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For the fiscal year ended November 28, 2008 | Commission File Number: 001-14965 |
Delaware | 13-4019460 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
85 Broad Street New York, N.Y. | 10004 (Zip Code) | |
(Address of principal executive offices) |
Title of each class: | Name of each exchange on which registered: | |
Common stock, par value $.01 per share, and attached Shareholder Protection Rights | New York Stock Exchange | |
Depositary Shares, Each Representing 1/1,000th Interest in a Share of Floating RateNon-Cumulative Preferred Stock, Series A | New York Stock Exchange | |
Depositary Shares, Each Representing 1/1,000th Interest in a Share of 6.20%Non-Cumulative Preferred Stock, Series B | New York Stock Exchange | |
Depositary Shares, Each Representing 1/1,000th Interest in a Share of Floating RateNon-Cumulative Preferred Stock, Series C | New York Stock Exchange | |
Depositary Shares, Each Representing 1/1,000th Interest in a Share of Floating RateNon-Cumulative Preferred Stock, Series D | New York Stock Exchange | |
5.793%Fixed-to-Floating Rate Normal Automatic Preferred Enhanced Capital Securities of Goldman Sachs Capital II (and Registrant’s guarantee with respect thereto) | New York Stock Exchange | |
Floating Rate Normal Automatic Preferred Enhanced Capital Securities of Goldman Sachs Capital III (and Registrant’s guarantee with respect thereto) | New York Stock Exchange | |
Medium-Term Notes, Series B, Index-Linked Notes due February 2013; Index-Linked Notes due April 2013; Index-Linked Notes due May 2013; Index-Linked Notes due 2010; and Index-Linked Notes due 2011 | NYSE Alternext US | |
Medium-Term Notes, Series B, 7.35% Notes due 2009; 7.80% Notes due 2010; and Floating Rate Notes due 2011 | New York Stock Exchange | |
Medium-Term Notes, Series A, Index-Linked Notes due 2037 of GS Finance Corp. (and Registrant’s guarantee with respect thereto) | NYSE Arca | |
Medium-Term Notes, Series B, Index-Linked Notes due 2037 | NYSE Arca |
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Item 1. | Business |
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(in millions)
Year Ended November | ||||||||||||||
2008 | 2007 | 2006 | ||||||||||||
Investment | Net revenues | $ | 5,185 | $ | 7,555 | $ | 5,629 | |||||||
Banking | Operating expenses | 3,143 | 4,985 | 4,062 | ||||||||||
Pre-tax earnings | $ | 2,042 | $ | 2,570 | $ | 1,567 | ||||||||
Trading and Principal | Net revenues | $ | 9,063 | $ | 31,226 | $ | 25,562 | |||||||
Investments | Operating expenses | 11,808 | 17,998 | 14,962 | ||||||||||
Pre-tax earnings/(loss) | $ | (2,745 | ) | $ | 13,228 | $ | 10,600 | |||||||
Asset Management and | Net revenues | $ | 7,974 | $ | 7,206 | $ | 6,474 | |||||||
Securities Services | Operating expenses | 4,939 | 5,363 | 4,036 | ||||||||||
Pre-tax earnings | $ | 3,035 | $ | 1,843 | $ | 2,438 | ||||||||
Total | Net revenues | $ | 22,222 | $ | 45,987 | $ | 37,665 | |||||||
Operating expenses (1) | 19,886 | 28,383 | 23,105 | |||||||||||
Pre-tax earnings | $ | 2,336 | $ | 17,604 | $ | 14,560 | ||||||||
(1) | Operating expenses include net provisions for a number of litigation and regulatory proceedings of $(4) million, $37 million and $45 million for the years ended November 2008, November 2007 and November 2006, respectively, that have not been allocated to our segments. |
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• | we are a member of and an active participant in most of the world’s major stock, options and futures exchanges and marketplaces; | |
• | we are a primary dealer in many of the largest government bond markets around the world; | |
• | we have interbank dealer status in currency markets around the world; | |
• | we are a member of or have relationships with major commodities exchanges worldwide; and | |
• | we have commercial banking or deposit-taking institutions organized or operating in the United States, the United Kingdom, Ireland, Brazil, Switzerland, Germany, France, Russia and South Korea. |
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Business Segment/Component | Primary Products and Activities | ||
Investment Banking: | |||
Financial Advisory | • Mergers and acquisitions advisory services | ||
• Financial restructuring advisory services | |||
Underwriting | • Equity and debt underwriting | ||
Trading and Principal Investments: | |||
Fixed Income, Currency and Commodities | • Commodities and commodity derivatives, including power generation and related activities | ||
• Credit products, including trading and investing in credit derivatives, investment-grade corporate securities, high-yield securities, bank and secured loans, municipal securities, emerging market and distressed debt, public and private equity securities and real estate | |||
• Currencies and currency derivatives | |||
• Interest rate products, including interest rate derivatives, global government securities and money market instruments, including matched book positions | |||
• Mortgage-related securities and loan products and other asset-backed instruments | |||
Equities | • Equity securities and derivatives | ||
• Securities, futures and options clearing services | |||
• Market-making and specialist activities in equity securities and options | |||
• Insurance activities | |||
Principal Investments | • Principal investments in connection with merchant banking activities | ||
• Investment in the ordinary shares of Industrial and Commercial Bank of China Limited | |||
Asset Management and Securities Services: | |||
Asset Management | • Investment advisory services, financial planning and investment products (primarily through separately managed accounts and commingled vehicles) across all major asset classes, including money markets, fixed income, equities and alternative investments (including hedge funds, private equity, real estate, currencies, commodities and asset allocation strategies), for institutional and individual investors (includinghigh-net-worth clients, as well as retail clients through third-party channels) | ||
• Management of merchant banking funds | |||
Securities Services | • Prime brokerage | ||
• Financing services | |||
• Securities lending | |||
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• | First, in large, highly liquid markets, we undertake a high volume of transactions for modest spreads and fees. | |
• | Second, by capitalizing on our strong relationships and capital position, we undertake transactions in less liquid markets where spreads and fees are generally larger. | |
• | Finally, we structure and execute transactions that address complex client needs. |
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(in billions)
![](https://capedge.com/proxy/10-K/0000950123-09-001278/y74032y7403201.gif)
(in billions)
As of November 30 | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Alternative investments (1) | $ | 146 | $ | 151 | $ | 145 | ||||||
Equity | 112 | 255 | 215 | |||||||||
Fixed income | 248 | 256 | 198 | |||||||||
Totalnon-money market assets | 506 | 662 | 558 | |||||||||
Money markets | 273 | 206 | 118 | |||||||||
Total assets under management | $ | 779 | $ | 868 | $ | 676 | ||||||
(1) | Primarily includes hedge funds, private equity, real estate, currencies, commodities and asset allocation strategies. |
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(in billions)
As of November 30 | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
• Directly Distributed | ||||||||||||
— Institutional | $ | 273 | $ | 354 | $ | 296 | ||||||
— High-net-worth individuals | 215 | 219 | 177 | |||||||||
•Third-Party Distributed | ||||||||||||
— Institutional,high-net-worth individuals and retail | 291 | 295 | 203 | |||||||||
Total | $ | 779 | $ | 868 | $ | 676 | ||||||
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• | The Equity Research Departments provide fundamental analysis, earnings forecasts and investment opinions for equity securities; | |
• | The Credit Research Department provides fundamental analysis, forecasts and investment opinions as toinvestment-grade andhigh-yield corporate bonds and credit derivatives; and | |
• | The Global ECS Department (formed in December 2008 through a consolidation of the Economic, Commodities and Strategy Research Departments) formulates macroeconomic forecasts for economic activity, foreign exchange and interest rates, provides research on the commodity markets, and provides equity market forecasts, opinions on both asset and industry sector allocation, equity trading strategies, credit trading strategies and options research. |
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• | Before we became a bank holding company, we were subject to capital guidelines by the SEC as a CSE that were generally consistent with those set out in the Revised Framework for the International Convergence of Capital Measurement and Capital Standards issued by the Basel Committee on Banking Supervision (Basel II). We currently compute and report our firmwide capital ratios in accordance with the Basel II requirements as applicable to us when we were regulated as a CSE for the purpose of assessing the adequacy of our capital. We expect to continue to report to investors for a period of time our Basel II capital ratios as applicable to us when we were regulated as a CSE. | |
• | The regulatory capital guidelines currently applicable to bank holding companies are based on the Capital Accord of the Basel Committee on Banking Supervision (Basel I), with Basel II to be phased in over time. We are currently working with the Federal Reserve Board to put in place the appropriate reporting and compliance mechanisms and methodologies to allow reporting of the Basel I capital ratios as of the end of March 2009. | |
• | In addition, we are currently working to implement the Basel II framework as applicable to us as a bank holding company (as opposed to as a CSE). U.S. banking regulators have incorporated the Basel II framework into the existingrisk-based capital requirements by requiring that internationally active banking organizations, such as Group Inc., transition to Basel II over the next several years. |
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• | to transfer any of the depository institution’s assets and liabilities to a new obligor without the approval of the depository institution’s creditors; |
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• | to enforce the terms of the depository institution’s contracts pursuant to their terms; or | |
• | to repudiate or disaffirm any contract or lease to which the depository institution is a party, the performance of which is determined by the FDIC to be burdensome and the disaffirmance or repudiation of which is determined by the FDIC to promote the orderly administration of the depository institution. |
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Item 1B. | Unresolved Staff Comments |
Item 2. | Properties |
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Item 3. | Legal Proceedings |
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Item 4. | Submission of Matters to a Vote of Security Holders |
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Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
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Total Number of | Maximum Number | |||||||||||||||
Average | Shares Purchased | of Shares That May | ||||||||||||||
Total Number | Price | as Part of Publicly | Yet Be Purchased | |||||||||||||
of Shares | Paid per | Announced Plans | Under the Plans or | |||||||||||||
Period | Purchased | Share | or Programs (2) | Programs (2) | ||||||||||||
Month #1 (August 30, 2008 to September 26, 2008) | — | — | — | 60,859,203 | ||||||||||||
Month #2 (September 27, 2008 to October 31, 2008) | 2,025 | $ | 121.35 | 2,025 | 60,857,178 | |||||||||||
Month #3 (November 1, 2008 to November 28, 2008) | 4,700 | $ | 53.31 | 4,700 | 60,852,478 | |||||||||||
Total (1) | 6,725 | $ | 73.80 | 6,725 | ||||||||||||
(1) | Goldman Sachs generally does not repurchase shares of its common stock as part of the repurchase program during self-imposed “black-out” periods, which run from the last two weeks of a fiscal quarter through and including the date of the earnings release for such quarter. | |
(2) | On March 21, 2000, we announced that our board of directors had approved a repurchase program, pursuant to which up to 15 million shares of our common stock may be repurchased. This repurchase program was increased by an aggregate of 280 million shares by resolutions of our board of directors adopted on June 18, 2001, March 18, 2002, November 20, 2002, January 30, 2004, January 25, 2005, September 16, 2005, September 11, 2006 and December 17, 2007. We use our share repurchase program to help maintain the appropriate level of common equity and to substantially offset increases in share count over time resulting from employeeshare-based compensation. Prior to October 28, 2011, unless we have redeemed all the preferred stock issued to the U.S. Treasury on October 28, 2008 or unless the U.S. Treasury has transferred all the preferred stock to a third party, the consent of the U.S. Treasury will be required for us to repurchase our common stock in an aggregate amount greater than the increase in the number of diluted shares outstanding (as reported in our Quarterly Report onForm 10-Q for the three months ended August 29, 2008) resulting from the grant, vesting or exercise ofequity-based compensation to employees and equitably adjusted for any stock split, stock dividend, reverse stock split, reclassification or similar transaction. |
Item 6. | Selected Financial Data |
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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• | Investment Banking. We provide a broad range of investment banking services to a diverse group of corporations, financial institutions, investment funds, governments and individuals. | |
• | Trading and Principal Investments. We facilitate client transactions with a diverse group of corporations, financial institutions, investment funds, governments and individuals and take proprietary positions through market making in, trading of and investing in fixed income and equity products, currencies, commodities and derivatives on these products. In addition, we engage in market-making and specialist activities on equities and options exchanges, and we clear client transactions on major stock, options and futures exchanges worldwide. In connection with our merchant banking and other investing activities, we make principal investments directly and through funds that we raise and manage. | |
• | Asset Management and Securities Services. We provide investment advisory and financial planning services and offer investment products (primarily through separately managed accounts and commingled vehicles, such as mutual funds and private investment funds) across all major asset classes to a diverse group of institutions and individuals worldwide and provide prime brokerage services, financing services and securities lending services to institutional clients, including hedge funds, mutual funds, pension funds and foundations, and tohigh-net-worth individuals worldwide. |
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(1) | Return on average tangible common shareholders’ equity (ROTE) is computed by dividing net earnings applicable to common shareholders by average monthly tangible common shareholders’ equity. See“— Results of Operations — Financial Overview” below for further information regarding our calculation of ROTE. |
(2) | Before we became a bank holding company, we were subject to capital guidelines as a Consolidated Supervised Entity (CSE) that were generally consistent with those set out in the Revised Framework for the International Convergence of Capital Measurement and Capital Standards issued by the Basel Committee on Banking Supervision (Basel II). We currently compute and report our consolidated capital ratios in accordance with the Basel II requirements, as applicable to us when we were regulated as a CSE, for the purpose of assessing the adequacy of our capital. Under the Basel II framework as it applied to us when we were regulated as a CSE, our Tier 1 Ratio equals Tier 1 Capital divided by TotalRisk-Weighted Assets (RWAs). We are currently working with the Federal Reserve Board to put in place the appropriate reporting and compliance mechanisms and methodologies to allow reporting of the Basel I capital ratios as of the end of March 2009. See“— Equity Capital” below for a further discussion of our Tier 1 Ratio. |
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• | Many of our businesses, such as our merchant banking businesses, our mortgages, leveraged loan and credit products businesses in our FICC segment, and our equity principal strategies business, have net “long” positions in debt securities, loans, derivatives, mortgages, equities (including private equity) and most other asset classes. In addition, many of ourmarket-making and other businesses in which we act as a principal to facilitate our clients’ activities, including our specialist businesses, commit large amounts of capital to maintain trading positions in interest rate and credit products, as well as currencies, commodities and equities. Because nearly all of these investing and trading positions aremarked-to-market on a daily basis, declines in asset values directly and immediately impact our earnings, unless we have effectively “hedged” our exposures to such declines. In certain circumstances (particularly in the case of leveraged loans and private equities or other securities that are not freely tradable or lack established and liquid trading markets), it may not be possible or economic to hedge such exposures and to the extent that we do so the hedge may be ineffective or may greatly reduce our ability to profit from increases in the values of the assets. Sudden declines and significant volatility in the prices of assets may substantially curtail or eliminate the trading markets for certain assets, which may make it very difficult to sell, hedge or value such assets. The inability to sell or effectively hedge assets reduces our ability to limit losses in such positions and the difficulty in valuing assets may increase ourrisk-weighted assets which requires us to maintain additional capital and increases our funding costs. | |
• | Our cost of obtaininglong-term unsecured funding is directly related to our credit spreads. Credit spreads are influenced by market perceptions of our creditworthiness. Widening credit spreads, as well as significant declines in the availability of credit, have adversely affected our ability to borrow on a secured and unsecured basis and may continue to do so. We fund ourselves on an unsecured basis by issuing commercial paper, promissory notes andlong-term debt, or by obtaining bank loans or lines of credit. We seek to finance many of our assets, including our less liquid assets, on a secured basis, including by entering into repurchase agreements. Disruptions in the credit markets make it harder and more expensive to obtain funding for our businesses. If our available funding is limited or we are forced to fund |
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our operations at a higher cost, these conditions may require us to curtail our business activities and increase our cost of funding, both of which could reduce our profitability, particularly in our businesses that involve investing, lending and taking principal positions, including market making. |
• | Our investment banking business has been and may continue to be adversely affected by market conditions. Poor economic conditions and other adverse geopolitical conditions can adversely affect and have adversely affected investor and CEO confidence, resulting in significantindustry-wide declines in the size and number of underwritings and of financial advisory transactions, which could continue to have an adverse effect on our revenues and our profit margins. In addition, our clients engaging in mergers and acquisitions often rely on access to the secured and unsecured credit markets to finance their transactions. The lack of available credit and the increased cost of credit can adversely affect the size, volume and timing of our clients’ merger and acquisition transactions — particularly large transactions. Because a significant portion of our investment banking revenues are derived from our participation in large transactions, a decline in the number of large transactions would adversely affect our investment banking business. | |
• | Certain of our trading businesses depend on market volatility to provide trading and arbitrage opportunities, and decreases in volatility may reduce these opportunities and adversely affect the results of these businesses. On the other hand, increased volatility, while it can increase trading volumes and spreads, also increases risk as measured by VaR and may expose us to increased risks in connection with ourmarket-making and proprietary businesses or cause us to reduce the size of these businesses in order to avoid increasing our VaR. Limiting the size of ourmarket-making positions and investing businesses can adversely affect our profitability. | |
• | We receiveasset-based management fees based on the value of our clients’ portfolios or investment in funds managed by us and, in some cases, we also receive incentive fees based on increases in the value of such investments. Declines in asset values reduce the value of our clients’ portfolios or fund assets, which in turn reduce the fees we earn for managing such assets. Market uncertainty, volatility and adverse economic conditions, as well as declines in asset values, may cause our clients to transfer their assets out of our funds or other products or their brokerage accounts or affect our ability to attract new clients or additional assets from existing clients and result in reduced net revenues, principally in our asset management business. To the extent that clients do not withdraw their funds, they may invest them in products that generate less fee income. | |
• | Concentration of risk increases the potential for significant losses in ourmarket-making, proprietary trading, investing, block trading, merchant banking, underwriting and lending businesses. This risk may increase to the extent we expand our proprietary trading and investing businesses or commit capital to facilitate customer-driven business. | |
• | Concerns about financial institution profitability and solvency as a result of general market conditions, particularly in the credit markets, together with the forced merger or failure of a number of major commercial and investment banks have at times caused a number of our clients to reduce the level of business that they do with us, either because of concerns about the safety of their assets held by us or simply arising from a desire to diversify their risk or for other reasons. Some clients have withdrawn some of the funds held at our firm or transferred them from deposits with GS Bank USA to other types of assets (in many cases leaving those assets in their brokerage accounts held with us). Some counterparties have at times refused to enter into certain derivatives and otherlong-term transactions with us or have requested additional collateral. These instances were more prevalent during periods when the lack of confidence in financial institutions was most widespread and have become significantly less frequent in recent months. |
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• | Statement of Financial Accounting Standards (SFAS) No. 115, “Accounting for Certain Investments in Debt and Equity Securities;” | |
• | specialized industry accounting forbroker-dealers and investment companies; | |
• | SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities;” or | |
• | the fair value option under either SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140,” or SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (i.e., the fair value option). |
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(in millions)
As of November | ||||||||||||||||
2008 | 2007 | |||||||||||||||
Trading | Trading | Trading | Trading | |||||||||||||
Assets, at | Liabilities, at | Assets, at | Liabilities, at | |||||||||||||
Fair Value | Fair Value | Fair Value | Fair Value | |||||||||||||
Cash trading instruments | $ | 186,231 | $ | 57,143 | $ | 324,181 | $ | 112,018 | ||||||||
ICBC | 5,496 | (1) | — | 6,807 | (1) | — | ||||||||||
SMFG | 1,135 | 1,134 | (4) | 4,060 | 3,627 | (4) | ||||||||||
Other principal investments | 15,126 | (2) | — | 11,933 | (2) | — | ||||||||||
Principal investments | 21,757 | 1,134 | 22,800 | 3,627 | ||||||||||||
Cash instruments | 207,988 | 58,277 | 346,981 | 115,645 | ||||||||||||
Exchange-traded | 6,164 | 8,347 | 13,541 | 12,280 | ||||||||||||
Over-the-counter | 124,173 | 109,348 | 92,073 | 87,098 | ||||||||||||
Derivative contracts | 130,337 | (3) | 117,695 | (5) | 105,614 | (3) | 99,378 | (5) | ||||||||
Total | $ | 338,325 | $ | 175,972 | $ | 452,595 | $ | 215,023 | ||||||||
(1) | Includes interests of $3.48 billion and $4.30 billion as of November 2008 and November 2007, respectively, held by investment funds managed by Goldman Sachs. The fair value of our investment in the ordinary shares of ICBC, which trade on The Stock Exchange of Hong Kong, includes the effect of foreign exchange revaluation for which we maintain an economic currency hedge. | |
(2) | The following table sets forth the principal investments (in addition to our investments in ICBC and Sumitomo Mitsui Financial Group, Inc. (SMFG)) included within the Principal Investments component of our Trading and Principal Investments segment: |
As of November | ||||||||||||||||||||||||
2008 | 2007 | |||||||||||||||||||||||
Corporate | Real Estate | Total | Corporate | Real Estate | Total | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Private | $ | 10,726 | $ | 2,935 | $ | 13,661 | $ | 7,297 | $ | 2,361 | $ | 9,658 | ||||||||||||
Public | 1,436 | 29 | 1,465 | 2,208 | 67 | 2,275 | ||||||||||||||||||
Total | $ | 12,162 | $ | 2,964 | $ | 15,126 | $ | 9,505 | $ | 2,428 | $ | 11,933 | ||||||||||||
(3) | Net of cash received pursuant to credit support agreements of $137.16 billion and $59.05 billion as of November 2008 and November 2007, respectively. | |
(4) | Represents an economic hedge on the shares of common stock underlying our investment in the convertible preferred stock of SMFG. | |
(5) | Net of cash paid pursuant to credit support agreements of $34.01 billion and $27.76 billion as of November 2008 and November 2007, respectively. |
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• | Cash Trading Instruments. Our cash trading instruments are generally valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices in active markets include most U.S. government and sovereign obligations, active listed equities and certain money market securities. |
• | Public Principal Investments. Our public principal investments held within the Principal Investments component of our Trading and Principal Investments segment tend to be large, concentrated holdings resulting from initial public offerings or other corporate transactions, and are valued based on quoted market prices. For positions that are not traded in active markets or are subject to transfer restrictions, valuations are adjusted to reflect illiquidityand/ornon-transferability. Such adjustments are generally based on available market evidence. In the absence of such evidence, management’s best estimate is used. |
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• | Private Principal Investments. Our private principal investments held within the Principal Investments component of our Trading and Principal Investments segment include investments in private equity, debt and real estate, primarily held through investment funds. By their nature, these investments have little or no price transparency. We value such instruments initially at transaction price and adjust valuations when evidence is available to support such adjustments. Such evidence includes transactions in similar instruments, completed or pending third-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalizations and other transactions across the capital structure, offerings in the equity or debt capital markets, and changes in financial ratios or cash flows. |
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• | Private equity and real estate fund investments. Investments are generally held at cost for the first year. Recentthird-party investments or pending transactions are considered to be the best evidence for any change in fair value. In the absence of such evidence, valuations are based on third-party independent appraisals, transactions in similar instruments, discounted cash flow techniques, valuation multiples and public comparables. Such evidence includes pending reorganizations (e.g., merger proposals, tender offers or debt restructurings); and significant changes in financial metrics (e.g., operating results as compared to previous projections, industry multiples, credit ratings and balance sheet ratios). | |
• | Bank loans and bridge loans and Corporate debt securities and other debt obligations. Valuations are generally based on discounted cash flow techniques, for which the key inputs are the amount and timing of expected future cash flows, market yields for such instruments and recovery assumptions. Inputs are generally determined based on relative value analyses, which incorporate comparisons both to credit default swaps that reference the same underlying credit risk and to other debt instruments for the same issuer for which observable prices or broker quotes are available. | |
• | Loans and securities backed by commercial real estate. Loans and securities backed by commercial real estate are collateralized by specific assets and are generally tranched into varying levels of subordination. Due to the nature of these instruments, valuation techniques vary by instrument. Methodologies include relative value analyses across different tranches, comparisons to transactions in both the underlying collateral and instruments with the same or substantially the same underlying collateral, market indices (such as the CMBX(1)), and credit default swaps, as well as discounted cash flow techniques. | |
• | Loans and securities backed by residential real estate. Valuations are based on both proprietary and industry recognized models (including Intex and Bloomberg), discounted cash flow techniques and hypothetical securitization analyses. In the recent market environment, the most significant inputs to the valuation of these instruments are rates of delinquency, default and loss expectations, which are driven in part by housing prices. Inputs are determined based on relative value analyses, which incorporate comparisons to instruments with similar collateral and risk profiles, including relevant indices such as the ABX(1). | |
• | Loan portfolios. Valuations are based on discounted cash flow techniques, for which the key inputs are the amount and timing of expected future cash flows and market yields for such instruments. Inputs are determined based on relative value analyses which incorporate comparisons to recent auction data for other similar loan portfolios. | |
