NOTE
S TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2016 AND 2015
1.
|
DESCRIPTION OF THE PLAN
|
The following brief description of The Lubrizol Corporation
Age-Weighted
Defined
Contribution Plan (the Plan) is provided for general information purposes only. Participants should refer to the Plan document for more complete information.
General
The Lubrizol Corporation (the Company) established the Plan for employees hired,
transferred,
re-hired
or transferred into
non-bargained
status on or after January 1, 2010. Employees in such categories prior to January 1, 2010 became
participants in The Lubrizol Corporation Pension Plan. The Plan provides employees of the Company and its participating subsidiaries with retirement benefits funded by participating employers annual Company contributions. The Plan is subject
to the reporting and disclosure requirements, the vesting standards and the fiduciary responsibility requirements of the Employee Retirement Income Security Act of 1974, as amended (ERISA).
Effective January 1, 2015 employees of Chemtool Incorporated became participants in the Plan and were given service
credit for vesting purposes equal to the amount of vesting service under The Lubrizol Corporation Employees Profit Sharing and Savings Plan.
Administration
The Plan is administered by the Employee Benefits Administrative Committee
(the Committee), which is appointed by the Management Advisory Committee (the MAC) of the Company. The Committees powers and duties relate to the issuance of interpretive rules and regulations in accordance with
the Plan document, including determination of the method and timing of benefit distributions and authorization of disbursements from the Plan.
The Plan is a participating plan in The Lubrizol Corporation Employees Profit Sharing and Savings Plan Trust
(Master Trust) along with The Lubrizol Corporation Employees Profit Sharing and Savings Plan (the Savings Plan). The assets of the above plans are part of the Master Trust.
The Retirement and Savings Plans Investment Committee (the Investment Committee), which is also appointed by the
MAC, reviews the investment policies and procedures for the Plan; it also monitors the performance of, and fees and expenses charged by, the investment alternatives offered under the Plan to ensure consistency of the investment alternatives with the
Plans investment policies; approves changes to the investment alternatives offered under the Plan; monitors the asset levels of the Master Trust: and appoints and may remove the Trustee for the Master Trust. The assets within the Master Trust
are maintained and administered by the Plans Trustee, Voya Institutional Trust Company and the Plans recordkeeper, Voya Institutional Plan Services. The Plan document and trust agreement provide that the Trustee of the Plan shall hold,
invest, reinvest, manage, and administer all assets of the Plan as a trust fund for the exclusive benefit of participants and their beneficiaries. Each plan (the Plan and the Savings Plan) has the ability to direct its own investments within the
Master Trust.
Participation and Contributions
All regular employees of the Company and participating
subsidiaries hired, transferred,
re-hired
or transferred into
non-bargained
status (or bargained status that provides for participation in the Plan) on or after
January 1, 2010 are eligible for participation on the first day of covered employment.
4
The Company contributes an annual amount (Company Contribution) to
the Plan. The Company Contribution is determined according to the rules contained in the Plan document and is allocated to each participants account based upon the
year-end
compensation and age of the
employee, as defined in the Plan document. The maximum eligible compensation set by the Internal Revenue Service for purposes of allocating Company Contributions was $265,000 for 2016 and 2015.
The following table shows the percentage of compensation the Company will contribute to a participants account.
|
|
|
|
|
|
|
|
|
Participants age on last day of plan year
|
|
Contribution percentage (*)
|
|
|
|
|
Under Age 36
|
|
3.00%
|
|
|
|
|
36 40
|
|
3.75%
|
|
|
|
|
41 45
|
|
4.50%
|
|
|
|
|
46 50
|
|
5.25%
|
|
|
|
|
51 55
|
|
6.00%
|
|
|
|
|
56 - 60
|
|
6.75%
|
|
|
|
|
Age 61 and Older
|
|
7.50%
|
|
|
* Except that the contribution percentage for a Plan Year for a participant who
is an employee of Chemtool Incorporated as of the last day of the Plan Year is 1.00%, regardless of the participants age on the last day of the Plan Year.
The Plan does not accept rollover contributions, including Roth rollover contributions or transferred contributions from
certain other
tax-qualified
plans.
Participant Accounts
Each
participants account is credited with an allocation of the Company Contribution, income from investments, gains or losses on sales of investments, appreciation or depreciation in the market value of investments and expenses, if any. The
benefit to which a participant is entitled is the benefit that can be provided from the participants vested account.
