Last week the Financial Accounting Standards Board reaffirmed its stance that VIE decision-maker fees - with the exception of meeting a stringent set of criteria - will be included in the FIN 46 expected residual return analysis.

This FASB Staff Position (FIN 46-c) primarily affects collateral managers of CDOs. As previously reported, a few managers have already indicated that FIN 46 requires them to consolidate their CDO assets. For example, Federated Investors stated that it might be consolidating $1.1 billion in assets associated with CBOs it manages, while its maximum exposure to loss is less than $1 million (see ASR 11/3/03). Similarly, BlackRock Financial was deemed the primary beneficiary in the six CDOs it manages primarily as a result of the market-based fees it collects, the company said in its quarterly financial statement. BlackRock's fees were about $3.4 million for the three months ended Sept. 30, associated with the $2.6 billion it will consolidate. The company stated that its maximum loss exposure to these CDOs is its vested $14.3 million (see ASR 10/20/03).

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