Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-219206
The information in this preliminary prospectus supplement is not complete and may be changed. This preliminary prospectus supplement is not an offer to sell nor
does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
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Subject to Completion. Dated October 30, 2018.
GS Finance Corp.
$
Autocallable Contingent Coupon Equity-Linked Notes due
guaranteed by
The Goldman Sachs Group, Inc.
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The notes will not pay a fixed coupon and may pay no coupon on a coupon
payment date. The amount that you will be paid on your notes is based on the performance of the Class C capital stock of Alphabet Inc. The notes will mature on the stated maturity date (expected to be November 20, 2019) unless they
are automatically called on any call observation date (expected to be each coupon determination date). Your notes will be automatically called if the closing price of the index stock on any call observation date is greater than or equal to the initial index stock price (set on the trade date, expected to be November 2,
2018), resulting in a payment on the corresponding call payment date (expected to be the third business day after the call observation date) equal to the face amount of your notes plus the coupon (defined below) then due.
On each coupon determination date (expected to be February 14, 2019, May 16, 2019 and August 15, 2019), subject to the automatic call feature, if the closing price of
the index stock is greater than or equal to 74.2% of the initial index stock price,
you will receive on the corresponding coupon payment date (expected to be the third business day after each coupon determination date), for each $1,000 face amount of your notes, a coupon payment equal to (i) the product of $25 times the number of coupon determination dates that have occurred up to and including the
relevant coupon determination date minus (ii) the sum of all coupons previously paid, if any.
If the closing price of the index stock on any coupon determination date is less than 74.2% of the initial index stock price, you will not receive a coupon payment on the applicable coupon payment date. In addition, the rate of any coupon payment received on any coupon payment date may be less than the percentage of
any increase in the index stock price from the initial index stock price to the corresponding coupon determination date.
If your notes are not automatically called, the amount that you will be paid on your notes on the
stated maturity date, if any, is based on the performance of the index stock as measured from the initial index stock price to the final index stock price, which is the arithmetic average of the closing prices of the index stock on each of the
averaging dates (expected to be November 11, 2019, November 12, 2019, November 13, 2019, November 14, 2019 and November 15, 2019). If the final index stock price is greater
than or equal to 74.2% of the initial index stock price, you will receive, for each $1,000 face amount of your notes, the sum of (i) $1,000 plus (ii) a coupon equal to $100 minus the sum of all coupons previously paid, if any. If the final index stock price declines by more than 25.8% from the initial index stock price, the
amount you receive at maturity will depend on the index stock return but will be less than the face amount of your notes. You will not benefit from any increase in the final index stock price above the initial index stock price, and you could
lose your entire investment in the notes if the final index stock price is zero.
If your notes are not automatically called, to determine your payment at maturity we will calculate
the index stock return, which is the percentage increase or decrease in the final index stock price from the initial index stock price. On the stated maturity date, for each $1,000 face amount of your notes you will receive an amount in cash
equal to:
| · |
if the index stock return is greater than or equal to -25.8% (the final index stock price is greater than or equal to 74.2% of the initial index stock price), the sum of (i) $1,000 plus (ii) a coupon equal to $100 minus the sum of all
coupons previously paid, if any; or
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if the index stock return is less than -25.8%
(the final index stock price is less than 74.2% of the initial index stock price), the sum of (i) $1,000 plus (ii) the product of (a) the
index stock return times (b) $1,000.
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You should read the disclosure herein to better understand the terms and
risks of your investment, including the credit risk of GS Finance Corp. and The Goldman Sachs Group, Inc. See page S-13. The estimated value of your notes at the time the terms of your notes are set on the trade date is expected to be between $960 and $990 per $1,000 face amount. For a discussion of the estimated value and the price at which Goldman Sachs & Co.
LLC would initially buy or sell your notes, if it makes a market in the notes, see the following page.
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Original issue date:
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expected to be November 7, 2018
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Original issue price:
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100% of the face amount*
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Underwriting discount:
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% of the face amount*
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Net proceeds to the issuer:
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% of the face amount
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*Accounts of certain national banks, acting as purchase agents for such accounts, have agreed with the purchase agents to pay a purchase price of
% of the face amount, and as a result of such agreements, the agents with respect to sales to be made to such accounts will not receive any portion of the underwriting discount from GS & Co.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or
passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. The notes are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental
agency, nor are they obligations of, or guaranteed by, a bank.
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Goldman Sachs & Co. LLC
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JPMorgan
Placement Agent
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Prospectus Supplement No. dated , 2018.
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The issue price, underwriting discount and net proceeds listed above relate to the notes we sell initially. We may decide to sell additional
notes after the date of this prospectus supplement, at issue prices and with underwriting discounts and net proceeds that differ from the amounts set forth above. The return (whether positive or negative) on your investment in notes will depend
in part on the issue price you pay for such notes.
GS Finance Corp. may use this prospectus in the initial sale of the notes. In addition, Goldman Sachs & Co. LLC, or any other
affiliate of GS Finance Corp., may use this prospectus in a market-making transaction in a note after its initial sale. Unless GS Finance Corp. or its
agent informs the purchaser otherwise in the confirmation of sale, this prospectus is being used in a market-making transaction.
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Estimated Value of Your Notes
The estimated value of your notes at the time the terms of your notes are set on the trade date (as
determined by reference to pricing models used by Goldman Sachs & Co. LLC (GS&Co.) and taking into account our credit spreads) is expected to be between $960 and $990 per $1,000 face amount, which is less than the original issue
price. The value of your notes at any time will reflect many factors and cannot be predicted; however, the price (not including GS&Co.’s customary bid and ask spreads) at which GS&Co. would initially buy or sell notes (if it
makes a market, which it is not obligated to do) and the value that GS&Co. will initially use for account statements and otherwise is equal to approximately the estimated value of your notes at the time of pricing, plus an additional
amount (initially equal to $ per $1,000 face amount).
Prior to , the price (not including GS&Co.’s customary
bid and ask spreads) at which GS&Co. would buy or sell your notes (if it makes a market, which it is not obligated to do) will equal approximately the sum of (a) the then-current estimated value of your notes (as determined by
reference to GS&Co.’s pricing models) plus (b) any remaining additional amount (the additional amount will decline to zero on a straight-line basis from the time of pricing through ). On and after , the price (not
including GS&Co.’s customary bid and ask spreads) at which GS&Co. would buy or sell your notes (if it makes a market) will equal approximately the then-current estimated value of your notes determined by reference to such
pricing models.
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About Your Prospectus
The notes are part of the Medium-Term Notes, Series E program of GS Finance Corp. and are fully and unconditionally guaranteed by The
Goldman Sachs Group, Inc. This prospectus includes this prospectus supplement and the accompanying documents listed below. This prospectus supplement constitutes a supplement to the documents listed below and should be read in
conjunction with such documents:
The information in this prospectus supplement supersedes any conflicting information in the documents listed above. In addition, some of
the terms or features described in the listed documents may not apply to your notes.
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We refer to the notes we are offering by this prospectus supplement as the “offered notes” or
the “notes”. Each of the offered notes has the terms described below and under “Specific Terms of Your Notes” on page S-23. Please note that in this prospectus supplement, references to “GS Finance Corp.”, “we”, “our” and “us” mean only
GS Finance Corp. and do not include its subsidiaries or affiliates, references to “The Goldman Sachs Group, Inc.”, our parent company, mean only The Goldman Sachs Group, Inc. and do not include its subsidiaries or affiliates and
references to “Goldman Sachs” mean The Goldman Sachs Group, Inc. together with its consolidated subsidiaries and affiliates, including us. Also, references to the “accompanying prospectus” mean the accompanying prospectus, dated July 10,
2017, and references to the “accompanying prospectus supplement” mean the accompanying prospectus supplement, dated July 10, 2017, for Medium-Term Notes, Series E, in each case of GS Finance Corp. and The Goldman Sachs Group, Inc.
References to the “indenture” in this prospectus supplement mean the senior debt indenture, dated as of October 10, 2008, as supplemented by the First Supplemental Indenture, dated as of February 20, 2015, each among us, as issuer, The
Goldman Sachs Group, Inc., as guarantor, and The Bank of New York Mellon, as trustee. This indenture is referred to as the “GSFC 2008 indenture” in the accompanying prospectus supplement.
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Key Terms
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Issuer:
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GS Finance Corp.
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Guarantor:
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The Goldman Sachs Group, Inc.
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Index stock:
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the Class C capital stock of Alphabet Inc. (Bloomberg ticker “GOOG UW”)
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Specified Currency:
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U.S. dollars ($)
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Face amount:
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each note will have a face amount of $1,000; $ in the aggregate for all the offered notes; the aggregate face amount of the
offered notes may be increased if the issuer, at its sole option, decides to sell an additional amount of the offered notes on a date subsequent to the date of this prospectus supplement
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Denominations:
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$10,000 and integral multiples of $1,000 in excess thereof
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Supplemental discussion of U.S.
federal income tax consequences:
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you will be obligated pursuant to the terms of the notes — in the absence of a change in law, an administrative determination or a judicial
ruling to the contrary — to characterize each note for all tax purposes as an income-bearing pre-paid derivative contract in respect of the index stock, as described under “Supplemental Discussion of U.S. Federal Income Tax Consequences”
below. Pursuant to this approach, it is the opinion of Sidley Austin llp that it is likely that any coupon payment will be taxed as ordinary income in
accordance with your regular method of accounting for U.S. federal income tax purposes. If you are a United States alien holder of the notes, we intend to withhold on coupon payments made to you at a 30% rate or at a lower rate specified
by an applicable income tax treaty. In addition, upon the sale, exchange, redemption or maturity of your notes, it would be reasonable for you to recognize capital gain or loss equal to the difference, if any, between the amount of cash
you receive at such time (excluding amounts attributable to any accrued and unpaid coupon payments) and your tax basis in your notes.
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Automatic call feature:
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if, as measured on any call observation date, the closing price of the index stock is greater than or equal to the initial index stock
price, your notes will be automatically called
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Cash settlement amount (on any
call payment date):
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if your notes are automatically called on any call observation date, for each $1,000 face amount of your notes, we will pay you on the corresponding call
payment date an amount in cash equal to the sum of (i) $1,000 plus (ii) the
coupon then due
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Cash settlement amount (on the
stated maturity date):
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if your notes are not automatically called, for each $1,000 face amount of
your notes we will pay you on the stated maturity date an amount in cash equal to:
· if the final index stock price is greater than or equal to 74.2% of the initial index stock price, the sum of (i) $1,000 plus (ii) a coupon equal to $100 minus the sum of all coupons previously paid, if any; or
· if the final index stock price is less than 74.2% of the initial index stock price, the sum of (1) $1,000 plus (2) the product
of (i) $1,000 times (ii) the index stock return
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Initial index stock price (to be
set on the trade date):
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the closing price of one share of the index stock on the trade date
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Final index stock price:
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the arithmetic average of the closing prices of one share of the index stock on each of the averaging dates, subject to adjustment as
described under “Specific Terms of Your Notes — Anti-dilution Adjustments” on page S-24
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Index stock return:
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the quotient of (1) the final index stock price minus the initial index stock price divided by (2) the initial index stock price,
expressed as a percentage
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Call observation dates (to be set
on the trade date):
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expected to be each coupon determination date, subject to adjustment as described under “Specific Terms of Your Notes —Call Observation
Dates” on page S-24
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Call payment dates (to be set on
the trade date):
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expected to be the third business day after each call observation date, subject to adjustment as described under “Specific Terms of Your
Notes — Call Payment Dates” on page S-23
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Coupon:
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subject to the automatic call feature, on each coupon payment date other than the stated maturity date, for each $1,000 face amount of your
notes we will pay you an amount in cash equal to:
· if the closing price of the index stock on the related coupon determination date is greater than or equal to 74.2% of the initial index stock price, (i) the product of $25 times the number of coupon determination dates that have occurred up to and including the relevant coupon determination date minus (ii) the sum of all coupons previously paid; or
· if the closing price of the index stock on the related coupon determination date is less than the 74.2% of the initial index stock price, $0
The coupon that may be paid on the stated maturity date will be calculated as described under “Cash settlement amount (on the stated
maturity date)” above, which is based on the index stock return and averaging dates as described below.
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Coupon determination dates (to
be set on the trade date):
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expected to be February 14, 2019, May 16, 2019 and August 15, 2019, subject to adjustment as described under “Specific Terms of Your Notes —
Coupon Determination Dates” on page S-23
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Coupon payment dates (to be set
on the trade date):
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expected to be (i) the third business day after each coupon determination date and (ii) the stated maturity date, subject to adjustment as
described under “Specific Terms of Your Notes — Coupon and Coupon Payment Dates” on page S-23
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Regular record dates:
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the scheduled business day immediately preceding the day on which payment is to be made (as such payment date may be adjusted)
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Trade date:
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expected to be November 2, 2018
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Original issue date (settlement
date) (to be set on the trade date):
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expected to be November 7, 2018
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Averaging dates (to be set on the
trade date):
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expected to be November 11, 2019, November 12, 2019, November 13, 2019, November 14, 2019 and November 15, 2019, each subject to adjustment
as described under “Specific Terms of Your Notes — Averaging Dates” on page S-23
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Determination date (to be set on
the trade date):
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the final averaging date, expected to be November 15, 2019, subject to adjustment as described under “Specific Terms of Your Notes ——
Averaging Dates” on page S-23
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Stated maturity date (to be set on
the trade date):
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expected to be November 20, 2019, subject to adjustment as described under “Specific Terms of Your Notes — Stated Maturity Date” on page
S-23
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No listing:
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the offered notes will not be listed on any securities exchange or interdealer quotation system
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Calculation agent:
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Goldman Sachs & Co. LLC (“GS&Co.”)
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Closing price:
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as described under “Specific Terms of Your Notes — Special Calculation Provisions — Closing Price” on page S-30
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Business day:
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as described under “Specific Terms of Your Notes — Special Calculation Provisions — Business Day” on page S-30
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Trading day:
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as described under “Specific Terms of Your Notes — Special Calculation Provisions — Trading Day” on page S-30
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CUSIP no.:
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40056EDB1
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ISIN:
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US40056EDB11
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Use of proceeds and hedging:
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as described under “Use of Proceeds” and “Hedging” on page S-32
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ERISA:
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as described under “Employee Retirement Income Security Act” on page S-39 of this prospectus supplement
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FDIC:
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the notes are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of,
or guaranteed by, a bank
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This is only a brief summary of the terms of your notes. You should read the detailed
description thereof in “Summary Information” on page S-3. Please read the terms below with the remainder of this prospectus supplement, the accompanying prospectus supplement, dated July
10, 2017, and the accompanying prospectus dated July 10, 2017.
Autocallable Contingent Coupon Equity-Linked Notes due
Issued by:
GS Finance Corp.
Guaranteed by:
The Goldman Sachs Group, Inc.
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Investment Objective
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For investors:
· who believe that the change in the closing price of the index stock from the trade date to the closing price of the index stock on
any coupon determination date will not be greater than or equal to 0% or less than -25.8%; and
· who want to receive (1) a coupon payment if the closing price of the index stock on any coupon determination date is greater than
or equal to 74.2% of the initial index stock price, subject to the automatic call feature, and (2) protection against a decline in the final index stock price (which is the arithmetic average of the closing prices of the index stock on
each of the averaging dates) of up to -25.8%, in exchange for:
· limiting their upside return for each $1,000 face amount to (i) the coupons payable, if any, on the coupon payment dates other than
the stated maturity date if the closing price of the index stock on the related coupon determination date is greater than or equal to 74.2% of the initial index stock price and (ii) the coupon payable on the stated maturity date, if
any, if the final index stock price is greater than or equal to 74.2% of the initial index stock price;
· receiving no coupon on a coupon payment date if the index stock price is less than 74.2% of the initial stock price on the
corresponding coupon determination date;
· receiving no coupon on the stated maturity date if the final index stock price is less than 74.2% of the initial stock price;
· accepting that the term for the notes may be reduced to as few as approximately three months after the original issue date if the notes are automatically called; and
· bearing the full downside risk if the final index stock price decreases by more than 25.8%, including the risk of losing their
entire investment in the notes.
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Determining the Cash Settlement Amount
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Your notes will be automatically called if the closing price of the index stock on any call observation date is greater than
or equal to the initial index stock price (set on the trade date), resulting in a payment on the corresponding call payment date equal to the face amount of your notes plus
the coupon then due.
