8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):
March 13, 2007

THE GOLDMAN SACHS GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware	No. 001-14965	No. 13-4019460
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

85 Broad Street
New York, New York	10004
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (212) 902-1000

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

EX-99.1: PRESS RELEASE

 EX-99.1: PRESS RELEASE

Item 2.02 Results of Operations and Financial Condition.

     On March 13, 2007, The Goldman Sachs Group, Inc. (the Registrant) reported its earnings for its fiscal first quarter ended February 23, 2007. A copy of the Registrant’s press release containing this information is being furnished as Exhibit 99.1 to this Report on Form 8-K and is incorporated herein by reference.

     The information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the Exchange Act) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933 or the Exchange Act.

Item 8.01 Other Events.

     On March 13, 2007, the Registrant reported net revenues of $12.73 billion and net earnings of $3.20 billion for its first quarter ended February 23, 2007. Diluted earnings per common share were $6.67 compared with $5.08 for the first quarter of 2006 and $6.59 for the fourth quarter of 2006. Annualized return on average tangible common shareholders’ equity ⁽¹⁾ was 44.7% and annualized return on average common shareholders’ equity was 38.0% for the first quarter of 2007.

Net Revenues

Investment Banking

     Net revenues in Investment Banking were $1.72 billion, 17% higher than the first quarter of 2006 and 28% higher than the fourth quarter of 2006. Net revenues in Financial Advisory were $861 million, 17% higher than the first quarter of 2006, primarily reflecting growth in industry-wide completed mergers and acquisitions. Net revenues in the firm’s Underwriting business were $855 million, 16% higher than the first quarter of 2006, reflecting significantly higher net revenues in debt underwriting, primarily due to an increase in leveraged finance activity, as the financing environment remained favorable. The firm’s investment banking backlog increased during the quarter. ⁽²⁾

Trading and Principal Investments

     Net revenues in Trading and Principal Investments were $9.42 billion, 35% higher than the first quarter of 2006 and 42% higher than the fourth quarter of 2006.

     Net revenues in Fixed Income, Currency and Commodities (FICC) were $4.60 billion, 20% higher than the first quarter of 2006, reflecting higher net revenues in credit products and mortgages. Net revenues in commodities and interest rate products were strong, but essentially unchanged from the same prior year

2

period. Net revenues in currencies were also strong, but lower compared with the first quarter of 2006. During the quarter, FICC operated in an environment characterized by strong customer-driven activity and favorable market opportunities. In addition, although the subprime sector within the mortgage market experienced significant weakness, the broader credit environment remained strong.

     Net revenues in Equities were $3.09 billion, 26% higher than the first quarter of 2006, primarily due to significantly higher net revenues in shares and principal strategies, reflecting strong results across all regions. Net revenues in derivatives were also strong, but essentially unchanged compared with the first quarter of 2006. During the quarter, Equities operated in an environment characterized by rising equity prices, strong customer-driven activity and favorable market opportunities.

     Principal Investments recorded net revenues of $1.73 billion, reflecting gains and overrides from corporate and real estate principal investments, including a $227 million gain related to the firm’s investment in the ordinary shares of Industrial and Commercial Bank of China Limited (ICBC) and a $161 million gain related to the firm’s investment in the convertible preferred stock of Sumitomo Mitsui Financial Group, Inc. (SMFG). Net revenues in Principal Investments included approximately $500 million in gains in the first quarter of 2007 related to the firm’s adoption of SFAS No. 157.

Asset Management and Securities Services

     Net revenues in Asset Management and Securities Services were $1.60 billion, 19% lower than the first quarter of 2006 and 12% higher than the fourth quarter of 2006.

     Asset Management net revenues were $1.07 billion, 28% lower than the first quarter of 2006, reflecting significantly lower incentive fees, partially offset by a 31% increase in management and other fees. Incentive fees were $90 million for the first quarter of 2007 compared with $739 million for the same prior year period. During the quarter, assets under management increased $43 billion to $719 billion, reflecting non-money market net asset inflows of $24 billion, primarily in equity and fixed income assets, money market net asset inflows of $11 billion and market appreciation of $8 billion in equity and fixed income assets.

     Securities Services net revenues were $525 million, 7% higher than the first quarter of 2006, as the firm’s prime brokerage business generated strong results, reflecting continued growth in customer balances in securities lending and margin lending.

Expenses

     Operating expenses were $7.87 billion, 17% higher than the first quarter of 2006 and 78% higher than the fourth quarter of 2006.

