Gs Q307 Earnings 9 20 2007

Company Name: Goldman Sachs Company Ticker: GS US Date: 2007-09-20 Event Description: Q3 2007 Earnings Call

Market Cap: 88,102.67 Current PX: 203.53 YTD Change($): +4.18 YTD Change(%): +2.097

Bloomberg Estimates - EPS Current Quarter: 5.870 Current Year: 22.042 Bloomberg Estimates - Sales Current Quarter: 9658.758 Current Year: 42034.571

Q3 2007 Earnings Call Participants • David A. Viniar • Samuel D. Robinson

MANAGEMENT DISCUSSION SECTION Samuel D. Robinson Non-GAAP Financial Measures I would also direct you to read the forward-looking disclaimers in our quarterly earnings release, particularly as it relates to our Investment Banking transaction backlog, and you should also read the information on the calculation of non-GAAP financial measures that is posted on the ‘Investor Relations’ portion of our website, gs.com

David A. Viniar Financial Highlights Opening Remarks • I’m pleased to report a very strong quarter for Goldman Sachs • Third quarter net revenues were $12.3B, our second highest result ever • Net earnings were $2.9B and earnings per diluted share were $6.13 • For the quarter, return on tangible equity was 36.6% and return on common equity was 31.6% • Before I address each business in detail, I’d like to make a few comments about our overall performance in Q3 • First, although there has rightly been a great deal of focus on the challenges all market participants face during August, it is important to remember that for many of our businesses the environment was very favorable • Second, for some of our clients and businesses the heightened volatility in volumes later in the quarter resulted in a higher level of activity • Third, as you’ve heard me say many times before, we benefit from our client franchise and our broad business and geographic diversity • There were many examples of this in Q3, but I would make particular mention of our international businesses • Finally, we were able to remain focused and nimble in constantly changing conditions • This combination of factors allow us to produce very strong results

Investment Banking

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Company Name: Goldman Sachs Company Ticker: GS US Date: 2007-09-20 Event Description: Q3 2007 Earnings Call

Market Cap: 88,102.67 Current PX: 203.53 YTD Change($): +4.18 YTD Change(%): +2.097

Bloomberg Estimates - EPS Current Quarter: 5.870 Current Year: 22.042 Bloomberg Estimates - Sales Current Quarter: 9658.758 Current Year: 42034.571

• Let me now review each of our major businesses • Investment Banking produced record net revenues of $2.1B in the quarter • Third quarter advisory revenues were a record $1.4B, nearly doubled last quarter’s performance • These results which were 64% better than our previous record reflect contributions from a significant number of deals that closed during the quarter • These included the Bank of New York $16B merger with Mellon Financial, Kinder Morgan’s $27B management led buy-out and MedImmune’s $15B acquisition by AstraZeneca • We were also advised on a number of important announced transactions including Blackstone’s $27B acquisition of Hilton hotels, Siemens’ automotives 11B euro acquisition by Continental and A.G Edwards $7B acquisition by Wachovia Goldman Sachs again retained its leadership in mergers, ranking first in globally announced M&A for the CY today

Underwriting Revenues • Underwriting revenues were $733mm, 28% below the record second quarter • Equity underwriting revenues were $355mm, down 1% on a sequential basis, while debt underwriting revenues fell 42% from the record second quarter to $378mm • Equity financing activity remained active throughout most of Q3 • The significant decline in debt underwriting is mainly attributable to the dislocation in the leveraged finance markets • During the quarter, we participated in a number of significant transactions including the $4.6B equity issuance by ICICI, one of India’s largest banks; Schering-Plough’s combination financing of $2.5B of convertible preferred and $1.6B of common equity; and Apollo’s $900mm 144A offering, the second offering on our GSTrUE platform

Backlog • Our Investment Banking backlog declined from the record second quarter but remains higher than year-end 2006 levels • Recent market uncertainty has led some to speculate on whether Investment Banking will enter a cyclical period of slope • While you know me well enough to know that I won’t try to predict the future, I would observe that global economic growth continues to look solid, globalization is continuing, strategic buyers and sellers continue to be active and financial sponsors • While unlikely in the near term to pursue the mega deals we have seen in the recent past, still have a lot of equity to invest • Assuming that global economic growth does not dramatically slow, we remain optimistic about the outlook for Investment Banking

