Goldman Sachs Reports Record First Quarter Results; Net Revenues Exceed $10 Billion

The Goldman Sachs Group, Inc. (NYSE: GS) today reportedrecord net revenues, net earnings and diluted earnings per commonshare for its first quarter ended February 24, 2006. Net revenues forthe quarter were $10.34 billion. Net earnings were $2.64 billion (1)and diluted earnings per common share were $5.41 (1), in each caseexcluding incremental non-cash expenses of $237 million related to theaccounting for certain stock-based awards under SFAS No. 123-R (1).Including these non-cash expenses, net earnings were $2.48 billion anddiluted earnings per common share were $5.08 for the first quarter.These results compare with $2.94 for the first quarter of 2005 and$3.35 for the fourth quarter of 2005.
Excluding the non-cash expenses of $237 million, annualized return
on average tangible common shareholders' equity (2) was 47.0% (1) and
annualized return on average common shareholders' equity was 38.8% (1)
for the first quarter. Including these non-cash expenses, annualized
return on average tangible common shareholders' equity (2) was 44.0%
and annualized return on average common shareholders' equity was
36.4%.


Business Highlights

-- Goldman Sachs generated record quarterly net revenues of
$10.34 billion, 42% higher than its previous record.

-- Investment Banking produced net revenues of $1.47 billion, its
second best quarter and its best quarterly performance in
nearly six years.

-- The firm continued its leadership in investment banking,
ranking first in worldwide completed mergers and acquisitions,
public common stock offerings and initial public offerings for
the fiscal year-to-date. (3)

-- Fixed Income, Currency and Commodities (FICC) generated record
quarterly net revenues of $3.74 billion, 42% higher than its
previous record.

-- Equities produced record quarterly net revenues of $2.45
billion, 33% higher than its previous record set in the first
quarter of 2001, reflecting strength across all major
businesses and regions.

-- Asset Management generated record quarterly net revenues of
$1.49 billion, including $739 million of incentive fees. Net
revenues were 89% higher than the previous record. Assets
under management increased 18% from a year ago to a record
$571 billion, with net asset inflows of $25 billion (4) during
the quarter.

-- Securities Services produced net revenues of $491 million, 29%
higher than the first quarter of 2005.

______________

"This performance clearly demonstrates the depth of our client
relationships and the strength and balance of our global franchise
across investment banking, sales and trading, and investment
management. Nearly all of our businesses produced record or near
record results this quarter," said Henry M. Paulson, Jr., Chairman and
Chief Executive Officer. "While we know that we cannot expect to
achieve these results every quarter, we continue to see attractive
opportunities and high levels of client activity."

Net Revenues

Investment Banking
------------------

Net revenues in Investment Banking were $1.47 billion, 65% higher
than the first quarter of 2005 and 55% higher than the fourth quarter
of 2005. Net revenues in Financial Advisory were $736 million, 78%
higher than the first quarter of 2005, primarily reflecting strong
growth in industry-wide completed mergers and acquisitions. Net
revenues in the firm's Underwriting business were $735 million, 53%
higher than the first quarter of 2005, reflecting significantly higher
net revenues in debt underwriting, primarily due to an increase in
leveraged finance and investment-grade activity, and significantly
higher net revenues in equity underwriting. The firm's investment
banking backlog declined during the quarter.

Trading and Principal Investments
---------------------------------

Net revenues in Trading and Principal Investments were $6.88
billion, 57% higher than the first quarter of 2005 and 68% higher than
the fourth quarter of 2005.

Net revenues in FICC were $3.74 billion, 50% higher than the first
quarter of 2005, as the business continued to operate in a favorable
environment. Net revenues were significantly higher in credit
products, commodities and currencies, as customer-driven activity was
strong and market opportunities were favorable. In addition, net
revenues in interest rate products were higher compared with a strong
first quarter of 2005, while net revenues in mortgages were lower
compared with the same prior year period.

