Goldman Sachs Reports Second Quarter Earnings Per Common Share of $1.78

The Goldman Sachs Group, Inc. (NYSE: GS) today reported net revenues of $6.63 billion and net earnings of $962 million for the second quarter ended June 30, 2012. Diluted earnings per common share were $1.78 compared with $1.85 for the second quarter of 2011 and $3.92 for the first quarter of 2012. Annualized return on average common shareholders’ equity (ROE) ⁽¹⁾ was 5.4% for the second quarter of 2012 and 8.8% for the first half of 2012.

Highlights

• Goldman Sachs continued its leadership in investment banking, ranking first in worldwide announced and completed mergers and acquisitions for the year-to-date. ⁽²⁾
• Book value per common share and tangible book value per common share ⁽³⁾ both increased approximately 2% during the quarter to $137.00 and $126.12, respectively.
• The firm continues to manage its liquidity and capital conservatively. The firm’s global core excess liquidity ⁽⁴⁾ was $175 billion as of June 30, 2012. In addition, the firm’s Tier 1 capital ratio under Basel 1 ⁽⁵⁾ was 15.0% and the firm’s Tier 1 common ratio under Basel 1 ⁽⁶⁾ was 13.1% as of June 30, 2012.

_____________

"During the second quarter, market conditions deteriorated and activity levels for both corporate and investing clients were lower given continued instability in Europe and concerns about global growth,” said Lloyd C. Blankfein, Chairman and Chief Executive Officer. "Still, we remain focused on meeting our clients’ needs, while prudently managing our capital, liquidity and risk.”

Net Revenues

Investment Banking

Net revenues in Investment Banking were $1.20 billion, 17% lower than the second quarter of 2011 and 4% higher than the first quarter of 2012. Net revenues in Financial Advisory were $469 million, 26% lower than the second quarter of 2011, reflecting a decline in industry-wide completed mergers and acquisitions. Net revenues in the firm’s Underwriting business were $734 million, 9% lower than the second quarter of 2011. Net revenues in equity underwriting were significantly lower compared with the second quarter of 2011, principally due to a decline in industry-wide activity. Net revenues in debt underwriting were higher compared with the second quarter of 2011, reflecting higher net revenues from investment-grade and commercial mortgage-related activity, partially offset by lower net revenues from leveraged finance activity. The firm’s investment banking transaction backlog increased compared with the end of the first quarter of 2012. ⁽⁷⁾

Institutional Client Services

Net revenues in Institutional Client Services were $3.89 billion, 11% higher than the second quarter of 2011 and 32% lower than the first quarter of 2012.

Net revenues in Fixed Income, Currency and Commodities Client Execution were $2.19 billion, 37% higher than the second quarter of 2011, reflecting higher net revenues in mortgages and commodities compared with difficult market-making conditions during the second quarter of 2011. During the second quarter of 2012, Fixed Income, Currency and Commodities Client Execution operated in a challenging environment reflecting broad market concerns and uncertainty, which resulted in generally wider credit spreads and lower activity levels compared with the first quarter of 2012.

Net revenues in Equities were $1.70 billion, 12% lower than the second quarter of 2011, primarily due to lower net revenues in equities client execution, reflecting significantly lower net revenues in derivatives. In addition, commissions and fees were lower compared with the second quarter of 2011, generally consistent with broader market activity. Securities services net revenues were lower compared with the second quarter of 2011, reflecting the impact of slightly lower average customer balances. During the second quarter of 2012, Equities operated in an environment characterized by a decrease in global equity prices and higher volatility levels compared with the first quarter of 2012.

The net gain attributable to the impact of changes in the firm’s own credit spreads on borrowings for which the fair value option was elected was not material for the second quarter of 2012.

