Kodak 2013 Annual Report Download - page 114

Table of Contents
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:
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 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.
The total plan assets attributable to the major U.S. defined benefit plans at December 31, 2013 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, 2013, 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 7.8%.
As with KRIP, the EROA assumptions for certain of Kodak’s other pension plans were reassessed as of December 31, 2013. The annual
expected return on plan assets for the major non-U.S. pension plans range from 2.4% to 7.2% based on the plans’
respective asset allocations as
of December 31, 2013.
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, 2013 and 2012, there were no significant concentrations (defined as greater than 10 percent of plan assets) of risk in
Kodak’s defined benefit plan assets.
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Successor
Predecessor
Four Months Ended
Eight Months Ended
Year Ended December 31,
December 31, 2013
August 31, 2013
2012
2011
U.S.
Non
-
U.S.
U.S.
Non
-
U.S.
U.S.
Non
-
U.S.
U.S.
Non
-
U.S.
Discount rate
4.25
%
3.14
%
4.25
%
3.14
%
4.25
%
4.41
%
5.24
%
4.95
%
Salary increase rate
3.39
%
2.69
%
3.39
%
2.69
%
3.45
%
2.98
%
3.99
%
3.89
%
Expected long-term rate of return on plan
assets
8.20
%
5.35
%
8.12
%
6.54
%
8.52
%
7.02
%
8.43
%
7.64
%