Opportunities in the Convertible

Bond Market

October 2008
 Executive Summary

 Convertible Bonds are corporate debt obligations with an embedded call option.

 Because of the fixed income and equity characteristics of converts, investors

expect better risk adjusted returns than both of these asset classes over time.
 However, during the current credit crisis, convertible bond valuations have
cheapened dramatically.
 This has created opportunities for investors who are looking to

 Establish long positions in distressed and investment grade assets

 Enhance the returns of equity portfolios by replacing long stock positions
with higher-yielding convertible bonds which are more senior in the capital
structure.
 Buy cheap equity options
 Obtain exposure to credits to which they otherwise would not have access:
for many issuers convertible bonds are the only credit products available.
 Assuming investors are comfortable with the overall credit of the underlying
issuer, a convertible bond offers the potential holder yield as well as a call option
on the issuing company.

2
 Why have Convertible Bonds Underperformed?
 Niche Market
 Over the last 7 years, convert arbitrageurs have increasingly become the dominant participants in the convertible market, with
many such players holding similar positions. As a result, there are few buyers in the market when arbitrageurs start to sell en
masse. In addition, new issues were structured towards convert arbitrageurs, with lower coupons and higher premiums to
increase volatility exposure at the expense of lower outright returns.
 Higher Funding Costs
 Because convert arbitrage is a leveraged strategy, the increase in funding costs have hurt returns for most convertible
arbitrageurs. This has caused a sell-off since it became more expensive to keep positions on the books, particularly on “carry
trades” (deep in-the-money convertible trades and mandatory trades).
 Lehman Unwind Trades
 When Lehman declared bankruptcy, many commercial banks who had repo lines with Lehman received converts that were
hypothecated to them as collateral for the repos. Since commercial banks were not active participants in convertible
investments, they sold these converts as they received it. This caused blocks to trade significantly below market prices that
put further pressure on valuations.
 TRACE Reporting
 The NASD Trace reporting requirements increased visibility of trades to the market/ Therefore market reactions to trades
(e.g. LEH unwind trades) exacerbated the selling. With each LEH block the entire market was repriced lower as all dealers
and investor alike saw each price. Before the TRACE requirement, block trades would trade “in the hole” but bonds would
snap back after the trade and valuations would not be depressed for a significant amount of time. Now each block trade
prices the market lower, leading to more selling because of the following reasons:
 Redemption Related Selling
 With convert arbitrageurs returns negative 15+% YTD, many funds are starting to face (or are beginning to fear and
prepare for) investor redemptions. This has led to more selling at depressed levels, putting further pressure on
valuations.
 Short Sale Rule
 The short selling ban on financials and other stocks adversely impacted valuations of the underlying converts.
Because investors cannot initiate or increase short positions in the specified names, sellers of those converts are
forced to sell into extremely low bids because arbitrageurs can not delta-hedge their positions. Valuation on these
names because without the ability to short stock against the converts, there is no way for arbitrageurs to extract the
theoretical cheapness. 3
 Why Invest in Convertibles Now?
Convertible Bonds: Market vs. Model Price
 Convertible bonds are trading significantly below values implied by Goldman Sachs
convertible models.
 The chart below shows the average difference between the market price of the 100
largest convertible bonds (based on face amount outstanding) and the “fair value” of the
bonds derived from Goldman Sachs’s models. The average is weighted by face amount
outstanding.
 Bonds were trading approximately in line with the model before the credit crisis began in
Jul 2007. However, since then the bonds have cheapened substantially and are now
trading more than 14% below the fair value based on Goldman Sachs model.

Source: Goldman Sachs. As of 10-Oct-08

4
 Why Invest in Convertible Now?
Yield Analysis: Converts vs. High-Yield & IG
 Yields of convertible bonds have widened significantly more than yields of high-yield and investment
grade bonds over the past year
 The chart below compares the average yield* of the largest 100 U.S. convertible bonds as of 31Oct07,
based on face amount outstanding to the yield of the iBoxx USD Liquid High-Yield Index.
 The average convertible bond yield has widened by more than 800 bps over the past year, while high-yield
and investment grade bond yields have only increased by approximately 260 bps and 150 bps respectively.
 Note that a portion of the widening of converts yields is due to the equity exposure of the converts. As
equities fall, converts yields will rise even if credit remains constant.