3

Compensation and Benefits

     Compensation and benefits expenses were $6.11 billion, 15% higher than the first quarter of 2006, reflecting the impact of higher net revenues. The ratio of compensation and benefits to net revenues was 48.0% for the quarter compared with 50.9% for the first quarter of 2006. Employment levels increased 2% during the quarter.

Non-Compensation Expenses

     Non-compensation expenses were $1.76 billion, 23% higher than the first quarter of 2006. Excluding non-compensation expenses related to consolidated entities held for investment purposes ⁽³⁾, non-compensation expenses were 26% higher than the first quarter of 2006, primarily due to higher brokerage, clearing, exchange and distribution fees, reflecting higher transaction volumes in Equities, and increased professional fees, reflecting increased levels of business activity. Other expenses also increased, primarily due to growth in the firm’s insurance business.

Provision For Taxes

     The effective income tax rate for the first quarter of 2007 was 34.2%, down from 34.5% for fiscal year 2006 and up from 32.8% for the first quarter of 2006. The increase from the first quarter of 2006 was primarily due to a reduction in the impact of permanent benefits due to higher levels of earnings, and changes in the geographic mix of earnings.

Capital

     As of February 23, 2007, total capital was $169.63 billion, consisting of $36.90 billion in total shareholders’ equity (common shareholders’ equity of $33.80 billion and preferred stock of $3.10 billion) and $132.73 billion in unsecured long-term borrowings. Book value per common share was $77.12 and tangible book value per common share was $65.74 ⁽¹⁾, an increase of 6% and 7%, respectively, compared with the end of 2006. 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 438.3 million at period end.

     The firm repurchased 13.0 million shares of its common stock at an average price of $207.26 per share, for a total cost of $2.69 billion during the quarter. The remaining share authorization under the firm’s existing common stock repurchase program is 39.6 million shares.

4

Dividends

     The Board of Directors of The Goldman Sachs Group, Inc. (the Board) declared a dividend of $0.35 per common share to be paid on May 24, 2007 to common shareholders of record on April 24, 2007. The Board also declared dividends of $369.15, $387.50, $369.15 and $364.31 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 1/1000th interest in a share of preferred stock), to be paid on May 10, 2007 to preferred shareholders of record on April 25, 2007.

Cautionary Note Regarding Forward-Looking Statements

     This Report on Form 8-K contains “forward-looking statements.” These statements are not historical facts but instead represent only the Registrant’s beliefs regarding future events, many of which, by their nature, are inherently uncertain and outside of the Registrant’s control. It is possible that the Registrant’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 Registrant’s future results, see “Risk Factors” in Part I, Item 1A of the Registrant’s Annual Report on Form 10-K for the fiscal year ended November 24, 2006 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Registrant’s Annual Report on Form 10-K for the fiscal year ended November 24, 2006.

     Statements about the Registrant’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 Registrant 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 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 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 Registrant’s investment banking transactions, see “Risk Factors” in Part I, Item 1A of the Registrant’s Annual Report on Form 10-K for the fiscal year ended November 24, 2006.

5

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

	Three Months Ended							% Change From
	Feb. 23,		Nov. 24,			Feb. 24,		Nov. 24,			Feb. 24,
	2007		2006			2006		2006			2006
Investment Banking
Financial Advisory	$	861	$	627		$	736		37	%		17	%
Equity underwriting		266		330			283		(19	)		(6	)
Debt underwriting		589		387			452		52			30
Total Underwriting		855		717			735		19			16
Total Investment Banking		1,716		1,344			1,471		28			17
Trading and Principal Investments
FICC		4,604		3,104			3,838		48			20
Equities trading		2,163		1,235			1,607		75			35
Equities commissions		924		896			842		3			10
Total Equities		3,087		2,131			2,449		45			26
SMFG		161		(78	)		405		N.M.			(60	)
ICBC		227		949			—		(76	)		N.M.
Other corporate and real estate gains and losses		1,123		323			200		N.M.			N.M.
Overrides		215		205			90		5			139
Total Principal Investments		1,726		1,399			695		23			148
Total Trading and Principal Investments		9,417		6,634			6,982		42			35
Asset Management and Securities Services
Management and other fees		982		910			750		8			31
Incentive fees		90		23			739		N.M.			(88	)
Total Asset Management		1,072		933			1,489		15			(28	)
Securities Services		525		496			491		6			7
Total Asset Management and Securities Services		1,597		1,429			1,980		12			(19	)
Total net revenues	$	12,730	$	9,407		$	10,433		35			22

