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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-30288
THE INFORMATION IN THIS PRELIMINARY
PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
Subject to Completion. Dated April 20, 2000.
Prospectus Supplement No. to the Prospectus dated February 16, 2000
[Goldman Sachs Logo]
$
THE GOLDMAN SACHS GROUP, INC.
Medium-Term Notes, Series B
-------------------------
Index-Linked Notes due 2004
(Linked to the Nasdaq-100 Index(R))
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Each note being offered has the terms described beginning on page S-7
including the following:
SUMMARY OF TERMS
FACE AMOUNT: as specified in the note; $ in the aggregate for all the
offered notes
PRINCIPAL AMOUNT: on the stated maturity date Goldman Sachs will pay the Holder
of the note cash equal to 90% of the outstanding face amount of the note plus
the additional amount, if any. The additional amount will be payable only if
the final index level exceeds the reference index level and will be calculated
as follows:
equity participation factor
x
outstanding face amount
x
(final index level - reference index level)
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reference index level
The equity participation factor, which will be determined on the trade date, is
expected to be in the range of 61% to 63%.
INDEX: the Nasdaq-100 Index(R), as published by The Nasdaq Stock Market, Inc.
REFERENCE INDEX LEVEL:
FINAL INDEX LEVEL: the closing level of the index on the determination date,
subject to adjustment
STATED MATURITY DATE: , 2004 unless extended for up to six business
days
INTEREST RATE: 0%; the note will not bear interest prior to maturity
LISTING: the offered notes will be listed on the American Stock Exchange on or
after the original issue date
ORIGINAL ISSUE DATE: , 2000
ORIGINAL ISSUE PRICE: 100% of the face amount
NET PROCEEDS TO THE GOLDMAN SACHS GROUP, INC.: % of the face amount
CALCULATION AGENT: Goldman, Sachs & Co.
See "Additional Risk Factors Specific to Your Note" beginning on page S-2
to read about investment risks relating to the offered 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 ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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Goldman Sachs may use this prospectus supplement in the initial sale of the
offered notes. In addition, Goldman, Sachs & Co. or any other affiliate of
Goldman Sachs may use this prospectus supplement in a market-making transaction
in an offered 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.
The Nasdaq-100(R), Nasdaq-100 Index(R) and Nasdaq(R) are trade or service
marks of The Nasdaq Stock Market, Inc. and are licensed for use by The Goldman
Sachs Group, Inc. The offered notes are not issued, endorsed, sold, promoted or
passed on as to legality or suitability by the licensor or its affiliates.
GOLDMAN, SACHS & CO.
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Prospectus Supplement dated , 2000.
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ADDITIONAL RISK FACTORS SPECIFIC TO YOUR NOTE
An investment in your note is subject to risks described in the attached
prospectus under "Risk Factors", including those relating to indexed notes, and
to the risks described below. Your note is a riskier investment than ordinary
debt securities. Also, your note is not equivalent to investing directly in the
index stocks -- i.e., the stocks comprising the index to which your note is
linked. You should carefully consider whether the offered notes are suited to
your particular circumstances.
YOU MAY LOSE SOME OF YOUR PRINCIPAL
If the final index level does not exceed the reference index level by at
least 16.39% in the case of an equity participation factor of 61% or 15.87% in
the case of an equity participation factor of 63%, you will receive less than
the outstanding face amount of your note on the stated maturity date. This will
be the case even if the final index level exceeds the index level on the date of
this prospectus supplement or if the level of the index at any time -- no matter
how long -- during the life of the note exceeds the reference index level
specified on the front cover of this prospectus supplement. However, in all
cases, the payment on the stated maturity date will not be less than 90% of the
outstanding face amount of your note.
YOUR NOTE DOES NOT BEAR PERIODIC INTEREST
You will not receive any periodic interest payments on your note. Even if
the final index level exceeds the reference index level by at least 16.39% in
the case of an equity participation factor of 61% or 15.87% in the case of an
equity participation factor of 63%, the over-all return you earn on your note
may be less than you would have earned by investing in a debt security that
bears interest at a prevailing market rate. Moreover, under applicable United
States tax law as described further below, you will have to pay tax on deemed
interest amounts even though your note does not bear periodic interest.
THE MARKET VALUE OF YOUR NOTE MAY BE INFLUENCED BY MANY FACTORS THAT ARE
UNPREDICTABLE AND INTERRELATED IN COMPLEX WAYS
When we refer to the market value of your note, we mean the value that you
could receive for your note if you chose to sell it in the open market before
the stated maturity date. The market value of your note will be affected by many
factors that are beyond our control and are unpredictable. Moreover, these
factors interrelate in complex ways, and the effect of one factor on the market
value of your note may offset or enhance the effect of another factor. For
example, an increase in interest rates, which could have a negative effect on
the market value of your note, may offset any positive effect that an increase
in the index level attributable to favorable economic developments could have.
The following paragraphs describe the expected impact on the market value of
your note given a change in a specific factor, assuming all other conditions
remain constant.
THE INDEX LEVEL WILL AFFECT THE MARKET VALUE OF YOUR NOTE
We expect that the market value of your note at any particular time will
depend substantially on the amount, if any, by which the level of the index at
that time has risen above or has fallen below the reference index level. Even if
you sell your note at a time when the index level exceeds the reference index
level, you may receive substantially less than the amount that would be payable
on the stated maturity date based on a final index level equal to that current
level. If you sell your note at a time when the level of the index is below, or
not sufficiently above, the reference index level, you may receive less than the
face amount of your note. Fluctuating dividend rates may affect the level of the
index and, indirectly, the market value of your note. Political, economic and
other developments that affect the stocks underlying the index may also affect
the level
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of the index and, indirectly, the market value of your note.
As indicated under "The Index -- Historical Closing Levels of the Index",
the level of the index has been highly volatile at times in the past. It is
impossible to predict whether the index will rise or fall.
CHANGES IN INTEREST RATES ARE LIKELY TO AFFECT THE MARKET VALUE OF YOUR NOTE
Because we will pay, at a minimum, 90% of the outstanding face amount of
your note on the stated maturity date, we expect that the market value of your
note, like that of a traditional debt security, will be affected by changes in
interest rates, although these changes may affect your note and a traditional
debt security in different degrees. In general, if interest rates increase, we
expect that the market value of your note will decrease and, conversely, if
interest rates decrease, we expect that the market value of your note will
increase.
CHANGES IN THE VOLATILITY OF THE INDEX ARE LIKELY TO AFFECT THE MARKET VALUE OF
YOUR NOTE
The volatility of the index refers to the size and frequency of the
changes in the index level. In general, if the volatility of the index
increases, we expect that the market value of your note will increase and,
conversely, if the volatility of the index decreases, we expect that the market
value of your note will decrease.
THE TIME REMAINING TO MATURITY IS LIKELY TO AFFECT THE MARKET VALUE OF YOUR NOTE
Prior to the stated maturity date, the market value of your note may be
higher than one would expect if that value were based solely on the level of the
index and the level of interest rates. This difference would reflect a "time
premium" due to expectations concerning the level of the index and interest
rates during the time remaining to the stated maturity date. However, as the
time remaining to the stated maturity date decreases, we expect that this time
premium will decrease, lowering the market value of your note.
CHANGES IN OUR CREDIT RATINGS MAY AFFECT THE MARKET VALUE OF YOUR NOTE
Our credit ratings are an assessment of our ability to pay our
obligations, including those on the offered notes. Consequently, actual or
anticipated changes in our credit ratings may affect the market value of your
note. However, because your return on your note is dependent upon factors, such
as the level of the index and interest rates, in addition to our ability to pay
our obligation on your note, an improvement in our credit ratings will not
reduce the other investment risks related to your note.
YOUR RETURN ON YOUR NOTE WILL NOT REFLECT THE RETURN ON THE INDEX STOCKS
The index sponsor calculates the level of the index by reference to the
prices of the common stocks included in the index without taking account of the
value of dividends paid on those stocks. As a result, the return on your note
will not reflect the return you would realize if you actually owned the stocks
included in the index and received the dividends paid on those stocks.
