Morgan Stanley 2010 Annual Report Download - page 255

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Transactions with Subsidiaries.
The Company has transactions with its consolidated subsidiaries determined on an agreed-upon basis and has
guaranteed certain unsecured lines of credit and contractual obligations of certain of its consolidated subsidiaries.
Guarantees.
In the normal course of its business, the Company guarantees certain of its subsidiaries’ obligations under
derivative and other financial arrangements. The Company records Financial instruments owned and Financial
instruments sold, not yet purchased, which include derivative contracts, at fair value on its consolidated
statements of financial condition.
The Company also, in the normal course of its business, provides standard indemnities to counterparties on
behalf of its subsidiaries for taxes, including U.S. and foreign withholding taxes, on interest and other payments
made on derivatives, securities and stock lending transactions and certain annuity products. These indemnity
payments could be required based on a change in the tax laws or change in interpretation of applicable tax
rulings. Certain contracts contain provisions that enable the Company to terminate the agreement upon the
occurrence of such events. The maximum potential amount of future payments that the Company could be
required to make under these indemnifications cannot be estimated. The Company has not recorded any
contingent liability in the condensed financial statements for these indemnifications and believes that the
occurrence of any events that would trigger payments under these contracts is remote.
The Company has issued guarantees on behalf of its subsidiaries to various U.S. and non-U.S. exchanges and
clearinghouses that trade and clear securities and/or futures contracts. Under these guarantee arrangements, the
Company may be required to pay the financial obligations of its subsidiaries related to business transacted on or
with the exchanges and clearinghouses in the event of a subsidiary’s default on its obligations to the exchange or
the clearinghouse. The Company has not recorded any contingent liability in the condensed financial statements
for these arrangements and believes that any potential requirements to make payments under these arrangements
are remote.
The Company guarantees certain debt instruments and warrants issued by subsidiaries. The debt instruments and
warrants totaled $8.3 billion and $5.5 billion at December 31, 2010 and December 31, 2009, respectively. In
connection with subsidiary lease obligations, the Company has issued guarantees to various lessors. At
December 31, 2010 and December 31, 2009, the Company had $1.5 billion and $1.6 billion guarantees
outstanding, respectively, under subsidiary lease obligations, primarily in the U.K.
At December 31, 2010 and 2009, the Company had $125 million and $138 million in guarantees related to
Crescent, respectively.
249