Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-198735
The information in this preliminary pricing supplement is not complete and may be changed. This preliminary pricing 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.
Subject to Completion. Dated May 19, 2017.
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GS Finance Corp.
$
Leveraged Buffered iShares
®
MSCI EAFE
ETF-Linked
Notes due
guaranteed by
The Goldman Sachs Group, Inc.
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The notes do not bear interest
. The amount that you will be paid on your notes on the stated maturity
date (expected to be November 26, 2019) is based on the performance of the iShares
®
MSCI EAFE ETF (ETF)as measured
from the trade date (expected to be May 22, 2017) to and including the determination date (expected to be November 22, 2019). If the final ETF level on the determination date is greater than the initial ETF level (set on the trade date),
the return on your notes will be positive and will equal 2.0
times
the ETF return, subject to the maximum settlement amount of $1,317.00 for each $1,000 face amount of your notes. If the final ETF level declines by up to 15.00% from the
initial ETF level, you will receive the face amount of your notes.
If the final ETF level declines by more than 15.00% from the initial ETF level, the return on your notes will be negative and you will lose a portion of the face amount of your
notes equal to the buffer rate (approximately 1.1765%, calculated as described on
PS-6)
for every 1.00% that the final ETF level has declined below 85.00% of the initial ETF level. You could lose a significant
portion of the face amount of your notes.
The return on your notes is linked to the performance of the iShares
®
MSCI EAFE ETF (ETF), and not to that of the MSCI EAFE Index (underlying index) on which the ETF is based. The ETF follows a strategy of representative sampling,
which means the ETFs holdings are not the same as those of the underlying index. The performance of the ETF may significantly diverge from that of the underlying index.
To determine your payment at maturity, we will calculate the ETF return, which is the percentage increase or decrease in the final ETF level from the initial ETF level. On the stated maturity date, for each $1,000
face amount of your notes, you will receive an amount in cash equal to:
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if the ETF return is
positive
(the final ETF level is
greater than
the initial ETF level), the
sum
of (i) $1,000
plus
(ii) the
product
of (a) $1,000
times
(b) 2.0
times
(c) the ETF return, subject to the maximum settlement amount;
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if the ETF return is
zero
or
negative
but
not below
-15.00%
(the final ETF level is
equal to
the initial ETF level or is
less than
the initial ETF level, but not by more than 15.00%), $1,000; or
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if the ETF return is
negative
and is
below
-15.00%
(the final ETF level is
less than
the initial ETF
level by more than 15.00%), the
sum
of (i) $1,000
plus
(ii) the
product
of (a) approximately 1.1765
times
(b) the
sum of
the ETF return
plus
15.00%
times
(c) $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 PS-12.
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 $970 and $999 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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, 2017
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Original issue price:
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100.00% 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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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.
Goldman Sachs & Co. LLC
Pricing Supplement No. dated
, 2017.
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 pricing 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.
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 $970 and $999 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.
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 pricing supplement and
the accompanying documents listed below. This pricing supplement constitutes a supplement to the documents listed below and should be read in conjunction with such documents:
The information in this pricing 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.
PS-2
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Leveraged Buffered iShares
®
MSCI EAFE
ETF-Linked
Notes
due
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INVESTMENT THESIS
You
should be willing to forgo:
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gains greater than a maximum settlement amount of 131.70% of the face amount in exchange for (i) 2x leveraged upside participation if the underlier return is
positive and (ii) a buffer against loss of principal in the event of a decline of up to 15.00% in the final underlier level relative to the initial underlier level.
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interest payments and risk losing your entire investment for the potential to earn 200.00% of any positive underlier return up to a maximum settlement amount of
131.70% of the face amount.
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Your maximum return on your notes will not be greater than 31.70%, and you could lose all or a portion of
your investment if the underlier return is less than
-15.00%.
DETERMINING THE CASH SETTLEMENT AMOUNT
At maturity, for each $1,000 face amount, the investor will receive (in each case as a percentage of the face amount):
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if the final underlier level is greater than 100.00% of the initial underlier level, 100.00%
plus
200.00% times the underlier return, subject to a maximum
settlement amount of 131.70%;
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if the final underlier level is between 85.00% and 100.00% of the initial underlier level, 100.00%; or
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if the final underlier level is less than 85.00% of the initial underlier level, 100.00%
minus
approximately 1.1765% for every 1.00% that the final
underlier level has declined below 85.00% of the initial underlier level
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If the final underlier level declines by more than 15.00%
from the initial underlier level, the return on the notes will be negative and the investor could lose their entire investment in the notes.
KEY
TERMS
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Issuer:
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GS Finance Corp.
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Guarantor:
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The Goldman Sachs Group, Inc.
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Underlier:
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The iShares
®
MSCI EAFE ETF (Bloomberg symbol, EFA UP
Equity)
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Face Amount:
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$ in the aggregate; each note will have a face amount equal to $1,000
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Trade Date:
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Expected to be May 22, 2017
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Settlement Date:
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Expected to be May 24, 2017
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Determination Date:
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Expected to be November 22, 2019
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Stated Maturity Date:
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Expected to be November 26, 2019
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Initial Underlier Level:
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To be determined on the trade date
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Final Underlier Level:
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The closing level of the underlier on the determination date
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Underlier Return:
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The
quotient
of (i) the final underlier level
minus
the initial underlier level
divided by
(ii) the initial underlier level, expressed as a positive or
negative percentage
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Upside Participation Rate:
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200.00%
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Buffer Level:
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85.00% of the initial underlier level (equal to
-15.00%
underlier return)
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Buffer Amount:
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15.00%
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Buffer Rate:
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The
quotient
of the initial underlier level
divided
by the buffer level, which equals approximately 117.65%
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Maximum Settlement Amount:
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$1,317.00
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Cap Level:
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115.85% of the initial underlier level
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CUSIP/ISIN:
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40054LD68 / US40054LD687
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PS-3
HYPOTHETICAL PAYMENT AT MATURITY
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Hypothetical Final
Underlier Level (as % of
Initial Underlier Level)
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Hypothetical Cash
Settlement Amount
(as % of Face Amount)
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150.000%
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131.700%
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140.000%
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131.700%
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130.000%
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131.700%
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120.000%
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131.700%
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115.850%
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131.700%
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111.000%
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122.000%
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107.000%
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114.000%
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103.000%
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106.000%
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100.000%
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100.000%
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96.000%
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100.000%
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92.000%
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100.000%
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88.000%
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100.000%
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85.000%
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100.000%
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75.000%
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88.235%
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50.000%
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58.824%
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25.000%
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29.412%
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0.000%
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0.000%
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RISKS
Please read the section entitled Additional Risk Factors Specific to Your Notes of this pricing supplement as well as the risks and considerations
described in the accompanying prospectus dated December 22, 2015, in the accompanying prospectus supplement dated December 22, 2015, under Additional Risk Factors Specific to the Underlier-Linked Notes in the accompanying
product supplement no. 28 dated December 22, 2015, and under Additional Risk Factors Specific to the Notes in the accompanying general terms supplement no. 24 dated December 22, 2015.
