Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-176914
Prospectus Supplement to the Prospectus dated September 19, 2011 and the
Prospectus Supplement dated September 19, 2011 — No. 1358
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The Goldman Sachs Group, Inc. Medium-Term Notes, Series D
$19,000,092.48 8.00% Equity Linked Notes Due 2013 (Linked to the Common Stock of NetApp, Inc.)
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The notes will pay interest at a fixed rate of 8.00% per annum payable on the 14th of each month commencing April 14, 2012 and ending on the stated maturity date (March 14, 2013), each subject to adjustment. In addition to any accrued but unpaid interest, we will pay you an amount on the stated maturity date based on the performance of the common stock of NetApp, Inc. (“NTAP”) (which we refer to as the index stock), as measured from the trade date (March 15, 2012) to and including the determination date (March 11, 2013, subject to adjustment). If the final index stock price is less than the lower strike price (approximately 112.25% of the initial index stock price of $43.273, which is $48.574), you would lose a portion of your investment in the notes and may lose a substantial portion of your investment, depending on the performance of the index stock.
The face amount of each note is $43.273. On the stated maturity date, we will exchange each $43.273 face amount of your notes for an amount in cash equal to the cash settlement amount (or in our sole discretion, the amount of shares of the index stock and/or any other property you will receive in lieu of such cash amount, if applicable).
The cash settlement amount for each $43.273 face amount of your notes will be an amount equal to:
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if the final index stock price is greater than or equal to the upper strike price, an amount in cash equal to the sum of (i) the product of the (x) upside exchange ratio times the (y) result of the final index stock price minus the upper strike price plus (ii) the $43.273 face amount; |
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if the final index stock price is greater than or equal to the lower strike price and less than the upper strike price, the $43.273 face amount; |
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if the final index stock price is greater than the protection strike price and less than the lower strike price, an amount in cash equal to the product of the (x) downside exchange ratio times (y) the quotient of the final index stock price divided by the initial index stock price times (z) the $43.273 face amount; or |
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if the final index stock price is less than or equal to the protection strike price, an amount in cash equal to the product of the (x) downside exchange ratio times the (y) quotient of the protection strike price divided by the initial index stock price times (z) the $43.273 face amount. |
The protection strike price is $36.782, which is approximately 85% of the initial index stock price. The lower strike price is $48.574, which is approximately 112.25% of the initial index stock price. The upper strike price is $50.370, which is approximately 116.40% of the initial index stock price. The downside exchange ratio is 1/1.1225, or approximately 0.8909 (i.e., for each 1% decline in the index stock price below the lower strike price until and including the protection strike price, you will lose approximately 0.8909% of the value of your note) and the upside exchange ratio is 0.65 (i.e., your participation in each 1% increase in the index stock price above the upper strike price will be limited to a 0.65% increase in the value of your note).
The amount you will be paid on your notes on the stated maturity date will not be affected by the closing price of the stock index on any day other than the determination date. You could lose a substantial portion of your investment in the notes. If the final stock price is less than the lower strike price, the payment you will receive on the stated maturity date (or in our sole discretion, the amount of shares of the index stock and/or any other property you will receive in lieu of such cash amount) will be less than the face amount of your notes.
Because we have provided only a brief summary of the terms of your notes above, you should read the detailed description of the terms of the notes found in “Summary Information” on page S-2 and “Specific Terms of Your Notes” on page S-16.
Your investment in the notes involves certain risks. In particular, assuming no changes in market conditions or our creditworthiness and other relevant factors, the value of your notes on the trade date (as determined by reference to pricing models used by Goldman, Sachs & Co. and taking into account our credit spreads) is, and the price you may receive for your notes may be, significantly less than the original issue price. The value or quoted price of your notes at any time will reflect many factors and cannot be predicted.
We encourage you to read “Additional Risk Factors Specific to Your Notes” on page S-7 of this prospectus supplement so that you may better understand those risks.
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Original issue date (settlement date): |
March 22, 2012 |
Underwriting discount: |
0.05% of the face amount |
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Original issue price: |
100% of the face amount |
Net proceeds to the issuer: |
99.95% of the face amount |
The issue price, underwriting discount and net proceeds listed above relate to the notes we sell initially. We may decide to sell additional notes after the date of this prospectus supplement, at issue prices and with underwriting discounts and net proceeds that differ from the amounts set forth above. The return (whether positive or negative) on your investment in notes will depend in part on the issue price you pay for such notes.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus supplement, the accompanying prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.
The notes are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank.
Goldman Sachs may use this prospectus supplement in the initial sale of the notes. In addition, Goldman, Sachs & Co. or any other affiliate of Goldman Sachs may use this prospectus supplement in a market-making transaction in a note after its initial sale. Unless Goldman Sachs or its agent informs the purchaser otherwise in the confirmation of sale, this prospectus supplement is being used in a market-making transaction.
Goldman, Sachs & Co.
Prospectus Supplement dated March 15, 2012.
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We refer to the notes we are offering by this prospectus supplement as the “offered notes” or the “notes”. Each of the offered notes, including your notes, has the terms described below and under “Specific Terms of Your Notes” on page S-16. Please note that in this prospectus supplement, references to “The Goldman Sachs Group, Inc.”, “we”, “our” and “us” mean only The Goldman Sachs Group, Inc. and do not include its consolidated subsidiaries. Also, references to the “accompanying prospectus” mean the accompanying prospectus, dated September 19, 2011, as supplemented by the accompanying prospectus supplement, dated September 19, 2011, in each case relating to the Medium-Term Notes, Series D of The Goldman Sachs Group, Inc. References to the “indenture” in this prospectus supplement mean the senior debt indenture, dated July 16, 2008, between The Goldman Sachs Group, Inc. and The Bank of New York Mellon, as trustee.
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Key Terms
Issuer: The Goldman Sachs Group, Inc.
Face amount: each offered note will have a face amount equal to $43.273; $19,000,092.48 in the aggregate for all the offered notes; the aggregate face amount of the offered notes may be increased if the issuer, at its sole option, decides to sell an additional amount of the offered notes on a date subsequent to the date of this prospectus supplement
Index stock and index stock issuer: common stock of NetApp, Inc. (“NTAP”) (Bloomberg symbol: “NTAP UW”)
Principal amount: on the stated maturity date, we will exchange each $43.273 face amount of your notes for an amount in cash equal to the cash settlement amount, or at the option of the issuer, for a number of shares of the index stock and/or any other specified property of equivalent value, based on the final index stock price
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. 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” on page S-7
Cash settlement amount: on the stated maturity date, in addition to any accrued and unpaid interest, we will pay, for each $43.273 face amount of your notes, an amount in cash (or in our sole discretion, the amount of shares of the index stock and/or any other property you will receive in lieu of such cash amount, if applicable) calculated as follows:
· if the final index stock price is greater than or equal to the upper strike price, an amount in cash equal to the sum of (i) the product of the (x) upside exchange ratio times (y) the result of the final index stock price minus the upper strike price plus (ii) the $43.273 face amount;
· if the final index stock price is greater than or equal to the lower strike price and less than the upper strike price, the $43.273 face amount;
· if the final index stock price is greater than the protection strike price and less than the lower strike price, an amount in cash equal to the product of the (x) downside exchange ratio times the (y) quotient of the final index stock price divided by the initial index stock price times (z) the $43.273 face amount; or
· if the final index stock price is less than or equal to the protection strike price, an amount in cash equal to the product of the (x) downside exchange ratio times the (y) quotient of the protection strike price divided by the initial index stock price times (z) the $43.273 face amount.
Initial index stock price: $43.273 per share
Final index stock price: the closing price of one share of the index stock on the determination date, subject to anti-dilution adjustments as described under “Specific Terms of Your Notes — Anti-dilution Adjustments” on page S-19
Dividend base amount: $0.00 per quarter
Dividend periods: the regular cash dividend period, which refers to the frequency of anti-dilution adjustments on account of regular cash dividends during the term of the offered notes, will be a calendar quarter
Protection strike price: $36.782, which is approximately 85% of the initial index stock price
Lower strike price: $48.574, which is approximately 112.25% of the initial index stock price
Upper strike price: $50.370, which is approximately 116.40% of the initial index stock price
Downside exchange ratio: 1/1.1225, or approximately 0.8909
Upside exchange ratio: 0.65
Trade date: March 15, 2012
Original issue date (settlement date): March 22, 2012
Stated maturity date: March 14, 2013, unless postponed as described under “Specific Terms of Your Notes — Cash Settlement Amount — Stated Maturity Date” on page S-18
Determination date: March 11, 2013, unless postponed as described under “Specific Terms of Your Notes — Cash Settlement Amount — Determination Date” on page S-18 and “Specific Terms of Your Notes — Consequences of a Market Disruption Event or a Non-Trading Day” on page S-18
Business day convention: following unadjusted; as described under “Specific Terms of Your Notes — Business Day Convention” on pages S-28
Interest rate (coupon): 8.00% per annum
Day count convention: 30/360 (ISDA)
Interest payment dates: monthly; on the 14th of each month (commencing on April 14, 2012) to and including the stated maturity date; if the stated maturity date is postponed to a date later than March 14, 2013, interest on your notes will accrue only to but excluding March 14, 2013
Regular record dates: for the interest payment dates specified above, five business days before each interest payment date
No listing: the offered notes will not be listed on any securities exchange or included in any interdealer market quotation system
CUSIP: 38147A531
ISIN: US38147A5314
Calculation agent: Goldman, Sachs & Co.
Business day: as described on page S-29
Trading day: as described on page S-29
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 table and chart are provided for purposes of illustration only. They should not be taken as an indication or prediction of future investment results and are intended merely to illustrate the impact that various hypothetical final index stock prices on the determination date could have on the cash settlement amount (assuming we opt to settle in cash rather than shares of the stock) and return at maturity on your investment in the notes, in each case, assuming all other variables remain constant.
The hypothetical cash settlement amounts and returns in the table and chart below are entirely hypothetical; no one can predict what the index stock price will be on any day throughout the life of your notes, and no one can predict what the closing price of the index stock will be on the determination date. They are based on market prices for the index stock that may not be achieved on the determination date and on assumptions that may prove to be erroneous. The price of the index stock has been highly volatile — meaning that the prices have changed substantially in relatively short periods — in the past and its performance cannot be predicted for any future period.
The information in the table below reflects hypothetical rates of return on a note assuming that it is purchased on the original issue date and held to the stated maturity date, and no anti-dilution adjustments or market disruption events occur. If you sell your notes in a secondary market prior to the stated maturity date, your return will depend on the market value of your notes at the time of sale, which may be affected by a number of factors that are not reflected in the table below, such as interest rates and volatility of the index stock. In addition, assuming no changes in market conditions or our creditworthiness and any other relevant factors, the value of your notes on the trade date (as determined by reference to pricing models used by Goldman, Sachs & Co. and taking into account our credit spreads) is, and the price you may receive for your notes may be, significantly less than the issue price. For more information on the value of your notes in the secondary market, see “Additional Risk Factors Specific to Your Notes — Assuming No Changes in Market Conditions or Any Other Relevant Factors, the Market Value of Your Notes on the Trade Date (As Determined by Reference to Pricing Models Used by Goldman Sachs & Co.) Is, and the Price You May Receive for Your Notes May Be, Significantly Less Than the Issue Price” on page S-7 and “— The Market Value of Your Notes May Be Influenced by Many Factors That Are Unpredictable and Interrelated in Complex Ways” on page S-8. The information in the table also reflects the key terms and assumptions in the box below.
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Key Terms and Assumptions | |
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Face amount |
$43.273 |
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Initial index stock price |
$43.273 |
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Protection strike price |
$36.782 (approximately 85% of the initial index stock price) |
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Lower strike price |
$48.574 (approximately 112.25% of the initial index stock price) |
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Upper strike price |
$50.370 (approximately 116.40% of the initial index stock price) |
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Downside exchange ratio |
1/1.1225, or approximately 0.8909 |
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Upside exchange ratio |
0.65 |
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Neither a market disruption event nor a non-trading day occurs on the originally scheduled determination date | |
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No change in or affecting the index stock | |
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Notes purchased on original issue date at the face amount and held to the stated maturity date | |
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Notes settled in cash rather than shares of stock | |
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For these reasons, the actual performance of the index stock over the life of the offered notes, as well as the amount of cash (or in our sole discretion, the amount of shares of the index stock and/or any other property you will receive in lieu of such cash amount, if applicable) payable at maturity, may bear little relation to the hypothetical final index stock price shown below or to the historical prices of the index stock shown elsewhere in this prospectus supplement. For more information about the closing level of the index stock during recent periods, see “Index Stock Issuer — Historical High, Low and Closing Levels of the Index Stock” on page S-32. Before investing in the offered notes, you should consult publicly available information to determine the prices of
the index stock between the date of this prospectus supplement and the date of your purchase of the offered notes.
Any rate of return you may earn on an investment in the notes may be lower than that which you could earn on a comparable investment in the index stock. Among other things, the return on the notes will not reflect any dividends that may be paid on the index stock.
Also, the hypothetical examples shown below do not take into account the effects of applicable taxes. Because of the U.S. tax treatment applicable to your notes, tax liabilities could affect the after-tax rate of return on your notes to a comparatively greater extent than the after-tax return on the index stock.
In the table below, the levels in the left column represent hypothetical final index stock prices expressed as percentages of the initial index stock price. The amounts in the right column represent the hypothetical cash settlement amounts based on the corresponding hypothetical final index stock prices (expressed as a percentage of the initial index stock price), and are expressed as percentages of the face amount of a note (rounded to the nearest one-hundredth of a percent). Thus, a hypothetical cash settlement amount of 100.00% means that the value of the cash payment that we would deliver for each $43.273 of the outstanding face amount of the offered notes on the stated maturity date would equal 100.00% of the face amount of a note, based on the corresponding hypothetical final index stock price (expressed as a percentage of the initial index stock price) and the assumptions noted above.
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Hypothetical Final Index Stock Price |
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Hypothetical Cash Settlement Amount |
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150.00% |
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121.84% |
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120.00% |
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102.34% |
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116.40% |
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100.00% |
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115.00% |
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100.00% |
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112.25% |
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100.00% |
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105.00% |
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93.54% |
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100.00% |
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89.09% |
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90.00% |
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80.18% |
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85.00% |
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75.72% |
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50.00% |
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75.72% |
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25.00% |
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75.72% |
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0.00% |
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75.72% |
As illustrated in the table above, if the final index stock price is less than 112.25% of the initial index stock price, you may lose a substantial portion of the principal of your notes.
The following chart reflects a graphical illustration of the hypothetical cash settlement amounts (expressed as percentages of the face amount) that we would deliver to the holder of your notes on the stated maturity date, if the final index stock price (expressed as percentages of the initial index stock price) were any of the hypothetical percentages shown on the horizontal axis. The chart illustrates that any hypothetical final index stock price of less than 112.25% of the initial index stock price (the section left of the 112.25% marker on the horizontal axis) would result in a hypothetical cash settlement amount of less than 100% of the face amount (the section below the 100% marker on the vertical axis) and, accordingly, in a loss of the principal.
The cash settlement amounts shown above are entirely hypothetical; they are based on market prices for the index stock that may not be achieved on the 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 Your Notes — The Market Value of Your Notes May Be Influenced by Many Factors That Are Unpredictable and Interrelated in Complex Ways” on page S-8.
Payments on the notes are economically equivalent to the amounts that would be paid on a combination of other instruments. For example, payments on the notes are economically equivalent to a combination of an interest-bearing bond bought by the holder and one or more options entered into between the holder and us (with one or more implicit option premiums paid over time). The discussion in this paragraph does not modify or affect the terms of the notes or the U.S. federal income tax treatment of the notes, as described elsewhere in this prospectus supplement.
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We cannot predict the actual final index stock price or what the market value of your notes will be on any particular trading day, nor can we predict the relationship between the index stock price and the market value of your notes at any time prior to the stated maturity date. The actual amount that you will receive at maturity and the rate of return on the offered notes will depend on the actual final index stock price determined by the calculation agent as described above. Moreover, the assumptions on which the hypothetical returns are based may turn out to be inaccurate. Consequently, the amount of cash to be paid in respect of your notes on the stated maturity date may be very different from the information reflected in the table and chart above.
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ADDITIONAL RISK FACTORS SPECIFIC TO YOUR NOTES
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An investment in your notes is subject to the risks described below, as well as the risks described under “Considerations Relating to Indexed Securities” in the accompanying prospectus dated April 6, 2009. Your notes are a riskier investment than ordinary debt securities. Also, your notes are not equivalent to investing directly in the index stock to which your notes are indexed. You should carefully consider whether the offered notes are suited to your particular circumstances.
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Assuming No Changes in Market Conditions or Any Other Relevant Factors, the Market Value of Your Notes on the Trade Date (As Determined By Reference to Pricing Models Used By Goldman, Sachs & Co.) Is, and the Price You May Receive for Your Notes May Be, Significantly Less Than the Issue Price
The value or quoted price of your notes at any time will reflect many factors and cannot be predicted. If Goldman, Sachs & Co. makes a market in the notes (which it is under no obligation to do), the price quoted by Goldman, Sachs & Co. would reflect any changes in market conditions and other relevant factors, including a deterioration in our creditworthiness or perceived creditworthiness whether measured by our credit ratings or other credit measures. These changes may adversely affect the market price of your notes, including the price you may receive for your notes in any market making transaction. To the extent that Goldman, Sachs & Co. makes a market in the notes, it may receive income from the spreads between its bid and offer prices for the notes, if any. The quoted price (and the value of your notes that Goldman, Sachs & Co. will use for account statements or otherwise) could be higher or lower than the original issue price, and may be higher or lower than the value of your notes as determined by reference to pricing models used by Goldman, Sachs & Co.
If at any time a third party dealer quotes a price to purchase your notes or otherwise values your notes, that price may be significantly different (higher or lower) than any price quoted by Goldman, Sachs & Co. You should read “Additional Risk Factors Specific to Your Notes — The Market Value of Your Notes May Be Influenced by Many Factors That Are Unpredictable and Interrelated in Complex Ways” on page S-8.
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.
There is no assurance that Goldman, Sachs & Co. or any other party will be willing to purchase your notes and, in this regard, Goldman, Sachs & Co. is not obligated to make a market in the notes. See “Additional Risk Factors Specific to Your Notes — Your Notes May Not Have an Active Trading Market” on page S-13.
You May Lose a Substantial Portion of Your Investment If the Final Index Stock Price is Less than the Lower Strike Price
You can lose a substantial portion of your investment in the notes. The amount that you receive for each of your notes on the stated maturity date depends, in part, upon the final index stock price relative to the lower strike price. If the final index stock price is less than the lower strike price, the amount you receive on the stated maturity date will be less than the face amount of your notes. Because of the formula that we will use to determine the cash settlement amount, the amount you receive on the stated maturity date may result in a lower return on your notes than you would have received had you invested in the index stock directly.
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
The cash settlement amount you will be paid for your notes on the stated maturity date 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.
The Notes Are Subject to the Credit Risk of Goldman Sachs
Although the return on the notes will be based on the performance of the index stock, plus any accrued and unpaid interest, the payment of any amount due on the notes (or the amount of shares of the index stock and/or any other property you will receive in lieu of such cash amount) is subject to the credit risk of Goldman Sachs. 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. In addition, any decline in our credit ratings or any increase in our credit spreads is likely to adversely affect the market value of the notes prior to maturity.
The Market Value of Your Notes May Be Influenced by Many Factors That Are Unpredictable and Interrelated in Complex Ways
When we refer to the market value of your notes, we mean the value that you could receive for your notes if you chose to sell them in the open market before the stated maturity date. A number of factors, many of which are beyond our control, will influence the market value of your notes, including:
· the market price of the index stock;
· the final index stock price;
· the volatility — i.e., the frequency and magnitude of changes — in the market price of the index stock;
· the dividend rate of the index stock;
· economic, financial, legislative regulatory and political, military or other events that affect the stock markets generally and the market segment of which the index stock is a part, and which may affect the level of the index stock;
· other interest rates and yield rates in the market;
· the time remaining until your notes mature; and
· our creditworthiness, whether actual or perceived, including actual or anticipated upgrades or downgrades in our credit ratings or changes in other credit measures.
These factors will influence the price you will receive if you sell your notes before maturity, including the price you may receive for your notes in any market-making transaction. If you sell your notes before maturity, you may receive less than the face amount of your notes.
You cannot predict the future price of the index stock based on its historical fluctuations. The actual price of the index stock over the life of the notes may bear little or no relation to the historical closing price of the index stock or to the hypothetical examples shown elsewhere in this prospectus supplement.
Even After Taking Account of Adjustments for Regular Cash Dividends and Certain Other Dividends and Distributions, the Return on Your Notes Will Not Reflect the Return You Would Realize If You Owned the Index Stock and Received Dividends on the Index Stock When they Were Paid
The reference amount will be adjusted for regular cash dividends and certain other dividends and distributions as described under “Specific Terms of Your Notes — Anti-dilution Adjustments — Regular Cash Dividends” and “Specific Terms of Your Notes — Anti-dilution Adjustments — Other Dividends and Distributions” below. Even after taking account of such adjustments, however, the return on your notes will not reflect the return you would realize if you actually owned the index stock and received the dividends paid on the index stock at the time they were paid. You will not receive any dividends that may be paid on the index stock by the index stock issuer. See “–You Have No Shareholder Rights or Rights to Receive the Index Stock” below for additional information.
The Market Value of the Shares that We May Deliver to You on the Stated Maturity Date Can, and Often Will, Fluctuate from the Market Value of Any Such Shares on the Determination Date, and Any Such Fluctuation Will Affect the Return on Your Notes
The market value of any shares that we may deliver to you on the stated maturity date can, and often will, fluctuate from the market value of such shares on the determination date. The longer the period of time between those two dates, the more the stock we deliver to you on the stated maturity date may be subject to price fluctuation. Any such fluctuation between the determination date and the stated maturity date will not change the number of shares that you may receive, if any, but will affect the return on your notes.
If the Market Price of the Index Stock Changes, the Market Value of Your Notes May Not Change in the Same Manner
Your notes may trade quite differently from the index stock. Changes in the market price of the index stock may not result in comparable changes in the market value of your notes. We discuss some of the reasons for this disparity under “—The Market Value of Your Notes May Be Influenced by Many Factors That Are Unpredictable and Interrelated in Complex Ways” above.
We Will Not Hold the Index Stock for Your Benefit
The indenture governing your notes does not contain any restriction on our ability or the ability of any of our affiliates to sell, pledge or otherwise convey all or any portion of the index stock acquired by us or them. Neither we nor our affiliates will pledge or otherwise hold shares of the index stock for your benefit in order to enable you to exchange your notes for shares under any circumstances. Consequently, in the event of our bankruptcy, insolvency or liquidation, any index stock owned by us will be subject to the claims of our creditors generally and will not be available for your benefit specifically.
You Have No Shareholder Rights or Rights to Receive the Index Stock
Investing in your notes will not make you a holder of the index stock. Neither you nor any other holder or owner of your notes will have any voting rights, any right to receive dividends or other distributions or any other rights with respect to the index stock. In addition, we may, at our sole option, elect to deliver on the stated maturity date a number of shares of the index stock in lieu of paying the cash settlement amount. However, you will have no right to receive any shares of the index stock in exchange for your notes on the stated maturity date unless we, at our sole option, elect to deliver shares and are able to do so on the stated maturity date. In addition, even if we elect to deliver shares of the index stock in lieu of cash, we may still pay cash in lieu of delivery of shares of the index stock if a market disruption event or certain dilution events, as described under “Specific Terms of Your Notes —Anti-dilution Adjustments” below, occur during the period between the determination date and the stated maturity date, and in lieu of delivery of any fractional share.
In Some Circumstances, the Payment You Receive on the Notes May Be Based on the Common Stock of Another Company and Not the Issuer of the Index Stock
Following certain corporate events relating to the index stock where its issuer is not the surviving entity, the amount you receive at maturity may be based on the common stock of a successor to the index stock issuer or any cash or any other assets distributed to holders of shares of the index stock in such corporate event. The occurrence of these corporate events and the consequent adjustments may materially and adversely affect the value of the notes. We describe the specific corporate events that can lead to these adjustments and the procedures for selecting distribution property (as described below) under “Specific Terms of Your Notes — Anti-dilution Adjustments”.
Other Investors in the Notes May Not Have the Same Interests as You
Other investors in the notes are not required to take into account the interests of any other investor in exercising remedies or voting or other rights in their capacity as securityholders or in
making requests or recommendations to Goldman Sachs as to the establishment of other transaction terms. The interests of other investors may, in some circumstances, be adverse to your interests. For example, certain investors may take short positions (directly or indirectly through derivative transactions) on assets that are the same or similar to your notes, the index stock or other similar securities, which may adversely impact the market for or value of your notes.
The Potential for the Value of Your Notes to Increase May Be Less Than Direct Investment in the Index Stock
Because of the formula we will use to determine the cash settlement amount, the amount you receive on the stated maturity date or the value of the shares on the determination date that we deliver, may result in a lower return on your notes than you would have received had you invested in the index stock directly.
Past Performance of the Index Stock Is No Guide to Future Performance of the Index Stock
The actual performance of the index stock, as well as the amount payable at maturity, may bear little or no relation to the historical closing prices of the index stock set forth below under “Index Stock Issuer — Quarterly High, Low and Closing Prices of the Index Stock” or to the hypothetical examples shown elsewhere in this prospectus supplement. You cannot predict the future prices of the index stock based on its historical fluctuations.
Goldman Sachs’ Anticipated Hedging Activities May Negatively Impact Investors in the Notes and Cause our Interests and Those of Our Clients and Counterparties to be Contrary to Those of Investors in the Notes
Goldman Sachs expects to hedge our obligations under the notes by purchasing futures and/or other instruments linked to the index stock. We also expect to adjust our hedge by, among other things, purchasing or selling any of the foregoing, and perhaps other instruments linked to the index stock, at any time and from time to time, and to unwind the hedge by selling any of the foregoing on or before the determination date for your notes. We may also enter into, adjust and unwind hedging transactions relating to other notes whose returns are linked to changes in the level of the index stock.
