long-term product offerings include alpha-seeking active and index strategies .
our alpha-seeking active strategies seek to earn attractive returns in excess of a market benchmark or performance hurdle while maintaining an appropriate risk profile , and leverage fundamental research and quantitative models to drive portfolio construction .
in contrast , index strategies seek to closely track the returns of a corresponding index , generally by investing in substantially the same underlying securities within the index or in a subset of those securities selected to approximate a similar risk and return profile of the index .
index strategies include both our non-etf index products and ishares etfs .
although many clients use both alpha-seeking active and index strategies , the application of these strategies may differ .
for example , clients may use index products to gain exposure to a market or asset class , or may use a combination of index strategies to target active returns .
in addition , institutional non-etf index assignments tend to be very large ( multi-billion dollars ) and typically reflect low fee rates .
net flows in institutional index products generally have a small impact on blackrock 2019s revenues and earnings .
equity year-end 2017 equity aum totaled $ 3.372 trillion , reflecting net inflows of $ 130.1 billion .
net inflows included $ 174.4 billion into ishares etfs , driven by net inflows into core funds and broad developed and emerging market equities , partially offset by non-etf index and active net outflows of $ 25.7 billion and $ 18.5 billion , respectively .
blackrock 2019s effective fee rates fluctuate due to changes in aum mix .
approximately half of blackrock 2019s equity aum is tied to international markets , including emerging markets , which tend to have higher fee rates than u.s .
equity strategies .
accordingly , fluctuations in international equity markets , which may not consistently move in tandem with u.s .
markets , have a greater impact on blackrock 2019s equity revenues and effective fee rate .
fixed income fixed income aum ended 2017 at $ 1.855 trillion , reflecting net inflows of $ 178.8 billion .
in 2017 , active net inflows of $ 21.5 billion were diversified across fixed income offerings , and included strong inflows into municipal , unconstrained and total return bond funds .
ishares etfs net inflows of $ 67.5 billion were led by flows into core , corporate and treasury bond funds .
non-etf index net inflows of $ 89.8 billion were driven by demand for liability-driven investment solutions .
multi-asset blackrock 2019s multi-asset team manages a variety of balanced funds and bespoke mandates for a diversified client base that leverages our broad investment expertise in global equities , bonds , currencies and commodities , and our extensive risk management capabilities .
investment solutions might include a combination of long-only portfolios and alternative investments as well as tactical asset allocation overlays .
component changes in multi-asset aum for 2017 are presented below .
( in millions ) december 31 , net inflows ( outflows ) market change impact december 31 .

( in millions )               | december 312016 | net inflows ( outflows ) | marketchange | fximpact | december 312017
----------------------------- | --------------- | ------------------------ | ------------ | -------- | ---------------
asset allocation and balanced | $ 176675        | $ -2502 ( 2502 )         | $ 17387      | $ 4985   | $ 196545
target date/risk              | 149432          | 23925                    | 24532        | 1577     | 199466
fiduciary                     | 68395           | -1047 ( 1047 )           | 7522         | 8819     | 83689
futureadvisor ( 1 )           | 505             | -46 ( 46 )               | 119          | 2014     | 578
total                         | $ 395007        | $ 20330                  | $ 49560      | $ 15381  | $ 480278

( 1 ) futureadvisor amounts do not include aum held in ishares etfs .
multi-asset net inflows reflected ongoing institutional demand for our solutions-based advice with $ 18.9 billion of net inflows coming from institutional clients .
defined contribution plans of institutional clients remained a significant driver of flows , and contributed $ 20.8 billion to institutional multi-asset net inflows in 2017 , primarily into target date and target risk product offerings .
retail net inflows of $ 1.1 billion reflected demand for our multi-asset income fund family , which raised $ 5.8 billion in 2017 .
the company 2019s multi-asset strategies include the following : 2022 asset allocation and balanced products represented 41% ( 41 % ) of multi-asset aum at year-end .
these strategies combine equity , fixed income and alternative components for investors seeking a tailored solution relative to a specific benchmark and within a risk budget .
in certain cases , these strategies seek to minimize downside risk through diversification , derivatives strategies and tactical asset allocation decisions .
flagship products in this category include our global allocation and multi-asset income fund families .
2022 target date and target risk products grew 16% ( 16 % ) organically in 2017 , with net inflows of $ 23.9 billion .
institutional investors represented 93% ( 93 % ) of target date and target risk aum , with defined contribution plans accounting for 87% ( 87 % ) of aum .
flows were driven by defined contribution investments in our lifepath offerings .
lifepath products utilize a proprietary active asset allocation overlay model that seeks to balance risk and return over an investment horizon based on the investor 2019s expected retirement timing .
underlying investments are primarily index products .
2022 fiduciary management services are complex mandates in which pension plan sponsors or endowments and foundations retain blackrock to assume responsibility for some or all aspects of investment management .
these customized services require strong partnership with the clients 2019 investment staff and trustees in order to tailor investment strategies to meet client-specific risk budgets and return objectives.


financial statement impact we believe that our accruals for sales returns , rebates , and discounts are reasonable and appropriate based on current facts and circumstances .
our global rebate and discount liabilities are included in sales rebates and discounts on our consolidated balance sheet .
our global sales return liability is included in other current liabilities and other noncurrent liabilities on our consolidated balance sheet .
as of december 31 , 2018 , a 5 percent change in our global sales return , rebate , and discount liability would have led to an approximate $ 275 million effect on our income before income taxes .
the portion of our global sales return , rebate , and discount liability resulting from sales of our products in the u.s .
was approximately 90 percent as of december 31 , 2018 and december 31 , 2017 .
the following represents a roll-forward of our most significant u.s .
pharmaceutical sales return , rebate , and discount liability balances , including managed care , medicare , and medicaid: .

( dollars in millions )                                                 | 2018                 | 2017
----------------------------------------------------------------------- | -------------------- | --------------------
sales return rebate and discount liabilities beginning of year          | $ 4172.0             | $ 3601.8
reduction of net sales due to sales returns discounts and rebates ( 1 ) | 12529.6              | 10603.4
cash payments of discounts and rebates                                  | -12023.4 ( 12023.4 ) | -10033.2 ( 10033.2 )
sales return rebate and discount liabilities end of year                | $ 4678.2             | $ 4172.0

( 1 ) adjustments of the estimates for these returns , rebates , and discounts to actual results were approximately 1 percent of consolidated net sales for each of the years presented .
product litigation liabilities and other contingencies background and uncertainties product litigation liabilities and other contingencies are , by their nature , uncertain and based upon complex judgments and probabilities .
the factors we consider in developing our product litigation liability reserves and other contingent liability amounts include the merits and jurisdiction of the litigation , the nature and the number of other similar current and past matters , the nature of the product and the current assessment of the science subject to the litigation , and the likelihood of settlement and current state of settlement discussions , if any .
in addition , we accrue for certain product liability claims incurred , but not filed , to the extent we can formulate a reasonable estimate of their costs based primarily on historical claims experience and data regarding product usage .
we accrue legal defense costs expected to be incurred in connection with significant product liability contingencies when both probable and reasonably estimable .
we also consider the insurance coverage we have to diminish the exposure for periods covered by insurance .
in assessing our insurance coverage , we consider the policy coverage limits and exclusions , the potential for denial of coverage by the insurance company , the financial condition of the insurers , and the possibility of and length of time for collection .
due to a very restrictive market for product liability insurance , we are self-insured for product liability losses for all our currently marketed products .
in addition to insurance coverage , we also consider any third-party indemnification to which we are entitled or under which we are obligated .
with respect to our third-party indemnification rights , these considerations include the nature of the indemnification , the financial condition of the indemnifying party , and the possibility of and length of time for collection .
the litigation accruals and environmental liabilities and the related estimated insurance recoverables have been reflected on a gross basis as liabilities and assets , respectively , on our consolidated balance sheets .
impairment of indefinite-lived and long-lived assets background and uncertainties we review the carrying value of long-lived assets ( both intangible and tangible ) for potential impairment on a periodic basis and whenever events or changes in circumstances indicate the carrying value of an asset ( or asset group ) may not be recoverable .
we identify impairment by comparing the projected undiscounted cash flows to be generated by the asset ( or asset group ) to its carrying value .
if an impairment is identified , a loss is recorded equal to the excess of the asset 2019s net book value over its fair value , and the cost basis is adjusted .
goodwill and indefinite-lived intangible assets are reviewed for impairment at least annually and when certain impairment indicators are present .
when required , a comparison of fair value to the carrying amount of assets is performed to determine the amount of any impairment.


capital asset purchases associated with the retail segment were $ 294 million in 2007 , bringing the total capital asset purchases since inception of the retail segment to $ 1.0 billion .
as of september 29 , 2007 , the retail segment had approximately 7900 employees and had outstanding operating lease commitments associated with retail store space and related facilities of $ 1.1 billion .
the company would incur substantial costs if it were to close multiple retail stores .
such costs could adversely affect the company 2019s financial condition and operating results .
other segments the company 2019s other segments , which consists of its asia pacific and filemaker operations , experienced an increase in net sales of $ 406 million , or 30% ( 30 % ) during 2007 compared to 2006 .
this increase related primarily to a 58% ( 58 % ) increase in sales of mac portable products and strong ipod sales in the company 2019s asia pacific region .
during 2006 , net sales in other segments increased 35% ( 35 % ) compared to 2005 primarily due to an increase in sales of ipod and mac portable products .
strong sales growth was a result of the introduction of the updated ipods featuring video-playing capabilities and the new intel-based mac portable products that translated to a 16% ( 16 % ) increase in mac unit sales during 2006 compared to 2005 .
gross margin gross margin for each of the last three fiscal years are as follows ( in millions , except gross margin percentages ) : september 29 , september 30 , september 24 , 2007 2006 2005 .