Net revenues in Equities were $2.45 billion, 58% higher than the
first quarter of 2005, as the business operated in a favorable
environment, characterized by generally higher equity prices. Net
revenues were significantly higher in the firm's customer franchise
and principal strategies businesses. The increase in the firm's
customer franchise businesses was primarily due to higher net revenues
in derivatives and shares, reflecting strong customer-driven activity
and favorable market opportunities. Net revenues in principal
strategies reflected strong performance across all regions.

Principal Investments recorded net revenues of $695 million,
reflecting a $405 million gain related to the firm's investment in the
convertible preferred stock of Sumitomo Mitsui Financial Group, Inc.
(SMFG) and $290 million in gains and overrides from real estate and
other corporate principal investments.

Asset Management and Securities Services
----------------------------------------

Net revenues in Asset Management and Securities Services were
$1.98 billion, 75% higher than the first quarter of 2005 and 60%
higher than the fourth quarter of 2005.

Asset Management net revenues were $1.49 billion, 99% higher than
the first quarter of 2005, reflecting significantly higher incentive
fees and a 21% increase in management and other fees. Incentive fees
were $739 million for the first quarter of 2006 compared with $131
million for the same prior year period. During the quarter, assets
under management increased 7% to $571 billion, reflecting net asset
inflows of $25 billion (4) across all asset classes as well as market
appreciation of $14 billion in equity, fixed income and alternative
investment assets. The firm has numerous incentive fee arrangements,
many of which have annual performance periods that end on December
31st and are not subject to adjustment thereafter. For that reason,
incentive fees are seasonally weighted each year to the firm's first
fiscal quarter.

Securities Services net revenues were $491 million, 29% higher
than the first quarter of 2005, as the firm's prime brokerage business
generated strong results, primarily reflecting significantly higher
global customer balances in securities lending and margin lending.

Expenses

Operating expenses were $6.65 billion, 56% higher than the first
quarter of 2005 and 75% higher than the fourth quarter of 2005.

Compensation and Benefits
-------------------------

Compensation and benefits expenses were $5.30 billion, 66% higher
than the first quarter of 2005, primarily due to higher net revenues.
Employment levels were essentially unchanged during the quarter.

Effective for the first quarter of 2006, the firm adopted SFAS No.
123-R, which requires that stock-based awards granted to
retirement-eligible employees, including those subject to non-compete
agreements, be expensed in the year of grant. In addition to expensing
current year awards, prior year awards must continue to be amortized
over the relevant service period. Therefore, although there is no
incremental economic cost to the firm, the firm's compensation and
benefits in 2006 will include both amortization of prior year awards
as well as new awards granted to retirement-eligible employees for
services rendered in 2006.

The majority of the expense related to the continued amortization
of prior year awards will be recognized in 2006. The estimated annual
expense for 2006 is approximately $650 million, of which $237 million
was recognized in the first quarter of 2006. The ratio of compensation
and benefits to net revenues, excluding the non-cash expenses of $237
million for the continued amortization of prior year awards, was 49.0%
(1) for the quarter compared with 50.0% for last year's first quarter.
Including the non-cash expenses of $237 million, the ratio of
compensation and benefits to net revenues was 51.3%.

Non-Compensation Expenses
-------------------------

Non-compensation expenses were $1.35 billion, 27% higher than the
first quarter of 2005. Excluding non-compensation expenses related to
consolidated entities held for investment purposes (5),
non-compensation expenses were 20% higher than the first quarter of
2005. Approximately one-half of this increase was attributable to
higher brokerage, clearing and exchange fees in both Equities and
FICC. Other expenses were higher primarily due to costs related to the
firm's recently acquired insurance business and increased charitable
contributions. Other expenses included net provisions for litigation
and regulatory proceedings of $29 million for the first quarter of
2006 compared with $31 million for the same prior year period.
Occupancy expenses increased primarily reflecting higher operating
expenses and increased rent.

Provision For Taxes
-------------------

The effective income tax rate for the first quarter of 2006 was
32.8%, up from 32.0% for fiscal year 2005 and up from 29.5% for the
first quarter of 2005, primarily due to a net benefit from various
audit settlements recognized during the first quarter of 2005.

