ComEd 2015 Annual Report Download - page 387

Table of Contents
Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
market-based price sources. Investments in U.S. Treasury securities have been categorized as Level 1 because they trade in highly-liquid and
transparent markets. Certain private placement fixed income securities have been categorized as Level 3 because they are priced using certain
significant unobservable inputs and are typically illiquid. The remaining fixed income securities, including certain other fixed income investments,
are based on evaluated prices that reflect observable market information, such as actual trade information of similar securities, adjusted for
observable differences and are categorized as Level 2
Other fixed income investments primarily consist of fixed income commingled funds and mutual funds, which are maintained by investment
companies and hold certain investments in accordance with a stated set of fund objectives, which are consistent with Exelon’s overall investment
strategy. The values of some of these funds are publicly quoted. For mutual funds which are publicly quoted, the funds are valued based on
quoted prices in active markets and have been categorized as Level 1. For fixed income commingled funds and mutual funds which are not
publicly quoted, the fund administrators value the funds using the NAV per fund share, derived from the quoted prices in active markets of the
underlying securities. These funds have been categorized as Level 2. Certain fixed income commingled funds are valued using the NAV per fund
share, which is based on the valuation of the underlying investments and include significant unobservable inputs. These funds have been
categorized as Level 3.
Derivative instruments consisting primarily of interest rate swaps to manage risk are recorded at fair value. Derivative instruments are valued
based on external price data of comparable securities and have been categorized as Level 2.
. Private equity investments include those in limited partnerships that invest in operating companies that are not publicly traded
on a stock exchange such as leveraged buyouts, growth capital, venture capital, distressed investments and investments in natural resources.
Private equity valuations are reported by the fund manager and are based on the valuation of the underlying investments, which include inputs
such as cost, operating results, discounted future cash flows and market based comparable data. Since these valuation inputs are not highly
observable, private equity investments have been categorized as Level 3.
. Hedge fund investments include those seeking to maximize absolute returns using a broad range of strategies to enhance
returns and provide additional diversification. The fair value of hedge funds is determined using NAV or ownership interest of the investments.
Exelon has the ability to redeem these investments at NAV or its equivalent subject to certain restrictions which may include a lock-up period or a
gate. For Exelon’s investments that have terms that allow redemption within a reasonable period of time from themeasurement date, the hedge
fund investments are categorized as Level 2. For investments that have restrictions that may limit Exelon’s ability to redeem the investments at
the measurement date or within a reasonable period of time, the hedge fund investments are categorized as Level 3.
. Real estate funds are funds with a direct investment in pools of real estate properties. These funds are valued by investment
managers on a periodic basis using pricing models that use independent appraisals from sources with professional qualifications. Since these
valuation inputs are not highly observable, these real estate funds have been categorized as Level 3.
Private credit investments primarily consist of limited partnerships that invest in private debt strategies. These investments
are generally less liquid assets with an underlying term of 3
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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