Goldman Sachs 2000 Annual Report Download - page 28

26 Goldman Sachs Annual Report 2000
Goldman Sachs is a leading global investment banking and
securities firm that provides a wide range of services world-
wide to a substantial and diversified client base. On May 7,
1999, we converted from a partnership to a corporation and
completed our initial public offering.
Our activities are divided into two segments:
Global Capital Markets. This segment comprises Invest-
ment Banking, which includes Financial Advisory and
Underwriting, and Trading and Principal Investments, which
includes Fixed Income, Currency and Commodities (FICC),
Equities and Principal Investments (Principal Investments
primarily represents net revenues from our merchant bank-
ing investments); and
Asset Management and Securities Services. This segment
comprises Asset Management, Securities Services and
Commissions.
All references to 2000, 1999 and 1998 refer to our fiscal
year ended, or the date, as the context requires, November
24, 2000, November 26, 1999 and November 27, 1998,
respectively.
When we use the terms “Goldman Sachs,” “we” and “our,”
we mean, after our conversion to corporate form, The
Goldman Sachs Group, Inc., a Delaware corporation, and its
consolidated subsidiaries and, prior to our conversion to
corporate form, The Goldman Sachs Group, L.P., a Delaware
limited partnership, and its consolidated subsidiaries.
In this discussion, we have included statements that may
constitute “forward-looking statements” within the mean-
ing of the safe harbor provisions of The Private Securities
Litigation Reform Act of 1995. These forward-looking state-
ments are not historical facts but instead represent only our
belief regarding future events, many of which, by their
nature, are inherently uncertain and beyond our control.
These statements relate to our future plans and objectives,
among other things. By identifying these statements for you
in this manner, we are alerting you to the possibility that our
actual results may differ, possibly materially, from the
results indicated in these forward-looking statements. The
factors noted below under “ —Results of Operations —
Certain Factors That May Affect Our Results of Operations,”
among others, could cause actual results to differ from
those in our forward-looking statements.
Business Environment
In the first half of fiscal 2000, the global economy grew at a
strong rate, reflecting low unemployment levels, low infla-
tion and increased productivity. This expansionary eco-
nomic environment provided a positive climate for all of our
businesses, particularly Investment Banking and Equities,
which benefited from higher levels of mergers and acquisi-
tions activity, an increase in new issue offerings and record
volumes in global equity markets. The pace of economic
growth slowed in the second half of the year as increases in
interest rates led to market uncertainty.
The economic expansion in the United States continued
during the first half of 2000. In an attempt to alleviate pos-
sible inflationary pressures, the Federal Reserve gradually
raised overnight interest rates by 100 basis points to
6.50%, the highest rate since the first quarter of 1991. The
pace of growth in the second half of 2000 declined as con-
sumer spending and corporate investment slowed. U.S.
equity markets achieved record highs earlier in the year but
declined markedly toward the end of the year amid market
uncertainty about prospects for gross domestic product and
corporate earnings growth. In particular, the Nasdaq
declined 42% from its record high posted in March 2000.
Fixed income markets were also affected as rising interest
rates, widening credit spreads and reduced new issue activ-
ity led to a decrease in secondary market activity.
The European economy continued to grow at a steady pace
during 2000 primarily due to increases in foreign demand,
consumer spending and corporate investment. European
equity markets were particularly active, reaching record
levels during the first half of the year but suffering declines
as the year came to a close. The European Central Bank
raised rates throughout the year in response to rising infla-
tion and the weakness of the euro.
Economic growth in Japan remained subdued, despite
increased investment in information technology. Doubts
concerning the recovery of private consumption and con-
cerns about corporate and government debt led to declines
in the Japanese equity market during the year. The Bank of
Japan’s zero-interest-rate policy was terminated and
interest rates were raised for the first time in a decade.
MANAGEMENT’S DISCUSSION AND ANALYSIS