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. 425
(GOLDMAN SACHS LOGO) THE GOLDMAN SACHS GROUP, INC.
Medium-Term Notes, Series B
$5,590,404
10.75% Mandatory Exchangeable Notes due March 2005
(Exchangeable for Common Stock of Ivax 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 $19.98, which is
the initial index stock price; the aggregate face amount for all the offered
notes is $5,590,404
INITIAL INDEX STOCK PRICE: $19.98
ORIGINAL ISSUE PRICE: 100% of the face amount
NET PROCEEDS TO THE ISSUER: 99.95% of the face amount
TRADE DATE: August 26, 2004
SETTLEMENT DATE (ORIGINAL ISSUE DATE): September 2, 2004
STATED MATURITY DATE: March 2, 2005, unless extended for up to six business days
INTEREST RATE (COUPON): 10.75% per year
INTEREST PAYMENT DATES: March 2 and December 2 in each year, beginning December
2, 2004
REGULAR RECORD DATES: for the interest payment dates specified above, February
23 and November 24
INDEX STOCK AND INDEX STOCK ISSUER: common stock of Ivax Corporation
CUSIP NO.: 38143U226
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.
PRICING SUPPLEMENT DATED AUGUST 26, 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 $19.98 of the outstanding face amount. Otherwise,
the exchange rate will equal one share of the index stock
for each $19.98 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 $19.98 of
outstanding face amount on the stated maturity date will not
exceed the threshold appreciation price and that it could be
substantially less than $19.98. You could lose your entire
investment in the offered notes.
INITIAL INDEX $19.98 per share.
STOCK PRICE:
FINAL INDEX STOCK The closing price of one share of the
PRICE: index stock on the determination date, subject to
anti-dilution adjustment.
THRESHOLD The initial index stock price times 1.20, which equals
APPRECIATION PRICE: $23.976 per share.
THRESHOLD FRACTION: The threshold appreciation price divided by the
final index stock price.
DETERMINATION DATE: The fifth business day prior to March 2, 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 ASSUMING NO CHANGES IN MARKET CONDITIONS OR ANY OTHER
FACTORS SPECIFIC RELEVANT FACTORS, THE VALUE OF YOUR NOTE ON THE DATE OF THIS
TO YOUR NOTE: 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 your note or otherwise values your note, that price
may be significantly different (higher or lower) than any
price quoted
S-2
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.
IVAX CORPORATION: According to its publicly available documents, Ivax
Corporation is a multinational company engaged in the
research, development, manufacture and marketing of
pharmaceutical products. Information filed with the SEC by
Ivax Corporation under the Exchange Act can be located by
referencing its SEC file number: 001-09623.
HISTORICAL The index stock is traded on the American Stock Exchange
TRADING PRICE under the symbol "IVX". The following table shows the
INFORMATION: quarterly high and low trading prices and the quarterly
closing prices for the index stock on the American Stock
Exchange for the four calendar quarters in each of 2002 and
2003 and the three calendar quarters in 2004, through August
26, 2004. We obtained the trading price information shown
below from Bloomberg Financial Services, without independent
verification.
HIGH LOW CLOSE
----- ----- -----
2002
Quarter ended March 31........... 16.86 12.32 12.84
Quarter ended June 30............ 12.72 8.42 8.64
Quarter ended September 30....... 11.59 8.04 9.82
Quarter ended December 31........ 10.87 8.67 9.70
2003
Quarter ended March 31........... 10.12 8.49 9.80
Quarter ended June 30............ 15.96 9.96 14.28
Quarter ended September 30....... 16.36 13.22 15.68
Quarter ended December 31........ 19.40 14.16 19.10
2004
Quarter ended March 31........... 21.46 17.81 18.22
Quarter ended June 30............ 19.83 16.93 19.19
Quarter ending September 30
(through August 26, 2004) ..... 20.18 16.03 19.56
Closing Price on August 26, 2004. 19.56
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 The table below shows the hypothetical payment amounts that
PAYMENT AMOUNT: we would deliver on the stated maturity date in exchange for
each $19.98 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 $19.98 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 $19.98 of the outstanding face amount of your note
on the stated maturity date would equal 100% of the initial
index stock price, or $19.98, 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 $19.98 FACE AMOUNT
------------------------- ------------------
200% 120%
175% 120%
150% 120%
125% 120%
110% 110%
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