SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   ---------

                                   FORM 10-K

                       FOR ANNUAL AND TRANSITION REPORTS
                    PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

(Mark One)
__X__  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

For the fiscal year ended November 28, 1997

                                       OR

_____  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
       EXCHANGE ACT OF 1934

For the transition period from ________ to ________

                       Commission File Number: 000-25178

                        GS FINANCIAL PRODUCTS U.S., L.P.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                              <C>
CAYMAN ISLANDS                                                                52-1919759
(State or other jurisdiction of incorporation or organization)    (I.R.S. employer identification no.)

P.O. Box 896, Harbour Centre, North Church Street
Grand Cayman, Cayman Islands, British West Indies
(Address of principal executive offices)                                        (Zip Code)

Registrant's telephone number, including area code                            (809) 945-1326
</TABLE>

          Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<S>                                                          <C>
Title of each class:                                          Name of each exchange on which registered:
--------------------                                          ------------------------------------------
Nikkei 225 Indexed Notes due December 22, 2000                          American Stock Exchange 
S&P Enhanced Stock Index Growth Notes due August 9, 2002                New York Stock Exchange 
3% Citicorp Exchangeable Notes due August 28, 2002                      American Stock Exchange
</TABLE>


          Securities registered pursuant to Section 12(g) of the Act:

                         Limited partnership interests

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days: Yes __X__ No______

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K: __X__

State the aggregate market value of the voting and non-voting common equity held
by  non-affiliates  of the  registrant.  The  aggregate  market  value  shall be
computed by reference to the price at which the common  equity was sold,  or the
average bid and asked  prices of such  common  equity,  as of a  specified  date
within 60 days prior to the date of filing. (See definition of affiliate in Rule
405.): Not Applicable


                                      -1-
<PAGE>



                        GS FINANCIAL PRODUCTS U.S., L.P.
                           ANNUAL REPORT ON FORM 10-K
                  FOR THE FISCAL YEAR ENDED NOVEMBER 28, 1997


Form 10-K Item Number:

<TABLE>
<CAPTION>
                                                                                       Page No.
                                                                                       --------

PART I
------

<S>                                                                                       <C>
Item 1:   Business...........................................................................3

Item 2:   Properties........................................................................16

Item 3:   Legal Proceedings.................................................................16

Item 4:   Submission of Matters to a Vote of Security-Holders...............................16


PART II
-------

Item 5:   Market for the Company's Common Equity and
             Related Stockholder Matters....................................................17

Item 6:   Selected Financial Data...........................................................17

Item 7:   Management's Discussion and Analysis of Financial Condition
             and Results of Operations......................................................17

Item 8:   Financial Statements and Supplementary Data.......................................26

Item 9:   Changes in and Disagreements With Accountants
             on Accounting and Financial Disclosure.........................................26


PART III
--------

Item 10:  Directors and Executive Officers of the Registrant................................27

Item 11:  Executive Compensation............................................................28

Item 12:  Security Ownership of Certain Beneficial Owners and Management....................28

Item 13:  Certain Relationships and Related Transactions....................................29


PART IV
-------

Item 14:  Exhibits, Financial Statement Schedules, and Reports on Form 8-K..................32

Index to Financial Statements of the Company...............................................F-1

Signatures................................................................................F-16

Exhibit Index

</TABLE>













                                      -2-
<PAGE>

                                     PART I
                                     ------

ITEM 1:  BUSINESS

General

    GS Financial  Products  U.S.,  L.P. (the  "Company")  was formed as a Cayman
Islands  exempted  limited  partnership on February 5, 1992. All the partnership
interests in the Company are owned by  subsidiaries  of The Goldman Sachs Group,
L.P. ("Group"). The Company currently owns a portfolio consisting principally of
$28 billion notional amount of interest rate swaps, interest rate options, index
swaps,  currency options,  currency forwards and currency swaps denominated in a
variety of currencies.

    The Company is a  derivative  products  company  engaged in the  business of
entering  into,  as principal or guarantor,  a variety of types of  transactions
involving  financial  instruments  such as interest  rate swaps,  interest  rate
options (e.g.,  interest rate caps, interest rate floors and options on interest
rate swaps),  currency  swaps and options,  commodity  swaps and options,  index
swaps  and  forward   contracts   (collectively,   "Derivative   Transactions").
Generally,  the Company  enters into or guarantees  Derivative  Transactions  in
situations  where  two or more  counterparties  (typically  including  a related
party)  wish  to  enter  into  one  or  more  Derivative   Transactions  between
themselves,  but want the  Company to  substitute  its credit for that of one or
more of the  counterparties.  Market practice for such  transactions is that the
Company  typically  substitutes  its own  credit  for that of one or more of the
counterparties by entering into each of such transactions directly as principal.
Such Derivative Transactions may also include the use of futures or the purchase
of the  underlying  instruments  subject  to the  transactions,  such as foreign
currencies,  physical commodities and securities. In addition, from time to time
the Company issues structured notes.

    The Company  observes  limits on its  activities in order to avoid  becoming
subject to regulation  in one or more  countries in which it does  business.  As
discussed under  "Regulation"  below, the principal  limitation on the Company's
business is that it will generally only transact business in instruments  which,
in its opinion,  do not constitute  "securities" under the United States federal
securities laws.  However,  the Company may engage in transactions in securities
to the extent that the Company does not believe that such  transactions are of a
magnitude  or of a nature  that will  cause the  Company  to become  subject  to
regulation.  Currently,  there are no regulations which materially  restrict the
ability  of the  Company  to  effect  transactions  in  commodities  or  futures
contracts or options on futures contracts.

HEDGING OF DERIVATIVE TRANSACTIONS

    Because of the nature of its business,  the Company does not intend to incur
any payment or delivery  obligation unless it is entitled to receive an equal or
greater  payment  or  delivery  from one or more  third  parties  (which  may be
affiliates of Group). In general,  the Company refers to transactions  where all
of the payment obligations or delivery obligations can be met from cash flows or
delivery  obligations  from one or more other  transactions  in its portfolio as
being "hedged", and as not having "market risk". It is important to note in this
regard  that the  Company  hedges  its cash  flow on a  portfolio  basis,  not a
transaction by transaction basis. Accordingly,  a particular payment or delivery
obligation  under a  transaction  may not be  offset  by a single  corresponding
transaction.

    Hedging is a strategy by which the Company  seeks to eliminate  market risk.
Obligations  incurred by the Company may be hedged in several ways. For example,
if the  Company  enters  into a  contract  requiring  it to make a payment  to a
counterparty based on an index, the Company may enter into one or more contracts
that require one or more other counterparties, which may be affiliates of Group,
to make an equal or greater cash payment to the Company based on the same index.
Similarly,  the Company will only enter into an obligation to pay a fixed amount
(e.g.,  issue a fixed rate bond),  if it also  acquires one or more assets which
entitle the Company to receive  amounts  which are equal to or greater  than the
amounts it owes.

    In its simplest  form,  the Company may hedge  obligations  by entering into
transactions  which mirror the  Company's  obligation.  For example,  if under a
10-year  interest rate swap with a $100 million  notional  principal  amount the
Company is obligated to make semi-annual payments to Party A based on a floating
rate of interest,  e.g.,  LIBOR,  and receive  payments based on a fixed rate of
interest,  e.g., 6.50%, the Company may hedge its payment  obligations under the
interest  rate swap by entering into an interest rate swap with Party B with the
same maturity and notional  principal amount under which Party B is obligated to
make  semi-annual  payments  to the  Company  based on LIBOR and the  Company is
obligated  to make  payments to Party B based on a 6.47% fixed rate of interest.
Over the


                                      -3-
<PAGE>

term of the swaps,  the Company's total revenue from the two swaps would consist
of the .03% difference between the amounts paid by the two counterparties.  This
type of hedge  eliminates all market risk and leaves the Company  exposed to the
credit  risk of  either  Party A or  Party  B,  depending  on the  level  of the
underlying index or interest rate (e.g., LIBOR).

    The Company also may hedge obligations by entering into  transactions  which
generate cash flows which exceed the Company's  obligations.  In such cases, the
Company would  typically have a cost to acquire the hedged  position,  and would
recover that cost together with a return,  over the life of the hedged position.
For  example,  the  Company  may enter into two  interest  rate swaps  which are
identical to those in the example above, except that Party A would agree to make
payments  based on a fixed  rate of 8.50%  instead  of 6.50%,  in return  for an
up-front  payment by the Company.  The up-front  payment would equal the present
value of the 2.00%  difference  between  the 8.50% paid by Party A and the 6.50%
market  level  for  similar  swaps.  In such a case,  the  Company  may fund the
up-front  payment by issuing debt.  The debt would be repaid from the difference
between the 8.50%  received from Party A and the 6.47% paid to Party B, over the
life of the swaps.  Over the term of the swaps, the Company's total revenue from
the two swaps would  consist of the  difference  between the amounts paid by the
two  counterparties,  less the amount originally paid by the Company to Party A.
This  would be  partially  offset  by  interest  on the debt  issued to fund the
up-front payment.  This type of hedge also eliminates all market risk and leaves
the Company  exposed to the credit risk of either Party A or Party B,  depending
on the level of the underlying index (e.g.,  LIBOR).  However, the profitability
of this type of hedge depends on the  difference  between the Company's  cost of
funds and the  discount  rate  applied to  determine  the amount of the up-front
payment.

    In a more complex manner, the Company may hedge obligations by using futures
contracts,  options on futures or other derivative  instruments generally traded
on a futures  exchange or board of trade, or by holding a portfolio of financial
instruments or physical commodities.  In an interest rate swap, for example, the
Company's  payment  obligations  could be hedged by the  purchase of a series of
futures  contracts which require payments to the Company based on LIBOR, so long
as the payment  flows on the futures  contracts can be expected to match exactly
or exceed the payment obligations on the swap.  Regardless of the method used to
hedge an obligation,  however, the Company is essentially placing itself between
two or, in certain circumstances, more separate counterparties, thereby enabling
each  counterparty to rely on the Company's credit rather than the corresponding
counterparty's  credit.  Like other types of hedges discussed above, the Company
would use these types of hedges only if they  completely  eliminated  all market
risk.  The  advantage  of these  types of hedges is that they  typically  do not
introduce as much credit risk as a hedge with another counterparty. For example,
if  the  Company  uses  futures  to  hedge,  the  counterparty  is  an  exchange
clearinghouse and the credit exposure is subject to margin requirements.

    Because the Company  anticipates  that all of its obligations will be offset
by equal or greater  obligations  from third  parties,  the Company will, in the
absence of a counterparty  default,  be protected  against the effects of market
fluctuations.   As  discussed  above,  however,  the  Company  will  enter  into
transactions  as  principal.  Accordingly,  in  the  event  of  a  default  by a
counterparty,  the Company  will be exposed to the risk of loss  because it will
remain  obligated  to comply  with its payment or  delivery  obligations  to the
non-defaulting counterparty.  Under such circumstances,  the Company may sustain
losses,  the amount of which will  depend  upon a number of  factors,  including
whether the  defaulting  counterparty  had accrued  payment  obligations  to the
Company,  whether the Company is able to enter into a transaction to replace the
position  on which the  default  occurred  and  whether  the  Company is able to
terminate  the  non-defaulted   position.  See  "Entering  into  New  Derivative
Transactions  and Risk  Management  -- Credit  Quality and  Counterparty  Credit
Risk", "Monitoring the Portfolio" and "Documentation" below.

DERIVATIVE TRANSACTIONS

    The  following  is a summary of the types of  instruments  that the  Company
currently  anticipates  entering  into,  purchasing,  selling and issuing in the
course of its business.  As discussed above, the Company's  current portfolio of
Derivative Transactions consists principally of interest rate swaps and options,
index swaps,  currency forwards and currency swaps and options  denominated in a
variety of  currencies.  Nevertheless,  the Company may expand its  portfolio to
include the entering  into of a variety of additional  Derivative  Transactions.
The exact extent and timing of the  expansion of the  Company's  portfolio  will
depend upon market conditions and other factors beyond the Company's control.

    Margin or  collateral  is sometimes  required to be deposited by one or both
parties to a Derivative  Transaction.  The Company does not expect  generally to
require  counterparties  to post margin or  collateral  in respect of Derivative
Transactions.   Changes  in  general  market  practices  or  in  counterparties'
perception of the Company's


                                      -4-

<PAGE>

creditworthiness  could result in the Company  generally  being required to post
collateral  or margin in the future.  Additionally,  as described in more detail
below, certain exchange traded instruments always require margin deposits.

    The Company does not currently  anticipate entering into a transaction which
requires it to post margin or collateral unless it anticipates having sufficient
unpledged assets to satisfy such margin or collateral requirements. For example,
the  Company  may agree to post  margin or  collateral  if it were to receive an
equivalent amount of margin or collateral under the related transactions.

    The Company  does not limit the  concentration  of its  portfolio in any one
type of instrument.  As a result, the Company's portfolio could consist entirely
of one kind of instrument,  or it could contain many types of  instruments.  See
"Entering into New Derivative Transactions and Risk Management" below.

    The Company may also engage in Derivative  Transactions to hedge its cost of
funds. For example, the Company may issue a debt obligation with a return linked
to an index,  and enter into a  Derivative  Transaction  with a third party or a
Group  affiliate to hedge the indexed  component of the debt obligation at terms
which will  result in a cost of funds to the  Company  which is either  fixed or
floating based on a short-term interest rate. See "Structured Notes" below.

  INTEREST RATE AND CURRENCY SWAPS

    An interest rate swap is a bilateral  agreement  that requires each party to
make periodic  payments to the other party,  the amounts of which are determined
on the basis of a stated  fixed or  floating  rate of  interest  and a specified
notional  principal amount.  Typically,  one party agrees to make payments in an
amount equal to a fixed rate of interest  multiplied  by the notional  principal
amount,  while the other party  agrees to make  payments in an amount equal to a
particular  floating  interest  rate (e.g.,  LIBOR)  multiplied  by the notional
amount.  The  payment  obligations  of the  parties  might  also be based on two
different floating rates. On each scheduled payment date, the amount required to
be paid by one party is netted  against  the amount  required  to be paid by the
other party and only this net amount is paid by one party to the other.  Neither
party actually pays the notional principal amount at any time during the term of
the swap.  Under a currency  swap, one party agrees to pay a fixed or a floating
amount of a specified  currency on each payment date, and the other party agrees
to pay a fixed or floating  amount of a  different  currency.  In contrast  with
interest  rate swaps,  the  parties to currency  swaps  typically  exchange  the
notional principal amount of each currency at initiation and maturity.

    Interest rate and currency swaps  generally  require  periodic  payments and
extend for periods of up to 10 years.  However,  some interest rate and currency
swaps may extend for  substantially  longer periods of time, such as 30 years or
more. Such  transactions  are entered into by each party acting as principal and
typically may not be transferred or terminated without counterparty  consent. As
a result,  interest rate and currency swaps have limited liquidity.  By entering
into a swap,  a party  assumes the risk of adverse  interest  or  exchange  rate
fluctuations, which could result in the party's being obligated to make payments
to its counterparty over a significant period of time.

  INTEREST RATE CAPS AND FLOORS

    An  interest  rate cap  provides  the  purchaser  with the right to  receive
payments  in an amount  equal to the excess of a floating  interest  rate over a
specified  fixed rate,  multiplied by a stated  notional  principal  amount.  An
interest rate floor provides the purchaser with the right to receive payments in
an amount  equal to the excess of a fixed  interest  rate over a floating  rate,
multiplied  by a stated  notional  principal  amount.  The purchaser of a cap or
floor pays a  non-refundable  fee (which may be referred to as a "premium")  for
this  right,  but has no further  payment  obligations.  In  contrast to a swap,
therefore,  a cap or floor imposes  continuing  payment  obligations only on the
seller,  and the purchaser cannot lose more than the fee paid. In addition,  the
seller has no ongoing credit exposure to the purchaser.  The seller, however, is
subject  to risk of loss to the  full  extent  of any  adverse  fluctuations  in
interest  rates above,  in the case of a cap, or below,  in the case of a floor,
the fixed rate and the  purchaser  therefore  incurs  exposure  to the  seller's
credit.  For this  reason,  the seller  may be  required  to  deposit  margin or
collateral.  Conversely,  the seller's  potential  profit on the  transaction is
limited to the amount of the fee.

    Payments are required to be made under caps and floors on periodic scheduled
payment dates, or on a single date. As in the case of swaps,  interest rate caps
and floors are entered  into by each party  acting as  principal  and may not be
transferred or terminated without counterparty  consent,  although the purchaser
may simply allow the cap or floor to expire and forfeit the fee.


                                      -5-
<PAGE>

  CURRENCY FORWARDS

    Forward  contracts on currencies  are  contractual  obligations  between two
parties to purchase and sell a specific  quantity of one currency for a specific
quantity of a second  currency  (thereby  creating a fixed exchange rate between
the two currencies) at a stated time in the future.  Forward contracts generally
may not be liquidated prior to the stated maturity date, although the parties to
a forward contract may agree to enter into a second offsetting  transaction with
the  same  maturity,  thereby  fixing  each  party's  profit  or loss on the two
transactions.  As a result,  a party to a forward  contract  must be prepared to
perform its obligations under the contract in full.

    Forward  contracts  are  entered  into  by the  parties  as  principals  and
generally may not be transferred  or terminated  without  counterparty  consent.
Each party's profit or loss on the transaction  will be determined by changes in
the exchange rate between the two currencies that are the subject of the forward
contract.

  CURRENCY OPTIONS

    An option on a currency provides the purchaser, or "holder", with the right,
but not the obligation, to purchase, in the case of a "call" option, or to sell,
in the case of a "put" option, a stated quantity of the underlying currency at a
fixed exchange rate up to a stated  expiration  date (or, in the case of certain
options,  on such date).  The holder pays a  non-refundable  fee for the option,
referred to as the "premium", but cannot lose more than this amount. In contrast
to a forward  contract,  an option  imposes  a  binding  obligation  only on the
seller,  or "writer",  of the option.  Upon the holder's exercise of the option,
the writer is obligated to complete the transaction in the underlying  currency.
An option becomes worthless to the holder when it expires.

    As in the case of interest  rate caps and  floors,  the writer of a currency
option has no ongoing credit exposure to the purchaser.  Because the writer must
complete the purchase or sale of the  underlying  currency upon the  purchaser's
exercise of the option,  however, the writer is exposed to potentially unlimited
losses in the event of adverse  fluctuations in the relevant  exchange rate. The
purchaser therefore has ongoing credit exposure to the writer and the writer may
be required to deposit margin or collateral.  Currency  options are entered into
by the parties as principals,  and may not be transferred or terminated  without
counterparty consent (although, as in the case of caps and floors, the purchaser
may simply allow the option to expire and forfeit the premium).

  FUTURES CONTRACTS

    A futures contract is a bilateral  agreement  providing for the purchase and
sale of a security (such as government bonds),  currency,  physical commodity or
index for a specified  price.  By its terms, a futures  contract  provides for a
specified  delivery month in which the security,  currency or commodity is to be
delivered or, in the case of a futures contract on an index of interest rates or
certain financial instruments,  in which a cash settlement is to be paid. Unlike
other types of derivative  instruments  described above,  futures  contracts are
traded only on organized  exchanges and may be entered into only through brokers
that are members of the relevant exchanges.  The exchange  clearinghouse acts as
the counterparty to each futures contract executed through the exchange,  and is
responsible  for all clearance  and  settlement  functions.  In contrast to most
other  derivative  instruments  described  herein,  therefore,  the parties to a
futures contract do not deal with each other as principals and assume the credit
risk of an exchange  clearinghouse,  rather than the credit risk of a particular
counterparty.  In addition,  because of the clearinghouse  system,  positions in
futures contracts may be liquidated by entering into offsetting  transactions in
the same contract,  which serves to terminate the position. As a result, futures
positions  may  be  terminated  without  counterparty  consent,  subject  to the
availability  of a liquid  secondary  market on which to effect  the  offsetting
transaction on the relevant exchange. Most futures contracts are settled in this
manner  rather  than  through  the  delivery  of the  underlying  instrument  or
commodity.