• | Derivative contracts. Valuation models are calibrated to initial transaction price. Subsequent changes in valuations are based on observable inputs to the valuation models (e.g., interest rates, credit spreads, volatilities, etc.). Inputs are changed only when corroborated by market data. Valuations of less liquid OTC derivatives are typically based on level 1 or level 2 inputs that can be observed in the market, as well as unobservable inputs, such as correlations and volatilities. |
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(in millions)
As of November | ||||||||
Description | 2008 | 2007 | ||||||
Private equity and real estate fund investments (1) | $ | 16,006 | $ | 18,006 | ||||
Bank loans and bridge loans (2) | 11,957 | 13,334 | ||||||
Corporate debt securities and other debt obligations (3) | 7,596 | 6,111 | ||||||
Mortgage and otherasset-backed loans and securities | ||||||||
Loans and securities backed by commercial real estate | 9,340 | 7,410 | ||||||
Loans and securities backed by residential real estate | 2,049 | 2,484 | ||||||
Loan portfolios (4) | 4,118 | 6,106 | ||||||
Cash instruments | 51,066 | 53,451 | ||||||
Derivative contracts | 15,124 | 15,700 | ||||||
Total level 3 assets at fair value | 66,190 | 69,151 | ||||||
Level 3 assets for which we do not bear economic exposure (5) | (6,616 | ) | (14,437 | ) | ||||
Level 3 assets for which we bear economic exposure | $ | 59,574 | $ | 54,714 | ||||
(1) | Includes $1.18 billion and $7.06 billion as of November 2008 and November 2007, respectively, of assets for which we do not bear economic exposure. Also includes $2.62 billion and $2.02 billion as of November 2008 and November 2007, respectively, of real estate fund investments. | |
(2) | Includes mezzanine financing, leveraged loans arising from capital market transactions and other corporate bank debt. | |
(3) | Includes $804 million and $2.49 billion as of November 2008 and November 2007, respectively, of CDOs backed by corporate obligations. | |
(4) | Consists of acquired portfolios of distressed loans, primarily backed by commercial and residential real estate collateral. | |
(5) | We do not bear economic exposure to these level 3 assets as they are financed by nonrecourse debt, attributable to minority investors or attributable to employee interests in certain consolidated funds. |
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(in millions)
As of November | ||||||||
2008 | 2007 | |||||||
Prime (1) | $ | 1,494 | $ | 7,135 | ||||
Alt-A | 1,845 | 6,358 | ||||||
Subprime (2) | 1,906 | 2,109 | ||||||
Total (3) | $ | 5,245 | $ | 15,602 | ||||
(1) | Excludes U.S. governmentagency-issued collateralized mortgage obligations of $4.27 billion and $7.24 billion as of November 2008 and November 2007, respectively. Also excludes U.S. governmentagency-issuedmortgage-pass through certificates. | |
(2) | Includes $228 million and $316 million of CDOs backed by subprime mortgages as of November 2008 and November 2007, respectively. | |
(3) | Includes $2.05 billion and $2.48 billion of financial instruments (primarily loans andinvestment-grade securities, the majority of which were issued during 2006 and 2007) classified as level 3 under the fair value hierarchy as of November 2008 and November 2007, respectively. |
Commercial Real Estate by Geographic Region
(in millions)
As of November | ||||||||
2008 | 2007 | |||||||
Americas (1) | $ | 7,433 | $ | 12,361 | ||||
EMEA (2) | 3,304 | 6,607 | ||||||
Asia | 157 | 52 | ||||||
Total (3) | $ | 10,894 | (4) | $ | 19,020 | (5) | ||
(1) | Substantially all relates to the U.S. | |
(2) | EMEA (Europe, Middle East and Africa). | |
(3) | Includes $9.34 billion and $7.41 billion of financial instruments classified as level 3 under the fair value hierarchy as of November 2008 and November 2007, respectively. | |
(4) | Comprised of loans of $9.23 billion and commercialmortgage-backed securities of $1.66 billion as of November 2008, of which $9.78 billion was floating rate and $1.11 billion was fixed rate. | |
(5) | Comprised of loans of $16.27 billion and commercialmortgage-backed securities of $2.75 billion as of November 2007, of which $16.52 billion was floating rate and $2.50 billion was fixed rate. |
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• | certain unsecuredshort-term borrowings, consisting of all promissory notes and commercial paper and certain hybrid financial instruments; | |
• | certain other secured financings, primarily transfers accounted for as financings rather than sales under SFAS No. 140, debt raised through our William Street program and certain other nonrecourse financings; | |
• | certain unsecuredlong-term borrowings, including prepaid physical commodity transactions; | |
• | resale and repurchase agreements; | |
• | securities borrowed and loaned within Trading and Principal Investments, consisting of our matched book and certain firm financing activities; | |
• | certain corporate loans, loan commitments and certificates of deposit issued by GS Bank USA as well as securities held by GS Bank USA; | |
• | receivables from customers and counterparties arising from transfers accounted for as secured loans rather than purchases under SFAS No. 140; | |
• | certain insurance and reinsurance contracts; and | |
• | in general, investments acquired after the adoption of SFAS No. 159 where we have significant influence over the investee and would otherwise apply the equity method of accounting. In certain cases, we may apply the equity method of accounting to new investments that are strategic in nature or closely related to our principal business activities, where we have a significant degree of involvement in the cash flows or operations of the investee, or wherecost-benefit considerations are less significant. |
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(in millions)
As of November | ||||||||
2008 | 2007 | |||||||
Investment Banking | ||||||||
Underwriting | $ | 125 | $ | 125 | ||||
Trading and Principal Investments | ||||||||
FICC | 247 | 123 | ||||||
Equities (1) | 2,389 | 2,381 | ||||||
Principal Investments | 80 | 11 | ||||||
Asset Management and Securities Services | ||||||||
Asset Management (2) | 565 | 564 | ||||||
Securities Services | 117 | 117 | ||||||
Total | $ | 3,523 | $ | 3,321 | ||||
(1) | Primarily related to SLK. | |
(2) | Primarily related to Ayco. |
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($ in millions)
As of November | ||||||||||||
2008 | 2007 | |||||||||||
Range of Estimated | ||||||||||||
Carrying | Remaining Lives | Carrying | ||||||||||
Value | (in years) | Value | ||||||||||
Customer lists (1) | $ | 724 | 2 - 17 | $ | 732 | |||||||
New York Stock Exchange (NYSE) Designated Market Maker (DMM) rights | 462 | 13 | 502 | |||||||||
Insurance-related assets (2) | 303 | 7 | 372 | |||||||||
Exchange-traded fund (ETF) lead market maker rights | 95 | 19 | 100 | |||||||||
Other (3) | 93 | 1 - 17 | 65 | |||||||||
Total | $ | 1,677 | $ | 1,771 | ||||||||
(1) | Primarily includes our clearance and execution and NASDAQ customer lists related to SLK and financial counseling customer lists related to Ayco. | |
(2) | Consists of the value of business acquired (VOBA) and deferred acquisition costs (DAC). VOBA represents the present value of estimated future gross profits of acquired variable annuity and life insurance businesses. DAC results from commissions paid by Goldman Sachs to the primary insurer (ceding company) on life and annuity reinsurance agreements as compensation to place the business with us and to cover the ceding company’s acquisition expenses. VOBA and DAC are amortized over the estimated life of the underlying contracts based on estimated gross profits, and amortization is adjusted based on actual experience. Theseven-year estimated life represents the weighted average remaining amortization period of the underlying contracts (certain of which extend for approximately 30 years). | |
(3) | Primarily includes marketing-related assets and power contracts. |
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• | total equity trading volumes in NYSE-listed companies will continue to grow at a rate consistent with recent historical trends; | |
• | the NYSE will be able to recapture approximatelyone-half of the market share that it lost in 2007; and | |
• | we will increase our market share of the NYSE DMM business and, as a DMM, the profitability of each share traded. |
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($ in millions, except per share amounts)
Year Ended November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Net revenues | $ | 22,222 | $ | 45,987 | $ | 37,665 | ||||||
Pre-tax earnings | 2,336 | 17,604 | 14,560 | |||||||||
Net earnings | 2,322 | 11,599 | 9,537 | |||||||||
Net earnings applicable to common shareholders | 2,041 | 11,407 | 9,398 | |||||||||
Diluted earnings per common share | 4.47 | 24.73 | 19.69 | |||||||||
Return on average common shareholders’ equity (1) | 4.9 | % | 32.7 | % | 32.8 | % | ||||||
Return on average tangible common shareholders’ equity (2) | 5.5 | % | 38.2 | % | 39.8 | % |
(1) | Return on average common shareholders’ equity (ROE) is computed by dividing net earnings applicable to common shareholders by average monthly common shareholders’ equity. | |
(2) | Tangible common shareholders’ equity equals total shareholders’ equity less preferred stock, goodwill and identifiable intangible assets, excluding power contracts. Identifiable intangible assets associated with power contracts are not deducted from total shareholders’ equity because, unlike other intangible assets, less than 50% of these assets are supported by common shareholders’ equity. |
Average for the | ||||||||||||
Year Ended November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Total shareholders’ equity | $ | 47,167 | $ | 37,959 | $ | 31,048 | ||||||
Preferred stock | (5,157 | ) | (3,100 | ) | (2,400 | ) | ||||||
Common shareholders’ equity | 42,010 | 34,859 | 28,648 | |||||||||
Goodwill and identifiable intangible assets, excluding power contracts | (5,220 | ) | (4,971 | ) | (5,013 | ) | ||||||
Tangible common shareholders’ equity | $ | 36,790 | $ | 29,888 | $ | 23,635 | ||||||
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($ in millions)
Year Ended November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Compensation and benefits (1) | $ | 10,934 | $ | 20,190 | $ | 16,457 | ||||||
Brokerage, clearing, exchange and distribution fees | 2,998 | 2,758 | 1,985 | |||||||||
Market development | 485 | 601 | 492 | |||||||||
Communications and technology | 759 | 665 | 544 | |||||||||
Depreciation and amortization | 1,022 | 624 | 521 | |||||||||
Amortization of identifiable intangible assets | 240 | 195 | 173 | |||||||||
Occupancy | 960 | 975 | 850 | |||||||||
Professional fees | 779 | 714 | 545 | |||||||||
Other expenses (2) | 1,709 | 1,661 | 1,538 | |||||||||
Totalnon-compensation expenses | 8,952 | 8,193 | 6,648 | |||||||||
Total operating expenses | $ | 19,886 | $ | 28,383 | $ | 23,105 | ||||||
Employees at year-end (3) | 30,067 | 30,522 | 26,467 |
(1) | Compensation and benefits includes $262 million, $168 million and $259 million for the years ended November 2008, November 2007 and November 2006, respectively, attributable to consolidated entities held for investment purposes. Consolidated entities held for investment purposes are entities that are held strictly for capital appreciation, have a defined exit strategy and are engaged in activities that are not closely related to our principal businesses. | |
(2) | Beginning in the first quarter of 2008, “Cost of power generation” was reclassified into “Other expenses” in the consolidated statements of earnings. Prior periods have been reclassified to conform to the current presentation. | |
(3) | Excludes 4,671, 4,572 and 3,868 employees as of November 2008, November 2007 and November 2006, respectively, of consolidated entities held for investment purposes (see footnote 1 above). |
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(in millions)
Year Ended November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Non-compensation expenses of consolidated investments (1) | $ | 779 | $ | 446 | $ | 501 | ||||||
Non-compensation expenses excluding consolidated investments | ||||||||||||
Brokerage, clearing, exchange and distribution fees | 2,998 | 2,758 | 1,985 | |||||||||
Market development | 475 | 593 | 461 | |||||||||
Communications and technology | 754 | 661 | 537 | |||||||||
Depreciation and amortization | 631 | 509 | 444 | |||||||||
Amortization of identifiable intangible assets | 233 | 189 | 169 | |||||||||
Occupancy | 861 | 892 | 738 | |||||||||
Professional fees | 770 | 711 | 534 | |||||||||
Other expenses (2) | 1,451 | 1,434 | 1,279 | |||||||||
Subtotal | 8,173 | 7,747 | 6,147 | |||||||||
Totalnon-compensation expenses, as reported | $ | 8,952 | $ | 8,193 | $ | 6,648 | ||||||
(1) | Consolidated entities held for investment purposes are entities that are held strictly for capital appreciation, have a defined exit strategy and are engaged in activities that are not closely related to our principal businesses. For example, these investments include consolidated entities that hold real estate assets, such as hotels, but exclude investments in entities that primarily hold financial assets. We believe that it is meaningful to reviewnon-compensation expenses excluding expenses related to these consolidated entities in order to evaluate trends innon-compensation expenses related to our principal business activities. Revenues related to such entities are included in “Trading and principal investments” in the consolidated statements of earnings. | |
(2) | Beginning in the first quarter of 2008, “Cost of power generation” was reclassified into “Other expenses” in the consolidated statements of earnings. Prior periods have been reclassified to conform to the current presentation. |
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(in millions)
Year Ended November | ||||||||||||||
2008 | 2007 | 2006 | ||||||||||||
Investment | Net revenues | $ | 5,185 | $ | 7,555 | $ | 5,629 | |||||||
Banking | Operating expenses | 3,143 | 4,985 | 4,062 | ||||||||||
Pre-tax earnings | $ | 2,042 | $ | 2,570 | $ | 1,567 | ||||||||
Trading and Principal | Net revenues | $ | 9,063 | $ | 31,226 | $ | 25,562 | |||||||
Investments | Operating expenses | 11,808 | 17,998 | 14,962 | ||||||||||
Pre-tax earnings/(loss) | $ | (2,745 | ) | $ | 13,228 | $ | 10,600 | |||||||
Asset Management and | Net revenues | $ | 7,974 | $ | 7,206 | $ | 6,474 | |||||||
Securities Services | Operating expenses | 4,939 | 5,363 | 4,036 | ||||||||||
Pre-tax earnings | $ | 3,035 | $ | 1,843 | $ | 2,438 | ||||||||
Total | Net revenues | $ | 22,222 | $ | 45,987 | $ | 37,665 | |||||||
Operating expenses (1) | 19,886 | 28,383 | 23,105 | |||||||||||
Pre-tax earnings | $ | 2,336 | $ | 17,604 | $ | 14,560 | ||||||||
(1) | Operating expenses include net provisions for a number of litigation and regulatory proceedings of $(4) million, $37 million and $45 million for the years ended November 2008, November 2007 and November 2006, respectively, that have not been allocated to our segments. |
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• | Financial Advisory. Financial Advisory includes advisory assignments with respect to mergers and acquisitions, divestitures, corporate defense activities, restructurings andspin-offs. | |
• | Underwriting. Underwriting includes public offerings and private placements of a wide range of securities and other financial instruments. |
(in millions)
Year Ended November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Financial Advisory | $ | 2,656 | $ | 4,222 | $ | 2,580 | ||||||
Equity underwriting | 1,353 | 1,382 | 1,365 | |||||||||
Debt underwriting | 1,176 | 1,951 | 1,684 | |||||||||
Total Underwriting | 2,529 | 3,333 | 3,049 | |||||||||
Total net revenues | 5,185 | 7,555 | 5,629 | |||||||||
Operating expenses | 3,143 | 4,985 | 4,062 | |||||||||
Pre-tax earnings | $ | 2,042 | $ | 2,570 | $ | 1,567 | ||||||
(in billions)
Year Ended November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Announced mergers and acquisitions | $ | 927 | $ | 1,249 | $ | 1,101 | ||||||
Completed mergers and acquisitions | 823 | 1,443 | 863 | |||||||||
Equity andequity-related offerings (2) | 61 | 66 | 74 | |||||||||
Debt offerings (3) | 185 | 345 | 320 |
(1) | Source: Thomson Reuters. Announced and completed mergers and acquisitions volumes are based on full credit to each of the advisors in a transaction. Equity andequity-related offerings and debt offerings are based on full credit for single book managers and equal credit for joint book managers. Transaction volumes may not be indicative of net revenues in a given period. In addition, transaction volumes for prior periods may vary from amounts previously reported due to the subsequent withdrawal or a change in the value of a previously announced transaction. | |
(2) | Includes Rule 144A and public common stock offerings, convertible offerings and rights offerings. | |
(3) | Includesnon-convertible preferred stock,mortgage-backed securities,asset-backed securities and taxable municipal debt. Includes publicly registered and Rule 144A issues. |
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• | FICC. We make markets in and trade interest rate and credit products,mortgage-related securities and loan products and otherasset-backed instruments, currencies and commodities, structure and enter into a wide variety of derivative transactions, and engage in proprietary trading and investing. | |
• | Equities. We make markets in and trade equities andequity-related products, structure and enter into equity derivative transactions and engage in proprietary trading. We generate commissions from executing and clearing client transactions on major stock, options and futures exchanges worldwide through our Equities client franchise and clearing activities. We also engage in specialist and insurance activities. | |
• | Principal Investments. We make real estate and corporate principal investments, including our investment in the ordinary shares of ICBC. We generate net revenues from returns on these investments and from the increased share of the income and gains derived from our merchant banking funds when the return on a fund’s investments over the life of the fund exceeds certain threshold returns (typically referred to as an override). |
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(in millions)
Year Ended November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
FICC | $ | 3,713 | $ | 16,165 | $ | 14,262 | ||||||
Equities trading | 4,208 | 6,725 | 4,965 | |||||||||
Equities commissions | 4,998 | 4,579 | 3,518 | |||||||||
Total Equities | 9,206 | 11,304 | 8,483 | |||||||||
ICBC | (446 | ) | 495 | 937 | ||||||||
Gross gains | 1,335 | 3,728 | 2,061 | |||||||||
Gross losses | (4,815 | ) | (943 | ) | (585 | ) | ||||||
Net other corporate and real estate investments | (3,480 | ) | 2,785 | 1,476 | ||||||||
Overrides | 70 | 477 | 404 | |||||||||
Total Principal Investments | (3,856 | ) | 3,757 | 2,817 | ||||||||
Total net revenues | 9,063 | 31,226 | 25,562 | |||||||||
Operating expenses | 11,808 | 17,998 | 14,962 | |||||||||
Pre-tax earnings/(loss) | $ | (2,745 | ) | $ | 13,228 | $ | 10,600 | |||||
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• | Asset Management. Asset Management provides investment advisory and financial planning services and offers investment products (primarily through separately managed accounts and commingled vehicles, such as mutual funds and private investment funds) across all major asset classes to a diverse group of institutions and individuals worldwide and primarily generates revenues in the form of management and incentive fees. | |
• | Securities Services. Securities Services provides prime brokerage services, financing services and securities lending services to institutional clients, including hedge funds, mutual funds, pension funds and foundations, and tohigh-net-worth individuals worldwide, and generates revenues primarily in the form of interest rate spreads or fees. |
(in millions)
Year Ended November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Management and other fees | $ | 4,321 | $ | 4,303 | $ | 3,332 | ||||||
Incentive fees | 231 | 187 | 962 | |||||||||
Total Asset Management | 4,552 | 4,490 | 4,294 | |||||||||
Securities Services | 3,422 | 2,716 | 2,180 | |||||||||
Total net revenues | 7,974 | 7,206 | 6,474 | |||||||||
Operating expenses | 4,939 | 5,363 | 4,036 | |||||||||
Pre-tax earnings | $ | 3,035 | $ | 1,843 | $ | 2,438 | ||||||
• | assets in brokerage accounts that generate commissions,mark-ups and spreads based on transactional activity, | |
• | our own investments in funds that we manage; | |
• | ornon-fee-paying assets, including interest-bearing deposits held through our depository institution subsidiaries. |
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(in billions)
As of November 30 | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Alternative investments (1) | $ | 146 | $ | 151 | $ | 145 | ||||||
Equity | 112 | 255 | 215 | |||||||||
Fixed income | 248 | 256 | 198 | |||||||||
Totalnon-money market assets | 506 | 662 | 558 | |||||||||
Money markets | 273 | 206 | 118 | |||||||||
Total assets under management | $ | 779 | $ | 868 | $ | 676 | ||||||
(in billions)
Year Ended November 30 | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Balance, beginning of year | $ | 868 | $ | 676 | $ | 532 | ||||||
Net inflows/(outflows) | ||||||||||||
Alternative investments | 8 | 9 | 32 | |||||||||
Equity | (55 | ) | 26 | 16 | ||||||||
Fixed income | 14 | 38 | 29 | |||||||||
Totalnon-money market net inflows/(outflows) | (33 | ) | 73 | (1) | 77 | |||||||
Money markets | 67 | 88 | 17 | (2) | ||||||||
Total net inflows/(outflows) | 34 | 161 | 94 | (3) | ||||||||
Net market appreciation/(depreciation) | (123 | ) | 31 | 50 | ||||||||
Balance, end of year | $ | 779 | $ | 868 | $ | 676 | ||||||
(1) | Includes $7 billion in net asset inflows in connection with our acquisition of Macquarie — IMM Investment Management. | |
(2) | Net of the transfer of $8 billion of money market assets under management to interest-bearing deposits at GS Bank USA. | |
(3) | Includes $3 billion of net asset inflows in connection with the acquisition of our variable annuity and life insurance business. |
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Type of Off-Balance-Sheet Arrangement | Disclosure in our Annual Report on Form 10-K | |
Retained interests or contingent interests in assets transferred by us to nonconsolidated entities | See Note 4 to the consolidated financial statements in Part II, Item 8 of our Annual Report on Form 10-K. | |
Leases, letters of credit, and loans and other commitments | See“— Contractual Obligations and Commitments” below and Note 8 to the consolidated financial statements in Part II, Item 8 of our Annual Report on Form 10-K. | |
Guarantees | See Note 8 to the consolidated financial statements in Part II, Item 8 of our Annual Report on Form 10-K. | |
Other obligations, including contingent obligations, arising out of variable interests we have in nonconsolidated entities | See Note 4 to the consolidated financial statements in Part II, Item 8 of our Annual Report on Form 10-K. | |
Derivative contracts | See“— Critical Accounting Policies” above, and“— Risk Management” and“— Derivatives” below and Notes 3 and 7 to the consolidated financial statements in Part II, Item 8 of our Annual Report on Form 10-K. | |
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• | Before we became a bank holding company, we were subject to capital guidelines by the SEC as a Consolidated Supervised Entity (CSE) that were generally consistent with those set out in the Revised Framework for the International Convergence of Capital Measurement and Capital Standards issued by the Basel Committee on Banking Supervision (Basel II). We currently compute and report our firmwide capital ratios in accordance with the Basel II requirements as applicable to us when we were regulated as a CSE for the purpose of assessing the adequacy of our capital. Under the Basel II framework as it applied to us when we were regulated as a CSE, we evaluate our Tier 1 Capital and Total Allowable Capital as a percentage of RWAs. As of November 2008, our Total Capital Ratio (Total Allowable Capital as a percentage of RWAs) was 18.9% and our Tier 1 Ratio (Tier 1 Capital as a percentage of RWAs) was 15.6%, in each case calculated under the Basel II framework as it applied to us when we were regulated as a CSE. See “— Consolidated Capital Ratios” below for further information. We expect to continue to report to investors for a period of time our Basel II capital ratios as applicable to us when we were regulated as a CSE. | |
• | The regulatory capital guidelines currently applicable to bank holding companies are based on the Capital Accord of the Basel Committee on Banking Supervision (Basel I), with Basel II to be phased in over time. We are currently working with the Federal Reserve Board to put in place the appropriate reporting and compliance mechanisms and methodologies to allow reporting of the Basel I capital ratios as of the end of March 2009. | |
• | In addition, we are currently working to implement the Basel II framework as applicable to us as a bank holding company (as opposed to as a CSE). U.S. banking regulators have incorporated the Basel II framework into the existingrisk-based capital requirements by requiring that internationally active banking organizations, such as Group Inc., transition to Basel II over the next several years. |
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As of | ||||
November | ||||
2008 | ||||
($ in millions) | ||||
I. Tier 1 and Total Allowable Capital | ||||
Common shareholders’ equity | $ | 47,898 | ||
Preferred stock | 16,471 | |||
Junior subordinated debt issued to trusts | 5,000 | |||
Less: Goodwill | (3,523 | ) | ||
Less: Disallowable intangible assets | (1,386 | ) | ||
Less: Other deductions (1) | (1,823 | ) | ||
Tier 1 Capital | 62,637 | |||
Other components of Total Allowable Capital | ||||
Qualifying subordinated debt (2) | 13,703 | |||
Less: Other deductions (1) | (690 | ) | ||
Total Allowable Capital | $ | 75,650 | ||
II.Risk-Weighted Assets | ||||
Market risk | $ | 176,646 | ||
Credit risk | 184,055 | |||
Operational risk | 39,675 | |||
TotalRisk-Weighted Assets | $ | 400,376 | ||
III. Tier 1 Ratio | 15.6 | % | ||
IV. Total Capital Ratio | 18.9 | % |
(1) | Principally included investments in regulated insurance entities and certain financial service entities (50% was deducted from both Tier 1 Capital and Total Allowable Capital). | |
(2) | Substantially all of our existing subordinated debt qualified as Total Allowable Capital for CSE purposes. |
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• | PD is an estimate of the probability that an obligor will default over aone-year horizon. PD is derived from the use of internally determined equivalents of public rating agency ratings. | |
• | LGD is an estimate of the economic loss rate if a default occurs during economic downturn conditions. LGD is determined based on industry data. |
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As of November | ||||||||
2008 | 2007 | |||||||
(in millions, except | ||||||||
per share amounts) | ||||||||
Number of shares repurchased | 10.54 | 41.22 | ||||||
Total cost | $ | 2,037 | $ | 8,956 | ||||
Average cost per share | $ | 193.18 | $ | 217.29 |
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Dividend | Shares | Shares | Earliest | Redemption Value | ||||||||||||||
Series | Preference | Issued | Authorized | Dividend Rate | Redemption Date | (in millions) | ||||||||||||
A | Non-cumulative | 30,000 | 50,000 | 3 month LIBOR + 0.75%, with floor of 3.75% per annum | April 25, 2010 | $ | 750 | |||||||||||
B | Non-cumulative | 32,000 | 50,000 | 6.20% per annum | October 31, 2010 | 800 | ||||||||||||
C | Non-cumulative | 8,000 | 25,000 | 3 month LIBOR + 0.75%, with floor of 4.00% per annum | October 31, 2010 | 200 | ||||||||||||
D | Non-cumulative | 54,000 | 60,000 | 3 month LIBOR + 0.67%, with floor of 4.00% per annum | May 24, 2011 | 1,350 | ||||||||||||
G | Cumulative | 50,000 | 50,000 | 10.00% per annum | Date of issuance | 5,500 | ||||||||||||
H | Cumulative | 10,000,000 | 10,000,000 | 5.00% per annum through November 14, 2013 and 9.00% per annum thereafter | Date of issuance | 10,000 | ||||||||||||
10,174,000 | 10,235,000 | $ | 18,600 | |||||||||||||||
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As of November | ||||||||
2008 | 2007 | |||||||
($ in millions, except | ||||||||
per share amounts) | ||||||||
Total assets | $ | 884,547 | $ | 1,119,796 | ||||
Adjusted assets (1) | 528,161 | 745,700 | ||||||
Total shareholders’ equity | 64,369 | 42,800 | ||||||
Tangible equity capital (2) | 64,186 | 42,728 | ||||||
Leverage ratio (3) | 13.7 | x | 26.2 | x | ||||
Adjusted leverage ratio (4) | 8.2 | x | 17.5 | x | ||||
Debt to equity ratio (5) | 2.6 | x | 3.8 | x | ||||
Common shareholders’ equity | $ | 47,898 | $ | 39,700 | ||||
Tangible common shareholders’ equity (6) | 42,715 | 34,628 | ||||||
Book value per common share (7) | $ | 98.68 | $ | 90.43 | ||||
Tangible book value per common share (8) | 88.00 | 78.88 |
(1) | Adjusted assets excludes(i) low-risk collateralized assets generally associated with our matched book and securities lending businesses and federal funds sold, (ii) cash and securities we segregate for regulatory and other purposes and (iii) goodwill and identifiable intangible assets, excluding power contracts. We do not deduct identifiable intangible assets associated with power contracts from total assets in order to be consistent with the calculation of tangible equity capital and the adjusted leverage ratio (see footnote 2 below). |
As of November | ||||||||||
2008 | 2007 | |||||||||
(in millions) | ||||||||||
Total assets | $ | 884,547 | $ | 1,119,796 | ||||||
Deduct: | Securities borrowed | (180,795 | ) | (277,413 | ) | |||||
Securities purchased under agreements to resell, at fair value and federal funds sold | (122,021 | ) | (87,317 | ) | ||||||
Add: | Trading liabilities, at fair value | 175,972 | 215,023 | |||||||
Less derivative liabilities | (117,695 | ) | (99,378 | ) | ||||||
Subtotal | 58,277 | 115,645 | ||||||||
Deduct: | Cash and securities segregated for regulatory and other purposes | (106,664 | ) | (119,939 | ) | |||||
Goodwill and identifiable intangible assets, excluding power contracts | (5,183 | ) | (5,072 | ) | ||||||
Adjusted assets | $ | 528,161 | $ | 745,700 | ||||||
(2) | Tangible equity capital equals total shareholders’ equity and junior subordinated debt issued to trusts less goodwill and identifiable intangible assets, excluding power contracts. We do not deduct identifiable intangible assets associated with power contracts from total shareholders’ equity because, unlike other intangible assets, less than 50% of these assets are supported by common shareholders’ equity. We consider junior subordinated debt issued to trusts to be a component of our tangible equity capital base due to certain characteristics of the debt, including itslong-term nature, our ability to defer payments due on the debt and the subordinated nature of the debt in our capital structure. |
As of November | ||||||||||
2008 | 2007 | |||||||||
(in millions) | ||||||||||
Total shareholders’ equity | $ | 64,369 | $ | 42,800 | ||||||
Add: | Junior subordinated debt issued to trusts | 5,000 | 5,000 | |||||||
Deduct: | Goodwill and identifiable intangible assets, excluding power contracts | (5,183 | ) | (5,072 | ) | |||||
