Avon 2000 Annual Report Download - page 35

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Supplemental Retirement Program > Avon maintains a
supplemental retirement program consisting of a
Supplemental Executive Retirement Plan (“serp”) and a
Benefits Restoration Pension Plan (“Restoration Plan”)
under which non-qualified supplemental pension benefits
are paid to higher paid employees in addition to amounts
received under Avon’s qualified retirement plan which is
subject to irs limitations on covered compensation. The
annual cost of this program has been included in the
determination of the net periodic benefit cost shown
above and in 2000 amounted to $10.2 (1999 –$10.1,
1998 –$6.1). The benefit obligation under this program
at December 31, 2000 was $32.9 (1999 –$29.3) and is
primarily included in Employee Benefit Plans.
Avon also maintains a Supplemental Life Insurance
Plan (“slip”) under which additional death benefits rang-
ing from $.35 to $2.0 are provided to certain active and
retired officers. Avon has acquired corporate-owned life
insurance policies to provide partial funding of the
benefits. The cash surrender value of these policies at
December 31, 2000 was $26.1 (1999–$24.2) and is held
in a grantor trust.
Avon has established a grantor trust to provide
funding for the benefits payable under the serp and slip
and further provides for funding of obligations under
Avon’s Deferred Compensation Plan. The trust is irrevo-
cable and assets contributed to the trust can only be used
to pay such benefits with certain exceptions. The assets
held in the trust at December 31, 2000, amounting to
$96.2 (1999 –$99.6), consisted of a fixed income portfo-
lio, a managed portfolio of equity securities and corpo-
rate-owned life insurance policies. These assets are
included in Other assets.
The equity securities and fixed income portfolio
included in the grantor trust are classified as available-
for-sale and recorded at current market value. In 2000,
net unrealized gains and losses on these securities were
recorded in Other Comprehensive Income (see Note 5).
In 1999, the net unrealized gains and losses on these secu-
rities were not recorded as the carrying value approxi-
mated market. The cost, gross unrealized gains and losses
and market value of the available-for-sale securities as of
December 31, 2000, are as follows:
Gross Gross
Cost Unrealized Unrealized Market
Gains Losses Value
Equity Securities $44.3 $2.5 $(12.2) $34.6
u.s. Government
Bonds 1.5 — — 1.5
State and Municipal
Bonds 30.9 0.6 (.2) 31.3
Mortgage Backed 1.9 — — 1.9
Corporate Bonds 0.8 — — .8
Tota l $79.4 $3.1 $(12.4) $70.1
Payments, proceeds and net realized gains from
the purchases and sales of these securities totaled $98.3,
$100.3 and $6.0, respectively, during 2000. For the pur-
pose of determining realized gains and losses, the cost of
securities sold was based on specific identification.
Postemployment Benefits > Avon provides postem-
ployment benefits which include salary continuation, sev-
erance benefits, disability benefits, continuation of health
care benefits and life insurance coverage to former
employees after employment but before retirement. At
December 31, 2000, the accrued cost for postemployment
benefits was $31.9 (1999–$38.5) and is included in
Employee Benefit Plans.