                        | september 29 2007 | september 30 2006 | september 24 2005
----------------------- | ----------------- | ----------------- | -----------------
net sales               | $ 24006           | $ 19315           | $ 13931
cost of sales           | 15852             | 13717             | 9889
gross margin            | $ 8154            | $ 5598            | $ 4042
gross margin percentage | 34.0% ( 34.0 % )  | 29.0% ( 29.0 % )  | 29.0% ( 29.0 % )

gross margin percentage of 34.0% ( 34.0 % ) in 2007 increased significantly from 29.0% ( 29.0 % ) in 2006 .
the primary drivers of this increase were more favorable costs on certain commodity components , including nand flash memory and dram memory , higher overall revenue that provided for more leverage on fixed production costs and a higher percentage of revenue from the company 2019s direct sales channels .
the company anticipates that its gross margin and the gross margins of the personal computer , consumer electronics and mobile communication industries will be subject to pressure due to price competition .
the company expects gross margin percentage to decline sequentially in the first quarter of 2008 primarily as a result of the full-quarter impact of product transitions and reduced pricing that were effected in the fourth quarter of 2007 , lower sales of ilife and iwork in their second quarter of availability , seasonally higher component costs , and a higher mix of indirect sales .
these factors are expected to be partially offset by higher sales of the company 2019s mac os x operating system due to the introduction of mac os x version 10.5 leopard ( 2018 2018mac os x leopard 2019 2019 ) that became available in october 2007 .
the foregoing statements regarding the company 2019s expected gross margin percentage are forward-looking .
there can be no assurance that current gross margin percentage will be maintained or targeted gross margin percentage levels will be achieved .
in general , gross margins and margins on individual products will remain under downward pressure due to a variety of factors , including continued industry wide global pricing pressures , increased competition , compressed product life cycles , potential increases in the cost and availability of raw material and outside manufacturing services , and a potential shift in the company 2019s sales mix towards products with lower gross margins .
in response to these competitive pressures , the company expects it will continue to take pricing actions with respect to its products .
gross margins could also be affected by the company 2019s ability to effectively manage product quality and warranty costs and to stimulate


american tower corporation and subsidiaries notes to consolidated financial statements 2014 ( continued ) to purchase 3924 and 911 shares , respectively .
in october 2005 , in connection with the exercise by mr .
gearon of his right to require the company to purchase his interest in atc south america , these options vested in full and were exercised .
upon exercise of these options , the holders received 4428 shares of atc south america , net of 1596 shares retained by the company to satisfy employee tax withholding obligations .
the 1596 shares retained by the company were treated as a repurchase of a minority interest in accordance with sfas no .
141 .
as a result , the company recorded a purchase price allocation adjustment of $ 5.6 million as an increase to intangible assets and a corresponding increase in minority interest as of the date of acquisition .
the holders had the right to require the company to purchase their shares of atc south america at their then fair market value six months and one day following their issuance .
in april 2006 , this repurchase right was exercised , and the company paid these holders an aggregate of $ 18.9 million in cash , which was the fair market value of their interests on the date of exercise of their repurchase right , as determined by the company 2019s board of directors with the assistance of an independent financial advisor .
12 .
impairments , net loss on sale of long-lived assets , restructuring and merger related expense the significant components reflected in impairments , net loss on sale of long-lived assets , restructuring and merger related expense in the accompanying consolidated statements of operations include the following : impairments and net loss on sale of long-lived assets 2014during the years ended december 31 , 2006 , 2005 and 2004 , the company recorded impairments and net loss on sale of long-lived assets ( primarily related to its rental and management segment ) of $ 3.0 million , $ 19.1 million and $ 22.3 million , respectively .
2022 non-core asset impairment charges 2014during the years ended december 31 , 2006 and 2005 respectively , the company recorded net losses associated with the sales of certain non-core towers and other assets , as well as impairment charges to write-down certain assets to net realizable value after an indicator of potential impairment had been identified .
as a result , the company recorded net losses and impairments of approximately $ 2.0 million , $ 16.8 million and $ 17.7 million for the years ended december 31 , 2006 , 2005 and 2004 , respectively .
the net loss for the year ended december 31 , 2006 is comprised net losses from asset sales and other impairments of $ 7.0 million , offset by gains from asset sales of $ 5.1 million .
2022 construction-in-progress impairment charges 2014for the years ended december 31 , 2006 , 2005 and 2004 , the company wrote-off approximately $ 1.0 million , $ 2.3 million and $ 4.6 million , respectively , of construction-in-progress costs , primarily associated with sites that it no longer planned to build .
restructuring expense 2014the following table displays activity with respect to the accrued restructuring liability for the years ended december 31 , 2004 , 2005 and 2006 ( in thousands ) : liability as of january 1 , expense payments liability december 31 , expense payments liability december 31 , expense payments liability december 31 .

                                                    | liability as of january 1 2004 | 2004 expense | 2004 cash payments | liability as of december 31 2004 | 2005 expense | 2005 cash payments | liability as of december 31 2005 | 2006 expense   | 2006 cash payments | liability as of december 31 2006
--------------------------------------------------- | ------------------------------ | ------------ | ------------------ | -------------------------------- | ------------ | ------------------ | -------------------------------- | -------------- | ------------------ | --------------------------------
employee separations                                | $ 2239                         | $ 823        | $ -2397 ( 2397 )   | $ 665                            | $ 84         | $ -448 ( 448 )     | $ 301                            | $ -267 ( 267 ) | $ -34 ( 34 )       | $ 0
lease terminations and other facility closing costs | 1450                           | -131 ( 131 ) | -888 ( 888 )       | 431                              | 12           | -325 ( 325 )       | 118                              | -10 ( 10 )     | -108 ( 108 )       | 0
total                                               | $ 3689                         | $ 692        | $ -3285 ( 3285 )   | $ 1096                           | $ 96         | $ -773 ( 773 )     | $ 419                            | $ -277 ( 277 ) | $ -142 ( 142 )     | $ 0

the accrued restructuring liability is reflected in accounts payable and accrued expenses in the accompanying consolidated balance sheets as of december 31 , 2005 .
during the year ended december 31 , 2006 , the company


net revenue utility following is an analysis of the change in net revenue comparing 2013 to 2012 .
amount ( in millions ) .

                                              | amount ( in millions )
--------------------------------------------- | ----------------------
2012 net revenue                              | $ 4969
retail electric price                         | 236
louisiana act 55 financing savings obligation | 165
grand gulf recovery                           | 75
volume/weather                                | 40
fuel recovery                                 | 35
miso deferral                                 | 12
decommissioning trusts                        | -23 ( 23 )
other                                         | 15
2013 net revenue                              | $ 5524

the retail electric price variance is primarily due to : 2022 a formula rate plan increase at entergy louisiana , effective january 2013 , which includes an increase relating to the waterford 3 steam generator replacement project , which was placed in service in december 2012 .
the net income effect of the formula rate plan increase is limited to a portion representing an allowed return on equity with the remainder offset by costs included in other operation and maintenance expenses , depreciation expenses , and taxes other than income taxes ; 2022 the recovery of hinds plant costs through the power management rider at entergy mississippi , as approved by the mpsc , effective with the first billing cycle of 2013 .
the net income effect of the hinds plant cost recovery is limited to a portion representing an allowed return on equity on the net plant investment with the remainder offset by the hinds plant costs in other operation and maintenance expenses , depreciation expenses , and taxes other than income taxes ; 2022 an increase in the capacity acquisition rider at entergy arkansas , as approved by the apsc , effective with the first billing cycle of december 2012 , relating to the hot spring plant acquisition .
the net income effect of the hot spring plant cost recovery is limited to a portion representing an allowed return on equity on the net plant investment with the remainder offset by the hot spring plant costs in other operation and maintenance expenses , depreciation expenses , and taxes other than income taxes ; 2022 increases in the energy efficiency rider , as approved by the apsc , effective july 2013 and july 2012 .
energy efficiency revenues are offset by costs included in other operation and maintenance expenses and have no effect on net income ; 2022 an annual base rate increase at entergy texas , effective july 2012 , as a result of the puct 2019s order that was issued in september 2012 in the november 2011 rate case ; and 2022 a formula rate plan increase at entergy mississippi , effective september 2013 .
see note 2 to the financial statements for a discussion of rate proceedings .
the louisiana act 55 financing savings obligation variance results from a regulatory charge recorded in the second quarter 2012 because entergy gulf states louisiana and entergy louisiana agreed to share with customers the savings from an irs settlement related to the uncertain tax position regarding the hurricane katrina and hurricane rita louisiana act 55 financing .
see note 3 to the financial statements for additional discussion of the tax settlement .
entergy corporation and subsidiaries management's financial discussion and analysis


the following tables present a reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs ( level 3 ) for 2015 and 2014 , respectively: .

