Filed Pursuant to Rule 424 (b) (3)
Registration Statement No. 333-112367
PRICING SUPPLEMENT TO THE PROSPECTUS SUPPLEMENT NO. 410 DATED JULY 6, 2004 --
NO. 472
(GOLDMAN SACHS LOGO)
THE GOLDMAN SACHS GROUP, INC.
Medium-Term Notes, Series B
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$12,031,200
7.25% Trigger Mandatory Exchangeable Notes due February 2006
(Exchangeable for Common Stock of The Gap, Inc.)
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This pricing supplement and the accompanying prospectus supplement no. 410,
relating to the trigger mandatory exchangeable notes, should be read together.
Because the trigger 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. 410 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. 410,
unless the context requires otherwise.
The trigger 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. 410, 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 $22.28, which is
the initial index stock price; the aggregate face amount for all the offered
notes is $12,031,200
INITIAL INDEX STOCK PRICE: $22.28
ORIGINAL ISSUE PRICE: 100% of the face amount
NET PROCEEDS TO THE ISSUER: 99.9% of the face amount
TRADE DATE: January 27, 2005
SETTLEMENT DATE (ORIGINAL ISSUE DATE): February 3, 2005
STATED MATURITY DATE: February 6, 2006, unless extended for up to six business
days
INTEREST RATE (COUPON): 7.25% per year
INTEREST PAYMENT DATES: the 6th calendar day of each month, until maturity,
commencing on March 6, 2005
REGULAR RECORD DATES: for the interest payment dates specified above, five
business days before each interest payment date
INDEX STOCK AND INDEX STOCK ISSUER: common stock of The Gap, Inc.
CUSIP NO.: 38143Y772
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-3 of this pricing supplement and on
page S-3 of the accompanying prospectus supplement no. 410 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.
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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 JANUARY 27, 2005.
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 cap price, then the exchange rate
will equal the cap fraction times one share
of index stock for each $22.28 of the
outstanding face amount, regardless of
whether the market price of the index stock
falls below the threshold price at any time
during the measurement period.
If the market price of the index stock does
not fall below the threshold price at any
time during the measurement period, then:
- if the final index stock price is
less than the cap price but equals
or exceeds the initial stock price,
the exchange rate will equal one
share of the index stock for each
$22.28 of the outstanding face
amount; or
- if the final index stock price is
less than the initial index stock
price, the exchange rate will equal
the threshold fraction times one
share of index stock for each
$22.28 of the outstanding face
amount.
If the market price of the index stock falls
below the threshold price at any time during
the measurement period, then:
- the exchange rate will equal one
share of the index stock for each
$22.28 of the outstanding face
amount.
The exchange rate is subject to anti-dilution
adjustment as described in the accompanying
prospectus supplement no. 410.
Please note that the amount you receive for
each $22.28 of outstanding face amount on the
stated maturity date will not exceed the cap
price and that it could be substantially less
than $22.28. You could lose your entire
investment in the offered notes.
INITIAL INDEX STOCK PRICE: $22.28 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.
CAP PRICE: The initial index stock price times 1.10,
which equals $24.508 per share.
CAP FRACTION: The cap price divided by the final index
stock price.
THRESHOLD PRICE: The initial index stock price times 0.80,
which equals $17.824 per share.
S-2
THRESHOLD FRACTION: The initial index stock price divided by the
final index stock price.
MEASUREMENT PERIOD: Any trading day from but not including the
trade date up to and including the
determination date.
DETERMINATION DATE: The fifth business day prior to the stated
maturity date unless extended for up to five
business days.
BUSINESS DAY: As described on page S-17 of the accompanying
prospectus supplement no. 410.
TRADING DAY: A day on which the principal securities
market of the index stock is open for
business.
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 CONDITIONS OR
TO YOUR NOTE: 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, however, 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. 410.
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. 410.
S-3
THE GAP, INC.: According to its publicly available
documents, The Gap, Inc. is a global
specialty retailer operating stores selling
casual apparel, accessories, and personal
care products for men, women and children
under the Gap, Banana Republic and Old Navy
brands. Information filed with the SEC by The
Gap, Inc. under the Exchange Act can be
located by referencing its SEC file number:
001-07562.