Capital

As of February 24, 2006, total capital was $143.57 billion,
consisting of $28.92 billion in total shareholders' equity (common
equity of $27.17 billion and preferred stock of $1.75 billion) and
$114.65 billion in long-term borrowings. (6) Book value per common
share was $60.42 based on common shares outstanding, including
restricted stock units granted to employees with no future service
requirements, of 449.6 million at period end. Tangible book value per
common share was $50.04. (2)

The firm repurchased 19.1 million shares of its common stock at an
average price of $134.75 per share, for a total cost of $2.58 billion
during the quarter. The remaining share authorization under the firm's
existing common stock repurchase program is 23.7 million shares.

Dividends

The Board of Directors of The Goldman Sachs Group, Inc. (the
Board) increased the firm's quarterly dividend to $0.35 per common
share from $0.25 per common share. The dividend will be paid on May
25, 2006 to common shareholders of record on April 25, 2006. The Board
also declared dividends of $338.08, $387.50 and $338.08 per share of
Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock, respectively (represented by depositary shares, each
representing a 1/1000th interest in a share of preferred stock), to be
paid on May 10, 2006 to preferred shareholders of record on April 25,
2006.

______________

Goldman Sachs is a leading global investment banking, securities
and investment management firm that provides a wide range of services
worldwide to a substantial and diversified client base that includes
corporations, financial institutions, governments and high-net-worth
individuals. Founded in 1869, it is one of the oldest and largest
investment banking firms. The firm is headquartered in New York and
maintains offices in London, Frankfurt, Tokyo, Hong Kong and other
major financial centers around the world.

Cautionary Note Regarding Forward-Looking Statements
----------------------------------------------------

This press release contains "forward-looking statements." These
statements are not historical facts but instead represent only the
firm's belief regarding future events, many of which, by their nature,
are inherently uncertain and outside of the firm's control. It is
possible that the firm's actual results and financial condition may
differ, possibly materially, from the anticipated results and
financial condition indicated in these forward-looking statements. For
a discussion of some of the risks and important factors that could
affect the firm's future results, see "Risk Factors" in Part I, Item
1A of the firm's Annual Report on Form 10-K for the fiscal year ended
November 25, 2005.

Statements about the firm's investment banking transaction backlog
also may constitute forward-looking statements. Such statements are
subject to the risk that the terms of these transactions may be
modified or that they may not be completed at all; therefore, the net
revenues that the firm expects to earn from these transactions may
differ, possibly materially, from those currently expected. Important
factors that could result in a modification of the terms of a
transaction or a transaction not being completed include, in the case
of underwriting transactions, a decline in general economic
conditions, volatility in the securities markets generally or an
adverse development with respect to the issuer of the securities and,
in the case of financial advisory transactions, a decline in the
securities markets, an adverse development with respect to a party to
the transaction or a failure to obtain a required regulatory approval.
For a discussion of other important factors that could adversely
affect the firm's investment banking transactions, see "Risk Factors"
in Part I, Item 1A of the firm's Annual Report on Form 10-K for the
fiscal year ended November 25, 2005.

Conference Call
---------------

A conference call to discuss the firm's results, outlook and
related matters will be held at 11:00 am (ET). The call will be open
to the public. Members of the public who would like to listen to the
conference call should dial 1-888-281-7154 (U.S. domestic) and
1-706-679-5627 (international). The number should be dialed at least
10 minutes prior to the start of the conference call. The conference
call will also be accessible as an audio webcast through the Investor
Relations section of the firm's Web site,
www.gs.com/our_firm/investor_relations/. There is no charge to access
the call. For those unable to listen to the live broadcast, a replay
will be available on the firm's Web site or by dialing 1-800-642-1687
(U.S. domestic) or 1-706-645-9291 (international) passcode number
5859428, beginning approximately two hours after the event. Please
direct any questions regarding obtaining access to the conference call
to Goldman Sachs Investor Relations, via e-mail, at
gs-investor-relations@gs.com.


THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
SEGMENT NET REVENUES
(UNAUDITED)
$ in millions

Three Months Ended % Change From
-------------------------- -----------------
Feb. 24, Nov. 25, Feb. 25, Nov. 25, Feb. 25,
2006 2005 2005 2005 2005
-------- -------- -------- -------- --------
Investment Banking
------------------

Financial Advisory $ 736 $ 546 $ 414 35 % 78 %

Equity underwriting 283 205 186 38 52
Debt underwriting 452 197 293 129 54
-------- -------- -------- -------- --------
Total Underwriting 735 402 479 83 53

-------- -------- -------- -------- --------
Total Investment Banking 1,471 948 893 55 65
-------- -------- -------- -------- --------
Trading and Principal
Investments
---------------------

FICC 3,740 1,850 2,489 102 50

Equities trading 1,607 602 829 167 94
Equities commissions 842 800 721 5 17
-------- -------- -------- -------- --------
Total Equities 2,449 1,402 1,550 75 58

SMFG 405 723 181 (44) 124
Other corporate and real
estate gains and losses 200 109 148 83 35
Overrides 90 20 15 N.M. N.M.
-------- -------- -------- -------- --------
Total Principal
Investments 695 852 344 (18) 102
-------- -------- -------- -------- --------
Total Trading and
Principal Investments 6,884 4,104 4,383 68 57
-------- -------- -------- -------- --------

Asset Management and
Securities Services
--------------------

Management and other fees 750 682 618 10 21
Incentive fees 739 105 131 N.M. N.M.
-------- -------- -------- -------- --------
Total Asset Management 1,489 787 749 89 99

Securities Services 491 447 380 10 29

-------- -------- -------- -------- --------
Total Asset Management
and Securities Services 1,980 1,234 1,129 60 75
-------- -------- -------- -------- --------

-------- -------- -------- -------- --------
Total net revenues $10,335 $ 6,286 $ 6,405 64 61
======== ======== ======== ======== ========


THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
In millions, except per share amounts and employees


Three Months Ended % Change From
-------------------------- -----------------
Feb. 24, Nov. 25, Feb. 25, Nov. 25, Feb. 25,
2006 2005 2005 2005 2005
-------- -------- -------- -------- --------
Revenues
Investment banking $ 1,470 $ 932 $ 873 58 % 68 %
Trading and principal
investments 6,687 3,907 4,141 71 61
Asset management and
securities services 1,554 820 774 90 101
Interest income 7,535 6,486 4,176 16 80
-------- -------- -------- -------- --------
Total revenues 17,246 12,145 9,964 42 73

Interest expense 6,813 5,742 3,449 19 98
Cost of power
generation (7) 98 117 110 (16) (11)
-------- -------- -------- -------- --------
Revenues, net of interest
expense and cost of
power generation 10,335 6,286 6,405 64 61
-------- -------- -------- -------- --------

Operating expenses
Compensation and
benefits 5,301 2,440 3,203 117 66

Brokerage, clearing and
exchange fees 351 312 252 13 39
Market development 100 110 82 (9) 22
Communications and
technology 124 125 118 (1) 5
Depreciation and
amortization 125 130 118 (4) 6
Amortization of
identifiable intangible
assets 34 31 31 10 10
Occupancy 193 194 148 (1) 30
Professional fees 109 153 96 (29) 14
Other expenses 309 312 212 (1) 46
-------- -------- -------- -------- --------
Total non-compensation
expenses 1,345 1,367 1,057 (2) 27

-------- -------- -------- -------- --------
Total operating expenses 6,646 3,807 4,260 75 56
-------- -------- -------- -------- --------

Pre-tax earnings 3,689 2,479 2,145 49 72
Provision for taxes 1,210 847 633 43 91
-------- -------- -------- -------- --------
Net earnings 2,479 1,632 1,512 52 64

Preferred stock dividends 26 8 - N.M. N.M.
-------- -------- -------- -------- --------
Net earnings applicable
to common shareholders $ 2,453 $ 1,624 $ 1,512 51 62
======== ======== ======== ======== ========

Earnings per common share
Basic $ 5.36 $ 3.53 $ 3.06 52 % 75 %
Diluted 5.08 3.35 2.94 52 73
Diluted, excluding the
impact of continued
amortization of prior
year stock-based awards
in 2006 (1) 5.41 3.35 2.94 61 84

