|
|
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 July 10, 2017, references to the “accompanying prospectus supplement” mean the accompanying
prospectus supplement, dated July 10, 2017, for Medium-Term Notes, Series E, references to the “accompanying general terms supplement no. 1,734” mean the accompanying general terms supplement no. 1,734, dated July 10, 2017, and references
to the “accompanying product supplement no. 1,738” mean the accompanying product supplement no. 1,738, dated July 10, 2017, 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, as so supplemented and as further supplemented thereafter, 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. 1,738 and “Supplemental Terms of the Notes” on page S-16 of the accompanying general terms supplement no. 1,734. Please note that certain features, as noted
below, described in the accompanying product supplement no. 1,738 and general terms supplement no. 1,734 are not applicable to the notes. This pricing supplement supersedes any conflicting provisions of the accompanying product supplement
no. 1,738 or the accompanying general terms supplement no. 1,734.
|
|
Key Terms
Issuer:
GS Finance Corp.
Guarantor:
The Goldman Sachs Group, Inc.
Basket underliers:
the S&P 500
®
Index (Bloomberg symbol,
“SPX Index”), as published by S&P Dow Jones Indices LLC; the iShares
®
MSCI EAFE ETF
(Bloomberg symbol, “EFA UP Equity”);
the
EURO STOXX 50
®
Index (Bloomberg symbol, “SX5E Index”), as published by STOXX Limited;
the
iShares
®
MSCI
Emerging Markets ETF (Bloomberg symbol, “EEM UP Equity”); and the Russell 2000
®
Index (Bloomberg symbol, “RTY Index”), as published by FTSE Russell; see “The Basket and the Basket Underliers” on page PS-23
Basket indices:
the S&P 500
®
Index, the EURO STOXX 50
®
Index and the Russell 2000
®
Index
Basket funds:
the iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF
Underlying index of the iShares
®
MSCI EAFE ETF:
the MSCI EAFE Index
Underlying index of the iShares
®
MSCI Emerging Markets ETF:
the MSCI Emerging Markets Index
Specified currency:
U.S. dollars (“$”)
Terms to be specified in accordance with the accompanying product supplement no.
1,738:
|
·
|
type of notes: notes linked to basket of underliers
|
|
·
|
exchange rates: not applicable
|
|
·
|
buffer level: yes, as described below
|
|
·
|
cap level: yes, as described below
|
|
·
|
averaging dates: not applicable
|
|
·
|
interest: not applicable
|
|
·
|
redemption right or price dependent redemption right: not applicable
|
Face amount:
each note will have a face amount of $1,000; $1,539,000 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 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-17 o
f
this pricing supplement
Supplemental discussion of 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 basket underliers, as described under “Supplemental Discussion of Federal Income Tax Consequences” on page S-41 of the accompanying product supplement no. 1,738. 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 the FATCA withholding rules.
Cash settlement amount:
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 basket level is
greater than
the initial basket level, the
sum
of (1) $1,000
plus
(2) the
product
of (i) $1,000
times
(ii) the upside participation rate
times
(iii) the basket
return, subject to the maximum settlement amount;
|
|
●
|
if the final basket level is
equal to
or
less than
the initial basket level but
greater than
or
equal to
the buffer level, $1,000; or
|
|
●
|
if the final basket 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
basket return
plus
the buffer amount
|
Initial basket level:
100
Initial weighted value:
the initial weighted value for each of the
basket underliers equals the
product
of the initial weight of such basket underlier
times
the initial basket level. The initial weight of each basket underlier is shown in the table below:
|
|
|
|
|
S&P 500
®
Index
|
|
40%
|
|
iShares
®
MSCI EAFE ETF
|
|
20%
|
|
EURO STOXX 50
®
Index
|
|
15%
|
|
iShares
®
MSCI Emerging Markets ETF
|
|
15%
|
|
Russell 2000
®
Index
|
|
10%
|
Initial S&P 500
®
Index
level:
2,584.96
Initial iShares
®
MSCI EAFE ETF level: $
61.21
Initial EURO STOXX 50
®
Index
level:
3,070.24
Initial iShares
®
MSCI Emerging Markets ETF level: $
40.64
Initial Russell 2000
®
Index
level:
1,438.807
Final S&P 500
®
Index level:
the closing level of such basket underlier on the determination date, 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-23 of the accompanying general terms supplement no. 1,734 and subject to adjustment as provided under “Supplemental Terms of the Notes — Discontinuance or Modification of an
Underlier” on page S-27 of the accompanying general terms supplement no. 1,734
Final iShares
®
MSCI EAFE ETF level:
the closing level of such basket underlier on the determination date, 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-23 of the accompanying general terms supplement no. 1,734, subject to anti-dilution adjustments as described under “Supplemental Terms of the Notes — Anti-dilution
Adjustments for Exchange-Traded Funds” on page S-28 of the accompanying general terms supplement no. 1,734 and subject to adjustment as provided under “Supplemental Terms of the Notes — Discontinuance or Modification of an Underlier” on page S-27
of the accompanying general terms supplement no. 1,734
Final EURO STOXX 50
®
Index
level:
the
closing level of such basket underlier on the determination date, 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-23 of the
accompanying general terms supplement no. 1,734 and subject to adjustment as provided under “Supplemental Terms of the Notes — Discontinuance or Modification of an Underlier” on page S-27 of the accompanying general terms supplement no. 1,734
Final iShares
®
MSCI Emerging Markets ETF level:
the closing level of such basket underlier on the determination date, 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-23 of the accompanying general terms supplement no. 1,734, subject to anti-dilution adjustments as described under “Supplemental Terms of the Notes —
Anti-dilution Adjustments for Exchange-Traded Funds” on page S-28 of the accompanying general terms supplement no. 1,734 and subject to adjustment as provided under “Supplemental Terms of the Notes — Discontinuance or Modification of an Underlier”
on page S-27 of the accompanying general terms supplement no. 1,734
Final Russell 2000
®
Index
level:
the
closing level of such basket underlier on the determination date, 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-23 of the
accompanying general terms supplement no. 1,734 and subject to adjustment as provided under “Supplemental Terms of the Notes — Discontinuance or Modification of an Underlier” on page S-27 of the accompanying general terms supplement no. 1,734
Final basket level:
the
sum
of the following: (1) the final S&P 500
®
Index
level
divided
by the initial S&P 500
®
Index level,
multiplied
by the initial weighted value of the S&P 500
®
Index
plus
(2)
the final iShares
®
MSCI EAFE ETF level
divided
by the initial iShares
®
MSCI EAFE ETF level,
multiplied
by the initial weighted value of the iShares
®
MSCI EAFE ETF
plus
(3)
the final EURO STOXX 50
®
Index
level
divided
by the initial EURO STOXX 50
®
Index
level,
multiplied
by the initial weighted value of the EURO STOXX 50
®
Index
plus
(4)
the final iShares
®
MSCI Emerging Markets ETF level
divided
by the initial iShares
®
MSCI Emerging Markets ETF level,
multiplied
by the initial weighted value of the iShares
®
MSCI Emerging Markets ETF
plus
(5) the final
Russell 2000
®
Index
level
divided
by the initial Russell 2000
®
Index
level,
multiplied
by the initial weighted value of the Russell 2000
®
Index
Basket return:
the
quotient
of (1) the final basket level
minus
the initial basket level
divided
by (2) the initial basket level, expressed as a percentage
Upside participation rate:
120%
Cap level:
117.5% of the initial basket level
Maximum settlement amount:
$1,210
Buffer level:
80% of the initial basket level
Buffer amount
: 20%
Buffer rate:
100%
Trade date:
January 9, 2019
Original issue date (settlement date):
January 14, 2019
Stated maturity date:
January 14, 2021, subject to
adjustment as described under “Supplemental Terms of the Notes — Stated Maturity Date” on page S-16 of the accompanying general terms supplement no. 1,734
Determination date:
January 11, 2021, subject to adjustment as described
under “Supplemental Terms of the Notes — Determination Date” on page S-17 of the accompanying general terms supplement no. 1,734
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-31 of the accompanying general terms supplement no. 1,734.
Business day:
as described under “Supplemental Terms of the Notes —
Special Calculation Provisions — Business Day” on page S-30 of the accompanying general terms supplement no. 1,734
Trading day:
as described under “Supplemental Terms of the Notes
—
Special Calculation Provisions
—
Trading Day” on page S-31 of the accompanying general terms supplement no. 1,734
Use of proceeds and hedging:
as described under “Use of Proceeds” and
“Hedging” on page S-40 of the accompanying product supplement no. 1,738
ERISA:
as described under “Employee Retirement Income Security Act” on
page S-48 of the accompanying product supplement no. 1,738
Supplemental plan of distribution; conflicts of interest:
as described under “Supplemental Plan of Distribution” on page S-49 of the accompanying product supplement no. 1,738 and “Plan of Distribution – Conflicts of Interest” on page 94 of the
accompanying prospectus; GS Finance Corp. estimates that its share of the total offering expenses, excluding underwriting discounts and commissions, will be approximately $20,000.
