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. 463
-------------------
(GOLDMAN SACHS LOGO)
THE GOLDMAN SACHS GROUP, INC.
Medium-Term Notes, Series B
-------------------
$20,000,334.60
4% Mandatory Exchangeable Notes due December 2005
(Exchangeable for Common Stock of EchoStar Communications 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 $33.57, which
is the initial index stock price; the aggregate face amount for all the
offered notes is $20,000,334.60
INITIAL INDEX STOCK PRICE: $33.57
ORIGINAL ISSUE PRICE: 100% of the face amount
NET PROCEEDS TO THE ISSUER: 99.9% of the face amount
TRADE DATE: December 21, 2004
SETTLEMENT DATE (ORIGINAL ISSUE DATE): December 29, 2004
STATED MATURITY DATE: December 30, 2005, unless extended for up to six business
days
INTEREST RATE (COUPON): 4% per year
INTEREST PAYMENT DATES: March 30, June 30, September 30, and December 30,
beginning March 30, 2005 and terminating on the stated maturity date
REGULAR RECORD DATES: for the interest payment dates specified above, five
business days before the respective interest payment dates
INDEX STOCK AND INDEX STOCK ISSUER: common stock of EchoStar Communications
Corporation
CUSIP NO.: 38143Y855
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.
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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.
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GOLDMAN, SACHS & CO.
-------------------
Pricing Supplement dated December 21, 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 $33.57 of the outstanding
face amount. Otherwise, the exchange rate
will equal one share of the index stock for
each $33.57 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 $33.57 of outstanding face amount on
the stated maturity date will not exceed
the threshold appreciation price and that
it could be substantially less than $33.57.
You could lose your entire investment in
the offered notes.
INITIAL INDEX STOCK PRICE: $33.57 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 $40.284 per share.
THRESHOLD FRACTION: The threshold appreciation price divided by
the final index stock price.
DETERMINATION DATE: The fifth business day prior to December
30, 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
TO YOUR NOTE: 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
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 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.
S-2
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.
ECHOSTAR COMMUNICATIONS
CORPORATION: According to its publicly available
documents, EchoStar Communications
Corporation is a provider of satellite
delivered digital television entertainment
services to customers across the United
States. Information filed with the SEC by
EchoStar Communications Corporation under
the Exchange Act can be located by
referencing its SEC file number: 000-26176.
HISTORICAL TRADING PRICE
INFORMATION: The index stock is traded on the Nasdaq
National Market System under the symbol
"DISH". The following table shows the
quarterly high, low and closing bid prices
for the index stock on the Nasdaq National
Market System for the four calendar
quarters in each of 2002 and 2003 and the
four calendar quarters in 2004, through
December 21, 2004. We obtained the trading
price information set forth below from
Bloomberg Financial Services, without
independent verification.
<Table>
<Caption>
HIGH LOW CLOSE
---- --- -----
2002
Quarter ended March 31...... 29.45 22.34 28.32
Quarter ended June 30....... 29.35 16.99 18.56
Quarter ended September 30.. 19.36 14.16 17.30
Quarter ended December 31... 23.09 16.89 22.26
2003
Quarter ended March 31...... 30.40 23.28 28.88
Quarter ended June 30....... 36.28 27.62 34.62
Quarter ended September 30.. 40.40 34.28 38.27
Quarter ended December 31... 40.53 30.34 34.00
2004
Quarter ended March 31...... 39.26 32.43 32.75
Quarter ended June 30....... 34.72 29.54 30.75
Quarter ended September 30.. 31.89 27.26 31.12
Quarter ending December 31
(through December 21,
2004)..................... 34.27 30.02 33.68
Closing price on December
21, 2004.................. 33.68
</Table>
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
S-3
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 $33.57 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
$33.57 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 $33.57 of the outstanding
face amount of your note on the stated
maturity date would equal 100% of the
initial index stock price, or $33.57, based
on the corresponding hypothetical final
index stock price and the assumptions noted
above.
<Table>
<Caption>
HYPOTHETICAL HYPOTHETICAL
FINAL INDEX PAYMENT
STOCK PRICE AMOUNTS AS
AS % OF % OF $33.57
INITIAL INDEX FACE
STOCK PRICE AMOUNT
------------- ------------
175% 120%
150% 120%
125% 120%
120% 120%
110% 110%
100% 100%
75% 75%
50% 50%
0% 0%
</Table>
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
S-4
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