 
  •   Governance profile of the combined company.
7. State of Incorporation
Reincorporation Proposals
Evaluate management or shareholder proposals to change a company’s state of incorporation on a CASE-BY-CASE basis, giving consideration to both financial and corporate governance concerns including the following:
  •   Reasons for reincorporation;
 
  •   Comparison of company’s governance practices and provisions prior to and following the reincorporation; and
 
  •   Comparison of corporation laws of original state and destination state.
Vote FOR reincorporation when the economic factors outweigh any neutral or negative governance changes.
8. Capital Structure
Common Stock Authorization
Votes on proposals to increase the number of shares of common stock authorized for issuance are determined on a CASE-BY-CASE basis. We consider company-specific factors that include, at a minimum, the following:
  •   Past Board performance;
 
  •   The company’s use of authorized shares during the last three years;
 
  •   One- and three-year total shareholder return;
 
  •   The board’s governance structure and practices;
 
  •   The current request;
 
  •   Disclosure in the proxy statement of specific reasons for the proposed increase;
 
  •   The dilutive impact of the request as determined through an allowable increase, which examines the company’s need for shares and total shareholder returns; and
 
  •   Risks to shareholders of not approving the request.
9. Corporate Social Responsibility (CSR) Issues
Overall Approach
When evaluating social and environmental shareholder proposals, the following factors should be considered:
  •   Whether adoption of the proposal is likely to enhance or protect shareholder value;
 
  •   Whether the information requested concerns business issues that relate to a meaningful percentage of the company’s business as measured by sales, assets, and earnings;
 
  •   The degree to which the company’s stated position on the issues raised in the proposal could affect its reputation or sales, or leave it vulnerable to a boycott or selective purchasing;
 
  •   Whether the issues presented are more appropriately/effectively dealt with through governmental or company-specific action;
 
  •   Whether the company has already responded in some appropriate manner to the request embodied in the proposal;
 
  •   Whether the company’s analysis and voting recommendation to shareholders are persuasive;

B-10

 

  •   What other companies have done in response to the issue addressed in the proposal;
 
  •   Whether the proposal itself is well framed and the cost of preparing the report is reasonable;
 
  •   Whether implementation of the proposal’s request would achieve the proposal’s objectives;
 
  •   Whether the subject of the proposal is best left to the discretion of the board;
 
  •   Whether the requested information is available to shareholders either from the company or from a publicly available source; and
 
  •   Whether providing this information would reveal proprietary or confidential information that would place the company at a competitive disadvantage.
Gender Identity and Sexual Orientation
A company should have a clear, public Equal Employment Opportunity (EEO) statement outlining various factors that are not discriminated against. Generally vote FOR proposals seeking to amend a company’s EEO statement or diversity policies to additionally prohibit discrimination based on sexual orientation and/or gender identity.
Lobbying Expenditures/Initiatives
Vote CASE-BY-CASE on proposals requesting information on a company’s lobbying initiatives, considering:
  •   Significant controversies, fines, or litigation surrounding a company’s public policy activities;
 
  •   The company’s current level of disclosure on lobbying strategy; and
 
  •   The impact that the policy issue may have on the company’s business operations.
Political Contributions and Trade Association Spending
Generally vote AGAINST proposals asking the company to affirm political nonpartisanship in the workplace so long as:
    There are no recent, significant controversies, fines or litigation regarding the company’s political contributions or trade association spending; and
    The company has procedures in place to ensure that employee contributions to company-sponsored political action committees (PACs) are strictly voluntary and prohibits coercion.
Vote CASE-BY-CASE on proposals to improve the disclosure of a company’s political contributions and trade association spending, considering:
    Recent significant controversy or litigation related to the company’s political contributions or governmental affairs;
    The public availability of a company policy on political contributions and trade association spending including information on the types of organizations supported, the business rationale for supporting these organizations, and the oversight and compliance procedures related to such expenditures of corporate assets; and
GSAM will not necessarily vote for the proposal merely to encourage further disclosure of trade association spending.
Vote AGAINST proposals barring the company from making political contributions. Businesses are affected by legislation at the federal, state, and local level and barring political contributions can put the company at a competitive disadvantage.
Labor and Human Rights Standards
Generally vote FOR proposals requesting a report on company or company supplier labor and/or human rights standards and policies unless such information is already publicly disclosed.

B-11

 

Vote CASE-BY-CASE on proposals to implement company or company supplier labor and/or human rights standards and policies, considering:
    The degree to which existing relevant policies and practices are disclosed;
    Whether or not existing relevant policies are consistent with internationally recognized standards;
    Whether company facilities and those of its suppliers are monitored and how;
    Company participation in fair labor organizations or other internationally recognized human rights initiatives;
    Scope and nature of business conducted in markets known to have higher risk of workplace labor/human rights abuse;
    Recent, significant company controversies, fines, or litigation regarding human rights at the company or its suppliers;
    The scope of the request; and
    Deviation from industry sector peer company standards and practices.
Sustainability and climate change reporting
Generally vote FOR proposals requesting the company to report on its policies, initiatives, and oversight mechanisms related to social, economic, and environmental sustainability, or how the company may be impacted by climate change. The following factors will be considered:
    The company’s current level of publicly-available disclosure including if the company already discloses similar information through existing reports or policies such as an Environment, Health, and Safety (EHS) report; a comprehensive Code of Corporate Conduct; and/or a Diversity Report or other similar report;
    If the company has formally committed to the implementation of a reporting program based on Global Reporting Initiative (GRI) guidelines or a similar standard within a specified time frame;
    If the company’s current level of disclosure is comparable to that of its industry peers; and
    If there are significant controversies, fines, penalties, or litigation associated with the company’s environmental performance.
The following section is a broad summary of the Guidelines, which form the basis of the Policy with respect to non-U.S. public equity investments. Applying these guidelines is subject to certain regional and country-specific exceptions and modifications and is not inclusive of all considerations in each market.
1. Operational Items
Financial Results/Director and Auditor Reports
Vote FOR approval of financial statements and director and auditor reports, unless:
    There are concerns about the accounts presented or audit procedures used; or
    The company is not responsive to shareholder questions about specific items that should be publicly disclosed.
Appointment of Auditors and Auditor Fees
Vote FOR the reelection of auditors and proposals authorizing the board to fix auditor fees, unless:
    There are serious concerns about the accounts presented, audit procedures used or audit opinion rendered;
    The auditors are being changed without explanation; non-audit-related fees are substantial or are in excess of standard annual audit-related fees; or the appointment of external auditors if they have previously served the company in an executive capacity or can otherwise be considered affiliated with the company.
Appointment of Statutory Auditors
Vote FOR the appointment or reelection of statutory auditors, unless:
      There are serious concerns about the statutory reports presented or the audit procedures used;
      Questions exist concerning any of the statutory auditors being appointed; or
      The auditors have previously served the company in an executive capacity or can otherwise be considered affiliated with the company.

B-12

 

Allocation of Income
Vote FOR approval of the allocation of income, unless:
      The dividend payout ratio has been consistently low without adequate explanation; or
      The payout is excessive given the company’s financial position.
Stock (Scrip) Dividend Alternative
Vote FOR most stock (scrip) dividend proposals.
Vote AGAINST proposals that do not allow for a cash option unless management demonstrates that the cash option is harmful to shareholder value.
Amendments to Articles of Association
Vote amendments to the articles of association on a CASE-BY-CASE basis.
Change in Company Fiscal Term
Vote FOR resolutions to change a company’s fiscal term unless a company’s motivation for the change is to postpone its AGM.
Lower Disclosure Threshold for Stock Ownership
Vote AGAINST resolutions to lower the stock ownership disclosure threshold below 5 percent unless specific reasons exist to implement a lower threshold.
Amend Quorum Requirements
Vote proposals to amend quorum requirements for shareholder meetings on a CASE-BY-CASE basis.
Transact Other Business
Vote AGAINST other business when it appears as a voting item.
2. Board of Directors
Director Elections
Vote FOR management nominees in the election of directors, unless:
     Adequate disclosure has not been provided in a timely manner; or
     There are clear concerns over questionable finances or restatements; or
     There have been questionable transactions or conflicts of interest; or
     There are any records of abuses against minority shareholder interests; or
     The board fails to meet minimum corporate governance standards. or
     There are reservations about:
     Director terms
     Bundling of proposals to elect directors
     Board independence
     Disclosure of named nominees
     Combined Chairman/CEO
     Election of former CEO as Chairman of the Board
     Overboarded directors

B-13

 

     Composition of committees
     Director independence
     Specific concerns about the individual or company, such as criminal wrongdoing or breach of fiduciary responsibilities; or
Unless there are other considerations which may include sanctions from government or authority, violations of laws and regulations, or other issues related to improper business practice, failure to replace management, or egregious actions related to service on other boards.
Vote on a CASE-BY-CASE basis in contested elections of directors, e.g., the election of shareholder nominees or the dismissal of incumbent directors, determining which directors are best suited to add value for shareholders.
Vote FOR employee and/or labor representatives if they sit on either the audit or compensation committee and are required by law to be on those committees.
Vote AGAINST employee and/or labor representatives if they sit on either the audit or compensation committee, if they are not required to be on those committees.
Classification of directors
Executive Director
Employee or executive of the company;
Any director who is classified as a non-executive, but receives salary, fees, bonus, and/or other benefits that are in line with the highest-paid executives of the company.
Non-Independent Non-Executive Director (NED)
Any director who is attested by the board to be a non-independent NED;
Any director specifically designated as a representative of a significant shareholder of the company;
Any director who is also an employee or executive of a significant shareholder of the company;
Beneficial owner (direct or indirect) of at least 10% of the company’s stock, either in economic terms or in voting rights (this may be aggregated if voting power is distributed among more than one member of a defined group, e.g., family members who beneficially own less than 10% individually, but collectively own more than 10%), unless market best practice dictates a lower ownership and/or disclosure threshold (and in other special market-specific circumstances);
Government representative;
Currently provides (or a relative provides) professional services to the company, to an affiliate of the company, or to an individual officer of the company or of one of its affiliates in excess of $10,000 per year;
Represents customer, supplier, creditor, banker, or other entity with which company maintains transactional/commercial relationship (unless company discloses information to apply a materiality test);
Any director who has conflicting or cross-directorships with executive directors or the chairman of the company;
Relative of a current employee of the company or its affiliates;
Relative of a former executive of the company or its affiliates;
A new appointee elected other than by a formal process through the General Meeting (such as a contractual appointment by a substantial shareholder);
Founder/co-founder/member of founding family but not currently an employee;
Former executive (5 year cooling off period);
Years of service is generally not a determining factor unless it is recommended best practice in a market and/or in extreme circumstances, in which case it may be considered;
Any additional relationship or principle considered to compromise independence under local corporate governance best practice guidance.

B-14

 

Independent NED
     No material connection, either directly or indirectly, to the company other than a board seat.
Employee Representative
Represents employees or employee shareholders of the company (classified as “employee representative” but considered a non-independent NED).
Discharge of Directors
Generally vote FOR the discharge of directors, including members of the management board and/or supervisory board, unless there is reliable information about significant and compelling controversies that the board is not fulfilling its fiduciary duties warranted by:
A lack of oversight or actions by board members which invoke shareholder distrust related to malfeasance or poor supervision, such as operating in private or company interest rather than in shareholder interest; or
Any legal issues (e.g., civil/criminal) aiming to hold the board responsible for breach of trust in the past or related to currently alleged actions yet to be confirmed (and not only the fiscal year in question), such as price fixing, insider trading, bribery, fraud, and other illegal actions; or
Other egregious governance issues where shareholders may bring legal action against the company or its directors; or
Vote on a CASE-BY-CASE basis where a vote against other agenda items are deemed inappropriate.
3. Compensation
Good pay practices should align management’s interests with long-term shareholder value creation. Detailed disclosure of compensation criteria is required; proof that companies follow the criteria should be evident. Compensation practices should allow a company to attract and retain proven talent. Some examples of poor pay practices include: abnormally large bonus payouts without justifiable performance linkage or proper disclosure, egregious employment contracts, excessive severance and/or change in control provisions, repricing or replacing of underwater stock options/stock appreciation rights without prior shareholder approval, and excessive perquisites.
Director Compensation
Vote FOR proposals to award cash fees to non-executive directors unless the amounts are excessive relative to other companies in the country or industry.
Vote non-executive director compensation proposals that include both cash and share-based components on a CASE-BY-CASE basis.
Vote proposals that bundle compensation for both non-executive and executive directors into a single resolution on a CASE-BY-CASE basis.
Vote AGAINST proposals to introduce retirement benefits for non-executive directors.
Compensation Plans
Vote compensation plans on a CASE-BY-CASE basis.
Director, Officer, and Auditor Indemnification and Liability Provisions
Vote proposals seeking indemnification and liability protection for directors and officers on a CASE-BY-CASE basis.
Vote AGAINST proposals to indemnify auditors.

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4. Board Structure
Vote FOR proposals to fix board size.
Vote AGAINST proposals to alter board structure or size in the context of a fight for control of the company or the board.
Chairman CEO combined role (for applicable markets)
GSAM will generally recommend a vote AGAINST shareholder proposals requiring that the chairman’s position be filled by an independent director, if the company satisfies 3 of the 4 following criteria:
2/3 independent board, or majority in countries where employee representation is common practice;
A designated, or a rotating, lead director, elected by and from the independent board members with clearly delineated and comprehensive duties;
Fully independent key committees; and/or
Established, publicly disclosed, governance guidelines and director biographies/profiles.
5. Capital Structure
Share Issuance Requests
General Issuances:
Vote FOR issuance requests with preemptive rights to a maximum of 100 percent over currently issued capital.
Vote FOR issuance requests without preemptive rights to a maximum of 20 percent of currently issued capital.
Increases in Authorized Capital
Vote FOR non-specific proposals to increase authorized capital up to 100 percent over the current authorization unless the increase would leave the company with less than 30 percent of its new authorization outstanding.
Vote FOR specific proposals to increase authorized capital to any amount, unless:
The specific purpose of the increase (such as a share-based acquisition or merger) does not meet guidelines for the purpose being proposed; or
The increase would leave the company with less than 30 percent of its new authorization outstanding after adjusting for all proposed issuances.
Vote AGAINST proposals to adopt unlimited capital authorizations.
Reduction of Capital
Vote FOR proposals to reduce capital for routine accounting purposes unless the terms are unfavorable to shareholders.
Vote proposals to reduce capital in connection with corporate restructuring on a CASE-BY-CASE basis.
Capital Structures
Vote FOR resolutions that seek to maintain or convert to a one-share, one-vote capital structure.

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Vote AGAINST requests for the creation or continuation of dual-class capital structures or the creation of new or additional supervoting shares.
Preferred Stock
Vote FOR the creation of a new class of preferred stock or for issuances of preferred stock up to 50 percent of issued capital unless the terms of the preferred stock would adversely affect the rights of existing shareholders.
Vote FOR the creation/issuance of convertible preferred stock as long as the maximum number of common shares that could be issued upon conversion meets guidelines on equity issuance requests.
Vote AGAINST the creation of a new class of preference shares that would carry superior voting rights to the common shares.
Vote AGAINST the creation of blank check preferred stock unless the board clearly states that the authorization will not be used to thwart a takeover bid.
Vote proposals to increase blank check preferred authorizations on a CASE-BY-CASE basis.
Debt Issuance Requests
Vote non-convertible debt issuance requests on a CASE-BY-CASE basis, with or without preemptive rights.
Vote FOR the creation/issuance of convertible debt instruments as long as the maximum number of common shares that could be issued upon conversion meets guidelines on equity issuance requests.
Vote FOR proposals to restructure existing debt arrangements unless the terms of the restructuring would adversely affect the rights of shareholders.
Pledging of Assets for Debt
Vote proposals to approve the pledging of assets for debt on a CASE-BY-CASE basis.
Increase in Borrowing Powers
Vote proposals to approve increases in a company’s borrowing powers on a CASE-BY-CASE basis.
Share Repurchase Plans
GSAM will generally recommend FOR share repurchase programs if the terms comply with the following criteria:
A repurchase limit of up to 10 percent of outstanding issued share capital;
A holding limit of up to 10 percent of a company’s issued share capital in treasury (“on the shelf”); and
Duration of no more than 5 years, or such lower threshold as may be set by applicable law, regulation, or code of governance best practice.
In markets where it is normal practice not to provide a repurchase limit, the proposal will be evaluated based on the company’s historical practice. In such cases, the authority must comply with the following criteria:
A holding limit of up to 10 percent of a company’s issued share capital in treasury (“on the shelf”); and
Duration of no more than 5 years.
In addition, vote AGAINST any proposal where:
There is clear evidence of abuse;
There is no safeguard against selective buybacks;
Pricing provisions and safeguards are deemed to be unreasonable in light of market practice.

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Reissuance of Repurchased Shares
Vote CASE-BY-CASE on requests to reissue any repurchased shares unless there is clear evidence of abuse of this authority in the past.
Capitalization of Reserves for Bonus Issues/Increase in Par Value
Vote FOR requests to capitalize reserves for bonus issues of shares or to increase par value.
6. Other
Reorganizations/Restructurings
Vote reorganizations and restructurings on a CASE-BY-CASE basis.
Mergers and Acquisitions
Vote CASE-BY-CASE on mergers and acquisitions taking into account the following based on publicly available information:
Valuation;
Market reaction;
Strategic rationale;
Management’s track record of successful integration of historical acquisitions;
Presence of conflicts of interest; and
Governance profile of the combined company.
Mandatory Takeover Bid Waivers
Vote proposals to waive mandatory takeover bid requirements on a CASE-BY-CASE basis.
Antitakeover Mechanisms
Generally vote AGAINST all antitakeover proposals, unless they are structured in such a way that they give shareholders the ultimate decision on any proposal or offer.
Reincorporation Proposals
Vote reincorporation proposals on a CASE-BY-CASE basis.
Expansion of Business Activities
Vote FOR resolutions to expand business activities unless the new business takes the company into inappropriately risky areas.
Related-Party Transactions
Vote related-party transactions on a CASE-BY-CASE basis.
          Environmental, climate change and social issues
Vote FOR proposals that would improve the company’s corporate governance or business profile at a reasonable cost.

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Labor and Human Rights Standards
Generally vote FOR proposals requesting a report on company or company supplier labor and/or human rights standards and policies unless such information is already publicly disclosed.
Vote CASE-BY-CASE on proposals to implement company or company supplier labor and/or human rights standards and policies, considering:
The degree to which existing relevant policies and practices are disclosed;
Whether or not existing relevant policies are consistent with internationally recognized standards;
Whether company facilities and those of its suppliers are monitored and how;
Company participation in fair labor organizations or other internationally recognized human rights initiatives;
Scope and nature of business conducted in markets known to have higher risk of workplace labor/human rights abuse;
Recent, significant company controversies, fines, or litigation regarding human rights at the company or its suppliers;
The scope of the request; and
Deviation from industry sector peer company standards and practices.
Sustainability and climate change reporting
Generally vote FOR proposals requesting the company to report on its policies, initiatives, and oversight mechanisms related to social, economic, and environmental sustainability, or how the company may be impacted by climate change. The following factors will be considered:
The company’s current level of publicly-available disclosure including if the company already discloses similar information through existing reports or policies such as an Environment, Health, and Safety (EHS) report; a comprehensive Code of Corporate Conduct; and/or a Diversity Report or other similar report;
If the company has formally committed to the implementation of a reporting program based on Global Reporting Initiative (GRI) guidelines or a similar standard within a specified time frame;
If the company’s current level of disclosure is comparable to that of its industry peers; and
If there are significant controversies, fines, penalties, or litigation associated with the company’s environmental performance.

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APPENDIX C
STATEMENT OF INTENTION
(applicable only to Class A Shares)
          If a shareholder anticipates purchasing within a 13-month period Class A Shares of the Fund alone or in combination with Class A Shares of another Goldman Sachs Fund in the amount of $50,000 or more, the shareholder may obtain shares of the Fund at the same reduced sales charge as though the total quantity were invested in one lump sum by checking and filing the Statement of Intention in the Account Application. Income dividends and capital gain distributions taken in additional shares, as well as any appreciation on shares previously purchased, will not apply toward the completion of the Statement of Intention.
          To ensure that the reduced price will be received on future purchases, the investor must inform Goldman Sachs that the Statement of Intention is in effect each time shares are purchased. Subject to the conditions mentioned below, each purchase will be made at the public offering price applicable to a single transaction of the dollar amount specified on the Account Application. The investor makes no commitment to purchase additional shares, but if the investor’s purchases within 13 months plus the value of shares credited toward completion do not total the sum specified, the investor will pay the increased amount of the sales charge prescribed in the Escrow Agreement.
Escrow Agreement
          Out of the initial purchase (or subsequent purchases if necessary), 5% of the dollar amount specified on the Account Application will be held in escrow by the Transfer Agent in the form of shares registered in the investor’s name. All income dividends and capital gains distributions on escrowed shares will be paid to the investor or to his or her order. When the minimum investment so specified is completed (either prior to or by the end of the 13th month), the investor will be notified and the escrowed shares will be released.
          If the intended investment is not completed, the investor will be asked to remit to Goldman Sachs any difference between the sales charge on the amount specified and on the amount actually attained. If the investor does not within 20 days after written request by Goldman Sachs pay such difference in the sales charge, the Transfer Agent will redeem, pursuant to the authority given by the investor in the Account Application, an appropriate number of the escrowed shares in order to realize such difference. Shares remaining after any such redemption will be released by the Transfer Agent.

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APPENDIX D
Sub-Adviser Proxy Voting Guidelines Summary
The following is a concise summary of the Dividend Growth Advisors’ proxy voting policy guidelines.
1. Auditors
Vote CASE-BY-CASE on shareholder proposals on auditor rotation, taking into account these factors:
  •   Tenure of the audit firm
 
  •   Establishment and disclosure of a renewal process whereby the auditor is regularly evaluated for audit quality
 
  •   Length of the rotation period advocated in the proposal
 
  •   Significant audit-related issues
 
  •   Number of audit committee meetings held each year
 
  •   Number of financial experts serving on the committee
2. Board of Directors
Voting on Director Nominees in Uncontested Elections Generally, vote CASE-BY-CASE. But WITHHOLD votes from:
  •   Insiders and affiliated outsiders on boards that are not at least majority independent
 
  •   Directors who adopt a poison pill without shareholder approval since the company’s last annual meeting and there is no requirement to put the pill to shareholder vote within 12 months of its adoption
 
  •   Directors who serve on the compensation committee when there is a negative correlation between chief executive pay and company performance (fiscal year end basis)
 
  •   Directors who have failed to address the issue(s) that resulted in any of the directors receiving more than 50% withhold votes out of those cast at the previous board election
Classification/Declassification of the Board
Vote AGAINST proposals to classify the board.
Vote FOR proposals to repeal classified boards and to elect all directors annually.
Independent Chairman (separate Chairman/CEO)
Vote FOR shareholder proposals asking that the chairman and CEO positions be separated (independent chairman), unless the company has a strong countervailing governance structure, including a lead director, two-thirds independent board, all independent key committees, and established governance guidelines.
Additionally, the company should not have underperformed its peers.
Majority of Independent Directors/Establishment of Committees

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Vote FOR shareholder proposals asking that a majority or more of directors be independent.
Open Access (Shareholder Resolution)
Vote CASE-BY-CASE basis, taking into account the ownership threshold proposed in the resolution and the proponent’s rationale.
3. Shareholder Rights
Shareholder Ability to Act by Written Consent
Vote AGAINST proposals to restrict or prohibit shareholder ability to take action by written consent.
Vote FOR proposals to allow or make easier shareholder action by written consent.
Shareholder Ability to Call Special Meetings
Vote AGAINST proposals to restrict or prohibit shareholder ability to call special meetings.
Vote FOR proposals that remove restrictions on the right of shareholders to act independently of management.
Supermajority Vote Requirements
Vote AGAINST proposals to require a supermajority shareholder vote.
Vote FOR proposals to lower supermajority vote requirements.
Cumulative Voting
Vote AGAINST proposals to eliminate cumulative voting.
Vote proposals to restore or permit cumulative voting on a CASE-BY-CASE basis relative to the company’s other governance provisions.
Confidential Voting
Vote FOR shareholder proposals requesting that corporations adopt confidential voting, use independent vote tabulators and use independent inspectors of election. In proxy contests, support confidential voting proposals only if dissidents agree to the same policy that applies to management.
4. Proxy Contests
Voting for Director Nominees in Contested Elections Votes in a contested election of directors must be evaluated on a CASE-BY-CASE basis, considering the factors that include the long-term financial performance, management’s track record, qualifications of director nominees (both slates), and an evaluation of what each side is offering shareholders.
Reimbursing Proxy Solicitation Expenses
Vote CASE-BY-CASE. Where Dividend Growth Advisors LLC recommends in favor of the
dissidents, we also recommend voting for reimbursing proxy solicitation expenses.

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5. Poison Pills
Vote FOR shareholder proposals that ask a company to submit its poison pill for shareholder ratification. Review on a CASE-BY-CASE basis shareholder proposals to redeem a company’s poison pill and management proposals to ratify a poison pill.
6. Mergers and Corporate Restructurings
Vote CASE-BY-CASE on mergers and corporate restructurings based on such features
as the fairness opinion, pricing, strategic rationale, and the negotiating process.
7. Reincorporation Proposals
Proposals to change a company’s state of incorporation should be evaluated on a CASE-BY-CASE basis, giving consideration to both financial and corporate governance concerns, including the reasons for reincorporating, a comparison of the governance provisions, and a comparison of the jurisdictional laws.
Vote FOR reincorporation when the economic factors outweigh any neutral or negative governance changes.
8. Capital Structure
Common Stock Authorization
Votes on proposals to increase the number of shares of common stock authorized for issuance are determined on a CASE-BY-CASE basis evaluating strategic business purpose of increase.
Vote AGAINST proposals at companies with dual-class capital structures to increase the number of authorized shares of the class of stock that has superior voting rights.
Vote FOR proposals to approve increases beyond the allowable increase when a company’s shares are in danger of being delisted or if a company’s ability to continue to operate as a going concern is uncertain.
Dual-class Stock
Vote AGAINST proposals to create a new class of common stock with superior voting rights.
Vote FOR proposals to create a new class of nonvoting or subvoting common stock if:
  •   It is intended for financing purposes with minimal or no dilution to current shareholders
 
  •   It is not designed to preserve the voting power of an insider or significant shareholder
9. Executive and Director Compensation
Vote AGAINST a plan if the cost exceeds the allowable cap.
Vote FOR a plan if the cost is reasonable (below the cap) unless any of the following conditions apply:
  •   The plan expressly permits repricing of underwater options without shareholder approval; or
 
  •   There is a disconnect between the CEO’s pay and performance (an increase in pay and a decrease in performance), the main source for the pay increase is equity-based, and the CEO participates in the plan being voted on
 
  •   The company’s most recent three-year burn rate is excessive and is an outlier within its peer group
A company that has triggered the burn rate policy may avoid an AGAINST vote recommendation if it commits to meet the industry average burn rate over the next three years. The above general voting guidelines for pay for

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performance may change if the compensation committee members can demonstrate improved performance in an additional public filing such as a DEFA 14A or 8K. To demonstrate improved performance, committee members should review all components of a CEO’s compensation and prepare a tally sheet with dollar amounts under various payout scenarios. The committee should also have the sole authority to hire and fire outside compensation consultants.
Director Compensation
Before recommending a vote FOR a director equity plan, Dividend Growth Advisors will review the company’s proxy statement for the following qualitative features:
  •   Stock ownership guidelines (a minimum of three times the annual cash retainer)
 
  •   Vesting schedule or mandatory holding/deferral period (minimum vesting of three years for stock options or restricted stock)
 
  •   Balanced mix between cash and equity
 
  •   Non-employee directors should not receive retirement benefits/perquisites
 
  •   Detailed disclosure of cash and equity compensation for each director
Management Proposals Seeking Approval to Reprice Options
Votes on management proposals seeking approval to reprice options are evaluated on a CASE-BY-CASE basis giving consideration to the following:
  •   Historic trading patterns
 
  •   Rationale for the repricing
 
  •   Value-for-value exchange
 
  •   Option vesting
 
  •   Term of the option
 
  •   Exercise price
 
  •   Participation
 
  •   Treatment of surrendered options
Qualified Employee Stock Purchase Plans
Vote on qualified employee stock purchase plans on a CASE-BY-CASE basis.
Vote FOR qualified employee stock purchase plans where all of the following apply:
  •   Purchase price is at least 85 percent of fair market value
 
  •   Offering period is 27 months or less, and
 
  •   Potential voting power dilution (VPD) is 10 percent or less.
Vote AGAINST qualified employee stock purchase plans where any of the opposite conditions occur.
Nonqualified Employee Stock Purchase Plans

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Vote on nonqualified employee stock purchase plans on a CASE-BY-CASE basis. Vote FOR nonqualified plans with all the following features:
  •   Broad-based participation
 
  •   Limits on employee contribution (a fixed dollar amount or a percentage of base salary)
 
  •   Company matching contribution up to 25 percent of employee’s contribution, which is effectively a discount of 20 percent from market value
 
  •   No discount on the stock price on the date of purchase since there is a company matching contribution
Vote AGAINST nonqualified employee stock purchase plans if they do not meet the above criteria.
Shareholder Proposals on Compensation
Generally vote CASE-BY-CASE, taking into account company performance, pay level versus peers, pay level versus industry, and long term corporate outlook. But generally vote FOR shareholder proposals that:
  •   Advocate the use of performance-based awards like indexed, premium-priced, and performance-vested options or performance-based shares, unless the proposal is overly restrictive or the company already substantially uses such awards.
 
  •   Call for a shareholder vote on extraordinary benefits contained in Supplemental Executive Retirement Plans (SERPs).
10. Social and Environmental Issues
These issues cover a wide range of topics, including consumer and public safety, environment and energy, general corporate issues, labor standards and human rights, and workplace diversity.
In general, vote CASE-BY-CASE. While a wide variety of factors goes into each analysis, the overall principal guiding all vote recommendations focuses on how the proposal will enhance the economic value of the company.
Vote:
  •   AGAINST resolutions asking for the adopting of voluntary labeling of ingredients or asking for companies to label until a phase out of such ingredients has been completed.
 
  •   CASE-BY-CASE on proposals calling for companies to report on the risks associated with outsourcing, with consideration of the risks associated with certain international markets, the utility of such a report to shareholders, and the existence of a publicly available code of corporate conduct that applies to international operations.

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PART C
Other Information
Item 15. Indemnification
Article IV of the Declaration of Trust of Goldman Sachs Trust, a Delaware statutory trust, provides for indemnification of the Trustees, officers and agents of the Trust, subject to certain limitations. The Declaration of Trust is incorporated by reference to Exhibit (1)(a).
The Management Agreement provides that the Investment Adviser will not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Investment Adviser or from reckless disregard by the Investment Adviser of its obligations or duties under the Management Agreement. The Management Agreement is incorporated by reference as Exhibit (6).
Section 9 of the Distribution Agreement between the Registrant and Goldman Sachs dated April 30, 1997, as amended, and Section 7 of the Transfer Agency Agreement between the Registrant and Goldman, Sachs & Co. dated August 9, 2007 provides that the Registrant will indemnify Goldman, Sachs & Co. against certain liabilities. Copies of the Distribution Agreement and the Transfer Agency Agreement are incorporated by reference as Exhibits (7)(a) and (13)(d) respectively.
Mutual fund and trustees and officers liability policies purchased jointly by the Registrant, Goldman Sachs Variable Insurance Trust and Goldman Sachs Credit Strategies Fund insure such persons and their respective trustees, partners, officers and employees, subject to the policies’ coverage limits and exclusions and varying deductibles, against loss resulting from claims by reason of any act, error, omission, misstatement, misleading statement, neglect or breach of duty.
Item 16. Exhibits
Unless otherwise noted, all referenced are to the Registrant’s Registration Statement on Form N-1A (the “Registration Statement”) as filed with the Securities and Exchange Commission (the “SEC”) (File Nos. 33-17619 and 811-05349).
1  (a)   Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 29 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on February 14, 1997.
 
  (b)   Amendment No. 1 dated April 24, 1997 to Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 40 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on October 16, 1997.
 
  (c)   Amendment No. 2 dated July 21, 1997 to Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 40 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on October 16, 1997.
 
  (d)   Amendment No. 3 dated October 21, 1997 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 41 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on February 13, 1998.
 
  (e)   Amendment No. 4 dated January 28, 1998 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 41 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on February 13, 1998.
 
  (f)   Amendment No. 5 dated January 28, 1998 to Agreement and Declaration of Trust dated January 28, 1997
 
  (g)   Amendment No. 6 dated July 22, 1998 to Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 47 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on October 1, 1998.

 

 

  (h)   Amendment No. 7 dated November 3, 1998 to Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 50 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 29, 1998.
 
  (i)   Amendment No. 8 dated March 1, 1999 to Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 52 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on February 12, 1999.
 
  (j)   Amendment No. 9 dated April 28, 1999 to Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 55 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on July 16, 1999.
 
  (k)   Amendment No. 10 dated July 27, 1999 to Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 56 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on September 16, 1999.
 
  (l)   Amendment No. 11 dated July 27, 1999 to Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 56 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on September 16, 1999.
 
  (m)   Amendment No. 12 dated October 26, 1999 to Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 58 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on November 22, 1999.
 
  (n)   Amendment No. 13 dated February 3, 2000 to Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 62 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on February 23, 2000.
 
  (o)   Amendment No. 14 dated April 26, 2000 to Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 65 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on May 3, 2000.
 
  (p)   Amendment No. 15 dated August 1, 2000 to Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 68 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on November 22, 2000.
 
  (q)   Amendment No. 16 dated January 30, 2001 to Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 72 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on April 13, 2001.
 
  (r)   Amendment No. 17 dated April 25, 2001 to Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 73 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 21, 2001.
 
  (s)   Amendment No. 18 dated July 1, 2002 to Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 79 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 11, 2002.
 
  (t)   Amendment No. 19 dated August 1, 2002 to Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 79 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 11, 2002.
 
  (u)   Amendment No. 20 dated August 1, 2002 to Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 79 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 11, 2002.
 
  (v)   Amendment No. 21 dated January 29, 2003 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 81 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on February 19, 2003.
 
  (w)   Amendment No. 22 dated July 31, 2003 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 85 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 12, 2003.

 

 

  (x)   Amendment No. 23 dated October 30, 2003 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 85 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 12, 2003.
 
  (y)   Amendment No. 24 dated May 6, 2004 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to the Registrant’s Registration Statement on Form N-14 relating to the Registrant’s acquisition of the Golden Oak® Family of Funds (“Acquisition”), SEC File No. 333-117561 as filed with the SEC on July 22, 2004.
 
  (z)   Amendment No. 25 dated April 21, 2004 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 93 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 23, 2004.
 
  (aa)   Amendment No. 26 dated November 4, 2004 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 93 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 23, 2004.
 
  (bb)   Amendment No. 27 dated February 10, 2005 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 103 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on June 17, 2005.
 
  (cc)   Amendment No. 28 dated May 12, 2005 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 112 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 7, 2005.
 
  (dd)   Amendment No. 29 dated June 16, 2005 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 112 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 7, 2005.
 
  (ee)   Amendment No. 30 dated August 4, 2005 to the Agreement and Declaration of Trust dated January 28, 1977 is incorporated herein by reference to Post-Effective Amendment No. 112 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 7, 2005.
 
  (ff)   Amendment No. 31 dated November 2, 2005 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 127 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on May 26, 2006.
 
  (gg)   Amendment No. 32 dated December 31, 2005 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 114 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 29, 2005.
 
  (hh)   Amendment No. 33 dated March 16, 2006 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 127 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on May 26, 2006.
 
  (ii)   Amendment No. 34 dated March 16, 2006 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 127 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on May 26, 2006.
 
  (jj)   Amendment No. 35 dated May 11, 2006 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 129 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on June 23, 2006.
 
  (kk)   Amendment No. 36 dated June 15, 2006 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 133 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on August 18, 2006.
 
  (ll)   Amendment No. 37 dated August 10, 2006 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 143 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 21, 2006.

 

 

  (mm)   Amendment No. 38 dated November 9, 2006 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 143 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 21, 2006.
 
  (nn)   Amendment No. 39 dated December 14, 2006 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 159 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on June 12, 2007.
 
  (oo)   Amendment No. 40 dated December 14, 2006 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 159 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on June 12, 2007.
 
  (pp)   Amendment No. 41 dated February 8, 2007 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 159 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on June 12, 2007.
 
  (qq)   Amendment No. 42 dated March 15, 2007 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 159 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on June 12, 2007.
 
  (rr)   Amendment No. 43 dated May 10, 2007 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 159 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on June 12, 2007.
 
  (ss)   Amendment No. 44 dated June 13, 2007 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 162 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on August 14, 2007.
 
  (tt)   Amendment No. 45 dated June 13, 2007 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 173 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on November 27, 2007.
 
  (uu)   Amendment No. 46 dated November 8, 2007 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 173 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on November 27, 2007.
 
  (vv)   Amendment No. 47 dated November 8, 2007 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 173 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on November 27, 2007.
 
  (ww)   Amendment No. 48 dated December 13, 2007 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 183 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on January 18, 2008.
 
  (xx)   Amendment No. 49 dated June 19, 2008 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 205 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on July 29, 2008.
 
  (yy)   Amendment No. 50 dated August 14, 2008 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 206 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on August 27, 2008.
 
  (zz)   Amendment No. 51 dated August 25, 2008 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 217 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on February 27, 2009.
 
  (aaa)   Amendment No. 52 dated November 13, 2008 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 217 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on February 27, 2009.
 
  (bbb)   Amendment No. 53 dated May 21, 2009 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 226 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on November 24, 2009.

 

 

  (ccc)   Amendment No. 54 dated November 19, 2009 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 226 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on November 24, 2009.
 
  (ddd)   Amendment No. 55 dated February 11, 2010 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 242 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on April 30, 2010.
 
  (eee)   Amendment No. 56 dated May 20, 2010 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 249 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on June 30, 2010.
 
  (fff)   Amendment No. 57 dated June 17, 2010 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 249 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on June 30, 2010.
 
  (ggg)   Amendment No. 58 dated November 18, 2010 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 261 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 3, 2010.
 
  (hhh)   Amendment No. 59 dated January 5, 2011 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 270 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on February 16, 2011.
 
  (iii)   Amendment No. 60 dated February 10, 2011 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 270 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on February 16, 2011.
 
  (jjj)   Amendment No. 61 dated February 10, 2011 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 270 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on February 16, 2011.
 
  (kkk)   Amendment No. 62 dated June 16, 2011 to the Agreement and Declaration of Trust dated January 28, 1997 is incorporated herein by reference to Post-Effective Amendment No. 285 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on July 29, 2011.
 
  (lll)   Amendment No. 63 dated August 18, 2011 to the Agreement and Declaration of Trust dated January 28, 1997, is incorporated herein by reference to Post-Effective Amendment No. 290 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 12, 2011.
 
  (mmm)   Form of Amendment No. 64 dated September 27, 2011 to the Agreement and Declaration of Trust dated January 28, 1997, is incorporated herein by reference to Post-Effective Amendment No. 290 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 12, 2011.
 
  (nnn)   Form of Amendment No. 65 dated October 20, 2011 to the Agreement and Declaration of Trust dated January 28, 1997, is incorporated herein by reference to Post-Effective Amendment No. 290 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 12, 2011.
 
(2)  (a)   Amended and Restated By-laws of Goldman Sachs Trust dated October 30, 2002 is incorporated herein by reference to Post-Effective Amendment No. 83 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on June 13, 2003.
 
  (b)   Amendment No. 1 dated November 4, 2004 to Amended and Restated By-laws of Goldman Sachs Trust dated October 30, 2002 is incorporated herein by reference to Post-Effective Amendment No. 103 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on June 17, 2005.
 
  (c)   Amendment No. 2 dated October 16, 2009 to Amended and Restated By-laws of Goldman Sachs Trust dated October 30, 2002 is incorporated herein by reference to Post-Effective Amendment No. 226 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on November 24, 2009.
 
  (d)   Amendment No. 3 dated February 10, 2011 to Amended and Restated By-laws of Goldman Sachs Trust dated October 30, 2002 is incorporated herein by reference to Post-Effective Amendment No. 270 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on February 16, 2011.
 
(3)      Not Applicable
 
(4)      Form of Agreement and Plan of Reorganization is included in Part A to the Registration Statement on Form N-14.

 

 

(5)      Article II, Section 10, Article IV, Section 3, Article V, Article VI, Article VII, Article IX, Section 8 and Section 9 of the Registrant’s Agreement and Declaration of Trust incorporated herein by reference as Exhibit (1)(a) and Article III of the Registrant’s Amended and Restated By-Laws incorporated by reference as Exhibit (2)(c).
 
(6)  (a)   Management Agreement dated April 30, 1997 between the Registrant, Goldman Sachs Asset Management, Goldman Sachs Fund Management L.P. and Goldman Sachs Asset Management International, is incorporated herein by reference to Post-Effective Amendment No. 48 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on November 25, 1998.
 
(b)   Amended Annex A dated October 20, 2011 to the Management Agreement dated April 30, 1997. 1997 between the Registrant, Goldman Sachs Asset Management, Goldman Sachs Fund Management L.P. and Goldman Sachs Asset Management International, is incorporated herein by reference to Post-Effective Amendment No. 290 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 12, 2011.
 
  (c)   Sub-Advisory Agreement between Goldman Sachs Asset Management, L.P. and Dividend Growth Advisors, LLC with respect to Goldman Sachs Rising Dividend Growth Fund to be filed by amendment.
 