HISTORICAL TRADING PRICE The index stock is traded on the New York
INFORMATION: Stock Exchange under the symbol "GPS". The
following table shows the quarterly high, low
and final closing prices for the index stock
as traded on the New York Stock Exchange for
the four calendar quarters in each of 2003
and 2004 and the first calendar quarter in
2005, through January 27, 2005. We obtained
the trading price information shown below
from Bloomberg Financial Services, without
independent verification.
HIGH LOW CLOSE
------ ------ ------
2003
Quarter ended March 31 ......... $16.07 $12.70 $14.49
Quarter ended June 30 .......... $18.76 $14.70 $18.76
Quarter ended September 30 ..... $21.03 $17.12 $17.12
Quarter ended December 31 ...... $23.24 $17.63 $23.21
2004
Quarter ended March 31 ......... $23.10 $18.40 $21.92
Quarter ended June 30 .......... $25.66 $21.70 $24.25
Quarter ended September 30 ..... $24.52 $18.65 $18.65
Quarter ended December 31 ...... $23.60 $18.95 $21.12
2005
Quarter ending March 31
(through January 27, 2005) .. $21.84 $20.65 $21.84
Closing price on January 27,
2005 ........................ $21.84
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.
410.
S-4
HYPOTHETICAL PAYMENT AMOUNT: The tables below show the hypothetical
payment amounts that we would deliver on the
stated maturity date in exchange for each
$22.28 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 first table
shows the hypothetical payment amounts in the
case where the market price of the index
stock does not fall below $17.824, the
threshold price, at any time during the
measurement period. The second table shows
the hypothetical payment amounts in the case
where the market price does fall below
$17.824 at any time during the measurement
period.
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 $22.28 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 $22.28 of the
outstanding face amount of your note on the
stated maturity date would equal 100% of the
initial index stock price, or $22.28, based
on the corresponding hypothetical final index
stock price and the assumptions noted above.
If the market price of the index stock does
not fall below the threshold price at any
time during the measurement period:
HYPOTHETICAL FINAL
INDEX STOCK PRICE AS % HYPOTHETICAL PAYMENT
OF INITIAL INDEX AMOUNTS AS % OF
STOCK PRICE $22.28 FACE AMOUNT
---------------------- --------------------
175% 110%
150% 110%
120% 110%
110% 110%
100% 100%
80% 100%
S-5
If the market price of the index stock does
fall below the threshold price at any time
during the measurement period:
HYPOTHETICAL FINAL
INDEX STOCK PRICE AS % HYPOTHETICAL PAYMENT
OF INITIAL INDEX AMOUNTS AS % OF
STOCK PRICE $22.28 FACE AMOUNT
---------------------- --------------------
175% 110%
150% 110%
120% 110%
110% 110%
100% 100%
90% 90%
80% 80%
70% 70%
50% 50%
0% 0%
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.
410.
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. 410 and below.
S-6
SUPPLEMENTAL DISCUSSION OF
FEDERAL INCOME TAX
CONSEQUENCES: The following section supplements the
discussion of U.S. federal income taxation in
the accompanying prospectus and prospectus
supplement no. 410 with respect to United
States holders. Except as described below,
the discussion of U.S. federal income
taxation in the accompanying prospectus
supplement no. 410 does not apply to your
note.
The following section is the opinion of
Sullivan & Cromwell LLP, counsel to The
Goldman Sachs Group, Inc. In addition, it is
the opinion of Sullivan & Cromwell LLP that
the characterization of the note for U.S.
federal income tax purposes that will be
required under the terms of the note, as
discussed below, is a reasonable
interpretation of current law. This section
applies to you only if you are a United
States holder (as defined in the accompanying
prospectus supplement no. 410) that holds
your note as a capital asset for tax
purposes. This section does not apply to you
if you are a member of a class of holders
subject to special rules, as described in the
accompanying prospectus supplement no. 410.
Although this section is based on the U.S.