GS Finance Corp. has agreed to sell to Goldman Sachs & Co. LLC (“GS&Co.”), and GS&Co. has agreed to 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 0.25% 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. GS&Co. will also pay a fee in connection with the distribution of the notes to SIMON
Markets LLC, a broker-dealer affiliated with GS Finance Corp.
We will deliver the notes against payment therefor in New York, New York on
January 14, 2019
.
Under Rule 15c6-1 of the Securities Exchange Act of 1934, trades in the secondary market generally are required to settle in
two business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade notes on any date prior to two business days before delivery will be required to specify alternative settlement
arrangements to prevent a failed settlement.
We have been advised by GS&Co. that it intends to make a market in the notes. However, neither GS&Co. nor any of our other affiliates that
makes a market is obligated to do so and any of them may stop doing so at any time without notice. No assurance can be given as to the liquidity or trading market for the notes.
Calculation agent:
GS&Co.
CUSIP no.:
40056ET81
ISIN no.:
US40056ET816
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
The following examples are provided for purposes of illustration only. They should not be taken as an indication
or prediction of future investment results and are intended merely to illustrate the impact that the various hypothetical basket closing levels or hypothetical closing levels of the basket underliers, as applicable, 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 basket levels and closing levels of the basket underliers that are entirely
hypothetical; no one can predict what the level of the basket will be on any day throughout the life of your notes, and no one can predict what the final basket level will be on the determination date. The basket underliers have been highly
volatile in the past — meaning that the levels of the basket underliers have changed considerably in relatively short periods — and their performances 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 examples below such as interest rates, the volatility of the basket underliers, 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-14 of this pricing supplement. The information in the examples also reflects the key terms and
assumptions in the box below.
|
|
Key Terms and Assumptions
|
|
|
Face amount
|
$1,000
|
|
|
Upside participation rate
|
120%
|
|
|
Initial basket level
|
100
|
|
|
Cap level
|
117.5% of the initial basket level
|
|
|
Maximum settlement amount
|
$1,210
|
|
|
Buffer level
|
80% of the initial basket level
|
|
|
Buffer rate
|
100%
|
|
|
Buffer amount
|
20%
|
|
|
|
|
|
|
Neither a market disruption event nor a non-trading day occurs on the originally scheduled determination date
|
|
|
No change in or affecting (i) any of the underlier stocks, (ii) the methods by which any underlier sponsor calculates the basket index or the underlying index for
a basket fund or (iii) the policies of the investment advisor of either basket fund
|
|
|
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 basket over the life of your notes, as well as the amount payable at maturity,
may bear little relation to the hypothetical examples shown below or to the historical level of each basket underlier shown elsewhere in this pricing supplement. For information about the historical level of each basket underlier during recent
periods, see “The Basket and the Basket
Underliers — Historical Closing Levels of the Basket Underliers” below. Before investing in the offered notes, you should consult
publicly available information to determine the level of the basket underliers between the date of this pricing supplement and the date of your purchase of the offered notes.
Also, the hypothetical examples shown below do not take into account the effects of applicable taxes. Because of the U.S. tax
treatment applicable to your notes, tax liabilities could affect the after-tax rate of return on your notes to a comparatively greater extent than the after-tax return on the basket underliers.
The levels in the left column of the table below represent hypothetical final basket levels and are expressed as percentages of
the initial basket level. The amounts in the right column represent the hypothetical cash settlement amounts, based on the corresponding hypothetical final basket level (expressed as a percentage of the initial basket 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 basket level (expressed as a percentage of the initial basket level) and the
assumptions noted above.
|
Hypothetical Final Basket Level
|
Hypothetical Cash Settlement
Amount
|
|
(as Percentage of Initial Basket Level)
|
(as Percentage of Face Amount)
|
|
200.000%
|
121.000%
|
|
175.000%
|
121.000%
|
|
150.000%
|
121.000%
|
|
140.000%
|
121.000%
|
|
130.000%
|
121.000%
|
|
117.500%
|
121.000%
|
|
115.000%
|
118.000%
|
|
110.000%
|
112.000%
|
|
100.000%
|
100.000%
|
|
90.000%
|
100.000%
|
|
80.000%
|
100.000%
|
|
65.000%
|
85.000%
|
|
50.000%
|
70.000%
|
|
25.000%
|
45.000%
|
|
0.000%
|
20.000%
|
If, for example, the final basket level were determined to be 25.000% of the initial basket level, the cash settlement amount that
we would deliver on your notes at maturity would be 45.000% of the face amount of your notes, as shown in the table above. As a result, if you purchased your notes on the original issue date at the face amount and held them to the stated maturity
date, you would lose 55.000% of your investment (if you purchased your notes at a premium to face amount you would lose a correspondingly higher percentage of your investment). In addition, if the final basket level were determined to be 150.000%
of the initial basket 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 121.000% of each $1,000 face amount of your
notes, as shown in the table above. As a result, if you held your notes to the stated maturity date, you would not benefit from any increase in the final basket level over 117.500% of the initial basket 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 basket level (expressed as a percentage of the initial basket level) were any of the hypothetical levels shown on the horizontal axis. The
chart shows that any hypothetical final basket level (expressed as a percentage of the initial basket level) of less than 80.000% (the section left of the 80.000% 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 basket level (expressed as a percentage of the initial basket level) of greater than or equal to 117.500% (the section right of the 117.500% marker on the
horizontal axis) would result in a capped return on your investment.
The following examples illustrate the hypothetical cash settlement amount at maturity for each note based on
hypothetical final levels of the basket underliers, calculated based on the key terms and assumptions above. The levels in Column A represent initial levels for each basket underlier, and the levels in Column B represent hypothetical final levels
for each basket underlier. The percentages in Column C represent hypothetical final levels for each basket underlier in Column B expressed as percentages of the corresponding initial levels in Column A. The amounts in Column D represent the
applicable initial weighted value for each basket underlier, and the amounts in Column E represent the
products
of the percentages in Column C
times
the corresponding amounts in Column D. The final basket level for each example is shown beneath each example, and will equal the
sum
of the products shown in Column E. The basket return for each example is shown beneath the final basket level for such example, and will equal the
quotient
of (i) the final basket level for such example
minus
the initial basket level
divided
by (ii) the initial basket level, expressed as a percentage. The values below have been rounded for ease of analysis.
Example 1:
The
final basket level is greater than the cap level. The cash settlement amount equals the maximum settlement amount.
|
|
|
Column A
|
|
Column B
|
|
Column C
|
|
Column D
|
|
Column E
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S&P 500
®
Index
|
|
2,584.96
|
|
3,877.44
|
|
150.00%
|
|
40.00
|
|
60.00
|
|
iShares
®
MSCI EAFE ETF
|
|
$61.21
|
|
$91.82
|
|
150.00%
|
|
20.00
|
|
30.00
|
|
EURO STOXX 50
®
Index
|
|
3,070.24
|
|
4,605.36
|
|
150.00%
|
|
15.00
|
|
22.50
|
|
iShares
®
MSCI Emerging Markets ETF
|
|
$40.64
|
|
$60.96
|
|
150.00%
|
|
15.00
|
|
22.50
|
|
Russell 2000
®
Index
|
|
1,438.807
|
|
2,158.211
|
|
150.00%
|
|
10.00
|
|
15.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Final Basket Level:
|
|
150.00
|
|
|
|
|
|
|
|
|
|
Basket Return:
|
|
50.00%
|
In this example, all of the hypothetical final levels for the basket underliers are greater than the applicable initial levels,
which results in the hypothetical final basket level being greater than the initial basket level of 100.00. Since the hypothetical final basket level was determined to be 150.00, the hypothetical cash settlement amount that we would deliver on
your notes at maturity would be capped at the maximum settlement amount of $1,210 for each $1,000 face amount of your notes (i.e. 121.000% of each $1,000 face amount of your notes).
Example 2:
The final basket level is greater than the initial basket level but less than the cap level.
|
|
|
Column A
|
|
Column B
|
|
Column C
|
|
Column D
|
|
Column E
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S&P 500
®
Index
|
|
2,584.96
|
|
2,714.21
|
|
105.00%
|
|
40.00
|
|
42.00
|
|
iShares
®
MSCI EAFE ETF
|
|
$61.21
|
|
$64.27
|
|
105.00%
|
|
20.00
|
|
21.00
|
|
EURO STOXX 50
®
Index
|
|
3,070.24
|
|
3,223.75
|
|
105.00%
|
|
15.00
|
|
15.75
|
|
iShares
®
MSCI Emerging Markets ETF
|
|
$40.64
|
|
$42.67
|
|
105.00%
|
|
15.00
|
|
15.75
|
|
Russell 2000
®
Index
|
|
1,438.807
|
|
1,510
.
