2011 auditors' report

THE MCCLATCHY COMPANY RETIREMENT PLAN

Financial Statements as of December 31, 2011 and 2010, and for the Years Then Ended, Supplemental

Schedules as of and for the Year Ended December 31, 2011, and Independent Auditors’ Report


TABLE OF CONTENTS

Page

INDEPENDENT AUDITORS’ REPORT ........................................................................................................... 1 FINANCIAL STATEMENTS:

Statement of Net Assets Available for Benefits – December 31, 2011 and 2010 ............................................ 2

Statement of Changes in Net Assets Available for Benefits – Years Ended December 31, 2011 and 2010 .................................................................................................. 3

Notes to Financial Statements .......................................................................................................................... 4

SUPPLEMENTAL SCHEDULES:

Form 5500, Schedule H, Part IV, Line 4i – Schedule of Assets (Held at End of Year) – As of December 31, 2011 ........................................................................................................................... 16

Form 5500, Schedule H, Part IV, Line 4j – Schedule of Reportable Transactions – As of December 31, 2011 ........................................................................................................................... 61

NOTE: All other schedules required by Section 2520.103-10 of the Department of Labor’s Rules and Regulations for

Reporting and Disclosure under Employment Retirement Income Security Act of 1974, have been omitted because they are not applicable.

INDEPENDENT AUDITORS' REPORT

To the Plan Administrator of The McClatchy Company Retirement Plan and The McClatchy Company Retirement Committee: Sacramento, California We were engaged to audit the financial statements of The McClatchy Company Retirement Plan (the “Plan”) as of December 31, 2011 and 2010, and for the years then ended, and supplemental schedules as of December 31, 2011, listed in the Table of Contents. These financial statements and supplemental schedules are the responsibility of the Plan's management. As permitted by 29 CFR 2520.103-8 of the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, the Plan administrator instructed us not to perform, and we did not perform, any auditing procedures with respect to the information summarized in Note 6, which was certified by The Northern Trust Company, the trustee of the Plan, except for comparing the information with the related information included in the financial statements and supplemental schedules. We have been informed by the Plan administrator that the trustee holds the Plan's investment assets and executes investment transactions. The Plan administrator has obtained certifications from the trustee that the information as of December 31, 2011 and 2010, and for the years then ended provided to the Plan administrator by the trustee is complete and accurate.

Because of the significance of the information that we did not audit, we are unable to express, and we do not express, an opinion on the accompanying financial statements and supplemental schedules. The Supplemental schedules are presented for the purposes of additional analysis and are not a required part of the financial statements but are supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The form and content of the information included in the financial statements and supplemental schedules, other than that derived from the information certified by the trustee, have been audited by us in accordance with auditing standards generally accepted in the United States of America and, in our opinion, are presented in compliance with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974.

October 11, 2012

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STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS

DECEMBER 31, 2011 AND 2010 (In thousands)

ASSETS 2011 2010

Investments at fair value: Cash and cash equivalents $ 30,816 $ 38,717 Mutual funds 40,861 32,708 Corporate stock 211 200 Corporate debt instruments 86,776 70,060 U.S. government securities 236,063 171,942 Common collective trusts and other qualified investment vehicles 764,983 692,553 Mortgage and asset-backed securities 22,265 17,140 Real Estate 50,530 - Other 23,317 17,403

Total investments 1,255,822 1,040,723

Other assets: Redemption receivables - 36,994 Employer contribution receivable 34,000 21,159 Receivables for security sales - 10,393

Total other assets 34,000 68,546

Total assets 1,289,822 1,109,269

LIABILITIESPayables for securities purchases 22,516 28,643 Other liabilities 65 65

Total liabilities 22,581 28,708

Net assets available for benefits $ 1,267,241 $ 1,080,561

See notes to financial statements

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STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS

YEARS ENDED DECEMBER 31, 2011 AND 2010 (In thousands)

2011 2010

ADDITIONSEmployer contributions - cash $ 197,000 $ 8,235 Employer contributions - noncash 28,551 21,159 Other - 8,104

Investment activity- Net appreciation in fair value of investments 28,984 129,633

