UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

		For the quarterly period ended ~~June 26,~~September 25, 2009

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

		For the transition period from to

Commission File Number:001-14965

The Goldman Sachs Group, Inc.

(Exact name of registrant as specified in its charter)


Delaware		13-4019460
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

85 Broad Street, New York, NY		10004
(Address of principal executive offices)		(Zip Code)

(212) 902-1000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” inRule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). o Yes x No

APPLICABLE ONLY TO CORPORATE ISSUERS

As of ~~July 24,~~October 23, 2009, there were ~~511,236,761~~514,082,153 shares of the registrant’s common stock outstanding.

THE GOLDMAN SACHS GROUP, INC.

QUARTERLY REPORT ONFORM 10-Q FOR THE FISCAL QUARTER ENDED ~~JUNE 26,~~SEPTEMBER 25, 2009

INDEX


		Page
Form 10-Q Item Number:		No.


PART I:	FINANCIAL INFORMATION

Item 1:	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Earnings for the three and ~~six~~nine months ended ~~June 26,~~September 25, 2009 and ~~May 30,~~August 29, 2008		2
	Condensed Consolidated Statements of Financial Condition as of ~~June 26,~~September 25, 2009 and November 28, 2008		3
	Condensed Consolidated Statements of Changes in Shareholders’ Equity for the ~~six~~nine months ended ~~June 26,~~September 25, 2009 and year ended November 28, 2008		4
	Condensed Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~June 26,~~September 25, 2009 and ~~May 30,~~August 29, 2008		5
	Condensed Consolidated Statements of Comprehensive Income for the three and ~~six~~nine months ended ~~June 26,~~September 25, 2009 and ~~May 30,~~August 29, 2008		6
	Notes to Condensed Consolidated Financial Statements		7
	Report of Independent Registered Public Accounting Firm		76
	Statistical Disclosures		77

Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations		81

Item 3:	Quantitative and Qualitative Disclosures About Market Risk		~~139~~138

Item 4:	Controls and Procedures		~~139~~138

PART II:	OTHER INFORMATION

Item 1:	Legal Proceedings		~~140~~139

Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds		~~142~~141

Item 4:5:	~~Submission of Matters to a Vote of Security Holders~~Other Information		~~143~~142

Item 6:	Exhibits		~~144~~143

SIGNATURES			~~145~~144
~~EX-10.1: LETTER TO MR. JAMES J. SCHIRO~~EX-3.1: CERTIFICATE OF ELIMINATION OF FIXED RATE CUMULATIVE PERPETUAL PREFERRED STOCK, SERIES H, OF THE GOLDMAN SACHS GROUP, INC.
EX-3.2: RESTATED CERTIFICATE OF INCORPORATION OF THE GOLDMAN SACHS GROUP, INC.
EX-3.3: AMENDED AND RESTATED BY-LAWS OF THE GOLDMAN SACHS GROUP, INC.
EX-12.1:STATEMENT RE: COMPUTATION OF ~~RATIONS~~RATIOS OF EARNINGS TO FIXED CHARGES AND RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
EX-15.1:LETTER RE: UNAUDITED INTERIM FINANCIAL INFORMATION
EX-31.1: RULE 13A-14(A) CERTIFICATIONS
EX-32.1: SECTION 1350 CERTIFICATIONS
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I: FINANCIAL INFORMATION


Item 1:	Financial Statements (Unaudited)

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(UNAUDITED)


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June		May		June		May		September		August		September		August
	2009		2008		2009		2008		2009		2008		2009		2008
	(in millions, except per share amounts)								(in millions, except per share amounts)

Revenues
Investment banking	$	1,440	$	1,685	$	2,263	$	2,851	$	899	$	1,294	$	3,162	$	4,145
Trading and principal investments		9,322		5,239		15,028		10,116		8,801		2,440		23,829		12,556
Asset management and securities services		957		1,221		1,946		2,562		982		1,174		2,928		3,736

Totalnon-interest revenues		11,719		8,145		19,237		15,529		10,682		4,908		29,919		20,437

Interest income		3,470		9,498		7,832		20,743		3,000		8,717		10,832		29,460
Interest expense		1,428		8,221		3,883		18,515		1,310		7,582		5,193		26,097

Net interest income		2,042		1,277		3,949		2,228		1,690		1,135		5,639		3,363

Net revenues, including net interest income		13,761		9,422		23,186		17,757		12,372		6,043		35,558		23,800


Operating expenses
Compensation and benefits		6,649		4,522		11,361		8,523		5,351		2,901		16,712		11,424

Brokerage, clearing, exchange and distribution fees		574		741		1,110		1,531		580		734		1,690		2,265
Market development		82		126		150		270		84		119		234		389
Communications and technology		173		192		346		379		194		192		540		571
Depreciation and amortization		426		220		975		474		367		300		1,342		774
Occupancy		242		234		483		470		230		237		713		707
Professional fees		145		185		280		363		183		168		463		531
Other expenses		441		370		823		772		589		432		1,412		1,204

Totalnon-compensation expenses		2,083		2,068		4,167		4,259		2,227		2,182		6,394		6,441

Total operating expenses		8,732		6,590		15,528		12,782		7,578		5,083		23,106		17,865


Pre-tax earnings		5,029		2,832		7,658		4,975		4,794		960		12,452		5,935
Provision for taxes		1,594		745		2,409		1,377		1,606		115		4,015		1,492

Net earnings		3,435		2,087		5,249		3,598		3,188		845		8,437		4,443
Preferred stock dividends		717		36		872		80		160		35		1,032		115

Net earnings applicable to common shareholders	$	2,718	$	2,051	$	4,377	$	3,518	$	3,028	$	810	$	7,405	$	4,328

Earnings per common share
Basic	$	5.27	$	4.80	$	8.81	$	8.18	$	5.74	$	1.89	$	14.60	$	10.08
Diluted		4.93		4.58		8.42		7.81		5.25		1.81		13.74		9.62

Dividends declared per common share	$	0.35	$	0.35	$	0.35	$	0.70	$	0.35	$	0.35	$	0.70	$	1.05

Average common shares outstanding
Basic		514.1		427.5		495.7		430.3		525.9		427.6		505.8		429.3
Diluted		551.0		447.4		520.1		450.6		576.9		448.3		539.0		449.7

The accompanying notes are an integral part of these condensed consolidated financial statements.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)


	As of						As of
	June			November			September			November
	2009			2008			2009			2008
	(in millions, except share						(in millions, except share
	and per share amounts)						and per share amounts)

Assets
Cash and cash equivalents	$	22,177		$	15,740		$	23,015		$	15,740
Cash and securities segregated for regulatory and other purposes (includes $32,038 and $78,830 at fair value as of June 2009 and November 2008, respectively)		53,813			106,664
Cash and securities segregated for regulatory and other purposes (includes $20,016 and $78,830 at fair value as of September 2009 and November 2008, respectively)								42,959			106,664
Collateralized agreements:
Securities purchased under agreements to resell and federal funds sold (includes $138,339 and $116,671 at fair value as of June 2009 and November 2008, respectively)		138,339			122,021
Securities borrowed (includes $87,018 and $59,810 at fair value as of June 2009 and November 2008, respectively)		218,544			180,795
Securities purchased under agreements to resell and federal funds sold (includes $142,589 and $116,671 at fair value as of September 2009 and November 2008, respectively)								142,589			122,021
Securities borrowed (includes $79,461 and $59,810 at fair value as of September 2009 and November 2008, respectively)								221,817			180,795
Receivables from brokers, dealers and clearing organizations		21,934			25,899			15,054			25,899
Receivables from customers and counterparties (includes $1,913 and $1,598 at fair value as of June 2009 and November 2008, respectively)		50,381			64,665
Trading assets, at fair value (includes $31,135 and $26,313 pledged as collateral as of June 2009 and November 2008, respectively)		355,251			338,325
Receivables from customers and counterparties (includes $2,026 and $1,598 at fair value as of September 2009 and November 2008, respectively)								54,882			64,665
Trading assets, at fair value (includes $34,869 and $26,313 pledged as collateral as of September 2009 and November 2008, respectively)								352,190			338,325
Other assets		29,105			30,438			29,679			30,438

Total assets	$	889,544		$	884,547		$	882,185		$	884,547


Liabilities and shareholders’ equity
Deposits (includes $5,045 and $4,224 at fair value as of June 2009 and November 2008, respectively)	$	41,457		$	27,643
Deposits (includes $3,825 and $4,224 at fair value as of September 2009 and November 2008, respectively)							$	42,431		$	27,643
Collateralized financings:
Securities sold under agreements to repurchase, at fair value		132,982			62,883			127,035			62,883
Securities loaned (includes $12,194 and $7,872 at fair value as of June 2009 and November 2008, respectively)		20,289			17,060
Other secured financings (includes $17,480 and $20,249 at fair value as of June 2009 and November 2008, respectively)		30,297			38,683
Securities loaned (includes $9,465 and $7,872 at fair value as of September 2009 and November 2008, respectively)								17,567			17,060
Other secured financings (includes $15,185 and $20,249 at fair value as of September 2009 and November 2008, respectively)								27,984			38,683
Payables to brokers, dealers and clearing organizations		11,028			8,585			5,434			8,585
Payables to customers and counterparties		185,353			245,258			181,770			245,258
Trading liabilities, at fair value		147,297			175,972			150,383			175,972
Unsecuredshort-term borrowings, including the current portion of unsecuredlong-term borrowings (includes $14,920 and $23,075 at fair value as of June 2009 and November 2008, respectively)		35,173			52,658
Unsecuredlong-term borrowings (includes $19,897 and $17,446 at fair value as of June 2009 and November 2008, respectively)		191,242			168,220
Other liabilities and accrued expenses (includes $2,162 and $978 at fair value as of June 2009 and November 2008, respectively)		31,613			23,216
Unsecuredshort-term borrowings, including the current portion of unsecuredlong-term borrowings (includes $14,801 and $23,075 at fair value as of September 2009 and November 2008, respectively)								38,555			52,658
Unsecuredlong-term borrowings (includes $20,795 and $17,446 at fair value as of September 2009 and November 2008, respectively)								189,724			168,220
Other liabilities and accrued expenses (includes $2,479 and $978 at fair value as of September 2009 and November 2008, respectively)								35,948			23,216

Total liabilities		826,731			820,178			816,831			820,178

Commitments, contingencies and guarantees

Shareholders’ equity
Preferred stock, par value $0.01 per share; aggregate liquidation preference of $8,100 and $18,100 as of June 2009 and November 2008, respectively		6,957			16,471
Common stock, par value $0.01 per share; 4,000,000,000 shares authorized, 749,041,990 and 680,953,836 shares issued as of June 2009 and November 2008, respectively, and 510,736,634 and 442,537,317 shares outstanding as of June 2009 and November 2008, respectively		7			7
Preferred stock, par value $0.01 per share; aggregate liquidation preference of $8,100 and $18,100 as of September 2009 and November 2008, respectively								6,957			16,471
Common stock, par value $0.01 per share; 4,000,000,000 shares authorized, 751,358,890 and 680,953,836 shares issued as of September 2009 and November 2008, respectively, and 513,055,963 and 442,537,317 shares outstanding as of September 2009 and November 2008, respectively								8			7
Restricted stock units and employee stock options		5,187			9,284			5,609			9,284
Nonvoting common stock, par value $0.01 per share; 200,000,000 shares authorized, no shares issued and outstanding		—			—			—			—
Additionalpaid-in capital		40,342			31,071			39,517			31,071
Retained earnings		42,827			39,913			45,660			39,913
Accumulated other comprehensive loss		(350	)		(202	)		(240	)		(202	)
Common stock held in treasury, at cost, par value $0.01 per share; 238,305,356 and 238,416,519 shares as of June 2009 and November 2008, respectively		(32,157	)		(32,175	)
Common stock held in treasury, at cost, par value $0.01 per share; 238,302,927 and 238,416,519 shares as of September 2009 and November 2008, respectively								(32,157	)		(32,175	)

Total shareholders’ equity		62,813			64,369			65,354			64,369

Total liabilities and shareholders’ equity	$	889,544		$	884,547		$	882,185		$	884,547

The accompanying notes are an integral part of these condensed consolidated financial statements.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(UNAUDITED)

~~(UNAUDITED)~~


	Six Months						Nine Months
	Ended			Year Ended			Ended			Year Ended
	June 2009⁽¹⁾			November 2008			September 2009 ⁽¹⁾			November 2008
	(in millions)						(in millions)

Preferred stock
Balance, beginning of period	$	16,483		$	3,100		$	16,483		$	3,100
Issued		—			13,367			—			13,367
Accretion		48			4			48			4
Repurchased		(9,574	)		—			(9,574	)		—

Balance, end of period		6,957			16,471			6,957			16,471
Common stock
Balance, beginning of period		7			6			7			6
Issued		—			1			1			1

Balance, end of period		7			7			8			7
Restricted stock units and employee stock options
Balance, beginning of period		9,463			9,302			9,463			9,302
Issuance and amortization of restricted stock units and employee stock options		959			2,254			1,409			2,254
Delivery of common stock underlying restricted stock units		(5,174	)		(1,995	)		(5,178	)		(1,995	)
Forfeiture of restricted stock units and employee stock options		(60	)		(274	)		(83	)		(274	)
Exercise of employee stock options		(1	)		(3	)		(2	)		(3	)

Balance, end of period		5,187			9,284			5,609			9,284
Additionalpaid-in capital
Balance, beginning of period		31,070			22,027			31,070			22,027
Issuance of common stock		5,750			5,750			5,750			5,750
Issuance of common stock warrants		—			1,633			—			1,633
Repurchase of common stock warrants								(1,100	)		—
Delivery of common stock underlying restricted stock units and proceeds from the exercise of employee stock options		5,303			2,331			5,510			2,331
Cancellation of restricted stock units in satisfaction of withholding tax requirements		(849	)		(1,314	)		(850	)		(1,314	)
Preferred and common stock issuance costs		—			(1	)		—			(1	)
Excess net tax benefit/(provision) related toshare-based compensation		(930	)		645			(861	)		645
Cash settlement ofshare-based compensation		(2	)		—			(2	)		—

Balance, end of period		40,342			31,071			39,517			31,071
Retained earnings
Balance, beginning of period		38,579			38,642			38,579			38,642
Cumulative effect of adjustment from adoption of FIN 48		—			(201	)
Cumulative effect from adoption of amended principles related to accounting for uncertainty in income taxes								—			(201	)

Balance, beginning of period, after cumulative effect of adjustments		38,579			38,441			38,579			38,441
Net earnings		5,249			2,322			8,437			2,322
Dividends and dividend equivalents declared on common stock and restricted stock units		(197	)		(642	)		(392	)		(642	)
Dividends declared on preferred stock		(756	)		(204	)		(916	)		(204	)
Preferred stock accretion		(48	)		(4	)		(48	)		(4	)

Balance, end of period		42,827			39,913			45,660			39,913
Accumulated other comprehensive income/(loss)
Balance, beginning of period		(372	)		(118	)		(372	)		(118	)
Currency translation adjustment, net of tax		(29	)		(98	)		(30	)		(98	)
Pension and postretirement liability adjustment, net of tax		17			69
Pension and postretirement liability adjustments, net of tax								25			69
Net unrealized gains/(losses) onavailable-for-sale securities, net of tax		34			(55	)		137			(55	)

Balance, end of period		(350	)		(202	)		(240	)		(202	)
Common stock held in treasury, at cost
Balance, beginning of period		(32,176	)		(30,159	)		(32,176	)		(30,159	)
Repurchased		(2	) ⁽²⁾		(2,037	)		(2	) ⁽²⁾		(2,037	)
Reissued		21			21			21			21

Balance, end of period		(32,157	)		(32,175	)		(32,157	)		(32,175	)

Total shareholders’ equity	$	62,813		$	64,369		$	65,354		$	64,369


⁽¹⁾		In connection with becoming a bank holding company, the firm was required to change its fiscal year-end from November to December. The beginning of period for the ~~six~~nine months ended ~~June~~September 2009 is December 26, 2008.

⁽²⁾		Relates to repurchases of common stock by abroker-dealer subsidiary to facilitate customer transactions in the ordinary course of business and shares withheld to satisfy withholding tax requirements.

The accompanying notes are an integral part of these condensed consolidated financial statements.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

~~(UNAUDITED)~~


	Six Months Ended						Nine Months Ended
	June			May			September			August
	2009			2008			2009			2008
	(in millions)						(in millions)

Cash flows from operating activities
Net earnings	$	5,249		$	3,598		$	8,437		$	4,443
Non-cash items included in net earnings
Depreciation and amortization		1,176			654			1,549			1,046
Share-based compensation		907			894			1,345			1,195
Changes in operating assets and liabilities
Cash and securities segregated for regulatory and other purposes		58,895			35,265			69,748			20,715
Net receivables from brokers, dealers and clearing organizations		2,715			(1,485	)		4,001			1,820
Net payables to customers and counterparties		(37,786	)		54,916			(45,872	)		82,244
Securities borrowed, net of securities loaned		(16,490	)		(15,196	)		(22,485	)		(24,463	)
Securities sold under agreements to repurchase, net of securities purchased under agreements to resell and federal funds sold		(136,246	)		(89,500	)		(146,443	)		(97,072	)
Trading assets, at fair value		172,389			28,881			177,292			37,946
Trading liabilities, at fair value		(38,731	)		(32,154	)		(35,646	)		(28,582	)
Other, net		3,942			35			11,426			(8,296	)

Net cash provided by/(used for) operating activities		16,020			(14,092	)		23,352			(9,004	)
Cash flows from investing activities
Purchase of property, leasehold improvements and equipment		(653	)		(1,033	)		(1,077	)		(1,529	)
Proceeds from sales of property, leasehold improvements and equipment		50			55			52			70
Business acquisitions, net of cash acquired		(208	)		(2,199	)		(210	)		(2,517	)
Proceeds from sales of investments		140			80			201			384
Purchase ofavailable-for-sale securities		(1,904	)		(2,556	)		(2,405	)		(3,240	)
Proceeds from sales ofavailable-for-sale securities		1,803			2,090			2,139			2,825

Net cash used for investing activities		(772	)		(3,563	)		(1,300	)		(4,007	)
Cash flows from financing activities
Unsecuredshort-term borrowings, net		(10,965	)		(7,286	)		(12,052	)		(10,061	)
Other secured financings(short-term), net		(6,531	)		(8,341	)		(8,820	)		(5,545	)
Proceeds from issuance of other secured financings(long-term)		3,400			5,014			3,703			9,870
Repayment of other secured financings(long-term), including the current portion		(2,850	)		(3,648	)		(3,652	)		(9,343	)
Proceeds from issuance of unsecuredlong-term borrowings		20,875			31,790			23,989			37,143
Repayment of unsecuredlong-term borrowings, including the current portion		(16,805	)		(11,751	)		(22,087	)		(19,190	)
Preferred stock repurchased		(9,574	)		—			(9,574	)		—
Repurchase of common stock warrants								(1,100	)		—
Derivative contracts with a financing element, net		1,815			155			2,130			73
Deposits, net		9,327			14,148			10,301			13,681
Common stock repurchased		(2	)		(1,761	)		(2	)		(2,032	)
Dividends and dividend equivalents paid on common stock, preferred stock and restricted stock units		(1,495	)		(393	)		(1,850	)		(587	)
Proceeds from issuance of common stock, including stock option exercises		5,893			170			6,089			261
Excess tax benefit related toshare-based compensation		38			582			85			619
Cash settlement ofshare-based compensation		(2	)		—			(2	)		—

Net cash provided by/(used for) financing activities		(6,876	)		18,679			(12,842	)		14,889

Net increase in cash and cash equivalents		8,372			1,024			9,210			1,878
Cash and cash equivalents, beginning of period		13,805			10,282			13,805			10,282

Cash and cash equivalents, end of period	$	22,177		$	11,306		$	23,015		$	12,160

SUPPLEMENTAL DISCLOSURES:

Cash payments for interest, net of capitalized interest, were ~~$4.58~~$6.05 billion and ~~$18.68~~$26.13 billion during the ~~six~~nine months ended ~~June~~September 2009 and ~~May~~August 2008, respectively.

Cash payments for income taxes, net of refunds, were ~~$1.81~~$3.60 billion and ~~$1.39~~$2.46 billion during the ~~six~~nine months ended ~~June~~September 2009 and ~~May~~August 2008, respectively.

Non-cash activities:

The firm assumed $16 million and $610 million of debt in connection with business acquisitions during the ~~six~~nine months ended ~~June~~September 2009 and ~~May~~August 2008, respectively.

The accompanying notes are an integral part of these condensed consolidated financial statements.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June			May			June			May			September			August			September			August
	2009			2008			2009			2008			2009			2008			2009			2008
	(in millions)												(in millions)

Net earnings	$	3,435		$	2,087		$	5,249		$	3,598		$	3,188		$	845		$	8,437		$	4,443
Currency translation adjustment, net of tax		(54	)		(21	)		(29	)		(12	)		(1	)		(25	)		(30	)		(37	)
Pension and postretirement liability adjustment, net of tax		8			6			17			6
Pension and postretirement liability adjustments, net of tax														8			3			25			9
Net unrealized gains/(losses) onavailable-for-sale securities, net of tax		53			23			34			(12	)		103			(7	)		137			(19	)

Comprehensive income	$	3,442		$	2,095		$	5,271		$	3,580		$	3,298		$	816		$	8,569		$	4,396

The accompanying notes are an integral part of these condensed consolidated financial statements.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


Note 1.	Description of Business

The Goldman Sachs Group, Inc. (Group Inc.), a Delaware corporation, together with its consolidated subsidiaries (collectively, the firm), is a leading global financial services firm providing investment banking, securities and investment management services to a substantial and diversified client base that includes corporations, financial institutions, governments andhigh-net-worth individuals. Founded in 1869, the firm is headquartered in New York and maintains offices in London, Frankfurt, Tokyo, Hong Kong and other major financial centers around the world.

The firm’s activities are divided into three segments:


	•	Investment Banking. The firm provides a broad range of investment banking services to a diverse group of corporations, financial institutions, investment funds, governments and individuals.

	•	Trading and Principal Investments. The firm facilitates client transactions with a diverse group of corporations, financial institutions, investment funds, governments and individuals and takes proprietary positions through market making in, trading of and investing in fixed income and equity products, currencies, commodities and derivatives on these products. In addition, the firm engages inmarket-making and specialist activities on equities and options exchanges, and the firm clears client transactions on major stock, options and futures exchanges worldwide. In connection with the firm’s merchant banking and other investing activities, the firm makes principal investments directly and through funds that the firm raises and manages.

	•	Asset Management and Securities Services. The firm provides investment advisory and financial planning services and offers investment products (primarily through separately managed accounts and commingled vehicles, such as mutual funds and private investment funds) across all major asset classes to a diverse group of institutions and individuals worldwide and provides prime brokerage services, financing services and securities lending services to institutional clients, including hedge funds, mutual funds, pension funds and foundations, and tohigh-net-worth individuals worldwide.


Note 2.	Significant Accounting Policies

Basis of Presentation

These condensed consolidated financial statements include the accounts of Group Inc. and all other entities in which the firm has a controlling financial interest. All material intercompany transactions and balances have been eliminated.

The firm determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity, a variable interest entity (VIE) or a qualifyingspecial-purpose entity (QSPE) under generally accepted accounting ~~principles.~~principles (GAAP).


	•	Voting Interest Entities. Voting interest entities are entities in which (i) the total equity investment at risk is sufficient to enable the entity to finance its activities independently and (ii) the equity holders have the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity’s activities. ~~Voting interest entities are consolidated in accordance with Accounting Research Bulletin (ARB) No. 51, “Consolidated Financial Statements,” as amended.~~ The usual condition for a controlling financial interest in ana voting interest entity is ownership of a majority voting interest. Accordingly, the firm consolidates voting interest entities in which it has a majority voting interest.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


	•	Variable Interest Entities. VIEs are entities that lack one or more of the characteristics of a voting interest entity. A controlling financial interest in a VIE is present when an enterprise has a variable interest, or a combination of variable interests, that will absorb a majority of the VIE’s expected losses, receive a majority of the VIE’s expected residual returns, or both. The enterprise with a controlling financial interest, known as the primary beneficiary, consolidates the VIE. ~~In accordance with Financial Accounting Standards Board (FASB) Interpretation(FIN) 46-R,~~ ~~“Consolidation of Variable Interest Entities,” the~~The firm determines whether it is the primary beneficiary of a VIE by first performing a qualitative analysis of the VIE’s expected losses and expected residual returns. This analysis includes a review of, among other factors, the VIE’s capital structure, contractual terms, which interests create or absorb variability, related party relationships and the design of the VIE. Where qualitative analysis is not conclusive, the firm performs a quantitative analysis. For purposes of allocating a VIE’s expected losses and expected residual returns to its variable interest holders, the firm utilizes the “top down” method. Under this method, the firm calculates its share of the VIE’s expected losses and expected residual returns using the specific cash flows that would be allocated to it, based on contractual arrangementsand/or the firm’s position in the capital structure of the VIE, under various probability-weighted scenarios. The firm reassesses its initial evaluation of an entity as a VIE and its initial determination of whether the firm is the primary beneficiary of a VIE upon the occurrence of certain reconsideration ~~events as defined inFIN 46-R.~~events. See“— Recent Accounting Developments” below for information regarding amendments to~~FIN 46-R.~~ accounting for VIEs.

	•	QSPEs. QSPEs are passive entities that are commonly used in mortgage and other securitization transactions. ~~Statement of Financial Accounting Standards (SFAS) No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” sets forth the criteria~~To be considered a QSPE, an entity must satisfy ~~to be a QSPE.~~certain criteria. These criteria include the types of assets a QSPE may hold, limits on asset sales, the use of derivatives and financial guarantees, and the level of discretion a servicer may exercise in attempting to collect receivables. These criteria may require management to make judgments about complex matters, such as whether a derivative is considered passive and the level of discretion a servicer may exercise, including, for example, determining when default is reasonably foreseeable. ~~In accordance with SFAS No. 140 andFIN 46-R,~~ ~~the~~The firm does not consolidate QSPEs. See“— Recent Accounting Developments” below for information regarding amendments to ~~SFAS No. 140.~~accounting for QSPEs.

	•	Equity-Method Investments. When the firm does not have a controlling financial interest in an entity but exerts significant influence over the entity’s operating and financial policies (generally defined as owning a voting interest of 20% to 50%) and has an investment in common stock orin-substance common stock, the firm accounts for its investment either ~~in accordance with Accounting Principles Board Opinion (APB) No. 18, “The Equity Method~~under the equity method of ~~Accounting for Investments in Common Stock”~~accounting or at fair value ~~in accordance with SFAS No. 159, “The Fair Value Option for~~pursuant to the fair value option available under Financial ~~Assets and Financial Liabilities.”~~Accounting Standards Board (FASB) Accounting Standards Codification(ASC) 825-10. In general, the firm accounts for investments acquired subsequent to November 24, 2006, when the ~~adoption of SFAS No. 159~~fair value option became available, at fair value. In certain cases, the firm may apply the equity method of accounting to new investments that are strategic in nature or closely related to the firm’s principal business activities, where the firm has a significant degree of involvement in the cash flows or operations of the investee, or wherecost-benefit considerations are less significant. See“— Revenue Recognition — Other Financial Assets and Financial Liabilities at Fair Value” below for a discussion of the firm’s application of ~~SFAS No. 159.~~the fair value option.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


	•	Other. If the firm does not consolidate an entity or apply the equity method of accounting, the firm accounts for its investment at fair value. The firm also has formed numerous nonconsolidated investment funds withthird-party investors that are typically organized as limited partnerships. The firm acts as general partner for these funds and generally does not hold a majority of the economic interests in these funds. The firm has generally provided thethird-party investors with rights to terminate the funds or to remove the firm as the general partner. As a result, the firm does not consolidate these funds. These fund investments are included in “Trading assets, at fair value” in the condensed consolidated statements of financial condition.

These condensed consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements included in the firm’s Annual Report onForm 10-K for the fiscal year ended November 28, 2008. The condensed consolidated financial information as of November 28, 2008 has been derived from audited consolidated financial statements not included herein.

These unaudited condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. These adjustments are of a normal, recurring nature. Interim period operating results may not be indicative of the operating results for a full year.

In connection with becoming a bank holding company, the firm was required to change its fiscalyear-end from November to December. This change in the firm’s fiscal year-end resulted in aone-month transition period that began on November 29, 2008 and ended on December 26, 2008. The firm’s financial information for this fiscal transition period is included in the firm’s Quarterly Report onForm 10-Q for the quarter ended March 27, 2009. On April 13, 2009, the Board of Directors of Group Inc. (the Board) approved a change in the firm’s fiscal year-end from the last Friday of December to December 31, beginning ~~with fiscal~~in the fourth quarter of 2009. Fiscal 2009 began on December 27, 2008 and will end on December 31, 2009. ~~The firm’s third fiscal quarter in 2009 will end on the last Friday of September. Beginning in the fourth quarter of 2009, the firm’s fiscal year will end on December 31.~~

In the condensed consolidated statements of earnings, cash flows and comprehensive income, the firm compares the three and ~~six~~nine month periods, as applicable, ended ~~June 26,~~September 25, 2009 with the previously reported three and ~~six~~nine month periods ended ~~May 30,~~August 29, 2008. Financial information for the three and ~~six~~nine months ended ~~June 27,~~September 26, 2008 has not been included in thisForm 10-Q for the following reasons: (i) the three and ~~six~~nine months ended ~~May 30,~~August 29, 2008 provide a meaningful comparison for the three and ~~six~~nine months ended ~~June 26,~~September 25, 2009; (ii) there are no significant factors, seasonal or other, that would impact the comparability of information if the results for the three and ~~six~~nine months ended ~~June 27,~~September 26, 2008 were presented in lieu of results for the three and ~~six~~nine months ended ~~May 30,~~August 29, 2008; and (iii) it was not practicable or cost justified to prepare this information.

All references to ~~June~~September 2009 and ~~May~~August 2008, unless specifically stated otherwise, refer to the firm’s~~three-month~~ fiscal periods ended, or the dates, as the context requires, ~~June 26,~~September 25, 2009 and ~~May 30,~~August 29, 2008, respectively. All references to November 2008, unless specifically stated otherwise, refer to the firm’s fiscal year ended, or the date, as the context requires, November 28, 2008. All references to 2009, unless specifically stated otherwise, refer to the firm’s fiscal year ending, or the date, as the context requires, December 31, 2009. Certain reclassifications have been made to previously reported amounts to conform to the current presentation.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Use of Estimates

These condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles that require management to make certain estimates and assumptions. The most important of these estimates and assumptions relate to fair value measurements, the accounting for goodwill and identifiable intangible assets, discretionary compensation accruals and the provision for potential losses that may arise from litigation and regulatory proceedings and tax audits. Although these and other estimates and assumptions are based on the best available information, actual results could be materially different from these estimates.

Revenue Recognition

Investment Banking. Underwriting revenues and fees from mergers and acquisitions and other financial advisory assignments are recognized in the condensed consolidated statements of earnings when the services related to the underlying transaction are completed under the terms of the engagement. Expenses associated with such transactions are deferred until the related revenue is recognized or the engagement is otherwise concluded. Underwriting revenues are presented net of related expenses. Expenses associated with financial advisory transactions are recorded asnon-compensation expenses, net of client reimbursements.

Trading Assets and Trading Liabilities. Substantially all trading assets and trading liabilities are reflected in the condensed consolidated statements of financial condition at fair ~~value, pursuant principally to:~~


	•	~~SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities;”~~

	•	~~specialized industry accounting forbroker-dealers~~ ~~and investment companies;~~

	•	~~SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities;” or~~

	•	the fair value option under either SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140,” or SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” (i.e., the fair value option).

value. Related ~~unrealized~~ gains or losses are generally recognized in “Trading and principal investments” in the condensed consolidated statements of earnings.

Other Financial Assets and Financial Liabilities at Fair Value. In addition to “Trading assets, at fair value” and “Trading liabilities, at fair value,” the firm has elected to account for certain of its other financial assets and financial liabilities at fair value under ASC815-15 and825-10 (i.e., the fair value ~~option.~~option). The primary reasons for electing the fair value option are to reflect economic events in earnings on a timely basis, to mitigate volatility in earnings from using different measurement attributes and to address simplification andcost-benefit considerations.

Such financial assets and financial liabilities accounted for at fair value include:


	•	certain unsecuredshort-term borrowings, consisting of all promissory notes and commercial paper and certain hybrid financial instruments;

	•	certain other secured financings, primarily transfers accounted for as financings rather than sales, ~~under SFAS No. 140,~~ debt raised through the firm’s William Street credit extension program and certain other nonrecourse financings;

~~THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(UNAUDITED)~~


	•	certain unsecuredlong-term borrowings, including prepaid physical commodity transactions and certain hybrid financial instruments;

	•	resale and repurchase agreements;

	•	securities borrowed and loaned within Trading and Principal Investments, consisting of the firm’s matched book and certain firm financing activities;

	•	certain deposits issued by Goldman Sachs Bank USA (GS Bank USA), as well as securities held by GS Bank USA;

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


	•	certain receivables from customers and counterparties, including certain margin loans, transfers accounted for as secured loans rather than purchases ~~under SFAS No. 140~~ and prepaid variable share forwards;

	•	certain insurance and reinsurance contracts and certain guarantees; and

	•	in general, investments acquired after November 24, 2006, when the ~~adoption of SFAS No. 159~~fair value option became available, where the firm has significant influence over the investee and would otherwise apply the equity method of accounting.

Fair Value Measurements. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs.

~~SFAS No. 157, “Fair Value Measurements,” establishes a~~The fair value hierarchy ~~that~~under ASC 820 prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy ~~under SFAS No. 157~~ are described below:

Basis of Fair Value Measurement


	Level 1	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

	Level 2	Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly;

	Level 3	Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The firm defines active markets for equity instruments based on the average daily trading volume both in absolute terms and relative to the market capitalization for the instrument. The firm defines active markets for debt instruments based on both the average daily trading volume and the number of days with trading activity.

~~In October 2008, the FASB issued FASB Staff Position (FSP)No. FAS 157-3,~~ “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active,” which specifies that it is acceptable to use inputs based on management estimates or assumptions, or for management to make adjustments to observable inputs, to determine fair value when markets are not active and

~~THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(UNAUDITED)~~

~~relevant observable inputs are not available. In April 2009, the FASB issued FSPNo. FAS 157-4,~~ “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” which provides additional guidance for estimating fair value when the volume and level of activity for an asset or liability have decreased significantly. The firm’s fair value measurement policies are consistent with the guidance in both FSP~~No. FAS 157-3~~ ~~and FSPNo. FAS 157-4.~~ ~~See“— Recent~~ ~~Accounting Developments” below for further information regarding FSPNo. FAS 157-4.~~

Credit risk is an essential component of fair value. Cash products (e.g., bonds and loans) and derivative instruments (particularly those with significant future projected cash flows) trade in the market at levels which reflect credit considerations. The firm calculates the fair value of derivative assets by discounting future cash flows at a rate which incorporates counterparty credit spreads and the fair value of derivative liabilities by discounting future cash flows at a rate which incorporates the firm’s own credit spreads. In doing so, credit exposures are adjusted to reflect mitigants, namely collateral agreements which reduce exposures based on triggers and contractual posting requirements. The firm manages its exposure to credit risk as it does other market risks and will price, economically hedge, facilitate and intermediate trades which involve credit risk. The firm records liquidity valuation adjustments to reflect the cost of exiting concentrated risk positions, including exposure to the firm’s own credit spreads.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

In determining fair value, the firm separates ~~its~~ “Trading assets, at fair value” and ~~its~~ “Trading liabilities, at fair value” into two categories: cash instruments and derivative contracts.


	•	Cash Instruments. The firm’s cash instruments are generally classified within level 1 or level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices in active markets include most government obligations, active listed equities and certain money market securities. Such instruments are generally classified within level 1 of the fair value hierarchy. ~~In accordance with SFAS No. 157,~~Instruments classified within level 1 of the ~~firm does not adjust the~~fair value hierarchy are required to be carried at quoted ~~price for such instruments,~~market prices, even in situations where the firm holds a large position and a sale could reasonably impact the quoted price.

The types of instruments that trade in markets that are not considered to be active, but are valued based on quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency include most government agency securities,~~investment-grade~~ most corporate bonds, certain mortgage products, certain bank loans and bridge loans, less liquid listed equities, certain state, municipal and provincial obligations and certain money market securities and loan commitments. Such instruments are generally classified within level 2 of the fair value hierarchy.

Certain cash instruments are classified within level 3 of the fair value hierarchy because they trade infrequently and therefore have little or no price transparency. Such instruments include private equity and real estate fund investments, certain bank loans and bridge loans (including certain mezzanine financing, leveraged loans arising from capital market transactions and other corporate bank debt), less liquid corporate debt securities and other debt obligations (including less liquid~~high-yield~~ corporate bonds, distressed debt instruments and collateralized debt obligations (CDOs) backed by corporate obligations), less liquid mortgage whole loans and securities (backed by either commercial or residential real estate), and acquired portfolios of distressed loans. The transaction price is initially used as the best estimate of fair value. Accordingly, when a pricing model is used to value such an instrument, the model is adjusted

~~THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(UNAUDITED)~~

so that the model value at inception equals the transaction price. This valuation is adjusted only when changes to inputs and assumptions are corroborated by evidence such as transactions in similar instruments, completed or pendingthird-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalizations and other transactions across the capital structure, offerings in the equity or debt capital markets, and changes in financial ratios or cash flows.

For positions that are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidityand/ornon-transferability. Such adjustments are generally based on market evidence where available. In the absence of such evidence, management’s best estimate is used.

Management’s judgment is required to determine the appropriaterisk-adjusted discount rate for cash trading instruments that are classified within level 3 of the fair value hierarchy and that have little or no price transparency as a result of decreased volumes and lower levels of trading activity. In such situations, the firm’s valuation is adjusted to approximate rates which market participants would likely consider appropriate for relevant credit and liquidity risks.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


	•	Derivative Contracts. Derivative contracts can beexchange-traded orover-the-counter (OTC).Exchange-traded derivatives typically fall within level 1 or level 2 of the fair value hierarchy depending on whether they are deemed to be actively traded or not. The firm generally valuesexchange-traded derivatives using models which calibrate tomarket-clearing levels and eliminate timing differences between the closing price of theexchange-traded derivatives and their underlying instruments. In such cases,exchange-traded derivatives are classified within level 2 of the fair value hierarchy.

OTC derivatives are valued using market transactions and other market evidence whenever possible, includingmarket-based inputs to models, model calibration tomarket-clearing transactions, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Where models are used, the selection of a particular model to value an OTC derivative depends upon the contractual terms of, and specific risks inherent in, the instrument, as well as the availability of pricing information in the market. The firm generally uses similar models to value similar instruments. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, prepayment rates and correlations of such inputs. For OTC derivatives that trade in liquid markets, such as generic forwards, swaps and options, model inputs can generally be verified and model selection does not involve significant management judgment. OTC derivatives are classified within level 2 of the fair value hierarchy when all of the significant inputs can be corroborated to market evidence.

Certain OTC derivatives trade in less liquid markets with limited pricing information, and the determination of fair value for these derivatives is inherently more difficult. Such instruments are classified within level 3 of the fair value hierarchy. Where the firm does not have corroborating market evidence to support significant model inputs and cannot verify the model to market transactions, the transaction price is initially used as the best estimate of fair value. Accordingly, when a pricing model is used to value such an instrument, the model is adjusted so that the model value at inception equals the transaction price. The valuations of these less liquid OTC derivatives are typically based on level 1and/or level 2 inputs that can be observed in the market, as well as unobservable level 3 inputs. Subsequent to initial recognition, the firm updates the level 1 and level 2 inputs to reflect observable market changes, with resulting gains and losses reflected within level 3. Level 3 inputs are only changed when corroborated

~~THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(UNAUDITED)~~

by evidence such as similar market transactions,third-party pricing servicesand/or broker or dealer quotations, or other empirical market data. In circumstances where the firm cannot verify the model value to market transactions, it is possible that a different valuation model could produce a materially different estimate of fair value.

When appropriate, valuations are adjusted for various factors such as liquidity, bid/offer spreads and credit considerations. Such adjustments are generally based on market evidence where available. In the absence of such evidence, management’s best estimate is used.

Collateralized Agreements and Financings. Collateralized agreements consist of resale agreements and securities borrowed. Collateralized financings consist of repurchase agreements, securities loaned and other secured financings. Interest on collateralized agreements and collateralized financings is recognized in “Interest income” and “Interest expense,” respectively, in the condensed consolidated statements of earnings over the life of the transaction.


	•	Resale and Repurchase Agreements. Securities purchased under agreements to resell and securities sold under agreements to repurchase, principally U.S. government, federal agency andinvestment-grade sovereign obligations, represent collateralized financing transactions.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


		The firm receives securities purchased under agreements to resell, makes delivery of securities sold under agreements to repurchase, monitors the market value of these securities on a daily basis and delivers or obtains additional collateral as appropriate. As noted above, resale and repurchase agreements are carried in the condensed consolidated statements of financial condition at fair value under ~~SFAS No. 159.~~the fair value option. Resale and repurchase agreements are generally valued based on inputs with reasonable levels of price transparency and are classified within level 2 of the fair value hierarchy. Resale and repurchase agreements are presented on anet-by-counterparty basis when ~~the requirements~~a right of ~~FIN 41, “Offsetting of Amounts Related to Certain Repurchase and Reverse Repurchase Agreements,” or FIN 39, “Offsetting of Amounts Related to Certain Contracts,” are satisfied.~~setoff exists.


	•	Securities Borrowed and Loaned. Securities borrowed and loaned are generally collateralized by cash, securities or letters of credit. The firm receives securities borrowed, makes delivery of securities loaned, monitors the market value of securities borrowed and loaned, and delivers or obtains additional collateral as appropriate. Securities borrowed and loaned within Securities Services, relating to both customer activities and, to a lesser extent, certain firm financing activities, are recorded based on the amount of cash collateral advanced or received plus accrued interest. As these arrangements generally can be terminated on demand, they exhibit little, if any, sensitivity to changes in interest rates. As noted above, securities borrowed and loaned within Trading and Principal Investments, which are related to the firm’s matched book and certain firm financing activities, are recorded at fair value under ~~SFAS No. 159.~~the fair value option. These securities borrowed and loaned transactions are generally valued based on inputs with reasonable levels of price transparency and are classified within level 2 of the fair value hierarchy.

	•	Other Secured Financings. In addition to repurchase agreements and securities loaned, the firm funds assets through the use of other secured financing arrangements and pledges financial instruments and other assets as collateral in these transactions. As noted above, the firm has elected to apply ~~SFAS No. 159~~the fair value option to transfers accounted for as financings rather than sales, ~~under SFAS No. 140,~~ debt raised through the firm’s William Street credit extension program and certain other nonrecourse financings, for which the use of fair value eliminatesnon-economic volatility in earnings that would arise from using different measurement attributes. These other secured financing transactions are generally classified within level 2 of the fair value hierarchy. Other

~~THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(UNAUDITED)~~


		secured financings that are not recorded at fair value are recorded based on the amount of cash received plus accrued interest. See Note 3 for further information regarding other secured financings.

Hybrid Financial Instruments. Hybrid financial instruments are instruments that contain bifurcatable embedded derivatives ~~under SFAS No. 133~~ and do not require settlement by physical delivery ofnon-financial assets (e.g., physical commodities). If the firm elects to bifurcate the embedded derivative from the associated debt, it is accounted for at fair value and the host contract is accounted for at amortized cost, adjusted for the effective portion of any fair value hedge accounting relationships. If the firm does not elect to bifurcate, the entire hybrid financial instrument is accounted for at fair value under ~~SFAS No. 155.~~the fair value option. See Notes 3 and 6 for further information regarding hybrid financial instruments.

Transfers of Financial Assets. In general, transfers of financial assets are accounted for as sales ~~under SFAS No. 140~~ when the firm has relinquished control over the transferred assets. For transfers accounted for as sales, any related gains or losses are recognized in net revenues. Transfers that are not accounted for as sales are accounted for as collateralized financings, with the related interest expense recognized in net revenues over the life of the transaction.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Commissions. Commission revenues from executing and clearing client transactions on stock, options and futures markets are recognized in “Trading and principal investments” in the condensed consolidated statements of earnings on atrade-date basis.

Insurance Activities. Certain of the firm’s insurance and reinsurance contracts are accounted for at fair value under ~~SFAS No. 159,~~the fair value option, with changes in fair value included in “Trading and principal investments” in the condensed consolidated statements of earnings.

Revenues from variable annuity and life insurance and reinsurance contracts not accounted for at fair value ~~under SFAS No. 159~~ generally consist of fees assessed on contract holder account balances for mortality charges, policy administration fees and surrender charges, and are recognized ~~within~~in “Trading and principal investments” in the condensed consolidated statements of earnings in the period that services are provided.

Interest credited to variable annuity and life insurance and reinsurance contract account balances and changes in reserves are recognized in “Other expenses” in the condensed consolidated statements of earnings.

Premiums earned for underwriting property catastrophe reinsurance are recognized ~~within~~in “Trading and principal investments” in the condensed consolidated statements of earnings over the coverage period, net of premiums ceded for the cost of reinsurance. Expenses for liabilities related to property catastrophe reinsurance claims, including estimates of losses that have been incurred but not reported, are recognized ~~within~~in “Other expenses” in the condensed consolidated statements of earnings.

Merchant Banking Overrides. The firm is entitled to receive merchant banking overrides (i.e., an increased share of a fund’s income and gains) when the return on the funds’ investments exceeds certain threshold returns. Overrides are based on investment performance over the life of each merchant banking fund, and future investment underperformance may require amounts of override previously distributed to the firm to be returned to the funds. Accordingly, overrides are recognized in the condensed consolidated statements of earnings only when all material contingencies have been resolved. Overrides are included in “Trading and principal investments” in the condensed consolidated statements of earnings.

~~THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(UNAUDITED)~~

Asset Management. Management fees are recognized over the period that the related service is provided based upon average net asset values. In certain circumstances, the firm is also entitled to receive incentive fees based on a percentage of a fund’s return or when the return on assets under management exceeds specified benchmark returns or other performance targets. Incentive fees are generally based on investment performance over a12-month period and are subject to adjustment prior to the end of the measurement period. Accordingly, incentive fees are recognized in the condensed consolidated statements of earnings when the measurement period ends. Asset management fees and incentive fees are included in “Asset management and securities services” in the condensed consolidated statements of earnings.

Share-Based Compensation

The ~~firm accounts forshare-based~~ ~~compensation in accordance withSFAS No. 123-R,“Share-Based~~ ~~Payment.” The~~ cost of employee services received in exchange for ashare-based award is generally measured based on the grant-date fair value of the ~~award.~~award in accordance with ASC 718.Share-based awards that do not require future service (i.e., vested awards, including awards granted to retirement-eligible employees) are expensed immediately.Share-based employee awards that require future service are amortized over the relevant service period. Expected forfeitures are included in determiningshare-based employee compensation expense. ~~In the first quarter of 2006, the firm adopted~~

~~SFAS No. 123-R~~THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES
~~under the modified prospective adoption method. Under this method of adoption, the provisions of~~

~~SFAS No. 123-R~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
~~are generally applied only to~~

~~share-based~~(UNAUDITED) ~~awards granted subsequent to adoption.Share-based~~ ~~awards held by employees that were retirement-eligible on the date of adoption ofSFAS No. 123-R~~ ~~continue to be amortized over the stated service period of the award.~~

The firm pays cash dividend equivalents on outstanding restricted stock ~~units.~~units (RSUs). Dividend equivalents paid on ~~restricted stock units~~RSUs are generally charged to retained earnings. Dividend equivalents paid on ~~restricted stock units~~RSUs expected to be forfeited are included in compensation expense. ~~The firm adopted Emerging Issues Task Force (EITF) IssueNo. 06-11,~~ ~~“Accounting for Income Tax Benefits of Dividends onShare-Based~~ ~~Payment Awards” in~~In the first quarter of fiscal ~~2009. Accordingly,~~2009, the firm adopted amended accounting principles related to income tax benefits of dividends onshare-based payment awards (ASC 718). These amended principles require the tax benefit related to dividend equivalents paid on ~~restricted stock units is~~RSUs to be accounted for as an increase to additionalpaid-in capital. ~~Prior to the adoption of EITF IssueNo. 06-11,~~Previously, the firm accounted for this tax benefit as a reduction to income tax expense. See “—“— Recent Accounting Developments” below for further information on ~~EITF IssueNo. 06-11.~~these amended principles.

In certain cases, primarily related to the death of an employee or conflicted employment (as outlined in the applicable award agreements), the firm may cash settleshare-based compensation awards. For awards accounted for as equity instruments, additionalpaid-in capital is adjusted to the extent of the difference between the current value of the award and the grant-date value of the award.

Goodwill

Goodwill is the cost of acquired companies in excess of the fair value of identifiable net assets at acquisition date. ~~In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill~~Goodwill is tested at least annually for impairment. An impairment loss is recognized if the estimated fair value of an operating segment, which is a component one level below the firm’s three business segments, is less than its estimated net book value. Such loss is calculated as the difference between the estimated fair value of goodwill and its carrying value.

~~THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(UNAUDITED)~~

Identifiable Intangible Assets

Identifiable intangible assets, which consist primarily of customer lists, New York Stock Exchange (NYSE) Designated Market Maker (DMM) rights and the value of business acquired (VOBA) in the firm’s insurance subsidiaries, are amortized over their estimated lives ~~in accordance with SFAS No. 142~~ or, in the case of insurance contracts, in ~~accordance with SFAS No. 60, “Accounting and Reporting by Insurance Enterprises,” and SFAS No. 97, “Accounting and Reporting by Insurance Enterprises for CertainLong-Duration~~ ~~Contracts and for Realized Gains and Losses from the Sale of Investments.”~~proportion to estimated gross profits or premium revenues. Identifiable intangible assets are tested for impairment whenever events or changes in circumstances suggest that an asset’s or asset group’s carrying value may not be fully ~~recoverable in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal ofLong-Lived~~ ~~Assets,” or SFAS No. 60 and SFAS No. 97.~~recoverable. An impairment loss, generally calculated as the difference between the estimated fair value and the carrying value of an asset or asset group, is recognized if the sum of the estimated undiscounted cash flows relating to the asset or asset group is less than the corresponding carrying value.

Property, Leasehold Improvements and Equipment

Property, leasehold improvements and equipment, net of accumulated depreciation and amortization, are recorded at cost and included in “Other assets” in the condensed consolidated statements of financial condition.

Substantially all property and equipment are depreciated on a straight-line basis over the useful life of the asset. Leasehold improvements are amortized on a straight-line basis over the useful life of the improvement or the term of the lease, whichever is shorter. Certain costs of software developed or obtained for internal use are capitalized and amortized on a straight-line basis over the useful life of the software.

Property, leasehold improvements and equipment are tested for impairment whenever events or changes in circumstances suggest that an asset’s or asset group’s carrying value may not be fully ~~recoverable in accordance with SFAS No. 144.~~recoverable. An impairment loss, calculated as the difference between the estimated fair value and the carrying value of an asset or asset group, is recognized if the sum of the expected undiscounted cash flows relating to the asset or asset group is less than the corresponding carrying value.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The firm’s operating leases include office space held in excess of current requirements. Rent expense relating to space held for growth is included in “Occupancy” in the condensed consolidated statements of earnings. ~~In accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” the~~The firm records a liability, based on the fair value of the remaining lease rentals reduced by any potential or existing sublease rentals, for leases where the firm has ceased using the space and management has concluded that the firm will not derive any future economic benefits. Costs to terminate a lease before the end of its term are recognized and measured at fair value upon termination.

Foreign Currency Translation

Assets and liabilities denominated innon-U.S. currencies are translated at rates of exchange prevailing on the date of the condensed consolidated statements of financial condition, and revenues and expenses are translated at average rates of exchange for the period. Gains or losses on translation of the financial statements of anon-U.S. operation, when the functional currency is other than the U.S. dollar, are included, net of hedges and taxes, in the condensed consolidated statements of comprehensive income. The firm seeks to reduce its net investment exposure to fluctuations in

~~THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(UNAUDITED)~~

foreign exchange rates through the use of foreign currency forward contracts and foreigncurrency-denominated debt. For foreign currency forward contracts, hedge effectiveness is assessed based on changes in forward exchange rates; accordingly, forward points are reflected as a component of the currency translation adjustment in the condensed consolidated statements of comprehensive income. For foreigncurrency-denominated debt, hedge effectiveness is assessed based on changes in spot rates. Foreign currency remeasurement gains or losses on transactions in nonfunctional currencies are included in the condensed consolidated statements of earnings.

Income Taxes

Income taxes are provided for using the asset and liability method. Deferred tax assets and liabilities are recognized for temporary differences between the financial reporting and tax bases of the firm’s assets and liabilities. Valuation allowances are established to reduce deferred tax assets to the amount that more likely than not will be realized. The firm’s tax assets and liabilities are presented as a component of “Other assets” and “Other liabilities and accrued expenses,” respectively, in the condensed consolidated statements of financial condition. ~~Tax provisions are computed in accordance with SFAS No. 109, “Accounting for Income Taxes.”~~ The firm adopted amended accounting principles related to the ~~provisions of FIN 48, “Accounting~~accounting for ~~Uncertainty~~uncertainty in ~~Income Taxes — an Interpretation of FASB Statement No. 109,”~~income taxes (ASC 740) as of December 1, 2007, and recorded a transition adjustment resulting in a reduction of $201 million to beginning retained earnings in the first fiscal quarter of 2008. ~~Under FIN 48, a~~The firm recognizes tax ~~position can be recognized~~positions in the financial statements only when it is more likely than not that the position will be sustained upon examination by the relevant taxing authority based on the technical merits of the position. A position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized upon settlement. A liability is established for differences between positions taken in a tax return and amounts recognized in the financial statements. The firm reports interest expense related to income tax matters in “Provision for taxes” in the condensed consolidated statements of earnings and income tax penalties in “Other expenses” in the condensed consolidated statements of earnings.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Earnings Per Common Share (EPS)

Basic EPS is calculated by dividing net earnings applicable to common shareholders by the weighted average number of common shares outstanding. Common shares outstanding includes common stock and ~~restricted stock units~~RSUs for which no future service is required as a condition to the delivery of the underlying common stock. Diluted EPS includes the determinants of basic EPS and, in addition, reflects the dilutive effect of the common stock deliverable pursuant to stock warrants and options and to ~~restricted stock units~~RSUs for which future service is required as a condition to the delivery of the underlying common stock. ~~The firm adopted FSP No. EITF03-6-1,~~ ~~“Determining Whether Instruments Granted inShare-Based~~ ~~Payment Transactions Are Participating Securities,” in~~In the first quarter of fiscal ~~2009.~~2009, the firm adopted amended accounting principles related to determining whether instruments granted inshare-based payment transactions are participating securities. Accordingly, the firm treats unvestedshare-based payment awards that havenon-forfeitable rights to ~~dividend~~dividends or dividend equivalents as a separate class of securities in calculating earnings per common share. See“— Recent Accounting Developments” below for further information on ~~FSP No. EITF03-6-1.~~these amended principles.

Cash and Cash Equivalents

The firm defines cash equivalents as highly liquid overnight deposits held in the ordinary course of business. As of ~~June~~September 2009 and November 2008, “Cash and cash equivalents” on the condensed consolidated statements of financial condition included ~~$6.02~~$4.07 billion and $5.60 billion, respectively, of cash and due from banks and ~~$16.16~~$18.95 billion and $10.14 billion, respectively, of interest-bearing deposits with banks.

Recent Accounting Developments

FASB Accounting Standards Codification. In July 2009, the FASB launched the FASB Accounting Standards Codification (the Codification) as the single source of GAAP. While the Codification did not change GAAP, it introduced a new structure to the accounting literature and changed references to accounting standards and other authoritative accounting guidance. The Codification was effective for the firm for the third quarter of 2009 and did not have an effect on the firm’s financial condition, results of operations or cash flows.

Accounting for Income Tax Benefits of Dividends onShare-Based Payment Awards (ASC 718). In June 2007, the FASB issued amended accounting principles related to income tax benefits of dividends onshare-based payment awards, which require that the tax benefit related to dividend equivalents paid on RSUs, which are expected to vest, be recorded as an increase to additionalpaid-in capital. The firm previously accounted for this tax benefit as a reduction to income tax expense. These amended accounting principles were applied prospectively for tax benefits on dividend equivalents declared beginning in the first quarter of fiscal 2009. Adoption did not have a material effect on the firm’s financial condition, results of operations or cash flows.

Accounting for Transfers of Financial Assets and Repurchase Financing Transactions (ASC 860). In February 2008, the FASB issued amended accounting principles related to transfers of financial assets and repurchase financing transactions. These amended principles require an initial transfer of a financial asset and a repurchase financing that was entered into contemporaneously or in contemplation of the initial transfer to be evaluated as a linked transaction (for purposes of determining whether a sale has occurred) unless certain criteria are met, including that the transferred asset must be readily obtainable in the marketplace. The firm adopted these amended accounting principles for new transactions entered into after November 2008. Adoption did not have a material effect on the firm’s financial condition, results of operations or cash flows.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

~~Recent Accounting Developments~~

~~EITF IssueNo. 06-11.~~ ~~In June 2007, the EITF reached consensus on IssueNo. 06-11,~~ ~~“Accounting for Income Tax Benefits of Dividends onShare-Based~~ ~~Payment Awards.” EITF IssueNo. 06-11~~ ~~requires that the tax benefit related to dividend equivalents paid on restricted stock units, which are expected to vest, be recorded as an increase to additionalpaid-in~~ ~~capital. The firm previously accounted for this tax benefit as a reduction to income tax expense. EITF IssueNo. 06-11~~ ~~was applied prospectively for tax benefits on dividend equivalents declared beginning in the first quarter of fiscal 2009. The adoption of EITF IssueNo. 06-11~~ ~~did not have a material effect on the firm’s financial condition, results of operations or cash flows.~~

~~FASB Staff PositionNo. FAS 140-3.~~ ~~In February 2008, the FASB issued FASB Staff PositionNo. FAS 140-3,~~ ~~“Accounting for Transfers of Financial Assets~~Disclosures About Derivative Instruments and ~~Repurchase Financing Transactions.” FSPNo. FAS 140-3~~ requires an initial transfer of a financial asset and a repurchase financing that was entered into contemporaneously or in contemplation of the initial transfer to be evaluated as a linked transaction under SFAS No. 140 unless certain criteria are met, including that the transferred asset must be readily obtainable in the marketplace. The firm adopted FSP~~No. FAS 140-3~~ ~~for new transactions entered into after November 2008. The adoption of FSPNo. FAS 140-3~~ ~~did not have a material effect on the firm’s financial condition, results of operations or cash flows.~~

~~SFAS No. 161.~~Hedging Activities (ASC 815). In March 2008, the FASB issued ~~SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133.” SFAS No. 161 requires enhanced~~amended principles related to disclosures about ~~an entity’s~~ derivative instruments and hedging activities, ~~and was~~which were effective for the firm beginning in theone-month transition period ended December 2008. Since ~~SFAS No. 161 requires~~these amended principles require only additional disclosures concerning derivatives and hedging activities, adoption ~~of SFAS No. 161~~ did not affect the firm’s financial condition, results of operations or cash flows.