Trading and Principal Investments • Let me turn to Trading and Principal Investments which includes FICC, Equities and Principal Investments

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Company Name: Goldman Sachs Company Ticker: GS US Date: 2007-09-20 Event Description: Q3 2007 Earnings Call

Market Cap: 88,102.67 Current PX: 203.53 YTD Change($): +4.18 YTD Change(%): +2.097

Bloomberg Estimates - EPS Current Quarter: 5.870 Current Year: 22.042 Bloomberg Estimates - Sales Current Quarter: 9658.758 Current Year: 42034.571

• Net revenues in this segment were $8.2B in Q3, up 24% from Q2 • FICC net revenues were a record $4.9B, 45% above Q2 • Currencies, rates and mortgages all had record quarters and although not a record commodities’ revenues were also strong and up sequentially • Currencies, rates and commodities all benefited from higher volatility, strong price trends and increased customer activity • The credit business produced solid results and benefited from considerable customer flow driven by high volatility and uncertainty • In addition, credit recorded substantial gains from equity investments including a gain of approximately $900mm related to the disposition of Horizon Wind • Credit also included a loss of $1.7B net of fees, $1.5mm net of fees and hedges related to leverage lending activities

Leverage Loan Market • As you all know, recent conditions in the leverage loan market have made it difficult to execute many non-investment grade funding transactions, including many that Goldman Sachs is committed to finance • As an investment bank, we use fair value accounting, and therefore our losses on our lending commitments and funded loans are included in each quarter’s results • I want to be very clear about this point • Whether a commitment is funded or not is irrelevant to its impact on our P&L. • We mark all commitments and funded loans to market and our marks reflect current market conditions, not a view of what a credit could be worth if the market dislocation were to end • Our aggregate loss is not a portfolio level reserve • Each credit is individually marked based on where we believe we could exit the commitment in current market conditions using as much external information as possible, including broker quotes, external pricing services, derivative indices and actual market trades in these and similar positions

Mortgages • Let me also address mortgages specifically • The mortgage sector continues to be challenged and there is a broad decline in the value of mortgage inventory during the quarter • As a result, we took significant markdowns on our long inventory positions during the quarter as we had in the previous two quarters • However, our risk bias in that market was to be short and that net short position was profitable • I also want to address the issue of marking mortgage inventory to market • There has been much speculation and commentary that it is impossible to mark many mortgage positions to market • We do not agree with that

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Company Name: Goldman Sachs Company Ticker: GS US Date: 2007-09-20 Event Description: Q3 2007 Earnings Call

Market Cap: 88,102.67 Current PX: 203.53 YTD Change($): +4.18 YTD Change(%): +2.097

Bloomberg Estimates - EPS Current Quarter: 5.870 Current Year: 22.042 Bloomberg Estimates - Sales Current Quarter: 9658.758 Current Year: 42034.571

• Not only is it possible, it is absolutely essential for market participants to understand the value of what they hold so they can manage their associated risks • While it is certainly more challenging to value many of these positions because of the current lack of liquidity, there is in fact a significant amount of evidence available

Process • Let me explain our process • Our traders mark their positions to market and then our controllers, who are independent of the trading function, verify these valuations using market transactions in the: • Same or similar securities • Prices of actively traded indices • Prices received from independent pricing services • Fundamental analysis • And information gained from collateral movements with counter-parties • If there is a question on price transparency, we may require our traders to execute trades to substantiate the valuations • We also back test marks against actual trades to ensure that our marks are accurate • It is also important to understand that these marks are not determined in a vacuum • We review our marks and all related evidence with our auditors on a regular basis • And as you would expect, difficult markets receive even greater attention from regulators and throughout the quarter, as part of our ongoing dialogue, we discuss our exposures and our marks with the SEC, our primary regulator

