Goldman Sachs Growth &
Emerging Markets Debt
Local Portfolio
October 2012
PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION IN CONNECTION WITH POOLS AND/OR ACCOUNTS WHOSE PARTICIPANTS ARE
LIMITED TO QUALIFIED ELIGIBLE PERSONS, AN OFFERING MEMORANDUM FOR THIS POOL AND/OR THIS BROCHURE OR ACCOUNT DOCUMENT IS NOT REQUIRED TO
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CONSEQUENTLY, THE COMMODITY FUTURES TRADING COMMISSION HAS NOT REVIEWED OR APPROVED THIS OFFERING OR ANY OFFERING MEMORANDUM FOR THIS
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For professional investors only –Not for public distribution
Goldman Sachs Asset Management
Biographies
2
Blair Reid, Global Fixed Income and Currency team,
Goldman Sachs Asset Management
Blair joined Goldman Sachs Asset Management in 2006 as a member
of the Global Fixed Income and Currency team.
Prior to joining GSAM, Blair spent five years at Barclays Global
Investors.
Blair gained a B.Ec. degree in Economics and Actuarial studies from
Macquarie University, in Sydney. Blair is a Fellow of the Institute of
Actuaries.
Goldman Sachs Asset Management
The big picture The world's changing economic "centre of gravity", 1980 - 2030
3
Source: Danny Quah, London School of Economic (http://econ.lse.ac.uk/~dquah/).
This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or
investment advice. Please see additional disclosures.
Today 1980 2030
Goldman Sachs Asset Management
EM fundamentals show a broad picture of health
4
Source: IMF and Haver, Data as at 01-Jan-2012
This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or
investment advice. Please see additional disclosures.
Government Debt (% of GDP)
Fiscal Deficit (% of GDP)
Current Account Balance (% of GDP)
108
34
0
20
40
60
80
100
120
DM EM-2.6
-1.1
-3.0
-2.0
-1.0
0.0
DM EM
-0.5
0.7
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
DM EM
DM EM
Goldman Sachs Asset Management
EM Central Banks are able to pursue counter cyclical
monetary policy
5
Inflation targeting (IT) in EM Inflation in EM
Source: IMF WEO, April 2012.
This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or
investment advice. Please see additional disclosures.
Countries
IT policy
adopted
Israel 1997
Czech Republic 1998
South korea 1998
Brazil 1999
Poland 1999
Chile 2000
Colombia 2000
South Africa 2000
Thailand 2000
Hungary 2001
Mexico 2001
Peru 2002
Philippines 2002
Guatemala 2005
Indonesia 2005
Romania 2005
Slovak Republic 2005
0
10
20
30
40
50
60
70
80
90
100
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
Emerging and developing economies
Central and eastern Europe
Commonwealth of Independent States
Developing Asia
Latin America and the Caribbean
Middle East and North Africa
Sub-Saharan Africa
Goldman Sachs Asset Management
Emerging Market
For illustrative purposes only. Source: Bloomberg, S&P, GSAM. Countries rating reflected is foreign currency long term on Bloomberg. As of Aug 31, 2012.
This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research
or investment advice. Please see additional disclosures. Past performance does not guarantee future results, which may vary.
Developed Market
AAA AA
Brazil South Africa
Mexico
Thailand
Poland
Malaysia
Hungary
Spain
Italy
Belgium
US
UK
Netherlands
Japan
Turkey Russia
Indonesia
Germany
France
Canada
A BBB BB B CCC
Brazil
South Africa
Mexico
Thailand
Poland
Malaysia Hungary
Spain
Italy
Belgium
US
UK
Netherlands
Japan
Turkey
Russia
Indonesia
Germany
France Canada
Today
2000
DM & EM Sovereign credit risk profile converging
6
Downgraded since 2000
Upgraded since 2000
Goldman Sachs Asset Management
Local EMD remains attractive
7
Nominal yield differentials
Source: Bloomberg, as of 31-Jul-12
Source: JP Morgan, Bloomberg. This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not
be construed as research or investment advice. Past performance is not indicative of future results, which may vary. Please see additional disclosures.
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Bo
nd
Yie
lds (
%)
JPM GBI-EM Global Index - YTM JPM GBI Global Index - YTMEM Local Nominal Yield DM Nominal Yield
Goldman Sachs Asset Management
Reasons to consider Local EMD
8
* From January 2003 to August 2012.
For illustrative purposes only. Diversification does not protect an investor from market risk and does not ensure a profit.
Higher yields and better fundamentals than developed markets
Key driver of global growth
Potential to benefit from currency appreciation
Low correlation to traditional fixed income (~0.4*) and can provide portfolio diversification benefits
A typical portfolio curently yields around 6%, exhibits volatility around 13%, and has exposure to 15-30 countries.
More than ever, we believe that Local EMD
should be a strategic allocation within an overall fixed income portfolio.
Goldman Sachs Asset Management
Goldman Sachs Growth & Emerging
Markets Debt Local Portfolio
Goldman Sachs Asset Management
Graph as of September 30, 2012. Sources: GSAM, JPMorgan. * Includes approximately $315mn of assets not directly traded by the EMD desk but that are part of EMD portfolios. .
