KeyBank 2009 Annual Report Download - page 116

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS KEYCORP AND SUBSIDIARIES
asset allocation policy. The following table shows the asset target
allocations prescribed by the pension funds’ investment policies.
Equity securities include common stocks of domestic and foreign
companies, as well as foreign company stocks traded as American
Depositary Shares on U.S. stock exchanges. Fixed income securities
include investments in domestic- and foreign-issued corporate bonds, U.S.
government and agency bonds, and mutual funds. Convertible securities
include investments in convertible preferred stocks and convertible
bonds. Other assets include deposits under insurance company contracts
and an investment in a multi-manager, multi-strategy investment fund.
Although the pension funds’ investment policies conditionally permit the
use of derivative contracts, no such contracts have been entered into, and
we do not expect to employ such contracts in the future.
Descriptions of the valuation methodologies used to measure the fair
value of pension plan assets are as follows:
Equity securities. Equity securities traded on securities exchanges are
valued at the closing price on the exchange or system where the security
is principally traded. These securities are classified as Level 1 since quoted
prices for identical securities in active markets are available.
Debt securities. Substantially all debt securities are investment grade and
include domestic and foreign-issued corporate bonds and U.S.
government and agency bonds. These securities are valued using
evaluated prices provided by Interactive Data, a third-party valuation
service. Because the evaluated prices are based on observable inputs, such
as dealer quotes, available trade information, spreads, bids and offers,
prepayment speeds, U.S. Treasury curves and interest rate movements,
securities in this category are classified as Level 2.
Mutual funds. Investments in mutual funds are valued at their closing
net asset value. Exchange-traded mutual funds are valued at the closing
price on the exchange or system where the security is principally traded.
These securities are generally classified as Level 1 since quoted prices for
identical securities in active markets are available.
Common trust funds. Investments in common trust funds are valued at
their closing net asset value. Because net asset values are based primarily
on observable inputs, most notably quoted prices of similar assets,
these investments are classified as Level 2.
Insurance company contracts. Deposits under insurance company
contracts are valued by the insurance companies. Because these
valuations are determined using a significant number of unobservable
inputs, these investments are classified as Level 3.
Multi-strategy investment funds. Investments in investment funds are
valued by the investment managers of the funds based on the fair value
of the fund’sunderlying investments. Because this valuation is determined
using a significant number of unobservable inputs, this fund is classified
as Level 3.
The following table shows the fair values of our pension plan assets by
asset category.
Target Allocation
Asset Class 2009
Equity securities 55%
Fixed income securities 25
Convertible securities 5
Other assets 15
Total 100%
December 31, 2009
in millions Level 1 Level 2 Level 3 Total
ASSET CATEGORY
Equity securities:
U.S. $374 — — $374
International 55 — — 55
Fixed income securities:
Corporate bonds — U.S. — $ 55 — 55
Corporate bonds — International — 5— 5
U.S. government and agency — 46 — 46
Mutual funds:
U.S. equity 1 — — 1
International equity 81 1 — 82
U.S. government and agency 50 — — 50
Common trust funds:
U.S. equity — 24 — 24
Fixed income securities — 14 — 14
Convertible securities — 66 —66
Short-term investments — 30 — 30
Insurance company contracts — — $11 11
Multi-strategy investment funds — — 26 26
Total net assets at fair value $561 $241 $37 $839