NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2015 AND 2014 AND FOR THE YEAR ENDED DECEMBER 31, 2015
Note 1 -- Description of the Plan
The following brief description of the Computer Sciences Corporation Matched Asset Plan (the “Plan”) is provided for general information purposes only. Participants should refer to the Plan document for more complete information. Computer Sciences Corporation, its subsidiaries, and those joint ventures and partnerships over which Computer Sciences Corporation exercises control and that participate in the Plan are hereafter collectively referred to as “CSC” or “the Company.”
The Plan is a defined contribution plan adopted by the action of the Board of Directors of CSC taken on November 3, 1986, and constituted an amendment and restatement of the Employee Stock Purchase Plan (“the Prior Plan”).
The Plan is a continuation of the Prior Plan and is qualified under the Internal Revenue Code, as amended (the "Code"), Section 401(a). Effective as of January 1, 1987, with respect to the portion thereof that qualifies as a qualified cash or deferred arrangement, is intended to satisfy the requirements of Code Section 401(k). It is also subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
The Company established the CSC Employee Benefits Fiduciary Committee (the "Committee"), which generally consists of five members appointed by the Compensation Committee of the Board of Directors of the Company who serve without additional compensation and are reimbursed by the Company for all reasonable expenses incurred in the discharge of their duties as members of the Committee to the extent such expenses are not paid by the Plan. The Committee serves as the named fiduciary and administrator of the Plan and has the power to interpret, construe and administer the Plan, and to decide any dispute which may arise under the Plan.
Effective April 1, 2015, the Plan was updated to incorporate several changes which included an updated investment menu line-up with white-labeled options, a restriction of future contributions to the CSC stock fund of 10% of eligible compensation, and a change in the default investment option to the Target Series fund by age.
Effective July 1, 2015, a self-directed brokerage account option was offered to plan participants.
Separation of CSRA -
On November 27, 2015, the Company completed the previously announced separation of the Company's U.S. public sector business and merger with SRA International to form a new publicly traded Company: CSRA Inc. (CSRA) (the Separation). Under the terms of the Separation agreements, on November 27, 2015, stockholders who held CSC common stock at the close of business on November 18, 2015 (the Record Date), received a distribution of one CSRA common share for every one share of CSC common stock held as of the Record Date. CSRA is now an independent public company trading under the symbol "CSRA" on the New York Stock Exchange.
Interest in the CSC Sponsored Trust
- Through November 2, 2015 the Plan assets were held in The Bank of New York in a master trust. As part of the Separation, CSC assigned the trust to CSRA Inc. and transferred all assets associated with the CSC employees into a newly formed master trust sponsored by the Company. The Bank of New York serves as trustee, agent, and custodian of the Plan for purposes of investment of the assets of the trust.
At December 31, 2015 and 2014, the Plan’s interest in the assets of the trust in which its asset were held was approximately 99% and 57%, respectively. Investment income and administrative expenses relating to each discretionary or directed fund are allocated to the individual plans based upon average monthly balances invested by each plan in each discretionary or directed fund. Accordingly, the Plan reports its investment in the trust account based on an allocation of individual investments of the trust account.
Plan Termination
- Although it has not expressed any intent to do so, the Company reserves the right, under the Plan, to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, the participants' rights to the Company's contributions fully vest immediately.
Eligibility and Participation
- Any eligible employee (as defined in the Plan) who has satisfied the Plan's age requirement, and is employed by a participating employer, and who receives a stated compensation in respect of employment on the United States of America (U.S.) payroll of the Company, is eligible to become a participant, with the exception of a person who is represented by a collective bargaining unit and whose benefits have been the subject of good faith bargaining under a contract that does not specify that such person is eligible to participate in the Plan. In addition, the Company may decide to exempt all employees of any division, unit, facility or class from coverage under the Plan. Any person who leaves the Company and, at a later time becomes re-employed, must reapply to participate in the Plan, provided he or she otherwise meets the eligibility requirements.
Employee and Company Contributions
- An eligible employee who elects to become a participant may authorize any whole percentage (at least 1% but not more than 50%, subject to certain additional limitations for highly compensated employees) of their compensation (as defined in the Plan) to be deferred and contributed to the trust fund on his or her behalf, subject to certain Code limitations. Any compensation deferral in excess of applicable Code limitations, together with income allocable to that excess, will be returned to a participant. Any matching Company contribution attributable to any excess contribution, and income allocable thereto, will be forfeited and returned to the Company via the forfeiture account or applied to reduce future matching Company contributions or Plan administrative expenses. Effective October 1, 2002, under the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA"), the Plan permits participants age 50 and over to make additional “catch-up” contributions in excess of the statutory limit. The catch-up provision provided these participants the opportunity to contribute up to an additional $
6,000
on a pre-tax basis in
2015
.