Even if no dividends are paid on the stocks included in the index, the
return on your note may be less than the return you would realize if you
actually owned those stocks. This is because the final index level must exceed
the reference index level by more than 16.39% in the case of an equity
participation factor of 61% or 15.87% in the case of an equity participation
factor of 63% before you will receive the outstanding face amount of your note
on the stated maturity date. See "-- You May Lose Some of Your Principal" above.
IF THE LEVEL OF THE INDEX CHANGES, THE MARKET VALUE OF YOUR NOTE MAY NOT CHANGE
IN THE SAME MANNER
The market value of your note may not have a one-to-one relationship with
the level of the index. Changes in the level of the index may not result in a
comparable change in the market value of your note. We discuss some of the
reasons for this disparity under "-- The Market Value of Your Note May Be
Influenced by Many Factors That Are
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Unpredictable and Interrelated in Complex Ways" above.
YOUR NOTE MAY NOT HAVE AN
ACTIVE TRADING MARKET
Although your note will be listed on the American Stock Exchange on or
after the original issue date, there may be little or no secondary market for
your note. Even if a secondary market for your note develops, it may not provide
significant liquidity and we expect that transaction costs in any secondary
market would be high. As a result, the difference between bid and asked prices
for your note in any secondary market could be substantial.
YOU HAVE NO SHAREHOLDER RIGHTS
Investing in your note will not make you a holder of any of the index
stocks. Neither you nor any other holder or owner of your note will have any
voting rights, any right to receive dividends or other distributions or any
other rights with respect to the index stocks. On the stated maturity date, your
note will be paid in cash, and you will have no right to receive delivery of any
index stocks.
WE CAN POSTPONE THE STATED MATURITY DATE IF A MARKET DISRUPTION EVENT OCCURS
If the calculation agent determines that, on the determination date, a
market disruption event has occurred or is continuing, the determination date
will be postponed until the first business day on which no market disruption
event occurs or is continuing. See "Specific Terms of Your Note -- Stated
Maturity Date". As a result, the stated maturity date for your note will also be
postponed, although not by more than five business days. Thus, you may not
receive the payment that we are obligated to make on the stated maturity date
until after the originally scheduled due date.
THE POLICIES OF THE INDEX SPONSOR AND CHANGES THAT AFFECT THE INDEX OR THE INDEX
STOCKS COULD AFFECT THE AMOUNT PAYABLE ON YOUR NOTE AND ITS MARKET VALUE
The policies of the index sponsor concerning the calculation of the index
level, additions, deletions or substitutions of index stocks and the manner in
which changes affecting the index stocks or their issuers, such as stock
dividends, reorganizations or mergers, are reflected in the index level could
affect the index level and, therefore, the amount payable on your note on the
stated maturity date and the market value of your note prior to that date. The
amount payable on your note and its market value could also be affected if the
index sponsor changes these policies, for example by changing the manner in
which it calculates the index level, or if the index sponsor discontinues or
suspends calculation or publication of the index level, in which case it may
become difficult to determine the market value of your note. If events such as
these occur, or if the index level is not available on the determination date
because of a market disruption event or for any other reason, the calculation
agent -- which initially will be Goldman, Sachs & Co., our affiliate -- may
determine the final index level -- and thus the amount payable on the stated
maturity date -- in a manner it considers appropriate, in its sole discretion.
We describe the discretion that the calculation agent will have in determining
the final index level and the amount payable on your note more fully under
"Specific Terms of Your Note -- Discontinuance or Modification of the Index" and
"-- Role of Calculation Agent".
TRADING AND OTHER TRANSACTIONS BY GOLDMAN SACHS IN SECURITIES LINKED TO THE
INDEX STOCKS MAY IMPAIR THE MARKET VALUE OF YOUR NOTE
As we describe under "Use of Proceeds and Hedging" below, we, through
Goldman, Sachs & Co. or one or more of our other affiliates, will hedge our
obligations under the offered notes by purchasing some or all of the index
stocks, options or futures on the index or index stocks or other instruments
linked to the index or index stocks and may adjust the hedge by, among other
things, purchasing or selling any of the foregoing at any time and from time to
time. Any of these hedging activities may adversely affect the index
level -- directly or indirectly by affecting the price of the index
stocks -- and,
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therefore, the value of your note. It is possible that we, through our
affiliates, could receive substantial returns with respect to our hedging
activities while the value of your note may decline. See "Use of Proceeds and
Hedging" for a further discussion of securities transactions in which we or one
or more of our affiliates may engage.
Goldman, Sachs & Co. and our other affiliates may also engage in trading
in one or more of the index stocks or instruments linked to the index or index
stocks for their proprietary accounts, for other accounts under their management
or to facilitate transactions, including block transactions, on behalf of
customers. Any of these activities of Goldman, Sachs & Co. or our other
affiliates could adversely affect the index level -- directly or indirectly by
affecting the price of the index stocks -- and, therefore, the value of your
note. We may also issue, and Goldman, Sachs & Co. and our other affiliates may
also issue or underwrite, other securities or financial or derivative
instruments with returns linked to changes in the level of the index or one or
more of the index stocks. By introducing competing products into the marketplace
in this manner, we or our affiliates could adversely affect the value of your
note.
The indenture governing your note does not contain any restriction on our
ability or the ability of any of our affiliates to purchase or sell all or any
portion of the index stocks or instruments linked to those stocks.
OUR BUSINESS ACTIVITIES MAY CREATE CONFLICTS OF INTEREST BETWEEN YOU AND US
As we have noted above, Goldman, Sachs & Co. and our other affiliates
expect to engage in trading activities related to the index and the index stocks
that are not for your account or on your behalf. These trading activities may
present a conflict between your interest in the note and the interests Goldman,
Sachs & Co. and our other affiliates will have in their proprietary accounts, in
facilitating transactions, including block trades, for their customers and in
accounts under their management. These trading activities, if they influence the
price of the index stocks, could be adverse to your interests as a beneficial
owner of your note.
Goldman, Sachs & Co. and our other affiliates may, at present or in the
future, engage in business with the issuers of the index stocks, including
making loans to or equity investments in those companies or providing advisory
services to those companies. These services could include merger and acquisition
advisory services. These activities may present a conflict between the
obligations of Goldman, Sachs & Co. or another affiliate of Goldman Sachs and
your interests as a beneficial owner of a note. Moreover, one or more of our
affiliates have published and in the future expect to publish research reports
with respect to some or all of the issuers of the index stocks. Any of these
activities by any of our affiliates may affect the price of the index stocks
and, therefore, the value of your note.
AS CALCULATION AGENT, GOLDMAN, SACHS & CO. WILL HAVE THE AUTHORITY TO MAKE
DETERMINATIONS THAT COULD AFFECT THE MARKET VALUE OF YOUR NOTE, WHEN YOUR NOTE
MATURES AND THE AMOUNT YOU RECEIVE AT MATURITY
As calculation agent for your note, Goldman, Sachs & Co. will have
discretion in making various determinations that affect your note. As described
in "Specific Terms of Your Note -- Discontinuance or Modification of the Index",
these may include making adjustments to the index and determining the final
index level, which we will use to calculate the amount we must pay on the stated
maturity date. These may also include determining whether to postpone the stated
maturity date because of a market disruption event. The exercise of this
discretion by Goldman, Sachs & Co. could adversely affect the value of your note
and may present Goldman, Sachs & Co. with a conflict of interest of the kind
described above under "-- Our Business Activities May Create Conflicts of
Interest Between You and Us".
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THERE IS NO AFFILIATION BETWEEN THE INDEX STOCK ISSUERS AND US, AND WE ARE NOT
RESPONSIBLE FOR ANY DISCLOSURE BY THE INDEX STOCK ISSUERS
Goldman Sachs is not affiliated with the issuers of the index stocks or
the index sponsor. As we have told you above, however, we or our affiliates may
currently or from time to time in the future engage in business with the index
stock issuers. Nevertheless, neither we nor any of our affiliates assumes any
responsibility for the adequacy or accuracy of any publicly available
information about the index stock issuers.
