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					August 19, 2009

United States: Portfolio Strategy: Strategy Baskets

United States: Portfolio Strategy

Strategy Baskets
Focus on degree of operating leverage and BRICs revenue exposure
The “sustained rally” segment of the current market rebound should continue during 2H 2009 as the economy recovers. Our strategy baskets are designed to reflect key themes in the market. We recommend buying firms with high operating leverage <GSTHOPHI> and firms with high sales to BRICs where strong economic growth should drive top line results.
BUY high operating leverage (GSTHOPHI); SELL low (GSTHOPLO)
We recommend investors buy our High Operating Leverage basket (Bloomberg ticker: <GSTHOPHI>) and sell our Low Operating Leverage basket (<GSTHOPLO>). We expect profit margins of high operating leverage stocks should expand as sales growth improves. The incremental benefit of increased revenue on EPS should be greater for high fixed-cost, high operating leverage stocks relative to low operating leverage firms that have more stable margins due to higher variable costs.
David J. Kostin
(212) 902-6781 | david.kostin@gs.com Goldman, Sachs & Co.

Nicole Fox
(212) 357-1744 | nicole.fox@gs.com Goldman, Sachs & Co.

Caesar Maasry
(212) 902-9693 | caesar.maasry@gs.com Goldman, Sachs & Co.

BUY exposure to the BRICs growth (GSTHBRIC)
We favor firms with high sales exposure to Brazil, Russia, India and China (BRICs) vs. developed markets given the significantly higher GDP growth outlook. We recommend investors gain exposure to the BRICs markets by buying our BRICS sales basket (<GSTHBRIC>) as an absolute long or as a sector-neutral pair trade versus S&P 500. The basket identifies 50 stocks in the Russell 1000 index across ten sectors with the highest sales exposure to the BRICs countries and regions. The median stock in the basket derives 23% of its sales from the BRICs regions vs. 0% for median S&P 500 stock.

Amanda Sneider
(212) 357-9860 | amanda.sneider@gs.com Goldman, Sachs & Co.

Rebalancing valuation baskets (GSTHSVLU and GSTHAVLU)
We completed the annual rebalance of our “Super-Value” and “AntiValue” baskets. These sector-neutral portfolios consist of the 50 least expensive (<GSTHSVLU>) and most expensive (<GSTHAVLU>) stocks in the S&P 500 based on valuation scores. We do not currently recommend either basket.

The Goldman Sachs Group, Inc. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification, see the end of the text. Other important disclosures follow the Reg AC certification, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.

The Goldman Sachs Group, Inc.

Goldman Sachs Global Economics, Commodities and Strategy Research

Goldman Sachs Global Economics, Commodities and Strategy Research

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United States: Portfolio Strategy: Strategy Baskets

Table of contents
Primer on US Portfolio Strategy Thematic Baskets Growth and Valuation for Portfolio Strategy Thematic Baskets 1. GSTHINTL – International Sales Basket 2. GSTHAINT – Domestic Sales Basket 3. GSTHWEUR – Western Europe Sales Basket 4. GSTHBRIC – BRICs Sales Basket 5. GSTHOPHI – High degree of Operating Leverage 6. GSTHOPLO – Low degree of Operating Leverage 7. GSTHSBAL – Strong Balance Sheet Basket 8. GSTHWBAL – Weak Balance Sheet Basket 9. GSTHDIVG – Dividend Growth Basket 10. GSTHHVIP – Hedge Fund Very-Important-Position (VIP) Basket 11. GSTHHFHI – S&P 500 High Hedge Fund Concentration Basket 12. GSTHHFSL – S&P 500 Low Hedge Fund Concentration Basket 13. GSTHSVLU and GSTHAVLU: Super-Value & Anti-Value Baskets 14. GSTHGARP – Growth at-a-Reasonable Price 15. GSTHHPNL and GSTHHPNS: Hispanization Baskets Disclosures 3 4 6 8 10 12 14 15 18 19 22 24 26 27 28 30 31 35

Permission to our GS Portfolio Strategy Baskets To receive access to the Goldman Sachs US Portfolio Strategy <GSSU5> Bloomberg page, please follow the directions below: 1. Please go to your Bloomberg terminal and type IAM <go>. 2. Take a screen shot of the page. 3. Send the attachment and an e-mail to your Goldman Sachs salesperson requesting access to the US Portfolio Strategy Bloomberg <GSSU5> page.

The prices in this report are based on the market close of August 14, 2009, unless otherwise noted.

Goldman Sachs Global Economics, Commodities and Strategy Research

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Primer on US Portfolio Strategy Thematic Baskets
Our portfolio strategy baskets are designed to provide portfolio managers with unique investment ideas to implement thematic views in the U.S. equity markets. Our baskets address a variety of important themes from strong international growth to hedge fund ownership to corporate use of cash that will drive market returns.
Goldman Sachs baskets, including our baskets, may be found on Bloomberg by typing <GSSU>. In addition to our portfolio strategy thematic baskets on <5>, Equity Trading Strategies offers Wavefronts baskets on <2> that consist of US long/short baskets for efficiently implementing macroeconomic views in the equity markets. Our portfolio strategists in Asia and Europe offer their thematic baskets on pages <11> and <12>.

Our baskets may be reached directly by typing <GSSU5> on Bloomberg. The Bloomberg page provides current basket prices and a list of current basket constituents. Our baskets are typically equally weighted at inception and begin pricing at 100. For any given basket, basket weights will gradually drift from their initial weights as stock performance differs for the constituents. Stocks with higher returns will increase their weight in the basket, while stocks with lower returns will fall.
Our baskets are also automatically adjusted for dividends and corporate actions. Dividends for a company increase that company’s weight within the basket. If a company is acquired, that constituent’s weight at closing in the basket will be reallocated to the remaining constituents in proportion to their current basket weights.

Exhibit 1: Type <GSSU5> for Goldman Sachs US Portfolio Strategy Baskets on Bloomberg

<GSSU5>
Macroeconomic
GSTHINTL GSTHAINT GSTHWEUR GSTHBRIC

Fundamental
GSTHOPHI GSTHOPLO GSTHSBAL GSTHWBAL

Hedge Fund
GSTHHVIP GSTHHFHI GSTHHFSL

Use of Cash
GSTHDIVG

Valuation
GSTHGARP GSTHSVLU GSTHAVLU

Demographic
GSTHHPNL GSTHHPNS
Source: Bloomberg and Goldman Sachs Global ECS Research.

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Growth and Valuation for Portfolio Strategy Thematic Baskets

Exhibit 2: Average Growth Metrics for Portfolio Strategy Thematic Baskets
as of August 14, 2009
GROWTH METRICS
EPS Growth 2008E 2009E 2009E 2010E (%) (%) EPS 3 month Revisions 2009 2010 Long Term Growth Rate Sales Growth 2008E 2009E 2009E 2010E (%) (%) Oper. Margin 2009 Profit Margin 2009 Chg. In Profit Margin 08-09 Expd. ROE NTM

Bloomberg Price Ticker 14-Aug-09

MACROECONOMIC BASKETS
International Sales Domestic Sales Western Europe Sales BRICs Sales GSTHINTL GSTHAINT GSTHWEUR GSTHBRIC 96.66 70.00 122.47 127.69 (14)% 0 (10) (8) 15 % 10 14 14 370 % 12 56 359 24 % (3) 13 44 10 % 11 12 14 (7)% (2) (6) (5) 6% 5 10 9 19 % 19 4 19 13 % 11 6 12 (254)bps (71) (70) 8 25 % 22 16 31

USES OF CASH
Dividend Growth GSTHDIVG 82.80 (10)% 15 % 28 % (0)% 8% (7)% 7% 19 % 12 % (69)bps 43 %

FUNDAMENTAL BASKETS
High Operating Leverage Low Operating Leverage Strong Balance Sheet Weak Balance Sheet GSTHOPHI GSTHOPLO GSTHSBAL GSTHWBAL 111.92 107.80 86.91 87.94 (27)% (11) (6) (24) 23 % 7 17 14 493 % 51 34 91 15 % 0 4 33 11 % 10 13 9 (12)% (9) (3) (12) 10 % 5 10 4 10 % 24 23 13 5% 16 16 6 (479)bps (62) (60) (201) 17 % 30 32 14

HEDGE FUND BASKETS
Very-Important-Position (VIP) S&P 500 High Hedge Fund S&P 500 Low Hedge Fund GSTHHVIP GSTHHFHI GSTHHFSL 68.84 68.40 86.50 (4)% 2 (17) 22 % 14 13 28 % 419 57 7% 13 0 11 % 12 8 (1)% (5) (10) 10 % 5 5 28 % 16 16 18 % 8 11 (78)bps (242) (95) 24 % 254 26

VALUATION BASKETS
"Super-value" "Anti-value" GARP GSTHSVLU GSTHAVLU GSTHGARP 73.52 84.45 105.94 (5)% (30) 3 9% 21 14 10 % 422 2 16 % 6 3 11 % 8 13 1% (15) (2) 5% 8 6 22 % 12 24 14 % 7 17 (85)bps (320) 31 18 % 22 44

DEMOGRAPHIC BASKETS
Hispanization Long Hispanization Short S&P 500 S&P 500 Equal-Weighted Average GSTHHPNL GSTHHPNS 77.51 76.48 (1)% (3) 12 % (14) 6% 14 35 % 14 31 % 48 3% 125 (5)% (0) 1% 8 11 % 9 9% 10 (2)% (0) (13)% (8) 1% 5 7% 6 3% 6 11 % 15 1% 2 7% 10 222 bps 285 (88)bps (143) 12 % 13 14 % 30

Source: Compustat, IDC via FactSet and Goldman Sachs Global ECS Research.

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Exhibit 3: Average Valuation Metrics for Portfolio Strategy Thematic Baskets
as of August 14, 2009
VALUATION METRICS
Total Return 1 mo YTD (%) (%) P/E Ratio NTM Cash PEG EV/ Flow Ratio EBITDA Yield NTM LTM LTM Dividend Price / Yield Book (%) LTM GS Debt / Value EV Monitor (%) (avg) Return to Target (a) (%)

Bloomberg Price Ticker 14-Aug-09

MACROECONOMIC BASKETS
International Sales Domestic Sales Western Europe Sales BRICs Sales GSTHINTL GSTHAINT GSTHWEUR GSTHBRIC 96.66 70.00 122.47 127.69 12 % 11 11 15 28 % 10 32 38 17.4x 17.2 16.6 18.0 1.9x 2.0 1.7 1.9 14x 8 13 16 3% 3 5 1 1.9 % 1.9 1.0 1.2 4.4x 3.1 3.1 4.8 22 % 32 26 22 (0.2) 0.0 (0.2) (0.3) 7% 5 8 5

USES OF CASH
Dividend Growth GSTHDIVG 82.80 5% 4% 14.4x 1.7x 7x 6% 3.5 % 6.4x 23 % 0.1 8%

FUNDAMENTAL BASKETS
High Operating Leverage Low Operating Leverage Strong Balance Sheet Weak Balance Sheet GSTHOPHI GSTHOPLO GSTHSBAL GSTHWBAL 111.92 107.80 86.91 87.94 10 20 21 47 22.5x 16.0 18.8 19.8 2.4x 1.6 1.6 3.2 15x 8 11 9 4% 4 6 4 1.4 % 2.2 1.2 2.0 3.3x 4.8 5.6 2.7 27 % 19 3 46 0.1 (0.0) (0.5) 0.1 8% 10 2 3

HEDGE FUND BASKETS
Very-Important-Position (VIP) S&P 500 High Hedge Fund S&P 500 Low Hedge Fund GSTHHVIP GSTHHFHI GSTHHFSL 68.84 68.40 86.50 10 % 20 11 23 % 64 9 18.1x 16.0 15.2 1.9x 1.5 2.5 11x 9 9 4% 5 8 1.6 % 0.3 3.4 3.6x 2.7 4.2 17 % 45 26 (0.2) 0.1 0.3 13 % 3 6

VALUATION BASKETS
"Super-value" "Anti-value" GARP GSTHSVLU GSTHAVLU GSTHGARP 73.52 84.45 105.94 16 % 9 8 25 % 10 24 14.8x 24.4 18.3 1.7x 3.7 1.5 8x 13 10 5% 4 6 1.6 % 2.1 0.7 2.9x 4.3 4.8 21 % 32 15 (1.3) 1.1 (0.6) 3% 0 6

DEMOGRAPHIC BASKETS
Hispanization Long Hispanization Short S&P 500 S&P 500 Equal-Weighted Average GSTHHPNL GSTHHPNS 77.51 76.48 17 % 13 11 % 11 12 % 11 13 % 13 17.4x 17.2 14.9x 17.4 1.9x 2.5 1.6x 2.1 5x 8 7x 9 9% 11 6% 5 1.7 % 1.9 2.1 % 1.9 1.9x 1.7 2.1x 3.1 (13)% 35 29 % 29 (0.4) 0.0 (0.8) (0.1) (0)% (2) 8% 3

(a) Return to analyst price target reflects aggregation of Goldman Sachs-covered stocks in the grouping.
Source: Compustat, IDC via FactSet and Goldman Sachs Global ECS Research.

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1. GSTHINTL – International Sales Basket
Exhibit 4: Stocks leveraged to international growth (Bloomberg <GSTHINTL>) Our international basket, introduced in February 2006 and last updated in November 2008, identifies 50 S&P 500 companies across ten sectors with the best leverage to international growth. The median stock in the basket derives 68% of its revenues from sales outside the US compared with 25% for the median S&P 500 stock and 32% for the S&P 500 in aggregate.
See our report Portfolio Passport: Coming to America (November 5, 2008) for details.