A participant is not permitted to make voluntary after-tax contributions to the Plan unless the participant is part of a collective bargaining unit for which after-tax contributions have been negotiated.
The Company will contribute an amount equal to 50% of the first 6% of the participant's compensation deferral, except for certain groups of employees for whom, under the terms of their contract agreements, the Company will contribute different amounts. Due to the Separation the CSRA employees are not eligible for matching contributions in 2015.
Effective January 1, 2014, the Plan switched to an annual posting of Company match for all participants that are in the standard match. The match earned during the year is posted to participant accounts in January of the following year. In order to receive this match, participants must remain employed through the end of the year or terminate due to retirement or death. Retired or deceased employees receive their contribution as soon as administratively feasible. The few select participants that receive a match during the year include collectively bargained employees, Swiss Re, and service contract employees.
Participants should refer to the Plan document for more information about the aforementioned groups.
Participant Accounts
- Individual accounts are maintained for each Plan participant. Each participant's account is credited with the participant's contribution, the Company's matching and discretionary contributions and allocations of Plan investment returns, net of an allocation of investment management fees, and is reduced
by any distributions. Allocations are based on participant earnings or account balances, as defined by the Plan document. The benefit to which a participant is entitled is the benefit that can be provided from the participant's vested account.
Investments
- Participants direct the investment of their contributions and account balance into various investment options offered by the Plan. The Plan currently offers the 21 investment options listed below.
The T. Rowe Price Stable Value Common Trust Fund is frozen to new participants and to new contributions. These investment options are made up of various investments as determined by the investment manager.
Commingled investment funds listed as one fund on Form 5500, Schedule H, Line 4i:
|
|
|
|
•
|
MCM International Country World Index EX US issued by Bank of New York Mellon (EB DL ACWI)
|
|
|
|
|
•
|
PIMCO All Asset All Authority Fund ( REGULATED)
|
|
|
|
|
•
|
Mellon EB Daily Liquidity Stock Index Fund issued by BNYM
|
|
|
|
|
•
|
MCM Daily Liquidity Completion Fund issued by BNYM (EB Daily Liquidity Market Completion Fund)
|
|
|
|
|
•
|
Pyramis Select Global Equity Commingled Funds
|
|
|
|
|
•
|
GMO Benchmark - Free Allocation Series Fund (US REGISTERED)
|
|
|
|
|
•
|
Blackrock Global Allocation Collective Fund
|
|
|
|
|
•
|
Money Market Fund issued by State Street Global Advisor ("SSgA")
|
|
|
|
|
•
|
Mellon TIPS Index Fund issued by BYNM (EB Daily Liquidity Non-SL)
|
|
|
|
|
•
|
Target Series Retirement Fund issued by SSgA (Target Retirement Income
|
|
|
|
|
•
|
Target Series Retirement 2015 Fund issued by SSgA (Target Retirement 2015 SL)
|
|
|
|
|
•
|
Target Series Retirement 2020 Fund issued by SSgA (Target Retirement 2020 SL)
|
|
|
|
|
•
|
Target Series Retirement 2025 Fund issued by SSgA (Target Retirement 2025 SL)
|
|
|
|
|
•
|
Target Series Retirement 2030 Fund issued by SSgA (Target Retirement 2030 SL)
|
|
|
|
|
•
|
Target Series Retirement 2035 Fund issued by SSgA (Target Retirement 2035 SL)
|
|
|
|
|
•
|
Target Series Retirement 2040 Fund issued by SSgA (Target Retirement 2040 SL)
|
|
|
|
|
•
|
Target Series Retirement 2045 Fund issued by SSgA (Target Retirement 2045 SL)
|
|
|
|
|
•
|
Target Series Retirement 2050 Fund issued by SSgA (Target Retirement 2050 SL)
|
|
|
|
|
•
|
Target Series Retirement 2055 Fund issued by SSgA (Target Retirement 2055)
|
|
|
|
|
•
|
Target Series Retirement 2060 Fund issued by SSgA (Target Retirement 2060)
|
|
|
|
|
•
|
T Rowe Price Stable Value Common Trust Fund
|
Separately managed investment funds for which the underlying investments are listed individually on Form 5500, Schedule H, Line 4i:
|
|
|
|
•
|
CSC Stock Fund (Computer Sciences Corporation Common Stock)
|
|
|
|
|
•
|
BlackRock Core Bond Portfolio (Bond Option)
|
•
Epoch Global Equity (Strategic Equity Option)
The individual investments of the above listed separately managed funds are listed in the Form 5500, Schedule H, Line 4i Schedule of Assets with the following descriptions:
|
|
|
|
•
|
U.S. Government Agencies
|
|
|
|
|
•
|
State and Local Obligations
|
|
|
|
|
•
|
Agency Mortgage Backed Securities
|
|
|
|
|
•
|
Asset and Other Mortgage Backed Securities
|
|
|
|
|
•
|
Self Directed Brokerage
|
The investment return, gains and losses, in the respective funds fluctuates on a daily basis within a participant's account due to changes in the net asset values (NAVs).
