Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-198735
|
|
|
|
|
|
|
The Goldman Sachs Group, Inc.
$8,981,000 Digital SPDR® S&P Oil & Gas Exploration & Production ETF-Linked Notes due 2016 |
|
|
The notes do not bear interest. The amount that you will be paid on your notes on the stated maturity
date (March 3, 2016) is based on the performance of the SPDR® S&P Oil & Gas Exploration & Production
ETF (which we refer to as the index fund) as measured from the trade date (January 28, 2015) to and including the determination date (February 29, 2016). If the final index fund level on the determination date is equal to or greater than 85.00% of
the initial index fund level of 44.83, you will receive the maximum settlement amount (of $1,141.50 for each $1,000 face amount of your notes). If the final index fund level declines by more than 15.00% from the initial index fund level, the
return on your notes will be negative. You could lose your entire investment in the notes.
To determine your payment at maturity, we will calculate
the index fund return, which is the percentage increase or decrease in the final index fund level from the initial index fund level. 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 fund return is greater than or equal to -15.00% (the final index fund level is greater than or equal to 85.00% of the
initial index fund level), the maximum settlement amount of $1,141.50; or |
|
|
if the index fund return is negative and is below -15.00% (the final index fund level is less than the initial index fund 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 index fund return plus 15.00% times (c) $1,000.
|
The return on your notes is linked to the performance of the SPDR® S&P Oil & Gas Exploration & Production ETF, and not to the performance of the S&P Oil & Gas Exploration & Production Select
Industry Index (which we refer to as the underlying index) on which the index fund is based. Although the index fund seeks results that correspond generally to the performance of the underlying index, the index fund follows a strategy of
representative sampling, which means the index funds holdings do not identically correspond to the holdings and weightings of the underlying index, and may significantly diverge from the underlying index. Although the index fund
generally invests at least 80% of its assets in some of the same securities as those contained in the underlying index, it does not hold all of the securities underlying the underlying index and may invest the remainder in securities that are not
contained in the underlying index, or in other types of investments. Additionally, when the index fund purchases securities not held by the underlying index, the index fund may be exposed to additional risks, such as counterparty credit risk or
liquidity risk, to which the underlying index components are not exposed. Therefore, your investment in the notes will not directly track the performance of the underlying index and there may be significant variation between the performance of the
index fund and the underlying index on which it is based.
Your investment in the notes involves certain risks, including, among other things,
our credit risk. See
page PS-11.
You should read the additional disclosure herein so that you may
better understand the terms and risks of your investment.
The estimated value of your notes at the time the terms of your notes were set on the
trade date (as determined by reference to pricing models used by Goldman, Sachs & Co. (GS&Co.) and taking into account our credit spreads) was equal to approximately $975 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 equals approximately $990 per $1,000 face amount, which exceeds the estimated value of your notes as
determined by reference to these models. The amount of the excess will decline on a straight line basis over the period from the trade date through April 28, 2015.
|
|
|
|
|
|
|
Original issue date: |
|
February 4, 2015 |
|
Original issue price: |
|
100.00% of the face amount |
Underwriting discount: |
|
0.81% of the face amount |
|
Net proceeds to the issuer: |
|
99.19% of the face amount |
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.
Pricing Supplement No. 3474 dated January 28, 2015.
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.
Goldman Sachs may use this prospectus in the initial sale of the notes. In
addition, Goldman, Sachs & Co. or any other affiliate of Goldman Sachs may use this prospectus in a market-making transaction in a note after its initial sale. Unless Goldman Sachs or its agent informs the purchaser otherwise in the
confirmation of sale, this prospectus is being used in a market-making transaction.
|
|
|
|
|
|
|
Digital SPDR® S&P Oil & Gas
Exploration & Production ETF-Linked Notes due 2016 |
|
|
INVESTMENT THESIS
|
|
For investors willing to forgo interest payments and risk losing all or a substantial portion of their investment for the potential to earn a maximum return of
14.15% as long as the underlier return is greater than or equal to -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):
|
|
If the final underlier level is at or above 85.00% of its initial level, 114.15% |
|
|
If the final underlier level is below 85.00% of its initial level, 100.00% minus approximately 1.1765% for every 1% that the underlier has declined below 85.00%
of its initial level |
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
|
|
|
Issuer: |
|
The Goldman Sachs Group, Inc. |
Underlier: |
|
The SPDR® S&P Oil & Gas Exploration & Production
ETF (Bloomberg symbol, XOP UP) |
Face Amount: |
|
$8,981,000 in the aggregate; each note will have a face amount equal to $1,000 |
Trade Date: |
|
January 28, 2015 |
Settlement Date: |
|
February 4, 2015 |
Determination Date: |
|
February 29, 2016 |
Stated Maturity Date: |
|
March 3, 2016 |
Initial Underlier Level: |
|
44.83 |
Final Underlier Level: |
|
The closing level of the underlier on the determination date |
Underlier Return: |
|
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 |
Threshold Level: |
|
85.00% of the initial underlier level |
Threshold Amount: |
|
15.00% |
Threshold Settlement Amount: |
|
$1,141.50 |
Maximum Settlement Amount: |
|
The threshold settlement amount |
Cap Level: |
|
114.15% of the initial underlier level |
CUSIP/ISIN: |
|
38148L403 / US38148L4032 |
HYPOTHETICAL PAYMENT AT MATURITY
|
|
|
Hypothetical Final
Underlier Level (as % of
Initial Underlier Level) |
|
Hypothetical Cash
Settlement Amount (as % of
Face Amount) |
150.000% |
|
114.150% |
140.000% |
|
114.150% |
130.000% |
|
114.150% |
120.000% |
|
114.150% |
110.000% |
|
114.150% |
100.000% |
|
114.150% |
85.000% |
|
114.150% |
84.999% |
|
99.999% |
75.000% |
|
88.235% |
50.000% |
|
58.824% |
25.000% |
|
29.412% |
0.000% |
|
0.000% |
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 September 15, 2014, in the accompanying prospectus supplement dated September 15, 2014, under Additional Risk Factors Specific to the Underlier-Linked Digital Notes in the
accompanying product supplement no. 3140 dated September 15, 2014, and under Additional Risk Factors Specific to the Notes in the accompanying general terms supplement dated September 26, 2014.
