Filed Pursuant to Rule 424(b)(3)
Registration Statement No. 333-112367
PRICING SUPPLEMENT TO THE PROSPECTUS SUPPLEMENT NO. 373 DATED FEBRUARY 6,
2004 -- NO. 403
[GOLDMAN SACHS LOGO]
THE GOLDMAN SACHS GROUP, INC.
Medium-Term Notes, Series B
-------------------------
$19,000,000
0% Exchangeable Notes due June 2009
(Exchangeable for Common Stock of Merrill Lynch & Co., Inc.)
-------------------------
This pricing supplement and the accompanying prospectus supplement no. 373,
relating to the exchangeable notes, should be read together. Because the
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. 373 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. 373, unless the context
requires otherwise.
The exchangeable notes offered by this pricing supplement, which we call
the "notes" or the "offered notes", have the terms described in the accompanying
prospectus supplement no. 373, as supplemented or modified by the following:
ISSUER: The Goldman Sachs Group, Inc.
FACE AMOUNT: $19,000,000 in the aggregate for all the offered notes
ORIGINAL ISSUE PRICE: 100% of the face amount
NET PROCEEDS TO THE ISSUER: 99.65% of the face amount
TRADE DATE: June 4, 2004
SETTLEMENT DATE (ORIGINAL ISSUE DATE): June 11, 2004
STATED MATURITY DATE: June 11, 2009, unless extended for up to six business days
INTEREST RATE (COUPON): 0%; the note will not bear interest prior to maturity
INDEX STOCK AND INDEX STOCK ISSUER: common stock of Merrill Lynch & Co., Inc.
PRINCIPAL AMOUNT: on the stated maturity date, we will pay the holder of an
offered note cash equal to 100% of the outstanding face amount of the note,
unless the holder exercises the exchange right, we exercise the call right or an
automatic exchange occurs
EXCHANGE RATE: 15.5059 shares of index stock for each $1,000 of outstanding face
amount exchanged, subject to anti-dilution adjustment. Upon any voluntary or
automatic exchange, we may, in our sole discretion, elect to pay the cash value
of the index stock we would otherwise be obligated to deliver, as described in
the accompanying prospectus supplement no. 373
EARLIEST CALL DATE; REDEMPTION PRICE: we may, in our sole discretion, redeem the
offered notes at any time after June 11, 2007, at a redemption price equal to
100% of the outstanding face amount. If we call the offered notes, we will give
notice to the holders not less than 5 nor more than 15 business days before the
call date
REFERENCE PRICE OF INDEX STOCK: $56.696 per share
CUSIP NO.: 38143UAM3
Your investment in the notes involves certain risks. We encourage you to
read "Additional Risk Factors Specific to Your Note" on page S-3 of the
accompanying prospectus supplement no. 373 so that you may better understand
those risks.
----------------------
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 June 4, 2004.
EXPIRATION OF EXCHANGE
RIGHT: If a holder wishes to exercise the exchange
right, the required deliveries described in the
accompanying prospectus supplement no. 373 under
"General Terms of the Exchangeable
Notes -- Holder's Exchange Right -- Exercise
Requirements" must be made no later than 11:00
A.M., New York City time, on the business day
before the determination date or any call notice
date, whichever is earlier.
NO LISTING: The offered notes will not be listed on any
securities exchange or interdealer market
quotation system.
ADDITIONAL TERMS SPECIFIC
TO YOUR NOTE: CHANGES IN REGULAR QUARTERLY DIVIDENDS
In addition to the anti-dilution adjustments to
the exchange rate described under "Anti-dilution
Adjustments" on pages S-16 through S-21 in the
accompanying prospectus supplement no. 373, we
will also adjust the exchange rate for increased
and decreased regular quarterly dividends in
respect of the first twenty quarters after the
date of this pricing supplement, as described
below. A regular quarterly dividend that is paid
in cash with respect to the index stock will be
deemed to be an increased quarterly dividend if
its per-share value exceeds the applicable
dividend reference amount for that quarter, and
will be deemed to be a decreased quarterly
dividend if its per-share value falls below the
applicable dividend reference amount for that
quarter. For the avoidance of doubt, a failure
of the index stock issuer to declare or make a
quarterly dividend payment on the index stock
(as determined by the calculation agent in its
sole discretion) will be deemed to be a
decreased quarterly dividend. In general, we
will adjust the exchange rate for your note
upward in the event of an increased quarterly
dividend and downward in the event of a
decreased quarterly dividend, as described
below. The exchange rate will not be adjusted,
however, unless the ex-dividend date occurs
after June 4, 2004, and on or before the
relevant exchange notice date. However, in the
event the exchange rate is adjusted because of a
failure by the index stock issuer to declare or
make a quarterly dividend payment, the effective
date for adjusting the exchange rate will be the
first business day immediately following the
regular quarterly ex-dividend dates specified
below, as applicable, ending on June 11, 2009.
