GS Where To Invest Now April 2012

The Goldman Sachs Group, Inc.
Goldman Sachs Research
Where to Invest Now

This time is similar
April 2012
David J. Kostin Chief US Equity Strategist Global ECS Research -- US Portfolio Strategy
Goldman, Sachs & Co. 212-902-6781 david.kostin@gs.com
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.
2012 US equity strategy
Its about the multiple, not the earnings
Index: S&P 500 mid-year 2012 target of 1325 and year-end target of 1250
Economy: Stagnant below-trend US economic growth of 2.2% in both 2012 and 2013; low inflation; low interest rates.
Earnings: We forecast operating EPS of $100 in 2012 and $106 in 2013 (bottom-up consensus is $106 and $119).
Valuation: Historical precedent suggests a stable P/E ratio in 2012. DDM supports our 12-month target of 1250.
Money flow: We forecast $500 billion of net inflow into US equities in 2012. Buybacks will offset retail outflow.
Risks to our forecast: Economy, policy, and margins

Economy: We expect recent strength in US data will moderate. We forecast 8.2% jobless rate for year-end 2012.
Policy: Downside risk from election uncertainty in US and Europe. Upside because LTRO reduced Europe financial risk.
Margins: Margins started to decline in 4Q and we expect trend will persist in 2012. Consensus expects margins to rise.
Sectors: Neutral, late-cycle given macro uncertainty

Overweight: Information Technology and Energy;
Underweight: Consumer Discretionary and Health Care.
Themes: Strategies for stagnation in 2012

1. High Quality stocks (Bloomberg ticker: <GSTHQUAL>);
2. High dividend yield and growth (<GSTHDIVG>);
3. High US revenues (<GSTHAINT>) versus international sales (<GSTHINTL>);
4. Cyclical stocks with attractive risk/reward (<GSTHCARR>) Note: The ability to trade baskets will
depend upon market conditions,
including liquidity and borrow
constraints at the time of trade.
Goldman Sachs Global ECS Research 2

S&P 500 YTD rally entirely driven by P/E multiple
expansion since EPS revisions have been negative
P/E multiple expansion drives index higher Negative 2012 sales and earnings revisions
1450 14.0 x
3 Month 2012 Revisions
1400 13.5 x EPS Sales
Information Technology 4.4 % 1.6 %
1350
S&P 500 Level 13.0 x Industrials (0.5) (0.2)
(LHS) 13.1x
S&P 500 (1.4) 1.7
S&P 500 Level
1300 12.5 x Health Care (1.4) 0.4
P/E Ratio
Consumer Discretionary (1.5) (0.4)
1250 12.0 x
Utilities (1.6) NM
Consumer Staples (2.3) 0.2
11.8x
Financials (3.3) NM
1200 11.5 x
Energy (4.1) 7.9
Materials (6.9) (1.1)
1150 11.0 x
Telecommunication Services (9.3) 1.0
Forward P/E
1100 (RHS) 10.5 x
1050 10.0 x
Sep-11
Jan-11
Apr-11
Jan-12
Apr-12
Nov-11
Jul-11
Feb-11
Mar-11
Jun-11
Feb-12
Mar-12
May-11
Aug-11
May-12
Oct-11
Dec-11
Source: Compustat, FirstCall, I/B/E/S, and GS Global ECS Research. As of April 9, 2012.

Recent US GDP per capita growth trend is following
the path typically observed during other stagnations
115
Average indexed
GDP per capita
110
in 93 stagnations
Stagnation starts + 1SD
(GDP = 100)
Japan
Indexed GDP per capita
105 (1992-2003)
100
95
US - 1SD
(2008-2013E)
90
85
Y-2 Y-1 Y0 Y+1 Y+2 Y+3 Y+4 Y+5 Y+6 Y+7
Stagnation year
Source: Compustat, I/B/E/S, FactSet and Goldman Sachs Global ECS Research. As of March 20, 2012.

Path of forward P/E multiple in periods of stagnation
180
Average indexed
forward P/E in 17 +1 SD
160 Stagnation starts
OECD stagnations
(P/E = 100)
140 18.8x
Indexed NTM P/E
120
14.1x
100
11.8x
80
Current US 9.3x
60
Forecast -1 SD
40
Y-2 Y-1 Y0 Y+1 Y+2 Y+3 Y+4 Y+5 Y+6
Stagnation Year
Source: Compustat, I/B/E/S, FactSet and Goldman Sachs Global ECS Research. As of February 29, 2012.

Goldman Sachs forecasts US real GDP growth of
2.2% in both 2012 and 2013
GS Economics and
consensus quarterly GDP forecasts Goldman Sachs US Economics forecasts
% Annual Change
4.0 %
Goldman Sachs 2011 2012E 2013E
3.5 % Economics Real GDP 1.7% 2.2% 2.2%
GDP Growth (qoq annualized %)
Consumer Spending 2.2 2.0 1.9

3.0 % Consensus Total Fixed Investment 6.8 8.0 7.7
Business Fixed Investment 8.8 7.5 7.0
2.5 % Residential Investment (1.3) 10.5 10.6
Federal Government Spending (1.9) (1.7) (2.5)
2.0 % Exports of Goods and Services 6.7 4.9 6.0
Imports of Goods and Services 4.9 4.3 5.8
1.5 % 3.0 Inflation
2.5 2.5 2.5 Producer Price Index 6.0 2.6 2.6
2.3
1.0 % 2.0 2.0 2.0 2.0
1.8 Headline CPI 3.1 2.3 1.7
1.3 Core CPI 1.7 1.9 1.5
0.5 %
Core PCE 1.4 1.6 1.4
0.4
0.0 % Unemployment Rate 9.0 8.3 8.2
Q1A Q2A Q3A Q4A Q1E Q2E Q3E Q4E Q1E Q2E Q3E Q4E Fed Funds Rate 0.1 0.1 0.1
2-year Treasury Rate 0.3 0.5 1.0
10-year Treasury Rate 1.9 2.5 3.3
2011 2012 2013
Source: Bloomberg and Goldman Sachs Global ECS Research. As of April 4, 2012.

Real income and consumption growth decelerating
We expect jobless rate to remain above 8% through 2013
Real income and consumption growth below 2% Unemployment and underemployment rates
20%
10
18%
8 Personal 16%
Consumption
6
Year/year Change (%)
14%
4 Underemployment Forecasts
12%
2 10% Goldman
Sachs
0 8%
Consensus
(2) 6%
(4) Personal Income 4%

Unemployment
(6) 2%
Jan-95
Jan-97
Jan-99
Jan-01
Jan-03
Jan-05
Jan-07
Jan-09
Jan-11
Jan-13
Jan-15
Dec-90
Dec-92
Dec-94
Dec-96
Dec-98
Dec-00
Dec-02
Dec-04
Dec-06
Dec-08
Dec-10
Dec-12
Dec-14
Source: Bureau of Economic Analysis, Goldman Sachs Global ECS Research. As of March 30, 2012.

Positive macro developments: Strong employment
data and surge in global central bank liquidity
Jobless claims now below 2001-07 average Central bank balance sheet expansion
700 170
March 2009 Peak:
Balance Sheet Assets, Local Curr.

160
ECB
650 652,500
Initial Jobless Claims (Thousands)
600 150
Initial Jobless Claims
550 (4-Week Moving Average) 140
500
SNB
130 BoE
450
120
400
110
US Fed
350
2001-2007 355,000
Average: 360,000 100 BoJ
300
90 Central Bank Balance Sheets
250 (Local Currency, June 2011 = 100)
200 80
Feb-12
Mar-12
Apr-12
Jun-11
Jul-11
Aug-11
Sep-11
Nov-11
Dec-11
Jan-12
Oct-11
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Source: Bureau of Economic Analysis, Federal Reserve Board, European Central Bank, Bank of Japan, Swiss National Bank, and Goldman Sachs Global ECS Research. As of March 23, 2012.

Negative micro developments:
Consensus 2012 EPS estimates continue to fall
US macro data surprises and consensus EPS Revisions to consensus 2012 EPS by quarter
114 100 103

US MAP Score YTD Change in 2012 S&P 500 Consensus EPS by Quarter
113 102
Consensus 2012E EPS
112 50 101 4QE +1%

111
US MAP Score
100
Indexed
110 0
99 3QE -1% Full-Year
109
98
2012E -2%
108 (50)
Positive Data 2QE -2%
107 97
Surprises
106 (100) 1QE -4%
Consensus 2012 96
105 S&P 500 EPS
95
30-Jan
31-Mar
30-Dec
29-Feb
30-Apr
104 (150)
Dec-10
Aug-11
Sep-11
Nov-11
Dec-11
Apr-11
Oct-11
Apr-12
Feb-11
Mar-11
Feb-12
Mar-12
Jul-11
May-11
Jan-11
Jun-11
Jan-12
Source: Compustat, FirstCall, and Goldman Sachs Global ECS Research. As of March, 30, 2012 and as of April 4, 2012, respectively.

Consensus estimates for year/year growth in
1Q 2012 sales, margins, and earnings
1QE 2012 Bottom-up Consensus

EPS Sales Margin
$/Share Growth $/Share Growth Level Change
Financials $4.19 18 % NM NM NM NM
Industrials 2.36 13 $30 9% 7.8 % 31 bp
Info Tech 4.60 12 28 10 16.4 16
Health Care 3.16 8 32 3 9.8 45
Energy 3.35 4 44 14 7.6 (78)
Utilities 0.82 0 NM NM NM NM
Consumer Staples 2.11 (2) 37 5 5.8 (43)
Consumer Discretionary 1.91 (9) 33 4 5.8 (85)
Materials 0.85 (13) 10 6 8.2 (172)
Telecom Services 0.48 (16) 9 4 5.6 (140)
S&P 500 $23.85 6%
ex. Financials and Utilities 18.83 4 $223 8% 8.5 % (32)bp
Apple (AAPL) $1.00 53 % $4 47 % 25.2 % 93 bp
Excluding Apple
S&P 500 $22.85 4%
ex. Financials and Utilities 17.83 2 $219 7% 8.1 % (42)bp
Info Tech 3.60 4 24 6 15.0 (33)
Source: Compustat, I/B/E/S, FirstCall, and Goldman Sachs Global ECS Research. As of April 4, 2012.

Consensus 2012 EPS growth by quarter
2012E Earnings Per Share Growth Annual

1QE 2QE 3QE 4QE 2012E
Financials 18 15 2 21 13
Industrials 13 8 13 17 12
Information Technology 12 13 25 19 18
Health Care 8 3 12 16 9
S&P 500 6 5 7 20 9
Energy 4 (6) (12) 28 1
Utilities 0 (5) (0) 8 1
Consumer Staples (2) 4 7 8 5
Consumer Discretionary (9) (0) 9 16 5
Materials (13) (6) 9 117 11
Telecom Services (16) 2 (7) 38 2
S&P 500 (ex-Financials) 3 3 8 20 9
Source: FirstCall, FactSet, and Goldman Sachs Global ECS Research. As of April 4, 2012.

2007 Peak vs. today, Part I: S&P 500 index change
Earnings at new high, but EPS growth rate falls and P/E contracts
S&P 500 Earnings, EPS growth rate, valuation, and index return
Change
9-Oct-07 21-Mar-12 Level Percent
Earnings
EPS (LTM) $91 $97 $5 6%
EPS (NTM) 103 106 3 3
Expected Growth 12.5 % 9.4 % (3.1)pp (25)%
Valuation (NTM P/E) 15.2 X 13.2 X (2.0)X (13)%
S&P 500 Index 1565 1403 (162) (10)%
Source: IDC, Compustat, FirstCall, I/B/E/S and Goldman Sachs Global ECS Research. As of March 21, 2012.

2007 Peak vs. today, Part II: Drivers of index change
Reasons S&P 500 trades 162 points (10%) below Oct 2007 peak
Negative: EPS collapse in Financials and P/E compression in Industrials and Health Care
Positive: EPS rise in Information Technology offset by fall in expected growth and P/E compression
9-Oct-07 21-Mar-12 Change in S&P 500 index points
LTM Expected P/E LTM Expected P/E EPS Expected Forward
Sector EPS Growth NTM EPS Growth NTM Level Growth P/E Total
Information Technology $9.85 24 % 20.8 X $19.42 10 % 13.5 X 129 (6) (89) 34
Consumer Discretionary 6.55 19 18.2 8.79 10 15.9 36 (7) (18) 10
Consumer Staples 7.56 10 17.6 9.14 7 15.4 24 (3) (19) 3
Materials 2.96 10 15.2 3.49 4 13.5 7 (2) (6) (1)
Utilities 3.10 10 16.0 3.55 (6) 14.1 6 (8) (6) (8)
Telecom Services 3.30 12 15.5 2.18 (4) 19.1 (21) (9) 13 (17)
Energy 13.58 10 12.1 14.34 2 11.0 8 (12) (16) (20)
Health Care 9.96 15 16.1 12.54 2 12.2 32 (14) (44) (27)
Industrials 9.74 11 16.6 9.89 10 13.7 2 (1) (32) (31)
Financials 24.81 8 11.8 13.56 32 11.8 (132) 26 0 (106)
S&P 500 $91.42 13 % 15.2 X $96.89 9% 13.2 X 90 (36) (217) (162)
LTM EPS uses analyst forecast methodology which differs from Standard & Poors due to varying definitions of operating earnings and other accounting differences.
Source: Compustat, IDC via Factset, I/B/E/S, FirstCall and Goldman Sachs Global ECS Research. As of March 21, 2012.