~~FASB Staff Position No. EITF03-6-1.~~ ~~In June 2008, the FASB issued FSP No. EITF03-6-1,~~ ~~“Determining~~Determining Whether Instruments Granted inShare-Based Payment Transactions Are Participating ~~Securities.” The FSP addresses~~Securities (ASC 260). In June 2008, the FASB issued amended accounting principles related to determining whether instruments granted inshare-based payment transactions are participating securities prior to vesting and therefore need to be included in the earnings allocation in calculating earnings per share under the two-class method described in SFAS No. 128, “Earnings per Share.” The FSP requiressecurities. These amended principles require companies to treat unvestedshare-based payment awards that havenon-forfeitable rights to dividends or dividend equivalents as a separate class of securities in calculating earnings per ~~share.~~common share under the two-class method. The firm adopted ~~the FSP~~these amended accounting principles in the first quarter of fiscal 2009. The impact ~~for the three and six months ended June 2009~~ to basic earnings per common share for the three and nine months ended September 2009 was a reduction of $0.02 and $0.04 per common ~~share.~~share, respectively. There was no impact on diluted earnings per common share. Prior periods have not been restated due to immateriality.

~~SFAS No. 141(R)~~Business Combinations (ASC 805). In December 2007, the FASB issued ~~a revision~~amended accounting principles related to ~~SFAS No. 141, “Business Combinations.” SFAS No. 141(R) requires changes to~~business combinations, which changed the accounting for transaction costs, certain contingent assets and liabilities, and other balances in a business combination. In addition, in partial acquisitions, when control is obtained, the amended principles require that the acquiring company ~~must~~ measure and record all of the target’s assets and liabilities, including goodwill, at fair value as if the entire target company had been acquired. ~~The provisions of SFAS No. 141(R)~~These amended accounting principles applied to the firm’s business combinations beginning in the first quarter of fiscal 2009. Adoption ~~of SFAS No. 141(R)~~ did not affect the firm’s financial condition, results of operations or cash flows, but may have an effect on accounting for future business combinations.

Noncontrolling Interests in Consolidated Financial Statements (ASC 810). In December 2007, the FASB issued amended accounting principles related to noncontrolling interests in consolidated financial statements, which require that ownership interests in consolidated subsidiaries held by parties other than the parent (i.e., noncontrolling interests) be accounted for and presented as equity, rather than as a liability or mezzanine equity. These amended accounting principles were effective for the firm beginning in the first quarter of fiscal 2009. Adoption did not have a material effect on the firm’s financial condition, results of operations or cash flows.

Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities (ASC 860 and 810). In December 2008, the FASB issued amended principles related to disclosures by public entities (enterprises) about transfers of financial assets and interests in variable interest entities, which were effective for the firm beginning in theone-month transition period ended December 2008. Since these amended principles require only additional disclosures concerning transfers of financial assets and interests in VIEs, adoption did not affect the firm’s financial condition, results of operations or cash flows.

Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock (ASC 815). In June 2008, the FASB issued amended accounting principles related to determining whether an instrument (or embedded feature) is indexed to an entity’s own stock. These amended accounting principles provide guidance about whether an instrument (such as the firm’s outstanding common stock warrants) should be classified as equity and not subsequently recorded at fair value. The firm adopted these amended accounting principles in the first quarter of fiscal 2009. Adoption did not affect the firm’s financial condition, results of operations or cash flows.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

~~SFAS No. 160.~~ In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51.” SFAS No. 160 requires that ownership interests in consolidated subsidiaries held by parties other than the parent (i.e., noncontrolling interests) be accounted for and presented as equity, rather than as a liability or mezzanine equity. SFAS No. 160 was effective for the firm beginning in the first quarter of fiscal 2009. Adoption of SFAS No. 160 did not have a material effect on the firm’s financial condition, results of operations or cash flows.

~~FASB Staff PositionNo. FAS 140-4~~ ~~and FIN 46(R)-8.~~ ~~In December 2008, the FASB issued FSPNo. FAS 140-4~~ ~~and FIN 46(R)-8, “Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities.” FSPNo. FAS 140-4~~ ~~and FIN 46(R)-8 requires enhanced disclosures about transfers of financial assets and interests in VIEs, and was effective for the firm beginning in theone-month~~ transition period ended December 2008. Since the FSP requires only additional disclosures concerning transfers of financial assets and interests in VIEs, adoption of the FSP did not affect the firm’s financial condition, results of operations or cash flows.

~~EITF IssueNo. 07-5.~~ ~~In June 2008, the EITF reached consensus on IssueNo. 07-5,~~ ~~“Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock.” EITF IssueNo. 07-5~~ provides guidance about whether an instrument (such as the firm’s outstanding common stock warrants) should be classified as equity and not subsequently recorded at fair value. The firm adopted EITF Issue~~No. 07-5~~ ~~in the first quarter of fiscal 2009. Adoption of EITF IssueNo. 07-5~~ ~~did not affect the firm’s financial condition, results of operations or cash flows.~~

~~FASB Staff PositionNo. FAS 157-4.~~ ~~In April 2009, the FASB issued FSPNo. FAS 157-4,~~ ~~“Determining~~Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not ~~Orderly.” The FSP provides guidance for estimating~~Orderly (ASC 820). In April 2009, the FASB issued amended accounting principles related to determining fair value when the volume and level of activity for anthe asset or liability have significantly decreased ~~significantly.~~and identifying transactions that are not orderly. Specifically, ~~the FSP lists~~these amended principles list factors which should be evaluated to determine whether a transaction is orderly, ~~clarifies~~clarify that adjustments to transactions or quoted prices may be necessary when the volume and level of activity for an asset or liability have decreased significantly, and ~~provides~~provide guidance for determining the concurrent weighting of the transaction price relative to fair value indications from other valuation techniques when estimating fair value. The firm adopted ~~FSPNo. FAS 157-4~~these amended accounting principles in the second quarter of 2009. Since the firm’s fair value methodologies were consistent with ~~FSPNo. FAS 157-4,~~these amended accounting principles, adoption ~~of the FSP~~ did not affect the firm’s financial condition, results of operations or cash flows.

~~FASB Staff Position~~Recognition and Presentation of~~No. FAS 115-2~~Other-Than-Temporary ~~andFAS 124-2.~~ Impairments (ASC 320). In April 2009, the FASB issued ~~FSP~~amended accounting principles related to recognition and presentation of~~No. FAS 115-2~~other-than-temporary ~~andFAS 124-2,~~ ~~“Recognition and Presentation ofOther-Than-Temporary~~ ~~Impairments.” Under the FSP,~~impairments. These amended principles prescribe that only the portion of another-than-temporary impairment on a debt security related to credit loss is recognized in current period earnings, with the remainder recognized in other comprehensive income, if the holder does not intend to sell the security and it is more likely than not that the holder will not be required to sell the security prior to recovery. Previously, the entireother-than-temporary impairment was recognized in current period earnings. The firm adopted ~~FSPNo. FAS 115-2~~ ~~andFAS 124-2~~these amended accounting principles in the second quarter of 2009. Adoption ~~of the FSP~~ did not have a material effect on the firm’s financial condition, results of operations or cash flows.

Interim Disclosures about Fair Value of Financial Instruments (ASC 825). In April 2009, the FASB issued amended principles related to interim disclosures about fair value of financial instruments. The firm adopted these amended principles in the second quarter of 2009. Adoption did not affect the firm’s financial condition, results of operations or cash flows.

Subsequent Events (ASC 855). In May 2009, the FASB issued amended accounting principles related to subsequent events, which codify the guidance regarding the disclosure of events occurring subsequent to the balance sheet date. These amended principles do not change the definition of a subsequent event (i.e., an event or transaction that occurs after the balance sheet date but before the financial statements are issued) but require disclosure of the date through which subsequent events were evaluated when determining whether adjustment to or disclosure in the financial statements is required. These amended principles were effective for the firm for the second quarter of 2009. For the third quarter of 2009, the firm evaluated subsequent events through November 3, 2009. Since these amended principles require only additional disclosures concerning subsequent events, adoption of the standard did not affect the firm’s financial condition, results of operations or cash flows.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

~~FASB Staff PositionNo. FAS 107-1~~ ~~and APB28-1.~~ ~~In April 2009, the FASB issued FSPNo. FAS 107-1~~ ~~and APB28-1,~~ ~~“Interim Disclosures about Fair Value~~Transfers of Financial ~~Instruments.” The FSP requires that the fair value disclosures prescribed by FASB Statement No. 107, “Disclosures about Fair Value of Financial Instruments” be included~~Assets and Interests in ~~financial statements prepared for interim periods. The firm adopted FSPNo. FAS 107-1~~ ~~and APB28-1~~ ~~in the second quarter of 2009. The adoption of the FSP did not affect the firm’s financial condition, results of operations or cash flows.~~

~~SFAS No. 165.~~ In May 2009, the FASB issued SFAS No. 165, “Subsequent Events,” which codifies the guidance regarding the disclosure of events occurring subsequent to the balance sheet date. SFAS No. 165 does not change the definition of a subsequent event (i.e., an event or transaction that occurs after the balance sheet date but before the financial statements are issued) but requires disclosure of the date through which subsequent events were evaluated when determining whether adjustment to or disclosure in the financial statements is required. SFAS No. 165 was effective for the firm for the second quarter of 2009. For the second quarter of 2009, the firm evaluated subsequent events through August 4, 2009. Since SFAS No. 165 requires only additional disclosures concerning subsequent events, adoption of the standard did not affect the firm’s financial condition, results of operations or cash flows.

~~SFAS No. 166 and 167.~~Variable Interest Entities. In June 2009, the FASB issued ~~SFAS~~Statement of Financial Accounting Standards (SFAS) No. 166, “Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140” and SFAS No. 167, “Amendments to FASB Interpretation No. 46(R),” which change the accounting for securitizations and VIEs. SFAS No. 166 will eliminate the concept of a QSPE, change the requirements for derecognizing financial assets, and require additional disclosures about transfers of financial assets, including securitization transactions and continuing involvement with transferred financial assets. SFAS No. 167 will change the determination of when a VIE should be consolidated. Under SFAS No. 167, the determination of whether to consolidate a VIE is based on the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance together with either the obligation to absorb losses or the right to receive benefits that could be significant to the VIE, as well as the VIE’s purpose and design. ~~Both Statements~~SFAS No. 166 and 167, which have not yet been incorporated into the Codification, are effective for fiscal years beginning after November 15, 2009. The firm is currently evaluating the impact of adopting SFAS No. 166 and 167, which requires the firm to make complex judgments that are subject to change as interpretations and practices evolve. Based on the firm’s current analyses, the firm does not expect adoption to have a material effect on its financial condition, results of operations ~~and~~or cash flows.

Fair Value Measurements and Disclosures — Measuring Liabilities at Fair Value. In August 2009, the FASB issued Accounting Standards Update (ASU)No. 2009-05, “Fair Value Measurements and Disclosures — Measuring Liabilities at Fair Value.” ASUNo. 2009-05 provides guidance in measuring liabilities when a quoted price in an active market for an identical liability is not available and clarifies that a reporting entity should not make an adjustment to fair value for a restriction that prevents the transfer of the liability.ASU No. 2009-05 is effective for financial statements issued for the first reporting period beginning after issuance of the ASU. Because the firm’s current fair value measurement policies are consistent with ASUNo. 2009-5, adoption will not affect the firm’s financial condition, results of operations or cash flows.

Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). In September 2009, the FASB issued ASUNo. 2009-12, “Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).” ASUNo. 2009-12 provides guidance about using net asset value to measure the fair value of interests in certain investment funds and requires additional disclosures about interests in investment funds. ASUNo. 2009-12 is effective for financial statements issued for reporting periods ending after December 15, 2009, with earlier application permitted. Because the firm’s current fair value measurement policies are consistent with ASUNo. 2009-12, adoption will not affect the firm’s financial condition, results of operations or cash flows. The firm will adopt the ASU in the fourth quarter of 2009 to comply with the ASU’s disclosure requirements.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


Note 3.	Financial Instruments

Fair Value of Financial Instruments

The following table sets forth the firm’s trading assets, at fair value, including those pledged as collateral, and trading liabilities, at fair value. At any point in time, the firm may use cash instruments as well as derivatives to manage a long or short risk position.


	As of												As of
	June 2009						November 2008						September 2009						November 2008
	Assets			Liabilities			Assets			Liabilities			Assets			Liabilities			Assets			Liabilities
	(in millions)												(in millions)
Commercial paper, certificates of deposit, time deposits and other money market instruments	$	16,965	⁽¹⁾	$	—		$	8,662	⁽¹⁾	$	—		$	16,427	⁽¹⁾	$	—		$	8,662	⁽¹⁾	$	—
Government and U.S. federal agency obligations		136,618			48,903			69,653			37,000			122,185			54,842			69,653			37,000
Mortgage and otherasset-backed loans and securities		13,730			134			22,393			340			14,023			143			22,393			340
Bank loans and bridge loans		18,349			2,419	⁽⁴⁾		21,839			3,108	⁽⁴⁾		19,879			1,752	⁽⁴⁾		21,839			3,108	⁽⁴⁾
Corporate debt securities and other debt obligations		27,926			6,056			27,879			5,711			29,621			6,003			27,879			5,711
Equities and convertible debentures		50,955			21,634			57,049			12,116			58,698			23,603			57,049			12,116
Physical commodities		682			—			513			2			3,090			—			513			2
Derivative contracts		90,026	⁽²⁾		68,151	⁽⁵⁾		130,337	⁽²⁾		117,695	⁽⁵⁾		88,267	⁽²⁾		64,040	⁽⁵⁾		130,337	⁽²⁾		117,695	⁽⁵⁾

Total	$	355,251	⁽³⁾	$	147,297		$	338,325	⁽³⁾	$	175,972		$	352,190	⁽³⁾	$	150,383		$	338,325	⁽³⁾	$	175,972


⁽¹⁾		Includes ~~$4.56~~$4.31 billion and $4.40 billion as of ~~June~~September 2009 and November 2008, respectively, of money market instruments held by William Street Funding Corporation (Funding Corp.) to support the William Street credit extension program. See Note 8 for further information regarding the William Street credit extension program.

⁽²⁾		Net of cash received pursuant to credit support agreements of ~~$133.34~~$126.82 billion and $137.16 billion as of ~~June~~September 2009 and November 2008, respectively.

⁽³⁾		Includes ~~$3.76~~$3.87 billion and $1.68 billion as of ~~June~~September 2009 and November 2008, respectively, of securities held within the firm’s insurance subsidiaries which are accounted for as~~available-for-sale~~available-for-sale. ~~under SFAS No. 115.~~

⁽⁴⁾		Consists of the fair value of unfunded commitments to extend credit. The fair value of partially funded commitments is included in trading ~~assets.~~assets, at fair value.

⁽⁵⁾		Net of cash paid pursuant to credit support agreements of ~~$16.31~~$16.83 billion and $34.01 billion as of ~~June~~September 2009 and November 2008, respectively.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Fair Value Hierarchy

The firm’s financial assets at fair value classified within level 3 of the fair value hierarchy are summarized below:


	As of									As of
	June			March			November			September			June			November
	2009			2009			2008			2009			2009			2008
	($ in millions)									($ in millions)
Total level 3 assets	$	54,444		$	59,062		$	66,190		$	50,466		$	54,444		$	66,190
Level 3 assets for which the firm bears economic exposure ⁽¹⁾		50,383			54,660			59,574			46,442			50,383			59,574

Total assets		889,544			925,290			884,547			882,185			889,544			884,547
Total financial assets at fair value		614,559			628,639			595,234			596,282			614,559			595,234

Total level 3 assets as a percentage of Total assets		6.1	%		6.4	%		7.5	%		5.7	%		6.1	%		7.5	%
Level 3 assets for which the firm bears economic exposure as a percentage of Total assets		5.7			5.9			6.7			5.3			5.7			6.7

Total level 3 assets as a percentage of Total financial assets at fair value		8.9			9.4			11.1			8.5			8.9			11.1
Level 3 assets for which the firm bears economic exposure as a percentage of Total financial assets at fair value		8.2			8.7			10.0			7.8			8.2			10.0


⁽¹⁾		Excludes assets which are financed by nonrecourse debt, attributable to minority investors or attributable to employee interests in certain consolidated funds.

The following tables set forth by level within the fair value hierarchy “Trading assets, at fair value,” “Trading liabilities, at fair value,” and other financial assets and financial liabilities accounted for at fair value under the fair value option as of ~~June~~September 2009 and November 2008. See Note 2 for further information on the fair value hierarchy. ~~As required by SFAS No. 157, assets~~Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


	Financial Assets at Fair Value as of June 2009														Financial Assets at Fair Value as of September 2009
										Netting and														Netting and
	Level 1			Level 2			Level 3			Collateral			Total		Level 1			Level 2			Level 3			Collateral			Total
	(in millions)														(in millions)
Commercial paper, certificates of deposit, time deposits and other money market instruments	$	8,419		$	8,546		$	—		$	—		$	16,965	$	5,237		$	11,190		$	—		$	—		$	16,427
U.S. government and federal agency obligations		34,720			57,352			—			—			92,072		31,139			44,659			—			—			75,798
Non-U.S. government obligations		41,585			2,961			—			—			44,546		42,444			3,943			—			—			46,387
Mortgage and otherasset-backed loans and securities:
Mortgage and otherasset-backed loans and securities ⁽¹⁾:
Loans and securities backed by commercial real estate		—			1,170			6,839			—			8,009		—			1,512			6,112			—			7,624
Loans and securities backed by residential real estate ⁽¹⁾		—			2,085			1,862			—			3,947		—			2,880			1,843			—			4,723
Loan portfolios ⁽²⁾		—			—			1,774			—			1,774		—			—			1,676			—			1,676
Bank loans and bridge loans		—			8,680			9,669			—			18,349		—			10,098			9,781			—			19,879
Corporate debt securities ⁽³⁾		282			17,932			2,372			—			20,586		155			21,054			1,858			—			23,067
State and municipal obligations		31			1,626			1,430			—			3,087		—			1,730			1,264			—			2,994
Other debt obligations		—			1,450			2,803			—			4,253		2			1,072			2,486			—			3,560
Equities and convertible debentures		20,197			18,079			12,679	⁽⁸⁾		—			50,955		25,165			21,052			12,481	⁽⁸⁾		—			58,698
Physical commodities		—			682			—			—			682		—			3,090			—			—			3,090

Cash instruments		105,234			120,563			39,428			—			265,225		104,142			122,280			37,501			—			263,923
Derivative contracts		333			212,185	⁽⁶⁾		15,016	⁽⁶⁾		(137,508	) ⁽⁹⁾		90,026		65			205,327	⁽⁶⁾		12,965	⁽⁶⁾		(130,090	) ⁽⁹⁾		88,267

Trading assets, at fair value		105,567			332,748			54,444			(137,508	)		355,251		104,207			327,607			50,466			(130,090	)		352,190
Securities segregated for regulatory and other purposes		14,846	⁽⁵⁾		17,192	⁽⁷⁾		—			—			32,038		12,197	⁽⁵⁾		7,819	⁽⁷⁾		—			—			20,016
Securities purchased under agreements to resell		—			138,339			—			—			138,339		—			142,589			—			—			142,589
Securities borrowed		—			87,018			—			—			87,018		—			79,461			—			—			79,461
Receivables from customers and counterparties		—			1,913			—			—			1,913		—			2,026			—			—			2,026

Total financial assets at fair value	$	120,413		$	577,210		$	54,444		$	(137,508	)	$	614,559	$	116,404		$	559,502		$	50,466		$	(130,090	)	$	596,282

Level 3 assets for which the firm does not bear economic exposure ⁽⁴⁾								(4,061	)													(4,024	)

Level 3 assets for which the firm bears economic exposure							$	50,383													$	46,442


⁽¹⁾	Includes $5$56 million and ~~$230~~$364 million of CDOs and collateralized loan obligations (CLOs) backed by real estate within level 2 and level 3, respectively, of the fair value hierarchy.

⁽²⁾	Consists of acquired portfolios of distressed loans, primarily backed by commercial and residential real estate collateral.

⁽³⁾	Includes ~~$222~~$396 million and ~~$518~~$405 million of CDOs and CLOs backed by corporate obligations within level 2 and level 3, respectively, of the fair value hierarchy.

⁽⁴⁾	Consists of level 3 assets which are financed by nonrecourse debt, attributable to minority investors or attributable to employee interests in certain consolidated funds.

⁽⁵⁾	~~Consists~~Principally consists of U.S. Treasury securities and money market instruments as well as insurance separate account assets measured at fair ~~value under American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP)03-1,~~ ~~“Accounting and Reporting by Insurance Enterprises for Certain NontraditionalLong-Duration~~ ~~Contracts and for Separate Accounts.”~~value.

⁽⁶⁾	Includes ~~$46.27~~$34.19 billion and ~~$9.01~~$9.52 billion of credit derivative assets within level 2 and level 3, respectively, of the fair value hierarchy. These amounts exclude the effects of netting under enforceable netting agreements across other derivative product types.

⁽⁷⁾	Principally consists of securities borrowed and resale agreements. The underlying securities have been segregated to satisfy certain regulatory requirements.

⁽⁸⁾	Consists of private equity and real estate fund investments.

⁽⁹⁾	Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Financial Liabilities at Fair Value as of June 2009
Netting and

Level 1

Level 2

Level 3

Collateral

Total
(in millions)
U.S. government and federal agency obligations $ 22,928 $ 276 $ — $ — $ 23,204
Non-U.S. government obligations
25,335 364 — — 25,699
Mortgage and otherasset-backed loans and securities:

Loans and securities backed by commercial real estate — 16 4 — 20
Loans and securities backed by residential real estate — 114 — — 114
Bank loans and bridge loans — 1,676 743 — 2,419
Corporate debt securities ⁽¹⁾
39 5,720 260 — 6,019
State and municipal obligations — 30 — — 30
Other debt obligations — — 7 — 7
Equities and convertible debentures 19,921 1,707 6 — 21,634

Cash instruments 68,223 9,903 1,020 — 79,146
Derivative contracts 202 76,491 ⁽²⁾ 11,940 ⁽²⁾ (20,482 ) ⁽⁴⁾ 68,151

Trading liabilities, at fair value 68,425 86,394 12,960 (20,482 ) 147,297
Deposits — 5,045 — — 5,045
Securities sold under agreements to repurchase, at fair value — 132,982 — — 132,982
Securities loaned — 12,194 — — 12,194
Other secured financings 287 9,126 8,067 — 17,480
Unsecuredshort-term borrowings
— 12,691 2,229 — 14,920
Unsecuredlong-term borrowings
— 16,470 3,427 — 19,897
Other liabilities and accrued expenses — 518 1,644 — 2,162

Total financial liabilities at fair value $ 68,712 $ 275,420 $ 28,327 ⁽³⁾ $ (20,482 ) $ 351,977


	Financial Liabilities at Fair Value as of September 2009
									Netting and
	Level 1		Level 2			Level 3			Collateral			Total
	(in millions)
U.S. government and federal agency obligations	$	28,842	$	924		$	—		$	—		$	29,766
Non-U.S. government obligations		24,879		197			—			—			25,076
Mortgage and otherasset-backed loans and securities:
Loans and securities backed by commercial real estate		—		9			4			—			13
Loans and securities backed by residential real estate		—		130			—			—			130
Bank loans and bridge loans		—		1,356			396			—			1,752
Corporate debt securities ⁽¹⁾		42		5,794			129			—			5,965
State and municipal obligations		—		36			—			—			36
Other debt obligations		—		—			2			—			2
Equities and convertible debentures		19,769		3,823			11			—			23,603

Cash instruments		73,532		12,269			542			—			86,343
Derivative contracts		12		75,321	⁽²⁾		8,804	⁽²⁾		(20,097	) ⁽⁴⁾		64,040

Trading liabilities, at fair value		73,544		87,590			9,346			(20,097	)		150,383
Deposits		—		3,825			—			—			3,825
Securities sold under agreements to repurchase, at fair value		—		127,035			—			—			127,035
Securities loaned		—		9,465			—			—			9,465
Other secured financings		88		7,195			7,902			—			15,185
Unsecuredshort-term borrowings		—		12,860			1,941			—			14,801
Unsecuredlong-term borrowings		—		17,366			3,429			—			20,795
Other liabilities and accrued expenses		—		657			1,822			—			2,479

Total financial liabilities at fair value	$	73,632	$	265,993		$	24,440	⁽³⁾	$	(20,097	)	$	343,968


⁽¹⁾	Includes ~~$12~~$8 million and ~~$149~~$101 million of CDOs and CLOs backed by corporate obligations within level 2 and level 3, respectively, of the fair value hierarchy.

⁽²⁾	Includes ~~$9.71~~$8.55 billion and ~~$6.52~~$3.23 billion of credit derivative liabilities within level 2 and level 3, respectively, of the fair value hierarchy. These amounts exclude the effects of netting under enforceable netting agreements across other derivative product types.

⁽³⁾	Level 3 liabilities were ~~8.0%~~7.1% of Total financial liabilities at fair value.

⁽⁴⁾	Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


	Financial Assets at Fair Value as of November 2008														Financial Assets at Fair Value as of November 2008
										Netting and														Netting and
	Level 1			Level 2			Level 3			Collateral			Total		Level 1			Level 2			Level 3			Collateral			Total
	(in millions)														(in millions)
Commercial paper, certificates of deposit, time deposits and other money market instruments	$	5,205		$	3,457		$	—		$	—		$	8,662	$	5,205		$	3,457		$	—		$	—		$	8,662
Government and U.S. federal agency obligations		35,069			34,584			—			—			69,653		35,069			34,584			—			—			69,653
Mortgage and otherasset-backed loans and securities		—			6,886			15,507			—			22,393		—			6,886			15,507			—			22,393
Bank loans and bridge loans		—			9,882			11,957			—			21,839		—			9,882			11,957			—			21,839
Corporate debt securities and other debt obligations		14			20,269			7,596			—			27,879		14			20,269			7,596			—			27,879
Equities and convertible debentures		25,068			15,975			16,006	⁽⁵⁾		—			57,049		25,068			15,975			16,006	⁽⁵⁾		—			57,049
Physical commodities		—			513			—			—			513		—			513			—			—			513

Cash instruments		65,356			91,566			51,066			—			207,988		65,356			91,566			51,066			—			207,988
Derivative contracts		24			256,412	⁽³⁾		15,124	⁽³⁾		(141,223	) ⁽⁶⁾		130,337		24			256,412	⁽³⁾		15,124	⁽³⁾		(141,223	) ⁽⁶⁾		130,337

Trading assets, at fair value		65,380			347,978			66,190			(141,223	)		338,325		65,380			347,978			66,190			(141,223	)		338,325
Securities segregated for regulatory and other purposes		20,030	⁽²⁾		58,800	⁽⁴⁾		—			—			78,830		20,030	⁽²⁾		58,800	⁽⁴⁾		—			—			78,830
Securities purchased under agreements to resell		—			116,671			—			—			116,671		—			116,671			—			—			116,671
Securities borrowed		—			59,810			—			—			59,810		—			59,810			—			—			59,810
Receivables from customers and counterparties		—			1,598			—			—			1,598		—			1,598			—			—			1,598

Total financial assets at fair value	$	85,410		$	584,857		$	66,190		$	(141,223	)	$	595,234	$	85,410		$	584,857		$	66,190		$	(141,223	)	$	595,234

Level 3 assets for which the firm does not bear economic exposure ⁽¹⁾								(6,616	)													(6,616	)

Level 3 assets for which the firm bears economic exposure							$	59,574													$	59,574


⁽¹⁾	Consists of level 3 assets which are financed by nonrecourse debt, attributable to minority investors or attributable to employee interests in certain consolidated funds.

⁽²⁾	Consists of U.S. Treasury securities and money market instruments as well as insurance separate account assets measured at fair ~~value under AICPASOP 03-1.~~value.

⁽³⁾	Includes $66.00 billion and $8.32 billion of credit derivative assets within level 2 and level 3, respectively, of the fair value hierarchy. These amounts exclude the effects of netting under enforceable netting agreements across other derivative product types.

⁽⁴⁾	Principally consists of securities borrowed and resale agreements. The underlying securities have been segregated to satisfy certain regulatory requirements.

⁽⁵⁾	Consists of private equity and real estate fund investments.

⁽⁶⁾	Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


	Financial Liabilities at Fair Value as of November 2008													Financial Liabilities at Fair Value as of November 2008
									Netting and													Netting and
	Level 1		Level 2			Level 3			Collateral			Total		Level 1		Level 2			Level 3			Collateral			Total
	(in millions)													(in millions)
Government and U.S. federal agency obligations	$	36,385	$	615		$	—		$	—		$	37,000	$	36,385	$	615		$	—		$	—		$	37,000
Mortgage and otherasset-backed loans and securities		—		320			20			—			340		—		320			20			—			340
Bank loans and bridge loans		—		2,278			830			—			3,108		—		2,278			830			—			3,108
Corporate debt securities and other debt obligations		11		5,185			515			—			5,711		11		5,185			515			—			5,711
Equities and convertible debentures		11,928		174			14			—			12,116		11,928		174			14			—			12,116
Physical commodities		2		—			—			—			2		2		—			—			—			2

Cash instruments		48,326		8,572			1,379			—			58,277		48,326		8,572			1,379			—			58,277
Derivative contracts		21		145,777	⁽¹⁾		9,968	⁽¹⁾		(38,071	) ⁽³⁾		117,695		21		145,777	⁽¹⁾		9,968	⁽¹⁾		(38,071	) ⁽³⁾		117,695

Trading liabilities, at fair value		48,347		154,349			11,347			(38,071	)		175,972		48,347		154,349			11,347			(38,071	)		175,972
Deposits		—		4,224			—			—			4,224		—		4,224			—			—			4,224
Securities sold under agreements to repurchase, at fair value		—		62,883			—			—			62,883		—		62,883			—			—			62,883
Securities loaned		—		7,872			—			—			7,872		—		7,872			—			—			7,872
Other secured financings		—		16,429			3,820			—			20,249		—		16,429			3,820			—			20,249
Unsecuredshort-term borrowings		—		17,916			5,159			—			23,075		—		17,916			5,159			—			23,075
Unsecuredlong-term borrowings		—		15,886			1,560			—			17,446		—		15,886			1,560			—			17,446
Other liabilities and accrued expenses		—		978			—			—			978		—		978			—			—			978

Total financial liabilities at fair value	$	48,347	$	280,537		$	21,886	⁽²⁾	$	(38,071	)	$	312,699	$	48,347	$	280,537		$	21,886	⁽²⁾	$	(38,071	)	$	312,699


⁽¹⁾	Includes $31.20 billion and $4.74 billion of credit derivative liabilities within level 2 and level 3, respectively, of the fair value hierarchy. These amounts exclude the effects of netting under enforceable netting agreements across other derivative product types.

⁽²⁾	Level 3 liabilities were 7.0% of Total financial liabilities at fair value.

⁽³⁾	Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Level 3 Unrealized Gains/(Losses)

The table below sets forth a summary of unrealized gains/(losses) on the firm’s level 3 financial assets and financial liabilities at fair value still held at the reporting date for the three and ~~six~~nine months ended ~~June~~September 2009 and ~~May~~August 2008:


	Level 3 Unrealized Gains/(Losses)												Level 3 Unrealized Gains/(Losses)
	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June			May			June			May			September			August			September			August
	2009			2008			2009			2008			2009			2008			2009			2008
	(in millions)												(in millions)
Cash instruments — assets	$	(1,932	)	$	(944	)	$	(5,597	)	$	(3,194	)	$	377		$	(2,207	)	$	(4,703	)	$	(4,249	)
Cash instruments — liabilities		289			—			280			(264	)		180			(104	)		433			(246	)

Net unrealized losses on level 3 cash instruments		(1,643	)		(944	)		(5,317	)		(3,458	)
Net unrealized gains/(losses) on level 3 cash instruments														557			(2,311	)		(4,270	)		(4,495	)
Derivative contracts — net		(1,403	)		(447	)		(171	)		1,900			(639	)		3,216			(1,216	)		5,623
Other secured financings		(442	)		—			(426	)		—			(295	)		99			(720	)		263
Unsecuredshort-term borrowings		(189	)		(18	)		(50	)		40			(193	)		310			(137	)		306
Unsecuredlong-term borrowings		(133	)		(71	)		(98	)		32			(217	)		217			(268	)		264
Other liabilities and accrued expenses		18			—			81			—			(22	)		(20	)		56			(20	)

Total level 3 unrealized losses	$	(3,792	)	$	(1,480	)	$	(5,981	)	$	(1,486	)
Total level 3 unrealized gains/(losses)													$	(809	)	$	1,511		$	(6,555	)	$	1,941

Cash Instruments

The net unrealized ~~loss~~gain on level 3 cash instruments of ~~$1.64 billion~~$557 million for the three months ended ~~June~~September 2009 primarily consisted of unrealized gains on certain bank loans, partially offset by unrealized losses on ~~real estate fund investments, and~~ loans and securities backed by commercial real ~~estate, reflecting continued weakness in the commercial real estate market.~~estate. The net unrealized loss on level 3 cash instruments of ~~$944 million~~$2.31 billion for the three months ended ~~May~~August 2008 primarily consisted of unrealized losses on ~~certain~~loans and securities backed by commercial real estate and bank loans and bridge ~~loans, and corporate debt securities and other debt obligations, reflecting weakness in the credit markets.~~loans. The net unrealized loss on level 3 cash instruments of ~~$5.32~~$4.27 billion for the ~~six~~nine months ended ~~June~~September 2009 primarily consisted of unrealized losses on private equity and real estate fund investments, and loans and securities backed by commercial real estate, reflecting weakness in ~~the global equity markets in the first quarter of 2009, as well as weakness in the commercial real estate market.~~these less liquid asset classes. The net unrealized loss on level 3 cash instruments of ~~$3.46~~$4.50 billion for the ~~six~~nine months ended ~~May~~August 2008 primarily consisted of unrealized losses on loans and securities backed by commercial and residential real estate and certain bank loans and bridge ~~loans, and corporate debt securities and other debt obligations, reflecting weakness in the broader credit markets.~~loans.

Level 3 cash instruments are frequently economically hedged with instruments classified within level 1 and level 2, and accordingly, gains or losses that have been reported in level 3 can be partially offset by gains or losses attributable to instruments classified within level 1 or level 2 or by gains or losses on derivative contracts classified within level 3 of the fair value hierarchy.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Derivative Contracts

The net unrealized loss on level 3 derivative contracts of ~~$1.40 billion~~$639 million for the three months ended ~~June~~September 2009 was primarily ~~driven by tighter~~attributable to changes in observable prices and observable credit spreads on the underlying instruments (which are level 2 ~~observable~~ inputs) ~~on the underlying instruments.~~. The net unrealized loss of ~~$171 million~~$1.22 billion for the ~~six~~nine months ended ~~June~~September 2009 was primarily attributable to tighter credit spreads on the underlying instruments partially offset by increases in commodities prices (which are level 2 observable inputs). The net unrealized ~~loss~~gain on level 3 derivative contracts of ~~$447 million~~$3.22 billion for the three months ended ~~May~~August 2008 and net unrealized gain of ~~$1.90~~$5.62 billion for the ~~six~~nine months ended ~~May~~August 2008 ~~were~~was primarily attributable to ~~observable~~ changes in ~~underlying~~observable credit spreads (which are level 2 inputs). on the underlying instruments. Level 3 gains and losses on derivative contracts should be considered in the context of the following:


	•	A derivative contract with level 1and/or level 2 inputs is classified as a level 3 financial instrument in its entirety if it has at least one significant level 3 input.

	•	If there is one significant level 3 input, the entire gain or loss from adjusting only observable inputs (i.e., level 1 and level 2) is still classified as level 3.

	•	Gains or losses that have been reported in level 3 resulting from changes in level 1 or level 2 inputs are frequently offset by gains or losses attributable to instruments classified within level 1 or level 2 or by cash instruments reported within level 3 of the fair value hierarchy.

The tables below set forth a summary of changes in the fair value of the firm’s level 3 financial assets and financial liabilities for the three and ~~six~~nine months ended ~~June~~September 2009 and ~~May~~August 2008. The tables reflect gains and losses, including gains and losses for the entire period on financial assets and financial liabilities that were transferred to level 3 during the period, for all financial assets and financial liabilities categorized as level 3 as of ~~June~~September 2009 and ~~May~~August 2008, respectively. The tables do not include gains or losses that were reported in level 3 in prior periods for instruments that were sold or transferred out of level 3 prior to the end of the period presented.


	Level 3 Financial Assets and Financial Liabilities at Fair Value																		Level 3 Financial Assets and Financial Liabilities at Fair Value
							Net unrealized																		Net unrealized
							gains/(losses)			Net															gains/(losses)			Net
							relating to			purchases,															relating to			purchases,
	Balance,						instruments still			issuances			Net transfers			Balance,			Balance,						instruments still			issuances			Net transfers			Balance,
	beginning of			Net realized			held at the			and			inand/or out			end of			beginning			Net realized			held at the			and			inand/or out			end of
	period			gains/(losses)			reporting date			settlements			of level 3			period			of period			gains/(losses)			reporting date			settlements			of level 3			period
	(in millions)																		(in millions)
Three Months Ended June 2009
Three Months Ended September 2009
Mortgage and otherasset-backed loans and securities:
Loans and securities backed by commercial real estate	$	7,705		$	(207	)	$	(637	)	$	(92	)	$	70		$	6,839		$	6,839		$	95		$	(259	)	$	(370	)	$	(193	)	$	6,112
Loans and securities backed by residential real estate		2,088			101			(14	)		(301	)		(12	)		1,862			1,862			49			62			(40	)		(90	)		1,843
Loan portfolios		1,851			41			(29	)		(89	)		—			1,774			1,774			32			(4	)		(126	)		—			1,676
Bank loans and bridge loans		9,866			169			(74	)		(679	)		387			9,669			9,669			182			409			(493	)		14			9,781
Corporate debt securities		2,648			23			(70	)		(161	)		(68	)		2,372			2,372			22			39			(327	)		(248	)		1,858
State and municipal obligations		1,157			3			(5	)		(33	)		308			1,430			1,430			(2	)		23			(39	)		(148	)		1,264
Other debt obligations		3,749			119			(166	)		(626	)		(273	)		2,803			2,803			26			20			(236	)		(127	)		2,486
Equities and convertible debentures		13,620			11			(937	)		118			(133	)		12,679			12,679			5			87			190			(480	) ⁽⁴⁾		12,481

Total cash instruments — assets		42,684			260	⁽¹⁾		(1,932	) ⁽¹⁾		(1,863	)		279			39,428			39,428			409	⁽¹⁾		377	⁽¹⁾		(1,441	)		(1,272	)		37,501

Cash instruments — liabilities		(1,304	)		(9	) ⁽²⁾		289	⁽²⁾		(31	)		35			(1,020	)		(1,020	)		10	⁽²⁾		180	⁽²⁾		250			38			(542	)
Derivative contracts — net		4,116			474	⁽²⁾		(1,403	) ⁽²⁾⁽³⁾		(141	)		30	⁽⁴⁾		3,076			3,076			170	⁽²⁾		(639	) ⁽²⁾⁽³⁾		367			1,187	⁽⁵⁾		4,161
Other secured financings		(7,277	)		(15	) ⁽²⁾		(442	) ⁽²⁾		90			(423	) ⁽⁵⁾		(8,067	)		(8,067	)		(4	) ⁽²⁾		(295	) ⁽²⁾		491			(27	)		(7,902	)
Unsecuredshort-term borrowings		(3,143	)		1	⁽²⁾		(189	) ⁽²⁾		(219	)		1,321	⁽⁶⁾		(2,229	)		(2,229	)		(61	) ⁽²⁾		(193	) ⁽²⁾		172			370			(1,941	)
Unsecuredlong-term borrowings		(1,916	)		(25	) ⁽²⁾		(133	) ⁽²⁾		54			(1,407	) ⁽⁶⁾		(3,427	)		(3,427	)		(5	) ⁽²⁾		(217	) ⁽²⁾		85			135			(3,429	)
Other liabilities and accrued expenses		(1,510	)		(11	) ⁽²⁾		18	⁽²⁾		(141	)		—			(1,644	)		(1,644	)		—	⁽²⁾		(22	) ⁽²⁾		(156	)		—			(1,822	)

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


	Level 3 Financial Assets and Financial Liabilities at Fair Value																		Level 3 Financial Assets and Financial Liabilities at Fair Value
							Net unrealized																		Net unrealized
							gains/(losses)			Net															gains/(losses)			Net
							relating to			purchases,															relating to			purchases,
	Balance,						instruments still			issuances			Net transfers			Balance,			Balance,						instruments still			issuances			Net transfers			Balance,
	beginning of			Net realized			held at the			and			inand/or out			end of			beginning			Net realized			held at the			and			inand/or out			end of
	period			gains/(losses)			reporting date			settlements			of level 3			period			of period			gains/(losses)			reporting date			settlements			of level 3			period
	(in millions)																		(in millions)
Six Months Ended June 2009
Nine Months Ended September 2009

Mortgage and otherasset-backed loans and securities:
Loans and securities backed by commercial real estate	$	9,170		$	(148	)	$	(1,546	)	$	(530	)	$	(107	)	$	6,839		$	9,170		$	202		$	(1,464	)	$	(1,481	)	$	(315	)	$	6,112
Loans and securities backed by residential real estate		1,927			183			(123	)		(505	)		380			1,862			1,927			79			66			(395	)		166			1,843
Loan portfolios		4,266			90			(269	)		(766	)		(1,547	) ⁽⁷⁾		1,774			4,266			148			(300	)		(891	)		(1,547	) ⁽⁶⁾		1,676
Bank loans and bridge loans		11,169			344			(682	)		(1,227	)		65			9,669			11,169			559			(194	)		(1,963	)		210			9,781
Corporate debt securities		2,734			163			(349	)		13			(189	)		2,372			2,734			152			(192	)		(525	)		(311	)		1,858
State and municipal obligations		1,356			7			(9	)		(219	)		295			1,430			1,356			(23	)		33			(424	)		322			1,264
Other debt obligations		3,903			68			(211	)		(920	)		(37	)		2,803			3,903			123			(200	)		(1,054	)		(286	)		2,486
Equities and convertible debentures		15,127			7			(2,408	)		(56	)		9			12,679			15,127			(14	)		(2,452	)		586			(766	) ⁽⁴⁾		12,481

Total cash instruments — assets		49,652			714	⁽¹⁾		(5,597	) ⁽¹⁾		(4,210	)		(1,131	)		39,428			49,652			1,226	⁽¹⁾		(4,703	) ⁽¹⁾		(6,147	)		(2,527	)		37,501

Cash instruments — liabilities		(1,727	)		(2	) ⁽²⁾		280	⁽²⁾		274			155			(1,020	)		(1,727	)		5	⁽²⁾		433	⁽²⁾		560			187			(542	)
Derivative contracts — net		3,315			577	⁽²⁾		(171	) ⁽²⁾⁽³⁾		(1,446	)		801	⁽⁸⁾		3,076			3,315			547	⁽²⁾		(1,216	) ⁽²⁾⁽³⁾		1,928			(413	)		4,161
Other secured financings		(4,039	)		(21	) ⁽²⁾		(426	) ⁽²⁾		(1,053	)		(2,528	) ⁽⁹⁾		(8,067	)		(4,039	)		(24	) ⁽²⁾		(720	) ⁽²⁾		(564	)		(2,555	) ⁽⁷⁾		(7,902	)
Unsecuredshort-term borrowings		(4,712	)		8	⁽²⁾		(50	) ⁽²⁾		(1,039	)		3,564	⁽⁹⁾		(2,229	)		(4,712	)		(70	) ⁽²⁾		(137	) ⁽²⁾		(837	)		3,815	⁽⁷⁾		(1,941	)
Unsecuredlong-term borrowings		(1,689	)		15	⁽²⁾		(98	) ⁽²⁾		225			(1,880	) ⁽⁹⁾		(3,427	)		(1,689	)		(45	) ⁽²⁾		(268	) ⁽²⁾		318			(1,745	) ⁽⁷⁾		(3,429	)
Other liabilities and accrued expenses		—			(21	) ⁽²⁾		81	⁽²⁾		(751	)		(953	) ⁽¹⁰⁾		(1,644	)		—			(21	) ⁽²⁾		56	⁽²⁾		(904	)		(953	) ⁽⁸⁾		(1,822	)


	⁽¹⁾	The aggregate amounts include approximately ~~$(2.18) billion~~$317 million and ~~$510~~$469 million reported in “Trading and principal investments” and “Interest income,” respectively, in the condensed consolidated statement of earnings for the three months ended ~~June~~September 2009. The aggregate amounts include approximately ~~$(5.96)~~$(4.92) billion and ~~$1.08~~$1.44 billion reported in “Trading and principal investments” and “Interest income,” respectively, in the condensed consolidated statement of earnings for the ~~six~~nine months ended ~~June~~September 2009.

	⁽²⁾	Substantially all is reported in “Trading and principal investments” in the condensed consolidated statements of earnings.

	⁽³⁾	Primarily resulted from changes in level 2 inputs.

	⁽⁴⁾	Principally reflects ~~transfers from level 2 within the fair value hierarchy of credit derivative assets, reflecting reduced transparency of the correlation inputs used to value these financial instruments, offset by~~ transfers to level 2 within the fair value hierarchy of certain private equity ~~derivative assets,~~investments, reflecting improved transparency of ~~the equity index volatility inputs used to value~~prices for these financial ~~instruments.~~instruments, primarily as a result of trading activity.

	⁽⁵⁾	~~Principally reflects transfers from level 2 within the fair value hierarchy due to reduced transparency of prices for municipal obligations that collateralize certain secured financings.~~

	⁽⁶⁾	~~Principally reflects transfers from level 3 unsecuredshort-term~~ ~~borrowings to level 3 unsecuredlong-term~~ ~~borrowings related to changes in the terms of certain notes.~~

	⁽⁷⁾	~~Principally reflects the deconsolidation of certain loan portfolios for which the firm did not bear economic exposure.~~

	⁽⁸⁾	Principally reflects transfers from level 2 within the fair value hierarchy of credit derivative assets, reflecting reduced transparency of certain credit spread inputs used to value these financial instruments, partially offset by transfers to level 2 within the fair value hierarchy of equity derivative assets, reflecting improved transparency of the equity index volatility inputs used to value these financial instruments.

⁽⁶⁾	Principally reflects the deconsolidation of certain loan portfolios for which the firm did not bear economic exposure.

⁽⁹⁾⁽⁷⁾	Principally reflects transfers from level 3 unsecuredshort-term borrowings to level 3 other secured financings and level 3 unsecuredlong-term borrowings related to changes in the terms of certain notes.


^(10)(8)	Principally reflects transfers from level 2 within the fair value hierarchy of certain insurance contracts, reflecting reduced transparency of mortality curve inputs used to value these ~~instruments.~~instruments as a result of less observable trading activity.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


	Level 3 Financial Assets and Financial Liabilities at Fair Value																		Level 3 Financial Assets and Financial Liabilities at Fair Value
							Net unrealized																		Net unrealized
							gains/(losses)			Net															gains/(losses)			Net
							relating to			purchases,															relating to			purchases,
	Balance,						instruments still			issuances			Net transfers			Balance,			Balance,						instruments still			issuances			Net transfers			Balance,
	beginning of			Net realized			held at the			and			inand/or out			end of			beginning			Net realized			held at the			and			inand/or out			end of
	period			gains/(losses)			reporting date			settlements			of level 3			period			of period			gains/(losses)			reporting date			settlements			of level 3			period
	(in millions)																		(in millions)
Three Months Ended May 2008
Three Months Ended August 2008

Cash instruments — assets	$	71,373		$	624	⁽¹⁾	$	(944	) ⁽¹⁾	$	(2,330	) ⁽⁴⁾	$	(9,052	) ⁽⁴⁾⁽⁵⁾	$	59,671		$	59,671		$	598	⁽¹⁾	$	(2,207	) ⁽¹⁾	$	(5,837	)	$	1,898	⁽⁴⁾	$	54,123
Cash instruments — liabilities		(977	)		13	⁽²⁾		—			301			82			(581	)		(581	)		(1	) ⁽²⁾		(104	) ⁽²⁾		100			(11	)		(597	)
Derivative contracts — net		9,394			(8	) ⁽²⁾		(447	) ⁽²⁾⁽³⁾		68			(2,499	) ⁽⁶⁾		6,508			6,508			(381	) ⁽²⁾		3,216	⁽²⁾⁽³⁾		40			(4,344	) ⁽⁵⁾		5,039
Other secured financings		—			(6	) ⁽²⁾		—			18			(892	) ⁽⁷⁾		(880	)		(880	)		25	⁽²⁾		99	⁽²⁾		352			(3,962	) ⁽⁶⁾		(4,366	)
Unsecuredshort-term borrowings		(3,839	)		(134	) ⁽²⁾		(18	) ⁽²⁾		357			(203	)		(3,837	)		(3,837	)		33	⁽²⁾		310	⁽²⁾		(787	)		(470	)		(4,751	)
Unsecuredlong-term borrowings		(1,247	)		(4	) ⁽²⁾		(71	) ⁽²⁾		(603	)		(77	)		(2,002	)		(2,002	)		(5	) ⁽²⁾		217	⁽²⁾		(202	)		74			(1,918	)
Other liabilities and accrued expenses																				—			(8	) ⁽²⁾		(20	) ⁽²⁾		(1,315	)		—			(1,343	)

Six Months Ended May 2008
Nine Months Ended August 2008

Cash instruments — assets	$	53,451		$	1,370	⁽¹⁾	$	(3,194	) ⁽¹⁾	$	5,422		$	2,622	⁽⁸⁾	$	59,671		$	53,451		$	2,103	⁽¹⁾	$	(4,249	) ⁽¹⁾	$	426		$	2,392	⁽⁷⁾	$	54,123
Cash instruments — liabilities		(554	)		10	⁽²⁾		(264	) ⁽²⁾		251			(24	)		(581	)		(554	)		2	⁽²⁾		(246	) ⁽²⁾		167			34			(597	)
Derivative contracts — net		2,056			104	⁽²⁾		1,900	⁽²⁾⁽³⁾		71			2,377	⁽⁹⁾		6,508			2,056			362	⁽²⁾		5,623	⁽²⁾⁽³⁾		(1,331	)		(1,671	) ⁽⁵⁾		5,039
Other secured financings		—			(6	) ⁽²⁾		—			(874	)		—			(880	)		—			25	⁽²⁾		263	⁽²⁾		271			(4,925	) ⁽⁶⁾		(4,366	)
Unsecuredshort-term borrowings		(4,271	)		(184	) ⁽²⁾		40	⁽²⁾		699			(121	)		(3,837	)		(4,271	)		(19	) ⁽²⁾		306	⁽²⁾		(283	)		(484	)		(4,751	)
Unsecuredlong-term borrowings		(767	)		5	⁽²⁾		32	⁽²⁾		(1,072	)		(200	)		(2,002	)		(767	)		(10	) ⁽²⁾		264	⁽²⁾		(1,304	)		(101	)		(1,918	)
Other liabilities and accrued expenses																				—			(8	) ⁽²⁾		(20	) ⁽²⁾		(1,315	)		—			(1,343	)


⁽¹⁾	The aggregate amounts include approximately ~~$(1.02)~~$(2.23) billion and ~~$696~~$623 million reported in “Trading and principal investments” and “Interest income,” respectively, in the condensed consolidated statement of earnings for the three months ended ~~May~~August 2008. The aggregate amounts include approximately ~~$(3.09)~~$(4.09) billion and ~~$1.27~~$1.94 billion reported in “Trading and principal investments” and “Interest income,” respectively, in the condensed consolidated statement of earnings for the ~~six~~nine months ended ~~May~~August 2008.

⁽²⁾	Substantially all is reported in “Trading and principal investments” in the condensed consolidated statements of earnings.

⁽³⁾	Principally resulted from changes in level 2 inputs.

⁽⁴⁾	~~The aggregate amount includes a decrease of $8.80 billion due to full and partial dispositions.~~

⁽⁵⁾	~~Includes~~Principally reflects transfers from level 2 within the fair value hierarchy of loans and securities backed by commercial real estate and ~~bank loans~~private equity investments, reflecting reduced price transparency for these financial instruments, partially offset by transfers of corporate debt securities and ~~bridge loans~~other debt obligations to level 2 within the fair value hierarchy, reflecting improved price transparency for these financial instruments, largely as a result of sales and partial ~~dispositions.~~sales.

⁽⁶⁾⁽⁵⁾	Principally reflects transfers to level 2 within the fair value hierarchy ofmortgage-related derivative assets, ~~due to~~as recent trading activity provided improved transparency of correlation inputs.

⁽⁶⁾	Consists of transfers from level 2 within the ~~correlation inputs used to~~fair value ~~these financial instruments.~~hierarchy.

⁽⁷⁾	Principally reflects transfers from level 2 within the fair value hierarchy ~~due to reduced transparency~~ of ~~prices for debt obligations that collateralize certain secured financings.~~

⁽⁸⁾	~~Principally reflects transfers of corporate debt securities and other debt obligations, and~~ loans and securities backed by commercial real estate, ~~from level 2 within the fair value hierarchy,~~ reflecting reduced price transparency for these financial instruments.

⁽⁹⁾	~~Principally reflects transfers to level 2 within the fair value hierarchy of derivative liabilities due to improved transparency of the correlation inputs used to value these financial instruments.~~

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Impact of Credit Spreads

On an ongoing basis, the firm realizes gains or losses relating to changes in credit risk on derivative contracts through changes in credit mitigants or the sale or unwind of the contracts. The net ~~gain/(loss)~~gain attributable to the impact of changes in credit exposure and credit spreads on derivative contracts (including derivative assets and liabilities and related hedges) was ~~$38~~$264 million and ~~$(145)~~$257 million for the three months ended ~~June~~September 2009 and ~~May~~August 2008, respectively, and ~~$86~~$350 million and ~~$(129)~~$128 million for the ~~six~~nine months ended ~~June~~September 2009 and ~~May~~August 2008, respectively.

The following table sets forth the net gains/(losses) attributable to the impact of changes in the firm’s own credit spreads on ~~unsecured~~ borrowings for which the fair value option was elected. The firm calculates the fair value of ~~unsecured~~ borrowings by discounting future cash flows at a rate which incorporates the firm’s observable credit spreads.


	Three Months Ended						Six Months Ended					Three Months Ended					Nine Months Ended
	June			May			June			May		September			August		September			August
	2009			2008			2009			2008		2009			2008		2009			2008
	(in millions)											(in millions)
Net gains/(losses) including hedges	$	(348	)	$	(178	)	$	(545	)	$	155	$	(278	)	$	176	$	(823	)	$	331
Net gains/(losses) excluding hedges		(353	)		(375	)		(545	)		143		(285	)		248		(830	)		391

The impact of changes in instrument-specific credit spreads on loans and loan commitments for which the fair value option was elected was a gain of ~~$917 million~~$1.33 billion and ~~a loss of $297 million~~$1.03 billion for the three and ~~six~~nine months ended ~~June~~September 2009, respectively, and not material for the three and ~~six~~nine months ended ~~May~~August 2008. The firm attributes changes in the fair value of floating rate loans and loan commitments to changes in instrument-specific credit spreads. For fixed rate loans and loan commitments, the firm allocates changes in fair value between interest rate-related changes and credit spread-related changes based on changes in interest rates. See below for additional details regarding the fair value option.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The Fair Value Option

Gains/(Losses)

The following table sets forth the gains/(losses) included in earnings for the three and ~~six~~nine months ended ~~June~~September 2009 and ~~May~~August 2008 as a result of the firm electing to apply the fair value option to certain financial assets and financial liabilities, as described in Note 2. The table excludes gains and losses related to (i) trading assets and trading liabilities, ~~as well as~~(ii) gains and losses on assets and liabilities that would have been ~~recognized~~accounted for at fair value under other ~~generally accepted accounting principles~~GAAP if the firm had not elected the fair value option, ~~or that are economically hedged with instruments~~and (iii) gains and losses on secured financings related to transfers of financial assets accounted for ~~at fair value under other generally accepted accounting principles.~~as financings rather than sales, as such gains and losses are offset by gains and losses on the related financial assets.


