Kodak 2011 Annual Report Download - page 100

Plan Asset Investment Strategy
The investment strategy underlying the asset allocation for the pension assets is to achieve an optimal return on assets with an acceptable level of risk
while providing for the long-term liabilities, and maintaining sufficient liquidity to pay current benefits and other cash obligations of the plans. This is
primarily achieved by investing in a broad portfolio constructed of various asset classes including equity and equity-like investments, debt and debt-like
investments, real estate, private equity and other assets and instruments. Long duration bonds are used to partially match the long-term nature of plan
liabilities. Other investment objectives include maintaining broad diversification between and within asset classes and fund managers, and managing
asset volatility relative to plan liabilities.
Every three years, or when market conditions have changed materially, each of the Company’s major pension plans will undertake an asset allocation or
asset and liability modeling study. The asset allocation and expected return on the plans’ assets are individually set to provide for benefits and other cash
obligations and within each country’s legal investment constraints.
Actual allocations may vary from the target asset allocations due to market value fluctuations, the length of time it takes to implement changes in
strategy, and the timing of cash contributions and cash requirements of the plans. The asset allocations are monitored, and are rebalanced in accordance
with the policy set forth for each plan.
Of the total plan assets attributable to the major U.S. defined benefit plans at December 31, 2011 and 2010, 97% relate to KRIP. The expected long-
term rate of return on plan assets assumption (“EROA”) is based on a combination of formal asset and liability studies that include forward-looking
return expectations given the current asset allocation. During 2010, an asset and liability study was completed and resulted in an 8.50% EROA for
KRIP. A review of the EROA as of December 2011 based upon the current asset allocation and forward-looking expected returns for the various
asset classes in which KRIP invests resulted in an EROA of 8.60%.
The annual expected return on plan assets for the major non-U.S. pension plans range from 3.70% to 7.80% for 2011. EROA assumptions for 2010 for
those plans were based on their respective asset allocations as of the end of the year. As with the KRIP, the EROA assumptions for certain of the
Company’s other pension plans were reassessed as of December 2011. EROA assumptions for those plans were updated accordingly.
Plan Asset Risk Management
The Company evaluates its defined benefit plans’ asset portfolios for the existence of significant concentrations of risk. Types of concentrations that are
evaluated include, but are not limited to, investment concentrations in a single entity, type of industry, foreign country, and individual fund. As of
December 31, 2011 and 2010, there were no significant concentrations (defined as greater than 10 percent of plan assets) of risk in the Company’s
defined benefit plan assets.
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
2011
2010
2011 Target
Equity securities
17
%
20
%
13%
-
27
%
Debt securities
38
%
45
%
35%
-
47
%
Real estate
4
%
5
%
2%
-
10
%
Cash
7
%
3
%
0%
-
6
%
Other
34
%
27
%
30%-
40
%
Total
100
%
100
%
98