The Goldman Sachs Group, Inc. (GS) 8-K Results of Operations and Financial Condition

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):
September 16, 2008

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:

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

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

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

[  ] 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

Item 2.02 Results of Operations and Financial Condition.

On September 16, 2008, The Goldman Sachs Group, Inc. (“Group Inc.” and, together with its consolidated subsidiaries, the “firm”) reported its earnings for its fiscal third quarter ended August 29, 2008. A copy of Group Inc.’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 Group Inc. under the Securities Act of 1933 or the Exchange Act.

Item 8.01 Other Events.

On September 16, 2008, Group Inc. reported net revenues of $6.04 billion and net earnings of $845 million for its third quarter ended August 29, 2008. Diluted earnings per common share were $1.81 compared with $6.13 for the third quarter of 2007 and $4.58 for the second quarter of 2008. Annualized return on average tangible common shareholders’ equity⁽¹⁾ was 8.8% for the third quarter of 2008 and 16.3% for the first nine months of 2008. Annualized return on average common shareholders’ equity was 7.7% for the third quarter of 2008 and 14.2% for the first nine months of 2008.

Net Revenues

Investment Banking

Net revenues in Investment Banking were $1.29 billion, 40% lower than the third quarter of 2007 and 23% lower than the second quarter of 2008.

Net revenues in Financial Advisory were $619 million, 56% lower than a particularly strong third quarter of 2007, primarily reflecting a decrease in industry-wide completed mergers and acquisitions. Net revenues in the firm’s Underwriting business were $675 million, 8% lower than the third quarter of 2007, due to lower net revenues in equity underwriting, primarily reflecting a decrease in industry-wide initial public offerings. Net revenues in debt underwriting were essentially unchanged from the third quarter of 2007. The firm’s investment banking transaction backlog increased during the quarter.⁽²⁾

Trading and Principal Investments

Net revenues in Trading and Principal Investments were $2.70 billion, 67% lower than the third quarter of 2007 and 52% lower than the second quarter of 2008.

Net revenues in Fixed Income, Currency and Commodities (FICC) were $1.60 billion, 67% lower than a very strong third quarter of 2007, primarily reflecting particularly weak results in credit products and mortgages, which were adversely affected by broad-based declines in

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asset values. Credit products included very weak results from investments and a loss of approximately $275 million (including hedges) related to non-investment-grade credit origination activities. Mortgages included net losses of approximately $500 million on residential mortgage loans and securities and approximately $325 million on commercial mortgage loans and securities. Commodities produced strong results, which were higher compared with the third quarter of 2007. Net revenues in currencies and interest rate products were also strong, although essentially unchanged from the third quarter of 2007. During the quarter, FICC operated in an environment generally characterized by wider mortgage and corporate credit spreads, volatile markets and lower levels of client activity.

Net revenues in Equities were $1.56 billion, 50% lower than a particularly strong third quarter of 2007. During the quarter, Equities operated in a challenging environment characterized by a significant decline in global equity prices, deleveraging by clients and generally lower client activity levels towards the end of the quarter. The decline in net revenues reflected very weak results in principal strategies. In addition, net revenues in derivatives were significantly lower than a particularly strong third quarter of 2007. Commissions were strong, but lower, compared with the third quarter of 2007.

Principal Investments recorded a net loss of $453 million for the third quarter of 2008. These results included losses from corporate and real estate principal investments, partially offset by a $106 million gain related to the firm’s investment in the ordinary shares of Industrial and Commercial Bank of China Limited (ICBC).

Asset Management and Securities Services

Net revenues in Asset Management and Securities Services were $2.05 billion, 4% higher than the third quarter of 2007 and 5% lower than the second quarter of 2008.

Asset Management net revenues were $1.13 billion, 6% lower than the third quarter of 2007, reflecting lower management and other fees, as well as lower incentive fees. The decrease in management and other fees primarily reflected the impact of one fewer week in the firm’s fiscal third quarter of 2008 compared with the third quarter of 2007. During the quarter, assets under management decreased $32 billion to $863 billion, due to $25 billion of market depreciation, primarily in equity assets, and $7 billion of net outflows. Net outflows reflected outflows in equity and money market assets, partially offset by inflows in alternative investment and fixed income assets.

Securities Services net revenues were $916 million, 20% higher than the third quarter of 2007. The firm’s prime brokerage business continued to generate strong results and customer balances were higher compared with the third quarter of 2007.