(7)  (a)   Distribution Agreement dated April 30, 1997 is incorporated herein by reference to Post-Effective Amendment No. 85 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 12, 2003.
 
  (b)   Amended Exhibit A dated October 20, 2011 to the Distribution Agreement dated April 30, 1997 is incorporated herein by reference to Post-Effective Amendment No. 290 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 12, 2011.
 
(8)      Not applicable.
 
(9)  (a)   Custodian Agreement dated July 15, 1991, between Registrant and State Street Bank and Trust Company is incorporated herein by reference to Post-Effective Amendment No. 26 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 29, 1995.
 
  (b)   Additional Portfolio Agreement dated September 27, 1999 between Registrant and State Street Bank and Trust Company is incorporated herein by reference to Post-Effective Amendment No. 62 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on February 23, 2000.
 
  (c)   Letter Agreement dated September 27, 1999 between Registrant and State Street Bank and Trust Company relating to Custodian Agreement dated April 6, 1990 is incorporated herein by reference to Post-Effective Amendment No. 62 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on February 23, 2000.
 
  (d)   Letter Agreement dated September 27, 1999 between Registrant and State Street Bank and Trust Company relating to Custodian Agreement dated July 15, 1991 is incorporated herein by reference to Post-Effective Amendment No. 62 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on February 23, 2000.
 
  (e)   Amendment dated July 2, 2001 to the Custodian Contract dated April 6, 1990 between Registrant and State Street Bank and Trust Company is incorporated herein by reference to Post-Effective Amendment No. 73 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 21, 2001.
 
  (f)   Amendment dated July 2, 2001 to the Custodian Contract dated July 15, 1991 between Registrant and State Street Bank and Trust Company is incorporated herein by reference to Post-Effective Amendment No. 73 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 21, 2001.
 
  (g)   Amendment to the Custodian Agreement dated April 6, 1990 between Registrant and State Street Bank and Trust Company is incorporated herein by reference to Post-Effective Amendment No. 75 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on April 15, 2002.
 
  (h)   Amendment to the Custodian Agreement dated July 15, 1991 between Registrant and State Street Bank and Trust Company is incorporated herein by reference to Post-Effective Amendment No. 75 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on April 15, 2002.
 
  (i)   Letter Amendment dated May 15, 2002 to the Custodian Agreement dated April 6, 1990 between Registrant and State Street Bank and Trust Company is incorporated herein by reference to Post-Effective Amendment No. 79 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 11, 2002.
 
  (j)   Global Custody Agreement dated June 30, 2006 between Registrant and JPMorgan Chase Bank, N.A. is incorporated herein by reference to Post-Effective Amendment No. 86 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on February 24, 2004.

 

 

(10) (a)   Class A Distribution and Service Plan amended and restated as of May 5, 2004 is incorporated herein by reference to Post-Effective Amendment No. 93 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 23, 2004.
 
  (b)   Plan in Accordance with Rule 18f-3, amended and restated as of December 1, 2010 is incorporated herein by reference to Post-Effective Amendment No. 263 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 29, 2010.
 
(11)     Opinion and Consent of Dechert LLP as to the legality of the securities is filed herewith.
 
(12)     Form of Opinion of Bingham McCutchen LLP supporting the tax matters and consequences to shareholders discussed in the Prospectus/Information Statement is filed herewith.
 
(13) (a)   First Amendment dated July 18, 1994 to Amended and Restated Wiring Agreement dated January 25, 1994 among Goldman, Sachs & Co., State Street Bank and Trust Company and The Northern Trust Company is incorporated herein by reference to Post-Effective Amendment No. 222 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on July 28, 2009.
 
  (b)   Amended and Restated Wiring Agreement dated January 25, 1994 among Goldman, Sachs & Co., State Street Bank and Trust Company and The Northern Trust Company is incorporated herein by reference to Post-Effective Amendment No. 222 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on July 28, 2009.
 
  (c)   Letter Agreement dated June 20, 1987 regarding use of checking account between Registrant and The Northern Trust Company is incorporated herein by reference to Post-Effective Amendment No. 26 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 29, 1995.
 
  (d)   Transfer Agency Agreement dated August 9, 2007 between Registrant and Goldman, Sachs & Co. is incorporated herein by reference to Post-Effective Amendment No. 175 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 10, 2007.
 
  (e)   Amended and Restated Transfer Agency Agreement Fee Schedule dated February 10, 2011, to the Transfer Agency Agreement dated August 9, 2007 between Registrant and Goldman, Sachs & Co. is incorporated herein by reference to Post-Effective Amendment No. 270 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on February 16, 2011.
 
  (f)   Form of Retail Service Agreement on behalf of Goldman Sachs Trust relating to Class A Shares of Goldman Sachs Asset Allocation Portfolios, Goldman Sachs Fixed Income Funds, Goldman Sachs Domestic Equity Funds and Goldman Sachs International Equity Funds is incorporated herein by reference to Post-Effective Amendment No. 40 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on October 16, 1997.
 
  (g)   Form of Retail Service Agreement on behalf of Goldman Sachs Trust — TPA Assistance Version relating to the Class A Shares of Goldman Sachs Asset Allocation Portfolios, Goldman Sachs Fixed Income Funds, Goldman Sachs Domestic Equity Funds and Goldman Sachs International Equity Funds is incorporated herein by reference to Post-Effective Amendment No. 198 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on April 28, 2008.
 
  (h)   Form of Supplemental Service Agreement on behalf of Goldman Sachs Trust relating to the Class A Shares and Service Shares of Goldman Sachs Equity and Fixed Income Funds is incorporated herein by reference to Post-Effective Amendment No. 198 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on April 28, 2008.
 
  (i)   Form of Service Agreement on behalf of Goldman Sachs Trust relating to the Institutional Class, Select Class, Preferred Class, Capital Class, Administration Class, Premier Class, Service Class, Resource Class and Cash Management Class, as applicable, of Goldman Sachs Financial Square

 

 

      Funds, Goldman Sachs Fixed Income Funds, Goldman Sachs Domestic Equity Funds, Goldman Sachs International Equity Funds and Goldman Sachs Fund of Funds Portfolios is incorporated herein by reference to Post-Effective Amendment No. 252 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on July 29, 2010.
 
  (j)   Mutual Funds Service Agreement dated June 30, 2006 between Registrant and J.P. Morgan Investor Services Co. is incorporated herein by reference to Post-Effective Amendment No. 149 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on January 19, 2007.
 
  (k)   Code of Ethics — Goldman Sachs Trust, Goldman Sachs Variable Insurance Trust and Goldman Sachs Credit Strategies Fund dated April 23, 1997, as amended effective March 12, 2009 is incorporated herein by reference to Post-Effective Amendment No. 249 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on June 30, 2010.
 
  (l)   Code of Ethics — Goldman, Sachs & Co., Goldman Sachs Asset Management, L.P., Goldman Sachs Asset Management International, Goldman Sachs Hedge Fund Strategies LLC and GS Investment Strategies, LLC dated January 23, 1991, effective November 17, 2010 is incorporated herein by reference to Post-Effective Amendment No. 263 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 29, 2010.
 
  (m)   Amended and Restated Transfer Agency Agreement Fee Schedule dated October 20, 2011, to the Transfer Agency Agreement dated August 9, 2007 between Registrant and Goldman, Sachs & Co., is incorporated herein by reference to Post-Effective Amendment No. 290 to the Registrant’s Registration Statement on Form N-1A as filed with the SEC on December 12, 2011.
 
(14)  (a)   Consent of Acquired Fund Independent Registered Public Accounting Firm is filed herewith.
 
  (b)   Consent of Acquiring Fund Independent Registered Public Accounting Firm is filed herewith.
 
(15)     Not Applicable.
 
(16)     Powers of Attorney are filed herewith.
 
(17) (a)   Form of Proxy Card is filed herewith.
 
  (b)   Summary Prospectus dated July 6, 2011 and Prospectus and SAI of Rising Dividend Growth Fund dated February 1, 2011, as supplemented, are filed herewith.
 
  (c)   Audited Financials of the Annual Report of Rising Dividend Growth Fund for the fiscal year September 30, 2011 are filed herewith.
Item 17. Undertakings
(1) The undersigned registrant agrees that prior to any public reoffering of the securities registered through the use of a prospectus which is a part of this registration statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) of the Securities Act [17 CFR 230.145c], the reoffering prospectus will contain the information called for by the applicable registration form for the reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.
(2) The undersigned registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as a part of an amendment to the registration statement and will not be used until the amendment is effective, and that, in determining any liability under the 1933 Act, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them.

 

 

(3) The Registrant hereby undertakes to file, by post-effective amendment, the final opinion of Bingham McCutchen LLP supporting the tax consequences of the proposed reorganization as soon as practicable after the closing of the reorganization.

 

 

SIGNATURES
     As required by the Securities Act of 1933, this registration statement has been signed on behalf of the registrant, in the City of New York and State of New York, on this 13th day of December, 2011.
GOLDMAN SACHS TRUST, on behalf of its series:
Goldman Sachs Rising Dividend Growth Fund
         
By:
  /s/ Peter V. Bonanno
 
Peter V. Bonanno 		   
 
  Secretary    
     As required by the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
         
Name   Title   Date
1James A. McNamara
 
James A. McNamara
  President (Chief Executive Officer)
and Trustee 		  December 13, 2011
 
        
1George F. Travers
 
George F. Travers
  Principal Financial Officer and
Senior Vice President 		  December 13, 2011
 
        
1Ashok N. Bakhru
 
Ashok N. Bakhru
  Chairman and Trustee    December 13, 2011
 
        
1Donald C. Burke
 
Donald C. Burke
  Trustee    December 13, 2011
 
        
1John P. Coblentz, Jr.
 
John P. Coblentz, Jr.
  Trustee    December 13, 2011
 
        
1Diana M. Daniels
 
Diana M. Daniels
  Trustee    December 13, 2011
 
        
1Joseph P. LoRusso
 
Joseph P. LoRusso
  Trustee    December 13, 2011
 
        
1Jessica Palmer
 
Jessica Palmer
  Trustee    December 13, 2011
 
        
1Alan A. Shuch
 
Alan A. Shuch
  Trustee    December 13, 2011
 
        
1Richard P. Strubel
 
Richard P. Strubel
  Trustee    December 13, 2011
         
By:
  /s/ Peter V. Bonanno
 
Peter V. Bonanno, 		   
 
  Attorney-In-Fact    
 
1   Pursuant to powers of attorney filed herewith.

 

 

Exhibit Index
     
(11)
  Opinion and Consent of Dechert LLP
 
    
(12)
  Form of Opinion of Bingham McCutchen LLP supporting the tax matters and consequences to shareholders discussed in the Prospectus/Information Statement
 
    
(14)(a)
  Consent of Acquired Fund Independent Registered Public Accounting Firm
 
    
(14)(b)
  Consent of Acquiring Fund Independent Registered Public Accounting Firm
 
    
(16)
  Powers of Attorney
 
    
(17)(a)
  Form of Proxy Card
 
    
(17)(b)
  Summary Prospectus dated July 6, 2011 and Prospectus and SAI of Rising Dividend Growth Fund dated February 1, 2011, as supplemented
 
    
(17)(c)
  Audited Financials of the Annual Report of Rising Dividend Growth Fund for the fiscal year September 30, 2011

 

EX-99.11 2 e92936exv99w11.htm EX-99.11 exv99w11
     
(DECHERT LOGO)
  1095 Avenue of the Americas
New York, NY 10036-6797
+1 212 698 3500 Main
+1 212 698 3599 Fax
www.dechert.com
December 13, 2011
Goldman Sachs Trust
71 South Wacker Drive
Chicago, IL 60606
      Re:   Goldman Sachs Trust — Goldman Sachs Rising Dividend Growth Fund (the “Acquiring Fund”) Registration Statement on Form N-14 (the “Registration Statement”)
Dear Ladies and Gentlemen:
We have acted as counsel to Goldman Sachs Trust (the “Trust”), a statutory trust duly organized and validly existing under the laws of the State of Delaware, in connection with the Trust’s Registration Statement under the Securities Act of 1933, as amended (the “1933 Act”), filed with the Securities and Exchange Commission (“SEC”), on December 13, 2011, relating to the transfer of all of the assets of the Rising Dividend Growth Fund (the “Acquired Fund”), a series of the Dividend Growth Trust, a Delaware statutory trust, in exchange for the issuance of shares of beneficial interest of the Acquiring Fund, a Series of the Trust (the “Shares”), and the assumption by the Acquiring Fund of the liabilities of the Acquired Fund, pursuant to the proposed reorganization as described in the Registration Statement and in the form of Agreement and Plan of Reorganization by and between the Trust, on behalf of the Acquiring Fund, and Dividend Growth Trust, on behalf of the Acquired Fund (the “Reorganization Agreement”) filed therewith.
We have examined such governmental and corporate certificates and records as we deemed necessary to render this opinion. In such examination, we have assumed the authenticity of all documents submitted to us as originals and the conformity to original documents of all copies submitted to us as certified, conformed or photostatic copies and the authenticity of the originals of such latter documents. In connection with the opinions expressed herein, we have relied as to factual matters on representations made by the Trust in the Reorganization Agreement and in other documents, instruments and certificates delivered to us in connection with the transactions contemplated by the Reorganization Agreement. We have also relied upon certificates of public officials and officers of the Trust and upon other information we have obtained in the course of our representation of the Trust in connection with the transactions contemplated by the Reorganization Agreement. We note that we are not admitted to practice law in the State of Delaware and, to the extent that this opinion is based on Delaware law, it is based on the published statutes of the State and on the published decisions of courts applying Delaware law.
Based on and subject to the foregoing, we are of the opinion that:
  1.   The Trust is a duly registered, open-end, management investment company, and its registration with the SEC as an investment company under the Investment Company Act of 1940, as amended, is in full force and effect; and
 
  2.   The Shares of the Acquiring Fund and each Class thereof to be registered under the 1933 Act have been duly authorized for issuance and, when issued to Acquired Fund shareholders in the manner described in the Registration Statement, will be validly issued and, subject to the
US Austin Boston Charlotte Hartford New York Orange County Philadelphia Princeton San Francisco Silicon Valley Washington DC EUROPE Brussels Dublin London Luxembourg Moscow Munich Paris ASIA Beijing Hong Kong

 

 

qualifications set forth in the Trust’s Declaration of Trust, fully paid and non-assessable beneficial interests in the Series and each Class thereof. In this regard, we note that, pursuant to Section 2 of Article VIII of the Declaration of Trust, the Trustees have the power to cause each shareholder, or each shareholder of any particular Series or Class, to pay directly, in advance or arrears, for charges of the Trust’s custodian or transfer, shareholder servicing or similar agent, an amount fixed from time to time by the Trustees, by setting off such charges due from such shareholder from declared but unpaid dividends owed such shareholder and/or by reducing the number of shares in the account of such shareholder by that number of full and/or fractional shares which represents the outstanding amount of such charges due from such shareholder.
This opinion is solely for the benefit of the Acquired Fund and may not be provided to or relied on by any other person without our prior written consent. Our opinion is based on and limited to the current status of the law, and is subject in all respects to, and may be limited by, further rules, regulations and legislation, as well as developing case law. We do not undertake to notify any person of changes in facts or law occurring or coming to our attention after the delivery of this opinion.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement, to be filed with the SEC, and to the use of our name in the Registration Statement, unless and until we revoke such consent. In giving such consent, however, we do not admit that we are within the category of persons whose consent is required by Section 7 of the 1933 Act or the rules and regulations thereunder.
Very truly yours,
/s/ Dechert LLP
Dechert LLP

 

EX-99.12 3 e92936exv99w12.htm EX-99.12 exv99w12
Exhibit 12
[__________ ___], 2012
Goldman Sachs Trust
71 South Wacker Drive
Chicago, Illinois 60606
Dividend Growth Trust
58 Riverwalk Boulevard, Building 2, Suite A
Ridgeland, South Carolina 29936
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Paragraph 8.5 of the Agreement and Plan of Reorganization (the “Agreement”), dated as of [__________ ___], 2012, by and between Goldman Sachs Trust, a Delaware statutory trust (the “Acquiring Trust”), on behalf of Goldman Sachs Rising Dividend Growth Fund, a series thereof (the “Acquiring Fund”), and Dividend Growth Trust, a Delaware statutory trust (the “Acquired Trust”), on behalf of its sole series, Rising Dividend Growth Fund (the “Acquired Fund”). All capitalized terms not otherwise defined herein have the meanings ascribed to them in the Agreement. The Agreement contemplates (1) the transfer of all of the assets of the Acquired Fund to the Acquiring Fund in exchange solely for (a) the issuance to the Acquired Fund of the number of Acquiring Fund Shares, including fractional Acquiring Fund Shares, of each class with an aggregate net asset value equal to the net asset value of the Acquired Fund attributable to the corresponding class of the Acquired Fund Shares, as determined in the manner set forth in Paragraphs 2.1 and 2.2 of the Agreement, and (b) the assumption by the Acquiring Fund of all liabilities of the Acquired Fund, and (2) the distribution by the Acquired Fund of the Acquiring Fund Shares to the Acquired Fund Shareholders in complete liquidation and dissolution of the Acquired Fund (collectively, the “Transaction”).
In connection with this opinion we have examined and relied upon the originals or copies, certified or otherwise identified to us to our satisfaction, of the Agreement, the Combined Proxy Statement of Rising Dividend Growth Fund and Prospectus for Goldman Sachs Rising Dividend Growth Fund dated [__________ ___], 2012, and related documents (collectively, the “Transaction Documents”). In that examination, we have assumed the genuineness of all signatures, the capacity and authority of each party executing a document to so execute the document, the authenticity and completeness of all documents purporting to be originals (whether reviewed by us in original or copy form) and the conformity to the originals of all documents purporting to be copies (including electronic copies). We have also assumed that each agreement and other instrument reviewed by us is valid and binding on the party or parties thereto and is enforceable in accordance with its terms, and that there are no contracts, agreements, arrangements, or understandings, either written or oral, that are inconsistent with or that would materially alter the terms of the Agreement or the other Transaction Documents.
As to certain factual matters, we have relied with your consent upon, and our opinion is limited by, the representations of the various parties set forth in the Transaction Documents and in certificates of the Acquiring Trust, on behalf of the Acquiring Fund, and the Acquired Trust, on behalf of the Acquired Fund, each dated as of the date hereof

 

 

Goldman Sachs Trust
Dividend Growth Trust
[________ ___], 2012
Page Two
(the “Certificates”). Our opinion assumes (i) that all representations set forth in the Transaction Documents and in the Certificates will be true and correct in all material respects as of the date of the Transaction, and (ii) that the Agreement is implemented in accordance with its terms and consistent with the representations set forth in the Transaction Documents and Certificates. Our opinion is limited solely to the provisions of the Internal Revenue Code of 1986, as amended and as presently in effect (the “Code”), existing case law, existing permanent and temporary treasury regulations promulgated under the Code (“Treasury Regulations”), and existing published revenue rulings and procedures of the Internal Revenue Service that are in effect as of the date hereof, all of which are subject to change and new interpretation, both prospectively and retroactively. We assume no obligation to update our opinion to reflect other facts or any changes in law or in the interpretation thereof that may hereafter occur.
On the basis of and subject to the foregoing, we are of the opinion that, for United States federal income tax purposes:
  1.   The Transaction will constitute a “reorganization” within the meaning of Section 368(a) of the Code, of the type described in Section 368(a)(1)(F) of the Code, and each of the Acquired Trust and the Acquiring Fund will be a “party to a reorganization” within the meaning of Section 368(b) of the Code.
 
  2.   No gain or loss will be recognized by the Acquired Trust on the transfer of the Acquired Assets to the Acquiring Fund solely in exchange for the Acquiring Fund Shares and the assumption by the Acquiring Fund of the Assumed Liabilities, or upon the distribution of the Acquiring Fund Shares to the shareholders of the Acquired Fund, except for (A) gain or loss that may be recognized on the transfer of “section 1256 contracts” as defined in Section 1256(b) of the Code, (B) gain that may be recognized on the transfer of stock in a “passive foreign investment company” as defined in Section 1297(a) of the Code, and (C) any other gain or loss that may be required to be recognized upon the transfer of an Acquired Asset regardless of whether such transfer would otherwise be a non-recognition transaction under the Code.
 
  3.   The tax basis in the hands of the Acquiring Fund of each Acquired Asset will be the same as the tax basis of such Acquired Asset in the hands of the Acquired Trust immediately prior to the transfer thereof, increased by the amount of gain (or decreased by the amount of loss), if any, recognized by the Acquired Trust on the transfer.
 
  4.   The holding period of each Acquired Asset in the hands of the Acquiring Fund, other than assets with respect to which gain or loss is required to be recognized, will include in each instance the period during which such Acquired Asset was held by the Acquired Fund (except where

 

 

Goldman Sachs Trust
Dividend Growth Trust
[________ ___], 2012
Page Three
      investment activities of the Acquiring Fund have the effect of reducing or eliminating the holding period with respect to an Asset).
 
  5.   No gain or loss will be recognized by the Acquiring Fund upon its receipt of the Acquired Assets solely in exchange for Acquiring Fund Shares and the assumption of the Assumed Liabilities.
 
  6.   No gain or loss will be recognized by the Acquired Fund Shareholders upon the exchange of their Acquired Fund Shares for Acquiring Fund Shares as part of the Transaction.
 
  7.   The aggregate tax basis of the Acquiring Fund Shares that each Acquired Fund Shareholder receives in the Transaction will be the same as the aggregate tax basis of the Acquired Fund Shares exchanged therefor.
 
  8.   Each Acquired Fund Shareholder’s holding period for the Acquiring Fund Shares received in the Transaction will include the period for which such shareholder held the Acquired Fund Shares exchanged therefor, provided that the Acquired Fund Shareholder held such Acquired Fund Shares as capital assets on the date of the exchange.
This opinion is being delivered solely to you for your use in connection with the referenced Transaction, and may not be relied upon by any other person or used for any other purpose.
Very truly yours,
BINGHAM McCUTCHEN LLP

 

EX-99.14.A 4 e92936exv99w14wa.htm EX-99.14.A exv99w14wa
Exhibit (14)(a)
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the references to our firm in the Registration Statement on Form N-14 of the Rising Dividend Growth Fund, a series of shares of Dividend Growth Trust. We also consent to the incorporation by reference, into such N-14 Registration Statement of our report, dated November 28, 2011, with respect to the financial statements and financial highlights of the Rising Dividend Growth Fund, included in the Annual Report to Shareholders for the fiscal year ended September 30, 2011.
/s/ BBD, LLP
 
BBD, LLP
Philadelphia, Pennsylvania
December 8, 2011

EX-99.14.B 5 e92936exv99w14wb.htm EX-99.14.B exv99w14wb
Exhibit (14)(b)
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to references to us under the heading “Independent Registered Public Accounting Firm” in the Registration Statement on Form N-14 of Goldman Sachs Rising Dividend Growth Fund.
PricewaterhouseCoopers LLP
Boston, MA
December 12, 2011

 

EX-99.16 6 e92936exv99w16.htm EX-99.16 exv99w16
Exhibit 16
POWER OF ATTORNEY
      Each person whose signature appears below hereby constitutes and appoints Peter V. Bonanno and James A. McNamara, and each of them, his or her true and lawful attorneys-in-fact and agents, with full power and authority of substitution and resubstitution, to do any and all acts and things and to execute any and all instruments which said attorneys-in-fact and agents, or any of them, may deem necessary or advisable or which may be required to enable Goldman Sachs Trust (the “Trust”) to comply with the Investment Company Act of 1940, as amended, and the Securities Act of 1933, as amended (collectively, the “Acts”), and any rules, regulations or requirements of the Securities and Exchange Commission in respect thereof, in connection with the filing and effectiveness of the Trust’s Registration Statement on Form N-14 (the “Registration Statement”), with respect to Goldman Sachs Rising Dividend Growth Fund, a series of the Trust, and any and all amendments (including post-effective amendments) to the Registration Statement, including specifically, but without limiting the generality of the foregoing, the power and authority to sign in the name and on behalf of the undersigned as a Trustee and/or officer of the Trust, any and all such amendments to the Registration Statement filed with the Securities and Exchange Commission under said Acts, and any other instruments or documents related thereto, and the undersigned does hereby ratify and confirm all that said attorneys-in-fact and agents, or any of them, shall do or cause to be done by virtue hereof.
     All past acts of such attorneys-in-fact and agents in furtherance of the foregoing are hereby ratified and confirmed.
     This Power of Attorney may be executed in multiple counterparts, each of which shall be deemed an original, but which taken together shall constitute one instrument.
     As to each of the undersigned, this Power of Attorney shall be valid from the date hereof until revoked by such individual.
     WITNESS our hands on the date(s) set forth below.

 

 

Pursuant to the requirements of the Securities Act of 1933, as amended, this Power of Attorney has been signed below by the following persons in the capacities and as of the dates indicated.
         
/s/ James A. McNamara
 
James A. McNamara
  President (Chief Executive Officer) and Trustee   September 27, 2011
 
        
/s/ George F. Travers
 
George F. Travers
  Principal Financial Officer and Senior Vice President   September 27, 2011
 
        
/s/ Ashok N. Bakhru
 
Ashok N. Bakhru
  Chairman and Trustee    September 27, 2011
 
        
/s/ Donald C. Burke
 
Donald C. Burke
  Trustee    September 27, 2011
 
        
/s/ John P. Coblentz, Jr.
 
John P. Coblentz, Jr.
  Trustee    September 27, 2011
 
        
/s/ Diana M. Daniels
 
Diana M. Daniels
  Trustee    September 27, 2011
 
        
/s/ Joseph P. LoRusso
 
Joseph P. LoRusso
  Trustee    September 27, 2011
 
        
/s/ Jessica Palmer
 
Jessica Palmer
  Trustee    September 27, 2011
 
        
/s/ Alan A. Shuch
 
Alan A. Shuch
  Trustee    September 27, 2011
 
        
/s/ Richard P. Strubel
 
Richard P. Strubel
  Trustee    September 27, 2011

 

EX-99.17.A 7 e92936exv99w17wa.htm EX-99.17.A exv99w17wa
Exhibit (17)(a)
RISING DIVIDEND GROWTH FUND
SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 23, 2012
This proxy is solicited on behalf of the Board of Trustees of Dividend Growth Trust (the “Trust”). The undersigned hereby appoints Charles Troy Shaver, Jr. and Ed Obuchowski, each of them (with full powers of substitution) to vote for the undersigned all shares of beneficial interest of the undersigned in Rising Dividend Growth Fund (the “Fund”), a series of the Trust, at the Special Meeting of Shareholders of the Fund to be held at 1:00 p.m., Eastern time, on February 23, 2012, at the offices of Dividend Growth Advisors, LLC, 58 Riverwalk Boulevard, Building 2, Suite A, Ridgeland, South Carolina 29936, and any adjournment or postponement thereof (the “Meeting”), with all the power the undersigned would have if personally present.
The shares represented by this proxy will be voted as instructed on the reverse side. Unless instructions to the contrary are given on the reverse or if this proxy is executed but no instruction is given, this proxy shall be deemed to grant authority to vote “FOR” the proposal, with discretionary power to vote upon such other business as may properly come before the Meeting or any adjournment or postponement. The proxies intend to vote with management on any such other business properly brought before the Meeting. The undersigned hereby acknowledges receipt of the accompanying Notice of the Special Meeting of Shareholders and combined Proxy Statement and Prospectus.
Date: [    ], 20[ ]
YOUR VOTE IS VERY IMPORTANT.
PLEASE COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD PROMPTLY.
 
 
Signature(s) of Shareholder(s) (Sign in the Box)
Note: Please sign exactly as your name appears on
this Proxy. When signing as attorney, executor,
administrator, trustee or guardian, please give your
full title as such. If a corporation or partnership,
please sign in full corporate or partnership name by
an authorized officer.

 

 

NOTE: YOUR PROXY CARD IS NOT VALID UNLESS IT IS SIGNED
YOUR VOTE IS IMPORTANT. PLEASE VOTE BY FILLING IN THE APPROPRIATE BOX BELOW. THIS PROXY WILL BE VOTED “FOR” THE PROPOSAL BELOW IF NO SPECIFICATION IS MADE BELOW.
Your Board of Trustees recommends that you vote “FOR” Proposal 1.
1.   To approve an Agreement and Plan of Reorganization providing for (i) the acquisition of all of the assets and the assumption of all of the liabilities of Rising Dividend Growth Fund, in exchange for shares of Goldman Sachs Rising Dividend Growth Fund to be distributed to the shareholders of Rising Dividend Growth Fund, and (ii) the subsequent liquidation and dissolution of Rising Dividend Growth Fund.
 
    Please review the enclosed combined Proxy Statement and Prospectus because it contains important information regarding this proposal.
 
    FOR __________ AGAINST __________ ABSTAIN __________
 
2.   To transact such other business as may properly come before the meeting or and adjournments or postponements thereof.
          WE NEED YOUR VOTE BEFORE [_________] [__], 20[ ].
      PLEASE SIGN AND DATE THE REVERSE SIDE.

 

EX-99.17.B 8 e92936exv99w17wb.htm EX-99.17.B exv99w17wb
Exhibit 17(b)
()
DIVIDEND GROWTH TRUST
Rising Dividend Growth Fund
SUMMARY PROSPECTUS
             
Share Class & Ticker:
  Class A   Class C   Class I
 
  ICRDX   ICRGX   ICRIX

     Before you invest, you may want to review the Fund’s prospectus, which contains more information about the Fund and its risks. You can find the Fund’s prospectus and other information about the Fund, including its statement of additional information (SAI) and most recent reports to shareholders, online at http://dividendgrowthadvisors.com/the-rising-dividend-growth-fund/reports-and-prospectus.html. You can also get this information at no cost by calling (888) 826-2520, by sending an email request to info@dividendgrowthadvisors.com, or by sending a written request to Rising Dividend Growth Fund, c/o Huntington Asset Services, P.O Box 6110, Indianapolis, Indiana, 46206. This Summary Prospectus incorporates by reference the Fund’s entire prospectus and SAI, each dated February 1, 2011.
Investment Objective
The Fund seeks long-term growth of capital and current income.
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. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Class A Shares of the Fund. More information about these and other discounts is available from your financial professional and in the “Ways to Reduce Sales Charges” section of this prospectus and in the “Purchase of Shares” section in the Fund’s Statement of Additional Information.
Shareholder Fees (fees paid directly from your investment)
                         
    Class A   Class C   Class I
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)
     5.75 %     None       None  
Maximum Contingent Deferred Sales Charge (as a percentage of the lesser of original purchase price or redemption proceeds)
     1.00 %     1.00 %4     None  
Redemption Fee (as a percentage of amount redeemed within 60 days of purchase)1
     1.00 %     1.00 %     None  
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment)
                         
Management Fees
     0.75 %     0.75 %     0.75 %
Distribution and Service (12b-1) fees
     0.40 %     1.00 %     0.00 %
Other Expenses
     0.71 %     0.71 %     0.71 %
Acquired Fund Fees and Expenses2
     0.01 %     0.01 %     0.01 %
 
                        
Total Annual Fund Operating Expenses
     1.87 %     2.47 %     1.47 %
Expenses Waived and/or Reimbursed3
     (0.21 %)     (0.21 %)     (0.21 %)
 
                        
Total Annual Fund Operating Expenses (After Fee Waivers and Expense Reimbursements)
     1.66 %     2.26 %     1.26 %
 
1.   A $15 fee will be assessed for any redemptions satisfied by wire payment.
 
2.   Acquired Fund Fees and Expenses represent the underlying expense of investing in other investment companies (“Acquired Funds”). The operating expenses in this fee table will not correlate to the expense ratio in the Fund’s financial statements (or to the financial highlights in this Prospectus) because the financial statements include only the direct operating expenses incurred by the Fund and not the indirect costs of investing in Acquired Funds.
 
3.   Total Annual Fund Operating Expenses (After Fee Waivers and Expense Reimbursements) reflect that Dividend Growth Advisors, LLC (“Advisor”) has contractually agreed to waive fees and/or pay certain expenses so that Net Annual Fund Operating Expenses (excluding Acquired Fund Fees and Expenses, brokerage and other investment-related costs, extraordinary expenses, and certain other fees) do not exceed 1.65% for Class A shares, 2.25% for Class C shares, and 1.25% for Class I shares. Any fees waived or expenses paid by the Advisor are subject to repayment by the Fund within the following three years if the Fund is able to make the repayment without exceeding the expense limits in place when the fees were waived or expenses paid. This Expense Limitation Agreement will stay in place until January 31, 2012, although it may be terminated by the Trust at any time. It may be reviewed, modified or discontinued thereafter.
 
4.   The contingent deferred sales charge (“CDSC”) for class C shares applies to redemptions that occur within one year from the date of purchase of such shares. This CDSC is only applicable on Class C shares that are redeemed in accounts that are established after March 1, 2010.
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 the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Additionally, the 10-year values in the Example for Class C shares assume conversion of such Class C shares to Class A shares, which occurs on or about the end of the month which is at least 7 years after the date on which shares were purchased, which, in turn, will lower the fees and expenses that you will pay if you continue to hold shares of the Fund. Although your actual costs may be different, based on these assumptions, your costs would be:

 

 

                                 
    1 YEAR   3 YEARS   5 YEARS   10 YEARS
Class A
   $ 734     $ 1,110     $ 1,509     $ 2,623  
Class C
   $ 229     $ 750     $ 1,297     $ 2,790  
Class I
   $ 128     $ 444     $ 783     $ 1,739  
You would pay the following expenses if you did not redeem your shares:
                                 
    1 YEAR   3 YEARS   5 YEARS   10 YEARS
Class A
   $ 734     $ 1,110     $ 1,509     $ 2,623  
Class C
   $ 229     $ 750     $ 1,297     $ 2,790  
Class I
   $ 128     $ 444     $ 783     $ 1,739  
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual operating expenses or in the Example, above, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 24.84% of the average value of its portfolio.
Principal Investment Strategies
Regardless of industry, the Fund invests at least 80% of its assets in equity securities of dividend-paying domestic and foreign companies whose market capitalization is at least $500 million and that have increased their dividend payments to stockholders for each of the past ten years or more. The Fund is non-diversified and normally concentrates its investments in a group of 25-50 of such companies. The Fund is a growth and income fund with a long-term investment philosophy. Once a company’s stock is owned by the Fund, if the company does not increase its common stock dividend from one year to the next, the stock will be sold.
Equity securities in which the Fund invests include common and preferred stocks as well as master limited partnerships (“MLPs”). Many MLPs operate pipelines transporting crude oil, natural gas and other petroleum products along with associated facilities. The Fund will limit its investment in MLPs to no more than 20% of its assets. The Fund may also invest in real estate investment trusts (“REITs”), other investment companies (including mutual funds and exchange-traded funds (“ETFs”)), and other investments consistent with its rising dividend philosophy.
Principal Risks
Any of the following situations could cause the Fund to lose money or underperform in comparison to its peer group or the broader stock market:
Stock Market Risks: Movements in the stock market may affect the specific securities held by the Fund on a daily basis.
Stock Selection Risks: The stocks in the Fund’s portfolio may decline in value or not increase in value when the stock market in general is increasing or decreasing in value and you could lose money.
Non-Diversification: The Fund is non-diversified and may invest a greater portion of its assets in the securities of a single issuer, or a smaller group of issuers, than a diversified fund. As a result, the Fund may be more sensitive to economic, business, political or other changes affecting the prices of such issuers’ securities.
Foreign Securities: There may be less information about foreign companies in the form of reports and ratings than about U.S. issuers. Foreign issuers may not be subject to uniform accounting, auditing and financial reporting requirements comparable to those applicable to U.S. issuers. Foreign markets may not be as developed or efficient as those in the United States, and there is generally less government supervision and regulation of securities exchanges, brokers and listed issuers than in the United States.
Securities of Smaller Companies: The securities of smaller companies involve greater risk of loss and price fluctuation than larger companies. Their securities may also be less liquid and more volatile. As a result, the Fund could have greater difficulty buying or selling these securities at an acceptable price, especially in periods of market volatility.
MLPs: Master limited partnerships are generally considered interest-rate sensitive investments. During periods of interest rate volatility, these investments may not provide attractive returns. Depending on the state of interest rates in general, the use of MLPs could enhance or harm the overall performance of the Fund.
Real Estate Investment Trusts (REITs): Equity REITs may be affected by changes in the value of underlying properties owned by the REITs. Mortgage REITs will be subject to credit risk, interest rate risk and prepayment risk with respect to the loans made. Credit risk is the risk that the borrower will be unable or unwilling to make interest and principal payments on the loan when they are due. Interest rate risk is the risk that a change in the prevailing interest rate will cause the value of the loan to fall. Prepayment risk is the risk that the mortgages underlying mortgage REITs may be paid off early, which makes it difficult to determine their actual maturity and, therefore, to calculate how they will respond to changes in interest rates. The REIT may reinvest prepaid amounts at lower rates. REITs incur fees that are separate from those of the Fund. As a result, the Fund’s shareholders will indirectly bear a proportionate share of the operating expenses of the REITs, in addition to Fund expenses.
Investment Company Securities: The Fund will incur higher and duplicative expenses when it invests in mutual funds, ETFs, and other investment companies. There is also the risk that the Fund may suffer losses due to the investment practices of the underlying funds.
Management: Fund management’s skill in choosing appropriate investments will play a large part in determining whether the Fund is able to achieve its investment objective. To the extent appropriate investments are not chosen, the Fund may decline in value and you could lose money.
An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Performance Information
Performance data is available on the Advisor’s website at www.dividendgrowthadvisors.com and/or by calling 888-826-2520.
The bar chart and performance table below illustrate the risks of investing in the Fund. The Fund’s past performance (before and after taxes) does not necessarily indicate how the Fund will perform in the future. The information provides some indication of the risks of investing in the Fund by showing changes in its performance from year to year and by showing how its average annual returns compare with those of a broad measure of market performance.
The bar chart shows changes in the Fund’s performance from year to year, with respect to Class A Shares. Sales loads are not reflected in the bar chart; if they were, returns would be less than shown.
Yearly Total Return as of December 31
(PERFORMANCE GRAPH)
     
BEST QUARTER
  13.19% in the 2nd quarter of 2009
WORST QUARTER   -14.74% in the 4th quarter of 2008
After-tax returns are shown for only Class A Shares. After-tax returns for the other Classes will vary. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-

 

 

tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts (“IRAs”). Class C shares will automatically convert to Class A shares seven years after purchase.
Performance Table (With Maximum Sales Charges)
(Average annual total returns for the periods ended December 31, 2010)
                         
    1 Year   5 Years   Since Inception
 
Class A Before Taxes (Inception Date March 18, 2004)
     11.93 %     6.01 %     6.10 %
Class A After Taxes on Distributions
     11.24 %     5.35 %     5.50 %
Class A After Taxes on Distributions and Sale of Fund Shares
     7.71 %     4.83 %     4.96 %
S&P 500 Composite Stock Index (reflects no deduction for fees, expenses or taxes)
     15.90 %     2.29 %     4.17 %
Class C Before Taxes (Inception Date April 14, 2005)
     18.49 %     6.73 %     6.69 %
S&P 500 Composite Stock Index (reflects no deduction for fees, expenses or taxes)
     15.90 %     2.29       3.53 %
Class I Before Taxes (Inception Date January 29, 2007)
     19.22 %     N/A       5.10 %
S&P 500 Composite Stock Index (reflects no deduction for fees, expenses or taxes)
     15.90 %     N/A       -0.85 %
Portfolio Management
     Investment Adviser — Dividend Growth Advisors, LLC
Portfolio Management Team
  •   Thomas Cameron, Portfolio Manager of the Fund since its inception in March 2004; Director, Chairman of the Board and founding member of the Advisor
 
  •   Jere Estes, Portfolio Manager of the Fund since May 2004; Managing Director of Research and Chief Investment Officer of the Advisor
 
  •   C. Troy Shaver, Jr., Portfolio Manager of the Fund since February 2010, President, CEO, and founding member of the Advisor
Buying and Selling Fund Shares
You may purchase or sell shares on any date the New York Stock Exchange is open, either directly through the Fund’s transfer agent by calling (888) 826-2520 or through your broker-dealer or financial intermediary. You may buy shares of the Fund with an initial investment of $5,000 (or $1,000 for IRAs) or more. Additional investments may be made for as little as $250. You may also redeem shares by submitting a written request to Dividend Growth Trust, P.O. Box 6110, Indianapolis, IN 46206.
Tax Information
The Fund’s distributions will be taxed as ordinary income or capital gains, unless you are investing through a tax-deferred account, such as a 401(k) plan, individual retirement account (IRA) or 529 college savings plan.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase Fund shares through a broker-dealer or other financial intermediary (such as a bank or trust company), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create conflicts of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.

 

 

DIVIDEND GROWTH TRUST
Rising Dividend Growth Fund
Class A
Class C
Class I
Supplement to the Prospectus and Statement of Additional Information
dated February 1, 2011 (as supplemented March 18, 2011)
Supplement dated June 30, 2011
     Effective June 30, 2011, Mr. Marc L. Murray will no longer serve as part of the portfolio management team of the Rising Dividend Growth Fund. All references to Mr. Murray in the Prospectus and Statement of Additional Information are no longer applicable.
You should read this Supplement in conjunction with the Prospectus and Statement of Additional Information, each dated February 1, 2011, as supplemented, which provide information that you should know before investing in the Fund and should be retained for future reference. These documents are available upon request and without charge by calling the Fund at (888) 826-2520.

