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management’s฀discussion฀and฀analysis
52฀฀฀G O L D M A N ฀ S A C H S ฀ 2004฀ ANNUAL฀REPO RT
52฀฀฀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
SHORT-TERM฀ BORROWINGS
Goldman Sachs obtains secured and unsecured short-term bor-
rowings primarily through issuance of promissory notes, com-
mercial paper and bank loans. Short-term borrowings also
include the portion of long-term borrowings maturing within
one year and certain long-term borrowings that may be redeem-
able within one year at the option of the holder.
The following table sets forth our short-term borrowings
by product:
short-term฀borrowings
฀ ฀ AS฀OF฀NOVEMBER
(IN฀MILLIONS)฀ 2004฀ 2003
Promissory notes $19,513 $24,119
Commercial paper 4,355 4,767
Bank loans and other 13,474 8,183
Current portion of
long-term borrowings 17,617 7,133
Total $54,959 $44,202
Our liquidity depends to an important degree on our ability to
refinance these borrowings on a continuous basis. Investors
who hold our outstanding promissory notes (short-term unse-
cured debt that is nontransferable and in which Goldman Sachs
does not make a market) and commercial paper have no obliga-
tion to purchase new instruments when the outstanding instru-
ments mature.
The following table sets forth our secured and unsecured short-
term borrowings:
฀ ฀ AS฀OF฀NOVEMBER
(IN฀MILLIONS)฀ 2004฀ 2003
Secured short-term borrowings $฀฀8,558 $฀฀3,321
Unsecured short-term borrowings 46,401 40,881
Total short-term borrowings $54,959 $44,202
Our secured short-term borrowings provide Goldman Sachs
with a more stable source of liquidity, as these borrowings are
less sensitive to changes in our credit ratings than our unsecured
short-term borrowings, due to the underlying collateral. See
“—Risk Management—Liquidity Risk” included below for a
discussion of the principal liquidity policies we have in place to
manage the liquidity risk associated with our short-term bor-
rowings. For a discussion of factors that could impair our abil-
ity to access these and other markets, see “—Certain Factors
That May Affect Our Business” included above. See Note 4 to
the consolidated financial statements for further information
regarding our short-term borrowings.
CREDIT฀RATINGS
We rely upon the short-term and long-term debt capital markets
to fund a significant portion of our day-to-day operations. The
cost and availability of debt financing is influenced by our credit
ratings. Credit ratings are important when we are competing in
certain markets and when we seek to engage in longer term
transactions, including OTC derivatives. We believe our credit
ratings are primarily based on the credit rating agencies’ assess-
ment of our liquidity, market and credit risk management prac-
tices, the level and variability of our earnings, our franchise,
reputation and management, our capital base, our corporate
governance and the external operating environment. See
“—Certain Factors That May Affect Our Business” included
above for a discussion of the risks associated with a reduction
in our credit ratings.
The following table sets forth our unsecured credit ratings as of
November 2004:
฀฀ ฀ SHORT-TERM฀ LONG-TERM฀฀฀
฀ ฀ DEBT฀ DEBT
Dominion Bond Rating
Service Limited R-1 (middle) A (high)
Fitch, Inc. F1+ AA-
Moody’s Investors Service P-1 Aa3
Standard & Poor’s A-1 A+
BES฀•฀Phone฀(201)฀635-5240฀฀•฀FAX฀(201)฀635-5199
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