CarMax 2015 Annual Report Download - page 65

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FAIR VALUE OF PLAN ASSETS AND FAIR VALUE HIERARCHY
As of February 28
(In thousands) 2015 2014
Mutual funds (Level 1):
Equity securities (1) $ 84,303 $ 78,576
Equity securities – international (2) 17,114 15,649
Fixed income securities (3) 32,549 29,500
Collective funds (Level 2):
Short-term investments (4) 1,341 1,046
Investment payables, net (58) (59)
Total $ 135,249 $ 124,712
(1) Includes large-, mid- and small-cap companies primarily from diverse U.S. industries including pharmaceutical, bank, oil
and gas, retail and computer sectors; approximately 95% of securities relate to U.S. entities and 5% of securities relate to
non-U.S. entities as of February 28, 2015 (95% and 5%, respectively, as of February 28, 2014) .
(2) Consists of equity securities of primarily foreign corporations from diverse industries including bank, pharmaceutical,
insurance, telecommunication, food, and oil and gas sectors; 100% of securities relate to non-U.S. entities as of
February 28, 2015 (100% relate to non-U.S. entities, as of February 28, 2014).
(3) Includes debt securities of U.S. and foreign governments, their agencies and corporations, and diverse investments in
mortgage-backed securities and banks; approximately 85% of securities relate to U.S. entities and 15% of securities relate to
non-U.S. entities as of February 28, 2015 (90% and 10%, respectively, as of February 28, 2014).
(4) Includes pooled funds representing short-term instruments that include governments, their agencies and corporations and
large-, mid- and small-cap companies primarily from the U.S. bank sector; nearly 100% of securities relate to U.S. entities
as of February 28, 2015 (nearly 100% as of February 28, 2014).
Plan Assets. Our pension plan assets are held in trust and management sets the investment policies and strategies.
Long-term strategic investment objectives include asset preservation and appropriately balancing risk and return. We
oversee the investment allocation process, which includes selecting investment managers, setting long-term strategic
targets and monitoring asset allocations and performance. Target allocations for plan assets are guidelines, not
limitations, and occasionally plan fiduciaries may approve allocations above or below the targets. We target allocating
75% of plan assets to equity and equity-related instruments and 25% to fixed income securities. Equity securities are
currently composed of mutual funds that include highly diversified investments in large-, mid- and small-cap
companies located in the United States and internationally. The fixed income securities are currently composed of
mutual funds that include investments in debt securities, mortgage-backed securities, corporate bonds and other debt
obligations primarily in the United States. We do not expect any plan assets to be returned to us during fiscal 2016.
Plan assets also include collective funds, which are public investment vehicles with the underlying assets representing
high quality, short-term instruments that include securities of governments, their agencies and corporations and large,
mid, and small cap companies located in the United States and internationally.
The fair values of the plan’s assets are provided by the plan’s trustee and the investment managers. Within the fair
value hierarchy (see Note 6), the mutual funds are classified as Level 1 as quoted active market prices for identical
assets are used to measure fair value. The collective funds are public investment vehicles valued using a net asset
value (“NAV”) provided by the plan’s trustee as a practical expedient for measuring the fair value. The NAV is based
on the underlying net assets owned by the fund divided by the number of shares outstanding. The NAV’s unit price
is quoted on a private market that was not active. However, the NAV is based on the fair value of the underlying
securities within the fund, which were traded on an active market and valued at the closing price reported on the active
market on which those individual securities are traded. The collective funds may be liquidated with minimal
restrictions and are classified as Level 2.
Funding Policy. For the pension plan, we contribute amounts sufficient to meet minimum funding requirements as
set forth in the employee benefit and tax laws, plus any additional amounts as we may determine to be appropriate.
We do not expect to make any contributions to the pension plan in fiscal 2016. For the non-funded restoration plan,
we contribute an amount equal to the benefit payments.