Subject to the automatic call feature, on each coupon determination date, if the closing price of the index stock is greater than or equal to 74.2% of the initial index stock price, you will receive on the corresponding coupon payment date a coupon payment
that is equal to the product of (i) $25 times the number of coupon determination dates that have occurred up
to and including the relevant coupon determination date minus (ii) the sum of all coupons previously paid, for each $1,000 face amount of your notes. If the closing price
of the index stock on any coupon determination date is less than 74.2% of the initial index stock price, you will not receive a coupon payment on the applicable coupon payment date.
If your notes are not automatically called, to determine your payment at maturity we will calculate the
index stock return, which is the percentage increase or decrease in the final index stock price from the initial index stock price. On the stated maturity date, for each $1,000 face amount of your notes, you will receive an amount in
cash equal to:
· if the index stock return is greater than or equal to -25.8%,
the sum of (i) $1,000 plus (ii) the coupon then due (which is equal to $100
minus the sum of all coupons previously paid, if any); or
· if the index stock return is less than -25.8%, the sum of (i)
$1,000 plus (ii) the product of (a) the index stock return times (b) $1,000.
Payment on the notes is subject to the creditworthiness of GS Finance Corp., as issuer, and The Goldman Sachs Group, Inc., as guarantor.
You could lose your entire investment in the notes.
You should expect to hold the notes until the stated maturity date. There may be little or no secondary market for the notes. We have been
advised by GS&Co. that it intends to make a market in the notes. However, neither GS&Co. nor any of our other affiliates that makes a market is obligated to do so and any of them may stop doing so at any time without notice.
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Indicative Terms
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Issuer
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GS Finance Corp.
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Guarantor
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The Goldman Sachs Group, Inc.
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Index Stock
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the Class C capital stock of Alphabet Inc. (Bloomberg ticker “GOOG UW”)
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Trade Date
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expected to be November 2, 2018
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Settlement Date
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expected to be November 7, 2018
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Averaging Dates
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expected to be November 11, 2019, November 12, 2019, November 13, 2019, November 14, 2019 and November 15, 2019
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Determination Date
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expected to be the final averaging date, November 15, 2019
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Stated Maturity Date
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expected to be November 20, 2019
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Initial Index Stock Price
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the closing price of one share of the index stock on the trade date
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Final Index Stock Price
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the arithmetic average of the closing prices of one share of the index stock on each of the averaging dates
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Index Stock Return
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the quotient of (1) the final index stock price minus the initial index stock price divided by (2) the initial index stock price, expressed as a percentage
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Automatic Call Feature
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if, as measured on any call observation date, the closing price of the index stock is greater than or equal to the initial index stock price, your notes will
be automatically called; if your notes are automatically called on any call observation date, on the corresponding call payment date you will receive an amount in cash equal to $1,000 for each $1,000 face amount of your notes in
addition to the coupon then due
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Call Observation Dates
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expected to be each coupon determination date
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Call Payment Dates
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expected to be the third business day after each call observation date
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Coupon
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subject to the automatic call feature, on each coupon payment date other than the stated maturity date, for each $1,000 face amount of your notes we will pay
you an amount in cash equal to:
· if the closing price of the index stock on the related coupon determination date is greater than or equal to 74.2% of the initial index stock price, (i) the product of $25 times the number of coupon determination dates that have occurred up to and including the relevant coupon determination date minus (ii) the sum of all coupons previously paid; or
· if the closing price of the index stock on the related coupon determination date is less than the 74.2% of the initial index stock price, $0
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Coupon Determination Dates
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expected to be February 14, 2019, May 16, 2019 and August 15, 2019
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Coupon Payment Dates
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expected to be (i) the third business day after each coupon determination date and (ii) the stated maturity date
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Denomination
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USD
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CUSIP
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40056EDB1
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Placement Agent
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JPMorgan Securities LLC
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Risk Factors
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You should read “Additional Risk Factors Specific to Your Notes” on page S-13 of this prospectus supplement so that
you may better understand the risks associated with an investment in the notes.
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Autocallable Contingent Coupon Equity-Linked Notes due
Issued by:
GS Finance Corp.
GS Finance Corp.
Guaranteed by:
The Goldman Sachs Group, Inc.
The Goldman Sachs Group, Inc.
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The following table is provided for purposes of illustration only. It should not be taken as an indication or prediction of future investment results and is
intended merely to illustrate the impact that various hypothetical final index stock prices could have on the cash settlement amount at maturity assuming the notes have not been automatically called and all other variables remain
constant.
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The Notes Have Not Been Automatically Called
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Hypothetical Final Index Stock Price
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Hypothetical Cash Settlement
Amount at
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(as Percentage of Initial Index Stock
Price)
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Maturity if the Notes Have Not
Been Automatically Called (as
Percentage of Face Amount)
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175.000%
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100.000%*
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150.000%
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100.000%*
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125.000%
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100.000%*
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110.000%
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100.000%*
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100.000%
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100.000%*
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90.000%
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100.000%*
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74.200%
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100.000%*
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74.199%
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74.199%
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60.000%
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60.000%
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50.000%
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50.000%
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40.000%
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40.000%
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25.000%
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25.000%
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0.000%
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0.000%
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*Does not include the coupon to be paid at maturity
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You should read this prospectus supplement together with the prospectus dated July 10, 2017 and the prospectus supplement dated
July 10, 2017. You may access these documents on the SEC website at sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC
website):
Prospectus dated July 10, 2017:
Prospectus supplement dated July 10, 2017:
The following examples are provided for purposes of illustration only. They should not be taken as an indication or prediction of
future investment results and are intended merely to illustrate (i) the impact that various hypothetical closing prices of the index stock on a coupon determination date could have on the coupon payable on the related coupon payment date and (ii)
the impact that various hypothetical final index stock prices could have on the cash settlement amount at maturity assuming the notes have not been automatically called and all other variables remain constant.
The examples below are based on a range of final index stock prices that are entirely hypothetical; no one can predict what the index stock price will
be on any day throughout the life of your notes, and no one can predict what the closing price of the index stock will be on any coupon determination date or call observation date, as the case may be, and what the closing prices for the index
stock will be on any averaging date. The index stock has been highly volatile in the past — meaning that the index stock price has changed considerably in relatively short periods — and its performance cannot be predicted for any future period.
The information in the following examples reflects the hypothetical rates of return on the offered notes assuming that they are
purchased on the original issue date at the face amount and held to a call payment date or the stated maturity date. If you sell your notes in a secondary market prior to a call payment date or the stated maturity date, as the case may be, your
return will depend upon the market value of your notes at the time of sale, which may be affected by a number of factors that are not reflected in the examples below such as interest rates, the volatility of the index stock and the
creditworthiness of GS Finance Corp., as issuer, and the creditworthiness of The Goldman Sachs Group, Inc. as guarantor. In addition, the estimated value of your notes at the time the terms of your notes are set on the trade date (as determined
by reference to pricing models used by GS&Co.) is less than the original issue price of your notes. For more information on the estimated value of your notes, see “Additional Risk Factors Specific to Your Notes — The Estimated Value of Your
Notes At the Time the Terms of Your Notes Are Set On the Trade Date (as Determined By Reference to Pricing Models Used By GS&Co.) Is Less Than the Original Issue Price Of Your Notes” on page S-13 of this prospectus supplement.
The information in the examples also reflects the key terms and assumptions in the box below.
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Key Terms and Assumptions
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Face amount
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$1,000
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Hypothetical Initial Index Stock Price
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$1,000
|
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· The notes are not automatically called, unless otherwise indicated below
· Neither a market disruption event nor a non-trading day occurs on any originally scheduled coupon determination date, call observation date or the originally scheduled averaging dates
· No change in or affecting the index stock
· The effect of any accrued and unpaid coupon has been excluded
· Notes purchased on original issue date at the face amount and held to a call payment date or the stated maturity date
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Moreover, we have not yet set the initial index stock price that will serve as the baseline for determining the index stock return and the amount that we will pay on
your notes at maturity. We will not do so until the trade date. As a result, the actual initial index stock price may differ substantially from the index stock price prior to the trade date.
For these reasons, the actual performance of the index stock over the life of your notes, as well as the amount payable at maturity, if any, may bear
little relation to the hypothetical examples shown below or to the historical index stock prices shown elsewhere in this prospectus supplement. For information about the historical prices of the index stock during recent periods, see “The Index
Stock — Historical Closing Prices of the Index Stock” below. Before investing in the offered notes, you should consult publicly available information to determine the prices of the index stock between the date of this prospectus supplement and
the date of your purchase of the offered notes.
Also, the hypothetical examples shown below do not take into account the effects of applicable taxes. Because of the U.S. tax treatment applicable
to your notes, tax liabilities could affect the after-tax rate of return on your notes to a comparatively greater extent than the after-tax return on the index stock.
Hypothetical Coupon Payments
The examples below show the hypothetical performance of the index as well as the hypothetical coupons, if any, that we would pay on each coupon payment date with
respect to each $1,000 face amount of the notes if the closing price of the index on the applicable coupon determination date were the hypothetical closing prices shown. If the closing price of the index stock on any coupon determination date is
equal to or greater than 74.2% of the initial index stock price you will receive, on the corresponding coupon payment date, a coupon payment equal to (i) the product of
$25 times the number of coupon determination dates that have occurred up to and including the relevant coupon determination date minus (ii) the sum of all coupons previously paid. If the closing price of the index stock on any call observation date (which occur on each coupon determination date) is equal to or greater than the
initial index stock price, your notes will be automatically called and for each $1,000 face amount of your notes you will receive, on the corresponding call payment date, $1,000 plus the coupon then due.
Scenario 1
|
Hypothetical Coupon Determination Date
|
Hypothetical Closing Price of the Index Stock ($)
|
Hypothetical Coupon
|
|
First
|
800
|
$25
|
|
Second
|
500
|
$0
|
|
Third
|
850
|
$50
|
|
Total Hypothetical Coupons
|
$75
|
In Scenario 1, because the hypothetical closing prices of the index stock on the first and third hypothetical coupon determination dates are greater than or equal to 74.2% of the initial index stock price, the total of the hypothetical coupons paid to but excluding the stated maturity date in Scenario 1 is $75.
Because the hypothetical closing price of the index stock on the second hypothetical coupon determination date is less than 74.2% of the initial index stock price, no coupon will be paid on the corresponding hypothetical coupon payment date.
Scenario 2
|
Hypothetical Coupon Determination Date
|
Hypothetical Closing Price of the Index Stock ($)
|
Hypothetical Coupon
|
|
First
|
600
|
$0
|
|
Second
|
700
|
$0
|
|
Third
|
650
|
$0
|
|
Total Hypothetical Coupons
|
$0
|
In Scenario 2, because in each case the
hypothetical closing price of the index stock on the related coupon determination date is less than 74.2%, you will not receive a coupon payment on the corresponding
hypothetical coupon payment date. Since this occurs on every hypothetical coupon determination date, the overall return earned on the notes through the third coupon payment date is zero or less. Therefore, the total of the hypothetical coupons
paid to but excluding the stated maturity date in Scenario 2 is $0.00.
Scenario 3
|
Hypothetical Coupon Determination Date
|
Hypothetical Closing Price of the Index Stock ($)
|
Hypothetical Coupon
|
|
First
|
550
|
$0
|
|
Second
|
800
|
$50
|
|
Third
|
600
|
$0
|
|
Total Hypothetical Coupons
|
$50
|
In Scenario 3, because the hypothetical closing price of the index stock on the second hypothetical coupon determination date is greater than or equal to 74.2% of the initial index stock price, the total of the hypothetical coupons paid to but excluding the stated maturity date in Scenario 3 is $50.
Because the hypothetical closing prices of the index stock on the first and third hypothetical coupon determination dates are less than 74.2% of the initial index stock price, no coupon will be paid on the corresponding coupon payment dates.
Scenario 4
|
Hypothetical Coupon Determination Date
|
Hypothetical Closing Price of the Index Stock ($)
|
Hypothetical Coupon
|
|
First
|
1,200
|
$25
|
|
Total Hypothetical Coupons
|
$25
|
In Scenario 4, the hypothetical closing price of the index
stock is greater than or equal to 74.2% of the initial index stock price on the first hypothetical coupon determination date. Because the hypothetical closing price is greater than or equal to the initial index stock price on the first hypothetical coupon determination date (which is also the first hypothetical call
observation date), the notes will be automatically called. Therefore, on the corresponding hypothetical call payment date, in addition to the hypothetical coupon of $25, you will receive an amount in cash equal to $1,000 for each $1,000 face
amount of your notes.
If the notes are not automatically called on a call
observation date (i.e., on a call observation date the closing price of the index stock was less than the initial index stock price) the cash settlement amount we would deliver for each $1,000 face amount of your notes on the maturity
date will depend on the performance of the index stock on each averaging date, as shown in the table below. The table below assumes that the notes have not been automatically called on a call observation date and does not include the final
coupon, if any, and reflects hypothetical cash settlement amounts that you could receive on the stated maturity date. If the final index stock price (expressed as a percentage of the initial stock price) is less than 74.2%, you will not be paid a final coupon at maturity. The prices in the left column of the table below represent hypothetical final
index stock prices and are expressed as percentages of the initial index stock price. The amounts in the right column represent the hypothetical cash settlement amounts, based on the corresponding hypothetical final index stock price (expressed
as a percentage of the initial index stock price), and are expressed as percentages of the face amount of a note (rounded to the nearest one-thousandth of a percent). Thus, a hypothetical cash settlement amount of 100.000% means that the value
of the cash payment that we would deliver for each $1,000 of the outstanding face amount of the offered notes on the stated maturity date would equal 100.000% of the face amount of a note, based on the corresponding hypothetical final index stock
price (expressed as a percentage of the initial index stock price) and the assumptions noted above.
The Notes Have Not Been Automatically Called
|
Hypothetical Final Index Stock Price
(as Percentage of Initial Index Stock
Price)
|
Hypothetical Cash Settlement
Amount at
Maturity if the Notes Have Not
Been Automatically Called (as
Percentage of Face Amount)
|
|
175.000%
|
100.000%*
|
|
150.000%
|
100.000%*
|
|
125.000%
|
100.000%*
|
|
110.000%
|
100.000%*
|
|
100.000%
|
100.000%*
|
|
90.000%
|
100.000%*
|
|
74.200%
|
100.000%*
|
|
74.199%
|
74.199%
|
|
60.000%
|
60.000%
|
|
50.000%
|
50.000%
|
|
40.000%
|
40.000%
|
|
25.000%
|
25.000%
|
|
0.000%
|
0.000%
|
|
*Does not include the coupon to be paid at maturity
|
|
If, for example, the notes have not been automatically called on a call observation date
and the final index stock price were determined to be 25.000% of the initial index stock price, the cash settlement amount that we would deliver on your notes at maturity would be 25.000% of the face amount of your notes, as shown in the table
above. As a result, if you purchased your notes on the original issue date at the face amount and held them to the stated maturity date, you would lose 75.000% of your investment (if you purchased your notes at a premium to face amount you would
lose a correspondingly higher percentage of your investment). In addition, if the final index stock price were determined to be 175.000% of the initial index stock price, the cash settlement amount that we would deliver on your notes at maturity
would be limited to 100.000% of each $1,000 face amount of your notes as shown in the table above. As a result, if you held your notes to the stated maturity date, you would not benefit from any increase in the final index stock price over of
the initial index stock price.
The cash settlement amounts shown above are entirely hypothetical; they are based on market prices for the index stock that may not be achieved on
the averaging dates and on assumptions that may prove to be erroneous. The actual market value of your notes on the stated maturity date or at any other time, including any time you may wish to sell your notes, may bear little relation to the
hypothetical cash settlement amounts shown above, and these amounts should not be viewed as an indication of the financial return on an investment in the offered notes. The hypothetical cash settlement amounts on notes held to the stated
maturity date in the examples above assume you purchased your notes at their face amount and have not been adjusted to reflect the actual issue price you pay for your notes. The return on your investment (whether positive or negative) in your
notes will be affected by the amount you pay for your notes. If you purchase your notes for a price other than the face amount, the return on your investment will differ from, and may be significantly lower than, the hypothetical returns
suggested by the above examples. Please read “Additional Risk Factors Specific to Your Notes — The Market Value of Your Notes May Be Influenced by Many Unpredictable Factors” on page S-15.
