Morgan Stanley 2009 Annual Report Download - page 152

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Financial instruments owned—Net derivative and other contracts. The net gains in Level 3 Net derivative
contracts were primarily driven by certain credit default swaps and other instruments associated with the
Company’s credit products and securitized products activities. The Company recorded offsetting net losses in
Level 2 Net derivative contracts, which were primarily associated with the Company’s credit products and
securitized products activities.
The Company reclassified certain Net derivative contracts from Level 2 to Level 3 because certain significant
inputs for the fair value measurement became unobservable. The most material transfers into Level 3 were
commercial and residential credit default swaps.
Financial instruments owned—Investments. The net gains from Financial instruments owned—investments
were primarily related to investments associated with the Company’s real estate products and private equity
portfolio.
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the One Month
Ended December 31, 2008
Beginning
Balance
at
November 30,
2008
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
at
December 31,
2008
Unrealized
Gains
(Losses)
for Level 3
Assets/
Liabilities
Outstanding at
December 31,
2008(2)
(dollars in millions)
Assets
Financial instruments owned:
U.S. government and agency
securities .................. $ 206 $ (3) $ (76) $ — $ 127 $ (5)
Other sovereign government
obligations ................ 3 — (1) (1) 1 —
Corporate and other debt ....... 34,460 (393) 1,036 (185) 34,918 (378)
Corporate equities ............ 907 (11) (3) 83 976 (10)
Net derivative and other
contracts(3) ................ 27,624 (2,040) (43) (2,159) 23,382 (1,879)
Investments .................. 9,732 (169) 149 (14) 9,698 (158)
Securities received as collateral ...... 15 — 15 — 30 —
Intangible assets .................. 220 (36) — — 184 (36)
Liabilities
Financial instruments sold, not yet
purchased:
Corporate and other debt ....... $ 3,943 $ (43) $ (140) $ (38) $ 3,808 $ (63)
Corporate equities ............ 21 (20) (20) 6 27 1
Obligation to return securities received
as collateral .................... 15 — 15 — 30 —
Other secured financings ........... 5,747 (219) 34 148 6,148 (219)
Long-term borrowings ............. 5,417 (52) 4 — 5,473 (51)
(1) Total realized and unrealized gains (losses) are primarily included in Principal transactions—trading in the consolidated statements of
income except for $(169) million related to Financial instruments owned—investments, which is included in Principal transactions—
investments.
147