Dow Chemical 2015 Annual Report Download - page 135

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Basis of Fair Value Measurements of
Pension Plan Assets at December 31, 2014
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 $ 61 $ 953 $ — $ 1,014
Equity securities:
U.S. equity (1) $ 3,011 $ 428 $ 9 $ 3,448
Non-U.S. equity – developed countries 1,814 1,410 — 3,224
Emerging markets 472 538 23 1,033
Convertible bonds 15 195 — 210
Equity derivatives — 7 — 7
Total equity securities $ 5,312 $ 2,578 $ 32 $ 7,922
Fixed income securities:
U.S. government and municipalities $ — $ 1,406 $ — $ 1,406
U.S. agency and agency mortgage-backed securities — 310 — 310
Corporate bonds – investment grade — 1,605 — 1,605
Non-U.S. governments – developed countries — 1,212 — 1,212
Non-U.S. corporate bonds – developed countries — 961 — 961
Emerging market debt — 93 — 93
Other asset-backed securities — 105 1 106
High yield bonds — 168 16 184
Other fixed income funds — 299 294 593
Fixed income derivatives — 31 — 31
Total fixed income securities $ — $ 6,190 $ 311 $ 6,501
Alternative investments:
Real estate $ 31 $ 36 $ 1,627 $ 1,694
Private equity — — 1,059 1,059
Absolute return — 586 656 1,242
Total alternative investments $ 31 $ 622 $ 3,342 $ 3,995
Other investments $ — $ 157 $ 40 $ 197
Total pension plan assets at fair value $ 5,404 $ 10,500 $ 3,725 $ 19,629
(1) Includes no Company common stock.
For pension 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 and 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 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 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.