Relative performance
125 120 115 110 105 100 95 90 85 Nov-06 Nov-07 Nov-08 Aug-06 Aug-07 Aug-08 May-06 May-07 May-08 May-09 Aug-09 Nov-09 Feb-06 Feb-07 Feb-08 Feb-09

• •

Constituent attributes Key Criteria: S&P 500 stocks with highest international sales across ten sectors. Growth: International basket expected to grow 2010 sales by 6% with earnings growth of 15%. Sales growth for S&P 500 expected to be faster in 2010 (7%) and forecast earnings growth is faster (35%). Valuation: Basket trades at a premium to S&P 500 with P/E ratio of 17.4x vs. 14.9x, and in-line with our Domestic Sales basket (17.2x). Sector Exposure: Rebalanced sector neutral to the S&P 500. Largest sectors include Info Tech (17%) and Financials (14%). Performance: -3.3% since inception vs. -15.9% for S&P 500 and +27.8% YTD vs. +13.0% for S&P 500.

Relative Performance

•

Long GSTHINTL / Short SPX

•

•
Source: FactSet and Goldman Sachs Global ECS Research.

Exhibit 5: Foreign revenues by region for the S&P 500

Exhibit 6: Sector composition of GSTHINTL Basket
Telecom Services 4%

Region Americas North America United States South America EMEA Europe Western Europe Eastern Europe Asia and Pacific Asia Japan Other S&P 500
Note: Based on 2007 company 10-K filings

Revenues ($ Billions) % of $6,345 6,220 6,030 85 $909 736 285 7 $437 276 83 $1,130 $8,821 72 % 71 68 1 10 % 8 3 0 5% 3 1 13 % 100 %

Utilities 5% Materials 5% Consumer Discretionary 9%

Info Tech 17%

Industrials 10%

Financials 14%

Energy 11% Consumer Staples 13%

Health Care 13%

Note: Revenues for banks and related financials are the sum of net interest revenues and gross fee income.

Source: Company 10-K filings, Compustat and Goldman Sachs Research.

Source: Goldman Sachs Global ECS Research.

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GSTHINTL: International Sales Basket Constituents
Exhibit 7: International Sales Basket Constituents, as of August 14, 2009
Company Ticker Information Technology (17% of the Basket) NVIDIA Corp. NVDA Advanced Micro Devices AMD Texas Instruments TXN QUALCOMM Inc. QCOM Intel Corp. INTC Applied Materials AMAT Altera Corp. ALTR National Semiconductor NSM Basket Median Sector Median Financials (14% of the Basket) AFLAC Inc. Aon Corp. Invesco Ltd. Morgan Stanley XL Capital Citigroup Inc. Marsh & McLennan Basket Median Sector Median Consumer Staples (13% of the Basket) Philip Morris Intl PM Heinz (H.J.) HNZ Avon Products AVP Colgate-Palmolive CL Coca-Cola Co. KO Procter & Gamble PG Estee Lauder EL Basket Median Sector Median Health Care (13% of the Basket) Waters Corporation Schering-Plough IMS Health Inc. Millipore Corp. PerkinElmer Baxter International Inc. Life Technologies Corp Basket Median Sector Median Energy (11% of the Basket) Transocean Ltd. Noble Corp. Schlumberger Ltd. Ensco International Inc. Spectra Energy Corp. Exxon Mobil Corp. Basket Median Sector Median Rating Neutral Sell Neutral Buy Neutral Buy Neutral Sell Non-US Sales 92 % 87 87 87 84 84 80 80 86 % 51 Company Industrials (10% of the Basket) Expeditors Int'l Pall Corp. PACCAR Inc. Flowserve Corp. 3M Company Basket Median Sector Median Consumer Discretionary (9% of the Basket) Harman International Industries Inc. HAR NIKE Inc. NKE McDonald's Corp. MCD Goodyear Tire & Rubber GT Basket Median Sector Median Utilities (5% of the Basket) AES Corp. Integrys Energy Group Basket Median Sector Median Materials (5% of the Basket) International Flav/Frag Newmont Mining Corp. (Hldg. Co.) Basket Median Sector Median Telecommunication Services (4% of the Basket) American Tower Corporation AMT Buy Verizon Communications VZ Buy Basket Median Sector Median Ticker EXPD PLL PCAR FLS MMM Rating NC NC Neutral NC Buy Non-US Sales 80 % 71 64 63 63 64 % 34

AFL AOC IVZ MS XL C MMC

CS Neutral Neutral Neutral Neutral Not Rated Buy

71 % 62 57 57 56 55 51 57 % 4

NC Neutral Buy Neutral

77 % 66 65 62 66 % 20

AES TEG

NC NC

81 % 22 51 % 0

Buy NC Sell Neutral Buy Neutral Sell

100 % 85 78 71 67 60 59 71 % 24

IFF NEM

NC NC

72 % 71 72 % 42

13 % 4 9% 0

WAT SGP RX MIL PKI BAX LIFE

NC Not Rated Neutral NC NC NC NC

68 % 64 63 63 63 57 53 63 % 36

RIG NE SLB ESV SE XOM

Buy Buy Neutral Buy Neutral Neutral

80 % 78 77 75 71 69 76 % 34 International Sales <GSTHINTL> Median S&P 500 Median 68 % 25

Source: Company 10-K filings, Compustat and Goldman Sachs Global ECS Research.

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2. GSTHAINT – Domestic Sales Basket
Exhibit 8: Stocks leveraged to domestic growth (Bloomberg <GSTHAINT>) Our Domestic Sales basket, introduced in October 2007 and rebalanced in November 2008, contains 51 stocks with the highest exposure to domestic revenues. The median stock in the basket derives 100% of its revenues domestically compared with 75% for the median S&P 500 company and 68% for the S&P 500 in aggregate.
See our report Portfolio Passport: Coming to America (November 5, 2008) for details.

Relative performance
115

•
Relative Performance

110

Long GSTHAINT / Short SPX

Constituent attributes Key Criteria: S&P 500 stocks with lowest international sales across ten sectors. Growth: Domestic Sales basket expected to grow 2010 sales by 5% and earnings by 10%. Sales and earnings growth for the S&P 500 expected to be faster in 2010 (7% and 35% respectively). Valuation: The basket trades at a premium multiple of 17.2x vs. 14.9x for the S&P 500. Sector Exposure: Rebalanced sector neutral to the S&P 500. Largest sectors include Info Tech (18%) and Health Care (16%). Performance: -30.0% since inception vs. -31.2% for S&P 500 and +9.7% YTD vs. +13.0% for S&P 500.

•

105

100

• •
Dec-07 Dec-08 Dec-09 Jun-08 Sep-07 Sep-08 Jun-09 Sep-09 Mar-08 Mar-09

95

•
Source: FactSet and Goldman Sachs Global ECS Research.

Exhibit 9: Regional composition of GSTHAINT Basket
Non-U.S. 1%

Exhibit 10: Sector composition of GSTHAINT Basket
Telecom Services Materials 4% 4% Industrials 9% Utilities 4%

Info Tech 18%

Consumer Discretionary 9%

Health Care 16%

Financials 11% Energy 12% Consumer Staples 14%

U.S. 99%
Note: Based on most recent company 10-K filings Note: Revenues for banks and related financials are the sum of net interest revenues and gross fee income.

Source: Company 10-K filings, Compustat and Goldman Sachs Research.

Source: Goldman Sachs Global ECS Research.

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GSTHAINT: Domestic Sales Basket Constituents
Exhibit 11: Domestic Sales Basket Constituents, as of August 14, 2009
Company Ticker Information Technology (18% of the Basket) Intuit, Inc. INTU Paychex Inc. PAYX FIserv Inc. FISV Affiliated Computer ACS Fidelity National Info Services FIS Harris Corp. HRS Convergys Corp. CVG VeriSign Inc. VRSN Harris Stratex Networks Inc. (Cl A) HSTX Basket Median Sector Median Health Care (16% of the Basket) Quest Diagnostics Humana Inc. Laboratory Corp. of America Holdi Medco Health Solutions Inc. United Health Group Inc. WellPoint Inc. Aetna Inc. Basket Median Sector Median Consumer Staples (14% of the Basket) CVS Corp. CVS Dean Foods DF Kroger Co. KR Lorillard LO Altria Group, Inc. MO Reynolds American Inc. RAI Walgreen Co. WAG Basket Median Sector Median Energy (12% of the Basket) Chesapeake Energy Corp. Cabot Oil & Gas Corp. Range Resources Corp Sunoco., Inc. Southwestern Energy XTO Energy Basket Median Sector Median Financials (11% of the Basket) BB&T Corporation Chicago Merc Exch Holdings PNC Bank Corp. Charles Schwab SunTrust Banks U.S. Bancorp Wells Fargo Basket Median Sector Median Rating Neutral Sell Neutral Neutral Not Rated NC NC Neutral NC Non-US Sales 0.0 % 0.0 5.0 8.0 11.2 13.0 13.9 16.6 NA 9.6 % 51.2 Company Industrials (9% of the Basket) Republic Services Inc Burlington Northern Santa Fe C Southwest Airlines Norfolk Southern Corp. Union Pacific Basket Median Sector Median Consumer Discretionary (9% of the Basket) Comcast Corp. CMCSA Kohl's Corp. KSS Lowe's Cos. LOW Target Corp. TGT Basket Median Sector Median Materials (4% of the Basket) Nucor Corp. Vulcan Materials Basket Median Sector Median Telecommunication Services (4% of the Basket) AT & T Inc. T Buy Windstream WIN Neutral Basket Median Sector Median Utilities (4% of the Basket) Exelon Corp. Southern Co. Basket Median Sector Median CHK COG RRC SUN SWN XTO Buy Neutral NC Sell Neutral Neutral 0.0 % 0.0 0.0 0.0 0.0 0.0 0.0 % 33.6 Ticker RSG BNI LUV NSC UNP Rating CS NC NC NC NC Non-US Sales 0.0 % 0.0 0.0 0.0 0.0 0.0 % 33.9

Buy Buy Buy Buy

0.0 % 0.0 0.0 0.0 0.0 % 20.3

DGX HUM LH MHS UNH WLP AET

Sell Neutral Neutral Buy Buy Not Rated Sell

0.0 % 0.0 0.0 0.0 0.0 0.0 0.0 0.0 % 35.8

NUE VMC

Buy NC

0.0 % 0.6 0.3 % 42.0

Buy NC Buy Buy Neutral Neutral Neutral

0.0 % 0.0 0.0 0.0 0.0 0.0 0.0 0.0 % 24.2

0.0 % 0.0 0.0 % 0.0

EXC SO

Buy NC

0.0 % 0.0 0.0 % 0.0

BBT CME PNC SCHW STI USB WFC

Neutral Buy Neutral Neutral Neutral Neutral Neutral

0.0 % 0.0 0.0 0.0 0.0 0.0 0.0 0.0 % 3.6 Domestic Sales <GSTHAINT> Median S&P 500 Median 0.0 % 25.1

Source: Company 10-K filings, Compustat and Goldman Sachs Global ECS Research.

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3. GSTHWEUR – Western Europe Sales Basket
Exhibit 12: Stocks leveraged to growth in Western Europe (Bloomberg <GSTHWEUR>) Our Western Europe Sales basket identifies 50 companies in the Russell 1000 across ten sectors with the highest sales exposure to the Europe, and primarily Western and Northern European countries. The median stock in the basket derives 34% of its revenues from Europe, and 58% of sales from outside the US. In comparison, the median stock in the S&P 500 derives 0% of its revenues from Europe and 25% internationally.
See our report Portfolio Passport: Coming to America (November 5, 2008) for details.

Relative performance
120

Relative Performance
115 110 105 100 95

•

Long GSTHWEUR / Short SPX

Constituent attributes Key Criteria: Russell 1000 stocks with highest revenue exposure to the European countries across ten sectors. Growth: Western Europe Sales basket expected to grow 2010 sales by 10% and earnings by 14%. Sales growth for the S&P 500 expected to be slower in 2010 (7%), but consensus earnings forecast is faster (35%). Valuation: The basket trades at a premium multiple of 16.6x vs. 14.9x for the S&P 500. Sector Exposure: Rebalanced sector neutral to the S&P 500. Largest sectors include Info Tech (16%) and Health Care (15%). Performance: +22.5% since inception vs. +7.7% for S&P 500 and +31.6% YTD vs. +13.0% for S&P 500.

•

•
90 Nov-08 May-09 Dec-08 Aug-09 Feb-09 Apr-09 Jun-09 Jul-09 Sep-09 Jan-09 Mar-09 Oct-09

•

•
Source: FactSet and Goldman Sachs Global ECS Research.

Exhibit 13: Average regional composition of GSTHWEUR

Exhibit 14: Sector composition of GSTHWEUR Basket
Telecom Materials Services 3% Utilities 3% 5% Consumer Discretionary 9% Energy 10% Health Care 15%

Other Other Americas EMEA 2% Asia & 5% Pacific 5% Other 10%

Info Tech 16%

U.S. 40%

Other Europe 12%

Industrials 11%
Explicit Western Europe 25%

Financials 15% Consumer Staples 14%

Source: Company 10-K filings, Compustat and Goldman Sachs Research.

Source: Goldman Sachs Global ECS Research.