    Upon entering into a futures contract, an amount of cash or cash equivalents
must be deposited  with the broker by the  purchaser  and the seller as "initial
margin".  Subsequent payments to and from the broker,  referred to as "variation
margin", are then made on a daily basis as the value of the underlying security,
currency,  commodity or index  fluctuates in value,  thereby making positions in
the  futures  contract  more or less  valuable,  a process  known as "marking to
market".  The Company will be subject to margin  requirements in connection with
the futures contracts into which it enters.


                                       -6-

<PAGE>

  OPTIONS ON FUTURES CONTRACTS

    An option on a futures contract  provides the holder with the right, but not
the  obligation,  to enter  into a "long"  position  in the  underlying  futures
contract,  in  the  case  of a  "call"  option,  or a  "short"  position  in the
underlying futures contract,  in the case of a "put" option, at a fixed price up
to a stated expiration date. As in the case of other options,  the holder pays a
non-refundable premium for the option, but cannot lose more than this amount.

    The  writer of an  option on a futures  contract,  however,  is  subject  to
initial and variation  margin  requirements in connection with the option and is
exposed to potentially  unlimited losses.  The Company will be subject to margin
requirements  in  connection  with options on futures  contracts  written by it.
Options on futures  contracts are traded on the same exchanges as the underlying
futures  contracts,  and may only be  entered  into  through  brokers  which are
members of the relevant exchanges. Positions in options on futures contracts are
cleared through the relevant  exchange  clearinghouse,  in the same manner,  and
subject to the same  considerations,  as those  discussed  above under  "Futures
Contracts".

  FORWARD CONTRACTS ON PHYSICAL COMMODITIES

    Forward contracts on physical commodities are contractual obligations by two
parties to purchase  and sell a stated  quantity of a commodity  for a specified
price at a stated time in the future.  Forward contracts on physical commodities
generally are used either to effect  purchases and sales of the commodity in the
future or to hedge against the risk of adverse  fluctuations in the value of the
commodity.  The Company may enter into forward contracts on physical commodities
in a manner substantially similar to its use of currency forwards, and will seek
to hedge  positions  in such  contracts  either  through  the  establishment  of
offsetting  forward positions or an offsetting  position in futures contracts on
the same commodity.

  COMMODITY OPTIONS

    An option on a physical commodity provides the purchaser with the right, but
not the obligation,  to purchase the underlying commodity, in the case of a call
option, or to sell the underlying commodity, in the case of a put option, at any
time up to a stated  expiration  date for a specified  price.  As in the case of
other types of options, the holder pays the writer a non-refundable  premium for
the option but cannot lose more than this amount.  Upon the holder's exercise of
the  option,  the  writer  is  obligated  to  complete  the  transaction  in the
underlying physical commodity.

  COMMODITY SWAPS

    A commodity swap, which is substantially similar to a swap on interest rates
or currency  exchange  rates,  is a bilateral  agreement  between two parties to
exchange payments on regularly scheduled dates, based on changes in the value of
a specified  commodity.  One party to the transaction  undertakes to pay a fixed
amount on each payment date, while the other party agrees to pay a floating rate
based on the price of the underlying  commodity,  in each case,  multiplied by a
notional  quantity of the  commodity.  On each payment date, the parties net the
payments owed by each party, and only the net amount is paid by one party to the
other.

    Commodity  swaps may extend over  substantial  periods of time and generally
require payments to be made on a quarterly basis.  Such transactions are entered
into by each party acting as principal and typically may not be  transferred  or
terminated  without  counterparty  consent.  As a result,  commodity  swaps have
limited  liquidity.  By entering into a commodity  swap,  each party assumes the
risk of adverse  changes in the value of the underlying  commodity,  which could
result in either party being obligated to make payments to its counterparty over
a significant period of time.

  INDEX SWAPS

    An index swap is a bilateral  agreement  between  two  parties  based on the
value of an index of one or more currencies  (including  baskets of currencies),
one or  more  commodities  (including  baskets  of  commodities),  one  or  more
securities  (including  baskets of securities) and/or any other index. One party
(Party A) may  undertake  to pay a decrease in a specified  notional  value of a
selected  index below a specified  level in exchange  for the  agreement  by the
other  party  (Party  B) to pay  any  increase  of the  selected  index  above a
specified  level. As with commodity  swaps, on each payment date the parties net
the payments owed by each party, and only the net amount is paid by one party to
the other.  Index swaps  generally  extend from  relatively  short  periods (six
months) to medium-term maturities (three


                                       -7-

<PAGE>


to five years).  Payments are exchanged  periodically at intervals negotiated by
the parties. On relatively short-term Derivative  Transactions,  the exchange of
payments is generally only made on the swap termination date.

    In an index swap,  both  parties  assume the risk of changes in the value of
the  selected  index,  since,  in the example  above,  if the index value on the
payment date is less than its value on the inception date,  Party A will owe the
difference to Party B. On the other hand, if the index value on the payment date
is more than its value on the inception date, Party B will owe the difference to
Party A. In either case, any interest owed under the index swap will be added to
or netted against the amounts owed in respect of changes in the index.

STRUCTURED NOTES

    As  discussed  under  "Management's  Discussion  and  Analysis of  Financial
Condition and Results of Operations -- Overview", the Company has entered into a
number of transactions in which the Company issues Medium Term Notes  ("Notes"),
where payments on the Notes are determined by reference to the  performance of a
single equity  security or an equity index.  Certain of the Notes are subject to
redemption at the option of the Company if certain conditions are met. The terms
of a Note linked to a single stock may either allow for or  mandatorily  require
the holder to exchange the notes into an amount of the underlying security.  The
Company  has  purchased  equity  securities  and  has  entered  into  Derivative
Transactions  with Affiliates of Group and purchased  exchange traded options to
eliminate  its market  risk on the Notes.  The cost of hedging an  equity-linked
Medium  Term Note may use up a  substantial  portion  of the  proceeds  from the
issuance of such Note.

SECURITIES OWNED

    As of November  28,  1997,  securities  owned  consisted of shares of common
stock of Oxford Health Plans,  Inc. (market value  approximately  $11.4 million)
and  shares  of common  stock of  Citicorp  (market  value  approximately  $83.8
million).  The  Company  purchased  these  securities  to hedge  certain  of the
Company's exposures incurred by its issuance of two series of Medium Term Notes,
one of which is mandatorily exchangeable at maturity into shares of common stock
of Oxford  Health  Plans,  Inc. and the other of which is  exchangeable,  at the
option of the holder, into shares of Citicorp common stock.

ENTERING INTO NEW DERIVATIVE TRANSACTIONS AND RISK MANAGEMENT

    In connection  with entering into any  Derivative  Transaction,  the Company
seeks to ensure that its obligations  under any new Derivative  Transactions can
be "hedged" with other  Derivative  Transactions.  The Company also  considers a
variety of factors, including any existing exposure of the Company and Group and
its  affiliates to the proposed  counterparty,  the level and  volatility of the
index to which the  transaction  would be  linked,  the  credit  quality  of the
proposed  counterparty  and the credit risk it is undertaking in connection with
entering  into  such  Derivative  Transaction  as  well  as  the  impact  of any
additional such risk on its portfolio of Derivative  Transactions.  In addition,
prior to entering into a Derivative Transaction, the Company must determine that
the spread on such Derivative Transaction is satisfactory in light of the credit
risk associated with such Derivative  Transaction.  The Board of Directors of GS
Financial Products US Co. (the "Corporate General Partner"), the general partner
of the Company, has approved the Company's procedures to monitor and control the
credit quality of, and the Company's  exposure to,  counterparties  as described
below and under "Monitoring the Portfolio" below. Such procedures may be changed
at any time and from time to time. See "Management's  Discussion and Analysis of
Financial  Condition  and Results of  Operations  --  Overview"  in item 7 for a
discussion of the current review of the Company's business and operations.

    In connection with the Company entering into new Derivative Transactions, it
is important to recognize that Group has control over the amount of new business
that the  Company  originates  and that the  Company may decline to enter into a
transaction  that meets its credit standards but exceeds the exposure limits set
by Group for itself and its  affiliates.  See "Credit  Quality and  Counterparty
Credit Risk -- Counterparty Credit Quality" below.

  MARKET RISK AND LIQUIDITY EXPOSURES

    The Company  intends to manage its portfolio of Derivative  Transactions  so
that cash payments to the Company from its portfolio will be sufficient to make,
when due,  all required  payments on all the  Company's  liabilities,  including
payments of principal,  premium, if any, and interest on any indebtedness.  As a
result, the Company  anticipates that it will not incur any obligation unless it
enters  into one or more  Derivative  Transactions  which  provide  it with,  or
entitle it to receive,  an equal or greater amount from a third party, which may
be an affiliate of Group. In addition, the


                                       -8-

<PAGE>

Company does not  anticipate  incurring any  obligation  unless it has scheduled
cash sources that are available on or before the dates of the required  payments
on the obligation.  For example, if the Company enters into a contract requiring
it to make payments based on an index, the Company may concurrently enter into a
contract  that  requires a third party to make equal or greater  payments to the
Company based on the same index at the same time.  As a result,  so long as none
of its  counterparties  defaults,  the Company  believes that it bears no market
risk  (i.e.,  its  ability to satisfy  its  obligations  will not be affected by
market conditions).

    The Company does not currently  engage in, nor does it  anticipate  engaging
in, "dynamic hedging" (i.e., entering into cash or Derivative Transactions which
are  expected  approximately,  but not exactly,  to offset the  economics of the
transactions  being hedged and which are adjusted  from time to time to maintain
the hedge ratio).  Generally,  dynamic hedging  strategies  would not permit the
Company to be certain that, absent a default,  cash flows would be sufficient to
satisfy all of the related liabilities.

  CREDIT QUALITY AND COUNTERPARTY CREDIT RISK

    The  Company  anticipates  that it will make  payments  on its  obligations,
including any  indebtedness,  principally or  exclusively  with cash on hand and
receipts  from its  portfolio  of  Derivative  Transactions.  As a  result,  the
Company's  ability to meet its obligations will depend on its ability to collect
the amounts owed pursuant to such Derivative Transactions. Accordingly, defaults
by  counterparties  with large  obligations to the Company could  materially and
adversely  affect the Company's  financial  position,  results of operations and
cash flows.

    The amount  which the Company  would  lose,  that is, the amount the Company
would  be  required  to pay to  obtain a  replacement  instrument  to hedge  its
obligations  on any  Derivative  Transaction  (the "loss"),  upon a counterparty
default on a particular transaction would be determined principally by the level
of the indices to which payments on the instruments  issued by that counterparty
were  linked.  In the case of a default by a  counterparty  to an interest  rate
swap, for example,  the amount of the Company's loss would depend principally on
the level of interest  rates.  Similarly,  the amount of the Company's loss on a
default in a currency swap would depend  principally on currency  exchange rates
whereas  the  amount  of  the  Company's  loss  on a  default  in  a  Derivative
Transaction  linked  to the  price of a  commodity  (such as gold or oil)  would
depend upon the price of such commodity.  The size of the loss would be affected
by the level of such  indices at the time of default  and, if the  Company  were
unable  to  replace  the   defaulted   instrument   or  terminate   its  hedging
transactions,  the  changes in the level of such  indices  after the default and
prior to maturity of the hedging  transactions.  A number of the  instruments in
which the Company  intends to  transact  business  have  limited  liquidity  and
therefore could be difficult to replace.  For any particular  transaction  there
will  also be a number  of other  factors  which can  affect  the  amount of the
Company's potential loss.  Depending on the terms of the transaction,  these can
include, for example, the time remaining until maturity of the transaction,  the
availability  of any netting  provisions in the agreement with the  counterparty
and changes in the supply and demand for that type of transaction.

    The Company utilizes  several  techniques to assess and limit credit risk as
described  below.  The  Company's  procedures  to monitor and control the credit
quality of, and the Company's exposure to, counterparties as described below may
be  changed  at any time by the  Board of  Directors  of the  Corporate  General
Partner of the Company.  See "Management's  Discussion and Analysis of Financial
Condition and Results of Operations -- Overview" for a discussion of the current
review of the Company's business and operations.

    Counterparty  Credit Quality.  The Company's  principal means of controlling
its credit risk is to substitute its credit principally for highly  creditworthy
counterparties.  By doing so, the Company  anticipates that it will experience a
relatively low frequency of counterparty defaults.

    The Company  anticipates that it will substitute its credit  principally for
obligors rated "A" or better by one or more  nationally  recognized  statistical
rating  organizations.  However, the Company may do business with counterparties
rated  below  "A"  and may  enter  into  Derivative  Transactions  with  unrated
counterparties.

    Pursuant to an Origination Agreement with Goldman, Sachs & Co. ("GS&Co.") as
described under "Certain  Relationships and Related  Transactions -- Operational
and Administrative Relationships with Group -- New Business Services Agreements"
in Item 13,  GS&Co.  has  agreed to  provide,  or cause to be  provided,  credit
reviews of  counterparties.  The  Company  has been  advised by GS&Co.  that the
credit quality of each counterparty to a new Derivative Transaction  (regardless
of the extent of existing  Derivative  Transactions with such counterparty) will
be evaluated by the credit department of one of its affiliates.  This evaluation
includes a review of the credit exposure of


                                       -9-

<PAGE>

Group and its affiliates to the  counterparty's  credit. The Company has further
been   advised  by  GS&Co.   that  these   credit   reviews  are   performed  by
representatives  of its  credit  department  and that they are  responsible  for
conducting  due diligence as to the credit  quality of potential  counterparties
for the purposes of other activities of Group and its affiliates.  GS&Co.'s role
is solely to provide information to the Company,  and it has no liability to the
Company in respect of the provision of such credit reviews except in the case of
gross  negligence.  Generally,  the Company does not  anticipate  entering  into
transactions  which  otherwise  might meet its standards but exceed any exposure
limits  set by Group for  itself  and its  affiliates.  This may  result in less
business for the Company, since Group and its affiliates may have large existing
exposures to certain counterparties.

    COLLATERAL OR MARGIN. In certain  circumstances,  the Company may reduce its
credit  exposure to a counterparty  by requiring that the  counterparty  deposit
margin or collateral. When accepting margin or collateral, the Company generally
accepts highly liquid and creditworthy securities (e.g., U.S. Treasury bonds and
notes and securities issued or backed by U.S. government agencies).  The Company
calculates  credit  exposure net of  collateral  when it believes  that it has a
perfected  security  interest in such collateral  under an enforceable  security
agreement.

    DOCUMENTATION.  To reduce  the amount of its credit  exposure,  the  Company
anticipates  that many of its swaps,  currency  options,  forward  contracts and
other similar  transactions  will be subject to master agreements which provide,
among  other   things,   for  net  payments   between  the  parties  in  certain
circumstances  and  for the  closing  out,  on a net  settlement  basis,  of all
outstanding  transactions  upon a default by, or  insolvency  events  affecting,
either party. A common form of such an agreement, particularly for interest rate
and  currency  swaps,  is the form  published  by the  International  Swaps  and
Derivatives Association,  Inc. (the "ISDA Agreement"),  although other forms may
be used as well. The Company  anticipates  that it will enter into  transactions
with GS Financial Products International, L.P. ("FPI") and Goldman Sachs Capital
Markets, L.P. ("GSCM") in order to hedge its obligations on transactions between
the Company and third parties.  In order to facilitate  such  transactions,  the
Company has entered into ISDA Agreements with both FPI and GSCM. The obligations
of GSCM under its ISDA Agreement have been unconditionally  guaranteed by Group.
Accordingly,  the  Company  treats  Group as the  obligor  with  respect  to the
Derivative  Transactions  entered into under the ISDA Agreement with GSCM. For a
summary of notional or contractual  amounts  involved in transactions  with such
affiliates  at  November  28,  1997 and  November  29,  1996,  see Note 3 to the
Company's audited financial statements included in Item 14 below.

    Currently,   Derivative   Transactions  shown  in  the  Company's  financial
statements  on a net basis are  subject to  agreements  that  contain  close-out
netting provisions that the Company believes are enforceable. In considering the
enforceability  of any netting  provisions,  the  Company  relies on advice from
counsel.  Any such analysis will depend on the country,  governing  law, type of
transactions and counterparty involved.

    In certain  circumstances,  the Company may be unable or  unwilling  to take
credit risk in a particular  transaction,  due to the Company's determination of
the credit  risks  present.  In some limited  cases,  the Company may be able to
enter into such a transaction  by structuring  it on a  limited-recourse  basis,
thereby  eliminating  its  credit  exposure  to  one  counterparty.  In  such  a
transaction,  the Company  would enter into a  Derivative  Transaction  with one
counterparty  ("Party  A").  The  Company  would hedge that  transaction  with a
different  counterparty ("Party B") in a transaction where the Company would not
be  obligated  to make  payments to Party B if payments  are not received by the
Company from Party A. (Party B would not,  however,  have a security interest in
the  transaction  with Party A.) As a result,  the Company  would have no credit
exposure to Party A. The Company has entered into this type of transaction  with
GSCM in the position of Party B.

    AGGREGATE CREDIT RISK.  Another technique which the Company may use to limit
the total credit risk to which it is exposed (i.e.,  the replacement cost of its
portfolio) is to limit the growth of its business. If the Company's total credit
risk exceeded levels which the Company found to be acceptable, the Company would
not enter into any Derivative Transactions which would increase its total credit
risk, and would, in the absence of transactions  which decrease its total credit
risk, limit its operations to collecting payments from assets as they mature and
holding  such  payments in cash  equivalents  until they are used to satisfy its
liabilities (i.e., it would operate in run-off mode).

    The  Company's  principal  measurement  of its total credit risk (the "Total
Credit  Risk")  is an  evaluation  of the  likelihood  that the  Company's  cash
receipts will be insufficient to meet its payment  obligations on a timely basis
as a result of counterparty  defaults,  market risk, or differences in timing of
payment  receipts and obligations.  The Company  estimates the Total Credit Risk
using computer based  simulations  which take into account the timing and amount
of payments  required  on the  Company's  assets,  liabilities,  and  contingent
liabilities, the level and volatility of any indices to which those payments are
linked and the credit ratings of any counterparties who could owe money to the


                                      -10-

<PAGE>

Company. These simulation programs were developed by GS&Co. and are periodically
updated by GS&Co.  to reflect new product  types.  The  assumptions  used in the
models are changed  from time to time when the  Company,  in  consultation  with
GS&Co. and with concurrence of the appropriate rating agency(s), determines that
such changes would result in a more accurate measurement of its credit risk.

    The Company estimates its credit risk (i.e., replacement cost) in respect of
Derivative  Transactions  using financial  models developed by its affiliates to
estimate  fair  value.  The  models  incorporate  market  data for the  relevant
instruments  or for  instruments  with  similar  characteristics.  Fair value is
estimated  at a  specified  point in time.  The  nature,  size,  and  timing  of
transactions  and the liquidity of the markets may not ultimately  allow for the
realization  of these  values.  The  Company's  estimates of its credit risk are
solely internal and neither the models nor the  assumptions  used in such models
are reviewed by third parties.