PS-4
SUMMARY INFORMATION
We refer to the notes we are offering by this pricing supplement as the offered notes or the
notes. Each of the offered notes has the terms described below. Please note that in this pricing 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 December 22, 2015,
references to the accompanying prospectus supplement mean the accompanying prospectus supplement, dated December 22, 2015, for Medium-Term Notes, Series E, references to the accompanying general terms supplement no.
24 mean the accompanying general terms supplement no. 24, dated December 22, 2015, and references to the accompanying product supplement no. 28 mean the accompanying product supplement no. 28, dated December 22, 2015, in
each case of GS Finance Corp. and The Goldman Sachs Group, Inc. The notes will be issued under 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. This section is meant
as a summary and should be read in conjunction with the section entitled General Terms of the Underlier-Linked Notes on page
S-35
of the accompanying product supplement no. 28 and
Supplemental Terms of the Notes on page
S-15
of the accompanying general terms supplement no. 24. Please note that certain features, as noted below, described in the accompanying product supplement
no. 28 and general terms supplement no. 24 are not applicable to the notes. This pricing supplement supersedes any conflicting provisions of the accompanying product supplement no. 28 or the accompanying general terms supplement no. 24.
Key Terms
Issuer:
GS Finance Corp.
Guarantor:
The Goldman
Sachs Group, Inc.
Underlier:
the
iShares
®
MSCI EAFE ETF (Bloomberg symbol, EFA UP Equity)
Underlying index:
the MSCI EAFE Index
Specified
currency:
U.S. dollars ($)
Terms to be specified in accordance with the accompanying product supplement no. 28:
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type of notes: notes linked to a single underlier
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exchange rates: not applicable
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averaging dates: not applicable
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redemption right or price dependent redemption right: not applicable
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cap level: yes, as described below
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buffer level: yes, as described below
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interest: not applicable
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Face amount:
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 pricing supplement
Purchase at amount other than face
amount:
the amount we will pay you at the stated maturity date for your notes will not be adjusted based on the issue price you pay for your notes, so if you acquire notes at a premium (or discount) to face amount and hold them to the stated
maturity date, it could affect your investment in a number of ways. The return on your investment in such notes will be lower (or higher) than it would have been had you purchased the notes at face amount. Also, the stated buffer level would not
offer the same measure of protection to your investment as would be the case if you had purchased
PS-5
the notes at face amount. Additionally, the cap level would be triggered at a lower (or higher) percentage return than indicated below, relative to your initial investment. See Additional
Risk Factors Specific to Your Notes If You Purchase Your Notes at a Premium to Face Amount, the Return on Your Investment Will Be Lower Than the Return on Notes Purchased at Face Amount and the Impact of Certain Key Terms of the Notes Will be
Negatively Affected on page PS-14 of this pricing supplement.
Supplemental discussion of U.S. federal income tax consequences:
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 a
pre-paid
derivative contract in respect of the underlier, as described under Supplemental Discussion of Federal Income Tax Consequences on page
S-42
of the
accompanying product supplement no. 28. Pursuant to this approach, it is the opinion of Sidley Austin
LLP
that upon the sale, exchange 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 and your tax basis in your notes. 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 or other disposition of the notes made before
January 1, 2019.
Cash settlement amount (on the stated maturity date):
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 underlier level is
greater than
or
equal to
the cap level, the maximum settlement amount;
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if the final underlier level is
greater than
the initial underlier level but
less than
the cap level, the
sum
of (1) $1,000
plus
(2) the
product
of (i) $1,000
times
(ii) the upside participation rate
times
(iii) the underlier return;
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if the final underlier level is
equal to
or
less than
the initial underlier level but
greater than
or
equal to
the buffer level,
$1,000; or
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if the final underlier level is
less than
the buffer level, the
sum
of (1) $1,000
plus
(2) the product of (i) $1,000
times
(ii) the buffer rate
times
(iii) the
sum
of the underlier return
plus
the buffer amount
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Initial
underlier level (set on the trade date):
Final underlier level:
the closing level of the underlier on the determination date,subject to
anti-dilution adjustments as described under Supplemental Terms of the Notes Anti-dilution Adjustments for Exchange-Traded Funds on page
S-24
of the accompanying general terms supplement,
except in the limited circumstances described under Supplemental Terms of the Notes Consequences of a Market Disruption Event or a
Non-Trading
Day on page
S-22
of the accompanying general terms supplement no. 24 and subject to adjustment as provided under Supplemental Terms of the Notes Discontinuance or Modification of an Underlier on page
S-26
of the accompanying general terms supplement no. 24
Underlier return:
the
quotient
of (1) the
final underlier level
minus
the initial underlier level
divided
by (2) the initial underlier level, expressed as a percentage
Upside participation rate:
200.00%
Cap level:
115.85% of the initial underlier level
Maximum settlement amount:
$1,317.00
Buffer level:
85.00% of the initial underlier level
Buffer amount:
15.00%
Buffer rate:
the
quotient
of the initial underlier level
divided
by the buffer level, which equals approximately 117.65%
Trade date:
expected to be May 22, 2017
Original
issue date (settlement date)
(set on the trade date):
expected to be May 24, 2017
PS-6
Determination date
(set on the trade date):
expected to be November 22, 2019, subject to adjustment
as described under Supplemental Terms of the Notes Determination Date on page
S-16
of the accompanying general terms supplement no. 24
Stated maturity date
(set on the trade date):
expected to be November 26, 2019, subject to adjustment as described under Supplemental
Terms of the Notes Stated Maturity Date on page
S-15
of the accompanying general terms supplement no. 24
No interest:
the offered notes do not bear interest
No listing:
the offered notes will not be listed
on any securities exchange or interdealer quotation system
No redemption:
the offered notes will not be subject to redemption right or price
dependent redemption right
Closing level:
as described under Supplemental Terms of the Notes Special Calculation Provisions
Closing Level on page
S-30
of the accompanying general terms supplement no. 24
Business day:
as
described under Supplemental Terms of the Notes Special Calculation Provisions Business Day on page
S-29
of the accompanying general terms supplement no. 24
Trading day:
as described under Supplemental Terms of the Notes Special Calculation Provisions Trading Day on page
S-29
of the accompanying general terms supplement no. 24
Use of proceeds and hedging:
as described under
Use of Proceeds and Hedging on page
S-40
of the accompanying product supplement no. 28
ERISA:
as described under Employee Retirement Income Security Act on page
S-49
of the accompanying
product supplement no. 28
Supplemental plan of distribution; conflicts of interest
:
as described under Supplemental Plan of
Distribution on page
S-50
of the accompanying product supplement no. 28 and Plan of Distribution Conflicts of Interest on page 78 of the accompanying prospectus; GS Finance Corp.
estimates that its share of the total offering expenses, excluding underwriting discounts and commissions, will be approximately $ .