Interest and dividends 15,951 9,686

Total investment activity 44,935 139,319

Total additions 270,486 176,817

DEDUCTIONS Benefits paid directly to participants 76,193 73,272 Administrative expenses 7,613 7,787

Total deductions 83,806 81,059

Net increase in net assets 186,680 95,758

Net assets available for benefits

Beginning of year 1,080,561 984,803

End of year $ 1,267,241 $ 1,080,561

See notes to financial statements

THE MCCLATCHY COMPANY RETIREMENT PLAN NOTES TO FINANCIAL STATEMENTS

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1. DESCRIPTION OF THE PLAN

The following description of The McClatchy Company Retirement Plan (the “Plan”) provides only general information. Participants should refer to the Plan document for a more complete description of the Plan provisions.

General

The Plan is a noncontributory defined benefit pension plan covering substantially all employees of The McClatchy Company (“McClatchy” or the “Company”) and wholly owned subsidiaries that began their employment prior to March 31, 2009. Effective March 31, 2009, the Plan was frozen such that no new participants may enter the Plan and no further benefits will accrue. However, years of service continue to count toward early retirement eligibility and vesting of benefits previously earned.

The Knight Ridder Pension Plan merged with and into the Plan effective December 31, 2007 and as of December 31, 2008, all assets of the Plan are in a single plan trust. The accrual formulas, terms, and conditions of the Plan that applied to Knight Ridder Pension Plan participants (“legacy Knight Ridder”) and to the Plan participants, prior to the Knight Ridder Pension Plan merger, (“legacy McClatchy”) continue under the merged plan.

The Retirement Committee, which reports to the Pension and Savings Plan Committee of the Board of Directors of the Company, controls and manages the operation and administration of the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).

Eligibility and Vesting

Effective January 1, 2009, all Plan participants earn one year of vesting service if they work at least 750 hours during the Plan year. The Plan generally provides for 100% vesting after five years of service.

Benefit payments

Monthly benefit payments are formula driven. The formula for legacy McClatchy participants is the greater of 1.3% of the average monthly earnings multiplied by years of benefit accrual service (up to 35) or 1.5% of career average monthly earnings multiplied by years of career benefit service, plus any prior plan benefit accrued. Generally, legacy McClatchy participants may receive a lump-sum distribution of the vested benefit if the actuarial equivalent present value is $10,000 or less.

Federal regulations under the Pension Protection Act may require the Plan to temporarily limit certain lump sum and social security level income payments, called accelerated payments, when the Plan’s funding level falls below certain thresholds. In accordance with these requirements, a temporary benefit restriction period was imposed effective April 1, 2010. While the temporary benefit restriction period is in effect, accelerated payments from the Plan may be restricted.

Generally, the formula for legacy Knight Ridder participants is based on a percentage of the average eligible compensation during the participants’ highest five years out of their last ten years of service; projected to normal retirement age; multiplied by the number of qualified years of service worked for Knight Ridder companies; and divided by the projected years of service to normal retirement. Benefits are subject to statutory maximums and, in some cases, benefits take into consideration any expected social security benefit payments and/or, benefits from other retirement plans, which may reduce benefits. Legacy Knight Ridder participants are not eligible to receive a lump-sum


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distribution of the vested benefit unless they have a prior pension plan benefit from certain Knight Ridder-acquired companies.

Effective January 1, 2008, the portion of the Plan reflecting the terms of the Knight Ridder Pension Plan was amended such that no participant shall accrue any further eligibility, vesting, or benefit accrual service relating to a period of long-term disability after December 31, 2007.