2007 Peak vs. today, Part III: Sector changes
Percent change in earnings, EPS growth, P/E multiple, price
Change in Earnings level Change in forward Earnings Growth rate

Info Tech 97% Financials 280%
Cons Discretionary 34% Industrials (8)%
Health Care 26% S&P 500 (25)%
Consumer Staples 21% Consumer Staples (37)%
Materials 18% Cons Discretionary (50)%
Utilities 14% Materials (58)%
S&P 500 6% Information Tech (58)%
Energy 6% Energy (84)%
Industrials 1% Health Care (85)%
Telecom Services (34)% Telecom Services (129)%
Financials (45)% Utilities (160)%
(80) (60) (40) (20) 0 20 40 60 80 100 120 (250) (200) (150) (100) (50) 0 50 100 150 200 250 300 350
Change in S&P 500 LTM EPS Change in NTM EPS Growth
Change in P/E multiple (NTM) Change in index Price

Telecom Services 23%
Information Tech 13%
Financials 0%
Cons Discretionary 7%
Energy (9)%
Consumer Staples 2%
Materials (11)%
Materials (1)%
Utilities (12)%
S&P 500 (10)%
Consumer Staples (13)%
Energy (11)%
Cons Discretionary (13)%
Utilities (14)%
S&P 500 (13)%
Health Care (15)%
Industrials (18)%
Industrials (17)%
Health Care (24)%
Telecom Services (30)%
Information Tech (35)%
Financials (33)%
(50) (40) (30) (20) (10) 0 10 20 30
(40) (30) (20) (10) 0 10 20
Change in P/E (NTM)
Change in S&P 500 Price
Source: Goldman Sachs Global ECS Research. As of March 21, 2012.
2007 Peak vs. today, Part IV: Decomposition of change
Level and change in earnings, EPS growth, P/E multiple, and price
A B C D E
Contribution to Expected NTM Contribution to Index Level
LEVEL S&P 500 LTM EPS EPS Growth P/E (NTM) S&P 500 Price Attribution
Sector 9-Oct-07 21-Mar-12 9-Oct-07 21-Mar-12 9-Oct-07 21-Mar-12 9-Oct-07 21-Mar-12 9-Oct-07 21-Mar-12
Information Technology $9.85 $19.42 24 % 10 % 20.8 X 13.5 X 253 287 16.2 % 20.5 %
Consumer Discretionary 6.55 8.79 19 10 18.2 15.9 143 153 9.1 10.9
Consumer Staples 7.56 9.14 10 7 17.6 15.4 147 150 9.4 10.7
Materials 2.96 3.49 10 4 15.2 13.5 50 49 3.2 3.5
Utilities 3.10 3.55 10 (6) 16.0 14.1 55 47 3.5 3.3
Telecom Services 3.30 2.18 12 (4) 15.5 19.1 57 40 3.7 2.9
Energy 13.58 14.34 10 2 12.1 11.0 181 161 11.6 11.5
Health Care 9.96 12.54 15 2 16.1 12.2 184 157 11.7 11.2
Industrials 9.74 9.89 11 10 16.6 13.7 180 149 11.5 10.6
Financials 24.81 13.56 8 32 11.8 11.8 316 211 20.2 15.0
S&P 500 $91.42 $96.89 13 % 9% 15.2 X 13.2 X 1565 1403 100.0 % 100.0 %
CHANGE
Sector Points % Growth % Multiple % Points % Weight %

Information Technology $9.57 97 % (14)pp (58)% (7.3)X (35)% 34 13 % 431 bp 27 %
Consumer Discretionary 2.24 34 (10) (50) (2.4) (13) 10 7 179 20
Consumer Staples 1.58 21 (4) (37) (2.3) (13) 3 2 127 14
Materials 0.52 18 (6) (58) (1.7) (11) (1) (1) 31 10
Utilities 0.45 14 (16) (160) (1.9) (12) (8) (14) (15) (4)
Telecom Services (1.12) (34) (16) (129) 3.6 23 (17) (30) (81) (22)
Energy 0.76 6 (8) (84) (1.1) (9) (20) (11) (11) (1)
Health Care 2.58 26 (12) (85) (3.8) (24) (27) (15) (55) (5)
Industrials 0.14 1 (1) (8) (2.9) (18) (31) (17) (86) (7)
Financials (11.25) (45) 23 280 0.0 0 (106) (33) (521) (26)
S&P 500 $5.48 6% (3)pp (25)% (2.0) (13)% (162) (10)% 0 bp 0%

2007 Peak vs. today, Part V: Company level analysis
The non-trivial impact of Apple and General Electric
AAPL drives change in the Info Tech sector

Apple Inc. (AAPL) $0.35 26 % 37.6 X $3.62 22 % 14.1 X 46 10 (10) 46
Info Tech ex. AAPL 9.50 24 20.1 15.80 7 13.3 84 (15) (80) (11)
Information Technology $9.85 24 % 20.8 X $19.42 10 % 13.5 X 129 (6) (89) 34
AAPL as % of Info Tech 4% 19 % 134 %
GE drives change in the Industrials sector

General Electric Co. (GE) $2.44 14 % 17.5 X $1.60 13 % 12.9 X (11) (2) (13) (25)
Industrials ex. GE 7.31 10 16.2 8.28 10 13.8 13 1 (20) (5)
Industrials $9.74 11 % 16.6 X $9.89 10 % 13.7 X 2 (1) (32) (31)
GE as % of Industrials 25 % 16 % 83 %
Source: IDC, Compustat, FirstCall, I/B/E/S and Goldman Sachs Global ECS Research. As of March 21, 2012.

4Q 2011 S&P 500 earnings, sales and margins
Info Tech EPS growth is 18% with AAPL, but 1% without
4Q 2011
EPS Sales Margin
Growth Growth Level Change
Financials 21 % NM NM NM
Info Tech 18 15 % 17.7 % 39 bp
Utilities 10 NM NM NM
Energy 9 21 7.0 (74)
Consumer Discretionary 6 7 6.7 (6)
Industrials 4 7 8.0 (23)
Consumer Staples 4 6 6.3 (16)
Health Care 2 7 8.4 (37)
Telecom Services (27) 5 4.2 (184)
Materials (42) 8 4.0 (350)
S&P 500 8%
ex. Financials and Utilities 6 10 % 8.4 % (35)bp
Apple (AAPL) 119 % 74 % 28.1 % 574 bp
Excluding Apple
S&P 500 5%
ex. Financials and Utilities 2 9% 7.9 % (61)bp
Info Tech excluding AAPL 1 8 15.6 (107)
Source: Compustat, I/B/E/S, FirstCall, and Goldman Sachs Global ECS Research. As of March 30, 2012.

S&P 500 sales, margins and EPS forecasts
Goldman Sachs top-down vs. consensus bottom-up
Top-down Bottom-Up
GS Forecast Consensus
2011 2012E 2013E 2012E 2013E
S&P 500 ex-Financials and Utilities
Sales Per Share $877 $905 $949 $931 $981
Y/Y growth 12 % 3% 5% 6% 5%
Y/Y growth ex- Energy 9 2 4 5 5
Profit Margin 8.8% 8.7% 8.9% 9.1% 9.7%

EPS $78 $79 $84 $85 $95
Y/Y growth 16% 2% 7% 9% 13%
Utilities EPS $3 $3 $3 $3 $3
Financials EPS 16 17 18 18 20
S&P 500 EPS $96 $100 $106 $106 $119
Y/Y growth 15% 3% 7% 9% 13%
Source: Compustat, FirstCall, I/B/E/S, and Goldman Sachs Global ECS Research. As of March 28, 2012.

Decomposition of S&P 500 earnings estimates
We forecast operating EPS of $100 in 2012 & $106 in 2013
Contribution to EPS Annual earnings growth rates

GS Top-Down EPS Bottom-Up GS Top-Down Bottom-Up
2011A 2012E 2013E 2012E 2013E 2012E 2013E 2012E 2013E
Information Technology $18 $19 $21 $21 $24 7% 8% 18 % 13 %
Energy 14 15 17 15 16 8 12 2 12
Health Care 12 12 13 13 14 5 3 9 8
Consumer Staples 9 9 10 10 11 2 3 4 10
Industrials 10 9 10 11 12 (3) 3 12 14
Consumer Discretionary 9 8 9 10 11 (11) 5 5 17
Utilities 3 3 3 3 3 0 6 1 2
Telecom Services 2 3 3 2 3 23 5 2 19
Materials 3 2 3 4 4 (23) 22 11 20
S&P 500 ex-Financials 81 82 88 88 99 2 7 9 12
Financials 16 17 18 18 20 12 5 14 14
S&P 500 Operating EPS $96 $100 $106 $106 $119 3% 7% 10 % 13 %
Source: Compustat, FirstCall, and Goldman Sachs Global ECS Research. As of April 4, 2012.

Goldman Sachs 2012 and 2013 US GDP forecasts
relative to consensus expectations
Distribution of 2012 US GDP forecasts Distribution of 2013 US GDP forecasts

18
2012 US GDP Forecasts 9
16 n=55 2013 US GDP Forecasts
8
n=51
14
7
Consensus Consensus
Number of Forecasts
12 2.6%
Number of Forecasts
2.3%
6
10
Goldman 5
Sachs Goldman
8 2.2% 4 Sachs
2.2%
6 3
4 2
2 1
0 0
1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2
2012 GDP Growth (%) 2013 GDP Growth (%)
Source: Blue Chip Economic Indicators and Goldman Sachs Global ECS Research. Consensus estimates as of March 10, 2012.

100 bp shift in GDP equals roughly $5 per share in
S&P 500 EPS for both 2012 and 2013
2012 2013
Sensitivity of 2012 EPS forecast to Sensitivity of 2013 EPS forecast to

US GDP growth (100bp $5) US GDP growth (100bp $5)
2012 US GDP 2013 US GDP
(0.9)% 0.1 % 1.1 % 2.1 % 3.1 % 4.1 % (1.0)% 0.0 % 1.0 % 2.2 % 3.0 % 4.0 %
(3)% (2)% (1)% 0% 1% 2% (3)% (2)% (1)% 0% 1% 2%
3.2 % 85 91 96 102 107 113 5.0 % 111 118 125 132 139 147
2012 US GDP
2011 US GDP
2.7 85 90 96 101 106 112 4.0 104 111 117 124 130 137
2.2 84 90 95 100 106 111 3.0 97 103 109 115 121 127
1.7 84 89 94 100 105 110 2.0 90 96 101 106 112 117
1.2 83 89 94 99 104 110 1.0 83 88 93 98 103 107
0.7 83 88 93 98 104 109 0.0 76 80 85 89 93 98
0.2 82 88 93 98 103 108 (1.0) 69 73 77 81 85 88
Source: Goldman Sachs Global ECS Research. As of February 27, 2012.

S&P 500 net profit margins have been flat since 2Q
We forecast stability; consensus expects further expansion
1979 2013E 2006 2013E

11% 11%
Bottom-up Consensus
Bottom-up Consensus Forecast 2013E
10% Forecast 9.7%
10% 3Q 2011 2012E
8.9% 9.1%
9% 8.8 2Q 2011 4QE 2011
S&P 500 Net Profit Margin 8.9% 8.8%
9%
8% 1Q 2011
8.9%
8.7% 8.7%
7% 8%
Goldman Sachs
Forecast
6%
5.9 7%
5% Goldman Sachs
Portfolio
4.7 6%
4% Strategy S&P 500 Net Profit Margin
3.9 (trailing four quarters)
3% 5%
Dec-79
Dec-84
Dec-89
Dec-94
Dec-99
Dec-04
Dec-09
Dec-14
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Source: Compustat, First Call, I/B/E/S and Goldman Sachs Global ECS Research. As of March 20, 2012.

50 bp shift in margins equals roughly $4 per share
in S&P 500 EPS for both 2012 and 2013
2012 2013
Sensitivity of 2012 EPS forecast to Sensitivity of 2013 EPS forecast to
sales growth and margin (50bp $4) sales growth and margin (50bp $4)
7.2 % 7.7 % 8.2 % 8.7 % 9.2 % 9.7 % 10.2 % 7.4 % 7.9 % 8.4 % 8.9 % 9.4 % 9.9 % 10.4 %
6.7 % 88 93 97 102 107 111 116 7.9 % 94 99 104 109 114 118 123
2012 Sales Growth
2013 Sales Growth

5.7 87 92 97 101 106 111 115 6.9 93 98 103 108 113 118 122
4.7 87 91 96 101 105 110 114 5.9 93 98 102 107 112 117 121
3.7 86 91 95 100 104 109 113 4.9 92 97 102 106 111 116 121
2.7 86 90 95 99 103 108 112 3.9 91 96 101 105 110 115 120
1.7 85 89 94 98 103 107 112 2.9 91 95 100 105 109 114 119
0.7 84 89 93 97 102 106 111 1.9 90 95 99 104 108 113 118
(0.3) 84 88 92 97 101 105 110 0.9 89 94 99 103 108 112 117
Source: Compustat and Goldman Sachs Global ECS Research. As of December 30, 2011.
Decomposition of S&P 500 net margins by sector
and gap between Goldman Sachs and consensus
Net Margin Annual Margin Expansion

GS Top-Down Margin Bottom-up 2012E GS less
2011 2012E 2013E 2012E 2013E GS Bottom-up Consensus
Telecom Services 6.2 % 7.5 % 7.7 % 6.1 % 7.1 % 126 bp (10)bp 136 bp
Energy 8.6 8.4 8.8 7.9 8.5 (21) 35 45
Consumer Staples 6.3 6.3 6.3 6.4 6.7 1 (2) (1)
Health Care 9.1 9.4 9.4 9.8 10.3 29 0 (44)
Industrials 8.1 7.7 7.7 8.4 9.1 (35) (1) (73)
Consumer Discretionary 6.9 6.1 6.2 6.9 7.5 (80) 11 (78)
Information Technology 16.6 16.9 17.0 17.8 18.6 32 10 (92)
Materials 8.0 6.4 7.3 8.5 9.5 (165) 86 (212)
S&P 500 Net Margin 8.8 % 8.7 % 8.9 % 9.1 % 9.7 % (12)bp 17 bp (36)bp

Information Technology margin is elevated relative
to history and S&P 500; AAPL is one key reason
Information Technology net profit margin Info Tech margins with and without AAPL
20%
22% 2013E
Net Profit Margin Bottom-Up Consensus 2013E 18.6%
20% Forecast S&P 500 Info Tech
18.6% 18%
18% Net Profit Margin
17.0% (trailing four quarters)
16% Information 17.4%
Technology 16%
14%
12% excluding
9.7% 14% AAPL
10%
8% 8.9%
12%
6% Bottom-up
4% Goldman Sachs Consensus
S&P 500 Portfolio Strategy 10% Forecast
2%
Forecast
0%
Dec-79
Dec-82
Dec-85
Dec-88
Dec-91
Dec-94
Dec-97
Dec-00
Dec-03
Dec-06
Dec-09
Dec-12
Dec-15
Dec-18
8%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Source: Compustat, I/B/E/S, FirstCall and Goldman Sachs Global ECS Research. As of March 21, 2012.

