Goldman Sachs 2004 Annual Report Download - page 92

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notes฀to฀consolidated฀financial฀statements
90฀฀฀G O L D M A N ฀ S A C H S ฀ 2004฀ ANNUAL฀REPO RT
90฀฀฀G O L D M A N ฀ S A C H S ฀ 2 004฀ A N N U A L ฀ R E P O RT
estimate losses or ranges of losses for cases where there is only
a reasonable possibility that a loss may have been incurred.
GUARANTEES฀
The firm enters into various derivative contracts that meet the
definition of a guarantee under FIN No. 45. Such derivative
contracts include credit default swaps, written equity and com-
modity put options, written currency contracts and interest rate
caps, floors and swaptions. FIN No. 45 does not require disclo-
sures about derivative contracts if such contracts may be cash
settled and the firm has no basis to conclude it is probable that
the counterparties held, at inception, the underlying instruments
related to the derivative contracts. The firm has concluded that
these conditions have been met, for certain large, internationally
active commercial and investment bank end users and certain
other users. Accordingly, the firm has not included such
contracts in the tables below.
The firm, in its capacity as an agency lender, occasionally
indemnifies securities lending customers against losses incurred
in the event that borrowers do not return securities and the
collateral held is insufficient to cover the market value of the
securities borrowed. In relation to certain asset sales and secu-
ritization transactions, the firm guarantees the collection of
contractual cash flows. In connection with its merchant bank-
ing activities, the firm may issue loan guarantees to secure
financing and to obtain preferential terms. In addition, the
firm provides letters of credit and other guarantees, on a
limited basis, to enable clients to enhance their credit standing
and complete transactions.
In connection with the firm’s establishment of the Trust, Group
Inc. effectively provided for the full and unconditional guaran-
tee of the beneficial interests in the Trust held by third parties.
Timely payment by Group Inc. of interest on the junior subor-
dinated debentures and other amounts due and performance of
its other obligations under the transaction documents will be
sufficient to cover payments due by the Trust on its beneficial
interests. As a result, management believes that it is unlikely the
firm will have to make payments related to the Trust other than
those required under the junior subordinated debentures and in
connection with certain expenses incurred by the Trust.
As of November 2004, the firm had entered into a contract to
acquire interests in power plants and related businesses from
National Energy & Gas Transmission, Inc., including addi-
tional interests in some of the same power plants and a natural
gas pipeline in which Cogentrix Energy, Inc., a wholly owned
subsidiary of the firm, already holds interests, for approxi-
mately $550 million.
The firm has contractual obligations under long-term noncan-
celable lease agreements, principally for office space, expiring
on various dates through 2029. Certain agreements are subject
to periodic escalation provisions for increases in real estate
taxes and other charges. Future minimum rental payments, net
of minimum sublease rentals, and rent charged to operating
expense for the last three years are set forth below:
(IN฀MILLIONS)
Minimum rental payments
2005 $฀฀฀359
2006 357
2007 319
2008 299
2009 301
2010-thereafter 1,884
Total $3,519
Net rent expense
2002 $฀฀฀359
2003 360
2004 356
CONTINGENCIES
The firm is involved in a number of judicial, regulatory and
arbitration proceedings concerning matters arising in connec-
tion with the conduct of its businesses. Management believes,
based on currently available information, that the results of
such proceedings, in the aggregate, will not have a material
adverse effect on the firm’s financial condition, but may be
material to the firm’s operating results for any particular period,
depending, in part, upon the operating results for such period.
Given the inherent difficulty of predicting the outcome of the
firm’s litigation matters, particularly in cases in which claimants
seek substantial or indeterminate damages, the firm cannot
BES฀•฀Phone฀(201)฀635-5240฀฀•฀FAX฀(201)฀635-5199
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