Goldman Sachs 2003 Annual Report Download - page 86

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Notes to Consolidated Financial Statements
84 GOLDMAN SACHS 2003 ANNUAL REPORT
Secured Borrowing and Lending Activities
The firm obtains secured short-term financing principally
through the use of repurchase agreements and securities
lending agreements to obtain securities for settlement, to
finance inventory positions and to meet customers’ needs.
In these transactions, the firm either provides or receives
collateral, including U.S. government, federal agency,
mortgage-backed, investment-grade foreign sovereign
obligations and equity securities.
The firm receives collateral in connection with resale
agreements, securities lending transactions, derivative
transactions, customer margin loans and other secured
lending activities. In many cases, the firm is permitted to
sell or repledge securities held as collateral. These securi-
ties may be used to secure repurchase agreements, enter
into securities lending or derivative transactions, or cover
short positions. As of November 2003 and November
2002, the fair value of securities received as collateral by
the firm that it was permitted to sell or repledge was
$410.01 billion and $316.31 billion, respectively, of
which the firm sold or repledged $350.57 billion and
$272.49 billion, respectively.
The firm also pledges its own assets to collateralize repur-
chase agreements and other secured financings. As of
November 2003 and November 2002, the carrying value
of securities included in “Financial instruments owned, at
fair value” that had been loaned or pledged to counter-
parties that did not have the right to sell or repledge was
$47.39 billion and $34.66 billion, respectively.
note 4
SHORT-TERM BORROWINGS
The firm obtains unsecured short-term borrowings
through issuance of promissory notes, commercial paper
and bank loans. Short-term borrowings also include the
portion of long-term borrowings maturing within one
year and certain long-term borrowings that may be
payable within one year at the option of the holder. The
carrying value of these short-term obligations approxi-
mates fair value due to their short-term nature.
Short-term borrowings are set forth below:
AS OF NOVEMBER
(IN MILLIONS) 2003 2002
Promissory notes $24,119 $20,433
Commercial paper 4,767 9,463
Bank loans and other 8,183 4,948
Current portion of long-term
borrowings 7,133 5,794
Total(1) $44,202 $40,638
(1) As of November 2003 and November 2002, the weighted average
interest rates for short-term borrowings, including commercial paper,
were 1.48% and 2.09%, respectively.
note 5
LONG-TERM BORROWINGS
Long-term borrowings are set forth below:
AS OF NOVEMBER
(IN MILLIONS) 2003 2002
Fixed rate obligations(1)
U.S. dollar $28,242 $19,550
Non-U.S. dollar 8,703 4,407
Floating rate obligations(2)
U.S. dollar 13,269 10,175
Non-U.S. dollar 7,268 4,579
Total $57,482 $38,711
(1) During 2003 and 2002, interest rates on U.S. dollar fixed rate obliga-
tions ranged from 4.13% to 12.00% and from 5.50% to 12.00%,
respectively. During 2003 and 2002, interest rates on non-U.S. dollar
fixed rate obligations ranged from 0.70% to 8.88% and from 1.20%
to 8.88%, respectively.
(2) Floating interest rates generally are based on LIBOR, the U.S.
Treasury bill rate or the federal funds rate. Certain equity-linked and
indexed instruments are included in floating rate obligations.
As of November 2003, long-term borrowings included
nonrecourse debt of $5.4 billion, consisting of $3.2 bil-
lion issued during the year by William Street Funding
Corporation (Funding Corp) (a wholly owned subsidiary
of Group Inc. formed to raise funding to support loan
commitments made by another wholly owned William
Street entity to investment-grade clients), $1.6 billion
issued by consolidated VIEs and $0.6 billion issued by
other consolidated entities, primarily associated with the
firm’s ownership of East Coast Power L.L.C. As of
November 2002, long-term borrowings included nonre-
course debt of $530 million issued by consolidated VIEs.
Nonrecourse debt is debt that Group Inc. is not directly
or indirectly obligated to repay through a guarantee, gen-
eral partnership interest or contractual arrangement.