Goldman Sachs 2004 Annual Report Download - page 50

Download and view the complete annual report

Please find page 50 of the 2004 Goldman Sachs annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 120

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120

48฀฀฀G O L D M A N ฀ S A C H S ฀ 2004฀ ANNUAL฀REPO RT
48฀฀฀G O L D M A N ฀ S A C H S ฀ 2 004฀ A N N U A L ฀ R E P O RT
The following table sets forth our assets under management by asset class:
assets฀under฀management฀by฀asset฀class
฀ ฀ AS฀OF฀NOVEMBER฀30
(IN฀BILLIONS)฀ 2004฀ 2003(3)฀ 2002
Money markets $฀฀90 $฀฀89฀ $108
Fixed income and currency 139 115฀ 96
Equity(1) 126 98฀ 86
Alternative investments(2) 97 71฀ 58
Total $452 $373฀ $348
BES฀•฀Phone฀(201)฀635-5240฀฀•฀FAX฀(201)฀635-5199
BPX/S10829฀•฀Flow฀15฀•฀Proof฀10฀•฀2/4/05฀•฀0700
(1)฀Includes฀both฀our฀fundamental฀equity฀and฀quantitative฀equity฀strategies.
(2)฀฀Includes฀other฀quantitative฀and/or฀non-traditional฀investment฀strategies฀(e.g.,฀hedge฀funds),฀merchant฀banking฀funds฀and฀vehicles฀where฀we฀contract฀with฀sub-
advisors฀for฀our฀clients.
(3)฀฀Includes฀$4฀billion฀in฀non-money฀market฀assets฀acquired฀in฀our฀combination฀with฀Ayco.
execution fees in our U.S. shares business. Principal Investments
recorded net revenues of $566 million, which included an unre-
alized gain related to our investment in the convertible preferred
stock of SMFG of $293 million (net of unrealized foreign
exchange losses on the Japanese yen-denominated borrowing
funding this investment), and gains and overrides from real
estate and other corporate principal investments.
Operating expenses were $6.94 billion in 2003, 7% higher than
2002, primarily due to increased compensation and benefits
expenses, with higher discretionary compensation (reflecting
increased net revenues) more than offsetting the impact of lower
levels of employment. Operating expenses also increased due to
intangible asset impairment charges in respect of option specialist
rights, higher other expenses, and increased occupancy expenses,
primarily related to exit costs associated with reductions in our
global office space. These expense increases were partially offset
by lower communications and technology expenses, deprecia-
tion and amortization expenses, brokerage, clearing and
exchange fees, and market development expenses, reflecting the
impact of reduced employment levels, lower levels of business
activity and continued cost-containment discipline. Pre-tax
earnings of $3.51 billion in 2003 increased 64% compared
with 2002.
Asset฀Management฀and฀Securities฀Services
Our Asset Management and Securities Services segment is
divided into two components:
• a s s e t ฀ m a n a ge m e n t ฀– ฀Asset Management provides
investment advisory and financial planning services to a
diverse group of institutions and individuals worldwide
and primarily generates revenues in the form of manage-
ment and incentive fees.
• s e curities ฀s e rv ices฀– ฀Securities Services provides prime
brokerage, financing services and securities lending services to
mutual funds, pension funds, hedge funds, foundations and
high-net-worth individuals worldwide, and generates reve-
nues primarily in the form of interest rate spreads or fees.
The following table sets forth the operating results of our Asset Management and Securities Services segment:
asset฀ management฀ and฀securities฀services฀operating฀results
฀ ฀ YEAR฀ENDED฀NOVEMBER
(IN฀MILLIONS)฀ 2004฀ 2003฀ 2002
Asset Management $2,553 $1,853฀ $1,653
Securities Services 1,296 1,005฀ 856
Total net revenues 3,849 2,858฀ 2,509
Operating expenses 2,430 1,890฀ 1,562
Pre-tax earnings $1,419 $฀ ฀968฀ $฀ ฀947
management’s฀discussion฀and฀analysis
Assets under management typically generate fees as a percentage
of asset value or based on investment performance. Assets under
management include our mutual funds, alternative investment
funds, separately managed accounts for institutional and individ-
ual investors and our merchant banking funds. Substantially all
assets under management are valued as of calendar month end.