6

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

	Three Months Ended									% Change From
	Feb. 23,			Nov. 24,			Feb. 24,			Nov. 24,			Feb. 24,
	2007			2006			2006			2006			2006
Revenues
Investment banking	$	1,716		$	1,337		$	1,470			28	%		17	%
Trading and principal investments		9,073			6,051			6,687			50			36
Asset management and securities services		1,133			982			1,554			15			(27	)
Interest income		10,358			9,756			7,535			6			37
Total revenues		22,280			18,126			17,246			23			29
Interest expense		9,550			8,719			6,813			10			40
Revenues, net of interest expense		12,730			9,407			10,433			35			22
Operating expenses
Compensation and benefits		6,111			2,505			5,314			144			15
Brokerage, clearing, exchange and distribution fees		551			571			418			(4	)		32
Market development		132			154			100			(14	)		32
Communications and technology		151			148			124			2			22
Depreciation and amortization		132			143			125			(8	)		6
Amortization of identifiable intangible assets		51			45			34			13			50
Occupancy		204			237			193			(14	)		6
Professional fees		161			178			109			(10	)		48
Cost of power generation		84			98			85			(14	)		(1	)
Other expenses		294			343			242			(14	)		21
Total non-compensation expenses		1,760			1,917			1,430			(8	)		23
Total operating expenses		7,871			4,422			6,744			78			17
Pre-tax earnings		4,859			4,985			3,689			(3	)		32
Provision for taxes		1,662			1,833			1,210			(9	)		37
Net earnings		3,197			3,152			2,479			1			29
Preferred stock dividends		49			48			26			N.M.			N.M.
Net earnings applicable to common shareholders	$	3,148		$	3,104		$	2,453			1			28
Earnings per common share
Basic	$	7.08		$	7.06		$	5.36			—	%		32	%
Diluted		6.67			6.59			5.08			1			31
Average common shares outstanding
Basic		444.5			439.8			457.3			1			(3	)
Diluted		471.9			470.7			483.3			—			(2	)
Selected Data
Employees at period end (4)		26,959			26,467			23,641			2			14
Ratio of compensation and benefits to net revenues		48.0	%		26.6	%		50.9	%

7

NON-COMPENSATION EXPENSES
(UNAUDITED)
$ in millions

	Three Months Ended						% Change From
	Feb. 23,		Nov. 24,		Feb. 24,		Nov. 24,			Feb. 24,
	2007		2006		2006		2006			2006
Non-compensation expenses of consolidated investments (3)	$	87	$	130	$	99		(33	)%		(12	)%
Non-compensation expenses excluding consolidated investments
Brokerage, clearing, exchange and distribution fees		551		571		418		(4	)		32
Market development		130		148		92		(12	)		41
Communications and technology		150		146		123		3			22
Depreciation and amortization		118		119		112		(1	)		5
Amortization of identifiable intangible assets		50		43		34		16			47
Occupancy		189		210		169		(10	)		12
Professional fees		160		176		105		(9	)		52
Cost of power generation		84		98		85		(14	)		(1	)
Other expenses		241		276		193		(13	)		25
Subtotal		1,673		1,787		1,331		(6	)		26
Total non-compensation expenses, as reported	$	1,760	$	1,917	$	1,430		(8	)		23

8

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

Average Daily VaR ⁽⁵⁾
$ in millions

	Three Months Ended
	Feb. 23,			Nov. 24,			Feb. 24,
	2007			2006			2006
Risk Categories
Interest rates	$	57		$	51		$	40
Equity prices		96			75			69
Currency rates		18			14			18
Commodity prices		30			29			30
Diversification effect (6)		(74	)		(63	)		(65	)
Total	$	127		$	106		$	92

Assets Under Management ⁽⁷⁾
$ in billions

	As of						% Change From
	Feb. 28,		Nov. 30,		Feb. 28,		Nov. 30,			Feb. 28,
	2007		2006		2006		2006			2006
Asset Class
Alternative investments	$	147	$	145	$	119		1	%		24	%
Equity		230		215		181		7			27
Fixed income		213		198		165		8			29
Total non-money market assets		590		558		465		6			27
Money markets		129		118		106		9			22
Total assets under management	$	719	$	676	$	571		6			26

	Three Months Ended
	Feb. 28,		Nov. 30,		Feb. 28,
	2007		2006		2006
Balance, beginning of period	$	676	$	629	$	532
Net asset inflows / (outflows)
Alternative investments		2		6		7
Equity		11		4		5
Fixed income		11		7		8
Total non-money market net asset inflows / (outflows)		24		17		20
Money markets		11		7		5
Total net asset inflows / (outflows)		35		24		25
Net market appreciation / (depreciation)		8		23		14
Balance, end of period	$	719	$	676	$	571