PS-3
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, including your notes, has the terms described below. Please note that in this pricing supplement, references to The Goldman Sachs Group, Inc., we, our and
us mean only The Goldman Sachs Group, Inc. and do not include its consolidated subsidiaries. Also, references to the accompanying prospectus mean the accompanying prospectus, dated September 15, 2014, as supplemented by
the accompanying prospectus supplement, dated September 15, 2014, of The Goldman Sachs Group, Inc. relating to the Medium-Term Notes, Series D program of The Goldman Sachs Group, Inc., references to the accompanying general terms
supplement mean the accompanying general terms supplement, dated September 26, 2014, of The Goldman Sachs Group, Inc. and references to the accompanying product supplement no. 3140 mean the accompanying product supplement no.
3140, dated September 15, 2014, of The Goldman Sachs Group, Inc.
This section is meant
as a summary and should be read in conjunction with the section entitled General Terms of the Underlier-Linked Digital Notes on page S-35 of the accompanying product supplement no. 3140 and Supplemental Terms of the Notes on
page S-13 of the accompanying general terms supplement. Please note that certain features, as noted below, described in the accompanying product supplement no. 3140 and general terms supplement are not applicable to the notes. This pricing
supplement supersedes any conflicting provisions of the accompanying product supplement no. 3140 or the accompanying general terms supplement.
Key Terms
Issuer: The Goldman Sachs Group, Inc.
Underlier: the
SPDR® S&P Oil & Gas Exploration & Production ETF (Bloomberg symbol, XOP UP)
Underlying index: S&P Oil & Gas Exploration & Production Select Industry Index, as published by S&P Dow Jones Indices LLC
(S&P)
Specified currency: U.S. dollars ($)
Terms to be specified in accordance with the accompanying product supplement no. 3140:
|
|
type of notes: notes linked to a single underlier |
|
|
exchange rates: not applicable |
|
|
averaging dates: not applicable |
|
|
redemption right or price dependent redemption right: not applicable |
|
|
cap level: yes, as described below |
|
|
buffer level: not applicable |
|
|
threshold level: yes, as described below |
|
|
upside participation rate: not applicable |
|
|
interest: not applicable |
Face amount:
each note will have a face amount of $1,000; $8,981,000 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 threshold level would not offer the same measure of
protection to your investment as would be the case if you had purchased 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
PS-4
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-13 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. 3140. 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 final Treasury regulations, the withholding tax described above will not apply to payments of
gross proceeds from the sale, exchange or other disposition of the notes (including payment at maturity) made before January 1, 2017.
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:
|
|
if the final underlier level is greater than or equal to the threshold level, the threshold settlement amount; or
|
|
|
if the final underlier level is less than the threshold 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 threshold amount |
Initial underlier level: 44.83
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-19 of the accompanying general terms supplement and subject to adjustment as
provided under Supplemental Terms of the Notes Discontinuance or Modification of an Underlier on page S-23 of the accompanying general terms supplement
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
Threshold level: 85.00% of the initial underlier level
Threshold settlement amount: $1,141.50
Cap
level: 114.15% of the initial underlier level
Maximum settlement amount: the threshold settlement amount
Threshold amount: 15.00%
Buffer rate: the
quotient of the initial underlier level divided by the threshold level, which equals approximately 117.65%
Trade date: January 28, 2015
Original issue date (settlement date): February 4,
2015
Determination date: February 29, 2016, subject to adjustment as described under Supplemental Terms of the Notes
Determination Date on page S-14 of the accompanying general terms supplement
Stated maturity date: March 3, 2016 subject
to adjustment as described under Supplemental Terms of the Notes Stated Maturity Date on page S-13 of the accompanying general terms supplement
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
PS-5
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-27 of the accompanying general terms supplement
Business day: as described under Supplemental Terms of the Notes
Special Calculation Provisions Business Day on page S-27 of the accompanying general terms supplement
Trading day: as
described under Supplemental Terms of the Notes Special Calculation Provisions Trading Day on page S-27 of the accompanying general terms supplement
Use of proceeds and hedging: as described under Use of Proceeds and Hedging on page S-40 of the accompanying product supplement no. 3140
ERISA: as described under Employee Retirement Income Security Act on page S-49 of the accompanying product supplement no. 3140
Supplemental plan of distribution: as described under Supplemental Plan of Distribution on page S-50 of the accompanying product
supplement no. 3140; The Goldman Sachs Group, Inc. estimates that its share of the total offering expenses, excluding underwriting discounts and commissions, will be approximately $10,000.
