Dow Chemical 2012 Annual Report Download - page 147

121
Basis of Fair Value Measurements of
Pension Plan Assets at December 31, 2011
Quoted Prices
in Active
Markets for
Identical Items
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
In millions (Level 1) (Level 2) (Level 3) Total
Cash and cash equivalents $ 52 $ 771 $ — $ 823
Equity securities:
U.S. equity (1) $ 2,257 $ 184 $ 3 $ 2,444
Non-U.S. equity – developed countries 1,660 1,059 9 2,728
Emerging markets 415 414 4 833
Convertible bonds — 169 — 169
Equity derivatives 16—7
Total equity securities $ 4,333 $ 1,832 $ 16 $ 6,181
Fixed income securities:
U.S. government and municipalities $ — $ 1,181 $ 1 $ 1,182
U.S. agency and agency mortgage-backed
securities — 482 2 484
Corporate bonds – investment grade — 1,461 — 1,461
Non-U.S. governments – developed countries — 1,073 — 1,073
Non-U.S. corporate bonds – developed countries — 664 — 664
Emerging market debt —54—54
Other asset-backed securities — 147 15 162
High yield bonds — 337 16 353
Other fixed income funds — 268 66 334
Fixed income derivatives — 167 — 167
Total fixed income securities $ — $ 5,834 $ 100 $ 5,934
Alternative investments:
Real estate $ 30 $ 29 $ 999 $ 1,058
Private equity — — 985 985
Absolute return — 448 344 792
Total alternative investments $ 30 $ 477 $ 2,328 $ 2,835
Other investments $ — $ 304 $ 42 $ 346
Total pension plan assets at fair value $ 4,415 $ 9,218 $ 2,486 $ 16,119
(1) Included less than $1 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 2 or 3
measurements) is determined based on the lowest level classification of 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.