Goldman Sachs 2001 Annual Report Goldman Sachs

Letter to Shareholders Core Businesses Business Principles September 11 Response Financials Clients www.gs.com

Sept 11 Response>
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John A. Thain, Henry M. Paulson, Jr., John L. Thornton

FROM LEFT

John A. Thain
President and
Co-Chief Operating Officer

Henry M. Paulson, Jr.
Chairman and
Chief Executive Officer

John L. Thornton
President and
Co-Chief Operating Officer

LETTER TO SHAREHOLDERS: Page 3
Investment Banking activity and revenues declined sharply for the industry. Our own results were no exception. The firm's performance in this challenging environment was, however, first-rate. We believe the quality of our client relationships and our leadership in the most important businesses have never been stronger.

For example, in 2001, we again were the number one advisor in merger transactions on a worldwide basis. We advised on 8 of the 10 largest transactions completed during the year, more than any other firm. We also were the number one global underwriter of initial public offerings and all common stock offerings. We think these results are a testament to the strength and quality of our franchise.

Within our Trading and Principal Investments business, Fixed Income, Currency and Commodities produced excellent results, increasing net revenues 35% by capitalizing on lower interest rates, increased volatility, and strong customer demand. Performance was strong across a wide range of our businesses, including commodities, currencies, our credit-sensitive businesses, and fixed income derivatives.

Net revenues declined in our equities business in a difficult environment with declining volatility and customer flow. Despite the challenging market, we were very pleased with our progress in the integration of Spear, Leeds & Kellogg with our own capabilities to strengthen our leading position in equities markets.

Principal Investments had a very disappointing year, with significant mark-to-market losses, principally in our high technology and telecommunications investments. Overall, however, we continue to believe that our merchant banking activities are an excellent business for us. We see many attractive opportunities created by the volatility in the past year.

Asset Management and Securities Services produced another record year in 2001. Assets under management increased 19% to $351 billion. In 2001, we had record net inflows of $67 billion of new client assets. These very strong results demonstrate the value created through a diverse, multi-product global platform. We also continue to build our high-net-worth business and believe it is one of our most attractive growth opportunities.

As our industry has undergone dramatic consolidation over the last few years, and as commercial banks have increasingly used low-priced credit as a competitive tool, some observers have asked, "Is Goldman Sachs big enough?" To be frank, we believe that this is the wrong question, particularly for a global firm with over 22,000 people, $18 billion in equity capital, and a $300 billion balance sheet. Capital has never been a limiting factor for us.

The right question—and the one we ask ourselves constantly—is, "Can we continue to manage growth by adapting our culture to a large and increasingly complex global company?" This, and not the size of competitors, will be the key to our continuing ability to execute our strategy superbly, which is the ultimate determinant of our success.

We face a big challenge, but we are up to it. We wouldn't trade places with any of our competitors, whatever their size or business model. Despite the uncertainties of the current market environment, we remain bullish about the future. We operate at the "sweet spot" of global capitalism.

We believe that the trends that have created opportunities for us in the past—globalization, deregulation, consolidation and market-driven reform—will continue to do so in the future. But we know that our ultimate success will depend upon a constant commitment to the core cultural values that allow us to execute successfully our corporate strategy and to attract the very best of the best in the world of finance. We have made that commitment and intend to adhere resolutely to it in 2002 and the years that follow.

We owe you, our shareholders, no less.

 

Henry Paulson
Henry M. Paulson, Jr.
Chairman and Chief Executive Officer

John A. Thain
John A. Thain
President and Co-Chief Operating Officer

John L. Thornton
John L. Thornton
President and Co-Chief Operating Officer

Source of market share information: Thomson Financial Securities Data—January 1, 2001 through December 31, 2001.

 

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