Vesting of Participants' Interests/Forfeitures
- Participants are fully vested immediately in their contributions plus actual earnings thereon.
The majority of participants have a vested interest in his or her Matching Contributions Account of 100% after achieving one full year of service. For a few selected groups of participants, vesting in his or her Matching Contributions Account, as defined, is equal to twenty-five percent (25%) after completing two full years of service and increasing by twenty-five percent (25%) for each additional full year of service. Vesting accelerates to 100% in the event of reaching age 65 while employed by the Company, upon severance by reason of death or total and permanent disability, or death.
Any nonvested portion of the Matching Contributions Account will be forfeited at the earlier of five one-year consecutive Breaks in Service, as defined, or upon withdrawal from the Plan. Such forfeitures during
2015
amounted to $3,424,976 . Forfeitures may be applied to reduce future matching contributions by the Company, pay Plan administrative expenses and restore amounts previously forfeited by terminated employees. The Plan had a forfeiture balance of
$2,386,649
at
December 31, 2015
and
$4,192,228
at
December 31, 2014
. In 2015, employer contributions attributable to the year ended December 31, 2014 were reduced by $4,192,228. The Plan also paid administrative expenses of $
0
, restored forfeitures of $
30,908
and transfered $
1,007,419
of forfeitures to CSRA, Inc. due to the spin off during the year ended December 31, 2015.
Distributable Amounts, Withdrawals and Refunds
- With a few exceptions applicable to a few selected groups, a participant may become entitled to his or her distributable benefit by reason of retirement, death, total and permanent disability, voluntary termination of employment, dismissal, or attainment of age fifty-nine and one-half (59-1/2). The rules of payment of a participant's distributable benefit depend upon age of the participant, the number of years of service completed by the participant and the type of severance.
While still an employee, a participant may take a withdrawal of his or her compensation deferral contributions provided a fully completed application is submitted. The request for withdrawal will be approved if it is deemed that an adequate financial hardship and resulting need for such an amount has been demonstrated by the participant.
Administrative Expenses
- Certain administrative expenses are paid by CSC (the Plan sponsor), as provided by the Plan. Effective June 30, 2011, a
$3.20
monthly administration fee is applied to accounts of terminated participants. Plan participants also incurred quarterly advisory fees totaling $
2.87
during calendar year 2015.
Note 2 -- Summary of Significant Accounting Policies
Basis of Accounting
- The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. ("GAAP").
Use of Estimates
- The preparation of financial statements in conformity with GAAP requires Plan management to make estimates and assumptions that affect the reported amounts of net assets available for benefits and changes therein and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
Risks and Uncertainties
- The Plan utilizes various investment instruments including short-term investment funds ("STIF"), fixed income securities, commingled funds, a stable value fund, Company stock, and certain derivative instruments. Investment securities, in general, are exposed to various risks such as interest rate,
credit, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the value 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 financial statements.
The Plan also invests in securities of international companies, which involves special risks and considerations not typically associated with investing in U.S. companies. These risks include devaluation of currencies, less reliable information about issuers, different securities transaction clearance and settlement practices, and possible adverse political and economic developments. Moreover, securities of many international companies and their markets may be less liquid and their prices more volatile than those securities of comparable U.S. companies.
Security Transactions
- Security transactions are accounted for on a trade-date basis. Dividend income is recorded on the ex-dividend date. Interest income is accounted for on the accrual basis. Net appreciation (depreciation) in fair value of investments includes realized and unrealized gains and losses on investments sold or held during the year.
Valuation of Investment Securities
- The Plan's investments are stated at fair value. Fair value of a financial instrument is 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 (see Note 5). Investments in the STIF are stated at amortized cost which approximates fair value. Fixed income securities including U.S. Treasuries, U.S. government agencies fixed income securities, corporate bonds, mortgage backed, asset backed and other fixed income securities are generally valued using model-based pricing methods that use observable market data as inputs. Investments in commingled funds are stated at estimated fair values, which have been determined based on the unit values of the funds. Unit values are determined by the financial institution sponsoring such funds by dividing the fund's net assets at fair value by its units outstanding at the valuation dates. Investments in common stocks are stated at fair value based upon closing sales prices reported on recognized securities exchanges on the last business day of the plan year. Derivatives are stated at fair value (see Note 8).
