5/5

PROMOTING AND PROTECTING SHAREHOLDER INTERESTS

research professionals, and the development, implementation and effectiveness of our policies and strategies relating to human capital management. In particular, the Compensation Committee, after reviewing in detail our CEO's performance and taking into consideration an evaluation by the Corporate Governance and Nominating Committee, sets the CEO's compensation. In consultation with the CEO, the Committee also determines the compensation of all of our senior officers. In a service business, we know that without attracting and retaining the best people, we cannot be the best firm. Appropriate compensation and human capital management programs are crucial to success in this area. During fiscal 2002, our Compensation Committee held four meetings. In addition, Mr. Johnson met with the chairs of our internal compensation policy committee five times.

In September 2002, we formed our Corporate Governance and Nominating Committee, which consists of all five of our outside independent directors and is chaired by John H. Bryan, the retired Chairman and CEO of Sara Lee Corporation. The primary purposes of the Corporate Governance and Nominating Committee are to recommend individuals to the Board for nomination, election or appointment as members of the Board or its committees and to take a leadership role in shaping the corporate governance of Goldman Sachs, including developing and recommending to the Board and reviewing on an ongoing basis the corporate governance principles and practices it should apply to the firm. The Corporate Governance and Nominating Committee played a central role in developing our Corporate Governance Guidelines and our Code of Business Conduct and Ethics which applies to all of our directors and the people of Goldman Sachs worldwide. The guidelines and code were adopted by the Board in February of this year and are available on our Web site. Since its formation, among its other activities, the Committee has conducted an evaluation of the performance of the Board and of our CEO and reviewed the CEO's management succession plan. The Committee also has led the continuing search for individuals who possess the exceptional qualities necessary to be recommended for Board membership. Our newest outside director, William George, the retired Chairman and CEO of Medtronic, Inc., and director nominee Lloyd Blankfein, a Vice Chairman of the firm with responsibility for our securities businesses, were initially reviewed by the Committee. Since its inception, the Corporate Governance and Nominating Committee has held three meetings.

CREATING LONG-TERM VALUE FOR SHAREHOLDERS
One thing that has not changed since becoming a public company is our focus on creating long-term value for our owners, the only difference being that, today, our owners are no longer our partners, but our shareholders. As a public company we have worked hard to retain the elements of our partnership culture that led to Goldman Sachs' success. We have also focused on the new elements unique to public companies: creating a world class Board of Directors and a strong framework of corporate governance. Although our history as a public company is less than four years, we believe that we are off to a good start. However, we have also learned over the past 133 years that we can never be complacent. Our Management and our Board of Directors understand this and will always work to ensure the success of Goldman Sachs for the benefit of our owners.

5/5