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. 428
-------------------
(GOLDMAN SACHS LOGO)
THE GOLDMAN SACHS GROUP, INC.
Medium-Term Notes, Series B
-------------------
$10,000,000
0.5% Exchangeable Notes due September 2012
(Exchangeable for Common Stock of Agilent Technologies, 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: $10,000,000 in the aggregate for all the offered notes
ORIGINAL ISSUE PRICE: 100% of the face amount
NET PROCEEDS TO THE ISSUER: 99.6% of the face amount
TRADE DATE: September 2, 2004
SETTLEMENT DATE (ORIGINAL ISSUE DATE): September 10, 2004
STATED MATURITY DATE: September 10, 2012, unless extended for up to six
business days
INTEREST RATE (COUPON): 0.5% per year
INTEREST PAYMENT DATES: March 10 and September 10 of each year, commencing on
March 10, 2005
REGULAR RECORD DATES: the business day before the related interest payment date
as long as the note is in global form
INDEX STOCK AND INDEX STOCK ISSUER: common stock of Agilent Technologies, 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: 34.5544 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 September 10, 2007, at a redemption
price equal to 100% of the outstanding face amount, provided, however, that
the holder will be entitled to the benefit, if any, of an automatic
exchange. 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: $21.124 per share
DENOMINATIONS: face amount of $2,000 and $1,000 integral multiples thereof
CUSIP NO.: 38143UAS0
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. 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.
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GOLDMAN, SACHS & CO.
-------------------
Pricing Supplement dated September 2, 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 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. 373.
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. 373.
AGILENT TECHNOLOGIES, INC.: According to its publicly available
documents, Agilent Technologies, Inc. is a
global diversified technology company that
provides enabling solutions to markets
within the communications, electronics,
life sciences
S-2
and chemical analysis industries.
Information filed with the SEC by the index
stock issuer under the Exchange Act can be
located by referencing its SEC file number:
001-15405.
HISTORICAL TRADING PRICE
INFORMATION: The index stock is traded on the New York
Stock Exchange ("NYSE") under the symbol
"A". The following table shows the
quarterly high and low trading prices and
the quarterly closing prices for the index
stock on the NYSE for the four calendar
quarters in each of 2002 and 2003 and for
the three calendar quarters in 2004,
through September 2, 2004. We obtained the
trading price information shown below from
Bloomberg Financial Services, without
independent verification.
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 28...... 37.31 25.98 34.96
Quarter ended June 28....... 36.53 23.20 23.65
Quarter ended September 30.. 23.95 12.85 13.06
Quarter ended December 31... 19.58 10.85 17.96
2003
Quarter ended March 31...... 19.96 11.45 13.15
Quarter ended June 30....... 19.91 13.50 19.55
Quarter ended September 30.. 26.43 19.91 22.11
Quarter ended December 31... 29.24 21.99 29.24
2004
Quarter ended March 31...... 37.49 28.80 31.63
Quarter ended June 30....... 32.56 24.30 29.28
Quarter ending September 30
(through September 2,
2004)..................... 28.64 19.68 21.20
Closing price on September
2, 2004................... 21.20
</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
S-3
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.
KEY TERMS AND ASSUMPTIONS
<Table>
Original issue price,
expressed as a percentage
of the face amount........ 100%
Exchange rate............... 34.5544 shares
Reference price of index
stock..................... $21.124 per share
Annual index stock dividend
yield, expressed as a
percentage of the
reference price of the
index stock (assumed)..... 0.0%
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
34.5544 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
$28.9399 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 $21.124 per share.
S-4
<Table>
<Caption>
INDEX STOCK YOUR NOTE
----------------------------------------- ---------------------------
HYPOTHETICAL HYPOTHETICAL
CLOSING MARKET
PRICE ON VALUE ON
HYPOTHETICAL STATED STATED
CLOSING MATURITY HYPOTHETICAL MATURITY
PRICE ON DATE PRETAX TOTAL DATE HYPOTHETICAL
STATED AS % OF RETURN ON AS % OF PRETAX TOTAL
MATURITY REFERENCE THE INDEX FACE RETURN ON
DATE PRICE STOCK AMOUNT YOUR NOTE
------------ ------------ ------------ ------------ ------------
$0.00 0.0% -100.0% 100.0% 2.5%
$10.56 50.0% -50.0% 100.0% 2.5%
$14.79 70.0% -30.0% 100.0% 2.5%
$21.1240 100.0% 0.0% 100.0% 2.5%
$25.35 120.0% 20.0% 100.0% 2.5%
$27.46 130.0% 30.0% 100.0% 2.5%
$28.9399 137.0% 37.0% 100.0% 2.5%
$31.69 150.0% 50.0% 109.5% 12.0%
$38.02 180.0% 80.0% 131.4% 33.9%
$42.25 200.0% 100.0% 146.0% 48.5%
</Table>
The hypothetical pretax total return on the
index stock represents the difference
between the hypothetical closing price of
one share of index stock on the stated
maturity date and 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 plus the
amount of interest that would be payable on
your note during the period from the trade
date to the stated maturity date (or to the
prior interest payment date as described
below), without reinvestment of that
interest, 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 sum of the outstanding
principal amount plus the amount of the
regular interest installment payable on
your note on that date. Moreover, if an
automatic exchange occurs, the holder of
your note will not be entitled to receive
that interest installment (as a result,
where the hypothetical market value of your
note is assumed to equal the automatic
exchange amount, the hypothetical total
return on your note is assumed to include
interest accruing only to the interest
payment date before the stated maturity
date). Therefore, we have assumed that,
unless that cash value exceeds that sum,
the
S-5
market value of your note on the stated
maturity date will equal the principal
amount.
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 are economically
equivalent to the amounts that would be
paid on a combination of other instruments.
For example, payments on the note are
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-6
NOTICE OF EXCHANGE
Dated:
The Bank of New York
Corporate Trust Administration
101 Barclay Street, 21W
New York, New York 10286
<Table>
Attn: Caroline Hyunji Lee (212-815-4991)
Hector Herrera (212-815-4293)
Fax: (212-815-5802)
</Table>
with a copy to:
Goldman, Sachs & Co.
85 Broad Street
Options and Derivatives Operations
New York, New York 10004
<Table>
Attn: Sharon Seibold (212-902-7921)
Stephen Barnitz (212-357-4217)
Fax: (212-902-7993)
</Table>
Re: 0.5% Exchangeable Notes due September 2012, issued by The Goldman Sachs
Group, Inc.
(Exchangeable for Common Stock of Agilent Technologies, 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. 428, dated September 2, 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.
Terms used and not defined in this notice have the meanings given to them in the
pricing supplement no. 428, dated September 2, 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.
2
Face amount of note to be exchanged:
$
(must be a minimum of $2,000 and
$1,000 integral multiples thereof)
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)
3