Neither the index sponsor nor the index stock issuers are involved in this
offering of your note in any way and neither of them have any obligation of any
sort with respect to your note. Thus, neither the index sponsor nor the index
stock issuers have any obligation to take your interests into consideration for
any reason, including in taking any corporate actions that might affect the
value of your note.
YOU WILL HAVE TO PAY TAX ON DEEMED INTEREST AMOUNTS, EVEN THOUGH YOUR NOTE DOES
NOT BEAR PERIODIC INTEREST, AND ANY GAIN YOU RECOGNIZE WHEN YOU SELL YOUR NOTE
WILL BE TAXED AS ORDINARY INCOME
Because your note will be subject to special rules governing contingent
payment obligations for United States federal income tax purposes, if you are a
United States holder, you will be required to accrue interest on your note even
though your note does not bear periodic interest. We will calculate a comparable
yield and projected payment schedule, which you will be required to use in
determining the amount of interest to be included in income each year unless you
timely disclose and justify on your federal income tax return the use of a
different comparable yield and projected payment schedule. This comparable yield
and projected payment schedule will not be provided to you for any other purpose
than the determination of your interest accruals with respect to your note.
If the amount actually paid at maturity is less than the assumed amount
payable at maturity, you will have recognized taxable income in periods prior to
maturity that exceeds your economic income from holding the note during those
periods (with an offsetting ordinary loss when your note matures to the extent
of the interest previously accrued and capital loss for any loss thereafter).
Moreover, if you otherwise sell or dispose of your note prior to maturity, you
will be required to treat any gain recognized upon the disposition of your note
as ordinary income instead of capital gain. See "Supplemental Discussion of
Federal Income Tax Consequences" for a more detailed description of the United
States federal income tax consequences of purchasing, owning and disposing of
your note.
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SPECIFIC TERMS OF YOUR NOTE
Please note that in this section entitled "Specific Terms of Your Note",
references to "The Goldman Sachs Group, Inc.", "we", "our" and "us" mean only
The Goldman Sachs Group, Inc. and do not include its consolidated subsidiaries,
while references to "Goldman Sachs" mean The Goldman Sachs Group, Inc. together
with its consolidated subsidiaries. Also, references to "Holders" mean those who
own notes registered in their own names, on the books that we or the trustee
maintains for this purpose, and not indirect holders who own beneficial
interests in notes registered in street name or in notes issued in book-entry
form through The Depository Trust Company. Please review the special
considerations that apply to indirect holders in the attached prospectus, under
"Description of Notes We May Offer -- Legal Ownership of Notes".
We refer to the notes offered in this prospectus supplement, including
your note, as the offered notes. The offered notes are part of a series of debt
securities, entitled "Medium-Term Notes, Series B", that we may issue under the
indenture from time to time. This prospectus supplement summarizes specific
financial and other terms that apply to the offered notes, including your note;
terms that apply generally to all Series B medium-term notes are described in
"Description of Notes We May Offer" in the attached prospectus. The terms
described here supplement those described in the attached prospectus and, if the
terms described here are inconsistent with those described there, the terms
described here are controlling.
In addition to those described on the front cover page, the following
terms will apply to your note:
SPECIFIED CURRENCY: U.S. dollars
FORM OF NOTE:
- - global form only: yes, at DTC
- - non-global form available: no
DENOMINATIONS: any note registered in the name of a Holder must have a
face amount of $10,000 or a multiple of $1,000 in excess of $10,000
DEFEASANCE APPLIES AS FOLLOWS:
- - full defeasance: no
- - covenant defeasance: no
OTHER TERMS:
- - the default amount will be payable on any acceleration of the maturity of your
note as described below under "-- Special Calculation Provisions"
- - a business day for your note will not be the same as a business day for our
other Series B medium-term notes, as described below under "-- Special
Calculation Provisions"
Please note that the information about the original issue date, original
issue price and net proceeds to The Goldman Sachs Group, Inc. on the front cover
page relates only to the initial sale of the notes. If you have purchased your
note in a market-making transaction after the initial sale, information about
the price and date of sale to you will be provided in a separate confirmation of
sale.
We describe the terms of your note in more detail below.
INDEX, INDEX SPONSOR AND INDEX STOCKS
In this prospectus supplement, when we refer to the index, we mean the
index specified on the front cover, or any successor index, as it may be
modified, replaced or adjusted from time to time as described below under
"-- Discontinuance or Modification of the Index". When we refer to the index
sponsor as of any time, we mean the entity, including any successor sponsor,
that determines and publishes the index as then in effect. When we refer to the
index stocks as of any time, we mean the stocks that comprise the index as then
in effect, after giving effect to any additions, deletions or substitutions.
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PAYMENT OF PRINCIPAL ON STATED MATURITY DATE
On the stated maturity date, we will pay as principal, to the Holder of
your note, cash in an amount equal to:
- - 90% of the outstanding face amount of the note on the stated maturity date
plus the additional amount, if any, described below.
- - The additional amount, which will be payable only if the final index level
exceeds the reference index level, will be an amount equal to the equity
participation factor multiplied by the outstanding face amount of the note on
the stated maturity date multiplied by a fraction, the numerator of which is
the final index level minus the reference index level and the denominator of
which is the reference index level.
- - The equity participation factor, which will be determined on the trade date,
is expected to be in the range of 61% to 63%.
Thus, on the stated maturity date, we will not pay more than 90% of the
outstanding face amount of your note unless the final index level exceeds the
reference index level.
The calculation agent will determine the final index level, which will be
the closing level of the index on the determination date described below as
calculated and published by the index sponsor. However, the calculation agent
will have discretion to adjust the final index level or to determine it in a
different manner as described below under "-- Discontinuance or Modification of
the Index".
STATED MATURITY DATE
The stated maturity date will be , 2004 unless that day is not a
business day, in which case the stated maturity date will be the next following
business day. If the fifth business day before this applicable day is not the
determination date described below, however, then the stated maturity date will
be the fifth business day following the determination date, provided that the
stated maturity date will never be later than the fifth business day after
, 2004 or, if , 2004 is not a business day, later than the sixth
business day after , 2004. The calculation agent may postpone the
determination date -- and therefore the stated maturity date -- if a market
disruption event occurs or is continuing on a day that would otherwise be the
determination date. We describe market disruption events below under "-- Special
Calculation Provisions".
DETERMINATION DATE
The determination date will be the fifth business day prior to ,
2004 unless the calculation agent determines that a market disruption event
occurs or is continuing on that fifth prior business day. In that event, the
determination date will be the first following business day on which the
calculation agent determines that a market disruption event does not occur and
is not continuing. In no event, however, will the determination date be later
than , 2004 or, if , 2004 is not a business day, later than the
first business day after , 2004.
DISCONTINUANCE OR MODIFICATION OF THE INDEX
If the index sponsor discontinues publication of the index and the index
sponsor or anyone else publishes a substitute index that the calculation agent
determines is comparable to the index, then the calculation agent will determine
the amount payable on the stated maturity date by reference to the substitute
index. We refer to any substitute index approved by the calculation agent as a
successor index.
If the calculation agent determines that the publication of the index is
discontinued and there is no successor index, or that the level of the index is
not available on the determination date because of a market disruption event or
for any other reason, the calculation agent will determine the amount payable on
the stated maturity date by reference to a group of stocks and a computation
methodology that the calculation agent determines will as closely as reasonably
possible replicate the index.
If the calculation agent determines that the index, the stocks comprising
the index or the method of calculating the index is changed at any time in any
respect -- including any addition, deletion or substitution
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and any reweighting or rebalancing of index stocks and whether the change is
made by the index sponsor under its existing policies or following a
modification of those policies, is due to the publication of a successor index,
is due to events affecting one or more of the index stocks or their issuers or
is due to any other reason -- then the calculation agent will be permitted (but
not required) to make such adjustments in the index or the method of its
calculation as it believes are appropriate to ensure that the final index level
used to determine the amount payable on the stated maturity date is equitable.