In addition to entering into such transactions itself, Goldman Sachs may structure such transactions for its clients or counterparties, or otherwise advise or assist clients or counterparties in entering into such transactions. These activities may be undertaken to achieve a variety of objectives, including: permitting other purchasers of the notes or other securities to hedge their investment in whole or in part; facilitating transactions for other clients or counterparties that may have business objectives or investment strategies that are inconsistent with or contrary to those of investors in the notes; hedging the exposure of Goldman Sachs to the notes including any interest in the notes that it reacquires or retains as part of the offering process, through its market-making activities or otherwise; enabling Goldman Sachs to comply with its internal risk limits or otherwise manage firmwide, business unit or product risk; and/or enabling Goldman Sachs to take directional views as to relevant markets on behalf of itself or its clients or counterparties that are inconsistent with or contrary to the views and objectives of the investors in the notes.
Any of these hedging or other activities may adversely affect the levels of the index stock — directly or indirectly by affecting the price of the index stock — and therefore the market value of your notes and the amount we will pay on your notes at maturity. In addition, you should expect that these transactions will cause Goldman Sachs or its clients or counterparties to have economic interests and incentives that do not align with, and that may be directly contrary to, those of an investor in the notes. Goldman Sachs will have no obligation to take, refrain from taking or cease taking any action with respect to these transactions based on the potential effect on an investor in the notes, and may receive substantial returns on hedging or other activities while the value of your notes declines.
Goldman Sachs’ Trading and Investment Activities for its Own Account or for its Clients, Could Negatively Impact Investors in the Notes
Goldman Sachs is a global investment banking, securities and investment management
firm that provides a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and high-net-worth individuals. As such, it acts as an investor, investment banker, research provider, investment manager, investment advisor, market maker, trader, prime broker and lender. In those and other capacities, Goldman Sachs purchases, sells or holds a broad array of investments, actively trades securities, derivatives, loans, commodities, currencies, credit default swaps, indices, baskets and other financial instruments and products for its own account or for the accounts of its customers, and will have other direct or indirect interests, in the global fixed income, currency, commodity, equity, bank loan and other markets. Any of Goldman Sachs’ financial market activities may, individually or in the aggregate, have an adverse effect on the market for your notes, and you should expect that the interests of Goldman Sachs or its clients or counterparties will at times be adverse to those of investors in the notes.
Goldman Sachs regularly offers a wide array of securities, financial instruments and other products into the marketplace, including existing or new products that are similar to your notes, or similar or linked to the index stock. Investors in the notes should expect that Goldman Sachs will offer securities, financial instruments, and other products that will compete with the notes for liquidity, research coverage or otherwise.
Goldman Sachs’ Market-Making Activities Could Negatively Impact Investors in the Notes
Goldman Sachs actively makes markets in and trades financial instruments for its own account and for the accounts of customers. These financial instruments include debt and equity securities, currencies, commodities, bank loans, indices, baskets and other products. Goldman Sachs’ activities include, among other things, executing large block trades and taking long and short positions directly and indirectly, through derivative instruments or otherwise. The securities and instruments in which Goldman Sachs takes positions, or expects to take positions, include securities and instruments of the index stock, securities and instruments similar to or linked to the foregoing or the currencies in which it is denominated. Market making is an activity where Goldman Sachs buys and sells on behalf of customers, or for its own account, to satisfy the expected demand of customers. By its nature, market making involves facilitating transactions among market participants that have differing views of securities and instruments. As a result, you should expect that Goldman Sachs will take positions that are inconsistent with, or adverse to, the investment objectives of investors in the notes.
If Goldman Sachs becomes a holder of any securities of the index stock in its capacity as a market-maker or otherwise, any actions that it takes in its capacity as securityholder, including voting or provision of consents, will not necessarily be aligned with, and may be inconsistent with, the interests of investors in the notes.
You Should Expect That Goldman Sachs Personnel Will Take Research Positions, or Otherwise Make Recommendations, Provide Investment Advice or Market Color or Encourage Trading Strategies That Might Negatively Impact Investors in the Notes
Goldman Sachs and its personnel, including its sales and trading, investment research and investment management personnel, regularly make investment recommendations, provide market color or trading ideas, or publish or express independent views in respect of a wide range of markets, issuers, securities and instruments. They regularly implement, or recommend to clients that they implement, various investment strategies relating to these markets, issuers, securities and instruments. These strategies include, for example, buying or selling credit protection against a default or other event involving an issuer or financial instrument. Any of these recommendations and views may be negative with respect to the index stock or other securities or instruments similar to or linked to the foregoing or result in trading strategies that have a negative impact on the market for any such securities or instruments, particularly in illiquid markets. In addition, you should expect that personnel in the trading and investing businesses of Goldman Sachs will have or develop independent views of the index stock, the relevant industry or other market trends, which may not be aligned with the views and objectives of investors in the notes.
Goldman Sachs Regularly Provides Services to, or Otherwise Has Business Relationships with, a Broad Client Base, Which May Include the Issuer of the Index Stock or Other Entities That Are Involved in the Transaction
Goldman Sachs regularly provides financial advisory, investment advisory and transactional services to a substantial and diversified client base, and you should assume that Goldman Sachs will, at present or in the future, provide such services or otherwise engage in transactions with, among others, the issuer of the index stock, or transact in securities or instruments or with parties that are directly or indirectly related to the foregoing. These services could include making loans to or equity investments in those companies, providing financial advisory or other investment banking services, or issuing research reports. You should expect that Goldman Sachs, in providing such services, engaging in such transactions, or acting for its own account, may take actions that have direct or indirect effects on the index stock and that such actions could be adverse to the interests of investors in the notes. In addition, in connection with these activities, certain Goldman Sachs personnel may have access to confidential material non-public information about these parties that would not be disclosed to Goldman Sachs employees that were not working on such transactions as Goldman Sachs has established internal information barriers that are designed to preserve the confidentiality of non-public information. Therefore, any such confidential material non-public information would not be shared with Goldman Sachs employees involved in structuring, selling or making markets in the notes or with investors in the notes.
In this offering, as well as in all other circumstances in which Goldman Sachs receives any fees or other compensation in any form relating to services provided to or transactions with any other party, no accounting, offset or payment in respect of the notes will be required or made; Goldman Sachs will be entitled to retain all such fees and other amounts, and no fees or other compensation payable by any party or indirectly by holders of the notes will be reduced by reason of receipt by Goldman Sachs of any such other fees or other amounts.
The Offering of the Notes May Reduce an Existing Exposure of Goldman Sachs or Facilitate a Transaction or Position That Serves the Objectives of Goldman Sachs or Other Parties
A completed offering may reduce Goldman Sachs’ existing exposure to the index stock, securities and instruments similar to or linked to the foregoing or the currencies in which they are denominated, including exposure gained through hedging transactions in anticipation of this offering. An offering of notes will effectively transfer a portion of Goldman Sachs’ exposure (and indirectly transfer the exposure of Goldman Sachs’ hedging or other counterparties) to investors in the notes.
The terms of the offering (including the selection of the index stock, and the establishment of other transaction terms) may have been selected in order to serve the investment or other objectives of Goldman Sachs or another client or counterparty of Goldman Sachs. In such a case, Goldman Sachs would typically receive the input of other parties that are involved in or otherwise have an interest in the offering, transactions hedged by the offering, or related transactions. The incentives of these other parties would normally differ from and in many cases be contrary to those of investors in the notes.
As Calculation Agent, Goldman, Sachs & Co. Will Have the Authority to Make Determinations that Could Affect the Market Value of Your Notes, When Your Notes Mature and the Amount You Receive at Maturity
As calculation agent for your notes, Goldman, Sachs & Co. will have discretion in making various determinations that affect your notes, including determining whether and how to make anti-dilution adjustments to the final index stock price; determining the closing price of the index stock on the determination date, which we will use to determine the amount of cash (or the amount of shares of the index stock and/or any other property you will receive in lieu of such cash amount) we must deliver on the stated maturity date; determining whether to postpone the determination date and the stated maturity date because of a market disruption event or a non-trading day; the stated maturity date; the default
amount on any amount payable on your notes. See “Specific Terms of Your Notes” below. The exercise of this discretion by Goldman, Sachs & Co. could adversely affect the value of your notes and may present Goldman, Sachs & Co. with a conflict of interest. We may change the calculation agent for your notes at any time without notice, and Goldman, Sachs & Co. may resign as calculation agent at any time upon 60 days’ written notice to Goldman Sachs.
There Is No Affiliation Between the Index Stock Issuer and Us, and We Are Not Responsible for Any Disclosure by the Index Stock Issuer
Goldman Sachs is not affiliated with the issuer of the index stock. As we have told you above, however, we or our affiliates may currently or from time to time in the future own securities of, or engage in business with the index stock issuer. Nevertheless, neither we nor any of our affiliates assumes any responsibility for the accuracy or the completeness of any information about the index stock issuer contained in this prospectus supplement or in any of the index stock issuer’s publicly available information. You, as an investor in your notes, should make your own investigation into the index stock issuer. See “The Index Stock Issuer” below for additional information about the index stock issuer.
The index stock issuer is not involved in this offering of your notes in any way and does not have any obligation of any sort with respect to your notes. Thus, the index stock issuer does not have any obligation to take your interests into consideration for any reason, including in taking any corporate actions that might affect the value of your notes.
Your Notes May Not Have an Active Trading Market
Your notes will not be listed or displayed on any securities exchange or included in any interdealer market quotation system, and there may be little or no secondary market for your notes. Even if a secondary market for your notes develops, we expect it will not provide significant liquidity and we expect that transaction costs in any secondary market would be high. As a result, the difference between bid and asked prices for your notes in any secondary market could be substantial.
You Have Limited Anti-dilution Protection
Goldman, Sachs & Co., as calculation agent for your notes, will adjust the final index stock price for stock splits, reverse stock splits, stock dividends, regular cash dividends, extraordinary dividends, reorganization events and other events that affect the index stock issuer’s capital structure, but only in the situations we describe in “Specific Terms of Your Notes — Anti-dilution Adjustments”. The calculation agent will not be required to make an adjustment for every corporate event that may affect the index stock. For example, the calculation agent will not adjust the final index stock price for events such as an offering of the index stock for cash by the index stock issuer, a tender or exchange offer for the index stock at a premium to its then-current market price by the index stock issuer or a tender or exchange offer for less than all outstanding shares of the index stock issuer by a third party. In addition, the calculation agent will determine in its sole discretion whether to make adjustments with respect to certain corporate or other events as described under “Specific Terms of Your Notes — Anti-dilution Adjustments — Reorganization Events” below. Those events or other actions by the index stock issuer or a third party may nevertheless adversely affect the market price of the index stock and, therefore, adversely affect the value of your notes.
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 prospectus supplement. The issue price of the notes in the subsequent sale may differ substantially (higher or lower) from the issue price you paid as provided on the cover of this prospectus supplement.
The Calculation Agent Can Postpone the Determination Date If a Market Disruption Event or a Non-Trading Day Occurs or is Continuing
If the calculation agent determines that, on the determination date, a market disruption event has occurred or is continuing with respect to such index stock or that day is not a trading day, the determination date will be postponed until the first following trading day on which no market disruption event occurs or is continuing, subject to limitations on postponement described under “Specific Terms of Your Notes—Payment of Principal on Stated Maturity Date—Determination Date” below. If the determination date is postponed to the last possible day and a market disruption event occurs or is continuing on such last possible day or such day is not a trading day, such date will nevertheless be the determination date. As a result of the foregoing, the stated maturity date for your notes may also be postponed as described under “—Payment of Principal on Stated Maturity Date – Stated Maturity Date” below. In such a case, you may not receive the cash payment or shares of the index stock, as applicable, or any accrued and unpaid interest that we are obligated to deliver on the stated maturity date until several days after the originally scheduled stated maturity date. Moreover, if the final index stock price is not available on the determination date, because of a market disruption event, a non-trading day or for any other reason (other than any dilution event), the calculation agent will determine the final index stock price as described under “—Consequences of a Market Disruption Event or a Non-Trading Day” below.
No Statutory, Judicial or Administrative Authority Directly Discusses the Tax Treatment of Your Notes, and Therefore the Tax Consequences of an Investment in Your Notes Are Uncertain
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. We intend to treat your notes as a short-term debt instrument that provides for a contingent payment upon maturity. We discuss these matters under “Supplemental Discussion of U.S. Federal Income Tax Consequences” below. Please also consult your own tax advisor concerning the U.S. federal income tax and any other applicable tax consequences to you of owning your notes in your particular circumstances.
Certain Considerations for Insurance Companies and Employee Benefit Plans
Any insurance company or fiduciary of a pension plan or other employee benefit plan that is subject to the prohibited transaction rules of the Employee Retirement Income Security Act of 1974, as amended, which we call “ERISA”, or the Internal Revenue Code of 1986, as amended, including an IRA or a Keogh plan (or a governmental plan to which similar prohibitions apply), and that is considering purchasing the offered notes with the assets of the insurance company or the assets of such a plan, should consult with its counsel regarding whether the purchase or holding of the offered notes could become a “prohibited transaction” under ERISA, the Internal Revenue Code or any substantially similar prohibition in light of the representations a purchaser or holder in any of the above categories is deemed to make by purchasing and holding the offered notes. This is discussed in more detail under “Employee Retirement Income Security Act” below.