Tangible equity capital | $ | 64,186 | $ | 42,728 | ||||||
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(3) | The leverage ratio equals total assets divided by total shareholders’ equity. This ratio is different from the Tier 1 leverage ratios included in“— Equity Capital — Consolidated Capital Requirements” and “— Equity Capital — Subsidiary Capital Requirements” above. | |
(4) | The adjusted leverage ratio equals adjusted assets divided by tangible equity capital. We believe that the adjusted leverage ratio is a more meaningful measure of our capital adequacy than the leverage ratio because it excludes certainlow-risk collateralized assets that are generally supported with little or no capital and reflects the tangible equity capital deployed in our businesses. | |
(5) | The debt to equity ratio equals unsecuredlong-term borrowings divided by total shareholders’ equity. | |
(6) | Tangible common shareholders’ equity equals total shareholders’ equity less preferred stock, goodwill and identifiable intangible assets, excluding power contracts. We do not deduct identifiable intangible assets associated with power contracts from total shareholders’ equity because, unlike other intangible assets, less than 50% of these assets are supported by common shareholders’ equity. |
As of November | ||||||||||
2008 | 2007 | |||||||||
(in millions) | ||||||||||
Total shareholders’ equity | $ | 64,369 | $ | 42,800 | ||||||
Deduct: | Preferred stock | (16,471 | ) | (3,100 | ) | |||||
Common shareholders’ equity | 47,898 | 39,700 | ||||||||
Deduct: | Goodwill and identifiable intangible assets, excluding power contracts | (5,183 | ) | (5,072 | ) | |||||
Tangible common shareholders’ equity | $ | 42,715 | $ | 34,628 | ||||||
(7) | Book value per common share is based on common shares outstanding, including restricted stock units granted to employees with no future service requirements, of 485.4 million and 439.0 million as of November 2008 and November 2007, respectively. | |
(8) | Tangible book value per common share is computed by dividing tangible common shareholders’ equity by the number of common shares outstanding, including restricted stock units granted to employees with no future service requirements. |
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(in millions)
2010- | 2012- | 2014- | ||||||||||||||||||
2009 | 2011 | 2013 | Thereafter | Total | ||||||||||||||||
Unsecuredlong-term borrowings (1)(2)(3) | $ | — | $ | 25,122 | $ | 38,750 | $ | 104,348 | $ | 168,220 | ||||||||||
Securedlong-term financings (1)(2)(4) | — | 6,735 | 4,417 | 6,306 | 17,458 | |||||||||||||||
Contractual interest payments (5) | 8,145 | 14,681 | 11,947 | 34,399 | 69,172 | |||||||||||||||
Insurance liabilities (6) | 642 | 951 | 791 | 4,879 | 7,263 | |||||||||||||||
Minimum rental payments | 494 | 800 | 535 | 1,664 | 3,493 | |||||||||||||||
Purchase obligations | 569 | 132 | 21 | 21 | 743 |
(1) | Obligations maturing within one year of our financial statement date or redeemable within one year of our financial statement date at the option of the holder are excluded from this table and are treated asshort-term obligations. See Note 3 to the consolidated financial statements in Part II, Item 8 of our Annual Report onForm 10-K for further information regarding our secured financings. | |
(2) | Obligations that are repayable prior to maturity at the option of Goldman Sachs are reflected at their contractual maturity dates. Obligations that are redeemable prior to maturity at the option of the holder are reflected at the dates such options become exercisable. | |
(3) | Includes $17.45 billion accounted for at fair value under SFAS No. 155 or SFAS No. 159, primarily consisting of hybrid financial instruments and prepaid physical commodity transactions. | |
(4) | These obligations are reported within “Other secured financings” in the consolidated statements of financial condition and include $7.85 billion accounted for at fair value under SFAS No. 159. | |
(5) | Represents estimated future interest payments related to unsecuredlong-term borrowings and securedlong-term financings based on applicable interest rates as of November 2008. Includes stated coupons, if any, on structured notes. | |
(6) | Represents estimated undiscounted payments related to future benefits and unpaid claims arising from policies associated with our insurance activities, excluding separate accounts and estimated recoveries under reinsurance contracts. |
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(in millions)
Commitment Amount by Fiscal Period of Expiration | ||||||||||||||||||||
2010- | 2012- | 2014- | ||||||||||||||||||
2009 | 2011 | 2013 | Thereafter | Total | ||||||||||||||||
Commitments to extend credit | ||||||||||||||||||||
Commercial lending: | ||||||||||||||||||||
Investment-grade | $ | 3,587 | $ | 2,705 | $ | 1,538 | $ | 177 | $ | 8,007 | ||||||||||
Non-investment-grade | 1,188 | 1,767 | 5,708 | 655 | 9,318 | |||||||||||||||
William Street program | 3,300 | 6,715 | 12,178 | 417 | 22,610 | |||||||||||||||
Warehouse financing | 604 | 497 | — | — | 1,101 | |||||||||||||||
Total commitments to extend credit (1) | 8,679 | 11,684 | 19,424 | 1,249 | 41,036 | |||||||||||||||
Forward starting resale and securities borrowing agreements | 61,455 | — | — | — | 61,455 | |||||||||||||||
Forward starting repurchase and securities lending agreements | 6,948 | — | — | — | 6,948 | |||||||||||||||
Commitments under letters of credit issued by banks to counterparties | 6,953 | 101 | 197 | — | 7,251 | |||||||||||||||
Investment commitments | 6,398 | 7,144 | 101 | 623 | 14,266 | |||||||||||||||
Underwriting commitments | 241 | — | — | — | 241 | |||||||||||||||
Total | $ | 90,674 | $ | 18,929 | $ | 19,722 | $ | 1,872 | $ | 131,197 | ||||||||||
(1) | Commitments to extend credit are net of amounts syndicated to third parties. |
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(in millions)
As of November 2008 | ||||||||||||
Funded | Unfunded | Total | ||||||||||
Americas (1) | $ | 3,036 | $ | 1,735 | $ | 4,771 | ||||||
EMEA (2) | 2,294 | 259 | 2,553 | |||||||||
Asia | 568 | 73 | 641 | |||||||||
Total | $ | 5,898 | $ | 2,067 | $ | 7,965 | ||||||
(1) | Substantially all relates to the U.S. | |
(2) | EMEA (Europe, Middle East and Africa). |
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• | Interest rate risks primarily result from exposures to changes in the level, slope and curvature of the yield curve, the volatility of interest rates, mortgage prepayment speeds and credit spreads. | |
• | Equity price risks result from exposures to changes in prices and volatilities of individual equities, equity baskets and equity indices. | |
• | Currency rate risks result from exposures to changes in spot prices, forward prices and volatilities of currency rates. | |
• | Commodity price risks result from exposures to changes in spot prices, forward prices and volatilities of commodities, such as electricity, natural gas, crude oil, petroleum products, and precious and base metals. |
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• | risk limits based on a summary measure of market risk exposure referred to as VaR; | |
• | scenario analyses, stress tests and other analytical tools that measure the potential effects on our trading net revenues of various market events, including, but not limited to, a large widening of credit spreads, a substantial decline in equity markets and significant moves in selected emerging markets; and | |
• | inventory position limits for selected business units. |
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(in millions)
Year Ended November | ||||||||||||
Risk Categories | 2008 | 2007 | 2006 | |||||||||
Interest rates | $ | 142 | $ | 85 | $ | 49 | ||||||
Equity prices | 72 | 100 | 72 | |||||||||
Currency rates | 30 | 23 | 21 | |||||||||
Commodity prices | 44 | 26 | 30 | |||||||||
Diversification effect (2) | (108 | ) | (96 | ) | (71 | ) | ||||||
Total | $ | 180 | $ | 138 | $ | 101 | ||||||
(1) | Certain portfolios and individual positions are not included in VaR, where VaR is not the most appropriate measure of risk (e.g., due to transfer restrictionsand/or illiquidity). See“— Other Market Risk Measures” below. | |
(2) | Equals the difference between total VaR and the sum of the VaRs for the four risk categories. This effect arises because the four market risk categories are not perfectly correlated. |
(in millions)
Year Ended | ||||||||||||||||
As of November | November 2008 | |||||||||||||||
Risk Categories | 2008 | 2007 | High | Low | ||||||||||||
Interest rates | $ | 228 | $ | 105 | $ | 228 | $ | 93 | ||||||||
Equity prices | 38 | 82 | 234 | 36 | ||||||||||||
Currency rates | 36 | 35 | 55 | 17 | ||||||||||||
Commodity prices | 33 | 33 | 68 | 25 | ||||||||||||
Diversification effect (2) | (91 | ) | (121 | ) | ||||||||||||
Total | $ | 244 | $ | 134 | $ | 246 | $ | 129 | ||||||||
(1) | Certain portfolios and individual positions are not included in VaR, where VaR is not the most appropriate measure of risk (e.g., due to transfer restrictionsand/or illiquidity). See“— Other Market Risk Measures” below. | |
(2) | Equals the difference between total VaR and the sum of the VaRs for the four risk categories. This effect arises because the four market risk categories are not perfectly correlated. |
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10% Sensitivity | ||||||||||
Amount as of November | ||||||||||
Asset Categories | 10% Sensitivity Measure | 2008 | 2007 | |||||||
(in millions) | ||||||||||
Trading Risk(1) | ||||||||||
Equity (2) | Underlying asset value | $ | 790 | $ | 1,325 | |||||
Debt (3) | Underlying asset value | 808 | 1,020 | |||||||
Non-trading Risk | ||||||||||
ICBC | ICBC ordinary share price | 202 | 250 | |||||||
Other Equity (4) | Underlying asset value | 1,155 | 1,054 | |||||||
Debt (5) | Underlying asset value | 694 | 500 | |||||||
Real Estate (6) | Underlying asset value | 1,330 | 1,108 |
(1) | In addition to the positions in these portfolios, which are accounted for at fair value, we make investments accounted for under the equity method and we also make direct investments in real estate, both of which are included in “Other assets” in the consolidated statements of financial condition. Direct investments in real estate are accounted for at cost less accumulated depreciation. See Note 12 to the consolidated financial statements in Part II, Item 8 of our Annual Report onForm 10-K for information on “Other assets.” | |
(2) | Relates to private and restricted public equity securities held within the FICC and Equities components of our Trading and Principal Investments segment. | |
(3) | Relates to acquired portfolios of distressed loans (primarily backed by commercial and residential real estate collateral), bank loans and bridge loans, and loans backed by commercial real estate and held within the FICC component of our Trading and Principal Investments segment. | |
(4) | Primarily relates to interests in our merchant banking funds that invest in corporate equities. | |
(5) | Primarily relates to interests in our merchant banking funds that invest in corporate mezzanine debt instruments. | |
(6) | Primarily relates to interests in our merchant banking funds that invest in real estate. Such funds typically employ leverage as part of the investment strategy. This sensitivity measure is based on our percentage ownership of the underlying asset values in the funds and unfunded commitments to the funds. |
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(in millions)
Assets | As of November 2008 | |||||||||||||||||||
0-12 | 1 - 5 | 5 - 10 | 10 Years | |||||||||||||||||
Contract Type | Months | Years | Years | or Greater | Total | |||||||||||||||
Interest rates | $ | 16,220 | $ | 43,864 | $ | 35,050 | $ | 40,649 | $ | 135,783 | ||||||||||
Credit derivatives | 10,364 | 45,596 | 20,110 | 13,788 | 89,858 | |||||||||||||||
Currencies | 28,056 | 12,191 | 5,980 | 4,137 | 50,364 | |||||||||||||||
Commodities | 13,660 | 12,717 | 1,175 | 1,681 | 29,233 | |||||||||||||||
Equities | 17,830 | 4,742 | 3,927 | 1,061 | 27,560 | |||||||||||||||
Netting across contract types (1) | (6,238 | ) | (9,160 | ) | (3,515 | ) | (3,802 | ) | (22,715 | ) | ||||||||||
Subtotal | $ | 79,892 | (4) | $ | 109,950 | $ | 62,727 | $ | 57,514 | $ | 310,083 | |||||||||
Cross maturity netting (2) | (48,750 | ) | ||||||||||||||||||
Cash collateral netting (3) | (137,160 | ) | ||||||||||||||||||
Total | $ | 124,173 | ||||||||||||||||||
Liabilities | ||||||||||||||||||||
0-12 | 1 - 5 | 5 - 10 | 10 Years | |||||||||||||||||
Contract Type | Months | Years | Years | or Greater | Total | |||||||||||||||
Interest rates | $ | 8,004 | $ | 16,152 | $ | 17,456 | $ | 26,399 | $ | 68,011 | ||||||||||
Credit derivatives | 6,591 | 20,958 | 10,301 | 13,610 | 51,460 | |||||||||||||||
Currencies | 29,130 | 13,755 | 4,109 | 2,051 | 49,045 | |||||||||||||||
Commodities | 12,685 | 10,391 | 1,575 | 827 | 25,478 | |||||||||||||||
Equities | 14,016 | 4,741 | 1,751 | 320 | 20,828 | |||||||||||||||
Netting across contract types (1) | (6,238 | ) | (9,160 | ) | (3,515 | ) | (3,802 | ) | (22,715 | ) | ||||||||||
Subtotal | $ | 64,188 | (4) | $ | 56,837 | $ | 31,677 | $ | 39,405 | $ | 192,107 | |||||||||
Cross maturity netting (2) | (48,750 | ) | ||||||||||||||||||
Cash collateral netting (3) | (34,009 | ) | ||||||||||||||||||
Total | $ | 109,348 | ||||||||||||||||||
(1) | Represents the netting of receivable balances with payable balances for the same counterparty across contract types within a maturity category, pursuant to credit support agreements. | |
(2) | Represents the netting of receivable balances with payable balances for the same counterparty across maturity categories, pursuant to credit support agreements. | |
(3) | Represents the netting of cash collateral received and posted on a counterparty basis pursuant to credit support agreements. | |
(4) | Includes fair values of OTC derivative assets and liabilities, maturing within six months, of $56.72 billion and $51.26 billion, respectively. |
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(in millions)
Assets | As of November 2007 | |||||||||||||||||||
0-12 | 1 - 5 | 5 - 10 | 10 Years | |||||||||||||||||
Contract Type | Months | Years | Years | or Greater | Total | |||||||||||||||
Interest rates | $ | 8,703 | $ | 10,965 | $ | 17,176 | $ | 28,388 | $ | 65,232 | ||||||||||
Credit derivatives | 11,168 | 13,006 | 6,501 | 20,163 | 50,838 | |||||||||||||||
Currencies | 20,586 | 9,275 | 5,106 | 2,127 | 37,094 | |||||||||||||||
Commodities | 6,264 | 12,064 | 1,766 | 899 | 20,993 | |||||||||||||||
Equities | 13,845 | 5,312 | 4,273 | 1,603 | 25,033 | |||||||||||||||
Netting across contract types (1) | (3,355 | ) | (5,665 | ) | (3,132 | ) | (2,066 | ) | (14,218 | ) | ||||||||||
Subtotal | $ | 57,211 | (4) | $ | 44,957 | $ | 31,690 | $ | 51,114 | $ | 184,972 | |||||||||
Cross maturity netting (2) | (33,849 | ) | ||||||||||||||||||
Cash collateral netting (3) | (59,050 | ) | ||||||||||||||||||
Total | $ | 92,073 | ||||||||||||||||||
Liabilities | ||||||||||||||||||||
0-12 | 1 - 5 | 5 - 10 | 10 Years | |||||||||||||||||
Contract Type | Months | Years | Years | or Greater | Total | |||||||||||||||
Interest rates | $ | 10,234 | $ | 10,802 | $ | 9,816 | $ | 10,287 | $ | 41,139 | ||||||||||
Credit derivatives | 7,085 | 11,842 | 5,084 | 16,077 | 40,088 | |||||||||||||||
Currencies | 16,560 | 9,815 | 1,446 | 1,772 | 29,593 | |||||||||||||||
Commodities | 8,752 | 9,690 | 2,757 | 506 | 21,705 | |||||||||||||||
Equities | 17,460 | 7,723 | 3,833 | 1,382 | 30,398 | |||||||||||||||
Netting across contract types (1) | (3,355 | ) | (5,665 | ) | (3,132 | ) | (2,066 | ) | (14,218 | ) | ||||||||||
Subtotal | $ | 56,736 | (4) | $ | 44,207 | $ | 19,804 | $ | 27,958 | $ | 148,705 | |||||||||
Cross maturity netting (2) | (33,849 | ) | ||||||||||||||||||
Cash collateral netting (3) | (27,758 | ) | ||||||||||||||||||
Total | $ | 87,098 | ||||||||||||||||||
(1) | Represents the netting of receivable balances with payable balances for the same counterparty across contract types within a maturity category, pursuant to credit support agreements. | |
(2) | Represents the netting of receivable balances with payable balances for the same counterparty across maturity categories, pursuant to credit support agreements. | |
(3) | Represents the netting of cash collateral received and posted on a counterparty basis pursuant to credit support agreements. | |
(4) | Includes fair values of OTC derivative assets and liabilities, maturing within six months, of $41.80 billion and $41.12 billion, respectively. |
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(in millions)
As of November 2008 | ||||||||||||||||||||||||||||||||
Exposure | ||||||||||||||||||||||||||||||||
Credit Rating | 0-12 | 1 - 5 | 5 - 10 | 10 Years | Net of | |||||||||||||||||||||||||||
Equivalent | Months | Years | Years | or Greater | Total | Netting (2) | Exposure | Collateral | ||||||||||||||||||||||||
AAA/Aaa | $ | 5,700 | $ | 7,000 | $ | 4,755 | $ | 2,726 | $ | 20,181 | $ | (6,765 | ) | $ | 13,416 | $ | 12,328 | |||||||||||||||
AA/Aa2 | 26,040 | 37,378 | 30,293 | 18,084 | 111,795 | (78,085 | ) | 33,710 | 29,438 | |||||||||||||||||||||||
A/A2 | 22,374 | 34,796 | 15,317 | 20,498 | 92,985 | (58,744 | ) | 34,241 | 28,643 | |||||||||||||||||||||||
BBB/Baa2 | 11,844 | 19,200 | 7,635 | 13,302 | 51,981 | (29,791 | ) | 22,190 | 16,155 | |||||||||||||||||||||||
BB/Ba2 or lower | 13,161 | 10,403 | 4,035 | 2,711 | 30,310 | (12,515 | ) | 17,795 | 11,212 | |||||||||||||||||||||||
Unrated | 773 | 1,173 | 692 | 193 | 2,831 | (10 | ) | 2,821 | 1,550 | |||||||||||||||||||||||
Total | $ | 79,892 | (1) | $ | 109,950 | $ | 62,727 | $ | 57,514 | $ | 310,083 | $ | (185,910 | ) | $ | 124,173 | $ | 99,326 | ||||||||||||||
As of November 2007 | ||||||||||||||||||||||||||||||||
Exposure | ||||||||||||||||||||||||||||||||
Credit Rating | 0-12 | 1 - 5 | 5 - 10 | 10 Years | Net of | |||||||||||||||||||||||||||
Equivalent | Months | Years | Years | or Greater | Total | Netting (2) | Exposure | Collateral | ||||||||||||||||||||||||
AAA/Aaa | $ | 6,018 | $ | 3,354 | $ | 2,893 | $ | 7,875 | $ | 20,140 | $ | (3,600 | ) | $ | 16,540 | $ | 14,453 | |||||||||||||||
AA/Aa2 | 19,331 | 14,339 | 13,184 | 22,708 | 69,562 | (40,661 | ) | 28,901 | 24,758 | |||||||||||||||||||||||
A/A2 | 14,491 | 13,380 | 10,012 | 15,133 | 53,016 | (32,453 | ) | 20,563 | 16,010 | |||||||||||||||||||||||
BBB/Baa2 | 4,059 | 5,774 | 1,707 | 2,777 | 14,317 | (4,437 | ) | 9,880 | 6,542 | |||||||||||||||||||||||
BB/Ba2 or lower | 6,854 | 5,676 | 3,347 | 2,541 | 18,418 | (4,834 | ) | 13,584 | 7,366 | |||||||||||||||||||||||
Unrated | 6,458 | 2,434 | 547 | 80 | 9,519 | (6,914 | ) | 2,605 | 1,280 | |||||||||||||||||||||||
Total | $ | 57,211 | (1) | $ | 44,957 | $ | 31,690 | $ | 51,114 | $ | 184,972 | $ | (92,899 | ) | $ | 92,073 | $ | 70,409 | ||||||||||||||
(1) | Includes fair values of OTC derivative assets, maturing within six months, of $56.72 billion and $41.80 billion as of November 2008 and November 2007, respectively. |
(2) | Represents the netting of receivable balances with payable balances for the same counterparty across maturity categories and the netting of cash collateral received, pursuant to credit support agreements. Receivable and payable balances with the same counterparty in the same maturity category are netted within such maturity category, where appropriate. |
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• | Excess Liquidity — We maintain substantial excess liquidity to meet a broad range of potential cash outflows in a stressed environment, including financing obligations. | |
• | Asset-Liability Management — We seek to maintain secured and unsecured funding sources that are sufficientlylong-term in order to withstand a prolonged or severe liquidity-stressed environment without having to rely on asset sales. | |
• | Conservative Liability Structure — We seek to access funding across a diverse range of markets, products and counterparties, emphasize lesscredit-sensitive sources of funding and conservatively manage the distribution of funding across our entity structure. | |
• | Crisis Planning — We base our liquidity and funding management onstress-scenario planning and maintain a crisis plan detailing our response to a liquidity-threatening event. |
• | The first days or weeks of a liquidity crisis are the most critical to a company’s survival. | |
• | Focus must be maintained on all potential cash and collateral outflows, not just disruptions to financing flows. Goldman Sachs’ businesses are diverse, and its cash needs are driven by many factors, including market movements, collateral requirements and client commitments, all of which can change dramatically in a difficult funding environment. | |
• | During a liquidity crisis,credit-sensitive funding, including unsecured debt and some types of secured financing agreements, may be unavailable, and the terms or availability of other types of secured financing may change. | |
• | As a result of our policy topre-fund liquidity that we estimate may be needed in a crisis, we hold more unencumbered securities and have larger unsecured debt balances than our businesses would otherwise require. We believe that our liquidity is stronger with greater balances of highly liquid unencumbered securities, even though it increases our unsecured liabilities and our funding costs. |
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• | upcoming maturities of unsecured debt and letters of credit; | |
• | potential buybacks of a portion of our outstanding negotiable unsecured debt and potential withdrawals of client deposits; | |
• | adverse changes in the terms or availability of secured funding; | |
• | derivatives and other margin and collateral outflows, including those due to market moves; | |
• | potential cash outflows associated with our prime brokerage business; | |
• | additional collateral that could be called in the event of atwo-notch downgrade in our credit ratings; | |
• | draws on our unfunded commitments not supported by William Street Funding Corporation (1); and | |
• | upcoming cash outflows, such as tax and other large payments. |
Year Ended November | ||||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
U.S. dollar-denominated | $ | 78,048 | $ | 52,115 | ||||
Non-U.S. dollar-denominated | 18,677 | 11,928 | ||||||
Total Global Core Excess(2) | $ | 96,725 | $ | 64,043 | ||||
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• | the portion of trading assets that we believe could not be funded on a secured basis in periods of market stress, assuming conservative loan values; | |
• | goodwill and identifiable intangible assets, property, leasehold improvements and equipment, and other illiquid assets; | |
• | derivative and other margin and collateral requirements; | |
• | anticipated draws on our unfunded loan commitments; and | |
• | capital or other forms of financing in our regulated subsidiaries that are in excess of theirlong-term financing requirements. See“— Conservative Liability Structure” below for a further discussion of how we fund our subsidiaries. |
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As of November | ||||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Mortgage and otherasset-backed loans and securities | $ | 22,393 | $ | 46,436 | (6) | |||
Bank loans and bridge loans (1) | 21,839 | 49,154 | ||||||
Emerging market debt securities | 2,827 | 3,343 | ||||||
High-yield and other debt obligations | 9,998 | 12,807 | ||||||
Private equity and real estate fund investments (2) | 18,171 | 16,244 | ||||||
Emerging market equity securities | 2,665 | 8,014 | ||||||
ICBC ordinary shares (3) | 5,496 | 6,807 | ||||||
SMFG convertible preferred stock (4) | 1,135 | 4,060 | ||||||
Other restricted public equity securities | 568 | 3,455 | ||||||
Other investments in funds (5) | 2,714 | 3,437 |
(1) | Includes funded commitments and inventory held in connection with our origination and secondary trading activities. | |
(2) | Includes interests in our merchant banking funds. Such amounts exclude assets related to consolidated investment funds of $1.16 billion and $8.13 billion as of November 2008 and November 2007, respectively, for which Goldman Sachs does not bear economic exposure. | |
(3) | Includes interests of $3.48 billion and $4.30 billion as of November 2008 and November 2007, respectively, held by investment funds managed by Goldman Sachs. | |
(4) | During our second quarter of 2008, we convertedone-third of our SMFG preferred stock investment into SMFG common stock, and delivered the common stock to close outone-third of our hedge position. | |
(5) | Includes interests in other investment funds that we manage. | |
(6) | Excludes $7.64 billion as of November 2007 of mortgage whole loans that were transferred to securitization vehicles where such transfers were accounted for as secured financings rather than sales under SFAS No. 140. We distributed to investors the securities that were issued by the securitization vehicles and therefore did not bear economic exposure to the underlying mortgage whole loans. |
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• | The Federal Reserve Bank of New York established the Primary Dealer Credit Facility in March 2008 to provide overnight funding to primary dealers in exchange for a specified range of collateral. In September 2008, the eligible collateral was expanded to include all collateral eligible in tri-party repurchase arrangements with the major clearing banks, and the facility was made available to GSI. This facility is scheduled to expire on April 30, 2009. | |
• | The Federal Reserve Board introduced a new Term Securities Lending Facility (TSLF) in March 2008, which extended the term for which the Federal Reserve Board will lend Treasury securities to primary dealers from overnight to 28 days and, in September 2008, expanded the types of assets that can be used as collateral under the TSLF to include allinvestment-grade debt securities (rather than just Treasury, agency and certain AAA-rated asset-backed securities). This facility is scheduled to expire on April 30, 2009. | |
• | In October 2008, the Federal Reserve Board established the Commercial Paper Funding Facility (CPFF) to serve as a funding backstop to facilitate the issuance of term commercial paper by eligible issuers. Through the CPFF, the Federal Reserve Bank of New York will finance the purchase of unsecured andasset-backed highly rated,U.S. dollar-denominated,three-month commercial paper from eligible issuers through its primary dealers. The facility is scheduled to expire on April 30, 2009. Our available funding under the CPFF is approximately $11 billion, of which a de minimis amount was utilized as of January 22, 2009. |
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• | The FDIC’s TLGP, which was established in October 2008, provides a guarantee of certain newly issued senior unsecured debt issued by eligible entities, including Group Inc. and GS Bank USA, as well as funds over $250,000 innon-interest-bearing transaction deposit accounts held by FDIC-insured banks (such as GS Bank USA). The debt guarantee is available, subject to limitations, for debt issued through June 30, 2009 and the deposit coverage lasts through December 31, 2009. We are able to have outstanding approximately $35 billion of debt under the TLGP that is issued prior to June 30, 2009. As of November 2008 and January 22, 2009, we had outstanding $4.18 billion of senior unsecuredshort-term borrowings and $25.54 billion of senior unsecured debt (comprised of $11.57 billion of short-term and $13.97 billion of long-term), respectively, under the TLGP. |
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Short-Term Debt | Long-Term Debt | Subordinated Debt | Preferred Stock | |||||
Dominion Bond Rating Service Limited | R-1 (middle) | A (high) | A | A (low) | ||||
Fitch, Inc. | F1+ | AA- | A+ | A+ | ||||
Moody’s Investors Service | P-1 | A1 | A2 | A3 | ||||
Standard & Poor’s Ratings Services | A-1 | A | A- | BBB | ||||
Rating and Investment Information, Inc. | a-1+ | AA- | Not Applicable | Not Applicable |
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Financial Reporting
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Year Ended November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions, except per | ||||||||||||
share amounts) | ||||||||||||
Revenues | ||||||||||||
Investment banking | $ | 5,179 | $ | 7,555 | $ | 5,613 | ||||||
Trading and principal investments | 8,095 | 29,714 | 24,027 | |||||||||
Asset management and securities services | 4,672 | 4,731 | 4,527 | |||||||||
Interest income | 35,633 | 45,968 | 35,186 | |||||||||
Total revenues | 53,579 | 87,968 | 69,353 | |||||||||
Interest expense | 31,357 | 41,981 | 31,688 | |||||||||
Revenues, net of interest expense | 22,222 | 45,987 | 37,665 | |||||||||
Operating expenses | ||||||||||||
Compensation and benefits | 10,934 | 20,190 | 16,457 | |||||||||
Brokerage, clearing, exchange and distribution fees | 2,998 | 2,758 | 1,985 | |||||||||
Market development | 485 | 601 | 492 | |||||||||
Communications and technology | 759 | 665 | 544 | |||||||||
Depreciation and amortization | 1,022 | 624 | 521 | |||||||||
Amortization of identifiable intangible assets | 240 | 195 | 173 | |||||||||
Occupancy | 960 | 975 | 850 | |||||||||
Professional fees | 779 | 714 | 545 | |||||||||
Other expenses | 1,709 | 1,661 | 1,538 | |||||||||
Totalnon-compensation expenses | 8,952 | 8,193 | 6,648 | |||||||||
Total operating expenses | 19,886 | 28,383 | 23,105 | |||||||||
Pre-tax earnings | 2,336 | 17,604 | 14,560 | |||||||||
Provision for taxes | 14 | 6,005 | 5,023 | |||||||||
Net earnings | 2,322 | 11,599 | 9,537 | |||||||||
Preferred stock dividends | 281 | 192 | 139 | |||||||||
Net earnings applicable to common shareholders | $ | 2,041 | $ | 11,407 | $ | 9,398 | ||||||
Earnings per common share | ||||||||||||
Basic | $ | 4.67 | $ | 26.34 | $ | 20.93 | ||||||
Diluted | 4.47 | 24.73 | 19.69 | |||||||||
Average common shares outstanding | ||||||||||||
Basic | 437.0 | 433.0 | 449.0 | |||||||||
Diluted | 456.2 | 461.2 | 477.4 |
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As of November | ||||||||
2008 | 2007 | |||||||
(in millions, except share | ||||||||
and per share amounts) | ||||||||
Assets | ||||||||
Cash and cash equivalents | $ | 15,740 | $ | 10,282 | ||||
Cash and securities segregated for regulatory and other purposes (includes $78,830 and $94,018 at fair value as of November 2008 and November 2007, respectively) | 106,664 | 119,939 | ||||||
Collateralized agreements: | ||||||||
Securities purchased under agreements to resell, at fair value, and federal funds sold (includes $116,671 and $85,717 at fair value as of November 2008 and November 2007, respectively) | 122,021 | 87,317 | ||||||
Securities borrowed (includes $59,810 and $83,277 at fair value as of November 2008 and November 2007, respectively) | 180,795 | 277,413 | ||||||
Receivables from brokers, dealers and clearing organizations | 25,899 | 19,078 | ||||||
Receivables from customers and counterparties (includes $1,598 and $1,950 at fair value as of November 2008 and November 2007, respectively) | 64,665 | 129,105 | ||||||
Trading assets, at fair value (includes $26,313 and $46,138 pledged as collateral as of November 2008 and November 2007, respectively) | 338,325 | 452,595 | ||||||
Other assets | 30,438 | 24,067 | ||||||
Total assets | $ | 884,547 | $ | 1,119,796 | ||||
Liabilities and shareholders’ equity | ||||||||
