Dow Chemical 2011 Annual Report Download - page 223

129
Basis of Fair Value Measurements of
Pension Plan Assets at December 31, 2010
In millions
Cash and cash equivalents
Equity securities:
U.S. equity (1)
Non-U.S. equity – developed countries
Emerging markets
Equity derivatives
Total equity securities
Fixed income securities:
U.S. government and municipalities
U.S. agency and agency mortgage-backed
securities
Corporate bonds – investment grade
Non-U.S. governments – developed countries
Non-U.S. corporate bonds – developed countries
Emerging market debt
Other asset-backed securities
Convertible bonds
High yield bonds
Other fixed income funds
Fixed income derivatives
Total fixed income securities
Alternative investments:
Real estate
Private equity
Absolute return
Total alternative investments
Other investments
Total pension plan assets at fair value
Quoted Prices
in Active
Markets for
Identical Items
(Level 1)
$ 56
$ 2,038
2,300
759
8
$ 5,105
$ —
—
—
—
—
—
—
32
14
—
—
$ 46
$ 29
—
—
$ 29
$ —
$ 5,236
Significant
Other
Observable
Inputs
(Level 2)
$ 751
$ 167
932
469
3
$ 1,571
$ 961
385
1,313
643
897
51
217
385
279
208
(11)
$ 5,328
$ 45
—
395
$ 440
$ 408
$ 8,498
Significant
Unobservable
Inputs
(Level 3)
$ —
$ —
—
—
—
$ —
$ —
—
—
—
—
—
13
—
17
20
—
$ 50
$ 727
997
303
$ 2,027
$ 40
$ 2,117
Total
$ 807
$ 2,205
3,232
1,228
11
$ 6,676
$ 961
385
1,313
643
897
51
230
417
310
228
(11)
$ 5,424
$ 801
997
698
$ 2,496
$ 448
$ 15,851
(1) Included $13 million of the Company’s common stock.
For pension or other postretirement benefit plan assets classified as Level 1 measurements (measured using quoted prices
in active markets), total fair value is either the price of the most recent trade at the time of the market close or the official close
price, as defined by the exchange on which the asset is most actively traded on the last trading day of the period, multiplied by
the number of units held without consideration of transaction costs.
For pension or other postretirement benefit plan assets classified as Level 2 measurements, where the security is frequently
traded in less active markets, fair value is based on the closing price at the end of the period; where the security is less
frequently traded, fair value is based on the price a dealer would pay for the security or similar securities, adjusted for any
terms specific to that asset or liability. Market inputs are obtained from well-established and recognized vendors of market data
and subjected to tolerance/quality checks. For derivative assets and liabilities, standard industry models are used to calculate
the fair value of the various financial instruments based on significant observable market inputs, such as foreign exchange
rates, commodity prices, swap rates, interest rates and implied volatilities obtained from various market sources.
Some pension or other postretirement benefit plan assets are held in funds where a net asset value is calculated based on
the fair value of the underlying assets and the number of shares owned. The classification of the fund (Level 1, 2 or 3
measurements) is determined based on the classification of the significant holdings within the fund. For all other pension or
other postretirement benefit plan assets for which observable inputs are used, fair value is derived through the use of fair value
models, such as a discounted cash flow model or other standard pricing models.