Vectren 2012 Annual Report Download - page 93

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calculated value is based on the fair market value of the underlying investments. These funds are primarily comprised of
investments in equity and fixed income securities which represent approximately 53 percent and 38 percent, respectively, of
their fair value as of December 31, 2012 and approximately 52 percent and 40 percent, respectively, as of December 31, 2011.
Equity securities within these funds are primarily valued using quoted market prices as these instruments have active markets.
From time to time, less liquid equity securities are valued using Level 2 inputs, such as bid prices or a closing price, as
determined in good faith by the investment manager. Fixed income securities are valued at the last available bid prices quoted
by an independent pricing service. When valuations are not readily available, fixed income securities are valued using primarily
other Level 2 inputs as determined in good faith by the investment manager.
The fair value of these funds totals $145.0 million at December 31, 2012 and $128.2 million at December 31, 2011. In relation to
these investments, there are no unfunded commitments. Also, the Plan can exchange shares with minimal restrictions.
However, in certain events up to 31 days may exist.
Guaranteed Annuity Contract
One of the Company’s pension plans is party to a group annuity contract with John Hancock Life Insurance Company. At
December 31, 2012 and 2011, the estimate of undiscounted funds necessary to satisfy John Hancock’s remaining obligation
was $3.6 million and $3.4 million, respectively. If funds retained by John Hancock are not sufficient to satisfy retirement
payments due these retirees, the shortfall must be funded by the Company. The composite investment return, net of manager
fees and other charges for the years ended December 31, 2012 and 2011 was 5.17 percent and 5.26 percent, respectively. The
Company values this illiquid investment using long-term interest rate and mortality assumptions, among others, and is therefore
considered a Level 3 investment. There is no unfunded commitment related to this investment.
The fair values of the Company’s pension and other retirement plan assets at December 31, 2012 and December 31, 2011 by
asset category and by fair value hierarchy are as follows:
As of December 31, 2012
(In millions) Level 1 Level 2 Level 3 Total
Domestic equities & equity funds $ 62.8 $ 77.6 $ — $ 140.4
International equities & equity funds 34.3 — — 34.3
Domestic bonds & bond funds 41.7 42.3 — 84.0
Inflation protected security fund — 12.6 — 12.6
Real estate, commodities & other 8.0 12.5 3.9 24.4
Total plan investments $ 146.8 $ 145.0 $ 3.9 $ 295.7
As of December 31, 2011
(In millions) Level 1 Level 2 Level 3 Total
Domestic equities & equity funds $ 54.7 $ 66.5 $ — $ 121.2
International equities & equity funds 28.6 — — 28.6
Domestic bonds & bond funds 38.2 39.1 — 77.3
Inflation protected security fund — 11.8 — 11.8
Real estate, commodities & other 7.5 10.8 3.8 22.1
Total plan investments $ 129.0 $ 128.2 $ 3.8 $ 261.0
A roll forward of the fair value of the guaranteed annuity contract calculated using Level 3 valuation assumptions follows:
(In millions) 2012 2011
Fair value, beginning of year $ 3.8 $ 3.7
Unrealized gains related to
investments still held at reporting date 0.2 0.2
Purchases, sales and settlements, net (0.1) (0.1)
Fair value, end of year $ 3.9 $ 3.8