Average common shares
outstanding
Basic 457.3 459.4 494.3 - (7)
Diluted 483.3 485.2 515.1 - (6)

Selected Data
Employees at period
end (8)(9) 23,641 23,623 21,606 - 9

Ratio of compensation and
benefits to net revenues 51.3% 38.8% 50.0%
Ratio of compensation and
benefits to net revenues,
excluding the impact of
continued amortization
of prior year
stock-based awards in
2006 (1) 49.0% 38.8% 50.0%


NON-COMPENSATION EXPENSES
(UNAUDITED)
$ in millions

Three Months Ended % Change From
-------------------------- -----------------
Feb. 24, Nov. 25, Feb. 25, Nov. 25, Feb. 25,
2006 2005 2005 2005 2005
-------- -------- -------- -------- --------

Non-compensation expenses
of consolidated
investments (5) $ 99 $ 101 $ 15 (2)% N.M. %

Non-compensation expenses
excluding consolidated
investments
Brokerage, clearing and
exchange fees 351 312 252 13 39
Market development 92 103 82 (11) 12
Communications and
technology 123 124 118 (1) 4
Depreciation and
amortization 112 113 116 (1) (3)
Amortization of
identifiable intangible
assets 34 31 31 10 10
Occupancy 169 166 148 2 14
Professional fees 105 150 96 (30) 9
Other expenses 260 267 199 (3) 31
-------- -------- -------- -------- --------
Subtotal 1,246 1,266 1,042 (2) 20

-------- -------- -------- -------- --------
Total non-compensation
expenses, as reported $ 1,345 $ 1,367 $ 1,057 (2) 27
======== ======== ======== ======== ========



THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(UNAUDITED)

Average Daily VaR (10)
$ in millions

Three Months Ended
--------------------------
Feb. 24, Nov. 25, Feb. 25,
2006 2005 2005
-------- -------- --------
Risk Categories
Interest rates $ 40 $ 45 $ 32
Equity prices 69 44 29
Currency rates 18 15 15
Commodity prices 30 25 28
Diversification effect (11) (65) (49) (39)
-------- -------- --------
Total $ 92 $ 80 $ 65
======== ======== ========


Assets Under Management (12)
$ in billions

As of % Change From
-------------------------- -----------------
Feb. 28, Nov. 30, Feb. 28, Nov. 30, Feb. 28,
2006 2005 2005 2005 2005
-------- -------- -------- -------- --------

Money markets $ 106 $ 101 $ 99 5 % 7 %
Fixed income 165 154 139 7 19
Equity 181 167 144 8 26
Alternative
investments 119 110 100 8 19
-------- -------- -------- -------- --------
Total $ 571(4)$ 532 $ 482 7 18
======== ======== ======== ======== ========

Three Months Ended
--------------------------
Feb. 28, Nov. 30, Feb. 28,
2006 2005 2005
-------- -------- --------
Balance, beginning of
period $ 532 $ 520 $ 452

Net asset inflows /
(outflows)
Money markets 5 3 9
Fixed income 8 - 6
Equity 5 4 9
Alternative investments 7 1 3
-------- -------- --------
Total net asset inflows /
(outflows) 25(4) 8 27

Net market appreciation /
(depreciation) 14 4 3

-------- -------- --------
Balance, end of period $ 571 $ 532 $ 482
======== ======== ========


Principal Investments
$ in millions

As of February 24, 2006
-------------------------------
Corporate Real Estate Total
--------- ----------- --------

Private $ 1,933 $ 678 $ 2,611
Public 386 8 394
--------- ----------- --------
Subtotal 2,319 686 3,005
SMFG convertible
preferred stock (13) 4,734 - 4,734
--------- ----------- --------
Total $ 7,053 $ 686 $ 7,739
========= =========== ========


