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The following is a description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy. 

## Equity securities 

The plan measures common stock using quoted prices which are available in an active market and classifies these investments within Level 1 of the valuation hierarchy. 

## Mutual and exchange traded funds 

All of the plan’s mutual and exchange traded funds are publicly traded. The plan measures the value of these investments using the fund’s quoted prices that are available in an active market and classifies these investments within Level 1 of the valuation hierarchy. 

## Debt securities 

For certain U.S. Treasury and federal agency and non-agency obligations, the plan measures the fair value based on quoted prices, which are available in an active market and classifies these investments within Level 1 of the valuation hierarchy. Where quoted prices are not available, the plan measures the fair value of these investments based on matrix pricing models that include the bid price, which factors in the yield curve and other characteristics of the security including the interest rate, prepayment speeds and length of maturity. Therefore, these investments are classified within Level 2 of the valuation hierarchy. 

## Plan Assumptions 

The plan assumptions are evaluated annually and are updated as necessary. The discount rate assumption reflects the yield on a portfolio of high quality fixed-income instruments that have a similar duration to the plan’s liabilities. The expected long-term rate of return assumption reflects the average return expected on the assets invested to provide for the plan’s liabilities. In determining the expected long-term rate of return, the Bancorp evaluated actuarial and economic inputs, including long-term inflation rate assumptions and broad equity and bond indices long-term return projections, as well as actual long-term historical plan performance. 

 The following table summarizes the plan assumptions for the years ended December 31: 

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Lowering both the expected rate of return on the plan and the discount rate by 0.25% would have increased the 2010 pension expense by approximately $1 million. 

Based on the actuarial assumptions, the Bancorp does not expect to contribute to the plan in 2011. Estimated pension benefit payments, which reflect expected future service, are $19 million in 2011, $20 million in 2012, $17 million in 2013, $17 million in 2014 and $16 million in 2015. The total estimated payments for the years 2016 through 2020 is $70 million. 

## Investment Policies and Strategies 

The Bancorp’s policy for the investment of plan assets is to employ investment strategies that achieve a range of weighted- average target asset allocations relating to equity securities (including the Bancorp’s common stock), fixed income securities 

(including federal agency obligations, corporate bonds and notes) and cash. 

The following table provides the Bancorp’s targeted and actual weighted-average asset allocations by asset category for years ended December 31: 

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(a) Includes mutual and exchange traded funds. 

The risk tolerance for the plan is determined by management to be “moderate to aggressive”, recognizing that higher returns involve some volatility and that periodic declines in the portfolio’s value are tolerated in an effort to achieve real capital growth. There were no significant concentrations of risk associated with the investments of the Bancorp’s benefit and retirement plans at December 31, 2010 and 2009. 

Permitted asset classes of the plan include cash and cash equivalents, fixed income (domestic and non-U.S. bonds), equities (U.S., non-U.S., emerging markets and REITS), equipment leasing precious metals, commodity transactions and mortgages. The plan utilizes derivative instruments including puts, calls, straddles or other option strategies, as approved by management. 

Prohibited asset classes of the plan include venture capital, short sales, limited partnerships and leveraged transactions. Per ERISA, the Bancorp’s common stock cannot exceed ten percent of the fair value of plan assets. 

Fifth Third Bank, as Trustee, is expected to manage the plan assets in a manner consistent with the plan agreement and other regulatory, federal and state laws. The Fifth Third Bank Pension, Profit Sharing and Medical Plan Committee (the “Committee”) is the plan administrator. The Trustee is required to provide to the Committee monthly and quarterly reports covering a list of plan assets, portfolio performance, transactions and asset allocation. The Trustee is also required to keep the Committee apprised of any material changes in the Trustee’s outlook and recommended investment policy. 

## Other Information on Retirement and Benefit Plans 

The accumulated benefit obligation for all defined benefit plans was $227 million and $217 million at December 31, 2010 and 2009, respectively. Amounts relating to the Bancorp’s defined benefit plans with assets exceeding benefit obligations were as follows at December 31: 

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Amounts relating to the Bancorp’s defined benefit plans with benefit obligations exceeding assets were as follows at December 31: 

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As of December 31, 2010 and 2009, $172 million and $160 million, respectively, of plan assets were managed through mutual funds by Fifth Third Bank, a subsidiary of the Bancorp. Plan assets included $5 million and $3 million of Bancorp common stock as of December 31, 2010 and 2009, respectively. Plan assets are not expected to be returned to the Bancorp during 2011. 