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GSTHWEUR: Western Europe Sales Basket Constituents
Exhibit 15: Western Europe Sales Basket Constituents, as of August 14, 2009
Company Ticker Rating Information Technology (16% of the Basket) Tech Data Corp. TECD Sell Mettler-Toledo International Inc. MTD NC Itron Inc. ITRI NC Vishay Intertechnology Inc. VSH NC Atmel Corp. ATML Neutral Novell Inc. NOVL NC Seagate Technology Inc. STX Buy eBay Inc. EBAY Neutral Basket Median Sector Median Financials (15% of the Basket) Lazard Ltd. TransAtlantic Holdings Inc. Morgan Stanley Marsh & McLennan Nyse Euronext Invesco Ltd. Legg Mason Inc Basket Median Sector Median Health Care (15% of the Basket) BioMarin Pharmaceutical Inc. Cooper Cos. Gilead Sciences ResMed Inc. Dentsply International Covance Inc. PerkinElmer Basket Median Sector Median Consumer Staples (14% of the Basket) Philip Morris Intl PM NBTY Inc. NTY Coca-Cola Enterprises CCE Constellation Brands STZ Procter & Gamble PG Kellogg Co. K Sara Lee Corp. SLE Basket Median Sector Median Industrials (11% of the Basket) IHS Inc. Cl A Oceaneering International Inc. Exxon Mobil Corp. National Oilwell Varco Noble Corp. Ensco International Inc. Basket Median Sector Median Sales Non-US Europe 61 % 71 59 83 87 40 69 51 65 % 51 53 % 47 43 38 35 29 29 27 37 % 12 Company Industrials (11% of the Basket) First Solar Inc. Foster Wheeler Ltd. AGCO Corp. SunPower Corp. (Cl A) Manpower Inc. Basket Median Sector Median Consumer Discretionary (9% of the Basket) Virgin Media Inc. VMED NC Wabco Holdings Inc. WBC NC Harman International Industries HAR NC Liberty Global Inc. (Cl A) LBTYA NC Basket Median Sector Median Utilities (5% of the Basket) PPL Corp. AES Corp. Basket Median Sector Median Telecommunication Services (3% of the Basket) Clearwire Corp. (Cl A) CLWR NC Level 3 Communications Inc. LVLT Sell Basket Median Sector Median Materials (3% of the Basket) AptarGroup Inc. Valhi Inc. Basket Median Sector Median Ticker FSLR FWLT AGCO SPWRA MAN Rating NC Neutral Neutral NC NC Sales Non-US Europe 100 % 79 83 55 90 83 % 34 99 % 67 57 50 34 57 % 9

LAZ TRH MS MMC NYX IVZ LM

Buy Neutral Neutral Buy Neutral Neutral Neutral

49 % 48 57 51 34 57 29 49 % 4

43 % 37 36 34 34 33 22 34 % 0

100 % 93 77 100 96 % 20

100 % 76 59 46 67 % 0

PPL AES

NC NC

14 % 81 47 % 0

14 % 9 11 % 0

BMRN COO GILD RMD XRAY CVD PKI

NC NC Neutral NC NC Neutral NC

76 % 49 49 51 58 38 63 51 % 36

57 % 49 43 28 28 25 25 28 % 0

19 % 6 12 % 0

19 % 6 12 % 0

ATR VHI

NC NC

74 % 68 71 % 42

62 % 55 58 % 7

Buy NC Buy Neutral Neutral Neutral Sell

100 % 40 37 46 60 39 48 46 % 24

48 % 34 30 23 22 20 17 23 % 0

IHS OII XOM NOV NE ESV

Neutral NC Neutral Neutral Buy Buy

48 % 51 69 43 78 75 60 % 34

32 % 24 24 22 19 18 23 % 0 Western Europe Sales <GSTHWEUR> Median S&P 500 Median 58 % 25 34 % 0

Source: Company 10-K filings, Compustat and Goldman Sachs Global ECS Research.

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4. GSTHBRIC – BRICs Sales Basket
Exhibit 16: BUY stocks levered to growth in the BRICs (Brazil, Russia, India and China) (Bloomberg <GSTHBRIC>) Our BRICs Sales basket identifies 50 companies in the Russell 1000 across ten sectors with the highest sales exposure to the BRICs countries and regions. South America for Brazil, Western Europe for Russia, and Asia excluding Japan for India and China. The median stock in the basket derives 23% of its revenues from the BRICs regions and 68% of sales from outside the US. In comparison, the median stock in the S&P 500 derives 0% of its revenues from the BRICs regions and 25% internationally. We favor exposure to Brazil, Russia, India and China (BRICs) over developed markets given the significantly higher GDP growth outlook. We believe investors should use this basket to identify stocks with high exposure to emerging market growth. Long/short investors should consider buying this basket against the S&P 500 to gain exposure to higher growth in the BRICs countries versus slower growth in developed regions.
See our report Portfolio Passport: Coming to America (November 5, 2008) for details.

Relative performance
125 120 115 110 105 100 95 90 85 Nov-08 Dec-08 May-09 Aug-09 Feb-09 Apr-09 Jun-09 Jul-09 Sep-09 Jan-09 Mar-09 Oct-09

•
Relative Performance

Long GSTHBRIC / Short SPX

Constituent attributes Key Criteria: Russell 1000 stocks with highest revenue exposure to the BRIC regions across ten sectors. Growth: BRICs Sales basket expected to grow 2010 sales by 9% and earnings by 14%. Consensus forecasts S&P 500 sales growth of 7% in 2010 and earnings growth of 35%. Valuation: The basket trades at a premium multiple of 18.0x vs. 14.9x for the S&P 500. Sector Exposure: Rebalanced sector neutral to the S&P 500. Largest sectors include Info Tech (19%) and Consumer Staples (14%). Performance: +27.7% since inception vs. +7.7% for S&P 500 and +37.9% YTD vs. +13.0% for S&P 500.

•

• •

•

Source: FactSet and Goldman Sachs Global ECS Research.

Exhibit 17: Real GDP Growth (%)

Exhibit 18: Sector composition of GSTHBRIC Basket
Telecom Services 3%

Real GDP Growth (%)
China India Brazil World Russia USA UK Canada Euroland Japan 2008 9.0 6.7 5.1 2.9 5.6 0.4 0.7 0.4 0.6 (0.7) 2009E 9.4 5.8 (0.4) (1.2) (7.5) (2.6) (4.2) (2.3) (3.8) (5.8) 2010E 11.9 7.8 4.0 3.5 3.0 2.0 1.9 1.6 1.2 1.1

Materials Utilities 5% 5% Consumer Discretionary 8%

Info Tech 19%

BRICS
Industrials 8% Consumer Staples 14%

Developed Markets

Financials 11% Energy 13% Health Care 14%

Source: Goldman Sachs Global ECS Research.

Source: Goldman Sachs Global ECS Research.

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GSTHBRIC: BRICs Sales Basket Constituents
Exhibit 19: BRICs Sales Basket Constituents, as of August 14, 2009
Company Ticker Rating Information Technology (19% of the Basket) Sohu.com Inc. SOHU Neutral Genpact Ltd G Neutral Marvell Technology Group Ltd. MRVL Buy Fairchild Semiconductor InternatFCS NC NVIDIA Corp. NVDA Neutral Novellus Systems NVLS Sell Cree Inc. CREE NC Silicon Laboratories Inc. SLAB NC Basket Median Sector Median Consumer Staples (14% of the Basket) Central European Distribution CoCEDC Avon Products AVP Bunge Ltd. BG Corn Products International Inc. CPO Philip Morris Intl PM PepsiAmericas Inc. PAS Coca-Cola Co. KO Basket Median Sector Median Health Care (14% of the Basket) Mylan Laboratories Pfizer, Inc. Waters Corporation Varian Medical Systems Bristol-Myers Squibb Schering-Plough Illumina Inc. Basket Median Sector Median Energy (13% of the Basket) Atwood Oceanics Inc. Global Industries Ltd. Pride International Inc. Helmerich & Payne Inc. Schlumberger Ltd. Dresser-Rand Group Inc. Basket Median Sector Median Financials (11% of the Basket) Citigroup Inc. C Morgan Stanley MS ProLogis PLD Franklin Resources BEN White Mountains Insurance GrouWTM Bank of New York BK Bank of America Corp. BAC Basket Median Sales Non-US BRICs 100 % 100 96 91 92 74 82 87 91 % 51 100 % 81 66 63 62 59 59 59 63 % 0 Company Industrials (8% of the Basket) Copa Holdings S.A. (Cl A) Expeditors Int'l Avery Dennison Corp. Boeing Company Emerson Electric Basket Median Sector Median Consumer Discretionary (8% of the Basket) Central European Media Enterprises LCETV CTC Media Inc. CTCM Las Vegas Sands Corp. LVS Yum! Brands, Inc YUM Basket Median Sector Median Utilities (5% of the Basket) AES Corp. Duke Energy Basket Median Sector Median Materials (5% of the Basket) Newmont Mining Corp. (Hldg. Co.) Mosaic Co. Basket Median Sector Median Telecommunication Services (3% of the Basket) NII Holdings Inc. NIHD Neutral American Tower Corporation AMT Buy Basket Median Sector Median Ticker CPA EXPD AVY BA EMR Rating NC NC NC Neutral Neutral Sales Non-US BRICs 100 % 80 63 41 52 63 % 34 69 % 58 23 23 21 23 % 0

NC Sell NC NC Buy Not Rated Buy

99 % 78 76 70 100 24 67 76 % 24

99 % 52 39 33 30 19 14 33 % 0

Neutral Neutral RS Buy

100 % 100 67 50 83 % 20

100 % 100 67 21 83 % 0

AES DUK

NC Neutral

81 % 9 45 % 0

68 % 8 38 % 0

MYL PFE WAT VAR BMY SGP ILMN

Buy Buy NC NC Neutral Not Rated Neutral

38 % 52 68 51 44 64 43 51 % 36

24 % 19 17 16 11 11 10 16 % 0

NEM MOS

NC Neutral

71 % 65 68 % 42

48 % 35 42 % 0

100 % 13 56 % 0

46 % 4 25 % 0

ATW GLBL PDE HP SLB DRC

Neutral NC Neutral Neutral Neutral Neutral

93 % 69 83 21 77 100 80 % 34

32 % 20 19 15 14 13 17 % 0

Not Rated Neutral Sell Buy NC Buy Buy

55 % 57 43 35 36 32 11 36 %

25 % 21 12 10 6 5 4 10 % BRICs Sales <GSTHBRIC> Median S&P 500 Median 68 % 25 23 % 0

Source: Company 10-K filings, Compustat and Goldman Sachs Global ECS Research.

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United States: Portfolio Strategy: Strategy Baskets

5. GSTHOPHI – High Degree of Operating Leverage
Exhibit 20: BUY firms that will benefit most from improvement in top-line sales (Bloomberg <GSTHOPHI>) Our High Operating Leverage basket (GSTHOPHI), introduced in July 2009, identifies 24 stocks that have high operating leverage relative to their sector. We measure operating leverage through each stock’s degree of operating leverage (DOL), the ratio of revenue after variable operating costs to revenue after variable and fixed operating costs. The median degree of operating leverage for GSTHOPHI is 4.7 versus 1.5 for the GSTHOPLO basket and 2.6 for the S&P 500. The incremental benefit of increased revenue on earnings should be greater for high operating leverage stocks relative to low operating leverage companies which have more stable margins due to higher variable costs. We recommend investors buy this basket as companies with high operating leverage should expand margins and grow EBIT faster than those companies which have more stable margins. Long/Short investors should consider shorting a basket of 24 stocks with low operating leverage <GSTHOPLO>.
See our report Macro to Micro Shift Part II: 2H 2009 Update (July 20, 2009) for details.

Relative performance

•
120 115 110 105 100 95 90 85 Dec-06 Dec-07 Dec-08 Dec-09 Jun-07 Jun-08 Sep-07 Sep-08 Jun-09 Sep-09 Mar-07 Mar-08 Mar-09

Constituent attributes Key Criteria: S&P 500 stocks with high degree of operating leverage relative to their sector. Financials and Utilities are excluded. Growth: Basket expected to grow 2010 sales by 10% and earnings by 23% (versus 5% and 7% respectively for the low operating leverage basket). Consensus forecasts S&P 500 sales growth of 7% in 2010 and earnings growth of 35%. Valuation: Basket trades at a premium to S&P 500 with P/E ratio of 22.5x vs. 14.9x (low operating leverage basket trades at 16.0x). Sector Exposure: Largest sectors include Consumer Staples (17%) and Health Care (16%). Performance: +11.9% since inception vs. +7.0% for S&P 500.

•

Relative Performance

Long GSTHOPHI / Short SPX

•

• •

Source: FactSet and Goldman Sachs Global ECS Research.

Exhibit 21: Degree of Operating Leverage
6 5 Median Operating Leverage 4

Exhibit 22: Sector Composition GSTHOPHI
Telecom Services Materials 4% 9% Consumer Staples 17%

Median Degree of Operating Leverage

High Operating Leverage (GSTHOPHI)

Info Tech 11% Health Care 16%
Low Operating Leverage (GSTHOPLO) Mar-98 Mar-00 Mar-02 Mar-04 Mar-06 Mar-08 Mar-10

3 2

1 0

Industrials 13%

Consumer Discretionary 14%

Energy 16%

Source: Compustat and Goldman Sachs Global ECS Research.

Source: Goldman Sachs Global ECS Research.

