UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
11-K
FOR
ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
(Mark One):
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x
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Annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934
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For
the fiscal year ended December 31, 2019
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OR
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¨
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Transition
report pursuant to Section 15(d) of the Securities Exchange Act of 1934
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For
the transition period from _______________ to ___________________
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Commission
File Number 1-5480
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A. Full
title of the plan and the address of the plan, if different from that of the issuer named
below:
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TEXTRON
SAVINGS PLAN
40
Westminster Street
Providence,
Rhode Island 02903
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B. Name
of issuer of the securities held pursuant to the plan and the address of its principal
executive office:
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TEXTRON
INC.
40
Westminster Street
Providence,
Rhode Island 02903
REQUIRED
INFORMATION
Financial
Statements and Exhibits
The following
Plan financial statements and schedules prepared in accordance with the financial reporting requirements of the Employee Retirement
Income Security Act of 1974 are filed herewith, as permitted by Item 4 of Form 11-K:
Report of
Independent Registered Public Accounting Firm
Statements
of Net Assets Available for Benefits
Statements
of Changes in Net Assets Available for Benefits
Notes to
financial statements
Supplemental
Schedule:
Schedule
H, Line 4i - Schedule of Assets (Held at End of Year)
Exhibits:
23.1 - Consent of Independent Auditors
Pursuant
to the requirements of the Securities Exchange Act of 1934, Textron Inc., as Plan Administrator, has duly caused this Annual Report
on Form 11-K to be signed by the undersigned hereunto duly authorized.
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TEXTRON INC., as Plan Administrator
for
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the Textron Savings Plan
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By:
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/s/Mark
S. Bamford
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Mark S. Bamford
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Vice President and
Corporate Controller
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Date: June 24, 2020
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Financial Statements
and Supplemental Schedule
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Textron Savings Plan
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Years Ended December 31, 2019 and 2018
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With Report of Independent Registered Public
Firm
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Textron
Savings Plan
Financial
Statements and
Supplemental
Schedule
Years Ended
December 31, 2019 and 2018
Contents
Report
of Independent Registered Public Accounting Firm
To the Plan
Participants and the Plan Administrator of Textron Savings Plan
Opinion
on the Financial Statements
We have
audited the accompanying statements of net assets available for benefits of Textron Savings Plan (the Plan) as of December 31,
2019 and 2018, and the related statements of changes in net assets available for benefits for the years then ended, and the related
notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly,
in all material respects, the net assets available for benefits of the Plan at December 31, 2019 and 2018, and the changes in
its net assets available for benefits for the years then ended, in conformity with U.S. generally accepted accounting principles.
Basis
for Opinion
These financial
statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on the Plan’s
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Plan in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted
our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As
part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose
of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express
no such opinion.
Our audits
included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that our audits provide a reasonable basis for our opinion.
Supplemental
Schedule
The accompanying
supplemental schedule of assets (held at end of year) as of December 31, 2019, has been subjected to audit procedures performed
in conjunction with the audit of the Plan’s financial statements. The information in the supplemental schedule is the responsibility
of the Plan’s management. Our audit procedures included determining whether the information reconciles to the financial
statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and
accuracy of the information presented in the supplemental schedule. In forming our opinion on the information, we evaluated whether
such information, including its form and content, is presented in conformity with the Department of Labor’s Rules and Regulations
for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the information is fairly
stated, in all material respects, in relation to the financial statements as a whole.
/s/ Ernst
& Young LLP
We have
served as the Plan’s auditor since at least 1994, but we are unable to determine the specific year.
Boston,
Massachusetts
June 24,
2020
Textron
Savings Plan
Statements
of Net Assets Available for Benefits
(In
thousands)
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Year
Ended
December 31,
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2019
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2018
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Assets
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Investments, at fair value
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$
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3,983,815
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$
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3,398,240
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Investment contracts, at contract value
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325,175
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342,792
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Total investments
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4,308,990
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3,741,032
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Accrued investment income
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378
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377
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Receivables:
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Employer contributions
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42,011
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38,900
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Employee contributions
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1,857
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5,747
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Notes receivable from participants
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81,582
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81,901
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125,450
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126,548
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Total assets
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4,434,818
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3,867,957
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Liabilities
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Accrued expenses
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239
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166
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Net assets available
for benefits
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$
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4,434,579
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$
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3,867,791
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See accompanying notes.