Investing & Lending

Net revenues in Investing & Lending were $203 million for the second quarter of 2012. Investing & Lending net revenues were negatively impacted by a decrease in global equity prices and generally wider credit spreads. Results for the second quarter of 2012 included a loss of $194 million from the firm’s investment in the ordinary shares of Industrial and Commercial Bank of China Limited (ICBC) and net losses of $112 million from other investments in equities, reflecting losses in public equities, largely offset by gains in private equities. In addition, Investing & Lending included net interest income and net gains of $222 million from debt securities and loans, and other net revenues of $287 million, principally related to the firm’s consolidated investment entities.

Investment Management

Net revenues in Investment Management were $1.33 billion, 5% higher than the second quarter of 2011 and 13% higher than the first quarter of 2012. The increase in net revenues compared with the second quarter of 2011 was due to significantly higher incentive fees, partially offset by lower management and other fees and lower transaction revenues. During the quarter, assets under management increased $12 billion to $836 billion. The increase in assets under management included net inflows of $16 billion ⁽⁸⁾, primarily in fixed income and money market assets, partially offset by net market depreciation of $4 billion, primarily in equity assets.

Expenses

Operating expenses were $5.21 billion, 8% lower than the second quarter of 2011 and 23% lower than the first quarter of 2012. The firm is in the process of implementing additional expense reduction initiatives.

Compensation and Benefits

The accrual for compensation and benefits expenses (including salaries, estimated year-end discretionary compensation, amortization of equity awards and other items such as benefits) was $2.92 billion for the second quarter of 2012, a 9% decline compared with the second quarter of 2011. The ratio of compensation and benefits to net revenues for the first half of 2012 was 44.0%.

Non-Compensation Expenses

Non-compensation expenses were $2.30 billion, 7% lower than the second quarter of 2011 and 4% lower than the first quarter of 2012. The decrease compared with the second quarter of 2011 primarily reflected decreased levels of business activity and the impact of expense reduction initiatives, partially offset by higher impairment charges related to consolidated investment entities during the second quarter of 2012. The second quarter of 2012 included net provisions for litigation and regulatory proceedings of $67 million.

Provision for Taxes

The effective income tax rate for the first half of 2012 was 33.2%, down slightly from 33.7% for the first quarter of 2012.

Capital

As of June 30, 2012, total capital was $239.85 billion, consisting of $72.86 billion in total shareholders’ equity (common shareholders’ equity of $68.01 billion and preferred stock of $4.85 billion) and $166.99 billion in unsecured long-term borrowings. Book value per common share was $137.00 and tangible book value per common share ⁽³⁾ was $126.12, both approximately 2% higher compared with the end of the first quarter of 2012. Book value and tangible book value per common share are based on common shares outstanding, including restricted stock units granted to employees with no future service requirements, of 496.4 million at period end.

On June 1, 2012, The Goldman Sachs Group, Inc. (Group Inc.) issued 17,500.1 shares of Perpetual Non-Cumulative Preferred Stock, Series E (Series E Preferred Stock), for aggregate proceeds of $1.75 billion.

During the quarter, the firm repurchased 14.3 million shares of its common stock at an average cost per share of $104.81, for a total cost of $1.50 billion. The remaining share authorization under the firm’s existing repurchase program is 46.0 million shares. ⁽⁹⁾

Under the regulatory capital guidelines currently applicable to bank holding companies (Basel 1), the firm’s Tier 1 capital ratio ⁽⁵⁾ was 15.0% and the firm’s Tier 1 common ratio ⁽⁶⁾ was 13.1% as of June 30, 2012, both up slightly compared with March 31, 2012.

Other Balance Sheet and Liquidity Metrics

• Total assets ⁽¹⁰⁾ were $949 billion as of June 30, 2012, compared with $951 billion as of March 31, 2012.
• Level 3 assets ⁽¹⁰⁾ were $47 billion as of June 30, 2012, compared with $48 billion as of March 31, 2012 and represented 4.9% of total assets.
• The firm’s global core excess liquidity ⁽⁴⁾ was $175 billion as of June 30, 2012 and averaged $174 billion for the second quarter of 2012, compared with an average of $167 billion for the first quarter of 2012.

