Introduction 82

Executive Overview 84

Business Environment 86

Critical Accounting Policies 88

Fair Value 88

Goodwill and Identifiable Intangible Assets 97

Use of Estimates 99

Results of Operations 100

Financial Overview 100

Segment Operating Results 105

Geographic Data 112

Off-Balance-Sheet Arrangements 112

Equity Capital 113

Contractual Obligations 121

Market Risk 123

Credit Risk 128

Derivatives 129

Liquidity and Funding Risk 134

Recent Accounting Developments 142

Cautionary Statement Pursuant to the U.S. Private Securities Litigation Reform Act of 1995 143

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 and high-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 in market-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 to high-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 on Form 10-K for the fiscal year ended November 28, 2008. References herein to our Annual Report on Form 10-K are to our Annual Report on Form 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 fiscal year-end from November to December. This change in our fiscal year-end resulted in a one-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 the condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. 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 2009. Fiscal 2009 began on December 27, 2008 and will end on December 31, 2009. Our second and third fiscal quarters in 2009 will end on the last Friday of June and September, respectively. Beginning in the fourth quarter of 2009, our fiscal year will end on December 31.

In "Results of Operations" below, we compare the three-month period ended March 27, 2009 with the previously reported three-month period ended February 29, 2008. Financial information for the three months ended March 28, 2008 has not been included in this Form 10-Q for the following reasons: (i) the three months ended February 29, 2008 provide a meaningful comparison for the three months ended March 27, 2009; (ii) there are no significant factors, seasonal or other, that would impact the comparability of information if the results for the three months ended March 28, 2008 were presented in lieu of results for the three months ended February 29, 2008; and
(iii) it was not practicable or cost justified to prepare this information.

All references to March 2009 and February 2008, unless specifically stated otherwise, refer to our three-month fiscal periods ended, or the dates, as the context requires, March 27, 2009 and February 29, 2008, respectively. All references to December 2008, unless specifically stated otherwise, refer to our fiscal one-month transition period ended, or the date, as the context requires, December 26, 2008. 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.

Three Months Ended March 2009 versus February 2008. Our diluted earnings per common share were $3.39 for the first quarter ended March 27, 2009 compared with $3.23 for the first quarter ended February 29, 2008. Annualized return on average common shareholders' equity (1) was 14.3% for the first quarter of 2009. Book value per common share was $98.82 and tangible book value per common share (2) was $88.02, both essentially unchanged from November 28, 2008. Our Tier 1 capital ratio under Basel II (3) was 16.0% at the end of the first quarter of 2009, up from 15.6% as of November 28, 2008. Our Tier 1 capital ratio under Basel I (3) was 13.7% at the end of the first quarter of 2009.

Our results for the first quarter of 2009 reflected significantly higher net revenues in Trading and Principal Investments compared with the first quarter of 2008, partially offset by significantly lower net revenues in Asset Management and Securities Services, and Investment Banking. The increase in Trading and Principal Investments reflected particularly strong results in Fixed Income, Currency and Commodities (FICC), as net revenues were more than double the amount in the first quarter of 2008, partially offset by very weak results in Principal Investments and lower net revenues in Equities. The increase in FICC reflected particularly strong performance in interest rate products, commodities and credit products, as FICC operated in a generally favorable environment characterized by client-driven activity, particularly in more liquid products, and high levels of volatility. However, illiquid assets generally continued to decline in value. Net revenues in currencies were solid, but lower compared with a particularly strong first quarter of 2008. Results in mortgages were higher compared with a difficult first quarter of 2008. During the quarter, credit products included losses from corporate debt and private equity investments, and mortgages included a loss of approximately $800 million (excluding hedges) on commercial mortgage loans and securities. In the first quarter of 2009, results in Principal Investments reflected net losses of $640 million from real estate principal investments and $621 million from corporate principal investments, as well as a $151 million loss related to our investment in the ordinary shares of Industrial and Commercial Bank of China Limited (ICBC). The decline in Equities reflected lower net revenues in the shares business due to lower commissions, primarily reflecting lower levels of activity outside of the U.S. In addition, net revenues in derivatives were solid, but lower compared with the first quarter of 2008. Results in principal strategies were also lower compared with the first quarter of 2008. During the quarter, Equities operated in an environment generally characterized by continued weakness in global equity markets and high, but declining, levels of volatility.

