GOLDMAN SACHS GROUP INC, 424B5, 2000-09-26

GOLDMAN SACHS GROUP INC
424B5, 2000-09-26
SECURITY BROKERS, DEALERS & FLOTATION COMPANIES

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<PAGE> 1
Filed Pursuant Rule 424(b)(5)
Registration No. 333-36178

The information in this preliminary prospectus supplement and the
accompanying prospectus is not complete and may be changed. An effective
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. This preliminary prospectus supplement,
together with the accompanying prospectus, is not an offer to sell nor does
it seek an offer to buy these securities in any jurisdiction where the
offer or sale is not permitted.

Subject to Completion. Dated September 21, 2000.

Prospectus Supplement to Prospectus dated May 8, 2000.

E
THE GOLDMAN SACHS GROUP, INC.
E % Notes due
E % Notes due
[GOLDMAN SACHS LOGO]
------------------------

The Goldman Sachs Group, Inc. will pay interest on the notes on
of each year. The first such payment will be made on ,
2001. If Goldman Sachs becomes obligated to pay additional amounts to non-U.S.
investors due to changes in U.S. withholding tax requirements, Goldman Sachs may
redeem the notes before their respective stated maturities at a price equal to
100% of the principal amount redeemed plus accrued interest to the applicable
redemption date.

Application has been made to list the notes on the Luxembourg Stock
Exchange in accordance with the rules thereof.
------------------------

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.

------------------------

<TABLE>
<CAPTION>
Per Note Per Note
due Total due Total
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Initial public offering price............ % E % E
Underwriting discount.................... % E % E
Proceeds, before expenses, to The Goldman
Sachs Group, Inc....................... % E % E
</TABLE>

The initial public offering price set forth above does not include accrued
interest, if any. Interest on the notes will accrue from , 2000 and
must be paid by the purchaser if the notes are delivered after ,
2000.
------------------------

The underwriters expect to deliver the notes in book-entry form through the
facilities of Euroclear and Clearstream, Luxembourg against payment in
immediately available funds in euros on , 2000.

The underwriters intend to offer the notes for sale primarily in Europe.
Goldman Sachs International, acting through Goldman, Sachs & Co., as its U.S.
selling agent, and the other underwriters, acting through their U.S. affiliates,
may also offer the notes in the United States.

Goldman Sachs may use this prospectus in the initial sale of the notes. In
addition, Goldman Sachs International, Goldman, Sachs & Co. or any other
affiliate of Goldman Sachs may use this prospectus in a market-making
transaction in the notes after their initial sale. UNLESS GOLDMAN SACHS OR ITS
AGENT INFORMS THE PURCHASER OTHERWISE IN THE CONFIRMATION OF SALE, THIS
PROSPECTUS IS BEING USED IN A MARKET-MAKING TRANSACTION.

GOLDMAN SACHS INTERNATIONAL
------------------------
Prospectus Supplement dated , 2000.
<PAGE> 2

This prospectus supplement and the accompanying prospectus do not
constitute an offer to sell or the solicitation of any offer to buy the notes
offered in any jurisdiction in which such offer or solicitation is unlawful.
There are restrictions on the offer and sale of the notes offered hereby in the
United Kingdom. All applicable provisions of the Financial Services Act of 1986
and Public Offers of Securities Regulations 1995 with respect to anything done
by any person in relation to the notes offered hereby, in, from or otherwise
involving the United Kingdom must be complied with. See "Underwriting".

In connection with the offering, the underwriters may effect transactions
which stabilize or maintain the market price of the securities offered hereby at
a level above that which might otherwise prevail in the open market. Such
transactions may be effected in the over-the-counter market or otherwise. Such
stabilization, if commenced, may be discontinued at any time.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements in this prospectus supplement and in the accompanying prospectus
may constitute "forward-looking statements". These statements are not historical
facts but instead represent only our belief regarding future events, many of
which, by their nature, are inherently uncertain and outside of our control. It
is possible that our 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
factors that would affect our future results, see our prospectus, dated August
1, 2000 (as filed with the SEC on August 2), under the caption "Risk Factors".

Forward-looking statements regarding the expected date of completion of the
transaction with Spear, Leeds & Kellogg are subject to the risk that the closing
conditions will not be satisfied, including the risk that the necessary
regulatory and other approvals will not be obtained.

Statements about our 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 that we expect to earn 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, volatility
in the securities markets generally or an adverse development with respect to
the issuer of the securities and, in the case of financial advisory
transactions, a decline in the securities markets, an adverse development with
respect to a party to the transaction or a failure to obtain a required
regulatory approval. Other important factors that could adversely affect our
investment banking transactions are contained in our prospectus, dated August 1,
2000, under the caption "Risk Factors".

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<PAGE> 3

THE GOLDMAN SACHS GROUP, INC.

Goldman Sachs is a leading global investment banking and securities firm
that provides a wide range of financial services worldwide to a substantial and
diversified client base. Our activities are divided into two business segments:

- Global Capital Markets; and
- Asset Management and Securities Services.

Our goal is to be the advisor of choice for our clients and a leading
participant in global financial markets. We seek to achieve this goal by
maintaining an intense commitment to our clients, focusing on our core
businesses and key opportunities, and operating as an integrated franchise.

For our fiscal year ended November 26, 1999, our net revenues were $13.3
billion and our net earnings were $2.7 billion, and, for the nine months ended
August 25, 2000, our net revenues were $13.2 billion and our net earnings were
$2.5 billion. As of August 25, 2000, our stockholders' equity was $12.7 billion.

Because we believe that the needs of our clients are global and that
international markets have high growth potential, we have built upon our
strength in the United States to achieve leading positions in other parts of the
world. Today, we have a strong global presence as evidenced by the geographic
breadth of our transactions, leadership in our core products and the size of our
international operations. As of November 26, 1999, we operated offices in over
20 countries and 37% of our 15,361 employees were based outside the United
States.

We are committed to a distinctive culture and set of core values. These
values are reflected in our business principles, which emphasize placing our
clients' interests first, integrity, commitment to excellence and innovation,
and teamwork.

STRATEGY AND PRINCIPAL BUSINESS LINES

Our strategy is to grow our three core businesses -- Investment Banking and
Trading and Principal Investments, which together comprise Global Capital
Markets, and Asset Management and Securities Services -- in markets throughout
the world. Our leadership position in investment banking provides us with access
to governments, financial institutions and corporate clients globally. Trading
and principal investing has been an important part of our culture and earnings,
and we remain committed to these businesses irrespective of their volatility.
Managing wealth is one of the fastest growing segments of the financial services
industry and we are positioning our asset management and securities services
businesses to take advantage of that growth. We expect to achieve the growth in
our core businesses principally through internal expansion and also through
acquisitions.

GLOBAL CAPITAL MARKETS

INVESTMENT BANKING. Investment Banking represented 33% of fiscal 1999 net
revenues and 31% of net revenues for the nine months ended August 25, 2000. We
are a market leader in both the Financial Advisory and Underwriting businesses,
serving over 3,000 clients worldwide. Financial Advisory includes advisory
assignments with respect to mergers and acquisitions, divestitures, corporate
defense activities, restructurings and spin-offs. Underwriting includes public
offerings and private placements of equity and debt securities.

TRADING AND PRINCIPAL INVESTMENTS. Trading and Principal Investments
represented 43% of fiscal 1999 net revenues and 43% of net revenues for the nine
months ended August 25, 2000. We make markets in equity and fixed income
products, currencies and commodities; enter into swaps and other derivative
transactions; engage in proprietary trading and arbitrage; and make principal
investments. In trading, we focus on building lasting relationships with our
most active clients while maintaining leadership positions in our key markets.
We believe our research,

S-3
<PAGE> 4

market-making and proprietary activities enhance our understanding of markets
and ability to serve our clients.

ASSET MANAGEMENT AND SECURITIES SERVICES

The Asset Management and Securities Services segment represented 24% of
fiscal 1999 net revenues and 26% of net revenues for the nine months ended
August 25, 2000. We provide global investment management and advisory services;
earn commissions on agency transactions; manage merchant banking funds; and
provide prime brokerage, securities lending and financing services. As of August
31, 2000, we had $308 billion of assets under management. We manage merchant
banking funds that had $24.4 billion of capital commitments as of August 25,
2000.

Assets under supervision are comprised of assets under management and other
client assets. Assets under management typically generate fees based on a
percentage of their value. Other client assets are comprised of assets in
brokerage accounts of primarily high-net-worth individuals, on which we earn
commissions.

OUR HEADQUARTERS

Our headquarters are located at 85 Broad Street, New York, New York 10004,
telephone (212) 902-1000.

S-4
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RECENT DEVELOPMENTS

SPEAR, LEEDS & KELLOGG TRANSACTION

On September 11, 2000, we announced an agreement to combine with Spear,
Leeds & Kellogg, L.P., or SLK, a leader in securities clearing and execution,
floor-based market making and off-floor market making. The transaction is valued
at $6.5 billion, comprised of $4.4 billion of Goldman Sachs stock (34 million
shares) and cash.

As part of this transaction, we are establishing a $900 million retention
pool in Goldman Sachs common stock for all SLK employees, which will have
varying vesting and delivery provisions. The transaction is expected to close
before year-end, and is subject to customary regulatory and other approvals.

FISCAL THIRD QUARTER RESULTS

On September 19, 2000, we reported net earnings of $824 million, or
$1.62 per diluted share, for our fiscal third quarter ended August 25, 2000.

Earnings per diluted share were 24% above pro forma earnings per diluted
share of $1.31 for the same 1999 quarter, and 9% higher than $1.48 for the
second quarter of 2000. Pro forma earnings for 1999 assume that our
incorporation and other related transactions had occurred at the beginning of
1999. Annualized return on average stockholders' equity was 29% for the first
nine months of 2000 and 27% for the third quarter.

BUSINESS SEGMENTS

GLOBAL CAPITAL MARKETS

Net revenues in Global Capital Markets, which includes Investment Banking
and Trading and Principal Investments, were $3.44 billion, 32% above the third
quarter of 1999 and 15% higher than the second quarter of 2000.

- Investment Banking

Investment Banking generated net revenues of $1.32 billion, 15% higher than
last year's third quarter and 17% lower than the record second quarter of
2000. Revenue growth was strong in all major regions, compared to the same
1999 period. Our investment banking transaction backlog as of August 25,
2000 remained strong.

Financial Advisory net revenues increased 9% over the same 1999 period as
we capitalized on increased mergers and acquisitions activity in the
communications, media and entertainment and high technology sectors.

Net revenues in Underwriting increased 21% compared to the same 1999 period
as we benefited from increased new issue activity in global equity markets.
Net revenue growth was largely driven by strong performances in the
communications, media and entertainment and high technology sectors.

- Trading and Principal Investments

Net revenues in Trading and Principal Investments were $2.12 billion for
the quarter, 46% higher than the third quarter of 1999 and 51% higher than
the second quarter of 2000, which was adversely affected by negative net
revenues in Principal Investments.

Fixed Income, Currency and Commodities net revenues increased 32% compared
to the third quarter of 1999, primarily due to increased customer flow in
fixed income derivatives and improved performances in the Japanese and
European government bond businesses, partially offset by lower net revenues
from decreased customer activity in our commodities and high-yield
businesses.

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<PAGE> 6

Net revenues in Equities rose 67% over the same 1999 period, primarily
resulting from strength in equity derivatives and higher transaction
volumes in our U.S. and European shares businesses.

Principal Investments net revenues increased 46% over the same 1999 period.
Net revenues of $480 million in the third quarter included significant
gains, balanced between realized and unrealized, on certain of our merchant
banking investments in the high-technology and telecommunications sectors.

ASSET MANAGEMENT AND SECURITIES SERVICES

Asset Management and Securities Services net revenues were $1.09 billion,
35% above the same prior year period, and 6% lower than the prior quarter.

Asset Management net revenues increased 48% over last year's third quarter,
primarily reflecting a 37% increase in average assets under management as well
as favorable changes in the composition of assets managed. Strong net inflows
and market appreciation led to the growth in assets under management during the
quarter.

Securities Services net revenues were 20% higher than the same 1999 period,
primarily due to increased customer balances in securities lending and margin
lending, partially offset by reduced spreads in the fixed income matched book.

Commissions increased 34% compared to the same period last year, primarily
due to higher transaction volumes in global equity markets. Revenues from the
increased share of income and gains from our merchant banking funds also
contributed to the increase in Commissions.

EXPENSES

Operating expenses for the third quarter were $3.15 billion, up 36% from
the same period in 1999, primarily reflecting increased compensation and
benefits commensurate with higher net revenue levels. The ratio of compensation
and benefits to net revenues was 50% for the third quarter of 2000.
Non-compensation-related expenses rose 56% compared to the same period in 1999,
primarily due to costs associated with global expansion, higher employment
levels and increased business activity. Technology expenditures also contributed
to the increase in non-compensation-related expenses. Our effective tax rate for
the third quarter was 40%.

CAPITAL

As of August 25, 2000, total capital was $41.22 billion, consisting of
$12.69 billion in stockholders' equity and $28.53 billion in long-term debt.
Book value per share was $26.43, based on common shares outstanding, including
restricted stock units granted to employees with no future service requirements,
of 480,263,530 at period end. We repurchased 102,145 shares of our common stock
during the quarter.

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<PAGE> 7

BUSINESS SEGMENT NET REVENUES

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------- -------------------------
(UNAUDITED) (UNAUDITED)
AUGUST 25, AUGUST 27, AUGUST 25, AUGUST 27,
2000 1999 2000 1999
---------- ---------- ---------- ----------
($ IN MILLIONS)
<S> <C> <C> <C> <C>
Global Capital Markets
Financial Advisory...................... $ 673 $ 616 $ 1,968 $1,648
Underwriting............................ 648 534 2,183 1,406
------ ------ ------- ------
Investment Banking................. 1,321 1,150 4,151 3,054
------ ------ ------- ------
FICC.................................... 872 661 2,522 2,448
Equities................................ 763 458 2,707 1,531
Principal Investments................... 480 328 373 543
------ ------ ------- ------
Trading and Principal
Investments...................... 2,115 1,447 5,602 4,522
------ ------ ------- ------
Total Global Capital
Markets..................... 3,436 2,597 9,753 7,576
------ ------ ------- ------
Asset Management and Securities Services
Asset Management........................ 327 221 987 637
Securities Services..................... 234 195 724 576
Commissions............................. 530 395 1,711 1,083
------ ------ ------- ------
Total Asset Management and
Securities Services......... 1,091 811 3,422 2,296
------ ------ ------- ------
Total net revenues....... $4,527 $3,408 $13,175 $9,872
====== ====== ======= ======
</TABLE>

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<PAGE> 8

SUMMARY CONSOLIDATED FINANCIAL DATA

The summary historical consolidated income statement and balance sheet data
set forth below have been derived from our consolidated financial statements and
their notes. Our consolidated financial statements have been audited by
PricewaterhouseCoopers LLP, independent public accountants, as of November 26,
1999 and November 27, 1998 and for the years ended November 26, 1999, November
27, 1998 and November 28, 1997. These financial statements, together with the
reports thereon of PricewaterhouseCoopers LLP, are incorporated by reference in
the accompanying prospectus.

The summary historical consolidated income statement and balance sheet data
set forth below as of November 28, 1997, November 29, 1996 and November 24,
1995, and for the years ended November 29, 1996 and November 24, 1995, have been
derived from our consolidated financial statements that are not included or
incorporated by reference in the accompanying prospectus.

The pro forma net earnings set forth below for the period ended November
26, 1999 have been derived from the pro forma data set forth in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in our
Annual Report on Form 10-K for the fiscal year ended November 26, 1999, which is
incorporated by reference in the accompanying prospectus. The pro forma net
earnings set forth below for the period ended August 27, 1999 have been derived
from the pro forma data set forth in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in our Quarterly Report on Form
10-Q for the fiscal quarter ended August 27, 1999.

The summary historical consolidated income statement data set forth below
for the periods ended August 25, 2000 and August 27, 1999 have not been audited
and have been derived from our consolidated statement of earnings and the notes
thereto in our Current Report on Form 8-K dated September 19, 2000, which is
incorporated by reference in the accompanying prospectus. The data regarding
total assets set forth below as of May 26, 2000 has not been audited and has
been derived from our consolidated balance sheet and the notes thereto in our
Quarterly Report on Form 10-Q for the fiscal quarter ended May 26, 2000, which
is incorporated by reference in the accompanying prospectus.

The summary consolidated financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and their notes in our
Annual Report on Form 10-K for the fiscal year ended November 26, 1999 and our
Quarterly Report on Form 10-Q for the fiscal quarter ended May 26, 2000, both of
which are incorporated by reference in the accompanying prospectus, and our
consolidated statement of earnings and the notes thereto in our Current Report
on Form 8-K dated September 19, 2000, which is incorporated by reference in the
accompanying prospectus.

S-8
<PAGE> 9

SUMMARY CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
AS OF OR FOR
NINE MONTHS
ENDED AUGUST AS OF OR FOR YEAR ENDED NOVEMBER
-------------------- -----------------------------------------------------
(UNAUDITED)
2000 1999 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ----
($ in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Investment Banking................ $ 4,151 $ 3,054 $ 4,359 $ 3,368 $ 2,587 $ 2,113 $ 1,595
Trading and Principal
Investments..................... 5,602 4,522 5,773 2,379 2,926 2,693 1,744
-------- -------- -------- -------- -------- -------- --------
Global Capital Markets.......... 9,753 7,576 10,132 5,747 5,513 4,806 3,339
Asset Management and Securities
Services........................ 3,422 2,296 3,213 2,773 1,934 1,323 1,144
-------- -------- -------- -------- -------- -------- --------
Net revenues.................... 13,175 9,872 13,345 8,520 7,447 6,129 4,483
Compensation and benefits(1)...... 6,587 4,932 6,459 3,838 3,097 2,421 2,005
Other operating expenses.......... 2,478 4,157(2) 4,894(2) 1,761 1,336 1,102 1,110
-------- -------- -------- -------- -------- -------- --------
Pre-tax earnings(1)............. $ 4,110 $ 783 $ 1,992 $ 2,921 $ 3,014 $ 2,606 $ 1,368
======== ======== ======== ======== ======== ======== ========
Pro forma net earnings
(unaudited)(3).................. $ 2,466(4) $ 1,794 $ 2,550 -- -- -- --

BALANCE SHEET DATA
Total assets(5)................... $278,319(6) $236,273 $250,491 $217,380 $178,401 $152,046 $100,066
Long-term borrowings.............. 28,528 20,340 20,952 19,906 15,667 12,376 13,358
Partners' capital................. -- -- -- 6,310 6,107 5,309 4,905
Stockholders' equity.............. 12,693 8,697 10,145 -- -- -- --

SELECTED DATA (UNAUDITED)
Employees:
United States................... 11,489 9,201 9,746 8,349 6,879 5,818 5,356
International................... 7,177 5,253 5,615 4,684 3,743 3,159 2,803
-------- -------- -------- -------- -------- -------- --------
Total employees(7)............ 18,666 14,454 15,361 13,033 10,622 8,977 8,159
======== ======== ======== ======== ======== ======== ========
Assets under supervision(8):
Assets under management......... $307,851 $220,522 $258,045 $194,821 $135,929 $ 94,599 $ 52,358
Other client assets............. 273,090 192,034 227,424 142,018 102,033 76,892 57,716
-------- -------- -------- -------- -------- -------- --------
Total assets under
supervision................. $580,941 $412,556 $485,469 $336,839 $237,962 $171,491 $110,074
======== ======== ======== ======== ======== ======== ========
</TABLE>

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<PAGE> 10

---------------

(1) Our pre-tax earnings in 2000 and 1999 reflect payments for services rendered
by managing directors who, prior to our conversion to corporate form, were
profit participating limited partners. In prior years, these payments were
accounted for as distributions of partners' capital rather than as
compensation and benefits expense. As a result, these payments are not
reflected in operating expenses in 1998, 1997, 1996 or 1995 and, therefore,
the pre-tax earnings in these years are not comparable to 2000 and 1999.

(2) Includes nonrecurring employee initial public offering awards of $2.26
billion and a charitable contribution to The Goldman Sachs Foundation of
$200 million made at the time of our initial public offering.

(3) Pro forma net earnings reflect the results of Goldman Sachs as if our
conversion to corporate form and related transactions had taken place at the
beginning of fiscal 1999.

The pro forma net earnings do not give effect to the following items due to
their nonrecurring nature:

- the employee award of formula-based restricted stock units,

- the initial irrevocable contribution of shares of common stock to the
defined contribution plan,

- the recognition of certain net tax assets, and

- the contribution to The Goldman Sachs Foundation.

The pro forma net earnings give effect to the following items:

- interest expense on junior subordinated debentures issued to retired
limited partners in exchange for their partnership interests,

- the amortization of the restricted stock units awarded to employees in
connection with the firm's initial public offering, for which future
service is required as a condition to the delivery of the underlying
shares of common stock, and

- the provision for taxes in corporate form.

For more detailed information concerning these adjustments, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our Annual Report on Form 10-K for the fiscal year ended
November 26, 1999, which is incorporated by reference in the accompanying
prospectus.

(4) Reflects actual results for the nine months ended August 25, 2000.

(5) Total assets were increased as of May 26, 2000, August 27, 1999, November
26, 1999 and November 27, 1998 as a result of certain provisions of
Statement of Financial Accounting Standards No. 125.

(6) Balance shown reflects total assets as of May 26, 2000.

(7) Excludes employees of Goldman Sachs' property management subsidiaries.
Substantially all of the costs of these employees are reimbursed to Goldman
Sachs by the real estate investment funds to which these subsidiaries
provide property management services.

(8) Substantially all assets under supervision are valued as of the relevant
calendar month end.

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<PAGE> 11

CAPITALIZATION

The following table sets forth the consolidated capitalization of Goldman
Sachs as of August 25, 2000 on a historical basis and on an as adjusted basis,
after giving effect to the sale of the notes in this offering as if the sale had
occurred on August 25, 2000.

<TABLE>
<CAPTION>
AS OF AUGUST 25, 2000
------------------------------
HISTORICAL AS ADJUSTED
---------- -----------
($ IN MILLIONS)
<S> <C> <C>
Short-term borrowings (including commercial
paper)......................................... $ 37,917 $ 37,917
============= =============

Long-term borrowings............................. $ 28,528 $ (1)
Stockholders' equity............................. 12,693 12,693
------------- -------------
Total capitalization........................ $ 41,221 $
============= =============
</TABLE>

---------------

(1) Gives effect to the issuance of E of notes in this offering, based on an
exchange rate of $ for E , the noon buying rate for cable
transfers in New York City on , 2000.

RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS THREE MONTHS NINE MONTHS
ENDED MAY 26, ENDED MAY 26, ENDED AUGUST 25, ENDED AUGUST 25,
2000 2000 2000 2000
<S> <C> <C> <C>
1.31x 1.36x 1.32x 1.35x
</TABLE>

For purposes of computing the ratio of earnings to fixed charges,
"earnings" represent pre-tax earnings plus fixed charges and "fixed charges"
represent interest expense plus that portion of rent expense that, in our
opinion, approximates the interest factor included in rent expense.

See "Ratio of Earnings to Fixed Charges" in the accompanying prospectus for
the ratio of earnings to fixed charges for the years ended November 24, 1995
through November 26, 1999.

USE OF PROCEEDS

We intend to use the net proceeds from the sale of the notes to provide
additional funds for our operations and for other general corporate purposes.

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SPECIFIC TERMS OF THE NOTES

Please note that in this section entitled "Specific Terms of the Notes",
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.
Also, in this section, references to "holders" mean those who have notes
registered in their own names, on the books that we or the trustee maintains for
this purpose, and not indirect owners who own beneficial interests in notes
through participants in Euroclear or Clearstream, Luxembourg, or in notes
registered in street name. Please review the special considerations that apply
to indirect owners in the attached prospectus, under "Legal Ownership and
Book-Entry Issuance".

Each tranche of notes will be a series of senior debt securities issued
under our senior debt indenture. This prospectus supplement summarizes specific
financial and other terms that will apply to the notes; terms that apply
generally to all of our debt securities are described in "Description of Debt
Securities 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.

FINANCIAL TERMS OF THE NOTES DUE

The specific financial terms of the notes due we are offering will be
as follows:

- TITLE OF THE NOTES: % Notes due

- ISSUER OF THE NOTES: The Goldman Sachs Group, Inc.

- TOTAL PRINCIPAL AMOUNT BEING ISSUED: E

- DUE DATE FOR PRINCIPAL:

- DENOMINATION: in euro, in denominations of E1000, and integral multiples of
E1000

- INTEREST RATE: % annually, calculated on the basis of the actual
number of days in respect of which payment is being made divided by the number
of days from, and including, the preceding interest payment date to, but
excluding, the next following interest payment date.

- DATE INTEREST STARTS ACCRUING: , 2000

- DUE DATES FOR INTEREST: every

- FIRST DUE DATE FOR INTEREST: , 2001

- REGULAR RECORD DATES FOR INTEREST: every

- BUSINESS DAY: any day that is not a Saturday or Sunday, and that is not a day
on which banking institutions are generally authorized or obligated by law,
regulation or executive order to close in The City of New York or London, and
that is also a day on which the Trans-European Automated Real-Time Gross
Settlement Express Transfer (TARGET) System or any successor system is open
for business.

- EXCHANGE RATE AGENT: Goldman Sachs International

- DEFEASANCE: The notes are subject to defeasance and covenant defeasance by us
if certain conditions are satisfied, as set forth in the section titled
"Description of Debt Securities We May Offer" in the attached prospectus.

- ADDITIONAL AMOUNTS: We intend to pay principal and interest without deducting
U.S. withholding taxes. If we are required to deduct U.S. withholding taxes
from payments to non-U.S. investors, however, we will pay additional amounts
on those payments, but only to the extent described below under "-- Payment of
Additional Amounts".

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<PAGE> 13

- REDEMPTION: We will not have the option to redeem the notes before they
mature, unless we become obligated to pay additional amounts because of
changes in U.S. withholding tax requirements.

- REPAYMENT AT OPTION OF HOLDER: none

FINANCIAL TERMS OF THE NOTES DUE

The specific financial terms of the notes due we are offering will be as
follows:

- TITLE OF THE NOTES: % Notes due

- ISSUER OF THE NOTES: The Goldman Sachs Group, Inc.

- TOTAL PRINCIPAL AMOUNT BEING ISSUED: E

- DUE DATE FOR PRINCIPAL:

- DENOMINATION: in euro, in denominations of E1000, and integral multiples of
E1,000

- DATE INTEREST STARTS ACCRUING: , 2000

- DUE DATES FOR INTEREST: every

- FIRST DUE DATE FOR INTEREST: , 2001

- REGULAR RECORD DATES FOR INTEREST: every

- BUSINESS DAY: any day that is not a Saturday or Sunday, and that is not a day
on which banking institutions are generally authorized or obligated by law,
regulation or executive order to close in The City of New York or London, and
that is also a day on which the TARGET System or any successor system is open
for business.

- EXCHANGE RATE AGENT: Goldman Sachs International

- REDEMPTION: We will not have the option to redeem the notes before they
mature, unless we become obligated to pay additional amounts because of
changes in U.S. withholding tax requirements.

- REPAYMENT AT OPTION OF HOLDER: none

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ADDITIONAL INFORMATION ABOUT THE NOTES

BOOK-ENTRY SYSTEM

We will issue the notes as global notes registered in the name of a nominee
of a common depositary for Clearstream Banking, societe anonyme (Clearstream,
Luxembourg), and Morgan Guaranty Trust Company of New York, Brussels Office, as
operator of the Euroclear system (Euroclear). Investors may hold book-entry
interests in a global note through organizations that participate, directly or
indirectly, in the Clearstream, Luxembourg and Euroclear systems. Book-entry
interests in the notes and all transfers relating to the notes will be reflected
in the book-entry records of Euroclear and Clearstream, Luxembourg. The initial
common depositary for Clearstream, Luxembourg and Euroclear will be The Bank of
New York and The Depository Trust Company will not be the depositary for the
notes.

The distribution of the notes will be cleared through Clearstream,
Luxembourg and Euroclear. Any secondary market trading of book-entry interests
in the notes will take place through Euroclear and Clearstream, Luxembourg
participants and will settle in same-day funds. Owners of book-entry interests
in the notes will receive payments relating to their notes in euros.

Clearstream, Luxembourg and Euroclear have established electronic
securities and payment transfer, processing, depositary and custodial links
among themselves and others, either directly or through custodians and
depositaries. These links allow securities to be issued, held and transferred
among the clearing systems without the physical transfer of certificates.
Special procedures to facilitate clearance and settlement have been established
among these clearing systems to trade securities across borders in the secondary
market.

The policies of Clearstream, Luxembourg and Euroclear will govern payments,
transfers, exchanges and other matters relating to the investor's interest in
securities held by them. We have no responsibility for any aspect of the records
kept by Clearstream, Luxembourg or Euroclear or any of their direct or indirect
participants. We also do not supervise these systems in any way.

Clearstream, Luxembourg and Euroclear and their participants perform these
clearance and settlement functions under agreements they have made with one
another or with their customers. You should be aware that they are not obligated
to perform or continue to perform these procedures and may modify them or
discontinue them at any time.

Except as provided below, owners of beneficial interests in the notes will
not be entitled to have the notes registered in their names, will not receive or
be entitled to receive physical delivery of the notes in definitive form and
will not be considered the owners or holders of the notes under the indenture
governing the notes, including for purposes of receiving any reports delivered
by us or the trustee pursuant to the indenture. Accordingly, each person owning
a beneficial interest in a note must rely on the procedures of the depositary
and, if such person is not a participant, on the procedures of the participant
through which such person owns its interest, in order to exercise any rights of
a holder of notes.

The description of the clearing systems in this section reflects our
understanding of the rules and procedures of Clearstream, Luxembourg and
Euroclear as they are currently in effect. These systems could change their
rules and procedures at any time. We have obtained the information in this
section concerning Clearstream, Luxembourg and Euroclear and their book-entry
systems and procedures from sources that we believe to be reliable, but we take
no responsibility for the accuracy of this information.

CLEARSTREAM, LUXEMBOURG

Clearstream, Luxembourg is incorporated as a bank under Luxembourg law.
Clearstream, Luxembourg holds securities for its customers and facilitates the
clearance and settlement of securities transactions between Clearstream,
Luxembourg customers through electronic book-entry changes in accounts of
Clearstream, Luxembourg customers, thus eliminating the need for physical
movement of certificates. Clearstream, Luxembourg provides to its customers,
among

S-14
<PAGE> 15

other things, services for safekeeping, administration, clearance and settlement
of internationally traded securities and securities lending and borrowing.
Clearstream, Luxembourg interfaces with domestic markets in a number of
countries. Clearstream, Luxembourg has established an electronic bridge with
Morgan Guaranty Trust Company of New York, the operator of the Euroclear System,
to facilitate settlement of trades between Clearstream, Luxembourg and
Euroclear.

As a registered bank in Luxembourg, Clearstream, Luxembourg is subject to
regulation by the Luxembourg Commission for the Supervision of the Financial
Sector. Clearstream, Luxembourg customers are recognized financial institutions
around the world, including underwriters, securities brokers and dealers, banks,
trust companies and clearing corporations. In the United States, Clearstream,
Luxembourg customers are limited to securities brokers and dealers. Clearstream,
Luxembourg customers may include the underwriters. Other institutions that
maintain a custodial relationship with a Clearstream, Luxembourg customer may
obtain indirect access to Clearstream, Luxembourg.

THE EUROCLEAR SYSTEM

The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System and to clear and settle transactions
between Euroclear participants through simultaneous electronic book-entry
delivery against payment, thus eliminating the need for physical movement of
certificates and risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in many currencies, including United
States dollars. The Euroclear System includes various other services, including
securities lending and borrowing and interfaces with domestic markets in several
countries.

The Euroclear System is operated by the Brussels office of Morgan Guaranty
Trust Company of New York, which is known as the Euroclear Operator, under
contract with Euroclear Clearance System, S.C., a Belgian cooperative
corporation. The Euroclear Operator conducts all operations, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with the
Euroclear Operator, not the cooperative. The cooperative establishes policy for
the Euroclear System on behalf of Euroclear participants. Euroclear participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries and may include the underwriters.
Indirect access to the Euroclear System is also available to other firms that
clear through or maintain a custodial relationship with a Euroclear participant,
either directly or indirectly.

The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. The Board of
Governors of the Federal Reserve System, the New York State Banking Department
and the Belgian Banking Commission regulate and examine the Euroclear Operator.

The Terms and Conditions Governing Use of Euroclear and the related
Operating Procedures of the Euroclear System and applicable Belgian law govern
securities clearance accounts and cash accounts with the Euroclear Operator.
Specifically, these terms and conditions govern:

- transfers of securities and cash within the Euroclear System;

- withdrawal of securities and cash from the Euroclear System; and

- receipts of payments with respect to securities in the Euroclear System.

All securities in the Euroclear System are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the terms and conditions only on behalf of
Euroclear participants and has no record of or relationship with persons holding
securities through Euroclear participants.

S-15
<PAGE> 16

CLEARANCE AND SETTLEMENT PROCEDURES

We understand that investors that hold their notes through Euroclear or
Clearstream, Luxembourg accounts will follow the settlement procedures that are
applicable to conventional Eurobonds in registered form. Notes will be credited
to the securities custody accounts of Euroclear and Clearstream, Luxembourg
participants on the business day following the settlement date, for value on the
settlement date. They will be credited either free of payment or against payment
for value on the settlement date.

We understand that secondary market trading between Euroclear and/or
Clearstream, Luxembourg participants will occur in the ordinary way following
the applicable rules and operating procedures of Euroclear and Clearstream,
Luxembourg. Secondary market trading will be settled using procedures applicable
to conventional Eurobonds in registered form.

You should be aware that investors will only be able to make and receive
deliveries, payments and other communications involving the notes through
Clearstream, Luxembourg and Euroclear on days when those systems are open for
business. Those systems may not be open for business on days when banks, brokers
and other institutions are open for business in the United States.

In addition, because of time-zone differences, there may be problems with
completing transactions involving Clearstream, Luxembourg and Euroclear on the
same business day as in the United States. U.S. investors who wish to transfer
their interests in the notes, or to make or receive a payment or delivery of the
notes, on a particular day, may find that the transactions will not be performed
until the next business day in Luxembourg or Brussels, depending on whether
Clearstream, Luxembourg or Euroclear is used.

Clearstream, Luxembourg or Euroclear will credit payments to the cash
accounts of Clearstream, Luxembourg customers or Euroclear participants in
accordance with the relevant system's rules and procedures, to the extent
received by its depositary. Clearstream, Luxembourg or the Euroclear Operator,
as the case may be, will take any other action permitted to be taken by a holder
under the indenture on behalf of a Clearstream, Luxembourg customer or Euroclear
participant only in accordance with its relevant rules and procedures.