Principal Investments
$ in millions

	As of February 23, 2007
	Corporate		Real Estate		Total
Private	$	3,939	$	1,103	$	5,042
Public		939		38		977
Subtotal		4,878		1,141		6,019
SMFG convertible preferred stock (8)		4,662		—		4,662
ICBC ordinary shares (9)		5,898		—		5,898
Total	$	15,438	$	1,141	$	16,579

9

Footnotes

(1)

Tangible common shareholders’ equity equals total shareholders’ equity less preferred stock, goodwill and identifiable intangible assets, excluding power contracts. Identifiable intangible assets associated with power contracts are not deducted from total shareholders’ equity because, unlike other intangible assets, less than 50% of these assets are supported by common shareholders’ equity. Management believes that return on average tangible common shareholders’ equity (ROTE) is meaningful because it measures the performance of businesses consistently, whether they were acquired or developed internally. ROTE is computed by dividing net earnings (or annualized net earnings for annualized ROTE) applicable to common shareholders by average monthly tangible common shareholders’ equity. 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.

The following table sets forth a reconciliation of total shareholders’ equity to tangible common shareholders’ equity:

	Average for the			As of
	Three Months Ended
	February 23, 2007			February 23, 2007
	(unaudited, $ in millions)
Total shareholders’ equity	$	36,258		$	36,900
Preferred stock		(3,100	)		(3,100	)
Common shareholders’ equity		33,158			33,800
Goodwill and identifiable intangible assets, excluding power contracts		(5,002	)		(4,988	)
Tangible common shareholders’ equity	$	28,156		$	28,812

(2)	The firm’s investment banking 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.
(3)	Consolidated entities held for investment purposes are entities that are held strictly for capital appreciation, have a defined exit strategy and are engaged in activities that are not closely related to the firm’s principal businesses. For example, these investments include consolidated entities that hold real estate assets, such as hotels, but exclude investments in entities that primarily hold financial assets. Management believes that it is meaningful to review non-compensation expenses excluding expenses related to these consolidated entities in order to evaluate trends in non-compensation expenses related to the firm’s principal business activities.
(4)	Excludes 4,994, 3,868 and 8,171 employees as of February 2007, November 2006 and February 2006, respectively, of consolidated entities held for investment purposes. Compensation and benefits includes $35 million, $64 million and $51 million for the three months ended February 23, 2007, November 24, 2006 and February 24, 2006, respectively, attributable to these consolidated entities.
(5)	VaR is the potential loss in value of Goldman Sachs’ trading positions due to adverse market movements over a one-day time horizon with a 95% confidence level. The modeling of the risk characteristics of the firm’s trading positions involves a number of assumptions and approximations. While management believes that these assumptions and approximations are reasonable, there is no standard methodology for estimating VaR, and different assumptions and/or approximations could produce materially different VaR estimates. For a further discussion of the calculation of VaR, see Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in the firm’s Annual Report on Form 10-K for the year ended November 24, 2006.
(6)	Equals the difference between total VaR and the sum of the VaRs for the four risk categories. This effect arises because the four market risk categories are not perfectly correlated.
(7)	Substantially all assets under management are valued as of calendar month end.
(8)	Excludes an economic hedge on the shares of common stock underlying the investment. As of February 23, 2007, the fair value of this hedge was $3.27 billion. Includes the effect of foreign exchange revaluation on the investment, for which the firm also maintains an economic hedge.
(9)	Includes interests of $3.73 billion as of February 23, 2007 held by investment funds managed by Goldman Sachs. The fair value of the investment in the ordinary shares of ICBC, which trade on The Stock Exchange of Hong Kong, includes the effect of foreign exchange revaluation.

10

Item 9.01 Financial Statements and Exhibits.

     (d) Exhibits.

     The following exhibit is being furnished as part of this Report on Form 8-K:

99.1 Press release of the Registrant dated March 13, 2007 containing financial information for its fiscal first quarter ended February 23, 2007.

