Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-198735
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The Goldman Sachs Group, Inc.
$849,000 Buffered Digital Russell 2000® Index-Linked Notes due 2018 |
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The notes do not bear interest. The amount that you will be paid on your notes on the stated maturity
date (June 1, 2018) is based on the performance of the Russell 2000® Index as measured from the trade date (May 27, 2015)
to and including the determination date (May 29, 2018). If the final index level on the determination date is greater than or equal to 85.00% of the initial index level of 1,254.357, you will receive the maximum settlement amount (of $1,150.00 for
each $1,000 face amount of your notes). If the final index level is less than 85.00% of the initial index level, the return on your notes will be negative. You could lose a substantial portion of your investment in the notes.
To determine your payment at maturity, we will calculate the index return, which is the percentage increase or decrease in the final index level from the initial
index level. On the stated maturity date, for each $1,000 face amount of your notes, you will receive an amount in cash equal to:
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if the index return is greater than or equal to -15.00% (the final index level is greater than or equal to 85.00% of the initial
index level), the maximum settlement amount; or |
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if the index return is negative and is below -15.00% (the final index level is less than the initial index level by more than 15.00%), the
sum of (i) $1,000 plus (ii) the product of (a) the sum of the index return plus 15.00% times (b) $1,000. |
Your investment in the notes involves certain risks, including, among other things, our credit risk. See
page PS-10.
You should read the additional disclosure herein so that you may better understand the terms and risks of your investment.
The estimated value of your notes at the time the terms of your notes were set on the trade date (as determined by reference to pricing models used by Goldman, Sachs & Co. (GS&Co.) and taking
into account our credit spreads) was equal to approximately $947 per $1,000 face amount, which is less than the original issue price. The value of your notes at any time will reflect many factors and cannot be predicted; however, the price (not
including GS&Co.s customary bid and ask spreads) at which GS&Co. would initially buy or sell notes (if it makes a market, which it is not obligated to do) and the value that GS&Co. will initially use for
account statements and otherwise equals approximately $970 per $1,000 face amount, which exceeds the estimated value of your notes as determined by reference to these models. The amount of the excess will decline on a straight line basis over the
period from the trade date through May 27, 2016.
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Original issue date: |
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May 29, 2015 |
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Original issue price: |
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100.00% of the face amount |
Underwriting discount: |
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3.25% of the face amount |
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Net proceeds to the issuer: |
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96.75% of the face amount |
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or
passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense. The notes are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency, nor
are they obligations of, or guaranteed by, a bank.
Goldman, Sachs & Co.
Pricing Supplement No. 3742 dated May 27, 2015.
The issue price, underwriting discount and net proceeds listed above relate to the notes we sell initially. We may
decide to sell additional notes after the date of this pricing supplement, at issue prices and with underwriting discounts and net proceeds that differ from the amounts set forth above. The return (whether positive or negative) on your investment in
notes will depend in part on the issue price you pay for such notes.
Goldman Sachs may use this prospectus in the initial sale of the notes. In
addition, Goldman, Sachs & Co. or any other affiliate of Goldman Sachs may use this prospectus in a market-making transaction in a note after its initial sale. Unless Goldman Sachs or its agent informs the purchaser otherwise in the
confirmation of sale, this prospectus is being used in a market-making transaction.
About Your Prospectus
The notes are part of the Medium-Term Notes, Series D program of The Goldman Sachs Group, Inc. This prospectus includes this pricing supplement and the accompanying documents listed below. This pricing supplement
constitutes a supplement to the documents listed below and should be read in conjunction with such documents:
The information in this pricing supplement supersedes any conflicting information in the documents
listed above. In addition, some of the terms or features described in the listed documents may not apply to your notes.
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Buffered Digital Russell 2000® Index-Linked Notes due 2018 |
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INVESTMENT THESIS
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For investors who are willing to forgo gains above a maximum payment of 115.00% of the face amount in exchange for a buffer against loss of principal in the
event of a decline of up to 15.00% in the final underlier level relative to the initial underlier level. |
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For investors willing to forgo interest payments and risk losing a substantial portion of their investment for the potential to earn a maximum return of 15.00%
as long as the underlier return is greater than or equal to -15.00%. |
DETERMINING THE CASH SETTLEMENT AMOUNT
At maturity, for each $1,000 face amount, the investor will receive (in each case as a percentage of the face amount):
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If the final underlier level is greater than or equal to 85.00% of the initial underlier level, 115.00%; or |
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If the final underlier level is less than 85.00% of the initial underlier level, 100.00% minus 1.00% for every 1.00% that the underlier has declined below
85.00% of its initial underlier level |
If the final underlier level declines by more than 15.00% from the initial underlier level,
the return on the notes will be negative and the investor could lose a substantial portion of their investment in the notes.