Clearstream, Luxembourg and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of the notes among participants of
Clearstream, Luxembourg and Euroclear. However, they are under no obligation to
perform or continue to perform those procedures, and they may discontinue those
procedures at any time.

SAME-DAY SETTLEMENT AND PAYMENT

The underwriters will settle the notes in immediately available funds. We
will make principal and interest payments on the notes in immediately available
funds or the equivalent. Secondary market trading between Clearstream,
Luxembourg customers and Euroclear participants will occur in accordance with
the applicable rules and operating procedures of Clearstream, Luxembourg and
Euroclear and will be settled using the procedures applicable to conventional
eurobonds in immediately available funds. No assurance can be given as to the
effect, if any, of settlement in immediately available funds on trading activity
(if any) in the notes.

CERTIFICATED NOTES

We will issue notes to you or your nominees, in fully certificated
registered form, only if (1) we advise the trustee in writing that the
depositary is no longer willing or able to discharge its responsibilities
properly, and the trustee or we are unable to locate a qualified successor
within 60 days; (2) an event of default has occurred and is continuing under the
indenture; or (3) we, at our option, elect to terminate the book-entry system.
If any of the three above events occurs, the trustee will reissue the notes in
fully certificated registered form and will recognize the registered holders of
the certificated notes as holders under the indenture.

S-16
<PAGE> 17

In the event individual certificates for the notes are issued, the holders
of such notes will be able to receive payment on the notes and effect transfers
of the notes at the offices of the Luxembourg paying agent. We have appointed
Banque Internationale a Luxembourg S.A. as paying agent in Luxembourg with
respect to the notes in individual certificated form, and as long as the notes
are listed on the Luxembourg Stock Exchange, we will maintain a paying agent in
Luxembourg.

Unless and until we issue the notes in fully certificated, registered form,
(1) you will not be entitled to receive a certificate representing your interest
in the notes; (2) all references in this prospectus supplement or in the
accompanying prospectus to action by holders will refer to actions taken by the
depositary upon instructions from their direct participants; and (3) all
references in this prospectus supplement or the accompanying prospectus to
payments and notices to holders will refer to payments and notices to the
depositary, as the registered holder of the notes, for distribution to you in
accordance with its policies and procedures.

NOTICES

The trustee will mail notices by first class mail, postage prepaid, to each
registered holder's last known address as it appears in the security register
that the trustee maintains. The trustee will only mail these notices to the
registered holder of the notes, unless we reissue the notes to you or your
nominees in fully certificated form.

In addition, if the notes are listed on the Luxembourg Stock Exchange, and
the rules of the Luxembourg Stock Exchange require notice~ by publication, the
trustee will publish notices regarding the notes in a daily newspaper of general
circulation in Luxembourg. We expect that this newspaper will be the Luxemburger
Wort. If publication in Luxembourg is not practical, the trustee will publish
these notices elsewhere in Europe. Published notices will be deemed to have been
given on the date they are published. If publication as described above becomes
impossible, then the trustee may publish sufficient notice by alternate means
that approximate the terms and conditions described in this paragraph.

PAYMENT OF ADDITIONAL AMOUNTS

We intend to make all payments on the notes without deducting U.S.
withholding taxes. If we are required by law to withhold U.S. tax from payments
to non-U.S. investors, however, we will pay additional amounts on those payments
to the extent described in this subsection.

We will pay additional amounts on a note only if the beneficial owner of
the note is a United States alien. The term "United States alien" means any
person who, for U.S. federal income tax purposes, is:

- a nonresident alien individual;

- a foreign corporation;

- a foreign partnership; or

- an estate or trust that is not subject to U.S. federal income tax on a
net income basis on income or gain from a note.

If the beneficial owner of a note is a United States alien, we will pay all
additional amounts that may be necessary so that every net payment of interest
or principal on that note will not be less than the amount provided for in that
note. By net payment we mean the amount we pay or our paying agent pays after
deducting or withholding an amount for or on account of any present or future
tax, assessment or other governmental charge imposed with respect to that
payment by a U.S. taxing authority.

S-17
<PAGE> 18

Our obligation to pay additional amounts is subject to several important
exceptions, however. We will NOT pay additional amounts for or on account of any
of the following:

- any tax, assessment or other governmental charge imposed solely because
at any time there is or was a connection between the beneficial
owner -- or between a fiduciary, settlor, beneficiary or member of the
beneficial owner, if the beneficial owner is an estate, trust or
partnership -- and the United States (other than the mere receipt of a
payment or the ownership or holding of a note), including because the
beneficial owner -- or the fiduciary, settlor, beneficiary or
member -- at any time, for U.S. federal income tax purposes:

-- is or was a citizen or resident or is or was treated as a resident of
the United States;

-- is or was present in the United States;

-- is or was engaged in a trade or business in the United States;

-- has or had a permanent establishment in the United States;

-- is or was a domestic or foreign personal holding company, a passive
foreign investment company or a controlled foreign corporation;

-- is or was a corporation that accumulates earnings to avoid U.S.
federal income tax; or

-- is or was a "ten percent shareholder" of The Goldman Sachs Group,
Inc.;

- any tax, assessment or other governmental charge imposed solely because
of a change in applicable law or regulation, or in any official
interpretation or application of applicable law or regulation, that
becomes effective after the day on which the payment becomes due or is
duly provided for, whichever occurs later;

- any estate, inheritance, gift, sales, excise, transfer, wealth or
personal property tax, or any similar tax, assessment or other
governmental charge;

- any tax, assessment or other governmental charge imposed solely because
the beneficial owner or any other person fails to comply with any
certification, identification or other reporting requirement concerning
the nationality, residence, identity or connection with the United States
of the holder or any beneficial owner of the note, if compliance is
required by statute, by regulation of the U.S. Treasury Department or by
an applicable income tax treaty to which the United States is a party, as
a precondition to exemption from the tax, assessment or other
governmental charge;

- any tax, assessment or other governmental charge that can be paid other
than by deduction or withholding from a payment on the notes;

- any tax, assessment or other governmental charge imposed solely because
the payment is to be made by a particular paying agent (which term may
include us) and would not be imposed if made by another paying agent; or

- any combination of the taxes, assessments or other governmental charges
described above.

In addition, we will not pay additional amounts with respect to any payment of
principal or interest to any United States alien who is a fiduciary or a
partnership, or who is not the sole beneficial owner of the payment, to the
extent that we would not have to pay additional amounts to any beneficiary or
settlor of the fiduciary or any member of the partnership, or to any beneficial
owner of the payment, if that person or entity were treated as the beneficial
owner of the note for this purpose.

When we refer to a "U.S. taxing authority" in the discussion of additional
amounts above and in the discussion of redemption for tax reasons below, we mean
the United States of America or any state, other jurisdiction or taxing
authority in the United States. When we refer to the "United States", we mean
the United States of America, including the states and the District of Columbia,
together with the territories, possessions and all other areas subject to the
jurisdiction of the United States of America.

S-18
<PAGE> 19

When we refer to any payment of interest or principal on a note, this
includes any additional amount that may be payable as described above in respect
of that payment.

WHEN WE CAN REDEEM THE NOTES

We will not be permitted to redeem the notes due or the notes
due we are offering before their respective stated maturities, except
as described below. The notes will not be entitled to the benefit of any sinking
fund -- that is, we will not deposit money on a regular basis into any separate
custodial account to repay your note. In addition, you will not be entitled to
require us to buy your note from you before its stated maturity.

We will be entitled, at our option, to redeem the outstanding notes
due in whole and not in part if at any time we become obligated to
pay additional amounts on any notes due on the next interest payment
date, but only if our obligation results from a change in the laws or
regulations of any U.S. taxing authority, or from a change in any official
interpretation or application of those laws or regulations, that becomes
effective or is announced after the date of this prospectus supplement.

Similarly, we will be entitled, at our option, to redeem the outstanding
notes due in whole and not in part if at any time we become obligated
to pay additional amounts on any notes due on the next interest
payment date, but only if our obligation results from a change in the laws or
regulations of any U.S. taxing authority, or from a change in any official
interpretation or application of those laws or regulations, that becomes
effective or is announced after the date of this prospectus supplement.

If we redeem any notes, we will do so at a redemption price equal to 100%
of the principal amount of the notes redeemed, plus accrued interest to the
redemption date.

If we become entitled to redeem the notes, we may do so at any time on a
redemption date of our choice. The redemption dates for the notes
due and the notes due could be different, or there could
be a redemption for the notes of one maturity but not for the notes of the other
maturity. However, we must give the holders of the notes being redeemed notice
of the redemption not less than 30 days or more than 60 days before the
redemption date and not more than 90 days before the next date on which we would
be obligated to pay additional amounts. In addition, our obligation to pay
additional amounts must remain in effect when we give the notice of redemption.
We will give the notice in the manner described under "Description of Debt
Securities We May Offer -- Notices" in the attached prospectus.

We or our affiliates may purchase notes from investors who are willing to
sell from time to time, either in the open market at prevailing prices or in
private transactions at negotiated prices. For example, we currently expect
Goldman Sachs International and Goldman, Sachs & Co. to make a market in the
notes by purchasing and reselling notes from time to time. Notes that we or our
subsidiaries purchase may, at our discretion, be held, resold or cancelled.

EMPLOYEE RETIREMENT INCOME SECURITY ACT

This section is only relevant to you if you are an insurance company or the
fiduciary of a pension plan or an employee benefit plan proposing to invest in
the notes.

The Employee Retirement Income Security Act of 1974, as amended, which we
call "ERISA", and the Internal Revenue Code of 1986, as amended, prohibit
certain transactions involving the assets of an employee benefit plan and
certain persons who are "parties in interest" (within the meaning of ERISA) or
"disqualified persons" (within the meaning of the Internal Revenue Code) with
respect to the plan; government plans may be subject to similar prohibitions.
Therefore, a

S-19
<PAGE> 20

plan fiduciary considering purchasing notes should consider whether the purchase
or holding of such instruments might constitute a "prohibited transaction".

The Goldman Sachs Group, Inc. and certain of its affiliates may each be
considered a "party in interest" or a "disqualified person" with respect to many
employee benefit plans by reason of, for example, The Goldman Sachs Group, Inc.
(or its affiliate) providing services to such plans. Prohibited transactions
within the meaning of ERISA or the Internal Revenue Code may arise, for example,
if notes are acquired by or with the assets of a pension or other employee
benefit plan that is subject to the fiduciary responsibility provisions of ERISA
or Section 4975 of the Internal Revenue Code (including individual retirement
accounts and other plans described in Section 4975(e)(1) of the Internal Revenue
Code), which we call a "Plan", and with respect to which The Goldman Sachs
Group, Inc. or any of its affiliates is a "party in interest" or a "disqualified
person", unless those notes are acquired under an exemption for transactions
effected on behalf of that plan by a "qualified professional asset manager" of
an "in-house asset manager" or for transactions involving insurance company
general accounts. The person making the decision on behalf of a Plan or a
government plan shall be deemed, on behalf of itself and the Plan, by purchasing
and holding the notes, to represent that such purchase and holding of the notes
will not result in a non-exempt prohibited transaction under ERISA or the
Internal Revenue Code (or, with respect to a government plan, under any similar
applicable law or regulation).

If you are an insurance company or the fiduciary of a pension plan or an
employee benefit plan, and propose to invest in the notes, you should consult
your legal counsel.

VALIDITY OF THE NOTES

The validity of the notes will be passed upon for The Goldman Sachs Group,
Inc. by its General Counsel, Gregory K. Palm, and for the underwriters by
Sullivan & Cromwell, New York, New York. As of the date of this prospectus
supplement, Mr. Palm owns less than one percent of the common stock, and
participates in employee benefit plans, of The Goldman Sachs Group, Inc.
Sullivan & Cromwell has in the past represented and continues to represent
Goldman Sachs on a regular basis and in a variety of matters, including
offerings of our common stock and debt securities. Sullivan & Cromwell also
performed services for The Goldman Sachs Group, Inc. in connection with the
offering of the notes described in this prospectus supplement.

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<PAGE> 21

UNDERWRITING

The Goldman Sachs Group, Inc. and the underwriters for this offering named
below have entered into a pricing agreement and an underwriting agreement with
respect to the notes. Subject to certain conditions, each underwriter has
severally agreed to purchase the principal amount of notes indicated in the
following table.

<TABLE>
<CAPTION>
Principal Amount of Principal Amount of
Underwriters Notes due Notes due
------------ ------------------- -------------------
<S> <C> <C>
Goldman Sachs International............... E E

------ ------
Total........................... E E
====== ======
</TABLE>

------------------------

The purchase price of the notes due payable by the underwriters
represents the offering price of % of the principal amount thereof
(plus any accrued interest) less a combined commission of % of such
principal amount. The purchase price of the notes due payable by the
underwriters represents the offering price of % of the principal
amount thereof (plus any accrued interest) less a combined commission of
% of such principal amount.

No underwriter, nor any of their affiliates, may offer or sell the notes
due at a price that is less than % of the principal amount
of those notes, or may offer or sell the notes due at a price that is
less than % of the principal amount of those notes, until the
specified time notified to such parties by Goldman Sachs International. After
the notes are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the underwriters.

The underwriters intend to offer the notes for sale primarily in Europe.
Goldman Sachs International, acting through Goldman, Sachs & Co., as its U.S.
selling agent, and the other underwriters, acting through their respective U.S.
affiliates, may also offer the notes for sale in the United States.

The notes are a new issue of securities with no established trading market.
The Goldman Sachs Group, Inc. has been advised by Goldman Sachs International
and Goldman, Sachs & Co. that they intend to make a market in the notes. Other
affiliates of The Goldman Sachs Group, Inc. may also do so. Neither Goldman
Sachs International, Goldman, Sachs & Co. nor any other affiliate, however, is
obligated to do so and any of them may discontinue market-making at any time
without notice. No assurance can be given as to the liquidity or the trading
market for the notes.

In connection with this offering, the underwriters or, in the United
Kingdom, Goldman Sachs International may purchase and sell notes in the open
market. These transactions may include short sales, stabilizing transactions and
purchases to cover positions created by short sales. Short sales involve the
sale by the underwriters or, in the United Kingdom, Goldman Sachs International
of a greater principal amount of notes than they are required to purchase in
this

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<PAGE> 22

offering. Stabilizing transactions consist of certain bids or purchases made for
the purpose of preventing or retarding a decline in the market price of the
notes while this offering is in progress.

The underwriters, including Goldman Sachs International, also may impose a
penalty bid. This occurs when a particular underwriter repays to the
underwriters a portion of the underwriting discount received by it because the
underwriters have repurchased notes sold by or for the account of that
underwriter in stabilizing or short-covering transactions.

These activities by the underwriters, including Goldman Sachs
International, may stabilize, maintain or otherwise affect the market price of
the notes. As a result, the price of the notes may be higher than the price that
otherwise might exist in the open market. If these activities are commenced,
they may be discontinued by the underwriters, including Goldman Sachs
International, at any time. These transactions may occur in the over-the-counter
market of otherwise.

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 a 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.

Goldman, Sachs & Co. and its affiliates have also informed The Goldman
Sachs Group, Inc. that they do not expect sales made by the underwriters in this
offering to accounts over which the underwriters exercise discretionary
authority to exceed five percent of the aggregate initial offering price of the
notes. No such sales will be made without the prior written approval of the
customer to which such account relates.

The Goldman Sachs Group, Inc. estimates that its share of the total
expenses of this offering, excluding underwriting discounts and commissions,
whether paid to Goldman Sachs International or any other underwriter, will be
approximately $ .

The Goldman Sachs Group, Inc. has agreed to indemnify the several
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.

Certain of the underwriters and their affiliates have in the past provided,
and may in the future from time to time provide, investment banking and general
financing and banking services to The Goldman Sachs Group, Inc. and its
affiliates, for which they have in the past received, and may in the future
receive, customary fees. The Goldman Sachs Group, Inc. and its affiliates have
in the past provided, and may in the future from time to time provide, similar
services to the underwriters and their affiliates on customary terms and for
customary fees.

This prospectus supplement may be used by U.S. affiliates of the
underwriters and other dealers in connection with offers and sales of notes to
persons located in the United States. These offers and sales may involve notes
initially sold by the underwriters in this offering outside the United States.

Each underwriter has also agreed that (a) it has not offered or sold and
prior to the date six months after the date of original issue of the notes will
not offer or sell any notes to persons in the United Kingdom except to persons
whose ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances that have not resulted and will not
result in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995 (as amended); (b) it has complied,
and will comply, with all applicable provisions of the Financial Services Act of
1986 with respect to anything done by it in relation to the notes in, from or
otherwise involving the United Kingdom; and (c) it has only issued or passed on
and will only issue or pass on in the United Kingdom any document received by it
in connection with the issuance of the notes to a person who is of a kind
described in Article 11(3)

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<PAGE> 23

of the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1996 (as amended) or is a person to whom the document may otherwise
lawfully be issued or passed on.

The notes may not be offered, sold, transferred or delivered in or from The
Netherlands, as part of their initial distribution or as part of any
re-offering, and neither this prospectus supplement, the accompanying prospectus
nor any other document in respect of the offering may be distributed or
circulated in The Netherlands, other than to individuals or legal entities which
include, but are not limited to, banks, brokers, dealers, institutional
investors and undertakings with a treasury department, who or which trade or
invest in securities in the conduct of a business or profession.

The Goldman Sachs Group, Inc. has applied to list these notes on the
Luxembourg Stock Exchange but cannot assure you that these notes will be
approved for listing.

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<PAGE> 24

LISTING AND GENERAL INFORMATION

The board of directors, and the Public Debt Committee of the board of
directors, of The Goldman Sachs Group, Inc. authorized the issuance of the notes
by resolutions dated March 29, 1999, March 13, 2000 and March 17, 2000.

Euroclear and Clearstream, Luxembourg have accepted the notes for clearance
through their systems. For the notes due , the Common Code is and
the International Security Identification Number (ISIN) is and for the
notes due , the Common Code is and the ISIN is .

The Goldman Sachs Group, Inc. has applied to list the notes on the
Luxembourg Stock Exchange. Prior to the listing, a legal notice relating to the
notes with The Goldman Sachs Group, Inc.'s certificate of incorporation and
by-laws will be registered with the Greffier en Chef du Tribunal
d'Arrondissement de et a Luxembourg, where copies may be obtained upon request.

As long as the notes are listed on the Luxembourg Stock Exchange, The
Goldman Sachs Group, Inc. will maintain a paying agent in Luxembourg. The
initial paying agent and listing agent in Luxembourg is Banque Internationale a
Luxembourg S.A.

As long as any notes remain outstanding, you may obtain copies of our
certificate of incorporation, by-laws and most recent annual report on Form
10-K, quarterly reports on Form 10-Q and current reports on Form 8-K during
normal business hours on any weekday (except Saturdays, Sundays and public
holidays) at the specified office of, or upon written request to, the trustee
and, as long as the notes are listed on the Luxembourg Stock Exchange and its
rules require, free of charge at the office of the listing agent in Luxembourg.
In addition, a copy of the indenture will be available for inspection at those
offices during those hours.

There has been no material adverse change in the consolidated financial
position of The Goldman Sachs Group, Inc. and its consolidated subsidiaries
taken as a whole since August 25, 2000, except as disclosed or contemplated in
this prospectus supplement and the accompanying prospectus or in the documents
incorporated by reference.

Neither The Goldman Sachs Group, Inc. nor any of its subsidiaries is a
party to any litigation that, in The Goldman Sachs Group, Inc.'s judgment, is
material in the context of the issue of the notes, except as disclosed or
contemplated in this prospectus supplement or the accompanying prospectus or in
the documents incorporated by reference.

The Luxembourg Stock Exchange takes no responsibility for the contents of
this document, makes no representation as to its accuracy or completeness and
expressly disclaims any liability whatsoever for any loss howsoever arising from
or in reliance upon the whole or any part of the contents of this prospectus
supplement or the accompanying prospectus.

This prospectus supplement and the accompanying prospectus may be used only
for the purposes for which they were published. This prospectus supplement and
the accompanying prospectus together represent an offer to sell the notes but
only under circumstances and in jurisdictions where it is lawful to do so.

You should rely only on information contained or incorporated by reference
in this prospectus supplement and the accompanying prospectus. No person has
been authorized to give any information or to make any representations other
than those contained in this prospectus supplement and the accompanying
prospectus in connection with the issue or sale of the notes, and if given or
made, such information or representations must not be relied upon as having been
authorized by The Goldman Sachs Group, Inc. or the underwriters. Neither the
delivery of this prospectus supplement nor the delivery of the accompanying
prospectus shall, under any circumstances, create any implication that there has
been no change in affairs of The Goldman Sachs Group, Inc. since the date on the
cover of this prospectus supplement.

S-24
<PAGE> 25

$25,000,000,000

THE GOLDMAN SACHS GROUP, INC.

[GOLDMAN SACHS LOGO] Debt Securities

Warrants

Purchase Contracts

Units

Preferred Stock

Depositary Shares
----------------------

The Goldman Sachs Group, Inc. from time to time may offer to sell debt
securities, warrants and purchase contracts, either individually or in units, as
well as preferred stock, either directly or represented by depositary shares.
The total amount of these securities will have an initial aggregate offering
price of up to $25,000,000,000, or the equivalent amount in other currencies,
currency units or composite currencies, although Goldman Sachs may increase this
amount in the future.

Goldman Sachs may offer and sell these securities to or through one or more
underwriters, dealers and agents, including the firm named below, or directly to
purchasers, on a continuous or delayed basis.

This prospectus describes some of the general terms that may apply to these
securities and the general manner in which they may be offered. The specific
terms of any securities to be offered, and the specific manner in which they may
be offered, will be described in a supplement to this prospectus.

----------------------

Goldman Sachs may use this prospectus in the initial sale of these
securities. In addition, Goldman, Sachs & Co. or any other affiliate of Goldman
Sachs may use this prospectus in a market-making transaction in any of these or
similar securities after their initial sale. UNLESS GOLDMAN SACHS OR ITS AGENT
INFORMS THE PURCHASER OTHERWISE IN THE CONFIRMATION OF SALE, THIS PROSPECTUS IS
BEING USED IN A MARKET-MAKING TRANSACTION.

----------------------

GOLDMAN, SACHS & CO.
----------------------

Prospectus dated May 8, 2000.
<PAGE> 26

TABLE OF CONTENTS

<TABLE>
<S> <C>
Available Information....................................... ii
Prospectus Summary.......................................... 1
Ratio of Earnings to Fixed Charges.......................... 4
Description of Debt Securities We May Offer................. 5
Description of Warrants We May Offer........................ 27
Description of Purchase Contracts We May Offer.............. 33
Description of Units We May Offer........................... 38
Description of Preferred Stock We May Offer................. 43
Legal Ownership and Book-Entry Issuance..................... 50
Considerations Relating to Securities Issued in Bearer
Form...................................................... 56
Considerations Relating to Indexed Securities............... 60
Considerations Relating to Securities Denominated or Payable
in or Linked to a Non-U.S. Dollar Currency................ 62
United States Taxation...................................... 65
Plan of Distribution........................................ 83
Employee Retirement Income Security Act..................... 86
Validity of the Securities.................................. 86
Experts..................................................... 86
Cautionary Statement Pursuant to the Private Securities
Litigation Reform Act of 1995............................. 87
</TABLE>

i
<PAGE> 27

AVAILABLE INFORMATION

The Goldman Sachs Group, Inc. is required to file annual, quarterly and
current reports, proxy statements and other information with the SEC. You may
read and copy any documents filed by us at the SEC's public reference room at
450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room. Our filings
with the SEC are also available to the public through the SEC's Internet site at
http://www.sec.gov and through the NYSE, 20 Broad Street, New York, New York
10005, on which our common stock is listed.

We have filed a registration statement on Form S-3 with the SEC relating to
the securities covered by this prospectus. This prospectus is a part of the
registration statement and does not contain all of the information in the
registration statement. Whenever a reference is made in this prospectus to a
contract or other document of Goldman Sachs, please be aware that the reference
is only a summary and that you should refer to the exhibits that are a part of
the registration statement for a copy of the contract or other document. You may
review a copy of the registration statement at the SEC's public reference room
in Washington, D.C., as well as through the SEC's Internet site.

The SEC's rules allow us to "incorporate by reference" information into
this prospectus. This means that we can disclose important information to you by
referring you to another document. Any information referred to in this way is
considered part of this prospectus from the date we file that document. Any
reports filed by us with the SEC after the date of this prospectus and before
the date that the offering of the securities by means of this prospectus is
terminated will automatically update and, where applicable, supersede any
information contained in this prospectus or incorporated by reference in this
prospectus.

The Goldman Sachs Group, Inc. incorporates by reference into this
prospectus the following documents or information filed with the SEC:

(1) Annual Report on Form 10-K for the fiscal year ended November 26, 1999
(File No. 001-14965);

(2) Quarterly Report on Form 10-Q for the quarter ended February 25, 2000
(File No. 001-14965);

(3) Current Report on Form 8-K, dated March 21, 2000 (File No. 001-14965);

(4) Current Report on Form 8-K, dated May 4, 2000 (File No. 001-14965);

(5) The description of common stock contained in the Registration Statement
on Form 8-A, dated April 27, 1999 (File No. 001-14965), of The Goldman
Sachs Group, Inc., filed with the SEC under Section 12(b) of the
Securities Exchange Act of 1934; and

(6) All documents filed by The Goldman Sachs Group, Inc. under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after
the date of this prospectus and before the termination of this
offering.

We will provide without charge to each person, including any beneficial
owner, to whom this prospectus is delivered, upon his or her written or oral
request, a copy of any or all documents referred to above which have been or may
be incorporated by reference into this prospectus, excluding exhibits to those
documents unless they are specifically incorporated by reference into those
documents. You can request those documents from our Director of Investor
Relations, 10 Hanover Square, New York, New York 10005, telephone (212)
357-2674.

ii
<PAGE> 28

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus or
incorporated by reference into this prospectus as further described above under
"Available Information". This summary does not contain all the information that
you should consider before investing in the securities being offered by this
prospectus. You should carefully read the entire prospectus, the documents
incorporated by reference into this prospectus and the prospectus supplement
relating to the securities that you propose to buy, especially any description
of investment risks that we may include in the prospectus supplement.

GOLDMAN SACHS

Goldman Sachs is a leading global investment banking and securities firm,
providing a full range of investing, advisory and financing services worldwide
to a substantial and diversified client base, which includes corporations,
financial institutions, governments and high-net-worth individuals. Founded in
1869, we are one of the oldest and largest investment banking firms. Our
headquarters are located at 85 Broad Street, New York, New York 10004, telephone
(212) 902-1000, and we maintain offices in London, Frankfurt, Tokyo, Hong Kong
and other major financial centers around the world.

THE SECURITIES WE ARE OFFERING

We may offer any of the following securities from time to time:

-- debt securities;

-- warrants;

-- purchase contracts;

-- units, comprised of two or more debt securities, warrants and purchase
contracts, in any combination; and

-- preferred stock, either directly or represented by depositary shares.

When we use the term "securities" in this prospectus, we mean any of the
securities we may offer with this prospectus, unless we say otherwise. This
prospectus, including the following summary, describes the general terms that
may apply to the securities; the specific terms of any particular securities
that we may offer will be described in a separate supplement to this prospectus.

DEBT SECURITIES

Our debt securities may be senior or subordinated in right of payment. For
any particular debt securities we offer, the applicable prospectus supplement
will describe the specific designation, the aggregate principal or face amount
and the purchase price; the ranking, whether senior or subordinated; the stated
maturity; the redemption terms, if any; the rate or manner of calculating the
rate and the payment dates for interest, if any; the amount or manner of
calculating the amount payable at maturity and whether that amount may be paid
by delivering cash, securities or other property; and any other specific terms.
We will issue the senior and subordinated debt securities under separate
indentures between us and The Bank of New York, as trustee.

1
<PAGE> 29

WARRANTS

We may offer two types of warrants:

-- warrants to purchase our debt securities; and

-- warrants to purchase or sell, or whose cash value is determined by
reference to the performance, level or value of, one or more of the
following:

-- securities of one or more issuers other than The Goldman Sachs Group,
Inc.;

-- one or more currencies;

-- one or more commodities;

-- any other financial, economic or other measure or instrument,
including the occurrence or non-occurrence of any event or
circumstance; and

-- one or more indices or baskets of the items described above.

For any particular warrants we offer, the applicable prospectus supplement
will describe the underlying property; the expiration date; the exercise price
or the manner of determining the exercise price; the amount and kind, or the
manner of determining the amount and kind, of property to be delivered by you or
us upon exercise; and any other specific terms. We may issue the warrants under
warrant agreements between us and one or more warrant agents.

PURCHASE CONTRACTS

We may offer purchase contracts for the purchase or sale of, or whose cash
value is determined by reference to the performance, level or value of, one or
more of the following:

-- securities of one or more issuers, including our securities described
in this prospectus and securities of third parties;

-- one or more currencies;

-- one or more commodities;

-- any other financial, economic or other measure or instrument,
including the occurrence or non-occurrence of any event or
circumstance; and

-- one or more indices or baskets of the items described above.

For any particular purchase contracts we offer, the applicable prospectus
supplement will describe the underlying property; the settlement date; the
purchase price or manner of determining the purchase price and whether it must
be paid when the purchase contract is issued or at a later date; the amount and
kind, or the manner of determining the amount and kind, of property to be
delivered at settlement; whether the holder will pledge property to secure the
performance of any obligations the holder may have under the purchase contract;
and any other specific terms. We may issue purchase contracts under an indenture
described above or a unit agreement described below.

UNITS

We may offer units, comprised of two or more debt securities, warrants and
purchase contracts, in any combination. For any particular units we offer, the
applicable prospectus supplement will describe the particular securities
comprising each unit; the terms on which those securities will be separable, if
any; whether the holder will pledge property to secure the performance of any
obligations the holder may have under the unit; and any other specific terms of
the units. We may issue the units under unit agreements between us and one or
more unit agents.

2
<PAGE> 30

PREFERRED STOCK AND DEPOSITARY SHARES

We may offer our preferred stock, par value $0.01 per share, in one or more
series. For any particular series we offer, the applicable prospectus supplement
will describe the specific designation; the aggregate number of shares offered;
the rate and periods, or manner of calculating the rate and periods, for
dividends, if any; the stated value and liquidation preference amount, if any;
the voting rights, if any; the terms on which the series will be convertible
into or exchangeable for other securities or property, if any; the redemption
terms, if any; and any other specific terms. We may also offer depositary
shares, each of which would represent an interest in a fractional share or
multiple shares of preferred stock. We may issue the depositary shares under
deposit agreements between us and one or more depositaries.

FORM OF SECURITIES

We will issue the securities in book-entry form through one or more
depositaries, such as The Depository Trust Company, Euroclear or Clearstream,
Luxembourg, named in the applicable prospectus supplement. Each sale of a
security in book-entry form will settle in immediately available funds through
the depositary, unless otherwise stated. We will issue the securities only in
registered form, without coupons, although we may issue the securities in bearer
form if so specified in the applicable prospectus supplement.

PAYMENT CURRENCIES

Amounts payable in respect of the securities, including the purchase price,
will be payable in U.S. dollars, unless the applicable prospectus supplement
says otherwise.

LISTING

If any securities are to be listed or quoted on a securities exchange or
quotation system, the applicable prospectus supplement will say so.

USE OF PROCEEDS

We intend to use the net proceeds from the sales of securities to provide
additional funds for our operations and for other general corporate purposes.

MANNER OF OFFERING

The securities will be offered in connection with their initial issuance or
in market-making transactions by our affiliates after initial issuance. Those
offered in market-making transactions may be securities that we will not issue
until after the date of this prospectus as well as debt securities that we have
previously issued. The initial aggregate offering price specified on the cover
of this prospectus relates to the securities that we have not yet issued.

When we issue new securities, we may offer them for sale to or through
underwriters, dealers and agents, including our affiliates, or directly to
purchasers. The applicable prospectus supplement will include any required
information about the firms we use and the discounts or commissions we may pay
them for their services.

Our affiliates that we refer to above may include Goldman, Sachs & Co., for
offers and sales in the United States, and Goldman Sachs International and
Goldman Sachs (Asia) L.L.C., for offers and sales outside the United States.

3
<PAGE> 31

RATIO OF EARNINGS TO FIXED CHARGES

The Goldman Sachs Group, Inc.'s consolidated ratios of earnings to fixed
charges for the three-month periods ended February 26, 1999 and February 25,
2000 and for each of the fiscal years ended November 24, 1995, November 29,
1996, November 28, 1997, November 27, 1998 and November 26, 1999, respectively,
are as follows:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED NOVEMBER ENDED FEBRUARY
----------------------------------------- ---------------
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges
(unaudited)(1)(2)..................... 1.14x 1.23x 1.23x 1.21x 1.16x 1.41x 1.42x
</TABLE>

---------------
(1) Our pre-tax earnings in fiscal year 1999 and the three-month period ended
February 25, 2000 reflect payments for services rendered by managing
directors who, before our conversion to corporate form, were profit
participating limited partners. In prior years, and for the three months
ended February 26, 1999, these payments were accounted for as distributions
of partners' capital rather than as compensation and benefits expense. As a
result, these payments are not reflected in operating expenses in fiscal
year 1995, 1996, 1997 or 1998 or the three months ended February 26, 1999
and, therefore, the pre-tax earnings in these periods are not comparable to
fiscal year 1999 and the three-month period ended February 25, 2000. Please
refer to our consolidated financial statements and their notes, which are
incorporated into this prospectus by reference, for further information. See
"Available Information" above for information about how to obtain copies of
our consolidated financial statements.

(2) For purposes of the ratio of earnings to fixed charges, "earnings" represent
pre-tax earnings plus fixed charges and "fixed charges" represent interest
expense plus that portion of rent expense that, in our opinion, approximates
the interest factor included in rent expense.

As of the date of this prospectus, we have no preferred stock outstanding.

4
<PAGE> 32

DESCRIPTION OF DEBT SECURITIES WE MAY OFFER

Please note that in this section entitled "Description of Debt Securities We May
Offer", references to The Goldman Sachs Group, Inc., "we", "our" and "us" refer
only to The Goldman Sachs Group, Inc. and not to its consolidated subsidiaries.
Also, in this section, references to "holders" mean those who own debt
securities registered in their own names, on the books that we or the trustee
maintain for this purpose, and not those who own beneficial interests in debt
securities registered in street name or in debt securities issued in book-entry
form through one or more depositaries. Owners of beneficial interests in the
debt securities should read the section below entitled "Legal Ownership and
Book-Entry Issuance".

DEBT SECURITIES MAY BE SENIOR OR SUBORDINATED

We may issue senior or subordinated debt securities. Neither the senior
debt securities nor the subordinated debt securities will be secured by any
property or assets of The Goldman Sachs Group, Inc. or its subsidiaries. Thus,
by owning a debt security, you are one of our unsecured creditors.

The senior debt securities and, in the case of senior debt securities in
bearer form, any related interest coupons will constitute part of our senior
debt, will be issued under our senior debt indenture described below and will
rank on a parity with all of our other unsecured and unsubordinated debt.

