Filed Pursuant to Rule 424(b)(3)
Registration Statement No. 333-112367
PRICING SUPPLEMENT TO THE PROSPECTUS SUPPLEMENT NO. 371 DATED FEBRUARY 6, 2004
-- NO. 397
(GOLDMAN SACHS LOGO)
THE GOLDMAN SACHS GROUP, INC.
Medium-Term Notes, Series B
----------
$12,178,568.16
6.5% Mandatory Exchangeable Notes due November 2004
(Exchangeable for Common Stock of Cooper Cameron Corporation)
----------
This pricing supplement and the accompanying prospectus supplement no. 371,
relating to the mandatory exchangeable notes, should be read together. Because
the mandatory exchangeable notes are part of a series of our debt securities
called Medium-Term Notes, Series B, this pricing supplement and the accompanying
prospectus supplement no. 371 should also be read with the accompanying
prospectus dated February 6, 2004, as supplemented by the accompanying
prospectus supplement dated February 6, 2004. Terms used here have the meanings
given them in the accompanying prospectus supplement no. 371, unless the context
requires otherwise.
The mandatory exchangeable notes offered by this pricing supplement, which
we call the "offered notes" or the "notes", have the terms described in the
accompanying prospectus supplement no. 371, as supplemented or modified by the
following:
ISSUER: The Goldman Sachs Group, Inc.
FACE AMOUNT: each offered note will have a face amount equal to $48.7728, which
is the initial index stock price; the aggregate face amount for all the offered
notes is $12,178,568.16
ORIGINAL ISSUE PRICE: 100% of the face amount
NET PROCEEDS TO THE ISSUER: 99.95% of the face amount
TRADE DATE: May 5, 2004
SETTLEMENT DATE (ORIGINAL ISSUE DATE): May 12, 2004
STATED MATURITY DATE: November 12, 2004, unless extended for up to six business
days
INTEREST RATE (COUPON): 6.5% per year
INTEREST PAYMENT DATES: June 12, July 12, August 12, September 12, October 12
and November 12, beginning on June 12, 2004
REGULAR RECORD DATES: for the interest payment dates specified above June 7,
July 2, August 5, September 3, October 4 and November 4, 2004 respectively
INDEX STOCK AND INDEX STOCK ISSUER: common stock of Cooper Cameron Corporation
CUSIP NO.: 38143U416
Your investment in the notes involves certain risks. We encourage you to
read "Additional Risk Factors Specific to Your Note" beginning on page S-3 of
the accompanying prospectus supplement no. 371 so that you may better understand
those risks. The offered notes are not principal-protected and the payment
amount is capped.
----------
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 PRICING SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------
Goldman Sachs may use this pricing supplement in the initial sale of the
offered notes. In addition, Goldman, Sachs & Co. or any other affiliate of
Goldman Sachs may use this pricing supplement in a market-making transaction in
an offered note after its initial sale. UNLESS GOLDMAN SACHS OR ITS AGENT
INFORMS THE PURCHASER OTHERWISE IN THE CONFIRMATION OF SALE, THIS PRICING
SUPPLEMENT IS BEING USED IN A MARKET-MAKING TRANSACTION.
GOLDMAN, SACHS & CO.
----------
PRICING SUPPLEMENT DATED MAY 5, 2004.
PRINCIPAL AMOUNT: On the stated maturity date, each offered
note will be exchanged for index stock at the
exchange rate or, at the option of Goldman
Sachs, for the cash value of that stock based
on the final index stock price.
EXCHANGE RATE: If the final index stock price equals or
exceeds the threshold appreciation price,
then the exchange rate will equal the
threshold fraction times one share of index
stock for each $48.7728 of the outstanding
face amount. Otherwise, the exchange rate
will equal one share of the index stock for
each $48.7728 of the outstanding face amount.
The exchange rate is subject to anti-dilution
adjustment as described in the accompanying
prospectus supplement no. 371.
Please note that the amount you receive for
each $48.7728 of outstanding face amount on
the stated maturity date will not exceed the
threshold appreciation price and that it
could be substantially less than $48.7728.
You could lose your entire investment in the
offered notes.
INITIAL INDEX STOCK PRICE: $48.7728 per share.
FINAL INDEX STOCK PRICE: The closing price of one share of the index
stock on the determination date, subject to
anti-dilution adjustment.
THRESHOLD APPRECIATION PRICE: The initial index stock price times 1.10,
which equals $53.65 per share.
THRESHOLD FRACTION: The threshold appreciation price divided by
the final index stock price.
NO LISTING: The offered notes will not be listed on any
securities exchange or interdealer market
quotation system.