The Plan invests in the T. Rowe Price Stable Value Common Trust Fund (the "Fund"), which is frozen to new participants and to new contributions. The Fund is stated at the fair value of the underlying investments and then adjusted to contract value for the purposes of the statements of net assets available for benefits. Contract value represents contributions made to the Fund plus earnings, less participants withdrawals. Fair value of the Fund is generally determined by discounting the scheduled future payments required under the contract using an interpolated market discount rate for contracts with maturities comparable to the average remaining life of the contract being valued. The beneficial interest of each participant is represented by units which are issued and redeemed daily at the Fund's constant NAV of $1 per unit. The Fund invests principally in Guaranteed Investment Contracts (GICs) issued by insurance companies; Bank Investment Contracts (BICs) issued by banks; Synthetic Investment Contracts (SICs) issued by banks, insurance companies and other issuers, as well as the securities supporting such SICs; separate account contracts (SACs); and other similar instruments which are intended to maintain a constant NAV.
Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value. The Fund imposes certain restrictions on the Plan, and the Fund itself may be subject to circumstances that affect its ability to transact at contract value. Specifically, any event outside the normal operation of the trust that causes a withdrawal from an investment contract may result in a negative market value adjustment with respect to such withdrawal. Examples of circumstances that may affect the the Fund's ability to transact at contract value include, partial or complete legal termination of the trust or a unit holder, tax disqualification of the trust or a unit holder and certain trust amendments if the issuer's consent is not obtained. As of
December 31, 2015
, the occurrence of an event outside the normal operation of the trust that would cause a withdrawal from an investment contract is not considered to be probable.
Notes Receivable from Participants
- Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Delinquent participant loans are recorded as distributions based on the terms of the Plan document.
Payment of Benefits
- Benefit payments to participants are recorded upon distribution. Amounts allocated to accounts of persons who have elected to withdraw from the Plan but have not yet been paid were
$2,902,807
and
$9,070,441
at
December 31, 2015
and
2014
, respectively.
Standards Issued But Not Yet Effective
- In May 2015, the FASB issued Accounting Standards Update No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) (ASU 2015-07). ASU 2015-07 removes the requirement to include investments in the fair value hierarchy for which fair value is measured using the net asset value per share practical expedient under ASC 820. ASU 2015-07 is effective for the Plan retrospectively for the year ending December 31, 2016 with early adoption permitted. The Committee is currently evaluating the impact of the pending adoption of ASU 2015-07 on the Plan’s financial statements.
In July 2015, the FASB issued ASU No. 2015-12, "Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): (Part I) Fully Benefit-Responsive Investment Contracts, (Part II) Plan Investment Disclosures, (Part III) Measurement Date Practical Expedient." Part I of the ASU eliminates the requirements to measure the fair value of fully benefit-responsive investment contracts and provide certain disclosures. Contract value is the only required measure for fully benefit-responsive investment contracts. Part II of the ASU eliminates the requirements to disclose individual investments that represent five percent or more of net assets available for benefits and the net appreciation or depreciation in fair value of investments by general type. It also simplifies the level of disaggregation of investments that are measured using fair value. Plans will continue to disaggregate investments that are measured using fair value by general type; however, plans are no longer required to also disaggregate investments by nature, characteristics and risks. Further, the disclosure of information about fair value measurements shall be provided by general type of plan asset. Part III of the ASU is not applicable to the Plan. The ASU is effective for fiscal years beginning after December 15, 2015, with retrospective application to all periods presented. The impact from this guidance on the Plan's financial statements and footnotes is currently being evaluated.
Note 3 -- Tax Status
The Internal Revenue Service has determined and informed the Company by a determination letter dated May 8, 2015, that the Plan and related trust are designed in accordance with applicable sections of the Code.
The Plan administrator and tax counsel believe that although the Plan was amended effective April 1, 2015 and that amendment was not considered in the most recent determination letter, the Plan is currently designed and being operated in compliance with applicable requirements of the Code and the Plan continues to be tax-exempt. As such, no provision for income taxes has been included in the Plan's financial statements.
GAAP requires Plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the taxing authorities. The Plan is subject to routine audits by taxing jurisdictions, and is currently not under an IRS audit.
Note 4 -- Investment Funds
Subject to rules the Committee may from time to time adopt, each participant has the right to designate one or more funds established by the Committee for the investment of his or her compensation deferral contributions, in increments of 1%. After an initial election has been made, a participant may designate a different fund or
funds into which future compensation deferral contributions shall be invested as of the next possible pay date once per calendar month. In addition, a participant may elect to redesignate twice per month any amounts in his or her account as of the current or next business day of any month (depending on when the election is made) to be invested in a different fund. These elections may be made by giving such advance notice as may be required by the Plan administrator.