    The Company considers the credit risks posed by its existing portfolio to be
below the levels it would find acceptable. The Company periodically monitors its
exposure to  individual  counterparties  and  reviews  its credit  exposure to a
counterparty  prior to entering into any new transaction with such counterparty.
If the Company determines that its exposure to any counterparty  exceeds a level
it deems  acceptable,  the Company will seek to reduce its exposure as described
under "Monitoring the Portfolio" below.

    AFFILIATE   CREDIT  RISK  LIMITS.   The  Company   enters  into   Derivative
Transactions  with  affiliates  of Group (such  affiliates,  other than FPI, the
"Group  Affiliates"),  principally  GSCM.  The Company  also enters into hedging
transactions with GSCM and FPI. Because the obligations of Group Affiliates will
be  guaranteed  by Group,  the  Company  treats  Group as the  obligor  on these
transactions  for purposes of measuring  its credit  exposure.  The Company may,
therefore,  have a significant  credit exposure to Group in the future, in which
case a default by Group would have a material  adverse  effect on the  Company's
financial  position,  results of operations and cash flows. The Company does not
expect, however, that such credit exposure would exceed the Company's net worth.

    In order to limit its exposure to Group, the Company  subjects  transactions
with Group  Affiliates to an  additional  credit limit over and above the limits
discussed  above  which are  applicable  to other  obligors.  Specifically,  the
Company will not acquire any receivables  issued or written by Group  Affiliates
if, after  giving  effect to such  acquisition  and to the effect of any netting
agreements,  the value of all such receivables would exceed 15% of the Company's
total assets. For a discussion of the Company's policies with respect to netting
agreements,  see  "Documentation"  above.  At November 28, 1997, the Company had
credit exposure of $23.0 million to Group or Group Affiliates. See "Management's
Discussion  and Analysis of Financial  Condition  and Results of  Operations  --
Liquidity and Capital Resources" under Item 7.

    The Company from time to time enters into Derivative  Transactions with FPI.
The Company is a general  partner of FPI. The Company does not intend to observe
any credit limits on transactions with FPI, or with any other entity in which it
becomes a general  partner in the  future.  The  Company  does not  consider  it
important  to limit its direct  credit  exposure  to any entity in which it is a
general partner, because as a general partner the Company is contingently liable
for all of the obligations of such entities (including transactions entered into
with third parties).

MONITORING THE PORTFOLIO

    The Company  monitors its portfolio on an ongoing basis to verify that there
is no market or liquidity  exposure and that its credit risk to obligors is at a
level the Company considers  acceptable.  The Company recalculates its estimates
of Total  Credit  Risk when it  believes  there is a  significant  change in the
composition of its portfolio,  the credit quality of its  counterparties  or the
indices to which its Derivative  Transactions are linked.  Typically,  the Total
Credit Risk is recalculated at least monthly.

    If credit  risk to one or more  obligors  exceeds  levels  which the Company
considers  acceptable,  then the Company  may attempt to reduce its  exposure to
such obligors by entering into one or more Derivative  Transactions  which would
have the  effect of  reducing  such risk.  Such  Derivative  Transactions  could
include, for example,  assigning or terminating a Derivative  Transaction upon a
counterparty  downgrade.   However,  counterparty  consent  would  generally  be
required for a sale or termination, and such consent may be difficult to obtain.
It may  also be  difficult  to sell  obligations  of  counterparties  which  are
perceived as weak credits.  There can be no assurance  that the Company would be
able to enter into Derivative Transactions which decrease the Total Credit Risk.


                                      -11-

<PAGE>

COMPETITION

    The market for Derivative Transactions is highly competitive.  The principal
means of competition are perceived credit quality, pricing and flexibility.

    In general, the Company competes with U.S. and international banks, U.S. and
international insurance companies and other similar financial institutions. Many
of these  institutions  have  well-established  reputations  in the  market  for
Derivative Transactions and have significantly more capital than the Company.

    The Company will also compete  with current and future  affiliates  of Group
which are in businesses  substantially similar to that of the Company. These are
FPI and Goldman Sachs Mitsui Marine Derivative Products, L.P. ("GSMMDP"),  which
was organized by Group and Mitsui Marine and Fire Insurance Co., Ltd. Neither of
these  entities is restricted  from  competing  with the Company and the Company
believes that each does so or intends to do so. The Company is a general partner
of FPI  and the  directors  and  executive  officers  of the  Company  are  also
directors  or  executive  officers  of  one  or  both  of  GSMMDP  or  FPI.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations -- Overview"  under Item 7 and "Directors  and Executive  Officers of
the Registrant" under Item 10. Further, since each of these entities is directly
or indirectly  controlled by Group,  Group may increase or decrease the level or
vary the composition of new business in which any of these  entities,  including
the  Company,  engages.  No  assurances  can be given as to  whether  Group will
allocate business to the Company or to one of its other highly rated affiliates.
See "Management's  Discussion and Analysis of Financial Condition and Results of
Operations -- Overview" for a discussion of the current  review of the Company's
business and operations.

    The Company anticipates that Group and certain  counterparties may prefer to
use the Company's  affiliates for certain  Derivative  Transactions  because the
Company will be subject to the reporting  obligations of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"),  whereas the Company's  affiliates
are not. Such reporting  obligations may require  inclusion in public filings of
information  that  counterparties  do not  wish to  disclose  and may  increase,
because of the involvement of counsel and accountants assisting in such filings,
the costs  associated  with such  transactions.  Due principally to restrictions
imposed by the United  States  federal  securities  laws,  the Company  does not
expect that FPI or GSMMDP will compete with it for any  transaction  which would
require such  affiliate to issue an  instrument  which is a security  under such
laws to a U.S. person.  In addition,  because the Company will be able to access
the U.S. capital markets, the Company's cost of funds may be lower than the cost
of funds for the Company's affiliates.  The Company believes Group has organized
these entities to take advantage of the  flexibility and cost advantages each of
such entities provides.

    GSMMDP is highly rated,  conducts a similar  business as the Company and can
be  expected  to  be a  significant  competitor  of  the  Company.  The  Company
anticipates that GSMMDP will engage principally in Derivative  Transactions with
counterparties  rated in the  three  highest  rating  categories  by one or more
nationally recognized statistical rating agencies. As a result, the Company does
not  anticipate  that it will  compete  with GSMMDP for  transactions  involving
counterparties with ratings below the three highest categories. For transactions
where the Company  competes  with GSMMDP,  in addition to the factors  described
above, the Company anticipates that a number of counterparties may prefer GSMMDP
due to its credit support from owners with a longer  operating  history,  larger
capital  base,  and more  diversified  business than the Company.  However,  the
Company is unable to predict the degree to which  potential  counterparties  may
prefer  GSMMDP to the Company.  One of the  directors of the  Corporate  General
Partner is also a director and  President  of the general  partner of GSMMDP and
another director is a director of the general partner of GSMMDP.  See "Directors
and Executive Officers of the Registrant" under Item 10.

    FPI is a  highly  rated  derivative  products  company.  FPI  has  the  same
executive officers as the Company.  The Company anticipates that FPI will engage
in certain  transactions  that the  Company  intends to avoid due to  regulatory
considerations,  i.e.,  transactions  which  involve  the  purchase  by  FPI  of
instruments  which may be  "securities"  within the meaning of the United States
federal securities laws. However, the Company also expects that FPI will compete
with the  Company  for all types of other  transactions.  The  Company  does not
expect most  counterparties  to have a preference  between  itself and FPI. As a
result, the Company expects  competition with FPI to be based principally on the
factors   described  above.  See  "Directors  and  Executive   Officers  of  the
Registrant" under Item 10.

    Counterparties  with the highest  credit  rating are the most  desired.  The
Company's  long term debt and  counterparty  credit  risk have been rated in the
highest  rating  category by Standard & Poor's  Ratings  Group ("S&P") and Fitch
IBCA,   Inc.   ("Fitch"  and,   together  with  S&P,  the  "Rating   Agencies"),
respectively. A reduction in the Company's long term debt or counterparty credit
risk rating may adversely affect the Company's ability to compete successfully.


                                      -12-

<PAGE>

    Price  competition is reflected in the spread between the hedged  positions.
The Company intends to keep its spreads competitive with the marketplace.

REGULATION

    In certain  jurisdictions  where the Company's  counterparties  are located,
particularly  the  United  States,  there  exist  regulatory  schemes  which are
designed for brokers,  dealers,  investment companies or banks. These regulatory
schemes  typically  have capital and other  requirements  with which the Company
could not comply.

    The Company limits the types of Derivative  Transactions in which it acts as
counterparty  in  order to  avoid  becoming  subject  to such  regulations.  The
principal  limitation  is that the  Company  proposes  to  engage  primarily  in
transactions  involving  instruments  which are not,  in its view,  "securities"
within the meaning of the United States federal  securities laws. As a result of
such limitations on its business and the capital  structure of the Company,  the
Company  believes  that  it is  not  required  to  be  licensed,  registered  or
authorized  under any current  securities,  commodities,  or banking laws of the
Cayman  Islands or the United States.  Accordingly,  neither the Company nor the
Corporate  General Partner is registered as a  broker-dealer  under the Exchange
Act (or any similar state law); nor are they registered as investment  companies
under the Investment Company Act of 1940 (or any similar state law).

    There can be no assurance,  however,  that regulatory  authorities in one or
more jurisdictions would not take a contrary view regarding the applicability of
any such laws  (including  the  applicability  of the  broker-dealer  regulation
requirements of the Exchange Act and the requirements of the Investment  Company
Act  of  1940).  For  example,  the  Securities  and  Exchange  Commission  (the
"Commission")  has generally  not  addressed the question of what  constitutes a
"security"  within the meaning of the Exchange Act, and has broadly  interpreted
the  definition of "security"  under the  Investment  Company Act of 1940 in the
context of applying  the  registration  requirements  of that Act. In  addition,
Congress  and United  States  governmental  agencies,  including  the  Commodity
Futures Trading Commission and the Government Accounting Office, have considered
or are considering issues relating to derivative  instruments  generally and the
appropriateness  of alternative  regulatory  approaches.  Were the Commission to
take the position that the  transactions  in which the Company  engages  involve
"securities",   it  might  seek  to  require   the  Company  to  register  as  a
broker-dealer or investment company.

    Application of these or any of the other regulatory schemes in their current
form would have a material  adverse  effect on the business of the Company.  The
Company cannot,  of course,  predict the outcomes of any other current or future
considerations  of issues such as the definition of securities under the federal
securities  laws or the  appropriateness  or method of  regulation of derivative
instruments.  Any of these may have a material adverse effect on the business of
the Company.

    As discussed herein,  the Company is a general partner in FPI whose business
involves the purchase and sale of instruments  that constitute  "securities" and
whose liabilities are held primarily outside the United States.  FPI is also not
registered as a broker-dealer under the Exchange Act or as an investment company
under the Investment Company Act of 1940, or licensed,  registered or authorized
under any other securities, commodities or banking laws of the Cayman Islands or
the United  States.  As with the  Company,  there can be no  assurance  that the
Commission or regulatory  authorities  in other  jurisdictions  would not take a
contrary view and require such licensing,  registration or authorization. In the
event  such  were  required,  by  virtue of the  Company's  general  partnership
interest in FPI and  transactions  in which the Company may engage with FPI, any
such licensing,  registration  or  authorization  could have a material  adverse
effect on the business of the Company.

    The  Commission  has  proposed  rules that would allow  derivative  products
companies,  such as the Company, to voluntarily  register as broker-dealers with
the  Commission  under a regime which would exempt such  companies  from certain
regulations  applicable to "full service"  broker-dealers  while permitting such
companies  to engage in  Derivative  Transactions  which  the  Commission  deems
securities  under  current law.  Depending  on the final form of the rules,  the
Company  may  decide to  register  as a limited  broker-dealer  and  expand  its
business to include Derivative Transactions involving securities. Alternatively,
the Company may determine to continue to limit its business  activities in order
to avoid being subject to such  regulation.  Any decision in this regard will be
made only after  final  rules are issued and only after the  company has weighed
the  benefits of entering  into  Derivative  Transactions  involving  securities
against the Company's ability to comply, and the costs associated with complying
with, the final rules.


                                      -13-

<PAGE>

    From time to time bills have been introduced in the U.S.  Congress which, if
enacted into law, would impose  varying  degrees of regulation on certain of the
types of Derivative Transactions in which the Company acts as counterparty. Such
regulation could adversely affect certain of the Company's business activities.

RATING INFORMATION

    The Company's  long term debt and  counterparty  credit risk have been rated
AAA by S&P and Fitch.  The Company  believes  that such ratings were based upon,
among other things,  the legal separation of the Company from Group, the absence
of market risk in the Company's  portfolio,  the credit quality of the Company's
counterparties, the capital of the Company available to absorb defaults, and the
procedures  implemented by the Company to monitor and control the credit quality
of, and the  Company's  exposure  to,  counterparties.  See  "Entering  into New
Derivative  Transactions  and Risk  Management"  and  "Monitoring the Portfolio"
above.

    There can be no  assurance  that S&P and  Fitch  will  continue  to rate the
Company's long term debt and counterparty  credit risk,  respectively,  in their
highest  category  and any  decrease in such  ratings may  adversely  affect the
Company's ability to compete successfully. See "Competition" above.

    A long term debt and  counterparty  risk rating is not a  recommendation  to
purchase,  sell or hold a security or enter into a Derivative  Transaction  with
the  Company.  Such rating does not comment as to the market price of a security
or the  suitability of entering into a Derivative  Transaction  for a particular
investor or counterparty.  Long term debt and  counterparty  credit risk ratings
may be changed or withdrawn at any time by the applicable Rating Agency.

CAYMAN ISLANDS TAXATION

    Under  existing  legislation,  the Government of the Cayman Islands will not
impose any income or profits  tax,  capital  gains tax,  capital  transfer  tax,
estate  duty or  inheritance  tax upon the  Company  or the  general  or limited
partners  thereof.  Furthermore,  the  Company  has  obtained  a  Tax  Exemption
Certificate  from the Governor of the Cayman  Islands  which is effective  for a
period  of 50 years  from  March 3,  1992.  The  undertaking  contained  in that
certificate  provides, in accordance with the provisions of Section 17(1) of the
Cayman Islands Exempted Limited  Partnership Law, that no law thereafter enacted
in the Cayman Islands imposing any tax to be levied on profits,  income, capital
gains or  appreciation  will apply to the Company or to any  partner  thereof in
respect of the operations or assets of such exempted limited  partnership or the
partnership  interest of a partner therein; and that the aforesaid taxes and any
tax in the  nature of estate  duty or  inheritance  tax will not be  payable  in
respect of the  obligations  of the  Company or the  interests  of the  partners
therein.  The Company is liable,  however,  to pay the  Government of the Cayman
Islands a nominal annual registration fee.

UNITED STATES TAXATION

    The Company, as a partnership,  is not subject to U.S. federal income taxes.
Prior to  January  1,  1997,  the  Company  was  required  by U.S.  federal  tax
regulations  to withhold  income tax on behalf of its partners.  These  payments
were made on behalf of the  Company by a related  party.  As of January 1, 1997,
the Company is no longer  required to withhold  taxes on behalf of its  partners
under U.S. federal tax regulations.

    Certain  of  the  Company's  income  is  subject  to  a  4%  New  York  City
unincorporated business tax. The statements of income for the fiscal years ended
November 28, 1997,  November 29, 1996 and November 24, 1995, include a provision
for unincorporated business tax on income earned by the Company related to doing
business in New York City.  Depending  upon the manner in which the  business of
the Company will be operated in other jurisdictions, there is a possibility that
one or more such jurisdictions would impose tax on the profits of the Company.

IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS

    The Company has made in this Annual Report on Form 10-K and anticipates that
it will  make in future  filings  with the  Commission,  in press  releases  and
otherwise, written and oral forward-looking statements. Any statement concerning
the Company's  expectations,  beliefs,  or intentions about future conditions or
events should be considered to be forward-looking and should be understood to be
subject to the factors  discussed  below,  among others,  which may cause actual
results  for the Company to differ  materially  from those  anticipated  by such
forward-looking statements.


                                      -14-

<PAGE>

    The Company's  expectation  that it will not be subject to market risk, that
it will  receive an equal or greater  payment or  delivery  with  respect to any
payment or delivery  obligation it incurs,  and that it will have scheduled cash
sources that are available on or before the required payment of an obligation is
dependent  upon the  absence of  counterparty  default.  While the  Company  has
procedures  in place to monitor the credit  quality of its  counterparties,  the
credit  quality of a  counterparty  may be affected by economic,  political  and
other events beyond the Company's control. Defaults by counterparties with large
obligations to the Company could  materially and adversely  affect the Company's
financial condition, results of operations and cash flows.

    Group  indirectly  controls the Company and all of its business  activities.
Group has several  affiliates  that  compete  with the  Company  for  Derivative
Transactions  and has its own credit policies for  counterparties.  No assurance
can be given that Group will not allocate  transactions to its other  affiliates
or  will  permit  the  business  of the  Company  to  continue  to  expand.  See
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations -- Overview" for a discussion of the current  review of the Company's
business and operations.

    The Company expects routinely to enter into transactions with GSCM and other
affiliates of Group. The obligations of GSCM will be guaranteed by Group and the
obligations  of other Group  affiliates  may also be  guaranteed  by Group.  The
Company  may,  therefore,  have a  significant  credit  exposure to Group in the
future.  If the  Company has a material  exposure  to Group,  a default by Group
would have a material and adverse effect on the Company.

    In certain  circumstances  the Company  anticipates that it would attempt to
enter into  Derivative  Transactions  to replace a defaulted  transaction  or to
reduce  the  risk  of  default.   Failure  to  replace  a  defaulted  Derivative
Transaction  or the inability to enter into a Derivative  Transaction  to reduce
the risk of default  could  prevent the Company from  eliminating  the market or
credit  risk with  respect to one or more  other  Derivative  Transactions.  The
Company's  ability to enter into  replacement  Derivative  Transactions or other
risk reducing  Derivative  Transactions  will be limited by the  availability of
appropriate   counterparties   willing   to  enter  into   suitable   Derivative
Transactions.  No assurance  can be given that the Company will be able to enter
into replacement or risk reducing Derivative Transactions.

    The Company  anticipates  that it will continue to depend upon affiliates of
Group  for  the   performance   of  essential   management,   operational,   and
administrative  functions and the  solicitation of new business.  The failure of
the  relevant  Group  affiliate to perform  those  functions  could  prevent the
Company from continuing to expand its business.

    The Company limits the types of instruments that it enters into as principal
or guarantees in order to avoid becoming subject to regulation. The enactment of
new legislation or new  interpretations of existing statutes and regulations may
cause the Company to become subject to regulation in one or more  countries.  If
the Company were to become subject to regulation, no assurance can be given that
the Company would be able to comply with the applicable regulatory requirements.

    While the Company believes that in the case of credit  exposures  calculated
on a "net basis"  (i.e.,  adding the  positive  and  negative  values) or net of
collateral  that  it  has  in  place  an  enforceable  netting  agreement  or an
enforceable security interest,  no assurance can be given that a court under all
circumstances  would enforce the netting  agreement or recognize the validity of
the security interest.