Investment of Contributions
Participants elect investment of the Company Contribution in one or more of the
Plans investment funds in 1% increments. A participant may elect to change his or her investment elections as to future Company Contributions and may also elect to reallocate once daily a portion or all of past Company Contributions among the
available investment funds in increments of 1% of the total amount to be reallocated. Participants may also elect to invest Company Contributions, up to 50% of their vested account balance, in one or more mutual funds through a self-directed
brokerage account.
If an employee does not make an investment election, the Company Contribution will be deposited in the
target retirement fund with the date that most closely matches a retirement age of 65, which meets the Department of Labors definition as a qualified default investment alternative.
Vesting and Distributions
Active participants vest in the Company Contribution at a rate of one third for
each full year of eligible service and become 100% vested after three years. The participant also will become 100% vested if his or her participation in the Plan ends due to retirement on or after age 55, total and permanent disability, or death.
Participants may request an
in-service
distribution upon attainment of age
59-1/2.
Upon attainment of age 55, vested active participants may request an
in-service
distribution. If a distribution is made prior to age
59-1/2,
it must be in the form of monthly, quarterly or annual installments over a fixed period of time not to exceed the lifetime of the participant. These installments may be adjusted in the year a
participant reaches age
59-1/2
or becomes disabled. Hardship withdrawals are not allowed under the Plan.
When a participants employment terminates, his or her vested account balance may be distributed in a single lump sum.
Participants may also elect installment distribution payments or partial withdrawals of their vested account balance. Amounts distributed from the Berkshire Hathaway Class B Stock Fund are paid in the form of Class B shares of Berkshire
Hathaway or their cash equivalent.
5
Forfeited Accounts
Forfeited nonvested accounts are used to
reduce future Company contributions. In 2016 and 2015, the forfeiture balance at year end totaled $67,434 and $33,488, respectively. Subsequent to year end 2016 and 2015, $67,000 and $30,000 of the forfeiture balance, respectively, was used to
reduce Company contributions and is netted with the respective years contribution receivable balance.
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
Basis of Accounting
Each fund of the Plan is accounted for separately. The accounts of these funds are
maintained, and the accompanying financial statements have been prepared, on the accrual basis of accounting.
Investments
held by a defined contribution plan are required to be reported at fair value, except for fully benefit-responsive investment contracts. Contract value is the relevant measure for the portion of the net assets available for benefits of a defined
contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants normally would receive if they were to initiate permitted transactions under the terms of the Plan.
New Accounting Pronouncements
In February 2017, the FASB issued ASU
No. 2017-06,
Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), and Health and Welfare Benefit Plans (Topic 965), Employee Benefit Plan Master
Trust Reporting
. ASU
No. 2017-06
removes the requirement to disclose the percentage interest of a master trust in which a plan holds a divided interest, and requires that plans disclose the
dollar amount of their interest in each general type of assets and liabilities within the master trust. The effective date of the ASU is for fiscal years beginning after December 15, 2018; however, early adoption is permitted. The Plan has not
early adopted, and believes that this standard will not have a significant effect on its financial statements.
Use
of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of
assets, liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
Valuation of Investments
Investments are reported at fair value other than the guaranteed investment
contracts (GICs) included in the Stable Value Fund which are stated at contract value, which is equivalent to cost plus reinvested interest. Purchases and sales of securities are recorded on a trade-date basis. Interest income is
recorded on a cash basis. Dividends are recorded on the
ex-dividend
date. Net investment gain (loss) includes gains and losses on investments bought and sold as well as held during the year.
The value of all funds and the interests of participants under each fund are calculated on a daily basis based on the best
information available, which may include estimated values. See Note 5 for discussion of fair value measurements.
Expenses
No fees are charged to participants for Plan administrative and operating expenses. Plan
administrative and operating expenses are paid directly by the Company or through revenue-sharing by the Plans investment funds. The Company monitors the payments received by the Plan service providers to ensure that they are used properly for
qualifying plan administrative and operating expenses. The Company reserves the right to initiate charges to participants for Plan administrative and operating costs in the future.
A redemption fee of 1% is imposed by the Fidelity Advisors Diversified International Fund on money transferred out of the fund
less than 30 days following a transfer of money into the fund. If expedited mailing of a distribution check is requested, a $50.00 fee is charged to the participants account.