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United States: Portfolio Strategy: Strategy Baskets

6. GSTHOPLO – Low Degree of Operating Leverage
Exhibit 23: SELL firms that will benefit less from improvement in top-line sales (Bloomberg <GSTHOPLO>) Our Low Operating Leverage basket (GSTHOPLO), introduced in July 2009, contains 24 stocks with low operating leverage relative to their sector. This basket is designed to be sector neutral to our High Operating Leverage basket. The median degree of operating leverage for GSTHOPHI is 4.7 versus 1.5 for the GSTHOPLO basket and 2.6 for the S&P 500. We recommend investors sell this basket short as a pair-trade with our high operating leverage basket because we believe these companies will grow EBIT slower than companies with high operating leverage.
See our report Macro to Micro Shift Part II: 2H 2009 Update (July 20, 2009) for details.

•
120

Relative Performance
115

Constituent attributes Key Criteria: S&P 500 stocks with low degree of operating leverage relative to their sector. Financials and Utilities are excluded. Growth: Basket expected to grow 2010 sales by 5% and earnings by 7% (versus 10% and 23% respectively for the high operating leverage basket). Consensus forecasts S&P 500 sales growth of 7% in 2010 and earnings growth of 35%. Valuation: Basket trades at a discount to S&P 500 with P/E ratio of 16.0x vs. 14.9x (high operating leverage basket trades at 22.5x). Sector Exposure: Largest sectors include Energy (17%) and Health Care (17%). Performance: +7.8% since inception vs. +7.0% for S&P 500.

Long GSTHOPLO / Short SPX

•

110

105

100

•

95 Dec-06 Dec-07 Dec-08 Dec-09 Jun-07 Jun-08 Sep-07 Sep-08 Jun-09 Sep-09 Mar-07 Mar-08 Mar-09

• •

Source: FactSet and Goldman Sachs Global ECS Research.

Exhibit 24: Performance of GSTHOPHI vs. GSTHOPLO

Exhibit 25: Sector Composition GSTHOPLO
Telecom Services Materials 4% 8% Consumer Discretionary 12% Health Care 17%

110 105 100 95 90

Energy 17%

Relative Performance
85 80 Dec-06 Dec-07 Dec-08 Dec-09 Jun-07 Jun-08 Sep-07 Sep-08 Jun-09 Sep-09 Mar-07 Mar-08 Mar-09

Long GSTHOPHI / Short GSTHOPLO

Info Tech 13%

Industrials 13%

Consumer Staples 16%

Source: Compustat and Goldman Sachs Global ECS Research.

Source: Goldman Sachs Global ECS Research.

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United States: Portfolio Strategy: Strategy Baskets

GSTHOPHI: Basket Constituents
Exhibit 26: High Operating Leverage Basket Constituents, as of August 14, 2009
EARNINGS GS Rating Neutral Buy Buy Degree of Operating Leverage 14.5 7.7 5.7 Beta vs S&P 500 1.6 1.5 1.0 2008E - 2009E 2009E 2010E (%) (%) NM (33) 13 NM 23 28 SALES 2008E - 2009E 2009E 2010E (%) (%) (18)% (7) 18 3% (0) 18 VALUATION P/E Ratio NTM 8x 15 45 GS Value Monitor 0.2 0.8 (1.3)

Company Consumer Discretionary Goodyear Tire & Rubber Macy's Inc Amazon.com Consumer Staples Whole Foods Market Inc. Estee Lauder Safeway Inc. Coca-Cola Enterprises Energy Pioneer Natural Anadarko Petroleum Smith International Inc. Hess Corp. Health Care Coventry Health Care Genzyme Corp. Celgene Corp. Merck & Co. Industrials Eaton Corp. Grainger (W.W.) Inc. Cummins Inc. Information Technology Applied Materials KLA-Tencor Corp. Broadcom Corporation Materials Ecolab Inc. Alcoa Inc Telecommunication Services Verizon Communications

Ticker GT M AMZN

WFMI EL SWY CCE

Neutral Sell Buy Buy

11.7 9.1 7.8 5.9

0.9 1.0 0.8 0.8

9% (18) (19) 14

22 % 21 11 13

2% (4) (7) 1

6% 3 3 3

27x 21 10 12

(0.4) 0.2 (0.6) 0.7

PXD APC SII HES

Buy Neutral Buy Buy

3.6 2.5 2.4 2.2

1.6 1.4 1.7 1.4

NM NM (73) (84)

NM NM 19 NM

(30)% (45) (23) (34)

21 % 42 4 27

40x NM 31 20

NM (0.1) 0.7 0.6

CVH GENZ CELG MRK

Neutral Sell Sell Buy

5.6 3.8 3.4 3.2

1.0 0.7 0.6 0.9

(29)% (34) 32 (6)

20 % 57 30 5

18 % 2 17 (2)

(21)% 21 20 2

11x 17 22 9

(0.4) (1.9) (1.9) (0.6)

ETN GWW CMI

Neutral Buy Buy

4.9 3.8 3.4

1.2 0.9 1.5

(71)% (21) (67)

50 % 8 33

(24)% (11) (31)

0% 4 3

17x 17 28

1.1 1.0 2.2

AMAT KLAC BRCM

Buy Buy Neutral

13.1 11.2 10.8

1.0 1.1 1.1

NM (94) (43)

NM NM 42

(34)% (26) (9)

29 % 13 16

68x NM 22

0.7 0.2 (0.0)

ECL AA

Neutral Neutral

4.6 3.7

0.8 1.7

8% NM

13 % NM

(4)% (36)

6% 8

20x NM

0.5 0.1

VZ

Buy

3.3 6.2 2.6

0.6 1.1 1.1

(0)% (27)% (14)

4% 23 % 14

11 % (12)% (8)

2% 10 % 6

12x 23x 17

0.0 0.1 (0.1)

High Operating Leverage <GSTHOPHI> Average S&P 500 Equal-Weighted Average

Degree of Operating Leverage calculated as (Sales – COGS) / (Sales – COGS – SGA – Depreciation). Based on LTM data. Source: IDC, Compustat, Goldman Sachs Research estimates, and Goldman Sachs Global ECS Research.

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United States: Portfolio Strategy: Strategy Baskets

GSTHOPLO: Basket Constituents
Exhibit 27: Low Operating Leverage Basket Constituents, as of August 14, 2009
EARNINGS GS Rating Neutral Buy Buy Degree of Operating Leverage 2.3 1.6 1.3 Beta vs S&P 500 1.3 0.7 1.4 2008E - 2009E 2009E 2010E (%) (%) (7)% 5 (46) 4% 10 (1) SALES 2008E - 2009E 2009E 2010E (%) (%) 2% (4) (18) 3% 5 0 VALUATION P/E Ratio NTM 15x 14 32 GS Value Monitor (0.9) 0.1 1.3

Company Consumer Discretionary Coach, Inc. McDonald's Corp. Marriott Int'l. Consumer Staples Coca-Cola Co. Brown-Forman Corp. Reynolds American Inc. Lorillard Energy Rowan Cos. Halliburton Co. Chesapeake Energy Corp. Devon Energy Corp. Health Care AmerisourceBergen Corp. Medco Health Solutions Inc. Gilead Sciences CIGNA Corp. Industrials Fluor Corp. Precision Castparts ITT Industries, Inc. Information Technology Linear Technology Corp. Total System Services Mastercard Materials Pactiv Corp. Allegheny Technologies Inc Telecommunication Services Windstream

Ticker COH MCD MAR

KO BF.B RAI LO

Buy Sell Neutral Buy

2.5 2.4 1.7 1.3

0.7 0.7 0.4 0.3

(4)% (2) (6) 14

10 % 6 4 8

(4)% (2) (6) (11)

6% 2 (2) 1

16x 16 10 12

(0.8) 0.2 0.6 0.1

RDC HAL CHK DVN

Neutral Neutral Buy Buy

1.3 1.3 0.7 0.6

1.5 1.4 1.6 1.4

(22)% (58) (32) (66)

(38)% (1) (6) 85

(21)% (23) (33) (45)

(10)% 6 12 29

9x 23 10 14

(1.0) 0.6 (0.5) 0.9

ABC MHS GILD CI

Neutral Buy Neutral Buy

2.4 1.9 1.6 1.3

0.6 0.5 0.5 1.1

9% 16 23 13

11 % 17 12 7

2% 16 25 (2)

3% 6 15 2

12x 18 16 7

0.1 0.3 (2.0) 0.6

FLR PCP ITT

Neutral Neutral Neutral

1.3 1.2 1.2

1.4 1.0 0.8

4% 0 (9)

(8)% 0 7

0% (9) (7)

(1)% (3) 2

15x 12 13

(0.2) (0.4) (0.2)

LLTC TSS MA

Buy Sell Buy

1.8 1.4 1.1

0.8 0.8 0.8

(20)% (15) 21

(4)% 8 18

(12)% (14) 2

3% 3 9

25x 13 17

(0.4) (0.3) (0.9)

PTV ATI

Neutral Neutral

1.9 1.6

1.1 2.0

38 % (96)

(2)% NM

(6)% (43)

4% 16

12x 46

0.4 0.6

WIN

Neutral

1.8 1.6 2.6

0.8 1.0 1.1

(18)% (11)% (14)

(1)% 7% 14

(5)% (9)% (8)

(2)% 5% 6

10x 16x 17

1.5 (0.0) (0.1)

Low Operating Leverage <GSTHOPLO> Average S&P 500 Equal-Weighted Average

Degree of Operating Leverage calculated as (Sales – COGS) / (Sales – COGS – SGA – Depreciation). Based on LTM data. Source: IDC, Compustat, Goldman Sachs Research estimates, and Goldman Sachs Global ECS Research.

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United States: Portfolio Strategy: Strategy Baskets

7. GSTHSBAL – Strong Balance Sheet Basket
Exhibit 28: Stocks with strong balance sheets (Bloomberg <GSTHSBAL>) Our strong balance sheet basket, introduced in February 2008 and rebalanced in December 2008, identifies 34 S&P 500 companies across seven sectors with strong balance sheets. We use the Altman Z-score to measure balance sheet strength. The Z-score is a weighted sum of 5 financial ratios, which was originally developed to forecast bankruptcies. These companies will have the necessary funds on their balance sheets to invest for growth through capex spending or strategic acquisition. See our Equity investing in a tight credit world (February 19, 2008) and 2009 Outlook: Shifting from Macro to Micro (December 8, 2008) reports for details. Relative performance
116

•
Relative Performance

Constituent attributes Key Criteria: S&P 500 stocks with Z-Scores above 6 at rebalance. Financials and Utilities are excluded. Growth: Strong Balance Sheet basket expected to grow earnings at 17% in 2010 vs. 35% for the overall market. Valuation: The basket trades at a premium multiple of 18.8x vs. 14.9x for the S&P 500. Sector Exposure: Largest sectors include Health Care (26%) and Info Tech (26%). Performance: -13.1% since inception vs. -22.7% for S&P 500 and +21.3% YTD vs. +13.0% for S&P 500.

112

Long GSTHSBAL / Short SPX

•

108

104

• •
Nov-08 Aug-08 May-08 May-09 Aug-09 Nov-09 Feb-08 Feb-09

100

96

•

Source: FactSet and Goldman Sachs Global ECS Research.

Exhibit 29: Distribution of Altman Z-scores for S&P 500
45 40 Distribution (% by category) 35 30 25

Exhibit 30: Sector composition of GSTHSBAL Basket
Materials Energy Consumer 3% 2% Staples 8%

Current Z-Score Distribution 35

Health Care 26%

23 21

20 15 10 5 0 <1 1-2 2-4 4-6 6-8 Stronger Balance Sheet >8

Industrials 13%

9 7 6

Weaker Balance Sheet

Altman Z-Score

Consumer Discretionary 22%

Info Tech 26%

Note: Excludes Financials and Utilities. Source: Company 10-K filings, Compustat and Goldman Sachs Research. Source: Goldman Sachs Global ECS Research.

Goldman Sachs Global Economics, Commodities and Strategy Research

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United States: Portfolio Strategy: Strategy Baskets

8. GSTHWBAL – Weak Balance Sheet Basket
Exhibit 31: Stocks with weak balance sheets (Bloomberg <GSTHWBAL>) Our weak balance sheet basket, introduced in February 2008 and rebalanced in December 2008, identifies 62 S&P 500 companies across eight sectors with weak balance sheets. As the credit environment tightened, these companies were less likely to have access to funds necessary to invest in growth. The weak balance sheet basket underperformed the strong balance sheet basket by 15 pp from September 2008 to February 2009. As credit conditions improved, the weak balance sheet basket outperformed the strong balance sheet basket. GSTHWBAL outperformed GSTHSBAL by 38 pp since the beginning of March. See our Equity investing in a tight credit world (February 19, 2008) and 2009 Outlook: Shifting from Macro to Micro
(December 8, 2008) reports for details.

Relative performance
115

•
Relative Performance

110 105 100 95 90 85

Long GSTHWBAL / Short SPX

Constituent attributes Key Criteria: S&P 500 stocks with Z-Scores below 2 at rebalance. Financials and Utilities are excluded. Growth: Weak balance sheet basket expected to grow 2010 earnings at 14% vs. 35% for the overall market and 17% for our strong balance sheet basket. Valuation: The basket trades at a premium to the S&P 500 (19.8x vs. 14.9x) and to our strong balance sheet basket (18.8x). Sector Exposure: Largest sectors include Info Tech (25%) and Consumer Discretionary (16%). Performance: -12.1% since inception vs. -22.7% for S&P 500 and +47.4% YTD vs. +13.0% for S&P 500.

•

•

•
Nov-08 Aug-08 May-08 May-09 Aug-09 Nov-09 Feb-08 Feb-09

•

Source: FactSet and Goldman Sachs Global ECS Research.

