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. 422
[GOLDMAN SACHS LOGO]
THE GOLDMAN SACHS GROUP, INC.
Medium-Term Notes, Series B
---------------------------
$5,191,809.87
10.25% Mandatory Exchangeable Notes due February 2005
(Exchangeable for Common Stock of Synopsys, Inc.)
---------------------------
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 $14.7369, which
is the initial index stock price; the aggregate face amount for all the offered
notes is $5,191,809.87
INITIAL INDEX STOCK PRICE: $14.7369
ORIGINAL ISSUE PRICE: 100% of the face amount
NET PROCEEDS TO THE ISSUER: 99.95% of the face amount
TRADE DATE: August 19, 2004
SETTLEMENT DATE (ORIGINAL ISSUE DATE): August 26, 2004
STATED MATURITY DATE: February 26, 2005, unless extended for up to six business
days
INTEREST RATE (COUPON): 10.25% per year
INTEREST PAYMENT DATES: September 26, October 26, November 26, December 26,
January 26 and February 26 in each year, beginning September 26, 2004
REGULAR RECORD DATES: for the interest payment dates specified above September
20, October 19, November 18, December 17, January 19 and February 18
INDEX STOCK AND INDEX STOCK ISSUER: common stock of Synopsys, Inc.
CUSIP NO.: 38143U242
Your investment in the notes involves certain risks. In particular,
assuming no changes in market conditions or any other relevant factors, the
value of your note on the date of this pricing supplement (as determined by
reference to pricing models used by Goldman, Sachs & Co.) is significantly less
than the original issue price. We encourage you to read "Additional Risk Factors
Specific to Your Note" beginning on page S-2 of this pricing supplement and 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.
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PRICING SUPPLEMENT DATED AUGUST 19, 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 $14.7369
of the outstanding face amount.
Otherwise, the exchange rate will equal
one share of the index stock for each
$14.7369 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 $14.7369 of outstanding face
amount on the stated maturity date will
not exceed the threshold appreciation
price and that it could be
substantially less than $14.7369. You
could lose your entire investment in
the offered notes.
INITIAL INDEX STOCK PRICE: $14.7369 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
1.20, which equals $17.6843 per share.
THRESHOLD FRACTION: The threshold appreciation price
divided by the final index stock price.
DETERMINATION DATE: The fifth business day prior to
February 26, 2005 unless extended for
up to five business days.
NO LISTING: The offered notes will not be listed on
any securities exchange or interdealer
market quotation system.
ADDITIONAL RISK FACTORS SPECIFIC ASSUMING NO CHANGES IN MARKET
TO YOUR NOTE: CONDITIONS OR ANY OTHER RELEVANT
FACTORS, THE VALUE OF YOUR NOTE ON THE
DATE OF THIS PRICING SUPPLEMENT (AS
DETERMINED BY REFERENCE TO PRICING
MODELS USED BY GOLDMAN, SACHS & CO.) IS
SIGNIFICANTLY LESS THAN THE ORIGINAL
ISSUE PRICE
The value or quoted price of your note
at any time will reflect many factors
and cannot be predicted. If Goldman,
Sachs & Co. makes a market in the
offered notes, the price quoted by
Goldman, Sachs & Co. would reflect any
changes in market conditions and other
relevant factors, and the quoted price
could be higher or lower than the
original issue price, and may be higher
or lower than the value of your note 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
S-2
your note or otherwise values your
note, 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 Note -- The
Market Price of Your Note May Be
Influenced by Many Unpredictable
Factors" in the accompanying prospectus
supplement no. 371.
Furthermore, if you sell your note, 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 note; and, in
this regard, Goldman, Sachs & Co. is
not obligated to make a market in the
notes. See "Additional Risk Factors
Specific to Your Note -- Your Note May
Not Have an Active Trading Market" in
the accompanying prospectus supplement
no. 371.
SYNOPSYS, INC. According to its publicly available
documents, Synopsys, Inc. is a producer
of electronic design automation
software used to design complex
integrated circuits and
systems-on-chips in the global
semiconductor and electronics
industries. Information filed with the
SEC by Synopsys, Inc. under the
Exchange Act can be located by
referencing its SEC file number:
000-19807.
HISTORICAL TRADING PRICE The index stock is traded on the Nasdaq
INFORMATION: National Market System under the symbol
"SNPS". The following table shows the
quarterly high and low trading prices
and the quarterly closing prices for
the index stock on the Nasdaq National
Market System for the four calendar
quarters in each of 2002 and 2003 and
the three calendar quarters in 2004,
through August 19, 2004. We obtained
the trading price information shown
below from Bloomberg Financial
Services, without independent
verification.
HIGH LOW CLOSE
---- --- -----
2002
Quarter ended March 31 ............. 29.43 22.84 27.58
Quarter ended June 30 .............. 27.6485 20.855 27.405
Quarter ended September 30 ......... 27.025 19.075 19.075
Quarter ended December 31 .......... 26.43 16.315 23.075
2003
Quarter ended March 31 ............. 23.46 18.25 21.286
Quarter ended June 30 .............. 32.01 21.565 30.965
Quarter ended September 30 ......... 34.50 30.00 30.91
Quarter ended December 31 .......... 34.75 27.07 33.86
2004
Quarter ended March 31 ............. 37.36 27.49 28.73
Quarter ended June 30 .............. 30.78 25.19 28.43
Quarter ending September 30
(through August 19, 2004) ........ 28.11 14.65 14.65
Closing Price on August 19, 2004.... 14.65
S-3
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.
HYPOTHETICAL PAYMENT AMOUNT: The table below shows the hypothetical
payment amounts that we would deliver
on the stated maturity date in exchange
for each $14.7369 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 $14.7369 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
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
$14.7369 of the outstanding face amount
of your note on the stated maturity
date would equal 100% of the initial
index stock price, or $14.7369, 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 $14.7369 FACE AMOUNT
- ------------------------- --------------------
175% 120%
150% 120%
125% 120%
120% 120%
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 are economically
equivalent to the amounts that would be
paid on a combination of other
instruments. For example, payments on
your note are 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