Internal Revenue Code of 1986, as amended,
its legislative history, existing and
proposed regulations under the Internal
Revenue Code, published rulings and court
decisions, all as currently in effect, no
statutory, judicial or administrative
authority directly discusses how your note
should be treated for U.S. federal income tax
purposes and as a result, the U.S. federal
income tax consequences of your investment in
your note are uncertain. Moreover, these laws
are subject to change, possibly on a
retroactive basis.
YOU SHOULD CONSULT YOUR TAX ADVISOR
CONCERNING THE U.S. FEDERAL INCOME TAX AND
OTHER TAX CONSEQUENCES OF YOUR INVESTMENT IN
THE NOTE, INCLUDING THE APPLICATION OF STATE,
LOCAL OR OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX
LAWS.
You will be obligated pursuant to the terms
of the note -- in the absence of an
administrative determination or judicial
ruling to the contrary -- to characterize
your note for all tax purposes as a forward
contract to purchase the index stock at the
stated maturity date, under the terms of
which contract:
(1) at the time of issuance of your note you
deposit irrevocably with us a fixed amount of
cash equal to the purchase price of your note
to assure the fulfillment of your purchase
obligation described in clause (3) below,
which deposit will unconditionally and
irrevocably be applied at the stated maturity
date to satisfy that obligation,
S-7
(2) until the stated maturity date we will be
obligated to pay interest on the deposit at a
rate equal to the stated rate of interest on
your note as compensation to you for our use
of the cash deposit during the term of the
note, and
(3) at the stated maturity date the cash
deposit unconditionally and irrevocably will
be applied by us in full satisfaction of your
obligation under the forward purchase
contract, and we will deliver to you the
number of shares of the index stock -- or, at
our option, an amount of cash equal to the
value of the shares of the index stock --
that you are entitled to receive at that time
pursuant to the terms of your note.
Although you will be obligated to treat the
payment of the purchase price for your note
as a deposit for U.S. federal income tax
purposes, the cash proceeds that we will
receive from the offering will not be
segregated by us during the term of your
note, but instead will be commingled with our
other assets.
Consistent with the above characterization,
amounts paid to us in respect of the original
issue of your note will be treated as
allocable in their entirety to the amount of
the cash deposit attributable to your note,
and amounts denominated as interest that are
payable with respect to your note will be
characterized as interest payable on the
amount of the deposit. Interest will be
includible annually in your income in
accordance with your method of accounting.
If your note is characterized as described
above, you are an initial purchaser of your
note who has purchased your note at the
original issue price and we elect to deliver
shares of the index stock at the stated
maturity date, you would not recognize gain
or loss on the purchase of the stock. You
would have an aggregate tax basis in the
index stock equal to your tax basis in your
note, less the portion of the tax basis of
your note allocable to any fractional shares,
as described in the next sentence, and would
have a holding period in the index stock
beginning on the date after the stated
maturity date. You would recognize short-term
capital gain or loss with respect to cash
received in lieu of any fractional shares, in
an amount equal to the difference between the
cash received and the portion of the basis of
your note allocable to the fractional shares.
S-8
If we deliver cash at the stated maturity
date, you would generally recognize capital
gain or loss equal to the difference between
the amount of cash received and your tax
basis in the note and the holding period for
purposes of such capital gain and loss will
begin on the day following the first day you
held the note.
If your note is characterized as described
above and you purchase your note at a price
other than the adjusted issue price as
determined for tax purposes, you would likely
be required to allocate your purchase price
for the note between the deposit component
and forward contract component of your note.
If the amount allocated to the deposit
component of your note is not equal to the
principal amount of the note, you may be
subject to the market discount rules
described in the accompanying prospectus
under "United States Taxation -- Taxation of
Debt Securities -- United States Holders --
Original Issue Discount -- Market Discount".