Deposits (includes $4,224 and $463 at fair value as of November 2008 and November 2007, respectively) | $ | 27,643 | $ | 15,370 | ||||
Collateralized financings: | ||||||||
Securities sold under agreements to repurchase, at fair value | 62,883 | 159,178 | ||||||
Securities loaned (includes $7,872 and $5,449 at fair value as of November 2008 and November 2007, respectively) | 17,060 | 28,624 | ||||||
Other secured financings (includes $20,249 and $33,581 at fair value as of November 2008 and November 2007, respectively) | 38,683 | 65,710 | ||||||
Payables to brokers, dealers and clearing organizations | 8,585 | 8,335 | ||||||
Payables to customers and counterparties | 245,258 | 310,118 | ||||||
Trading liabilities, at fair value | 175,972 | 215,023 | ||||||
Unsecuredshort-term borrowings, including the current portion of unsecuredlong-term borrowings (includes $23,075 and $48,331 at fair value as of November 2008 and November 2007, respectively) | 52,658 | 71,557 | ||||||
Unsecuredlong-term borrowings (includes $17,446 and $15,928 at fair value as of November 2008 and November 2007, respectively) | 168,220 | 164,174 | ||||||
Other liabilities and accrued expenses (includes $978 at fair value as of November 2008) | 23,216 | 38,907 | ||||||
Total liabilities | 820,178 | 1,076,996 | ||||||
Commitments, contingencies and guarantees | ||||||||
Shareholders’ equity | ||||||||
Preferred stock, par value $0.01 per share; aggregate liquidation preference of $18,100 and $3,100 as of November 2008 and November 2007, respectively | 16,471 | 3,100 | ||||||
Common stock, par value $0.01 per share; 4,000,000,000 shares authorized, 680,953,836 and 618,707,032 shares issued as of November 2008 and November 2007, respectively, and 442,537,317 and 390,682,013 shares outstanding as of November 2008 and November 2007, respectively | 7 | 6 | ||||||
Restricted stock units and employee stock options | 9,284 | 9,302 | ||||||
Nonvoting common stock, par value $0.01 per share; 200,000,000 shares authorized, no shares issued and outstanding | — | — | ||||||
Additionalpaid-in capital | 31,071 | 22,027 | ||||||
Retained earnings | 39,913 | 38,642 | ||||||
Accumulated other comprehensive income/(loss) | (202 | ) | (118 | ) | ||||
Common stock held in treasury, at cost, par value $0.01 per share; 238,416,519 and 228,025,019 shares as of November 2008 and November 2007, respectively | (32,175 | ) | (30,159 | ) | ||||
Total shareholders’ equity | 64,369 | 42,800 | ||||||
Total liabilities and shareholders’ equity | $ | 884,547 | $ | 1,119,796 | ||||
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Year Ended November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions, except per share amounts) | ||||||||||||
Preferred stock | ||||||||||||
Balance, beginning of year | $ | 3,100 | $ | 3,100 | $ | 1,750 | ||||||
Issued | 13,367 | — | 1,350 | |||||||||
Preferred stock accretion | 4 | — | — | |||||||||
Balance, end of year | 16,471 | 3,100 | 3,100 | |||||||||
Common stock, par value $0.01 per share | ||||||||||||
Balance, beginning of year | 6 | 6 | 6 | |||||||||
Issued | 1 | — | — | |||||||||
Balance, end of year | 7 | 6 | 6 | |||||||||
Restricted stock units and employee stock options | ||||||||||||
Balance, beginning of year | 9,302 | 6,290 | 3,415 | |||||||||
Issuance and amortization of restricted stock units and employee stock options | 2,254 | 4,684 | 3,787 | |||||||||
Delivery of common stock underlying restricted stock units | (1,995 | ) | (1,548 | ) | (781 | ) | ||||||
Forfeiture of restricted stock units and employee stock options | (274 | ) | (113 | ) | (129 | ) | ||||||
Exercise of employee stock options | (3 | ) | (11 | ) | (2 | ) | ||||||
Balance, end of year | 9,284 | 9,302 | 6,290 | |||||||||
Additionalpaid-in capital | ||||||||||||
Balance, beginning of year | 22,027 | 19,731 | 17,159 | |||||||||
Issuance of common stock warrants | 1,633 | — | — | |||||||||
Issuance of common stock, including the delivery of common stock underlying restricted stock units and proceeds from the exercise of employee stock options | 8,081 | 2,338 | 2,432 | |||||||||
Cancellation of restricted stock units in satisfaction of withholding tax requirements | (1,314 | ) | (929 | ) | (375 | ) | ||||||
Stock purchase contract fee related to automatic preferred enhanced capital securities | — | (20 | ) | — | ||||||||
Preferred and common stock issuance costs | (1 | ) | — | (1 | ) | |||||||
Excess net tax benefit related toshare-based compensation | 645 | 908 | 653 | |||||||||
Cash settlement ofshare-based compensation | — | (1 | ) | (137 | ) | |||||||
Balance, end of year | 31,071 | 22,027 | 19,731 | |||||||||
Retained earnings | ||||||||||||
Balance, beginning of year, as previously reported | 38,642 | 27,868 | 19,085 | |||||||||
Cumulative effect of adjustment from adoption of FIN 48 | (201 | ) | — | — | ||||||||
Cumulative effect of adjustment from adoption of SFAS No. 157, net of tax | — | 51 | — | |||||||||
Cumulative effect of adjustment from adoption of SFAS No. 159, net of tax | — | (45 | ) | — | ||||||||
Balance, beginning of year, after cumulative effect of adjustments | 38,441 | 27,874 | 19,085 | |||||||||
Net earnings | 2,322 | 11,599 | 9,537 | |||||||||
Dividends and dividend equivalents declared on common stock and restricted stock units | (642 | ) | (639 | ) | (615 | ) | ||||||
Dividends declared on preferred stock | (204 | ) | (192 | ) | (139 | ) | ||||||
Preferred stock accretion | (4 | ) | — | — | ||||||||
Balance, end of year | 39,913 | 38,642 | 27,868 | |||||||||
Accumulated other comprehensive income/(loss) | ||||||||||||
Balance, beginning of year | (118 | ) | 21 | — | ||||||||
Adjustment from adoption of SFAS No. 158, net of tax | — | (194 | ) | — | ||||||||
Currency translation adjustment, net of tax | (98 | ) | 39 | 45 | ||||||||
Pension and postretirement liability adjustment, net of tax | 69 | 38 | (27 | ) | ||||||||
Net gains/(losses) on cash flow hedges, net of tax | — | (2 | ) | (7 | ) | |||||||
Net unrealized gains/(losses) onavailable-for-sale securities, net of tax | (55 | ) | (12 | ) | 10 | |||||||
Reclassification to retained earnings from adoption of SFAS No. 159, net of tax | — | (8 | ) | — | ||||||||
Balance, end of year | (202 | ) | (118 | ) | 21 | |||||||
Common stock held in treasury, at cost | ||||||||||||
Balance, beginning of year | (30,159 | ) | (21,230 | ) | (13,413 | ) | ||||||
Repurchased | (2,037 | ) | (8,956 | ) | (7,817 | ) | ||||||
Reissued | 21 | 27 | — | |||||||||
Balance, end of year | (32,175 | ) | (30,159 | ) | (21,230 | ) | ||||||
Total shareholders’ equity | $ | 64,369 | $ | 42,800 | $ | 35,786 | ||||||
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Year Ended November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Cash flows from operating activities | ||||||||||||
Net earnings | $ | 2,322 | $ | 11,599 | $ | 9,537 | ||||||
Non-cash items included in net earnings | ||||||||||||
Depreciation and amortization | 1,385 | 916 | 749 | |||||||||
Amortization of identifiable intangible assets | 240 | 251 | 246 | |||||||||
Deferred income taxes | (1,763 | ) | 129 | (1,505 | ) | |||||||
Share-based compensation | 1,611 | 4,465 | 3,654 | |||||||||
Changes in operating assets and liabilities | ||||||||||||
Cash and securities segregated for regulatory and other purposes | 12,995 | (39,079 | ) | (21,044 | ) | |||||||
Net receivables from brokers, dealers and clearing organizations | (6,587 | ) | (3,811 | ) | (1,794 | ) | ||||||
Net payables to customers and counterparties | (50 | ) | 53,857 | 9,823 | ||||||||
Securities borrowed, net of securities loaned | 85,054 | (51,655 | ) | (28,666 | ) | |||||||
Securities sold under agreements to repurchase, net of securities purchased under agreements to resell and federal funds sold | (130,999 | ) | 6,845 | 5,825 | ||||||||
Trading assets, at fair value | 97,723 | (118,864 | ) | (48,479 | ) | |||||||
Trading liabilities, at fair value | (39,051 | ) | 57,938 | 6,384 | ||||||||
Other, net | (20,986 | ) | 7,962 | 12,823 | ||||||||
Net cash provided by/(used for) operating activities | 1,894 | (69,447 | ) | (52,447 | ) | |||||||
Cash flows from investing activities | ||||||||||||
Purchase of property, leasehold improvements and equipment | (2,027 | ) | (2,130 | ) | (1,744 | ) | ||||||
Proceeds from sales of property, leasehold improvements and equipment | 121 | 93 | 69 | |||||||||
Business acquisitions, net of cash acquired | (2,613 | ) | (1,900 | ) | (1,661 | ) | ||||||
Proceeds from sales of investments | 624 | 4,294 | 2,114 | |||||||||
Purchase ofavailable-for-sale securities | (3,851 | ) | (872 | ) | (12,922 | ) | ||||||
Proceeds from sales ofavailable-for-sale securities | 3,409 | 911 | 4,396 | |||||||||
Net cash provided by/(used for) investing activities | (4,337 | ) | 396 | (9,748 | ) | |||||||
Cash flows from financing activities | ||||||||||||
Unsecuredshort-term borrowings, net | (19,295 | ) | 12,262 | (4,031 | ) | |||||||
Other secured financings(short-term), net | (8,727 | ) | 2,780 | 16,856 | ||||||||
Proceeds from issuance of other secured financings(long-term) | 12,509 | 21,703 | 14,451 | |||||||||
Repayment of other secured financings(long-term), including the current portion | (20,653 | ) | (7,355 | ) | (7,420 | ) | ||||||
Proceeds from issuance of unsecuredlong-term borrowings | 37,758 | 57,516 | 48,839 | |||||||||
Repayment of unsecuredlong-term borrowings, including the current portion | (25,579 | ) | (14,823 | ) | (13,510 | ) | ||||||
Derivative contracts with a financing element, net | 781 | 4,814 | 3,494 | |||||||||
Deposits, net | 12,273 | 4,673 | 10,697 | |||||||||
Common stock repurchased | (2,034 | ) | (8,956 | ) | (7,817 | ) | ||||||
Dividends and dividend equivalents paid on common stock, preferred stock and restricted stock units | (850 | ) | (831 | ) | (754 | ) | ||||||
Proceeds from issuance of common stock | 6,105 | 791 | 1,613 | |||||||||
Proceeds from issuance of preferred stock, net of issuance costs | 13,366 | — | 1,349 | |||||||||
Proceeds from issuance of common stock warrants | 1,633 | — | — | |||||||||
Excess tax benefit related toshare-based compensation | 614 | 817 | 464 | |||||||||
Cash settlement ofshare-based compensation | — | (1 | ) | (137 | ) | |||||||
Net cash provided by financing activities | 7,901 | 73,390 | 64,094 | |||||||||
Net increase in cash and cash equivalents | 5,458 | 4,339 | 1,899 | |||||||||
Cash and cash equivalents, beginning of year | 10,282 | 5,943 | 4,044 | |||||||||
Cash and cash equivalents, end of year | $ | 15,740 | $ | 10,282 | $ | 5,943 | ||||||
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Year Ended November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Net earnings | $ | 2,322 | $ | 11,599 | $ | 9,537 | ||||||
Currency translation adjustment, net of tax | (98 | ) | 39 | 45 | ||||||||
Pension and postretirement liability adjustment, net of tax | 69 | 38 | (27 | ) | ||||||||
Net gains/(losses) on cash flow hedges, net of tax | — | (2 | ) | (7 | ) | |||||||
Net unrealized gains/(losses) onavailable-for-sale securities, net of tax | (55 | ) | (12 | ) | 10 | |||||||
Comprehensive income | $ | 2,238 | $ | 11,662 | $ | 9,558 | ||||||
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Note 1. | Description of Business |
• | Investment Banking. The firm provides a broad range of investment banking services to a diverse group of corporations, financial institutions, investment funds, governments and individuals. | |
• | Trading and Principal Investments. The firm facilitates client transactions with a diverse group of corporations, financial institutions, investment funds, governments and individuals and takes proprietary positions through market making in, trading of and investing in fixed income and equity products, currencies, commodities and derivatives on these products. In addition, the firm engages in market-making and specialist activities on equities and options exchanges, and the firm clears client transactions on major stock, options and futures exchanges worldwide. In connection with the firm’s merchant banking and other investing activities, the firm makes principal investments directly and through funds that the firm raises and manages. | |
• | Asset Management and Securities Services. The firm provides investment advisory and financial planning services and offers investment products (primarily through separately managed accounts and commingled vehicles, such as mutual funds and private investment funds) across all major asset classes to a diverse group of institutions and individuals worldwide and provides prime brokerage services, financing services and securities lending services to institutional clients, including hedge funds, mutual funds, pension funds and foundations, and tohigh-net-worth individuals worldwide. |
Note 2. | Significant Accounting Policies |
• | Voting Interest Entities. Voting interest entities are entities in which (i) the total equity investment at risk is sufficient to enable the entity to finance its activities independently and (ii) the equity holders have the obligation to absorb losses, the right to receive residual returns and the right to make decisions about the entity’s activities. Voting interest entities are consolidated in accordance with Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” as amended. The usual condition for a controlling financial interest in an entity is ownership of a majority voting interest. Accordingly, the firm consolidates voting interest entities in which it has a majority voting interest. | |
• | Variable Interest Entities. VIEs are entities that lack one or more of the characteristics of a voting interest entity. A controlling financial interest in a VIE is present when an enterprise has a variable interest, or a combination of variable interests, that will absorb a majority of the VIE’s expected losses, receive a majority of the VIE’s expected residual returns, or both. The |
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enterprise with a controlling financial interest, known as the primary beneficiary, consolidates the VIE. In accordance with Financial Accounting Standards Board (FASB) Interpretation(FIN) 46-R, “Consolidation of Variable Interest Entities,” the firm consolidates VIEs for which it is the primary beneficiary. The firm determines whether it is the primary beneficiary of a VIE by first performing a qualitative analysis of the VIE’s expected losses and expected residual returns. This analysis includes a review of, among other factors, the VIE’s capital structure, contractual terms, which interests create or absorb variability, related party relationships and the design of the VIE. Where qualitative analysis is not conclusive, the firm performs a quantitative analysis. For purposes of allocating a VIE’s expected losses and expected residual returns to its variable interest holders, the firm utilizes the “top down” method. Under that method, the firm calculates its share of the VIE’s expected losses and expected residual returns using the specific cash flows that would be allocated to it, based on contractual arrangementsand/or the firm’s position in the capital structure of the VIE, under various probability-weighted scenarios. The firm reassesses its initial evaluation of an entity as a VIE and its initial determination of whether the firm is the primary beneficiary of a VIE upon the occurrence of certain reconsideration events as defined inFIN 46-R. |
• | QSPEs. QSPEs are passive entities that are commonly used in mortgage and other securitization transactions. Statement of Financial Accounting Standards (SFAS) No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” sets forth the criteria an entity must satisfy to be a QSPE. These criteria include the types of assets a QSPE may hold, limits on asset sales, the use of derivatives and financial guarantees, and the level of discretion a servicer may exercise in attempting to collect receivables. These criteria may require management to make judgments about complex matters, such as whether a derivative is considered passive and the level of discretion a servicer may exercise, including, for example, determining when default is reasonably foreseeable. In accordance with SFAS No. 140 andFIN 46-R, the firm does not consolidate QSPEs. | |
• | Equity-Method Investments. When the firm does not have a controlling financial interest in an entity but exerts significant influence over the entity’s operating and financial policies (generally defined as owning a voting interest of 20% to 50%) and has an investment in common stock orin-substance common stock, the firm accounts for its investment either in accordance with Accounting Principles Board Opinion (APB) No. 18, “The Equity Method of Accounting for Investments in Common Stock” or at fair value in accordance with SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” In general, the firm accounts for investments acquired subsequent to the adoption of SFAS No. 159 at fair value. In certain cases, the firm may apply the equity method of accounting to new investments that are strategic in nature or closely related to the firm’s principal business activities, where the firm has a significant degree of involvement in the cash flows or operations of the investee, or wherecost-benefit considerations are less significant. See“— Revenue Recognition — Other Financial Assets and Financial Liabilities at Fair Value” below for a discussion of the firm’s application of SFAS No. 159. | |
• | Other. If the firm does not consolidate an entity or apply the equity method of accounting, the firm accounts for its investment at fair value. The firm also has formed numerous nonconsolidated investment funds withthird-party investors that are typically organized as limited partnerships. The firm acts as general partner for these funds and generally does not hold a majority of the economic interests in these funds. The firm has generally provided thethird-party investors with rights to terminate the funds or to remove the firm as the general partner. As a result, the firm does not consolidate these funds. These fund investments are included in “Trading assets, at fair value” in the consolidated statements of financial condition. |
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• | SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities;” | |
• | specialized industry accounting forbroker-dealers and investment companies; | |
• | SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities;” or | |
• | the fair value option under either SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140,” or SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” (i.e., the fair value option). |
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• | certain unsecuredshort-term borrowings, consisting of all promissory notes and commercial paper and certain hybrid financial instruments; | |
• | certain other secured financings, primarily transfers accounted for as financings rather than sales under SFAS No. 140, debt raised through the firm’s William Street program and certain other nonrecourse financings; | |
• | certain unsecuredlong-term borrowings, including prepaid physical commodity transactions; | |
• | resale and repurchase agreements; | |
• | securities borrowed and loaned within Trading and Principal Investments, consisting of the firm’s matched book and certain firm financing activities; | |
• | certain corporate loans, loan commitments and certificates of deposit issued by GS Bank USA as well as securities held by GS Bank USA; | |
• | receivables from customers and counterparties arising from transfers accounted for as secured loans rather than purchases under SFAS No. 140; | |
• | certain insurance and reinsurance contracts; and | |
• | in general, investments acquired after the adoption of SFAS No. 159 where the firm has significant influence over the investee and would otherwise apply the equity method of accounting. |
Level 1 | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; | |
Level 2 | Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly; | |
Level 3 | Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. |
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• | Cash Instruments. The firm’s cash instruments are generally classified within level 1 or level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices in active markets include most U.S. government and sovereign obligations, active listed equities and certain money market securities. Such instruments are generally classified within level 1 of the fair value hierarchy. In accordance with SFAS No. 157, the firm does not adjust the quoted price for such instruments, even in situations where the firm holds a large position and a sale could reasonably impact the quoted price. |
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• | Derivative Contracts. Derivative contracts can beexchange-traded orover-the-counter (OTC).Exchange-traded derivatives typically fall within level 1 or level 2 of the fair value hierarchy depending on whether they are deemed to be actively traded or not. The firm generally valuesexchange-traded derivatives using models which calibrate tomarket-clearing levels and eliminate timing differences between the closing price of theexchange-traded derivatives and their underlying instruments. In such cases,exchange-traded derivatives are classified within level 2 of the fair value hierarchy. |
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• | Resale and Repurchase Agreements. Securities purchased under agreements to resell and securities sold under agreements to repurchase, principally U.S. government, federal agency andinvestment-grade sovereign obligations, represent collateralized financing transactions. The firm receives securities purchased under agreements to resell, makes delivery of securities sold under agreements to repurchase, monitors the market value of these securities on a daily basis and delivers or obtains additional collateral as appropriate. As noted above, resale and repurchase agreements are carried in the consolidated statements of financial condition at fair value under SFAS No. 159. Resale and repurchase agreements are generally valued based on inputs with reasonable levels of price transparency and are classified within level 2 of the fair value hierarchy. Resale and repurchase agreements are presented on anet-by-counterparty basis when the requirements of FIN 41, “Offsetting of Amounts Related to Certain Repurchase and Reverse Repurchase Agreements,” or FIN 39, “Offsetting of Amounts Related to Certain Contracts,” are satisfied. | |
• | Securities Borrowed and Loaned. Securities borrowed and loaned are generally collateralized by cash, securities or letters of credit. The firm receives securities borrowed, makes delivery of securities loaned, monitors the market value of securities borrowed and loaned, and delivers or obtains additional collateral as appropriate. Securities borrowed and loaned within Securities Services, relating to both customer activities and, to a lesser extent, certain firm financing activities, are recorded based on the amount of cash collateral advanced or received plus accrued interest. As these arrangements generally can be terminated on demand, they exhibit little, if any, sensitivity to changes in interest rates. As noted above, securities borrowed and loaned within Trading and Principal Investments, which are related to the firm’s matched book and certain firm financing activities, are recorded at fair value under SFAS No. 159. These securities borrowed and loaned transactions are generally valued based on inputs with reasonable levels of price transparency and are classified within level 2 of the fair value hierarchy. |
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• | Other Secured Financings. In addition to repurchase agreements and securities loaned, the firm funds assets through the use of other secured financing arrangements and pledges financial instruments and other assets as collateral in these transactions. As noted above, the firm has elected to apply SFAS No. 159 to transfers accounted for as financings rather than sales under SFAS No. 140, debt raised through the firm’s William Street program and certain other nonrecourse financings, for which the use of fair value eliminatesnon-economic volatility in earnings that would arise from using different measurement attributes. These other secured financing transactions are generally valued based on inputs with reasonable levels of price transparency and are generally classified within level 2 of the fair value hierarchy. Other secured financings that are not recorded at fair value are recorded based on the amount of cash received plus accrued interest. See Note 3 for further information regarding other secured financings. |
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Note 3. | Financial Instruments |
As of November | ||||||||||||||||
2008 | 2007 | |||||||||||||||
Assets | Liabilities | Assets | Liabilities | |||||||||||||
(in millions) | ||||||||||||||||
Commercial paper, certificates of deposit, time deposits and other money market instruments | $ | 8,662 | (1) | $ | — | $ | 8,985 | (1) | $ | — | ||||||
U.S. government, federal agency and sovereign obligations | 69,653 | 37,000 | 70,774 | 58,637 | ||||||||||||
Mortgage and otherasset-backed loans and securities | 22,393 | 340 | 54,073 | (6) | — | |||||||||||
Bank loans and bridge loans | 21,839 | 3,108 | (4) | 49,154 | 3,563 | (4) | ||||||||||
Corporate debt securities and other debt obligations | 27,879 | 5,711 | 39,219 | 8,280 | ||||||||||||
Equities and convertible debentures | 57,049 | 12,116 | 122,205 | 45,130 | ||||||||||||
Physical commodities | 513 | 2 | 2,571 | 35 | ||||||||||||
Derivative contracts | 130,337 | (2) | 117,695 | (5) | 105,614 | (2) | 99,378 | (5) | ||||||||
Total | $ | 338,325 | (3) | $ | 175,972 | $ | 452,595 | (3) | $ | 215,023 | ||||||
(1) | Includes $4.40 billion and $6.17 billion as of November 2008 and November 2007, respectively, of money market instruments held by William Street Funding Corporation (Funding Corp.) to support the William Street credit extension program. See Note 8 for further information regarding the William Street program. | |
(2) | Net of cash received pursuant to credit support agreements of $137.16 billion and $59.05 billion as of November 2008 and November 2007, respectively. | |
(3) | Includes $1.68 billion and $1.17 billion as of November 2008 and November 2007, respectively, of securities held within the firm’s insurance subsidiaries which are accounted for asavailable-for-sale under SFAS No. 115. | |
(4) | Includes the fair value of commitments to extend credit. | |
(5) | Net of cash paid pursuant to credit support agreements of $34.01 billion and $27.76 billion as of November 2008 and November 2007, respectively. | |
(6) | Includes $7.64 billion as of November 2007 of mortgage whole loans that were transferred to securitization vehicles where such transfers were accounted for as secured financings rather than sales under SFAS No. 140. The firm distributed to investors the securities that were issued by the securitization vehicles and therefore did not bear economic exposure to the underlying mortgage whole loans. |
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As of November | ||||||||
2008 | 2007 | |||||||
($ in millions) | ||||||||
Total level 3 assets | $ | 66,190 | $ | 69,151 | ||||
Level 3 assets for which the firm bears economic exposure (1) | 59,574 | 54,714 | ||||||
Total assets | 884,547 | 1,119,796 | ||||||
Total financial assets at fair value | 595,234 | 717,557 | ||||||
Total level 3 assets as a percentage of Total assets | 7.5 | % | 6.2 | % | ||||
Level 3 assets for which the firm bears economic exposure as a percentage of Total assets | 6.7 | 4.9 | ||||||
Total level 3 assets as a percentage of Total financial assets at fair value | 11.1 | 9.6 | ||||||
Level 3 assets for which the firm bears economic exposure as a percentage of Total financial assets at fair value | 10.0 | 7.6 |
(1) | Excludes assets which are financed by nonrecourse debt, attributable to minority investors or attributable to employee interests in certain consolidated funds. |
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Financial Assets at Fair Value as of November 2008 | ||||||||||||||||||||
Netting and | ||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Collateral | Total | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Commercial paper, certificates of deposit, time deposits and other money market instruments | $ | 5,205 | $ | 3,457 | $ | — | $ | — | $ | 8,662 | ||||||||||
U.S. government, federal agency and sovereign obligations | 35,069 | 34,584 | — | — | 69,653 | |||||||||||||||
Mortgage and otherasset-backed loans and securities | — | 6,886 | 15,507 | — | 22,393 | |||||||||||||||
Bank loans and bridge loans | — | 9,882 | 11,957 | — | 21,839 | |||||||||||||||
Corporate debt securities and other debt obligations | 14 | 20,269 | 7,596 | — | 27,879 | |||||||||||||||
Equities and convertible debentures | 25,068 | 15,975 | 16,006 | (6) | — | 57,049 | ||||||||||||||
Physical commodities | — | 513 | — | — | 513 | |||||||||||||||
Cash instruments | 65,356 | 91,566 | 51,066 | — | 207,988 | |||||||||||||||
Derivative contracts | 24 | 256,412 | 15,124 | (141,223 | ) (7) | 130,337 | ||||||||||||||
Trading assets, at fair value | 65,380 | 347,978 | 66,190 | (141,223 | ) | 338,325 | ||||||||||||||
Securities segregated for regulatory and other purposes | 20,030 | (4) | 58,800 | (5) | — | — | 78,830 | |||||||||||||
Receivables from customers and counterparties (1) | — | 1,598 | — | — | 1,598 | |||||||||||||||
Securities borrowed (2) | — | 59,810 | — | — | 59,810 | |||||||||||||||
Securities purchased under agreements to resell, at fair value | — | 116,671 | — | — | 116,671 | |||||||||||||||
Total financial assets at fair value | $ | 85,410 | $ | 584,857 | $ | 66,190 | $ | (141,223 | ) | $ | 595,234 | |||||||||
Level 3 assets for which the firm does not bear economic exposure (3) | (6,616 | ) | ||||||||||||||||||
Level 3 assets for which the firm bears economic exposure | $ | 59,574 | ||||||||||||||||||
(1) | Principally consists of transfers accounted for as secured loans rather than purchases under SFAS No. 140 and prepaid variable share forwards. |
(2) | Consists of securities borrowed within Trading and Principal Investments. Excludes securities borrowed within Securities Services, which are accounted for based on the amount of cash collateral advanced plus accrued interest. |
(3) | Consists of level 3 assets which are financed by nonrecourse debt, attributable to minority investors or attributable to employee interests in certain consolidated funds. |
(4) | Consists of U.S. Treasury securities and money market instruments as well as insurance separate account assets measured at fair value under AICPASOP 03-1, “Accounting and Reporting by Insurance Enterprises for Certain NontraditionalLong-Duration Contracts and for Separate Accounts.” |
(5) | Principally consists of securities borrowed and resale agreements. The underlying securities have been segregated to satisfy certain regulatory requirements. |
(6) | Consists of private equity and real estate fund investments. |
(7) | Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level. |
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Financial Liabilities at Fair Value as of November 2008 | ||||||||||||||||||||
Netting and | ||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Collateral | Total | ||||||||||||||||
(in millions) | ||||||||||||||||||||
