Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2016

Fair Value of Assets and Liabilities Measured on Recurring Basis

The following tables present these assets and liabilities at September 30, 2016, December 31, 2015, and September 30, 2015.



September 30, 2016	Level 1		Level 2		Level 3		Total
in millions
ASSETS MEASURED ON A RECURRING BASIS
Trading account assets:
U.S. Treasury, agencies and corporations	—		$	712	—		$	712
States and political subdivisions	—		87		—		87
Collateralized mortgage obligations	—		—		—		—
Other mortgage-backed securities	—		93		—		93
Other securities	—		28		—		28
Total trading account securities	—		920		—		920
Commercial loans	—		6		—		6
Total trading account assets	—		926		—		926
Securities available for sale:
U.S. Treasury, agencies and corporations	—		190		—		190
States and political subdivisions	—		11		—		11
Agency residential collateralized mortgage obligations ^(a)	—		17,438		—		17,438
Agency residential mortgage-backed securities ^(a)	—		2,018		—		2,018
Agency commercial mortgage-backed securities	—		863		—		863
Other securities	$	3	—		$	17	20
Total securities available for sale	3		20,520		17		20,540
Other investments:
Principal investments:
Direct	—		—		27		27
Indirect (measured at NAV) ^(b)	—		—		—		173
Total principal investments	—		—		27		200
Equity and mezzanine investments:
Indirect (measured at NAV)^(b)	—		—		—		8
Total equity and mezzanine investments	—		—		—		8
Total other investments	—		—		27		208
Loans, net of unearned income	—		—		—		—
Loans held for sale	—		62		—		62
Derivative assets:
Interest rate	—		1,581		9		1,590
Foreign exchange	83		9		—		92
Commodity	—		161		—		161
Credit	—		1		3		4
Other	—		—		4		4
Derivative assets	83		1,752		16		1,851
Netting adjustments^(c)	—		—		—		(547		)
Total derivative assets	83		1,752		16		1,304
Accrued income and other assets	—		1		—		1
Total assets on a recurring basis at fair value	$	86	$	23,261	$	60	$	23,041
LIABILITIES MEASURED ON A RECURRING BASIS
Bank notes and other short-term borrowings:
Short positions	$	210	$	599	—		$	809
Derivative liabilities:
Interest rate	—		1,068		—		1,068
Foreign exchange	80		8		—		88
Commodity	—		151		—		151
Credit	—		5		$	1	6
Other	—		1		—		1
Derivative liabilities	80		1,233		1		1,314
Netting adjustments ^(c)	—		—		—		(464		)
Total derivative liabilities	80		1,233		1		850
Accrued expense and other liabilities	—		4		—		4
Total liabilities on a recurring basis at fair value	$	290	$	1,836	$	1	$	1,663


(a)	"Collateralized mortgage obligations” and “Other mortgage-back securities” were renamed to “Agency residential collateralized mortgage obligations” and “Agency residential mortgage-backed securities”, respectively, in September 2016. There was no reclassification of previously reported balances.


(b)	Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.

(c)

Netting adjustments represent the amounts recorded to convert our derivative assets and liabilities from a gross basis to a net basis in accordance with applicable accounting guidance. The net basis takes into account the impact of bilateral collateral and master netting agreements that allow us to settle all derivative contracts with a single counterparty on a net basis and to offset the net derivative position with the related cash collateral. Total derivative assets and liabilities include these netting adjustments.



