Dow Chemical 2015 Annual Report Download - page 134
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124
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 related to derivative activity is mitigated by
utilizing multiple counterparties, collateral support agreements and centralized clearing, where appropriate.
The Northern Trust Collective Government Short Term Investment money market fund is utilized as the sweep vehicle for the
U.S. plans, which from time to time can represent a significant investment. For one U.S. plan, approximately half of the
liability is covered by a participating group annuity issued by Prudential Insurance Company.
The following tables summarize the bases used to measure the Company’s pension plan assets at fair value for the years ended
December 31, 2015 and 2014:
Basis of Fair Value Measurements of
Pension Plan Assets at December 31, 2015
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 $ 84 $ 733 $ — $ 817
Equity securities:
U.S. equity (1) $ 2,525 $ 558 $ 1 $ 3,084
Non-U.S. equity – developed countries 1,877 1,167 — 3,044
Emerging markets 462 542 27 1,031
Convertible bonds 26 177 — 203
Equity derivatives — 8 — 8
Total equity securities $ 4,890 $ 2,452 $ 28 $ 7,370
Fixed income securities:
U.S. government and municipalities $ — $ 1,320 $ — $ 1,320
U.S. agency and agency mortgage-backed securities — 279 — 279
Corporate bonds – investment grade — 1,527 — 1,527
Non-U.S. governments – developed countries — 1,161 — 1,161
Non-U.S. corporate bonds – developed countries — 917 — 917
Emerging market debt — 109 — 109
Other asset-backed securities — 88 1 89
High yield bonds 47 166 16 229
Other fixed income funds — 295 276 571
Fixed income derivatives — 33 — 33
Total fixed income securities $ 47 $ 5,895 $ 293 $ 6,235
Alternative investments:
Real estate $ 22 $ 38 $ 1,772 $ 1,832
Private equity — — 1,054 1,054
Absolute return — 483 695 1,178
Total alternative investments $ 22 $ 521 $ 3,521 $ 4,064
Other investments $ — $ 250 $ 38 $ 288
Total pension plan assets at fair value $ 5,043 $ 9,851 $ 3,880 $ 18,774
Less: Fair value of pension plan assets due to Olin (2) (179) — — (179)
Net pension plan assets at fair value $ 4,864 $ 9,851 $ 3,880 $ 18,595
(1) Includes no Company common stock.
(2) Pension plan assets due to Olin and expected to be transferred in 2016. See Note 6 for additional information.