The subordinated debt securities and, in the case of subordinated debt
securities in bearer form, any related interest coupons will constitute part of
our subordinated debt, will be issued under our subordinated debt indenture
described below and will be subordinate in right of payment to all of our
"senior indebtedness", as defined in the subordinated debt indenture. The
prospectus supplement for any series of subordinated debt securities or the
information incorporated in this prospectus by reference will indicate the
approximate amount of senior indebtedness outstanding as of the end of our most
recent fiscal quarter. Neither indenture limits our ability to incur additional
senior indebtedness.

When we refer to "debt securities" in this prospectus, we mean both the
senior debt securities and the subordinated debt securities.

THE SENIOR DEBT INDENTURE AND THE SUBORDINATED DEBT INDENTURE

The senior debt securities and the subordinated debt securities are each
governed by a document called an indenture -- the senior debt indenture, in the
case of the senior debt securities, and the subordinated debt indenture, in the
case of the subordinated debt securities. Each indenture is a contract between
us and The Bank of New York, which will initially act as trustee. The indentures
are substantially identical, except for our covenant described below under
"-- Restriction on Liens", which is included only in the senior debt indenture,
and the provisions relating to subordination, which are included only in the
subordinated debt indenture.

The trustee under each indenture has two main roles:

-- First, the trustee can enforce your rights against us if we default.
There are some limitations on the extent to which the trustee acts on
your behalf, which we describe later under "-- Default, Remedies and
Waiver of Default".

-- Second, the trustee performs administrative duties for us, such as
sending you interest payments and notices.

See "-- Our Relationship With the Trustee" below for more information about the
trustee.

5
<PAGE> 33

When we refer to the indenture or the trustee with respect to any debt
securities, we mean the indenture under which those debt securities are issued
and the trustee under that indenture.

WE MAY ISSUE MANY SERIES OF DEBT SECURITIES

We may issue as many distinct series of debt securities under either
indenture as we wish. This section summarizes terms of the securities that apply
generally to all series. The provisions of each indenture allow us not only to
issue debt securities with terms different from those of debt securities
previously issued under that indenture, but also to "reopen" a previous issue of
a series of debt securities and issue additional debt securities of that series.
Most of the financial and other specific terms of your series, whether it be a
series of the senior debt securities or subordinated debt securities, are
described in the prospectus supplement to be attached to the front of this
prospectus. Those terms may vary from the terms described here.

As you read this section, please remember that the specific terms of your debt
security as described in your prospectus supplement will supplement and, if
applicable, may modify or replace the general terms described in this section.
If there are any differences between your prospectus supplement and this
prospectus, your prospectus supplement will control. Thus, the statements we
make in this section may not apply to your debt security.

When we refer to a series of debt securities, we mean a series issued under
the applicable indenture. When we refer to your prospectus supplement, we mean
the prospectus supplement describing the specific terms of the debt security you
purchase. The terms used in your prospectus supplement will have the meanings
described in this prospectus, unless otherwise specified.

AMOUNTS THAT WE MAY ISSUE

Neither indenture limits the aggregate amount of debt securities that we
may issue or the number of series or the aggregate amount of any particular
series. We may issue debt securities and other securities in amounts that exceed
the total amount specified on the cover of this prospectus, at any time without
your consent and without notifying you.

The indentures and the debt securities do not limit our ability to incur
other indebtedness or to issue other securities. Also, we are not subject to
financial or similar restrictions by the terms of the debt securities, except as
described below under "-- Restriction on Liens".

PRINCIPAL AMOUNT, STATED MATURITY AND MATURITY

The principal amount of a debt security means the principal amount payable
at its stated maturity, unless that amount is not determinable, in which case
the principal amount of a debt security is its face amount. Any debt securities
owned by us or any of our affiliates are not deemed to be outstanding.

The term "stated maturity" with respect to any debt security means the day
on which the principal amount of your debt security is scheduled to become due.
The principal may become due sooner, by reason of redemption or acceleration
after a default or otherwise in accordance with the terms of the debt security.
The day on which the principal actually becomes due, whether at the stated
maturity or earlier, is called the maturity of the principal.

We also use the terms "stated maturity" and "maturity" to refer to the days
when other payments become due. For example, we may refer to a regular interest
payment date when an installment of interest is scheduled to become due as the
"stated maturity" of that installment.

6
<PAGE> 34

When we refer to the "stated maturity" or the "maturity" of a debt security
without specifying a particular payment, we mean the stated maturity or
maturity, as the case may be, of the principal.

WE ARE A HOLDING COMPANY

Because our assets consist principally of interests in the subsidiaries
through which we conduct our businesses, our right to participate as an equity
holder in any distribution of assets of any of our subsidiaries upon the
subsidiary's liquidation or otherwise, and thus the ability of our security
holders to benefit from the distribution, is junior to creditors of the
subsidiary, except to the extent that any claims we may have as a creditor of
the subsidiary are recognized. In addition, dividends, loans and advances to us
from some of our subsidiaries, including Goldman, Sachs & Co., are restricted by
net capital requirements under the Securities Exchange Act of 1934 and under
rules of securities exchanges and other regulatory bodies. Furthermore, because
some of our subsidiaries, including Goldman, Sachs & Co., are partnerships in
which we are a general partner, we may be liable for their obligations. We also
guarantee many of the obligations of our subsidiaries. Any liability we may have
for our subsidiaries' obligations could reduce our assets that are available to
satisfy our direct creditors, including investors in our securities.

THIS SECTION IS ONLY A SUMMARY

The indentures and their associated documents, including your debt
security, contain the full legal text of the matters described in this section
and your prospectus supplement. We have filed copies of the indentures with the
SEC as exhibits to our registration statement. See "Available Information" above
for information on how to obtain copies of them.

This section and your prospectus supplement summarize all the material
terms of the indentures and your debt security. They do not, however, describe
every aspect of the indentures and your debt security. For example, in this
section and your prospectus supplement, we use terms that have been given
special meaning in the indentures, but we describe the meaning for only the more
important of those terms.

GOVERNING LAW

The indentures and the debt securities will be governed by New York law.

CURRENCY OF DEBT SECURITIES

Amounts that become due and payable on your debt security in cash will be
payable in a currency, composite currency, basket of currencies or currency unit
or units specified in your prospectus supplement. We refer to this currency,
composite currency, basket of currencies or currency unit or units as a
"specified currency". The specified currency for your debt security will be U.S.
dollars, unless your prospectus supplement states otherwise. Some debt
securities may have different specified currencies for principal and interest.
You will have to pay for your debt securities by delivering the requisite amount
of the specified currency for the principal to Goldman, Sachs & Co. or another
firm that we name in your prospectus supplement, unless other arrangements have
been made between you and us or you and that firm. We will make payments on your
debt securities in the specified currency, except as described below in
"-- Payment Mechanics for Debt Securities". See "Considerations Relating to
Securities Denominated or Payable in or Linked to a Non-U.S. Dollar Currency"
below for more information about risks of investing in debt securities of this
kind.

7
<PAGE> 35

FORM OF DEBT SECURITIES

We will issue each debt security in global -- i.e., book-entry -- form
only, unless we specify otherwise in the applicable prospectus supplement. Debt
securities in book-entry form will be represented by a global security
registered in the name of a depositary, which will be the holder of all the debt
securities represented by the global security. Those who own beneficial
interests in a global debt security will do so through participants in the
depositary's securities clearance system, and the rights of these indirect
owners will be governed solely by the applicable procedures of the depositary
and its participants. We describe book-entry securities below under "Legal
Ownership and Book-Entry Issuance".

In addition, we will generally issue each debt security in registered form,
without coupons, unless we specify otherwise in the applicable prospectus
supplement. If we issue a debt security in bearer form, the provisions described
below under "Considerations Relating to Securities Issued in Bearer Form" would
apply to that security. As we note in that section, some of the features of the
debt securities that we describe in this prospectus may not apply to bearer debt
securities.

TYPES OF DEBT SECURITIES

We may issue any of the following three types of senior debt securities or
subordinated debt securities:

FIXED RATE DEBT SECURITIES

A debt security of this type will bear interest at a fixed rate described
in the applicable prospectus supplement. This type includes zero coupon debt
securities, which bear no interest and are instead issued at a price lower than
the principal amount. See "-- Original Issue Discount Debt Securities" below for
more information about zero coupon and other original issue discount debt
securities.

Each fixed rate debt security, except any zero coupon debt security, will
bear interest from its original issue date or from the most recent date to which
interest on the debt security has been paid or made available for payment.
Interest will accrue on the principal of a fixed rate debt security at the fixed
yearly rate stated in the applicable prospectus supplement, until the principal
is paid or made available for payment. Each payment of interest due on an
interest payment date or the date of maturity will include interest accrued from
and including the last date to which interest has been paid, or made available
for payment, or from the issue date if none has been paid or made available for
payment, to but excluding the interest payment date or the date of maturity. We
will compute interest on fixed rate debt securities on the basis of a 360-day
year of twelve 30-day months. We will pay interest on each interest payment date
and at maturity as described below under "-- Payment Mechanics for Debt
Securities".

FLOATING RATE DEBT SECURITIES

A debt security of this type will bear interest at rates that are
determined by reference to an interest rate formula. In some cases, the rates
may also be adjusted by adding or subtracting a spread or multiplying by a
spread multiplier and may be subject to a minimum rate or a maximum rate. If
your debt security is a floating rate debt security, the formula and any
adjustments that apply to the interest rate will be specified in your prospectus
supplement.

Each floating rate debt security will bear interest from its original issue
date or from the most recent date to which interest on the debt security has
been paid or made available for payment. Interest will accrue on the principal
of a floating rate debt security at the yearly rate determined according to the
interest rate formula stated in the applicable prospectus supplement, until the
principal is paid or made available for payment. We will pay interest on each
interest payment date and at maturity as described below under "-- Payment
Mechanics for Debt Securities".
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CALCULATION OF INTEREST. Calculations relating to floating rate debt
securities will be made by the calculation agent, an institution that we appoint
as our agent for this purpose. That institution may include any affiliate of
ours, such as Goldman, Sachs & Co. The prospectus supplement for a particular
floating rate debt security will name the institution that we have appointed to
act as the calculation agent for that debt security as of its original issue
date. We may appoint a different institution to serve as calculation agent from
time to time after the original issue date of the debt security without your
consent and without notifying you of the change.

For each floating rate debt security, the calculation agent will determine,
on the corresponding interest calculation or determination date, as described in
the applicable prospectus supplement, the interest rate that takes effect on
each interest reset date. In addition, the calculation agent will calculate the
amount of interest that has accrued during each interest period -- i.e., the
period from and including the original issue date, or the last date to which
interest has been paid or made available for payment, to but excluding the
payment date. For each interest period, the calculation agent will calculate the
amount of accrued interest by multiplying the face or other specified amount of
the floating rate debt security by an accrued interest factor for the interest
period. This factor will equal the sum of the interest factors calculated for
each day during the interest period. The interest factor for each day will be
expressed as a decimal and will be calculated by dividing the interest rate,
also expressed as a decimal, applicable to that day by 360 or by the actual
number of days in the year, as specified in the applicable prospectus
supplement.

Upon the request of the holder of any floating rate debt security, the
calculation agent will provide for that debt security the interest rate then in
effect -- and, if determined, the interest rate that will become effective on
the next interest reset date. The calculation agent's determination of any
interest rate, and its calculation of the amount of interest for any interest
period, will be final and binding in the absence of manifest error.

All percentages resulting from any calculation relating to a debt security
will be rounded upward or downward, as appropriate, to the next higher or lower
one hundred-thousandth of a percentage point, e.g., 9.876541% (or .09876541)
being rounded down to 9.87654% (or .0987654) and 9.876545% (or .09876545) being
rounded up to 9.87655% (or .0987655). All amounts used in or resulting from any
calculation relating to a floating rate debt security will be rounded upward or
downward, as appropriate, to the nearest cent, in the case of U.S. dollars, or
to the nearest corresponding hundredth of a unit, in the case of a currency
other than U.S. dollars, with one-half cent or one-half of a corresponding
hundredth of a unit or more being rounded upward.

In determining the base rate that applies to a floating rate debt security
during a particular interest period, the calculation agent may obtain rate
quotes from various banks or dealers active in the relevant market, as described
in the applicable prospectus supplement. Those reference banks and dealers may
include the calculation agent itself and its affiliates, as well as any
underwriter, dealer or agent participating in the distribution of the relevant
floating rate debt securities and its affiliates, and they may include
affiliates of The Goldman Sachs Group, Inc.

INDEXED DEBT SECURITIES

A debt security of this type provides that the principal amount payable at
its maturity, and/or the amount of interest payable on an interest payment date,
will be determined by reference to:

-- securities of one or more issuers;

-- one or more currencies;

-- one or more commodities;

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-- any other financial, economic or other measure or instrument,
including the occurrence or non-occurrence of any event or
circumstance; and/or

-- one or more indices or baskets of the items described above.

If you are a holder of an indexed debt security, you may receive an amount at
maturity that is greater than or less than the face amount of your debt security
depending upon the value of the applicable index at maturity. The value of the
applicable index will fluctuate over time.

An indexed debt security may provide either for cash settlement or for
physical settlement by delivery of the underlying property or another property
of the type listed above. An indexed debt security may also provide that the
form of settlement may be determined at our option or at the holder's option.
Some indexed debt securities may be exchangeable, at our option or the holder's
option, for securities of an issuer other than The Goldman Sachs Group, Inc.

If you purchase an indexed debt security, your prospectus supplement will
include information about the relevant index, about how amounts that are to
become payable will be determined by reference to the price or value of that
index and about the terms on which the security may be settled physically or in
cash. The prospectus supplement will also identify the calculation agent that
will calculate the amounts payable with respect to the indexed debt security and
may exercise significant discretion in doing so. The calculation agent may be
Goldman, Sachs & Co. or another of our affiliates. See "Considerations Relating
to Indexed Securities" for more information about risks of investing in debt
securities of this type.

ORIGINAL ISSUE DISCOUNT DEBT SECURITIES

A fixed rate debt security, a floating rate debt security or an indexed
debt security may be an original issue discount debt security. A debt security
of this type is issued at a price lower than its principal amount and provides
that, upon redemption or acceleration of its maturity, an amount less than its
principal amount will be payable. An original issue discount debt security may
be a zero coupon debt security. A debt security issued at a discount to its
principal may, for U.S. federal income tax purposes, be considered an original
issue discount debt security, regardless of the amount payable upon redemption
or acceleration of maturity. See "United States Taxation -- Taxation of Debt
Securities -- United States Holders -- Original Issue Discount" below for a
brief description of the U.S. federal income tax consequences of owning an
original issue discount debt security.

INFORMATION IN THE PROSPECTUS SUPPLEMENT

Your prospectus supplement will describe the specific terms of your debt
security, which will include some or all of the following:

-- whether it is a senior debt security or a subordinated debt security;

-- any limit on the total principal amount of the debt securities of the
same series;

-- the stated maturity;

-- the specified currency or currencies for principal and interest, if
not U.S. dollars;

-- the price at which we originally issue your debt security, expressed
as a percentage of the principal amount, and the original issue date;

-- whether your debt security is a fixed rate debt security, a floating
rate debt security or an indexed debt security;

-- if your debt security is a fixed rate debt security, the yearly rate
at which your debt security will bear interest, if any, and the
interest payment dates;

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-- if your debt security is a floating rate debt security, the interest
rate basis; any applicable index currency or maturity, spread or
spread multiplier or initial, maximum or minimum rate; the interest
reset, determination, calculation and payment dates; the day count
used to calculate interest payments for any period; and the
calculation agent;

-- if your debt security is an indexed debt security, the principal
amount, if any, we will pay you at maturity, the amount of interest,
if any, we will pay you on an interest payment date or the formula we
will use to calculate these amounts, if any, and the terms on which
your debt security will be exchangeable for or payable in cash,
securities or other property;

-- if your debt security is also an original issue discount debt
security, the yield to maturity;

-- if applicable, the circumstances under which your debt security may be
redeemed at our option or repaid at the holder's option before the
stated maturity, including any redemption commencement date, repayment
date(s), redemption price(s) and redemption period(s);

-- the authorized denominations, if other than $1,000 and integral
multiples of $1,000;

-- the depositary for your debt security, if other than DTC, and any
circumstances under which the holder may request securities in
non-global form, if we choose not to issue your debt security in
book-entry form only;

-- if your debt security will be issued in bearer form, any special
provisions relating to bearer securities that are not addressed in
this prospectus;

-- if applicable, the circumstances under which we will pay additional
amounts on any debt securities held by a person who is not a United
States person for tax purposes and under which we can redeem the debt
securities if we have to pay additional amounts;

-- the names and duties of any co-trustees, depositaries, authenticating
agents, paying agents, transfer agents or registrars for your debt
security; and

-- any other terms of your debt security, which could be different from
those described in this prospectus.

MARKET-MAKING TRANSACTIONS. If you purchase your debt security -- or any
of our other securities we describe in this prospectus -- in a market-making
transaction, you will receive information about the price you pay and your trade
and settlement dates in a separate confirmation of sale. A market-making
transaction is one in which Goldman, Sachs & Co. or another of our affiliates
resells a security that it has previously acquired from another holder. A
market-making transaction in a particular security occurs after the original
issuance and sale of the security.

REDEMPTION AND REPAYMENT

Unless otherwise indicated in your prospectus supplement, your debt
security will not be entitled to the benefit of any sinking fund -- that is, we
will not deposit money on a regular basis into any separate custodial account to
repay your debt securities. In addition, we will not be entitled to redeem your
debt security before its stated maturity unless your prospectus supplement
specifies a redemption commencement date. You will not be entitled to require us
to buy your debt security from you, before its stated maturity, unless your
prospectus supplement specifies one or more repayment dates.

If your prospectus supplement specifies a redemption commencement date or a
repayment date, it will also specify one or more redemption prices or repayment
prices, which may be expressed as a percentage of the principal amount of your
debt security. It may also specify one or more redemption periods during which
the redemption prices relating to a redemption of debt securities during those
periods will apply.

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If your prospectus supplement specifies a redemption commencement date,
your debt security will be redeemable at our option at any time on or after that
date or at a specified time or times. If we redeem your debt security, we will
do so at the specified redemption price, together with interest accrued to the
redemption date. If different prices are specified for different redemption
periods, the price we pay will be the price that applies to the redemption
period during which your debt security is redeemed.

If your prospectus supplement specifies a repayment date, your debt
security will be repayable at the holder's option on the specified repayment
date at the specified repayment price, together with interest accrued to the
repayment date.

If we exercise an option to redeem any debt security, we will give to the
trustee and the holder written notice of the principal amount of the debt
security to be redeemed, not less than 30 days nor more than 60 days before the
applicable redemption date. We will give the notice in the manner described
below in "-- Notices".

If a debt security represented by a global debt security is subject to
repayment at the holder's option, the depositary or its nominee, as the holder,
will be the only person that can exercise the right to repayment. Any indirect
owners who own beneficial interests in the global debt security and wish to
exercise a repayment right must give proper and timely instructions to their
banks or brokers through which they hold their interests, requesting that they
notify the depositary to exercise the repayment right on their behalf. Different
firms have different deadlines for accepting instructions from their customers,
and you should take care to act promptly enough to ensure that your request is
given effect by the depositary before the applicable deadline for exercise.

Street name and other indirect owners should contact their banks or brokers for
information about how to exercise a repayment right in a timely manner.

We or our affiliates may purchase debt securities from investors who are
willing to sell from time to time, either in the open market at prevailing
prices or in private transactions at negotiated prices. Debt securities that we
or they purchase may, at our discretion, be held, resold or cancelled.

MERGERS AND SIMILAR TRANSACTIONS

We are generally permitted to merge or consolidate with another corporation
or other entity. We are also permitted to sell our assets substantially as an
entirety to another corporation or other entity. With regard to any series of
debt securities, however, we may not take any of these actions unless all the
following conditions are met:

-- If the successor entity in the transaction is not The Goldman Sachs
Group, Inc., the successor entity must be organized as a corporation,
partnership, trust, limited liability company or other similar entity
and must expressly assume our obligations under the debt securities of
that series and the indenture with respect to that series. The
successor entity may be organized under the laws of any jurisdiction,
whether in the United States or elsewhere.

-- Immediately after the transaction, no default under the debt
securities of that series has occurred and is continuing. For this
purpose, "default under the debt securities of that series" means an
event of default with respect to that series or any event that would
be an event of default with respect to that series if the requirements
for giving us default notice and for our default having to continue
for a specific period of time were

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disregarded. We describe these matters below under "-- Default,
Remedies and Waiver of Default".

If the conditions described above are satisfied with respect to the debt
securities of any series, we will not need to obtain the approval of the holders
of those debt securities in order to merge or consolidate or to sell our assets.
Also, these conditions will apply only if we wish to merge or consolidate with
another entity or sell our assets substantially as an entirety to another
entity. We will not need to satisfy these conditions if we enter into other
types of transactions, including any transaction in which we acquire the stock
or assets of another entity, any transaction that involves a change of control
of The Goldman Sachs Group, Inc. but in which we do not merge or consolidate and
any transaction in which we sell less than substantially all our assets.

Also, if we merge, consolidate or sell our assets substantially as an
entirety and the successor is a non-U.S. entity, neither we nor any successor
would have any obligation to compensate you for any resulting adverse tax
consequences relating to your debt securities.

SUBORDINATION PROVISIONS

Holders of subordinated debt securities should recognize that contractual
provisions in the subordinated debt indenture may prohibit us from making
payments on those securities. Subordinated debt securities are subordinate in
right of payment, to the extent and in the manner stated in the subordinated
debt indenture, to all of our senior indebtedness, including all debt securities
we have issued and will issue under the senior debt indenture.

The subordinated debt indenture defines "senior indebtedness" as all
indebtedness and obligations of, or guaranteed or assumed by, The Goldman Sachs
Group, Inc. for borrowed money or evidenced by bonds, debentures, notes or other
similar instruments, whether existing now or in the future, and all amendments,
renewals, extensions, modifications and refundings of any indebtedness or
obligations of that kind. Senior debt excludes the subordinated debt securities
and any other indebtedness or obligations specifically designated as being
subordinate, or not superior, in right of payment to the subordinated debt
securities.

The subordinated debt indenture provides that, unless all principal of and
any premium or interest on the senior indebtedness has been paid in full, no
payment or other distribution may be made in respect of any subordinated debt
securities in the following circumstances:

-- in the event of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization, assignment for creditors or
other similar proceedings or events involving us or our assets;

-- (a) in the event and during the continuation of any default in the
payment of principal, premium or interest on any senior indebtedness
beyond any applicable grace period or (b) in the event that any event
of default with respect to any senior indebtedness has occurred and is
continuing, permitting the holders of that senior indebtedness (or a
trustee) to accelerate the maturity of that senior indebtedness,
whether or not the maturity is in fact accelerated (unless, in the
case of (a) or (b), the payment default or event of default has been
cured or waived or ceased to exist and any related acceleration has
been rescinded) or (c) in the event that any judicial proceeding is
pending with respect to a payment default or event of default
described in (a) or (b); or

-- in the event that any subordinated debt securities have been declared
due and payable before their stated maturity.

If the trustee under the subordinated debt indenture or any holders of the
subordinated debt securities receive any payment or distribution that is
prohibited under the subordination

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provisions, then the trustee or the holders will have to repay that money to the
holders of the senior indebtedness.

Even if the subordination provisions prevent us from making any payment
when due on the subordinated debt securities of any series, we will be in
default on our obligations under that series if we do not make the payment when
due. This means that the trustee under the subordinated debt indenture and the
holders of that series can take action against us, but they will not receive any
money until the claims of the holders of senior indebtedness have been fully
satisfied.

The subordinated debt indenture allows the holders of senior indebtedness
to obtain a court order requiring us and any holder of subordinated debt
securities to comply with the subordination provisions.

RESTRICTION ON LIENS

In the senior debt indenture, we promise, with respect to each series of
senior debt securities, not to create or guarantee any debt for borrowed money
that is secured by a lien on the voting or profit participating equity ownership
interests that we or any of our subsidiaries own in Goldman, Sachs & Co., or in
any subsidiary that beneficially owns or holds, directly or indirectly, those
interests in Goldman, Sachs & Co., unless we also secure the senior debt
securities of that series on an equal or priority basis with the other secured
debt. Our promise, however, is subject to an important exception: we may secure
debt for borrowed money with liens on those interests without securing the
senior debt securities of any series if our board of directors determines that
the liens do not materially detract from or interfere with the value or control
of those interests, as of the date of the determination.

The subordinated debt indenture does not include the promise described in the
preceding paragraph.

Except as noted above, neither indenture restricts our ability to put liens
on our interests in our subsidiaries other than Goldman, Sachs & Co., nor do the
indentures restrict our ability to sell or otherwise dispose of our interests in
any of our subsidiaries, including Goldman, Sachs & Co. In addition, the
restriction on liens in the senior debt indenture applies only to liens that
secure debt for borrowed money. For example, liens imposed by operation of law,
such as liens to secure statutory obligations for taxes or workers' compensation
benefits, or liens we create to secure obligations to pay legal judgments or
surety bonds, would not be covered by this restriction.

DEFEASANCE AND COVENANT DEFEASANCE

Unless we say otherwise in the applicable prospectus supplement, the
provisions for full defeasance and covenant defeasance described below apply to
each senior and subordinated debt security. In general, we expect these
provisions to apply to each debt security that has a specified currency of U.S.
dollars and is not a floating rate or indexed debt security.

FULL DEFEASANCE. If there is a change in U.S. federal tax law, as
described below, we can legally release ourselves from all payment and other
obligations on any debt securities. This is called full defeasance. For us to do
so, each of the following must occur:

-- We must deposit in trust for the benefit of all holders of those debt
securities a combination of money and U.S. government or U.S.
government agency notes or bonds that will generate enough cash to
make interest, principal and any other payments on those debt
securities on their various due dates;

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-- There must be a change in current U.S. federal tax law or an Internal
Revenue Service ruling that lets us make the above deposit without
causing the holders to be taxed on those debt securities any
differently than if we did not make the deposit and just repaid those
debt securities ourselves. Under current federal tax law, the deposit
and our legal release from your debt security would be treated as
though we took back your debt security and gave you your share of the
cash and notes or bonds deposited in trust. In that event, you could
recognize gain or loss on your debt security;

-- We must deliver to the trustee a legal opinion of our counsel
confirming the tax law change described above; and

-- In the case of the subordinated debt securities, the following
requirements must also be met:

-- No event or condition may exist that, under the provisions described
above under "-- Subordination Provisions" above, would prevent us
from making payments of principal, premium or interest on those
subordinated debt securities on the date of the deposit referred to
above or during the 90 days after that date; and

-- We must deliver to the trustee an opinion of counsel to the effect
that (a) the trust funds will not be subject to any rights of holders
of senior indebtedness and (b) after the 90-day period referred to
above, the trust funds will not be subject to any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, except that if a court were to rule
under any of those laws in any case or proceeding that the trust
funds remained our property, then the relevant trustee and the
holders of the subordinated debt securities would be entitled to some
enumerated rights as secured creditors in the trust funds.

If we ever fully defeased your debt security, you would have to rely solely
on the trust deposit for payments on your debt security. You would not be able
to look to us for payment in the event of any shortfall.

COVENANT DEFEASANCE. Under current U.S. federal tax law, we can make the
same type of deposit described above and be released from the restriction on
liens described under "-- Restriction on Liens" above and any other restrictive
covenants relating to your debt security that may be described in your
prospectus supplement. This is called covenant defeasance. In that event, you
would lose the protection of those restrictive covenants. In order to achieve
covenant defeasance for any debt securities, we must do both of the following:

-- We must deposit in trust for the benefit of the holders of those debt
securities a combination of money and U.S. government or U.S.
government agency notes or bonds that will generate enough cash to
make interest, principal and any other payments on those debt
securities on their various due dates; and

-- We must deliver to the trustee a legal opinion of our counsel
confirming that under current U.S. federal income tax law we may make
the above deposit without causing the holders to be taxed on those
debt securities any differently than if we did not make the deposit
and just repaid those debt securities ourselves.

In addition, in order to achieve covenant defeasance for any subordinated debt
securities that have the benefit of any restrictive covenants, both conditions
described in the last bullet point under "-- Full Defeasance" above must be
satisfied. Subordinated debt securities will not have the benefit of any
restrictive covenants unless the applicable prospectus supplement specifically
provides that they do.

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If we accomplish covenant defeasance with regard to your debt security, the
following provisions of the applicable indenture and your debt security would no
longer apply:

-- If your debt security is a senior debt security, our promise not to
create liens on our voting or profit participating equity ownership
interests in Goldman, Sachs & Co. described above under
"-- Restriction on Liens";

-- Any additional covenants that your prospectus supplement may state are
applicable to your debt security; and

-- The events of default resulting from a breach of covenants, described
below in the fourth bullet point under "-- Default, Remedies and
Waiver of Default -- Events of Default".

If we accomplish covenant defeasance on your debt security, you can still
look to us for repayment of your debt security in the event of any shortfall in
the trust deposit. You should note, however, that if one of the remaining events
of default occurred, such as our bankruptcy, and your debt security became
immediately due and payable, there may be a shortfall. Depending on the event
causing the default, you may not be able to obtain payment of the shortfall.

DEFAULT, REMEDIES AND WAIVER OF DEFAULT

You will have special rights if an event of default with respect to your
series of debt securities occurs and is continuing, as described in this
subsection.

EVENTS OF DEFAULT

When we refer to an event of default with respect to any series of debt
securities, we mean any of the following:

-- We do not pay the principal or any premium on any debt security of
that series on the due date;

-- We do not pay interest on any debt security of that series within 30
days after the due date;

-- We do not deposit a sinking fund payment with regard to any debt
security of that series on the due date, but only if the payment is
required under provisions described in the applicable prospectus
supplement;

-- We remain in breach of our covenant described above under
"-- Restriction on Liens", in the case of any series of senior debt
securities, or any other covenant we make in the indenture for the
benefit of the relevant series, for 60 days after we receive a notice
of default stating that we are in breach. The notice must be sent by
the trustee or the holders of not less than 10% in principal amount of
the relevant series of debt securities;

-- We file for bankruptcy or other events of bankruptcy, insolvency or
reorganization relating to The Goldman Sachs Group, Inc. occur. Those
events must arise under U.S. federal or state law, unless we merge,
consolidate or sell our assets as described above and the successor
firm is a non-U.S. entity. If that happens, then those events must
arise under U.S. federal or state law or the law of the jurisdiction
in which the successor firm is legally organized; or

-- If the applicable prospectus supplement states that any additional
event of default applies to the series, that event of default occurs.

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REMEDIES IF AN EVENT OF DEFAULT OCCURS

If you are the holder of a subordinated debt security, all the remedies
available upon the occurrence of an event of default under the subordinated debt
indenture will be subject to the restrictions on the subordinated debt
securities described above under "-- Subordination Provisions".

If an event of default has occurred with respect to any series of debt
securities and has not been cured or waived, the trustee or the holders of not
less than 25% in principal amount of all debt securities of that series may
declare the entire principal amount of the debt securities of that series to be
due immediately. If the event of default occurs because of events in bankruptcy,
insolvency or reorganization relating to The Goldman Sachs Group, Inc., the
entire principal amount of the debt securities of that series will be
automatically accelerated, without any action by the trustee or any holder.

Each of the situations described above is called an acceleration of the
maturity of the affected series of debt securities. If the maturity of any
series is accelerated and a judgment for payment has not yet been obtained, the
holders of a majority in principal amount of the debt securities of that series
may cancel the acceleration for the entire series.

If an event of default occurs, the trustee will have special duties. In
that situation, the trustee will be obligated to use those of its rights and
powers under the relevant indenture, and to use the same degree of care and
skill in doing so, that a prudent person would use in that situation in
conducting his or her own affairs.

Except as described in the prior paragraph, the trustee is not required to
take any action under the relevant indenture at the request of any holders
unless the holders offer the trustee reasonable protection from expenses and
liability. This is called an indemnity. If the trustee is provided with an
indemnity reasonably satisfactory to it, the holders of a majority in principal
amount of all debt securities of the relevant series may direct the time, method
and place of conducting any lawsuit or other formal legal action seeking any
remedy available to that trustee with respect to that series. These majority
holders may also direct the trustee in performing any other action under the
applicable indenture with respect to the debt securities of that series.

Before you bypass the trustee and bring your own lawsuit or other formal
legal action or take other steps to enforce your rights or protect your
interests relating to any debt security, the following must occur:

-- The holder of your debt security must give the trustee written notice
that an event of default has occurred, and the event of default must
not have been cured or waived.

-- The holders of not less than 25% in principal amount of all debt
securities of your series must make a written request that the trustee
take action because of the default, and they or other holders must
offer to the trustee indemnity reasonably satisfactory to the trustee
against the cost and other liabilities of taking that action.

-- The trustee must not have taken action for 60 days after the above
steps have been taken.

-- During those 60 days, the holders of a majority in principal amount of
the debt securities of your series must not have given the trustee
directions that are inconsistent with the written request of the
holders of not less than 25% in principal amount of the debt
securities of your series.

You are entitled at any time, however, to bring a lawsuit for the payment of
money due on your debt security on or after its due date.

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WAIVER OF DEFAULT

The holders of not less than a majority in principal amount of the debt
securities of any series may waive a default for all debt securities of that
series. If this happens, the default will be treated as if it has not occurred.
No one can waive a payment default on your debt security, however, without the
approval of the particular holder of that debt security.

WE WILL GIVE THE TRUSTEE INFORMATION ABOUT DEFAULTS ANNUALLY

We will furnish to each trustee every year a written statement of two of
our officers certifying that to their knowledge we are in compliance with the
applicable indenture and the debt securities issued under it, or else specifying
any default under the indenture.

Book-entry and other indirect owners should consult their banks or brokers for
information on how to give notice or direction to or make a request of the
trustee and how to declare or cancel an acceleration of the maturity. Book-entry
and other indirect owners are described below under "Legal Ownership and
Book-Entry Issuance".

MODIFICATION OF THE INDENTURES AND WAIVER OF COVENANTS

There are four types of changes we can make to a particular indenture and
the debt securities of any series issued under that indenture.

CHANGES REQUIRING EACH HOLDER'S APPROVAL

First, there are changes that cannot be made without the approval of each
holder of a debt security affected by the change under a particular indenture.
Here is a list of those types of changes:

-- change the stated maturity for any principal or interest payment on a
debt security;

-- reduce the principal amount, the amount payable on acceleration of the
maturity after a default, the interest rate or the redemption price
for a debt security;

-- permit redemption of a debt security if not previously permitted;

-- impair any right a holder may have to require repayment of its debt
security;

-- impair any right that a holder of an indexed debt security may have to
exchange the debt security for securities or other property;

-- change the currency of any payment on a debt security other than as
permitted by the debt security;

-- change the place of payment on a debt security, if it is in non-global
form;

-- impair a holder's right to sue for payment of any amount due on its
debt security;

-- reduce the percentage in principal amount of the debt securities of
any one or more affected series, taken together, the approval of whose
holders is needed to change the indenture or those debt securities;

-- reduce the percentage in principal amount of the debt securities of
any one or more affected series, taken separately or together, as the
case may be, the consent of whose holders is needed to waive our
compliance with the applicable indenture or to waive defaults; and

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-- change the provisions of the applicable indenture dealing with
modification and waiver in any other respect, except to increase any
required percentage referred to above or to add to the provisions that
cannot be changed or waived without approval.