U.S. government, federal agency and sovereign obligations | $ | 36,385 | $ | 615 | $ | — | $ | — | $ | 37,000 | ||||||||||
Mortgage and otherasset-backed loans and securities | — | 320 | 20 | — | 340 | |||||||||||||||
Bank loans and bridge loans | — | 2,278 | 830 | — | 3,108 | |||||||||||||||
Corporate debt securities and other debt obligations | 11 | 5,185 | 515 | — | 5,711 | |||||||||||||||
Equities and convertible debentures | 11,928 | 174 | 14 | — | 12,116 | |||||||||||||||
Physical commodities | 2 | — | — | — | 2 | |||||||||||||||
Cash instruments | 48,326 | 8,572 | 1,379 | — | 58,277 | |||||||||||||||
Derivative contracts | 21 | 145,777 | 9,968 | (38,071 | ) (8) | 117,695 | ||||||||||||||
Trading liabilities, at fair value | 48,347 | 154,349 | 11,347 | (38,071 | ) | 175,972 | ||||||||||||||
Unsecuredshort-term borrowings (1) | — | 17,916 | 5,159 | — | 23,075 | |||||||||||||||
Deposits (2) | — | 4,224 | — | — | 4,224 | |||||||||||||||
Securities loaned (3) | — | 7,872 | — | — | 7,872 | |||||||||||||||
Securities sold under agreements to repurchase, at fair value | — | 62,883 | — | — | 62,883 | |||||||||||||||
Other secured financings (4) | — | 16,429 | 3,820 | — | 20,249 | |||||||||||||||
Other liabilities (5) | — | 978 | — | — | 978 | |||||||||||||||
Unsecuredlong-term borrowings (6) | — | 15,886 | 1,560 | — | 17,446 | |||||||||||||||
Total financial liabilities at fair value | $ | 48,347 | $ | 280,537 | $ | 21,886 | (7) | $ | (38,071 | ) | $ | 312,699 | ||||||||
(1) | Consists of promissory notes, commercial paper and hybrid financial instruments. |
(2) | Consists of certain certificates of deposit issued by GS Bank USA. |
(3) | Consists of securities loaned within Trading and Principal Investments. Excludes securities loaned within Securities Services, which are accounted for based on the amount of cash collateral received plus accrued interest. |
(4) | Primarily includes transfers accounted for as financings rather than sales under SFAS No. 140, debt raised through the firm’s William Street program and certain other nonrecourse financings. |
(5) | Consists of liabilities related to insurance contracts. |
(6) | Primarily includes hybrid financial instruments and prepaid physical commodity transactions. |
(7) | Level 3 liabilities were 7.0% of Total liabilities at fair value. |
(8) | Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level. |
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Financial Assets at Fair Value as of November 2007 | ||||||||||||||||||||
Netting and | ||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Collateral | Total | ||||||||||||||||
(in millions) | ||||||||||||||||||||
Commercial paper, certificates of deposit, time deposits and other money market instruments | $ | 6,237 | $ | 2,748 | $ | — | $ | — | $ | 8,985 | ||||||||||
U.S. government, federal agency and sovereign obligations | 37,966 | 32,808 | — | — | 70,774 | |||||||||||||||
Mortgage and otherasset-backed loans and securities | — | 38,073 | 16,000 | — | 54,073 | |||||||||||||||
Bank loans and bridge loans | — | 35,820 | 13,334 | — | 49,154 | |||||||||||||||
Corporate debt securities and other debt obligations | 915 | 32,193 | 6,111 | — | 39,219 | |||||||||||||||
Equities and convertible debentures | 68,727 | 35,472 | 18,006 | (6) | — | 122,205 | ||||||||||||||
Physical commodities | — | 2,571 | — | — | 2,571 | |||||||||||||||
Cash instruments | 113,845 | 179,685 | 53,451 | — | 346,981 | |||||||||||||||
Derivative contracts | 286 | 153,065 | 15,700 | (63,437 | ) (7) | 105,614 | ||||||||||||||
Trading assets, at fair value | 114,131 | 332,750 | 69,151 | (63,437 | ) | 452,595 | ||||||||||||||
Securities segregated for regulatory and other purposes | 24,078 | (4) | 69,940 | (5) | — | — | 94,018 | |||||||||||||
Receivables from customers and counterparties (1) | — | 1,950 | — | — | 1,950 | |||||||||||||||
Securities borrowed (2) | — | 83,277 | — | — | 83,277 | |||||||||||||||
Securities purchased under agreements to resell, at fair value | — | 85,717 | — | — | 85,717 | |||||||||||||||
Total financial assets at fair value | $ | 138,209 | $ | 573,634 | $ | 69,151 | $ | (63,437 | ) | $ | 717,557 | |||||||||
Level 3 assets for which the firm does not bear economic exposure (3) | (14,437 | ) | ||||||||||||||||||
Level 3 assets for which the firm bears economic exposure | $ | 54,714 | ||||||||||||||||||
(1) | Consists of transfers accounted for as secured loans rather than purchases under SFAS No. 140 and prepaid variable share forwards. |
(2) | Consists of securities borrowed within Trading and Principal Investments. Excludes securities borrowed within Securities Services, which are accounted for based on the amount of cash collateral advanced plus accrued interest. |
(3) | Consists of level 3 assets which are financed by nonrecourse debt, attributable to minority investors or attributable to employee interests in certain consolidated funds. |
(4) | Consists of U.S. Treasury securities and money market instruments as well as insurance separate account assets measured at fair value under AICPASOP 03-1, “Accounting and Reporting by Insurance Enterprises for Certain NontraditionalLong-Duration Contracts and for Separate Accounts.” |
(5) | Principally consists of securities borrowed and resale agreements. The underlying securities have been segregated to satisfy certain regulatory requirements. |
(6) | Consists of private equity and real estate fund investments. |
(7) | Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level. |
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Financial Liabilities at Fair Value as of November 2007 | ||||||||||||||||||||
Netting and | ||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Collateral | Total | ||||||||||||||||
(in millions) | ||||||||||||||||||||
U.S. government, federal agency and sovereign obligations | $ | 57,714 | $ | 923 | $ | — | $ | — | $ | 58,637 | ||||||||||
Bank loans and bridge loans | — | 3,525 | 38 | — | 3,563 | |||||||||||||||
Corporate debt securities and other debt obligations | — | 7,764 | 516 | — | 8,280 | |||||||||||||||
Equities and convertible debentures | 44,076 | 1,054 | — | — | 45,130 | |||||||||||||||
Physical commodities | — | 35 | — | — | 35 | |||||||||||||||
Cash instruments | 101,790 | 13,301 | 554 | — | 115,645 | |||||||||||||||
Derivative contracts | 212 | 117,794 | 13,644 | (32,272 | ) (7) | 99,378 | ||||||||||||||
Trading liabilities, at fair value | 102,002 | 131,095 | 14,198 | (32,272 | ) | 215,023 | ||||||||||||||
Unsecuredshort-term borrowings (1) | — | 44,060 | 4,271 | — | 48,331 | |||||||||||||||
Deposits (2) | — | 463 | — | — | 463 | |||||||||||||||
Securities loaned (3) | — | 5,449 | — | — | 5,449 | |||||||||||||||
Securities sold under agreements to repurchase, at fair value | — | 159,178 | — | — | 159,178 | |||||||||||||||
Other secured financings (4) | — | 33,581 | — | — | 33,581 | |||||||||||||||
Unsecuredlong-term borrowings (5) | — | 15,161 | 767 | — | 15,928 | |||||||||||||||
Total financial liabilities at fair value | $ | 102,002 | $ | 388,987 | $ | 19,236 | (6) | $ | (32,272 | ) | $ | 477,953 | ||||||||
(1) | Consists of promissory notes, commercial paper and hybrid financial instruments. |
(2) | Consists of certain certificates of deposit issued by GS Bank USA. |
(3) | Consists of securities loaned within Trading and Principal Investments. Excludes securities loaned within Securities Services, which are accounted for based on the amount of cash collateral received plus accrued interest. |
(4) | Primarily includes transfers accounted for as financings rather than sales under SFAS No. 140, debt raised through the firm’s William Street program and certain other nonrecourse financings. |
(5) | Primarily includes hybrid financial instruments and prepaid physical commodity transactions. |
(6) | Level 3 liabilities were 4.0% of Total liabilities at fair value. |
(7) | Represents cash collateral and the impact of netting across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level. |
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Level 3 Unrealized | ||||||||
Gains/(Losses) | ||||||||
Year Ended November | ||||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Cash Instruments — Assets | $ | (11,485 | ) | $ | (2,292 | ) | ||
Cash Instruments — Liabilities | (871 | ) | (294 | ) | ||||
Net unrealized gains/(losses) on level 3 cash instruments | (12,356 | ) | (2,586 | ) | ||||
Derivative Contracts — Net | 5,577 | 4,543 | ||||||
UnsecuredShort-Term Borrowings | 737 | (666 | ) | |||||
Other Secured Financings | 838 | — | ||||||
UnsecuredLong-Term Borrowings | 657 | 22 | ||||||
Total level 3 unrealized gains/(losses) | $ | (4,547 | ) | $ | 1,313 | |||
• | A derivative contract with level 1and/or level 2 inputs is classified as a level 3 financial instrument in its entirety if it has at least one significant level 3 input. | |
• | If there is one significant level 3 input, the entire gain or loss from adjusting only observable inputs (i.e., level 1 and level 2) is still classified as level 3. | |
• | Gains or losses that have been reported in level 3 resulting from changes in level 1 or level 2 inputs are frequently offset by gains or losses attributable to instruments classified within level 1 or level 2 or by cash instruments reported in level 3 of the fair value hierarchy. |
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Level 3 Financial Assets and Financial Liabilities | ||||||||||||||||||||||||
Year Ended November 2008 | ||||||||||||||||||||||||
Cash | Cash | Derivative | Unsecured | Other | Unsecured | |||||||||||||||||||
Instruments | Instruments | Contracts | Short-Term | Secured | Long-Term | |||||||||||||||||||
- Assets | - Liabilities | - Net | Borrowings | Financings | Borrowings | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Balance, beginning of year | $ | 53,451 | $ | (554 | ) | $ | 2,056 | $ | (4,271 | ) | $ | — | $ | (767 | ) | |||||||||
Realized gains/(losses) | 1,930 | (1) | 28 | (3) | 267 | (3) | 354 | (3) | 87 | (3) | (20 | ) (3) | ||||||||||||
Unrealized gains/(losses) relating to instruments still held at the reporting date | (11,485 | ) (1) | (871 | ) (3) | 5,577 | (3)(4) | 737 | (3) | 838 | (3) | 657 | (3) | ||||||||||||
Purchases, issuances and settlements | 3,955 | 55 | (1,813 | ) | (1,353 | ) | 416 | (1,314 | ) | |||||||||||||||
Transfers inand/or out of level 3 | 3,215 | (2) | (37 | ) | (931 | ) (5) | (626 | ) | (5,161 | ) (6) | (116 | ) | ||||||||||||
Balance, end of year | $ | 51,066 | $ | (1,379 | ) | $ | 5,156 | $ | (5,159 | ) | $ | (3,820 | ) | $ | (1,560 | ) | ||||||||
Level 3 Financial Assets and Financial Liabilities | ||||||||||||||||||||||||
Year Ended November 2007 | ||||||||||||||||||||||||
Cash | Cash | Derivative | Unsecured | Other | Unsecured | |||||||||||||||||||
Instruments | Instruments | Contracts | Short-Term | Secured | Long-Term | |||||||||||||||||||
- Assets | - Liabilities | - Net | Borrowings | Financings | Borrowings | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Balance, beginning of year | $ | 29,905 | $ | (223 | ) | $ | 580 | $ | (3,253 | ) | $ | — | $ | (135 | ) | |||||||||
Realized gains/(losses) | 2,232 | (1) | (9 | ) (3) | 1,713 | (3) | 167 | (3) | — | (7 | ) (3) | |||||||||||||
Unrealized gains/(losses) relating to instruments still held at the reporting date | (2,292 | ) (1) | (294 | ) (3) | 4,543 | (3)(4) | (666 | ) (3) | — | 22 | ��(3) | |||||||||||||
Purchases, issuances and settlements | 22,561 | (30 | ) | (1,365 | ) | (1,559 | ) | — | (567 | ) | ||||||||||||||
Transfers inand/or out of level 3 | 1,045 | (7) | 2 | (3,415 | ) (8) | 1,040 | — | (80 | ) | |||||||||||||||
Balance, end of year | $ | 53,451 | $ | (554 | ) | $ | 2,056 | $ | (4,271 | ) | $ | — | $ | (767 | ) | |||||||||
(1) | The aggregate amounts include approximately $(11.54) billion and $1.98 billion reported in “Trading and principal investments” and “Interest income,” respectively, in the consolidated statements of earnings for the year ended November 2008. The aggregate amounts include approximately $(1.77) billion and $1.71 billion reported in “Trading and principal investments” and “Interest income,” respectively, in the consolidated statements of earnings for the year ended November 2007. |
(2) | Principally reflects transfers from level 2 within the fair value hierarchy of loans and securities backed by commercial real estate, reflecting reduced price transparency for these financial instruments. |
(3) | Substantially all is reported in “Trading and principal investments” in the consolidated statements of earnings. |
(4) | Principally resulted from changes in level 2 inputs. |
(5) | Principally reflects transfers to level 2 within the fair value hierarchy ofmortgage-related derivative assets, as recent trading activity provided improved transparency of correlation inputs. This decrease was partially offset by transfers from level 2 within the fair value hierarchy of credit andequity-linked derivatives due to reduced price transparency. |
(6) | Consists of transfers from level 2 within the fair value hierarchy. |
(7) | Principally reflects transfers from level 2 within the fair value hierarchy of loans and securities backed by commercial and residential real estate and certain bank loans and bridge loans, reflecting reduced price transparency for these financial instruments. |
(8) | Principally reflects transfers from level 2 within the fair value hierarchy of structured credit derivative liabilities, due to reduced transparency of correlation inputs. |
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Year Ended November | ||||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Net gains including hedges | $ | 1,127 | $ | 203 | ||||
Net gains excluding hedges | 1,196 | 216 |
Year Ended November | ||||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Unsecuredlong-term borrowings (1) | $ | 915 | $ | 202 | ||||
Other secured financings (2) | 894 | (293 | ) | |||||
Unsecuredshort-term borrowings (3) | 266 | 6 | ||||||
Other (4) | (20 | ) | 18 | |||||
Total (5) | $ | 2,055 | $ | (67 | ) | |||
(1) | Excludes gains of $2.42 billion and losses of $2.18 billion for the years ended November 2008 and November 2007, respectively, related to the derivative component of hybrid financial instruments. Such gains and losses would have been recognized pursuant to SFAS No. 133 if the firm had not elected to account for the entire hybrid instrument at fair value under the fair value option. |
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(2) | Excludes gains of $1.29 billion and $2.19 billion for the years ended November 2008 and November 2007, respectively, related to financings recorded as a result of securitization-related transactions that were accounted for as secured financings rather than sales under SFAS No. 140. Changes in the fair value of these secured financings are offset by changes in the fair value of the related financial instruments included within the firm’s “Trading assets, at fair value” in the consolidated statements of financial condition. | |
(3) | Excludes gains of $6.37 billion and losses of $1.07 billion for the years ended November 2008 and November 2007, respectively, related to the derivative component of hybrid financial instruments. Such gains and losses would have been recognized pursuant to SFAS No. 133 if the firm had not elected to account for the entire hybrid instrument at fair value under the fair value option. | |
(4) | Primarily consists of certain insurance and reinsurance contracts, resale and repurchase agreements and securities borrowed and loaned within Trading and Principal Investments. | |
(5) | Reported within “Trading and principal investments” within the consolidated statements of earnings. The amounts exclude contractual interest, which is included in “Interest income” and “Interest expense,” for all instruments other than hybrid financial instruments. |
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As of November | ||||||||||||||||
2008 | 2007 | |||||||||||||||
Assets | Liabilities | Assets | Liabilities | |||||||||||||
(in millions) | ||||||||||||||||
Contract Type | ||||||||||||||||
Forward settlement contracts | $ | 35,997 | $ | 35,778 | $ | 22,561 | $ | 27,138 | ||||||||
Swap agreements | 175,153 | 82,189 | 104,793 | 62,697 | ||||||||||||
Option contracts | 81,077 | 58,467 | 53,056 | 53,047 | ||||||||||||
Subtotal | 292,227 | 176,434 | 180,410 | 142,882 | ||||||||||||
Netting across contract types (1) | (24,730 | ) | (24,730 | ) | (15,746 | ) | (15,746 | ) | ||||||||
Cash collateral netting (2) | (137,160 | ) | (34,009 | ) | (59,050 | ) | (27,758 | ) | ||||||||
Total | $ | 130,337 | $ | 117,695 | $ | 105,614 | $ | 99,378 | ||||||||
(1) | Represents the netting of receivable balances with payable balances for the same counterparty across contract types pursuant to legally enforceable netting agreements. | |
(2) | Represents the netting of cash collateral received and posted on a counterparty basis pursuant to credit support agreements. |
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As of November 2008 | ||||||||||||||||||||||||||||
Maximum Payout/Notional Amount by Period of Expiration | Maximum Payout/Notional Amount | |||||||||||||||||||||||||||
Offsetting | Other | Written | ||||||||||||||||||||||||||
Written | Purchased | Purchased | Credit | |||||||||||||||||||||||||
10 Years | Credit | Credit | Credit | Derivatives at | ||||||||||||||||||||||||
0 - 5 Years | 5 - 10 Years | or Greater | Derivatives | Derivatives (1) | Derivatives (2) | Fair Value | ||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||
Credit spread on underlying (basis points) (3) | ||||||||||||||||||||||||||||
0-250 | $ | 1,194,228 | $ | 609,056 | $ | 22,866 | $ | 1,826,150 | $ | 1,632,681 | $ | 347,573 | $ | 77,836 | ||||||||||||||
251-500 | 591,813 | 184,763 | 12,494 | 789,070 | 784,149 | 26,316 | 94,278 | |||||||||||||||||||||
501-1,000 | 430,801 | 140,782 | 15,886 | 587,469 | 538,251 | 67,958 | 75,079 | |||||||||||||||||||||
Greater than 1,000 | 383,626 | 120,866 | 71,690 | 576,182 | 533,816 | 103,362 | 222,346 | |||||||||||||||||||||
Total | $ | 2,600,468 | (4) | $ | 1,055,467 | $ | 122,936 | $ | 3,778,871 | $ | 3,488,897 | (4) | $ | 545,209 | $ | 469,539 | (5) | |||||||||||
(1) | Offsetting purchased credit derivatives represent the notional amount of purchased credit derivatives to the extent they hedge written credit derivatives with identical underlyings. |
(2) | Comprised of purchased protection in excess of the amount of written protection on identical underlyings and purchased protection on other underlyings on which the firm has not written protection. |
(3) | Credit spread on the underlying, together with the period of expiration, are indicators of payment/performance risk. For example, the firm is least likely to pay or otherwise be required to perform where the credit spread on the underlying is“0-250” basis points and the period of expiration is “0-5 Years.” The likelihood of payment or performance is generally greater as the credit spread on the underlying and period of expiration increase. |
(4) | Includes a maximum payout/notional amount for written credit derivatives of $208.44 billion expiring within one year as of November 2008. |
(5) | This liability excludes the effects of both netting under enforceable netting agreements and netting of cash collateral paid pursuant to credit support agreements. Including the effects of netting receivable balances with payable balances for the same counterparty pursuant to enforceable netting agreements, the firm’s net liability related to credit derivatives in the firm’s statement of financial condition as of November 2008 was $33.76 billion. This net amount excludes the netting of cash collateral paid pursuant to credit support agreements. |
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As of November | ||||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Other secured financings(short-term) (1)(2) | $ | 21,225 | $ | 32,410 | ||||
Other secured financings(long-term): | ||||||||
2009 | — | 2,903 | ||||||
2010 | 2,157 | 2,301 | ||||||
2011 | 4,578 | 2,427 | ||||||
2012 | 3,040 | 4,973 | ||||||
2013 | 1,377 | 702 | ||||||
2014-thereafter | 6,306 | 19,994 | ||||||
Total other secured financings(long-term) (3)(4) | 17,458 | 33,300 | ||||||
Total other secured financings (5) | $ | 38,683 | $ | 65,710 | ||||
(1) | As of November 2008, consists ofU.S. dollar-denominated financings of $12.53 billion with a weighted average interest rate of 2.98% andnon-U.S. dollar-denominated financings of $8.70 billion with a weighted average interest rate of 0.95%, after giving effect to hedging activities. As of November 2007, consists ofU.S. dollar-denominated financings of $18.47 billion with a weighted average interest rate of 5.32% andnon-U.S. dollar-denominated financings of $13.94 billion with a weighted average interest rate of 0.91%, after giving effect to hedging activities. The weighted average interest rates as of November 2008 and November 2007 excluded financial instruments accounted for at fair value under SFAS No. 159. | |
(2) | Includes other secured financings maturing within one year of the financial statement date and other secured financings that are redeemable within one year of the financial statement date at the option of the holder. | |
(3) | As of November 2008, consists ofU.S. dollar-denominated financings of $9.55 billion with a weighted average interest rate of 4.62% andnon-U.S. dollar-denominated financings of $7.91 billion with a weighted average interest rate of 4.39%, after giving effect to hedging activities. As of November 2007, consists ofU.S. dollar-denominated financings of $22.13 billion with a weighted average interest rate of 5.73% andnon-U.S. dollar-denominated financings of $11.17 billion with a weighted average interest rate of 4.28%, after giving effect to hedging activities. The weighted average interest rates as of November 2008 and November 2007 excluded financial instruments accounted for at fair value under SFAS No. 159. | |
(4) | Securedlong-term financings that are repayable prior to maturity at the option of the firm are reflected at their contractual maturity dates. Securedlong-term financings that are redeemable prior to maturity at the option of the holder are reflected at the dates such options become exercisable. | |
(5) | As of November 2008, $31.54 billion of these financings were collateralized by financial instruments and $7.14 billion by other assets (primarily real estate and cash). As of November 2007, $61.34 billion of these financings were collateralized by financial instruments and $4.37 billion by other assets (primarily real estate and cash). Other secured financings include $13.74 billion and $25.37 billion of nonrecourse obligations as of November 2008 and November 2007, respectively. |
Note 4. | Securitization Activities and Variable Interest Entities |
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Year Ended November | ||||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Residential mortgages | $ | 6,671 | $ | 24,954 | ||||
Commercial mortgages | 773 | 19,498 | ||||||
Other financial assets | 7,014 | (1) | 36,948 | (2) | ||||
Total | $ | 14,458 | $ | 81,400 | ||||
Cash flows received on retained interests | $ | 505 | $ | 705 | ||||
(1) | Primarily in connection with collateralized loan obligations (CLOs). | |
(2) | Primarily in connection with CDOs and CLOs. |
As of November 2008 | As of November 2007 | |||||||||||||||
Type of Retained Interests | Type of Retained Interests | |||||||||||||||
Mortgage- | CDOs and | Mortgage- | CDOs and | |||||||||||||
Backed | CLOs (4) | Backed | CLOs (4) | |||||||||||||
($ in millions) | ||||||||||||||||
Fair value of retained interests | $ | 1,415 | $ | 367 | $ | 3,378 | $ | 1,188 | ||||||||
Weighted average life (years) | 6.0 | 5.1 | 6.6 | 2.7 | ||||||||||||
Constant prepayment rate (1) | 15.5 | % | 4.5 | % | 15.1 | % | 11.9 | % | ||||||||
Impact of 10% adverse change (1) | $ | (14 | ) | $ | (6 | ) | $ | (50 | ) | $ | (43 | ) | ||||
Impact of 20% adverse change (1) | (27 | ) | (12 | ) | (91 | ) | (98 | ) | ||||||||
Anticipated credit losses (2) | 2.0 | % | N/A | 4.3 | % | N/A | ||||||||||
Impact of 10% adverse change (3) | $ | (1 | ) | $ | — | $ | (45 | ) | $ | — | ||||||
Impact of 20% adverse change (3) | (2 | ) | — | (72 | ) | — | ||||||||||
Discount rate | 21.1 | % | 29.2 | % | 8.4 | % | 23.1 | % | ||||||||
Impact of 10% adverse change | $ | (46 | ) | $ | (25 | ) | $ | (89 | ) | $ | (46 | ) | ||||
Impact of 20% adverse change | (89 | ) | (45 | ) | (170 | ) | (92 | ) |
(1) | Constant prepayment rate is included only for positions for which constant prepayment rate is a key assumption in the determination of fair value. | |
(2) | Anticipated credit losses are computed only on positions for which expected credit loss is a key assumption in the determination of fair value or positions for which expected credit loss is not reflected within the discount rate. | |
(3) | The impacts of adverse change take into account credit mitigants incorporated in the retained interests, includingover-collateralization and subordination provisions. | |
(4) | Includes $192 million and $905 million as of November 2008 and November 2007, respectively, of retained interests related to transfers of securitized assets that were accounted for as secured financings rather than sales under SFAS No. 140. |
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Year Ended | ||||
November 2008 | ||||
(in millions) | ||||
Balance, beginning of year | $ | 93 | ||
Purchases (1) | 272 | |||
Servicing assets that resulted from transfers of financial assets | 3 | |||
Changes in fair value due to changes in valuation inputs and assumptions | (221 | ) | ||
Balance, end of year (2) | $ | 147 | ||
Contractually specified servicing fees | $ | 315 | ||
(1) | Primarily related to the acquisition of Litton Loan Servicing LP. | |
(2) | As of November 2008, the fair value was estimated using a weighted average discount rate of approximately 16% and a weighted average prepayment rate of approximately 27%. |
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As of November 2008 | |||||||||||||||||||||||||
Maximum Exposure to Loss in Nonconsolidated VIEs (1) | |||||||||||||||||||||||||
Purchased | Commitments | ||||||||||||||||||||||||
and Retained | and | Loans and | |||||||||||||||||||||||
VIE Assets | Interests | Guarantees | Derivatives | Investments | Total | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||
Mortgage CDOs | $ | 13,061 | $ | 242 | $ | — | $ | 5,616 | (4) | $ | — | $ | 5,858 | ||||||||||||
Corporate CDOs and CLOs | 8,584 | 161 | — | 918 | (5) | — | 1,079 | ||||||||||||||||||
Real estate,credit-related and other investing (2) | 26,898 | — | 143 | — | 3,223 | 3,366 | |||||||||||||||||||
Municipal bond securitizations | 111 | — | 111 | — | — | 111 | |||||||||||||||||||
Otherasset-backed | 4,355 | — | — | 1,084 | — | 1,084 | |||||||||||||||||||
Power-related | 844 | — | 37 | — | 213 | 250 | |||||||||||||||||||
Principal-protected notes (3) | 4,516 | — | — | 4,353 | — | 4,353 | |||||||||||||||||||
Total | $ | 58,369 | $ | 403 | $ | 291 | $ | 11,971 | $ | 3,436 | $ | 16,101 | |||||||||||||
As of November 2007 | |||||||||||||||||||||||||
Maximum Exposure to Loss in Nonconsolidated VIEs (1) | |||||||||||||||||||||||||
Purchased | Commitments | ||||||||||||||||||||||||
and Retained | and | Loans and | |||||||||||||||||||||||
VIE Assets | Interests | Guarantees | Derivatives | Investments | Total | ||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||
Mortgage CDOs | $ | 18,914 | $ | 1,011 | $ | — | $ | 10,089 | (4) | $ | — | $ | 11,100 | ||||||||||||
Corporate CDOs and CLOs | 10,750 | 411 | — | 2,218 | (5) | — | 2,629 | ||||||||||||||||||
Real estate,credit-related and other investing (2) | 17,272 | — | 107 | 12 | 3,141 | 3,260 | |||||||||||||||||||
Municipal bond securitizations | 1,413 | — | 1,413 | — | — | 1,413 | |||||||||||||||||||
Othermortgage-backed | 3,881 | 719 | — | — | — | 719 | |||||||||||||||||||
Otherasset-backed | 3,771 | — | — | 1,579 | — | 1,579 | |||||||||||||||||||
Power-related | 438 | 2 | 37 | — | 16 | 55 | |||||||||||||||||||
Principal-protected notes (3) | 5,698 | — | — | 5,186 | — | 5,186 | |||||||||||||||||||
Total | $ | 62,137 | $ | 2,143 | $ | 1,557 | $ | 19,084 | $ | 3,157 | $ | 25,941 | |||||||||||||
(1) | Such amounts do not represent the anticipated losses in connection with these transactions as they exclude the effect of offsetting financial instruments that are held to mitigate these risks. |
(2) | The firm obtains interests in these VIEs in connection with making investments in real estate, distressed loans and other types of debt, mezzanine instruments and equities. |
(3) | Consists ofout-of-the-money written put options that provide principal protection to clients invested in various fund products, with risk to the firm mitigated through portfolio rebalancing. |
(4) | Primarily consists of written protection oninvestment-grade,short-term collateral held by VIEs that have issued CDOs. |
(5) | Primarily consists of total return swaps on CDOs and CLOs. The firm has generally transferred the risks related to the underlying securities through derivatives withnon-VIEs. |
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As of November 2008 | As of November 2007 | |||||||||||||||
Maximum | Maximum | |||||||||||||||
Exposure | Exposure | |||||||||||||||
VIE Assets (1) | to Loss (2) | VIE Assets (1) | to Loss (2) | |||||||||||||
(in millions) | ||||||||||||||||
Real estate,credit-related and other investing | $ | 1,560 | $ | 469 | $ | 2,118 | $ | 525 | ||||||||
Municipal bond securitizations | 985 | 985 | 1,959 | 1,959 | ||||||||||||
CDOs,mortgage-backed and otherasset-backed | 32 | — | 604 | 109 | ||||||||||||
Foreign exchange and commodities | 652 | 740 | 300 | 329 | ||||||||||||
Principal-protected notes | 215 | 233 | 1,119 | 1,118 | ||||||||||||
Total | $ | 3,444 | $ | 2,427 | $ | 6,100 | $ | 4,040 | ||||||||
(1) | Consolidated VIE assets include assets financed on a nonrecourse basis. | |
(2) | Such amounts do not represent the anticipated losses in connection with these transactions as they exclude the effect of offsetting financial instruments that are held to mitigate these risks. |
Note 5. | Deposits |
As of November | ||||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
U.S. offices (1) | $ | 23,018 | $ | 15,272 | ||||
Non-U.S. offices (2) | 4,625 | 98 | ||||||
Total (includes $4,224 and $463 at fair value as of November 2008 and November 2007, respectively) | $ | 27,643 | $ | 15,370 | ||||
(1) | Substantially all U.S. deposits were interest-bearing and were held at GS Bank USA. | |
(2) | Allnon-U.S. deposits were interest-bearing and were primarily held at Goldman Sachs Bank (Europe) PLC (GS Bank Europe). |
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As of November 2008 | ||||||||||||
U.S. | Non-U.S. | Total | ||||||||||
(in millions) | ||||||||||||
2009 | $ | 3,583 | $ | — | $ | 3,583 | ||||||
2010 | 937 | 30 | 967 | |||||||||
2011 | 661 | — | 661 | |||||||||
2012 | 286 | — | 286 | |||||||||
2013 | 1,431 | 25 | 1,456 | |||||||||
2014-thereafter | 1,532 | — | 1,532 | |||||||||
Total | $ | 8,430 | $ | 55 | $ | 8,485 | ||||||
Note 6. | Short-Term Borrowings |
As of November | ||||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Current portion of unsecuredlong-term borrowings (1) | $ | 26,281 | $ | 22,740 | ||||
Hybrid financial instruments | 12,086 | 22,318 | ||||||
Promissory notes (2) | 6,944 | 13,251 | ||||||
Commercial paper (3) | 1,125 | 4,343 | ||||||