Dividends

Group Inc. declared a dividend of $0.46 per common share to be paid on September 27, 2012 to common shareholders of record on August 30, 2012. The firm declared dividends of $239.58, $387.50, $255.56 and $255.56 per share of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, respectively (represented by depositary shares, each representing a 1/1,000th interest in a share of preferred stock), to be paid on August 10, 2012 to preferred shareholders of record on July 26, 2012. In addition, the firm declared a dividend of $1,055.56 per share of Series E Preferred Stock to be paid on September 4, 2012 to preferred shareholders of record on August 20, 2012.

______________

The Goldman Sachs Group, Inc. is a leading global investment banking, securities and investment management firm that provides a wide range of financial 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 all major financial centers around the world.

Cautionary Note Regarding Forward-Looking Statements

This press release contains "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 the firm’s beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of the firm’s control. It is possible that the firm’s actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. For a discussion of some of the risks and important factors that could affect the firm’s future results and financial condition, see "Risk Factors” in Part I, Item 1A of the firm’s Annual Report on Form 10-K for the year ended December 31, 2011.

Certain of the information regarding the firm’s capital ratios, risk-weighted assets, total assets, level 3 assets and global core excess liquidity consist of preliminary estimates. These estimates are forward-looking statements and are subject to change, possibly materially, as the firm completes its financial statements.

Statements about the firm’s investment banking transaction backlog also may constitute forward-looking statements. Such statements are subject to the risk that the terms of these transactions may be modified or that they may not be completed at all; therefore, the net revenues, if any, that the firm actually earns 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 the firm’s investment banking transactions, see "Risk Factors” in Part I, Item 1A of the firm’s Annual Report on Form 10-K for the year ended December 31, 2011.

Conference Call

A conference call to discuss the firm’s results, outlook and related matters will be held at 9:30 am (ET). The call will be open to the public. Members of the public who would like to listen to the conference call should dial 1-888-281-7154 (U.S. domestic) or 1-706-679-5627 (international). The number should be dialed at least 10 minutes prior to the start of the conference call. The conference call will also be accessible as an audio webcast through the Investor Relations section of the firm’s web site, www.gs.com/shareholders. There is no charge to access the call. For those unable to listen to the live broadcast, a replay will be available on the firm’s web site or by dialing 1-855-859-2056 (U.S. domestic) or 1-404-537-3406 (international) passcode number 89062398, beginning approximately two hours after the event. Please direct any questions regarding obtaining access to the conference call to Goldman Sachs Investor Relations, via e-mail, at gs-investor-relations@gs.com.

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

		Three Months Ended																	% Change From
		June 30,						March 31,						June 30,					March 31,				June 30,
		2012						2012						2011					2012				2011
Investment Banking
Financial Advisory		$	469					$	489					$	637				(4	)	%		(26	)	%
Equity underwriting			239						255						378				(6	)			(37	)
Debt underwriting			495						410						433				21				14
Total Underwriting			734						665						811				10				(9	)
Total Investment Banking			1,203						1,154						1,448				4				(17	)
Institutional Client Services
Fixed Income, Currency and Commodities Client Execution			2,194						3,458						1,599				(37	)			37
Equities client execution			510						1,050						623				(51	)			(18	)
Commissions and fees			776						834						861				(7	)			(10	)
Securities services			409						367						432				11				(5	)
Total Equities			1,695						2,251						1,916				(25	)			(12	)
Total Institutional Client Services			3,889						5,709						3,515				(32	)			11
Investing & Lending
ICBC			(194	)					169						(176	)			N.M.				N.M.
Equity securities (excluding ICBC)			(112	)					891						686				N.M.				N.M.
Debt securities and loans			222						585						200				(62	)			11
Other			287						266						334				8				(14	)
Total Investing & Lending			203						1,911						1,044				(89	)			(81	)
Investment Management
Management and other fees			1,019						1,003						1,080				2				(6	)
Incentive fees			217						58						63				N.M.				N.M.
Transaction revenues			96						114						131				(16	)			(27	)
Total Investment Management			1,332						1,175						1,274				13				5
Total net revenues		$	6,627					$	9,949					$	7,281				(33	)			(9	)
		Six Months Ended												% Change From
		June 30,						June 30,						June 30,
		2012						2011						2011
Investment Banking
Financial Advisory		$	958					$	994						(4	)	%
Equity underwriting			494						804						(39	)
Debt underwriting			905						919						(2	)
Total Underwriting			1,399						1,723						(19	)
Total Investment Banking			2,357						2,717						(13	)
Institutional Client Services
Fixed Income, Currency and Commodities Client Execution			5,652						5,924						(5	)
Equities client execution			1,560						1,602						(3	)
Commissions and fees			1,610						1,832						(12	)
Securities services			776						804						(3	)
Total Equities			3,946						4,238						(7	)
Total Institutional Client Services			9,598						10,162						(6	)
Investing & Lending
ICBC			(25	)					140					N.M.
Equity securities (excluding ICBC)			779						1,740						(55	)
Debt securities and loans			807						1,224						(34	)
Other			553						645						(14	)
Total Investing & Lending			2,114						3,749						(44	)
Investment Management
Management and other fees			2,022						2,128						(5	)
Incentive fees			275						137						101
Transaction revenues			210						282						(26	)
Total Investment Management			2,507						2,547						(2	)
Total net revenues		$	16,576					$	19,175						(14	)