    The Company  expects to make profits,  if any,  principally  from the spread
between hedge transactions, which spread is expected to be a small percentage of
the  notional  amount  of such  transactions.  The  size of the  spread  between
transactions  is  subject  to  market  forces  and may be  materially  adversely
impacted by competitive or other economic conditions.

    The Company's long term debt and counterparty credit risk have been rated in
the highest categories by the Rating Agencies. A change in the Company's ratings
would  materially  adversely  impact its  ability to compete  successfully.  The
Company's  ratings may be changed or  withdrawn at any time by any of the Rating
Agencies, based upon factors selected solely by the Rating Agencies.









                                      -15-

<PAGE>

ITEM 2: PROPERTIES

    The Company does not own any real property and owns minimal physical assets.
The Company leases its office from an affiliate under a Space Sharing Agreement.
See  "Certain   Relationships  and  Related   Transactions  --  Operational  and
Administrative  Relationships with Group -- Administrative  Services Agreements"
under Item 13.


ITEM 3: LEGAL PROCEEDINGS

    The Company is not a party to any legal proceedings.


ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

    Not applicable





























                                      -16-

<PAGE>

                                    PART II

ITEM 5: MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    All of the Company's general partnership and limited  partnership  interests
are  indirectly  held by Group  (see Item 12).  Accordingly,  there is no public
market, in the United States or elsewhere, for the Company's limited partnership
interests. See "Liquidity and Capital Resources" under Item 7.

    The Company, as a partnership,  is not subject to U.S. federal income taxes.
Prior  to  January  1,  1997  the  Company  was  required  by U.S.  federal  tax
regulations  to withhold  income tax on behalf of its partners.  These  payments
were made on behalf of the Company by a related party.  Such  withholdings  were
accounted for as a distribution to partners.  As of January 1, 1997, the Company
is no longer  required to withhold  taxes on behalf of its  partners  under U.S.
federal tax  regulations.  There is no reciprocal  tax treaty between the Cayman
Islands and the United States.

    Partners'  capital is not subject to  withdrawal  or redemption on demand by
the  partners.  The  Company  anticipates  that it will  make  distributions  to
partners in the future.  However, the amount of such dividends and distributions
will be limited to ensure that the Company's  ability to meet its obligations is
not adversely affected.


ITEM 6: SELECTED FINANCIAL DATA

    The selected  income  statement data for the fiscal years ended November 26,
1993,  November 25, 1994,  November 24, 1995, November 29, 1996 and November 28,
1997,  and the balance  sheet data as of November 26,  1993,  November 25, 1994,
November  24,  1995,  November  29, 1996 and  November 28, 1997 are derived from
financial  statements of the Company. The selected financial data should be read
in  conjunction  with the financial  statements of the Company and notes thereto
contained in Item 14.

(U.S. dollars in thousands, except ratios)
<TABLE>
<S>                                        <C>               <C>              <C>               <C>               <C>
                                           Fiscal Year       Fiscal Year      Fiscal Year       Fiscal Year       Fiscal Year
                                           Ended             Ended            Ended             Ended             Ended
                                           Nov. 26, 1993     Nov. 25, 1994    Nov. 24, 1995     Nov. 29, 1996     Nov. 28, 1997
                                           -------------     -------------    -------------     -------------     -------------
Income Statement Data:
Revenues, net of interest expense              $5,694            $11,844           $13,461          $15,393         $15,558
Operating expenses                                882              1,645               878              879             722
Income before taxes                             4,812             10,199            12,583           14,514          14,836
Net income                                      4,812             10,199            12,280           13,933          14,228

Balance Sheet Data:
Total assets                                 $168,661           $334,068          $425,052         $370,975        $581,683

Long-term borrowings                                0                  0            40,383          116,778         276,489
Partners' capital                             106,737            117,042           124,805          134,043         148,121


Other Data
Ratio of earnings to fixed charges(1)  Not applicable             378X (2)           26X               5X             2.6X

<FN>
Notes: (1) For purposes of computing the ratio of earning to fixed charges,
           earnings as adjusted consist of net income plus income taxes and fixed
           charges. Fixed charges consist of interest expense and amortization of
           debt issuance costs.

       (2) The Company does not consider this ratio to be meaningful since it is
           based on $5,000,000 in principal amount of the Company's Series A
           Medium-Term Notes outstanding only 42 days during fiscal 1994.
</FN>
</TABLE>


ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
        OF OPERATIONS

OVERVIEW

    The Company is a  derivative  products  company  engaged in the  business of
entering  into,  as principal  or  guarantor,  a variety of types of  Derivative
Transactions,  principally  interest rate swaps,  interest  rate options  (e.g.,
interest  rate caps,  interest  rate floors and options on interest rate swaps),
currency swaps and currency options, index


                                      -17-

<PAGE>

swaps, commodity swaps and options and forward contracts. Generally, the Company
enters into or guarantees  Derivative  Transactions  in situations  where two or
more  counterparties  wish to  enter  into one or more  Derivative  Transactions
between  themselves,  but want the Company to substitute  its credit for that of
one or more of the counterparties. Market practice for such transactions is that
the Company typically  substitutes its own credit for that of one or more of the
counterparties by entering into each of such transactions directly as principal.
Such Derivative  Transactions may also include the use of futures contracts,  or
the purchase of the underlying instruments subject to the transactions,  such as
foreign currency,  physical  commodities and securities.  The Company's owned or
guaranteed  Derivative  Transactions consist principally of interest rate swaps,
interest rate options,  index swaps,  currency  options,  currency  forwards and
currency swaps denominated in a variety of currencies. See "Business" in Item 1.
In addition, from time to time the Company issues structured notes.

    At November 28, 1997, the Company had entered into or guaranteed $21 billion
notional  amount of  interest  rate swaps and  options  and $7 billion  notional
amount  of   currency   options,   forwards   and  swaps  with  a  total  of  83
counterparties.

    In general,  the  Company  refers to  transactions  where all of the payment
obligations  or  delivery  obligations  can be met from  cash  flow or  delivery
obligations from one or more transactions in its portfolio as being "hedged". It
is important  to note in this regard that the Company  hedges its cash flow on a
portfolio basis,  not on a transaction by transaction  basis.  Accordingly,  any
particular payment or delivery  obligation under a transaction may not be offset
with a single corresponding transaction.

    Through  November 28, 1997,  substantially  all of the Company's  Derivative
Transactions  involved some degree of hedging with  affiliates.  The Company has
entered  into  or  guaranteed   $16  billion   notional   amount  of  Derivative
Transactions  with  affiliates  principally  to hedge  exposures  on third party
transactions.  In general,  the notional amount of Derivative  Transactions with
affiliates  exceeds that with  non-affiliates due to the greater notional amount
of affiliate versus non-affiliate transactions guaranteed, as well as Derivative
Transactions  between  the  Company and  affiliates  which  hedge the  Company's
interest rate or currency  exposure on surplus cash flow from its portfolio,  or
which are intended to mitigate total credit risk.

    As of November 28,  1997,  the Company has  equity-linked  Medium Term Notes
outstanding  with a  carrying  value of $276  million.  The  Company  expects to
continue to issue  equity-linked  Medium  Term Notes in the future.  The Company
intends to utilize the majority of the proceeds  received from such issuances to
acquire  shares  of  common  stock,   purchase  or  write  exchange  traded  and
over-the-counter options and enter into interest rate and equity-linked swaps to
hedge its  obligations  under the Notes.  The remainder of the net proceeds from
each  issuance  will be added to the  Company's  working  capital to support its
operating activities.

    The Company  does not intend to be exposed to market risk (see  "Business --
Entering into New Derivative Transactions and Risk Management -- Market Risk and
Liquidity  Exposures"  under Item 1). As a result,  the Company  expects to make
profits, if any,  principally from the "spread" between the hedged transactions.
The  spread  between  the  hedged  transactions  will  depend  upon  the type of
instrument  subject  to the  transaction,  the size of the  transaction  and the
creditworthiness of the counterparties. Generally, the spread between the hedged
transactions will be a small percentage (usually less than .10%) of the notional
amount of the  transactions.  The  Derivative  Transactions  business  is highly
competitive,  however,  and the spread for any set of hedged transactions may be
less than .01%. See "Business -- Competition" under Item 1.

    For a discussion  of  affiliates of Group that may compete with the Company,
see "Business --  Competition"  under Item 1. It is important to recognize that,
since each of these  affiliates is directly or  indirectly  controlled by Group,
Group may increase or decrease the level or vary the composition of new business
in which any of these affiliates,  including the Company, engages. No assurances
can be given as to whether Group will allocate business to the Company or to one
of its other highly rated affiliates.

    Since  October 1997 Group has  undertaken a review of the  operations of the
Company and certain other Group  Affiliates  engaged in the derivative  products
business in order to reassess  the scope of their  activities,  to evaluate  the
level and nature of staffing and to review the  procedures  that are in place to
handle the type and  volume of  businesses  that they may  pursue.  During  this
review,   the  Company  and  FPI  have  not  entered  into  any  new  Derivative
Transactions and have not issued any new debt securities.  This lack of activity
by the Company has negatively  affected the Company's  results of operations for
the 1997 fourth fiscal quarter.  In addition,  this lack of activity is expected
to have a significant  negative effect on the Company's results of operations in
the first and second fiscal  


                                      -18-

<PAGE>


quarters of 1998, and it may affect later quarters  depending upon the timing of
the completion and implementation of the review.

    As the year 2000  approaches,  an issue has emerged  regarding  how existing
application  software programs and operating systems can distinguish between the
year 2000 and the year 1900.  Systems  that do not properly  recognize  the year
2000 could generate erroneous data or fail.

    The  Company  recognizes  the  need to  ensure  its  operations  will not be
adversely affected by Year 2000 software  failures.  As discussed under "Certain
Relationships  and  Related   Transactions  --  Operational  and  Administrative
Relationships with Group -- Administrative  Services  Agreements" under Item 13,
the  Company's   administrative   services  are  provided  through  a  Custodian
Agreement.  As a result,  the Company is relying on Group and its  affiliates to
properly address the Year 2000 issue. The Company has been advised by Group that
Group and its affiliates have assessed the computer systems on which the Company
relies and have  established  a process for  evaluating  and  managing the risks
associated with this problem.  Based on this advice,  the Company currently does
not expect that the Year 2000 issue will have a material  adverse  effect on its
financial position, results of operations or cash flows.

RESULTS OF OPERATIONS

    Changes in the Company's  revenues are highly dependent on the volume,  term
and type of new transactions originated. Derivative Transactions are recorded at
their  estimated  fair  value.  As  a  result,  a  substantial  portion  of  the
intermediation  profit from new Derivative  Transactions  may be recognized upon
entering  into such  transactions.  Hence,  the Company's  profitability  may be
extremely  variable  from  quarter to  quarter,  depending  on the volume of new
origination.

    Although  certain  of the  interest  rate  swaps  in the  Company's  current
portfolio  require payments in currencies other than U.S.  dollars,  the Company
has entered into Derivative  Transactions with affiliates of Group which entitle
it to receive  equal or greater  amounts of the same  currencies.  To the extent
that the Company has or is entitled to receive amounts of currencies  other than
the  U.S.  dollar  which  amounts  are  not  needed  to  service  the  Company's
obligations,  the Company's reported earnings will be affected by changes in the
value (expressed in U.S.  dollars) of such currencies.  However,  as of November
28, 1997,  the Company does not consider its exposure to  currencies  other than
the U.S.  dollar to be material to its financial  condition  since,  even if the
Company were to realize no value from any currencies other than the U.S. dollar,
its net worth  would be  reduced  by less than 1%. As the  Company  is unable to
predict  the  movement of foreign  currencies,  the Company is unable to predict
whether its net worth would be reduced as a result of such exposure.

    Changes in interest  rates will  change the present  value of any cash flows
which the Company is entitled to receive in the future. The Company,  therefore,
may  experience  fluctuations  in  reported  earnings  as a result of changes in
interest  rates.  However,  the  sensitivity  as of  November  28,  1997  of the
Company's portfolio at that date to interest rates is such that a one percentage
point adverse  change in interest  rates would reduce the Company's net worth by
less than 1%. As the  Company  is unable to predict  the  movement  of  interest
rates,  the Company is unable to predict  whether its net worth would be reduced
as a result of such exposure.

    Neither the Company  nor its  partners  are subject to any income or profits
tax,  capital gains tax,  capital  transfer tax,  estate duty or inheritance tax
under the laws of the Cayman  Islands.  Further,  the Company has obtained a Tax
Exemption  Certificate  from  the  Governor  of the  Cayman  Islands,  which  is
effective for 50 years from March 3, 1992, which provides that no law thereafter
enacted in the Cayman Islands imposing any tax on profits, income, capital gains
or appreciation may apply to the Company or any partner  thereof.  See "Business
-- Cayman Islands Taxation" under Item 1.

    The Company, as a partnership,  is not subject to U.S. federal income taxes.
Prior to  January  1,  1997,  the  Company  was  required  by U.S.  federal  tax
regulations  to withhold  income tax on behalf of its partners.  These  payments
were made on behalf of the Company by a related party. For the fiscal year ended
November 29, 1996, the related party remitted $4.53 million to tax  authorities,
the  entire  amount of which the  Company  repaid to the  related  party.  As of
January 1, 1997,  the Company is no longer  required to withhold taxes on behalf
of its partners under U.S. federal tax regulations.

                                      -19-


<PAGE>


    Certain  of  the  Company's  income  is  subject  to  a  4%  New  York  City
unincorporated business tax. The statements of income for the fiscal years ended
November 28, 1997,  November 29, 1996 and November 24, 1995, include a provision
for unincorporated business tax on income earned by the Company related to doing
business in New York City.  Depending  upon the manner in which the  business of
the Company will be operated in other jurisdictions, there is a possibility that
one or more such jurisdictions would impose tax on the profits of the Company.

FISCAL 1997 COMPARED WITH FISCAL 1996

    For fiscal 1997, the Company  reported  revenues net of interest  expense of
$15.6 million, consisting principally of intermediation profits of $10.6 million
and net  interest  income of $5.0  million.  This  represented  an  increase  in
reported  revenues  net of interest  expense of 1.3%  compared  to fiscal  1996.
During the  period,  the  Company  entered  into or  guaranteed  656  Derivative
Transactions  with   non-affiliates,   and  683  Derivative   Transactions  with
affiliates.  The aggregate notional principal amount of Derivative  Transactions
entered into or guaranteed by the Company  during the period was $18.3  billion,
which  resulted  in  initial  intermediation  profits  of  $7.3  million.  Other
intermediation  profit for the period was $3.3  million,  resulting  principally
from an increase in the present  value of the  expected  surplus cash flows from
the Company's portfolio due primarily to a reduction in the time remaining until
those cash flows are realized.  The Company  incurred  interest  expense of $9.3
million during fiscal 1997 as a result of an increase in the Company's long term
debt. See "Liquidity and Capital Resources" below.

    For fiscal 1996, the Company  reported  revenues net of interest  expense of
$15.4 million,  which consisted  principally of $11.6 million in  intermediation
profits and net interest income of $3.8 million. During fiscal 1996, the Company
entered into or guaranteed  315  Derivative  Transactions  with  non-affiliates,
including 8 transactions  which the Company purchased from an affiliate at their
market value,  and 369 hedging  Derivative  Transactions  with  affiliates.  The
aggregate notional principal amount of Derivative  Transactions  entered into or
guaranteed by the Company during the period was $18.6 billion, which resulted in
initial  intermediation  profits of $7.0 million,  including $473 thousand which
resulted  from  transactions   purchased  from  affiliates.   The  remainder  of
intermediation  profits for fiscal 1996 resulted from an increase in the present
value of the expected  surplus cash flows from the Company's  portfolio due to a
reduction in the time remaining until those cash flows are realized. The Company
incurred interest expense of $3.6 million during fiscal 1996.

    Interest income for fiscal 1997 increased to $14.2 million, compared to $7.5
million  during the  preceding  year,  primarily  as a result of larger  average
balances  of cash and cash  equivalents.  Total  intermediation  profit  for the
fiscal year ended November 28, 1997 decreased  approximately  $1 million or 8.2%
as  compared  to fiscal  1996.  Initial  intermediation  profit for fiscal  1997
increased  by $0.3 million or 4.3% over fiscal  1996,  reflecting a  significant
increase  in  the  number  of   Derivative   Transactions   entered   into  with
non-affiliates,  mostly offset by a reduction in the average  notional amount of
such  transactions  and  the  shorter  maturities  of such  transactions.  Other
intermediation  profit  decreased by $1.3 million to $3.3 million in fiscal 1997
versus other intermediation  profit of $4.6 million in fiscal 1996. The decrease
principally  reflected a decrease in the average net  investment  in  Derivative
Transactions  during the year.  Interest  expense of $9.3 million for the fiscal
year ended  November  28, 1997  increased  significantly  from the $3.6  million
incurred in the same fiscal period in 1996.  This increase was the result of the
significant increase in the average long term debt outstanding in fiscal 1997 as
compared to fiscal 1996. The effective  weighted  average interest rate for long
term borrowings was 5.91% for fiscal 1997 and 5.41% for fiscal 1996.

    Operating  expenses  for the fiscal year ended  November  28, 1997 were $722
thousand,  decreased from $879 thousand during the same period in 1996. Fees and
expense  reimbursement  to Group affiliates  included within operating  expenses
were $197  thousand and $211  thousand  for the fiscal years ended  November 28,
1997 and November 29, 1996,  respectively.  Other  operating  expenses were $525
thousand  and $668  thousand  for the fiscal  years ended  November 28, 1997 and
November 29, 1996, respectively,  and consisted principally of legal, accounting
and rating agency fees.

    Net income of $14.2 million for the 1997 fiscal year increased by 2% or $0.3
million  from  fiscal  1996 net  income  of $13.9  million.  Total  assets as of
November  28,  1997 were $582  million,  consisting  principally  of  Derivative
Transactions, cash and cash equivalents and securities owned.

    As described in "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Overview"  above, the Group has undertaken a review
of the operations of the Company and certain other Group  Affiliates  engaged in
the derivative  products  business.  Since the commencement of this review,  the
Company  has not  entered  into any new  Derivative  Transactions.  This lack of
activity  by the  Company  has  negatively  affected  the  

                                      -20-

<PAGE>


Company's  results of operations in the 1997 fourth fiscal  quarter  relative to
the  fourth  fiscal  quarter  of the prior  year.  See  "Supplementary Financial
Information" under Item 14.

    Net cash  provided  by  operating  activities  during  fiscal  1997 was $126
million,  which  principally  reflected a  reduction  in the net  investment  in
Derivative  Transactions,  unrealized  losses on the Oxford Health  Plans,  Inc.
common stock purchased as a hedge of a Medium Term Note and net income. Net cash
provided by financing  activities during fiscal 1997 was $161 million reflecting
the issuance of Medium-Term Notes. Net cash used in investing  activities during
fiscal 1997 was $137 million reflecting the purchase of securities as a hedge of
the  Medium-Term   Notes.  See  "Liquidity  and  Capital  Resources"  below.  In
comparison,  for the 1996 fiscal  year,  cash used in operating  activities  was
$115.8  million  which   principally   reflected  the   pre-payment  of  certain
liabilities under Derivative Transactions with affiliates.  Net cash provided by
financing   activities  during  fiscal  1996  was  $64.0  million,   principally
reflecting proceeds on the issuance of the Company's Medium-Term Notes.