GS Finance Corp. will sell to Goldman Sachs & Co. LLC (GS&Co.), and GS&Co. will purchase from GS Finance Corp., the aggregate face amount of the offered notes specified on the front
cover of this pricing supplement. GS&Co. proposes initially to offer the notes to the public at the original issue price set forth on the cover page of this pricing supplement, and to certain securities dealers at such price less a concession
not in excess of % of the face amount. 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.
We expect to deliver the
notes against payment therefor in New York, New York on May 24, 2017, which is expected to be the second scheduled business day following the date of this pricing supplement and of the pricing of 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. No assurance can be given as to the liquidity or trading market for the notes.
Calculation agent:
GS&Co.
CUSIP no.:
40054LD68
ISIN no.:
US40054LD687
FDIC
: 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
PS-7
HYPOTHETICAL EXAMPLES
The following table and chart are provided for purposes of illustration only. They should not be taken as an indication or prediction of future investment results
and merely are intended to illustrate the impact that the various hypothetical underlier levels on the determination date could have on the cash settlement amount at maturity assuming all other variables remain constant.
The examples below are based on a range of final underlier levels that are entirely hypothetical; the underlier level on any day throughout the life of the notes,
including the final underlier level on the determination date, cannot be predicted. The underlier has been highly volatile in the past meaning that the underlier level has changed considerably in relatively short periods and its
performance cannot be predicted for any future period.
The information in the following examples reflects 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 the stated maturity date. If you sell your notes in a secondary market prior to the stated maturity date, 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 table below, such as interest rates, the volatility of the underlier, 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 PS-12 of this pricing supplement. The information in the table 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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Upside participation rate
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200.00%
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Cap level
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115.85% of the initial underlier level
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Maximum settlement amount
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$1,317.00
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Buffer level
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85.00% of the initial underlier level
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Buffer rate
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approximately 117.65%
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Buffer amount
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15.00%
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Neither a market disruption event nor a
non-trading
day occurs on the originally scheduled determination date
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No change in or affecting any of the underlier stocks or the method by which the underlier sponsor calculates the underlier
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Notes purchased on original issue date at the face amount and held to the stated maturity date
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Moreover, we have not yet set the initial underlier level that will serve as the baseline for determining the underlier
return and the amount that we will pay on your notes, if any, at maturity. We will not do so until the trade date. As a result, the actual initial underlier level may differ substantially from the underlier level prior to the trade date.
For these reasons, the actual performance of the underlier 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 underlier levels shown elsewhere in this pricing supplement. For information about the historical levels of the underlier during recent periods, see The Underlier Historical
Closing Levels of the Underlier below. Before investing in the offered notes, you should consult publicly available information to determine the levels of the underlier between the date of this pricing supplement and the date of your purchase
of the offered notes.
PS-8
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 underlier stocks.
The levels in the left column of the table below represent hypothetical final underlier levels and are expressed as
percentages of the initial underlier level. The amounts in the right column represent the hypothetical cash settlement amounts, based on the corresponding hypothetical final underlier level, 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 underlier level and the assumptions noted above.
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Hypothetical Final Underlier Level
(as Percentage of Initial Underlier Level)
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Hypothetical Cash Settlement Amount
(as Percentage of Face Amount)
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150.000%
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131.700%
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140.000%
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131.700%
|
130.000%
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131.700%
|
120.000%
|
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131.700%
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115.850%
|
|
131.700%
|
111.000%
|
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122.000%
|
107.000%
|
|
114.000%
|
103.000%
|
|
106.000%
|
100.000%
|
|
100.000%
|
96.000%
|
|
100.000%
|
92.000%
|
|
100.000%
|
88.000%
|
|
100.000%
|
85.000%
|
|
100.000%
|
75.000%
|
|
88.235%
|
50.000%
|
|
58.824%
|
25.000%
|
|
29.412%
|
0.000%
|
|
0.000%
|
If, for example, the final underlier level were determined to be 25.000% of the initial underlier level, the cash settlement amount
that we would deliver on your notes at maturity would be approximately 29.412% 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 approximately 70.588% of your investment (if you purchased your notes at a premium to face amount you would lose a correspondingly higher percentage of your investment). If the final underlier level were
determined to be 0.000% of the initial underlier level, you would lose your entire investment in the notes. In addition, if the final underlier level were determined to be 150.000% of the initial underlier level, the cash settlement amount that we
would deliver on your notes at maturity would be capped at the maximum settlement amount, or 131.700% 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 underlier level of greater than 115.850% of the initial underlier level.
The following chart shows a
graphical illustration of the hypothetical cash settlement amounts that we would pay on your notes on the stated maturity date, if the final underlier level were any of the hypothetical levels shown on the horizontal axis. The hypothetical cash
settlement amounts in the chart are expressed as percentages of the face amount of your notes and the hypothetical final underlier levels are expressed as percentages of the initial underlier level. The chart shows that any hypothetical final
underlier level of less than 85.000% (the section left of the 85.000% marker on the horizontal axis) would result in a hypothetical cash settlement amount of less than 100.000% of the face amount of your notes (the section below the 100.000% marker
on the vertical axis) and, accordingly, in a loss of principal to the holder of the notes. The chart also shows that any hypothetical final underlier level of greater than or equal to 115.850% (the section right of the 115.850% marker on the
horizontal axis) would result in a capped return on your investment.
PS-9
The cash settlement amounts shown above are entirely hypothetical; they are based on market prices for the underlier stocks that
may not be achieved on the determination date 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 the Underlier-Linked Notes The Market Value of Your Notes May Be Influenced by Many Unpredictable Factors on page
S-32
of the accompanying product supplement no. 28.
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 pricing
supplement.
PS-10
We cannot predict the actual final underlier level or what the market value of your notes will be on any particular trading day, nor can we predict the relationship between the underlier level 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 the actual initial underlier level, which we will set on the
trade date, and the actual final underlier level 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 table and chart above.