Equities and Risks • Turning now to equities, net revenues for Q3 were a record $3.1B, up 25% from Q2 • Equities trading net revenues rose 27% to $1.8B. • Our derivatives business produced record revenues as equity market volatility increased dramatically during the quarter • Cash equities and principal strategies were down sequentially • Equities commissions were a record $1.3B, up 23% over last quarter’s previous record • The strength in this business reflects both higher customer activity levels during Q3, as well as our increased share of those transaction flows • Turning to risk, average daily value at risk in Q3 was $139mm compared to $133mm for Q2 • The increase in VAR was primarily in the interest rate category, reflecting continued higher volatility in the U.S. mortgage and credit markets

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Company Name: Goldman Sachs Company Ticker: GS US Date: 2007-09-20 Event Description: Q3 2007 Earnings Call

Market Cap: 88,102.67 Current PX: 203.53 YTD Change($): +4.18 YTD Change(%): +2.097

Bloomberg Estimates - EPS Current Quarter: 5.870 Current Year: 22.042 Bloomberg Estimates - Sales Current Quarter: 9658.758 Current Year: 42034.571

Principal Investments • Let me now review principal investments where third quarter net revenues were $211mm • Corporate and real estate principal investing produced net revenues of $242mm in the quarter • A $230mm gain on our ICBC investment was more than offset by $261mm loss in our investment in SMFG. • Asset management and securities services reported third quarter net revenues of $2B, up 8% from Q2 • Asset management produced net revenues of $1.2B, up 14% primarily based on record management fees • Assets under management increased to a record $796mm at the end of Q3 • Total inflows during the quarter were $50B including $19B across fixed income equities and alternative investments and $31B into money markets as investors sought higher quality assets • These inflows were offset by $12B in market depreciation in equity and alternative investments • Securities services produced net revenues of $762mm, up 1% from Q2 • This business benefited from robust customer activity levels and continued growth in balances

Expenses • Now let me turn to expenses • Compensation and benefits expense in Q3 was $5.9B accrued at 48% of net revenues • Third quarter non-compensation expenses were $2.1B, excluding 100mm of expenses related to consolidated investments, a 17% increase from Q2 • The sequential increase was largely driven by higher brokerage and clearing and professional fees

Headcount and Effective Tax Rate • Headcount at the end of Q3 was approximately 29,900, up 13% YTD and 7% from Q2, reflecting in part the normal seasonal pattern of college and business school hires, starting in our analyst and associate programs in the summer • Our effective tax rate was 33.2% YTD and 33% for Q3 • During the quarter, the firm repurchased 11mm shares for approximately $2.5B. • We currently have about 23mm shares remaining under the firm’s existing stock repurchase authorization

Closing Remarks To conclude, I think our results this quarter underscore the point I’ve made before: that Goldman Sachs has a client franchise, a geographic and business diversity, and a group of talented people that are second to none Despite sometimes challenging conditions, we were able to leverage these strengths to produce exceptional results Looking at our performance YTD, the firm’s 2007 net revenues are up 25%, diluted EPS are 35% higher and return on equity is 32% compared to 30% for the same period last year We’re pleased that we’ve been able to deliver strong growth in returns for our shareholders and we remain very focused on these goals

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Company Name: Goldman Sachs Company Ticker: GS US Date: 2007-09-20 Event Description: Q3 2007 Earnings Call

Market Cap: 88,102.67 Current PX: 203.53 YTD Change($): +4.18 YTD Change(%): +2.097

Bloomberg Estimates - EPS Current Quarter: 5.870 Current Year: 22.042 Bloomberg Estimates - Sales Current Quarter: 9658.758 Current Year: 42034.571

• While we never know what the next quarter will bring, over the medium and longer term, global economic growth will continue to be the fundamental driver of our business • And given the opportunities in new markets, in new products, and with new customers, I believe Goldman Sachs’ competitive positioning and opportunities for future growth continue to be strong