                                        | level 3
--------------------------------------- | --------
balance as of january 1 2015            | $ 127
actual return on assets                 | 12
purchases issuances and settlements net | -3 ( 3 )
balance as of december 31 2015          | $ 136

purchases , issuances and settlements , net .
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76 balance as of december 31 , 2014 .
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$ 127 the company 2019s other postretirement benefit plans are partially funded and the assets are held under various trusts .
the investments and risk mitigation strategies for the plans are tailored specifically for each trust .
in setting new strategic asset mixes , consideration is given to the likelihood that the selected asset allocation will effectively fund the projected plan liabilities and the risk tolerance of the company .
the company periodically updates the long-term , strategic asset allocations and uses various analytics to determine the optimal asset allocation .
considerations include plan liability characteristics , liquidity characteristics , funding requirements , expected rates of return and the distribution of returns .
in june 2012 , the company implemented a de-risking strategy for the medical bargaining trust within the plan to minimize volatility .
as part of the de-risking strategy , the company revised the asset allocations to increase the matching characteristics of assets relative to liabilities .
the initial de-risking asset allocation for the plan was 60% ( 60 % ) return-generating assets and 40% ( 40 % ) liability-driven assets .
the investment strategies and policies for the plan reflect a balance of liability driven and return-generating considerations .
the objective of minimizing the volatility of assets relative to liabilities is addressed primarily through asset 2014liability matching , asset diversification and hedging .
the fixed income target asset allocation matches the bond-like and long-dated nature of the postretirement liabilities .
assets are broadly diversified within asset classes to achieve risk-adjusted returns that in total lower asset volatility relative to the liabilities .
the company assesses the investment strategy regularly to ensure actual allocations are in line with target allocations as appropriate .
strategies to address the goal of ensuring sufficient assets to pay benefits include target allocations to a broad array of asset classes and , within asset classes strategies are employed to provide adequate returns , diversification and liquidity .
the assets of the company 2019s other trusts , within the other postretirement benefit plans , have been primarily invested in equities and fixed income funds .
the assets under the various other postretirement benefit trusts are invested differently based on the assets and liabilities of each trust .
the obligations of the other postretirement benefit plans are dominated by obligations for the medical bargaining trust .
thirty-nine percent and four percent of the total postretirement plan benefit obligations are related to the medical non-bargaining and life insurance trusts , respectively .
because expected benefit payments related to the benefit obligations are so far into the future , and the size of the medical non-bargaining and life insurance trusts 2019 obligations are large compared to each trusts 2019 assets , the investment strategy is to allocate a significant portion of the assets 2019 investment to equities , which the company believes will provide the highest long-term return and improve the funding ratio .
the company engages third party investment managers for all invested assets .
managers are not permitted to invest outside of the asset class ( e.g .
fixed income , equity , alternatives ) or strategy for which they have been appointed .
investment management agreements and recurring performance and attribution analysis are used as tools to ensure investment managers invest solely within the investment strategy they have been provided .
futures and options may be used to adjust portfolio duration to align with a plan 2019s targeted investment policy.


wood products sales in the united states in 2005 of $ 1.6 billion were up 3% ( 3 % ) from $ 1.5 billion in 2004 and 18% ( 18 % ) from $ 1.3 billion in 2003 .
average price realiza- tions for lumber were up 6% ( 6 % ) and 21% ( 21 % ) in 2005 compared with 2004 and 2003 , respectively .
lumber sales volumes in 2005 were up 5% ( 5 % ) versus 2004 and 10% ( 10 % ) versus 2003 .
average sales prices for plywood were down 4% ( 4 % ) from 2004 , but were 15% ( 15 % ) higher than in 2003 .
plywood sales volumes in 2005 were slightly higher than 2004 and 2003 .
operating profits in 2005 were 18% ( 18 % ) lower than 2004 , but nearly three times higher than 2003 .
lower average plywood prices and higher raw material costs more than offset the effects of higher average lumber prices , volume increases and a positive sales mix .
in 2005 , log costs were up 9% ( 9 % ) versus 2004 , negatively im- pacting both plywood and lumber profits .
lumber and plywood operating costs also reflected substantially higher glue and natural gas costs versus both 2004 and looking forward to the first quarter of 2006 , a con- tinued strong housing market , combined with low prod- uct inventory in the distribution chain , should translate into continued strong lumber and plywood demand .
however , a possible softening of housing starts and higher interest rates later in the year could put down- ward pressure on pricing in the second half of 2006 .
specialty businesses and other the specialty businesses and other segment in- cludes the operating results of arizona chemical , euro- pean distribution and , prior to its closure in 2003 , our natchez , mississippi chemical cellulose pulp mill .
also included are certain divested businesses whose results are included in this segment for periods prior to their sale or closure .
this segment 2019s 2005 net sales declined 18% ( 18 % ) and 26% ( 26 % ) from 2004 and 2003 , respectively .
operating profits in 2005 were down substantially from both 2004 and 2003 .
the decline in sales principally reflects declining contributions from businesses sold or closed .
operating profits were also affected by higher energy and raw material costs in our chemical business .
specialty businesses and other in millions 2005 2004 2003 .

in millions      | 2005  | 2004   | 2003
---------------- | ----- | ------ | ------
sales            | $ 915 | $ 1120 | $ 1235
operating profit | $ 4   | $ 38   | $ 23

chemicals sales were $ 692 million in 2005 , com- pared with $ 672 million in 2004 and $ 625 million in 2003 .
although demand was strong for most arizona chemical product lines , operating profits in 2005 were 84% ( 84 % ) and 83% ( 83 % ) lower than in 2004 and 2003 , re- spectively , due to higher energy costs in the u.s. , and higher prices and reduced availability for crude tall oil ( cto ) .
in the united states , energy costs increased 41% ( 41 % ) compared to 2004 due to higher natural gas prices and supply interruption costs .
cto prices increased 26% ( 26 % ) compared to 2004 , as certain energy users turned to cto as a substitute fuel for high-cost alternative energy sources such as natural gas and fuel oil .
european cto receipts decreased 30% ( 30 % ) compared to 2004 due to lower yields following the finnish paper industry strike and a swedish storm that limited cto throughput and corre- sponding sales volumes .
other businesses in this operating segment include operations that have been sold , closed , or are held for sale , principally the european distribution business , the oil and gas and mineral royalty business , decorative products , retail packaging , and the natchez chemical cellulose pulp mill .
sales for these businesses were ap- proximately $ 223 million in 2005 ( mainly european distribution and decorative products ) compared with $ 448 million in 2004 ( mainly european distribution and decorative products ) , and $ 610 million in 2003 .
liquidity and capital resources overview a major factor in international paper 2019s liquidity and capital resource planning is its generation of operat- ing cash flow , which is highly sensitive to changes in the pricing and demand for our major products .
while changes in key cash operating costs , such as energy and raw material costs , do have an effect on operating cash generation , we believe that our strong focus on cost controls has improved our cash flow generation over an operating cycle .
as a result , we believe that we are well positioned for improvements in operating cash flow should prices and worldwide economic conditions im- prove in the future .
as part of our continuing focus on improving our return on investment , we have focused our capital spending on improving our key platform businesses in north america and in geographic areas with strong growth opportunities .
spending levels have been kept below the level of depreciation and amortization charges for each of the last three years , and we anticipate con- tinuing this approach in 2006 .
with the low interest rate environment in 2005 , financing activities have focused largely on the repay- ment or refinancing of higher coupon debt , resulting in a net reduction in debt of approximately $ 1.7 billion in 2005 .
we plan to continue this program , with addi- tional reductions anticipated as our previously an- nounced transformation plan progresses in 2006 .
our liquidity position continues to be strong , with approx- imately $ 3.2 billion of committed liquidity to cover fu- ture short-term cash flow requirements not met by operating cash flows.


part i item 1 entergy corporation , utility operating companies , and system energy including the continued effectiveness of the clean energy standards/zero emissions credit program ( ces/zec ) , the establishment of certain long-term agreements on acceptable terms with the energy research and development authority of the state of new york in connection with the ces/zec program , and nypsc approval of the transaction on acceptable terms , entergy refueled the fitzpatrick plant in january and february 2017 .
in october 2015 , entergy determined that it would close the pilgrim plant .
the decision came after management 2019s extensive analysis of the economics and operating life of the plant following the nrc 2019s decision in september 2015 to place the plant in its 201cmultiple/repetitive degraded cornerstone column 201d ( column 4 ) of its reactor oversight process action matrix .
the pilgrim plant is expected to cease operations on may 31 , 2019 , after refueling in the spring of 2017 and operating through the end of that fuel cycle .
in december 2015 , entergy wholesale commodities closed on the sale of its 583 mw rhode island state energy center ( risec ) , in johnston , rhode island .
the base sales price , excluding adjustments , was approximately $ 490 million .
entergy wholesale commodities purchased risec for $ 346 million in december 2011 .
in december 2016 , entergy announced that it reached an agreement with consumers energy to terminate the ppa for the palisades plant on may 31 , 2018 .
pursuant to the ppa termination agreement , consumers energy will pay entergy $ 172 million for the early termination of the ppa .
the ppa termination agreement is subject to regulatory approvals .
separately , and assuming regulatory approvals are obtained for the ppa termination agreement , entergy intends to shut down the palisades nuclear power plant permanently on october 1 , 2018 , after refueling in the spring of 2017 and operating through the end of that fuel cycle .
entergy expects to enter into a new ppa with consumers energy under which the plant would continue to operate through october 1 , 2018 .
in january 2017 , entergy announced that it reached a settlement with new york state to shut down indian point 2 by april 30 , 2020 and indian point 3 by april 30 , 2021 , and resolve all new york state-initiated legal challenges to indian point 2019s operating license renewal .
as part of the settlement , new york state has agreed to issue indian point 2019s water quality certification and coastal zone management act consistency certification and to withdraw its objection to license renewal before the nrc .
new york state also has agreed to issue a water discharge permit , which is required regardless of whether the plant is seeking a renewed nrc license .
the shutdowns are conditioned , among other things , upon such actions being taken by new york state .
even without opposition , the nrc license renewal process is expected to continue at least into 2018 .
with the settlement concerning indian point , entergy now has announced plans for the disposition of all of the entergy wholesale commodities nuclear power plants , including the sales of vermont yankee and fitzpatrick , and the earlier than previously expected shutdowns of pilgrim , palisades , indian point 2 , and indian point 3 .
see 201centergy wholesale commodities exit from the merchant power business 201d for further discussion .
property nuclear generating stations entergy wholesale commodities includes the ownership of the following nuclear power plants : power plant market service year acquired location capacity - reactor type license expiration .

power plant          | market | in service year | acquired    | location    | capacity - reactor type     | license expiration date
-------------------- | ------ | --------------- | ----------- | ----------- | --------------------------- | -----------------------
pilgrim ( a )        | is0-ne | 1972            | july 1999   | plymouth ma | 688 mw - boiling water      | 2032 ( a )
fitzpatrick ( b )    | nyiso  | 1975            | nov . 2000  | oswego ny   | 838 mw - boiling water      | 2034 ( b )
indian point 3 ( c ) | nyiso  | 1976            | nov . 2000  | buchanan ny | 1041 mw - pressurized water | 2015 ( c )
indian point 2 ( c ) | nyiso  | 1974            | sept . 2001 | buchanan ny | 1028 mw - pressurized water | 2013 ( c )
vermont yankee ( d ) | is0-ne | 1972            | july 2002   | vernon vt   | 605 mw - boiling water      | 2032 ( d )
palisades ( e )      | miso   | 1971            | apr . 2007  | covert mi   | 811 mw - pressurized water  | 2031 ( e )


jpmorgan chase & co./2012 annual report 249 note 13 2013 securities financing activities jpmorgan chase enters into resale agreements , repurchase agreements , securities borrowed transactions and securities loaned transactions ( collectively , 201csecurities financing agreements 201d ) primarily to finance the firm 2019s inventory positions , acquire securities to cover short positions , accommodate customers 2019 financing needs , and settle other securities obligations .
securities financing agreements are treated as collateralized financings on the firm 2019s consolidated balance sheets .
resale and repurchase agreements are generally carried at the amounts at which the securities will be subsequently sold or repurchased , plus accrued interest .
securities borrowed and securities loaned transactions are generally carried at the amount of cash collateral advanced or received .
where appropriate under applicable accounting guidance , resale and repurchase agreements with the same counterparty are reported on a net basis .
fees received and paid in connection with securities financing agreements are recorded in interest income and interest expense , respectively .
the firm has elected the fair value option for certain securities financing agreements .
for further information regarding the fair value option , see note 4 on pages 214 2013 216 of this annual report .
the securities financing agreements for which the fair value option has been elected are reported within securities purchased under resale agreements ; securities loaned or sold under repurchase agreements ; and securities borrowed on the consolidated balance sheets .
generally , for agreements carried at fair value , current-period interest accruals are recorded within interest income and interest expense , with changes in fair value reported in principal transactions revenue .
however , for financial instruments containing embedded derivatives that would be separately accounted for in accordance with accounting guidance for hybrid instruments , all changes in fair value , including any interest elements , are reported in principal transactions revenue .
the following table details the firm 2019s securities financing agreements , all of which are accounted for as collateralized financings during the periods presented .
december 31 , ( in millions ) 2012 2011 securities purchased under resale agreements ( a ) $ 295413 $ 235000 securities borrowed ( b ) 119017 142462 securities sold under repurchase agreements ( c ) $ 215560 $ 197789 securities loaned ( d ) 23582 14214 ( a ) at december 31 , 2012 and 2011 , included resale agreements of $ 24.3 billion and $ 22.2 billion , respectively , accounted for at fair value .
( b ) at december 31 , 2012 and 2011 , included securities borrowed of $ 10.2 billion and $ 15.3 billion , respectively , accounted for at fair value .
( c ) at december 31 , 2012 and 2011 , included repurchase agreements of $ 3.9 billion and $ 6.8 billion , respectively , accounted for at fair value .
( d ) at december 31 , 2012 , included securities loaned of $ 457 million accounted for at fair value .
there were no securities loaned accounted for at fair value at december 31 , 2011 .
the amounts reported in the table above were reduced by $ 96.9 billion and $ 115.7 billion at december 31 , 2012 and 2011 , respectively , as a result of agreements in effect that meet the specified conditions for net presentation under applicable accounting guidance .
jpmorgan chase 2019s policy is to take possession , where possible , of securities purchased under resale agreements and of securities borrowed .
the firm monitors the value of the underlying securities ( primarily g7 government securities , u.s .
agency securities and agency mbs , and equities ) that it has received from its counterparties and either requests additional collateral or returns a portion of the collateral when appropriate in light of the market value of the underlying securities .
margin levels are established initially based upon the counterparty and type of collateral and monitored on an ongoing basis to protect against declines in collateral value in the event of default .
jpmorgan chase typically enters into master netting agreements and other collateral arrangements with its resale agreement and securities borrowed counterparties , which provide for the right to liquidate the purchased or borrowed securities in the event of a customer default .
as a result of the firm 2019s credit risk mitigation practices with respect to resale and securities borrowed agreements as described above , the firm did not hold any reserves for credit impairment with respect to these agreements as of december 31 , 2012 and for further information regarding assets pledged and collateral received in securities financing agreements , see note 30 on pages 315 2013316 of this annual report. .

december 31 ( in millions )                        | 2012     | 2011
-------------------------------------------------- | -------- | --------
securities purchased under resale agreements ( a ) | $ 295413 | $ 235000
securities borrowed ( b )                          | 119017   | 142462
securities sold under repurchase agreements ( c )  | $ 215560 | $ 197789
securities loaned ( d )                            | 23582    | 14214

jpmorgan chase & co./2012 annual report 249 note 13 2013 securities financing activities jpmorgan chase enters into resale agreements , repurchase agreements , securities borrowed transactions and securities loaned transactions ( collectively , 201csecurities financing agreements 201d ) primarily to finance the firm 2019s inventory positions , acquire securities to cover short positions , accommodate customers 2019 financing needs , and settle other securities obligations .
securities financing agreements are treated as collateralized financings on the firm 2019s consolidated balance sheets .
resale and repurchase agreements are generally carried at the amounts at which the securities will be subsequently sold or repurchased , plus accrued interest .
securities borrowed and securities loaned transactions are generally carried at the amount of cash collateral advanced or received .
where appropriate under applicable accounting guidance , resale and repurchase agreements with the same counterparty are reported on a net basis .
fees received and paid in connection with securities financing agreements are recorded in interest income and interest expense , respectively .
the firm has elected the fair value option for certain securities financing agreements .
for further information regarding the fair value option , see note 4 on pages 214 2013 216 of this annual report .
the securities financing agreements for which the fair value option has been elected are reported within securities purchased under resale agreements ; securities loaned or sold under repurchase agreements ; and securities borrowed on the consolidated balance sheets .
generally , for agreements carried at fair value , current-period interest accruals are recorded within interest income and interest expense , with changes in fair value reported in principal transactions revenue .
however , for financial instruments containing embedded derivatives that would be separately accounted for in accordance with accounting guidance for hybrid instruments , all changes in fair value , including any interest elements , are reported in principal transactions revenue .
the following table details the firm 2019s securities financing agreements , all of which are accounted for as collateralized financings during the periods presented .
december 31 , ( in millions ) 2012 2011 securities purchased under resale agreements ( a ) $ 295413 $ 235000 securities borrowed ( b ) 119017 142462 securities sold under repurchase agreements ( c ) $ 215560 $ 197789 securities loaned ( d ) 23582 14214 ( a ) at december 31 , 2012 and 2011 , included resale agreements of $ 24.3 billion and $ 22.2 billion , respectively , accounted for at fair value .
( b ) at december 31 , 2012 and 2011 , included securities borrowed of $ 10.2 billion and $ 15.3 billion , respectively , accounted for at fair value .
( c ) at december 31 , 2012 and 2011 , included repurchase agreements of $ 3.9 billion and $ 6.8 billion , respectively , accounted for at fair value .
( d ) at december 31 , 2012 , included securities loaned of $ 457 million accounted for at fair value .
there were no securities loaned accounted for at fair value at december 31 , 2011 .
the amounts reported in the table above were reduced by $ 96.9 billion and $ 115.7 billion at december 31 , 2012 and 2011 , respectively , as a result of agreements in effect that meet the specified conditions for net presentation under applicable accounting guidance .
jpmorgan chase 2019s policy is to take possession , where possible , of securities purchased under resale agreements and of securities borrowed .
the firm monitors the value of the underlying securities ( primarily g7 government securities , u.s .
agency securities and agency mbs , and equities ) that it has received from its counterparties and either requests additional collateral or returns a portion of the collateral when appropriate in light of the market value of the underlying securities .
margin levels are established initially based upon the counterparty and type of collateral and monitored on an ongoing basis to protect against declines in collateral value in the event of default .
jpmorgan chase typically enters into master netting agreements and other collateral arrangements with its resale agreement and securities borrowed counterparties , which provide for the right to liquidate the purchased or borrowed securities in the event of a customer default .
as a result of the firm 2019s credit risk mitigation practices with respect to resale and securities borrowed agreements as described above , the firm did not hold any reserves for credit impairment with respect to these agreements as of december 31 , 2012 and for further information regarding assets pledged and collateral received in securities financing agreements , see note 30 on pages 315 2013316 of this annual report.


entergy arkansas , inc .
and subsidiaries management 2019s financial discussion and analysis stock restrict the amount of retained earnings available for the payment of cash dividends or other distributions on its common and preferred stock .
sources of capital entergy arkansas 2019s sources to meet its capital requirements include : 2022 internally generated funds ; 2022 cash on hand ; 2022 debt or preferred stock issuances ; and 2022 bank financing under new or existing facilities .
entergy arkansas may refinance , redeem , or otherwise retire debt and preferred stock prior to maturity , to the extent market conditions and interest and dividend rates are favorable .
all debt and common and preferred stock issuances by entergy arkansas require prior regulatory approval .
preferred stock and debt issuances are also subject to issuance tests set forth in entergy arkansas 2019s corporate charters , bond indentures , and other agreements .
entergy arkansas has sufficient capacity under these tests to meet its foreseeable capital needs .
entergy arkansas 2019s receivables from or ( payables to ) the money pool were as follows as of december 31 for each of the following years. .