PS-11
ADDITIONAL RISK FACTORS SPECIFIC TO YOUR NOTES
An investment in your notes is subject to the risks described below, as well as the risks and considerations
described in the accompanying prospectus, in the accompanying prospectus supplement, under Additional Risk Factors Specific to the Notes in the accompanying general terms supplement no. 24 and under Additional Risk Factors Specific
to the Underlier-Linked Notes in the accompanying product supplement no. 28. You should carefully review these risks and considerations as well as the terms of the notes described herein and in the accompanying prospectus, the accompanying
prospectus supplement, the accompanying general terms supplement no. 24 and the accompanying product supplement no. 28. Your notes are a riskier investment than ordinary debt securities. Also, your notes are not equivalent to investing directly in
the underlier stocks, i.e., the stocks comprising the underlier to which your notes are linked. 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, and 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 Additional Risk Factors Specific to the Underlier-Linked Notes The Market Value of Your Notes May Be Influenced by Many Unpredictable Factors on
page
S-32
of the accompanying product supplement no. 28.
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
PS-12
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 Additional Risk Factors Specific to the Underlier-Linked Notes Your
Notes May Not Have an Active Trading Market on page
S-31
of the accompanying product supplement no. 28.
The Notes Are Subject to the Credit Risk of the Issuer
and the Guarantor
Although the return on the
notes will be based on the performance of the underlier, 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 markets 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 markets 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.
The Amount Payable on Your Notes Is Not Linked to the Level of the Underlier at Any Time Other than the Determination Date
The final underlier level will be based on the closing level of the underlier on the determination date (subject to adjustment as described elsewhere in this
pricing supplement). Therefore, if the closing level of the underlier dropped precipitously on 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 to the closing level of the underlier prior to such drop in the level of the underlier. Although the actual level of the underlier on the stated maturity date or at other times during the life of your notes may be higher than the final
underlier level, you will not benefit from the closing level of the underlier at any time other than on the determination date.
You
May Lose Your Entire Investment in the Notes
You can lose your entire investment in the notes. The cash payment on your notes,
if any, on the stated maturity date will be based on the performance of the iShares
®
MSCI EAFE ETF as measured from the
initial underlier level set on the trade date to the closing level on the determination date. If the final underlier level is
less than
the buffer level, you will have a loss for each $1,000 of the face amount of your notes equal to the
product
of the buffer rate
times
the
sum
of the underlier return
plus
the buffer amount
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.
Your Notes Do Not Bear Interest
You will not receive any interest payments on your notes. As a result, even
if the cash settlement amount payable for your notes on the stated maturity date exceeds the face amount of your notes, the overall return you earn on your notes may be less than you would have earned by investing in a
non-indexed
debt security of comparable maturity that bears interest at a prevailing market rate.
PS-13
The Potential for the Value of Your Notes to Increase Will Be Limited
Your ability to participate in any change in the value of the underlier over the life of your notes will be limited because of the cap level. The maximum
settlement amount will limit the cash settlement amount you may receive for each of your notes at maturity, no matter how much the level of the underlier may rise beyond the cap level 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 underlier.
You Have No
Shareholder Rights or Rights to Receive Any
Shares of the Underlier or Any
Underlier Stock
Investing in your notes will not make you
a holder of any shares of the underlier or any underlier stock. Neither you nor any other holder or owner of your notes will have any rights with respect to the underlier stocks, including any voting rights, any right to receive dividends or other
distributions, any rights to make a claim against the underlier or the stocks comprising the underlier or any other rights of a holder of the underlier or the stocks comprising the underlier. Your notes will be paid in cash and you will have no
right to receive delivery of any shares of the underlier or the stocks comprising the underlier.
We May Sell an Additional Aggregate
Face Amount of the Notes at a Different Issue Price
At our sole option, we may decide to sell an additional aggregate face amount of the notes
subsequent to the date of this pricing supplement. The issue price of the notes in the subsequent sale may differ substantially (higher or lower) from the original issue price you paid as provided on the cover of this pricing supplement.
If You Purchase Your Notes at a Premium to Face Amount, the Return on Your Investment Will Be Lower Than the Return on Notes Purchased at Face
Amount and the Impact of Certain Key Terms of the Notes Will be Negatively Affected
The cash settlement amount will not be adjusted based on the
issue price you pay for the notes. If you purchase notes at a price that differs from the face amount of the notes, then the return on your investment in such notes held to the stated maturity date will differ from, and may be substantially less
than, the return on notes purchased at face amount. If you purchase your notes at a premium to face amount and hold them to the stated maturity date, the return on your investment in the notes will be lower than it would have been had you purchased
the notes at face amount or a discount to face amount. In addition, the impact of the buffer level and the cap level on the return on your investment will depend upon the price you pay for your notes relative to face amount. For example, if you
purchase your notes at a premium to face amount, the cap level will only permit a lower positive return in your investment in the notes than would have been the case for notes purchased at face amount or a discount to face amount. Similarly, the
buffer level, while still providing some protection for the return on the notes, will allow a greater percentage decrease in your investment in the notes than would have been the case for notes purchased at face amount or a discount to face amount.
The Policies of the Underliers Investment Advisor, BlackRock Fund Advisors, and MSCI, the Sponsor of The Underlying Index,
Could Affect the Amount Payable on Your Notes and Their Market Value
The underliers investment advisor, BlackRock Fund Advisors
(BFA, or the underlier investment advisor) may from time to time be called upon to make certain policy decisions or judgments with respect to the implementation of policies of the investment advisor concerning the calculation
of the net asset value of the underlier, additions, deletions or substitutions of securities in the underlier and the manner in which changes affecting the underlying index are reflected in the underlier that could affect the market price of the
shares of the underlier, and therefore, the amount payable on your notes on the maturity date. The amount payable on your notes and their market value could also be affected if the investment advisor changes these policies, for example, by changing
the manner in which it calculates the net asset value of the underlier, or if the investment advisor discontinues or suspends calculation or publication of the net asset value of the underlier, in which case it may become difficult or inappropriate
to determine the market value of your notes.
If events such as these occur, the calculation agent which initially will be GS&Co. may
determine the closing price of the underlier on the determination date and thus the amount payable on the maturity date, if any in a manner, in its sole discretion, it considers appropriate. We describe the
PS-14
discretion that the calculation agent will have in determining the closing underlier price on the determination date and the amount payable on your notes more fully under Supplemental Terms
of the Notes Discontinuance or Modification of an Underlier on page
S-26
of the accompanying general terms supplement no. 24.
In addition, MSCI (the underlying index sponsor) owns the underlying index and is responsible for the design and maintenance of the underlying index. The policies of the underlying index sponsor
concerning the calculation of the underlying index, including decisions regarding the addition, deletion or substitution of the equity securities included in the underlying index, could affect the level of the underlying index and, consequently,
could affect the market prices of shares of the underlier and, therefore, the amount payable on your notes and their market value.
There Are Risks Associated with The Underlier
Although the underliers shares are listed for trading on NYSE Arca, Inc. (the NYSE Arca) and a number of similar products have been traded on the
NYSE Arca or other securities exchanges for varying periods of time, there is no assurance that an active trading market will continue for the shares of the underlier or that there will be liquidity in the trading market.