Payments on the notes are economically equivalent to the amounts that would be paid on a combination of other instruments. For example, payments on
the notes are economically equivalent to a combination of an interest-bearing bond bought by the holder and one or more options entered into between the holder and us (with one or more implicit option premiums paid over time). The discussion in
this paragraph does not modify or affect the terms of the notes or the U.S. federal income tax treatment of the notes, as described elsewhere in this prospectus supplement.
|
We cannot predict the actual final index stock price or what the market value of your notes will be on any particular
trading day, nor can we predict the relationship between the final index stock price and the market value of your notes at any time prior to the stated maturity date. The actual amount that you will receive, if any, at maturity and the
rate of return on the offered notes will depend on whether or not the notes are automatically called on any call observation date, the actual initial index stock price, which will be set on the trade date, and the actual final index stock
price determined by the calculation agent as described above. Moreover, the assumptions on which the hypothetical returns are based may turn out to be inaccurate. Consequently, the amount of cash to be paid in respect of your notes, if
any, on the stated maturity date may be very different from the information reflected in the examples above.
|
|
An investment in your notes is subject to the risks described below, as well as the risks and considerations
described in the accompanying prospectus and in the accompanying prospectus supplement. You should carefully review these risks and considerations as well as the terms of the notes described herein and in the accompanying prospectus and
the accompanying prospectus supplement. Your notes are a riskier investment than ordinary debt securities. Also, your notes are not equivalent to investing directly in the index stock. You should carefully consider whether the offered
notes are suited to your particular circumstances.
|
| § |
THE ESTIMATED VALUE OF YOUR NOTES AT THE TIME THE TERMS OF YOUR NOTES ARE SET ON THE TRADE DATE (AS DETERMINED
BY REFERENCE TO PRICING MODELS USED BY GS&CO.) IS LESS THAN THE ORIGINAL ISSUE PRICE OF YOUR NOTES
|
The original issue price for your notes exceeds the estimated value of your notes as of the time the terms of
your notes are set on the trade date, as determined by reference to GS&Co.’s pricing models and taking into account our credit spreads. Such estimated value on the trade date is set forth above under “Estimated Value of Your Notes”; after the
trade date, the estimated value as determined by reference to these models will be affected by changes in market conditions, the creditworthiness of GS Finance Corp., as issuer, the creditworthiness of The Goldman Sachs Group, Inc., as guarantor,
and other relevant factors. The price at which GS&Co. would initially buy or sell your notes (if GS&Co. makes a market, which it is not obligated to do), and the value that GS&Co. will initially use for account statements and
otherwise, also exceeds the estimated value of your notes as determined by reference to these models. As agreed by GS&Co. and the distribution participants, this excess (i.e., the additional amount described under “Estimated Value of Your
Notes”) will decline to zero on a straight line basis over the period from the date hereof through the applicable date set forth above under “Estimated Value of Your Notes”. Thereafter, if GS&Co. buys or sells your notes it will do so at
prices that reflect the estimated value determined by reference to such pricing models at that time. The price at which GS&Co. will buy or sell your notes at any time also will reflect its then current bid and ask spread for similar sized
trades of structured notes.
In estimating the value of your notes as of the time the terms of your notes are set on the trade date, as
disclosed above under “Estimated Value of Your Notes”, GS&Co.’s pricing models consider certain variables, including principally our credit spreads, interest rates (forecasted, current and historical rates), volatility, price-sensitivity
analysis and the time to maturity of the notes. These pricing models are proprietary and rely in part on certain assumptions about future events, which may prove to be incorrect. As a result, the actual value you would receive if you sold your
notes in the secondary market, if any, to others may differ, perhaps materially, from the estimated value of your notes determined by reference to our models due to, among other things, any differences in pricing models or assumptions used by
others. See “— The Market Value of Your Notes May Be Influenced by Many Unpredictable Factors” below.
The difference between the estimated value of your notes as of the time the terms of your notes are set on the
trade date and the original issue price is a result of certain factors, including principally the underwriting discount and commissions, the expenses incurred in creating, documenting and marketing the notes, and an estimate of the difference
between the amounts we pay to GS&Co. and the amounts GS&Co. pays to us in connection with your notes. We pay to GS&Co. amounts based on what we would pay to holders of a non-structured note with a similar maturity. In return for such
payment, GS&Co. pays to us the amounts we owe under your notes.
In addition to the factors discussed above, the value and quoted price of your notes at any time will reflect
many factors and cannot be predicted. If GS&Co. makes a market in the notes, the price quoted by GS&Co. would reflect any changes in market conditions and other relevant factors, including any deterioration in our creditworthiness or
perceived creditworthiness or the creditworthiness or perceived creditworthiness of The Goldman Sachs Group, Inc. These changes may adversely affect the value of your notes, including the price you may receive for your notes in any market making
transaction. To the extent that GS&Co. makes a market in the notes, the quoted price will reflect the estimated value determined by reference to GS&Co.’s pricing models at that time, plus or minus its then current bid and ask spread for
similar sized trades of structured notes (and subject to the declining excess amount described above).
Furthermore, if you sell your notes, you will likely be charged a commission for secondary market transactions, or the price will likely
reflect a dealer discount. This commission or discount will further reduce the proceeds you would receive for your notes in a secondary market sale.
There is no assurance that GS&Co. or any other party will be willing to purchase your notes at any price
and, in this regard, GS&Co. is not obligated to make a market in the notes. See “— Your Notes May Not Have an Active Trading Market” below.
|
§
|
THE NOTES ARE SUBJECT TO THE CREDIT RISK OF THE ISSUER AND THE GUARANTOR
|
Although coupons (if any) and the return on the notes will be based on the performance of the index stock, the
payment of any amount due on the notes is subject to the credit risk of GS Finance Corp. as issuer of the notes, and the credit risk of The Goldman Sachs Group, Inc., as guarantor of the notes. The notes are our unsecured obligations. Investors
are dependent on our ability to pay all amounts due on the notes, and therefore investors are subject to our credit risk and to changes in the market’s view of our creditworthiness. Similarly, investors are dependent on the ability of The Goldman
Sachs Group, Inc., as guarantor of the notes, to pay all amounts due on the notes, and therefore are also subject to its credit risk and to changes in the market’s view of its creditworthiness. See “Description of the Notes We May Offer —
Information About Our Medium-Term Notes, Series E Program — How the Notes Rank Against Other Debt” on page S-4 of the accompanying prospectus supplement and “Description of Debt Securities We May Offer — Guarantee by The Goldman Sachs Group,
Inc.” on page 33 of the accompanying prospectus.
| § |
YOU MAY NOT RECEIVE A COUPON ON ANY COUPON PAYMENT DATE
|
If the closing price of the index stock on the related coupon determination date is less than 74.2% of the
initial index stock price, you will not receive a coupon payment on the applicable coupon payment date. If this occurs on every coupon determination date, the overall return you earn on your notes may be zero and may be less than you would have
earned by investing in a note that bears interest at the prevailing market rate.
| § |
THE POTENTIAL FOR THE VALUE OF YOUR NOTES TO INCREASE WILL BE LIMITED
|
The cash settlement amount you may receive for each of your notes at maturity is limited to $1,000, no matter
how much the price of the index stock may rise beyond the initial index stock price over the life of your notes. Accordingly, the amount payable for each of your notes may be significantly less than it would have been had you invested directly
in the index stock.
| § |
THE RETURN ON YOUR NOTES MAY CHANGE SIGNIFICANTLY DESPITE ONLY A SMALL CHANGE IN THE PRICE OF THE INDEX STOCK
|
If your notes are not automatically called and the final index stock price is less than 74.2% of the initial
index stock price, you will receive less than the face amount of your notes and you could lose all or a substantial portion of your investment in the notes. This means that while a drop of up to 25.8% between the initial index stock price and the
final index stock price will not result in a loss of principal on the notes, a decrease in the final index stock price to less than 74.2% of the initial index stock price will result in a loss of a significant portion of the face amount of the
notes despite only a small change in the price of the index stock.
| § |
YOUR NOTES ARE SUBJECT TO AUTOMATIC REDEMPTION
|
We will automatically call and redeem all, but not part, of your notes on a call payment date, if, as measured
on any call observation date, the closing price of the index stock is greater than or equal to the initial index stock price. Therefore, the term for your notes may be reduced to as few as approximately three months after the original issue date.
You may not be able to reinvest the proceeds from an investment in the notes at a comparable return for a similar level of risk in the event the notes are automatically called prior to maturity.
| § |
THE COUPON DOES NOT REFLECT THE ACTUAL PERFORMANCE OF THE INDEX STOCK FROM COUPON DETERMINATION DATE TO COUPON
DETERMINATION DATE
|
The coupon for each quarterly coupon payment date is different from, and may be less than, a coupon determined based on the percentage
difference between the initial index stock price and the closing price of the index stock on any coupon determination date or the difference between the closing prices of the index stock on two coupon determination dates. Accordingly, the
coupons, if any, on the notes may be less than the return you could earn on another instrument linked to the index stock that pays interest based on the performance of the index stock from the initial index stock price to the closing price of the
index stock on any coupon determination date or from coupon determination date to coupon determination date.
| § |
THE CASH SETTLEMENT AMOUNT ON THE STATED MATURITY DATE IS LINKED TO THE CLOSING PRICE OF THE INDEX STOCK ON FIVE
AVERAGING DATES
|
The index stock return will be based on the arithmetic average of the index stock closing prices on each of the
five averaging dates (each of which is subject to adjustment in the case of market disruption events or non-trading days), and therefore not the simple performance of the index stock over the life of your notes. For example, if the closing price
of the index stock dramatically increased on the final averaging date (in other words, the determination date), the cash settlement amount for your notes may be significantly less than it would have been had the cash settlement amount been linked
only to the closing price of the index stock on that final averaging date.
| § |
YOU MAY LOSE YOUR ENTIRE INVESTMENT IN THE NOTES
|
You can lose your entire investment in the notes. Assuming your notes are not automatically called on a call
observation date, the cash settlement amount on your notes, if any, on the stated maturity date will be based on the performance of the index stock, as measured from the initial index stock price to the final index stock price, which is the
arithmetic average of the closing prices of the index stock on each of the averaging dates. If the final index stock price is less than 74.2% of the initial index
stock price, you will have a loss for each $1,000 of the face amount of your notes equal to the product of the index stock return times $1,000. Thus, you may lose your entire investment in the notes, which would include any premium to face amount you paid when you purchased the notes.
Also, the market price of your notes prior to the stated maturity date may be significantly lower than the
purchase price you pay for your notes. Consequently, if you sell your notes before the stated maturity date, you may receive far less than the amount of your investment in the notes.
| § |
THE MARKET VALUE OF YOUR NOTES MAY BE INFLUENCED BY MANY UNPREDICTABLE FACTORS
|
When we refer to the market value of your notes, we mean the value that you could receive for your notes if you
chose to sell them in the open market before the stated maturity date. A number of factors, many of which are beyond our control, will influence the market value of your notes, including:
| • |
the market price of the index stock to which your notes are linked;
|
| • |
the volatility — i.e., the frequency and magnitude of changes — in the market price of the index stock;
|
| • |
the dividend rate of the index stock;
|
| • |
economic, financial, regulatory, political, military and other events that affect stock markets generally and the market segment of which the index stock is a part, and which may
affect the market price of the index stock;
|
| • |
other interest rate and yield rates in the market;
|
| • |
the time remaining until your notes mature; and
|
| • |
our creditworthiness and the creditworthiness of The Goldman Sachs Group, Inc., whether actual or perceived, and including actual or anticipated upgrades or downgrades in our credit
ratings or the credit ratings of The Goldman Sachs Group, Inc. or changes in other credit measures.
|
These factors will influence the price you will receive if you sell your notes before maturity, including the
price you may receive for your notes in any market making transaction. If you sell your notes before maturity, you may receive less than the face amount of your notes.
You cannot predict the future performance of the index stock based on its historical performance. The actual performance of the index stock over the
life of the offered notes, the cash settlement amount paid on a call payment date or the stated maturity date, as the case may be, as well as the coupon payable, if any, on each coupon payment date, may bear little or no relation to the
historical closing prices of the index stock or to the hypothetical examples shown elsewhere in this prospectus supplement.
| § |
IF THE MARKET PRICE OF THE INDEX STOCK CHANGES, THE MARKET VALUE OF YOUR NOTE MAY NOT CHANGE IN THE SAME MANNER
|
Your note may trade quite differently from the index stock. Changes in the market price of the index stock may not result in a comparable
change in the market value of your note. We discuss some of the reasons for this disparity under “— The Market Value of Your Notes May Be Influenced by Many Unpredictable Factors” above.
| § |
WE WILL NOT HOLD SHARES OF THE INDEX STOCK FOR YOUR BENEFIT
|
The indenture governing your note does not contain any restriction on our ability or the ability of any of our
affiliates to sell, pledge or otherwise convey a share or shares of the index stock acquired by us or them. Neither we nor our affiliates will pledge or otherwise hold shares of the index stock for your benefit in order to enable you to exchange
your note for shares under any circumstances. Consequently, in the event of our bankruptcy, insolvency or liquidation, any shares of the index stock owned by us will be subject to the claims of our creditors generally and will not be available
for your benefit specifically.
| § |
YOU HAVE NO SHAREHOLDER RIGHTS OR ANY RIGHTS TO RECEIVE STOCK
|
Investing in your notes will not make you a holder of the index stock. Neither you nor any other holder or owner
of your note will have any rights with respect to the index stock, including any voting rights, any right to receive dividends or other distributions, any rights to make a claim against the index stock, or any other rights of a holder of any
shares of the index stock. In addition, you will have no right to receive any shares of the index stock on the stated maturity date.
| § |
IN SOME CIRCUMSTANCES, THE PAYMENT YOU RECEIVE ON THE NOTES MAY BE BASED ON THE COMMON STOCK OF ANOTHER COMPANY
AND NOT THE ISSUER OF THE INDEX STOCK
|
Following certain corporate events relating to the index stock where its issuer is not the surviving entity, the
amount you receive at maturity may be based on the common stock of a successor to the index stock issuer or any cash or any other assets distributed to holders of shares of the index stock in such corporate event. The occurrence of these
corporate events and the consequent adjustments may materially and adversely affect the value of the notes. We describe the specific corporate events that can lead to these adjustments and the procedures for selecting Distribution Property (as
described below) under “Specific Terms of Your Notes — Anti-dilution Adjustments”.
| § |
OTHER INVESTORS IN THE NOTES MAY NOT HAVE THE SAME INTERESTS AS YOU
|
Other investors in the notes are not required to take into account the interests of any other investor in
exercising remedies or voting or other rights in their capacity as securityholders or in making requests or recommendations to Goldman Sachs as to the establishment of other transaction terms. The interests of other investors may, in some
circumstances, be adverse to your interests. For example, certain investors may take short positions (directly or indirectly through derivative transactions) on assets that are the same or similar to your notes, the index stock or other similar
securities, which may adversely impact the market for or value of your notes.
| § |
ANTICIPATED HEDGING ACTIVITIES BY GOLDMAN SACHS OR OUR DISTRIBUTORS MAY NEGATIVELY IMPACT INVESTORS IN THE NOTES
AND CAUSE OUR INTERESTS AND THOSE OF OUR CLIENTS AND COUNTERPARTIES TO BE CONTRARY TO THOSE OF INVESTORS IN THE NOTES
|
Goldman Sachs expects to hedge our obligations under the notes by purchasing listed or over-the-counter options, shares of the
index stock, futures and/or other instruments linked to the index stock, indices or constituent indices thereof. Goldman Sachs also expects to adjust the hedge by, among other things, purchasing or selling any of the foregoing, and perhaps other
instruments linked to the index stock, at any time and from time to time, and to unwind the hedge by selling any of the foregoing on or before the determination date for your notes. Alternatively, Goldman Sachs may hedge all or part of our
obligations under the notes with unaffiliated distributors of the notes which we expect will undertake similar market activity. Goldman Sachs may also enter into, adjust and unwind hedging transactions relating to other notes whose returns are
linked to changes in the price of the index stock.
In addition to entering into such transactions itself, or distributors entering into such transactions, Goldman Sachs may
structure such transactions for its clients or counterparties, or otherwise advise or assist clients or counterparties in entering into such transactions. These activities may be undertaken to achieve a variety of objectives, including:
permitting other purchasers of the notes or other securities to hedge their investment in whole or in part; facilitating transactions for other clients or counterparties that may have business objectives or investment strategies that are
inconsistent with or contrary to those of investors in the notes; hedging the exposure of Goldman Sachs to the notes including any interest in the notes that it reacquires or retains as part of the offering process, through its market-making
activities or otherwise; enabling Goldman Sachs to comply with its internal risk limits or otherwise manage firmwide, business unit or product risk; and/or enabling Goldman Sachs to take directional views as to relevant markets on behalf of
itself or its clients or counterparties that are inconsistent with or contrary to the views and objectives of the investors in the notes.
