Lockheed Martin 2015 Annual Report Download - page 105

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As of December 31, 2015 and 2014, the assets associated with our foreign defined benefit pension plans were not
material and have not been included in the table above.
The following table presents the changes during 2015 and 2014 in the fair value of plan assets categorized as Level 3 in
the preceding table (in millions):
Private
Equity
Funds
Real
Estate
Funds
Hedge
Funds Other Total
Balance at January 1, 2014 $2,601 $572 $ 505 $145 $3,823
Actual return on plan assets:
Realized gains, net 182 43 34 1 260
Unrealized gains (losses), net 38 22 (11) (21) 28
Purchases, sales and settlements, net 131 92 (24) 8 207
Transfers out of Level 3, net — — — (72) (72)
Balance at December 31, 2014 $2,952 $729 $ 504 $61 $4,246
Actual return on plan assets:
Realized gains, net 315 84 23 (12) 410
Unrealized (losses) gains, net (163) 20 5 7 (131)
Purchases, sales and settlements, net 27 183 (177) (22) 11
Transfers out of Level 3, net — — — (3) (3)
Balance at December 31, 2015 $3,131 $1,016 $ 355 $ 31 $4,533
Valuation techniques – Cash equivalents are mostly comprised of short-term money-market instruments and are valued
at cost, which approximates fair value.
U.S. equity securities and international equity securities categorized as Level 1 are traded on active national and
international exchanges and are valued at their closing prices on the last trading day of the year. For U.S. equity securities
and international equity securities not traded on an active exchange, or if the closing price is not available, the trustee obtains
indicative quotes from a pricing vendor, broker or investment manager. These securities are categorized as Level 2 if the
custodian obtains corroborated quotes from a pricing vendor or categorized as Level 3 if the custodian obtains
uncorroborated quotes from a broker or investment manager.
Commingled equity funds are investment vehicles valued using the Net Asset Value (NAV) provided by the fund
managers. The NAV is the total value of the fund divided by the number of shares outstanding. Commingled equity funds are
categorized as Level 1 if traded at their NAV on a nationally recognized securities exchange or categorized as Level 2 if the
NAV is corroborated by observable market data (e.g., purchases or sales activity) and we are able to redeem our investment
in the near-term.
Fixed income investments categorized as Level 2 are valued by the trustee using pricing models that use verifiable
observable market data (e.g., interest rates and yield curves observable at commonly quoted intervals and credit spreads),
bids provided by brokers or dealers or quoted prices of securities with similar characteristics. Fixed income investments are
categorized at Level 3 when valuations using observable inputs are unavailable. The trustee obtains pricing based on
indicative quotes or bid evaluations from vendors, brokers or the investment manager.
Private equity funds, real estate funds and hedge funds are valued using the NAV based on valuation models of
underlying securities which generally include significant unobservable inputs that cannot be corroborated using verifiable
observable market data. Valuations for private equity funds and real estate funds are determined by the general partners.
Depending on the nature of the assets, the general partners may use various valuation methodologies, including the income
and market approaches in their models. The market approach consists of analyzing market transactions for comparable assets
while the income approach uses earnings or the net present value of estimated future cash flows adjusted for liquidity and
other risk factors. Hedge funds are valued by independent administrators using various pricing sources and models based on
the nature of the securities. Private equity funds, real estate funds and hedge funds are generally categorized as Level 3 as we
cannot fully redeem our investment in the near-term.
Commodities are traded on an active commodity exchange and are valued at their closing prices on the last trading day
of the year.
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