Goldman Sachs 2002 Annual Report Download - page 88

N otes to Consolidated Financial Statem ents
GO L D M A N SA CH S 2002 A N N UAL R EPO RT 85
A reconciliation of the U.S. federal statutory income tax rate to the firm’s effective income tax rate is set forth below:
YEAR ENDED NOVEMBER
2002 2001 2000
U.S. federal statutory income tax rate 35.0% 35.0% 35.0%
Increase related to state and local taxes, net of U.S. income tax effects 2.7 2.8 4.3
Domestic tax credits (1.3) ——
Tax-exempt income, including dividends (1.3) (0.6) (0.2)
Foreign operations (0.9) ——
Other 0.8 0.3 (0.2)
Effective income tax rate 35.0% 37.5% 38.9%
Tax benefits of approximately $119 million in 2002,
$123 million in 2001 and $116 million in 2000, related
to the delivery of restricted stock units and the exercise of
options, were credited directly to “Additional paid-in
capital” in the consolidated statements of financial con-
dition and changes in shareholders’ equity.
N O T E 14
REGULATED SUBSIDIARIES
GS&Co. and Spear, Leeds and Kellogg, L.P. are registered
U.S. broker-dealers and futures commission merchants
subject to Rule 15c3-1 of the Securities and Exchange
Commission and Rule 1.17 of the Commodity Futures
Trading Commission, which specify uniform minimum
net capital requirements, as defined, for their registrants.
They have elected to compute their net capital in accor-
dance with the “Alternative Net Capital Requirement” as
permitted by Rule 15c3-1. As of November 2002 and
November 2001, GS& Co. had regulatory net capital, as
defined, of $4.75 billion and $4.59 billion respectively,
which exceeded the amounts required by $4.09 billion
and $3.91 billion, respectively. As of November 2002
and November 2001, Spear, Leeds and Kellogg, L.P. had
regulatory net capital, as defined, of $1.28 billion and
$952 million, respectively, which exceeded the amounts
required by $1.24 billion and $907 million, respectively.
GSI, a registered U.K. broker-dealer, is subject to the cap-
ital requirements of The Financial Services Authority, and
GSJL, a Tokyo-based broker-dealer, is subject to the cap-
ital requirements of the Financial Services Agency. As of
November 2002 and November 2001, GSI and GSJL
were in compliance with their local capital adequacy
requirements.
Certain other subsidiaries of the firm are also subject to
capital adequacy requirements promulgated by authori-
ties of the countries in which they operate. As of
November 2002 and November 2001, these sub-
sidiaries were in compliance with their local capital ade-
quacy requirements.
N O T E 15
BUSINESS SEGMENTS
In reporting to management, the firm’s operating results
are categorized into the following three segments:
Investment Banking, Trading and Principal Investments,
and Asset Management and Securities Services. The
Investment Banking and Trading and Principal
Investments segments were previously aggregated into
one reporting segment — Global Capital Markets.
Investment Banking
The Investment Banking segment provides a broad range
of investment banking services to a diverse group of cor-
porations, financial institutions, governments and indi-
viduals. Investment banking activities are divided into
two categories:
•F I N A N C I A L A D V I S O R Y –Financial Advisory includes
advisory assignments with respect to mergers and
acquisitions, divestitures, corporate defense activi-
ties, restructurings and spin-offs; and
•U N D E R W R I T I N G –Underwriting includes public
offerings and private placements of equity and debt
securities.
Trading and Principal Investments
The Trading and Principal Investments business facilitates
customer transactions with a diverse group of corpora-
tions, financial institutions, governments and individuals
and takes proprietary positions through market making
in, and trading of, fixed income and equity products, cur-
rencies, commodities, and swaps and other derivatives. In
addition, the firm engages in floor-based and electronic
market making as a specialist on U.S. equities and