Your Notes May Bear Interest at a Low Rate
Your notes may bear interest at a rate that is below the prevailing market rate for our debt securities that are not indexed to stock. Consequently, unless the value of the amount in cash payable or the shares of the index stock
(and the amount of other property, if any) deliverable, as applicable, on your notes on the stated maturity date sufficiently exceeds the amount you paid for the notes, the overall return you earn on your notes could be less than you would have earned by investing in non-indexed debt securities that bear interest at the prevailing market rate.
The Market Value of the Shares That We May Deliver to You on the Stated Maturity Date Can, and Often Will, Fluctuate from the Market Value of Any Such Shares on the Determination Date, and Any Such Fluctuation Will Affect the Return on Your Notes
The market value of any shares that we may deliver to you on the stated maturity date can, and often will, fluctuate from the market value of such shares on the determination date. The longer the period of time between those two dates, the more the stock we deliver to you on the stated maturity date may be subject to price fluctuation. Any such fluctuation between the determination date and the stated maturity date will not change the number of shares that you may receive, if any, but will affect the return on your notes.
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We refer to the notes we are offering by this prospectus supplement as the “offered notes” or the “notes”. Please note that in this prospectus supplement, references to “The Goldman Sachs Group, Inc.”, “we”, “our” and “us” mean only The Goldman Sachs Group, Inc. and do not include its consolidated subsidiaries. Also, references to the “accompanying prospectus” mean the accompanying prospectus, dated September 19, 2011, as supplemented by the accompanying prospectus supplement, dated September 19, 2011, in each case relating to the Medium-Term Notes, Series D, of The Goldman Sachs Group, Inc. Please note that in this section entitled “Specific Terms of Your Notes”, references to “holders” mean those who own notes registered in their own names, on the books that we or the trustee maintain for this purpose, and not those who own beneficial interests in notes registered in street name or in notes issued in book-entry form through The Depository Trust Company. Please review the special considerations that apply to owners of beneficial interests in the accompanying prospectus, under “Legal Ownership and Book-Entry Issuance”.
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The offered notes are part of a series of debt securities, entitled “Medium-Term Notes, Series D”, that we may issue under the indenture from time to time as described in the accompanying prospectus and accompanying prospectus supplement. The offered notes are also “indexed debt securities”, as defined in the accompanying prospectus.
This prospectus supplement summarizes specific financial and other terms that apply to the offered notes, including your notes; terms that apply generally to all Series D medium-term notes are described in “Description of Notes We May Offer” in the accompanying prospectus supplement. The terms described here supplement those described in the accompanying prospectus supplement and the accompanying prospectus and, if the terms described here are inconsistent with those described there, the terms described here are controlling.
In addition to those terms described on the first three pages of this prospectus supplement, the following terms will apply to your notes:
Specified Currency: Unless we elect to deliver shares of the index stock at maturity, all payments of principal and interest will be made in U.S. dollars (“$” or “USD”)
Form of Note: the offered notes will be issued only in global form through the Depositary Trust Company (“DTC”).
Denominations: each note registered in the name of a holder must have a face amount of $43.273 or any integral multiple in excess thereof.
Defeasance: neither full defeasance nor covenant defeasance will apply to your notes.
Other Terms:
· the default amount will be payable on any acceleration of the maturity of your notes as described under “— Special Calculation Provisions” below;
· anti-dilution provisions will apply to your notes as described under “— Anti-dilution Adjustments” below;
· a business day for your notes will not be the same as a business day for our other Series D medium-term notes, as described under “— Special Calculation Provisions” below.
Please note that the information about the settlement date or trade date, issue price, underwriting discount or commission and net proceeds to The Goldman Sachs Group, Inc. on the front cover page or elsewhere in this prospectus supplement relates only to the initial issuances and sale of the notes. We may decide to sell additional notes on one or more dates after the date of this prospectus supplement, at issue prices, underwriting discounts and net proceeds that differ from the amounts set forth on the front cover page or elsewhere in this prospectus supplement. If you have purchased your notes in a market making transaction after either of the initial issuances and sales of the offered notes, any such relevant
information about the sale to you will be provided in a separate confirmation of sale.
We describe the terms of your notes in more detail below.
Index Stock and Index Stock Issuer
In this prospectus supplement, when we refer to the index stock, we mean the common stock of NetApp, Inc., and when we refer to the index stock issuer, we mean NetApp, Inc., except as described under “—Anti-dilution Adjustments — Reorganization Events” and “— Anti-dilution Adjustments — Distribution Property” below.
Payment of Principal on Stated Maturity Date
On the stated maturity date, we will exchange each of your notes for an amount in cash equal to the cash settlement amount, calculated as described below based on the final index stock price and subject to anti-dilution adjustments. Alternatively, at our sole option, we may instead deliver a number of shares of the index stock (and each type of distribution property, if any, as described under “— Anti-dilution Adjustments — Adjustments for Reorganization Events” below). If we choose to deliver shares of the index stock, we will notify the holder of our election at least one business day before the determination date; if we choose to deliver shares of the index stock, we will deliver shares of the index stock (and any distribution property, if applicable), except in the limited circumstances described under “— Antidilution Adjustments” and “— Consequences of a Market Disruption Event or a Non-Trading Day” below.
In the event we elect to deliver shares of the index stock, and if no property other than the index stock is to be delivered, the number of shares of the index stock that we will deliver in exchange for each of your notes, if any, will equal the quotient of the cash settlement amount divided by the closing price of one share of the index stock on the determination date.
On the other hand, if we elect to deliver shares of the index stock, and if your notes would be exchangeable in whole or in part for property other than the index stock because of a reorganization event, the calculation agent will determine the amount of each type of distribution property (which may include shares of the index stock) that we will deliver for each of your notes in the manner described under “— Anti-Dilution Adjustments — Adjustments for Reorganization Events” below. In addition, if we choose at our sole option to deliver shares of the index stock and such delivery would otherwise involve a fractional share of the index stock, we will pay cash instead of the fractional share, in an amount equal to that fraction multiplied by the closing price of the index stock on the determination date. If we elect to deliver shares of the index stock and other distribution property, if any, the calculation agent may, in its sole discretion, adjust the number of shares of the index stock or any other distribution property to be delivered to reflect a dilution or reorganization event that occurs after the determination date but prior to the stated maturity date.
The cash we must pay in exchange for your notes on the stated maturity date, if any, represents the principal amount of your notes, unless we elect to deliver shares of the index stock. In that case, the shares of the index stock, together with any cash payable for a fractional share and each type of distribution property, if any, after giving effect to any anti-dilution adjustments, which we must deliver on the stated maturity date in exchange for your notes, if any, represent the principal amount of your notes.
The cash you receive in exchange for your notes on the stated maturity date may be less than 100% of the face amount of your notes. We describe this risk under “Additional Risk Factors Specific to Your Notes — You May Lose a Substantial Portion of Your Investment If the Final Index Stock Price is Less than the Lower Strike Price” above.
Cash Settlement Amount
The cash settlement amount for each $43.273 face amount of your notes will equal an amount in cash calculated as follows:
· if the final index stock price is greater than or equal to the upper strike price, an amount in cash equal to the sum of (i) the product of the (x) upside exchange ratio times (y) the
result of the final index stock price minus the upper strike price plus (ii) the $43.273 face amount;
· if the final index stock price is greater than or equal to the lower strike price and less than the upper strike price, the $43.273 face amount;
· if the final index stock price is greater than the protection strike price and less than the lower strike price, an amount in cash equal to the product of the (x) downside exchange ratio times the (y) quotient of the final index stock price divided by the initial index stock price times (z) the $43.273 face amount; or
· if the final index stock price is less than or equal to the protection strike price, an amount in cash equal to the product of the (x) downside exchange ratio times the (y) quotient of the protection strike price divided by the initial index stock price times (z) the $43.273 face amount.
The face amount of each note equals the initial index stock price of $43.273. The protection strike price is $36.782, which is approximately 85% of the initial index stock price. The lower strike price is $48.574, which is approximately 112.25% of the initial index stock price. The upper strike price is $50.370, which is approximately 116.40% of the initial index stock price. The downside exchange ratio is 1/1.1225, or approximately 0.8909, i.e., for each 1% decline in the index stock price below the lower strike price until and including the protection strike price, you will lose approximately 0.8909% of the value of your note, and the upside exchange ratio is 0.65, i.e., your participation in each 1% increase in the index stock price above the upper strike price will be limited to a 0.65% increase in the value of your note.
The final index stock price will be the closing price of one share of the index stock on the determination date. The final index stock price may be adjusted, with respect to both the amount and type of consideration, as a result of dilution events, as we describe under “— Anti-dilution Adjustments” below. In addition, if a market disruption event or non-trading day occurs or is continuing on the last possible determination date, as described under “— Determination Date” below, the calculation agent will determine the final index stock price with respect to the index stock on the determination date in its sole discretion.
The cash we must pay in exchange for your notes on the stated maturity date represents the principal amount of your notes, unless we elect to deliver shares of the stock. In that event, the shares of the stock, together with any cash payable for fractional shares and after giving effect to any antidilution adjustments that we must deliver on the stated maturity date in exchange for your note represent the principal amount of your note.
Stated Maturity Date
The stated maturity date is March 14, 2013 unless that day is not a business day, in which case the stated maturity date will be the next following business day. If the determination date is postponed as described under “— Determination Date” below, the stated maturity date will be postponed by the same number of business day(s) from but excluding the originally scheduled determination date to and including the actual determination date.
Determination Date
The determination date is March 11, 2013 unless the calculation agent determines that a market disruption event occurs or is continuing on that day or that day is not otherwise a trading day. In that event, the determination date will be the first following trading day on which the calculation agent determines that a market disruption event does not occur and is not continuing. In no event, however, will the determination date be postponed to a date later than the originally scheduled stated maturity date or, if the originally scheduled stated maturity date is not a business day, later than the first business day after the originally scheduled stated maturity date. If the determination date is postponed to the last possible day, but a market disruption event occurs or is continuing on that day or that day is not a trading day, that day will nevertheless be the determination date.
Consequences of a Market Disruption Event or a Non-Trading Day
If a market disruption event occurs or is continuing on a day that would otherwise be the determination date or such day is not a trading day, then the determination date will be postponed as described under “— Determination Date” above.
If the calculation agent determines that the closing price of the index stock that must be used to determine the cash settlement amount is not available on the determination date because of a market disruption event, a non-trading day or for any other reason, the calculation agent will nevertheless determine the final index stock price based on its assessment, made in its sole discretion, of the price of the index stock on that day.
In addition, if a market disruption event occurs or is continuing on the determination date or on any later day through and including the stated maturity date, or if for any other reason we are unable to deliver shares of the index stock, we may choose to pay cash instead of delivering shares of the index stock on the stated maturity date, even if we have notified the holder of our election to deliver shares of the index stock as described under “— Payment of Principal on Stated Maturity Date” above.
Interest Payments
Interest will accrue on the outstanding face amount of your notes and will be calculated and paid as described in the accompanying prospectus and accompanying prospectus supplement with regard to fixed rate notes, except that the interest payment and regular record dates will be those specified in this prospectus supplement.
Interest on the original notes will accrue from March 22, 2012 and interest will be paid on the offered notes on the 14th of each month (commencing on April 14, 2012) to and including the stated maturity date (March 14, 2013, subject to adjustment as described under “— Consequences of a Market Disruption Event or a Non-Trading Day” above).
If the stated maturity date does not occur on March 14, 2013, however, the interest payment date scheduled for March 14, 2013 will instead occur on the stated maturity date. Even if the interest payment rate is postponed to a date later than March 14, 2013, however, interest on your notes will accrue only up to and excluding March 14, 2013.
Anti-dilution Adjustments
The calculation agent will adjust the final index stock price as described below, but only if an event described under one of the seven subsections beginning with “— Stock Splits” below occurs with regard to that index stock and only if the relevant event occurs during the period described under the applicable subsection. However, if we elect to deliver shares of the index stock and other distribution property, if any, the calculation agent may, in its sole discretion, adjust the number of shares of the index stock or any other distribution property to be delivered to reflect a dilution or reorganization event that occurs after the determination date but prior to the stated maturity date.
The adjustments described below do not cover all events that could affect the final index stock price, such as an issuer tender or exchange offer for the index stock at a premium to its market price or a tender or exchange offer made by a third party for less than all outstanding shares of the index stock. We describe the risks relating to dilution under “Additional Risk Factors Specific to Your Notes — You Will Have Limited Anti-dilution Protection” above.
How Adjustments Will Be Made
In this prospectus supplement, we refer to antidilution adjustment of the final index stock price. If an event requiring anti-dilution adjustment occurs, the calculation agent will make the adjustment by taking the following steps:
· Step One. The calculation agent will adjust the reference amount. This term refers to the amount of the index stock or other property for which the final index stock price is to be determined on the determination date. For example, if no adjustment is required, the reference amount will be one share of the index stock. In that case, the final index stock price will be the closing price of one share of the index stock on the determination date. We describe how the closing price will be determined under “— Special Calculation Provisions” below.
If an adjustment is required because one of the dilution events described in the first six subsections below — these involve stock splits, reverse stock splits, stock dividends, regular cash dividends, other dividends and distributions and issuances of transferable
rights and warrants — occurs, then the adjusted reference amount may be, for example, two shares of the index stock or one half share of the index stock, depending on the event. In that example, the final index stock price would be the closing price, on the determination date, of two shares of the index stock or a half share of the index stock, as applicable.