	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June			May			June			May			September			August			September			August
	2009			2008			2009			2008			2009			2008			2009			2008
	(in millions)												(in millions)
Unsecuredlong-term borrowings ⁽¹⁾	$	(307	)	$	(371	)	$	(442	)	$	135		$	(209	)	$	236		$	(651	)	$	371
Other secured financings ⁽²⁾		(442	)		124			(417	)		123			(349	)		142			(766	)		265
Unsecuredshort-term borrowings ⁽³⁾		(27	)		25			(94	)		(25	)		(44	)		8			(138	)		(17	)
Receivables from customers and counterparties ⁽⁴⁾		84			1			82			1			241			(33	)		323			(32	)
Other liabilities and accrued expenses ⁽⁵⁾		(162	)		—			(80	)		—			(180	)		(27	)		(260	)		(27	)
Other ⁽⁶⁾		34			(28	)		8			(22	)		53			(6	)		61			(28	)

Total ⁽⁷⁾	$	(820	)	$	(249	)	$	(943	)	$	212		$	(488	)	$	320		$	(1,431	)	$	532


⁽¹⁾		Excludes ~~losses~~gains/(losses) of ~~$2.96~~$(1.45) billion and ~~$1.54~~$1.50 billion for the three months ended ~~June~~September 2009 and ~~May~~August 2008, respectively, and ~~$1.72~~$(3.17) billion and ~~$2.26 billion~~$(758) million for the ~~six~~nine months ended ~~June~~September 2009 and ~~May~~August 2008, respectively, related to the embedded derivative component of hybrid financial instruments. Such gains and losses would have been recognized ~~pursuant to SFAS No. 133~~even if the firm had not elected to account for the entire hybrid instrument at fair value under the fair value option.

⁽²⁾		Excludes ~~gains/(losses)~~gains of ~~$(12)~~$34 million and ~~$10~~$90 million for the three months ended ~~June~~September 2009 and ~~May~~August 2008, respectively, and $7$41 million and ~~$1.04~~$1.13 billion for the ~~six~~nine months ended ~~June~~September 2009 and ~~May~~August 2008, respectively, related to financings recorded as a result of ~~securitization-related~~ transactions that were accounted for as secured financings rather than ~~sales under SFAS No. 140.~~sales. Changes in the fair value of these secured financings are offset by changes in the fair value of the related financial instruments included ~~within the firm’s~~in “Trading assets, at fair value” in the condensed consolidated statements of financial condition.

⁽³⁾		Excludes gains/(losses) of ~~$(1.18)~~$(893) million and $1.91 billion ~~and $(59) million~~ for the three months ended ~~June~~September 2009 and ~~May~~August 2008, respectively, ~~$(1.48)~~and $(2.37) billion and ~~$253 million~~$2.17 billion for the ~~six~~nine months ended ~~June~~September 2009 and ~~May~~August 2008, respectively, related to the embedded derivative component of hybrid financial instruments. Such gains and losses would have been recognized ~~pursuant to SFAS No. 133~~even if the firm had not elected to account for the entire hybrid instrument at fair value under the fair value option.

⁽⁴⁾		Primarily consists of ~~gains~~gains/(losses) on certain reinsurance contracts.

⁽⁵⁾		Primarily consists of losses on certain insurance and reinsurance contracts.

⁽⁶⁾		Primarily consists of gains/(losses) on resale and repurchase agreements, and securities borrowed and loaned within Trading and Principal Investments.

⁽⁷⁾		Reported ~~within~~in “Trading and principal investments” in the condensed consolidated statements of earnings. The amounts exclude contractual interest, which is included in “Interest income” and “Interest expense” in the condensed consolidated statements of earnings, for all instruments other than hybrid financial instruments.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

All trading assets and trading liabilities are accounted for at fair value either under the fair value option or as required by other accounting ~~pronouncements.~~standards (principally ASC 320, ASC 940 and ASC 815). Excluding equities commissions of ~~$1.02 billion~~$930 million and ~~$1.23~~$1.21 billion for the three months ended ~~June~~September 2009 and ~~May~~August 2008, respectively, and ~~$2.00~~$2.93 billion and ~~$2.47~~$3.68 billion for the ~~six~~nine months ended ~~June~~September 2009 and ~~May~~August 2008, respectively, and the gains and losses on the instruments accounted for under the fair value option described above, ~~the firm’s~~ “Trading and principal investments” ~~revenues~~ in the condensed consolidated statements of earnings primarily ~~represent~~represents gains and losses on “Trading assets, at fair value” and “Trading liabilities, at fair value” in the condensed consolidated statements of financial condition.

Loans and Loan Commitments

As of ~~June~~September 2009, the aggregate contractual principal amount of loans andlong-term receivables for which the fair value option was elected exceeded the related fair value by ~~$45.31~~$44.68 billion, including a difference of ~~$37.53~~$38.65 billion related to loans with an aggregate fair value of ~~$4.60~~$4.95 billion that were on nonaccrual status (including loans more than 90 days past due). As of November 2008, the aggregate contractual principal amount of loans andlong-term receivables for which the fair value option was elected exceeded the related fair value by $50.21 billion, including a difference of $37.46 billion related to loans with an aggregate fair value of $3.77 billion that were on nonaccrual status (including loans more than 90 days past due). The aggregate contractual principal exceeds the related fair value primarily because the firm regularly purchases loans, such as distressed loans, at values significantly below contractual principal amounts.

As of ~~June~~September 2009 and November 2008, the fair value of unfunded lending commitments for which the fair value option was elected was a liability of ~~$1.78~~$1.16 billion and $3.52 billion, respectively, and the related total contractual amount of these lending commitments was ~~$38.58~~$40.57 billion and $39.49 billion, respectively.

Long-term Debt Instruments

The aggregate contractual principal amount oflong-term debt instruments (principal andnon-principal protected) for which the fair value option was elected exceeded the related fair value by ~~$1.95 billion~~$893 million and $2.42 billion as of ~~June~~September 2009 and November 2008, respectively.

Derivative Activities

Derivative contracts are instruments, such as futures, forwards, swaps or option contracts, that derive their value from underlying assets, indices, reference rates or a combination of these factors. Derivative instruments may be privately negotiated contracts, which are often referred to as OTC derivatives, or they may be listed and traded on an exchange. Derivatives may involve future commitments to purchase or sell financial instruments or commodities, or to exchange currency or interest payment streams. The amounts exchanged are based on the specific terms of the contract with reference to specified rates, securities, commodities, currencies or indices.

Certain cash instruments, such asmortgage-backed securities, interest-only and principal-only obligations, and indexed debt instruments, are not considered derivatives even though their values or contractually required cash flows are derived from the price of some other security or index. However, certain commodity-related contracts are included in the firm’s derivatives disclosure, as these contracts may be settled in cash or the assets to be delivered under the contract are readily convertible into cash.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The firm enters into derivative transactions to facilitate client transactions, to take proprietary positions and as a means of risk management. Risk exposures are managed through diversification, by controlling position sizes and by entering into offsetting positions. For example, the firm may manage the risk related to a portfolio of common stock by entering into an offsetting position in a relatedequity-index futures contract.

The firm applies hedge accounting ~~under SFAS No. 133~~ to certain derivative contracts. The firm uses these derivatives to manage certain interest rate and currency exposures, including the firm’s net investment innon-U.S. operations. The firm designates certain interest rate swap contracts as fair value hedges. These interest rate swap contracts hedge changes in the relevant benchmark interest rate (e.g., London Interbank Offered Rate (LIBOR)), effectively converting a substantial portion of the firm’s unsecuredlong-term borrowings, certain unsecuredshort-term borrowings and certificates of deposit into floating rate obligations. See Note 2 for information regarding the firm’s accounting policy for foreign currency forward contracts used to hedge its net investment innon-U.S. operations.

The firm applies along-haul method to all of its hedge accounting relationships to perform an ongoing assessment of the effectiveness of these relationships in achieving offsetting changes in fair value or offsetting cash flows attributable to the risk being hedged. The firm utilizes adollar-offset method, which compares the change in the fair value of the hedging instrument to the change in the fair value of the hedged item, excluding the effect of the passage of time, to prospectively and retrospectively assess hedge ~~effectiveness.~~effectiveness under thelong-haul method. The firm’s prospectivedollar-offset assessment utilizes scenario analyses to test hedge effectiveness via simulations of numerous parallel and slope shifts of the relevant yield curve. Parallel shifts change the interest rate of all maturities by identical amounts. Slope shifts change the curvature of the yield curve. For both the prospective assessment, in response to each of the simulated yield curve shifts, and the retrospective assessment, a hedging relationship is deemed to be effective if the fair value of the hedging instrument and the hedged item change inversely within a range of 80% to 125%.

For fair value hedges, gains or losses on derivative transactions are recognized in “Interest expense” in the condensed consolidated statements of earnings. The change in fair value of the hedged item attributable to the risk being hedged is reported as an adjustment to its carrying value and is subsequently amortized into interest expense over its remaining life. Gains or losses related to hedge ineffectiveness for these hedges are generally included in “Interest expense” in the condensed consolidated statements of earnings. These gains or losses were not material for the three and ~~six~~nine months ended ~~June~~September 2009 and ~~May~~August 2008. Gains and losses on derivatives used for trading purposes are included in “Trading and principal investments” in the condensed consolidated statements of earnings.

The fair value of the firm’s derivative contracts is reflected net of cash paid or received pursuant to credit support agreements and is reported on anet-by-counterparty basis in the firm’s condensed consolidated statements of financial condition when management believes a legal right of setoff exists under an enforceable netting agreement. The following table sets forth the fair value and the number of contracts of the firm’s derivative contracts by major product type on a gross basis as of ~~June~~September 2009. Gross fair values in the table below exclude the effects of both netting under enforceable netting agreements and netting of cash received or posted pursuant to credit support agreements, and therefore are not representative of the firm’s exposure:

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


	As of June 2009								As of September 2009
	Derivative			Derivative			Number of		Derivative			Derivative			Number of
	Assets			Liabilities			Contracts		Assets			Liabilities			Contracts
	(in millions, except number of contracts)								(in millions, except number of contracts)
Derivative contracts for trading activities

Interest rates	$	539,606	⁽⁴⁾	$	486,423	⁽⁴⁾		275,197	$	533,136	⁽⁴⁾	$	480,148	⁽⁴⁾		274,115
Credit		291,660			252,615			464,120		194,977			163,051			449,917
Currencies		87,011			76,341			200,828		88,021			75,537			227,152
Commodities		63,188			60,539			201,563		57,208			55,296			164,402
Equities		91,474			79,143			278,774		87,168			74,504			245,282

Subtotal	$	1,072,939		$	955,061			1,420,482	$	960,510		$	848,536			1,360,868

Derivative contracts accounted for as hedges under SFAS No. 133⁽¹⁾
Derivative contracts accounted for as hedges⁽¹⁾

Interest rates	$	21,039	⁽⁵⁾	$	6	⁽⁵⁾		825	$	22,325	⁽⁵⁾	$	4	⁽⁵⁾		817
Currencies		10	⁽⁶⁾		20	⁽⁶⁾		30		52	⁽⁶⁾		127	⁽⁶⁾		79

Subtotal	$	21,049		$	26			855	$	22,377		$	131			896

Gross fair value of derivative contracts	$	1,093,988		$	955,087			1,421,337	$	982,887		$	848,667			1,361,764

Counterparty netting ⁽²⁾		(870,627	)		(870,627	)				(767,797	)		(767,797	)
Cash collateral netting ⁽³⁾		(133,335	)		(16,309	)				(126,823	)		(16,830	)

Fair value included in “Trading assets, at fair value”	$	90,026							$	88,267

Fair value included in “Trading liabilities, at fair value”				$	68,151							$	64,040


⁽¹⁾		As of November 2008, the gross fair value of derivative contracts accounted for as hedges ~~under SFAS No. 133~~ consisted of $20.40 billion in assets and $128 million in liabilities.

⁽²⁾		Represents the netting of receivable balances with payable balances for the same counterparty pursuant to credit support ~~agreements in accordance with FIN 39.~~agreements.

⁽³⁾		Represents the netting of cash collateral received and posted on a counterparty basis pursuant to credit support agreements.

⁽⁴⁾		Presented after giving effect to ~~$410.20~~$469.23 billion of derivative assets and ~~$390.04~~$450.07 billion of derivative liabilities settled with clearing organizations.

⁽⁵⁾		For the three and ~~six~~nine months ended ~~June~~September 2009, the ~~loss~~gain/(loss) recognized on these derivative contracts was ~~$5.54 billion~~$844 million and ~~$8.01~~$(7.17) billion, respectively, and the related ~~gain~~gain/(loss) recognized on the hedged borrowings and bank deposits was ~~$5.54 billion~~$(832) million and ~~$7.97~~$7.14 billion, respectively. These gains and losses are included in “Interest expense” in the condensed consolidated statements of earnings. For the three and ~~six~~nine months ended ~~June~~September 2009, the ~~loss~~gain/(loss) recognized on these derivative contracts included losses of ~~$350~~$223 million and ~~$666~~$889 million, respectively, which were excluded from the assessment of hedge effectiveness.

⁽⁶⁾		For the three and ~~six~~nine months ended ~~June~~September 2009, the loss on these derivative contracts was ~~$450~~$145 million and ~~$297~~$442 million, respectively. Such amounts are included in “Currency translation adjustment, net of tax” in the condensed consolidated statements of comprehensive income. The gain/(loss) related to ineffectiveness and thegain/(loss) reclassified to earnings from accumulated other comprehensive income were not material for the three and ~~six~~nine months ended ~~June~~September 2009.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The firm also has embedded derivatives that have been bifurcated from related ~~borrowings under SFAS No. 133.~~borrowings. Such derivatives, which are classified in unsecuredshort-term and unsecuredlong-term borrowings in the firm’s condensed consolidated statements of financial condition, had a net asset carrying value of ~~$363~~$585 million and $774 million as of ~~June~~September 2009 and November 2008, respectively. The net asset as of ~~June~~September 2009, which represented ~~339~~324 contracts, included gross assets of ~~$698~~$990 million (primarily comprised of equity ~~credit~~ and interest rate derivatives) and gross liabilities of ~~$335~~$405 million (primarily comprised of equity and interest rate derivatives). See Notes 6 and 7 for further information regarding the firm’s unsecured borrowings.

As of ~~June~~September 2009 and November 2008, ~~respectively,~~ the firm has designated ~~$3.31~~$3.50 billion and $3.36 billion, respectively, of foreigncurrency-denominated debt, included in unsecuredlong-term borrowings in the firm’s condensed consolidated statements of financial condition, as hedges of net investments innon-U.S. ~~subsidiaries~~subsidiaries. ~~under SFAS No. 133.~~ For the three and ~~six~~nine months ended ~~June~~September 2009, the~~gain/(loss)~~ loss on these debt instruments was ~~$(90)~~$195 million and ~~$179~~$16 million, respectively. Such amounts are included in “Currency translation adjustment, net of tax” in the condensed consolidated statements of comprehensive income. The gain/(loss) related to ineffectiveness and the gain/(loss) reclassified to earnings from accumulated other comprehensive income were not material for the three and ~~six~~nine months ended ~~June~~September 2009.

The following table sets forth by major product type the firm’s gains/(losses) related to trading activities, including both derivative and nonderivative financial instruments, for the three and ~~six~~nine months ended ~~June 2009 in accordance with SFAS No. 161.~~September 2009. These gains/(losses) are not representative of the firm’s individual business unit results because many of the firm’s trading strategies utilize financial instruments across various product types. Accordingly, gains or losses in one product type frequently offset gains or losses in other product types. For example, most of the firm’s longer-term derivative contracts are sensitive to changes in interest rates and may be economically hedged with interest rate swaps. Similarly, a significant portion of the firm’s cash and derivatives trading inventory has exposure to foreign currencies and may be economically hedged with foreign currency contracts. The gains/(losses) set forth below are included in “Trading and principal investments” in the condensed consolidated statements of earnings and exclude related interest income and interest expense.


	Three Months			Six Months
	Ended June			Ended June			Three Months Ended			Nine Months Ended
	2009			2009			September 2009			September 2009
	(in millions)						(in millions)
Interest rates	$	3,814		$	4,386		$	3,928		$	8,314
Credit		1,014			2,336			2,022			4,358
Currencies		(1,398	) ⁽¹⁾		(421	)
Currencies ⁽¹⁾								(3,617	)		(4,038	)
Equities		2,743			4,109			3,406			7,515
Commodities and other		1,574			3,343			964			4,307

Total	$	7,747		$	13,753		$	6,703		$	20,456


⁽¹⁾		Includes gains/(losses) on currency contracts used to economically hedge positions included in other product types in this table.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Certain of the firm’s derivative instruments have been transacted pursuant to bilateral agreements with certain counterparties that may require the firm to post collateral or terminate the transactions based on the firm’slong-term credit ratings. As of ~~June~~September 2009, the aggregate fair value of such derivative contracts that were in a net liability position was ~~$31.19~~$22.15 billion, and the aggregate fair value of assets posted by the firm as collateral for these derivative contracts was ~~$14.26~~$16.32 billion. As of ~~June~~September 2009, additional collateral or termination payments pursuant to bilateral agreements with certain counterparties of approximately ~~$763~~$685 million and ~~$1.93~~$1.70 billion could have been called by counterparties in the event of aone-notch andtwo-notch reduction, respectively, in the firm’slong-term credit ratings.

The firm enters into ~~various derivative transactions that are considered~~a broad array of credit derivatives ~~under FSPNo. FAS 133-1~~to facilitate client transactions, to take proprietary positions and~~FIN 45-4.~~ as a means of risk management. The ~~firm’s written and purchased~~firm uses each of the credit derivatives ~~include~~described below for these purposes. These credit ~~default swaps, credit spread options, credit index products~~derivatives are entered into by various trading desks around the world, and ~~total return swaps.~~are actively managed based on the underlying risks. These activities are frequently part of a broader trading strategy and are dynamically managed based on the net risk position. As individually negotiated contracts, credit derivatives can have numerous settlement and payment conventions. The more common types of triggers include bankruptcy of the reference credit entity, acceleration of indebtedness, failure to pay, restructuring, repudiation and dissolution of the entity.


	•	Credit default swaps: Single-name credit default swaps protect the buyer against the loss of principal on one or more bonds, loans or mortgages (reference obligations) in the event of a default by the issuer (reference entity). The buyer of protection pays an initial or periodic premium to the seller and receives credit default protection for the period of the contract. If there is no credit default event, as defined by the specific derivative contract, then the seller of protection makes no payments to the buyer of protection. However, if a credit default event occurs, the seller of protection will be required to make a payment to the buyer of protection. Typical credit default events requiring payment include bankruptcy of the reference credit entity, failure to pay the principal or interest, and restructuring of the relevant obligations of the reference entity.

	•	Credit indices, baskets and tranches: Credit derivatives may reference a basket of single-name credit default swaps or abroad-based index. Typically, in the event of a default of one of the underlying reference obligations, the protection seller will pay to the protection buyer a pro-rata portion of a transaction’s total notional amount relating to the underlying defaulted reference obligation. In tranched transactions, the credit risk of a basket or index is separated into various portions each having different levels of subordination. The most junior tranches cover initial defaults, and once losses exceed the notional amount of these tranches, the excess is covered by the next most senior tranche in the capital structure.

	•	Total return swaps: A total return swap transfers the risks relating to economic performance of a reference obligation from the protection buyer to the protection seller. Typically, the protection buyer receives from the protection seller a floating rate of interest and protection against any reduction in fair value of the reference obligation, and in return the protection seller receives the cash flows associated with the reference obligation, plus any increase in the fair value of the reference obligation.

	•	Credit options: In a credit option, the option writer assumes the obligation to purchase or sell a reference obligation at a specified price or credit spread. The option purchaser buys the right to sell the reference obligation to, or purchase it from, the option writer. The payments on credit options depend either on a particular credit spread or the price of the reference obligation.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Substantially all of the firm’s purchased credit derivative transactions are with financial institutions and are subject to stringent collateral thresholds. The firm economically hedges its exposure to written credit derivatives primarily by entering into offsetting purchased credit derivatives with identical underlyings. In addition, upon the occurrence of a specified trigger event, the firm may take possession of the reference obligations underlying a particular written credit derivative, and consequently may, upon liquidation of the reference obligations, recover amounts on the underlying reference obligations in the event of default. As of ~~June~~September 2009, the firm’s written and purchased credit derivatives had total gross notional amounts of ~~$2.96~~$2.81 trillion and ~~$3.19~~$2.95 trillion, respectively, for total net purchased protection of ~~$227.02~~$136.80 billion in notional value. As of November 2008, the firm’s written and purchased credit derivatives had total gross notional amounts of $3.78 trillion and $4.03 trillion, respectively, for total net purchased protection of $255.24 billion in notional value. The decrease in notional amounts from November 2008 to ~~June~~September 2009 primarily reflects compression efforts across the industry.

~~THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(UNAUDITED)~~

The following table sets forth certain information related to the firm’s credit derivatives. Fair values in the table below exclude the effects of both netting under enforceable netting agreements and netting of cash paid pursuant to credit support agreements, and therefore are not representative of the firm’s exposure.


									Maximum Payout/Notional															Maximum Payout/Notional				Carrying Value
	Maximum Payout/Notional Amount								Amount of Purchased							Maximum Payout/Notional Amount								Amount of Purchased				of Written Credit
	of Written Credit Derivatives by Tenor ⁽¹⁾								Credit Derivatives							of Written Credit Derivatives by Tenor ⁽¹⁾								Credit Derivatives				Derivatives
									Offsetting		Other													Offsetting		Other
					5 Years				Purchased		Purchased		Written Credit							5 Years				Purchased		Purchased
	0 - 12		1 - 5		or				Credit		Credit		Derivatives at			0 - 12		1 - 5		or				Credit		Credit
	Months		Years		Greater		Total		Derivatives⁽²⁾		Derivatives⁽³⁾		Fair Value			Months		Years		Greater		Total		Derivatives⁽²⁾		Derivatives⁽³⁾		Asset/(Liability)
	($ in millions)															($ in millions)
As of June 2009
As of September 2009
Credit spread on underlying (basis points)⁽⁴⁾
0-250	$	193,565	$	1,269,520	$	351,796	$	1,814,881	$	1,713,493	$	179,753	$	46,316		$	223,600	$	1,456,260	$	492,390	$	2,172,250	$	1,997,498	$	247,284	$	11,766
251-500		52,816		362,155		203,387		618,358		562,599		90,180		44,985			26,827		154,932		42,262		224,021		207,479		30,291		(3,720	)
501-1,000		24,122		174,015		43,871		242,008		228,985		89,162		24,115			15,773		146,937		51,786		214,496		201,185		35,108		(18,091	)
Greater than 1,000		44,752		210,653		29,516		284,921		254,360		68,654		91,411			26,988		143,215		31,960		202,163		167,974		62,909		(71,726	)

Total	$	315,255	$	2,016,343	$	628,570	$	2,960,168	$	2,759,437	$	427,749	$	206,827	⁽⁵⁾	$	293,188	$	1,901,344	$	618,398	$	2,812,930	$	2,574,136	$	375,592	$	(81,771	) ⁽⁵⁾

As of November 2008
Credit spread on underlying (basis points)⁽⁴⁾
0-250	$	108,555	$	1,093,651	$	623,944	$	1,826,150	$	1,632,681	$	347,573	$	77,836		$	108,555	$	1,093,651	$	623,944	$	1,826,150	$	1,632,681	$	347,573	$	(77,836	)
251-500		51,015		551,971		186,084		789,070		784,149		26,316		94,278			51,015		551,971		186,084		789,070		784,149		26,316		(94,278	)
501-1,000		34,756		404,661		148,052		587,469		538,251		67,958		75,079			34,756		404,661		148,052		587,469		538,251		67,958		(75,079	)
Greater than 1,000		41,496		373,211		161,475		576,182		533,816		103,362		222,346			41,496		373,211		161,475		576,182		533,816		103,362		(222,346	)

Total	$	235,822	$	2,423,494	$	1,119,555	$	3,778,871	$	3,488,897	$	545,209	$	469,539	⁽⁵⁾	$	235,822	$	2,423,494	$	1,119,555	$	3,778,871	$	3,488,897	$	545,209	$	(469,539	) ⁽⁵⁾


⁽¹⁾	Tenor is based on expected duration formortgage-related credit derivatives and on remaining contractual maturity for other credit derivatives.

⁽²⁾	Offsetting purchased credit derivatives represent the notional amount of purchased credit derivatives to the extent they economically hedge written credit derivatives with identical underlyings.

⁽³⁾	Comprised of purchased protection in excess of the amount of written protection on identical underlyings and purchased protection on other underlyings on which the firm has not written protection.

⁽⁴⁾	Credit spread on the underlying, together with the tenor of the contract, are indicators of payment/performance risk. For example, the firm is least likely to pay or otherwise be required to perform where the credit spread on the underlying is“0-250” basis points and the tenor is~~“0-12~~ “0-12 Months.” The likelihood of payment or performance is generally greater as the credit spread on the underlying and tenor increase.

⁽⁵⁾	This net liability excludes the effects of both netting under enforceable netting agreements and netting of cash collateral paid pursuant to credit support agreements. Including the effects of netting receivable balances with payable balances for the same counterparty pursuant to enforceable netting agreements, the firm’s net liability related to credit derivatives in the firm’s condensed consolidated statements of financial condition as of ~~June~~September 2009 and November 2008 was ~~$13.46~~$10.17 billion and $33.76 billion, respectively. This net amount excludes the netting of cash collateral paid pursuant to credit support agreements. The decrease in this net liability from November 2008 to ~~June~~September 2009 primarily reflected tightening credit spreads.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Collateralized Transactions

The firm receives financial instruments as collateral, primarily in connection with resale agreements, securities borrowed, derivative transactions and customer margin loans. Such financial instruments may include obligations of the U.S. government, federal agencies, sovereigns and corporations, as well as equities and convertibles.

In many cases, the firm is permitted to deliver or repledge these financial instruments in connection with entering into repurchase agreements, securities lending agreements and other secured financings, collateralizing derivative transactions and meeting firm or customer settlement requirements. As of ~~June~~September 2009 and November 2008, the fair value of financial instruments received as collateral by the firm that it was permitted to deliver or repledge was ~~$596.34~~$599.70 billion and $578.72 billion, respectively, of which the firm delivered or repledged ~~$435.55~~$423.52 billion and $445.11 billion, respectively.

The firm also pledges assets that it owns to counterparties who may or may not have the right to deliver or repledge them. Trading assets pledged to counterparties that have the right to deliver or repledge are included in “Trading assets, at fair value” in the condensed consolidated statements of financial condition and were ~~$31.14~~$34.87 billion and $26.31 billion as of ~~June~~September 2009 and November 2008, respectively. Trading assets, pledged in connection with repurchase agreements, securities lending agreements and other secured financings to counterparties that did not have the right to sell or repledge are included in “Trading assets, at fair value” in the condensed consolidated statements of financial condition and were ~~$122.01~~$117.10 billion and $80.85 billion as of ~~June~~September 2009 and November 2008, respectively. Other assets (primarily real estate and cash) owned and pledged in connection with other secured financings to counterparties that did not have the right to sell or repledge were ~~$6.61~~$7.38 billion and $9.24 billion as of ~~June~~September 2009 and November 2008, respectively.

In addition to repurchase agreements and securities lending agreements, the firm obtains secured funding through the use of other arrangements. Other secured financings include arrangements that are nonrecourse, that is, only the subsidiary that executed the arrangement or a subsidiary guaranteeing the arrangement is obligated to repay the financing. Other secured financings consist of liabilities related to the firm’s William Street credit extension program; consolidated VIEs; collateralized central bank financings and other transfers of financial assets that are accounted for as financings rather than sales ~~under SFAS No. 140~~ (primarily pledged bank loans and mortgage whole loans); and other structured financing arrangements.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Other secured financings by maturity are set forth in the table below:


	As of				As of
	June		November		September		November
	2009		2008		2009		2008
	(in millions)				(in millions)
Other secured financings(short-term) ⁽¹⁾⁽²⁾	$	14,239	$	21,225	$	13,403	$	21,225
Other secured financings(long-term):
2010		3,113		2,157		1,342		2,157
2011		3,766		4,578		3,973		4,578
2012		3,195		3,040		3,315		3,040
2013		1,558		1,377		1,610		1,377
2014		1,319		1,512		1,464		1,512
2015-thereafter		3,107		4,794		2,877		4,794

Total other secured financings(long-term) ⁽³⁾⁽⁴⁾		16,058		17,458		14,581		17,458

Total other secured financings ⁽⁵⁾⁽⁶⁾	$	30,297	$	38,683	$	27,984	$	38,683


⁽¹⁾		As of ~~June~~September 2009 and November 2008, consists ofU.S. dollar-denominated financings of ~~$5.06~~$4.72 billion and $12.53 billion, respectively, with a weighted average interest rate of ~~1.35%~~2.37% and 2.98%, respectively, andnon-U.S. dollar-denominated financings of ~~$9.18~~$8.68 billion and $8.70 billion, respectively, with a weighted average interest rate of ~~0.62%~~0.75% and 0.95%, respectively, after giving effect to hedging activities. The weighted average interest rates as of ~~June~~September 2009 and November 2008 excluded financial instruments accounted for at fair value under ~~SFAS No. 159.~~the fair value option.

⁽²⁾		Includes other secured financings maturing within one year of the financial statement date and other secured financings that are redeemable within one year of the financial statement date at the option of the holder.

⁽³⁾		As of ~~June~~September 2009 and November 2008, consists ofU.S. dollar-denominated financings of ~~$9.41~~$8.81 billion and $9.55 billion, respectively, with a weighted average interest rate of ~~2.80%~~1.64% and 4.62%, respectively, andnon-U.S. dollar-denominated financings of ~~$6.65~~$5.77 billion and $7.91 billion, respectively, with a weighted average interest rate of ~~2.55%~~2.16% and 4.39%, respectively, after giving effect to hedging activities. The weighted average interest rates as of ~~June~~September 2009 and November 2008 excluded financial instruments accounted for at fair value under ~~SFAS No. 159.~~the fair value option.

⁽⁴⁾		Securedlong-term financings that are repayable prior to maturity at the option of the firm are reflected at their contractual maturity dates. Securedlong-term financings that are redeemable prior to maturity at the option of the holder are reflected at the dates such options become exercisable.

⁽⁵⁾		As of ~~June~~September 2009 and November 2008, ~~$25.83~~$22.39 billion and $31.54 billion, respectively, of these financings were collateralized by trading assets and ~~$4.47~~$5.59 billion and $7.14 billion, respectively, by other assets (primarily real estate and cash). Other secured financings include ~~$11.50~~$11.71 billion and $13.74 billion of nonrecourse obligations as of ~~June~~September 2009 and November 2008, respectively.

⁽⁶⁾		As of ~~June~~September 2009, other secured financings includes ~~$16.13~~$12.96 billion ~~respectively,~~ related to transfers of financial assets accounted for as financings rather than ~~sales under SFAS No. 140.~~sales. Such financings were collateralized by financial assets included in “Trading assets, at fair value” in the condensed consolidated statement of financial condition of ~~$16.54~~$13.15 billion as of ~~June 2009, respectively.~~September 2009.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


Note 4.	Securitization Activities and Variable Interest Entities

Securitization Activities

The firm securitizes commercial and residential mortgages, government and corporate bonds and other types of financial assets. The firm acts as underwriter of the beneficial interests that are sold to investors. The firm derecognizes financial assets transferred in securitizations, provided it has relinquished control over such assets. Transferred assets are accounted for at fair value prior to securitization. Net revenues related to these underwriting activities are recognized in connection with the sales of the underlying beneficial interests to investors.

The firm may have continuing involvement with transferred assets, including: retaining interests in securitized financial assets, primarily in the form of senior or subordinated securities; retaining servicing rights; and purchasing senior or subordinated securities in connection with secondarymarket-making activities. Retained interests and other interests related to the firm’s continuing involvement are accounted for at fair value and are included in “Trading assets, at fair value” in the condensed consolidated statements of financial condition. See Note 2 for additional information regarding fair value measurement.

During the three and ~~six~~nine months ended ~~June~~September 2009, the firm securitized ~~$12.91~~$18.75 billion and ~~$16.47~~$35.22 billion, respectively, of financial assets in which the firm had continuing involvement as of ~~June~~September 2009, including ~~$12.41~~$18.75 billion and ~~$15.88~~$34.63 billion, respectively, of residential mortgages, primarily in connection with government agency securitizations, and ~~$496 million~~$0 and $591 million, respectively, of other financial assets. During the three and ~~six~~nine months ended ~~May~~August 2008, the firm securitized ~~$3.97~~$5.85 billion and ~~$6.54~~$12.39 billion, respectively, of financial assets, including ~~$2.59~~$1.38 billion and ~~$4.11~~$5.49 billion, respectively, of residential mortgages, ~~$773 million~~$0 and $773 million, respectively, of commercial mortgages, and ~~$605 million~~$4.48 billion and ~~$1.65~~$6.13 billion, respectively, of other financial assets, primarily in connection with CLOs. Cash flows received on retained interests were ~~$106~~$135 million and ~~$200~~$335 million for the three and ~~six~~nine months ended ~~June~~September 2009, respectively, and ~~$155~~$133 million and ~~$271~~$404 million for the three and ~~six~~nine months ended ~~May~~August 2008, respectively.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The following table sets forth certain information related to the firm’s continuing involvement in securitization entities to which the firm sold assets, as well as the total outstanding principal amount of transferred assets in which the firm has continuing involvement, as of ~~June 2009 in accordance with FSPNo. FAS 140-4~~ ~~and FIN 46(R)-8.~~September 2009. The outstanding principal amount set forth in the ~~tables~~table below is presented for the purpose of providing information about the size of the securitization entities in which the firm has continuing involvement, and is not representative of the firm’s risk of loss. For retained or purchased interests, the firm’s risk of loss is limited to the fair value of these interests.


	As of June 2009 ⁽¹⁾							As of September 2009 ⁽¹⁾
	Outstanding		Fair value of			Fair value of		Outstanding		Fair value of		Fair value of
	principal		retained			purchased		principal		retained		purchased
	amount		interests			interests⁽²⁾		amount		interests		interests⁽²⁾
	(in millions)							(in millions)
Residentialmortgage-backed(3)	$	41,352	$	1,998	⁽⁴⁾	$	134	$	50,315	$	2,306	$	15
Commercialmortgage-backed		13,714		236			61		14,291		179		80
Otherasset-backed ⁽³⁾⁽⁴⁾		19,225		113			4		17,485		87		26

Total	$	74,291	$	2,347		$	199	$	82,091	$	2,572	$	121


⁽¹⁾		As of ~~June~~September 2009, fair value of other continuing involvement excludes ~~$334~~$485 million of purchased interests in securitization entities where the firm’s involvement was related to secondarymarket-making activities. Continuing involvement also excludes derivative contracts that are used by securitization entities to manage credit, interest rate or foreign exchange risk. See Note 3 for information on the firm’s derivative contracts.

⁽²⁾		Comprised of senior and subordinated interests purchased in connection with secondarymarket-making activities in VIEs and QSPEs in which the firm also holds retained interests. In addition to these interests, the firm had other continuing involvement in the form of derivative transactions and guarantees with certain VIEs for which the carrying value was a net liability of ~~$253~~$115 million as of ~~June~~September 2009. The notional amounts of these transactions are included in maximum exposure to loss in the nonconsolidated VIE table below.

⁽³⁾		Primarily consists of outstanding principal and retained interests related to government agency QSPEs.

⁽⁴⁾		Primarily consists of CDOs backed by corporate and mortgage obligations and CLOs. Outstanding principal amount and fair value of retained interests include ~~$18.07~~$16.13 billion and ~~$76~~$53 million, respectively, as of ~~June~~September 2009 related to VIEs which are also included in the nonconsolidated VIE table below.

⁽⁴⁾		~~Primarily consists of retained interests in government agency QSPEs.~~

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The following table sets forth the weighted average key economic assumptions used in measuring the fair value of the firm’s retained interests and the sensitivity of this fair value to immediate adverse changes of 10% and 20% in those assumptions:


	As of June 2009					As of November 2008
	Type of Retained Interests ⁽¹⁾					Type of Retained Interests ⁽¹⁾						As of September 2009					As of November 2008
				Other					Other			Type of Retained Interests ⁽¹⁾					Type of Retained Interests ⁽¹⁾
	Mortgage-			Asset-		Mortgage-			Asset-			Mortgage-			Other Asset-		Mortgage-			Other Asset-
	Backed			Backed ⁽²⁾		Backed			Backed			Backed			Backed⁽²⁾		Backed			Backed
	($ in millions)											($ in millions)
Fair value of retained interests	$	2,234		$	113	$	1,415		$	367	⁽⁵⁾	$	2,485		$	87	$	1,415		$	367	⁽⁵⁾

Weighted average life (years)		5.2			3.6		6.0			5.1			5.9			3.7		6.0			5.1

Constant prepayment rate ⁽³⁾		19.1	%		N.M.		15.5	%		4.5	%		18.9	%		N.M.		15.5	%		4.5	%
Impact of 10% adverse change ⁽³⁾	$	(20	)		N.M.	$	(14	)	$	(6	)	$	(26	)		N.M.	$	(14	)	$	(6	)
Impact of 20% adverse change ⁽³⁾		(40	)		N.M.		(27	)		(12	)		(55	)		N.M.		(27	)		(12	)

Discount rate ⁽⁴⁾		11.3	%		N.M.		21.1	%		29.2	%		10.4	%		N.M.		21.1	%		29.2	%
Impact of 10% adverse change	$	(62	)		N.M.	$	(46	)	$	(25	)	$	(69	)		N.M.	$	(46	)	$	(25	)
Impact of 20% adverse change		(119	)		N.M.		(89	)		(45	)		(133	)		N.M.		(89	)		(45	)


⁽¹⁾		Includes ~~$2.27~~$2.52 billion and $1.53 billion as of ~~June~~September 2009 and November 2008, respectively, held in QSPEs.

⁽²⁾		Due to the nature and current fair value of certain of these retained interests, the weighted average assumptions for constant prepayment and discount rates and the related sensitivity to adverse changes are not meaningful as of ~~June~~September 2009. The firm’s maximum exposure to adverse changes in the value of these interests is the firm’s carrying value of ~~$113~~$87 million.

⁽³⁾		Constant prepayment rate is included only for positions for which constant prepayment rate is a key assumption in the determination of fair value.

⁽⁴⁾		The majority of the firm’smortgage-backed retained interests are U.S. governmentagency-issued collateralized mortgage obligations, for which there is no anticipated credit loss. For the remainder of the firm’s retained interests, the expected credit loss assumptions are reflected within the discount rate.

⁽⁵⁾		Includes $192 million of retained interests related to transfers of securitized assets that were accounted for as secured financings rather than ~~sales under SFAS No. 140.~~sales.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The preceding table does not give effect to the offsetting benefit of other financial instruments that are held to mitigate risks inherent in these retained interests. Changes in fair value based on an adverse variation in assumptions generally cannot be extrapolated because the relationship of the change in assumptions to the change in fair value is not usually linear. In addition, the impact of a change in a particular assumption is calculated independently of changes in any other assumption. In practice, simultaneous changes in assumptions might magnify or counteract the sensitivities disclosed above.

As of ~~June~~September 2009 and November 2008, the firm held mortgage servicing rights with a fair value of ~~$130~~$131 million and $147 million, respectively. These servicing assets represent the firm’s right to receive a future stream of cash flows, such as servicing fees, in excess of the firm’s obligation to service residential mortgages. The fair value of mortgage servicing rights will fluctuate in response to changes in certain economic variables, such as discount rates and loan prepayment rates. The firm estimates the fair value of mortgage servicing rights by using valuation models that incorporate these variables in quantifying anticipated cash flows related to servicing activities. Mortgage servicing rights are included in “Trading assets, at fair value” in the condensed consolidated statements of financial condition and are classified within level 3 of the fair value hierarchy. The following table sets forth changes in the firm’s mortgage servicing rights, as well as servicing fees earned:


	Three Months Ended						Six Months Ended						Three Months Ended					Nine Months Ended
	June			May			June			May			September		August			September			August
	2009			2008			2009			2008			2009		2008			2009			2008
				(in millions)									(in millions)
Balance, beginning of period	$	139		$	283		$	153		$	93		$	130	$	248		$	153		$	93
Purchases		—			—			—			212	⁽²⁾		—		27			—			239	⁽²⁾
Servicing assets that resulted from transfers of financial assets		—			—			—			3			—		—			—			3
Changes in fair value due to changes in valuation inputs and assumptions		(9	)		(35	)		(23	)		(60	)		1		(35	)		(22	)		(95	)

Balance, end of period ⁽¹⁾	$	130		$	248		$	130		$	248		$	131	$	240		$	131		$	240


Contractually specified servicing fees	$	85		$	72		$	177		$	137		$	71	$	87		$	248		$	224


⁽¹⁾		As of ~~June~~September 2009 ~~the fair value was estimated using a weighted average discount rate of approximately 16%~~ and ~~a weighted average prepayment rate of approximately 27%. As of May~~August 2008, the fair value was estimated using a weighted average discount rate of approximately 16% and 16%, respectively, and a weighted average prepayment rate of approximately 26%. and 28%, respectively.

⁽²⁾		Primarily related to the acquisition of Litton Loan Servicing LP.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Variable Interest Entities ~~(VIEs)~~

The firm, in the ordinary course of business, retains interests in VIEs in connection with its securitization activities. The firm also purchases and sells variable interests in VIEs, which primarily issuemortgage-backed and otherasset-backed securities, CDOs and CLOs, in connection with itsmarket-making activities and makes investments in and loans to VIEs that hold performing and nonperforming debt, equity, real estate, power-related and other assets. In addition, the firm utilizes VIEs to provide investors with principal-protected notes,credit-linked notes andasset-repackaged notes designed to meet their objectives. VIEs generally purchase assets by issuing debt and equity instruments.

The firm’s significant variable interests in VIEs include senior and subordinated debt interests inmortgage-backed andasset-backed securitization vehicles, CDOs and CLOs; loan commitments; limited and general partnership interests; preferred and common stock; interest rate, foreign currency, equity, commodity and credit derivatives; and guarantees.

The firm’s exposure to the obligations of VIEs is generally limited to its interests in these entities. In the tables set forth below, the maximum exposure to loss for purchased and retained interests and loans and investments is the carrying value of these interests. In certain instances, the firm provides guarantees, including derivative guarantees, to VIEs or holders of variable interests in VIEs. For these contracts, maximum exposure to loss set forth in the tables below is the notional amount of such guarantees, which does not represent anticipated losses and also has not been reduced by unrealized losses already recorded by the firm in connection with these guarantees. As a result, the maximum exposure to loss exceeds the firm’s liabilities related to VIEs.

The following tables set forth total assets in firm-sponsored nonconsolidated VIEs in which the firm holds variable interests and other nonconsolidated VIEs in which the firm holds significant variable interests, and the firm’s maximum exposure to loss excluding the benefit of offsetting financial instruments that are held to mitigate the risks associated with these variable interests. For ~~June~~ 2009, in accordance with ~~FSPNo. FAS 140-4~~ ~~and FIN 46(R)-8,~~amended principles requiring enhanced disclosures, the following ~~tables~~table also ~~set~~sets forth the total assets and total liabilities included in the condensed consolidated statements of financial condition related to the firm’s significant interests in nonconsolidated VIEs. The firm has aggregated nonconsolidated VIEs based on principal business activity, as reflected in the first column. The nature of the firm’s variable interests can take different forms, as described in the columns under maximum exposure to loss.


	As of June 2009																		As of September 2009
			Carrying Value of																		Carrying Value of
			the Firm’s																		the Firm’s
			Variable Interests				Maximum Exposure to Loss in Nonconsolidated VIEs ⁽¹⁾														Variable Interests				Maximum Exposure to Loss in Nonconsolidated VIEs ⁽¹⁾
							Purchased		Commitments																Purchased		Commitments
	Assets						and Retained		and						Loans and				Assets						and Retained		and						Loans and
	in VIE		Assets		Liabilities		Interests		Guarantees			Derivatives			Investments		Total		in VIE		Assets		Liabilities		Interests		Guarantees			Derivatives			Investments		Total
							(in millions)																		(in millions)
Mortgage CDOs ⁽²⁾	$	9,065	$	108	$	—	$	49	$	—		$	4,214	⁽⁷⁾	$	—	$	4,263	$	8,796	$	140	$	4	$	51	$	—		$	4,016	⁽⁷⁾	$	—	$	4,067
Corporate CDOs and CLOs ⁽²⁾		24,829		495		650		223		—			6,059	⁽⁸⁾		—		6,282		28,193		752		468		216		—			7,302	⁽⁸⁾		—		7,518
Real estate,credit-related and other investing ⁽³⁾		28,659		2,969		168		—		347			—			2,906		3,253		27,975		3,221		189		—		364			—			3,270		3,634
Otherasset-backed ⁽²⁾		516		13		17		—		—			516			—		516		537		11		17		—		—			537			—		537
Power-related ⁽⁴⁾		617		213		3		—		37			—			213		250		603		219		3		—		37			—			219		256
Principal-protected notes ⁽⁵⁾		2,459		26		1,654		—		—			2,550			—		2,550		2,355		13		1,369		—		—			2,620			—		2,620

Total	$	66,145	$	3,824	$	2,492	$	272	$	384	⁽⁶⁾	$	13,339	⁽⁶⁾	$	3,119	$	17,114	$	68,459	$	4,356	$	2,050	$	267	$	401	⁽⁶⁾	$	14,475	⁽⁶⁾	$	3,489	$	18,632

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


	As of November 2008
			Maximum Exposure to Loss in Nonconsolidated VIEs ⁽¹⁾
			Purchased		Commitments
	Assets		and Retained		and					Loans and
	in VIE		Interests		Guarantees		Derivatives			Investments		Total
			(in millions)
Mortgage CDOs	$	13,061	$	242	$	—	$	5,616	⁽⁷⁾	$	—	$	5,858
Corporate CDOs and CLOs		8,584		161		—		918	⁽⁸⁾		—		1,079
Real estate,credit-related and other investing ⁽³⁾		26,898		—		143		—			3,223		3,366
Municipal bond securitizations		111		—		111		—			—		111
Otherasset-backed		4,355		—		—		1,084			—		1,084
Power-related		844		—		37		—			213		250
Principal-protected notes ⁽⁵⁾		4,516		—		—		4,353			—		4,353

Total	$	58,369	$	403	$	291	$	11,971		$	3,436	$	16,101


⁽¹⁾	Such amounts do not represent the anticipated losses in connection with these transactions as they exclude the effect of offsetting financial instruments that are held to mitigate these risks.

⁽²⁾	These VIEs are generally financed through the issuance of debt instruments collateralized by assets held by the VIE. Substantially all assets and liabilities held by the firm related to these VIEs are included in “Trading assets, at fair value” and “Trading liabilities, at fair value,” respectively, in the condensed consolidated statement of financial condition.

⁽³⁾	The firm obtains interests in these VIEs in connection with making investments in real estate, distressed loans and other types of debt, mezzanine instruments and equities. These VIEs are generally financed through the issuance of debt and equity instruments which are either collateralized by or indexed to assets held by the VIE. Substantially all assets and liabilities held by the firm related to these VIEs are included in “Trading assets, at fair value” and “Other liabilities and accrued expenses,” respectively, in the condensed consolidated statement of financial condition.

⁽⁴⁾	Assets and liabilities held by the firm related to these VIEs are included in “Other assets” and “Trading liabilities, at fair value” in the condensed consolidated statement of financial condition.

⁽⁵⁾	Consists ofout-of-the-money written put options that provide principal protection to clients invested in various fund products, with risk to the firm mitigated through portfolio rebalancing. Assets related to these VIEs are included in “Trading assets, at fair value” and liabilities related to these VIEs are included in “Other secured financings,” “Unsecuredshort-term borrowings” or “Unsecuredlong-term borrowings” in the condensed consolidated statement of financial condition. Assets in VIE, carrying value of liabilities and maximum exposure to loss exclude ~~$3.70~~$3.89 billion as of ~~June~~September 2009, associated with guarantees related to the firm’s performance under borrowings from the VIE, which are recorded as liabilities in the condensed consolidated statement of financial condition. Substantially all of the liabilities included in the table above relate to additional borrowings from the VIE associated with principal protected notes guaranteed by the firm.

⁽⁶⁾	The aggregate amounts include ~~$4.95~~$4.70 billion as of ~~June~~September 2009, related to guarantees and derivative transactions with VIEs to which the firm transferred assets.

⁽⁷⁾	Primarily consists of written protection oninvestment-grade,short-term collateral held by VIEs that have issued CDOs.

⁽⁸⁾	Primarily consists of total return swaps on CDOs and CLOs. The firm has generally transferred the risks related to the underlying securities through derivatives withnon-VIEs.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The following table sets forth the firm’s total assets excluding the benefit of offsetting financial instruments that are held to mitigate the risks associated with its variable interests in consolidated VIEs. The following table excludes VIEs in which the firm holds a majority voting interest unless the activities of the VIE are primarily related to securitization,asset-backed financings or single-lessee leasing arrangements. For ~~June~~ 2009, in accordance with ~~FSPNo. FAS 140-4~~ ~~and FIN 46(R)-8,~~amended principles requiring enhanced disclosures, the following table also sets forth the total liabilities included in the condensed consolidated statement of financial condition related to the firm’s consolidated VIEs. The firm has aggregated consolidated VIEs based on principal business activity, as reflected in the first column.


	As of							As of
	June 2009					November 2008		September 2009					November 2008
	VIE		VIE			VIE		VIE		VIE			VIE
	Assets ⁽¹⁾		Liabilities ⁽¹⁾			Assets ⁽¹⁾		Assets ⁽¹⁾		Liabilities ⁽¹⁾			Assets ⁽¹⁾
	(in millions)							(in millions)
Real estate,credit-related and other investing	$	1,154	$	936	⁽²⁾	$	1,560	$	1,085	$	816	⁽²⁾	$	1,560
Municipal bond securitizations		733		922	⁽³⁾		985		756		893	⁽³⁾		985
CDOs,mortgage-backed and otherasset-backed		626		548	⁽⁴⁾		32		630		569	⁽⁴⁾		32
Foreign exchange and commodities		298		297	⁽⁵⁾		652		245		272	⁽⁵⁾		652
Principal-protected notes		207		207	⁽⁶⁾		215		218		218	⁽⁶⁾		215

Total	$	3,018	$	2,910		$	3,444	$	2,934	$	2,768		$	3,444


⁽¹⁾		Consolidated VIE assets and liabilities are presented after intercompany eliminations and include assets financed on a nonrecourse basis. Substantially all VIE assets are included in “Trading assets, at fair value” in the condensed consolidated statements of financial condition.

⁽²⁾		These VIE liabilities ~~which~~ are generally collateralized by the related VIE assets ~~are~~and included in “Other secured financings” in the condensed consolidated statement of financial ~~condition and~~condition. These VIE liabilities generally do not provide for recourse to the general credit of the firm.

⁽³⁾		These VIE liabilities, which are partially collateralized by the related VIE assets, are included in “Other secured financings” in the condensed consolidated statement of financial condition.

⁽⁴⁾		These VIE liabilities are primarily included in “Securities sold under agreements to repurchase, at fair value” and “Other secured financings” in the condensed consolidated statement of financial condition and generally do not provide for recourse to the general credit of the firm.

⁽⁵⁾		These VIE liabilities are primarily included in “Trading liabilities, at fair value” onin the condensed consolidated statement of financial condition.

⁽⁶⁾		These VIE liabilities are included in ~~“Other secured financings” on~~“Unsecuredshort-term borrowings, including the current portion of unsecuredlong-term borrowings” in the condensed consolidated statement of financial condition.

The firm did not haveoff-balance-sheet commitments to purchase or finance any CDOs held by structured investment vehicles as of ~~June~~September 2009 ~~and~~or November 2008.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


Note 5.	Deposits

The following table sets forth deposits as of ~~June~~September 2009 and November 2008:


	As of				As of
	June		November		September		November
	2009		2008		2009		2008
	(in millions)				(in millions)
U.S. offices ⁽¹⁾	$	35,665	$	23,018	$	35,771	$	23,018
Non-U.S. offices ⁽²⁾		5,792		4,625		6,660		4,625

Total	$	41,457	$	27,643	$	42,431	$	27,643


⁽¹⁾		Substantially all U.S. deposits were interest-bearing and were held at GS Bank USA.

⁽²⁾		Substantially allnon-U.S. deposits were interest-bearing and were held at Goldman Sachs Bank (Europe) PLC (GS Bank Europe).

Included in the above table are time deposits of ~~$13.01~~$11.36 billion and $8.49 billion as of ~~June~~September 2009 and November 2008, respectively. The following table sets forth the maturities of time deposits as of ~~June~~September 2009:


	As of June 2009						As of September 2009
	U.S.		Non-U.S.		Total		U.S.		Non-U.S.		Total
	(in millions)						(in millions)
2009	$	3,705	$	981	$	4,686	$	2,165	$	603	$	2,768
2010		1,516		14		1,530		1,617		106		1,723
2011		1,593		—		1,593		1,605		—		1,605
2012		839		—		839		873		—		873
2013		1,783		25		1,808		1,795		15		1,810
2014-thereafter		2,551		—		2,551		2,585		—		2,585

Total	$	11,987	$	1,020	$	13,007	$	10,640	$	724	$	11,364

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


Note 6.	Short-Term Borrowings

As of ~~June~~September 2009 and November 2008,short-term borrowings were ~~$49.41~~$51.96 billion and $73.89 billion, respectively, comprised of ~~$14.24~~$13.40 billion and $21.23 billion, respectively, included in “Other secured financings” in the condensed consolidated statements of financial condition and ~~$35.17~~$38.56 billion and $52.66 billion, respectively, of unsecuredshort-term borrowings. See Note 3 for information on other secured financings.

Unsecuredshort-term borrowings include the portion of unsecuredlong-term borrowings maturing within one year of the financial statement date and unsecuredlong-term borrowings that are redeemable within one year of the financial statement date at the option of the holder. The firm accounts for promissory notes, commercial paper and certain hybrid financial instruments at fair value under ~~SFAS No. 155 or SFAS No. 159.~~the fair value option.Short-term borrowings that are not recorded at fair value are recorded based on the amount of cash received plus accrued interest, and such amounts approximate fair value due to theshort-term nature of the obligations.

Unsecuredshort-term borrowings are set forth below:


	As of				As of
	June		November		September		November
	2009		2008		2009		2008
	(in millions)				(in millions)
Current portion of unsecuredlong-term borrowings	$	16,062	$	26,281	$	19,977	$	26,281
Hybrid financial instruments		8,938		12,086		10,351		12,086
Promissory notes ⁽¹⁾		3,294		6,944		846		6,944
Commercial paper ⁽²⁾		463		1,125		1,424		1,125
Othershort-term borrowings ⁽³⁾		6,416		6,222		5,957		6,222

Total ⁽⁴⁾	$	35,173	$	52,658	$	38,555	$	52,658


⁽¹⁾		Includes ~~$3.28 billion~~$661 million and $3.42 billion as of ~~June~~September 2009 and November 2008, respectively, guaranteed by the Federal Deposit Insurance Corporation (FDIC) under the Temporary Liquidity Guarantee Program (TLGP).

⁽²⁾		Includes $0 and $751 million as of ~~June~~September 2009 and November 2008, respectively, guaranteed by the FDIC under the TLGP.

⁽³⁾		Includes $1.11 billion and $0 as of ~~June~~September 2009 and November 2008, respectively, guaranteed by the FDIC under the TLGP.

⁽⁴⁾		The weighted average interest rates for these borrowings, after giving effect to hedging activities, were ~~1.70%~~1.58% and 3.37% as of ~~June~~September 2009 and November 2008, respectively, and excluded financial instruments accounted for at fair value under ~~SFAS No. 155 or SFAS No. 159.~~the fair value option.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


Note 7.	Long-Term Borrowings

As of ~~June~~September 2009 and November 2008,long-term borrowings were ~~$207.30~~$204.30 billion and $185.68 billion, respectively, comprised of ~~$16.06~~$14.58 billion and $17.46 billion, respectively, included in “Other secured financings” in the condensed consolidated statements of financial condition and ~~$191.24~~$189.72 billion and $168.22 billion, respectively, of unsecuredlong-term borrowings. See Note 3 for information regarding other secured financings.

The firm’s unsecuredlong-term borrowings extend through 2043 and consist principally of senior borrowings.

Unsecuredlong-term borrowings are set forth below:


	As of				As of
	June		November		September		November
	2009		2008		2009		2008
	(in millions)				(in millions)
Fixed rate obligations ⁽¹⁾	$	118,723	$	103,825	$	119,398	$	103,825
Floating rate obligations ⁽²⁾		72,519		64,395		70,326		64,395

Total ⁽³⁾	$	191,242	$	168,220	$	189,724	$	168,220


⁽¹⁾		As of ~~June~~September 2009 and November 2008, ~~$79.82~~$81.28 billion and $70.08 billion, respectively, of the firm’s fixed rate debt obligations were denominated in U.S. dollars and interest rates ranged from 1.63% to 10.04% and from 3.87% to 10.04%, respectively. As of ~~June~~September 2009 and November 2008, ~~$38.90~~$38.12 billion and $33.75 billion, respectively, of the firm’s fixed rate debt obligations were denominated innon-U.S. dollars and interest rates ranged from 0.67% to ~~12.65%~~7.45% and from 0.67% to 8.88%, respectively.

⁽²⁾		As of ~~June~~September 2009 and November 2008, ~~$37.77~~$35.08 billion and $32.41 billion, respectively, of the firm’s floating rate debt obligations were denominated in U.S. dollars. As of ~~June~~September 2009 and November 2008, ~~$34.75~~$35.25 billion and $31.99 billion, respectively, of the firm’s floating rate debt obligations were denominated innon-U.S. dollars. Floating interest rates generally are based on LIBOR or the federal funds target rate.Equity-linked and indexed instruments are included in floating rate obligations.

⁽³⁾		Includes ~~$20.75~~$20.85 billion and $0 as of ~~June~~September 2009 and November 2008, respectively, guaranteed by the FDIC under the TLGP.

Unsecuredlong-term borrowings by maturity date are set forth below (in millions):


	As of		As of
	June 2009		September 2009
2010	$	9,303	$	3,047
2011		23,766		23,749
2012		26,453		27,500
2013		23,088		23,774
2014		18,055		18,539
2015-thereafter		90,577		93,115

Total ⁽¹⁾⁽²⁾	$	191,242	$	189,724


⁽¹⁾		Unsecuredlong-term borrowings maturing within one year of the financial statement date and unsecuredlong-term borrowings that are redeemable within one year of the financial statement date at the option of the holder are included as unsecuredshort-term borrowings in the condensed consolidated statements of financial condition.