Valuation: Six approaches to S&P 500 fair value
Implied S&P 500 Fair Value

P/E Price
Methodology Multiple Level Upside
Fed Model 15.5X 1640 16 %

Macroeconomic Regression 12.9 1370 (3)
Uncertainty-based Model 12.4 1320 (6)
US Portfolio Strategy DDM 12.8 1275 (9)
Cyclically Adjusted P/E 16.7 1270 (10)
Price/Book
ROE and Price/Book 2.3X 1410 0%
Average 1380 (2)%

S&P 500 currently trades near the 80-year average
cyclically-adjusted operating P/E ratio of 16.7x
50
45
Cyclically Adjusted
S&P 500 P/E Ratio
40
(10-year average trailing EPS)
35
Cyclically-Adjusted P/E
Current
(30-Mar)
30
As Reported
22.6x
25
As Reported
80 year Operating
20 avg = 17.6x 18.6x
15
Operating 80
10 year
avg = 16.7x 9-Mar-09
9.9x
5 16-Aug-82
1932 6.2x
5.1x
0
1929
1934
1939
1944
1949
1954
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
Note: Traditional Shiller series uses As Reported EPS. GS series uses Operating EPS when available (1988 Present).
Source: Compustat, Robert Shiller and Goldman Sachs Global ECS Research. As of March 30, 2012.

Decline in volatility has raised our uncertainty-based
implied P/E ratio by 2 multiple points since November
24
22
S&P 500 forward P/E estimate
20
18
16
14
12.4X
12
95% confidence range

10
Predicted P/E
8
Jan-92
Jan-94
Jan-96
Jan-98
Jan-00
Jan-02
Jan-04
Jan-06
Jan-08
Jan-10
Jan-12
Jan-14

Four components of our uncertainty-based P/E model
Consensus earnings uncertainty Equity volatility premium

18 1.0
16 Equity volatility premium
Equity volatility premium (%)

0.8
Equity analyst uncertainty
EPS standard deviation / Mean
14 0.6
12
20-year 0.4
10 average
20-year
0.2 average
8
6 0.0
4 (0.2)
2 (0.4)
Jan-92
Jan-94
Jan-96
Jan-98
Jan-00
Jan-02
Jan-04
Jan-06
Jan-08
Jan-10
Jan-12
Jan-14
0
Jan-91
Jan-93
Jan-95
Jan-97
Jan-99
Jan-01
Jan-03
Jan-05
Jan-07
Jan-09
Jan-11
Jan-13
Yield curve slope Inflation expectations
120% 6
Yield curve slope as % of 10-yr
100% University of Michigan survey
UM 1 year ahead inflation (%)

5 of inflation expectations
Normalized yield
80% curve slope
4 20-year
60% average
3
40%
2
20%
0% 1
(20%) 0
Jan-91
Jan-93
Jan-95
Jan-97
Jan-99
Jan-01
Jan-03
Jan-05
Jan-07
Jan-09
Jan-11
Jan-13
Jan-91
Jan-93
Jan-95
Jan-97
Jan-99
Jan-01
Jan-03
Jan-05
Jan-07
Jan-09
Jan-11
Jan-13
Source: Goldman Sachs Global ECS Research. As of February 29, 2012.
S&P 500 return on equity (ROE) will reach 17.5% in 2012
and 17.3% in 2013 (20% and 21% on ex-Financials basis)
S&P 500 Return on Equity (ROE) 20.0%

20
2002 - 2007
1987 - 1989 17.8% 2012E
18 1975 - 1979 17.5%
16.9% 2011
16.4% 16.9% 2013E
17.3%
S&P 500 ROE (%)
16 1983 - 1984 1991 - 1997

14.5%
14
12 12.5%
12.0% 11.9%
11.6% 11.5%
10
9.9%
8
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
Source: Compustat and Goldman Sachs Global ECS Research. As of March 23, 2012.

S&P 500 Price/Book (P/B) multiple has generally
remained stable during ROE expansion cycles
6.0
S&P 500
5.5 ROE Expansion Cycles
5.0
4.5
4.0
Price to book (P/B, x)
1991 - 1997
3.5
2002 - 2007
3.0
2.5 2009 - Present

2012 Year-end
2.0 Forecast
ROE: 17.5%
1.5 1987 - 1989 P/B: 2.3x
1983 - 1984
1.0 1975 - 1979
0.5
0.0
8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Return on Equity (ROE, %)

Margin, turnover, and taxes contributed to rising
S&P 500 ROE in 2011 while leverage detracted
150
Factor contribution to change in
Contribution to change in 2011 ROE
S&P 500 2011 ROE

100
75 bp
57 bp 59 bp
50
0 bp
0
139 bp
(50)
(54)bp
(100)
Margin Turnover Borrow Leverage Taxes Total

Decomposition of S&P 500 ROE, 1975-2011
Margin drives 2/3 of ROE cycle
Turnover Leverage
120% 7
S&P 500 Trailing 4-Quarter
6
100% Turnover
5
Leverage
Turnover
80%
4
60%
3
S&P 500 Trailing 4-Quarter
40% 2 Leverage
20% 1
1975
1980
1985
1990
1995
2000
2005
2010
2015
1975
1980
1985
1990
1995
2000
2005
2010
2015
Borrow cost Tax rate

2.5% 60%
55% S&P 500 Trailing 4-Quarter

2.0%
50% Tax Rate
Borrow Cost
Tax Rate
45%
1.5%
40%
35%
1.0% S&P 500 Trailing 4-Quarter 30%
Borrow Cost
25%
0.5%
20%
1975
1980
1985
1990
1995
2000
2005
2010
2015
1975
1980
1985
1990
1995
2000
2005
2010
2015
Source: Goldman Sachs Global ECS Research. As of April 4, 2012.
We expect S&P 500 ROE in 2012 will equal 17.5%
while ROE ex-Financials will exceed 20%
ROE ex-Financials and for Financials sector alone ROE vs. Book Value for S&P 500 sectors
25% 30%
Financials large share of S&P 500
S&P 500 (ex-Financials) book value magnifies the impact of
20% Info Tech
25% the sector's low ROE on the index
Staples
Discretionary
15% GS
Return on Equity (LTM)
Forecast Materials Health Care

20%
4Q 2011 Sector ROE

Energy
Industrials
10%
15% S&P 500 ROE = 16.9%
5%
Utilities
10% Financials
Telecom Services
0%
Return on Equity Financials 5%

(5%)
(LTM)
(10%) 0%
Dec-75
Dec-79
Dec-83
Dec-87
Dec-91
Dec-95
Dec-99
Dec-03
Dec-07
Dec-11
Dec-15
0% 5% 10% 15% 20% 25% 30% 35%

% of S&P Book Value

Distribution of 2012 and 2013 ROE estimates for
Financials firms covered by Goldman Sachs analysts
2012E 2013E
45% 45%
% S&P 500 Financials' Book Value
% S&P 500 Financials' Book Value

40% Book value- Book value-
40%
weighted weighted
35% average 2012E 35% average 2013E
ROE = 8.4% ROE = 9.0%
30% 30%
25% 25%
20% 20%
15% 15%
10% 10%
5%
5%
0%
0%
<0 2 4 6 8 10 12 14 16 18 20 22 24 25+
<0 2 4 6 8 10 12 14 16 18 20 22 24 25+
2012E ROE (%)
2013E ROE (%)

We expect S&P 500 firms will allocate 61% of cash
usage for growth and 39% for return to shareholders
2500
Buybacks
Dividends
2000 Cash Acquisitions
Research & Development
Capital Expenditures 23%

Cash Uses ($ billions)
34% 22%
1500
30% 23% 24%
21% 17%
17%
29% 14% 17% 13% 15%
1000 14%
22% 16% 14%
15% 13% 21% 14%
15% 14% 13% 14%
17% 11% 12% 16% 15%
17% 16% 20% 14%
12% 14% 12% 12%
12% 19% 15% 14% 16% 13% 12% 12%
11% 10% 13%
17% 12% 11% 15%
500 16% 14% 12% 11%
13% 16% 13%
14% 13% 16%
35% 35% 36% 34%
46% 30% 27% 38% 36%
41% 41% 41% 43% 40% 34% 31%
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013E
Use of cash:
Invest for Growth 71% 71% 74% 75% 70% 68% 58% 56% 56% 52% 60% 67% 62% 59% 61% 59%
(capex + R&D + M&A)
Return to Investors 29% 29% 26% 25% 30% 32% 42% 44% 44% 48% 40% 33% 38% 41% 39% 41%
(buybacks + dividends)
Source: Compustat and Goldman Sachs Global ECS Research.

US Portfolio Strategy S&P 500 capital usage forecasts
$ Billions 2007 2008 2009 2010 2011 2012E 2013E

Capital Usage
Capital Expenditures $516 $566 $446 $487 $544 $589 $607
Research & Development 188 195 169 180 189 205 217
Cash Acquisitions 268 203 160 185 225 248 273
Share Buybacks 639 367 146 290 400 380 437
Dividends 268 266 239 225 255 293 327
Total Capital Usage $1,879 $1,596 $1,159 $1,366 $1,614 $1,714 $1,861
% of Year/Year Growth
Capital Usage
Capital Expenditures 5% 10 % (21)% 9% 12 % 8% 3%
Research & Development 7 3 (13) 7 5 8 6
Cash Acquisitions 10 (24) (21) 15 22 10 10
Share Buybacks 29 (43) (60) 98 38 (5) 15
Dividends 16 (1) (10) (6) 13 15 12
Total Capital Usage 15 % (15)% (27)% 18 % 18 % 6% 9%
TARP repayments of approximately $125 bil in 2009, $50 bil 2010, and $50 bill in 2011 excluded from share buyback totals

Goldman Sachs vs. swap market dividend forecasts
Largest gap occurs during 2018-2021

$55
2021E
$50 Goldman Sachs $49.89
Top-Down Dividend
$45 Current 2021E
S&P 500 dividends per share
$45.94
$40
2012E
$30.38
$35 Swap Market
Jul-08 2011 Current
$30 $29.04 $26.42
2012E
$30.10
$25
$20 Feb-10
$21.71 S&P 500 dividends per share
$15
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023

S&P 500 dividends per share, 2011-2021E
S&P 500 dividends per share
Goldman Sachs
Top-down Forecast Dividend Swap Level Upside /
Level Yield (a) Growth Level Yield (a) Growth (Downside)
2011A $26.43 2.1 % 16.3 % $26.43 2.1 % 16.3 %
2012 30.38 2.2 14.9 30.10 2.1 13.9 1%
2013 33.91 2.4 11.6 32.90 2.3 9.3 3
2014 35.80 2.5 5.6 34.25 2.4 4.1 5
2015 37.80 2.7 5.6 35.76 2.5 4.4 6
2016 39.80 2.8 5.3 37.29 2.7 4.3 7
2017 41.80 3.0 5.0 38.90 2.8 4.3 7
2018 43.81 3.1 4.8 40.55 2.9 4.2 8
2019 45.82 3.3 4.6 42.27 3.0 4.3 8
2020 47.85 3.4 4.4 44.07 3.1 4.2 9
2021 49.89 3.5 4.3 45.94 3.3 4.3 9
2011-2021E CAGR 6.6 % 5.7 %

S&P 500 sector dividend concentration and growth
Sector Concentration Dividend Growth

2011 2012E 2013E 2011 2012E 2013E
Info Tech 10 % 12 % 15 % 23 % 48 % 32 %
Financials 11 13 13 43 29 15
Materials 4 4 4 27 15 10
Consumer Discretionary 8 8 8 21 14 14
Health Care 13 12 12 15 11 6
Industrials 12 12 12 21 11 10
Consumer Staples 16 15 15 8 8 8
Energy 11 10 10 9 7 7
Utilities 7 7 6 5 4 3
Telecom Services 8 7 6 5 1 2
S&P 500 $26.43 $30.38 $33.91 16 % 15 % 12 %

AAPL will be #2 dividend payer in S&P 500 in 2013
2013E Bloomberg
Market Dividend Estimates
Cap Index S&P 500 DPS
Ticker Sector Weight Points Contribution Growth
T Telecom Services 1.5% $1.18 3.5% 2%
AAPL Info Tech 4.4 1.09 3.2 100
XOM Energy 3.2 1.09 3.2 6
GE Industrials 1.7 0.96 2.8 16
PFE Health Care 1.3 0.80 2.4 9
CVX Energy 1.7 0.80 2.4 9
JNJ Health Care 1.4 0.80 2.3 8
MSFT Info Tech 1.9 0.78 2.3 14
PG Consumer Staples 1.5 0.74 2.2 9
PM Consumer Staples 1.2 0.66 2.0 8
Top 10 2013 DPS Payers 19.7% $8.91 26.2% 15 %

S&P 500 100.0 34.00 100.0 12

We forecast $500 billion of net equity inflow in 2012
Buybacks and cash M&A will dominate the inflows
Ownership of the US Equity market since 1945 We forecast $500 billion of inflow
100%
2012E Net
Share of
90%
US Corporate Equity Market
Equity Inflow
Category ($ billions)
80% Households 33%
Retail / Individual $ (125)
70% 54% Retirement Funds 75
60% Mutual Funds 20% Institutional Investors
Hedge Funds -
50%
Foreign Investors 100
40% Pension Funds 8% ETFs 100
Government 17%
30% Retirement Funds 8% Corporations
International Investors 14% Repurchases and M&A 500
20% New Equity Issuance (150)
Hedge Funds 3%
10%
TOTAL $ 500
ETFs 4%
Other 9%
0%
1945
1948
1951
1954
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
Source: Federal Reserve, Lionshare via FactSet, and Goldman Sachs Global ECS Research. As of December 31, 2011.