If an adjustment is required because one of the reorganization events described under “— Reorganization Events” below — these involve events in which cash, securities or other property is distributed in respect of the index stock — occurs, then the reference amount will be adjusted to be as follows, assuming there has been no prior anti-dilution adjustment: the amount of each type of property distributed in the reorganization event in respect of one share of the index stock, plus one share of the index stock if the index stock remains outstanding. In that event, the final index stock price will be the value, on the determination date, of the adjusted reference amount.
The manner in which the calculation agent adjusts the reference amount in step one will depend on the type of dilution event requiring adjustment. These events and the nature of the required adjustments are described in the seven subsections that follow.
· Step Two. Having adjusted the reference amount in step one, the calculation agent will determine the final index stock price, which will be the closing price of one share of the index stock multiplied by the adjusted reference amount on the determination date.
· However, if the reference amount was adjusted due to the occurrence of a reorganization event such that the reference amount is now made up of distribution property, the final index stock price will be the total value of such distribution property (as further adjusted due to any subsequent dilution events) on the determination date as determined by the calculation agent in the manner described under “— Adjustments for Reorganization Events” below.
· Step Three. Having determined the final index stock price in step two, the calculation agent will use this price to calculate the cash settlement amount.
· Step Four. If we elect to deliver shares of the index stock to the holder on the stated maturity date, the calculation agent will determine the amount and type of each property we will deliver, if any, in lieu of cash in the following manner.
If the adjusted reference amount at the close of trading hours for the index stock on the determination date consists entirely of shares of the index stock, we will deliver, for each note, a number of shares equal to the cash settlement amount divided by the closing price of one share of the index stock on the determination date, rather than by the final index stock price.
On the other hand, if the adjusted reference amount at the close of trading hours for the index stock on the determination date includes any property other than shares of the index stock, then the calculation agent will determine the amount of each type of distribution property that we will deliver for your notes in the manner described under “— Adjustments for Reorganization Events” below.
If more than one event requiring adjustment of the final index stock price occurs, the calculation agent will first adjust the reference amount as described in step one above for each event, sequentially, in the order in which the events occur, and on a cumulative basis. Thus, having adjusted the reference amount for the first event, the calculation agent will repeat step one for the second event, applying the required adjustment to the reference amount as already adjusted for the first event, and so on for each subsequent event. Having adjusted the reference amount for all events, the calculation agent will then take the remaining applicable steps in the process described above, determining the final index stock price using the reference amount as sequentially and cumulatively adjusted for all the relevant events. The calculation agent will make all required determinations and adjustments no later than the determination date.
The calculation agent will adjust the reference amount for each reorganization event described under “— Reorganization Events”
below. For any other dilution event described below, however, the calculation agent will not be required to adjust the reference amount unless the adjustment of the reference amount would result in a change of at least 0.1% in the final index stock price that would apply without the adjustment. The final index stock price resulting from any adjustment of the reference amount will be rounded up or down, as appropriate, to the nearest ten-thousandth, with five hundred-thousandths being rounded upward — e.g., 0.12344 will be rounded down to 0.1234 and 0.12345 will be rounded up to 0.1235.
If an event requiring anti-dilution adjustment occurs, the calculation agent will make the adjustment with a view to offsetting, to the extent practical, any change in the economic position of the holder and The Goldman Sachs Group, Inc., relative to your notes, that results solely from that event. The calculation agent may, in its sole discretion, modify the anti-dilution adjustments as necessary to ensure an equitable result. The calculation agent will make all determinations with respect to anti-dilution adjustments, including any determination as to whether an event requiring adjustment has occurred, as to the nature of the adjustment required and how it will be made or as to the value of any property distributed in a reorganization event, and will do so in its sole discretion. In the absence of manifest error, those determinations will be conclusive for all purposes and will be binding on you and us, without any liability on the part of the calculation agent. The calculation agent will provide information about the adjustments it makes upon written request by the holder.
In this prospectus supplement, when we say that the calculation agent will adjust the reference amount for one or more dilution events, we mean that the calculation agent will take all the applicable steps described above with respect to those events.
The following seven subsections describe the dilution events for which the reference amount is to be adjusted. Each subsection describes the manner in which the calculation agent will adjust the reference amount — the first step in the adjustment process described above — for the relevant event.
Stock Splits
A stock split is an increase in the number of a corporation’s outstanding shares of stock without any change in its stockholders’ equity. Each outstanding share will be worth less as a result of a stock split.
If the index stock is subject to a stock split, then the calculation agent will adjust the reference amount to equal the sum of the prior reference amount — i.e., the reference amount before that adjustment — plus the product of (1) the number of additional shares issued in the stock split with respect to one share of the index stock times (2) the prior reference amount. The reference amount — and thus the final index stock price — will not be adjusted, however, unless the first day on which the index stock trades without the right to receive the stock split occurs after the trade date and on or before the determination date.
Reverse Stock Splits
A reverse stock split is a decrease in the number of a corporation’s outstanding shares of stock without any change in its stockholders’ equity. Each outstanding share will be worth more as a result of a reverse stock split.
If the index stock is subject to a reverse stock split, then once the reverse stock split becomes effective, the calculation agent will adjust the reference amount to equal the product of the prior reference amount times the quotient of (1) the number of shares of the index stock outstanding immediately after the reverse stock split becomes effective divided by (2) the number of shares of the index stock outstanding immediately before the reverse stock split becomes effective. The reference amount — and thus the final index stock price — will not be adjusted, however, unless the reverse stock split becomes effective after the trade and on or before the determination date.
Stock Dividends
In a stock dividend, a corporation issues additional shares of its stock to all holders of its outstanding shares of its stock in proportion to the shares they own. Each outstanding share will be worth less as a result of a stock dividend.
If the index stock is subject to a stock dividend, then the calculation agent will adjust
the reference amount to equal the sum of the prior reference amount plus the product of (1) the number of additional shares issued in the stock dividend with respect to one share of the index stock times (2) the prior reference amount. The reference amount — and thus the final index stock price — will not be adjusted, however, unless the ex-dividend date occurs after the trade date and on or before the determination date.
The ex-dividend date for any dividend or other distribution is the first day on which the index stock trades without the right to receive that dividend or other distribution.
Regular Cash Dividends
We will adjust the reference amount for increased regular cash dividends after the date of this prospectus supplement, as described below. The regular cash dividend period for your notes refers to the frequency of anti-dilution adjustments on account of regular cash dividends during the term of your notes. The regular cash dividend period for your notes is a calendar quarter. A regular dividend that is paid in cash with respect to the index stock in a particular regular cash dividend period (according to such index stock issuer’s fiscal year) will be deemed to be an increased regular dividend if its per share value exceeds the dividend base amount for such index stock, which is $0.00. A regular cash dividend will be deemed to be made on the ex-dividend date for such dividend.
A dividend with respect to the index stock will be deemed to be a regular cash dividend if it is any cash dividend paid on the stock during a regular cash dividend period that is neither an extraordinary dividend as defined under “— Other Dividends and Distributions” below nor the result of any other event described in this subsection entitled “— Anti-dilution Adjustments”. A distribution on the index stock that is both an extraordinary dividend as defined below and also an increased regular dividend will result in an adjustment to the reference amount only as described under “— Other Dividends and Distributions” below.
The calculation agent will adjust the reference amount for your notes upward in the event of an increased regular dividend. The reference amount will not be adjusted on account of any regular dividend, however, unless the relevant ex-dividend date occurs after the trade date and on or before the determination date.
If an increased regular dividend occurs in respect of a regular cash dividend period, the calculation agent will adjust the reference amount to equal the product of (1) the prior reference amount (as adjusted as a result of any previous increased regular dividends or any other events described in this subsection entitled “— Anti-dilution Adjustments”) times (2) a fraction, the numerator of which is the closing price of the index stock on the trading day immediately before the ex-dividend date and the denominator of which is the difference of that closing price minus the increased dividend amount (as defined below). The reference amount — and thus the final index stock price — will not be adjusted, however, unless the ex-dividend date occurs after the trade date and on or before the determination date.
The increased dividend amount for any regular cash dividend period equals the per share amount of the regular dividend minus the applicable dividend base amount for that regular cash dividend period.
The calculation agent will adjust the dividend base amount to reflect other adjustments to the reference amount as a result of any other event described in this subsection entitled “— Anti-dilution Adjustments”. For example, if the index stock is subject to a 1-for-2 reverse stock split, then the calculation agent will double the dividend base amount, and if the index stock is subject to a 2-for-1 stock split, then the calculation agent will reduce the dividend base amount by half. In addition, the calculation agent may adjust the dividend base amount and/or the regular cash dividend period for your notes in connection with increased regular dividends as it deems necessary to obtain an equitable result in case the index stock issuer changes the frequency of dividend payments. For example, if the regular cash dividend period for your notes was a quarter but the index stock issuer declares regular dividends on a semi-annual basis in the future, the calculation agent will (1) adjust the regular cash dividend period to half a year for any period in which the dividend frequency is so changed, and (2) use the sum of the two dividend base amounts relating to that semi-annual period as the new dividend base
amount, subject to any further adjustments by the calculation agent.
A distribution on the index stock that is both an extraordinary dividend as defined below and also an increased regular dividend will result in an adjustment to the reference amount only as described under “— Other Dividends and Distributions” below.
The calculation agent will make all determinations with respect to adjustments, including whether an increased regular dividend has been paid in respect of any regular cash dividend period and, if so, the nature and amount of any reference amount adjustment that may be made in respect of that dividend, and will do so in its sole discretion.
Other Dividends and Distributions
The reference amount will not be adjusted to reflect dividends or other distributions paid with respect to the index stock, other than:
· stock dividends described above,
· regular cash dividends described above,
· issuances of transferable rights and warrants as described under “— Transferable Rights and Warrants” below,
· distributions that are spin-off events described under “— Reorganization Events” below, and‚ extraordinary dividends described below.
A dividend or other distribution with respect to the index stock will be deemed to be an extraordinary dividend if its per share value exceeds that of the immediately preceding non-extraordinary dividend, if any, for the index stock by an amount equal to at least 10% of the closing price of the index stock on the first trading day before the ex-dividend date.
If an extraordinary dividend occurs with respect to the index stock, the calculation agent will adjust the reference amount to equal the product of (1) the prior reference amount times (2) a fraction, the numerator of which is the closing price of the index stock on the trading day before the ex-dividend date and the denominator of which is the amount by which that closing price exceeds the extraordinary dividend amount. The reference amount — and thus the final index stock price — will not be adjusted, however, unless the ex-dividend date occurs after the trade date and on or before the determination date.
The extraordinary dividend amount with respect to an extraordinary dividend for the index stock equals:
· for an extraordinary dividend that is paid in lieu of a regular quarterly dividend, the amount of the extraordinary dividend per share of the index stock minus the amount per share of the immediately preceding dividend, if any, that was not an extraordinary dividend for the index stock, or
· for an extraordinary dividend that is not paid in lieu of a regular quarterly dividend, the amount per share of the extraordinary dividend.
To the extent an extraordinary dividend is not paid in cash, the value of the non-cash component will be determined by the calculation agent. A distribution on the index stock that is a stock dividend, an issuance of transferable rights or warrants or a spin-off event and also an extraordinary dividend will result in an adjustment to the final index stock price only as described under “— Stock Dividends” above, “— Transferable Rights and Warrants” below or “— Reorganization Events” below, as the case may be, and not as described here.
Transferable Rights and Warrants
If the index stock issuer issues transferable rights or warrants to all holders of the index stock to subscribe for or purchase the index stock at an exercise price per share that is less than the closing price of the index stock on the trading day immediately preceding the ex-dividend date for the issuance, then the reference amount will be adjusted by multiplying the prior reference amount by the following fraction:
· the numerator will be the number of shares of the index stock outstanding at the close of business on the day immediately preceding that ex-dividend date plus the number of additional shares of the index stock offered for subscription or purchase under those transferable rights or warrants, and
· the denominator will be the number of shares of the index stock outstanding at the close of business on the day immediately preceding that ex-dividend date plus the number of additional shares of the index stock that the aggregate offering price of the total number of shares of the index stock so offered for subscription or purchase would purchase at the closing price of the index stock on the trading day immediately before that ex-dividend date, with that number of additional shares being determined by multiplying the total number of shares so offered by the exercise price of those transferable rights or warrants and dividing the resulting product by the closing price on the trading day immediately before that ex-dividend date.
The reference amount — and thus the final index stock price — will not be adjusted, however, unless the ex-dividend date described above occurs after the trade date and on or before the determination date.
Reorganization Events
Each of the following is a reorganization event:
· the index stock is reclassified or changed,
· the index stock issuer has been subject to a merger, consolidation, amalgamation, binding share exchange or other business combination and either is not the surviving entity or is the surviving entity but all of the outstanding shares of the index stock are reclassified or changed,
· the index stock has been subject to a takeover offer, tender offer, exchange offer, solicitation proposal or other event by another entity or person to purchase or otherwise obtain all of the outstanding shares of the index stock such that all of the outstanding shares of the index stock (other than shares of the index stock owned or controlled by such other entity or person) are transferred, or irrevocably committed to be transferred, to another entity or person,
· the index stock issuer or any subsidiary of the index stock issuer has been subject to a merger, consolidation, amalgamation or binding share exchange in which the index stock issuer is the surviving entity and all the outstanding index stock (other than shares of the index stock owned or controlled by such other entity or person) immediately prior to such event collectively represent less than 50% of the outstanding shares of the index stock immediately following such event,
· the index stock issuer sells or otherwise transfers its property and assets as an entirety or substantially as an entirety to another entity,
· the index stock issuer effects a spin-off — that is, issues to all holders of the index stock equity securities of another issuer, other than as part of an event described in the five bullet points above,
· the index stock issuer is liquidated, dissolved or wound up or is subject to a proceeding under any applicable bankruptcy, insolvency or other similar law, or
· any other corporate or similar events that affect or could potentially affect market prices of, or shareholders’ rights in, the index stock or distribution property, which will be substantiated by an official characterization by either the Options Clearing Corporation with respect to options contracts on the index stock or by the primary securities exchange on which the index stock or listed options on the index stock are traded, and will ultimately be determined by the calculation agent in its sole discretion.