A participant who invests in the self-directed brokerage account is charged a $50.00 annual fee which is deducted quarterly
($12.50 per quarter) from the participants account. In addition, any mutual fund investment purchased or sold through the self-directed brokerage account may carry with it additional fees. The TD Ameritrade Fee Schedule provided to
participants details such fees including a redemption fee of $49.99 for almost any mutual fund investment that is not held for at least 90 days.
6
Payment of Benefits
Benefits are recorded when paid.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year
presentation.
3.
|
DESCRIPTION OF THE INVESTMENT FUNDS
|
The Plan offers various investment alternatives, maintains separate accounts for each participant, and invests
contributions and earnings, as required by the Plan or as directed by each participant, in one or more of the following funds:
The Stable Value Fund
invests in stable value investment contracts, issued by banks, insurance companies and other
financial institutions and a diversified portfolio of fixed income instruments including U.S. Government and agency securities, mortgage-backed securities, asset-backed securities, corporate bonds, interest rate futures and options. Goldman Sachs
Asset Management manages the investment of the Fund.
The Core Fixed Income Fund
invests in a mutual fund, the
Baird Aggregate Bond Fund. The fund invests in fixed income instruments including U.S. Government and corporate bond securities, mortgage and asset-backed securities, U.S. dollar and
non-U.S.
dollar
denominated securities of
non-U.S.
issuers.
The Target Retirement Income Fund
is an actively managed collective trust fund by State Street Global Advisors and invests in a combination of U.S. and international equity securities, fixed income securities, alternative investments such as real estate securities index funds
and commodity index funds and cash with a current target asset allocation of 65% fixed income and 35% in equities, real estate and commodities. The funds objective is to allocate its assets across multiple asset classes while seeking to
achieve the appropriate level of risk for a retired participant or a participant who anticipates retiring in the near-term.
The Target Retirement 2020 Fund
is an actively managed collective trust fund by State Street Global Advisors and
invests in a combination of U.S. and international equity securities, fixed income securities, alternative investments such as real estate securities index funds and commodity index funds and cash with a current target asset allocation of 45% fixed
income and 55% in equities, real estate and commodities. The funds objective is to allocate its assets across multiple asset classes while seeking to achieve the appropriate level of risk given a participants anticipated retirement date
in or within a few years of 2020.
The Target Retirement 2030 Fund
is an actively managed collective trust fund by
State Street Global Advisors and invests in a combination of U.S. and international equity securities, fixed income securities, alternative investments such as real estate securities index funds and commodity index funds and cash with a current
target asset allocation of 26% fixed income and 74% equities and commodities. The funds objective is to allocate its assets across multiple asset classes while seeking to achieve the appropriate level of risk given a participants
anticipated retirement date in or within a few years of 2030.
The Target Retirement 2040 Fund
is an actively
managed collective trust fund by State Street Global Advisors and invests in a combination of U.S. and international equity securities, fixed income securities, alternative investments such as real estate securities index funds and commodity index
funds and cash with a current target asset allocation of 14% fixed income and 86% equities and commodities. The funds objective is to allocate its assets across multiple asset classes while seeking to achieve the appropriate level of risk
given a participants anticipated retirement date in or within a few years of 2040.
The Target Retirement 2050
Fund
is an actively managed collective trust fund by State Street Global Advisors and invests in a combination of U.S. and international equity securities, fixed income securities, alternative investments such as real estate securities index
funds and commodity index funds and cash with a current target asset allocation of 10% fixed income and 90% equities and commodities. The funds objective is to allocate its assets across multiple asset classes while seeking to achieve the
appropriate level of risk given a participants anticipated retirement date in or within a few years of 2050.
7
The Target Retirement 2060 Fund
is an actively managed collective trust
fund by State Street Global Advisors and invests in a combination of U.S. and international equity securities, fixed income securities, alternative investments such as real estate securities index funds and commodity index funds and cash with a
current target asset allocation of 10% fixed income and 90% equities and commodities. The funds objective is to allocate its assets across multiple asset classes while seeking to achieve the appropriate level of risk given a participants
anticipated retirement date in or within a few years of 2060.
The Large Cap Core Equity Passive Fund
invests in a
collective trust fund, the State Street S&P 500 Index Fund maintained by State Street Global Advisors, which invests in the common stocks included in the Standard & Poors 500 Index, futures contracts and other derivative
securities. The funds objective is to closely replicate the performance of the common stocks included in the Standard & Poors Composite Stock Price Index.