Any of these hedging or other activities may adversely affect the prices of the index stock— directly or indirectly— and therefore the market
value of your notes and the amount we will pay on your notes, if any, at maturity. In addition, you should expect that these transactions will cause Goldman Sachs or its clients, counterparties or
distributors to have economic interests and incentives that do not align with, and that may be directly contrary to, those of an
investor in the notes. Neither Goldman Sachs nor any distributor will have any obligation to take, refrain from taking or cease taking any action with respect to these transactions based on the potential effect on an investor in the notes, and
may receive substantial returns on hedging or other activities while the value of your notes declines. In addition, if the distributor from which you purchase notes is to conduct hedging activities in connection with the notes, that distributor
may otherwise profit in connection with such hedging activities and such profit, if any, will be in addition to the compensation that the distributor receives for the sale of the notes to you. You should be aware that the potential to earn fees
in connection with hedging activities may create a further incentive for the distributor to sell the notes to you in addition to the compensation they would receive for the sale of the notes.
| § |
GOLDMAN SACHS’ TRADING AND INVESTMENT ACTIVITIES FOR ITS OWN ACCOUNT OR FOR ITS CLIENTS, COULD NEGATIVELY IMPACT
INVESTORS IN THE NOTES
|
Goldman Sachs is a global investment banking, securities and investment management firm that provides a wide
range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and individuals. As such, it acts as an investor, investment banker, research provider, investment manager,
investment advisor, market maker, trader, prime broker and lender. In those and other capacities, Goldman Sachs purchases, sells or holds a broad array of investments, actively trades securities, derivatives, loans, commodities, currencies,
credit default swaps, indices, baskets and other financial instruments and products for its own account or for the accounts of its customers, and will have other direct or indirect interests, in the global fixed income, currency, commodity,
equity, bank loan and other markets. Any of Goldman Sachs’ financial market activities may, individually or in the aggregate, have an adverse effect on the market for your notes, and you should expect that the interests of Goldman Sachs or its
clients or counterparties will at times be adverse to those of investors in the notes.
Goldman Sachs regularly offers a wide array of securities, financial instruments and other products into the
marketplace, including existing or new products that are similar to your notes, or similar or linked to the index stock. Investors in the notes should expect that Goldman Sachs will offer securities, financial instruments, and other products
that will compete with the notes for liquidity, research coverage or otherwise.
| § |
GOLDMAN SACHS’ MARKET-MAKING ACTIVITIES COULD NEGATIVELY IMPACT INVESTORS IN THE NOTES
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Goldman Sachs actively makes markets in and trades financial instruments for its own account and for the
accounts of customers. These financial instruments include debt and equity securities, currencies, commodities, bank loans, indices, baskets and other products. Goldman Sachs’ activities include, among other things, executing large block trades
and taking long and short positions directly and indirectly, through derivative instruments or otherwise. The securities and instruments in which Goldman Sachs takes positions, or expects to take positions, include securities and instruments of
the index stock, securities and instruments similar to or linked to the foregoing or the currencies in which they are denominated. Market making is an activity where Goldman Sachs buys and sells on behalf of customers, or for its own account, to
satisfy the expected demand of customers. By its nature, market making involves facilitating transactions among market participants that have differing views of securities and instruments. As a result, you should expect that Goldman Sachs will
take positions that are inconsistent with, or adverse to, the investment objectives of investors in the notes.
If Goldman Sachs becomes a holder of the index stock in its capacity as a market-maker or otherwise, any actions
that it takes in its capacity as securityholder, including voting or provision of consents, will not necessarily be aligned with, and may be inconsistent with, the interests of investors in the notes.
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YOU SHOULD EXPECT THAT GOLDMAN SACHS PERSONNEL WILL TAKE RESEARCH POSITIONS, OR OTHERWISE MAKE RECOMMENDATIONS,
PROVIDE INVESTMENT ADVICE OR MARKET COLOR OR ENCOURAGE TRADING STRATEGIES THAT MIGHT NEGATIVELY IMPACT INVESTORS IN THE NOTES
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Goldman Sachs and its personnel, including its sales and trading, investment research and investment management personnel, regularly make investment recommendations, provide market color or trading ideas, or publish
or express independent views in respect of a wide range of markets, issuers, securities and instruments. They regularly implement, or recommend to clients that they implement, various investment strategies relating to these markets, issuers,
securities and instruments. These strategies include, for example, buying or selling credit protection against a default or other event involving an issuer or financial instrument. Any of these recommendations and views may be negative with
respect to the index stock or other securities or instruments similar to or linked to the foregoing or result in trading strategies that have a negative impact on the market for any such securities or instruments, particularly in illiquid
markets. In addition, you should expect that personnel in the trading and investing businesses of Goldman Sachs will have or develop independent views of the index stock, the relevant industry or other market trends, which may not be aligned with the views and objectives of investors in
the notes.
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GOLDMAN SACHS REGULARLY PROVIDES SERVICES TO, OR OTHERWISE HAS BUSINESS RELATIONSHIPS WITH, A BROAD CLIENT BASE,
WHICH MAY INCLUDE THE ISSUER OF THE INDEX STOCK OR OTHER ENTITIES THAT ARE INVOLVED IN THE TRANSACTION
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Goldman Sachs regularly provides financial advisory, investment advisory and transactional services to a
substantial and diversified client base, and you should assume that Goldman Sachs will, at present or in the future, provide such services or otherwise engage in transactions with, among others, the issuer of the index stock, or transact in
securities or instruments or with parties that are directly or indirectly related to the foregoing. These services could include making loans to or equity investments in those companies, providing financial advisory or other investment banking
services, or issuing research reports. You should expect that Goldman Sachs, in providing such services, engaging in such transactions, or acting for its own account, may take actions that have direct or indirect effects on the index stock and
that such actions could be adverse to the interests of investors in the notes. In addition, in connection with these activities, certain Goldman Sachs personnel may have access to confidential material non-public information about these parties
that would not be disclosed to Goldman Sachs employees that were not working on such transactions as Goldman Sachs has established internal information barriers that are designed to preserve the confidentiality of non-public information.
Therefore, any such confidential material non-public information would not be shared with Goldman Sachs employees involved in structuring, selling or making markets in the notes or with investors in the notes.
In this offering, as well as in all other circumstances in which Goldman Sachs receives any fees or other
compensation in any form relating to services provided to or transactions with any other party, no accounting, offset or payment in respect of the notes will be required or made; Goldman Sachs will be entitled to retain all such fees and other
amounts, and no fees or other compensation payable by any party or indirectly by holders of the notes will be reduced by reason of receipt by Goldman Sachs of any such other fees or other amounts.
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THE OFFERING OF THE NOTES MAY REDUCE AN EXISTING EXPOSURE OF GOLDMAN SACHS OR FACILITATE A TRANSACTION OR
POSITION THAT SERVES THE OBJECTIVES OF GOLDMAN SACHS OR OTHER PARTIES
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A completed offering may reduce Goldman Sachs’ existing exposure to the index stock, securities and instruments
similar to or linked to the foregoing or the currencies in which they are denominated, including exposure gained through hedging transactions in anticipation of this offering. An offering of notes will effectively transfer a portion of Goldman
Sachs’ exposure (and indirectly transfer the exposure of Goldman Sachs’ hedging or other counterparties) to investors in the notes.
The terms of the offering (including the selection of the index stock, and the establishment of other
transaction terms) may have been selected in order to serve the investment or other objectives of Goldman Sachs or another client or counterparty of Goldman Sachs. In such a case, Goldman Sachs would typically receive the input of other parties
that are involved in or otherwise have an interest in the offering, transactions hedged by the offering, or related transactions. The incentives of these other parties would normally differ from and in many cases be contrary to those of
investors in the notes.
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PAST INDEX STOCK PERFORMANCE IS NO GUIDE TO FUTURE PERFORMANCE
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The actual performance of the index stock over the life of the notes, as well as the amount payable at maturity
or on any coupon payment date, as applicable, if any, may bear little relation to the historical closing prices of the index stock or to the hypothetical examples set forth elsewhere in this prospectus supplement. We cannot predict the future
performance of the index stock.
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AS CALCULATION AGENT, GS&CO. WILL HAVE THE AUTHORITY TO MAKE DETERMINATIONS THAT COULD AFFECT THE VALUE OF
YOUR NOTES
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As calculation agent for your notes, GS&Co. will have discretion in making certain determinations that affect your notes, including
determining: the closing price of the index stock on any coupon determination date, which we will use to determine the coupon, if any, we will pay on any applicable coupon payment date; whether your notes will be automatically called; the final
index stock price on the determination date, which we will use to determine the amount we must pay on the stated maturity date; whether to postpone a coupon determination date or the determination date because of a market disruption event or a
non-trading day; when and how to make anti-dilution adjustments to the index stock price; and the coupon determination dates and the coupon payment dates; the call observation dates and the call payment dates; and the stated maturity date. See
“Specific Terms of Your Notes — Anti-dilution Adjustments”
below. The exercise of this discretion by GS&Co. could adversely affect the value of your notes and may present GS&Co. with a conflict
of interest. We may change the calculation agent at any time without notice and GS&Co. may resign as calculation agent at any time upon 60 days’ written notice to us.
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THERE IS NO AFFILIATION BETWEEN THE INDEX STOCK ISSUER AND US
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Goldman Sachs is not affiliated with the index stock issuer. As discussed above, however, we or our affiliates
may currently or from time to time in the future engage in business with the index stock issuer. Neither we nor any of our affiliates have participated in the preparation of any publicly available information or made any “due diligence”
investigation or inquiry with respect to the index stock issuer. You, as an investor in your note, should make your own investigation into the index stock issuer.
The index stock issuer is not involved in this offering of your notes in any way and does not have any
obligation of any sort with respect to your notes. Thus, the index stock issuer does not have any obligation to take your interests into consideration for any reason, including in taking or not taking any corporate actions that might affect the
value of your notes.
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YOUR NOTES MAY NOT HAVE AN ACTIVE TRADING MARKET
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Your notes will not be listed or displayed on any securities exchange or included in any interdealer market
quotation system, and there may be little or no secondary market for your notes. Even if a secondary market for your notes develops, it may not provide significant liquidity and we expect that transaction costs in any secondary market would be
high. As a result, the difference between bid and asked prices for your notes in any secondary market could be substantial.
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YOU HAVE LIMITED ANTI-DILUTION PROTECTION
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GS&Co., as calculation agent for your note, will adjust the index stock price for stock splits, reverse
stock splits, stock dividends, extraordinary dividends, reorganization events, and other events that affect the index stock issuer’s, or any distribution property issuer’s, capital structure, but only in the situations we describe in “Specific
Terms of Your Notes — Anti-dilution Adjustments” below. The calculation agent will not be required to make an adjustment for every corporate event that may affect the index stock. For example, the calculation agent will not adjust the index stock
price for events such as an offering of the index stock for cash by the index stock issuer, a tender or exchange offer for the index stock at a premium to its then-current market price by the index stock issuer or a tender or exchange offer for
less than all the outstanding shares of the index stock by a third party. In addition, the calculation agent will not adjust the reference amount for regular cash dividends. Furthermore, the calculation agent will determine in its sole discretion
whether to make adjustments with respect to corporate or other events as described under “Specific Terms of Your Notes — Anti-dilution Adjustments — Reorganization Events” below. Those events or other actions by the index stock issuer or a third
party may nevertheless adversely affect the market price of one share of the index stock and, therefore, adversely affect the market value of your note. The index stock issuer or a third party could make an offering or a tender or exchange offer,
or the index stock issuer could take any other action, that adversely affects the market price of the index stock and the market value of your note but does not result in an anti-dilution adjustment for your benefit.
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WE MAY SELL AN ADDITIONAL AGGREGATE FACE AMOUNT OF THE NOTES AT A DIFFERENT ISSUE PRICE
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At our sole option, we may decide to sell an additional aggregate face amount of the notes subsequent to the
date of this prospectus supplement. The issue price of the notes in the subsequent sale may differ substantially (higher or lower) from the issue price you paid as provided on the cover of this prospectus supplement.
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THE CALCULATION AGENT CAN POSTPONE A COUPON DETERMINATION DATE OR THE DETERMINATION DATE, AS THE CASE MAY BE, IF
A MARKET DISRUPTION EVENT OR A NON-TRADING DAY OCCURS OR IS CONTINUING
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If the calculation agent determines that, on a date that would otherwise be a coupon determination date or an
averaging date, as applicable, a market disruption event has occurred or is continuing or that day is not a trading day, the applicable coupon determination date or averaging date will be postponed as described under “Specific Terms of Your Notes
— Coupon Determination Dates” and “— Averaging Dates” below.
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CERTAIN CONSIDERATIONS FOR INSURANCE COMPANIES AND EMPLOYEE BENEFIT PLANS
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Any insurance company or fiduciary of a pension plan or other employee benefit plan that is subject to the prohibited transaction rules of the
Employee Retirement Income Security Act of 1974, as amended, which we call “ERISA”, or the Internal Revenue Code of 1986, as amended, including an IRA or a Keogh plan (or a governmental plan to which
similar prohibitions apply), and that is considering purchasing the offered notes with the assets of the insurance company or the assets of
such a plan, should consult with its counsel regarding whether the purchase or holding of the offered notes could become a “prohibited transaction” under ERISA, the Internal Revenue Code or any substantially similar prohibition in light of the
representations a purchaser or holder in any of the above categories is deemed to make by purchasing and holding the offered notes. This is discussed in more detail under “Employee Retirement Income Security Act” below.
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THE TAX CONSEQUENCES OF AN INVESTMENT IN YOUR NOTES ARE UNCERTAIN
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The tax consequences of an investment in your notes are uncertain, both as to the timing and character of any
inclusion in income in respect of your notes.
The Internal Revenue Service announced on December 7, 2007 that it is considering issuing guidance regarding the
tax treatment of an instrument such as your notes, and any such guidance could adversely affect the value and the tax treatment of your notes. Among other things, the Internal Revenue Service may decide to require the holders to accrue ordinary
income on a current basis and recognize ordinary income on payment at maturity, and could subject non-U.S. investors to withholding tax. Furthermore, in 2007, legislation was introduced in Congress that, if enacted, would have required holders
that acquired instruments such as your notes after the bill was enacted to accrue interest income over the term of such instruments even though there may be no interest payments over the term of such instruments. It is not possible to predict
whether a similar or identical bill will be enacted in the future, or whether any such bill would affect the tax treatment of your notes. We describe these developments in more detail under “Supplemental Discussion of U.S. Federal Income Tax
Consequences – United States Holders – Possible Change in Law” below. You should consult your tax advisor about this matter. Except to the extent otherwise provided by law, GS Finance Corp. intends to continue treating the notes for U.S. federal
income tax purposes in accordance with the treatment described under “Supplemental Discussion of U.S. Federal Income Tax Consequences” on page S-35 below unless and until such time as Congress, the Treasury Department or the Internal Revenue
Service determine that some other treatment is more appropriate. Please also consult your tax advisor concerning the U.S. federal income tax and any other applicable tax consequences to you of owning your notes in your particular circumstances.
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FOREIGN ACCOUNT TAX COMPLIANCE ACT (FATCA) WITHHOLDING MAY APPLY TO PAYMENTS ON YOUR NOTES, INCLUDING AS A
RESULT OF THE FAILURE OF THE BANK OR BROKER THROUGH WHICH YOU HOLD THE NOTES TO PROVIDE INFORMATION TO TAX AUTHORITIES
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Please see the discussion under “United States Taxation — Taxation of Debt Securities — Foreign Account Tax Compliance Act (FATCA)
Withholding” in the accompanying prospectus for a description of the applicability of FATCA to payments made on your notes.
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We refer to the notes we are offering by this prospectus supplement as the “offered notes” or the “notes”. Please note that
in this prospectus supplement, references to “GS Finance Corp.”, “we”, “our” and “us” mean only GS Finance Corp. and do not include its subsidiaries or affiliates, references to “The Goldman Sachs Group, Inc.”, our parent company, mean
only The Goldman Sachs Group, Inc. and do not include its subsidiaries or affiliates and references to “Goldman Sachs” mean The Goldman Sachs Group, Inc. together with its consolidated subsidiaries and affiliates, including us. Also,
references to the “accompanying prospectus” mean the accompanying prospectus, dated July 10, 2017, and references to the “accompanying prospectus supplement” mean the accompanying prospectus supplement, dated July 10, 2017, for
Medium-Term Notes, Series E, in each case of GS Finance Corp. and The Goldman Sachs Group, Inc. Please note that in this section entitled “Specific Terms of Your Notes”, references to “holders” mean those who own notes registered in
their own names, on the books that we or the trustee maintain for this purpose, and not those who own beneficial interests in notes registered in street name or in notes issued in book-entry form through The Depository Trust Company.
Please review the special considerations that apply to owners of beneficial interests in the accompanying prospectus, under “Legal Ownership and Book-Entry Issuance”.