Adjustments for Reorganization Events
If a reorganization event occurs, then the calculation agent will adjust the reference amount so that it consists of the amount of each type of distribution property distributed in respect of one share of the index stock — or in respect of whatever the prior reference amount may be — in the reorganization event as of the determination date. We define the term “distribution property” below. For purposes of the four step adjustment process described under “— How Adjustments Will Be Made” above, the distribution property so distributed will be deemed to be the reference amount adjusted as described in step one, the value of
the adjusted reference amount on the determination date will be deemed to be the final index stock price described in step two and the calculation agent will determine the cash settlement amount based on the final index stock price as described in step three. If a reorganization event occurs and we elect to deliver shares of the stock, for purposes of step four, the calculation agent will then determine, in its sole discretion, the amount of each type of distribution property to be delivered on the stated maturity date by first (i) dividing the cash settlement amount by the total value of the adjusted reference amount at the close of trading hours for the stock on the determination date, and then (ii) multiplying the number calculated from (i) above by the amount of each type of distribution property included in the adjusted reference amount on the determination date. We may elect, at our discretion, to substitute any one or more types of distribution property with a cash payment of equivalent value. As described under “— How Adjustments Will Be Made” above, the calculation agent may, in its sole discretion, modify the adjustments described in this paragraph as necessary to ensure an equitable result.
The calculation agent will determine the value of each type of distribution property, in its sole discretion. For any distribution property consisting of a listed security, the calculation agent will use the closing price for the security on the determination date. The calculation agent may value, on the determination date, other types of property in any manner it determines, in its sole discretion, to be appropriate.
If a holder of the index stock may elect to receive different types or combinations of types of distribution property in the reorganization event, the distribution property will consist of the types and amounts of each type distributed to a holder that makes no election, as determined by the calculation agent in its sole discretion.
We may elect, at our discretion, to substitute any one or more types of distribution property with a cash payment of equivalent value. As described under “— How Adjustments Will Be Made” above, the calculation agent may, in its sole discretion, modify the adjustments described in this paragraph as necessary to ensure an equitable result.
If a reorganization event occurs and the calculation agent adjusts the reference amount to consist of the distribution property distributed in the reorganization event, as described above, the calculation agent will make any further anti-dilution adjustments for later events that affect the distribution property, or any component of the distribution property, comprising the new reference amount. The calculation agent will do so to the same extent that it would make adjustments if the index stock were outstanding and were affected by the same kinds of events. If a subsequent reorganization event affects only a particular component of the reference amount, the required adjustment will be made with respect to that component, as if it alone were the reference amount.
For example, if the index stock issuer merges into another company and each share of the index stock is converted into the right to receive two common shares of the surviving company and a specified amount of cash, the reference amount will be adjusted to consist of two common shares of the surviving company and the specified amount of cash for each share of the index stock (adjusted proportionately for any partial share) comprising the reference amount before the adjustment. The calculation agent will adjust the common share component of the adjusted reference amount to reflect any later stock split or other event, including any later reorganization event, that affects the common shares of the surviving company, to the extent described in this subsection entitled “— Anti-dilution Adjustments” as if the common shares of the surviving company were the index stock. In that event, the cash component will not be adjusted but will continue to be a component of the reference amount. Consequently, each component included in the reference amount will be adjusted on a sequential and cumulative basis for all relevant events requiring adjustment up to the relevant date.
The calculation agent will not make any adjustment for a reorganization event, however, unless the event becomes effective (or, if the event is a spin-off, unless the ex-dividend date for the spin-off occurs) after the trade date and on or before the determination date.
Distribution Property. When we refer to distribution property, we mean the cash, securities and other property or assets distributed in a reorganization event in respect of
one outstanding share of the index stock — or in respect of whatever the applicable reference amount may then be if any anti-dilution adjustment has been made in respect of a prior event. In the case of a spin-off or any other reorganization event after which the index stock remains outstanding, the distribution property also includes one share of the index stock — or other applicable reference amount — in respect of which the distribution is made.
If a reorganization event occurs, the distribution property distributed in the event will be substituted for the index stock as described above. Consequently, when we refer to the index stock, we mean any distribution property that is distributed in a reorganization event and comprises the adjusted reference amount. Similarly, when we refer to the index stock issuer, we mean any successor entity in a reorganization event.
Default Amount on Acceleration
If an event of default occurs and the maturity of your notes is accelerated, we will pay the default amount in respect of the principal of your notes at the maturity, instead of the amount payable on the stated maturity date as described earlier. We describe the default amount under “— Special Calculation Provisions” below.
For the purpose of determining whether the holders of our Series D medium-term notes, which include the offered notes, are entitled to take any action under the indenture, we will treat the outstanding face amount of each offered note as the outstanding principal amount of that note. Although the terms of the offered notes differ from those of the other Series D medium-term notes, holders of specified percentages in principal amount of all Series D medium-term notes, together in some cases with other series of our debt securities, will be able to take action affecting all the Series D medium-term notes, including the offered notes. This action may involve changing some of the terms that apply to the Series D medium-term notes, accelerating the maturity of the Series D medium-term notes after a default or waiving some of our obligations under the indenture. We discuss these matters in the accompanying prospectus under “Description of Debt Securities We May Offer — Default, Remedies and Waiver of Default” and “— Modification of the Debt Indentures and Waiver of Covenants”.
Manner of Payment or Delivery
Any payment or delivery on your notes at maturity will be made to an account designated by the holder of your notes and approved by us, or at the office of the trustee in New York City, but only when your notes are surrendered to the trustee at that office. We also may make any payment or delivery in accordance with the applicable procedures of the depositary. We may make any delivery of index stock or of distribution property ourselves or cause our agent to do so on our behalf. If delivery of shares of the index stock would otherwise involve a fractional share, we will pay cash instead of the fractional share, in an amount equal to that fraction multiplied by the closing price of one share of the index stock on the determination date.
Business Day Convention
The “following unadjusted business day” convention applies to this note. As described in the accompanying prospectus supplement, when a following unadjusted business day convention is applied, any payment (or share delivery) on your note that would otherwise be due on a day that is not a business day may instead be paid (or delivered) on the next day that is a business day, with the same effect as if paid (or delivered) on the original due date. For your note, the term business day is defined under “— Special Calculation Provisions” below.
Role of Calculation Agent
The calculation agent will make all determinations regarding the final index stock price, anti-dilution adjustments, market disruption events, the default amount, business days, trading days, the determination date, the stated maturity date, the cash settlement amount, the default amount and the amount payable on your notes. Absent manifest error, all determinations of the calculation agent will be final and binding on you and us, without any liability on the part of the calculation agent.
Please note that the firm named as the calculation agent in this prospectus supplement is the firm serving in that role as of the original issue date of your notes. We may change the calculation agent after the original issue date without notice and Goldman, Sachs & Co. may
resign as calculation agent at any time upon 60 days’ written notice to Goldman Sachs.
Special Calculation Provisions
Business Day
When we refer to a business day with respect to your notes, we mean a day that is a New York business day as described under “Description of Debt Securities We May Offer — Payment Mechanics for Debt Securities — Business Days” on page 28 in the accompanying prospectus.
Trading Day
When we refer to a trading day with respect to your notes, we mean a day on which the principal securities market for the index stock is open for trading.
Closing Price
The closing price for any security on any day will equal the official closing sale price or last reported official sale price, regular way, for the security, on a per-share or other unit basis:
· on the principal national securities exchange on which that security is listed for trading on that day, or
· if that security is not listed on any national securities exchange on that day, on any other U.S. national market system that is the primary market for the trading of that security.
If that security is not listed or traded as described above, then the closing price for that security on any day will be the average, as determined by the calculation agent, of the bid prices for the security obtained from as many dealers in that security selected by the calculation agent as will make those bid prices available to the calculation agent. The number of dealers need not exceed three and may include the calculation agent or any of its or our affiliates.
Default Amount
The default amount for your notes on any day (except as provided in the last sentence under “—Default Quotation Period” below) will be an amount, in the specified currency for the principal of your notes, equal to the cost of having a qualified financial institution, of the kind and selected as described below, expressly assume all our payment and other obligations with respect to your notes as of that day and as if no default or acceleration had occurred, or to undertake other obligations providing substantially equivalent economic value to you with respect to your notes. That cost will equal:
· the lowest amount that a qualified financial institution would charge to effect this assumption or undertaking, plus
· the reasonable expenses, including reasonable attorneys’ fees, incurred by the holder of your notes in preparing any documentation necessary for this assumption or undertaking.
During the default quotation period for your notes, which we describe below, the holder and/or we may request a qualified financial institution to provide a quotation of the amount it would charge to effect this assumption or undertaking. If either party obtains a quotation, it must notify the other party in writing of the quotation. The amount referred to in the first bullet point above will equal the lowest — or, if there is only one, the only — quotation obtained, and as to which notice is so given, during the default quotation period. With respect to any quotation, however, the party not obtaining the quotation may object, on reasonable and significant grounds, to the assumption or undertaking by the qualified financial institution providing the quotation and notify the other party in writing of those grounds within two business days after the last day of the default quotation period, in which case that quotation will be disregarded in determining the default amount.
Default Quotation Period. The default quotation period is the period beginning on the day the default amount first becomes due and ending on the third business day after that day, unless:
· no quotation of the kind referred to above is obtained, or
· every quotation of that kind obtained is objected to within five business days after the due day as described above.
If either of these two events occurs, the default quotation period will continue until the
third business day after the first business day on which prompt notice of a quotation is given as described above. If that quotation is objected to as described above within five business days after that first business day, however, the default quotation period will continue as described in the prior sentence and this sentence.
In any event, if the default quotation period and the subsequent two-business-day objection period have not ended before the determination date, then the default amount will equal the principal amount of your notes.
Qualified Financial Institutions. For the purpose of determining the default amount at any time, a qualified financial institution must be a financial institution organized under the laws of any jurisdiction in the United States of America, Europe or Japan, which at that time has outstanding debt obligations with a stated maturity of one year or less from the date of issue and that is, or whose securities are, rated either:
· A-1 or higher by Standard & Poor’s Ratings Services or any successor, or any other comparable rating then used by that rating agency, or
· P-1 or higher by Moody’s Investors Service, Inc. or any successor, or any other comparable rating then used by that rating agency.
Market Disruption Event
With respect to any given trading day, any of the following will be a market disruption event:
· a suspension, absence or material limitation of trading in the index stock on its primary market for more than two consecutive hours of trading or during the one-half hour before the close of trading in that market, as determined by the calculation agent in its sole discretion, or
· a suspension, absence or material limitation of trading in option or futures contracts relating to the index stock in the primary market for those contracts for more than two consecutive hours of trading or during the one-half hour before the close of trading in that market, as determined by the calculation agent in its sole discretion, or
· the index stock does not trade on what was the primary market for the index stock, as determined by the calculation agent in its sole discretion,
and, in the case of any of these events, the calculation agent determines in its sole discretion that the event could materially interfere with the ability of The Goldman Sachs Group, Inc. or any of its affiliates or a similarly situated party to unwind all or a material portion of a hedge that could be effected with respect to the offered notes. For more information about hedging by The Goldman Sachs Group, Inc. and/or any of its affiliates, see “Use of Proceeds and Hedging” below.
The following events will not be market disruption events:
· a limitation on the hours or numbers of days of trading, but only if the limitation results from an announced change in the regular business hours of the relevant market, and
· a decision to permanently discontinue trading in option or futures contracts relating to the index stock.
For this purpose, an “absence of trading” in the primary securities market on which an index stock is traded, or on which option or futures contracts relating to the index stock are traded, will not include any time when that market is itself closed for trading under ordinary circumstances. In contrast, a suspension or limitation of trading in an index stock or in option or futures contracts relating to the index stock, if available, in the primary market for that stock or those contracts, by reason of:
· a price change exceeding limits set by that market, or
· an imbalance of orders relating to that stock or those contracts, or
· a disparity in bid and ask quotes relating to that stock or those contracts,
will constitute a suspension or material limitation of trading in that stock or those contracts in that market.
In this subsection about market disruption events, references to the index stock include securities that are part of any adjusted reference amount, as determined by the calculation agent in its sole discretion.
We expect to use the net proceeds we receive from the sale of the offered notes for the purposes we describe in the accompanying prospectus under “Use of Proceeds”. We or our affiliates may also use those proceeds in transactions intended to hedge our obligations under the offered notes as described below.