December 31, 2015	Level 1		Level 2		Level 3		Total
in millions
ASSETS MEASURED ON A RECURRING BASIS
Trading account assets:
U.S. Treasury, agencies and corporations	—		$	704	—		$	704
States and political subdivisions	—		25		—		25
Collateralized mortgage obligations	—		—		—		—
Other mortgage-backed securities	—		26		—		26
Other securities	$	3	24		—		27
Total trading account securities	3		779		—		782
Commercial loans	—		6		—		6
Total trading account assets	3		785		—		788
Securities available for sale:
States and political subdivisions	—		14		—		14
Agency residential collateralized mortgage obligations ^(a)	—		11,995		—		11,995
Agency residential mortgage-backed securities ^(a)	—		2,189		—		2,189
Other securities	3		—		$	17	20
Total securities available for sale	3		14,198		17		14,218
Other investments:
Principal investments:
Direct	—		19		50		69
Indirect (measured at NAV) ^(b)	—		—		—		235
Total principal investments	—		19		50		304
Equity and mezzanine investments:
Indirect (measured at NAV) ^(b)	—		—		—		8
Total equity and mezzanine investments	—		—		—		8
Total other investments	—		19		50		312
Derivative assets:
Interest rate	—		868		16		884
Foreign exchange	143		8		—		151
Commodity	—		444		—		444
Credit	—		4		2		6
Derivative assets	143		1,324		18		1,485
Netting adjustments ^(c)	—		—		—		(866		)
Total derivative assets	143		1,324		18		619
Accrued income and other assets	—		1		—		1
Total assets on a recurring basis at fair value	$	149	$	16,327	$	85	$	15,938
LIABILITIES MEASURED ON A RECURRING BASIS
Bank notes and other short-term borrowings:
Short positions	—		$	533	—		$	533
Derivative liabilities:
Interest rate	—		563		—		563
Foreign exchange	$	116	8		—		124
Commodity	—		433		—		433
Credit	—		5		$	1	6
Derivative liabilities	116		1,009		1		1,126
Netting adjustments ^(c)	—		—		—		(494		)
Total derivative liabilities	116		1,009		1		632
Accrued expense and other liabilities	—		1		—		1
Total liabilities on a recurring basis at fair value	$	116	$	1,543	$	1	$	1,166


(a)	"Collateralized mortgage obligations” and “Other mortgage-back securities” were renamed to “Agency residential collateralized mortgage obligations” and “Agency residential mortgage-backed securities”, respectively, in September 2016. There was no reclassification of previously reported balances.


(b)	Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.

(c)



September 30, 2015	Level 1		Level 2		Level 3		Total
in millions
ASSETS MEASURED ON A RECURRING BASIS
Trading account assets:
U.S. Treasury, agencies and corporations	—		$	694	—		$	694
States and political subdivisions	—		35		—		35
Collateralized mortgage obligations	—		—		—		—
Other mortgage-backed securities	—		46		—		46
Other securities	$	4	23		—		27
Total trading account securities	4		798		—		802
Commercial loans	—		9		—		9
Total trading account assets	4		807		—		811
Securities available for sale:
States and political subdivisions	—		15		—		15
Agency residential collateralized mortgage obligations ^(a)	—		12,003		—		12,003
Agency residential mortgage-backed securities ^(a)	—		2,330		—		2,330
Other securities	11		—		$	17	28
Total securities available for sale	11		14,348		17		14,376
Other investments:
Principal investments:
Direct	—		—		66		66
Indirect (measured at NAV) ^(b)	—		—		—		271
Total principal investments	—		—		66		337
Equity and mezzanine investments:
Indirect (measured at NAV) ^(b)	—		—		—		9
Total equity and mezzanine investments	—		—		—		9
Other (measured at NAV) ^(b)	—		—		—		4
Total other investments	—		—		66		350
Derivative assets:
Interest rate	—		1,097		22		1,119
Foreign exchange	120		10		—		130
Commodity	—		482		—		482
Credit	—		4		3		7
Derivative assets	120		1,593		25		1,738
Netting adjustments^(c)	—		—		—		(945		)
Total derivative assets	120		1,593		25		793
Accrued income and other assets	—		2		—		2
Total assets on a recurring basis at fair value	$	135	$	16,750	$	108	$	16,332
LIABILITIES MEASURED ON A RECURRING BASIS
Bank notes and other short-term borrowings:
Short positions	$	—	$	677	—		$	677
Derivative liabilities:
Interest rate	—		656		—		656
Foreign exchange	102		10		—		112
Commodity	—		469		—		469
Credit	—		5		—		5
Derivative liabilities	102		1,140		—		1,242
Netting adjustments ^(c)	—		—		—		(566		)
Total derivative liabilities	102		1,140		—		676
Accrued expense and other liabilities	—		2		—		2
Total liabilities on a recurring basis at fair value	$	102	$	1,819	—		$	1,355


(a)	"Collateralized mortgage obligations” and “Other mortgage-back securities” were renamed to “Agency residential collateralized mortgage obligations” and “Agency residential mortgage-backed securities”, respectively, in September 2016. There was no reclassification of previously reported balances.


(b)	Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.

