ADP 2012 Annual Report Download - page 78

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The pension plans’ assets are currently invested in various asset classes with differing expected rates of return, correlations and volatilities,
including large capitalization and small capitalization U.S. equities, international equities, U.S. fixed income securities and cash.
The target asset allocation ranges are generally as follows:
The pension plans’ fixed income portfolio is designed to match the duration and liquidity characteristics of the pension plans’ liabilities. In
addition, the pension plans invest only in investment-grade debt securities to ensure preservation of capital. The pension plans’ equity
portfolios are subject to diversification guidelines to reduce the impact of losses in single investments. Investment managers are prohibited
from buying or selling commodities and from the short selling of securities.
None of the pension plans
’ assets are directly invested in the Company’s stock, although the pension plans may hold a minimal amount of
Company stock to the extent of the Company’s participation in the S&P 500 Index.
Plan investments included in Level 1 are valued using closing prices for identical instruments that are traded on active exchanges. Plan
investments included in Level 2 are valued utilizing inputs obtained from an independent pricing service, which are reviewed by the Company
for reasonableness. To determine the fair value of our Level 2 plan assets, a variety of inputs are utilized, including benchmark yields, reported
trades, non-binding broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, new issue data,
and monthly payment information. The Plan has no Level 3 investments at June 30, 2012.
The following table presents the investments of the pension plans measured at fair value at June 30, 2012:
In addition to the investments in the above table, the pension plans also held cash and cash equivalents of $57.2 million as of June 30, 2012.
71
United States Fixed Income Securities 35% –
45%
United States Equity Securities 37% –
50%
International Equity Securities 12% –
20%
Level 1 Level 2 Level 3 Total
Comingled trusts
$
-
$
583.5
$
-
$
583.5
U.S. Government securities -
272.5
-
272.5
Mutual funds
269.6
- -
269.6
Corporate and municipal bonds -
272.8
-
272.8
Mortgage-backed security bonds
-
13.9
-
13.9
Total pension assets $
269.6
$
1,142.7
$ - $
1,412.3