⁽²⁾		Unsecuredlong-term borrowings that are repayable prior to maturity at the option of the firm are reflected at their contractual maturity dates. Unsecuredlong-term borrowings that are redeemable prior to maturity at the option of the holder are reflected at the dates such options become exercisable.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The firm enters into derivative contracts to effectively convert a substantial portion of its unsecuredlong-term borrowings which are not accounted for at fair value into floating rate obligations. Accordingly, excluding the cumulative impact of changes in the firm’s credit spreads, the carrying value of unsecuredlong-term borrowings approximated fair value as of ~~June~~September 2009 and November 2008. For unsecuredlong-term borrowings for which the firm did not elect the fair value option, the cumulative impact due to the widening of the firm’s own credit spreads would be a reduction in the carrying value of total unsecuredlong-term borrowings of approximately 3%1% and 9% as of ~~June~~September 2009 and November 2008, respectively.

The effective weighted average interest rates for unsecuredlong-term borrowings are set forth below:


	As of										As of
	June 2009					November 2008					September 2009					November 2008
	Amount		Rate			Amount		Rate			Amount		Rate			Amount		Rate
	($ in millions)										($ in millions)
Fixed rate obligations	$	4,225		6.51	%	$	4,015		4.97	%	$	4,273		5.48	%	$	4,015		4.97	%
Floating rate obligations ⁽¹⁾		187,017		0.96			164,205		2.66			185,451		0.72			164,205		2.66

Total ⁽²⁾	$	191,242		1.11		$	168,220		2.73		$	189,724		0.83		$	168,220		2.73


⁽¹⁾		Includes fixed rate obligations that have been converted into floating rate obligations through derivative contracts.

⁽²⁾		The weighted average interest rates as of ~~June~~September 2009 and November 2008 excluded financial instruments accounted for at fair value under ~~SFAS No. 155 or SFAS No. 159.~~the fair value option.

Subordinated Borrowings

Unsecuredlong-term borrowings included subordinated borrowings with outstanding principal amounts of ~~$19.17~~$19.16 billion and $19.26 billion as of ~~June~~September 2009 and November 2008, respectively, as set forth below.

Junior Subordinated Debt Issued to Trusts in Connection withFixed-to-Floating and Floating Rate Normal Automatic Preferred Enhanced Capital Securities. In 2007, Group Inc. issued a total of $2.25 billion of remarketable junior subordinated debt to Goldman Sachs Capital II and Goldman Sachs Capital III (APEX Trusts), Delaware statutory trusts that, in turn, issued $2.25 billion of guaranteed perpetual Normal Automatic Preferred Enhanced Capital Securities (APEX) to third parties and a de minimis amount of common securities to Group Inc. Group Inc. also entered into contracts with the APEX Trusts to sell $2.25 billion of perpetualnon-cumulative preferred stock to be issued by Group Inc. (the stock purchase contracts). The APEX Trusts are wholly owned finance subsidiaries of the firm for regulatory and legal purposes but are not consolidated for accounting purposes.

The firm pays interestsemi-annually on $1.75 billion of junior subordinated debt issued to Goldman Sachs Capital II at a fixed annual rate of 5.59% and the debt matures on June 1, 2043. The firm pays interest quarterly on $500 million of junior subordinated debt issued to Goldman Sachs Capital III at a rate per annum equal tothree-month LIBOR plus 0.57% and the debt matures on September 1, 2043. In addition, the firm makes contract payments at a rate of 0.20% per annum on the stock purchase contracts held by the APEX Trusts. The firm has the right to defer payments on the junior subordinated debt and the stock purchase contracts, subject to limitations, and therefore cause payment on the APEX to be deferred. During any such extension period, the firm will not be permitted to, among other things, pay dividends on or make certain repurchases of its common or preferred stock. The junior subordinated debt is junior in right of payment to all of Group Inc.’s senior indebtedness and all of Group Inc.’s other subordinated borrowings.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

In connection with the APEX issuance, the firm covenanted in favor of certain of its debtholders, who are initially the holders of Group Inc.’s 6.345% Junior Subordinated Debentures due February 15, 2034, that, subject to certain exceptions, the firm would not redeem or purchase (i) Group Inc.’s junior subordinated debt issued to the APEX Trusts prior to the applicable stock purchase date or (ii) APEX or shares of Group Inc.’s Series E or Series F Preferred Stock prior to the date that is ten years after the applicable stock purchase date, unless the applicable redemption or purchase price does not exceed a maximum amount determined by reference to the aggregate amount of net cash proceeds that the firm has received from the sale of qualifying equity securities during the180-day period preceding the redemption or purchase.

The firm ~~has~~ accounted for the stock purchase contracts as equity instruments ~~under EITF IssueNo. 00-19,~~ ~~“Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock,”~~ and, accordingly, recorded the cost of the stock purchase contracts as a reduction to additionalpaid-in capital. See Note 9 for information on the preferred stock that Group Inc. will issue in connection with the stock purchase contracts.

Junior Subordinated Debt Issued to a Trust in Connection with Trust Preferred Securities.Group Inc. issued $2.84 billion of junior subordinated debentures in 2004 to Goldman Sachs Capital I (Trust), a Delaware statutory trust that, in turn, issued $2.75 billion of guaranteed preferred beneficial interests to third parties and $85 million of common beneficial interests to Group Inc. and invested the proceeds from the sale in junior subordinated debentures issued by Group Inc. The Trust is a wholly owned finance subsidiary of the firm for regulatory and legal purposes but is not consolidated for accounting purposes.

The firm pays interestsemi-annually on these debentures at an annual rate of 6.345% and the debentures mature on February 15, 2034. The coupon rate and the payment dates applicable to the beneficial interests are the same as the interest rate and payment dates applicable to the debentures. The firm has the right, from time to time, to defer payment of interest on the debentures, and, therefore, cause payment on the Trust’s preferred beneficial interests to be deferred, in each case up to ten consecutivesemi-annual periods. During any such extension period, the firm will not be permitted to, among other things, pay dividends on or make certain repurchases of its common stock. The Trust is not permitted to pay any distributions on the common beneficial interests held by Group Inc. unless all dividends payable on the preferred beneficial interests have been paid in full. These debentures are junior in right of payment to all of Group Inc.’s senior indebtedness and all of Group Inc.’s subordinated borrowings, other than the junior subordinated debt issued in connection with the ~~Normal Automatic Preferred Enhanced Capital Securities.~~APEX.

Subordinated Debt. As of ~~June~~September 2009, the firm had ~~$14.08~~$14.07 billion of other subordinated debt outstanding with maturities ranging from fiscal 2010 to 2038. The effective weighted average interest rate on this debt was ~~0.53%~~0.46%, after giving effect to derivative contracts used to convert fixed rate obligations into floating rate obligations. As of November 2008, the firm had $14.17 billion of other subordinated debt outstanding with maturities ranging from fiscal 2009 to 2038. The effective weighted average interest rate on this debt was 1.99%, after giving effect to derivative contracts used to convert fixed rate obligations into floating rate obligations. This debt is junior in right of payment to all of the firm’s senior indebtedness.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


Note 8.	Commitments, Contingencies and Guarantees

Commitments

The following table summarizes the firm’s commitments as of ~~June~~September 2009 and November 2008:


	Commitment Amount by Fiscal Period												Commitment Amount by Fiscal Period
	of Expiration as of June 2009								Total Commitments as of				of Expiration as of September 2009								Total Commitments as of
	Remainder		2010-		2012-		2014-		June		November		Remainder		2010-		2012-		2014-		September		November
	of 2009		2011		2013		Thereafter		2009		2008		of 2009		2011		2013		Thereafter		2009		2008
	(in millions)												(in millions)
Commitments to extend credit ⁽¹⁾
Commercial lending:
Investment-grade	$	990	$	4,675	$	2,181	$	75	$	7,921	$	8,007	$	990	$	5,285	$	2,553	$	—	$	8,828	$	8,007
Non-investment-grade ⁽²⁾		921		1,933		4,309		349		7,512		9,318		614		2,833		4,466		398		8,311		9,318
William Street program		1,441		9,290		13,009		439		24,179		22,610
William Street credit extension program														672		9,985		13,373		441		24,471		22,610
Warehouse financing		292		40		—		—		332		1,101		—		29		—		—		29		1,101

Total commitments to extend credit		3,644		15,938		19,499		863		39,944		41,036		2,276		18,132		20,392		839		41,639		41,036
Forward starting resale and securities borrowing agreements		57,373		1,201		—		—		58,574		61,455		60,578		361		—		—		60,939		61,455
Forward starting repurchase and securities lending agreements		12,638		—		—		—		12,638		6,948		15,479		364		—		—		15,843		6,948
Underwriting commitments		1,858		—		—		—		1,858		241		—		1,176		—		—		1,176		241
Letters of credit ⁽³⁾		2,890		564		179		1		3,634		7,251		1,513		806		175		5		2,499		7,251
Investment commitments ⁽⁴⁾		2,112		10,598		110		903		13,723		14,266		1,824		10,004		149		869		12,846		14,266
Construction-related commitments ⁽⁵⁾		340		50		—		—		390		483		205		68		—		—		273		483
Other		130		97		27		24		278		260		58		111		36		34		239		260

Total commitments	$	80,985	$	28,448	$	19,815	$	1,791	$	131,039	$	131,940	$	81,933	$	31,022	$	20,752	$	1,747	$	135,454	$	131,940


⁽¹⁾	Commitments to extend credit are presented net of amounts syndicated to third parties.

⁽²⁾	Included withinnon-investment-grade commitments as of ~~June~~September 2009 and November 2008 were ~~$1.31~~$2.14 billion and $2.07 billion, respectively, related to leveraged lending capital market transactions; ~~$105~~$89 million and $164 million, respectively, related to commercial real estate transactions; and ~~$6.09~~$6.08 billion and $7.09 billion, respectively, arising from other unfunded credit facilities. Including funded loans, the total notional amount of the firm’s leveraged lending capital market transactions was ~~$5.38~~$5.77 billion and $7.97 billion as of ~~June~~September 2009 and November 2008, respectively.

⁽³⁾	Consists of commitments under letters of credit issued by various banks which the firm provides to counterparties in lieu of securities or cash to satisfy various collateral and margin deposit requirements.

⁽⁴⁾	Consists of the firm’s commitments to invest in private equity, real estate and other assets directly and through funds that the firm raises and manages in connection with its merchant banking and other investing activities, consisting of ~~$3.09~~$2.43 billion and $3.15 billion as of ~~June~~September 2009 and November 2008, respectively, related to real estate private investments and ~~$10.63~~$10.42 billion and $11.12 billion as of ~~June~~September 2009 and November 2008, respectively, related to corporate and other private investments. Such commitments include ~~$12.21~~$11.36 billion and $12.25 billion as of ~~June~~September 2009 and November 2008, respectively, of commitments to invest in funds managed by the firm, which will be funded at market value on the date of investment.

⁽⁵⁾	Includes commitments of ~~$348~~$239 million and $388 million as of ~~June~~September 2009 and November 2008, respectively, related to the firm’s new headquarters in New York City, which is expected to cost ~~between $2.05 billion and $2.15~~approximately $2.1 billion. ~~The firm has partially financed this construction project with $1.65 billion oftax-exempt~~ ~~Liberty Bonds.~~

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Commitments to Extend Credit.The firm’s commitments to extend credit are agreements to lend to counterparties that have fixed termination dates and are contingent on the satisfaction of all conditions to borrowing set forth in the contract. Since these commitments may expire unused or be reduced or cancelled at the counterparty’s request, the total commitment amount does not necessarily reflect the actual future cash flow requirements. The firm accounts for these commitments at fair value. To the extent that the firm recognizes losses on these commitments, such losses are recorded within the firm’s Trading and Principal Investments segment net of any related underwriting fees.


	•	Commercial lending commitments. The firm’s commercial lending commitments are generally extended in connection with contingent acquisition financing and other types of corporate lending as well as commercial real estate financing. The total commitment amount does not necessarily reflect the actual future cash flow requirements, as the firm may syndicate all or substantial portions of these commitments in the future, the commitments may expire unused, or the commitments may be cancelled or reduced at the request of the counterparty. In addition, commitments that are extended for contingent acquisition financing are often intended to beshort-term in nature, as borrowers often seek to replace them with other funding sources.

	•	William Street credit extension program. Substantially all of the commitments provided under the William Street credit extension program are toinvestment-grade corporate borrowers. Commitments under the program are principally extended by William Street Commitment Corporation (Commitment Corp.), a consolidated wholly owned subsidiary of GS Bank USA, GS Bank USA and other subsidiaries of GS Bank USA. The commitments extended by Commitment Corp. are supported, in part, by funding raised by William Street Funding Corporation (Funding Corp.), another consolidated wholly owned subsidiary of GS Bank USA. The assets and liabilities of Commitment Corp. and Funding Corp. are legally separated from other assets and liabilities of the firm. The assets of Commitment Corp. and of Funding Corp. will not be available to their respective shareholders until the claims of their respective creditors have been paid. In addition, no affiliate of either Commitment Corp. or Funding Corp., except in limited cases as expressly agreed in writing, is responsible for any obligation of either entity. With respect to most of the William Street commitments, Sumitomo Mitsui Financial Group, Inc. (SMFG) provides the firm with credit loss protection that is generally limited to 95% of the first loss the firm realizes on approved loan commitments, up to a maximum of ~~$1.00~~approximately $1 billion. In addition, subject to the satisfaction of certain conditions, upon the firm’s request, SMFG will provide protection for 70% of additional losses on such commitments, up to a maximum of $1.13 billion, of which $375 million of protection has been provided as of ~~June~~September 2009 and November 2008. The firm also uses other financial instruments to mitigate credit risks related to certain William Street commitments not covered by SMFG.

	•	Warehouse financing. The firm provides financing for the warehousing of financial assets. These arrangements are secured by the warehoused assets, primarily consisting of commercial mortgages as of ~~June~~September 2009 and November 2008.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Leases. The firm has contractual obligations underlong-term noncancelable lease agreements, principally for office space, expiring on various dates through 2069. Certain agreements are subject to periodic escalation provisions for increases in real estate taxes and other charges. Future minimum rental payments, net of minimum sublease rentals are set forth below (in millions):


			As of
			September 2009
Remainder of 2009	$	249	$	127
2010		466		467
2011		360		365
2012		299		301
2013		271		271
2014-thereafter		1,780		1,771

Total	$	3,425	$	3,302

Contingencies

The firm is involved in a number of judicial, regulatory and arbitration proceedings concerning matters arising in connection with the conduct of its businesses. Management believes, based on currently available information, that the results of such proceedings, in the aggregate, will not have a material adverse effect on the firm’s financial condition, but may be material to the firm’s operating results for any particular period, depending, in part, upon the operating results for such period. Given the inherent difficulty of predicting the outcome of the firm’s litigation and regulatory matters, particularly in cases or proceedings in which substantial or indeterminate damages or fines are sought, the firm cannot estimate losses or ranges of losses for cases or proceedings where there is only a reasonable possibility that a loss may be incurred.

In connection with its insurance business, the firm is contingently liable to provide guaranteed minimum death and income benefits to certain contract holders and has established a reserve related to ~~$6.09~~$6.26 billion and $6.13 billion of contract holder account balances as of ~~June~~September 2009 and November 2008, respectively, for such benefits. The weighted average attained age of these contract holders was 68 years as of both ~~June~~September 2009 and November 2008. The net amount at risk, representing guaranteed minimum death and income benefits in excess of contract holder account balances, was ~~$2.49~~$2.16 billion and $2.96 billion as of ~~June~~September 2009 and November 2008, respectively. See Note 12 for more information on the firm’s insurance liabilities.

Guarantees

The firm enters into various derivative contracts that meet the definition of a guarantee under ~~FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” as amended by FSPNo. FAS 133-1~~ ~~andFIN 45-4.~~

~~FIN 45 does not require disclosures~~ASC 460. Disclosures about derivative contracts are not required if such contracts may be cash settled and the firm has no basis to conclude it is probable that the counterparties held, at inception, the underlying instruments related to the derivative contracts. The firm has concluded that these conditions have been met for certain large, internationally active commercial and investment bank counterparties and certain other counterparties. Accordingly, the firm has not included such contracts in the tables below.

The firm, in its capacity as an agency lender, indemnifies most of its securities lending customers against losses incurred in the event that borrowers do not return securities and the collateral held is insufficient to cover the market value of the securities borrowed.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

In the ordinary course of business, the firm provides other financial guarantees of the obligations of third parties (e.g., performance bonds, standby letters of credit and other guarantees to enable clients to complete transactions and merchant banking fund-related guarantees). These guarantees represent obligations to make payments to beneficiaries if the guaranteed party fails to fulfill its obligation under a contractual arrangement with that beneficiary.

The following table sets forth certain information about the firm’s derivative contracts that meet the definition of a guarantee and certain other guarantees as of ~~June~~September 2009 and November 2008. Derivative contracts set forth below include written equity and commodity put options, written currency contracts and interest rate caps, floors and swaptions. See Note 3 for information regarding credit derivative contracts that meet the definition of a guarantee, which are not included below.


			Maximum Payout/													Maximum Payout/
			Notional Amount by Period of Expiration ⁽¹⁾											Carrying		Notional Amount by Period of Expiration ⁽¹⁾
	Carrying				2010-		2012-		2014-					Value of				2010-		2012-		2014-
	Value		2009		2011		2013		Thereafter			Total		Net Liability		2009		2011		2013		Thereafter		Total
	(in millions)													(in millions)
As of June 2009											��
As of September 2009
Derivatives ⁽²⁾	$	7,548	$	54,434	$	103,668	$	53,300	$	79,521		$	290,923	$	7,705	$	41,030	$	165,450	$	67,574	$	97,387	$	371,441
Securities lending indemnifications ⁽³⁾		—		22,674		—		—		—			22,674		—		26,317		—		—		—		26,317
Other financial guarantees		229		207		325		463		1,029			2,024		205		73		386		487		1,027		1,973


As of November 2008
Derivatives ⁽²⁾	$	17,462	$	114,863	$	73,224	$	30,312	$	90,643		$	309,042	$	17,462	$	114,863	$	73,224	$	30,312	$	90,643	$	309,042
Securities lending indemnifications ⁽³⁾		—		19,306		—		—		—			19,306		—		19,306		—		—		—		19,306
Other financial guarantees		235		203		477		458		238			1,376		235		203		477		458		238		1,376


⁽¹⁾		Such amounts do not represent the anticipated losses in connection with these contracts.

⁽²⁾		Because derivative contracts are accounted for at fair value, carrying value is considered the best indication of payment/performance risk for individual contracts. However, the carrying value excludes the effect of a legal right of setoff that may exist under an enforceable netting agreement and the effect of netting of cash paid pursuant to credit support agreements. These derivative contracts are risk managed together with derivative contracts that ~~are~~do not ~~considered guarantees~~meet the definition of a guarantee under ~~FIN 45~~ASC 460 and, therefore, these amounts do not reflect the firm’s overall risk related to its derivative activities.

⁽³⁾		Collateral held by the lenders in connection with securities lending indemnifications was ~~$23.35~~$27.06 billion and $19.95 billion as of ~~June~~September 2009 and November 2008, respectively. Because the contractual nature of these arrangements requires the firm to obtain collateral with a market value that exceeds the value of the securities on loan from the borrower, there is minimal performance risk associated with these guarantees.

The firm has established trusts, including Goldman Sachs Capital I, II and III, and other entities for the limited purpose of issuing securities to third parties, lending the proceeds to the firm and entering into contractual arrangements with the firm and third parties related to this purpose. See Note 7 for information regarding the transactions involving Goldman Sachs Capital I, II and III. The firm effectively provides for the full and unconditional guarantee of the securities issued by these entities, which are not consolidated for accounting purposes. Timely payment by the firm of amounts due to these entities under the borrowing, preferred stock and related contractual arrangements will be sufficient to cover payments due on the securities issued by these entities. Management believes that it is unlikely that any circumstances will occur, such as nonperformance on the part of paying agents or other service providers, that would make it necessary for the firm to make payments related to these entities other than those required under the terms of the borrowing, preferred stock and related contractual arrangements and in connection with certain expenses incurred by these entities. ~~Group Inc. also fully and unconditionally guarantees the securities issued by GS Finance Corp., a wholly owned finance subsidiary of the firm, which is consolidated for accounting purposes.~~

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Group Inc. also fully and unconditionally guarantees the securities issued by GS Finance Corp., a wholly owned finance subsidiary of the firm, which is consolidated for accounting purposes.

In the ordinary course of business, the firm indemnifies and guarantees certain service providers, such as clearing and custody agents, trustees and administrators, against specified potential losses in connection with their acting as an agent of, or providing services to, the firm or its affiliates. The firm also indemnifies some clients against potential losses incurred in the event specifiedthird-party service providers, includingsub-custodians andthird-party brokers, improperly execute transactions. In addition, the firm is a member of payment, clearing and settlement networks as well as securities exchanges around the world that may require the firm to meet the obligations of such networks and exchanges in the event of member defaults. In connection with its prime brokerage and clearing businesses, the firm agrees to clear and settle on behalf of its clients the transactions entered into by them with other brokerage firms. The firm’s obligations in respect of such transactions are secured by the assets in the client’s account as well as any proceeds received from the transactions cleared and settled by the firm on behalf of the client. In connection with joint venture investments, the firm may issue loan guarantees under which it may be liable in the event of fraud, misappropriation, environmental liabilities and certain other matters involving the borrower. The firm is unable to develop an estimate of the maximum payout under these guarantees and indemnifications. However, management believes that it is unlikely the firm will have to make any material payments under these arrangements, and no liabilities related to these guarantees and indemnifications have been recognized in the condensed consolidated statements of financial condition as of ~~June~~September 2009 and November 2008.

The firm provides representations and warranties to counterparties in connection with a variety of commercial transactions and occasionally indemnifies them against potential losses caused by the breach of those representations and warranties. The firm may also provide indemnifications protecting against changes in or adverse application of certain U.S. tax laws in connection with ordinary-course transactions such as securities issuances, borrowings or derivatives. In addition, the firm may provide indemnifications to some counterparties to protect them in the event additional taxes are owed or payments are withheld, due either to a change in or an adverse application of certainnon-U.S. tax laws. These indemnifications generally are standard contractual terms and are entered into in the ordinary course of business. Generally, there are no stated or notional amounts included in these indemnifications, and the contingencies triggering the obligation to indemnify are not expected to occur. The firm is unable to develop an estimate of the maximum payout under these guarantees and indemnifications. However, management believes that it is unlikely the firm will have to make any material payments under these arrangements, and no liabilities related to these arrangements have been recognized in the condensed consolidated statements of financial condition as of ~~June~~September 2009 and November 2008.

Group Inc. has guaranteed the payment obligations of Goldman, Sachs & Co. (GS&Co.), GS Bank USA and GS Bank Europe, subject to certain exceptions. In November 2008, the firm contributed subsidiaries into GS Bank USA, and Group Inc. agreed to guarantee certain losses, includingcredit-related losses, relating to assets held by the contributed entities. In connection with this guarantee, Group Inc. also agreed to pledge to GS Bank USA certain collateral, including interests in subsidiaries and other illiquid assets. In addition, Group Inc. guarantees many of the obligations of its other consolidated subsidiaries on atransaction-by-transaction basis, as negotiated with counterparties. Group Inc. is unable to develop an estimate of the maximum payout under its subsidiary guarantees; however, because these guaranteed obligations are also obligations of consolidated subsidiaries included in the table above, Group Inc.’s liabilities as guarantor are not separately disclosed.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


Note 9.	Shareholders’ Equity

Common and Preferred Equity

During the second quarter of 2009, Group Inc. completed a public offering of 46.7 million common shares at $123.00 per share for total proceeds of $5.75 billion.

In June 2009, Group Inc. repurchased from the U.S. Department of the Treasury (U.S. Treasury) the 10.0 million shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series H (Series H Preferred Stock), that were issued to the U.S. Treasury pursuant to the U.S. Treasury’s TARP Capital Purchase Program. The aggregate purchase price paid by Group Inc. to the U.S. Treasury for the Series H Preferred Stock, including accrued dividends, was $10.04 billion. The repurchase resulted in aone-time preferred dividend of $426 million, which is included in the condensed consolidated ~~statements~~statement of earnings for the ~~three and six~~nine months ended ~~June~~September 2009. Thisone-time preferred dividend represented the difference between the carrying value and the redemption value of the Series H Preferred Stock. In connection with the issuance of the Series H Preferred Stock in October 2008, the firm issued a10-year warrant to the U.S. Treasury to purchase up to 12.2 million shares of common stock at an exercise price of $122.90 per share. ~~See Note 18 for information regarding Group Inc.’s repurchase of~~The firm repurchased this warrant in full in July ~~2009.~~2009 for $1.1 billion. This amount was recorded as a reduction to additionalpaid-in capital.

On ~~July 13,~~October 14, 2009, the Board declared a dividend of $0.35 per common share to be paid on ~~September 24,~~December 30, 2009 to common shareholders of record on ~~August 25,~~December 2, 2009.

To satisfy minimum statutory employee tax withholding requirements related to the delivery of common stock underlying ~~restricted stock units,~~RSUs, the firm cancelled 11.1 million of ~~restricted stock units~~RSUs with a total value of ~~$849~~$850 million induring the ~~first half of~~nine months ended September 2009.

The firm’s share repurchase program is intended to help maintain the appropriate level of common equity and to substantially offset increases in share count over time resulting from employeeshare-based compensation. The repurchase program is effected primarily through regularopen-market purchases, the amounts and timing of which are determined primarily by the firm’s current and projected capital positions (i.e., comparisons of the firm’s desired level of capital to its actual level of capital) but which may also be influenced by general market conditions and the prevailing price and trading volumes of the firm’s common stock. Upon repurchase of the Series H Preferred Stock in June 2009, the Company was no longer subject to the limitations on common stock repurchases imposed under the U.S. Treasury’s TARP Capital Purchase Program.

As of ~~June~~September 2009, the firm had 174,000 shares of perpetual preferred stock issued and outstanding as set forth in the following table:


								Redemption									Redemption
	Dividend	Shares		Shares			Earliest	Value		Dividend	Shares		Shares			Earliest	Value
Series	Preference	Issued		Authorized		Dividend Rate	Redemption Date	(in millions)		Preference	Issued		Authorized		Dividend Rate	Redemption Date	(in millions)
A	Non-cumulative		30,000		50,000	3 month LIBOR + 0.75%, with floor of 3.75% per annum	April 25, 2010	$	750	Non-cumulative		30,000		50,000	3 month LIBOR + 0.75%, with floor of 3.75% per annum	April 25, 2010	$	750

B	Non-cumulative		32,000		50,000	6.20% per annum	October 31, 2010		800	Non-cumulative		32,000		50,000	6.20% per annum	October 31, 2010		800

C	Non-cumulative		8,000		25,000	3 month LIBOR + 0.75%, with floor of 4.00% per annum	October 31, 2010		200	Non-cumulative		8,000		25,000	3 month LIBOR + 0.75%, with floor of 4.00% per annum	October 31, 2010		200

D	Non-cumulative		54,000		60,000	3 month LIBOR + 0.67%, with floor of 4.00% per annum	May 24, 2011		1,350	Non-cumulative		54,000		60,000	3 month LIBOR + 0.67%, with floor of 4.00% per annum	May 24, 2011		1,350

G	Cumulative		50,000		50,000	10.00% per annum	Date of issuance		5,500	Cumulative		50,000		50,000	10.00% per annum	October 1, 2008		5,500

			174,000		235,000			$	8,600			174,000		235,000			$	8,600

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Each share ofnon-cumulative preferred stock issued and outstanding has a par value of $0.01, has a liquidation preference of $25,000, is represented by 1,000 depositary shares and is redeemable at the firm’s option, subject to the approval of the Board of Governors of the Federal Reserve System (Federal Reserve Board), at a redemption price equal to $25,000 plus declared and unpaid dividends.

Each share of Series G Preferred Stock issued and outstanding has a par value of $0.01, has a liquidation preference of $100,000 and is redeemable at the firm’s option, subject to the approval of the Federal Reserve Board, at a redemption price equal to $110,000 plus accrued and unpaid dividends. In connection with the issuance of the Series G Preferred Stock, the firm issued a five-year warrant to purchase up to 43.5 million shares of common stock at an exercise price of $115.00 per share. The warrant is exercisable at any time until October 1, 2013 and the number of shares of common stock underlying the warrant and the exercise price are subject to adjustment for certain dilutive events.

All series of preferred stock are pari passu and have a preference over the firm’s common stock upon liquidation. Dividends on each series of preferred stock, if declared, are payable quarterly in arrears. The firm’s ability to declare or pay dividends on, or purchase, redeem or otherwise acquire, its common stock is subject to certain restrictions in the event that the firm fails to pay or set aside full dividends on the preferred stock for the latest completed dividend period.

In 2007, the Board authorized 17,500.1 shares of perpetualNon-Cumulative Preferred Stock, Series E, and 5,000.1 shares of perpetualNon-Cumulative Preferred Stock, Series F, in connection with the APEX issuance. See Note 7 for further information on the APEX issuance. Under the stock purchase contracts, Group Inc. will issue on the relevant stock purchase dates (on or before June 1, 2013 and September 1, 2013 for Series E and Series F preferred stock, respectively) one share of Series E and Series F preferred stock to Goldman Sachs Capital II and III, respectively, for each $100,000 principal amount of subordinated debt held by these trusts. When issued, each share of Series E and Series F preferred stock will have a par value of $0.01 and a liquidation preference of $100,000 per share. Dividends on Series E preferred stock, if declared, will be payablesemi-annually at a fixed annual rate of 5.79% if the stock is issued prior to June 1, 2012 and quarterly thereafter, at a rate per annum equal to the greater of(i) three-month LIBOR plus 0.77% and (ii) 4.00%. Dividends on Series F preferred stock, if declared, will be payable quarterly at a rate per annum equal tothree-month LIBOR plus 0.77% if the stock is issued prior to September 1, 2012 and quarterly thereafter, at a rate per annum equal to the greater of(i) three-month LIBOR plus 0.77% and (ii) 4.00%. The preferred stock may be redeemed at the option of the firm on the stock purchase dates or any day thereafter, subject to regulatory approval and certain covenant restrictions governing the firm’s ability to redeem or purchase the preferred stock without issuing common stock or other instruments withequity-like characteristics.

On ~~July 13,~~October 14, 2009, the Board declared dividends of ~~$236.98,~~$239.58, $387.50, ~~$252.78~~$255.56 and ~~$252.78~~$255.56 per share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, respectively, to be paid on ~~August~~November 10, 2009 to preferred shareholders of record on ~~July~~October 26, 2009. In addition, the Board declared a dividend of $2,500 per share of Series G Preferred Stock to be paid on ~~August~~November 10, 2009 to preferred shareholders of record on ~~July~~October 26, 2009.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Other Comprehensive Income

The following table sets forth the firm’s accumulated other comprehensive income/(loss) by type:

As of
June
November
2009 2008
(in millions)
Adjustment from adoption of SFAS No. 158, net of tax $ (194 ) $ (194 )
Currency translation adjustment, net of tax (91 ) (30 )
Pension and postretirement liability adjustment, net of tax (89 ) 69
Net unrealized gains/(losses) onavailable-for-sale securities, net of tax ⁽¹⁾
24 (47 )

Total accumulated other comprehensive loss, net of tax $ (350 ) $ (202 )


	As of
	September			November
	2009			2008
	(in millions)
Currency translation adjustment, net of tax	$	(92	)	$	(30	)
Pension and postretirement liability adjustments, net of tax		(275	)		(125	)
Net unrealized gains/(losses) onavailable-for-sale securities, net of tax ⁽¹⁾		127			(47	)

Total accumulated other comprehensive loss, net of tax	$	(240	)	$	(202	)


⁽¹⁾		Consists of net unrealized gains/(losses) of ~~$17~~$121 million and $(55) million onavailable-for-sale securities held by the firm’s insurance subsidiaries as of ~~June~~September 2009 and November 2008, respectively, and net unrealized gains of $7$6 million and $8 million onavailable-for-sale securities held by investees accounted for under the equity method as of ~~June~~September 2009 and November 2008, respectively.


Note 10.	Earnings Per Common Share

The computations of basic and diluted earnings per common share are set forth below:


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June		May		June		May		September		August		September		August
	2009		2008		2009		2008		2009		2008		2009		2008
	(in millions, except per share amounts)								(in millions, except per share amounts)
Numerator for basic and diluted EPS — net earnings applicable to common shareholders	$	2,718	$	2,051	$	4,377	$	3,518	$	3,028	$	810	$	7,405	$	4,328

Denominator for basic EPS — weighted average number of common shares		514.1		427.5		495.7		430.3		525.9		427.6		505.8		429.3
Effect of dilutive securities ⁽¹⁾
Restricted stock units		15.8		9.6		12.6		9.1		18.6		11.2		14.6		9.8
Stock options and warrants		21.1		10.3		11.8		11.2		32.4		9.5		18.6		10.6

Dilutive potential common shares		36.9		19.9		24.4		20.3		51.0		20.7		33.2		20.4

Denominator for diluted EPS — weighted average number of common shares and dilutive potential common shares		551.0		447.4		520.1		450.6		576.9		448.3		539.0		449.7

Basic EPS ⁽²⁾	$	5.27	$	4.80	$	8.81	$	8.18	$	5.74	$	1.89	$	14.60	$	10.08
Diluted EPS ⁽²⁾		4.93		4.58		8.42		7.81		5.25		1.81		13.74		9.62


⁽¹⁾		The diluted EPS computations do not include the antidilutive effect of ~~restricted stock units (RSUs),~~RSUs, stock options and warrants as follows:

Three Months Ended Six Months Ended
June
May
June
May
2009 2008 2009 2008
(in millions)

Number of antidilutive RSUs and common shares underlying antidilutive stock options and warrants 14.3 6.4 53.3 7.0


	Three Months Ended				Nine Months Ended
	September		August		September		August
	2009		2008		2009		2008
	(in millions)

Number of antidilutive RSUs and common shares underlying antidilutive stock options and warrants		6.0		6.1		31.8		6.7


⁽²⁾		In ~~accordance with FSP No. EITF03-6-1,~~the first quarter of fiscal 2009, the firm adopted amended accounting principles which require that unvestedshare-based payment awards that havenon-forfeitable rights to dividends or dividend equivalents ~~are to~~ be treated as a separate class of securities in calculating earnings per common share. The ~~firm adopted the FSP in the first quarter~~impact of ~~fiscal 2009. The impact~~applying these amended principles to basic earnings per common share for the three and ~~six~~nine months ended ~~June~~September 2009 was a reduction of $0.02 and $0.04 per common ~~share.~~share, respectively. There was no impact on diluted earnings per common share. Prior periods have not been restated due to immateriality.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


Note 11.	Goodwill and Identifiable Intangible Assets

Goodwill

The following table sets forth the carrying value of the firm’s goodwill by operating segment, which is included in “Other assets” in the condensed consolidated statements of financial condition:


	As of				As of
	June		November		September		November
	2009		2008		2009		2008
	(in millions)				(in millions)
Investment Banking
Underwriting	$	125	$	125	$	125	$	125
Trading and Principal Investments
FICC		256		247		266		247
Equities ⁽¹⁾		2,389		2,389		2,389		2,389
Principal Investments		84		80		84		80
Asset Management and Securities Services
Asset Management ⁽²⁾		565		565		565		565
Securities Services		117		117		117		117

Total	$	3,536	$	3,523	$	3,546	$	3,523


⁽¹⁾		Primarily related to SLK LLC (SLK).

⁽²⁾		Primarily related to The Ayco Company, L.P. (Ayco).

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Identifiable Intangible Assets

The following table sets forth the gross carrying amount, accumulated amortization and net carrying amount of the firm’s identifiable intangible assets:


		As of							As of
		June			November				September			November
		2009			2008				2009			2008
		(in millions)							(in millions)

Customer lists ⁽¹⁾	Gross carrying amount	$	1,116		$	1,160		Gross carrying amount	$	1,117		$	1,160
	Accumulated amortization		(438	)		(436	)	Accumulated amortization		(455	)		(436	)

	Net carrying amount	$	678		$	724		Net carrying amount	$	662		$	724

New York Stock	Gross carrying amount	$	714		$	714
Exchange (NYSE)	Accumulated amortization		(274	)		(252	)
NYSE DMM rights								Gross carrying amount	$	714		$	714
								Accumulated amortization		(284	)		(252	)
DMM rights	Net carrying amount	$	440		$	462

								Net carrying amount	$	430		$	462

Insurance-related	Gross carrying amount	$	292		$	292		Gross carrying amount	$	292		$	292
assets ⁽²⁾	Accumulated amortization		(167	)		(137	)	Accumulated amortization		(160	)		(137	)

	Net carrying amount	$	125		$	155		Net carrying amount	$	132		$	155

Exchange-traded	Gross carrying amount	$	138		$	138		Gross carrying amount	$	138		$	138
fund (ETF) lead	Accumulated amortization		(46	)		(43	)	Accumulated amortization		(47	)		(43	)

market maker rights	Net carrying amount	$	92		$	95		Net carrying amount	$	91		$	95

Other ⁽³⁾	Gross carrying amount	$	195		$	178		Gross carrying amount	$	168		$	178
	Accumulated amortization		(93	)		(85	)	Accumulated amortization		(95	)		(85	)

	Net carrying amount	$	102		$	93		Net carrying amount	$	73		$	93

Total	Gross carrying amount	$	2,455		$	2,482		Gross carrying amount	$	2,429		$	2,482
	Accumulated amortization		(1,018	)		(953	)	Accumulated amortization		(1,041	)		(953	)

	Net carrying amount	$	1,437		$	1,529		Net carrying amount	$	1,388		$	1,529


⁽¹⁾		Primarily includes the firm’s clearance and execution and NASDAQ customer lists related to SLK and financial counseling customer lists related to Ayco.

⁽²⁾		Primarily includes VOBA related to the firm’s insurance businesses.

⁽³⁾		Primarily includes marketing-related assets and other contractual rights.

Substantially all of the firm’s identifiable intangible assets are considered to have finite lives and are amortized over their estimated lives. The weighted average remaining life of the firm’s identifiable intangible assets is approximately 11 years. “Depreciation and amortization” in the condensed consolidated statements of earnings includes amortization related to identifiable intangible assets of $8 million and $49 million for the three months ended September 2009 and August 2008, respectively, and $70 million and $170 million for the nine months ended September 2009 and August 2008, respectively.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The estimated future amortization for existing identifiable intangible assets through 2014 is set forth below (in millions):


			As of
			September 2009
Remainder of 2009	$	72	$	36
2010		137		139
2011		133		135
2012		125		126
2013		119		120
2014		116		117


Note 12.	Other Assets and Other Liabilities

Other Assets

Other assets are generally less liquid,non-financial assets. The following table sets forth the firm’s other assets by type:


	As of				As of
	June		November		September		November
	2009		2008		2009		2008
	(in millions)				(in millions)
Property, leasehold improvements and equipment ⁽¹⁾	$	10,925	$	10,793	$	11,321	$	10,793
Goodwill and identifiable intangible assets ⁽²⁾		4,973		5,052		4,934		5,052
Income tax-related assets		7,829		8,359		8,156		8,359
Equity-method investments ⁽³⁾		1,425		1,454		1,432		1,454
Miscellaneous receivables and other		3,953		4,780		3,836		4,780

Total	$	29,105	$	30,438	$	29,679	$	30,438


⁽¹⁾		Net of accumulated depreciation and amortization of ~~$7.67~~$7.94 billion and $6.55 billion as of ~~June~~September 2009 and November 2008, respectively.

⁽²⁾		See Note 11 for further information regarding the firm’s goodwill and identifiable intangible assets.

⁽³⁾		Excludes investments of ~~$2.81~~$2.87 billion and $3.45 billion accounted for at fair value under ~~SFAS No. 159~~the fair value option as of ~~June~~September 2009 and November 2008, respectively, which are included in “Trading assets, at fair value” in the condensed consolidated statements of financial condition.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Other Liabilities

The following table sets forth the firm’s other liabilities and accrued expenses by type:


	As of				As of
	June		November		September		November
	2009		2008		2009		2008
	(in millions)				(in millions)
Compensation and benefits	$	10,178	$	4,646	$	13,777	$	4,646
Insurance-related liabilities ⁽¹⁾		11,851		9,673		12,323		9,673
Noncontrolling interests ⁽²⁾		938		1,127		957		1,127
Income tax-related liabilities		3,010		2,865		3,070		2,865
Employee interests in consolidated funds		438		517		430		517
Accrued expenses and other payables		5,198		4,388		5,391		4,388

Total	$	31,613	$	23,216	$	35,948	$	23,216


⁽¹⁾		Insurance-related liabilities are set forth in the table below:


	As of				As of
	June		November		September		November
	2009		2008		2009		2008
	(in millions)				(in millions)

Separate account liabilities	$	3,808	$	3,628	$	4,117	$	3,628
Liabilities for future benefits and unpaid claims		6,895		4,778		7,041		4,778
Contract holder account balances		812		899		863		899
Reserves for guaranteed minimum death and income benefits		336		368		302		368

Total insurance-related liabilities	$	11,851	$	9,673	$	12,323	$	9,673

Separate account liabilities are supported by separate account assets, representing segregated contract holder funds under variable annuity and life insurance contracts. Separate account assets are included in “Cash and securities segregated for regulatory and other purposes” in the condensed consolidated statements of financial condition.

Liabilities for future benefits and unpaid claims include liabilities arising from reinsurance provided by the firm to other insurers. The firm had a receivable for ~~$1.32 billion and~~ $1.30 billion as of ~~June~~both September 2009 and November 2008 ~~respectively,~~ related to such reinsurance contracts, which is reported in “Receivables from customers and counterparties” in the condensed consolidated statements of financial condition. In addition, the firm has ceded risks to reinsurers related to certain of its liabilities for future benefits and unpaid claims and had a receivable of ~~$1.35~~$1.42 billion and $1.20 billion as of ~~June~~September 2009 and November 2008, respectively, related to such reinsurance contracts, which is reported in “Receivables from customers and counterparties” in the condensed consolidated statements of financial condition. Contracts to cede risks to reinsurers do not relieve the firm from its obligations to contract holders. Liabilities for future benefits and unpaid claims include ~~$2.10~~$2.27 billion and $978 million carried at fair value under ~~SFAS No. 159~~the fair value option as of ~~June~~September 2009 and November 2008, respectively.

Reserves for guaranteed minimum death and income benefits represent a liability for the expected value of guaranteed benefits in excess of projected annuity account balances. These reserves are ~~computed in accordance with AICPASOP 03-1~~ ~~and are~~ based on total payments expected to be made less total fees expected to be assessed over the life of the contract.


⁽²⁾		Includes ~~$601~~$599 million and $784 million related to consolidated investment funds as of ~~June~~September 2009 and November 2008, respectively.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


Note 13.	Transactions with Affiliated Funds

The firm has formed numerous nonconsolidated investment funds withthird-party investors. The firm generally acts as the investment manager for these funds and, as such, is entitled to receive management fees and, in certain cases, advisory fees, incentive fees or overrides from these funds. These fees amounted to ~~$1.19~~$1.80 billion and ~~$1.76~~$2.55 billion for the ~~six~~nine months ended ~~June~~September 2009 and ~~May~~August 2008, respectively. As of ~~June~~September 2009 and November 2008, the fees receivable from these funds were ~~$908 million~~$1.06 billion and $861 million, respectively. Additionally, the firm may invest alongside thethird-party investors in certain funds. The aggregate carrying value of the firm’s interests in these funds was ~~$12.82~~$13.73 billion and $14.45 billion as of ~~June~~September 2009 and November 2008, respectively. In the ordinary course of business, the firm may also engage in other activities with these funds, including, among others, securities lending, trade execution, trading, custody, and acquisition and bridge financing. See Note 8 for the firm’s commitments related to these funds.


Note 14.	Income Taxes

The firm is subject to examination by the U.S. Internal Revenue Service (IRS) and other taxing authorities in jurisdictions where the firm has significant business operations, such as the United Kingdom, Japan, Hong Kong, Korea and various states, such as New York. The tax years under examination vary by jurisdiction. The firm does not expect unrecognized tax benefits to change significantly during the twelve months subsequent to ~~June~~September 2009.

Below is a table of the earliest tax years that remain subject to examination by major jurisdiction:


	~~Earliest~~
	~~Tax Year~~
	~~Subject to~~As of
Jurisdiction	~~Examination~~ September 2009
U.S. Federal		2005	⁽¹⁾
New York State and City		2004	⁽²⁾
United Kingdom		2005
Japan		2005
Hong Kong		2003
Korea		2003


⁽¹⁾		IRS examination of fiscal 2005, 2006 and 2007 began during 2008. IRS examination of fiscal 2003 and 2004 has been completed but the liabilities for those years are not yet final.

⁽²⁾		New York State and City examination of fiscal 2004, 2005 and 2006 began in 2008. ~~New York State examinations of fiscal 1999 through 2003 have been completed but the liabilities for those years are not yet final.~~

All years subsequent to the above years remain open to examination by the taxing authorities. The firm believes that the liability for unrecognized tax benefits it has established is adequate in relation to the potential for additional assessments. The resolution of tax matters is not expected to have a material effect on the firm’s financial condition but may be material to the firm’s operating results for a particular period, depending, in part, upon the operating results for that period.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


Note 15.	Regulation and Capital Adequacy

The Federal Reserve Board is the primary U.S. regulator of Group Inc., a bank holding company that in August 2009 also became a financial holding company under the Bank Holding Company Act. As a bank holding company, the firm is subject to consolidated regulatory capital requirements administered by the Federal Reserve Board. The firm’s bank depository institution subsidiaries, including GS Bank USA, are subject to similar capital requirements. Under the Federal Reserve Board’s capital adequacy requirements and the regulatory framework for prompt corrective action (PCA) that is applicable to GS Bank USA, the firm and its bank depository institution subsidiaries must meet specific capital requirements that involve quantitative measures of assets, liabilities and certainoff-balance-sheet items as calculated under regulatory reporting practices. The firm and its bank depository institution subsidiaries’ capital levels, as well as GS Bank USA’s PCA classification, are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Many of the firm’s subsidiaries, including GS&Co. and the firm’s otherbroker-dealer subsidiaries, are subject to separate regulation and capital requirements as described below.

The following table sets forth information regarding Group Inc.’s capital ratios as of ~~June~~September 2009 calculated in accordance with the Federal Reserve Board’s regulatory capital requirements currently applicable to bank holding companies, which are based on the Capital Accord of the Basel Committee on Banking Supervision (Basel I). These ratios are used by the Federal Reserve Board and other U.S. Federal banking agencies in the supervisory review process, including the assessment of the firm’s capital adequacy. The calculation of these ratios includes certain market risk measures that are under review by the Federal Reserve Board, as part of Group Inc.’s transition to bank holding company status. The calculation of these ratios has not been reviewed with the Federal Reserve Board and, accordingly, these ratios may be revised in subsequent filings.


	As of			As of
	June 2009			September 2009
	($ in millions)			($ in millions)
Tier 1 Capital
Common shareholders’ equity	$	55,856		$	58,397
Preferred stock		6,957			6,957
Junior subordinated debt issued to trusts		5,000			5,000
Less: Goodwill		(3,536	)		(3,546	)
Less: Disallowable intangible assets		(1,437	)		(1,388	)
Less: Other deductions ⁽¹⁾		(6,297	)		(5,959	)

Tier 1 Capital		56,543			59,461
Tier 2 Capital
Qualifying subordinated debt ⁽²⁾		13,989			13,979
Less: Other deductions ⁽¹⁾		(160	)		(122	)

Tier 2 Capital	$	13,829		$	13,857

Total Capital	$	70,372		$	73,318

Risk-Weighted Assets	$	409,204		$	409,291

Tier 1 Capital Ratio		13.8	%		14.5	%
Total Capital Ratio		17.2	%		17.9	%
Tier 1 Leverage Ratio		6.4	%		6.9	%


⁽¹⁾		Principally includes equity investments innon-financial companies and the cumulative change in the fair value of the firm’s unsecured borrowings attributable to the impact of changes in the firm’s own credit spreads, disallowed deferred tax assets, and investments in certain nonconsolidating entities.

⁽²⁾		Substantially all of the firm’s existing subordinated debt qualifies as Tier 2 capital for Basel I purposes.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Risk-Weighted Assets (RWAs) under the Federal Reserve Board’srisk-based capital guidelines are comprised of requirements for market risk and credit risk. RWAs for market risk include certain measures that are under review by the Federal Reserve Board as part of Group Inc.’s transition to bank holding company status. Credit risk RWAs for on-balance sheet assets are based on the balance sheet value. For off-balance sheet exposures, including OTC derivatives and commitments, a credit equivalent amount is calculated based on the notional of each trade. All such assets and amounts are then assigned a risk weight depending on whether the counterparty is a sovereign, bank or qualifying securities firm, or other entity (or where collateral is held, the risk weight will depend on the nature of such collateral).

The firm’s Tier 1 leverage ratio is defined as Tier 1 capital under Basel I divided by adjusted average total assets (which includes adjustments for disallowed goodwill and certain intangible assets).

Federal Reserve Board regulations require bank holding companies to maintain a minimum Tier 1 capital ratio of 4% and a minimum total capital ratio of 8%. The required minimum Tier 1 capital ratio and total capital ratio in order to be considered a “well capitalized” bank holding company under the Federal Reserve Board guidelines are 6% and 10%, respectively. Bank holding companies may be expected to maintain ratios well above the minimum levels, depending upon their particular condition, risk profile and growth plans. The minimum Tier 1 leverage ratio is 3% for bank holding companies that have received the highest supervisory rating under Federal Reserve Board guidelines or that have implemented the Federal Reserve Board’s capital measure for market risk. Other bank holding companies must have a minimum Tier 1 leverage ratio of 4%.

The firm also ~~continues~~assesses its capital adequacy using an internalrisk-based (IRB) capital methodology. Under this methodology, the calculation of the Tier 1 capital ratio is generally consistent with the guidelines set out in the Revised Framework for the International Convergence of Capital Measurement and Capital Standards issued by the Basel Committee on Banking Supervision (Basel II). Prior to ~~disclose~~September 2009, the firm disclosed its capital ratios in accordance with the capital guidelines applicable to it before it became a bank holding company in September 2008, when the firm was regulated by the SEC as a Consolidated Supervised ~~Entity (CSE). These guidelines were generally consistent with those set out in the Revised Framework for the International Convergence of Capital Measurement and Capital Standards issued by~~Entity. The firm is currently working to fully implement the Basel ~~Committee on Banking Supervision (Basel II). Subsequent~~II framework as applicable to ~~becoming~~it as a bank holding ~~company,~~company. U.S. banking regulators have incorporated the ~~firm no longer reports~~Basel II framework into the ~~CSE~~existingrisk-based capital ~~ratios~~requirements by requiring that internationally active banking organizations, such as Group Inc., transition to Basel II over the ~~SEC and Group Inc. is no longer regulated as a CSE.~~next several years.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The following table sets forth information regarding Group Inc.’s capital ratios using the firm’s IRB capital methodology as of ~~June 2009 and November 2008 calculated in the same manner (generally consistent with Basel II) as when the firm was regulated by the SEC as a CSE:~~September 2009:


	As of
	June			November			As of
	2009			2008			September 2009
	($ in millions)						($ in millions)
I. Tier 1 and Total Allowable Capital
Common shareholders’ equity	$	55,856		$	47,898		$	58,397
Preferred stock		6,957			16,471			6,957
Junior subordinated debt issued to trusts		5,000			5,000			5,000
Less: Goodwill		(3,536	)		(3,523	)		(3,546	)
Less: Disallowable intangible assets		(1,437	)		(1,386	)		(1,388	)
Less: Other deductions ⁽¹⁾		(1,322	)		(1,823	)		(926	)

Tier 1 Capital		61,518			62,637			64,494
Other components of Total Allowable Capital
Qualifying subordinated debt ⁽²⁾		13,989			13,703			13,979
Less: Other deductions ⁽¹⁾		(160	)		(690	)		(122	)

Total Allowable Capital	$	75,347		$	75,650		$	78,351

II.Risk-Weighted Assets
Market risk	$	169,649		$	176,646		$	191,524
Credit risk		172,195			184,055			167,156
Operational risk		40,000			39,675			45,025

TotalRisk-Weighted Assets	$	381,844		$	400,376		$	403,705

III. Tier 1 Capital Ratio		16.1	%		15.6	%		16.0	%
IV. Total Capital Ratio		19.7	%		18.9	%		19.4	%


⁽¹⁾		Principally includes the cumulative change in the fair value of the firm’s unsecured borrowings attributable to the impact of changes in the firm’s own credit spreads, disallowed deferred tax assets, and investments in certain nonconsolidated entities.

⁽²⁾		Substantially all of the firm’s existing subordinated debt qualifies as Total Allowable Capital.

The firm’s RWAs based on the ~~guidelines applicable to the firm when it was regulated as a CSE~~firm’s IRB capital methodology are driven by the amount of market risk, credit risk and operational risk associated with its business activities in a manner generally consistent with methodologies set out in Basel II. The methodologies used to compute these RWAs for each of market risk, credit risk and operational risk are closely aligned with the firm’s risk management practices.

The firm is currently working to implement the Basel II framework as applicable to it as a bank holding company (as opposed to as a CSE). U.S. banking regulators have incorporated the Basel II framework into the existing~~risk-based~~ ~~capital requirements by requiring that internationally active banking organizations, such as Group Inc., transition to Basel II over the next several years.~~

~~THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(UNAUDITED)~~

GS Bank USA, a New York State-chartered bank and a member of the Federal Reserve System and the FDIC, is regulated by the Federal Reserve Board and the New York State Banking Department (NYSBD) and is subject to minimum capital requirements that (subject to certain exceptions) are similar to those applicable to bank holding companies. GS Bank USA computes its capital ratios in accordance with the regulatory capital guidelines currently applicable to state member banks, which are based on Basel I as implemented by the Federal Reserve Board, for purposes of assessing the adequacy of its capital. In order to be considered a “well capitalized” depository institution under the Federal Reserve Board guidelines, GS Bank USA must maintain a Tier 1 capital ratio of at least 6%, a total capital ratio of at least 10% and a Tier 1 leverage ratio of at least 5%. In November 2008, the firm contributed subsidiaries into GS Bank USA. In connection with this

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

contribution, GS Bank USA agreed with the Federal Reserve Board to minimum capital ratios in excess of these “well capitalized” levels. Accordingly, for a period of time, GS Bank USA is expected to maintain a Tier 1 capital ratio of at least 8%, a total capital ratio of at least 11% and a Tier 1 leverage ratio of at least 6%.

The following table sets forth information regarding GS Bank USA’s capital ratios under Basel I as implemented by the Federal Reserve Board, as of ~~June~~September 2009.


	As of
	~~June~~September 2009
Tier 1 Capital Ratio		~~12.9~~14.0	%
Total Capital Ratio		~~17.2~~18.3	%
Tier 1 Leverage Ratio		~~9.8~~13.9	%

Consistent with the calculation of Group Inc.’s capital ratios, the calculation of GS Bank USA’s capital ratios includes certain market risk measures that are under review by the Federal Reserve Board. Accordingly, these ratios may be revised in subsequent filings. GS Bank USA is currently working to implement the Basel II framework. Similar to the firm’s requirement as a bank holding company, GS Bank USA is required to transition to Basel II over the next several years.

The deposits of GS Bank USA are insured by the FDIC to the extent provided by law. The Federal Reserve Board requires depository institutions to maintain cash reserves with a Federal Reserve Bank. The amount deposited by the firm’s depository institution subsidiaries held at the Federal Reserve Bank was approximately ~~$7.04~~$14.00 billion and $94 million as of ~~June~~September 2009 and November 2008, respectively, which exceeded required reserve amounts by ~~$6.73~~$12.39 billion and $6 million as of ~~June~~September 2009 and November 2008, respectively. GS Bank Europe, a wholly owned credit institution, is regulated by the Irish Financial Services Regulatory Authority and is subject to minimum capital requirements. As of ~~June~~September 2009 and November 2008, GS Bank USA and GS Bank Europe were both in compliance with all regulatory capital requirements.

Transactions between GS Bank USA and its subsidiaries and Group Inc. and its subsidiaries and affiliates (other than, generally, subsidiaries of GS Bank USA) are regulated by the Federal Reserve Board. These regulations generally limit the types and amounts of transactions (including loans to and borrowings from GS Bank USA) that may take place and generally require those transactions to be on an arms-length basis.

~~THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(UNAUDITED)~~

The firm’s U.S. regulatedbroker-dealer subsidiaries include GS&Co. and Goldman Sachs Execution & Clearing, L.P. (GSEC). GS&Co. and GSEC are registeredU.S. broker-dealers and futures commission merchants subject toRule 15c3-1 of the SEC and Rule 1.17 of the Commodity Futures Trading Commission, which specify uniform minimum net capital requirements, as defined, for their registrants, and also effectively require that a significant part of the registrants’ assets be kept in relatively liquid form. GS&Co. and GSEC have elected to compute their minimum capital requirements in accordance with the “Alternative Net Capital Requirement” as permitted byRule 15c3-1. As of ~~June~~September 2009, GS&Co. had regulatory net capital, as defined byRule 15c3-1, of ~~$13.19~~$13.41 billion, which exceeded the amount required by ~~$11.42~~$11.48 billion. As of ~~June~~September 2009, GSEC had regulatory net capital, as defined byRule 15c3-1, of ~~$1.87~~$1.95 billion, which exceeded the amount required by ~~$1.80~~$1.84 billion. In addition to its alternative minimum net capital requirements, GS&Co. is also required to hold tentative net capital in excess of $1 billion and net capital in excess of $500 million in accordance with the market and credit risk standards of Appendix E ofRule 15c3-1. GS&Co. is also required to notify the SEC in the event that its tentative net capital is less than $5 billion. As of ~~June~~September 2009 and November 2008, GS&Co. had tentative net capital and net capital in excess of both the minimum and the notification requirements.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The firm has U.S. insurance subsidiaries that are subject to state insurance regulation and oversight in the states in which they are domiciled and in the other states in which they are licensed. In addition, certain of the firm’s insurance subsidiaries outside of the U.S. are regulated by the Bermuda Monetary Authority and by Lloyd’s (which is, in turn, regulated by the U.K.’s Financial Services Authority (FSA)). The firm’s insurance subsidiaries were in compliance with all regulatory capital requirements as of ~~June~~September 2009 and November 2008.

