Dow Chemical 2009 Annual Report Download - page 166
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Table of Contents
Concentration of Risk
The Company mitigates the credit risk of investments by establishing guidelines with investment managers that limit investment in any single issue or issuer
to an amount that is not material to the portfolio being managed. These guidelines are monitored for compliance both by the Company and external managers.
Credit risk for hedging activity is mitigated by utilizing multiple counterparties and through collateral support agreements.
The JP Morgan Federal Agency money market fund is utilized as the sweep vehicle for the two largest U.S. plans, which from time to time can represent a
significant investment. For one U.S. plan, approximately half of the plan is covered by a participating group annuity issued by Prudential Insurance
Company.
The following table summarizes the bases used to measure the Company’s pension plan assets at fair value:
Basis of Fair Value
Measurements of Pension Plan
Assets
at December 31, 2009
In millions
Quoted Prices in
Active Markets for
Identical Items
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3) Total
Cash and cash equivalents $ 100 $ 730 - $ 830
Equity securities:
U.S. equity (1) 1,774 $ 142 - $ 1,916
Non-U.S. equity – developed
countries 2,203 922 - 3,125
Emerging market 668 490 - 1,158
Equity derivatives 1 9 - 10
Total equity securities $ 4,646 $ 1,563 - $ 6,209
Fixed income securities:
U.S. government and
municipalities - $ 991 - $ 991
U.S. agency and agency
mortgage backed securities - 300 - 300
Corporate bonds – investment
grade - 1,242 - 1,242
Non-U.S. governments –
developed countries - 463 - 463
Non-U.S. corporate bonds –
developed countries - 557 - 557
Emerging market debt - 30 - 30
Other asset-backed securities - 156 $ 25 181
Convertible bonds $ 50 386 - 436
High yield bonds - 176 25 201
Other fixed income funds - 878 - 878
Fixed income derivatives (7) (36) - (43)
Total fixed income securities $ 43 $ 5,143 $ 50 $ 5,236
Alternative investments:
Real estate $ 26 $ 46 $ 561 $ 633
Private equity - - 802 802
Absolute return - 350 95 445
Total alternative investments $ 26 $ 396 $ 1,458 $ 1,880
Other - $ 391 $ 43 $ 434
Total assets at fair value $ 4,815 $ 8,223 $ 1,551 $ 14,589
(1) Includes $11 million of the Company’s common stock.
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