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

				Three Months Ended																		% Change From
				June 30,						March 31,						June 30,						March 31,				June 30,
				2012						2012						2011						2012				2011
Revenues
Investment banking				$	1,206					$	1,160					$	1,448					4		%		(17	)	%
Investment management					1,266						1,105						1,188					15				7
Commissions and fees					799						860						894					(7	)			(11	)
Market making					2,097						3,905						1,736					(46	)			21
Other principal transactions					169						1,938						602					(91	)			(72	)
Total non-interest revenues					5,537						8,968						5,868					(38	)			(6	)
Interest income					3,055						2,833						3,681					8				(17	)
Interest expense					1,965						1,852						2,268					6				(13	)
Net interest income					1,090						981						1,413					11				(23	)
Net revenues, including net interest income					6,627						9,949						7,281					(33	)			(9	)
Operating expenses
Compensation and benefits					2,915						4,378						3,204					(33	)			(9	)
Brokerage, clearing, exchange and distribution fees					544						567						615					(4	)			(12	)
Market development					129						117						183					10				(30	)
Communications and technology					202						196						210					3				(4	)
Depreciation and amortization					409						433						372					(6	)			10
Occupancy					214						212						252					1				(15	)
Professional fees					213						234						263					(9	)			(19	)
Insurance reserves					121						157						117					(23	)			3
Other expenses					465						474						453					(2	)			3
Total non-compensation expenses					2,297						2,390						2,465					(4	)			(7	)
Total operating expenses					5,212						6,768						5,669					(23	)			(8	)
Pre-tax earnings					1,415						3,181						1,612					(56	)			(12	)
Provision for taxes					453						1,072						525					(58	)			(14	)
Net earnings					962						2,109						1,087					(54	)			(11	)
Preferred stock dividends					35						35						35					-				-
Net earnings applicable to common shareholders				$	927					$	2,074					$	1,052					(55	)			(12	)
Earnings per common share
Basic (11)				$	1.83					$	4.05					$	1.96					(55	)	%		(7	)	%
Diluted					1.78						3.92						1.85					(55	)			(4	)
Average common shares outstanding
Basic					501.5						510.8						531.9					(2	)			(6	)
Diluted					520.3						529.2						569.5					(2	)			(9	)
Selected Data
Total staff at period-end (12)					32,300						32,400						35,500					-				(9	)

