Sears 2011 Annual Report Download - page 84

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SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
short-term investment funds are stated at net asset value (NAV) as determined by the investment managers.
Investment managers value the underlying investments of the funds at amortized cost, which approximates fair
value, and have assigned a Level 2 to the valuation of those investments. Fixed income securities are primarily
valued by institutional bid evaluation, which determines the estimated price a dealer would pay for a security and
which is developed using proprietary models established by the pricing vendors for this purpose.
Certain corporate and mortgage-backed debt securities are conservatively assigned to Level 3 based on the
relatively low position in the preferred hierarchy of the pricing source. Valuation of the Plan’s non-public limited
partnerships requires significant judgment by the general partners due to the absence of quoted market value,
inherent lack of liquidity, and the long-term nature of the assets, and may result in fair value measurements that
are not indicative of ultimate realizable value. Hedge funds consist of fund-of-funds investments and direct hedge
funds and are assigned to Level 3. The fund-of-funds investments are primarily valued using a market approach
based on the NAVs calculated by the fund and are not publicly available. Direct hedge funds are primarily valued
by each fund’s third party administrator based on the valuation of the underlying type of security held and are not
publicly available. All hedge fund investments are in the process of being redeemed.
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