2016             | 2015             | 2014             | 2013
---------------- | ---------------- | ---------------- | ----------------
( in thousands ) | ( in thousands ) | ( in thousands ) | ( in thousands )
( $ 51232 )      | ( $ 52742 )      | $ 2218           | $ 17531

see note 4 to the financial statements for a description of the money pool .
entergy arkansas has a credit facility in the amount of $ 150 million scheduled to expire in august 2021 .
entergy arkansas also has a $ 20 million credit facility scheduled to expire in april 2017 .
the $ 150 million credit facility allows entergy arkansas to issue letters of credit against 50% ( 50 % ) of the borrowing capacity of the facility .
as of december 31 , 2016 , there were no cash borrowings and no letters of credit outstanding under the credit facilities .
in addition , entergy arkansas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations under miso .
as of december 31 , 2016 , a $ 1 million letter of credit was outstanding under entergy arkansas 2019s uncommitted letter of credit facility .
see note 4 to the financial statements for additional discussion of the credit facilities .
the entergy arkansas nuclear fuel company variable interest entity has a credit facility in the amount of $ 80 million scheduled to expire in may 2019 .
as of december 31 , 2016 , no letters of credit were outstanding under the credit facility to support commercial paper issued by the entergy arkansas nuclear fuel company variable interest entity .
see note 4 to the financial statements for additional discussion of the nuclear fuel company variable interest entity credit facility .
entergy arkansas obtained authorizations from the ferc through october 2017 for short-term borrowings not to exceed an aggregate amount of $ 250 million at any time outstanding and long-term borrowings by its nuclear fuel company variable interest entity .
see note 4 to the financial statements for further discussion of entergy arkansas 2019s short-term borrowing limits .
the long-term securities issuances of entergy arkansas are limited to amounts authorized by the apsc and the tennessee regulatory authority ; the current authorizations extend through december 2018.


grants of restricted awards are subject to forfeiture if a grantee , among other conditions , leaves our employment prior to expiration of the restricted period .
new grants of restricted awards generally vest one year after the date of grant in 25% ( 25 % ) increments over a four year period , with the exception of tsrs which vest after a three year period .
the following table summarizes the changes in non-vested restricted stock awards for the years ended may 31 , 2013 and 2012 ( share awards in thousands ) : shares weighted average grant-date fair value .

                          | shares       | weighted averagegrant-datefair value
------------------------- | ------------ | ------------------------------------
non-vested at may 31 2011 | 869          | $ 40
granted                   | 472          | 48
vested                    | -321 ( 321 ) | 40
forfeited                 | -79 ( 79 )   | 43
non-vested at may 31 2012 | 941          | 44
granted                   | 561          | 44
vested                    | -315 ( 315 ) | 43
forfeited                 | -91 ( 91 )   | 44
non-vested at may 31 2013 | 1096         | $ 44

the total fair value of share awards vested during the years ended may 31 , 2013 , 2012 and 2011 was $ 13.6 million , $ 12.9 million and $ 10.8 million , respectively .
we recognized compensation expense for restricted stock of $ 16.2 million , $ 13.6 million , and $ 12.5 million in the years ended may 31 , 2013 , 2012 and 2011 , respectively .
as of may 31 , 2013 , there was $ 33.5 million of total unrecognized compensation cost related to unvested restricted stock awards that is expected to be recognized over a weighted average period of 2.5 years .
employee stock purchase plan we have an employee stock purchase plan under which the sale of 2.4 million shares of our common stock has been authorized .
employees may designate up to the lesser of $ 25000 or 20% ( 20 % ) of their annual compensation for the purchase of stock .
the price for shares purchased under the plan is 85% ( 85 % ) of the market value on the last day of the quarterly purchase period .
as of may 31 , 2013 , 1.0 million shares had been issued under this plan , with 1.4 million shares reserved for future issuance .
we recognized compensation expense for the plan of $ 0.5 million in the years ended may 31 , 2013 , 2012 and 2011 .
the weighted average grant-date fair value of each designated share purchased under this plan during the years ended may 31 , 2013 , 2012 and 2011 was $ 6 , $ 7 and $ 6 , respectively , which represents the fair value of the 15% ( 15 % ) discount .
stock options stock options are granted at 100% ( 100 % ) of fair market value on the date of grant and have 10-year terms .
stock options granted vest one year after the date of grant in 25% ( 25 % ) increments over a four year period .
the plans provide for accelerated vesting under certain conditions .
there were no options granted under the plans during the years ended may 31 , 2013 and may 31 , 2012.


notes to consolidated financial statements the fair values for substantially all of the firm 2019s financial assets and financial liabilities are based on observable prices and inputs and are classified in levels 1 and 2 of the fair value hierarchy .
certain level 2 and level 3 financial assets and financial liabilities may require appropriate valuation adjustments that a market participant would require to arrive at fair value for factors such as counterparty and the firm 2019s credit quality , funding risk , transfer restrictions , liquidity and bid/offer spreads .
valuation adjustments are generally based on market evidence .
see notes 6 and 7 for further information about fair value measurements of cash instruments and derivatives , respectively , included in 201cfinancial instruments owned , at fair value 201d and 201cfinancial instruments sold , but not yet purchased , at fair value , 201d and note 8 for further information about fair value measurements of other financial assets and financial liabilities accounted for at fair value under the fair value option .
financial assets and financial liabilities accounted for at fair value under the fair value option or in accordance with other u.s .
gaap are summarized below. .

$ in millions                                                                                | as of december 2012 | as of december 2011
----------------------------------------------------------------------------------------------- | ------------------- | -------------------
total level 1 financial assets                                                                  | $ 190737            | $ 136780
total level 2 financial assets                                                                  | 502293              | 587416
total level 3 financial assets                                                                  | 47095               | 47937
cash collateral and counterparty netting1                                                       | -101612 ( 101612 )  | -120821 ( 120821 )
total financial assets at fair value                                                            | $ 638513            | $ 651312
total assets                                                                                | $ 938555            | $ 923225
total level 3 financial assets as a percentage of total assets                                  | 5.0% ( 5.0 % )      | 5.2% ( 5.2 % )
total level 3 financial assets as a percentage of total financial assets at fair value          | 7.4% ( 7.4 % )      | 7.4% ( 7.4 % )
total level 1 financial liabilities                                                             | $ 65994             | $ 75557
total level 2 financial liabilities                                                             | 318764              | 319160
total level 3 financial liabilities                                                             | 25679               | 25498
cash collateral and counterparty netting1                                                       | -32760 ( 32760 )    | -31546 ( 31546 )
total financial liabilities at fair value                                                       | $ 377677            | $ 388669
total level 3 financial liabilities as a percentage of total financial liabilities at fairvalue | 6.8% ( 6.8 % )      | 6.6% ( 6.6 % )

1 .
represents the impact on derivatives of cash collateral netting , and counterparty netting across levels of the fair value hierarchy .
netting among positions classified in the same level is included in that level .
level 3 financial assets as of december 2012 decreased compared with december 2011 , primarily reflecting a decrease in derivative assets , partially offset by an increase in private equity investments .
the decrease in derivative assets primarily reflected a decline in credit derivative assets , principally due to settlements , unrealized losses and sales , partially offset by net transfers from level 2 .
level 3 currency derivative assets also declined compared with december 2011 , principally due to unrealized losses and net transfers to level 2 .
the increase in private equity investments primarily reflected purchases and unrealized gains , partially offset by settlements and net transfers to level 2 .
see notes 6 , 7 and 8 for further information about level 3 cash instruments , derivatives and other financial assets and financial liabilities accounted for at fair value under the fair value option , respectively , including information about significant unrealized gains and losses , and transfers in and out of level 3 .
goldman sachs 2012 annual report 119


certain mortgage loans citigroup has elected the fair value option for certain purchased and originated prime fixed-rate and conforming adjustable-rate first mortgage loans held-for-sale .
these loans are intended for sale or securitization and are hedged with derivative instruments .
the company has elected the fair value option to mitigate accounting mismatches in cases where hedge .