(c)

Change in Fair Values of Level 3 Financial Instruments

The following table shows the components of the change in the fair values of our Level 3 financial instruments for the three and nine months ended September 30, 2016, and September 30, 2015. We mitigate the credit risk, interest rate risk, and risk of loss related to many of these Level 3 instruments by using securities and derivative positions classified as Level 1 or Level 2. Level 1 and Level 2 instruments are not included in the following table. Therefore, the gains or losses shown do not include the impact of our risk management activities.



in millions	Beginning of Period Balance		Gains (Losses) Included in Earnings				Purchases		Sales			Settlements		Transfers Other			Transfers into Level 3 ^(e)			Transfers out of Level 3^(e)				End of Period Balance ^(g)		Unrealized Gains (Losses) Included in Earnings
Nine months ended September 30, 2016
Securities available for sale
Other securities	$	17	—				—		—			—		—			—			—				$	17	—
Other investments
Principal investments
Direct	50		$	7		^(c)	—		$	(30	)	—		—			—			—				27		$	2		^(c)
Other indirect	20		—				—		(20		)	—		—			—			—				—		(1		)	^(c)

Derivative instruments ^(b)
Interest rate	16		6			^(d)	—		—			—		—			$	8	^(f)	$	(21	)	^(f)	9		—
Credit	1		(9		)	^(d)	—		—			$	10	—			—			—				2		—
Other ^(a)	—		—				$	5	—			—		$	(1	)	—			—				4		—
Three months ended September 30, 2016
Securities available for sale
Other securities	$	17	—				—		—			—		—			—			—				$	17	—
Other investments
Principal investments
Direct	24		$	4		^(c)	—		$	(1	)	—		—			—			—				27		$	3		^(c)

Derivative instruments ^(b)
Interest rate	15		—				—		—			—		—			$	5		$	(11	)	^(f)	9		—
Credit	2		(3		)	^(d)	—		—			$	3	—			—			—				2		—
Other ^(a)	—		—				$	5	—			—		$	(1	)	—			—				4		—



in millions	Beginning of Period Balance		Gains (Losses) Included in Earnings				Purchases		Sales			Settlements			Transfers into Level 3 ^(e)			Transfers out of Level 3 ^(e)				End of Period Balance ^(g)		Unrealized Gains (Losses) Included in Earnings
Nine months ended September 30, 2015
Securities available for sale
Other securities	$	10	—				$	7	—			—			—			—				$	17	—
Other investments
Principal investments
Direct	102		$	20		^(c)	5		$	(61	)	—			—			—				66		—
Equity and mezzanine investments
Direct	—		2			^(c)	—		(2		)	—			—			—				—		2		^(c)
Derivative instruments ^(b)
Interest rate	13		5			^(d)	1		—			—			$	10	^(f)	$	(7	)	^(f)	22		—
Credit	2		(7		)	^(d)	—		8			—			—			—				3		—
Three months ended September 30, 2015
Securities available for sale
Other securities	$	10	—				$	7	—			—			—			—				$	17	—
Other investments
Principal investments
Direct	70		$	4		^(c)	3		$	(11	)	—			—			—				66		$	3	^(c)
Derivative instruments ^(b)
Interest rate	16		6			^(d)	—		—			—			$	2	^(f)	$	(2	)	^(f)	22		—
Credit	3		(3		)	^(d)	—		8			$	(5	)	—			—				3		—


(a)	Interest rate lock commitments totaling $4 million were acquired as part of the First Niagara acquisition.


(b)	Amounts represent Level 3 derivative assets less Level 3 derivative liabilities.


(c)	Realized and unrealized gains and losses on principal investments are reported in “net gains (losses) from principal investing” on the income statement. Realized and unrealized losses on other and private equity and mezzanine investments are reported in “other income” on the income statement.


(d)	Realized and unrealized gains and losses on derivative instruments are reported in “corporate services income” and “other income” on the income statement.


(e)	Our policy is to recognize transfers into and transfers out of Level 3 as of the end of the reporting period.


(f)	Certain derivatives previously classified as Level 2 were transferred to Level 3 because Level 3 unobservable inputs became significant. Certain derivatives previously classified as Level 3 were transferred to Level 2 because Level 3 unobservable inputs became less significant.


(g)	There were no issuances for the nine-month periods ended September 30, 2016, and September 30, 2015.