Textron
Savings Plan
Statements
of Changes in Net Assets Available for Benefits
(In
thousands)
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Year
Ended
December 31,
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2019
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2018
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Additions
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Interest and dividends
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$
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23,715
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$
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22,131
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Net appreciation
in value of investments
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599,144
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-
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622,859
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22,131
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Contributions:
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Participants
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175,646
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169,966
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Employer
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113,168
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107,826
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Participant
rollovers
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9,992
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6,349
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298,806
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284,141
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Total additions
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921,665
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306,272
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Deductions
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Net depreciation in value of investments
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-
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375,866
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Benefit payments
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352,488
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388,570
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Administrative
and other expenses
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2,389
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2,798
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Total deductions
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354,877
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767,234
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Net Increase/(decrease)
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566,788
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(460,962
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)
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Net assets available for benefits:
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Beginning of year
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3,867,791
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4,328,753
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End of year
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$
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4,434,579
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$
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3,867,791
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See accompanying notes.
Textron Savings Plan
Notes to Financial Statements
December 31, 2019
1.
Description of Plan
General
The Textron
Savings Plan (the Plan) covers all eligible employees of Textron Inc. (Textron), as defined in the Plan. This Plan description
includes provisions covering the majority of Plan participants. Certain business and bargaining units have other provisions. The
Plan invests in the Textron Stock Fund along with Guaranteed Investment Contracts, Separate Account Contracts, Synthetic Guaranteed
Investment Contracts and Common Collective Trust Funds. The Plan also offers a brokerage feature. The portion that invests in
the Textron Stock Fund is an employee stock ownership plan. The remainder of the Plan is a profit-sharing and 401(k) plan. The
Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA) and was amended and restated
effective January 1, 2019 to reflect recent statutory, regulatory and other plan changes.
The Plan
is currently administered under the terms of a Trust Agreement, dated December 1, 2004 and amended from time to time, with Fidelity
Management Trust Company (the Trustee or Fidelity). Fidelity also serves as the Plan’s recordkeeper.
Investment
Options
Participants
may elect to direct their employee contributions to the following funds: Fidelity® Diversified International Commingled Pool,
Wellington Core Bond, JPMCB U.S. Active Core Equity Fund CF-C, Wellington SMID Cap Research Equity Portfolio, Vanguard Institutional
500 Index Trust, Vanguard Institutional Small/Mid Cap Index Trust, Vanguard Institutional Total Bond Market Index Trust, Vanguard
Institutional Total International Stock Market Index Trust, Textron Stock Fund, Textron Managed Income Fund, State Street Real
Asset Non-Lending Series Fund Class C, Vanguard Target Retirement Income Trust Plus and Vanguard Target Retirement Trust Plus
(with various targeted retirement dates).
Also,
the Plan offers a self-directed brokerage feature, called Fidelity BrokerageLink, which gives participants expanded investment
choices by enabling them to select from numerous investment and individual securities that are not otherwise available under the
Plan. The values of investments purchased through the Fidelity BrokerageLink were $172,945,122 and
$134,592,026 as of December 31, 2019 and 2018, respectively.
Contributions
Participants
of the Plan are entitled to elect to contribute up to 40% of their eligible compensation, within the limits prescribed by Section
401(k) of the Internal Revenue Code (the Code). Certain participants may also contribute amounts representing distributions from
other qualified employer retirement plans. Participants’ pre-tax and after-tax contributions, which are matched 50%
on the first 10% of contributions to a maximum of 5% of eligible compensation by Textron, subject to certain ERISA restrictions
and plan limits, are recorded when Textron makes payroll deductions from participants’ wages.
Textron Savings Plan
Notes to Financial Statements
December 31, 2019
1. Description
of Plan (continued)
Eligible
employees are subject to automatic enrollment on the 60th day after their date of hire, if they have not specifically elected
to be excluded from the Plan. The automatic enrollment is for 3% of eligible compensation per pay period. An employee who is automatically
enrolled may elect to change or suspend his/her enrollment in the Plan at any time.