in millions of dollars                                                                                | december 31 2009 | december 31 2008
------------------------------------------------------------------------------------------------------------------- | ---------------- | ----------------
carrying amount reported on the consolidated balance sheet                                                          | $ 3338           | $ 4273
aggregate fair value in excess of unpaid principalbalance                                                           | 55               | 138
balance of non-accrual loans or loans more than 90 days past due                                                    | 4                | 9
aggregate unpaid principal balance in excess of fair value for non-accrualloans or loans more than 90 days past due | 3                | 2

the changes in fair values of these mortgage loans are reported in other revenue in the company 2019s consolidated statement of income .
the changes in fair value during the years ended december 31 , 2009 and 2008 due to instrument-specific credit risk resulted in a $ 10 million loss and $ 32 million loss , respectively .
related interest income continues to be measured based on the contractual interest rates and reported as such in the consolidated statement of income .
mortgage servicing rights the company accounts for mortgage servicing rights ( msrs ) at fair value .
fair value for msrs is determined using an option-adjusted spread valuation approach .
this approach consists of projecting servicing cash flows under multiple interest-rate scenarios and discounting these cash flows using risk-adjusted rates .
the model assumptions used in the valuation of msrs include mortgage prepayment speeds and discount rates .
the fair value of msrs is primarily affected by changes in prepayments that result from shifts in mortgage interest rates .
in managing this risk , the company hedges a significant portion of the values of its msrs through the use of interest-rate derivative contracts , forward-purchase commitments of mortgage-backed securities , and purchased securities classified as trading .
see note 23 to the consolidated financial statements for further discussions regarding the accounting and reporting of msrs .
these msrs , which totaled $ 6.5 billion and $ 5.7 billion as of december 31 , 2009 and 2008 , respectively , are classified as mortgage servicing rights on citigroup 2019s consolidated balance sheet .
changes in fair value of msrs are recorded in commissions and fees in the company 2019s consolidated statement of income .
certain structured liabilities the company has elected the fair value option for certain structured liabilities whose performance is linked to structured interest rates , inflation or currency risks ( 201cstructured liabilities 201d ) .
the company elected the fair value option , because these exposures are considered to be trading-related positions and , therefore , are managed on a fair value basis .
these positions will continue to be classified as debt , deposits or derivatives ( trading account liabilities ) on the company 2019s consolidated balance sheet according to their legal form .
for those structured liabilities classified as long-term debt for which the fair value option has been elected , the aggregate unpaid principal balance exceeded the aggregate fair value by $ 125 million and $ 671 million as of december 31 , 2009 and 2008 , respectively .
the change in fair value for these structured liabilities is reported in principal transactions in the company 2019s consolidated statement of income .
related interest expense is measured based on the contractual interest rates and reported as such in the consolidated income statement .
certain non-structured liabilities the company has elected the fair value option for certain non-structured liabilities with fixed and floating interest rates ( 201cnon-structured liabilities 201d ) .
the company has elected the fair value option where the interest-rate risk of such liabilities is economically hedged with derivative contracts or the proceeds are used to purchase financial assets that will also be accounted for at fair value through earnings .
the election has been made to mitigate accounting mismatches and to achieve operational simplifications .
these positions are reported in short-term borrowings and long-term debt on the company 2019s consolidated balance sheet .
for those non-structured liabilities classified as short-term borrowings for which the fair value option has been elected , the aggregate unpaid principal balance exceeded the aggregate fair value of such instruments by $ 220 million as of december 31 , 2008 .
for non-structured liabilities classified as long-term debt for which the fair value option has been elected , the aggregate unpaid principal balance exceeded the aggregate fair value by $ 1542 million and $ 856 million as of december 31 , 2009 and 2008 , respectively .
the change in fair value for these non-structured liabilities is reported in principal transactions in the company 2019s consolidated statement of income .
related interest expense continues to be measured based on the contractual interest rates and reported as such in the consolidated income statement .
accounting is complex and to achieve operational simplifications .
the fair value option was not elected for loans held-for-investment , as those loans are not hedged with derivative instruments .
the following table provides information about certain mortgage loans carried at fair value:


kimco realty corporation and subsidiaries job title kimco realty ar revision 6 serial date / time tuesday , april 03 , 2007 /10:32 pm job number 142704 type current page no .
65 operator pm2 <12345678> at december 31 , 2006 and 2005 , the company 2019s net invest- ment in the leveraged lease consisted of the following ( in mil- lions ) : .

                                      | 2006           | 2005
------------------------------------- | -------------- | --------------
remaining net rentals                 | $ 62.3         | $ 68.9
estimated unguaranteed residual value | 40.5           | 43.8
non-recourse mortgage debt            | -48.4 ( 48.4 ) | -52.8 ( 52.8 )
unearned and deferred income          | -50.7 ( 50.7 ) | -55.9 ( 55.9 )
net investment in leveraged lease     | $ 3.7          | $ 4.0

9 .
mortgages and other financing receivables : during january 2006 , the company provided approximately $ 16.0 million as its share of a $ 50.0 million junior participation in a $ 700.0 million first mortgage loan , in connection with a private investment firm 2019s acquisition of a retailer .
this loan participation bore interest at libor plus 7.75% ( 7.75 % ) per annum and had a two-year term with a one-year extension option and was collateralized by certain real estate interests of the retailer .
during june 2006 , the borrower elected to pre-pay the outstanding loan balance of approximately $ 16.0 million in full satisfaction of this loan .
additionally , during january 2006 , the company provided approximately $ 5.2 million as its share of an $ 11.5 million term loan to a real estate developer for the acquisition of a 59 acre land parcel located in san antonio , tx .
this loan is interest only at a fixed rate of 11.0% ( 11.0 % ) for a term of two years payable monthly and collateralized by a first mortgage on the subject property .
as of december 31 , 2006 , the outstanding balance on this loan was approximately $ 5.2 million .
during february 2006 , the company committed to provide a one year $ 17.2 million credit facility at a fixed rate of 8.0% ( 8.0 % ) for a term of nine months and 9.0% ( 9.0 % ) for the remaining term to a real estate investor for the recapitalization of a discount and entertain- ment mall that it currently owns .
during 2006 , this facility was fully paid and was terminated .
during april 2006 , the company provided two separate mortgages aggregating $ 14.5 million on a property owned by a real estate investor .
proceeds were used to payoff the existing first mortgage , buyout the existing partner and for redevelopment of the property .
the mortgages bear interest at 8.0% ( 8.0 % ) per annum and mature in 2008 and 2013 .
these mortgages are collateralized by the subject property .
as of december 31 , 2006 , the aggregate outstanding balance on these mortgages was approximately $ 15.0 million , including $ 0.5 million of accrued interest .
during may 2006 , the company provided a cad $ 23.5 million collateralized credit facility at a fixed rate of 8.5% ( 8.5 % ) per annum for a term of two years to a real estate company for the execution of its property acquisitions program .
the credit facility is guaranteed by the real estate company .
the company was issued 9811 units , valued at approximately usd $ 0.1 million , and warrants to purchase up to 0.1 million shares of the real estate company as a loan origination fee .
during august 2006 , the company increased the credit facility to cad $ 45.0 million and received an additional 9811 units , valued at approximately usd $ 0.1 million , and warrants to purchase up to 0.1 million shares of the real estate company .
as of december 31 , 2006 , the outstand- ing balance on this credit facility was approximately cad $ 3.6 million ( approximately usd $ 3.1 million ) .
during september 2005 , a newly formed joint venture , in which the company had an 80% ( 80 % ) interest , acquired a 90% ( 90 % ) interest in a $ 48.4 million mortgage receivable for a purchase price of approximately $ 34.2 million .
this loan bore interest at a rate of three-month libor plus 2.75% ( 2.75 % ) per annum and was scheduled to mature on january 12 , 2010 .
a 626-room hotel located in lake buena vista , fl collateralized the loan .
the company had determined that this joint venture entity was a vie and had further determined that the company was the primary benefici- ary of this vie and had therefore consolidated it for financial reporting purposes .
during march 2006 , the joint venture acquired the remaining 10% ( 10 % ) of this mortgage receivable for a purchase price of approximately $ 3.8 million .
during june 2006 , the joint venture accepted a pre-payment of approximately $ 45.2 million from the borrower as full satisfaction of this loan .
during august 2006 , the company provided $ 8.8 million as its share of a $ 13.2 million 12-month term loan to a retailer for general corporate purposes .
this loan bears interest at a fixed rate of 12.50% ( 12.50 % ) with interest payable monthly and a balloon payment for the principal balance at maturity .
the loan is collateralized by the underlying real estate of the retailer .
additionally , the company funded $ 13.3 million as its share of a $ 20.0 million revolving debtor-in-possession facility to this retailer .
the facility bears interest at libor plus 3.00% ( 3.00 % ) and has an unused line fee of 0.375% ( 0.375 % ) .
this credit facility is collateralized by a first priority lien on all the retailer 2019s assets .
as of december 31 , 2006 , the compa- ny 2019s share of the outstanding balance on this loan and credit facility was approximately $ 7.6 million and $ 4.9 million , respec- tively .
during september 2006 , the company provided a mxp 57.3 million ( approximately usd $ 5.3 million ) loan to an owner of an operating property in mexico .
the loan , which is collateralized by the property , bears interest at 12.0% ( 12.0 % ) per annum and matures in 2016 .
the company is entitled to a participation feature of 25% ( 25 % ) of annual cash flows after debt service and 20% ( 20 % ) of the gain on sale of the property .
as of december 31 , 2006 , the outstand- ing balance on this loan was approximately mxp 57.8 million ( approximately usd $ 5.3 million ) .
during november 2006 , the company committed to provide a mxp 124.8 million ( approximately usd $ 11.5 million ) loan to an owner of a land parcel in acapulco , mexico .
the loan , which is collateralized with an operating property owned by the bor- rower , bears interest at 10% ( 10 % ) per annum and matures in 2016 .
the company is entitled to a participation feature of 20% ( 20 % ) of excess cash flows and gains on sale of the property .
as of decem- ber 31 , 2006 , the outstanding balance on this loan was mxp 12.8 million ( approximately usd $ 1.2 million ) .