This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or
investment advice. Please see additional disclosures.
Long history of managing Emerging Markets Debt at GSAM
10
De
c-9
3
De
c-9
4
De
c-9
5
De
c-9
6
De
c-9
7
De
c-9
8
De
c-9
9
De
c-0
0
De
c-0
1
De
c-0
2
De
c-0
3
De
c-0
4
De
c-0
5
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c-0
6
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c-0
7
De
c-0
8
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c-0
9
De
c-1
0
De
c-1
1
-
500
1,000
1,500
2,000
2,500
3,000
Marke
t Valu
e (U
SD, b
illion
)
EM USD Sovereign Debt (JPM EMBI Global)
EM USD Corporate Debt (JPM CEMBI Broad)
EM Local Sovereign Debt (JPM GBI-EM Broad)
GSAM Milestones
EM currency
management
First dedicated EM Local
debt portfolio (bm agnostic)
EM debt part of
Core Fixed Income
First dedicated EM
Local debt portfolio
(JPM GBI-EM GD)
First dedicated EM
External debt portfolio
Manage EM corporates
within portfolios
EM Local debt part
of Core FI portfolios
First dedicated EM
Corp portfolio
De
c-9
3
De
c-9
4
De
c-9
5
De
c-9
6
De
c-9
7
De
c-9
8
De
c-9
9
De
c-0
0
De
c-0
1
De
c-0
2
De
c-0
3
De
c-0
4
De
c-0
5
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c-0
6
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c-0
7
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c-0
8
De
c-0
9
De
c-1
0
De
c-1
1-
500
1,000
1,500
2,000
2,500
3,000
Marke
t Valu
e (U
SD, b
illion
)
EM USD Sovereign Debt (JPM EMBI Global)
EM USD Corporate Debt (JPM CEMBI Broad)
EM Local Sovereign Debt (JPM GBI-EM Broad)
GSAM Milestones
EMD Market Size
(JPM benchmarks, September 2012)
Total: $2.6 trillion
EM External
$555EM Local
$1,530
EM Corp$538
GSAM EMD Assets
Total: $33.4 billion*
Including FI portfolios: $40.1 billion
(As of September 2012)
EMD Hard
$16.3
EMD Hard
(constr.)
$4.9
EMD Local $8.8
EM Corp $3.4
Goldman Sachs Asset Management
Cross-pollination of ideas between EMD and other FI teams
The Emerging Markets team benefits from synergies with other GSAM FI teams.
The EMD team is seated between the US Corp Credit group and the Global Commodities team.
The Treasury/MBS professionals are close-by to advise on duration and interest rate exposure.
11
As of July 31, 2012.
Currency
Commodities
Money
markets
Securitised
Cross
sector
Duration
Emerging
market
debt
Global
Equity
Team
Corporates
Emerging Market
Debt (+8) TSY/MBS
(+12) Risk (+4)
Global Commodities
(+4)
US Corporate
Credit (+30)
New York Floor Layout
Goldman Sachs Asset Management
Fully resourced team – specialists across EMD asset classes
Head of Emerging Markets Debt
Sam Finkelstein (16)
Sovereign Economists
Sovereign Analysis
Ricardo Penfold (15)
Owi Ruivivar (15)
Diego Sasson (5)
Lead Portfolio Managers
Portfolio Monitoring
Yacov Arnopolin (13)
Blair Reid (11)
Traders
Security Selection
Vladimir Liberzon (11)
Michael Jalkut (13)
Jacqueline Leary (4)
Neil Squires (11)
Singapore
New York
London
Bangalore
Singapore
Beijing (3-person team)*
Seoul (5-person team)*
Corporate Analysts
EM Corporate Analysis
Nick Saunders (11)
Salman Niaz (12)
Hubert Chu (6)
Aakash Thombre (5)
Sowmya Srinivasan (<1)
Vikalp Kumar (4)
Prashant Bajaj(<1)
Krishnan V R (<1)
Numbers in parentheses ( ) indicate years of investment experience, as of 1-Oct-2012 *Cities where local teams provide colour. 12
Goldman Sachs Asset Management
Investment approach
13
Currency team Macro team Country /
Peripherals team Commodities team
Jim O’Neill Growth
Markets Team
Optimal portfolio
construction – allocate
risk to best ideas
Portfolio beta positioning
influenced by macro views of
GSAM FI risk teams.
Sam Finkelstein has ultimate
responsibility for overall
portfolio beta decisions.
GSAM FI Inputs
EM Team Portfolio Decisions
Sovereign Economists Local analysts EM traders EM Corp team
Country selection – a
research-intensive process;
decisions via dialogue and
debate within EMD team.
Sam Finkelstein acts as
arbiter for the discussion.
Country
selection Security selection and
relative value views.
Input on market
technicals, flows and
liquidity.
Security
selection
Tactical
positioning
EM Team Portfolio Decisions
Goldman Sachs Asset Management
Three pillars of analyzing sovereign debt
Uniform approach to formulating macroeconomic views on individual countries.