The firm’s principalnon-U.S. regulated subsidiaries include Goldman Sachs International (GSI) and Goldman Sachs Japan Co., Ltd. (GSJCL). GSI, the firm’s regulated U.K.broker-dealer, is subject to the capital requirements of the FSA. GSJCL, the firm’s regulated Japanesebroker-dealer, is subject to the capital requirements imposed by Japan’s Financial Services Agency. As of ~~June~~September 2009 and November 2008, GSI and GSJCL were in compliance with their local capital adequacy requirements. Certain othernon-U.S. subsidiaries of the firm are also subject to capital adequacy requirements promulgated by authorities of the countries in which they operate. As of ~~June~~September 2009 and November 2008, these subsidiaries were in compliance with their local capital adequacy requirements.

The regulatory requirements referred to above restrict Group Inc.’s ability to withdraw capital from its regulated subsidiaries. In addition to limitations on the payment of dividends imposed by federal and state laws, the Federal Reserve Board, the FDIC and the NYSBD have authority to prohibit or to limit the payment of dividends by the banking organizations they supervise (including GS Bank USA) if, in the relevant regulator’s opinion, payment of a dividend would constitute an unsafe or unsound practice in the light of the financial condition of the banking organization. As of ~~June~~September 2009, GS Bank USA could have declared dividends of ~~$1.31~~$2.43 billion to Group Inc. without regulatory approval. As of November 2008, GS Bank USA would not have been able to declare dividends to Group Inc. without regulatory approval.


Note 16.	Business Segments

In reporting to management, the firm’s operating results are categorized into the following three business segments: Investment Banking, Trading and Principal Investments, and Asset Management and Securities Services. See Note 18 to the consolidated financial statements in Part II, Item 8 of the firm’s Annual Report onForm 10-K for the fiscal year ended November 2008 for a discussion of the basis of presentation for the firm’s business segments.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Segment Operating Results

Management believes that the following information provides a reasonable representation of each segment’s contribution to consolidatedpre-tax earnings and total assets:


		As of or for the									As of or for the
		Three Months Ended				Six Months Ended					Three Months Ended					Nine Months Ended
		June		May		June		May			September		August			September		August
		2009		2008		2009		2008			2009		2008			2009		2008
		(in millions)									(in millions)

Investment	Net revenues	$	1,440	$	1,685	$	2,263	$	2,857	Net revenues	$	899	$	1,294		$	3,162	$	4,151
Banking	Operating expenses		1,167		1,155		1,872		2,095	Operating expenses		772		772			2,644		2,867

	Pre-tax earnings	$	273	$	530	$	391	$	762	Pre-tax earnings	$	127	$	522		$	518	$	1,284

	Segment assets	$	1,473	$	7,269	$	1,473	$	7,269	Segment assets	$	1,363	$	3,663		$	1,363	$	3,663

Trading and	Net revenues	$	10,784	$	5,591	$	17,934	$	10,715	Net revenues	$	10,027	$	2,704		$	27,961	$	13,419
Principal	Operating expenses		6,290		3,961		11,163		7,704	Operating expenses		5,550		3,465			16,713		11,169

Investments	Pre-tax earnings	$	4,494	$	1,630	$	6,771	$	3,011	Pre-tax earnings/(loss)	$	4,477	$	(761	)	$	11,248	$	2,250

	Segment assets	$	696,454	$	724,122	$	696,454	$	724,122	Segment assets	$	684,878	$	724,717		$	684,878	$	724,717

Asset Management	Net revenues	$	1,537	$	2,146	$	2,989	$	4,185	Net revenues	$	1,446	$	2,045		$	4,435	$	6,230
and Securities	Operating expenses		1,250		1,477		2,455		2,970	Operating expenses		1,220		833			3,675		3,803

Services	Pre-tax earnings	$	287	$	669	$	534	$	1,215	Pre-tax earnings	$	226	$	1,212		$	760	$	2,427

	Segment assets	$	191,617	$	356,754	$	191,617	$	356,754	Segment assets	$	195,944	$	353,393		$	195,944	$	353,393

Total	Net revenues ⁽¹⁾⁽²⁾	$	13,761	$	9,422	$	23,186	$	17,757	Net revenues ⁽¹⁾⁽²⁾	$	12,372	$	6,043		$	35,558	$	23,800
	Operating expenses ⁽³⁾		8,732		6,590		15,528		12,782	Operating expenses ⁽³⁾		7,578		5,083			23,106		17,865

	Pre-tax earnings ⁽⁴⁾	$	5,029	$	2,832	$	7,658	$	4,975	Pre-tax earnings ⁽⁴⁾	$	4,794	$	960		$	12,452	$	5,935

	Total assets	$	889,544	$	1,088,145	$	889,544	$	1,088,145	Total assets	$	882,185	$	1,081,773		$	882,185	$	1,081,773


⁽¹⁾		Net revenues include net interest income as set forth in the table below:


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June		May		June		May		September		August		September		August
	2009		2008		2009		2008		2009		2008		2009		2008
	(in millions)								(in millions)

Investment Banking	$	—	$	—	$	—	$	6	$	—	$	—	$	—	$	6
Trading and Principal Investments		1,462		352		2,906		599		1,226		264		4,132		863
Asset Management and Securities Services		580		925		1,043		1,623		464		871		1,507		2,494

Total net interest	$	2,042	$	1,277	$	3,949	$	2,228	$	1,690	$	1,135	$	5,639	$	3,363


⁽²⁾		Net revenues includenon-interest revenues as set forth in the table below:


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June		May		June		May		September		August		September		August
	2009		2008		2009		2008		2009		2008		2009		2008
			(in millions)						(in millions)

Investment banking fees	$	1,440	$	1,685	$	2,263	$	2,851	$	899	$	1,294	$	3,162	$	4,145
Equities commissions		1,021		1,234		1,995		2,472		930		1,208		2,925		3,680
Asset management and other fees		957		1,221		1,946		2,562		982		1,174		2,928		3,736
Trading and principal investments revenues		8,301		4,005		13,033		7,644		7,871		1,232		20,904		8,876

Totalnon-interest revenues	$	11,719	$	8,145	$	19,237	$	15,529	$	10,682	$	4,908	$	29,919	$	20,437

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Trading and principal investments revenues include ~~$10 million~~$0 and ~~$(3)~~$(10) million for the three months ended ~~June~~September 2009 and ~~May~~August 2008, respectively, and $16 million and ~~$(2)~~$(12) million for the ~~six~~nine months ended ~~June~~September 2009 and ~~May~~August 2008, respectively, of realized gains/(losses) on securities held within the firm’s insurance subsidiaries which are accounted for as~~available-for-sale~~available-for-sale. ~~under SFAS No. 115.~~


⁽³⁾		Operating expenses include net provisions for a number of litigation and regulatory proceedings of ~~$25~~$36 million and ~~$(3)~~$13 million for the three months ended ~~June~~September 2009 and ~~May~~August 2008, respectively, and ~~$38~~$74 million and ~~$13~~$26 million for the ~~six~~nine months ended ~~June~~September 2009 and ~~May~~August 2008, respectively, that have not been allocated to the firm’s segments.

⁽⁴⁾		Pre-tax earnings include total depreciation and amortization as set forth in the table below:


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June		May		June		May		September		August		September		August
	2009		2008		2009		2008		2009		2008		2009		2008
	(in millions)								(in millions)

Investment Banking	$	39	$	38	$	76	$	76	$	42	$	41	$	118	$	117
Trading and Principal Investments		428		214		951		460		267		289		1,218		749
Asset Management and Securities Services		60		59		149		118		64		62		213		180

Total depreciation and amortization	$	527	$	311	$	1,176	$	654	$	373	$	392	$	1,549	$	1,046

Geographic Information

Due to the highly integrated nature of international financial markets, the firm manages its businesses based on the profitability of the enterprise as a whole. Since a significant portion of the firm’s activities require cross-border coordination in order to facilitate the needs of the firm’s clients, the methodology for allocating the firm’s profitability to geographic regions is dependent on estimates and management judgment. Specifically, in interim periods, the firm allocates compensation and benefits to geographic regions based upon the firmwide compensation to net revenues ratio. In the fourth quarter when compensation by employee is finalized, compensation and benefits are allocated to the geographic regions based upon total actual compensation during the fiscal year. See Note 18 to the consolidated financial statements in Part II, Item 8 of the firm’s Annual Report onForm 10-K for the fiscal year ended November 2008 for a discussion of the method of allocating by geographic region.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The following table sets forth the total net revenues andpre-tax earnings of the firm and its consolidated subsidiaries by geographic region allocated based on the methodology referred to above, as well as the percentage of total net revenues andpre-tax earnings for each geographic region:


	Three Months Ended									Six Months Ended										Three Months Ended										Nine Months Ended
	June 2009					May 2008				June 2009					May 2008					September 2009					August 2008					September 2009					August 2008
	($ in millions)																			($ in millions)
Net revenues
Americas ⁽¹⁾	$	7,019		51	%	$	5,316	57	%	$	13,492		58	%	$	9,523		53	%	$	6,590		53	%	$	4,315		71	%	$	20,082		56	%	$	13,838		58	%
EMEA ⁽²⁾		3,727		27			2,756	29			5,613		24			5,430		31			3,529		29			1,523		25			9,142		26			6,953		29
Asia		3,015		22			1,350	14			4,081		18			2,804		16			2,253		18			205		4			6,334		18			3,009		13

Total net revenues	$	13,761		100	%	$	9,422	100	%	$	23,186		100	%	$	17,757		100	%	$	12,372		100	%	$	6,043		100	%	$	35,558		100	%	$	23,800		100	%

Pre-tax earnings
Americas ⁽¹⁾	$	2,385		47	%	$	1,651	58	%	$	4,530		59	%	$	2,650		53	%	$	2,264		47	%	$	1,045		N.M.		$	6,794		54	%	$	3,695		62	%
EMEA ⁽²⁾		1,562		31			865	31			2,141		28			1,652		33			1,609		33			238		N.M.			3,750		30			1,890		32
Asia		1,107		22			313	11			1,025		13			686		14			957		20			(310	)	N.M.			1,982		16			376		6
Corporate ⁽³⁾		(25	)	N.M.			3	N.M.			(38	)	N.M.			(13	)	N.M.			(36	)	N.M.			(13	)	N.M.			(74	)	N.M.			(26	)	N.M.

Totalpre-tax earnings	$	5,029		100	%	$	2,832	100	%	$	7,658		100	%	$	4,975		100	%	$	4,794		100	%	$	960		100	%	$	12,452		100	%	$	5,935		100	%


⁽¹⁾		Substantially all relates to the U.S.

⁽²⁾		EMEA (Europe, Middle East and Africa).

⁽³⁾		Consists of net provisions for a number of litigation and regulatory proceedings.

THE GOLDMAN SACHS GROUP, INC. and SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)


Note 17.	Interest Income and Interest Expense

The following table sets forth the details of the firm’s interest income and interest expense:


	Three Months Ended					Six Months Ended					Three Months Ended					Nine Months Ended
	June			May		June			May		September			August		September			August
	2009			2008		2009			2008		2009			2008		2009			2008
	(in millions)										(in millions)
Interest income ⁽¹⁾
Deposits with banks	$	18		$	38	$	40		$	87	$	10		$	32	$	50		$	119
Securities borrowed, securities purchased under agreements to resell and federal funds sold		176			3,184		727			7,314		122			2,917		849			10,231
Trading assets, at fair value		2,881			3,426		6,039			7,143		2,507			3,134		8,546			10,277
Other interest ⁽²⁾		395			2,850		1,026			6,199		361			2,634		1,387			8,833

Total interest income	$	3,470		$	9,498	$	7,832		$	20,743	$	3,000		$	8,717	$	10,832		$	29,460

Interest expense
Deposits	$	119		$	186	$	269		$	386	$	77		$	169	$	346		$	555
Securities loaned and securities sold under agreements to repurchase, at fair value		366			1,875		911			4,486		246			1,639		1,157			6,125
Trading liabilities, at fair value		406			630		869			1,327		520			699		1,389			2,026
Short-term borrowings ⁽³⁾		154			448		394			985		114			434		508			1,419
Long-term borrowings ⁽⁴⁾		648			1,891		1,597			4,260		467			1,804		2,064			6,064
Other interest ⁽⁵⁾		(265	)		3,191		(157	)		7,071		(114	)		2,837		(271	)		9,908

Total interest expense	$	1,428		$	8,221	$	3,883		$	18,515	$	1,310		$	7,582	$	5,193		$	26,097

Net interest income	$	2,042		$	1,277	$	3,949		$	2,228	$	1,690		$	1,135	$	5,639		$	3,363


⁽¹⁾		Interest income is recorded on an accrual basis based on contractual interest rates.

⁽²⁾		Primarily includes interest income on customer debit balances and other interest-earning assets.

⁽³⁾		Includes interest on unsecuredshort-term borrowings andshort-term other secured financings.

⁽⁴⁾		Includes interest on unsecuredlong-term borrowings andlong-term other secured financings.

⁽⁵⁾		Primarily includes interest expense on customer credit balances and other interest-bearing liabilities.


~~Note 18.~~	~~Subsequent Event~~

On July 22, 2009, Group Inc. repurchased in full from the U.S. Treasury the warrant to purchase 12.2 million shares of common stock that was issued to the U.S. Treasury pursuant to the U.S. Treasury’s TARP Capital Purchase Program. The purchase price paid by Group Inc. to the U.S. Treasury for this warrant was $1.1 billion. This amount was recorded as a reduction to shareholders’ equity.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and the Shareholders of

The Goldman Sachs Group, Inc.:

We have reviewed the accompanying condensed consolidated statement of financial condition of The Goldman Sachs Group, Inc. and its subsidiaries (the Company) as of ~~June 26,~~September 25, 2009, the related condensed consolidated statements of earnings for the three and ~~six~~nine months ended ~~June 26,~~September 25, 2009 and ~~May 30,~~August 29, 2008, the condensed consolidated statement of changes in shareholders’ equity for the ~~six~~nine months ended ~~June 26,~~September 25, 2009, the condensed consolidated statements of cash flows for the ~~six~~nine months ended ~~June 26,~~September 25, 2009 and ~~May 30,~~August 29, 2008, and the condensed consolidated statements of comprehensive income for the three and ~~six~~nine months ended ~~June 26,~~September 25, 2009 and ~~May 30,~~August 29, 2008. These condensed consolidated interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of financial condition as of November 28, 2008, and the related consolidated statements of earnings, changes in shareholders’ equity, cash flows and comprehensive income for the year then ended (not presented herein), and in our report dated January 22, 2009, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated statement of financial condition as of November 28, 2008 and the condensed consolidated statement of changes in shareholders’ equity for the year ended November 28, 2008, is fairly stated in all material respects in relation to the consolidated financial statements from which it has been derived.

/s/PricewaterhouseCoopers, LLP

New York, New York

~~August 4,~~November 3, 2009

STATISTICAL DISCLOSURES

Distribution of Assets, Liabilities and Shareholders’ Equity

The following tables set forth a summary of consolidated average balances and interest rates for the three and ~~six~~nine months ended ~~June~~September 2009 and ~~May~~August 2008:


	Three Months Ended																Three Months Ended
	June 2009								May 2008								September 2009								August 2008
						Average								Average								Average							Average
	Average					rate			Average					rate			Average					rate			Average				rate
	balance		Interest			(annualized)			balance		Interest			(annualized)			balance		Interest			(annualized)			balance		Interest		(annualized)
	(in millions, except rates)																(in millions, except rates)
Assets
Deposits with banks	$	25,040	$	18			0.29	%	$	5,300	$	38			2.88	%	$	20,036	$	10			0.20	%	$	5,459	$	32		2.36	%
U.S.		18,220		13			0.29			1,387		2			0.58			15,929		7			0.18			1,429		8		2.25
Non-U.S.		6,820		5			0.29			3,913		36			3.70			4,107		3			0.29			4,030		24		2.40
Securities borrowed, securities purchased under agreements to resell and federal funds sold		354,792		176			0.20			445,615		3,184			2.87			361,589		122			0.14			461,797		2,917		2.54
U.S.		268,925		(109	)		(0.16	)		354,145		2,194			2.49			243,005		(21	)		(0.03	)		375,682		2,093		2.24
Non-U.S.		85,867		285			1.33			91,470		990			4.35			118,584		143			0.48			86,115		824		3.85
Trading assets, at fair value ⁽¹⁾⁽²⁾		267,542		2,881			4.32			362,204		3,426			3.80			270,662		2,507			3.72			305,474		3,134		4.13
U.S.		193,117		2,231			4.63			198,807		1,824			3.69			189,556		1,772			3.75			175,578		1,924		4.41
Non-U.S.		74,425		650			3.50			163,397		1,602			3.94			81,106		735			3.63			129,896		1,210		3.75
Other interest-earning assets ⁽³⁾		125,783		395			1.26			229,684		2,850			4.99			110,724		361			1.31			198,918		2,634		5.33
U.S.		77,381		206			1.07			135,980		1,376			4.07			70,246		231			1.32			118,265		1,256		4.27
Non-U.S.		48,402		189			1.57			93,704		1,474			6.33			40,478		130			1.29			80,653		1,378		6.87

Total interest-earning assets		773,157		3,470			1.80			1,042,803		9,498			3.66			763,011		3,000			1.58			971,648		8,717		3.61
Cash and due from banks		9,428								7,275								4,583								6,520
Other noninterest-earning assets ⁽²⁾		122,478								160,248								115,933								157,031

Total assets	$	905,063							$	1,210,326							$	883,527							$	1,135,199

Liabilities
Deposits	$	42,571	$	119			1.12	%	$	29,282	$	186			2.55	%	$	41,662	$	77			0.74	%	$	30,109	$	169		2.26	%
U.S.		36,717		107			1.17			23,063		143			2.49			35,097		66			0.75			23,359		118		2.03
Non-U.S.		5,854		12			0.82			6,219		43			2.78			6,565		11			0.67			6,750		51		3.04
Securities loaned and securities sold under agreements to repurchase, at fair value		150,602		366			0.97			216,994		1,875			3.48			143,888		246			0.69			178,880		1,639		3.69
U.S.		108,002		110			0.41			120,318		905			3.03			105,453		79			0.30			89,206		731		3.30
Non-U.S.		42,600		256			2.41			96,676		970			4.04			38,435		167			1.74			89,674		908		4.07
Trading liabilities, at fair value ⁽¹⁾⁽²⁾		67,262		406			2.42			101,166		630			2.50			82,939		520			2.51			93,264		699		3.01
U.S.		35,324		86			0.98			50,028		194			1.56			47,781		187			1.57			48,340		258		2.15
Non-U.S.		31,938		320			4.02			51,138		436			3.43			35,158		333			3.80			44,924		441		3.95
Commercial paper		381		—			0.26			4,453		24			2.17			1,190		1			0.34			1,765		4		0.91
U.S.		260		—			0.22			2,968		16			2.17			228		—			0.21			755		2		1.07
Non-U.S.		121		—			0.36			1,485		8			2.17			962		1			0.42			1,010		2		0.80
Other borrowings ⁽⁴⁾⁽⁵⁾		60,017		154			1.03			104,537		424			1.63			49,853		113			0.91			99,870		430		1.73
U.S.		36,250		130			1.44			53,265		216			1.63			30,302		93			1.23			53,707		231		1.73
Non-U.S.		23,767		24			0.41			51,272		208			1.63			19,551		20			0.41			46,163		199		1.73
Long-term borrowings ⁽⁵⁾⁽⁶⁾		205,941		648			1.26			216,612		1,891			3.51			202,807		467			0.92			205,704		1,804		3.53
U.S.		194,460		596			1.23			192,750		1,683			3.51			191,347		402			0.84			182,679		1,602		3.53
Non-U.S.		11,481		52			1.82			23,862		208			3.51			11,460		65			2.27			23,025		202		3.53
Other interest-bearing liabilities ⁽⁷⁾		210,979		(265	)		(0.50	)		365,881		3,191			3.51			197,959		(114	)		(0.23	)		366,765		2,837		3.11
U.S.		146,049		(374	)		(1.03	)		222,508		770			1.39			143,630		(195	)		(0.54	)		221,487		1,497		2.72
Non-U.S.		64,930		109			0.67			143,373		2,421			6.79			54,329		81			0.60			145,278		1,340		3.71

Total interest-bearing liabilities		737,753		1,428			0.78			1,038,925		8,221			3.18			720,298		1,310			0.73			976,357		7,582		3.12
Noninterest-bearing deposits		83								—								56								4
Other noninterest-bearing liabilities ⁽²⁾		100,357								128,140								99,539								113,668

Total liabilities		838,193								1,167,065								819,893								1,090,029
Shareholders’ equity
Preferred stock		14,125								3,100								6,957								3,100
Common stock		52,745								40,161								56,677								42,070

Total shareholders’ equity		66,870								43,261								63,634								45,170
Total liabilities and shareholders’ equity	$	905,063							$	1,210,326							$	883,527							$	1,135,199

Interest rate spread							1.02	%							0.48	%							0.85	%						0.49	%
Net interest income and net yield on interest-earning assets			$	2,042			1.06				$	1,277			0.49				$	1,690			0.89				$	1,135		0.47
U.S.				1,686			1.21					1,469			0.86					1,357			1.05					842		0.50
Non-U.S.				356			0.66					(192	)		(0.22	)				333			0.55					293		0.39
Percentage of interest-earning assets andinterest-bearing liabilities attributable tonon-U.S. operations ⁽⁸⁾
Assets							27.87	%							33.80	%							32.01	%						30.95	%
Liabilities							24.49								36.00								23.11							36.55

STATISTICAL DISCLOSURES


	Six Months Ended															Nine Months Ended
	June 2009								May 2008							September 2009								August 2008
						Average							Average								Average							Average
	Average					rate			Average				rate			Average					rate			Average				rate
	balance		Interest			(annualized)			balance		Interest		(annualized)			balance		Interest			(annualized)			balance		Interest		(annualized)
	(in millions, except rates)															(in millions, except rates)
Assets
Deposits with banks	$	22,960	$	40			0.35	%	$	5,359	$	87		3.26	%	$	21,986	$	50			0.30	%	$	5,392	$	119		2.96	%
U.S.		18,321		26			0.28			1,403		12		1.72			17,524		33			0.25			1,411		20		1.90
Non-U.S.		4,639		14			0.61			3,956		75		3.81			4,462		17			0.51			3,981		99		3.33
Securities borrowed, securities purchased under agreements to resell and federal funds sold		355,035		727			0.41			416,489		7,314		3.53			357,220		849			0.32			431,592		10,231		3.18
U.S.		266,682		52			0.04			330,835		5,606		3.41			258,790		31			0.02			345,784		7,699		2.99
Non-U.S.		88,353		675			1.53			85,654		1,708		4.01			98,430		818			1.11			85,808		2,532		3.96
Trading assets, at fair value ⁽¹⁾⁽²⁾		281,637		6,039			4.30			372,556		7,143		3.86			277,978		8,546			4.11			350,195		10,277		3.93
U.S.		205,771		4,807			4.69			204,059		4,019		3.96			200,365		6,579			4.39			194,565		5,943		4.10
Non-U.S.		75,866		1,232			3.26			168,497		3,124		3.73			77,613		1,967			3.39			155,630		4,334		3.73
Other interest-earning assets ⁽³⁾		142,857		1,026			1.44			243,218		6,199		5.13			132,146		1,387			1.40			228,451		8,833		5.18
U.S.		93,725		568			1.22			139,951		2,539		3.65			85,898		799			1.24			132,722		3,795		3.83
Non-U.S.		49,132		458			1.87			103,267		3,660		7.13			46,248		588			1.70			95,729		5,038		7.06

Total interest-earning assets		802,489		7,832			1.96			1,037,622		20,743		4.02			789,330		10,832			1.83			1,015,630		29,460		3.89
Cash and due from banks		6,344								7,062							5,757								6,881
Other noninterest-earning assets ⁽²⁾		133,510								148,435							127,651								151,301

Total assets	$	942,343							$	1,193,119						$	922,738							$	1,173,812

Liabilities
Deposits(5)	$	41,049	$	269			1.31	%	$	25,090	$	386		3.09	%	$	41,212	$	346			1.12	%	$	26,762	$	555		2.78	%
U.S.		35,493		243			1.37			21,065		332		3.17			35,320		309			1.17			21,829		450		2.76
Non-U.S.		5,556		26			0.94			4,025		54		2.70			5,892		37			0.84			4,933		105		2.85
Securities loaned and securities sold under agreements to repurchase, at fair value		168,946		911			1.08			219,811		4,486		4.10			160,593		1,157			0.96			206,168		6,125		3.98
U.S.		122,369		259			0.42			123,344		2,425		3.95			116,730		338			0.39			111,965		3,156		3.78
Non-U.S.		46,577		652			2.81			96,467		2,061		4.30			43,863		819			2.50			94,203		2,969		4.23
Trading liabilities, at fair value ⁽¹⁾⁽²⁾		65,273		869			2.67			107,146		1,327		2.49			71,162		1,389			2.61			102,519		2,026		2.65
U.S.		33,166		238			1.44			55,468		448		1.62			38,038		425			1.49			53,092		706		1.78
Non-U.S.		32,107		631			3.94			51,678		879		3.42			33,124		964			3.89			49,427		1,320		3.58
Commercial paper		525		3			1.15			6,494		98		3.03			747		4			0.72			4,918		102		2.78
U.S.		322		3			1.87			5,226		83		3.19			291		3			1.38			3,736		85		3.05
Non-U.S.		203		—			0.19			1,268		15		2.38			456		1			0.29			1,182		17		1.93
Other borrowings ⁽⁴⁾ ⁽⁵⁾		67,122		391			1.17			104,240		887		1.71
Other borrowings ⁽⁴⁾⁽⁵⁾																	61,366		504			1.10			102,783		1,317		1.72
U.S.		42,701		337			1.58			52,041		638		2.47			38,569		430			1.49			52,596		869		2.22
Non-U.S.		24,421		54			0.44			52,199		249		0.96			22,797		74			0.43			50,187		448		1.20
Long-term borrowings ⁽⁵⁾ ⁽⁶⁾		203,337		1,597			1.58			207,453		4,260		4.13
Long-term borrowings ⁽⁵⁾⁽⁶⁾																	203,160		2,064			1.36			206,870		6,064		3.93
U.S.		191,978		1,470			1.54			184,853		3,842		4.18			191,768		1,872			1.31			184,128		5,444		3.96
Non-U.S.		11,359		127			2.24			22,600		418		3.72			11,392		192			2.25			22,742		620		3.65
Other interest-bearing liabilities ⁽⁷⁾		218,758		(157	)		(0.14	)		350,275		7,071		4.06			211,599		(271	)		(0.17	)		355,772		9,908		3.73
U.S.		152,450		(447	)		(0.59	)		212,636		2,894		2.74			149,346		(642	)		(0.57	)		215,587		4,391		2.73
Non-U.S.		66,308		290			0.88			137,639		4,177		6.10			62,253		371			0.80			140,185		5,517		5.28

Total interest-bearing liabilities		765,010		3,883			1.02			1,020,509		18,515		3.65			749,839		5,193			0.93			1,005,792		26,097		3.48
Noninterest-bearing deposits		83								—							74								1
Other noninterest-bearing liabilities ⁽²⁾		112,083								129,534							108,036								124,280

Total liabilities		877,176								1,150,043							857,949								1,130,073
Shareholders’ equity
Preferred stock		15,139								3,100							12,685								3,100
Common stock		50,028								39,976							52,104								40,639

Total shareholders’ equity		65,167								43,076							64,789								43,739
Total liabilities and shareholders’ equity	$	942,343							$	1,193,119						$	922,738							$	1,173,812

Interest rate spread							0.94	%						0.37	%							0.90	%						0.41	%
Net interest income and net yield on interest-earning assets			$	3,949			0.99				$	2,228		0.43				$	5,639			0.96				$	3,363		0.44
U.S.				3,350			1.15					1,514		0.45					4,707			1.12					2,356		0.47
Non-U.S.				599			0.55					714		0.40					932			0.55					1,007		0.40
Percentage of interest-earning assets andinterest-bearing liabilities attributable tonon-U.S. operations ⁽⁸⁾
Assets							27.16	%						34.83	%							28.73	%						33.59	%
Liabilities							24.38							35.85								23.98							36.08

STATISTICAL DISCLOSURES


⁽¹⁾	Consists of cash trading instruments, including equity securities and convertible debentures.

⁽²⁾	Derivative instruments are included in other noninterest-earning assets and other noninterest-bearing liabilities.

⁽³⁾	Primarily consists of cash and securities segregated for regulatory and other purposes and receivables from customers and counterparties.

⁽⁴⁾	Consists ofshort-term other secured financings and unsecuredshort-term borrowings, excluding commercial paper.

⁽⁵⁾	Interest rates include the effects of ~~hedging in accordance with SFAS No. 133.~~interest rate swaps accounted for as hedges.

⁽⁶⁾	Consists oflong-term other secured financings and unsecuredlong-term borrowings.

⁽⁷⁾	Primarily consists of payables to customers and counterparties.

⁽⁸⁾	Assets, liabilities and interest are attributed to U.S. andnon-U.S. based on the location of the legal entity in which the assets and liabilities are held.

STATISTICAL DISCLOSURES

Ratios

The following table sets forth selected financial ratios:


	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June			May			June			May			September			August			September			August
	2009			2008			2009			2008			2009			2008			2009			2008
Annualized net earnings to average assets		1.5	%		0.7	%		1.1	%		0.6	%		1.4	%		0.3	%		1.2	%		0.5	%
Annualized return on average common shareholders’ equity ⁽¹⁾		23.0	⁽³⁾		20.4			18.3	⁽³⁾		17.6			21.4			7.7			19.2	⁽³⁾		14.2
Annualized return on average total shareholders’ equity ⁽²⁾		20.5			19.3			16.1			16.7			20.0			7.5			17.4			13.5
Total average equity to average assets		7.4			3.6			6.9			3.6			7.2			4.0			7.0			3.7


⁽¹⁾		Based on annualized net earnings applicable to common shareholders divided by average monthly common shareholders’ equity.

⁽²⁾		Based on annualized net earnings divided by average monthly total shareholders’ equity.

⁽³⁾		Theone-time preferred dividend of $426 million related to the repurchase of the ~~firm’s~~ TARP Series H preferred stock (calculated as the difference between the carrying value and the redemption value of the preferred stock) in the second quarter of 2009 was not annualized in the calculation of annualized net earnings applicable to common shareholders for the nine months ended September 2009 since it has no impact on other quarters in the year.

Cross-border Outstandings

Cross-border outstandings are based upon the Federal Financial Institutions Examination Council’s (FFIEC) regulatory guidelines for reporting cross-border risk. Claims include cash, receivables, securities purchased under agreements to resell, securities borrowed and cash trading instruments, but exclude derivative instruments and commitments. Securities purchased under agreements to resell and securities borrowed are presented based on the domicile of the counterparty, without reduction for related securities collateral held.

The following table sets forth cross-border outstandings for each country in which cross-border outstandings exceed 0.75% of consolidated assets as of ~~June~~September 2009 in accordance with the FFIEC guidelines:


	Banks		Governments		Other		Total		Banks		Governments		Other		Total
	(in millions)								(in millions)
Country
United Kingdom	$	5,757	$	6,604	$	40,126	$	52,487	$	6,742	$	5,602	$	44,108	$	56,452
Japan		18,301		230		4,293		22,824		18,729		116		3,819		22,664
Germany		1,893		6,784		12,559		21,236
Cayman Islands		36		1		15,147		15,184		61		—		17,542		17,603
France		4,103		3,246		4,878		12,227		4,896		5,723		5,045		15,664
Germany										2,194		6,629		6,527		15,350
Italy		692		8,002		533		9,227		397		8,944		700		10,041
China		7,359		29		1,617		9,005		7,725		105		1,966		9,796
Ireland										6,399		106		2,049		8,554
Switzerland										1,431		16		5,594		7,041


Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations

INDEX


	Page
	No.

Introduction		82

Executive Overview		84

Business Environment		87

Critical Accounting Policies		88

Fair Value		88

Goodwill and Identifiable Intangible Assets		9796

Use of Estimates		9998

Results of Operations		9998

Financial Overview		~~100~~99

Segment Operating Results		~~106~~104

Geographic Data		~~113~~111

Off-Balance-Sheet Arrangements		~~113~~112

Equity Capital		~~114~~113

Contractual Obligations		~~119~~118

Market Risk		~~121~~120

Credit Risk		~~126~~125

Derivatives		~~127~~126

Liquidity and Funding Risk		~~131~~130

Recent Accounting Developments		~~138~~137

Cautionary Statement Pursuant to the U.S. Private Securities Litigation Reform Act of 1995		~~139~~138

Introduction

The Goldman Sachs Group, Inc. (Group Inc.) is a leading global financial services firm providing investment banking, securities and investment management services to a substantial and diversified client base that includes corporations, financial institutions, governments andhigh-net-worth individuals. Founded in 1869, the firm is headquartered in New York and maintains offices in London, Frankfurt, Tokyo, Hong Kong and other major financial centers around the world.

Our activities are divided into three segments:


	•	Investment Banking. We provide a broad range of investment banking services to a diverse group of corporations, financial institutions, investment funds, governments and individuals.

	•	Trading and Principal Investments. We facilitate client transactions with a diverse group of corporations, financial institutions, investment funds, governments and individuals and take proprietary positions through market making in, trading of and investing in fixed income and equity products, currencies, commodities and derivatives on these products. In addition, we engage inmarket-making and specialist activities on equities and options exchanges, and we clear client transactions on major stock, options and futures exchanges worldwide. In connection with our merchant banking and other investing activities, we make principal investments directly and through funds that we raise and manage.

	•	Asset Management and Securities Services. We provide investment advisory and financial planning services and offer investment products (primarily through separately managed accounts and commingled vehicles, such as mutual funds and private investment funds) across all major asset classes to a diverse group of institutions and individuals worldwide and provide prime brokerage services, financing services and securities lending services to institutional clients, including hedge funds, mutual funds, pension funds and foundations, and tohigh-net-worth individuals worldwide.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our Annual Report onForm 10-K for the fiscal year ended November 28, 2008. References herein to our Annual Report onForm 10-K are to our Annual Report onForm 10-K for the fiscal year ended November 28, 2008.

When we use the terms “Goldman Sachs,” “we,” “us” and “our,” we mean Group Inc., a Delaware corporation, and its consolidated subsidiaries.

In connection with becoming a bank holding company, we were required to change our fiscalyear-end from November to December. This change in our fiscal year-end resulted in aone-month transition period that began on November 29, 2008 and ended on December 26, 2008. Financial information for this fiscal transition period is included in our Quarterly Report onForm 10-Q for the quarter ended March 27, 2009. On April 13, 2009, the Board of Directors of Group Inc. (the Board) approved a change in our fiscal year-end from the last Friday of December to December 31, beginning ~~with fiscal~~in the fourth quarter of 2009. Fiscal 2009 began on December 27, 2008 and will end on December 31, 2009. ~~Our third fiscal quarter in 2009 will end on the last Friday of September. Beginning in the fourth quarter of 2009, our fiscal year will end on December 31.~~

In “Results of Operations” below, we compare the three and ~~six~~nine month periods, as applicable, ended ~~June 26,~~September 25, 2009 with the previously reported three and ~~six~~nine month periods ended ~~May 30,~~August 29, 2008. Financial information for the three and ~~six~~nine months ended ~~June 27,~~September 26, 2008 has not been included in thisForm 10-Q for the following reasons: (i) the three and ~~six~~nine months ended ~~May 30,~~August 29, 2008 provide a meaningful comparison for the three and ~~six~~nine months ended ~~June 26,~~September 25, 2009; (ii) there are no significant factors, seasonal or other, that would impact the comparability of information if the results for the three and ~~six~~nine months ended ~~June 27,~~September 26, 2008 were presented in lieu of results for the three and ~~six~~nine months ended ~~May 30,~~August 29, 2008; and (iii) it was not practicable or cost justified to prepare this information.

All references to ~~June~~September 2009 and ~~May~~August 2008, unless specifically stated otherwise, refer to our~~three-month~~ fiscal periods ended, or the dates, as the context requires, ~~June 26,~~September 25, 2009 and ~~May 30,~~August 29, 2008, respectively. All references to November 2008, unless specifically stated otherwise, refer to our fiscal year ended, or the date, as the context requires, November 28, 2008. All references to 2009, unless specifically stated otherwise, refer to our fiscal year ending, or the date, as the context requires, December 31, 2009.

Executive Overview

Three Months Ended ~~June~~September 2009 versus ~~May~~August 2008. Our diluted earnings per common share were ~~$4.93~~$5.25 for the ~~second~~third quarter ended ~~June 26,~~September 25, 2009 compared with ~~$4.58~~$1.81 for the ~~second~~third quarter ended ~~May 30,~~August 29, 2008. Annualized return on average common shareholders’ equity (ROE) ⁽¹⁾ was ~~23.0%~~21.4% for the ~~second~~third quarter of 2009. During the quarter, the firm repurchased the preferred stock that was issued to the U.S. Department of the Treasury (U.S. Treasury) pursuant to its TARP Capital Purchase Program for an aggregate purchase price of $10.04 billion (including accrued dividends). The repurchase resulted in a~~one-time~~ ~~preferred dividend of $426 million, which is included in our results for the second quarter of 2009. Excluding thisone-time~~ ~~preferred dividend, diluted earnings per common share were $5.71~~ ⁽²⁾ ~~and annualized ROE was 23.8%~~ ⁽²⁾ ~~for the second quarter of 2009. In addition, the firm completed a public offering of common stock for proceeds of $5.75 billion.~~ During the quarter, book value per common share increased ~~approximately 8%~~4% to ~~$106.41~~$110.75 and tangible book value per common share increased 5% to $101.39. On July 22, 2009, we repurchased in full from the U.S. Department of the Treasury (U.S. Treasury) the warrant to purchase 12.2 million shares of common stock that was issued to the U.S. Treasury pursuant to its TARP Capital Purchase Program. The purchase price paid to the U.S. Treasury for this warrant was $1.1 billion and was recorded as a reduction to common shareholders’ equity. Excluding this repurchase, book value and tangible book value per common share ⁽³⁾⁽²⁾ increased ~~approximately 10% to $96.94.~~ 6% and 7%, respectively, during the quarter.

Our Tier 1 capital ratio under Basel I ⁽⁴⁾⁽³⁾ was 14.5% at the end of the third quarter of 2009, up from 13.8% at the end of the second quarter of ~~2009, up from 13.7%~~2009. Our Tier 1 common ratio ⁽³⁾ under Basel I was 11.6% at the end of the ~~first~~third quarter of ~~2009. Our Tier 1 capital ratio under Basel II~~ ⁽⁴⁾ ~~was 16.1%~~2009, up from 10.9% at the end of the second ~~quarter of 2009, up from 16.0% at the end of the first~~ quarter of 2009.

Our results for the ~~second~~third quarter of 2009 reflected significantly higher net revenues in Trading and Principal ~~Investments compared with the second quarter of 2008, partially offset by significantly lower net revenues in Asset Management and Securities Services and lower net revenues in Investment Banking.~~Investments. The increase in Trading and Principal Investments reflected ~~particularly~~ strong results in Fixed Income, Currency and Commodities (FICC), Equities and ~~Equities,~~Principal Investments, which were ~~both~~each significantly higher ~~than the second~~compared with a very weak third quarter of 2008. The increase in FICC reflected ~~particularly~~ strong performances in credit products and mortgages, which were significantly higher compared with a difficult third quarter of 2008. Net revenues in interest rate products were also strong and ~~currencies, reflecting strength in the client franchise. In addition, net revenues in both mortgages and commodities were~~significantly higher compared with the ~~second~~third quarter of ~~2008. In~~2008, while net revenues in commodities and currencies were lower compared with the ~~second quarter of 2009, mortgages included a loss of approximately $700 million on commercial mortgage loans.~~same prior year period. During the quarter, FICC operated in an environment characterized by ~~strong client-driven~~solid client activity ~~particularly~~levels, tighter credit spreads and a general improvement in ~~more liquid products, favorable market opportunities and tighter corporate credit spreads.~~asset values. The increase in Equities reflected ~~significantly higher~~strong net revenues in derivatives, ~~and, to~~which were significantly higher compared with the third quarter of 2008, as well as a ~~lesser extent, principal strategies.~~solid performance in shares. In addition, net revenues in ~~shares were solid, but essentially unchanged~~principal strategies improved significantly compared with ~~the second~~a difficult third quarter of 2008. Commissions declined compared with the ~~second~~third quarter of 2008. During the quarter, Equities operated in an environment generally characterized by ~~solid client-driven activity, favorable market opportunities,~~ a significant increase in global equity prices, favorable market opportunities and a decline in volatility levels. Results in Principal Investments ~~were also higher compared with the second quarter of 2008, and~~ included a gain of ~~$948~~$977 million from corporate principal investments, a gain of $344 million related to our investment in the ordinary shares of Industrial and Commercial Bank of China Limited (ICBC)~~, a gain of $343 million from corporate principal investments~~ and a loss of ~~$499~~$66 million from real estate principal investments.

~~The decline~~Net revenues in Asset Management and Securities Services ~~reflected~~declined significantly compared with the third quarter of 2008, due to significantly lower net revenues in ~~both Asset Management and~~ Securities Services, ~~compared with the second quarter of 2008.~~as well as lower net revenues in Asset Management. The decrease in Securities Services primarily reflected the impact of lower customer ~~balances compared with the second quarter of 2008.~~balances. The decrease in Asset Management ~~principally~~primarily reflected the impact of ~~lower~~changes in the composition of assets under management, due to market depreciation since the end of the second quarter of 2008. During the quarter, assets under management increased $48 billion to $819 billion, due to $42 billion of market appreciation, primarily in equity and fixed income assets, and $6 billion of net inflows.managed.

~~The decline~~Net revenues in Investment Banking ~~reflected~~declined significantly compared with the third quarter of 2008, reflecting significantly lower net revenues in Financial Advisory, ~~partially offset by significantly higher~~as well as lower net revenues in ~~Underwriting compared with the second quarter of 2008.~~Underwriting. The decrease in Financial Advisory primarily reflected a significant decline inindustry-wide completed mergers and acquisitions. The ~~increase~~decrease in Underwriting ~~reflected~~was due to significantly lower net revenues in debt underwriting, partially offset by higher net revenues in equity underwriting. The decrease in debt underwriting ~~which achieved its highest quarterly performance, as well as higher~~primarily reflected a decline in net revenues ~~in debt underwriting.~~from leveraged loans. The increase in equity underwriting primarily reflected ~~very strong client activity. The~~an increase in ~~debt underwriting primarily reflected higher net revenues frominvestment-grade~~industry-wide ~~and municipal activity.~~initial public offerings. Our investment banking transaction backlog ~~decreased~~increased significantly during the quarter. ⁽⁵⁾⁽⁴⁾

~~Six~~Nine Months Ended ~~June~~September 2009 versus ~~May~~August 2008. Our diluted earnings per common share were ~~$8.42~~$13.74 for the ~~six~~nine months ended ~~June 26,~~September 25, 2009 compared with ~~$7.81~~$9.62 for the ~~six~~nine months ended ~~May 30,~~August 29, 2008. Annualized ROE ⁽¹⁾ was ~~18.3%~~19.2% for the first ~~half of 2009. Excluding theone-time~~ ~~preferred dividend of $426 million related to the repurchase of our TARP preferred stock, diluted earnings per common share were $9.23~~ ⁽²⁾ ~~and annualized ROE was 19.2%~~ ⁽²⁾ ~~for the first half~~nine months of 2009.

Our results for the first ~~half~~nine months of 2009 reflected significantly higher net revenues in Trading and Principal ~~Investments, partially offset by significantly lower net revenues in Asset Management and Securities Services, and Investment Banking.~~Investments. The increase in Trading and Principal Investments reflected significantly higher net revenues in FICC, which were more than double the amount in the first ~~half~~nine months of 2008, as well as significantly higher net revenues in ~~Equities, partially offset by weak results~~Equities. Results in Principal ~~Investments.~~Investments were also significantly higher compared with a difficult first nine months of 2008. The increase in FICC reflected particularly strong ~~results~~performances in credit products, mortgages and interest rate products, ~~and, to a lesser extent, commodities, reflecting strength in the client franchise. In addition, results in mortgages~~which were each significantly higher compared with the first nine months of 2008. During the first nine months of 2009, mortgages included a ~~difficult~~loss of approximately $1.6 billion on commercial mortgage loans. Net revenues in commodities were strong and higher compared with the first ~~half~~nine months of ~~2008, while net~~2008. Net revenues in currencies were solid, but lower compared with the first ~~half~~nine months of 2008. ~~In the first half of 2009, mortgages included a loss of approximately $1.5 billion on commercial mortgage loans.~~ During the first ~~half~~nine months of 2009, FICC operated in ana generally favorable environment characterized by strong client-driven activity, particularly in more liquid ~~products,~~products. In addition, during our second and ~~favorable market opportunities.~~third quarters of 2009, asset values generally improved and corporate credit spreads tightened. The increase in Equities reflected particularly strong net revenues in derivatives, ~~as well as~~which were significantly higher ~~results in principal strategies. These increases were partially offset by lower net revenues in shares~~ compared with the first ~~half~~nine months of 2008. In addition, net revenues in principal strategies improved significantly compared with a difficult first nine months of 2008. Net revenues in shares were solid, but essentially unchanged compared with the first nine months of 2008. Commissions declined significantly compared with the first ~~half~~nine months of 2008. During the first ~~half~~nine months of 2009, Equities operated in an environment ~~generally~~ characterized by ana significant increase in global equity prices, ~~(principally during our second quarter)~~favorable market opportunities and ~~high, but declining, levels of volatility.~~a significant decline in volatility levels. In the first ~~half~~nine months of 2009, results in Principal Investments ~~reflected net losses~~included a gain of $1.14 billion ~~from real estate principal investments and $278 million from corporate principal investments, partially offset by a gain of $797 million~~ related to our investment in the ordinary shares of ~~ICBC.~~ICBC, a gain of $699 million from corporate principal investments and a loss of $1.21 billion from real estate principal investments.

~~The decline~~Net revenues in Asset Management and Securities Services ~~reflected significant decreases~~decreased significantly compared with the first nine months of 2008, reflecting significantly lower net revenues in both Securities Services and Asset ~~Management and Securities Services. The decrease in Asset Management primarily reflected the impact of lower assets under management, due to market depreciation during the second half of 2008.~~Management. The decrease in Securities Services primarily reflected the impact of lower customer balances. The decrease in Asset Management primarily reflected the impact of changes in the composition of assets managed.

~~The decline~~Net revenues in Investment Banking ~~primarily reflected~~decreased significantly compared with the first nine months of 2008, reflecting significantly lower net revenues in Financial Advisory, ~~due to~~as well as lower net revenues in Underwriting. The decrease in Financial Advisory reflected a significant decline inindustry-wide completed mergers and acquisitions. ~~Net revenues~~The decrease in Underwriting ~~were slightly lower compared with the first half of 2008, primarily due to~~reflected significantly lower net revenues in debt underwriting, ~~reflecting a decrease in leveraged finance activity. Net~~partially offset by higher net revenues in equity underwriting. The decrease in debt underwriting ~~were essentially unchanged compared with the first half of 2008.~~was primarily due to a decline in net revenues from leveraged loans.

Our business, by its nature, does not produce predictable earnings. Our results in any given period can be materially affected by conditions in global financial markets and economic conditions generally. For a further discussion of the factors that may affect our future operating results, see “Risk Factors” in Part I, Item 1A of our Annual Report onForm 10-K.


⁽¹⁾	Annualized ~~return on average common shareholders’ equity (ROE)~~ROE is computed by dividing annualized net earnings applicable to common shareholders by average monthly common shareholders’ equity. Theone-time preferred dividend of $426 million related to the repurchase of ~~our~~the TARP Series H preferred stock (calculated as the difference between the carrying value and the redemption value of the preferred stock) in the second quarter of 2009 was not annualized in the calculation of annualized net earnings applicable to common shareholders for the nine months ended September 2009 since it has no impact on other quarters in the year. See“— Results of Operations — Financial Overview” below for further information regarding our calculation of ROE.

⁽²⁾	~~We believe that presenting our results excluding the impact of theone-time~~ ~~preferred dividend of $426 million related to the repurchase of our TARP preferred stock is meaningful because it increases the comparability ofperiod-to-period~~ ~~results. See “— Results of Operations — Financial Overview” below for further information regarding our calculation of diluted earnings per common share and ROE excluding the impact of thisone-time~~ ~~dividend.~~

⁽³⁾	Tangible common shareholders’ equity equals total shareholders’ equity less preferred stock, goodwill and identifiable intangible assets. 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 (RSUs) granted to employees with no future service requirements. We believe that tangible common shareholders’ equity is meaningful because it is one of the measures that we and investors use to assess capital adequacy. ~~See~~In addition, we believe that presenting the change in book value and tangible book value per common share excluding the~~“— Equity~~one-time ~~Capital — Capital Ratios and Metrics” below for further information regarding tangible common shareholders’ equity.~~impact of the repurchase of our TARP warrant provides a meaningfulperiod-to-period comparison of these measures.

The following table sets forth the reconciliation of total shareholders’ equity to tangible common shareholders’ equity:


		As of September 2009
					Add back:		Excluding
					impact of		impact of
		As			TARP warrant		TARP warrant
		reported			repurchase		repurchase
		(in millions)
Total shareholders’ equity		$	65,354		$	1,100	$	66,454
Deduct:	Preferred stock		(6,957	)		—		(6,957	)

Common shareholders’ equity			58,397			1,100		59,497
Deduct:	Goodwill and identifiable intangible assets		(4,934	)		—		(4,934	)

Tangible common shareholders’ equity		$	53,463		$	1,100	$	54,563


⁽⁴⁾⁽³⁾	As a bank holding company, we are subject to consolidated regulatory capital requirements administered by the Federal Reserve Board. We are reporting our ~~Tier 1~~ capital ~~ratio~~ratios calculated in accordance with the regulatory capital requirements currently applicable to bank holding companies, which are based on the Capital Accord of the Basel Committee on Banking Supervision (Basel I). The ~~calculation of our~~ Tier 1 capital ratio ~~under Basel I includes certain market risk measures that are under review by the Federal Reserve Board, as part of our transition to bank holding company status. The calculation of our~~equals Tier 1 capital divided by totalrisk-weighted assets. The Tier 1 common ratio ~~has not been reviewed with the Federal Reserve Board and, accordingly, may be revised in subsequent filings. We also continue to disclose our~~equals Tier 1 capital ~~ratio calculated in accordance with the capital guidelines applicable~~less preferred stock and junior subordinated debt issued to ~~us when we were regulated~~trusts, divided by the SEC as a Consolidated Supervised Entity (CSE). These guidelines were generally consistent with those set out in the Revised Framework for the International Convergence of Capital Measurement and Capital Standards issued by the Basel Committee on Banking Supervision (Basel II).risk-weighted assets. See“— Equity ~~Capital”~~Capital — Capital Ratios and Metrics” below for a further ~~discussion of~~information regarding our capital ratios.

⁽⁵⁾⁽⁴⁾	Our investment banking transaction backlog represents an estimate of our future net revenues from investment banking transactions where we believe that future revenue realization is more likely than not.

Business Environment

Global economic conditions ~~remained weak, but showed some signs of stabilization~~generally improved during our ~~second~~third quarter of fiscal ~~2009. Although~~2009 as real gross domestic product (GDP) ~~continued to decline~~increased in most ~~major economies, the decline was significantly less than in the first quarter of fiscal 2009, and economic activity in a number of emerging economies improved. Global~~economies. Most global equity markets increased significantly during our ~~second~~third quarter and volatility levels across fixed income and equity markets generally declined. In addition, corporate and mortgage credit spreads tightened during our ~~second~~third quarter. ~~The price of crude oil increased, but remained well below the levels reached in fiscal 2008.~~ The U.S. dollar depreciated against the ~~British pound, the~~ Euro and the Japanese ~~yen.~~yen, but appreciated against the British pound. In investment banking,industry-wide mergers and acquisitions activity remained ~~weak, while~~weak.~~industry-wide~~Industry-wide equity andequity-related offerings ~~increased significantly~~declined during our third quarter as the second quarter ~~particularly~~included significant activity in the financial sector. However,industry-wide initial public offerings increased during our third quarter.

In the U.S., real GDP increased during our third quarter. A slowing in the pace of inventory liquidation, an increase in residential construction and continued fiscal stimulus helped support economic growth. However, unemployment levels continued to ~~decline during our second quarter,~~rise, although at a slower pace compared with ~~our~~the first ~~quarter. Residential investment~~half of the year. Measures of core inflation continued to contract due to ongoing weakness in the housing market and the rate of unemployment continued to rise at a rapid pace. However, the fiscal stimulus package contributed to an increase in government expenditure. The rate of inflation declineddecline during our ~~second~~third quarter, reflecting ~~rising~~significant excess production capacity. The U.S. Federal Reserve maintained its federal funds rate at a target range of zero to 0.25% during our ~~second~~third quarter. The10-year U.S. Treasury note yield ended our ~~second~~third quarter 7418 basis points ~~higher~~lower at ~~3.52%~~3.34%. In equity markets, ~~the NASDAQ Composite Index, the S&P 500 Index and~~ the Dow Jones Industrial Average increased by ~~19%, 13%~~15% and ~~9%, respectively,~~the NASDAQ Composite Index and the S&P 500 Index each increased by 14% during our ~~second~~third quarter.

In the Eurozone economies, real GDP ~~declined~~appeared to increase during our ~~second~~third quarter ~~as business investment, exports and consumer spending remained weak. Labor markets also remained weak, with the rate of unemployment rising~~due to a slowing in the ~~major economies. However,~~pace of inventory liquidation and an improvement in industrial output. In addition, surveys of business and consumer confidence ~~recovered from the very low levels~~continued to improve. The rate of inflation declined during our ~~first~~third quarter. ~~In response to a continued challenging economic outlook and declining inflation, the~~The European Central Bank ~~further lowered~~kept its main refinancing operations rate ~~by 50 basis points to~~at 1.00%~~. The~~ and the Euro appreciated by 6%4% against the U.S. dollar. In the U.K., ~~real GDP~~economic conditions also appeared to ~~decline~~improve during ~~the~~our third quarter, partially due to ~~weaker consumer and business investment spending, partially offset by~~ stronger exports. The Bank of England maintained its official bank rate at 0.50% during the ~~quarter. After a period of sustained weakness over the previous two quarters,~~quarter and the British pound ~~appreciated~~depreciated by ~~15%~~4% against the U.S. dollar. Equity markets in both the U.K. and continental Europe increased significantly, ~~during our second quarter,~~ whilelong-term government bond yields ~~increased.~~decreased during our third quarter.

In Japan, real GDP appeared to increase during our ~~second quarter, after a significant decline in the first~~third quarter. ~~A recovery~~Growth was driven by strong public sector investment spending and an increase in exports, partially offset by continued weak capital investment spending. Consumer spending increased slightly despite an increase in unemployment and ~~consumer spending more than offset continued weakness in business investment. Business confidence improved slightly but remained at low levels and the rate of unemployment continued to rise.~~declining average wages. Measures of inflation ~~declined during the quarter.~~continued to decline. The Bank of Japan left its target overnight call rate unchanged at 0.10%, while the yield on10-year Japanese government bonds ~~increased slightly~~decreased during the quarter. The Japanese yen appreciated by 3%6% against the U.S. dollar and the Nikkei 225 Index increased ~~14%~~4% during our ~~second~~third quarter.

In China, real GDP growth ~~accelerated~~remained strong during our ~~second quarter as~~third quarter. Growth was driven by strong ~~domestic demand, led by high levels of~~ consumption and fixed investment spending, ~~helped~~partially due to ~~offset weak export demand.~~rapid credit growth. Measures of inflation continued to decline during the quarter. The People’s Bank of China left itsone-year benchmark lending rate unchanged at 5.31%. The Chinese yuan remained essentially unchanged against the U.S. dollar and the Shanghai Composite Index ~~increased 23%~~decreased 3% during our ~~second~~third quarter. Equity markets in Hong Kong and Korea ~~also~~ ended the quarter significantly higher. In India, ~~the pace of~~ economic growth ~~also accelerated due to an increase in~~remained solid, supported by solid business investment and consumer spending. The Indian rupee appreciated ~~by 5%~~slightly against the U.S. dollar during our ~~second~~third quarter and equity markets in India ended the quarter significantly higher.

Critical Accounting Policies

Fair Value

The use of fair value to measure financial instruments, with related ~~unrealized~~ gains or losses generally recognized in “Trading and principal investments” in our condensed consolidated statements of earnings, is fundamental to our financial statements and our risk management processes and is our most critical accounting policy. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price) ~~in accordance with SFAS No. 157, “Fair Value Measurements.”~~. Financial assets are marked to bid prices and financial liabilities are marked to offer prices.

~~In October 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP)No. FAS 157-3,~~ ~~“Determining the~~ Fair Value of a Financial Asset When the Market for That Asset Is Not Active,” which specifies that it is acceptable to use inputs based on management estimates or assumptions, or for management to make adjustments to observable inputs, to determine fair value ~~when markets are~~measurements do not ~~active and relevant observable inputs are not available. In April 2009, the FASB issued FSPNo. FAS 157-4,~~ “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” which provides additional guidance for estimating fair value when the volume and level of activity for an asset or liability have decreased significantly. Our fair value measurement policies are consistent with the guidance in both FSP~~No. FAS 157-3~~ ~~and FSPNo. FAS 157-4.~~ ~~See Note 2 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report onForm 10-Q~~ ~~for further information regarding FSPNo. FAS 157-4.~~include transaction costs.