747
|
|
105.00%
|
|
10.00
|
|
10.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Final Basket Level:
|
|
105.00
|
|
|
|
|
|
|
|
|
|
Basket Return:
|
|
5.00%
|
In this example, all of the hypothetical final levels for the basket underliers are greater than the applicable initial levels,
which results in the hypothetical final basket level being greater than the initial basket level of 100.00. Since the hypothetical final basket level was determined to be 105.000, the hypothetical cash settlement amount for each $1,000 face amount
of your notes will equal:
Cash settlement amount = $1,000 + ($1,000 × 120.00% × 5.000%) = $1,060.00
Example 3: The final basket level is less than the initial basket level, but greater than the buffer level. The cash settlement
amount equals the $1,000 face amount.
|
|
|
Column A
|
|
Column B
|
|
Column C
|
|
Column D
|
|
Column E
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S&P 500
®
Index
|
|
2,584.96
|
|
2,455.71
|
|
95.00%
|
|
40.00
|
|
38.00
|
|
iShares
®
MSCI EAFE ETF
|
|
$61.21
|
|
$58.15
|
|
95.00%
|
|
20.00
|
|
19.00
|
|
EURO STOXX 50
®
Index
|
|
3,070.24
|
|
2,916.73
|
|
95.00%
|
|
15.00
|
|
14.25
|
|
iShares
®
MSCI Emerging Markets ETF
|
|
$40.64
|
|
$38.61
|
|
95.00%
|
|
15.00
|
|
14.25
|
|
Russell 2000
®
Index
|
|
1,438.807
|
|
1,366.867
|
|
95.00%
|
|
10.00
|
|
9.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Final Basket Level:
|
|
95.00
|
|
|
|
|
|
|
|
|
|
Basket Return:
|
|
-5.00%
|
|
|
|
|
|
|
|
|
|
|
|
|
In this example, all of the hypothetical final levels for the basket underliers are less than the applicable initial levels, which
results in the hypothetical final basket level being less than the initial basket level of 100.00. Since the hypothetical final basket level of 95.00 is greater than the buffer level of 80.00% of the initial basket level but less than the initial
basket level of 100, the hypothetical cash settlement amount for each $1,000 face amount of your notes will equal the face amount of the note, or $1,000.
Example 4: The final basket level is less than the buffer level. The cash settlement amount is less than the $1,000 face amount.
|
|
|
Column A
|
|
Column B
|
|
Column C
|
|
Column D
|
|
Column E
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S&P 500
®
Index
|
|
2,584.96
|
|
1,033.98
|
|
40.00%
|
|
40.00
|
|
16.00
|
|
iShares
®
MSCI EAFE ETF
|
|
$61.21
|
|
$61.21
|
|
100.00%
|
|
20.00
|
|
20.00
|
|
EURO STOXX 50
®
Index
|
|
3,070.24
|
|
3,070.24
|
|
100.00%
|
|
15.00
|
|
15.00
|
|
iShares
®
MSCI Emerging Markets ETF
|
|
$40.64
|
|
$44.70
|
|
110.00%
|
|
15.00
|
|
16.50
|
|
Russell 2000
®
Index
|
|
1,438.807
|
|
1,582.688
|
|
110.00%
|
|
10.00
|
|
11.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Final Basket Level:
|
|
78.50
|
|
|
|
|
|
|
|
|
|
Basket Return:
|
|
-
21.50%
|
In this example, the hypothetical final level of the S&P 5
00
®
Index is less
than its initial level, while the hypothetical final levels of the iShares
®
MSCI EAFE ETF and the EURO STOXX 50
®
Index are equal to their applicable initial levels and the hypothetical final levels of the iShares
®
MSCI Emerging Markets ETF and the Russell 2000
®
Index are greater than its applicable initial level.
Because the basket is unequally weighted, increases in the lower weighted basket underliers will be offset by a decrease in the more heavily weighted
basket underlier. In this example, the large decline in the S&P 500
®
Index results in the hypothetical final basket level being less than the buffer level of 80.00% of the initial basket level even though the iShares
®
MSCI EAFE ETF
and
the EURO STOXX 50
®
Index remained flat and
the
iShares
®
MSCI Emerging Markets ETF and the
Russell 2000
®
Index increased.
Since the hypothetical final basket level of 78.50 is less than the buffer level of 80.00% of the initial basket level, the
hypothetical cash settlement amount for each $1,000 face amount of your notes will equal:
Cash settlement amount = $1,000 + ($1,000 × 100.00% × (-21.50% + 20.00%)) = $985.00
Example 5: The final basket level is less than the buffer level. The cash settlement amount is less than the $1,000 face amount.
|
|
|
Column A
|
|
Column B
|
|
Column C
|
|
Column D
|
|
Column E
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S&P 500
®
Index
|
|
2,584.96
|
|
1,292.48
|
|
50.00%
|
|
40.00
|
|
20.00
|
|
iShares
®
MSCI EAFE ETF
|
|
$61.21
|
|
$30.61
|
|
50.00%
|
|
20.00
|
|
10.00
|
|
EURO STOXX 50
®
Index
|
|
3,070.24
|
|
1,535.12
|
|
50.00%
|
|
15.00
|
|
7.50
|
|
iShares
®
MSCI Emerging Markets ETF
|
|
$40.64
|
|
$20.32
|
|
50.00%
|
|
15.00
|
|
7.50
|
|
Russell 2000
®
Index
|
|
1,438.807
|
|
719.404
|
|
50.00%
|
|
10.00
|
|
5.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Final Basket Level:
|
|
50.00
|
|
|
|
|
|
|
|
|
|
Basket Return:
|
|
-50.00%
|
In this example, the hypothetical final levels for all of the basket underliers are less than the applicable initial levels, which
results in the hypothetical final basket level being less than the initial basket level of 100.00. Since the hypothetical final basket level of 50.00 is less than the buffer level of 80.00% of the initial basket level, the hypothetical cash
settlement amount for each $1,000 face amount of your notes will equal:
Cash settlement amount = $1,000 + ($1,000 × 100.00% × (-50.00% + 20.00%)) = $700.00
The cash settlement amounts shown above are entirely hypothetical; they are based on levels of the basket
underliers 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. 1,738.
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.
|
|
We cannot predict the actual final basket level on the determination date, nor can we predict the relationship
between the level of each basket underlier and the market value of your notes at any time prior to the stated maturity date. The actual amount that a holder of the offered notes will receive on the stated maturity date and the rate of
return on the offered notes will depend on the actual basket return 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 on the stated maturity date may be very different from the hypothetical cash settlement amounts shown in the examples above
.
|
|
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. 1,734 and under “Additional Risk Factors
Specific to the Underlier-Linked Notes” in the accompanying product supplement no. 1,738. 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. 1,734 and the accompanying product supplement no. 1,738. Your notes are a riskier investment than ordinary debt securities. Also, your notes are not
equivalent to investing directly in the basket underlier stocks, i.e., with respect to a basket underlier to which your notes are linked, the stocks comprising such basket underlier. 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. 1,738.
The difference between
the estimated value of your notes as of the time the terms of your notes are set on the trade date and the original issue price is a result of certain factors, including principally the underwriting discount and commissions, the expenses incurred
in creating, documenting and marketing the notes, and an estimate of the difference between the amounts we pay to GS&Co. and the amounts GS&Co. pays to us in connection with your notes. We pay to GS&Co. amounts based on what we would
pay to holders of a non-structured note with a similar maturity. In return for such payment, GS&Co. pays to us the amounts we owe under your notes.
In addition to the factors discussed
above, the value and quoted price of your notes at any time will reflect many factors and cannot be predicted. If GS&Co. makes a market in the notes, the price quoted by GS&Co. would reflect any changes in market conditions and other
relevant factors, including any
deterioration in our creditworthiness or
perceived creditworthiness or the creditworthiness or perceived creditworthiness of The Goldman Sachs Group, Inc. These changes may adversely affect the value of your notes, including the price you may receive for your notes in any market making
transaction. To the extent that GS&Co. makes a market in the notes, the quoted price will reflect the estimated value determined by reference to GS&Co.’s pricing models at that time, plus or minus its then current bid and ask spread for
similar sized trades of structured notes (and subject to the declining excess amount described above).
Furthermore, if you sell
your notes, you will likely be charged a commission for secondary market transactions, or the price will likely reflect a dealer discount. This commission or discount will further reduce the proceeds you would receive for your notes in a
secondary market sale.
There is no assurance
that GS&Co. or any other party will be willing to purchase your notes at any price and, in this regard, GS&Co. is not obligated to make a market in the notes. See “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. 1,738.
