Morgan Stanley 2009 Annual Report Download - page 151

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Fiscal Year
Ended November 30, 2007
Beginning
Balance
Total
Realized
and
Unrealized
Gains
(Losses)(1)
Purchases,
Sales,
Other
Settlements
and
Issuances,
net
Net
Transfers
In and/or
(Out) of
Level 3
Ending
Balance
Unrealized
Gains
(Losses)
for Level 3
Assets/
Liabilities
Outstanding at
November 30,
2007(2)
(dollars in millions)
Assets
Financial instruments owned:
U.S. government and agency
securities .................. $ 2 $ 134 $ 524 $ — $ 660 $ 49
Other sovereign government
obligations ................. 162 10 (143) — 29 2
Corporate and other debt ....... 33,941 (5,999) 3,664 5,452 37,058 (4,528)
Corporate equities ............. 1,040 62 (260) 394 1,236 515
Net derivative and other
contracts(3) ................ 30 4,152 913 843 5,938 (3,294)
Investments .................. 3,879 2,538 6,651 — 13,068 1,492
Securities received as collateral ...... 40 — (33) — 7 —
Other assets(4) ................... 2,154 32 (2,186) — — —
Liabilities
Financial instruments sold, not yet
purchased:
Corporate and other debt ....... $ 185 $(1,242) $ (439) $ 134 $ 1,122 $ (455)
Corporate equities ............. 9 (58) (55) 4 16 (27)
Obligation to return securities received
as collateral .................... 40 — (33) — 7 —
Other secured financings ........... 4,724 — (2,403) — 2,321 —
Long-term borrowings ............. 464 (114) (185) 5 398 (116)
(1) Total realized and unrealized gains (losses) are included in Principal transactions—trading in the consolidated statements of income
except for $2,538 million related to Financial instruments owned—investments, which is included in Principal transactions—investments
and $32 million related to Other assets associated with DFS and included in discontinued operations.
(2) Amounts represent unrealized gains (losses) for fiscal 2007 related to assets and liabilities still outstanding at November 30, 2007.
(3) Net derivative and other contracts represent Financial instruments owned—derivative and other contracts net of Financial instruments
sold, not yet purchased—derivative and other contracts.
(4) Other assets were disposed of in connection with the Discover Spin-off.
Financial instruments owned and Financial instruments sold, not yet purchased—Corporate and other
debt. The net losses in Level 3 Corporate and other debt were primarily driven by certain asset-backed
securities, including residential and commercial mortgage loans, and by corporate loans and lending
commitments.
The Company reclassified certain Corporate and other debt from Level 2 to Level 3 because certain significant
inputs for the fair value measurement became unobservable. These reclassifications included transfers in the
fourth quarter of fiscal 2007 primarily related to the continued market and liquidity deterioration in the mortgage
markets. The most material transfers into Level 3 were in commercial whole loans, residuals from residential
securitizations and interest-only commercial mortgage and agency bonds.
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