Goldman Sachs 2003 Annual Report Download - page 53

Management’s Discussion and Analysis
GOLDMAN SACHS 2003 ANNUAL REPORT 51
CAPITAL AND FUNDING
Capital
The amount of capital we hold is principally determined
by subsidiary capital requirements, rating agency guide-
lines, and the size and composition of our balance sheet.
Goldman Sachs’ total capital increased 37% to
$79.11 billion as of November 2003 compared with
$57.71 billion as of November 2002. See “— Risk
Management— Liquidity Risk — Cash Flows” for a dis-
cussion of how we deployed capital raised as part of our
financing activities.
The increase in total capital resulted primarily from an
increase in long-term borrowings to $57.48 billion as of
November 2003 from $38.71 billion as of November
2002. The weighted average maturity of our long-term
borrowings as of November 2003 was approximately 6
years. We swap a substantial portion of our long-term
borrowings into U.S. dollar obligations with short-term
floating interest rates in order to minimize our exposure
to interest rates and foreign exchange movements.
Shareholders’ equity increased by 14% to $21.63 billion as
of November 2003 from $19.00 billion as of November
2002. During 2003, we repurchased 12.2 million shares
of our common stock. The principal purpose of our stock
repurchase program is to substantially offset increases in
share count over time resulting from employee equity-
based compensation. The repurchase program has been
effected through regular open-market purchases, the sizes
of which have been and will continue to be influenced by,
among other factors, prevailing prices and market condi-
tions. As of November 2003, we were authorized to
repurchase up to 8.6 million additional shares of com-
mon stock pursuant to our common stock repurchase
program. The average price paid per share for repur-
chased shares was $76.83, $76.49 and $88.22 for the
years ended November 2003, November 2002 and
November 2001, respectively. For additional information
on our share repurchase program, see “Market for
Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities” in our
Annual Report on Form 10-K for our 2003 fiscal year.
The following table sets forth information on our assets,
shareholders’ equity, leverage ratios and book value
per share:
AS OF NOVEMBER
($ IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 2003 2002
Total assets $403,799 $355,574
Adjusted assets(1) 273,941 215,547
Shareholders’ equity 21,632 19,003
Tangible shareholders’ equity(2) 16,650 14,164
Leverage ratio(3) 18.7x 18.7x
Adjusted leverage ratio(4) 16.5x 15.2x
Book value per share(5) $ 43.60 $38.69
Tangible book value per share(6) 33.56 28.84
(1) Adjusted assets excludes (i) low-risk collateralized assets generally
associated with our matched book and securities lending businesses
(which we calculate by adding our securities purchased under agree-
ments to resell and securities borrowed, and then subtracting our
nonderivative short positions), (ii) cash and securities we segregate
in compliance with regulations and (iii) goodwill and identifiable intan-
gible assets. The following table sets forth a reconciliation of total
assets to adjusted assets:
AS OF NOVEMBER
(IN MILLIONS) 2003 2002
Total assets $ 403,799 $ 355,574
Deduct: Securities purchased under
agreements to resell (26,856) (45,772)
Securities borrowed (129,118) (113,579)
Add: Financial instruments sold, but
not yet purchased, at fair value
(excluding derivatives) 60,813 44,552
Deduct: Cash and securities segregated
in compliance with U.S. federal
and other regulations (29,715) (20,389)
Goodwill and identifiable
intangible assets (4,982) (4,839)
Adjusted assets $ 273,941 $ 215,547
(2) Tangible shareholders’ equity equals total shareholders’ equity less
goodwill and identifiable intangible assets. The following table sets
forth a reconciliation of shareholders’ equity to tangible shareholders’
equity:
AS OF NOVEMBER
(IN MILLIONS) 2003 2002
Shareholders’ equity $21,632 $19,003
Deduct: Goodwill and identifiable
intangible assets (4,982) (4,839)
Tangible shareholders’ equity $16,650 $14,164
(3) Leverage ratio equals total assets divided by shareholders’ equity.
(4) Adjusted leverage ratio equals adjusted assets divided by tangible
shareholders’ equity. We believe that the adjusted leverage ratio is a
more meaningful measure of our capital adequacy because it excludes
certain low-risk collateralized assets that are generally supported
with little or no capital and reflects the tangible equity deployed in
our businesses.
(5) Book value per share is based on common shares outstanding,
including restricted stock units granted to employees with no future
service requirements, of 496.1 million as of November 2003 and
491.2 million as of November 2002.
(6) Tangible book value per share is computed by dividing tangible
shareholders’ equity by the number of common shares outstanding,
including restricted stock units granted to employees with no future
service requirements.