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The offered notes are part of a series of debt securities, entitled “Medium-Term Notes, Series E”, that we may issue under the indenture from time to
time as described in the accompanying prospectus supplement and accompanying prospectus. The offered notes are also “indexed debt securities”, as defined in the accompanying prospectus.
This prospectus supplement summarizes specific financial and other terms that apply to the offered notes, including your notes; terms that apply
generally to all Series E medium-term notes are described in “Description of Notes We May Offer” in the accompanying prospectus supplement. The terms described here supplement those described in the accompanying prospectus supplement and the
accompanying prospectus and, if the terms described here are inconsistent with those described there, the terms described here are controlling.
In addition to those terms described under “Summary Information” in this prospectus supplement, the following terms will apply to your notes:
Specified currency:
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U.S. dollars (“$”)
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Form of note:
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global form only: yes, at DTC
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non-global form available: no
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Denominations: each note registered in the name of a holder must have a
face amount of $10,000 or an integral multiple of $1,000 in excess thereof
No listing: your notes will not be listed or displayed on any
securities exchange or included in any interdealer market quotation system
Defeasance applies as follows:
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full defeasance: no
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covenant defeasance: no
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Other terms:
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the default amount will be payable on any acceleration of the maturity of your notes as described under “— Special Calculation Provisions” below
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anti-dilution provisions will apply to your notes; see “— Anti-dilution Adjustments” below
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a business day for your notes may not be the same as a business day for certain of our other Series E medium-term notes, as described under “— Special Calculation Provisions” below
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a trading day for your notes will be as described under “— Special Calculation Provisions” below
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Please note that the information about the settlement or trade dates, issue price, discounts or commissions and net proceeds to GS Finance Corp. on the front cover page
or elsewhere in this prospectus supplement relates only to the
initial issuance and sale of the offered notes. We may decide to sell additional notes on one or more dates after the date of this prospectus
supplement, at issue prices and with underwriting discounts and net proceeds that differ from the amounts set forth on the front cover page or elsewhere in this prospectus supplement. If you have purchased your notes in a market-making
transaction after the initial issuance and sale of the notes, any such relevant information about the sale to you will be provided in a separate confirmation of sale.
We describe the terms of your notes in more detail below.
Index Stock and Index Stock Issuer
In this prospectus supplement, when we refer to the index stock, we mean the Class C capital stock of Alphabet Inc., except as described under “—
Anti-dilution Adjustments — Reorganization Events” and “— Anti-dilution Adjustments — Distribution Property” below. When we refer to the index stock issuer, we mean Alphabet Inc. or any successor thereto.
Automatic Call Feature
If, as measured on any call observation date, the closing price of the index stock is greater than or equal to the initial index stock price, your notes will be automatically called; if your notes are automatically
called on any call observation date, on the corresponding call payment date you will receive an amount in cash equal to $1,000 for each $1,000 face amount of your notes in addition to the coupon then due.
The calculation agent will determine the closing price of the index stock for each call observation date, which will be the closing price of the
index stock on the applicable call observation date, subject to any anti-dilution adjustments.
The calculation agent will have discretion to adjust the closing price of the index stock on the applicable call observation date or to determine it
in a different manner as described under “— Consequences of a Market Disruption Event or a Non-Trading Day” and “— Anti-Dilution Adjustments” below.
Payment of Principal on Stated Maturity Date
Unless your notes are automatically called, on the stated maturity date, for each $1,000 face amount of your notes, we will pay you an amount in
cash equal to the cash settlement amount described below. The cash we must pay in exchange for your notes on the stated maturity date, if any, represents the principal amount of your notes. The cash you receive in exchange for your notes on the
stated maturity date, if any, may be less than 100% of the face amount of your notes. We describe this risk under “Additional Risk Factors Specific to Your Notes — You May Lose Your Entire Investment in the Notes” above.
Payment of Contingent Coupon
Subject to the automatic call feature, on each coupon payment date other than the stated maturity date, for each $1,000 face amount of your notes we will pay you an
amount in cash equal to:
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if the closing price of the index stock on the related coupon determination date is greater than or equal to 74.2% of the initial index stock price, (i) the product of $25 times the number of coupon determination dates that have occurred up to and including such coupon determination date minus (ii) the sum of all coupons previously paid; or
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if the closing price of the index stock on the related coupon determination date is less than 74.2% of
the initial index stock price, $0
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The coupon that may be paid on the stated maturity date will be calculated as described under “Cash Settlement Amount on the Stated Maturity Date”
below, which is based on the index stock return and averaging dates as described below.
The initial index stock price will be set on the trade date and is expected to be the closing price of the index stock on the trade date. The
calculation agent will determine the closing price for each coupon determination date, which will be the closing price of the index stock on the applicable coupon determination date, subject to any anti-dilution adjustments. The calculation agent
will have discretion to adjust the closing price of the index stock on the applicable coupon determination date or to determine it in a different manner as described under “— Consequences of a Market Disruption Event or a Non-Trading Day” and “—
Anti-Dilution Adjustments” below.
Cash Settlement Amount on the Stated Maturity Date
If your notes are not automatically called, for each $1,000 face amount of your notes we will pay you
on the stated maturity date an amount in cash equal to:
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if the final index stock price is greater than or equal to 74.2% of the initial index stock price, the sum of (1) $1,000 plus (2) a coupon equal to $100 minus the sum of all coupons previously paid, if any; or
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if the final index stock price is less than 74.2% of the initial index stock price, the sum of (1) $1,000 plus (2) the product of (i) $1,000 times (ii) the index stock return.
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The index stock return is calculated by subtracting the initial
index stock price from the final index stock price and dividing the result by the initial index stock price, with the quotient expressed as a percentage. The
calculation agent will determine the final index stock price, which will be the arithmetic average of the closing prices of one share of the index stock on each of the averaging dates. However, the calculation agent will have discretion to
adjust the closing price on an averaging date or to determine it in a different manner as described under “ — Consequences of a Market Disruption Event or a Non-Trading Day” and “— Anti-Dilution Adjustments” below.
Averaging Dates
The averaging dates for your notes will be set on the trade date and are expected to be November 11, 2019, November 12, 2019, November 13, 2019,
November 14, 2019 and November 15, 2019, each subject to the following adjustments. If a market disruption event occurs or is continuing on any day that would otherwise be an averaging date or such day is not otherwise a trading day, such
averaging date and each succeeding averaging date, if any, will be postponed to the next trading day(s) on which no market disruption event occurs or is continuing. However,
no averaging date will be later than the originally scheduled stated maturity date or, if the originally scheduled stated maturity date is not a business day, later than the first business day after the originally scheduled stated maturity
date. If a market disruption event occurs or is continuing on such last possible averaging date or such last possible day is not a trading day, that day will nevertheless be the final averaging date. In such cases, more than one
averaging date may occur simultaneously on such last possible day.
Determination Date
The determination date for your notes will be set on the trade date and is expected to be November 15, 2019 (the final averaging date), subject to
adjustment as described under “— Averaging Dates” above).
Stated Maturity Date
The stated maturity date will be set on the trade date and is expected to be November 20, 2019, unless that day is not a business day, in which case
the stated maturity date will be the next following business day. If the final averaging date is postponed as described under “— Averaging Dates” above, the stated maturity date will also be postponed by the same number of business day(s) from
but excluding the originally scheduled final averaging date to and including the actual final averaging date.
Coupon and Coupon Payment Dates
The coupons will be calculated and paid as described in this prospectus supplement.
The coupons on the offered notes will be paid on the coupon payment dates (to be set on the trade date and are expected to be (i) the third business
day after each coupon determination date and (ii) the stated maturity date, subject to adjustment as described under “— Coupon Determination Dates” below).
Coupon Determination Dates
The coupon determination dates will be set on the trade date and are expected to be February 14, 2019, May 16, 2019 and August 15, 2019, unless the
calculation agent determines that a market disruption event occurs or is continuing on that day or that day is not otherwise a trading day. In that event, the coupon determination date will be the first following trading day on which the
calculation agent determines that a market disruption event does not occur or is not continuing. In no event, however, will the applicable coupon determination date be postponed to a date later than the applicable originally scheduled coupon
payment date or, if the originally scheduled coupon payment date is not a business day, later than the first business day after the originally scheduled coupon payment date. On such last possible coupon determination date applicable to the
relevant coupon payment date, if a market disruption event occurs or is continuing or such day is not a trading day, that day will nevertheless be the coupon determination date.
Call Payment Dates
If your notes are automatically called on any call observation date, on the corresponding call payment date (to be set on the trade date and is expected to be the third
business day after each call observation date, subject to adjustment as described under “— Call Observation
Dates” below) you will receive an amount in cash equal to $1,000 for each $1,000 face amount of your notes in addition to the coupon then due.
Call Observation Dates
The call observation dates will be set on the trade date and are expected to be each coupon determination date, subject to adjustment as described
under “— Coupon Determination Dates” above.
Consequences of a Market Disruption Event or a Non-Trading Day
As indicated above, if a market disruption event occurs or is continuing on a day that would otherwise be a coupon determination date or an
averaging date, as applicable, or such day is not a trading day, then such coupon determination date or averaging date, as applicable will be postponed as described under “— Coupon Determination Dates” and “— Averaging Dates”, respectively,
above. As a result, the corresponding coupon payment date, call payment date or the stated maturity date, as applicable, for your notes may also be postponed, as described under “— Coupon Payment Date” and “— Stated Maturity Date”, respectively,
above.
If the closing price of the index stock that must be used to determine the coupon payable on the coupon payment date, if any, or the cash settlement
amount is not available on the last possible coupon determination date or averaging date, as applicable, either because of a market disruption event or non-trading day or for any other reason (except as described under “— Anti-dilution
Adjustments” below), then the calculation agent will nevertheless determine the index stock price based on its assessment, made in its sole discretion, of the market value of the index stock at the applicable time on that day.
Anti-dilution Adjustments
The calculation agent will adjust the closing price of the index stock on a coupon determination date or an averaging date, as applicable, only if an
event described under one of the six subsections beginning with “— Stock Splits” below occurs and only if the relevant event occurs during the period described under the applicable subsection. The adjustments described below do not cover all
events that could affect the closing price of the index stock on a coupon determination date or an averaging date, as applicable, such as an issuer tender or exchange offer for the index stock at a premium to its market price or a tender or
exchange offer made by a third party for less than all outstanding shares of the index stock. We describe the risks relating to dilution under “Additional Risk Factors Specific to Your Notes — You Have Limited Anti-dilution Protection” above.
How Adjustments Will Be Made
In this prospectus supplement, we refer to anti-dilution adjustment of the closing price of the index stock on a coupon determination date or an
averaging date, as applicable. If an event requiring anti-dilution adjustment occurs, the calculation agent will make the adjustment by taking the following steps:
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Step One. The calculation agent will adjust the reference amount. This term refers
to the amount of the index stock or other property that must be used to determine the closing price of the index stock on a coupon determination date or an averaging date, as applicable. For example, if no adjustment described under
this subsection entitled “— Anti-dilution Adjustments” is required at a time, the reference amount for that time will be one share of the index stock. In that case, the closing price of the index stock on a coupon determination date
or an averaging date, as applicable, will be the closing price of one share of the index stock on the applicable coupon determination date or averaging date. We describe how the closing price will be determined under “— Special
Calculation Provisions” below.
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If an adjustment described under this subsection entitled “— Anti-dilution Adjustments” is required because one of the dilution events described in
the first five subsections below — these involve stock splits, reverse stock splits, stock dividends, other dividends and distributions and issuances of transferable rights and warrants — occurs, then the adjusted reference amount at that time
might instead be, for example, two shares of the index stock or a half share of the index stock, depending on the event. In that example, the closing price of the index stock on a coupon determination date or an averaging date, as applicable,
would be the price (determined as specified under “— Special Calculation Provisions — Closing Price” below) at the close of trading on the applicable coupon determination date or averaging date of two shares of the index stock or a half share of
the index stock, as applicable.
If an adjustment described under this subsection entitled “— Anti-dilution Adjustments” is required at a time because one of the reorganization events described under
“— Reorganization Events” below — these involve events in which cash,
securities or other property is distributed in respect of the index stock — occurs, then the reference amount at that time will be adjusted to be as
follows, assuming there has been no prior or subsequent anti-dilution adjustment: the amount of each type of the property distributed in the reorganization event in respect of one share of the index stock, plus one share of the index stock if the
index stock remains outstanding. In that event, the closing price of the index stock on a coupon determination date or an averaging date, as applicable, would be the value of the adjusted reference amount at the close of trading on such coupon
determination date or averaging date.
The manner in which the calculation agent adjusts the reference amount in step one will depend on the type of dilution event requiring adjustment.
These events and the nature of the required adjustments are described in the six subsections that follow.
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Step Two. Having adjusted the reference amount in step one, the calculation agent
will determine the closing price of the index stock on a coupon determination date or an averaging date, as applicable, in the following manner.
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If the adjusted reference amount at the applicable time consists entirely of shares of the index stock, the index stock price will be the closing
price (determined as described under “— Special Calculation Provisions — Closing Price” below) of the adjusted reference amount on the applicable date.
On the other hand, if the adjusted reference amount at the applicable time includes any property other than shares of the index stock, the closing
price of the index stock on a coupon determination date or an averaging date, as applicable, will be the value of the adjusted reference amount as determined by the calculation agent in the manner described under “— Reorganization Events —
Adjustments for Reorganization Events” below at the applicable time.
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Step Three. Having determined the closing price of the index stock on a coupon
determination date or an averaging date, as applicable, in step two, the calculation agent will use such price to calculate the coupon payable on the applicable coupon payment date, if any, or the cash settlement amount.
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If more than one event requiring adjustment as described in this subsection entitled “— Anti-dilution Adjustments” occurs, the calculation agent
will first adjust the reference amount as described in step one above for each event, sequentially, in the order in which the events occur, and on a cumulative basis. Thus, having adjusted the reference amount for the first event, the calculation
agent will repeat step one for the second event, applying the required adjustment to the reference amount as already adjusted for the first event, and so on for each event. Having adjusted the reference amount for all events, the calculation
agent will then take the remaining applicable steps in the process described above, determining the closing price of the index stock on a coupon determination date or an averaging date, as applicable, using the reference amount as sequentially
and cumulatively adjusted for all the relevant events. The calculation agent will make all required determinations and adjustments no later than the applicable coupon determination date or averaging date, as applicable.
The calculation agent will adjust the reference amount for each reorganization event described under “— Reorganization Events” below. For any other
dilution event described below, however, the calculation agent will not be required to adjust the reference amount unless the adjustment would result in a change of at least 0.1% in the index stock price that would apply without the adjustment.
The closing price of the index stock on a coupon determination date or an averaging date, as applicable, resulting from any adjustment will be rounded up or down, as appropriate, to the nearest ten-thousandth, with five hundred-thousandths being
rounded upward — e.g., 0.12344 will be rounded down to 0.1234 and 0.12345 will be rounded up to 0.1235.
If an event requiring anti-dilution adjustment occurs, the calculation agent will make the adjustment with a view to offsetting, to the extent
practical, any change in the economic position of the holder, GS Finance Corp., as issuer, and The Goldman Sachs Group, Inc., as guarantor, relative to your notes, that results solely from that event. The calculation agent may, in its sole
discretion, modify the anti-dilution adjustments as necessary to ensure an equitable result.
The calculation agent will make all determinations with respect to anti-dilution adjustments, including any determination as to whether an event
requiring adjustment has occurred, as to the nature of the adjustment required and how it will be made or as to the value of any property distributed in a reorganization event, and will do so in its sole discretion. In the absence of manifest
error, those determinations will be conclusive for all purposes and will be binding on you and us, without any liability on the part of the calculation agent. The calculation agent will provide information about the adjustments it makes upon
written request by the holder.
In this prospectus supplement, when we say that the calculation agent will adjust the reference amount for one or more dilution events, we mean that the calculation
agent will take all the applicable steps described above with respect to those events.
The following six subsections describe the dilution events for which the reference amount is to be adjusted. Each subsection describes the manner in
which the calculation agent will adjust the reference amount — the first step in the adjustment process described above — for the relevant event.
Stock Splits
A stock split is an increase in the number of a corporation’s outstanding shares of stock without any change in its stockholders’ equity. Each
outstanding share will be worth less as a result of a stock split.
If the index stock is subject to a stock split, then the calculation agent will adjust the reference amount to equal the sum of the prior reference
amount — i.e., the reference amount before that adjustment — plus the product of (1) the number of additional shares issued in the stock split with respect to one share of the index stock times (2) the prior reference amount. The reference amount
will not be adjusted, however, unless the first day on which the index stock trades without the right to receive the stock split occurs after the trade date and on or before a coupon determination date or an averaging date, as applicable.