Source: Goldman
Sachs

*Yield shown is the maximum of Yield-to-Put and Yield-to-Maturity. Bonds are chosen that have at least $200mn face
amount outstanding and at least 18 months until maturity. Average is weighted by face amount outstanding.
As of 10-Oct-08 5
 Why Invest in Convertibles Now?
Low Implied Volatility: Converts vs. SPX
 The implied volatilities of Convertible bonds are trading significantly below the implied
volatilities of SPX names, based on Goldman Sachs models.
 The chart below compares the average implied volatility of the 100 largest convertible
bonds (based on face amount outstanding) and the average 2y, 25-delta call volatility of
the top 200 SPX names, extrapolated from the implied volatility surface. The bond and
option averages are weighted by face amount outstanding and market cap, respectively.
 While equity option volatilities have been increasing in recent months, converts implied
volatilities have been rapidly declining.

Note: calculation of implied vol for

converts requires a credit-spread
input. For names that do not have
CDS markets, we back out an
estimate of the spread from the
HY CDX.

Source: Goldman Sachs. As of 10-Oct-08

6
 Convertible Bond Investment Themes

 On the following slides, we show examples of different investment themes in the

convertible bond market:
 High Yield
 Investment Grade
 Equity Income Opportunities
 Negative Basis Trades
 For each of these themes, we show examples* of bonds that meet this criteria.

 We would be happy to work with you to customize a list of convertible bonds to

meet your objectives.

*note that these bonds are examples only. This presentation does not provide any opinion about
the fundamental strength of any of the bonds shown or of their issuers.

7
 High Yield Opportunities: Yield and Leverage By
Sector
 The table below shows that the Media, Telecom, Transportation, Basic Materials, Semis,
Autos, Software, Hardware, and Consumer Cyclical sectors provide the best trade-off between
yield and leverage.
 However, opportunities may be found in specific bonds in other sectors as well.
Average Statistics of Converts With At Least $200mm Face Amount Outstanding
(Sorted By Difference Between Avg Yield and Avg Leverage)
Sector Avg Yield (%) Avg Net Debt/Adj EBITDA Total Size (mm) # Bonds
Media 7.4 1.3 $10,639 19
Telecom 9.17 3.4 $14,949 24
Transportation 7.38 2.1 $1,928 6
Basic Materials 7.06 1.8 $781 2
Autos 8.71 4.5 $6,303 6
Semis 4.24 0.3 $10,586 19
Software 2.91 -0.2 $10,626 23
Hardware 8.1 5.1 $16,376 25
Consumer Cyclicals 4.52 1.6 $8,043 18
Healthcare 3.08 1.4 $31,193 53
Consumer Staples 4.57 2.9 $4,151 8
Reits 9.09 8.4 $22,616 42
Biotec 1.03 0.6 $13,535 22
Industrials 2.18 1.8 $7,886 20
Natural Resources 1.26 0.9 $2,342 6
Energy 2.22 2.7 $19,860 26
Construction -3.87 -1.1 $600 2
Utility -14.28 4.7 $787 3
Banks 10.91 n/a $9,261 13
Insurance 9.01 n/a $6,159 6

Yield is max of yield-to-put and yield-to-maturity.

Averages are weighted by face amount outstanding.
Only includes bonds with at least $200mm face amount outstanding whose underlying issuer has positive Adj.
EBITDA
Source: Goldman Sachs
As of 10-Oct-08 8
 High Yield Opportunities

 The table below shows a few examples of high-yielding convertible bonds with at least
$200mm of face amount outstanding.