The Plan provides for early retirement benefits at age 55 for vested legacy McClatchy participants and age 55 with 10 years of service for legacy Knight Ridder participants who terminated after July 1, 1989. Normal retirement benefits for the legacy McClatchy participants are payable for employees under the Plan at age 65. Normal retirement benefits for the legacy Knight Ridder participants are payable under the Plan at the later of 1) age 65 or 2) the earlier of (a) the fifth anniversary of the participation date or (b) the date the participant completed 5 years of vesting service. In the event of death of a vested participant prior to receiving benefits, the participant’s spouse may be eligible for a retirement benefit.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The accompanying financial statements have been prepared on the accrual basis in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Investments Valuation and Income Recognition

At December 31, 2011 and 2010, the Plan’s investments are stated at fair value as determined by The Northern Trust Company (the “Plan Trustee”), which holds the various investments (see Notes 6 and 7). The methods and assumptions used to estimate the fair value of each class of financial instruments are disclosed below in Note 9. Purchases and sales of investments are recorded on a trade-date basis, dividends are recorded on the ex-dividend date, and interest is recorded on an accrual basis. Net appreciation includes net gain (loss) on the sale of assets and unrealized asset appreciation (depreciation), less investment advisory and management fees.

Redemption Receivable

Assets represent the estimated amount to be received from a redemption request made to an equity investment fund in 2008. In 2009, the Company became aware that there was a regulatory action and criminal charges for securities fraud filed against two principals that operated the investment strategy in which the fund was invested, and accordingly, the timing and amount of the Plan’s redemption were uncertain. A court-appointed receiver held the fund assets. Criminal and civil claims were in process against the fund principals. At December 31, 2010, the Plan had recorded the value of its receivable at $37.0 million, based upon the amount the Plan expected to collect. In April 2011, the Plan received the $37.0 million. The timing and amount, if any, of additional cash to be received from the receiver is uncertain.


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Use of Estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

The actuarial present value of accumulated plan benefits is based on certain assumptions pertaining to interest rates, inflation rates, employee compensation, and demographics. Due to the changing nature of these assumptions, it is at least reasonably possible that changes in these assumptions will occur in the near term and, due to the uncertainties inherent in setting assumptions, that the effect of such changes could be material to the financial statements.

Risks and Uncertainties

As described in Notes 6 and 7, the Plan utilizes various investment instruments. Investment securities, in general, are exposed to various risks, such as interest rate, credit risk, and to overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and those changes could materially affect the amounts reported in the financial statements.

Administrative Expenses

Most administrative expenses of the Plan are paid by the Plan within the extent permitted by applicable law and the Plan document. The Company provides accounting and other administrative services for the Plan at no charge.

Payment of Benefits

Benefit payments to participants are recorded upon distribution.

Income Taxes

The Plan received a determination letter dated August 24, 2010, stating that the Plan is qualified in accordance with the applicable Internal Revenue Code (“IRC”) requirements and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its tax qualification. The Plan administrator believes the Plan is in compliance with the applicable requirements of the IRC and, therefore, no provision for income taxes has been included in the Plan’s financial statements.

Recent Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-06, Fair Value Measurements and Disclosures, which amended ASC 820, Fair Value Measurements and Disclosures, adding new disclosure requirements for Levels 1 and 2, separate disclosures of purchases, sales, issuances, and settlements relating to Level 3 measurements and clarification of existing fair value disclosures. ASU No. 2010-06 was effective for periods beginning after December 15, 2009, except for the requirement to provide Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, was effective for fiscal years beginning after December 15, 2010. The adoption did not materially affect the Plan’s financial statements.


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In May 2011, the FASB issued ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (Topic 820) – Fair Value Measurement. ASU 2011-04 was issued to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between GAAP and International Financial Reporting Standards. It also changes certain fair value measurement principles and enhances the disclosure requirements particularly for level 3 fair value measurements. It is effective for annual reporting periods beginning after December 15, 2011. The Plan’s management is currently evaluating the impact this update will have on the Plan’s financial statements.

3. FUNDING POLICY

Company contributions that meet the funding requirements of ERISA are determined by actuarial valuations and are made to the Plan in amounts expected to be sufficient to provide the Plan with assets to pay estimated pension benefits to Plan participants.

Contributions to the Plan are determined based upon calculations made by the actuary and are designed to annually fund current normal cost and to amortize the unfunded liability, which results in annual contributions equal to or in excess of the minimum funding requirements for Plan years. The Company elected the 15-year amortization for the payment as allowed under Pension Relief Act IRC 430(c)(2)(D)(iii) which reduces the funding requirement over the next 15 years.