In anticipation of the sale of the offered notes, we and/or our affiliates have entered into or expect to enter into hedging transactions involving purchases of futures and other instruments linked to the index stock on or before the trade date. In addition, from time to time after we issue the offered notes, we and/or our affiliates may enter into additional hedging transactions, and to unwind those we have entered into, in connection with the offered notes and perhaps in connection with other notes we issue, some of which may have returns linked to the same index stock. Consequently, with regard to your notes, from time to time, we and/or our affiliates:
· expect to acquire or dispose of the index stock or other securities of the index stock issuer,
· may take short positions in the index stock or other securities of the index stock issuer — i.e., we and/or our affiliates may sell securities of the kind that we do not own or that we borrow for delivery to the purchaser,
· may take or dispose of positions in listed or over-the-counter options, futures or other instruments based on the index stock, and/or
· may take or dispose of positions in listed or over-the-counter options or other instruments based on indices designed to track the performance of the NASDAQ Stock Market LLC, the New York Stock Exchange or other components of the U.S. equity market.
We and/or our affiliates may acquire a long or short position in securities similar to your notes from time to time and may, in our or their sole discretion, hold or resell those securities.
In the future, we and/or our affiliates expect to close out hedge positions relating to the offered notes and perhaps relating to other notes with returns linked to the same index stock. We expect these steps, which could occur on or before the determination date for your notes, to involve sales of the index stock and may involve sales and/or purchases of listed or over-the-counter options, futures or other instruments based on the index stock, or listed or over-the-counter options, futures or other instruments based on indices designed to track the performance of the NASDAQ Stock Market LLC, the New York Stock Exchange or other components of the U.S. equity market.
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The hedging activity discussed above may adversely affect the market value of your notes from time to time and the amount we will pay on your notes at maturity. See “Additional Risk Factors Specific to Your Notes” above for a discussion of these adverse effects.
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The index stock issuer is NetApp, Inc. According to publicly available information, NetApp, Inc. is a provider of storage and data management solutions.
Where Information About the Index Stock Issuer Can Be Obtained
The index stock is registered under the Securities Exchange Act of 1934. Companies with securities registered under the Exchange Act are required to file financial and other information specified by the U.S. Securities and Exchange Commission (“SEC”) periodically. Information filed with the SEC can be inspected and copied at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates. You may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. In addition, information filed by the index stock issuer with the SEC electronically can be reviewed through a web site maintained by the SEC. The address of the SEC’s web site is http://www.sec.gov. Information filed with the SEC by the index stock issuer under the Exchange Act can be located by referencing its SEC file number 0-27130.
Information about the index stock issuer may also be obtained from other sources such as press releases, newspaper articles and other publicly available documents.
We do not make any representation or warranty as to the accuracy or completeness of any materials referred to above, including any filings made by the index stock issuer with the SEC.
We Obtained the Information About the Index Stock Issuer from the Index Stock Issuer’s Public Filings
This prospectus supplement relates only to your notes and will not relate to the index stock or other securities of the index stock issuer. We have derived all information about the index stock issuer in this prospectus supplement from the publicly available information referred to in the preceding subsection. We have not participated in the preparation of any of those documents or made any “due diligence” investigation or inquiry with respect to the index stock issuer in connection with the offering of your notes. We do not make any representation that any publicly available information about the index stock issuer is accurate or complete. Furthermore, we do not know whether all events occurring before the date of this prospectus supplement — including events that would affect the accuracy or completeness of the publicly available documents referred to above, the trading price of the index stock and, therefore, the cash settlement amount — have been publicly disclosed. Subsequent disclosure of any events of this kind or the disclosure of or failure to disclose material future events concerning the index stock issuer could affect the value you will receive at maturity and, therefore, the market value of your notes.
Neither we nor any of our affiliates make any representation to you as to the performance of the index stock.
We or any of our affiliates may currently or from time to time engage in business with the index stock issuer, including making loans to or equity investments in the index stock issuer or providing advisory services to the index stock issuer, including merger and acquisition advisory services. In the course of that business, we or any of our affiliates may acquire non-public information about the index stock issuer and, in addition, one or more of our affiliates may publish research reports about the index stock issuer. As an investor in your notes, you should undertake such independent investigation of the index stock issuer as in your judgment is appropriate to make an informed decision with respect to an investment in your notes.
Historical High, Low and Closing Levels of the Index Stock
The closing level of the index stock has fluctuated in the past and may, in the future, experience significant fluctuations. Any historical upward or downward trend in the closing level of the index stock during any period shown below is not an indication that the index stock is more or less likely to increase or decrease at any time during the life of your notes.
You should not take historical prices of the index stock as an indication of future performance of the index stock. We cannot
give you any assurance that the future performance of the price of the index stock will result in your receiving an amount greater than the outstanding face amount of your notes on the stated maturity date. In light of the increased volatility currently being experienced by U.S. and global securities markets and recent market declines, it may be substantially more likely that you could lose a substantial part of your investment in the notes. During the period from January 2, 2009 through March 15, 2012, there were 554 12-month periods, the first of which began on January 2, 2009 and the last of which ended on March 15, 2012. In 158 of such 554 12-month periods, the closing level of the index stock on the final date of such period has fallen below 112.25% of the initial index stock price. Therefore, during approximately 28.52% of such 12-month periods, if you had owned notes with terms similar to these notes, you may have received less than the face amount of such notes at maturity. (We calculated these figures using fixed 12-month periods and did not take into account holidays or non-business days.)
Neither we nor any of our affiliates make any representation to you as to the performance of the index stock. Before investing in the offered notes, you should consult publicly available information to determine the relevant index stock price between the date of this prospectus supplement and the date of your purchase of the offered notes. The actual performance of the index stock 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 table below shows the high and low levels of the index stock as well as the closing levels of the index stock for each of the four calendar quarters in 2009, 2010 and 2011 and the first calendar quarter of 2012 (through March 15, 2012). We obtained the levels listed in the table below from Bloomberg Financial Services, without independent verification.
Quarterly High, Low and Closing Prices of the Index Stock
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|
|
High |
|
Low |
|
Close |
|
|
2009 |
|
|
|
|
|
|
|
|
Quarter ended March 31 |
|
16.40 |
|
12.52 |
|
14.84 |
|
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Quarter ended June 30 |
|
20.69 |
|
14.97 |
|
19.72 |
|
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Quarter ended September 30 |
|
26.68 |
|
18.09 |
|
26.68 |
|
|
Quarter ended December 31 |
|
34.54 |
|
25.89 |
|
34.39 |
|
|
2010 |
|
|
|
|
|
|
|
|
Quarter ended March 31 |
|
34.19 |
|
29.13 |
|
32.56 |
|
|
Quarter ended June 30 |
|
41.78 |
|
31.48 |
|
37.31 |
|
|
Quarter ended September 30 |
|
51.00 |
|
37.12 |
|
49.79 |
|
|
Quarter ended December 31 |
|
56.90 |
|
47.70 |
|
54.96 |
|
|
2011 |
|
|
|
|
|
|
|
|
Quarter ended March 31 |
|
60.60 |
|
46.38 |
|
48.18 |
|
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Quarter ended June 30 |
|
55.33 |
|
45.70 |
|
52.78 |
|
|
Quarter ended September 30 |
|
54.30 |
|
33.94 |
|
33.94 |
|
|
Quarter ended December 31 |
|
43.94 |
|
33.64 |
|
36.27 |
|
|
2012 |
|
|
|
|
|
|
|
|
Quarter ending March 31(through March 15, 2012) |
|
43.58 |
|
33.73 |
|
43.33 |
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SUPPLEMENTAL DISCUSSION OF U.S. FEDERAL INCOME TAX CONSEQUENCES
The following section supplements the discussion of U.S. federal income taxation in the accompanying prospectus and the prospectus supplement.
The following section is the opinion of Sidley Austin LLP, counsel to The Goldman Sachs Group, Inc. It applies to you only if you hold your notes as a capital asset for tax purposes. In addition, it is the opinion of Sidley Austin LLP that the characterization of the notes for U.S. federal income tax purposes that will be required under the terms of the notes, as discussed below, is a reasonable interpretation of current law. This section does not apply to you if you are a member of a class of holders subject to special rules, such as:
· a dealer in securities or currencies;
· a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings;
· a bank;
· a regulated investment company;
· a life insurance company;
· a tax-exempt organization;
· a person that owns the notes as a hedge or that is hedged against interest rate risks;
· a person that owns the notes as part of a straddle or conversion transaction for tax purposes; or
· a United States holder whose functional currency for tax purposes is not the U.S. dollar.
This section is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), its legislative history, existing and proposed regulations under the Internal Revenue Code, published rulings and court decisions, all as currently in effect. These laws are subject to change, possibly on a retroactive basis.
You should consult your tax advisor concerning the U.S. federal income tax and other tax consequences of your investment in the notes, including the application of state, local or other tax laws and the possible effects of changes in federal or other tax laws.
United States Holders
This subsection describes the tax consequences to a United States holder. You are a United States holder if you are a beneficial owner of notes and you are:
· a citizen or resident of the United States;
· a domestic corporation;
· an estate whose income is subject to U.S. federal income tax regardless of its source; or
· a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust.
If you are not a United States holder, this section does not apply to you and you should refer to “— United States Alien Holders” below.
Pursuant to the terms of the notes, you and the issuer agree — in the absence of a change in law, an administrative determination or a judicial ruling to the contrary — to characterize the notes as a short-term debt instrument that provides for a contingent payment upon maturity. Except as otherwise noted under “Alternative Treatments” below, this discussion assumes that the notes will be so treated.
There is no authority that specifically addresses the tax treatment of short-term notes that provide for contingent payments, and the relevant law is unclear. Specifically, it is unclear whether taxpayers are required to include interest payments on debt instruments such as the notes in income according to their regular
method of accounting. Because the interest payment on your notes are not contingent, we intend to take the position that any interest payment will be taxed to you as ordinary income at the time it is received or accrued in accordance with your regular method of accounting.
If you are an initial purchaser of the notes, upon the sale, exchange or maturity of your notes, you should recognize gain or loss in an amount equal to the difference between the amount received by you (or, if we elect to deliver shares of the index stock, the fair market value of the shares you receive at such time plus the cash received in lieu of a fractional share, if any) upon such sale, exchange or maturity and your tax basis in your notes. We believe that it would be reasonable for you to treat any such gain as short-term capital gain, and any such loss as ordinary loss to the extent of interest you previously accrued in respect of your notes, and thereafter as short-term capital loss, in a manner similar to the tax treatment of notes that are subject to the special rules governing contingent payment debt obligations. However, if you sell or exchange your notes between the determination date and the maturity date, you should treat substantially all of any gain that you recognize as ordinary income. Your tax basis in the notes should generally be equal to the amount that you paid for the notes. The deductibility of capital losses is subject to limitations. If we elect to deliver shares of the index stock upon the maturity of your notes, you will take as basis in such shares in an amount equal to their fair market value at such time. Your holding period in any shares you received would be measured from the day you receive the shares.
If you are a secondary purchaser of the notes, you should be treated in the same manner as described above with respect to initial purchasers except that if you purchase your notes at a discount from their principal amount and (i) hold them until maturity, it would be reasonable for you to treat any income you recognize as short-term capital gain to the extent of the excess of the principal amount of your notes over the amount you paid for your notes, or (ii) sell or exchange them between the determination date and the maturity date, it would be reasonable to treat any gain that you recognize upon such sale or exchange as short-term capital gain to the extent that such gain does not exceed the difference between the principal amount of your notes and the amount you paid for your notes.
You may be required to defer interest deductions that are allocable to your purchase of the notes.
For more information, please see the discussion under “United States Taxation – Taxation of Debt Securities – United States Holders – Short-Term Debt Securities” in the accompanying prospectus.
No statutory, judicial or administrative authority directly discusses how your notes should be treated for U.S. federal income tax purposes. As a result, the U.S. federal income tax consequences of your investment in the notes are uncertain and alternative characterizations are possible. Accordingly, we urge you to consult your tax advisor in determining the tax consequences of an investment in your notes in your particular circumstances, including the application of state, local or other tax laws and the possible effects of changes in federal or other tax laws.
Alternative Treatments. There is no judicial or administrative authority discussing how your notes should be treated for U.S. federal income tax purposes. Therefore, the Internal Revenue Service might assert that treatment other than that described above is more appropriate. For example, you should consult your own tax advisor regarding the possibility that you may not be required to include any interest payments in income until the sale or maturity of your notes.
It is also possible that the IRS could assert that any loss you recognize upon the sale, exchange or maturity of your notes should be treated as short-term capital loss. In such a case, the combination of ordinary income treatment of any interest payments on your notes and a capital loss upon the sale, exchange or maturity of your notes may result in adverse tax consequences to you, because an investor’s ability to deduct capital losses is subject to significant limitations.
It might also be reasonable to characterize each note for all tax purposes as a
single prepaid derivative contract with respect to the index-stock, that matures on the maturity date for the notes. If the notes are so treated, upon the sale or maturity of your notes, you should recognize gain or loss in an amount equal to the difference, if any, between the amount you receive at such time and your tax basis in the notes. Such gain or loss should be short-term capital gain or loss. Your tax basis in the notes should generally be equal to the amount that you paid for the notes. Under this treatment, it is likely that any interest payment will be taxed as ordinary income in accordance with your regular method of accounting for U.S. federal income tax purposes.
