Emerson 2014 Annual Report Download - page 49

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also includes a high-yield element which is generally shorter in duration. For diversification, a small portion of U.S.
plan assets is allocated to private equity partnerships and real asset fund investments, providing opportunities
for above market returns. Leveraging techniques are not used and the use of derivatives in any fund is limited
and inconsequential.
The fair values of defined benefit pension assets as of September 30, organized by asset class and by the fair value
hierarchy of ASC 820, Fair Value Measurement, follow:
leVel 1 leVel 2 leVel 3 total percentage
2014
U.S. equities $1,097 535 184 1,816 33%
International equities 589 767 1,356 25%
Emerging market equities 279 279 5%
Corporate bonds 594 594 11%
Government bonds 2 720 722 13%
High-yield bonds 181 181 3%
Other 209 180 124 513 10%
Total $1,897 3,256 308 5,461 100%
2013
U.S. equities $1,078 560 121 1,759 35%
International equities 563 632 1,195 24%
Emerging market equities 263 263 5%
Corporate bonds 524 524 10%
Government bonds 22 614 636 13%
High-yield bonds 159 159 3%
Other 178 168 129 475 10%
Total $1,841 2,920 250 5,011 100%
ASSET CLASSES
U.S. equities reflects companies domiciled in the U.S., including multinational companies. International
equities is comprised of companies domiciled in developed nations outside the U.S. Emerging market equities
is comprised of companies domiciled in portions of Asia, Eastern Europe and Latin America. Corporate bonds
represents investment-grade debt of issuers primarily from the U.S. Government bonds includes investment-
grade instruments issued by federal, state and local governments, primarily in the U.S. High-yield bonds includes
noninvestment-grade debt from a diverse group of developed market issuers. Other includes cash, interests in
mixed asset funds investing in commodities, natural resources, agriculture, real estate and infrastructure funds,
life insurance contracts (U.S.), and shares in certain general investment funds of financial institutions or insurance
arrangements (non-U.S.) that typically ensure no market losses or provide for a small minimum return guarantee.
FAIR VALUE HIERARCHY CATEGORIES
Valuations of Level 1 assets for all classes are based on quoted closing market prices from the principal exchanges
where the individual securities are traded. Cash is valued at cost, which approximates fair value. Equity securities
categorized as Level 2 assets are primarily nonexchange-traded commingled or collective funds where the
underlying securities have observable prices available from active markets. Valuation is based on the net asset
value of fund units held as derived from the fair value of the underlying assets. Debt securities categorized as
Level 2 assets are generally valued based on independent broker/dealer bids or by comparison to other debt
securities having similar durations, yields and credit ratings. Other Level 2 assets are valued based on a net asset
value of fund units held, which is derived from either market-observed pricing for the underlying assets or broker/
dealer quotation. U.S. equity securities classified as Level 3 are fund investments in private companies. Valuation
techniques and inputs for these assets include discounted cash flow analysis, earnings multiple approaches, recent
transactions, transferability restrictions, prevailing discount rates, volatilities, credit ratings and other factors. In the
Other class, interests in mixed assets funds are Level 2, and U.S. life insurance contracts and non-U.S. general fund
investments and insurance arrangements are Level 3.