Freeport-McMoRan 2013 Annual Report Download - page 103

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2013 ANNUAL REPORT | 101
A summary of changes in the fair value of FCX’s Level 3 pension
plan assets for the years ended December 31 follows:
Private Equity Real Estate
Investments Property Total
Balance at January 1, 2012 $ 50 $ 35 $ 85
Actual return on plan assets:
Realized gains — 2 2
Net unrealized (losses) gains related to
assets still held at the end of the year (5) 4 (1)
Purchases 4 — 4
Settlements, net (4) — (4)
Balance at December 31, 2012 45 41 86
Actual return on plan assets:
Realized gains — 1 1
Net unrealized (losses) gains related to
assets still held at the end of the year (1) 6 5
Purchases 3 — 3
Sales — (1) (1)
Settlements, net (4) — (4)
Balance at December 31, 2013 $ 43 $ 47 $ 90
A summary of the fair value hierarchy for pension plan assets
associated with the PT-FI plan follows:
Fair Value at December 31, 2013
Total Level 1 Level 2 Level 3
Common stocks $ 27 $ 27 $ — $ —
Government bonds 23 23 — —
Mutual funds 12 12 — —
Total investments 62 $ 62 $ — $ —
Cash and receivables
a
62
Total pension plan net assets $ 124
Fair Value at December 31, 2012
Total Level 1 Level 2 Level 3
Common stocks $ 32 $ 32 $ — $ —
Government bonds 27 27 — —
Mutual funds 10 10 — —
Total investments 69 $ 69 $ — $ —
Cash and receivables
a
61
Total pension plan net assets $ 130
a. Cash consisted primarily of short-term time deposits.
Following is a description of the valuation techniques used for
pension plan assets measured at fair value associated with the
PT-FI plan. There have been no changes to the techniques used to
measure fair value.
Common stocks, government bonds and mutual funds are
valued at the closing price reported on the active market on which
the individual securities are traded and, as such, are classified
within Level 1 of the fair value hierarchy.
The techniques described above may produce a fair value
calculation that may not be indicative of net realizable value or
reflective of future fair values. Furthermore, while FCX believes
its valuation techniques are appropriate and consistent with other
market participants, the use of different techniques or
assumptions to determine the fair value of certain financial
Following is a description of the pension plan asset categories
and the valuation techniques used to measure fair value. There have
been no changes to the techniques used to measure fair value.
Commingled/collective funds are managed by several fund
managers and are valued at the net asset value per unit of the
fund. For most of these funds, the majority of the underlying
assets are actively traded equity securities; however, the unit level
is considered to be at the fund level. These funds (except the
real estate property funds) require less than a month’s notice for
redemptions and, as such, are classified within Level 2 of the
fair value hierarchy. Real estate property funds are valued at net
realizable value using information from independent appraisal
firms, who have knowledge and expertise about the current
market values of real property in the same vicinity as the
investments. Redemptions of the real estate property funds are
allowed once per quarter, subject to available cash and, as such,
are classified within Level 3 of the fair value hierarchy.
Open-ended mutual funds are managed by registered
investment companies and are valued at the daily published net
asset value of shares/units held. Because redemptions and
purchases of shares/units occur at the net asset value without any
adjustments to the published net asset value that is provided on
an ongoing basis (active-market criteria are met), these investments
are classified within Level 1 of the fair value hierarchy.
Mutual funds are valued at the closing price reported on the
active market on which the individual securities are traded and, as
such, are classified within Level 1 of the fair value hierarchy.
Fixed income investments include government and corporate
bonds held directly by the Master Trust or through commingled
funds. Fixed income securities are valued using a bid evaluation
price or a mid-evaluation price and, as such, are classified within
Level 2 of the fair value hierarchy. A bid evaluation price is
an estimated price at which a dealer would pay for a security. A
mid-evaluation price is the average of the estimated price at
which a dealer would sell a security and the estimated price at
which a dealer would pay for a security. These evaluations are
based on quoted prices, if available, or models that use
observable inputs.
Private equity investments are valued at net realizable value
using information from general partners and, as such, are
classified within Level 3 of the fair value hierarchy because of the
inherent restrictions on redemptions that may affect the ability
to sell the investments at their net asset value in the near term.