11

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	THE GOLDMAN SACHS GROUP, INC. (Registrant)
Date: March 13, 2007	By:	/s/ David A. Viniar
		Name:	David A. Viniar
		Title: Chief Financial Officer

12

EX-99.1

Exhibit 99.1

The Goldman Sachs Group, Inc. ½ 85 Broad Street ½ New York, New York 10004

GOLDMAN SACHS REPORTS FIRST QUARTER RECORD
EARNINGS PER COMMON SHARE OF $6.67

NEW YORK, March 13, 2007 — The Goldman Sachs Group, Inc. (NYSE: GS) today reported net revenues of $12.73 billion and net earnings of $3.20 billion for its first quarter ended February 23, 2007. Diluted earnings per common share were $6.67 compared with $5.08 for the first quarter of 2006 and $6.59 for the fourth quarter of 2006. Annualized return on average tangible common shareholders’ equity ⁽¹⁾ was 44.7% and annualized return on average common shareholders’ equity was 38.0% for the first quarter of 2007.

Business Highlights

• Goldman Sachs generated record quarterly net revenues, net earnings and diluted earnings per common share.

• Investment Banking produced record quarterly net revenues of $1.72 billion, including record results in Financial Advisory and Debt Underwriting.

• The firm continued its leadership in worldwide mergers and acquisitions, ranking first in announced transactions for the fiscal
year-to-date. ⁽²⁾

• Fixed Income, Currency and Commodities (FICC) generated record quarterly net revenues of $4.60 billion, reflecting strong performance across all major businesses.

• Equities produced record quarterly net revenues of $3.09 billion, 26% higher than the previous record set in the first quarter of 2006, reflecting strength across all major businesses.

• Asset Management generated net revenues of $1.07 billion, including record management and other fees of $982 million. Assets under management increased 26% from a year ago to a record $719 billion, with net asset inflows of $35 billion during the quarter.

“We are very pleased with our first quarter’s results. They are a product of strong client activity across every region and every segment of our business,” said Lloyd C. Blankfein, Chairman and Chief Executive Officer. “While market conditions will regularly shift, we are confident that our client-driven strategy will continue to produce the strongest results for the firm.”

Media Relations: Peter Rose 212-902-5400       ½       Investor Relations: John Andrews 212-357-2674

Net Revenues

Investment Banking

Net revenues in Investment Banking were $1.72 billion, 17% higher than the first quarter of 2006 and 28% higher than the fourth quarter of 2006. Net revenues in Financial Advisory were $861 million, 17% higher than the first quarter of 2006, primarily reflecting growth in industry-wide completed mergers and acquisitions. Net revenues in the firm’s Underwriting business were $855 million, 16% higher than the first quarter of 2006, reflecting significantly higher net revenues in debt underwriting, primarily due to an increase in leveraged finance activity, as the financing environment remained favorable. The firm’s investment banking backlog increased during the quarter. ⁽³⁾

Trading and Principal Investments

Net revenues in Trading and Principal Investments were $9.42 billion, 35% higher than the first quarter of 2006 and 42% higher than the fourth quarter of 2006.

Net revenues in FICC were $4.60 billion, 20% higher than the first quarter of 2006, reflecting higher net revenues in credit products and mortgages. Net revenues in commodities and interest rate products were strong, but essentially unchanged from the same prior year period. Net revenues in currencies were also strong, but lower compared with the first quarter of 2006. During the quarter, FICC operated in an environment characterized by strong customer-driven activity and favorable market opportunities. In addition, although the subprime sector within the mortgage market experienced significant weakness, the broader credit environment remained strong.

Net revenues in Equities were $3.09 billion, 26% higher than the first quarter of 2006, primarily due to significantly higher net revenues in shares and principal strategies, reflecting strong results across all regions. Net revenues in derivatives were also strong, but essentially unchanged compared with the first quarter of 2006. During the quarter, Equities operated in an environment characterized by rising equity prices, strong customer-driven activity and favorable market opportunities.

Principal Investments recorded net revenues of $1.73 billion, reflecting gains and overrides from corporate and real estate principal investments, including a $227 million gain related to the firm’s investment in the ordinary shares of Industrial and Commercial Bank of China Limited (ICBC) and a $161 million gain related to the firm’s investment in the convertible preferred stock of Sumitomo Mitsui Financial Group, Inc. (SMFG). Net revenues in Principal Investments included approximately $500 million in gains in the first quarter of 2007 related to the firm’s adoption of SFAS No. 157.

Asset Management and Securities Services

Net revenues in Asset Management and Securities Services were $1.60 billion, 19% lower than the first quarter of 2006 and 12% higher than the fourth quarter of 2006.