All determinations and adjustments to be made by the calculation agent
with respect to the index may be made by the calculation agent in its sole
discretion.
DEFAULT AMOUNT ON ACCELERATION
If an event of default occurs and the maturity of your note is
accelerated, we will pay the default amount in respect of the principal of your
note at the maturity. We describe the default amount below under "-- Special
Calculation Provisions".
For the purpose of determining whether the Holders of our Series B
medium-term notes, which include the offered notes, are entitled to take any
action under the indenture, we will treat the outstanding face amount of each
offered note as the outstanding principal amount of your note. Although the
terms of the offered notes differ from those of the other Series B medium-term
notes, Holders of specified percentages in principal amount of all Series B
medium-term notes, together in some cases with other series of our debt
securities, will be able to take action affecting all the Series B medium-term
notes, including the offered notes. This action may involve changing some of the
terms that apply to the Series B medium-term notes, accelerating the maturity of
the Series B medium-term notes after a default or waiving some of our
obligations under the indenture. We discuss these matters in the attached
prospectus under "Description of Notes We May Offer -- Default, Remedies and
Waiver of Default" and "-- Modification and Waiver of Covenants".
MANNER OF PAYMENT
Any payment on your note at maturity will be made to an account designated
by the Holder of your note and approved by us, or at the office of the trustee
in New York City, but only when the note is surrendered to the trustee at that
office. We also may make any payment in accordance with the applicable
procedures of the depositary.
MODIFIED BUSINESS DAY
As described in the attached prospectus, any payment on your note that
would otherwise be due on a day that is not a business day may instead be paid
on the next day that is a business day, with the same effect as if paid on the
original due date. For your note, however, the term business day has a different
meaning than it does for other Series B medium-term notes. We discuss this term
under "-- Special Calculation Provisions" below.
ROLE OF CALCULATION AGENT
The calculation agent in its sole discretion will make all determinations
regarding the index, market disruption events, business days, the final index
level, the default amount and the amount payable in respect of your note on the
stated maturity date. Absent manifest error, all determinations of the
calculation agent will be final and binding on you and us, without any liability
on the part of the calculation agent.
Please note that Goldman, Sachs & Co. is serving as the calculation agent
as of the original issue date of your note. We may change the calculation agent
after the original issue date without notice.
SPECIAL CALCULATION PROVISIONS
BUSINESS DAY
When we refer to a business day with respect to your note, we mean a day
that is a business day of the kind described in the attached prospectus but that
is not a day on which the Nasdaq National Market System is closed or on which
the index is not calculated and published by the index sponsor because the index
sponsor is not open for business.
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DEFAULT AMOUNT
The default amount for your note on any day will be an amount, in the
specified currency for the principal of your note, equal to the cost of having a
qualified financial institution, of the kind and selected as described below,
expressly assume all our payment and other obligations with respect to your note
as of that day and as if no default or acceleration had occurred, or to
undertake other obligations providing substantially equivalent economic value to
you with respect to your note. That cost will equal:
- - the lowest amount that a qualified financial institution would charge to
effect this assumption or undertaking, plus
- - the reasonable expenses, including reasonable attorneys' fees, incurred by the
Holder of your note in preparing any documentation necessary for this
assumption or undertaking.
During the default quotation period for your note, which we describe below, the
Holder and/or we may request a qualified financial institution to provide a
quotation of the amount it would charge to effect this assumption or
undertaking. If either party obtains a quotation, it must notify the other party
in writing of the quotation. The amount referred to in the first bullet point
above will equal the lowest -- or, if there is only one, the only -- quotation
obtained, and as to which notice is so given, during the default quotation
period. With respect to any quotation, however, the party not obtaining the
quotation may object, on reasonable and significant grounds, to the assumption
or undertaking by the qualified financial institution providing the quotation
and notify the other party in writing of those grounds within two business days
after the last day of the default quotation period, in which case that quotation
will be disregarded in determining the default amount.
DEFAULT QUOTATION PERIOD. The default quotation period is the period
beginning on the day the default amount first becomes due and ending on the
third business day after that day, unless:
- - no quotation of the kind referred to above is obtained or
- - every quotation of that kind obtained is objected to within five business days
after the due day as described above.
If either of these two events occurs, the default quotation period will continue
until the third business day after the first business day on which prompt notice
of a quotation is given as described above. If that quotation is objected to as
described above within five business days after that first business day,
however, the default quotation period will continue as described in the prior
sentence and this sentence.
In any event, if the default quotation period and the subsequent two
business day objection period have not ended before the determination date, then
the default amount will equal the principal amount of your note.
QUALIFIED FINANCIAL INSTITUTIONS. For the purpose of determining the
default amount at any time, a qualified financial institution must be a
financial institution organized under the laws of any jurisdiction in the United
States of America, Europe or Japan, which at that time has outstanding debt
obligations with a stated maturity of one year or less from the date of issue
and rated either:
- - A-1 or higher by Standard & Poor's Ratings Group or any successor, or any
other comparable rating then used by that rating agency, or
- - P-1 or higher by Moody's Investors Service, Inc. or any successor, or any
other comparable rating then used by that rating agency.
MARKET DISRUPTION EVENT
Any of the following will be a market disruption event:
- - a suspension, absence or material limitation of trading in index stocks
constituting 20% or more, by weight, of the index on their primary market, in
each case for more than two hours of trading or during the one-half
S-10
<PAGE> 11
hour before the close of trading in that market, as determined by the
calculation agent in its sole discretion, or
- - a suspension, absence or material limitation of trading in option or futures
contracts relating to the index or to index stocks constituting 20% or more,
by weight, of the index, if available, in the primary market for those
contracts, in each case for more than two hours of trading or during the
one-half hour before the close of trading in that market, as determined by the
calculation agent in its sole discretion, or
- - index stocks constituting 20% or more, by weight, of the index, or option or
futures contracts relating to the index or to index stocks constituting 20% or
more, by weight, of the index, if available, do not trade on what was the
primary market for those index stocks or contracts, as determined by the
calculation agent in its sole discretion,
and, in any of these events, the calculation agent determines in its sole
discretion that the event materially interferes with the ability of The Goldman
Sachs Group, Inc. or any of its affiliates to unwind all or a material portion
of a hedge with respect to the offered notes that we or our affiliates may
effect as described below under "Use of Proceeds and Hedging".
The following events will not be market disruption events:
- - a limitation on the hours or numbers of days of trading, but only if the
limitation results from an announced change in the regular business hours of
the relevant market, and
- - a decision to permanently discontinue trading in the option or futures
contracts relating to the index or to any index stock.
For this purpose, an "absence of trading" in the primary securities market
on which an index stock, or on which option or futures contracts relating to the
index or an index stock, are traded will not include any time when that market
is itself closed for trading under ordinary circumstances. In contrast, a
suspension or limitation of trading in an index stock or in option or futures
contracts relating to the index or an index stock, if available, in the primary
market for that stock or those contracts, by reason of:
- - a price change exceeding limits set by that market, or
- - an imbalance of orders relating to that stock or those contracts, or
- - a disparity in bid and ask quotes relating to that stock or those contracts,
will constitute a suspension or material limitation of trading in that stock or
those contracts in that primary market.
As is the case throughout this prospectus supplement, references to the
index in this description of market disruption events includes the index and any
successor index as it may be modified, replaced or adjusted from time to time.