CHANGES NOT REQUIRING APPROVAL

The second type of change does not require any approval by holders of the
debt securities of an affected series. These changes are limited to
clarifications and changes that would not adversely affect the debt securities
of that series in any material respect. Nor do we need any approval to make
changes that affect only debt securities to be issued under the applicable
indenture after the changes take effect.

We may also make changes or obtain waivers that do not adversely affect a
particular debt security, even if they affect other debt securities. In those
cases, we do not need to obtain the approval of the holder of that debt
security; we need only obtain any required approvals from the holders of the
affected debt securities.

MODIFICATION OF SUBORDINATION PROVISIONS

We may not amend the subordinated debt indenture to alter the subordination
of any outstanding subordinated debt securities without the written consent of
each holder of senior indebtedness then outstanding who would be adversely
affected. In addition, we may not modify the subordination provisions of the
subordinated debt indenture in a manner that would adversely affect the
outstanding subordinated debt securities of any one or more series in any
material respect, without the consent of the holders of a majority in aggregate
principal amount of all affected series, voting together as one class.

CHANGES REQUIRING MAJORITY APPROVAL

Any other change to a particular indenture and the debt securities issued
under that indenture would require the following approval:

-- If the change affects only the debt securities of a particular series,
it must be approved by the holders of a majority in principal amount
of the debt securities of that series.

-- If the change affects the debt securities of more than one series of
debt securities issued under the applicable indenture, it must be
approved by the holders of a majority in principal amount of all
series affected by the change, with the debt securities of all the
affected series voting together as one class for this purpose.

In each case, the required approval must be given by written consent.

The same majority approval would be required for us to obtain a waiver of
any of our covenants in either indenture. Our covenants include the promises we
make about merging and putting liens on our interests in Goldman, Sachs & Co.,
which we describe above under "-- Mergers and Similar Transactions" and
"-- Restrictions on Liens" and which, in the latter case, are only for the
benefit of the holders of our senior debt securities. If the holders approve a
waiver of a covenant, we will not have to comply with it. The holders, however,
cannot approve a waiver of any provision in a particular debt security, or in
the applicable indenture as it affects that debt security, that we cannot change
without the approval of the holder of that debt security as described above in
"-- Changes Requiring Each Holder's Approval", unless that holder approves the
waiver.

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<PAGE> 47

Book-entry and other indirect owners should consult their banks or brokers for
information on how approval may be granted or denied if we seek to change an
indenture or any debt securities or request a waiver.

SPECIAL RULES FOR ACTION BY HOLDERS

When holders take any action under either indenture, such as giving a
notice of default, declaring an acceleration, approving any change or waiver or
giving the trustee an instruction, we will apply the following rules.

ONLY OUTSTANDING DEBT SECURITIES ARE ELIGIBLE

Only holders of outstanding debt securities of the applicable series will
be eligible to participate in any action by holders of debt securities of that
series. Also, we will count only outstanding debt securities in determining
whether the various percentage requirements for taking action have been met. For
these purposes, a debt security will not be "outstanding":

-- if it has been surrendered for cancellation;

-- if we have deposited or set aside, in trust for its holder, money for
its payment or redemption;

-- if we have fully defeased it as described above under "-- Defeasance
and Covenant Defeasance -- Full Defeasance"; or

-- if we or one of our affiliates, such as Goldman, Sachs & Co., is the
owner.

ELIGIBLE PRINCIPAL AMOUNT OF SOME DEBT SECURITIES

In some situations, we may follow special rules in calculating the
principal amount of a debt security that is to be treated as outstanding for the
purposes described above. This may happen, for example, if the principal amount
is payable in a non-U.S. dollar currency, increases over time or is not to be
fixed until maturity.

For any debt security of the kind described below, we will decide how much
principal amount to attribute to the debt security as follows:

-- For an original issue discount debt security, we will use the
principal amount that would be due and payable on the action date if
the maturity of the debt security were accelerated to that date
because of a default;

-- For a debt security whose principal amount is not known, we will use
any amount that we indicate in the prospectus supplement for that debt
security. The principal amount of a debt security may not be known,
for example, because it is based on an index that changes from time to
time and the principal amount is not to be determined until a later
date; or

-- For debt securities with a principal amount denominated in one or more
non-U.S. dollar currencies or currency units, we will use the U.S.
dollar equivalent, which we will determine.

DETERMINING RECORD DATES FOR ACTION BY HOLDERS

We will generally be entitled to set any day as a record date for the
purpose of determining the holders that are entitled to take action under either
indenture. In certain limited circumstances, only the trustee will be entitled
to set a record date for action by holders. If we or the trustee set a record
date for an approval or other action to be taken by holders, that vote or

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action may be taken only by persons or entities who are holders on the record
date and must be taken during the period that we specify for this purpose, or
that the trustee specifies if it sets the record date. We or the trustee, as
applicable, may shorten or lengthen this period from time to time. This period,
however, may not extend beyond the 180th day after the record date for the
action. In addition, record dates for any global debt security may be set in
accordance with procedures established by the depositary from time to time.
Accordingly, record dates for global debt securities may differ from those for
other debt securities.

FORM, EXCHANGE AND TRANSFER OF DEBT SECURITIES

If any debt securities cease to be issued in registered global form, they
will be issued:

-- only in fully registered form;

-- without interest coupons; and

-- unless we indicate otherwise in your prospectus supplement, in
denominations of $1,000 and that are multiples of $1,000.

Holders may exchange their debt securities for debt securities of smaller
denominations or combined into fewer debt securities of larger denominations, as
long as the total principal amount is not changed.

Holders may exchange or transfer their debt securities at the office of the
trustee. They may also replace lost, stolen, destroyed or mutilated debt
securities at that office. We have appointed the trustee to act as our agent for
registering debt securities in the names of holders and transferring and
replacing debt securities. We may appoint another entity to perform these
functions or perform them ourselves.

Holders will not be required to pay a service charge to transfer or
exchange their debt securities, but they may be required to pay for any tax or
other governmental charge associated with the exchange or transfer. The transfer
or exchange, and any replacement, will be made only if our transfer agent is
satisfied with the holder's proof of legal ownership. The transfer agent may
require an indemnity before replacing any debt securities.

If we have designated additional transfer agents for your debt security,
they will be named in your prospectus supplement. We may appoint additional
transfer agents or cancel the appointment of any particular transfer agent. We
may also approve a change in the office through which any transfer agent acts.

If the debt securities of any series are redeemable and we redeem less than
all those debt securities, we may block the transfer or exchange of those debt
securities during the period beginning 15 days before the day we mail the notice
of redemption and ending on the day of that mailing, in order to freeze the list
of holders to prepare the mailing. We may also refuse to register transfers of
or exchange any debt security selected for redemption, except that we will
continue to permit transfers and exchanges of the unredeemed portion of any debt
security being partially redeemed.

If a debt security is issued as a global debt security, only the
depositary -- e.g., DTC, Euroclear or Clearstream, Luxembourg -- will be
entitled to transfer and exchange the debt security as described in this
subsection, since the depositary will be the sole holder of the debt security.

The rules for exchange described above apply to exchange of debt securities
for other debt securities of the same series and kind. If a debt security is
exchangeable for a different kind of security, such as one that we have not
issued, or for other property, the rules governing that type of exchange will be
described in the applicable prospectus supplement.

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PAYMENT MECHANICS FOR DEBT SECURITIES

WHO RECEIVES PAYMENT?

If interest is due on a debt security on an interest payment date, we will
pay the interest to the person in whose name the debt security is registered at
the close of business on the regular record date relating to the interest
payment date as described below under "-- Payment and Record Dates for
Interest". If interest is due at maturity but on a day that is not an interest
payment date, we will pay the interest to the person entitled to receive the
principal of the debt security. If principal or another amount besides interest
is due on a debt security at maturity, we will pay the amount to the holder of
the debt security against surrender of the debt security at a proper place of
payment or, in the case of a global debt security, in accordance with the
applicable policies of the depositary, Euroclear and Clearstream, Luxembourg, as
applicable.

PAYMENT AND RECORD DATES FOR INTEREST

Unless we specify otherwise in the applicable prospectus supplement,
interest on any fixed rate debt security will be payable semiannually each May
15 and November 15 and at maturity, and the regular record date relating to an
interest payment date for any fixed rate debt security will be the May 1 or
November 1 next preceding that interest payment date. The regular record date
relating to an interest payment date for any floating rate debt security will be
the 15th calendar day before that interest payment date. These record dates will
apply regardless of whether a particular record date is a "business day", as
defined below. For the purpose of determining the holder at the close of
business on a regular record date when business is not being conducted, the
close of business will mean 5:00 P.M., New York City time, on that day.

BUSINESS DAY. The term "business day" means, for any debt security, a day
that meets all the following applicable requirements:

-- for all debt securities, is a Monday, Tuesday, Wednesday, Thursday or
Friday that is not a day on which banking institutions in New York
City generally are authorized or obligated by law, regulation or
executive order to close;

-- if the debt security is a floating rate debt security whose interest
rate is based on LIBOR, is also a day on which dealings in the
relevant index currency specified in the applicable prospectus
supplement are transacted in the London interbank market;

-- if the debt security has a specified currency other than U.S. dollars
or euros, is also a day on which banking institutions are not
authorized or obligated by law, regulation or executive order to close
in the principal financial center of the country issuing the specified
currency;

-- if the debt security either is a floating rate debt security whose
interest rate is based on EURIBOR or has a specified currency of
euros, is also a day on which the Trans-European Automated Real-Time
Gross Settlement Express Transfer (TARGET) System, or any successor
system, is open for business;

-- if the debt security is held through Euroclear, is also not a day on
which banking institutions in Brussels, Belgium are generally
authorized or obligated by law, regulation or executive order to
close; and

-- if the debt security is held through Clearstream, Luxembourg, is also
not a day on which banking institutions in Luxembourg are generally
authorized or obligated by law, regulation or executive order to
close.

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HOW WE WILL MAKE PAYMENTS DUE IN U.S. DOLLARS

We will follow the practice described in this subsection when paying
amounts due in U.S. dollars. Payments of amounts due in other currencies will be
made as described in the next subsection.

PAYMENTS ON GLOBAL DEBT SECURITIES. We will make payments on a global debt
security in accordance with the applicable policies of the depositary as in
effect from time to time. Under those policies, we will pay directly to the
depositary, or its nominee, and not to any indirect owners who own beneficial
interests in the global debt security. An indirect owner's right to receive
those payments will be governed by the rules and practices of the depositary and
its participants, as described below in the section entitled "Legal Ownership
and Book-Entry Issuance -- What Is a Global Security?".

PAYMENTS ON NON-GLOBAL DEBT SECURITIES. We will make payments on a debt
security in non-global, registered form as follows. We will pay interest that is
due on an interest payment date by check mailed on the interest payment date to
the holder at his or her address shown on the trustee's records as of the close
of business on the regular record date. We will make all other payments by check
at the paying agent described below, against surrender of the debt security. All
payments by check will be made in next-day funds -- i.e., funds that become
available on the day after the check is cashed.

Alternatively, if a non-global debt security has a face amount of at least
$1,000,000 and the holder asks us to do so, we will pay any amount that becomes
due on the debt security by wire transfer of immediately available funds to an
account at a bank in New York City, on the due date. To request wire payment,
the holder must give the paying agent appropriate wire transfer instructions at
least five business days before the requested wire payment is due. In the case
of any interest payment due on an interest payment date, the instructions must
be given by the person or entity who is the holder on the relevant regular
record date. In the case of any other payment, payment will be made only after
the debt security is surrendered to the paying agent. Any wire instructions,
once properly given, will remain in effect unless and until new instructions are
given in the manner described above.

Book-entry and other indirect owners should consult their banks or brokers for
information on how they will receive payments on their debt securities.

HOW WE WILL MAKE PAYMENTS DUE IN OTHER CURRENCIES

We will follow the practice described in this subsection when paying
amounts that are due in a specified currency other than U.S. dollars.

PAYMENTS ON GLOBAL DEBT SECURITIES. We will make payments on a global debt
security in accordance with the applicable policies as in effect from time to
time of the depositary, which will be DTC, Euroclear or Clearstream, Luxembourg.
Unless we specify otherwise in the applicable prospectus supplement, The
Depository Trust Company, New York, New York, known as DTC, will be the
depositary for all debt securities in global form. We understand that DTC's
policies, as currently in effect, are as follows:

Unless otherwise indicated in your prospectus supplement, if you are an
indirect owner of global debt securities denominated in a specified currency
other than U.S. dollars and if you have

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the right to elect to receive payments in that other currency and do so elect,
you must notify the participant through which your interest in the global debt
security is held of your election:

-- on or before the applicable regular record date, in the case of a
payment of interest; or

-- on or before the 16th day before the stated maturity, or any
redemption or repayment date, in the case of payment of principal or
any premium.

Your participant must, in turn, notify DTC of your election on or before
the third DTC business day after that regular record date, in the case of a
payment of interest, and on or before the 12th DTC business day prior to the
stated maturity, or on the redemption or repayment date if your debt security is
redeemed or repaid earlier, in the case of a payment of principal or any
premium.

DTC, in turn, will notify the paying agent of your election in accordance
with DTC's procedures.

If complete instructions are received by the participant and forwarded by
the participant to DTC, and by DTC to the paying agent, on or before the dates
noted above, the paying agent, in accordance with DTC's instructions, will make
the payments to you or your participant by wire transfer of immediately
available funds to an account maintained by the payee with a bank located in the
country issuing the specified currency or in another jurisdiction acceptable to
us and the paying agent.

If the foregoing steps are not properly completed, we expect DTC to inform
the paying agent that payment is to be made in U.S. dollars. In that case, we or
our agent will convert the payment to U.S. dollars in the manner described below
under "-- Conversion to U.S. Dollars". We expect that we or our agent will then
make the payment in U.S. dollars to DTC, and that DTC in turn will pass it along
to its participants.

Indirect owners of a global debt security denominated in a currency other than
U.S. dollars should consult their banks or brokers for information on how to
request payment in the specified currency.

PAYMENTS ON NON-GLOBAL DEBT SECURITIES. Except as described in the last
paragraph under this heading, we will make payments on debt securities in
non-global form in the applicable specified currency. We will make these
payments by wire transfer of immediately available funds to any account that is
maintained in the applicable specified currency at a bank designated by the
holder and is acceptable to us and the trustee. To designate an account for wire
payment, the holder must give the paying agent appropriate wire instructions at
least five business days before the requested wire payment is due. In the case
of any interest payment due on an interest payment date, the instructions must
be given by the person or entity who is the holder on the regular record date.
In the case of any other payment, the payment will be made only after the debt
security is surrendered to the paying agent. Any instructions, once properly
given, will remain in effect unless and until new instructions are properly
given in the manner described above.

If a holder fails to give instructions as described above, we will notify
the holder at the address in the trustee's records and will make the payment
within five business days after the holder provides appropriate instructions.
Any late payment made in these circumstances will be treated under the
applicable indenture as if made on the due date, and no interest will accrue on
the late payment from the due date to the date paid.

Although a payment on a debt security in non-global form may be due in a
specified currency other than U.S. dollars, we will make the payment in U.S.
dollars if the holder asks us

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to do so. To request U.S. dollar payment, the holder must provide appropriate
written notice to the trustee at least five business days before the next due
date for which payment in U.S. dollars is requested. In the case of any interest
payment due on an interest payment date, the request must be made by the person
or entity who is the holder on the regular record date. Any request, once
properly made, will remain in effect unless and until revoked by notice properly
given in the manner described above.

Book-entry and other indirect owners of a debt security with a specified
currency other than U.S. dollars should contact their banks or brokers for
information about how to receive payments in the specified currency or in U.S.
dollars.

CONVERSION TO U.S. DOLLARS. When we are asked by a holder to make payments
in U.S. dollars of an amount due in another currency, either on a global debt
security or a non-global debt security as described above, the exchange rate
agent described below will calculate the U.S. dollar amount the holder receives
in the exchange rate agent's discretion.

A holder that requests payment in U.S. dollars will bear all associated
currency exchange costs, which will be deducted from the payment.

WHEN THE SPECIFIED CURRENCY IS NOT AVAILABLE. If we are obligated to make
any payment in a specified currency other than U.S. dollars, and the specified
currency or any successor currency is not available to us due to circumstances
beyond our control -- such as the imposition of exchange controls or a
disruption in the currency markets -- we will be entitled to satisfy our
obligation to make the payment in that specified currency by making the payment
in U.S. dollars, on the basis of the exchange rate determined by the exchange
rate agent described below, in its discretion.

The foregoing will apply to any debt security, whether in global or
non-global form, and to any payment, including a payment at maturity. Any
payment made under the circumstances and in a manner described above will not
result in a default under any debt security or the applicable indenture.

THE EURO. The euro may be a specified currency for some debt securities.
On January 1, 1999, the euro became the legal currency for the 11 member states
participating in the European Economic and Monetary Union. During a transition
period from January 1, 1999 to December 31, 2001 and for a maximum of six months
after December 31, 2001, the former national currencies of these 11 member
states will continue to be legal tender in their country of issue, at rates
irrevocably fixed on December 31, 1998.

EXCHANGE RATE AGENT. If we issue a debt security in a specified currency
other than U.S. dollars, we will appoint a financial institution to act as the
exchange rate agent and will name the institution initially appointed when the
debt security is originally issued in the applicable prospectus supplement. We
may select Goldman, Sachs & Co. or another of our affiliates to perform this
role. We may change the exchange rate agent from time to time after the original
issue date of the debt security without your consent and without notifying you
of the change.

All determinations made by the exchange rate agent will be in its sole
discretion unless we state in the applicable prospectus supplement that any
determination requires our approval. In the absence of manifest error, those
determinations will be conclusive for all purposes and binding on you and us,
without any liability on the part of the exchange rate agent.

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PAYMENT WHEN OFFICES ARE CLOSED

If any payment is due on a debt security on a day that is not a business
day, we will make the payment on the next day that is a business day. Payments
postponed to the next business day in this situation will be treated under the
applicable indenture as if they were made on the original due date. Postponement
of this kind will not result in a default under any debt security or the
applicable indenture, and no interest will accrue on the postponed amount from
the original due date to the next day that is a business day. The term business
day has a special meaning, which we describe above under "-- Payment and Record
Dates for Interest".

PAYING AGENT

We may appoint one or more financial institutions to act as our paying
agents, at whose designated offices debt securities in non-global entry form may
be surrendered for payment at their maturity. We call each of those offices a
paying agent. We may add, replace or terminate paying agents from time to time.
We may also choose to act as our own paying agent. Initially, we have appointed
the trustee, at its corporate trust office in New York City, as the paying
agent. We must notify you of changes in the paying agent.

UNCLAIMED PAYMENTS

Regardless of who acts as paying agent, all money paid by us to a paying
agent that remains unclaimed at the end of two years after the amount is due to
a holder will be repaid to us. After that two-year period, the holder may look
only to us for payment and not to the trustee, any other paying agent or anyone
else.

NOTICES

Notices to be given to holders of a global debt security will be given only
to the depositary, in accordance with its applicable policies as in effect from
time to time. Notices to be given to holders of debt securities not in global
form will be sent by mail to the respective addresses of the holders as they
appear in the trustee's records, and will be deemed given when mailed. Neither
the failure to give any notice to a particular holder, nor any defect in a
notice given to a particular holder, will affect the sufficiency of any notice
given to another holder.

Book-entry and other indirect owners should consult their banks or brokers for
information on how they will receive notices.

OUR RELATIONSHIP WITH THE TRUSTEE

The Bank of New York has provided commercial banking and other services for
us and our affiliates in the past and may do so in the future. Among other
things, The Bank of New York provides us with a line of credit, holds debt
securities issued by us and serves as trustee or agent with regard to other debt
obligations of The Goldman Sachs Group, Inc. or its subsidiaries.

The Bank of New York is initially serving as the trustee for both the
senior debt securities and the subordinated debt securities. Consequently, if an
actual or potential event of default occurs with respect to any debt securities,
the trustee may be considered to have a conflicting interest for purposes of the
Trust Indenture Act of 1939. In that case, the trustee may be required to resign
under one of the indentures, and we would be required to appoint a successor
trustee. For this purpose, a "potential" event of default means an event that
would be an event of default if the requirements for giving us default notice or
for the default having to exist for a specific period of time were disregarded.

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DESCRIPTION OF WARRANTS WE MAY OFFER

Please note that in this section entitled "Description of Warrants We May
Offer", references to The Goldman Sachs Group, Inc., "we", "our" and "us" refer
only to The Goldman Sachs Group, Inc. and not to its consolidated subsidiaries.
Also, in this section, references to "holders" mean those who own warrants
registered in their own names, on the books that we or our agent maintain for
this purpose, and not those who own beneficial interests in warrants registered
in street name or in warrants issued in book-entry form through one or more
depositaries. Owners of beneficial interests in the warrants should read the
section below entitled "Legal Ownership and Book-Entry Issuance".

WE MAY ISSUE MANY SERIES OF WARRANTS

We may issue warrants that are debt warrants or universal warrants. We may
offer warrants separately or together with our debt securities. We may also
offer warrants together with other warrants, purchase contracts and debt
securities in the form of units, as summarized below in "Description of Units We
May Offer".

We may issue warrants in such amounts or in as many distinct series as we
wish. This section summarizes terms of the warrants that apply generally to all
series. Most of the financial and other specific terms of your warrant will be
described in the prospectus supplement to be attached to the front of this
prospectus. Those terms may vary from the terms described here.

As you read this section, please remember that the specific terms of your
warrant as described in your prospectus supplement will supplement and, if
applicable, may modify or replace the general terms described in this section.
If there are differences between your prospectus supplement and this prospectus,
your prospectus supplement will control. Thus, the statements we make in this
section may not apply to your warrant.

When we refer to a series of warrants, we mean all warrants issued as part
of the same series under the applicable warrant agreement. When we refer to your
prospectus supplement, we mean the prospectus supplement describing the specific
terms of the warrant you purchase. The terms used in your prospectus supplement
will have the meanings described in this prospectus, unless otherwise specified.

DEBT WARRANTS

We may issue warrants for the purchase of our debt securities on terms to
be determined at the time of sale. We refer to this type of warrant as a "debt
warrant".

UNIVERSAL WARRANTS

We may also issue warrants, on terms to be determined at the time of sale,
for the purchase or sale of, or whose cash value is determined by reference to
the performance, level or value of, one or more of the following:

-- securities of one or more issuers other than The Goldman Sachs Group,
Inc.;

-- one or more currencies;

-- one or more commodities;

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-- any other financial, economic or other measure or instrument,
including the occurrence or non-occurrence of any event or
circumstance; and

-- one or more indices or baskets of the items described above.

We refer to this type of warrant as a "universal warrant". We refer to each
property described above as a "warrant property".

We may satisfy our obligations, if any, with respect to any universal
warrants by delivering:

-- the warrant property;

-- the cash value of the warrant property; or

-- the cash value of the warrants determined by reference to the
performance, level or value of the warrant property.

The applicable prospectus supplement will describe what we may deliver to
satisfy our obligations with respect to any universal warrants.

GENERAL TERMS OF WARRANTS

Your prospectus supplement may contain, where applicable, the following
information about your warrants:

-- the specific designation and aggregate number of, and the price at
which we will issue, the warrants;

-- the currency with which the warrants may be purchased;

-- the date on which the right to exercise the warrants will begin and
the date on which that right will expire or, if you may not
continuously exercise the warrants throughout that period, the
specific date or dates on which you may exercise the warrants;

-- whether the warrants will be issued in fully registered form or bearer
form, in global or non-global form or in any combination of these
forms, although, in any case, the form of a warrant included in a unit
will correspond to the form of the unit and of any debt security or
purchase contract included in that unit;

-- the identities of the warrant agent, any depositaries and any paying,
transfer, calculation or other agents for the warrants;

-- any securities exchange or quotation system on which the warrants or
any securities deliverable upon exercise of the warrants may be
listed;

-- whether the warrants are to be sold separately or with other
securities, as part of units or otherwise; and

-- any other terms of the warrants.

If we issue warrants as part of a unit, the accompanying prospectus
supplement will specify whether the warrants will be separable from the other
securities in the unit before the warrants' expiration date. A warrant issued in
a unit in the United States may not be so separated before the 91st day after
the unit is issued.

No holder of a warrant will have any rights of a holder of the warrant
property purchasable under the warrant.

An investment in a warrant may involve special risks, including risks
associated with indexed securities and currency-related risks if the warrant or
the warrant property is linked to an index or is payable in or otherwise linked
to a non-U.S. dollar currency. We describe some of these

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risks below under "Considerations Relating to Indexed Securities" and
"Considerations Relating to Securities Denominated or Payable in or Linked to a
Non-U.S. Dollar Currency".

Because we are a holding company, our ability to perform our obligations on
the warrants will depend in part on our ability to participate in distributions
of assets from our subsidiaries. We discuss these matters above under
"Description of Debt Securities We May Offer -- We Are a Holding Company".

Our affiliates may resell warrants in market-making transactions after
their initial issuance. We discuss these transactions above under "Description
of Debt Securities We May Offer -- Information in the Prospectus
Supplement -- Market-Making Transactions".

ADDITIONAL TERMS OF WARRANTS

DEBT WARRANTS

If you purchase debt warrants, your prospectus supplement may contain,
where applicable, the following additional information about your warrants:

-- the designation, aggregate principal amount, currency and terms of the
debt securities that may be purchased upon exercise of the debt
warrants;

-- whether the exercise price may be paid in cash, by the exchange of any
debt warrants or other securities or both and the method of exercising
the debt warrants; and

-- the designation, terms and amount of debt securities, if any, to be
issued together with each of the debt warrants and the date, if any,
after which the debt warrants and debt securities will be separately
transferable.

UNIVERSAL WARRANTS

If you purchase universal warrants, your prospectus supplement may contain,
where applicable, the following additional information about your warrants:

-- whether the universal warrants are put warrants or call warrants;

-- the warrant property, and the amount or method for determining the
amount of warrant property, deliverable upon exercise of each
universal warrant;

-- the price at which and the currency with which the warrant property
may be purchased or sold upon the exercise of each universal warrant,
or the method of determining that price;

-- whether the exercise price may be paid in cash, by the exchange of any
universal warrants or other securities or both, and the method of
exercising the universal warrants; and

-- whether the exercise of the universal warrants is to be settled in
cash or by delivery of the warrant property or both and whether
settlement will occur on a net basis or a gross basis.

GENERAL PROVISIONS OF WARRANT AGREEMENTS

We will issue the warrants in one or more series and under one or more
warrant agreements, each to be entered into between us and a bank, trust company
or other financial institution as warrant agent. We may add, replace or
terminate warrant agents from time to time. We may also choose to act as our own
warrant agent. We will describe the warrant agreement under which we issue any
warrants in the applicable prospectus supplement, and we will file that
agreement with the SEC, either as an exhibit to a current report on Form 8-K or
as an exhibit to

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the registration statement of which this prospectus is a part. See "Available
Information" above for information on how to obtain a copy of a warrant
agreement when it is filed.

In some cases, we may issue warrants under one of our indentures. For these
warrants, the applicable provisions relating to our debt securities and
indentures would apply instead of the provisions described in this section.

ENFORCEMENT OF RIGHTS

The warrant agent under a warrant agreement will act solely as our agent in
connection with the warrants issued under that agreement. The warrant agent will
not assume any obligation or relationship of agency or trust for or with any
holders of those warrants. Any holder of warrants may, without the consent of
any other person, enforce by appropriate legal action, on its own behalf, its
right to exercise those warrants in accordance with their terms. No holder of
any warrant will be entitled to any rights of a holder of the debt securities or
any other warrant property purchasable upon exercise of the warrant, including
any right to receive payments on those debt securities or other warrant property
or to enforce any covenants or rights in the relevant indenture or any other
agreement.

MODIFICATIONS WITHOUT CONSENT OF HOLDERS

We and the applicable warrant agent may amend any warrant or warrant
agreement without the consent of any holder:

-- to cure any ambiguity;

-- to cure, correct or supplement any defective or inconsistent
provision; or

-- to make any other change that we believe is necessary or desirable and
will not adversely affect the interests of the affected holders in any
material respect.

We do not need any approval to make changes that affect only warrants to be
issued after the changes take effect. We may also make changes that do not
adversely affect a particular warrant in any material respect, even if they
adversely affect other warrants in a material respect. In those cases, we do not
need to obtain the approval of the holder of the unaffected warrant; we need
only obtain any required approvals from the holders of the affected warrants.

MODIFICATIONS WITH CONSENT OF HOLDERS

We may not amend any particular warrant or a warrant agreement with respect
to any particular warrant unless we obtain the consent of the holder of that
warrant, if the amendment would:

-- change the exercise price of the warrant;

-- change the kind or reduce the amount of the warrant property or other
consideration receivable upon exercise, cancellation or expiration of
the warrant, except as permitted by the antidilution or other
adjustment provisions of the warrant;

-- shorten, advance or defer the period of time during which the holder
may exercise the warrant or otherwise impair the holder's right to
exercise the warrant; or

-- reduce the percentage of outstanding, unexpired warrants of any series
or class the consent of whose holders is required to amend the series
or class, or the applicable warrant agreement with regard to that
series or class, as described below.

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Any other change to a particular warrant agreement and the warrants issued
under that agreement would require the following approval:

-- If the change affects only the warrants of a particular series issued
under that agreement, the change must be approved by the holders of a
majority of the outstanding, unexpired warrants of that series.

-- If the change affects the warrants of more than one series issued
under that agreement, the change must be approved by the holders of a
majority of all outstanding, unexpired warrants of all series affected
by the change, with the warrants of all the affected series voting
together as one class for this purpose.

In each case, the required approval must be given in writing.

WARRANT AGREEMENT WILL NOT BE QUALIFIED UNDER TRUST INDENTURE ACT

No warrant agreement will be qualified as an indenture, and no warrant
agent will be required to qualify as a trustee, under the Trust Indenture Act.
Therefore, holders of warrants issued under a warrant agreement will not have
the protection of the Trust Indenture Act with respect to their warrants.

MERGER AND SIMILAR TRANSACTIONS PERMITTED; NO RESTRICTIVE COVENANTS OR EVENTS OF
DEFAULT

The warrants and warrant agreements will not restrict our ability to merge
or consolidate with, or sell our assets to, another firm or to engage in any
other transactions. If at any time we merge or consolidate with, or sell our
assets substantially as an entirety to, another firm, the successor corporation
will succeed to and assume our obligations under the warrants and warrant
agreements. We will then be relieved of any further obligation under the
warrants and warrant agreements.

The warrants and warrant agreements will not include any restrictions on
our ability to put liens on our assets, including our interests in our
subsidiaries, nor will they restrict our ability to sell our assets. The
warrants and warrant agreements also will not provide for any events of default
or remedies upon the occurrence of any events of default.

GOVERNING LAW

The warrants and each warrant agreement will be governed by New York law.

FORM, EXCHANGE AND TRANSFER

We will issue each warrant in global -- i.e., book-entry -- form only,
unless we say otherwise in the applicable prospectus supplement. Warrants in
book-entry form will be represented by a global security registered in the name
of a depositary, which will be the holder of all the warrants represented by the
global security. Those who own beneficial interests in a global warrant will do
so through participants in the depositary's system, and the rights of these
indirect owners will be governed solely by the applicable procedures of the
depositary and its participants. We describe book-entry securities below under
"Legal Ownership and Book-Entry Issuance".

In addition, we will issue each warrant in registered form, unless we say
otherwise in the applicable prospectus supplement. Bearer securities would be
subject to special provisions, as we describe below under "Considerations
Relating to Securities Issued in Bearer Form".

If any warrants are issued in non-global form, the following will apply to
them:

The warrants will be issued in fully registered form in denominations
stated in the applicable prospectus supplement. Holders may exchange their
warrants for warrants of smaller denomina-
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tions or combined into fewer warrants of larger denominations, as long as the
total amount is not changed.

Holders may exchange or transfer their warrants at the office of the
warrant agent. They may also replace lost, stolen, destroyed or mutilated
warrants at that office. We may appoint another entity to perform these
functions or perform them ourselves.

Holders will not be required to pay a service charge to transfer or
exchange their warrants, but they may be required to pay any tax or other
governmental charge associated with the transfer or exchange. The transfer or
exchange, and any replacement, will be made only if our transfer agent is
satisfied with the holder's proof of legal ownership. The transfer agent may
also require an indemnity before replacing any warrants.

If we have the right to redeem, accelerate or settle any warrants before
their expiration, and we exercise our right as to less than all those warrants,
we may block the transfer or exchange of those warrants during the period
beginning 15 days before the day we mail the notice of exercise and ending on
the day of that mailing, in order to freeze the list of holders to prepare the
mailing. We may also refuse to register transfers of or exchange any warrant
selected for early settlement, except that we will continue to permit transfers
and exchanges of the unsettled portion of any warrant being partially settled.

Only the depositary will be entitled to transfer or exchange a warrant in
global form, since it will be the sole holder of the warrant.

PAYMENTS AND NOTICES

In making payments and giving notices with respect to our warrants, we will
follow the procedures we plan to use with respect to our debt securities, where
applicable. We describe these procedures above under "Description of Debt
Securities We May Offer -- Payment Mechanics for Debt Securities" and
"-- Notices".

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DESCRIPTION OF PURCHASE CONTRACTS WE MAY OFFER

Please note that in this section entitled "Description of Purchase Contracts We
May Offer", references to The Goldman Sachs Group, Inc., "we", "our" and "us"
refer only to The Goldman Sachs Group, Inc. and not to its consolidated
subsidiaries. Also, in this section, references to "holders" mean those who own
purchase contracts registered in their own names, on the books that we or our
agent maintain for this purpose, and not those who own beneficial interests in
purchase contracts registered in street name or in purchase contracts issued in
book-entry form through one or more depositaries. Owners of beneficial interests
in the purchase contracts should read the section below entitled "Legal
Ownership and Book-Entry Issuance".

PURCHASE CONTRACT PROPERTY

We may issue purchase contracts for the purchase or sale of, or whose cash
value is determined by reference or linked to the performance, level or value
of, one or more of the following:

-- securities of one or more issuers, including our securities described
in this prospectus and securities of third parties;

-- one or more currencies;

-- one or more commodities;

-- any other financial, economic or other measure or instrument,
including the occurrence or non-occurrence of any event or
circumstance; and

-- one or more indices or baskets of the items described above.