The minimum funding requirement for 2011 and 2010 was $60.8 and $39.3 million, respectively. In 2011, the Company contributed real property of $49.7 million (see Note 7). Approximately $28.5 million and $21.2 million of this real property contribution was used to satisfy the minimum funding requirements for 2011 and 2010, respectively. During 2011 the Company also contributed cash of $163.0 million, which exceeds the minimum funding requirement. In addition, in January 2012, the Company made a cash contribution $40.0 million, of which $34.0 million was applied to 2011. The Company used credit balances accrued in the Plan and the 15-year deferral election to offset the contribution payments for the 2010 funding requirement. During 2011 the Company contributed cash of $8.2 million and applied $21.2 million of the real property contribution, described above, to satisfy the remaining minimum funding requirement for 2010.

4. PLAN TERMINATION

As discussed in Note 1, the Plan was frozen effective March 31, 2009 such that no new participants may enter the Plan and no further benefits will accrue. While the Company has not expressed any intent to terminate the Plan or to discontinue contributions, it has the right to do so at any time, subject to the provisions set forth in ERISA. If the Plan is terminated at some future date, all participants will become 100% vested in benefits earned as of the termination date.

If the termination is the result of bankruptcy or near bankruptcy of the Company, and the Plan’s assets are not adequate to pay all benefits vested prior to the termination, the Pension Benefit Guaranty Corporation (“PBGC”) will take over the Plan and will pay those benefits that it guarantees. In this case, some participants may receive a smaller benefit than if the Plan had continued. Whether a particular participant’s accumulated plan benefits will be paid depends on both the priority of those benefits (as described in the Plan) and the level of benefits guaranteed by the PBGC at that time.

If, however, the Plan is terminated for any reason other than bankruptcy or near bankruptcy of the Company and the Plan has insufficient assets, the Company will be required to pay to the Plan an amount, which, together with Plan assets, will satisfy all benefits accumulated to the date of the Plan’s termination.


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5. ACTUARIAL PRESENT VALUE OF ACCUMULATED PLAN BENEFITS

Accumulated plan benefits are those estimated future periodic payments, including lump-sum distributions that are attributable under the Plan’s provisions for services rendered by the employees to the valuation date. Accumulated plan benefits include benefits expected to be paid to (a) retired or former employees and their beneficiaries, (b) beneficiaries of employees who have died, and (c) active employees and their beneficiaries. Benefits payable under all circumstances (retirement, death, disability, and termination of employment) are included to the extent they are deemed attributable to employee service rendered to the valuation date. See Note 1 regarding the freezing of the Plan.

At January 1, 2011 and 2010, the actuarial present value of accumulated plan benefits was determined using the unit credit actuarial method by the Plan’s independent actuaries. The amount that results from applying actuarial assumptions to adjust the accumulated plan benefits to reflect the time value of money (through discounts for interest) and the probability of payment (by means of decrements such as for death, disability, withdrawal, or retirement) between the valuation date and the expected dates of payment.

The actuarial present value of accumulated plan benefits and the changes in the actuarial present value of accumulated pension benefits as of and for the year ended January 1, 2011 and 2010, were as follow (in thousands):

2011 2010

Actuarial present value of accumulated pension benefits: Vested benefits: Participants currently receiving payments $ 610,612 $ 588,175 Other participants 540,537 547,330

Total vested benefits 1,151,149 1,135,505 Nonvested benefits 7,698 9,233 Total actuarial present value of accumulated pension benefits $ 1,158,847 $ 1,144,738

2011 2010

Changes in the actuarial present value of accumulated pension benefits: Accumulated pension benefits — beginning of year $ 1,144,738 $ 1,121,648 Actuarial (gain) loss (6,137) 5,918 Decrease in discount period 91,480 89,532 Benefits paid (73,232) (74,308) Assumption changes 1,998 1,948

Accumulated pension benefits — end of year $ 1,158,847 $ 1,144,738


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The significant actuarial assumptions used in the valuations as of January 1, 2011 and 2010 were as follows:

Interest rates used to discount future obligations to present value: 8.25% in 2011 and 2010

Retirement rates: Various rates ranging from 2% at age 55 to 100% at age 70

Mortality rates: Based on RP-2000 Mortality Table

The RP-2000 Mortality Tables were updated in accordance with Internal Revenue Code Section 430. These changes received automatic approval from the IRS. There were no changes to the asset valuation method for the 2011 plan year. The foregoing actuarial assumptions are based on the presumption that the Plan will continue. If the Plan were to terminate, different actuarial assumptions and other factors might be applicable in determining the actuarial present value of accumulated plan benefits.

