GS $ High Yield Index™ GS $ HYTop™ Index Rules and ... - Goldman Sachs

Goldman Sachs

Global Credit Strategy Credit Indices

GS $ High Yield IndexTM GS $ HYTopTM Index

Rules and Methodology

Global Credit Strategy

gs-cr-indices@ny.email.

Important disclosures appear at the back of this material.

March 2006

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Global Credit Strategy

Table of Contents Page

The Index Policy Committee .....................................................................................................1 GS $ High Yield IndexTM ..........................................................................................................1 GS $ HYTopTM Index ................................................................................................................3 Monthly Rebalancing................................................................................................................7 Calculation Methodology...........................................................................................................7 Index Value................................................................................................................................9 Error Correction .........................................................................................................................9

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The GS $ High Yield Indices ? Rules & Methodology

The Index Policy Committee

The rules of the Goldman Sachs US $ High Yield Indices* are governed by the Index Policy Committee ("Committee"). The Committee is comprised of at least 50% nonGoldman Sachs members. The Committee has oversight over the formulation of the rules governing the index. Implementation of the rules is the responsibility of Goldman Sachs. The Committee's decisions are binding.

The Committee meets at least once a year to review the rules and composition of the indices in light of changing market structure, though it also strives for continuity.

GS $ High Yield IndexTM

General Selection Criteria

The Goldman Sachs US $ High Yield IndexTM is composed of US dollar-denominated bonds issued by corporate issuers and rated by at least one of two rating services: Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Rating Services, a division of The McGraw-Hill Companies, Inc. ("S&P"). The index composition is eligible for rebalancing once a month, after the close of business on the last business day of the rebalancing month (the "rebalancing date"). The new index composition is effective on the first business day of the next month (the "composition month").

The bonds in the US $ High Yield Index must meet the criteria described below as of the close of business five business days prior to the rebalancing date provided that the relevant bond data can be verified, at Goldman Sach's sole discretion, as of such date ("Bond Selection Cutoff Date").

Candidates ? Denomination. Must be denominated in US dollars.

? Corporate Credit. Must be corporate credit, i.e., debt instruments backed by corporate issuers that are not secured by specific assets. Debt of governments, sovereigns, quasi-sovereigns, and government-backed or guaranteed entities is excluded.

? Geographic Scope. The issuer or, in the case of a finance subsidiary, the issuer's guarantor, must be domiciled in the US, Canada, Bermuda, Cayman Islands, Western Europe, or Japan.

* GS $ HYTopTM, GS $ High Yield IndexTM and Goldman Sachs? are trademarks of Goldman, Sachs & Co. The methodology of the GS $ HYTopTM Index is owned by Goldman, Sachs & Co. and may be covered by one or more patents or pending patent applications.

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? Agency Ratings. Bonds must be rated below investment grade ? but not in default ? at BB+ or lower by S&P or Ba1 or lower by Moody's as of the Bond Selection Cutoff Date to qualify.1 Split-rated (e.g., Baa3/BB+ or Ba1/BBB) issues are excluded from the index. A split-rated issue means an issue that is rated investment grade by one rating agency and non-investment grade by another rating agency. Issues rated D by S&P or that have been subject to a default press release by Moody's cannot enter the indices; those issues in the index that are subsequently downgraded to D by S&P or subject to a default press release by Moody's (as of the Bond Selection Cutoff Date) will be taken out of the index on the next rebalancing date. Notwithstanding this limitation, Goldman Sachs retains the discretion, but not the obligation to consider ratings changes after the Bond Selection Cutoff Date in assessing candidates for inclusion in the index. After a bond has migrated into high yield from investment grade status, it must retain that status for three months (the "stabilization period") before it can be included in the index.

? Size. The outstanding face value of a candidate bond must be greater than or equal to $200 million as of the Bond Selection Cutoff Date. Partial buybacks or add-ons will affect the outstanding face value of a candidate bond. Goldman Sachs will consider changes in the outstanding face value of a candidate bond as a result of partial or full buybacks or add-ons, provided that Goldman Sachs is aware of such changes as of the Bond Selection Cutoff Date. Notwithstanding this limitation, Goldman Sachs retains the discretion, but not the obligation to consider changes in the outstanding face value of a candidate bond after the Bond Selection Cutoff Date in assessing candidates for inclusion in the index.

? Age. New issues must have first settlement dates on or before a rebalancing date to be included in the index for the next period. As of a rebalancing date, bonds must be less than five years old and have at least three years remaining to maturity. Only bonds issued after January 1, 1997, are considered.

? Bond Type. Fixed coupon bonds, zero coupon bonds, step-up bonds with coupon schedules known at issuance (or as functions of the issuer's rating), bonds with sinking funds, medium term notes ("MTNs"), Rule 144A offerings and callable bonds are candidates for inclusion. The following instruments are excluded as candidates from the index: preferred shares, convertible bonds, bonds with other equity features attached (e.g., options/warrants), perpetual maturity bonds, floating rate notes, putables and Reg S offerings.

Bond Weighting

Bonds are weighted according to their outstanding bond market capitalization amount.

1 If a bond is part of a Medium Term Note program, and has no individual rating, the shelf rating of the program will be used as a proxy for the individual bond rating.

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Subindices

The bonds comprising the subindices are a subset of the bonds in the composite indices and therefore have to pass the same eligibility tests. Bonds are assigned to specific issuer entities and industry sectors by Goldman Sachs. Also, if a bond is rated by only one agency (Moody's or S&P), or if both agencies classify it in the same quality sector (BB, B, CCC, CC or C), it will be included in the corresponding quality sector subindex. For bonds with split ratings, the higher rating will prevail in determining quality sector inclusion.

For purposes of selecting candidates for the subindices, an "issuer" is defined by the Bloomberg ticker (i.e., all bonds sharing a ticker are attributed to a common issuer).

Base date

The base date for the index is December 31, 1998.

GS $ HYTopTM Index

The GS $ HYTopTM Index ("HYTop Index") is a basket of 50 bonds,2 rebalanced monthly on the rebalancing date, designed to provide a balanced representation of the US dollar high yield corporate market through some of the most liquid high yield corporate bonds available. All 50 bonds in the basket are equally price-weighted in returns (assuming same quantity of each bond).

For purposes of selecting candidates for the index, an "issuer" is defined by the Bloomberg ticker (i.e., all bonds sharing a ticker are attributed to a common issuer).

General Selection Criteria

1. Qualified Entrants. Bonds must satisfy all the conditions for inclusion in the GS $ High Yield IndexTM.

2. Minimum Runs & Lockouts.

? Minimum Run. Any bond which enters the HYTop Index must remain in the Index for a minimum of six months, provided it maintains eligibility for the GS $ High Yield IndexTM during that period.

? Lockout Period. A bond that drops out of the HYTop Index at rebalancing faces a three-month lockout period before it can reenter the HYTop Index.

3. Disqualification. Bonds are disqualified from candidacy in the HYTop Index for any of the following reasons:

2The number of bonds in the HYTop Index changed to 50 from 30 on April 1, 2004. 3

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