Avon 2010 Annual Report Download - page 95
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Non-U.S. Pension Plans
Asset Category Level 1 Level 2 Level 3 Total
Equity Securities:
Domestic equity $ – $ 98.4 $ – $ 98.4
International equity 13.8 191.4 – 205.2
– 289.8 – 303.6
Fixed Income Securities:
Corporate bonds – 69.1 – 69.1
Government securities 83.2 83.2
Other – 9.0 – 9.0
– 161.3 – 161.3
Other:
Cash 20.4 – – 20.4
Real estate – – 13.0 13.0
Other – – 1.2 1.2
20.4 – 14.2 34.6
Total $34.2 $451.1 $14.2 $499.5
A reconciliation of the beginning and ending balances for our Level 3 investments was as follows:
Amount
Balance as of January 1, 2009 $14.9
Actual return on plan assets held (1.0)
Foreign currency changes .3
Balance as of December 31, 2009 14.2
Actual return on plan assets held .7
Foreign currency changes .5
Balance as of December 31, 2010 $15.4
Investments in equity securities classified as Level 1 in the fair value hierarchy are valued at quoted market prices. Investments in equity
securities classified as Level 2 in the fair value hierarchy include collective funds that are valued at quoted market prices for non-active
securities. Fixed income securities are based on broker quotes for non-active securities. Mutual funds are valued at quoted market
prices. Real estate is valued by reference to investment and leasing transactions at similar types of property and are supplemented by
third party appraisals.
The overall objective of our U.S. pension plan is to provide the means to pay benefits to participants and their beneficiaries in the amounts
and at the times called for by the plan. This is expected to be achieved through the investment of our contributions and other trust assets
and by utilizing investment policies designed to achieve adequate funding over a reasonable period of time.
Pension trust assets are invested so as to achieve a return on investment, based on levels of liquidity and investment risk that is prudent and
reasonable as circumstances change from time to time. While we recognize the importance of the preservation of capital, we also adhere to
the theory of capital market pricing which maintains that varying degrees of investment risk should be rewarded with compensating returns.
Consequently, prudent risk-taking is justifiable.
The asset allocation decision includes consideration of the non-investment aspects of the Avon Products, Inc. Personal Retirement Account
Plan, including future retirements, lump-sum elections, growth in the number of participants, company contributions, and cash flow. These
characteristics of the plan place certain demands upon the level, risk, and required growth of trust assets. We regularly conduct analyses of
the plan’s current and likely future financial status by forecasting assets, liabilities, benefits and company contributions over time. In so
doing, the impact of alternative investment policies upon the plan’s financial status is measured and an asset mix which balances asset
returns and risk is selected.
A V O N 2010 F-31