Kodak 2012 Annual Report Download - page 102

Table of Contents
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 and treasury bond
futures 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 Kodak’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, 2012, 96% 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. A review of the EROA as of December 31, 2012, 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 8.20%.
As with KRIP, the EROA assumptions for certain of Kodak’s other pension plans were reassessed as of December 31, 2012. The annual
expected return on plan assets for the major non-U.S. pension plans range from 3.70% to 7.30% based on the plans’ respective asset allocations
as of December 31, 2012.
Plan Asset Risk Management
Kodak 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, 2012 and 2011, there were no significant concentrations (defined as greater than 10 percent of plan assets) of risk in Kodak’s
defined benefit plan assets.
Kodak’s weighted-average asset allocations for its major U.S. defined benefit pension plans, by asset category, are as follows:
98
As of December 31,
Asset Category
2012
2011
2012 Target
Equity securities
25
%
17
%
13%
-
27%
Debt securities
38
%
38
%
35%
-
47%
Real estate
4
%
4
%
2%
-
10%
Cash
2
%
7
%
0%
-
6%
Global balanced asset allocation funds
11
%
6
%
5%
-
12%
Other
20
%
28
%
19%
-
29%
Total
100
%
100
%