(1) Annualized return on average common shareholders' equity (ROE) is computed by dividing annualized net earnings applicable to common shareholders by average monthly common shareholders' equity. See "- Results of Operations - Financial Overview" below for further information regarding our calculation of ROE.
(2) 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 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 "- Equity Capital - Other Capital Ratios and Metrics" below for further information regarding tangible common shareholders' equity.
(3) We continue to disclose our Tier 1 capital ratio 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). As a bank holding company, we are subject to consolidated regulatory capital requirements administered by the Federal Reserve Board. Beginning with the first quarter of 2009, we are reporting an estimated Tier 1 capital ratio 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 estimated 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 estimated Tier 1 capital ratio has not been reviewed with the Federal Reserve Board and, accordingly, may be revised in subsequent filings. See "- Equity Capital" below for a further discussion of our capital ratios.

The decline in Asset Management and Securities Services reflected significant decreases in both Asset Management and Securities Services compared with the first quarter of 2008. The decrease in Asset Management was due to lower management and other fees, reflecting lower assets under management, principally due to market depreciation, and lower incentive fees. The decrease in Securities Services primarily reflected the impact of lower customer balances.

The decline in Investment Banking reflected significantly lower net revenues in both Underwriting and Financial Advisory. The decrease in Underwriting primarily reflected a significant decline in industry-wide equity and equity-related offerings, as well as a decrease in leveraged finance activity. The decrease in Financial Advisory reflected lower levels of deal activity. Our investment banking transaction backlog decreased during the quarter. (1)

One Month Ended December 2008. Our diluted loss per common share was $2.15 and net revenues were $183 million for the one month ended December 26, 2008. Our results for December 2008 reflected a continuation of the difficult operating environment experienced during our fiscal fourth quarter of 2008, particularly across global equity and credit markets. Trading and Principal Investments recorded negative net revenues of $507 million. Results in Principal Investments reflected net losses of $529 million from real estate principal investments and $501 million from corporate principal investments, partially offset by a gain of $228 million related to our investment in the ordinary shares of ICBC. Results in FICC included a loss in credit products of approximately $1 billion (net of hedges) related to non-investment-grade credit origination activities, primarily reflecting a writedown of approximately $850 million related to the bridge and bank loan facilities held in LyondellBasell Finance Company. In addition, results in mortgages included a net loss of approximately $625 million (excluding hedges) on commercial mortgage loans and securities. Interest rate products, currencies and commodities each produced strong results for the month of December 2008. During the month of December, although market opportunities were favorable for certain businesses, FICC operated in an environment generally characterized by continued weakness in the broader credit markets. Results in Equities reflected lower commission volumes and lower net revenues from derivatives compared with average monthly levels in 2008, as well as weak results in principal strategies. During the month of December, Equities operated in an environment characterized by continued weakness in global equity markets and continued high levels of volatility.

Net revenues in Investment Banking were $135 million for the month of December and reflected very low levels of activity in industry-wide completed mergers and acquisitions, as well as continued challenging market conditions across equity and leveraged finance markets, which adversely affected our Underwriting business. Our investment banking transaction backlog decreased during the month of December. (1)

Net revenues in Asset Management and Securities Services were $555 million for the month of December, reflecting Asset Management net revenues of $319 million and Securities Services net revenues of $236 million. During the month of December, assets under management increased $19 billion to $798 billion due to $13 billion of market appreciation, primarily in fixed income and equity assets, and $6 billion of net inflows. Net inflows reflected inflows in money market assets, partially offset by outflows in fixed income, equity and alternative investment assets. Net revenues in Securities Services reflected favorable changes in the composition of securities lending balances, but were negatively impacted by a decline in total average customer balances.

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

(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.

Three Months Ended March 2009. Global economic conditions remained very weak during our first quarter of fiscal 2009, as real gross domestic product (GDP) declined in most major economies. Growth in emerging markets slowed during our first quarter, reflecting a reduced flow of capital into these economies. Fixed income and equity markets continued to experience high levels of volatility and major global equity markets generally continued to decline. After a significant decline in the second half of calendar year 2008, the price of crude oil increased during our first quarter. The U.S. dollar appreciated against the Euro, the British pound and the Japanese yen. Investment banking activity levels continued to slow during our first quarter, with significant declines in industry-wide announced and completed mergers and acquisitions, and industry-wide equity and equity-related offerings.

In the U.S., real GDP declined at a rapid pace during our first quarter. Residential investment continued to contract due to ongoing weakness in the housing market. Fixed business investment also declined significantly as corporate profits fell across many industries. While the rate of unemployment continued to increase, consumer spending appeared to improve after falling rapidly in the second half of 2008. The rate of inflation remained subdued during our first quarter, reflecting rising excess production capacity and generally lower commodity prices. The U.S. Federal Reserve maintained its federal funds rate at a target range of zero to 0.25% during our first quarter. The 10-year U.S. Treasury note yield ended our first quarter 62 basis points higher than December 2008 at 2.78%. In equity markets, the Dow Jones Industrial Average and the S&P 500 Index decreased by 9% and 7%, respectively, and the NASDAQ Composite Index increased by 1% during our first quarter.

