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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-75321
Prospectus Supplement C
to
Prospectus Dated May 18, 1999
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$15,000,000,000
THE GOLDMAN SACHS GROUP, INC.
Medium-Term Notes, Series B
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You should read this prospectus supplement, which describes the third
quarter earnings reported by Goldman Sachs, in conjunction with the prospectus
dated May 18, 1999 and Prospectus Supplement B dated July 9, 1999.
See "Risk Factors" beginning on page 11 of the prospectus dated May 18,
1999 to read about factors you should consider before investing in any notes.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY
OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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Goldman Sachs may sell the notes directly or through one or more agents or
dealers, including the agent listed below. The agents are not required to sell
any particular amount of the notes.
Goldman Sachs may use this prospectus supplement in the initial sale of any
note. In addition, Goldman, Sachs & Co. or any other affiliate of Goldman Sachs
may use this prospectus supplement in a market-making transaction in any note
after its initial sale. UNLESS GOLDMAN SACHS OR ITS AGENT INFORMS THE PURCHASER
OTHERWISE IN THE CONFIRMATION OF SALE, THIS PROSPECTUS SUPPLEMENT IS BEING USED
IN A MARKET-MAKING TRANSACTION.
GOLDMAN, SACHS & CO.
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Prospectus Supplement dated September 21, 1999.
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<PAGE> 2
RECENT DEVELOPMENTS
On September 21, 1999, The Goldman Sachs Group, Inc. reported net earnings
of $638 million for its fiscal third quarter ended August 27, 1999.
BUSINESS LINE REVIEW
Investment Banking
Investment Banking generated net revenues of $1.2 billion in the third
quarter, a 15% increase over the prior quarter and 20% above the same 1998
period. Goldman Sachs' worldwide advisory and financing businesses continued to
perform strongly as global corporate consolidation fueled healthy deal flow in
financial advisory, and new issue activity remained robust. Net revenue growth
was particularly strong in the technology, energy and power, and retail sectors.
Investment Banking also benefited from active markets in both Europe and Asia.
Trading and Principal Investments
Net revenues in Trading and Principal Investments were $1.4 billion, 16%
lower than an outstanding second quarter of 1999 but substantially above last
year's depressed third quarter. FICC net revenues increased 52% over the same
period in 1998 primarily due to improved performance in Goldman Sachs' trading
and credit-sensitive businesses, which were negatively affected by a dramatic
widening of credit spreads in 1998. Strong results in commodities, which
benefited from increased customer activity, also contributed to the growth in
FICC. Net revenues in Equities increased substantially over the prior year
period primarily due to strength in equity arbitrage, higher transaction volumes
in the global shares businesses and strong customer flow in equity derivatives.
Net revenues in principal investments increased significantly over the prior
year due to mark-to-market gains on certain of Goldman Sachs' merchant banking
investments.
Asset Management and Securities Services
Net revenues in Asset Management and Securities Services were $811 million
for the third quarter, an increase of 8% over the second quarter and 13% above
the third quarter of 1998. Asset management revenues increased 11% over the
prior year period, reflecting growth in assets under management. Securities
services net revenues were up 6% compared to the same 1998 period, primarily due
to increased customer balances in Goldman Sachs' securities lending and margin
lending businesses. Commissions rose by 17% compared to the prior year period,
benefiting from higher transaction volumes worldwide in listed equity
securities.
EXPENSE REVIEW
Operating expenses were $2.3 billion in the third quarter. The ratio of
compensation and benefits to net revenues was 50% for both the quarter and
year-to-date periods. Non-compensation-related expenses rose 23% compared to the
same period in 1998 due to higher employment levels and growth in business
activity. Goldman Sachs' effective tax rate was 41%.
CAPITAL
As of August 27, 1999, total capital was $28.9 billion, consisting of $8.6
billion in stockholders' equity and $20.3 billion in long-term debt. Book value
per share was $18.11, based on common shares outstanding, including the
formula-based restricted stock units, of 474,598,485 at period end.
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<PAGE> 3
DIVIDEND
On September 20, 1999, the Board of Directors of The Goldman Sachs Group,
Inc. declared a dividend of $0.12 per share to be paid on November 22, 1999 to
voting and nonvoting common stockholders of record on October 25, 1999.
