Medtronic 2011 Annual Report Download - page 93

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89
Medtronic, Inc.
Non-U.S. Plans
Target
Allocation
2011 2010
Asset Category
Equity securities 41% 40%
Debt securities 23 15
Other 36 45
Total100% 100%
Retirement Benefit Plan Asset Fair Values The following is a
description of the valuation methodologies used for retirement
benefit plan assets measured at fair value.
Short-term investments: Valued at the closing price reported in
the active markets in which the individual security is traded.
U.S. government securities:
are valued at the closing price reported in the active markets
in which the individual security is traded. Other U.S. government
securities are valued based on inputs other than quoted prices
that are observable.
Corporate debt securities: Valued based on inputs other than
quoted prices that are observable.
Common stock: Valued at the closing price reported in the
active markets in which the individual security is traded.
Equity Mutual Funds/Commingled Trusts: Valued based on the
year-end net asset values of the investment vehicles. The net
asset values of the vehicles are based on the fair values of the
underlying investments of the partnerships valued at the closing
price reported in the active markets in which the individual
security is traded. Equity mutual funds have a daily reported net
asset value and the Company classifies these investments as Level
2. Commingled trusts do not have a daily reported net asset value
and the Company classifies these investments as Level 3.
Fixed Income Mutual Funds: Valued based on the year-end net
asset values of the investment vehicles. The net asset values of
the vehicles are based on the fair values of the underlying
investments of the partnerships valued based on inputs other
than quoted prices that are observable.
Partnership Units: Valued based on the year-end net asset values
of the underlying partnerships. The net asset values of the
partnerships are based on the fair values of the underlying
investments of the partnerships. Quoted market prices are used
to value the underlying investments of the partnerships, where
available partnerships consist of the investment pools which
invest primarily in common stocks. Partnership units include
partnerships, private equity investments, and real asset
investments. Partnerships primarily include long/short equity and
absolute return strategies. These investments can be redeemed
monthly with notice periods ranging from 45 to 95 days. There
are two absolute return strategy funds totaling $18 million that
are in the process of liquidation. The Company expects to receive
the majority of the proceeds over the next five years. Private
equity investments consist of common stock and debt instruments
of private companies. For private equity funds, the sum of the
unfunded commitments is $29 million and the estimated
liquidation period of these funds is expected to be one to 10
years. Real asset investments consist of commodities, derivatives,
Real Estate Investment Trusts, and illiquid real estate holdings.
These investments have redemption periods ranging from 30
days to 10 years. If a quoted market price is not available for a
partnership investment, other valuation procedures are utilized to
arrive at fair value.
Registered Investment Companies: Valued at the quoted
prices of shares held by the plan at year-end in the active market
on which the individual securities are traded.
Insurance Contracts: Comprised of investments in collective
(group) insurance contracts, consisting of individual insurance
policies. The policyholder is the employer and each member is
the owner/beneficiary of their individual insurance policy. These
policies are a part of the insurance company’s general portfolio
and participate in the insurer’s profit-sharing policy on an excess
yield basis.
The methods described above may produce fair values that
may not be indicative of net realizable value or reflective of future
fair values. Furthermore, while the Company believes its valuation
methods are appropriate and consistent with other market
participants, the use of different methodologies or assumptions
to determine fair value of certain financial instruments could
result in a different fair value measurement at the reporting date.
During fiscal year 2011, the Company reviewed the hierarchy
classification of fixed income mutual funds. The Company
determined these investments had valuation characteristics
consistent with Level 2 securities. Consequently, the Company
transferred fixed income mutual funds from Level 1 to Level 2.
Additionally, the Company reviewed the hierarchy classification of
registered investment companies. The Company determined
these investments had valuation characteristics consistent with
Level 2 securities. Consequently, the Company transferred
registered investment companies from Level 1 to Level 2. There
were no significant transfers from Level 1 or 2 to Level 3 during
the fiscal years ended April 29, 2011 or April 30, 2010.