Abbott Laboratories 2013 Annual Report Download - page 53

ABBOTT 2013 ANNUAL REPORT
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The following table summarizes the bases used to measure the
defined benefit and medical and dental plan assets at fair value:
(in millions) Basis of Fair Value Measurement
Quoted Significant
Prices in Other Significant
Outstanding Active Observable Unobservable
December 31, 2013: Balances Markets Inputs Inputs
Equities:
U.S. large cap (a) $ 1,618 $ 741 $ 877 $ —
U.S. mid cap (b) 409 134 275 —
International (c) 1,319 608 711 —
Fixed income securities:
U.S. government
securities (d) 453 61 392 —
Corporate debt
instruments (e) 378 108 270 —
Non‑U.S. government
securities (f ) 536 305 231 —
Other (g) 77 69 8 —
Absolute return funds (h) 1,474 197 791 486
Commodities (i) 170 6 97 67
Other (j) 151 149 — 2
$6,585 $2,378 $ 3,652 $555
December 31, 2012:
Equities:
U.S. large cap (a) $ 1,831 $1,058 $ 773 $ —
U.S. mid cap (b) 491 133 358 —
International (c) 1,607 657 950 —
Fixed income securities:
U.S. government
securities (d) 899 172 727 —
Corporate debt
instruments (e) 736 355 381 —
Non‑U.S. government
securities (f ) 374 83 291 —
Other (g) 24 — 24 —
Absolute return funds (h) 2,070 85 1,246 739
Commodities (i) 222 9 172 41
Other (j) 112 109 — 3
$8,366 $2,661 $4,922 $783
Prior year amounts have been revised to conform with the current year’s asset classifications.
(a) A mix of index funds that track the S&P 500 (60 percent in 2013 and 50 percent in 2012)
and separate actively managed equity accounts that are benchmarked to the Russell 1000
(40 percent in 2013 and 50 percent in 2012).
(b) A mix of index funds (70 percent in 2013 and 75 percent in 2012) and separate actively
managed equity accounts (30 percent in 2013 and 25 percent in 2012) that track or are
benchmarked to the S&P 400 midcap index.
(c) Primarily separate actively managed pooled investment accounts that are benchmarked
to the MSCI and MSCI emerging market indices.
(d) Index funds not actively managed (50 percent in 2013 and 2012) and separate actively
managed accounts (50 percent in 2013 and 2012).
(e) Index funds not actively managed (40 percent in 2013 and 20 percent in 2012) and
separate actively managed accounts (60 percent in 2013 and 80 percent in 2012).
(f ) Primarily United Kingdom, Japan and Irish government‑issued bonds.
(g) Primarily mortgage backed securities.
(h) Primarily funds invested by managers that have a global mandate with the flexibility
to allocate capital broadly across a wide range of asset classes and strategies including,
but not limited to equities, fixed income, commodities, interest rate futures, currencies
and other securities to outperform an agreed upon benchmark with specific return and
volatility targets.
(i) Primarily investments in liquid commodity future contracts and private energy funds.
(j) Primarily cash and cash equivalents.
Equities that are valued using quoted prices are valued at the
published market prices. Equities in a common collective trust or
a registered investment company that are valued using significant
other observable inputs are valued at the net asset value (NAV)
provided by the fund administrator. The NAV is based on the value
of the underlying assets owned by the fund minus its liabilities.
Fixed income securities that are valued using significant other
observable inputs are valued at prices obtained from independent
financial service industry‑recognized vendors. Absolute return
funds and commodities are valued at the NAV provided by the fund
administrator. Private energy funds are valued at the NAV provided
by the partnership on a one‑quarter lag adjusted for known cash
flows and significant events through the reporting date.
The following table summarizes the change in the value of assets
that are measured using significant unobservable inputs:
(in millions) 2013 2012
January 1 $783 $682
Transfers in (out of ) from other categories 6 6
Separation of AbbVie Inc. (165) —
Actual return on plan assets:
Assets on hand at year end 29 59
Assets sold during the year 51 (4)
Purchases, sales and settlements, net (149) 40
December 31 $555 $783
The investment mix of equity securities, fixed income and other
asset allocation strategies is based upon achieving a desired
return, balancing higher return, more volatile equity securities,
and lower return, less volatile fixed income securities. Investment
allocations are made across a range of markets, industry sectors,
capitalization sizes, and in the case of fixed income securities,
maturities and credit quality. The plans do not directly hold any
securities of Abbott. There are no known significant concentra‑
tions of risk in the plans’ assets. Abbott’s medical and dental plans’
assets are invested in a similar mix as the pension plan assets.
The actual asset allocation percentages at year end are consistent
with the company’s targeted asset allocation percentages.
The plans’ expected return on assets, as shown above is based on
management’s expectations of long‑term average rates of return to
be achieved by the underlying investment portfolios. In establishing
this assumption, management considers historical and expected
returns for the asset classes in which the plans are invested, as well
as current economic and capital market conditions.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS