sector. The decrease in commodities was primarily attributable to a $700 million gain in the second quarter of 2006 related to the sale of East Coast Power, L.L.C. Net revenues in interest rate products were strong but lower compared with the same prior year period. Net revenues in credit products and currencies were also strong and were higher compared with the second quarter of 2006. During the quarter, FICC operated in an environment characterized by solid customer-driven activity, generally low volatility levels and strength in the broader credit markets.

Net revenues in Equities were $2.50 billion, 6% higher than the second quarter of 2006, due to higher net revenues in principal strategies as well as higher net revenues in the shares business, primarily in Europe. These increases were partially offset by strong but lower net revenues in derivatives compared with the second quarter of 2006. Following challenging market conditions early in the quarter, Equities operated in a favorable environment characterized by generally rising equity prices and strong customer-driven activity.

Principal Investments recorded net revenues of $784 million, primarily reflecting gains and overrides from corporate principal investments. These results included a $125 million loss related to the firm’s investment in the ordinary shares of Industrial and Commercial Bank of China Limited (ICBC) and a $64 million loss related to the firm’s investment in the convertible preferred stock of Sumitomo Mitsui Financial Group, Inc. (SMFG).

Asset Management and Securities Services

Net revenues in Asset Management and Securities Services were $1.81 billion, 13% higher than both the second quarter of 2006 and the first quarter of 2007.

Asset Management net revenues were $1.06 billion, 11% higher than the second quarter of 2006, reflecting a 22% increase in management and other fees, partially offset by lower incentive fees. During the quarter, assets under management increased $39 billion to $758 billion, reflecting non-money market net asset inflows of $14 billion in equity and fixed income assets, money market net asset inflows of $4 billion and market appreciation of $21 billion, primarily in equity assets.

Securities Services net revenues were $757 million, 15% higher than the second quarter of 2006, as the firm’s prime brokerage business continued to generate strong results, reflecting significantly higher customer balances in securities lending and margin lending and higher seasonal activity levels in Europe.

Expenses

Operating expenses were $6.75 billion, essentially unchanged from the second quarter of 2006 and 14% lower than the first quarter of 2007.

Compensation and Benefits

Compensation and benefits expenses were $4.89 billion, 4% lower than the second quarter of 2006, primarily reflecting the impact of a lower ratio of compensation and benefits to net revenues. The ratio of compensation and benefits to net revenues was 48.0% for the first half of 2007 compared with 50.4% for the first half of 2006. Employment levels increased 4% during the quarter.

Non-Compensation Expenses

Non-compensation expenses were $1.86 billion, 16% higher than the second quarter of 2006 and 6% higher than the first quarter of 2007. The increase compared with the second quarter of 2006 was primarily attributable to the impact of higher levels of business activity and continued geographic expansion. The majority of this increase was in brokerage, clearing, exchange and distribution fees, which principally reflected higher transaction volumes in Equities.

Provision For Taxes

The effective income tax rate for the first half of 2007 was 33.3%, down from 34.2% for the first quarter of 2007 and 34.5% for fiscal year 2006. The decreases in the effective tax rate were primarily due to changes in the geographic earnings mix and, to a lesser extent, an increase in tax credits.

Capital

As of May 25, 2007, total capital was $179.94 billion, consisting of $38.46 billion in total shareholders’ equity (common shareholders’ equity of $35.36 billion and preferred stock of $3.10 billion) and $141.48 billion in unsecured long-term borrowings. Book value per common share was $81.30 and tangible book value per common share was $69.99 ⁽¹⁾, an increase of 5% and 6%, respectively, compared with the end of the first quarter of 2007. 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 434.9 million at period end.

On May 15, 2007, two trusts created by The Goldman Sachs Group, Inc. (Group Inc.) issued $2.25 billion of Automatic Preferred Enhanced Capital Securities (APEX). The assets held by the trusts in support of the APEX initially consist of remarketable junior subordinated notes and preferred stock purchase contracts issued by Group Inc. and will ultimately consist of $1.75 billion of perpetual Non-Cumulative Series E Preferred Stock and $500 million of perpetual Non-Cumulative Series F Preferred Stock, that Group Inc. will issue to the trusts no later than June 1, 2013 and September 1, 2013, respectively.