The Large Cap Value Equity Passive Fund
invests in a collective trust fund, the State Street Russell Large Cap Value
Index Fund maintained by State Street Global Advisors, which invests in the common stocks included in the FTSE Russell 1000 Value Index, futures contracts and other derivative securities. The funds objective is to closely replicate the
performance of the Russell 1000 Value Index.
The Large Cap Growth Equity Passive
Fund invests in a collective
trust fund, the State Street Russell Large Cap Growth Index Fund maintained by State Street Global Advisors, which invests in the common stocks included in the FTSE Russell 1000 Growth Index, futures contracts and other derivative securities. The
funds objective is to closely replicate the performance of the Russell 1000 Growth Index.
The Mid Cap Value
Equity Fund
invests in a mutual fund, the Vanguard Selected Value Fund, which invests in equity securities that are believed to be undervalued.
The Mid Cap Growth Equity Fund
invests in a mutual fund, the MassMutual Select Mid Cap Growth Equity Fund, which
invests primarily in securities of companies that are believed to have above-average earnings growth potential.
The
Small Cap Value Equity Fund
invests in a mutual fund, the DFA US Small Cap Value Fund. The fund invests primarily in a portfolio of common stocks of small capitalization companies that are believed to be undervalued versus their peer group and
have the greatest potential for significant appreciation.
The Small Cap Growth Equity Fund
invests in a mutual
fund, the Hartford Small Cap Growth HLS Fund, that invests primarily in a portfolio of common stocks of small market capitalization companies which are believed to have superior growth potential.
The International Core Equity Fund
invests in a mutual fund, the Fidelity Advisors Diversified International Fund Z,
which invests in a diversified portfolio of common stocks and other equity-like securities of issuers domiciled outside the United States.
The International Small Cap Equity Fund
invests in a mutual fund, the Templeton Institutional Foreign Smaller Companies
Fund. The fund invests primarily in a diversified portfolio of equity securities with small market capitalizations that are traded principally in markets outside the United States.
The Emerging Markets Equity Fund
invests in a mutual fund, the DFA Emerging Markets Core Equity Fund, which invests in
a diversified portfolio of equity securities of issuers domiciled in the Emerging Markets.
The Berkshire Hathaway
Class
B Stock Fund
became effective on April 1, 2015. The fund consists of Class B shares of Berkshire Hathaway and temporary investments in the State Street Government Short Term Fund.
The self-directed brokerage account is a brokerage account offered in the Plan and provided through TD Ameritrade. It gives
participants access to more than 13,000 mutual funds (of which more than 2,100 are
no-load,
no-transaction-fee
(NTF) mutual
funds). Unlike the Plans current investment options, transaction fees and operating expense fees generally apply to the mutual funds available through the self-directed brokerage account.
8
Participants may invest up to 50% of their total vested Plan account balance
through the self-directed brokerage account. The minimum initial transfer into the self-directed brokerage account must be $1,000 per account. The mutual fund participants selection may also require a minimum investment.
An investment in the
self-directed brokerage account must come from a current Plan balance through a funds transfer; participants cannot elect to directly invest future contributions into the self-directed brokerage account.
Effective July 1, 2015 no more than 50% of a participants future investment elections may be invested in the
Berkshire Hathaway Class B Stock Fund.
See Note 10 for subsequent events.
4.
|
INVESTMENT CONTRACTS WITH THIRD PARTIES
|
The Plan has an investment contract with Goldman Sachs Asset Management through which both traditional and synthetic GICs are
held in the Plans Stable Value Fund. Traditional GICs are unsecured, general account obligations of insurance companies. The obligation is backed by the general account assets of the insurance company that writes the investment contract. The
crediting rate on this product is typically fixed for the life of the investment. A separate account GIC is similar to a traditional GIC except investments are segregated in separate accounts maintained by an insurance company for the benefit of the
investors. The total return of the segregated account assets supports the separate account GICs return. The crediting rate on this product will reset periodically but will not have an interest rate of less than 0%.
General fixed maturity synthetic GICs consist of an asset or collection of assets that are owned by the fund and a
benefit-responsive, book value wrap contract purchased for the portfolio. The wrap contract provides book value accounting for the asset and assures that book value, benefit-responsive payments will be made for participant-directed withdrawals from
the Stable Value Fund. The crediting rate of the contract is set at the start of the contract and typically resets every quarter. The initial crediting rate is established based on the market interest rates at the time the initial asset is purchased
but will not be less than 0%.