KEY TERMS
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Issuer: |
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The Goldman Sachs Group, Inc. |
Underlier: |
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The Russell 2000® Index (Bloomberg symbol, RTY
Index) |
Face Amount: |
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$849,000 in the aggregate; each note will have a face amount equal to $1,000 |
Trade Date: |
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May 27, 2015 |
Settlement Date: |
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May 29, 2015 |
Determination Date: |
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May 29, 2018 |
Stated Maturity Date: |
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June 1, 2018 |
Initial Underlier Level: |
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1,254.357 |
Final Underlier Level: |
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The closing level of the underlier on the determination date |
Underlier Return: |
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The quotient of (i) the final underlier level minus the initial underlier level divided by (ii) the initial underlier level, expressed as a positive or negative
percentage |
Buffer Level: |
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85.00% of the initial underlier level |
Buffer Amount: |
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15.00% |
Threshold Level |
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85.00% of the initial underlier level |
Threshold Settlement Amount: |
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$1,150.00 |
Maximum Settlement Amount: |
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The threshold settlement amount |
Cap Level: |
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115.00% of the initial underlier level |
CUSIP/ISIN: |
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38148T2N8 / US38148T2N88 |
HYPOTHETICAL PAYMENT AT MATURITY
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Hypothetical Final
Underlier Level (as % of
Initial Underlier Level) |
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Hypothetical Cash Settlement
Amount (as % of Face
Amount) |
150.000% |
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115.000% |
130.000% |
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115.000% |
110.000% |
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115.000% |
100.000% |
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115.000% |
95.000% |
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115.000% |
90.000% |
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115.000% |
85.000% |
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115.000% |
84.999% |
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99.999% |
75.000% |
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90.000% |
50.000% |
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65.000% |
25.000% |
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40.000% |
0.000% |
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15.000% |
RISKS
Please read the section entitled Additional Risk Factors Specific to Your Notes of this pricing supplement as well as the risks and considerations
described in the accompanying prospectus dated September 15, 2014, in the accompanying prospectus supplement dated September 15, 2014, under Additional Risk Factors Specific to the Underlier-Linked Digital Notes in the
accompanying product supplement no. 3140 dated September 15, 2014, and under Additional Risk Factors Specific to the Notes in the accompanying general terms supplement dated September 26, 2014.
PS-3
SUMMARY INFORMATION
We refer to the notes we are offering by this pricing supplement as the offered notes or the
notes. Each of the offered notes, including your notes, has the terms described below. Please note that in this pricing supplement, references to The Goldman Sachs Group, Inc., we, our and
us mean only The Goldman Sachs Group, Inc. and do not include its consolidated subsidiaries. Also, references to the accompanying prospectus mean the accompanying prospectus, dated September 15, 2014, as supplemented by
the accompanying prospectus supplement, dated September 15, 2014, of The Goldman Sachs Group, Inc. relating to the Medium-Term Notes, Series D program of The Goldman Sachs Group, Inc., references to the accompanying general terms
supplement mean the accompanying general terms supplement, dated September 26, 2014, of The Goldman Sachs Group, Inc. and references to the accompanying product supplement no. 3140 mean the accompanying product supplement no.
3140, dated September 15, 2014, of The Goldman Sachs Group, Inc.
This section is meant
as a summary and should be read in conjunction with the section entitled General Terms of the Underlier-Linked Digital Notes on page S-35 of the accompanying product supplement no. 3140 and Supplemental Terms of the Notes on
page S-13 of the accompanying general terms supplement. Please note that certain features, as noted below, described in the accompanying product supplement no. 3140 and general terms supplement are not applicable to the notes. This pricing
supplement supersedes any conflicting provisions of the accompanying product supplement no. 3140 or the accompanying general terms supplement.
Key Terms
Issuer: The Goldman Sachs Group, Inc.
Underlier: the Russell
2000® Index (Bloomberg symbol, RTY Index), as published by the Russell Investment Group
(Russell)
Specified currency: U.S. dollars ($)
Terms to be specified in accordance with the accompanying product supplement no. 3140:
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type of notes: notes linked to a single underlier |
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exchange rates: not applicable |
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averaging dates: not applicable |
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redemption right or price dependent redemption right: not applicable |
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cap level: yes, as described below |
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buffer level: yes, as described below |
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threshold level: yes, as described below |
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upside participation rate: not applicable |
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interest: not applicable |
Face amount:
each note will have a face amount of $1,000; $849,000 in the aggregate for all the offered notes; the aggregate face amount of the offered notes may be increased if the issuer, at its sole option, decides to sell an additional amount of the offered
notes on a date subsequent to the date of this pricing supplement
Purchase at amount other than face amount: the amount we will pay you
at the stated maturity date for your notes will not be adjusted based on the issue price you pay for your notes, so if you acquire notes at a premium (or discount) to face amount and hold them to the stated maturity date, it could affect your
investment in a number of ways. The return on your investment in such notes will be lower (or higher) than it would have been had you purchased the notes at face amount. Also, the stated buffer level would not offer the same measure of protection to
your investment as would be the case if you had purchased the notes at face amount. Additionally, the cap level would be triggered at a lower (or higher) percentage return than indicated below, relative to your initial investment. See
Additional Risk Factors Specific to Your Notes If You Purchase Your Notes at a Premium to Face Amount, the Return on Your Investment Will Be Lower Than the Return on Notes Purchased at Face Amount and the Impact of Certain Key Terms of
the Notes Will be Negatively Affected on page PS-12 of this pricing supplement.
PS-4
Supplemental discussion of U.S. federal income tax consequences: you will be obligated pursuant to the terms of
the notes in the absence of a change in law, an administrative determination or a judicial ruling to the contrary to characterize each note for all tax purposes as a pre-paid derivative contract in respect of the underlier, as
described under Supplemental Discussion of Federal Income Tax Consequences on page S-42 of the accompanying product supplement no. 3140. Pursuant to this approach, it is the opinion of Sidley Austin LLP that upon the sale,
exchange or maturity of your notes, it would be reasonable for you to recognize capital gain or loss equal to the difference, if any, between the amount of cash you receive at such time and your tax basis in your notes. Pursuant to Treasury
regulations, Foreign Account Tax Compliance Act (FATCA) withholding (as described in United States Taxation Taxation of Debt Securities Foreign Account Tax Compliance Act (FATCA) Withholding in the accompanying prospectus)
will generally apply to obligations that are issued on or after July 1, 2014; therefore, the notes will generally be subject to FATCA withholding. However, according to final Treasury regulations, the withholding tax described above will not
apply to payments of gross proceeds from the sale, exchange or other disposition of the notes made before January 1, 2017.
