Goldman Sachs 2003 Annual Report Download - page 85

Notes to Consolidated Financial Statements
GOLDMAN SACHS 2003 ANNUAL REPORT 83
The following table sets forth the firm’s total assets and maximum exposure to loss associated with its significant vari-
able interests in consolidated, asset-backed VIEs:
AS OF NOVEMBER
(IN MILLIONS) 2003 2002
VIE assets(1) $1,832 $1,746
Maximum exposure to loss 145 270
(1) Consolidated VIE assets include assets financed by nonrecourse short-term and long-term debt. Nonrecourse debt is debt that Group Inc. is not
directly or indirectly obligated to repay through a guarantee, general partnership interest or contractual arrangement.
The following table sets forth the firm’s total assets and maximum exposure to loss associated with its significant
variable interests in nonconsolidated VIEs:
AS OF NOVEMBER 2003
MAXIMUM EXPOSURE TO LOSS
VIE PURCHASED LOANS AND
(IN MILLIONS) ASSETS INTERESTS GUARANTEES DERIVATIVES INVESTMENTS TOTAL
Mortgage-backed $1,648 $24 $ — $ — $ 507 $ 531
Other asset-backed 6,617 65 236 100 920 1,321
Total $8,265 $89 $236 $100 $1,427 $1,852
AS OF NOVEMBER 2002
MAXIMUM EXPOSURE TO LOSS
VIE PURCHASED LOANS AND
(IN MILLIONS) ASSETS INTERESTS GUARANTEES DERIVATIVES INVESTMENTS TOTAL
Mortgage-backed $3,102 $148 $— $ — $ — $148
Other asset-backed 5,614 292 — 137 318 747
Total $8,716 $440 $— $137 $318 $895
In connection with the issuance of asset-repackaged
notes to investors, the firm had derivative receivables
from QSPEs, to which the firm has transferred assets,
with a fair value of $188 million and $222 million as of
November 2003 and November 2002, respectively.
These receivables are collateralized by a first-priority
interest in the assets held by each QSPE. Accordingly,
the firm views these derivative receivables in the same
manner as other segregated collateral arrangements
from a credit perspective.
Variable Interest Entities (VIEs)
The firm, in the ordinary course of its business, retains
interests in VIEs in connection with its securitization
activities. The firm also purchases and sells variable inter-
ests in VIEs, primarily mortgage-backed and asset-
backed interests, in connection with its market-making
activities and makes investments in and loans to VIEs
that hold performing and nonperforming debt, real estate
and other assets. In addition, the firm utilizes VIEs to
provide investors with credit-linked and asset-repackaged
notes designed to meet their objectives.
VIEs generally purchase assets by issuing debt and equity
instruments and through other contractual arrangements.
In certain instances, the firm has provided guarantees to
certain VIEs or holders of variable interests in these VIEs.
In such cases, the maximum exposure to loss included in
the tables set forth below is the notional amount of such
guarantees. Such amounts do not represent anticipated
losses in connection with these guarantees. The firm’s
variable interests in these VIEs include senior and subor-
dinated debt; limited and general partnership interests;
preferred and common stock; interest rate, foreign cur-
rency, equity, commodity and credit derivatives; guaran-
tees; and residual interests in mortgage-backed and
asset-backed securitization vehicles. Group Inc. generally
is not directly or indirectly obligated to repay the debt
and equity instruments and contractual arrangements
entered into by these VIEs.