Footnotes

(1) Statement of Financial Accounting Standards (SFAS) No. 123-R,
"Share-Based Payment" focuses primarily on accounting for
transactions in which an entity obtains employee services in
share-based payment transactions. Effective for the first quarter
of 2006, the firm adopted SFAS No. 123-R, which requires that
stock-based awards granted to retirement-eligible employees,
including those subject to non-compete agreements, be expensed in
the year of grant. In addition to expensing current year awards,
prior year awards must continue to be amortized over the relevant
service period. Therefore, although there is no incremental
economic cost to the firm, the firm's compensation and benefits
in 2006 will include both amortization of prior year awards as
well as new awards granted to retirement-eligible employees for
services rendered in 2006. Management believes that presenting
the firm's results excluding the impact of the continued
amortization of prior year stock-based awards granted to
retirement-eligible employees increases the comparability of
period-to-period operating results and allows for a more
meaningful representation of the relationship of current period
compensation to net revenues.

The following tables set forth a reconciliation of net earnings,
diluted earnings per common share, common shareholders' equity
and the ratio of compensation and benefits to net revenues as
reported, to these items excluding the impact of continued
amortization of prior year stock-based awards granted to
retirement-eligible employees:


Three Months Ended
February 24, 2006
-------------------
(unaudited, $ in
millions)

Net earnings $ 2,479
Impact of continued amortization of prior year
stock-based awards, net of tax 159
------------------
Net earnings, excluding the impact of continued
amortization of prior year stock-based awards 2,638
Preferred stock dividends (26)
------------------
Net earnings applicable to common shareholders,
excluding the impact of continued amortization
of prior year stock-based awards $ 2,612
==================

Three Months Ended
February 24, 2006
------------------
(unaudited)

Diluted earnings per common share $ 5.08
Impact of continued amortization of prior year
stock-based awards, net of tax 0.33
------------------
Diluted earnings per common share, excluding
the impact of continued amortization of prior
year stock-based awards $ 5.41
==================

Average for the
Three Months Ended
February 24, 2006
------------------
(unaudited, $ in
millions)

Total shareholders' equity $28,724
Preferred stock (1,750)
------------------
Common shareholders' equity 26,974
Impact of continued amortization of prior year
stock-based awards, net of tax (48)
------------------
Common shareholders' equity, excluding the
impact of continued amortization of prior year
stock-based awards 26,926
Goodwill and certain identifiable intangible
assets (4,687)
------------------
Tangible common shareholders' equity (see
footnote 2 below), excluding the impact of
continued amortization of prior year
stock-based awards $22,239
==================

Three Months Ended
February 24, 2006
------------------
(unaudited, $ in
millions)

Compensation and benefits $ 5,301
Impact of continued amortization of prior year
stock-based awards (237)
------------------
Compensation and benefits, excluding the impact
of continued amortization of prior year
stock-based awards $ 5,064
==================

Total net revenues $10,335
Ratio of compensation and benefits to net
revenues, excluding the impact of continued
amortization of prior year stock-based awards 49.0%

The firm's ratio of compensation and benefits to net revenues,
excluding the impact of continued amortization of prior year
stock-based awards, is computed by dividing compensation and
benefits, excluding the impact of continued amortization of prior
year stock-based awards, by total net revenues.

(2) Tangible common shareholders' equity equals total shareholders'
equity less preferred stock and goodwill and certain identifiable
intangible assets (primarily customer lists and specialist
rights). Management believes that annualized return on average
tangible common shareholders' equity is a meaningful measure of
performance because it excludes the portion of the firm's common
shareholders' equity attributable to goodwill and certain
identifiable intangible assets. As a result, this calculation
measures corporate performance in a manner that treats underlying
businesses consistently, whether they were acquired or developed
internally. Annualized return on average tangible common
shareholders' equity is computed by dividing annualized net
earnings applicable to common shareholders by average monthly
tangible common shareholders' equity. Tangible book value per
common share is computed by dividing tangible common
shareholders' equity by the number of common shares outstanding,
including restricted stock units granted to employees with no
future service requirements. The following table sets forth a
reconciliation of total shareholders' equity to tangible common
shareholders' equity:

Average for the As of
Three Months Ended
February 24, 2006 February 24, 2006
------------------- -----------------
(unaudited, $ in millions)

Total shareholders' equity $28,724 $28,915
Preferred stock (1,750) (1,750)
------------------- -----------------
Common shareholders' equity 26,974 27,165
Goodwill and certain
identifiable intangible
assets (4,687) (4,669)
------------------- -----------------
Tangible common
shareholders' equity $ 22,287 $22,496
=================== ==================

(3) Thomson Financial - November 26, 2005 through February 24, 2006.