The following table represents the Plan's investments (including the underlying investments of the separately managed funds) that each exceeded 5% of the Plan's net assets available for benefits, as of
December 31, 2015
and
2014
:
|
|
|
|
|
|
|
|
|
|
|
|
Description of Issue
|
2015
|
|
2014
|
|
|
|
|
|
|
SSgA Money Market Fund
|
$
|
195,399,149
|
|
|
$
|
257,887,733
|
|
|
Commingled Funds:
|
|
|
|
|
Mellon Bank Daily Liquidity Stock Index Fund
(1)
|
287,180,148
|
|
|
609,383,784
|
|
|
Mellon Bank EB Daily Market Completion Fund
(1)
|
—
|
|
|
350,507,958
|
|
|
Mellon Bank EB Daily Liquidity All Country World Index Fund
(1)
|
319,792,147
|
|
|
—
|
|
|
Frank Russell Equity #1 Fund
|
—
|
|
|
243,478,211
|
|
|
CSC common stock
(1)
|
188,279,415
|
|
|
529,184,325
|
|
|
CSRA common stock
|
198,149,310
|
|
|
—
|
|
|
Balanced Commingled Funds:
|
|
|
|
|
SSgA Target Retirement 2020
|
149,449,854
|
|
|
228,298,615
|
|
SSgA Target Retirement 2025
|
163,806,706
|
|
|
223,485,526
|
|
|
|
|
|
(1) Represents a party-in-interest to the Plan.
The Plan's investments (including gains and losses on investments bought and sold, as well as investments held during the year) appreciated/(depreciated) in value during the year ended
December 31, 2015
as follows:
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
Interest in commingled funds
|
$
|
(50,999,865
|
)
|
|
CSC common stock
|
(19,056,481
|
)
|
|
CSRA common stock
|
29,391,023
|
|
|
International equities
|
8,739,477
|
|
|
Bonds and debentures
|
(5,074,521
|
)
|
|
Other
|
(11,951
|
)
|
|
|
|
|
Net depreciation in fair value of investments
|
$
|
(37,012,318
|
)
|
Note 5 -- Fair Value Measurements
In accordance with GAAP, the Plan classifies investments into three levels based on valuation inputs used to determine fair value. Level 1 refers to securities valued using quoted prices from active markets for identical assets; Level 2 refers to securities not traded on an active market but for which observable market inputs are readily available, or securities for which model-derived valuations have inputs that are observable or have significant value drivers that are observable; and Level 3 refers to securities valued based on significant
unobservable inputs. Categorization within the hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Asset Valuation Techniques -
Cash and cash equivalents are primarily short-term investment funds that are categorized as Level 2 and are stated at amortized cost which approximates fair value.
Fixed income securities are generally categorized as Level 2. These investments are generally valued using model-based pricing methods that use observable market data as inputs. Broker dealer bids or quotes of securities with similar characteristics may also be used.
The following table provides examples of inputs that are commonly relevant for valuing particular classes of fixed income securities in which the Plan invests. However, these classifications are not exclusive, and any of the inputs may be used to value any other class of fixed income security.
|
|
|
|
|
|
|
Fixed income class
|
|
Examples of standard inputs
|
|
|
|
|
|
All
|
|
Trade execution data, live trading levels, cash flows, bids, offers, quotes, spreads, indices, Treasury curves, observed market movements, volatility, specific terms and conditions (collectively referred to as “standard inputs”)
|
|
|
|
|
|
Corporate bonds
|
|
Standard inputs and events affecting market sectors and individual issuer credit worthiness
|
|
|
|
|
|
U.S. Treasuries, U.S. government agencies, state and local obligations, non-U.S. government securities
|
|
Standard inputs
|
|
|
|
|
|
Mortgage backed securities, asset backed securities
|
|
Standard inputs, prepayment speeds, actual pool, and collateral information
|
U.S. and global equity securities in separately managed funds are categorized as Level 1 if the securities trade on national or international exchanges and are valued at their last reported closing price. Equity securities in commingled funds are categorized as Level 2 based on the NAV.
Derivative instruments are generally valued using model based pricing methods with observable inputs, and are categorized as Level 2. Inputs may include, for example, notional amounts, currency, maturity date, and payment frequency. See Note 8.
Transfers Between Levels -
The availability of observable market data is monitored to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period.
Plan management evaluates the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total net assets available for benefits. For the years ended
December 31, 2015
, and
December 31, 2014
, there were no transfers between levels.