In addition, the underlier is subject to management risk, which is the risk that the underlier investment advisors investment strategy, the implementation of
which is subject to a number of constraints, may not produce the intended results. For example, the underlier investment advisor may select up to 10% of the underliers assets to be invested in shares of equity securities that are not included
in the underlying index. The underlier is also not actively managed and may be affected by a general decline in market segments relating to the underlying index. The underlier investment advisor invests in securities included in, or representative
of, the underlying index regardless of their investment merits. The underlier investment advisor does not attempt to take defensive positions in declining markets.
In addition, the underlier is subject to custody risk, which refers to the risks in the process of clearing and settling trades and to the holding of securities by local banks, agent and depositories. Low trading
volumes and volatile prices in less developed markets make trades harder to complete and settle, and governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation.
The less developed a countrys securities market is, the greater the likelihood of custody problems.
The Underlier and The
Underlying Index are Different and the Performance of the Underlier May Not Correlate with the Performance of the Underlying Index
The underlier
uses a representative sampling strategy (more fully described under The Underlier) to attempt to track the performance of the underlying index. The underlier may not hold all or substantially all of the equity securities included in the
underlying index and may hold securities or assets not included in the underlying index. Therefore, while the performance of the underlier is generally linked to the performance of the underlying index, the performance of the underlier is also
linked in part to shares of equity securities not included in the underlying index and to the performance of other assets, such as futures contracts, options and swaps, as well as cash and cash equivalents, including shares of money market funds
affiliated with the underlier investment advisor.
Imperfect correlation between the underliers portfolio securities and those in the underlying
index, rounding of prices, changes to the underlying index and regulatory requirements may cause tracking error, the divergence of the underliers performance from that of the underlying index.
In addition, the performance of the underlier will reflect additional transaction costs and fees that are not included in the calculation of the underlying index
and this may increase the tracking error of the underlier. Also, corporate actions with respect to the sample of equity securities (such as mergers and spin-offs) may impact the performance differential between the underlier and the underlying
index. Finally, because the shares of the underlier are traded on the NYSE Arca and are subject to market supply and investor demand, the market value of one share of the underlier may differ from the net asset value per share of the underlier.
For all of the foregoing reasons, the performance of the underlier may not correlate with the performance of the underlying index. Consequently, the
return on the notes will not be the same as investing directly in the underlier or in the underlying index or in the underlier stocks or in the underlying index stocks, and will
PS-15
not be the same as investing in a debt security with a payment at maturity linked to the performance of the underlying index.
Investment in the Offered Notes Is Subject to Risks Associated with Foreign Securities Markets
The value of your notes is linked to an underlier that holds stocks traded in the equity markets of emerging market countries. Investments linked to the value of
foreign equity securities involve particular risks. Any foreign securities market may be less liquid, more volatile and affected by global or domestic market developments in a different way than are the U.S. securities market or other foreign
securities markets. Both government intervention in a foreign securities market, either directly or indirectly, and cross-shareholdings in foreign companies, may affect trading prices and volumes in that market. Also, there is generally less
publicly available information about foreign companies than about those U.S. companies that are subject to the reporting requirements of the U.S. Securities and Exchange Commission. Further, foreign companies are subject to accounting, auditing and
financial reporting standards and requirements that differ from those applicable to U.S. reporting companies.
The prices of securities in a foreign
country are subject to political, economic, financial and social factors that are unique to such foreign countrys geographical region. These factors include: recent changes, or the possibility of future changes, in the applicable foreign
governments economic and fiscal policies; the possible implementation of, or changes in, currency exchange laws or other laws or restrictions applicable to foreign companies or investments in foreign equity securities; fluctuations, or the
possibility of fluctuations, in currency exchange rates; and the possibility of outbreaks of hostility, political instability, natural disaster or adverse public health developments. The United Kingdom has voted to leave the European Union
(popularly known as Brexit). The effect of Brexit is uncertain, and Brexit has and may continue to contribute to volatility in the prices of securities of companies located in Europe and currency exchange rates, including the valuation
of the euro and British pound in particular. Any one of these factors, or the combination of more than one of these factors, could negatively affect such foreign securities market and the price of securities therein. Further, geographical regions
may react to global factors in different ways, which may cause the prices of securities in a foreign securities market to fluctuate in a way that differs from those of securities in the U.S. securities market or other foreign securities markets.
Foreign economies may also differ from the U.S. economy in important respects, including growth of gross national product, rate of inflation, capital reinvestment, resources and self-sufficiency, which may have a positive or negative effect on
foreign securities prices.
Because foreign exchanges may be open on days when the underlier is not traded, the value of the securities underlying the
underlier may change on days when shareholders will not be able to purchase or sell shares of the underlier.
Your Investment in the
Notes Will Be Subject to Foreign Currency Exchange Rate Risk
The ETF holds assets that are denominated in
non-U.S.
dollar currencies. The value of the assets held by the ETF that are denominated in
non-U.S.
dollar currencies will be adjusted to reflect their U.S. dollar
value by converting the price of such assets from the
non-U.S.
dollar currency to U.S. dollars. Consequently, if the value of the U.S. dollar strengthens against the
non-U.S.
dollar currency in which an asset is denominated, the level of the ETF may not increase even if the
non-dollar
value of the asset held by the ETF increases.
Foreign currency exchange rates vary over time, and may vary considerably during the term of your notes. Changes in a particular exchange rate result
from the interaction of many factors directly or indirectly affecting economic and political conditions. Of particular importance are:
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existing and expected rates of inflation;
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existing and expected interest rate levels;
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the balance of payments among countries;
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the extent of government surpluses or deficits in the relevant foreign country and the United States; and
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other financial, economic, military and political factors.
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PS-16
All of these factors are, in turn, sensitive to the monetary, fiscal and trade policies pursued by the governments of
the relevant foreign countries and the United States and other countries important to international trade and finance.
The market price of the notes
and level of the ETF could also be adversely affected by delays in, or refusals to grant, any required governmental approval for conversions of a local currency and remittances abroad or other de facto restrictions on the repatriation of U.S.
dollars.
It has been reported that the U.K. Financial Conduct Authority and regulators from other countries are in the process of investigating the
potential manipulation of published currency exchange rates. If such manipulation has occurred or is continuing, certain published exchange rates may have been, or may be in the future, artificially lower (or higher) than they would otherwise have
been. Any such manipulation could have an adverse impact on any payments on, and the value of, your notes and the trading market for your notes. In addition, we cannot predict whether any changes or reforms affecting the determination or publication
of exchange rates or the supervision of currency trading will be implemented in connection with these investigations. Any such changes or reforms could also adversely impact your notes.