In addition, the exchange rate will not be
adjusted as described below in respect of any
dividend that is not a regular quarterly
dividend paid in cash.
S-2
The dividend reference amounts for the regular
quarterly dividends paid in respect of the
following quarters will be as follows:
<Table>
<Caption>
DIVIDEND
EX-DIVIDEND REFERENCE
DATE AMOUNT
----------- ---------
2004
Quarter ending September 30... August 2 0.16
Quarter ending December 31.... November 1 0.16
2005
Quarter ending March 31....... February 3 0.23
Quarter ending June 30........ May 3 0.23
Quarter ending September 30... August 2 0.23
Quarter ending December 31.... November 1 0.23
2006
Quarter ending March 31....... February 3 0.25
Quarter ending June 30........ May 3 0.25
Quarter ending September 30... August 2 0.25
Quarter ending December 31.... November 1 0.25
2007
Quarter ending March 31....... February 2 0.27
Quarter ending June 30........ May 3 0.27
Quarter ending September 30... August 2 0.27
Quarter ending December 31.... November 1 0.27
2008
Quarter ending March 31....... February 1 0.27
Quarter ending June 30........ May 2 0.27
Quarter ending September 30... August 1 0.27
Quarter ending December 31.... October 31 0.27
2009
Quarter ending March 31....... February 2 0.27
Quarter ending June 30........ May 4 0.27
</Table>
If an increased or decreased quarterly dividend
occurs in respect of one of the quarters listed
in the table above, the calculation agent will
adjust the exchange rate to equal the product of
(1) the prior exchange rate (as adjusted as a
result of any previous anti-dilution events and
increased or decreased regular quarterly
dividends) times (2) a fraction, the numerator
of which is the closing price of the index stock
on the business day before the ex-dividend date
and the denominator of which is an amount equal
to that closing price minus the increased
dividend amount or plus the decreased dividend
amount, as applicable. The increased dividend
amount equals the per-share amount of the
increased quarterly dividend minus the
applicable dividend reference amount for that
quarter, and the decreased dividend amount
equals the applicable dividend reference amount
for that quarter minus the per-share amount of
the decreased quarterly dividend. If the
exchange rate is adjusted as described under
"Anti-dilution Adjustments" on pages S-16
through S-21 in the accompanying prospectus
supplement no. 373, the calculation agent will
adjust the dividend reference amount to the
extent (if any) it determines is appropriate to
reflect the events giving rise to those other
adjustments. For example, if the index stock is
subject to a 1-for-2 reverse stock split, then
the calculation agent will double the dividend
reference amount, and if the index stock is
subject to a 2-for-1 stock split, then the
calculation agent will reduce the dividend
reference amount by half. In addition,
S-3
the calculation agent may adjust the dividend
reference amount and/or the frequency of
adjustments to the exchange rate in connection
with decreased or increased dividends as it
deems necessary to obtain an equitable result in
case the index stock issuer changes the
frequency of dividend payments. For example, if
the index stock issuer declares regular
dividends on a semi-annual basis in the future,
the calculation agent will (1) make any
adjustment on a semi-annual instead of a
quarterly basis for any period in which the
dividend frequency is so changed, and (2) use
the sum of the two dividend reference amounts
relating to that semi-annual period listed in
the table above as the new dividend reference
amount.
A distribution on the index stock that is both
an extraordinary dividend (as defined in the
accompanying prospectus supplement no. 373) and
also an increased or decreased regular quarterly
dividend will result in an adjustment to the
exchange rate only as described under "-- Other
Dividends and Distributions" on page S-18 in the
accompanying prospectus supplement no. 373 and
not as described here.