The Goldman Sachs Group, Inc. has agreed to sell to Goldman, Sachs & Co., and Goldman, Sachs & Co. has agreed to purchase from The Goldman Sachs
Group, Inc., the aggregate face amount of the offered notes specified on the front cover of this pricing supplement. Goldman, Sachs & 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. The underwriting discount set forth on the cover page of this pricing supplement per $1,000 face amount is comprised of $1.00 of underwriting fees and $7.10 of selling commission.
We will deliver the notes against payment therefor in New York, New York on February 4, 2015, which is the fifth scheduled business day following the date of
this pricing supplement and of the pricing of the notes. Under Rule 15c6-1 of the Securities Exchange Act of 1934, trades in the secondary market generally are required to settle in three business days, unless the parties to any such trade expressly
agree otherwise. Accordingly, purchasers who wish to trade notes on any date prior to three business days before delivery will be required, by virtue of the fact that the notes will initially settle in five business days (T + 5), to specify
alternative settlement arrangements to prevent a failed settlement.
We have been advised by Goldman, Sachs & Co. that it intends to make a
market in the notes. However, neither Goldman, Sachs & 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: Goldman, Sachs & Co.
CUSIP no.: 38148L403
ISIN no.:
US38148L4032
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-6
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 are intended merely 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; no one can predict what the underlier level will be on any day
throughout the life of your notes, and no one can predict what the final underlier level will be on the determination date. 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 and our creditworthiness.
In addition, the estimated value of your notes at the time the terms of your notes were set on the trade date (as determined by reference to pricing models used by Goldman, Sachs & Co.) was 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 Were Set On the Trade Date (as Determined By Reference
to Pricing Models Used By Goldman, Sachs & Co.) Was Less Than the Original Issue Price Of Your Notes on page PS-11 of this pricing supplement. The information in the table also reflects the key terms and assumptions in the box below.
|
|
|
Key Terms and Assumptions |
Face amount |
|
$1,000 |
Threshold settlement amount |
|
$1,141.50 |
Threshold level |
|
85.00% of the initial underlier level |
Cap level |
|
114.15% of the initial underlier level |
Maximum settlement amount |
|
$1,141.50 |
Buffer rate |
|
approximately 117.65% |
Threshold amount |
|
15.00% |
|
Neither a market disruption event nor a non-trading day occurs on the originally scheduled determination date |
|
No change in or affecting the underlier, any of the underlier stocks or the policies of the underliers investment advisor or the method by which the underlying index sponsor
calculates the underlying index |
|
Notes purchased on original issue date at the face amount and held to the stated maturity 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-7
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 (expressed as a percentage of the initial 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 (expressed as a percentage of the initial underlier level) and the assumptions noted above.
|
|
|
Hypothetical Final Underlier Level
(as Percentage of Initial Underlier Level) |
|
Hypothetical Cash Settlement Amount
(as Percentage of Face Amount) |
150.000% |
|
114.150% |
140.000% |
|
114.150% |
130.000% |
|
114.150% |
120.000% |
|
114.150% |
110.000% |
|
114.150% |
100.000% |
|
114.150% |
85.000% |
|
114.150% |
84.999% |
|
99.999% |
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). 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 (expressed as a percentage of the face amount), or 114.15% 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 over 85.000% of the initial underlier level.
The following chart also shows a graphical illustration of the hypothetical cash settlement amounts (expressed as a percentage of the face amount of
your notes) that we would pay on your notes on the stated maturity date, if the final underlier level (expressed as a percentage of the initial underlier level) were any of the hypothetical levels shown on the horizontal axis. The chart shows that
any hypothetical final underlier level (expressed as a percentage of the initial 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 (expressed
as a percentage of the initial underlier level) of greater than or equal to 85.000% (the section right of the 85.000% marker on the horizontal axis) would result in a capped return on your investment.
PS-8
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 Digital Notes The Market Value of Your Notes May Be Influenced by Many Unpredictable Factors on page S-33 of the accompanying
product supplement no. 3140.
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-9
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 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-10
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 dated September 15, 2014, in the accompanying prospectus supplement dated September 15, 2014, under Additional Risk Factors Specific to the Notes in the accompanying general terms
supplement, and under Additional Risk Factors Specific to the Underlier-Linked Digital Notes in the accompanying product supplement no. 3140. You should carefully review these risks and considerations as well as the terms of the notes
described herein and in the accompanying prospectus, dated September 15, 2014, as supplemented by the accompanying prospectus supplement, dated September 15, 2014, the accompanying general terms supplement, dated September 26, 2014,
and the accompanying product supplement no. 3140, dated September 15, 2014, of The Goldman Sachs Group, Inc. 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 Were Set On the Trade Date (as Determined By Reference to Pricing Models
Used By Goldman, Sachs & Co.) Was 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 were set on the trade date, as determined by reference to Goldman, Sachs & Co.s pricing models and taking into account our credit spreads. Such estimated value on
the trade date is set forth on the cover of this pricing supplement; after the trade date, the estimated value as determined by reference to these models will be affected by changes in market conditions, our creditworthiness and other relevant
factors. The price at which Goldman, Sachs & Co. would initially buy or sell your notes (if Goldman, Sachs & Co. makes a market, which it is not obligated to do), and the value that Goldman, Sachs & 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 Goldman, Sachs & Co. and the distribution participants, the amount of this excess will decline on
a straight line basis over the period from the date hereof through the applicable date set forth on the cover. Thereafter, if Goldman, Sachs & 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 Goldman, Sachs & 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 were set on the trade date, as disclosed on the front cover of this
pricing supplement, Goldman, Sachs & 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 Digital Notes The Market Value of Your Notes May Be Influenced by Many Unpredictable Factors on page S-33 of the accompanying product supplement no. 3140.