We refer to each property described above as a "purchase contract property".
Each purchase contract will obligate:

-- the holder to purchase or sell, and obligate us to sell or purchase,
on specified dates, one or more purchase contract properties at a
specified price or prices; or

-- the holder or us to settle the purchase contract by reference to the
value, performance or level of one or more purchase contract
properties, on specified dates and at a specified price or prices.

Some purchase contracts may include multiple obligations to purchase or sell
different purchase contract properties, and both we and the holder may be
sellers or buyers under the same purchase contract. No holder of a purchase
contract will have any rights of a holder of the purchase contract property
purchasable under the contract, including any right to receive payments on that
property.

An investment in purchase contracts may involve special risks, including
risks associated with indexed securities and currency-related risks if the
purchase contract or purchase contract property is linked to an index or is
payable in or otherwise linked to a non-U.S. dollar currency. We describe some
of these risks below under "Considerations Relating to Indexed Securities" and
"Considerations Relating to Securities Denominated or Payable in or Linked to a
Non-U.S. Dollar Currency".

Because we are a holding company, our ability to perform our obligations on
the purchase contracts will depend in part on our ability to participate in
distributions of assets from our

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subsidiaries. We discuss these matters above under "Description of Debt
Securities We May Offer -- We Are a Holding Company".

Our affiliates may resell purchase contracts after their initial issuance
in market-making transactions. We describe these transactions above under
"Description of Debt Securities We May Offer -- Information in the Prospectus
Supplement -- Market-Making Transactions".

WE MAY ISSUE MANY SERIES OF PURCHASE CONTRACTS

We may issue purchase contracts in such amounts and in as many distinct
series as we wish. In addition, we may issue a purchase contract separately or
as part of a unit, as described below under "Description of Units We May Offer".

This section summarizes terms of the purchase contracts that will apply
generally to all purchase contracts. We will describe most of the financial and
other specific terms of your purchase contract in the prospectus supplement to
be attached to the front of this prospectus. Those terms may vary from the terms
described here.

As you read this section, please remember that the specific terms of your
purchase contract as described in your prospectus supplement will supplement
and, if applicable, may modify or replace the general terms described in this
section. If there are differences between your prospectus supplement and this
prospectus, your prospectus supplement will control. Thus, the statements we
make in this section may not apply to your purchase contract.

When we refer to a series of purchase contracts, we mean all the purchase
contracts issued as part of the same series under the applicable governing
instrument. When we refer to your prospectus supplement, we mean the prospectus
supplement describing the specific terms of the purchase contract you purchase.
The terms used in your prospectus supplement will have the meanings described in
this prospectus, unless otherwise specified.

PREPAID PURCHASE CONTRACTS; APPLICABILITY OF INDENTURE

Some purchase contracts may require the holders to satisfy their
obligations under the contracts at the time the contracts are issued. We refer
to those contracts as "prepaid purchase contracts". Our obligation to settle a
prepaid purchase contract on the relevant settlement date will be one of our
senior debt securities or subordinated debt securities, which are described
above under "Description of Debt Securities We May Offer". Prepaid purchase
contracts will be issued under the applicable indenture, and the provisions of
that indenture will govern those contracts, including the rights and duties of
the holders, the trustee and us with respect to those contracts.

NON-PREPAID PURCHASE CONTRACTS; NO TRUST INDENTURE ACT PROTECTION

Some purchase contracts do not require the holders to satisfy their
obligations under the contracts until settlement. We refer to those contracts as
"non-prepaid purchase contracts". The holder of a non-prepaid purchase contract
may remain obligated to perform under the contract for a substantial period of
time.

Non-prepaid purchase contracts will be issued under a unit agreement, if
they are issued in units, or under some other document, if they are not. For
example, we may issue non-prepaid purchase contracts under which the holder has
multiple obligations to purchase or sell, some of which are prepaid and some of
which are not, under one of our indentures. We describe unit agreements
generally under "Description of Units We May Offer" below. We will describe the

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particular governing document that applies to your non-prepaid purchase
contracts in the applicable prospectus supplement.

Non-prepaid purchase contracts will not be senior debt securities or
subordinated debt securities and will not be issued under one of our indentures,
unless we say otherwise in the applicable prospectus supplement. Consequently,
no governing documents for non-prepaid purchase contracts will be qualified as
indentures, and no third party will be required to qualify as a trustee with
regard to those contracts, under the Trust Indenture Act. Holders of non-prepaid
purchase contracts will not have the protection of the Trust Indenture Act with
respect to those contracts.

GENERAL TERMS OF PURCHASE CONTRACTS

Your prospectus supplement may contain, where applicable, the following
information about your purchase contract:

-- whether the purchase contract obligates the holder to purchase or
sell, or both purchase and sell, one or more purchase contract
properties and the nature and amount of each of those properties, or
the method of determining those amounts;

-- whether the purchase contract is to be prepaid or not and the
governing document for the contract;

-- whether the purchase contract is to be settled by delivery, or by
reference or linkage to the value, performance or level of, the
purchase contract properties;

-- any acceleration, cancellation, termination or other provisions
relating to the settlement of the purchase contract;

-- whether the purchase contract will be issued as part of a unit and, if
so, the other securities comprising the unit and whether any unit
securities will be subject to a security interest in our favor as
described below; and

-- whether the purchase contract will be issued in fully registered or
bearer form and in global or non-global form.

If we issue a purchase contract as part of a unit, the accompanying
prospectus supplement will state whether the contract will be separable from the
other securities in the unit before the contract settlement date. A purchase
contract issued in a unit in the United States may not be so separated before
the 91st day after the unit is issued.

ADDITIONAL TERMS OF NON-PREPAID PURCHASE CONTRACTS

In addition to the general terms described above, a non-prepaid purchase
contract may include the following additional terms.

PLEDGE BY HOLDERS TO SECURE PERFORMANCE

If we say so in the applicable prospectus supplement, the holder's
obligations under the purchase contract and governing document will be secured
by collateral. In that case, the holder, acting through the unit agent as its
attorney-in-fact, if applicable, will pledge the items described below to a
collateral agent named in the prospectus supplement, which will hold them, for
our benefit, as collateral to secure the holder's obligations. We refer to this
as the "pledge" and all the items described below as the "pledged items". The
pledge will create a security interest in the holder's entire interest in and
to:

-- any other securities included in the unit, if the purchase contract is
part of a unit, or any other property specified in the applicable
prospectus supplement;
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-- all additions to and substitutions for the pledged items;

-- all income, proceeds and collections received in respect of the
pledged items; and

-- all powers and rights owned or acquired later with respect to the
pledged items.

The collateral agent will forward all payments from the pledged items to us,
unless the payments have been released from the pledge in accordance with the
purchase contract and the governing document. We will use the payments from the
pledged items to satisfy the holder's obligations under the purchase contract.

SETTLEMENT OF PURCHASE CONTRACTS THAT ARE PART OF UNITS

The following will apply to a non-prepaid purchase contract that is issued
together with any of our debt securities as part of a unit. If the holder fails
to satisfy its obligations under the purchase contract, the unit agent may apply
the principal payments on the debt securities to satisfy those obligations as
provided in the governing document. If the holder is permitted to settle its
obligations by cash payment, the holder may be permitted to do so by delivering
the debt securities in the unit to the unit agent as provided in the governing
document.

Book-entry and other indirect owners should consult their banks or brokers for
information on how to settle their purchase contracts.

FAILURE OF HOLDER TO PERFORM OBLIGATIONS

If the holder fails to settle its obligations under a non-prepaid purchase
contract as required, the holder will not receive the purchase contract property
or other consideration to be delivered at settlement. Holders that fail to make
timely settlement may also be obligated to pay interest or other amounts.

MERGER AND SIMILAR TRANSACTIONS PERMITTED; NO RESTRICTIVE COVENANTS OR EVENTS OF
DEFAULT

Purchase contracts that are not prepaid will not restrict our ability to
merge or consolidate with, or sell our assets to, another firm or to engage in
any other transactions. If at any time we merge or consolidate with, or sell our
assets substantially as an entirety to, another firm, the successor corporation
will succeed to and assume our obligations under these purchase contracts. We
will then be relieved of any further obligation under these purchase contracts.

Purchase contracts that are not prepaid will not include any restrictions
on our ability to put liens on our assets, including our interests in our
subsidiaries, nor will they restrict our ability to sell our assets. These
purchase contracts also will not provide for any events of default or remedies
upon the occurrence of any events of default.

GOVERNING LAW

The purchase contracts and any governing documents will be governed by New
York law.

FORM, EXCHANGE AND TRANSFER

We will issue each purchase contract in global -- i.e., book-entry -- form
only, unless we specify otherwise in the applicable prospectus supplement.
Purchase contracts in book-entry form will be represented by a global security
registered in the name of a depositary, which will be the holder of all the
purchase contracts represented by the global security. Those who own beneficial
interests in a purchase contract will do so through participants in the
depositary's

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<PAGE> 64

system, and the rights of these indirect owners will be governed solely by the
applicable procedures of the depositary and its participants. We describe
book-entry securities under "Legal Ownership and Book-Entry Issuance".

In addition, we will issue each purchase contract in registered form,
unless we say otherwise in the applicable prospectus supplement. Bearer
securities would be subject to special provisions, as we describe below under
"Considerations Relating to Securities Issued in Bearer Form".

If any purchase contracts are issued in non-global form, the following will
apply to them:

-- The purchase contracts will be issued in fully registered form in
denominations stated in the applicable prospectus supplement. Holders
may exchange their purchase contracts for contracts of smaller
denominations or combined into fewer contracts of larger
denominations, as long as the total amount is not changed.

-- Holders may exchange or transfer their purchase contracts at the
office of the trustee, unit agent or other agent we name in the
applicable prospectus supplement. Holders may also replace lost,
stolen, destroyed or mutilated purchase contracts at that office. We
may appoint another entity to perform these functions or perform them
ourselves.

-- Holders will not be required to pay a service charge to transfer or
exchange their purchase contracts, but they may be required to pay for
any tax or other governmental charge associated with the transfer or
exchange. The transfer or exchange, and any replacement, will be made
only if our transfer agent is satisfied with the holder's proof of
legal ownership. The transfer agent may also require an indemnity
before replacing any purchase contracts.

-- If we have the right to redeem, accelerate or settle any purchase
contracts prior to their maturity, and we exercise our right as to
less than all those purchase contracts, we may block the transfer or
exchange of those purchase contracts during the period beginning 15
days before the day we mail the notice of exercise and ending on the
day of that mailing, in order to freeze the list of holders to prepare
the mailing. We may also refuse to register transfers of or exchange
any purchase contract selected for early settlement, except that we
will continue to permit transfers and exchanges of the unsettled
portion of any purchase contract being partially settled.

Only the depositary will be entitled to transfer or exchange a purchase
contract in global form, since it will be the sole holder of the purchase
contract.

PAYMENTS AND NOTICES

In making payments and giving notices with respect to purchase contracts,
we will follow the procedures we plan to use with respect to our debt
securities, when applicable. We describe these procedures above under
"Description of Debt Securities We May Offer -- Payment Mechanics for Debt
Securities" and "-- Notices."

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DESCRIPTION OF UNITS WE MAY OFFER

Please note that in this section entitled "Description of Units We May Offer",
references to The Goldman Sachs Group, Inc., "we", "our" and "us" refer only to
The Goldman Sachs Group, Inc. and not to its consolidated subsidiaries. Also, in
this section, references to "holders" mean those who own units registered in
their own names, on the books that we or our agent maintain for this purpose,
and not those who own beneficial interests in units registered in street name or
in units issued in book-entry form through one or more depositaries. Owners of
beneficial interests in the units should read the section below entitled "Legal
Ownership and Book-Entry Issuance".

We may issue units comprised of one or more debt securities, warrants and
purchase contracts in any combination. Each unit will be issued so that the
holder of the unit is also the holder of each security included in the unit.
Thus, the holder of a unit will have the rights and obligations of a holder of
each included security. The unit agreement under which a unit is issued may
provide that the securities included in the unit may not be held or transferred
separately, at any time or at any time before a specified date.

The applicable prospectus supplement may describe:

-- the designation and terms of the units and of the securities
comprising the units, including whether and under what circumstances
those securities may be held or transferred separately;

-- any provisions of the governing unit agreement that differ from those
described below; and

-- any provisions for the issuance, payment, settlement, transfer or
exchange of the units or of the securities comprising the units.

The applicable provisions described in this section, as well as those described
under "Description of Debt Securities We May Offer", "Description of Warrants We
May Offer" and "Description of Purchase Contracts We May Offer", will apply to
each unit and to any debt security, warrant or purchase contract included in
each unit, respectively.

An investment in units may involve special risks, including risks
associated with indexed securities and currency-related risks if the securities
comprising the units are linked to an index or are payable in or otherwise
linked to a non-U.S. dollar currency. We describe some of these risks below
under "Considerations Relating to Indexed Securities" and "Considerations
Relating to Securities Denominated or Payable in or Linked to a Non-U.S. Dollar
Currency".

Our affiliates may resell units after their initial issuance in
market-making transactions. We discuss these transactions above under
"Description of Debt Securities We May Offer -- Information in the Prospectus
Supplement -- Market-Making Transactions".

WE MAY ISSUE MANY SERIES OF UNITS

We may issue units in such amounts and in as many distinct series as we
wish. This section summarizes terms of the units that apply generally to all
series. Most of the financial and other specific terms of your series will be
described in the prospectus supplement to be attached to the front of this
prospectus. Those terms may vary from the terms described here.

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As you read this section, please remember that the specific terms of your unit
as described in your prospectus supplement will supplement and, if applicable,
may modify or replace the general terms described in this section. If there are
differences between your prospectus supplement and this prospectus, your
prospectus supplement will control. Thus, the statements we make in this section
may not apply to your unit.

When we refer to a series of units, we mean all units issued as part of the
same series under the applicable unit agreement. We will identify the series of
which your units are a part in your prospectus supplement. When we refer to your
prospectus supplement, we mean the prospectus supplement describing the specific
terms of the units you purchase. The terms used in your prospectus supplement
will have the meanings described in this prospectus, unless otherwise specified.

UNIT AGREEMENTS: PREPAID, NON-PREPAID AND OTHER

We will issue the units under one or more unit agreements to be entered
into between us and a bank or other financial institution, as unit agent. We may
add, replace or terminate unit agents from time to time. We may also choose to
act as our own unit agent. We will identify the unit agreement under which your
units will be issued and the unit agent under that agreement in your prospectus
supplement.

If a unit includes one or more purchase contracts and all those purchase
contracts are prepaid purchase contracts, we will issue the unit under a
"prepaid unit agreement". Prepaid unit agreements will reflect the fact that the
holders of the related units have no further obligations under the purchase
contracts included in their units. If a unit includes one or more non-prepaid
purchase contracts, we will issue the unit under a "non-prepaid unit agreement".
Non-prepaid unit agreements will reflect the fact that the holders have payment
or other obligations under one or more of the purchase contracts comprising
their units. We may also issue units under other kinds of unit agreements, which
we will describe in the applicable prospectus supplement. In some cases, we may
issue units under one of our indentures.

A unit agreement may also serve as the governing document for a security
included in a unit. For example, a non-prepaid purchase contract that is part of
a unit may be issued under and governed by the relevant unit agreement.

In this prospectus, we refer to prepaid unit agreements, non-prepaid unit
agreements and other unit agreements, generally, as "unit agreements". We will
file the unit agreement under which we issue your units with the SEC, either as
an exhibit to a current report on Form 8-K or as an exhibit to an amendment to
the registration statement of which this prospectus is a part. See "Available
Information" above for information on how to obtain a copy of a unit agreement
when it is filed.

GENERAL PROVISIONS OF A UNIT AGREEMENT

This following provisions will generally apply to all unit agreements
unless otherwise stated in the applicable prospectus supplement.

ENFORCEMENT OF RIGHTS

The unit agent under a unit agreement will act solely as our agent in
connection with the units issued under that agreement. The unit agent will not
assume any obligation or relationship of agency or trust for or with any holders
of those units or of the securities comprising those units. The unit agent will
not be obligated to take any action on behalf of those holders to enforce or
protect their rights under the units or the included securities.

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Except as indicated in the next paragraph, a holder of a unit may, without
the consent of the unit agent or any other holder, enforce its rights as holder
under any security included in the unit, in accordance with the terms of that
security and the indenture, warrant agreement or unit agreement under which that
security is issued. Those terms are described elsewhere in this prospectus under
the sections relating to debt securities, warrants and purchase contracts.

Notwithstanding the foregoing, a unit agreement may limit or otherwise
affect the ability of a holder of units issued under that agreement to enforce
its rights, including any right to bring a legal action, with respect to those
units or any securities, other than debt securities and prepaid purchase
contracts, that are included in those units. Limitations of this kind will be
described in the applicable prospectus supplement.

MODIFICATION WITHOUT CONSENT OF HOLDERS

We and the applicable unit agent may amend any unit or unit agreement
without the consent of any holder:

-- to cure any ambiguity;

-- to correct or supplement any defective or inconsistent provision; or

-- to make any other change that we believe is necessary or desirable and
will not adversely affect the interests of the affected holders in any
material respect.

We do not need any approval to make changes that affect only units to be issued
after the changes take effect. We may also make changes that do not adversely
affect a particular unit in any material respect, even if they adversely affect
other units in a material respect. In those cases, we do not need to obtain the
approval of the holder of the unaffected unit; we need only obtain any required
approvals from the holders of the affected units.

The foregoing applies also to any security issued under a unit agreement,
as the governing document.

MODIFICATION WITH CONSENT OF HOLDERS

We may not amend any particular unit or a unit agreement with respect to
any particular unit unless we obtain the consent of the holder of that unit, if
the amendment would:

-- impair any right of the holder to exercise or enforce any right under
a security included in the unit if the terms of that security require
the consent of the holder to any changes that would impair the
exercise or enforcement of that right;

-- impair the right of the holder to purchase or sell, as the case may
be, the purchase contract property under any non-prepaid purchase
contract issued under the unit agreement, or to require delivery of or
payment for that property when due; or

-- reduce the percentage of outstanding units of any series or class the
consent of whose holders is required to amend that series or class, or
the applicable unit agreement with respect to that series or class, as
described below.

Any other change to a particular unit agreement and the units issued under
that agreement would require the following approval:

-- If the change affects only the units of a particular series issued
under that agreement, the change must be approved by the holders of a
majority of the outstanding units of that series.

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-- If the change affects the units of more than one series issued under
that agreement, it must be approved by the holders of a majority of
all outstanding units of all series affected by the change, with the
units of all the affected series voting together as one class for this
purpose.

These provisions regarding changes with majority approval also apply to changes
affecting any securities issued under a unit agreement, as the governing
document.

In each case, the required approval must be given by written consent.

UNIT AGREEMENTS WILL NOT BE QUALIFIED UNDER TRUST INDENTURE ACT

No unit agreement will be qualified as an indenture, and no unit agent will
be required to qualify as a trustee, under the Trust Indenture Act. Therefore,
holders of units issued under unit agreements will not have the protections of
the Trust Indenture Act with respect to their units.

ADDITIONAL PROVISIONS OF A NON-PREPAID UNIT AGREEMENT

In addition to the provisions described above, a non-prepaid unit agreement
will include the following provisions.

OBLIGATIONS OF UNIT HOLDER

Each holder of units issued under a non-prepaid unit agreement will:

-- be bound by the terms of each non-prepaid purchase contract included
in the holder's units and by the terms of the unit agreement with
respect to those contracts; and

-- appoint the unit agent as its authorized agent to execute, deliver and
perform on the holder's behalf each non-prepaid purchase contract
included in the holder's units.

The unit agreement for a unit that includes a non-prepaid purchase contract will
also include provisions regarding the holder's pledge of collateral and special
settlement provisions. These are described above under "Description of Purchase
Contracts We May Offer -- Additional Terms of Non-Prepaid Purchase Contracts".

ASSUMPTION OF OBLIGATIONS BY TRANSFEREE

When the holder of a unit issued under a non-prepaid unit agreement
transfers the unit to a new holder, the new holder will assume the obligations
of the prior holder with respect to each non-prepaid purchase contract included
in the unit, and the prior holder will be released from those obligations. Under
the non-prepaid unit agreement, we will consent to the transfer of the unit, to
the assumption of those obligations by the new holder and to the release of the
prior holder, if the transfer is made in accordance with the provisions of that
agreement.

MERGERS AND SIMILAR TRANSACTIONS PERMITTED; NO RESTRICTIVE COVENANTS OR EVENTS
OF DEFAULT

The unit agreements will not restrict our ability to merge or consolidate
with, or sell our assets to, another firm or to engage in any other
transactions. If at any time we merge or consolidate with, or sell our assets
substantially as an entirety to, another firm, the successor corporation will
succeed to and assume our obligations under the unit agreements. We will then be
relieved of any further obligation under these agreements.

The unit agreements will not include any restrictions on our ability to put
liens on our assets, including our interests in our subsidiaries, nor will they
restrict our ability to sell our assets. The unit agreements also will not
provide for any events of default or remedies upon the occurrence of any events
of default.

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GOVERNING LAW

The unit agreements and the units will be governed by New York law.

FORM, EXCHANGE AND TRANSFER

We will issue each unit in global -- i.e., book-entry -- form only. Units
in book-entry form will be represented by a global security registered in the
name of a depositary, which will be the holder of all the units represented by
the global security. Those who own beneficial interests in a unit will do so
through participants in the depositary's system, and the rights of these
indirect owners will be governed solely by the applicable procedures of the
depositary and its participants. We describe book-entry securities below under
"Legal Ownership and Book-Entry Issuance".

In addition, we will issue each unit in registered form, unless we say
otherwise in the applicable prospectus supplement. Bearer securities would be
subject to special provisions, as we describe below under "Considerations
Relating to Securities Issued in Bearer Form".

Each unit and all securities comprising the unit will be issued in the same
form.

If we issue any units in registered, non-global form, the following will
apply to them:

The units will be issued in the denominations stated in the applicable
prospectus supplement. Holders may exchange their units for units of smaller
denominations or combined into fewer units of larger denominations, as long as
the total amount is not changed.

-- Holders may exchange or transfer their units at the office of the unit
agent. Holders may also replace lost, stolen, destroyed or mutilated
units at that office. We may appoint another entity to perform these
functions or perform them ourselves.

-- Holders will not be required to pay a service charge to transfer or
exchange their units, but they may be required to pay for any tax or
other governmental charge associated with the transfer or exchange.
The transfer or exchange, and any replacement, will be made only if
our transfer agent is satisfied with the holder's proof of legal
ownership. The transfer agent may also require an indemnity before
replacing any units.

-- If we have the right to redeem, accelerate or settle any units prior
to their maturity, and we exercise our right as to less than all those
units or other securities, we may block the transfer or exchange of
those units during the period beginning 15 days before the day we mail
the notice of exercise and ending on the day of that mailing, in order
to freeze the list of holders to prepare the mailing. We may also
refuse to register transfers of or exchange any unit selected for
early settlement, except that we will continue to permit transfers and
exchanges of the unsettled portion of any unit being partially
settled. We may also block the transfer or exchange of any unit in
this manner if the unit includes securities that are or may be
selected for early settlement.

Only the depositary will be entitled to transfer or exchange a unit in
global form, since it will be the sole holder of the unit.

PAYMENTS AND NOTICES

In making payments and giving notices with respect to our units, we will
follow the procedures we plan to use with respect to our debt securities, where
applicable. We describe those procedures above under "Descriptions of Debt
Securities We May Offer -- Payment Mechanics for Debt Securities" and
"-- Notices".

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DESCRIPTION OF PREFERRED STOCK WE MAY OFFER

Please note that in this section entitled "Description of Preferred Stock We May
Offer", references to The Goldman Sachs Group, Inc., "we", "our" and "us" refer
only to The Goldman Sachs Group, Inc. and not to its consolidated subsidiaries.
Also, in this section, references to "holders" mean those who own shares of
preferred stock or depositary shares, as the case may be, registered in their
own names, on the books that the registrar or we maintain for this purpose, and
not those who own beneficial interests in shares registered in street name or in
shares issued in book-entry form through one or more depositaries. Owners of
beneficial interests in shares of preferred stock or depositary shares should
read the section below entitled "Legal Ownership and Book-Entry Issuance".

We may issue our preferred stock in one or more series, as described below.
This section summarizes terms of the preferred stock that apply generally to all
series. Most of the financial and other specific terms of your series will be
described in the prospectus supplement to be attached to the front of this
prospectus. Those terms may vary from the terms described here.

As you read this section, please remember that the specific terms of your series
of preferred stock and any related depositary shares as described in your
prospectus supplement will supplement and, if applicable, may modify or replace
the general terms described in this section. If there are differences between
your prospectus supplement and this prospectus, your prospectus supplement will
control. Thus, the statements we make in this section may not apply to your
series of preferred stock or any related depositary shares.

When we refer to a series of preferred stock, we mean all of the shares of
preferred stock issued as part of the same series under a certificate of
designations filed as part of our certificate of incorporation. When we refer to
your prospectus supplement, we mean the prospectus supplement describing the
specific terms of the preferred stock and any related depositary shares you
purchase. The terms used in your prospectus supplement will have the meanings
described in this prospectus, unless otherwise specified.

Our affiliates may resell preferred stock and depositary shares after their
initial issuance in market-making transactions. We describe these transactions
above under "Description of Debt Securities We May Offer -- Information in the
Prospectus Supplement -- Market-Making Transactions."

OUR AUTHORIZED PREFERRED STOCK

Our authorized capital stock includes 150,000,000 shares of preferred
stock, par value $0.01 per share. We do not have any preferred stock outstanding
as of the date of this prospectus; the prospectus supplement with respect to any
offered preferred stock will describe any preferred stock that may be
outstanding as of the date of the prospectus supplement.

PREFERRED STOCK ISSUED IN SEPARATE SERIES

Our board of directors is authorized to divide the preferred stock into
series and, with respect to each series, to determine the designations, the
powers, preferences and rights and the qualifications, limitations and
restrictions of the series, including:

-- dividend rights;

-- conversion or exchange rights;

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-- voting rights;

-- redemption rights and terms;

-- liquidation preferences;

-- sinking fund provisions;

-- the serial designation of the series; and

-- the number of shares constituting the series.

Subject to the rights of the holders of any series of preferred stock, the
number of authorized shares of any series of preferred stock may be increased or
decreased, but not below the number of shares of that series then outstanding,
by resolution adopted by our board of directors and approved by the affirmative
vote of the holders of a majority of the voting power of all outstanding shares
of capital stock entitled to vote on the matter, voting together as a single
class. No separate vote of the holders of any series of preferred stock is
required for an increase or decrease in the number of authorized shares of that
series.

Before we issue any series of preferred stock, our board of directors will
adopt resolutions creating and designating the series and will file a
certificate of designations stating the terms of the series with the Secretary
of State of the State of Delaware. None of our stockholders will need to approve
that amendment.

In addition, as described below under "-- Fractional or Multiple Shares of
Preferred Stock Issued as Depositary Shares", we may, at our option, instead of
offering whole individual shares of any series of preferred stock, offer
depositary shares evidenced by depositary receipts, each representing a fraction
of a share or some multiple of shares of the particular series of preferred
stock issued and deposited with a depositary. The fraction of a share or
multiple of shares of preferred stock which each depositary share represents
will be stated in the prospectus supplement relating to any series of preferred
stock offered through depositary shares.

The rights of holders of preferred stock may be adversely affected by the
rights of holders of any preferred stock that may be issued in the future. Our
board of directors may cause shares of preferred stock to be issued in public or
private transactions for any proper corporate purpose. Examples of proper
corporate purposes include issuances to obtain additional financing for
acquisitions and issuances to officers, directors and employees under their
respective benefit plans. Shares of preferred stock we issue may have the effect
of discouraging or making more difficult an acquisition of The Goldman Sachs
Group, Inc. We may choose to issue preferred stock, together with our other
securities described in this prospectus, in units.

Preferred stock will be fully paid and nonassessable when issued, which
means that its holders will have paid their purchase price in full and that we
may not ask them to surrender additional funds. Holders of preferred stock will
not have preemptive or subscription rights to acquire more stock of The Goldman
Sachs Group, Inc.

The transfer agent, registrar, dividend disbursing agent and redemption
agent for shares of each series of preferred stock will be named in the
prospectus supplement relating to that series.

RANK

Shares of each series of preferred stock will rank equally with each other
series of preferred stock and senior to our common stock with respect to
dividends and distributions of assets. In addition, we will generally be able to
pay dividends and distributions of assets to holders of our preferred stock only
if we have satisfied our obligations on our indebtedness then due and payable.

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DIVIDENDS

Holders of each series of preferred stock will be entitled to receive cash
dividends when, as and if declared by our board of directors, from funds legally
available for the payment of dividends. The rates and dates of payment of
dividends for each series of preferred stock will be stated in the applicable
prospectus supplement. Dividends will be payable to holders of record of
preferred stock as they appear on our books on the record dates fixed by our
board of directors. Dividends on any series of preferred stock may be cumulative
or noncumulative, as set forth in the applicable prospectus supplement.

REDEMPTION

If specified in an applicable prospectus supplement, a series of preferred
stock may be redeemable at any time, in whole or in part, at our option or the
holder's, and may be redeemed mandatorily.

Any restriction on the repurchase or redemption by us of our preferred
stock while there is an arrearage in the payment of dividends will be described
in the applicable prospectus supplement.

Any partial redemptions of preferred stock will be made in a way that our
board of directors decides is equitable.

Unless we default in the payment of the redemption price, dividends will
cease to accrue after the redemption date on shares of preferred stock called
for redemption and all rights of holders of these shares will terminate except
for the right to receive the redemption price.

LIQUIDATION PREFERENCE

Upon any voluntary or involuntary liquidation, dissolution or winding up of
The Goldman Sachs Group, Inc., holders of each series of preferred stock will be
entitled to receive distributions upon liquidation in the amount described in
the applicable prospectus supplement, plus an amount equal to any accrued and
unpaid dividends. These distributions will be made before any distribution is
made on any securities ranking junior to the preferred stock with respect to
liquidation, including our common stock. If the liquidation amounts payable
relating to the preferred stock of any series and any other securities ranking
on a parity regarding liquidation rights are not paid in full, the holders of
the preferred stock of that series and the other securities will share in any
distribution of our available assets on a ratable basis in proportion to the
full liquidation preferences of each security. Holders of our preferred stock
will not be entitled to any other amounts from us after they have received their
full liquidation preference.

VOTING RIGHTS

The holders of preferred stock of each series will have no voting rights,
except:

-- as stated in the applicable prospectus supplement and in the
certificate of designations establishing the series; or

-- as required by applicable law.

MERGER AND SIMILAR TRANSACTIONS PERMITTED; NO RESTRICTIVE COVENANTS

The terms of the preferred stock will not include any restrictions on our
ability to merge or consolidate with, or sell our assets to, another firm or to
engage in any other transactions. The terms of the preferred stock also will not
include any restrictions on our ability to put liens on our assets, including
our interests in our subsidiaries.

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Because we are a holding company, our ability to make payments on the
preferred stock will depend in part on our ability to participate in
distributions of assets from our subsidiaries. We discuss these matters above
under "Description of Debt Securities We May Offer -- We Are a Holding Company".

GOVERNING LAW

The preferred stock will be governed by Delaware law.

FRACTIONAL OR MULTIPLE SHARES OF PREFERRED STOCK ISSUED AS DEPOSITARY SHARES

We may choose to offer fractional shares or some multiple of shares of our
preferred stock, rather than whole individual shares. If we decide to do so, we
will issue the preferred stock in the form of depositary shares. Each depositary
share would represent a fraction or multiple of a share of the preferred stock
and would be evidenced by a depositary receipt. We will issue depositary shares
under a deposit agreement between a depositary, which we will appoint in our
discretion, and us.

DEPOSIT AGREEMENT

We will deposit the shares of preferred stock to be represented by
depositary shares under a deposit agreement. The parties to the deposit
agreement will be:

-- The Goldman Sachs Group, Inc.;

-- a bank or other financial institution selected by us and named in the
applicable prospectus supplement, as preferred stock depositary; and

-- the holders from time to time of depositary receipts issued under that
depositary agreement.

Each holder of a depositary share will be entitled to all the rights and
preferences of the underlying preferred stock, including, where applicable,
dividend, voting, redemption, conversion and liquidation rights, in proportion
to the applicable fraction or multiple of a share of preferred stock represented
by the depositary share. The depositary shares will be evidenced by depositary
receipts issued under the deposit agreement. The depositary receipts will be
distributed to those persons purchasing the fractional or multiple shares of
preferred stock. A depositary receipt may evidence any number of whole
depositary shares.

We will file the deposit agreement, including the form of depositary
receipt, with the SEC, either as an exhibit to an amendment to the registration
statement of which this prospectus forms a part or as an exhibit to a current
report on Form 8-K. See "Available Information" above for information on how to
obtain a copy of the form of deposit agreement.

DIVIDENDS AND OTHER DISTRIBUTIONS

The preferred stock depositary will distribute any cash dividends or other
cash distributions received in respect of the deposited preferred stock to the
record holders of depositary shares relating to the underlying preferred stock
in proportion to the number of depositary shares owned by the holders. The
preferred stock depositary will distribute any property received by it other
than cash to the record holders of depositary shares entitled to those
distributions, unless it determines that the distribution cannot be made
proportionally among those holders or that it is not feasible to make a
distribution. In that event, the preferred stock depositary may, with our
approval, sell the property and distribute the net proceeds from the sale to the
holders of the depositary shares in proportion to the number of depositary
shares they own.

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The amounts distributed to holders of depositary shares will be reduced by
any amounts required to be withheld by the preferred stock depositary or by us
on account of taxes or other governmental charges.

REDEMPTION OF PREFERRED STOCK

If we redeem preferred stock represented by depositary shares, the
preferred stock depositary will redeem the depositary shares from the proceeds
it receives from the redemption, in whole or in part, of the preferred stock.
The preferred stock depositary will redeem the depositary shares at a price per
share equal to the applicable fraction or multiple of the redemption price per
share of preferred stock. Whenever we redeem shares of preferred stock held by
the preferred stock depositary, the preferred stock depositary will redeem as of
the same date the number of depositary shares representing the redeemed shares
of preferred stock. If fewer than all the depositary shares are to be redeemed,
the preferred stock depositary will select the depositary shares to be redeemed
by lot or ratably or by any other equitable method it chooses.

After the date fixed for redemption, the depositary shares called for
redemption will no longer be deemed to be outstanding, and all rights of the
holders of those shares will cease, except the right to receive the amount
payable and any other property to which the holders were entitled upon the
redemption. To receive this amount or other property, the holders must surrender
the depositary receipts evidencing their depositary shares to the preferred
stock depositary. Any funds that we deposit with the preferred stock depositary
for any depositary shares that the holders fail to redeem will be returned to us
after a period of two years from the date we deposit the funds.