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

				Six Months Ended												% Change From
				June 30,						June 30,						June 30,
				2012						2011						2011
Revenues
Investment banking				$	2,366					$	2,717					(13	)	%
Investment management					2,371						2,362					-
Commissions and fees					1,659						1,913					(13	)
Market making					6,002						6,198					(3	)
Other principal transactions					2,107						3,214					(34	)
Total non-interest revenues					14,505						16,404					(12	)
Interest income					5,888						6,788					(13	)
Interest expense					3,817						4,017					(5	)
Net interest income					2,071						2,771					(25	)
Net revenues, including net interest income					16,576						19,175					(14	)
Operating expenses
Compensation and benefits					7,293						8,437					(14	)
Brokerage, clearing, exchange and distribution fees					1,111						1,235					(10	)
Market development					246						362					(32	)
Communications and technology					398						408					(2	)
Depreciation and amortization					842						962					(12	)
Occupancy					426						519					(18	)
Professional fees					447						496					(10	)
Insurance reserves					278						205					36
Other expenses					939						899					4
Total non-compensation expenses					4,687						5,086					(8	)
Total operating expenses					11,980						13,523					(11	)
Pre-tax earnings					4,596						5,652					(19	)
Provision for taxes					1,525						1,830					(17	)
Net earnings					3,071						3,822					(20	)
Preferred stock dividends					70						1,862					(96	)
Net earnings applicable to common shareholders				$	3,001					$	1,960					53
Earnings per common share
Basic (11)				$	5.90					$	3.62					63		%
Diluted					5.72						3.40					68
Average common shares outstanding
Basic					506.1						536.2					(6	)
Diluted					524.7						576.4					(9	)

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

Average Daily VaR (13)
$ in millions
								Three Months Ended
								June 30,					March 31,						June 30,
								2012					2012						2011
Risk Categories
Interest rates								$	83				$	90					$	76
Equity prices									23					29						35
Currency rates									16					15						21
Commodity prices									20					26						39
Diversification effect (13)									(50	)				(65	)					(70	)
Total								$	92				$	95					$	101
Assets Under Management (14)
$ in billions
								As of																	% Change From
								June 30,					March 31,						June 30,						March 31,				June 30,
								2012					2012						2011						2012				2011
Asset Class
Alternative investments								$	137				$	139					$	148					(1	)	%		(7	)	%
Equity									127					136						148					(7	)			(14	)
Fixed income									363					347						352					5				3
Total non-money market assets									627					622						648					1				(3	)
Money markets									209					202						196					3				7
Total assets under management								$	836				$	824					$	844					1				(1	)
								Three Months Ended
								June 30,					March 31,						June 30,
								2012					2012						2011
Balance, beginning of period								$	824				$	828					$	840
Net inflows / (outflows)
Alternative investments									(1	)				(4	)					(3	)
Equity									(2	)				(5	)					(2	)
Fixed income									12					1						7
Total non-money market net inflows / (outflows)									9					(8	)					2
Money markets									7					(18	)					(5	)
Total net inflows / (outflows)									16		(8)			(26	)					(3	)
Net market appreciation / (depreciation)									(4	)				22						7
Balance, end of period								$	836				$	824					$	844

Footnotes

(1)		Annualized ROE is computed by dividing annualized net earnings applicable to common shareholders by average monthly common shareholders’ equity. The table below presents the firm’s average common shareholders’ equity:

																																															Average for the
																																															Three Months Ended					Six Months Ended
				Unaudited, in millions																																											June 30, 2012					June 30, 2012
				Total shareholders' equity																																											$	71,637				$	71,170
				Preferred stock																																												(3,538	)				(3,350	)
				Common shareholders' equity																																											$	68,099				$	67,820

(2)		Thomson Reuters – January 1, 2012 through June 30, 2012.
(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 granted to employees with no future service requirements. Management believes that tangible common shareholders’ equity and tangible book value per common share are meaningful because they are measures that the firm and investors use to assess capital adequacy. Tangible common shareholders’ equity and tangible book value per common share are non-GAAP measures and may not be comparable to similar non-GAAP measures used by other companies. The table below presents the reconciliation of total shareholders' equity to tangible common shareholders' equity:

																																																													As of
				Unaudited, in millions																																																									June 30, 2012
				Total shareholders' equity																																																									$	72,855
				Preferred stock																																																										(4,850	)
				Common shareholders' equity																																																										68,005
				Goodwill and identifiable intangible assets																																																										(5,400	)
				Tangible common shareholders' equity																																																									$	62,605

(4)	The firm’s global core excess represents a pool of excess liquidity consisting of unencumbered, highly liquid securities and cash. These amounts represent preliminary estimates as of the date of this earnings release and may be revised in the firm’s Quarterly Report on Form 10-Q for the period ended June 30, 2012 (June 30, 2012 Form 10-Q). For a further discussion of the firm's global core excess liquidity pool, see "Liquidity Risk Management” in Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations” in the firm's Quarterly Report on Form 10-Q for the period ended March 31, 2012 (March 31, 2012 Form 10-Q).
(5)	The Tier 1 capital ratio equals Tier 1 capital divided by risk-weighted assets. The firm’s risk-weighted assets under the Board of Governors of the Federal Reserve System capital adequacy regulations currently applicable to bank holding companies (Basel 1) were approximately $429 billion as of June 30, 2012. This ratio represents a preliminary estimate as of the date of this earnings release and may be revised in the firm’s June 30, 2012 Form 10-Q. For a further discussion of the firm's capital ratios, see "Equity Capital” in Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations” in the firm’s March 31, 2012 Form 10-Q.
(6)	The Tier 1 common ratio equals Tier 1 common capital divided by risk-weighted assets. As of June 30, 2012, Tier 1 common capital was $56.34 billion, consisting of Tier 1 capital of $64.44 billion less preferred stock of $4.85 billion and junior subordinated debt issued to trusts of $3.25 billion. Management believes that the Tier 1 common ratio is meaningful because it is one of the measures that the firm and investors use to assess capital adequacy. The Tier 1 common ratio is a non-GAAP measure and may not be comparable to similar non-GAAP measures used by other companies. This ratio represents a preliminary estimate as of the date of this earnings release and may be revised in the firm’s June 30, 2012 Form 10-Q. For a further discussion of the firm's capital ratios, see "Equity Capital” in Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations” in the firm’s March 31, 2012 Form 10-Q.
(7)	The firm’s investment banking transaction backlog represents an estimate of the firm’s future net revenues from investment banking transactions where management believes that future revenue realization is more likely than not.
(8)	Includes $17 billion of fixed income asset inflows in connection with the firm’s acquisition of Dwight Asset Management Company LLC.
(9)	The remaining share authorization represents the shares that may be repurchased under the repurchase program approved by the Board of Directors. As disclosed in "Note 19. Shareholders’ Equity” in Part I, Item 1 "Financial Statements” in the firm’s March 31, 2012 Form 10-Q, share repurchases require approval by the Board of Governors of the Federal Reserve System.
(10)	This amount represents a preliminary estimate as of the date of this earnings release and may be revised in the firm’s June 30, 2012 Form 10-Q.
(11)	Unvested share-based payment awards that have non-forfeitable rights to dividends or dividend equivalents are treated as a separate class of securities in calculating earnings per common share. The impact of applying this methodology was a reduction in basic earnings per common share of $0.02, $0.01 and $0.02 for the three months ended June 30, 2012, March 31, 2012 and June 30, 2011, respectively, and $0.03 and $0.04 for the six months ended June 30, 2012 and June 30, 2011, respectively.
(12)	Includes employees, consultants and temporary staff.
(13)	VaR is the potential loss in value of the firm’s inventory positions due to adverse market movements over a one-day time horizon with a 95% confidence level. Diversification effect equals the difference between total VaR and the sum of the VaRs for the four risk categories. For a further discussion of VaR and the diversification effect, see "Market Risk Management” in Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations” in the firm’s March 31, 2012 Form 10-Q.
(14)	Assets under management include client assets where the firm earns a fee for managing assets on a discretionary basis.