FISCAL 1996 COMPARED WITH FISCAL 1995

    For fiscal 1996, the Company  reported  revenues net of interest  expense of
$15.4 million, consisting principally of intermediation profits of $11.6 million
and net  interest  income of $3.8  million.  This  represented  an  increase  in
reported  revenues  net of interest  expense of 14.4%  compared to fiscal  1995.
During the  period,  the  Company  entered  into or  guaranteed  315  Derivative
Transactions  with  non-affiliates,  including 8 transactions  which the Company
purchased  from an affiliate at their market value,  and 369 hedging  Derivative
Transactions  with  affiliates.  The  aggregate  notional  principal  amount  of
Derivative  Transactions  entered into or guaranteed  by the Company  during the
period was $18.6 billion,  which resulted in initial  intermediation  profits of
$7.0 million, including $473 thousand which resulted from transactions purchased
from affiliates.  Other  intermediation  profit for the period was $4.6 million,
resulting  principally  from an increase in the  present  value of the  expected
surplus cash flows from the Company's  portfolio due primarily to a reduction in
the time  remaining  until those cash flows are realized.  The Company  incurred
interest expense of $3.6 million during fiscal 1996.

    For fiscal 1995, the Company  reported  revenues net of interest  expense of
$13.5 million,  which  consisted  principally of $7.9 million in  intermediation
profits and net interest income of $5.6 million. During fiscal 1995, the Company
entered into or  guaranteed  86  Derivative  Transactions  with  non-affiliates,
including 9 transactions  which the Company purchased from an affiliate at their
market  value,  and 98 hedging  Derivative  Transactions  with  affiliates.  The
aggregate notional principal amount of Derivative  Transactions  entered into or
guaranteed by the Company during the period was $23.8 billion, which resulted in
initial  intermediation  profit of $6.7 million,  including  $784 thousand which
resulted  from  transactions   purchased  from  affiliates.   The  remainder  of
intermediation  profits for fiscal 1995 resulted from an increase in the present
value of the expected  surplus cash flows from the Company's  portfolio due to a
reduction in the time remaining until those cash flows are realized. The Company
incurred interest expense of $471 thousand during fiscal 1995.

    Interest income for fiscal 1996 increased to $7.5 million,  compared to $6.0
million  during the preceding  year, as a result of larger  average  balances of
cash and cash equivalents. Total intermediation profit for the fiscal year ended
November  29, 1996  increased  approximately  $3.7 million or 47% as compared to
fiscal 1995.  Initial  intermediation  profit for fiscal 1996  increased by $0.3
million or 4% over fiscal 1995,  reflecting a significant increase in the number
of Derivative Transactions entered into with non-affiliates,  mostly offset by a
reduction in the  notional  amount of such  transactions  as well as the shorter
maturities of such transactions.  Other intermediation  profit increased by $3.4
million to $4.6  million in fiscal 1996 versus  other  intermediation  profit of
$1.2 million in fiscal 1995. The increase  principally  reflected an increase in
the average net investment in Derivative  Transactions during the year. Interest
expense of $3.6 million for the fiscal year ended  November  29, 1996  increased
significantly  from the $0.5 million incurred in the same fiscal period in 1995.
This  increase  was the result of the  significant  increase in the average long
term debt  outstanding  in fiscal 1996 as compared to fiscal 1995. The effective
weighted  average  interest rate for long term  borrowings  was 5.41% for fiscal
1996 and 5.89% for fiscal 1995.

    Operating  expenses  for the fiscal year ended  November  29, 1996 were $879
thousand, virtually unchanged from $878 thousand during the same period in 1995.
Fees and expense  reimbursement  to Group  affiliates  included within operating
expenses  were $211  thousand  and $195  thousand  for the  fiscal  years  ended
November 29, 1996 and November 24, 1995, respectively.  Other operating expenses
were $668  thousand and $685  thousand  for the fiscal years ended  November 29,
1996 and November 24, 1995,  respectively,  and consisted  principally of legal,
accounting and rating agency fees.

                                      -21-


<PAGE>


    Net income of $13.9  million for the 1996 fiscal year  increased by 13.5% or
$1.7  million from fiscal 1995 net income of $12.3  million.  Total assets as of
November  29,  1996 were $371  million,  consisting  principally  of  Derivative
Transactions and cash and cash equivalents.

    Net cash used in operating activities during fiscal 1996 was $115.8 million,
which  principally   reflected  the  prepayment  of  certain  liabilities  under
Derivative  Transactions  with  affiliates.   Net  cash  provided  by  financing
activities during fiscal 1996 was $64.0 million principally  reflecting proceeds
on issuance of the Company's  Medium-Term  Notes.  In  comparison,  for the 1995
fiscal year,  cash  provided  from  operating  activities  was $80.1 million and
principally  reflected receipts  exceeding payments on Derivative  Transactions.
Net cash  provided  from  financing  activities  during  fiscal  1995 was  $35.0
million,  which reflected the repayment of the Company's  Medium-Term Series A-1
Notes and the issuance of the Company's  Nikkei 225 Index Notes due December 22,
2000.

LIQUIDITY AND CAPITAL RESOURCES

    The Company  conducts its business in a manner designed to require that cash
payments  to  the  Company  from  its  portfolio,  taking  into  account  market
fluctuations and the possibility of default, will be sufficient to make when due
all required payments on all the Company's  liabilities,  including  payments of
principal and interest on borrowings.  The Company needs capital  principally to
absorb potential losses due to counterparty  defaults. If counterparties were to
default on their obligations to the Company,  these losses could be substantial.
However,   based  on  the  credit  quality  of  its  counterparties   (including
affiliates),  the Company does not currently  anticipate  any default losses and
has not recorded  any  provisions  for credit  losses.  For a discussion  of the
effects of a counterparty default, see "Business -- Entering into New Derivative
Transactions and Risk Management -- Credit Quality and Counterparty Credit Risk"
under Item 1.

    The Company  believes  that the best  measure,  at any point in time, of its
credit  exposure  to a  particular  counterparty  is the cost it would  incur to
replace the obligations of that  counterparty  if it defaulted,  net of any high
quality  marketable  securities  posted as collateral by the  counterparty.  The
Company  believes  that under  current  market  conditions  it could  enter into
replacement  contracts  for all of its contracts if the  counterparties  were to
default.  However,  there can be no assurance  that the Company could enter into
such  replacement  contracts  due to factors  beyond the control of the Company,
such as the limited  liquidity of many of the Company's assets and the potential
unavailability of suitable  replacement  contracts.  Where several  transactions
with one  counterparty  are subject to a master  agreement  which  provides  for
netting and which the Company  believes is legally  enforceable  under  relevant
law, the Company  calculates the exposure resulting from those transactions on a
net  basis,  i.e.,  adding  the  positive  and  negative  value;  and  where the
transactions are not subject to such a netting agreement, the Company calculates
its exposure on a gross basis, i.e., adding only positive values. This method is
identical to that used for  calculating  the amount of  Derivative  Transactions
recorded on the Company's  balance sheet. As a result, at any point in time, the
Company's  aggregate  credit  exposure in respect of an asset equals the cost of
replacing such asset less the value of any collateral posted by the counterparty
and any  Derivative  Transactions  structured  on a  limited  recourse  basis as
discussed  under  "Documentation"  in Item 1. The Company has applied  Financial
Accounting  Standards  Board  Interpretation  No.  39,  "Offsetting  of  Amounts
Relating to Certain Contracts", for financial reporting purposes for all periods
presented.

    In certain  circumstances,  the Company may reduce its credit  exposure to a
counterparty  by requiring that the  counterparty  deposit margin or collateral.
When accepting margin or collateral,  the Company generally accepts high quality
marketable  securities (e.g., U.S. Treasury bonds or notes and securities issued
or backed by U.S. governmental agencies). The Company calculates credit exposure
net of collateral when it believes that it has a perfected  security interest in
such collateral under an enforceable agreement.

    The  composition,  at  November  29,  1996 and  November  28,  1997,  of the
Company's  credit  exposures  is  shown in the  tables  below  according  to the
long-term  debt  ratings of the  obligors by S&P rating and by the  industry and
location of the obligors.  (Totals do not equal Derivative Transactions reported
as assets principally because credit exposures include cash and cash equivalents
and exclude certain  Derivative  Transactions where the Company believes that it
does not have credit risk -- e.g., Derivative Transactions reported as assets in
respect of which  collateral has been received to the extent of the value of the
collateral  received and any  Derivative  Transactions  structured  on a limited
recourse basis as discussed  under  "Documentation"  in Item 1.) At November 29,
1996 and November 28, 1997, the Company's  counterparties  consisted  largely of
banks located in Europe,  North America and Japan, as well as Group  Affiliates.
It is important to note that the Company's  credit exposures will fluctuate as a
result  of new  transactions,  as well as  changes  in the  replacement  cost of
existing  transactions  due to changes  in,  among  

                                      -22-

<PAGE>


other things, the level of indices to which transactions are linked,  supply and
demand for particular  transactions and the time remaining until maturity of the
transactions.


              Current Credit Exposure - By S&P Rating of Obligor:
              ---------------------------------------------------
                           (U.S. dollars in millions)

                              November 29, 1996         November 28, 1997
                              -----------------         -----------------
S&P Rating:                      $       Percent          $       Percent
-----------                    -----     -------        -----     -------
AAA                           $125.3     34.0%         $127.8      28.8%
AA+                             10.0      2.7            77.1      17.4
AA                              31.9      8.7            70.4      15.9
AA-                             23.6      6.4            33.2       7.5
A+                              84.1     22.8            86.1      19.4
A                               48.8     13.2            11.0       2.5
A-                              45.1     12.2            37.1       8.4
Below A-                         0.0      0.0             0.3       0.1
                              ------    -----          ------     -----
    Total                     $368.8    100.0%         $443.0     100.0%
                              ======    =====          ======     ===== 


        Current Credit Exposure - By Country of Obligor's Headquarters:
        ---------------------------------------------------------------
                           (U.S. dollars in millions)

                              November 29, 1996         November 28, 1997
                              -----------------         -----------------
Country:                         $       Percent          $       Percent
--------                       -----     -------        -----     -------
  U.S.                        $178.7       48.4%       $253.2      57.2%
  Switzerland                   28.3        7.7          70.3      15.9
  France                        65.5       17.7          58.6      13.2
  Germany                        6.9        1.9          36.9       8.3
  Japan                         69.7       18.9          24.0       5.4
  Netherlands                   17.6        4.8             0       0.0
  Other                          2.1        0.6             0       0.0
                              ------      -----        ------     -----
    Total                     $368.8      100.0%       $443.0     100.0%
                              ======      =====        ======     ===== 


                 Current Credit Exposure - By Obligor Industry:
                 ----------------------------------------------
                           (U.S. dollars in millions)

                              November 29, 1996         November 28, 1997
                              -----------------         -----------------
Industry:                       $        Percent          $       Percent
---------                     -----      -------        -----     -------
Banks                         $257.7       69.9%       $336.5      76.0%
Financials                      43.3       11.7          60.2      13.5
Industrials                     48.4       13.1          28.7       6.5
Government Agencies             19.4        5.3          17.6       4.0
                              ------      -----        ------     -----
    Total                     $368.8      100.0%       $443.0     100.0%
                              ======      =====        ======     ===== 


    The  Company  has  entered  into and  expects  to  continue  to  enter  into
transactions  with  FPI or  GSCM  (obligations  of  GSCM  being  unconditionally
guaranteed by Group) in order to hedge transactions with third parties.

                                      -23-


<PAGE>


(The notional amount of Derivative  Transactions  with  affiliates  exceeds that
with  non-affiliates  due to a  greater  notional  amount  of  affiliate  versus
non-affiliate  transactions  guaranteed,  as  well  as  Derivative  Transactions
between the Company and  affiliates  which hedge the Company's  interest rate or
currency exposure on surplus cash flow from its portfolio, or which are intended
to mitigate  total  credit  risk.) At  November  28,  1997,  the Company had $16
million and $7 million of credit  exposure to GSCM and FPI,  respectively,  as a
result of these  transactions.  Due to the level of credit  exposure to Group or
its affiliates at November 28, 1997, the Company does not believe that financial
information with respect to Group is material to investors in the Company's debt
securities.

    The Company anticipates that its credit exposures may be highly concentrated
since financial  instruments reported as assets may be transacted with a limited
number of  counterparties.  At November 29, 1996 the Company had credit exposure
net of collateral exceeding 10% of its total assets to Banque Nationale de Paris
and Morgan  Guaranty  Trust Company of New York.  Banque  Nationale de Paris and
Morgan  Guaranty Trust Company of New York were rated A+ and AAA,  respectively,
by S&P at November  29,  1996.  At  November  28,  1997,  the Company had credit
exposure  net of  collateral  exceeding  10% of its  total  assets  to  Republic
National Bank,  Union Bank of Switzerland,  Morgan Guaranty Trust Company of New
York and Banque Nationale de Paris. Collectively, such exposures represented 44%
of total assets.  The Company  would incur a large loss if these  counterparties
were to default.  The Company's  largest credit exposure to any one counterparty
was $70 million, or 12% of total assets, to Union Bank of Switzerland.  However,
Republic National Bank, Union Bank of Switzerland, Morgan Guaranty Trust Company
of New York and  Banque  Nationale  de Paris  were  rated AA,  AA+,  AAA and A+,
respectively,  by S&P at November 28, 1997,  and the Company  currently does not
anticipate any loss as a result of these  exposures.  Additionally,  the Company
currently does not consider its credit  exposure to any  counterparty  excessive
since none of such exposures exceeded the Company's net worth.

    As of November 28, 1997, the Company was a party to Derivative  Transactions
with a notional amount of $28 billion.  Of these,  $7.2 billion  notional amount
with an  estimated  fair  market  value of $72  million  represented  Derivative
Transactions  which could not expose the  Company to credit risk (e.g.,  options
written).   The  composition  of  the  remainder  of  the  Company's  Derivative
Transactions by maturity and  counterparty  S&P rating is illustrated  below. It
should be noted  that  notional  principal  amount is not a measure of market or
credit risk.


        Notional Amount of Derivative Transactions With Potential Credit
                             Exposure By Maturity:
        ----------------------------------------------------------------
                           (U.S. dollars in millions)


                              November 29, 1996          November 28, 1997
                              -----------------          -----------------
                                $       Percent            $       Percent
                              -----     -------          -----     -------
1994-1996                       $850      3.6%              $0        0.0%
1997-1999                     12,918     54.0            8,374       40.1
2000-2003                      4,671     19.5            5,792       27.8
2004-2005                      2,549     10.7            2,107       10.1
2006-2021                      2,895     12.2            4,580       22.0
                              ------    -----          -------      -----
    Total                    $23,883    100.0%         $20,853      100.0%
                             =======    =====          =======      ===== 


















                                      -24-


<PAGE>


   Notional Amount of Derivative Transactions With Potential Credit Exposure
                         By Credit Quality of Obligor:
   -------------------------------------------------------------------------
                           (U.S. dollars in millions)

                              November 29, 1996          November 28, 1997
                              -----------------          -----------------
S&P Rating:                     $       Percent            $       Percent
-----------                   -----     -------          -----     -------
   AAA                       $2,727      11.4%          $3,415       16.4%
   AA+                          472       2.0              239        1.1
   AA                           696a      2.9              303        1.5
   AA-                        1,133       4.7              438        2.1
   A+                           274       1.1               66        0.3
   A                          1,465       6.1            1,112        5.3
   A-                         1,088       4.6            1,552        7.4
   Below A-                     290a      1.2              114a       0.6
   Affiliates                15,738      66.0           13,614       65.3
                            -------     -----          -------     ------
    Total                   $23,883     100.0%         $20,853      100.0%
                            =======     =====          =======      ===== 


  (a) Includes Derivative Transactions which were collateralized in part.


   Notional Amount of Derivative Transactions With Potential Credit Exposure
                      By Principal Underlying Index Type:
   -------------------------------------------------------------------------
                           (U.S. dollars in millions)

                              November 29, 1996          November 28, 1997
                              -----------------          -----------------
                                $       Percent            $     Percent
                              -----     -------          -----   -------
Interest rate               $19,910      83.4%         $16,498      79.1%
Currency                      3,923      16.4            4,271      20.5
Other                            50       0.2               84       0.4
                            -------     -----          -------     ----- 
    Total                   $23,883     100.0%         $20,853     100.0%
                            =======     =====          =======     ===== 

    The notional amount of currencies, expressed in U.S. dollars at November 28,
1997, to be exchanged under currency  options and currency swaps  outstanding at
November 28, 1997 (see  "Currency"  in the table above) were U.S.  dollars ($728
million),  European currency units  (approximately  $328 million),  Japanese yen
(approximately  $695  million),  Dutch  guilders  (approximately  $625 million),
Deutsche marks (approximately $456 million),  British pounds (approximately $631
million),   Italian   lire   (approximately   $509   million),   French   francs
(approximately  $94 million),  Australian  dollars  (approximately $17 million),
Argentine pesos  (approximately $30 million),  Brazilian real (approximately $41
million),   Hong  Kong  dollars   (approximately  $41  million),   Swiss  francs
(approximately  $23  million),  Spanish  pesetas  (approximately  $26  million),
Mexican pesos  (approximately  $16 million) and Canadian dollars  (approximately
$11 million).

    The fair values of Derivative  Transactions  as of November 28, 1997 and the
average monthly fair values of such  instruments for the fiscal year then ended,
computed in accordance with the Company's netting policy, are as follows:


                                   November 28, 1997          Average
                                   -----------------          -------
(U.S. dollars in millions)        Assets  Liabilities    Assets  Liabilities
                                  ------  -----------    ------  -----------
Non-affiliates
--------------
Derivative Transactions           $173.0    $154.0       $175.1     $131.2

Affiliates
----------
Derivative Transactions             19.6       0.0         14.0        0.0



                                      -25-

<PAGE>



    The Company is also a general partner of FPI and, as such,  would ultimately
be liable for all the obligations of FPI if it were  insolvent.  At November 28,
1997, FPI had total  liabilities of $203 million.  The Company,  after analyzing
the financial  position,  results of operations and cash flows of FPI,  believes
that FPI will be able to meet its obligations under its outstanding liabilities.
Accordingly,  the Company does not believe that it is necessary to, and has not,
established a reserve with respect to FPI's obligations under its liabilities.

    At  November  28,  1997,  the  Company  had  $291  million  of cash and cash
equivalents available to meet its payment obligations. The Company believes that
such level of cash and cash  equivalents  is sufficient to enable it to meet all
of its current payment  obligations.  The Company  anticipates that it will make
distributions to partners in the future.  However,  the amount of such dividends
and  distributions  will be limited to ensure the Company's  ability to meet its
obligations is not adversely affected.