Passive equity assets (index mutual funds and ETFs)
continue to gain market share relative to active
Passive equity assets account for 27% of total Since 2008: Passive inflows, active outflows
250
8,000 30%
1995-2011 CAGR : 200
7,000 Passive +24% 25% 150
Active +8%
Passive % of Total AUM

6,000
100
20%
5,000
AUM ($ bn)
50
Flows ($ bn)
4,000 15% 0
3,000 (50)
10%
2,000 (100)
5%
1,000 (150)
0 0% (200) Active Equity

1995 1997 1999 2001 2003 2005 2007 2009 2011
(250) Passive Equity
Active (lef t axis) Passive (lef t axis) Passive % of total (right axis)
(300)
2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Strategic Insight (Simfund) and Goldman Sachs Global ECS Research. As of December 2011.

Mutual fund and ETF inflows/(outflows) among
equities, bonds and money markets
Equity Bond Money Market
50
35 39
40
32
30
20
20
10 6
$ billions
(10)
(1) (3)
(20)
(30)
(40) Jan 2012 Feb 2012 Mar 2012 (36)

(50) (47)
(60)
Equity Bond Money Market
Mutual Funds & ETFs Mutual Funds & ETFs Mutual Funds
Source: ICI and Goldman Sachs Global ECS Research. As of March 29, 2012.

ETFs receiving significant inflows YTD ($33 billion)
while equity mutual funds saw outflows ($7 billion)
Net equity inflows/(outflows)

25
20
20
ETFs Mutual Funds
15
10
8
5
5
0
(0) (1)
(5)
(6)
(10)
Jan 2012 Feb 2012 Mar 2012

Mutual fund flows and net equity purchases
Fund flows and net equity purchases Mutual fund liquidity ratio
5 7%
2 Liquidity Ratio 7.3%
0
6%
(2) Five-Year
One-Year
(5) (3) Range
Range
$ billions
(10) 5%
(12)
(15) (14)
Fund Flows 4%
Current
(20)
(20) Net Equity
Purchases 3%
(25) All Equity Domestic World
Dec 2011 Jan 2012 Feb 2012 Equity Equity

Surge in institutional equity futures positions since
October while levered funds have covered shorts
Institutions increasing positions Hedge Funds reducing short exposure

120 0
Leveraged Fund Net US Equity Position ($B)

110
Institution Net US Equity Position ($B)
100 (10) Leveraged Funds

90
Institutions (20)
80
70
(30)
60
50
(40)
40
30
(50)
20
10 (60)
Jul-10
Jul-11
May-10
May-11
May-12
Jan-10
Jan-11
Jan-12
Sep-10
Nov-10
Sep-11
Nov-11
Mar-10
Mar-11
Mar-12
Jul-10
Jul-11
May-10
May-11
May-12
Jan-10
Jan-11
Jan-12
Sep-10
Nov-10
Sep-11
Nov-11
Mar-10
Mar-11
Mar-12
Source: Commodities and Futures Trading Corporation and Goldman Sachs Global ECS Research. As of March 27, 2012.

US Portfolio Strategy sector weightings
Our recommended sector weightings Tech and Financials account for 60% of YTD return
Contribution
Sector Weightings Initial YTD to S&P 500
Weight Return Return Share
Total Goldman Sachs Current GS
Return Recommended S&P 500 Overweight / Info Tech 19 % 20.7 % 394 bp 37 %
Sectors YTD Sector Weightings Weight Underweight Financials 13 18.1 244 23
Energy 3% 11 % 200 bp Consumer Discr. 11 14.7 157 15
Overweight
Information Technology 21 21 200
Industrials 11 8.2 87 8
Consumer Staples 6 11 0 Health Care 12 7.4 87 8
Financials 20 15 0 Consumer Staples 12 4.5 52 5
Industrials 10 11 0 Materials 4 8.0 28 3
Neutral
Materials 10 3 0
Energy 12 0.7 9 1
Telecom Services 3 3 0
Telecom Services 3 1.3 4 0
Utilities (1) 3 0
Utilities 4 (2.6) (10) (1)
Consumer Discretionary 15 11 (200)
Underweight S&P 500 100 % 10.6 % 1052 bp 100 %
Health Care 9 11 (200)
S&P 500 12 % 100 % 0 bp Apple (AAPL) 3% 57.1 % 189 bp 18 %
(a) Sector weightings last rebalanced on January 30, 2012.

Source: FactSet and Goldman Sachs Global ECS Research. As of April 9, 2012.

Sector absolute valuation and historical relative
valuation versus S&P 500
Aggregate valuation metrics for S&P 500 and sectors Standard deviation vs. 10-year history (Z-Score)
EV/ EV/ Price/ FCF PEG Median

EV/ EV/ Price/ FCF PEG NTM Sales EBITDA Book Yield P/E Ratio Z-Score
Sales EBITDA Book Yield Ratio P/E
S&P 500 (0.6) (1.3) (0.8) (0.6) (1.0) (0.8) (0.8)
S&P 500 1.4x 7.7x 2.3x 5.9 % 1.1x 13.2x
Health Care (1.1) (0.8) (0.9) (1.2) (0.5) 2.4 (0.8)
Telecommunication Services 1.8 5.9 1.9 9.0 1.6 18.8
Information Technology 0.8 (0.7) 1.3 (1.1) (1.1) (0.8) (0.8)
Consumer Discretionary 1.4 7.9 3.3 5.9 1.1 15.8
Energy (1.6) (1.0) (0.8) 0.8 0.1 (0.6) (0.7)
Consumer Staples 1.3 9.9 3.7 5.3 1.8 15.6
Financials NM NM (1.3) NM (0.1) (0.1) (0.1)
Utilities NM 7.7 1.6 1.1 4.6 14.3
Materials 0.4 (0.2) 0.5 0.5 (0.1) (0.4) 0.1
Industrials 1.6 9.7 2.8 6.4 1.0 13.5
Industrials (1.2) 0.5 1.2 0.8 (0.1) (1.3) 0.2
Information Technology 2.3 8.8 3.9 7.2 1.0 13.5
Materials 1.4 7.4 2.6 5.3 1.1 13.3 Consumer Discretionary 2.7 0.8 2.4 (0.2) 0.1 (0.4) 0.5
Health Care 1.3 7.7 2.7 8.0 1.6 12.5 Telecommunication Services (0.4) 1.3 0.6 0.4 3.2 (0.9) 0.5
Financials NM NM 1.1 NM 1.1 11.5 Utilities NM 0.9 0.2 0.1 1.1 3.6 0.9
Energy 0.9 4.8 2.0 2.6 0.8 10.7 Consumer Staples 2.0 2.3 (0.1) 0.6 0.9 2.0 1.5
S&P valuation calculated on an absolute basis, sector valuations calculated relative to S&P 500.
Based on bottom-up consensus valuation, as of April 4, 2012.
Source: Compustat, FirstCall via FactSet, and Goldman Sachs Global ECS Research.

Rising Cyclical equities and oil prices reflect better
activity; we forecast $120 average Brent in 2012
Cyclical equities have tracked crude oil Distribution of 2012 Brent crude forecasts
130 120 25
Brent 115
2012 Brent Crude Oil
120 Crude (33 estimates)
110 20 Consensus
Cyclicals performance
110 $110
Brent crude ($)
105
% of forecasts
100 15
100
95
90
90 10
Goldman
80 Cyclicals Basket 85 Sachs
(<GSSBCYCL>) $120
80 5
70
75
60 70
0
Feb-11
Feb-12
May-10
May-11
May-12
Aug-10
Nov-10
Aug-11
Nov-11
100
102
104
106
108
110
112
114
116
118
120
122
124
126
92
94
96
98
Source: Factset, Bloomberg, and Goldman Sachs Global ECS Research. As of March 23, 2012.

Elevated oil prices suggest Energy will outperform
while Consumer Discretionary lags the S&P 500
Energy outperforms, Discretionary lags in oil shocks Energy equities attractively valued relative to oil
15 %
Sep-73 Dec-78 Jun-90 Dec-98 Dec-04 Jan-07 May-10
Oil Convergence
Sector Nov-75 Feb-81 Oct-90 Sep-00 Jul-06 Jul-08 Apr-11 Median
10 %
Energy stocks attractive
Energy 5.4 % 69.2 % 15.8 % 16.8 % 48.7 % 37.3 % 25.9 % 26 %
Utilities 8.2 (27.8) 17.7 17.2 19.9 17.6 (6.7) 17
Materials 19.5 20.9 (2.5) (32.9) 1.1 23.1 12.1 12
5% +1 Stdev
Telecom 19.1 (44.0) 9.4 (27.8) 6.2 (7.4) 10.8 6
Industrials (6.3) 12.6 (7.3) 5.0 (4.4) 6.6 5.5 5
0%
Health Care (4.5) 4.7 6.8 (7.6) (0.2) 4.6 (2.6) (0)
Staples (3.5) (24.7) 7.8 (31.9) 1.7 17.1 (3.7) (3)
Info Tech (12.4) (38.7) (10.1) 42.2 (18.2) 6.8 (4.3) (10) (5)% -1 Stdev
Financials (0.5) (11.4) (18.1) 7.7 4.3 (29.8) (14.5) (11)

Discretionary (4.3) (19.6) (11.6) (17.5) (14.4) (17.2) 0.1 (14) Energy stocks expensive
(10)%
Apr-10
Oct-10
Apr-11
Oct-11
Apr-12
Jul-10
Jul-11
Jul-12
Jan-11
Jan-12
S&P 500 (8.7)% 50.5 % (14.8)% 19.8 % 8.3 % (8.8)% 27.4 % 8%

Sector, intra-sector, and stock return correlations
2012 has witnessed a sharp decline from 2011 peaks
1.0
0.9 Average sector correlation
0.8
Average Correlation
0.7
0.6 0.64
0.5
0.4
0.3
0.2 0.24
0.1
Average stock correlation
0.0
Dec-89
Dec-90
Dec-91
Dec-92
Dec-93
Dec-94
Dec-95
Dec-96
Dec-97
Dec-98
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13

S&P 500 monthly return dispersion
2012 opportunity set has been below 30-year average
S&P 500 1-month Return Dispersion
50 +/- 1 Standard Deviation in 1-Month Returns

30-Year
+/- 1 Standard Deviation Spread in Returns (pp)
22-Mar-12 Average %-tile

45
S&P 500 13pp 17pp 17 %
40
Since 1980 Telecom Services 18pp 13pp 83 %
opportunity set
35 Consumer Discr 16 17 47
of monthly returns
(2/3 of S&P 500 stocks) Energy 13 14 48
30 averages 17 pp Financials 11 14 39
Consumer Staples 8 13 3
25
Info Tech 14 21 14
20 Industrials 10 15 11
Health Care 7 15 0
15 Materials 11 16 11
Utilities 5 11 2
10
0
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
Source: Compustat, IDC via FactSet, and Goldman Sachs Global ECS Research. As of March 22, 2012.

Low idiosyncratic risk environments have been
associated with mutual fund underperformance
70 4.5
Percent of Core Mutual Funds Funds
65 4.0
Outperforming S&P 500 outperform
% of funds outperforming benchmark
60 (4-Quarter Average, LHS)

3.5
Average idiosyncratic risk

55
3.0
50
2.5
45
2.0
40
1.5
35
Funds
underperform 1.0
30
Idiosyncratic Risk
25 0.5
(3-Month Average, RHS)
20 0.0
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
The Fama French model uses three variables to explain stock returns:
1. Market, the return of the entire market;
2. Size, the performance of stocks with small market capitalization minus those with the large capitalization; and
3. Value, the performance of stocks with the highest book/price ratio minus those with the lowest.
The idiosyncratic return is the residual portion of stock returns not attributable to those three factors.
For details, see S&P 500 Idiosyncratic Risk: micro vs. macro equity returns, February 24, 2012.
Source: Strategic Insight and Goldman Sachs Global ECS Research.

Most large-cap mutual fund managers are
outperforming benchmarks in 2012
Large-Cap Core Funds (291 funds, $700 billion) Large-Cap Value Funds (133 funds, $216 billion)
80 40
70 49% 51% 35 35% 65%
Underperforming Outperforming Underperforming Outperforming
Number of Funds
60 Benchmark 30
Benchmark
Number of Funds
50 25
40 20 R1000V
30 15 +10%
20 10
10 S&P 500 5
+12%
0 0
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
2012 YTD Return (%) 2012 YTD Return (%)
Large-Cap Growth Funds (207 funds, $294 billion) Small-Cap Core Funds (209 funds, $147 billion)
50 60
45 22% 78% 56% 44%
40 50
Outperforming
Number of Funds
Underperforming Underperforming Outperforming
Number of Funds
35 Benchmark Benchmark
40
30
25 R1000G 30
20 +14%
15 20
10
10
R2000
5 +12%
0 0
4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
2012 YTD Return (%) 2012 YTD Return (%)
Source: FactSet, Lipper, Lionshare, and Goldman Sachs Global ECS Research. As of March 23, 2012.

Distribution of hedge fund 2012 YTD performance
Hedge funds lagging S&P 500 and our VIP long basket
20
Hedge Fund
18
2012 YTD VIP Basket
16 <GSTHHVIP>
Performance 14%
14
% of Funds
S&P 500
12
12%
10
8 Avg MF
6
11%
4
Avg HF
2 3%
0
<-4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 >18
2012 YTD Returns (%)
Source: FactSet, Lipper, Lionshare, Goldman Sachs Asset Management, and Goldman Sachs Global ECS Research. As of March 23, 2012.