Your Notes May Be Subject to an Adverse Change in Tax Treatment in the Future
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 proper U.S. federal income tax treatment of an instrument such as your notes, and any such
guidance could adversely affect the tax treatment and the value 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 will 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 Federal Income Tax Consequences on page
S-42
of the accompanying product supplement no. 28. 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 Federal Income Tax Consequences on page
S-42
of the accompanying product supplement no.
28 unless and until such time as Congress, the Treasury Department or the Internal Revenue Service determine that some other treatment is more appropriate.
United States Alien Holders Should Consider the Withholding Tax Implications of Owning the Notes
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 amounts a United States alien holder receives upon the sale,
exchange or maturity of the 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 underlier during the term of the notes. We
could also require a United States alien holder to make certifications (e.g., an applicable Internal Revenue Service Form
W-8)
prior to the
maturity of the notes in order to avoid or minimize
withholding obligations, and we could withhold accordingly (subject to the United States alien holders 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, 2018, 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
PS-17
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.
Your Notes May Be Subject to the Constructive Ownership Rules
There exists a risk that the constructive ownership rules of Section 1260 of the Internal Revenue Code could apply to your notes. If your notes were subject
to the constructive ownership rules, then any long-term capital gain that you realize upon the sale, exchange or maturity of your notes would be
re-characterized
as ordinary income (and you would be subject to
an interest charge on deferred tax liability with respect to such
re-characterized
capital gain) to the extent that such capital gain exceeds the amount of net underlying long-term capital gain (as
defined in Section 1260 of the Internal Revenue Code). Because the application of the constructive ownership rules is unclear you are strongly urged to consult your tax advisor with respect to the possible application of the constructive
ownership rules to your investment in the notes.
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
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.
PS-18
THE UNDERLIER
The shares of the
iShares
®
MSCI EAFE ETF (the ETF) are issued by iShares
®
Trust, a registered investment company.
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The ETF is a tracking ETF that seeks investment results which correspond generally to the price and yield performance, before fees and expenses, of the index.
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The index it tracks is the MSCI EAFE Index (the index).
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Investment Advisor: BlackRock Fund Advisors (BFA).
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The ETFs shares trade on the NYSE Arca under the ticker symbol EFA.
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The iShares
®
Trusts SEC CIK
Number is 0001100663.
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The ETFs inception date was August 14, 2001.
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The ETFs shares are issued or redeemed only in creation units of 600,000 shares or multiples thereof.
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We obtained the following fee information from the
iShares
®
website without independent verification. The investment advisor is paid a management fee from the ETF based on the ETFs allocable portion of an
aggregate management fee based on the aggregate average daily net assets of the ETF and a set of other specified iShares
®
funds (the funds) as follows: 0.35% per annum of the aggregate net assets of the funds less than or equal to $30.0 billion,
plus
0.32% per annum of the aggregate net assets of the funds on amounts in excess of
$30.0 billion, up to and including $60.0 billion,
plus
0.28% per annum of the aggregate net assets of the funds on amounts in excess of $60.0 billion, up to and including $90.0 billion,
plus
0.252% per annum of the
aggregate net assets of the funds on amounts in excess of $90.0 billion. As of March 31, 2017, the aggregate expense ratio of the ETF was 0.33% per annum.
For additional information regarding iShares
®
Trust or BFA, please consult the reports
(including the Semi-Annual Report to Shareholders on Form
N-CSRS
for the period ended January 31, 2017) and other information iShares
®
Trust files with the SEC. In addition, information regarding the ETF, including its top portfolio holdings, may be obtained from other sources including, but not
limited to, press releases, newspaper articles, other publicly available documents, and the iShares
®
website at
us.ishares.com/product_info/fund/overview/EFA.htm. We are not incorporating by reference the website, the sources listed above or any material they include in this pricing supplement.
Investment Objective
The ETF seeks to
provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the index. The ETFs investment objective and the index may be changed without the approval of BFAs shareholders.
The following table displays the top holdings and weightings by industry sector of the ETF. (Sector designations are determined by the ETF sponsor
using criteria it has selected or developed. Index and ETF sponsors may use very different standards for determining sector designations. In addition, many companies operate in a number of sectors, but are listed in only one sector and the basis on
which that sector is selected may also differ. As a result, sector comparisons between indices or ETFs with different sponsors may reflect differences in methodology as well as actual differences in the sector composition of the indices or ETFs.) We
obtained the information in the tables below from the ETF website without independent verification.
PS-19
iShares
®
MSCI EAFE ETF Top Ten Holdings as of
May 9, 2017
|
|
|
|
|
ETF Stock Issuer
|
|
Percentage (%)
|
|
NESTLE SA
|
|
|
1.84
|
%
|
ROCHE HOLDING PAR AG
|
|
|
1.40
|
%
|
NOVARTIS AG
|
|
|
1.29
|
%
|
HSBC HOLDINGS PLC
|
|
|
1.25
|
%
|
TOYOTA MOTOR CORP
|
|
|
1.02
|
%
|
BRITISH AMERICAN TOBACCO PLC
|
|
|
0.94
|
%
|
TOTAL SA
|
|
|
0.87
|
%
|
ROYAL DUTCH SHELL PLC CLASS A
|
|
|
0.87
|
%
|
SANOFI SA
|
|
|
0.83
|
%
|
BP PLC
|
|
|
0.82
|
%
|
|
|
|
|
|
Total
|
|
|
11.13
|
%
|
iShares
®
MSCI
EAFE ETF Weighting by Sector as of May 9, 2017*
|
|
|
|
|
Sector
|
|
Percentage (%)
|
|
Financials
|
|
|
21.08
|
%
|
Consumer Discretionary
|
|
|
12.17
|
%
|
Industrials
|
|
|
14.33
|
%
|
Consumer Staples
|
|
|
11.33
|
%
|
Health Care
|
|
|
10.74
|
%
|
Materials
|
|
|
7.57
|
%
|
Information Technology
|
|
|
5.72
|
%
|
Telecommunications
|
|
|
4.24
|
%
|
Energy
|
|
|
4.84
|
%
|
Real Estate
|
|
|
3.64
|
%
|
Utilities
|
|
|
3.32
|
%
|
Cash and/or Derivatives
|
|
|
1.01
|
%
|
|
|
|
|
|
Total
|
|
|
99.99
|
%
|
*
|
Percentages may not sum to 100% due to rounding.