Constant duration synthetic GICs consist of a portfolio of securities owned by the fund and
a benefit-responsive, book value wrap contract purchased for the portfolio. The wrap contract amortizes gains and losses of the underlying securities over the portfolio duration, and assures that book value, benefit-responsive payments will be made
for participant-directed withdrawals from the Stable Value Fund. The crediting rate on a constant duration synthetic GIC resets every quarter based on the book value of the contract and the market yield, market value and average duration of the
underlying assets. The crediting rate aims at converging the book value of the contract and the market value of the underlying portfolio over the duration of the contract and therefore will be affected by movements in interest rates and/or changes
in the market value of the underlying portfolio. The initial crediting rate is established based on the market interest rates at the time the underlying portfolio is first put together but will not be less than 0%.
Withdrawals and transfers resulting from certain events, including employer initiated events and changes in the qualification
of the Plan, may limit the ability of the Stable Value Fund to transact at book or contract value. These events may cause liquidation of all or a portion of a contract at market value. The Plan administrator does not believe that the occurrence of
any event that would limit the Plans ability to transact at book or contract value is probable. All contracts are fully benefit-responsive.
The components of the Stable Value Fund held within the Master Trust (at contract value) as of December 31, 2016 and 2015
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
Traditional GICs
|
|
$
|
7,319
|
|
|
$
|
13,021
|
|
|
Synthetic GICs
|
|
|
208,569
|
|
|
|
184,120
|
|
|
Cash and equivalents
|
|
|
5,628
|
|
|
|
13,254
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
221,516
|
|
|
$
|
210,395
|
|
|
|
|
|
|
|
|
|
|
|
|
9
5.
|
INTEREST IN THE LUBRIZOL CORPORATION EMPLOYEES PROFIT SHARING AND SAVINGS PLAN TRUST
|
The Plans investments are held in a Master Trust for the investment of assets of the Plan and
the Savings Plan. The value of the Plans interest in the Master Trust is based on the beginning of year value of the Plans interest in the Master Trust plus actual contributions and allocated investment income less actual distributions
and allocated expenses. The Plans interest in the net assets of the Master Trust was 1.53% at December 31, 2016 and 0.96% at December 31, 2015. Investment income and expenses within the Master Trust are allocated to the individual
plans based on the underlying individual participants activity and account balances.
The Plan estimates the fair
value of investments in the Master Trust using available market information and generally accepted valuation methodologies. Fair value is defined as the price that would be received to sell an asset or would be paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The inputs used to measure fair value are classified into three levels: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2,
defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its
own assumptions.
The following is a description of the valuation methodologies used for assets of the Master Trust
measured at fair value:
|
|
|
Berkshire Hathaway Class B stock fund: Class B shares of Berkshire Hathaway (Symbol
BRK-B)
are valued at the closing price as reported on the New York Stock Exchange. The fund also consists of temporary investments in the State Street Government Short Term Fund for liquidity purposes and is
therefore classified within Level 2 of the valuation hierarchy.
|
|
|
|
Mutual funds: Valued at the net asset value (NAV) as reported on various stock exchanges and
classified within Level 1 of the valuation hierarchy.
|
|
|
|
Self-directed brokerage accounts: Valued at the NAV as reported on various stock exchanges and classified
within Level 1 of the valuation hierarchy.
|
|
|
|
Common collective trust funds: Valued using the NAV provided by the administrator of the trust and classified
within Level 2 of the valuation hierarchy. The NAV is based on the value of the underlying assets owned by the trust, minus its liabilities, and then divided by the number of shares outstanding.