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Expenses

Operating expenses were $5.08 billion, 37% lower than the third quarter of 2007 and 23% lower than the second quarter of 2008.

Compensation and Benefits

Compensation and benefits expenses were $2.90 billion, 51% lower than the third quarter of 2007, commensurate with lower net revenues. The ratio of compensation and benefits to net revenues was 48.0% for the first nine months of 2008, consistent with the first nine months of 2007. Employment levels increased 3% during the quarter, primarily reflecting the seasonal timing of school hires.

Non-Compensation Expenses

Non-compensation expenses were $2.18 billion, 1% higher than the third quarter of 2007 and 6% higher than the second quarter of 2008. Excluding consolidated entities held for investment purposes⁽³⁾, non-compensation expenses were 3% lower than the third quarter of 2007, primarily reflecting lower brokerage, clearing, exchange and distribution fees.

Provision for Taxes

The effective income tax rate for the first nine months of 2008 was 25.1%, down from 27.7% for the first half of 2008 and down from 34.1% for fiscal year 2007. The decreases in the effective income tax rate were primarily due to changes in geographic earnings mix and an increase in permanent benefits as a percentage of lower earnings.

Capital

As of August 29, 2008, total capital was $221.97 billion, consisting of $45.60 billion in total shareholders’ equity (common shareholders’ equity of $42.50 billion and preferred stock of $3.10 billion) and $176.37 billion in unsecured long-term borrowings. Book value per common share was $99.30 and tangible book value per common share⁽¹⁾ was $87.11, each increasing 2% during the quarter. 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 428.0 million at period end.

The firm repurchased 1.5 million shares of its common stock at an average cost per share of $180.07, for a total cost of $271 million during the quarter. The remaining share authorization under the firm’s existing share repurchase program is 60.9 million shares.

The firm’s Tier 1 Ratio⁽⁴⁾ was 11.6% as of August 29, 2008.

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Other Balance Sheet and Liquidity Metrics

• Total assets⁽⁵⁾ were $1.08 trillion as of August 29, 2008.

• Level 3 assets⁽⁶⁾, including those for which the firm bears no economic exposure, were approximately $68 billion as of August 29, 2008 and represented 6% of total assets. Level 3 assets excluding those for which the firm bears no economic exposure⁽⁶⁾were approximately $58 billion as of August 29, 2008 and represented 5% of total assets.

• Average global core excess⁽⁷⁾ liquidity was $102.33 billion for the quarter ended August 29, 2008.

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 November 24, 2008 to common shareholders of record on October 27, 2008. The Board also declared dividends of $236.98, $387.50, $252.78 and $252.78 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 onNovember 10, 2008 to preferred shareholders of record on October 26, 2008.

Cautionary Note Regarding Forward-Looking Statements

This Report on Form 8-K contains “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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 and financial condition, see “Risk Factors” in Part I, Item 1A of the firm’s Annual Report on Form 10-K for the fiscal year ended November 30, 2007 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 30, 2007.

Certain of the information regarding the firm’s capital ratio, 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 quarterly financial statements.

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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 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 fiscal year ended November 30, 2007 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 30, 2007.