Substantially all trading assets and trading liabilities are reflected in our condensed consolidated statements of financial condition at fair ~~value, pursuant principally to:~~


	•	~~SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities;”~~

	•	~~specialized industry accounting forbroker-dealers~~ ~~and investment companies;~~

	•	~~SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities;” or~~

	•	the fair value option under either SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140,” or SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” (i.e., the fair value option).

value. In determining fair value, we separate our “Trading assets, at fair value” and “Trading liabilities, at fair value” into two categories: cash instruments and derivative contracts, as set forth in the following table:

Trading Instruments by Category
(in millions)


	As of June 2009						As of November 2008						As of September 2009						As of November 2008
	Trading			Trading			Trading			Trading			Trading			Trading			Trading			Trading
	Assets, at			Liabilities, at			Assets, at			Liabilities, at			Assets, at			Liabilities, at			Assets, at			Liabilities, at
	Fair Value			Fair Value			Fair Value			Fair Value			Fair Value			Fair Value			Fair Value			Fair Value
Cash trading instruments	$	244,617		$	77,819		$	186,231		$	57,143		$	241,752		$	85,252		$	186,231		$	57,143
ICBC		6,269	⁽¹⁾		—			5,496	⁽¹⁾		—			6,875	⁽¹⁾		—			5,496	⁽¹⁾		—
SMFG		1,330			1,327	⁽⁴⁾		1,135			1,134	⁽⁴⁾		1,091			1,091	⁽⁴⁾		1,135			1,134	⁽⁴⁾
Other principal investments		13,009	⁽²⁾		—			15,126	⁽²⁾		—			14,205	⁽²⁾		—			15,126	⁽²⁾		—

Principal investments		20,608			1,327			21,757			1,134			22,171			1,091			21,757			1,134

Cash instruments		265,225			79,146			207,988			58,277			263,923			86,343			207,988			58,277
Exchange-traded		4,709			5,573			6,164			8,347			5,336			3,147			6,164			8,347
Over-the-counter		85,317			62,578			124,173			109,348			82,931			60,893			124,173			109,348

Derivative contracts		90,026	⁽³⁾		68,151	⁽⁵⁾		130,337	⁽³⁾		117,695	⁽⁵⁾		88,267	⁽³⁾		64,040	⁽⁵⁾		130,337	⁽³⁾		117,695	⁽⁵⁾

Total	$	355,251		$	147,297		$	338,325		$	175,972		$	352,190		$	150,383		$	338,325		$	175,972


⁽¹⁾		Includes interests of ~~$3.96~~$4.35 billion and $3.48 billion as of ~~June~~September 2009 and November 2008, respectively, held by investment funds managed by Goldman Sachs. The fair value of our investment in the ordinary shares of ICBC, which trade on The Stock Exchange of Hong Kong, includes the effect of foreign exchange revaluation for which we maintain an economic currency hedge.

⁽²⁾		The following table sets forth the principal investments (in addition to our investments in ICBC and Sumitomo Mitsui Financial Group, Inc. (SMFG)) included within the Principal Investments component of our Trading and Principal Investments segment:


	As of June 2009						As of November 2008						As of September 2009						As of November 2008
	Corporate		Real Estate		Total		Corporate		Real Estate		Total		Corporate		Real Estate		Total		Corporate		Real Estate		Total
	(in millions)												(in millions)

Private	$	9,407	$	1,812	$	11,219	$	10,726	$	2,935	$	13,661	$	10,283	$	1,703	$	11,986	$	10,726	$	2,935	$	13,661
Public		1,747		43		1,790		1,436		29		1,465		2,170		49		2,219		1,436		29		1,465

Total	$	11,154	$	1,855	$	13,009	$	12,162	$	2,964	$	15,126	$	12,453	$	1,752	$	14,205	$	12,162	$	2,964	$	15,126


⁽³⁾		Net of cash received pursuant to credit support agreements of ~~$133.34~~$126.82 billion and $137.16 billion as of ~~June~~September 2009 and November 2008, respectively.

⁽⁴⁾		Represents an economic hedge on the shares of common stock underlying our investment in the convertible preferred stock of SMFG.

⁽⁵⁾		Net of cash paid pursuant to credit support agreements of ~~$16.31~~$16.83 billion and $34.01 billion as of ~~June~~September 2009 and November 2008, respectively.

8988

Cash Instruments. Cash instruments include cash trading instruments, public principal investments and private principal investments.


	•	Cash Trading Instruments. Our cash trading instruments are generally valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices in active markets include most government obligations, active listed equities and certain money market securities.

Certain cash trading instruments trade infrequently and therefore have little or no price transparency. Such instruments include private equity and real estate fund investments, certain bank loans and bridge loans (including certain mezzanine financing, leveraged loans arising from capital market transactions and other corporate bank debt), less liquid corporate debt securities and other debt obligations (including less liquid~~high-yield~~ corporate bonds, distressed debt instruments and collateralized debt obligations (CDOs) backed by corporate obligations), less liquid mortgage whole loans and securities (backed by either commercial or residential real estate), and acquired portfolios of distressed loans. The transaction price is initially used as the best estimate of fair value. Accordingly, when a pricing model is used to value such an instrument, the model is adjusted so that the model value at inception equals the transaction price. This valuation is adjusted only when changes to inputs and assumptions are corroborated by evidence such as transactions in similar instruments, completed or pendingthird-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalizations and other transactions across the capital structure, offerings in the equity or debt capital markets, and changes in financial ratios or cash flows.


	•	Public Principal Investments. Our public principal investments held within the Principal Investments component of our Trading and Principal Investments segment tend to be large, concentrated holdings resulting from initial public offerings or other corporate transactions, and are valued based on quoted market prices. For positions that are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidityand/ornon-transferability. Such adjustments are generally based on market evidence where available. In the absence of such evidence, management’s best estimate is used.

Our most significant public principal investment is our investment in the ordinary shares of ICBC. Our investment in ICBC is valued using the quoted market price adjusted for transfer restrictions. During the quarter ended March 2009, we committed to supplemental transfer restrictions in relation to our investment in ICBC. Under the original transfer restrictions, the ICBC shares we held would have become free from transfer restrictions in equal installments on April 28, 2009 and October 20, 2009. Under the new supplemental transfer restrictions, on April 28, 2009, 20% of the ICBC shares that we held became free from transfer restrictions and we completed the disposition of these shares during the second quarter of 2009. Our remaining ICBC shares are subject to transfer restrictions, which prohibit liquidation at any time prior to April 28, 2010.

9089

We also have an investment in the convertible preferred stock of SMFG. This investment is valued using a model that is principally based on SMFG’s common stock price. During 2008, we convertedone-third of our SMFG preferred stock investment into SMFG common stock, and delivered the common stock to close outone-third of our hedge position. As of ~~June~~September 2009, we remained hedged on the common stock underlying our remaining investment in SMFG.


	•	Private Principal Investments. Our private principal investments held within the Principal Investments component of our Trading and Principal Investments segment include investments in private equity, debt and real estate, primarily held through investment funds. By their nature, these investments have little or no price transparency. We value such instruments initially at transaction price and adjust valuations when evidence is available to support such adjustments. Such evidence includes transactions in similar instruments, completed or pendingthird-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalizations and other transactions across the capital structure, offerings in the equity or debt capital markets, and changes in financial ratios or cash flows.

Derivative Contracts. Derivative contracts can beexchange-traded orover-the-counter (OTC). We generally valueexchange-traded derivatives using models which calibrate tomarket-clearing levels and eliminate timing differences between the closing price of theexchange-traded derivatives and their underlying instruments.

OTC derivatives are valued using market transactions and other market evidence whenever possible, includingmarket-based inputs to models, model calibration tomarket-clearing transactions, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Where models are used, the selection of a particular model to value an OTC derivative depends upon the contractual terms of, and specific risks inherent in, the instrument, as well as the availability of pricing information in the market. We generally use similar models to value similar instruments. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, prepayment rates and correlations of such inputs. For OTC derivatives that trade in liquid markets, such as generic forwards, swaps and options, model inputs can generally be verified and model selection does not involve significant management judgment.

Certain OTC derivatives trade in less liquid markets with limited pricing information, and the determination of fair value for these derivatives is inherently more difficult. Where we do not have corroborating market evidence to support significant model inputs and cannot verify the model to market transactions, the transaction price is initially used as the best estimate of fair value. Accordingly, when a pricing model is used to value such an instrument, the model is adjusted so that the model value at inception equals the transaction price. Subsequent to initial recognition, we only update valuation inputs when corroborated by evidence such as similar market transactions,third-party pricing servicesand/or broker or dealer quotations, or other empirical market data. In circumstances where we cannot verify the model value to market transactions, it is possible that a different valuation model could produce a materially different estimate of fair value. See“— “— Derivatives” below for further information on our OTC derivatives.

Controls Over Valuation of Financial Instruments. A control infrastructure, independent of the trading and investing functions, is fundamental to ensuring that our financial instruments are appropriately valued atmarket-clearing levels (i.e., exit prices) and that fair value measurements are reliable and consistently determined.

9190

We employ an oversight structure that includes appropriate segregation of duties. Senior management, independent of the trading and investing functions, is responsible for the oversight of control and valuation policies and for reporting the results of these policies to our Audit Committee. We seek to maintain the necessary resources to ensure that control functions are performed appropriately. We employ procedures for the approval of new transaction types and markets, price verification, review of daily profit and loss, and review of valuation models by personnel with appropriate technical knowledge of relevant products and markets. These procedures are performed by personnel independent of the trading and investing functions. For financial instruments where prices or valuations that require inputs are less observable, we employ, where possible, procedures that include comparisons with similar observable positions, analysis of actual to projected cash flows, comparisons with subsequent sales, reviews of valuations used for collateral management purposes and discussions with senior business leaders. See“— Market Risk” and“— Credit Risk” below for a further discussion of how we manage the risks inherent in our trading and principal investing businesses.

Fair Value Hierarchy — Level 3. ~~SFAS No. 157 establishes a~~The fair value hierarchy ~~that~~under Financial Accounting Standards Board Accounting Standards Codification (ASC) 820 prioritizes the inputs to valuation techniques used to measure fair value. The objective of a fair value measurement is to determine the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Instruments that trade infrequently and therefore have little or no price transparency are classified within level 3 of the fair value hierarchy. We determine which instruments are classified within level 3 based on the results of our price verification process. This process is performed by personnel independent of our trading and investing functions who corroborate valuations to external market data (e.g., quoted market prices, broker or dealer quotations,third-party pricing vendors, recent trading activity and comparative analyses to similar instruments). Instruments with valuations which cannot be corroborated to external market data are classified within level 3 of the fair value hierarchy.

When broker or dealer quotations orthird-party pricing vendors are used for valuation or price verification, greater priority is given to executable quotes. As part of our price verification process, valuations based on quotes are corroborated by comparison both to other quotes and to recent trading activity in the same or similar instruments. The number of quotes obtained varies by instrument and depends on the liquidity of the particular instrument. See Notes 2 and 3 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report onForm 10-Q for further information regarding ~~SFAS No. 157.~~fair value measurements.

Management’s judgment is required to determine the appropriaterisk-adjusted discount rate for cash trading instruments that are classified within level 3 of the fair value hierarchy and that have little or no price transparency as a result of decreased volumes and lower levels of trading activity. In such situations, our valuation is adjusted to approximate rates which market participants would likely consider appropriate for relevant credit and liquidity risks.

9291

Valuation Methodologies for Level 3 Assets. Instruments classified within level 3 of the fair value hierarchy are initially valued at transaction price, which is considered to be the best initial estimate of fair value. As time passes, transaction price becomes less reliable as an estimate of fair value and accordingly, we use other methodologies to determine fair value, which vary based on the type of instrument, as described below. Regardless of the methodology, valuation inputs and assumptions are only changed when corroborated by substantive evidence. Senior management in control functions, independent of the trading and investing functions, reviews all significant unrealized gains/losses, including the primary drivers of the change in value. Valuations are further corroborated by values realized upon sales of our level 3 assets. An overview of methodologies used to value our level 3 assets subsequent to the transaction date is as follows:


	•	Private equity and real estate fund investments. Investments are generally held at cost for the first year. Recentthird-party investments or pending transactions are considered to be the best evidence for any change in fair value. In the absence of such evidence, valuations are based onthird-party independent appraisals, transactions in similar instruments, discounted cash flow techniques, valuation multiples and public comparables. Such evidence includes pending reorganizations (e.g., merger proposals, tender offers or debt restructurings); and significant changes in financial metrics (e.g., operating results as compared to previous projections, industry multiples, credit ratings and balance sheet ratios).

	•	Bank loans and bridge loans and Corporate debt securities and other debt obligations.Valuations are generally based on discounted cash flow techniques, for which the key inputs are the amount and timing of expected future cash flows, market yields for such instruments and recovery assumptions. Inputs are generally determined based on relative value analyses, which incorporate comparisons both to credit default swaps that reference the same underlying credit risk and to other debt instruments for the same issuer for which observable prices or broker quotes are available.

	•	Loans and securities backed by commercial real estate. Loans and securities backed by commercial real estate are collateralized by specific assets and are generally tranched into varying levels of subordination. Due to the nature of these instruments, valuation techniques vary by instrument. Methodologies include relative value analyses across different tranches, comparisons to transactions in both the underlying collateral and instruments with the same or substantially the same underlying collateral, market indices (such as the CMBX ⁽¹⁾), and credit default swaps, as well as discounted cash flow techniques.

	•	Loans and securities backed by residential real estate.Valuations are based on both proprietary and industry recognized models (including Intex and Bloomberg), and discounted cash flow ~~techniques and hypothetical securitization analyses.~~techniques. In the recent market environment, the most significant inputs to the valuation of these instruments are rates of delinquency, default and loss expectations, which are driven in part by housing prices. Inputs are determined based on relative value analyses, which incorporate comparisons to instruments with similar collateral and risk profiles, including relevant indices such as the ABX⁽¹⁾.

	•	Loan portfolios. Valuations are based on discounted cash flow techniques, for which the key inputs are the amount and timing of expected future cash flows and market yields for such instruments. Inputs are determined based on relative value analyses which incorporate comparisons to recent auction data for other similar loan portfolios.


	•	Derivative contracts. Valuation models are calibrated to initial transaction price. Subsequent changes in valuations are based on observable inputs to the valuation models (e.g., interest rates, credit spreads, volatilities, etc.). Inputs are changed only when corroborated by market data. Valuations of less liquid OTC derivatives are typically based on level 1 or level 2 inputs that can be observed in the market, as well as unobservable inputs, such as correlations and volatilities.

⁽¹⁾ The CMBX and ABX are indices that track the performance of commercial mortgage bonds and subprime residential mortgage bonds, respectively.

9392

Total level 3 assets were ~~$54.44~~$50.47 billion, ~~$59.06~~$54.44 billion and $66.19 billion as of ~~June~~September 2009, ~~March~~June 2009 and November 2008, respectively. The decrease in level 3 assets during the three months ended ~~June~~September 2009 primarily reflected unrealized losses ~~(principally~~ on ~~real estate fund investments,~~derivative assets, principally due to tighter credit spreads (which are level 2 inputs) on the underlying instruments, and sales and paydowns on corporate debt and other debt obligations, and on loans and securities backed by commercial real ~~estate) and sales and paydowns (principally on bank loans and bridge loans and other debt obligations).~~estate. The decrease in level 3 assets as of ~~June~~September 2009 as compared with November 2008 primarily reflected unrealized losses ~~principally~~(principally on private equity and real estate fund investments, loans and securities backed by commercial real estate, and bank loans and bridge ~~loans.~~loans) and sales and paydowns (principally on bank loans and bridge loans, other debt obligations, and loans and securities backed by commercial real estate).

The following table sets forth the fair values of financial assets classified within level 3 of the fair value hierarchy:

Level 3 Financial Assets at Fair Value
(in millions)


	As of									As of
	June			March			November			September			June			November
Description	2009			2009			2008			2009			2009			2008
Private equity and real estate fund investments ⁽¹⁾	$	12,679		$	13,620		$	16,006		$	12,481		$	12,679		$	16,006
Bank loans and bridge loans ⁽²⁾		9,669			9,866			11,957			9,781			9,669			11,957
Corporate debt securities and other debt obligations ⁽³⁾		6,605			7,554			7,596			5,608			6,605			7,596
Mortgage and otherasset-backed loans and securities:
Loans and securities backed by commercial real estate		6,839			7,705			9,340			6,112			6,839			9,340
Loans and securities backed by residential real estate		1,862			2,088			2,049			1,843			1,862			2,049
Loan portfolios ⁽⁴⁾		1,774			1,851			4,118			1,676			1,774			4,118

Cash instruments		39,428			42,684			51,066			37,501			39,428			51,066
Derivative contracts		15,016			16,378			15,124			12,965			15,016			15,124

Total level 3 assets at fair value		54,444			59,062			66,190			50,466			54,444			66,190
Level 3 assets for which we do not bear economic exposure ⁽⁵⁾		(4,061	)		(4,402	)		(6,616	)		(4,024	)		(4,061	)		(6,616	)

Level 3 assets for which we bear economic exposure	$	50,383		$	54,660		$	59,574		$	46,442		$	50,383		$	59,574


⁽¹⁾		Includes ~~$1.55~~$1.50 billion, ~~$1.82~~$1.55 billion and $2.62 billion as of ~~June~~September 2009, ~~March~~June 2009 and November 2008, respectively, of real estate fund investments.

⁽²⁾		Includes certain mezzanine financing, leveraged loans arising from capital market transactions and other corporate bank debt.

⁽³⁾		Includes ~~$518~~$405 million, ~~$739~~$518 million and $804 million as of ~~June~~September 2009, ~~March~~June 2009 and November 2008, respectively, of CDOs backed by corporate obligations.

⁽⁴⁾		Consists of acquired portfolios of distressed loans, primarily backed by commercial and residential real estate collateral.

⁽⁵⁾		We do not bear economic exposure to these level 3 assets as they are financed by nonrecourse debt, attributable to minority investors or attributable to employee interests in certain consolidated funds.

9493

Loans and securities backed by residential real estate. We securitize, underwrite and make markets in various types of residential mortgages, including prime,Alt-A and subprime. At any point in time, we may use cash instruments as well as derivatives to manage our long or short risk position in residential real estate. The following table sets forth the fair value of our long positions in prime,Alt-A and subprime mortgage cash instruments:

Long Positions in Loans and Securities Backed by Residential Real Estate
(in millions)


	As of				As of
	June		November		September		November
	2009		2008		2009		2008
Prime ⁽¹⁾	$	1,511	$	1,494	$	1,847	$	1,494
Alt-A		825		1,845		849		1,845
Subprime ⁽²⁾		1,611		1,906		2,027		1,906

Total ⁽³⁾	$	3,947	$	5,245	$	4,723	$	5,245


⁽¹⁾		Excludes U.S. governmentagency-issued collateralized mortgage obligations of ~~$7.45~~$6.27 billion and $4.27 billion as of ~~June~~September 2009 and November 2008, respectively. Also excludes U.S. governmentagency-issued mortgagepass-through certificates.

⁽²⁾		Includes ~~$209~~$255 million and $228 million of CDOs backed by subprime mortgages as of ~~June~~September 2009 and November 2008, respectively.

⁽³⁾		Includes ~~$1.86~~$1.84 billion and $2.05 billion of financial instruments (primarily loans andinvestment-grade securities, the majority of which were issued during 2006 and 2007) classified within level 3 of the fair value hierarchy as of ~~June~~September 2009 and November 2008, respectively.

Loans and securities backed by commercial real estate. We originate, securitize and syndicate fixed and floating rate commercial mortgages globally. At any point in time, we may use cash instruments as well as derivatives to manage our risk position in the commercial mortgage market. The following table sets forth the fair value of our long positions in loans and securities backed by commercial real estate by geographic region. The decrease in loans and securities backed by commercial real estate from November 2008 to ~~June~~September 2009 was primarily due to writedowns.

Long Positions in Loans and Securities Backed by
Commercial Real Estate by Geographic Region
(in millions)


	As of						As of
	June			November			September			November
	2009			2008			2009			2008
Americas ⁽¹⁾	$	6,132		$	7,433		$	5,966		$	7,433
EMEA ⁽²⁾		1,800			3,304			1,606			3,304
Asia		77			157			52			157

Total ⁽³⁾	$	8,009	⁽⁴⁾	$	10,894	⁽⁵⁾	$	7,624	⁽⁴⁾	$	10,894	⁽⁵⁾


⁽¹⁾		Substantially all relates to the U.S.

⁽²⁾		EMEA (Europe, Middle East and Africa).

⁽³⁾		Includes ~~$6.84~~$6.11 billion and $9.34 billion of financial instruments classified within level 3 of the fair value hierarchy as of ~~June~~September 2009 and November 2008, respectively.

⁽⁴⁾		Comprised of loans of ~~$6.43~~$5.80 billion and commercialmortgage-backed securities of ~~$1.58~~$1.82 billion as of ~~June~~September 2009, of which ~~$7.39~~$6.34 billion was floating rate and ~~$621 million~~$1.28 billion was fixed rate.

⁽⁵⁾		Comprised of loans of $9.23 billion and commercialmortgage-backed securities of $1.66 billion as of November 2008, of which $9.78 billion was floating rate and $1.11 billion was fixed rate.

9594

Leveraged Lending Capital Market ~~Transactions~~Transactions.

We arrange, extend and syndicate loans and commitments related to leveraged lending capital market transactions globally. The following table sets forth the notional amount of our leveraged lending capital market transactions by geographic region:

Leveraged Lending Capital Market Transactions by Geographic Region
(in millions)


	As of June 2009							As of November 2008							As of September 2009							As of November 2008
	Funded		Unfunded		Total			Funded		Unfunded		Total			Funded		Unfunded		Total			Funded		Unfunded		Total
Americas ⁽¹⁾	$	1,692	$	1,204	$	2,896		$	3,036	$	1,735	$	4,771		$	1,344	$	1,218	$	2,562		$	3,036	$	1,735	$	4,771
EMEA ⁽²⁾		1,765		63		1,828			2,294		259		2,553			1,651		886		2,537			2,294		259		2,553
Asia		612		40		652			568		73		641			634		38		672			568		73		641

Total	$	4,069	$	1,307	$	5,376	⁽³⁾	$	5,898	$	2,067	$	7,965	⁽³⁾	$	3,629	$	2,142	$	5,771	⁽³⁾	$	5,898	$	2,067	$	7,965	⁽³⁾


⁽¹⁾		Substantially all relates to the U.S.

⁽²⁾		EMEA (Europe, Middle East and Africa).

⁽³⁾		Represents the notional amount. We account for these transactions at fair value and our exposure was ~~$2.75~~$3.44 billion and $5.53 billion as of ~~June~~September 2009 and November 2008, respectively.

Other Financial Assets and Financial Liabilities at Fair Value. In addition to “Trading assets, at fair value” and “Trading liabilities, at fair value,” we have elected to account for certain of our other financial assets and financial liabilities at fair value under ASC815-15 and ASC825-10 (i.e., the fair value ~~option.~~option). The primary reasons for electing the fair value option are to reflect economic events in earnings on a timely basis, to mitigate volatility in earnings from using different measurement attributes and to address simplification andcost-benefit considerations.

Such financial assets and financial liabilities accounted for at fair value include:


	•	certain unsecuredshort-term borrowings, consisting of all promissory notes and commercial paper and certain hybrid financial instruments;

	•	certain other secured financings, primarily transfers accounted for as financings rather than sales, ~~under SFAS No. 140,~~ debt raised through our William Street credit extension program and certain other nonrecourse financings;

	•	certain unsecuredlong-term borrowings, including prepaid physical commodity transactions and certain hybrid financial instruments;

	•	resale and repurchase agreements;

	•	securities borrowed and loaned within Trading and Principal Investments, consisting of our matched book and certain firm financing activities;

	•	certain deposits issued by GSGoldman Sachs Bank USA (GS Bank USA), as well as securities held by GS Bank USA;


	•	certain receivables from customers and counterparties, including certain margin loans, transfers accounted for as secured loans rather than purchases ~~under SFAS No. 140~~ and prepaid variable share forwards;


	•	certain insurance and reinsurance contracts and certain guarantees; and

	•	in general, investments acquired after November 24, 2006, when the ~~adoption of SFAS No. 159~~fair value option became available, where we have significant influence over the investee and would otherwise apply the equity method of accounting. In certain cases, we may apply the equity method of accounting to new investments that are strategic in nature or closely related to our principal business activities, where we have a significant degree of involvement in the cash flows or operations of the investee, or wherecost-benefit considerations are less significant.

9695

Goodwill and Identifiable Intangible Assets

As a result of our acquisitions, principally SLK LLC (SLK) in 2000, The Ayco Company, L.P. (Ayco) in 2003 and our variable annuity and life insurance business in 2006, we have acquired goodwill and identifiable intangible assets. Goodwill is the cost of acquired companies in excess of the fair value of net assets, including identifiable intangible assets, at the acquisition date.

Goodwill. We test the goodwill in each of our operating segments, which are components one level below our three business segments, for impairment at least annually, ~~in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,”~~ by comparing the estimated fair value of each operating segment with its estimated net book value. We derive the fair value of each of our operating segments based on valuation techniques we believe market participants would use for each segment (observable averageprice-to-earnings multiples of our competitors in these businesses andprice-to-book multiples). We derive the net book value of our operating segments by estimating the amount of shareholders’ equity required to support the activities of each operating segment. Our last annual impairment test was performed during our 2008 fourth quarter and no impairment was identified.

During 2008 (particularly during the fourth quarter) and early 2009, the financial services industry and the securities markets generally were materially and adversely affected by significant declines in the values of nearly all asset classes and by a serious lack of liquidity. IfWhile there ishas been some recovery in recent months, if there was a prolonged period of weakness in the business environment and financial markets, our businesses ~~may~~would be adversely affected, which could result in an impairment of goodwill in the future.

The following table sets forth the carrying value of our goodwill by operating segment:

Goodwill by Operating Segment
(in millions)


	As of				As of
	June		November		September		November
	2009		2008		2009		2008
Investment Banking
Underwriting	$	125	$	125	$	125	$	125
Trading and Principal Investments
FICC		256		247		266		247
Equities ⁽¹⁾		2,389		2,389		2,389		2,389
Principal Investments		84		80		84		80
Asset Management and Securities Services
Asset Management ⁽²⁾		565		565		565		565
Securities Services		117		117		117		117

Total	$	3,536	$	3,523	$	3,546	$	3,523


⁽¹⁾		Primarily related to SLK.

⁽²⁾		Primarily related to Ayco.

9796

Identifiable Intangible Assets. We amortize our identifiable intangible assets over their estimated lives ~~in accordance with SFAS No. 142~~ or, in the case of insurance contracts, in ~~accordance with SFAS No. 60, “Accounting and Reporting by Insurance Enterprises,” and SFAS No. 97, “Accounting and Reporting by Insurance Enterprises for CertainLong-Duration~~ ~~Contracts and for Realized Gains and Losses from the Sale of Investments.”~~proportion to estimated gross profits or premium revenues. Identifiable intangible assets are tested for impairment whenever events or changes in circumstances suggest that an asset’s or asset group’s carrying value may not be fully ~~recoverable in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal ofLong-Lived~~ ~~Assets,” or SFAS No. 60 and SFAS No. 97.~~recoverable. An impairment loss, generally calculated as the difference between the estimated fair value and the carrying value of an asset or asset group, is recognized if the sum of the estimated undiscounted cash flows relating to the asset or asset group is less than the corresponding carrying value.

The following table sets forth the carrying value and range of remaining lives of our identifiable intangible assets by major asset class:

Identifiable Intangible Assets by Asset Class
($ in millions)


	As of June 2009				As of November 2008		As of September 2009				As of November 2008
			Range of Estimated						Range of Estimated
	Carrying		Remaining Lives		Carrying		Carrying		Remaining Lives			Carrying
	Value		(in years)		Value		Value		(in years)			Value
Customer lists ⁽¹⁾	$	678		2-16	$	724	$	662		2-16		$	724
New York Stock Exchange (NYSE) Designated Market Maker (DMM) rights		440		12		462		430		12			462
Insurance-related assets ⁽²⁾		125		6		155		132		6			155
Exchange-traded fund (ETF) lead market maker rights		92		18		95		91		18			95
Other ⁽³⁾		102		1-17		93		73		2-16			93

Total	$	1,437			$	1,529	$	1,388				$	1,529


⁽¹⁾		Primarily includes our clearance and execution and NASDAQ customer lists related to SLK and financial counseling customer lists related to Ayco.

⁽²⁾		Primarily includes the value of business acquired related to our insurance businesses.

⁽³⁾		Primarily includes marketing-related assets and other contractual rights.

A prolonged period of weakness in global equity markets ~~and the trading of securities in multiple markets and on multiple exchanges~~ could adversely impact our businesses and impair the value of our identifiable intangible assets. In addition, certain events could indicate a potential impairment of our identifiable intangible assets, including (i) changes in trading volumes or market structure that could adversely affect our specialist businesses (see discussion below), (ii) an adverse action or assessment by a regulator or (iii) adverse actual experience on the contracts in our variable annuity and life insurance business.

In October 2008, the SEC approved the NYSE’s proposal to create a new market model and redefine the role of NYSE DMMs. This new rule set further aligns the NYSE’s model with investor requirements for speed and efficiency of execution and establishes specialists as DMMs. While DMMs still have an obligation to commit capital, they are now able to trade on parity with other market participants. In addition, in June 2009 the NYSE successfully completed the rollout of new systems architecture that further reduces order completion time, which enables the NYSE to offer competitive execution speeds, while continuing to incorporate the price discovery provided by DMMs. The new rule set, in combination with technology improvements to increase execution speed, ~~is expected to continue~~continues to bolster the NYSE’s competitive position.

9897

Since our last impairment test, there have been no events or changes in circumstances indicating that NYSE DMM rights intangible asset may not be recoverable. However, we will continue to evaluate the performance of the specialist business under the new market model. There can be no assurance that these rule and system changes will result in sufficient cash flows to avoid impairment of our NYSE DMM rights in the future. As of ~~June~~September 2009, the carrying value of our NYSE DMM rights was ~~$440~~$430 million. To the extent that there were to be an impairment in the future, it could result in a significant writedown in the carrying value of these DMM rights.

Use of Estimates

The use of generally accepted accounting principles requires management to make certain estimates and assumptions. In addition to the estimates we make in connection with fair value measurements and the accounting for goodwill and identifiable intangible assets, the use of estimates and assumptions is also important in determining provisions for potential losses that may arise from litigation and regulatory proceedings and tax audits.

A substantial portion of our compensation and benefits represents discretionary compensation, which ~~are determined~~is finalized at year-end. We believe the most appropriate way to allocate estimated annual discretionary compensation among interim periods is in proportion to the net revenues earned in such periods. In addition to the level of net revenues, our overall compensation expense in any given year is also influenced by, among other factors, prevailing labor markets, business mix and the structure of ourshare-based compensation programs. Our ratio of compensation and benefits to net revenues was ~~49.0%~~47.0% for the first ~~half~~nine months of 2009.

We estimate and provide for potential losses that may arise out of litigation and regulatory proceedings to the extent that such losses are probable and can be ~~estimated, in accordance with SFAS No. 5, “Accounting~~estimated. In accounting for ~~Contingencies.” We~~income taxes, we estimate and provide for potential liabilities that may arise out of tax audits to the extent that uncertain tax positions fail to meet the recognition standard under ASC 740. See Note 2 to the condensed consolidated financial statements in Part I, Item 1 of ~~FIN 48, “Accounting~~this Quarterly Report onForm 10-Q for ~~Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109.”~~further information regarding accounting for income taxes.

Significant judgment is required in making these estimates and our final liabilities may ultimately be materially different. Our total estimated liability in respect of litigation and regulatory proceedings is determined on acase-by-case basis and represents an estimate of probable losses after considering, among other factors, the progress of each case or proceeding, our experience and the experience of others in similar cases or proceedings, and the opinions and views of legal counsel. Given the inherent difficulty of predicting the outcome of our litigation and regulatory matters, particularly in cases or proceedings in which substantial or indeterminate damages or fines are sought, we cannot estimate losses or ranges of losses for cases or proceedings where there is only a reasonable possibility that a loss may be incurred. See“— Legal Proceedings” in Part I, Item 3 of our Annual Report onForm 10-K, and in Part II, Item 1 of this Quarterly Report onForm 10-Q and theForms 10-Q for our first and second fiscal quarters of 2009 for information on our judicial, regulatory and arbitration proceedings.

Results of Operations

The composition of our net revenues has varied over time as financial markets and the scope of our operations have changed. The composition of net revenues can also vary over the shorter term due to fluctuations in U.S. and global economic and market conditions. See “Risk Factors” in Part I, Item 1A of our Annual Report onForm 10-K for a further discussion of the impact of economic and market conditions on our results of operations.

9998

Financial Overview

The following table sets forth an overview of our financial results:

Financial Overview
($ in millions, except per share amounts)


	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June			May			June			May			September			August			September			August
	2009			2008			2009			2008			2009			2008			2009			2008
Net revenues	$	13,761		$	9,422		$	23,186		$	17,757		$	12,372		$	6,043		$	35,558		$	23,800
Pre-tax earnings		5,029			2,832			7,658			4,975			4,794			960			12,452			5,935
Net earnings		3,435			2,087			5,249			3,598			3,188			845			8,437			4,443
Net earnings applicable to common shareholders		2,718			2,051			4,377			3,518			3,028			810			7,405			4,328
Diluted earnings per common share		4.93			4.58			8.42			7.81			5.25			1.81			13.74			9.62
Annualized return on average common shareholders’ equity ⁽¹⁾		23.0	%		20.4	%		18.3	%		17.6	%		21.4	%		7.7	%		19.2	%		14.2	%
Diluted earnings per common share, excluding the impact ofone-time TARP preferred dividend ⁽²⁾	$	5.71			N/A		$	9.23			N/A
Annualized return on average common shareholders’ equity, excluding the impact ofone-time TARP preferred dividend ⁽²⁾		23.8	%		N/A			19.2	%		N/A
Diluted earnings per common share, excluding the impact ofone-time TARP Series H preferred dividend ⁽²⁾														N/A			N/A		$	14.53			N/A
Annualized return on average common shareholders’ equity, excluding the impact ofone-time TARP Series H preferred dividend ⁽²⁾														N/A			N/A			20.0	%		N/A


⁽¹⁾		Annualized ~~return on average common shareholders’ equity (ROE)~~ROE is computed by dividing annualized net earnings applicable to common shareholders by average monthly common shareholders’ equity. Theone-time preferred dividend of $426 million related to the repurchase of ~~our~~the TARP Series H preferred stock (calculated as the difference between the carrying value and the redemption value of the preferred stock) in the second quarter of 2009 was not annualized in the calculation of annualized net earnings applicable to common shareholders for the nine months ended September 2009 since it has no impact on other quarters in the year. The following table sets forth our average common shareholders’ equity:


	Average for the												Average for the
	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June			May			June			May			September			August			September			August
	2009			2008			2009			2008			2009			2008			2009			2008
	(in millions)												(in millions)
Total shareholders’ equity	$	66,870		$	43,261		$	65,167		$	43,076		$	63,634		$	45,170		$	64,789		$	43,739
Preferred stock		(14,125	)		(3,100	)		(15,139	)		(3,100	)		(6,957	)		(3,100	)		(12,685	)		(3,100	)

Common shareholders’ equity	$	52,745		$	40,161		$	50,028		$	39,976		$	56,677		$	42,070		$	52,104		$	40,639


⁽²⁾		We believe that presenting our results excluding the impact of theone-time preferred dividend of $426 million related to the repurchase of ~~our~~the TARP Series H preferred stock is meaningful because it increases the comparability ofperiod-to-period results. The following tables set forth the calculation of net earnings applicable to common shareholders, diluted earnings per common share and average common shareholders’ equity excluding the impact of thisone-time preferred dividend:

Three Months
Six Months
Ended June Ended June
2009 2009
(in millions, except
per share amounts)
Net earnings applicable to common shareholders $ 2,718 $ 4,377
Impact ofone-time TARP preferred dividend
426 426

Net earnings applicable to common shareholders, excluding the impact ofone-time TARP preferred dividend
3,144 4,803
Divided by: average diluted common shares outstanding 551.0 520.1

Diluted earnings per common share, excluding the impact ofone-time TARP preferred dividend
$ 5.71 $ 9.23


	Nine Months Ended
	September 2009
	(in millions, except
	per share amounts)
Net earnings applicable to common shareholders	$	7,405
Impact ofone-time TARP Series H preferred dividend		426

Net earnings applicable to common shareholders, excluding the impact ofone-time TARP Series H preferred dividend		7,831
Divided by: average diluted common shares outstanding		539.0

Diluted earnings per common share, excluding the impact ofone-time TARP Series H preferred dividend	$	14.53


	Average for the
	Three Months			Six Months			Average for the
	Ended June			Ended June			Nine Months Ended
	2009			2009			September 2009
	(in millions)						(in millions)
Total shareholders’ equity	$	66,870		$	65,167		$	64,789
Preferred stock		(14,125	)		(15,139	)		(12,685	)

Common shareholders’ equity		52,745			50,028			52,104
Impact ofone-time TARP preferred dividend on average common shareholders’ equity		107			61
Impact ofone-time TARP Series H preferred dividend on average common shareholders’ equity								170

Common shareholders’ equity, excluding the impact ofone-time TARP preferred dividend on average common shareholders’ equity	$	52,852		$	50,089
Common shareholders’ equity, excluding the impact ofone-time TARP Series H preferred dividend on average common shareholders’ equity							$	52,274

~~100~~99

Net Revenues

Three Months Ended ~~June~~September 2009 versus ~~May~~August 2008. Our net revenues were ~~$13.76~~$12.37 billion for the ~~second~~third quarter of 2009, ~~an increase of 46%~~significantly higher compared with the ~~second~~third quarter of 2008, reflecting significantly higher net revenues in Trading and Principal ~~Investments, partially offset by significantly lower net revenues in Asset Management and Securities Services and lower net revenues in Investment Banking.~~Investments. The increase in Trading and Principal Investments reflected ~~particularly~~ strong results in FICC, Equities and ~~Equities,~~Principal Investments, which were ~~both~~each significantly higher ~~than the second~~compared with a very weak third quarter of 2008. The increase in FICC reflected ~~particularly~~ strong performances in credit products and mortgages, which were significantly higher compared with a difficult third quarter of 2008. Net revenues in interest rate products were also strong and ~~currencies, reflecting strength in the client franchise. In addition, net revenues in both mortgages and commodities were~~significantly higher compared with the ~~second~~third quarter of ~~2008. In~~2008, while net revenues in commodities and currencies were lower compared with the ~~second quarter of 2009, mortgages included a loss of approximately $700 million on commercial mortgage loans.~~same prior year period. During the quarter, FICC operated in an environment characterized by ~~strong client-driven~~solid client activity ~~particularly~~levels, tighter credit spreads and a general improvement in ~~more liquid products, favorable market opportunities and tighter corporate credit spreads.~~asset values. The increase in Equities reflected ~~significantly higher~~strong net revenues in derivatives, ~~and, to~~which were significantly higher compared with the third quarter of 2008, as well as a ~~lesser extent, principal strategies.~~solid performance in shares. In addition, net revenues in ~~shares were solid, but essentially unchanged~~principal strategies improved significantly compared with ~~the second~~a difficult third quarter of 2008. Commissions declined compared with the ~~second~~third quarter of 2008. During the quarter, Equities operated in an environment generally characterized by ~~solid client-driven activity, favorable market opportunities,~~ a significant increase in global equity prices, favorable market opportunities and a decline in volatility levels. Results in Principal Investments ~~were also higher compared with the second quarter of 2008, and~~ included a gain of ~~$948~~$977 million from corporate principal investments, a gain of $344 million related to our investment in the ordinary shares of ICBC ~~a gain of $343 million from corporate principal investments~~ and a loss of ~~$499~~$66 million from real estate principal investments.

~~101~~100

~~Six~~Nine Months Ended ~~June~~September 2009 versus ~~May~~August 2008. Our net revenues were ~~$23.19~~$35.56 billion for the ~~six~~nine months ended ~~June~~September 2009, an increase of ~~31%~~49% compared with the first ~~half~~nine months of 2008, reflecting significantly higher net revenues in Trading and Principal ~~Investments, partially offset by significantly lower net revenues in Asset Management and Securities Services, and Investment Banking.~~Investments. The increase in Trading and Principal Investments reflected significantly higher net revenues in FICC, which were more than double the amount in the first ~~half~~nine months of 2008, as well as significantly higher net revenues in ~~Equities, partially offset by weak results~~Equities. Results in Principal ~~Investments.~~Investments were also significantly higher compared with a difficult first nine months of 2008. The increase in FICC reflected particularly strong ~~results~~performances in credit products, mortgages and interest rate products, ~~and, to a lesser extent, commodities, reflecting strength in the client franchise. In addition, results in mortgages~~which were each significantly higher compared with the first nine months of 2008. During the first nine months of 2009, mortgages included a ~~difficult~~loss of approximately $1.6 billion on commercial mortgage loans. Net revenues in commodities were strong and higher compared with the first ~~half~~nine months of ~~2008, while net~~2008. Net revenues in currencies were solid, but lower compared with the first ~~half~~nine months of 2008. ~~In the first half of 2009, mortgages included a loss of approximately $1.5 billion on commercial mortgage loans.~~ During the first ~~half~~nine months of 2009, FICC operated in ana generally favorable environment characterized by strongclient-driven activity, particularly in more liquid ~~products,~~products. In addition, during our second and ~~favorable market opportunities.~~third quarters of 2009, asset values generally improved and corporate credit spreads tightened. The increase in Equities reflected particularly strong net revenues in derivatives, ~~as well as~~which were significantly higher ~~results in principal strategies. These increases were partially offset by lower net revenues in shares~~ compared with the first ~~half~~nine months of 2008. In addition, net revenues in principal strategies improved significantly compared with a difficult first nine months of 2008. Net revenues in shares were solid, but essentially unchanged compared with the first nine months of 2008. Commissions declined significantly compared with the first ~~half~~nine months of 2008. During the first ~~half~~nine months of 2009, Equities operated in an environment ~~generally~~ characterized by ana significant increase in global equity prices, ~~(principally during our second quarter)~~favorable market opportunities and ~~high, but declining, levels of volatility.~~a significant decline in volatility levels. In the first ~~half~~nine months of 2009, results in Principal Investments ~~reflected net losses~~included a gain of $1.14 billion ~~from real estate principal investments and $278 million from corporate principal investments, partially offset by a gain of $797 million~~ related to our investment in the ordinary shares of ~~ICBC.~~ICBC, a gain of $699 million from corporate principal investments and a loss of $1.21 billion from real estate principal investments.

~~102~~101

Operating Expenses

Our operating expenses are primarily influenced by compensation, headcount and levels of business activity. Compensation and benefits expenses includes salaries, estimated year-end discretionary compensation, amortization of equity awards and other items such as payroll taxes, severance costs and benefits. Discretionary compensation is significantly impacted by, among other factors, the level of net revenues, prevailing labor markets, business mix and the structure of ourshare-based compensation programs. Our ratio of compensation and benefits to net revenues was ~~49.0%~~47.0% for the first ~~half~~nine months of ~~2009.~~2009 compared with 48.0% for the first nine months of 2008.

The following table sets forth our operating expenses and total staff:

Operating Expenses and Total Staff
($ in millions)


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June		May		June		May		September		August		September		August
	2009		2008		2009		2008		2009		2008		2009		2008
Compensation and benefits ⁽¹⁾	$	6,649	$	4,522	$	11,361	$	8,523	$	5,351	$	2,901	$	16,712	$	11,424

Brokerage, clearing, exchange and distribution fees		574		741		1,110		1,531		580		734		1,690		2,265
Market development		82		126		150		270		84		119		234		389
Communications and technology		173		192		346		379		194		192		540		571
Depreciation and amortization ⁽²⁾⁽¹⁾		426		220		975		474		367		300		1,342		774
Occupancy		242		234		483		470		230		237		713		707
Professional fees		145		185		280		363		183		168		463		531
Other expenses		441		370		823		772		589		432		1,412		1,204

Totalnon-compensation expenses		2,083		2,068		4,167		4,259		2,227		2,182		6,394		6,441

Total operating expenses	$	8,732	$	6,590	$	15,528	$	12,782	$	7,578	$	5,083	$	23,106	$	17,865

Total staff at period end ⁽³⁾⁽²⁾		29,400		35,000						31,700		37,600
Total staff at period end including consolidated entities held for investment purposes ⁽³⁾										35,500		42,500


⁽¹⁾		Compensation and benefits includes $66 million for both the three months ended June 2009 and May 2008 and $136 million and $129 million for the six months ended June 2009 and May 2008, respectively, attributable to consolidated entities held for investment purposes. Consolidated entities held for investment purposes are entities that are held strictly for capital appreciation, have a defined exit strategy and are engaged in activities that are not closely related to our principal businesses.

⁽²⁾		Beginning in the second quarter of 2009, “Amortization of identifiable intangible assets” is included in “Depreciation and amortization” in the condensed consolidated statements of earnings. Prior periods have been reclassified to conform to the current presentation.

⁽³⁾⁽²⁾		Includes employees, consultants and temporary staff. ~~Excludes total staff of approximately 3,900~~

⁽³⁾		Compensation and ~~4,900 as of June 2009~~benefits and ~~May 2008, respectively, of~~non-compensation expenses related to consolidated entities held for investment purposes ~~(see footnote 1 above).~~

~~103~~

~~The following table sets forthnon-compensation~~ ~~expenses of consolidated entities held for investment purposes and our remainingnon-compensation~~ ~~expenses by line item:~~

~~Non-Compensation~~ ~~Expenses~~
~~(in millions)~~

Three Months Ended Six Months Ended
June
May
June
May
2009 2008 2009 2008
Non-compensation expenses of consolidated investments ⁽¹⁾
$ 286 $ 123 $ 746 $ 248

Non-compensation expenses excluding consolidated investments

Brokerage, clearing, exchange and distribution fees 574 741 1,110 1,531
Market development 80 124 146 265
Communications and technology 171 191 343 377
Depreciation and amortization ⁽²⁾
220 184 421 413
Occupancy 223 211 431 428
Professional fees 143 181 276 357
Other expenses 386 313 694 640

Subtotal 1,797 1,945 3,421 4,011

Totalnon-compensation expenses, as reported
$ 2,083 $ 2,068 $ 4,167 $ 4,259


⁽¹⁾		are included in their respective line items in the condensed consolidated statements of earnings. Consolidated entities held for investment purposes are entities that are held strictly for capital appreciation, have a defined exit strategy and are engaged in activities that are not closely related to our principal businesses. For example, these investments include consolidated entities that hold real estate assets, such as hotels, but exclude investments in entities that primarily hold financial assets. We believe that it is meaningful to review~~non-compensation~~ ~~expenses excluding expenses related to these consolidated entities in order to evaluate trends innon-compensation~~ ~~expenses related to our principal business activities. Revenues related to such entities are included in “Trading and principal investments” in the condensed consolidated statements of earnings.~~

⁽²⁾		Beginning in the second quarter of 2009, “Amortization of identifiable intangible assets” is included in “Depreciation and amortization” in the condensed consolidated statements of earnings. Prior periods have been reclassified to conform to the current presentation.

102

Three Months Ended ~~June~~September 2009 versus ~~May~~August 2008. Operating expenses of ~~$8.73~~$7.58 billion for the ~~second~~third quarter of 2009 increased ~~33%~~49% compared with the ~~second~~third quarter of 2008. Compensation and benefits expenses (including salaries, estimated year-end discretionary compensation, amortization of equity awards and other items such as payroll taxes, severance costs and benefits) of ~~$6.65~~$5.35 billion were higher ~~than~~compared with the ~~second~~third quarter of 2008, ~~primarily~~ due to higher net revenues. ~~During the second quarter of 2009, our~~Our ratio of compensation and benefits to net revenues was ~~48.3%.~~43.3% for the third quarter of 2009 compared with 48.0% for the third quarter of 2008. Total staff ~~decreased 1%~~increased 2% during the ~~second~~third quarter of 2009.

~~104~~

~~Non-compensation~~ ~~expenses, excluding~~ Total staff including consolidated entities held for investment purposes ~~were $1.80~~increased 1% during the third quarter of 2009.

Non-compensation expenses of $2.23 billion ~~8% lower than~~increased 2% compared with the ~~second~~third quarter of 2008. The ~~decrease~~increase compared with the ~~second~~third quarter of 2008 ~~was attributable to lower brokerage, clearing, exchange and distribution fees, principally reflecting lower transaction volumes in Equities. In addition,non-compensation~~ expenses during the second quarter of 2009 were generally lower than the second quarter of 2008 principally due to the impact of reduced staff levels and the effect of expense reduction initiatives. These decreases were partially offset by the impact of higher FDIC fees on bank deposits, includingreflected the impact of a ~~special assessment~~$200 million charitable contribution to The Goldman Sachs Foundation and $36 million of ~~approximately $50 million, and~~ net provisions for litigation and regulatory proceedings ~~of $25 million. The increase innon-compensation~~ ~~expenses related to consolidated entities held for investment purposes reflected real estate impairment charges of approximately $170 million~~ during the ~~second~~third quarter of ~~2009. This loss, which was measured based on discounted cash flow analysis, is included~~2009, partially offset by the impact of lower transaction volumes in ~~our Trading and Principal Investments segment and reflected weakness in the commercial real estate markets, particularly in Asia. Including consolidated entities held for investment purposes,non-compensation~~ ~~expenses were $2.08 billion, essentially unchanged from the second quarter of 2008.~~Equities.

~~Six~~Nine Months Ended ~~June~~September 2009 versus ~~May~~August 2008. Operating expenses of ~~$15.53~~$23.11 billion for the first ~~half~~nine months of 2009 increased ~~21%~~29% compared with the first ~~half~~nine months of 2008. Compensation and benefits expenses (including salaries, estimated year-end discretionary compensation, amortization of equity awards and other items such as payroll taxes, severance costs and benefits) of ~~$11.36~~$16.71 billion were higher ~~than~~compared with the first ~~half~~nine months of 2008, ~~primarily~~ due to higher net revenues. Our ratio of compensation and benefits to net revenues was ~~49.0%~~47.0% for the first ~~half~~nine months of 2009 compared with 48.0% for the first nine months of 2008. Total staff decreased 5% during the first nine months of 2009. Total staff including consolidated entities held for investment purposes decreased 7% during the first ~~half~~nine months of 2009.

Non-compensation expenses ~~excluding consolidated entities held for investment purposes, were $3.42~~of $6.39 billion ~~15% lower than~~decreased 1% compared with the first ~~half~~nine months of 2008. The decrease compared with the first ~~half~~nine months of 2008 ~~was primarily attributable to lower brokerage, clearing, exchange and distribution fees, principally reflecting~~reflected the impact of lower transaction volumes in ~~Equities. The remainder of the decrease compared with the first half of 2008 generally reflected the impact of~~Equities, reduced staff levels and ~~the effect of~~ expense reduction ~~initiatives. The increase innon-compensation~~ ~~expenses~~initiatives, partially offset by the impact of real estate impairment charges of approximately $500 million related to consolidated entities held for investment purposes ~~reflected~~during the first nine months of 2009 and a $200 million charitable contribution to The Goldman Sachs Foundation during the third quarter of 2009. The real estate impairment charges, ~~of approximately $470 million during the first half of 2009. These losses,~~ which were measured based on discounted cash flow analysis, are included in our Trading and Principal Investments segment and reflected weakness in the commercial real estate markets, particularly in ~~Asia. Including consolidated entities held for investment purposes,non-compensation~~ ~~expenses were $4.17 billion, 2% lower than~~Asia during the first half of ~~2008.~~2009.

Provision for Taxes

The effective income tax rate for the first ~~half~~nine months of 2009 was ~~31.5%~~32.2%, up slightly from ~~31.0%~~31.5% for the first ~~quarter~~half of 2009. The effective income tax rate for fiscal year 2008 was approximately 1%. The increase in the effective tax rate from 2008 was primarily due to changes in geographic earnings mix. During 2008, we incurred losses in various U.S. andnon-U.S. entities whoseincome/(losses) are subject to tax in the U.S. We also had profitable operations in certainnon-U.S. entities that are taxed at their applicable local tax rates, which are generally lower than the U.S. rate. The effective tax rate for the first ~~half~~nine months of 2009 represents a return to a geographic earnings mix that is more in line with our historic earnings mix.

~~105~~103

Segment Operating Results

The following table sets forth the net revenues, operating expenses andpre-tax earnings of our segments:

Segment Operating Results
(in millions)


		Three Months Ended				Six Months Ended					Three Months Ended					Nine Months Ended
		June		May		June		May			September		August			September		August
		2009		2008		2009		2008			2009		2008			2009		2008

Investment	Net revenues	$	1,440	$	1,685	$	2,263	$	2,857	Net revenues	$	899	$	1,294		$	3,162	$	4,151
Banking	Operating expenses		1,167		1,155		1,872		2,095	Operating expenses		772		772			2,644		2,867

	Pre-tax earnings	$	273	$	530	$	391	$	762	Pre-tax earnings	$	127	$	522		$	518	$	1,284

Trading and Principal	Net revenues	$	10,784	$	5,591	$	17,934	$	10,715	Net revenues	$	10,027	$	2,704		$	27,961	$	13,419
Investments	Operating expenses		6,290		3,961		11,163		7,704	Operating expenses		5,550		3,465			16,713		11,169

	Pre-tax earnings	$	4,494	$	1,630	$	6,771	$	3,011	Pre-tax earnings/(loss)	$	4,477	$	(761	)	$	11,248	$	2,250

Asset Management and	Net revenues	$	1,537	$	2,146	$	2,989	$	4,185	Net revenues	$	1,446	$	2,045		$	4,435	$	6,230
Securities Services	Operating expenses		1,250		1,477		2,455		2,970	Operating expenses		1,220		833			3,675		3,803

	Pre-tax earnings	$	287	$	669	$	534	$	1,215	Pre-tax earnings	$	226	$	1,212		$	760	$	2,427

Total	Net revenues	$	13,761	$	9,422	$	23,186	$	17,757	Net revenues	$	12,372	$	6,043		$	35,558	$	23,800
	Operating expenses ⁽¹⁾		8,732		6,590		15,528		12,782	Operating expenses ⁽¹⁾		7,578		5,083			23,106		17,865

	Pre-tax earnings	$	5,029	$	2,832	$	7,658	$	4,975	Pre-tax earnings	$	4,794	$	960		$	12,452	$	5,935


⁽¹⁾		Operating expenses include net provisions for a number of litigation and regulatory proceedings of ~~$25~~$36 million and ~~$(3)~~$13 million for the three months ended ~~June~~September 2009 and ~~May~~August 2008, respectively, and ~~$38~~$74 million and ~~$13~~$26 million for the ~~six~~nine months ended ~~June~~September 2009 and ~~May~~August 2008, respectively, that have not been allocated to our segments.

Net revenues in our segments include allocations of interest income and interest expense to specific securities, commodities and other positions in relation to the cash generated by, or funding requirements of, such underlying positions. See Note 16 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report onForm 10-Q for further information regarding our business segments.

The cost drivers of Goldman Sachs taken as a whole — compensation, headcount and levels of business activity — are broadly similar in each of our business segments. Compensation and benefits expenses within our segments reflect, among other factors, the overall performance of Goldman Sachs as well as the performance of individual business units. Consequently,pre-tax margins in one segment of our business may be significantly affected by the performance of our other business segments. A discussion of segment operating results follows.

~~106~~104

Investment Banking

Our Investment Banking segment is divided into two components:


	•	Financial Advisory. Financial Advisory includes advisory assignments with respect to mergers and acquisitions, divestitures, corporate defense activities, restructurings andspin-offs.

	•	Underwriting. Underwriting includes public offerings and private placements of a wide range of securities and other financial instruments.

The following table sets forth the operating results of our Investment Banking segment:

Investment Banking Operating Results
(in millions)


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June		May		June		May		September		August		September		August
	2009		2008		2009		2008		2009		2008		2009		2008
Financial Advisory	$	368	$	800	$	895	$	1,463	$	325	$	619	$	1,220	$	2,082

Equity underwriting		736		616		784		788		363		292		1,147		1,080
Debt underwriting		336		269		584		606		211		383		795		989

Total Underwriting		1,072		885		1,368		1,394		574		675		1,942		2,069

Total net revenues		1,440		1,685		2,263		2,857		899		1,294		3,162		4,151
Operating expenses		1,167		1,155		1,872		2,095		772		772		2,644		2,867

Pre-tax earnings	$	273	$	530	$	391	$	762	$	127	$	522	$	518	$	1,284

The following table sets forth our financial advisory and underwriting transaction volumes:

Goldman Sachs Global Investment Banking Volumes⁽¹⁾(in billions)


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June		May		June		May		September		August		September		August
	2009		2008		2009		2008		2009		2008		2009		2008
Announced mergers and acquisitions(2)	$	183	$	339	$	350	$	480	$	113	$	288	$	451	$	701
Completed mergers and acquisitions(2)		71		257		299		400		45		236		394		661
Equity andequity-related offerings ⁽²⁾⁽³⁾		32		20		34		30		12		18		46		48
Debt offerings ⁽³⁾⁽⁴⁾		82		68		160		129		51		31		193		145


⁽¹⁾		~~Source: Thomson Reuters.~~ Announced and completed mergers and acquisitions volumes are based on full credit to each of the advisors in a transaction. Equity andequity-related offerings and debt offerings are based on full credit for single book managers and equal credit for joint book managers. Transaction volumes may not be indicative of net revenues in a given period. In addition, transaction volumes for prior periods may vary from amounts previously reported due to the subsequent withdrawal or a change in the value of a transaction.

⁽²⁾		Source: Dealogic.

⁽³⁾		Source: Thomson Reuters. Includes Rule 144A and public common stock offerings, convertible offerings and rights offerings.

⁽³⁾⁽⁴⁾		Source: Thomson Reuters. Includesnon-convertible preferred stock,mortgage-backed securities,asset-backed securities and taxable municipal debt. Includes publicly registered and Rule 144A issues. Excludes leveraged loans.