The difference between the estimated value of your notes as of the time the terms of your notes were 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 Goldman, Sachs &
Co. and the amounts Goldman, Sachs & Co. pays to us in connection with your notes. We pay to Goldman, Sachs & Co. amounts based on what we would pay to holders of a non-structured note with a similar maturity. In return for such
payment, Goldman, Sachs & 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 Goldman, Sachs & Co. makes a market in the notes, the price quoted by Goldman, Sachs & Co. would reflect any changes in market conditions and
other relevant
PS-11
factors, including any deterioration in our creditworthiness or perceived creditworthiness. 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 Goldman, Sachs & Co. makes a market in the notes, the quoted price will reflect the estimated value determined by reference to Goldman, Sachs & 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 Goldman, Sachs & Co. or any other party
will be willing to purchase your notes at any price and, in this regard, Goldman, Sachs & Co. is not obligated to make a market in the notes. See Additional Risk Factors Specific to the Underlier-Linked Digital Notes Your Notes
May Not Have an Active Trading Market on page S-32 of the accompanying product supplement no. 3140.
The Notes Are Subject to
the Credit Risk of the Issuer
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 our credit risk. 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. See Description of the Notes We May Offer Information About Our Medium-Term Notes, Series D Program How the Notes Rank Against Other Debt on page S-4 of the accompanying prospectus supplement.
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
SPDR® S&P Oil & Gas Exploration & Production ETF as measured from the initial underlier level to the
closing level on the determination date. If the final underlier level is less than the threshold 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 threshold 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.
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 maximum settlement amount (which
is equal to the threshold settlement amount),. 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 initial
underlier level
PS-12
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 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 with respect to 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 threshold 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 percentage increase 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, while the threshold level will still provide for an increase in the return on the notes if the final underlier level is greater than or equal to the
threshold level but less than the cap level, if the final underlier level is less than the threshold level you will incur 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, SSgA Funds Management, Inc., and S&P, the
Sponsor of The Underlying Index, Could Affect the Amount Payable on Your Notes and Their Market Value
The underliers investment advisor, SSgA
Funds Management, Inc. (SSgA 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 Goldman, Sachs & 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 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
PS-13
the Notes Discontinuance or Modification of an Underlier on page S-23 of the accompanying general terms supplement.
In addition, S&P (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.
The SPDR® S&P Oil & Gas Exploration & Production ETF is Concentrated in the Oil & Gas Sector and Does
Not Provide Diversified Exposure
The SPDR® S&P Oil & Gas Exploration & Production ETF is not diversified. The SPDR® S&P Oil & Gas Exploration & Production ETFs assets will be concentrated in the oil & gas sector, which means the SPDR® S&P Oil & Gas Exploration & Production ETF is more likely to be more adversely affected by any negative
performance of the oil & gas sector than an underlier that has more diversified holdings across a number of sectors. Companies in the oil & gas sector develop and produce crude oil and natural gas and provide drilling and other
energy resources production and distribution related services. Stock prices for these types of companies are affected by supply and demand both for their specific product or service and for energy products in general. The price of oil and gas,
exploration and production spending, government regulation, world events and economic conditions will likewise affect the performance of these companies. Correspondingly, securities of companies in the oil & gas sector are subject to swift
price and supply fluctuations caused by events relating to international politics, energy conservation, the success of exploration projects, and tax and other governmental regulatory policies. Weak demand for the companies products or services
or for energy products and services in general, as well as negative developments in these other areas, would adversely impact the performance of the SPDR® S&P Oil & Gas Exploration & Production ETF. For example, the SPDR® S&P Oil & Gas Exploration & Production ETF suffered a significant negative performance for the year 2014 to date primarily due to negative
developments in the oil & gas sector, while the broader S&P 500® index achieved a positive return for the
same period. In addition, oil and gas exploration and production can be significantly affected by natural disasters as well as changes in exchange rates, interest rates, government regulation, world events and economic conditions. Companies in the
oil & gas sector may also be at risk for environmental damage claims.
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 20% 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.
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
PS-14
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 not be the same
as investing in a debt security with a payment at maturity linked to the performance of the underlying index.
Your Notes May Be
Subject to an Adverse Change in Tax Treatment in the Future
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 that are currently characterized as pre-paid derivative contracts, 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 notes
even though there may be no interest payments over the term of such notes. 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 such 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. 3140. You should consult your tax advisor about this matter. Except to
the extent otherwise provided by law, The Goldman Sachs Group, Inc. 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. 3140 unless and until such time as Congress, the Treasury Department or the Internal Revenue Service determine that some other treatment is more appropriate.
Because the underlier constitutes a pass-thru entity under Section 1260 of the Internal Revenue Code, it is possible that all or a portion of your
gain could be recharacterized as ordinary income and subject to an interest charge. Please see Supplemental Discussion of Federal Income Tax Consequences United States Holders Alternative Treatments in the accompanying
product supplement no. 3140 for a more detailed discussion.
