Valero 2015 Annual Report Download - page 104
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Table of Contents
VALERO ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fair Value Measurements Using
Total as of
December 31,
2014
Level 1
Level 2
Level 3
Equity securities:
U.S. companies(a) $ 541
$ —
$ —
$ 541
International companies 144
—
—
144
Preferred stock 1
1
—
2
Mutual funds:
International growth 119
—
—
119
Index funds(b) 199
—
—
199
Corporate debt instruments —
263
—
263
Government securities:
U.S. Treasury securities 71
—
—
71
Other government securities —
100
—
100
Common collective trusts —
379
—
379
Private fund —
40
—
40
Insurance contracts —
18
—
18
Interest and dividends receivable 5
—
—
5
Cash and cash equivalents 75
22
—
97
Total $ 1,155
$ 823
$ —
$ 1,978
_____ _ ____________ _ _____________ __
(a) Equity securities are held in a wide range of industrial sectors, including consumer goods, information technology, healthcare, industrials, and financial services.
(b) This class includes primarily investments in approximately 60 percent equities and 40 percent bonds.
The investment policies and strategies for the assets of our pension plans incorporate a well-diversified approach that is expected to
earn long-term returns from capital appreciation and a growing stream of current income. This approach recognizes that assets are
exposed to risk and the market value of the pension plans’ assets may fluctuate from year to year. Risk tolerance is determined based
on our financial ability to withstand risk within the investment program and the willingness to accept return volatility. In line with the
investment return objective and risk parameters, the pension plans’ mix of assets includes a diversified portfolio of equity and fixed-
income investments. Equity securities include international stocks and a blend of U.S. growth and value stocks of various sizes of
capitalization. Fixed income securities include bonds and notes issued by the U.S. government and its agencies, corporate bonds, and
mortgage-backed securities. The aggregate asset allocation is reviewed on an annual basis. As of December 31, 2015, the target
allocations for plan assets are 70 percent equity securities and 30 percent fixed income investments.
The expected long-term rate of return on plan assets is based on a forward-looking expected asset return model. This model derives an
expected rate of return based on the target asset allocation of a plan’s assets. The underlying assumptions regarding expected rates of
return for each asset class reflect Aon Hewitt’s best expectations for these asset classes. The model reflects the positive effect of
periodic rebalancing among diversified asset classes. We select an expected asset return that is supported by this model.
98