Othershort-term borrowings | 6,222 | 8,905 | ||||||
Total (4) | $ | 52,658 | $ | 71,557 | ||||
(1) | Includes $25.12 billion and $21.24 billion as of November 2008 and November 2007, respectively, issued by Group Inc. | |
(2) | Includes $3.42 billion as of November 2008 guaranteed by the Federal Deposit Insurance Corporation (FDIC) under the Temporary Liquidity Guarantee Program (TLGP). | |
(3) | Includes $751 million as of November 2008 guaranteed by the FDIC under the TLGP. | |
(4) | The weighted average interest rates for these borrowings, after giving effect to hedging activities, were 3.37% and 4.77% as of November 2008 and November 2007, respectively. The weighted average interest rates as of November 2008 and November 2007 excluded financial instruments accounted for at fair value under SFAS No. 155 or SFAS No. 159. |
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Note 7. | Long-Term Borrowings |
As of November | ||||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Fixed rate obligations (1) | ||||||||
Group Inc. | $ | 101,454 | $ | 82,276 | ||||
Subsidiaries | 2,371 | 2,144 | ||||||
Floating rate obligations (2) | ||||||||
Group Inc. | 57,018 | 73,075 | ||||||
Subsidiaries | 7,377 | 6,679 | ||||||
Total (3) | $ | 168,220 | $ | 164,174 | ||||
(1) | As of November 2008 and November 2007, $70.08 billion and $55.28 billion, respectively, of the firm’s fixed rate debt obligations were denominated in U.S. dollars and interest rates ranged from 3.87% to 10.04% and from 3.88% to 10.04%, respectively. As of November 2008 and November 2007, $33.75 billion and $29.14 billion, respectively, of the firm’s fixed rate debt obligations were denominated innon-U.S. dollars and interest rates ranged from 0.67% to 8.88% for both periods. | |
(2) | As of November 2008 and November 2007, $32.41 billion and $47.31 billion, respectively, of the firm’s floating rate debt obligations were denominated in U.S. dollars. As of November 2008 and November 2007, $31.99 billion and $32.44 billion, respectively, of the firm’s floating rate debt obligations were denominated innon-U.S. dollars. Floating interest rates generally are based on LIBOR or the federal funds target rate.Equity-linked and indexed instruments are included in floating rate obligations. | |
(3) | Includes $3.36 billion and $3.05 billion as of November 2008 and November 2007, respectively, of foreigncurrency-denominated debt designated as hedges of net investments innon-U.S. subsidiaries under SFAS No. 133. |
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As of November | ||||||||||||||||||||||||
2008 (1)(2) | 2007 (1)(2) | |||||||||||||||||||||||
Group Inc. | Subsidiaries | Total | Group Inc. | Subsidiaries | Total | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
2009 | $ | — | $ | — | $ | — | $ | 22,695 | $ | 487 | $ | 23,182 | ||||||||||||
2010 | 13,967 | 276 | 14,243 | 13,433 | 270 | 13,703 | ||||||||||||||||||
2011 | 10,377 | 502 | 10,879 | 10,572 | 115 | 10,687 | ||||||||||||||||||
2012 | 16,806 | 66 | 16,872 | 18,487 | 121 | 18,608 | ||||||||||||||||||
2013 | 21,627 | 251 | 21,878 | 15,501 | 315 | 15,816 | ||||||||||||||||||
2014-thereafter | 95,695 | 8,653 | 104,348 | 74,663 | 7,515 | 82,178 | ||||||||||||||||||
Total | $ | 158,472 | $ | 9,748 | $ | 168,220 | $ | 155,351 | $ | 8,823 | $ | 164,174 | ||||||||||||
(1) | Unsecuredlong-term borrowings maturing within one year of the financial statement date and certain unsecuredlong-term borrowings that are redeemable within one year of the financial statement date at the option of the holder are included as unsecuredshort-term borrowings in the consolidated statements of financial condition. | |
(2) | Unsecuredlong-term borrowings that are repayable prior to maturity at the option of the firm are reflected at their contractual maturity dates. Unsecuredlong-term borrowings that are redeemable prior to maturity at the option of the holder are reflected at the dates such options become exercisable. |
As of November | ||||||||||||||||
2008 | 2007 | |||||||||||||||
Amount | Rate | Amount | Rate | |||||||||||||
($ in millions) | ||||||||||||||||
Fixed rate obligations | ||||||||||||||||
Group Inc. | $ | 1,863 | 5.71 | % | $ | 1,858 | 5.69 | % | ||||||||
Subsidiaries | 2,152 | 4.32 | 1,929 | 4.88 | ||||||||||||
Floating rate obligations (1)(2) | ||||||||||||||||
Group Inc. | 156,609 | 2.66 | 153,493 | 5.20 | ||||||||||||
Subsidiaries | 7,596 | 4.23 | 6,894 | 4.43 | ||||||||||||
Total (2) | $ | 168,220 | 2.73 | % | $ | 164,174 | 5.19 | % | ||||||||
(1) | Includes fixed rate obligations that have been converted into floating rate obligations through derivative contracts. | |
(2) | The weighted average interest rates as of November 2008 and November 2007 excluded financial instruments accounted for at fair value under SFAS No. 155 or SFAS No. 159. |
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Note 8. | Commitments, Contingencies and Guarantees |
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Year Ended November | ||||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Commercial lending commitments | ||||||||
Investment-grade | $ | 8,007 | $ | 11,719 | ||||
Non-investment-grade | 9,318 | 41,930 | ||||||
William Street program | 22,610 | 24,488 | ||||||
Warehouse financing | 1,101 | 4,610 | ||||||
Total commitments to extend credit | $ | 41,036 | $ | 82,747 | ||||
• | Commercial lending commitments. The firm’s commercial lending commitments are generally extended in connection with contingent acquisition financing and other types of corporate lending as well as commercial real estate financing. The total commitment amount does not necessarily reflect the actual future cash flow requirements, as the firm may syndicate all or substantial portions of these commitments in the future, the commitments may expire unused, or the commitments may be cancelled or reduced at the request of the counterparty. In addition, commitments that are extended for contingent acquisition financing are often intended to beshort-term in nature, as borrowers often seek to replace them with other funding sources. |
• | William Street program. Substantially all of the commitments provided under the William Street credit extension program are toinvestment-grade corporate borrowers. Commitments under the program are principally extended by William Street Commitment Corporation (Commitment Corp.), a consolidated wholly owned subsidiary of GS Bank USA, and also by William Street Credit Corporation, GS Bank USA or Goldman Sachs Credit Partners L.P. The commitments extended by Commitment Corp. are supported, in part, by funding raised by William Street Funding Corporation (Funding Corp.), another consolidated wholly owned subsidiary of GS Bank USA. The assets and liabilities of Commitment Corp. and Funding Corp. are legally separated from other assets and liabilities of the firm. The assets of Commitment Corp. and of Funding Corp. will not be available to their respective shareholders until the claims of their respective creditors have been paid. In addition, no affiliate of either Commitment Corp. or Funding Corp., except in limited cases as expressly agreed in writing, is responsible for any obligation of either entity. With respect to most of the William Street commitments, Sumitomo Mitsui Financial Group, Inc. (SMFG) provides the firm with credit loss protection that is generally limited to 95% of the first loss the firm realizes on approved loan commitments, up to a maximum of $1.00 billion. In addition, subject to the satisfaction of certain conditions, upon the firm’s request, SMFG will provide protection for 70% of additional losses on such commitments, up to a maximum of $1.13 billion, of which $375 million of protection has been provided as of November 2008. The firm also uses other financial instruments to mitigate credit risks related to certain William Street commitments not covered by SMFG. |
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• | Warehouse financing. The firm provides financing for the warehousing of financial assets. These arrangements are secured by the warehoused assets, primarily consisting of commercial mortgages as of November 2008 and corporate bank loans and commercial mortgages as of November 2007. |
Minimum rental payments | ||||
2009 | $ | 494 | ||
2010 | 458 | |||
2011 | 342 | |||
2012 | 276 | |||
2013 | 259 | |||
2014-thereafter | 1,664 | |||
Total | $ | 3,493 | ||
Net rent expense | ||||
2006 | $ | 404 | ||
2007 | 412 | |||
2008 | 438 |
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As of November 2008 | ||||||||||||||||||||||||
Maximum Payout/Notional Amount by Period of Expiration (1) | ||||||||||||||||||||||||
Carrying | 2010- | 2012- | 2014- | |||||||||||||||||||||
Value | 2009 | 2011 | 2013 | Thereafter | Total | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Derivatives (2) | $17,462 | $114,863 | $73,224 | $30,312 | $90,643 | $309,042 | ||||||||||||||||||
Securities lending indemnifications (3) | — | 19,306 | — | — | — | 19,306 | ||||||||||||||||||
Other financial guarantees | 235 | 203 | 477 | 458 | 238 | 1,376 | ||||||||||||||||||
As of November 2007 | ||||||||||||||||||||||||
Maximum Payout/Notional Amount by Period of Expiration (1) | ||||||||||||||||||||||||
Carrying | 2009- | 2011- | 2013- | |||||||||||||||||||||
Value | 2008 | 2010 | 2012 | Thereafter | Total | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Derivatives (2)(4) | $33,098 | $580,769 | $492,563 | $457,511 | $514,498 | $2,045,341 | ||||||||||||||||||
Securities lending indemnifications (3) | — | 26,673 | — | — | — | 26,673 | ||||||||||||||||||
Performance bond (5) | — | 2,046 | — | — | — | 2,046 | ||||||||||||||||||
Other financial guarantees | 43 | 381 | 121 | 258 | 46 | 806 |
(1) | Such amounts do not represent the anticipated losses in connection with these contracts. | |
(2) | Because derivative contracts are accounted for at fair value, carrying value is considered the best indication of payment/performance risk for individual contracts. However, the carrying value excludes the effect of a legal right of setoff that may exist under an enforceable netting agreement and the effect of netting of cash paid pursuant to credit support agreements. These derivative contracts are risk managed together with derivative contracts that are not considered guarantees under FIN 45 and, therefore, these amounts do not reflect the firm’s overall risk related to its derivative activities. | |
(3) | Collateral held by the lenders in connection with securities lending indemnifications was $19.95 billion and $27.49 billion as of November 2008 and November 2007, respectively. Because the contractual nature of these arrangements requires the firm to obtain collateral with a market value that exceeds the value of the securities on loan from the borrower, there is minimal performance risk associated with these guarantees. | |
(4) | Includes credit derivatives that meet the definition of a guarantee as of November 2007. | |
(5) | Excludes cash collateral of $2.05 billion related to this obligation. |
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Note 9. | Shareholders’ Equity |
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Dividend | Shares | Shares | Earliest | Redemption Value | ||||||||||||||
Series | Preference | Issued | Authorized | Dividend Rate | Redemption Date | (in millions) | ||||||||||||
A | Non-cumulative | 30,000 | 50,000 | 3 month LIBOR + 0.75%, with floor of 3.75% per annum | April 25, 2010 | $ | 750 | |||||||||||
B | Non-cumulative | 32,000 | 50,000 | 6.20% per annum | October 31, 2010 | 800 | ||||||||||||
C | Non-cumulative | 8,000 | 25,000 | 3 month LIBOR + 0.75%, with floor of 4.00% per annum | October 31, 2010 | 200 | ||||||||||||
D | Non-cumulative | 54,000 | 60,000 | 3 month LIBOR + 0.67%, with floor of 4.00% per annum | May 24, 2011 | 1,350 | ||||||||||||
G | Cumulative | 50,000 | 50,000 | 10.00% per annum | Date of issuance | 5,500 | ||||||||||||
H | Cumulative | 10,000,000 | 10,000,000 | 5.00% per annum through November 14, 2013 and 9.00% per annum thereafter | Date of issuance | 10,000 | ||||||||||||
10,174,000 | 10,235,000 | $ | 18,600 | |||||||||||||||
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Year Ended November | ||||||||||||||||
2008 | 2007 | |||||||||||||||
(per share) | (in millions) | (per share) | (in millions) | |||||||||||||
Series A | $ | 1,068.86 | $ | 32 | $ | 1,563.51 | $ | 47 | ||||||||
Series B | 1,550.00 | 50 | 1,550.00 | 50 | ||||||||||||
Series C | 1,110.18 | 9 | 1,563.51 | 12 | ||||||||||||
Series D | 1,105.18 | 59 | 1,543.06 | 83 | ||||||||||||
Series G | 1,083.33 | 54 | — | — | ||||||||||||
Total | $ | 204 | $ | 192 | ||||||||||||
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As of | ||||||||
November | ||||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Adjustment from adoption of SFAS No. 158, net of tax | $ | (194 | ) | $ | (194 | ) | ||
Currency translation adjustment, net of tax | (30 | ) | 68 | |||||
Pension and postretirement liability adjustment, net of tax | 69 | — | ||||||
Net unrealized gains/(losses) onavailable-for-sale securities, net of tax (1) | (47 | ) | 8 | |||||
Total accumulated other comprehensive income/(loss), net of tax | $ | (202 | ) | $ | (118 | ) | ||
(1) | Consists of net unrealized losses of $55 million onavailable-for-sale securities held by the firm’s insurance subsidiaries and net unrealized gains of $8 million onavailable-for-sale securities held by investees accounted for under the equity method as of November 2008. Consists of net unrealized gains of $9 million onavailable-for-sale securities held by investees accounted for under the equity method and net unrealized losses of $1 million onavailable-for-sale securities held by the firm’s insurance subsidiaries as of November 2007. |
Note 10. | Earnings Per Common Share |
Year Ended November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions, except per share amounts) | ||||||||||||
Numerator for basic and diluted EPS — net earnings applicable to common shareholders | $ | 2,041 | $ | 11,407 | $ | 9,398 | ||||||
Denominator for basic EPS — weighted average number of common shares | 437.0 | 433.0 | 449.0 | |||||||||
Effect of dilutive securities (1) | ||||||||||||
Restricted stock units | 10.2 | 13.6 | 13.6 | |||||||||
Stock options | 9.0 | 14.6 | 14.8 | |||||||||
Dilutive potential common shares | 19.2 | 28.2 | 28.4 | |||||||||
Denominator for diluted EPS — weighted average number of common shares and dilutive potential common shares | 456.2 | 461.2 | 477.4 | |||||||||
Basic EPS | $ | 4.67 | $ | 26.34 | $ | 20.93 | ||||||
Diluted EPS | 4.47 | 24.73 | 19.69 |
(1) | The diluted EPS computations do not include the antidilutive effect of restricted stock units (RSUs), stock options and warrants as follows: |
As of November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Number of antidilutive RSUs and common shares underlying antidilutive stock options and warrants | 60.5 | — | — | |||||||||
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Note 11. | Goodwill and Identifiable Intangible Assets |
As of November | ||||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Investment Banking | ||||||||
Underwriting | $ | 125 | $ | 125 | ||||
Trading and Principal Investments | ||||||||
FICC | 247 | 123 | ||||||
Equities (1) | 2,389 | 2,381 | ||||||
Principal Investments | 80 | 11 | ||||||
Asset Management and Securities Services | ||||||||
Asset Management (2) | 565 | 564 | ||||||
Securities Services | 117 | 117 | ||||||
Total | $ | 3,523 | $ | 3,321 | ||||
(1) | Primarily related to SLK LLC (SLK). | |
(2) | Primarily related to The Ayco Company, L.P. (Ayco). |
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As of November | ||||||||||
2008 | 2007 | |||||||||
(in millions) | ||||||||||
Customer lists (1) | Gross carrying amount | $ | 1,160 | $ | 1,086 | |||||
Accumulated amortization | (436 | ) | (354 | ) | ||||||
Net carrying amount | $ | 724 | $ | 732 | ||||||
New York Stock | Gross carrying amount | $ | 714 | $ | 714 | |||||
Exchange (NYSE) | Accumulated amortization | (252 | ) | (212 | ) | |||||
DMM rights | Net carrying amount | $ | 462 | $ | 502 | |||||
Insurance-related | Gross carrying amount | $ | 448 | $ | 461 | |||||
assets (2) | Accumulated amortization | (145 | ) | (89 | ) | |||||
Net carrying amount | $ | 303 | $ | 372 | ||||||
Exchange-traded | Gross carrying amount | $ | 138 | $ | 138 | |||||
fund (ETF) lead | Accumulated amortization | (43 | ) | (38 | ) | |||||
market maker rights | Net carrying amount | $ | 95 | $ | 100 | |||||
Other (3) | Gross carrying amount | $ | 178 | $ | 360 | |||||
Accumulated amortization | (85 | ) | (295 | ) | ||||||
Net carrying amount | $ | 93 | $ | 65 | ||||||
Total | Gross carrying amount | $ | 2,638 | $ | 2,759 | |||||
Accumulated amortization | (961 | ) | (988 | ) | ||||||
Net carrying amount | $ | 1,677 | $ | 1,771 | ||||||
(1) | Primarily includes the firm’s clearance and execution and NASDAQ customer lists related to SLK and financial counseling customer lists related to Ayco. | |
(2) | Consists of VOBA and DAC. VOBA represents the present value of estimated future gross profits of acquired variable annuity and life insurance businesses. DAC results from commissions paid by the firm to the primary insurer (ceding company) on life and annuity reinsurance agreements as compensation to place the business with the firm and to cover the ceding company’s acquisition expenses. VOBA and DAC are amortized over the estimated life of the underlying contracts based on estimated gross profits, and amortization is adjusted based on actual experience. The weighted average remaining amortization period for VOBA and DAC is seven years as of November 2008. | |
(3) | Primarily includes marketing-related assets and power contracts. |
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2009 | $ | 172 | ||
2010 | 155 | |||
2011 | 150 | |||
2012 | 142 | |||
2013 | 129 |
Note 12. | Other Assets and Other Liabilities |
As of November | ||||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Property, leasehold improvements and equipment (1) | $ | 10,793 | $ | 8,975 | ||||
Goodwill and identifiable intangible assets (2) | 5,200 | 5,092 | ||||||
Income tax-related assets | 8,359 | 4,177 | ||||||
Equity-method investments (3) | 1,454 | 2,014 | ||||||
Miscellaneous receivables and other | 4,632 | 3,809 | ||||||
Total | $ | 30,438 | $ | 24,067 | ||||
(1) | Net of accumulated depreciation and amortization of $6.55 billion and $5.88 billion as of November 2008 and November 2007, respectively. | |
(2) | See Note 11 for further information regarding the firm’s goodwill and identifiable intangible assets. | |
(3) | Excludes investments of $3.45 billion and $2.25 billion accounted for at fair value under SFAS No. 159 as of November 2008 and November 2007, respectively, which are included in “Trading assets, at fair value” in the consolidated statements of financial condition. |
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As of November | ||||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Compensation and benefits | $ | 4,646 | $ | 11,816 | ||||
Insurance-related liabilities (1) | 9,673 | 10,344 | ||||||
Minority interest (2) | 1,643 | 7,265 | ||||||
Income tax-related liabilities | 2,865 | 2,546 | ||||||
Employee interests in consolidated funds | 517 | 2,187 | ||||||
Accrued expenses and other payables | 3,872 | 4,749 | ||||||
Total | $ | 23,216 | $ | 38,907 | ||||
(1) | Insurance-related liabilities are set forth in the table below: |
As of November | ||||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Separate account liabilities | $ | 3,628 | $ | 7,039 | ||||
Liabilities for future benefits and unpaid claims | 4,778 | 2,142 | ||||||
Contract holder account balances | 899 | 937 | ||||||
Reserves for guaranteed minimum death and income benefits | 368 | 226 | ||||||
Total insurance-related liabilities | $ | 9,673 | $ | 10,344 | ||||
(2) | Includes $784 million and $5.95 billion related to consolidated investment funds as of November 2008 and November 2007, respectively. |
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Note 13. | Employee Benefit Plans |
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As of or for the Year Ended November | ||||||||||||||||||||||||
2008 | 2007 | |||||||||||||||||||||||
U.S. | Non-U.S. | Post- | U.S. | Non-U.S. | Post- | |||||||||||||||||||
Pension | Pension | retirement | Pension | Pension | retirement | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Benefit obligation | ||||||||||||||||||||||||
Balance, beginning of year | $ | 399 | $ | 748 | $ | 445 | $ | 395 | $ | 673 | $ | 372 | ||||||||||||
Service cost | — | 84 | 26 | — | 78 | 21 | ||||||||||||||||||
Interest cost | 24 | 41 | 31 | 22 | 34 | 23 | ||||||||||||||||||
Plan amendments | — | — | (61 | ) | — | (1 | ) | — | ||||||||||||||||
Actuarial loss/(gain) | (50 | ) | (261 | ) | 10 | (11 | ) | (79 | ) | 36 | ||||||||||||||
Benefits paid | (8 | ) | (2 | ) | (10 | ) | (7 | ) | (1 | ) | (7 | ) | ||||||||||||
Effect of foreign exchange rates | — | (154 | ) | — | — | 44 | — | |||||||||||||||||
Balance, end of year | $ | 365 | $ | 456 | $ | 441 | $ | 399 | $ | 748 | $ | 445 | ||||||||||||
Fair value of plan assets | ||||||||||||||||||||||||
Balance, beginning of year | $ | 450 | $ | 614 | $ | — | $ | 423 | $ | 506 | $ | — | ||||||||||||
Actual return on plan assets | (151 | ) | (77 | ) | — | 34 | 36 | — | ||||||||||||||||
Firm contributions | — | 184 | 9 | — | 38 | 7 | ||||||||||||||||||
Employee contributions | — | 1 | — | — | 1 | — | ||||||||||||||||||
Benefits paid | (8 | ) | (1 | ) | (9 | ) | (7 | ) | (1 | ) | (7 | ) | ||||||||||||
Effect of foreign exchange rates | — | (170 | ) | — | — | 34 | — | |||||||||||||||||
Balance, end of year | $ | 291 | $ | 551 | $ | — | $ | 450 | $ | 614 | $ | — | ||||||||||||
Funded status of plans | $ | (74 | ) | $ | 95 | $ | (441 | ) | $ | 51 | $ | (134 | ) | $ | (445 | ) | ||||||||
Amounts recognized in the Consolidated Statements of Financial Condition consist of: | ||||||||||||||||||||||||
Other assets | $ | — | $ | 129 | $ | — | $ | 51 | $ | — | $ | — | ||||||||||||
Other liabilities and accrued expenses | (74 | ) | (34 | ) | (441 | ) | — | (134 | ) | (445 | ) | |||||||||||||
Net amount recognized | $ | (74 | ) | $ | 95 | $ | (441 | ) | $ | 51 | $ | (134 | ) | $ | (445 | ) | ||||||||
Amounts recognized in Accumulated other comprehensive income/(loss) consist of: | ||||||||||||||||||||||||
Actuarial loss/(gain) | $ | 195 | $ | (59 | ) | $ | 129 | $ | 60 | $ | 79 | $ | 130 | |||||||||||
Prior service cost/(credit) | — | 3 | (39 | ) | — | 3 | 34 | |||||||||||||||||
Transition obligation/(asset) | (11 | ) | 3 | — | (14 | ) | 4 | 1 | ||||||||||||||||
Total amount recognized —Pre-tax | $ | 184 | $ | (53 | ) | $ | 90 | $ | 46 | $ | 86 | $ | 165 | |||||||||||
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Year Ended November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
U.S. pension | ||||||||||||
Interest cost | $ | 24 | $ | 22 | $ | 21 | ||||||
Expected return on plan assets | (33 | ) | (32 | ) | (26 | ) | ||||||
Net amortization | (1 | ) | 1 | 7 | ||||||||
Total | $ | (10 | ) | $ | (9 | ) | $ | 2 | ||||
Non-U.S. pension | ||||||||||||
Service cost | $ | 84 | $ | 78 | $ | 58 | ||||||
Interest cost | 41 | 34 | 25 | |||||||||
Expected return on plan assets | (41 | ) | (36 | ) | (29 | ) | ||||||
Net amortization | 2 | 10 | 11 | |||||||||
Total | $ | 86 | $ | 86 | $ | 65 | ||||||
Postretirement | ||||||||||||
Service cost | $ | 26 | $ | 21 | $ | 19 | ||||||
Interest cost | 31 | 23 | 19 | |||||||||
Net amortization | 23 | 19 | 18 | |||||||||
Total | $ | 80 | $ | 63 | $ | 56 | ||||||
Estimated 2009 amortization from Accumulated other comprehensive income: | ||||||||||||
Actuarial loss/(gain) | $ | 26 | ||||||||||
Prior service cost/(credit) | 8 | |||||||||||
Transition obligation/(asset) | (2 | ) | ||||||||||
Total | $ | 32 | ||||||||||
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Year Ended November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Defined benefit pension plans | ||||||||||||
U.S. pension — projected benefit obligation | ||||||||||||
Discount rate | 6.75 | % | 6.00 | % | 5.50 | % | ||||||
Rate of increase in future compensation levels | N/A | N/A | N/A | |||||||||
U.S. pension — net periodic benefit cost | ||||||||||||
Discount rate | 6.00 | 5.50 | 5.25 | |||||||||
Rate of increase in future compensation levels | N/A | N/A | N/A | |||||||||
Expectedlong-term rate of return on plan assets | 7.50 | 7.50 | 7.50 | |||||||||
Non-U.S. pension — projected benefit obligation | ||||||||||||
Discount rate | 6.79 | 5.91 | 4.85 | |||||||||
Rate of increase in future compensation levels | 3.85 | 5.38 | 4.98 | |||||||||
Non-U.S. pension — net periodic benefit cost | ||||||||||||
Discount rate | 5.91 | 4.85 | 4.81 | |||||||||
Rate of increase in future compensation levels | 5.38 | 4.98 | 4.75 | |||||||||
Expectedlong-term rate of return on plan assets | 5.89 | 6.84 | 6.93 | |||||||||
Postretirement plans — benefit obligation | ||||||||||||
Discount rate | 6.75 | % | 6.00 | % | 5.50 | % | ||||||
Rate of increase in future compensation levels | 5.00 | 5.00 | 5.00 | |||||||||
Postretirement plans — net periodic benefit cost | ||||||||||||
Discount rate | 6.00 | 5.50 | 5.25 | |||||||||
Rate of increase in future compensation levels | 5.00 | 5.00 | 5.00 |
1% Increase | 1% Decrease | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(in millions) | ||||||||||||||||
Service plus interest costs | $ | 11 | $ | 12 | $ | (9 | ) | $ | (9 | ) | ||||||
Obligation | 90 | 94 | (70 | ) | (72 | ) |
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As of November | ||||||||||||||||
2008 | 2007 | |||||||||||||||
U.S. | Non-U.S. | U.S. | Non-U.S. | |||||||||||||
Pension | Pension | Pension | Pension | |||||||||||||
Equity securities | 69 | % | 28 | % | 63 | % | 45 | % | ||||||||
Debt securities | 29 | 7 | 23 | 8 | ||||||||||||
Other | 2 | 65 | 14 | 47 | ||||||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | ||||||||
U.S. | Non-U.S. | Post- | ||||||||||
Pension | Pension | retirement | ||||||||||
(in millions) | ||||||||||||
2009 | $ | 9 | $ | 7 | $ | 13 | ||||||
2010 | 10 | 8 | 15 | |||||||||
2011 | 10 | 8 | 17 | |||||||||
2012 | 11 | 8 | 18 | |||||||||
2013 | 13 | 8 | 19 | |||||||||
2014-2018 | 81 | 47 | 108 |
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Note 14. | Employee Incentive Plans |
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Weighted Average Grant-Date | ||||||||||||||||
Restricted Stock | Fair Value of Restricted | |||||||||||||||
Units Outstanding | Stock Units Outstanding | |||||||||||||||
Future | No Future | Future | No Future | |||||||||||||
Service | Service | Service | Service | |||||||||||||
Required | Required | Required | Required | |||||||||||||
Outstanding, November 2007 (1) | 22,025,347 | 51,565,557 | $ | 180.98 | $ | 164.94 | ||||||||||
Granted (2)(3) | 1,787,746 | 103,474 | 154.32 | 154.13 | ||||||||||||
Forfeited | (898,950 | ) | (649,694 | ) | 184.67 | 171.40 | ||||||||||
Delivered (4) | — | (18,086,395 | ) | — | 112.27 | |||||||||||
Vested (3) | (10,950,279 | ) | 10,950,279 | 152.06 | 152.06 | |||||||||||
Outstanding, November 2008 | 11,963,864 | 43,883,221 | $ | 203.19 | $ | 183.31 | ||||||||||
(1) | Includes restricted stock units granted to employees in December 2007 as part of compensation for fiscal 2007. | |
(2) | The weighted average grant-date fair value of restricted stock units granted during the years ended November 2008, November 2007 and November 2006 was $154.31, $224.13 and $196.99, respectively. | |
(3) | The aggregate fair value of awards vested during the years ended November 2008, November 2007 and November 2006 was $1.03 billion, $5.63 billion and $4.40 billion, respectively. | |
(4) | Includes restricted stock units that were cash settled. |
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Weighted | ||||||||||||||||
Weighted | Aggregate | Average | ||||||||||||||
Options | Average | Intrinsic Value | Remaining | |||||||||||||
Outstanding | Exercise Price | (in millions) | Life (years) | |||||||||||||
Outstanding, November 2007 (1) | 39,229,629 | $ | 106.63 | |||||||||||||
Granted | — | — | ||||||||||||||
Exercised | (4,743,181 | ) | 74.55 | |||||||||||||
Forfeited | (847,316 | ) | 173.21 | |||||||||||||
Outstanding, November 2008 | 33,639,132 | $ | 109.47 | $ | 34 | 4.23 | ||||||||||
Exercisable, November 2008 | 24,866,508 | $ | 84.67 | $ | 34 | 2.87 | ||||||||||
(1) | Includes stock options granted to employees in December 2007 as part of compensation for fiscal 2007, for which no future service was required. |
Weighted | ||||||||||||||||||||
Weighted | Average | |||||||||||||||||||
Options | Average | Remaining | ||||||||||||||||||
Exercise Price | Outstanding | Exercise Price | Life (years) | |||||||||||||||||
$ | 45.00 – | $ | 59.99 | 1,285,788 | $ | 52.97 | 0.50 | |||||||||||||
60.00 – | 74.99 | — | — | — | ||||||||||||||||
75.00 – | 89.99 | 11,898,382 | 81.03 | 2.93 | ||||||||||||||||
90.00 – | 104.99 | 11,682,338 | 91.86 | 3.07 | ||||||||||||||||
105.00 – | 119.99 | — | — | — | ||||||||||||||||
120.00 – | 134.99 | 2,791,500 | 131.64 | 7.00 | ||||||||||||||||
135.00 – | 194.99 | — | — | — | ||||||||||||||||
195.00 – | 209.99 | 5,981,124 | 202.27 | 8.56 | ||||||||||||||||
Outstanding, November 2008 | 33,639,132 | |||||||||||||||||||
Year Ended November | ||||||||||||
2008 (1) | 2007 | 2006 | ||||||||||
Risk-free interest rate | N/A | 4.0 | % | 4.6 | % | |||||||
Expected volatility | N/A | 35.0 | 27.5 | |||||||||
Dividend yield | N/A | 0.7 | 0.7 | |||||||||
Expected life | N/A | 7.5 years | 7.5 years |
(1) | There were no options granted during fiscal 2008 other than those related to 2007 compensation and included in the 2007 disclosures above. |
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Year Ended November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Share-based compensation | $ | 1,587 | $ | 4,549 | $ | 3,669 | ||||||
Excess tax benefit related to options exercised | 144 | 469 | 542 | |||||||||
Excess tax benefit related toshare-based compensation (1) | 645 | 908 | 653 |
(1) | Represents the tax benefit, recognized in additionalpaid-in capital, on stock options exercised and the delivery of common stock underlying restricted stock units. |
Note 15. | Transactions with Affiliated Funds |
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Note 16. | Income Taxes |
Year Ended November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Current taxes | ||||||||||||
U.S. federal | $ | (278 | ) | $ | 2,934 | $ | 3,736 | |||||
State and local | 91 | 388 | 627 | |||||||||
Non-U.S. | 1,964 | 2,554 | 2,165 | |||||||||
Total current tax expense | 1,777 | 5,876 | 6,528 | |||||||||
Deferred taxes | ||||||||||||
U.S. federal | (880 | ) | 118 | (635 | ) | |||||||
State and local | (92 | ) | 100 | (262 | ) | |||||||
Non-U.S. | (791 | ) | (89 | ) | (608 | ) | ||||||
Total deferred tax (benefit)/expense | (1,763 | ) | 129 | (1,505 | ) | |||||||
Net tax expense | $ | 14 | $ | 6,005 | $ | 5,023 | ||||||
As of November | ||||||||
2008 | 2007 | |||||||
(in millions) | ||||||||
Deferred tax assets | ||||||||
Compensation and benefits | $ | 3,732 | $ | 3,869 | ||||
FIN 48 asset | 625 | — | ||||||
Foreign tax credits | 334 | — | ||||||
Unrealized losses | 94 | — | ||||||
Other, net | 1,481 | 997 | ||||||
6,266 | 4,866 | |||||||
Valuation allowance (1) | (93 | ) | (112 | ) | ||||
Total deferred tax assets (2) | $ | 6,173 | $ | 4,754 | ||||
Deferred tax liabilities | ||||||||
Depreciation and amortization | 1,558 | 1,208 | ||||||
