Morgan Stanley 2009 Annual Report Download - page 48

Certain Factors Affecting Results of Operations.
The Company’s results of operations may be materially affected by market fluctuations and by economic factors.
In addition, results of operations in the past have been, and in the future may continue to be, materially affected
by many factors of a global nature, including the effect of political and economic conditions and geopolitical
events; the effect of market conditions, particularly in the global equity, fixed income and credit markets,
including corporate and mortgage (commercial and residential) lending and commercial real estate investments;
the impact of current, pending and future legislation, regulation, and legal actions in the U.S. and worldwide; the
level and volatility of equity, fixed income and commodity prices, and interest rates, currency values and other
market indices; the availability and cost of both credit and capital as well as the credit ratings assigned to the
Company’s unsecured short-term and long-term debt; investor sentiment and confidence in the financial markets;
the Company’s reputation; the actions and initiatives of current and potential competitors; and technological
changes. Such factors also may have an impact on the Company’s ability to achieve its strategic objectives on a
global basis. For a further discussion of these and other important factors that could affect the Company’s
business, see “Competition” and “Supervision and Regulation” in Part I, Item 1, and “Risk Factors” in Part I,
Item 1A.
Results of Operations.
The following items significantly affected the Company’s results of operations in 2009, fiscal 2008 and the one
month ended December 31, 2008.
Morgan Stanley Debt. Net revenues reflected (losses) gains from the (tightening) widening of the Company’s
credit spreads on certain long-term and short-term borrowings, including structured notes and junior subordinated
debentures, that are accounted for at fair value as follows:
2009
Fiscal
2008
One Month
Ended
December 31,
2008
(dollars in billions)
Losses from the tightening of the Company’s credit spreads ................... $(5.5) $— $(0.2)
Gains from the widening of the Company’s credit spreads ..................... — 5.6 —
Total (losses) gains ................................................ $(5.5) $ 5.6 $(0.2)
In addition, in 2009, fiscal 2008 and the one month ended December 31, 2008, the Company recorded gains of
approximately $491 million, $2.3 billion and $73 million, respectively, from repurchasing its debt in the open
market. In fiscal 2008, the Company also recorded mark-to-market gains of approximately $1.4 billion on certain
swaps previously designated as hedges of a portion of the Company’s long-term debt. These swaps were no
longer considered hedges once the related debt was repurchased by the Company (i.e., the swaps were
“de-designated” as hedges). During the period the swaps were hedging the debt, changes in fair value of these
instruments were generally offset by adjustments to the basis of the debt being hedged.
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