Since
2009, Textron has closed most of its defined benefit pension plans to new participants. When new hires join Textron locations
that were formerly defined benefit pension eligible locations, these employees are eligible to receive an additional retirement
cash contribution to their Plan account of either 2% or 4% (depending on employee status) of their eligible compensation. These
discretionary contributions vest in accordance with the vesting schedule below. The contributions are deposited in the participant
account by the end of the first quarter of the following plan year. The amount of the discretionary funding paid in 2020 for the
2019 plan year was $41,322,904 and
the amount paid in 2019 for the 2018 plan year was $36,689,960 .
The discretionary contribution is in addition to the matching contribution of 50% on the first 10% up to a maximum of 5%. These
contributions are not considered part of the vested balance eligible for participant loans.
Participants
who are at least age 50 or who will reach age 50 during the year are allowed to make additional employee pre-tax contributions
(catch-up contributions), above the otherwise applicable limits. In accordance with limits under the federal tax laws, catch-up
contributions cannot exceed $6,000 in each of 2019 and 2018 .
After that, the limit may be adjusted from time to time by the U.S. Internal Revenue Service to reflect inflation. Catch-up contributions
are not eligible for Company matching contributions.
Textron
makes contributions to the Plan based on actual contribution levels. All forfeitures arising out of a participant’s termination
of employment for reasons other than retirement, disability or death are used to reduce future Textron contributions. At December 31,
2019 and 2018, forfeitures totaled $1,119,503 and
$2,963,253 , respectively. Forfeitures used during the years
ended December 31, 2019 and 2018 to offset the Company match were $8,354,988 and
$6,857,943 , respectively.
Employer
matching contributions are made in the form of Textron Stock and invested in the Textron Stock Fund. Employees have the ability
to subsequently reallocate matching contributions among any of the investment options offered in the Plan with no restrictions.
Benefits
In
the event a participant ceases to be an employee or becomes totally disabled while employed, all of his or her account, to the
extent then vested, shall become distributable. Distributions are in the form of cash, unless Textron stock is requested. An account
will be distributed in a single payment if the value of the account is less than $5,000 when the account first becomes distributable.
If the value of the account is $5,000 or more when the account first becomes distributable, a participant is not required to take
a distribution immediately. A participant is always vested in the portions of his or her account attributable to his or her own
contributions and compensation deferrals. The Plan provides for full vesting of a participant’s account in the event of
his or her termination of employment, other than for cause, within two years after a change in control of Textron.
Textron Savings Plan
Notes to Financial Statements
December 31, 2019
1.
Description of Plan (continued)
Vesting
Textron’s
contributions vest based on the length of service in the Plan, as follows:
Months of Service
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Vested
Percentage
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24 months but less than 36 months
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25
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%
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36 months but less than 48 months
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50
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%
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48 months but less than 60 months
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75
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%
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60 months or more
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100
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%
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Participant
Accounts
A separate
account is maintained for each participant and is increased by (a) the participant’s contributions and compensation deferrals,
(b) Textron’s matching contribution, and any additional discretionary contributions made by Textron, including any retirement
supplement contributions and (c) plan income (loss), and is charged with an allocation of administrative expenses. Allocations
are based on participant earnings or account balances, as defined. The participant is entitled to the vested amount in the account.
Notes
Receivable from Participants
Active participants,
not including directors or executive officers as determined by the plan administrator, are permitted to take up to two loans at
a time and may borrow a minimum of $1,000 up to a maximum of the lesser of one-half of their vested balance or $50,000, less the
participant’s highest outstanding loan balance during the 12-month period preceding the new loan request. Interest is charged
at a rate of Reuters Prime Rate plus 1%, as of the first business day of the month. A fee is charged to the participant to cover
the cost of administration. The loan terms may range from one to five years and are repaid primarily through automatic payroll
deductions.
Textron Savings Plan
Notes to Financial Statements
December 31, 2019
1.
Description of Plan (continued)
Plan
Termination
Textron
has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions
of ERISA. Textron has not expressed any intent to terminate the Plan. In the event of Plan termination, participants will become
100% vested in their accounts.
Textron Savings Plan
Notes to Financial Statements
December 31, 2019
2. Significant
Accounting Policies
Basis
of Accounting
The financial
statements are prepared on the accrual basis of accounting.
