From right:
HENRY M. PAULSON, JR.
Chairman and Chief Executive Officer
JOHN A. THAIN
President and Co-Chief Operating Officer
JOHN L. THORNTON
President and Co-Chief Operating Officer
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LETTER TO SHAREHOLDERS
SIGNIFICANT TRANSACTIONS
On February 7, 2003, Goldman Sachs entered into a series of related
transactions with Sumitomo Mitsui Financial Group, Inc. (SMFG) that
include an investment of ¥150.3 billion ($1.25 billion) in convertible
preferred stock of SMFG, the provision by SMFG of credit loss protection
to Goldman Sachs and a broadening of cooperative initiatives between our
two firms. We believe these transactions have strategic significance and
real benefit to both organizations and their shareholders. For Goldman
Sachs, it enables us to pursue three important objectives. First, it
deepens our participation in Japan and Japanese financial markets,
through an investment in one of that nation's largest and best-managed
institutions. Second, the credit protection component will enhance
Goldman Sachs' ability to offer credit commitments to investment-grade
clients while mitigating in part the credit risk of doing so. Finally,
the agreement with SMFG extends the range of cooperative initiatives
between Goldman Sachs and SMFG, and areas on which we anticipate working
together will include the disposition of non-performing assets,
investment banking and asset management. This transaction is especially
meaningful, given the long and successful relationship between our
firms, including Sumitomo Bank's historic capital investment of $500
million in Goldman Sachs initiated in 1986.
BOARD OF DIRECTORS/MANAGEMENT CHANGES
In December, we announced that William George, former Chairman and CEO
of Medtronic, Inc., was joining our Board of Directors. Bill fills the
seat Steve Friedman left when he retired to become Assistant to the
President for Economic Policy and Director of the National Economic
Council. We will miss Steve's contributions to the Board, although we
are gratified that President Bush will have the benefit of his counsel.
And we are fortunate to gain a new director of Bill's caliber. Morris
Chang and Meg Whitman also resigned as directors late in 2002. We are
grateful for their dedication and insights as directors. In February
2003, in light of the announced retirement of Bob Hurst, the Board
nominated Lloyd Blankfein, a Vice Chairman of Goldman Sachs with
responsibility for our securities businesses, to stand for election to
our Board of Directors at the April 1 Annual Meeting. We look forward to
having Lloyd as a new director and we thank Bob for his contributions to
our Board.
Over the past year we changed the ranks of our senior leadership to meet
the challenging business environment and to ensure the best possible
service to our clients. Lloyd Blankfein, Bob Steel and Rob Kaplan were
appointed Vice Chairmen and asked to take on expanded management
responsibilities. In addition, Masanori Mochida, Suzanne Nora Johnson,
John Weinberg, Gary Cohn, Chris Cole, Michael Evans, Scott Kapnick,
Peter Kraus, Eric Mindich, Tom Montag, Eric Schwartz, Michael Sherwood
and Andrew Melnick joined the firm's Management Committee over the
course of 2002. These individuals bring a wealth of talent and
experience and a diversity of perspectives to the Committee.
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