Cash
settlement amount (on the stated maturity date): for each $1,000 face amount of your notes, we will pay you on the stated maturity date an amount in cash equal to:
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if the final underlier level is greater than or equal to the threshold level, the threshold settlement amount; or |
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if the final underlier level is less than the buffer level, the sum of (1) $1,000 plus (2) the product of (a) $1,000
times (b) the buffer rate times (c) the sum of the underlier return plus the buffer amount |
Initial
underlier level: 1,254.357
Final underlier level: the closing level of the underlier on the determination date, except in the limited
circumstances described under Supplemental Terms of the Notes Consequences of a Market Disruption Event or a Non-Trading Day on page S-19 of the accompanying general terms supplement and subject to adjustment as provided under
Supplemental Terms of the Notes Discontinuance or Modification of an Underlier on page S-23 of the accompanying general terms supplement
Underlier return: the quotient of (1) the final underlier level minus the initial underlier level divided by (2) the initial underlier
level, expressed as a percentage
Threshold level: 85.00% of the initial underlier level
Threshold settlement amount: $1,150.00
Cap
level: 115.00% of the initial underlier level
Maximum settlement amount: the threshold settlement amount
Buffer level: 85.00% of the initial underlier level
Buffer amount: 15.00%
Buffer rate:
100.00%
Trade date: May 27, 2015
Original issue date (settlement date): May 29, 2015
Determination date: May 29, 2018,
subject to adjustment as described under Supplemental Terms of the Notes Determination Date on page S-14 of the accompanying general terms supplement
Stated maturity date: June 1, 2018, subject to adjustment as described under Supplemental Terms of the Notes Stated Maturity Date on page S-13 of the accompanying general terms
supplement
No interest: the offered notes do not bear interest
No listing: the offered notes will not be listed on any securities exchange or interdealer quotation system
No redemption: the offered notes will not be subject to redemption right or price dependent redemption right
Closing level: as described under Supplemental Terms of the Notes Special Calculation Provisions Closing Level on page S-27 of the accompanying general terms supplement
PS-5
Business day: as described under Supplemental Terms of the Notes Special Calculation Provisions
Business Day on page S-27 of the accompanying general terms supplement
Trading day: as described under Supplemental
Terms of the Notes Special Calculation Provisions Trading Day on page S-27 of the accompanying general terms supplement
Use of proceeds and hedging: as described under Use of Proceeds and Hedging on page S-40 of the accompanying product supplement no.
3140
ERISA: as described under Employee Retirement Income Security Act on page S-49 of the accompanying product supplement
no. 3140
Supplemental plan of distribution: as described under Supplemental Plan of Distribution on page S-50 of the
accompanying product supplement no. 3140; The Goldman Sachs Group, Inc. estimates that its share of the total offering expenses, excluding underwriting discounts and commissions, will be approximately $10,000.
The Goldman Sachs Group, Inc. has agreed to sell to Goldman, Sachs & Co., and Goldman, Sachs & Co. has agreed to purchase from The Goldman Sachs
Group, Inc., the aggregate face amount of the offered notes specified on the front cover of this pricing supplement. Goldman, Sachs & Co. proposes initially to offer the notes to the public at the original issue price set forth on the
cover page of this pricing supplement, and to certain securities dealers at such price less a concession not in excess of 3.00% of the face amount.
We
will deliver the notes against payment therefor in New York, New York on May 29, 2015, which is the second scheduled business day following the date of this pricing supplement and of the pricing of the notes.
We have been advised by Goldman, Sachs & Co. that it intends to make a market in the notes. However, neither Goldman, Sachs & Co. nor any of our
other affiliates that makes a market is obligated to do so and any of them may stop doing so at any time without notice. No assurance can be given as to the liquidity or trading market for the notes.
Calculation agent: Goldman, Sachs & Co.
CUSIP no.: 38148T2N8
ISIN no.:
US38148T2N88
FDIC: the notes are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other
governmental agency, nor are they obligations of, or guaranteed by, a bank
PS-6
HYPOTHETICAL EXAMPLES
The following table and chart are provided for purposes of illustration only. They should not be taken as an indication or prediction of future investment results
and are intended merely to illustrate the impact that the various hypothetical underlier levels on the determination date could have on the cash settlement amount at maturity assuming all other variables remain constant.
The examples below are based on a range of final underlier levels that are entirely hypothetical; no one can predict what the underlier level will be on any day
throughout the life of your notes, and no one can predict what the final underlier level will be on the determination date. The underlier has been highly volatile in the past meaning that the underlier level has changed considerably in
relatively short periods and its performance cannot be predicted for any future period.
The information in the following examples reflects
hypothetical rates of return on the offered notes assuming that they are purchased on the original issue date at the face amount and held to the stated maturity date. If you sell your notes in a secondary market prior to the stated maturity date,
your return will depend upon the market value of your notes at the time of sale, which may be affected by a number of factors that are not reflected in the table below such as interest rates, the volatility of the underlier and our creditworthiness.
