Goldman Sachs Execution & Clearing, L.P.

 30 Hudson Street  Jersey City, NJ 07302

August, 2009

Goldman Sachs Electronic Trading: Our Practices in Handling Electronic Order Flow

To our GSEC clients –

Given the pace of change in the equities market structure and the recent public dialogue about trading
strategies, market venues and order handling, we thought it would be an ideal time to affirm our practices
relating to electronic order handling.

From its inception in 1992, our business model has been to provide agency brokerage and associated
technology services. We now provide services to over 2,000 clients, which include a diversified base of
institutions, hedge funds, broker-dealers and exchanges. We have designated resources to ensure that
our value proposition lives up to the highest standards, and we highlight these in the four sections below.

A. Organizational Structure
Since the acquisition of Spear, Leeds & Kellogg, L.P. in 2000, Goldman Sachs has operated two separate
U.S. broker-dealers: Goldman, Sachs & Co. (“GS & Co.”) and Goldman Sachs Execution & Clearing, L.P.
(“GSEC”). The following is a brief description about the structure of the two broker-dealers.

Separate Broker-Dealer – The services of Goldman Sachs Electronic Trading in the US are offered
through the agency-only broker-dealer GSEC. GSEC is a separately registered broker-dealer, distinct
from its affiliate, GS&Co, the broker-dealer that houses the more traditional, “upstairs” equity trading
businesses.

Separate Locations – GS&Co.’s U.S. equity trading business is primarily located in New York City, while
the GSEC business is primarily located in Jersey City, NJ. In the case of our regional US offices – in San
Francisco, Chicago, and Boston – the two broker-dealers are also physically separated, either via a
restricted access, walled-off enclosure within the same building or by being located in a different building.

Staff and Management – The employees who support, develop, and sell our electronic agency services
are designated for that business. GS&Co. and GSEC have independent management teams that oversee
the day-to-day operations of each broker-dealer. GSEC’s co-Chief Executive Officers have accountability
to senior managers in the Securities Division of GS&Co.

Information Exchange – We are committed to preserving the confidentiality of client information. Sharing
customer information for the purposes of trading ahead of, or otherwise disadvantaging, a customer order
would violate various regulations to which each of GSEC and GS&Co. is subject. Accordingly, both
broker-dealers enforce policies and procedures governing the safeguarding of confidential information.

B. Order Routing, Smart Routing, and Best Execution

Our foremost obligation is to provide clients with the best possible execution quality and a breadth of
choices to help manage their orders. Across all platforms, we allow clients to self-direct orders to a public
exchange or to our SIGMA X ATS; use our various smart router order types; and/or choose one of our
many algorithmic strategies. All of these choices have parameters that clients can either control on an
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order level or by setting defaults in REDIPlus , additional front-end systems, and/or GSEC’s order-
management infrastructure. We also provide the option to create customized order handling logic and
settings to provide customers additional order handling control.

In determining where or when to place an electronic order, best execution takes first priority. We
continuously strive to improve our order routing logic through ongoing research of execution performance
and market structure, and regularly modify the smart router and algorithms in response to the continuously
changing market micro structure. Orders are directed to all available liquidity venues, including SIGMA X,
unless directed otherwise by the client.

GSEC monitors execution performance and metrics for the handling of customer order flow via an
independent best execution committee, which is separate from GS&Co.’s best execution committee.
Further, as prescribed by the SEC, all GSEC execution statistics are available to the public, as per Rules
605/606.

C. Execution Quality Practices

In a highly fragmented, competitive trading environment, it is critical that our practices ensure that
customer orders are handled in accordance with the customer’s instructions and regulatory requirements.
Accordingly, we have incorporated certain features into our algorithmic strategies and SIGMA X to protect
orders.

Our Algorithmic Policies and Practices

• Neither GSEC algorithms, nor our smart router, participate in any so-called exchange “Flash”
order type programs.
• We protect our algorithmic flow by employing all of the following: child order placement
randomization; price limits; volume limits; spread monitoring; minimum execution quantities;
reserve orders; discretion logic; and Immediate or Cancel orders (“IOCs”).
• The GSEC algorithms and smart router may receive Indications of Interest (“IOIs”) from other
non-displayed pools. When GSEC orders are sent to destinations that publish IOIs, we opt out of
this functionality.

SIGMA X Policies and Practices

• SIGMA X is a 100% non-displayed liquidity pool. Orders on the ATS book are not viewable by any
market participant. Any orders from GS&Co. are treated identically to other customer orders and
are not given priority in the ATS.
• SIGMA X does not generate any sort of IOI messaging. Symbol-specific SIGMA X volumes are
not available, in any form, intra-day. GSEC offers clients a symbol-specific data point of
combined SIGMA router plus SIGMA X executed shares, on a delayed basis, through both
REDIPlus and Bloomberg’s IOIA page. Customers are also given the opportunity to opt out of this
calculation if they prefer to do so.
• A designated team insures proper operation and performance of the ATS. Monitoring tools allow
GSEC business managers to review participants’ performance.

D. Transparency and Reporting

Clients receive access only to their own execution information and may receive this information real-time
or post-trade. Full transparency – including destination, quantity, and price information – is provided for
every execution. By offering clients a flexible range of options for pre-, intra-, and post-trade analytics, we
aim to make clients’ execution process as transparent as possible.

We hope this description offers you some basic information about our order handling practices. We
welcome your questions and are happy to provide more details. Furthermore, we invite you to
visit us in our offices at 30 Hudson Street in Jersey City to engage in that dialogue. We welcome
your feedback.