 

DIVIDEND GROWTH TRUST
Rising Dividend Growth Fund
Class A: ICRDX
Class C: ICRGX
Class I: ICRIX
Supplement to the Prospectus dated February 1, 2011
Supplement dated March 18, 2011
     Effective March 18, 2011, Mr. Marc L. Murray will become part of the portfolio management team of the Rising Dividend Growth Fund. The disclosure under Portfolio Management — Portfolio Management Team on page 8 of the Prospectus is supplemented as follows:
  •   Marc L. Murray, Portfolio Manager of the Fund since March 18, 2011. Senior Portfolio Manager with the Adviser.
The disclosure under Management of the Fund — Portfolio Management Team on pages 13 and 14 of the Prospectus is supplemented as follows:
Mr. Murray, Senior Portfolio Manager with the Adviser, became a portfolio manager of the Fund on March 18, 2011. From 2009 to 2011, Mr. Murray was a Portfolio Manager/Chief Strategist for Shandon Hill Capital. From 2005 to 2009, Mr. Murray served as a Portfolio Strategist/Senior Research Analyst at Morgan Stanley where he oversaw $500 million in assets. From 2002 to 2004 Mr. Murray served as Senior Vice President/Group Manager, Institutions Banking at Bank of America.
     
This supplement and the Prospectus provide the information a prospective investor should know about the Fund and should be retained for future reference. The Fund’s Statement of Additional Information, dated February 1, 2011, as supplemented, has been filed with the Securities and Exchange Commission. You may obtain the Prospectus or Statement of Additional Information without charge by calling the Fund at (888) 826-2520.
  Page |

 

 

DIVIDEND GROWTH TRUST
Rising Dividend Growth Fund
Class A: ICRDX
Class C: ICRGX
Class I: ICRIX
Supplement to Statement of Additional Information
dated February 1, 2011
Supplement dated March 18, 2011
Effective March 18, 2011, Mr. Marc L. Murray will become part of the portfolio management team of the Rising Dividend Growth Fund. The disclosure under Portfolio Management Team on pages 16 and 17 of the Statement of Additional Information is replaced by the following:
Portfolio Management Team
The Fund’s portfolio management team is Thomas W.L. Cameron, Senior Portfolio Manager and former Chief Investment Officer of the Advisor; Jere E. Estes, current Chief Investment Officer, Senior Portfolio Manager and Director of Research for the Advisor; C. Troy Shaver, Jr, President, Chief Executive Officer, and Sr. Portfolio Manager of the Advisor; and Marc L. Murray, Senior Portfolio Manager of the Advisor. Mr. Cameron and Mr. Estes have managed the Fund since its inception; Mr. Shaver was named to the team as of February 2010; and Mr. Murray was named to the team as of March 2011. The team manages all other equity investment accounts. The following table lists the accounts managed by the portfolio management team as of February 28, 2011. None of the accounts managed has an advisory fee based on the performance of the account.
                                 
                    No. of   Total Assets
                    Accounts   of
                    Paying   Performance
    No. of   Total Assets   Performance   Fee
    Accounts   of Accounts*   Fee   Accounts*
Registered Investment Companies
     1     $ 99.7       0     $ 0  
 
                                
Other Pooled Investment Vehicles
     5     $ 24.9       0     $ 0  
 
                                
Other Accounts
     895     $ 564.7       0     $ 0  
 
*   in millions of dollars
     
You should read this Supplement in conjunction with the Statement of Additional Information, as well as the Fund’s Prospectus dated February 1, 2011, as supplemented, which provide information that you should know before investing in the Fund and should be retained for future reference. These documents are available upon request and without charge by calling the Fund at (888) 826-2520.
  Page | 1

 

 

DIVIDEND GROWTH TRUST
Rising Dividend Growth Fund
Class A: ICRDX
Class C: ICRGX
Class I: ICRIX
Supplement to Statement of Additional Information
dated February 1, 2011
Supplement dated March 18, 2011
The following table provides information regarding shares of the Fund owned by each Portfolio Manager as of March 15, 2011.
     
    Dollar Range of
Portfolio Manager   Fund Shares
Thomas Cameron
   $100,001 - $500,000
Jere Estes
   $500,001 - $1,000,000
C. Troy Shaver, Jr.
   $10,001 - $50,000
Marc L. Murray
   $10,001 - $50,000
Each portfolio manager is responsible for management of the Fund and other investment accounts. The possibility of conflicts of interest may arise in the management of the Fund and these other accounts. The portfolio manager may have conflicts of interest in the allocation of investment opportunities and management time. Investment strategies and restrictions may apply that are different for the Fund than the other investment accounts. No accounts of the portfolio managers have performance fee structures. If conflicts of interest occur, the portfolio managers will exercise discretion that is equitable to all interested persons.
     
You should read this Supplement in conjunction with the Statement of Additional Information, as well as the Fund’s Prospectus dated February 1, 2011, as supplemented, which provide information that you should know before investing in the Fund and should be retained for future reference. These documents are available upon request and without charge by calling the Fund at (888) 826-2520.
  Page | 2

 

 

DIVIDEND GROWTH TRUST
Rising Dividend Growth Fund
PROSPECTUS
Class A: ICRDX
Class C: ICRGX
Class I: ICRIX
February 1, 2011
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.

 

 

TABLE OF CONTENTS
         
    PAGE NO.  
SUMMARY SECTION
     3  
 
        
ADDITIONAL INFORMATION ABOUT THE FUND’S PRINCIPAL STRATEGIES AND RELATED RISKS
     9  
 
        
MANAGEMENT OF THE FUND
     12  
 
        
OTHER SERVICE PROVIDERS
     14  
 
        
PURCHASE PRICE/DETERMINATION OF NAV
     15  
 
        
YOUR ACCOUNT
     15  
 
        
CHOOSING A SHARE CLASS
     16  
 
        
BUYING SHARES
     18  
 
        
SELLING YOUR SHARES
     20  
 
        
ADDITIONAL INFORMATION ON BUYING AND SELLING FUND SHARES
     21  
 
        
DIVIDENDS AND OTHER DISTRIBUTIONS
     25  
 
        
TAXES
     26  
 
        
OTHER INVESTMENT STRATEGIES AND RISKS
     27  
 
        
FINANCIAL HIGHLIGHTS
     28  
 
        
ADDITIONAL INFORMATION
     BACK COVER  

 

 

SUMMARY SECTION
Investment Objective
The Fund seeks long-term growth of capital and current income.
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. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $50,000 in Class A Shares of the Fund. More information about these and other discounts is available from your financial professional and in the “Ways to Reduce Sales Charges” section of this prospectus and in the “Purchase of Shares” section in the Fund’s Statement of Additional Information.
                         
    Class A   Class C   Class I
    Shares   Shares   Shares
Shareholder Fees: (fees paid directly from your investment)
                        
 
                        
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)
     5.75 %   None   None
Maximum Contingent Deferred Sales Charge (as a percentage of the lesser of original purchase price or redemption proceeds)
     1.00 %     1.00 % 4   None
Redemption Fee (as a percentage of amount redeemed within 60 days of purchase) 1
     1.00 %     1.00 %   None
 
                        
Annual Fund Operating Expenses:
                        
(expenses that you pay each year as a percentage of the value of your investment)
                        
Management Fees
     0.75 %     0.75 %     0.75 %
Distribution and Service (12b-1) fees
     0.40 %     1.00 %     0.00 %
Other Expenses
     0.71 %     0.71 %     0.71 %
Acquired Fund Fees and Expenses 2
     0.01 %     0.01 %     0.01 %
 
                        
Total Annual Fund Operating Expenses
     1.87 %     2.47 %     1.47 %
Expenses Waived and/or Reimbursed 3
     (0.21 %)     (0.21 %)     (0.21 %)
 
                        
Total Annual Fund Operating Expenses (After Fee Waivers and Expense Reimbursements)
     1.66 %     2.26 %     1.26 %
 
1   A $15 fee will be assessed for any redemptions satisfied by wire payment.
 
2.   Acquired Fund Fees and Expenses represent the underlying expense of investing in other investment companies (“Acquired Funds”). The operating expenses in this fee table will not correlate to the expense ratio in the Fund’s financial statements (or to the financial highlights in this Prospectus) because the financial statements include only the direct operating expenses incurred by the Fund and not the indirect costs of investing in Acquired Funds.
 
3.   Total Annual Fund Operating Expenses (After Fee Waivers and Expense Reimbursements) reflect that Dividend Growth Advisors, LLC (“Advisor”) has contractually agreed to waive fees and/or pay certain expenses so that Net Annual Fund Operating Expenses (excluding Acquired Fund Fees and Expenses, brokerage and other investment-related costs, extraordinary expenses, and certain other fees) do not exceed 1.65% for Class A shares, 2.25% for Class C shares, and 1.25% for Class I shares. Any fees waived or expenses paid by the Advisor are subject to repayment by the Fund within the following three years if the Fund is able to make the repayment without exceeding the expense limits in place when the fees were waived or expenses paid. This Expense Limitation Agreement will stay in place until January 31, 2012, although it may be terminated by the Trust at any time. It may be reviewed, modified or discontinued thereafter.
 
4.   The contingent deferred sales charge (“CDSC”) for class C shares applies to redemptions that occur within one year from the date of purchase of such shares. This CDSC is only applicable on Class C shares that are redeemed in accounts that are established after March 1, 2010.
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.
This example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Additionally, the 10-year values in the example for Class C shares assume conversion of such Class C shares to Class A shares, which occurs on or about the end of the month which is at least 7 years after the date on which shares were purchased, which, in turn, will lower the fees and expenses that you will pay if you continue to hold shares of the Fund. 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 A
   $ 734     $ 1,110     $ 1,509     $ 2,623  
Class C
   $ 229     $ 750     $ 1,297     $ 2,790  
Class I
   $ 128     $ 444     $ 783     $ 1,739  
You would pay the following expenses if you did not redeem your shares:
                                 
    1 YEAR   3 YEARS   5 YEARS   10 YEARS
Class A
   $ 734     $ 1,110     $ 1,509     $ 2,623  
Class C
   $ 229     $ 750     $ 1,297     $ 2,790  
Class I
   $ 128     $ 444     $ 783     $ 1,739  
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual operating expenses or in the example above, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 24.84% of the average value of its portfolio.
Principal Investment Strategies
Regardless of industry, the Fund invests at least 80% of its assets in equity securities of dividend-paying domestic and foreign companies whose market capitalization is at least $500 million and that have increased their dividend payments to stockholders for each of the past ten years or more. The Fund is non-diversified and normally concentrates its investments in a group of 25-50 of such companies. The Fund is a growth and income fund with a long-term investment philosophy. Once a company’s stock is owned by the Fund, if the company does not increase its common stock dividend from one year to the next, the stock will be sold.
Equity securities in which the Fund invests include common and preferred stocks as well as master limited partnerships (“MLPs”). Many MLPs operate pipelines transporting crude oil, natural gas and other petroleum products along with associated facilities. The Fund will limit its investment in MLPs to no more than 20% of its assets. The Fund may also invest in real estate investment trusts (“REITs”), other investment companies (including mutual funds and exchange-traded funds (“ETFs”)), and other investments consistent with its rising dividend philosophy.
Principal Risks
Any of the following situations could cause the Fund to lose money or underperform in comparison to its peer group or the broader stock market:
Stock Market Risks: Movements in the stock market may affect the specific securities held by the Fund on a daily basis.
Stock Selection Risks: The stocks in the Fund’s portfolio may decline in value or not increase in value when the stock market in general is increasing or decreasing in value and you could lose money.
Non-Diversification: The Fund is non-diversified and may invest a greater portion of its assets in the securities of a single issuer, or a smaller group of issuers, than a diversified fund. As a result, the Fund may be more sensitive to economic, business, political or other changes affecting the prices of such issuers’ securities.
Foreign Securities: There may be less information about foreign companies in the form of reports and ratings than about U.S. issuers. Foreign issuers may not be subject to uniform accounting, auditing and financial reporting requirements comparable to those applicable to U.S. issuers. Foreign markets may not be as developed or efficient as those in the United States, and there

 

 

is generally less government supervision and regulation of securities exchanges, brokers and listed issuers than in the United States.
Securities of Smaller Companies: The securities of smaller companies involve greater risk of loss and price fluctuation than larger companies. Their securities may also be less liquid and more volatile. As a result, the Fund could have greater difficulty buying or selling these securities at an acceptable price, especially in periods of market volatility.
MLPs: Master limited partnerships are generally considered interest-rate sensitive investments. During periods of interest rate volatility, these investments may not provide attractive returns. Depending on the state of interest rates in general, the use of MLPs could enhance or harm the overall performance of the Fund.
Real Estate Investment Trusts (REITs): Equity REITs may be affected by changes in the value of underlying properties owned by the REITs. Mortgage REITs will be subject to credit risk, interest rate risk and prepayment risk with respect to the loans made. Credit risk is the risk that the borrower will be unable or unwilling to make interest and principal payments on the loan when they are due. Interest rate risk is the risk that a change in the prevailing interest rate will cause the value of the loan to fall. Prepayment risk is the risk that the mortgages underlying mortgage REITs may be paid off early, which makes it difficult to determine their actual maturity and, therefore, to calculate how they will respond to changes in interest rates. The REIT may reinvest prepaid amounts at lower rates. REITs incur fees that are separate from those of the Fund. As a result, the Fund’s shareholders will indirectly bear a proportionate share of the operating expenses of the REITs, in addition to Fund expenses.
Investment Company Securities: The Fund will incur higher and duplicative expenses when it invests in mutual funds, ETFs, and other investment companies. There is also the risk that the Fund may suffer losses due to the investment practices of the underlying funds.
Management: Fund management’s skill in choosing appropriate investments will play a large part in determining whether the Fund is able to achieve its investment objective. To the extent appropriate investments are not chosen, the Fund may decline in value and you could lose money.
An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Performance
Performance data is available on the Advisor’s website at www.dividendgrowthadvisors.com and/or by calling 888-826-2520.
The bar chart and performance table below illustrate the risks of investing in the Fund. The Fund’s past performance (before and after taxes) does not necessarily indicate how the Fund will perform in the future. The information provides some indication of the risks of investing in the Fund by showing changes in its performance from year to year and by showing how its average annual returns compare with those of a broad measure of market performance.
The bar chart shows changes in the Fund’s performance from year to year, with respect to Class A Shares. Sales loads are not reflected in the bar chart; if they were, returns would be less than shown.
Yearly Total Return as of December 31
(BAR CHART)

 

 

     
BEST QUARTER
  13.19% in the 2nd quarter of 2009
WORST QUARTER
  -14.74% in the 4th quarter of 2008
After-tax returns are shown for only Class A Shares. After-tax returns for the other Classes will vary. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts (“IRAs”). Class C shares will automatically convert to Class A shares seven years after purchase.
Performance Table (With Maximum Sales Charges)
(Average annual total returns for the periods ended December 31, 2010)
                         
    1 Year   5 Years   Since Inception
 
Class A Before Taxes (Inception Date March 18, 2004)
     11.93 %     6.01 %     6.10 %
Class A After Taxes on Distributions
     11.24 %     5.35 %     5.50 %
Class A After Taxes on Distributions and Sale of Fund Shares
     7.71 %     4.83 %     4.96 %
S&P 500 Composite Stock Index (reflects no deduction for fees, expenses or taxes)
     15.90 %     2.29 %     4.17 %
Class C Before Taxes (Inception Date April 14, 2005)
     18.49 %     6.73 %     6.69 %
S&P 500 Composite Stock Index (reflects no deduction for fees, expenses or taxes)
     15.90 %     2.29       3.53 %
Class I Before Taxes (Inception Date January 29, 2007)
     19.22 %     N/A       5.10 %
S&P 500 Composite Stock Index (reflects no deduction for fees, expenses or taxes)
     15.90 %     N/A       -0.85 %
Portfolio Management
     Investment Adviser — Dividend Growth Advisors, LLC
      Portfolio Management Team
 
  •   Thomas Cameron, Portfolio Manager of the Fund since its inception in March 2004; Director, Chairman of the Board and founding member of the Advisor
 
  •   Jere Estes, Portfolio Manager of the Fund since May 2004; Managing Director of Research and Chief Investment Officer of the Advisor
 
  •   C. Troy Shaver, Jr., Portfolio Manager of the Fund since February 2010, President, CEO, and founding member of the Advisor
Buying and Selling Fund Shares
You may purchase or sell shares on any date the New York Stock Exchange is open, either directly through the Fund’s transfer agent by calling (888) 826-2520 or through your broker-dealer or financial intermediary. You may buy shares of the Fund with an initial investment of $5,000 (or $1,000 for IRAs) or more. Additional investments may be made for as little as $250. You may also redeem shares by submitting a written request to Dividend Growth Trust, P.O. Box 6110, Indianapolis, IN 46206.
Tax Information
The Fund’s distributions will be taxed as ordinary income or capital gains, unless you are investing through a tax-deferred account, such as a 401(k) plan, individual retirement account (IRA) or 529 college savings plan.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase Fund shares through a broker-dealer or other financial intermediary (such as a bank or trust company), the

 

 

Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create conflicts of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
ADDITIONAL INFORMATION ABOUT THE FUND’S PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
Investment Objective
The Fund seeks long-term growth of capital and current income. The Fund’s investment objective is fundamental and may not be changed without shareholder vote.
Principal Investment Strategies of the Fund
The Fund attempts to achieve its investment objective by investing in equity securities of domestic and foreign companies that have increased their dividend payments to shareholders for each of the past ten years or more.
Regardless of industry, the Fund invests at least 80% of its assets in equity securities of dividend-paying domestic and foreign companies whose market capitalization is at least $500 million and that have increased their dividend payments to stockholders for each of the past ten years or more. The Fund is non-diversified and normally concentrates its investments in a group of 25-50 of such companies. The Fund is a growth and income fund with a long-term investment philosophy. Once a company’s stock is owned by the Fund, if the company does not increase its common stock dividend from one year to the next, the stock will be sold.
Stocks are selected for the Fund by seeking companies with strong earnings growth potential and special emphasis will be placed on those companies that the Fund believes demonstrate:
  •   Financial stability
 
  •   Strong market position with solid pricing power
 
  •   Effective management leadership
 
  •   Prominent brand recognition
 
  •   Strong patent position
Current income created by rising common stock dividends is an important consideration in selecting the Fund’s investments.
Equity securities in which the Fund invests include common and preferred stocks as well as master limited partnerships (“MLPs”). Many MLPs operate pipelines transporting crude oil, natural gas and other petroleum products along with associated facilities. The Fund will limit its investment in MLPs to no more than 20% of its assets. The Fund may also invest in real estate investment trusts (“REITs”), other investment companies (including mutual funds and exchange-traded funds (“ETFs”)), and other investments consistent with its rising dividend philosophy.
Temporary Investments
To respond to adverse market, economic, political or other conditions, the Fund may invest up to 100% of its assets in money market mutual funds and in U.S. short-term money market instruments as a temporary defensive measure. These instruments include:
  •   Cash and cash equivalents
 
  •   U.S. government securities
 
  •   Certificates of deposit or other obligations of U.S. banks
 
  •   Corporate debt obligations with remaining maturities of 12 months or less
 
  •   Commercial paper
 
  •   Demand and time deposits
 
  •   Repurchase agreements
 
  •   Bankers’ acceptances
To the extent that the Fund engages in a temporary, defensive strategy, it may not achieve its investment objective. Any percentage limitations with respect to the investment of assets of the Fund are applied at the time of purchase.
Principal Risks
Any of the following situations could cause the Fund to lose money or underperform in comparison to its peer group or the

 

 

broader stock market:
Stock Market Risks: Movements in the stock market may affect the Fund’s share prices on a daily basis. The overall market and the specific securities held by the Fund may decline in value and you could lose money.
Stock Selection Risks: The stocks in the Fund’s portfolio may decline in value or not increase in value when the stock market in general is increasing or decreasing in value and you could lose money.
Non-Diversification: The Fund is non-diversified and may invest a greater portion of its assets in the securities of a single issuer, or a smaller group of issuers, than a diversified fund. As a result, the Fund may be more sensitive to economic, business, political or other changes affecting the prices of such issuers’ securities, which may result in greater fluctuation in the value of the Fund’s shares and you could lose money. The Fund intends, however, to continue to meet certain tax diversification requirements.
Foreign Securities: Investments in foreign securities may involve a greater degree of risk than securities of U.S. issuers. There may be less information about foreign companies in the form of reports and ratings than about U.S. issuers. Foreign issuers may not be subject to uniform accounting, auditing and financial reporting requirements comparable to those applicable to U.S. issuers. Foreign markets may not be as developed or efficient as those in the United States, and there is generally less government supervision and regulation of securities exchanges, brokers and listed issuers than in the United States.
Securities of Smaller Companies: The securities of smaller companies may experience more market price volatility than the securities of larger companies. These companies are typically subject to more dramatic changes in earnings and business prospects than larger, more established companies. Additionally, the securities of smaller companies are less liquid because they tend to trade over-the-counter or on regional stock exchanges and the frequency and volume of their trading are often substantially less than for securities of larger companies.
MLPs: Master limited partnerships are generally considered interest-rate sensitive investments. During periods of interest rate volatility, these investments may not provide attractive returns. Depending on the state of interest rates in general, the use of MLPs could enhance or harm the overall performance of the Fund.
Real Estate Investment Trusts (REITs): Equity REITs may be affected by changes in the value of the underlying properties owned by the REITs. Mortgage REITs will be subject to credit risk, interest rate risk and prepayment risk with respect to the loans made. Credit risk is the risk that the borrower will be unable or unwilling to make interest and principal payments on the loan when they are due. Interest rate risk is the risk that a change in the prevailing interest rate will cause the value of the loan to fall. Prepayment risk is the risk that the mortgages underlying mortgage REITs may be paid off early, which makes it difficult to determine their actual maturity and, therefore, to calculate how they will respond to changes in interest rates. The REIT may have to reinvest prepaid amounts at lower rates. REITs incur fees that are separate from those of the Fund. As a result, the Fund’s shareholders will indirectly bear a proportionate share of the operating expenses of the REITs, in addition to Fund expenses.
Investment Company Securities: When the Fund invests in other investment companies (such as mutual funds or ETFs), it will indirectly bear its proportionate share of any fees and expenses payable directly by the other investment company. Therefore, the Fund will incur higher expenses, many of which may be duplicative. The Fund may also be affected by losses of the underlying funds and the level of risk arising from the investment practices of the underlying funds. The Fund has no control over the risks taken by the underlying funds in which it invests. In addition to risks generally associated with investments in investment company securities, ETFs are subject to the following risks that do not apply to non-exchange traded funds: (i) the ETF’s shares may trade at a market price above or below their net asset value; (ii) an active trading market for an ETF’s shares may not develop or be maintained; (iii) the ETF may employ an investment strategy that utilizes high leverage ratios; and (iv) trading of an ETF’s shares may be halted if the listing exchange’s officials deem such action appropriate, the shares are de-listed from the exchange, or the activation of market-wide “circuit breakers” (which are tied to large decreases in stock prices) halts stock trading generally.
Management: Fund management’s skill in choosing appropriate investments will play a large part in determining whether the Fund is able to achieve its investment objective. To the extent appropriate investments are not chosen, the Fund may decline in value and you could lose money.
Suitability
The Fund may be appropriate for investors who seek capital appreciation with some current income and who are able to accept short-term fluctuations in return for the potential for greater long-term growth. Investors who are seeking significant current income or who have a conservative or short-term investment approach may wish to consider other investments.
MANAGEMENT OF THE FUND
The Advisor’s offices are located at 58 Riverwalk Boulevard, Building 2, Suite A, Ridgeland, SC 29936. The Advisor

 

 

manages the investments of the Fund in accordance with the Fund’s investment objectives, policies and limitations. Prior to October 19, 2005, Eastern Point Advisors, Inc. (“EPA”) was the investment advisor to the Fund and the Advisor was the sub-advisor to the Fund.
The Advisor, a South Carolina limited liability company, is a registered investment advisor founded in 2003. In addition to acting as the investment advisor to the Fund, the Advisor also manages individual private accounts. As of December 31, 2010, the Advisor had approximately $635 million under management.
At a Special Meeting of Shareholders held on October 18, 2005, shareholders of the Fund approved a multi-manager structure for the Fund. The multi-manager arrangement permits the Trust and the Advisor to enter into, and materially amend, sub-advisory agreements with any sub-adviser that may be retained in the future to manage the Fund without obtaining shareholder approval. In each instance, the Board of Trustees of the Trust must conclude that any sub-advisory arrangements are in the best interests of the Fund’s shareholders and must approve any related sub-advisory agreement. In addition, before a multi-manager arrangement could go into effect for the Fund, the Trust would have to obtain the necessary exemptive relief in the form of an order from the Securities and Exchange Commission (“SEC”), or, alternatively, a proposed SEC rule on the subject would have to be adopted. The Trust has not yet applied to the SEC for a multi-manager exemptive order. If the Trust does apply to the SEC for an order, there is no assurance that such an order will be granted.
Portfolio Management Team
Thomas Cameron, Jere Estes, and C. Troy Shaver, Jr. serve as the portfolio management team for the Fund.
Mr. Cameron has been a portfolio manager of the Fund since the Fund’s inception. Mr. Cameron served as the chief investment officer of the Advisor from 2003 to 2008 and is a director and founding member of the Advisor. Mr. Cameron has been managing portfolios using a rising dividend philosophy since 1979. From 1978 to 2000, Mr. Cameron served as vice president at Interstate Johnson Lane Brokerage in Charlotte, NC. Mr. Cameron served as a director of the Sovereign Investors Fund, which utilized the rising dividend philosophy, from 1979 until 1997. Mr. Cameron was also a founder of Cameron and Associates, a firm providing investment services to individuals, corporations, and institutional investors from July, 2000 through January, 2009. From June, 2000 until March, 2004, Mr. Cameron was a registered representative of ProEquities, Inc.
Mr. Estes became a portfolio manager of the Fund on May 1, 2004, having served as a portfolio consultant to the Fund prior thereto. Mr. Estes, currently Chief Investment Officer and Asst. Treasurer of the Trust, served as a consultant to the Advisor from 2003 until May of 2004. Since June of 2004, Mr. Estes has served as a Managing Director of the Advisor. From 1992 to 1999, Mr. Estes served as Vice President/Director of Research and Senior Portfolio Manager at Sovereign Asset Management in Bryn Mawr, PA. From June of 1999 until May of 2004, Mr. Estes served as Senior Vice President and Chief Investment Officer at Bryn Mawr Trust Company in Bryn Mawr, PA. Mr. Estes was also a registered representative of Investors Capital Corporation from June of 2004 until December of 2004.
Mr. Shaver, President of the Trust, became a portfolio manager for the Fund on February 1, 2010. Mr. Shaver has been the President, CEO and Chief Compliance Officer of the Advisor since its inception in 2003. From 2000 to 2004 Mr. Shaver was Vice Chairman/ President & Chief Executive Officer of GoldK, Inc./GoldK Investment Services, Inc. From 1996 to 2000 Mr. Shaver served as President of State Street Research Investment Services, Inc.
The Statement of Additional Information (“SAI”) provides additional information about each portfolio manager’s compensation, other accounts managed by each portfolio manager and each portfolio manager’s ownership of shares of the Fund, if any.
Management Fees
Under the Advisory Agreement, the monthly compensation paid to the Advisor is accrued daily at an annual rate equal to 0.75% of the average daily net assets of the Fund. During the fiscal year ended September 30, 2010, the Advisor received compensation of 0.54% of the average daily net assets.
Pursuant to the terms of an Expense Limitation Agreement, the Advisor has contractually agreed to waive fees and/or reimburse Fund expenses excluding brokerage and other investment-related costs, “acquired fund fees and expenses” (as that term is defined in the Securities and Exchange Commission’s Form N-1A), interest, taxes, dues, fees and other charges of government and their agencies including the cost of qualifying the Fund’s shares for sales in any jurisdiction, extraordinary expenses such as litigation (including legal and audit fees and other costs in contemplation of or incident thereto) and indemnification and other expenses not incurred in the ordinary course of the Fund’s business (“Fund Operating Expenses”), so that Net Annual Fund Operating Expenses do not exceed 1.65% for Class A shares, 2.25% for Class C shares, and 1.25% for Class I shares. The Expense Limitation Agreement currently is set to expire on January 31, 2012. The Advisor is entitled to reimbursement of fees waived or Fund expenses paid under the terms of the Expense Limitation Agreement. Any fees waived or expenses paid by the Advisor are subject to repayment by the Fund within the following three years if the Fund is able to make the repayment without exceeding the expense limits in place when the fees were waived or expenses paid. The waived fees relating to operating expenses subject to recovery, at September 30, 2010, were as follows:

 

 

         
Amount   Subject to Repayment by September 30,
 
$  18,357
    2011  
$144,352
    2012  
$125,343
    2013  
A discussion regarding the basis for the Board of Trustees’ approval of the Investment Advisory Agreement of the Fund is available in the Fund’s annual report to shareholders for the year ended September 30, 2010.
OTHER SERVICE PROVIDERS
Distributor
Unified Financial Securities, Inc. is the distributor of the shares of the Fund.
Fund Administrator, Accounting Services Agent, Dividend Paying Agent and Transfer Agent
Huntington Asset Services, Inc. is the fund administrator, accounting services agent, dividend paying agent and transfer agent for the Trust.
Custodian
Huntington National Bank is the custodian of the Trust.
PURCHASE PRICE/DETERMINATION OF NAV
The price of the Fund’s shares is based on the net asset value (the “NAV”) plus any applicable front-end sales charge for Class A Shares (the “Offering Price”). The Fund calculates the NAV by adding the total market value of its investments and other assets, subtracting any liabilities and then dividing that figure by the total number of Fund shares outstanding (assets - liabilities/number of shares outstanding = NAV).
The Fund’s investments are valued based on market value. However, in certain cases, such as when events occur after certain markets have closed, these prices may be unreliable and, therefore, be deemed to be unavailable. When the Fund believes a reported market price for a security does not reflect the amount the Fund would receive on a current sale of that security, the Fund may substitute for the market price a fair-value estimate made according to methods approved by the Board of Trustees of the Trust. The Fund may also use these methods to value certain types of illiquid securities. Fair value pricing generally will be used if the exchange on which a portfolio security is traded closes early or if trading in a particular security was halted during the day and did not resume prior to the Fund’s net asset value calculation. The effect of using fair value pricing is that the Fund’s net asset value will be subject to the judgment of the Advisor, operating under procedures approved by the Board of Trustees of the Trust, instead of being determined by market prices. Using fair value to price securities may result in a value that is different from a security’s most recent closing price and from the prices used by other mutual funds to calculate their net asset values. The Fund’s NAV is calculated at the close of regular trading of the New York Stock Exchange (the “NYSE”), which is normally 4 p.m. Eastern Time. If the Fund holds securities listed primarily on a foreign exchange that trades on days when the Fund is not open for business, the value of your shares may change on days that you cannot buy or sell shares.
If you pay a sales charge, your price will be the Fund’s offering price. When you buy shares at the offering price, the Fund deducts the appropriate sales charge and invests the rest in the Fund. If you qualify for a sales charge waiver, your price will be the Fund’s NAV.
YOUR ACCOUNT
Investing in the Fund
The Fund offers three classes of shares. Each class of shares has a different combination of sales charges, fees and other features. You should consult your financial advisor to determine which class best suits your investment goals and time frame.
CHOOSING A SHARE CLASS

 

 

Class A Shares
Class A Shares have a maximum up-front sales charge of 5.75% that you pay when you buy your shares. The front-end sales charge for the Class A Shares decreases with the amount you invest and is included in the offering price.
                 
            Sales charge as %
            of net amount
    Sales charge as %   invested in
Amount invested   of offering price   the Fund
less than $50,000
     5.75 %     6.10 %
$50,000 but less than $100,000
     4.75 %     4.99 %
$100,000 but less than $500,000
     3.75 %     3.90 %
$500,000 but less than $1,000,000
     2.75 %     2.83 %
$1,000,000 or more
     0.00 %     N/A  
Although purchases of $1,000,000 or more will not be subject to an up-front sales charge, a 1.00% contingent deferred sales charge will be assessed when such shares are sold within twelve months of their acquisition. (See “Contingent Deferred Sales Charges”). The dealer of record receives a commission of 1% from the Fund’s Distributor on sales of $1 million or more.
Under certain circumstances, the sales charge for Class A Shares may be waived. Please see below as well as the SAI. Class A Shares are subject to an annual 12b-1 fee of 0.40%, of which 0.25% are annual distribution fees and 0.15% are annual service fees paid to the distributor, dealers or others for providing personal services and maintaining shareholder accounts.
As described in greater detail in the SAI, some or all of the sales charge may be re-allowed to dealers who achieve certain levels of sales or who have coordinated sales support efforts. The distributor uses a portion of the sales charge that is not re-allowed to other dealers to pay for various marketing expenses of the Fund.
Ways to Reduce Sales Charges
Investors can reduce or eliminate sales charges on Class A shares under certain conditions:
Combined Purchases
Purchases made at the same time by an individual, his or her spouse and any children under the age of 21 are added together to determine the sales charge rate.
Employees and Clients of Certain Entities
Shares may be sold without a sales charge to any current or retired officers, directors, trustees and employees of the Advisor and/or any of its affiliated companies and immediate family members of any of these people. Shares may also be sold without a sales charge to individuals with an investment account or relationship with the Advisor.
Letter Of Intent
This non-binding agreement allows you to purchase Class A Shares over a period of 13 months with the sales charge that would have applied if you had purchased them all at once.
Rights of Accumulation
You can use the combined total value of Class A Shares of the Fund you own for the purpose of calculating the sales charge.
Please Note:
You must advise your dealer, the transfer agent or the Fund if you qualify for a reduction and/or waiver of sales charges.
Class C Shares
Class C Shares have no up-front sales charge, so that the full amount of your purchase is invested in the Fund. Effective with new accounts established on or after March 1, 2010, Class C shares are subject to a 1.00% contingent deferred sales charge if sold within 12 months of purchase. (See “Contingent Deferred Sales Charges”) Class C shares will automatically convert to Class A shares seven (7) years after purchase of such Class C shares, thus reducing future annual expenses.

 

 

  -   Class C Shares are subject to an annual 12b-1 fee of 1.00%, of which 0.75% are annual distribution fees and 0.25% are service fees paid to the distributor, dealers or others for providing personal services and maintaining shareholder accounts.
 
  -   Because of the higher 12b-1 fees, Class C Shares have higher expenses and pay lower dividends than Class A Shares.
The Fund has adopted a Class A Shares 12b-1 plan and a Class C Shares 12b-1 plan that allow the Fund to pay distribution fees for the sale and distribution of its shares. Because these fees are paid out of the Fund’s 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 sales charges.
Class I Shares
Class I shares have no up-front sales charge and no 12b-1 fee. In addition, Class I shares have no contingent deferred sales charge and no redemption fee. Class I shares are offered to certain institutional investors and to certain individuals, and may be offered through financial intermediaries including, but not limited to, broker-dealers, retirement plans, bank trust departments, and financial advisers. Institutional investors may include, but are not limited to, corporations, retirement plans, public plans, and foundations/endowments.
BUYING SHARES
You can purchase shares of the Fund through broker-dealers or directly through the Fund’s transfer agent. You may buy shares of the Fund with an initial investment of $5,000 (or $1,000 for IRAs) or more. Additional investments may be made for as little as $250.
Class C shares are not intended for purchases in excess of $250,000. Because the Fund may not be able to identify an individual investor’s trading activities when investing through omnibus account arrangements, you and/or your investment professional are responsible for ensuring that your investment in Class C shares does not exceed $250,000. The Fund cannot ensure that it will identify purchase orders that would cause your investment in Class C shares to exceed the $250,000 maximum allowed amount. To the extent the Fund is able to determine that a purchase order for class C Shares exceeds $250,000, that purchase order will be declined. When investing through such arrangements, you and/or your investment professional should be diligent in determining that you have selected the correct share class for you.
The Fund also has the right to reject any purchase order.
To Buy Shares
             
    Initial Investment       Subsequent Investments
 
By Mail
            
 
       • Complete and sign the account application.            • Make your check payable to the Rising Dividend Growth Fund.
 
       • Make your check payable to the Rising Dividend Growth Fund            • Fill out an investment slip from an account statement, include your name and account number.
 
       • Mail the application and your check to:            • Mail to:
 
  Dividend Growth Trust       Dividend Growth Trust
 
  P.O. Box 6110       P.O. Box 6110
 
  Indianapolis, IN 46206       Indianapolis, IN 46206
 
       • Minimum initial investment is $5,000 for non-qualified accounts; $1,000 minimum for IRAs.            • Minimum subsequent investment for all accounts is $250.
 
            
By Wire
            
 
       • Call the transfer agent at (888) 826-2520 to arrange for a wire purchase and receive wire instructions. For same day purchase, the wire must be received by 4:00 p.m. Eastern Time.            • Call the transfer agent at (888) 826-2520 to arrange for a wire purchase and receive wire instructions. For same day purchase, the wire must be received by 4:00 p.m. Eastern time.
 
            
 
       • Mail completed account application to the address above.            • Note: Your bank may charge a wire fee.
 
       • Note: Your bank may charge a wire fee.        
 
            
By Automatic Investment Plan        
 
       • You must open a regular Fund account with            • Call (888) 826-2520 to request the form.
 
       $5,000 minimum prior to participating in this plan.            • Complete and return the form and any other required materials.

 

 

Brokers, 401(k) plans, financial advisors or financial supermarkets may charge additional transaction fees, which would not be charged if shares were purchased directly from the Fund.
The Fund may accept telephone orders unless you decline telephone privileges on your account application. You may be responsible for any fraudulent telephone orders as long as the Fund takes reasonable measures to verify the orders.
Important Information About Procedures For
Opening a New Account
Shares of the Fund are available exclusively to U.S. citizens. To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. This means that, when you open an account, we will ask for your name, residential address, date of birth, government identification number and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents, and may take additional steps to verify your identity. If we do not receive this required data, there may be a delay in processing your investment request, which could subject your investment to market risk. If we are unable to immediately verify your identity, the Fund may restrict further investment until your identity is verified. However, if we are unable to verify your identity at all, the Fund reserves the right to close your account without notice and return your investment to you at the NAV determined on the day in which your account is closed. If we close your account because we are unable to verify your identity, your investment will be subject to market fluctuation, which could result in a loss of a portion of your principal investment.
Retirement Accounts
Shares of the Fund are available for purchase through IRAs and qualified retirement plans. These tax-deferred accounts and plans allow you to shelter your net investment income and net capital gains from current federal income taxes. IRAs and accounts established under such plans must have all Fund dividends reinvested in Fund shares. You should consult your tax advisor before purchasing shares for an IRA or a retirement plan. For more information about these accounts and plans or for an IRA application, please call (888) 826-2520.
SELLING YOUR SHARES
You may sell or “redeem” your shares on any day the NYSE is open, either directly through the Fund’s transfer agent or through your broker-dealer or other financial intermediary. The price you receive will be the NAV next calculated after the Fund’s transfer agent receives your redemption request in good order (less redemption fees and contingent deferred sales charges, if applicable).
Selling Recently Purchased Shares
The Fund will redeem shares that were recently purchased by check, but may delay mailing the proceeds for up to 15 business days to allow the purchase check to clear. If the purchase check has cleared, the 15 business day period will not apply.
Signature Guarantees
A signature guarantee protects you against fraud by guaranteeing your signature is authentic. A guarantee may be required on all redemption requests over $10,000 or when the redemption proceeds are to be sent to someone other than the owner of record or to an address or bank account other than those of record. Most banks or financial institutions can provide you with a signature guarantee, but a notary public cannot. The signature guarantee requirements apply to redemption requests received by mail or by telephone.
When the Fund requires a signature guarantee, a New Technology Medallion signature guarantee must be provided. For joint accounts, both signatures must be guaranteed. A medallion signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency, savings association or other financial institution which is participating in a medallion program recognized by the Securities Transfer Association. The three recognized medallion programs are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc., Medallion Signature Program (NYSE MSP). Signature guarantees from financial institutions which are not participating in one of these programs will not be accepted.
To Sell Shares:

 

 

             
By Mail
            
 
       • Submit a written request for redemption with:            • Mail your request to:
 
       • The Fund’s name;            Dividend Growth Trust
 
       • Your Fund account number;            P.O. Box 6110
 
       • The dollar amount or number of shares or percentage of the account to be redeemed; and            Indianapolis, IN 46206
 
       • Signatures of all owners of the account, exactly as the shares are registered.            • A check will be mailed to the name and address in which the account is registered.
 
            
By Wire
            
 
       • This option must be elected either in the initial application or subsequently in writing with a signature guarantee.            • Wire redemption requests must be received before 4:00 p.m. Eastern Time for money to be wired the next business day.
 
       • Call the transfer agent at (888) 826-2520 with your request.            • There is a $15.00 charge for redemptions made by wire.
 
            
By Telephone        
 
       • The Fund may accept telephone redemptions unless you decline telephone privileges on your account application.            • The Fund will use reasonable procedures to confirm that the request is genuine.
 
       • Call the transfer agent at (888) 826-2520 with your request.            • Written confirmation will be provided.
 