Choose best expression of current views – hard currency vs local debt vs FX vs corporates.
Ensure highest conviction ideas are in all portfolios – “best ideas” approach.
14
Source: GSAM
For illustrative use only. Please see additional disclosures. This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political
conditions and should not be construed as research or investment advice. Please see additional disclosures.
What to watch out for - RED FLAGS
Fiscal 1 Balance of Payments 2 Monetary/Financial 3
Current account deficit as a % of GDP above 5%
Consistently high fiscal deficit above 4%
High external debt relative to exports & GDP
Excessive credit growth
Debt level and its
composition
Main drivers of fiscal
revenue
Political ability to raise
taxes or cut expenditures
Structure of the balance
of payment
Capital account and
current account
Destination of the
country’s exports and
imports
Health of the financial
sector
Credit growth outlook
Composition, vulnerability
and leverage of the
banking sector
Three pillars of analyzing sovereign debt
Goldman Sachs Asset Management
Example of Local Debt Analysis Overweight Brazil
15
GSAM computations based on Bloomberg and GSAM data. For illustrative purposes only to demonstrate GSAM's analytical process. Any reference to an individual country does not
constitute a recommendation to buy, hold or sell a security of such country.
Analysis:
Analysis supported by our research on the ground in
Sao Paulo
Real yields in Brazil are extremely high compared to
all other emerging market yields
We attempted to model a ‘Reserve Bank Reaction
Function’ which points to the likely behaviour of
central banks around the world (Taylor rule). This
model is a function of growth, output gap & inflation.
Our analysis suggested the Brazil central bank had
scope to cut rates. We believe real interest rates are
going to decrease in the future and converge in line
with other emerging market economies levels.
Positioning:
Overweight Brazil local debt
0
2
4
6
8
10
12
14
16
0 5 10 15 20 25 30
(%)
2006 2008 2010 2011
Brazilian Inflation Linked Yield Curves
Goldman Sachs Asset Management
Emerging Market Debt Local Goldman Sachs Growth & Emerging Markets Debt Local Portfolio performance
as of September 30, 2012
16
* Net returns reflect the maximum deductible fees; offshore mutual fund fees are negotiable, based on total mandate size and the level of client servicing required.
Base Distribution Share Class: LU0302282511. Past performance is not indicative of future results, which may vary. Fund inception date: 29-Jun-07.
Prior to 01-Jan-2010 the portfolio was
not managed against a benchmark.
For reference the JPM GBI-EM Global
Diversified Index is shown.
Gross Excess
Return (bps) 232 -83 372
As Of September 30, 2012 1-year 3-years, pa Since Inception, pa
GS Growth & Emerging Markets Debt Local Portfolio (gross), % 17.27 11.14 7.63
GS Growth & Emerging Markets Debt Local Portfolio (net), % 15.16 9.11 5.66
JP Morgan GBI-EM Global Diversified (1 Day Lag), % 12.62 9.42 9.34
Gross Excess Return, bps 465 172 -171
Tracking Error (gross), bps 198 210 385
Information Ratio (gross) 2.35 0.82 -0.44
4.08
18.00
-2.58
15.84
2.18
15.86
-4.40
14.30
9.48
15.68
-1.75
12.12
-10
-5
0
5
10
15
20
Since Inception to Dec-09 2010 2011 2012 (YTD)
%
GS Global Emerging Markets Debt Local Portfolio (gross) GS Global Emerging Markets Debt Local Portfolio (net)* JPM GBI-EM Global Diversified Index (%)
Goldman Sachs Asset Management
Goldman Sachs Growth & Emerging Markets Debt Local Portfolio Investment objectives - set within a risk management framework
17
Derivatives are used to access countries where physical bonds are not accessible or high transaction cost and low liquidity exist. Currency forwards are used to optimise our local currency positions
Source: GSAM.
* These guidelines refer to our internal principles only and is subject to change without notification. Targets are subject to change and are current as of the date of this presentation.
Targets are objectives and do not provide any assurance as to future results. Please see additional disclosures. Past performance is not indicative of future results, which may vary.