6. INFORMATION CERTIFIED BY TRUSTEE The following is a summary of the unaudited information regarding the Plan, included in the Plan’s financial statements and supplemental schedule that was prepared by or derived from information reported by the trustee of the Plan for 2011 and 2010. The Plan administrator has obtained certifications from the trustee that such information is complete and accurate at December 31, 2011 and 2010, as follows (in thousands):

2011 2010

Statement of net assets available for benefits:Investments at fair value $ 1,255,822 $ 1,040,723 Receivable for security sales - 10,393 Payable for security sales (22,516) (28,643)

2011 2010

Statement of changes in net assets available:for benefits - investment income:

Net appreciation in fair value of investments $ 28,984 $ 129,633 Interest and dividends 15,951 9,686

Total $ 44,935 $ 139,319

Such amounts and all of the financial information in Note 7 are included in the accompanying financial statements of the Plan based on such certifications from the Plan Trustee.

The Plan Trustee also certifies all investment balances and investment information in Note 9, excluding the classification of investments by level.

All information is presented in the Supplemental Schedules.


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7. INVESTMENTS

The Plan’s investments that represented 5% or more of the net assets available for benefits as of December 31, 2011 and 2010, are as follows (in thousands):

2011 2010

EAFE Index Fund $ 140,697 $ 117,229 NTGI S&P 500 374,914 319,308 KFR Pimco 122,467 91,434 KR Pimco Tips 99,764 74,197 Master TR NISA 122,242 90,497 SSGA Small Cap 91,502 81,034 Wellington Commodities - 53,910

During the years ended December 31, 2011 and 2010, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value as follows:

2011 2010

Cash and cash equivalents $ - $ - Mutual funds (8,948) 7,861 Corporate stock 59 2,310 Debt securities 66,994 19,798 Common collective trusts and other qualified investment vehicles (30,229) 99,600 Other 1,108 64

Total net appreciation in fair value of investments $ 28,984 $ 129,633

In January 2011, the Company contributed company-owned real property from seven locations to the Plan. The Plan obtained independent appraisals of the property, and based on these appraisals the plans recorded the contribution (the fair value of the property) at $49.7 million (see Note 3). The Plan entered into leases for the contributed properties for 10 years at an annual rent of approximately $4.0 million. An independent fiduciary manages the properties on behalf of the Plan and the fiduciary negotiated the terms of the leases. Management believes that the contribution of the properties to the Plan and subsequent leaseback of those properties is exempt from the prohibited transactions prohibitions pursuant to Section 408(e) of Employee Retirement Income Security Act and Section 4975(d)(13) of the Internal Revenue Code.

8. EXEMPT PARTY-IN-INTEREST TRANSACTIONS

Certain short-term Plan investments are held in investments managed by the Plan Trustee, and therefore, these transactions qualify as exempt party-in-interest transactions. Fees paid by the Plan primarily related to investment management services and were $7.6 million for the year ended December 31, 2011.


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9. FAIR VALUE MEASUREMENTS

The Plan accounts for certain assets and liabilities at fair value. The hierarchy below lists three levels of fair value based on the extent to which inputs used in measuring fair value are observable in the market. The Plan categorizes each of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

Level 1 – Unadjusted quoted prices available in active markets for identical investments as of the reporting date.

Level 2 – Observable inputs to the valuation methodology are other than Level 1 inputs, which are either directly or indirectly observable as of the reporting date, and fair value can be determined through the use of models or other valuation methodologies.

Level 3 – Inputs to the valuation methodology are unobservable inputs in situations where there is little or no market activity for the asset or liability, and the reporting entity makes estimates and assumptions related to the pricing of the asset or liability including assumptions regarding risk.

The Plan’s policy is to recognize significant transfers between levels at the actual date of the event or circumstance that caused the transfer.