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<PAGE> 12
HYPOTHETICAL RETURNS ON YOUR NOTE
In the table below, we provide a range of hypothetical final index levels
for the index. Based on these hypothetical final index levels, a four-year
maturity of the offered notes, the actual reference index level and the other
assumptions set forth in the box below, we illustrate a range of (i)
hypothetical amounts that will be payable on the stated maturity date per each
$1,000 of outstanding face amount of your note, (ii) hypothetical total rates of
return on your note to the stated maturity date and (iii) hypothetical pretax
annualized rates of return on your note. Based on the same hypothetical final
index levels, we also compare the hypothetical pretax annualized rates of return
on your note referred to above to hypothetical pretax annualized rates of return
on owning the index stocks (having the same relative weighting as they do in the
index) during the four-year period from the trade date to the stated maturity
date. In the paragraphs following the table, we explain how we have calculated
these amounts.
The information in the table reflects hypothetical rates of return on the
offered notes assuming that they are held to the stated maturity date. If you
sell your note prior to the stated maturity date, your return will depend upon
the market value of your note at the time of sale, which may be affected by a
number of factors that are not reflected in the table below. For a discussion of
some of these factors, see "Additional Risk Factors Specific to Your Note -- The
Market Value of Your Note May Be Influenced By Many Factors That Are
Unpredictable and Interrelated in Complex Ways".
ASSUMPTIONS
<TABLE>
<S> <C>
Face amount $1,000
Original issue price, expressed
as a percentage of the face
amount 100%
Reference index level 3,583
Annual index dividend amount $1.43
Equity participation factor 61%
No change in or affecting any of
the index stocks or the method
by which the index sponsor
calculates the index level
No change in the relative
weighting of any index stock
No market disruption event
occurs
</TABLE>
We have assumed that the reference index level will be the level shown in
the box above. However, the actual reference level will not be determined until
the trade date and is likely to differ from the assumed reference index level.
The actual reference index level also may differ from the closing level of the
index on the trade date.
We have assumed for the hypothetical returns in the table an equity
participation factor of 61%. The actual equity participation factor, which will
not be determined until the trade date, will be set in the range of 61% to 63%.
There can be no assurance, however, that the equity participation factor will be
higher than 61%.
The index level has been highly volatile in the past and cannot be
predicted for future periods. For information about the level of the index
during recent periods, see "The Index -- Historical Information" below.
In order to calculate the hypothetical returns on the index stocks shown
in the table below, we have assumed that the aggregate amount of dividends paid
on the index stocks, taken together after giving effect to their relative
weightings in the index, in each of the four years prior to the stated
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<PAGE> 13
maturity date will equal the annual index dividend amount shown in the box
above. We have assumed that the annual index dividend amount will not change
during the four-year period, regardless of any changes in the index. (Thus, when
expressed as a dividend yield based on the index level, the assumed annual
dividend amount would result in a declining dividend yield as the index level
rises and a rising dividend yield as the index level falls.) We do not know,
however, whether or to what extent the issuers of the index stocks will pay
dividends in the future. These are matters that will be determined by the
issuers of the index stocks and not by us. Consequently, the amount of dividends
actually paid on the index stocks by their issuers, and, therefore, the rate of
return on the index stocks, during the four-year period may differ substantially
from the information reflected in the table below.
As the following table indicates, the hypothetical rates of return shown
below do not take into account the effects of applicable taxes. Because of the
U.S. tax treatment applicable to your note, tax liabilities could negatively
affect the rate of return on your note to a comparatively greater extent than
the over-all rate of return on the index stocks.
The following table is provided for purposes of illustration only. It
should not be taken as an indication or prediction of future investment results
and is intended merely to illustrate the impact that various hypothetical final
index levels at the end of the indicated period could have on the rate of return
on your note and the over-all rates of return on the index stocks, assuming all
other variables remained constant.
<TABLE>
<CAPTION>
1 2 3 4 5 6
- ------------ ------------------ ----------------- -------------- -------------- ---------------
HYPOTHETICAL
AMOUNT PAYABLE ON HYPOTHETICAL HYPOTHETICAL
HYPOTHETICAL FINAL STATED MATURITY HYPOTHETICAL PRETAX PRETAX
HYPOTHETICAL INDEX LEVEL AS % DATE PER $1,000 PRETAX TOTAL ANNUALIZED ANNUALIZED RATE
FINAL INDEX OF REFERENCE OUTSTANDING FACE RATE OF RETURN RATE OF RETURN OF RETURN ON
LEVEL INDEX LEVEL AMOUNT OF NOTE ON NOTE ON NOTE INDEX STOCKS
- ------------ ------------------ ----------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
2,508.10 70% 900.00 -10% -2.62% -8.67%
2,866.40 80% 900.00 -10% -2.62% -5.45%
3,224.70 90% 900.00 -10% -2.62% -2.57%
3,403.85 95% 900.00 -10% -2.62% -1.24%
3,583.00 100% 900.00 -10% -2.62% 0.04%
3,941.30 110% 961.00 -4% -0.99% 2.43%
4,299.60 120% 1,022.00 2% 0.54% 4.64%
4,657.90 130% 1,083.00 8% 2.00% 6.70%
5,016.20 140% 1,144.00 14% 3.39% 8.62%
5,374.50 150% 1,205.00 21% 4.72% 10.43%
5,732.80 160% 1,266.00 27% 5.98% 12.13%
6,091.10 170% 1,327.00 33% 7.20% 13.74%
6,449.40 180% 1,388.00 39% 8.37% 15.27%
6,807.70 190% 1,449.00 45% 9.49% 16.73%
7,166.00 200% 1,510.00 51% 10.57% 18.12%
</TABLE>
The hypothetical pretax total rate of return on note to stated maturity
date (fourth column) represents (i) the hypothetical amount payable on stated
maturity date per $1,000 of outstanding face amount of note (third column) minus
(ii) $1,000, with the difference expressed as a percentage of $1,000.
The hypothetical pretax annualized rate of return on note (fifth column)
represents the hypothetical pretax total rate of return on
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<PAGE> 14
note (fourth column) expressed on an annualized basis for the period from the
trade date to the stated maturity date and is calculated on a semi-annual,
bond-equivalent basis.
The hypothetical pretax annualized rate of return on index stocks (sixth
column) represents the hypothetical pretax total rate of return on the index
stocks during the period from the trade date to the stated maturity date,
expressed on an annualized basis for this period and calculated on a
semi-annual, bond-equivalent basis. For this purpose, the hypothetical pretax
total rate of return on the index stocks is assumed to equal the sum of (i) the
difference between the hypothetical final index level and the reference index
level expressed as a percentage of the reference index level (i.e., the
percentage in column two minus 100%) plus (ii) 0.16% (the assumed annual index
dividend amount multiplied by four and expressed as a percentage of the
reference index level).
We cannot predict the actual final index level or the market value of your
note, nor can we predict the relationship between the index level and the
market value of your note at any time prior to the stated maturity date.
The actual amount that a holder of the offered notes will receive at
stated maturity and the total and pretax rates of return on the offered
notes will depend entirely on the reference index level and the actual
final index level determined by the calculation agent as described above.
In particular, the final index level could be lower or higher than the
levels reflected in the table. Moreover, the assumptions we have made in
connection with the illustration set forth above may not reflect actual
events. Consequently, the total return that an investor in the offered
notes would actually achieve, as well as how that return would compare to
the total return that an investor in the index stocks would actually
achieve, may be very different from the information reflected in the table
above.
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<PAGE> 15
THE INDEX
We have derived all information regarding the index contained in this
prospectus supplement, including its make-up, method of calculation and changes
in its components, from publicly available information. That information
reflects the policies of, and is subject to change by, The Nasdaq Stock Market,
Inc., which is the index sponsor and is commonly referred to as Nasdaq. Nasdaq
owns the copyright and all other rights to the index. Nasdaq has no obligation
to continue to publish, and may discontinue publication of, the index. The
consequences of Nasdaq discontinuing the index are described above in the
section entitled "Specific Terms of Your Note -- Discontinuance or Modification
of the Index".
The Nasdaq-100 Index(R) is a modified capitalization-weighted index of 100
of the largest and most actively traded stocks of non-financial companies listed
on the Nasdaq National Market tier of the National Market System. The index was
first published in January 1985 and includes companies across a variety of major
industry groups. As of March 31, 2000, the major industry groups covered in the
index (listed according to their respective capitalization in the index) were as
follows: computer and office equipment (39.86%), computer software/services
(26.17%), telecommunications (22.44%), biotechnology (4.93%), services (2.85%),
retail/wholesale trade (2.66%), manufacturing (0.52%), health care (0.50%) and
transportation (0.07%). Current information regarding the market value of the
index is available from Nasdaq and from numerous market information services.
The index is determined, comprised and calculated by Nasdaq without regard to
the offered notes.
The index share weights of the component securities, or underlying stocks,
of the index at any time are based upon the total shares outstanding in each of
the 100 securities in the index and are additionally subject, in certain cases,
to rebalancing to ensure that the relative weighting of the underlying stocks
continues to meet minimum pre-established requirements for a diversified
portfolio. Accordingly, each underlying stock's influence on the value of the
index is directly proportional to the value of its index share weight. At any
moment in time, the value of the index equals the aggregate value of the
then-current index share weights of each of the component 100 underlying stocks
multiplied by each such security's respective last sale price on the Nasdaq
National Market System, and divided by a scaling factor (the "divisor") which
becomes the basis for the reported index value. The divisor serves the purpose
of scaling such aggregate value (otherwise in the trillions) to a lower order of
magnitude, which is more desirable for index reporting purposes.
COMPUTATION OF THE INDEX
UNDERLYING STOCK ELIGIBILITY CRITERIA AND ANNUAL RANKING REVIEW
To be eligible for inclusion in the index, a security must be traded on
the Nasdaq National Market tier of the Nasdaq National Market System and meet
the following criteria:
(1) the security must be of a non-financial company;
(2) only one class of security per issuer is allowed;
(3) the security may not be issued by an issuer currently in
bankruptcy proceedings;
(4) the security must have an average daily trading volume of at
least 100,000 shares per day;
(5) the security must have "seasoned" on the Nasdaq National Market
System or another recognized market (generally, a company is considered to
be seasoned by Nasdaq if it has been listed on the market system for at
least two years; in the case of spin-offs, the operating history of the
spin-off will be considered);
(6) if a security would otherwise qualify to be in the top 25% of
the
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<PAGE> 16
issuers included in the index by market capitalization, then a one-year
"seasoning" criteria would apply;
(7) if the security is of a foreign issuer, the company must have a
worldwide market value of at least $10 billion, a U.S. market value of at
least $4 billion and average trading volume on the Nasdaq National Market
System of at least 200,000 shares per day; in addition, foreign securities
must be eligible for listed options trading; and
(8) the issuer of the security may not have entered into a
definitive agreement or other arrangement which would result in the
security no longer being listed on the Nasdaq National Market System
within the next six months.
These index eligibility criteria may be revised from time to time by the
National Association of Security Dealers, Inc., the corporate parent of Nasdaq,
without regard to the offered notes.
The underlying stocks are evaluated annually as follows, except under
extraordinary circumstances that may result in an interim evaluation (the
"Ranking Review"). Securities listed on the Nasdaq National Market System which
meet the above eligibility criteria are ranked by market value. Index-eligible
securities which are already in the index and which are in the top 150 eligible
securities (based on market value) are retained in the index provided that such
security was ranked in the top 100 eligible securities as of the previous
Ranking Review. Securities not meeting such criteria are replaced. The
replacement securities chosen are those index-eligible securities not currently
in the index which have the largest market capitalization. Generally, the list
of annual additions and deletions is publicly announced via a press release in
the early part of December. Replacements are made effective after the close of
trading on the third Friday in December. Moreover, if at any time during the
year an underlying stock is no longer traded on the Nasdaq National Market
System, or is otherwise determined by Nasdaq to become ineligible for continued
inclusion in the index, the security will be replaced with the largest market
capitalization security not currently in the index and meeting the index
eligibility criteria listed above.
In addition to the Ranking Review, the securities in the index are
monitored every day by Nasdaq with respect to changes in total shares
outstanding arising from secondary offerings, stock repurchases, conversions or
other corporate actions. Nasdaq has adopted the following quarterly scheduled
weight adjustment procedures with respect to such changes. If the change in
total shares outstanding arising from such corporate action is greater than or
equal to 5.0%, such change is ordinarily made to the index on the evening prior
to the effective date of such corporate action or as soon as practical
thereafter. Otherwise, if the change in total shares outstanding is less than
5%, then all such changes are accumulated and made effective at one time on a
quarterly basis after the close of trading on the third Friday in each of March,
June, September and December. In either case, the index share weights for such
underlying stocks are adjusted by the same percentage amount by which the total
shares outstanding have changed in such underlying stocks. Ordinarily, whenever
there is a change in index share weights or a change in a component security
included in the index, Nasdaq adjusts the divisor to assure that there is no
discontinuity in the value of the index that might otherwise be caused by any
such change.
CALCULATION OF THE INDEX
The index is calculated under a "modified capitalization-weighted"
methodology, which is a hybrid between equal weighting and conventional
capitalization weighting. This methodology is expected to: (1) retain in general
the economic attributes of capitalization weighting; (2) promote portfolio
weight diversification (thereby limiting domination of the index by a few large
stocks); (3) reduce index performance distortion by preserving the
capitalization ranking of companies; and (4) reduce market impact on the
smallest underlying stocks from necessary weight rebalancings.
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<PAGE> 17
Under the methodology employed, on a quarterly basis coinciding with
Nasdaq's quarterly scheduled weight adjustment procedures, the underlying stocks
are categorized as either "large stocks" or "small stocks" depending on whether
their current percentage weights (after taking into account such scheduled
weight adjustments due to stock repurchases, secondary offerings or other
corporate actions) are greater than, or less than or equal to, the average
percentage weight in the index (i.e., as a 100-stock index, the average
percentage weight in the index is 1.0%).
Such quarterly examination will result in an index rebalancing if either
one or both of the following two weight distribution requirements are not met:
(1) the current weight of the single largest market capitalization underlying
stock must be less than or equal to 24.0% and (2) the "collective weight" of
those underlying stocks whose individual current weights are in excess of 4.5%,
when added together, must be less than or equal to 48.0%. In addition, Nasdaq
may conduct a special rebalancing if it is determined necessary to maintain the
integrity of the index.
If either one or both of these weight distribution requirements are not
met upon quarterly review or Nasdaq determines that a special rebalancing is
required, a weight rebalancing will be performed. First, relating to weight
distribution requirement (1) above, if the current weight of the single largest
underlying stock exceeds 24.0%, then the weights of all large stocks will be
scaled down proportionately towards 1.0% by enough for the adjusted weight of
the single largest underlying stock to be set to 20.0%. Second, relating to
weight distribution requirement (2) above, for those underlying stocks whose
individual current weights or adjusted weights in accordance with the preceding
step are in excess of 4.5%, if their "collective weight" exceeds 48.0%, then the
weights of all large stocks will be scaled down proportionately towards 1.0% by
just enough for the "collective weight", so adjusted, to be set to 40.0%.
The aggregate weight reduction among the large stocks resulting from
either or both of the above rescalings will then be redistributed to the small
stocks in the following iterative manner. In the first iteration, the weight of
the largest small stock will be scaled upwards by a factor which sets it equal
to the average index weight of 1.0%. The weights of each of the smaller
remaining small stocks will be scaled up by the same factor reduced in relation
to each stock's relative ranking among the small stocks such that the smaller
the underlying stock in the ranking, the less the scale-up of its weight. This
is intended to reduce the market impact of the weight rebalancing on the smaller
component securities in the index.
In the second iteration, the weight of the second largest small stock,
already adjusted in the first iteration, will be scaled upwards by a factor
which sets it equal to the average index weight of 1.0%. The weights of each of
the smaller remaining small stocks will be scaled up by this same factor reduced
in relation to each stock's relative ranking among the small stocks such that,
once again, the smaller the stock in the ranking, the less the scale-up of its
weight.