Hedge fund turnover reached all-time low in 4Q 2011
60%
55%
Bottom quartile
50%
Portfolio Turnover (%)
45%
40% 41%
35%
All positions
30%
28%
25%
20%
15% Top quartile

14%
10%
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Source: Compustat, Lionshare via FactSet, and Goldman Sachs Global ECS Research. As of December 31, 2011.
Hedge fund asset allocation by sector
Net exposure highest in Tech and Consumer Discretionary
Aggregate Asset Allocation

Long Short
Portfolio Portfolio Allocation Net
Sector ($715 bil) ($383 bil) Difference Weighting
Information Technology 18.7 % 16.7 % 203 bp 21.1 %
Consumer Discretionary 18.2 16.8 141 19.8
Energy 12.2 10.9 128 13.7
Health Care 11.1 12.0 (88) 10.1
Materials 7.1 4.8 232 9.8
Industrials 10.1 11.0 (87) 9.1
Financials 12.4 15.6 (316) 8.8
Consumer Staples 5.4 7.0 (164) 3.5
Telecom Services 2.5 1.9 59 3.2
Utilities 2.2 3.3 (108) 1.0
Total 100.0 100.0 0 100.0
Source: Lionshare via FactSet, IDC and Goldman Sachs Global ECS Research. Holdings as of December 31, 2011; pricing as of February 15, 2012
Estimated hedge fund long, short, and net
exposure, by sector ($ in billions)
Overweight / Underweight
Consumer Information Telecom Health Consumer
Discretionary Materials Energy Technology Services Care Industrials Utilities Financials Staples TOTAL
LONG
Stock Positions $129 $49 $86 $132 $18 $78 $71 $15 $87 $37 $704
ETF Positions 1 2 1 2 0 1 1 0 2 1 11
Hedge Fund LONG $130 $51 $87 $134 $18 $79 $72 $16 $89 $38 $715
SHORT
Stock Positions $58 $15 $30 $54 $6 $39 $35 $10 $49 $21 $318
ETF Positions 6 3 11 10 2 7 7 2 10 6 65
Estimated SHORT $64 $18 $42 $64 $7 $46 $42 $13 $60 $27 $383
EXPOSURE
Gross $195 $69 $129 $198 $26 $125 $114 $28 $149 $65 $1,098
Net 66 32 45 70 11 34 30 3 29 12 332
% Net Long (Net/Long) 51 % 64 % 52 % 52 % 59 % 42 % 42 % 20 % 33 % 30 % 46 %
Net Sector Weighting (%)

Hedge Fund Net Exposure 20 % 10 % 14 % 21 % 3% 10 % 9% 1% 9% 3% 100 %
Russell 3000 12 4 11 18 3 11 11 4 16 11 100
Over/(Under)weight 764 bp 596 bp 305 bp 279 bp 55 bp (58)bp (221)bp (283)bp (686)bp (752)bp
Source: Lionshare via FactSet, IDC and Goldman Sachs Global ECS Research. Holdings as of December 31, 2011; pricing as of February 15, 2012
Goldman Sachs US Portfolio Strategy Baskets
Bloomberg <GSTH>
Thematic Baskets Sector Baskets

Bloomberg Bloomberg
<GSTH1> <GSTH2>
Macroeconomic Cyclicals
GSTHCARR GSSBCYCL
GSTHAINT
GSTHINTL Defensives
GSTHBETA GSSBDEFS
GSTHBRIC
GSTHWEUR Global
GSSBGLBL
Fundamental
GSTHQUAL Domestic
GSTHREVG GSSBDOMS
GSTHGROE
GSTHOPHI Global Cyclicals
GSTHOPLO GSSBGCYC
GSTHSBAL
GSTHWBAL Domestic Cyclical
GSSBDCYC
Hedge Fund
GSTHHVIP Global Defensive
GSTHHFHI GSSBGDEF
GSTHHFSL
Domestic Defensive
Valuation GSSBDDEF
GSTHDIVG
Permission to our GS Portfolio Strategy Baskets
GSTHSHRP
GSTHSVLU To receive access to the Goldman Sachs US Portfolio Strategy <GSTH> Bloomberg page,
GSTHAVLU please follow the directions below:
GSTHGARP 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 email to your Goldman Sachs salesperson requesting access to
the US Portfolio Strategy Bloomberg <GSTH> page . Note: The ability to trade baskets will
depend upon market conditions,
including liquidity and borrow
Source: Bloomberg and Goldman Sachs Research. constraints at the time of trade.

US Portfolio Strategy Thematic basket YTD returns
Cyclicals, hedge fund positions, high Sharpe Ratio, BRICs sales
Beta EPS Growth

Bloomberg YTD vs 2011E - 2012E - P/E
Cyc Attr RR <GSTHCARR> 18.1 Ticker Return SP500 2012E 2013E NTM
Macroeconomic Baskets
Dom Cyclical <GSSBDCYC> 17.4
Cyclically Attractive Risk-Reward GSTHCARR 18 % 1.4 16 % 19 % 13.3x
High HF Conc <GSTHHFHI> 17.1 BRICs Sales GSTHBRIC 14 1.3 8 14 13.4
Dual Beta GSTHBETA 14 1.5 8 19 13.6
Sharpe Ratio <GSTHSHRP> 15.1 International Sales GSTHINTL 12 1.2 8 14 14.5
Western Europe Sales GSTHWEUR 11 1.1 11 13 14.5
BRIC Sales <GSTHBRIC> 14.4
Domestic Sales GSTHAINT 9 1.0 8 13 14.2
Dual Beta <GSTHBETA> 14.0 Fundamental Baskets
High Revenue Growth GSTHREVG 15 % 1.3 16 % 18 % 18.2x
Hedge Fund VIP <GSTHHVIP> 14.0 ROE Growth GSTHGROE 14 1.3 9 14 13.6
Strong Balance Sheet GSTHSBAL 13 1.1 18 17 20.2
ROE Growth <GSTHGROE> 13.6
Low Operating Leverage GSTHOPLO 13 1.1 10 15 16.1
Global Cyclical <GSSBGCYC> 13.1 Weak Balance Sheet GSTHWBAL 12 1.2 7 13 13.8
High Operating Leverage GSTHOPHI 11 1.3 12 13 12.9
Strong B/S <GSTHSBAL> 13.1 High Quality GSTHQUAL 11 1.0 7 12 15.6
Int'l Sales <GSTHINTL> 11.9 Valuation Baskets

High Sharpe Ratio GSTHSHRP 15 % 1.3 7% 13 % 12.4x
S&P 500 11.9 "Anti-value" GSTHAVLU 11 0.9 13 13 18.5
GARP GSTHGARP 10 1.2 11 13 13.6
Weak B/S <GSTHWBAL> 11.5 Dividend Growth GSTHDIVG 10 1.1 3 11 12.2
"Super-value" GSTHSVLU 8 1.1 3 10 10.6
W Europe Sales <GSTHWEUR> 11.2
Hedge Fund Baskets
High Quality <GSTHQUAL> 11.0 High Hedge Fund Concentration GSTHHFHI 17 % 1.2 17 % 15 % 15.4x
Hedge Fund "VIP" List GSTHHVIP 14 1.1 12 14 13.1
GARP <GSTHGARP> 10.2 Low Hedge Fund Concentration GSTHHFSL 9 0.9 7 9 14.8
Dividend Growth <GSTHDIVG> 9.6 Sector Baskets
Domestic Cyclicals GSSBDCYC 17 % 1.2 11 % 13 % 13.5x
US Sales <GSTHAINT> 9.4 Cyclicals GSSBCYCL 15 1.3 10 14 13.7
Global Cyclicals GSSBGCYC 13 1.3 9 15 13.9
Low HF Conc <GSTHHFSL> 8.9
Domestic GSSBDOMS 13 1.0 9 11 13.9
Global Defensive <GSSBGDEF> 8.5 Global GSSBGLBL 11 1.2 8 14 14.5
Global Defensives GSSBGDEF 8 0.9 8 11 15.5
Dom Defensive <GSSBDDEF> 8.1 Defensives GSSBDEFS 8 0.9 8 11 14.9
Domestic Defensives GSSBDDEF 8 0.9 7 10 14.4
0 5 10 15 20 S&P 500 12 % 1.0 9% 13 % 13.2x
YTD Return (%) S&P 500 Average 1.1 9 14 15.4
Source: FactSet and Goldman Sachs Global ECS Research. As of April 4, 2012. S&P 500 Median 1.1 9 12 14.2

US Portfolio Strategy current thematic investment
recommendations
Investment Recommendation (<Bloomberg Ticker>)

High Quality Stocks Stocks with strong balance sheets, stable sales growth, stable earnings, stable prices,
high ROE, and large equity capitalization should outperform <GSTHQUAL>.
Dividend Growth Low interest rates suggest stocks with high dividend yields and growth will outperform
and Yield <GSTHDIVG>.
US vs. International Our sector-neutral 50-stock basket should outperform the broad market and a basket
Sales of stocks with primarily international sales (<GSTHAINT> vs. <GSTHINTL>).
Cyclically Attractive Select companies exposed to depressed cyclical parts of the economy offer attractive
Risk-Reward risk/reward if activity levels normalize (<GSTHCARR>).
Source: Goldman Sachs Global ECS Research.

US Portfolio Strategy recommended thematic
basket performance (see Bloomberg <GSTH>)
High Quality <GSTHQUAL> Dividend Growth <GSTHDIVG>
160 120
150 High Quality 115

140
110
130
120 105
110
Relative Performance 100 Relative Performance
100 Long GSTHQUAL / Long GSTHDIVG /
Short SPX Short SPX
90 95
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Domestic vs. International Sales <GSTHAINT> Cyclically Attractive risk/reward <GSTHCARR>

110 140
105
135 Cyclically Attractive Risk-Reward Basket
130
100 125
95 120
115
90
110
85 105
Relative Performance Relative Performance
80 Long GSTHAINT / 100
Long GSTHCARR /
Short GSTHINTL 95 Short SPX
75
90
Oct-07
Oct-08
Oct-09
Oct-10
Oct-11
Oct-12
Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
Dec-09
Dec-10
Dec-11
Mar-10
Jun-10
Mar-11
Jun-11
Mar-12
Jun-12
Sep-10
Sep-11
Source: FactSet and Goldman Sachs Global ECS Research. As of March 23, 2012.
High Quality basket
<GSTHQUAL>
Market Altman EPS Growth P/E Dividend ROE Quality Market Altman EPS Growth P/E Dividend ROE Quality
Company Ticker Cap ($B) Z-Score 2012E NTM Yield LTM Score Company Ticker Cap ($B) Z-Score 2012E NTM Yield LTM Score
CONSUMER DISCRETIONARY INDUSTRIALS
TJX Cos. TJX $29 8.0 16 % 16.9 x 1.0 % 47 % 89 C.H. Robinson Worldwide CHRW $11 14.5 11 % 21.8 x 2.0 % 34 % 89
Coach Inc. COH 23 16.1 17 20.5 1.1 54 87 General Dynamics GD 26 2.9 1 9.8 2.8 19 86
Yum! Brands YUM 33 5.5 14 21.7 1.6 71 86 United Technologies UTX 75 3.3 2 14.6 2.3 22 85
Amazon.com AMZN 70 7.2 (8) NM 0.0 8 83 Danaher Corp. DHR 31 3.4 17 16.5 0.2 12 83
Nike Inc. NKE 41 9.8 15 19.7 1.3 23 82 3M Co. MMM 62 5.3 4 14.1 2.7 26 69
Basket Median $33 8.0 15 % 20.5 x 1.1 % 47 % 86 Basket Median $31 3.4 4% 14.6 x 2.3 % 22 % 85
Sector Median 10 4.0 12 15.4 1.5 19 51 Sector Median 12 3.4 11 13.7 2.0 18 49
CONSUMER STAPLES INFORMATION TECHNOLOGY

PepsiCo Inc. PEP $103 3.2 (7)% 15.8 x 3.2 % 28 % 89 Cognizant Tech Solutions CTSH $23 15.7 21 % 22.2 x 0.0 % 23 % 93
Walgreen Co. WAG 29 NM 1 12.3 2.7 NM 88 Intuit Inc. INTU 17 6.7 15 19.2 1.0 27 81
Colgate-Palmolive CL 46 6.5 6 17.9 2.6 93 84 Oracle Corp. ORCL 112 4.6 8 11.2 0.8 24 80
Coca-Cola Co. KO 162 4.1 6 17.6 2.9 26 80 eBay Inc. EBAY 43 5.2 12 16.5 0.0 19 78
Wal-Mart Stores WMT 106 4.2 8 12.5 2.6 23 77 QUALCOMM Inc. QCOM 112 9.3 16 17.4 1.3 18 77
Kellogg Co. K 106 4.2 8 12.5 2.6 23 77 Microsoft Corp. MSFT 239 5.3 5 11.3 2.5 40 74
Accenture ACN 41 5.7 13 15.9 2.1 64 69
Basket Median $104 4.2 6% 14.2 x 2.7 % 26 % 82 Citrix Systems CTXS 15 8.8 10 28.6 0.0 13 61
Sector Median 14 3.6 6 14.8 2.7 21 59 Adobe Systems ADBE 17 5.6 5 13.2 0.0 14 60
Dell Inc. DELL 26 3.5 2 8.3 0.0 41 59
ENERGY
National Oilwell Varco NOV $33 4.6 25 % 13.4 x 0.6 % 12 % 84 Basket Median $34 5.7 11 % 16.2 x 0.4 % 23 % 75
Cameron Intl CAM 12 3.9 25 15.2 0.0 11 83 Sector Median 11 4.9 8 15.9 0.8 17 48
Baker Hughes BHI 19 3.3 7 9.6 1.4 11 75
ConocoPhillips COP 97 3.0 (8) 8.9 3.5 18 74 MATERIALS
Occidental Petroleum OXY 78 4.2 (1) 11.3 2.3 19 73 Ecolab Inc. ECL $17 3.7 16 % 19.9 x 1.3 % 15 % 94
Schlumberger Ltd. SLB 78 4.2 (1) 11.3 2.3 19 73 Praxair Inc. PX 33 3.8 7 19.0 2.0 28 81
Basket Median $56 4.0 3% 11.3 x 1.8 % 15 % 74 Basket Median $25 3.8 11 % 19.4 x 1.7 % 21 % 87
Sector Median 12 2.6 7 12.8 0.7 12 44 Sector Median 10 3.1 7 13.9 2.0 18 46
FINANCIALS TELECOMMUNICATION SERVICES
Simon Property Group SPG $44 NM 12 % 19.4 x 2.7 % 22 % 86 CenturyLink CTL $24 1.1 (10)% 16.5 x 7.4 % 3% 75
Wells Fargo & Co. WFC 176 NM 14 10.3 1.4 12 81
Basket Median $24 1.1 (10)% 16.5 x 7.4 % 3% 75
AFLAC Inc. AFL 21 NM 5 6.9 2.9 16 81
Vornado Realty Trust VNO 15 NM (2) 16.0 3.3 8 66 Sector Median 11 1.1 7 16.5 5.3 5 51
State Street Corp. STT 22 NM 4 11.5 2.1 10 64 UTILITIES
Boston Properties BXP 15 NM (1) 21.4 2.1 6 63 Southern Co. SO $38 NM 4% 16.5 x 4.3 % 13 % 88
JPMorgan Chase JPM 170 NM 7 9.3 2.7 11 61
Consolidated Edison ED 17 NM 3 15.3 4.2 9 68
Basket Median $22 NM 5% 11.5 x 2.7 % 11 % 66 Basket Median $27 NM 4% 15.9 x 4.3 % 11 % 78
Sector Median 13 NM 11 13.5 2.1 8 50 Sector Median 10 NM 2 14.2 4.4 10 48
HEALTH CARE
St. Jude Medical STJ $14 4.0 6% 12.4 x 2.1 % 18 % 89
Stryker Corp. SYK 18 5.5 10 13.2 1.6 18 86
Gilead Sciences GILD 35 4.9 0 12.0 0.0 45 82
Intuitive Surgical ISRG 21 36.2 19 37.2 0.0 21 82
Medtronic Inc. MDT 40 3.6 4 10.7 2.5 20 80
Amgen Inc. AMGN 40 3.6 4 10.7 2.5 20 80
Basket Median $28 4.5 5% 12.2 x 1.8 % 20 % 82 High Quality <GSTHQUAL> Median $33 4.6 6% 15.3 x 2.1 % 19 % 81
Sector Median 14 4.0 8 13.0 0.9 18 60 S&P 500 Median 12 3.6 9 14.1 1.8 15 50