In addition, the estimated value of your notes at the time the terms of your notes were set on the trade date (as determined by reference to pricing models used by Goldman, Sachs & Co.) was less than the original issue price of your notes.
For more information on the estimated value of your notes, see Additional Risk Factors Specific to Your Notes The Estimated Value of Your Notes At the Time the Terms of Your Notes Were Set On the Trade Date (as Determined By Reference
to Pricing Models Used By Goldman, Sachs & Co.) Was Less Than the Original Issue Price Of Your Notes on page PS-10 of this pricing supplement. The information in the table also reflects the key terms and assumptions in the box below.
Key Terms and Assumptions
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Face amount |
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$1,000 |
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Threshold settlement amount |
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$1,150.00 |
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Threshold level |
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85.00% of the initial underlier level |
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Buffer level |
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85.00% of the initial underlier level |
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Cap level |
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115.00% of the initial underlier level |
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Maximum settlement amount |
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$1,150.00 |
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Buffer rate |
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100.00% |
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Buffer amount |
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15.00% |
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Neither a market disruption event nor a non-trading day occurs on the originally scheduled determination date |
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No change in or affecting any of the underlier stocks or the method by which the underlier sponsor calculates the underlier |
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Notes purchased on original issue date at the face amount and held to the stated maturity date |
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For these reasons, the actual performance of the underlier over the life of your notes, as well as the amount payable at
maturity may bear little relation to the hypothetical examples shown below or to the historical underlier levels shown elsewhere in this pricing supplement. For information about the historical levels of the underlier during recent periods, see
The Underlier Historical Closing Levels of the Underlier below. Before investing in the offered notes, you should consult publicly available information to determine the levels of the underlier between the date of this pricing
supplement and the date of your purchase of the offered notes.
PS-7
Also, the hypothetical examples shown below do not take into account the effects of applicable taxes. Because of the
U.S. tax treatment applicable to your notes, tax liabilities could affect the after-tax rate of return on your notes to a comparatively greater extent than the after-tax return on the underlier stocks.
The levels in the left column of the table below represent hypothetical final underlier levels and are expressed as percentages of the initial underlier level. The
amounts in the right column represent the hypothetical cash settlement amounts, based on the corresponding hypothetical final underlier level (expressed as a percentage of the initial underlier level), and are expressed as percentages of the face
amount of a note (rounded to the nearest one-thousandth of a percent). Thus, a hypothetical cash settlement amount of 100.000% means that the value of the cash payment that we would deliver for each $1,000 of the outstanding face amount of the
offered notes on the stated maturity date would equal 100.000% of the face amount of a note, based on the corresponding hypothetical final underlier level (expressed as a percentage of the initial underlier level) and the assumptions noted above.
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Hypothetical Final Underlier Level
(as Percentage of Initial Underlier Level) |
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Hypothetical Cash Settlement Amount
(as Percentage of Face Amount) |
150.000% |
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115.000% |
130.000% |
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115.000% |
110.000% |
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115.000% |
100.000% |
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115.000% |
95.000% |
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115.000% |
90.000% |
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115.000% |
85.000% |
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115.000% |
84.999% |
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99.999% |
75.000% |
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90.000% |
50.000% |
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65.000% |
25.000% |
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40.000% |
0.000% |
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15.000% |
If, for example, the final underlier level were determined to be 25.000% of the initial underlier level, the cash settlement amount
that we would deliver on your notes at maturity would be 40.000% of the face amount of your notes, as shown in the table above. As a result, if you purchased your notes on the original issue date at the face amount and held them to the stated
maturity date, you would lose 60.000% of your investment (if you purchased your notes at a premium to face amount you would lose a correspondingly higher percentage of your investment). In addition, if the final underlier level were determined to be
150.000% of the initial underlier level, the cash settlement amount that we would deliver on your notes at maturity would be capped at the maximum settlement amount (expressed as a percentage of the face amount), or 115.000% of each $1,000 face
amount of your notes, as shown in the table above. As a result, if you held your notes to the stated maturity date, you would not benefit from any increase in the final underlier level over 85.000% of the initial underlier level.
The following chart also shows a graphical illustration of the hypothetical cash settlement amounts (expressed as a percentage of the face amount of your notes)
that we would pay on your notes on the stated maturity date, if the final underlier level (expressed as a percentage of the initial underlier level) were any of the hypothetical levels shown on the horizontal axis. The chart shows that any
hypothetical final underlier level (expressed as a percentage of the initial underlier level) of less than 85.000% (the section left of the 85.000% marker on the horizontal axis) would result in a hypothetical cash settlement amount of less than
100.000% of the face amount of your notes (the section below the 100.000% marker on the vertical axis) and, accordingly, in a loss of principal to the holder of the notes. The chart also shows that any hypothetical final underlier level (expressed
as a percentage of the initial underlier level) of greater than or equal to 85.000% (the section right of the 85.000% marker on the horizontal axis) would result in a capped return on your investment.
