instruments. While most corporate debt securities are categorized in Level 2 of the
fair value hierarchy, in instances where lower relative weight is placed on transaction prices, quotations, or similar observable inputs,
they are categorized in Level 3.
Equity securities: Securities are stated at the last reported sales price or closing price on the day
of valuation taken from the primary exchange where the security is principally traded. To the extent these securities
are actively traded and valuation adjustments are not applied, they are categorized in Level 1 of the fair value hierarchy. Equities traded
on inactive markets or valued by reference to similar instruments are generally categorized in Level 2 or Level 3 if inputs are unobservable.
Foreign equity securities: Securities in which the primary trading market closes at the same time or after the
NYSE, are valued based on quotations from the primary market in which they are traded and are categorized in
Level 1. Because many foreign securities markets and exchanges close prior to the close of the NYSE, closing prices for foreign securities
in those markets or on those exchanges do not reflect the events that occur after that close. Certain foreign securities may be fair valued
using a pricing service that considers the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets
for investments such as American Depositary Receipts, financial futures, or ETFs and the movement of certain indices of securities
based on a statistical analysis of their historical relationship; such valuations generally are categorized in Level 2.
Foreign government obligations: Foreign government obligations are normally valued using a model that incorporates
market observable data such as reported sales of similar securities, broker quotes, yields, bids, offers,
and reference data. Certain securities are valued by principally using dealer quotations. Foreign government obligations generally are
categorized in Level 2 of the fair value hierarchy, or Level 3 if inputs are unobservable.
Mortgage-backed securities: The fair value of mortgage-backed securities is estimated based on models that consider
issuer type, coupon, cash flows, mortgage prepayment projection tables and adjustable rate mortgage
evaluations that incorporate index data, periodic life caps and the next coupon reset date. To the extent the inputs are observable
and timely, the values would generally be categorized in Level 2 of the fair value hierarchy; otherwise they are categorized
in Level 3.
Municipal government obligations: The fair value of municipal government obligations and variable rate notes is estimated
based on models that consider, among other factors, information received from market makers
and broker-dealers, current trades, bid-want lists, offerings, market movements, the liquidity of the bond, state of issuance, benchmark
yield curves, and bond or note insurance. To the extent the inputs are observable and timely, the values would generally be categorized
in Level 2 of the fair value hierarchy; otherwise they are categorized in Level 3.
U.S. government agency obligations: U.S. government agency obligations are comprised of two main categories consisting
of agency issued debt and mortgage pass-throughs. Generally, agency issued debt securities are
valued in a manner similar to U.S. government obligations. Mortgage pass-throughs include to be announced (“TBA”) securities and mortgage pass-through certificates. Generally, TBA securities and mortgage pass-throughs are valued using dealer quotations. Depending
on market activity levels and whether quotations or other observable data are used, these securities are typically categorized in Level
2 of the fair value hierarchy; otherwise they would be categorized in Level 3.
U.S. government obligations: U.S. government obligations are normally valued using a model that incorporates market
observable data such as reported sales of similar securities, broker quotes, yields, bids, offers,
and reference data. Certain securities are valued by principally using dealer quotations. U.S. government obligations generally are categorized
in Level 2 of the fair value hierarchy, or Level 3 if inputs are unobservable.
Warrants: Warrants may be priced intrinsically using a model that incorporates the subscription
or strike price, the daily market price for the underlying security, and a subscription ratio. If the inputs are unavailable, or if
the subscription or strike price is higher than the market price, then the warrants are priced at zero. Warrants are generally categorized in
Level 2 of the fair value hierarchy, or Level 3 if inputs are unobservable.
Short-term notes: The Portfolio normally values short-term government and U.S. government agency securities
using a model that incorporates market observable data such as reported sales of similar securities,
broker quotes, yields, bids, offers and reference data. Certain securities are valued by principally using dealer quotations. Short-term government
and U.S. government agency securities generally are categorized in Level 2 of the fair value hierarchy, or Level 3 if inputs
are unobservable.
Securities lending collateral: Securities lending collateral is invested in a money market fund which is valued
at the actively traded NAV and no valuation adjustments are applied. Securities lending collateral is categorized
in Level 1 of the fair value hierarchy.