Additional iterations will be performed until the accumulated increase in
weight among the small stocks exactly equals the aggregate weight reduction
among the large stocks from rebalancing in accordance with weight distribution
requirement (1) and/or weight distribution requirement (2).
Then, to complete the rebalancing procedure, once the final percentage
weights of each index security are set, the index share weights will be
determined again based upon the last sale prices and aggregate capitalization of
the index at the close of trading on the Thursday in the week immediately
preceding the week of the third Friday in March, June, September and December.
Changes to the index share weights will be made effective after the close of
trading on the third Friday in March, June, September and December and an
adjustment to the index divisor will be made to ensure continuity of the index.
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<PAGE> 18
Ordinarily, new rebalanced weights will be determined by applying the
above procedures to the current index share weights. However, Nasdaq may from
time to time determine rebalanced weights, if necessary, by instead applying the
above procedure to the actual current market capitalization of the index
components. In such instances, Nasdaq would announce the different basis for
rebalancing prior to its implementation.
HISTORICAL CLOSING LEVELS OF THE INDEX
The first table below sets forth the closing levels of the index on the
last business day of each year from 1989 through 1995. The second table below
sets forth the high, the low and the last closing levels of the index for each
of the four calendar quarters in 1996, 1997, 1998 and 1999, for the first
calendar quarter in 2000 and for the second calendar quarter in 2000, through
April 19, 2000, all as published by Nasdaq. We obtained the closing levels
listed in the two tables below from Bloomberg Financial Services, without
independent verification.
Since its inception, the level of the index has experienced significant
fluctuations. Any historical upward or downward trend in the closing level of
the index during any period shown below is not an indication that the index is
more or less likely to increase or decrease at any time during the term of your
note. You should not take the historical levels of the index as an indication of
future performance. We cannot give you any assurance that the future performance
of the index or the index stocks will result in you receiving an amount greater
than the outstanding face amount of your note on the stated maturity date;
indeed, you may receive an amount less than the outstanding face amount. See
"Additional Risk Factors Specific to Your Note -- You May Lose Some of Your
Principal" above.
YEAR-END CLOSING LEVELS OF THE INDEX
<TABLE>
<CAPTION>
YEAR CLOSING LEVEL
- ---- -------------
<S> <C>
1989......................................... 223.84
1990......................................... 200.53
1991......................................... 330.86
1992......................................... 360.19
1993......................................... 398.28
1994......................................... 404.27
1995......................................... 576.23
</TABLE>
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QUARTERLY HIGH, LOW AND CLOSING LEVELS OF THE INDEX
<TABLE>
<CAPTION>
HIGH LOW CLOSE
-------- -------- --------
<S> <C> <C> <C>
1996
Quarter ended March 31.................................. 643.41 534.42 609.69
Quarter ended June 30................................... 699.35 604.07 677.30
Quarter ended September 30.............................. 745.73 598.34 737.58
Quarter ended December 31............................... 856.64 731.21 821.36
1997
Quarter ended March 31.................................. 925.52 797.06 797.06
Quarter ended June 30................................... 989.37 783.92 957.30
Quarter ended September 30.............................. 1,145.07 953.44 1,097.17
Quarter ended December 31............................... 1,148.21 938.99 990.80
1998
Quarter ended March 31.................................. 1,220.66 956.19 1,220.66
Quarter ended June 30................................... 1,339.71 1,163.98 1,337.34
Quarter ended September 30.............................. 1,465.89 1,140.34 1,345.48
Quarter ended December 31............................... 1,836.01 1,128.88 1,836.01
1999
Quarter ended March 31.................................. 2,144.66 1,854.39 2,106.39
Quarter ended June 30................................... 2,296.77 1,967.84 2,296.77
Quarter ended September 30.............................. 2,545.41 2,163.77 2,407.90
Quarter ended December 31............................... 3,707.83 2,362.11 3,707.83
2000
Quarter ended March 31.................................. 4,704.73 3,340.81 4,397.84
Quarter ending June 30 (through April 19)............... 4,291.53 3,207.96 3,583.07
Closing level of the index on April 19.................. 3,583.07
</TABLE>
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<PAGE> 20
LICENSE AGREEMENT
Nasdaq and The Goldman Sachs Group, Inc. have entered into a non-exclusive
license agreement providing for the license to The Goldman Sachs Group, Inc., in
exchange for a fee, of the right to use the index in connection with the
issuance of certain securities, including the offered notes. Goldman, Sachs &
Co. is a sub-licensee to that license agreement.
The offered notes are not sponsored, endorsed, sold or promoted by Nasdaq
or its affiliates, referred to collectively as "Nasdaq". Nasdaq has not passed
on the legality or suitability of, or the accuracy or adequacy of descriptions
and disclosures relating to, the offered notes. Nasdaq makes no representation
or warranty, express or implied, to the owners of the offered notes or any
member of the public regarding the advisability of investing in securities
generally or in the offered notes particularly, or the ability of the index to
track general stock market performance. Nasdaq's only relationship to Goldman
Sachs is in the licensing of the Nasdaq-100(R), Nasdaq-100 Index(R) and
Nasdaq(R) trademarks or service marks, and certain trade names of Nasdaq and the
use of the index which is determined, composed or calculated by Nasdaq without
regard to Goldman Sachs or the offered notes. Nasdaq has no obligation to take
the needs of Goldman Sachs or the owners of the offered notes into consideration
in determining, composing or calculating the index. Nasdaq is not responsible
for and has not participated in the determination of the timing of, prices at or
quantities of the offered notes to be issued or in the determination or
calculation of the equation by which the offered notes are to be converted into
cash. Nasdaq has no liability in connection with the administration, marketing
or trading of the offered notes.
NASDAQ DOES NOT GUARANTEE THE ACCURACY AND/OR UNINTERRUPTED CALCULATION OF
THE INDEX OR ANY DATA INCLUDED THEREIN. NASDAQ MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY GOLDMAN SACHS, OWNERS OF THE OFFERED
NOTES OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA
INCLUDED THEREIN. NASDAQ MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR USE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING
ANY OF THE FOREGOING, IN NO EVENT WILL NASDAQ HAVE ANY LIABILITY FOR ANY LOST
PROFITS OR SPECIAL, INCIDENTAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES,
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
All disclosures contained in this prospectus supplement regarding the
index, including its make-up, method of calculation and changes in its
components, are derived from publicly available information prepared by Nasdaq.
Goldman Sachs does not assume any responsibility for the accuracy or
completeness of that information.
S-20
<PAGE> 21
USE OF PROCEEDS AND HEDGING
We will use the net proceeds we receive from the sale of the offered notes
for the purposes we describe in the attached prospectus under "Use of Proceeds".
We or our affiliates may also use those proceeds in transactions intended to
hedge our obligations under the offered notes as described below.
In anticipation of the sale of the offered notes, we and/or our affiliates
will enter into hedging transactions involving purchases of some or all of the
index stocks, options or futures on the index or index stocks or other
instruments linked to the index or index stocks on the trade date. From time to
time, we and/or our affiliates may enter into additional hedging transactions or
unwind those we have entered into. In this regard, we and/or our affiliates may:
- - acquire or dispose of index stocks or other securities of an index stock
issuer,
- - take short positions in index stocks or other securities of an index stock
issuer -- i.e., we and/or our affiliates may sell securities of the kind that
we do not own or that we borrow for delivery to a purchaser,
- - take or dispose of positions in options or futures on the index or index
stocks or other instruments linked to the index or index stocks, and/or
- - take or dispose of positions in listed or over-the-counter options or other
instruments based on indices designed to track the performance of the index or
other components of the global equity markets.
We and/or our affiliates may acquire a long or short position in securities
similar to the offered notes from time to time and may, in our or their sole
discretion, hold or resell those securities.
We and/or our affiliates may close out our or their hedge on or before the
determination date. That step may involve sales or purchases of one or more of
the index stocks, options or futures on the index or index stocks or other
instruments linked to the index or index stocks, or options or other instruments
linked to indices designed to track the performance of the index or other
components of the global equity markets.