Q&A : Good morning, David. : Good morning, Guy. : You alluded to $1.7B I think of leveraged finance write-downs before fee impact. Is that right? : That’s correct. : Or rather have [inaudible] : That includes – that is after the impact of fees. : That’s what I meant by after fees. I was wondering if you could give us the impact – the gross impact sort of before the fees? : It would be about $2.4B. : Thanks. That’s helpful. : No problem. : There’s been mention at several of the other firms that have reported this week, the benefits of the mark on structured liabilities from spread wide -- from your own spread widening... : Yes. : Can you talk a little bit about the impact that that would have had on Goldman on fixed income and then separately the equities businesses? : Yes the total impact for us Guy is pretty immaterial in the context of our quarter. It was a little bit under $300mm in total. And that – it is – I actually don’t have the exact breakdown because it depends on which business unit the structured notes were issued from. So some portion of that would be in the various businesses within FICC and some portion within equities. But the total is less than $300mm. : Okay. Thanks. : You’re welcome. : You mentioned the backlog being down somewhat vs. the prior quarter. Is that mostly because of deals that completed? Or was a large part of that because deals were either pulled or probability adjusted downward? : Well it’s both. Part of it was because of deals being completed. On the debt underwriting side, which was the biggest part of the decline a substantial portion was because the fees that were expected to be earned on some of the leveraged finance commitment are now not expected to be earned. : Got you. And then finally just a question on sort of your thoughts on the outlook for some of the higher margin structured fixed income products over the next few quarters.

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Company Name: Goldman Sachs Company Ticker: GS US Date: 2007-09-20 Event Description: Q3 2007 Earnings Call

Market Cap: 88,102.67 Current PX: 203.53 YTD Change($): +4.18 YTD Change(%): +2.097

Bloomberg Estimates - EPS Current Quarter: 5.870 Current Year: 22.042 Bloomberg Estimates - Sales Current Quarter: 9658.758 Current Year: 42034.571

: You know, Guy, it’s always hard to predict what the next quarter or 2 will bring. I’m always more comfortable predicting what I think is going to happen over the medium to long term. I think it’s pretty clear there is going to be lower CDO activity in the next quarter than there was a year ago, but I don’t think any of those businesses are gone. I think that there’s going to be some shakeout, and I think that they’ll be slower over the next couple of quarters, and then we’ll see. : Okay. Thanks very much, David. I appreciate it. : You’re welcome. No problem. : Thank you. I was wondering, David, with some of the larger LBO financings coming to market post Labor Day, are you willing to discuss at all the validation of the marks that you took on those commitments at the end of August? : Sure. You know we haven’t sold that much since the end of the quarter, but we have had reasonable sized sales of some of the positions, and everything that we have sold so far has been either at or slightly above our marks. : Okay. And second, on the comp ratio, I was a little surprised that it is stuck at the 48% level. Can you just walk us back once again through your policy or philosophy on comp accrual vis-à-vis kind of the competitive environment. Clearly with Goldman’s revenue this year you’ve got the wherewithal to out pay any of your peers, and how much does that factor in? : You know the competition for talent remains there. We are in a competitive environment. We compete not just with securities firms. We compete with hedge funds and private equity firms, and all other types of financial firms. And when we look and we do our calculation, as you know, we are accruing at 48% because as we sit here today, that’s our best estimate of what we think we might have to pay. Of course you know that the great majority of our compensation is bonuses. That is calculated and done at the end of each year, and so ultimately our compensation expense will be what we ultimately pay, but we have no better information than 48% today. : Okay. Thank you. : You’re welcome. : Hello there. : Good morning, Glenn. : First of all, Samuel did an awesome job. : Samuel thanks you. : Where does the quant investment show up? : It’s in equities. Equities trading. : In equities, and so that will get a mark to market on a quarterly basis. Now did I read right somewhere in the press that you’re up 16% since you put – infused – made the investment? : 16% from when we invested until the end of the quarter. : until the end of the quarter. Great. And that will, like I said, it will run through equities up and down in each quarter? : Correct. : Okay. In asset management, the 19B in inflows on the long-term money side. : Yes?

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Company Name: Goldman Sachs Company Ticker: GS US Date: 2007-09-20 Event Description: Q3 2007 Earnings Call

Market Cap: 88,102.67 Current PX: 203.53 YTD Change($): +4.18 YTD Change(%): +2.097

Bloomberg Estimates - EPS Current Quarter: 5.870 Current Year: 22.042 Bloomberg Estimates - Sales Current Quarter: 9658.758 Current Year: 42034.571

