HP 2014 Annual Report Download - page 123

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 4: Retirement and Post-Retirement Benefit Plans (Continued)
(3) Includes a fund that invests in both private and public equities primarily in the U.S. and the United Kingdom, as well as emerging
markets across all sectors. The fund also holds fixed income and derivative instruments to hedge interest rate and inflation risk. In
addition, the fund includes units in transferable securities, collective investment schemes, money market funds, cash and deposits.
(4) Includes limited partnerships that invest both long and short primarily in common stocks and credit, relative value, event driven
equity, distressed debt and macro strategies. Management of the hedge funds has the ability to shift investments from value to
growth strategies, from small to large capitalization stocks and bonds, and from a net long position to a net short position.
(5) Department of Labor 103-12 IE (Investment Entity) designation is for plan assets held by two or more unrelated employee benefit
plans which includes limited partnerships and venture capital partnerships.
(6) Includes publicly and privately traded Registered Investment Entities.
(7) Includes cash and cash equivalents such as short-term marketable securities.
(8) Includes international insured contracts, derivative instruments and unsettled transactions.
Changes in fair value measurements of Level 3 investments were as follows:
For the fiscal year ended October 31, 2013
Post-Retirement
U.S. Defined Benefit Plans Non-U.S. Defined Benefit Plans Benefit Plans
Debt Alternative Alternative Alternative
Securities Investments Equity Investments Investments
Insurance
Corporate Private Hedge Non U.S. Private Hedge Real Group Private
Debt Equity Hybrids Funds Total Equities Equity Funds Estate Annuities Other Total Equity Hybrids Total
In millions
Beginning balance at
October 31, 2012 ...... $1 $1,300 $ 2 $ 65 $1,368 $76 $21 $233 $194 $88 $ 2 $614 $235 $ 1 $236
Actual return on plan assets:
Relating to assets still held
at the reporting date . . — (9) — 13 4 1 8 — 16 (5) — 20 5 — 5
Relating to assets sold
during the period . . . . — 143 — — 143 — — 11 — — — 11 21 — 21
Purchases, sales, and
settlements (net) ...... — (184) — 35 (149) — 19 (40) 115 (2) — 92 (27) — (27)
Transfers in and/or out of
Level 3 ........... (1) — — — (1) — — — — — — — — — —
Ending balance at
October 31, 2013 ...... $— $1,250 $ 2 $113 $1,365 $77 $48 $204 $325 $81 $ 2 $737 $234 $ 1 $235
The following is a description of the valuation methodologies used to measure plan assets at fair
value. There have been no changes in the methodologies used during the reporting period.
Investments in publicly-traded equity securities are valued using the closing price on the
measurement date as reported on the stock exchange on which the individual securities are traded. For
corporate, government and asset-backed debt securities, fair value is based on observable inputs of
comparable market transactions. For corporate and government debt securities traded on active
exchanges, fair value is based on observable quoted prices. The valuation of alternative investments,
such as limited partnerships and joint ventures, may require significant management judgment. For
alternative investments, valuation is based on net asset value (‘‘NAV’’) as reported by the Asset
Manager and adjusted for cash flows, if necessary. In making such an assessment, a variety of factors
are reviewed by management, including, but not limited to, the timeliness of NAV as reported by the
asset manager and changes in general economic and market conditions subsequent to the last NAV
reported by the asset manager. Depending on the amount of management judgment, the lack of
near-term liquidity, and the absence of quoted market prices, these assets are classified in Level 2 or
Level 3 of the fair value hierarchy. Further, depending on how quickly HP can redeem its hedge fund
investments, and the extent of any adjustments to NAV, hedge funds are classified in either Level 2 or
Level 3 of the fair value hierarchy. Common collective trusts, interests in 103-12 entities and registered
investment companies are valued at NAV. The valuation for some of these assets requires judgment due
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