The hedging activity discussed above may adversely affect the market value
of your note from time to time. See "Additional Risk Factors Specific to
Your Note -- Trading and Other Transactions by Goldman Sachs in Securities
Linked to the Index Stocks May Impair the Value of Your Note" and "-- Our
Business Activities May Create Conflicts of Interest Between You and Us"
for a discussion of these adverse effects.
S-21
<PAGE> 22
SUPPLEMENTAL DISCUSSION OF UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following section supplements the discussion of U.S. federal income taxation
in the attached prospectus with respect to United States holders. The following
section is the opinion of Sullivan & Cromwell, counsel to The Goldman Sachs
Group, Inc. Please consult your own tax advisor concerning the U.S. federal
income tax and any other applicable tax consequences of owning your note in your
particular circumstances.
Your note will be subject to special rules governing contingent payment
obligations for United States federal income tax purposes. Under those rules,
the amount of interest you are required to take into account for each accrual
period will be determined by constructing a projected payment schedule for your
note and applying rules similar to those for accruing original issue discount on
a hypothetical noncontingent debt instrument with that projected payment
schedule. This method is applied by first determining the yield at which we
would issue a noncontingent fixed rate debt instrument with terms and conditions
similar to your note (the "comparable yield") and then determining a payment
schedule as of the issue date that would produce the comparable yield. These
rules will generally have the effect of requiring you to include interest in
respect of your note prior to your receipt of cash attributable to such income.
The comparable yield and projected payment schedule may be obtained from
us by contacting the Goldman Sachs Treasury Administration Department, Debt
Administration Group, at 212-902-1000. You are required to use the comparable
yield and projected payment schedule determined by us in determining your
interest accruals in respect of your note unless you timely disclose and justify
on your federal income tax return the use of a different comparable yield and
projected payment schedule.
The comparable yield and projected payment schedule is not provided to you
for any purpose other than the determination of your interest accruals in
respect of your note, and we make no representation regarding the amount
of contingent payments with respect to your note.
If you purchase your note for an amount that differs from the note's
adjusted issue price at the time of the purchase, you must determine the extent
to which the difference between the price you paid for your note and its
adjusted issue price is attributable to a change in expectations as to the
projected payment schedule, a change in interest rates, or both, and allocate
the difference accordingly. The adjusted issue price of your note will equal
your note's original issue price plus any interest deemed to be accrued on your
note (under the rules governing contingent payment obligations) as of the time
you purchase your note. If the notes are listed on the American Stock Exchange
on the date of purchase, you may (but are not required to) allocate the
difference pro rata to interest accruals over the remaining term of the debt
instrument to the extent that your yield on the note, determined after taking
into account amounts allocated to interest, is not less than the applicable U.S.
federal rate for the note. The applicable U.S. federal rate will be the U.S.
federal short-term rate, if your note is expected to mature within three years
of the date you purchase your note, or the U.S. federal mid-term rate, if your
note is expected to mature more than three years from the date you purchase your
note. These rates are determined monthly by the U.S. Secretary of the Treasury
and are intended to approximate
S-22
<PAGE> 23
the average yield on short- and mid-term U.S. government obligations,
respectively.
If the adjusted issue price of your note is greater than the price you
paid for your note, you must make positive adjustments increasing the amount of
interest that you would otherwise accrue and include in income each year, and
the amount of ordinary income (or decreasing the amount of ordinary loss)
recognized upon maturity by the amounts allocated to each of interest and
projected payment schedule; if the adjusted issue price of your note is less
than the price you paid for your note, you must make negative adjustments,
decreasing the amount of interest that you must include in income each year, and
the amount of ordinary income (or increasing the amount of ordinary loss)
recognized upon maturity by the amounts allocated to each of interest and
projected payment schedule. Adjustments allocated to the interest amount are not
made until the date the daily portion of interest accrues.
Because any Form 1099-OID that you receive will not reflect the effects of
positive or negative adjustments resulting from your purchase of a note in the
secondary market, you are urged to consult with your tax advisor as to whether
and how adjustments should be made to the amounts reported on any Form 1099-OID.
You will recognize gain or loss upon the sale or maturity of your note in
an amount equal to the difference, if any, between the amount of cash you
receive at such time and your adjusted basis in your note. In general, your
adjusted basis in your note will equal the amount you paid for your note,
increased by the amount of interest you previously accrued with respect to your
note (in accordance with the comparable yield and the projected payment schedule
for your note) and increased or decreased by the amount of any positive or
negative adjustment, respectively, that you are required to make if you purchase
your note in the secondary market.
Any gain you recognize upon the sale or maturity of your note will be
ordinary interest income. Any loss you recognize at such time will be ordinary
loss to the extent of interest you included as income in the current or previous
taxable years in respect of your note, and thereafter, capital loss.
EMPLOYEE RETIREMENT INCOME SECURITY ACT
If you are an insurance company or the fiduciary of a pension plan or an
employee benefit plan proposing to invest in the offered notes, you should refer
to the matters described under "Employee Retirement Income Security Act" in the
attached prospectus.
S-23
<PAGE> 24
SUPPLEMENTAL PLAN OF DISTRIBUTION
The Goldman Sachs Group, Inc. has agreed to sell to Goldman, Sachs & Co.,
and Goldman, Sachs & Co. has agreed to purchase from The Goldman Sachs Group,
Inc., the aggregate face amount of the offered notes specified on the front
cover of this prospectus supplement. Goldman, Sachs & Co. intends to resell the
offered notes at the original issue price. In the future, Goldman, Sachs & Co.
or other affiliates of The Goldman Sachs Group, Inc. may repurchase and resell
the offered notes in market-making transactions, with resales being made at
prices related to prevailing market prices at the time of resale or at
negotiated prices. For more information about the plan of distribution and
possible market-making activities, see "Plan of Distribution" in the attached
prospectus.
NOTICE TO INVESTORS IN SINGAPORE
Notes may not be offered or sold, nor may any document or other material
in connection with the notes be issued, circulated or distributed, either
directly or indirectly, to persons in Singapore other than (i) under
circumstances in which the offer or sale does not constitute an offer or sale of
the notes to the public in Singapore or (ii) to persons whose ordinary business
it is to buy or sell shares or debentures, whether as principal or agent.
S-24
<PAGE> 25
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No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell or a solicitation of an offer to buy the securities it describes, but only
under circumstances and in jurisdictions where it is lawful to do so. The
information contained in this prospectus is current only as of its date.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Prospectus Supplement
Additional Risk Factors Specific to Your
Note.................................... S-2
Specific Terms of Your Note............... S-7
Hypothetical Returns on Your Note......... S-12
The Index................................. S-15
Use of Proceeds and Hedging............... S-21
Supplemental Discussion of United States
Federal Income Tax Consequences......... S-22
Employee Retirement Income Security Act... S-23
Supplemental Plan of Distribution......... S-24
Prospectus
Our Business Principles................... 2
Prospectus Summary........................ 3
Risk Factors.............................. 9
Use of Proceeds........................... 24
Capitalization............................ 25
Selected Consolidated Financial Data...... 26
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 28
Business.................................. 51
Management................................ 68
Principal Shareholders.................... 81
Certain Relationships and Related
Transactions............................ 84
Description of Notes We May Offer......... 89
United States Taxation.................... 119
Employee Retirement Income Security Act... 130
Validity of the Notes..................... 130
Experts................................... 130
Available Information..................... 131
Cautionary Statement Pursuant to The
Private Securities Litigation Reform Act
of 1995................................. 131
Index to Consolidated Financial
Statements.............................. F-1
Plan of Distribution...................... P-1
</TABLE>
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$
THE GOLDMAN SACHS
GROUP, INC.
Index-Linked Notes due 2004
(Linked to the Nasdaq-100 Index(R))
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[GOLDMAN SACHS LOGO]
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GOLDMAN, SACHS & CO.
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