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 basket underliers, the payment of any amount due on the notes is subject to the credit risk of GS Finance Corp., as issuer of the notes, and the credit risk of The Goldman Sachs Group, Inc. as
guarantor of the notes. The notes are our unsecured obligations. Investors are dependent on our ability to pay all amounts due on the notes, and therefore investors are subject to our credit risk and to changes in the market’s view of our
creditworthiness. Similarly, investors are dependent on the ability of The Goldman Sachs Group, Inc., as guarantor of the notes, to pay all amounts due on the notes, and therefore are also subject to its credit risk and to changes in the market’s
view of its creditworthiness. See “Description of the Notes We May Offer — Information About Our Medium-Term Notes, Series E Program — How the Notes Rank Against Other Debt” on page S-4 of the accompanying prospectus supplement and “Description
of Debt Securities We May Offer — Guarantee by The Goldman Sachs Group, Inc.” on page 42 of the accompanying prospectus.
The Amount Payable on Your Notes Is Not Linked to the Level of Each Basket Underlier at Any Time Other than the Determination
Date
The final basket level will be based on the closing levels of the basket underliers on the determination date
(subject to adjustment as described elsewhere in this pricing supplement). Therefore, if the closing levels of the basket underliers 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 levels of the basket underliers prior to such drop in the levels of the basket underliers. Although the actual levels of the basket underliers on the stated
maturity date or at other times during the life of your notes may be higher than the closing levels of the basket underliers on the determination date, you will not benefit from the closing levels of the basket underliers at any time other than on
the determination date.
You May Lose a Substantial Portion of Your Investment in the Notes
You can lose a substantial portion of your investment in the notes. The cash payment on your notes on the stated
maturity date will be based on the performance of a weighted basket comprised of the S&P 500
®
Index, the iShares
®
MSCI EAFE ETF, the EURO STOXX 50
®
Index, the iShares
®
MSCI Emerging Markets ETF and
the Russell 2000
®
Index as measured from the initial basket level of 100 to the final basket level on the determination date. If the final basket level for your notes 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 (i) the buffer rate
times
(ii) the
sum
of the basket return
plus
the buffer amount
times
(iii) $1,000. Thus, you may lose a substantial portion of your 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 basket over the life of your notes will be limited because of the
cap level. The maximum settlement amount will limit the amount in cash you may receive for each of your notes at maturity, no matter how much the level of the basket 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 basket or any of the basket underliers.
The Lower Performance of One Basket Underlier May Offset an Increase in the Other Basket Underliers
Declines in the level of one basket underlier may offset increases in the levels of the other basket underliers. As a result, any
return on the basket — and thus on your notes — may be reduced or eliminated, which will have the effect of reducing the amount payable in respect of your notes at maturity. In addition, because the basket underliers are not equally weighted,
increases in the lower weighted basket underliers may be offset by even small decreases in the more heavily weighted basket underliers. In particular, due to the weighting of the S&P 500
®
Index in the basket relative to the other
basket underliers, any decrease in the S&P 500
®
Index will have a significantly larger impact on your return on the notes than any proportional increase in the other basket underliers.
The Return on Your
Notes Will Not Reflect Any Dividends Paid on the Basket Underliers or the Basket Underlier Stocks, as Applicable
The underlier sponsors of the basket
indices calculate the value of applicable basket index by reference to the prices of its basket underlier stocks, without taking account of the value of dividends paid on those stocks. Therefore, the return on your notes will not reflect the
return you would realize if you actually owned the basket underlier stocks and received the dividends paid on those stocks. In addition, the return on your notes will not reflect the return you would realize if you actually owned the basket funds
and received the dividends paid on the shares of such basket funds. You will not receive any dividends that may be paid on any of the basket underlier stocks by the basket underlier stock issuers or on the shares of the basket funds. See “— You
Have No Shareholder Rights or Rights to Receive Any Shares of a Basket Underlier or Any Basket Underlier Stocks” below for additional information.
You Have No Shareholder Rights or Rights
to Receive Any Shares of a Basket Underlier or Any Basket Underlier Stocks
Investing in your notes
will not make you a holder of any shares of any basket underlier or any basket underlier stocks. Neither you nor any other holder or owner of your notes will have any rights with respect to a basket underlier or its basket underlier stocks,
including any voting rights, any right to receive dividends or other distributions, any rights to make a claim against the basket underlier or its basket underlier stocks or any other rights of a holder of any shares of a basket underlier or its
basket underlier stocks. Your notes will be paid in cash and you will have no right to receive delivery of any basket underlier or any basket underlier stocks
.
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 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 the 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 on your investment in the notes than would have been the case for notes purchased at face amount or a discount to the 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 an Underlier Sponsor and Changes that Affect a Basket Index or An Underlying Index or the
Underlier Stocks Comprising a Basket Underlier or an Underlying Index, Could Affect the Cash Settlement Amount on the Stated Maturity Date and the Market Value of Your Notes
The policies of an underlier sponsor concerning the calculation of the level of
a basket index and each underlying index,
additions, deletions or substitutions of the underlier stocks comprising such basket index or underlying index, and the manner in which changes affecting the underlier stocks or
their issuers, such as stock dividends, reorganizations or mergers, are reflected in the level of a basket index or underlying index, could affect the level of the applicable basket index or underlying index and, therefore, the amount payable on
your
notes
on the stated maturity date and the market value of your
notes
before that date. The amount payable on your
notes
and their market value could also be affected if an underlier sponsor changes these policies, for example, by changing the manner in which it calculates the level of the applicable basket
index or underlying index, or if any underlier sponsor discontinues or suspends calculation or publication of the level of the applicable basket index or underlying index, in which case it may become difficult to determine the market value of your
notes
. If events such as these occur on the determination date, the calculation agent — which initially will be GS&Co., our affiliate — may determine the closing level of the applicable
basket index or underlying index on the determination date — and thus the amount payable on the stated maturity date — in a manner it considers appropriate, in its sole discretion. We describe the discretion that the calculation agent will have in
determining the levels of the basket underliers 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-27 and “— Role of Calculation Agent” on page S-28 of the accompanying general terms supplement no. 1,734.
The Policies of the Investment Advisor of the Basket Funds, Blackrock Fund Advisors, and the Sponsor of the Underlying Indices of
the Basket Funds, MSCI, Could Affect the Amount Payable on Your Notes and Their Market Value
The investment advisor of the basket funds, Blackrock Fund Advisors (“BFA”), may from time to time be called upon to make certain
policy decisions or judgments with respect to the implementation of policies concerning the calculation of the net asset value of a basket fund, additions, deletions or substitutions of securities in that basket fund and the manner in which changes
affecting the underlying index for that basket fund are reflected in that basket fund that could affect the market price of the shares of that basket fund, and therefore, the amount payable on your notes on the stated 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 a basket fund, or if the investment advisor
discontinues or suspends calculation or publication of the net asset value of a basket fund, 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 level of that basket fund on the
determination date — and thus the amount payable on the stated
maturity date — in a manner, in its sole discretion, it considers appropriate.
We describe
the discretion that the calculation agent will have in determining the levels of the basket underliers 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-27 and “— Role of Calculation Agent” on page S-28 of the accompanying general terms supplement
no. 1,734.
In addition, MSCI, the underlier sponsor of the underlying indices of the basket funds, owns each underlying index
and is responsible for the design and maintenance of the underlying indices. The policies of the underlier sponsor concerning the calculation of a particular underlying index, including decisions regarding the addition, deletion or substitution of
the equity securities included in that underlying index, could affect the level of that underlying index and, consequently, could affect the market prices of shares of the related basket fund and, therefore, the cash settlement amount payable on
your notes and their market value.
There Are Risks Associated With Each of the Basket Funds
Although the shares of each of the
iShares
®
MSCI EAFE ETF and the iShares
®
MSCI Emerging Markets ETF are listed for trading on the NYSE Arca, Inc. (the “NYSE Arca”), a number of similar products
have been traded on the NYSE Arca or other securities exchanges for varying periods of time, and there is no assurance that an active trading market will continue for the shares of any basket fund or that there will be liquidity in the trading
market.
In addition, each basket fund is subject
to management risk, which is the risk that the basket fund investment advisor’s investment strategy, the implementation of which is subject to a number of constraints, may not produce the intended results. For example, a basket fund investment
advisor may select a portion of such basket fund’s assets to be invested in securities that are not included in its underlying index. No basket fund is actively managed and each basket fund may be affected by a general decline in market segments
relating to the respective underlying index. Each basket fund investment advisor invests in securities included in, or representative of, the underlying index regardless of their investment merits. The basket fund investment advisors do not
attempt to take defensive positions in declining markets.
In addition, the basket funds are 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, agents 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 country’s securities market is, the greater
the likelihood of custody problems.