WITHDRAWAL OF PREFERRED STOCK

Unless the related depositary shares have previously been called for
redemption, any holder of depositary shares may receive the number of whole
shares of the related series of preferred stock and any money or other property
represented by those depositary receipts after surrendering the depositary
receipts at the corporate trust office of the preferred stock depositary, paying
any taxes, charges and fees provided for in the deposit agreement and complying
with any other requirement of the deposit agreement. Holders of depositary
shares making these withdrawals will be entitled to receive whole shares of
preferred stock, but holders of whole shares of preferred stock will not be
entitled to deposit that preferred stock under the deposit agreement or to
receive depositary receipts for that preferred stock after withdrawal. If the
depositary shares surrendered by the holder in connection with withdrawal exceed
the number of depositary shares that represent the number of whole shares of
preferred stock to be withdrawn, the preferred stock depositary will deliver to
that holder at the same time a new depositary receipt evidencing the excess
number of depositary shares.

VOTING DEPOSITED PREFERRED STOCK

When the preferred stock depositary receives notice of any meeting at which
the holders of any series of deposited preferred stock are entitled to vote, the
preferred stock depositary will mail the information contained in the notice to
the record holders of the depositary shares relating to the applicable series of
preferred stock. Each record holder of the depositary shares on the record date,
which will be the same date as the record date for the preferred stock, may
instruct the preferred stock depositary to vote the amount of the preferred
stock represented by the holder's depositary shares. To the extent possible, the
preferred stock depositary will vote the amount of the series of preferred stock
represented by depositary shares in accordance with the instructions it
receives. We will agree to take all reasonable actions that the preferred stock
depositary determines are necessary to enable the preferred stock depositary to
vote as instructed. If the preferred stock depositary does not receive specific
instructions from the
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holders of any depositary shares representing a series of preferred stock, it
will vote all shares of that series held by it proportionately with instructions
received.

AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT

We may amend the form of depositary receipt evidencing the depositary
shares and any provision of the deposit agreement at any time and from time to
time by agreement with the preferred stock depositary. However, any amendment
that imposes additional charges or materially and adversely alters any
substantial existing right of the holders of depositary shares will not be
effective unless the holders of at least a majority of the affected depositary
shares then outstanding approve the amendment. We will make no amendment that
impairs the right of any holder of depositary shares, as described above under
"-- Withdrawal of Preferred Stock", to receive shares of the related series of
preferred stock and any money or other property represented by those depositary
shares, except in order to comply with mandatory provisions of applicable law.
Holders who retain or acquire their depositary receipts after an amendment
becomes effective will be deemed to have agreed to the amendment and will be
bound by the amended deposit agreement.

The deposit agreement will automatically terminate if:

-- all outstanding depositary shares have been redeemed or converted or
exchanged for any other securities into which they or the underlying
preferred stock are convertible or exchangeable; or

-- a final distribution in respect of the preferred stock has been made
to the holders of depositary shares in connection with any
liquidation, dissolution or winding up of The Goldman Sachs Group,
Inc.

We may terminate the deposit agreement at any time, and the preferred stock
depositary will give notice of that termination to the recordholders of all
outstanding depositary receipts not less than 30 days before the termination
date. In that event, the preferred stock depositary will deliver or make
available for delivery to holders of depositary shares, upon surrender of the
depositary receipts evidencing the depositary shares, the number of whole or
fractional shares of the related series of preferred stock as are represented by
those depositary shares.

CHARGES OF PREFERRED STOCK DEPOSITARY; TAXES AND OTHER GOVERNMENTAL CHARGES

We will pay the fees, charges and expenses of the preferred stock
depositary provided in the deposit agreement to be payable by us. Holders of
depositary receipts will pay any taxes and governmental charges and any charges
provided in the deposit agreement to be payable by them, including a fee for the
withdrawal of shares of preferred stock upon surrender of depositary receipts.
If the preferred stock depositary incurs fees, charges or expenses for which it
is not otherwise liable at the election of a holder of a depositary receipt or
other person, that holder or other person will be liable for those fees, charges
and expenses.

RESIGNATION AND REMOVAL OF DEPOSITARY

The preferred stock depositary may resign at any time by giving us notice,
and we may remove or replace the preferred stock depositary at any time.

REPORTS TO HOLDERS

We will deliver all required reports and communications to holders of the
preferred stock to the preferred stock depositary. It will forward those reports
and communications to the holders of depositary shares.

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LIMITATION ON LIABILITY OF THE PREFERRED STOCK DEPOSITARY

The preferred stock depositary will not be liable if it is prevented or
delayed by law or any circumstances beyond its control in performing its
obligations under the deposit agreement. The obligations of the preferred stock
depositary under the deposit agreement will be limited to performance in good
faith of its duties under the agreement, and it will not be obligated to
prosecute or defend any legal proceeding in respect of any depositary shares,
depositary receipts or shares of preferred stock unless satisfactory and
reasonable protection from expenses and liability is furnished. This is called
an indemnity. The preferred stock depositary may rely upon written advice of
counsel or accountants, upon information provided by holders of depositary
receipts or other persons believed to be competent and upon documents believed
to be genuine.

FORM OF PREFERRED STOCK AND DEPOSITARY SHARES

We may issue preferred stock in book-entry form. Preferred stock in
book-entry form will be represented by a global security registered in the name
of a depositary, which will be the holder of all the shares of preferred stock
represented by the global security. Those who own beneficial interests in shares
of preferred stock will do so through participants in the depositary's system,
and the rights of these indirect owners will be governed solely by the
applicable procedures of the depositary and its participants. However,
beneficial owners of any preferred stock in book-entry form will have the right
to obtain their shares in non-global form. We describe book-entry securities
below under "Legal Ownership and Book-Entry Issuance". All preferred stock will
be issued in registered form.

We will issue depositary shares in book-entry form, to the same extent as
we describe above for preferred stock. Depositary shares will be issued in
registered form.

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LEGAL OWNERSHIP AND BOOK-ENTRY ISSUANCE

In this section, we describe special considerations that will apply to
registered securities issued in global -- i.e., book-entry -- form. First we
describe the difference between legal ownership and indirect ownership of
registered securities. Then we describe special provisions that apply to global
securities.

WHO IS THE LEGAL OWNER OF A REGISTERED SECURITY?

Each debt security, warrant, purchase contract, unit, share of preferred
stock and depositary share in registered form will be represented either by a
certificate issued in definitive form to a particular investor or by one or more
global securities representing the entire issuance of securities. We refer to
those who have securities registered in their own names, on the books that we or
the trustee maintain for this purpose, as the "holders" of those securities.
These persons are the legal holders of the securities. We refer to those who,
indirectly through others, own beneficial interests in securities that are not
registered in their own names as indirect owners of those securities. As we
discuss below, indirect owners are not legal holders, and investors in
securities issued in book-entry form or in street name will be indirect owners.

BOOK-ENTRY OWNERS

We will issue each security in book-entry form only. This means securities
will be represented by one or more global securities registered in the name of a
financial institution that holds them as depositary on behalf of other financial
institutions that participate in the depositary's book-entry system. These
participating institutions, in turn, hold beneficial interests in the securities
on behalf of themselves or their customers.

Under each indenture, only the person in whose name a security is
registered is recognized as the holder of that security. Consequently, for
securities issued in global form, we will recognize only the depositary as the
holder of the securities and we will make all payments on the securities,
including deliveries of any property other than cash, to the depositary. The
depositary passes along the payments it receives to its participants, which in
turn pass the payments along to their customers who are the beneficial owners.
The depositary and its participants do so under agreements they have made with
one another or with their customers; they are not obligated to do so under the
terms of the securities.

As a result, investors will not own securities directly. Instead, they will
own beneficial interests in a global security, through a bank, broker or other
financial institution that participates in the depositary's book-entry system or
holds an interest through a participant. As long as the securities are issued in
global form, investors will be indirect owners, and not holders, of the
securities.

STREET NAME OWNERS

In the future we may terminate a global security or issue securities
initially in non-global form. In these cases, investors may choose to hold their
securities in their own names or in street name. Securities held by an investor
in street name would be registered in the name of a bank, broker or other
financial institution that the investor chooses, and the investor would hold
only a beneficial interest in those securities through an account he or she
maintains at that institution.

For securities held in street name, we will recognize only the intermediary
banks, brokers and other financial institutions in whose names the securities
are registered as the holders of those securities and we will make all payments
on those securities, including deliveries of any property other than cash, to
them. These institutions pass along the payments they receive to their customers
who are the beneficial owners, but only because they agree to do so in their
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customer agreements or because they are legally required to do so. Investors who
hold securities in street name will be indirect owners, not holders, of those
securities.

LEGAL HOLDERS

Our obligations, as well as the obligations of the trustee and the
obligations, if any, of any warrant agents and unit agents and any other third
parties employed by us, the trustee or any of those agents, run only to the
holders of the securities. We do not have obligations to investors who hold
indirect interests in global securities, in street name or by any other indirect
means. This will be the case whether an investor chooses to be an indirect owner
of a security or has no choice because we are issuing the securities only in
global form.

For example, once we make a payment or give a notice to the holder, we have
no further responsibility for that payment or notice even if that holder is
required, under agreements with depositary participants or customers or by law,
to pass it along to the indirect owners but does not do so. Similarly, if we
want to obtain the approval of the holders for any purpose -- e.g., to amend the
indenture for a series of debt securities or the warrant agreement for a series
of warrants or to relieve us of the consequences of a default or of our
obligation to comply with a particular provision of the indenture -- we would
seek the approval only from the holders, and not the indirect owners, of the
relevant securities. Whether and how the holders contact the indirect owners is
up to the holders.

When we refer to "you" in this prospectus, we mean those who invest in the
securities being offered by this prospectus, whether they are the holders or
only indirect owners of those securities. When we refer to "your securities" in
this prospectus, we mean the securities in which you will hold a direct or
indirect interest.

SPECIAL CONSIDERATIONS FOR INDIRECT OWNERS

If you hold securities through a bank, broker or other financial
institution, either in book-entry form or in street name, you should check with
your own institution to find out:

-- how it handles securities payments and notices;

-- whether it imposes fees or charges;

-- whether and how you can instruct it to exercise any rights to purchase
or sell warrant property under a warrant or purchase contract property
under a purchase contract or to exchange or convert a security for or
into other property;

-- how it would handle a request for the holders' consent, if ever
required;

-- whether and how you can instruct it to send you securities registered
in your own name so you can be a holder, if that is permitted in the
future;

-- how it would exercise rights under the securities if there were a
default or other event triggering the need for holders to act to
protect their interests; and

-- if the securities are in book-entry form, how the depositary's rules
and procedures will affect these matters.

WHAT IS A GLOBAL SECURITY?

We will issue each security in book-entry form only. Each security issued
in book-entry form will be represented by a global security that we deposit with
and register in the name of one or more financial institutions or clearing
systems, or their nominees, which we select. A financial institution or clearing
system that we select for any security for this purpose is called the

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"depositary" for that security. A security will usually have only one depositary
but it may have more.

Each series of securities will have one or more of the following as the
depositaries:

-- The Depository Trust Company, New York, New York, which is known as
"DTC";

-- a financial institution holding the securities on behalf of Morgan
Guaranty Trust Company of New York, acting out of its Brussels,
Belgium, office, as operator of the Euroclear system, which is known
as "Euroclear";

-- a financial institution holding the securities on behalf of
Clearstream Banking, societe anonyme, Luxembourg, which is known as
"Clearstream, Luxembourg"; and

-- any other clearing system or financial institution named in the
applicable prospectus supplement.

The depositaries named above may also be participants in one another's systems.
Thus, for example, if DTC is the depositary for a global security, investors may
hold beneficial interests in that security through Euroclear or Clearstream,
Luxembourg, as DTC participants. The depositary or depositaries for your
securities will be named in your prospectus supplement; if none is named, the
depositary will be DTC.

A global security may represent one or any other number of individual
securities. Generally, all securities represented by the same global security
will have the same terms. We may, however, issue a global security that
represents multiple securities of the same kind, such as debt securities, that
have different terms and are issued at different times. We call this kind of
global security a master global security. Your prospectus supplement will not
indicate whether your securities are represented by a master global security.

A global security may not be transferred to or registered in the name of
anyone other than the depositary or its nominee, unless special termination
situations arise. We describe those situations below under "-- Holder's Option
to Obtain a Non-Global Security; Special Situations When a Global Security Will
Be Terminated". As a result of these arrangements, the depositary, or its
nominee, will be the sole registered owner and holder of all securities
represented by a global security, and investors will be permitted to own only
indirect interests in a global security. Indirect interests must be held by
means of an account with a broker, bank or other financial institution that in
turn has an account with the depositary or with another institution that does.
Thus, an investor whose security is represented by a global security will not be
a holder of the security, but only an indirect owner of an interest in the
global security.

If the prospectus supplement for a particular security indicates that the
security will be issued in global form only, then the security will be
represented by a global security at all times unless and until the global
security is terminated. We describe the situations in which this can occur below
under "-- Holder's Option to Obtain a Non-Global Security; Special Situations
When a Global Security Will Be Terminated". If termination occurs, we may issue
the securities through another book-entry clearing system or decide that the
securities may no longer be held through any book-entry clearing system.

SPECIAL CONSIDERATIONS FOR GLOBAL SECURITIES

As an indirect owner, an investor's rights relating to a global security
will be governed by the account rules of the depositary and those of the
investor's financial institution or other intermediary through which it holds
its interest (e.g., Euroclear or Clearstream, Luxembourg, if DTC is the
depositary), as well as general laws relating to securities transfers. We do not
recognize this type of investor or any intermediary as a holder of securities
and instead deal only with the depositary that holds the global security.

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If securities are issued only in the form of a global security, an investor
should be aware of the following:

-- An investor cannot cause the securities to be registered in his or her
own name, and cannot obtain non-global certificates for his or her
interest in the securities, except in the special situations we
describe below;

-- An investor will be an indirect holder and must look to his or her own
bank or broker for payments on the securities and protection of his or
her legal rights relating to the securities, as we describe above
under "-- Who Is the Legal Owner of a Registered Security?";

-- An investor may not be able to sell interests in the securities to
some insurance companies and other institutions that are required by
law to own their securities in non-book-entry form;

-- An investor may not be able to pledge his or her interest in a global
security in circumstances where certificates representing the
securities must be delivered to the lender or other beneficiary of the
pledge in order for the pledge to be effective;

-- The depositary's policies will govern payments, deliveries, transfers,
exchanges, notices and other matters relating to an investor's
interest in a global security, and those policies may change from time
to time. We, the trustee and any warrant agents and unit agents will
have no responsibility for any aspect of the depositary's policies,
actions or records of ownership interests in a global security. We,
the trustee and any warrant and unit agents also do not supervise the
depositary in any way;

-- The depositary will require that those who purchase and sell interests
in a global security within its book-entry system use immediately
available funds and your broker or bank may require you to do so as
well; and

-- Financial institutions that participate in the depositary's book-entry
system and through which an investor holds its interest in the global
securities, directly or indirectly, may also have their own policies
affecting payments, deliveries, transfers, exchanges, notices and
other matters relating to the securities, and those policies may
change from time to time. For example, if you hold an interest in a
global security through Euroclear or Clearstream, Luxembourg, when DTC
is the depositary, Euroclear or Clearstream, Luxembourg, as
applicable, will require those who purchase and sell interests in that
security through them to use immediately available funds and comply
with other policies and procedures, including deadlines for giving
instructions as to transactions that are to be effected on a
particular day. There may be more than one financial intermediary in
the chain of ownership for an investor. We do not monitor and are not
responsible for the policies or actions or records of ownership
interests of any of those intermediaries.

HOLDER'S OPTION TO OBTAIN A NON-GLOBAL SECURITY; SPECIAL SITUATIONS WHEN A
GLOBAL SECURITY WILL BE TERMINATED

If we issue any series of securities in book-entry form but we choose to
give the beneficial owners of that series the right to obtain non-global
securities, any beneficial owner entitled to obtain non-global securities may do
so by following the applicable procedures of the depositary, any transfer agent
or registrar for that series and that owner's bank, broker or other financial
institution through which that owner holds its beneficial interest in the
securities. For example, in the case of a global security representing preferred
stock or depositary shares, a beneficial owner will be entitled to obtain a
non-global security representing its interest by making a written request to the
transfer agent or other agent designated by us. If you are entitled to request a
non-global certificate and wish to do so, you will need to allow sufficient lead
time to enable us or our agent to prepare the requested certificate.
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In addition, in a few special situations described below, a global security
will be terminated and interests in it will be exchanged for certificates in
non-global form representing the securities it represented. After that exchange,
the choice of whether to hold the securities directly or in street name will be
up to the investor. Investors must consult their own banks or brokers to find
out how to have their interests in a global security transferred on termination
to their own names, so that they will be holders. We have described the rights
of holders and street name investors above under "-- Who Is the Legal Owner of a
Registered Security?".

The special situations for termination of a global security are as follows:

-- if the depositary notifies us that it is unwilling, unable or no
longer qualified to continue as depositary for that global security
and we do not appoint another institution to act as depositary within
60 days;

-- if we notify the trustee, warrant agent or unit agent, as applicable,
that we wish to terminate that global security; or

-- in the case of a global security representing debt securities, if an
event of default has occurred with regard to these debt securities and
has not been cured or waived.

If a global security is terminated, only the depositary, and not we, the
trustee for any debt securities, the warrant agent for any warrants or the unit
agent for any units, is responsible for deciding the names of the institutions
in whose names the securities represented by the global security will be
registered and, therefore, who will be the holders of those securities.

CONSIDERATIONS RELATING TO EUROCLEAR AND CLEARSTREAM, LUXEMBOURG

Euroclear and Clearstream, Luxembourg are securities clearance systems in
Europe. Both systems clear and settle securities transactions between their
participants through electronic, book-entry delivery of securities against
payment.

Euroclear and Clearstream, Luxembourg may be depositaries for a global
security. In addition, if DTC is the depositary for a global security, Euroclear
and Clearstream, Luxembourg may hold interests in the global security as
participants in DTC.

As long as any global security is held by Euroclear or Clearstream,
Luxembourg as depositary, you may hold an interest in the global security only
through an organization that participates, directly or indirectly, in Euroclear
or Clearstream, Luxembourg. If Euroclear or Clearstream, Luxembourg is the
depositary for a global security and there is no depositary in the United
States, you will not be able to hold interests in that global security through
any securities clearance system in the United States.

Payments, deliveries, transfers, exchanges, notices and other matters
relating to the securities made through Euroclear or Clearstream, Luxembourg
must comply with the rules and procedures of those systems. Those systems could
change their rules and procedures at any time. We have no control over those
systems or their participants and we take no responsibility for their
activities. Transactions between participants in Euroclear or Clearstream,
Luxembourg, on one hand, and participants in DTC, on the other hand, when DTC is
the depositary, would also be subject to DTC's rules and procedures.

SPECIAL TIMING CONSIDERATIONS FOR TRANSACTIONS IN EUROCLEAR AND CLEARSTREAM,
LUXEMBOURG

Investors will be able to make and receive through Euroclear and
Clearstream, Luxembourg payments, deliveries, transfers, exchanges, notices and
other transactions involving any securities held through those systems only on
days when those systems are open for business. Those systems may not be open for
business on days when banks, brokers and other institutions are open for
business in the United States.

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In addition, because of time-zone differences, U.S. investors who hold
their interests in the securities through these systems and wish to transfer
their interests, or to receive or make a payment or delivery or exercise any
other right with respect to their interests, on a particular day may find that
the transaction will not be effected until the next business day in Luxembourg
or Brussels, as applicable. Thus, investors who wish to exercise rights that
expire on a particular day may need to act before the expiration date. In
addition, investors who hold their interests through both DTC and Euroclear or
Clearstream, Luxembourg may need to make special arrangements to finance any
purchases or sales of their interests between the U.S. and European clearing
systems, and those transactions may settle later than would be the case for
transactions within one clearing system.

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CONSIDERATIONS RELATING TO SECURITIES ISSUED IN BEARER FORM

If we issue securities in bearer, rather than registered, form, those
securities will be subject to special provisions described in this section. This
section primarily describes provisions relating to debt securities issued in
bearer form. Other provisions may apply to securities of other kinds issued in
bearer form. To the extent the provisions described in this section are
inconsistent with those described elsewhere in this prospectus, they supersede
those described elsewhere with regard to any bearer securities. Otherwise, the
relevant provisions described elsewhere in this prospectus will apply to bearer
securities.

TEMPORARY AND PERMANENT BEARER GLOBAL SECURITIES

If we issue securities in bearer form, all securities of the same series
and kind will initially be represented by a temporary bearer global security,
which we will deposit with a common depositary for Euroclear and Clearstream,
Luxembourg. Euroclear and Clearstream, Luxembourg will credit the account of
each of their subscribers with the amount of securities the subscriber
purchases. We will promise to exchange the temporary bearer global security for
a permanent bearer global security, which we will deliver to the common
depositary upon the later of the following two dates:

-- the date that is 40 days after the later of (a) the completion of the
distribution of the securities as determined by the underwriter,
dealer or agent and (b) the closing date for the sale of the
securities by us; we may extend this date as described below under
"-- Extensions for Further Issuances"; and

-- the date on which Euroclear and Clearstream, Luxembourg provide us or
our agent with the necessary tax certificates described below under
"-- U.S. Tax Certificate Required".

Unless we say otherwise in the applicable prospectus supplement, owners of
beneficial interests in a permanent bearer global security will be able to
exchange those interests at their option, in whole but not in part, for:

-- non-global securities in bearer form with interest coupons attached,
if applicable; or

-- non-global securities in registered form without coupons attached.

A beneficial owner will be able to make this exchange by giving us or our
designated agent 60 days' prior written notice in accordance with the terms of
the securities.

EXTENSIONS FOR FURTHER ISSUANCES

Without the consent of the trustee, any holders or any other person, we may
issue additional securities identical to a prior issue from time to time. If we
issue additional securities before the date on which we would otherwise be
required to exchange the temporary bearer global security representing the prior
issue for a permanent bearer global security as described above, that date will
be extended until the 40th day after the completion of the distribution and the
closing, whichever is later, for the additional securities. Extensions of this
kind may be repeated if we sell additional identical securities. As a result of
these extensions, beneficial interests in the temporary bearer global security
may not be exchanged for interests in a permanent bearer global security until
the 40th day after the additional securities have been distributed and sold.

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U.S. TAX CERTIFICATE REQUIRED

We will not pay or deliver interest or other amounts in respect of any
portion of a temporary bearer global security unless and until Euroclear or
Clearstream, Luxembourg delivers to us or our agent a tax certificate with
regard to the owners of the beneficial interests in that portion of the global
security. Also, we will not exchange any portion of a temporary bearer global
security for a permanent bearer global security unless and until we receive from
Euroclear or Clearstream, Luxembourg a tax certificate with regard to the owners
of the beneficial interests in the portion to be exchanged. In each case, this
tax certificate must state that each of the relevant owners:

-- is not a United States person, as defined below under "-- Limitations
on Issuance of Bearer Securities";

-- is a foreign branch of a United States financial institution
purchasing for its own account or for resale, or is a United States
person who acquired the security through a financial institution of
this kind and who holds the security through that financial
institution on the date of certification, provided in either case that
the financial institution provides a certificate to us or the
distributor selling the security to it stating that it agrees to
comply with the requirements of Section 165(j)(3)(A), (B) or (C) of
the U.S. Internal Revenue Code and the U.S. Treasury Regulations under
that Section; or

-- is a financial institution holding for purposes of resale during the
"restricted period", as defined in U.S. Treasury Regulations Section
1.163-5(c)(2)(i)(D)(7). A financial institution of this kind, whether
or not it is also described in either of the two preceding bullet
points, must certify that it has not acquired the security for
purposes of resale directly or indirectly to a United States person or
to a person within the United States or its possessions.

The tax certificate must be signed by an authorized person satisfactory to us.

No one who owns an interest in a temporary bearer global security will receive
payment or delivery of any amount or property in respect of its interest, and
will not be permitted to exchange its interest for an interest in a permanent
bearer global security or a security in any other form, unless we or our agent
have received the required tax certificate on its behalf.

Special requirements and restrictions imposed by United States federal tax
laws and regulations will apply to bearer debt securities. We describe these
below under "-- Limitations on Issuance of Bearer Debt Securities".

LEGAL OWNERSHIP OF BEARER SECURITIES

Securities in bearer form are not registered in any name. Whoever is the
bearer of the certificate representing a security in bearer form is the legal
owner of that security. Legal title and ownership of bearer securities will pass
by delivery of the certificates representing the securities. Thus, when we use
the term "holder" in this prospectus with regard to bearer securities, we mean
the bearer of those securities.

The common depositary for Euroclear and Clearstream, Luxembourg will be the
bearer, and thus the holder and legal owner, of both the temporary and permanent
bearer global securities described above. Investors in those securities will own
beneficial interests in the securities represented by those global securities;
they will be only indirect owners, not holders or legal owners, of the
securities.

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As long as the common depositary is the bearer of any bearer security in
global form, the common depositary will be considered the sole legal owner and
holder of the securities represented by the bearer security in global form.
Ownership of beneficial interests in any bearer security in global form will be
shown on records maintained by Euroclear or Clearstream, Luxembourg, as
applicable, or by the common depositary on their behalf, and by the direct and
indirect participants in their systems, and ownership interests can be held and
transferred only through those records. We will pay any amounts owing with
respect to a bearer global security only to the common depositary.

Neither we, the trustee nor any agent will recognize any owner of indirect
interests as a holder or legal owner. Nor will we, the trustee or any agent have
any responsibility for the ownership records or practices of Euroclear or
Clearstream, Luxembourg, the common depositary or any direct or indirect
participants in those systems or for any payments, transfers, deliveries,
exchanges, notices or other transactions within those systems, all of which will
be subject to the rules and procedures of those systems and participants. If you
own an indirect interest in a bearer global security, you must look only to the
common depositary for Euroclear or Clearstream, Luxembourg, and to their direct
and indirect participants through which you hold your interest, for your
ownership rights. You should read the section above entitled "Legal Ownership
and Book-Entry Issuance" for more information about holding interests through
Euroclear and Clearstream, Luxembourg.

PAYMENT AND EXCHANGE OF NON-GLOBAL BEARER SECURITIES

Payments and deliveries owing on non-global bearer securities will be made,
in the case of interest payments, only to the holder of the relevant coupon
after the coupon is surrendered to the paying agent. In all other cases,
payments and deliveries will be made only to the holder of the certificate
representing the relevant security after the certificate is surrendered to the
paying agent.

Non-global bearer securities, with all unmatured coupons relating to the
securities, if any, may be exchanged for a like aggregate amount of non-global
bearer or registered securities of like kind. Non-global registered securities
may be exchanged for a like aggregate amount of non-global registered securities
of like kind, as described above in the sections on the different types of
securities we may offer. However, we will not issue bearer securities in
exchange for any registered securities.

Replacement certificates and coupons for non-global bearer securities will
not be issued in lieu of any lost, stolen or destroyed certificates and coupons
unless we and our transfer agent receive evidence of the loss, theft or
destruction, and an indemnity against liabilities, satisfactory to us and our
agent. Upon redemption or any other settlement before the stated maturity or
expiration, as well as upon any exchange, of a non-global bearer security, the
holder will be required to surrender all unmatured coupons to us or our
designated agent. If any unmatured coupons are not surrendered, we or our agent
may deduct the amount of interest relating to those coupons from the amount
otherwise payable or deliverable or we or our agent may demand an indemnity
against liabilities satisfactory to us and our agent.

We may make payments, deliveries and exchanges in respect of bearer
securities in global form in any manner acceptable to us and the depositary.

NOTICES

If we are required to give notice to the holders of bearer securities, we
will do so by publication in a daily newspaper of general circulation in a city
in Western Europe. The term "daily newspaper" means a newspaper that is
published on each day, other than a Saturday, Sunday or holiday, in the relevant
city. If these bearer securities are listed on the Luxembourg
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Stock Exchange and its rules so require, that city will be Luxembourg and that
newspaper will be the Luxemburger Wort, unless publication in that newspaper is
impractical. A notice of this kind will be presumed to have been received on the
date it is first published. If we cannot give notice as described in this
paragraph because the publication of any newspaper is suspended or it is
otherwise impractical to publish the notice, then we will give notice in another
form. That alternate form of notice will be deemed to be sufficient notice to
each holder. Neither the failure to give notice to a particular holder, nor any
defect in a notice given to a particular holder, will affect the sufficiency of
any notice given to another holder.

We may give any required notice with regard to bearer securities in global
form to the common depositary for the securities, in accordance with its
applicable procedures. If these provisions do not require that notice be given
by publication in a newspaper, we may omit giving notice by publication.

LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES

In compliance with United States federal income tax laws and regulations,
bearer debt securities, including bearer debt securities in global form, will
not be offered, sold, resold or delivered, directly or indirectly, in the United
States or its possessions or to United States persons, as defined below, except
as otherwise permitted by U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D).
Any underwriters, dealers or agents participating in the offerings of bearer
debt securities, directly or indirectly, must agree that they will not, in
connection with the original issuance of any bearer debt securities or during
the restricted period applicable under the Treasury Regulations cited earlier,
offer, sell, resell or deliver, directly or indirectly, any bearer debt
securities in the United States or its possessions or to United States persons,
other than as permitted by the applicable Treasury Regulations described above.
In addition, any underwriters, dealers or agents must have procedures reasonably
designed to ensure that their employees or agents who are directly engaged in
selling bearer debt securities are aware of the above restrictions on the
offering, sale, resale or delivery of bearer debt securities.

We will make payments on bearer debt securities only outside the United
States and its possessions except as permitted by the applicable Treasury
Regulations described above.

Bearer debt securities and any coupons will bear the following legend:

"Any United States person who holds this obligation will be subject to
limitations under the United States income tax laws, including the
limitations provided in sections 165(j) and 1287(a) of the Internal Revenue
Code."

The sections referred to in this legend provide that, with exceptions, a United
States person will not be permitted to deduct any loss, and will not be eligible
for capital gain treatment with respect to any gain, realized on the sale,
exchange or redemption of that bearer debt security or coupon.

As used in this subsection entitled "-- Limitations on Issuance of Bearer
Debt Securities", the term "bearer debt securities" includes bearer debt
securities that are part of units. As used in this section entitled
"Considerations Relating to Securities Issued in Bearer Form", "United States
person" means:

-- a citizen or resident of the United States;

-- a corporation or partnership, including an entity treated as a
corporation or partnership for United States federal income tax
purposes, created or organized in or under the laws of the United
States, any state of the United States or the District of Columbia;

-- an estate the income of which is subject to United States federal
income taxation regardless of its source; or

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-- a trust if a court within the United States is able to exercise
primary supervision of the administration of the trust and one or more
United States persons have the authority to control all substantial
decisions of the trust.

"United States" means the United States of America, including the States
and the District of Columbia, and "possessions" of the United States include
Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the
Northern Mariana Islands.

CONSIDERATIONS RELATING TO INDEXED SECURITIES

We use the term "indexed securities" to mean debt securities, warrants and
purchase contracts whose value is linked to an underlying property or index, as
well as units that include any debt security, warrant or purchase contract of
this kind. Indexed securities may present a high level of risk, and those who
invest in some indexed securities may lose their entire investment. In addition,
the treatment of indexed securities for U.S. federal income tax purposes is
often unclear due to the absence of any authority specifically addressing the
issues presented by any particular indexed security. Thus, if you propose to
invest in indexed securities, you should independently evaluate the federal
income tax consequences of purchasing an indexed security that apply in your
particular circumstances. You should also read "United States Taxation" for a
discussion of U.S. tax matters.

INVESTORS IN INDEXED SECURITIES COULD LOSE THEIR INVESTMENT

The amount of principal and/or interest payable on an indexed debt
security, the cash value or physical settlement value of a physically settled
debt security and the cash value or physical settlement value of an indexed
warrant or purchase contract will be determined by reference to the price, value
or level of one or more securities, currencies, commodities or other properties,
any other financial, economic or other measure or instrument, including the
occurrence or non-occurrence of any event or circumstance, and/or one or more
indices or baskets of any of these items. We refer to each of these as an
"index". The direction and magnitude of the change in the price, value or level
of the relevant index will determine the amount of principal and/or interest
payable on an indexed debt security, the cash value or physical settlement value
of a physically settled debt security and the cash value or physical settlement
value of an indexed warrant or purchase contract. The terms of a particular
indexed debt security may or may not include a guaranteed return of a percentage
of the face amount at maturity or a minimum interest rate. An indexed warrant or
purchase contract generally will not provide for any guaranteed minimum
settlement value. Thus, if you purchase an indexed security, you may lose all or
a portion of the principal or other amount you invest and may receive no
interest on your investment.

THE ISSUER OF A SECURITY OR CURRENCY THAT SERVES AS AN INDEX COULD TAKE ACTIONS
THAT MAY ADVERSELY AFFECT AN INDEXED SECURITY

The issuer of a security that serves as an index or part of an index for an
indexed security will have no involvement in the offer and sale of the indexed
security and no obligations to the holder of the indexed security. The issuer
may take actions, such as a merger or sale of assets, without regard to the
interests of the holder. Any of these actions could adversely affect the value
of a security indexed to that security or to an index of which that security is
a component.

If the index for an indexed security includes a non-U.S. dollar currency or
other asset denominated in a non-U.S. dollar currency, the government that
issues that currency will also have no involvement in the offer and sale of the
indexed security and no obligations to the holder of the indexed security. That
government may take actions that could adversely affect the value of the
security. See "Considerations Relating to Securities Denominated or Payable in
or Linked to a Non-U.S. Dollar Currency -- Government Policy Can Adversely
Affect Currency Exchange

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Rates and an Investment in a Non-U.S. Dollar Security" below for more
information about these kinds of government actions.

AN INDEXED SECURITY MAY BE LINKED TO A VOLATILE INDEX, WHICH COULD HURT YOUR
INVESTMENT

Some indices are highly volatile, which means that their value may change
significantly, up or down, over a short period of time. The amount of principal
or interest that can be expected to become payable on an indexed debt security
or the expected settlement value of an indexed warrant or purchase contract may
vary substantially from time to time. Because the amounts payable with respect
to an indexed security are generally calculated based on the value or level of
the relevant index on a specified date or over a limited period of time,
volatility in the index increases the risk that the return on the indexed
security may be adversely affected by a fluctuation in the level of the relevant
index.

The volatility of an index may be affected by political or economic events,
including governmental actions, or by the activities of participants in the
relevant markets. Any of these events or activities could adversely affect the
value of an indexed security.

AN INDEX TO WHICH A SECURITY IS LINKED COULD BE CHANGED OR BECOME UNAVAILABLE

Some indices compiled by us or our affiliates or third parties may consist
of or refer to several or many different securities, commodities or currencies
or other instruments or measures. The compiler of such an index typically
reserves the right to alter the composition of the index and the manner in which
the value or level of the index is calculated. An alteration may result in a
decrease in the value of or return on an indexed security that is linked to the
index. The indices for our indexed securities may include published indices of
this kind or customized indices developed by us or our affiliates in connection
with particular issues of indexed securities.