on may 12 , 2017 , the company 2019s stockholders approved the american water works company , inc .
2017 omnibus equity compensation plan ( the 201c2017 omnibus plan 201d ) .
a total of 7.2 million shares of common stock may be issued under the 2017 omnibus plan .
as of december 31 , 2017 , 7.2 million shares were available for grant under the 2017 omnibus plan .
the 2017 omnibus plan provides that grants of awards may be in any of the following forms : incentive stock options , nonqualified stock options , stock appreciation rights , stock units , stock awards , other stock-based awards and dividend equivalents , which may be granted only on stock units or other stock-based awards .
following the approval of the 2017 omnibus plan , no additional awards are to be granted under the 2007 plan .
however , shares will still be issued under the 2007 plan pursuant to the terms of awards previously issued under that plan prior to may 12 , 2017 .
the cost of services received from employees in exchange for the issuance of stock options and restricted stock awards is measured based on the grant date fair value of the awards issued .
the value of stock options and rsus awards at the date of the grant is amortized through expense over the three-year service period .
all awards granted in 2017 , 2016 and 2015 are classified as equity .
the company recognizes compensation expense for stock awards over the vesting period of the award .
the company stratified its grant populations and used historic employee turnover rates to estimate employee forfeitures .
the estimated rate is compared to the actual forfeitures at the end of the reporting period and adjusted as necessary .
the following table presents stock-based compensation expense recorded in operation and maintenance expense in the accompanying consolidated statements of operations for the years ended december 31: .

                                            | 2017     | 2016     | 2015
------------------------------------------- | -------- | -------- | --------
stock options                               | $ 1      | $ 2      | $ 2
rsus                                        | 9        | 8        | 8
nonqualified employee stock purchase plan   | 1        | 1        | 1
stock-based compensation                    | 11       | 11       | 11
income tax benefit                          | -4 ( 4 ) | -4 ( 4 ) | -4 ( 4 )
stock-based compensation expense net of tax | $ 7      | $ 7      | $ 7

there were no significant stock-based compensation costs capitalized during the years ended december 31 , 2017 , 2016 and 2015 .
the company receives a tax deduction based on the intrinsic value of the award at the exercise date for stock options and the distribution date for rsus .
for each award , throughout the requisite service period , the company recognizes the tax benefits , which have been included in deferred income tax assets , related to compensation costs .
the tax deductions in excess of the benefits recorded throughout the requisite service period are recorded to the consolidated statements of operations and are presented in the financing section of the consolidated statements of cash flows .
stock options there were no grants of stock options to employees in 2017 .
in 2016 and 2015 , the company granted non-qualified stock options to certain employees under the 2007 plan .
the stock options vest ratably over the three-year service period beginning on january 1 of the year of the grant and have no performance vesting conditions .
expense is recognized using the straight-line method and is amortized over the requisite service period.


2022 increased proved liquid hydrocarbon , including synthetic crude oil , reserves to 78 percent from 75 percent of proved reserves 2022 increased e&p net sales volumes , excluding libya , by 7 percent 2022 recorded 96 percent average operational availability for all major company-operated e&p assets , compared to 94 percent in 2010 2022 completed debottlenecking work that increased crude oil production capacity at the alvheim fpso in norway to 150000 gross bbld from the previous capacity of 142000 gross bbld and the original 2008 capacity of 120000 gross bbld 2022 announced two non-operated discoveries in the iraqi kurdistan region and began drilling in poland 2022 completed aosp expansion 1 , including the start-up of the expanded scotford upgrader , realizing an increase in net synthetic crude oil sales volumes of 48 percent 2022 completed dispositions of non-core assets and interests in acreage positions for net proceeds of $ 518 million 2022 repurchased 12 million shares of our common stock at a cost of $ 300 million 2022 retired $ 2498 million principal of our long-term debt 2022 resumed limited production in libya in the fourth quarter of 2011 following the february 2011 temporary suspension of operations consolidated results of operations : 2011 compared to 2010 due to the spin-off of our downstream business on june 30 , 2011 , which is reported as discontinued operations , income from continuing operations is more representative of marathon oil as an independent energy company .
consolidated income from continuing operations before income taxes was 9 percent higher in 2011 than in 2010 , largely due to higher liquid hydrocarbon prices .
this improvement was offset by increased income taxes primarily the result of excess foreign tax credits generated during 2011 that we do not expect to utilize in the future .
the effective income tax rate for continuing operations was 61 percent in 2011 compared to 54 percent in 2010 .
revenues are summarized in the following table : ( in millions ) 2011 2010 .

( in millions )                      | 2011       | 2010
------------------------------------ | ---------- | ----------
e&p                                  | $ 13029    | $ 10782
osm                                  | 1588       | 833
ig                                   | 93         | 150
segment revenues                     | 14710      | 11765
elimination of intersegment revenues | -47 ( 47 ) | -75 ( 75 )
total revenues                       | $ 14663    | $ 11690

e&p segment revenues increased $ 2247 million from 2010 to 2011 , primarily due to higher average liquid hydrocarbon realizations , which were $ 99.37 per bbl in 2011 , a 31 percent increase over 2010 .
revenues in 2010 included net pre-tax gains of $ 95 million on derivative instruments intended to mitigate price risk on future sales of liquid hydrocarbons and natural gas .
included in our e&p segment are supply optimization activities which include the purchase of commodities from third parties for resale .
supply optimization serves to aggregate volumes in order to satisfy transportation commitments and to achieve flexibility within product types and delivery points .
see the cost of revenues discussion as revenues from supply optimization approximate the related costs .
higher average crude oil prices in 2011 compared to 2010 increased revenues related to supply optimization .
revenues from the sale of our u.s .
production are higher in 2011 primarily as a result of higher liquid hydrocarbon and natural gas price realizations , but sales volumes declined.


cgmhi also has substantial borrowing arrangements consisting of facilities that cgmhi has been advised are available , but where no contractual lending obligation exists .
these arrangements are reviewed on an ongoing basis to ensure flexibility in meeting cgmhi 2019s short-term requirements .
the company issues both fixed and variable rate debt in a range of currencies .
it uses derivative contracts , primarily interest rate swaps , to effectively convert a portion of its fixed rate debt to variable rate debt and variable rate debt to fixed rate debt .
the maturity structure of the derivatives generally corresponds to the maturity structure of the debt being hedged .
in addition , the company uses other derivative contracts to manage the foreign exchange impact of certain debt issuances .
at december 31 , 2009 , the company 2019s overall weighted average interest rate for long-term debt was 3.51% ( 3.51 % ) on a contractual basis and 3.91% ( 3.91 % ) including the effects of derivative contracts .
aggregate annual maturities of long-term debt obligations ( based on final maturity dates ) including trust preferred securities are as follows: .

in millions of dollars                  | 2010    | 2011    | 2012    | 2013    | 2014    | thereafter
--------------------------------------- | ------- | ------- | ------- | ------- | ------- | ----------
citigroup parent company                | $ 18030 | $ 20435 | $ 29706 | $ 17775 | $ 18916 | $ 92942
other citigroup subsidiaries            | 18710   | 29316   | 17214   | 5177    | 12202   | 14675
citigroup global markets holdings inc . | 1315    | 1030    | 1686    | 388     | 522     | 8481
citigroup funding inc .                 | 9107    | 8875    | 20738   | 4792    | 3255    | 8732
total                                   | $ 47162 | $ 59656 | $ 69344 | $ 28132 | $ 34895 | $ 124830