Further, under continuous listing standards adopted by the
NYSE Arca, each basket fund will be required to confirm on an ongoing basis that the components of its underlying index satisfy the applicable listing requirements. In the event that the underlying index of a basket fund does not comply with the
applicable listing requirements, such basket fund would be required to rectify such non-compliance by requesting that the applicable underlying index sponsor modify such underlying index, adopting a new underlying index or obtaining relief from
the Securities and Exchange Commission. There can be no assurance that an underlying index sponsor would so modify such underlying index or that relief would be obtained from the Securities and Exchange Commission and, therefore, non-compliance
with the continuous listing standards may result in the basket fund being delisted by the NYSE Arca.
Each Basket Fund and its Underlying Index are Different and the Performance of Each Basket Fund May Not Correlate With the
Performance of its Underlying Index
Each basket fund uses a representative sampling strategy (more
fully described under “The Basket Underliers — iShares
®
MSCI EAFE ETF and
iShares
®
MSCI Emerging Markets ETF”) to attempt to track the performance of its
underlying index. In each case, the basket fund may not hold all or substantially all of the equity securities included in its underlying index and may hold securities or assets not included in its underlying index. Therefore, while the
performance of each basket fund is generally linked to the performance of its underlying index, the performance of each basket fund is also linked in part to shares of
equity securities not included in its 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 its underlier investment advisor.
Imperfect correlation between a basket
fund’s portfolio securities and those in its underlying index, rounding of prices, changes to its underlying index and regulatory requirements may cause tracking error, which is the divergence of a basket fund’s performance from that of its
underlying index.
In addition, the performance of each
basket fund will reflect additional transaction costs and fees that are not included in the calculation of its underlying index and this may increase the tracking error of such basket fund. Also, corporate actions with respect to the sample of
equity securities (such as mergers and spin-offs) may impact the performance differential between each basket fund and its underlying index. Finally, because the shares of each basket fund are traded on the NYSE Arca and are subject to market
supply and investor demand, the market value of one share of a basket fund may differ from the net asset value per share of that basket fund.
For all of the foregoing reasons, the
performance of each basket fund may not correlate with the performance of its underlying index. Consequently, in each case, the cash settlement amount payable on your notes will not be the same as investing directly in the basket fund or in its
underlying index or in any of the underlier stocks or in any of 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 respective underlying index.
An Investment in the Offered Notes Is Subject to Risks Associated with Foreign Securities
The value of your notes is linked, in part, to basket underliers that are comprised of stocks from one or more foreign securities
markets, and, in part, to the iShares
®
MSCI Emerging Markets ETF, which 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 country's geographical region. These factors include: recent changes, or the possibility of future changes, in the applicable foreign government's 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 basket funds are not traded, the value of the securities underlying the basket funds may change
on days when shareholders will not be able to purchase or sell shares of the basket funds. This could result in premiums or discounts to a basket fund’s
net asset value that may be greater than those experienced by a basket fund that does not hold foreign assets.
The countries whose markets are represented by the iShares
®
MSCI Emerging Markets ETF include Brazil, Chile, China,
Colombia, the Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, South Africa, South Korea, Taiwan, Thailand, Turkey and United Arab Emirates. Countries with emerging
markets may have relatively unstable governments, may present the risks of nationalization of businesses, restrictions on foreign ownership and prohibitions on the repatriation of assets, and may have less protection of property rights than more
developed countries. The economies of countries with emerging markets may be based on only a few industries, may be highly vulnerable to changes in local or global trade conditions, and may suffer from extreme and volatile debt burdens or inflation
rates. Local securities markets may trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially making prompt liquidation of holdings difficult or impossible at times. It will also likely
be more costly and difficult for the investment advisor of the iShares
®
MSCI Emerging Markets ETF to enforce the laws or regulations of a foreign country or trading facility, and it is possible that the foreign country or trading
facility may not have laws or regulations which adequately protect the rights and interests of investors in the stocks included in the iShares
®
MSCI Emerging Markets ETF.
Your Investment in the Notes Will Be Subject to Foreign Currency Exchange Rate Risk
The basket funds hold assets that are denominated in non-U.S. dollar currencies. The value of the assets held by the basket funds
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 a basket fund may not increase even if the non-dollar value of the asset held by such basket fund 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:
|
·
|
existing and expected rates of inflation;
|
|
·
|
existing and expected interest rate levels;
|
|
·
|
the balance of payments among countries;
|
|
·
|
the extent of government surpluses or deficits in the relevant foreign country and the United States; and
|
|
·
|
other financial, economic, military and political factors.
|
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 levels of the basket funds 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-41 of the accompanying product supplement no. 1,738. 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-41 of the accompanying product supplement no. 1,738 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 your notes, could be collected via withholding. If these regulations were to apply to the notes, we may be
required to withhold such taxes if any U.S.-source dividends are paid on the basket funds or on the stocks included in the basket indices 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 holder’s potential right to claim a refund from the Internal Revenue Service) if such certifications were not received or were not satisfactory. If withholding was required, we would not be required
to pay any additional amounts with respect to amounts so withheld. These regulations generally will apply to 871(m) financial instruments (or a combination of financial instruments treated as having been entered into in connection with each other)
issued (or significantly modified and treated as retired and reissued) on or after January 1, 2021, but will also apply to certain 871(m) financial instruments (or a combination of financial instruments treated as having been entered into in
connection with each other) that have a delta (as defined in the applicable Treasury regulations) of one and are issued (or significantly modified and treated as retired and reissued) on or after January 1, 2017. In addition, these regulations
will not apply to financial instruments that reference a “qualified index” (as defined in the regulations). We have determined that, as of the issue date of your notes, your notes will not be subject to withholding under these rules. In certain
limited circumstances, however, you should be aware that it is possible for United States alien holders to be liable for tax under these rules with respect to a combination of transactions treated as having been entered into in connection with each
other even when no withholding is required. You should consult your tax advisor concerning these regulations, subsequent official guidance and regarding any other possible alternative characterizations of your notes for U.S. federal income tax
purposes.
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 all or a
portion of your notes. If all or a portion of your notes were subject to the constructive ownership rules, then all or a portion of 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.
THE BASKET AND THE BASKET UNDERLIERS
The Basket
The basket is comprised of the following basket underliers with the following initial weights within the basket: the S&P 500
®
Index (40% weighting), the iShares
®
MSCI EAFE ETF (20% weighting), the EURO STOXX 50
®
Index (15% weighting), the iShares
®
MSCI Emerging Markets ETF (15% weighting) and the Russell 2000
®
Index (10%
weighting).
The S&P 500
®
Index
The S&P 500
®
Index includes a representative sample of 500 leading companies in leading industries of the U.S.
economy. The S&P 500
®
Index is calculated, maintained and published by S&P Dow Jones Indices LLC (“S&P”).
As of July 31, 2017, companies with multiple share class lines are no longer eligible for inclusion in the S&P 500
®
Index. Constituents of the S&P 500
®
Index prior to July 31, 2017 with multiple share class lines will be grandfathered in and continue to be included in the S&P 500
®
Index. If an S&P 500
®
Index
constituent reorganizes into a multiple share class line structure, that company will be reviewed for continued inclusion in the S&P 500
®
Index at the discretion of the S&P Index Committee. Also as of July 31, 2017, the criteria
employed by S&P for purposes of making additions to the S&P 500
®
Index were changed as follows:
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●
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with respect to the “U.S. company” criterion, (i) the IEX was added as an “eligible exchange” for the primary listing of the relevant company’s common stock and (ii) the former
“corporate governance structure consistent with U.S. practice” requirement was removed; and
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●
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with respect to constituents of the S&P MidCap 400
®
Index and the S&P SmallCap 600
®
Index that are being considered for addition to the S&P 500
®
Index, the financial viability, public float and/or liquidity eligibility criteria no longer need to be met if the S&P Index Committee decides that such an addition will enhance the representativeness of the S&P 500
®
Index as a market benchmark.
|
As of January 2, 2019, the 500 companies included in the S&P 500
®
Index were divided into eleven Global Industry Classification Sectors. The Global
Industry Classification Sectors include (with the approximate percentage currently included in such sectors indicated in parentheses): Communication Services (10.23%), Consumer Discretionary (10.01%), Consumer Staples (7.36%), Energy (5.42%),
Financials (13.45%), Health Care (15.30%), Industrials (9.22%), Information Technology (20.09%), Materials (2.74%), Real Estate (2.89%) and Utilities (3.27%). (Sector designations are determined by the 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.) As of the close of business on September 21, 2018,
S&P and MSCI, Inc. updated the Global Industry Classification Sector structure. Among other things, the update broadened the Telecommunications Services sector and renamed it the Communication Services sector. The renamed sector includes the
previously existing Telecommunication Services Industry group, as well as the Media Industry group, which was moved from the Consumer Discretionary sector and renamed the Media & Entertainment Industry group. The Media & Entertainment
Industry group contains three industries: Media, Entertainment and Interactive Media & Services. The Media industry continues to consist of the Advertising, Broadcasting, Cable & Satellite and Publishing sub-industries. The Entertainment
industry contains the Movies & Entertainment sub-industry (which includes online entertainment streaming companies in addition to companies previously classified in such industry prior to September 21, 2018) and the Interactive Home
Entertainment sub-industry (which includes companies previously classified in the Home Entertainment Software sub-industry prior to September 21, 2018 (when the Home Entertainment Software sub-industry was a sub-industry in the Information
Technology sector)), as well as producers of interactive gaming products, including mobile gaming applications). The Interactive Media & Services industry and sub-industry includes companies engaged in content and information creation or
distribution through proprietary platforms, where revenues are derived primarily through pay-per-click advertisements, and includes search engines, social media and networking platforms, online classifieds and online review companies. The Global
Industry Classification Sector structure changes are
effective for the S&P 500
®
Index as of the open of business on September 24, 2018 to coincide with the September 2018 quarterly rebalancing.