|
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or
reflective of future fair values. There have been no changes in the methodologies used at December 31, 2016 and 2015. Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the
use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
The following table sets forth by level, within the fair value hierarchy, the investments of the Master Trust as of
December 31, 2016 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Berkshire Hathaway Class B stock fund
|
|
$
|
-
|
|
|
$
|
66,338
|
|
|
$
|
-
|
|
|
$
|
66,338
|
|
Mutual funds
|
|
|
220,971
|
|
|
|
-
|
|
|
|
-
|
|
|
|
220,971
|
|
Self-directed brokerage accounts
|
|
|
5,846
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,846
|
|
Common collective trust funds
|
|
|
-
|
|
|
|
666,562
|
|
|
|
-
|
|
|
|
666,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
226,817
|
|
|
$
|
732,900
|
|
|
$
|
-
|
|
|
$
|
959,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
Total investments of the Master Trust as of December 31, 2016 (in
thousands):
|
|
|
|
|
Investments at fair value
|
|
$
|
959,717
|
|
Investments at contract value
|
|
|
221,516
|
|
|
|
|
|
|
Total
|
|
$
|
1,181,233
|
|
|
|
|
|
|
Activity of the Master Trust for the year ended December 31, 2016 (in thousands):
|
|
|
|
|
Net appreciation in fair value of investments
|
|
$
|
83,046
|
|
Interest and dividends
|
|
|
7,354
|
|
Net transfers
|
|
|
7,067
|
|
|
|
|
|
|
Total
|
|
$
|
97,467
|
|
|
|
|
|
|
The following table sets forth by level, within the fair value hierarchy, the investments of
the Master Trust as of December 31, 2015 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Berkshire Hathaway Class B stock fund
|
|
$
|
-
|
|
|
$
|
59,672
|
|
|
$
|
-
|
|
|
$
|
59,672
|
|
Mutual funds
|
|
|
210,703
|
|
|
|
-
|
|
|
|
-
|
|
|
|
210,703
|
|
Self-directed brokerage accounts
|
|
|
4,628
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,628
|
|
Common collective trust funds
|
|
|
-
|
|
|
|
598,368
|
|
|
|
-
|
|
|
|
598,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
215,331
|
|
|
$
|
658,040
|
|
|
$
|
-
|
|
|
$
|
873,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments of the Master Trust as of December 31, 2015 (in thousands):
|
|
|
|
|
Investments at fair value
|
|
$
|
873,371
|
|
Investments at contract value
|
|
|
210,395
|
|
|
|
|
|
|
Total
|
|
$
|
1,083,766
|
|
|
|
|
|
|
Activity of the Master Trust for the year ended December 31, 2015 (in thousands):
|
|
|
|
|
Net appreciation in fair value of investments
|
|
$
|
(21,464
|
)
|
Interest and dividends
|
|
|
9,431
|
|
Net transfers
|
|
|
(1,092
|
)
|
|
|
|
|
|
Total
|
|
$
|
(13,125
|
)
|
|
|
|
|
|
6.
|
RISKS AND UNCERTAINTIES
|
The Master Trust holds various investment securities. Investment securities are exposed to various risks such as interest
rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could
materially affect participants account balances and the amounts reported in the Statement of Net Assets Available for Benefits.
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7.
|
PARTY-IN-INTEREST
TRANSACTIONS
|
The Plan, through the Master Trust, invests in Class B shares of Berkshire
Hathaway within the Berkshire Hathaway Class B stock fund. During the years ended December 31, 2016 and 2015, 142,760 and 160,238 Class B shares, respectively, of Berkshire Hathaway at a cost of $20,361,682 and $23,026,071
respectively, were purchased within the fund. All purchased shares were acquired at the then current market value on the open market. In addition, during the years ended December 31, 2016 and 2015, the fund sold or distributed to participants
192,582 and 188,407 Class B shares, respectively, of Berkshire Hathaway and received proceeds of $27,161,894 and $26,680,577 respectively. The realized gains on these sales were $2,333,837 and $3,932,252 for 2016 and 2015, respectively.
The Plan obtained its latest determination letter dated August 24, 2011, in which the Internal Revenue Service (IRS)
stated that the Plan, as then designed, was in compliance with the applicable requirements of Section 401 of the Internal Revenue Code. The Plan has been amended since receiving this determination letter. However, the Company believes that the
Plan currently is designed and is being operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, no provision for income taxes has been included in the Plans financial statements.
The Plan administrator has analyzed the tax positions taken by the Plan and has concluded that, as of December 31, 2016,
there are no uncertain positions taken or expected to be taken that would require such recognition or disclosure in the financial statements. As of December 31, 2016, the Plans tax years from 2013 and thereafter remain subject to
examination by the IRS, as well as by other applicable taxing authorities.
The Plan was adopted with the expectation that it will continue indefinitely. The Board of Directors of the Company may,
however, terminate the Plan at any time. In addition, the Board of Directors of any subsidiary may withdraw such subsidiary from the Plan at any time. In the event of termination of the Plan, all participants immediately will become fully vested in
the value of their account balances.
The following fund change is scheduled to become effective August 1, 2017:
Fund removed from the Plans fund
line-up:
o The Franklin Templeton International Smaller Co. Fund (ticker symbol TFSCX)
Fund added to the Plans fund
line-up:
o Vanguard International Explorer Fund (ticker symbol VINEX)
12