New Accounting Pronouncements
In July
2018, the FASB issued ASU 2018-09, Codification Improvements, which, among other things, amends an illustrative example of a fair
value hierarchy disclosure to indicate that a certain type of investment should not always be considered to be eligible to use
the net asset value per share practical expedient. Also, it further clarifies that an entity should evaluate whether a readily
determinable fair value exists or whether its investments qualify for net asset value per share practical expedient in accordance
with ASC 820, Fair Value Measurement. Adoption of the amended guidance, which is to be applied prospectively, affects the fair
value disclosures, but does not change the fair value measurement of the investments. The new standard was effective January 1,
2019. In connection with the adoption, the Plan has prospectively included certain investments in the fair value hierarchy disclosure
that were previously excluded from such disclosure because those investments previously used the net asset value per share practical
expedient. These investments meet the criteria of readily determinable fair value.
Fair Values of Assets
In accordance
with the provisions of ASC 820, Fair Value Measurement, fair value is measured at the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assumptions
that market participants would use in pricing the asset or liability (the “inputs”) are prioritized into a three-tier
fair value hierarchy. This fair value hierarchy gives the highest priority (Level 1) to quoted prices in active markets for identical
assets or liabilities and the lowest priority (Level 3) to unobservable inputs in which little or no market data exists, requiring
companies to develop their own assumptions.
Observable
inputs that do not meet the criteria of Level 1, which include quoted prices for similar assets or liabilities in active markets
or quoted prices for identical assets and liabilities in markets that are not active, are categorized as Level 2. Level 3 inputs
are those that reflect Plan estimates about the assumptions market participants would use in pricing the asset or liability, based
on the best information available in the circumstances. Valuation techniques for assets and liabilities measured using Level 3
inputs may include methodologies such as the market approach, the income approach or the cost approach, and may use unobservable
inputs such as projections, estimates and management’s interpretation of current market data. These unobservable inputs
are only utilized to the extent that observable inputs are not available or cost-effective to obtain. There were no transfers
between Levels 1, 2 and 3 in 2019 or 2018.
Textron Savings Plan
Notes to Financial Statements
December 31, 2019
2. Significant
Accounting Policies (continued)
Assets
and Liabilities Recorded at Fair Value on a Recurring Basis
The tables
below present the assets and liabilities measured at fair value on a recurring basis categorized by the level of inputs used in
the valuation of each asset and liability.
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|
December 31, 2019
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(In thousands)
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Level
1
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Level
2
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Level
3
|
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Not
Subject to
Leveling
|
|
Textron Stock Fund
|
|
$
|
842,495
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
BrokerageLink
|
|
|
172,945
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Common Collective Trust Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Blended Debt and Equity
|
|
|
1,509,398
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Domestic Equity
|
|
|
1,152,572
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
International Equity
|
|
|
153,470
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Debt Securities
|
|
|
146,362
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Domestic Debt
held by the Textron Managed Income Fund
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,573
|
|
Total assets
|
|
$
|
3,977,242
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,573
|
|
|
|
|
December
31, 2018
|
|
(In
thousands)
|
|
|
Level
1
|
|
|
|
Level
2
|
|
|
|
Level
3
|
|
|
|
Not
Subject to
Leveling
|
|
Textron Stock Fund
|
|
$
|
866,405
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
BrokerageLink
|
|
|
134,592
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Common Collective Trust Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Blended Debt and Equity
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,225,566
|
|
Domestic Equity
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
909,343
|
|
International Equity
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
121,907
|
|
Debt Securities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
126,516
|
|
Domestic Debt
held by the Textron Managed Income Fund
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13,911
|
|
Total assets
|
|
$
|
1,000,997
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,397,243
|
|
Textron Savings Plan
Notes to Financial Statements
December 31, 2019
2. Significant
Accounting Policies (continued)
The Textron
Stock Fund consists solely of Textron stock, which is valued at its quoted market price, and is considered a Level 1 investment.
BrokerageLink includes common stock, mutual funds, and cash valued at each company’s quoted market price, and is also considered
a Level 1 investment.
The Common
Collective Trust Funds (CCTs) are groups of investments similar to mutual funds in that they provide diversification by holding
various equity and debt securities. The fair value of these investments are quoted at the net asset value per share at each valuation
date and they are considered Level 1 investments.