The following table shows the index stock
issuer's dividend payments for the four calendar
quarters in 2002 and 2003 and for the two
calendar quarters in 2004, through June 4, 2004:
<Table>
<Caption>
DIVIDEND PAID
-------------
2002
Quarter ended March 31..................... 0.16
Quarter ended June 30...................... 0.16
Quarter ended September 30................. 0.16
Quarter ended December 31.................. 0.16
2003
Quarter ended March 31..................... 0.16
Quarter ended June 30...................... 0.16
Quarter ended September 30................. 0.16
Quarter ended December 31.................. 0.16
2004
Quarter ended March 31..................... 0.16
Quarter ending June 30 (through June 4,
2004)................................... 0.16
</Table>
We obtained the dividend payment information
shown above from Bloomberg Financial Services,
without independent verification. It is
impossible to predict whether dividend payments
on the index stock will rise or fall during the
life of your note or whether the index stock
issuer will continue to pay dividends at all,
and you should not view past dividend payments
as an indication of the dividend payments the
index stock issuer may make in the future. Thus,
there is no assurance as to whether any
quarterly dividend will be greater than or less
than the relevant dividend reference amount or,
therefore, whether the exchange rate will be
adjusted upward or downward or at all. Moreover,
a dividend payment can result in an increase or
decline of the market value of the index stock
and thus of your note, irrespective of any
adjustment to the exchange rate. Therefore, it
is
S-4
impossible to predict whether any dividend paid
will result in an increase or a reduction in the
amount you will receive at maturity (or upon
exercise of our call right or your exchange
right). We have no knowledge about whether the
index stock issuer will pay dividends or, if so,
the amounts, and whether it does is in its sole
discretion and beyond our control.
You will have no right to receive any dividend
that is paid on the index stock. Dividend
payments may adversely affect the market value
of the index stock, and thus of your note, and
there is no assurance that any adjustment of the
exchange rate that might be made will compensate
you for any decline in value.
The calculation agent will make all
determinations with respect to adjustments,
including whether an increased or decreased
regular quarterly dividend has been paid in
respect of any quarter and, if so, the nature
and amount of any exchange rate adjustment that
may be made in respect of that dividend, and
will do so in its sole discretion. In the
absence of manifest error, those determinations
will be conclusive for all purposes and will be
binding on you and us, without any liability on
the part of the calculation agent. The
calculation agent will provide information about
the adjustments it makes upon written request by
the holder. In addition, the calculation agent
may, in its sole discretion, modify these
adjustments as necessary to ensure an equitable
result.
MERRILL LYNCH & CO., INC.: According to its publicly available documents,
Merrill Lynch & Co., Inc., a Delaware
corporation formed in 1973, is a holding company
that, through its subsidiaries and affiliates,
provides broker-dealer, investment banking,
financing, wealth management, advisory, asset
management, insurance, lending and related
products and services on a global basis.
Information filed with the SEC by Merrill Lynch
& Co., Inc. under the Exchange Act can be
located by referencing its SEC file number:
001-07182.
HISTORICAL TRADING PRICE
INFORMATION: The index stock is traded on the New York Stock
Exchange under the symbol "MER". The following
table shows the quarterly high and low trading
prices and the quarterly closing prices for the
index stock on the New York Stock Exchange for
the four calendar quarters in each of 2002 and
2003 and for the two calendar quarters in 2004,
through June 4, 2004. We obtained the trading
price information shown below from Bloomberg
Financial Services, without independent
verification.
S-5
The actual performance of the index stock over
the life of the offered notes may bear little
relation to the historical trading prices of the
index stock shown below.
<Table>
<Caption>
HIGH LOW CLOSE
---- --- -----
2002
Quarter ended March 31................... 59.32 44.15 55.38
Quarter ended June 30.................... 55.2 36.78 40.5
Quarter ended September 30............... 40.66 31 32.95
Quarter ended December 31................ 44.9 28.21 37.95
2003
Quarter ended March 31................... 43.75 30.76 35.4
Quarter ended June 30.................... 49.2 35.3 46.68
Quarter ended September 30............... 57.5 45.84 53.53
Quarter ended December 31................ 60.47 53.85 58.65
2004
Quarter ended March 31................... 64.85 56.97 59.56
Quarter ending June 30 (through June 4,
2004).................................. 60.7 51.35 56.54
Closing Price on June 4, 2004............ 56.54
</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. 373.
HYPOTHETICAL RETURNS TABLE: In the table below, we compare the total pretax
return on owning the index stock to the total
pretax return on owning your note, in each case
during the period from the trade date to the
stated maturity date. The information in the
table is based on hypothetical market values for
the index stock and your note at the end of this
period, and on the key terms and assumptions
stated in the box below.
The index stock has been highly volatile in the
past and its performance cannot be predicted for
any future period. The actual performance of the
index stock over the life of the offered notes,
as well as the amount payable at maturity, may
bear little relation to the historical trading
prices of the index stock shown above or to the
hypothetical return examples shown below.