|
iShares
®
MSCI EAFE ETF Weighting by Country as of May 9, 2017*
|
|
|
|
|
Country
|
|
Percentage (%)
|
|
Japan
|
|
|
22.67
|
%
|
United Kingdom
|
|
|
17.67
|
%
|
France
|
|
|
10.49
|
%
|
Germany
|
|
|
9.51
|
%
|
Switzerland
|
|
|
8.73
|
%
|
Australia
|
|
|
6.93
|
%
|
Hong Kong
|
|
|
3.46
|
%
|
Netherlands
|
|
|
3.52
|
%
|
Spain
|
|
|
3.47
|
%
|
Sweden
|
|
|
2.90
|
%
|
Italy
|
|
|
2.21
|
%
|
Denmark
|
|
|
1.71
|
%
|
Singapore
|
|
|
1.29
|
%
|
Belgium
|
|
|
1.20
|
%
|
Cash and/or Derivatives
|
|
|
1.01
|
%
|
Other
|
|
|
3.26
|
%
|
|
|
|
|
|
Total
|
|
|
100.03
|
%
|
*
|
Percentages may not sum to 100% due to rounding.
|
PS-20
Representative Sampling
BFA uses a representative sampling indexing strategy to manage the ETF. This strategy involves investing in a representative sample of securities that collectively has an investment profile similar to that of the
index. The securities selected are expected to have, in the aggregate, investment characteristics (based on factors such as market capitalization and industry weightings), fundamental characteristics (such as return variability and yield) and
liquidity measures similar to those of the index.
The ETF generally invests at least 90% of its assets in the securities of the index and in depositary
receipts representing securities of the index. The ETF may invest the remainder of its assets in certain futures, options and swap contracts, cash and cash equivalents, including shares of money market funds advised by BFA or its affiliates, as well
as in securities not included in the index, but which BFA believes will help the ETF track the index. Also, the ETF may lend securities representing up to
one-third
of the value of the ETFs total assets
(including the value of the collateral received).
Tracking Error
The performance of the ETF and the index may vary due to a variety of factors, including differences between the securities and other instruments held in the ETFs portfolio and those included in the index,
pricing differences (including differences between a securitys price at the local market close and the ETFs valuation of a security at the time of calculation of the ETFs net asset value),differences in transaction costs, the
ETFs holding of uninvested cash, differences in timing of the accrual of or the valuation of dividends or interest, tax gains or losses, changes to the index or the costs to the ETF of complying with various new or existing regulatory
requirements. Tracking error also may result because the ETF incurs fees and expenses, while the index does not. BFA expects that, over time, the ETFs tracking error will not exceed 5%. The ETFs use of a representative sampling indexing
strategy can be expected to produce a larger tracking error than would result if the ETF used a replication indexing strategy in which an ETF invests in substantially all of the securities in its index in approximately the same proportions as in the
index.
As of April 30, 2017, iShares
®
reported the following average annual returns on the market price of the ETFs shares and the index. The market price of the ETFs shares takes into account
distributions on the shares and the returns shown account for changes in the
mid-point
of the bid and ask prices at 4:00 p.m., Eastern time on the relevant date. ETF shares: 1 year, 12.57%; 3 years, 0.71%; 5
years, 6.69%; 10 years, 0.82%; since inception, 5.15%; index: 1 year, 11.29%; 3 years, 0.86%; 5 years, 6.78%; 10 years, 0.87%; since ETF inception, 5.21%.
Industry Concentration Policy
The ETF will concentrate its investments (i.e., hold 25% or more of its total
assets) in a particular industry or group of industries to approximately the same extent that the index is concentrated.
The
Underlying Index
The underlying index is a stock index calculated, published and disseminated daily by MSCI Inc., which we refer to as
MSCI, through numerous data vendors, on the MSCI website and in real time on Bloomberg Financial Markets and Reuters Limited.
PS-21
MSCI EAFE Index
Index Stock Weighting by Country as of April 28, 2017
|
|
|
|
|
Country:
|
|
Percentage (%)*
|
|
Australia
|
|
|
7.39
|
%
|
Austria
|
|
|
0.22
|
%
|
Belgium
|
|
|
1.17
|
%
|
Denmark
|
|
|
1.72
|
%
|
Finland
|
|
|
0.99
|
%
|
France
|
|
|
10.47
|
%
|
Germany
|
|
|
9.55
|
%
|
Hong Kong
|
|
|
3.52
|
%
|
Ireland
|
|
|
0.46
|
%
|
Israel
|
|
|
0.66
|
%
|
Italy
|
|
|
2.16
|
%
|
Japan
|
|
|
23.09
|
%
|
Netherlands
|
|
|
3.50
|
%
|
New Zealand
|
|
|
0.17
|
%
|
Norway
|
|
|
0.61
|
%
|
Portugal
|
|
|
0.15
|
%
|
Singapore
|
|
|
1.29
|
%
|
Spain
|
|
|
3.44
|
%
|
Sweden
|
|
|
2.93
|
%
|
Switzerland
|
|
|
8.75
|
%
|
United Kingdom
|
|
|
17.76
|
%
|
*
|
Information provided by MSCI. Percentages may not sum to 100% due to rounding.
|
MSCI EAFE Index Stock Weighting by Sector as of April 28, 2017
|
|
|
|
|
Sector**
|
|
Percentage (%)*
|
|
Consumer Discretionary
|
|
|
12.37
|
%
|
Consumer Staples
|
|
|
11.35
|
%
|
Energy
|
|
|
4.83
|
%
|
Financials
|
|
|
21.39
|
%
|
Health Care
|
|
|
10.74
|
%
|
Industrials
|
|
|
14.52
|
%
|
Information Technology
|
|
|
5.70
|
%
|
Materials
|
|
|
7.81
|
%
|
Real Estate
|
|
|
3.70
|
%
|
Telecommunication Services
|
|
|
4.25
|
%
|
Utilities
|
|
|
3.34
|
%
|
*
|
Information provided by MSCI. Percentages may not sum to 100% due to rounding.
|
**
|
Sector designations are determined by the underlying index sponsor using criteria it has selected or developed. Index sponsors may use very different standards for determining
sector designations. In addition, many companies operate in a number of sectors, but are listed in only one sector and the basis on which that sector is selected may also differ. As a result, sector comparisons between indices with different index
sponsors may reflect differences in methodology as well as actual differences in the sector composition of the indices.
|
The above
information supplements the description of the underlying index found in the accompanying general terms supplement no. 24. For more details about the underlying index, the underlying index sponsor and license agreement between the underlying index
sponsor and the issuer, see The Underliers MSCI Indices on page
S-45
of the accompanying general terms supplement no. 24. Additional information about the underlying index is available on
the following website: msci.com/index-methodology. We are not incorporating by reference the website or any material it includes in this pricing supplement.