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

	Three Months Ended								% Change From
	Aug. 29,			May 30,		Aug. 31,			May 30,			Aug. 31,
	2008			2008		2007			2008			2007
Investment Banking
Financial Advisory	$	619		$	800	$	1,412			(23	)%		(56	)%
Equity underwriting		292			616		355			(53	)		(18	)
Debt underwriting		383			269		378			42			1
Total Underwriting		675			885		733			(24	)		(8	)
Total Investment Banking		1,294			1,685		2,145			(23	)		(40	)
Trading and Principal Investments
FICC		1,595			2,379		4,889			(33	)		(67	)
Equities trading		354			1,253		1,799			(72	)		(80	)
Equities commissions		1,208			1,234		1,330			(2	)		(9	)
Total Equities		1,562			2,487		3,129			(37	)		(50	)
ICBC		106			214		230			(50	)		(54	)
Other corporate and real estate gains and losses		(581	)		476		(113	)		N.M.			N.M.
Overrides		22			35		94			(37	)		(77	)
Total Principal Investments		(453	)		725		211			N.M.			N.M.
Total Trading and Principal Investments		2,704			5,591		8,229			(52	)		(67	)
Asset Management and Securities Services
Management and other fees		1,115			1,153		1,152			(3	)		(3	)
Incentive fees		14			8		46			75			(70	)
Total Asset Management		1,129			1,161		1,198			(3	)		(6	)
Securities Services		916			985		762			(7	)		20
Total Asset Management and Securities Services		2,045			2,146		1,960			(5	)		4
Total net revenues	$	6,043		$	9,422	$	12,334			(36	)		(51	)
	Nine Months Ended					% Change From
	Aug. 29,			Aug. 31,		Aug. 31,
	2008			2007		2007
Investment Banking
Financial Advisory	$	2,082		$	2,982		(30	)%
Equity underwriting		1,080			979		10
Debt underwriting		989			1,621		(39	)
Total Underwriting		2,069			2,600		(20	)
Total Investment Banking		4,151			5,582		(26	)
Trading and Principal Investments
FICC		7,116			12,861		(45	)
Equities trading		2,883			5,377		(46	)
Equities commissions		3,680			3,336		10
Total Equities		6,563			8,713		(25	)
ICBC		185			332		(44	)
Other corporate and real estate gains and losses		(515	)		2,016		N.M.
Overrides		70			373		(81	)
Total Principal Investments		(260	)		2,721		N.M.
Total Trading and Principal Investments		13,419			24,295		(45	)
Asset Management and Securities Services
Management and other fees		3,391			3,169		7
Incentive fees		216			156		38
Total Asset Management		3,607			3,325		8
Securities Services		2,623			2,044		28
Total Asset Management and Securities Services		6,230			5,369		16
Total net revenues	$	23,800		$	35,246		(32	)

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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
	Aug. 29,			May 30,			Aug. 31,			May 30,			Aug. 31,
	2008			2008			2007			2008			2007
Revenues
Investment banking	$	1,294		$	1,685		$	2,145			(23	)%		(40	)%
Trading and principal investments		2,440			5,239			7,576			(53	)		(68	)
Asset management and securities services		1,174			1,221			1,272			(4	)		(8	)
Interest income		8,717			9,498			12,810			(8	)		(32	)
Total revenues		13,625			17,643			23,803			(23	)		(43	)
Interest expense		7,582			8,221			11,469			(8	)		(34	)
Revenues, net of interest expense		6,043			9,422			12,334			(36	)		(51	)
Operating expenses
Compensation and benefits		2,901			4,522			5,920			(36	)		(51	)
Brokerage, clearing, exchange and distribution fees		734			741			795			(1	)		(8	)
Market development		119			126			148			(6	)		(20	)
Communications and technology		192			192			169			—			14
Depreciation and amortization		251			183			145			37			73
Amortization of identifiable intangible assets		49			37			53			32			(8	)
Occupancy		237			234			218			1			9
Professional fees		168			185			188			(9	)		(11	)
Other expenses		432			370			439			17			(2	)
Total non-compensation expenses		2,182			2,068			2,155			6			1
Total operating expenses		5,083			6,590			8,075			(23	)		(37	)
Pre-tax earnings		960			2,832			4,259			(66	)		(77	)
Provision for taxes		115			745			1,405			(85	)		(92	)
Net earnings		845			2,087			2,854			(60	)		(70	)
Preferred stock dividends		35			36			48			(3	)		(27	)
Net earnings applicable to common shareholders	$	810		$	2,051		$	2,806			(61	)		(71	)
Earnings per common share
Basic	$	1.89		$	4.80		$	6.54			(61	)%		(71	)%
Diluted		1.81			4.58			6.13			(60	)		(70	)
Average common shares outstanding
Basic		427.6			427.5			429.0			—			—
Diluted		448.3			447.4			457.4			—			(2	)
Selected Data
Employees at period end (8)		32,569			31,495			29,905			3			9
Ratio of compensation and benefits to net revenues		48.0	%		48.0	%		48.0	%