In the Eurozone economies, real GDP declined in our first quarter, as business investment, exports and consumer spending remained weak. Labor markets also experienced significant deterioration during our first quarter, with the rate of unemployment rising in the major economies. In addition, surveys of business and consumer confidence remained at very low levels. In response to a challenging economic outlook and declining inflation, the European Central Bank further lowered its main refinancing operations rate by 100 basis points to 1.50%. The Euro depreciated by 5% against the U.S. dollar. In the U.K., real GDP also declined, although it appeared to decline at a slower pace compared with the fourth quarter of 2008. The Bank of England lowered its official bank rate by 150 basis points to 0.50% during the quarter. The British pound depreciated by 2% against the U.S. dollar. Equity markets in both the U.K. and continental Europe decreased significantly during our first quarter, while long-term government bond yields increased.

In Japan, real GDP growth declined significantly as a result of a significant decline in exports, weakness in business investment and a decline in consumer spending. Business confidence remained near historically low levels and the unemployment rate continued to increase. Measures of inflation returned to near-zero levels during the quarter. The Bank of Japan left its target overnight call rate unchanged at 0.10%, while the yield on 10-year Japanese government bonds increased during the quarter. The Japanese yen depreciated by 8% against the U.S. dollar and the Nikkei 225 Index decreased 1% during our first quarter.

In China, weak export demand continued to adversely impact real GDP during the first quarter. However, capital investment increased due to an increase in availability of credit and consumer spending remained solid. In addition, measures of inflation continued to decline during the quarter. During our first quarter, The People's Bank of China left its one-year benchmark lending rate unchanged at 5.31%. The Chinese yuan appreciated slightly against the U.S. dollar. The Shanghai Composite Index increased by 28% during our first quarter, while equity markets in Hong Kong remained essentially unchanged. In India, economic growth slowed due to weaker business investment and lower industrial production; however, consumer spending remained generally solid. The Indian rupee depreciated by 2% against the U.S. dollar during our first quarter. Equity markets in India and Korea increased during our first quarter.

One Month Ended December 2008. Global economic conditions were also weak during the month of December 2008. Most key indicators of economic activity, such as industrial production, employment, international trade and business and consumer sentiment, continued to decline. The rate of inflation in most major economies generally declined due to weak commodity prices and falling aggregate demand. Fixed income and equity markets continued to experience high levels of volatility and major global equity markets generally continued to decline. The U.S. Federal Reserve lowered its federal funds rate from 1.00% to a target range of zero to 0.25%, and central banks in the Eurozone, United Kingdom, Japan and China also lowered interest rates during the month. In addition, a number of central banks expanded programs to provide liquidity and credit to the financial sector. During the month, the U.S. dollar depreciated against the Euro and the Japanese yen, but appreciated against the British pound. Investment banking activity remained subdued, reflecting very low levels of activity in industry-wide announced and completed mergers and acquisitions, and industry-wide equity and equity-related offerings.

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.

During the fourth quarter of 2008, both the Financial Accounting Standards Board (FASB) and the staff of the SEC re-emphasized the importance of sound fair value measurement in financial reporting. 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." This statement clarifies that determining fair value in an inactive or dislocated market depends on facts and circumstances and requires significant management judgment. This statement 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 relevant observable inputs are not available. Our fair value measurement policies are consistent with the guidance in FSP No. FAS 157-3.

In April 2009, the FASB issued FSP No. 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." The FSP provides guidance for estimating fair value when the volume and level of activity for an asset or liability have decreased significantly. Specifically, the FSP lists factors which should be evaluated to determine whether a transaction is orderly, clarifies 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 guidance for determining the concurrent weighting of the transaction price relative to fair value indications from other valuation techniques when estimating fair value. The FSP is effective for periods ending after June 15, 2009. Because our current fair value methodology is consistent with FSP No. FAS 157-4, adoption of the FSP will not affect our financial condition, results of operations or cash flows. We will adopt the FSP in the second quarter of fiscal 2009 to comply with the FSP's disclosure requirements.

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 for broker-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).

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 March 2009                      As of November 2008                    As of December 2008
                                                                                  Trading             Trading            Trading             Trading            Trading             Trading
                                                                                 Assets, at       Liabilities, at       Assets, at       Liabilities, at       Assets, at       Liabilities, at
                                                                                 Fair Value         Fair Value          Fair Value         Fair Value          Fair Value         Fair Value
. . .