Reverse Stock Splits
A reverse stock split is a decrease in the number of a corporation’s outstanding shares of stock without any change in its stockholders’ equity.
Each outstanding share will be worth more as a result of a reverse stock split.
If the index stock is subject to a reverse stock split, then once the reverse stock split becomes effective, the calculation agent will adjust the
reference amount to equal the product of the prior reference amount times the quotient of (1) the number of additional shares of the index stock outstanding
immediately after the reverse stock split becomes effective divided by (2) the number of shares of the index stock outstanding immediately before the reverse stock split becomes effective. The reference amount will not be adjusted, however,
unless the reverse stock split becomes effective after the trade date and on or before a coupon determination date or an averaging date, as applicable.
Stock Dividends
In a stock dividend, a corporation issues additional shares of its stock to all holders of its outstanding shares of its stock in proportion to the
shares they own. Each outstanding share will be worth less as a result of a stock dividend.
If the index stock is subject to a stock dividend, then the calculation agent will adjust the reference amount to equal the sum of the prior
reference amount plus the product of (1) the number of additional shares issued in the stock dividend with respect to one share of the index stock times (2) the prior reference amount. The reference amount will not be adjusted, however, unless
the ex-dividend date occurs after the trade date and on or before a coupon determination date or an averaging date, as applicable.
The ex-dividend date for any dividend or other distribution is the first day on which the index stock trades without the right to receive that
dividend or other distribution.
Other Dividends and Distributions
The reference amount will not be adjusted to reflect dividends or other distributions paid with respect to the index stock, other than:
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stock dividends described above,
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issuances of transferable rights and warrants as described under “— Transferable Rights and Warrants” below,
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distributions that are spin-off events described under “— Reorganization Events” below, and
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extraordinary dividends described below.
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A dividend or other distribution with respect to the index stock will be deemed to be an extraordinary dividend if its per share value exceeds that
of the immediately preceding non-extraordinary dividend, if any, for the index stock by an amount equal to at least 10% of the closing price of the index stock on the first trading day before the ex-dividend date.
If an extraordinary dividend occurs with respect to the index stock, the calculation agent will adjust the reference amount to equal the product of (1) the prior
reference amount times (2) a fraction, the numerator of which is the closing price of the index stock on the trading day immediately preceding the ex-dividend date and the denominator of which is the amount by which that closing price exceeds the
extraordinary dividend amount. The reference amount will not be adjusted, however, unless the ex-dividend date occurs after the trade date and on or before a coupon determination date or
an averaging date, as applicable.
The extraordinary dividend amount with respect to an extraordinary dividend for the index stock equals:
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for an extraordinary dividend that is paid in lieu of a regular quarterly dividend, the amount of the extraordinary dividend per share of the index stock minus the amount per share
of the immediately preceding dividend, if any, that was not an extraordinary dividend for the index stock, or
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for an extraordinary dividend that is not paid in lieu of a regular quarterly dividend, the amount per share of the extraordinary dividend.
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To the extent an extraordinary dividend is not paid in cash, the value of the non-cash component will be determined by the calculation agent. A
distribution on the index stock that is a stock dividend, an issuance of transferable rights or warrants or a spin-off event and also an extraordinary dividend will result in an adjustment to the reference amount only as described under “— Stock
Dividends” above, “— Transferable Rights and Warrants” below or “— Reorganization Events” below, as the case may be, and not as described here.
Transferable Rights and Warrants
If the index stock issuer issues transferable rights or warrants to all holders of the index stock to subscribe for or purchase index stock at an
exercise price per share that is less than the closing price of the index stock on the trading day immediately preceding the ex-dividend date for the issuance, then the reference amount will be adjusted by multiplying the prior reference amount
by the following fraction:
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the numerator will be the number of shares of the index stock outstanding at the close of business on the day immediately preceding that ex-dividend date plus the number of
additional shares of the index stock offered for subscription or purchase under those transferable rights or warrants, and
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the denominator will be the number of shares of the index stock outstanding at the close of business on the day immediately preceding that ex-dividend date plus the number of
additional shares of the index stock that the aggregate offering price of the total number of shares of the index stock so offered for subscription or purchase would purchase at the closing price of the index stock on the trading day
immediately preceding that ex-dividend date, with that number of additional shares being determined by multiplying the total number of shares so offered by the exercise price of those transferable rights or warrants and dividing the
resulting product by the closing price on the trading day immediately preceding that ex-dividend date.
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The reference amount will not be adjusted, however, unless the ex-dividend date described above occurs after the trade date and on or before a
coupon determination date or an averaging date, as applicable.
Reorganization Events
Each of the following is a reorganization event:
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the index stock is reclassified or changed,
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the index stock issuer has been subject to a merger, consolidation, amalgamation, binding share exchange or other business combination and either is not the surviving entity or is
the surviving entity but all the outstanding shares of the index stock are reclassified or changed,
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the index stock has been subject to a takeover, tender offer, exchange offer, solicitation proposal or other event by another entity or person to purchase or otherwise obtain all of
the outstanding shares of the index stock, such that all of the outstanding shares of the index stock (other than shares of the index stock owned or controlled by such other entity or person) are transferred, or irrevocably committed
to be transferred, to another entity or person,
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the index stock issuer or any subsidiary of the index stock issuer has been subject to a merger, consolidation, amalgamation or binding share exchange in which the index stock issuer
is the surviving entity and all the outstanding shares of the index stock (other than shares of the index stock owned or controlled by such other entity or person) immediately prior to such event collectively represent less than 50%
of the outstanding shares of the index stock immediately following such event,
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the index stock issuer sells or otherwise transfers its property and assets as an entirety or substantially as an entirety to another entity,
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the index stock issuer effects a spin-off — that is, issues to all holders of the index stock equity securities of another issuer, other than as part of an event described in the
four bullet points above,
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the index stock issuer is liquidated, dissolved or wound up or is subject to a proceeding under any applicable bankruptcy, insolvency or other similar law, or
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any other corporate or similar events that affect or could potentially affect market prices of, or shareholders’ rights in, the index stock or distribution property, which will be
substantiated by an official characterization by either the Options Clearing Corporation with respect to options contracts on the index stock or by the primary securities exchange on which the index stock or listed options on the
index stock are traded, and will ultimately be determined by the calculation agent in its sole discretion.
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Adjustments for Reorganization Events
If a reorganization event occurs, then the calculation agent will adjust the reference amount so that it consists of the amount of each type of
distribution property distributed in respect of one share of the index stock — or in respect of whatever the prior reference amount may be — in the reorganization event, taken together. We define the term “distribution property” below. For
purposes of the three-step adjustment process described under “— How Adjustments Will Be Made” above, the distribution property so distributed will be the adjusted reference amount described in step one, the value of that property at the close of
trading hours for the index stock on the applicable date will be the index stock price described in step two, and the calculation agent will determine the coupon payable on a coupon payment date, if any, or the cash settlement amount as described
in step three. As described under “— How Adjustments Will Be Made” above, the calculation agent may, in its sole discretion, modify the adjustments described in this paragraph as necessary to ensure an equitable result.
The calculation agent will determine the value of each type of distribution property in its sole discretion. For any distribution property
consisting of a security, the calculation agent will use the closing price (calculated according to the same methodology as specified in this prospectus supplement, without any anti-dilution adjustments) of one share of such security on the
applicable date. The calculation agent may value other types of property in any manner it determines, in its sole discretion, to be appropriate. If a holder of the index stock may elect to receive different types or combinations of types of
distribution property in the reorganization event, the distribution property will consist of the types and amounts of each type distributed to a holder that makes no election, as determined by the calculation agent in its sole discretion. As
described under “— How Adjustments Will Be Made” above, the calculation agent may, in its sole discretion, modify the adjustments described in this paragraph as necessary to ensure an equitable result.
If a reorganization event occurs and the calculation agent adjusts the reference amount to consist of the distribution property distributed in the
reorganization event, as described above, the calculation agent will make any further anti-dilution adjustments for later events that affect the distribution property, or any component of the distribution property, comprising the new reference
amount. The calculation agent will do so to the same extent that it would make adjustments if the index stock were outstanding and were affected by the same kinds of events. If a subsequent reorganization event affects only a particular component
of the reference amount, the required adjustment will be made with respect to that component, as if it alone were the reference amount.
For example, if the index stock issuer merges into another company and each share of the index stock is converted into the right to receive two
common shares of the surviving company and a specified amount of cash, the reference amount will be adjusted to consist of two common shares of the surviving company and the specified amount of cash for each share of index stock (adjusted
proportionately for any partial share) comprising the reference amount before the adjustment. The calculation agent will adjust the common share component of the adjusted reference amount to reflect any later stock split or other event, including
any later reorganization event, that affects the common shares of the surviving company, to the extent described in this subsection entitled “— Anti-dilution Adjustments” as if the common shares of the surviving company were the index stock. In
that event, the cash component will not be adjusted but will continue to be a component of the reference amount. Consequently, each component included in the reference amount will be adjusted on a sequential and cumulative basis for all relevant
events requiring adjustment up to the relevant date.
The calculation agent will not make any adjustment for a reorganization event, however, unless the event becomes effective (or, if the event is a spin-off, unless the
ex-dividend date for the spin-off occurs) after the trade date and on or before a coupon determination date or an averaging date, as applicable.
Distribution Property
When we refer to distribution property, we mean the cash, securities and other property or assets distributed in a reorganization event in respect
of one outstanding share of the index stock — or in respect of whatever the applicable reference amount may then be if any anti-dilution adjustment has been made in respect of a prior event. In the case of a spin-off, or any other reorganization
event after which the index stock remains outstanding, the distribution property also includes one share of the index stock — or other applicable reference amount — in respect of which the distribution is made.
If a reorganization event occurs, the distribution property distributed in the event will be substituted for the index stock as described above.
Consequently, in this prospectus supplement, when we refer to the index stock, we mean any distribution property that is distributed in a reorganization event and comprises the adjusted reference amount. Similarly, when we refer to the index
stock issuer, we mean any successor entity in a reorganization event.
Default Amount on Acceleration
If an event of default occurs and the maturity of your notes is accelerated, we will pay the default amount in respect of the principal of your
notes at the maturity, instead of the amount payable on the stated maturity date as described earlier. We describe the default amount under “— Special Calculation Provisions” below.
For the purpose of determining whether the holders of our Series E medium-term notes, which include your notes, are entitled to take any action
under the indenture, we will treat the outstanding face amount of each offered note as the outstanding principal amount of that note. Although the terms of the offered notes differ from those of the other Series E medium-term notes, holders of
specified percentages in principal amount of all Series E medium-term notes, together in some cases with other series of our debt securities, will be able to take action affecting all the Series E medium-term notes, including your notes, except
with respect to certain Series E medium-term notes if the terms of such notes specify that the holders of specified percentages in the principal amount of all such notes must also consent to such action. This action may involve changing some of
the terms that apply to the Series E medium-term notes, accelerating the maturity of the Series E medium-term notes after a default or waiving some of our obligations under the indenture. In addition, certain changes to the indenture and the
notes that only affect certain debt securities may be made with the approval of holders of a majority of the principal amount of such affected debt securities. We discuss these matters in the accompanying prospectus under “Description of Debt
Securities We May Offer — Default, Remedies and Waiver of Default” and “— Modification of the Debt Indentures and Waiver of Covenants”.
Manner of Payment
Any payment or delivery on your note at maturity will be made to an account designated by the holder of your note and approved by us, or at the
office of the trustee in New York City, but only when your note is surrendered to the trustee at that office. We also may make any payment or delivery in accordance with the applicable procedures of the depositary.
Modified Business Day
As described in the accompanying prospectus, any payment on your notes that would otherwise be due on a day that is not a business day may instead
be paid on the next day that is a business day, with the same effect as if paid on the original due date. For your notes, however, the term business day may have a different meaning than it does for other Series E medium-term notes. We discuss
this term under “— Special Calculation Provisions” below.
Role of Calculation Agent
The calculation agent, in its sole discretion, will make all determinations regarding whether a coupon will be paid on any coupon payment date,
whether your notes will be automatically called, the final index stock price, anti-dilution adjustments, market disruption events, averaging dates, coupon determination dates, business days, trading days and the amount of cash to be delivered in
exchange for your note. Absent manifest error, all determinations of the calculation agent will be final and binding on you and us, without any liability on the part of the calculation agent.
Please note that GS&Co., our affiliate, is currently serving as the calculation agent as of the original issue date of your note. We may change the calculation
agent for your note at any time after the original issue date without notice, and GS&Co. may resign as calculation agent at any time upon 60 days’ written notice to us.
Special Calculation Provisions
Business Day
When we refer to a business day with respect to your notes, we mean a day that is a New York business day as described under “Description of Debt
Securities We May Offer — Calculations of Interest on Debt Securities — Business Days” on page 16 in the accompanying prospectus. A day is a scheduled business day if, as of the trade date, such day is scheduled to be a New York business day.
Trading Day
When we refer to a trading day with respect to your notes, we mean a day on which the principal securities market for the index stock is open for
trading.
Closing Price
The closing price for any security on any day will equal the closing sale price or last reported sale price, regular way, for the security, on a
per-share or other unit basis:
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on the principal national securities exchange on which that security is listed for trading on that day; or
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if that security is not listed on any national securities exchange on that day, on any other U.S. national market system that is the primary market for the trading of that security.
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If that security is not listed or traded as described above, then the closing price for that security on any day will be the average, as determined
by the calculation agent, of the bid prices for the security obtained from as many dealers in that security selected by the calculation agent as will make those bid prices available to the calculation agent. The number of dealers need not exceed
three and may include the calculation agent or any of its or our affiliates.
The closing price is subject to adjustment as described under “— Anti-dilution Adjustments” above.
Default Amount
The default amount for your notes on any day (except as provided in the last sentence under “—Default Quotation Period” below) will be an amount, in
the specified currency for the principal of your notes, equal to the cost of having a qualified financial institution, of the kind and selected as described below, expressly assume all our payment and other obligations with respect to your notes
as of that day and as if no default or acceleration had occurred, or to undertake other obligations providing substantially equivalent economic value to you with respect to your notes. That cost will equal:
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the lowest amount that a qualified financial institution would charge to effect this assumption or undertaking, plus
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the reasonable expenses, including reasonable attorneys’ fees, incurred by the holder of your note in preparing any documentation necessary for this assumption or undertaking.
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During the default quotation period for your note, which we describe below, the holder and/or we may request a qualified financial institution to
provide a quotation of the amount it would charge to effect this assumption or undertaking. If either party obtains a quotation, it must notify the other party in writing of the quotation. The amount referred to in the first bullet point above
will equal the lowest — or, if there is only one, the only — quotation obtained, and as to which notice is so given, during the default quotation period. With respect to any quotation, however, the party not obtaining the quotation may object, on
reasonable and significant grounds, to the assumption or undertaking by the qualified financial institution providing the quotation and notify the other party in writing of those grounds within two business days after the last day of the default
quotation period, in which case that quotation will be disregarded in determining the default amount.
Default Quotation Period. The default quotation
period is the period beginning on the day the default amount first becomes due and ending on the third business day after that day, unless:
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no quotation of the kind referred to above is obtained, or
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every quotation of that kind obtained is objected to within five business days after the day the default amount first becomes due.
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If either of these two events occurs, the default quotation period will continue until the third business day after the first business day on which prompt notice of a
quotation is given as described above. If that quotation is objected to as described above within five business days after that first business day, however, the default quotation period
will continue as described in the prior sentence and this paragraph.
In any event, if the default quotation period and the subsequent two business day objection period have not ended before the determination date,
then the default amount will equal the principal amount of your notes.
Qualified Financial Institutions. For the purpose
of determining the default amount at any time, a qualified financial institution must be a financial institution organized under the laws of any jurisdiction in the United States of America, Europe or Japan, which at that time has outstanding
debt obligations with a stated maturity of one year or less from the date of issue that is, or whose securities are, rated either:
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A-1 or higher by Standard & Poor’s Ratings Services or any successor, or any other comparable rating then used by that rating agency, or
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P-1 or higher by Moody’s Investors Service, Inc. or any successor, or any other comparable rating then used by that rating agency.
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Market Disruption Event
Any of the following will be a market disruption event:
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a suspension, absence or material limitation of trading in the index stock on its primary market for more than two consecutive hours of trading or during the one-half hour before the
close of trading in that market, as determined by the calculation agent in its sole discretion, or
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a suspension, absence or material limitation of trading in option or futures contracts, if available, relating to the index stock, in the primary markets for those contracts for more
than two consecutive hours of trading or during the one-half hour before the close of trading in that market, as determined by the calculation agent in its sole discretion, or
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the index stock is not trading on what was the primary market for the index stock, as determined by the calculation agent in its sole discretion,
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and, in the case of any of these events, the calculation agent determines in its sole discretion that the event could materially interfere with the
ability of GS Finance Corp. or any of its affiliates or a similarly situated party to unwind all or a material portion of a hedge that could be effected with respect to the offered notes. For more information about hedging by GS Finance Corp.
and/or any of its affiliates, see “Use of Proceeds” and “Hedging” below.