Assets and Liabilities Measured at Fair Value on Nonrecurring Basis

The following table presents our assets measured at fair value on a nonrecurring basis at September 30, 2016, December 31, 2015, and September 30, 2015:



	September 30, 2016
in millions	Level 1	Level 2	Level 3		Total
ASSETS MEASURED ON A NONRECURRING BASIS
Impaired loans	—	—	$	6	$	6
Loans held for sale ^(a)	—	—	—		—
Accrued income and other assets	—	—	7		7
Total assets on a nonrecurring basis at fair value	—	—	$	13	$	13
	December 31, 2015
in millions	Level 1	Level 2	Level 3		Total
ASSETS MEASURED ON A NONRECURRING BASIS
Impaired loans	—	—	—		—
Loans held for sale^(a)	—	—	—		—
Accrued income and other assets	—	—	$	7	$	7
Total assets on a nonrecurring basis at fair value	—	—	$	7	$	7
	September 30, 2015
in millions	Level 1	Level 2	Level 3		Total
ASSETS MEASURED ON A NONRECURRING BASIS
Impaired loans	—	—	$	3	$	3
Loans held for sale ^(a)	—	—	—		—
Accrued income and other assets	—	—	6		6
Total assets on a nonrecurring basis at fair value	—	—	$	9	$	9


(a)	During the first nine months of 2016, we transferred $24 million of commercial loans and leases at their current fair value from held-to-maturity portfolio to held-for-sale status, compared to $62 million during 2015, and $24 million during the first nine months of 2015.

Quantitative Information about Level 3 Fair Value Measurements

The range and weighted-average of the significant unobservable inputs used to fair value our material Level 3 recurring and nonrecurring assets at September 30, 2016, December 31, 2015, and September 30, 2015, along with the valuation techniques used, are shown in the following table:



September 30, 2016	Fair Value of Level 3 Assets		Valuation Technique	Significant Unobservable Input	Range (Weighted-Average)
dollars in millions	Fair Value of Level 3 Assets		Valuation Technique	Significant Unobservable Input	Range (Weighted-Average)
Recurring
Other investments — principal investments — direct:	$	27	Individual analysis of the condition of each investment
Debt instruments				EBITDA multiple	6.30 - 7.00 (6.50)
Equity instruments of private companies				EBITDA multiple (where applicable)	N/A (6.3)
Nonrecurring
Impaired loans	6		Fair value of underlying collateral	Discount	00.00 - 80.00% (14.00%)



December 31, 2015	Fair Value of Level 3 Assets		Valuation Technique	Significant Unobservable Input	Range (Weighted-Average)
dollars in millions	Fair Value of Level 3 Assets		Valuation Technique	Significant Unobservable Input	Range (Weighted-Average)
Recurring
Other investments — principal investments — direct:	$	50	Individual analysis of the condition of each investment
Debt instruments				EBITDA multiple	N/A (5.40)
Equity instruments of private companies				EBITDA multiple (where applicable)	5.40 - 6.70 (6.60)
Nonrecurring
Impaired loans ^(a)	—		Fair value of underlying collateral	Discount	00.00 - 34.00% (15.00%)



September 30, 2015	Fair Value of Level 3 Assets		Valuation Technique	Significant Unobservable Input	Range (Weighted-Average)
dollars in millions	Fair Value of Level 3 Assets		Valuation Technique	Significant Unobservable Input	Range (Weighted-Average)
Recurring
Other investments — principal investments — direct:	$	66	Individual analysis of the condition of each investment
Debt instruments				EBITDA multiple	N/A (5.40)
Equity instruments of private companies				EBITDA multiple (where applicable)	5.40 - 6.50 (6.40)
Equity instruments of public companies			Market approach	Discount	N/A (6.00)
Nonrecurring
Impaired loans	3		Fair value of underlying collateral	Discount	00.00 - 50.00% (14.00%)


(a)	Impaired loans are less than $1 million at December 31, 2015.

Fair Value Disclosures of Financial Instruments

The levels in the fair value hierarchy ascribed to our financial instruments and the related carrying amounts at September 30, 2016, December 31, 2015, and September 30, 2015, are shown in the following table.