            
By Systematic Withdrawal Plan        
 
       • Complete the appropriate section on the Account Application or call (888) 826-2520 to request a form to add the plan.            • Withdrawals can be monthly, quarterly, semi-annually or annually. The minimum amount is $100. Redemption fees will not be charged under this plan.
Please note that if you use a broker-dealer or financial institution to assist you in any of these transactions, they may charge a fee for this service that would not be charged by the Fund.
Under certain circumstances, the Fund may effect redemptions in-kind (i.e., by delivering securities instead of cash) as described in more detail in the SAI.
Redemption proceeds sent by check by the Fund and not cashed within 180 days will be reinvested in the Fund at the current day’s NAV. Redemption proceeds that are reinvested are subject to market risk like any other investment in the Fund.
ADDITIONAL INFORMATION ON BUYING AND SELLING FUND SHARES
General Policies
The Fund reserves the right to:
  •   Change the minimum investment amounts;
 
  •   Cancel any purchase order and impose a $20 returned check fee if the purchase check does not clear; and
 
  •   Reject checks drawn on banks outside the United States or endorsed over by a third party. All investments must be made in U.S. dollars.
The Fund may limit the amount of purchases and refuse to sell shares to any person. If your check or wire does not clear, you will be responsible for any loss incurred by the Fund. You may be prohibited or restricted from making future purchases in the Fund. Checks should be made payable to the Fund. The Fund and its transfer agent may refuse any purchase order for any reason. Cash, third party checks (except for properly endorsed IRA rollover checks), credit card checks, and checks drawn on non-U.S. financial institutions will not be accepted. Cashier’s checks, bank official checks, and bank money orders may be accepted in amounts greater than $10,000. Cashier’s checks and bank official checks in amounts less than $10,000 will also be accepted for IRA transfers from other financial institutions. If the Fund has not yet collected payment for shares you are selling, it may delay paying out the proceeds on your sale until payment has been collected, which may take up to 15 days from the date of purchase.
If you are investing indirectly in the Fund through a financial intermediary, such as a broker-dealer, a bank (including a bank trust department), an investment adviser, an administrator or trustee of a retirement plan or a sponsor of a fee-based program that maintains a master account (an omnibus account) with the Fund for trading on behalf of its customers, different

 

 

guidelines, conditions and restrictions may apply than if you held your shares of the Fund directly. These differences may include, but are not limited to: (i) different eligibility standards to purchase and sell shares; (ii) different minimum and maximum initial and subsequent purchase amounts; (iii) system inability to provide Letter of Intent privileges; and (iv) different annual amounts subject to withdrawal under a Systematic Withdrawal Plan. The financial intermediary through whom you are investing may also choose to impose a redemption fee that has different characteristics, which may be more or less restrictive, than the redemption fee currently imposed on the Fund. If the financial intermediary is managing your account, you may also be charged a transaction or other fee by such financial intermediary, including service fees for handling redemption transactions. Consult with your financial intermediary (or, in the case of a retirement plan, your plan sponsor) to determine what fees, guidelines, conditions and restrictions, including any of the above, may be applicable to you.
Market Timing Policies and Procedures
Some investors try to profit from a strategy of frequent purchases and redemptions of Fund shares commonly known as market timing. Such activity can be harmful to Fund shareholders. The risks of frequent purchases and redemptions of Fund shares include:
  •   Dilution in the value of Fund shares held by long-term investors
 
  •   Interference with efficient management of the Fund’s portfolio
 
  •   Increased brokerage and administrative costs
 
  •   To the extent the Fund invests in foreign securities, the risk that the Fund is more susceptible to arbitrage opportunities resulting from pricing variations due to time zone differences across international financial markets.
The Board of Trustees of the Trust has adopted a policy designed to discourage frequent purchases and redemptions by shareholders. In furtherance of this policy, the Board of Trustees has adopted the following procedures:
  •   The Fund refuses to accept a shareholder’s purchases for sixty (60) calendar days after the shareholder has redeemed out of the Fund.
 
  •   Transactions involving more than $1 million or ten percent (10%) of total Fund assets will be reviewed prior to execution to determine whether the activity will be harmful to other shareholders in the Fund. If a purchase order involves more than $1 million or ten percent (10%) of total Fund assets and it is determined to be harmful to the Fund, then the Fund will refuse to accept the purchase order.
The Fund reserves the right to impose the following restrictions:
  •   Imposition of a redemption fee or modification of any applicable existing redemption fee;
 
  •   Exchanges may only be made by U.S. mail; no exchanges will be permitted to be made electronically, by telephone or by facsimile;
 
  •   Suspension or termination of a shareholder’s right to purchase shares of the Fund.
Shareholders who engage, or are suspected of engaging, in disruptive trading practices may be placed on a “watch list.” Shareholders who have been placed on such list will have their transactions scrutinized before they are permitted to make further purchases of Fund shares to determine that such activity is not harmful to the Fund.
To the extent feasible, the Fund reviews the activity of the underlying shareholders in omnibus accounts to determine whether such transactions are harmful to the Fund. To the extent that the activity is deemed harmful to the Fund, the Fund will work with the financial intermediary to impose any or all of the restrictions described above.
The Fund, through its service providers, including the Advisor, applies these policies with respect to market-timing activities by monitoring trading activity in the Fund, attempting to identify excessive trading patterns, and warning or prohibiting shareholders who trade excessively from making further purchases of Fund shares. These policies and procedures are applied consistently to all shareholders. Although the Fund makes efforts to monitor for market-timing activities, the ability of the Fund to monitor trades that are placed by the underlying shareholders of omnibus accounts maintained by brokers, retirement plan accounts and other approved intermediaries may be limited in those instances in which the investment intermediary maintains the underlying shareholder accounts. Under a federal rule, the Fund is required to have an agreement with many of its intermediaries obligating the intermediaries to provide, upon the Fund’s request, information regarding the intermediaries’ customers and their transactions. However, there can be no guarantee that all excessive, short-term or other abusive trading activities will be detected, even with such an agreement in place. There can be no assurance that the Fund will be able to eliminate all market-timing activities.
Exceptions to Restrictions on Frequent Purchase and Redemption Policy and Procedures:
Notwithstanding the policy and procedures set forth above, the Fund may permit frequent purchases and redemptions under the following limited circumstances:

 

 

  •   Systematic Withdrawal Plan
 
  •   National emergency
 
  •   Market volatility
 
  •   Accounts held by certain retirement plans (such as 401(k) plans) which allow for frequent purchases and redemptions.
Timing of Purchase or Sale Requests
All requests received in good order by the transfer agent before the close of the NYSE, typically 4:00 p.m. Eastern Time, will be executed the same day, at that day’s NAV. Orders received after the close of the NYSE will be executed the following day, at that day’s NAV. The Fund has authorized certain broker-dealers and other financial institutions (including their designated intermediaries) to accept on its behalf purchase and sell orders. The Fund is deemed to have received an order when the authorized person or designee accepts the order and promptly transmits the order in good order to the Fund’s transfer agent, and the order is processed at the NAV next calculated thereafter. It is the responsibility of the broker-dealer or other financial institution to transmit orders promptly to the Fund’s transfer agent. Purchase and redemption orders are executed only on days when the NYSE is open for trading. The NYSE is closed on New Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas. If the NYSE closes early, the deadlines for purchase and redemption orders will be accelerated to the earlier closing time.
Redemption Policies
Payment for redemptions of Fund shares is usually made within one business day, but no later than seven calendar days after receipt of your redemption request. The Fund may suspend the right of redemption or postpone the date of payment for more than seven days during any period when (1) trading on the NYSE is restricted or the NYSE is closed for other than customary weekends and holidays, (2) the SEC has by order permitted such suspension for the protection of the Fund’s shareholders, or (3) an emergency exists making disposal of portfolio securities or valuation of net assets of the Fund not reasonably practicable.
Redemption Fees
To discourage short-term trading, the Fund reserves the right to impose a 1.00% redemption fee on redemptions of Class A and Class C Shares within 60 days of acquisition. Redemption fees are not imposed on shares acquired through the reinvestment of dividends or capital gain distributions or involuntarily redeemed shares. Class I shares are not subject to a redemption fee.
Contingent Deferred Sales Charges
Purchases of Class A shares of $1 million or more either as a lump sum or through our cumulative quantity discount or letter of intent programs that are subsequently redeemed within 12 months of acquisition are subject to a 1.00% contingent deferred sales charge. Effective with new accounts established on or after March 1, 2010, Class C shares are subject to a 1.00% contingent deferred sales charge if redeemed within 12 months of purchase. Contingent deferred sales charges are not imposed on shares acquired through the reinvestment of dividends or capital gain distributions or involuntarily redeemed shares. The contingent deferred sales charge may be waived for certain redemptions and distributions, including in situations in which a redemption fee, as described above, is charged.
Minimum Balances
The Fund may redeem your remaining shares at NAV if the balance of your account falls below $5,000 (or $1,000 for IRAs) due to redemptions. The Fund will notify you if your balance has fallen below these amounts, and you will have 60 days to increase your account balance before your shares are redeemed. The Fund may close any account without notice if the account is inactive and the value of the account is $0.
Mailings to Shareholders
The Fund mails quarterly statements summarizing the activity in your account(s) and confirmations following each purchase or sale of your Fund shares. To reduce expenses, the Fund will limit mailings of most financial reports, prospectuses and account statements to one copy for each address that lists one or more shareholders with the same last name. If you would like additional copies of financial reports and prospectuses or separate mailings of account statements, please call (888) 826-2520.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Fund intends to qualify each year as a regulated investment company under the Internal Revenue Code. As a regulated

 

 

investment company, the Fund generally pays no federal income tax on the income and gains it distributes to you. Dividends from net investment income, if any, are declared and paid quarterly. Because of the nature of the Fund’s underlying investments in MLPs, some of the Fund’s distributions may consist of returns of capital. The Fund intends to distribute annually any net capital gains.
A dividend from net investment income represents the income the Fund earns from dividends and interest, if any, paid on its investments, after payment of its expenses. Net capital gains represent the amount the Fund realizes from the sale of securities at a gain (i.e., for an amount exceeding the cost of the security) over the losses it realizes from the sales of securities.
Reinvestment Option: Dividend and capital gain distributions are automatically reinvested in additional shares of the distributing class of the Fund unless you elect on the account application to receive them by check. You may change your distribution option at any time by requesting a change in writing. You must have your distributions reinvested if you participate in the Systematic Withdrawal Plan or own Fund shares through a retirement plan. Distributions are reinvested on the ex-distribution date at the NAV determined at the close of business that day. There are no fees or charges on reinvestments.
The Fund will send dividends and capital gain distributions elected to be received as cash to the address of record or bank of record on the applicable account. Your distribution option will automatically be converted to having all dividends and other distributions reinvested in additional shares if any of the following occur:
  •   Postal or other delivery service is unable to deliver checks to the address of record;
 
  •   Dividends and capital gain distributions are not cashed within 180 days; or
 
  •   Bank account of record is no longer valid.
TAXES
The following information is meant as a general summary of the U.S. federal income tax provisions regarding the taxation of the Fund’s shareholders.
In general, a shareholder who sells or redeems Fund shares will realize a capital gain or loss, which will be long-term or short-term depending upon the shareholder’s holding period for the Fund shares, provided that any loss recognized on the sale of Fund shares held for six months or less will be treated as long-term capital loss to the extent of capital gain dividends received with respect to such shares. An exchange of shares may be treated as a sale and any gain may be subject to tax.
The Fund intends to distribute substantially all of its net investment income and net realized gains to its shareholders at least annually. A Fund’s shareholders may elect to take in cash or reinvest in additional Fund shares any dividends from net investment income or capital gains distributions. In general, dividends and other distributions you receive from the Fund are taxable for federal income tax purposes whether you reinvest them in additional Fund shares or take them in cash, although the Fund will not be taxed on amounts it distributes. Shareholders will not be taxed on distributions to the extent such distributions constitute a return of capital, which is generally a distribution in excess of the Fund’s earnings and profits. Dividends the Fund pays to you from its investment company taxable income (generally consisting of net investment income, the excess of net short-term capital gain over net long-term capital loss, and net gains and losses from certain foreign currency transactions, if any, all determined without regard to any deduction for dividends paid) generally are taxable to you as ordinary income.
Distributions to you of the Fund’s net capital gain (the excess of net long-term capital gain over net short-term capital loss) are taxable to you as long-term capital gains, regardless of how long you have held your Fund shares. Taxable distributions paid by the Fund to corporate shareholders will be taxed at corporate tax rates. A portion of the Fund’s dividends — not exceeding the aggregate dividends it receives from domestic corporations only — also may be eligible for the dividends-received deduction allowed to corporations, subject to similar holding period, debt-financing, and other restrictions. However, dividends a corporate shareholder deducts pursuant to the dividends-received deduction are subject indirectly to the federal alternative minimum tax. Every year you will be sent information showing the amount and status of dividends and other distributions you received from the Fund during the prior calendar year.
As described above, the Fund might invest in foreign securities. Accordingly, the Fund may be subject to foreign withholding taxes on income from certain foreign securities, which could reduce the amount of distributions paid to shareholders. The shareholders might be able to claim a credit or deduction for foreign taxes paid if more than 50% of the Fund’s assets are invested in foreign securities at the end of a fiscal year and the Fund makes an election to pass through to the shareholders their pro rata share of foreign taxes paid. If this election is made, the Fund may report more taxable income to the shareholders than it actually distributes. The shareholders will then be entitled either to deduct their share of these taxes in computing their taxable income, or to claim a foreign tax credit for these taxes against their U.S. federal income tax (subject to limitations for certain shareholders). The Fund will provide the shareholders with the information necessary to claim this deduction or credit on their personal income tax return if the Fund makes this election.
If you purchase Fund shares just prior to a distribution, you will pay the full price for the shares and receive a portion of the

 

 

purchase price back as a taxable distribution. The dividend distributed to you will be included in your taxable income, even though you may not have participated in the increase in the NAV of the Fund. You should consider the potential tax consequences of purchasing shares of the Fund close to the end of the year (when the Fund normally distributes any net capital gains).
The foreign, state and local income tax consequences of investing in the Fund may differ materially from the federal income tax consequences described above. In addition, this discussion is inapplicable to investors that are generally exempt from federal income tax, such as retirement plans that are qualified under Section 401 of the Internal Revenue Code, IRAs, and Roth IRAs. This discussion is not a complete analysis of the federal tax implications of investing in the Fund. Additional tax information is available in the SAI under “Taxes.” You should consult your tax advisor before investing.
Backup Withholding: The Fund may be required to withhold and remit to the U.S. Treasury 28% of all taxable distributions (regardless of the extent to which gain or loss may be realized) otherwise payable to any individual or certain other non-corporate shareholder who fails to properly furnish the Fund with a correct taxpayer identification number (together with the withholding described in the next sentence, “backup withholding”). Withholding at that rate also is required from such distributions otherwise payable to such a shareholder who is subject to backup withholding for any other reason. Backup withholding is not an additional tax, and any amounts so withheld may be credited against a shareholder’s federal income tax liability or refunded.
OTHER INVESTMENT STRATEGIES AND RISKS
The Fund’s main investment strategies are set out in the front of the Prospectus. The Fund may also use other investment strategies and invest in securities that are not discussed in this Prospectus but that are described in detail in the Fund’s SAI. You may obtain a copy of the SAI without charge by calling (888) 826-2520.
Portfolio Holdings
A description of the Fund’s policies and procedures regarding the disclosure of its portfolio securities is available in the SAI.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund’s financial performance. 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 during each period assuming you reinvested all dividends and other distributions. BBD, LLP, an independent registered public accounting firm, has audited this information and their report, along with the Fund’s financial statements, is included in the annual report, which is available upon request. The table below sets forth financial data for a share outstanding throughout the periods.
Dividend Growth Trust
Rising Dividend Growth Fund — Class A
Financial Highlights
For a share outstanding during each year
                                         
    For the fiscal year ended September 30,  
    2010     2009     2008     2007     2006  
Selected Per Share Data
                                        
Net asset value, beginning of year
   $ 11.07     $ 11.31     $ 13.60     $ 12.06     $ 10.86  
 
                              
 
                                        
Income from investment operations
                                        
Net investment income (loss)
     0.01       0.04       (0.01 )     0.02       (0.06 )
Net realized and unrealized gain (loss)
     2.05       (0.04 )     (1.95 )     1.93       1.42  
 
                              
Total from investment operations
     2.06       0.00       (1.96 )     1.95       1.36  
 
                              
 
                                        
Less Distributions to shareholders:
                                        
From net investment income
     (0.01 )     (0.06 )     —       (0.02 )     —  
From net realized gain
     —       —       (0.05 )     (0.23 )     (0.03 )
From tax return of capital
     —       (0.10 )     (0.27 )     (0.12 )     (0.09 )
In excess of net investment income
     (0.18 )     (0.08 )     (0.01 )     (0.04 )     (0.04 )
 
                              

 

 

                                         
    For the fiscal year ended September 30,  
    2010     2009     2008     2007     2006  
Total distributions
     (0.19 )     (0.24 )     (0.33 )     (0.41 )     (0.16 )
 
                              
 
                                        
Paid in capital from redemption fees (a)
     —       —       —       —       —  
 
                              
 
                                        
Net asset value, end of year
   $ 12.94     $ 11.07     $ 11.31     $ 13.60     $ 12.06  
 
                              
 
                                        
Total Return (b)
     18.69 %     0.33 %     -14.63 %     16.25 %     12.62 %
 
                                        
Ratios and Supplemental Data
                                        
Net assets, end of year (000)
   $ 46,003     $ 39,998     $ 45,894     $ 63,827     $ 43,566  
Ratio of expenses to average net assets
     1.65 %     1.65 %     1.65 %     1.65 %     1.65 %
Ratio of expenses to average net assets before waiver & reimbursement or recoupment
     1.86 %     1.92 %     1.56 %     1.94 %     2.13 %
Ratio of net investment income (loss) to average net assets
     0.01 %     0.51 %     (0.05 )%     0.19 %     (0.36 )%
Ratio of net investment income (loss) to average net assets before waiver & reimbursement or recoupment
     (0.20 )%     0.24 %     0.04 %     (0.11 )%     (0.84 )%
Portfolio turnover rate
     24.84 %     39.40 %     24.66 %     31.09 %     50.20 %
 
(a)   Redemption fees resulted in less than $0.005 per share in each year.
 
(b)   Total return in the above table represents the rate that an investor (invested for the entire year) would have earned on an investment in the Fund, assuming reinvestment of dividends. Returns shown exclude the effect of the sales load.

 

 

Dividend Growth Trust
Rising Dividend Growth Fund — Class C
Financial Highlights
For a share outstanding during each year
                                         
    For the fiscal year ended September 30,  
    2010     2009     2008     2007     2006  
Selected Per Share Data
                                        
Net asset value, beginning of year
   $ 11.14     $ 11.39     $ 13.62     $ 12.08     $ 10.87  
 
                              
 
                                        
Income from investment operations
                                        
Net investment income (loss)
     (0.07 )     (0.02 )     (0.08 )     —       (0.10 )
Net realized and unrealized gain (loss)
     2.12       (0.05 )     (1.95 )     1.85       1.40  
 
                              
Total from investment operations
     2.05       (0.07 )     (2.03 )     1.85       1.30  
 
                              
 
                                        
Less distributions to shareholders:
                                        
From net investment income
     — (a)     (0.04 )     —       —       —  
From net realized gain
     —       —       (0.05 )     (0.23 )     (0.03 )
From tax return of capital
     —       (0.08 )     (0.15 )     (0.06 )     (0.04 )
In excess of net investment income
     (0.11 )     (0.06 )     (0.00) (a)     (0.02 )     (0.02 )
 
                              
Total distributions
     (0.11 )     (0.18 )     (0.20 )     (0.31 )     (0.09 )
 
                              
 
                                        
Paid in capital from redemption fees (b)
     —       —       —       —       —  
 
                              
 
                                        
Net asset value, end of year
   $ 13.08     $ 11.14     $ 11.39     $ 13.62     $ 12.08  
 
                              
 
                                        
Total Return (c)
     18.50 %     -0.37 %     -15.04 %     15.55 %     12.01 %
 
                                        
Ratios and Supplemental Data
                                        
Net assets, end of period (000)
   $ 4,456     $ 3,898     $ 4,338     $ 5,505     $ 3,457  
Ratio of expenses to average net assets
     2.25 %     2.25 %     2.25 %     2.25 %     2.36 %
Ratio of expenses to average net assets before waiver & reimbursement or recoupment
     2.46 %     2.52 %     2.03 %     2.54 %     2.84 %
Ratio of net investment income (loss) to average net assets
     (0.59 )%     (0.10 )%     (0.64 )%     (0.41 )%     (1.07 )%
Ratio of net investment income (loss) to average net assets before waiver & reimbursement or recoupment
     (0.80 )%     (0.37 )%     (0.42 )%     (0.71 )%     (1.55 )%
Portfolio turnover rate
     24.84 %     39.40 %     24.66 %     31.09 %     50.20 %
 
(a)   Less than $0.01 per share.
 
(b)   Redemption fees resulted in less than $0.005 per share in each period.
 
(c)   Total return in the above table represents the rate that an investor (invested for the entire period) would have earned on an investment in the Fund, assuming reinvestment of dividends.

 

 

Dividend Growth Trust
Rising Dividend Growth Fund — Class I
Financial Highlights
For a share outstanding during each period
                                 
          For the period ended  
    For the fiscal year ended September 30,     September 30,  
    2010     2009     2008     2007 (a)
Selected Per Share Data
                                
Net asset value, beginning of period
   $ 11.25     $ 11.50     $ 13.85     $ 12.80  
 
                        
 
                                
Income from investment operations
                                
Net investment income
     0.10       0.09       0.09       0.01  
Net realized and unrealized gain (loss)
     2.05       (0.06 )     (2.00 )     1.10  
 
                        
Total from investment operations
     2.15       0.03       (1.91 )     1.11  
 
                        
 
                                
Less distributions to shareholders:
                                
From net investment income
     (0.01 )     (0.07 )     —       (0.01 )
From net realized gain
     —       —       (0.05 )     —  
From tax return of capital
     —       (0.12 )     (0.37 )     (0.04 )
In excess of net investment income
     (0.23 )     (0.09 )     (0.02 )     (0.01 )
 
                        
Total distributions
     (0.24 )     (0.28 )     (0.44 )     (0.06 )
 
                        
 
                                
Net asset value, end of period
   $ 13.16     $ 11.25     $ 11.50     $ 13.85  
 
                        
 
                                
Total Return (b)
     19.21 %     0.63 %     -14.08 %     8.61 %(c)
 
                                
Ratios and Supplemental Data
                                
Net assets, end of period (000)
   $ 18,092     $ 12,628     $ 11,153     $ 6,548  
Ratio of expenses to average net assets
     1.25 %     1.25 %     1.25 %     1.25 %(d)
Ratio of expenses to average net assets before waiver & reimbursement
     1.46 %     1.52 %     1.44 %     1.54 %(d)
Ratio of net investment income (loss) to average net assets
     0.41 %     0.97 %     0.40 %     (0.59 )%(d)
Ratio of net investment income (loss) to average net assets before waiver & reimbursement
     0.20 %     0.70 %     0.21 %     (0.29 )%(d)
Portfolio turnover rate
     24.84 %     39.40 %     24.66 %     31.09 %(d)
 
(a)   March 21, 2007 (Commencement of Operations) through September 30, 2007.
 
(b)   Total return in the above table represents the rate that an investor (invested for the entire period) would have earned on an investment in the Fund, assuming reinvestment of dividends.
 
(c)   Not annualized.
 
(d)   Annualized.

 

 

ADDITIONAL INFORMATION
For investors who want more information about the Fund, the following document is available free upon request:
STATEMENT OF ADDITIONAL INFORMATION (THE “SAI”)
The SAI provides more detailed information about the Fund and is incorporated by reference into this Prospectus.
You can get free copies of the SAI, annual and semi-annual reports and request other information and ask questions about the Fund by contacting:
Huntington Asset Services, Inc.
2960 N. Meridian St., Suite 300
Indianapolis, IN 46208
Telephone: (888) 826-2520
The SAI, Annual and Semi-Annual Reports are available on the Advisor’s Internet Website at www.dividendgrowthadvisors.com.
Additional information about the Fund’s investments is available in the Fund’s annual and semi-annual reports to shareholders which are available without charge upon request. In the Fund’s annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund’s performance during its last fiscal year.
Information about the Fund (including the SAI) can be reviewed and copied at the Public Reference Room of the Securities and Exchange Commission (“SEC”) in Washington, D.C. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling the SEC at 1-202-551-8090. Reports and other information about the Fund are available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov. Copies of the information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Section, Washington, D.C. 20549-1520.
The Fund’s SEC File No. is 811-09497

 

 

DIVIDEND GROWTH TRUST
Rising Dividend Growth Fund
Statement of Additional Information
February 1, 2011
This Statement of Additional Information (“SAI”) is not a prospectus. It should be read in conjunction with the prospectus for the Rising Dividend Growth Fund (the “Fund”) dated February 1, 2011 (the “Prospectus”). The Prospectus incorporates this SAI by reference. The information in this SAI expands on information contained in the Prospectus. The Prospectus can be obtained without charge by contacting either the financial intermediary through whom you purchased shares or the principal distributor of the Fund at the phone number or address below.
Principal Distributor
Unified Financial Securities, Inc.
2960 N. Meridian Street, Suite 300
Indianapolis, IN 46208
(888) 826-2520
The Fund’s audited financial statements and notes thereto for the year ended September 30, 2010 and the unqualified report of BBD, LLP, the Fund’s independent registered public accounting firm, on such financial statements are included in the Fund’s Annual Report to Shareholders for that year (the “Annual Report”) and are incorporated by reference and made a part of this SAI. No other parts of the Annual Report are incorporated herein. An investor may obtain a copy of the Annual Report, free of charge, by writing to the Fund or calling (888) 826-2520.
Table of Contents
         
    Page  
Description of the Trust
     1  
 
        
Investment Strategies and Related Risks
     1  
 
        
Other Investment Practices and Risks
     3  
 
        
Investment Restrictions
     7  
 
        
Disclosure of Portfolio Holdings
     8  
 
        
Management of the Trust
     10  
 
        
Proxy Voting Policies and Procedures
     17  
 
        
Principal Holders of Securities
     18  
 
        
Investment Management and Other Services
     18  
 
        
Description of the Trust’s Shares
     23  
 
        
Brokerage
     23  
 
        
Purchase, Redemption and Pricing of Shares
     24  
 
        
Net Asset Value
     27  
 
        
Taxes
     28  
 
        
Fund Performance
     41  

 

 

         
    Page  
Financial Statements
     41  
 
        
Appendix A — Descriptions of Securities Ratings
     42  
 
        
Appendix B — Proxy Voting Guidelines Summary
     43  

 

 

Description of the Trust
Dividend Growth Trust (the “Trust”), 58 Riverwalk Boulevard, Building 2, Suite A, Ridgeland, South Carolina 29936, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Trust was organized as a Delaware statutory trust on July 14, 1999. The Trust was formerly known as Eastern Point Advisors Funds Trust, but it changed its name to Dividend Growth Trust on October 21, 2005.
The Trust offers three classes of shares of beneficial interest (“shares”) in the Fund: Class A shares, Class C shares and Class I shares (referred to individually as a “class” and collectively as the “classes”).
At a Special Meeting of shareholders of the Capital Appreciation Fund, another former series of the Trust, held on September 6, 2006, shareholders thereof approved its reorganization with and into the Fund. The reorganization took place at the close of business on September 8, 2006.
Investment Strategies and Related Risks
The Prospectus describes the investment objective and certain restrictions applicable to the Fund. The following supplements the information found in the Prospectus concerning the investment policies of the Fund. The investment practices described below, except the practice regarding portfolio loan transactions, are not fundamental and may be changed by the Trust’s Board of Trustees (the “Board”) without shareholder approval.
Common Stock. The Fund may invest in common stocks. Common stock represents an equity (ownership) interest in a company or other entity. This ownership interest often gives the Fund the right to vote on measures affecting the company’s organization and operations. Although common stocks generally have a history of long-term growth in value, common stock prices are often volatile in the short-term and can be influenced by general market risk and specific corporate risks.
Non-Diversification. The Fund is classified as “non-diversified” under the 1940 Act. Non-diversification means that the proportion of the Fund’s assets that may be invested in the securities of a single issuer is not limited by the 1940 Act, although the Fund nevertheless will continue to comply with the diversification requirements necessary for it to continue to qualify as a “regulated investment company” for federal tax purposes. See “Taxes.” Since the Fund may invest a larger proportion of its assets in a single issuer or group of issuers, an investment in the Fund may be subject to greater fluctuations in value than an investment in a diversified fund.
Convertible Securities. The Fund may invest in convertible securities. Convertible securities may be bonds, preferred stock or other securities that pay a fixed rate of interest or dividends but offer the owner the option of converting the security into common stock. The value of convertible securities will change based on the price of the underlying common stock. Convertible securities generally pay less interest or dividend income than similar non-convertible securities, but a non-convertible security’s income provides a cushion against the stock’s price declines.
Master Limited Partnerships. The Fund may invest in interests in master limited partnerships (“MLPs”). MLP interests trade like shares of stock, and MLPs generally distribute most of their distributable cash flow to investors. Many MLPs operate pipelines transporting crude oil, natural gas and other petroleum products along with associated facilities. Their income generally depends on the volume of the products transported, not on the commodity’s price. An MLP is a public limited partnership. Interests in MLPs are traded on an exchange or on the Nasdaq National Market System (the “Nasdaq”). The ability to trade the interests provides liquidity that is not present with conventional private limited partnerships, but those interests are less liquid than conventional publicly traded securities. MLPs can be organized for income, capital gains or tax shelter purposes. MLPs are generally considered interest-rate sensitive investments. During periods of interest rate volatility, these investments may not provide attractive returns. Depending on the state of interest rates in general, the use of MLPs could enhance or harm the overall performance of the Fund.
Small Capitalization Companies. The Fund may invest in companies with market capitalization of at least $500 million. Investing in the common stock of smaller companies involves special risks and considerations not typically associated with investing in the common stock of larger companies. The securities of smaller companies may experience more market price volatility than the securities of larger companies. These companies are typically subject to more dramatic changes in earnings and business prospects than larger, more established companies. In addition, the securities of smaller companies are less liquid because they tend to trade over-the-counter or on regional exchanges and the frequency and volume of their trading are often substantially less than for securities of larger companies.
Foreign Securities. The Fund may invest indirectly in foreign securities through American Depositary Receipts and European Depositary Receipts (“ADRs” and “EDRs”). For many foreign securities, there are U.S. dollar denominated ADRs, which are bought and sold in the United States and are issued by domestic banks. ADRs represent the right to receive securities of foreign issuers deposited in the domestic bank or a correspondent bank. Generally, there is a large, liquid market in the United States for most ADRs. The Fund may also invest in EDRs, which are receipts evidencing an arrangement with a European bank similar to that for ADRs and are designed for use in the European securities markets. EDRs are not necessarily

 

 

denominated in the currency of the underlying security. The Fund will not invest in unsponsored ADRs and EDRs.
Risks of Foreign Securities. Indirect investments in foreign securities through ADRs and EDRs may involve a greater degree of risk than securities of U.S. issuers. There may be less information about foreign companies in the form of reports and ratings than about U.S. issuers. Foreign issuers may not be subject to uniform accounting, auditing and financial reporting requirements comparable to those applicable to U.S. issuers. Foreign markets may not be as developed or efficient as those in the United States and there is generally less government supervision and regulation of securities exchanges, brokers and listed issuers than in the United States.
Additionally, there is the possibility of adverse changes in investment or exchange control regulations, expropriation, nationalization, foreign taxation, limitations on the removal of assets of the Fund from a country, political or social instability, or diplomatic developments.
If the Fund’s foreign securities are denominated in currencies other than the U.S. dollar, changes in foreign currency exchange rates will affect the Fund’s net asset value, the value of dividends and interest it earns, gains and losses it realizes on the sale of securities and any net investment income and gains that it distributes to shareholders.
Restricted Securities. The Fund may purchase securities that are not registered under the Securities Act of 1933, as amended (the “1933 Act”), and that are subject to restrictions on transfer. The Fund will limit investments in restricted securities to no more than 15% of its total assets, excluding restricted securities eligible for resale pursuant to Rule 144A that have been determined to be liquid by the Board.
Rule 144A Securities. The Fund may purchase securities which are not registered under the 1933 Act but that can be sold to “qualified institutional buyers” in accordance with Rule 144A under the 1933 Act. These securities may be classified as “illiquid securities,” however, any such security will not be considered illiquid if it is determined by Dividend Growth Advisors, LLC (the “Advisor”), under guidelines approved by the Board, that an adequate market exists for that security. This investment practice could have the effect of raising the level of illiquidity in the Fund during any period in which qualified institutional buyers are not interested in purchasing these securities.
Illiquid Securities. The Fund may invest up to 15% of its net assets in securities that are illiquid because of restrictions on transferability or other reasons. Illiquid securities generally include securities that cannot be sold within seven business days in the ordinary course of business at approximately the price at which the Fund has valued the securities. Repurchase agreements with maturities in excess of seven business days and securities that are not registered under the 1933 Act, but that may be purchased by institutional buyers pursuant to Rule 144A under the Securities Act, are subject to this 15% limit (unless such securities are variable amount master demand notes with maturities of nine months or less or unless the Board determines that a liquid trading market exists).
Other Investment Practices and Risks
Lending Portfolio Securities. The Fund may lend its portfolio securities. These loans are secured by the delivery to the Fund of cash collateral, which may be invested in short-term debt securities and money market funds. The Fund may make loans only to broker-dealers who are members of the New York Stock Exchange (“NYSE”) or who have net capital of at least $10,000,000. Such loans will not be made against less than 100% cash collateral maintained at 100% of the market value (marked-to-market daily) of the loaned securities. Loans will be made only if the Fund can terminate the loan at any time.
When the Fund lends portfolio securities, there is a risk that the borrower may fail to return the securities. As a result, the Fund may incur a loss or, in the event of a borrower’s bankruptcy, may be prevented from or delayed in, liquidating the collateral. In addition the securities in which the collateral is invested may lose value, requiring the Fund to make up the shortfall.
Reverse Repurchase Agreements. The Fund may enter into reverse repurchase agreements under which it sells portfolio assets with an agreement to repurchase the assets at a later date at a set price. The Fund continues to receive principal and interest payments on these securities. The Fund will maintain a segregated custodial account consisting of cash or liquid securities of any type or maturity, having a value at least equal to the repurchase price, plus accrued interest.
Reverse repurchase agreements involve the risk that the value of the securities sold by the Fund may decline below the price of the securities the Fund is obligated to repurchase. Reverse repurchase agreements are borrowings by the Fund and are subject to its investment restrictions on borrowing.
Portfolio Turnover. The Fund’s portfolio turnover rate is calculated by dividing the lesser of the purchases or sales of portfolio investments for the reporting period by the monthly average value of the portfolio investments owned during the reporting period.
High rates of portfolio turnover (100% or more) entail certain costs and may result in the Fund’s recognizing increased amounts of net short-term capital gain, which would be taxable to its shareholders as ordinary income when distributed to

 

them. Also, the higher the turnover, the higher the overall brokerage commissions, dealer mark-ups and mark-downs and other transaction costs incurred. The Advisor takes these costs into account, since they affect the Fund’s overall investment performance and reduce shareholders’ return.
Temporary Investments. To maintain cash for redemptions and distributions and for temporary defensive purposes, the Fund may invest in money market mutual funds and in investment grade short-term fixed income securities including short-term U.S. government securities, negotiable certificates of deposit, commercial paper, banker’s acceptances and repurchase agreements. To the extent that the Fund engages in a temporary, defensive strategy, the Fund may not achieve its investment objective.
Other Investments. The Board may, in the future, authorize the Fund to invest in securities other than those listed here and in the Prospectus, provided that such investment would be consistent with the Fund’s investment objective and that it would not violate any fundamental investment policies or restrictions applicable to the Fund.
Fixed Income Securities. The Fund may invest in fixed income securities. Even though interest-bearing securities are investments that promise a stable stream of income, the prices of such securities are affected by changes in interest rates. In general, bond prices rise when interest rates fall and fall when interest rates rise. The values of fixed income securities also may be affected by changes in the credit rating or financial condition of the issuing entities. Once the rating of a portfolio security has been changed, the Fund will consider all circumstances deemed relevant in determining whether to continue to hold the security.
U.S. Government Securities. The Fund may invest in certain securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, including U.S. Treasury securities, which differ in their interest rates, maturities and times of issuance. Treasury bills have a maturity of one year or less, Treasury notes have a maturity of one to ten years, and Treasury bonds generally have maturities of greater than ten years at the date of issuance. Some obligations issued or guaranteed by U.S. government agencies and instrumentalities, such as Government National Mortgage Association pass-through certificates, are supported by the full faith and credit of the U.S. Treasury. Other obligations, such as those of the Federal Home Loan Bank, are supported only by the credit of the instrumentalities. Government securities may have fixed, floating or variable rates of interest. Principal and interest may fluctuate based on generally recognized reference rates or the relationship of rates. No assurance can be given that the U.S. government would provide financial support to U.S. government instrumentalities, as it is not obligated to do so by law.
Credit Ratings. When investing in fixed income securities, the Fund will purchase only those securities rated at the time of purchase within the highest grades assigned by Standard & Poor’s Rating Group, a division of The McGraw-Hill Companies, Inc. (“S&P”) (AAA, AA, A, BBB), or Moody’s Investors Service, Inc. (“Moody’s”) (Aaa, Aa, A, Baa).
Generally, the ratings of Moody’s and S&P represent the opinions of these agencies as to the credit quality of the securities which they rate. These ratings are subjective and are not absolute standards of quality. Changes in the rating of any fixed-income security or in the ability of the issuer to make payments of interest and principal will affect the value of the security.
The Fund may invest in eligible unrated securities that, in the opinion of the Advisor, offer comparable risks to permissible rated securities. A security may cease to be rated or its rating may be reduced below the minimum required for purchase by the Fund after purchase. Neither of these events will necessarily require the Fund to sell the securities.
Fixed income investments bear certain risks, including credit risk, or the ability of an issuer to pay interest and principal as they become due. Generally, higher yielding bonds are subject to more credit risk than lower yielding bonds. Interest rate risk refers to the fluctuations in value of fixed income securities resulting from the inverse relationship between the market value of outstanding fixed income securities and changes in interest rates. An increase in interest rates will generally reduce the market value of fixed income investments and a decline in interest rates will tend to increase their value.
Call risk is the risk that an issuer will pay principal on an obligation earlier than scheduled or expected, which would accelerate cash flows from, and shorten the average life of, the security. Bonds are typically called when interest rates have declined. In the event of a bond being called, the Advisor may have to reinvest the proceeds in lower yielding securities to the detriment of the Fund.
Extension risk is the risk that an issuer may pay principal on an obligation slower than expected, having the effect of extending the average life and duration of the obligation. This typically happens when interest rates have increased.
Repurchase Agreements. The Fund may enter into repurchase agreements with approved banks and broker-dealers. In a repurchase agreement, the Fund purchases securities with the understanding that they will be repurchased by the seller at a set price on a set date.
Repurchase agreements involve some credit risk. For example, if a seller defaults, the Fund will suffer a loss if the proceeds from the sale of the collateral are lower than the repurchase price. To minimize risk, collateral must be held with the Fund’s custodian at least equal to the repurchase price, including any accrued interest.

 

Derivatives. The Fund may invest in derivative instruments, which are financial instruments whose performance and value are derived, at least in part, from another source, such as the performance of an underlying asset or security. Derivatives may be purchased for hedging purposes, to enhance returns, as a substitute for purchasing or selling securities, to maintain liquidity or in anticipation of changes in the composition of the Fund’s portfolio holdings. The Fund’s transactions in derivative instruments may include, among others, the purchase and writing of options on securities.
Writing Covered Options. A call option on securities obligates the Fund to sell specified securities to the holder of the option at a specified price if the option is exercised at any time before the option’s expiration date. A put option on securities obligates the Fund to purchase specified securities from the option holder at a specified price if the option is exercised at any time before the option’s expiration date. Writing covered call options may deprive the Fund of the opportunity to profit from an increase in the market price of the securities in its portfolio. Writing covered put options may deprive the Fund of the opportunity to profit from a decrease in the market price of the securities to be acquired for its portfolio.
All call and put options written by the Fund are covered by (1) maintaining cash or liquid securities in a segregated account with a value at least equal to the Fund’s obligation under the option, (2) entering into an offsetting forward commitment and/or (3) purchasing an offsetting option or any other option that, by virtue of its exercise price or otherwise, reduces the Fund’s net exposure on its written option position. A written call option on securities is typically covered by maintaining the securities that are subject to the option in a segregated account.
The Fund may terminate its obligations under an exchange-traded call or put option by purchasing an option identical to the one it has written. Obligations under over-the-counter options may be terminated only by entering into an offsetting transaction with the other party to the option. These purchases are referred to as “closing purchase transactions.”
Purchasing Options. The Fund would normally purchase call options in anticipation of an increase, or put options in anticipation of a decrease (“protective puts”), in the market value of securities of the type in which it may invest. The Fund may also sell call and put options to close out its purchased options.
The purchase of a call option enables the Fund to purchase specified securities at a set price during the option period, in return for the premium paid. The Fund would ordinarily realize a gain on the purchase of a call option if, during the option period, the value of such securities exceeded the sum of the exercise price, the premium paid and transaction costs; otherwise the Fund would realize either no gain or a loss on the purchase of the call option.
The purchase of a put option enables the Fund to sell specified securities at a specified price during the option period, in exchange for the premium paid. The purchase of protective puts is designed to offset or hedge against a decline in the market value of the Fund’s portfolio securities. Put options may also be purchased for the purpose of the Fund’s benefiting from a decline in the price of securities it does not own. The Fund would ordinarily realize a gain if, during the option period, the value of the underlying securities decreased below the exercise price sufficiently to cover the premium and transaction costs; otherwise the Fund would realize either no gain or a loss on the purchase of the put option. Gains and losses on the purchase of put options may be offset by compensating changes in the value of the Fund’s portfolio securities.
Risks Associated With Options Transactions. The success of transactions in derivative instruments depends on the Advisor’s judgment as to their potential risks and rewards. Use of derivatives exposes the Fund to additional investment risks and transaction costs. Risks inherent in the use of derivative instruments include adverse movements in the prices of securities or currencies and the possible absence of a liquid secondary market for any particular instrument.
Investment Restrictions
Fundamental Investment Restrictions. The following investment restrictions are considered fundamental, which means they may be changed only with the approval of the holders of a majority of the Fund’s outstanding voting securities, defined in the 1940 Act as the lesser of: (1) 67% or more of the Fund’s outstanding shares present at a meeting, if the holders of more than 50% of the Fund’s outstanding shares are present in person or represented by proxy, or (2) more than 50% of the Fund’s outstanding shares. Except as otherwise stated in the Prospectus, the Fund may not:
1.   Borrow money or issue senior securities, except to the extent permitted by the 1940 Act.
 