PS-8
The cash settlement amounts shown above are entirely hypothetical; they are based on market prices for the underlier stocks that
may not be achieved on the determination date and on assumptions that may prove to be erroneous. The actual market value of your notes on the stated maturity date or at any other time, including any time you may wish to sell your notes, may bear
little relation to the hypothetical cash settlement amounts shown above, and these amounts should not be viewed as an indication of the financial return on an investment in the offered notes. The hypothetical cash settlement amounts on notes held to
the stated maturity date in the examples above assume you purchased your notes at their face amount and have not been adjusted to reflect the actual issue price you pay for your notes. The return on your investment (whether positive or negative) in
your notes will be affected by the amount you pay for your notes. If you purchase your notes for a price other than the face amount, the return on your investment will differ from, and may be significantly lower than, the hypothetical returns
suggested by the above examples. Please read Additional Risk Factors Specific to the Underlier-Linked Digital Notes The Market Value of Your Notes May Be Influenced by Many Unpredictable Factors on page S-33 of the accompanying
product supplement no. 3140.
Payments on the notes are economically equivalent to the amounts that would be paid on a combination of other instruments.
For example, payments on the notes are economically equivalent to a combination of an interest-bearing bond bought by the holder and one or more options entered into between the holder and us (with one or more implicit option premiums paid over
time). The discussion in this paragraph does not modify or affect the terms of the notes or the U.S. federal income tax treatment of the notes, as described elsewhere in this pricing supplement.
We cannot predict the actual final underlier level or what the market value of your notes will be on any
particular trading day, nor can we predict the relationship between the underlier level and the market value of your notes at any time prior to the stated maturity date. The actual amount that you will receive at maturity and the rate of return on
the offered notes will depend on the actual final underlier level determined by the calculation agent as described above. Moreover, the assumptions on which the hypothetical returns are based may turn out to be inaccurate. Consequently, the amount
of cash to be paid in respect of your notes on the stated maturity date may be very different from the information reflected in the table and chart above.
PS-9
ADDITIONAL RISK FACTORS SPECIFIC TO YOUR NOTES
An investment in your notes is subject to the risks described below, as well as the risks and considerations
described in the accompanying prospectus dated September 15, 2014, in the accompanying prospectus supplement dated September 15, 2014, under Additional Risk Factors Specific to the Notes in the accompanying general terms
supplement, and under Additional Risk Factors Specific to the Underlier-Linked Digital Notes in the accompanying product supplement no. 3140. You should carefully review these risks and considerations as well as the terms of the notes
described herein and in the accompanying prospectus, dated September 15, 2014, as supplemented by the accompanying prospectus supplement, dated September 15, 2014, the accompanying general terms supplement, dated September 26, 2014,
and the accompanying product supplement no. 3140, dated September 15, 2014, of The Goldman Sachs Group, Inc. Your notes are a riskier investment than ordinary debt securities. Also, your notes are not equivalent to investing directly in the
underlier stocks, i.e., the stocks comprising the underlier to which your notes are linked. You should carefully consider whether the offered notes are suited to your particular circumstances.
The Estimated Value of Your Notes At the Time the Terms of Your Notes Were Set On the Trade Date (as Determined By Reference to Pricing Models
Used By Goldman, Sachs & Co.) Was Less Than the Original Issue Price Of Your Notes
The original issue price for your notes exceeds the
estimated value of your notes as of the time the terms of your notes were set on the trade date, as determined by reference to Goldman, Sachs & Co.s pricing models and taking into account our credit spreads. Such estimated value on
the trade date is set forth on the cover of this pricing supplement; after the trade date, the estimated value as determined by reference to these models will be affected by changes in market conditions, our creditworthiness and other relevant
factors. The price at which Goldman, Sachs & Co. would initially buy or sell your notes (if Goldman, Sachs & Co. makes a market, which it is not obligated to do), and the value that Goldman, Sachs & Co. will initially use
for account statements and otherwise, also exceeds the estimated value of your notes as determined by reference to these models. As agreed by Goldman, Sachs & Co. and the distribution participants, the amount of this excess will decline on
a straight line basis over the period from the date hereof through the applicable date set forth on the cover. Thereafter, if Goldman, Sachs & Co. buys or sells your notes it will do so at prices that reflect the estimated value determined
by reference to such pricing models at that time. The price at which Goldman, Sachs & Co. will buy or sell your notes at any time also will reflect its then current bid and ask spread for similar sized trades of structured notes.
In estimating the value of your notes as of the time the terms of your notes were set on the trade date, as disclosed on the front cover of this
pricing supplement, Goldman, Sachs & Co.s pricing models consider certain variables, including principally our credit spreads, interest rates (forecasted, current and historical rates), volatility, price-sensitivity analysis and the
time to maturity of the notes. These pricing models are proprietary and rely in part on certain assumptions about future events, which may prove to be incorrect. As a result, the actual value you would receive if you sold your notes in the secondary
market, if any, to others may differ, perhaps materially, from the estimated value of your notes determined by reference to our models due to, among other things, any differences in pricing models or assumptions used by others. See Additional
Risk Factors Specific to the Underlier-Linked Digital Notes The Market Value of Your Notes May Be Influenced by Many Unpredictable Factors on page S-33 of the accompanying product supplement no. 3140.
The difference between the estimated value of your notes as of the time the terms of your notes were set on the trade date and the original issue price is a result
of certain factors, including principally the underwriting discount and commissions, the expenses incurred in creating, documenting and marketing the notes, and an estimate of the difference between the amounts we pay to Goldman, Sachs &
Co. and the amounts Goldman, Sachs & Co. pays to us in connection with your notes. We pay to Goldman, Sachs & Co. amounts based on what we would pay to holders of a non-structured note with a similar maturity. In return for such
payment, Goldman, Sachs & Co. pays to us the amounts we owe under your notes.
