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. 476
(GOLDMAN SACHS LOGO)
THE GOLDMAN SACHS GROUP, INC.
Medium-Term Notes, Series B
-------------------------
$20,000,179.31
7.4% Trigger Mandatory Exchangeable Notes due February 2006
(Exchangeable for Common Stock of Merck & Co., Inc.)
-------------------------
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 $28.733, which
is the initial index stock price; the aggregate face amount for all the offered
notes is $20,000,179.31
INITIAL INDEX STOCK PRICE: $28.733
ORIGINAL ISSUE PRICE: 100% of the face amount
NET PROCEEDS TO THE ISSUER: 99.9% of the face amount
TRADE DATE: February 9, 2005
SETTLEMENT DATE (ORIGINAL ISSUE DATE): February 16, 2005
STATED MATURITY DATE: February 17, 2006, unless extended for up to six business
days
INTEREST RATE (COUPON): 7.4% per year
INTEREST PAYMENT DATES: on each May 17, August 17, November 17 and February 17
until Maturity, commencing on May 17, 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 Merck & Co., Inc.
CUSIP NO.: 38143Y756
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.
----------------------
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 February 9, 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 $28.733 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
$28.733 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 $28.733 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 $28.733 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
$28.733 of outstanding face amount on the stated
maturity date will not exceed the cap price and
that it could be substantially less than
$28.733. You could lose your entire investment
in the offered notes.
INITIAL INDEX STOCK PRICE: $28.733 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 $31.6063 per share.
CAP FRACTION: The cap price divided by the final index stock
price.
THRESHOLD PRICE: The initial index stock price times 0.82, which
equals $23.561 per share.
THRESHOLD FRACTION: The initial index stock price divided by the
final index stock price.
S-2
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 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, 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.
MERCK & CO., INC.: According to its publicly available documents,
Merck & Co., Inc. is a global research-driven
pharmaceutical products company that discovers,
develops, manufactures and markets a broad range
of products to improve human and animal health.
Information filed with the SEC by Merck & Co.,
Inc. under the Exchange Act can be located by
referencing its SEC file number: 001-03305.
S-3
HISTORICAL TRADING PRICE
INFORMATION: The index stock is traded on the New York Stock
Exchange under the symbol "MRK". 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
February 9, 2005. We obtained the trading price
information shown below from Bloomberg Financial
Services, without independent verification.
<Table>
<Caption>
HIGH LOW CLOSE
-------- -------- -------
2003
Quarter ended March 31.......... $56.6739 $48.0516 $51.847
Quarter ended June 30........... $ 59.854 $ 51.828 $57.308
Quarter ended September 30...... $58.5762 $ 49.76 $ 50.62
Quarter ended December 31....... $ 51.16 $ 40.60 $ 46.20
2004
Quarter ended March 31.......... $ 49.08 $ 43.01 $ 44.19
Quarter ended June 30........... $ 48.37 $ 44.58 $ 47.50
Quarter ended September 30...... $ 46.35 $ 33.00 $ 33.00
Quarter ended December 31....... $ 34.23 $ 26.00 $ 32.14
2005
Quarter ending March 31 (through
February 9, 2005)............... $ 31.53 $ 27.83 $ 28.70
Closing price on February 9,
2005.......................... $ 28.70
</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
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.
HYPOTHETICAL PAYMENT
AMOUNT: The tables below show the hypothetical payment
amounts that we would deliver on the stated
maturity date in exchange for each $28.733 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 $23.561, 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 $23.561 at any
time during the measurement period.
S-4
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 $28.733 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
$28.733 of the outstanding face amount of your
note on the stated maturity date would equal
100% of the initial index stock price, or
$28.733, 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:
<Table>
<Caption>
HYPOTHETICAL FINAL INDEX HYPOTHETICAL PAYMENT
STOCK PRICE AS % OF AMOUNTS AS % OF
INITIAL INDEX STOCK PRICE $28.733 FACE AMOUNT
------------------------- --------------------
200% 110%
175% 110%
150% 110%
120% 110%
110% 110%
100% 100%
82% 100%
</Table>
If the market price of the index stock does fall
below the threshold price at any time during the
measurement period:
<Table>
<Caption>
HYPOTHETICAL FINAL INDEX HYPOTHETICAL PAYMENT
STOCK PRICE AS % OF AMOUNTS AS % OF
INITIAL INDEX STOCK PRICE $28.733 FACE AMOUNT
------------------------- --------------------
200% 110%
175% 110%
150% 110%
120% 110%
110% 110%
100% 100%
90% 90%
80% 80%
70% 70%
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
S-5
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.
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.
S-6
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,
(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
S-7
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.
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-8
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.
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
S-9
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.
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-10