~~107~~105

Three Months Ended ~~June~~September 2009 versus ~~May~~August 2008. Net revenues in Investment Banking of ~~$1.44 billion~~$899 million for the ~~second~~third quarter of 2009 decreased ~~15%~~31% compared with the ~~second~~third quarter of 2008.

Net revenues in Financial Advisory of ~~$368~~$325 million decreased ~~54%~~47% compared with the ~~second~~third quarter of 2008, primarily reflecting a significant decline inindustry-wide completed mergers and acquisitions. Net revenues in our Underwriting business of ~~$1.07 billion increased 21%~~$574 million decreased 15% compared with the ~~second~~third quarter of 2008, due to significantly lower net revenues in debt underwriting, partially offset by higher net revenues in equity underwriting. The decrease in debt underwriting ~~as well as higher~~primarily reflected a decline in net revenues ~~in debt underwriting.~~from leveraged loans. The increase in equity underwriting primarily reflected ~~very strong client activity. The~~an increase in ~~debt underwriting primarily reflected higher net revenues frominvestment-grade~~industry-wide ~~and municipal activity.~~initial public offerings. Our investment banking transaction backlog ~~decreased~~increased significantly during the quarter. ⁽¹⁾

Operating expenses of ~~$1.17 billion~~$772 million for the ~~second~~third quarter of 2009 were ~~essentially~~ unchanged compared with the ~~second~~third quarter of 2008.Pre-tax earnings of ~~$273~~$127 million in the ~~second~~third quarter of 2009 decreased ~~48%~~76% compared with the ~~second~~third quarter of 2008.

~~Six~~Nine Months Ended ~~June~~September 2009 versus ~~May~~August 2008. Net revenues in Investment Banking of ~~$2.26~~$3.16 billion for the first ~~half~~nine months of 2009 decreased ~~21%~~24% compared with the first ~~half~~nine months of 2008.

Net revenues in Financial Advisory of ~~$895 million~~$1.22 billion decreased ~~39%~~41% compared with the first ~~half~~nine months of 2008, reflecting a significant decline inindustry-wide completed mergers and acquisitions. Net revenues in our Underwriting business of ~~$1.37~~$1.94 billion decreased 2%6% compared with the first ~~half~~nine months of 2008, ~~primarily due to~~reflecting significantly lower net revenues in debt underwriting, ~~reflecting a decrease in leveraged finance activity. Net~~partially offset by higher net revenues in equity underwriting. The decrease in debt underwriting ~~were essentially unchanged compared with the first half of 2008.~~was primarily due to a decline in net revenues from leveraged loans.

Operating expenses of ~~$1.87~~$2.64 billion for the first ~~half~~nine months of 2009 decreased ~~11%~~8% compared with the first ~~half~~nine months of 2008, due to decreasednon-compensation expenses, principally due to lower activity levels, and decreased compensation and benefits ~~expenses~~ resulting from lower net revenues.Pre-tax earnings of ~~$391~~$518 million infor the first ~~half~~nine months of 2009 decreased ~~49%~~60% compared with the first ~~half~~nine months of 2008.

Trading and Principal Investments

Our Trading and Principal Investments segment is divided into three components:


	•	FICC. We make markets in and trade interest rate and credit products,mortgage-related securities and loan products and otherasset-backed instruments, currencies and commodities, structure and enter into a wide variety of derivative transactions, and engage in proprietary trading and investing.

	•	Equities. We make markets in and trade equities andequity-related products, structure and enter into equity derivative transactions and engage in proprietary trading. We generate commissions from executing and clearing client transactions on major stock, options and futures exchanges worldwide through our Equities client franchise and clearing activities. We also engage in specialist and insurance activities.

	•	Principal Investments. We make real estate and corporate principal investments, including our investment in the ordinary shares of ICBC. We generate net revenues from returns on these investments and from the increased share of the income and gains derived from our merchant banking funds when the return on a fund’s investments over the life of the fund exceeds certain threshold returns (typically referred to as an override).

⁽¹⁾ Our investment banking transaction backlog represents an estimate of our future net revenues from investment banking
transactions where we believe that future revenue realization is more likely than not.

~~108~~106

Substantially all of our inventory ismarked-to-market daily and, therefore, its value and our net revenues are subject to fluctuations based on market movements. In addition, net revenues derived from our principal investments, including those in privately held concerns and in real estate, may fluctuate significantly depending on the revaluation of these investments in any given period. We also regularly enter into large transactions as part of our trading businesses. The number and size of such transactions may affect our results of operations in a given period.

Net revenues from Principal Investments do not include management fees generated from our merchant banking funds. These management fees are included in the net revenues of the Asset Management and Securities Services segment.

The following table sets forth the operating results of our Trading and Principal Investments segment:

Trading and Principal Investments Operating Results
(in millions)


	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June			May			June			May			September			August			September			August
	2009			2008			2009			2008			2009			2008			2009			2008
FICC	$	6,795		$	2,379		$	13,352		$	5,521		$	5,991		$	1,595		$	19,343		$	7,116

Equities trading		2,157			1,253			3,184			2,529			1,845			354			5,029			2,883
Equities commissions		1,021			1,234			1,995			2,472			930			1,208			2,925			3,680

Total Equities		3,178			2,487			5,179			5,001			2,775			1,562			7,954			6,563

ICBC		948			214			797			79			344			106			1,141			185

Gross gains		1,306			979			1,812			1,336			1,375			904			2,684			1,582
Gross losses		(1,462	)		(503	)		(3,229	)		(1,270	)		(464	)		(1,485	)		(3,190	)		(2,097	)

Net other corporate and real estate investments		(156	)		476			(1,417	)		66			911			(581	)		(506	)		(515	)
Overrides		19			35			23			48			6			22			29			70


Total Principal Investments		811			725			(597	)		193			1,261			(453	)		664			(260	)

Total net revenues		10,784			5,591			17,934			10,715			10,027			2,704			27,961			13,419
Operating expenses		6,290			3,961			11,163			7,704			5,550			3,465			16,713			11,169

Pre-tax earnings	$	4,494		$	1,630		$	6,771		$	3,011
Pre-tax earnings/(loss)													$	4,477		$	(761	)	$	11,248		$	2,250

Three Months Ended ~~June~~September 2009 versus ~~May~~August 2008. Net revenues in Trading and Principal Investments of ~~$10.78~~$10.03 billion increased ~~93%~~significantly compared with the ~~second~~third quarter of 2008.

Net revenues in FICC of ~~$6.80~~$5.99 billion increased significantly compared with the ~~second~~third quarter of 2008. These results reflected ~~particularly~~ strong performances in credit products and mortgages, which were significantly higher compared with a difficult third quarter of 2008. Net revenues in interest rate products were also strong and ~~currencies, reflecting strength in the client franchise. In addition, net revenues in both mortgages and commodities were~~significantly higher compared with the ~~second~~third quarter of ~~2008. In~~2008, while net revenues in commodities and currencies were lower compared with the ~~second quarter of 2009, mortgages included a loss of approximately $700 million on commercial mortgage loans.~~same prior year period. During the quarter, FICC operated in an environment characterized by ~~strong client-driven~~solid client activity ~~particularly~~levels, tighter credit spreads and a general improvement in ~~more liquid products, favorable market opportunities and tighter corporate credit spreads.~~asset values.

107

Net revenues in Equities of ~~$3.18~~$2.78 billion increased ~~28%~~78% compared with the ~~second~~third quarter of ~~2008, reflecting significantly higher~~2008. These results reflected strong net revenues in derivatives, ~~and, to~~which were significantly higher compared with the third quarter of 2008, as well as a ~~lesser extent, principal strategies.~~solid performance in shares. In addition, net revenues in ~~shares were solid, but essentially unchanged~~principal strategies improved significantly compared with ~~the second~~a difficult third quarter of 2008. Commissions declined compared with the ~~second~~third quarter of 2008. During the quarter, Equities operated in an environment generally characterized by ~~solid client-driven activity, favorable market opportunities,~~ a significant increase in global equity prices, favorable market opportunities and a decline in volatility levels.

~~109~~

Principal Investments recorded net revenues of ~~$811 million~~$1.26 billion for the ~~second~~third quarter of 2009. These results included a gain of ~~$948~~$977 million from corporate principal investments, a gain of $344 million related to our investment in the ordinary shares of ICBC ~~a gain of $343 million from corporate principal investments~~ and a loss of ~~$499~~$66 million from real estate principal investments.

Operating expenses of ~~$6.29~~$5.55 billion for the ~~second~~third quarter of 2009 increased ~~59%~~60% compared with the ~~second~~third quarter of 2008, due to increased compensation and benefits expenses resulting from higher net ~~revenues, and real estate impairment charges during the second quarter of 2009 of approximately $170 million related to consolidated entities held for investment purposes. These increases were~~revenues. This increase was partially offset by lower ~~brokerage, clearing, exchange and distribution fees, principally~~non-compensation expenses, primarily reflecting the impact of lower transaction volumes in Equities.Pre-tax earnings were ~~$4.49~~$4.48 billion in the ~~second~~third quarter of 2009 compared with ~~$1.63 billion~~apre-tax loss of $761 million in the ~~second~~third quarter of 2008.

~~Six~~Nine Months Ended ~~June~~September 2009 versus ~~May~~August 2008. Net revenues in Trading and Principal Investments of ~~$17.93~~$27.96 billion increased ~~67%~~significantly compared with the first ~~half~~nine months of ~~2008.~~2009.

Net revenues in FICC of ~~$13.35~~$19.34 billion were more than double the amount in the first ~~half~~nine months of 2008. These results reflected particularly strong ~~results~~performances in credit products, mortgages and interest rate products, ~~and, to a lesser extent, commodities, reflecting strength in the client franchise. In addition, results in mortgages~~which were each significantly higher compared with the first nine months of 2008. During the first nine months of 2009, mortgages included a ~~difficult~~loss of approximately $1.6 billion on commercial mortgage loans. Net revenues in commodities were strong and higher compared with the first ~~half~~nine months of ~~2008, while net~~2008. Net revenues in currencies were solid, but lower compared with the first ~~half~~nine months of 2008. ~~In the first half of 2009, mortgages included a loss of approximately $1.5 billion on commercial mortgage loans.~~ During the first ~~half~~nine months of 2009, FICC operated in ana generally favorable environment characterized by strong client-driven activity, particularly in more liquid ~~products,~~products. In addition, during our second and ~~favorable market opportunities.~~third quarters of 2009, asset values generally improved and corporate credit spreads tightened.

Net revenues in Equities of ~~$5.18~~$7.95 billion increased 4%21% compared with the first ~~half~~nine months of ~~2008, reflecting~~2008. These results reflected particularly strong net revenues in derivatives, ~~as well as~~which were significantly higher ~~results in principal strategies. These increases were partially offset by lower net revenues in shares~~ compared with the first ~~half~~nine months of 2008. In addition, net revenues in principal strategies improved significantly compared with a difficult first nine months of 2008. Net revenues in shares were solid, but essentially unchanged compared with the first nine months of 2008. Commissions declined significantly compared with the first ~~half~~nine months of 2008. During the first ~~half~~nine months of 2009, Equities operated in an environment ~~generally~~ characterized by ana significant increase in global equity prices, ~~(principally during our second quarter)~~favorable market opportunities and ~~high, but declining, levels of volatility.~~a significant decline in volatility levels.

Principal Investments recorded a net ~~loss~~revenues of ~~$597~~$664 million for the first ~~half~~nine months of 2009. These results included ~~net losses~~a gain of $1.14 billion ~~from real estate principal investments and $278 million from corporate principal investments, partially offset by a gain of $797 million~~ related to our investment in the ordinary shares of ~~ICBC.~~ICBC, a gain of $699 million from corporate principal investments and a loss of $1.21 billion from real estate principal investments.

Operating expenses of ~~$11.16~~$16.71 billion for the first ~~half~~nine months of 2009 increased ~~45%~~50% compared with the first ~~half~~nine months of 2008, due to increased compensation and benefits expenses resulting from higher net ~~revenues, and~~revenues.Non-compensation expenses for the first nine months of 2009 were essentially unchanged compared with the first nine months of 2008.Non-compensation expenses for the first nine months of 2009 included the impact of real estate impairment charges ~~during the first half of 2009~~ of approximately ~~$470~~$500 million related to consolidated entities held for investment ~~purposes. These increases were partially~~purposes, which was largely offset by ~~lower brokerage, clearing, exchange and distribution fees, principally reflecting~~the impact of lower transaction volumes in Equities.Pre-tax earnings were ~~$6.77~~$11.25 billion infor the first ~~half~~nine months of 2009 compared with ~~$3.01~~$2.25 billion infor the first ~~half~~nine months of 2008.

108

Asset Management and Securities Services

Our Asset Management and Securities Services segment is divided into two components:


	•	Asset Management. Asset Management provides investment advisory and financial planning services and offers investment products (primarily through separately managed accounts and commingled vehicles, such as mutual funds and private investment funds) across all major asset classes to a diverse group of institutions and individuals worldwide and primarily generates revenues in the form of management and incentive fees.

	•	Securities Services. Securities Services provides prime brokerage services, financing services and securities lending services to institutional clients, including hedge funds, mutual funds, pension funds and foundations, and tohigh-net-worth individuals worldwide, and generates revenues primarily in the form of interest rate spreads or fees.

~~110~~

Assets under management typically generate fees as a percentage of asset value, which is affected by investment performance and by inflows and redemptions. The fees that we charge vary by asset class, as do our related expenses. In certain circumstances, we are also entitled to receive incentive fees based on a percentage of a fund’s return or when the return on assets under management exceeds specified benchmark returns or other performance targets. Incentive fees are recognized when the performance period ends and they are no longer subject to adjustment. We have numerous incentive fee arrangements, many of which have annual performance periods that end on December 31.

The following table sets forth the operating results of our Asset Management and Securities Services segment:

Asset Management and Securities Services Operating Results
(in millions)


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June		May		June		May		September		August		September		August
	2009		2008		2009		2008		2009		2008		2009		2008
Management and other fees	$	918	$	1,153	$	1,849	$	2,276	$	971	$	1,115	$	2,820	$	3,391
Incentive fees		4		8		22		202		3		14		25		216

Total Asset Management		922		1,161		1,871		2,478		974		1,129		2,845		3,607
Securities Services		615		985		1,118		1,707		472		916		1,590		2,623

Total net revenues		1,537		2,146		2,989		4,185		1,446		2,045		4,435		6,230
Operating expenses		1,250		1,477		2,455		2,970		1,220		833		3,675		3,803

Pre-tax earnings	$	287	$	669	$	534	$	1,215	$	226	$	1,212	$	760	$	2,427

Assets under management include our mutual funds, alternative investment funds and separately managed accounts for institutional and individual investors. Substantially all assets under management are valued as of calendarmonth-end. Assets under management do not include:


	•	assets in brokerage accounts that generate commissions,mark-ups and spreads based on transactional activity;

	•	our own investments in funds that we manage; or

	•	non-fee-paying assets, includinginterest-bearing deposits held through our depository institution subsidiaries.

109

The following table sets forth our assets under management by asset class:

Assets Under Management by Asset Class
(in billions)


	As of									As of
	June 30,			May 31,		November 30,				September 30,		August 31,		November 30,
	2009			2008		2008		2007		2009		2008		2008		2007
Alternative investments ⁽¹⁾	$	142		$	146	$	146	$	151	$	145	$	154	$	146	$	151
Equity		121			211		112		255		139		179		112		255
Fixed income		272			269		248		256		292		268		248		256

Totalnon-money market assets		535			626		506		662		576		601		506		662
Money markets		284			269		273		206		272		262		273		206

Total assets under management	$	819	⁽²⁾	$	895	$	779	$	868	$	848	$	863	$	779	$	868


⁽¹⁾		Primarily includes hedge funds, private equity, real estate, currencies, commodities and asset allocation strategies.

⁽²⁾		~~Excludes the federal agency pass-throughmortgage-backed~~ ~~securities account managed for the Federal Reserve.~~

~~111~~

The following table sets forth a summary of the changes in our assets under management:

Changes in Assets Under Management
(in billions)


	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June 30,			May 31,			June 30,			May 31,			September 30,			August 31,			September 30,			August 31,
	2009			2008			2009			2008			2009			2008			2009			2008
Balance, beginning of period	$	771		$	873		$	798		$	868		$	819		$	895		$	798		$	868

Net inflows/(outflows)
Alternative investments		(2	)		(3	)		(4	)		(5	)		—			9			(4	)		4
Equity		(1	)		(18	)		(2	)		(35	)		(1	)		(12	)		(3	)		(47	)
Fixed income		6			10			3			12			3			3			6			15

Totalnon-money market net inflows/(outflows)		3			(11	)		(3	)		(28	)		2			—			(1	)		(28	)
Money markets		3			17			(2	)		63			(12	)		(7	)		(14	)		56

Total net inflows/(outflows)		6	⁽¹⁾		6			(5	) ⁽¹⁾		35			(10	)		(7	)		(15	)		28

Net market appreciation/(depreciation)		42			16			26			(8	)		39			(25	)		65			(33	)

Balance, end of period	$	819		$	895		$	819		$	895		$	848		$	863		$	848		$	863

110


⁽¹⁾		~~Excludes the federal agency pass-throughmortgage-backed~~ ~~securities account managed for the Federal Reserve.~~

Three Months Ended ~~June~~September 2009 versus ~~May~~August 2008. Net revenues in Asset Management and Securities Services of ~~$1.54~~$1.45 billion ~~were 28% lower~~decreased 29% compared with the ~~second~~third quarter of 2008.

Asset Management net revenues of ~~$922~~$974 million ~~were 21% lower than~~decreased 14% compared with the ~~second~~third quarter of 2008, primarily reflecting ~~lower~~the impact of changes in the composition of assets ~~under management, due to market depreciation since~~managed. During the ~~end of the second~~third quarter of ~~2008. During the quarter,~~2009, assets under management increased ~~$48~~$29 billion to ~~$819~~$848 billion, due to ~~$42~~$39 billion of market appreciation, primarily in equity and fixed income assets, ~~and $6~~partially offset by $10 billion of net ~~inflows.~~outflows. Net outflows primarily reflected outflows in money market assets, partially offset by inflows in fixed income assets.

Securities Services net revenues of ~~$615~~$472 million ~~were 38% lower than~~decreased 48% compared with the ~~second~~third quarter of 2008. The decrease in net revenues primarily reflected the impact of lower customer balances.

Operating expenses of ~~$1.25~~$1.22 billion for the ~~second~~third quarter of 2009 increased 46% compared with the third quarter of 2008, primarily due to increased compensation and benefits expenses.Pre-tax earnings of $226 million in third quarter of 2009 decreased ~~15%~~81% compared with the ~~second~~third quarter of 2008.

Nine Months Ended September 2009 versus August 2008. Net revenues in Asset Management and Securities Services of $4.44 billion decreased 29% compared with the first nine months of 2008.

Asset Management net revenues of $2.85 billion decreased 21% compared with the first nine months of 2008, primarily reflecting the impact of changes in the composition of assets managed. During the first nine months of 2009, assets under management increased $50 billion, reflecting $65 billion of market appreciation, primarily in fixed income and equity assets, partially offset by $15 billion of net outflows, primarily in money market assets.

Securities Services net revenues of $1.59 billion decreased 39% compared with the first nine months of 2009. The decrease in net revenues primarily reflected the impact of lower customer balances.

Operating expenses of $3.68 billion for the first nine months of 2009 decreased 3% compared with the first nine months of 2008, primarily due to decreased compensation and benefits expenses resulting from lower net revenues.Pre-tax earnings of ~~$287~~$760 million for the first nine months of 2009 decreased ~~57% compared with the second quarter of 2008.~~

~~Six Months Ended June 2009 versus May 2008.~~ ~~Net revenues in Asset Management and Securities Services of $2.99 billion were 29% lower~~69% compared with the first ~~half of 2008.~~

Asset Management net revenues of $1.87 billion were 24% lower than the first half of 2008, primarily reflecting the impact of lower assets under management, due to market depreciation during the second half of 2008. During the first half of 2009, assets under management increased $21 billion, reflecting $26 billion of market appreciation, primarily in fixed income and equity assets, partially offset by $5 billion of net outflows.

~~Securities Services net revenues of $1.12 billion were 35% lower than the first half of 2008. The decrease in net revenues primarily reflected the impact of lower customer balances.~~

~~112~~

Operating expenses of $2.46 billion for the first half of 2009 decreased 17% compared with the first half of 2008. The decrease primarily reflected decreased compensation and benefits expenses resulting from lower net revenues, and lower distribution fees, primarily reflecting lower assets under management, principally due to market depreciation during the second half of 2008.~~Pre-tax~~ ~~earnings of $534 million decreased 56% compared with the first half~~nine months of 2008.

Geographic Data

See Note 16 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report onForm 10-Q for a summary of our total net revenues andpre-tax earnings by geographic region.

111

Off-Balance-Sheet Arrangements

We have various types ofoff-balance-sheet arrangements that we enter into in the ordinary course of business. Our involvement in these arrangements can take many different forms, including purchasing or retaining residual and other interests inmortgage-backed and otherasset-backed securitization vehicles; holding senior and subordinated debt, interests in limited and general partnerships, and preferred and common stock in other nonconsolidated vehicles; entering into interest rate, foreign currency, equity, commodity and credit derivatives, including total return swaps; entering into operating leases; and providing guarantees, indemnifications, loan commitments, letters of credit and representations and warranties.

We enter into these arrangements for a variety of business purposes, including the securitization of commercial and residential mortgages, government and corporate bonds, and other types of financial assets. Other reasons for entering into these arrangements include underwriting client securitization transactions; providing secondary market liquidity; making investments in performing and nonperforming debt, equity, real estate and other assets; providing investors withcredit-linked andasset-repackaged notes; and receiving or providing letters of credit to satisfy margin requirements and to facilitate the clearance and settlement process.

We engage in transactions with variable interest entities (VIEs) and qualifyingspecial-purpose entities (QSPEs).Asset-backed financing vehicles are critical to the functioning of several significant investor markets, including themortgage-backed and otherasset-backed securities markets, since they offer investors access to specific cash flows and risks created through the securitization process. Our financial interests in, and derivative transactions with, such nonconsolidated entities are accounted for at fair value, in the same manner as our other financial instruments, except in cases where we apply the equity method of accounting.

We did not haveoff-balance-sheet commitments to purchase or finance any CDOs held by structured investment vehicles as of ~~June~~September 2009 or November 2008.

In December 2007, the American Securitization Forum (ASF) issued the “Streamlined Foreclosure and Loss Avoidance Framework for Securitized Subprime Adjustable Rate Mortgage Loans” (ASF Framework). The ASF Framework provides guidance for servicers to streamline borrower evaluation procedures and to facilitate the use of foreclosure and loss prevention measures for securitized subprime residential mortgages that meet certain criteria. For certain eligible loans as defined in the ASF Framework, servicers may presume default is reasonably foreseeable and apply afast-track loan modification plan, under which the loan interest rate will be kept at the then current rate for a period up to five years following the upcoming reset date. Mortgage loan modifications of these eligible loans will not affect our accounting treatment for QSPEs that hold the subprime loans.

~~113~~112

The following table sets forth where a discussion ofoff-balance-sheet arrangements may be found in Part I, Items 1 and 2 of this Quarterly Report onForm 10-Q:


Type of Off-Balance-Sheet Arrangement		Disclosure in Quarterly Report onForm 10-Q



Retained interests or other continuing involvement relating to assets transferred by us to nonconsolidated entities		See Note 4 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report onForm 10-Q.

Leases, letters of credit, and loans and other commitments		See Note 8 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report onForm 10-Q and“— Contractual Obligations” below.

Guarantees		See Note 8 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report onForm 10-Q.

Other obligations, including contingent obligations, arising out of variable interests we have in nonconsolidated entities		See Note 4 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report onForm 10-Q.

Derivative contracts		See“— Critical Accounting Policies” above, and“— Risk Management” and“— Derivatives” below and Notes 3 and 7 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report onForm 10-Q.

In addition, see Note 2 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report onForm 10-Q for a discussion of our consolidation policies and for information regarding amendments to~~FIN 46-R,~~ ~~“Consolidation of Variable Interest Entities,” and SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.”~~ the accounting standards related to consolidation.

Equity Capital

The level and composition of our equity capital are principally determined by our consolidated regulatory capital requirements but may also be influenced by rating agency guidelines, subsidiary capital requirements, the business environment, conditions in the financial markets and assessments of potential future losses due to extreme and adverse changes in our business and market environments. As of ~~June~~September 2009, our total shareholders’ equity was ~~$62.81~~$65.35 billion (consisting of common shareholders’ equity of ~~$55.86~~$58.40 billion and preferred stock of $6.96 billion). As of November 2008, our total shareholders’ equity was $64.37 billion (consisting of common shareholders’ equity of $47.90 billion and preferred stock of $16.47 billion). In addition to total shareholders’ equity, we consider our $5.00 billion of junior subordinated debt issued to trusts to be part of our equity capital, as it qualifies as capital for regulatory and certain rating agency purposes.

~~114~~113

Consolidated Capital Requirements

The Federal Reserve Board is the primary U.S. regulator of Group Inc., a bank holding company that in August 2009 also became a financial holding company under the Bank Holding Company Act. As a bank holding company, we are subject to consolidated regulatory capital requirements administered by the Federal Reserve Board. Our bank depository institution subsidiaries, including GS Bank USA, are subject to similar capital requirements. Under the Federal Reserve Board’s capital adequacy requirements and the regulatory framework for prompt corrective action (PCA) that is applicable to GS Bank USA, Goldman Sachs and its bank depository institution subsidiaries must meet specific capital requirements that involve quantitative measures of assets, liabilities and certainoff-balance-sheet items as calculated under regulatory reporting practices. Goldman Sachs and its bank depository institution subsidiaries’ capital levels, as well as GS Bank USA’s PCA classification, are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

We are reporting our capital ratios calculated in accordance with the regulatory capital requirements currently applicable to bank holding companies, which are based on the Capital Accord of the Basel Committee on Banking Supervision (Basel I). These ratios are used by the Federal Reserve Board and other U.S. Federal banking agencies in the supervisory review process, including the assessment of our capital adequacy.

We also ~~continue~~assess our capital adequacy using an internalrisk-based (IRB) capital methodology. Under this methodology, the calculation of the Tier 1 capital ratio is generally consistent with the guidelines set out in the Revised Framework for the International Convergence of Capital Measurement and Capital Standards issued by the Basel Committee on Banking Supervision (Basel II). Prior to ~~disclose~~September 2009, we disclosed our capital ratios in accordance with the capital guidelines applicable to us before we became a bank holding company in September 2008, when we were regulated by the SEC as a Consolidated Supervised Entity (CSE). These guidelines were generally consistent with those set out in the Revised Framework for the International Convergence of Capital Measurement and Capital Standards issued by the Basel Committee on Banking Supervision (Basel II). Subsequent to becoming a bank holding company, we no longer report the CSE capital ratios to the SEC and Group Inc. is no longer regulated as a CSE.Entity.

Our capital ratios are set forth under“— Capital Ratios and Metrics” below. See Note 15 to the condensed consolidated financial statements in Part 1,I, Item 1 of this Quarterly Report onForm 10-Q for information regarding our capital ratios calculated in accordance with the Federal Reserve Board’s regulatory capital requirements currently applicable to bank holding companies, which are based on Basel I, and our capital ratios calculated in accordance with ~~the~~our IRB capital ~~guidelines applicable to us before we became a bank holding company in September 2008, when we were regulated by the SEC as a CSE,~~methodology, which ~~were~~is generally consistent with ~~guidelines set out in~~ Basel II.

Subsidiary Capital Requirements

Many of our subsidiaries are subject to separate regulation and capital requirements in jurisdictions throughout the world. Goldman, Sachs & Co. (GS&Co.) and Goldman Sachs Execution & Clearing, L.P. are registeredU.S. broker-dealers and futures commission merchants, and are subject to regulatory capital requirements, including those imposed by the SEC, the Commodity Futures Trading Commission, the Chicago Board of Trade, the Financial Industry Regulatory Authority, Inc. (FINRA) and the National Futures Association.

GS Bank USA, a New York State-chartered bank and a member of the Federal Reserve System and the ~~FDIC,~~Federal Deposit Insurance Corporation (FDIC), is regulated by the Federal Reserve Board and the New York State Banking Department (NYSBD) and is subject to minimum capital requirements that (subject to certain exceptions) are similar to those applicable to bank holding companies. GS Bank USA computes its capital ratios in accordance with the regulatory capital guidelines currently applicable to state member banks, which are based on Basel I as implemented by the Federal Reserve Board, for purposes of assessing the adequacy of its capital. See Note 15 to the condensed consolidated financial statements in Part 1,I, Item 1 of this Quarterly Report onForm 10-Q for information regarding GS Bank USA’s capital ratios under Basel I as implemented by the Federal Reserve Board, and for further information regarding the capital requirements of our other regulated subsidiaries.

~~115~~114

Subsidiaries not subject to separate regulation may hold capital to satisfy local tax guidelines, rating agency requirements (for entities with assigned credit ratings) or internal policies, including policies concerning the minimum amount of capital a subsidiary should hold based on its underlying level of risk. See“— Liquidity and Funding Risk — Conservative Liability Structure” below for a discussion of our potential inability to access funds from our subsidiaries.

Group Inc. has guaranteed the payment obligations of GS&Co., GS Bank USA and GSGoldman Sachs Bank ~~Europe,~~(Europe) PLC, subject to certain exceptions. In November 2008, we contributed subsidiaries into GS Bank USA, and Group Inc. agreed to guarantee certain losses, includingcredit-related losses, relating to assets held by the contributed entities. In connection with this guarantee, Group Inc. also agreed to pledge to GS Bank USA certain collateral, including interests in subsidiaries and other illiquid assets.

Equity investments in subsidiaries are generally funded with parent company equity capital, commensurate with the entity’s risk of loss. As of ~~June~~September 2009 and November 2008, Group Inc.’s equity investment in subsidiaries was ~~$58.90~~$59.80 billion and $51.70 billion, respectively, compared with its total shareholders’ equity of ~~$62.81~~$65.35 billion and $64.37 ~~billion.~~billion, respectively.

Our capital invested innon-U.S. subsidiaries is generally exposed to foreign exchange risk, substantially all of which is managed through a combination of derivative contracts andnon-U.S. denominated debt. In addition, we generally manage thenon-trading exposure to foreign exchange risk that arises from transactions denominated in currencies other than the transacting entity’s functional currency.

Rating Agency Guidelines

The credit rating agencies assign credit ratings to the obligations of Group Inc., which directly issues or guarantees substantially all of the firm’s senior unsecured obligations. In addition, GS Bank USA has been assigned along-term issuer rating as well as ratings on itslong-term andshort-term bank deposits. The level and composition of our equity capital are among the many factors considered in determining our credit ratings. Each agency has its own definition of eligible capital and methodology for evaluating capital adequacy, and assessments are generally based on a combination of factors rather than a single calculation. See“— Liquidity and Funding Risk — Credit Ratings” below for further information regarding our credit ratings.

Equity Capital Management

Our objective is to maintain a sufficient level and optimal composition of equity capital. We manage our capital through repurchases of our common stock and issuances of common and preferred stock, junior subordinated debt issued to trusts and other subordinated debt. We manage our capital requirements principally by setting limits on balance sheet assetsand/or limits on risk, in each case at both the consolidated and business unit levels. We attribute capital usage to each of our business units based upon our ~~regulatory~~IRB capital framework and manage the levels of usage based upon the balance sheet and risk limits established.

Stock Offering. During the second quarter of 2009, we completed a public offering of 46.7 million common shares at $123.00 per share for total proceeds of $5.75 billion.

Preferred Stock. In June 2009, we repurchased from the U.S. ~~Department of the~~ Treasury ~~(U.S. Treasury)~~ the 10.0 million shares of our Fixed Rate Cumulative Perpetual Preferred Stock, Series H, that were issued to the U.S. Treasury pursuant to the U.S. Treasury’s TARP Capital Purchase Program. The aggregate purchase price paid by us to the U.S. Treasury for the Preferred Stock, including accrued dividends, was $10.04 billion. Upon repurchase of the Series H Preferred Stock in June 2009, we were no longer subject to the limit on common stock repurchases imposed under the U.S. Treasury’s TARP Capital Purchase Program. In July 2009, we repurchased from the U.S. Treasury the10-year warrant, to purchase up to 12.2 million shares of common stock, that we had issued to the U.S. Treasury in connection with the issuance of the Series H Preferred Stock. The purchase price we paid to the U.S. Treasury to repurchase the warrant was $1.1 billion.

~~116~~115

Share Repurchase Program. We seek to use our share repurchase program to help maintain the appropriate level of common equity and to substantially offset increases in share count over time resulting from employeeshare-based compensation. The repurchase program is effected primarily through regularopen-market purchases, the amounts and timing of which are determined primarily by our current and projected capital positions (i.e., comparisons of our desired level of capital to our actual level of capital) but which may also be influenced by general market conditions and the prevailing price and trading volumes of our common stock.

As of ~~June~~September 2009, we were authorized to repurchase up to 60.8 million additional shares of common stock pursuant to our repurchase program. See “Unregistered Sales of Equity Securities and Use of Proceeds” in Part II, Item 2 of this Quarterly Report onForm 10-Q for additional information on our repurchase program.

See Note 9 to the condensed consolidated financial statements in Part 1,I, Item 1 of this Quarterly Report onForm 10-Q for further information regarding our preferred stock, junior subordinated debt issued to trusts and other subordinated debt.

Capital Ratios and Metrics

The following table sets forth information on our assets, shareholders’ equity, leverage ratios, capital ratios and book value per common share:

As of
June
November
2009 2008
($ in millions, except
per share amounts)
Total assets $ 889,544 $ 884,547
Adjusted assets ⁽¹⁾
553,021 528,292
Total shareholders’ equity 62,813 64,369
Tangible equity capital ⁽²⁾
62,840 64,317
Leverage ratio ⁽³⁾
14.2 x 13.7 x
Adjusted leverage ratio ⁽⁴⁾
8.8 x 8.2 x
Debt to equity ratio ⁽⁵⁾
3.0 x 2.6 x
Common shareholders’ equity $ 55,856 $ 47,898
Tangible common shareholders’ equity ⁽⁶⁾
50,883 42,846
Basel I ⁽⁷⁾

Tier 1 capital ratio 13.8 % N/A
Total capital ratio 17.2 % N/A
Tier 1 leverage ratio 6.4 % N/A
Tier 1 common ratio ⁽⁸⁾
10.9 % N/A
Tangible common shareholders’ equity torisk-weighted assets ratio
12.4 % N/A
Basel II ⁽⁹⁾

Tier 1 capital ratio 16.1 % 15.6 %
Total capital ratio 19.7 % 18.9 %
Tier 1 common ratio ⁽⁸⁾
13.0 % 10.3 %
Tangible common shareholders’ equity torisk-weighted assets ratio
13.3 % 10.7 %
Book value per common share ⁽¹⁰⁾
$ 106.41 $ 98.68
Tangible book value per common share ⁽¹¹⁾
96.94 88.27


	As of
	September			November
	2009			2008
	($ in millions, except
	per share amounts)
Total assets	$	882,185		$	884,547
Adjusted assets ⁽¹⁾		556,229			528,292
Total shareholders’ equity		65,354			64,369
Tangible equity capital ⁽²⁾		65,420			64,317
Leverage ratio ⁽³⁾		13.5	x		13.7	x
Adjusted leverage ratio ⁽⁴⁾		8.5	x		8.2	x
Debt to equity ratio ⁽⁵⁾		2.9	x		2.6	x
Common shareholders’ equity	$	58,397		$	47,898
Tangible common shareholders’ equity ⁽⁶⁾		53,463			42,846
Book value per common share ⁽⁷⁾		110.75			98.68
Tangible book value per common share ⁽⁶⁾⁽⁷⁾		101.39			88.27


	As of
	September 2009
	Basel I ⁽⁸⁾		IRB ⁽⁹⁾
Tier 1 capital ratio		14.5%		16.0%
Total capital ratio		17.9%		19.4%
Tier 1 leverage ratio		6.9%		N/A
Tier 1 common ratio ⁽¹⁰⁾		11.6%		13.0%
Tangible common shareholders’ equity ⁽⁶⁾ torisk-weighted assets ratio		13.1%		13.2%


⁽¹⁾		Adjusted assets excludes(i) low-risk collateralized assets generally associated with our matched book and securities lending businesses and federal funds sold, (ii) cash and securities we segregate for regulatory and other purposes and (iii) goodwill and identifiable intangible assets which are deducted when calculating tangible equity capital (see footnote 2 below).

~~117~~116

The following table sets forth the reconciliation of total assets to adjusted assets:


			As of								As of
			June			November					September			November
			2009			2008					2009			2008
			(in millions)								(in millions)
Total assets	Total assets		$	889,544		$	884,547		Total assets		$	882,185		$	884,547
Deduct:		Securities borrowed		(218,544	)		(180,795	)		Securities borrowed		(221,817	)		(180,795	)
		Securities purchased under agreements to resell and federal funds sold		(138,339	)		(122,021	)		Securities purchased under agreements to resell and federal funds sold		(142,589	)		(122,021	)
Add:		Trading liabilities, at fair value		147,297			175,972			Trading liabilities, at fair value		150,383			175,972
		Less derivative liabilities		(68,151	)		(117,695	)		Less derivative liabilities		(64,040	)		(117,695	)

		Subtotal		79,146			58,277			Subtotal		86,343			58,277
Deduct:		Cash and securities segregated for regulatory and other purposes		(53,813	)		(106,664	)		Cash and securities segregated for regulatory and other purposes		(42,959	)		(106,664	)
		Goodwill and identifiable intangible assets		(4,973	)		(5,052	)		Goodwill and identifiable intangible assets		(4,934	)		(5,052	)

Adjusted assets	Adjusted assets		$	553,021		$	528,292		Adjusted assets		$	556,229		$	528,292


⁽²⁾		Tangible equity capital equals total shareholders’ equity and junior subordinated debt issued to trusts less goodwill and identifiable intangible assets. We consider junior subordinated debt issued to trusts to be a component of our tangible equity capital base due to certain characteristics of the debt, including itslong-term nature, our ability to defer payments due on the debt and the subordinated nature of the debt in our capital structure.

The following table sets forth the reconciliation of total shareholders’ equity to tangible equity capital:


			As of								As of
			June			November					September			November
			2009			2008					2009			2008
			(in millions)								(in millions)
Total shareholders’ equity	Total shareholders’ equity		$	62,813		$	64,369		Total shareholders’ equity		$	65,354		$	64,369
Add:		Junior subordinated debt issued to trusts		5,000			5,000			Junior subordinated debt issued to trusts		5,000			5,000
Deduct:		Goodwill and identifiable intangible assets		(4,973	)		(5,052	)		Goodwill and identifiable intangible assets		(4,934	)		(5,052	)

Tangible equity capital	Tangible equity capital		$	62,840		$	64,317		Tangible equity capital		$	65,420		$	64,317


⁽³⁾		The leverage ratio equals total assets divided by total shareholders’ equity. This ratio is different from the Tier 1 leverage ~~ratios~~ratio included above, ~~and~~which is described in Note 15 to the condensed consolidated financial statements in Part 1,I, Item 1 of this Quarterly Report onForm 10-Q.

⁽⁴⁾		The adjusted leverage ratio equals adjusted assets divided by tangible equity capital. We believe that the adjusted leverage ratio is a more meaningful measure of our capital adequacy than the leverage ratio because it excludes certainlow-risk collateralized assets that are generally supported with little or no capital and reflects the tangible equity capital deployed in our businesses.

⁽⁵⁾		The debt to equity ratio equals unsecuredlong-term borrowings divided by total shareholders’ equity.

⁽⁶⁾		Tangible common shareholders’ equity equals total shareholders’ equity less preferred stock, goodwill and identifiable intangible assets. Tangible book value per common share is computed by dividing tangible common shareholders’ equity by the number of common shares outstanding, including RSUs granted to employees with no future service requirements. We believe that tangible common shareholders’ equity is meaningful because it is one of the measures that we and investors use to assess capital adequacy.

The following table sets forth the reconciliation of total shareholders’ equity to tangible common shareholders’ equity:


			As of								As of
			June			November					September			November
			2009			2008					2009			2008
			(in millions)								(in millions)
Total shareholders’ equity	Total shareholders’ equity		$	62,813		$	64,369		Total shareholders’ equity		$	65,354		$	64,369
Deduct:		Preferred stock		(6,957	)		(16,471	)		Preferred stock		(6,957	)		(16,471	)

Common shareholders’ equity	Common shareholders’ equity			55,856			47,898		Common shareholders’ equity			58,397			47,898
Deduct:		Goodwill and identifiable intangible assets		(4,973	)		(5,052	)		Goodwill and identifiable intangible assets		(4,934	)		(5,052	)

Tangible common shareholders’ equity	Tangible common shareholders’ equity		$	50,883		$	42,846		Tangible common shareholders’ equity		$	53,463		$	42,846


⁽⁷⁾		Book value and tangible book value per common share are based on common shares outstanding, including RSUs granted to employees with no future service requirements, of 527.3 million and 485.4 million as of September 2009 and November 2008, respectively.

117


⁽⁸⁾		Calculated in accordance with the regulatory capital requirements currently applicable to bank holding companies.Risk-weighted assets were ~~$409.20~~$409.29 billion as of ~~June~~September 2009 under Basel I. See Note 15 to the condensed consolidated financial statements in Part 1,I, Item 1 of this Quarterly Report onForm 10-Q for further information regarding our regulatory capital ratios.

⁽⁸⁾⁽⁹⁾		Calculated in accordance with our IRB capital methodology, which is generally consistent with Basel II.Risk-weighted assets were $403.71 billion as of September 2009 under this methodology. See Note 15 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report onForm 10-Q for further information regarding our regulatory capital ratios.

⁽¹⁰⁾		The Tier 1 common ratio equals Tier 1 capital less preferred stock and junior subordinated debt issued to trusts, divided byrisk-weighted assets.

⁽⁹⁾		~~Calculated in accordance with the capital guidelines applicable to us when we were regulated by the SEC as a CSE.Risk-weighted~~ assets were $381.84 billion and $400.38 billion as of June 2009 and November 2008, respectively, under Basel II. See Note 15 to the condensed consolidated financial statements in Part 1, Item 1 of this Quarterly Report on~~Form 10-Q~~ ~~for further information regarding our regulatory capital ratios.~~

~~118~~


⁽¹⁰⁾		Book value per common share is based on common shares outstanding, including restricted stock units granted to employees with no future service requirements, of 524.9 million and 485.4 million and as of June 2009 and November 2008, respectively.

⁽¹¹⁾		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.

Contractual Obligations

Goldman Sachs has contractual obligations to make future payments related to our unsecuredlong-term borrowings, securedlong-term financings,long-term noncancelable lease agreements and purchase obligations and has commitments under a variety of commercial arrangements.

The following table sets forth our contractual obligations by fiscal maturity date as of ~~June~~September 2009:

Contractual Obligations
(in millions)


	Remainder		2010-		2012-		2014-				Remainder		2010-		2012-		2014-
	of 2009		2011		2013		Thereafter		Total		of 2009		2011		2013		Thereafter		Total
Unsecuredlong-term borrowings ^(1)(2)(3)	$	—	$	33,069	$	49,541	$	108,632	$	191,242	$	—	$	26,796	$	51,274	$	111,654	$	189,724
Securedlong-term financings ^(1)(2)(4)		—		6,879		4,753		4,426		16,058		—		5,315		4,925		4,341		14,581
Contractual interest payments ⁽⁵⁾		3,656		13,480		10,860		33,060		61,056		1,793		13,247		10,658		32,231		57,929
Insurance liabilities ⁽⁶⁾		526		2,561		891		7,172		11,150		234		1,339		1,123		8,661		11,357
Minimum rental payments		249		826		570		1,780		3,425		127		832		572		1,771		3,302
Purchase obligations		470		147		27		24		668		263		179		36		34		512


⁽¹⁾		Obligations maturing within one year of our financial statement date or redeemable within one year of our financial statement date at the option of the holder are excluded from this table and are treated asshort-term obligations. See Note 3 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report onForm 10-Q for further information regarding our secured financings.

⁽²⁾		Obligations that are repayable prior to maturity at the option of Goldman Sachs are reflected at their contractual maturity dates. Obligations that are redeemable prior to maturity at the option of the holder are reflected at the dates such options become exercisable.

⁽³⁾		Includes ~~$19.90~~$20.80 billion accounted for at fair value under ~~SFAS No. 155 or SFAS No. 159,~~the fair value option, primarily consisting of hybrid financial instruments and prepaid physical commodity transactions.

⁽⁴⁾		These obligations are reported ~~within~~in “Other secured financings” in the condensed consolidated statements of financial condition and include ~~$10.67~~$9.52 billion accounted for at fair value under ~~SFAS No. 159.~~the fair value option.

⁽⁵⁾		Represents estimated future interest payments related to unsecuredlong-term borrowings and securedlong-term financings based on applicable interest rates as of ~~June~~September 2009. Includes stated coupons, if any, on structured notes.

⁽⁶⁾		Represents estimated undiscounted payments related to future benefits and unpaid claims arising from policies associated with our insurance activities, excluding separate accounts and estimated recoveries under reinsurance contracts.

As of ~~June~~September 2009, our unsecuredlong-term borrowings were ~~$191.24~~$189.72 billion, with maturities extending to 2043, and consisted principally of senior borrowings. See Note 7 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report onForm 10-Q for further information regarding our unsecuredlong-term borrowings.

118

As of ~~June~~September 2009, our future minimum rental payments, net of minimum sublease rentals, under noncancelable leases were ~~$3.43~~$3.30 billion. These lease commitments, principally for office space, expire on various dates through 2069. Certain agreements are subject to periodic escalation provisions for increases in real estate taxes and other charges. See Note 8 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report onForm 10-Q for further information regarding our leases.

~~119~~

Our occupancy expenses include costs associated with office space held in excess of our current requirements. This excess space, the cost of which is charged to earnings as incurred, is being held for potential growth or to replace currently occupied space that we may exit in the future. We regularly evaluate our current and future space capacity in relation to current and projected staffing levels. During the three and ~~six~~nine months ended ~~June~~September 2009, we incurred exit costs of ~~$35~~$1 million and ~~$51~~$52 million, respectively, related to our office space (included in “Occupancy” and “Depreciation and Amortization” in the condensed consolidated statements of earnings). We may incur exit costs in the future to the extent we (i) reduce our space capacity or (ii) commit to, or occupy, new properties in the locations in which we operate and, consequently, dispose of existing space that had been held for potential growth. These exit costs may be material to our results of operations in a given period.

As of ~~June~~September 2009, included in purchase obligations was ~~$390~~$273 million ofconstruction-related obligations. As of ~~June~~September 2009, ourconstruction-related obligations include commitments of ~~$348~~$239 million, related to our new headquarters in New York City, which is expected to cost ~~between $2.05 billion and $2.15~~approximately $2.1 billion. We ~~have partially financed this construction project with $1.65 billion~~expect initial occupancy of~~tax-exempt~~ ~~Liberty Bonds.~~ our new headquarters to occur during the fourth quarter of 2009.

Due to the uncertainty of the timing and amounts that will ultimately be paid, our liability for unrecognized tax benefits has been excluded from the above contractual obligations table.

See Note 8 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report onForm 10-Q for information regarding our commitments, contingencies and guarantees.

~~120~~119

Market Risk

The potential for changes in the market value of our trading and investing positions is referred to as market risk. Such positions result frommarket-making, proprietary trading, underwriting, specialist and investing activities. Substantially all of our inventory positions aremarked-to-market on a daily basis and changes are recorded in net revenues.

Categories of market risk include exposures to interest rates, equity prices, currency rates and commodity prices. A description of each market risk category is set forth below:


	•	Interest rate risks primarily result from exposures to changes in the level, slope and curvature of the yield curve, the volatility of interest rates, mortgage prepayment speeds and credit spreads.

	•	Equity price risks result from exposures to changes in prices and volatilities of individual equities, equity baskets and equity indices.

	•	Currency rate risks result from exposures to changes in spot prices, forward prices and volatilities of currency rates.

	•	Commodity price risks result from exposures to changes in spot prices, forward prices and volatilities of commodities, such as electricity, natural gas, crude oil, petroleum products, and precious and base metals.

We seek to manage these risks by diversifying exposures, controlling position sizes and establishing economic hedges in related securities or derivatives. For example, we may seek to hedge a portfolio of common stocks by taking an offsetting position in a relatedequity-index futures contract. The ability to manage an exposure may, however, be limited by adverse changes in the liquidity of the security or the related hedge instrument and in the correlation of price movements between the security and related hedge instrument.

In addition to applying business judgment, senior management uses a number of quantitative tools to manage our exposure to market risk for “Trading assets, at fair value” and “Trading liabilities, at fair value” in the condensed consolidated statements of financial condition. These tools include:


	•	risk limits based on a summary measure of market risk exposure referred to as VaR;

	•	scenario analyses, stress tests and other analytical tools that measure the potential effects on our trading net revenues of various market events, including, but not limited to, a large widening of credit spreads, a substantial decline in equity markets and significant moves in selected emerging markets; and

	•	inventory position limits for selected business units.

VaR

VaR is the potential loss in value of trading positions due to adverse market movements over a defined time horizon with a specified confidence level.

For the VaR numbers reported below, aone-day time horizon and a 95% confidence level were used. This means that there is a 1 in 20 chance that daily trading net revenues will fall below the expected daily trading net revenues by an amount at least as large as the reported VaR. Thus, shortfalls from expected trading net revenues on a single trading day greater than the reported VaR would be anticipated to occur, on average, about once a month. Shortfalls on a single day can exceed reported VaR by significant amounts. Shortfalls can also occur more frequently or accumulate over a longer time horizon such as a number of consecutive trading days.

~~121~~120

The modeling of the risk characteristics of our trading positions involves a number of assumptions and approximations. While we believe that these assumptions and approximations are reasonable, there is no standard methodology for estimating VaR, and different assumptionsand/or approximations could produce materially different VaR estimates.

We use historical data to estimate our VaR and, to better reflect current asset volatilities, we generally weight historical data to give greater importance to more recent observations. Given its reliance on historical data, VaR is most effective in estimating risk exposures in markets in which there are no sudden fundamental changes or shifts in market conditions. An inherent limitation of VaR is that the distribution of past changes in market risk factors may not produce accurate predictions of future market risk. Different VaR methodologies and distributional assumptions could produce a materially different VaR. Moreover, VaR calculated for aone-day time horizon does not fully capture the market risk of positions that cannot be liquidated or offset with hedges within one day.

The following tables set forth the daily VaR:

Average Daily VaR⁽¹⁾(in millions)


	Average for the												Average for the
	Three Months Ended						Six Months Ended						Three Months Ended						Nine Months Ended
	June			May			June			May			September			August			September			August
Risk Categories	2009			2008			2009			2008			2009			2008			2009			2008
Interest rates	$	205		$	144		$	211		$	125		$	159		$	141		$	194		$	130
Equity prices		60			79			49			84			74			67			57			78
Currency rates		39			32			38			31			35			25			37			29
Commodity prices		40			48			40			43			27			51			35			45
Diversification effect ⁽²⁾		(99	)		(119	)		(95	)		(112	)		(87	)		(103	)		(92	)		(108	)

Total	$	245		$	184		$	243		$	171		$	208		$	181		$	231		$	174


⁽¹⁾		Certain portfolios and individual positions are not included in VaR, where VaR is not the most appropriate measure of risk (e.g., due to transfer restrictionsand/or illiquidity). See“— Other Market Risk Measures” below.

⁽²⁾		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.

Our average daily VaR increased to ~~$245~~$208 million for the ~~second~~third quarter of 2009 from ~~$184~~$181 million for the ~~second~~third quarter of 2008, principally due to an increase in the interest rates category and a reduction in the diversification benefit across risk categories, partially offset by a decrease in the commodity prices category. The increase in interest rates was primarily due to higher ~~market~~levels of volatility and wider ~~credit~~ spreads. The decrease in commodity prices was primarily due to lower levels of exposure, partially offset by higher levels of volatility.

VaR excludes the impact of changes in counterparty and our own credit spreads on derivatives as well as changes in our own credit spreads on unsecured borrowings for which the fair value option was elected. The estimated sensitivity of our net revenues to a one basis point increase in credit spreads (counterparty and our own) on derivatives was less than a $1 million loss as of ~~June~~September 2009. In addition, the estimated sensitivity of our net revenues to a one basis point increase in our own credit spreads on unsecured borrowings for which the fair value option was elected was a $7$9 million gain (including hedges) as of ~~June~~September 2009.

~~122~~121

Daily VaR⁽¹⁾(in millions)


	As of						Three Months Ended				As of						Three Months Ended
	June			March			June 2009				September			June			September 2009
Risk Categories	2009			2009			High		Low		2009			2009			High		Low
Interest rates	$	176		$	242		$	242	$	175	$	141		$	176		$	174	$	136
Equity prices		72			40			108		33		63			72			106		56
Currency rates		31			43			58		21		32			31			52		27
Commodity prices		29			48			59		28		46			29			55		18
Diversification effect ⁽²⁾		(87	)		(107	)						(93	)		(87	)

Total	$	221		$	266		$	270	$	212	$	189		$	221		$	234	$	184


⁽¹⁾		Certain portfolios and individual positions are not included in VaR, where VaR is not the most appropriate measure of risk (e.g., due to transfer restrictionsand/or illiquidity). See“— Other Market Risk Measures” below.

⁽²⁾		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.

Our daily VaR decreased to $189 million as of September 2009 from $221 million as of June ~~2009 from $266 million as of March~~ 2009, primarily due to a decrease in the interest rates category, partially offset by an increase in the ~~equity~~commodity prices category. The decrease in interest rates was principally due to lower levels of volatility and ~~reduced rate exposures.~~tighter credit spreads. The increase in ~~equity~~commodity prices was ~~principally driven~~primarily due to higher levels of exposure, partially offset by ~~increased equity exposures.~~lower levels of volatility.

The following chart presents our daily VaR during the last four quarters and the month of December 2008:

Daily VaR
($ in millions)

~~123~~122

Trading Net Revenues Distribution

The following chart sets forth the frequency distribution of our daily trading net revenues for substantially all inventory positions included in VaR for the quarter ended ~~June~~September 2009:

Daily Trading Net Revenues
($ in millions)

As part of our overall risk control process, daily trading net revenues are compared with VaR calculated as of the end of the prior business day. Trading losses incurred on a single day did not exceed our 95%one-day VaR during the ~~second~~third quarter of 2009.

Other Market Risk Measures

Certain portfolios and individual positions are not included in VaR, where VaR is not the most appropriate measure of risk (e.g., due to transfer restrictionsand/or illiquidity). The market risk related to our investment in the ordinary shares of ICBC, excluding interests held by investment funds managed by Goldman Sachs, is measured by estimating the potential reduction in net revenues associated with a 10% decline in the ICBC ordinary share price. The market risk related to the remaining positions is measured by estimating the potential reduction in net revenues associated with a 10% decline in asset values.

The sensitivity analyses for equity and debt positions in our trading portfolio and equity, debt (primarily mezzanine instruments) and real estate positions in ournon-trading portfolio are measured by the impact of a decline in the asset values (including the impact of leverage in the underlying investments for real estate positions in ournon-trading portfolio) of such positions. The fair value of the underlying positions may be impacted by factors such as transactions in similar instruments, completed or pendingthird-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalizations and other transactions across the capital structure, offerings in the equity or debt capital markets, and changes in financial ratios or cash flows.

~~124~~123

The following table sets forth market risk for positions not included in VaR. These measures do not reflect diversification benefits across asset categories and, given the differing likelihood of the potential declines in asset categories, these measures have not been aggregated:


		10% Sensitivity
		Amount as of
Asset Categories	10% Sensitivity Measure	June 2009		March 2009		10% Sensitivity Measure	10% Sensitivity
							Amount as of
		(in millions)					September 2009		June 2009
		(in millions)
Trading Risk⁽¹⁾
Equity ⁽²⁾	Underlying asset value	$	617	$	667	Underlying asset value	$	619	$	617
Debt ⁽³⁾	Underlying asset value		523		521	Underlying asset value		517		523

Non-trading Risk
ICBC	ICBC ordinary share price		217		212	ICBC ordinary share price		253		217
Other Equity ⁽⁴⁾	Underlying asset value		987		982	Underlying asset value		1,038		987
Debt ⁽⁵⁾	Underlying asset value		774		689	Underlying asset value		849		774
Real Estate ⁽⁶⁾	Underlying asset value		828		942	Underlying asset value		790		828


⁽¹⁾		In addition to the positions in these portfolios, which are accounted for at fair value, we make investments accounted for under the equity method and we also make direct investments in real estate, both of which are included in “Other assets” in the condensed consolidated statements of financial condition. Direct investments in real estate are accounted for at cost less accumulated depreciation. See Note 12 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report onForm 10-Q for information on “Other assets.”

⁽²⁾		Relates to private and restricted public equity securities held within the FICC and Equities components of our Trading and Principal Investments segment.

⁽³⁾		Primarily relates to acquired portfolios of distressed loans (primarily backed by commercial and residential real estate collateral), loans backed by commercial real estate, and corporate debt held within the FICC component of our Trading and Principal Investments segment.

⁽⁴⁾		Primarily relates to interests in our merchant banking funds that invest in corporate equities.

⁽⁵⁾		Primarily relates to interests in our merchant banking funds that invest in corporate mezzanine debt instruments.

⁽⁶⁾		Primarily relates to interests in our merchant banking funds that invest in real estate. Such funds typically employ leverage as part of the investment strategy. This sensitivity measure is based on our percentage ownership of the underlying asset values in the funds and unfunded commitments to the funds.

During the ~~second~~third quarter of 2009, the ~~decrease in our 10% sensitivity measure for equity in our trading portfolio was due to dispositions and a decrease in the fair value of the portfolio. The~~ increase in our 10% sensitivity ~~measure~~measures for debt and equity positions in ournon-trading ~~portfolio~~portfolios was primarily due to ~~new investment activity and~~ an increase in the fair value of the ~~portfolio.~~portfolios. The decrease in our 10% sensitivity measure for real estate positions in ournon-trading portfolio was primarily due to a decrease in the fair value of the portfolio.