In addition to the factors discussed above, the value and quoted
price of your notes at any time will reflect many factors and cannot be predicted. If Goldman, Sachs & Co. makes a market in the notes, the price quoted by Goldman, Sachs & Co. would reflect any changes in market conditions and
other relevant
PS-10
factors, including any deterioration in our creditworthiness or perceived creditworthiness. These changes may adversely affect the value of your notes, including the price you may receive for
your notes in any market making transaction. To the extent that Goldman, Sachs & Co. makes a market in the notes, the quoted price will reflect the estimated value determined by reference to Goldman, Sachs & Co.s pricing
models at that time, plus or minus its then current bid and ask spread for similar sized trades of structured notes (and subject to the declining excess amount described above).
Furthermore, if you sell your notes, you will likely be charged a commission for secondary market transactions, or the price will likely reflect a dealer discount. This commission or discount will further reduce
the proceeds you would receive for your notes in a secondary market sale.
There is no assurance that Goldman, Sachs & Co. or any other party
will be willing to purchase your notes at any price and, in this regard, Goldman, Sachs & Co. is not obligated to make a market in the notes. See Additional Risk Factors Specific to the Underlier-Linked Digital Notes Your Notes
May Not Have an Active Trading Market on page S-32 of the accompanying product supplement no. 3140.
The Notes Are Subject to
the Credit Risk of the Issuer
Although the return on the notes will be based on the performance of the underlier, the payment of any amount due on
the notes is subject to our credit risk. The notes are our unsecured obligations. Investors are dependent on our ability to pay all amounts due on the notes, and therefore investors are subject to our credit risk and to changes in the markets
view of our creditworthiness. See Description of the Notes We May Offer Information About Our Medium-Term Notes, Series D Program How the Notes Rank Against Other Debt on page S-4 of the accompanying prospectus supplement.
The Amount Payable on Your Notes Is Not Linked to the Level of the Underlier at Any Time Other than the Determination Date
The final underlier level will be based on the closing level of the underlier on the determination date (subject to adjustment as described
elsewhere in this pricing supplement). Therefore, if the closing level of the underlier dropped precipitously on the determination date, the cash settlement amount for your notes may be significantly less than it would have been had the cash
settlement amount been linked to the closing level of the underlier prior to such drop in the level of the underlier. Although the actual level of the underlier on the stated maturity date or at other times during the life of your notes may be
higher than the final underlier level, you will not benefit from the closing level of the underlier at any time other than on the determination date.
You May Lose a Substantial Portion of Your Investment in the Notes
You can lose a
substantial portion of your investment in the notes. The cash payment on your notes on the stated maturity date will be based on the performance of the Russell 2000® Index as measured from the initial underlier level to the closing level on the determination date. If the final underlier level is less than the buffer level,
you will have a loss for each $1,000 of the face amount of your notes equal to the sum of the underlier return plus the buffer amount times $1,000. Thus, you may lose a substantial portion of your investment in the notes, which would
include any premium to face amount you paid when you purchased the notes.
Also, the market price of your notes prior to the stated maturity date
may be significantly lower than the purchase price you pay for your notes. Consequently, if you sell your notes before the stated maturity date, you may receive far less than the amount of your investment in the notes.
Your Notes Do Not Bear Interest
You will
not receive any interest payments on your notes. As a result, even if the cash settlement amount payable for your notes on the stated maturity date exceeds the face amount of your notes, the overall return you earn on your notes may be less than you
would have earned by investing in a non-indexed debt security of comparable maturity that bears interest at a prevailing market rate.
PS-11
The Potential for the Value of Your Notes to Increase Will Be Limited
Your ability to participate in any change in the value of the underlier over the life of your
notes will be limited because of the maximum settlement amount (which is equal to the threshold settlement amount). The maximum settlement amount will limit the cash settlement amount you may receive for each of your notes at maturity, no matter how
much the level of the underlier may rise beyond the initial underlier level over the life of your notes. Accordingly, the amount payable for each of your notes may be significantly less than it would have been had you invested directly in the
underlier.
You Have No Shareholder Rights or Rights to Receive Any Underlier Stock
Investing in your notes will not make you a holder of any of the underlier stocks. Neither you nor any other holder or owner of your notes will have any voting
rights, any right to receive dividends or other distributions, any rights to make a claim against the underlier stocks or any other rights with respect to the underlier stocks. Your notes will be paid in cash and you will have no right to receive
delivery of any underlier stocks.
We May Sell an Additional Aggregate Face Amount of the Notes at a Different Issue Price
At our sole option, we may decide to sell an additional aggregate face amount of the notes subsequent to the date of this pricing supplement. The
issue price of the notes in the subsequent sale may differ substantially (higher or lower) from the original issue price you paid as provided on the cover of this pricing supplement.
If You Purchase Your Notes at a Premium to Face Amount, the Return on Your Investment Will Be Lower Than the Return on Notes Purchased at Face
Amount and the Impact of Certain Key Terms of the Notes Will be Negatively Affected
The cash settlement amount will not be adjusted based on the
issue price you pay for the notes. If you purchase notes at a price that differs from the face amount of the notes, then the return on your investment in such notes held to the stated maturity date will differ from, and may be substantially less
than, the return on notes purchased at face amount. If you purchase your notes at a premium to face amount and hold them to the stated maturity date the return on your investment in the notes will be lower than it would have been had you purchased
the notes at face amount or a discount to face amount. In addition, the impact of the buffer level and the cap level on the return on your investment will depend upon the price you pay for your notes relative to face amount. For example, if you
purchase your notes at a premium to face amount, the cap level will only permit a lower percentage increase in your investment in the notes than would have been the case for notes purchased at face amount or a discount to face amount. Similarly, the
buffer level, while still providing some protection for the return on the notes, will allow a greater percentage decrease in your investment in the notes than would have been the case for notes purchased at face amount or a discount to face amount.