The above information supplements the description of the underlier found in the accompanying general terms supplement no. 1,734. This
information was derived from information prepared by the underlier sponsor, however, the percentages we have listed above are approximate and may not match the information available on the underlier sponsor’s website due to subsequent corporate
actions or other activity relating to a particular stock. For more details about the underlier, the underlier sponsor and license agreement between the underlier sponsor and the issuer, see “The Underliers — S&P 500
®
Index” on page
S-40 of the accompanying general terms supplement no. 1,734.
The S&P 500
®
Index is a product of S&P Dow Jones Indices LLC, and has been licensed for use by GS Finance Corp. (“Goldman”).
Standard & Poor’s
®
and S&P
®
are registered trademarks of Standard & Poor’s Financial Services LLC; Dow Jones
®
is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and these
trademarks have been licensed for use by S&P Dow Jones Indices LLC and sublicensed for certain purposes by Goldman. Goldman’s notes are not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, Standard & Poor’s
Financial Services LLC or any of their respective affiliates and neither S&P Dow Jones Indices LLC, Dow Jones, Standard & Poor’s Financial Services LLC or any of their respective affiliates make any representation regarding the advisability
of investing in such notes.
The iShares
®
MSCI EAFE ETF
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 underlying index.
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The index it tracks is the MSCI EAFE Index (the “underlying index”).
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·
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Investment Advisor: BlackRock Fund Advisors (“BFA”).
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·
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The ETF’s shares trade on the NYSE Arca under the ticker symbol “EFA”.
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·
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The iShares
®
Trust’s SEC CIK Number is 0001100663.
|
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·
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The ETF’s inception date was August 14, 2001.
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·
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The ETF’s shares are issued or redeemed only in creation units of 600,000 shares or multiples
thereof.
|
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 ETF’s 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
, up to and including $120.0 billion,
plus
0.227% per annum of the aggregate net
assets of the funds on amounts in excess of $120.0 billion. As of September 30, 2018, the aggregate expense ratio of the ETF was 0.32% 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, 2018
) 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 underlying index. The ETF’s investment objective and the underlying index may be changed without the approval of BFA’s 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.
Notwithstanding the ETF’s
investment objective, the return on your notes will not reflect any dividends paid on the ETF shares, on the securities purchased by the ETF or on the securities that comprise the underlying index.
iShares
®
MSCI EAFE ETF Top Ten Holdings as of January 4, 2019
|
ETF Stock Issuer
|
Percentage (%)
|
|
NESTLE SA
|
2.01%
|
|
NOVARTIS AG
|
1.47%
|
|
ROCHE HOLDING PAR AG
|
1.41%
|
|
HSBC HOLDINGS PLC
|
1.31%
|
|
ROYAL DUTCH SHELL PLC CLASS A
|
1.09%
|
|
TOYOTA MOTOR CORP
|
1.05%
|
|
BP PLC
|
1.04%
|
|
TOTAL SA
|
1.02%
|
|
ROYAL DUTCH SHELL PLC CLASS B
|
0.90%
|
|
ASTRAZENECA PLC
|
0.77%
|
|
Total
|
12.07%
|
iShares
®
MSCI EAFE ETF Weighting by Sector as of January 4, 2019*
ǂ
|
Sector
|
Percentage (%)
|
|
Financials
|
19.43%
|
|
Consumer Discretionary
|
11.06%
|
|
Industrials
|
14.13%
|
|
Consumer Staples
|
11.47%
|
|
Health Care
|
11.40%
|
|
Materials
|
7.31%
|
|
Information Technology
|
5.74 %
|
|
Communication Services
|
5.50%
|
|
Energy
|
5.95 %
|
|
Real Estate
|
3.69%
|
|
Utilities
|
3.76%
|
|
Cash and/or Derivatives
|
0.56%
|
|
Total
|
100.00%
|
* Percentages may not sum to 100% due to rounding.
ǂ
The Global Industry Classification Structure, which MSCI utilizes to classify the constituents of the MSCI EAFE
Index, was
updated in September 2018. Please see “ ―
The MSCI
®
EAFE Index” below for additional information about these updates.
iShares
®
MSCI EAFE ETF Weighting by Country as of January 4, 2019*
|
Country
|
Percentage (%)
|
|
Japan
|
23.95
|
|
United Kingdom
|
17.30
|
|
France
|
10.89
|
|
Germany
|
8.86
|
|
Switzerland
|
8.69
|
|
Australia
|
6.84
|
|
Hong Kong
|
3.82
|
|
Netherlands
|
3.38
|
|
Spain
|
3.13
|
|
Sweden
|
2.70
|
|
Italy
|
2.28
|
|
Denmark
|
1.77
|
|
Singapore
|
1.35
|
|
Finland
|
1.05
|
|
Cash and/or Derivatives
|
0.56
|
|
Other
|
3.44
|
|
Total
|
100.01%
|
* Percentages may not sum to 100% due to rounding.
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 underlying 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
underlying index.
The ETF generally invests
at least 90% of its assets in the securities of the underlying index and in depositary receipts representing securities of the underlying 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 underlying index, but which BFA believes will help the ETF track the underlying index. Also, the ETF may
lend securities representing up to one-third of the value of the ETF’s total assets (including the value of the collateral received).
Tracking Error
The performance of the ETF and the
underlying index may vary due to a variety of factors, including differences between the securities and other instruments held in the ETF’s portfolio and those included in the underlying index, pricing differences (including differences between a
security’s price at the local market close and the ETF’s valuation of a security at the time of calculation of the ETF’s net asset value), differences in transaction costs, the ETF’s 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 underlying 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 underlying index does not. BFA expects that, over time, the ETF’s tracking error will not exceed 5%. The ETF’s 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 underlying index.
As of December 31, 2018, iShares
®
reported the following average annual returns on the market price of the ETF’s shares and the
MSCI EAFE Index. The market price of the ETF’s 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, -13.79%; 3 years, 2.98%; 5 years, 0.30%; 10 years, 5.84%; since inception, 4.50%; MSCI EAFE Index: 1 year, -13.75%; 3 years, 2.87%; 5 years, 0.53%; 10 years, 6.32%; since ETF inception, 4.57%.
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 underlying index is concentrated.
The MSCI EAFE Index
The MSCI EAFE 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.
Net Total Return Methodology
The ETF tracks the net
total return version of the underlying index. A net total return index represents the total return earned in a portfolio that tracks the price return version of the index and reinvests dividend income, net of certain withholding taxes, in the
overall index, not in the specific stock paying the dividend. The difference between the price return calculation and the net total return calculation of an index is that, with respect to the price return calculation, changes in the index level
reflect changes in stock prices, whereas with respect to the net total return calculation of the index, changes in the index level reflect both movements in stock prices and the reinvestment of dividend income net of certain withholding taxes.
MSCI’s net total return
methodology reinvests net cash dividends in the index the day the security is quoted ex-dividend, or on the ex-date (converted to U.S. dollars, as applicable). Certain dividends, including special/extraordinary dividends and commemorative
dividends, are reinvested in the index if, a day prior to the ex-date, the dividend impact on price is less than 5%. If the impact is 5% or more, the dividend will be reflected in the index through a price adjustment. A specific price adjustment
is always applied for stock dividends that are issued at no cost to the shareholders, an extraordinary capital repayment or a dividend paid in the shares of another company. Cash payments related to corporate events, such as mergers and
acquisitions, are considered on a case-by-case basis.
Notwithstanding the ETF’s
investment objective, the return on your notes will not reflect any dividends paid on the ETF shares, on the securities purchased by the ETF or on the securities that comprise the underlying index.