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

	Nine Months Ended						% Change From
	Aug. 29,			Aug. 31,			Aug. 31,
	2008			2007			2007
Revenues
Investment banking	$	4,145		$	5,581			(26	)%
Trading and principal investments		12,556			22,891			(45	)
Asset management and securities services		3,736			3,512			6
Interest income		29,460			34,450			(14	)
Total revenues		49,897			66,434			(25	)
Interest expense		26,097			31,188			(16	)
Revenues, net of interest expense		23,800			35,246			(32	)
Operating expenses
Compensation and benefits		11,424			16,918			(32	)
Brokerage, clearing, exchange and distribution fees		2,265			1,984			14
Market development		389			424			(8	)
Communications and technology		571			481			19
Depreciation and amortization		604			417			45
Amortization of identifiable intangible assets		170			154			10
Occupancy		707			632			12
Professional fees		531			510			4
Other expenses		1,204			1,177			2
Total non-compensation expenses		6,441			5,779			11
Total operating expenses		17,865			22,697			(21	)
Pre-tax earnings		5,935			12,549			(53	)
Provision for taxes		1,492			4,165			(64	)
Net earnings		4,443			8,384			(47	)
Preferred stock dividends		115			143			(20	)
Net earnings applicable to common shareholders	$	4,328		$	8,241			(47	)
Earnings per common share
Basic	$	10.08		$	18.89			(47	)%
Diluted		9.62			17.75			(46	)
Average common shares outstanding
Basic		429.3			436.2			(2	)
Diluted		449.7			464.3			(3	)
Selected Data
Ratio of compensation and benefits to net revenues		48.0	%		48.0	%

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NON-COMPENSATION EXPENSES
(UNAUDITED)
$ in millions

	Three Months Ended							% Change From
	Aug. 29,		May 30,		Aug. 31,			May 30,			Aug. 31,
	2008		2008		2007			2008			2007
Non-compensation expenses of consolidated investments(3)	$	194	$	123	$	101			58	%		92	%
Non-compensation expenses excluding consolidated investments
Brokerage, clearing, exchange and distribution fees		734		741		795			(1	)		(8	)
Market development		117		124		146			(6	)		(20	)
Communications and technology		191		191		168			—			14
Depreciation and amortization		155		148		128			5			21
Amortization of identifiable intangible assets		47		36		52			31			(10	)
Occupancy		209		211		200			(1	)		5
Professional fees		167		181		188			(8	)		(11	)
Other expenses		368		313		377			18			(2	)
Subtotal		1,988		1,945		2,054			2			(3	)
Total non-compensation expenses, as reported	$	2,182	$	2,068	$	2,155			6			1
	Nine Months Ended				% Change From
	Aug. 29,		Aug. 31,		Aug. 31,
	2008		2007		2007
Non-compensation expenses of consolidated investments(3)	$	442	$	289		53	%
Non-compensation expenses excluding consolidated investments
Brokerage, clearing, exchange and distribution fees		2,265		1,984		14
Market development		382		418		(9	)
Communications and technology		568		479		19
Depreciation and amortization		449		367		22
Amortization of identifiable intangible assets		166		150		11
Occupancy		637		581		10
Professional fees		524		508		3
Other expenses		1,008		1,003		—
Subtotal		5,999		5,490		9
Total non-compensation expenses, as reported	$	6,441	$	5,779		11

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

Average Daily VaR⁽⁹⁾
$ in millions

	Three Months Ended
	Aug. 29,			May 30,			Aug. 31,
	2008			2008			2007
Risk Categories
Interest rates	$	141		$	144		$	96
Equity prices		67			79			97
Currency rates		25			32			23
Commodity prices		51			48			24
Diversification effect(10)		(103	)		(119	)		(101	)
Total	$	181		$	184		$	139

Assets Under Management⁽¹¹⁾

$ in billions

	As of						% Change From
	Aug. 31,		May 31,		Aug. 31,		May 31,			Aug. 31,
	2008		2008		2007		2008			2007
Asset Class
Alternative investments	$	154	$	146	$	151		5	%		2	%
Equity		179		211		251		(15	)		(29	)
Fixed income		268		269		230		—			17
Total non-money market assets		601		626		632		(4	)		(5	)
Money markets		262		269		164		(3	)		60
Total assets under management	$	863	$	895	$	796		(4	)		8

	Three Months Ended
	Aug. 31,			May 31,			Aug. 31,
	2008			2008			2007
Balance, beginning of period	$	895		$	873		$	758
Net inflows / (outflows)
Alternative investments		9			(3	)		7
Equity		(12	)		(18	)		7
Fixed income		3			10			5
Total non-money market net inflows / (outflows)		—		(11		)		19
Money markets		(7	)		17			31
Total net inflows / (outflows)		(7	)		6			50
Net market appreciation / (depreciation)		(25	)		16			(12	)
Balance, end of period	$	863		$	895		$	796