Permissible Investments
Key Internal Guidelines *
Benchmark JP Morgan GBI-EM Global Diversified Index
Portfolio Targets
Base Distribution Share Class: LU0302282511
Gross excess return target of 2-3% per annum
Target tracking error of 2-4% per annum
EM sovereign & quasi-sovereign debt (external or local currency denominated)
EM corporate debt (external or local currency denominated)
Derivatives (includes US Treasury futures, currency forwards, interest rate swaps, credit default swaps,
total return swaps, credit-linked notes)
Max country exposure: 10% vs. index
Max sector exposure: EM corporates 25%, EM external debt 30%
Max single issuer exposure to EM corporates: 3%, EM quasi-sovereign : 5%
Max total EM local currency exposure: 50% vs. index
Max exposure to non-USD funding currencies:15%
Goldman Sachs Asset Management
10.0% 10.0%
4.1%
2.3%
0.2%
10.0% 10.0%
9.3%
6.3%
10.0% 10.0% 10.0%
7.3%
0.5%
0%
2%
4%
6%
8%
10%
12%
Bra
zil
Me
xico
Co
lom
bia
Pe
ru
Ch
ile
Turk
ey
Po
lan
d
Ru
ssia
Hu
nga
ry
Sou
th A
fric
a
Mal
aysi
a
Ind
on
esi
a
Thai
lan
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Ph
ilip
pin
es
JPM
GB
I-EM
Glo
bal
Div
ers
ifie
d I
nd
ex,
%
Investment Universe – EM Local Debt
18
As of September 30, 2012 for benchmark characteristics. Source: JP Morgan, Bloomberg, GSAM. The source of average credit rating is JP Morgan. This information discusses general
market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. Please see
additional disclosures. Any reference to a specific company or country does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. It should
not be assumed that the recommendations made in the future will be profitable or will equal the performance of the securities discussed in this document. Past performance is not
indicative of future results, which may vary. JPMorgan Government Bond Index – Emerging Markets Global Diversified Index is an unmanaged index of debt instruments of Emerging
Countries. The Index figures do not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in an unmanaged index. Duration shown is spread duration.
Latin America: 27%
Middle East /
Africa: 10% Europe: 35% Asia: 28%
JPM GBI-EM Global Diversified Countries Average Credit Rating Yield (%) Duration (yrs)
Index Characteristics: 14 Baa2 (Moody's), BBB+ (S&P) 5.87 4.63
Goldman Sachs Asset Management
Decomposition of rates vs. currency for the JPM GBI-EM
Global Diversified Index
19
FX (currency) is calculated as the JPM GBI-EM Global USD-unhedged Index minus the JPM GBI-EM Global USD- hedged Index.
As of September 30, 2012. Source: JP Morgan, Bloomberg, GSAM. Cumulative returns. This information discusses general market activity, industry or sector trends, or other broad-based
economic, market or political conditions and should not be construed as research or investment advice. Past performance is not indicative of future results, which may vary. Please see
additional disclosures. Return data are shown since 31-Dec-2002.
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (YTD)
An
n. R
etu
rn
Rates Currencies
Region
Rates Currency Rates Currency
GBI-EM Global Diversified 6.5% 5.7% 4.5% 9.0%
Asia 6.5% 2.8% 6.7% 4.7%
Europe 4.9% 6.5% 4.6% 13.4%
Latam 9.6% 6.4% 5.3% 9.8%
Middle East/Africa 5.0% 7.2% 6.4% 17.5%
Return (Ann.) Volatility (Ann.)Region Correlation
Rates Currency Rates Currency
GBI-EM Global Diversified 52% 48% 28% 71% 0.51
Asia 69% 31% 62% 38% 0.57
Europe 40% 60% 20% 79% 0.53
Latam 58% 42% 29% 71% 0.35
Middle East/Africa 37% 63% 19% 80% 0.38
Breakdown of Cumulative Return Risk Decomposition
Goldman Sachs Asset Management
GS Growth & Emerging Markets Debt Local Portfolio vs. JPMorgan GBI-EM Global Diversified index
Goldman Sachs Growth & Emerging Markets Debt Local Portfolio Portfolio characteristics
20
As of 30 September 2012
Source: GSAM, JPMorgan. Holdings are subject to change and should not be construed as research or investment advice. 1 Non-Rated (NR) includes holdings of securities not rated by any major rating agency. Unrated securities held in the fund may be of higher, lower, or comparable credit quality to securities
that have a credit rating from a Nationally Recognized Statistical Rating Organization (NRSRO). Therefore, investors should not assume that the unrated securities in the fund increase or
decrease the fund’s overall credit quality. 2 Cash may include local currency, foreign currency, short-term investment funds, bank acceptances, commercial paper, margin, repurchase agreements, time deposits, variable-rate
demand notes, and/or money market mutual funds. The Cash category may show a negative market value percentage as a result of a) the timing of trade date versus settlement date
transactions and/or b) the portfolio’s derivative investments, which are collateralized by the portfolio’s available cash and securities. Such securities are AAA rated by an independent rating
agency, have durations between -2 and 1 years, and are limited to the following sectors: governments, agencies, supranationals, corporates, and agency-backed adjustable-rate
mortgages. These securities are not reclassified under the Cash category; rather, they remain classified under their proper descriptions (e.g., rating, sector, etc.). 3 Swaps may be used for hedging purposes and/or to express outright investment views. The table’s market value percentage total for derivatives reflects aggregated unrealized gains or
losses on positions.
