[Federal Register Volume 66, Number 20 (Tuesday, January 30, 2001)]
[Notices]
[Pages 8245-8250]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-2503]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-24834; 812-11900]
Goldman Sachs Trust, et al.; Notice of Application
January 23, 2001.
AGENCY: Securities and Exchange Commission (``Commission'' or ``SEC'').
ACTION: Notice of application for an order under sections 6(c) and
17(b) of the Investment Company Act of 1940 (the ``Act'') for an
exemption from section 17(a) of the Act.
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SUMMARY OF APPLICATION: Applicants request an order that would permit
certain money market funds to engage in principal transactions in tax-
exempt money market instruments with an affiliated dealer.
APPLICANTS: Goldman Sachs Trust (the ``Trust''), Goldman, Sachs & Co.,
Goldman Sachs Funds Management, L.P. (``GSFM''), and Goldman Sachs
Asset Management International (``GSAMI'').
FILING DATES: The application was filed on December 21, 1999 and
amended on May 24, 2000, September 1, 2000 and November 14, 2000.
Applicants have agreed to file an amendment during the notice period,
the substance of which is reflected in this notice.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
applicants with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on February 20,
2001, and should be accompanied by proof of service on applicants, in
the form of an affidavit, or, for lawyers, a certificate of service.
Hearing requests should state the nature of the writer's interest, the
reason for the request, and the issues contested. Person may request
notification of a hearing by writing to the SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, NW., Washington, DC 20549-
0609.
[[Page 8246]]
APPLICANTS: The Trust, 4900 Sears Tower, Chicago, Illinois 60606-6303;
Goldman, Sachs & Co., 85 Broad St., New York, NY 10004; GSFM, 32 Old
Slip, New York, NY 10005; GSAMI, Procession House, 55 Ludgate Hill,
London EC4A AM7JW, England.
FOR FURTHER INFORMATION CONTACT: Marilyn Mann, Senior Counsel, at (202)
942-0582, or Mary Kay Frech, Branch Chief, at (202) 942-0564 (Division
of Investment Management, Office of Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee from
the SEC's Public Reference Branch, 450 5th Street, NW., Washington, DC
20549-0102 (telephone (202) 942-8090).
Applicants' Representations
1. Goldman, Sachs & Co. is a New York limited partnership
registered as a broker-dealer under the Securities Exchange Act of 1934
(the ``1934 Act''), and as an investment adviser under the Investment
Advisers Act of 1940 (the ``Advisers Act'').\1\ GSFM is a Delaware
limited partnership registered as an investment adviser under the
Advisers Act and GSAMI is a United Kingdom corporation registered as an
investment adviser under the Advisers Act. Goldman, Sachs & Co., in its
capacity as a dealer in securities and financial instruments, is
referred to as ``Goldman Sachs'' or the ``Dealer.'' Goldman, Sachs &
Co., acting through a business unit of its Investment Management
Division (Goldman Sachs Asset Management (``GSAM'')), GSFM and GSAMI
are individually referred to as an ``Adviser'' and collectively as the
``Advisers.''\2\
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\1\ The relief would also apply to any successors to all or
substantially all of the business, assets or property of Goldman,
Sachs & Co. Any such succession shall be solely by way of change of
organization, such as incorporation, reincorporation or
reorganization as a public company, partnership, limited liability
company or business trust, whether publicly traded or privately
held.
\2\ As used in the application, the term ``Advisers'' also
includes any other division of, or other person controlled by,
controlling or under common control with, Goldman, Sachs & Co. that
is engaged in providing advisory services, now or in the future, to
the Trust or to any other Fund, as defined below, subject to the
terms and conditions of the order.
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2. The Trust is a Delaware business trust and is registered under
the Act as an open-end management investment company. For purposes of
the application, a ``Money Market Series'' is a separate series of the
Trust that is a money market fund (as that term is defined in rule 2a-
7(b) under the Act) that is permitted to invest in Municipal
Instruments. ``Municipal Instruments'' are short-term tax-exempt money
market securities, including tax-exempt securities that qualify for
purchase by a money market fund under rule 2a-7 due to the existence of
a floating rate of interest or a demand feature. The requested relief
would permit each existing or future Money Market Series of the
Trust,\3\ and other registered investment company or separate series
thereof that is a money market fund for which any one of the Advisers
may, in the future, serve as investment adviser or subadviser (the
``Future Funds,'' and collectively with the Money Market Series of the
Trust, the ``Funds'') to engage in purchases and sales of Municipal
Instruments with Goldman Sachs.\4\
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\3\ Currently, the Money Market Series of the Trust are the
Prime Obligations Portfolio, Money Market Portfolio, Tax-Exempt
Diversified Portfolio, Tax-Exempt California Portfolio and Tax
Exempt New York Portfolio (the ``ILA Funds''), which are five of the
Goldman Sachs-Institutional Liquid Assets Portfolios (``ILA'') and
Prime Obligations Fund, Money Market Fund and Tax-Free Money Market
Fund (the ``FST Funds''), which are three of the Financial Square
Funds (``FTS``).
The Prime Obligations Portfolio, Money Market Portfolio, Prime
Obligations Fund and Money Market Fund are taxable money market
funds. In 1994 a Commission order was issued permitting these Funds
to engage in principal transaction in taxable money market
instruments with Goldman Sachs. Institutional Liquid Assets,
Investment Company Act Release Nos. 20653 (Oct. 25, 1994) (notice)
and 20733 (Nov. 23, 1994) (order). While none of these Funds
currently invests in Municipal Instruments, each has the investment
flexibility to do so under its investment objectives and policies.
\4\ All registered investment companies that currently intend to
rely on the order are named as applicants. Any of the Future Funds
that rely on the order will comply with the terms and conditions of
the order.
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3. The investment objective of each Money Market Series is a
maximize current income, to the extent consistent with the preservation
of capital and the maintenance of liquidity. The Tax-Free Money Market
Fund, Tax-Exempt Diversified Portfolio, Tax-Exempt California Portfolio
and Tax-Exempt New York Portfolio seek income excluded from gross
income for federal income tax purposes, and in the case of the Tax-
Exempt California Portfolio and Tax-Exempt California Portfolio and
Tax-Exempt New York Portfolio, exempt from California State and New
York State and City personal income taxes, respectively.
4. Each Fund values its portfolio by using the amortized cost
method of valuation in reliance on rule 2a-7 under the Act. Each of the
existing Funds has an investment advisory agreement with Goldman, Sachs
& Co., pursuant to which Goldman, Sachs & Co. provides investment
advisory and management services through its operating division GSAM,
and a distribution agreement with Goldman, Sachs & Co., pursuant to
which Goldman, Sachs & Co. serves as distributor for shares of the
Funds. Currently, neither GSFM nor GSAMI acts as investment adviser to
a Fund.\5\
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\5\ GSFM and GSAMI are included as applicants because either or
both may act in the future as investment adviser to a Fund.
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5. Goldman, Sachs & Co., GSFM and GSAMI are directly or indirectly
partnership or corporate subsidiaries of The Goldman Sachs Group, Inc.
(``GS Group''), a Delaware corporation. GS Group is the general partner
and a limited partner of Goldman, Sachs & Co. The other general partner
of Goldman, Sachs & Co., Goldman, Sachs & Co. L.L.C., is a limited
liability company whose membership interests are held solely by GS
Group. GSFM is a Delaware limited partnership of which the general
partner is a corporation wholly-owned directly by GS Group and the sole
limited partner is GS Group. GSAMI is an English company wholly-owned
indirectly by GS Group. The Advisers maintain offices that are
physically separate form those of the Dealer.
6. The investment advisory operations for the Funds are handled by
a group currently consisting of 12 persons (the ``Money market Trading
Desk'') within GSAM. The personnel assigned to the Money Market Trading
Desk are exclusively devoted to the business and affairs of GSAM.
Subject to the supervision of the Board of Trustees (the ``Trustees'')
of the Funds, the executive management of GSAM, the Investment Policy
Committee (discussed below) and the Credit Department (discussed
below), all portfolio selection and trading decisions made for the
Funds are made by personnel assigned to the Money Market Trading Desk.
All portfolio managers responsible for the Funds are assigned to the
Money Market Trading Desk.
7. Personnel on the Money Market Trading Desk are not responsible
for the marketing or sale of Fund shares or other Goldman, Sach & Co.
products, although from time to time they participate in meetings with
significant potential clients and may provide other client services.
Because of their expertise in and knowledge of the markets for short-
term money market instruments, other Goldman, Sachs & Co. personnel,
may, from time to time, solicit their views on the viability (from the
portfolio management perspective) of proposals for pooled investment
vehicles involving such markets or instruments. Finally, Money Market
Trading Desk personnel, who are generally familiar with instruments
structured to satisfy various provisions
[[Page 8247]]
of rule 2a-7, may also be solicited from time to time by various
dealers, including Goldman Sachs, for their views on the structure of
new instruments designed to be eligible under rule 2a-7.
8. Credit analysis for the Money Market Trading Desk, Goldman,
Sachs & Co. and other affiliates of GS Group is performed by the Credit
Department. The Credit Department is a central department of Goldman,
Sachs & Co. which analyzes securities credit, counterparty risk,
customer credit and related issues. The Credit Department maintains a
list of eligible instruments which is used by the Money Market Trading
Desk for portfolio management. The Money Market Trading Desk is not
authorized to purchase instruments that are not on this list.
9. In general, the Money Market Trading Desk develops and
implements portfolio investment strategies within a preselected average
maturity range. The average maturity range is selected in weekly
meetings of the Investment Policy Committee (the ``Committee''). The
Committee determines the target average maturity range based on (1)
fundamental economic analysis and technical market data; (2)
anticipated trends in monetary and fiscal policy; and (3) anticipated
customer activity. In connection with (1) and (2), personnel of the
Money Market Trading Desk solicit views of dealers, including Goldman
Sachs, on economic and market developments. For example, such personnel
routinely canvas dealers, including Goldman Sachs, to determine the
``market'' consensus regarding pending economic data releases,
anticipated changes in Federal Reserve policy, and the forecast for
gross supply of money market securities available for investment.\6\
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\6\ GSAM may also consult regarding municipal securities with
Goldman Sachs business groups that conduct brokerage and advisory
services for private clients (collectively; ``PCS'').
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10. The Committee is not involved in review or approval of specific
securities to be purchased, the terms of any transactions or the types
of securities in which the Funds may invest. The Committee is currently
composed of 10 GSAM employees (including personnel of the Money Market
Trading Desk, but no other portfolio management personnel) and one
employee from the Investment Research Division of Goldman, Sachs & Co.
The Goldman, Sachs & Co. employee's input into the process is limited
to participation in the Committee's deliberations on economic policy
outlook, as it pertains to the very narrow issues for which the
Committee is responsible. Security and sector selection remain the
exclusive responsibility of the portfolio managers, subject of the
Funds' prospectus and credit guidelines, and are entirely outside the
Committee process. The Committee's decisions on average maturity ranges
are made by consensus, and no member has a veto over the decisions made
by the Committee. Once a decision is made, the Money Market Trading
Desk implements the decision, managing each Fund's average maturity
range until the Committee's decision is modified at a subsequent
meeting of the Committee.
11. Neither GSFM nor GSAMI currently manages any U.S. registered
money market funds. As a result, neither has established a unit
corresponding to the Money Market Trading Desk or to the Committee. It
has not been determined whether, if GSFM or GSAMI were to manage a
Fund, either would establish such a unit, or alternatively whether GSFM
and/or GSAMI would rely in whole or in part on GSAM's Money Market
Trading Desk and Committee. In any event, any counterpart of the Money
Market Trading Desk or the Committee established by either GSFM or
GSAMI would conform in all material respects to the description set
forth in the application and would comply with all of the conditions to
the order.
12. Applicants state that the operators of the Advisers, on the one
hand, and those of the Dealer, on the other hand, are independent of
each other. Condition 6 below describes certain elements of this
independence and is designed to ensure that the Advisers and the Dealer
continue to operate independently.
13. Municipal Instruments are commonly referred to as ``tax-exempt
money market instruments'' and are traded in the ``tax-exempt money
market.'' Applicants state that the tax-exempt money market is
generally characterized by: (a) Obligors or guarantors having high
credit ratings and, accordingly, relatively low risk of principal
losses due to credit events; (b) trading in over-the-counter markets,
consisting of dealer firms that are primarily major securities firms or
large banks; (c) trading costs to the portfolio primarily consisting of
dealer or underwriter spreads, typically not greater than 12.5 basis
points (0.125%), but subject to variations based on the type of
instrument or the occurrence of turbulent market conditions; (d) an
elaborate telephone communication network to match buyers with sellers,
which generally precludes being able to obtain a single market price
for a given instrument at any given time; and (e) varying price,
volatility, liquidity and availability for each type of instrument
within the market.
14. Applicants state that recent growth in tax-exempt money market
fund assets and withdrawals by several major dealers from making
markets in Municipal Instruments have contributed to the limited
availability of Municipal Instruments to money market funds that are
authorized to purchase Municipal Instruments. Applicants assert that,
over the past ten years, the growth in money market funds that purchase
Municipal Instruments has substantially outpaced the growth in
Municipal Instruments.
15. Applicants state that Goldman Sachs has remained committed to
the tax-exempt market, and has moved to fill the void left by departing
dealers. As the number of dealers with which the Funds can transact
business has decreased, it has become even more important for the Funds
to have meaningful access to all of the major dealers in Municipal
Instruments in order to diversify each Fund's portfolio, to maintain
portfolio liquidity, and to increase opportunities for obtaining best
price and execution with respect to portfolio trades.
16. Applicants state that, for the most part, Municipal Instruments
consist of conventional municipal notes (``conventional notes''), tax-
exempt commercial paper, variable rate demand notes, put bonds and
flexible notes. Applicants state that there is no comprehensive
information published as to the dollar amount and volume of secondary
market transactions executed in Municipal Instruments. However, Goldman
Sachs believes that it is generally one of the top secondary market
dealers in Municipal Instruments, and leads the distribution of
outstanding tax-exempt commercial paper and remarketing of flexible
notes. Based upon Goldman Sachs estimates, Goldman Sachs was
responsible for 21% of the trading volume in variable rate demand
notes, tax-exempt commercial paper and put bonds among Goldman Sachs
and seven other leading dealers as of March, 2000. This estimate
includes 16% of the trading volume in variable rate demand notes, 37%
for tax-exempt commercial paper, and 12% for put bonds.\7\ The broker-
dealer operations at Goldman Sachs are handled by its Fixed Income,
Currency & Commodities Division.
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\7\ Flexible notes are aggregated in variable rate demand notes,
put bonds and commercial paper in these statistics.
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[[Page 8248]]
Applicants' Legal Analysis
1. Section 17(a) of the Act generally prohibits an affiliated
person of a registered investment company, or an affiliated person of
such a person, acting as principal, from selling any security to, or
purchasing any security from, the company. Section 2(a)(30 defines an
affiliated person of another person to include, if such other person is
an investment company, any investment adviser of the company.
Applicants state that Goldman, Sachs & Co., as investment adviser to
the Funds, is an affiliated person of the Funds.\8\ Goldman Sachs is
thus prohibited from engaging in principal transactions with the Funds.
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\8\ In the case of a Fund advised by an affiliate of Goldman,
Sachs & Co., Goldman, Sachs & Co. would be an affiliated person of
an affiliated person of the Fund.
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2. Section 6(c) of the Act provides that the Commission may exempt
any person, security, or transaction, or any class of persons,
securities, or transactions, if and to the extent that such exemption
is necessary or appropriate in the public interest and consistent with
the protection of investors and the purposes fairly intended by the
policy and provisions of the Act.
3. Section 17(b) authorizes the Commission to exempt a proposed
transaction from section 17(a) if evidence establishes that (a) the
terms of the transaction, including the consideration to be paid or
received, are reasonable and fair and do not involve overreaching on
the part of any person concerned, (b) the proposed transaction is
consistent with the policy of each registered investment company
concerned, as recited in its registration statement and reports filed
under the Act, and (c) the proposed transaction is consistent with the
general purposes of the Act.
4. Applicants state that the Funds are major buyers and sellers in
the tax-exempt money market with a strong need for access to large
quantities of high quality Municipal Instruments. The applicants
believe that having access to a major dealer, such as Goldman Sachs,
would increase the Funds' ability to obtain suitable portfolio
securities. The applicants also submit that the protective conditions
set forth below will prevent any overreaching on the part of any person
that could act to the detriment of a Fund and will ensure that each
transaction is effected on a basis that is reasonable and fair to the
Fund and its shareholders. The applicants also believe that the
proposed exemption is necessary and appropriate in the public interest
and consistent with the protection of investors, consistent with the
polices of each Fund, and consistent with purposes fairly intended by
the policy and provisions of the Act.
Applicants' Conditions
Applicants agree that any order of the SEC granting the requested
relief will be subject to the following conditions:
1. The exemption shall be applicable to principal transactions in
the secondary market and primary or secondary fixed price dealer
offerings not made pursuant to underwriting syndicates. Principal
purchase or sale transactions will be conducted only in Municipal
Instruments that are First Tier Securities as defined in rule 2a-
7(a)(12)(i) under the Act. Notwithstanding the foregoing, if a Fund
purchases a Municipal Instrument meeting the above requirements from
the Dealer and, subsequent to such purchase the security becomes no
longer an ``Eligible Security,'' the Fund may sell the security to the
Dealer in a manner consistent with the requirements of rule 2a-
7(c)(6)(i)(B). The exemption shall not apply to any purchase or sale of
any security issued by Goldman Sachs or any affiliated person thereof
or to any security subject to a Demand Feature or Guarantee, as defined
in rule 2a-7, issued by Goldman Sachs or any affiliated person thereof.
For purposes of this requirement, Goldman Sachs will not be considered
to be the issuer of a Demand Feature or Guarantee solely by reason of
serving as a remarketing agent for a Municipal Instrument.
2. A determination will be made with respect to each principal
transaction conducted by a Fund pursuant to the order, based upon the
information reasonably available to the Funds and the Advisers, that
the price available from Goldman Sachs is at least as favorable to the
Fund as the prices obtained from two other dealer bids in connection
with securities falling within the same category of instrument, quality
and maturity (but not necessarily the identical security or issuer)
(``price test''). In the case of variable rate demand notes, for which
dealer bids are not ordinarily available, the Fund will only undertake
purchases and sales where the rate of interest to be earned from the
variable rate demand note is at least equal to that of variable rate
demands notes of comparable quality that are available from other
dealers. GS Group will not have any involvement with respect to
proposed transactions between the Funds and the Advisers and will not
attempt to influence or control in any way the placing by the Funds or
the Advisers of orders with Goldman Sachs.
3. Before any principal transaction may be conducted pursuant to
the order, the Funds or the Advisers must obtain such information as
they deem reasonably necessary to determine that the price test has
been satisfied. In the case of each purchase or sale transactions, the
Funds or the Advisers must make and document a good faith determination
with respect to compliance with the price test based on current price
information obtained through the contemporaneous solicitation of bona
fide offers in connection with securities falling within the same
category of instrument, quality and maturity (but not necessarily the
identical security or issuer). With respect to variable rate demand
notes, contemporaneous solicitation of a bona fide offer will be
construed to mean any bona fide offer solicited during the same trading
day. With respect to prospective purchases of securities by a Fund, the
dealer firms from which prices are solicited must be those who have
securities of the same categories and the type desired in their
inventories and who are in a position to quote favorable prices with
respect thereto. With respect to the prospective sale of securities by
a Fund, these dealer firms must be those who, in the experience of the
Funds and the Advisers, are in a position to quote favorable prices.
4. Principal transactions conducted by a tax-exempt Fund pursuant
to the order shall be limited to no more than than an aggregate of 20%
of the purchases and 20% of the sales of all transactions in Municipal
Instruments conducted by that Fund. Principal transactions in Municipal
Instruments conducted by a taxable Fund pursuant to the requested order
shall be limited to no more than an aggregate of 20% of the purchases
and 20% of the sales of all transactions in Municipal Instruments
conducted by that Fund. These calculations shall be measured on an
annual basis and shall be computed with respect to the dollar volume
thereof. For the purposes of these calculations, purchases of Municipal
Instruments by a taxable Fund shall also count towards the 25%
cumulative limitation for purchases or sales set forth in condition 3
of Institutional Liquid Assets, Investment Company Act Release No.
20653 (Oct. 25, 1994).
5. Goldman Sachs' dealer spread regarding any transaction with the
Funds will be no greater than its customary dealer spread on similar
(with unaffiliated parties) of a similar
[[Page 8249]]
size during a comparable time period. Its customary dealer spread also
will be consistent with the average or standard spread charged by
dealers in money market securities of a similar type and transaction
size.
6. The Advisers, on the one hand, and the Dealer, on the other,
will operate on different sides of appropriate Chinese Walls with
respect to the Funds and the Municipal Instruments. The Chinese Walls
will include all of the following characteristics, and such others as
may from time to time be considered reasonable by the Dealer and the
Advisers to facilitate the factual independence of the Advisers from
the Dealer:
(a) Each of the Advisers will maintain offices physically separate
from those of the Dealer.
(b) The compensation of persons assigned to any of the Advisers
(i.e., executive, administrative or investment personnel) will not
depend on the volume or nature of trades effected by the Advisers for
the Funds with the Dealer under the exemption, exemption, except to the
extent that such trades may affect the profits and losses of the GS
Group or Goldman, Sachs & Co. as a whole.
(c) The Fixed Income, Currency & Commodities Division of Goldman
Sachs will not compensate to Advisers from its profits or losses on
such specific transactions with any of the Advisers, provided that the
allocation of the profits by GS Group to its shareholders and by
Goldman, Sachs & Co. to its partners, and the determination of general
firm-wide compensation of officers and employees, will be unaffected by
this undertaking.
(d) Personnel assigned to the Money Market Trading Desk will be
exclusively devoted to the business and affairs of one or more of the
Advisers, except for consultations with Goldman Sachs, PCS, and other
dealers as discussed in the application. Personnel assigned to the
Dealer will not participate in or otherwise seek to influence the Money
Market Trading Desk other than in the normal course of sales and dealer
activities of the same nature as are simultaneously being carried out
with respect to nonaffiliated institutional clients. Each Adviser, on
the one hand, and the Dealer, on the other hand, may nonetheless
maintain affiliations other than with respect to the Funds, and in
addition with respect to the Funds as follows:
(i) GSAM has organized and any other Adviser may organize an
Investment Policy Committee the members of which include Money Market
Group Trading Desk personnel, other GSAM personnel and respresentatives
from the Investment Research Department of the Dealer. The non-GSAM
member's input on the Investment Policy Committee will be limited
solely to expressions of his or her opinion on interest rate and
similar economic matters, and will be included in the Investment Policy
Committee only to the extent of considering and ratifying the portfolio
managers' average maturity recommendations. The Investment Policy
Committee will develop recommendations only on average maturity ranges
and will not develop recommendations on specific securities or on types
of Securities.
(ii) Money Market Trading Desk personnel may rely on research,
including credit analysis and reports prepared by the Goldman, Sachs &
Co. Credit Department, which is responsible firmwide for credit
analysis and counterparty credit risk evaluations and recommendations.
(iii) Members of the Management Committee of Goldman, Sachs & Co.
and GS Group, and certain other senior executives with responsibility
for overseeing operations of various division, subsidiaries and
affiliates of Goldman, Sachs & Co. are not precluded from exercising
those functions over the Advisors because they oversee the Dealers as
well, provided that such persons shall not have any involvement with
respect to proposed transactions pursuant to the exemption and will not
in any way attempt to influence or control the placing by the Funds or
any Adviser of orders in respect of Municipal Instruments with Goldman
Sachs.
7. The Funds and the Advisers will maintain such records with
respect to those transactions conducted pursuant to the exemptions as
may be necessary to confirm compliance with the conditions to the
requested relief. To this end, each Fund shall maintain the following:
(a) An itemized daily record of all purchases and sales of
securities pursuant to the exemption, showing for each transaction the
following: (i) The name and quantity of securities; (ii) the unit
purchase or sale price; and (iii) the time and date of the transaction.
For each transaction (other than variable rate demand notes), these
records shall documents two quotations received from other dealers for
securities falling within the same category of instrument, quality and
maturity; including the following: (i) The names of the dealers; (ii)
the names of the securities; (iii) the prices quoted; and (iv) the
times and dates the quotations were received. In the case of variable
rate demand notes, the same records shall be maintained except that the
rates of quoted will be substituted for the prices quoted.
(b) Records sufficient to verify compliance with the volume
limitations contained on condition (4) above. The Dealer will provide
the Funds with all records and information necessary to implement this
requirement. The records required by this condition (7) will be
maintained and preserved in the same manner as records required under
rule 31a-1(b)(1) under the Act.
8. The legal and compliance department of Goldman Sachs and the
Advisers will prepare and administer guidelines for personnel of
Goldman Sachs and the Advisers to make certain that transactions
conducted pursuant to the order comply with the conditions set forth in
the order and that the parties generally maintain arm's-length
relationships. In the training of Goldman Sachs' personnel, particular
emphasis will be placed upon the fact that the Funds are to receive
rates as favorable as other institutional purchasers buying the same
quantities. The legal and compliance departments will periodically
monitor the activities of Goldman Sachs and the Advisers to make
certain that the conditions set forth in the order are adhered to.
9. The non-interested Trustees of the Funds will approve,
periodically review, and update as necessary, guidelines for the Funds
and the Advisers that are reasonably designed to make certain that the
transactions conducted pursuant to the exemption comply with the
conditions set forth therein and that the above procedures are followed
in all respects. The respective non-interested Trustees will
periodically monitor the activities of the Funds and the Advisers in
this regard to ensure that these goals are being accomplished.
10. The Trustees of the Trust, including a majority of the non-
interested Trustees, will have approved the Fund's participation in
transaction conducted pursuant to the exemption and determined that
such participation by the Fund is the best interests of the Funds and
its shareholders. The minutes of the meeting of the Board of Trustees
at which this approval was given must reflect in detail the reasons for
the Trustee's determination. The Trustees will review no less
frequently than annually the Fund's participation in transactions
conducted pursuant to the exemption during the prior year and determine
whether the Fund's participation in such transaction continues to be in
the best interests of the Fund and its shareholders. Such
[[Page 8250]]
review will include (but not be limited) (a) a comparison of the volume
of transactions in each type of security conducted pursuant to the
exemption to the market presence of the Dealer in the Market for that
type of security, which market data may be based on good faith
estimates to the extent that current formal data is not reasonably
available, and (b) a determination that the Funds are maintaining
appropriate trading relationships with other sources for each type of
security, to ensure that there are appropriate sources for the
quotations required by condition 3. The minutes of the meetings of the
Trustees of the Trust at which these determinations are made will
reflect in detail the reasons for the Trustees' determinations.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-2503 Filed 1-29-01; 8:45 am]
BILLING CODE 8010-01-M