MSCI divides the companies included in
the index into eleven Global Industry Classification Sectors: Consumer Discretionary, Consumer Staples, Energy, Financials, Health Care, Industrials, Information Technology, Materials, Real Estate, Telecommunication Services and Utilities. As of
the close of business on September 21, 2018, MSCI and S&P Dow Jones Indices LLC updated the Global Industry Classification Sector structure. Among other things, the update broadened the Telecommunications Services sector and renamed it the
Communication Services sector. The renamed sector includes the previously existing Telecommunication Services Industry group, as well as the Media Industry group, which was moved from the Consumer Discretionary sector and renamed the Media &
Entertainment Industry group. The Media & Entertainment Industry group contains three industries: Media, Entertainment and Interactive Media & Services. The Media industry continues to consist of the Advertising, Broadcasting, Cable &
Satellite and Publishing sub-industries. The Entertainment industry contains the Movies & Entertainment sub-industry (which includes online entertainment streaming companies in addition to companies previously classified in such industry
prior to September 21, 2018) and the Interactive Home Entertainment sub-industry (which includes companies previously classified in the Home Entertainment Software sub-industry prior to September 21, 2018 (when the Home Entertainment Software
sub-industry was a sub-industry in the Information Technology sector)), as well as producers of interactive gaming products, including mobile gaming applications). The Interactive Media & Services industry and sub-industry includes companies
engaged in content and information creation or distribution through proprietary platforms, where revenues are derived primarily through pay-per-click advertisements, and includes search engines, social media and networking platforms, online
classifieds and online review companies. The Global Industry Classification Sector structure changes are effective for the MSCI EAFE Index as of the open of business on December 3, 2018 to coincide with the November 2018 semi-annual index review
.
The above information
supplements the description of the underlying index found in the accompanying general terms supplement no. 1,734. 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-46 of the accompanying general terms supplement no. 1,734. 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.
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 MSCI’s 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.
The EURO STOXX 50
®
Index
The EURO STOXX 50
®
Index is a free-float market capitalization-weighted index of 50 European blue-chip
stocks and was created by and is sponsored and maintained by STOXX Limited. Publication of the EURO STOXX 50
®
Index began on February 26, 1998, based on an initial index value of 1,000 at December 31, 1991. The level of the EURO STOXX 50
®
Index is disseminated on the STOXX Limited website. STOXX Limited is under no obligation to continue to publish the index and may discontinue publication of it at any time. Additional information regarding the EURO STOXX 50
®
Index may be
obtained from the STOXX Limited website: stoxx.com. We are not incorporating by reference the website or any material it includes in this pricing supplement.
The top ten constituent stocks of the EURO STOXX 50
®
Index as of December 17, 2018, by weight, are:
Total S.A. (5.87%), SAP SE (4.34%), Sanofi (3.98%), Siemens AG (3.84%), LINDE PLC (3.51%), Allianz SE (3.42%), Unilever N.V. (3.33%), LVMH Moët Hennessy Louis Vuitton SE (3.03%), Banco Santander S.A. (2.95%) and ASML Holding N.V. (2.83%);
constituent weights may be found at stoxx.com/download/indices/factsheets/SX5GT.pdf under “Factsheets and Methodologies” and are updated periodically.
As of December 17, 2018, the sixteen industry sectors which comprise the EURO STOXX 50
®
Index represent
the following weights in the index: Automobiles & Parts (4.21%), Banks (10.76%), Chemicals (4.53%), Construction & Materials (2.68%), Food & Beverage (4.22%), Health Care (10.25%), Industrial Goods & Services (10.43%), Insurance
(6.48%), Media (0.93%), Oil & Gas (7.48%), Personal & Household Goods (10.13%), Real Estate (0.89%), Retail (3.82%), Technology (9.73%), Telecommunications (5.23%) and Utilities (4.73%); industry weightings may be found at
stoxx.com/download/indices/factsheets/SX5GT.pdf under “Factsheets and Methodologies” and are updated periodically. Percentages may not sum to 100% due to rounding. Sector designations are determined by the underlier 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.
As of December 17, 2018, the eight countries which comprise the EURO STOXX 50
®
Index represent the
following weights in the index: Belgium (2.36%), Finland (1.33%), France (38.38%), Germany (27.88%), Ireland (4.37%), Italy (4.83%), Netherlands (10.53%) and Spain (10.32%); country weightings may be found at
stoxx.com/download/indices/factsheets/SX5GT.pdf under “Factsheets and Methodologies” and are updated periodically.
The above information supplements the description of the EURO STOXX 50
®
Index found in the accompanying general terms
supplement no. 1,734. This information was derived from information prepared by the basket underlier sponsor, however, the percentages we have listed above are approximate
and may not match the information available on the basket underlier sponsor's website due to subsequent corporate actions or other
activity relating to a particular stock. For more details about the EURO STOXX 50
®
Index
,
the basket underlier sponsor and license agreement between the basket underlier sponsor
and the issuer, see “The Underliers — EURO STOXX 50
®
Index” on page S-75 of the accompanying general terms supplement no. 1,734.
The EURO STOXX 50
®
is the intellectual property of STOXX Limited, Zurich, Switzerland and/or its
licensors (“Licensors”), which is used under license. The securities or other financial instruments based on the index are in no way sponsored, endorsed, sold or promoted by STOXX and its Licensors and neither STOXX nor its Licensors shall have any
liability with respect thereto.
The iShares
®
MSCI Emerging Markets ETF
The shares of the iShares
®
MSCI Emerging Markets ETF are issued by iShares, Inc., a registered
investment company. The iShares
®
MSCI Emerging Markets ETF seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI Emerging Markets Index. The iShares
®
MSCI
Emerging Markets ETF trades on the NYSE Arca under the ticker symbol “EEM”. BlackRock Fund Advisors (“BFA”) serves as the investment advisor to the iShares
®
MSCI Emerging Markets ETF.
The following tables display the top holdings and weighting by sector and country of the iShares
®
MSCI
Emerging Markets ETF. A list of constituent stocks can be found at us.iShares.com/product_info/fund/overview/EEM.htm. We are not incorporating by reference the website or any material it includes in this pricing supplement. This information has
been obtained from the iShares
®
website without independent verification.
iShares
®
MSCI Emerging Markets ETF Top Ten Holdings as of January 4, 2019
|
ETF Stock Issuer
|
Percentage (%)
|
|
TENCENT HOLDINGS LTD
|
4.70%
|
|
ALIBABA GOUP HOLDING ADR REPRESEN
|
3.76%
|
|
TAIWAN SEMICONDUCTOR MANUFACTURING
|
3.42%
|
|
SAMSUNG ELECTRONICS LTD
|
3.30%
|
|
NASPERS LIMITED N LTD
|
1.86%
|
|
CHINA CONSTRUCTION BANK CORP H
|
1.63%
|
|
CHINA MOBILE LTD
|
1.25%
|
|
INDUSTRIAL AND COMMERCIAL BANK OF
|
1.01%
|
|
BAIDU ADR REPTG INC CLASS A
|
1.15%
|
|
ITAU UNIBANCO HOLDING PREF SA
|
1.00%
|
|
HOUSING DEVELOPMENT FINANCE CORPOR
|
0.94%
|
|
Total
|
24.02%
|
iShares
®
MSCI Emerging Markets ETF Weighting by Country as of January 4, 2019*
|
Country
|
Percentage (%)
|
|
China
|
30.05%
|
|
Korea (South)
|
13.29%
|
|
Taiwan
|
10.72%
|
|
India
|
9.17%
|
|
Brazil
|
8.04%
|
|
South Africa
|
6.38%
|
|
Russian Federation
|
3.84%
|
|
Mexico
|
2.86%
|
|
Thailand
|
2.48%
|
|
Malaysia
|
2.39%
|
|
Indonesia
|
2.36%
|
|
Poland
|
1.26%
|
|
Phillippines
|
1.15%
|
|
Chile
|
1.12%
|
|
Qatar
|
1.08%
|
|
Cash and/or Derivatives
|
0.74%
|
|
Other
|
3.08%
|
|
Total
|
100.01%
|
* Percentages may not sum to 100% due to rounding.
iShares
®
MSCI Emerging Markets ETF Weighting by Sector as of January 4, 2019*
ǂ
|
Sector
|
Percentage (%)
|
|
Financials
|
24.86%
|
|
Information Technology
|
13.41%
|
|
Communication Services
|
14.12%
|
|
Consumer Discretionary
|
10.47%
|
|
Energy
|
8.12%
|
|
Materials
|
7.56%
|
|
Consumer Staples
|
6.76%
|
|
Industrials
|
5.49%
|
|
Health Care
|
2.77%
|
|
Real Estate
|
3.00%
|
|
Utilities
|
2.70%
|
|
Cash and/or Derivatives
|
0.74%
|
|
Total
|
100.00%
|
* Percentages may not sum to 100% due to rounding.