(4) Includes $3 billion of net asset inflows in connection with the
December 30, 2005 acquisition of the variable annuity and
variable life insurance business of The Hanover Insurance Group,
Inc. (formerly Allmerica Financial Corporation), including its
wholly owned life insurance subsidiary, Allmerica Financial Life
Insurance and Annuity Company.

(5) Consolidated entities held for investment purposes includes
entities that are held strictly for capital appreciation, have a
defined exit strategy and are engaged in activities that are not
closely related to the firm's principal businesses. For example,
these investments include consolidated entities that hold real
estate assets such as golf courses and hotels in Asia, but
exclude investments in entities that primarily hold financial
assets. Management believes that it is meaningful to review
non-compensation expenses excluding expenses related to these
consolidated entities in order to evaluate trends in
non-compensation expenses related to the firm's principal
business activities.

(6) Long-term borrowings includes nonrecourse debt of $16.34 billion,
consisting of $7.12 billion issued by William Street Funding
Corporation (a wholly owned subsidiary of The Goldman Sachs
Group, Inc. formed to raise funding to support loan commitments
to investment-grade clients made by another wholly owned William
Street entity) and $9.22 billion issued by other consolidated
entities. Nonrecourse debt is debt that only the issuing
subsidiary or, if applicable, a subsidiary guaranteeing the debt
is obligated to repay.

(7) Cost of power generation includes all of the direct costs of the
firm's consolidated power generation facilities (e.g., fuel,
operations and maintenance), as well as the depreciation and
amortization associated with the facility and related contractual
assets. Power generation revenues are included in "Trading and
principal investments."

(8) Excludes 8,171, 7,382 and 536 employees as of February 2006,
November 2005 and February 2005, respectively, of consolidated
entities held for investment purposes. Compensation and benefits
includes $51 million, $60 million and $5 million for the three
months ended February 24, 2006, November 25, 2005 and February
25, 2005, respectively, attributable to these consolidated
entities.

(9) Beginning with the first quarter of 2006, includes 1,168
employees of Goldman Sachs' consolidated property management and
loan servicing subsidiaries. Prior periods have been restated to
conform to the current period presentation and include 1,198 and
928 employees as of November 2005 and February 2005,
respectively.

(10) VaR is the potential loss in value of Goldman Sachs' trading
positions due to adverse market movements over a one-day time
horizon with a 95% confidence level. The modeling of the risk
characteristics of the firm's trading positions involves a number
of assumptions and approximations. While management believes that
these assumptions and approximations are reasonable, there is no
standard methodology for estimating VaR, and different
assumptions and/or approximations could produce materially
different VaR estimates. For a further discussion of the
calculation of VaR, see Part II, Item 7A "Quantitative and
Qualitative Disclosures About Market Risk" in the firm's Annual
Report on Form 10-K for the fiscal year ended November 25, 2005.

(11) Equals the difference between total VaR and the sum of the VaRs
for the four risk categories. This effect arises because the four
market risk categories are not perfectly correlated.

(12) In the first fiscal quarter of 2006, the methodology for
classifying certain non-money market assets was changed. The
changes were primarily to reclassify certain assets allocated to
external investment managers out of alternative investment assets
and to reclassify currency assets into alternative investment
assets. The changes did not impact total assets under management
and prior periods have been restated to conform to the current
period presentation. Substantially all assets under management
are valued as of calendar month end.

(13) Excludes an economic hedge on the unrestricted shares of common
stock underlying the investment. As of February 24, 2006, the
fair value of this hedge was $1.70 billion. Includes the impact
of foreign exchange revaluation on the investment, for which the
firm also maintains an economic hedge.