2

Asset Management net revenues were $1.07 billion, 28% lower than the first quarter of 2006, reflecting significantly lower incentive fees, partially offset by a 31% increase in management and other fees. Incentive fees were $90 million for the first quarter of 2007 compared with $739 million for the same prior year period. During the quarter, assets under management increased $43 billion to $719 billion, reflecting non-money market net asset inflows of $24 billion, primarily in equity and fixed income assets, money market net asset inflows of $11 billion and market appreciation of $8 billion in equity and fixed income assets.

Securities Services net revenues were $525 million, 7% higher than the first quarter of 2006, as the firm’s prime brokerage business generated strong results, reflecting continued growth in customer balances in securities lending and margin lending.

Expenses

Operating expenses were $7.87 billion, 17% higher than the first quarter of 2006 and 78% higher than the fourth quarter of 2006.

Compensation and Benefits

Compensation and benefits expenses were $6.11 billion, 15% higher than the first quarter of 2006, reflecting the impact of higher net revenues. The ratio of compensation and benefits to net revenues was 48.0% for the quarter compared with 50.9% for the first quarter of 2006. Employment levels increased 2% during the quarter.

Non-Compensation Expenses

Non-compensation expenses were $1.76 billion, 23% higher than the first quarter of 2006. Excluding non-compensation expenses related to consolidated entities held for investment purposes ⁽⁴⁾, non-compensation expenses were 26% higher than the first quarter of 2006, primarily due to higher brokerage, clearing, exchange and distribution fees, reflecting higher transaction volumes in Equities, and increased professional fees, reflecting increased levels of business activity. Other expenses also increased, primarily due to growth in the firm’s insurance business.

Provision For Taxes

The effective income tax rate for the first quarter of 2007 was 34.2%, down from 34.5% for fiscal year 2006 and up from 32.8% for the first quarter of 2006. The increase from the first quarter of 2006 was primarily due to a reduction in the impact of permanent benefits due to higher levels of earnings, and changes in the geographic mix of earnings.

Capital

As of February 23, 2007, total capital was $169.63 billion, consisting of $36.90 billion in total shareholders’ equity (common shareholders’ equity of $33.80 billion and preferred stock of $3.10 billion) and $132.73 billion in unsecured long-term borrowings. Book value per common share was $77.12 and tangible book value per common share was $65.74 ⁽¹⁾, an increase of 6% and 7%, respectively, compared with the end of 2006. 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 438.3 million at period end.

3

The firm repurchased 13.0 million shares of its common stock at an average price of $207.26 per share, for a total cost of $2.69 billion during the quarter. The remaining share authorization under the firm’s existing common stock repurchase program is 39.6 million shares.

Dividends

The Board of Directors of The Goldman Sachs Group, Inc. (the Board) declared a dividend of $0.35 per common share to be paid on May 24, 2007 to common shareholders of record on April 24, 2007. The Board also declared dividends of $369.15, $387.50, $369.15 and $364.31 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 1/1000th interest in a share of preferred stock), to be paid on May 10, 2007 to preferred shareholders of record on April 25, 2007.

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.

Cautionary Note Regarding Forward-Looking Statements

This press release contains “forward-looking statements.” These 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, see “Risk Factors” in Part I, Item 1A of the firm’s Annual Report on Form 10-K for the fiscal year ended November 24, 2006 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the firm’s Annual Report on Form 10-K for the fiscal year ended November 24, 2006.

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 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 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 fiscal year ended November 24, 2006.

Conference Call

A conference call to discuss the firm’s results, outlook and related matters will be held at 11:00 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) and 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/our_firm/investor_relations/. 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 1-800-642-1687 (U.S. domestic) or 1-706-645-9291 (international) passcode number 1076656, 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.

4

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

	Three Months Ended							% Change From
	Feb. 23,		Nov. 24,			Feb. 24,		Nov. 24,			Feb. 24,
	2007		2006			2006		2006			2006
Investment Banking
Financial Advisory	$	861	$	627		$	736		37	%		17	%
Equity underwriting		266		330			283		(19	)		(6	)
Debt underwriting		589		387			452		52			30
Total Underwriting		855		717			735		19			16
Total Investment Banking		1,716		1,344			1,471		28			17
Trading and Principal Investments
FICC		4,604		3,104			3,838		48			20
Equities trading		2,163		1,235			1,607		75			35
Equities commissions		924		896			842		3			10
Total Equities		3,087		2,131			2,449		45			26
SMFG		161		(78	)		405		N.M.			(60	)
ICBC		227		949			—		(76	)		N.M.
Other corporate and real estate gains and losses		1,123		323			200		N.M.			N.M.
Overrides		215		205			90		5			139
Total Principal Investments		1,726		1,399			695		23			148
Total Trading and Principal Investments		9,417		6,634			6,982		42			35
Asset Management and Securities Services
Management and other fees		982		910			750		8			31
Incentive fees		90		23			739		N.M.			(88	)
Total Asset Management		1,072		933			1,489		15			(28	)
Securities Services		525		496			491		6			7
Total Asset Management and Securities Services		1,597		1,429			1,980		12			(19	)
Total net revenues	$	12,730	$	9,407		$	10,433		35			22