Description Tkr BondPx StkPx %Premium YTM/YTP S&P Moodys PutDate IssueSize($)
EYE 2.500 07/15/24 A EYE 78.53 6.83 479.48 23.01 B- Caa1 1/15/2010 350,000
Q 3.500 11/15/25 Q 70.5 2.18 81.96 21.7 B+ B1 11/15/2010 1,265,000
NT B 2.125 04/15/14 NT 41.31 1.63 750.31 19.31 B- NR 4/15/2014 575,000
SVVS 3.000 05/15/12 SVVS 58.24 7.12 485.58 19.28 NR NR 5/15/2012 345,000
LAMR 2.875 12/31/10 LAMR 73.94 22.48 61.91 17.29 B NR 12/31/2010 287,209
NIHD 2.750 08/15/25 NIHD 79.05 21.9 83.07 15.7 NR NR 8/15/2010 350,000
HERO 3.375 06/01/38 A HERO 61.12 6.24 392.48 15.34 NR NR 6/1/2013 250,000
FLEX 1.000 08/01/10 FLEX 78.06 4.97 145.39 15.1 BB- NR 8/1/2010 500,000
BGC 1.000 10/15/12 BGC 62.06 16.43 217.02 13.62 NR NR 10/15/2012 475,000
BGC 0.875 11/15/13 BGC 54.545 16.43 67.58 13.49 B+ B1 11/15/2013 355,000
CIEN 0.875 06/15/17 CIEN 36.14 7.27 94.86 13.32 B+ NR 6/15/2017 500,000
BID 3.125 06/15/13 BID 65.15 11.62 91.36 13.32 BBB- Ba3 6/15/2013 200,000
CHK A 2.500 05/15/37 CHK 46.665 16.52 46.05 12.95 BB Ba3 5/15/2017 1,150,000
MEE 3.25 8/01/15 MEE 58.705 20.73 148.69 12.39 BB- NR 8/1/2015 690,000
OCR 3.250 12/15/35 OCR 57.74 22.97 101.27 12.21 B+ B3 12/15/2015 977,500
HOLX 2.000 12/15/37 HOLX 62.145 14.59 64.73 12.02 B+ NR 12/13/2013 1,725,000
LPNT 3.500 05/15/14 LPNT 66.04 23.44 46.45 11.95 B NR 5/15/2014 575,000
ARM 4.000 2/15/27 A ARM 53.67 9.69 49.42 11.79 B NR 2/15/2019 200,000
ALU A 2.750 06/15/23 ALU 85.99 2.33 525.36 11.7 BB- Ba3 6/15/2010 750,000
AGP 2.000 05/15/12 AGP 72.41 18.1 70.73 11.54 B+ NR 5/15/2012 260,000
NTAP 1.750 06/01/13 NTAP 66.45 13.25 60.93 11.07 NR NR 6/1/2013 1,265,000
LPNT 3.250 08/15/25 LPNT 73.85 23.44 93.52 10.91 B B1 2/15/2013 225,000
ARM 4.625 3/1/26 A ARM 69.75 9.69 52.1 10.52 B NR 3/1/2016 300,000
SFD 4.000 06/30/13 SFD 78.415 13.73 29.76 9.8 BB- NR 6/30/2013 400,000
STX 2.375 08/15/12 STX 76.27 8.66 51.04 9.79 BB+ NR 8/15/2012 326,000
MIL 3.750 06/01/26 A MIL 83.89 55.99 36.02 9.76 BB- NR 12/1/2011 565,000
MYL 3.750 09/15/15 A MYL 71.445 7.22 32.03 9.44 B+ NR 9/15/2015 500,000
SNDK 1.000 05/15/13 SNDK 75.05 15.92 290.84 7.39 B+ NR 5/15/2013 1,150,000

Source: Goldman Sachs. Prices as of 10 - Oct-08.

9
 Investment Grade Opportunities

 The table below shows examples of yield opportunities in investment grade convertible bonds.

