Macquarie Group Limited and its subsidiaries  macquarie.com.au  2014 Annual Financial Report  Notes to the financial statements  Reconciliation of balances in Level 3 of the fair value hierarchy  for the financial year ended 31 March 2014  continued The following table reconciles the balances in Level 3 of the fair value hierarchy for the Consolidated Entity for the financial years  ended 31 March 2014 and 31 March 2013:  Trading  portfolio  assets  Investment  securities  available  for sale  $m  $m  Balance at 1 April 2013  322  744  Purchases  354  583  Sales  (196)  (237)  Issues  –  49  Settlements  –  (3)  Transfers into Level 3  312  16  Transfers out of Level 3  (90)  (65)  Fair value gains/(losses) recognised in the income statement (1) 8  76  Fair value gains recognised in other comprehensive income (1) –  61  Balance at 31 March 2014  710  1,224  Fair value gains/(losses) for the financial year included in the income  statement for assets and liabilities held at the end of the financial year (1) 9  33  Balance at 1 April 2012  452  553  Purchases  298  196  Sales  (379)  (95)  Issues  –  –  Settlements  –  –  Transfers into Level 3  233  108  Transfers out of Level 3  (302)  (40)  Fair value gains/(losses) recognised in the income statement (1) 20  (13)  Fair value gains recognised in other comprehensive income (1) –  35  Balance at 31 March 2013  322  744  Fair value gains/(losses) for the financial year included in the income statement for  assets and liabilities held at the end of the financial year (1) 28  (5)   (1) The consolidated entity employs various hedging techniques in order to manage risks, including risks in Level 3 positions. Such  techniques may include the purchase or sale of financial instruments that are classified as Levels 1 and/or 2. The realised and unrealised  gains and losses for assets and liabilities in Level 3 presented in the table above do not reflect the related realised or unrealised gains  and losses arising on economic hedging instruments classified in Level 1 and/or 2.  (2) The derivative financial instruments in the table above are represented on a net basis. On a gross basis derivative assets are $98 million  (2013: $68 million) and derivative liabilities are $87 million (2013: $45 million).  200  Note 39  Fair values of financial assets and liabilities  continued 