Kodak 2011 Annual Report Download - page 106

especially if this would maintain the aggregate volatility desired for each plan’s portfolio. Investment managers are retained for the purpose of managing
specific investment strategies within contractual investment guidelines. Certain investment managers are authorized to invest in derivatives such as futures,
swaps, and currency forward contracts. Investments in futures and swaps are used to obtain targeted exposure to a particular asset, index or bond duration
and only require a portion of the cash to gain exposure to the notional value of the underlying investment. The remaining cash is available to be deployed
and in some cases is invested in a diversified portfolio of various uncorrelated hedge fund strategies that provide added returns at a lower level of risk. Of
the investments shown in the major U.S. plans table as of December 31, 2011 above, 9% and 16% of the total U.S. assets reported within equity securities
and government bonds, respectively, are reflective of the exposures gained from the use of derivatives, and are invested in a diversified portfolio of hedge
funds using equity, debt, commodity, and currency strategies. Of the investments shown in the major Non-
U.S. plans table as of December 31, 2011 above,
1% and 3% of the total Non-U.S. assets reported within equity securities and government bonds, respectively, are reflective of the exposures gained from
the use of derivatives, and are invested in a diversified portfolio of hedge funds using equity, debt, commodity, and currency strategies. Foreign currency
contracts and swaps are used to partially hedge foreign currency risk. Additionally, the Company’s major defined benefit pension plans invest in
government bond futures or local government bonds to partially hedge the liability risk of the plans.
The following is a reconciliation of the beginning and ending balances of level 3 assets of the Company’s major U.S. defined benefit pension plans (in
millions):
The following is a reconciliation of the beginning and ending balances of level 3 assets of the Company’s major Non-U.S. defined benefit pension plans
(in millions):
U.S.
Balance at
January 1,
2011
Net Realized
and
Unrealized
Gains/(Losses)
Net Purchases
and Sales
Net Transfer
Into/(Out of)
Level 3
Balance at
December 31,
2011
Equity Securities
$
19
$
(1
)
$
-
$
-
$
18
Inflations
-
Linked Bonds
221
39
-
-
260
Private Equity
1,063
139
(231
)
-
971
Real Estate
240
18
(45
)
-
213
Total
$
1,543
$
195
$
(276
)
$
-
$
1,462
U.S.
Balance at
January 1,
2010
Net Realized
and
Unrealized
Gains/(Losses)
Net Purchases
and Sales
Net Transfer
Into/(Out of)
Level 3
Balance at
December 31,
2010
Equity Securities
$
7
$
5
$
7
$
-
$
19
Inflation
-
Linked Bonds
172
49
-
-
221
Private Equity
958
135
(30
)
-
1,063
Real Estate
293
(34
)
(19
)
-
240
Total
$
1,430
$
155
$
(42
)
$
-
$
1,543
Non
-
U.S.
Balance at
January 1,
2011
Net Realized
and
Unrealized
Gains/(Losses)
Net Purchases
and Sales
Net Transfer
Into/(Out of)
Level 3
Balance at
December 31,
2011
Inflation
-
Linked Bonds
$
65
$
12
$
(23
)
$
(54
)
$
-
Private Equity
301
44
(33
)
-
312
Real Estate
77
(7
)
(15
)
-
55
Total
$
443
$
49
$
(71
)
$
(54
)
$
367
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