Goldman Sachs to Invest in Sumitomo Mitsui Financial Group; Firms Will Expand Relationship Through Cooperative Efforts

Business Wire, Jan 15, 2003

Business Editors

NEW YORK AND TOKYO--(BUSINESS WIRE)--Jan. 15, 2003

The Goldman Sachs Group, Inc. (NYSE: GS) and Sumitomo Mitsui Financial Group, Inc. (SMFG) (TSE: 8316) announced today an agreement that includes the investment by Goldman Sachs in SMFG convertible preferred stock, the provision by SMFG of credit loss protection to support Goldman Sachs' lending activities and a broadening of business cooperation between the two organizations.

The transactions are expected to close in February 2003, subject to regulatory approvals and execution of definitive documentation.

Under the agreement, Goldman Sachs will purchase JPY 150.3 billion (approximately $1.27 billion) of convertible preferred stock with an annual 4.5% cash dividend. The preferred stock will be convertible into common stock beginning two years after issuance, and on a mandatory basis at the end of 25 years. The underlying common stock will generally not be transferable for a minimum of two years after issuance.

Also as part of the agreement, SMFG will provide Goldman Sachs with up to an aggregate of $1 billion in first loss protection to mitigate risks associated with extending credit to Goldman Sachs' investment grade clients. If requested by Goldman Sachs, SMFG will provide additional second loss protection, which will be rated investment grade.

Finally, Goldman Sachs and SMFG have agreed to expand their cooperative activities. The two organizations will work together on the disposition of non-performing assets, on SMFG's financial restructuring and in other areas where Goldman Sachs' expertise can be of use.

"We welcome Goldman Sachs as an investor, and look forward to extending the ties between our firms," said Yoshifumi Nishikawa, President and Chief Executive Officer of SMFG. "This investment, coupled with other initiatives, will strengthen the financial position of SMFG and enable us to accelerate our program to improve asset quality, an effort that Goldman Sachs' expertise will certainly facilitate."

Mr. Nishikawa went on to say, "While new regulatory guidelines announced by the Japanese FSA may increase SMFG's credit costs substantially, we believe the costs will be manageable. Given our enhanced capital base, earnings capacity and focus on the disposition of non-performing loans and rehabilitation of borrowers through our recently established Asset Restructuring Unit, we are confident that the steps we have taken will expedite meeting our goals of long-term earnings growth and improved asset quality."

Henry M. Paulson, Jr., Chairman and Chief Executive Officer of The Goldman Sachs Group, Inc. said, "Today's agreement serves to mark our commitment to Japan and to SMFG, one of Japan's largest and most prominent financial groups. We view this as an important opportunity to deepen Goldman Sachs' participation in Japan and its markets, and the next step in the long and successful relationship between our organizations."

"We are looking forward to working with SMFG on all the initiatives outlined in this transaction, and on its program to achieve its financial objectives," Mr. Paulson added. "We believe the benefits of today's agreement to both organizations and their shareholders will be significant."

Goldman Sachs is filing a Form 8-K today with more detailed information on the transactions.

Sumitomo Mitsui Financial Group, Inc. is a holding company established on December 2, 2002 with headquarters in Tokyo. Sumitomo Mitsui Banking Corporation (SMBC) is a 100% owned subsidiary of SMFG. SMBC is one of Japan's leading commercial banks, formed as a result of the merger of Sumitomo Bank, Limited and Sakura Bank, Limited, both having roots in the 19th century. SMBC provides a comprehensive range of wholesale and retail banking services to one of Japan's most diverse and affluent client bases. SMFG operates 545 domestic and 21 overseas branches in major financial centers around the world.

Goldman Sachs is a leading global investment banking, securities and investment management firm that provides a wide range of services worldwide to a substantial and diversified client base that includes corporations, financial institutions, governments and high net worth individuals. Founded in 1869, it is one of the oldest and largest investment banking firms. The firm is headquartered in New York and maintains offices in London, Frankfurt, Tokyo, Hong Kong and other major financial centers around the world.

Conference Call

A call to discuss today's announcement will be held at 9:00 am (ET), and 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 (US domestic) and 1-706-672-5627 (international) passcode number 7620451. 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, http://www.gs.com/our_firm/investor_relations/. There is no charge to access the call. 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.