Your Notes May Be Subject to an Adverse Change in Tax Treatment in the Future
The Internal Revenue Service announced on December 7, 2007 that it is considering issuing guidance regarding the proper U.S. federal income tax treatment of
an instrument such as your notes that are currently characterized as pre-paid derivative contracts, and any such guidance could adversely affect the tax treatment and the value of your notes. Among other things, the Internal Revenue Service may
decide to require the holders to accrue ordinary income on a current basis and recognize ordinary income on payment at maturity, and could subject non-U.S. investors to withholding tax. Furthermore, in 2007, legislation was introduced in Congress
that, if enacted, would have required holders that acquired instruments such as your notes after the bill was enacted to accrue interest income over the term of such notes even though there may be no interest payments over the term of such notes. It
is not possible to predict whether a similar or identical bill will be enacted in the future, or whether any such bill would affect the tax treatment of such notes. We describe these developments in more detail under Supplemental Discussion of
Federal Income Tax Consequences on page S-42 of the accompanying product supplement no. 3140. You should consult your tax advisor about this matter. Except to the extent otherwise provided by law, The Goldman Sachs Group, Inc. intends to
continue treating the notes for U.S. federal income tax purposes in accordance with the treatment described under Supplemental Discussion of Federal Income Tax Consequences on page S-42 of the accompanying product supplement no. 3140
unless and until such time as Congress, the Treasury Department or the Internal Revenue Service determine that some other treatment is more appropriate.
PS-12
Foreign Account Tax Compliance Act (FATCA) Withholding May Apply to Payments on Your Notes,
Including as a Result of the Failure of the Bank or Broker Through Which You Hold the Notes to Provide Information to Tax Authorities
Please see
the discussion under United States Taxation Taxation of Debt Securities Foreign Account Tax Compliance Act (FATCA) Withholding in the accompanying prospectus for a description of the applicability of FATCA to payments made
on your notes.
PS-13
THE UNDERLIER
The Russell
2000® Index is an index calculated, published and disseminated by Russell Investment Group (Russell), and
measures the composite price performance of stocks of 2,000 companies incorporated in the U.S., its territories and certain benefit-driven incorporation countries.
Russell will evaluate multiple share classes of a company independently for inclusion in the Russell 2000® Index. In order for a share class to be included independently of the companys primary vehicle, it must meet market
capitalization, average daily dollar trading value and float requirements. Where an additional share class does not meet the requirements, the shares will be aggregated with the primary vehicle. If a company distributes an additional share class to
existing shareholders through a mandatory corporate action or to the public through an IPO, the additional share class will be reviewed for independent inclusion at the time of distribution and if the share class is not eligible at the time of
distribution, it will be reviewed again for independent inclusion at the next reconstitution.
As of May 27, 2015, the 2,000
companies included in the Russell 2000® Index were divided into nine Russell Global Sectors. The Russell Global Sectors
include (with the approximate percentage currently included in such sectors indicated in parentheses):Consumer Discretionary (14.44%), Consumer Staples (2.76%), Financial Services (24.69%), Health Care (16.17%), Materials & Processing
(6.54%), Other Energy (3.19%), Producer Durables (12.85%), Technology (14.98%) and Utilities (4.38%). (Sector designations are determined by the underlier sponsor using criteria it has selected or developed. Index sponsors may use very
different standards for determining sector designations. In addition, many companies operate in a number of sectors, but are listed in only one sector and the basis on which that sector is selected may also differ. As a result, sector comparisons
between indices with different index sponsors may reflect differences in methodology as well as actual differences in the sector composition of the indices.)
The above information supplements the description of the underlier found in the accompanying general terms supplement. This information was derived from information prepared by the underlier sponsor, however, the
percentages we have listed above are approximate and may not match the information available on the underlier sponsors website due to subsequent corporation actions or other activity relating to a particular stock. For more details about the
underlier, the underlier sponsor and license agreement between the underlier sponsor and the issuer, see Russell
2000® Index on page S-55 of the accompanying general terms supplement.
The Russell
2000® Index is a trademark of Russell Investment Group (Russell) and has been licensed for use by The Goldman
Sachs Group, Inc.. The securities are not sponsored, endorsed, sold or promoted by Russell, and Russell makes no representation regarding the advisability of investing in the securities.
Historical Closing Levels of the Underlier
The closing level of the underlier has fluctuated in the past and may, in the future, experience significant fluctuations. Any historical upward or downward trend
in the closing level of the underlier during the period shown below is not an indication that the underlier is more or less likely to increase or decrease at any time during the life of your notes.
You should not take the historical levels of the underlier as an indication of the future performance of the underlier. We cannot give you any assurance
that the future performance of the underlier or the underlier stocks will result in your receiving an amount greater than the outstanding face amount of your notes on the stated maturity date.
Neither we nor any of our affiliates make any representation to you as to the performance of the underlier. The actual performance of the underlier over the life
of the offered notes, as well as the cash settlement amount, may bear little relation to the historical levels shown below.