5

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

	Three Months Ended									% Change From
	Feb. 23,			Nov. 24,			Feb. 24,			Nov. 24,			Feb. 24,
	2007			2006			2006			2006			2006
Revenues
Investment banking	$	1,716		$	1,337		$	1,470			28	%		17	%
Trading and principal investments		9,073			6,051			6,687			50			36
Asset management and securities services		1,133			982			1,554			15			(27	)
Interest income		10,358			9,756			7,535			6			37
Total revenues		22,280			18,126			17,246			23			29
Interest expense		9,550			8,719			6,813			10			40
Revenues, net of interest expense		12,730			9,407			10,433			35			22
Operating expenses
Compensation and benefits		6,111			2,505			5,314			144			15
Brokerage, clearing, exchange and distribution fees		551			571			418			(4	)		32
Market development		132			154			100			(14	)		32
Communications and technology		151			148			124			2			22
Depreciation and amortization		132			143			125			(8	)		6
Amortization of identifiable intangible assets		51			45			34			13			50
Occupancy		204			237			193			(14	)		6
Professional fees		161			178			109			(10	)		48
Cost of power generation		84			98			85			(14	)		(1	)
Other expenses		294			343			242			(14	)		21
Total non-compensation expenses		1,760			1,917			1,430			(8	)		23
Total operating expenses		7,871			4,422			6,744			78			17
Pre-tax earnings		4,859			4,985			3,689			(3	)		32
Provision for taxes		1,662			1,833			1,210			(9	)		37
Net earnings		3,197			3,152			2,479			1			29
Preferred stock dividends		49			48			26			N.M.			N.M.
Net earnings applicable to common shareholders	$	3,148		$	3,104		$	2,453			1			28
Earnings per common share
Basic	$	7.08		$	7.06		$	5.36			—	%		32	%
Diluted		6.67			6.59			5.08			1			31
Average common shares outstanding
Basic		444.5			439.8			457.3			1			(3	)
Diluted		471.9			470.7			483.3			—			(2	)
Selected Data
Employees at period end (5)		26,959			26,467			23,641			2			14
Ratio of compensation and benefits to net revenues		48.0	%		26.6	%		50.9	%

6

NON-COMPENSATION EXPENSES
(UNAUDITED)
$ in millions

	Three Months Ended						% Change From
	Feb. 23,		Nov. 24,		Feb. 24,		Nov. 24,			Feb. 24,
	2007		2006		2006		2006			2006
Non-compensation expenses of consolidated investments (4)	$	87	$	130	$	99		(33	)%		(12	)%
Non-compensation expenses excluding consolidated investments
Brokerage, clearing, exchange and distribution fees		551		571		418		(4	)		32
Market development		130		148		92		(12	)		41
Communications and technology		150		146		123		3			22
Depreciation and amortization		118		119		112		(1	)		5
Amortization of identifiable intangible assets		50		43		34		16			47
Occupancy		189		210		169		(10	)		12
Professional fees		160		176		105		(9	)		52
Cost of power generation		84		98		85		(14	)		(1	)
Other expenses		241		276		193		(13	)		25
Subtotal		1,673		1,787		1,331		(6	)		26
Total non-compensation expenses, as reported	$	1,760	$	1,917	$	1,430		(8	)		23

7

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

Average Daily VaR⁽⁶⁾
$ in millions

	Three Months Ended
	Feb. 23,			Nov. 24,			Feb. 24,
	2007			2006			2006
Risk Categories
Interest rates	$	57		$	51		$	40
Equity prices		96			75			69
Currency rates		18			14			18
Commodity prices		30			29			30
Diversification effect (7)		(74	)		(63	)		(65	)
Total	$	127		$	106		$	92

Assets Under Management ⁽⁸⁾
$ in billions

	As of						% Change From
	Feb. 28,		Nov. 30,		Feb. 28,		Nov. 30,			Feb. 28,
	2007		2006		2006		2006			2006
Asset Class
Alternative investments	$	147	$	145	$	119		1	%		24	%
Equity		230		215		181		7			27
Fixed income		213		198		165		8			29
Total non-money market assets		590		558		465		6			27
Money markets		129		118		106		9			22
Total assets under management	$	719	$	676	$	571		6			26

