Morgan Stanley 2009 Annual Report Download - page 71

The Company’s real estate investments as of December 31, 2009 and December 31, 2008 are shown below. Such
amounts exclude investments that benefit certain employee deferred compensation and co-investment plans:
Statement of
Financial
Condition
December 31,
2009
Statement of
Financial
Condition
December 31,
2008
(dollars in billions)
Consolidated interests(1) ................................................ $1.5 $3.8
Real estate funds(2) .................................................... 0.5 1.0
Real estate bridge financing .............................................. — 0.2
Infrastructure fund ..................................................... 0.2 0.1
Total(3) ......................................................... $2.2 $5.1
(1) Consolidated statement of financial condition amounts represent investment assets of consolidated subsidiaries, net of non-controlling
interests. The decrease from December 31, 2008 to December 31, 2009 was primarily due to the disposition of Crescent in the fourth
quarter of 2009, whereby the Company transferred its ownership interest in Crescent to Crescent’s primary creditor in exchange for full
release of liability on the related loans.
(2) In 2009, the Company consolidated certain real estate funds resulting in a transfer of investment assets of $0.2 billion, which is net of
non-controlling interests of $0.6 billion, from real estate funds to consolidated interests. The results for 2009 for these newly
consolidated subsidiaries, net of non-controlling interests, were not significant. The Company consolidated the funds during 2009 due to
a reassessment of its primary beneficiary position with respect to the funds, reflecting the continued deterioration of equity in the funds
combined with the Company’s financial assistance provided to the funds. The limited partnership interests in the earnings of these funds
are reported in Net income (loss) applicable to non-controlling interests on the consolidated statement of income.
(3) In 2009, losses on consolidated interests were $0.8 billion, of which $0.6 billion were included in discontinued operations related to
Crescent. Losses on real estate funds and real estate bridge financing were $0.9 billion and $0.2 billion, respectively, in 2009. In addition,
the Company has contractual capital commitments, guarantees, lending facilities and counterparty arrangements with respect to these
investments of $1.5 billion as of December 31, 2009 (see Note 11 to the consolidated financial statements).
Defined Benefit Pension and Other Postretirement Plans.
Contributions. The Company made contributions of $321 million, $325 million, $130 million and $2 million to
its U.S. and non-U.S. defined benefit pension plans in 2009, fiscal 2008, fiscal 2007 and the one month ended
December 31, 2008, respectively. These contributions were funded with cash from operations.
The Company determines the amount of its pension contributions to its funded plans by considering several factors,
including the level of plan assets relative to plan liabilities, the types of assets in which the plans are invested, expected
plan liquidity needs and expected future contribution requirements. The Company’s policy is to fund at least the
amounts sufficient to meet minimum funding requirements under applicable employee benefit and tax laws (for
example, in the U.S., the minimum required contribution under the Employee Retirement Income Security Act of
1974, or “ERISA”). As of December 31, 2009 and December 31, 2008, there were no minimum required ERISA
contributions for the Company’s U.S. pension plan that is qualified under Section 401(a) of the Internal Revenue Code.
The contributions made to the U.S. pension plan of $278 million and $276 million were funded based
on the service cost earned by the eligible employees plus a portion of the unfunded accumulated benefit obligation on a
funding basis for 2009 and fiscal 2008, respectively. Liabilities for benefits payable under certain postretirement and
unfunded supplementary plans are accrued by the Company and are funded when paid to the beneficiaries.
Expense. The Company recognizes the compensation cost of an employee’s pension benefits (including prior-
service cost) over the employee’s estimated service period. This process involves making certain estimates and
assumptions, including the discount rate and the expected long-term rate of return on plan assets. For fiscal 2008,
as required under the alternative transition method set forth in current accounting guidance, the Company
changed the measurement date to coincide with the Company’s fiscal year-end date. Net periodic pension
expense was $175 million, $132 million, $143 million and $9 million, while net periodic postretirement expense
was $26 million, $17 million, $14 million and $2 million for 2009, fiscal 2008, fiscal 2007 and the one month
ended December 31, 2008, respectively.
See Notes 2 and 19 to the consolidated financial statements for more information on the Company’s defined
benefit pension and postretirement plans, including the adoption of accounting guidance for defined benefit
pension and other postretirement plans.
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