ǂ
The Global Industry Classification Structure, which MSCI utilizes to classify the constituents of
the MSCI Emerging Markets Index was updated in September 2018. Please see below for additional information about these updates.
As of December 31, 2018, iShares
®
reported the following average annual returns on the market price of the ETF’s shares
and the MSCI Emerging Markets Index. The market price of the ETF’s 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, -15.26%; 3 years, 8.84%; 5 years, 0.75%; 10 years, 6.68%; since inception, 10.15%; MSCI Emerging Markets Index: 1 year, -14.58%; 3 years, 9.25%; 5 years, 1.65%; 10 years, 8.02%; since ETF inception,10.64%.
Notwithstanding the iShares
®
MSCI Emerging Markets ETF’s investment objective, the return on your notes will not reflect
any dividends paid on the shares of the iShares
®
MSCI Emerging Markets ETF, on the securities purchased by the iShares
®
MSCI Emerging Markets ETF or on the securities that comprise the MSCI Emerging Markets Index.
As of the close on May 31, 2018, MSCI began a multi-step process to include, in the MSCI Emerging Markets Index, large cap China A shares that are not
in trading suspension. As part of the first step of the inclusion process, which resulted from the May 2018 quarterly index review, MSCI added such large cap China A shares to the MSCI Emerging Markets Index at 2.5% of their foreign inclusion
factor-adjusted market capitalization. In connection with the August 2018 quarterly index review, MSCI implemented the second step of the inclusion process by increasing the foreign inclusion factor-adjusted market capitalization of those existing
China A share constituents from 2.5% to 5%. With the implementation of this second step, and the inclusion of additional China A shares in connection with the August 2018 quarterly index review, China A shares were initially expected to represent
approximately 0.75% of the MSCI Emerging Markets Index.
MSCI has announced that, beginning in June 2019, it expects to include the MSCI Saudi Arabia Index in the MSCI Emerging Markets
Index, representing on a pro forma basis a weight of approximately 2.6% of
the MSCI Emerging Markets Index with 32 securities, following a two-step inclusion process. The first inclusion step is expected to
coincide with the May 2019 semi-annual review and the second inclusion step is expected to take place as part of the August 2019 quarterly index review. In addition, MSCI has announced the reclassification of the MSCI Argentina Index from a
“frontier market” to an “emerging market”, and the MSCI Argentina Index is expected to be included in the MSCI Emerging Markets Index coinciding with the May 2019 semi-annual index review. MSCI expects to continue to restrict the inclusion in the
MSCI Argentina Index to only foreign listings of Argentinian companies, such as American depositary receipts.
As of the close of
business on September 21, 2018,
MSCI and S&P Dow Jones Indices LLC
updated the Global Industry Classification Sector structure. Among other
things, the update broadened the Telecommunications Services sector and renamed it the Communication Services sector. The renamed sector includes the previously existing Telecommunication Services Industry group, as well as the Media Industry
group, which was moved from the Consumer Discretionary sector and renamed the Media & Entertainment Industry group. The Media & Entertainment Industry group contains three industries: Media, Entertainment and Interactive Media &
Services. The Media industry continues to consist of the Advertising, Broadcasting, Cable & Satellite and Publishing sub-industries. The Entertainment industry contains the Movies & Entertainment sub-industry (which includes online
entertainment streaming companies in addition to companies previously classified in such industry prior to September 21, 2018) and the Interactive Home Entertainment sub-industry (which includes companies previously classified in the Home
Entertainment Software sub-industry prior to September 21, 2018 (when the Home Entertainment Software sub-industry was a sub-industry in the Information Technology sector)), as well as producers of interactive gaming products, including mobile
gaming applications). The Interactive Media & Services industry and sub-industry includes companies engaged in content and information creation or distribution through proprietary platforms, where revenues are derived primarily through
pay-per-click advertisements, and includes search engines, social media and networking platforms, online classifieds and online review companies. The Global Industry Classification Sector structure changes are effective for the MSCI Emerging
Markets Index as of the open of business on December 3, 2018 to coincide with the November 2018 semi-annual index review.
The
above information supplements the description of the ETF found in the accompanying general terms supplement no. 1,734. This information was derived from information prepared by the investment advisor, however, the percentages we have listed above
are approximate and may not match the information available on the investment advisor's website due to subsequent corporate actions or other activity relating to a particular stock.
For more details about the ETF, the investment advisor and license agreement between the
investment advisor and the issuer, see “The Underliers — The iShares
®
MSCI Emerging Markets ETF” on page S-90
of the accompanying general terms supplement no. 1,734.
iShares
®
is a registered trademark of BlackRock Institutional Trust Company, N.A. ("BITC"). The
securities are not sponsored, endorsed, sold, or promoted by BITC. BITC makes no representations or warranties to the owners of the securities or any member of the public regarding the advisability of investing in the securities. BITC has no
obligation or liability in connection with the operation, marketing, trading or sale of the securities.
The MSCI Indexes are the exclusive property of MSCI Inc. ("MSCI"). The securities referred to herein are not sponsored, endorsed,
or promoted by MSCI, and MSCI bears no liability with respect to any such securities.
The Russell 2000
®
Index
The Russell 2000
®
Index measures the composite price performance of stocks of 2,000 companies
incorporated in the U.S., its territories and certain “benefit-driven incorporation countries.”
As of December 17, 2018, the 2,000 companies included in the Russell 2000
®
Index were divided into nine
Russell Global Sectors. The Russell Global Sectors include (with the approximate percentage currently included in such sectors indicated in parentheses): Consumer Discretionary (14.57%), Consumer Staples (2.39%), Financial Services (23.87%), Health
Care (14.15%), Materials & Processing (5.92%), Other Energy (3.63%), Producer Durables (13.15%), Technology (12.41%) and Utilities (4.83%). (Sector designations are determined by the underlier 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.)
In addition to the exclusions discussed under “Exclusions from the Russell 2000
®
Index” on page S-62 of the accompanying general terms supplement no. 1,734, a company with 5% or less of its voting rights in the hands of unrestricted shareholders is no longer eligible for
inclusion in the Russell 2000
®
Index. Existing constituents of the Russell 2000
®
Index that do not currently have more than 5% of the company’s voting rights in the hands of unrestricted shareholders have until the September
2022 review to meet this requirement.
The above information supplements the description of the underlier found in the accompanying general terms
supplement no. 1,734. This information was derived from information prepared by the underlier sponsor, however, the percentages we have listed above are approximate and may not match the information available on the underlier sponsor's website due
to subsequent corporate actions or other activity relating to a particular stock. For more details about the underlier, the underlier sponsor and license agreement between the underlier sponsor and the issuer, see “The Underliers — Russell 2000
®
Index” on page S-61 of the accompanying general terms supplement no. 1,734.
The Russell 2000
®
Index is a trademark of FTSE Russell (“Russell”) and has been licensed for use by GS Finance Corp.
The notes are not sponsored, endorsed, sold or promoted by Russell, and Russell makes no representation regarding the advisability of investing in the notes.
Historical Closing Levels of the Basket Underliers
The respective closing level of the basket underliers have fluctuated in the past and may, in the future, experience significant
fluctuations. Any historical upward or downward trend in the level of any of the basket underliers during the period shown below is not an indication that the basket underliers are 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 basket or
the basket underliers as an indication of the future performances of the basket underliers.
We cannot give you any assurance that the future performance of the basket, basket underliers or the basket 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 basket or the basket underliers.
Before investing in the offered notes, you should consult publicly available information to determine the level of the basket underliers between the date of this pricing supplement and the date of your purchase of the offered notes. The actual
performance of the basket and the basket underliers over the life of the offered notes, as well as the cash settlement amount at maturity, may bear little relation to the historical levels shown below.
The graphs below show the daily historical closing levels of each basket underlier from January 9, 2009 through January 9, 2019. We obtained the
closing levels in the graphs below from Bloomberg Financial Services, without independent verification. Although the official closing levels of the Russell 2000
®
Index are published to six decimal places by the index sponsor, Bloomberg
Financial Services reports the levels of the Russell 2000
®
Index to fewer decimal places.
Historical Basket Levels
The following graph is based on the basket closing level for the period from January 9, 2009 through January 9, 2019 assuming that
the basket closing level was 100 on January 9, 2009. We derived the basket closing levels based on the method to calculate the basket closing level as described in this pricing supplement and on actual closing levels of the relevant basket
underliers on the relevant date. The basket closing level has been normalized such that its hypothetical level on January 9, 2009 was 100. As noted in this pricing supplement, the initial basket level will be set at 100 on the trade date. The
basket closing level can increase or decrease due to changes in the levels of the basket underliers.
Basket Performance