Portfolio Benchmark Difference Portfolio Benchmark Difference
Market value (MM) 2,530.98 937,198.63 AAA 0.00% 0.00% 0.00%
Number of Holdings 278 168 110 AA 0.78% 0.19% 0.59%
Number of Countries 32 14 18 A 46.82% 57.27% -10.45%
Average Credit Quality BBB- BBB+ BBB 28.22% 25.77% 2.45%
Average Country Weight %) 3.13% 7.14% -4.02% BB 2.78% 16.77% -14.00%
Coupon (%) 8.56 6.92 1.64 B 2.33% 0.00% 2.33%
Yield To Maturity (%) 6.10 5.87 0.24 CCC 0.00% 0.00% 0.00%
Yield To Worst (%) 6.03 5.86 0.17 CC 0.00% 0.00% 0.00%
Credit Adjusted Duration (years) 0.01 0.04 (0.04) C 0.00% 0.00% 0.00%
Option Adjusted Duration (years) 4.00 4.15 (0.15) D 0.00% 0.00% 0.00%
Option Adjusted Spread Duration (years) 4.88 4.63 0.25 NR1 14.40% 0.00% 14.40%
Convexity 0.33 0.36 (0.03) Cash2 4.35% 0.00% 4.35%
Maturity (years) 6.41 6.74 (0.33) Interest Rate Swaps3 0.32% 0.00% 0.32%
LIBOR OAS (bps) 40 1 39
Total 100.00% 100.00% 0.00%
Credit Rating Allocation*Top Level Statistics
Goldman Sachs Asset Management
Sector Allocation (market value, %)
As of 30 September 2012
Source: GSAM, JPMorgan. * Cash includes cash-backed derivatives exposure such as currency forwards and the unrealized profit and loss from those derivatives exposures.
Holdings are subject to change and should not be construed as research or investment advice.
Goldman Sachs Growth & Emerging Markets Debt Local Portfolio Sector and currency distribution
21
Active Currency Exposure (market value, %)
External Sovereign Debt,
2.3%
Local Sovereign Debt, 88.0%
External Quasi-Sovereign Debt,
0.2%
Local Quasi-Sovereign Debt,
3.1%
Local Corporate Debt, 2.1%
Cash, 4.4% India (INR), 6.28%
Mexico (MXN), 16.09%
Russia (RUB), 14.81%
Malaysia (MYR), 13.57%
Brazil (BRL), 12.12%
Philippines (PHP), 2.33%
Nigeria (NGN), 1.69%Turkey (TRY),
11.49%
Peru (PEN), 3.80%
Israel (ILS), 1.42%
China (CNY), 0.98%Dominican Republic
(DOP), 0.50%
Colombia (COP), 4.63%
Argentina (ARS), 0.21%
Thailand (THB), 7.32%
Indonesia (IDR), 9.94%
South Africa (ZAR), 9.84%
Singapore (SGD), -1.01%
Various (EUR), -1.13%
Japan (JPY), -1.71%
Czech Republic (CZK), -1.77%
Taiwan (TWD), -1.98%
Hungary (HUF), 4.24%
Poland (PLN), 7.86% Bulgaria (BGN), -2.25%
United States (USD), -19.51%
Goldman Sachs Asset Management
-30.0%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
Ind
ia
Me
xic
o
Ru
ssia
Ma
laysia
Bra
zil
Ph
ilip
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es
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ica
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Un
ite
d S
tate
s
Mark
et
vau
le (
%)
External Sovereign Debt Local Sovereign Debt External Quasi-Sovereign Debt Local Quasi-Sovereign Debt External Corporate Debt
Local Corporate Debt Currency Forward (FX) Cash Other Benchmark Total
Goldman Sachs Growth & Emerging Markets Debt Local Portfolio Country distribution
22
GS Growth & Emerging Markets Debt Local Portfolio vs. JPMorgan GBI-EM Global Diversified Index (market value, %)
As of 30 September 2012
Source: GSAM, JPMorgan. The data shown is of a representative account, is for informational purposes only, and is not indicative of future portfolio characteristics/returns. Actual results
may vary for each client due to specific client guidelines and other factors. Holdings are subject to change and should not be construed as research or investment advice. This chart is
intended to show key positions and does not show every position in the portfolio.
Goldman Sachs Asset Management
Goldman Sachs Growth & Emerging Markets Debt Local Portfolio Country distribution
23
GS Growth & Emerging Markets Debt Local Portfolio vs. JPMorgan GBI-EM Global Diversified Index (spread duration, years)
As of 30 September 2012
Source: GSAM, JPMorgan. The data shown is of a representative account, is for informational purposes only, and is not indicative of future portfolio characteristics/returns. Actual results
may vary for each client due to specific client guidelines and other factors. Holdings are subject to change and should not be construed as research or investment advice. This chart is
intended to show key positions and does not show every position in the portfolio.