    The  Company  may  expand  its  portfolio  by  purchasing   new   Derivative
Transactions, principally from affiliates of Group. The Company has an effective
registration statement that initially covered $500 million of Medium-Term Notes.
As of November  28,  1997,  the Company had $266  million  available  for future
issuance  under  such  registration  statement.   The  Company  has  issued  and
outstanding $40 million face amount of Nikkei 225 indexed Notes due December 22,
2000,  $73 million  face amount of S&P  Enhanced  Stock Index  Growth  Notes due
August  9,  2002,  approximately  $41  million  initial  principal  amount of 7%
Mandatorily  Exchangeable Notes due July 23, 1999 (Subject to Mandatory Exchange
into Shares of Common Stock of Oxford Health Plans,  Inc.) ("Oxford"),  and $120
million principal amount of 3% Citicorp  Exchangeable  Notes due August 28, 2002
("Citicorp").  The  single  stock  related  note  issuances  (i.e.,  Oxford  and
Citicorp)  are  an  integral   part  of   individually   structured   derivative
transactions.  Payments on the above Notes are  determined  by  reference to the
performance of a single equity security or an equity index.  The terms of a Note
linked to a single stock may either allow for or mandatorily  require the holder
to exchange the notes into an amount of the underlying security. The Company has
purchased equity  securities and has entered into Derivative  Transactions  with
Affiliates  of Group and  purchased  exchange  traded  options to eliminate  its
market risk on the Notes. The cost of hedging an equity-linked  Medium Term Note
may use up a substantial portion of the proceeds from the issuance of such Note.
The Company intends to continue to issue equity-linked  Medium-Term Notes in the
future.  As a result,  the  Company's  leverage  will  increase.  The  Company's
activities also may include purchasing new instruments,  primarily interest rate
and currency  swaps,  and entering  into hedges which convert the return on such
Derivative Transactions into a fixed or floating rate of return on the Company's
investment.

    As of November  28,  1997,  securities  owned  consisted of shares of common
stock of Oxford Health Plans,  Inc. (market value  approximately  $11.4 million)
and  shares  of common  stock of  Citicorp  (market  value  approximately  $83.8
million).  The  Company  purchased  these  securities  to hedge  certain  of the
Company's exposures incurred by its issuance of two series of Medium Term Notes,
one of which is mandatorily exchangeable at maturity into shares of common stock
of Oxford  Health  Plans,  Inc. and the other of which is  exchangeable,  at the
option of the holder, into shares of Citicorp common stock.

    Partners'  capital is not subject to  withdrawal  or redemption on demand by
the  partners.  However,  prior to January 1, 1997,  the Company was required by
U.S.  federal tax  regulations to withhold income tax on behalf of its partners.
This withholding, which is accounted for as a distribution to partners, amounted
to $4.530 million for the fiscal year ended 1996.  Other than such  withholding,
all net income during fiscal 1996 and fiscal 1997, respectively, was retained in
partners'  capital.  At November  28,  1997,  the  Company  had $148  million of
partners' capital.  The Company believes that this level of partners' capital is
sufficient  for it to  continue  to expand  both the type and the  volume of its
Derivative Transactions.


ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    See Index to Financial Statements and Schedules on page F-1.


ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
        FINANCIAL DISCLOSURE

    Not applicable



                                      -26-



<PAGE>


                                    PART III
                                    --------

ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The  Partnership  Agreement (as defined in Item 12) of the Company  provides
for the conduct and management of the Company's  business to be performed by the
Corporate  General  Partner.  The Company does not  compensate  the directors or
officers of the Corporate General Partner for their services to the Company. The
compensation  received by a director or officer of the Corporate General Partner
from Group or its  affiliates  is not  determined  by  reference to the services
performed by such director or officer for the Corporate General Partner.

    The table below sets forth the names,  ages and positions of the persons who
are the directors and executive  officers of the Corporate General Partner.  All
the  directors  below are also  directors  of GS Financial  Products Co.  ("GSFP
Co."), the managing general partner of FPI, and Executive Vice Presidents of the
general partner of Group.


NAME                                AGE           POSITION
----                                ---           --------

Richard E. Witten                   44            Director

Oki Matsumoto                       34            Director

Thomas K. Montag                    41            Director

Kipp Nelson                         38            Director

Mark Zurack.                        41            Director

Greg Swart                          30            President

Amy Furman                          32            Secretary

Daphine Campbell                    32            Vice President


    Richard E. Witten has been a Director of the Corporate General Partner since
August 22, 1994.  Mr.  Witten  became a general  partner of GS&Co.  in 1990.  In
November 1996, Mr. Witten became a participating limited partner of Group.

    Oki Matsumoto has been a Director of the Corporate General Partner since May
1, 1995.  Mr.  Matsumoto  became a general  partner of GS&Co.  and a director of
Goldman Sachs (Japan)  Limited in 1994.  Mr.  Matsumoto was a vice  president of
GS&Co.   prior  to  that  time.  In  November  1996,  Mr.   Matsumoto  became  a
participating limited partner of Group.

    Thomas K. Montag has been a Director of the Corporate  General Partner since
May 1, 1995. Mr. Montag became a general  partner of GS&Co. in November 1994 and
was a vice  president of GS&Co.  prior to that time. Mr. Montag is a Director of
the corporate general partner of GSMMDP.  Commencing in October 1993, Mr. Montag
has served  intermittently  as president  and vice  president  of the  corporate
general  partner of GSMMDP.  In November 1996, Mr. Montag became a participating
limited partner of Group.

    Kipp Nelson has been a Director of the Corporate  General  Partner since May
1, 1995. Mr. Nelson became a general  partner of GS&Co. in November 1994 and was
a vice  president  of GS&Co.  prior to that  time.  Mr.  Nelson  has also been a
managing  director  of Goldman  Sachs  International  since  February  1995.  In
November 1996, Mr. Nelson became a participating limited partner of Group.

    Mark Zurack has been a Director of the Corporate General Partner since April
1, 1997. Mr. Zurack became a general  partner of GS&Co. in November 1994 and was
a vice  president  of GS&Co.  prior to that time.  In November  1996 Mr.  Zurack
became a participating limited partner of Group.

    Greg  Swart  has been  President  of the  Corporate  General  Partner  since
February 5, 1992.  Mr.  Swart is also the  President  of GSFP Co.,  the managing
general partner of FPI. Mr. Swart has been an employee of Goldman Sachs (Cayman)
Trust,  Limited ("Cayman Trust"), a Group Affiliate,  since October 1991 and was
an  Assistant   Manager  in  the   Controllers   Department   of  Goldman  Sachs
International ("GSI") from January 1990 to January 1991.


                                      -27-


<PAGE>


    Amy Furman has been Secretary of the Corporate General Partner since August,
1996. Ms. Furman is also the Secretary of GSFP Co., the managing general partner
of FPI. Ms. Furman has been an employee of Cayman Trust since May 1994 and prior
to that was an  associate  at Penn Corp.  Financial  Group from  January 1992 to
October 1993.

    Daphine Campbell has been a Vice President of the Corporate  General Partner
since  August  1996.  Ms.  Campbell  has been an employee of Cayman  Trust since
January  1993 and prior to that was an employee of Midland  Bank Trust  (Cayman)
from January 1989 to December 1992.

    The President, Vice President and the Secretary are responsible to the Board
of Directors  for the  execution of  transactions  approved by the Board and the
administration of the business of the Corporate  General Partner  (including the
business of the Company) pursuant to authorities  given by the Board.  There are
no other officers of the Corporate General Partner or the Company.


ITEM 11: EXECUTIVE COMPENSATION

    The Company does not employ any persons to conduct its business and does not
maintain  any  employee  benefit  plans.   Instead,  as  discussed  above  under
"Directors and Executive Officers" in Item 10, the conduct and management of the
Company's  business is performed by the Corporate  General Partner.  Neither the
directors  nor  the  officers  of the  Corporate  General  Partner  receive  any
compensation  from the Company for their  services to the Company.  As discussed
under "Certain  Relationships and Related  Transactions" in Item 13, the Company
engages Group Affiliates to perform operational and administrative functions.

    The Company expensed $211 thousand and $197 thousand during the fiscal years
ended  November  29, 1996 and  November  28,  1997,  respectively,  for services
provided  by Group  Affiliates  pursuant  to the  Custodian  and  Space  Sharing
Agreements  (as  defined  in Item 13).  Additionally,  the  Company  paid  Group
Affiliates  $702 thousand for services  rendered in connection with the issuance
of its long term notes,  pursuant to the  Origination  Agreements (as defined in
Item 13) during the fiscal  year ended  November  28,  1997.  No  services  were
obtained  or charged  under the  Origination  Agreements  during the fiscal year
ended  November  29,  1996  since all  transactions  in that year were done on a
principal basis. See "Certain  Relationships and Related Transactions -- Summary
of Expenses" in Item 13.

    The Company and the  affiliates of Group  providing  services to the Company
are all subsidiaries of Group.  Each director of the Corporate  General Partner,
as a participating limited partner of Group, has substantially the same interest
in the profits of the Company as he has in the  profits of the  affiliates  that
provide  services to the Company.  Accordingly,  the  directors of the Corporate
General Partner are not benefited by these inter-company payments.

    Under the Partnership  Agreement (as defined in Item 12) of the Company, the
Corporate  General  Partner  has an  interest  in the  profits and losses of the
Company which may not fall below 0.2%.  This  interest is intended,  in part, to
compensate  the Corporate  General  Partner for the services of its officers and
directors to the Company.  No other  payments to the Corporate  General  Partner
will be made as a result of the  performance  of  services by the  officers  and
directors of the Corporate General Partner to the Company. The Corporate General
Partner  does not  incur  expenses  on its own  behalf  as a result of its being
Corporate General Partner.


ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The Company was formed  February 5, 1992  pursuant to a limited  partnership
agreement (as amended and restated, the "Partnership Agreement").  There are two
partners of the Company, the Corporate General Partner,  which is both a general
and a limited  partner,  and GS Financial  Products,  L.P.  ("GSFP"),  a limited
partner.

    The sole business of the Corporate General Partner is to manage the Company.
As of  November  28,  1997,  the  Corporate  General  Partner had equity of $2.2
million, and assets of $2.8 million (principally cash and cash equivalents).

    The Corporate  General Partner has one authorized and  outstanding  deferred
share (the "Deferred  Share") held by Deutsche Morgan Grenfell Nominees (Cayman)
Ltd., a Cayman Islands company  ("DMGCL").  Under the Articles of Association of
the Corporate General Partner, the Deferred Share has sufficient voting power to
permit  its holder to 

                                      -28-

<PAGE>


block an attempt to voluntarily  dissolve the Corporate  General  Partner or the
Company, even in circumstances where Group or its affiliates have become subject
to insolvency  proceedings.  The Deferred  Share has no other economic or voting
rights.  DMGCL holds the Deferred  Share as beneficial  owner and not as trustee
for the holders of any  indebtedness  of the Company and owes no duty to holders
of the  indebtedness,  or other  creditors of the  Company,  with respect to the
exercise of the voting rights attached to the Deferred Share.

    In the event of an insolvency of the Company and an inadequacy of the assets
of the Company to satisfy its liabilities,  under Cayman Islands law, the assets
of the Corporate  General Partner would become available to the creditors of the
Company.  The Corporate  General  Partner is a Cayman Islands  exempted  limited
liability  company.  As a result,  under Cayman  Islands  law,  creditors of the
Company  would have no  recourse  against  the owners of the  Corporate  General
Partner.  Accordingly,  in an  insolvency  proceeding,  creditors of the Company
would have only the assets of the  Company  and the  Corporate  General  Partner
available to satisfy their claims.  This is similar to the  protection  afforded
shareholders of a corporation organized in the United States.

    The sole  shareholder  of the  Corporate  General  Partner is GSFP, a Cayman
Islands exempted limited partnership. GSFP has two partners, GSFP Co., a general
partner, and GSCI Holdings L.L.C. ("Holdings"),  a limited partner. GSFP is also
the managing  general  partner of FPI, while the Company is a general partner of
FPI.

    GSFP Co. is a Cayman Islands limited liability company,  all of the ordinary
shares of which are owned by Holdings.  Like the Corporate General Partner, GSFP
Co. has one authorized and  outstanding  deferred  share.  Under the Articles of
Association of GSFP Co. the deferred share has sufficient voting power to permit
its  holder to block an  attempt  to  dissolve  voluntarily  GSFP  Co.,  even in
circumstances  where Group or its  affiliates  have become subject to insolvency
proceedings.

    Holdings is a Delaware limited liability company which is owned by Group and
GS Equity Markets, L.P., a partnership controlled by Group.

    Group is the parent company of the Goldman Sachs organization.  As discussed
above,  Group  directly  and  indirectly  owns  all of the  ordinary  shares  of
Holdings. In addition, all of the directors of the Corporate General Partner are
also Executive Vice Presidents of the general partner of Group. Therefore, Group
effectively  controls the business and operations of the Company. See "Directors
and  Executive  Officers  of the  Registrant"  under Item 10. See  "Management's
Discussion  and Analysis of Financial  Condition  and Results of  Operations  --
Overview" for a discussion of the current  review of the Company's  business and
operations.  However,  liabilities  of the  Company are not  liabilities  of, or
guaranteed  by,  Group or any partner  thereof or  controlling  person  thereof.
Accordingly, neither Group nor any such person has any liability with respect to
any indebtedness or other obligations of the Company.


ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

HEDGING TRANSACTIONS WITH GSCM AND FPI

    In the  ordinary  course  of  business,  the  Company  enters  into  hedging
transactions  with GSCM and/or FPI. As of  November  28, 1997 and  November  29,
1996, the notional amounts of the Derivative  Transactions  with GSCM were $15.7
billion and $16.8  billion,  respectively.  As of November 28, 1997 and November
29, 1996,  the notional  amounts of the  Derivative  Transactions  with FPI were
$0.04 billion and $1.0 billion, respectively.

OPERATIONAL AND ADMINISTRATIVE RELATIONSHIPS WITH GROUP

    The Company has engaged Group Affiliates to perform substantially all of its
operational and administrative  functions.  These services include both services
which the Company  believes are essential to its ability to continue to function
("Administrative  Services"),  as well as those services which it needs in order
to continue to expand its business ("New Business  Services").  The Company will
not enter into any  agreement or  Derivative  Transaction  with any affiliate of
Group on terms  that it  believes  are less  favorable  than arm's  length.  The
Company believes that the fees it has paid or will pay to Group Affiliates under
the Administrative Services and New Business Services agreements are at least as
favorable  as would be available  from  non-affiliated  entities.  Each of these
agreements  had an  original  term of 10 years.  While each of these  agreements
provides for resignation or termination of the appointment of the relevant Group
Affiliate  upon 60 days' written  notice,  the relevant  Group  Affiliate is not
permitted to 

                                      -29-

<PAGE>


resign  until a  successor  is  appointed.  Were the  Company to  replace  Group
Affiliates as the providers of services under these agreements,  it is uncertain
whether such services could be obtained at the same expense.

    The Company has also entered into backup  arrangements  with Deutsche Morgan
Grenfell  (Cayman)  Limited  to  provide  Administrative  Services  if the Group
Affiliates  providing the  Administrative  Services were unable to do so or were
terminated by the Company.  However, in the case of New Business Services,  if a
Group Affiliate  performing New Business Services were unable to perform or were
terminated by the Company,  the Company might not be able to find a successor to
perform such services.  Without New Business Services, the Company may be unable
to enter into any further Derivative  Transactions,  at which point its business
may in practice be restricted to collecting the payments from its assets as they
mature and  holding  such  payments in cash  equivalents  until they are used to
satisfy its liabilities.

    Following  are summaries of certain  provisions of the Company's  agreements
regarding operational and administrative  services with Group Affiliates.  These
summaries do not purport to be complete and are subject to, and are qualified in
their  entirety by reference  to, copies of the  agreements,  which are exhibits
hereto. See Item 14.

  ADMINISTRATIVE SERVICES AGREEMENTS

    The services which the Company considers Administrative Services include the
maintenance of books, records and accounts,  the preparation and distribution of
financial statements and other such material, and the investment on a short-term
basis of the Company's excess cash resources pursuant to prearranged guidelines.
These  services  currently  are  provided  under an  agreement  (the  "Custodian
Agreement") with Cayman Trust. In addition,  pursuant to another  agreement (the
"Space  Sharing  Agreement"),  Cayman Trust provides for the  non-exclusive  use
within  its  premises  of  space  for the  Company's  business  uses,  including
directors' and partners'  meetings,  as well as telecopy facilities and separate
telephone and post office box facilities.  Each of the Company's agreements with
Cayman  Trust was entered into on November 27,  1992.  The  Custodian  Agreement
requires the Company to pay fees of $150,000 per annum, subject to renegotiation
under  materially  changed  circumstances,  while  the Space  Sharing  Agreement
requires the Company to pay fees of $5,000 per annum, plus reasonable expenses.

    Additionally,   the  Company  holds   brokerage   accounts  with  two  Group
Affiliates,  GS&Co.  and GSI, and various Group  Affiliates may provide  custody
services for, and clear and settle transactions by, the Company.

  NEW BUSINESS SERVICES AGREEMENTS

    Each of GS&Co.  and GSI  provides  or will  provide  New  Business  Services
pursuant to separate  agreements with the Company  (together,  the  "Origination
Agreements").  Under these Agreements,  each of GS&Co. and GSI has agreed to use
reasonable  efforts to obtain bids from third  parties  with respect to proposed
transactions  between third  parties and the Company.  In addition,  GS&Co.  has
agreed  to  provide,  or  cause  to  be  provided,   analyses  of  products  and
transactions  and credit  reviews of  counterparties.  See "Business -- Entering
into New  Derivative  Transactions  and Risk  Management  -- Credit  Quality and
Counterparty  Credit Risk --  Counterparty  Credit Quality" under Item 1. GS&Co.
has no liability in respect of the  provision of such credit  reviews  except in
the  case of  gross  negligence.  GS&Co.  also  provides,  pursuant  to  another
agreement (the "Calculation  Agreement"),  certain technical and  administrative
services to the  Company,  principally  those  required in  connection  with new
Derivative  Transactions  such as  performing  calculations  designed to measure
credit and other risks to which the Company may be subject.

    The Origination Agreements and the Calculation Agreement require the Company
to pay an amount  equal to 105% of the  costs  and  expenses  of  providing  the
services  covered by the  agreements,  apportioned  in  accordance  with Group's
apportionment of such expenses for federal income tax purposes.  In addition, if
the Company  enters into a  transaction  based on a bid provided  pursuant to an
Origination  Agreement,  the  Company  would  pay a fee  equal to the fee  which
typically would be charged to third parties with respect to those services.  For
an interest rate swap,  the fee would  generally be the present value of between
 .001% and .01% per year of the notional  principal  amount of the interest  rate
swap.

    The Company does not currently  anticipate  making any changes to the method
pursuant to which costs are  apportioned  under the  Origination and Calculation
Agreements.  The  Company  expects  the level of such  expenses  to  continue to
increase in  proportion  with  increases,  if any,  in the volume of  Derivative
Transactions  entered  into.  The  Company  believes  that  its  costs  would be
substantially  similar if it were to obtain  from  third  parties  the  services


                                      -30-


<PAGE>


provided  pursuant to these  agreements  and that the method of cost  allocation
used in such agreements is reasonable.

  SUMMARY OF EXPENSES

    The following  table  summarizes  the charges paid by the Company during the
fiscal years ended  November  24, 1995,  November 29, 1996 and November 28, 1997
pursuant to the foregoing agreements. No services were obtained or charged under
the  Origination  Agreements  through  November  29,  1996,  since  all  of  the
transactions  prior to such date were done on a principal  basis.  The  payments
under the GS&Co.  Origination  Agreement  for the 1997  fiscal  year  related to
services  performed by GS&Co. in connection  with the issuance of  equity-linked
Medium Term Notes.  The payments  will be amortized  over the life of the Notes.
The  Company  expects  to  make  similar  payments  in  connection  with  future
equity-linked  note issuances.  Charges under the Calculation  Agreement for the
period were  determined by applying the standard  hourly  overhead rates used by
Group for the time spent by individuals providing services under such Agreement.