A published index may become unavailable, or a customized index may become
impossible to calculate in the normal manner, due to events such as war, natural
disasters, cessation of publication of the index or a suspension or disruption
of trading in one or more securities, commodities or currencies or other
instruments or measures on which the index is based. If an index becomes
unavailable or impossible to calculate in the normal manner, the terms of a
particular indexed security may allow us to delay determining the amount payable
as principal or interest on an indexed debt security or the settlement value of
an indexed warrant or purchase contract, or we may use an alternative method to
determine the value of the unavailable index. Alternative methods of valuation
are generally intended to produce a value similar to the value resulting from
reference to the relevant index. However, it is unlikely that any alternative
method of valuation we use will produce a value identical to the value that the
actual index would produce. If we use an alternative method of valuation for a
security linked to an index of this kind, the value of the security, or the rate
of return on it, may be lower than it otherwise would be.

Some indexed securities are linked to indices that are not commonly used or
that have been developed only recently. The lack of a trading history may make
it difficult to anticipate the volatility or other risks associated with an
indexed security of this kind. In addition, trading in these indices or their
underlying stocks, commodities or currencies or other instruments or measures,
or options or futures contracts on these stocks, commodities or currencies or
other instruments or measures, may be limited, which could increase their
volatility and decrease the value of the related indexed securities or the rates
of return on them.

WE MAY ENGAGE IN HEDGING ACTIVITIES THAT COULD ADVERSELY AFFECT AN INDEXED
SECURITY

In order to hedge an exposure on a particular indexed security, we may,
directly or through our affiliates, enter into transactions involving the
securities, commodities or currencies or other instruments or measures that
underlie the index for that security, or involving derivative
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instruments, such as swaps, options or futures, on the index or any of its
component items. By engaging in transactions of this kind, we could adversely
affect the value of an indexed security. It is possible that we could achieve
substantial returns from our hedging transactions while the value of the indexed
security may decline.

INFORMATION ABOUT INDICES MAY NOT BE INDICATIVE OF FUTURE PERFORMANCE

If we issue an indexed security, we may include historical information
about the relevant index in the applicable prospectus supplement. Any
information about indices that we may provide will be furnished as a matter of
information only, and you should not regard the information as indicative of the
range of, or trends in, fluctuations in the relevant index that may occur in the
future.

WE MAY HAVE CONFLICTS OF INTEREST REGARDING AN INDEXED SECURITY

Goldman, Sachs & Co. and our other affiliates may have conflicts of
interest with respect to some indexed securities. Goldman, Sachs & Co. and our
other affiliates may engage in trading, including trading for hedging purposes,
for their proprietary accounts or for other accounts under their management, in
indexed securities and in the securities, commodities or currencies or other
instruments or measures on which the index is based or in other derivative
instruments related to the index or its component items. These trading
activities could adversely affect the value of indexed securities. We and our
affiliates may also issue or underwrite securities or derivative instruments
that are linked to the same index as one or more indexed securities. By
introducing competing products into the marketplace in this manner, we could
adversely affect the value of an indexed security.

Goldman, Sachs & Co. or another of our affiliates may serve as calculation
agent for the indexed securities and may have considerable discretion in
calculating the amounts payable in respect of the securities. To the extent that
Goldman, Sachs & Co. or another of our affiliates calculates or compiles a
particular index, it may also have considerable discretion in performing the
calculation or compilation of the index. Exercising discretion in this manner
could adversely affect the value of an indexed security based on the index or
the rate of return on the security.

CONSIDERATIONS RELATING TO SECURITIES DENOMINATED OR
PAYABLE IN OR LINKED TO A NON-U.S. DOLLAR CURRENCY

If you intend to invest in a non-U.S. dollar security -- e.g., a security
whose principal and/or interest is payable in a currency other than U.S. dollars
or that may be settled by delivery of or reference to a non-U.S. dollar currency
or property denominated in or otherwise linked to a non-U.S. dollar
currency -- you should consult your own financial and legal advisors as to the
currency risks entailed by your investment. Securities of this kind may not be
an appropriate investment for investors who are unsophisticated with respect to
non-U.S. dollar currency transactions.

The information in this prospectus is directed primarily to investors who
are U.S. residents. Investors who are not U.S. residents should consult their
own financial and legal advisors about currency-related risks particular to
their investment.

AN INVESTMENT IN A NON-U.S. DOLLAR SECURITY INVOLVES CURRENCY-RELATED RISKS

An investment in a non-U.S. dollar security entails significant risks that
are not associated with a similar investment in a security that is payable
solely in U.S. dollars and where settlement value is not otherwise based on a
non-U.S. dollar currency. These risks include the possibility of significant
changes in rates of exchange between the U.S. dollar and the various non-U.S.
dollar currencies or composite currencies and the possibility of the imposition
or modification of foreign

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exchange controls or other conditions by either the United States or non-U.S.
governments. These risks generally depend on factors over which we have no
control, such as economic and political events and the supply of and demand for
the relevant currencies in the global markets.

CHANGES IN CURRENCY EXCHANGE RATES CAN BE VOLATILE AND UNPREDICTABLE

Rates of exchange between the U.S. dollar and many other currencies have
been highly volatile, and this volatility may continue and perhaps spread to
other currencies in the future. Fluctuations in currency exchange rates could
adversely affect an investment in a security denominated in, or where value is
otherwise linked to, a specified currency other than U.S. dollars. Depreciation
of the specified currency against the U.S. dollar could result in a decrease in
the U.S. dollar-equivalent value of payments on the security, including the
principal payable at maturity or settlement value payable upon exercise. That in
turn could cause the market value of the security to fall. Depreciation of the
specified currency against the U.S. dollar could result in a loss to the
investor on a U.S. dollar basis.

GOVERNMENT POLICY CAN ADVERSELY AFFECT CURRENCY EXCHANGE RATES AND AN INVESTMENT
IN A NON-U.S. DOLLAR SECURITY

Currency exchange rates can either float or be fixed by sovereign
governments. From time to time, governments use a variety of techniques, such as
intervention by a country's central bank or imposition of regulatory controls or
taxes, to affect the exchange rate of their currencies. Governments may also
issue a new currency to replace an existing currency or alter the exchange rate
or exchange characteristics by devaluation or revaluation of a currency. Thus, a
special risk in purchasing non-U.S. dollar securities is that their yields or
payouts could be significantly and unpredictably affected by governmental
actions. Even in the absence of governmental action directly affecting currency
exchange rates, political or economic developments in the country issuing the
specified currency for a non-U.S. dollar security or elsewhere could lead to
significant and sudden changes in the exchange rate between the U.S. dollar and
the specified currency. These changes could affect the value of the security as
participants in the global currency markets move to buy or sell the specified
currency or U.S. dollars in reaction to these developments.

Governments have imposed from time to time and may in the future impose
exchange controls or other conditions, including taxes, with respect to the
exchange or transfer of a specified currency that could affect exchange rates as
well as the availability of a specified currency for a security at its maturity
or on any other payment date. In addition, the ability of a holder to move
currency freely out of the country in which payment in the currency is received
or to convert the currency at a freely determined market rate could be limited
by governmental actions.

NON-U.S. DOLLAR SECURITIES MAY PERMIT US TO MAKE PAYMENTS IN U.S. DOLLARS OR
DELAY PAYMENT IF WE ARE UNABLE TO OBTAIN THE SPECIFIED CURRENCY

Securities payable in a currency other than U.S. dollars may provide that,
if the other currency is subject to convertibility, transferability, market
disruption or other conditions affecting its availability at or about the time
when a payment on the securities comes due because of circumstances beyond our
control, we will be entitled to make the payment in U.S. dollars or delay making
the payment. These circumstances could include the imposition of exchange
controls or our inability to obtain the other currency because of a disruption
in the currency markets. If we made payment in U.S. dollars, the exchange rate
we would use would be determined in the manner described above under
"Description of Debt Securities We May Offer -- Payment Mechanics for Debt
Securities -- How We Will Make Payments Due in Other Currencies -- When the
Specified Currency Is Not Available". A determination of this kind may be based
on limited information and would involve significant discretion on the part of
our
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foreign exchange agent. As a result, the value of the payment in U.S. dollars an
investor would receive on the payment date may be less than the value of the
payment the investor would have received in the other currency if it had been
available, or may be zero. In addition, a government may impose extraordinary
taxes on transfers of a currency. If that happens, we will be entitled to deduct
these taxes from any payment on securities payable in that currency.

WE WILL NOT ADJUST NON-U.S. DOLLAR SECURITIES TO COMPENSATE FOR CHANGES IN
CURRENCY EXCHANGE RATES

Except as described above, we will not make any adjustment or change in the
terms of a non-U.S. dollar security in the event of any change in exchange rates
for the relevant currency, whether in the event of any devaluation, revaluation
or imposition of exchange or other regulatory controls or taxes or in the event
of other developments affecting that currency, the U.S. dollar or any other
currency. Consequently, investors in non-U.S. dollar securities will bear the
risk that their investment may be adversely affected by these types of events.

IN A LAWSUIT FOR PAYMENT ON A NON-U.S. DOLLAR SECURITY, AN INVESTOR MAY BEAR
CURRENCY EXCHANGE RISK

Our debt securities, warrants, purchase contracts and units will be
governed by New York law. Under Section 27 of the New York Judiciary Law, a
state court in the State of New York rendering a judgment on a security
denominated in a currency other than U.S. dollars would be required to render
the judgment in the specified currency; however, the judgment would be converted
into U.S. dollars at the exchange rate prevailing on the date of entry of the
judgment. Consequently, in a lawsuit for payment on a security denominated in a
currency other than U.S. dollars, investors would bear currency exchange risk
until judgment is entered, which could be a long time.

In courts outside of New York, investors may not be able to obtain judgment
in a specified currency other than U.S. dollars. For example, a judgment for
money in an action based on a non-U.S. dollar security in many other U.S.
federal or state courts ordinarily would be enforced in the United States only
in U.S. dollars. The date used to determine the rate of conversion of the
currency in which any particular security is denominated into U.S. dollars will
depend upon various factors, including which court renders the judgment.

INFORMATION ABOUT EXCHANGE RATES MAY NOT BE INDICATIVE OF FUTURE PERFORMANCE

If we issue a non-U.S. dollar security, we may include in the applicable
prospectus supplement a currency supplement that provides information about
historical exchange rates for the relevant non-U.S. dollar currency or
currencies. Any information about exchange rates that we may provide will be
furnished as a matter of information only, and you should not regard the
information as indicative of the range of, or trends in, fluctuations in
currency exchange rates that may occur in the future. That rate will likely
differ from the exchange rate used under the terms that apply to a particular
security.

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UNITED STATES TAXATION

This section describes the material United States federal income tax
consequences of owning the debt securities and preferred stock we are offering.
It is the opinion of Sullivan & Cromwell, United States tax counsel to The
Goldman Sachs Group, Inc. It applies to you only if you hold your securities as
capital assets for tax purposes. This section does not apply to you if you are a
member of a class of holders subject to special rules, such as:

-- a dealer in securities or currencies;

-- a trader in securities that elects to use a mark-to-market method of
accounting for your securities holdings;

-- a bank;

-- a life insurance company;

-- a tax-exempt organization;

-- a person that owns debt securities that are a hedge or that are hedged
against interest rate or currency risks;

-- a person that owns debt securities as part of a straddle or conversion
transaction for tax purposes; or

-- a person whose functional currency for tax purposes is not the U.S.
dollar.

This section is based on the U.S. Internal Revenue Code of 1986, as amended, its
legislative history, existing and proposed regulations under the Internal
Revenue Code, published rulings and court decisions, all as currently in effect.
These laws are subject to change, possibly on a retroactive basis.

Please consult your own tax advisor concerning the consequences of owning these
securities in your particular circumstances under the Internal Revenue Code and
the laws of any other taxing jurisdiction.

TAXATION OF DEBT SECURITIES

This subsection describes the material United States federal income tax
consequences of owning, selling and disposing of the debt securities we are
offering. It deals only with debt securities that are due to mature 30 years or
less from the date on which they are issued. The United States federal income
tax consequences of owning debt securities that are due to mature more than 30
years from their date of issue will be discussed in an applicable prospectus
supplement.

UNITED STATES HOLDERS

This subsection describes the tax consequences to a United States holder.
You are a United States holder if you are a beneficial owner of a debt security
and you are:

-- a citizen or resident of the United States;

-- a domestic corporation;

-- an estate whose income is subject to United States federal income tax
regardless of its source; or

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-- a trust if a United States court can exercise primary supervision over
the trust's administration and one or more United States persons are
authorized to control all substantial decisions of the trust.

If you are not a United States holder, this section does not apply to you and
you should refer to "-- United States Alien Holders" below.

PAYMENTS OF INTEREST. Except as described below in the case of interest on
a discount debt security that is not qualified stated interest, each as defined
below under "-- Original Issue Discount", you will be taxed on any interest on
your debt security, whether payable in U.S. dollars or a non-U.S. dollar
currency, including a composite currency or basket of currencies other than U.S.
dollars, as ordinary income at the time you receive the interest or when it
accrues, depending on your method of accounting for tax purposes.

CASH BASIS TAXPAYERS

If you are a taxpayer that uses the cash receipts and disbursements method
of accounting for tax purposes and you receive an interest payment that is
denominated in, or determined by reference to, a non-U.S. dollar currency, you
must recognize income equal to the U.S. dollar value of the interest payment,
based on the exchange rate in effect on the date of receipt, regardless of
whether you actually convert the payment into U.S. dollars.

ACCRUAL BASIS TAXPAYERS

If you are a taxpayer that uses an accrual method of accounting for tax
purposes, you may determine the amount of income that you recognize with respect
to an interest payment denominated in, or determined by reference to, a non-U.S.
dollar currency by using one of two methods. Under the first method, you will
determine the amount of income accrued based on the average exchange rate in
effect during the interest accrual period or, with respect to an accrual period
that spans two taxable years, that part of the period within the taxable year.

If you elect the second method, you would determine the amount of income
accrued on the basis of the exchange rate in effect on the last day of the
accrual period, or, in the case of an accrual period that spans two taxable
years, the exchange rate in effect on the last day of the part of the period
within the taxable year. Additionally, under this second method, if you receive
a payment of interest within five business days of the last day of your accrual
period or taxable year, you may instead translate the interest accrued into U.S.
dollars at the exchange rate in effect on the day that you actually receive the
interest payment. If you elect the second method, it will apply to all debt
instruments that you hold at the beginning of the first taxable year to which
the election applies and to all debt instruments that you subsequently acquire.
You may not revoke this election without the consent of the United States
Internal Revenue Service.

When you actually receive an interest payment, including a payment
attributable to accrued but unpaid interest upon the sale or retirement of your
debt security, denominated in, or determined by reference to, a non-U.S. dollar
currency for which you accrued an amount of income, you will recognize ordinary
income or loss measured by the difference, if any, between the exchange rate
that you used to accrue interest income and the exchange rate in effect on the
date of receipt, regardless of whether you actually convert the payment into
U.S. dollars.

ORIGINAL ISSUE DISCOUNT. If you own a debt security, other than a
short-term debt security with a term of one year or less, it will be treated as
a discount debt security issued at an original issue discount if the amount by
which the debt security's stated redemption price at maturity exceeds its issue
price is more than a de minimis amount. Generally, a debt security's issue price
will be the first price at which a substantial amount of debt securities
included in the issue of which the debt security is a part is sold to persons
other than bond houses, brokers, or similar persons or organizations acting in
the capacity of underwriters, placement agents, or wholesalers. A debt
security's stated redemption price at maturity is the total of all payments

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provided by the debt security that are not payments of qualified stated
interest. Generally, an interest payment on a debt security is qualified stated
interest if it is one of a series of stated interest payments on a debt security
that are unconditionally payable at least annually at a single fixed rate, with
certain exceptions for lower rates paid during some periods, applied to the
outstanding principal amount of the debt security. There are special rules for
variable rate debt securities that are discussed below under "-- Variable Rate
Debt Securities".

In general, your debt security is not a discount debt security if the
amount by which its stated redemption price at maturity exceeds its issue price
is less than the de minimis amount of 0.25 percent of its stated redemption
price at maturity multiplied by the number of complete years to its maturity.
Your debt security will have de minimis original issue discount if the amount of
the excess is less than the de minimis amount. If your debt security has de
minimis original issue discount, you must include the de minimis amount in
income as stated principal payments are made on the debt security, unless you
make the election described below under "-- Election to Treat All Interest as
Original Issue Discount". You can determine the includible amount with respect
to each such payment by multiplying the total amount of your debt security's de
minimis original issue discount by a fraction equal to:

-- the amount of the principal payment made

divided by:

-- the stated principal amount of the debt security.

Generally, if your discount debt security matures more than one year from
its date of issue, you must include original issue discount in income before you
receive cash attributable to that income. The amount of original issue discount
that you must include in income is calculated using a constant-yield method, and
generally you will include increasingly greater amounts of original issue
discount in income over the life of your debt security. More specifically, you
can calculate the amount of original issue discount that you must include in
income by adding the daily portions of original issue discount with respect to
your discount debt security for each day during the taxable year or portion of
the taxable year that you hold your discount debt security. You can determine
the daily portion by allocating to each day in any accrual period a pro rata
portion of the original issue discount allocable to that accrual period. You may
select an accrual period of any length with respect to your discount debt
security and you may vary the length of each accrual period over the term of
your discount debt security. However, no accrual period may be longer than one
year and each scheduled payment of interest or principal on the discount debt
security must occur on either the first or final day of an accrual period.

You can determine the amount of original issue discount allocable to an
accrual period by:

-- multiplying your discount debt security's adjusted issue price at the
beginning of the accrual period by your debt security's yield to
maturity; and then

-- subtracting from this figure the sum of the payments of qualified
stated interest on your debt security allocable to the accrual period.

You must determine the discount debt security's yield to maturity on the basis
of compounding at the close of each accrual period and adjusting for the length
of each accrual period. Further, you determine your discount debt security's
adjusted issue price at the beginning of any accrual period by:

-- adding your discount debt security's issue price and any accrued
original issue discount for each prior accrual period; and then

-- subtracting any payments previously made on your discount debt
security that were not qualified stated interest payments.

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If an interval between payments of qualified stated interest on your
discount debt security contains more than one accrual period, then, when you
determine the amount of original issue discount allocable to an accrual period,
you must allocate the amount of qualified stated interest payable at the end of
the interval, including any qualified stated interest that is payable on the
first day of the accrual period immediately following the interval, pro rata to
each accrual period in the interval based on their relative lengths. In
addition, you must increase the adjusted issue price at the beginning of each
accrual period in the interval by the amount of any qualified stated interest
that has accrued prior to the first day of the accrual period but that is not
payable until the end of the interval. You may compute the amount of original
issue discount allocable to an initial short accrual period by using any
reasonable method if all other accrual periods, other than a final short accrual
period, are of equal length.

The amount of original issue discount allocable to the final accrual period
is equal to the difference between:

-- the amount payable at the maturity of your debt security, other than
any payment of qualified stated interest; and

-- your debt security's adjusted issue price as of the beginning of the
final accrual period.

ACQUISITION PREMIUM

If you purchase your debt security for an amount that is less than or equal
to the sum of all amounts, other than qualified stated interest, payable on your
debt security after the purchase date but is greater than the amount of your
debt security's adjusted issue price, as determined above, the excess is
acquisition premium. If you do not make the election described below under
"-- Election to Treat All Interest as Original Issue Discount", then you must
reduce the daily portions of original issue discount by an amount equal to:

-- the excess of your adjusted basis in the debt security immediately
after purchase over the adjusted issue price of the debt security

divided by:

-- the excess of the sum of all amounts payable, other than qualified
stated interest, on the debt security after the purchase date over the
debt security's adjusted issue price.

MARKET DISCOUNT

You will be treated as if you purchased your debt security, other than a
short-term debt security, at a market discount, and your debt security will be a
market discount debt security if the difference between the debt security's
stated redemption price at maturity or, in the case of a discount debt security,
the debt security's revised issue price, and the price you paid for your debt
security is equal to or greater than 0.25 percent of your debt security's stated
redemption price at maturity or revised issue price, respectively, multiplied by
the number of complete years to the debt security's maturity. To determine the
revised issue price of your debt security for these purposes, you generally add
any original issue discount that has accrued on your debt security to its issue
price.

If your debt security's stated redemption price at maturity or, in the case
of a discount debt security, its revised issue price, does not exceed the price
you paid for the debt security by 0.25 percent multiplied by the number of
complete years to the debt security's maturity, the excess constitutes de
minimis market discount, and the rules discussed below are not applicable to
you.

You must treat any gain you recognize on the maturity or disposition of
your market discount debt security as ordinary income to the extent of the
accrued market discount on your debt security. Alternatively, you may elect to
include market discount in income currently over the life of your debt security.
If you make this election, it will apply to all debt instruments with market
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discount that you acquire on or after the first day of the first taxable year to
which the election applies. You may not revoke this election without the consent
of the United States Internal Revenue Service. If you own a market discount debt
security and do not make this election, you will generally be required to defer
deductions for interest on borrowings allocable to your debt security in an
amount not exceeding the accrued market discount on your debt security until the
maturity or disposition of your debt security.

You will accrue market discount on your market discount debt security on a
straight-line basis unless you elect to accrue market discount using a
constant-yield method. If you make this election, it will apply only to the debt
security with respect to which it is made and you may not revoke it.

PRE-ISSUANCE ACCRUED INTEREST

An election may be made to decrease the issue price of your debt security
by the amount of pre-issuance accrued interest if:

-- a portion of the initial purchase price of your debt security is
attributable to pre-issuance accrued interest;

-- the first stated interest payment on your debt security is to be made
within one year of your debt security's issue date; and

-- the payment will equal or exceed the amount of pre-issuance accrued
interest.

If this election is made, a portion of the first stated interest payment
will be treated as a return of the excluded pre-issuance accrued interest and
not as an amount payable on your debt security.

DEBT SECURITIES SUBJECT TO CONTINGENCIES INCLUDING OPTIONAL REDEMPTION

Your debt security is subject to a contingency if it provides for an
alternative payment schedule or schedules applicable upon the occurrence of a
contingency or contingencies, other than a remote or incidental contingency,
whether such contingency relates to payments of interest or of principal. In
such a case, you must determine the yield and maturity of your debt security by
assuming that the payments will be made according to the payment schedule most
likely to occur if:

-- the timing and amounts of the payments that comprise each payment
schedule are known as of the issue date; and

-- one of such schedules is significantly more likely than not to occur.

If there is no single payment schedule that is significantly more likely
than not to occur, other than because of a mandatory sinking fund, you must
include income on your debt security in accordance with the general rules that
govern contingent payment obligations. These rules will be discussed in the
applicable prospectus supplement.

Notwithstanding the general rules for determining yield and maturity, if
your debt security is subject to contingencies, and either you or we have an
unconditional option or options that, if exercised, would require payments to be
made on the debt security under an alternative payment schedule or schedules,
then:

-- in the case of an option or options that we may exercise, we will be
deemed to exercise or not exercise an option or combination of options
in the manner that minimizes the yield on your debt security; and

-- in the case of an option or options that you may exercise, you will be
deemed to exercise or not exercise an option or combination of options
in the manner that maximizes the yield on your debt security.

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If both you and we hold options described in the preceding sentence, those
rules will apply to each option in the order in which they may be exercised. You
may determine the yield on your debt security for the purposes of those
calculations by using any date on which your debt security may be redeemed or
repurchased as the maturity date and the amount payable on the date that you
chose in accordance with the terms of your debt security as the principal amount
payable at maturity.

If a contingency, including the exercise of an option, actually occurs or
does not occur contrary to an assumption made according to the above rules then,
except to the extent that a portion of your debt security is repaid as a result
of this change in circumstances and solely to determine the amount and accrual
of original issue discount, you must redetermine the yield and maturity of your
debt security by treating your debt security as having been retired and reissued
on the date of the change in circumstances for an amount equal to your debt
security's adjusted issue price on that date.

ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT

You may elect to include in gross income all interest that accrues on your
debt security using the constant-yield method described above, with the
modifications described below. For purposes of this election, interest will
include stated interest, original issue discount, de minimis original issue
discount, market discount, de minimis market discount and unstated interest, as
adjusted by any amortizable bond premium, described below under "-- Debt
Securities Purchased at a Premium", or acquisition premium.

If you make this election for your debt security, then, when you apply the
constant-yield method:

-- the issue price of your debt security will equal your cost;

-- the issue date of your debt security will be the date you acquired it;
and

-- no payments on your debt security will be treated as payments of
qualified stated interest.

Generally, this election will apply only to the debt security for which you
make it; however, if the debt security has amortizable bond premium, you will be
deemed to have made an election to apply amortizable bond premium against
interest for all debt instruments with amortizable bond premium, other than debt
instruments the interest on which is excludible from gross income, that you hold
as of the beginning of the taxable year to which the election applies or any
taxable year thereafter. Additionally, if you make this election for a market
discount debt security, you will be treated as having made the election
discussed above under "-- Market Discount" to include market discount in income
currently over the life of all debt instruments that you currently own or later
acquire. You may not revoke any election to apply the constant-yield method to
all interest on a debt security or the deemed elections with respect to
amortizable bond premium or market discount debt securities without the consent
of the United States Internal Revenue Service.

VARIABLE RATE DEBT SECURITIES

Your debt security will be a variable rate debt security if:

-- your debt security's issue price does not exceed the total
noncontingent principal payments by more than the lesser of:

1. .015 multiplied by the product of the total noncontingent principal
payments and the number of complete years to maturity from the issue
date; or

2. 15 percent of the total noncontingent principal payments; and

-- your debt security provides for stated interest, compounded or paid at
least annually, only at:

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1. one or more qualified floating rates;

2. a single fixed rate and one or more qualified floating rates;

3. a single objective rate; or

4. a single fixed rate and a single objective rate that is a qualified
inverse floating rate.

Your debt security will have a variable rate that is a qualified floating rate
if:

-- variations in the value of the rate can reasonably be expected to
measure contemporaneous variations in the cost of newly borrowed funds
in the currency in which your debt security is denominated; or

-- the rate is equal to such a rate multiplied by either:

1. a fixed multiple that is greater than 0.65 but not more than 1.35; or

2. a fixed multiple greater than 0.65 but not more than 1.35, increased
or decreased by a fixed rate; and

-- the value of the rate on any date during the term of your debt
security is set no earlier than three months prior to the first day on
which that value is in effect and no later than one year following
that first day.

If your debt security provides for two or more qualified floating rates
that are within 0.25 percentage points of each other on the issue date or can
reasonably be expected to have approximately the same values throughout the term
of the debt security, the qualified floating rates together constitute a single
qualified floating rate.

Your debt security will not have a qualified floating rate, however, if the
rate is subject to certain restrictions (including caps, floors, governors, or
other similar restrictions) unless such restrictions are fixed throughout the
term of the debt security or are not reasonably expected to significantly affect
the yield on the debt security.

Your debt security will have a variable rate that is a single objective
rate if:

-- the rate is not a qualified floating rate;

-- the rate is determined using a single, fixed formula that is based on
objective financial or economic information that is not within the
control of or unique to the circumstances of the issuer or a related
party; and

Your debt security will not have a variable rate that is an objective rate,
however, if it is reasonably expected that the average value of the rate during
the first half of your debt security's term will be either significantly less
than or significantly greater than the average value of the rate during the
final half of your debt security's term.

An objective rate as described above is a qualified inverse floating rate
if:

-- the rate is equal to a fixed rate minus a qualified floating rate and

-- the variations in the rate can reasonably be expected to inversely
reflect contemporaneous variations in the cost of newly borrowed
funds.

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Your debt security will also have a single qualified floating rate or an
objective rate if interest on your debt security is stated at a fixed rate for
an initial period of one year or less followed by either a qualified floating
rate or an objective rate for a subsequent period, and either:

-- the fixed rate and the qualified floating rate or objective rate have
values on the issue date of the debt security that do not differ by
more than 0.25 percentage points or

-- the value of the qualified floating rate or objective rate is intended
to approximate the fixed rate.

In general, if your variable rate debt security provides for stated
interest at a single qualified floating rate or objective rate, or one of those
rates after a single fixed rate for an initial period, all stated interest on
your debt security is qualified stated interest. In this case, the amount of
original issue discount, if any, is determined by using, in the case of a
qualified floating rate or qualified inverse floating rate, the value as of the
issue date of the qualified floating rate or qualified inverse floating rate or,
for any other objective rate, a fixed rate that reflects the yield reasonably
expected for your debt security.

If your variable rate debt security does not provide for stated interest at
a single qualified floating rate or a single objective rate, and also does not
provide for interest payable at a fixed rate other than a single fixed rate for
an initial period, you generally must determine the interest and original issue
discount accruals on your debt security by:

-- determining a fixed rate substitute for each variable rate provided
under your variable rate debt security;

-- constructing the equivalent fixed rate debt instrument, using the
fixed rate substitute described above;

-- determining the amount of qualified stated interest and original issue
discount with respect to the equivalent fixed rate debt instrument;
and

-- adjusting for actual variable rates during the applicable accrual
period.

When you determine the fixed rate substitute for each variable rate provided
under the variable rate debt security, you generally will use the value of each
variable rate as of the issue date or, for an objective rate that is not a
qualified inverse floating rate, a rate that reflects the reasonably expected
yield on your debt security.

If your variable rate debt security provides for stated interest either at
one or more qualified floating rates or at a qualified inverse floating rate,
and also provides for stated interest at a single fixed rate other than at a
single fixed rate for an initial period, you generally must determine interest
and original issue discount accruals by using the method described in the
previous paragraph. However, your variable rate debt security will be treated,
for purposes of the first three steps of the determination, as if your debt
security had provided for a qualified floating rate, or a qualified inverse
floating rate, rather than the fixed rate. The qualified floating rate, or
qualified inverse floating rate, that replaces the fixed rate must be such that
the fair market value of your variable rate debt security as of the issue date
approximates the fair market value of an otherwise identical debt instrument
that provides for the qualified floating rate, or qualified inverse floating
rate, rather than the fixed rate.

SHORT-TERM DEBT SECURITIES

In general, if you are an individual or other cash-basis United States
holder of a short-term debt security, you are not required to accrue original
issue discount, as specially defined below for the purposes of this paragraph,
for United States federal income tax purposes unless you elect to do so.
However, you may be required to include any stated interest in income as you
receive it. If you are an accrual basis taxpayer, a taxpayer in a special class,
including, but not limited to, a regulated investment company, common trust
fund, or a certain type of pass-through entity, or a cash basis taxpayer who so
elects, you will be required to accrue original issue discount on short-term
debt securities on either a straight-line basis or under the constant-yield
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method, based on daily compounding. If you are not required and do not elect to
include original issue discount in income currently, any gain you realize on the
sale or retirement of your short-term debt security will be ordinary income to
the extent of the accrued original issue discount, which will be determined on a
straight-line basis unless you make an election to accrue the original issue
discount under the constant-yield method, through the date of sale or
retirement. However, if you are not required and do not elect to accrue original
issue discount on your short-term debt securities, you will be required to defer
deductions for interest on borrowings allocable to your short-term debt
securities in an amount not exceeding the deferred income until the deferred
income is realized.

When you determine the amount of original issue discount subject to these
rules, you must include all interest payments on your short-term debt security,
including stated interest, in your short-term debt security's stated redemption
price at maturity.

NON-U.S. DOLLAR CURRENCY DISCOUNT DEBT SECURITIES

If your discount debt security is denominated in, or determined by
reference to, a non-U.S. dollar currency, you must determine original issue
discount for any accrual period on your discount debt security in the non-U.S.
dollar currency and then translate the amount of original issue discount into
U.S. dollars in the same manner as stated interest accrued by an accrual basis
United States holder, as described above under "-- Payments of Interest". You
may recognize ordinary income or loss when you receive an amount attributable to
original issue discount in connection with a payment of interest or the sale or
retirement of your debt security.

DEBT SECURITIES PURCHASED AT A PREMIUM. If you purchase your debt security
for an amount in excess of its principal amount, you may elect to treat the
excess as amortizable bond premium. If you make this election, you will reduce
the amount required to be included in your income each year with respect to
interest on your debt security by the amount of amortizable bond premium
allocable to that year, based on your debt security's yield to maturity. If your
debt security is denominated in, or determined by reference to, a non-U.S.
dollar currency, you will compute your amortizable bond premium in units of the
non-U.S. dollar currency and your amortizable bond premium will reduce your
interest income in units of the non-U.S. dollar currency. Gain or loss
recognized that is attributable to changes in exchange rates between the time
your amortized bond premium offsets interest income and the time of the
acquisition of your debt security is generally taxable as ordinary income or
loss. If you make an election to amortize bond premium, it will apply to all
debt instruments, other than debt instruments the interest on which is
excludible from gross income, that you hold at the beginning of the first
taxable year to which the election applies or that you thereafter acquire, and
you may not revoke it without the consent of the United States Internal Revenue
Service. See also "-- Original Issue Discount -- Election to Treat All Interest
as Original Issue Discount" above.

PURCHASE, SALE AND RETIREMENT OF THE DEBT SECURITIES. Your tax basis in
your debt security will generally be the U.S. dollar cost, as defined below, of
your debt security, adjusted by:

-- adding any original issue discount, market discount, de minimis
original issue discount and de minimis market discount previously
included in income with respect to your debt security; and then

-- subtracting any payments on your debt security that are not qualified
stated interest payments and any amortizable bond premium applied to
reduce interest on your debt security.

If you purchase your debt security with non-U.S. dollar currency, the U.S.
dollar cost of your debt security will generally be the U.S. dollar value of the
purchase price on the date of purchase. However, if you are a cash basis
taxpayer, or an accrual basis taxpayer if you so elect, and your debt security
is traded on an established securities market, as defined in the applicable U.S.

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Treasury regulations, the U.S. dollar cost of your debt security will be the
U.S. dollar value of the purchase price on the settlement date of your purchase.

You will generally recognize gain or loss on the sale or retirement of your
debt security equal to the difference between the amount you realize on the sale
or retirement and your tax basis in your debt security. If your debt security is
sold or retired for an amount in non-U.S. dollar currency, the amount you
realize will be the U.S. dollar value of such amount on:

-- the date payment is received, if you are a cash basis taxpayer and the
debt securities are not traded on an established securities market, as
defined in the applicable Treasury regulations;

-- the date of disposition, if you are an accrual basis taxpayer; or

-- the settlement date for the sale, if you are a cash basis taxpayer, or
an accrual basis taxpayer that so elects, and the debt securities are
traded on an established securities market, as defined in the
applicable Treasury regulations.

You will recognize capital gain or loss when you sell or retire your debt
security, except to the extent:

-- described above under "-- Original Issue Discount -- Short-Term Debt
Securities" or "-- Market Discount";

-- attributable to accrued but unpaid interest;

-- the rules governing contingent payment obligations apply; or

-- attributable to changes in exchange rates as described below.

