Goldman Sachs 2003 Annual Report Letter to Shareholders
previousnext
lloyd blanfein, henry paulson, john thain
Strategic Transactions
In 2003, we completed a number of strategic transactions. Our first announcement involved our $1.25 billion investment in SMFG, which we mentioned above. We are pleased with the performance of our investment as well as the other aspects of our relationship with SMFG.

With the credit loss protection provided by SMFG, we initiated our William Street credit extension program. This capability has given us an innovative way to extend credit selectively to our investment-grade clients, while reducing our credit and liquidity risks. By the end of fiscal 2003, $4.32 billion of credit commitments had been made under the program. In addition, our business cooperation agreement with SMFG has already resulted in a number of initiatives. In October, we announced the formation of a joint venture to facilitate the corporate recovery of certain SMFG borrowing clients and to accelerate SMFG's plans to improve its asset quality.

In September, we combined our Australian operations with JBWere to create a new venture called Goldman Sachs JBWere. We own 45% of the new entity, one of the leading investment banking and securities firms in Australia.

We also made several acquisitions in 2003. Our approach to acquisitions is to strengthen our business and build shareholder value, principally through emphasizing bolt-on deals where we can add new clients or acquire new products to provide to our existing clients. 2003 offered us a number of such opportunities.

In July, we acquired The Ayco Company, a leading provider of sophisticated, fee-based financial counseling in the United States. Ayco enables us to develop further our high-net-worth and asset management businesses by using its extensive portfolio of financial planning capabilities, including tax, estate and charitable planning services.

We also made two acquisitions of power generation assets. In October, we acquired East Coast Power, owner of the 940-megawatt cogeneration facility in Linden, New Jersey, which sells some 80% of its power to the New York City market. In the same month, we announced the acquisition of Cogentrix Energy, an independent power producer based in Charlotte, North Carolina, adding interests in 26 power plants and 3,300 megawatts of generating capacity to our portfolio.

These generation facilities were acquired to complement our existing commodity trading and merchant energy restructuring capabilities. Of course, ownership of physical power assets brings incremental responsibilities of which we are particularly mindful.

Board of Directors
In June, we announced that Claes Dahlbäck, nonexecutive Chairman of Investor AB, and Edward M. Liddy, Chairman of the Board, President and Chief Executive Officer of The Allstate Corporation, were joining our Board of Directors. Claes and Ed are both distinguished business leaders as well as thoughtful corporate directors, and we welcome the contributions they are already making to the Board. The Board has also nominated Lois D. Juliber, Chief Operating Officer of the Colgate-Palmolive Company, to stand for election to our Board of Directors at the March 31 Annual Meeting. In addition, John Thain and John Thornton retired as directors and we thank them for their service on our Board and to our shareholders.

Outlook
On balance, 2003 proved to be a more favorable operating environment than we expected at the beginning of the year. Markets rose, economic growth improved in most major economies and business confidence rose.

Although we expect these trends to continue in 2004, we cannot, of course, predict with certainty what global events, economic or political, in fact will shape the markets in which we work. But, we can—and will—pursue a strategy that permits us to seize business opportunities in an environment of continuing uncertainty and possible volatility. We owe you, our shareholders, nothing less. In terms of our own industry, it is clear that, if anything, regulatory scrutiny has intensified in the U.S. and in other countries around the world. We anticipate that this will continue to be a feature of the environment in which we operate.

That said, we look forward with confidence to 2004 and beyond. Our franchise is stronger than ever. Our people remain focused, dedicated and enthusiastic. We are committed to serving you, our shareholders, by delivering long-term growth and by producing real value for our clients through products and services that strengthen the global capital markets and support economic growth.

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

Lloyd C. Blankfein
Lloyd C. Blankfein
President and Chief Operating Officer
|
|
previousnext