Description Tkr BondPx StkPx Parity Premium %Premium YTM/YTP S&P Moodys
PLD 1.875 11/15/37 PLD 55.46 27.31 33.31 22.4 67.27 16.91 BBB+ NR
OMC 0.000 02/07/31 OMC 95.225 30.12 54.76 40.59 74.12 15.83 A- Baa1
DRE 3.750 12/07/11 DRE 71.64 16.26 33.23 38.66 116.33 15.42 BBB+ NR
AVT 2.000 03/15/34 AVT 94.68 16.99 50.21 44.72 89.07 14.99 BBB- Baa3
BID 3.125 06/15/13 BID 65.15 11.62 34.18 31.22 91.36 13.32 BBB- Ba3
BXP 2.875 02/15/37 BXP 72.38 76.18 53.65 18.98 35.38 13.31 A- NR
VNO 2.850 03/15/27 VNO 71.85 78.23 48.15 23.95 49.74 13.15 BBB Baa2
TECD 2.750 12/15/26 TECD 73.98 22.57 41.6 32.88 79.05 12.81 BBB- Ba2
RIG A 1.625 12/15/37 RIG 80.115 69.05 40.95 39.29 95.93 12.30 BBB+ Baa2
RIG B 1.500 12/15/37 RIG 74.165 69.05 40.95 33.34 81.4 11.41 BBB+ Baa2
NBR 0.940 05/15/2011 NBR 78.005 14.00 30.55 47.52 155.53 10.92 BBB+ NR
EQR 3.850 08/15/26 EQR 82.87 41.00 67.33 15.79 23.45 10.92 BBB+ NR
RIG C 1.500 12/15/37 RIG 70.475 69.05 40.95 29.65 72.39 10.38 BBB+ Baa2
GENZ 1.25 12/01/23 GENZ 98.63 64.59 90.66 8.22 9.06 10.29 BBB+ NR
STJ 1.220 12/15/08 STJ 98.435 32.52 62.47 36.09 57.76 10.13 A- NR
CCL 1.132 04/29/33 CCL 60.92 28.02 34.13 27.04 79.24 8.87 A- A3
BXP 3.625 02/15/14 BXP 78.52 76.18 64.79 13.98 21.58 8.68 A- NR
ADM 0.875 02/15/14 ADM 69.135 15.45 35.28 33.98 96.31 8.09 A NR
OMC 0.000 06/15/33 OMC 87.645 30.12 58.49 29.29 50.08 7.99 A- Baa1
AMGN A .125 02/01/11 AMGN 83.79 48.58 60.84 23.2 38.12 7.87 A+ A2
BXP 3.750 05/15/36 BXP 84.39 76.18 76.23 8.41 11.03 7.80 A- NR
OMC 0.000 07/01/38 OMC 88.08 30.12 58.49 29.85 51.04 7.74 A- Baa1
MDT A 1.500 04/15/11 MDT 87.125 40.00 71.49 15.76 22.05 7.17 AA- A1
WYE L-50bps 01/15/24 WYE 96.57 29.89 49.49 47.33 95.62 6.58 A+ A3
EMC 1.75 12/01/11 EMC 87.83 10.12 62.94 25.13 39.93 5.99 A- NR

Source: Goldman Sachs. Prices as of 10-Oct-08.

10
 Equity Income Opportunities
Overview of Break-Even Metric
 The recent cheapening of convert valuations has created attractive opportunities for equity
income oriented players.
 Since many convertible bonds are currently yielding higher than their underlying dividend
yields, for equity investors this creates an opportunity to play the income pick-up as well
as upside in common stock.
 Swapping into convertibles from equity also allows investors to gain relative senior
position vs. equity in the capital structure.
 A common metric for evaluating equity income pick-up strategies is the amount of time a
convert must be held until the additional cash-flow earned vs. the stock position is equal to the
premium initially paid to swap into the convert.
 This metric is referred to as the “Break-Even”
 It is given by the following formula:

Bond Price - (Stock Price × Conversion Ratio)

Breakeven =
Coupon - (Dividend Yield * Conversion Ratio * Stock Price)

 Note that a convertible bond can outperform its underlying stock position in less time
than this breakeven if convertible bond valuations strengthen.