The Treasury Department has issued proposed regulations under which amounts paid or deemed
paid on certain 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 you receive upon sale, exchange or maturity of your notes, could be collected via withholding. The proposed regulations, if finalized in their current form, would
apply to payments made or deemed made on or after January 1, 2016. In a recently published notice, the Internal Revenue Service and the Treasury Department announced their intent that the proposed regulations, if finalized, would only apply to
financial
PS-15
instruments that are issued on or after 90 days after the date of publication of final regulations. Accordingly, the proposed regulations, if finalized, should not apply to the notes. As
significant aspects of the application of these regulations to the notes are uncertain, depending upon the exact content of any final regulations, we may be required to withhold such taxes if any dividends are paid on the underlier during the term
of the notes. We could also require you to make certifications prior to 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 is required, we will not be required to pay any additional amounts with respect to amounts so withheld. You should consult your tax advisor
concerning the potential application of these regulations (or subsequent regulations and other official guidance) to payments you receive on the notes and regarding any other possible alternative characterizations of your notes for U.S. federal
income tax purposes.
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-16
THE UNDERLIER
The shares of the SPDR® S&P Oil & Gas Exploration & Production ETF (the fund) are issued by the SPDR® Series Trust (the trust), a registered investment company. The fund seeks investment results that correspond generally to the total return performance,
before fees and expenses, of the S&P Oil & Gas Exploration & Production Select Industry Index. The fund trades on the NYSE Arca under the ticker symbol XOP. SSgA Funds Management, Inc. (SSgA) currently
serves as the investment advisor to the fund.
We obtained the following fee information from the SPDR® website, without independent verification. SSgA is entitled to receive a management fee from the fund based on a percentage of
the funds average daily net assets at an annual rate of 0.35% of the average daily net assets of the fund. From time to time, SSgA may waive all or a portion of its fee, although it does not currently intend to do so. In addition, the fund has
adopted a Distribution and Service Plan pursuant to which payments of up to 0.25% of the funds average daily net assets may be made for the sale and distribution of its shares. However, the funds board of trustees has determined that no
such 12b-1 fee payments will be made through at least October 31, 2015. SSgA pays all expenses of the fund other than the management fee, any fee pursuant to the Distribution and Service Plan, brokerage expenses, taxes, interest, fees and
expenses of the independent trustees (including any trustees counsel fees), litigation expenses, acquired fund fees and expenses and other extraordinary expenses. As of January 7, 2015, the expense ratio of the fund was 0.35% per
annum.
For additional information regarding the trust or SSgA, please consult the reports (including the Annual
Report to Shareholders on Form NCSR for the fiscal year ended June 30, 2014) and other information the trust files with the SEC. Information provided to or filed with the SEC can be inspected and copied at the public reference facilities
maintained by the SEC or through the SECs website at www.sec.gov. In addition, information regarding the fund, 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 SPDR® website at https://www.spdrs.com/product/fund.seam?ticker=XOP.
We are not incorporating by reference the website, the sources listed above or any material they include in this pricing supplement.
Investment Objective and Strategy
The fund seeks to provide investment results that correspond generally to the total return performance, before fees and expenses, of the S&P Oil & Gas Exploration & Production Select Industry
Index (the index). SSgA uses a representative sampling strategy to try to achieve the funds investment objective, which means that the fund is not required to purchase all of the securities represented in the index. Instead, the
fund may purchase a subset of the securities in the index in an effort to hold a portfolio of securities with generally the same risk and return characteristics of the index. Under normal market conditions, the fund generally invests substantially
all, but at least 80%, of its total assets in the securities comprising the index. The fund will provide shareholders with at least 60 days notice prior to any material change in this 80% investment policy. In addition, the fund may invest in
equity securities not included in the index, cash and cash equivalents or money market instruments, such as repurchase agreements and money market funds (including money market funds advised by SSgA).
In certain situations or market conditions, the fund may temporarily depart from its normal investment policies and strategies provided that the
alternative is consistent with the funds investment objective and is in the best interest of the fund. For example, the fund may make larger than normal investments in derivatives to maintain exposure to the index if it is unable to invest
directly in a component security.
The trust may change the funds investment strategy, index and other policies without
shareholder approval. The trust may also change the funds investment objective without shareholder approval. However, the fund will provide shareholders with at least 60 days notice prior to changing the underlying index.
PS-17
The Funds Holdings and Industrial Sector Classifications
The fund holds stocks of companies in the oil and gas exploration and production industry group of the S&P Total Market Index. As of
January 20, 2015, the fund held stocks of companies in the following sub-industries (with their corresponding weights in the fund): oil & gas exploration & production (78.63%); oil & gas refining & marketing
(16.25%) and integrated oil & gas (5.13%).
As of January 16, 2015, the top ten constituents of the fund and their
relative weights in the fund were as follows: Sanchez Energy Corporation (1.71%), Matador Resources Company (1.69%), Parsley Energy Inc. Class A (1.64%), Carrizo Oil & Gas Inc. (1.60%), PDC Energy Inc. (1.60%), Synergy Resources
Corporation (1.56%), RSP Permian Inc. (1.51%), Bonanza Creek Energy Inc. (1.51%), Diamondback Energy Inc. (1.50%), and Bill Barrett Corporation (1.50%).
Correlation
Although SSgA seeks to track the performance of the index as closely as possible
(i.e., achieve a high degree of correlation with the index), the funds return may not match or achieve a high degree of correlation with the return of the index due to, among other things, operating expenses, transaction costs, cash flows,
regulatory requirements and operational inefficiencies. For example, SSgA anticipates that it may take several business days for additions and deletions to the index to be reflected in the funds portfolio composition.