The CCT
investments have the following objectives for investees:
(a) Blended
debt and equity – This category includes securities in a diversified mix of stocks, bonds and short-term investments within
one investment option. In general, these funds are age-based and allocate investments between equities and fixed income based
on target retirement date. The investment funds provide daily liquidity.
(b) Domestic
and international equity – This category includes diversified portfolios invested primarily in the common stock of U.S.
and international companies. The objective is to provide capital appreciation and long-term return. The investment
funds provide daily liquidity.
(c) Debt
Securities – This category includes diversified portfolios invested primarily in U.S. investment grade bonds. The
objective is to provide long-term total return. The investment funds provide daily liquidity.
(d) Domestic
debt, held in the Textron Managed Income Fund – This category includes investments in diversified fixed income securities
designed to provide capital preservation and income. These securities have an associated wrap contract. The Managed Income Fund
includes an equity wash restriction on movement to competing funds for 90 days.
Investment
Valuation and Income Recognition
Purchases
and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded
on the ex-dividend date.
Textron Savings Plan
Notes to Financial Statements
December 31, 2019
2. Significant
Accounting Policies (continued)
Guaranteed
Investment Contracts, Separate Account Contracts, and Synthetic Guaranteed Investment Contracts in the Managed Income Fund
The Textron
Managed Income Fund (the Fund) invests in a variety of stable value products, including traditional Guaranteed Investment Contracts
(GICs), Separate Account Contracts (ISA GICs) and Security-backed Investment Contracts (synthetic GICs,) in addition to CCTs.
The GICs,
ISA GICs, and Synthetic GICs represent fully benefit-responsive investments and, therefore, are reported at contract value. Contract
value is the relevant measure for fully benefit-responsive investment contracts, because this is the amount received by participants
if they were to initiate permitted transactions under the terms of the Plan. Contract value represents contributions made under
the contract, plus interest at the crediting rate payable under such contract less participant withdrawals and administrative
expenses. Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value.
The issuers guarantee that all qualified participant withdrawals will be at contract value (principal, plus accrued interest).
There are currently no reserves against contract values for credit risk of the contract issuers or otherwise.
Certain
events limit the ability of the Plan to transact at contract value with an issuer. In addition to certain Synthetic GIC termination
provisions discussed below, such contracts generally provide for withdrawals associated with certain events which are not in the
ordinary course of Plan operations. These withdrawals are paid with a market value adjustment applied to the withdrawal, as defined
in the investment contract. Each contract issuer specifies the events which may trigger a market value adjustment; however, such
events include the following: material amendments to the Fund’s structure or administration; changes to the participating
plans’ competing investment options including the elimination of equity wash provisions; complete or partial termination
of the Fund, including a merger with another fund; the failure of the Fund to qualify for exemption from federal income taxes
or any required prohibited transaction exemption under ERISA; the redemption of all or a portion of the interests in the Fund
held by a participating plan at the direction of the participating plan sponsor, including withdrawals due to the removal of a
specifically identifiable group of employees from coverage under the participating plan (such as a group layoff or early retirement
incentive program), the closing or sale of a subsidiary, employing unit, or affiliate, the bankruptcy or insolvency of a plan
sponsor, the merger of the plan with another plan, or the plan sponsor’s establishment of another tax qualified defined
contribution plan; any change in law, regulation, ruling, administrative or judicial position, or accounting requirement, applicable
to the Fund or participating plans; the delivery of any communication to plan participants designed to influence a participant
not to invest in the Fund.
At this
time, the Fund does not believe that the occurrence of any such market value event, which would limit the Fund’s ability
to transact at contract value with participants, is probable.
Textron Savings Plan
Notes to Financial Statements
December 31, 2019
2. Significant
Accounting Policies (continued)
In addition,
Synthetic GICs and ISA GICs typically provide for an adjustment to contract value if a security that is part of the underlying
assets defaults or otherwise becomes impaired as defined in the wrap contract. In the event of an impairment, generally contract
value is decreased by the amortized cost of the impaired security and, if such security is subsequently sold, contract value is
increased by the amount of such sales proceeds.