S-6
<Table>
KEY TERMS AND ASSUMPTIONS
Original issue price, expressed as a
percentage of the face amount............... 100%
Exchange rate................................. 15.5059 shares
Reference price of index stock................ $56.696 per share
Annual index stock dividend yield, expressed
as a percentage of the reference price of
the index stock (assumed)................... 1.11%
Automatic exchange in full on the stated
maturity date -- i.e., no prior redemption
or voluntary exchange (assumed)
No anti-dilution adjustments to exchange rate
(assumed)
No market disruption event occurs (assumed)
</Table>
We calculate the total pretax return on your
note based on the exchange rate of 15.5059
shares of the index stock for each $1,000 of the
outstanding face amount of your note.
The closing price of the index stock must be, on
the determination date, more than $64.4917 per
share in order for the holder of a note to
receive stock or cash having a value in excess
of the principal amount (100% of the outstanding
face amount) on the stated maturity date. This
closing price is substantially higher than the
reference price of $56.696 per share.
The following table assumes that dividends will
be paid on the index stock, at the annual index
stock dividend yield shown in the box above,
from the trade date to the stated maturity date.
We do not know, however, whether or to what
extent the issuer of the index stock will pay
dividends in the future. These are matters that
will be determined by the issuer of the index
stock and not by us. Consequently, the amount of
dividends actually paid on the index stock by
its issuer, and, therefore, the rate of pretax
return on the index stock during the life of the
offered notes, may differ substantially from the
information reflected in the table below.
S-7
<Table>
<Caption>
INDEX STOCK YOUR NOTE
------------------------------------------------- ------------------------------
HYPOTHETICAL HYPOTHETICAL
HYPOTHETICAL CLOSING PRICE ON MARKET VALUE ON
CLOSING PRICE ON STATED MATURITY HYPOTHETICAL STATED MATURITY HYPOTHETICAL
STATED MATURITY DATE AS % OF PRETAX TOTAL DATE AS % OF PRETAX TOTAL
DATE REFERENCE PRICE RETURN FACE AMOUNT RETURN
---------------- ---------------- ------------ --------------- ------------
$ 0.00......... 0% -94.4% 100.0% 0.0%
$ 28.35......... 50% -44.4% 100.0% 0.0%
$ 34.02......... 60% -34.4% 100.0% 0.0%
$ 39.69......... 70% -24.4% 100.0% 0.0%
$ 45.36......... 80% -14.4% 100.0% 0.0%
$ 51.03......... 90% -4.4% 100.0% 0.0%
$ 56.70......... 100% 5.6% 100.0% 0.0%
$ 62.37......... 110% 15.7% 100.0% 0.0%
$ 64.49......... 113.75% 19.4% 100.0% 0.0%
$ 68.04......... 120% 25.7% 105.5% 5.5%
$ 73.70......... 130% 35.7% 114.3% 14.3%
$ 79.37......... 140% 45.7% 123.1% 23.1%
$ 85.04......... 150% 55.7% 131.9% 31.9%
$ 90.71......... 160% 65.7% 140.7% 40.7%
$ 96.38......... 170% 75.7% 149.5% 49.5%
$102.05......... 180% 85.7% 158.2% 58.2%
$107.72......... 190% 95.7% 167.0% 67.0%
$113.39......... 200% 105.7% 175.8% 75.8%
</Table>
The hypothetical pretax total return on the
index stock represents the difference between
(a) the hypothetical closing price of one share
of index stock on the stated maturity date plus
the dividends that would be paid on one share of
the index stock at the assumed dividend yield
rate during the period from the trade date to
the stated maturity date, without reinvestment
of those dividends, and (b) the reference price
of the index stock. This difference is expressed
as a percentage of the reference price.
The hypothetical pretax total return on your
note represents the difference between (a) the
hypothetical market value of your note on the
stated maturity date and (b) the original issue
price of your note. This difference is expressed
as a percentage of the original issue price of
your note.
We have assumed that the market value of your
note on the stated maturity date will equal the
greater of the principal amount (100% of
outstanding face amount) of your note and the
cash value (based on the hypothetical closing
prices shown above) of the index stock that we
would be obligated to deliver on that date in an
automatic exchange of your note. There will be
no automatic exchange on the stated maturity
date, however, unless that cash value exceeds
the outstanding principal amount of your note.
Therefore, we have assumed that, unless that
cash value exceeds the outstanding principal
amount of your note, the market value of your
note on the stated maturity date will equal the
principal amount.
S-8
We have also assumed that the closing price of
the index stock will be the same on the
determination date and the stated maturity date.
Because the amount of stock that we will deliver
on your note on the stated maturity date will
depend on the closing price of the index stock
on the determination date, changes in the
closing price between the determination date and
the stated maturity date could cause the pretax
returns on your note to be substantially
different from those reflected in the table
above.