11
 Equity Income Opportunities
Breakeven Metric Example
 Consider a bond with the following details
 Bond Price: $73.67 per $100 Bond Face
 Coupon: 6.5% of Bond Face
 Conversion Ratio: 52.03 Shares per $1,000 Bond Face
 Stock Price: $8.47 per share
 Dividend Yield: 1.69%
 The premium of the bond over the stock price, per $100 face, is equal to:

52.03
Premium = $73.67 − × $8.47 = $29.60
10
 The annual carry of the bond over the stock, per $100 face, is equal to:
52.03
Annual Carry vs Stock = $6.5 − 1.69% × $8.47 × = $5.76
10
 The breakeven of the bond vs. the stock is equal to:
$29.60
Breakeven = = 5.1 years
5.76
 Thus, an investor must hold the bond for 5.1 years before the extra carry earned is equal to the
upfront premium paid to swap into the bond. Again, the bond could outperform sooner than
5.1 years if its valuation rises vs. the stock.

12
 Equity Income Opportunities

 The table below shows examples of potential equity to convertibles swap candidates ordered
by their break-evens.
Description Tkr BondPx StkPx Premium %Premium Brk-Evn(yrs) Call Date PutDate YTM/YTP S&P Moodys
F 4.250 12/15/36 F 28.37 1.99 7.24 33.47 1.7 12/20/2013 12/20/2016 25.13 CCC Caa1
VRTX 4.750 02/15/13 VRTX 118.04 25.44 8.34 7.59 1.8 2/15/2010 2/15/2013 0.48 NR NR
DRS 2.000 02/01/26 DRS 130.72 76.21 3.32 2.60 1.9 2/1/2009 2/1/2011 0.18 BB- B2
ITRI 2.500 8/1/26 ITRI 115.57 71.25 6.72 6.15 2.7 8/1/2011 8/1/2011 1.47 B- NR
THOR 1.3798 5/16/34 THOR 74.85 24.23 3.71 5.19 2.7 5/16/2011 5/16/2011 1.31 NR NR
FTWR 9.000 11/15/12 FTWR 41.00 1.29 26.44 169.91 2.9 11/15/2010 11/15/2012 43.17 NR NR
LVLT 10.000 5/1/11 LVLT 71.83 1.46 32.28 79.59 3.2 5/1/2009 5/1/2011 25.08 CCC NR
DST (A) 4.125 08/15/23 DST 97.03 41.25 13.49 16.05 3.3 8/20/2010 8/15/2010 5.56 NR NR
CEPH 2.000 06/01/15 CEPH 138.59 61.61 6.91 5.24 3.5 6/1/2015 -3.21 NR NR
VMED 6.500 11/15/16 VMED 45.87 5.16 20.03 74.59 3.5 11/15/2016 20.03 B- NR
AMD 6.000 05/01/15 AMD 36.20 3.81 23.64 174.19 3.9 5/1/2015 26.9 B NR
AG 1.750 12/31/33 AG 166.47 35.66 7.12 4.46 4.1 1/1/2011 12/31/2010 -0.67 BB B1
CQB 4.250 08/15/16 CQB 74.07 12.63 18.06 32.09 4.2 2/19/2014 8/15/2016 8.87 CCC+ NR
SFD 4.000 06/30/13 SFD 78.42 13.73 18.01 29.76 4.5 6/30/2013 9.8 BB- NR
ATK 3.000 08/15/24 ATK 111.04 77.72 13.7 14.06 4.6 8/20/2014 8/15/2014 2.16 BB- NR
VRSN 3.250 08/15/37 VRSN 78.87 22.17 14.87 23.05 4.6 8/15/2017 8/15/2037 4.54 NR NR
MYL 3.750 09/15/15 MYL 71.45 7.22 17.36 32.03 4.6 9/15/2015 9.44 B+ NR
STP 3.000 03/15/13 STP 67.44 21.90 14.44 27.12 4.8 3/15/2013 12.81 NR NR
AMD 5.750 08/15/12 AMD 45.93 3.81 28 147.93 4.9 8/15/2012 29.93 B NR
PSSI 3.125 08/01/14 PSSI 96.36 17.11 15.96 19.80 5.1 8/1/2014 3.78 BB- NR
ALO 2.125 03/15/27 ALO 106.22 30.62 12.55 13.37 5.9 3/20/2014 3/15/2014 1.71 B+ NR
MIL 3.750 06/01/26 MIL 83.89 55.99 22.28 36.02 5.9 12/1/2011 12/1/2011 9.76 BB- NR
LPNT 3.500 05/15/14 LPNT 66.04 23.44 21.03 46.45 6.0 5/15/2014 11.95 B NR
LEAP 4.500 07/15/14 LEAP 53.64 24.24 28.13 108.18 6.3 7/15/2014 17.44 CCC Caa1
CEDC 3.000 03/15/13 CEDC 57.52 26.45 18.86 48.47 6.3 3/15/2013 16.97 B- NR
KCI 3.250 04/15/15 KCI 64.66 22.44 21.21 48.53 6.5 4/15/2015 10.93 B+ NR
SKS 2.000 03/15/24 SKS 62.61 5.83 14.01 28.76 7.0 3/21/2011 3/15/2014 11.46 BB- NR
CHK A 2.500 05/15/37 CHK 46.67 16.52 14.75 46.05 7.2 5/15/2017 5/15/2017 12.95 BB Ba3