GICs generally
do not permit issuers to terminate the agreement prior to the scheduled maturity date. Synthetic GICs generally are evergreen
contracts that contain termination provisions. The termination provisions of Synthetic GICs permit the fund’s investment
manager or issuer to terminate upon notice at any time at market value and provide for automatic termination of the Synthetic
GIC if the contract value or market value of the contract equals zero. The issuer is not excused from paying the excess contract
value when the market value equals zero. Synthetic GICs that permit the issuer to terminate at market value generally provide
that the fund may elect to convert such termination to an Amortization Election, as described below. In addition, if the fund
defaults in its obligations or representations under the agreement (including non-compliance with investment guidelines governing
the underlying assets, or the issuer’s determination that the agreement constitutes a nonexempt prohibited transaction as
defined under ERISA) and such default is not cured within any applicable cure period, then the Synthetic GIC may be terminated
by the issuer and the fund will receive the market value as of the date of termination. Also, generally, Synthetic GICs permit
the issuer or investment manager to elect at any time to convert the wrapped portfolio to a declining duration strategy, whereby
the contract would terminate at a date which corresponds to the duration of the underlying fixed income portfolio on the date
of the Amortization Election. After the effective date of an amortization election, the fixed income portfolio must conform to
the guidelines agreed upon by the wrap issuer and the investment manager for the Amortization Election period. Such guidelines
are intended to result in contract value equaling market value of the wrapped portfolio by such termination date. Synthetic GICs
and ISA GICs also define certain other termination events that permit the issuer to terminate the contract at market value.
Termination
events typically include the following:
(i) termination
or replacement of the investment adviser without the issuer’s consent, (ii) the Plan or its trust is fully or partially
terminated or fails to be exempt from federal income taxation, (iii) the plan merges with another plan, (iv) if a security is
sold or subject to a lien other than as permitted under the contract, (v) the contract holder engages in fraud or other action
that materially and adversely affects the risk profile of the contract, (vi) if there is any change in law, regulation, ruling,
or accounting requirement applicable to the Plan or Fund that could cause substantial withdrawals from the Fund, (vii) performance
of the issuer’s obligations under the contract becomes illegal, (viii) the bankruptcy of the Fund, Textron Savings Plan
Trust or investment advisor, or (ix) the level of impaired securities as defined in the contract exceeds an agreed upon amount
of the portfolio.
Textron Savings Plan
Notes to Financial Statements
December 31, 2019
2. Significant
Accounting Policies (continued)
Total contract value of each
type of investment contract is as follows:
|
|
Year Ended
December 31,
|
|
(In thousands)
|
|
2019
|
|
|
2018
|
|
Guaranteed Investment Contracts
|
|
$
|
—
|
|
|
$
|
2,599
|
|
Separate Account Contracts
|
|
|
84,777
|
|
|
|
88,682
|
|
Security-backed investment contracts
(synthetic GICs)
|
|
|
240,398
|
|
|
|
251,511
|
|
|
|
$
|
325,175
|
|
|
$
|
342,792
|
|
Notes
Receivable from Participants
Notes receivable
from participants represent participant loans that are recorded at their unpaid principal balance, plus any accrued but unpaid
interest. Interest income on notes receivable from participants is recorded when it is earned. Related fees are recorded as administrative
expenses and are expensed when they are incurred. No allowance for credit losses has been recorded as of December 31, 2019 or
2018. If a participant ceases to make loan repayments and the plan administrator deems the participant loan to be a distribution,
the participant loan balance is reduced and a benefit payment is recorded.
Benefit
Payments
Benefit
Payments are recorded upon payment.
Administrative
Expenses
Administrative
and other fees paid by the Plan are allocated as follows:
|
•
|
Fees
associated with in-service withdrawals, distributions and loans are charged directly
to the associated participant account.
|
|
•
|
Fees
with respect to each investment fund are charged against the investment returns of those
investment funds and allocated on a pro-rata basis to participants who invest in those
investment funds.
|
|
•
|
Expenses
associated with qualified domestic relations orders are charged directly to the related
participant account.
|
|
•
|
Expenses
associated with operating the Plan, such as recordkeeping fees, legal fees, consulting
fees, transfer fees, annuity fees, annual reporting fees, claims processing fees, cost
of supplies and similar fees, are charged directly or allocated on a pro rata basis to
the participant accounts.
|
Textron Savings Plan
Notes to Financial Statements
December 31, 2019
2.