As of December 31, 2014, the SPDR® website gave the following performance figures for the market value return of the funds shares (which is based on the midpoint between the highest bid and the
lowest offer on the exchange on which the shares of the fund are listed for trading, as of the time that the funds NAV is calculated, and is before tax) and the index return (in each case on an annualized basis):
|
|
|
|
|
|
|
|
|
Period |
|
1 year |
|
3 years |
|
5 years |
|
Since fund inception* |
Funds shares |
|
-29.43% |
|
-2.10% |
|
4.01% |
|
4.94% |
Index |
|
-29.42% |
|
-2.01% |
|
4.17% |
|
5.14% |
Industry Concentration Policy
The fund may invest a substantial portion of its assets within one or more economic sectors or industries, which may change from
period to period. To the extent the fund invests a substantial portion of its assets in one or more sectors, market or economic factors impacting those sectors could have a significant effect on the value of the funds investments.
Additionally, the funds performance may be more volatile when the funds investments are less diversified across sectors.
Share Prices and the Secondary Market
The trading prices of shares of the fund in the secondary market generally differ (and may deviate significantly during periods of market volatility) from the funds daily net asset value and are affected by
market forces such as supply and demand, economic conditions and other factors. The approximate value of the shares of the fund is disseminated every fifteen seconds throughout the trading day by NYSE Arca. This approximate value calculations are
based on estimates of the value of the funds net asset value per share using market data converted into U.S. dollars at the current currency rates. The approximate value is based on quotes and closing prices from the securities local
market and may not reflect events that occur subsequent to the local markets close. Premiums and discounts between the approximate value and the market price may occur. This should not be viewed as a real-time update of the net
asset value per share of the fund, which is calculated only once a day. In addition, the issuance or redemption of fund shares to or from certain institutional investors, which are done only in large blocks of at least 50,000, may cause temporary
dislocations in the market price of the shares.
The Underlying Index
The S&P Oil & Gas Exploration & Production Select Industry Index (Bloomberg ticker SPSIOPTR) is managed by S&P Dow Jones
Indices LLC (S&P) and is an equal-weighted index that is designed to
PS-18
measure the performance of stocks in the S&P Total Market Index that are classified under the Global Industry Classification Standard (GICS®) in the oil & gas exploration & production industry group. The S&P Total Market Index is a benchmark index that includes all U.S. common
equities listed on the NYSE (including NYSE Arca), the NYSE MKT, the NASDAQ Global Select Market, the NASDAQ Select Market and the NASDAQ Capital Market. The index is one of the 25 sub-industry sector indices S&P maintains that are derived from
a portion of the stocks comprising the S&P Total Market Index. An equal-weighted index is one where every stock has the same weight in the index. As such, the index must be rebalanced from time to time to re-establish the proper weighting.
Eligibility for Inclusion in the Index
Selection for the index is based on a companys GICS® classification, as well as liquidity and market capitalization requirements. In addition, only U.S. companies are eligible for inclusion in the index. GICS® classifications are determined by S&P using criteria it has selected or developed. Index and classification system
sponsors may use very different standards for determining sector designations. In addition, many companies operate in a number of sectors, but are listed only in one sector. As a result, sector comparisons between indices with different sponsors may
reflect differences in methodology as well as actual differences in the sector composition of the indices.
To be eligible for inclusion
in the index, stocks must be in the S&P Total Market Index and satisfy the following combined size and liquidity criteria: (i) a float-adjusted market capitalization above $500 million with a float-adjusted liquidity ratio above 90% or
(ii) a float-adjusted market capitalization above $400 million with a float-adjusted liquidity ratio above 150%. The float-adjusted liquidity ratio is defined as the dollar value traded over the previous 12 months divided by the float-adjusted
market capitalization as of the indexs rebalancing reference date.
All companies in the related GICS® sub-industry satisfying the above requirements are included in the index and the total number of companies in the index should
be at least 35. If there are fewer than 35 companies, then companies from a supplementary list of highly correlated sub-industries that meet the market capitalization and liquidity thresholds described above are added sequentially in order of
float-adjusted market capitalization. If there are still fewer than 35 companies in the index, the market capitalization requirements may be relaxed to reach at least 22 companies.
With respect to liquidity, the length of time to evaluate liquidity is reduced to the available trading period for companies that recently became
public or companies that were spun-off from other companies, the stocks of which therefore do not have 12 months of trading history.
Current Composition of the Index
The index holds stocks of companies in the oil & gas exploration & production industry group of the S&P Total Market Index. As of January 20, 2015 the index held stocks of companies in
the following sub-industries (with their corresponding weights in the fund): oil & gas exploration & production (79.29%); oil & gas refining & marketing (15.67%) and integrated oil & gas (5.04%).
As of January 16, 2015, the top ten constituents of the index and their relative weights in the index were as follows: Sanchez
Energy Corporation (1.67%), Matador Resources Company (1.65%), Synergy Resources Corporation (1.61%), Parsley Energy Inc. Class A (1.60%), PDC Energy Inc. (1.59%), Carrizo Oil & Gas Inc. (1.55%), RSP Permian Inc. (1.54%), Diamondback
Energy Inc. (1.52%), Bill Barrett Corporation (1.49%), and Concho Resources Inc. (1.48%).
Calculation of the Index
The index is calculated as the index market value divided by the divisor. In an equal-weighted index like the index, the market capitalization of
each stock used in the calculation of the index market value is redefined so that each stock has an equal weight in the index on each rebalancing date. The adjusted market capitalization for each stock in the index is calculated as the product of
the stock price, the number of shares outstanding, the stocks float factor and the adjustment factor.
A stocks float factor
refers to the number of shares outstanding that are not closely held shares. S&P indices exclude closely held shares from the index calculation because such shares are not available to investors. For each stock, S&P calculates an Investable
Weight Factor (IWF) which is the percentage of total shares outstanding that are included in the index calculation.