: Just qualitatively, driven via the new funds that you’ve been talking about or old funds, or a combination? : It depends on which sector. In alternative investments, the inflows, a lot of that was in new funds that we raised. In equities and fixed income, it would largely be inflows into the current mutual funds or fixed income funds or other funds that we have. : Okay. And then yesterday there was a press release or news in the news on Cogentrix? : Yes. : We know the cost, but I don’t think I saw the sale price anywhere. Is that disclosed? : I don’t believe so. : Okay. Cool. Thanks, Dave. : You’re welcome. : Hey, good morning, David. : Good morning. : So with respect to your position on credit, you’ve been open in the past about saying your stance was one of bearishness. Where would you place yourself today? : That was on mortgages. : Yes, I meant on mortgages. : Okay. Yes. I think what I would say is we are a lot closer to the bottom than where we were in the end of Q2. There are still I think some things that have to be worked through the market and we haven’t seen the end of that. But we’re a lot closer to the bottom. : Okay. I wanted to ask, I guess just in terms of the GEO and Global Alpha fund, can you tell us where they ended for I guess the month of August and relative to where they bottomed? You’re up 16% since you made the investment in GEO, so I guess we have a pretty good idea. : Right, right. GEO ended the quarter, I believe it was down a little bit over 20% for the quarter, and Alpha was down about 30% for the quarter. : Okay. When you made the investment in GEO, obviously that was a vote of confidence in the fund at the time. You had, I think, some redemption notice periods coming up. Can you speak to whether there were any significant redemption requests? : Yes. In Alpha, the redemption requests are a little bit over $1.6B, and in the other funds, given where the funds are, it’s probably not very material to the funds. : Okay. Can you walk through the loan commitments from the end of Q2 to the end of Q3 in terms of what fell away, what got funded, what got resized? : Yes, I will give you the numbers, but then I also want to make a comment. The numbers were, we had about $51B of commitments at the end of Q2. There was approximately $28B that went away, either because the deals closed, they were syndicated, the deals went away. And then there were $19B of new commitments, which left us with a total of $42B at the end of Q3. Now the only comment I want to make is there’s been some talk about the fact that that’s actually relevant, because things you might have committed to in Q3 might have had better terms and would be better than things in Q2. But remember, because we mark everything to market based on where we could exit today, at the end of Q3, it’s the same.

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Company Name: Goldman Sachs Company Ticker: GS US Date: 2007-09-20 Event Description: Q3 2007 Earnings Call

Market Cap: 88,102.67 Current PX: 203.53 YTD Change($): +4.18 YTD Change(%): +2.097

Bloomberg Estimates - EPS Current Quarter: 5.870 Current Year: 22.042 Bloomberg Estimates - Sales Current Quarter: 9658.758 Current Year: 42034.571

So whenever we committed to them, it doesn’t really matter, they’re all marked to what their current value is and where we could exit them today. : Okay. Fair enough. Last question. Can you talk to any changes in, I guess level 2, level 3 assets and particularly any shift between 2 and 3? : Sure, again let me make some comments there as best I can because it’s very technical, but our level 3 assets at the end of Q2 were roughly 6% of our balance sheet. We expect them to increase again. We’re still working through these numbers, but we expect them to increase to around 7% at the end of Q3. Again, the great bulk of that increase is going to be from leverage loans. And one of the things I want to clarify is what’s in these categories, because again there’s some confusion. Remember, level 1 assets are limited to actively traded, generally quoted instruments like listed equities on the New York Stock Exchange that you can pick up the newspaper and find the quote. So, virtually all derivatives by definition can’t be level 1. So, yes exchange traded options can be, but interest rate swaps which trade in very, very liquid markets where someone can easily get prices on it, by definition, are not level 1 securities are level 2 securities. Most of our mortgage inventory, for example, because we have reasonable external pricing is level 2. Level 3, although it does include some derivatives and it includes derivatives where at least one input is unobservable, it also includes a lot of assets that people understand quite well. And, so leverage loans are in level 3. Real estate, which is valued using discounted cash flow and has been for 100 years, is in level 3. And corporate principal investments are in level 3. If you took those 3 categories of assets for us, it would make up the majority of our level 3 assets. So, I just want to clarify that a little bit. : Appreciate the extra color, thanks David. : No problem. : Good morning. I had three questions, please. : Okay, Meredith. : Hi, I loved your conviction and this is a very efficient call, so thanks. : You’re welcome. : The level of conviction you have with your marks, can you talk about that in terms of a historical context and regression analysis you’ve done in different environments where you’ve taken similar marks and where that has ended up being relative to market value? : Sure, you know again, there’s been a lot of confusion about this. Marking our assets to market is in some ways the lifeblood of what we do. We mark all of our assets to market. Our traders mark our assets. We have a controllers department that has around a thousand people that is responsible for verifying the prices of all of the marks of all of the assets at Goldman Sachs. And we do that not just in market turmoil, we do it every day and we can’t manage our risk if we don’t know the value of our assets. And, so our whole risk management process is predicated on being able to value the assets that you have and, so we do it, we do it carefully. It is reviewed by very, very senior people. It is then reviewed by our auditors. And as I said, we have ongoing discussion with the SEC as our main regulators about the methodology for marking and for verifying our prices, and not just this quarter but we have forever and we continue to. One of the things we do in addition to marking and using all of the evidence that we have, most of which is actual market trades, is we back test. So we look at assets that we sell compared to where they were marked. Obviously that couldn’t change what you did, but it informs us of whether or not we’ve been doing it accurately over time. And over time what we find is that we never say all, but substantially all of the sales that we see are at or slightly above where we have assets marked.

