Xerox 2013 Annual Report Download - page 123

The following tables represents a roll-forward of the defined benefit plans assets measured using significant
unobservable inputs (Level 3 assets):
Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
U.S. Defined Benefit Plans Assets Non-U.S. Defined Benefit Plans Assets
Real
Estate
Private
Equity/
Venture
Capital Total
Real
Estate
Private
Equity/
Venture
Capital
Guaranteed
Insurance
Contracts Total
Balance at December 31, 2011 $72 $318 $390 $280 $3$116 $ 399
Purchases 1 20 21 13 — 15 28
Sales (11) (48)(59)(21) — (7) (28)
Net transfers in from Level 2 — — — 69 — — 69
Realized gains (losses) 1 36 37 1 — 4 5
Unrealized gains (losses) (5)(26)(31)(25) — (1) (26)
Currency translation — — — 15 — 419
Balance at December 31, 2012 58 300 358 332 3 131 466
Purchases 1 177 178 64 193 3 260
Sales (36) (59)(95)(128) — (5) (133)
Net transfers in from Level 1 — — — — — (1) (1)
Net transfers in from Level 2 — — — — — — —
Realized gains (losses) 24 46 70 17 2 4 23
Unrealized gains (losses) (18) (13)(31)(21)2(2) (21)
Currency translation — — — 5 12 522
Balance at December 31, 2013 $29 $451 $480 $269 $212 $135 $ 616
Valuation Method
Our primary Level 3 assets are Real Estate and Private Equity/Venture Capital investments. The fair value of our real
estate investment funds are based on the Net Asset Value (NAV) of our ownership interest in the funds. NAV
information is received from the investment advisers and is primarily derived from third-party real estate appraisals for
the properties owned. The fair value for our private equity/venture capital partnership investments are based on our
share of the estimated fair values of the underlying investments held by these partnerships as reported in their audited
financial statements. The valuation techniques and inputs for our Level 3 assets have been consistently applied for all
periods presented.
Investment Strategy
The target asset allocations for our worldwide defined benefit pension plans were:
2013 2012
U.S. Non-U.S. U.S. Non-U.S.
Equity investments 36% 41% 41% 40%
Fixed income investments 44% 47% 43% 47%
Real estate 5% 9% 5% 9%
Private equity 14% —% 9% —%
Other 1% 3% 2% 4%
Total Investment Strategy 100% 100% 100% 100%
We employ a total return investment approach whereby a mix of equities and fixed income investments are used to
maximize the long-term return of plan assets for a prudent level of risk. The intent of this strategy is to minimize plan
expenses by exceeding the interest growth in long-term plan liabilities. Risk tolerance is established through careful
consideration of plan liabilities, plan funded status and corporate financial condition. This consideration involves the
use of long-term measures that address both return and risk. The investment portfolio contains a diversified blend of
equity and fixed income investments. Furthermore, equity investments are diversified across U.S. and non-U.S. stocks,
as well as growth, value and small and large capitalizations, and may include Company stock. Other assets such as
real estate, private equity, and hedge funds are used to improve portfolio diversification. Derivatives may be used to
hedge market exposure in an efficient and timely manner; however, derivatives may not be used to leverage the
portfolio beyond the market value of the underlying investments. Investment risks and returns are measured and
monitored on an ongoing basis through annual liability measurements and quarterly investment portfolio reviews.
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