-0.40
-0.20
0.00
0.20
0.40
0.60
0.80
1.00
1.20
Bra
zil
So
uth
Afr
ica
Tu
rke
y
Isra
el
Me
xic
o
Co
te d
'Ivo
ire
Ve
ne
zu
ela
Co
lom
bia
Arg
en
tin
a
Th
aila
nd
Ph
ilip
pin
es
Do
min
ica
n R
ep
ub
lic
Ch
ile
Ch
ina
Nig
eri
a
Sri
La
nka
Pe
ru
Hu
ng
ary
Ru
ssia
Un
ite
d S
tate
s
Ma
laysia
Ind
on
esia
So
uth
Ko
rea
Ta
iwa
n
Po
lan
d
Sp
read
du
rati
on
(years
)
External Sovereign Debt Local Sovereign Debt External Quasi-Sovereign Debt Local Quasi-Sovereign Debt
External Corporate Debt Local Corporate Debt Benchmark Total
Goldman Sachs Asset Management
GSAM EMD Advantages
24
Global Presence
Risk Managed Approach
Access to Multiple Resources
Sam Finkelstein facilitates GSAM macro strategy discussions
Access to broader GSAM & GS systems & resources
Experienced and Specialist
team
Core of the EMD team together for 10 years
Minimum turnover since inception of the strategy in 2000
Presence on 3 continents and 4 countries
Continuous monitoring of global markets
Risk managed at multiple levels: EMD team, GSAM FI, IMD
Proprietary factor risk model used for risk analysis and budgeting
Enhanced ability to identify
opportunities globally
Minimizes the probability of
taking unintended risk
Robust idea generation
Deep knowledge of emerging
markets
Characteristics Features Potential Benefits
As of 31 July 2012
Past performance is not indicative of future results, which may vary. The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low
risk. GSAM leverages the resources of Goldman Sachs & Co. subject to Chinese Wall restrictions.
Goldman Sachs Asset Management
Appendix
Goldman Sachs Asset Management
Investment universe - EM external debt
26
As of September 30 2012 for benchmark characteristics. Source: JP Morgan, Bloomberg, GSAM. The source of average credit rating is JP Morgan. This information discusses general market
activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. Please see additional
disclosures. Any reference to a specific company or country does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. It should not be
assumed that the recommendations made in the future will be profitable or will equal the performance of the securities discussed in this document. Past performance is not indicative of future
results, which may vary. The J.P. Morgan Emerging Markets Bond Index Global Diversified is an unmanaged market capitalization Index that tracks total returns for U.S. dollar denominated
debt instruments issued by emerging market sovereign and quasi-sovereign issuers. The index does not reflect any deduction for fees, expenses or taxes. It is not possible to invest directly in
an unmanaged index. Duration shown is spread duration.
Latin America: 38% Europe: 29%
Middle East / Africa: 10%
Asia: 23%
6.4
5.8
4.4 4.3
3.7
2.93.1
2.3
1.9
1.4
0.8
0.40.3 0.2 0.2 0.1
5.9 5.8
3.6
3.1
2.6 2.4
2.0
0.80.6 0.6 0.5 0.5 0.4
3.6
3.2
0.8 0.7 0.6
0.3 0.3 0.2 0.2 0.2 0.2 0.2
6.05.7
2.8
3.2
2.4
1.4
0.60.3
0.2
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Bra
zil
Mex
ico
Colo
mbi
a
Ven
ezu
ela
Peru
Pan
ama
Chile
Uru
guay
Arg
enti
na
El S
alva
dor
Dom
inic
an …
Jam
aic
a
Gua
tem
ala
Ecu
ad
or
Co
sta
Ric
a
Bel
ize
Tu
rke
y
Rus
sia
Pola
nd
Ukr
aine
Lith
ua
nia
Hun
gary
Croa
tia
Rom
ania
Se
rbia
Bel
arus
Latv
ia
Bu
lga
ria
Ge
org
ia
Sou
th A
fric
a
Leba
non
Iraq
Egyp
t
Co
te D
'Ivo
ire
Gab
on
Gh
ana
Jord
an
Nig
eria
Sen
egal
Nam
ibia
Aze
rba
ijan
Ph
ilip
pin
es
Ind
on
esi
a
Ch
ina
Kaza
khst
an
Ma
lays
ia
Sri
La
nka
Vie
tna
m
Pa
kist
an
Mo
ng
olia
JP
M E
MB
I G
lob
al
Div
ers
ifie
d I
nd
ex,
%
JPM EMBI Global Diversified Countries Average Credit Rating Yield (%) Spread (bps) Duration (yrs)
Index Characteristics: 50 Baa3 (Moody's) / BBB- (S&P) 4.23 282 7.09
Goldman Sachs Asset Management
Investment Grade
Country
Credit
Rating
Sovereign
Spread (bps)
Bulgaria BBB 124
Peru BBB 125
Malaysia A- 131
Colombia BBB- 132
Uruguay BBB- 139
Chile A+ 143
Poland A- 144
Panama BBB 148
Brazil BBB 162
China AA- 171
Mexico BBB 172
South Africa BBB+ 176
Russia BBB 208
Lithuania BBB 209
Latvia BBB- 218
Namibia* BBB- 237
Kazakhstan BBB+ 247
Azerbaijan BBB- 309
Croatia BBB- 349
BB
Country Credit Rating
Sovereign
Spread (bps)
Philippines BB+ 144
Indonesia BB+ 204
Turkey BB 236
Gabon BB- 265
Guatemala BB 273
Vietnam BB- 352
Romania BB+ 362
Mongolia BB- 376
Hungary BB+ 383
Georgia BB- 389
Costa Rica BB+ 393
Jordan BB 405
El Salvador* BB 426
Serbia BB- 523
B
Country
Credit
Rating
Sovereign
Spread (bps)
Nigeria B+ 345
Sri Lanka B+ 352
Ghana B 374
Dom Rep B+ 418
Lebanon B 420
Senegal B+ 421
Egypt B 444
Jamaica B- 662
Ukraine B+ 722
Ecuador B 743
Belarus B- 831
Argentina Bu 897
Venezuela B+ 956
Pakistan B- 976
NR
Country
Credit
Rating
Sovereign
Spread (bps)
Iraq NR 504
Cote D'Ivoire NR 563
Belize SD 2399
JP Morgan EMBI Index – Sovereign Ratings and Spreads
* Denotes Fitch Rating used as country is rated NR by S&P.