Dividend Growth basket
<GSTHDIVG>
2013E Cash 2013E Cash
Market Ann. 2012E Dividend Growth 2011-2013 Return on Market Ann. 2012E Dividend Growth 2011-2013 Return on
Price Cap Payout Dividend 2012E 2013E Dividend Cash Price Cap Payout Dividend 2012E 2013E Dividend Cash
Company Name Ticker 22-Mar-12 ($ bil) Ratio Yield Growth Growth CAGR Invested Company Name Ticker 22-Mar-12 ($ bil) Ratio Yield Growth Growth CAGR Invested
CONSUMER DISCRETIONARY INDUSTRIALS

Cablevision Systems CVC $14.73 $3 62 % 4.5 % 15 % 17 % 16 % 5.2 % Avery Dennison AVY $28.68 $3 52 % 3.8 % 8% 11 % 10 % 4.2 %
Darden Restaurants DRI 51.83 7 44 3.6 24 14 19 4.1 General Electric GE 19.85 210 44 3.6 16 15 16 4.1
Carnival Corp. CCL 31.86 14 57 3.1 0 20 10 3.8 Iron Mountain IRM 28.65 5 75 3.8 15 9 12 4.1
Time Warner Cable TWC 80.18 25 41 2.8 17 11 14 3.1 Emerson Electric EMR 52.00 38 43 3.2 14 10 12 3.5
Johnson Controls JCI 31.66 22 25 2.4 15 24 19 3.0 Eaton Corp. ETN 48.67 16 34 3.1 12 13 12 3.5
CONSUMER STAPLES INFORMATION TECHNOLOGY

Lorillard Inc. LO $129.41 $17 70 % 4.8 % 19 % 3% 11 % 4.9 % Microchip Technology MCHP $36.70 $7 69 % 3.8 % 35 % 1% 17 % 3.9 %
Dr Pepper Snapple Group DPS 38.95 8 46 3.6 17 10 14 4.0 Intel Corp. INTC 27.90 139 34 3.2 12 14 13 3.6
Safeway Inc. SWY 20.86 6 30 3.2 21 20 20 3.9 Harris Corp. HRS 43.72 5 25 3.0 25 6 15 3.2
Molson Coors Brewing TAP 43.49 7 35 3.2 13 11 12 3.6 Microsoft Corp. MSFT 32.00 239 28 2.6 22 14 18 3.0
Walgreen Co. WAG 33.38 29 33 2.9 21 13 17 3.3 Computer Sciences Corp. CSC 30.41 5 25 2.7 3 9 6 3.0
Coca-Cola Enterprises CCE 28.25 8 28 2.3 25 0 12 2.3 Xerox Corp. XRX 8.21 11 15 2.1 0 41 19 2.9
KLA-Tencor Corp. KLAC 52.28 9 31 2.7 17 7 12 2.9
ENERGY Accenture ACN 63.52 41 34 2.2 27 12 19 2.5
Williams Companies Inc WMB $30.21 $18 69 % 3.8 % 50 % 12 % 30 % 4.3 % Texas Instruments TXN 33.43 38 36 2.1 25 11 18 2.3
Chevron Corp. CVX 105.35 208 26 3.2 9 9 9 3.5 International Bus. Machines IBM 205.49 238 20 1.6 14 12 13 1.8
Marathon Petroleum MPC 43.37 15 19 2.4 129 12 60 2.7
Occidental Petroleum OXY 95.75 78 25 2.3 17 15 16 2.6 MATERIALS
Valero Energy Corp. VLO 26.44 15 15 2.3 100 8 47 2.5 Newmont Mining NEM $52.41 $26 26 % 3.2 % 70 % 31 % 49 % 4.2 %
Exxon Mobil Corp. XOM 85.33 402 23 2.3 6 6 6 2.4 Dow Chemical DOW 34.47 41 37 3.3 28 17 22 3.9
FINANCIALS TELECOMMUNICATION SERVICES

SLM Corp. SLM $16.03 $8 24 % 3.1 % 67 % 20 % 41 % 3.7 % AT&T Inc. T $31.71 $188 75 % 5.6 % 2% 2% 2% 5.7 %
Huntington Bancshares HBAN 6.35 5 27 2.5 60 38 48 3.5
BlackRock Inc. BLK 198.52 20 45 3.0 9 13 11 3.4 UTILITIES
U.S. Bancorp USB 31.37 60 29 2.5 56 23 39 3.1 Northeast Utilities NU $36.38 $6 49 % 3.2 % 7% 6% 7% 3.4 %
PNC Financial Svc. Gp. PNC 62.60 33 22 2.5 35 23 29 3.0 ONEOK Inc. OKE 81.52 8 66 3.1 16 12 14 3.4
JPMorgan Chase JPM 44.65 170 25 2.6 44 17 30 3.0
Fifth Third Bancorp FITB 14.09 13 23 2.3 14 25 20 2.8
HEALTH CARE
Pfizer Inc. PFE $21.73 $164 39 % 4.0 % 10 % 9% 10 % 4.4 %
Johnson & Johnson JNJ 64.46 177 45 3.8 8 8 8 4.1
Becton Dickinson BDX 76.88 16 30 2.4 10 10 10 2.6
Cardinal Health CAH 41.53 14 26 2.3 15 13 14 2.6
Amgen Inc. AMGN 66.62 53 24 2.2 157 8 67 2.3 Dividend Growth <GSTHDIVG> Average $58 37% 3.0% 27% 14% 19 % 3.4 %
Covidien COV 53.61 26 21 1.7 12 11 12 1.9 S&P 500 Equal-Weighted Average 1393 25 27 1.9 22 15 13 2.1
Source: Bloomberg, IDC via FactSet, and Goldman Sachs Global ECS Research. As of March 22, 2012.
Our recommended US Portfolio Strategy baskets:
High Quality, Dividend Growth, Domestic Sales
Dividend Growth High Quality Stocks
<GSTHDIVG> <GSTHQUAL>
ACN CVC HRS MPC T ACN COH GD NKE STJ
AMGN CVX IBM MSFT TAP ADBE COP GILD NOV STT
AVY DOW INTC NEM TWC AFL CTL INTU ORCL SYK
BDX DPS IRM NU TXN AMGN CTSH ISRG OXY TJX
BLK DRI JCI OKE USB AMZN CTXS JPM PEP UTX
CAH EMR JNJ OXY VLO BHI DELL K PX VNO
CCE ETN JPM PFE WAG BXP DHR KO QCOM WAG
CCL FITB KLAC PNC WMB CAM EBAY MDT SLB WFC
COV GE LO SLM XOM CHRW ECL MMM SO WMT
CSC HBAN MCHP SWY XRX CL ED MSFT SPG YUM
High Quality
<GSTHQUAL>
SO
ACN JPM CTL SPG
AMGN MSFT CTSH WFC
OXY INTU
WAG
Dividend Domestic
Growth Sales
<GSTHDIVG> HRS TWC <GSTHAINT>
PNC USB
Domestic Sales
<GSTHAINT>
ADP CTSH KR PWR TGT
AET CVS KSS QEP TROW
AKAM DNR LOW RAI TWC
BBT DVA LUV RRC UNH
CHK EQT MHS RSG USB
CMCSA FIS MO SAI VMC
CME FISV NSC SCHW WAG
COG HRS NUE SO WFC
Bold indicates overlap between baskets. CSX HUM PAYX SPG WLP
Source: Bloomberg and Goldman Sachs Global ECS Research. CTL INTU PNC SWN WM

Cyclically attractive risk/reward basket
<GSTHCARR>
Market Return
Stock Company Sector Cap $bn YTD Investment case one-liner
Auto sales exposure
F Ford Motor Co. Consumer Discretionary 48 15 % Manufacturers are the most direct vehicle for exposure to higher auto sales
JCI Johnson Controls Consumer Discretionary 22 3 Healthy auto backlog and HVAC exposure
LEA Lear Corp. Consumer Discretionary 4 17 Valuation implies sizable 2012 EBITDA contraction
TEN Tenneco Inc. Consumer Discretionary 2 26 Secular pollution control growth outpaces auto production
BWA BorgWarner Consumer Discretionary 7 32 High backlog supports volume growth 10% above peers
DAN Dana Holding Corp. Consumer Discretionary 2 33 Price increases and industry low valuation
Business fixed investment exposure

IR Ingersoll-Rand Industrials 11 33 Developed market construction 60% of revenues; large HVAC exposure
CAT Caterpillar Industrials 68 20 Exposure to mining, energy and rail capex and N. America construction
CMI Cummins Inc. Industrials 20 39 49% of profits from developed market trucks and construction
UTX United Technologies Industrials 70 13 HVAC and commercial aerospace exposure
MLM Martin Marietta Materials Materials 3 17 72% of revenues from construction; 98% N. America
ETN Eaton Corp. Industrials 17 14 Late cycle construction 35% of revenue at trough levels; 30% EM revenues
Inventory re-stocking exposure

UPS United Parcel Service Industrials 73 10 An inventory re-stock would directly benefit package delivery companies
UNP Union Pacific Corp. Industrials 54 3 Intermodal railroads have high exposure to inventory recovery
CSX CSX Corp. Industrials 24 1 Intermodal railroads have high exposure to inventory recovery
FDX FedEx Corp. Industrials 30 11 An inventory re-stock would directly benefit package delivery companies
Residential investment exposure

LOW Lowe's Cos. Consumer Discretionary 34 22 Do-it-yourself retailers have high exposure to increased residential investment
HD Home Depot Consumer Discretionary 70 19 Do-it-yourself retailers have high exposure to increased residential investment
PHM PulteGroup Consumer Discretionary 3 41 Homebuilder with long land banks and high-end buyers
TOL Toll Brothers Consumer Discretionary 3 16 Homebuilder with long land banks and high-end buyers
SHW Sherwin-Williams Materials 10 21 Low inventory paint chemicals should respond to residential investment
LPX Louisiana-Pacific Corp. Materials 1 16 Wood panel pure play with exposure to housing stabilization
WY Weyerhaeuser Financials 11 18 Lumber, timberland and wood panel exposure to housing market
Source: Compustat, FactSet, and Goldman Sachs Global ECS Research. As of March 23, 2012.