The fair value of Plan assets by investment category and the corresponding level within the fair value hierarchy as of
December 31, 2015
and
December 31, 2014
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Assets at Fair Value as of December 31, 2015
|
|
|
Quoted Prices in Active Markets for Identical Assets
|
|
Significant Observable Inputs
|
|
Significant Unobservable Inputs
|
|
Total
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Fair Value
|
|
Equity:
|
|
|
|
|
|
|
|
|
Global Equity
|
$
|
20,151,164
|
|
|
$
|
319,792,147
|
|
|
$
|
—
|
|
|
$
|
339,943,311
|
|
|
CSC common stock
|
188,304,219
|
|
|
—
|
|
|
—
|
|
|
188,304,219
|
|
|
CSRA common stock
|
198,149,310
|
|
|
—
|
|
|
—
|
|
|
198,149,310
|
|
|
Domestic equity
|
32,351,808
|
|
|
452,773,668
|
|
|
—
|
|
|
485,125,476
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Income:
|
|
|
|
|
|
|
|
|
U.S. Treasuries
|
—
|
|
|
51,010,616
|
|
|
—
|
|
|
51,010,616
|
|
|
U.S. government agencies
|
—
|
|
|
2,892,679
|
|
|
—
|
|
|
2,892,679
|
|
|
State and local obligations
|
—
|
|
|
1,031,781
|
|
|
—
|
|
|
1,031,781
|
|
|
Non U.S. government
|
—
|
|
|
1,881,541
|
|
|
—
|
|
|
1,881,541
|
|
|
Agency mortgage backed securities
|
—
|
|
|
42,677,873
|
|
|
—
|
|
|
42,677,873
|
|
|
Asset and other mortgage backed securities
|
—
|
|
|
36,120,496
|
|
|
—
|
|
|
36,120,496
|
|
|
Corporate bonds
|
—
|
|
|
44,144,737
|
|
|
—
|
|
|
44,144,737
|
|
|
Fixed income commingled fund
|
—
|
|
|
47,392,634
|
|
|
—
|
|
|
47,392,634
|
|
|
Stable value fund
|
—
|
|
|
3,041,414
|
|
|
—
|
|
|
3,041,414
|
|
|
Balanced commingled funds
|
—
|
|
|
767,708,797
|
|
|
—
|
|
|
767,708,797
|
|
|
Alternatives Fund ( Mutual Fund)
|
69,881,840
|
|
|
—
|
|
|
—
|
|
|
69,881,840
|
|
|
Alternatives Fund (CF)
|
—
|
|
|
36,585,807
|
|
|
—
|
|
|
36,585,807
|
|
|
Other:
|
|
|
|
|
|
|
|
|
Self Directed Brokerage
|
17,429,043
|
|
|
—
|
|
|
—
|
|
|
17,429,043
|
|
|
|
|
|
|
|
|
|
|
|
Cash & cash equivalents
|
—
|
|
|
213,209,240
|
|
|
—
|
|
|
213,209,240
|
|
|
|
|
|
|
|
|
|
|
|
Total investment assets at fair value
|
$
|
526,267,384
|
|
|
$
|
2,020,263,430
|
|
|
$
|
—
|
|
|
$
|
2,546,530,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Assets at Fair Value as of December 31, 2014
|
|
|
Quoted Prices in Active Markets for Identical Assets
|
|
Significant Observable Inputs
|
|
Significant Unobservable Inputs
|
|
Total
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Fair Value
|
|
Equity:
|
|
|
|
|
|
|
|
|
Global Equity
|
$
|
72,771,268
|
|
|
$
|
101,936,337
|
|
|
$
|
—
|
|
|
$
|
174,707,605
|
|
|
CSC common stock
|
529,184,325
|
|
|
—
|
|
|
—
|
|
|
529,184,325
|
|
|
Domestic equity
|
—
|
|
|
1,387,031,034
|
|
|
—
|
|
|
1,387,031,034
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Income:
|
|
|
|
|
|
|
|
|
U.S. Treasuries
|
—
|
|
|
52,169,456
|
|
|
—
|
|
|
52,169,456
|
|
|
U.S. government agencies
|
—
|
|
|
5,166,275
|
|
|
—
|
|
|
5,166,275
|
|
|
State and local obligations
|
—
|
|
|
3,428,282
|
|
|
—
|
|
|
3,428,282
|
|
|
Non U.S. government
|
—
|
|
|
2,204,586
|
|
|
—
|
|
|
2,204,586
|
|
|
Agency mortgage backed securities
|
—
|
|
|
38,793,225
|
|
|
—
|
|
|
38,793,225
|
|
|
Asset and other mortgage backed securities
|
—
|
|
|
70,192,536
|
|
|
—
|
|
|
70,192,536
|
|
|
Corporate bonds
|
386,219
|
|
|
65,734,785
|
|
|
—
|
|
|
66,121,004
|
|
|
Fixed income commingled fund
|
—
|
|
|
76,259,062
|
|
|
—
|
|
|
76,259,062
|
|
|
Stable value fund
|
—
|
|
|
4,964,719
|
|
|
—
|
|
|
4,964,719
|
|
|
Balanced commingled funds
|
—
|
|
|
1,110,920,063
|
|
|
—
|
|
|
1,110,920,063
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
—
|
|
|
(4,579
|
)
|
|
—
|
|
|
(4,579
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash & cash equivalents
|
93,144
|
|
|
288,019,341
|
|
|
—
|
|
|
288,112,485
|
|
|
|
|
|
|
|
|
|
|
|
Total investment assets at fair value
|
$
|
602,434,956
|
|
|
$
|
3,206,815,122
|
|
|
$
|
—
|
|
|
$
|
3,809,250,078
|
|
Short-Term and Commingled Funds
- The following funds held by the Plan have a daily redemption frequency and have no unfunded commitments or notice period requirement for participants. The investment strategy for each commingled fund category as presented above is as follows:
Short-term investment funds
|
|
|
|
•
|
The SSgA Money Market Fund is a commingled STIF utilized for the Money Market Fund Option for participants and holds highly liquid, short-term investments, and therefore is classified as cash and cash equivalents.