Significant Accounting Policies (continued)
Use
of Estimates
The preparation
of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates
that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
3.
Related Party and Party in Interest Transactions
The
Plan holds shares of a fund managed by Fidelity Management Trust Company, the trustee of the plan. At December 31, 2019 and 2018,
9,882,192 shares and 10,428,901
shares, respectively, of the Fidelity Fund were held by
the Plan, with a fair value of $141,809,450 and $115,343,645 ,
respectively. The Plan also invests in shares of Textron’s common stock. At December 31, 2019 and 2018, 18,890,024 shares
and 18,838,996 shares, respectively, of Textron’s
common stock were held by the Plan, with a fair value of $842,495,062 and
$866,405,448 , respectively. Dividend income recorded by
the Plan for Textron’s common stock for the years ended December 31, 2019 and 2018 was $1,519,223 and
$1,524,936 , respectively. These transactions qualify as
party-in-interest transactions; however, they are exempt from the prohibited transaction rules under ERISA.
4.
Subsequent Events
Subsequent
to year end, the COVID-19 pandemic has resulted in substantial volatility in the global financial markets. As a result, the Plan’s
investments have incurred a significant decline in their fair value since December 31, 2019. Because the value of the Plan’s
investments have and will fluctuate in response to changing market conditions, the amount of losses, if any, that will be recognized
in subsequent periods, cannot be determined.
5.
Risks and Uncertainties
The Plan
invests in 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 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 statements of net assets available for benefits.
6.
Income Tax Status
The Plan
has received a determination letter from the Internal Revenue Service (IRS) dated December 5, 2014, stating that the Plan is qualified
under Section 401(a) of the Internal Revenue Code and, therefore, the related trust is exempt from taxation. Subsequent to this
determination by the IRS, the Plan was amended and restated. Once qualified, the Plan is required to operate in conformity with
the Code to maintain its qualified status. The plan administrator believes the Plan, as amended and restated, is being operated
in compliance with the
applicable requirements of the Code and, therefore, believes the Plan is qualified and the related trust is tax-exempt.
Textron Savings Plan
Notes to Financial Statements
December 31, 2019
6.
Income Tax Status (continued)
Accounting
principles generally accepted in the United States require plan management to evaluate uncertain tax positions taken by the Plan.
The financial statement impact of a tax position is recognized when the position is more likely than not, based on the technical
merits, to be sustained upon examination by the IRS. The plan administrator has analyzed the tax positions taken by the Plan,
and has concluded that, as of December 31, 2019 and 2018, there are no uncertain positions taken or expected to be taken. The
Plan has recognized no interest or penalties related to uncertain tax positions.
The
Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.
Supplemental
Schedule
Textron
Savings Plan
Employer
Identification Number 05-0315468
Plan Number
030
Schedule
H, Line 4i, Schedule of Assets
(Held at
End of Year)
December
31, 2019
(In
thousands)
Identity of Issue
|
|
Description
of
Investments,
Including Rate of
Interest or Number
of Shares/Units
|
|
|
Current
Value
|
|
Textron Stock Fund*
|
|
|
18,890
|
|
|
$
|
842,495
|
|
Common Collective Trust Funds (outside of Textron Managed