long-term debt at december 31 , 2009 and december 31 , 2008 includes $ 19345 million and $ 24060 million , respectively , of junior subordinated debt .
the company formed statutory business trusts under the laws of the state of delaware .
the trusts exist for the exclusive purposes of ( i ) issuing trust securities representing undivided beneficial interests in the assets of the trust ; ( ii ) investing the gross proceeds of the trust securities in junior subordinated deferrable interest debentures ( subordinated debentures ) of its parent ; and ( iii ) engaging in only those activities necessary or incidental thereto .
upon approval from the federal reserve , citigroup has the right to redeem these securities .
citigroup has contractually agreed not to redeem or purchase ( i ) the 6.50% ( 6.50 % ) enhanced trust preferred securities of citigroup capital xv before september 15 , 2056 , ( ii ) the 6.45% ( 6.45 % ) enhanced trust preferred securities of citigroup capital xvi before december 31 , 2046 , ( iii ) the 6.35% ( 6.35 % ) enhanced trust preferred securities of citigroup capital xvii before march 15 , 2057 , ( iv ) the 6.829% ( 6.829 % ) fixed rate/floating rate enhanced trust preferred securities of citigroup capital xviii before june 28 , 2047 , ( v ) the 7.250% ( 7.250 % ) enhanced trust preferred securities of citigroup capital xix before august 15 , 2047 , ( vi ) the 7.875% ( 7.875 % ) enhanced trust preferred securities of citigroup capital xx before december 15 , 2067 , and ( vii ) the 8.300% ( 8.300 % ) fixed rate/floating rate enhanced trust preferred securities of citigroup capital xxi before december 21 , 2067 , unless certain conditions , described in exhibit 4.03 to citigroup 2019s current report on form 8-k filed on september 18 , 2006 , in exhibit 4.02 to citigroup 2019s current report on form 8-k filed on november 28 , 2006 , in exhibit 4.02 to citigroup 2019s current report on form 8-k filed on march 8 , 2007 , in exhibit 4.02 to citigroup 2019s current report on form 8-k filed on july 2 , 2007 , in exhibit 4.02 to citigroup 2019s current report on form 8-k filed on august 17 , 2007 , in exhibit 4.2 to citigroup 2019s current report on form 8-k filed on november 27 , 2007 , and in exhibit 4.2 to citigroup 2019s current report on form 8-k filed on december 21 , 2007 , respectively , are met .
these agreements are for the benefit of the holders of citigroup 2019s 6.00% ( 6.00 % ) junior subordinated deferrable interest debentures due 2034 .
citigroup owns all of the voting securities of these subsidiary trusts .
these subsidiary trusts have no assets , operations , revenues or cash flows other than those related to the issuance , administration , and repayment of the subsidiary trusts and the subsidiary trusts 2019 common securities .
these subsidiary trusts 2019 obligations are fully and unconditionally guaranteed by citigroup.


acquire operations and facilities from municipalities and other local governments , as they increasingly seek to raise capital and reduce risk .
we realize synergies from consolidating businesses into our existing operations , whether through acquisitions or public-private partnerships , which allows us to reduce capital expenditures and expenses associated with truck routing , personnel , fleet maintenance , inventories and back-office administration .
operating model the goal of our operating model pillar is to deliver a consistent , high-quality service to all of our customers through the republic way : one way .
everywhere .
every day .
this approach of developing standardized processes with rigorous controls and tracking allows us to leverage our scale and deliver durable operational excellence .
the republic way is the key to harnessing the best of what we do as operators and translating that across all facets of our business .
a key enabler of the republic way is our organizational structure that fosters a high performance culture by maintaining 360-degree accountability and full profit and loss responsibility with local management , supported by a functional structure to provide subject matter expertise .
this structure allows us to take advantage of our scale by coordinating functionally across all of our markets , while empowering local management to respond to unique market dynamics .
we have rolled out several productivity and cost control initiatives designed to deliver the best service possible to our customers in the most efficient and environmentally sound way .
fleet automation approximately 75% ( 75 % ) of our residential routes have been converted to automated single-driver trucks .
by converting our residential routes to automated service , we reduce labor costs , improve driver productivity , decrease emissions and create a safer work environment for our employees .
additionally , communities using automated vehicles have higher participation rates in recycling programs , thereby complementing our initiative to expand our recycling capabilities .
fleet conversion to compressed natural gas ( cng ) approximately 19% ( 19 % ) of our fleet operates on natural gas .
we expect to continue our gradual fleet conversion to cng as part of our ordinary annual fleet replacement process .
we believe a gradual fleet conversion is the most prudent approach to realizing the full value of our previous fleet investments .
approximately 30% ( 30 % ) of our replacement vehicle purchases during 2017 were cng vehicles .
we believe using cng vehicles provides us a competitive advantage in communities with strict clean emission initiatives that focus on protecting the environment .
although upfront capital costs are higher , using cng reduces our overall fleet operating costs through lower fuel expenses .
as of december 31 , 2017 , we operated 37 cng fueling stations .
standardized maintenance based on an industry trade publication , we operate the seventh largest vocational fleet in the united states .
as of december 31 , 2017 , our average fleet age in years , by line of business , was as follows : approximate number of vehicles approximate average age .

                | approximate number of vehicles | approximate average age
--------------- | ------------------------------ | -----------------------
residential     | 7200                           | 7.5
small-container | 4600                           | 7.1
large-container | 4100                           | 8.8
total           | 15900                          | 7.7


stock performance graph * $ 100 invested on december 31 , 2011 in our stock or in the relevant index , including reinvestment of dividends .
fiscal year ended december 31 , 2016 .
( 1 ) delphi automotive plc ( 2 ) s&p 500 2013 standard & poor 2019s 500 total return index ( 3 ) automotive supplier peer group 2013 russell 3000 auto parts index , including american axle & manufacturing , borgwarner inc. , cooper tire & rubber company , dana inc. , delphi automotive plc , dorman products inc. , federal-mogul corp. , ford motor co. , general motors co. , gentex corp. , gentherm inc. , genuine parts co. , goodyear tire & rubber co. , johnson controls international plc , lear corp. , lkq corp. , meritor inc. , standard motor products inc. , stoneridge inc. , superior industries international , tenneco inc. , tesla motors inc. , tower international inc. , visteon corp. , and wabco holdings inc .
company index december 31 , december 31 , december 31 , december 31 , december 31 , december 31 .

company index                        | december 31 2011 | december 31 2012 | december 31 2013 | december 31 2014 | december 31 2015 | december 31 2016
------------------------------------ | ---------------- | ---------------- | ---------------- | ---------------- | ---------------- | ----------------
delphi automotive plc ( 1 )          | $ 100.00         | $ 177.58         | $ 283.02         | $ 347.40         | $ 414.58         | $ 331.43
s&p 500 ( 2 )                        | 100.00           | 116.00           | 153.58           | 174.60           | 177.01           | 198.18
automotive supplier peer group ( 3 ) | 100.00           | 127.04           | 188.67           | 203.06           | 198.34           | 202.30

dividends the company has declared and paid cash dividends of $ 0.25 and $ 0.29 per ordinary share in each quarter of 2015 and 2016 , respectively .
in addition , in january 2017 , the board of directors declared a regular quarterly cash dividend of $ 0.29 per ordinary share , payable on february 15 , 2017 to shareholders of record at the close of business on february 6 , 2017.


notes to consolidated financial statements ( continued ) march 31 , 2004 5 .
income taxes ( continued ) the effective tax rate of zero differs from the statutory rate of 34% ( 34 % ) primarily due to the inability of the company to recognize deferred tax assets for its operating losses and tax credits .
of the total valuation allowance , approximately $ 2400000 relates to stock option compensation deductions .
the tax benefit associated with the stock option compensation deductions will be credited to equity when realized .
6 .
commitments and contingencies the company applies the disclosure provisions of fin no .
45 , guarantor 2019s accounting and disclosure requirements for guarantees , including guarantees of indebtedness of others , and interpretation of fasb statements no .
5 , 57 and 107 and rescission of fasb interpretation no .
34 ( fin no .
45 ) to its agreements that contain guarantee or indemnification clauses .
these disclosure provisions expand those required by sfas no .
5 , accounting for contingencies , by requiring that guarantors disclose certain types of guarantees , even if the likelihood of requiring the guarantor 2019s performance is remote .
the following is a description of arrangements in which the company is a guarantor .
product warranties 2013 the company routinely accrues for estimated future warranty costs on its product sales at the time of sale .
the ab5000 and bvs products are subject to rigorous regulation and quality standards .
while the company engages in extensive product quality programs and processes , including monitoring and evaluating the quality of component suppliers , its warranty obligation is affected by product failure rates .
operating results could be adversely effected if the actual cost of product failures exceeds the estimated warranty provision .
patent indemnifications 2013 in many sales transactions , the company indemnifies customers against possible claims of patent infringement caused by the company 2019s products .
the indemnifications contained within sales contracts usually do not include limits on the claims .
the company has never incurred any material costs to defend lawsuits or settle patent infringement claims related to sales transactions .
under the provisions of fin no .
45 , intellectual property indemnifications require disclosure only .
as of march 31 , 2004 , the company had entered into leases for its facilities , including its primary operating facility in danvers , massachusetts , with terms through fiscal 2010 .
the company has elected not to exercise a buyout option available under its primary lease that would have allowed for early termination in 2005 .
total rent expense under these leases , included in the accompanying consolidated statements of operations , was approximately $ 856000 , $ 823000 and $ 821000 for the fiscal years ended march 31 , 2002 , 2003 and 2004 , respectively .
during the fiscal year ended march 31 , 2000 , the company entered into 36-month operating leases totaling approximately $ 644000 for the lease of office furniture .
these leases ended in fiscal year 2003 and at the company 2019s option the furniture was purchased .
rental expense recorded for these leases during the fiscal years ended march 31 , 2002 and 2003 was approximately $ 215000 and $ 127000 respectively .
during fiscal 2000 , the company entered into a 36-month capital lease for computer equipment and software for approximately $ 221000 .
this lease ended in fiscal year 2003 and at the company 2019s option these assets were purchased .
future minimum lease payments under all non-cancelable operating leases as of march 31 , 2004 are approximately as follows ( in thousands ) : .

year ending march 31,               | operating leases
----------------------------------- | ----------------
2005                                | $ 781
2006                                | 776
2007                                | 769
2008                                | 772
2009                                | 772
thereafter                          | 708
total future minimum lease payments | $ 4578

from time-to-time , the company is involved in legal and administrative proceedings and claims of various types .
while any litigation contains an element of uncertainty , management , in consultation with the company 2019s general counsel , presently believes that the outcome of each such other proceedings or claims which are pending or known to be threatened , or all of them combined , will not have a material adverse effect on the company.