The following events will not be market disruption events with respect to the index stock:
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a limitation on the hours or numbers of days of trading, but only if the limitation results from an announced change in the regular business hours of the relevant market, and
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a decision to permanently discontinue trading in the option or futures contracts relating to the index stock.
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For this purpose, an “absence of trading” in the primary securities market on which the index stock, or on which option or futures contracts
relating to the index stock, are traded will not include any time when that market is itself closed for trading under ordinary circumstances. In contrast, a suspension or limitation of trading in the index stock or in option or futures contracts
relating to the index stock, if available, in the primary market for that stock or those contracts, by reason of:
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a price change exceeding limits set by that market, or
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an imbalance of orders relating to that index stock or those contracts, or
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a disparity in bid and ask quotes relating to that index stock or those contracts,
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will constitute a suspension or material limitation of trading in that stock or those contracts in that market.
As is the case throughout this prospectus supplement, references to the index stock in this description of market disruption events include securities that are part of
any adjusted reference amount, as determined by the calculation agent in its sole discretion.
We intend to lend the net proceeds from the sale of the offered notes to The Goldman Sachs Group, Inc. or its affiliates. The Goldman Sachs Group,
Inc. expects to use the proceeds from such loans for the purposes we describe in the accompanying prospectus under “Use of Proceeds”. We or our affiliates may also use those proceeds in transactions intended to hedge our obligations under the
offered notes as described below.
In anticipation of the sale of the offered notes, we and/or our affiliates expect to enter into hedging transactions involving purchases of the
index stock and listed or over-the-counter options, futures or other instruments linked to the index stock on or before the trade date. In addition, from time to time, we and/or our affiliates expect to enter into additional hedging transactions
and to unwind those we have entered into, in connection with the offered notes and perhaps in connection with other notes we issue, some of which may have returns linked to index stock. Consequently, with regard to your notes, from time to time,
we and/or our affiliates:
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expect to acquire, or dispose of positions in listed or over-the-counter options, futures or other instruments linked to the index stock,
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may take or dispose of positions in the securities of the index stock issuer itself,
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may take or dispose of positions in listed or over-the-counter options or other instruments based on indices designed to track the performance of the New York Stock Exchange or other
components of the U.S. equity market, and/ or
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may take short positions in the index stock or other securities of the kind described above — i.e., we and/or our affiliates may sell securities of the kind that we do not own or
that we borrow for delivery to purchaser.
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We and/or our affiliates may also acquire a long or short position in securities similar to your notes from time to time and may, in our or their
sole discretion, hold or resell those securities.
In the future, we and/or our affiliates expect to close out hedge positions relating to the offered notes and perhaps relating to other notes with
returns linked to the index stock. We expect these steps to involve sales of instruments linked to the index stock on or shortly before the final averaging date. These steps may also involve sales and/or purchases of the index stock, or listed or
over-the-counter options, futures or other instruments linked to the index stock or indices designed to track the performance of the New York Stock Exchange or other components of the U.S. equity market.
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The hedging activity discussed above may adversely affect the market value of your notes from time to time and
the amount we will pay on your notes at maturity. See “Additional Risk Factors Specific to Your Notes” above for a discussion of these adverse effects.
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The index stock issuer is Alphabet Inc. According to publicly available information, Alphabet Inc. is a holding company for a collection of businesses, the largest of which is Google Inc. On October 2, 2015, Alphabet Inc. became the successor SEC registrant to, and parent holding company of, Google Inc. in connection with a holding company reorganization.
Where Information About the Index Stock Issuer Can be Obtained
The index stock is registered under the Securities Exchange Act of 1934. Companies with securities registered under the Exchange Act are required to file financial and
other information specified by the U.S. Securities and Exchange Commission (“SEC”) periodically. Information filed with the SEC can be inspected and copied at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549,
at prescribed rates. You may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. In addition, information filed by the index stock issuer with the SEC electronically can be reviewed through a web
site maintained by the SEC. The address of the SEC’s web site is sec.gov. Information filed with the SEC by the index stock issuer under the Exchange Act can be located by
referencing its SEC file number 001-37580.
Information about the index stock issuer may also be obtained from other sources such as press releases, newspaper articles and other publicly
available documents.
We do not make any representation or warranty as to the accuracy or completeness of any materials referred to above, including any filings made by the
index stock issuer with the SEC.
We Obtained the Information About the Index Stock Issuer from the Index Stock Issuer’s Public Filings
This prospectus supplement relates only to your note and does not relate to the index stock or other securities of the index stock issuer. We have derived all
information about the index stock issuer in this prospectus supplement from the publicly available information referred to in the preceding subsection. We have not participated in the preparation of any of those documents or made any “due
diligence” investigation or inquiry with respect to the index stock issuer in connection with the offering of your note. Furthermore, we do not know whether all events occurring before the date of this prospectus supplement — including events
that would affect the accuracy or completeness of the publicly available documents referred to above and the trading price of shares of the index stock — have been publicly disclosed. Subsequent disclosure of any events of this kind or the
disclosure of or failure to disclose material future events concerning the index stock issuer could affect the value you will receive at maturity and, therefore, the market value of your note.
Neither we nor any of our affiliates make any representation to you as to the performance of the index stock.
We or any of our affiliates may currently or from time to time engage in business with the index stock issuer, including making loans to or equity
investments in the index stock issuer or providing advisory services to the index stock issuer, including merger and acquisition advisory services. In the course of that business, we or any of our affiliates may acquire non-public information
about the index stock issuer and, in addition, one or more of our affiliates may publish research reports about the index stock issuer. As an investor in a note, you should undertake such independent investigation of the index stock issuer as in
your judgment is appropriate to make an informed decision with respect to an investment in a note.
Historical Closing Prices of the Index Stock
The closing prices of the index stock have fluctuated in the past and may, in the future, experience significant fluctuations. Any historical
upward or downward trend in the closing prices of the index stock during the period shown below is not an indication that the index stock is more or less likely to increase or decrease at any time during the life of your notes.
You should not take the historical prices of the index stock as an indication
of the future performance of the index stock. We cannot give you any assurance that the future performance of the index stock will result in your receiving an amount greater than the outstanding face amount of your notes on the stated
maturity date.
Neither we nor any of our affiliates make any representation to you as to the performance of the index stock. Before investing in the notes, you should consult
publicly available information to determine the prices of the index stock between the date of this prospectus supplement and the date of your purchase of the notes. The actual performance of the index stock over the life of the offered notes, as well as the cash settlement amount, may bear little relation to the historical prices shown below.
The graph below shows the daily historical closing prices of the index stock from October 26, 2008 through October 26, 2018. We obtained the closing prices in the graph below from Bloomberg Financial Services, without independent verification. In the graph, the vertical solid line marker reflects
the date Alphabet Inc. became the successor SEC registrant to Google Inc. The historical closing prices to the left of the vertical solid line marker reflect the Class C capital stock of Google Inc. and the historical closing prices to the right
of the vertical solid line marker reflect the Class C capital stock of Alphabet Inc.
Historical Performance of Alphabet Inc.
The following section supplements the discussion of U.S. federal income taxation in the accompanying prospectus.
The following section is the opinion of Sidley Austin llp,
counsel to GS Finance Corp. and The Goldman Sachs Group, Inc. In addition, it is the opinion of Sidley Austin llp that the characterization of the notes for
U.S. federal income tax purposes that will be required under the terms of the notes, as discussed below, is a reasonable interpretation of current law.
This section does not apply to you if you are a member of a class of holders subject to special rules, such as:
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a dealer in securities or currencies;
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a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings;
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a bank;
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a life insurance company;
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a regulated investment company;
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an accrual method taxpayer subject to special tax accounting rules as a result of its use of financial statements;
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a tax exempt organization;
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a partnership;
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a person that owns a note as a hedge or that is hedged against interest rate risks;
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a person that owns a note as part of a straddle or conversion transaction for tax purposes; or
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a United States holder (as defined below) whose functional currency for tax purposes is not the U.S. dollar.
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Although this section is based on the U.S. Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations
under the Internal Revenue Code, published rulings and court decisions, all as currently in effect, no statutory, judicial or administrative authority directly discusses how your notes should be treated for U.S. federal income tax purposes, and
as a result, the U.S. federal income tax consequences of your investment in your notes are uncertain. Moreover, these laws are subject to change, possibly on a retroactive basis.
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You should consult your tax advisor concerning the U.S. federal income tax and other tax consequences of your investment in
the notes, including the application of state, local or other tax laws and the possible effects of changes in federal or other tax laws.
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United States Holders
This section applies to you only if you are a United States holder that holds your notes as a capital asset for tax purposes. You are a United
States holder if you are a beneficial owner of a note and you are:
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a citizen or resident of the United States;
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a domestic corporation;
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an estate whose income is subject to U.S. federal income tax regardless of its source; or
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a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial
decisions of the trust.
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Tax Treatment. You will be obligated pursuant to the terms of the
notes — in the absence of a change in law, an administrative determination or a judicial ruling to the contrary — to characterize your notes for all tax purposes as income-bearing pre-paid derivative contracts in respect of the index stock.
Except as otherwise stated below, the discussion below assumes that the notes will be so treated.
Coupon payments that you receive should be included in ordinary income at the time you receive the payment or when the payment accrues, in accordance with your regular
method of accounting for U.S. federal income tax purposes.
Upon the sale, exchange, redemption or maturity of your notes, you should recognize capital gain or loss equal to the difference between the amount
realized on the sale, exchange, redemption or maturity (excluding any amounts attributable to accrued and unpaid coupon payments, which will be taxable as described above) and your tax basis in your notes. Your tax basis in your notes will
generally be equal to the amount that you paid for the notes. Such capital gain or loss should generally be short-term capital gain or loss if you hold the notes for one year or less, and should be long-term capital gain or loss if you hold the
notes for more than one year. Short-term capital gains are generally subject to tax at the marginal tax rates applicable to ordinary income.
No statutory, judicial or administrative authority directly discusses how your notes should be treated for U.S. federal income
tax purposes. As a result, the U.S. federal income tax consequences of your investment in the notes are uncertain and alternative characterizations are possible. Accordingly, we urge you to consult your tax advisor in determining the tax
consequences of an investment in your notes in your particular circumstances, including the application of state, local or other tax laws and the possible effects of changes in federal or other tax laws.
Alternative Treatments. There is no judicial or administrative
authority discussing how your notes should be treated for U.S. federal income tax purposes. Therefore, the Internal Revenue Service might assert that a treatment other than that described above is more appropriate. For example, the Internal
Revenue Service could treat your notes as a single debt instrument subject to special rules governing contingent payment debt instruments.
Under those rules, the amount of interest you are required to take into account for each accrual period would be determined by constructing a
projected payment schedule for the notes and applying rules similar to those for accruing original issue discount on a hypothetical noncontingent debt instrument with that projected payment schedule. This method is applied by first determining
the comparable yield — i.e., the yield at which we would issue a noncontingent fixed rate debt instrument with terms and conditions similar to your notes — and then determining a payment schedule as of the applicable original issue date that
would produce the comparable yield. These rules may have the effect of requiring you to include interest in income in respect of your notes prior to your receipt of cash attributable to that income.
If the rules governing contingent payment debt instruments apply, any income you recognize upon the sale, exchange, redemption or maturity of your
notes would be treated as ordinary interest income. Any loss you recognize at that time would be treated as ordinary loss to the extent of interest you included as income in the current or previous taxable years in respect of your notes, and,
thereafter, as capital loss.
If the rules governing contingent payment debt instruments apply, special rules would apply to persons who purchase a note at other than the
adjusted issue price as determined for tax purposes.
It is possible that the Internal Revenue Service could assert that your notes should generally be characterized as described above, except that (1)
the gain you recognize upon the sale, exchange, redemption or maturity of your notes should be treated as ordinary income or (2) you should not include the coupon payments in income as you receive them but instead you should reduce your basis in
your notes by the amount of coupon payments that you receive. It is also possible that the Internal Revenue Service could seek to characterize your notes in a manner that results in tax consequences to you different from those described above.
It is also possible that the Internal Revenue Service could seek to characterize your notes as notional principal contracts. It is also possible
that the coupon payments would not be treated as either ordinary income or interest for U.S. federal income tax purposes, but instead would be treated in some other manner.
You should consult your tax advisor as to possible alternative characterizations of your notes for U.S. federal income tax purposes.
Possible Change in Law
In 2007, legislation was introduced in Congress that, if enacted, would have required holders that acquired instruments such as your notes after
the bill was enacted to accrue interest income over the term of such instruments even though there may be no interest payments over the term of such instruments. It is not possible to predict whether a similar or identical bill will be enacted
in the future, or whether any such bill would affect the tax treatment of your notes.
In addition, on December 7, 2007, the Internal Revenue Service released a notice stating that the Internal Revenue Service and the Treasury Department are actively
considering issuing guidance regarding the proper U.S. federal income tax treatment of an instrument such as the offered notes including whether the holders should be required to accrue
ordinary income on a current basis and whether gain or loss should be ordinary or capital. It is not possible to determine what guidance they will
ultimately issue, if any. It is possible, however, that under such guidance, holders of the notes will ultimately be required to accrue income currently and this could be applied on a retroactive basis. The Internal Revenue Service and the
Treasury Department are also considering other relevant issues, including whether foreign holders of such instruments should be subject to withholding tax on any deemed income accruals, and whether the special “constructive ownership rules” of
Section 1260 of the Internal Revenue Code might be applied to such instruments. Except to the extent otherwise provided by law, GS Finance Corp. intends to continue treating the notes for U.S. federal income tax purposes in accordance with the
treatment described above unless and until such time as Congress, the Treasury Department or the Internal Revenue Service determine that some other treatment is more appropriate.
It is impossible to predict what any such legislation or administrative or regulatory guidance might provide, and whether the effective date of any
legislation or guidance will affect notes that were issued before the date that such legislation or guidance is issued. You are urged to consult your tax advisor as to the possibility that any legislative or administrative action may adversely
affect the tax treatment of your notes.
United States Alien Holders
This section applies to you only if you are a United States alien holder. You are a United States alien holder if you are the beneficial owner of
the notes and are, for U.S. federal income tax purposes:
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a nonresident alien individual;
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a foreign corporation; or
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an estate or trust that in either case is not subject to U.S. federal income tax on a net income basis on income or gain from the notes.
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Because the U.S. federal income tax treatment (including the applicability of withholding) of the coupon payments on the notes is uncertain, in the
absence of further guidance, we intend to withhold on the coupon payments made to you at a 30% rate or at a lower rate specified by an applicable income tax treaty under an “other income” or similar provision. We will not make payments of any
additional amounts. To claim a reduced treaty rate for withholding, you generally must provide a valid Internal Revenue Service Form W-8BEN, Internal Revenue Service Form W-8BEN-E or an acceptable substitute form upon which you certify, under
penalty of perjury, your status as a U.S. alien holder and your entitlement to the lower treaty rate. Payments will be made to you at a reduced treaty rate of withholding only if such reduced treaty rate would apply to any possible
characterization of the payments (including, for example, if the coupon payments were characterized as contract fees). Withholding also may not apply to coupon payments made to you if: (i) the coupon payments are “effectively connected” with your
conduct of a trade or business in the United States and are includable in your gross income for U.S. federal income tax purposes, (ii) the coupon payments are attributable to a permanent establishment that you maintain in the United States, if
required by an applicable tax treaty, and (iii) you comply with the requisite certification requirements (generally, by providing an Internal Revenue Service Form W-8ECI). If you are eligible for a reduced rate of United States withholding tax,
you may obtain a refund of any amounts withheld in excess of that rate by filing a refund claim with the Internal Revenue Service.
“Effectively connected” payments includable in your United States gross income are generally taxed at rates applicable to United States citizens,
resident aliens, and domestic corporations; if you are a corporate United States alien holder, “effectively connected” payments may be subject to an additional “branch profits tax” under certain circumstances.
You will also be subject to generally applicable information reporting and backup withholding requirements with respect to payments on your notes
and, notwithstanding that we do not intend to treat the notes as debt for tax purposes, we intend to backup withhold on such payments with respect to your notes unless you comply with the requirements necessary to avoid backup withholding on debt
instruments (in which case you will not be subject to such backup withholding) as set forth under “United States Taxation – Taxation of Debt Securities – United States Alien Holders” in the accompanying prospectus.