The firm repurchased 5.4 million shares of its common stock at an average cost per share of $208.41, for a total cost of $1.13 billion during the quarter. The remaining authorization under the firm’s existing share repurchase program is 34.2 million shares.

Dividends

The Board of Directors of Group Inc. (the Board) declared a dividend of $0.35 per common share to be paid on August 30, 2007 to common shareholders of record on July 31, 2007. The Board also declared dividends of $390.16, $387.50, $390.16 and $385.05 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 August 10, 2007 to preferred shareholders of record on July 26, 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.

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

		Three Months Ended												% Change From
		May 25,				Feb. 23,				May 26,				Feb. 23,				May 26,
		2007				2007				2006				2007				2006
Investment Banking
Financial Advisory		$	709			$	861			$	608				(18	)%			17	%
Equity underwriting			358				266				482				35				(26	)
Debt underwriting			654				589				436				11				50
Total Underwriting			1,012				855				918				18				10
Total Investment Banking			1,721				1,716				1,526				—				13
Trading and Principal Investments
FICC			3,368				4,604				4,460				(27	)			(24	)
Equities trading			1,415				2,163				1,416				(35	)			—
Equities commissions			1,082				924				936				17				16
Total Equities			2,497				3,087				2,352				(19	)			6
SMFG			(64	)			161				(61	)			N.M.				N.M.
ICBC			(125	)			227				(4	)			N.M.				N.M.
Other corporate and real estate gains and losses			909				1,123				284				(19	)			N.M.
Overrides			64				215				74				(70	)			(14	)
Total Principal Investments			784				1,726				293				(55	)			168
Total Trading and Principal Investments			6,649				9,417				7,105				(29	)			(6	)
Asset Management and Securities Services
Management and other fees			1,035				982				850				5				22
Incentive fees			20				90				104				(78	)			(81	)
Total Asset Management			1,055				1,072				954				(2	)			11
Securities Services			757				525				656				44				15
Total Asset Management and Securities Services			1,812				1,597				1,610				13				13
Total net revenues		$	10,182			$	12,730			$	10,241				(20	)			(1	)
		Six Months Ended								% Change From
		May 25,				May 26,				May 26,
		2007				2006				2006
Investment Banking
Financial Advisory		$	1,570			$	1,344				17	%
Equity underwriting			624				765				(18	)
Debt underwriting			1,243				888				40
Total Underwriting			1,867				1,653				13
Total Investment Banking			3,437				2,997				15
Trading and Principal Investments
FICC			7,972				8,298				(4	)
Equities trading			3,578				3,023				18
Equities commissions			2,006				1,778				13
Total Equities			5,584				4,801				16
SMFG			97				344				(72	)
ICBC			102				(4	)			N.M.
Other corporate and real estate gains and losses			2,032				484				N.M.
Overrides			279				164				70
Total Principal Investments			2,510				988				154
Total Trading and Principal Investments			16,066				14,087				14
Asset Management and Securities Services
Management and other fees			2,017				1,600				26
Incentive fees			110				843				(87	)
Total Asset Management			2,127				2,443				(13	)
Securities Services			1,282				1,147				12
Total Asset Management and Securities Services			3,409				3,590				(5	)
Total net revenues		$	22,912			$	20,674				11

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
		May 25,				Feb. 23,				May 26,				Feb. 23,				May 26,
		2007				2007				2006				2007				2006
Revenues
Investment banking		$	1,720			$	1,716			$	1,521				—	%			13	%
Trading and principal investments			6,242				9,073				6,921				(31	)			(10	)
Asset management and securities services			1,107				1,133				1,016				(2	)			9
Interest income			11,282				10,358				8,544				9				32
Total revenues			20,351				22,280				18,002				(9	)			13
Interest expense			10,169				9,550				7,761				6				31
Revenues, net of interest expense			10,182				12,730				10,241				(20	)			(1	)
Operating expenses
Compensation and benefits			4,887				6,111				5,108				(20	)			(4	)
Brokerage, clearing, exchange and distribution fees			638				551				473				16				35
Market development			144				132				121				9				19
Communications and technology			161				151				131				7				23
Depreciation and amortization			140				132				127				6				10
Amortization of identifiable intangible assets			50				51				44				(2	)			14
Occupancy			210				204				199				3				6
Professional fees			161				161				123				—				31
Cost of power generation			81				84				122				(4	)			(34	)
Other expenses			279				294				269				(5	)			4
Total non-compensation expenses			1,864				1,760				1,609				6				16
Total operating expenses			6,751				7,871				6,717				(14	)			1
Pre-tax earnings			3,431				4,859				3,524				(29	)			(3	)
Provision for taxes			1,098				1,662				1,212				(34	)			(9	)
Net earnings			2,333				3,197				2,312				(27	)			1
Preferred stock dividends			46				49				26				N.M.				N.M.
Net earnings applicable to common shareholders		$	2,287			$	3,148			$	2,286				(27	)			—
Earnings per common share
Basic		$	5.25			$	7.08			$	5.08				(26	)%			3	%
Diluted			4.93				6.67				4.78				(26	)			3
Average common shares outstanding
Basic			435.8				444.5				449.7				(2	)			(3	)
Diluted			464.1				471.9				478.3				(2	)			(3	)
Selected Data
Employees at period end (3)			28,012				26,959				24,013				4				17
Ratio of compensation and benefits to net revenues			48.0	%			48.0	%			49.9	%

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

		Six Months Ended								% Change From
		May 25,				May 26,				May 26,
		2007				2006				2006
Revenues
Investment banking		$	3,436			$	2,991				15	%
Trading and principal investments			15,315				13,608				13
Asset management and securities services			2,240				2,570				(13	)
Interest income			21,640				16,079				35
Total revenues			42,631				35,248				21
Interest expense			19,719				14,574				35
Revenues, net of interest expense			22,912				20,674				11
Operating expenses
Compensation and benefits			10,998				10,422				6
Brokerage, clearing, exchange and distribution fees			1,189				891				33
Market development			276				221				25
Communications and technology			312				255				22
Depreciation and amortization			272				252				8
Amortization of identifiable intangible assets			101				78				29
Occupancy			414				392				6
Professional fees			322				232				39
Cost of power generation			165				207				(20	)
Other expenses			573				511				12
Total non-compensation expenses			3,624				3,039				19
Total operating expenses			14,622				13,461				9
Pre-tax earnings			8,290				7,213				15
Provision for taxes			2,760				2,422				14
Net earnings			5,530				4,791				15
Preferred stock dividends			95				52				N.M.
Net earnings applicable to common shareholders		$	5,435			$	4,739				15
Earnings per common share
Basic		$	12.35			$	10.45				18	%
Diluted			11.61				9.86				18
Average common shares outstanding
Basic			440.2				453.5				(3	)
Diluted			468.0				480.8				(3	)
Selected Data
Ratio of compensation and benefits to net revenues			48.0	%			50.4	%

NON-COMPENSATION EXPENSES
(UNAUDITED)
$ in millions

		Three Months Ended												% Change From
		May 25,				Feb. 23,				May 26,				Feb. 23,				May 26,
		2007				2007				2006				2007				2006
Non-compensation expenses of consolidated investments (4)		$	101			$	87			$	119				16	%			(15)	%
Non-compensation expenses excluding consolidated investments
Brokerage, clearing, exchange and distribution fees			638				551				473				16				35
Market development			142				130				113				9				26
Communications and technology			161				150				129				7				25
Depreciation and amortization			121				118				110				3				10
Amortization of identifiable intangible assets			48				50				44				(4	)			9
Occupancy			192				189				171				2				12
Professional fees			160				160				121				—				32
Cost of power generation			81				84				122				(4	)			(34	)
Other expenses			220				241				207				(9	)			6
Subtotal			1,763				1,673				1,490				5				18
Total non-compensation expenses, as reported		$	1,864			$	1,760			$	1,609				6				16
		Six Months Ended								% Change From
		May 25,				May 26,				May 26,
		2007				2006				2006
Non-compensation expenses of consolidated investments (4)		$	188			$	218				(14	)%
Non-compensation expenses excluding consolidated investments
Brokerage, clearing, exchange and distribution fees			1,189				891				33
Market development			272				205				33
Communications and technology			311				252				23
Depreciation and amortization			239				222				8
Amortization of identifiable intangible assets			98				78				26
Occupancy			381				340				12
Professional fees			320				226				42
Cost of power generation			165				207				(20	)
Other expenses			461				400				15
Subtotal			3,436				2,821				22
Total non-compensation expenses, as reported		$	3,624			$	3,039				19