US Portfolio Strategy thematic baskets reflecting
RISK: Sharpe ratio, balance sheet, hedge fund positions
High Sharpe ratio <GSTHSHRP> Balance sheet <GSTHSBAL> vs. <GSTHWBAL>

130 120
125 115 Relative Performance

120
Long GSTHSBAL /
110 Short GSTHWBAL
115
105
110
100
105
95
100 Relative Performance
Long GSTHSHRP / 90
95 Short SPX
90 85
Feb-08
Feb-09
Feb-10
Feb-11
Feb-12
Dec-09
Dec-10
Dec-11
Mar-10
Jun-10
Mar-11
Jun-11
Mar-12
Jun-12
Aug-08
Aug-09
Aug-10
Aug-11
Aug-12
Sep-10
Sep-11
Hedge fund VIP <GSTHHVIP> Hedge fund concentration <GSTHHFHI> vs. <GSTHHFSL>
125 90 150
S&P 500 Hedge Fund Baskets
Relative Performance 80 140 (relative returns vs. SPX) LEAST
120 Long GSTHHVIP / Concentrated
Relative Total Return (100 = Feb 21, 2007)

Short SPX 70 130
<GSTHHFSL>
115 60 120
110
50
VIX
110
100
40
90
105 30 MOST
80 Concentrated
20 <GSTHHFHI>
100 70
VIX (RHS) 10
60
95 0
May-08
May-09
May-10
May-11
May-12
Nov-07
Nov-08
Nov-09
Nov-10
Nov-11
50
Nov-07
Nov-08
Nov-09
Nov-10
Nov-11
May-07
Aug-07
May-08
Aug-08
May-09
Aug-09
May-10
Aug-10
May-11
Aug-11
May-12
Feb-07
Feb-08
Feb-09
Feb-10
Feb-11
Feb-12
US Portfolio Strategy thematic baskets reflecting
GROWTH: Sales, ROE, Beta, GARP
Revenue growth <GSTHREVG> ROE growth <GSTHGROE>

104 105
Relative Performance
102
Long GSTHREVG /
Short SPX 100
100
95
98
90 Relative Performance
96
Long GSTHGROE /
Short SPX
94 85
Dec-11
Nov-11
Jan-12
Jun-11
Feb-12
Mar-12
Jul-11
Sep-11
Oct-11
Apr-12
Aug-11
Dec-10
Dec-11
Mar-11
Jun-11
Mar-12
Jun-12
Sep-11
Dual Beta <GSTHBETA> GARP <GSTHGARP>
120 120
Relative Performance Relative Performance

115
Long GSTHBETA / 115 Long GSTHGARP /
110 Short SPX Short SPX
110
105
100 105
95
100
90
85 High betas to both US GDP 95

growth and S&P 500
80 90
Dec-10
Dec-11
Mar-11
Jun-11
Mar-12
Jun-12
Sep-11
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Stocks that matter most to hedge funds have
outperformed by 68 bp/quarter on average since 2001
125
Hedge Fund Stocks Total Return (100 = Dec 2003)

Stocks that "Matter Most"
Stocks that "Matter Most" Bloomberg: <GSTHHVIP>
Bloomberg <GSTHHVIP> 120 (Relative Return vs. SPX)
Quarterly Relative Return vs. SPX

Maximum 674 bp 115
75th Percentile 191 Current =
110
Median 100
110
25th Percentile (66)
Minimum (785)
Standard Deviation 271 105
Average Excess Return (bp) 68 bp

100 Returns 4Q _ YTD
Sharpe Ratio 0.25 VIP List 12.5% 14.3%
S&P 500 11.8% 11.6%
Hit rate of outperformance 65 %
95
since May 2001
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Source: Lionshare via FactSet, IDC and Goldman Sachs Global ECS Research. As of March 23, 2012.
Hedge Fund VIP (Very-Important-Positions) basket
<GSTHHVIP>
Hedge Fund Very Important Position (VIP) Basket <GSTHHVIP>
No. of funds Percent of No. of funds Percent of
with stock Equity Cap with stock Equity Cap
Total as Top 10 owned by Total as Top 10 owned by
Return holding Hedge Funds Return holding Hedge Funds
Company Ticker Sub-sector YTD 31-Dec-11 31-Dec-11 Company Ticker Sub-sector YTD 31-Dec-11 31-Dec-11
Apple Inc. AAPL Computer Hardware 47% 105 4% Charter Communications Inc. CHTR Cable & Satellite 14% 16 43%
Google Inc. GOOG Internet Software & Services (1) 76 5 Cisco Systems Inc. CSCO Communications Equipment 14 16 1
Microsoft Corp. MSFT Systems Software 24 48 2 Philip Morris International Inc. PM Tobacco 11 16 1
JPMorgan Chase & Co. JPM Other Diversified Financial Services 37 36 3 Exxon Mobil Corp. XOM Integrated Oil & Gas 1 16 1
QUALCOMM Inc. QCOM Communications Equipment 22 33 4 CVS Caremark Corp. CVS Drug Retail 11 15 3
Citigroup Inc. C Other Diversified Financial Services 41 28 5 Johnson & Johnson JNJ Pharmaceuticals (1) 15 1
Pfizer Inc. PFE Pharmaceuticals 2 28 2 Sunoco Inc. SUN Oil & Gas Refining & Marketing 15 15 26
Liberty Media Corp LMCA Broadcasting 13 23 27 Tyco International Ltd. TYC Industrial Conglomerates 14 15 9
LyondellBasell Industries LYB Specialty Chemicals 32 23 40 Visteon Corp. VC Auto Parts & Equipment 9 15 34
Anadarko Petroleum Corp. APC Oil & Gas Exploration & Production 4 22 8 Bank of America Corp. BAC Other Diversified Financial Services 77 14 2
General Motors Co. GM Automobile Manufacturers 24 21 5 Lear Corp. LEA Auto Parts & Equipment 17 14 19
News Corp. NWSA Movies & Entertainment 11 21 13 Occidental Petroleum Corp. OXY Integrated Oil & Gas 5 14 2
Wells Fargo & Co. WFC Diversified Banks 23 21 2 Pioneer Natural Resources Co. PXD Oil & Gas Exploration & Production 14 14 18
BP PLC ADS BP Integrated Oil & Gas 8 20 2 Viacom Inc. Cl B VIAB Movies & Entertainment 3 14 9
priceline.com Inc. PCLN Internet Retail 53 20 16 Hewlett-Packard Co. HPQ Computer Hardware (8) 13 4
Yahoo! Inc. YHOO Internet Software & Services (5) 20 13 Liberty Interactive Corp. Interactive Series A LINTA Catalog Retail 18 13 13
Delphi Automotive PLC DLPH Auto Parts & Equipment 44 19 63 McDonald's Corp. MCD Restaurants (4) 13 1
Dollar Thrifty Automotive Grp DTG Trucking 15 19 77 Newmont Mining Corp. NEM Gold (11) 13 3
Visa Inc. V Data Processing & Outsourced Services 17 19 6 Valeant Pharmaceuticals International Inc. VRX Pharmaceuticals 15 13 15
Wal-Mart Stores Inc. WMT Hypermarkets & Super Centers 2 19 1 Amazon.com Inc. AMZN Internet Retail 13 12 3
Baidu Inc. ADS BIDU Internet Software & Services 24 18 8 ENSCO PLC ADS ESV Oil & Gas Drilling 17 12 13
CIT Group Inc. CIT Regional Banks 20 18 14 International Business Machines Corp. IBM IT Consulting & Other Services 12 12 1
Express Scripts Inc. ESRX Health Care Services 18 18 15 Las Vegas Sands Corp. LVS Casinos & Gaming 35 12 5
MasterCard Inc. MA Data Processing & Outsourced Services 14 18 4
Seagate Technology Inc. STX Computer Storage & Peripherals 72 18 13
Williams Companies Inc WMB Oil & Gas Storage & Transportation 13 18 15 GSTHHVIP Average 14% 21 12%
Halliburton Co. HAL Oil & Gas Equipment & Services (3) 17 5 Median 12 18 5
Note: Based on our analysis of 557 hedge funds with $466 billion in equity assets that own between 1 and 200 individual stock positions.
New stocks entering the basket in 4Q 2011 listed in bold. Holdings as of December 31, 2011; Pricing as of March 23, 2012. Source: Lionshare via FactSet, IDC and Goldman Sachs Global ECS Research.

Goldman Sachs Economics forecasts GDP growth
of 3.5% for World, 2.2% for US, and -0.4% for Euro
2012 and 2013 GDP Growth by country

2012E 2013E
Goldman GS vs. Goldman
Sachs Consensus Consensus Sachs
UK 1.2 % 0.6 % 60 bp 2.3
Japan 2.1 1.9 20 1.6
Russia 3.9 3.7 20 4.5
China 8.6 8.4 20 8.7
World 3.5 3.4 10 4.1
BRICs 7.1 7.0 10 7.6
India 7.2 7.2 0 7.8
Euro Area (0.4) (0.4) 0 0.7
USA 2.2 2.3 (10) 2.2
Brazil 3.1 3.3 (20) 4.6
Source: Blue Chip Economic Indicators, Consensus Economics and Goldman Sachs Global ECS Research. As of April 9, 2012.

S&P 500 foreign revenues by region and sector
Non-US sales account for 31% of S&P 500 revenues
Revenues by region for the S&P 500 2010 S&P 500 foreign revenues by sector
Other
12% Foreign
Revenues ($ Billions) Sales
Other EMEA Sector Total Foreign Exposure
7% Information Technology $897 $513 57 %
Materials 319 153 48
Asia & Pacific ex. Energy 1,233 553 45
Japan Industrials 1,014 388 38
5%
Consumer Staples 1,411 390 28
Western Europe Consumer Discretionary 1,201 306 25
3% Financials 1,253 268 21
U.S.
69% Other Americas Health Care 1,102 219 20
2% Utilities 336 17 5
Japan Telecom Services 296 6 2
1%
S&P 500 (sales weighted) $9,061 $2,812 31 %
South America
1%
Source: Company 10-K filings, FactSet, and Goldman Sachs Global ECS Research.

Domestic Sales basket
<GSTHAINT>
Non- Non- Non-
Company Ticker US Sales Company Ticker US Sales Company Ticker US Sales
Information Technology Industrials Consumer Discretionary
Paychex Inc. PAYX 0% CSX Corp. CSX 0% Comcast Corp. CMCSA 0%
SAIC Inc. SAI 1 Norfolk Southern NSC 0 Lowe's Cos. LOW 0
Intuit Inc. INTU 5 Republic Services RSG 0 Target Corp. TGT 0
Harris Corp. HRS 6 Southwest Airlines LUV 0 Time Warner Cable TWC 0
Fiserv Inc. FISV 6 Waste Management WM 6 Kohl's Corp. KSS 0
Fidelity National Info Svc. FIS 17 Quanta Services PWR 7
Automatic Data Processing ADP 19 Basket median 0%
Cognizant Tech Solutions CTSH 22 Sector median 22
Akamai Technologies AKAM 28
Basket median 6% Basket median 0%

Sector median 53 Sector median 32
Financials Health Care

Wells Fargo & Co. WFC 0%
Materials
UnitedHealth Group UNH 0%
U.S. Bancorp USB 0 Nucor Corp. NUE 0%
WellPoint Inc. WLP 0
PNC Financial Svc. Gp. PNC 0 Vulcan Materials VMC 1
Medco Health Solutions MHS 0
Simon Property Group SPG 0 Aetna Inc. AET 0
Charles Schwab SCHW 0 Basket median 0%
Humana Inc. HUM 0
CME Group Inc. CME 0 DaVita Inc. DVA 0
Sector median 49
BB&T Corp. BBT 0
T. Rowe Price Group TROW 0
Basket median 0% Basket median 0% Telecommunication Services

Sector median 5 Sector median 35 CenturyLink CTL 0%
Energy Consumer Staples Basket median 0%

Chesapeake Energy CHK 0% Altria Group MO 0% Sector median 0
Southwestern Energy SWN 0 CVS Caremark Corp. CVS 0
Denbury Resources DNR 0 Walgreen Co. WAG 0 Utilities
Range Resources RRC 0 Reynolds American RAI 0 Southern Co. SO 0%
Kroger Co. KR 0
EQT Corp. EQT 0
QEP Resources QEP 0 Basket median 0%
Cabot Oil & Gas COG 0 Sector median 0
Basket median 0% Basket median 0%

Sector median 24 Sector median 24 Domestic Sales <GSTHAINT> Median 0%
S&P 500 Median 28
Source: Compustat, company filings, and Goldman Sachs Global ECS Research.

International Sales basket
<GSTHINTL>
Non- Non- Non-
Company Ticker US Sales Company Ticker US Sales Company Ticker US Sales
Information Technology Industrials Consumer Discretionary
Broadcom Corp. BRCM 97 % Expeditors Intl EXPD 77 % Harman Intl Industries HAR 80 %
QUALCOMM Inc. QCOM 95 Pall Corp. PLL 71 Wynn Resorts Ltd. WYNN 69
NVIDIA Corp. NVDA 92 Caterpillar CAT 69 McDonald's Corp. MCD 66
MEMC Electronic Materials WFR 89 Avery Dennison AVY 68 Yum! Brands YUM 64
Advanced Micro Devices AMD 88 Flowserve Corp. FLS 67 Johnson Controls JCI 62
Applied Materials AMAT 88 3M Co. MMM 65
Texas Instruments TXN 88 Basket median 66 %
First Solar FSLR 87 Sector median 22
Intel Corp. INTC 85
Basket median 88 % Basket median 68 %

Sector median 53 Sector median 32
Financials Health Care

Materials
AFLAC Inc. AFL 76 % Waters Corp. WAT 70 %
XL Group XL 60 Newmont Mining NEM 78 %
Agilent Technologies A 68
AON Corp. AON 60 International Flav/Frag IFF 76
Dentsply Intl XRAY 62
Marsh & McLennan MMC 56 PerkinElmer PKI 61
INVESCO Ltd. IVZ 52 Basket median 77 %
Edwards Lifesciences EW 60
IntercontinentalExchange ICE 47 Sector median 49
Life Technologies LIFE 60
Moody's Corp. MCO 46
Citigroup Inc. C 46
Basket median 54 % Basket median 61 % Telecommunication Services

Sector median 5 Sector median 35 American Tower Corp AMT 19 %
Energy Consumer Staples Basket median 19 %

Diamond Offshore Drilling DO 81 % Philip Morris Intl PM 100 % Sector median 0
Noble Corp. NE 80 Coca-Cola Enterprises CCE 100
FMC Technologies FTI 77 Avon Products AVP 84 Utilities
Schlumberger Ltd. SLB 76 Colgate-Palmolive CL 77 AES Corp. AES 84 %
Exxon Mobil Corp. XOM 69 Coca-Cola Co. KO 70
National Oilwell Varco NOV 66 Basket median 84 %
Spectra Energy SE 66 Sector median 0
Basket median 76 % Basket median 84 %

Sector median 24 Sector median 24 International Sales <GSTHINTL> Median 70 %
S&P 500 Median 28
Source: Compustat, company filings, and Goldman Sachs Global ECS Research.

2007 Peak vs. today: Global equity index performance
S&P 500 is closest to peak index level
110
2007 Peak Level

100
S&P 500
90 (-10%)
Indexed Performance
80 MXAPJ
(-26%)
70
Stoxx 600
60 (-35%)
50
TOPIX
(-53%)
40
30
Jul-07
Jul-08
Jul-09
Jul-10
Jul-11
Jul-12
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Source: Factset and Goldman Sachs Global ECS Research. As of March 29, 2012.