Furthermore, on December 7, 2007, the Internal Revenue Service released Notice 2008-2 soliciting comments from the public on various issues, including whether
instruments such as your notes should be subject to withholding. It is therefore possible that rules will be issued in the future, possibly with retroactive effects, that would cause payments on your notes to be subject to withholding, even if
you comply with certification requirements as to your foreign status.
As discussed above, alternative characterizations of the notes for U.S. federal income tax purposes are possible. Should an alternative
characterization of the notes, by reason of a change or clarification of the law, by regulation or otherwise, cause payments with respect to the notes to become subject to withholding tax, we will withhold tax at the applicable statutory rate and
we will not make payments of any additional amounts. Prospective United States alien holders of the notes should consult their tax advisors in this regard.
In addition, the Treasury Department has issued regulations under which amounts paid or deemed paid on certain financial instruments (“871(m)
financial instruments”) that are treated as attributable to U.S.-source dividends could be treated, in whole or in part depending on the circumstances, as a “dividend equivalent” payment that is subject to tax at a rate of 30% (or a lower rate
under an applicable treaty), which in the case of any coupon payments and any amounts you receive upon the sale, exchange, redemption or maturity of your notes, could be collected via withholding. If these regulations were to apply to the notes,
we may be required to withhold such taxes if any U.S.-source dividends are paid on the index stock during the term of the notes. We could also require you to make certifications (e.g., an applicable Internal Revenue Service Form W-8) prior to any
coupon payment or the maturity of the notes in order to avoid or minimize withholding obligations, and we could withhold accordingly (subject to your potential right to
claim a refund from the Internal Revenue Service) if such certifications were not received or were not satisfactory. If withholding was required, we would not be required to pay any additional amounts with respect to amounts so withheld. These
regulations generally will apply to 871(m) financial instruments (or a combination of financial instruments treated as having been entered into in connection with each other) issued (or significantly modified and treated as retired and reissued)
on or after January 1, 2021, but will also apply to certain 871(m) financial instruments (or a combination of financial instruments treated as having been entered into in connection with each other) that have a delta (as defined in the applicable
Treasury regulations) of one and are issued (or significantly modified and treated as retired and reissued) on or after January 1, 2017. In addition, these regulations will not apply to financial instruments that reference a “qualified index”
(as defined in the regulations). We have determined that, as of the issue date of your notes, your notes will not be subject to withholding under these rules. In certain limited circumstances, however, you should be aware that it is possible
for United States alien holders to be liable for tax under these rules with respect to a combination of transactions treated as having been entered into in connection with each other even when no withholding is required. You should consult your
tax advisor concerning these regulations, subsequent official guidance and regarding any other possible alternative characterizations of your notes for U.S. federal income tax purposes.
Foreign Account Tax Compliance Act (FATCA) Withholding
Pursuant to Treasury regulations, Foreign Account Tax Compliance Act (FATCA) withholding (as described in “United States Taxation—Taxation of
Debt Securities—Foreign Account Tax Compliance Act (FATCA) Withholding” in the accompanying prospectus) will generally apply to obligations that are issued on or after July 1, 2014; therefore, the notes will generally be subject to FATCA
withholding. However, according to published guidance, the withholding tax described above will not apply to payments of gross proceeds from the sale, exchange, redemption or other disposition of the notes made before January 1, 2019.
This section is only relevant to you if you are an insurance company or the fiduciary of a pension plan or an employee
benefit plan (including a governmental plan, an IRA or a Keogh Plan) proposing to invest in the notes.
The U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and the U.S. Internal Revenue Code of 1986, as amended (the “Code”), prohibit certain
transactions (“prohibited transactions”) involving the assets of an employee benefit plan that is subject to the fiduciary responsibility provisions of ERISA or Section 4975 of the Code (including individual retirement accounts, Keogh plans and
other plans described in Section 4975(e)(1) of the Code) (a “Plan”) and certain persons who are “parties in interest” (within the meaning of ERISA) or “disqualified persons” (within the meaning of the Code) with respect to the Plan; governmental
plans may be subject to similar prohibitions unless an exemption applies to the transaction. The assets of a Plan may include assets held in the general account of an insurance company that are deemed “plan assets” under ERISA or assets of
certain investment vehicles in which the Plan invests. Each of The Goldman Sachs Group, Inc. and certain of its affiliates may be considered a “party in interest” or a “disqualified person” with respect to many Plans, and, accordingly, prohibited
transactions may arise if the notes are acquired by or on behalf of a Plan unless those notes are acquired and held pursuant to an available exemption. In general, available exemptions are: transactions effected on behalf of that Plan by a
“qualified professional asset manager” (prohibited transaction exemption 84-14) or an “in-house asset manager” (prohibited transaction exemption 96-23), transactions involving insurance company general accounts (prohibited transaction exemption
95-60), transactions involving insurance company pooled separate accounts (prohibited transaction exemption 90-1), transactions involving bank collective investment funds (prohibited transaction exemption 91-38) and transactions with service
providers under Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code where the Plan receives no less and pays no more than “adequate consideration” (within the meaning of Section 408(b)(17) of ERISA and Section 4975(f)(10) of the
Code). The person making the decision on behalf of a Plan or a governmental plan shall be deemed, on behalf of itself and the plan, by purchasing and holding the notes, or exercising any rights related thereto, to represent that (a) the plan will
receive no less and pay no more than “adequate consideration” (within the meaning of Section 408(b)(17) of ERISA and Section 4975(f)(10) of the Code) in connection with the purchase and holding of the notes, (b) none of the purchase, holding or
disposition of the notes or the exercise of any rights related to the notes will result in a non-exempt prohibited transaction under ERISA or the Code (or, with respect to a governmental plan, under any similar applicable law or regulation), and
(c) neither The Goldman Sachs Group, Inc. nor any of its affiliates is a “fiduciary” (within the meaning of Section 3(21) of ERISA or, with respect to a governmental plan, under any similar applicable law or regulation) with respect to the
purchaser or holder in connection with such person’s acquisition, disposition or holding of the notes, or as a result of any exercise by The Goldman Sachs Group, Inc. or any of its affiliates of any rights in connection with the notes, and
neither The Goldman Sachs Group, Inc. nor any of its affiliates has provided investment advice in connection with such person’s acquisition, disposition or holding of the notes.
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If you are an insurance company or the fiduciary of a pension plan or an employee benefit plan (including a
government plan, an IRA or a Keogh plan), and propose to invest in the notes, you should consult your legal counsel.
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GS Finance Corp. expects to agree to sell to GS&Co., and GS&Co. expects to agree to purchase from GS Finance Corp., the
aggregate face amount of the offered notes specified on the front cover page of this prospectus supplement. GS&Co. proposes initially to offer the notes to the public at the original issue prices set forth on the front cover of this
prospectus supplement, and to certain securities dealers at such prices less a concession not in excess of % of the face amount. Accounts of certain national banks, acting as purchase agents for such accounts, have agreed with the purchase
agents to pay a purchase price of % of the face amount, and as a result of such agreements the agents with respect to sales to be made to such accounts will not receive any portion of the underwriting discount set forth on the front cover
page of this prospectus supplement from GS&Co.
GS Finance Corp. estimates that its share of the total offering expenses, excluding underwriting discounts and commissions, will be
approximately $ .
We expect to deliver the notes against payment therefor in New York, New York on November 7, 2018. Under Rule 15c6-1 of the
Securities Exchange Act of 1934, trades in the secondary market generally are required to settle in two business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade notes on any date
prior to two business days before delivery will be required to specify alternative settlement arrangements to prevent a failed settlement.
We have been advised by GS&Co. that it intends to make a market in the notes. However, neither GS&Co. nor any of our other
affiliates that makes a market is obligated to do so and any of them may stop doing so at any time without notice. No assurance can be given as to the liquidity or trading market for the notes.
Any notes which are the subject of the offering contemplated by this prospectus supplement, the accompanying prospectus and the
accompanying prospectus supplement may not be offered, sold or otherwise made available to any retail investor in the European Economic Area. Consequently no key information document required by Regulation (EU) No 1286/2014 (the “PRIIPs
Regulation”) for offering or selling the notes or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the notes or otherwise making them available to any retail investor in the EEA
may be unlawful under the PRIIPs Regulation. For the purposes of this provision:
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the expression “retail investor” means a person who is one (or more) of the following:
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a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, “MiFID II”); or
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a customer within the meaning of Directive 2002/92/EC (as amended, the “Insurance Mediation Directive”), where that customer would not qualify as a professional client as defined in
point (10) of Article 4(1) of MiFID II; or
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not a qualified investor as defined in Directive 2003/71/EC (as amended, the “Prospectus Directive”); and
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the expression an “offer” includes the communication in any form and by any means of sufficient information on the terms of the offer and the notes to be offered so as to enable an
investor to decide to purchase or subscribe for the notes.
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In relation to each Member State of the European Economic
Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), GS&Co. has represented and agreed that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member
State (the “Relevant Implementation Date”) it has not made and will not make an offer of notes which are the subject of the offering contemplated by this prospectus supplement, the accompanying prospectus and the accompanying prospectus
supplement to the public in that Relevant Member State except that, with effect from and including the Relevant Implementation Date, an offer of such notes may be made to the public in that Relevant Member State:
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at any time to any legal entity which is a qualified investor as defined in the Prospectus
Directive;
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at any time to fewer than 150 natural or legal persons (other than qualified investors as
defined in the Prospectus Directive), subject to obtaining the prior consent of the relevant dealer or dealers nominated by the issuer for any such offer; or
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at any time in any other circumstances falling within Article 3(2) of the Prospectus
Directive,
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provided that no such offer of notes referred to above shall require us or any dealer to publish a prospectus pursuant to Article 3 of the
Prospectus Directive.
For the purposes of this provision, the expression an “offer of notes to the
public” in relation to any notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the notes to be offered so as to enable an investor to decide to purchase
or subscribe for the notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive” means Directive 2003/71/EC (as amended, including by Directive 2010/73/EU), and includes any relevant implementing measure in
the Relevant Member State.
Any invitation or inducement to engage in investment
activity (within the meaning of Section 21 of the FSMA) in connection with the issue or sale of the notes may only be communicated or caused to be communicated in circumstances in which Section 21(1) of the FSMA does not apply to GS Finance
Corp. or The Goldman Sachs Group, Inc.
All applicable provisions of the FSMA must be complied with
in respect to anything done by any person in relation to the notes in, from or otherwise involving the United Kingdom.
The notes may not be offered or sold in Hong Kong by means
of any document other than (i) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) and any rules made thereunder, or (ii) in other circumstances which do not result in the document
being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong) or which do not constitute an offer to the public within the meaning of that Ordinance; and no
advertisement, invitation or document relating to the notes may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere) which is directed at, or the contents of which are
likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the notes which are or are intended to be disposed of only to persons outside Hong Kong
or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made thereunder.
This prospectus supplement, along with the accompanying
prospectus supplement and the accompanying prospectus have not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus supplement, along with the accompanying prospectus supplement and the
accompanying prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the notes may not be circulated or distributed, nor may the notes be offered or sold, or be made the
subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor (as defined in Section 4A of the Securities and Futures Act, Chapter 289 of Singapore
(the “SFA”)) under Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions
specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to conditions set forth in the SFA.
Where the notes are subscribed or purchased under Section
275 of the SFA by a relevant person which is a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or
more individuals, each of whom is an accredited investor, the securities (as defined in Section 239(1) of the SFA) of that corporation shall not be transferable for six months after that corporation has acquired the notes under Section 275 of
the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer in that corporation’s securities pursuant to Section
275(1A) of the SFA, (3) where no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32 of the Securities and
Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore (“Regulation 32”).
Where the notes are subscribed or purchased under Section
275 of the SFA by a relevant person which is a trust (where the trustee is not an accredited investor (as defined in Section 4A of the SFA)) whose sole purpose is to hold investments and each beneficiary of the trust is an accredited investor,
the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferable for six months after that trust has acquired the notes under Section 275 of the SFA except: (1) to an institutional investor under Section 274
of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer that is made on terms that such rights or interest are acquired at a consideration of not less than S$200,000 (or its
equivalent in a foreign currency) for each transaction (whether such amount is to be paid for in cash or by exchange of securities or other assets), (3) where no consideration is or will be given for the transfer, (4) where the transfer is by
operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32.
The notes have not been and will not be registered under the Financial
Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended), or the FIEA. The notes may not be offered or sold, directly or indirectly, in Japan or to or for the benefit of any resident of Japan (including any person resident in
Japan or any corporation or other entity organized under the laws of Japan) or to others for reoffering or resale, directly or indirectly, in Japan or to or for the benefit of any resident of Japan, except pursuant to an exemption from the
registration requirements of the FIEA and otherwise in compliance with any relevant laws and regulations of Japan.
The notes are not offered, sold or advertised, directly or
indirectly, in, into or from Switzerland on the basis of a public offering and will not be listed on the SIX Swiss Exchange or any other offering or regulated trading facility in Switzerland. Accordingly, neither this prospectus supplement nor
any accompanying prospectus supplement, prospectus or other marketing material constitute a prospectus as defined in article 652a or article 1156 of the Swiss Code of Obligations or a listing prospectus as defined in article 32 of the Listing
Rules of the SIX Swiss Exchange or any other regulated trading facility in Switzerland. Any resales of the notes by the underwriters thereof may only be undertaken on a private basis to selected individual investors in compliance with Swiss
law. This prospectus supplement and accompanying prospectus and prospectus supplement may not be copied, reproduced, distributed or passed on to others or otherwise made available in Switzerland without our prior written consent. By accepting
this prospectus supplement and accompanying prospectus and prospectus supplement or by subscribing to the notes, investors are deemed to have acknowledged and agreed to abide by these restrictions. Investors are advised to consult with their
financial, legal or tax advisers before investing in the notes.
GS&Co. is an affiliate of GS Finance Corp. and The Goldman Sachs Group, Inc. and, as such, will have a “conflict of interest” in this offering of notes within
the meaning of Financial Industry Regulatory Authority, Inc. (FINRA) Rule 5121. Consequently, this offering of notes will be conducted in compliance with the provisions of FINRA Rule 5121. GS&Co. will not be permitted to sell notes in this
offering to an account over which it exercises discretionary authority without the prior specific written approval of the account holder.
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We have not authorized anyone to provide any information or to make any representations other than those contained or incorporated by reference in this prospectus supplement, the accompanying
prospectus supplement or the accompanying prospectus. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus supplement, the accompanying
prospectus supplement and the accompanying prospectus is an offer to sell only the notes offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus supplement,
the accompanying prospectus supplement and the accompanying prospectus is current only as of the respective dates of such documents.
Prospectus Supplement
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S-8
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S-9
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S-13
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S-21
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S-32
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S-32
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S-35
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S-39
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S-40
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S-42
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Prospectus Supplement dated July 10, 2017
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Use of Proceeds
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S-2
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Description of Notes We May Offer
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S-3
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Considerations Relating to Indexed Notes
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S-15
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United States Taxation
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S-18
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Employee Retirement Income Security Act
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S-19
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Supplemental Plan of Distribution
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S-20
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Validity of the Notes and Guarantees
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S-21
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Prospectus dated July 10, 2017
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Available Information
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Prospectus Summary
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4
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Risks Relating to Regulatory Resolution Strategies and Long-Term Debt Requirements
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Use of Proceeds
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11
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Description of Debt Securities We May Offer
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12
|
|
Description of Warrants We May Offer
|
45
|
|
Description of Units We May Offer
|
60
|
|
GS Finance Corp.
|
65
|
|
Legal Ownership and Book-Entry Issuance
|
67
|
|
Considerations Relating to Floating Rate Debt Securities
|
72
|
|
Considerations Relating to Indexed Securities
|
73
|
|
Considerations Relating to Securities Denominated or Payable in or Linked to a Non-U.S. Dollar Currency
|
74
|
|
United States Taxation
|
77
|
|
Plan of Distribution
|
92
|
|
Conflicts of Interest
|
94
|
|
Employee Retirement Income Security Act
|
95
|
|
Validity of the Securities and Guarantees
|
95
|
|
Experts
|
96
|
|
Review of Unaudited Condensed Consolidated Financial Statements by Independent Registered Public Accounting Firm
|
96
|
|
Cautionary Statement Pursuant to the Private Securities Litigation Reform Act of 1995
|
96
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$
GS Finance Corp.
Autocallable Contingent Coupon Equity-Linked
Notes due
guaranteed by
The Goldman Sachs Group, Inc.
Goldman Sachs & Co. LLC
JPMorgan
Placement Agent
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