E-Z-GO 2014 Annual Report Download - page 73

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The fair value of total pension plan assets by major category and level in the fair value hierarchy as defined in Note 8 is as follows:
January 3, 2015
December 28, 2013
(In millions)
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Cash and equivalents
$ 27
$ 194
$ —
$ 17
$ 144
$ —
Equity securities:
Domestic
1,417
595
—
1,179
866
—
International
1,185
253
—
1,140
258
—
Debt securities:
National, state and local governments
526
419
—
506
411
—
Corporate debt
—
950
—
—
638
—
Asset-backed securities
—
110
—
—
153
—
Private investment partnerships
—
—
380
—
—
305
Real estate
—
—
744
—
—
553
Hedge funds
—
—
179
—
—
175
Total
$ 3,155
$ 2,521
$ 1,303
$ 2,842
$ 2,470
$ 1,033
Cash equivalents and equity and debt securities include comingled funds, which represent investments in funds offered to
institutional investors that are similar to mutual funds in that they provide diversification by holding various equity and debt
securities. Since these comingled funds are not quoted on any active market, they are priced based on the relative value of the
underlying equity and debt investments and their individual prices at any given time; accordingly, they are classified as Level 2.
Debt securities are valued based on same day actual trading prices, if available. If such prices are not available, we use a matrix
pricing model with historical prices, trends and other factors.
Private investment partnerships represent investments in funds, which, in turn, invest in stocks and debt securities of companies
that, in most cases, are not publicly traded. These partnerships are valued using income and market methods that include cash flow
projections and market multiples for various comparable companies. Real estate includes owned properties and investments in
partnerships. Owned properties are valued using certified appraisals at least every three years, which then are updated at least
annually by the real estate investment manager based on current market trends and other available information. These appraisals
generally use the standard methods for valuing real estate, including forecasting income and identifying current transactions for
comparable real estate to arrive at a fair value. Real estate partnerships are valued similar to private investment partnerships, with
the general partner using standard real estate valuation methods to value the real estate properties and securities held within their
fund portfolios. We believe these assumptions are consistent with assumptions that market participants would use in valuing these
investments.
Hedge funds represent an investment in a diversified fund of hedge funds of which we are the sole investor. The fund invests in
portfolio funds that are not publicly traded and are managed by various portfolio managers. Investments in portfolio funds are
typically valued on the basis of the most recent price or valuation provided by the relevant fund’s administrator. The administrator
for the fund aggregates these valuations with the other assets and liabilities to calculate the net asset value of the fund.
The table below presents a reconciliation of the beginning and ending balances for fair value measurements that use significant
unobservable inputs (Level 3) by major category:
(In millions)
Private
Investment
Partnerships
Real Estate
Hedge Funds
Balance at beginning of year
$ 305
$ 553
$ 175
Actual return on plan assets:
Related to assets still held at reporting date
(7)
6
4
Related to assets sold during the period
41
28
—
Purchases, sales and settlements, net
41
157
—
Balance at end of year
$ 380
$ 744
$ 179
Estimated Future Cash Flow Impact
Defined benefits under salaried plans are based on salary and years of service. Hourly plans generally provide benefits based on
stated amounts for each year of service. Our funding policy is consistent with applicable laws and regulations. In 2015, we expect
to contribute approximately $80 million to fund our pension plans and the RAP. Benefit payments provided below reflect
expected future employee service, as appropriate, and are expected to be paid, net of estimated participant contributions. These
payments are based on the same assumptions used to measure our benefit obligation at the end of fiscal 2014. While pension
67 Textron Inc. Annual Report • 2014