	September 30, 2016
			Fair Value
in millions	Carrying Amount		Level 1		Level 2		Level 3		Measured at NAV		Netting Adjustment				Total
ASSETS
Cash and short-term investments ^(a)	$	3,965	$	3,965	—		—		—		—				$	3,965
Trading account assets ^(b)	926		—		$	926	—		—		—				926
Securities available for sale ^(b)	20,540		3		20,520		$	17	—		—				20,540
Held-to-maturity securities ^(c)	8,995		—		9,048		—		—		—				9,048
Other investments ^(b)	747		—		—		561		$	181	—				742
Loans, net of allowance ^(d)	84,663		—		—		83,564		—		—				83,564
Loans held for sale ^(b)	1,137		—		62		1,075		—		—				1,137
Derivative assets ^(b)	1,304		83		1,752		16		—		$	(547	)	^(f)	1,304
LIABILITIES
Deposits with no stated maturity ^(a)	$	93,791	—		$	93,791	—		—		—				$	93,791
Time deposits ^(e)	10,394		—		10,464		—		—		—				10,464
Short-term borrowings ^(a)	1,411		$	210	1,201		—		—		—				1,411
Long-term debt ^(e)	12,622		12,784		325		—		—		—				13,109
Derivative liabilities ^(b)	850		80		1,233		1		—		$	(464	)	^(f)	850



	December 31, 2015
			Fair Value
in millions	Carrying Amount		Level 1		Level 2		Level 3		Measured at NAV		Netting Adjustment				Total
ASSETS
Cash and short-term investments ^(a)	$	3,314	$	3,314	—		—		—		—				$	3,314
Trading account assets ^(b)	788		3		$	785	—		—		—				788
Securities available for sale ^(b)	14,218		3		14,198		$	17	—		—				14,218
Held-to-maturity securities ^(c)	4,897		—		4,848		—		—		—				4,848
Other investments ^(b)	655		—		19		393		$	243	—				655
Loans, net of allowance ^(d)	59,080		—		—		57,508		—		—				57,508
Loans held for sale ^(b)	639		—		—		639		—		—				639
Derivative assets ^(b)	619		143		1,324		18		—		$	(866	)	^(f)	619
LIABILITIES
Deposits with no stated maturity ^(a)	$	65,527	—		$	65,527	—		—		—				$	65,527
Time deposits ^(e)	5,519		—		5,575		—		—		—				5,575
Short-term borrowings ^(a)	905		—		905		—		—		—				905
Long-term debt ^(e)	10,186		$	9,987	420		—		—		—				10,407
Derivative liabilities ^(b)	632		116		1,009		$	1	—		$	(494	)	^(f)	632



	September 30, 2015
			Fair Value
in millions	Carrying Amount		Level 1		Level 2		Level 3		Measured at NAV		Netting Adjustment				Total
ASSETS
Cash and short-term investments^(a)	$	2,434	$	2,434	—		—		—		—				$	2,434
Trading account assets^(b)	811		4		$	807	—		—		—				811
Securities available for sale ^(b)	14,376		11		14,348		$	17	—		—				14,376
Held-to-maturity securities ^(c)	4,936		—		4,940		—		—		—				4,940
Other investments ^(b)	691		—		—		407		$	284	—				691
Loans, net of allowance ^(d)	59,295		—		—		57,497		—		—				57,497
Loans held for sale ^(b)	916		—		—		916		—		—				916
Derivative assets ^(b)	793		120		1,593		25		—		$	(945	)	^(f)	793
LIABILITIES
Deposits with no stated maturity ^(a)	$	65,624	—		$	65,624	—		—		—				$	65,624
Time deposits ^(e)	5,449		$	427	5,075		—		—		—				5,502
Short-term borrowings ^(a)	1,084		—		1,084		—		—		—				1,084
Long-term debt ^(e)	10,310		10,146		463		—		—		—				10,609
Derivative liabilities ^(b)	676		102		1,140		—		—		$	(566	)	^(f)	676

Valuation Methods and Assumptions


(a)	Fair value equals or approximates carrying amount. The fair value of deposits with no stated maturity does not take into consideration the value ascribed to core deposit intangibles.

(b)

Information pertaining to our methodology for measuring the fair values of these assets and liabilities is included in the sections entitled “Qualitative Disclosures of Valuation Techniques” and “Assets Measured at Fair Value on a Nonrecurring Basis” in this Note. Investments accounted for under the equity method are not included in "Fair Value Disclosures of Financial Instruments" table above.

