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7 2
NOTES TO THE FINANCIAL STATEMENTS
NOTE 12. SALES OF RECEIVABLES – FINANCIAL SERVICES SECTOR
Servicing Portfolio
We retain servicing rights for receivables sold in off-balance sheet securitization and whole-loan sale transactions.
The servicing portfolio is summarized in the following table (in millions):
Retained Interest
Components of retained interest in securitized assets at December 31 include (in millions):
Most of the retained interest in sold wholesale receivables ($5.5 billion and $8 billion at December 31, 2004 and
December 31, 2003, respectively) represents our undivided interest in wholesale receivables that are available to support the
issuance of additional securities by a securitization SPE; the balance represents credit enhancements.
Retained interests are recorded at fair value. For wholesale receivables, book value approximates fair value because of their
short-term maturities. The fair value of subordinated and senior securities is estimated based on market prices. In determining
the fair value of residual interest in securitization transactions, we discount the present value of the projected cash flows
retained at various discount rates based on economic factors in individual countries. Investments in subordinated securities
and restricted cash are senior to the residual interest in securitization transactions.
Investment and Other Income
The following table summarizes the activity related to off-balance sheet sales of receivables reported in Revenues for the
years ended December 31 (in millions):
Retail & Wholesale
Receivables
Servicing portfolio at December 31, 2002 $ 75,071
Receivables sales 19,296
Collections (40,197)
Servicing portfolio at December 31, 2003 $ 54,170
Receivables sales 6,933
Collections (21,530)
Servicing portfolio at December 31, 2004 $ 39,573
2004 2003
Interest in sold wholesale receivables $ 6,904 $ 9,249
Subordinated securities 875 1,455
Residual interest in securitization transactions 756 834
Restricted cash held for benefit of securitization SPEs 503 511
Senior securities 128 520
Retained interest in securitized assets $ 9,166 $ 12,569
2004 2003 2002
Net gain on sales of receivables $ 155 $ 373 $ 489
Income on interest in sold wholesale receivables and retained securities 588 679 606
Servicing fees 372 618 689
Income on residual interest and other 815 941 775
Investment and other income related to sales of receivables $ 1,930 $ 2,611 $ 2,559