The graph below shows the
daily historical closing levels of the underlier from May 27, 2005 through May 27, 2015. We obtained the closing levels in the graph below from Bloomberg Financial Services, without independent verification.
PS-14
PS-15
VALIDITY OF THE NOTES
In the opinion of Sidley Austin LLP, as counsel to The Goldman Sachs Group, Inc., when the notes offered by this pricing supplement have been executed and issued
by The Goldman Sachs Group, Inc. and authenticated by the trustee pursuant to the indenture, and delivered against payment as contemplated herein, such notes will be valid and binding obligations of The Goldman Sachs Group, Inc., enforceable in
accordance with their terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors rights generally, concepts of reasonableness and equitable principles of general applicability (including, without limitation,
concepts of good faith, fair dealing and the lack of bad faith), provided that such counsel expresses no opinion as to the effect of fraudulent conveyance, fraudulent transfer or similar provision of applicable law on the conclusions expressed
above. This opinion is given as of the date hereof and is limited to the Federal laws of the United States, the laws of the State of New York and the General Corporation Law of the State of Delaware as in effect on the date hereof. In addition, this
opinion is subject to customary assumptions about the trustees authorization, execution and delivery of the indenture and the genuineness of signatures and certain factual matters, all as stated in the letter of such counsel dated
September 15, 2014, which has been filed as Exhibit 5.5 to The Goldman Sachs Group, Inc.s registration statement on Form S-3 filed with the Securities and Exchange Commission on September 15, 2014.
PS-16
We have not authorized anyone to provide any information or to make any representations other than those contained or
incorporated by reference in this pricing supplement, the accompanying product supplement, the accompanying general terms supplement, the accompanying prospectus supplement or the accompanying prospectus. We take no responsibility for, and can
provide no assurance as to the reliability of, any other information that others may give you. This pricing supplement, the accompanying product supplement, the accompanying general terms supplement, the accompanying prospectus supplement and the
accompanying prospectus is an offer to sell only the notes offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this pricing supplement, the accompanying product supplement, the
accompanying general terms supplement, the accompanying prospectus supplement and the accompanying prospectus is current only as of the respective dates of such documents.
TABLE OF CONTENTS
Pricing Supplement
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Page |
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Summary Information |
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PS-4 |
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Hypothetical Examples |
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PS-7 |
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Additional Risk Factors Specific to Your Notes |
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PS-10 |
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The Underlier |
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PS-14 |
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Validity of the Notes |
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PS-16 |
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Product Supplement No. 3140 dated September 15, 2014 |
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Summary Information |
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S-1 |
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Hypothetical Returns on the Underlier-Linked Digital Notes |
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S-11 |
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Additional Risk Factors Specific to the Underlier-Linked Digital Notes |
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S-31 |
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General Terms of the Underlier-Linked Digital Notes |
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S-35 |
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Use of Proceeds |
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S-40 |
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Hedging |
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S-40 |
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Supplemental Discussion of Federal Income Tax Consequences |
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S-42 |
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Employee Retirement Income Security Act |
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S-49 |
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Supplemental Plan of Distribution |
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S-50 |
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General Terms Supplement dated September 26, 2014 |
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Additional Risk Factors Specific to the Notes |
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S-1 |
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Supplemental Terms of the Notes |
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S-13 |
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The Underliers |
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S-33 |
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S&P 500®
Index |
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S-37 |
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MSCI Indices |
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S-42 |
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Hang Seng China Enterprises Index |
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S-50 |
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Russell
2000® Index |
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S-55 |
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FTSE® 100
Index |
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S-62 |
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EURO STOXX
50® Index |
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S-67 |
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TOPIX |
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S-73 |
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The Dow Jones Industrial AverageTM |
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S-78 |
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The iShares®
MSCI Emerging Markets ETF |
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S-81 |
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Prospectus Supplement dated September 15, 2014 |
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Use of Proceeds |
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S-2 |
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Description of Notes We May Offer |
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S-3 |
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Considerations Relating to Indexed Notes |
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S-19 |
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United States Taxation |
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S-22 |
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Employee Retirement Income Security Act |
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S-23 |
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Supplemental Plan of Distribution |
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S-24 |
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Validity of the Notes |
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S-26 |
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Prospectus dated September 15, 2014 |
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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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39 |
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Description of Purchase Contracts We May Offer |
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56 |
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Description of Units We May Offer |
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61 |
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Description of Preferred Stock We May Offer |
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67 |
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Description of Capital Stock of The Goldman Sachs Group, Inc. |
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75 |
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Legal Ownership and Book-Entry Issuance |
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80 |
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Considerations Relating to Floating Rate Securities |
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85 |
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Considerations Relating to Indexed Securities |
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87 |
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Considerations Relating to Securities Denominated or Payable in or Linked to a Non-U.S. Dollar Currency |
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88 |
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United States Taxation |
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91 |
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Plan of Distribution |
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114 |
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Conflicts of Interest |
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117 |
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Employee Retirement Income Security Act |
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118 |
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Validity of the Securities |
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119 |
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Experts |
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119 |
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Review of Unaudited Condensed Consolidated Financial Statements by Independent Registered Public Accounting Firm |
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120 |
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Cautionary Statement Pursuant to the Private Securities Litigation Reform Act of 1995 |
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120 |
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$849,000
The Goldman Sachs Group, Inc.
Buffered Digital Russell 2000® Index-Linked Notes due 2018
Goldman, Sachs & Co.
Goldman Sachs (NYSE:GS)
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