Capital gain of a noncorporate United States holder is generally taxed at a
maximum rate of 20% where the property is held more than one year.

You must treat any portion of the gain or loss that you recognize on the
sale or retirement of a debt security as ordinary income or loss to the extent
attributable to changes in exchange rates. However, you take exchange gain or
loss into account only to the extent of the total gain or loss you realize on
the transaction.

EXCHANGE OF AMOUNTS IN OTHER THAN U.S. DOLLARS. If you receive non-U.S.
dollar currency as interest on your debt security or on the sale or retirement
of your debt security, your tax basis in the non-U.S. dollar currency will equal
its U.S. dollar value when the interest is received or at the time of the sale
or retirement. If you purchase non-U.S. dollar currency, you generally will have
a tax basis equal to the U.S. dollar value of the non-U.S. dollar currency on
the date of your purchase. If you sell or dispose of a non-U.S. dollar currency,
including if you use it to purchase debt securities or exchange it for U.S.
dollars, any gain or loss recognized generally will be ordinary income or loss.

INDEXED AND OTHER DEBT SECURITIES. The applicable prospectus supplement
will discuss any special United States federal income tax rules with respect to
contingent non-U.S. dollar currency debt securities, debt securities the
payments on which are determined by reference to any index and other debt
securities that are subject to the rules governing contingent payment
obligations which are not subject to the rules governing variable rate debt
securities and with respect to any renewable and extendible debt securities and
any debt securities providing for the periodic payment of principal over the
life of the debt security.

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UNITED STATES ALIEN HOLDERS

This subsection describes the tax consequences to a United States alien
holder. You are a United States alien holder if you are the beneficial owner of
a debt security and are, for United States federal income tax purposes:

-- a nonresident alien individual;

-- a foreign corporation;

-- a foreign partnership; or

-- an estate or trust that in either case is not subject to United States
federal income tax on a net income basis on income or gain from a debt
security.

If you are a United States holder, this section does not apply to you.

This discussion assumes that the debt security or coupon is not subject to
the rules of Section 871(h)(4)(A) of the Internal Revenue Code, relating to
interest payments that are determined by reference to the income, profits,
changes in the value of property or other attributes of the debtor or a related
party.

Under present United States federal income and estate tax law, and subject
to the discussion of backup withholding below, if you are a United States alien
holder of a debt security or coupon:

-- we and other payors will not be required to deduct United States
withholding tax from payments of principal, premium, if any, and
interest, including the original issue discount, to you if, in the
case of interest:

1. you do not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Company entitled
to vote;

2. you are not a controlled foreign corporation that is related to the
Company through stock ownership, and in the case of a debt security
other than a bearer debt security:

a. you certify to us or a U.S. payor, under penalties of perjury,
that you are not a United States holder and provide your name and
address; or

b. a non-U.S. securities clearing organization, bank or other
financial institution that holds customers' securities in the
ordinary course of its trade or business and holds the debt
security certifies to us or a U.S. payor under penalties of
perjury that a similar statement has been received from you by it
or by a similar financial institution between it and you and
furnishes the payor with a copy thereof; and

3. in the case of a bearer debt security, the debt security is offered,
sold and delivered in compliance with the restrictions described
above under "Considerations Relating to Securities Issued in Bearer
Form" and payments on the debt security are made in accordance with
the procedures described in that section; and

-- no deduction for any United States federal withholding tax will be
made from any gain that you realize on the sale or exchange of your
debt security or coupon.

Further, a debt security or coupon held by an individual who at death is not a
citizen or resident of the United States will not be includible in the
individual's gross estate for United States federal estate tax purposes if:

-- the decedent did not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company
entitled to vote at the time of death; and

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-- the income on the debt security would not have been effectively
connected with a U.S. trade or business of the decedent at the same
time.

If you receive a payment after December 31, 2000, recently finalized U.S.
Treasury regulations will apply. Under these final withholding regulations,
after December 31, 2000, you may use an alternative method to satisfy the
certification requirement described above. Additionally, if you are a partner in
a foreign partnership, after December 31, 2000, you, in addition to the foreign
partnership, must provide the certification described above and the partnership
must provide certain information. The United States Internal Revenue Service
will apply a look-through rule in the case of tiered partnerships.

U.S. BACKUP WITHHOLDING AND INFORMATION REPORTING

UNITED STATES HOLDERS

In general, if you are a noncorporate United States holder, we and other
payors are required to report to the United States Internal Revenue Service all
payments of principal, any premium and interest on your debt security, and the
accrual of original issue discount on a discount debt security. In addition, the
proceeds of the sale of your debt security before maturity within the United
States will be reported to the United States Internal Revenue Service.
Additionally, backup withholding at a rate of 31% will apply to any payments,
including payments of original issue discount, if you fail to provide an
accurate taxpayer identification number, or you are notified by the United
States Internal Revenue Service that you have failed to report all interest and
dividends required to be shown on your federal income tax returns.

UNITED STATES ALIEN HOLDERS

You are generally exempt from backup withholding and information reporting
with respect to any payments of principal, premium or interest, including
original issue discount, made by us and other payors provided that in the case
of debt securities other than bearer debt securities, you provide the
certification described above under "-- United States Alien Holders", and
provided further that the payor does not have actual knowledge that you are a
United States person. See "-- United States Alien Holders" above for a
discussion of the rules under the final withholding regulations. We and other
payors, however, may report payments of interest on your debt securities on
Internal Revenue Service Form 1042-S.

In general, payment of the proceeds from the sale of debt securities to or
through a United States office of a broker is subject to both U.S. backup
withholding and information reporting. If, however, you are a United States
alien holder, you will not be subject to information reporting and backup
withholding if you certify as to your non-U.S. status, under penalties of
perjury, or otherwise establish an exemption. Payments of the proceeds from the
sale by a United States alien holder of a debt security made to or through a
foreign office of a broker will not be subject to information reporting or
backup withholding. However, information reporting, but not backup withholding,
may apply to a payment made outside the United States of the proceeds of a sale
of a debt security through an office outside the United States if the broker is:

-- a United States person;

-- a controlled foreign corporation for United States tax purposes;

-- a foreign person 50% or more of whose gross income is effectively
connected with a United States trade or business for a specified
three-year period; or

-- with respect to payments made after December 31, 2000, a foreign
partnership, if at any time during its tax year:

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1. one or more of its partners are "U.S. persons", as defined in U.S.
Treasury regulations, who in the aggregate hold more than 50% of the
income or capital interest in the partnership; or

2. at any time during its tax year, the foreign partnership is engaged
in a U.S. trade or business,

unless the broker has documentary evidence in its records that you are a
non-U.S. person or you otherwise establish an exemption.

TAXATION OF PREFERRED STOCK

This subsection describes the material United States federal income tax
consequences of owning, selling and disposing of the preferred stock and
depositary shares that we may offer. When we refer to preferred stock in this
subsection, we mean both preferred stock and depositary shares.

UNITED STATES HOLDERS

This subsection describes the tax consequences to a United States holder.
You are a United States holder if you are a beneficial owner of a share of
preferred stock and you are:

-- a citizen or resident of the United States;

-- a domestic corporation;

-- an estate whose income is subject to United States federal income tax
regardless of its source; or

If you are not a United States holder, this subsection does not apply to you and
you should refer to "-- United States Alien Holders" below.

DISTRIBUTIONS ON PREFERRED STOCK. You will be taxed on distributions on
preferred stock as ordinary dividend income to the extent paid out of our
current or accumulated earnings and profits for United States federal income tax
purposes. If you are taxed as a corporation, except as described in the next
subsection, dividends would be eligible for the 70% dividends-received
deduction.

You generally will not be taxed on any portion of a distribution not paid
out of our current or accumulated earnings and profits if your tax basis in the
preferred stock is greater than or equal to the amount of the distribution.
However, you would be required to reduce your tax basis (but not below zero) in
the preferred stock by the amount of the distribution, and would recognize
capital gain to the extent that the distribution exceeds your tax basis in the
preferred stock. Further, if you are a corporation, you would not be entitled to
a dividends-received deduction on this portion of a distribution.

LIMITATIONS ON DIVIDENDS-RECEIVED DEDUCTION. Corporate shareholders may
not be entitled to take the 70% dividends-received deduction in all
circumstances. Prospective corporate investors in preferred stock should
consider the effect of:

-- Section 246A of the Internal Revenue Code, which reduces the
dividends-received deduction allowed to a corporate shareholder that
has incurred indebtedness that is "directly attributable" to an
investment in portfolio stock such as preferred stock;

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-- Section 246(c) of the Internal Revenue Code, which, among other
things, disallows the dividends-received deduction in respect of any
dividend on a share of stock that is held for less than the minimum
holding period (generally at least 46 days during the 90 day period
beginning on the date which is 45 days before the date on which such
share becomes ex-dividend with respect to such dividend); and

-- Section 1059 of the Internal Revenue Code, which, under certain
circumstances, reduces the basis of stock for purposes of calculating
gain or loss in a subsequent disposition by the portion of any
"extraordinary dividend" (as defined below) that is eligible for the
dividends-received deduction.

EXTRAORDINARY DIVIDENDS. If you are a corporate shareholder, you will be
required to reduce your tax basis (but not below zero) in the preferred stock by
the nontaxed portion of any "extraordinary dividend" if you have not held your
stock for more than two years before the earliest of the date such dividend is
declared, announced, or agreed. Generally, the nontaxed portion of an
extraordinary dividend is the amount excluded from income by operation of the
dividends-received deduction. An extraordinary dividend on the preferred stock
generally would be a dividend that:

-- equals or exceeds 5% of the corporate shareholder's adjusted tax basis
in the preferred stock, treating all dividends having ex-dividend
dates within an 85 day period as one dividend; or

-- exceeds 20% of the corporate shareholder's adjusted tax basis in the
preferred stock, treating all dividends having ex-dividend dates
within a 365 day period as one dividend.

In determining whether a dividend paid on the preferred stock is an
extraordinary dividend, a corporate shareholder may elect to substitute the fair
market value of the stock for its tax basis for purposes of applying these tests
if the fair market value as of the day before the ex-dividend date is
established to the satisfaction of the Secretary of the Treasury. An
extraordinary dividend also includes any amount treated as a dividend in the
case of a redemption that is either non-pro rata as to all stockholders or in
partial liquidation of the company, regardless of the stockholder's holding
period and regardless of the size of the dividend. Any part of the nontaxed
portion of an extraordinary dividend that is not applied to reduce the corporate
shareholder's tax basis as a result of the limitation on reducing its basis
below zero would be treated as capital gain and would be recognized in the
taxable year in which the extraordinary dividend is received.

If you are a corporate shareholder, please consult your tax advisor with respect
to the possible application of the extraordinary dividend provisions of the
federal income tax law to your ownership or disposition of preferred stock in
your particular circumstances.

REDEMPTION PREMIUM. If we may redeem your preferred stock at a redemption
price in excess of its issue price, the entire amount of the excess may
constitute an unreasonable redemption premium that will be treated as a
constructive dividend. You generally must take this constructive dividend into
account each year in the same manner as original issue discount would be taken
into account if the preferred stock were treated as a debt security for United
States federal income tax purposes. See "-- Taxation of Debt
Securities -- United States Holders -- Original Issue Discount" above for a
discussion of the special tax rules for original issue discount. A corporate
shareholder would be entitled to a dividends-received deduction for any
constructive dividends unless the special rules denying a dividends-received
deduction described above in "-- Limitations on Dividends-Received Deduction"
apply. A corporate shareholder would also be required to take these constructive
dividends into account when applying the extraordinary dividend rules described
above. Thus, a corporate shareholder's

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receipt of a constructive dividend may cause some or all stated dividends to be
treated as extraordinary dividends. The applicable prospectus supplement for
preferred stock that is redeemable at a price in excess of its issue price will
indicate whether tax counsel believes that a shareholder must include any
redemption premium in income.

SALE OR EXCHANGE OF PREFERRED STOCK OTHER THAN BY REDEMPTION. If you sell
or otherwise dispose of your preferred stock (other than by redemption), you
will generally recognize capital gain or loss equal to the difference between
the amount realized upon the disposition and your adjusted tax basis of the
preferred stock. Capital gain of a noncorporate United States holder is
generally taxed at a maximum rate of 20% where the preferred stock is held more
than one year.

REDEMPTION OF PREFERRED STOCK. If we are permitted to and redeem your
preferred stock, it generally would be a taxable event. You would be treated as
if you had sold your preferred stock if the redemption:

-- results in a complete termination of your stock interest in the
company;

-- is substantially disproportionate with respect to you; or

-- is not essentially equivalent to a dividend with respect to you.

In determining whether any of these tests has been met, shares of stock
considered to be owned by you by reason of certain constructive ownership rules
set forth in Section 318 of the Internal Revenue Code, as well as shares
actually owned, must be taken into account.

If we redeem your preferred stock in a redemption that meets one of the
tests described above, you generally would recognize taxable gain or loss equal
to the sum of the amount of cash and fair market value of property (other than
stock of us or a successor to us) received by you less your tax basis in the
preferred stock redeemed. This gain or loss would be long-term capital gain or
capital loss if you have held the preferred stock for more than one year.

If a redemption does not meet any of the tests described above, you
generally would be taxed on the cash and fair market value of the property you
receive as a dividend to the extent paid out of our current and accumulated
earnings and profits. Any amount in excess of our current or accumulated
earnings and profits would first reduce your tax basis in the preferred stock
and thereafter would be treated as capital gain. If a redemption of the
preferred stock is treated as a distribution that is taxable as a dividend, your
basis in the redeemed preferred stock would be transferred to the remaining
shares of our stock that you own, if any.

Special rules apply if we redeem preferred stock for our debt securities.
We will discuss these rules in an applicable prospectus supplement if we have
the option to redeem your preferred stock for our debt securities.

UNITED STATES ALIEN HOLDERS

This section summarizes certain United States federal income and estate tax
consequences of the ownership and disposition of preferred stock by a United
States alien holder. You are a United States alien holder if you are, for United
States federal income tax purposes:

-- a nonresident alien individual;

-- a foreign corporation;

-- a foreign partnership; or

-- an estate or trust that in either case is not subject to United States
federal income tax on a net income basis on income or gain from
preferred stock.

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DIVIDENDS. Except as described below, if you are a United States alien
holder of preferred stock, dividends paid to you are subject to withholding of
United States federal income tax at a 30% rate or at a lower rate if you are
eligible for the benefits of an income tax treaty that provides for a lower
rate. Under currently effective U.S. Treasury regulations, for purposes of
determining if dividends are subject to the 30% withholding tax, dividends paid
to an address in a foreign country are presumed to be paid to a resident of that
country, unless the person making the payment has knowledge to the contrary.
Under current interpretations of U.S. Treasury regulations, this presumption
also applies for purposes of determining whether a lower withholding rate
applies under an income tax treaty.

Under U.S. Treasury regulations that will generally apply to dividends paid
after December 31, 2000, you must satisfy certain certification requirements in
order to claim the benefit of a lower treaty rate. Additionally, if you are a
partner in a foreign partnership, you, in addition to the foreign partnership,
must satisfy the certification requirements and the partnership must provide
certain information as well. The United States Internal Revenue Service will
apply a look-through rule in the case of tiered partnerships.

If you are eligible for a reduced rate of United States withholding tax
under a tax treaty, you may obtain a refund of any amounts withheld in excess of
that rate by filing a refund claim with the United States Internal Revenue
Service.

If the dividends are "effectively connected" with your conduct of a trade
or business within the United States, and, if required by a tax treaty, the
dividends are attributable to a permanent establishment that you maintain in the
United States, then the dividends generally are not subject to withholding tax.
Instead, "effectively connected" dividends are taxed at rates applicable to
United States citizens, resident aliens and domestic United States corporations.

If you are a corporate United States alien holder, "effectively connected"
dividends that you receive may, under certain circumstances, be subject to an
additional "branch profits tax" at a 30% rate or at a lower rate if you are
eligible for the benefits of an income tax treaty that provides for a lower
rate.

GAIN ON DISPOSITION OF PREFERRED STOCK. If you are a United States alien
holder, you generally will not be subject to United States federal income tax on
gain that you recognize on a disposition of preferred stock unless:

-- the gain is "effectively connected" with your conduct of a trade or
business in the United States, and the gain is attributable to a
permanent establishment that you maintain in the United States, if
that is required by an applicable income tax treaty as a condition for
subjecting you to United States taxation on a net income basis;

-- you are an individual, you hold the preferred stock as a capital
asset, you are present in the United States for 183 or more days in
the taxable year of the sale and certain other conditions exist; or

-- we are or have been a United States real property holding corporation
for federal income tax purposes and you held, directly or indirectly,
at any time during the five-year period ending on the date of
disposition, more than 5% of your class of preferred stock and you are
not eligible for any treaty exemption.

If you are a corporate United States alien holder, "effectively connected"
gains that you recognize may also, under certain circumstances, be subject to an
additional "branch profits tax" at a 30% rate or at a lower rate if you are
eligible for the benefits of an income tax treaty that provides for a lower
rate.

We have not been, are not and do not anticipate becoming a United States
real property holding corporation for United States federal income tax purposes.

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FEDERAL ESTATE TAXES. Preferred stock held by a United States alien holder
at the time of death will be included in the holder's gross estate for United
States federal estate tax purposes, unless an applicable estate tax treaty
provides otherwise.

U.S. INFORMATION REPORTING AND BACKUP WITHHOLDING

UNITED STATES HOLDERS

In general, dividend payments, or other taxable distributions, made within
the United States to you will be subject to information reporting requirements
and backup withholding tax at the rate of 31% if you are a non-corporate United
States person and you:

-- fail to provide an accurate taxpayer identification number;

-- are notified by the United States Internal Revenue Service that you
have failed to report all interest or dividends required to be shown
on your federal income tax returns; or

-- in certain circumstances, fail to comply with applicable certification
requirements.

If you sell your preferred stock outside the United States through a
non-U.S. office of a non-U.S. broker, and the sales proceeds are paid to you
outside the United States, then U.S. backup withholding and information
reporting requirements generally will not apply to that payment. However, U.S.
information reporting, but not backup withholding, will apply to a payment of
sales proceeds, even if that payment is made outside the United States, if you
sell your preferred stock through a non-U.S. office of a broker that:

-- is a United States person;

-- derives 50% or more of its gross income for a specified three-year
period from the conduct of a trade or business in the United States;

-- is a "controlled foreign corporation" as to the United States; or

-- with respect to payments made after December 31, 2000, is a foreign
partnership, if at any time during its tax year:

1. one or more of its partners are U.S. persons, as defined in U.S.
Treasury regulations, who in the aggregate hold more than 50% of the
income or capital interest in the partnership; or

2. at any time during its tax year the foreign partnership is engaged in
a U.S. trade or business.

You generally may obtain a refund of any amounts withheld under the U.S.
backup withholding rules that exceed your income tax liability by filing a
refund claim with the United States Internal Revenue Service.

UNITED STATES ALIEN HOLDERS

Under currently applicable law, if you are a United States alien holder,
dividends paid to you at an address outside the United States will not be
subject to U.S. information reporting requirements or backup withholding tax.
Beginning with respect to payments made after December 31, 2000, a United States
alien holder will be entitled to this exemption only if the United States alien
holder provides a Form W-8 (or satisfies certain documentary evidence
requirements for establishing that it is a United States alien holder) or
otherwise establishes an exemption.

If you sell your preferred stock outside of the United States through a
non-U.S. office of a non-U.S. broker, and the sales proceeds are paid to you
outside the United States, then U.S.

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backup withholding and information reporting requirements generally will not
apply to that payment. However, U.S. information reporting, but not backup
withholding, will apply to a payment of sales proceeds, even if that payment is
made outside the United States, if you sell your preferred stock through a
non-U.S. office of a broker that:

-- is a United States person;

-- derives 50% or more of its gross income for certain periods from the
conduct of a trade or business in the United States;

-- is a "controlled foreign corporation" as to the United States; or

-- with respect to payments made after December 31, 2000, is a foreign
partnership, if at any time during its tax year:

1. one or more of its partners are "U.S. persons", as defined in U.S.
Treasury regulations, who in the aggregate hold more than 50% of the
income or capital interests in the partnership; or

2. at any time during its tax year, the foreign partnership is engaged
in a U.S. trade or business,

unless the broker has documentary evidence in its files that you are a non-U.S.
person or you otherwise establish an exemption.

If you receive payments of the proceeds of a sale of preferred stock to or
through a U.S. office of a broker, the payment is subject to both United States
backup withholding and information reporting unless you certify, under penalties
of perjury, that you are a non-U.S. person or you otherwise establish an
exemption.

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PLAN OF DISTRIBUTION

INITIAL OFFERING AND SALE OF SECURITIES

We may sell the securities from time to time in their initial offering as
follows:

-- through agents;

-- to dealers or underwriters for resale;

-- directly to purchasers; or

-- through a combination of any of these methods of sale.

In addition, we may issue the securities as a dividend or distribution or
in a subscription rights offering to our existing security holders. In some
cases, we or dealers acting with us or on our behalf may also purchase
securities and reoffer them to the public by one or more of the methods
described above. This prospectus may be used in connection with any offering of
our securities through any of these methods or other methods described in the
applicable prospectus supplement.

The securities we distribute by any of these methods may be sold to the
public, in one or more transactions, either:

-- at a fixed price or prices, which may be changed;

-- at market prices prevailing at the time of sale;

-- at prices related to prevailing market prices; or

-- at negotiated prices.

We may solicit offers to purchase securities directly from the public from
time to time. We may also designate agents from time to time to solicit offers
to purchase securities from the public on our behalf. The prospectus supplement
relating to any particular offering of securities will name any agents
designated to solicit offers, and will include information about any commissions
we may pay the agents, in that offering. Agents may be deemed to be
"underwriters" as that term is defined in the Securities Act.

From time to time, we may sell securities to one or more dealers acting as
principals. The dealers, who may be deemed to be "underwriters" as that term is
defined in the Securities Act, may then resell those securities to the public.

We may sell securities from time to time to one or more underwriters, who
would purchase the securities as principal for resale to the public, either on a
firm-commitment or best-efforts basis. If we sell securities to underwriters, we
may execute an underwriting agreement with them at the time of sale and will
name them in the applicable prospectus supplement. In connection with those
sales, underwriters may be deemed to have received compensation from us in the
form of underwriting discounts or commissions and may also receive commissions
from purchasers of the securities for whom they may act as agents. Underwriters
may resell the securities to or through dealers, and those dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from purchasers for whom they may act as agents.
The applicable prospectus supplement will include any required information about
underwriting compensation we pay to underwriters, and any discounts, concessions
or commissions underwriters allow to participating dealers, in connection with
an offering of securities.

If we offer securities in a subscription rights offering to our existing
security holders, we may enter into a standby underwriting agreement with
dealers, acting as standby underwriters. We may pay the standby underwriters a
commitment fee for the securities they commit to purchase

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on a standby basis. If we do not enter into a standby underwriting arrangement,
we may retain a dealer-manager to manage a subscription rights offering for us.

We may authorize underwriters, dealers and agents to solicit from third
parties offers to purchase securities under contracts providing for payment and
delivery on future dates. The applicable prospectus supplement will describe the
material terms of these contracts, including any conditions to the purchasers'
obligations, and will include any required information about commissions we may
pay for soliciting these contracts.

Underwriters, dealers, agents and other persons may be entitled, under
agreements that they may enter into with us, to indemnification by us against
certain liabilities, including liabilities under the Securities Act.

In connection with an offering, the underwriters may purchase and sell
securities in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a greater number of
securities than they are required to purchase in an offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the securities while an
offering is in progress.

The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the underwriters have repurchased securities
sold by or for the account of that underwriter in stabilizing or short-covering
transactions.

These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the securities. As a result, the price of the
securities may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on an exchange or
automated quotation system, if the securities are listed on that exchange or
admitted for trading on that automated quotation system, or in the
over-the-counter market or otherwise.

The underwriters, dealers and agents, as well as their associates, may be
customers of or lenders to, and may engage in transactions with and perform
services for, The Goldman Sachs Group, Inc. and its subsidiaries in the ordinary
course of business. In addition, we expect to offer the securities to or through
our affiliates, as underwriters, dealers or agents. Among our affiliates,
Goldman, Sachs & Co. may offer the securities for sale in the United States and
Goldman Sachs International and Goldman Sachs (Asia) L.L.C. may offer the
securities for sale outside the United States. Our affiliates may also offer the
securities in other markets through one or more selling agents, including one
another.

Goldman, Sachs & Co. is a subsidiary of The Goldman Sachs Group, Inc., and
The Goldman Sachs Group, Inc. is the parent of Goldman, Sachs & Co. Rule 2720 of
the Conduct Rules of the National Association of Securities Dealers, Inc.
imposes certain requirements when an NASD member, such as Goldman, Sachs & Co.,
distributes an affiliated company's securities. Goldman, Sachs & Co. has advised
The Goldman Sachs Group, Inc. that each particular offering of securities in
which it participates will comply with the applicable requirements of Rule 2720.

Goldman, Sachs & Co. will not confirm initial sales to accounts over which
it exercises discretionary authority without the prior written approval of the
customer.

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MARKET-MAKING RESALES BY AFFILIATES

This prospectus may be used by Goldman, Sachs & Co. in connection with
offers and sales of the securities in market-making transactions. In a
market-making transaction, Goldman, Sachs & Co. may resell a security it
acquires from other holders, after the original offering and sale of the
security. Resales of this kind may occur in the open market or may be privately
negotiated, at prevailing market prices at the time of resale or at related or
negotiated prices. In these transactions, Goldman, Sachs & Co. may act as
principal or agent, including as agent for the counterparty in a transaction in
which Goldman, Sachs & Co. acts as principal, or as agent for both
counterparties in a transaction in which Goldman, Sachs & Co. does not act as
principal. Goldman, Sachs & Co. may receive compensation in the form of
discounts and commissions, including from both counterparties in some cases.
Other affiliates of The Goldman Sachs Group, Inc. may also engage in
transactions of this kind and may use this prospectus for this purpose. These
other affiliates may include Goldman Sachs International and Goldman Sachs
(Asia) L.L.C.

The aggregate initial offering price specified on the cover of this
prospectus relates to the initial offering of the securities not yet issued as
of the date of this prospectus. This amount does not include the securities to
be sold in market-making transactions. The latter include securities to be
issued after the date of this prospectus, as well as securities previously
issued.

The Goldman Sachs Group, Inc. does not expect to receive any proceeds from
market-making transactions. The Goldman Sachs Group, Inc. does not expect that
Goldman, Sachs & Co. or any other affiliate that engages in these transactions
will pay any proceeds from its market-making resales to The Goldman Sachs Group,
Inc.

Information about the trade and settlement dates, as well as the purchase
price, for a market-making transaction will be provided to the purchaser in a
separate confirmation of sale.

Unless The Goldman Sachs Group, Inc. or an agent informs you in your
confirmation of sale that your security is being purchased in its original
offering and sale, you may assume that you are purchasing your security in a
market-making transaction.

MATTERS RELATING TO INITIAL OFFERING AND MARKET-MAKING RESALES

Each series of securities will be a new issue, and there will be no
established trading market for any security prior to its original issue date. We
may not list any particular series of securities on a securities exchange or
quotation system. We have been advised by Goldman, Sachs & Co. that it intends
to make a market in the securities, and any underwriters to whom we sell
securities for public offering may also make a market in those securities.
However, neither Goldman, Sachs & Co. nor any underwriter that makes a market is
obligated to do so, and any of them may stop doing so at any time without
notice. No assurance can be given as to the liquidity or trading market for any
of the securities.

Unless otherwise indicated in the applicable prospectus supplement or
confirmation of sale, the purchase price of the securities will be required to
be paid in immediately available funds in New York City.

In this prospectus, the terms "this offering" means the initial offering of
the securities made in connection with their original issuance. This term does
not refer to any subsequent resales of securities in market-making transactions.

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EMPLOYEE RETIREMENT INCOME SECURITY ACT

This section is only relevant to you if you are an insurance company or the
fiduciary of a pension plan or an employee benefit plan proposing to invest in
the securities.

The Goldman Sachs Group, Inc. and certain of its affiliates may each be
considered a "party in interest" within the meaning of the U.S. Employee
Retirement Income Security Act of 1974, as amended, which we call "ERISA", or a
"disqualified person" within the meaning of the U.S. Internal Revenue Code of
1986, as amended, with respect to many employee benefit plans. Prohibited
transactions within the meaning of ERISA or the Internal Revenue Code may arise,
for example, if the debt securities, warrants or purchase contracts, or any
units including debt securities, warrants and/or purchase contracts, are
acquired by or with the assets of a pension or other employee benefit plan for
which The Goldman Sachs Group, Inc. or any of its affiliates is a service
provider, unless those securities are acquired under an exemption for
transactions effected on behalf of that plan by a "qualified professional asset
manager" or an "in-house asset manager" or under any other available exemption.
The assets of a pension or other employee benefit plan may include assets held
in the general account of an insurance company that are deemed to be "plan
assets" under ERISA.

If you are an insurance company or the fiduciary of a pension plan or an
employee benefit plan and propose to invest in the securities described in this
prospectus, you should consult your legal counsel.

VALIDITY OF THE SECURITIES

The validity of the securities offered by this prospectus has been passed
upon for The Goldman Sachs Group, Inc. by Sullivan & Cromwell, New York, New
York. The opinion of Sullivan & Cromwell was based on certain assumptions about
future actions required to be taken by The Goldman Sachs Group, Inc. and the
trustee, warrant or unit agent or preferred stock depositary, if any, in
connection with the issuance and sale of each security, about the specific terms
of each security and its governing documents and about other matters that may
affect the validity of the securities but which could not be ascertained on the
date of that opinion.

In connection with particular offerings of the securities in the future,
the validity of those securities may be passed upon for The Goldman Sachs Group,
Inc. by one of its General Counsel, Robert J. Katz or Gregory K. Palm, and for
any underwriters or agents by Sullivan & Cromwell or other counsel named in the
applicable prospectus supplement.

Sullivan & Cromwell has in the past represented and continues to represent
Goldman Sachs on a regular basis and in a variety of matters, including
offerings of our common stock and debt securities. Sullivan & Cromwell also
performed services for The Goldman Sachs Group, Inc. in connection with the
offering of the securities described in this prospectus.

EXPERTS

The financial statements of Goldman Sachs as of November 27, 1998 and
November 26, 1999 and for each of the three years in the period ended November
26, 1999 incorporated by reference in this prospectus and the financial
statement schedule incorporated by reference in the registration statement have
been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.

The historical income statement, balance sheet and common share data set
forth in "Selected Consolidated Financial Data" for each of the five fiscal
years in the period ended November 26, 1999 incorporated by reference in this
prospectus have been so included in

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reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.

With respect to the unaudited condensed consolidated financial statements
of Goldman Sachs as of and for the three months ended February 25, 2000 and for
the three months ended February 26, 1999 incorporated by reference in this
prospectus, PricewaterhouseCoopers LLP reported that they have applied limited
procedures in accordance with professional standards for a review of such
information. However, their separate report dated April 5, 2000 incorporated by
reference herein states that they did not audit and they do not express an
opinion on the unaudited condensed consolidated financial statements.
Accordingly, the degree of reliance on their report on such information should
be restricted in light of the limited nature of the review procedures applied.
PricewaterhouseCoopers LLP is not subject to the liability provisions of Section
11 of the Securities Act of 1933 for their report on the unaudited condensed
consolidated financial statements because this report is not a "report" or a
"part" of the registration statement prepared or certified by
PricewaterhouseCoopers LLP within the meaning of Sections 7 and 11 of the
Securities Act of 1933.

CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

We have included or incorporated by reference in this prospectus statements
that may constitute "forward-looking statements" within the meaning of the safe
harbor provisions of The Private Securities Litigation Reform Act of 1995. These
forward-looking statements are not historical facts but instead represent only
our belief regarding future events, many of which, by their nature, are
inherently uncertain and outside of our control. It is possible that our actual
results may differ, possibly materially, from the anticipated results indicated
in these forward-looking statements.

Information regarding important factors that could cause actual results to
differ, perhaps materially, from those in our forward-looking statements is
contained under the caption "Item 1: Business -- Certain Factors That May Affect
Our Business" in our Annual Report on Form 10-K for the fiscal year ended
November 26, 1999, which is incorporated in this prospectus by reference. See
"Available Information" above for information about how to obtain a copy of this
Annual Report.

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PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER

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

TRUSTEE, REGISTRAR, TRANSFER AGENT AND PRINCIPAL PAYING AGENT

The Bank of New York
101 Barclay Street
New York, New York 10286

LISTING AGENT AND PAYING AGENT IN LUXEMBOURG

Banque Internationale a Luxembourg S.A.
69, route d'Esch
L-1470 Luxembourg

LEGAL ADVISORS

<TABLE>
<CAPTION>
TO THE ISSUER TO THE UNDERWRITERS
<S> <C>
Gregory K. Palm, Esq. Sullivan & Cromwell
125 Broad Street
General Counsel New York, New York 10004
The Goldman Sachs Group, Inc.
85 Broad Street
New York, New York 10004
</TABLE>

INDEPENDENT ACCOUNTANTS
FOR THE ISSUER

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
<PAGE> 116

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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.
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TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Supplement
Cautionary Note Regarding
Forward-Looking Statements.......... S-2
The Goldman Sachs Group, Inc. ........ S-3
Recent Developments................... S-5
Summary Consolidated Financial Data... S-8
Capitalization........................ S-11
Ratio of Earnings to Fixed Charges.... S-11
Use of Proceeds....................... S-11
Specific Terms of the Notes........... S-12
Employee Retirement Income Security
Act................................. S-19
Validity of the Notes................. S-20
Underwriting.......................... S-21
Listing and General Information....... S-24

Prospectus
Available Information................. ii
Prospectus Summary.................... 1
Ratio of Earnings to Fixed Charges.... 4
Description of Debt Securities We May
Offer............................... 5
Description of Warrants We May
Offer............................... 27
Description of Purchase Contracts We
May Offer........................... 33
Description of Units We May Offer..... 38
Description of Preferred Stock We May
Offer............................... 43
Legal Ownership and Book-Entry
Issuance............................ 50
Considerations Relating to Securities
Issued in Bearer Form............... 56
Considerations Relating to Indexed
Securities.......................... 60
Considerations Relating to Securities
Denominated or Payable in or Linked
to a Non-U.S. Dollar Currency....... 62
United States Taxation................ 65
Plan of Distribution.................. 83
Employee Retirement Income Security
Act................................. 86
Validity of the Securities............ 86
Experts............................... 86
Cautionary Statement Pursuant to the
Private Securities Litigation Reform
Act of 1995......................... 87
</TABLE>

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THE GOLDMAN SACHS
GROUP, INC.

E % Notes due

E % Notes due
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[GOLDMAN SACHS LOGO]

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GOLDMAN SACHS INTERNATIONAL
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