3M 2012 Annual Report Download - page 95
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89
reported in the active market in which the individual security is traded. Corporate bonds and notes, asset backed
securities and collateralized mortgage obligations are valued at either the yields currently available on comparable
securities of issuers with similar credit ratings or valued under a discounted cash flows approach that maximizes
observable inputs, such as current yields of similar instruments, but includes adjustments for certain risks that may not be
observable such as credit and liquidity risks. Swaps and derivative instruments are valued by the custodian using market
swap curves and market derived inputs.
The private equity portfolio is a diversified mix of partnership interests including buyouts, derivative instruments, direct
investments, distressed debt, growth equity, mezzanine, real estate and venture capital investments. Partnership interests
are valued using the most recent general partner statement of fair value, updated for any subsequent partnership
interests’ cash flows or expected changes in fair value.
Absolute return primarily consists of private partnership interests in hedge funds, hedge fund of funds and bank loan
funds. Partnership interests are valued using the NAV as determined by the independent administrator or custodian of the
fund.
Commodities consist of commodity-linked notes and commodity-linked derivative contracts designed to deliver investment
returns similar to the GSCI or Dow Jones UBS Commodity index returns. Commodities are valued at closing prices
determined by calculation agents for outstanding transactions.
Other items to reconcile to fair value of plan assets include the net of interest receivables, amounts due for securities sold,
foreign currency fluctuations, amounts payable for securities purchased and interest payable.
The following table sets forth a summary of changes in the fair values of the postretirement plans’ level 3 assets for the
years ended December 31, 2012 and 2011:
Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
Equities
Fixed Income
Private
Equity
Absolute
Return
Commodities
Total
(Millions)
Beginning balance at Jan. 1, 2011
$
16
$
4
$
226
$
20
$
3
$
269
Net transfers into / (out of) level 3
―
―
―
(2)
―
(2)
Purchases, sales, issuances, and
settlements, net
(1)
(3)
(43)
1
―
(46)
Realized gain / (loss)
―
1
(31)
―
―
(30)
Change in unrealized gains / (losses)
relating to instruments sold during
the period
(1)
(1)
20
(1)
―
17
Change in unrealized gains / (losses)
relating to instruments still held at
the reporting date
―
1
15
(1)
1
16
Ending balance at Dec. 31, 2011
14
2
187
17
4
224
Net transfers into / (out of) level 3
―
―
―
15
―
15
Purchases, sales, issuances, and
settlements, net
―
(2)
(27)
(7)
―
(36)
Realized gain / (loss)
―
1
11
2
―
14
Change in unrealized gains / (losses)
relating to instruments sold during
the period
―
(1)
(4)
(1)
―
(6)
Change in unrealized gains / (losses)
relating to instruments still held at
the reporting date
2
―
3
2
―
7
Ending balance at Dec. 31, 2012
$
16
$
―
$
170
$
28
$
4
$
218