<TABLE>
<CAPTION>

                                               GROUP AFFILIATE    BASIS OF                 COMPENSATION EXPENSES INCURRED
AGREEMENT           DESCRIPTION OF SERVICE     PARTY THERETO     COMPENSATION               DURING THE FISCAL YEARS ENDED
------------        ----------------------     ---------------   ------------               ------------------------------
                                                                                              (U.S. DOLLARS IN THOUSANDS)
                                                                                    NOV. 24, 1995     NOV. 29, 1996   NOV. 26, 1997
                                                                                    -------------     -------------   -------------
<S>                 <C>                        <C>             <C>                  <C>               <C>             <C>
Custodian           "Back Office", i.e.,        Cayman Trust   $150,000 per annum      $150.0           $150.0           $150.0
Agreement           payment processing,
                    accounting, cash
                    management, custody

Space Sharing       Office Space                Cayman Trust   $5,000 per annum          $5.0             $5.0             $5.0
Agreement

Origination         Opportunities to bid on     GS&Co.         Cost plus 5%              $0.0             $0.0           $702.0a
Agreement           intermediation of third
                    party transactions

Origination         Opportunities to bid on     GSI            Cost plus 5%              $0.0             $0.0             $0.0
Agreement           intermediation of third
                    party transactions

Calculation         Credit Risk limit           GS&Co.         Cost plus 5%             $40.5            $56.0            $42.0
Agreement           calculations

<FN>
(a)  Payments were capitalized and will be amortized over the life of the Notes.
</FN>
</TABLE>






















                                      -31-
<PAGE>


                                    PART IV
                                    -------


ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

    (a) DOCUMENTS FILED AS A PART OF THIS REPORT:

        1.  Financial Statements 
            The financial statements are listed on page F-1 hereof

        2.  Financial Statement Schedules
            None required

    (b) REPORTS ON FORM 8-K:
        None

    (c) EXHIBITS:


EXHIBIT NO.       DESCRIPTION
-----------       -----------

  1.1             Distribution Agreement, dated January 3, 1996, between
                  the Company and Goldman, Sachs & Co. ("GS&Co.")*

  3.1             Certificate of Registration of the Company**

  3.2(a)          Amended and Restated Limited Partnership Agreement of
                  the Company**

  3.2 (b)         Amendment, dated November 24, 1993, to the Amended and
                  Restated Partnership Agreement of the Company**

  3.3             Memorandum of Association of the Corporate General Partner**

  3.4             Restates Articles of Association of the Corporate General 
                  Partner**

  4.1             Indenture between the Company and The Bank of New York,
                  as Trustee, dated October 11, 1994***

  10.1            Origination Agreement, dated January 5, 1994, between Goldman
                  Sachs International Limited and the Company**

  10.2            Origination Agreement, dated November 27, 1992, between GS&Co.
                  and the Company**

  10.3            International Swaps and Derivative Association, Inc. Master
                  Agreement, dated November 4, 1993, between the Company and
                  GS Financial Products International, L.P. ("GSFPI")**

  10.4            International Swaps and Derivatives Association, Inc. Master
                  Agreement, dated February 24, 1993 (the "GSCM Agreement"),
                  between the Company and Goldman Sachs Capital Markets, L.P.
                  ("GSCM")**

  10.5            Guaranty, dated February 24, 1993, by The Goldman Sachs Group,
                  L.P. of GSCM's obligations under the GSCM Agreement**

  10.6            Calculation Agreement, dated January 5, 1994, between the
                  Company and GS&Co.**


                                      -32-


<PAGE>




EXHIBIT NO.       DESCRIPTION
-----------       -----------

  10.7(a)         Custodian Agreement, dated November 27, 1992 (the "Custody
                  Agreement") between the Company and Goldman Sachs (Cayman)
                  Trust, Limited ("Cayman Trust")****

  10.7(b)         Amendment No. 1, dated as of February 14, 1996, to the Custody
                  Agreement*****

  10.8            Space Sharing Agreement, dated November 27, 1992, between
                  Cayman Trust and the Company**

  10.9            Back-up Agreement, dated June 10, 1993, between Morgan
                  Grenfell (Cayman) Limited and the Company**

  10.10           Assignment and Assumption Agreement, dated as of November 23,
                  1992, among the Company, GS&Co., GSCM and Group** +

  12.1            Statement re computation of ratios of earnings to fixed
                  charges

  23.1            Consent of Coopers & Lybrand L.L.P.

  27.1            Financial Data Schedule

  99.1            Tax Exemption Certificate of the Company**

  99.2            Tax Exemption Certificate of the Corporate General Partner**


Notes
------------

*     Incorporated herein by reference to the same numbered exhibit to the
      Company's Current Report on Form 8-K dated January 3, 1996.

**    Incorporated herein by reference from the same numbered exhibit to the
      Company's Registration Statement on Form S-1 (File No. 33-71544), dated
      October 7, 1994.

***   Incorporated herein by reference to the same numbered exhibit to the
      Company's Quarterly Report on Form 10-Q for the quarter ended August 26,
      1994.

****  Incorporated herein by reference to Exhibit 10.7 to the Company's
      Registration Statement  on Form  S-1 (File No. 33-71544), dated
      October 7, 1994.

***** Incorporated herein by reference to the same numbered exhibit to the
      Company's Annual Report on Form 10-K for the year ended November 24, 1995.

+     A portion of this exhibit has been omitted pursuant to an order of the
      Securities and Exchange Commission dated October 6, 1994.





















                                      -33-


<PAGE>


INDEX TO FINANCIAL STATEMENTS OF THE COMPANY

Report of Independent Accountants........................................F-2

Balance Sheets as of November 29, 1996 and November 28, 1997.............F-3

Statements of Income for the fiscal years ended November 24, 1995,
       November 29, 1996 and November 28, 1997...........................F-4

Statements of Changes in Partners' Capital for the fiscal years
       ended November 24, 1995, November 29, 1996 and November 28,
       1997..............................................................F-5

Statements of Cash Flows for the fiscal years ended November 24, 1995,
       November 29, 1996 and November 28, 1997...........................F-6

Notes to Financial Statements............................................F-7

Supplementary Financial Information (Unaudited)..........................F-14






















                                      F-1


<PAGE>


                       REPORT OF INDEPENDENT ACCOUNTANTS
                                   ----------



To the Partners, GS Financial Products U.S., L.P.:

We have audited the accompanying  balance sheets of GS FINANCIAL  PRODUCTS U.S.,
L.P. as of November 29, 1996 and November 28, 1997,  and the related  statements
of income,  changes in  partners'  capital  and cash flows for the fiscal  years
ended  November  24,  1995,  November  29, 1996 and  November  28,  1997.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of GS Financial  Products U.S.,
L.P.,  as of November 29, 1996 and  November  28,  1997,  and the results of its
operations  and its cash flows for the fiscal  years ended  November  24,  1995,
November  29,  1996  and  November  28,  1997,  in  conformity  with  accounting
principles generally accepted in the United States.

                            COOPERS & LYBRAND L.L.P.


New York, New York
January 22, 1998.
























                                      F-2
<PAGE>


                        GS FINANCIAL PRODUCTS U.S., L.P.

<TABLE>
<CAPTION>
                                 BALANCE SHEETS
                           (U.S. dollars in thousands)
                                   ----------

<S>                                       <C>                 <C>
                                          November 29, 1996   November 28, 1997
                                          -----------------   -----------------
Assets:
Cash and cash equivalents (Note 1)             $141,550           $291,375
Securities owned, at fair value (Note 2)              0             95,185
Derivative transactions, at fair value
 (Notes 1, 3 and 4):
       Affiliate                                  5,273             19,561
       Non-affiliate                            222,493            172,956
Investment in affiliates (Note 5)                   952                780
Other assets                                        707              1,826
                                                -------            -------
                    Total assets               $370,975           $581,683
                                               ========           ========

Liabilities and Partners' Capital:
Derivative transactions, at fair value
  (Notes 1, 3 and 4):
       Affiliate                             $    4,157                 $0
       Non-affiliate                            107,401            153,983
Long-term borrowings (Note 6)                   116,778            276,489
Other liabilities and accrued expenses            8,596              3,090
                                                -------            -------
                       Total liabilities        236,932            433,562

Commitments and contingencies (Note 5)

Partners' capital:
   Limited Partners                             133,364           147,373
   General Partner                                  679               748
                                                -------           --------
                    Total partners' capital     134,043           148,121
                                                -------           --------

      Total liabilities and partners' capital  $370,975          $581,683
                                               ========          ========

</TABLE>



The accompanying notes are an integral part of the financial statements.




                                      F-3


<PAGE>


                        GS FINANCIAL PRODUCTS U.S., L.P.

<TABLE>
<CAPTION>
                              STATEMENTS OF INCOME
                          (U.S. dollars in thousands)
                                   ----------


                                                                                 Fiscal Years Ended
                                                      ----------------------------------------------------------
                                                      November 24, 1995   November 29, 1996    November 28, 1997
                                                      -----------------   -----------------    -----------------
<S>                                                   <C>                 <C>                  <C>
Revenues:
Intermediation profit (Notes 1, 3 and 4)                    $7,898             $11,570                $10,622
Interest                                                     6,025               7,460                 14,224
Equity in (loss) earnings of affiliate (Note 5)                  9                 (10)                   (23)
                                                           -------             -------               --------
         Total revenues                                     13,932              19,020                 24,823

Interest expense (Note 6)                                      471               3,627                  9,265
                                                           -------             -------                -------
   Revenues, net of interest expense                        13,461              15,393                 15,558

Expenses:

Operating (Note 4)                                             878                 879                    722
                                                           -------             -------                -------

Income before taxes                                         12,583              14,514                 14,836

Income taxes (Note 8)                                          303                 581                    608
                                                           -------             -------                -------
         Net Income                                        $12,280             $13,933                $14,228
                                                           =======             =======                =======

</TABLE>












    The accompanying notes are an integral part of the financial statements


                                      F-4



<PAGE>


                        GS FINANCIAL PRODUCTS U.S., L.P.

<TABLE>
<CAPTION>
                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
                          (U.S. dollars in thousands)
                                   ----------


                                                          General               Limited                 Total
                                                      Partner's Capital     Partners' Capital     Partners' Capital
                                                      -----------------     -----------------     -----------------
<S>                                                   <C>                   <C>                   <C>              
Balance, November 25, 1994                                 $595                 $116,447               $117,042

     Change in cumulative translation adjustment             (1)                     (30)                   (31)

     Net Income                                              61                   12,219                 12,280

     Distribution to partners                               (22)                  (4,464)                (4,486)
                                                            ---                  -------                -------

Balance, November 24, 1995                                  633                  124,172                124,805

     Change in cumulative translation adjustment             (1)                    (164)                  (165)

     Net Income                                              69                   13,864                 13,933

     Distribution to partners                               (22)                  (4,508)                (4,530)
                                                            ---                  -------                -------

Balance, November 29, 1996                                  679                  133,364                134,043


     Change in cumulative translation adjustment             (1)                    (149)                  (150)

     Net Income                                              70                   14,158                 14,228
                                                            ---                  -------                -------

Balance, November 28, 1997                                 $748                 $147,373               $148,121
                                                           ====                 ========               ========

</TABLE>

    The accompanying notes are an integral part of the financial statements


                                      F-5

<PAGE>


                        GS FINANCIAL PRODUCTS U.S., L.P.

<TABLE>
<CAPTION>
                            STATEMENTS OF CASH FLOWS
                          (U.S. dollars in thousands)
                                   ----------



                                                                                 FISCAL YEARS ENDED
                                                           ----------------------------------------------------------
                                                           NOVEMBER 24, 1995   NOVEMBER 29, 1996    NOVEMBER 28, 1997
                                                           -----------------   -----------------    -----------------
<S>                                                        <C>                 <C>                  <C>
Cash flows from operating activities:
    Net Income                                                  $12,280             $13,933             $14,228
    Adjustments to reconcile net income to net cash
        provided by operating activities:
            Equity in (earnings) loss of affiliate                   (9)                 10                  23
            Unrealized loss on securities owned                       0                   0              41,613
            (Decrease) in long-term borrowing due to
              embedded derivative transactions, net                   0                   0              (1,087)

Decreases (increases) in operating assets: 
     Derivative transactions, at fair value:
            Affiliate                                                 0              (4,050)            (14,288)
            Non-affiliate                                        24,308               7,833              49,537
            Other assets                                           (188)               (490)             (1,119)

Increases (decreases) in operating liabilities: 
     Derivative transactions, at fair value:
            Affiliate                                           (15,791)           (149,481)             (4,157)
            Non-affiliate                                        56,977               8,681              46,582
     Other liabilities and accrued expenses                       2,549               7,748              (5,506)
                                                                 ------            --------             -------

Net cash provided by (used in) operating activities              80,126            (115,816)            125,826

Cash flows from investing activities:
    Short term investments                                      (24,690)             24,690                   0
    Purchase of securities owned                                      0                   0            (136,798)
                                                                 ------            --------             -------

Net cash provided by (used in) investing activities             (24,690)             24,690            (136,798)

Cash flows from financing activities:
    Repayment of short-term borrowings                           (5,000)                  0                   0
    Proceeds from long-term borrowings                           40,000              73,000             160,797
    Distribution to partners                                          0              (9,016)                  0
                                                                 ------            --------             -------

Net cash provided by financing activities                        35,000              63,984             160,797

Net increase (decrease) in cash and cash equivalents             90,436             (27,142)            149,825

Cash and cash equivalents, beginning of period                   78,256             168,692             141,550
                                                               --------            --------            --------

Cash and cash equivalents, end of period                       $168,692            $141,550            $291,375
                                                               ========            ========            ========


Supplemental disclosure of cash flow information:
    Interest paid                                                  $280              $1,067              $4,824
    Income taxes paid                                                $0                $752                $155





   The accompanying notes are an integral part of the financial statements

</TABLE>

                                      F-6


<PAGE>


                        GS FINANCIAL PRODUCTS U.S., L.P.

                         Notes to Financial Statements
                                   ----------


1.   Business and Significant Accounting Policies:

     The business of GS Financial  Products  U.S.,  L.P.  (the  "Company") is to
     enter into, as principal or guarantor,  a variety of types of  transactions
     involving financial  instruments such as interest rate swaps, interest rate
     options  (e.g.,  interest  rate caps,  interest  rate floors and options on
     interest  rate  swaps),  currency  swaps and options,  commodity  swaps and
     options,  index  swaps and  forward  contracts  (collectively,  "Derivative
     Transactions"). Generally, the Company enters into or guarantees Derivative
     Transactions  in  situations  where two or more  counterparties  (typically
     including  a  related  party)  wish to enter  into  one or more  Derivative
     Transactions  between  themselves  but want the Company to  substitute  its
     credit for that of one or more of the  counterparties.  Market practice for
     such transactions is that the Company typically  substitutes its own credit
     for that of one or more of the counterparties by entering into each of such
     transactions directly as principal.  Such Derivative  Transactions may also
     include the use of futures,  or the purchase of the underlying  instruments
     subject to the transactions, such as foreign currency, physical commodities
     and securities.  Because it conducts its business  exclusively on a matched
     basis,  the  Company  is subject  to credit  risk but not  market  risk (as
     described under Derivative  Transactions -- see Note 3). In addition,  from
     time to time the Company issues structured notes. (See Note 6.)

     The Company's long term debt and  counterparty  credit risk have been rated
     AAA by  Standard  & Poor's  Ratings  Group  ("S&P")  and Fitch  IBCA,  Inc.
     ("Fitch").  There can be no assurance  that S&P and Fitch will  continue to
     rate  the  Company's   long  term  debt  and   counterparty   credit  risk,
     respectively,  in their  highest  category and any decrease in such ratings
     may adversely affect the Company's ability to compete successfully.

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions that affect the reported amounts.

     The Company is organized as a Cayman Islands exempted limited  partnership.
     All of the  partnership  interests in the Company are owned by subsidiaries
     of The Goldman Sachs Group, L.P. ("Group").

     The Company's  financial  statements  have been prepared in accordance with
     accounting   principles  generally  accepted  in  the  United  States.  The
     statements are reported in U.S.  dollars,  the  functional  currency of the
     Company.  Assets and liabilities  denominated in currencies  other than the
     U.S. dollar are measured using exchange rates  prevailing as of the balance
     sheet dates.  Revenues and expenses are measured at weighted  average rates
     of  exchange  for the  periods.  The  Company's  equity  in gains or losses
     resulting from translating the financial  statements of affiliates in which
     it has invested,  whose functional  currency is other than the U.S. dollar,
     is recorded as cumulative translation adjustments and included in partners'
     capital.

     The Company's Derivative  Transactions and securities owned are recorded on
     a trade date basis.

     Securities owned are recorded at their fair value.  Derivative Transactions
     are recorded at their estimated fair value. As a result,  due to the nature
     of the Company's  activities,  a substantial  portion of the intermediation
     profit from credit enhancing new Derivative  Transactions may be recognized
     upon entering into such transactions.  Such amounts were $7.3 million, $7.0
     million and $6.7  million for the fiscal  years ended 1997,  1996 and 1995,
     respectively.

     The  remainder  of   intermediation   profit  for  these  periods  resulted
     principally  from an increase in the present value of the expected  surplus
     cash  flows  from  the  Company's  portfolio  due to a  reduction  in  time
     remaining until those cash flows are realized  (including the impact of all
     hedges). Intermediation profit earned on performance guarantees is deferred
     and amortized over the term of the guarantee. (See Notes 3 & 4).

     Fair value for all securities owned is based on quoted market prices.  Fair
     value for all  Derivative  Transactions  is  estimated  by using  financial
     models  developed  by  affiliates,  which  incorporate  market data for the
     relevant instruments or for instruments with similar characteristics.  Fair
     value is estimated  at a specified  point in time.


                                   Continued

                                      F-7



<PAGE>


                        GS FINANCIAL PRODUCTS U.S., L.P.

                   Notes to Financial Statements (Continued)
                                   ----------


     The nature,  size,  and timing of  transactions  and the  liquidity  of the
     markets may not ultimately allow for the realization of these values.

     Certain  transactions  entered  into  under  master  agreements  and  other
     arrangements  that provide the Company,  in its opinion,  with the right of
     setoff in the event of a  bankruptcy  or  default by the  counterparty  are
     presented net in the balance sheets.

     Cash equivalents are short-term, highly liquid investments,  including time
     deposits at banks with original maturities of three months or less.

     At November 28, 1997, the Company had credit exposure  exceeding 10% of its
     total assets to four counterparties, which represented 44% of total assets.
     All four  counterparties  had a rating  of A+ or  better  from at least one
     internationally  recognized credit rating agency. At November 29, 1996, the
     Company  had  credit  exposure  exceeding  10% of its  total  assets to two
     counterparties,  which  represented  26%  of  total  assets.  Both  of  the
     counterparties  had a rating  of  single  A or  better  from at  least  one
     internationally recognized credit rating agency.

     Certain  prior year  amounts  have been  reclassified  to conform  with the
     November 28, 1997 presentation.


2.   Securities Owned:

     As of November  28, 1997  securities  owned  consisted  of shares of common
     stock of Oxford Health Plans, Inc. (fair value approximately $11.4 million)
     and shares of common  stock of  Citicorp  (fair value  approximately  $83.8
     million).  The Company  purchased these  securities to hedge certain of the
     Company's  exposures  incurred  by its  issuance  of  two  series  of  debt
     securities,  one of which is  mandatorily  exchangeable  at  maturity  into
     shares of common stock of Oxford Health Plans,  Inc. and the other of which
     is  exchangeable,  at the option of the  holder,  into  shares of  Citicorp
     common stock. (See Note 6.)