S&P Long Term Foreign Currencies rating shown as at 10-Oct-12. Source: Bloomberg
Sovereign spreads are as at 28-Sep-12. Source: JP Morgan
Goldman Sachs Asset Management
Emerging Market Debt Goldman Sachs Growth & Emerging Markets Debt Portfolio performance as of
September 30, 2012
28
* Net returns reflect the maximum deductible fees; offshore mutual fund fees are negotiable, based on total mandate size and the level of client servicing required.
Base Distribution Share Class: LU0110449138. Past performance is not indicative of future results, which may vary. Fund inception date: 03-May-00.
52 604 268 315 564 556 314 -58 -754 1,057 Gross Excess
Return (bps) 278 45 279
As Of September 30, 2012 1-year 3-years, pa 5-years, pa Since Inception, pa
GS Growth & Emerging Markets Debt Portfolio (gross), % 23.30 14.24 10.72 13.66
GS Growth & Emerging Markets Debt Portfolio (net), % 21.45 12.54 9.08 11.91
JPM EMBI Global Diversified Index (1 Day Lag), % 19.04 11.96 10.03 11.22
Gross Excess Return, bps 426 229 69 244
Tracking Error (gross), bps 171 166 377 283
Information Ratio (gross) 2.50 1.38 0.18 0.86
9.6
16.1 15.7
25.6
17.2 15.9
13.1
5.4
-19.6
40.4
15.0
7.8
17.0
8.4
14.2 13.8
23.6
15.3 14.0 11.5
3.9
-20.8
38.4
13.2
7.0
14.9
9.1 10.0 13.0
22.5
11.6 10.3 10.0 6.0
-12.0
29.9
12.2
7.4
14.2
-25%
-10%
5%
20%
35%
50%
2000Partial
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (YTD)
GS Global Emerging Markets Debt Portfolio (gross) GS Global Emerging Markets Debt Portfolio (net)* JPMorgan EMBI Global Diversified (1-Day Lag)
Goldman Sachs Asset Management
Correlation across asset classes
29
As of May 31, 2012. Source: GSAM, Bloomberg. This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions
and should not be construed as research or investment advice. Please see additional disclosures.
Last 10 years
Last 5 years
EM External
Debt
EM Local
Debt
EM
Currency EM Equity
Global
Bonds
US HY Corp
Bonds
US IG Corp
Bonds US Equity
Global
Equity Commodities
EM External Debt 1.00
EM Local Debt 0.70 1.00
EM Currency 0.65 0.94 1.00
EM Equity 0.66 0.78 0.80 1.00
Global Bonds 0.54 0.62 0.62 0.33 1.00
US HY Corp Bonds 0.74 0.60 0.57 0.70 0.28 1.00
US IG Corp Bonds 0.74 0.51 0.44 0.38 0.68 0.58 1.00
US Equity 0.60 0.64 0.69 0.82 0.22 0.70 0.28 1.00
Global Equity 0.64 0.72 0.78 0.90 0.31 0.73 0.35 0.97 1.00
Commodities 0.26 0.43 0.50 0.50 0.26 0.33 0.22 0.34 0.43 1.00
EM External
Debt
EM Local
Debt
EM
Currency EM Equity
Global
Bonds
US HY Corp
Bonds
US IG Corp
Bonds US Equity
Global
Equity Commodities
EM External Debt 1.00
EM Local Debt 0.81 1.00
EM Currency 0.72 0.95 1.00
EM Equity 0.75 0.86 0.84 1.00
Global Bonds 0.64 0.70 0.70 0.49 1.00
US HY Corp Bonds 0.80 0.67 0.60 0.77 0.36 1.00
US IG Corp Bonds 0.82 0.60 0.50 0.56 0.66 0.67 1.00
US Equity 0.67 0.76 0.74 0.84 0.40 0.76 0.46 1.00
Global Equity 0.73 0.83 0.82 0.91 0.49 0.79 0.53 0.98 1.00
Commodities 0.45 0.64 0.71 0.72 0.31 0.50 0.29 0.62 0.68 1.00
Goldman Sachs Asset Management
024681012141618
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/07
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Corn (LHS) $/bu Wheat (LHS) $/buSoybeans (RHS) $/bu Rice (RHS) $/cwt
We believe EM inflation will stay contained despite
increase in food price
30
While corn, wheat and soy have climbed, rice prices have been steady. Food represents ~25-30% of EM inflation baskets.
EM import prices never fully baked in the recent drop in agricultural
prices.