Unrealized gains | — | 1,279 | ||||||
Total deferred tax liabilities (2) | $ | 1,558 | $ | 2,487 | ||||
(1) | Relates primarily to the ability to utilize losses in various tax jurisdictions. | |
(2) | Before netting within tax jurisdictions. |
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Balance at December 1, 2007 | $ | 1,042 | ||
Increases based on tax positions related to the current year | 172 | |||
Increases based on tax positions related to prior years | 264 | |||
Decreases related to tax positions of prior years | (67 | ) | ||
Decreases related to settlements | (38 | ) | ||
Balance at November 2008 | $ | 1,373 | ||
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Earliest | ||||
Tax Year | ||||
Subject to | ||||
Jurisdiction | Examination | |||
U.S. Federal | 2005 | (1) | ||
New York State and City | 2004 | (2) | ||
United Kingdom | 2005 | |||
Japan | 2005 | |||
Hong Kong | 2002 | |||
Korea | 2003 |
(1) | IRS examination of fiscal 2005, 2006 and 2007 began during 2008. | |
(2) | New York State and City examination of fiscal 2004, 2005 and 2006 began in 2008. |
Year Ended November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
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 | — | 1.8 | 1.6 | |||||||||
Tax credits | (4.3 | ) | (0.5 | ) | (0.6 | ) | ||||||
Foreign operations | (29.8 | ) | (1.6 | ) | (1.3 | ) | ||||||
Tax-exempt income, including dividends | (5.9 | ) | (0.4 | ) | (0.4 | ) | ||||||
Other | 5.6 | (1) | (0.2 | ) (2) | 0.2 | |||||||
Effective income tax rate | 0.6 | % | 34.1 | % | 34.5 | % | ||||||
(1) | Primarily includes the effect of FIN 48 liability increase. | |
(2) | Primarily includes the effect of audit settlements. |
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Note 17. | Regulation |
• | Before Group Inc. became a bank holding company, it was subject to capital guidelines by the SEC as a CSE that were generally consistent with those set out in the Revised Framework for the International Convergence of Capital Measurement and Capital Standards issued by the Basel Committee on Banking Supervision (Basel II). The firm currently computes and reports its firmwide capital ratios in accordance with the Basel II requirements as applicable to the firm when it was regulated as a CSE for the purpose of assessing the adequacy of its capital. Under the Basel II framework as it applied to the firm when it was regulated as a CSE, the firm evaluates its Tier 1 Capital and Total Allowable Capital as a percentage ofRisk-Weighted Assets (RWAs). As of November 2008, the firm’s Total Capital Ratio (Total Allowable Capital as a percentage of RWAs) was 18.9% and the firm’s Tier 1 Ratio (Tier 1 Capital as a percentage of RWAs) was 15.6%, in each case calculated under the Basel II framework as it applied to the firm when it was regulated as a CSE. The firm expects to continue to report to investors for a period of time its Basel II capital ratios as applicable to it when it was regulated as a CSE. | |
• | The regulatory capital guidelines currently applicable to bank holding companies are based on the Capital Accord of the Basel Committee on Banking Supervision (Basel I), with Basel II to be phased in over time. The firm is currently working with the Federal Reserve Board to put in place the appropriate reporting and compliance mechanisms and methodologies to allow reporting of the Basel I capital ratios as of the end of March 2009. | |
• | In addition, the firm is currently working to implement the Basel II framework as applicable to it as a bank holding company (as opposed to as a CSE). U.S. banking regulators have incorporated the Basel II framework into the existingrisk-based capital requirements by requiring that internationally active banking organizations, such as Group Inc., transition to Basel II over the next several years. |
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Note 18. | Business Segments |
• | Revenues and expenses directly associated with each segment are included in determiningpre-tax earnings. | |
• | Net revenues in the firm’s segments include allocations of interest income and interest expense to specific securities, commodities and other positions in relation to the cash generated by, or funding requirements of, such underlying positions. Net interest is included within segment net revenues as it is consistent with the way in which management assesses segment performance. | |
• | Overhead expenses not directly allocable to specific segments are allocated ratably based on direct segment expenses. |
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As of or for the Year Ended November | ||||||||||||||
2008 | 2007 | 2006 | ||||||||||||
(in millions) | ||||||||||||||
Investment | Net revenues | $ | 5,185 | $ | 7,555 | $ | 5,629 | |||||||
Banking | Operating expenses | 3,143 | 4,985 | 4,062 | ||||||||||
Pre-tax earnings | $ | 2,042 | $ | 2,570 | $ | 1,567 | ||||||||
Segment assets | $ | 1,948 | $ | 5,526 | $ | 4,967 | ||||||||
Trading and | Net revenues | $ | 9,063 | $ | 31,226 | $ | 25,562 | |||||||
Principal | Operating expenses | 11,808 | 17,998 | 14,962 | ||||||||||
Investments | Pre-tax earnings/(loss) | $ | (2,745 | ) | $ | 13,228 | $ | 10,600 | ||||||
Segment assets | $ | 645,267 | $ | 744,647 | $ | 566,499 | ||||||||
Asset Management | Net revenues | $ | 7,974 | $ | 7,206 | $ | 6,474 | |||||||
and Securities | Operating expenses | 4,939 | 5,363 | 4,036 | ||||||||||
Services | Pre-tax earnings | $ | 3,035 | $ | 1,843 | $ | 2,438 | |||||||
Segment assets | $ | 237,332 | $ | 369,623 | $ | 266,735 | ||||||||
Total | Net revenues (1)(2) | $ | 22,222 | $ | 45,987 | $ | 37,665 | |||||||
Operating expenses (3) | 19,886 | 28,383 | 23,105 | |||||||||||
Pre-tax earnings (4) | $ | 2,336 | $ | 17,604 | $ | 14,560 | ||||||||
Total assets | $ | 884,547 | $ | 1,119,796 | $ | 838,201 | ||||||||
(1) | Net revenues include net interest as set forth in the table below: |
Year Ended November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Investment Banking | $ | 6 | $ | — | $ | 16 | ||||||
Trading and Principal Investments | 968 | 1,512 | 1,535 | |||||||||
Asset Management and Securities Services | 3,302 | 2,475 | 1,947 | |||||||||
Total net interest | $ | 4,276 | $ | 3,987 | $ | 3,498 | ||||||
(2) | Net revenues includesnon-interest income as set forth in the table below: |
Year Ended November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Investment banking fees | $ | 5,179 | $ | 7,555 | $ | 5,613 | ||||||
Equities commissions | 4,998 | 4,579 | 3,518 | |||||||||
Asset management and other fees | 4,672 | 4,731 | 4,527 | |||||||||
Trading and principal investments revenues | 3,097 | 25,135 | 20,509 | |||||||||
Totalnon-interest income | $ | 17,946 | $ | 42,000 | $ | 34,167 | ||||||
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(3) | Operating expenses include net provisions for a number of litigation and regulatory proceedings of $(4) million, $37 million and $45 million for the years ended November 2008, November 2007 and November 2006, respectively, that have not been allocated to the firm’s segments. | |
(4) | Pre-tax earnings include total depreciation and amortization as set forth in the table below: |
Year Ended November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Investment Banking | $ | 187 | $ | 137 | $ | 119 | ||||||
Trading and Principal Investments | 1,161 | 845 | 725 | |||||||||
Asset Management and Securities Services | 277 | 185 | 151 | |||||||||
Total depreciation and amortization | $ | 1,625 | $ | 1,167 | $ | 995 | ||||||
• | Investment Banking: location of the client and investment banking team. | |
• | Fixed Income, Currency and Commodities, and Equities: location of the trading desk. | |
• | Principal Investments: location of the investment. | |
• | Asset Management: location of the sales team. | |
• | Securities Services: location of the primary market for the underlying security. |
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Year Ended November | ||||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||
Net revenues | ||||||||||||||||||||||||
Americas (1) | $ | 15,485 | 70 | % | $ | 23,412 | 51 | % | $ | 20,361 | 54 | % | ||||||||||||
EMEA (2) | 5,910 | 26 | 13,538 | 29 | 9,354 | 25 | ||||||||||||||||||
Asia | 827 | 4 | 9,037 | 20 | 7,950 | 21 | ||||||||||||||||||
Total net revenues | $ | 22,222 | 100 | % | $ | 45,987 | 100 | % | $ | 37,665 | 100 | % | ||||||||||||
Pre-tax earnings | ||||||||||||||||||||||||
Americas (1) | $ | 4,879 | N.M. | % | $ | 7,673 | 43 | % | $ | 7,515 | 52 | % | ||||||||||||
EMEA (2) | 169 | N.M. | 5,458 | 31 | 3,075 | 21 | ||||||||||||||||||
Asia | (2,716 | ) | N.M. | 4,510 | 26 | 4,015 | 27 | |||||||||||||||||
Corporate (3) | 4 | — | (37 | ) | — | (45 | ) | — | ||||||||||||||||
Totalpre-tax earnings | $ | 2,336 | 100 | % | $ | 17,604 | 100 | % | $ | 14,560 | 100 | % | ||||||||||||
Net earnings | ||||||||||||||||||||||||
Americas (1) | $ | 3,371 | N.M. | % | $ | 4,981 | 43 | % | $ | 4,855 | 51 | % | ||||||||||||
EMEA (2) | 694 | N.M. | 3,735 | 32 | 2,117 | 22 | ||||||||||||||||||
Asia | (1,746 | ) | N.M. | 2,907 | 25 | 2,594 | 27 | |||||||||||||||||
Corporate (3) | 3 | — | (24 | ) | — | (29 | ) | — | ||||||||||||||||
Total net earnings | $ | 2,322 | 100 | % | $ | 11,599 | 100 | % | $ | 9,537 | 100 | % | ||||||||||||
(1) | Substantially all relates to the U.S. | |
(2) | EMEA (Europe, Middle East and Africa). | |
(3) | Consists of net provisions for a number of litigation and regulatory proceedings. |
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Note 19. | Interest Income and Interest Expense |
Year Ended November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
(in millions) | ||||||||||||
Interest income (1) | ||||||||||||
Deposits with banks | $ | 188 | $ | 119 | $ | 159 | ||||||
Securities borrowed, securities purchased under agreements to resell, at fair value, and federal funds sold | 11,746 | 18,013 | 9,850 | |||||||||
Trading assets | 13,150 | 13,120 | 10,717 | |||||||||
Other interest (2) | 10,549 | 14,716 | 14,460 | |||||||||
Total interest income | $ | 35,633 | $ | 45,968 | $ | 35,186 | ||||||
Interest expense | ||||||||||||
Deposits | $ | 756 | $ | 677 | $ | 146 | ||||||
Securities loaned and securities sold under agreements to repurchase, at fair value | 7,414 | 12,612 | 9,525 | |||||||||
Trading liabilities | 2,789 | 3,866 | 3,125 | |||||||||
Short-term borrowings (3) | 1,864 | 3,398 | 2,905 | |||||||||
Long-term borrowings (4) | 13,687 | 14,147 | 9,777 | |||||||||
Other interest (5) | 4,847 | 7,281 | 6,210 | |||||||||
Total interest expense | $ | 31,357 | $ | 41,981 | $ | 31,688 | ||||||
Net interest income | $ | 4,276 | $ | 3,987 | $ | 3,498 | ||||||
(1) | Interest income is recorded on an accrual basis based on contractual interest rates. | |
(2) | Primarily includes interest income on customer debit balances, securities borrowed and other interest-earning assets. | |
(3) | Includes interest on unsecuredshort-term borrowings andshort-term other secured financings. | |
(4) | Includes interest on unsecuredlong-term borrowings andlong-term other secured financings. | |
(5) | Primarily includes interest expense on customer credit balances, securities loaned and other interest-bearing liabilities. |
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Note 20. | Parent Company |
Year ended November | 2008 | 2007 | 2006 | |||||||||
(in millions) | ||||||||||||
Revenues | ||||||||||||
Dividends from bank subsidiary (1) | $ | 2,922 | $ | 18 | $ | 285 | ||||||
Dividends from nonbank subsidiaries | 3,716 | 4,273 | 5,076 | |||||||||
Undistributed earnings/(loss) of subsidiaries | (3,971 | ) | 6,708 | 4,516 | ||||||||
Principal investments (2) | (2,886 | ) | 2,062 | 1,951 | ||||||||
Interest income (2) | 7,167 | 9,049 | 7,231 | |||||||||
Total revenues | 6,948 | 22,110 | 19,059 | |||||||||
Interest expense (2) | 8,229 | 8,914 | 6,760 | |||||||||
Revenues, net of interest expense | (1,281 | ) | 13,196 | 12,299 | ||||||||
Operating expenses | ||||||||||||
Compensation and benefits | 122 | 780 | 407 | |||||||||
Other expenses (2) | 471 | 281 | 177 | |||||||||
Total operating expenses | 593 | 1,061 | 584 | |||||||||
Pre-tax earnings/(loss) | (1,874 | ) | 12,135 | 11,715 | ||||||||
Provision/(benefit) for taxes | (4,196 | ) | 536 | 2,178 | ||||||||
Net earnings | 2,322 | 11,599 | 9,537 | |||||||||
Preferred stock dividends | 281 | 192 | 139 | |||||||||
Net earnings applicable to common shareholders | $ | 2,041 | $ | 11,407 | $ | 9,398 | ||||||
As of November | 2008 | 2007 | ||||||
(in millions) | ||||||||
Assets | ||||||||
Cash and cash equivalents | $ | 1,035 | $ | 62 | ||||
Loans to and receivables from subsidiaries (2) | ||||||||
Bank subsidiary (1) | 19,247 | 1,626 | ||||||
Nonbank subsidiaries | 157,086 | 174,589 | ||||||
Investments in subsidiaries and associates (2) | ||||||||
Bank subsidiary (1) | 13,322 | 4,028 | ||||||
Nonbank subsidiaries | 38,375 | 36,333 | ||||||
Trading assets, at fair value | 40,171 | 35,614 | ||||||
Other assets (2) | 10,414 | 6,929 | ||||||
Total assets | $ | 279,650 | $ | 259,181 | ||||
Liabilities and shareholders’ equity | ||||||||
Unsecuredshort-term borrowings (3) | ||||||||
With third parties | $ | 37,941 | $ | 46,577 | ||||
With subsidiaries | 7,462 | 5,137 | ||||||
Payables to subsidiaries | 754 | 392 | ||||||
Trading liabilities, at fair value | 3,530 | 1,971 | ||||||
Other liabilities | 5,247 | 5,038 | ||||||
Unsecuredlong-term borrowings (4) | ||||||||
With third parties (2) | 158,472 | 155,351 | ||||||
With subsidiaries (2) (5) | 1,875 | 1,915 | ||||||
Total liabilities | 215,281 | 216,381 | ||||||
Commitments, contingencies and guarantees | ||||||||
Shareholders’ equity | ||||||||
Preferred stock | 16,471 | 3,100 | ||||||
Common stock | 7 | 6 | ||||||
Restricted stock units and employee stock options | 9,284 | 9,302 | ||||||
Additionalpaid-in capital | 31,071 | 22,027 | ||||||
Retained earnings | 39,913 | 38,642 | ||||||
Accumulated other comprehensive income/(loss) | (202 | ) | (118 | ) | ||||
Common stock held in treasury, at cost | (32,175 | ) | (30,159 | ) | ||||
Total shareholders’ equity | 64,369 | 42,800 | ||||||
Total liabilities and shareholders’ equity | $ | 279,650 | $ | 259,181 | ||||
Year ended November | 2008 | 2007 | 2006 | |||||||||
(in millions) | ||||||||||||
Cash flows from operating activities | ||||||||||||
Net earnings | $ | 2,322 | $ | 11,599 | $ | 9,537 | ||||||
Non-cash items included in net earnings | ||||||||||||
Undistributed (earnings)/loss of subsidiaries (2) | 3,971 | (6,708 | ) | (4,516 | ) | |||||||
Depreciation and amortization | 1 | 11 | 7 | |||||||||
Deferred income taxes | (2,178 | ) | 877 | 228 | ||||||||
Share-based compensation | 40 | 459 | 451 | |||||||||
Changes in operating assets and liabilities | ||||||||||||
Trading assets, at fair value | (4,661 | ) | (17,795 | ) | (7,763 | ) | ||||||
Trading liabilities, at fair value | 1,559 | 86 | (85 | ) | ||||||||
Net receivables from subsidiaries | (12,177 | ) | 2,396 | 1,883 | ||||||||
Other, net | (6,588 | ) | 5,448 | 4,187 | ||||||||
Net cash provided by/(used for) operating activities | (17,711 | ) | (3,627 | ) | 3,929 | |||||||
Cash flows from investing activities | ||||||||||||
Purchase of property, leasehold improvements and equipment | (49 | ) | (29 | ) | — | |||||||
Proceeds from sales of property, leasehold improvements and equipment | — | 11 | 30 | |||||||||
Issuance of short-term loans to subsidiaries, net of repayments | 3,701 | (22,668 | ) | (12,953 | ) | |||||||
Issuance of term loans to subsidiaries | (14,242 | ) | (48,299 | ) | (12,362 | ) | ||||||
Repayments of term loans by subsidiaries | 24,925 | 41,143 | 3,967 | |||||||||
Dividends received (2) | 6,638 | 4,291 | 5,361 | |||||||||
Capital contributions to subsidiaries, net (2) | (22,245 | ) | (4,517 | ) | (7,898 | ) | ||||||
Net cash used for investing activities | (1,272 | ) | (30,068 | ) | (23,855 | ) | ||||||
Cash flows from financing activities | ||||||||||||
Unsecuredshort-term borrowings, net | (10,564 | ) | 3,255 | (6,621 | ) | |||||||
Other secured financing(short-term), net | — | (380 | ) | 380 | ||||||||
Proceeds from issuance oflong-term borrowings | 35,645 | 53,041 | 44,043 | |||||||||
Repayment oflong-term borrowings, including the current portion | (23,959 | ) | (13,984 | ) | (12,590 | ) | ||||||
Common stock repurchased | (2,034 | ) | (8,956 | ) | (7,817 | ) | ||||||
Dividends and dividend equivalents paid on common stock, preferred stock and restricted stock units | (850 | ) | (831 | ) | (754 | ) | ||||||
Proceeds from issuance of common stock | 6,105 | 791 | 1,613 | |||||||||
Proceeds from issuance of preferred stock, net of issuance costs | 13,366 | — | 1,349 | |||||||||
Proceeds from issuance of common stock warrants | 1,633 | — | — | |||||||||
Excess tax benefit related toshare-based compensation | 614 | 817 | 464 | |||||||||
Cash settlement ofshare-based compensation | — | (1 | ) | (137 | ) | |||||||
Net cash provided by financing activities | 19,956 | 33,752 | 19,930 | |||||||||
Net increase in cash and cash equivalents | 973 | 57 | 4 | |||||||||
Cash and cash equivalents, beginning of year | 62 | 5 | 1 | |||||||||
Cash and cash equivalents, end of year | $ | 1,035 | $ | 62 | $ | 5 | ||||||
(1) | GS Bank USA. For purposes of identifying bank subsidiaries, the reorganization described in Note 17 is given effect as of the earliest reporting period in this disclosure. | |
(2) | Prior periods have been reclassified to conform to the current presentation. | |
(3) | Includes $11.67 billion and $28.69 billion at fair value as of November 2008 and November 2007, respectively. | |
(4) | Includes $10.90 billion and $10.29 billion at fair value as of November 2008 and November 2007, respectively. | |
(5) | As of November 2008, unsecuredlong-term borrowings with subsidiaries by maturity date are $506 million in 2009, $512 million in 2010, $184 million in 2011, $126 million in 2012, $142 million in 2013 and $405 million in 2014-thereafter. |
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Note 21. | Subsequent Events |
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2008 Quarter | ||||||||||||||||
First | Second | Third | Fourth | |||||||||||||
(in millions, except per share data) | ||||||||||||||||
Total revenues | $ | 18,629 | $ | 17,643 | $ | 13,625 | $ | 3,682 | ||||||||
Interest expense | 10,294 | 8,221 | 7,582 | 5,260 | ||||||||||||
Revenues, net of interest expense | 8,335 | 9,422 | 6,043 | (1,578 | ) | |||||||||||
Operating expenses (1) | 6,192 | 6,590 | 5,083 | 2,021 | ||||||||||||
Pre-tax earnings/(loss) | 2,143 | 2,832 | 960 | (3,599 | ) | |||||||||||
Provision/(benefit) for taxes | 632 | 745 | 115 | (1,478 | ) | |||||||||||
Net earnings/(loss) | 1,511 | 2,087 | 845 | (2,121 | ) | |||||||||||
Preferred stock dividends | 44 | 36 | 35 | 166 | ||||||||||||
Net earnings/(loss) applicable to common shareholders | $ | 1,467 | $ | 2,051 | $ | 810 | $ | (2,287 | ) | |||||||
Earnings/(loss) per common share | ||||||||||||||||
Basic | $ | 3.39 | $ | 4.80 | $ | 1.89 | $ | (4.97 | ) | |||||||
Diluted | 3.23 | 4.58 | 1.81 | (4.97 | ) | |||||||||||
Dividends declared and paid per common share | 0.35 | 0.35 | 0.35 | 0.35 | ||||||||||||
2007 Quarter | ||||||||||||||||
First | Second | Third | Fourth | |||||||||||||
(in millions, except per share data) | ||||||||||||||||
Total revenues | $ | 22,280 | $ | 20,351 | $ | 23,803 | $ | 21,534 | ||||||||
Interest expense | 9,550 | 10,169 | 11,469 | 10,793 | ||||||||||||
Revenues, net of interest expense | 12,730 | 10,182 | 12,334 | 10,741 | ||||||||||||
Operating expenses (1) | 7,871 | 6,751 | 8,075 | 5,686 | ||||||||||||
Pre-tax earnings | 4,859 | 3,431 | 4,259 | 5,055 | ||||||||||||
Provision for taxes | 1,662 | 1,098 | 1,405 | 1,840 | ||||||||||||
Net earnings | 3,197 | 2,333 | 2,854 | 3,215 | ||||||||||||
Preferred stock dividends | 49 | 46 | 48 | 49 | ||||||||||||
Net earnings applicable to common shareholders | $ | 3,148 | $ | 2,287 | $ | 2,806 | $ | 3,166 | ||||||||
Earnings per common share | ||||||||||||||||
Basic | $ | 7.08 | $ | 5.25 | $ | 6.54 | $ | 7.49 | ||||||||
Diluted | 6.67 | 4.93 | 6.13 | 7.01 | ||||||||||||
Dividends declared and paid per common share | 0.35 | 0.35 | 0.35 | 0.35 |
(1) | The timing and magnitude of changes in the firm’s bonus accruals can have a significant effect on results in a given quarter. |
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Sales Price | ||||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
High | Low | High | Low | High | Low | |||||||||||||||||||
First quarter | $ | 229.35 | $ | 169.00 | $ | 222.75 | $ | 191.50 | $ | 146.35 | $ | 124.23 | ||||||||||||
Second quarter | 203.39 | 140.27 | 232.41 | 189.85 | 169.31 | 139.18 | ||||||||||||||||||
Third quarter | 190.04 | 152.25 | 233.97 | 157.38 | 157.00 | 136.79 | ||||||||||||||||||
Fourth quarter | 172.45 | 47.41 | 250.70 | 175.00 | 203.35 | 145.66 |
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As of or for the Year Ended November | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Income statement data(in millions) | ||||||||||||||||||||
Total revenues | $ | 53,579 | $ | 87,968 | $ | 69,353 | $ | 43,391 | $ | 29,839 | ||||||||||
Interest expense | 31,357 | 41,981 | 31,688 | 18,153 | 8,888 | |||||||||||||||
Revenues, net of interest expense | 22,222 | 45,987 | 37,665 | 25,238 | 20,951 | |||||||||||||||
Compensation and benefits | 10,934 | 20,190 | 16,457 | 11,758 | 9,681 | |||||||||||||||
Other operating expenses | 8,952 | 8,193 | 6,648 | 5,207 | 4,594 | |||||||||||||||
Pre-tax earnings | $ | 2,336 | $ | 17,604 | $ | 14,560 | $ | 8,273 | $ | 6,676 | ||||||||||
Balance sheet data(in millions) | ||||||||||||||||||||
Total assets | $ | 884,547 | $ | 1,119,796 | $ | 838,201 | $ | 706,804 | $ | 531,379 | ||||||||||
Other secured financings(long-term) | 17,458 | 33,300 | 26,134 | 15,669 | 12,087 | |||||||||||||||
Unsecuredlong-term borrowings | 168,220 | 164,174 | 122,842 | 84,338 | 68,609 | |||||||||||||||
Total liabilities | 820,178 | 1,076,996 | 802,415 | 678,802 | 506,300 | |||||||||||||||
Total shareholders’ equity | 64,369 | 42,800 | 35,786 | 28,002 | 25,079 | |||||||||||||||
Common share data(in millions, except per share amounts) | ||||||||||||||||||||
Earnings per common share | ||||||||||||||||||||
Basic | $ | 4.67 | $ | 26.34 | $ | 20.93 | $ | 11.73 | $ | 9.30 | ||||||||||
Diluted | 4.47 | 24.73 | 19.69 | 11.21 | 8.92 | |||||||||||||||
Dividends declared and paid per common share | 1.40 | 1.40 | 1.30 | 1.00 | 1.00 | |||||||||||||||
Book value per common share (1) | 98.68 | 90.43 | 72.62 | 57.02 | 50.77 | |||||||||||||||
Average common shares outstanding | ||||||||||||||||||||
Basic | 437.0 | 433.0 | 449.0 | 478.1 | 489.5 | |||||||||||||||
Diluted | 456.2 | 461.2 | 477.4 | 500.2 | 510.5 | |||||||||||||||
Selected data(unaudited) | ||||||||||||||||||||
Employees | ||||||||||||||||||||
Americas | 17,276 | 17,383 | 15,477 | 14,466 | 13,846 | |||||||||||||||
Non-Americas | 12,791 | 13,139 | 10,990 | 9,157 | 7,890 | |||||||||||||||
Total employees (2) | 30,067 | 30,522 | 26,467 | 23,623 | 21,736 | |||||||||||||||
Assets under management(in billions) (3) | ||||||||||||||||||||
Asset class | ||||||||||||||||||||
Alternative investments (4) | $ | 146 | $ | 151 | $ | 145 | $ | 110 | $ | 95 | ||||||||||
Equity | 112 | 255 | 215 | 167 | 133 | |||||||||||||||
Fixed income | 248 | 256 | 198 | 154 | 134 | |||||||||||||||
Totalnon-money market assets | 506 | 662 | 558 | 431 | 362 | |||||||||||||||
Money markets | 273 | 206 | 118 | 101 | 90 | |||||||||||||||
Total assets under management | $ | 779 | $ | 868 | $ | 676 | $ | 532 | $ | 452 | ||||||||||
(1) | Book value per common share is based on common shares outstanding, including restricted stock units granted to employees with no future service requirements, of 485.4 million, 439.0 million, 450.1 million, 460.4 million and 494.0 million as of November 2008, November 2007, November 2006, November 2005 and November 2004, respectively. |
(2) | Excludes 4,671, 4,572, 3,868, 7,382 and 485 employees as of November 2008, November 2007, November 2006, November 2005 and November 2004, respectively, of consolidated entities held for investment purposes. |
(3) | Substantially all assets under management are valued as of calendar month-end. |
(4) | Primarily includes hedge funds, private equity, real estate, currencies, commodities and asset allocation strategies. |
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For the Year Ended November | ||||||||||||||||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | |||||||||||||||||||||||||||||||
balance | Interest | rate | balance | Interest | rate | balance | Interest | rate | ||||||||||||||||||||||||||||
(in millions, except rates) | ||||||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||
Deposits with banks | $ | 5,887 | $ | 188 | 3.19 | % | $ | 3,516 | $ | 119 | 3.38 | % | $ | 3,728 | $ | 159 | 4.27 | % | ||||||||||||||||||
U.S. | 1,541 | 41 | 2.66 | 741 | 23 | 3.10 | 1,351 | 36 | 2.66 | |||||||||||||||||||||||||||
Non-U.S. | 4,346 | 147 | 3.38 | 2,775 | 96 | 3.46 | 2,377 | 123 | 5.17 | |||||||||||||||||||||||||||
Securities borrowed, securities purchased under agreements to resell, at fair value, and federal funds sold | 421,157 | 11,746 | 2.79 | 348,691 | 18,013 | 5.17 | 308,509 | 9,850 | 3.19 | |||||||||||||||||||||||||||
U.S. | 331,043 | 8,791 | 2.66 | 279,456 | 15,449 | 5.53 | 240,263 | 8,061 | 3.36 | |||||||||||||||||||||||||||
Non-U.S. | 90,114 | 2,955 | 3.28 | 69,235 | 2,564 | 3.70 | 68,246 | 1,789 | 2.62 | |||||||||||||||||||||||||||
Trading assets (1)(2) | 328,208 | 13,150 | 4.01 | 336,412 | 13,120 | 3.90 | 265,878 | 10,717 | 4.03 | |||||||||||||||||||||||||||
U.S. | 186,498 | 7,700 | 4.13 | 190,589 | 8,167 | 4.29 | 177,984 | 7,397 | 4.16 | |||||||||||||||||||||||||||
Non-U.S. | 141,710 | 5,450 | 3.85 | 145,823 | 4,953 | 3.40 | 87,894 | 3,320 | 3.78 | |||||||||||||||||||||||||||
Other interest-earning assets (3) | 221,040 | 10,549 | 4.77 | 203,048 | 14,716 | 7.25 | 158,162 | 14,460 | 9.14 | |||||||||||||||||||||||||||
U.S. | 131,778 | 4,438 | 3.37 | 97,830 | 6,480 | 6.62 | 96,517 | 9,321 | 9.66 | |||||||||||||||||||||||||||
Non-U.S. | 89,262 | 6,111 | 6.85 | 105,218 | 8,236 | 7.83 | 61,645 | 5,139 | 8.34 | |||||||||||||||||||||||||||
Total interest-earning assets | 976,292 | 35,633 | 3.65 | 891,667 | 45,968 | 5.16 | 736,277 | 35,186 | 4.78 | |||||||||||||||||||||||||||
Cash and due from banks | 7,975 | 3,926 | 3,348 | |||||||||||||||||||||||||||||||||
Other noninterest-earning assets (2) | 154,727 | 102,312 | 80,856 | |||||||||||||||||||||||||||||||||
Total Assets | $ | 1,138,994 | $ | 997,905 | $ | 820,481 | ||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||
Interest-bearing deposits | $ | 26,455 | 756 | 2.86 | $ | 13,227 | 677 | 5.12 | $ | 2,853 | 146 | 5.12 | ||||||||||||||||||||||||
U.S. | 21,598 | 617 | 2.86 | 13,128 | 674 | 5.13 | 2,778 | 143 | 5.15 | |||||||||||||||||||||||||||
Non-U.S. | 4,857 | 139 | 2.86 | 99 | 3 | 3.03 | 75 | 3 | 4.00 | |||||||||||||||||||||||||||
Securities loaned and securities sold under agreements to repurchase, at fair value | 194,935 | 7,414 | 3.80 | 214,511 | 12,612 | 5.88 | 206,992 | 9,525 | 4.60 | |||||||||||||||||||||||||||
U.S. | 107,361 | 3,663 | 3.41 | 95,391 | 7,697 | 8.07 | 118,020 | 7,055 | 5.98 | |||||||||||||||||||||||||||
Non-U.S. | 87,574 | 3,751 | 4.28 | 119,120 | 4,915 | 4.13 | 88,972 | 2,470 | 2.78 | |||||||||||||||||||||||||||
Trading liabilities (1)(2) | 95,377 | 2,789 | 2.92 | 109,736 | 3,866 | 3.52 | 99,967 | 3,125 | 3.13 | |||||||||||||||||||||||||||
U.S. | 49,152 | 1,202 | 2.45 | 61,510 | 2,334 | 3.79 | 61,005 | 1,814 | 2.97 | |||||||||||||||||||||||||||
Non-U.S. | 46,225 | 1,587 | 3.43 | 48,226 | 1,532 | 3.18 | 38,962 | 1,311 | 3.36 | |||||||||||||||||||||||||||
Commercial paper | 4,097 | 145 | 3.54 | 5,605 | 269 | 4.80 | 7,485 | 361 | 4.82 | |||||||||||||||||||||||||||
U.S. | 3,147 | 121 | 3.84 | 4,871 | 242 | 4.97 | 6,859 | 331 | 4.83 | |||||||||||||||||||||||||||
Non-U.S. | 950 | 24 | 2.53 | 734 | 27 | 3.68 | 626 | 30 | 4.79 | |||||||||||||||||||||||||||
Other borrowings (4)(5) | 99,351 | 1,719 | 1.73 | 89,924 | 3,129 | 3.48 | 58,277 | 2,544 | 4.37 | |||||||||||||||||||||||||||
U.S. | 52,126 | 1,046 | 2.01 | 44,789 | 1,779 | 3.97 | 43,534 | 1,521 | 3.49 | |||||||||||||||||||||||||||
Non-U.S. | 47,225 | 673 | 1.43 | 45,135 | 1,350 | 2.99 | 14,743 | 1,023 | 6.94 | |||||||||||||||||||||||||||
Long-term borrowings (5)(6) | 203,360 | 13,687 | 6.73 | 167,997 | 14,147 | 8.42 | 121,935 | 9,777 | 8.02 | |||||||||||||||||||||||||||
U.S. | 181,775 | 12,306 | 6.77 | 158,694 | 13,317 | 8.39 | 110,186 | 9,396 | 8.53 | |||||||||||||||||||||||||||
Non-U.S. | 21,585 | 1,381 | 6.40 | 9,303 | 830 | 8.92 | 11,749 | 381 | 3.24 | |||||||||||||||||||||||||||
Other interest-bearing liabilities (7) | 345,956 | 4,847 | 1.40 | 248,640 | 7,281 | 2.93 | 205,556 | 6,210 | 3.02 | |||||||||||||||||||||||||||
U.S. | 214,780 | 2,184 | 1.02 | 142,002 | 3,666 | 2.58 | 114,874 | 2,932 | 2.55 | |||||||||||||||||||||||||||
Non-U.S. | 131,176 | 2,663 | 2.03 | 106,638 | 3,615 | 3.39 | 90,682 | 3,278 | 3.61 | |||||||||||||||||||||||||||
Total interest-bearing liabilities | 969,531 | 31,357 | 3.23 | 849,640 | 41,981 | 4.94 | 703,065 | 31,688 | 4.51 | |||||||||||||||||||||||||||
Noninterest-bearing deposits | 4 | — | — | |||||||||||||||||||||||||||||||||
Other noninterest-bearing liabilities (2) | 122,292 | 110,306 | 86,368 | |||||||||||||||||||||||||||||||||
Total liabilities | 1,091,827 | 959,946 | 789,433 | |||||||||||||||||||||||||||||||||
Shareholders’ equity | ||||||||||||||||||||||||||||||||||||
Preferred stock | 5,157 | 3,100 | 2,400 | |||||||||||||||||||||||||||||||||
Common stock | 42,010 | 34,859 | 28,648 | |||||||||||||||||||||||||||||||||
Total shareholders’ equity | 47,167 | 37,959 | 31,048 | |||||||||||||||||||||||||||||||||
Total liabilities, preferred stock and shareholders’ equity | $ | 1,138,994 | $ | 997,905 | $ | 820,481 | ||||||||||||||||||||||||||||||
Interest rate spread | 0.42 | % | 0.22 | % | 0.27 | % | ||||||||||||||||||||||||||||||
Net interest income and net yield on interest-earning assets | $ | 4,276 | 0.44 | $ | 3,987 | 0.45 | $ | 3,498 | 0.48 | |||||||||||||||||||||||||||
U.S. | (169 | ) | (0.03 | ) | 410 | 0.07 | 1,623 | 0.31 | ||||||||||||||||||||||||||||
Non-U.S. | 4,445 | 1.37 | 3,577 | 1.11 | 1,875 | 0.85 | ||||||||||||||||||||||||||||||
Percentage of interest-earning assets and interest-bearing liabilities attributable tonon-U.S. operations (8) | ||||||||||||||||||||||||||||||||||||
Assets | 33.33 | % | 36.23 | % | 29.90 | % | ||||||||||||||||||||||||||||||
Liabilities | 35.03 | 38.75 | 34.96 |
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(1) | Consists of cash trading instruments, including equity securities and convertible debentures. |
(2) | Derivative instruments are included in other noninterest-earning assets and other noninterest-bearing liabilities. |
(3) | Primarily consists of cash and securities segregated for regulatory and other purposes and receivables from customers and counterparties. |
(4) | Consists of short-term other secured financings and unsecured short-term borrowings, excluding commercial paper. |
(5) | Interest rates include the effects of hedging in accordance with SFAS No. 133. |
(6) | Consists of long-term other secured financings and unsecured long-term borrowings. |
(7) | Primarily consists of payables to customers and counterparties. |
(8) | Assets, liabilities and interest are attributed to U.S. andnon-U.S. based on the principal place of operations of the legal entity in which the assets and liabilities are held. |