2.   Underwrite securities of other issuers, except insofar as the Fund may be deemed an underwriter under the 1933 Act when selling its own portfolio securities.
 
3.   Purchase or sell real estate, provided that liquid securities of companies which deal in real estate or interests therein would not be deemed to be an investment in real estate;
 
4.   Invest in commodities or commodity futures contracts, or invest in oil, gas or other mineral leases, or exploration or development programs, except for transactions in financial derivative contracts, such as forward currency contracts; financial futures contracts and options on financial futures contracts; options on securities and currencies.

 

5.   Make loans to other persons, except loans of securities not exceeding one-third of the Fund’s total assets. For purposes of this limitation, investments in debt obligations and transactions in repurchase agreements shall not be treated as loans.
 
6.   Invest in the securities of any one industry (except securities issued or guaranteed by the U.S. government, its agencies and instrumentalities), if as a result more than 25% of the Fund’s total assets would be invested in the securities of such industry.
The Fund’s investment objective is also considered to be fundamental.
Non-Fundamental Investment Restrictions. The following restrictions may be modified by the Board without shareholder approval. The Fund may not:
1.   Invest more than 15% of its net assets in illiquid securities. A security is illiquid if it cannot be sold in seven business days at a price approximately equal to the price at which the Fund is valuing the security. Restricted securities and repurchase agreements with maturities in excess of seven business days are subject to this 15% limitation.
 
2.   Invest in other open-end investment companies except to the extent allowed in the 1940 Act.
 
3.   Invest in a company for the purpose of exercising control or management of the company.
 
4.   Write or purchase options in excess of 5% of the value of the Fund’s total net assets.
 
5.   Purchase securities on margin, except for such short-term credits as are necessary for the clearance of transactions.
Except with respect to 300% asset coverage for borrowing, whenever any investment restriction states a maximum percentage of the Fund’s assets that may be invested in any security, such percentage limitation will be applied only at the time the Fund acquires such security and will not be violated by subsequent increases in value relative to other assets held by the Fund.
Disclosure of Portfolio Holdings
The Trust has adopted policies and procedures with respect to the disclosure of the Fund’s portfolio securities.
The Fund prohibits the disclosure of information about its portfolio holdings, before such information is publicly disclosed, to any outside parties, including individual investors, institutional investors, intermediaries, third party service providers to the Advisor or the Fund, rating and ranking organizations, and affiliated persons of the Fund or the Advisor (the “Potential Recipients”) unless such disclosure is consistent with a Fund’s legitimate business purposes and is in the best interests of its shareholders (the “Best Interests Standard”). The Fund publicly furnishes periodically updated information related to its portfolio holdings on the Advisor’s website at http://www.dividendgrowthadvisors.com/products_fund.htm. By the 15th day following month end, the Fund publishes updated performance information, and by the 15th day following quarter end, the Fund publishes the Fund’s top ten holdings on such website.
As of the date of this SAI, the Advisor and the Fund have determined that the only categories of Potential Recipients that meet the Best Interests Standard are certain officers of the Advisor and certain mutual fund rating and ranking organizations and third party service providers to the Advisor or the Fund with a specific business reason to know the portfolio holdings of a Fund (e.g., securities lending agents). As such, certain procedures must be adhered to before the Potential Recipients may receive the portfolio holdings prior to their being made public. Potential Recipients that get approved for receipt of the portfolio holdings are known as “Approved Recipients.” The Fund’s President or the Chief Investment Officer may determine to expand the categories of Potential Recipients only if he or she first determines that the Best Interests Standard has been met (e.g., for disclosure to a newly hired investment adviser or sub-adviser to the Fund prior to commencing its duties), and only with the written concurrence of the Advisor’s legal counsel and compliance department.
Portfolio Holdings Disclosure Procedures
Neither the Fund nor the Advisor nor any affiliate of either may receive any compensation or consideration for the disclosure of portfolio holdings, although usual and customary compensation may be paid in connection with a service delivered, such as securities lending. Each Potential Recipient who is not an employee or officer of the Advisor must sign a non-disclosure agreement, or otherwise be subject to confidentiality obligations, before such Potential Recipient may become an Approved Recipient. Potential Recipients are (1) required to keep all portfolio holdings information confidential, and (2) prohibited from trading based on such information. In consultation with the Fund’s Chief Compliance Officer, the Board reviews the Fund’s portfolio holdings disclosure policy and procedures annually to determine their effectiveness and to adopt changes as necessary. Employees and officers of the Advisor are subject to the Trust’s Code of Ethics as well as to each entity’s own Code of Ethics with respect to non-disclosure.
Portfolio Holdings Approved Recipients

 

The Fund currently has ongoing arrangements to disclose portfolio holdings information prior to their being made public with the following Approved Recipients:
Huntington National Bank (“Huntington”). The Fund has selected Huntington as custodian for its securities and cash. Pursuant to a custodian contract, the Fund employs Huntington as the custodian of its assets. As custodian, Huntington creates and maintains all records relating to the Fund’s activities and supplies the Fund with a daily tabulation of the securities it owns and that are held by Huntington. Pursuant to such contract, Huntington agrees that all books, records, information and data pertaining to the business of the Fund which are exchanged or received pursuant to the contract shall remain confidential, shall not be voluntarily disclosed to any other person, except as may be required by law, and shall not be used by Huntington for any purpose not directly related to the business of the Fund, except with the Fund’s written consent. Huntington receives reasonable compensation for its services and expenses as custodian.
Huntington Asset Services, Inc. (“HASI”). HASI serves as the Fund’s administrator, fund accounting services agent, dividend paying agent and transfer agent. It receives reasonable compensation for its services and for certain expenses incurred in performing these functions. HASI is not permitted to disclose portfolio holdings to any third parties without the written consent of the Fund.
Unified Financial Securities, Inc. (the “Distributor”). The Distributor serves as the distributor of the Trust’s shares. It receives reasonable compensation for its services and certain expenses for performing this function. The Distributor is not permitted to disclose portfolio holdings to any third parties without the written consent of the Fund.
Rating, Ranking and Research Agencies. The Fund may send its complete portfolio holdings information to certain rating, ranking and research agencies for the purpose of having such agency develop a rating, ranking or specific research product for the Fund. On approximately the 25th day following the previous month-end, the Fund provides its complete portfolio holdings to: Morningstar, Inc.; Bloomberg L.P.; Standard and Poor’s, a division of The McGraw-Hill Companies, Inc.; Thompson Financial and Vickers — Stock. No compensation is received by the Fund or Advisor or any other person in connection with the disclosure of this information. The Fund expects to enter into written confidentiality agreements with each rating, ranking or research agency in which the agency will agree to keep the Fund’s portfolio holdings confidential and to use such information only in connection with developing a rating, ranking or research product for the Fund.
Legal Counsel. The Fund may disclose portfolio holding information to its legal counsel on an as - needed basis in connection with its providing services and counsel to the Trust.
Independent Registered Public Accounting Firm. The Fund may disclose portfolio holding information to its auditors within sixty (60) days after the applicable fiscal period or other periods as necessary for use in providing audit opinions and other advice related to financial, regulatory, or tax reporting.
The Trust may also disclose non-public portfolio holdings information if such disclosure is required by applicable laws, rules, or regulations, or by regulatory authorities.
The Trust’s Chief Compliance Officer (“CCO”) will monitor compliance with the policies and procedures adopted by the Trust. The CCO will report violations to the Board.
Management of the Trust
Trustees and Officers of the Trust. The direction and supervision of the Fund is the responsibility of the Board of Trustees. All Trustees were elected by shareholders of the Trust at a shareholder meeting held on August 3, 2005. Each Trustee serves as a trustee until termination of the Trust unless the Trustee dies, resigns, retires or is removed.
The Trustees and officers of the Trust and their principal occupations during the past five years are set forth below:
Independent Trustees*:
                     
    Position(s) Held with   Number of        
    Trust and Term and   Funds in       Other
    Length of Time   Trust   Principal Occupation(s)   Directorships by
Name (Age) and Address**   Served   Overseen   During the Past 5 Years   Trustees
 
Roger B. Rainville (66)
  Independent Trustee
since August, 2005

Indefinite 		    1     President and Chief Executive Officer of Pioneer Investment Management Shareholder Services Corporation from September 1990 to July 2001. Retired in July 2001 when Pioneer Mutual Funds were acquired by UniCredito Italiano of Milan, Italy.  
None

 

                     
    Position(s) Held with   Number of        
    Trust and Term and   Funds in       Other
    Length of Time   Trust   Principal Occupation(s)   Directorships by
Name (Age) and Address**   Served   Overseen   During the Past 5 Years   Trustees
 
Earl L. Mason (63)
  Independent Trustee since August, 2005 and Chairman since December, 2005

Indefinite 		    1     Currently Retired. Former Chairman of the Board, Computer Horizons; Former Lead Director and Chairman of the Audit Committee, Earle M. Jorgensen, a metals distributor, from 2002 to 2006   Director, Chair of the Audit Committee, and member of the compensation committee, BWAY Corp., from 2007 to 2010
 
                    
William Thomas Smith, Jr. (64)
  Independent Trustee
since August, 2005


Indefinite 		    1     Managing Partner, TTV, a venture capital company, from April 2000 to present.   Director, Green Dot Corp., 2000 to present; Austin Logistics, from 2005 to present; E-duction, from 2006 to present; Microbilt, from 2008 to present; Silverpop, from 2002 to present; E-wise, 2008 to present.
 
*   “Independent Trustees” are Trustees who are not “interested persons” (as that term is defined in the 1940 Act) of the Trust.
 
**   The address for each independent trustee is 58 Riverwalk Boulevard, Building 2, Suite A, Ridgeland, South Carolina 29936.
Interested Trustees and Principal Officers:
                     
    Position(s) Held with   Number of        
    Trust and Term and   Funds in       Other
    Length of Time   Trust   Principal Occupation(s)   Directorships by
Name (Age) and Address**   Served   Overseen   During the Past 5 Years   Trustees
 
Charles Troy Shaver, Jr.* (63)
  Interested Trustee and President since August, 2005

Indefinite 		    1     President, Chief Executive Officer, Member and minority owner of Dividend Growth Advisors, LLC, since June 1, 2004.   None
 
                    
Ed Obuchowski (65)
  Treasurer and Principal Accounting Officer since March, 2008

Indefinite 		    1     Chief Financial Officer, Member and minority owner of Dividend Growth Advisors, LLC since December  , 2006. SVP and CIO of Alliant Food, and VP of Internal Audit for Compaq Computer from 1998 to 2004.   Former member of the Board of Directors of Computer Horizons Corporation
 
                    
Jere E. Estes (68)
  Chief Investment Officer since October, 2008; Assistant Treasurer since March, 2008; Treasurer and Principal Accounting Officer from August, 2005 to March, 2008

Indefinite 		    1     Chief Investment Officer as of October, 2008; Director of Research, Senior Portfolio Manager, Member and Minority Owner, Dividend Growth Advisors, LLC since April 1, 2004.   None
 
                    
John H. Lively (42)
  Secretary since September, 2010

Indefinite 		    1     Attorney, The Law Offices of John H. Lively & Associates, Inc., March, 2010 to present; Partner, Husch Blackwell   None

 

                     
    Position(s) Held with   Number of        
    Trust and Term and   Funds in       Other
    Length of Time   Trust   Principal Occupation(s)   Directorships by
Name (Age) and Address**   Served   Overseen   During the Past 5 Years   Trustees
 
 
              Sanders LLP (law firm), March, 2007 to February, 2010; Managing Attorney, Raymond James Financial (financial services), September, 2005 to March, 2007; Assistant General Counsel, AIM Investments (investment adviser — currently, INVESCO), October, 2000 to September, 2005.    
 
                    
Jane Cameron (74)
  Chief Compliance
Officer
since June, 2006
Indefinite 		    1     Chief Compliance Officer — Mutual Funds, Dividend Growth Advisors, LLC since June, 2006. Managing Director HR & Strategic Sourcing from October  , 2008. Prior thereto, Ms. Cameron was Director of Strategic Sourcing, Fidelity Investments, from September, 1996 until February, 2006.   None
 
*   Mr. Shaver is considered to be an “interested person” of the Trust because he is an officer of the Advisor.
 
**   The address for each interested trustee and officer is 58 Riverwalk Boulevard, Building 2, Suite A, Ridgeland, South Carolina 29936.
As noted above, the Chairman of the Board of Trustees is Earl L. Mason, who is an Independent Trustee (i.e., he is not an “interested person” of the Trust, as that term is defined under the 1940 Act). The Board of Trustees has considered the overall leadership structure of the Trust and has established committees designed to facilitate the governance of the Trust by the Trustees generally and the Board’s role with respect to risk oversight specifically. The Trust’s committees are responsible for certain aspects of risk oversight relating to financial statements, the valuation of the Trust’s assets, and compliance matters. The Board of Trustees also has frequent interaction with the service providers and Chief Compliance Officer of the Trust with respect to risk oversight matters. The Trust’s Chief Compliance Officer (the “CCO”) reports directly to the Board generally with respect to the CCO’s role in managing the compliance risks of the Trust. The CCO may also report directly to a particular committee of the Board depending on the subject matter. The Trust’s principal financial officer reports to the Audit Committee of the Board on all financial matters affecting the Trust, including risks associated with financial reporting. Through the committee structure, the Trustees also interact with other officers and service providers of the Trust to monitor risks related to the Trust’s operations. The Trust has determined that its leadership structure is appropriate based on the size of the Trust, the Board of Trustees’ current responsibilities, each Trustee’s ability to participate in the oversight of the Trust and committee transparency.
The Trust has a standing Audit Committee of the Board composed of the Independent Trustees. The functions of the Audit Committee are to meet with the Trust’s independent auditors to review the scope and findings of the annual audit, discuss the Trust’s accounting policies, discuss any recommendations of the independent auditors with respect to the Trust’s management practices, review the impact of changes in accounting standards on the Trust’s financial statements, recommend to the Board the selection of independent auditors and perform such other duties as may be assigned to the Audit Committee by the Board. During the Trust’s most recent fiscal year ended September 30, 2010, the Audit Committee met four times.
The Trust has a standing Nomination and Governance Committee of the Board composed of the Independent Trustees. The Nomination and Governance Committee is responsible for the selection and nomination of candidates to serve as Independent Trustees of the Trust. Although the Nomination and Governance Committee expects to be able to find an adequate number of qualified candidates to serve as Independent Trustees, the Nomination and Governance Committee is willing to consider nominations received from shareholders. Shareholders wishing to submit a nomination should do so by notifying the Secretary of the Trust, in writing, at the address listed on the cover of this SAI. During the Trust’s most recent fiscal year ended September 30, 2010, the Nomination and Governance Committee met four times.
Generally, no one factor was decisive in the original selection of an individual to join the Board. Among the factors the Board considered when concluding that an individual should serve on the Board were the following: (1) the individual’s business and professional experience and accomplishments; (2) the individual’s ability to work effectively with the other members of the Board; and (3) how the individual’s skills, experience and attributes would contribute to an appropriate mix of relevant skills and experience on the Board.

 

In respect of each Trustee, the individual’s substantial professional accomplishments and prior experience, including, in some cases, in fields related to the operations of the Trust, were a significant factor in the determination that the individual should serve as a Trustee of the Trust.
In addition to the information provided above, below is a summary of the specific experience, qualifications, attributes or skills of each Trustee and the reason why he was selected to serve as Trustee:
     Roger B. Rainville — Mr. Rainville has over 35 years of experience in the mutual fund industry. He also had extensive executive management experience in his role as President and CEO of the worldwide operations of a major investment management shareholder services company. Mr. Rainville was selected to serve as an Independent Trustee of the Trust based primarily on his extensive knowledge of mutual fund operations.
     Earl L. Mason — Mr. Mason has over 40 years of business experience. He served in executive management positions as CFO and CEO for major corporations. In addition, he has served as a Director on numerous boards of directors — both public and private. He was selected to serve as an Independent Trustee of the Trust and Chairman of the Board based primarily on his demonstrated leadership abilities and extensive knowledge of operational, management and financial principles.
     William Thomas Smith, Jr. — Mr. Smith has 35 years of business experience. For 30 years, he served with a Fortune 500 company, where he held various executive management positions, such as Vice President of small and medium business in the Americas and as the Southern Area General Manager. In 2006, he became a founding partner in a venture capital company, which offers resources to assist in the creation of industry-leading companies. Mr. Smith was selected as an Independent Trustee of the Trust based on his business acumen and strategic insights.
     C. Troy Shaver — Mr. Shaver has over 35 years of experience in the financial services industry — 24 of those years in the mutual fund side of the business. He is currently the President of the Trust. He was selected to serve as the Interested Trustee of the Trust based on his in-depth knowledge of the financial services industry in general and the mutual fund industry in particular.
Ownership of Securities. The following table provides information regarding shares of the Fund owned by each Trustee as of December 31, 2010.
     
Trustee   Dollar Range of Fund Shares
 
Roger B. Rainville
   $10,001 - $50,000
Earl L. Mason
   $10,001 - $50,000
William Thomas Smith, Jr.
   over $100,000
Charles Troy Shaver, Jr.
   $10,001 - $50,000
Compensation of Trustees and Officers. Trustees and Officers affiliated with the Advisor are not compensated by the Trust for their services. The Trust does not have any retirement plan for its Trustees. Each Trustee who is not an affiliated person of the Advisor, as defined in the 1940 Act, receives $1,000 per regular meeting attended, as well as reimbursement for expenses incurred in connection with attendance at such meetings. The Trustees also receive $500 for each special board meeting attended. The Independent Chairman of the Board receives an additional $1,000 per meeting. The Chairman of the Audit Committee and the Chairman of the Nomination and Governance Committee each receives $500 per committee meeting chaired, respectively, for acting as Chairmen of such Committees.
Compensation Table
The following table sets forth the compensation paid by the Trust to the non-interested Trustees during the Trust’s fiscal year ended September 30, 2010:
                         
            Pension or     Total Compensation  
            Retirement     From Fund and  
    Aggregate     Benefits Accrued as     Fund  
    Compensation     Part of Fund     Complex Paid to  
Name of Person   from Fund     Expenses     Trustees  
Roger B. Rainville
   $ 6,000       0     $ 6,000  
 
                  
 
                        
Earl L. Mason
   $ 8,000       0     $ 8,000  
 
                  
 
                        
William Thomas Smith, Jr.
   $ 6,000       0     $ 6,000  
 
                  

 

Portfolio Management Team
The Fund’s portfolio management team is Thomas W.L. Cameron, Senior Portfolio Manager and former Chief Investment Officer of the Advisor; Jere E. Estes, current Chief Investment Officer, Senior Portfolio Manager and Director of Research for the Advisor; and C. Troy Shaver, Jr, President, Chief Executive Officer, and Sr. Portfolio Manager of the Advisor. Mr. Cameron and Mr. Estes have managed the Fund since its inception; Mr. Shaver was named to the team as of February 2010. The team manages all other equity investment accounts. The following table lists the accounts managed by the portfolio management team as of September 30, 2010, the end of the Fund’s most recent fiscal year. None of the accounts managed has an advisory fee based on the performance of the account.
                                 
                    No. of Accounts   Total Assets of
            Total Assets   Paying   Performance Fee
    No. of Accounts   of Accounts*   Performance Fee   Accounts*
Registered Investment Companies
     1     $ 68.60       0     $ 0  
 
                                
Other Pooled Investment Vehicles
     5     $ 21.30       0     $ 0  
 
                                
Other Accounts
     849     $ 482     $ 0       0  
 
*   in millions of dollars
The following table provides information regarding shares of the Fund owned by each Portfolio Manager as of September 30, 2010.
         
    Dollar Range of
Portfolio Manager   Fund Shares
 
Thomas Cameron
   $ 100,001 - $500,000  
Jere Estes
   $ 500,001 - $1,000,000  
 
        
C. Troy Shaver, Jr.
   $ 10,001 - $50,000  
Each portfolio manager is responsible for management of the Fund and other investment accounts. The possibility of conflicts of interest may arise in the management of the Fund and these other accounts. The portfolio manager may have conflicts of interest in the allocation of investment opportunities and management time. Investment strategies and restrictions may apply that are different for the Fund than the other investment accounts. No accounts of the portfolio managers have performance fee structures. If conflicts of interest occur, the portfolio managers will exercise discretion that is equitable to all interested persons.
Compensation Structure
The compensation structure of the Advisor for all investment professionals is based on a fixed salary and quarterly bonuses based on the assets under management of certain investment accounts excluding the Fund. Salary adjustments generally occur annually in February.
Sales Load
The sales load is waived for purchases of Fund shares made by current or former Trustees, officers, or employees, or agents of the Trust, the Advisor, and by members of their immediate families.
Code of Ethics
The Trust and the Advisor have each adopted a Code of Ethics, pursuant to Rule 17j-1 under the 1940 Act, applicable to the securities trading practices of their personnel. Each respective code permits the covered personnel to trade in securities in which the Trust may invest, subject to certain restrictions and reporting requirements.
The Codes of Ethics are on file with, and can be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. In addition, the Codes of Ethics are also available on the EDGAR Database on the SEC’s Internet Website at http://www.sec.gov.
Proxy Voting Policies and Procedures

 

The Board has delegated to the Advisor the authority to vote all proxies relating to the Fund’s portfolio securities in accordance with the Advisor’s own policies and procedures. The Advisor’s Proxy Voting Guidelines summaries are set forth in Appendix B hereto. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, 2010 is available (1) without charge, upon request, by calling 1-888-826-2520 and (2) on the SEC’s website at http://www.sec.gov.
Principal Holders of Securities
To the best knowledge of the Trust, the names and addresses of the record and beneficial holders of 5% or more of the outstanding shares of each class of the Fund’s equity securities and the percentage of outstanding shares held by such holders are set forth below. Unless otherwise indicated, the Trust has no knowledge as to whether all or any portion of the shares owned of record are also owned beneficially. A shareholder who owns beneficially more than 25% of the Fund’s outstanding shares is presumed, under the 1940 Act, to “control” the Fund. Such control may affect the voting rights of other shareholders. All information in the table below is provided as of January 5, 2011.
                     
                    Record or Beneficial
Name of Shareholder   Class   Address   % Held   Holder
 
CapitalBank Wealth Management Group
  A   P.O. Box 218     29.51 %   Record
      Greenwood, SC 29648            
 
  I         26.69 %   Record
Donaldson Lufkin Jenrette Securities Corporation, Inc.
  A   P.O. Box 2052     19.52 %   Record
      Jersey City, NJ 07303            
                   
Stifel Nicolaus & Co., Inc.
  A   501 North Broadway
St. Louis, MO 63102 		    5.87 %   Record
 
  C         8.11 %   Record
Pershing, LLC
  C   P.O. Box 2052     37.40 %   Record
 
      Jersey City, NJ 07303            
 
  I         8.52 %   Record
National Financial Services
  C   200 Liberty St.     9.21 %   Record
 
      New York, NY 10281            
 
  I         15.97 %   Record
Bank of Ann Arbor
  I   125 S. Fifth Ave.     10.33 %   Record
 
      Ann Arbor, MI 48107            
Springtrust
  I   17801 Georgia Ave     9.53 %   Record
 
      Olney, MD 20832            
Ameritrade, Inc.
  I   P.O. Box 2226     5.92 %   Record
 
      Omaha, NE 68103            
Management Ownership. As of December 31, 2010, the Trustees and officers, as a group, owned approximately 1.6% of the outstanding shares of the Fund, its series or classes.
Investment Management and Other Services
Investment Advisor. The Fund’s investment advisor is Dividend Growth Advisors, LLC (“Advisor” or “DGA”), 58 Riverwalk Boulevard, Building 2, Suite A, Ridgeland, SC 29936. The Advisor manages the investments of the Fund in accordance with the Fund’s investment objectives, policies and limitations. Prior to October 19, 2005, Eastern Point Advisors, Inc. (“EPA”) was the investment advisor to the Fund and DGA was the sub-advisor to the Fund.
The Advisor may be deemed to be “controlled”, as defined under the 1940 Act, by Mr. Cameron, Mr. Shaver and Mr. Estes by virtue of their positions and/or ownership interests in the Advisor.
The Advisor, a South Carolina limited liability company, is a registered investment advisor registered in 2004. In addition to acting as the investment advisor to the Fund, the Advisor also manages individual private accounts. The Advisor is responsible for managing the investments of the Fund in accordance with the Fund’s investment objective, policies and limitations and any investment guidelines established by the Advisor. The Advisor is responsible for the selection, purchasing, monitoring and sale of the securities in the Fund’s investment portfolio. The Advisor arranges for the transfer agency, custody and all other services necessary to operate the Fund.
The Advisor also manages primarily individual private accounts. As of December 31, 2010, the Advisor had approximately $635 million of assets under management.
In addition to managing the Fund’s investments consistent with its investment objectives, policies and limitations, the Advisor makes recommendations with respect to other aspects and affairs of the Fund. The Advisor also furnishes the Fund with

 

certain administrative services, office space and equipment. All other expenses incurred in the operation of the Fund are borne by the Fund. Under the Investment Advisory Agreement, the Advisor will not be liable for any error of judgment or mistake of fact or law or for any loss by the Fund in connection with the performance of the Investment Advisory Agreement, except a loss from a breach of a fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard of its obligations or duties under the Investment Advisory Agreement.
For providing investment advisory and other services, the Fund pays the Advisor a monthly fee at the annual rate of 0.75% of the value of the Fund’s average daily net assets. For the fiscal year ended September 30, 2010, DGA, the Fund’s investment advisor, earned $443,595 in fees from the Fund, of which it waived $125,343.
The Advisor has contractually agreed to waive or limit its fee and reimburse certain Fund operating expenses, until January 31, 2012, so that the ratio of total annual operating expenses does not exceed 1.65% for Class A, 2.25% for Class C, and 1.25% for Class I. This operating expense limitation does not apply to brokerage and other investment-related costs, “acquired fund fees and expenses,” interest, taxes, dues, fees and other charges of governments and their agencies, including the costs of qualifying the Fund’s shares for sale in any jurisdiction, extraordinary expenses and indemnification and other expenses not incurred in the ordinary course of the Fund’s business. Acquired Fund Fees and Expenses represent the pro rata expense indirectly incurred by the Fund as a result of investing in other investment companies, including ETFs, closed-end funds and money market funds that have their own expenses. The Advisor may be entitled to the reimbursement of any fees waived or expenses reimbursed pursuant to the agreement provided overall expenses fall below the limitations set forth above. The Advisor may recoup the sum of all fees previously waived or expenses reimbursed during any of the previous three (3) years, less any reimbursement previously paid, provided total expenses do not exceed the limitation set forth above.
The Investment Advisory Agreement continues in effect from year to year provided such continuance is approved annually by the Board or by a vote of a majority of the outstanding shares of the Fund, and, in either case, by the vote of a majority of the Trustees who are not parties to the Investment Advisory Agreement or “interested persons” of any party to the Investment Advisory Agreement, voting in person at a meeting called for the purpose of voting on such approval. The Investment Advisory Agreement may be terminated at any time without penalty by the Board, by vote of a majority of the outstanding shares of the Fund or by the Advisor, upon sixty days’ written notice. The Investment Advisory Agreement terminates automatically if “assigned,” as that term is defined under the 1940 Act.
The Trust pays all expenses not assumed by the Advisor, including Trustees’ expenses, audit fees, legal fees, interest expenses, brokerage commissions, fees for registration and notification of shares for sale with the Securities and Exchange Commission (the “SEC”) and various state securities commissions, taxes, insurance premiums, fees of the Trust’s administrator, transfer agent, fund accounting agent or other service providers, and costs of obtaining quotations for portfolio securities and the pricing of fund shares.
The following table shows the amounts of investment advisory fees incurred, fees waived and Fund expenses paid for the last three fiscal periods shown.
                         
Fiscal Year Ended            
September 30,   Fees Incurred   Fees Waived   Expenses Paid
 
2010
   $ 443,595     $ 125,343     $ -0-  
2009
   $ 397,580     $ 144,352     $ -0-  
2008
   $ 539,367     $ 18,357     $ -0-  
Transfer Agent and Dividend Paying Agent. Huntington Asset Services, Inc. (“HASI”), 2960 North Meridian Street, Suite 300, Indianapolis, Indiana 46208, acts as the Fund’s transfer agent. HASI maintains the records of each shareholder’s account, answers shareholders’ inquiries concerning their accounts, processes purchases and redemptions of the Fund’s shares, acts as dividend and distribution disbursing agent and performs other transfer agent and shareholder service functions. HASI receives a monthly fee from the Fund equal to an annual rate of $15.00 per active shareholder account with a minimum fee of $15,000 per initial portfolio and/or share class per year plus $9,000 per year for each additional share class. These fees are subject to various discounts during the term of the agreement with HASI.
Fund Accounting Services Agent. In addition, HASI provides the Fund with fund accounting services, which include certain monthly reports, record-keeping and other management-related services. For its services as Fund accountant, HASI receives a monthly fee from the Fund equal to an annual rate of 0.05% for the first $50 million in average net assets per portfolio and/or share class per year, 0.04% from $50 million to $100 million in average net assets per portfolio and/or share class per year; 0.03% from $100 million to $150 million in average net assets per portfolio and/or share class per year; and 0.02% over $150 million in average net assets per portfolio and/or share class per year (subject to a $20,000 annual minimum per portfolio (one share class) plus $7,500 per additional share class). These fees are subject to various discounts during the term of the agreement with HASI.

 

Administrator. HASI also provides the Fund with administrative services, including all regulatory reporting and necessary office equipment, personnel and facilities. HASI receives a monthly fee from the Advisor equal to an annual rate of 0.10% for the first $50 million in average net assets per portfolio and/or share class per year; 0.07% from $50 million to $100 million in average net assets per portfolio and/or share class per year; 0.05% from $100 million to $150 million in average net assets per portfolio and/or share class per year; and 0.03% over $150 million in average net assets per portfolio and/or share class per year (subject to a $25,000 annual minimum per portfolio (one share class) plus $7,500 per additional share class). These fees are subject to various discounts during the term of the agreement with HASI.
Distributor. The Advisor and the Trust have entered into a Distribution Agreement with Unified Financial Securities, Inc. (the “Distributor”), 2960 N. Meridian Street, Suite 300, Indianapolis, Indiana 46208. Under the Distribution Agreement, the Distributor is obligated to use its best efforts to sell shares of each class of the Fund. Shares of the Fund are also sold by selected broker-dealers (the “Selling Brokers”) who have entered into selling agency agreements with the Distributor. The Distributor accepts orders for the purchase of shares of the Fund, which are continually offered at net asset value next determined, plus any applicable sales charge. The Distributor may pay extra compensation to financial services firms selling large amounts of Fund shares. This additional compensation would be calculated as a percentage of Fund shares sold by the firm. The Distributor uses a portion of any sales charge that is not re-allowed to other dealers to pay for various marketing expenses of the Fund.
The following table shows the amount the Fund paid the Distributor on the sale of Fund shares, and the amount the Distributor retained for each of the fiscal years indicated. The amounts not retained by the Distributor were paid out to selling broker-dealers.
                 
Fiscal Year Ended   Amount Paid To   Amount Retained By
September 30,   Distributor   Distributor
 
2010
   $ 170,596     $ 12,751  
2009
   $ 79,006     $ 6,384  
2008
   $ 236,011     $ 18,328  
Distribution Plans. The Trust has adopted distribution plans for the Class A and Class C shares of the Fund (the “Plans”) in accordance with Rule 12b-1 under the 1940 Act. The Plans compensate the Distributor for its services and distribution expenses under the Distribution Agreement. The principal services and expenses for which such compensation may be used include: compensation to employees or account executives and reimbursement of their expenses; overhead and telephone costs of such employees or account executives; printing of prospectuses or reports for prospective shareholders; advertising; preparation, printing and distribution of sales literature; reimbursements of marketing expenses incurred by the Advisor; and allowances to other financial intermediaries. A report of the amounts expended under each Plan is submitted to and approved by the Board each quarter.
The Plans are subject to annual approval by the Board. The Plans are terminable at any time by vote of the Board or by vote of a majority of the shares of the Fund.
Although there is no obligation for the Trust to pay expenses incurred by the Distributor in excess of those paid to the Distributor under a Plan, if the Plan is terminated, the Board will consider how to treat such expenses. Any expenses incurred by the Distributor but not yet recovered through distribution fees will not be recovered through future distribution fees. If the Distributor’s actual distribution expenditures in a given year are less than the Rule 12b-1 payments it receives from the Fund for that year and no effect is given to previously accumulated distribution expenditures in excess of the Rule 12b-1 payments borne by the Distributor out of its own resources in other years, the difference would be profit to the Distributor for that year.
Because amounts paid pursuant to a Plan are paid to the Distributor, the Distributor and its officers, directors and employees may be deemed to have a financial interest in the operation of the Plans. None of the Independent Trustees has a financial interest in the operation of any Plan.
The Plans were adopted because of their anticipated benefits to the Fund. These anticipated benefits include: increased promotion and distribution of the Fund’s shares, an enhancement in the Fund’s ability to maintain accounts and improve asset retention, increased stability of net assets of the Fund, increased stability in the Fund’s positions and greater flexibility in achieving investment objectives.
The following table summarizes Rule 12b-1 expenses incurred for the fiscal year ended September 30, 2010:
         
Class A Shares   Class C Shares
$169,356
  $ 40,411  
The Distributor received the following compensation for the fiscal year ended September 30, 2010:

 

                         
Net Underwriting   Compensation on        
Discounts and   Redemptions and   Brokerage   Other
Commissions   Repurchases   Commissions   Compensation
$12,751
   $ 0     $ 0     $ 0  
Custodian. Huntington National Bank, 7 Easton Oval, Columbus, OH 43219, serves as custodian of the Trust. Huntington is responsible for, among other things, safeguarding and controlling the Trust’s cash and securities, handling the receipt and delivery of securities and collecting interest and dividends on the Trust’s investments.
Legal Counsel. The Law Offices of John H. Lively & Associates, Inc., 2041 West 141 st Terrace, Suite 119, Leawood, KS 66224, is legal counsel to the Trust.
Independent Registered Public Accounting Firm. BBD, LLP, 1835 Market St., 26th Floor, Philadelphia, PA 19103, is the Independent Registered Public Accounting Firm of the Trust.
Description of the Trust’s Shares
The Trust is a statutory trust organized on July 14, 1999 under Delaware law. The Trustees are responsible for the management and supervision of the Trust. The Trust Instrument (i.e., one of the Trust’s organizational documents), dated June 29, 1999 and amended September 8, 2006, permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest of the Fund, with $0.001 par value.
Under the Trust Instrument, the Trustees have the authority to create and classify shares of beneficial interest in separate series, without further action by shareholders. The Trust Instrument also authorizes the Trustees to classify and reclassify the shares of the Trust, or any other series of the Trust, into one or more classes.
Each share of the Trust represents an equal proportionate interest in the assets belonging to the Trust and has equal dividend rights. When issued and paid for in accordance with the prospectus, shares are fully paid and non-assessable. In the event of liquidation of the Trust, shareholders are entitled to share pro rata in the net assets of the Trust available for distribution to such shareholders. A shareholder vote is not necessary to liquidate the Fund or the Trust. Shares of the Trust are freely transferable and have no preemptive, subscription or conversion rights.
In accordance with the provisions of the Trust Instrument, the Trustees have initially determined that shares entitle their holders to one vote per share on any matter on which such shares are entitled to vote, and each fractional share shall be entitled to a proportionate fractional vote. The Trustees may determine in the future, without the vote or consent of shareholders, that each dollar of net asset value (number of shares owned times net asset value per share) will be entitled to one vote on any matter on which such shares are entitled to vote.
Unless otherwise required by the 1940 Act or the Trust Instrument, the Trust has no intention of holding annual meetings of shareholders. Shareholders may remove a Trustee by the affirmative vote of at least two-thirds of the Trust’s outstanding shares. At any time that less than a majority of the Trustees holding office was elected by the shareholders, the Trustees will call a special meeting of shareholders for the purpose of electing Trustees.
Brokerage
Purchases and sales of portfolio securities are generally placed with broker-dealers who provide the best price (including brokerage commissions) and execution for orders. Higher fees may be paid to brokers that do not furnish research or furnish less valuable research if a good faith determination is made that the commissions paid are reasonable in relation to the value of the brokerage and research services provided. Among these services are those that brokerage houses customarily provide to institutional investors, such as statistical and economic data and research reports on companies and industries.
The Fund paid brokerage commissions in the amounts indicated in the table below during the last three fiscal years.
         
Fiscal Year Ended    
September 30,   Commissions Paid
2010
   $ 7,124  
2009
   $ 15,113  
2008
   $ 9,530  
Purchase, Redemption and Pricing of Shares

 

Purchase of Shares. The Fund offers Class A shares, Class C shares and Class I shares. The Trustees and Officers reserve the right to change or waive the Fund’s minimum investment requirements and to reject any order to purchase shares (including purchases by exchange) when in their judgment the rejection is in the Fund’s best interest.
Initial Sales Charges on Class A Shares. Class A shares are offered at a price equal to their net asset value plus a sales charge which is imposed at the time of purchase. The sales charges applicable to purchases of Class A shares of the Fund are described in the Prospectus. Up to 100% of the sales charge may be re-allowed to dealers who achieve certain levels of sales or who have rendered coordinated sales support efforts. These dealers may be deemed underwriters. Other dealers will receive the following compensation:
         
    Dealer Concession as a % of
Amount Invested   Offering Price of Shares Purchased
Less than $50,000
     5.25 %
$50,000 but less than $100,000
     4.50 %
$100,000 but less than $500,000
     3.50 %
$500,000 but less than $1,000,000
     2.75 %
$1,000,000 or more
     0.00 %
The Distributor uses a portion of the sales charge that is not re-allowed to other dealers to pay for various marketing expenses of the Fund.
Obtaining a Reduced Sales Charge for Class A Shares. Methods of obtaining a reduced sales charge referred to in the Prospectus are described in more detail below. No sales charge will be imposed on increases in net asset value, dividends or capital gain distributions, or reinvestment of distributions in additional shares.
Rights of Accumulation (Class A Shares). If you already hold Class A shares, you may qualify for a reduced sales charge on your purchase of additional Class A shares. If the value of the Class A shares you currently hold plus the amount you wish to purchase is $50,000 or more, the sales charge on the Class A shares being purchased will be at the rate applicable to the total aggregate amount.
The Distributor’s policy is to give investors the lowest commission rate possible under the sales charge structure. However, to take full advantage of rights of accumulation, at the time of placing a purchase order, the investor or his dealer must request the discount and give the Distributor sufficient information to determine and confirm whether the purchase qualifies for the discount. Rights of accumulation may be amended or terminated at any time as to all purchases occurring thereafter.
Letter of Intent (Class A Shares). If you intend to purchase Class A shares valued at $50,000 or more during a 13-month period, you may make the purchases under a Letter of Intent so that the initial Class A shares you purchase qualify for the reduced sales charge applicable to the aggregate amount of your projected purchase. Your initial purchase must be at least 5% of the intended purchase. Purchases made within ninety days before the signing of the Letter of Intent may be included in such total amount and will be valued on the date of the Letter of Intent. The Letter of Intent will not impose a binding obligation to buy or sell shares on either the purchaser or the Fund.
During the period of the Letter of Intent, the transfer agent will hold shares representing 3% of the intended purchase in escrow to provide payment of additional sales charges that may have to be paid if the total amount purchased under the Letter of Intent is reduced. These shares will be released upon completion of the intended investment. If the total Class A shares covered by the Letter of Intent are not purchased, a price adjustment is made, depending upon the actual amount invested within the period covered by the Letter of Intent, by a redemption of sufficient shares held in escrow for the account of the investor. A Letter of Intent can be amended: (a) during the 13-month period if the purchaser files an amended Letter of Intent with the same expiration date as the original; and (b) automatically after the end of the period, if the total purchases of Class A shares credited to the Letter of Intent qualify for an additional reduction in the sales charge. For more information concerning the Letter of Intent, see the application form or contact the Distributor.
Sales Charge Waivers (Class A Shares). Under certain conditions, Class A shares may be sold without a sales charge to officers, directors, Trustees and employees of the Advisor and any of their affiliated companies and immediate family members of any of these people. Class A shares may also be sold without a sales charge to individuals with an investment account or relationship with the Advisor; fee-based financial planners acting for the account of their clients; broker-dealers who have entered into selling agreements with the Distributor for their own accounts; and banks, other financial institutions and financial supermarkets that have entered into agreements with the Fund to provide shareholder services for customers.
Class C Share Purchases. Purchases of Class C shares will be processed at net asset value next determined after receipt of your purchase order. Class C shares are not subject to an initial sales charge, but may pay higher fees than Class A shares. Class C shares will convert to Class A shares following the month that is seven (7) years after purchase of such Class C shares, thus reducing future annual expenses.