|
|
|
|
|
•
|
The Collective STIF (an underlying investment of separately managed funds) for the investment of overnight cash holdings and holds exchange traded and short duration securities.
|
Domestic Equity Commingled funds
|
|
|
|
•
|
The Mellon EB Daily Liquidity Stock Index Fund is a component of the Global Equity Index Option and seeks to track the performance of the S&P 500 Index. It is designed to represent the entire stock market by reflecting the risk and return of 500 large cap companies listed on U.S. stock exchanges.
|
|
|
|
|
•
|
The MCM Daily Liquidity Completion Fund is a component of the Global Equity Index Option and
|
seeks to match the performance of the Dow Jones U.S. Completion Total Stock Market Index. This universe is made up of all U.S. companies without the S&P 500 companies leaving a universe of mid- to small-size companies.
Global Equity Commingled funds
|
|
|
|
•
|
The MCM International Country World Index EX US. Fund is a component of the Global Equity Index Option and seeks to track the performance of the MSCI All Country World (ACWI) ex-US Index. This universe is designed to provide a broad measure of equity-market performance throughout the world and is comprised of stocks from both developed and emerging markets.
|
|
|
|
|
•
|
Pyramis Select Global Equity Commingled Pool is a component of the Strategic Equity Option and seeks in to provide long-term total growth of capital primarily through investments in equity securities of companies anywhere in the world.
|
Mutual Funds (U.S. Registered Funded)
|
|
|
|
•
|
The PIMCO All Asset All Authority Fund is a component of the Strategic Allocation Option and utilizes global stocks and bonds, inflation-related investments and alternative strategies. The fund seeks maximum real return, consistent with preservation of real capital and prudent investment management.
|
|
|
|
|
•
|
The GMO Benchmark-Free Allocation Series Fund is a component of the Strategic Allocation Option that invests in both domestic and international stocks and bonds and seeks positive total return not "relative" return.
|
Fixed income commingled fund
|
|
|
|
•
|
The (Mellon) TIPS Index Fund is a component of the Strategic Real Asset Option and seeks to track the performance of the Barclays U.S. Treasury Inflation-Protected Securities (TIPS) Index.
The fund invests primarily in inflation-indexed fixed income securities issued in the United States. Inflation-indexed bonds are fixed income securities that are structured to provide protection against inflation.
|
Stable value fund
|
|
|
|
•
|
The T. Rowe Price Stable Value Common Trust Fund invests primarily in a portfolio of GICs, BICs, and SICs, including underlying fixed income securities supporting SICs. Contracts are issued by U.S. insurance companies, U.S. banks, and U.S. branches of foreign insurance companies and foreign banks.
|
Balanced commingled funds
|
|
|
|
•
|
The SSgA Target Retirement Series Funds (Retirement Income and the Target Retirement Funds 2015 through 2060) provide a diversified allocation of stocks, bonds, REITs and commodities. The specific allocation is determined by the expected retirement date. Professional managers then adjust the index fund mix annually, forming an increasingly more conservative asset allocation as the retirement date approaches.
|
Other Commingled funds
|
|
|
|
•
|
BlackRock Global Allocation Collective Fund is a component of the Strategic Allocation Option and seeks to provide total investment return utilizing U.S. and foreign equity securities, debt and money market securities, the combination of which will be varied from time to time both with respect to types of securities and markets in response to changing market and economic trends.
|
The CSRA Common Stock is held due to the spin-off on November 27, 2015. The stock is held by an independent investment manager and fiduciary until liquidated.
