NOTE 3.
INVESTMENTS AND FAIR VALUE MEASUREMENTS (CONTINUED)
Most corporate stocks and U.S. Treasury obligations are traded in active markets on national and international securities exchanges and are valued at closing prices on the last business day of each period presented. The mutual funds represent investments in index and international equity funds. The fair values of these investments are determined by reference to the funds’ underlying assets, which are principally marketable equity securities. Shares held in mutual funds are traded on national securities exchanges and are valued at the net asset value as of the last business day of each period presented. Money market funds and certificates of deposit are valued at cost, which approximates their fair value. U.S. Government Agency, municipal and corporate obligations are generally valued by benchmarking model-derived prices to quoted market prices and trade data for identical or comparable securities. To the extent that quoted prices are not available, fair value is determined based on a valuation model that include inputs such as interest rate yield curves and credit spreads. Securities traded in markets that are not considered active are valued based on quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Securities that trade infrequently and therefore have little or no price transparency are valued using the investment custodian’s best estimates. At June 30, 2017 and 2016, these securities had a weighted average length to maturity of 5.1 and 2.9 years, respectively, and a weighted average coupon rate of 4.58% and 4.38%, respectively. The fair value of the group annuity contract separate account is based on the net asset value per share by reference to the underlying assets, which consist primarily of mortgage loans and various short-term investments. Redemptions from the group annuity contract separate account are processed as follows: redemption requests of less than 80% are transferred on the business day following the third valuation date after receipt of the redemption request. Valuation date is defined as the close of business on the last business day of the month. In the case of full redemptions, the investment manager will transfer an amount equal to 80% of the value of the redeemed units calculated as of the second valuation date following receipt of the redemption request and such payment will be made on the first business day following the third valuation date. The final payment equal to the value of the remainder of the redeemed units will be transferred within three weeks after the third valuation date. Included in corporate stocks are shares of Ullico Inc., a non-publicly held company, with a cost value of $353,303 at both June 30, 2017 and 2016. This investment is generally considered to be illiquid due to the lack of available trading markets. It is not practical for the International Union to determine the fair value of these shares. The book value of these shares, as estimated by Ullico Inc. at the time of its independent audit, was $15.33 and $12.47 at December 31, 2016 and 2015, respectively. The total book value for the International Union’s shares is estimated to be $522,446 and $424,978 at June 30, 2017 and 2016, respectively. There is a high degree of subjectivity in estimating book value, and such values do not purport to represent the fair value of the investment. The International President serves on the 22 member board of directors of Ullico Inc.
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