United States Alien Holders
Except as otherwise noted below, this subsection assumes that the notes are characterized as described above. If you are a United States alien holder, please see the discussion under “United States Taxation — Taxation of Debt Securities — United States Alien Holders” in the accompanying prospectus for a description of the tax consequences relevant to you. You are a United States alien holder if you are the beneficial owner of the notes and are, for U.S. federal income tax purposes:
· a nonresident alien individual;
· a foreign corporation; or
· an estate or trust that in either case is not subject to U.S. federal income tax on a net income basis on income or gain from the notes.
As discussed above, alternative characterizations of the notes for U.S. federal income tax purposes are possible. Should an alternative characterization of the notes, by reason of a change or clarification of the law, by regulation or otherwise, cause payments with respect to the notes to become subject to withholding tax, we will withhold tax at the applicable statutory rate and we will not make payments of any additional amounts. Prospective United States alien holders of the notes should consult their own tax advisors in this regard.
Possible Application of Section 871(m) of the Internal Revenue Code. The Treasury Department has issued proposed regulations under Section 871(m) of the Internal Revenue Code that could ultimately require all or a portion of the interest payments or amounts you receive upon sale or maturity of your notes after December 31, 2012 to be treated as a “dividend equivalent” payment that is subject to withholding at a rate of 30% (or a lower rate under an applicable treaty). While significant aspects of the application of these regulations to the notes are uncertain, we may be required to withhold on amounts with respect to the notes to the extent that payments on the notes are contingent upon or adjusted to reflect any extraordinary dividend paid with respect to the index stock or if you purchased the notes on or after the announcement of, and prior to the ex-dividend date for, a special dividend (a nonrecurring payment that is in addition to any regular dividend). We could require you to make certifications prior to maturity of the notes in order to prevent or minimize withholding, and we could be required to withhold accordingly if such certifications were not received or were not satisfactory. If withholding is so required, we will not be required to pay any additional amounts with respect to amounts so withheld. You should consult your tax advisor concerning the potential application of these regulations to payments you receive on the notes when these regulations are finalized and regarding any other possible alternative characterizations of your notes for U.S. federal income tax purposes.
EMPLOYEE RETIREMENT INCOME SECURITY ACT
This section is only relevant to you if you are an insurance company or the fiduciary of a pension plan or an employee benefit plan (including a governmental plan, an IRA or a Keogh Plan) proposing to invest in the offered notes.
The U.S. Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and the U.S. Internal Revenue Code of 1986, as amended (the “Code”), prohibit certain transactions (“prohibited transactions”) involving the assets of an employee benefit plan that is subject to the fiduciary responsibility provisions of ERISA or Section 4975 of the Code (including individual retirement accounts, Keogh plans and other plans described in Section 4975(e)(1) of the Code) (a “Plan”) and certain persons who are “parties in interest” (within the meaning of ERISA) or “disqualified persons” (within the meaning of the Code) with respect to the Plan; governmental plans may be subject to similar prohibitions unless an exemption applies to the transaction. The assets of a Plan may include assets held in the general account of an insurance company that are deemed “plan assets” under ERISA or assets of certain investment vehicles in which the Plan invests. Each of The Goldman Sachs Group, Inc. and certain of its affiliates may be considered a “party in interest” or a “disqualified person” with respect to many Plans, and, accordingly, prohibited transactions may arise if the notes are acquired by or on behalf of a Plan unless those notes are acquired and held pursuant to an available exemption. In general, available exemptions are: transactions effected on behalf of that Plan by a “qualified professional asset manager” (prohibited transaction exemption 84-14) or an “in-house asset manager” (prohibited transaction exemption 96-23), transactions involving insurance company general accounts (prohibited transaction exemption 95-60), transactions involving insurance company pooled separate accounts (prohibited transaction exemption 90-1), transactions involving bank collective investment funds (prohibited transaction exemption 91-38) and transactions with service providers under Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code where the Plan receives no less and pays no more than “adequate consideration” (within the meaning of Section 408(b)(17) of ERISA and Section 4975(f)(10) of the Code). The person making the decision on behalf of a Plan or a governmental plan shall be deemed, on behalf of itself and the plan, by purchasing and holding the notes, or exercising any rights related thereto, to represent that (a) the plan will receive no less and pay no more than “adequate consideration” (within the meaning of Section 408(b)(17) of ERISA and Section 4975(f)(10) of the Code) in connection with the purchase and holding of the notes, (b) none of the purchase, holding or disposition of the notes or the exercise of any rights related to the notes will result in a nonexempt prohibited transaction under ERISA or the Code (or, with respect to a governmental plan, under any similar applicable law or regulation), and (c) neither The Goldman Sachs Group, Inc. nor any of its affiliates is a “fiduciary” (within the meaning of Section 3(21) of ERISA) or, with respect to a governmental plan, under any similar applicable law or regulation) with respect to the purchaser or holder in connection with such person’s acquisition, disposition or holding of the notes, or as a result of any exercise by The Goldman Sachs Group, Inc. or any of its affiliates of any rights in connection with the notes, and no advice provided by The Goldman Sachs Group, Inc. or any of its affiliates has formed a primary basis for any investment decision by or on behalf of such purchaser or holder in connection with the notes and the transactions contemplated with respect to the notes.
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If you are an insurance company or the fiduciary of a pension plan or an employee benefit plan (including a government plan, an IRA or a Keogh plan) and propose to invest in the notes, you should consult your legal counsel.
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SUPPLEMENTAL PLAN OF DISTRIBUTION
The Goldman Sachs Group, Inc. has agreed to sell to Goldman, Sachs & Co., and Goldman, Sachs & Co. has agreed to purchase from The Goldman Sachs Group, Inc., the aggregate face amount of the offered notes specified on the front cover of this prospectus supplement. Goldman, Sachs & Co. proposes initially to offer the notes to the public at the original issue price set forth on the cover page of this prospectus supplement.
In the future, Goldman, Sachs & Co. or other affiliates of The Goldman Sachs Group, Inc. may repurchase and resell the offered notes in market-making transactions, with resales being made at prices related to prevailing market prices at the time of resale or at negotiated prices. The Goldman Sachs Group, Inc. estimates that its share of the total offering expenses, excluding underwriting discounts and commissions, will be approximately $15,000. For more information about the plan of distribution and possible market-making activities, see “Plan of Distribution” in the accompanying prospectus.
We will deliver the notes against payment therefor in New York, New York on March 22, 2012, which is the fifth scheduled business day following the date of this prospectus supplement and of the pricing of the notes. Under Rule 15c6-1 of the Exchange Act, trades in the secondary market generally are required to settle in three business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade notes on any date prior to three business days before delivery will be required, by virtue of the fact that the notes will initially settle in five business days (T + 5), to specify alternative settlement arrangements to prevent a failed settlement.
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”) with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”) an offer of the offered notes which are the subject of the offering contemplated by this prospectus supplement in relation thereto may not be made to the public in that Relevant Member State except that, with effect from and including the Relevant Implementation Date, an offer of such offered notes may be made to the public in that Relevant Member State:
(a) if the final terms in relation to the offered notes specify that an offer of those notes may be made other than pursuant to Article 3(2) of the Prospectus Directive in that Relevant Member State (a “Non-exempt Offer”), following the date of publication of a prospectus in relation to the offered notes which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, provided that any such prospectus has subsequently been completed by the final terms contemplating such Non-exempt Offer, in accordance with the Prospectus Directive, in the period beginning and ending on the dates specified in such prospectus or final terms, as applicable and the Issuer has consented in writing to its use for the purpose of that Non-exempt Offer;
(b) at any time to any legal entity which is a qualified investor as defined in the Prospectus Directive;
(c) at any time to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), subject to obtaining the prior consent of the relevant Dealer or Dealers nominated by the Issuer for any such offer; or
(d) at any time in any other circumstances falling within Article 3(2) of the Prospectus Directive,
provided that no such offer of offered notes referred to in (b) to (d) above shall require the Issuer or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive, or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.
For the purposes of this provision, the expression an “offer of notes to the public” in relation to any notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the notes to be offered so as to enable an investor to decide to purchase or subscribe the notes, as the same may be varied in that Relevant Member State by any
measure implementing the Prospectus Directive in that Relevant Member State, the expression Prospectus Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.
Goldman, Sachs & Co. has represented and agreed that:
(a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the offered notes in circumstances in which Section 21(1) of the FSMA does not apply to The Goldman Sachs Group, Inc.; and
(b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the notes in, from or otherwise involving the United Kingdom.
No advertisement, invitation or document relating to the notes may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), if such advertisement, invitation or document is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to the offered notes which are or are intended to be disposed of only to persons outside of Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong, the “SFO”) and any rules made thereunder.
The offered notes have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended, the “FIEL”) and Goldman, Sachs & Co. has agreed that it will not offer or sell any offered notes, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the FIEL and any other applicable laws, regulations and ministerial guidelines of Japan. As used in this paragraph, resident of Japan means any person resident in Japan, including any corporation or other entity organized under the laws of Japan.
This prospectus supplement has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus supplement and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the offered notes may not be circulated or distributed, nor may the notes be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person (pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the offered notes are subscribed or purchased under Section 275 of the SFA by a relevant person which is: (a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the offered notes pursuant to an offer made under Section 275 of the SFA except: (1) to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at a consideration of not
less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions specified in Section 275 of the SFA; (2) where no consideration is or will be given for the transfer; (3) where the transfer is by operation of law; or (4) pursuant to Section 276(7) of the SFA.
In the opinion of Sidley Austin LLP, as counsel to The Goldman Sachs Group, Inc., when the notes offered by this prospectus supplement have been executed and issued by The Goldman Sachs Group, Inc. and authenticated by the trustee pursuant to the indenture, and delivered against payment as contemplated herein, such notes will be valid and binding obligations of The Goldman Sachs Group, Inc., enforceable in accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally, concepts of reasonableness and equitable principles of general applicability (including, without limitation, concepts of good faith, fair dealing and the lack of bad faith), provided that such counsel expresses no opinion as to the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law on the conclusions expressed above. This opinion is given as of the date hereof and is limited to the Federal laws of the United States, the laws of the State of New York and the General Corporation Law of the State of Delaware as in effect on the date hereof. In addition, this opinion is subject to customary assumptions about the trustee’s authorization, execution and delivery of the indenture and the genuineness of signatures and certain factual matters, all as stated in the letter of such counsel dated September 19, 2011, which has been filed as Exhibit 5.5 to The Goldman Sachs Group, Inc.’s registration statement on Form S-3 filed with the Securities and Exchange Commission on September 19, 2011.
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We have not authorized anyone to provide any information or to make any representations other than those contained or incorporated by reference in this prospectus supplement, the accompanying prospectus supplement or the accompanying prospectus. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus supplement, the accompanying prospectus supplement and the accompanying prospectus is an offer to sell only the notes offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus supplement, the accompanying prospectus supplement and the accompanying prospectus is current only as of the respective dates of such documents.
Prospectus Supplement
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$19,000,092.48
The Goldman Sachs Group, Inc.
8.00% Equity Linked Notes due 2013 (Linked to the Common Stock of NetApp, Inc.)
Medium-Term Notes, Series D
___________________
___________________
Goldman, Sachs & Co.
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S-2 |
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S-4 |
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S-7 |
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S-16 |
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S-31 |
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S-32 |
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S-33 |
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S-36 |
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S-37 |
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S-39 |
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Prospectus Supplement dated September 19, 2011 |
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Use of Proceeds |
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S-2 |
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Description of Notes We May Offer |
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S-3 |
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United States Taxation |
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S-25 |
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Employee Retirement Income Security Act |
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S-26 |
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Supplemental Plan of Distribution |
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S-27 |
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Validity of the Notes |
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S-28 |
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Prospectus dated September 19, 2011 |
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Available Information |
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2 |
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Prospectus Summary |
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4 |
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Use of Proceeds |
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8 |
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Description of Debt Securities We May Offer |
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9 |
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Description of Warrants We May Offer |
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33 |
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Description of Purchase Contracts We May Offer |
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48 |
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Description of Units We May Offer |
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53 |
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Description of Preferred Stock We May Offer |
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58 |
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The Issuer Trusts |
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65 |
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Description of Capital Securities and Related Instruments |
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67 |
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Description of Capital Stock of The Goldman Sachs Group, Inc. |
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88 |
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Legal Ownership and Book-Entry Issuance |
|
92 |
| |
|
Considerations Relating to Floating Rate Debt Securities |
|
97 |
| |
|
Considerations Relating to Securities Issued in Bearer Form |
|
98 |
| |
|
Considerations Relating to Indexed Securities |
|
102 |
| |
|
Considerations Relating to Securities Denominated or Payable in or Linked to a Non-U.S. Dollar Currency |
|
105 |
| |
|
Considerations Relating to Capital Securities |
|
108 |
| |
|
United States Taxation |
|
112 |
| |
|
Plan of Distribution |
|
135 |
| |
|
Conflicts of Interest |
|
137 |
| |
|
Employee Retirement Income Security Act |
|
138 |
| |
|
Validity of the Securities |
|
139 |
| |
|
Experts |
|
139 |
| |
|
Review of Unaudited Condensed Consolidated Financial Statements by Independent Registered Public Accounting Firm |
|
139 |
| |
|
Cautionary Statement Pursuant to the Private Securities Litigation Reform Act of 1995 |
|
140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