COOPER CAMERON CORPORATION: According to its publicly available
documents, Cooper Cameron Corporation
designs, manufactures, markets and services
equipment used by the oil and gas industry
and industrial manufacturing companies.
Information filed with the SEC by the index
stock issuer under the Exchange Act can be
located by referencing its SEC file number:
001-13884.
HISTORICAL TRADING PRICE The index stock is traded on the New York
INFORMATION: Stock Exchange under the symbol "CAM". The
following table shows the quarterly high and
low trading prices and the quarterly closing
prices for the index stock on the New York
Stock Exchange for the four calendar quarters
in each of 2002 and 2003 and for the two
calendar quarters in 2004, through May 5,
2004. We obtained the trading price
information shown below from Bloomberg
Financial Services, without independent
verification.
S-2
HIGH LOW CLOSE
---- --- -----
2002
Quarter ended March 31 .... 52.98 36.4 51.11
Quarter ended June 30 ...... 59.6 47.99 48.42
Quarter ended September 30 . 50.86 35.94 41.76
Quarter ended December 31 .. 53.31 38.56 49.82
2003
Quarter ended March 31 .... 54.55 44 49.51
Quarter ended June 30 ...... 55.6 44.8 50.38
Quarter ended September 30 . 51.5 45 46.21
Quarter ended December 31 .. 48.66 41.3 46.6
2004
Quarter ended March 31 ..... 49.49 40.34 44.05
Quarter ending June 30
(through May 5, 2004) ... 50.78 42.93 48.96
Closing price on May 5, 2004 48.96
As indicated above, the market price of the
index stock has been highly volatile during
recent periods. It is impossible to predict
whether the price of the index stock will
rise or fall, and you should not view the
historical prices of the index stock as an
indication of future performance. See
"Additional Risk Factors Specific to Your
Note -- The Market Price of Your Note May Be
Influenced by Many Unpredictable Factors" in
the accompanying prospectus supplement no.
371.
S-3
HYPOTHETICAL PAYMENT AMOUNT: The table below shows the hypothetical
payment amounts that we would deliver on the
stated maturity date in exchange for each
$48.7728 of the outstanding face amount of
your note, if the final index stock price
were any of the hypothetical prices shown in
the left column. For this purpose, we have
assumed that there will be no anti-dilution
adjustments to the exchange rate and no
market disruption events.
The prices in the left column represent
hypothetical closing prices for one share of
index stock on the determination date and are
expressed as percentages of the initial index
stock price, which equals $48.7728 per share.
The amounts in the right column represent the
hypothetical cash value of the index stock to
be exchanged, based on the corresponding
hypothetical final index stock prices, and
are also expressed as percentages of the
initial index stock price. Thus, a
hypothetical payment amount of 100% means
that the cash value of the index stock that
we would deliver in exchange for each
$48.7728 of the outstanding face amount of
your note on the stated maturity date would
equal 100% of the initial index stock price,
or $48.7728, based on the corresponding
hypothetical final index stock price and the
assumptions noted above.
HYPOTHETICAL FINAL INDEX HYPOTHETICAL PAYMENT
STOCK PRICE AS % OF AMOUNTS AS % OF
INITIAL INDEX STOCK PRICE INITIAL INDEX STOCK PRICE
------------------------- -------------------------
175% 110%
150% 110%
125% 110%
110% 110%
105% 105%
100% 100%
75% 75%
50% 50%
0% 0%
S-4
The payment 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 note on the stated
maturity date or at any other time, including
any time you may wish to sell your note, may
bear little relation to the hypothetical
payment amounts shown above, and those
amounts should not be viewed as an indication
of the financial return on an investment in
the offered notes or on an investment in the
index stock. Please read "Additional Risk
Factors Specific to Your Note" and
"Hypothetical Payment Amounts on Your Note"
in the accompanying prospectus supplement no.
371.
Payments on your note may be economically
equivalent to the amounts that would be paid
on a combination of other instruments. For
example, payments on your note may be
economically equivalent to the amounts that
would be paid on a combination of an interest
bearing bond bought, and an option sold, by
the holder (with an implicit option premium
paid over time to the holder). The discussion
in this paragraph does not modify or affect
the terms of the offered notes or the United
States income tax treatment of the offered
notes as described under "Supplemental
Discussion of Federal Income Tax
Consequences" in the accompanying prospectus
supplement no. 371.
HEDGING: In anticipation of the sale of the offered
notes, we and/or our affiliates have entered
into hedging transactions involving purchases
of the index stock on the trade date. For a
description of how our hedging and other
trading activities may affect the value of
your note, see "Additional Risk Factors
Specific to Your Note -- Our Business
Activities May Create Conflicts of Interest
Between You and Us" and "Use of Proceeds and
Hedging" in the accompanying prospectus
supplement no. 371.
S-5