The recent upturn in food prices is more likely to curb the recent drop in
EM inflation rather than reversing the 12-month downward trend.
0%
10%
20%
30%
40%
50%
Bra
zil
Chile
Colo
mb
ia
Me
xic
o
Pe
ru
Indonesia
Ko
rea
Ma
laysia
Th
aila
nd
Hungary
Isra
el
Po
lan
d
So
uth
Afr
ica
Tu
rkey
Share of food related items in CPI basket
Source: Haver Analytics, GSAM. As of June 30, 2012
Source: Citi Global Macro Strategy Research. As of June 30, 2012 Source: Citi Global Macro Strategy Research. As of June 30, 2012
Source: Bloomberg. As of July 26, 2012
This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or
investment advice. Please see additional disclosures.
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12
Latam 4 Asia CEEMEA GDP weighted EM average
*all simple averages except EM
aggregate
Goldman Sachs Asset Management
Proprietary Systems Zephyr – The Taylor Rule
31
For illustrative purposes only.
Goldman Sachs Asset Management
Proprietary Systems Zephyr – What’s priced in?
32
For illustrative purposes only.
Goldman Sachs Asset Management
Proprietary Systems Zephyr – Valuation model
33
For illustrative purposes only.
Goldman Sachs Asset Management
Proprietary Systems GRM – Global Risk Management
34
For illustrative purposes only.
Goldman Sachs Asset Management
This material is provided at your request for informational purposes only and does not constitute a solicitation in any jurisdiction in which such a solicitation is unlawful or to any person to whom it is unlawful. Moreover, it
neither constitutes an offer to enter into an investment agreement with the recipient of this document nor an invitation to respond to it by making an offer to enter into an investment agreement.
References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results.
The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate
from those of the benchmark.
Opinions expressed are current opinions as of the date appearing in this material only.
The strategy may include the use of derivatives. Derivatives often involve a high degree of financial risk because a relatively small movement in the price of the underlying security or benchmark may result in a
disproportionately large movement in the price of the derivative and are not suitable for all investors. No representation regarding the suitability of these instruments and strategies for a particular investor is made.
High-yield, lower-rated securities involve greater price volatility and present greater credit risks than higher-rated fixed income securities.
Emerging markets securities may be less liquid and more volatile and are subject to a number of additional risks, including but not limited to currency fluctuations and political instability.
CORESM is a registered service mark of Goldman, Sachs & Co.
Indices are unmanaged. The figures for the index reflect the reinvestment of dividends but do not reflect the deduction of any fees or expenses which would reduce returns. Investors cannot invest directly in indices.
This material has been prepared by GSAM and is not a product of the Goldman Sachs Global Investment Research Division. The views and opinions expressed may differ from the views and opinions expressed by the
Global Investment Research Division or other departments or divisions of Goldman Sachs and its affiliates. Investors are urged to consult with their financial advisors before buying or selling any securities. This
information should not be relied upon in making an investment decision. GSAM has no obligation to provide any updates or changes.
Holdings may change by the time you receive this report. The securities discussed do not represent all of the portfolio's holdings and may represent only a small percentage of the strategy’s portfolio holdings. A
complete list of holdings is available upon request. Future portfolio holdings may not be profitable. The information should not be deemed representative of future characteristics for the strategy.
The portfolio risk management process includes an effort to monitor and manage risk, but does not imply low risk.
Tracking Error (TE) is one possible measurement of the dispersion of a portfolio’s returns from its stated benchmark. More specifically, it is the standard deviation of such excess returns. TE figures are representations
of statistical expectations falling within “normal” distributions of return patterns. Normal statistical distributions of returns suggests that approximately two thirds of the time the annual gross returns of the accounts will lie
in a range equal to the benchmark return plus or minus the TE if the market behaves in a manner suggested by historical returns. Targeted TE therefore applies statistical probabilities (and the language of uncertainty)
and so cannot be predictive of actual results. In addition, past tracking error is not indicative of future TE and there can be no assurance that the TE actually reflected in your accounts will be at levels either specified in
the investment objectives or suggested by our forecasts.
Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. We have relied upon and assumed without independent verification, the
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It only contains selected information on this fund and does not constitute an offer to buy shares in the fund. Prior to an investment, prospective investors should carefully read the latest offering documentation, including
but not limited to the fund’s prospectus which contains inter alia a comprehensive disclosure of applicable risks. The relevant articles of incorporation, prospectus, simplified prospectus/key investor information document
as applicable and latest annual/semi-annual report are available free of charge from the fund’s paying and information agent (■■■), and/or from your financial advisor.
Financial advisers generally suggest a diversified portfolio of investments. The fund described herein does not represent a diversified investment by itself. An investor should only invest if he/she has the necessary
financial resources to bear a complete loss of this investment.
This information must not be misconstrued as investment or tax advice. Prospective investors should consult their financial and tax adviser before investing in order to determine whether an investment would be
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The information contained herein is only intended as a product description and is not prepared by the Goldman Sachs Global Investment Research (GIR) Department. The views and opinions expressed herein are valid
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General disclosures
35