3.   Derivative Transactions:

     The fair  values of  Derivative  Transactions  entered  into  under  master
     agreements and other arrangements that provide the Company, in its opinion,
     with a right of  setoff  in the  event of  bankruptcy  and  default  by the
     counterparty are presented on a net basis in the balance sheets. Derivative
     Transactions  are principally  interest rate swaps,  interest rate options,
     index swaps,  currency options,  currency forwards and currency swaps which
     are denominated in various currencies.  The fair values of swap and forward
     agreements in a gain position,  as well as options  purchased are reported,
     in accordance with the Company's  netting policy,  as assets in "Derivative
     Transactions".  Similarly, the fair value of swap and forward agreements in
     a loss position as well as options  written are reported as  liabilities in
     "Derivative Transactions".  Derivative Transactions reported, in accordance
     with the Company's netting policy, as assets are principally obligations of
     major  international  financial  institutions,  primarily banks,  which are
     rated  A+ or  better  by at least  one  internationally  recognized  rating
     agency.

     Futures contracts are exchange-traded  standardized contractual commitments
     to buy or sell a specified quantity of a financial instrument,  currency or
     commodity  at a specified  price and future  date.  Forward  contracts  are
     over-the-counter  ("OTC")  contracts  between  two  parties  who  agree  to
     exchange a  specified  quantity  of a  financial  instrument,  currency  or
     commodity at a specified price and future date. Option contracts convey the
     right to buy (call  option) or sell (put  option) a  financial  instrument,
     currency  or  commodity  at a  pre-determined  price.  For  written  option
     contracts,  the writer  receives a premium in exchange for bearing the risk
     of unfavorable changes in the financial instrument,  currency or commodity.
     Swaps are OTC contracts  between two parties who agree to exchange periodic
     cash flow streams  calculated on a  pre-determined  contractual  (notional)
     amount.


                                   Continued

                                      F-8


<PAGE>


                        GS FINANCIAL PRODUCTS U.S., L.P.

                   Notes to Financial Statements (Continued)
                                   ----------


     In the normal  course of its  business  the  Company  enters  into  various
     Derivative  Transactions whereby the Company agrees to pay amounts that may
     increase in the event of changes in the level of an underlying  index.  The
     Company enters into such  transactions  with  counterparties  only if it is
     able to enter into  offsetting  transactions  that  entitle  the Company to
     receive amounts that are equal to or in excess of the amounts it owes. As a
     result,  so  long  as  none of its  counterparties  defaults,  the  Company
     believes  that it bears no market  risk  (i.e.,  its ability to satisfy its
     obligations will not be affected by market conditions).

     While the ultimate excess cash flows on these offsetting  transactions will
     be  positive or zero,  the  reported  revenues in any period  (based on the
     discounted value of these excess cash flows) will be impacted by changes in
     interest rates or foreign currency exchange rates.

     The Company's principal risk in respect of Derivative Transactions owned or
     guaranteed  is  the  credit  risk  associated  with  potential  failure  by
     counterparties  to  perform  under  the terms of their  obligations  to the
     Company.  Credit  exposure is measured by the loss the Company would record
     in such a  circumstance  and  equals,  at any  point in  time,  the cost of
     replacing such financial instruments, net of collateral. As of November 29,
     1996 and November 28, 1997,  the  Company's  aggregate  credit  exposure in
     respect of Derivative  Transactions was approximately $226 million and $152
     million, respectively.

     The  Company  limits its credit  risk by doing  business  principally  with
     highly rated counterparties. In certain circumstances, the Company may also
     require a counterparty  to post  marketable  securities,  principally  U.S.
     government agency and U.S. treasury  securities,  as collateral in order to
     reduce  the  amount of the  Company's  credit  exposure.  The  Company  had
     obtained  collateral  of  approximately  $5 million  related to  Derivative
     Transactions as of November 28, 1997.

     The Company also limits its credit risk by observing certain limitations on
     new Derivative  Transactions.  If such limits exceed management's criteria,
     the Company will not enter into any transaction  which increases that risk.
     The  calculation of these  limitations  incorporates  the net assets of the
     Company's  general  partner  which is  ultimately  liable for the Company's
     obligations (See Note 7).

     A summary of the  notional or  contractual  amounts ($ in  millions) of the
     Company's Derivative  Transactions by principal  characteristic follows. It
     should be noted that notional  principal  amount is not a measure of market
     or credit risk.

<TABLE>
<S>                                         <C>                        <C>
                                            November 29, 1996          November 28, 1997
                                            -----------------          -----------------
Non-affiliates
   Interest rate swap agreements                       $6,869                     $5,809
   Currency options written                             1,034                        909
   Currency options purchased                             594                        589
   Interest rate options written                        1,800                      1,471
   Interest rate options purchased                      1,481                      1,787
   Currency and other swap agreements                     502                        162
   Foreign currency forwards                              393                      1,552

 Affiliates
   Interest rate swap agreements                       $9,879                     $8,003
   Currency options written                               594                        396
   Currency options purchased                           1,034                      1,103
   Interest rate options written                        1,481                      1,742
   Interest rate options purchased                      2,458                      2,081
   Currency and other swap agreements                   1,974                        893
   Foreign currency forwards                              393                      1,535
</TABLE>

                                   Continued

                                      F-9


<PAGE>


                        GS FINANCIAL PRODUCTS U.S., L.P.

                   Notes to Financial Statements (Continued)
                                   ----------


     The notional amount of Derivative Transactions with affiliates differs from
     that with  non-affiliates  generally due to a different  notional amount of
     affiliate  versus  non-affiliate  transactions  guaranteed,  as  well as to
     Derivative  Transactions between the Company and affiliates which hedge the
     Company's  interest rate or currency exposure on surplus cash flow from its
     portfolio, or which are intended to mitigate total credit risk.

     As described in Note 1,  Derivative  Transactions  are carried at estimated
     fair value,  with the resulting  gains and losses  recognized  currently as
     intermediation profit. The fair values of Derivative  Transactions owned or
     issued as of November 28, 1997 and the average  monthly fair values of such
     instruments for the fiscal year then ended, computed in accordance with the
     Company's netting policy, are as follows:

<TABLE>
<CAPTION>
     (U.S. dollars in millions)           November 28, 1997               Average
     --------------------------          -------------------        --------------------
                                         Assets   Liabilities       Assets   Liabilities
                                         ------   -----------       ------   -----------
<S>                                      <C>      <C>               <C>      <C>
     Non-affiliates
     --------------
     Derivative transactions             $173.0        $154.0       $175.1        $131.2

     Affiliates
     ----------
     Derivative transactions               19.6           0.0         14.0           0.0

</TABLE>


4.   Related Party Transactions:

     During the fiscal years ended 1996 and 1995,  the Company  purchased  third
     party  interest  rate swaps and options from an affiliate at fair value and
     hedged these purchases with Derivative  Transactions  issued to affiliates.
     Intermediation  profit related to these transactions were $473 thousand and
     $784 thousand for the fiscal years ended 1996 and 1995, respectively. There
     were no transactions purchased from affiliates during fiscal 1997.

     In the  ordinary  course of  business,  the  Company  enters  into  hedging
     transactions with affiliates.  Through November 28, 1997, substantially all
     of the Company's  Derivative  Transactions  involved some degree of hedging
     with affiliates.

     The Company paid approximately $702 thousand to an affiliate related to the
     issuance of certain medium-term notes pursuant to an origination agreement.
     The Company has  deferred and will  amortize  these costs over the lives of
     the related notes.

     In  accordance  with  agreements  with certain  affiliates,  technical  and
     administrative  services  may be  provided  to the  Company  for an  amount
     representing  105% of the cost  incurred.  In  addition,  the  Company  has
     entered into a custodian and space sharing agreement with another affiliate
     for which an agreed upon fee per annum is charged. The Company also obtains
     brokerage and  custodial  services  from  affiliates.  For the fiscal years
     ended 1997, 1996 and 1995,  approximately $197 thousand,  $211 thousand and
     $195 thousand were charged for such services, respectively.


5.   Investment in Affiliates:

     The Company owns an approximate 2% general and limited partnership interest
     in GS Financial Products International,  L.P. ("FPI"). The Company accounts
     for  its  investment  in  FPI  under  the  equity  method  because  of  its
     non-managing general partner interest in FPI.


                                   Continued

                                      F-10

<PAGE>



                        GS FINANCIAL PRODUCTS U.S., L.P.

                   Notes to Financial Statements (Continued)
                                   ----------


     FPI is engaged in a business similar to that of the Company. As of November
     28, 1997, its assets consist  principally of cash and cash  equivalents and
     equity  securities of entities  organized  under Japanese law. Under Cayman
     Islands law, as a general  partner,  the Company would be liable for all of
     the  liabilities  of FPI if the assets of FPI were  inadequate  to meet its
     obligations.  As of November 28, 1997,  FPI had total  liabilities  of $203
     million.  The Company,  after analyzing the financial position,  results of
     operations  and cash flows of FPI,  believes  that FPI will be able to meet
     its obligations under its outstanding liabilities. Accordingly, the Company
     does not  believe  that it is  necessary  to,  and has not,  established  a
     reserve with respect to FPI's obligations under its liabilities.

     FPI's  functional  currency is the Japanese yen, and the amounts  presented
     below were translated at the appropriate yen/dollar exchange rate.

     Selected financial data for FPI (U.S. dollars in millions):

                                           Fiscal years ended
                        --------------------------------------------------------
                        November 24, 1995  November 29, 1996  November 28, 1997
                        -----------------  -----------------  -----------------

     Total assets                    $516               $400               $235
     Total liabilities                406                304                203
     Partners' capital                110                 96                 32
     Net (loss) income                0.9              (0.3)               (2.7)

     The  decrease  in  capital  in  fiscal  1997  is a  result  of a Y6 billion
     distribution of capital made by FPI to GS Financial Products,  L.P., one of
     the  Company's  limited  partners.  As a result of this  distribution,  the
     Company's general and limited partnership interest in FPI increased from 1%
     to 2%.


6.   Long-term Borrowings:

     The Company has issued both principal protected and non-principal protected
     Medium Term Notes  ("Notes").  The payments on the Notes are  determined by
     reference  to the  performance  of a single  equity  security  or an equity
     index. The Company's obligations to the holders of the Notes will fluctuate
     based on the  closing  price of the  applicable  equity  security or equity
     index.  Certain of the Notes are subject to redemption at the option of the
     Company  if certain  conditions  are met.  The terms of a Note  linked to a
     single  stock may either  allow for or  mandatorily  require  the holder to
     exchange the Notes into an amount of the underlying  security.  The cost of
     hedging an equity-linked  Medium Term Note may use up a substantial portion
     of the proceeds from the issuance of such Note.

     The Company has ascribed, where applicable,  the proceeds from the Notes to
     the   underlying   principal   component   and  the   embedded   Derivative
     Transactions. The amounts ascribed to the principal component will accrete,
     under the effective  interest rate method,  to the stated  principal amount
     over time. The embedded  Derivative  Transactions are recorded at estimated
     fair value.

     The Company has purchased  equity  securities  and has entered into various
     Derivative  Transactions with affiliates and has purchased  exchange traded
     options  to  eliminate  its  market  risk on the  Notes.  (See Note 3 for a
     discussion of credit risk on Derivative  Transactions.)  The fixed rates on
     Notes  linked to an equity  index have been  effectively  converted to U.S.
     dollar-based  floating  interest  rate costs by  entering  into  Derivative
     Transactions  with  affiliates.  The gains and  losses on these  Derivative
     Transactions  hedging the principal component are deferred and the periodic
     receipts and payments are recognized as adjustments to interest expense and
     are accrued  over the life of the Notes.  For the year ended  November  28,
     1997,  interest  expense  on the notes  linked  to a single  stock was $2.9
     million which is primarily  offset by amounts  recorded in interest income.
     As discussed in Note 1,  securities  owned and the Derivative  Transactions
     hedging the embedded Derivative Transactions are recorded at fair value and
     estimated fair value, respectively.


                                   Continued

                                      F-11

<PAGE>


                        GS FINANCIAL PRODUCTS U.S., L.P.

                   Notes to Financial Statements (Continued)
                                   ----------

<TABLE>
<S>                                                         <C>                        <C>
                                                            November 29, 1996          November 28, 1997
                                                            -----------------          -----------------

Nikkei Indexed Notes due December 22, 2000(1)                         $40,449                    $52,008

S&P Enhanced Stock Index Growth Notes due August 9, 2002(2)            76,329                     94,380

7% Mandatorily Exchangeable Notes due July 23, 1999(3)                    N/A                     16,808
  (Subject to Mandatory Exchange into Shares of 
   Common Stock of Oxford Health Plans, Inc.)

3% Citicorp Exchangeable Notes due August 28, 2002(4)                     N/A                    113,293
                                                                      -------                  ---------

                                                                     $116,778                   $276,489
                                                                     ========                   ========
<FN>

(1)  The $40 million face amount of Nikkei Indexed Notes are principal protected
     and have no stated  coupon.  The carrying value is inclusive of an embedded
     written option to the note holders of $11.6 million as at November 29, 1996
     and $19.0 million as at November 28, 1997.

(2)  The $73 million  face amount of S&P  Enhanced  Stock Index Growth Notes are
     principal  protected  and have no  stated  coupon.  The  carrying  value is
     inclusive  of an  embedded  written  option  to the note  holders  of $25.3
     million as at November 29, 1996 and $40.1 million as at November 28, 1997.

(3)  The 7% Mandatorily  Exchangeable Notes due July 23, 1999 do not have a face
     amount,  but  had an  initial  principal  amount  of  $40.8  million  which
     represented  477,865 notes at the prevailing  market price of Oxford Health
     Plans,  Inc.  common stock on the date of issue.  The  principal  repayment
     amount will be  determined by the closing price of the Oxford Health Plans,
     Inc.  common stock at maturity and,  accordingly,  the carrying  value will
     fluctuate based upon the prevailing  market price of the common stock.  The
     ability  of the note  holders to  participate  in the  appreciation  of the
     Oxford  Health  Plans,  Inc.  common  stock is limited and cannot  exceed a
     closing  price of  $129.77  per note at  maturity.  The  carrying  value is
     inclusive of the embedded Derivative  Transactions of ($29.4) million as at
     November 28, 1997.

(4)  The $120 million face amount of Citicorp  Exchangeable  Notes are principal
     protected and are  exchangeable in $250,000  increments by the note holders
     into 1,455 shares per increment of Citicorp common stock. In addition,  the
     Notes are  redeemable by the Company at various  times after  September 14,
     1999 at the face amount,  plus accrued  interest,  if the note holders have
     not exercised their exchange option. The carrying value is inclusive of the
     embedded  Derivative  Transactions,  net of $8.6 million as at November 28,
     1997.

     Including the impact of the Derivative  Transactions,  the weighted average
     interest  rate for the notes was 5.91% as of November 28, 1997 and 5.41% as
     of November 29, 1996.
</FN>
</TABLE>


7.   Liability of General Partner:

     The  Company's  sole general  partner is GS Financial  Products US Co. (the
     "Corporate  General  Partner").  Under Cayman  Islands  law, the  Corporate
     General Partner,  but not its shareholders,  would be liable for all of the
     obligations of the Company if the assets of the Company were  inadequate to
     meet its obligations. The sole business of the Corporate General Partner is
     to manage the Company.

     The assets of the Corporate General Partner consist principally of cash and
     cash equivalents. The Corporate General Partner had assets of $12.3 million
     and equity of  approximately  $12.2  million as of  November  29,  1996 and
     assets of  approximately  $2.8  million  and equity of  approximately  $2.2
     million as of November 28, 1997. The decrease in total assets and equity is
     the result of a $10  million  distribution  paid by the  Corporate  General
     Partner  to GS  Financial  Products,  L.P.,  one of the  Company's  limited
     partners.





                                   Continued

                                      F-12


<PAGE>


                        GS FINANCIAL PRODUCTS U.S., L.P.

                   Notes to Financial Statements (Continued)
                                   ----------


8.   Income Taxes:

     The Company, as a partnership, is not subject to U.S. federal income taxes.
     Prior to January 1, 1997,  the  Company was  required  by U.S.  federal tax
     regulations  to  withhold  income  tax on  behalf  of its  partners.  These
     payments  were made on behalf of the  Company by a related  party.  For the
     fiscal year ended  November  29, 1996,  the related  party  remitted  $4.53
     million to tax  authorities,  the entire amount of which the Company repaid
     to the  related  party.  As of January 1,  1997,  the  Company is no longer
     required to withhold taxes on behalf of its partners under U.S. federal tax
     regulations.

     Certain  of  the  Company's  income  is  subject  to a  4%  New  York  City
     unincorporated  business  tax. The statement of income for the fiscal years
     ended November 28, 1997, November 29, 1996 and November 24, 1995 includes a
     provision for  unincorporated  business tax on income earned by the Company
     related to doing business in New York City.



















                                      F-13


<PAGE>


GS FINANCIAL PRODUCTS U.S., L.P.

SUPPLEMENTARY FINANCIAL INFORMATION

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                     1996 FISCAL QUARTERS ENDED
(U.S. dollars in thousands)         February 23      May 31            August 30        November 29
                                    -----------      ------            ---------        -----------
<S>                                 <C>              <C>               <C>              <C>

Total revenues                         4,072         4,007               4,419             6,522

Revenues, net of interest expense      3,511         3,375               3,568             4,939

Net income                             3,083         3,061               3,264             4,525




                                                     1997 FISCAL QUARTERS ENDED
(U.S. dollars in thousands)         February 28      May 31            August 29        November 28
                                    -----------      ------            ---------        -----------

Total revenues                         6,424         4,524               7,076             6,799

Revenues, net of interest expense      4,822         2,923               5,125             2,688

Net income                             4,457         2,674               4,692             2,405
</TABLE>


























                                      F-14


<PAGE>


                                   SIGNATURE


     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the  undersigned  thereunto  duly  authorized  on this 26th day of
February, 1998.



                                  GS FINANCIAL PRODUCTS U.S., L.P.
                                  acting by its general partner, GS Financial
                                  Products US Co.



                            By:            /s/     Greg Swart
                                   -------------------------------------------
                                                  Greg Swart
                                     President, Principal Financial Officer
                                     and Principal Accounting Officer

                                  For and on behalf of GS Financial Products US 
                                  Co., managing general partner of GS Financial 
                                  Products U.S., L.P.























                                      F-15


<PAGE>



                                   SIGNATURES


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.


          Signatures                Capacity                     Date
          ----------                --------                     ----
                          position with general partner



 /s/ Richard E. Witten              Director                  February 26, 1998
-------------------------
 Richard E. Witten



  /s/ Oki Matsumoto                 Director                  February 26, 1998
-------------------------
 Oki Matsumoto



/s/ Thomas K. Montag                Director                  February 26, 1998
-------------------------
 Thomas K. Montag



   /s/ Kipp Nelson                  Director                  February 26, 1998
-------------------------
 Kipp Nelson



   /s/ Mark Zurack                  Director                  February 26, 1998
-------------------------
 Mark Zurack



    /s/ Greg Swart                  President,                February 26, 1998
-------------------------  Principal Financial Officer and
 Greg Swart                  Principal Accounting Officer
















                                      F-16