 

Terms of Redemptions. The amount of your redemption proceeds will be based on the net asset value per share next computed after the Distributor, the Fund, an authorized intermediary or the transfer agent receives the redemption request in proper form. Payment for your redemption normally will be mailed to you, except as provided below. Your redemption proceeds will normally be mailed or wired the day after your redemption is processed. If you have purchased shares by check, the payment of your redemption proceeds may be delayed until the purchase check has cleared, which may take fifteen or more days. This potential delay can be avoided by purchasing shares with federal funds or a certified check.
Beneficial owners of shares held of record in the name of the Distributor or a financial intermediary may redeem their shares only through that firm. The right of redemption may be suspended or the date of payment postponed under certain emergency or extraordinary situations, such as suspension of trading on the NYSE, or when trading in the markets the Trust normally uses is restricted or an emergency exists, as determined by the SEC, so that disposal of the Trust’s assets or determination of its net asset value is not reasonably practicable, or for such other periods as the SEC by order may permit. The Trust reserves the right to redeem your account if its value is less than $5,000 for non-qualified accounts and $1,000 for individual retirement accounts (“IRAs”) due to redemptions. The Trust will give the shareholder sixty days’ notice to increase the account value to at least $5,000 for non-qualified accounts and $1,000 for IRAs. Redemption proceeds will be mailed in accordance with the procedures described above.
Redemptions-in-Kind. Although the Trust would not normally do so, the Trust has the right to pay the redemption price of shares of the Trust in whole or in part in portfolio securities as prescribed by the Board. When the shareholder sells portfolio securities received in this fashion, a brokerage charge would be incurred. The Trust will value securities distributed in an in-kind redemption at the same value as is used in determining NAV.
Redemption Fees (Class A and Class C Shares). To discourage short-term trading, the Fund reserves the right to impose a 1.00% redemption fee on short-term redemptions of Class A and Class C Shares within 60 days of acquisition. Redemption fees are not imposed on shares acquired through the reinvestment of dividends or capital gain distributions or involuntary redemptions. Redemption fees are paid to the Trust to help defray transaction costs.
Waiver of Redemption Fees (Class A and Class C Shares). The redemption fee will be waived in the event of redemptions following the death or disability (within the meaning of Section 72(m)(7) of the Internal Revenue Code of 1986, as amended (the “Code”)) of a shareholder.
Reinstatement Privilege (Class A Shares). A shareholder of Class A shares who has redeemed such shares and has not previously exercised the reinstatement privilege may subsequently reinvest any portion or all of the redemption proceeds in Class A shares at net asset value, provided that such reinstatement occurs within 120 calendar days after such redemption and the account meets the minimum account size requirement. This privilege may be modified or terminated at any time by the Trust.
In order to use this privilege, the shareholder must clearly indicate by written request to the Trust that the purchase represents a reinvestment of proceeds from previously redeemed Class A shares. If a shareholder realizes a gain on redemption of shares, that gain will be taxable for federal income tax purposes even if all of the proceeds thereof are reinvested. If a shareholder incurs a loss on a redemption and reinvests the proceeds in the Fund within 30 days thereafter, part or all of such loss may not be currently deductible for such purposes. See “Taxes — Dispositions of Shares.” Redemption fees are not reimbursed in the event of using the reinstatement privilege. The reinstatement privilege may be used by each shareholder only once, regardless of the number of shares redeemed or repurchased. However, the privilege may be used without limit in connection with transactions for the sole purpose of transferring a shareholder’s interest in the Trust to his or her IRA or other tax-qualified retirement plan account.
Contingent Deferred Sales Charges. Purchases of Class A shares of $1 million or more that are subsequently redeemed within 12 months of acquisition are subject to a 1.00% contingent deferred sales charge. Effective with new accounts established on or after March 1, 2010, Class C shares are subject to a 1.00% contingent deferred sales charge if redeemed within 12 months of purchase. Contingent deferred sales charges are not imposed on shares acquired through the reinvestment of dividends or capital gain distributions or involuntarily redeemed shares. The contingent deferred sales charge may be waived for certain redemptions and distributions, including in situations in which a redemption fee, as described above, is charged.
Net Asset Value
The price of the Fund’s shares is based on its net asset value (“NAV”) plus any applicable front-end sales charge for Class A shares (the “Offering Price”). The Trust calculates NAV for each class by adding the total market value of its investments and other assets, subtracting any liabilities and then dividing that figure by the total number of its shares outstanding (assets-liabilities/the number of shares = NAV). The Trust uses the following procedures for purposes of calculating the NAV of Fund shares. If the Trust holds securities listed primarily on a foreign exchange that trades on days when the Trust is not open for business, the value of your shares may change on days that you cannot buy or sell shares.
Equity securities generally are valued by using market quotations but may be valued on the basis of prices furnished by a pricing service when the Advisor believes such prices accurately reflect the fair market value of such securities. Securities that

 

are traded on any stock exchange are generally valued by the pricing service at the last quoted sale price. Lacking a last sale price, an exchange-traded security is generally valued by the pricing service at its last bid price. Securities traded in the Nasdaq are generally valued by the pricing service at the Nasdaq Official Closing Price. When market quotations are not readily available, when the Advisor determines that the market quotation or the price provided by the pricing service does not accurately reflect the current market value or when restricted or illiquid securities are being valued, such securities are valued as determined in good faith by the Advisor, in conformity with guidelines adopted by and subject to review of the Board.
Fixed income securities generally are valued by using market quotations, but may be valued on the basis of prices furnished by a pricing service when the Advisor believes such prices accurately reflect the fair market value of such securities. A pricing service utilizes electronic data processing techniques based on yield spreads relating to securities with similar characteristics to determine prices for normal institutional-size trading units of debt securities without regard to sale or bid prices. If the Advisor decides that a price provided by the pricing service does not accurately reflect the fair market value of the securities, when prices are not readily available from a pricing service or when restricted or illiquid securities are being valued, securities are valued at fair value as determined in good faith by the Advisor, in conformity with guidelines adopted by and subject to review of the Board. Short-term investments in fixed income securities with maturities of less than 60 days when acquired, or which subsequently are within 60 days of maturity, are valued by using the amortized cost method of valuation, which the Board has determined will represent fair value.
The Trust may determine the fair value of any security in good faith in accordance with procedures approved by the Board if market quotations are not readily available, or if in the opinion of the Advisor any quotation or market price is not representative of true market value.
The Trust values foreign securities, if any, on the basis of quotations from the primary market in which they are traded. The Custodian translates assets or liabilities expressed in foreign currencies into U.S. dollars based on London currency quotations as of 5:00 p.m., London time (12:00 noon, New York time) on the date of determining the Trust’s NAV. If quotations are not readily available, or the value of foreign securities has been materially affected by events occurring after the closing of a foreign market, the Trust may value its assets by a method that the Board believes accurately reflects fair value. On any day an international market is closed and the NYSE is open, any foreign securities will be valued at the prior day’s close with the current day’s exchange rate. Trading of foreign securities may take place on Saturdays and U.S. business holidays on which the Trust’s NAV is not calculated. Consequently, the Trust’s portfolio securities may trade and the NAV of the Trust’s shares may be significantly affected on days when a shareholder has no access to the Trust.
Taxes
PURSUANT TO U.S. TREASURY DEPARTMENT CIRCULAR NO. 230, EACH SHAREHOLDER IS HEREBY INFORMED THAT (A) THE GENERAL DISCUSSION CONTAINED IN THIS STATEMENT OF ADDITIONAL INFORMATION AS TO FEDERAL INCOME TAX CONSIDERATIONS IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED BY ANY PERSON, FOR THE PURPOSE OF AVOIDING TAX PENALTIES THAT MAY BE IMPOSED UNDER U.S. TAX LAWS; (B) SUCH GENERAL DISCUSSION IS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED IN THIS STATEMENT OF ADDITIONAL INFORMATION, INCLUDING THE PRIVATE PLACEMENT OF INTERESTS IN THE UNITED STATES; AND (C) EACH TAXPAYER SHOULD SEEK FEDERAL TAX ADVICE BASED ON THE TAXPAYER’S PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.
The following is a brief and general summary (and is not intended as a substitute for careful tax planning) of certain material federal tax considerations concerning the Fund and the purchase, ownership and disposition of Fund shares and does not purport to be complete or to deal with all aspects of local, state, foreign or federal taxation that may be relevant to shareholders in light of their particular circumstances. The discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), including as modified by Regulated Investment Company Modernization Act of 2010 Public Law No: 111-325 (the “2010 RIC Act”), the Treasury Regulations promulgated thereunder, court decisions, published positions of the Internal Revenue Service (the “IRS”) and other applicable authorities — all as in effect on the date hereof and all of which are subject to change or differing interpretations (possibly with retroactive effect) — and is limited to U.S. persons who hold Fund shares as capital assets for federal income tax purposes (generally, assets held for investment). No assurance can be given that changes in existing laws or regulations or their interpretation will not occur after the date of this Statement of Additional Information or that any such future guidance or interpretation will not be applied retroactively.
The tax matters relating to the Fund are complex and are subject to varying interpretations. This summary is not tax advice and does not address all of the federal income tax consequences that may be relevant to a particular shareholder or to shareholders who may be subject to special treatment under the Code. No ruling has been or will be obtained from the IRS regarding any matter relating to the shares, and no assurance can be given that the IRS would not assert a position contrary to any of the tax consequences described below.
The following discussion necessarily condenses or eliminates many details that might adversely affect some shareholders significantly and does not address the tax issues that may be important to certain types of shareholders who are subject to special tax treatment such as foreigners and tax-exempt entities. Accordingly, each prospective investor must consult with and

 

rely solely on its, his or her professional tax advisors with respect to the tax results of its, his or her investment in the Fund. Except as otherwise specifically noted, this general discussion does not discuss aspects of foreign, state or local taxation. In addition, no attempt is made to address tax concerns applicable to an investor with a special tax status such as a financial institution, real estate investment trust, (“REIT”) insurance company, regulated investment company (“RIC”), individual retirement account, other tax-exempt entity, dealer in securities or non-U.S. investor. Furthermore, this discussion does not reflect possible application of the alternative minimum tax (“AMT”). Unless otherwise noted, this discussion assumes shares of the Fund are held by U.S. shareholders and that such shares are held as capital assets.
Prospective investors should consult their own tax advisors with regard to the federal tax consequences of the purchase, ownership and disposition of Fund shares, as well as the tax consequences arising under the laws of any local, state, foreign country or other taxing jurisdiction. No representation is made as to the tax consequences of the operation of the Fund.
U.S. Shareholder. A U.S. shareholder is a beneficial owner of shares of the Fund that is for U.S. federal income tax purposes:
  •   a citizen or individual resident of the United States (including certain former citizens and former long-term residents);
 
  •   a domestic partnership
 
  •   a domestic corporation or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any state thereof or the District of Columbia;
 
  •   an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
 
  •   a trust if a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions or the trust has made a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.
A “Non-U.S. shareholder” is a beneficial owner of shares of the Fund that is an individual, corporation, trust or estate and is not a U.S. shareholder. If a partnership (including any entity treated as a partnership for U.S. federal income tax purposes) holds shares of the Fund, the tax treatment of a partner in the partnership generally depends upon the status of the partner and the activities of the partnership. A prospective shareholder who is a partner of a partnership holding the Fund shares should consult its tax advisors with respect to the purchase, ownership and disposition of its Fund shares.
Election to Be Taxed as a RIC. The Fund intends to qualify and remain qualified as a RIC under Subchapter M of the Code. There can be no assurance that it actually will so qualify. In order to so qualify, the Fund must satisfy certain requirements regarding its source of income, diversification of assets and distribution of earnings that are discussed further below. In addition, by the end of the Fund’s first taxable year as a RIC, it also must eliminate any earnings and profits accumulated before the intended RIC election became effective. The Fund intends to accomplish this by paying its shareholders one or more cash dividends representing substantially all of its accumulated earnings and profits, if any, for the period from the Fund’s inception through the date on which the intended RIC election becomes effective. The amount of these dividends will be based on a number of factors, including the Fund’s results of operations through the date on which the intended RIC election becomes effective. The Fund will need to manage its cash or have access to cash to enable it to pay any such dividend or dividends. Any dividend of accumulated earnings and profits would be taxable to shareholders as discussed further below. These dividends, if any, would be in addition to the dividends the Fund intends to pay to satisfy the RIC distribution of earnings requirement.
The Fund anticipates that, on the effective date of the RIC election, it may hold assets (including intangible assets not reflected on the balance sheet, such as goodwill) with “built-in gain,” which are assets whose fair market value as of the effective date of the RIC election exceeds their tax basis. In general, any entity taxable as a corporation that converts to taxation as a RIC must pay corporate-level federal income tax on any of the net built-in gains it recognizes during the 10-year period beginning on the effective date of its election to be treated as a RIC. Alternatively, the corporation may elect to recognize all of its built-in gain at the time of its conversion and pay such tax on the built-in gain at that time. The Fund may or may not make this election. If it does make this election, the Fund will mark its portfolio to market at the time of the intended RIC election, pay corporate-level federal income tax on any resulting taxable income, and distribute resulting earnings at that time or before the end of the first taxable year in which the Fund qualifies as a RIC. If the Fund does not make this election, it will pay such corporate-level federal income tax as is payable at the time the built-in gains are recognized (which generally will be the years in which the built-in gain assets are actually sold in taxable transactions). The amount of this tax will vary depending on the assets that are actually sold by the Fund in this 10-year period, the actual amount of the net built-in gain or loss present in those assets as of the effective date of the RIC election and effective tax rates. Recognized built-in gains that are ordinary in character and the excess of short-term capital gains over long-term capital losses will be included in the Fund’s investment company taxable income, and generally the Fund must distribute annually at least 90% of any such amounts (net of corporate taxes paid on those gains) in order to be eligible for RIC tax treatment. Any such amount distributed will be taxable to the shareholders as ordinary income. Built-in gains (net of taxes) that are recognized within the 10-year period and that are long term capital gains will also be distributed (or deemed distributed) annually to the shareholders. Any such amount distributed (or deemed distributed) will be taxable to the shareholders as capital gains.
Taxation as a RIC. The Fund will qualify as a RIC if, among other things, it meets the source-of-income and the asset-

 

diversification requirements. With respect to the source-of-income requirement, the Fund must derive in each taxable year at least 90% of its gross income (including tax-exempt interest) from (a) dividends, interest, payments with respect to certain securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including but not limited to gains from options, futures and forward contracts) derived with respect to its business of investing in such shares, securities or currencies, and (b) net income derived from an interest in a “qualified publicly traded partnership.” A “qualified publicly traded partnership” is generally defined as a publicly traded partnership under Section 7704 of the Code, which is generally a partnership the interests in which are “traded on an established securities market” or are “readily tradable on a secondary market (or the substantial equivalent thereof)”. However, for these purposes, a qualified publicly traded partnership does not include a publicly traded partnership if 90% or more of its income is described in (i) above. The Fund intends to invest a portion of its assets in MLPs. MLPs are generally publicly traded partnerships. Net income from MLPs that are qualified publicly traded partnerships is included in the sources of income from which a RIC must derive 90% of its gross income. Income derived from a partnership (other than a qualified publicly traded partnership) or trust is qualifying income to the extent such income is attributable to items of income of the partnership or trust which would be qualifying income if realized by the Fund in the same manner as realized by the partnership or trust.
Beginning in 2011, the 2010 RIC Act provides that if a RIC fails this 90% income test, such RIC is no longer subject to 35% penalty as long as such failure is inadvertent. Instead, such RIC is only required to pay tax in the amount of shortfall to the amount that would have satisfied the 90% income test.
With respect to the asset-diversification requirement, the Fund must diversify its holdings so that, at the end of each quarter of each taxable year (a) at least 50% of the value of the Fund’s total assets is represented by cash and cash items, U.S. government securities, the securities of other RICs and other securities, if such other securities of any one issuer do not represent more than 5% of the value of the Fund’s total assets or more than 10% of the outstanding voting securities of such issuer, and (b) not more than 25% of the value of the Fund’s total assets is invested in the securities other than U.S. government securities or the securities of other RICs of (a) one issuer, (b) two or more issuers that are controlled by the Fund and that are engaged in the same, similar or related trades or businesses, or (c) one or more qualified publicly traded partnerships.
Beginning in 2011, the 2010 RIC Act provides that if a RIC fails this asset-diversification test, such RIC, in addition to other cure provisions previously permitted, has a 6-month period to correct any failure without incurring a penalty if such failure is “de minimus.” Such cure right is similar to that previously and currently permitted for a REIT.
If the Fund qualifies as a RIC and distributes to its shareholders, for each taxable year, at least 90% of the sum of (a) its “investment company taxable income” as that term is defined in the Code (which includes, among other things, dividends, taxable interest, the excess of any net short-term capital gains over net long-term capital losses and certain net foreign exchange gains as reduced by certain deductible expenses) without regard to the deduction for dividends paid, and (b) the excess of its gross tax-exempt interest, if any, over certain deductions attributable to such interest that are otherwise disallowed, the Fund will be relieved of U.S. federal income tax on any income of the Fund, including long-term capital gains, distributed to shareholders. However, any ordinary income or capital gain retained by the Fund will be subject to U.S. federal income tax at regular corporate federal income tax rates (currently at a maximum rate of 35%). The Fund intends to distribute at least annually substantially all of its investment company taxable income, net tax-exempt interest, and net capital gain.
Beginning in 2011, the 2010 RIC Act permits a RIC to carry forward net capital losses indefinitely and allows losses to retain their original character (as short or as long-term). For net capital losses recognized prior to 2011, such losses are permitted to be carried forward up to 8 years and are characterized as short-term.
The Fund intends to distribute all realized capital gains, if any, at least annually. If, however, the Fund were to retain any net capital gain, the Fund may designate the retained amount as undistributed capital gains in a notice to shareholders who, if subject to U.S. federal income tax on long-term capital gains, (a) will be required to include in income as long-term capital gain, their proportionate shares of such undistributed amount, and (b) will be entitled to credit their proportionate shares of the federal income tax paid by the Fund on the undistributed amount against their U.S. federal income tax liabilities, if any, and to claim refunds to the extent the credit exceeds such liabilities. If such an event occurs, the tax basis of shares owned by a shareholder of the Fund will, for U.S. federal income tax purposes, generally be increased by the difference between the amount of undistributed net capital gain included in the shareholder’s gross income and the tax deemed paid by the shareholders.
If the Fund is unable to satisfy the 90% distribution requirement or otherwise fails to qualify as a RIC in any year, it will be subject to corporate level income tax on all of its income and gain, regardless of whether or not such income was distributed. Distributions to the Fund’s shareholders of such income and gain will not be deductible by the Fund in computing its taxable income. In such event, the Fund’s distributions, to the extent derived from the Fund’s current or accumulated earnings and profits, would constitute ordinary dividends, which would generally be eligible for the dividends received deduction available to corporate shareholders, and non-corporate shareholders would generally be able to treat such distributions as “qualified dividend income” eligible for reduced rates of U.S. federal income taxation in taxable years beginning on or before December 31, 2010, provided in each case that certain holding period and other requirements are satisfied. Distributions in excess of the Fund’s current and accumulated earnings and profits would be treated first as a return

 

of capital to the extent of the shareholders’ tax basis in their Fund shares, and any remaining distributions would be treated as a capital gain. To qualify as a RIC in a subsequent taxable year, the Fund would be required to satisfy the source-of-income, the asset diversification, and the annual distribution requirements for that year and dispose of any earnings and profits from any year in which the Fund failed to qualify for tax treatment as a RIC. Subject to a limited exception applicable to RICs that qualified as such under the Code for at least one year prior to disqualification and that re-qualify as a RIC no later than the second year following the non-qualifying year, the Fund would be subject to tax on any unrealized built-in gains in the assets held by it during the period in which the Fund failed to qualify for tax treatment as a RIC that are recognized within the subsequent 10 years, unless the Fund made a special election to pay corporate-level tax on such built-in gain at the time of its re-qualification as a RIC. The remainder of this discussion assumes that the Fund qualifies as a RIC.
The Fund will generally be subject to a nondeductible 4% federal excise tax on the portion of its undistributed ordinary income with respect to each calendar year and undistributed capital gains if it fails to meet certain distribution requirements with respect to the one-year period ending on October 31 in that calendar year. In order to avoid the 4% federal excise tax, the required minimum distribution is generally equal to the sum of (i) 98% of the Fund’s ordinary income (computed on a calendar year basis), (ii) 98.2% of the Fund’s capital gain net income (generally computed for the one-year period ending on October 31) and (iii) any income realized, but not distributed, and on which the Fund paid no federal income tax in preceding years. The Fund generally intends to make distributions in a timely manner in an amount at least equal to the required minimum distribution and therefore, under normal market conditions, does not expect to be subject to this excise tax.
The Fund may be required to recognize taxable income in circumstances in which it does not receive cash. For example, if the Fund holds debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments with payment in kind interest or, in certain cases, with increasing interest rates or that are issued with warrants), the Fund must include in income each year a portion of the original issue discount that accrues over the life of the obligation regardless of whether cash representing such income is received by the Fund in the same taxable year. Because any original issue discount accrued will be included in the Fund’s “investment company taxable income” (discussed below) for the year of accrual, the Fund may be required to make a distribution to its shareholders to satisfy the distribution requirement, even though it will not have received an amount of cash that corresponds with the income earned.
Gain or loss realized by the Fund from the sale or exchange of warrants acquired by the Fund as well as any loss attributable to the lapse of such warrants generally will be treated as capital gain or loss. Such gain or loss generally will be long-term or short-term, depending on how long the Fund held a particular warrant. Upon the exercise of a warrant acquired by the Fund, the Fund’s tax basis in the stock purchased under the warrant will equal the sum of the amount paid for the warrant plus the strike price paid on the exercise of the warrant. Except as set forth in “Failure to Qualify as a RIC,” the remainder of this discussion assumes that the Fund will qualify as a RIC for each taxable year.
As a RIC, the Fund will be subject to the AMT, but any items that are treated differently for AMT purposes must be apportioned between the Fund and its shareholders and this may affect the shareholders’ AMT liabilities. The Fund intends in general to apportion these items in the same proportion that dividends paid to each shareholder bear to the Fund’s taxable income, determined without regard to the dividends paid deduction.
Taxation of U.S. Shareholders. Distributions paid to U.S. shareholders by the Fund from its investment company taxable income (which is, generally, the Fund’s ordinary income plus net realized short-term capital gains in excess of net realized long-term capital losses) are generally taxable to U.S. shareholders as ordinary income to the extent of the Fund’s earnings and profits, whether paid in cash or reinvested in additional shares. Such distributions (if designated by the Fund) may qualify (a) for the dividends received deduction in the case of corporate shareholders under Section 243 of the Code to the extent that the Fund’s income consists of dividend income from U.S. corporations, excluding distributions from tax-exempt organizations, exempt farmers’ cooperatives or real estate investment trusts, or (b) in the case of individual shareholders for taxable years beginning on or prior to December 31, 2010, as qualified dividend income eligible to be taxed at reduced rates under Section 1(h)(11) of the Code (which provides for a maximum 15% rate) to the extent that the Fund receives qualified dividend income, and provided in each case certain holding period and other requirements are met, as discussed below. Qualified dividend income is, in general, dividend income from taxable domestic corporations and qualified foreign corporations (e.g., generally, foreign corporations incorporated in a possession of the United States or in certain countries with a qualified comprehensive income tax treaty with the United States, or the stock with respect to which such dividend is paid is readily tradable on an established securities market in the United States). A qualified foreign corporation generally excludes any foreign corporation, which for the taxable year of the corporation in which the dividend was paid, or the preceding taxable year, is a passive foreign investment company. Distributions made to a U.S. shareholder from an excess of net long-term capital gains over net short-term capital losses (“capital gain dividends”), including capital gain dividends credited to such shareholder but retained by the Fund, are taxable to such shareholder as long-term capital gain if they have been properly designated by the Fund, regardless of the length of time such shareholder owned the shares of the Fund. The maximum tax rate on capital gain dividends received by individuals is generally 15% (5% for individuals in lower brackets). Distributions in excess of the Fund’s earnings and profits will be treated by the U.S. shareholder, first, as a tax-free return of capital, which is applied against and will reduce the adjusted tax basis of the U.S. shareholder’s shares and, after such adjusted tax basis is reduced to zero, will constitute capital gain to the U.S. shareholder (assuming the shares are held as a capital asset). Under current law, the maximum 15% tax rate on long-term capital gains and qualified dividend income will cease to apply for taxable years beginning after December 31, 2010; beginning in 2011, the maximum rate on long-term capital gains is scheduled to revert to 20%, and all ordinary

 

dividends (including amounts treated as qualified dividends under the law currently in effect) would be taxed as ordinary income. Beginning in 2011, under the 2010 RIC Act, the Fund will not be required to provide written notice designating the amount of any qualified dividend income or capital gain dividends and other distributions.
As a RIC, the Fund will be subject to the AMT, but any items that are treated differently for AMT purposes must be apportioned between the Fund and the shareholders and this may affect the shareholders’ AMT liabilities. Although Treasury Regulations explaining the precise method of apportionment have not yet been issued by the IRS, the Fund intends in general to apportion these items in the same proportion that dividends paid to each shareholder bear to the Fund’s taxable income (determined without regard to the dividends paid deduction), unless the Fund determines that a different method for a particular item is warranted under the circumstances.
For purpose of determining (a) whether the annual distribution requirement is satisfied for any year, and (b) the amount of capital gain dividends paid for that year, the Fund may, under certain circumstances, elect to treat a dividend that is paid during the following taxable year as if it had been paid during the taxable year in question. If the Fund makes such an election, the U.S. shareholder will still be treated as receiving the dividend in the taxable year in which the distribution is made. However, any dividend declared by the Fund in October, November or December of any calendar year, payable to shareholders of record on a specified date in such a month and actually paid during January of the following year, will be treated as if it had been received by the U.S. shareholders on December 31 of the year in which the dividend was declared.
Distributions made to a U.S. shareholder from an excess of net long-term capital gains over net short-term capital losses (“capital gain dividends”), including capital gain dividends credited to such shareholder but retained by the Fund, are taxable to such shareholder as long-term capital gain if they have been properly designated by the Fund, regardless of the length of time such shareholder owned the shares of the Fund. The maximum tax rate on capital gain dividends received by individuals is generally 15%. Distributions in excess of the Fund’s earnings and profits will be treated by the U.S. shareholder, first, as a tax-free return of capital, which is applied against and will reduce the adjusted tax basis of the U.S. shareholder’s shares and, after such adjusted tax basis is reduced to zero, will constitute capital gain to the U.S. shareholder (assuming the shares are held as a capital asset). The maximum rate on long-term capital gains is 15%, and all ordinary dividends (including amounts treated as qualified dividends under the law currently in effect) is taxed as ordinary income.
A Fund distribution will be treated as paid on December 31 of a calendar year if it is declared by the Fund in October, November or December of that year with a record date in such a month and is paid by the Fund during January of the following year. Such a distribution will be taxable to shareholders for the calendar year in which the distribution is declared, rather than the calendar year in which the distribution is received. For purpose of determining (a) whether the annual distribution requirement is satisfied for any year, and (b) the amount of capital gain dividends paid for that year, the Fund may, under certain circumstances, elect to treat a dividend that is paid during the following taxable year as if it had been paid during the taxable year in question. If the Fund makes such an election, the U.S. shareholder will still be treated as receiving the dividend in the taxable year in which the distribution is made.
If the net asset value of shares is reduced below a shareholder’s cost as a result of a distribution by the Fund, that distribution generally will be taxable even though it represents a return of invested capital.
Information on the Amount and Tax Character of Distributions. The Fund will inform you of the amount and character of your distributions at the time they are paid, and will advise you of the tax status of such distributions for federal income tax purposes shortly after the close of each calendar year. If you have not held Fund shares for a full year, the Fund may designate and distribute to you, as ordinary income, qualified dividends or capital gains, and in the case of non-U.S. shareholders, the Fund may further designate and distribute as interest-related dividends and short-term capital gain dividends, a percentage of income that is not equal to the actual amount of such income earned during the period of your investment in the Fund.
Qualified Dividend Income for Individuals. For individual shareholders, a portion of the dividends paid by the Fund may be qualified dividend income, which is eligible for taxation at long-term capital gain rates. This reduced rate generally is available for dividends paid by the Fund out of dividends earned on the Fund’s investment in stocks of domestic corporations and qualified foreign corporations (generally, foreign corporations incorporated in a possession of the United States or in certain countries with a qualified comprehensive income tax treaty with the United States, or the stock with respect to which such dividend is paid is readily tradable on an established securities market in the United States). A qualified foreign corporation generally excludes any foreign corporation, which for the taxable year of the corporation in which the dividend was paid, or the preceding taxable year, is a passive foreign investment company.
Both the Fund and the investor must meet certain holding period requirements to qualify Fund dividends for this treatment. Specifically, the Fund must hold the stock for at least 61 days during the 121-day period beginning 60 days before the stock becomes ex-dividend. Similarly, investors must hold their Fund shares for at least 61 days during the 121-day period beginning 60 days before the Fund distribution goes ex-dividend. The ex-dividend date is the first date following the declaration of a dividend on which the purchaser of stock is not entitled to receive the dividend payment. When counting the number of days you held your Fund shares, include the day you sold your shares but not the day you acquired these shares.
While the income received in the form of a qualified dividend is taxed at the same rates as long-term capital gains, such

 

income will not be considered as a long-term capital gain for other federal income tax purposes. For example, you will not be allowed to offset your long-term capital losses against qualified dividend income on your federal income tax return. Any qualified dividend income that you elect to be taxed at these reduced rates also cannot be used as investment income in determining your allowable investment interest expense. For other limitations on the amount of or use of qualified dividend income on your income tax return, please contact your personal tax advisor.
After the close of its fiscal year, the Fund will designate the portion of its ordinary dividend income that meets the definition of qualified dividend income taxable at reduced rates. If 95% or more of the Fund’s income is from qualified sources, it will be allowed to designate 100% of its ordinary income distributions as qualified dividend income.
This favorable taxation of qualified dividend income at long-term capital gain tax rates expires and will no longer apply to dividends paid by the Fund with respect to its taxable years beginning after December 31, 2010 (sunset date), unless such provision is extended or made permanent.
Dividends-Received Deduction for Corporations. For corporate shareholders, a portion of the dividends paid by the Fund may qualify for the dividends-received deduction. The portion of dividends paid by the Fund that so qualifies will be designated each year in a notice mailed to the Fund’s shareholders, and cannot exceed the gross amount of dividends received by the Fund from domestic (U.S.) corporations that would have qualified for the dividends-received deduction in the hands of the Fund if the Fund was a regular corporation.
The availability of the dividends-received deduction is subject to certain holding period and debt financing restrictions imposed under the Code on the corporation claiming the deduction. The amount that the Fund may designate as eligible for the dividends-received deduction will be reduced or eliminated if the shares on which the dividends earned by the Fund were debt-financed or held by the Fund for less than a minimum period of time, generally 46 days during a 91-day period beginning 45 days before the stock becomes ex-dividend. Similarly, if your Fund shares are debt-financed or held by you for less than a 46-day period then the dividends-received deduction for Fund dividends on your shares may also be reduced or eliminated. Even if designated as dividends eligible for the dividends-received deduction, all dividends (including any deducted portion) must be included in your alternative minimum taxable income calculation.
Dispositions of Shares. Sales and other dispositions of the shares of the Fund shares generally are taxable events. U.S. shareholders should consult their own tax adviser with reference to their individual circumstances to determine whether any particular transaction in the shares of the Fund is properly treated as a sale or exchange for federal income tax purposes, as the following discussion assumes, and the tax treatment of any gains or losses recognized in such transactions.
The sale or other disposition of shares of the Fund will generally result in capital gain or loss to the shareholder equal to the difference between the amount realized and his adjusted tax basis in the shares sold or exchanged, and will be long-term capital gain or loss if the shares have been held for more than one year at the time of sale. Any loss upon the sale or exchange of shares held for six months or less will be treated as long-term capital loss to the extent of any capital gain dividends received (including amounts credited as an undistributed capital gain dividend) by such shareholder with respect to such shares. Any loss realized on a sale or exchange of Fund shares will be disallowed to the extent the shares disposed of are replaced (including through reinvestment of distributions) with substantially identical shares within a period of 61 days, beginning 30 days before and ending 30 days after the shares are disposed of. In such a case, the basis in the shares acquired will be adjusted to reflect the disallowed loss. If a shareholder holds Fund shares for six months or less and during that period receives a distribution taxable to the shareholder as long-term capital gain, any loss realized on the redemption or exchange of those shares would be a long-term loss to the extent of that distribution.
Present law taxes both long-term and short-term capital gain of corporations at the rates applicable to ordinary income of corporations. For non-corporate taxpayers, short-term capital gain will currently be taxed at the rate applicable to ordinary income, currently a maximum of 35%, while long-term capital gain generally will be taxed at a maximum rate of 15%. Capital losses are subject to certain limitations.
Under recently enacted provisions of the Emergency Economic Stabilization Act of 2008, the Fund’s administrative agent will be required to provide you with cost basis information on the sale of any of your shares in the Fund, subject to certain exceptions. This cost basis reporting requirement is effective for shares purchased in the Fund on or after January 1, 2012.
Other Taxation. Distributions may be subject to state, local and foreign taxes, depending on each shareholder’s particular situation.
Retirement Accounts. Fund shares are available for purchase through certain retirement plans and accounts, including IRAs, Roth IRAs, SIMPLE IRAs and tax-sheltered annuities. Contributions to retirement plans are subject to specific eligibility and contribution limitations. Distributions from retirement plans and accounts generally are subject to ordinary income tax and, if withdrawn prior to age 591/2, a 10% penalty. Furthermore, distributions from such plans and accounts generally must commence no later than April 1 of the year after the account owner reaches age 701/2. There are exceptions to these rules depending on the type of plan or account and the individual’s own circumstances. You should consult with your tax advisor regarding the income aspects of opening, maintaining and withdrawing amounts from retirement plans and accounts.

 

Taxation of Fund Operations
Hedging Transactions. The use of hedging strategies, such as writing (selling) and purchasing options and futures contracts and entering into forward contracts, involves complex rules that will determine for income tax purposes the amount, character and timing of recognition of the gains and losses the Fund realizes in connection therewith. Gains from the disposition of foreign currencies (except certain gains that may be excluded by future Treasury Regulations), and gains from options, futures and forward contracts the Fund derives with respect to its business of investing in securities or foreign currencies, will be treated as qualifying income under the income requirement.
Certain of the Fund’s investment practices are subject to special and complex federal income tax provisions that may, among other things; (a) disallow, suspend or otherwise limit the allowance of certain losses or deductions; (b) convert lower taxed long-term capital gain to higher taxed short-term capital gain or ordinary income; (c) convert an ordinary loss or a deduction to a capital loss (the deductibility of which is more limited), (d) cause the Fund to recognize income or gain without a corresponding receipt of cash; (e) adversely affect the timing as to when a purchase or sale of securities is deemed to occur; and (f) adversely alter the characterization of certain complex financial transactions. The Fund will monitor its transactions and may make certain tax elections to mitigate the effect of these rules and prevent its disqualification as a RIC.
Foreign Securities. Dividends and interest the Fund receives, and gains it realizes, may be subject to income, withholding or other taxes imposed by foreign countries and U.S. possessions that would reduce the total return on its securities. Tax treaties between certain countries and the United States may reduce or eliminate these taxes, however, and many foreign countries do not impose taxes on capital gains in respect of investments by foreign investors.
The Fund may be subject to foreign withholding taxes on income from certain foreign securities. This, in turn, could reduce such Fund’s distributions paid to the shareholders. If more than 50% of the Fund’s total assets at the end of a fiscal year is invested in foreign securities, the Fund may elect to pass through to the shareholders their pro rata share of foreign taxes paid by the Fund. If this election is made, the Fund may report more taxable income to the shareholders than it actually distributes. The shareholders will then be entitled either to deduct their share of these taxes in computing their taxable income, or to claim a foreign tax credit for these taxes against their U.S. federal income tax (subject to limitations for certain shareholders). The Fund will provide the shareholders with the information necessary to claim this deduction or credit on their personal income tax return if the Fund makes this election. A shareholder’s use of foreign dividends, designated by a Fund as qualified dividend income subject to taxation at long-term capital gain rates, may reduce the otherwise available foreign tax credits on its federal income tax return. Shareholders in these circumstances should talk with their personal tax advisors about their foreign tax credits and the procedures that they should follow to claim these credits on their personal income tax returns.
The Fund may invest in the stock of “passive foreign investment companies” (“PFICs”). A PFIC is any foreign corporation (with certain exceptions) that, in general, meets either of the following tests: (1) at least 75% of its gross income for the taxable year is passive or (2) an average of at least 50% of its assets produce, or are held for the production of, passive income. Under certain circumstances, if the Fund holds stock of a PFIC, it will be subject to federal income tax on a portion of any “excess distribution” it receives on the stock or of any gain on its disposition of the stock (collectively, “PFIC income”), plus interest thereon, even if it distributes the PFIC income as a taxable dividend to its shareholders. The balance of the PFIC income will be included in the Fund’s investment company taxable income and, accordingly, will not be taxable to it to the extent it distributes that income to its shareholders. Fund distributions attributable to PFIC income will not be eligible for the 15% federal income tax rate on “qualified dividend income” mentioned in the Prospectus.
If the Fund invests in a PFIC and elects to treat the PFIC as a “qualified electing fund” (a “QEF”), then in lieu of the Fund’s incurring the foregoing tax and interest obligation, it would be required to include in income each year its pro rata share of the QEF’s annual ordinary earnings and net capital gain — which the Fund most likely would have to distribute to satisfy the Distribution Requirement and avoid imposition of the Excise Tax — even if the Fund did not receive those earnings and gain from the QEF. In most instances it will be very difficult, if not impossible, to make this election because of certain requirements thereof.
The Fund may elect to “mark-to-market” any stock in a PFIC it owns at the end of its taxable year. “Marking-to-market,” in this context, means including in gross income for each taxable year (and treating as ordinary income) the excess, if any, of the fair market value of the stock over the Fund’s adjusted basis therein as of the end of that year. Pursuant to the election, the Fund also may deduct (as an ordinary, not capital, loss) the excess, if any, of its adjusted basis in PFIC stock over the fair market value thereof as of the taxable year-end, but only to the extent of any net mark-to-market gains with respect to that stock the Fund included in income for prior taxable years under the election. The Fund’s adjusted basis in each PFIC’s stock subject to the election would be adjusted to reflect the amounts of income included and deductions taken thereunder.
Investors should be aware that the Fund may not be able, at the time it acquires a foreign corporation’s shares, to ascertain whether the corporation is a PFIC and that a foreign corporation may become a PFIC after the Fund acquires shares therein. While the Fund generally will seek to avoid investing in PFIC shares to avoid the tax consequences summarized above, there are no guarantees that it will be able to do so and it reserves the right to make such investments as a matter of its investment policy.

 

Under Section 988 of the Code, gains or losses (a) from the disposition of foreign currencies, including forward contracts; (b) except in certain circumstances, from options, futures and forward contracts on foreign currencies (and on financial instruments involving foreign currencies) and from notional principal contracts (e.g., swaps, caps, floors and collars) involving payments denominated in foreign currencies; (c) on the disposition of each foreign-currency-denominated debt security that are attributable to fluctuations in the value of the foreign currency between the dates of acquisition and disposition of the security; and (d) that are attributable to exchange rate fluctuations between the time the Fund accrues interest, dividends or other receivables or expenses or other liabilities denominated in a foreign currency and the time it actually collects the receivables or pays the liabilities, generally will be treated as ordinary income or loss. These gains or losses will increase or decrease the amount of the Fund’s investment company taxable income to be distributed to its shareholders as ordinary income, rather than increasing or decreasing the amount of its net capital gain. If the Fund’s section 988 losses exceed other investment company taxable income during a taxable year, it would not be able to distribute any dividends, and any distributions made during that year before the losses were realized would be recharacterized as a return of capital to shareholders, rather than as a dividend, thereby reducing each shareholder’s basis in his or her Fund shares.
The foregoing is a general and abbreviated summary of the provisions of the Code and the Treasury Regulations in effect as they directly govern the taxation of the Fund and its shareholders. These provisions are subject to change by legislative and administrative action, and any such change may be retroactive. Shareholders are urged to consult their tax advisers regarding specific questions as to U.S. federal income, estate or gift taxes, or foreign, state, local taxes or other taxes.
Fund Performance
The performance of the Fund may be compared in publications to the performance of various indices and investments for which reliable performance data is available. The performance of the Fund may be compared in publications to averages, performance rankings, or other information prepared by recognized mutual fund statistical services. The Annual Report contains additional performance information and will be made available to investors upon request and without charge.
Financial Statements
Reports to Shareholders. Shareholders will receive unaudited semi-annual reports describing the Fund’s investment operations and annual financial statements audited by independent certified public accountants.
Audited Financial Statements. The Fund’s financial statements, including the notes thereto, dated as of September 30, 2010, which have been audited by BBD, LLP, an independent registered public accounting firm, are incorporated herein by reference from the Fund’s 2010 Annual Report to Shareholders.

 

Appendix A — Descriptions of Securities Ratings
Commercial Paper Ratings
Moody’s Investors Service, Inc. (Moody’s): “PRIME-1” and “PRIME-2” are Moody’s two highest commercial paper rating categories. Moody’s evaluates the salient features that affect a commercial paper issuer’s financial and competitive position. The appraisal includes, but is not limited to the review of such factors as:
1.   Quality of management.
 