The Plan’s financial instruments carried at fair value on a recurring basis by the fair value hierarchy levels discussed as of December 31, 2011, are as follows (in thousands):

Level 1 Level 2 Level 3 Total

Cash and cash equivalents $ 30,816 $ - $ - $ 30,816 Mutual funds: International stock fund 40,861 - - 40,861 Total mutual funds 40,861 - - 40,861 Corporate stock: Financial services 211 - - 211 Total corporate stock 211 - - 211 Corporate debt instruments - 86,776 - 86,776 U.S. government securities - 236,063 - 236,063 Common collective trusts and other qualified investment vehicles - 764,983 - 764,983 Mortgage-backed and asset backed securities - 22,265 - 22,265 Real estate - - 50,530 50,530 Other - 14,418 8,899 23,317

Total $ 71,888 $ 1,124,505 $ 59,429 $ 1,255,822

2011

Plan Assets

The Plan’s policy is to recognize significant transfers between levels at the actual date of the event or circumstance that caused the transfer.


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The changes in the fair value of Plan’s Level 3 investment assets held for the year ended December 31, 2011, are as follows (in thousands):

Real EstatePrivate Equity Total

Beginning balance, December 31, 2010 $ - $ 7,792 $ 7,792 Purchases, issuances, sales, settlements (net) 49,710 - 49,710 Realized gains 3,472 - 3,472 Transfers out of Level 3 (3,472) - (3,472) Unrealized gains 820 1,107 1,927

Ending balance, December 31, 2011 $ 50,530 $ 8,899 $ 59,429

The Plan’s financial instruments carried at fair value on a recurring basis by the fair value hierarchy levels discussed as of December 31, 2010, are as follows (in thousands):

Level 1 Level 2 Level 3 Total

Cash and cash equivalents $ 38,717 $ - $ - $ 38,717 Mutual funds: International stock fund 32,708 - - 32,708 Total mutual funds 32,708 - - 32,708 Corporate stock: Financial services 200 - - 200 Total corporate stock 200 - - 200 Corporate debt instruments - 70,060 - 70,060 U.S. government securities - 171,942 - 171,942 Common collective trusts and other qualified investment vehicles - 692,553 - 692,553 Mortgage-backed and asset backed securities - 17,140 - 17,140 Other - 9,611 7,792 17,403

Total $ 71,625 $ 961,306 $ 7,792 $ 1,040,723

2010

Plan Assets


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The changes in the fair value of Plan’s Level 3 investment assets held for the year ended December 31, 2010, are as follows (in thousands):

Commercial Bank Loans

Private Equity Total

Beginning balance, December 31, 2009 $ 1,538 $ 7,904 $ 9,442 Purchases, issuances, sales, settlement (net) (5,165) (172) (5,337) Unrealized losses 3,627 60 3,687

Ending balance, December 31, 2010 $ - $ 7,792 $ 7,792

Cash and cash equivalents: The carrying value of these items approximates fair value.

Mutual funds: Shares of registered investment companies held are categorized as Level 1 and are reported at fair value based on the quoted market price of the fund, which represents the net asset values on the last business day of the Plan year.

Corporate stock: The fair value of corporate stock held is categorized as Level 1 and is based on the exchange-quoted market prices.

Corporate debt instruments: The fair value of corporate debt instruments held are categorized as Level 2 and is based on yields currently available on comparable securities of issuers with similar credit ratings. When quoted prices are not available for identical or similar debt instruments, the fair value is based upon an industry valuation model, which maximizes observable inputs.

U.S. government securities: U.S. government securities held are categorized as Level 2 and primarily consist of investments in U.S. Treasury Bonds, Indexed Linked Bonds, and Treasury Inflation Protected Securities. The fair value of U.S. government securities is based on quoted market prices when available or is based on yields currently available on comparable securities or on an industry valuation model, which maximizes observable inputs.

