Filed Pursuant to Rule 424(b)(3)
Registration Statement No. 333-112367
[Goldman Sachs Logo]
Pricing Supplement to the Prospectus Supplement No. 371
dated February 6, 2004 -- No. 426
The Goldman Sachs Group, Inc.
Medium-Term Notes, Series B
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$8,268,929.20
6.625% Mandatory Exchangeable Notes due September 2005
(Exchangeable for Common Stock of Dollar General Corporation)
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This pricing supplement and the accompanying prospectus supplement no.
371, relating to the mandatory exchangeable notes, should be read together.
Because the mandatory exchangeable notes are part of a series of our debt
securities called Medium-Term Notes, Series B, this pricing supplement and the
accompanying prospectus supplement no. 371 should also be read with the
accompanying prospectus dated February 6, 2004, as supplemented by the
accompanying prospectus supplement dated February 6, 2004. Terms used here have
the meanings given them in the accompanying prospectus supplement no. 371,
unless the context requires otherwise.
The mandatory exchangeable notes offered by this pricing supplement, which
we call the "offered notes" or the "notes", have the terms described in the
accompanying prospectus supplement no. 371, as supplemented or modified by the
following:
Issuer: The Goldman Sachs Group, Inc.
Face amount: each offered note will have a face amount equal to $19.516, which
is the initial index stock price; the aggregate face amount for all the offered
notes is $8,268,929.20
Initial index stock price: $19.516
Original issue price: 100% of the face amount
Net proceeds to the issuer: 99.9% of the face amount
Trade date: September 1, 2004
Settlement date (original issue date): September 9, 2004
Stated maturity date: September 12, 2005, unless extended for up to six business
days
Interest rate (coupon): 6.625% per year
Interest payment dates: the 12th day of each month, beginning October 12, 2004
Regular record dates: for the interest payment dates specified above, five
business days before the 12th day of each month
Index stock and index stock issuer: common stock of Dollar General Corporation
CUSIP no.: 38143U192
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.
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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 September 1, 2004.
Principal amount: On the stated maturity date, each offered note
will be exchanged for index stock at the
exchange rate or, at the option of Goldman
Sachs, for the cash value of that stock based on
the final index stock price.
Exchange rate: If the final index stock price equals or exceeds
the threshold appreciation price, then the
exchange rate will equal the threshold fraction
times one share of index stock for each $19.516
of the outstanding face amount. Otherwise, the
exchange rate will equal one share of the index
stock for each $19.516 of the outstanding face
amount. The exchange rate is subject to
anti-dilution adjustment as described in the
accompanying prospectus supplement no. 371.
Please note that the amount you receive for each
$19.516 of outstanding face amount on the stated
maturity date will not exceed the threshold
appreciation price and that it could be
substantially less than $19.516. You could lose
your entire investment in the offered notes.
Initial index stock price: $19.516 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 1.10, which
equals $21.4676 per share.
Threshold fraction: The threshold appreciation price divided by the
final index stock price.
Determination date: The fifth business day prior to September 12,
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 Assuming No Changes in Market Conditions or Any
specific to your note: 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
S-2
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.
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.
Dollar General Corporation: According to its publicly available documents,
Dollar General Corporation is a discount
retailer of general merchandise. Information
filed with the SEC by Dollar General Corporation
under the Exchange Act can be located by
referencing its SEC file number: 001-11421.
Historical trading price The index stock is traded on the New York Stock
information: Exchange under the symbol "DG". 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 the three calendar quarters in 2004,
through September 1, 2004. We obtained the
trading price information shown below from
Bloomberg Financial Services, without
independent verification.
High Low Close
2002 ----- ----- -----
Quarter ended March 31........... 17.03 14.00 16.28
Quarter ended June 30............ 19.03 14.85 19.03
Quarter ended September 30....... 19.46 13.25 13.42
Quarter ended December 31 2003... 14.76 11.80 11.95
2003
Quarter ended March 31........... 13.27 9.78 12.21
Quarter ended June 30............ 19.22 12.09 18.26
Quarter ended September 30....... 22.94 18.04 20.00
Quarter ended December 31 2004... 22.63 19.00 20.99
2004
Quarter ended March 31........... 23.10 18.80 19.20
Quarter ended June 30............ 20.54 17.32 19.56
Quarter ending September 30
(through September 1, 2004) ... 19.70 18.08 19.53
Closing price on September 1, 2004. 19.53
S-3
As indicated above, the market price of the
index stock has been highly volatile during
recent periods. It is impossible to predict
whether the price of the index stock will rise
or fall, and you should not view the historical
prices of the index stock as an indication of
future performance. See "Additional Risk Factors
Specific to Your Note -- The Market Price of
Your Note May Be Influenced by Many
Unpredictable Factors" in the accompanying
prospectus supplement no. 371.
Hypothetical payment amount: The table below shows the hypothetical payment
amounts that we would deliver on the stated
maturity date in exchange for each $19.516 of
the outstanding face amount of your note, if the
final index stock price were any of the
hypothetical prices shown in the left column.
For this purpose, we have assumed that there
will be no anti-dilution adjustments to the
exchange rate and no market disruption events.
The prices in the left column represent
hypothetical closing prices for one share of
index stock on the determination date and are
expressed as percentages of the initial index
stock price, which equals $19.516 per share. The
amounts in the right column represent the
hypothetical cash value of the index stock to be
exchanged, based on the corresponding
hypothetical final index stock prices, and are
expressed as percentages of the initial index
stock price. Thus, a hypothetical payment amount
of 100% means that the cash value of the index
stock that we would deliver in exchange for each
$19.516 of the outstanding face amount of your
note on the stated maturity date would equal
100% of the initial index stock price, or
$19.516, based on the corresponding hypothetical
final index stock price and the assumptions
noted above.
Hypothetical Final Index Hypothetical Payment
Stock Price as % of Amounts as % of
Initial Index Stock Price $19.98 Face Amount
------------------------- ------------------
200% 110%
175% 110%
150% 110%
125% 110%
110% 110%
100% 100%
75% 75%
50% 50%
0% 0%
S-4
The payment amounts shown above are entirely
hypothetical; they are based on market prices
for the index stock that may not be achieved on
the determination date and on assumptions that
may prove to be erroneous. The actual market
value of your note on the stated maturity date
or at any other time, including any time you may
wish to sell your note, may bear little relation
to the hypothetical payment amounts shown above,
and those amounts should not be viewed as an
indication of the financial return on an
investment in the offered notes or on an
investment in the index stock. Please read
"Additional Risk Factors Specific to Your Note"
and "Hypothetical Payment Amounts on Your Note"
in the accompanying prospectus supplement no.
371.
Payments on your note are economically
equivalent to the amounts that would be paid on
a combination of other instruments. For example,
payments on your note are economically
equivalent to the amounts that would be paid on
a combination of an interest-bearing bond
bought, and an option sold, by the holder (with
an implicit option premium paid over time to the
holder). The discussion in this paragraph does
not modify or affect the terms of the offered
notes or the United States income tax treatment
of the offered notes as described under
"Supplemental Discussion of Federal Income Tax
Consequences" in the accompanying prospectus
supplement no. 371.
Hedging: In anticipation of the sale of the offered
notes, we and/or our affiliates have entered
into hedging transactions involving purchases of
the index stock on the trade date. For a
description of how our hedging and other trading
activities may affect the value of your note,
see "Additional Risk Factors Specific to Your
Note -- Our Business Activities May Create
Conflicts of Interest Between You and Us" and
"Use of Proceeds and Hedging" in the
accompanying prospectus supplement no. 371.
S-5