2012 Annual Report  Plan Assets  61  Level 3 unobservable inputs are used when little or no market data is available. Equity funds and venture capital and limited  partnership investments classified as Level 3 within the fair value hierarchy are valued at estimated fair value. The estimated fair  value is based on the fair value of the underlying investment values or cost plus or minus accumulated earnings or losses which  approximates fair value. Insurance contract interests are carried at contract value, which approximates the estimated fair value  and is based on the fair value of the underlying investment of the insurance company. Insurance contracts are held by certain  foreign pension plans. Valuation models for corporate debt securities, collateralized mortgage obligation bonds and asset backed  securities classified as Level 3 within the fair value hierarchy are based on estimated bids from brokers or other third-party vendor  sources that utilize expected cash flow streams and collateral values including assessments of counterparty credit quality, default  risk, discount rates and overall capital market liquidity.  Level 2 inputs include observable prices for similar instruments, quoted prices for identical or similar instruments in markets that  are not active, and other observable inputs that can be corroborated by market data for substantially the full term of the assets or  liabilities. Equity funds, fixed income funds, event driven hedge funds and short-term investment funds classified as Level 2  within the fair value hierarchy are valued at the net asset value of their shares held at year end. There were no significant  unfunded commitments or restrictions on redemptions related to investments valued at NAV as of December 31, 2012. Corporate  debt securities, government mortgage backed securities, collateralized mortgage obligation bonds, asset backed securities, U.S.  treasury and agency securities, state and municipal bonds, and real estate interests classified as Level 2 within the fair value  hierarchy are valued utilizing observable prices for similar instruments and quoted prices for identical or similar instruments in  markets that are not active.  Level 1 inputs utilize quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets  or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. These instruments include equity securities,  equity funds, and fixed income funds publicly traded on a national securities exchange, U.S. treasury and agency securities, and  cash and cash equivalents. Cash and cash equivalents are highly liquid investments with original maturities of three months or  less at the time of purchase and are recognized at cost, which approximates fair value. Pending trade sales and purchases are  included in cash and cash equivalents until final settlement.  The investment valuation policies per investment class are as follows:  The fair value of pension and postretirement plan assets by asset category at December 31, 2012 and 2011 was as follows:  December 31, 2012  December 31, 2011  Dollars in Millions  Level 1 Level 2 Level 3  Total  Level 1 Level 2 Level 3  Total Equity Securities $  2,196 $  - $  - $ 2,196 $ 1,679 $   - $   - $ 1,679  Equity Funds  410 1,555 1,965 236 1,559 4 1,799  Fixed Income Funds  234 401  - 635 203 419  - 622  Corporate Debt Securities   - 453 3 456  - 315 10 325  Venture Capital and Limited Partnerships   - 381 381  - 408 408  Government Mortgage Backed Securities   - 350  8 358  - 372  8 380  U.S. Treasury and Agency Securities  259  - 259 304  - 304  Short-Term Investment Funds   - 189 189  - 306 306  Insurance Contracts   -  132 132  -  125 125  Event Driven Hedge Funds   - 92  - 92  - 86  - 86  Collateralized Mortgage Obligation Bonds  50 6 56 63 7 70  State and Municipal Bonds   - 44  3 47  - 34  - 34  Asset Backed Securities   23 3 26 17 4 21  Real Estate   3  -  - 3  - 12  - 12  Cash and Cash Equivalents  58 58 (24)  - (24) Total plan assets at fair value  $  2,901 $ 3,416 $ 536 $ 6,853 $ 2,094 $  3,487 $  566 $ 6,147 