2.   Industry strengths and risks.
 
3.   Vulnerability to business cycles.
 
4.   Competitive position.
 
5.   Liquidity measurements.
 
6.   Debt structures.
 
7.   Operating trends and access to capital markets.
Differing degrees of weight are applied to the above factors as deemed appropriate for individual situations.
Standard & Poor’s Ratings Group, a division of The McGraw-Hill Companies, Inc. (S&P): “A-1” and “A-2” are S&P’s two highest commercial paper rating categories and issuers rated in these categories have the following characteristics:
1.   Liquidity ratios are adequate to meet cash requirements.
 
2.   Long-term senior debt is rated A or better.
 
3.   The issuer has access to at least two additional channels of borrowing.
 
4.   Basic earnings and cash flow have an upward trend with allowance made for unusual circumstances.
 
5.   Typically, the issuer is in a strong position in a well-established industry or industries.
 
6.   The reliability and quality of management is unquestioned.
Relative strength or weakness of the above characteristics determine whether an issuer’s paper is rated “A-1” or “A-2”. Additionally, within the “A-1” designation, those issues determined to possess overwhelming safety characteristics are denoted with a plus (+) rating category.

 

Appendix B — Proxy Voting Guidelines Summary
The following is a concise summary of the Dividend Growth Advisors’ proxy voting policy guidelines.
1.   Auditors
Vote CASE-BY-CASE on shareholder proposals on auditor rotation, taking into account these factors:
  •   Tenure of the audit firm
 
  •   Establishment and disclosure of a renewal process whereby the auditor is regularly evaluated for audit quality
 
  •   Length of the rotation period advocated in the proposal
 
  •   Significant audit-related issues
 
  •   Number of audit committee meetings held each year
 
  •   Number of financial experts serving on the committee
2.   Board of Directors
Voting on Director Nominees in Uncontested Elections
Generally, vote CASE-BY-CASE. But WITHHOLD votes from:
  •   Insiders and affiliated outsiders on boards that are not at least majority independent
 
  •   Directors who adopt a poison pill without shareholder approval since the company’s last annual meeting and there is no requirement to put the pill to shareholder vote within 12 months of its adoption
 
  •   Directors who serve on the compensation committee when there is a negative correlation between chief executive pay and company performance (fiscal year end basis)
 
  •   Directors who have failed to address the issue(s) that resulted in any of the directors receiving more than 50% withhold votes out of those cast at the previous board election
Classification/Declassification of the Board
Vote AGAINST proposals to classify the board.
Vote FOR proposals to repeal classified boards and to elect all directors annually.
Independent Chairman (separate Chairman/CEO)
Vote FOR shareholder proposals asking that the chairman and CEO positions be separated (independent chairman), unless the company has a strong countervailing governance structure, including a lead director, two-thirds independent board, all independent key committees, and established governance guidelines.
Additionally, the company should not have underperformed its peers.
Majority of Independent Directors/Establishment of Committees
Vote FOR shareholder proposals asking that a majority or more of directors be independent.
Open Access (Shareholder Resolution)
Vote CASE-BY-CASE basis, taking into account the ownership threshold proposed in the resolution and the proponent’s rationale.
3.   Shareholder Rights

 

Shareholder Ability to Act by Written Consent
Vote AGAINST proposals to restrict or prohibit shareholder ability to take action by written consent.
Vote FOR proposals to allow or make easier shareholder action by written consent.
Shareholder Ability to Call Special Meetings
Vote AGAINST proposals to restrict or prohibit shareholder ability to call special meetings.
Vote FOR proposals that remove restrictions on the right of shareholders to act independently of management.
Supermajority Vote Requirements
Vote AGAINST proposals to require a supermajority shareholder vote.
Vote FOR proposals to lower supermajority vote requirements.
Cumulative Voting
Vote AGAINST proposals to eliminate cumulative voting.
Vote proposals to restore or permit cumulative voting on a CASE-BY-CASE basis relative to the company’s other governance provisions.
Confidential Voting
Vote FOR shareholder proposals requesting that corporations adopt confidential voting, use independent vote tabulators and use independent inspectors of election. In proxy contests, support confidential voting proposals only if dissidents agree to the same policy that applies to management.
4.   Proxy Contests
Voting for Director Nominees in Contested Elections Votes in a contested election of directors must be evaluated on a CASE-BY-CASE basis, considering the factors that include the long-term financial performance, management’s track record, qualifications of director nominees (both slates), and an evaluation of what each side is offering shareholders.
Reimbursing Proxy Solicitation Expenses
Vote CASE-BY-CASE. Where Dividend Growth Advisors LLC recommends in favor of the
dissidents, we also recommend voting for reimbursing proxy solicitation expenses.
5.   Poison Pills
Vote FOR shareholder proposals that ask a company to submit its poison pill for shareholder ratification. Review on a CASE-BY-CASE basis shareholder proposals to redeem a company’s poison pill and management proposals to ratify a poison pill.
6.   Mergers and Corporate Restructurings
Vote CASE-BY-CASE on mergers and corporate restructurings based on such features
as the fairness opinion, pricing, strategic rationale, and the negotiating process.
7.   Reincorporation Proposals
Proposals to change a company’s state of incorporation should be evaluated on a CASE-BY-CASE basis, giving consideration to both financial and corporate governance concerns, including the reasons for reincorporating, a comparison of the governance provisions, and a comparison of the jurisdictional laws.
Vote FOR reincorporation when the economic factors outweigh any neutral or negative governance changes.
8.   Capital Structure
Common Stock Authorization

 

Votes on proposals to increase the number of shares of common stock authorized for issuance are determined on a CASE-BY-CASE basis evaluating strategic business purpose of increase.
Vote AGAINST proposals at companies with dual-class capital structures to increase the number of authorized shares of the class of stock that has superior voting rights.
Vote FOR proposals to approve increases beyond the allowable increase when a company’s shares are in danger of being delisted or if a company’s ability to continue to operate as a going concern is uncertain.
Dual-class Stock
Vote AGAINST proposals to create a new class of common stock with superior voting rights.
Vote FOR proposals to create a new class of nonvoting or subvoting common stock if:
  •   It is intended for financing purposes with minimal or no dilution to current shareholders
 
  •   It is not designed to preserve the voting power of an insider or significant shareholder
9   Executive and Director Compensation
Vote AGAINST a plan if the cost exceeds the allowable cap.
Vote FOR a plan if the cost is reasonable (below the cap) unless any of the following conditions apply:
  •   The plan expressly permits repricing of underwater options without shareholder approval; or
 
  •   There is a disconnect between the CEO’s pay and performance (an increase in pay and a decrease in performance), the main source for the pay increase is equity-based, and the CEO participates in the plan being voted on
 
  •   The company’s most recent three-year burn rate is excessive and is an outlier within its peer group
A company that has triggered the burn rate policy may avoid an AGAINST vote recommendation if it commits to meet the industry average burn rate over the next three years. The above general voting guidelines for pay for performance may change if the compensation committee members can demonstrate improved performance in an additional public filing such as a DEFA 14A or 8K. To demonstrate improved performance, committee members should review all components of a CEO’s compensation and prepare a tally sheet with dollar amounts under various payout scenarios. The committee should also have the sole authority to hire and fire outside compensation consultants.
Director Compensation
Before recommending a vote FOR a director equity plan, Dividend Growth Advisors will review the company’s proxy statement for the following qualitative features:
  •   Stock ownership guidelines (a minimum of three times the annual cash retainer)
 
  •   Vesting schedule or mandatory holding/deferral period (minimum vesting of three years for stock options or restricted stock)
 
  •   Balanced mix between cash and equity
 
  •   Non-employee directors should not receive retirement benefits/perquisites
 
  •   Detailed disclosure of cash and equity compensation for each director
Management Proposals Seeking Approval to Reprice Options
Votes on management proposals seeking approval to reprice options are evaluated on a CASE-BY-CASE basis giving consideration to the following:
  •   Historic trading patterns
 
  •   Rationale for the repricing
 
  •   Value-for-value exchange
 
  •   Option vesting

 

  •   Term of the option
 
  •   Exercise price
 
  •   Participation
 
  •   Treatment of surrendered options
Qualified Employee Stock Purchase Plans
Vote on qualified employee stock purchase plans on a CASE-BY-CASE basis.
Vote FOR qualified employee stock purchase plans where all of the following apply:
  •   Purchase price is at least 85 percent of fair market value
 
  •   Offering period is 27 months or less, and
 
  •   Potential voting power dilution (VPD) is 10 percent or less.
Vote AGAINST qualified employee stock purchase plans where any of the opposite conditions occur.
Nonqualified Employee Stock Purchase Plans
Vote on nonqualified employee stock purchase plans on a CASE-BY-CASE basis. Vote FOR nonqualified plans with all the following features:
  •   Broad-based participation
 
  •   Limits on employee contribution (a fixed dollar amount or a percentage of base salary)
 
  •   Company matching contribution up to 25 percent of employee’s contribution, which is effectively a discount of 20 percent from market value
 
  •   No discount on the stock price on the date of purchase since there is a company matching contribution
Vote AGAINST nonqualified employee stock purchase plans if they do not meet the above criteria.
Shareholder Proposals on Compensation
Generally vote CASE-BY-CASE, taking into account company performance, pay level versus peers, pay level versus industry, and long term corporate outlook. But generally vote FOR shareholder proposals that:
  •   Advocate the use of performance-based awards like indexed, premium-priced, and performance-vested options or performance-based shares, unless the proposal is overly restrictive or the company already substantially uses such awards.
 
  •   Call for a shareholder vote on extraordinary benefits contained in Supplemental Executive Retirement Plans (SERPs).
10.   Social and Environmental Issues
These issues cover a wide range of topics, including consumer and public safety, environment and energy, general corporate issues, labor standards and human rights, and workplace diversity.
In general, vote CASE-BY-CASE. While a wide variety of factors goes into each analysis, the overall principal guiding all vote recommendations focuses on how the proposal will enhance the economic value of the company.
Vote:
  •   AGAINST resolutions asking for the adopting of voluntary labeling of ingredients or asking for companies to label until a phase out of such ingredients has been completed.
 
  •   CASE-BY-CASE on proposals calling for companies to report on the risks associated with outsourcing, with consideration of the risks associated with certain international markets, the utility of such a report to shareholders, and the existence of a publicly available code of corporate conduct that applies to international operations.
EX-99.17.C 9 e92936exv99w17wc.htm EX-99.17.C exv99w17wc
Exhibit 17(c)
Rising Dividend Growth Fund
Annual Report
September 30, 2011
Fund Advisor:
Dividend Growth Advisors, LLC
58 Riverwalk Boulevard
Building 2, Suite A
Ridgeland, SC 29936
Toll Free: (888) 826-2520

 

Management’s Discussion of Fund Performance
The Investment Environment
Several years ago shock waves were sent through the various investment markets by over-leveraged financial institutions. While the painful declines were mainly centered in the financial markets, the impact radiated out to include housing, construction, energy, employment, and government to name but a few. It would appear that not much has happened to fix the problems. As the calendar third quarter and the Fund’s fiscal 2011 drew to a close, investors are still dealing with a poor housing environment, disappointingly high unemployment, and sterile governments. Some of the attention has been shifted to Europe as the European Union wrestles with significant leverage and capital adequacy problems. While US banks appear to be in better shape than their European cousins, there continues to be strains on capital. Net interest margins continue to be thin at most banks and tighter supervision by the bank regulators further complicates bank lending. Here in the United States the political stalemates at both the federal and state levels have only polarized positions and rendered governments ineffective. To put it mildly, the third quarter has been a difficult quarter.
The issues mentioned above have reappeared in the second quarter of 2011 as there was evidence that the economies of the countries around the world were beginning to slow. Natural disasters did play a part as the tragic earthquake and tsunami in Japan hurt production of numerous components which are sent to other countries for the production of electronics and autos to mention but a few. An earthquake in New Zealand and tornados and flooding in the US also had an impact. Political unrest in the Arab world dubbed the “Arab Spring” has extended into summer and now the fall creating uncertainty as to how this part of the world is going to interact with the West.
Mutual Fund Performance Review for the Second Half, Fiscal Year 2011
The six month period from April 1st to September 30th, the Fund’s second half, was a disappointing time for equity markets. Using the S&P 500 as the benchmark, the total return for the index was down 13.78%, the year-to-date number was down 8.68%, and the one year number up 1.14%. We believe the general equity markets were reacting to the circumstances described above. The Class A shares of Rising Dividend Growth Fund for the six month period were down 9.86%, outperforming the S&P 500 Index by 392 basis points. The year-to-date Fund performance was down 6.34%, an outperformance of 234 basis points and the one year performance was a positive 0.95%, trailing the Index by 19 basis points.
The performance for the Fund’s fiscal year 2011 had the Class A shares up 0.95% compared to the S&P 500’s 1.14%. A longer term review of the performance shows the 3 year average annual total return of the S&P 500 at up 1.23% versus the Fund’s A shares up 6.33%, a difference of 510 basis points in favor of the A shares. The comparable 5 year average annual number for the S&P 500 is -1.18% versus the A shares of the Fund up 3.59% for an outperformance by the Fund of 477 basis points.1
There is an important point to be made from the statistics in the preceding paragraph: that is, the Fund’s A shares generally outperformed the S&P 500 during these down markets. The following discussion of the Fund’s attribution analysis will focus on the structure of the portfolio and what some of the factors were that enabled the Class A shares of the Fund to outperform the S&P 500 by 392 basis points in the last half of the Fund’s fiscal year.
The first point is a basic tenant of the Rising Dividend Growth Fund. Companies that are able to increase their dividend for ten consecutive years at an average rate of at least ten percent, our 10/10 philosophy, are financially sound or else they would not be able to hit these minimum standards. The second point is the Fund’s investment of up to 20% of the portfolio in energy Master Limited Partnerships (MLPs). At the end of the quarter, a little over 18% of the Fund’s assets were invested in the MLP space. The MLPs provide a high level of distribution which aids the dividend that the Fund is able to pay. MLP distributions often contain some return of capital. Historically, the MLPs have also had better price performance, particularly in down markets. For instance, the Alerian Index (an index that measures the market price action of 50 large MLPs) for the five year period from September 2006 to September 2011 had a total return of +86.5%. During the same period the cumulative total return of the S&P 500 Index was -5.8%. If a shorter time frame is reviewed like the 6 months ended September 30, 2011, the Alerian index was -7.5% while the S&P 500 was -13.8%2. The 630 basis point difference in the performance of the two indexes for the six month period has been a mitigating factor in the better performance of the Fund as compared to the S&P 500 Index in recent history.
The third point is the level of cash reserves that the Fund holds. The S&P 500 Index holds no cash and therefore is more exposed to market volatility. The portfolio management team for the Fund began to feel uncomfortable with the macroeconomic and geopolitical conditions around the world in the second quarter and began to build cash reserves. By the time the third quarter ended cash reserves were 18.3% of the portfolio. This helped to cushion the impact of the declining market.
The portfolio of common stocks more closely resembled the performance of the S&P 500. For instance, the financial sector holdings of the Fund were underweighted compared to the S&P sector weight. The Fund’s financials holdings were 4.3% of the portfolio compared to approximately 15.7% of the S&P 500. This sector had a very difficult 6 months, drifting down 27.9% for the S&P 500 and 21.5% for the Fund. In this case, being underweight helped the comparative performance. Another sector that was difficult was the industrials which comprised 12.3% of the Fund’s portfolio versus 11.0% of the S&P 500. The Fund’s holdings in industrials were down an average of 15.9% compared to a negative 22.5% for the S&P.3 It appears from these results that sectors and companies that are viewed as being more cyclical had greater volatility on the downside during this period.
A final point to keep in mind is the fact that companies held in the Fund’s portfolio continue to raise their dividends each year at a rate sufficient to keep the average growth rate at or above the 10% average required by the Fund’s investment discipline. The average dividend growth in 2011 is 12.5%.4
Outlook
The portfolio management team anticipates continued volatility in the fourth quarter of 2011 and beyond. While it is possible that the two political parties in the United States may find some common ground, it will likely be only with continued brinksmanship such as what occurred over the summer in regard to the raising of the debt ceiling. Unemployment will remain higher than wanted. Financial leverage is still an issue. We believe that the next year will be a time for investing in the financially strong companies with astute managements, and dominant products and services that make up the universe of companies that have raised their dividends for at least 10 consecutive years at an average rate of at least 10%. Additionally, the current yields generated by the MLPs should continue to provide a foundation for total return that is difficult to acquire in traditional common stocks.
Thomas W. L. Cameron
C. Troy Shaver, Jr.
Jere E. Estes
October 12, 2011
The views in the foregoing discussion were those of the Fund’s investment advisor as of the date set forth above and may not reflect its views on the date this report is first published or anytime thereafter. These views are intended to assist shareholders in understanding their investment in the Fund and do not constitute

 

     investment advice.
1  Source: Bloomberg and Huntington Asset Services Inc.
2  IBID
3  IBID
4  Bloomberg Finance and Dividend Growth Advisors

 

Fund Performance — (Unaudited)
Total Returns*
(for the periods ended September 30, 2011)
                         
                    Average Annual  
                    Since Commencement  
            Average Annual     of Operations  
    One Year     Five Year     (March 23, 2004)**  
Rising Dividend Growth Fund — Class A
     0.95 %     3.59 %     5.38 %
Rising Dividend Growth Fund — Class A (after deduction of sales load)***
     -4.86 %     2.37 %     4.56 %
S&P 500@ Index****
     1.14 %     -1.18 %     2.51 %
Total annual operating expenses for Class A shares for the fiscal year ended September 30, 2010, as disclosed in the Fund’s prospectus, were 1.87% of average daily net assets (1.65% after fee waivers/expense reimbursements by the Advisor, which excluded the effect of acquired fund fees). The Advisor contractually has agreed to waive its fee and/or cap certain expenses (excluding acquired fund fees, brokerage, and certain other costs) of the Fund so that the net operating expenses of the Fund’s Class A shares do not exceed 1.65%. This Expense Limitation Agreement will stay in place until January 31, 2012, although it may be terminated by the Trust at any time. It may be reviewed, modified or discontinued thereafter.
Total Returns*
(for the periods ended September 30, 2011)
                         
                    Average Annual  
                    Since Commencement  
            Average Annual     of Operations  
    One Year     Five Year     (April 14, 2005)  
Rising Dividend Growth Fund — Class C
     0.51 %     3.10 %     4.77 %
Rising Dividend Growth Fund — Class C (after deduction of sales load)***
     0.51 %     3.10 %     4.77 %
S&P 500@ Index****
     1.14 %     -1.18 %     1.68 %
Total annual operating expenses for Class C shares for the fiscal year ended September 30, 2010, as disclosed in the Fund’s prospectus, were 2.47% of average daily net assets (2.25% after fee waivers/expense reimbursements by the Advisor, which excluded the effect of acquired fund fees). The Advisor contractually has agreed to waive its fee and/or cap certain expenses (excluding acquired fund fees, brokerage, and certain other costs) of the Fund so that the net operating expenses of the Fund’s Class C shares do not exceed 2.25%. This Expense Limitation Agreement will stay in place until January 31, 2012, although it may be terminated by the Trust at any time. It may be reviewed, modified or discontinued thereafter.
Total Returns*
(for the periods ended September 30, 2011)
                         
                    Average Annual  
                    Since Commencement  
            Average Annual     of Operations  
    One Year     Five Year     (March 21, 2007)  
Rising Dividend Growth Fund — Class I
     1.47 %     6.77 %     2.85 %
S&P 500@ Index****
     1.14 %     1.23 %     -2.68 %
Total annual operating expenses for Class I shares for the fiscal year ended September 30, 2010, as disclosed in the Fund’s prospectus, were 1.47% of average daily net assets (1.25% after fee waivers/expense reimbursements by the Advisor, which excluded the effect of acquired fund fees). The Advisor contractually has agreed to waive its fee and/or cap certain expenses (excluding acquired fund fees, brokerage, and certain other costs) of the Fund so that the net operating expenses of the Fund’s Class I shares do not exceed 1.25%. This Expense Limitation Agreement will stay in place until January 31, 2012, although it may be terminated by the Trust at any time. It may be reviewed, modified or discontinued thereafter.

 

THE PERFORMANCE QUOTED REPRESENTS PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemptions of Fund shares. Current performance of the Fund may be lower or higher than the performance quoted. For more information on the Fund, and to obtain performance data current to the most recent month end or to request a prospectus, please call (888) 826-2520 or visit www.dividendgrowthadvisors.com.
You should carefully consider the investment objectives, potential risk, management fees, and charges and expenses of the Fund before investing. The Fund’s prospectus contains this and other information about the Fund, and should be read carefully before investing.
* Return figures reflect any change in price per share and assume the reinvestment of all dividends and distributions.
** Class A commenced operations on March 18, 2004. For performance calculations, the inception date is March 23, 2004, the date the Fund first began to invest in accordance with its stated objective.
*** In compliance with SEC guidelines, these returns reflect the deduction of maximum sales charges and other recurring fees. Class A Shares have a maximum up-front sales charge of 5.75% that you pay when you buy your shares. The front-end sales charge for the Class A Shares decreases with the amount you invest and is included in the offering price. The 1.00% contingent deferred sales charge (“CDSC”) for Class A shares applies to redemptions that occur within one year from the date of purchase on purchase amounts of $1,000,000 or more. The 1.00% CDSC for Class C shares applies to redemptions that occur within one year from the date of purchase of such shares. This CDSC is only applicable on Class C shares that are redeemed in accounts that are established after March 1, 2010. The 1.00% redemption fee for Class A and Class C Shares applies only to redemptions within 60 days of acquisition. The fee is not applied to shares acquired through reinvestment of dividends or distributions.
**** The S&P 500® Index is an unmanaged benchmark that assumes reinvestment of all distributions and excludes the effect of taxes and fees. The Index is a widely recognized unmanaged index representative of broader markets and ranges of securities than are found in the Fund’s portfolio. Individuals cannot invest directly in the Index; however, an individual can invest in exchange-traded funds or other investment vehicles that attempt to track the performance of a benchmark index.

 

(GRAPH CHART)

 

(GRAPH CHART)
(GRAPH CHART)

 

The results shown for the Fund include reinvested distributions, applicable sales charges, fund expenses and management fees, and are shown before taxes on fund distributions and sale of fund shares. There is no sales charge on dividends or capital gain distributions that are reinvested in additional shares. The market indexes are unmanaged, do not reflect sales charges, commissions or expenses, or the effects of taxes. You cannot invest directly into an index. The performance quoted represents past performance, which does not guarantee future results. Investment returns and principal values will fluctuate so that your shares, when redeemed, may be worth more or less than their original purchase price. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling (888) 826-2520 or visiting www.dividendgrowthadvisors.com.
The Fund’s investment objectives, risks, charges and expenses must be considered carefully before investing. The prospectus contains this and other important information about the investment company and may be obtained by calling (888) 826-2520. Please read it carefully before investing.
The Fund is distributed by Unified Financial Securities, Inc., Member FINRA.

 

Fund Holdings — (Unaudited)
(GRAPH CHART)
     1  As a percent of net assets.
The Fund attempts to achieve its investment objective of long-term growth of capital and current income by investing in equity securities of domestic and foreign companies that have increased their dividend payments to shareholders for each of the past ten years or more.
Regardless of industry, the Fund invests at least 80% of its assets in equity securities of dividend-paying domestic and foreign companies whose market capitalization is at least $500 million and that have increased their dividend payments to stockholders for each of the past ten years or more. The Fund is non-diversified and normally concentrates its investments in a group of 25-50 of such companies. The Fund is a growth and income fund with a long-term investment philosophy.
Availability of Portfolio Schedule
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Qs are available at the SEC’s website at www.sec.gov. The Fund’s Form N-Qs may be reviewed and copied at the Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Summary of Fund’s Expenses — (Unaudited)
As a shareholder of the Fund, you incur two types of costs: (i) transaction costs, including sales charges (loads) on purchase payments or contingent deferred sales charges and/or redemption fees on certain redemptions and (ii) ongoing costs, including management fees, distribution fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period, April 1, 2011 and held for the six months ended September 30, 2011.

 

Actual Expenses
The first line of each table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.60), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of each table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which are not the Fund’s actual returns. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Expenses shown are meant to highlight your ongoing costs only and do not reflect any transactional costs such as the sales loads on purchase payments, contingent deferred sales charges, and/or redemption fees on certain redemptions. Therefore, the second line of the table below is useful for comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If addition, if these transactional costs were included, your costs would have been higher.
                         
            Ending     Expenses Paid  
    Beginning     Account Value     During Period  
Rising Dividend Growth Fund   Account Value     September 30,     April 1, 2011 -  
Class A   April 1, 2011     2011     September 30, 2011*  
Actual
   $ 1,000.00     $ 901.36     $ 7.87  
Hypothetical**
   $ 1,000.00     $ 1,016.79     $ 8.34  
                         
            Ending     Expenses Paid  
    Beginning     Account Value     During Period  
Rising Dividend Growth Fund   Account Value     September 30,     April 1, 2011 -  
Class C   April 1, 2011     2011     September 30, 2011***  
Actual
   $ 1,000.00     $ 900.06     $ 10.74  
Hypothetical**
   $ 1,000.00     $ 1,013.77     $ 11.38  
                         
            Ending     Expenses Paid  
    Beginning     Account Value     During Period  
Rising Dividend Growth Fund   Account Value     September 30,     April 1, 2011 -  
Class I   April 1, 2011     2011     September 30, 2011****  
Actual
   $ 1,000.00     $ 904.10     $ 5.98  
Hypothetical**
   $ 1,000.00     $ 1,018.79     $ 6.34  
 
    *Expenses are equal to Class A’s annualized net expense ratio of 1.65%, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the partial year period).
 
    **Assumes a 5.00% return before expenses.
 
    ***Expenses are equal to Class C’s annualized expense ratio of 2.25%, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the partial year period).
 
    ****Expenses are equal to Class I’s annualized expense ratio of 1.25%, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the partial year period).

 

Dividend Growth Trust
Rising Dividend Growth Fund
Schedule of Investments
September 30, 2011
                 
Common Stocks/Master Limited Partnerships - 81.47%   Shares     Value  
Aircraft Engines & Engine Parts - 1.38%
                
United Technologies Corp.
     26,400     $ 1,857,504  
 
              
 
                
Bituminous Coal & Lignite Surface Mining - 1.61%
                
Natural Resource Partners, L.P.
     85,200       2,160,672  
 
              
 
                
Bottled & Canned Soft Drinks Carbonated Waters - 1.91%
                
Coca-Cola Co. / The
     38,000       2,567,280  
 
              
 
                
Computer & Office Equipment - 4.02%
                
International Business Machines Corp. (IBM)
     30,800       5,390,924  
 
              
 
                
Crude Petroleum & Natural Gas - 3.25%
                
Linn Energy, LLC
     122,300       4,361,218  
 
              
 
                
Fire, Marine, & Casualty Insurance - 1.82%
                
HCC Insurance Holdings, Inc.
     90,400       2,445,320  
 
              
 
                
Food & Kindred Products - 3.45%
                
Nestle SA (a)
     83,950       4,625,645  
 
              
 
                
General Industrial Machinery & Equipment - 1.08%
                
Illinois Tool Works, Inc.
     35,000       1,456,000  
 
              
 
                
Industrial Inorganic Chemicals - 3.20%
                
Praxair, Inc.
     45,900       4,290,732  
 
              
 
                
Industrial Instruments for Measurement, Display, & Control - 3.10%
                
Roper Industries, Inc.
     60,400       4,162,164  
 
              
 
                
Investment Advice - 2.46%
                
Franklin Resources, Inc.
     34,500       3,299,580  
 
              
 
                
Men’s & Boy’s Furnishings, Work Clothing, and Allied Garments - 2.40%
                
VF Corp.
     26,500       3,220,280  
 
              
 
                
Miscellaneous Food Preparations & Kindred Products - 1.82%
                
McCormick & Co., Inc. (b)
     53,000       2,446,480  
 
              
 
                
Natural Gas Transmission - 7.99%
                
DCP Midstream Partners, L.P.
     25,000       1,000,500  
El Paso Pipeline Partners, L.P.
     52,000       1,844,440  
Energy Transfer Equity, L.P.
     64,000       2,225,920  
Enterprise Products Partners, L.P.
     62,400       2,505,360  
Williams Partners, L.P.
     58,000       3,145,920  
 
              
 
             10,722,140  
 
              
See accompanying notes which are an integral part of these financial statements.

 

Dividend Growth Trust
Rising Dividend Growth Fund
Schedule of Investments — continued
September 30, 2011
                 
Common Stocks/Master Limited Partnerships - 81.47% - continued   Shares     Value  
Orthopedic, Prosthetic & Surgical Appliances & Supplies - 1.65%
                
Mine Safety Appliances Co.
     82,000     $ 2,210,720  
 
              
 
                
Pharmaceutical Preparations - 9.04%
                
Novartis AG (a)
     48,000       2,676,960  
Novo-Nordisk A/S (a)
     54,300       5,403,936  
Teva Pharmaceutical Industries, Ltd. (a)
     109,000       4,056,980  
 
              
 
             12,137,876  
 
              
 
                
Pipe Lines (No Natural Gas) - 5.43%
                
Magellan Midstream Partners, L.P.
     35,700       2,156,280  
NuStar GP Holdings, LLC.
     57,000       1,747,620  
Plains All American Pipeline, L.P.
     33,500       1,973,820  
Sunoco Logistics Partners, L.P.
     16,000       1,415,840  
 
              
 
             7,293,560  
 
              
 
                
Radio Telephone Communications - 3.11%
                
Vodafone Group, Plc. (a)
     163,000       4,180,950  
 
              
 
                
Railroads — Line-Haul Operating - 3.16%
                
Canadian National Railway Co.
     36,100       2,403,538  
Norfolk Southern Corp.
     30,000       1,830,600  
 
              
 
             4,234,138  
 
              
 
                
Retail — Building Materials, Hardware, Garden Supply - 1.92%
                
Fastenal Co.
     77,600       2,582,528  
 
              
 
                
Retail — Drug Stores and Proprietary Stores - 1.63%
                
Walgreen Co.
     66,600       2,190,474  
 
              
 
                
Retail — Eating Places - 4.06%
                
McDonald’s Corp.
     62,000       5,444,840  
 
              
 
                
Retail — Family Clothing Stores - 3.32%
                
Ross Stores, Inc.
     32,000       2,518,080  
TJX Companies, Inc. / The
     35,000       1,941,450  
 
              
 
             4,459,530  
 
              
 
                
Services — Computer Processing & Data Preparation - 1.46%
                
Automatic Data Processing, Inc.
     41,600       1,961,440  
 
              
See accompanying notes which are an integral part of these financial statements.

 

Dividend Growth Trust
Rising Dividend Growth Fund
Schedule of Investments — continued
September 30, 2011
                 
Common Stocks/Master Limited Partnerships - 81.47% - continued   Shares     Value  
Steel Works, Blast Furnaces, Rolling Mills - 2.36%
                
Nucor Corp.
     100,100     $ 3,167,164  
 
              
 
                
Surgical & Medical Instruments & Apparatus - 1.17%
                
Becton, Dickinson & Co.
     21,400       1,569,048  
 
              
 
                
Telephone Communications (No Radio Telephone) - 1.68%
                
CenturyLink, Inc.
     68,000       2,252,160  
 
              
 
                
Wholesale — Drugs Proprietaries & Druggists’ Sundries - 1.99%
                
Cardinal Health, Inc.
     63,900       2,676,132  
 
              
 
                
TOTAL COMMON STOCKS/MASTER LIMITED PARTNERSHIPS (Cost $98,933,696)
             109,366,499  
 
              
 
                
Money Market Securities - 18.28%
                
Fidelity Institutional Money Market Portfolio — Institutional Shares, 0.16% (c)
     24,534,862       24,534,862  
 
              
 
                
TOTAL MONEY MARKET SECURITIES (Cost $24,534,862)
             24,534,862  
 
              
 
                
TOTAL INVESTMENTS (Cost $123,468,558) - 99.75%
           $ 133,901,361  
 
              
 
                
Assets in excess of other liabilities - 0.25%
             332,253  
 
              
 
                
TOTAL NET ASSETS - 100.00%
           $ 134,233,614  
 
              
 
(a)   American Depositary Receipt.
 
(b)   Non-voting shares
 
(c)   Variable rate security; the money market rate shown represents the seven-day yield at September 30, 2011.
See accompanying notes which are an integral part of these financial statements.

 

Dividend Growth Trust
Rising Dividend Growth Fund
Statement of Assets and Liabilities
September 30, 2011
         
Assets
        
Investments in securities, at value (cost $123,468,558)
   $ 133,901,361  
Cash
     63,615  
Interest receivable
     2,847  
Dividends receivable
     127,668  
Receivable for fund shares sold
     393,681  
Tax reclaim receivable
     24,808  
Prepaid expenses
     22,019  
 
      
Total assets
     134,535,999  
 
      
 
        
Liabilities
        
Payable due to Advisor (a)
     75,573  
Payable for fund shares redeemed
     126,027  
Accrued 12b-1 fees
     33,565  
Other accrued expenses
     67,220  
 
      
Total liabilities
     302,385  
 
      
 
        
Net Assets
   $ 134,233,614  
 
      
 
        
Net Assets consist of:
        
Paid in capital
   $ 129,728,629  
Accumulated net investment income (loss)
     (956,252 )
Accumulated net realized gain (loss) on investments
     (4,971,566 )
Net unrealized appreciation (depreciation) on investments
     10,432,803  
 
      
 
        
Net Assets
   $ 134,233,614  
 
      
 
        
Net Assets: Class A
   $ 66,336,112  
 
      
 
        
Shares outstanding (unlimited number of shares authorized, with par value of $0.001)
     5,175,667  
 
      
 
        
Net asset value per share
   $ 12.82  
 
      
 
        
Maximum offering price per share ($12.82 / 94.25%)
   $ 13.60  
 
      
 
        
Minimum redemption price per share ($12.82 * 98.00%) (b) (c)
   $ 12.56  
 
      
 
        
Net Assets: Class C
   $ 12,332,358  
 
      
 
        
Shares outstanding (unlimited number of shares authorized, with par value of $0.001)
     950,772  
 
      
 
        
Net asset value and offering price per share
   $ 12.97  
 
      
 
        
Minimum redemption price per share ($12.97 * 98.00%) (c) (d)
   $ 12.71  
 
      
 
        
Net Assets: Class I
   $ 55,565,144  
 
      
 
        
Shares outstanding (unlimited number of shares authorized, with par value of $0.001)
     4,255,905  
 
      
 
        
Net asset value, offering and redemption price per share
   $ 13.06  
 
      
 
(a)   See Note 5 in the Notes to the Financial Statements.
 
(b)   A contingent deferred sales charge (“CDSC”) of 1.00% may be charged on redemptions of accounts greater than $1,000,000 redeemed within 12 months of purchase.
 
(c)   A redemption fee of 1.00% may be charged on redemptions of shares within 60 days of purchase.
 
(d)   A contingent deferred sales charge (“CDSC”) of 1.00% for Class C shares applies to redemptions that occur within one year from the date of purchase of such shares. This CDSC is only applicable on Class C shares that are redeemed in accounts that are established after March 1, 2010.
See accompanying notes which are an integral part of these financial statements.

 

 

Dividend Growth Trust
Rising Dividend Growth Fund
Statement of Operations
For the fiscal year ended September 30, 2011
         
Investment Income
        
Dividend income (net of foreign withholding taxes of $66,552) (a)
   $ 1,841,376  
Interest income
     21,985  
 
      
Total Investment Income
     1,863,361  
 
      
 
        
Expenses
        
Investment advisor fee (b)
     790,449  
12b-1 fees (Class A — $242,820; Class C — $85,020)
     327,840  
Transfer agent expenses
     132,176  
Administration expenses
     99,358  
Registration expenses
     63,038  
Fund accounting expenses
     52,856  
Miscellaneous expenses
     48,000  
Legal expenses
     45,104  
Custody expenses
     24,751  
Printing expenses
     23,605  
Auditing expenses
     21,502  
Trustee expenses
     19,996  
Insurance expenses
     16,536  
24f-2 expenses
     8,835  
Pricing expenses
     3,048  
 
      
Total Expenses
     1,677,094  
Advisor fees waived (b)
     (29,073 )
 
      
Net operating expenses
     1,648,021  
 
      
Net Investment Income
     215,340  
 
      
 
        
Realized & Unrealized Gain (Loss) on Investments
        
Net realized gain (loss) on investment securities
     1,424,260  
Change in unrealized appreciation (depreciation) on investment securities
     (6,143,424 )
 
      
Net realized and unrealized gain (loss) on investment securities
     (4,719,164 )
 
      
Net increase (decrease) in net assets resulting from operations
   $ (4,503,824 )
 
      
 
(a)   Dividend income is net of $1,130,836 of return of capital distributions and passive income/losses from master limited partnerships.
 
(b)   See Note 5 in the Notes to the Financial Statements.
See accompanying notes which are an integral part of these financial statements.

 

 

Dividend Growth Trust
Rising Dividend Growth Fund
Statements of Changes In Net Assets
                 
    Fiscal Year Ended     Fiscal Year Ended  
    September 30,     September 30,  
    2011     2010  
Operations
                
Net investment income (loss)
   $ 215,340     $ 30,524  
Net realized gain (loss) on investment securities
     1,424,260       2,561,507  
Change in unrealized appreciation (depreciation) on investment securities
     (6,143,424 )     7,742,139  
 
            
Net increase (decrease) in net assets resulting from operations
     (4,503,824 )     10,334,170  
 
            
Distributions
                
From net investment income, Class A
     (115,140 )     (21,480 )
From net investment income, Class C
     (12,196 )     (1,204 )
From net investment income, Class I
     (88,004 )     (7,840 )
From return of capital distributions, Class A
     (677,859 )     —  
From return of capital distributions, Class C
     (71,800 )     —  
From return of capital distributions, Class I
     (518,108 )     —  
Distributions in excess of net investment income, Class A
     (373,251 )     (633,556 )
Distributions in excess of net investment income, Class C
     (39,535 )     (35,513 )
Distributions in excess of net investment income, Class I
     (285,287 )     (231,257 )
 
            
Total distributions
     (2,181,180 )     (930,850 )
 
            
 
                
Capital Share Transactions (a)
                
Proceeds from shares sold
                
Class A
     31,587,156       5,866,898  
Class C
     10,358,715       787,346  
Class I
     47,291,995       9,676,044  
Reinvestment of distributions
                
Class A
     1,027,438       603,630  
Class C
     113,082       33,426  
Class I
     594,713       146,220  
Amount paid for shares redeemed
                
Class A (b)
     (9,809,998 )     (7,074,966 )
Class C (c)
     (1,807,526 )     (922,016 )
Class I
     (6,988,181 )     (6,491,921 )
 
            
Net increase (decrease) in net assets resulting from share transactions
     72,367,394       2,624,661  
 
            
Total Increase (Decrease) in Net Assets
     65,682,390       12,027,981  
 
            
 
(a)   See Note 1 in the Notes to the Financial Statements.
 
(b)   Redemption fees of $13,744 and $2,297, respectively, retained by the Fund are included.
 
(c)   Redemption fees of $4,801 and $29, respectively, retained by the Fund are included.
See accompanying notes which are an integral part of these financial statements.

 

 

Dividend Growth Trust
Rising Dividend Growth Fund
Statements of Changes In Net Assets — continued
                 
    Fiscal Year Ended     Fiscal Year Ended  
    September 30,     September 30,  
    2011     2010  
Net Assets
                
Beginning of year
     68,551,224       56,523,243  
 
            
 
                
End of year
   $ 134,233,614     $ 68,551,224  
 
            
 
                
Accumulated net investment income (loss) included in net assets
   $ (956,252 )   $ (257,884 )
 
            
 
                
Capital Share Transactions — A Shares (a)
                
Shares sold
     2,256,075       477,083  
Shares issued in reinvestment of distributions
     74,302       49,424  
Shares redeemed
     (708,543 )     (586,126 )
 
            
 
                
Net increase (decrease) from capital share transactions
     1,621,834       (59,619 )
 
            
 
                
Capital Share Transactions — C Shares (a)
                
Shares sold
     729,959       63,388  
Shares issued in reinvestment of distributions
     8,117       2,724  
Shares redeemed
     (127,875 )     (75,496 )
 
            
 
                
Net increase (decrease) from capital share transactions
     610,201       (9,384 )
 
            
 
                
Capital Share Transactions — I Shares (a)
                
Shares sold
     3,341,383       781,290  
Shares issued in reinvestment of distributions
     42,571       11,739  
Shares redeemed
     (502,803 )     (541,198 )
 
            
 
                
Net increase (decrease) from capital share transactions
     2,881,151       251,831  
 
            
 
(a)   See Note 1 in the Notes to the Financial Statements.
See accompanying notes which are an integral part of these financial statements.