Exhibit 32: Performance of GSTHSBAL vs. GSTHWBAL
120

Exhibit 33: Sector composition of GSTHWBAL Basket
Telecom Services 6% Info Tech 25%

Relative Performance
115

Long GSTHSBAL / Short GSTHWBAL

Health Care 8%

110

Materials 9% Consumer Staples 10% Consumer Discretionary 16% Energy 15%

105

100

95 Nov-08 Aug-08 May-08 May-09 Aug-09 Nov-09 Feb-08 Feb-09

Industrials 12%

Source: Goldman Sachs Global ECS Research.

Source: Goldman Sachs Global ECS Research.

Goldman Sachs Global Economics, Commodities and Strategy Research

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United States: Portfolio Strategy: Strategy Baskets

GSTHSBAL: Strong Balance Sheet Basket Constituents
Exhibit 34: Strong Balance Sheet Basket Constituents, as of August 14, 2009
Company Health Care (26% of the Basket) Intuitive Surgical Celgene Corp. Gilead Sciences Bard (C.R.) Inc. Forest Laboratories Stryker Corp. Genzyme Corp. Becton, Dickinson AmerisourceBergen Corp. Express Scripts Basket Median Sector Median Information Technology (26% of the Basket) Google Inc. GOOG Cognizant Tech Solutions CTSH Analog Devices ADI Texas Instruments TXN QLogic Corp. QLGC Adobe Systems ADBE QUALCOMM Inc. QCOM Basket Median Sector Median Consumer Discretionary (22% of the Basket) Coach, Inc. COH Apollo Group APOL Amazon.com AMZN Bed Bath & Beyond BBBY Gap, Inc. GPS Big Lots, Inc. BIG NIKE Inc. NKE Basket Median Sector Median
Source: Compustat, FactSet and Goldman Sachs Global ECS Research.

Ticker ISRG CELG GILD BCR FRX SYK GENZ BDX ABC ESRX

Rating NC Sell Neutral NC Sell NC Sell NC Neutral Not Rated

Z-Score 24.1 17.7 10.0 9.2 8.0 8.1 4.8 5.6 6.5 5.3 8.1 4.2

Company Industrials (13% of the Basket) Fastnal Co. C H Robins Worldwide Inc. Expeditors Int'l Robert Half International Grainger (W.W.) Inc. Basket Median Sector Median

Ticker FAST CHRW EXPD RHI GWW

Rating NC NC NC NC Buy

Z-Score 27.7 14.7 11.0 10.5 7.6 11.0 3.0

Consumer Staples (8% of the Basket) Lorillard LO Sysco Corp. SYY Colgate-Palmolive CL Basket Median Sector Median Materials (3% of the Basket) Sigma-Aldrich Basket Median Sector Median Energy (2% of the Basket) Exxon Mobil Corp. Basket Median Sector Median

Buy Neutral Neutral

7.5 6.7 6.5 6.7 3.6

Buy Buy Buy Neutral Neutral Neutral Buy

27.2 18.3 13.6 12.2 12.6 10.8 8.5 12.6 3.9

SIAL

Neutral

6.9 6.9 2.4

XOM

Neutral

5.4 5.4 2.7

Neutral NC Buy Neutral Neutral NC Neutral

10.6 10.2 8.1 7.8 7.9 7.1 6.9 7.9 3.2

Strong Balance Sheet <GSTHSBAL> Median S&P 500 Median

8.3 3.0

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GSTHWBAL: Weak Balance Sheet Basket Constituents
Exhibit 35: Weak Balance Sheet Basket Constituents, as of August 14, 2009
Company Ticker Information Technology (25% of the Basket) JDS Uniphase Corp JDSU VeriSign Inc. VRSN Ciena Corp. CIEN Advanced Micro Devices AMD LSI Logic LSI Micron Technology MU SanDisk Corp. SNDK Sun Microsystems Inc. JAVA Automatic Data Processing Inc. ADP Xerox Corp. XRX Tyco Electronics Ltd. TEL Motorola Inc. MOT Computer Associates Intl. CA Novell Inc. NOVL Basket Median Sector Median Consumer Discretionary (16% of the Basket) CBS Corp CBS Time Warner Inc. TWX Time Warner Cable TWC Wyndham Worldwide WYN Comcast Corp. CMCSA Interpublic Group IPG Goodyear Tire & Rubber GT Starwood Hotels & Resorts HOT Meredith Corp. MDP Omnicom Group OMC Basket Median Sector Median Energy (15% of the Basket) Chesapeake Energy Corp. El Paso Corp. Spectra Energy Corp. Williams Cos. Anadarko Petroleum XTO Energy Consol Energy Inc. Nabors Industries Ltd. Cabot Oil & Gas Corp. Range Resources Corp Basket Median Sector Median Industrials (12% of the Basket) Ryder System Ingersoll-Rand Plc Southwest Airlines Norfolk Southern Corp. CSX Corp. Tyco International Ltd. Caterpillar Inc. Donnelley (R.R.) & Sons Pitney-Bowes Basket Median Sector Median
Source: Compustat, FactSet and Goldman Sachs Global ECS Research.

Rating NC Neutral NC Sell Buy Sell Buy Neutral Neutral NC NC Neutral Neutral NC

Z-Score (54.7) (9.2) (2.9) (0.4) (0.1) 0.3 1.3 1.5 1.6 1.6 1.6 2.1 2.2 2.2 1.4 3.9

Company Ticker Consumer Staples (10% of the Basket) Constellation Brands STZ Reynolds American Inc. RAI Dr. Pepper Snapple Group DPS Coca-Cola Enterprises CCE Molson Coors Brewing Co. TAP Pepsi Bottling Group PBG Basket Median Sector Median Materials (9% of the Basket) Freeport-McMoran Cp & Gld Alcoa Inc International Paper MeadWestvaco Corporation Basket Median Sector Median Health Care (8% of the Basket) Tenet Healthcare Corp. Boston Scientific Mylan Laboratories Aetna Inc. Basket Median Sector Median

Rating Neutral Neutral Buy Buy Buy Neutral

Z-Score 1.4 1.6 1.7 1.8 1.9 2.0 1.7 3.6

FCX AA IP MWV

Buy Neutral Buy Neutral

0.1 1.3 1.4 1.4 1.3 2.4

Neutral Neutral Sell Neutral Buy NC Neutral Buy NC NC

(0.7) (0.5) 0.8 0.8 0.9 0.9 1.4 1.3 2.1 2.1 0.9 3.2

THC BSX MYL AET

Buy NC Buy Sell

1.1 1.2 1.5 1.6 1.4 4.2

Telecommunication Services (6% of the Basket) Qwest Communications Int Q Sell Sprint Nextel Corp. S Neutral Frontier Communications FTR Neutral Verizon Communications VZ Buy Windstream WIN Neutral Basket Median Sector Median

(1.8) (0.0) 0.8 1.0 1.2 0.8 1.2

CHK EP SE WMB APC XTO CNX NBR COG RRC

Buy Buy Neutral NC Neutral Neutral Neutral Sell Neutral NC

0.5 0.6 0.9 1.1 1.4 1.6 1.9 1.9 2.2 2.4 1.5 2.7

R IR LUV NSC CSX TYC CAT RRD PBI

NC Neutral NC NC NC Neutral Sell NC Neutral

1.4 1.6 1.7 1.7 1.7 1.7 1.7 2.0 2.1 1.7 3.0 Weak Balance Sheet <GSTHWBAL> Median S&P 500 Median 1.4 3.0

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9. GSTHDIVG – Dividend Growth Basket
Exhibit 36: Stocks returning cash to shareholders through dividends (Bloomberg <GSTHDIVG>) Our dividend growth basket, introduced in December 2006 and last rebalanced in March 2009, consists of 34 stocks expected to grow dividends by an average of 8% a year over the next two years (vs. -6% dividend growth for the average S&P 500 stock). Currently, the basket has a 2010 dividend yield of 3.7% (vs. 1.9% for the S&P 500 on average). Investors should use this basket to identify stocks returning cash to shareholders through strong dividend growth and high dividend yields.
See our US Thematic Views: Second-stage risk aversion: Buy stocks with dividend yield + growth (March 8, 2009) report for details.

Relative performance
120

•
Relative Performance

115 110 105 100 95 90 Dec-06

Long GSTHDIVG / Short S&P 500

Constituent attributes Key Criteria: Companies expected to increase dividends over the next two years and a dividend yield above that of the S&P 500 at rebalance. Growth: Slower earnings growth of 15% in 2010 vs. 35% for S&P 500, but faster dividend growth over the next two years (+8% vs. -6%, respectively). Valuation: Trades at a slight discount on P/E (14.4x vs. 14.9x for S&P 500) with higher 2010 dividend yield (3.7% vs. 1.9%, respectively). Sector Exposure: Largest sectors include Consumer Staples (22%) and Industrials (20%). Performance: -17.2% since inception vs. -24.4% for S&P 500 and +4.3% YTD vs. +13.0% for S&P 500.

•

•

Dec-07

Dec-08

Dec-09

Jun-07

Jun-08

Sep-07

Sep-08

Jun-09

Sep-09

Mar-07

Mar-08

Mar-09

• •

Source: FactSet and Goldman Sachs Global ECS Research.

Exhibit 37: Sector composition of GSTHDIVG basket

Telecom Services 5% Info Tech 5% Utilities 5% Materials 7%

Financials 5%

Consumer Staples 22%

Health Care 7%

Industrials 20%

Energy 12%

Consumer Discretionary 12%

Source: Goldman Sachs Global ECS Research.

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GSTHDIVG: Dividend Growth Basket Constituents
Exhibit 38: Dividend Growth Basket Constituents, as of August 14, 2009
EARNINGS Total Return YTD 21 % (6) (4) (3) 10 32 (5) (15) 4 7 7 (0) (10) (13) 24 2 7 (3) (16) (10) 26 15 9 15 6 (5) 8 25 50 (2) 31 13 16 19 4% 13 2008E - 2009E 2009E 2010E (%) (%) 7% 5% (4) 7 (0) 4 (0) 7 (12) 12 14 8 (63) 78 11 11 2 6 (7) 13 13 10 2 2 5 10 (1) (1) (20) (4) (1) 8 5 10 8 8 NM NM 0 0 (15) 14 1 7 2 21 (69) 89 (51) 21 16 7 (17) 10 (9) 8 (11) 16 7 4 (22) 38 11 11 (46) (6) (65) 57 (10)% (14) 15 % 14 VALUATION P/E Ratio NTM 10x 12 12 12 14 12 10 11 13 9 14 17 14 14 25 13 14 14 20 10 12 11 14 10 17 10 13 15 16 13 25 16 30 16 14x 17 2010E Dividend Yield 8.3 % 6.6 6.4 5.7 5.1 5.1 4.1 3.9 3.9 3.8 3.7 3.7 3.6 3.6 3.5 3.4 3.4 3.4 3.4 3.3 3.2 3.2 3.1 3.1 3.1 2.9 2.8 2.7 2.6 2.3 2.3 2.2 2.1 1.9 3.7% 1.9 Annualized 2009-2010 2010E Payout Dividend Cash Return on Ratio CAGR Cash Invested 73 % 9% 8.3 % 77 2 6.6 72 7 6.4 66 2 5.7 63 10 5.1 61 0 5.1 41 5 4.1 41 11 3.9 44 12 3.9 34 7 3.8 48 12 3.7 57 9 3.7 49 11 3.6 47 10 3.6 81 5 3.5 43 7 3.4 46 10 3.4 45 9 3.4 66 3 3.4 30 15 3.3 37 2 3.2 35 15 3.2 44 14 3.1 30 0 3.1 53 9 3.1 25 10 2.9 36 9 2.8 40 2 2.7 39 4 2.6 26 14 2.3 56 4 2.3 35 6 2.2 62 5 2.1 30 6 1.9 48% 35 8% (6) 3.7 % 1.9

Company Name Altria Group, Inc. AT & T Inc. Verizon Communications Scana Corp Philip Morris Intl Lorillard Chevron Corp. Abbott Labs Campbell Soup Northrop Grumman Corp. Clorox Co. Automatic Data Processing Inc. McDonald's Corp. Procter & Gamble Linear Technology Corp. Johnson & Johnson Kellogg Co. General Mills Valero Energy Lockheed Martin Corp. McGraw-Hill Darden Restaurants Wisconsin Energy Marathon Oil Corp. Dover Corp. Raytheon Co. United Technologies International Flav/Frag Air Products & Chemicals Becton, Dickinson T. Rowe Price Group Yum! Brands, Inc Parker-Hannifin Occidental Petroleum

Ticker MO T VZ SCG PM LO CVX ABT CPB NOC CLX ADP MCD PG LLTC JNJ K GIS VLO LMT MHP DRI WEC MRO DOV RTN UTX IFF APD BDX TROW YUM PH OXY

Sector Consumer Staples Telecommunication Services Telecommunication Services Utilities Consumer Staples Consumer Staples Energy Health Care Consumer Staples Industrials Consumer Staples Information Technology Consumer Discretionary Consumer Staples Information Technology Health Care Consumer Staples Consumer Staples Energy Industrials Consumer Discretionary Consumer Discretionary Utilities Energy Industrials Industrials Industrials Materials Materials Health Care Financials Consumer Discretionary Industrials Energy

Rating Neutral Buy Buy Neutral Buy Buy Neutral Buy Neutral Sell Buy Neutral Buy Neutral Buy Neutral Neutral Buy Sell Neutral NC Neutral Neutral Neutral Buy Neutral Buy NC Buy NC Neutral Buy Sell Neutral

Dividend Growth <GSTHDIVG> Average S&P 500 Equal-Weighted Average

Source: Compustat, FirstCall, IDC via FactSet and Goldman Sachs Global ECS Research.