	Three Months Ended
	Feb. 28,		Nov. 30,		Feb. 28,
	2007		2006		2006
Balance, beginning of period	$	676	$	629	$	532
Net asset inflows / (outflows)
Alternative investments		2		6		7
Equity		11		4		5
Fixed income		11		7		8
Total non-money market net asset inflows / (outflows)		24		17		20
Money markets		11		7		5
Total net asset inflows / (outflows)		35		24		25
Net market appreciation / (depreciation)		8		23		14
Balance, end of period	$	719	$	676	$	571

Principal Investments
$ in millions

	As of February 23, 2007
	Corporate		Real Estate		Total
Private	$	3,939	$	1,103	$	5,042
Public		939		38		977
Subtotal		4,878		1,141		6,019
SMFG convertible preferred stock (9)		4,662		—		4,662
ICBC ordinary shares (10)		5,898		—		5,898
Total	$	15,438	$	1,141	$	16,579

8

Footnotes

(1)

Tangible common shareholders’ equity equals total shareholders’ equity less preferred stock, goodwill and identifiable intangible assets, excluding power contracts. Identifiable intangible assets associated with power contracts are not deducted from total shareholders’ equity because, unlike other intangible assets, less than 50% of these assets are supported by common shareholders’ equity. Management believes that return on average tangible common shareholders’ equity (ROTE) is meaningful because it measures the performance of businesses consistently, whether they were acquired or developed internally. ROTE is computed by dividing net earnings (or annualized net earnings for annualized ROTE) applicable to common shareholders by average monthly tangible common shareholders’ equity. 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.

The following table sets forth a reconciliation of total shareholders’ equity to tangible common shareholders’ equity:

	Average for the			As of
	Three Months Ended
	February 23, 2007			February 23, 2007
	(unaudited, $ in millions)
Total shareholders’ equity	$	36,258		$	36,900
Preferred stock		(3,100	)		(3,100	)
Common shareholders’ equity		33,158			33,800
Goodwill and identifiable intangible assets, excluding power contracts		(5,002	)		(4,988	)
Tangible common shareholders’ equity	$	28,156		$	28,812

(2)	Thomson Financial – November 25, 2006 through February 23, 2007.
(3)	The firm’s investment banking 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.
(4)	Consolidated entities held for investment purposes are entities that are held strictly for capital appreciation, have a defined exit strategy and are engaged in activities that are not closely related to the firm’s principal businesses. For example, these investments include consolidated entities that hold real estate assets, such as hotels, but exclude investments in entities that primarily hold financial assets. Management believes that it is meaningful to review non-compensation expenses excluding expenses related to these consolidated entities in order to evaluate trends in non-compensation expenses related to the firm’s principal business activities.
(5)	Excludes 4,994, 3,868 and 8,171 employees as of February 2007, November 2006 and February 2006, respectively, of consolidated entities held for investment purposes. Compensation and benefits includes $35 million, $64 million and $51 million for the three months ended February 23, 2007, November 24, 2006 and February 24, 2006, respectively, attributable to these consolidated entities.
(6)	VaR is the potential loss in value of Goldman Sachs’ trading positions due to adverse market movements over a one-day time horizon with a 95% confidence level. The modeling of the risk characteristics of the firm’s trading positions involves a number of assumptions and approximations. While management believes that these assumptions and approximations are reasonable, there is no standard methodology for estimating VaR, and different assumptions and/or approximations could produce materially different VaR estimates. For a further discussion of the calculation of VaR, see Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in the firm’s Annual Report on Form 10-K for the year ended November 24, 2006.
(7)	Equals the difference between total VaR and the sum of the VaRs for the four risk categories. This effect arises because the four market risk categories are not perfectly correlated.
(8)	Substantially all assets under management are valued as of calendar month end.
(9)	Excludes an economic hedge on the shares of common stock underlying the investment. As of February 23, 2007, the fair value of this hedge was $3.27 billion. Includes the effect of foreign exchange revaluation on the investment, for which the firm also maintains an economic hedge.
(10)	Includes interests of $3.73 billion as of February 23, 2007 held by investment funds managed by Goldman Sachs. The fair value of the investment in the ordinary shares of ICBC, which trade on The Stock Exchange of Hong Kong, includes the effect of foreign exchange revaluation.

9