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Company Name: Goldman Sachs Company Ticker: GS US Date: 2007-09-20 Event Description: Q3 2007 Earnings Call

Market Cap: 88,102.67 Current PX: 203.53 YTD Change($): +4.18 YTD Change(%): +2.097

Bloomberg Estimates - EPS Current Quarter: 5.870 Current Year: 22.042 Bloomberg Estimates - Sales Current Quarter: 9658.758 Current Year: 42034.571

: Okay. That’s very helpful. Thanks. Getting onto – back to one of Glenn’s questions which was Cogentrix; can you give us an ish type of context, which is, is it Horizon-ish like or Linden Power-like in gain or will we even notice it? : How about if I tell you it’s profitable-ish? : Oh, that’s not ish enough. That’s too ish, or maybe that’s too-ish. : That’s as close as we’re going to get. : Okay. And then my last question is on distressed opportunities. Within the mortgage space and outside the mortgage space with the larger debt markets, you know, obviously issues are trading at significant discounts to where they’re cash flowing. Can you give a sense of the timing? This is more of a market question. A timing of when a lot of the funds that have been raised to invest in these distressed assets are really going to start to move so we’ll see some stabilization of this market? : Look, that’s a very good question, Meredith, because clearly there are distressed assets out there. There are also assets that I would say are not distressed assets that are trading at distressed prices. And so, you know, there is a lot of people looking on some of these assets, like the leveraged loans, one of the things that’s going on, it is there are a lot of distressed buyers out there. But the holders don’t believe they’re distressed assets because they’re very good assets, and so that’s one of the reasons there is a supply-demand imbalance, because people have not yet come to an agreement on what price the sellers will sell at where the buyers will actually buy. I think it’s getting closer and I think we’re getting to the point where, at least in my view, the buyers are becoming more realistic about price and therefore I think you’ll see some of that logjam be broken. But you know, I think it’s going to happen over the next couple of months. : Okay. Thanks so much. : You’re welcome. : Good morning. : Good morning, Mike. : If you can fix my math here. So you took $2.4B of write-downs, gross of fees on the leveraged loan. And should we use a denominator of the $42B period end which implies a 6% markdown? : Okay. So let’s just do the math first. The write-downs were on the commitments. It was also on funded loans, which we had about 10B at the end of the quarter but also some that we had sold already. So you can’t completely do that math, but I will tell you, the bulk of the write-downs were on unfunded commitments. Not all, but the bulk. The only thing I will tell you, Mike, is that that math, all it will do is give you a mathematical answer to what the numerator over the denominator tells you; it won’t tell you much else, because as I mentioned, we mark every single position individually; they all have different characteristics. You’ll see some will be marked at 98, and some at 96, and some at 94, and some at 90, and at 88, and at 86 and every one is completely different. And so I think doing the mathematical calculation might be interesting but it won’t tell you very much. : But are we in the ballpark, if we say the average write-down per dollar of leveraged loan is 5 to 6%? : The mathematical calculation is correct, so yes; you would be correct. That is a true statement if you said the average is, you just take the numerator over the denominator, but I will tell you it is – it will not inform very much if you think we wrote everything down by 5%. There are some that we did and there are some that we wrote down by less and some that we wrote down by more. But, mathematically, you are correct. : Separately, on international, how did non-U.S. do this quarter vs. Q2?