(c)

Fair values of held-to-maturity securities are determined by using models that are based on security-specific details, as well as relevant industry and economic factors. The most significant of these inputs are quoted market prices, interest rate spreads on relevant benchmark securities, and certain prepayment assumptions. We review the valuations derived from the models to ensure they are reasonable and consistent with the values placed on similar securities traded in the secondary markets.

(d)

The fair value of loans is based on the present value of the expected cash flows. The projected cash flows are based on the contractual terms of the loans, adjusted for prepayments and use of a discount rate based on the relative risk of the cash flows, taking into account the loan type, maturity of the loan, liquidity risk, servicing costs, and a required return on debt and capital. In addition, an incremental liquidity discount is applied to certain loans, using historical sales of loans during periods of similar economic conditions as a benchmark. The fair value of loans includes lease financing receivables at their aggregate carrying amount, which is equivalent to their fair value.


(e)	Fair values of time deposits and long-term debt are based on discounted cash flows utilizing relevant market inputs.

(f)

Principal Investments [Member]

Fair Value of Direct and Indirect Investments, Related Unfunded Commitments and Financial Support Provided

The following table presents the fair value of our indirect investments and related unfunded commitments at September 30, 2016. We did not provide any financial support to investees related to our direct and indirect investments for the nine months ended September 30, 2016, and September 30, 2015.



September 30, 2016	Fair Value		Unfunded Commitments
in millions	Fair Value		Unfunded Commitments
INVESTMENT TYPE
Indirect investments
Passive funds ^(a)	$	8	$	2
Total	$	8	$	2

(a)

We invest in passive funds, which are multi-investor private equity funds. These investments can never be redeemed. Instead, distributions are received through the liquidation of the underlying investments in the funds. Some funds have no restrictions on sale, while others require investors to remain in the fund until maturity. The funds will be liquidated over a period of one to three years. The purpose of KREEC’s funding is to allow funds to make additional investments and keep a certain market value threshold in the funds. KREEC is obligated to provide financial support, as all investors are required, to the funds based on its ownership percentage, as noted in the Limited Partnership Agreements.

Private Equity and Mezzanine Investments [Member]

Fair Value of Direct and Indirect Investments, Related Unfunded Commitments and Financial Support Provided

The following table presents the fair value of our direct and indirect principal investments and related unfunded commitments at September 30, 2016, as well as financial support provided for the nine months ended September 30, 2016, and September 30, 2015.



					Financial support provided
					Three months ended September 30,						Nine months ended September 30,
	September 30, 2016				2016			2015			2016				2015
in millions	Fair Value		Unfunded Commitments		Funded Commitments		Funded Other	Funded Commitments		Funded Other	Funded Commitments		Funded Other		Funded Commitments		Funded Other
INVESTMENT TYPE
Direct investments ^(a)	$	27	—		—		—	—		—	—		$	13	—		$	2
Indirect investments^(b) (measured at NAV)	173		$	42	$	2	—	$	2	—	$	5	—		$	7	—
Total	$	200	$	42	$	2	—	$	2	—	$	5	$	13	$	7	$	2

(a)

Our direct investments consist of equity and debt investments directly in independent business enterprises. Operations of the business enterprises are handled by management of the portfolio company. The purpose of funding these enterprises is to provide financial support for business development and acquisition strategies. We infuse equity capital based on an initial contractual cash contribution and later from additional requests on behalf of the companies’ management.

(b)

Our indirect investments consist of buyout funds, venture capital funds, and fund of funds. These investments are generally not redeemable. Instead, distributions are received through the liquidation of the underlying investments of the fund. An investment in any one of these funds typically can be sold only with the approval of the fund’s general partners. We estimate that the underlying investments of the funds will be liquidated over a period of one to eight years. The purpose of funding our capital commitments to these investments is to allow the funds to make additional follow-on investments and pay fund expenses until the fund dissolves. We, and all other investors in the fund, are obligated to fund the full amount of our respective capital commitments to the fund based on our and their respective ownership percentages, as noted in the applicable Limited Partnership Agreement.

- Definition

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, provide the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (b) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (c) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) for loans and other receivables held as assets, the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk, the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk; and (3) certain other disclosures as required or determined to be provided.

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