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<PAGE> 4
THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
BUSINESS LINE NET REVENUES
(unaudited)
($ in millions)
<TABLE>
<CAPTION>
CHANGE
THREE MONTHS ENDED CHANGE FROM NINE MONTHS ENDED FROM
--------------------------------- -------------------- ----------------------- ----------
AUGUST 27, MAY 28, AUGUST 28, MAY 28, AUGUST 28, AUGUST 27, AUGUST 28, AUGUST 28,
1999 1999 1998 1999 1998 1999 1998 1998
---------- ------- ---------- ------- ---------- ---------- ---------- ----------
(in millions, except share and per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Banking
Financial advisory...... $ 616 $ 510 $ 561 21% 10% $1,648 $1,360 21%
Underwriting............ 534 492 399 9 34 1,406 1,187 18
------ ------ ------ ------ ------
Total Investment
Banking............... $1,150 $1,002 $ 960 15 20 $3,054 $2,547 20
------ ------ ------ ------ ------
Trading and Principal
Investments
FICC.................... $ 661 $ 911 $ 434 (27)% 52% $2,448 $2,109 16%
Equities................ 458 618 0 (26) N.M. 1,531 659 132
Principal investments... 328 189 30 74 N.M. 543 274 98
------ ------ ------ ------ ------
Total Trading and
Principal
Investments........... $1,447 $1,718 $ 464 (16) 212 $4,522 $3,042 49
------ ------ ------ ------ ------
Asset Management and
Securities Services
Asset management........ $ 221 $ 214 $ 199 3% 11% $ 637 $ 483 32%
Securities services..... 195 174 184 12 6 576 528 9
Commissions............. 395 361 337 9 17 1,083 1,005 8
------ ------ ------ ------ ------
Total Asset Management
and Securities
Services.............. $ 811 $ 749 $ 720 8 13 $2,296 $2,016 14
------ ------ ------ ------ ------
Total net revenues...... $3,408 $3,469 $2,144 (2) 59 $9,872 $7,605 30
====== ====== ====== ====== ======
</TABLE>
* * *
ASSETS UNDER SUPERVISION
(unaudited)
($ in millions)
<TABLE>
<CAPTION>
AS OF CHANGE FROM AS OF
---------------------------------- -------------------- -------------------
AUGUST 27, MAY 28, AUGUST 28, MAY 28, AUGUST 28, NOV. 27, NOV. 28,
1999 1999 1998 1999 1998 1998 1997
---------- ------- ---------- ------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets under management........ $220,522 $206,553 $173,991 7% 27% $194,821 $135,929
Other client assets............ 192,034 176,369 119,005 9 61 142,018 102,033
-------- -------- -------- -------- --------
Total assets under
supervision.................. $412,556 $382,922 $292,996 8 41 $336,839 $237,962
======== ======== ======== ======== ========
</TABLE>
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<PAGE> 5
THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------------ -----------------------
AUGUST 27, MAY 28, AUGUST 28, AUGUST 27, AUGUST 28,
1999 1999(1) 1998 1999 1998
---------- ------- ---------- ---------- ----------
(in millions, except share and per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues:
Investment banking.................. $1,150 $ 1,002 $ 960 $ 3,054 $ 2,547
Trading and principal investments... 1,423 1,719 293 4,540 2,719
Asset management and securities
services.......................... 629 616 550 1,788 1,531
Interest income..................... 3,238 3,018 3,932 9,269 11,404
------ ------- ------ ------- -------
Total revenues............ 6,440 6,355 5,735 18,651 18,201
Interest expense, principally on
short-term funding................ 3,032 2,886 3,591 8,779 10,596
------ ------- ------ ------- -------
Revenues, net of interest
expense........................ 3,408 3,469 2,144 9,872 7,605
Operating expenses:
Compensation and benefits, excluding
employee initial public offering
awards............................ 1,704 1,953 977 4,932 3,566
Non-recurring employee initial
public offering awards............ -- 2,257 -- 2,257 --
Amortization of employee initial
public offering awards............ 115 39 -- 154 --
Brokerage, clearing and exchange
fees.............................. 108 109 107 328 301
Market development.................. 92 78 67 247 201
Communications and technology....... 75 71 68 224 189
Depreciation and amortization....... 71 61 54 229 158
Occupancy........................... 76 67 54 221 147
Professional services and other..... 85 121 62 297 229
Charitable contribution............. -- 200 -- 200 --
------ ------- ------ ------- -------
Total operating
expenses................ 2,326 4,956 1,389 9,089 4,791
Pre-tax earnings/(loss)............. 1,082 (1,487) 755 783 2,814
Provision/(benefit) for taxes....... 444 (1,827) 102 (1,202) 430
====== ======= ====== ======= =======
Net earnings........................ $ 638 $ 340 $ 653 $ 1,985 $ 2,384
====== ======= ====== ======= =======
</TABLE>
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(1)Includes approximately ten weeks as a partnership and three weeks as a
corporation.
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