 

 

Dividend Growth Trust
Rising Dividend Growth Fund — Class A
Financial Highlights
For a share outstanding during each year
                                         
    For the fiscal year ended September 30,  
    2011     2010     2009     2008     2007  
Selected Per Share Data
                                        
Net asset value, beginning of year
   $ 12.94     $ 11.07     $ 11.31     $ 13.60     $ 12.06  
 
                              
Income from investment operations
                                        
Net investment income (loss)
     0.02 (a)     0.01       0.04       (0.01 )     0.02  
Net realized and unrealized gain (loss)
     0.12       2.05       (0.04 )     (1.95 )     1.93  
 
                              
Total from investment operations
     0.14       2.06       0.00       (1.96 )     1.95  
 
                              
 
                                        
Less Distributions to shareholders:
                                        
From net investment income
     (0.03 )     (0.01 )     (0.06 )     —       (0.02 )
From net realized gain
     —       —       —       (0.05 )     (0.23 )
From tax return of capital
     (0.15 )     —       (0.10 )     (0.27 )     (0.12 )
In excess of net investment income
     (0.08 )     (0.18 )     (0.08 )     (0.01 )     (0.04 )
 
                              
Total distributions
     (0.26 )     (0.19 )     (0.24 )     (0.33 )     (0.41 )
 
                              
 
                                        
Paid in capital from redemption fees (b)
     —       —       —       —       —  
 
                              
 
                                        
Net asset value, end of year
   $ 12.82     $ 12.94     $ 11.07     $ 11.31     $ 13.60  
 
                              
 
                                        
Total Return (c)
     0.95 %     18.69 %     0.33 %     -14.63 %     16.25 %
Ratios and Supplemental Data
                                        
Net assets, end of year (000)
   $ 66,336     $ 46,003     $ 39,998     $ 45,894     $ 63,827  
Ratio of expenses to average net assets
     1.65 %     1.65 %     1.65 %     1.65 %     1.65 %
Ratio of expenses to average net assets before waiver & reimbursement or recoupment
     1.68 %     1.86 %     1.92 %     1.56 %     1.94 %
Ratio of net investment income (loss) to average net assets
     0.12 %     0.01 %     0.51 %     (0.05 )%     0.19 %
Ratio of net investment income (loss) to average net assets before waiver & reimbursement or recoupment
     0.09 %     (0.20 )%     0.24 %     0.04 %     (0.11 )%
Portfolio turnover rate
     51.85 %     24.84 %     39.40 %     24.66 %     31.09 %
 
(a)   Per share net investment income has been calculated using the average shares method.
 
(b)   Redemption fees resulted in less than $0.005 per share in each year.
 
(c)   Total return in the above table represents the rate that an investor (invested for the entire year) would have earned on an investment in the Fund, assuming reinvestment of dividends. Returns shown exclude the effect of the sales load.
See accompanying notes which are an integral part of these financial statements.

 

 

Dividend Growth Trust
Rising Dividend Growth Fund — Class C
Financial Highlights
For a share outstanding during each year
                                         
    For the fiscal year ended September 30,  
    2011     2010     2009     2008     2007  
Selected Per Share Data
                                        
Net asset value, beginning of year
   $ 13.08     $ 11.14     $ 11.39     $ 13.62     $ 12.08  
 
                              
Income from investment operations
                                        
Net investment income (loss)
     (0.07) (a)     (0.07 )     (0.02 )     (0.08 )     —  
Net realized and unrealized gain (loss)
     0.15       2.12       (0.05 )     (1.95 )     1.85  
 
                              
Total from investment operations
     0.08       2.05       (0.07 )     (2.03 )     1.85  
 
                              
Less distributions to shareholders:
                                        
From net investment income
     (0.02 )     — (b)     (0.04 )     —       —  
From net realized gain
     —       —       —       (0.05 )     (0.23 )
From tax return of capital
     (0.11 )     —       (0.08 )     (0.15 )     (0.06 )
In excess of net investment income
     (0.06 )     (0.11 )     (0.06 )     (0.00) (b)     (0.02 )
 
                              
Total distributions
     (0.19 )     (0.11 )     (0.18 )     (0.20 )     (0.31 )
 
                              
Paid in capital from redemption fees (c)
     —       —       —       —       —  
 
                              
Net asset value, end of year
   $ 12.97     $ 13.08     $ 11.14     $ 11.39     $ 13.62  
 
                              
Total Return (d)
     0.51 %     18.50 %     -0.37 %     -15.04 %     15.55 %
Ratios and Supplemental Data
                                        
Net assets, end of year (000)
   $ 12,332     $ 4,456     $ 3,898     $ 4,338     $ 5,505  
Ratio of expenses to average net assets
     2.25 %     2.25 %     2.25 %     2.25 %     2.25 %
Ratio of expenses to average net assets before waiver & reimbursement or recoupment
     2.28 %     2.46 %     2.52 %     2.03 %     2.54 %
Ratio of net investment income (loss) to average net assets
     (0.48 )%     (0.59 )%     (0.10 )%     (0.64 )%     (0.41 )%
Ratio of net investment income (loss) to average net assets before waiver & reimbursement or recoupment
     (0.51 )%     (0.80 )%     (0.37 )%     (0.42 )%     (0.71 )%
Portfolio turnover rate
     51.85 %     24.84 %     39.40 %     24.66 %     31.09 %
 
(a)   Per share net investment income has been calculated using the average shares method.
 
(b)   Less than $0.01 per share.
 
(c)   Redemption fees resulted in less than $0.005 per share in each year.
 
(d)   Total return in the above table represents the rate that an investor (invested for the entire period) would have earned on an investment in the Fund, assuming reinvestment of dividends. Returns shown exclude the effect of the sales load.
See accompanying notes which are an integral part of these financial statements.

 

 

Dividend Growth Trust
     Rising Dividend Growth Fund — Class I
Financial Highlights
For a share outstanding during each period
                                         
                                    For the period  
                                    ended  
    For the fiscal year ended September 30,     September 30,  
    2011     2010     2009     2008     2007(a)  
Selected Per Share Data
                                        
Net asset value, beginning of period
   $ 13.16     $ 11.25     $ 11.50     $ 13.85     $ 12.80  
 
                              
 
                                        
Income from investment operations
                                        
Net investment income
     0.07 (b)     0.10       0.09       0.09       0.01  
Net realized and unrealized gain (loss)
     0.14       2.05       (0.06 )     (2.00 )     1.10  
 
                              
Total from investment operations
     0.21       2.15       0.03       (1.91 )     1.11  
 
                              
 
                                        
Less distributions to shareholders:
                                        
From net investment income
     (0.03 )     (0.01 )     (0.07 )     —       (0.01 )
From net realized gain
     —       —       —       (0.05 )     —  
From tax return of capital
     (0.18 )     —       (0.12 )     (0.37 )     (0.04 )
In excess of net investment income
     (0.10 )     (0.23 )     (0.09 )     (0.02 )     (0.01 )
 
                              
Total distributions
     (0.31 )     (0.24 )     (0.28 )     (0.44 )     (0.06 )
 
                              
 
                                        
Net asset value, end of period
   $ 13.06     $ 13.16     $ 11.25     $ 11.50     $ 13.85  
 
                              
Total Return (c)
     1.47 %     19.21 %     0.63 %     -14.08 %     8.61% (d)
 
                                        
Ratios and Supplemental Data
                                        
Net assets, end of period (000)
   $ 55,565     $ 18,092     $ 12,628     $ 11,153     $ 6,548  
Ratio of expenses to average net assets
     1.25 %     1.25 %     1.25 %     1.25 %     1.25% (e)
Ratio of expenses to average net assets before waiver & reimbursement
     1.28 %     1.46 %     1.52 %     1.44 %     1.54% (e)
Ratio of net investment income (loss) to average net assets
     0.51 %     0.41 %     0.97 %     0.40 %     (0.59)% (e)
Ratio of net investment income (loss) to average net assets before waiver & reimbursement
     0.48 %     0.20 %     0.70 %     0.21 %     (0.29)% (e)
Portfolio turnover rate
     51.85 %     24.84 %     39.40 %     24.66 %     31.09% (d)
 
(a)   March 21, 2007 (Commencement of Operations) through September 30, 2007.
 
(b)   Per share net investment income has been calculated using the average shares method.
 
(c)   Total return in the above table represents the rate that an investor (invested for the entire period) would have earned on an investment in the Fund, assuming reinvestment of dividends.
 
(d)   Not annualized.
 
(e)   Annualized.
See accompanying notes which are an integral part of these financial statements.

 

 

Dividend Growth Trust
Rising Dividend Growth Fund
Notes to the Financial Statements
September 30, 2011
NOTE 1. ORGANIZATION
Dividend Growth Trust (the “Trust”), is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Trust was organized as a Delaware business trust (now a “statutory trust”) on July 14, 1999.
The Trust is authorized to issue an unlimited number of shares of beneficial interest of $.001 par value. The Trust currently offers shares of the Rising Dividend Growth Fund (“Fund”), which is a non-diversified series of the Trust. Prior to April 14, 2005, the Fund offered Class A shares only. Commencement of operations for Class A Shares was March 18, 2004; for Class C Shares was April 14, 2005; and Class I Shares was March 21, 2007. The Fund currently offers three Classes of shares (“Class A”, “Class C,” and “Class I”). Each Class of shares has equal rights as to earnings, assets and voting privileges, except that each Class bears different distribution expenses. Each Class of shares has exclusive voting rights with respect to matters that affect only that Class. Income, expenses (other than expenses attributable to a specific Class) and realized and unrealized gains or losses on investments are allocated to each Class of shares based on relative net assets.
The Fund seeks long-term growth of capital and current income by investing primarily in common stocks and master limited partnerships of domestic and foreign companies that have increased their dividend payments to shareholders each year for the past ten years or more. The Fund normally concentrates its investments in a group of 25-50 common stocks. Due to the inherent risk in any investment program, the Fund cannot ensure that its investment objectives will be realized.
NOTE 2. INDEMNIFICATION
Under the Trust’s organizational documents each trustee, officer, employee, manager or other agent of the Trust is indemnified against certain liabilities that may arise out of the performance of their duties to the Trust and the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of representations, which provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote.
NOTE 3. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
Security Valuation — All investments in securities are recorded at their estimated fair value as described in note 4.
When market quotations are not readily available, when Dividend Growth Advisors, LLC (“Advisor” or “DGA”) determines that the market quotation or the price provided by the pricing service does not accurately reflect the current market value or when restricted or illiquid securities are being valued, such securities are valued as determined in good faith by the Advisor, according to guidelines established by the Board. As a general principle, the current fair value of a security being valued by the Advisor would be the amount which the Fund might reasonably expect to receive upon a current sale. Methods which are in accord with this principle may, for example, be based on, among other factors, a multiple of earnings, a discount from market of a similar freely traded security, or yield to maturity with respect to debt issues. Fair value determinations will not be based on what the Advisor believes that a buyer may pay at a later time, such as when market conditions change or when the market ultimately recognizes a security’s true value as perceived by the Advisor. Similarly, bonds and other instruments may not be fair valued at par based on the expectation that the Fund will hold the investment until maturity.
Federal Income Taxes — There is no provision for federal income tax. The Fund intends to qualify each year as a “regulated investment company” under subchapter M of the Internal Revenue Code of 1986, as amended, by distributing substantially all of its net investment income and net realized capital gains, if any, annually. If the required amount of net investment income is not distributed, the Fund could incur a tax expense.
As of and during the fiscal year ended September 30, 2011, the Fund did not have a liability for any unrecognized tax benefits. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the year the Fund did not incur any interest and penalties. The statute of limitations on the Fund’s tax returns remains open for the years ended September 30, 2008 through September 30, 2010. Management has considered uncertain tax positions for all open tax years, and concluded that there are none.

 

 

Dividend Growth Trust
Rising Dividend Growth Fund
Notes to the Financial Statements — continued
September 30, 2011
NOTE 3. SIGNIFICANT ACCOUNTING POLICIES — continued
Security Transactions and Related Income — The Fund follows industry practice and records security transactions on the trade date. The specific identification method is used for determining gains or losses for financial statements and income tax purposes. Dividend income is recorded on the ex-dividend date and interest income is recorded on an accrual basis. Dividend income and distributions from Master Limited Partnerships (“MLPs”) are recorded on the ex-dividend date. Distributions received from the Fund’s investments in MLPs generally are recorded as a return of capital, reducing the cost basis of the associated MLP investment. Income or loss from the MLP investments is recorded upon receipt of the MLP’s K-1.
Dividends and Distributions — The Fund typically distributes substantially all of its net investment income in the form of dividends and taxable capital gains to its shareholders. Dividends to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. The treatment for financial reporting purposes of distributions made to shareholders during the year from net investment income or net realized capital gains may differ from their ultimate treatment for federal income tax purposes. These differences are caused primarily by differences in the timing of the recognition of certain components of income, expense or realized capital gain for federal income tax purposes. Where such differences are permanent in nature, they are reclassified in the components of the net assets based on their ultimate characterization for federal income tax purposes. Any such reclassifications will have no effect on net assets, results of operations or net asset values per share of the Fund. GAAP requires that certain components of the net assets be reclassified between financial and tax reporting. Those reclassifications have no effect on the net assets or the net asset value per share.
Subsequent Events - Management has evaluated subsequent events and determined there were no material subsequent events.
NOTE 4. SECURITIES VALUATION AND FAIR VALUE MEASUREMENTS
Fair value is defined as the price that a Fund would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. GAAP establishes a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes.
Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

 

 

Dividend Growth Trust
Rising Dividend Growth Fund
Notes to the Financial Statements — continued
September 30, 2011
NOTE 4. SECURITIES VALUATION AND FAIR VALUE MEASUREMENTS — continued
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below.
•   Level 1 — quoted prices in active markets for identical securities
 
•   Level 2 — other significant observable inputs (including, but not limited to, quoted prices for an identical security in an inactive market, quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
 
•   Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining fair value of investments based on the best information available)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Equity securities, including common stock and master limited partnerships, are generally valued by using market quotations, but may be valued on the basis of prices furnished by a pricing service when the Advisor believes such prices more accurately reflect the fair value of such securities. Securities that are traded on any stock exchange are generally valued by the pricing service at the last quoted sale price. Lacking a last sale price, an exchange traded security is generally valued by the pricing service at its last bid price. Securities traded in the NASDAQ over-the-counter market are generally valued by the pricing service at the NASDAQ Official Closing Price. When using the market quotations or close prices provided by the pricing service and when the market is considered active, the security will generally be classified as a Level 1 security. Sometimes, an equity security owned by the Fund will be valued by the pricing service with factors other than market quotations or when the market is considered inactive. When this happens, the security will generally be classified as a Level 2 security. When market quotations are not readily available, when the Advisor determines that the market quotation or the price provided by the pricing service does not accurately reflect the current fair value, or when restricted or illiquid securities are being valued, such securities are valued as determined in good faith by the Advisor, in conformity with guidelines adopted by and subject to review by the Board. These securities will generally be categorized as Level 3 securities.
Investments in mutual funds, including money market mutual funds, are generally priced at the ending net asset value (NAV) provided by the service agent of the funds. These securities will be categorized as Level 1 securities.
Short-term investments in fixed income securities, (those with maturities of less than 60 days when acquired, or which subsequently are within 60 days of maturity), are valued by using the amortized cost method of valuation, which the Board has determined will represent fair value. These securities will be classified as Level 2 securities.

 

 

Dividend Growth Trust
Rising Dividend Growth Fund
Notes to the Financial Statements — continued
September 30, 2011
NOTE 4. SECURITIES VALUATION AND FAIR VALUE MEASUREMENTS — continued
The following is a summary of the inputs used to value the Fund’s investments as of September 30, 2011:
                                 
    Valuation Inputs  
            Level 2 - Other     Level 3 -        
    Level 1 - Quoted     Significant     Significant        
    Prices in Active     Observable     Unobservable        
Investments   Markets     Inputs     Inputs     Total  
Common Stocks*
   $ 63,884,438     $ —     $ —     $ 63,884,438  
 
                        
American Depositary Receipts*
     20,944,471       —       —       20,944,471  
 
                        
Master Limited Partnerships*
     24,537,590       —       —       24,537,590  
 
                        
Money Market Securities
     24,534,862       —       —       24,534,862  
 
                        
Total
   $ 133,901,361     $ —     $ —     $ 133,901,361  
 
                        
 
*   Refer to the Schedule of Investments for industry classifications.
The Fund did not hold any investments at any time during the reporting period in which significant unobservable inputs were used in determining fair value; therefore, no reconciliation of Level 3 securities is included for this reporting period. The Fund did not hold any derivative instruments during the reporting period. During the year ended September 30, 2011, there were no significant transfers between levels.
NOTE 5. FEES AND OTHER TRANSACTIONS WITH SERVICE PROVIDERS
The Trust retains DGA as the Fund’s investment advisor. The Advisor manages the investments of the Fund in accordance with the Fund’s investment objectives, policies and limitations. Pursuant to the terms of the Investment Advisory Agreement, the Advisor has full discretion to manage the assets of the Fund in accordance with its investment objective. As compensation for its investment management services, the Fund is obligated to pay the Advisor a fee computed and accrued daily and paid monthly at an annual rate of 0.75% of the Fund’s average daily net assets. The Advisor has also agreed to waive its advisory fees or reimburse other Fund expenses so that the Fund’s annual operating expenses will not exceed 1.65% for Class A shares, 2.25% for Class C shares, and 1.25% for Class I shares of the average daily net assets of the respective class (excluding brokerage and other investment-related costs, interest, taxes, dues, fees, costs of qualifying the Fund’s shares for sales and extraordinary expenses and the fees and expenses associated with acquired funds). For the fiscal year ended September 30, 2011, the Advisor earned fees of $790,449 and waived fees of $29,073. At September 30, 2011, there was a net payable due to the Advisor in the amount of $75,573. The Advisor is entitled to reimbursement of fees waived or reimbursed to the Fund if the actual operating expense ratios falls below the expense limits that were in place at the time such waivers and reimbursements occurred. The total amount of reimbursement recoverable by the Advisor is the sum of all fees previously waived or remitted by the Advisor to the Fund during any of the previous three years, less any reimbursement previously paid by the Fund to the Advisor with respect to waivers, reductions, and payments made with respect to the Fund. The waived fees related to operating expenses subject to recovery, at September 30, 2011 were as follows and may not be ratably applicable to each class of shares:
         
Amount   To be repaid by September 30,  
$144,352
     2012  
125,343
     2013  
29,073
     2014  
For the fiscal year ended September 30, 2011, $18,357 was permanently waived.

 

 

Dividend Growth Trust
Rising Dividend Growth Fund
Notes to the Financial Statements — continued
September 30, 2011
NOTE 5. FEES AND OTHER TRANSACTIONS WITH SERVICE PROVIDERS — continued
The Fund retains Huntington Asset Services, Inc. (“HASI”), a wholly owned subsidiary of Huntington Bancshares, Inc. (“Huntington”), to manage the Fund’s business affairs and provide the Fund with administrative services, including all regulatory reporting. For the fiscal year ended September 30, 2011, HASI earned $99,358 for administrative services provided to the Fund.
The Fund also retains HASI to act as the Fund’s transfer agent. HASI maintains the records of each shareholder’s account, answers shareholders’ inquiries concerning their accounts, processes purchases and redemptions of the Fund’s shares, acts as dividend and distribution disbursing agent and performs other transfer agent and shareholder service functions. For the fiscal year ended September 30, 2011, HASI earned fees of $79,800 for transfer agent services provided to the Fund and $52,376 in reimbursement of out-of-pocket expenses incurred in providing transfer agent services to the Fund.
In addition, HASI provides the Fund with fund accounting services, which includes certain monthly reports, record keeping and other management-related services. For the fiscal year ended September 30, 2011, HASI earned $52,856 for fund accounting services provided to the Fund.
The Fund retains Unified Financial Securities, Inc. (the “Distributor”), a wholly owned subsidiary of Huntington, to act as the principal distributor of its shares. Huntington is also the parent company of Huntington National Bank, the Fund’s Custodian.
The Trust, on behalf of the Fund for Class A and Class C Shares, has adopted a Distribution Plan (each “Plan”) pursuant to Rule 12b-1 under the 1940 Act under which it is authorized to compensate the Distributor for payments to dealers or others with distribution fees as follows: Class A Shares: An annual distribution fee of 0.25% and an annual service fee of 0.15% of the Class A Share’s average daily net assets for a total of 0.40%. Class C Shares: An annual distribution fee of 0.75% and an annual service fee of 0.25% of the Class C share’s average daily net assets for a total of 1.00%. The fees payable under each Plan shall be used to compensate the Distributor for any expenses primarily intended to result in the sale of the Fund’s shares, including, but not limited to: payments the Distributor makes to broker-dealers or other financial institutions and industry professionals for providing distribution assistance and administrative support services to the holders of the Fund’s shares, payments made for the preparation, printing and distribution of advertisements and sales literature, and payments made for printing and distributing prospectuses and shareholders reports to other than existing shareholders of the Fund. Class I shares are not subject to rule 12b-1 fees.
The shareholder servicing fees shall be used to pay, among other things: assisting in establishing and maintaining customer accounts and records, assisting with purchase and redemption requests, arranging for bank wires, monitoring dividend payments from the Trust on behalf of customers, furnishing personal services and maintaining shareholder accounts, facilitating certain shareholder communications from the Trust to customers, receiving and answering correspondence and aiding in maintaining the investment of the Fund’s shareholders. For the fiscal year ended September 30, 2011, Class A incurred 12b-1 expenses of $242,820 and Class C incurred 12b-1 expenses of $85,020. At September 30, 2011, the Fund owed the Distributor $33,565 for 12b-1 expenses.
Trustees and Officers affiliated with the Advisor are not compensated by the Trust for their services. The Trust does not have any retirement plan for its Trustees. Each Trustee who is not an “interested person” of the Trust, as that term is defined in the 1940 Act, receives $1,500 per regular meeting attended, as well as reimbursement for expenses incurred in connection with attendance at such meetings. The Trustees also receive $500 for each special board meeting attended. The Independent Chairman of the Board receives an additional $500 per meeting. The Chairman of the Audit Committee and the Chairman of the Nomination and Governance Committee each receives $500 per committee meeting chaired, respectively, for acting as Chairmen of such Committees.
The Law Offices of John H. Lively and Associates, Inc., a member firm of The 1940 Act Law Group, serves as legal counsel to the Trust. John H. Lively, Secretary of the Trust, is the owner of The Law Offices of John H. Lively & Associates, Inc., but he receives no direct compensation from the Trust or the Funds for serving as an officer of the Trust.

 

 

Dividend Growth Trust
Rising Dividend Growth Fund
Notes to the Financial Statements — continued
September 30, 2011
NOTE 6. INVESTMENTS
For the fiscal year ended September 30, 2011, purchases and sales of investment securities, other than short-term investments and short-term U.S. government obligations were as follows:
         
Purchases
        
Other
   $ 102,886,738  
Sales
        
Other
   $ 49,265,391  
At September 30, 2011, the net unrealized appreciation (depreciation) of investments for tax purposes was as follows:
         
Gross Appreciation
   $ 16,785,000  
Gross Depreciation
     (7,308,449 )
 
      
Net Appreciation (Depreciation) on Investments
   $ 9,476,551  
 
      
At September 30, 2011, the aggregate cost of securities for federal income tax purposes was $124,424,810. The difference between cost amounts for financial statement and federal income tax purposes are due primarily to timing differences in recognizing certain passive losses earned through MLP’s.
NOTE 7. ESTIMATES
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.

 

 

Dividend Growth Trust
Rising Dividend Growth Fund
Notes to the Financial Statements — continued
September 30, 2011
NOTE 8. DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income were paid quarterly and totaled $0.03 per share to Class A shareholders, $0.02 per share to Class C shareholders, and $0.03 per share to Class I shareholders. Distributions from tax return of capital were paid quarterly and totaled $0.15 per share to Class A shareholders, $0.11 per share to Class C shareholders, and $0.18 per share to Class I shareholders. Distributions in excess of net investment income were paid quarterly and totaled $0.08 per share to Class A shareholders, $0.06 per share to Class C shareholders, and $0.10 per share to Class I shareholders.
The tax character of distributions paid during the fiscal years ended September 30, 2011 and 2010 is as follows:
                 
Ordinary income
   $ 913,416     $ 930,850  
Return of Capital
     1,267,764       —  
 
            
Total distributions paid
   $ 2,181,180     $ 930,850  
 
            
     At September 30, 2011, the components of distributable earnings on a tax basis were as follows:
         
Capital loss carryforwards (see Note 9)
   $ (4,971,566 )
Unrealized appreciation
     9,476,551  
Distributable earnings
   $ 4,504,985  
 
      
The differences between book basis and tax basis undistributed amounts result from differences in recognizing certain passive losses earned through MLPs and the treatment of capital loss carryforwards not yet available for tax purposes.
For the year ended September 30, 2011, the Fund made the following reclassifications relating to permanent book/tax differences resulting from re-characterization of gains/(losses) on the sale of various Master Limited Partnership holdings:
         
Accumulated   Accumulated
Net Investment Income (Loss)   Net Realized Gain (Loss)
$(295)
   $ 295  
NOTE 9. CAPITAL LOSS CARRYFORWARDS
At September 30, 2011, for federal income tax purposes, the Fund has capital loss carryforwards available to offset future capital gains, if any, in the following amounts:
     
    Expiring
Amount   September 30,
4,971,566
   2018
Capital loss carryforwards are available to offset future realized capital gains. To the extent that these carryforwards are used to offset future capital gains, the amount offset will not be distributed to shareholders.

 

 

Dividend Growth Trust
Rising Dividend Growth Fund
Notes to the Financial Statements — continued
September 30, 2011
NOTE 10. NEW ACCOUNTING PRONOUNCEMENTS
In April 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-03 “Reconsideration of Effective control for Repurchase Agreements”. The objective of ASU 2011-03 is to improve the accounting for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. Under previous guidance, whether or not to account for a transaction as a sale was based on, in part, if the entity maintained effective control over the transferred financial assets. ASU 2011-03 removes the transferor’s ability criterion from the effective control assessment. This guidance is effective prospectively for interim and annual reporting periods beginning on or after December 15, 2011. At this time, management is evaluating the implications of ASU No. 2011-03 and its impact on the financial statements has not been determined.
In May 2011, the FASB issued ASU No. 2011-04 “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.” ASU 2011-04 includes common requirements for measurement of and disclosure about fair value between U.S. GAAP and IFRS. ASU 2011-04 will require reporting entities to disclose quantitative information about the unobservable inputs used in the fair value measurements categorized within Level 3 of the fair value hierarchy. In addition, ASU 2011-04 will require reporting entities to make disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2011. At this time, management is evaluating the implications of ASU No. 2011-04 and its impact on the financial statements has not been determined.

 

 

(LOGO)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of Dividend Growth Trust
and the Shareholders of Rising Dividend Growth Fund
We have audited the accompanying statement of assets and liabilities of Rising Dividend Growth Fund, a series of shares of Dividend Growth Trust, including the schedule of investments, as of September 30, 2011, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the years and period in the five-year period ended September 30, 2011. These financial statements and financial highlights are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2011 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Rising Dividend Growth Fund as of September 30, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the years and period in the five-year period ended September 30, 2011, in conformity with accounting principles generally accepted in the United States of America.
(LOGO)
BBD, LLP
Philadelphia, Pennsylvania
November 28, 2011

 

 

BOARD OF TRUSTEES AND OFFICERS — (Unaudited)
                         
Independent Trustees
        Term of Office &            
    Position(s) Held   Length of Time   Principal Occupation(s) During Past 5   Funds Overseen   Other Trustee/
Name (Age) and Address*   with the Trust   Served   Years   by Trustee   Directorships Held by Trustee
Roger B. Rainville (67)
  Independent Trustee   Indefinite. Since August, 2005   President and Chief Executive Officer of Pioneer Investment Management Shareholder Services Corporation from September 1990 to July 2001. Retired in July 2001 when Pioneer Mutual Funds were acquired by UniCredito Italiano of Milan, Italy.     1     None
 
                        
Earl L. Mason (64)
  Independent Trustee Chairman since December 2005   Indefinite. Since August, 2005   Currently Retired, Former Chairman of the Board, Computer Horizons; Former Lead Director and Chairman of Audit Committee, Earle M. Jorgensen, a metals distributor, from 2002 to 2006.     1     Director, Chair of the Audit Committee, member of the compensation committee, and former director, BWAY Corp., from 2007 to 2010.
 
                        
William Thomas Smith, Jr. (64)
  Independent Trustee   Indefinite. Since August, 2005   Managing Partner, TTV, a venture capital company, from April 2000 to present.     1     Former Director, Green Dot Corp 2000 to 2011, Director Austin Logistics, from 2005 to 2011; Director, E-duction, from 2006 to present; Former Director, Microbilt from 2008 to 2011, Director, Silverpop 2002 to present, Director, E-Wise 2008 to present.
                         
Interested Trustee and Principal Officers
        Term of Office &       Funds    
Name (Age) and   Position(s) Held   Length of Time       Overseen by   Other Trustee/
Address*   with the Trust   Served   Principal Occupation(s) During Past 5 Years   Trustee / Officer   Directorships Held by Trustee
Charles Troy Shaver, Jr.** (64)
  Interested Trustee, President   Indefinite.
Since August, 2005 		  President, Chief Executive Officer, Chief Compliance Officer, Member and minority owner of Dividend Growth Advisors, LLC, since June 1, 2004.     1     Former Chairman of Spring Island Trust.
 
                        
Ed Obuchowski (65)
  Treasurer and Principal Accounting Officer   Indefinite.
Since March, 2008 		  Chief Operations Officer as of October 2008. Chief Financial Officer, Member and minority owner of Dividend Growth Advisors, LLC since December 2006. Prior to Dividend Growth Advisors, Mr. Obuchowski was SVP and CIO of Alliant Food, and VP of Internal Audit for Compaq Computer from 1998 to 2004.     1     Former member of the Board of Directors of Computer Horizons Corporation
 
                        
Jere E. Estes (69)
  Chief Investment Officer, Assistant Treasurer, Treasurer and Principal Accounting Officer   Indefinite.
Since August, 2005 		  Chief Investment Officer as of October, 2008; Director of Research, Senior Portfolio Manager, Member and Minority Owner, Dividend Growth Advisors, LLC since April 1, 2004.     1     None
 
                        
 
      Interested Trustee and Principal Officers — continued                
 
                        
John Lively (42)
  Secretary   Indefinite.
Since September, 2010 		  Attorney, The Law Offices of John H. Lively & Associates, Inc., March 2010 to present; Partner, Husch Blackwell Sanders LLP (law firm), March 2007 to February 2010; Managing Attorney, Raymond James Financial (financial services), September 2005 to March 2007; Assistant General Counsel, AIM Investments (investment adviser — currently, INVESCO), October 2000 to September 2005.     1     None

 

 

                         
Interested Trustee and Principal Officers
        Term of Office &       Funds    
Name (Age) and   Position(s) Held   Length of Time       Overseen by   Other Trustee/
Address*   with the Trust   Served   Principal Occupation(s) During Past 5 Years   Trustee / Officer   Directorships Held by Trustee
Jane Cameron (75)
  Chief Compliance Officer   Indefinite.
Since June, 2006 		  Chief Compliance Officer — Mutual Funds, Dividend Growth Advisors, LLC since June, 2006. Managing Director HR & Strategic Sourcing from October 2008. Prior thereto, Ms. Cameron was Director of Strategic Sourcing, Fidelity Investments, from September, 1996 until February, 2006.     1     None
 
                        
Tara Pierson
(36)
  Assistant Secretary   Indefinite.
Since March, 2006 		  Employed by Huntington Asset Services, Inc., the Trust’s administrator, since February 2000.     1     None
 
*   The address for the trustees and officers is 58 Riverwalk Blvd., Building 2, Suite A, Ridgeland, SC 29936.
 
**   Mr. Shaver is considered an interested trustee because he is an “interested person” of the Trust as that term is defined in the 1940 Act based on the positions that he holds with Dividend Growth Advisors, LLC, the advisor to the Fund.
The Fund’s Statement of Additional Information (“SAI”) includes additional information about the Trustees and Officers and is available, without charge, upon request. You may call toll-free (888) 826-2520 to request a copy of the SAI or to make shareholder inquiries.
Continuance of Investment Advisory Agreement — (Unaudited)
At the quarterly meeting of the Board of Trustees of the Trust that was held on September 16, 2011, the Trustees, including a majority of the trustees who are not parties to the Investment Advisory Agreement (the “Agreement”) between the Advisor and the Trust with respect to the Fund, unanimously approved the renewal of the Agreement for another one year term.
In considering whether to approve the renewal of the Agreement, the Trustees considered factors that they deemed reasonable, including the following material factors: (i) the nature, extent, and quality of the services provided by the Advisor; (ii) the investment performance of the Fund; (iii) the costs of the services to be provided and profits to be realized by the Advisor from the relationship with the Fund; (iv) the extent to which economies of scale would be realized if the Fund grows and whether advisory fee levels reflect those economies of scale for the benefit of the Fund’s investors; (v) the Advisor’s practices regarding brokerage and portfolio transactions; and (vi) the Advisor’s practices regarding possible conflicts of interest.
In assessing these factors and reaching its decisions, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular Board meetings, as well as information specifically prepared and/or presented in connection with the annual renewal process, including information presented at the Meeting. The Board requested and was provided with information and reports relevant to the annual renewal of the Agreement, including: (i) reports regarding the services and support provided to the Fund and its shareholders by the Advisor; (ii) quarterly assessments of the investment performance of the Fund by personnel of the Advisor; (iii) commentary on the reasons for the performance; (iv) presentations by Fund management addressing the Advisor’s investment philosophy, investment strategy, personnel and operations; (v) compliance and audit reports concerning the Fund and the Advisor; (vi) disclosure information contained in the registration statement of the Trust and the Form ADV
of the Advisor; (vii) information on relevant developments in the mutual fund industry and how the Fund and/or the Advisor are responding to them; and (viii) a memorandum from Counsel, that summarized the fiduciary duties and responsibilities of the Board in reviewing and approving the Agreement, including the material factors set forth above and the types of information included in each factor that should be considered by the Board in order to make an informed decision. The Board also requested and received various informational materials including, without limitation: (i) documents containing information about the Advisor, including financial information, a description of personnel and the services provided to the Fund, information on investment advice, performance, summaries of Fund expenses, compliance program, current legal matters, and other general information; (ii) comparative expense and performance information for other mutual funds with strategies similar to the Fund; (iii) the anticipated effect of size on the Fund’s performance and expenses; and (iv) benefits to be realized by the Advisor from its relationship with the Fund. The Board also had discussions with the Advisor on succession planning and it asked the Advisor to keep it abreast of developments related to this topic.
The Board did not identify any particular information that was most relevant to its consideration to approve the Agreement and each Trustee may have afforded different weight to the various factors.
1. Nature, Extent and Quality of the Services Provided by the Advisor.
In considering the nature, extent, and quality of the services provided by the Advisor, the Trustees reviewed the responsibilities of the Advisor under the Agreement. The Trustees reviewed the services being provided by the Advisor to the Fund including, without limitation: the quality of its investment advisory services (including research and recommendations with respect to portfolio securities); its process for formulating investment recommendations and assuring compliance with the Fund’s investment objective, strategies, and limitations, as well as for ensuring compliance with regulatory requirements; its coordination of services for the Fund among the service providers and the Independent Trustees; and its efforts to promote the Fund and grow its assets. The Trustees noted the Advisor’s continuity of, and commitment to retain, qualified personnel and the Advisor’s commitment to maintain and enhance its resources and systems; the commitment of the Advisor’s personnel to finding alternatives and options that allow the Fund to maintain its goals; and the Advisor’s continued cooperation with the Independent Trustees and Counsel for the Fund. The Trustees evaluated the Advisor’s personnel, including the education and experience of the Advisor’s personnel. The Trustees noted that several of the officers of the Trust, including the principal executive and financial officers and the president for the Trust, were employees of the Advisor, and they served the Trust without additional compensation. After reviewing the foregoing information and further information in the materials provided by the Advisor (including the Advisor’s Form ADV), the Board concluded that, in light of all the facts and circumstances, the nature, extent, and quality of the services provided by the Advisor were satisfactory and adequate for the Fund.
2. Investment Performance of the Fund and the Advisor.
In considering the investment performance of the Fund and the Advisor, the Trustees compared the short and long-term performance of the Fund with the performance of funds with similar objectives managed by other investment advisors, as well as with aggregated peer group data. The Trustees also considered the consistency of the Advisor’s management of the Fund with its investment objective, strategies, and limitations. The Trustees noted that the Fund’s performance was comparable to the performance of the Advisor’s composites for accounts managed similarly to the Fund. The Trustees also compared the short and long-term performance of the Fund with the performance of its benchmark index, comparable funds with similar objectives and size managed by other investment advisors, and comparable peer group indices (e.g., Morningstar and Lipper category averages). The Trustees noted that the Fund’s performance was better than most of its peers in the short term and since the Fund’s inception. After reviewing and discussing the investment performance of the Fund further, the Advisor’s experience managing the Fund, the Advisor’s historical investment performance, and other relevant factors, the Board concluded, in light of all the facts and circumstances, that the

 

 

investment performance of the Fund and the Advisor was satisfactory.
3. Costs of the Services to be provided and profits to be realized by the Advisor.
In considering the costs of the services to be provided and profits to be realized by the Advisor from the relationship with the Fund, the Trustees considered: (1) the Advisor’s financial condition and the level of commitment to the Fund and the Advisor by the principals of the Advisor; (2) the asset level of the Fund; (3) the overall expenses of the Fund; and (4) the nature and frequency of advisory fee payments. The Trustees reviewed information provided by the Advisor regarding its profits associated with managing the Fund. The Trustees also considered potential benefits for the Advisor in managing the Fund. The Trustees then compared the fees and expenses of the Fund (including the management fee) to other comparable mutual funds. The Trustees noted that the Fund’s management fee and expense ratios were lower than some of the specifically identified comparable funds and higher than others. Based on the foregoing, the Board concluded that the fees to be paid to the Advisor by the Fund and the profits to be realized by the Advisor, in light of all the facts and circumstances, were fair and reasonable in relation to the nature and quality of the services provided by the Advisor.
4. Economies of Scale.
The Board next considered the impact of economies of scale on the Fund’s size and whether advisory fee levels reflect those economies of scale for the benefit of the Fund’s investors. The Trustees considered that while the management fee remained the same at all asset levels, the Fund’s shareholders had experienced benefits from the Fund’s expense limitation arrangement. The Trustees noted that the Fund’s shareholders would continue to experience benefits from the expense limitation arrangement until the Fund’s expenses fell below the cap set by the arrangement. Thereafter, the Trustees noted that the Fund’s shareholders would continue to benefit from economies of scale under the Fund’s agreements with service providers other than the Advisor. In light of its ongoing consideration of the Fund’s asset levels, expectations for growth in the Fund, and fee levels, the Board determined that the Fund’s fee arrangements, in light of all the facts and circumstances, were fair and reasonable in relation to the nature and quality of the services provided by the Advisor.
5. The Advisor’s Practices Regarding Brokerage and Portfolio Transactions.
In considering the Advisor’s practices regarding brokerage and portfolio transactions, the Trustees reviewed the Advisor’s practice for seeking best execution for the Fund’s portfolio transactions. The Trustees also considered the portfolio turnover rate for the Fund, and they considered the Advisor’s practices with respect to allocating portfolio business to broker-dealers who provide research, statistical, or other services — this latter assessment included consideration of whether commission rates paid to broker-dealers are reasonable in relation to the value of the services provided. The Trustees considered the process by which evaluations are made of the overall reasonableness of commissions paid and the method and basis for selecting and evaluating the broker-dealers used by the Advisor. The Trustees noted that in selecting broker-dealers to execute portfolio transactions, the Advisor considers a variety of factors including, among others, the price of the security, the rate of the commission, the size and difficulty of the order, the firm’s ability to provide professional services (e.g., the firm’s reliability, integrity, quality of execution, and operational capabilities) and research provided by the firm. The Trustees also considered the extent to which the foregoing services benefit other accounts advised by the Advisor and the extent to which such services enable the Advisor to avoid expenses that it otherwise would be required to bear under the Agreement. After further review and discussion, the Board determined that the Advisor’s practices regarding brokerage and portfolio transactions were satisfactory.
6. The Advisor’s Practices Regarding Possible Conflicts of Interest.
In considering the Advisor’s practices regarding conflicts of interest, the Trustees evaluated the potential for conflicts of interest and considered such matters as the experience and ability of the advisory personnel assigned to the Fund; the basis of decisions to buy or sell securities for the Fund and/or the Advisor’s other accounts; and the substance and administration of the Advisor’s code of ethics. The Trustees also considered disclosure in the registration statement of the Trust related to the Advisor’s potential conflicts of interest. Based on the foregoing, the Board determined that the Advisor’s standards and practices of the Advisor relating to the identification and mitigation of possible conflicts of interest were satisfactory.
Based upon all of the foregoing considerations, the Board, including a majority of the Independent Trustees, approved the renewal of the Agreement.

 

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Bingham McCutchen LLP
One Federal Street
Boston, MA 02110
December 13, 2011
Securities and Exchange Commission
Division of Investment Management
100 F Street, N.E.
Washington, DC 20549
      Re:   Goldman Sachs Trust
Registration Statement on Form N-14
(File No. 811-05349)
Ladies and Gentlemen:
     On behalf of our client, Goldman Sachs Trust (the “Registrant”), a Delaware statutory trust, we are hereby filing a combined proxy and registration statement on Form N-14, with exhibits (the “Registration Statement”).
     The Registration Statement relates to a proposed Agreement and Plan of Reorganization whereby substantially all of the assets of Rising Dividend Growth Fund, a series of Dividend Growth Trust, a Delaware statutory trust, will be transferred in a tax-free reorganization to Goldman Sachs Rising Dividend Growth Fund, a newly-organized series of the Registrant Trust that will be created to continue the operations of Rising Dividend Growth Fund, in exchange for shares of Goldman Sachs Rising Dividend Growth Fund.
     The Registration Statement is being filed pursuant to Rule 488 under the Securities Act of 1933, as amended. It is proposed that this filing will become effective on January 12, 2012 pursuant to Rule 488.
     Please call the undersigned at (617) 951-8458 or Barry N. Hurwitz at (617) 951-8267 with any questions relating to the filing.
     
 
  Sincerely,
 
  /s/ Jeremy B. Kantrowitz
 
  Jeremy B. Kantrowitz