Kraft 2013 Annual Report Download - page 65

63
Changes in our Level 3 plan assets, which are recorded in operations, for the year ended December 29, 2012
included:
Asset Category
January 1,
2012
Balance
Net Realized
and Unrealized
Gains/(Losses)
Net Purchases,
Issuances and
Settlements
Net Transfers
Into/(Out of)
Level 3
December 29,
2012
Balance
(in millions)
Corporate bond and other fixed-
income securities —— 7 — 7
Real estate $ —$ (1) $ 187 $ — $ 186
Total Level 3 investments $ —$ (1) $ 194 $ — $ 193
In connection with the Spin-Off, International transferred to us $3 million of corporate bonds and other
fixed-income securities and $187 million of real estate which are classified as Level 3 pension assets.
The percentage of fair value of pension plan assets at December 28, 2013 and December 29, 2012 was:
U.S. Plans Non-U.S. Plans
Asset Category December 28, 2013 December 29, 2012 December 28, 2013 December 29, 2012
Equity securities 53% 61% 61% 64%
Fixed-income securities 43% 36% 38% 35%
Real estate 4% 3% — —
Other —% —% 1% 1%
Total 100% 100% 100% 100%
During 2013, we began a new liability-driven investment strategy for pension assets. This strategy, which will be
phased in over the next several years, better aligns our pension assets with the projected benefit obligation to
reduce volatility by targeting an investment of approximately 80% of our U.S. plan assets in fixed-income securities
and approximately 20% in equity securities.
As of December 28, 2013, approximately 43% of our U.S. plan assets are in fixed-income securities and
approximately 53% are in equity securities. The strategy uses actively managed and indexed U.S. investment grade
fixed-income securities (which constitute 97% or more of fixed-income securities) with lesser allocations to high
yield fixed-income securities, indexed U.S. equity securities, and actively managed and indexed international equity
securities.
For the plans outside the U.S., the investment strategy is subject to local regulations and the asset / liability profiles
of the plans in each individual country. In aggregate, the long-term asset allocation targets of our non-U.S. plans are
broadly characterized as a mix of 70% fixed-income securities and 30% equity securities. The other asset balance
of our non-U.S. plans at December 28, 2013 primarily related to $8 million in cash accounts.
We attempt to maintain our target asset allocation by rebalancing between asset classes as we make contributions
and monthly benefit payments.
Employer Contributions:
In order to align cash flows with expenses and reduce volatility, we have executed a level funding strategy. For our
U.S. qualified pension plans, in 2014, we currently are only required to make a nominal cash contribution under the
Pension Protection Act of 2006. However, based on our level funding strategy, we estimate that 2014 pension
contributions will be approximately $160 million to our U.S. plans and approximately $40 million to our non-U.S.
plans. Our actual contributions may be different due to many factors, including changes in tax and other benefit
laws, significant differences between expected and actual pension asset performance or interest rates, or other
factors. In 2013, we contributed $435 million to our U.S. pension plans and $176 million to our non-U.S. pension
plans. Of the total 2013 pension contributions, approximately $518 million was voluntary. We make contributions to
our U.S. and non-U.S. pension plans, primarily, to the extent that they are tax deductible. In addition, employees
contributed $5 million in 2013 to our non-U.S. plans and $3 million in 2012.