In addition to the positions included in VaR and the other risk measures described above, as of ~~June~~September 2009, we held approximately ~~$13.71~~$11.19 billion of financial instruments in our bank and insurance subsidiaries, primarily consisting of ~~$8.29~~$5.31 billion of money market instruments, ~~$1.37~~$1.38 billion of government and U.S. federal agency obligations, ~~$2.51~~$2.76 billion of corporate debt securities and other debt obligations, and ~~$1.19~~$1.38 billion of mortgage and otherasset-backed loans and securities. As of November 2008, we held approximately $10.39 billion of financial instruments in our bank and insurance subsidiaries, primarily consisting of $2.86 billion of money market instruments, $3.08 billion of government and U.S. federal agency obligations, $2.87 billion of corporate debt securities and other debt obligations, and $1.22 billion of mortgage and otherasset-backed loans and securities. In addition, as of ~~June~~September 2009 and November 2008, we held commitments and loans under the William Street credit extension program. See Note 8 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report onForm 10-Q for further information regarding our William Street credit extension program.

~~125~~124

Credit Risk

Credit risk represents the loss that we would incur if a counterparty or an issuer of securities or other instruments we hold fails to perform under its contractual obligations to us, or upon a deterioration in the credit quality of third parties whose securities or other instruments, including OTC derivatives, we hold. Our exposure to credit risk principally arises through our trading, investing and financing activities. To reduce our credit exposures, we seek to enter into netting agreements with counterparties that permit us to offset receivables and payables with such counterparties. In addition, we attempt to further reduce credit risk with certain counterparties by (i) entering into agreements that enable us to obtain collateral from a counterparty on an upfront or contingent basis, (ii) seekingthird-party guarantees of the counterparty’s obligations,and/or (iii) transferring our credit risk to third parties using credit derivativesand/or other structures and techniques.

To measure and manage our credit exposures, we use a variety of tools, including credit limits referenced to both current exposure and potential exposure. Potential exposure is an estimate of exposure, within a specified confidence level, that could be outstanding over the life of a transaction based on market movements. In addition, as part of our market risk management process, for positions measured by changes in credit spreads, we use VaR and other sensitivity measures. To supplement our primary credit exposure measures, we also use scenario analyses, such as credit spread widening scenarios, stress tests and other quantitative tools.

Our global credit management systems monitor credit exposure to individual counterparties and on an aggregate basis to counterparties and their affiliates. These systems also provide management, including the Firmwide Risk and Credit Policy Committees, with information regarding credit risk by product, industry sector, country and region.

While our activities expose us to many different industries and counterparties, we routinely execute a high volume of transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks and investment funds, resulting in significant credit concentration with respect to this industry. In the ordinary course of business, we may also be subject to a concentration of credit risk to a particular counterparty, borrower or issuer.

As of ~~June~~September 2009 and November 2008, we held ~~$98.43~~$78.19 billion ~~(11%~~(9% of total assets) and $53.98 billion (6% of total assets), respectively, of U.S. government and federal agency obligations included in “Trading assets, at fair value” and “Cash and securities segregated for regulatory and other purposes” in the condensed consolidated statements of financial condition. As of ~~June~~September 2009 and November 2008, we held ~~$44.52~~$46.15 billion (5% of total assets) and $21.13 billion (2% of total assets), respectively, of other sovereign obligations, principally consisting of securities issued by the governments of ~~Japan and~~ the United ~~Kingdom.~~Kingdom and Japan. In addition, as of ~~June~~September 2009 and November 2008, ~~$129.35~~$113.16 billion and $126.27 billion of our securities purchased under agreements to resell and securities borrowed (including those in “Cash and securities segregated for regulatory and other purposes”), respectively, were collateralized by U.S. government and federal agency obligations. As of ~~June~~September 2009 and November 2008, ~~$62.90~~$66.50 billion and $65.37 billion of our securities purchased under agreements to resell and securities borrowed, respectively, were collateralized by other sovereign obligations, principally consisting of securities issued by the governments of Germany and Japan. As of ~~June~~September 2009 and November 2008, we did not have credit exposure to any other counterparty that exceeded 2% of our total assets.

~~126~~125

Derivatives

Substantially all of our derivative transactions are entered into to facilitate client transactions, to take proprietary positions or as a means of risk management. In addition to derivative transactions entered into for trading purposes, we enter into derivative contracts to manage currency exposure on our net investment innon-U.S. operations and to manage the interest rate and currency exposure on ourlong-term borrowings and certainshort-term borrowings.

Derivatives are used in many of our businesses, and we believe that the associated market risk can only be understood relative to all of the underlying assets or risks being hedged, or as part of a broader trading strategy. Accordingly, the market risk of derivative positions is managed together with our nonderivative positions.

The fair value of our derivative contracts is reflected net of cash paid or received pursuant to credit support agreements and is reported on anet-by-counterparty basis in our condensed consolidated statements of financial condition when we believe a legal right of setoff exists under an enforceable netting agreement. For an OTC derivative, our credit exposure is directly with our counterparty and continues until the maturity or termination of such contract.

~~127~~126

The following tables set forth the fair values of our OTC derivative assets and liabilities by product type and by tenor. Tenor is based on expected duration formortgage-related credit derivatives and on remaining contractual maturity for other derivatives.

OTC Derivatives
(in millions)


Assets	As of June 2009															As of September 2009
	0 - 12			1 - 5			5 - 10			10 Years						0 - 12			1 - 5			5 - 10			10 Years
Product Type	Months			Years			Years			or Greater			Total			Months			Years			Years			or Greater			Total
Interest rates	$	10,628		$	42,755		$	27,262		$	38,214		$	118,859		$	14,158		$	40,348		$	28,450		$	41,824		$	124,780
Credit derivatives		10,284			26,613			15,499			8,937			61,333			8,458			18,418			14,496			7,155			48,527
Currencies		13,537			10,504			6,034			4,518			34,593			11,438			12,512			6,071			5,980			36,001
Commodities		10,260			9,613			603			502			20,978			8,565			10,309			2,141			125			21,140
Equities		17,674			6,975			2,975			1,270			28,894			10,092			12,257			1,694			678			24,721
Netting across product types ⁽¹⁾		(4,137	)		(8,916	)		(3,319	)		(2,553	)		(18,925	)		(4,043	)		(7,812	)		(3,125	)		(2,085	)		(17,065	)

Subtotal	$	58,246	⁽⁴⁾	$	87,544		$	49,054		$	50,888		$	245,732		$	48,668	⁽⁴⁾	$	86,032		$	49,727		$	53,677		$	238,104

Cross maturity netting ⁽²⁾														(27,080	)														(28,350	)
Cash collateral netting ⁽³⁾														(133,335	)														(126,823	)

Total													$	85,317														$	82,931



Liabilities
	0 - 12			1 - 5			5 - 10			10 Years						0 - 12			1 - 5			5 - 10			10 Years
Product Type	Months			Years			Years			or Greater			Total			Months			Years			Years			or Greater			Total

Interest rates	$	8,869		$	12,222		$	10,259		$	13,351		$	44,701		$	10,103		$	12,833		$	12,280		$	14,365		$	49,581
Credit derivatives		4,559			4,858			8,561			4,310			22,288			4,675			6,775			3,922			1,228			16,600
Currencies		11,467			6,544			3,427			2,236			23,674			13,113			5,514			3,308			1,539			23,474
Commodities		11,089			6,180			1,047			1,169			19,485			9,247			8,701			2,022			473			20,443
Equities		9,605			2,105			2,435			599			14,744			5,143			5,103			2,397			397			13,040
Netting across product types ⁽¹⁾		(4,137	)		(8,916	)		(3,319	)		(2,553	)		(18,925	)		(4,043	)		(7,812	)		(3,125	)		(2,085	)		(17,065	)

Subtotal	$	41,452	⁽⁴⁾	$	22,993		$	22,410		$	19,112		$	105,967		$	38,238	⁽⁴⁾	$	31,114		$	20,804		$	15,917		$	106,073

Cross maturity netting ⁽²⁾														(27,080	)														(28,350	)
Cash collateral netting ⁽³⁾														(16,309	)														(16,830	)

Total													$	62,578														$	60,893


⁽¹⁾		Represents the netting of receivable balances with payable balances for the same counterparty across product types within a maturity category, pursuant to credit support agreements.

⁽²⁾		Represents the netting of receivable balances with payable balances for the same counterparty across maturity categories, pursuant to credit support agreements.

⁽³⁾		Represents the netting of cash collateral received and posted on a counterparty basis pursuant to credit support agreements.

⁽⁴⁾		Includes fair values of OTC derivative assets and liabilities, maturing within six months, of ~~$37.29~~$32.28 billion and ~~$27.44~~$25.71 billion, respectively.

~~128~~127

OTC Derivatives
(in millions)


Assets	As of November 2008
	0 - 12			1 - 5			5 - 10			10 Years
Product Type	Months			Years			Years			or Greater			Total
Interest rates	$	9,757		$	39,806		$	36,229		$	48,508		$	134,300
Credit derivatives		18,608			29,625			27,151			11,682			87,066
Currencies		28,056			12,191			5,980			4,137			50,364
Commodities		13,660			12,500			1,175			1,898			29,233
Equities		17,046			3,945			4,279			2,475			27,745
Netting across product types ⁽¹⁾		(5,390	)		(8,124	)		(4,287	)		(2,779	)		(20,580	)

Subtotal	$	81,737	⁽⁴⁾	$	89,943		$	70,527		$	65,921		$	308,128

Cross maturity netting ⁽²⁾														(46,795	)
Cash collateral netting ⁽³⁾														(137,160	)

Total													$	124,173



Liabilities
	0 - 12			1 - 5			5 - 10			10 Years
Product Type	Months			Years			Years			or Greater			Total

Interest rates	$	6,293		$	14,201		$	17,671		$	28,363		$	66,528
Credit derivatives		7,991			23,316			13,380			3,981			48,668
Currencies		29,130			13,755			4,109			2,051			49,045
Commodities		12,685			10,391			1,575			827			25,478
Equities		12,391			5,065			2,654			903			21,013
Netting across product types ⁽¹⁾		(5,390	)		(8,124	)		(4,287	)		(2,779	)		(20,580	)

Subtotal	$	63,100	⁽⁴⁾	$	58,604		$	35,102		$	33,346		$	190,152

Cross maturity netting ⁽²⁾														(46,795	)
Cash collateral netting ⁽³⁾														(34,009	)

Total													$	109,348


⁽¹⁾		Represents the netting of receivable balances with payable balances for the same counterparty across product types within a maturity category, pursuant to credit support agreements.

⁽²⁾		Represents the netting of receivable balances with payable balances for the same counterparty across maturity categories, pursuant to credit support agreements.

⁽³⁾		Represents the netting of cash collateral received and posted on a counterparty basis pursuant to credit support agreements.

⁽⁴⁾		Includes fair values of OTC derivative assets and liabilities, maturing within six months, of $56.64 billion and $48.56 billion, respectively.

In the tables above, for option contracts that require settlement by delivery of an underlying derivative instrument, the tenor is generally classified based upon the maturity date of the underlying derivative instrument. In those instances where the underlying instrument does not have a maturity date or either counterparty has the right to settle in cash, the tenor is generally based upon the option expiration date.

~~129~~128

The following table sets forth the distribution, by credit rating, of our exposure with respect to OTC derivatives by tenor, both before and after consideration of the effect of collateral and netting agreements. Tenor is based on expected duration formortgage-related credit derivatives and on remaining contractual maturity for other derivatives. The categories shown reflect our internally determined public rating agency equivalents:

OTC Derivative Credit Exposure
(in millions)


	As of June 2009																		As of September 2009
																	Exposure																		Exposure
Credit Rating	0 - 12			1 - 5		5 - 10		10 Years									Net of		0 - 12			1 - 5		5 - 10		10 Years									Net of
Equivalent	Months			Years		Years		or Greater		Total		Netting ⁽²⁾			Exposure		Collateral		Months			Years		Years		or Greater		Total		Netting ⁽²⁾			Exposure		Collateral

AAA/Aaa	$	2,743		$	4,524	$	4,623	$	3,209	$	15,099	$	(6,221	)	$	8,878	$	8,520	$	1,482		$	3,249	$	3,809	$	2,777	$	11,317	$	(5,481	)	$	5,836	$	5,349
AA/Aa2		6,989			20,669		9,252		9,252		46,162		(32,641	)		13,521		9,759		6,647			12,741		7,695		9,332		36,415		(20,804	)		15,611		11,815
A/A2		36,715			39,178		28,307		28,760		132,960		(103,597	)		29,363		25,539		31,999			46,761		29,324		31,747		139,831		(111,238	)		28,593		24,795
BBB/Baa2		5,091			10,211		3,435		7,238		25,975		(11,908	)		14,067		8,492		4,825			7,780		5,609		8,190		26,404		(12,069	)		14,335		8,041
BB/Ba2 or lower		5,849			11,576		2,814		1,983		22,222		(5,965	)		16,257		10,160		3,049			13,931		2,903		1,483		21,366		(5,357	)		16,009		9,472
Unrated		859			1,386		623		446		3,314		(83	)		3,231		2,808		666			1,570		387		148		2,771		(224	)		2,547		1,845

Total	$	58,246	⁽¹⁾	$	87,544	$	49,054	$	50,888	$	245,732	$	(160,415	)	$	85,317	$	65,278	$	48,668	⁽¹⁾	$	86,032	$	49,727	$	53,677	$	238,104	$	(155,173	)	$	82,931	$	61,317



	As of November 2008																		As of November 2008
																	Exposure																		Exposure
Credit Rating	0 - 12			1 - 5		5 - 10		10 Years									Net of		0 - 12			1 - 5		5 - 10		10 Years									Net of
Equivalent	Months			Years		Years		or Greater		Total		Netting ⁽²⁾			Exposure		Collateral		Months			Years		Years		or Greater		Total		Netting ⁽²⁾			Exposure		Collateral

AAA/Aaa	$	5,519		$	3,871	$	5,853	$	4,250	$	19,493	$	(6,093	)	$	13,400	$	12,312	$	5,519		$	3,871	$	5,853	$	4,250	$	19,493	$	(6,093	)	$	13,400	$	12,312
AA/Aa2		26,835			30,532		33,479		18,980		109,826		(76,119	)		33,707		29,435		26,835			30,532		33,479		18,980		109,826		(76,119	)		33,707		29,435
A/A2		25,416			27,263		17,009		24,427		94,115		(59,903	)		34,212		28,614		25,416			27,263		17,009		24,427		94,115		(59,903	)		34,212		28,614
BBB/Baa2		11,324			17,156		8,684		14,311		51,475		(29,229	)		22,246		16,211		11,324			17,156		8,684		14,311		51,475		(29,229	)		22,246		16,211
BB/Ba2 or lower		11,835			10,228		4,586		3,738		30,387		(12,600	)		17,787		11,204		11,835			10,228		4,586		3,738		30,387		(12,600	)		17,787		11,204
Unrated		808			893		916		215		2,832		(11	)		2,821		1,550		808			893		916		215		2,832		(11	)		2,821		1,550

Total	$	81,737	⁽¹⁾	$	89,943	$	70,527	$	65,921	$	308,128	$	(183,955	)	$	124,173	$	99,326	$	81,737	⁽¹⁾	$	89,943	$	70,527	$	65,921	$	308,128	$	(183,955	)	$	124,173	$	99,326


⁽¹⁾	Includes fair values of OTC derivative assets, maturing within six months, of ~~$37.29~~$32.28 billion and $56.64 billion as of ~~June~~September 2009 and November 2008, respectively.

⁽²⁾	Represents the netting of receivable balances with payable balances for the same counterparty across maturity categories and the netting of cash collateral received, pursuant to credit support agreements. Receivable and payable balances with the same counterparty in the same maturity category are netted within such maturity category, where appropriate.

Derivative transactions may also involve legal risks including the risk that they are not authorized or appropriate for a counterparty, that documentation has not been properly executed or that executed agreements may not be enforceable against the counterparty. We attempt to minimize these risks by obtaining advice of counsel on the enforceability of agreements as well as on the authority of a counterparty to effect the derivative transaction. In addition, certain derivative transactions (e.g., credit derivative contracts) involve the risk that we may have difficulty obtaining, or be unable to obtain, the underlying security or obligation in order to satisfy any physical settlement requirement.

~~130~~129

Liquidity and Funding Risk

Liquidity is of critical importance to companies in the financial services sector. Most failures of financial institutions have occurred in large part due to insufficient liquidity resulting from adverse circumstances. Accordingly, Goldman Sachs has in place a comprehensive set of liquidity and funding policies that are intended to maintain significant flexibility to address both Goldman Sachs-specific and broader industry or market liquidity events. Our principal objective is to be able to fund Goldman Sachs and to enable our core businesses to continue to generate revenues, even under adverse circumstances.

We have implemented a number of policies according to the following liquidity risk management framework:


	•	Excess Liquidity — We maintain substantial excess liquidity to meet a broad range of potential cash outflows in a stressed environment, including financing obligations.

	•	Asset-Liability Management — We seek to maintain secured and unsecured funding sources that are sufficientlylong-term in order to withstand a prolonged or severe liquidity-stressed environment without having to rely on asset sales.

	•	Conservative Liability Structure — We seek to access funding across a diverse range of markets, products and counterparties, emphasize lesscredit-sensitive sources of funding and conservatively manage the distribution of funding across our entity structure.

	•	Crisis Planning — We base our liquidity and funding management onstress-scenario planning and maintain a crisis plan detailing our response to a liquidity-threatening event.

Excess Liquidity

Our most important liquidity policy is topre-fund what we estimate will be our potential cash needs during a liquidity crisis and hold such excess liquidity in the form of unencumbered, highly liquid securities that may be sold or pledged to providesame-day liquidity. This “Global Core Excess” is intended to allow us to meet immediate obligations without needing to sell other assets or depend on additional funding fromcredit-sensitive markets. We believe that this pool of excess liquidity provides us with a resilient source of funds and gives us significant flexibility in managing through a difficult funding environment. Our Global Core Excess reflects the following principles:


	•	The first days or weeks of a liquidity crisis are the most critical to a company’s survival.

	•	Focus must be maintained on all potential cash and collateral outflows, not just disruptions to financing flows. Our businesses are diverse, and our cash needs are driven by many factors, including market movements, collateral requirements and client commitments, all of which can change dramatically in a difficult funding environment.

	•	During a liquidity crisis,credit-sensitive funding, including unsecured debt and some types of secured financing agreements, may be unavailable, and the terms or availability of other types of secured financing may change.

	•	As a result of our policy topre-fund liquidity that we estimate may be needed in a crisis, we hold more unencumbered securities and have larger unsecured debt balances than our businesses would otherwise require. We believe that our liquidity is stronger with greater balances of highly liquid unencumbered securities, even though it increases our unsecured liabilities and our funding costs.

~~131~~130

The size of our Global Core Excess is based on an internal liquidity model together with a qualitative assessment of the condition of the financial markets and of Goldman Sachs. Our liquidity model identifies and estimates contractual and contingent cash and collateral outflows over ashort-term horizon in a liquidity crisis, including, but not limited to:


	•	upcoming maturities of unsecured debt and letters of credit;

	•	potential buybacks of a portion of our outstanding negotiable unsecured debt and potential withdrawals of client deposits;

	•	adverse changes in the terms or availability of secured funding;

	•	derivatives and other margin and collateral outflows, including those due to market moves;

	•	potential liquidity outflows associated with our prime brokerage business;

	•	additional collateral that could be called in the event of atwo-notch downgrade in our credit ratings;

	•	draws on our unfunded commitments not supported by William Street Funding Corporation ⁽¹⁾; and

	•	upcoming cash outflows, such as tax and other large payments.

The following table sets forth the average loan value (the estimated amount of cash that would be advanced by counterparties against these securities), as well as overnight cash deposits, of our Global Core Excess:


	Three Months		Year Ended		Three Months		Year Ended
	Ended June		November		Ended September		November
	2009		2008		2009		2008
	(in millions)				(in millions)
U.S. dollar-denominated	$	128,434	$	78,048	$	122,049	$	78,048
Non-U.S. dollar-denominated		42,514		18,677		45,423		18,677

Total Global Core Excess	$	170,948	$	96,725	$	167,472	$	96,725

TheU.S. dollar-denominated excess is comprised of only unencumbered U.S. government securities, U.S. agency securities and highly liquid U.S. agencymortgage-backed securities, all of which are eligible as collateral in Federal Reserve open market operations, as well as overnight cash deposits. Ournon-U.S. dollar-denominated excess is comprised of only unencumbered French, German, United Kingdom and Japanese government bonds and overnight cash deposits in highly liquid currencies. We strictly limit our Global Core Excess to this narrowly defined list of securities and cash because we believe they are highly liquid, even in a difficult funding environment. We do not believe that other potential sources of excess liquidity, such as lower-quality unencumbered securities or committed credit facilities, are as reliable in a liquidity crisis.

We maintain our Global Core Excess to enable us to meet current and potential liquidity requirements of our parent company, Group Inc., and all of its subsidiaries. The amount of our Global Core Excess is driven by our assessment of potential cash and collateral outflows, regulatory obligations and the currency and timing requirements of our global business model. In addition, we recognize that our Global Core Excess held in a regulated entity may not be available to our parent company or other subsidiaries and therefore may only be available to meet the potential liquidity requirements of that entity.

⁽¹⁾ The Global Core Excess excludes liquid assets of ~~$4.56~~$4.31 billion held separately by William Street Funding Corporation. See Note 8 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report onForm 10-Q for further information regarding the William Street credit extension program.

~~132~~131

In addition to our Global Core Excess, we have a significant amount of other unencumbered securities as a result of our business activities. These assets, which are located in the U.S., Europe and Asia, include other government bonds,high-grade money market securities, corporate bonds and marginable equities. We do not include these securities in our Global Core Excess.

We maintain our Global Core Excess and other unencumbered assets in an amount that, if pledged or sold, would provide the funds necessary to replace at least 110% of our unsecured obligations that are scheduled to mature (or where holders have the option to redeem) within the next 12 months. We assume conservative loan values that are based onstress-scenario borrowing capacity and we regularly review these assumptions asset class by asset class. The estimated aggregate loan value of our Global Core Excess, as well as overnight cash deposits, and our other unencumbered assets averaged ~~$220.77~~$209.29 billion and $163.41 billion for the three months ended ~~June~~September 2009 and year ended November 2008, respectively.

Asset-Liability Management

We seek to maintain a highly liquid balance sheet and substantially all of our inventory ismarked-to-market daily. We utilize aged inventory limits for certain financial instruments as a disincentive to our businesses to hold inventory over longer periods of time. We believe that these limits provide a complementary mechanism for ensuring appropriate balance sheet liquidity in addition to our standard position limits. Although our balance sheet fluctuates due to client activity, market conventions and periodic market opportunities in certain of our businesses, our total assets and adjusted assets at financial statement dates are typically not materially different from those occurring within our reporting periods.

We seek to manage the maturity profile of our secured and unsecured funding base such that we should be able to liquidate our assets prior to our liabilities coming due, even in times of prolonged or severe liquidity stress. We do not rely on immediate sales of assets (other than our Global Core Excess) to maintain liquidity in a distressed environment, although we recognize orderly asset sales may be prudent or necessary in a severe or persistent liquidity crisis.

In order to avoid reliance on asset sales, our goal is to ensure that we have sufficient total capital (unsecuredlong-term borrowings plus total shareholders’ equity) to fund our balance sheet for at least one year. The target amount of our total capital is based on an internal liquidity model which incorporates, among other things, the followinglong-term financing requirements:


	•	the portion of trading assets that we believe could not be funded on a secured basis in periods of market stress, assuming conservative loan values;

	•	goodwill and identifiable intangible assets, property, leasehold improvements and equipment, and other illiquid assets;

	•	derivative and other margin and collateral requirements;

	•	anticipated draws on our unfunded loan commitments; and

	•	capital or other forms of financing in our regulated subsidiaries that are in excess of theirlong-term financing requirements. See“— Conservative Liability Structure” below for a further discussion of how we fund our subsidiaries.

~~133~~132

Certain financial instruments may be more difficult to fund on a secured basis during times of market stress. Accordingly, we generally hold higher levels of total capital for these assets than more liquid types of financial instruments. The following table sets forth our aggregate holdings in these categories of financial instruments:


	As of				As of
	June		November		September		November
	2009		2008		2009		2008
	(in millions)				(in millions)
Mortgage and otherasset-backed loans and securities	$	13,730	$	22,393	$	14,023	$	22,393
Bank loans and bridge loans ⁽¹⁾		18,349		21,839		19,879		21,839
Emerging market debt securities		1,639		2,827		2,377		2,827
High-yield and other debt obligations		10,708		9,998		11,093		9,998
Private equity and real estate fund investments ⁽²⁾		14,380		18,171		14,906		18,171
Emerging market equity securities		4,554		2,665		5,401		2,665
ICBC ordinary shares ⁽³⁾		6,269		5,496		6,875		5,496
SMFG convertible preferred stock		1,330		1,135		1,091		1,135
Other restricted public equity securities		237		568		208		568
Other investments in funds ⁽⁴⁾		2,809		2,714		2,792		2,714


⁽¹⁾		Includes funded commitments and inventory held in connection with our origination and secondary trading activities.

⁽²⁾		Includes interests in our merchant banking funds. Such amounts exclude assets related to consolidated investment funds of ~~$899~~$926 million and $1.16 billion as of ~~June~~September 2009 and November 2008, respectively, for which Goldman Sachs does not bear economic exposure.

⁽³⁾		Includes interests of ~~$3.96~~$4.35 billion and $3.48 billion as of ~~June~~September 2009 and November 2008, respectively, held by investment funds managed by Goldman Sachs.

⁽⁴⁾		Includes interests in other investment funds that we manage.

We focus on funding these assets with long contractual maturities to reduce refinancing risk in periods of market stress.

See Note 3 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report onForm 10-Q for further information regarding the financial instruments we hold.

Conservative Liability Structure

We seek to structure our liabilities conservatively to reduce refinancing risk and the risk that we may be required to redeem or repurchase certain of our borrowings prior to their contractual maturity.

We fund a substantial portion of our inventory on a secured basis, which we believe provides Goldman Sachs with a more stable source of liquidity than unsecured financing, as it is less sensitive to changes in our credit due to the underlying collateral. However, we recognize that the terms or availability of secured funding, particularly overnight funding, can deteriorate rapidly in a difficult environment. To help mitigate this risk, we raise the majority of our funding for durations longer than overnight. We seek longer terms for secured funding collateralized by lower-quality assets, as we believe these funding transactions may pose greater refinancing risk. The weighted average life of our secured funding, excluding funding collateralized by highly liquid securities, such as U.S., French, German, United Kingdom and Japanese government bonds, and U.S. agency securities, exceeded 100 days as of ~~June~~September 2009.

~~134~~133

Our liquidity also depends, to an important degree, on the stability of ourshort-term unsecured financing base. Accordingly, we prefer the use of promissory notes (in which Goldman Sachs does not make a market) over commercial paper, which we may repurchase prior to maturity through the ordinary course of business as a market maker. As of ~~June~~September 2009, our unsecuredshort-term borrowings, including the current portion of unsecuredlong-term borrowings, were ~~$35.17~~$38.56 billion. See Note 6 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report onForm 10-Q for further information regarding our unsecuredshort-term borrowings.

We issuelong-term borrowings as a source of total capital in order to meet ourlong-term financing requirements. The following table sets forth our quarterly unsecuredlong-term borrowings maturity profile through the ~~second~~third quarter of ~~2015:~~2015 as of September 2009:

UnsecuredLong-Term Borrowings Maturity Profile
($ in millions)

The weighted average maturity of our unsecuredlong-term borrowings as of ~~June~~September 2009 was approximately seven years. To mitigate refinancing risk, we seek to limit the principal amount of debt maturing on any one day or during any week or year. We swap a substantial portion of ourlong-term borrowings intoshort-term floating rate obligations in order to minimize our exposure to interest rates.

We issue substantially all of our unsecured debt without provisions that would, based solely upon an adverse change in our credit ratings, financial ratios, earnings, cash flows or stock price, trigger a requirement for an early payment, collateral support, change in terms, acceleration of maturity or the creation of an additional financial obligation.

~~135~~134

As of ~~June~~September 2009, our bank depository institution subsidiaries had ~~$41.46~~$42.43 billion in customer deposits, including ~~$28.45~~$31.07 billion of deposits from bank sweep programs and ~~$13.01~~$11.36 billion of certificates of deposit and other time deposits with a weighted average maturity of three years. Since September 2008, GS Bank USA has had access to funding through the Federal Reserve Bank discount window. While we do not rely on funding through the Federal Reserve Bank discount window in our liquidity modeling and stress testing, we maintain policies and procedures necessary to access this funding.

We seek to maintain broad and diversified funding sources globally for both secured and unsecured funding. We make extensive use of the repurchase agreement and securities lending markets, as well as other secured funding markets. In addition, we issue debt through syndicated U.S. registered offerings, U.S. registered and 144Amedium-term note programs, offshoremedium-term note offerings and other bond offerings, U.S. andnon-U.S. commercial paper and promissory note issuances and other methods. We also arrange for letters of credit to be issued on our behalf.

We seek to distribute our funding products through our own sales force to a large, diverse global creditor base and we believe that our relationships with our creditors are critical to our liquidity. Our creditors include banks, governments, securities lenders, pension funds, insurance companies, mutual funds and individuals. We access funding in a variety of markets in the Americas, Europe and Asia. We have imposed various internal guidelines on creditor concentration, including the amount of our commercial paper and promissory notes that can be owned and letters of credit that can be issued by any single creditor or group of creditors.

As a bank holding company, the firm has access to certain programs and facilities established on a temporary basis by a number of U.S. regulatory ~~agencies, including the Temporary Liquidity Guarantee Program (TLGP).~~agencies. See “Liquidity and Funding Risk” in Part II, Item 7 of our Annual Report onForm 10-K for the fiscal year ended November 2008 for a discussion of these programs. ~~Under the TLGP, we are able to have outstanding approximately $35 billion of debt that is issued prior to October 31, 2009 guaranteed by the Federal Deposit Insurance Corporation (FDIC).~~ As of ~~June~~September 2009, we had outstanding ~~$25.14~~$22.62 billion of senior unsecured debt (comprised of ~~$4.39~~$1.77 billion ofshort-term and ~~$20.75~~$20.85 billion oflong-term) guaranteed by the FDIC under the ~~TLGP.~~Temporary Liquidity Guarantee Program (TLGP). We have not issuedlong-term debt under the TLGP since March 2009 and the program expired for new issuances with respect to the firm on October 31, 2009.

See “Risk Factors” in Part I, Item 1A of our Annual Report onForm 10-K for a discussion of factors that could impair our ability to access the capital markets.

Subsidiary Funding Policies. The majority of our unsecured funding is raised by our parent company, Group Inc. The parent company then lends the necessary funds to its subsidiaries, some of which are regulated, to meet their asset financing and capital requirements. In addition, the parent company provides its regulated subsidiaries with the necessary capital to meet their regulatory requirements. The benefits of this approach to subsidiary funding include enhanced control and greater flexibility to meet the funding requirements of our subsidiaries. Funding is also raised at the subsidiary level through secured funding and deposits.

Our intercompany funding policies are predicated on an assumption that, unless legally provided for, funds or securities are not freely available from a subsidiary to its parent company or other subsidiaries. In particular, many of our subsidiaries are subject to laws that authorize regulatory bodies to block or limit the flow of funds from those subsidiaries to Group Inc. Regulatory action of that kind could impede access to funds that Group Inc. needs to make payments on obligations, including debt obligations. As such, we assume that capital or other financing provided to our regulated subsidiaries is not available to our parent company or other subsidiaries until the maturity of such financing. In addition, we recognize that the Global Core Excess held in our regulated entities may not be available to our parent company or other subsidiaries and therefore may only be available to meet the potential liquidity requirements of those entities.

~~136~~135

We also manage our liquidity risk by requiring senior and subordinated intercompany loans to have maturities equal to or shorter than the maturities of the aggregate borrowings of the parent company. This policy ensures that the subsidiaries’ obligations to the parent company will generally mature in advance of the parent company’sthird-party borrowings. In addition, many of our subsidiaries and affiliates maintain unencumbered assets to cover their unsecured intercompany borrowings (other than subordinated debt) in order to mitigate parent company liquidity risk.

Group Inc. has provided substantial amounts of equity and subordinated indebtedness, directly or indirectly, to its regulated subsidiaries. For example, as of ~~June~~September 2009, Group Inc. had ~~$24.75~~$23.81 billion of such equity and subordinated indebtedness invested in GS&Co., its principal U.S. registeredbroker-dealer; ~~$23.71~~$20.77 billion invested in GSI, a regulated U.K.broker-dealer; ~~$2.53~~$2.56 billion invested in Goldman Sachs Execution & Clearing, L.P., a U.S. registeredbroker-dealer; ~~$3.73~~$3.98 billion invested in Goldman Sachs Japan Co., Ltd., a regulated Japanesebroker-dealer; and ~~$20.05~~$21.43 billion invested in GS Bank USA, a regulated New York State-chartered bank. Group Inc. also had ~~$90.05~~$80.75 billion of unsubordinated loans and ~~$17.22~~$16.77 billion of collateral provided to these entities as of ~~June~~September 2009, as well as significant amounts of capital invested in and loans to its other regulated subsidiaries.

Crisis Planning

In order to be prepared for a liquidity event, or a period of market stress, we base our liquidity risk management framework and our resulting funding and liquidity policies on conservativestress-scenario assumptions. Our planning incorporates severalmarket-based and operational stress scenarios. We also periodically conduct liquidity crisis drills to test our lines of communication and backup funding procedures.

In addition, we maintain a liquidity crisis plan that specifies an approach for analyzing and responding to a liquidity-threatening event. The plan provides the framework to estimate the likely impact of a liquidity event on Goldman Sachs based on some of the risks identified above and outlines which and to what extent liquidity maintenance activities should be implemented based on the severity of the event.

Credit Ratings

We rely upon theshort-term andlong-term debt capital markets to fund a significant portion of ourday-to-day operations. The cost and availability of debt financing is influenced by our credit ratings. Credit ratings are important when we are competing in certain markets and when we seek to engage in longer-term transactions, including OTC derivatives. We believe our credit ratings are primarily based on the credit rating agencies’ assessment of our liquidity, market, credit and operational risk management practices, the level and variability of our earnings, our capital base, our franchise, reputation and management, our corporate governance and the external operating environment, including the perceived level of government support. See “Risk Factors” in Part I, Item 1A of our Annual Report onForm 10-K for a discussion of the risks associated with a reduction in our credit ratings.

~~137~~136

The following table sets forth our unsecured credit ratings (excluding debt guaranteed by the FDIC under the TLGP) as of ~~June~~September 2009:


	Short-Term Debt	Long-Term Debt	Subordinated Debt	Preferred Stock
Dominion Bond Rating Service Limited	R-1 (middle)	A (high)	A	BBB
Fitch, Inc.	F1+	A+	A	A−
~~Moody’s~~Moody’s Investors Service ⁽¹⁾	P-1	A1	A2	A3
Standard & ~~Poor’s~~Poor’s Ratings Services	A-1	A	A−	BBB
Rating and Investment Information, Inc.	a-1+	AA−	~~Not Applicable~~A+	Not Applicable


⁽¹⁾		GS Bank USA has been assigned aLong-Term Issuer rating of Aa3 as well as a rating of Aa3 forLong-Term Bank Deposits and a rating ofP-1 forShort-Term Bank Deposits.

Based on our credit ratings as of ~~June~~September 2009, additional collateral or termination payments pursuant to bilateral agreements with certain counterparties of approximately ~~$763~~$685 million and ~~$1.93~~$1.70 billion could have been called by counterparties in the event of aone-notch andtwo-notch reduction, respectively, in ourlong-term credit ratings. In evaluating our liquidity requirements, we consider additional collateral or termination payments that may be required in the event of atwo-notch reduction in ourlong-term credit ratings, as well as collateral that has not been called by counterparties, but is available to them.

Cash Flows

As a global financial institution, our cash flows are complex and interrelated and bear little relation to our net earnings and net assets and, consequently, we believe that traditional cash flow analysis is less meaningful in evaluating our liquidity position than the excess liquidity andasset-liability management policies described above. Cash flow analysis may, however, be helpful in highlighting certain macro trends and strategic initiatives in our businesses.

~~Six~~Nine Months Ended ~~June~~September 2009. Our cash and cash equivalents increased by ~~$8.37~~$9.21 billion to ~~$22.18~~$23.02 billion at the end of the ~~second~~third quarter of 2009. We generated ~~$16.02~~$23.35 billion in net cash from operating activities. We used net cash of ~~$7.65~~$14.14 billion ~~from~~for investing and financing activities, primarily for net repayments in ~~secured~~unsecured and ~~unsecured~~securedshort-term borrowings and the ~~repurchase~~repurchases of Series H Preferred Stock and the related common stock warrant from the U.S. Treasury, partially offset by an increase in bank deposits and the issuance of common stock.

~~Six~~Nine Months Ended ~~May~~August 2008. Our cash and cash equivalents increased by ~~$1.02~~$1.88 billion to ~~$11.31~~$12.16 billion at the end of the ~~second~~third quarter of 2008. We raised ~~$18.68~~$14.89 billion in net cash from financing activities, primarily in ~~unsecured borrowings and~~ bank deposits ~~partially offset by repayments of secured financings.~~and unsecuredlong-term borrowings. We used net cash of ~~$17.66~~$13.01 billion in our operating and investing activities, primarily to capitalize on trading and investing opportunities for our clients and ourselves.

Recent Accounting Developments

See Note 2 to the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report onForm 10-Q for information regarding Recent Accounting Developments.

~~138~~137

Cautionary Statement Pursuant to the U.S. Private Securities

Litigation Reform Act of 1995

We have included or incorporated by reference in this Quarterly Report onForm 10-Q, and from time to time our management may make, statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are not historical facts but instead represent only our beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside our control. It is possible that our 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 our future results and financial condition, see “Risk Factors” in Part I, Item 1A of our Annual Report onForm 10-K for the fiscal year ended November 28, 2008 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report onForm 10-K for the fiscal year ended November 28, 2008.

Certain of the information regarding our capital ratios, as calculated in accordance with Basel I, is based on certain market risk measures that are under review by the Federal Reserve Board. This information is subject to change as the calculation of these ratios has not been reviewed with the Federal Reserve Board, and these ratios may be revised in subsequent filings.

Statements about our investment banking transaction backlog also may constituteforward-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, if any, that we actually 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 or continued weakness in general economic conditions, outbreak of hostilities, 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 inability to obtain adequate financing, 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 our investment banking transactions, see “Risk Factors” in Part I, Item 1A of our Annual Report onForm 10-K for the fiscal year ended November 28, 2008 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report onForm 10-K for the fiscal year ended November 28, 2008.


Item 3:	Quantitative and Qualitative Disclosures About Market Risk

Quantitative and qualitative disclosures about market risk are set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risk” in Part I, Item 2 above.


Item 4:	Controls and Procedures

As of the end of the period covered by this report, an evaluation was carried out by Goldman Sachs’ management, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined inRule 13a-15(e) under the U.S. Securities Exchange Act of 1934 (Exchange Act)). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of the end of the period covered by this report. In addition, no change in our internal control over financial reporting (as defined inRule 13a-15(f) under the Exchange Act) occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

~~139~~138

PART II: OTHER INFORMATION


Item 1:	Legal Proceedings

The following supplements and amends our discussion set forth under Item 3 “Legal Proceedings” in our Annual Report onForm 10-K for the fiscal year ended November 28, 2008, as updated by our Quarterly ~~Report~~Reports onForm 10-Q for the ~~quarter~~quarters ended March 27, 2009 and June 26, 2009.

IPO Process Matters

In the lawsuits alleging that the prospectuses for certain offerings violated the federal securities laws by failing to disclose the existence of alleged arrangements to “tie” allocations to higher customer brokerage commission rates as well as purchase orders in the aftermarket, by a decision dated October 5, 2009, the federal district court approved the proposed settlement. On October 23, 2009, certain objectors filed a petition in the U.S. Court of Appeals for the Second Circuit seeking review of the district court’s certification of a class for purposes of the settlement.

Research Independence Matters

In the class action relating to coverage of RSL Communications, Inc., ~~on April 30,~~by a decision dated August 4, 2009, ~~plaintiffs~~the federal district court granted plaintiffs’ renewed ~~their~~ motion seeking class certification. On August 18, 2009, defendants filed a petition with the U.S. Court of Appeals for the Second Circuit seeking review of the certification ruling.

~~Adelphia Communications Fraudulent Conveyance~~Enron Litigation Matters

In the class action relating to the exchangeable notes, on October 28, 2009, the federal district court entered an order preliminarily approving the settlement and setting a final hearing for February 4, 2010.

Specialist Matters

By an order dated October 1, 2009, the U.S. Court of Appeals for the Second Circuit declined to review the certification ruling. The specialist defendants filed a petition for rehearing and/or rehearing en banc on October 15, 2009.

Treasury Matters

By a decision dated ~~May 4,~~August 6, 2009, the federal district court denied GS&Co.’s motion for summary judgment as to ~~dismiss.~~the remaining claims. On October 13, 2009, the parties filed an offer of judgment and notice of acceptance with respect to plaintiff’s individual claim. Plaintiff’s notice purported to reserve the right to appeal with respect to the district court’s prior denial of class certification, and GS&Co. ~~moved for reconsideration, and by a decision dated June 15, 2009, the district court granted the motion insofar as requiring plaintiff to amend~~has indicated its ~~complaint to specify the source of the margin payments to GS&Co. By a decision dated July 30, 2009, the district court held~~position that ~~the sufficiency of the amended claim would be determined at the summary judgment stage.~~

~~Executive Compensation Matters~~

In the action filed in New York state court, Group Inc. removed the action to federal court, and it has been transferred on consent to the U.S. District Court for the Eastern District of New York, where defendants moved to dismiss on July 8, 2009. On July 10, 2009, plaintiff moved to remand the action to state court.

~~Group Inc. and certain of its affiliates have received inquiries from various governmental agencies and self-regulatory organizations regarding the firm’s compensation processes. The firm~~such reservation is ~~cooperating with the requests.~~

The Board has received several demand letters from shareholders relating to compensation matters, including demands that the Board investigate compensation awards over recent years, take steps to recoup alleged excessive compensation, and adopt certain reforms. The Board is considering the demand letters.ineffective.

Mortgage-Related Matters

On May 11, 2009, the Massachusetts Attorney General announced that it had entered into an agreement with GS&Co. (on behalf of itself and certain affiliates) in order to conclude and resolve all issues arising from the Attorney General’s investigation of certain subprime matters. In connection with the settlement, GS&Co. agreed, among other things, to pay $10 million to Massachusetts and offer to provide certain relief to Massachusetts homeowners whose mortgages are owned by GS&Co. or its affiliates.

~~In the action brought by the City of Cleveland, the district court granted defendants’ motion to dismiss by a decision dated May 15, 2009. The City appealed on May 18, 2009.~~

In the purported class action relating to various mortgage pass-through andasset-backed certificates issued by various securitization trusts in 2007, ~~plaintiffs filed an amended~~defendants moved to dismiss the complaint on ~~May 15,~~August 19, 2009.

~~140~~

~~Group Inc., GS&Co., Goldman Sachs Mortgage Company and GS Mortgage Securities Corp. are among~~ By a decision rendered on September 17, 2009, the ~~defendants in a separate putative~~federal district court dismissed the complaint with leave to amend.

In the purported class action ~~commenced on February 6, 2009 in the U.S. District Court for the Southern District of New York brought on behalf of purchasers of~~relating to various mortgage pass-through ~~certificates~~ andasset-backed certificates issued by various securitization trusts in 2006, ~~and underwritten by GS&Co. The other~~ defendants ~~include three current or former Goldman Sachs employees and various rating agencies. The~~moved to dismiss the complaint on August 10, 2009. Rather than respond, plaintiff filed an amended complaint ~~generally alleges that~~on September 18, 2009. Defendants moved to dismiss the ~~registration statement and prospectus supplements for the certificates violated the federal securities laws. The~~ amended complaint asserts a claim under Section 11 of the Securities Act against all defendants, a claim under Section 12(a)(2) of the Securities Act against Group Inc. and GS&Co. and a related “controlling person” claim under Section 15 of the Securities Act against Group Inc., GS&Co., Goldman Sachs Mortgage Company and the individual defendants, and seeks unspecified compensatory and rescissionary damages.on November 2, 2009.

139

Auction Products Matters

InFollowing the dismissal of the shareholder derivative ~~actions against Group Inc., its board of directors, and certain senior officers, on May 19, 2009,~~action, the ~~district court granted defendants’ motion to dismiss, and on July 20, 2009 denied plaintiffs’ motion for reconsideration.~~named plaintiff in such action sent the Board a letter demanding that the Board investigate the allegations set forth in the complaint. The Board is considering the demand letter.

Washington Mutual Securities Litigation

By a decision dated ~~May 15,~~October 27, 2009, the federal district court granted ~~in part~~ and denied in part the ~~underwriter defendants’~~underwriters’ motion to ~~dismiss, with leave to replead, and on June 15, 2009, plaintiffs filed an amended complaint. On July 17, 2009, the underwriters moved to dismiss certain aspects of the amended complaint.~~dismiss.

Britannia Bulk Securities Litigation

~~On June 12,~~By a decision dated October 19, 2009, the federal district court granted the underwriter ~~defendants including GS&Co. moved~~defendants’ motion to ~~dismiss.~~

~~IndyMac Pass-Through Certificates Litigation~~

~~On May 21, 2009, plaintiffs voluntarily dismissed their California complaint. On May 14, 2009, a new plaintiff filed an action in the U.S. District Court~~dismiss but provided for ~~the Southern District~~further consideration of ~~New York asserting the same substantive~~certain claims ~~as in the California action.~~

~~Montana Power Litigation~~

~~On July 21, 2009, the parties reached a settlement in principle, subject to, among~~against other ~~things, negotiation of a definitive agreement and court approval.~~

~~Credit Derivatives~~

Group Inc. and certain of its affiliates have received inquiries from various governmental agencies and self-regulatory organizations regarding credit derivative instruments. The firm is cooperating with the requests.

~~Enron Litigation Matters~~

On August 3, 2009, GS&Co. entered into a definitive settlement agreement with plaintiffs in the purported securities class action relating to the exchangeable notes. The settlement remains subject to court approval.defendants.

~~141~~140


Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds

The table below sets forth the information with respect to purchases made by or on behalf of Group Inc. or any “affiliated purchaser” (as defined inRule 10b-18(a)(3) under the Exchange Act) of our common stock during the three months ended ~~June 26,~~September 25, 2009.

Total Number of

Maximum Number

Average

Shares Purchased

of Shares That May

Total Number

Price

as Part of Publicly

Yet Be Purchased

of Shares

Paid per

Announced Plans

Under the Plans or

Period

Purchased

Share

or Programs ⁽¹⁾

Programs ⁽¹⁾

Month #1

—

60,838,106

(~~March 28,~~June 27, 2009 to
~~April 24,~~July 31, 2009)

Month #2

—

60,838,106

(~~April 25,~~August 1, 2009 to
~~May 29,~~August 28, 2009)

Month #3

—

60,838,106

(~~May 30,~~August 29, 2009 to
~~June 26,~~September 25, 2009)

Total

—


⁽¹⁾		On March 21, 2000, we announced that our board of directors had approved a repurchase program, pursuant to which up to 15 million shares of our common stock may be repurchased. This repurchase program was increased by an aggregate of 280 million shares by resolutions of our board of directors adopted on June 18, 2001, March 18, 2002, November 20, 2002, January 30, 2004, January 25, 2005, September 16, 2005, September 11, 2006 and December 17, 2007. We use our share repurchase program to help maintain the appropriate level of common equity and to substantially offset increases in share count over time resulting from employeeshare-based compensation.

The repurchase program is effected primarily through regularopen-market purchases, the amounts and timing of which are determined primarily by our current and projected capital positions (i.e., comparisons of our desired level of capital to our actual level of capital) but which may also be influenced by general market conditions and the prevailing price and trading volumes of our common ~~stock, in each case subject to the limit described in the prior paragraph.~~stock. The total remaining authorization under the repurchase program was 60,838,106 shares as of ~~July 24,~~October 23, 2009; the repurchase program has no set expiration or termination date.

~~142~~141


Item 4:5:	~~Submission of Matters to a Vote of Security Holders~~Other Information

Amendments to Articles of Incorporation or By-Laws

Amendments to Restated Certificate of Incorporation

On ~~May 8,~~November 2, 2009, Group Inc. ~~held its Annual Meeting~~filed a Certificate of ~~Shareholders at~~Elimination with the Secretary of State of the State of Delaware which, upon filing, had the ~~shareholders voted upon (i) the election~~effect of Lloyd C. Blankfein, John H. Bryan, Gary D. Cohn, Claes Dahlbäck, Stephen Friedman, William W. George, Rajat K. Gupta, James A. Johnson, Lois D. Juliber, Lakshmi N. Mittal, James J. Schiro and Ruth J. Simmonseliminating from our Restated Certificate of Incorporation all matters set forth therein with respect to the ~~Board of Directors of Group Inc. (the Board) forone-year~~ ~~terms, (ii)~~TARP Series H Preferred Stock, which had previously been repurchased in full from the ~~ratification~~U.S. Treasury. A copy of the ~~appointment~~Certificate of ~~PricewaterhouseCoopers LLP~~Elimination is attached as ~~Group Inc.’s independent registered public accounting firm for~~Exhibit 3.1 to this Quarterly Report on Form 10-Q and incorporated by reference herein. A Restated Certificate of Incorporation reflecting these changes was filed with the Secretary of State of the State of Delaware on November 2, 2009, ~~fiscal year, (iii)~~and a ~~management-sponsored advisory vote~~copy is attached as Exhibit 3.2 to approve executive compensation, (iv) a shareholder proposal requesting that the Board take the necessary steps to adopt cumulative voting, (v) a shareholder proposal requesting that the Board take the necessary steps to adopt simple majority voting, (vi) a shareholder proposal to amend the by-laws of Group Inc. (By-laws) to provide for a board committeethis Quarterly Report on ~~U.S. economic security and (vii) a shareholder proposal requesting that Group Inc. provide a report relating to its political contributions and expenditures.~~Form 10-Q.

~~The shareholders elected all twelve directors, approved the ratification of the appointment of PricewaterhouseCoopers LLP as Group Inc.’s independent registered public accounting firm for the~~Amendments to Amended and Restated By-Laws

At our 2009 ~~fiscal~~annual meeting earlier this year, approved the management-sponsored advisory vote to approve executive compensation and approved the shareholder proposal regarding simple majority voting. The other shareholder proposals did not receive the approvalholders of a majority of the outstanding shares of our common ~~stock; as~~stock approved a ~~result,~~shareholder proposal requesting that the Board take the steps necessary to change the supermajority provisions in ~~accordance with~~ our ~~By-laws, these shareholder proposals were not approved. The number~~Restated Certificate of Incorporation and our Amended and Restated By-Laws (By-Laws) to a simple majority of votes cast, in compliance with applicable laws. Taking into account these voting results, the Board has determined that it is in the best interests of our firm to remove all supermajority provisions from our constituent documents. The Board amended our By-Laws, effective October 30, 2009, to change the default threshold required for approval of management and shareholder proposals to a majority of shares present in person or ~~against~~represented by proxy at the meeting and entitled to vote. Section 1.8 of our By-Laws was amended and Section 1.12 of our By-Laws was eliminated in its entirety to effect this change. This change does not affect director elections, which will continue to be governed by our existing majority voting and other by-law provisions. The Board also determined to submit a management proposal at next year’s annual meeting to remove the ~~number~~supermajority voting provisions in our Restated Certificate of ~~abstentions and brokernon-votes~~ ~~with respect~~Incorporation because shareholder approval is required to ~~each matter voted upon, as applicable, are set forth below.~~effect those changes. Our Board will recommend a vote in favor of those amendments.

Broker

For

Against

Abstain

Non-Votes
Election of Directors:
Lloyd C. Blankfein 394,948,844 4,617,289 491,019 *
John H. Bryan 389,147,946 10,355,659 553,547 *
Gary D. Cohn 397,284,153 2,172,283 600,716 *
Claes Dahlbäck 395,410,514 4,119,945 526,693 *
Stephen Friedman 396,383,586 3,158,960 514,606 *
William W. George 397,438,183 2,145,578 473,391 *
Rajat K. Gupta 384,198,605 15,294,846 563,701 *
James A. Johnson 393,843,955 5,646,878 566,319 *
Lois D. Juliber 389,240,130 10,312,669 504,353 *
Lakshmi N. Mittal 306,121,981 92,822,384 1,112,787 *
James J. Schiro 393,834,365 5,652,578 570,209 *
Ruth J. Simmons 395,389,257 4,110,867 557,028 *
Ratification of Appointment of Independent Registered Public Accounting Firm 395,390,645 4,136,962 529,545 *
Advisory Vote to Approve Executive Compensation 389,367,961 8,404,183 2,285,008 *
Shareholder Proposal Regarding Cumulative Voting 97,057,123 238,879,898 971,486 63,148,645
Shareholder Proposal Regarding Simple Majority Vote 252,805,076 82,985,939 1,117,492 63,148,645
Shareholder Proposal to Amend By-Laws to Provide for a Board Committee on U.S. Economic Security 6,715,464 323,145,941 7,047,102 63,148,645
Shareholder Proposal Regarding Political Contributions 74,858,483 198,421,668 63,628,356 63,148,645

In addition, the Board made several clarifying and updating changes to our By-Laws, effective October 30, 2009, as follows:


*	•	~~Not applicable~~Section 1.3 of the By-Laws was amended to provide for notices of stockholder meetings to be delivered by electronic mail or electronic network posting, and to provide for “householding” as permitted by Section 233 of the Delaware General Corporation Law andRule 14a-3(e) under the Exchange Act;

	•	Section 1.11(c) of the By-Laws was amended to clarify that for any matter to be properly brought before a special meeting of stockholders, the matter must be set forth in the notice for such meeting given by or at the direction of the Board; and

	•	Section 1.11(e) of the By-Laws was amended to clarify that a postponement of an annual meeting that has already been publicly noticed will not commence a new period for giving notice.

The foregoing summary of the amendments to the By-Laws is qualified in its entirety by reference to the By-Laws, as amended, a copy of which is attached as Exhibit 3.3 to this Quarterly Report onForm 10-Q and incorporated by reference herein.

~~143~~142


Item 6:	Exhibits

~~Exhibits:~~


Exhibits:

	3.1	Certificate of Elimination of Fixed Rate Cumulative Perpetual Preferred Stock, Series H, of The Goldman Sachs Group, Inc.

	~~10.1~~ 3.2	~~Letter, dated May 12, 2009, from~~Restated Certificate of Incorporation of The Goldman Sachs Group, Inc. ~~to Mr. James J. Schiro.~~

	3.3	Amended and Restated By-Laws of The Goldman Sachs Group, Inc.

	12.1	Statement re: Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends.

	15.1	Letter re: Unaudited Interim Financial Information.

	31.1	Rule 13a-14(a) Certifications.

	32.1	Section 1350 Certifications.

	101	Interactive data files pursuant to Rule 405 ofRegulation S-T: (i) the Condensed Consolidated Statements of Earnings for the three and ~~six~~nine months ended ~~June 26,~~September 25, 2009 and ~~May 30,~~August 29, 2008, (ii) the Condensed Consolidated Statements of Financial Condition as of ~~June 26,~~September 25, 2009 and November 28, 2008, (iii) the Condensed Consolidated Statements of Changes in Shareholders’ Equity for the ~~six~~nine months ended ~~June 26,~~September 25, 2009 and year ended November 28, 2008, (iv) the Condensed Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~June 26,~~September 25, 2009 and ~~May 30,~~August 29, 2008, (v) the Condensed Consolidated Statements of Comprehensive Income for the three and ~~six~~nine months ended ~~June 26,~~September 25, 2009 and ~~May 30,~~August 29, 2008 and (vi) the notes to the Condensed Consolidated Financial Statements, tagged as blocks of text.*


*	As provided in Rule 406T ofRegulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

~~144~~143

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

THE GOLDMAN SACHS GROUP, INC.


	By:	/s/ David A. Viniar

Name: David A. Viniar


	Title:	Chief Financial Officer


	By:	/s/ Sarah E. Smith

Name: Sarah E. Smith


	Title:	Principal Accounting Officer

Date: ~~August 4,~~November 3, 2009

~~145~~144


							Broker
	For		Against		Abstain		Non-Votes
Election of Directors:
Lloyd C. Blankfein		394,948,844		4,617,289		491,019	*
John H. Bryan		389,147,946		10,355,659		553,547	*
Gary D. Cohn		397,284,153		2,172,283		600,716	*
Claes Dahlbäck		395,410,514		4,119,945		526,693	*
Stephen Friedman		396,383,586		3,158,960		514,606	*
William W. George		397,438,183		2,145,578		473,391	*
Rajat K. Gupta		384,198,605		15,294,846		563,701	*
James A. Johnson		393,843,955		5,646,878		566,319	*
Lois D. Juliber		389,240,130		10,312,669		504,353	*
Lakshmi N. Mittal		306,121,981		92,822,384		1,112,787	*
James J. Schiro		393,834,365		5,652,578		570,209	*
Ruth J. Simmons		395,389,257		4,110,867		557,028	*
Ratification of Appointment of Independent Registered Public Accounting Firm		395,390,645		4,136,962		529,545	*
Advisory Vote to Approve Executive Compensation		389,367,961		8,404,183		2,285,008	*
Shareholder Proposal Regarding Cumulative Voting		97,057,123		238,879,898		971,486	63,148,645
Shareholder Proposal Regarding Simple Majority Vote		252,805,076		82,985,939		1,117,492	63,148,645
Shareholder Proposal to Amend By-Laws to Provide for a Board Committee on U.S. Economic Security		6,715,464		323,145,941		7,047,102	63,148,645
Shareholder Proposal Regarding Political Contributions		74,858,483		198,421,668		63,628,356	63,148,645