Source: Goldman Sachs. Prices as of 10-Oct-08.

13
 Negative Basis Trades

 Due to technical factors, there are times when a convertible bond can trade
below the theoretical price derived from CDS spread (commonly referred to as
Bond Floor).
 Such a bond is considered to have a negative basis.
 This could be an attractive outright long convertible bond trade or a relative value
trade by being long convertible and long CDS protection against it.
 Example:
 BXP 2.875s due 2/15/2037 Puttable 2/20/2012. Price quoted 72.375 vs.
$76.18 on 10/10/08.
 Bond is less than 4 years to put. Using 300bps CDS spread (4yrs)
bond floor or investment value of the convertible implies 89.05.
 Therefore, bond basis is calculated as (72.375 – 89.05) = -16.68

14
 Negative Basis Trades

 Below we show examples of negative basis trades with at least $200mm of face amount
outstanding.
Description Tkr BondPx BondFloor Basis StkPx Parity Premium %Premium YTM/YTP S&P Moodys
PLD 2.625 5/15/38 PLD 56.05 74.91 -18.86 27.31 35.83 20.47 57.13 16.62 BBB+ NR
DRE 3.750 12/07/11 DRE 71.64 90.13 -18.49 16.26 33.23 38.66 116.33 15.42 BBB+ NR
PLD 1.875 11/15/37 PLD 55.46 73.8 -18.34 27.31 33.31 22.4 67.27 16.91 BBB+ NR
BXP 2.875 02/15/37 BXP 72.38 89.06 -16.68 76.18 53.65 18.98 35.38 13.31 A- NR
DDR 3.500 08/15/11 DDR 62.17 79.69 -17.52 19 29.18 33.24 113.9 22.03 BBB NR
DDR 3.000 03/15/12 DDR 58.36 75.15 -16.79 19 25.42 33.19 130.57 20.42 BBB NR
VNO 2.850 03/15/27 VNO 71.85 88.15 -16.30 78.23 48.15 23.95 49.74 13.15 BBB Baa2
WRI 3.95 08/01/26 WRI 75.20 90.45 -15.25 26.55 54.1 21.35 39.46 15.03 BBB+ NR
VNO 3.625 11/15/26 VNO 76.90 91.89 -14.99 78.23 50.98 26.17 51.34 12.83 BBB Baa2
BRE 4.125 08/15/26 BRE 74.72 89.15 -14.43 38.25 53.72 21.25 39.57 13.69 BBB NR
RIG B 1.500 12/15/37 RIG 74.17 86.94 -12.78 69.05 40.95 33.34 81.4 11.41 BBB+ Baa2
HPT 3.800 03/15/27 HPT 66.38 78.67 -12.29 11.29 22.36 44.28 198.05 17.05 BBB Baa2
RIG A 1.625 12/15/37 RIG 80.12 92.06 -11.95 69.05 40.95 39.29 95.93 12.3 BBB+ Baa2
RIG C 1.500 12/15/37 RIG 70.48 82.19 -11.72 69.05 40.95 29.65 72.39 10.38 BBB+ Baa2
NBR 0.940 05/15/2011 NBR 78.01 89.14 -11.14 14 30.55 47.52 155.53 10.92 BBB+ NR
ADM 0.875 02/15/14 ADM 69.14 77.88 -8.74 15.45 35.28 33.98 96.31 8.09 A NR
EQR 3.850 08/15/26 EQR 82.87 91.53 -8.66 41 67.33 15.79 23.45 10.92 BBB+ NR
AMGN A .125 02/01/11 AMGN 83.79 91.87 -8.08 48.58 60.84 23.2 38.12 7.87 A+ A2
PRU L-163 bps 12/15/37 PRU 84.50 91.84 -7.34 36.13 27.29 57.71 211.47 26.17 A+ A3
MDT A 1.500 04/15/11 MDT 87.13 94.41 -7.29 40 71.49 15.76 22.05 7.17 AA- A1
BXP 3.625 02/15/14 BXP 78.52 85.76 -7.24 76.18 64.79 13.98 21.58 8.68 A- NR
PRU L-240 bps 12/12/36 PRU 90.50 97.49 -6.99 36.13 34.67 56.33 162.47 62.9 A+ NR