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10. GSTHHVIP – Hedge Fund Very-Important-Position (VIP) Basket
Exhibit 39: Stocks that fundamentally-driven hedge funds seem to favor (Bloomberg <GSTHHVIP>) Our Very-Important-Position (VIP) basket, introduced in November 2007 and last rebalanced in May 2009, consists of 50 companies that “matter most” to hedge funds. The positions in this basket are the stocks that appear most frequently as top ten holdings of hedge funds with 10-200 total holdings. We label these the “stocks that matter most” to hedge funds. See our Hedge Fund Trend Monitor report (May 21, 2009) for details. Relative performance
110

•

105

Constituent attributes Key Criteria: Stocks that appear most frequently among the top ten positions within hedge funds with 10 to 200 distinct equity positions. Rebalanced quarterly. Growth: Earnings growth is expected to be below the S&P 500 in 2010 (22% vs. 35%, respectively). Valuation: P/E ratios trade at a premium to S&P 500 (18.1x vs. 14.9x, respectively). Sector Exposure: Largest sectors include Info Tech (27%) and Energy (15%). Performance: -31.2% since inception vs. -26.1% for S&P 500 and +23.4% YTD vs. +13.0% for S&P 500.

100

• • •
Nov-08 May-09 Aug-09 Nov-09 Feb-09

95

Relative Performance
90

Long GSTHHVIP / Short SPX
Nov-07 Feb-08 May-08 Aug-08

85

•

Source: FactSet and Goldman Sachs Global ECS Research.

Exhibit 40: Sector composition of GSTHHVIP basket
Consumer Telecom Discretionary Services 5% 2% Industrials 5% Financials 7%

Info Tech 27%

Materials 11%

Consumer Staples 12% Health Care 15%

Energy 15%

Source: Goldman Sachs Global ECS Research.

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GSTHHVIP: Hedge Fund VIP Basket Constituents
Exhibit 41: Hedge Fund Very-Important-Position (VIP) Basket Constituents, as of August 14, 2009
Total Return Sector YTD Information Technology 30 % Information Technology 24 Information Technology 95 Information Technology 42 Information Technology 30 Energy 60 Information Technology 50 Consumer Staples (6) Financials 37 Information Technology 22 Consumer Staples 22 Health Care 24 Health Care (7) Consumer Staples 10 Health Care 32 Information Technology 24 Health Care 22 Energy (13) Materials 17 Industrials 29 Information Technology 31 Materials 160 Materials 0 Consumer Staples (13) Health Care 4 Financials 24 Health Care 2 Consumer Staples 32 Utilities (24) Consumer Discretionary (11) Telecommunication Services 10 Health Care 97 Materials 34 Consumer Discretionary 102 Information Technology 43 Materials (7) Financials 13 Energy 41 Energy 75 Consumer Staples 29 Energy 44 Industrials 29 7 Information Technology 33 Information Technology 31 Information Technology 19 Energy 19 Energy (13) Energy (5) 23 % 13 No. of funds with 10 to 200 positions owning stock 31-Mar-09 61 61 55 50 43 44 47 43 45 34 34 27 41 35 31 31 27 28 38 28 36 32 24 23 19 29 26 22 22 22 22 27 19 23 23 27 27 20 26 24 25 18 20 21 23 18 22 25 23 30 No. of funds with stock as Top 10 holding 31-Mar-09 40 35 33 31 31 29 26 25 24 23 22 21 20 20 19 18 18 17 17 17 16 16 16 16 15 15 15 15 14 14 14 14 14 14 13 13 13 13 13 13 13 13 13 12 12 12 12 12 12 18 Average portfolio weight when stock ranks among Top 10 holdings 6% 6 6 8 7 6 7 6 6 7 6 7 7 8 6 6 6 4 6 7 5 6 6 5 3 11 5 6 7 8 5 7 7 7 5 7 9 6 7 5 5 8 7 5 4 5 5 5 7 6% % Equity Cap owned by Hedge Funds 6% 1 3 20 11 5 3 1 2 2 5 6 2 3 10 2 3 0 3 7 1 6 5 1 2 3 1 14 18 2 7 16 15 37 1 3 7 8 2 5 11 30 0 10 1 14 1 2 1 6% 5

Company Ticker QUALCOMM Inc. QCOM Microsoft Corp. MSFT Apple Computer AAPL Mastercard MA Visa Inc. V Transocean Ltd. RIG Google Inc. GOOG Wal-Mart Stores WMT JPMorgan Chase & Co. JPM Hewlett-Packard HPQ CVS Corp. CVS WellPoint Inc. WLP Pfizer, Inc. PFE Philip Morris Intl PM Thermo Electron TMO Oracle Corp. ORCL Teva Pharmaceutical Industries Ltd. (ATEVA Exxon Mobil Corp. XOM Monsanto Co. MON Union Pacific UNP Cisco Systems CSCO Freeport-McMoran Cp & Gld FCX Newmont Mining Corp. (Hldg. Co.) NEM Procter & Gamble PG Baxter International Inc. BAX Bank of America Corp. BAC Johnson & Johnson JNJ Lorillard LO Allegheny Energy AYE Comcast Corp. CMCSA American Tower Corporation AMT Life Technologies Corp LIFE Crown Holdings Inc. CCK priceline.com Inc. PCLN International Bus. Machines IBM Barrick Gold Corp. ABX Annaly Capital Management Inc. NLY Range Resources Corp RRC Petrobras Petroleo Brasileiro PBR Walgreen Co. WAG Petrohawk Energy Corp. HK TransDigm Group Inc. TDG Sapphire Industrials Corp. FYR Electronic Arts ERTS Intel Corp. INTC Akamai Technologies Inc. AKAM Occidental Petroleum OXY ConocoPhillips COP Chevron Corp. CVX

GS Rating Buy Buy Neutral Buy Buy Buy Buy Neutral Buy Buy Buy Not Rated Buy Buy NC Buy Buy Neutral Neutral NC Neutral Buy NC Neutral NC Buy Neutral Buy Neutral Buy Buy NC Neutral Buy Neutral NC NC NC Buy Neutral NC NC NC Buy Neutral Sell Neutral Neutral Neutral

Hedge Fund Very-Important-Position (VIP) <GSTHHVIP> Average S&P 500 Equal-Weighted Average

Source: Lionshare via FactSet, IDC via FactSet and Goldman Sachs Global ECS Research.

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11. GSTHHFHI – S&P 500 High Hedge Fund Concentration Basket
Exhibit 42: S&P 500 companies with the HIGHEST hedge fund ownership (Bloomberg <GSTHHFHI>) Our S&P 500 high hedge fund concentration basket, introduced in February 2007 and last rebalanced in May 2009, consists of 20 companies in the S&P 500 with the highest concentration of hedge fund ownership (ranging from 16% to 59%). Concentrated stocks have typically underperformed the market by 110 bp during corrections and rallied back by 130 bp in the first month of recovery. The high hedge fund concentration basket returned 41% in the first month after the trough (vs. 27% for the S&P 500). See our Hedge Fund Trend Monitor report (May 21, 2009) for details. Relative performance
110 105 100 95 90 85 80 75 70 Nov-07 Nov-08 Aug-07 Aug-08 May-07 May-08 May-09 Aug-09 Nov-09 Feb-07 Feb-08 Feb-09

Relative Performance

•

Long GSTHHFHI / Short SPX

Constituent attributes Key Criteria: S&P 500 companies selected quarterly with the HIGHEST hedge fund ownership as a percentage of market cap (average of 24%). Rebalanced quarterly. Growth: Basket expected to grow earnings 14% in 2010 vs. 35% for the overall market. Low hedge fund stocks expected to grow earnings by 13%. Valuation: Basket trades at a premium to S&P 500 with P/E ratio of 16.0x vs. 14.9x (low hedge fund ownership basket trades at 15.2x). Sector Exposure: Largest sectors include Consumer Discretionary (37%) and Info Tech (19%). Performance: -31.6% since inception vs. -27.1% for S&P 500 and +63.6% YTD vs. +13.0% for S&P 500.

•

•

• •

Source: FactSet and Goldman Sachs Global ECS Research.

Exhibit 43: S&P 500 High Hedge Fund Concentration Basket Constituents
as of August 14, 2009
EARNINGS GS Rating Sell Sell Neutral NC NC Neutral Not Rated Neutral Buy Neutral NC NC Neutral Neutral Neutral NC Neutral NC NC Buy Total Return YTD 98 % 87 3 9 (2) 125 50 158 42 140 87 59 198 (3) (24) (69) 4 97 66 25 64 % 13 % Equity Cap owned by Hedge Funds 59 % 47 46 24 24 22 22 20 20 19 19 19 19 18 18 18 16 16 16 16 24 % 5 Beta vs S&P 500 1.2 1.0 0.7 1.1 2.2 2.1 0.6 1.9 0.8 1.8 1.4 1.5 1.6 1.0 1.1 NM 1.1 0.6 1.0 1.4 1.3 1.1 2008E - 2009E 2009E 2010E (%) (%) 16 % (15)% 3 16 9 12 NM NM (10) 53 NM NM 16 12 (68) 71 21 18 (22) (14) NM NM NM NM NM NM (12) (4) (2) 11 NM NM 38 (2) (3) 15 57 11 (20) 20 2% (14) 14 % 14 VALUATION P/E Ratio NTM 41x 16 11 14 9 35 13 28 17 10 NM NM 8 11 9 NM 12 16 10 10 16x 17 GS Value Monitor 0.2 1.0 0.7 (0.3) (1.2) NM (0.4) 3.3 (0.9) (0.1) (0.7) 0.5 0.2 0.1 (0.4) NM 0.4 NM (0.9) 1.1 0.1 (0.1)

Company Sears Holding Corp. AutoNation, Inc. AutoZone Inc. New York Times Cl. A SLM Corporation AK Steel Fidelity National Info Services Cb Richard Ellis Group Inc Mastercard Wyndham Worldwide Ciena Corp. Harman International Industries Inc. Goodyear Tire & Rubber King Pharmaceuticals Allegheny Energy CIT Group Inc. Pactiv Corp. Life Technologies Corp Convergys Corp. Owens-Illinois Inc

Ticker SHLD AN AZO NYT SLM AKS FIS CBG MA WYN CIEN HAR GT KG AYE CIT PTV LIFE CVG OI

Sector Consumer Discretionary Consumer Discretionary Consumer Discretionary Consumer Discretionary Financials Materials Information Technology Financials Information Technology Consumer Discretionary Information Technology Consumer Discretionary Consumer Discretionary Health Care Utilities Financials Materials Health Care Information Technology Materials

S&P 500 High Hedge Fund Concentration <GSTHHFHI> Average S&P 500 Equal-Weighted Average

Source: Lionshare via FactSet, IDC via FactSet and Goldman Sachs Research.

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12. GSTHHFSL – S&P 500 Low Hedge Fund Concentration Basket
Exhibit 44: S&P 500 companies with the LOWEST hedge fund ownership (Bloomberg <GSTHHFSL>) Our S&P 500 low hedge fund concentration basket, introduced in August 2007 and last rebalanced in May 2009, consists of 20 companies in the S&P 500 with the lowest concentration of hedge fund ownership. This basket matched the market performance from August 2007 through August 2008, but outperformed significantly over September through December 2008. Year-to-date, the S&P 500 low hedge fund concentration basket has underperformed the market by 433 basis points. See our Hedge Fund Trend Monitor report (May 21, 2009) for details. Relative performance
120

•
Relative Performance

115

Long GSTHHFSL / Short SPX

110

Constituent attributes Key Criteria: S&P 500 companies selected quarterly with the LOWEST hedge fund ownership as a percentage of market cap (average of 0.4%). Rebalanced quarterly. Growth: Basket expected to grow earnings at 13% in 2010, below both the S&P 500 (35%) and inline with the high hedge fund ownership stocks (14%). Valuation: Basket trades at a slight premium to S&P 500 with P/E ratio of 15.2x vs. 14.9x. Sector Exposure: Largest sectors include Industrials (26%) and Consumer Staples (19%). Performance: -13.5% since inception vs. -27.3% for S&P 500 and +8.6% YTD vs. +13.0% for S&P 500.

•
105 100

95

• • •

90 Nov-07 Nov-08 Aug-07 Aug-08 May-08 May-09 Aug-09 Nov-09 Feb-08 Feb-09

Source: FactSet and Goldman Sachs Global ECS Research.

