Morgan Stanley 2014 Annual Report Download - page 190

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for 2013.
Beginning
Balance at
December 31,
2012
Total Realized
and Unrealized
Gains (Losses)(1) Purchases Sales Issuances Settlements Net Transfers
Ending
Balance at
December 31,
2013
Unrealized
Gains (Losses)
for Level 3
Assets/
Liabilities
Outstanding at
December 31,
2013(2)
(dollars in millions)
Assets at Fair Value
Trading assets:
Other sovereign government obligations . . . $ 6 $ (18) $ 41 $ (7) $ — $ — $ 5 $27 $ (18)
Corporate and other debt:
Residential mortgage-backed securities .... 45 25 54 (51) — — (26) 47 (6)
Commercial mortgage-backed
securities ........................ 232 13 57 (187) — (7) — 108 4
Asset-backed securities ............... 109 — 6 (12) — — — 103 —
Corporate bonds .................... 660 (20) 324 (371) — (19) (52) 522 (55)
Collateralized debt and loan
obligations ....................... 1,951 363 742 (960) — (626) (2) 1,468 131
Loans and lending commitments ....... 4,694 (130) 3,744 (448) — (3,096) 365 5,129 (199)
Other debt ......................... 45 (1) 20 (36) — — (1) 27 (2)
Total corporate and other debt ........ 7,736 250 4,947 (2,065) — (3,748) 284 7,404 (127)
Corporate equities .................... 288 (63) 113 (127) — — (21) 190 (72)
Net derivative and other contracts(3):
Interest rate contracts ............... (82) 28 6 — (34) 135 60 113 36
Credit contracts ................... 1,822 (1,674) 266 — (703) (295) 437 (147) (1,723)
Foreign exchange contracts .......... (359) 130 — — — 281 16 68 124
Equity contracts ................... (1,144) 463 170 (74) (318) (11) 83 (831) 61
Commodity contracts ............... 709 200 41 — (36) (29) (5) 880 174
Other ............................ (7) (6) — — — 9 — (4) (7)
Total net derivative and other
contracts ...................... 939 (859) 483 (74) (1,091) 90 591 79 (1,335)
Investments:
Private equity funds ................. 2,179 704 212 (564) — — — 2,531 657
Real estate funds .................... 1,370 413 103 (249) — — — 1,637 625
Hedge funds ....................... 552 10 62 (163) — — (29) 432 10
Principal investments ................ 2,833 110 111 (445) — — (449) 2,160 3
Other ............................. 486 76 13 (36) — — (1) 538 77
Total investments .................. 7,420 1,313 501 (1,457) — — (479) 7,298 1,372
Intangible assets ...................... 7 9 — — — (8) — 8 3
Liabilities at Fair Value
Commercial paper and other short-term
borrowings .......................... $ 19 $ — $ — $ — $ — $ (1) $(17) $ 1 $—
Trading liabilities:
Corporate and other debt:
Residential mortgage-backed securities .... 4 4 — — — — — — 4
Corporate bonds ...................... 177 28 (64) 43 — — (106) 22 28
Unfunded lending commitments ........ 46 44 — — — — — 2 44
Other debt ......................... 49 2 — 5 — (6) 2 48 2
Total corporate and other debt ........ 276 78 (64) 48 — (6) (104) 72 78
Corporate equities .................... 5 1 (26) 29 — — 1 8 3
Securities sold under agreements to
repurchase ........................... 151 (3) — — — — — 154 (3)
Other secured financings ................. 406 11 — — 19 (136) — 278 4
Long-term borrowings ................... 2,789 (162) — — 877 (606) (1,335) 1,887 (138)
(1) Total realized and unrealized gains (losses) are primarily included in Trading revenues in the Company’s consolidated statements of
income except for $1,313 million related to Trading assets—Investments, which is included in Investments revenues.
(2) Amounts represent unrealized gains (losses) for 2013 related to assets and liabilities still outstanding at December 31, 2013.
(3) Net derivative and other contracts represent Trading assets—Derivative and other contracts, net of Trading liabilities—Derivative and
other contracts. For further information on derivative instruments and hedging activities, see Note 12.
Long-term borrowings. During 2013, the Company reclassified approximately $1.3 billion of certain long-term
borrowings, primarily structured notes, from Level 3 to Level 2. The Company reclassified the structured notes
as the unobservable embedded derivative component became insignificant to the overall valuation.
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