Union Pacific 2009 Annual Report Download - page 74

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The investment of pension plan assets in securities issued by Union Pacific is specifically prohibited for
both the equity and debt portfolios, other than through index fund holdings.
Fair Value Measurements
The pension plan assets are valued at fair value. The following is a description of the valuation
methodologies used for the investments measured at fair value, including the general classification of
such instruments pursuant to the valuation hierarchy.
Temporary Cash Investments – These investments consist of U.S. dollars and foreign currencies held in
master trust accounts at The Northern Trust Company. Foreign currencies held are reported in terms of
U.S. dollars based on currency exchange rates readily available in active markets. These temporary cash
investments are classified as Level 1 investments.
Registered Investment Companies – Registered Investment Companies are mutual funds, unit trusts,
and other commingled funds registered with the Securities and Exchange Commission. Mutual fund and
unit trust shares are traded actively on public exchanges. The share prices for mutual funds and unit trusts
are published at the close of each business day. Holdings of mutual funds and unit trusts are classified as
Level 1 investments. Other registered commingled funds are not traded publicly, but the underlying
assets (stocks and bonds) held in these funds are traded on active markets and the prices for these assets
are readily observable. Holdings in other registered commingled funds are classified as Level 2
investments.
U.S. Government Securities – U.S. Government Securities consist of bills, notes, bonds, and other fixed
income securities issued directly by the U.S. Treasury or by government-sponsored enterprises. These
assets are valued using a bid evaluation process with bid data provided by independent pricing sources.
U.S. Government Securities are classified as Level 2 investments.
Corporate Bonds & Debentures – Corporate bonds and debentures consist of fixed income securities
issued by U.S. and non-U.S. corporations. These assets are valued using a bid evaluation process with
bid data provided by independent pricing sources. Corporate bonds & debentures are classified as Level
2 investments.
Corporate Stock – This investment category consists of common and preferred stock issued by U.S. and
non-U.S. corporations. Common and preferred shares are traded actively on exchanges and price quotes
for these shares are readily available. Holdings of corporate stock are classified as Level 1 investments.
Venture Capital and Partnerships – This investment category is comprised primarily of interests in
limited partnerships that invest in privately-held companies or privately-held real estate assets. Due to the
private nature of the partnership investments, pricing inputs are not readily observable. Asset valuations
are developed by the general partners that manage the partnerships. These valuations are based on
property appraisals, application of public market multiples to private company cash flows, utilization of
market transactions that provide valuation information for comparable companies, and other methods.
Holdings of limited partnership interests are classified as Level 3 investments.
This category also includes an investment in a limited liability company that invests in publicly-traded
convertible securities. The limited liability company investment is a fund that invests in both long and
short positions in convertible securities, stocks, and fixed income securities. The underlying securities
held by the fund are traded actively on exchanges and price quotes for these investments are readily
available. Interest in the limited liability company is classified as a Level 2 investment.