AT&T Wireless 2012 Annual Report Download - page 84

Notes to Consolidated Financial Statements (continued)
Dollars in millions except per share amounts
82 | AT&T Inc.
Asset and benefit obligation forecasting studies are
conducted periodically, generally every two to three years,
or when significant changes have occurred in market
conditions, benefits, participant demographics or funded
status. Decisions regarding investment policy are made
with an understanding of the effect of asset allocation on
funded status, future contributions and projected expenses.
The current asset allocation policy and risk level for the
pension plan and VEBA assets are based on a study
completed and approved during 2011.
The plans’ weighted-average asset targets and actual
allocations as a percentage of plan assets, including the
notional exposure of future contracts by asset categories
at December 31, are as follows:
We maintain VEBA trusts to partially fund postretirement
benefits; however, there are no ERISA or regulatory
requirements that these postretirement benefit plans
be funded annually.
The principal investment objectives are to ensure the
availability of funds to pay pension and postretirement
benefits as they become due under a broad range of future
economic scenarios, to maximize long-term investment
return with an acceptable level of risk based on our pension
and postretirement obligations, and to be broadly diversified
across and within the capital markets to insulate asset
values against adverse experience in any one market.
Each asset class has broadly diversified characteristics.
Substantial biases toward any particular investing style or
type of security are sought to be avoided by managing
the aggregation of all accounts with portfolio benchmarks.
Pension Assets Postretirement (VEBA) Assets
Target 2012 2011 Target 2012 2011
Equity securities:
Domestic 25% – 35% 26% 24% 32% – 42% 37% 39%
International 10% – 20% 16 15 28% – 38% 33 31
Fixed income securities 30% – 40% 34 34 19% – 29% 24 21
Real assets 6% – 16% 11 11 0% – 6% 1 1
Private equity 4% – 14% 13 13 0% – 9% 4 5
Other 0% – 5% — 3 0% – 7% 1 3
Total 100% 100% 100% 100%
the bid price or the average of the bid and asked price on
the last business day of the year from published sources
where available and, if not available, from other sources
considered reliable. Depending on the types and contractual
terms of OTC derivatives, fair value is measured using
valuation techniques, such as the Black-Scholes option
pricing model, simulation models or a combination of
various models.
Common/collective trust funds, pooled separate accounts,
and other commingled (103-12) investment entities are
valued at quoted redemption values that represent the net
asset values of units held at year-end which management
has determined approximates fair value.
Alternative investments, including investments in private
equity, real estate, natural resources (included in real assets),
mezzanine and distressed debt (included in partnerships/joint
ventures), limited partnership interest, fixed income securities
and hedge funds do not have readily available market values.
These estimated fair values may differ significantly from the
At December 31, 2012, AT&T securities represented less than
0.5% of assets held by our pension plans and VEBA trusts.
Investment Valuation
Investments are stated at fair value. Fair value is the price
that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants
at the measurement date. See “Fair Value Measurements”
for further discussion.
Investments in securities traded on a national securities
exchange are valued at the last reported sales price on the
last business day of the year. If no sale was reported on
that date, they are valued at the last reported bid price.
Investments in securities not traded on a national securities
exchange are valued using pricing models, quoted prices of
securities with similar characteristics or discounted cash
flows. Shares of registered investment companies are valued
based on quoted market prices, which represent the net
asset value of shares held at year-end. Over-the-counter
(OTC) securities and government obligations are valued at