Exhibit 45: S&P 500 Low Hedge Fund Concentration Basket Constituents
as of August 14, 2009
EARNINGS GS Rating Neutral Sell Sell NC Buy Buy NC Neutral NC Neutral Neutral NC Buy Neutral NC Buy Neutral Buy Neutral Neutral Total Return YTD 20 % (13) 14 9 (11) 29 15 (13) (4) (11) 9 29 26 33 16 5 4 (4) 9 2 9% 13 % Equity Cap owned by Hedge Funds 0.2 % 0.2 0.3 0.3 0.3 0.3 0.4 0.4 0.4 0.4 0.5 0.5 0.5 0.5 0.5 0.6 0.6 0.6 0.6 0.6 0.4 % 4.6 Beta vs S&P 500 1.1 0.7 0.5 0.6 1.4 1.0 1.0 1.0 0.8 0.9 1.4 1.0 0.9 1.0 0.7 0.9 0.5 0.6 0.7 0.5 0.9 1.1 2008E - 2009E 2009E 2010E (%) (%) (52)% 47 % (2) 6 10 8 5 7 (44) (12) (6) 14 13 6 (54) 43 (1) 4 (20) 9 (42) 40 (89) NM (19) 8 (44) 31 (1) 10 (6) 5 2 6 (0) 4 (2) 5 (1) 8 (17)% (14) 13 % 14 VALUATION P/E Ratio NTM 21x 16 18 13 17 18 16 14 11 9 22 NM 16 19 17 9 13 12 13 13 15x 17 GS Value Monitor 1.3 0.2 0.9 0.4 (0.0) 1.1 1.1 0.4 0.4 (0.9) 1.0 0.5 0.2 1.9 NM (0.6) (0.1) 0.0 (1.7) (0.8) 0.3 (0.1)

Company Illinois Tool Works Brown-Forman Corp. The Hershey Company Xcel Energy Inc General Electric Praxair, Inc. Bemis Company Exxon Mobil Corp. Dominion Resources Pitney-Bowes BB&T Corporation Robert Half International 3M Company PPG Industries Dentsply International Merck & Co. Campbell Soup Verizon Communications Sysco Corp. Johnson & Johnson

Ticker ITW BF.B HSY XEL GE PX BMS XOM D PBI BBT RHI MMM PPG XRAY MRK CPB VZ SYY JNJ

Sector Industrials Consumer Staples Consumer Staples Utilities Industrials Materials Materials Energy Utilities Industrials Financials Industrials Industrials Materials Health Care Health Care Consumer Staples Telecommunication Services Consumer Staples Health Care

S&P 500 Low Hedge Fund Concentration <GSTHHFSL> Average S&P 500 Equal-Weighted Average

Source: Lionshare via FactSet, IDC via FactSet and Goldman Sachs Global ECS Research.

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13. GSTHSVLU and GSTHAVLU: Super-Value & Anti-Value Baskets
Exhibit 46: Value stocks in “super-value” and expensive stocks in “anti-value” (<GSTHSVLU> and <GSTHAVLU>) Our “Super-Value” and “Anti-Value” baskets, introduced in September 2006 and last rebalanced in August 2009, consist of sector-neutral portfolios of the 50 least expensive and the 50 most expensive stocks in the S&P 500, respectively, as of August 14, 2009. We identified the constituents for each basket by screening the S&P 500 using valuation scores based on seven metrics: EV/Sales, EV/EBITDA, Price/Book, Free Cash Flow yield, P/E, PEG, and Implied Growth. One risk to this approach is that stocks may screen as attractively valued due to overestimation of growth prospects. In these cases, valuation reversion is less likely to occur in the near-term. This is of greatest concern in the Financials sector.
See our Seeking Value: “Super-value” and “Anti-value” portfolios (September 11, 2006) and US Equity Views: Still Seeking Value (September 3, 2008) reports for details.

Relative performance
105

Constituent attributes

•
Relative Performance

100 95 90 85 80 75 Dec-06 Dec-07

Long GSTHSVLU / Short GSTHAVLU

Key Criteria: Sector-neutral baskets vs. S&P 500 constructed by selecting companies with highest and lowest GS value scores within each sector. Growth: Expected earnings growth for super-value basket is 9% in 2010. Anti-value stocks expect 21% earnings growth. Valuation: At basket composition, stocks in our “super-value” basket trade at a relative historical valuation discount on seven metrics while stocks in “anti-value” trade at a premium. Sector Exposure: Both baskets constructed to have the same sector composition as the overall market at rebalance. Performance: Long/short trade has returned -10.9% since inception and +15.7% YTD.

•

•

Dec-08

Dec-09

Jun-07

Jun-08

Sep-06

Sep-07

Sep-08

Jun-09

Sep-09

Mar-07

Mar-08

Mar-09

•

•

Source: FactSet and Goldman Sachs Global ECS Research.

Exhibit 47: Our “Super-value” and “Anti-value” baskets are constructed at the company level and are sector neutral. A sector-level example of the valuation methodology appears below.

Goldman Sachs US Valuation Monitor
S&P 500 Health Care Consumer Staples Information Technology Telecommunication Services Utilities Consumer Discretionary Industrials Energy Financials Materials EV/ EV/ Price/ Sales EBITDA Book (1.1) (2.7) (1.2) (1.8) 0.4 (0.2) (1.1) NM 1.9 0.6 0.4 NM 1.9 (0.8) 2.3 (0.2) 1.0 1.5 2.1 1.6 (0.4) NM 8.6 (0.9) (0.7) 0.5 0.3 0.6 1.8 0.3 (0.3) (1.1) 1.4 FCF PEG Yield P/E Ratio (1.2) (0.7) 2.4 (2.5) (0.9) (0.9) (1.5) 1.2 (1.4) (0.9) 2.9 NM 1.6 (2.7) (1.8) (1.3) (1.1) 0.1 0.1 1.1 1.6 2.8 2.2 (1.7) (3.3) (1.2) (0.0) (0.1) (0.2) (0.3) 4.3 1.7 1.0 Implied Growth (1.2) (2.5) (2.8) (2.5) (0.3) 0.3 (0.2) 2.0 1.6 3.5 1.1 Average Score (0.8) (1.9) (1.0) (0.8) (0.4) 0.6 0.6 0.6 1.4 1.7 2.5 INEXPENSIVE

EXPENSIVE

Note: S&P valuation calculated on an absolute basis, sector valuations calculated relative to S&P 500. Valuation score calculated as the average number of standard deviations seven valuation metrics differ from 10-year averages: EV/Sales, EV/EBITDA, P/B, FCF yield, P/E, PEG, and Implied Growth.
Source: Compustat and Goldman Sachs Global ECS Research.

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GSTHSVLU and GSTHAVLU: Super-Value and Anti-Value Baskets
Exhibit 48: “Super-value” and “Anti-value” Basket Constituents
as of August 14, 2009
"Super-value"
GS Company Ticker Rating CONSUMER DISCRETIONARY (Weight = 10%) Comcast Corp. CMCSA Buy Directv Group DTV Not Rated Amazon.com AMZN NC Gannett Co. GCI NC GameStop Corp. GME Neutral CONSUMER STAPLES (Weight = 12%) Sysco Corp. SYY Walgreen Co. WAG McCormick & Co. MKC PepsiCo Inc. PEP Wal-Mart Stores WMT Dean Foods DF ENERGY (Weight = 12%) Rowan Cos. Spectra Energy Corp. National Oilwell Varco Consol Energy Inc. Baker Hughes Chesapeake Energy Corp. FINANCIALS (Weight = 14%) Zions Bancorp Marshall & Ilsley Corp. Citigroup Inc. SunTrust Banks Boston Properties Huntington Bancshares American Int'l. Group HEALTH CARE (Weight = 14%) Stryker Corp. Gilead Sciences Celgene Corp. Genzyme Corp. Eli Lilly & Co. Medtronic Inc. Varian Medical Systems INDUSTRIALS (Weight = 10%) L-3 Communications Holdings Cintas Corporation Jacobs Engineering Group Pitney-Bowes Dun & Bradstreet Corp Total Return YTD (11)% 8 63 5 22 GS Value Monitor (1.4) (1.3) (1.3) (1.2) (1.2)

"Anti-value"
GS Company Ticker Rating CONSUMER DISCRETIONARY (Weight = 10%) Ford Motor F Buy Black & Decker Corp. BDK NC Sherwin-Williams SHW Neutral Johnson Controls JCI Sell Marriott Int'l. MAR Buy CONSUMER STAPLES (Weight = 12%) The Hershey Company HSY Pepsi Bottling Group PBG Coca-Cola Enterprises CCE Altria Group, Inc. MO Reynolds American Inc. RAI Molson Coors Brewing Co. TAP ENERGY (Weight = 12%) Occidental Petroleum Cabot Oil & Gas Corp. Devon Energy Corp. Range Resources Corp Apache Corp. Smith International Inc. FINANCIALS (Weight = 14%) Cb Richard Ellis Group Inc Bank of America Corp. Legg Mason Inc Plum Creek Timber Co. PNC Bank Corp. M&T Bank Corp. U.S. Bancorp HEALTH CARE (Weight = 14%) CIGNA Corp. Aetna Inc. Medco Health Solutions Inc. Quest Diagnostics Express Scripts AmerisourceBergen Corp. King Pharmaceuticals INDUSTRIALS (Weight = 10%) Cummins Inc. Parker-Hannifin Deere & Co. Caterpillar Inc. Rockwell Automation, Inc. Total Return YTD 242 % 3 3 42 24 GS Value Monitor 2.1 1.7 1.6 1.5 1.3

Neutral Neutral NC Not Rated Neutral NC

9% 29 1 5 (6) 2

(1.7) (1.5) (1.0) (0.9) (0.9) (0.9)

Sell Neutral Buy Neutral Neutral Buy

14 % 60 66 21 17 (6)

0.9 0.9 0.7 0.6 0.6 0.6

RDC SE NOV CNX BHI CHK

Neutral Neutral Neutral Neutral Buy Buy

33 % 23 49 42 17 48

(1.0) (1.0) (0.9) (0.8) (0.7) (0.5)

OXY COG DVN RRC APA SII

Neutral Neutral Buy NC Neutral Buy

19 % 35 (4) 41 17 17

1.7 1.1 0.9 0.8 0.8 0.7

ZION MI C STI BXP HBAN AIG

Sell Sell Not Rated Neutral Buy Neutral NC

(30)% (47) (40) (28) 10 (39) (22)

(2.1) (2.1) (1.9) (1.9) (1.6) (1.5) (1.5)

CBG BAC LM PCL PNC MTB USB

Neutral Buy Neutral Neutral Neutral NC Neutral

158 % 24 29 (4) (13) 8 (10)

3.3 2.2 1.9 1.8 1.7 1.6 1.6

SYK GILD CELG GENZ LLY MDT VAR

NC Neutral Sell Sell Sell NC NC

1% (12) (5) (24) (15) 19 5

(2.2) (2.0) (1.9) (1.9) (1.8) (1.8) (1.7)

CI AET MHS DGX ESRX ABC KG

Buy NC Buy Sell Not Rated NC Neutral

72 % (1) 28 4 22 15 (3)

0.6 0.4 0.3 0.3 0.2 0.1 0.1

LLL CTAS JEC PBI DNB

Neutral NC Neutral Neutral NC

3% 18 (9) (11) (2)

(1.7) (1.0) (0.9) (0.9) (0.8)

CMI PH DE CAT ROK

Buy Sell Neutral Sell NC

78 % 16 18 7 28

2.2 1.9 1.8 1.8 1.5

INFORMATION TECHNOLOGY (Weight = 18%) Paychex Inc. PAYX Sell Lexmark Int'l Inc LXK Sell Electronic Arts ERTS Buy Affiliated Computer ACS NC eBay Inc. EBAY Neutral Dell Inc. DELL Buy Automatic Data Processing Inc. ADP NC Symantec Corp. SYMC Buy Akamai Technologies Inc. AKAM NC MATERIALS (Weight = 4%) Titanium Metals TIE Newmont Mining Corp. (Hldg. Co. NEM

10 % (34) 33 (2) 55 39 (0) 13 19

(1.4) (1.3) (1.2) (1.2) (1.1) (1.0) (1.0) (1.0) (0.9)

INFORMATION TECHNOLOGY (Weight = 18%) National Semiconductor NSM Sell Teradata Corp TDC NC Advanced Micro Devices AMD NC Applied Materials AMAT NC Autodesk, Inc. ADSK NC LSI Logic LSI Buy NVIDIA Corp. NVDA Neutral Microchip Technology Inc. MCHP Sell Motorola Inc. MOT Neutral MATERIALS (Weight = 4%) PPG Industries Nucor Corp.

51 % 83 71 36 29 54 66 43 64

1.2 1.0 1.0 0.7 0.6 0.6 0.5 0.5 0.4

NC NC

(8)% 0

(0.5) (0.3)

PPG NUE

Neutral Buy

33 % 3

1.9 1.7

TELECOMMUNICATION SERVICES (Weight = 2%) Century Telephone CTL Neutral UTILITIES (Weight = 4%) Questar Corp. Ameren Corporation

21 %

(1.1)

TELECOMMUNICATION SERVICES (Weight = 2%) Windstream WIN Neutral UTILITIES (Weight = 4%) Edison Int'l Pepco Holdings Inc.

(1)%

1.5

STR AEE

Neutral NC

3% (18) 25 % 13

(0.9) (0.6) (1.3) (0.1)

EIX POM

Neutral NC

2% (17) 10 % 13

0.9 0.6 1.1 (0.1)

"Super-value" <GSTHSVLU> Average S&P 500 Equal-Weighted Average

"Anti-value" <GSTHAVLU> Average S&P 500 Equal-Weighted Average

Source: Compustat, IDC via FactSet and Goldman Sachs Global ECS Research.

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14. GSTHGARP – Growth at-a-Reasonable Price
Exhibit 49: Stocks in sub-sectors that screen best on a combination of growth and value (Bloomberg <GSTHGARP>) In 2004, we introduced our GARP basket that includes S&P 500 stocks from the sub-sectors that screen best on our quantitative growth and valuation approach. The basket is constructed by equally weighting the S&P 500 sub-sectors that screen as GARP and market-cap weighting the stocks within each sub-sector.
See our US Monthly Chartbook report (August 4, 2009) for details on our GARP methodology.