OMC 0.000 06/15/33 OMC 87.65 94.18 -6.54 30.12 58.49 29.29 50.08 7.99 A- Baa1
OMC 0.000 07/01/38 OMC 88.08 94.18 -6.10 30.12 58.49 29.85 51.04 7.74 A- Baa1
AMGN B .375 02/01/13 AMGN 78.95 83.39 -4.44 48.58 61.12 18.08 29.58 5.94 A+ A3
BXP 3.750 05/15/36 BXP 84.39 88.57 -4.18 76.18 76.23 8.41 11.03 7.8 A- NR
MDT B 1.625 04/15/13 MDT 84.13 87.87 -3.75 40 71.49 12.76 17.86 5.64 AA- A1
EMC 1.75 12/01/11 EMC 87.83 91.4 -3.57 10.12 62.94 25.13 39.93 5.99 A- NR

Source: Goldman Sachs. Prices as of 10-Oct-08.

Bond floor implied by CDS
15
 Disclaimer

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current options disclosure document before entering into any options transactions. Current United States listed options disclosure documents
are available from our sales representatives or at http://theocc.com/publications/risks/riskstoc.pdf. This material is not for distribution to retail
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including derivatives, mentioned in this material will not be made available by us to any such retail client. Foreign-currency-denominated
securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of, or income derived from, the
investment. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies, effectively assume
currency risk. The material is based on information that we consider reliable, but we do not represent that it is accurate, complete and/or up to
date, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only and
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asset value. These ETFs can trade at a discount or premium to the net asset value. There is always a fundamental risk of declining stock
prices, which can cause losses to your investment.

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 Disclaimer

Order Handling Practices for U.S. Listed Equity and Index Options: While the firm is holding your options order, the firm or its clients may
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Conflict of Interest Disclosure: We are a full-service, integrated investment banking, investment management, and brokerage firm. The
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from the firm's trading, capital markets, investment banking and other business. They, along with other salespeople, traders, and other
professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the
opinions expressed herein or the opinions expressed in research reports issued by our Research Departments, and our proprietary trading and
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© Copyright 2008 The Goldman Sachs Group, Inc. All Rights Reserved.

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