Common collective trust and other qualified investment vehicles: These investments report fair value using a calculated or equivalent NAV and are categorized as Level 2. The attributes relating to the nature and risk of such investments as of December 31, 2011 are as follows:

2011 2010

Redemption Frequency (if

Currently Eligible)

Redemption Notice Period

U.S. equity funds (a) $ 466,416 $ 400,344 Daily None

International equity funds (b) 212,907 188,624 Daily-Monthly None (*)

Real estate/REITS (c) 27,430 49,675 Daily-Monthly None

Other investments (d) 58,230 53,910 Daily None

Total $ 764,983 $ 692,553

_____________________

(*) One international equity fund (genesis emerging market fund) requiring up to a 60 day notice which represents 20% of the fair value total.


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(a) U.S. equity fund strategies - Investments in U.S. equities are defined as commitments to U.S. dollar-denominated, publicly traded common stocks of U.S. domiciled companies and securities convertible into common stock. The aggregate U.S. equity portfolio is expected to exhibit characteristics comparable to, but not necessarily equal to, that of the Russell 3000 Index.

(b) International equity funds strategies - Investments in international developed markets equities are defined as commitments to publicly traded common stocks and securities convertible into common stock issued by companies domiciled in countries included in the MSCI EAFE Index

(c) Real estate/REITS fund strategies - Global real estate investment trusts (“Global REITs”) invest in properties on a global basis, including in emerging market countries. REITs typically own income-producing real estate, such as retail, office, industrial, apartment, multifamily, and hotels. The Global REITs portfolio should have characteristics similar to, but not necessarily equal to, the FTSE EPRA/NAREIT Global Real Estate Index, which is designed to track the performance of listed real estate companies and REITs worldwide.

(d) Other investments strategies - Commodities are expected to provide a hedge against both rising and realized inflation. The major commodity sectors include energy, industrial metals, precious metals, agriculture, and livestock. The commodities portfolio shall have similar characteristics to, but not necessarily equal to, the S&P Goldman Sachs Commodity Index or a custom commodities index.

Mortgage and Asset-backed securities: Mortgage and asset-backed securities held are categorized as Level 2 and are valued using quotes from independent pricing vendors based on recent trading activity and other relevant information, including market interest rate curves, referenced credit spreads, and estimated prepayment rates, where applicable.

Real estate property: The Company donated seven real property locations to the Plan in January 2011. The Company is leasing back the properties for 10 years at approximately $4 million annually. There are no restrictions on the donated property and the Plan may sell any or all of them, if desired. These properties are not actively traded and are valued based upon the appraisals performed and is included as a Level 3 investment in the table above.

Other:

Private Equity Fund: Private equity funds represent investments in limited partnerships, which invest in start-up or other private companies. Fair value is estimated based on valuations of comparable public companies, recent sales of comparable private and public companies, and discounted cash flow analysis of portfolio companies and is included as a Level 3 investment in the table above.

Commercial Bank Loans: Commercial bank loans represent investments in a fund that invests in commercial bank loans. These loans are not actively traded and are valued based upon an industry valuation model based on observable and unobservable inputs and is included as a Level 3 investment in the table above.

Real Estate Fund: These investments primarily represent investments in the different real estate investment funds that in turn invests in the real estate around the world. The trust is a commingled investment fund and is classified as a Level 2.


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10. SUBSEQUENT EVENTS

Management has evaluated all events and transactions that occurred after December 31, 2011 through October 12, 2012, the date these financial statements were available to be issued.

Cash Contribution

In January 2012, the Company contributed $40.0 million of cash to the Plan. Approximately $6.0 million and $34.0 million of this contribution will be applied to 2012 and 2011 Plan years, respectively (see Note 3).

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pkesavaraman

Text Box

- 51

-

pkesavaraman

Text Box

- 52

-

pkesavaraman

Text Box

- 53

-

pkesavaraman

Text Box

- 54

-

pkesavaraman

Text Box

- 55

-

pkesavaraman

Text Box

- 56

-

pkesavaraman

Text Box

- 57

-

pkesavaraman

Text Box

- 58

-

pkesavaraman

Text Box

- 59

-

pkesavaraman

Text Box

- 60 -

- 61

-

- 62

-

pkesavaraman

Text Box

- 63

-

pkesavaraman

Text Box

- 64

-

pkesavaraman

Text Box

- 65

-

pkesavaraman

Text Box

- 66

-

pkesavaraman

Text Box

2011 auditors' report

Documents