PS-19
The adjustment factor for each stock is assigned at each rebalancing date and is calculated by
dividing a specific constant set for the purpose of deriving the adjustment factor (often referred to as modified index shares) by the number of stocks in the index multiplied by the float adjusted market value of such stock on such rebalancing
date.
Adjustments are also made to ensure that there are no stocks whose weight in the index is more than can be traded in a single day
for a $500 million portfolio. A maximum basket liquidity weight for each stock in the index is calculated using the ratio of its three-month average daily value traded to $500 million. Each stocks weight in the index is then compared to its
maximum basket liquidity weight and is set to the lesser of (1) its maximum basket liquidity weight or (2) its initial equal weight. All excess weight is redistributed across the index to the uncapped stocks. If necessary, a final
adjustment is made to ensure that no stock in the index has a weight greater than 4.5%. No further adjustments are made if the latter step would force the weight of those stocks limited to their maximum basket liquidity weight to exceed that weight.
If the index contains exactly 22 companies as of the rebalancing effective date, the index will be equally weighted without basket liquidity constraints.
The index is calculated by using the divisor methodology used in all S&Ps equity indices. The initial divisor was set to have a base value of 1,000 on December 17, 1999. The index value is the index
market value divided by the index divisor. In order to maintain index series continuity, it is also necessary to adjust the divisor at each rebalancing. Therefore, the divisor (after rebalancing) equals the index market value (after rebalancing)
divided by the index value before rebalancing. By itself, the divisor is an arbitrary number. However, in the context of the calculation of the index, it keeps the index comparable over time and is one manipulation point for adjustments to the
index, which we refer to as maintenance of the index.
Maintenance of the Index
The composition of the index is reviewed quarterly. Rebalancing occurs after the closing of the relevant U.S. trading markets
on the third Friday of the month ending that quarter. The reference date for additions and deletions is the last trading day of the previous month. Existing companies in the index are removed at the quarterly rebalancing if either their
float-adjusted capitalization falls below $300 million or their float-adjusted liquidity ratio falls below 50%. A company will also be deleted from the index if the S&P Total Market Index deletes that company. Additional companies typically are
not added between rebalancing dates. However, if a company deletion causes the number of companies in the index to fall below 22, an addition will be made to the index at that time. The newly added company will be added to the index at the weight of
the deleted company. If the stock was deleted at $0.00, the newly added stock will be added at the deleted stocks previous days closing value (or the most immediate prior business day that the deleted stock was not valued at $0.00) and
an adjustment to the divisor will be made. At the next rebalancing, the index will be rebalanced based on the eligibility requirements and equal-weight methodology discussed above. In the case of GICS® changes, where a company does not belong to the oil & gas exploration & production sub-industry or another qualifying sub-industry after the
classification change, it is removed from the index on the next rebalancing date. In the case of a spinoff that is treated as a deletion or addition in the S&P Total Market Index, no weight adjustment is made to the index and price adjustments
follow the announced S&P Total Market Index action. The number of index shares is adjusted so that the companys weight remains the same as its weight before the spinoff.
Adjustments are made to the index in the event of certain corporate actions relating to the stocks included in the index, such as spin-offs, rights
offerings, stock splits and special dividends, as specified below.
The table below summarizes the types of index maintenance
adjustments:
|
|
|
|
|
Type of Corporate Action |
|
Adjustment Factor |
|
Divisor Adjustment
Required |
|
|
|
Spin-Off |
|
In general and subject to certain exceptions, both
the parent company and spin-off companies will remain in the index until the next index rebalancing, regardless of whether they conform to the theme of the index. |
|
No |
PS-20
|
|
|
|
|
|
|
|
|
|
When there is no market-determined price available for the spin, the spin is added to the index at zero price at the close of the day before the ex-date. |
|
|
|
|
|
Rights Offering |
|
Price is adjusted to equal (i) price of parent company minus (ii) price of rights subscription divided by the rights ratio. |
|
No |
|
|
|
Stock split (e.g., 2-for-1), stock dividend or reverse stock split |
|
Index shares multiplied by split factor (i.e., 2); stock price divided by split factor (i.e., 2) |
|
No |
|
|
|
Share issuance or share repurchase |
|
None |
|
No |
|
|
|
Special dividends |
|
Price of the stock making the special dividend payment is reduced by the per share special dividend amount after the close of trading on the day before the dividend ex-date. |
|
Yes |
Unscheduled Market Closures
In situations where an exchange is forced to close early due to unforeseen events, such as computer or electric power failures, weather conditions or other events, S&P will calculate the closing price of the
stocks in the index based on (1) the closing prices published by the exchange, or (2) if no closing price is available, the last regular trade reported before the exchange closed. In all cases, the prices will be from the primary exchange
for each stock in the index. If an exchange for a stock fails to open due to unforeseen circumstances, S&P will use the prior days closing prices for such stock. If all exchanges fail to open, S&P may determine not to publish the index
for that day.
SPDR® is a registered trademark of Standard & Poors Financial Services LLC (S&P) and Dow Jones is a registered trademark of Dow Jones
Trademark Holdings LLC (Dow Jones) and have been licensed for use by S&P Dow Jones Indices LLC. The offered notes are not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P or their respective
affiliates, and neither S&P Dow Jones Indices LLC, Dow Jones, S&P or their respective affiliates make any representation regarding the advisability of investing in the offered notes.
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. 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 levels shown below.