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For the Year Ended November | ||||||||||||||||||||||||
2008 versus 2007 | 2007 versus 2006 | |||||||||||||||||||||||
Increase (decrease) | Increase (decrease) | |||||||||||||||||||||||
due to change in: | due to change in: | |||||||||||||||||||||||
Net | Net | |||||||||||||||||||||||
Volume | Rate | change | Volume | Rate | change | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Interest-earning assets | ||||||||||||||||||||||||
Deposits with banks | $ | 74 | $ | (5 | ) | $ | 69 | $ | (5 | ) | $ | (35 | ) | $ | (40 | ) | ||||||||
U.S. | 21 | (3 | ) | 18 | (19 | ) | 6 | (13 | ) | |||||||||||||||
Non-U.S. | 53 | (2 | ) | 51 | 14 | (41 | ) | (27 | ) | |||||||||||||||
Securities borrowed, securities purchased under agreements to resell, at fair value and federal funds sold | 2,055 | (8,322 | ) | (6,267 | ) | 2,203 | 5,960 | 8,163 | ||||||||||||||||
U.S. | 1,370 | (8,028 | ) | (6,658 | ) | 2,167 | 5,221 | 7,388 | ||||||||||||||||
Non-U.S. | 685 | (294 | ) | 391 | 36 | 739 | 775 | |||||||||||||||||
Trading assets | (327 | ) | 357 | 30 | 2,508 | (105 | ) | 2,403 | ||||||||||||||||
U.S. | (169 | ) | (298 | ) | (467 | ) | 540 | 230 | 770 | |||||||||||||||
Non-U.S. | (158 | ) | 655 | 497 | 1,968 | (335 | ) | 1,633 | ||||||||||||||||
Other interest-earning assets | 51 | (4,218 | ) | (4,167 | ) | 3,498 | (3,242 | ) | 256 | |||||||||||||||
U.S. | 1,143 | (3,185 | ) | (2,042 | ) | 87 | (2,928 | ) | (2,841 | ) | ||||||||||||||
Non-U.S. | (1,092 | ) | (1,033 | ) | (2,125 | ) | 3,411 | (314 | ) | 3,097 | ||||||||||||||
Change in interest income | 1,853 | (12,188 | ) | (10,335 | ) | 8,204 | 2,578 | 10,782 | ||||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||||||
Interest-bearing deposits | 378 | (299 | ) | 79 | 532 | (1 | ) | 531 | ||||||||||||||||
U.S. | 242 | (299 | ) | (57 | ) | 531 | — | 531 | ||||||||||||||||
Non-U.S. | 136 | — | 136 | 1 | (1 | ) | — | |||||||||||||||||
Securities loaned and securities sold under agreements to repurchase, at fair value | (943 | ) | (4,255 | ) | (5,198 | ) | (582 | ) | 3,669 | 3,087 | ||||||||||||||
U.S. | 408 | (4,442 | ) | (4,034 | ) | (1,826 | ) | 2,468 | 642 | |||||||||||||||
Non-U.S. | (1,351 | ) | 187 | (1,164 | ) | 1,244 | 1,201 | 2,445 | ||||||||||||||||
Trading liabilities | (371 | ) | (706 | ) | (1,077 | ) | 313 | 428 | 741 | |||||||||||||||
U.S. | (302 | ) | (830 | ) | (1,132 | ) | 19 | 501 | 520 | |||||||||||||||
Non-U.S. | (69 | ) | 124 | 55 | 294 | (73 | ) | 221 | ||||||||||||||||
Commercial paper | (61 | ) | (63 | ) | (124 | ) | (95 | ) | 3 | (92 | ) | |||||||||||||
U.S. | (66 | ) | (55 | ) | (121 | ) | (99 | ) | 10 | (89 | ) | |||||||||||||
Non-U.S. | 5 | (8 | ) | (3 | ) | 4 | (7 | ) | (3 | ) | ||||||||||||||
Other borrowings | 177 | (1,587 | ) | (1,410 | ) | 959 | (374 | ) | 585 | |||||||||||||||
U.S. | 147 | (880 | ) | (733 | ) | 50 | 208 | 258 | ||||||||||||||||
Non-U.S. | 30 | (707 | ) | (677 | ) | 909 | (582 | ) | 327 | |||||||||||||||
Long-term debt | 2,349 | (2,809 | ) | (460 | ) | 3,852 | 518 | 4,370 | ||||||||||||||||
U.S. | 1,563 | (2,574 | ) | (1,011 | ) | 4,070 | (149 | ) | 3,921 | |||||||||||||||
Non-U.S. | 786 | (235 | ) | 551 | (218 | ) | 667 | 449 | ||||||||||||||||
Other interest-bearing liabilities | 1,238 | (3,672 | ) | (2,434 | ) | 1,243 | (172 | ) | 1,071 | |||||||||||||||
U.S. | 740 | (2,222 | ) | (1,482 | ) | 701 | 33 | 734 | ||||||||||||||||
Non-U.S. | 498 | (1,450 | ) | (952 | ) | 542 | (205 | ) | 337 | |||||||||||||||
Change in interest expense | 2,767 | (13,391 | ) | (10,624 | ) | 6,222 | 4,071 | 10,293 | ||||||||||||||||
Change in net interest income | $ | (914 | ) | $ | 1,203 | $ | 289 | $ | 1,982 | $ | (1,493 | ) | $ | 489 | ||||||||||
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Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
(in millions) | ||||||||||||||||
Available-for-sale securities, November 2008 | ||||||||||||||||
Commercial paper, certificates of deposit, time deposits and other money market instruments | $ | 259 | $ | — | $ | — | $ | 259 | ||||||||
U.S. governments, federal agency and sovereign obligations | 574 | 23 | (3 | ) | 594 | |||||||||||
Mortgage and otherasset-backed loans and securities | 213 | — | (49 | ) | 164 | |||||||||||
Corporate debt securities and other debt obligations | 750 | 5 | (90 | ) | 665 | |||||||||||
Totalavailable-for-sale securities | $ | 1,796 | $ | 28 | $ | (142 | ) | $ | 1,682 | |||||||
Available-for-sale securities, November 2007 | ||||||||||||||||
Commercial paper, certificates of deposit, time deposits and other money market instruments | $ | 29 | $ | — | $ | — | $ | 29 | ||||||||
U.S. governments, federal agency and sovereign obligations | 389 | 9 | — | 398 | ||||||||||||
Mortgage and otherasset-backed loans and securities | 179 | 1 | (2 | ) | 178 | |||||||||||
Corporate debt securities and other debt obligations | 575 | 3 | (14 | ) | 564 | |||||||||||
Totalavailable-for-sale securities | $ | 1,172 | $ | 13 | $ | (16 | ) | $ | 1,169 | |||||||
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As of November 2008 | ||||||||||||||||||||||||||||||||||||||||
Due After | Due After | |||||||||||||||||||||||||||||||||||||||
One Year | Five Years | |||||||||||||||||||||||||||||||||||||||
Due in One Year | Through | Through | Due After | |||||||||||||||||||||||||||||||||||||
or Less | Five Years | Ten Years | Ten Years | Total | ||||||||||||||||||||||||||||||||||||
Amount | Yield (1) | Amount | Yield (1) | Amount | Yield (1) | Amount | Yield (1) | Amount | Yield (1) | |||||||||||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||||||||||||||
Fair value ofavailable-for-sale securities | ||||||||||||||||||||||||||||||||||||||||
Commercial paper, certificates of deposit, time deposits and other money market instruments | $ | 259 | 1 | % | $ | — | — | % | $ | — | — | % | $ | — | — | % | $ | 259 | 1 | % | ||||||||||||||||||||
U.S. governments, federal agency and sovereign obligations | — | — | 144 | 2 | 133 | 4 | 317 | 5 | 594 | 4 | ||||||||||||||||||||||||||||||
Mortgage and otherasset-backed loans and securities | — | — | — | — | — | — | 164 | 21 | 164 | 21 | ||||||||||||||||||||||||||||||
Corporate debt securities and other debt obligations | 48 | 16 | 227 | 7 | 94 | 8 | 296 | 9 | 665 | 9 | ||||||||||||||||||||||||||||||
Totalavailable-for-sale securities | $ | 307 | $ | 371 | $ | 227 | $ | 777 | $ | 1,682 | ||||||||||||||||||||||||||||||
Amortized cost of available-for-sale securities | $ | 310 | $ | 377 | $ | 229 | $ | 880 | $ | 1,796 |
(1) | Yields are calculated on a weighted average basis. |
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Average Balances | Average Interest Rates | |||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 | 2007 | 2006 | |||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||
U.S.: | ||||||||||||||||||||||||
Savings (1) | $ | 20,214 | $ | 13,096 | $ | 2,745 | 2.82 | % | 5.12 | % | 5.14 | % | ||||||||||||
Time | 1,384 | 32 | 33 | 3.40 | 9.96 | 5.42 | ||||||||||||||||||
Total U.S. deposits | 21,598 | 13,128 | 2,778 | 2.86 | 5.13 | 5.15 | ||||||||||||||||||
Non-U.S.: | ||||||||||||||||||||||||
Demand | 4,842 | 99 | 75 | 2.83 | 3.03 | 4.00 | ||||||||||||||||||
Time | 15 | — | — | 13.00 | — | — | ||||||||||||||||||
Total Non-U.S. deposits | 4,857 | 99 | 75 | 2.86 | 3.03 | 4.00 | ||||||||||||||||||
Total deposits | $ | 26,455 | $ | 13,227 | $ | 2,853 | 2.86 | % | 5.12 | % | 5.12 | % | ||||||||||||
(1) | Amounts are available for withdrawal upon short notice, generally within seven days. |
Year Ended November | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Net income to average assets | 0.2 | % | 1.2 | % | 1.2 | % | ||||||
Return on common shareholders’ equity (1) | 4.9 | 32.7 | 32.8 | |||||||||
Return on total shareholders’ equity (2) | 4.9 | 30.6 | 30.7 | |||||||||
Total average equity to average assets | 4.1 | 3.8 | 3.8 | |||||||||
Dividend payout ratio (3) | 31.3 | 5.7 | 6.6 |
(1) | Based on net income less preferred stock dividends as a percentage of average common shareholders’ equity. | |
(2) | Based on net income as a percentage of average total shareholders’ equity. | |
(3) | Dividends declared per common share as a percentage of net income per diluted share. |
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Securities Loaned and | ||||||||||||||||||||||||||||||||||||
Securities Sold Under | ||||||||||||||||||||||||||||||||||||
Agreements to Repurchase | Commercial Paper | Other Funds Borrowed(2)(3) | ||||||||||||||||||||||||||||||||||
2008 | 2007 | 2006 | 2008 | 2007 | 2006 | 2008 | 2007 | 2006 | ||||||||||||||||||||||||||||
($ in millions) | ||||||||||||||||||||||||||||||||||||
Amounts outstanding atyear-end | $ | 79,943 | $ | 187,802 | $ | 169,700 | $ | 1,125 | $ | 4,343 | $ | 1,489 | $ | 72,758 | $ | 99,624 | $ | 70,705 | ||||||||||||||||||
Average outstanding during the year | 194,935 | 214,511 | 206,992 | 4,097 | 5,605 | 7,485 | 99,351 | 89,924 | 58,277 | |||||||||||||||||||||||||||
Maximum month-end outstanding | 256,596 | 270,991 | 278,560 | 12,718 | 8,846 | 18,227 | 109,927 | 105,845 | 82,353 | |||||||||||||||||||||||||||
Weighted average interest rate | ||||||||||||||||||||||||||||||||||||
During the year (3) | 3.80 | % | 5.88 | % | 4.60 | % | 3.54 | % | 4.80 | % | 4.82 | % | 1.73 | % | 3.48 | % | 4.37 | % | ||||||||||||||||||
At year-end | 3.27 | 5.15 | 5.52 | 2.79 | 4.81 | 4.99 | 2.06 | (3) | 3.11 | (3) | 3.93 | (3) |
(1) | Includes borrowings maturing within one year of the financial statement date and borrowings that are redeemable at the option of the holder within one year of the financial statement date. | |
(2) | Includesshort-term secured financings of $21.23 billion as of November 2008, $32.41 billion as of November 2007 and $24.29 billion as of November 2006. | |
(3) | As of November 2008, November 2007 and November 2006, weighted average interest rates include the effects of hedging in accordance with SFAS No. 133. |
Banks | Governments | Other | Total | |||||||||||||
(in millions) | ||||||||||||||||
Country | ||||||||||||||||
United Kingdom | $ | 5,104 | $ | 4,600 | $ | 51,531 | $ | 61,235 | ||||||||
Cayman Islands | 50 | — | 20,904 | 20,954 | ||||||||||||
Germany | 3,973 | 2,518 | 7,825 | 14,316 | ||||||||||||
France | 2,264 | 1,320 | 9,791 | 13,375 | ||||||||||||
Japan | 4,003 | 100 | 3,354 | 7,457 |
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Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
Item 9B. | Other Information |
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Item 10. | Directors, Executive Officers and Corporate Governance |
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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Number of Securities | ||||||||||||||||
Number of | Remaining Available | |||||||||||||||
Securities to be | for Future Issuance | |||||||||||||||
Issued Upon | Weighted-Average | Under Equity | ||||||||||||||
Exercise of | Exercise Price of | Compensation Plans | ||||||||||||||
Outstanding | Outstanding | (Excluding Securities | ||||||||||||||
Options, Warrants | Options, Warrants | Reflected in the | ||||||||||||||
Plan Category | and Rights | and Rights | Second Column) | |||||||||||||
Equity compensation plans approved by security holders | The Goldman Sachs Amended and Restated Stock Incentive Plan (1) | 33,639,132 | (2) | $ | 109.47 | (2) | 216,990,058 | (3) | ||||||||
Equity compensation plans not approved by security holders | None | — | — | — | ||||||||||||
Total | 33,639,132 | (2) | 216,990,058 | (3)(4) | ||||||||||||
(1) | The Goldman Sachs Amended and Restated Stock Incentive Plan (SIP) was approved by the shareholders of Goldman Sachs at our 2003 Annual Meeting of Shareholders and is a successor plan to The Goldman Sachs 1999 Stock Incentive Plan (1999 Plan), which was approved by our shareholders immediately prior to our initial public offering in May 1999 and under which no additional awards have been granted since approval of the SIP. | |
(2) | Includes options that are subject to vesting and other conditions. | |
(3) | Of these shares, 54,852,028 shares may be issued pursuant to outstanding restricted stock units, including 54,824,666 shares granted under the SIP and 27,362 shares granted under the 1999 Plan; 151,230 shares may be issued pursuant to outstanding performance-based units granted under the SIP. | |
(4) | Represents shares remaining to be issued under the SIP (217,388,173 shares) and the 1999 Plan (27,362 shares). The total number of shares of common stock that may be delivered pursuant to awards granted under the SIP initially may not exceed 250,000,000 shares. Beginning November 29, 2008 and each fiscal year thereafter, the number of shares of common stock that may be delivered pursuant to awards granted after April 1, 2003 under the SIP may not exceed 5% of our issued and outstanding shares of common stock, determined as of the last day of the immediately preceding fiscal year, increased by the number of shares that were available for awards in previous fiscal years but were not, at the date of determination, covered by awards granted in previous years. |
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Item 14. | Principal Accountant Fees and Services |
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Item 15. | Exhibits and Financial Statement Schedules |
(a) | Documents filed as part of this Report: |
1. | Consolidated Financial Statements |
2. | Exhibits |
2.1 | Plan of Incorporation (incorporated by reference to the corresponding exhibit to the Registrant’s registration statement on Form S-1 (No. 333-74449)). | |||
3.1 | Restated Certificate of Incorporation of The Goldman Sachs Group, Inc. | |||
3.2 | Amended and Restated By-Laws of The Goldman Sachs Group, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report onForm 8-K, filed December 12, 2006). | |||
4.1 | Indenture, dated as of May 19, 1999, between The Goldman Sachs Group, Inc. and The Bank of New York, as trustee (incorporated by reference to Exhibit 6 to the Registrant’s registration statement on Form 8-A, filed June 29, 1999). | |||
4.2 | Subordinated Debt Indenture, dated as of February 20, 2004, between The Goldman Sachs Group, Inc. and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended November 28, 2003). | |||
4.3 | Warrant Indenture, dated as of February 14, 2006, between The Goldman Sachs Group, Inc. and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.34 to the Registrant’s Post-Effective Amendment No. 3 to Form S-3, filed on March 1, 2006). | |||
4.4 | Senior Debt Indenture, dated as of December 4, 2007, among GS Finance Corp., as issuer, The Goldman Sachs Group, Inc., as guarantor, and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.69 to the Registrant’s Post-Effective Amendment No. 10 to Form S-3, filed on December 4, 2007). | |||
4.5 | Form of floating rate senior debt security (TLGP) issued under the Senior Debt Indenture, dated as of July 16, 2008, between The Goldman Sachs Group, Inc. and The Bank of New York Mellon, as trustee. | |||
4.6 | Form of fixed rate senior debt security (TLGP) issued under the Senior Debt Indenture, dated as of July 16, 2008, between The Goldman Sachs Group, Inc. and The Bank of New York Mellon, as trustee. | |||
4.7 | Form of floating rate Medium-Term Note, Series D (TLGP) issued under the Senior Debt Indenture, dated as of July 16, 2008, between The Goldman Sachs Group, Inc. and The Bank of New York Mellon, as trustee. | |||
4.8 | Form of fixed rate Medium-Term Note, Series D (TLGP) issued under the Senior Debt Indenture, dated as of July 16, 2008, between The Goldman Sachs Group, Inc. and The Bank of New York Mellon, as trustee. | |||
4.9 | Senior Debt Indenture, dated as of July 16, 2008, between The Goldman Sachs Group, Inc. and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.82 to the Registrant’s Post-Effective Amendment No. 11 toForm S-3(No. 333-130074), filed July 17, 2008). | |||
4.10 | Senior Debt Indenture, dated as of October 10, 2008, among GS Finance Corp., as issuer, The Goldman Sachs Group, Inc., as guarantor, and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.70 to the Registrant’s registration statement onForm S-3(No. 333-154173), filed October 10, 2008). | |||
Certain instruments defining the rights of holders of long-term debt securities of the Registrant and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. The Registrant hereby undertakes to furnish to the SEC, upon request, copies of any such instruments. |
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10.1 | The Goldman Sachs Amended and Restated Stock Incentive Plan.† | |||
10.2 | The Goldman Sachs Defined Contribution Plan (incorporated by reference to Exhibit 10.16 to the Registrant’s registration statement on Form S-1(No. 333-75213)).† | |||
10.3 | The Goldman Sachs Amended and Restated Restricted Partner Compensation Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report onForm 10-Q for the period ended February 24, 2006).† | |||
10.4 | Form of Employment Agreement for pre-IPO Participating Managing Directors (incorporated by reference to Exhibit 10.19 to the Registrant’s registration statement on Form S-1(No. 333-75213)).† | |||
10.5 | Form of Agreement Relating to Noncompetition and Other Covenants (incorporated by reference to Exhibit 10.20 to the Registrant’s registration statement on Form S-1(No. 333-75213)).† | |||
10.6 | Form of Option Agreement (Discretionary Options) (incorporated by reference to Exhibit 10.24 to the Registrant’s registration statement on Form S-1(No. 333-75213)).† | |||
10.7 | Tax Indemnification Agreement, dated as of May 7, 1999, by and among The Goldman Sachs Group, Inc. and various parties (incorporated by reference to Exhibit 10.25 to the Registrant’s registration statement on Form S-1(No. 333-75213)). | |||
10.8 | Amended and Restated Shareholders’ Agreement, dated June 22, 2004, among The Goldman Sachs Group, Inc. and various parties (incorporated by reference to Exhibit M to Amendment No. 54 to Schedule 13D, filed June 23, 2004, relating to the Registrant’s common stock (No. 005-56295)). | |||
10.9 | Instrument of Indemnification (incorporated by reference to Exhibit 10.27 to the Registrant’s registration statement on Form S-1(No. 333-75213)). | |||
10.10 | Form of Indemnification Agreement (incorporated by reference to Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended November 26, 1999). | |||
10.11 | Registration Rights Instrument, dated as of December 10, 1999 (incorporated by reference to Exhibit G to Amendment No. 1 to Schedule 13D, filed December 17, 1999, relating to the Registrant’s common stock (No. 005-56295)). | |||
10.12 | Supplemental Registration Rights Instrument, dated as of December 10, 1999 (incorporated by reference to Exhibit H to Amendment No. 1 to Schedule 13D, filed December 17, 1999, relating to the Registrant’s common stock (No. 005-56295)). | |||
10.13 | Form of Indemnification Agreement (incorporated by reference to Exhibit 10.44 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended November 26, 1999). | |||
10.14 | Form of Indemnification Agreement, dated as of July 5, 2000 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report onForm 10-Q for the period ended August 25, 2000). | |||
10.15 | Amendment No. 1, dated as of September 5, 2000, to the Tax Indemnification Agreement, dated as of May 7, 1999 (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report onForm 10-Q for the period ended August 25, 2000). | |||
10.16 | Supplemental Registration Rights Instrument, dated as of December 21, 2000 (incorporated by reference to Exhibit AA to Amendment No. 12 to Schedule 13D, filed January 23, 2001, relating to the Registrant’s common stock (No. 005-56295)). | |||
10.17 | Supplemental Registration Rights Instrument, dated as of December 21, 2001 (incorporated by reference to Exhibit 4.4 to the Registrant’s registration statement on Form S-3(No. 333-74006)). |
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10.18 | Supplemental Registration Rights Instrument, dated as of December 20, 2002 (incorporated by reference to Exhibit 4.4 to the Registrant’s registration statement on Form S-3(No. 333-101093)). | |||
10.19 | Letter, dated February 6, 2001, from The Goldman Sachs Group, Inc. to Dr. Ruth J. Simmons (incorporated by reference to Exhibit 10.63 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended November 24, 2000).† | |||
10.20 | Letter, dated February 6, 2001, from The Goldman Sachs Group, Inc. to Mr. John H. Bryan (incorporated by reference to Exhibit 10.64 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended November 24, 2000).† | |||
10.21 | Letter, dated February 6, 2001, from The Goldman Sachs Group, Inc. to Mr. James A. Johnson (incorporated by reference to Exhibit 10.65 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended November 24, 2000).† | |||
10.22 | Letter, dated December 18, 2002, from The Goldman Sachs Group, Inc. to Mr. William W. George (incorporated by reference to Exhibit 10.39 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended November 29, 2002).† | |||
10.23 | Letter, dated June 20, 2003, from The Goldman Sachs Group, Inc. to Mr. Claes Dahlbäck (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report onForm 10-Q for the period ended May 30, 2003).† | |||
10.24 | Supplemental Registration Rights Instrument, dated as of December 19, 2003 (incorporated by reference to Exhibit 4.4 to the Registrant’s registration statement on Form S-3(No. 333-110371)). | |||
10.25 | Letter, dated March 31, 2004, from The Goldman Sachs Group, Inc. to Ms. Lois D. Juliber (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report onForm 10-Q for the period ended May 28, 2004).† | |||
10.26 | Letter, dated April 6, 2005, from The Goldman Sachs Group, Inc. to Mr. Stephen Friedman (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed April 8, 2005).† | |||
10.27 | Form of Amendment, dated November 27, 2004, to Agreement Relating to Noncompetition and Other Covenants, dated May 7, 1999 (incorporated by reference to Exhibit 10.32 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended November 26, 2004).† | |||
10.28 | Form of RSU Award Agreement for PMD Discount Stock Program (subject to transfer restrictions) (incorporated by reference to Exhibit 10.29 to the Registrant’s Annual Report onForm 10-K for the fiscal year ended November 30, 2007).† | |||
10.29 | Form of RSU Award Agreement for PMD Discount Stock Program (not subject to transfer restrictions) (incorporated by reference to Exhibit 10.30 to the Registrant’s Annual Report onForm 10-K for the fiscal year ended November 30, 2007).† | |||
10.30 | Form of RSU Award Agreement for PMD Discount Stock Program (subject to transfer restrictions) (French alternative award) (incorporated by reference to Exhibit 10.31 to the Registrant’s Annual Report onForm 10-K for the fiscal year ended November 30, 2007).† | |||
10.31 | Form of RSU Award Agreement for PMD Discount Stock Program (not subject to transfer restrictions) (French alternative award) (incorporated by reference to Exhibit 10.32 to the Registrant’s Annual Report onForm 10-K for the fiscal year ended November 30, 2007).† | |||
10.32 | Form of RSU Award Agreement for PMD Discount Stock Program (U.K. employee benefit trusts) (incorporated by reference to Exhibit 10.33 to the Registrant’s Annual Report onForm 10-K for the fiscal year ended November 30, 2007).† | |||
10.33 | Form of Year-End Restricted Stock Award (incorporated by reference to Exhibit 10.34 to the Registrant’s Annual Report on Form10-K for the fiscal year ended November 30, 2007).† |
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10.34 | Form of Year-End Restricted Stock Award in Connection with Outstanding RSU Awards (incorporated by reference to Exhibit 10.35 to the Registrant’s Annual Report on Form10-K for the fiscal year ended November 30, 2007).† | |||
10.35 | The Goldman Sachs Group, Inc. Non-Qualified Deferred Compensation Plan for U.S. Participating Managing Directors (terminated as of December 15, 2008) (incorporated by reference to Exhibit 10.36 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended November 30, 2007).† | |||
10.36 | Form of Year-End Option Award Agreement.† | |||
10.37 | Form of Year-End RSU Award Agreement (not fully vested upon grant).† | |||
10.38 | Form of Year-End RSU Award Agreement (fully vested upon grant) (incorporated by reference to Exhibit 10.37 to the Registrant’s Annual Report on Form10-K for the fiscal year ended November 30, 2007).† | |||
10.39 | Form of Year-End RSU Award Agreement (French alternative award).† | |||
10.40 | Amendments to 2005 and 2006 Year-End RSU and Option Award Agreements (incorporated by reference to Exhibit 10.44 to the Registrant’s Annual Report on Form10-K for the fiscal year ended November 30, 2007).† | |||
10.41 | Form of Non-Employee Director Option Award Agreement.† | |||
10.42 | Form of Non-Employee Director RSU Award Agreement.† | |||
10.43 | Description of Non-Employee Director Compensation.† | |||
10.44 | Ground Lease, dated August 23, 2005, between Battery Park City Authority d/b/a/ Hugh L. Carey Battery Park City Authority, as Landlord, and Goldman Sachs Headquarters LLC, as Tenant (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed August 26, 2005). | |||
10.45 | General Guarantee Agreement, dated January 30, 2006, made by The Goldman Sachs Group, Inc. (incorporated by reference to Exhibit 10.45 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended November 25, 2005). | |||
10.46 | Letter, dated November 10, 2006, from The Goldman Sachs Group, Inc. to Mr. Rajat K. Gupta (incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K, filed November 13, 2006).† | |||
10.47 | Goldman, Sachs & Co. Executive Life Insurance Policy and Certificate with Metropolitan Life Insurance Company for Participating Managing Directors (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report onForm 10-Q for the period ended August 25, 2006).† | |||
10.48 | Form of Goldman, Sachs & Co. Executive Life Insurance Policy with Pacific Life & Annuity Company for Participating Managing Directors, including policy specifications and form of restriction on Policy Owner’s Rights (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report onForm 10-Q for the period ended August 25, 2006).† | |||
10.49 | Form of Signature Card for Equity Awards.† | |||
10.50 | Form of Employment Agreement for post-IPO Participating Managing Directors (incorporated by reference to Exhibit 10.50 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended November 24, 2006).† | |||
10.51 | Form of Second Amendment, dated November 25, 2006, to Agreement Relating to Noncompetition and Other Covenants, dated May 7, 1999, as amended effective November 27, 2004 (incorporated by reference to Exhibit 10.51 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended November 24, 2006).† | |||
10.52 | Description of PMD Retiree Medical Program (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report onForm 10-Q for the period ended February 29, 2008).† |
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10.53 | Letter, dated June 28, 2008, from The Goldman Sachs Group, Inc. to Mr. Lakshmi N. Mittal (incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K, filed June 30, 2008).† | |||
10.54 | Securities Purchase Agreement, dated September 29, 2008, between The Goldman Sachs Group, Inc. and Berkshire Hathaway Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report onForm 10-Q for the period ended August 29, 2008). | |||
10.55 | General Guarantee Agreement, dated October 21, 2008, made by The Goldman Sachs Group, Inc. relating to the obligations of Goldman Sachs Bank USA (incorporated by reference to Exhibit 4.85 to the Registrant’s Post-Effective Amendment No. 1 to Form S-3, filed October 22, 2008). | |||
10.56 | Form of Letter Agreement between The Goldman Sachs Group, Inc. and each of Lloyd C. Blankfein, Gary D. Cohn, Jon Winkelried and David A. Viniar (incorporated by reference to Exhibit O to Amendment No. 70 to Schedule 13D, filed October 1, 2008, relating to the Registrant’s common stock (No. 005-56295)). | |||
10.57 | Letter Agreement, dated as of October 26, 2008, including Securities Purchase Agreement — Standard Terms incorporated by reference therein, between The Goldman Sachs Group, Inc. and the United States Department of the Treasury (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed October 28, 2008). | |||
10.58 | Form of Letter Agreement, dated October 28, 2008, between The Goldman Sachs Group, Inc. and its senior executive officers relating to executive compensation limitations under the U.S. Treasury Department’s Capital Purchase Program.† | |||
10.59 | General Guarantee Agreement, dated November 24, 2008, made by The Goldman Sachs Group, Inc. relating to the obligations of Goldman Sachs Bank (Europe) PLC. | |||
10.60 | Guarantee Agreement, dated November 28, 2008, between The Goldman Sachs Group, Inc. and Goldman Sachs Bank USA. | |||
10.61 | Collateral Agreement, dated November 28, 2008, between The Goldman Sachs Group, Inc., Goldman Sachs Bank USA and each other party that becomes a pledgor pursuant thereto. | |||
10.62 | Form of Performance-Based One-Time RSU Award Agreement.† | |||
10.63 | Form of Make-Whole One-Time RSU Award Agreement.† | |||
10.64 | Form of Incentive One-Time RSU Award Agreement.† | |||
10.65 | Form of Year-End Supplemental RSU Award Agreement (employees in France).† | |||
10.66 | Form of Signature Card for Equity Awards (employees in Asia outside China).† | |||
10.67 | Form of Signature Card for Equity Awards (employees in China).† | |||
10.68 | Amendments to Certain Equity Award Agreements.† | |||
10.69 | Amendments to Certain Non-Employee Director Equity Award Agreements.† | |||
12.1 | Statement re: Computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends. | |||
21.1 | List of significant subsidiaries of The Goldman Sachs Group, Inc. | |||
23.1 | Consent of Independent Registered Public Accounting Firm. | |||
24.1 | Powers of Attorney (included on signature page). | |||
31.1 | Rule 13a-14(a) Certifications. | |||
32.1 | Section 1350 Certifications. | |||
99.1 | Report of Independent Registered Public Accounting Firm on Selected Financial Data. |
† | This exhibit is a management contract or a compensatory plan or arrangement. |
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By: | /s/ David A. Viniar |
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Signature | Capacity | Date | ||||
/s/ Lloyd C. Blankfein | Director, Chairman and Chief Executive Officer (Principal Executive Officer) | January 26, 2009 | ||||
/s/ John H. Bryan | Director | January 26, 2009 | ||||
/s/ Gary D. Cohn | Director | January 26, 2009 | ||||
/s/ Claes Dahlbäck | Director | January 26, 2009 | ||||
/s/ Stephen Friedman | Director | January 26, 2009 | ||||
/s/ William W. George | Director | January 26, 2009 | ||||
/s/ Rajat K. Gupta | Director | January 26, 2009 | ||||
/s/ James A. Johnson | Director | January 26, 2009 | ||||
/s/ Lois D. Juliber | Director | January 26, 2009 | ||||
/s/ Lakshmi N. Mittal | Director | January 26, 2009 | ||||
/s/ Ruth J. Simmons | Director | January 26, 2009 |
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Signature | Capacity | Date | ||||
/s/ Jon Winkelried | Director | January 26, 2009 | ||||
/s/ David A. Viniar | Chief Financial Officer (Principal Financial Officer) | January 26, 2009 | ||||
/s/ Sarah E. Smith | Principal Accounting Officer | January 26, 2009 |
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