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 or no relation to the
hypothetical values shown above, and those
values 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. The pretax rates of return shown above
are entirely hypothetical; they are based on
market values that may not be achieved on the
relevant date and on assumptions that may prove
to be erroneous and do not take into account the
effects of any applicable taxes. Please read
"Additional Risk Factors Specific to Your Note"
and "Hypothetical Returns on Your Note" in the
accompanying prospectus supplement no. 373.
Payments on this note may be economically
equivalent to the amounts that would be paid on
a combination of other instruments. For example,
payments on the note may be economically
equivalent to the amounts that would be paid on
a combination of an interest-bearing bond and an
option, in each case, bought by the holder (with
an implicit option premium paid over time by the
holder). The discussion in this paragraph does
not modify or affect the terms of the note or
the United States income tax treatment of the
note as described under "Supplemental Discussion
of Federal Income Tax Consequences" in the
accompanying prospectus supplement no. 373.
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. 373.
S-9
NOTICE OF EXCHANGE
Dated:
The Bank of New York
Corporate Trust Administration
101 Barclay Street, 21W
New York, New York 10286
Attn: Caroline Hyunji
Lee (212-815-4991)
Hector Herrera (212-815-4293)
Fax: (212-815-5802)
with a copy to:
Goldman, Sachs & Co.
85 Broad Street
Options and Derivatives Operations
New York, New York 10004
Attn: Sharon Seibold (212-902-7921)
Stephen Barnitz (212-357-4217)
Fax: (212-902-7993)
Re: 0% Exchangeable Notes due June 2009, issued by The Goldman Sachs Group,
Inc. (Exchangeable for Common Stock of Merrill Lynch & Co., Inc.)
Dear Sirs:
The undersigned is, or is acting on behalf of, the beneficial owner of a
portion of one of the notes specified above, which portion has an outstanding
face amount equal to or greater than the amount set forth at the end of this
notice of exchange. The undersigned hereby irrevocably elects to exercise the
exchange right described in the pricing supplement no. 403, dated June 4, 2004,
to the prospectus supplement no. 373, dated February 6, 2004, with respect to
the outstanding face amount of the note set forth at the end of this notice of
exchange. The exercise is to be effective on the business day on which the
trustee has received this notice of exchange, together with all other items
required to be delivered on exercise, and the calculation agent has received a
copy of this notice of exchange, unless all required items have not been
received by 11:00 A.M., New York City time, on that business day, in which case
the exercise will be effective as of the next business day. We understand,
however, that the effective date in all cases must be no later than the earlier
of (i) the business day before the determination date and (ii) any call notice
date. The effective date will be the exchange notice date.
If the note to be exchanged is in global form, the undersigned is
delivering this notice of exchange to the trustee and to the calculation agent,
in each case by facsimile transmission to the relevant number stated above, or
such other number as the trustee or calculation agent may have designated for
this purpose to the holder. In addition, the beneficial interest in the face
amount indicated below is being transferred on the books of the depositary to an
account of the trustee at the depositary.
If the note to be exchanged is not in global form, the undersigned or the
beneficial owner is the holder of the note and is delivering this notice of
exchange to the trustee and to the calculation agent by facsimile transmission
as described above. In addition, the certificate representing the note and any
payment required in respect of accrued interest are being delivered to the
trustee.
If the undersigned is not the beneficial owner of the note to be exchanged,
the undersigned hereby represents that it has been duly authorized by the
beneficial owner to act on behalf of the beneficial owner.
S-10
Terms used and not defined in this notice have the meanings given to them
in the pricing supplement no. 403, dated June 4, 2004, and the prospectus
supplement no. 373, dated February 6, 2004. The exchange of the note will be
governed by the terms of the note.
The calculation agent should internally acknowledge receipt of the copy of
this notice of exchange, in the place provided below, on the business day of
receipt, noting the date and time of receipt. The consideration to be delivered
or paid in the requested exchange should be made on the fifth business day after
the exchange notice date in accordance with the terms of the note.
Face amount of note to be exchanged:
$
- --------------------------------------
(must be a multiple of $1,000)
Very truly yours,
--------------------------------------
(Name of beneficial owner or person
authorized to act on its behalf)
--------------------------------------
(Title)
--------------------------------------
(Telephone No.)
--------------------------------------
(Fax No.)
--------------------------------------
(DTC participant account number for
delivery of index stock, if any)
FOR INTERNAL USE ONLY:
Receipt of the above notice of
exchange
is hereby acknowledged:
GOLDMAN, SACHS & CO., as calculation
agent
By:
- --------------------------------------
(Title)
Date and time of receipt:
- --------------------------------------
(Date)
- --------------------------------------
(Time)
S-11