Relative performance
120

Constituent attributes

•
Relative Performance

115

Long GSTHGARP / Short SPX

Key Criteria: Screen the S&P 500 for sub-sectors with high growth and value scores. Rebalanced monthly. Growth: The GARP basket is expected to grow earnings slower than the S&P 500 (14% vs. 35%) in 2010. Valuation: The GARP basket trades at a premium to the S&P 500 (P/E ratio of 18.3x vs. 14.9x). Sector Exposure: Largest sectors include Info Tech (53%) and Consumer Discretionary (18%). Performance: +5.9% since inception vs. -1.6% for S&P 500 and +24.4% YTD vs. +13.0% for S&P 500.

•

110

105

100

• •
Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jul-09 Jan-10

95

90

•

Source: FactSet and Goldman Sachs Global ECS Research.

Exhibit 50: GARP Sub-Sector Constituents, as of August 14, 2009
Equity Mkt Cap ($ bil) $450 363 238 221 201 173 158 96 96 52 47 30 14 10 8 7 6 $2172 Total Return YTD (%) 51 % 23 35 (7) 44 13 (5) 20 3 44 40 48 (11) (11) (6) 33 (23) 24 % 13 EARNINGS 2008E 2009E 2009E 2010E (%) (%) 2% 12 % (1) 7 (13) 18 1 3 4 13 7 11 6 13 7 9 6 10 13 20 (16) 13 (20) 16 36 22 1 7 31 5 1,598 77 9 11 3% 12 14 % 35

Sub-Sectors Computer Hardware Systems Software Communications Equipment Household Products Internet Software & Services Health Care Equipment Biotechnology Data Processing & Outsourced Services Restaurants Computer Storage & Peripherals Application Software Electronic Components Education Services Distillers & Vintners Brewers Home Entertainment Software Specialized Consumer Services GARP <GSTHGARP> S&P 500

Number of Companies 6 8 8 4 5 11 6 10 4 6 6 2 2 2 1 1 1 83 500

Growth Score 6 6 8 6 7 6 8 6 6 6 7 8 8 6 6 6 6 7

Value Score 6 7 9 7 9 8 8 6 5 9 6 9 8 7 5 8 6 7

Source: Compustat, IDC via FactSet and Goldman Sachs Global ECS Research.

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15. GSTHHPNL and GSTHHPNS: Hispanization Baskets
Exhibit 51: Stocks most exposed to Hispanic trends and stocks least exposed to Hispanic trends (Bloomberg <GSTHHPNL> and <GSTHHPNS>) Our Hispanization baskets, both introduced in October 2007, consist of stocks most and least exposed to the growing influence of Hispanics in the US economy. Our investment framework considers three strategic angles to invest in this trend: the “Right States,” the “Right Products” and the “Right Customers.” We identify investment ideas in the housing, retail, health care and financial services industries that represent “hispanization”.
See our US Hispanization: Long/short strategies report (October 23, 2007) for details.

Relative performance
106

Constituent attributes

•
Relative Performance

103

Long GSTHHPNL / Short GSTHHPNS

Key Criteria: Companies selected that have distribution facilities in the “right states”, sell the “right products” and target the “right customers” that fit into our Hispanization theme. Growth: Long basket expected to grow earnings by 6% in 2010 vs. short basket growth of 14%. Valuation: Baskets trade inline on P/E (17.4x for long basket, 17.2x for short basket). Sector Exposure: Baskets were created sector neutral with Financials, Health Care, Consumer Staples and Consumer Discretionary companies. Performance: The long-short trade has generated a return of +102 bps since inception and +143 bps YTD.

100

• • •
Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09

97

94

•

Source: FactSet and Goldman Sachs Global ECS Research.

Exhibit 52: Sector composition of GSTHHPNL basket
Health Care 15%

Exhibit 53: Sector composition of GSTHHPNS basket
Consumer Staples 12%

Financials 34% Consumer Staples 18% Health Care 19%

Consumer Discretionary 36%

Consumer Discretionary 33%

Financials 33%

Source: Goldman Sachs Global ECS Research.

Source: Goldman Sachs Global ECS Research.

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GSTHHPNL: Hispanization Long Basket Constituents
Exhibit 54: Hispanization Long Basket Constituents, as of August 14, 2009
EARNINGS GS Rating Buy Neutral Sell Neutral Sell Neutral NC NC Neutral Neutral Neutral NC Neutral NC Buy Buy Neutral Buy Neutral NC NC Sell NC NC NC NC NC NC NC NC NC NC NC Total Return YTD 77 % 76 11 16 (1) 50 % 71 19 31 4 198 (10) (6) 57 22 % 28 (19) 35 (7) 1% (3) (14) 1 (34) (37) (69) (29) (83) (33) 23 31 1 (75) 12 % 13 2008E 2009E (%) NM NM 8 23 5 26 % NM (32) (1) (23) 9 7 (7) (18) 9% 16 (10) 19 0 15 % 10 NM (17) (18) NM NM (13) NM NM 26 (61) 2 NM (1)% (14) 2009E 2010E (%) NM NM (5) (10) (26) 10 % NM 39 7 (1) 22 NM 9 12 15 % 17 9 (18) 0 12 % 12 NM 15 12 NM NM (19) NM NM 7 NM 4 NM 6% 14 VALUATION P/E Ratio NTM NM NM 16 13 15 15x 57 15 13 7 27 21 19 10 12x 18 10 7 6 9x 13 58 16 15 NM NM 11 NM NM 15 20 17 NM 17x 17 PEG Ratio NTM NM NM 2.8 4.2 2.2 1.0x 3.8 0.5 1.0 1.0 2.1 1.8 1.5 0.7 0.9x 1.0 0.7 0.7 0.5 0.7x 0.8 8.9 1.9 2.1 NM NM NM NM NM 1.5 2.0 2.6 NM 1.9x 2.1

Company HOUSING D. R. Horton Meritage Homes Corp. AvalonBay Communities Camden Property Trust Essex Property Trust Inc. RETAIL Ross Stores Inc. Tween Brands Inc. Wet Seal Inc. (Cl A) Best Buy Co., Inc. Supervalu Inc. Whole Foods Market Inc. Winn-Dixie Stores Inc. Costco Co. Herbalife Ltd. HEALTH CARE CVS Corp. Medco Health Solutions Inc. AMERIGROUP Corp. Health Net Inc. Humana Inc. FINANCIAL SERVICES Cash America International Inc. First Cash Financial Services Inc. City National Corp. Cullen/Frost Bankers Inc. CVB Financial Corp. East West Bancorp Inc. First Bancorp Of Puerto Rico International Bancshares Corp. Pacific Capital Bancorp PacWest Bancorp. Prosperity Bancshares Inc. Sterling Bancshares Inc. Westamerica Bancorp FirstFed Financial Corp.

Ticker DHI MTH AVB CPT ESS ROST TWB WTSLA BBY SVU WFMI WINN COST HLF CVS MHS AGP HNT HUM CSH FCFS CYN CFR CVBF EWBC FBP IBOC PCBC PACW PRSP SBIB WABC FFED

Sector Homebuilding Homebuilding Residential REITs Residential REITs Residential REITs Apparel Retail Apparel Retail Apparel Retail Computer & Electronics Retail Food Retail Food Retail Food Retail Hypermarkets & Super Centers Personal Products Drug Retail Health Care Services Managed Health Care Managed Health Care Managed Health Care Consumer Finance Consumer Finance Regional Banks Regional Banks Regional Banks Regional Banks Regional Banks Regional Banks Regional Banks Regional Banks Regional Banks Regional Banks Regional Banks Thrifts & Mortgage Finance

Hispanization Long <GSTHHPNL> Average S&P 500 Equal-Weighted Average
Source: Compustat, FirstCall, IDC via FactSet and Goldman Sachs Global ECS Research.

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GSTHHPNS: Hispanization Short Basket Constituents
Exhibit 55: Hispanization Short Basket Constituents, as of August 14, 2009
EARNINGS GS Rating Sell Neutral Buy NC NC NC NC Neutral Neutral NC NC Sell Neutral NC Neutral Neutral NC Neutral Buy Sell NC NC NC NC NC NC NC NC NC NC NC NC NC Total Return YTD 27 % 36 (4) 1 21 24 % 18 147 23 17 (9) (4) 3 168 448 % 191 8 12 (11) (4)% (74) (10) (21) (35) (55) (63) (61) 7 (15) (41) (14) (5) (1) 11 % 13 2008E 2009E (%) NM 50 (0) (11) (3) 21 % 17 3 2 8 (2) 34 (15) 1 0% NM (3) (4) (3) 34 % NM (20) NM (58) NM NM NM (39) (14) NM (9) (8) (22) (3)% (14) 2009E 2010E (%) NM 24 (11) (3) (2) 7% 12 30 (4) 6 NM 5 17 12 0% NM (3) 8 11 5% NM 10 NM 48 NM NM NM 64 8 NM 50 18 NM 14 % 14 VALUATION P/E Ratio NTM NM 24 14 13 12 10x 13 30 10 14 13 13 16 12 NM NM 10 10 8 13x NM 19 23 22 NM NM NM 18 21 42 18 26 29 17x 17 PEG Ratio NTM NM 1.9 3.8 5.7 2.8 0.9x 1.3 1.6 1.2 1.4 1.1 NM 1.8 1.2 NM NM 0.8 1.3 0.7 NM NM 4.7 3.5 3.7 NM NM NM 4.5 2.6 5.0 NM 2.6 4.2 2.5x 2.1

Company HOUSING KB Home NVR Inc. Equity Residential Home Properties Inc. Mid-America Apartment Communities Inc. RETAIL Buckle Inc. Cato Corp. (Cl A) J. Crew Group Inc. RadioShack Corp Casey's General Stores Inc. Ruddick Corp. Weis Markets Inc. Sherwin-Williams Cabela's Inc. HEALTH CARE Rite Aid Corp. Brookdale Senior Living Inc. Kindred Healthcare Inc. Lifepoint Hospitals Inc. Centene Corp. FINANCIAL SERVICES Weis Markets Inc. Citizens Republic Bancorp Inc. Commerce Bancshares Inc. Fulton Financial Corp. Old National Bancorp South Financial Group Inc. Sterling Financial Corp. (Washington) Susquehanna Bancshares Inc. TCF Financial Corp. UMB Financial Corp. Wilmington Trust Corp. First Niagara Financial Group Inc. NewAlliance Bancshares Inc. Washington Federal Inc.

Ticker KBH NVR EQR HME MAA BKE CTR JCG RSH CASY RDK WMK SHW CAB RAD BKD KND LPNT CNC WMK CRBC CBSH FULT ONB TSFG STSA SUSQ TCB UMBF WL FNFG NAL WFSL

Sector Homebuilding Homebuilding Residential REITs Residential REITs Residential REITs Apparel Retail Apparel Retail Apparel Retail Computer & Electronics Retail Food Retail Food Retail Food Retail Home Improvement Retail Specialty Stores Drug Retail Health Care Facilities Health Care Facilities Health Care Facilities Managed Health Care Asset Management & Custody Ba Regional Banks Regional Banks Regional Banks Regional Banks Regional Banks Regional Banks Regional Banks Regional Banks Regional Banks Regional Banks Thrifts & Mortgage Finance Thrifts & Mortgage Finance Thrifts & Mortgage Finance

Hispanization Short <GSTHHPNS> Average S&P 500 Equal-Weighted Average
Source: Compustat, IDC via FactSet and Goldman Sachs Global ECS Research.

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Exhibit 56: The Bottom Line
Our key forecasts for the S&P 500 index, recommended sector positioning and top thematic trade ideas; as of August 14, 2009

S&P 500 Index Forecasts
2009 year-end price target S&P 500 EPS estimates GS Portfolio Strategy top-down Growth (% year/year)

1,060
2007A

6% above current price level of 1004 2008A 2009E 2010E

$83 (6)

$50 (40)

$52 5

$75 45

Recommended Sector Positioning
S&P 500 Sector Recommended Positioning GS Overweight / Underweight (a) S&P 500 Weight Total Return YTD GS Alpha YTD

Energy Materials Financials Information Technology Industrials Utilities Consumer Discretionary Telecom Services Health Care Consumer Staples S&P 500

Overweight

300 bp 200 200 100 100 0 0 (200) (300) (400) 0 bp

12% 3 15 18 10 4 9 3% 13 11 100%

2% 32 15 37 6 2 21 (2) 6 4 13%

(19)bp 4 17 (1) 0 13 (14) 6 (28) (7) (29)bp

Neutral

Underweight

Thematic Trade Recommendations
Our best trade ideas: Portfolio Strategy thematic baskets (b) Initiation Date 20-Jul-09 4-May-09 Return 2.9 % 6.1 %

BUY High Operating Leverage (GSTHOPHI); SELL Low Operating Leverage (GSTHOPLO)
See Macro to Micro Shift Part II: 2H 2009 Update (20-Jul-09).

BUY BRICs Sales Basket (GSTHBRIC); SELL S&P 500
See Portfolio Passport: Coming to America (5-Nov-08).

(a) Sector weightings last rebalanced on 20-Jul-09. (b) US Portfolio Strategy baskets may be found on Bloomberg by typing <GSSU5>. The Bloomberg page provides real-time basket performance and current basket constituents. To obtain access to our baskets on Bloomberg, please contact your Goldman Sachs salesperson. The ability to trade these baskets will depend upon market conditions, including liquidity and borrow constraints at the time of trade. Note: The ability to trade these baskets depends on market conditions, including liquidity and borrowing constrain at the time of trade. Source: FactSet and Goldman Sachs Research.

Disclosure
The Equities Division of the firm has previously introduced the basket of securities discussed in this report. The Equity Analyst may have been consulted as to the composition of the basket prior to its launch. However, the views expressed in this research and its timing were not shared with the Equities Division.

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Reg AC
I, David J. Kostin, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

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