Kodak 2007 Annual Report Download - page 81

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The weighted-average assumptions used to determine net pension (income) expense for all the major funded and unfunded U.S. and Non-U.S. defined
benefit plans were as follows:
For the Year Ended December 31,
2007 2006
U.S. Non-U.S. U.S. Non-U.S.
Discount rate 6.12% 5.36% 5.98% 4.78%
Salary increase rate 4.59% 3.84% 4.58% 3.67%
Expected long-term rate of return on plan assets 8.99% 8.10% 8.99% 7.99%
Of the total plan assets attributable to the major U.S. defined benefit plans at December 31, 2007 and 2006, 98% relate to the KRIP. The expected long-
term rate of return on plan assets assumption (EROA) is determined from the plan’s asset allocation using forward-looking assumptions in the context of
historical returns, correlations and volatilities. The investment strategy underlying the asset allocation is to manage the assets of the U.S. plans to provide
for the long-term liabilities while maintaining sufficient liquidity to pay current benefits. This is primarily achieved by holding equity-like investments while in-
vesting a portion of the assets in long duration bonds in order to provide for benefits included in the projected benefit obligation. The Company undertakes
an asset and liability modeling study once every three years or when there are material changes in the composition of the plan liability or capital markets.
The Company completed its most recent study in 2005, which supports an EROA of 9%.
The expected return on plan assets for the major non-U.S. pension plans range from 3.74% to 9.00% for 2007. Every three years or when market
conditions have changed materially, the Company will undertake new asset and liability modeling studies for each of its larger pension plans. The asset
allocations and expected return on plan assets are individually set to provide for benefits included in the projected benefit obligation within each country’s
legal investment constraints. The investment strategy is to manage the assets of the non-U.S. plans to provide for the long-term liabilities while maintain-
ing sufficient liquidity to pay current benefits. This is primarily achieved by holding equity-like investments while investing a portion of the assets in long
duration bonds in order to partially match the long-term nature of the liabilities.
The Company’s weighted-average asset allocations for its major U.S. defined benefit pension plans, by asset category, are as follows:
As of December 31,
Asset Category 2007 2006 Target
Equity securities 37% 42% 32%-42%
Debt securities 32% 30% 29%-34%
Real estate 5% 5% 3%-13%
Other 26% 23% 19%-29%
Total 100% 100%
The Company’s weighted-average asset allocations for its major non-U.S. Defined Benefit Pension Plans, by asset category are as follows:
As of December 31,
Asset Category 2007 2006 Target
Equity securities 32% 35% 29%-39%
Debt securities 35% 31% 33%-39%
Real estate 7% 7% 3%-13%
Other 26% 27% 19%-29%
Total 100% 100%
The Other asset category in the tables above is primarily composed of private equity, venture capital, cash and other investments.
The Company expects to contribute approximately $23 million and $28 million in 2008 for U.S. and Non-U.S. defined benefit pension plans, respectively.