Note 6 -- Notes Receivable to Participants
The Plan allows participants to borrow from their vested account balances from a minimum of $1,000 to a maximum of 50% of their vested account balances up to $50,000, subject to certain limitations. The loans are secured by the balance in the participant account and bear interest at the prime rate quoted in the Wall Street Journal plus 1%. Loan terms range from 1-5 years or up to 15 years for purchase of a principal residence.
Loan amounts are taken from the participants' accounts according to a priority specified in the Plan's loan rules and, within each account, prorated from the funds based on their balances at the time. Loan principal repayments go back into the participants' accounts in the reverse order of the priority specified in the Plan's loan rules. Interest payments are prorated to the participants' accounts based on each account's outstanding principal. Both loan principal and interest repayments are invested according to the participant's current investment fund elections. Principal and interest are paid rateable through payroll deductions.
Note 7 -- Exempt Party-in-Interest Transactions
Certain investment funds are managed by The Bank of New York Mellon and by one of its management firms, Mellon Capital Management. The Bank of New York Mellon is the trustee as defined by the Plan and, therefore, these transactions qualify as exempt party-in-interest transactions. The trustee fees associated with the short-term investment fund managed by the trustee were paid by the Company and amounted to
$3,000
for the year ended
December 31, 2015
. During the year ended
December 31, 2015
, the Plan expensed
$358,240
to The Bank of New York Mellon's Mellon Capital Management for fund manager fees.
At
December 31, 2015
and
2014
, the Plan held
5,762,063
and
8,393,090
shares, respectively, of common stock of the Computer Sciences Corporation, the sponsoring employer, with a cost basis of
$142,886,305
and
$403,083,179
, respectively. The Plan received
$62,171,737
in dividends from the Computer Sciences Corporation common stock for the year ended
December 31, 2015
.
Note 8 -- Derivative Financial Instruments
In the Plan's investment funds, only one fixed income investment manager is permitted to use certain specified types of derivative instruments as part of its 2014 strategy. This strategy includes the use of futures, swaps, and options as substitutes for and in conjunction with certain types of fixed income securities. Currency contracts are primarily used to diminish foreign exchange risk for investments held in currencies other than the U.S. dollar. Equity and commodity contracts are used to cost effectively meet investment target allocations. Exchange listed futures are priced using vendor services. Over-the-counter derivatives are priced using broker quotes.
Futures Contracts
- The Plan enters into futures contracts in the normal course of its investing activities to manage market risk associated with the Plan's fixed income investments and to achieve overall investment portfolio objectives. The credit risk associated with these contracts is minimal as they are traded by professional investment managers on organized exchanges and settled daily.
During
2014
, the Plan was a party to futures contracts held for trading purposes for U.S. Treasury securities. Upon entering into a futures contract, the Plan is required to deposit, either in cash or securities, an amount (“initial margin”) equal to a certain percentage of the fair value of the contract. Subsequent payments are then made or received by the Plan, depending on the daily fluctuations in the value of the underlying contracts.
At
December 31, 2015
, the Plan had no futures contracts. At
December 31, 2014
, the Plan had futures contracts to buy and sell U.S. Treasury Notes and Bond contracts with notional amounts of
$32,588,898
. Notional amounts do not quantify risk or represent assets or liabilities of the Plan, but are used in the calculation of cash settlements under the contracts.
Futures are priced nightly with an offset to cash at the broker. There were no futures contracts at
December 31, 2015
. The fair value of futures contracts was
$63,922
at
December 31, 2014
. Realized gains or losses are accounted for as net appreciation (depreciation) in fair value of investments.
Interest Rate Swaps
- An interest rate swap is an agreement between two parties (known as counterparties) where one stream of future interest payments is exchanged for another based on a specified principal amount. Interest rate swaps often exchange a fixed payment for a floating payment that is linked to an interest rate (most often the LIBOR). The Plan will typically use interest rate swaps to limit, or manage, its exposure to fluctuations in interest rates, or to obtain a marginally lower interest rate than it would have been able to get without the swap. Counterparties must be rated BBB or better by a nationally recognized rating agency. As of December 31, 2015, the Plan had not entered into any interest rate swap contracts. The Plan had entered into
4
interest rate swap contracts as of
December 31, 2014
, with a total fair value of
$(66,955)
and a notional value of
$4,200,000
.
Credit Default Swaps
- A credit default swap is designed to transfer the credit default exposure of fixed income products between parties. The buyer of a credit swap receives credit protection, whereas the seller of the swap guarantees the credit worthiness of the product. By doing this, the risk of default is transferred from the holder of the fixed income security to the seller of the swap. As of December 31, 2015 the Plan had no swap. The Plan had entered into
one
credit default swaps, as the buyer, with a fair value of
$(1,546)
and notional amount of
$265,000
as of
December 31, 2014
.
The fair values of derivative instruments in the statement of net assets available for benefits as of December 31,
2014
were as follows: