8.19.2008 Goldman Sachs Asset Management L.P. and Goldman Sachs Asset Management International (the "Advisers") provide investment advisory services to certain investment companies (the “Funds”). Goldman Sachs & Co. ("GS&Co.") is the principal underwriter for the Funds. Advisers are affiliated persons of GS&Co. GS&Co. also is the principal underwriter for certain fixed income securities offerings that involve:

  • two or more co-issuers ("co-issuer underwritings"); and
  • securities of which the payment of principal and interest are fully guaranteed by a guarantor ("guarantor underwritings") (together with co-issuer underwritings, "GS&Co. Offerings").

Each co-issuer underwriting involves: (a) an issuer ("Co-Issuer A") that is a company which has been in continuous operation for at least three years; and (b) a separate issuer ("Co-Issuer B"), which may have been in existence for less than three years at the time of the securities offering, that is either a wholly owned subsidiary of Co-Issuer A or is under common control with Co-Issuer A and that may have nominal assets and revenue. Each of Co-Issuer A and Co-Issuer B are responsible unconditionally for 100% of the payment of principal and interest on the fixed income securities purchased by a Fund. Any Fund that acquires such securities would have direct recourse against each of Co-Issuer A and Co-Issuer B in the event that 100% of the payment of principal and interest on the securities is not made.

The fixed income securities offered in a guarantor underwriting are backed by the unconditional guarantee of an established company ("Guarantor") that has been in continuous operation for at least three years. The guarantee provides for the payment in full of principal and interest on the securities purchased by a Fund. The securities guaranteed by the Guarantor are issued by another company ("Issuer C"), which is an affiliate of Guarantor and may have been in existence for less than three years at the time of the securities offering. Any Fund that acquires such securities would have direct recourse against the Guarantor in the event that payment in full of principal and interest on the securities is not made.

The incoming letter proposed to have the Funds purchase fixed income securities from each type of GS&Co. Offering. The credit of Co-Issuer A (in co-issuer underwritings) and the credit of Guarantor (in guarantor underwritings) would stand behind the fixed income securities. Absent the obligations of Co-Issuer A and the Guarantor, the Funds would not purchase securities in these underwritings.

Each of the fixed income securities issued in the GS&Co. Offerings would be:

  • part of an issue registered under the Securities Act of 1933;
  • government securities (as defined in Section 2(a)(16) of the 1940 Act);
  • securities that are part of an "Eligible Foreign Offering"; or
  • securities that are part of an "Eligible Rule 144A Offering" as those terms are defined in rule 10f-3 under the 1940 Act (altogether, "Eligible Securities").

The proposed purchases would be conducted in accordance with Rule 10f-3 under the 1940 Act, except for the requirement in paragraph (c)(4) that the issuer of any securities purchased pursuant to the Rule be in continuous operation for not less than three years.

The SEC agreed with the incoming letter’s argument that the concerns that Rule 10f-3(c)(4) is intended to address, namely that a fund will acquire less seasoned securities from an affiliated underwriter, would not be implicated by the proposed purchases. The incoming letter successfully argued that the credit of Co-Issuer A (in co-issuer underwritings) and the credit of Guarantor (in guarantor underwritings) will stand behind the fixed income securities. In each GS&Co. Offering, the Funds will have direct recourse against an established company (including the operations of any predecessors) that has been in continuous operation for at least three years for 100% of the payment obligations on the fixed income securities that are issued. With respect to co-issuer underwritings, Co-Issuer A is responsible unconditionally for 100% of the payment obligations on the fixed income securities, and that with respect to guarantor underwritings, the Guarantor has guaranteed payment in full of the principal and interest on the securities in the respective GS&Co. Offering. Finally, each Fund will comply with all of the conditions of Rule 10f-3 under the 1940 Act, except for Rule 10f-3(c)(4) with respect to the proposed purchases.

Click http://www.sec.gov/divisions/investment/noaction/2008/goldmansachstrust081908.htm to access the no-action letter.