Goldman Sachs 2004 Annual Report Download - page 9

industry practice yesterday will be the target of intense
scrutiny tomorrow. We must conduct ourselves accordingly
and ensure that we have thoroughly and thoughtfully
analyzed all of our business priorities. At the same time,
it is naïve to think that we can operate without conflicts.
They are embedded in our role as a valued intermediary —
between providers and users of capital and those who want
to shed risk versus those who are willing to assume it. Like
every industry, ours faces conflicting interests and the relevant
question must be: How do we effectively manage them?
We will continue to devote substantial effort and resources
to this important issue.
We must also stay focused on the growth and develop-
ment of our business. We firmly believe that the integrated
investment bank, intermediating capital flows and providing
advice to clients, has a central role to play in the efficient
functioning of capital markets, which in turn is vital to
sustained, long-term global growth.
Strategic฀Transactions
Goldman Sachs is not a financial services conglomerate but
an integrated investment bank, securities firm and asset
manager. Although we analyze many potential transactions,
we remain focused on finding ways to grow that are consistent
with and complementary to this basic strategy. During 2004,
we completed some important strategic transactions.
Asia is a region of great opportunity and China has been
a strategic priority for our firm for many years. In December,
we announced that we had received official approval to
establish a joint venture investment banking and securities
firm in China. This was the culmination of a significant long-
term effort to obtain a domestic license in this critical market.
We are already a leader in providing advisory services to some
of China’s most important companies and bringing them to
the international capital markets. Goldman Sachs Gao Hua
Securities Company Limited will enable us for the first time
to offer a wide range of investment banking and securities
trading services to Chinese clients in their domestic market.
Specifically, the joint venture will be able to underwrite locally
listed “A” share transactions and Renminbi-denominated
corporate bonds and convertible bonds, as well as offer
domestic advisory services and undertake other investment
banking activities. The establishment of Goldman Sachs Gao
Hua Securities is a crucial step in the development of our
business in one of the world’s most important economies.
In September 2004, we agreed to acquire interests in 11
power plants in six U.S. states for approximately $550 million.
From our earlier acquisition of Cogentrix Energy, we already
had ownership interests in nine of the 11 plants. With its
closing on January 31, 2005, this transaction continues our
strategy of acquiring what we believe to be attractively priced
power assets to complement our existing commodity trading
and merchant energy restructuring capabilities.
People
Lois D. Juliber, a Vice Chairman of the Colgate-Palmolive
Company, was elected to the Board of Directors at the 2004
Annual Meeting of Shareholders. Lois has played a central
role in extending Colgate’s business to over 200 countries.
We are fortunate to benefit from her international depth
and experience.
In addition, on November 29, 2004, we were pleased to
announce that Suzanne M. Nora Johnson was appointed a
Vice Chairman of the firm. Suzanne’s career at Goldman
Sachs has spanned nearly 20 years. She will continue to head
our Global Investment Research division and to lead our
efforts with the new Global Markets Institute.
Our leadership team was also enhanced by the February
2004 appointment of Alan M. Cohen, formerly a partner in
the law firm of O’Melveny & Myers LLP, as Global Head of
Compliance. Alan’s extensive experience in private practice
and his tenure as an Assistant U.S. Attorney, position him well
to lead this critically important area of the firm.
At the end of 2004, we expanded our senior leadership
by selecting 98 new partners of the firm and 190 new MDs.
They are a superb new generation of leaders who we believe
will help to ensure the continued success of Goldman Sachs.
Outlook
As we begin 2005, we continue to see significant potential
across the firm. Investment banking activity appears to be
recovering gradually, equity markets have improved from
the summer of 2004 and the environment across our FICC
businesses remains broadly favorable. In managing the firm,
we remain focused on our clients, and our people are as
dedicated and enthusiastic as ever. We believe the people
of Goldman Sachs are second to none in the industry.
As we look ahead, the cornerstones of our business are
unchanged — serving our clients’ needs, capitalizing on
market opportunities as they emerge and harnessing the
entrepreneurial talents of our people.
henry฀m.฀paulson,฀jr.฀
Chairman and Chief Executive Officer
lloyd฀c.฀blankfein฀
President and Chief Operating Officer
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