Kodak 2013 Annual Report Download - page 120

Table of Contents
For all of Kodak’s major defined benefit pension plans, investment managers are selected that are expected to provide best-in-class asset
management for their particular asset class, and expected returns greater than those expected from existing salable assets, 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 above, 10%, 10%, and 3% of the
total assets as of December 31, 2013 reported in equity securities, government bonds, and inflation-linked bonds, respectively and 11%, 15%
and 4% of the total assets as of December 31, 2012 reported in equity securities, government bonds, and inflation-linked 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 above, 1%, and 10% of the total assets as of December 31, 2013 reported in equity
securities and government bonds, respectively, and 3%, 4% and 20% of the total assets as of December 31, 2012 reported in equity securities,
government bonds, and inflation-linked 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, Kodak’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 Kodak’s major U.S. defined benefit pension plans:
(in millions)
PAGE 113
Successor
U.S.
Balance at
September 1, 2013
Net Realized and
Unrealized
Gains/(Losses)
Net Purchases
and Sales
Net Transfer
Into/(Out of)
Level 3
Balance at
December 31, 2013
Equity Securities
$
176
$
9
$
(2
)
$
—
$
183
Government Bonds
204
5
(4
)
—
205
Inflation
-
Linked Bonds
111
(4
)
(2
)
—
105
Global High Yield & Emerging
Market Debt
140
38
—
—
178
Real Estate
204
6
(10
)
—
200
Private Equity
959
52
(60
)
—
951
Total
$
1,794
$
106
$
(78
)
$
—
$
1,822
Predecessor
U.S.
Balance at
January 1, 2013
Net Realized and
Unrealized
Gains/(Losses)
Net Purchases
and Sales
Net Transfer
Into/(Out of)
Level 3
Balance at
August 31, 2013
Equity Securities
$
163
$
16
$
5
$
(8
)
$
176
Government Bonds
201
17
(15
)
1
204
Inflation
-
Linked Bonds
104
12
(5
)
—
111
Global High Yield & Emerging
Market Debt
201
27
(5
)
(83
)
140
Real Estate
198
21
(15
)
—
204
Private Equity
1,002
39
(82
)
—
959
Total
$
1,869
$
132
$
(117
)
$
(90
)
$
1,794