JP Morgan Chase 2008 Annual Report Download - page 77

JPMorgan Chase & Co. / 2008 Annual Report 75
Private equity portfolio
2008 compared with 2007
The carrying value of the private equity portfolio at December 31,
2008, was $6.9 billion, down from $7.2 billion at December 31,
2007. The portfolio decrease was primarily driven by unfavorable valu-
ation adjustments on existing investments, partially offset by new
investments, and the addition of the Bear Stearns portfolios. The port-
folio represented 5.8% of the Firm’s stockholders’ equity less good-
will at December 31, 2008, down from 9.2% at December 31, 2007.
2007 compared with 2006
The carrying value of the private equity portfolio at December 31,
2007, was $7.2 billion, up from $6.1 billion at December 31, 2006.
The portfolio increase was due primarily to favorable valuation
adjustments on nonpublic investments and new investments, partially
offset by sales activity. The portfolio represented 9.2% of the Firm’s
stockholders’ equity less goodwill at December 31, 2007, up from
8.6% at December 31, 2006.
Selected income statement and balance sheet data
Year ended December 31,
(in millions) 2008 2007 2006
Corporate
Securities gains (losses)(a) $ 1,652 $ 37 $ (619)
Investment securities portfolio
(average)(b) 106,801 85,517 63,361
Investment securities portfolio
(ending)(b) 166,662 76,200 82,091
Mortgage loans (average)(c) 7,059 5,639 —
Mortgage loans (ending)(c) 7,292 6,635 —
Private equity
Realized gains $ 1,717 $ 2,312 $ 1,223
Unrealized gains (losses)(d)(e) (2,480) 1,607 (1)
Total direct investments (763) 3,919 1,222
Third-party fund investments (131) 165 77
Total private equity gains
(losses)(f) $ (894) $ 4,084 $ 1,299
Private equity portfolio
information(g)
Direct investments
Publicly held securities
Carrying value $ 483 $ 390 $ 587
Cost 792 288 451
Quoted public value 543 536 831
Privately held direct securities
Carrying value 5,564 5,914 4,692
Cost 6,296 4,867 5,795
Third-party fund investments(h)
Carrying value 805 849 802
Cost 1,169 1,076 1,080
Total private equity
portfolio – Carrying value $ 6,852 $ 7,153 $ 6,081
Total private equity portfolio – Cost $ 8,257 $ 6,231 $ 7,326
(a) Results for 2008 included a gain on the sale of MasterCard shares. All periods
reflect repositioning of the Corporate investment securities portfolio and exclude
gains/losses on securities used to manage risk associated with MSRs.
(b) Includes Chief Investment Office investment securities only.
(c) Held-for-investment prime mortgage loans were transferred from AM to the
Corporate/Private Equity segment for risk management and reporting purposes. The
initial transfer in 2007 had no material impact on the financial results of
Corporate/Private Equity.
(d) Unrealized gains (losses) contain reversals of unrealized gains and losses that were
recognized in prior periods and have now been realized.
(e) The Firm adopted SFAS 157 in the first quarter of 2007. For additional information,
see Note 4 on pages 141–155 of this Annual Report.
(f) Included in principal transactions revenue in the Consolidated Statements of
Income.
(g) For more information on the Firm’s policies regarding the valuation of the private
equity portfolio, see Note 4 on pages 141–155 of this Annual Report.
(h) Unfunded commitments to third-party equity funds were $1.4 billion, $881 million
and $589 million at December 31, 2008, 2007 and 2006, respectively.