Your note may also be subject to the
amortizable bond premium rules described in
the accompanying prospectus under "United
States Taxation -- Taxation of Debt
Securities -- United States Holders --
Original Issue Discount -- Debt Securities
Purchased at a Premium". You would generally
be treated upon maturity of your note in the
same manner described above with respect to
initial purchasers of notes, except that (1)
you would be required to recognize gain or
loss with respect to the deposit component of
your note in an amount equal to any market
discount (including any de minimis market
discount) or premium, respectively, not
previously taken into account by you with
respect to the deposit component of your
notes, and (2) for purposes of computing any
gain or loss recognized at such time or your
basis in any stock received at such time, you
would be required to adjust your purchase
price for your note to take into account any
market discount (including de minimis market
discount) or premium previously taken into
account (either over the term of your note or
upon maturity of your note) with respect to
your note. Because the appropriate U.S.
federal income tax treatment of persons who
purchase notes at a price other than the
adjusted issue price as determined for tax
purposes is unclear, those persons are urged
to consult their tax advisors regarding the
tax consequences of their purchase of notes.
S-9
If your note is characterized as described
above, your tax basis in your note generally
would equal your cost for your note, as
adjusted for any accruals of market discount
or amortization of bond premium. Upon the
sale or exchange of your note, you would
recognize gain or loss equal to the
difference between the amount realized on the
sale or exchange and your tax basis in your
note. The gain or loss generally will be
long-term capital gain or loss, except to the
extent attributable to accrued but unpaid
interest and any accrued market discount not
previously included in income, if you hold
your note for more than one year. If you hold
your note for less than one year, the gain or
loss generally will be short-term capital
gain or loss, except to the extent
attributable to accrued but unpaid interest
and any accrued market discount not
previously included in income.
There is no judicial or administrative
authority discussing how your note should be
treated for U.S. federal income tax purposes.
Therefore, the Internal Revenue Service might
assert that treatment other than that
described above is more appropriate. For
example, the Internal Revenue Service could
treat your note as a single debt instrument
subject to special rules governing contingent
payment obligations. Under those rules, the
amount of interest you are required to take
into account for each accrual period would be
determined by constructing a projected
payment schedule for the note and applying
rules similar to those for accruing original
issue discount on a hypothetical
noncontingent debt instrument with that
projected payment schedule. This method is
applied by first determining the comparable
yield -- i.e., the yield at which we would
issue a noncontingent fixed rate debt
instrument with terms and conditions similar
to your note -- and then determining a
payment schedule as of the issue date that
would produce the comparable yield. These
rules may have the effect of requiring you to
include interest in income in respect of your
note prior to your receipt of cash
attributable to that income.
S-10
If the rules governing contingent payment
obligations apply, you would recognize gain
or loss upon the sale or maturity of your
note -- including if you receive index stock
at that time -- in an amount equal to the
difference, if any, between the fair market
value of the amount you receive at that time
-- which, in the case of index stock, would
equal the fair market value of the index
stock at the stated maturity date -- and your
adjusted basis in your note. In general, your
adjusted basis in your note would equal the
amount you paid for your note, increased by
the amount of interest you previously accrued
with respect to your note, in accordance with
the comparable yield and the projected
payment schedule for your note, and decreased
by the amount of interest payments you
received with respect to your note. Your
holding period in any index stock you receive
upon the maturity of your note would begin on
the day after the stated maturity date.
If the rules governing contingent payment
obligations apply, any gain you recognize
upon the sale or maturity of your note would
be ordinary interest income. Any loss you
recognize at that time would be ordinary loss
to the extent of interest you included as
income in the current or previous taxable
years in respect of your note, and
thereafter, as capital loss.
If the rules governing contingent payment
obligations apply, special rules would apply
to persons who purchase a note at a price
other than the adjusted issue price as
determined for tax purposes.
It is possible that the Internal Revenue
Service could seek to characterize your note
in a manner that results in tax consequences
to you different from those described above.
For example, the Internal Revenue Service
could seek to allocate less than all the
amounts you paid for your note to the cash
deposit described above and treat the cash
deposit as a debt instrument acquired at a
discount. In that case, you would be required
to include such original issue discount in
income as it accrues in addition to stated
interest on your note. The Internal Revenue
Service could also seek to characterize your
note as a notional principal contract, or as
a prepaid forward without a cash deposit
component. You should consult your tax
advisors as to possible alternative
characterizations of your note for U.S.
federal income tax purposes.
S-11
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. 410.
S-12