Sunoco 2011 Annual Report Download - page 95

The following table sets forth the change in fair value for plan assets measured using significant
unobservable inputs (level 3) (in millions of dollars):
2011 2010
Balance at beginning of year ................................................ $ 77 $ 56
Actual gain on plan assets:
Assets held at end of year ................................................ 8 13
Assets sold during the year ............................................... — —
Investments ............................................................. 11 19
Return of capital ......................................................... (11) (11)
Balance at end of year ..................................................... $ 85 $ 77
The valuation of mutual funds is determined primarily based on the closing market price of the assets held
in the funds on the last business day of the year. Collective trust funds are valued primarily at net asset value per
share, which is determined by dividing the fair value of a fund’s net assets by the number of fund units
outstanding at the valuation date. The collective trust funds are invested in various underlying investments,
primarily including U.S. and international common stocks, U.S. corporate debt instruments and other traditional
short-term investments, with the goal of providing liquidity and preservation of capital while maximizing return
on assets. Government obligations, asset backed securities, corporate bonds and other debt securities are
primarily valued using a market approach pricing methodology, where observable prices are obtained by market
transactions involving identical or comparable securities of issuers with similar credit ratings or at the average of
the most recent observable bid and asked prices. Private equity investments are primarily valued at the estimated
fair value of the underlying assets. The private equity investments have various strategies, primarily including
corporate finance and buyout, debt and real estate. Cash and cash equivalents are valued at cost, which
approximates fair value.
The asset allocations attributable to the assets of the funded defined benefit plans at December 31, 2011 and
2010 and the target allocation of plan assets for 2012, by asset category, are as follows (in percentages):
2012 Target
December 31,
2011 2010
Asset category:
Equity securities ............................................. 50 38 52
Fixed income securities* ...................................... 45 52 41
Private equity investments ..................................... 5 10 7
Total .................................................... 100 100 100
*Includes cash and cash equivalents which are held to manage duration in connection with fixed income investment strategies. At
December 31, 2011, also includes cash held in anticipation of a transfer to SunCoke Energy’s pension trust.
The investment strategy of the Company’s funded defined benefit plans is to achieve consistent positive
returns, after adjusting for inflation, and to maximize long-term total return within prudent levels of risk through
a combination of income and capital appreciation. During 2009, a shift in the targeted investment mix was
approved which has resulted in a reallocation of 10 percent of plan assets from equity securities to fixed income
securities. In addition, the duration of the fixed income portfolio has been increased to better match the duration
of the plan obligations. The objective of this strategy change is to reduce the volatility of investment returns,
maintain a sufficient funded status of the plans and limit required contributions. The Company anticipates further
shifts in targeted asset allocation from equity securities to fixed income securities if funding levels improve due
to asset performance or Company contributions.
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