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

Average Daily VaR ⁽⁵⁾
$ in millions

		Three Months Ended
		May 25,				Feb. 23,				May 26,
		2007				2007				2006
Risk Categories
Interest rates		$	81			$	57			$	49
Equity prices			101				96				83
Currency rates			20				18				29
Commodity prices			24				30				31
Diversification effect (6)			(93	)			(74	)			(80	)
Total		$	133			$	127			$	112

Assets Under Management ⁽⁷⁾
$ in billions

		As of												% Change From
		May 31,				Feb. 28,				May 31,				Feb. 28,				May 31,
		2007				2007				2006				2007				2006
Asset Class
Alternative investments		$	151			$	147			$	128				3	%			18	%
Equity			253				230				185				10				37
Fixed income			221				213				172				4				28
Total non-money market assets			625				590				485				6				29
Money markets			133				129				108				3				23
Total assets under management		$	758			$	719			$	593				5				28

		Three Months Ended
		May 31,				Feb. 28,				May 31,
		2007				2007				2006
Balance, beginning of period		$	719			$	676			$	571
Net asset inflows / (outflows)
Alternative investments			—				2				6
Equity			7				11				3
Fixed income			7				11				4
Total non-money market net asset inflows / (outflows)			14				24				13
Money markets			4				11				2
Total net asset inflows / (outflows)			18				35				15
Net market appreciation / (depreciation)			21				8				7
Balance, end of period		$	758			$	719			$	593

Principal Investments ⁽⁸⁾
$ in millions

		As of May 25, 2007
		Corporate				Real Estate				Total
Private		$	4,172			$	1,248			$	5,420
Public			1,687				41				1,728
Subtotal			5,859				1,289				7,148
SMFG convertible preferred stock (9)			4,528				—				4,528
ICBC ordinary shares (10)			5,643				—				5,643
Total		$	16,030			$	1,289			$	17,319

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				Six Months Ended
		May 25, 2007				May 25, 2007				May 25, 2007
		(unaudited, $ in millions)
Total shareholders’ equity		$	37,374			$	36,804			$	38,459
Preferred stock			(3,100	)			(3,100	)			(3,100	)
Common shareholders’ equity			34,274				33,704				35,359
Goodwill and identifiable intangible assets, excluding power contracts			(4,938	)			(4,967	)			(4,919	)
Tangible common shareholders’ equity		$	29,336			$	28,737			$	30,440

(2)		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.
(3)		Excludes 4,841, 4,994 and 9,369 employees as of May 2007, February 2007 and May 2006, respectively, of consolidated entities held for investment purposes. Compensation and benefits includes $50 million, $35 million and $61 million for the three months ended May 25, 2007, February 23, 2007 and May 26, 2006, respectively, attributable to these consolidated entities.
(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)		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)		Represents investments included within the Principal Investments component of our Trading and Principal Investments segment. Excludes assets related to consolidated investment funds of $15.56 billion as of May 2007, for which Goldman Sachs is not at risk.
(9)		Excludes an economic hedge on the shares of common stock underlying the investment. As of May 2007, the fair value of this hedge was $3.17 billion. Includes the effect of foreign exchange revaluation on the investment, for which the firm also maintains an economic hedge.
(10)		Includes interests of $3.57 billion as of May 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.

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.