Principal Investments ⁽¹²⁾

$ in millions

	As of August 29, 2008
	Corporate			Real Estate		Total
Private	$	10,971		$	3,843	$	14,814
Public		2,249			49		2,298
Subtotal		13,220			3,892		17,112
ICBC ordinary shares (13)		7,137			—		7,137
Total	$	20,357	(14)	$	3,892	$	24,249

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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			Nine Months Ended
	August 29, 2008			August 29, 2008			August 29, 2008
	(unaudited, $ in millions)
Total shareholders’ equity	$	45,170		$	43,739		$	45,599
Preferred stock		(3,100	)		(3,100	)		(3,100	)
Common shareholders’ equity		42,070			40,639			42,499
Goodwill and identifiable intangible assets, excluding power contracts		(5,244	)		(5,219	)		(5,215	)
Tangible common shareholders’ equity	$	36,826		$	35,420		$	37,284

(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)	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)	The firm is regulated by the SEC as a Consolidated Supervised Entity and, as such, is subject to group-wide supervision and examination by the SEC and to minimum capital adequacy standards on a consolidated basis. The Tier 1 Ratio equals tier 1 capital divided by total risk-weighted assets. For a further discussion of the firm’s Tier 1 Ratio, see “Equity Capital” 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 fiscal period endedMay 30, 2008. This ratio represents a preliminary estimate as of the date of this Report on Form 8-K and may be revised in the firm’s Quarterly Report on Form 10-Q for the firm’s third fiscal quarter.
(5)	This amount represents a preliminary estimate as of the date of this Report on Form 8-K and may be revised in the firm’s Quarterly Report on Form 10-Q for the firm’s third fiscal quarter.
(6)	SFAS No. 157, “Fair Value Measurements,” establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). Level 3 assets reflect prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. Level 3 assets excluding those for which the firm bears no economic exposure excludes assets which are financed by nonrecourse debt, attributable to minority investors or attributable to employee interests in certain consolidated funds. For a further discussion of the firm’s level 3 assets, see “Critical Accounting Policies — Fair Value — Fair Value Hierarchy — Level 3 ” 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 fiscal period ended May 30, 2008. These amounts represent preliminary estimates as of the date of this Report on Form 8-K and may be revised in the firm’s Quarterly Report on Form 10-Q for the firm’s third fiscal quarter.
(7)	Global core excess represents a pool of excess liquidity consisting of unencumbered, highly liquid securities that may be sold or pledged to provide same-day liquidity, as well as overnight cash deposits. This liquidity is intended to allow the firm to meet immediate obligations without the need to sell other assets or depend on additional funding from credit-sensitive markets in a difficult funding environment. This amount represents the average loan value (the estimated amount of cash that would be advanced by counterparties against these securities), as well as overnight cash deposits in the global core excess. For a further discussion of the firm’s global core excess liquidity pool, please see “Liquidity and Funding Risk” 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 fiscal period ended May 30, 2008. This amount represents a preliminary estimate as of the date of this Report on Form 8-K and may be revised in the firm’s Quarterly Report on Form 10-Q for the firm’s third fiscal quarter.
(8)	Excludes 4,909, 4,948 and 4,904 employees as of August 29, 2008, May 30, 2008 and August 31, 2007, respectively, of consolidated entities held for investment purposes. Compensation and benefits includes $63 million, $66 million and $40 million for the three months ended August 29, 2008, May 30, 2008 and August 31, 2007, respectively, attributable to these consolidated entities.

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Footnotes (continued)

(9)	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 fiscal year ended November 30, 2007.
(10)	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.
(11)	Substantially all assets under management are valued as of calendar month end. Assets under management do not include the firm’s investments in funds that it manages.
(12)	Represents investments included within the Principal Investments component of the firm’s Trading and Principal Investments segment.
(13)	Includes interests of $4.51 billion as of August 29, 2008 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 for which Goldman Sachs maintains an economic currency hedge.
(14)	Excludes the firm’s investment in the convertible preferred stock of Sumitomo Mitsui Financial Group, Inc. The firm has hedged all of the common stock underlying the investment.

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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 Group Inc. dated September 16, 2008 containing financial information for its fiscal third quarter ended August 29, 2008.

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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: September 16, 2008	By:	/s/ David A. Viniar
		Name:	David A. Viniar
		Title:	Chief Financial Officer

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