Page 10 of 12

Company Name: Goldman Sachs Company Ticker: GS US Date: 2007-09-20 Event Description: Q3 2007 Earnings Call

Market Cap: 88,102.67 Current PX: 203.53 YTD Change($): +4.18 YTD Change(%): +2.097

Bloomberg Estimates - EPS Current Quarter: 5.870 Current Year: 22.042 Bloomberg Estimates - Sales Current Quarter: 9658.758 Current Year: 42034.571

: one, just a note of caution that that number could easily bounce around, within a few percent here or there. It includes lots of transaction that are cross-border transactions where you have a non-U.S. buyer and a U.S. seller or vice versa; a non-U.S. company issuing equities in the U.S. You know, we have global trading books, so, as I said, the number could bounce around. But it certainly does indicate the, where the business is going, which is that the U.S. businesses are growing faster than the businesses – the non-U.S. businesses are growing faster than the businesses within the U.S. So, I think it does inform you by its direction more than by its precision. : In your opening comments, you stressed, I think you said something like especially international is strong, but the proportion is kind of similar? : That’s my – because it continues to grow. The percentage of revenues outside the U.S. continues to grow. : And then another question... : Go ahead, Mike, I’m sorry. : No, I’ll let you finish. : I was going to say and for example the $1.7B of losses in leveraged loans were substantially in the [inaudible] : Okay. And any one region you want to highlight? I mean, China, I know is kind of a long-term story; that market’s done well. Is there any way to capitalize more aggressively there than you’re already doing? : Yes, I think we are very, very focused on China. We think we have a terrific team there; we think we have a terrific franchise in China. We think we were there ahead of most of our competitors and we continue to be extremely focused and it’s certainly one of, if not the biggest focus in the firm and highest growth areas we have. : And then last question. In mortgages, you’ve been underrepresented and that helped you. And also, being short on mortgages obviously helped you. How do you think about the mortgage business? Is now the right time to expand in that business more aggressively? Also, can you, kind of size what kind of gain you might have made by shorting mortgages? : Mortgages is an important business for Goldman Sachs; it always has been, but in the context of all of our other businesses, it’s certainly smaller than some of our competitors. We think that there are going to be opportunities in the mortgage business; there are certainly going to be opportunities to buy distressed assets. Timing is going to be very important and it’s something that we are certainly looking at right now, we’ll continue to look at it and consider it over time, and sorry the one thing we don’t do is disclose individual business units. So, I can’t tell you the actual profits of the shorts. : Well, can you say, was this like one desk or is this a whole unit or does a whole asset class make it up to the CEO? : It was across the capital structure of mortgages. : All right. Thank you. : You’re welcome. This transcript may not be 100 percent accurate and may contain misspellings and other inaccuracies. This transcript is provided "as is", without express or implied warranties of any kind. Bloomberg retains all rights to this transcript and provides it solely for your personal, non-commercial use. Bloomberg, its suppliers and third-party agents shall have no liability for errors in this transcript or for lost profits, losses, or direct, indirect, incidental, consequential, special or punitive damages in connection with the furnishing, performance or use of such transcript. Neither the

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Company Name: Goldman Sachs Company Ticker: GS US Date: 2007-09-20 Event Description: Q3 2007 Earnings Call

Market Cap: 88,102.67 Current PX: 203.53 YTD Change($): +4.18 YTD Change(%): +2.097

Bloomberg Estimates - EPS Current Quarter: 5.870 Current Year: 22.042 Bloomberg Estimates - Sales Current Quarter: 9658.758 Current Year: 42034.571

information nor any opinion expressed in this transcript constitutes a solicitation of the purchase or sale of securities or commodities. Any opinion expressed in the transcript does not necessarily reflect the views of Bloomberg LP. © COPYRIGHT 2007, BLOOMBERG LP. All rights reserved. Any reproduction, redistribution or retransmission is expressly prohibited.

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