The graph below shows the
daily historical closing levels of the underlier from June 22, 2006 through January 28, 2015. We obtained the closing levels in the graph below from Bloomberg Financial Services, without independent verification.
PS-21
PS-22
VALIDITY OF THE NOTES
In the opinion of Sidley Austin LLP, as counsel to The Goldman Sachs Group, Inc., when the notes offered by this pricing supplement have been
executed and issued by The Goldman Sachs Group, Inc. and authenticated by the trustee pursuant to the indenture, and delivered against payment as contemplated herein, such notes will be valid and binding obligations of The Goldman Sachs Group, Inc.,
enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors rights generally, concepts of reasonableness and equitable principles of general applicability (including, without
limitation, concepts of good faith, fair dealing and the lack of bad faith), provided that such counsel expresses no opinion as to the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law on the conclusions
expressed above. This opinion is given as of the date hereof and is limited to the Federal laws of the United States, the laws of the State of New York and the General Corporation Law of the State of Delaware as in effect on the date hereof. In
addition, this opinion is subject to customary assumptions about the trustees authorization, execution and delivery of the indenture and the genuineness of signatures and certain factual matters, all as stated in the letter of such counsel
dated September 15, 2014, which has been filed as Exhibit 5.5 to The Goldman Sachs Group, Inc.s registration statement on Form S-3 filed with the Securities and Exchange Commission on September 15, 2014.
PS-23
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, the accompanying general terms 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 pricing supplement, the accompanying product supplement, the accompanying general terms 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 pricing supplement, the accompanying product supplement, the
accompanying general terms supplement, 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-4 |
|
Hypothetical Examples |
|
|
PS-7 |
|
Additional Risk Factors Specific to Your Notes |
|
|
PS-11 |
|
The Underlier |
|
|
PS-17 |
|
Validity of the Notes |
|
|
PS-23 |
|
|
|
Product Supplement No. 3140 dated September 15, 2014 |
|
|
|
|
Summary Information |
|
|
S-1 |
|
Hypothetical Returns on the Underlier-Linked Digital Notes |
|
|
S-11 |
|
Additional Risk Factors Specific to the Underlier-Linked Digital Notes |
|
|
S-31 |
|
General Terms of the Underlier-Linked Digital 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 |
|
|
|
General Terms Supplement dated September 26, 2014 |
|
|
|
|
Additional Risk Factors Specific to the Notes |
|
|
S-1 |
|
Supplemental Terms of the Notes |
|
|
S-13 |
|
The Underliers |
|
|
S-33 |
|
S&P 500®
Index |
|
|
S-37 |
|
MSCI Indices |
|
|
S-42 |
|
Hang Seng China Enterprises Index |
|
|
S-50 |
|
Russell
2000® Index |
|
|
S-55 |
|
FTSE® 100
Index |
|
|
S-62 |
|
EURO STOXX
50® Index |
|
|
S-67 |
|
TOPIX |
|
|
S-73 |
|
The Dow Jones Industrial AverageSM |
|
|
S-78 |
|
The iShares®
MSCI Emerging Markets ETF |
|
|
S-81 |
|
|
|
Prospectus Supplement dated September 15, 2014 |
|
|
|
|
Use of Proceeds |
|
|
S-2 |
|
Description of Notes We May Offer |
|
|
S-3 |
|
Considerations Relating to Indexed Notes |
|
|
S-19 |
|
United States Taxation |
|
|
S-22 |
|
Employee Retirement Income Security Act |
|
|
S-23 |
|
Supplemental Plan of Distribution |
|
|
S-24 |
|
Validity of the Notes |
|
|
S-26 |
|
|
|
Prospectus dated September 15, 2014 |
|
|
|
|
Available Information |
|
|
2 |
|
Prospectus Summary |
|
|
4 |
|
Use of Proceeds |
|
|
8 |
|
Description of Debt Securities We May Offer |
|
|
9 |
|
Description of Warrants We May Offer |
|
|
39 |
|
Description of Purchase Contracts We May Offer |
|
|
56 |
|
Description of Units We May Offer |
|
|
61 |
|
Description of Preferred Stock We May Offer |
|
|
67 |
|
Description of Capital Stock of The Goldman Sachs Group, Inc. |
|
|
75 |
|
Legal Ownership and Book-Entry Issuance |
|
|
80 |
|
Considerations Relating to Floating Rate Securities |
|
|
85 |
|
Considerations Relating to Indexed Securities |
|
|
87 |
|
Considerations Relating to Securities Denominated or Payable in or Linked to a Non-U.S. Dollar Currency |
|
|
88 |
|
United States Taxation |
|
|
91 |
|
Plan of Distribution |
|
|
114 |
|
Conflicts of Interest |
|
|
117 |
|
Employee Retirement Income Security Act |
|
|
118 |
|
Validity of the Securities |
|
|
119 |
|
Experts |
|
|
119 |
|
Review of Unaudited Condensed Consolidated Financial Statements by Independent Registered Public Accounting Firm |
|
|
120 |
|
Cautionary Statement Pursuant to the Private Securities Litigation Reform Act of 1995 |
|
|
120 |
|
$8,981,000
The Goldman Sachs Group, Inc.
Digital SPDR® S&P Oil & Gas Exploration & Production ETF-Linked Notes due 2016
Goldman, Sachs & Co.
Goldman Sachs (NYSE:GS)
Historical Stock Chart
From Sep 2024 to Oct 2024
Goldman Sachs (NYSE:GS)
Historical Stock Chart
From Oct 2023 to Oct 2024