2007 Peak vs. today: Global equity indices
Level and change in earnings, EPS growth, P/E multiple, and price
Attribution of
Peak 29-Mar-12 Index Price Change
LTM Expected P/E LTM Expected P/E EPS Expected Forward Price
Sector EPS Growth NTM EPS Growth NTM Level Growth P/E Change
S&P 500 91 13 % 15.2 X 97 9% 13.2 X 5 pp (2)pp (13)pp (10)%
MXAPJ 29 17 17.3 34 13 11.4 10 (1) (34) (26)
Stoxx 600 27 8 13.7 23 8 10.5 (11) (1) (23) (35)
TOPIX 79 13 20.3 39 50 14.6 (32) 7 (28) (53)
TOPIX (since 1989) 50 8 53.5 39 50 14.6 (5)pp 8 pp (73)pp (70)%

S&P 500 P/E has generally had a negative
relationship with nominal bond yields
18
1976 - 2012
16
UST nominal 10-year yield (%)
14
12
10
2 R = 0.50
Current
0
0 5 10 15 20 25 30
S&P 500 forward P/E (NTM)
Source: Compustat, I/B/E/S, Haver, and Goldman Sachs Global ECS Research.

But the relationship has changed over time
Strong negative slope for two decades Positive relationship since 2000
18 8
1976 - 1999 2000 - 2012
16 7
R = 0.65

14
6
12
5
10
4
8
3
6
2
4
2 R = 0.60 1
Current
0 0
0 5 10 15 20 25 30 0 5 10 15 20 25 30
S&P 500 forward P/E (NTM) S&P 500 forward P/E (NTM)
Source: Compustat, I/B/E/S, Haver, and Goldman Sachs Global ECS Research.

US Treasury yields trade below Goldman Sachs fair
value estimate while earnings yield gap is wide
US Treasury yields below fair value S&P 500 earnings yield at a historically large
premium to 10-year UST yield
4.5
GS Sudoku "fair" value 25 18
+/- 1 std deviation
4.0 16
US Treasury 10-year bond yield (%)

S&P 500 forward earnings yield (%)
US Treasury 10-year yield (%)
20
14
UST 10-year yield (RHS)
3.5 12
15
10
3.0
8
10
6
2.5
4
5
S&P earnings yield (LHS) 2

2.0
UST 10-year 0 0
Jan-76
Jan-78
Jan-80
Jan-82
Jan-84
Jan-86
Jan-88
Jan-90
Jan-92
Jan-94
Jan-96
Jan-98
Jan-00
Jan-02
Jan-04
Jan-06
Jan-08
Jan-10
Jan-12
Jan-14
1.5
2009 2010 2011 2012 2013 2014
Source: Factset, Compustat, Haver Analytics, and Goldman Sachs Global ECS Research.

S&P 500 P/E multiple could reach 15x if Treasury
yield normalizes and Equities account for 50%
Share of yield spread closed by equity price change

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
1.50% 13.5 14.2 14.9 15.7 16.5 17.5 18.6 19.9 21.3 22.9
US Treasury fair value yield
1.75% 13.5 14.1 14.7 15.4 16.2 17.1 18.0 19.1 20.3 21.7
2.00% 13.4 14.0 14.6 15.2 15.9 16.6 17.5 18.4 19.4 20.6
2.25% 13.4 13.9 14.4 15.0 15.6 16.2 17.0 17.7 18.6 19.6
2.50% 13.3 13.8 14.2 14.7 15.3 15.8 16.5 17.1 17.9 18.7
2.75% 13.3 13.7 14.1 14.5 15.0 15.5 16.0 16.6 17.2 17.8
3.00% 13.3 13.6 13.9 14.3 14.7 15.1 15.6 16.0 16.5 17.1
3.25% 13.2 13.5 13.8 14.1 14.4 14.8 15.2 15.5 15.9 16.4
3.50% 13.2 13.4 13.7 13.9 14.2 14.5 14.8 15.1 15.4 15.7
3.75% 13.1 13.3 13.5 13.7 13.9 14.2 14.4 14.6 14.9 15.1
4.00% 13.1 13.2 13.4 13.5 13.7 13.9 14.0 14.2 14.4 14.6
4.25% 13.0 13.1 13.3 13.4 13.5 13.6 13.7 13.8 13.9 14.1
4.50% 13.0 13.1 13.1 13.2 13.3 13.3 13.4 13.4 13.5 13.6
Source: Goldman Sachs Global ECS Research

Disclosures
Equity Basket Disclosure

The Securities Division of the firm may have been consulted as to the various components of the baskets of securities discussed in this
report prior to their launch; however, none of this research, the conclusions expressed herein, nor the timing of this report was shared
with the Securities Division.

Disclosure Appendix
March 5, 2012
Disclosure Appendix
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.
Coverage group(s) of stocks by primary analyst(s)
There are no coverage groups associated with the analyst(s).
Company-specific regulatory disclosures
Compendium report: please see disclosures at http://www.gs.com/research/hedge.html. Disclosures applicable to the

companies included in this compendium can be found in the latest relevant published research.

Disclosure Appendix
Distribution of ratings/investment banking relationships

Goldman Sachs Investment Research global coverage universe
Rating Distribution Investment Banking Relationships
Buy Hold Sell Buy Hold Sell
Global 30% 55% 15% 47% 42% 34%
As of January 16, 2012, Goldman Sachs Global Investment Research had investment ratings on 3,593 equity securities.
Goldman Sachs assigns stocks as Buys and Sells on various regional Investment Lists; stocks not so assigned are deemed
Neutral. Such assignments equate to Buy, Hold and Sell for the purposes of the above disclosure required by NASD/NYSE
rules. See 'Ratings, Coverage groups and view s and related definitions' below .
Price target and rating history chart(s)
Compendium report: please see disclosures at http://www.gs.com/research/hedge.html. Disclosures applicable to the

companies included in this compendium can be found in the latest relevant published research.

Disclosure Appendix
Regulatory disclosures
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Disclosure Appendix
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display or is not applicable. Not Meaningful (NM). The information is not meaningful and is therefore excluded.
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The Global Investment Research Division of Goldman Sachs produces and distributes research products for clients of Goldman Sachs on a global basis. Analysts based in Goldman
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Disclosure Appendix
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This research is for our clients only. Other than disclosures relating to Goldman Sachs, this research is based on current public information that we consider reliable, but we do not
represent it is accurate or complete, and it should not be relied on as such. We seek to update our research as appropriate, but various regulations may prevent us from doing so.
Other than certain industry reports published on a periodic basis, the large majority of reports are published at irregular intervals as appropriate in the analyst's judgment.
Goldman Sachs conducts a global full-service, integrated investment banking, investment management, and brokerage business. We have investment banking and other business
relationships with a substantial percentage of the companies covered by our Global Investment Research Division. Goldman, Sachs & Co., the United States broker dealer, is a
member of SIPC (http://www.sipc.org).
Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients and our proprietary trading desks that reflect
opinions that are contrary to the opinions expressed in this research. Our asset management area, our proprietary trading desks and investing businesses may make investment
decisions that are inconsistent with the recommendations or views expressed in this research.
The analysts named in this report may have from time to time discussed with our clients, including Goldman Sachs salespersons and traders, or may discuss in this report, trading
strategies that reference catalysts or events that may have a near-term impact on the market price of the equity securities discussed in this report, which impact may be directionally
counter to the analysts published price target expectations for such stocks. Any such trading strategies are distinct from and do not affect the analysts fundamental equity rating for
such stocks, which rating reflects a stocks return potential relative to its coverage group as described herein.
We and our affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or short positions in, act as principal in, and buy or sell,
the securities or derivatives, if any, referred to in this research.
This research is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It does not constitute a
personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or
recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. The price and value of investments
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capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments.
Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for all investors. Investors should review current
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In producing research reports, members of the Global Investment Research Division of Goldman Sachs Australia may attend site visits and other meetings hosted by the issuers the
subject of its research reports. In some instances the costs of such site visits or meetings may be met in part or in whole by the issuers concerned if Goldman Sachs Australia
considers it is appropriate and reasonable in the specific circumstances relating to the site visit or meeting.
All research reports are disseminated and available to all clients simultaneously through electronic publication to our internal client websites. Not all research content is redistributed to
our clients or available to third-party aggregators, nor is Goldman Sachs responsible for the redistribution of our research by third party aggregators. For all research available on a
particular stock, please contact your sales representative or go to http://360.gs.com.
Disclosure information is also available at http://www.gs.com/research/hedge.html or from Research Compliance, 200 West Street, New York, NY 10282.
2012 Goldman Sachs.
No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent
of The Goldman Sachs Group, Inc

Disclosure Appendix
General disclosures
This research is for our clients only. Other than disclosures relating to Goldman Sachs, this research is based on current public information that we consider reliable, but we do not
represent it is accurate or complete, and it should not be relied on as such. We seek to update our research as appropriate, but various regulations may prevent us from doing so.
Other than certain industry reports published on a periodic basis, the large majority of reports are published at irregular intervals as appropriate in the analyst's judgment.
Goldman Sachs conducts a global full-service, integrated investment banking, investment management, and brokerage business. We have investment banking and other business
relationships with a substantial percentage of the companies covered by our Global Investment Research Division. Goldman, Sachs & Co., the United States broker dealer, is a
member of SIPC (http://www.sipc.org).
Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients and our proprietary trading desks that reflect
opinions that are contrary to the opinions expressed in this research. Our asset management area, our proprietary trading desks and investing businesses may make investment
decisions that are inconsistent with the recommendations or views expressed in this research.
The analysts named in this report may have from time to time discussed with our clients, including Goldman Sachs salespersons and traders, or may discuss in this report, trading
strategies that reference catalysts or events that may have a near-term impact on the market price of the equity securities discussed in this report, which impact may be directionally
counter to the analysts published price target expectations for such stocks. Any such trading strategies are distinct from and do not affect the analysts fundamental equity rating for
such stocks, which rating reflects a stocks return potential relative to its coverage group as described herein.
We and our affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or short positions in, act as principal in, and buy or sell,
the securities or derivatives, if any, referred to in this research.
This research is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It does not constitute a
personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or
recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. The price and value of investments
referred to in this research and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original
capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments.
Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for all investors. Investors should review current
options disclosure documents which are available from Goldman Sachs sales representatives or at http://www.theocc.com/about/publications/character-risks.jsp. Transaction costs
may be significant in option strategies calling for multiple purchase and sales of options such as spreads. Supporting documentation will be supplied upon request.
In producing research reports, members of the Global Investment Research Division of Goldman Sachs Australia may attend site visits and other meetings hosted by the issuers the
subject of its research reports. In some instances the costs of such site visits or meetings may be met in part or in whole by the issuers concerned if Goldman Sachs Australia
considers it is appropriate and reasonable in the specific circumstances relating to the site visit or meeting.
All research reports are disseminated and available to all clients simultaneously through electronic publication to our internal client websites. Not all research content is redistributed to
our clients or available to third-party aggregators, nor is Goldman Sachs responsible for the redistribution of our research by third party aggregators. For all research available on a
particular stock, please contact your sales representative or go to http://360.gs.com.
Disclosure information is also available at http://www.gs.com/research/hedge.html or from Research Compliance, 200 West Street, New York, NY 10282.
2012 Goldman Sachs.
No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent
of The Goldman Sachs Group, Inc

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The Goldman Sachs Group, Inc.

Goldman Sachs Research

Where to Invest Now

Goldman, Sachs & Co. 212-902-6781 david.kostin@gs.com

Risks to our forecast: Economy, policy, and margins

Sectors: Neutral, late-cycle given macro uncertainty

Themes: Strategies for stagnation in 2012

Goldman Sachs Global ECS Research 2

1300 12.5 x Health Care (1.4) 0.4

Goldman Sachs Global ECS Research 3

Goldman Sachs Global ECS Research 4

Goldman Sachs Global ECS Research 5

Consumer Spending 2.2 2.0 1.9

Goldman Sachs Global ECS Research 6

(4) Personal Income 4%

Goldman Sachs Global ECS Research 7

Balance Sheet Assets, Local Curr.

Goldman Sachs Global ECS Research 8

114 100 103

112 50 101 4QE +1%

Goldman Sachs Global ECS Research 9

1QE 2012 Bottom-up Consensus

Apple (AAPL) $1.00 53 % $4 47 % 25.2 % 93 bp

Goldman Sachs Global ECS Research 10

2012E Earnings Per Share Growth Annual

S&P 500 (ex-Financials) 3 3 8 20 9

Goldman Sachs Global ECS Research 11

Goldman Sachs Global ECS Research 12

Goldman Sachs Global ECS Research 13

Change in Earnings level Change in forward Earnings Growth rate

Change in P/E multiple (NTM) Change in index Price

Sector Points % Growth % Multiple % Points % Weight %

S&P 500 $5.48 6% (3)pp (25)% (2.0) (13)% (162) (10)% 0 bp 0%

Goldman Sachs Global ECS Research 15

AAPL drives change in the Info Tech sector

GE drives change in the Industrials sector

Goldman Sachs Global ECS Research 16

Apple (AAPL) 119 % 74 % 28.1 % 574 bp

Goldman Sachs Global ECS Research 17

Profit Margin 8.8% 8.7% 8.9% 9.1% 9.7%

Goldman Sachs Global ECS Research 18

Contribution to EPS Annual earnings growth rates

S&P 500 Operating EPS $96 $100 $106 $106 $119 3% 7% 10 % 13 %

Goldman Sachs Global ECS Research 19

Distribution of 2012 US GDP forecasts Distribution of 2013 US GDP forecasts

Goldman Sachs Global ECS Research 20

Sensitivity of 2012 EPS forecast to Sensitivity of 2013 EPS forecast to

Source: Goldman Sachs Global ECS Research. As of February 27, 2012.

Goldman Sachs Global ECS Research 21

1979 2013E 2006 2013E

Goldman Sachs Global ECS Research 22

2013 Sales Growth

Net Margin Annual Margin Expansion

Goldman Sachs Global ECS Research 24

Goldman Sachs Global ECS Research 25

Implied S&P 500 Fair Value

Fed Model 15.5X 1640 16 %

Average 1380 (2)%

Source: Goldman Sachs Global ECS Research. As of March 30, 2012.

Goldman Sachs Global ECS Research 26

Goldman Sachs Global ECS Research 27

95% confidence range

Goldman Sachs Global ECS Research 28