PS-22
The MSCI indices are the exclusive property of MSCI Inc. (MSCI). MSCI and the MSCI index names are service
mark(s) of MSCI or its affiliates and are licensed for use for certain purposes by GS Finance Corp. and its affiliates. These securities, based on such index, have not been passed on by MSCI as to their legality or suitability, and are not issued,
sponsored, endorsed, sold or promoted by MSCI, and MSCI bears no liability with respect to any such securities. No purchaser, seller or holder of the securities, or any other person or entity, should use or refer to any MSCI trade name, trademark or
service mark to sponsor, endorse, market or promote the securities without first contacting MSCI to determine whether MSCIs permission is required. Under no circumstances may any person or entity claim any affiliation with MSCI without the
prior written permission of MSCI. The general terms supplement contains a more detailed description of the limited relationship MSCI has with GS Finance Corp. and any related securities.
Historical Closing Levels of the Underlier
The closing level of the underlier has fluctuated in the past and may, in the future, experience significant fluctuations. Any historical upward or downward trend
in the closing level of the underlier during the period shown below is not an indication that the underlier is more or less likely to increase or decrease at any time during the life of your notes.
You should not take the historical levels of the underlier as an indication of the future performance of the underlier.
We cannot give you any assurance
that the future performance of the underlier or the underlier stocks 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 underlier. Before investing in the offered notes, you should
consult publicly available information to determine the levels of the underlier between the date of this pricing supplement and the date of your purchase of the offered notes. The actual performance of the underlier over the life of the offered
notes, as well as the cash settlement amount, may bear little relation to the historical closing levels shown below.
The graph below shows the daily
historical closing levels of the underlier from May 18, 2007 through May 18, 2017. We obtained the closing levels in the graph below from Bloomberg Financial Services, without independent verification.
PS-23
Historical Performance of the iShares
®
MSCI EAFE ETF
PS-24
We have not authorized anyone to provide any information or to make any representations other than those contained or
incorporated by reference in this pricing supplement, the accompanying product supplement no. 28, the accompanying general terms supplement no. 24, 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 pricing supplement, the accompanying product supplement no. 28, the accompanying general terms supplement no. 24, 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 pricing supplement, the accompanying
product supplement no. 28, the accompanying general terms supplement no. 24, the accompanying prospectus supplement and the accompanying prospectus is current only as of the respective dates of such documents.
TABLE OF CONTENTS
Pricing Supplement
|
|
|
|
|
|
|
Page
|
|
Summary Information
|
|
|
PS-5
|
|
Hypothetical Examples
|
|
|
PS-8
|
|
Additional Risk Factors Specific to Your Notes
|
|
|
PS-12
|
|
The Underlier
|
|
|
PS-19
|
|
|
Product Supplement No. 28 dated December 22, 2015
|
|
Summary Information
|
|
|
S-1
|
|
Hypothetical Returns on the Underlier-Linked Notes
|
|
|
S-10
|
|
Additional Risk Factors Specific to the Underlier-Linked Notes
|
|
|
S-30
|
|
General Terms of the Underlier-Linked Notes
|
|
|
S-35
|
|
Use of Proceeds
|
|
|
S-40
|
|
Hedging
|
|
|
S-40
|
|
Supplemental Discussion of Federal Income Tax Consequences
|
|
|
S-42
|
|
Employee Retirement Income Security Act
|
|
|
S-49
|
|
Supplemental Plan of Distribution
|
|
|
S-50
|
|
Conflicts of Interest
|
|
|
S-52
|
|
|
General Terms Supplement No. 24 dated December 22, 2015
|
|
Additional Risk Factors Specific to the Notes
|
|
|
S-1
|
|
Supplemental Terms of the Notes
|
|
|
S-15
|
|
The Underliers
|
|
|
S-35
|
|
S&P 500
®
Index
|
|
|
S-39
|
|
MSCI Indices
|
|
|
S-45
|
|
Hang Seng China Enterprises Index
|
|
|
S-54
|
|
Russell
2000
®
Index
|
|
|
S-59
|
|
FTSE
®
100
Index
|
|
|
S-67
|
|
EURO STOXX
50
®
Index
|
|
|
S-73
|
|
TOPIX
|
|
|
S-80
|
|
The Dow Jones Industrial Average
TM
|
|
|
S-86
|
|
The iShares
®
MSCI Emerging Markets ETF
|
|
|
S-90
|
|
Use of Proceeds
|
|
|
S-92
|
|
Hedging
|
|
|
S-92
|
|
Employee Retirement Income Security Act
|
|
|
S-93
|
|
Supplemental Plan of Distribution
|
|
|
S-94
|
|
Conflicts of Interest
|
|
|
S-96
|
|
|
Prospectus Supplement dated December 22, 2015
|
|
Use of Proceeds
|
|
|
S-2
|
|
Description of Notes We May Offer
|
|
|
S-3
|
|
Considerations Relating to Indexed Notes
|
|
|
S-16
|
|
United States Taxation
|
|
|
S-17
|
|
Employee Retirement Income Security Act
|
|
|
S-18
|
|
Supplemental Plan of Distribution
|
|
|
S-19
|
|
Validity of the Notes and Guarantees
|
|
|
S-19
|
|
|
Prospectus dated December 22, 2015
|
|
Available Information
|
|
|
2
|
|
Prospectus Summary
|
|
|
3
|
|
Risks Relating to Regulatory Resolution Strategies and Long-Term Debt Requirements
|
|
|
6
|
|
Use of Proceeds
|
|
|
7
|
|
Description of Debt Securities We May Offer
|
|
|
8
|
|
Description of Warrants We May Offer
|
|
|
35
|
|
Description of Units We May Offer
|
|
|
47
|
|
GS Finance Corp.
|
|
|
51
|
|
Legal Ownership and Book-Entry Issuance
|
|
|
53
|
|
Considerations Relating to Floating Rate Debt Securities
|
|
|
57
|
|
Considerations Relating to Indexed Securities
|
|
|
58
|
|
Considerations Relating to Securities Denominated or Payable in or Linked to a
Non-U.S.
Dollar
Currency
|
|
|
61
|
|
United States Taxation
|
|
|
64
|
|
Plan of Distribution
|
|
|
76
|
|
Conflicts of Interest
|
|
|
78
|
|
Employee Retirement Income Security Act
|
|
|
78
|
|
Validity of the Securities and Guarantees
|
|
|
79
|
|
Experts
|
|
|
79
|
|
Review of Unaudited Condensed Consolidated Financial Statements by Independent Registered Public Accounting Firm
|
|
|
79
|
|
Cautionary Statement Pursuant to the Private Securities Litigation Reform Act of 1995
|
|
|
79
|
|
$
GS Finance Corp.
Leveraged Buffered iShares
®
MSCI EAFE
ETF-Linked
Notes due
guaranteed by
The Goldman Sachs Group, Inc.
Goldman Sachs & Co. LLC
Goldman Sachs (NYSE:GS)
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