Income Fund):
|
|
|
|
|
|
|
|
|
Fidelity® Diversified International
Commingled Pool*
|
|
|
9,882
|
|
|
|
141,809
|
|
Wellington Core Bond
|
|
|
12,475
|
|
|
|
130,119
|
|
JPMCB U.S. Active Core Equity
Fund CF-C
|
|
|
6,551
|
|
|
|
291,794
|
|
Wellington SMID Cap Research
Equity Portfolio
|
|
|
19,820
|
|
|
|
249,733
|
|
Vanguard Institutional Small/Mid
Cap Index Trust
|
|
|
162
|
|
|
|
19,376
|
|
Vanguard Institutional Total
Bond Market Index Trust
|
|
|
149
|
|
|
|
16,243
|
|
Vanguard Institutional Total
International Stock Market Index Trust
|
|
|
110
|
|
|
|
11,661
|
|
Vanguard Institutional 500 Index
Trust
|
|
|
4,539
|
|
|
|
591,669
|
|
Vanguard Target Retirement Income
Trust Plus
|
|
|
868
|
|
|
|
40,710
|
|
Vanguard Target Retirement 2015
Trust Plus
|
|
|
840
|
|
|
|
45,316
|
|
Vanguard Target Retirement 2020
Trust Plus
|
|
|
2,794
|
|
|
|
162,891
|
|
Vanguard Target Retirement 2025
Trust Plus
|
|
|
4,568
|
|
|
|
281,090
|
|
Vanguard Target Retirement 2030
Trust Plus
|
|
|
3,854
|
|
|
|
248,450
|
|
Vanguard Target Retirement 2035
Trust Plus
|
|
|
3,034
|
|
|
|
204,513
|
|
Vanguard Target Retirement 2040
Trust Plus
|
|
|
2,779
|
|
|
|
193,445
|
|
Vanguard Target Retirement 2045
Trust Plus
|
|
|
1,676
|
|
|
|
117,815
|
|
Vanguard Target Retirement 2050
Trust Plus
|
|
|
1,402
|
|
|
|
98,584
|
|
Vanguard Target Retirement 2055
Trust Plus
|
|
|
1,021
|
|
|
|
71,732
|
|
Vanguard Target Retirement 2060
Trust Plus
|
|
|
879
|
|
|
|
37,148
|
|
Vanguard Target Retirement 2065
Trust Plus
|
|
|
201
|
|
|
|
5,263
|
|
State Street Real Asset Non-Lending
Series Fund Class C
|
|
|
193
|
|
|
|
2,441
|
|
Total Common Collective Trust
Funds (outside Textron Managed Income Fund)
|
|
|
|
|
|
$
|
2,961,802
|
|
*Indicates party-in-interest
to the Plan
Textron
Savings Plan
Employer
Identification Number 05-0315468
Plan Number
030
Schedule
H, Line 4i, Schedule of Assets
(Held at
End of Year) (continued)
December 31,
2019
(In
thousands)
Identity of Issue
|
|
Description
of
Investments,
Including Rate of
Interest or Number of
Shares/Units
|
|
|
Current
Value
|
|
Separate Account Contracts (in Managed Income Fund):
|
|
|
|
|
|
|
|
|
Metropolitan
Life Insurance Co (Account # 771)
|
|
|
2.85
|
%
|
|
|
46,599
|
|
Metropolitan
Life Insurance Co (Account # 690)
|
|
|
2.85
|
%
|
|
|
38,178
|
|
Total Separate Account Contracts
(in Managed Income Fund)
|
|
|
|
|
|
|
84,777
|
|
Security-backed (Synthetic) Investment Contracts (in
Managed Income Fund):
|
|
|
|
|
|
|
|
|
Prudential Insurance
Company (Contract # 062428)
|
|
|
2.51
|
%
|
|
|
81,177
|
|
Voya Retirement Insurance
and Annuity Co (Fixed Income Fund F)
|
|
|
2.82
|
%
|
|
|
32,495
|
|
Voya Retirement Insurance
and Annuity Co (Fixed Income Fund E)
|
|
|
2.82
|
%
|
|
|
45,467
|
|
Voya Retirement Insurance
and Annuity Co (Fixed Income Fund L)
|
|
|
2.82
|
%
|
|
|
2,316
|
|
Pacific
Life Insurance Company (Contract # G-027810.01.0001)
|
|
|
2.91
|
%
|
|
|
78,943
|
|
Total Security-backed (Synthetic)
Investment Contracts Fund (in Managed Income Fund):
|
|
|
|
|
|
|
240,398
|
|
Common Collective Trust Funds (in Managed Income Fund):
|
|
|
|
|
|
|
|
|
Wells
Fargo/BlackRock Short Term Investment Fund
|
|
|
1.81
|
%
|
|
|
6,573
|
|
Total Common Collective Trust
Funds (in Managed Income Fund)
|
|
|
|
|
|
|
6,573
|
|
Self-directed brokerage accounts
|
|
|
|
|
|
|
172,781
|
|
Cash (in self-directed brokerage
account)
|
|
|
|
|
|
|
164
|
|
Notes receivable
from participants
|
|
|
3.25%
to 11
|
%
|
|
|
81,582
|
|
|
|
|
|
|
|
$
|
4,390,572
|
|
Note: Cost information has
not been provided, because all investments are participant directed.
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