Estee Lauder 2014 Annual Report Download - page 99

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THE EST{E LAUDER COMPANIES INC. 97
The expected cash flows for the Company’s pension and post-retirement plans are as follows:
Other than
Pension Plans Pension Plans
U.S. International Post-retirement
(In millions)
Expected employer contributions for
year ending June 30, 2015 $— $ 24.0 $—
Expected benefit payments for year ending June 30,
2015 61.2 23.3 6.3
2016 59.7 20.5 7.0
2017 55.9 21.6 7.8
2018 52.7 22.2 8.5
2019 54.6 21.4 9.3
Years 2020–2024 291.1 140.6 59.5
Plan Assets
The Company’s investment strategy for its pension and post-retirement plan assets is to maintain a diversified portfolio of
asset classes with the primary goal of meeting long-term cash requirements as they become due. Assets are primarily
invested in diversified funds that hold equity or debt securities to maintain the security of the funds while maximizing the
returns within each plan’s investment policy. The investment policy for each plan specifies the type of investment vehicles
appropriate for the plan, asset allocation guidelines, criteria for selection of investment managers, procedures to monitor
overall investment performance, as well as investment manager performance.
The Company’s target asset allocation at June 30, 2014 is as follows:
Other than
Pension Plans Pension Plans
U.S. International Post-retirement
Equity 30% 22% 30%
Debt securities 39% 47% 39%
Other 31% 31% 31%
100% 100% 100%
The following is a description of the valuation methodolo-
gies used for plan assets measured at fair value:
Short-term investment funds — The fair value is deter-
mined using the Net Asset Value (“NAV”) provided by the
administrator of the fund. The NAV is based on the value
of the underlying assets owned by the fund, minus its
liabilities, and then divided by the number of shares
outstanding. The NAV is a quoted price in a market that is
not active and is primarily classified as Level 2. When
quoted in an active market, these investments are classi-
fied within Level 1 of the valuation hierarchy.
Government and agency securities— When quoted
prices are available in an active market, the investments
are classified as Level 1. When quoted market prices are not
available in an active market, these investments are classi-
fied as Level 2.
Equity securities — The fair values reflect the closing
price reported on a major market where the individual
securities are traded. These investments are classified
within Level 1 of the valuation hierarchy.
Debt instruments — The fair values are based on a com-
pilation of primarily observable market information or a
broker quote in a non-active market. These investments are
primarily classified within Level 2 of the valuation hierarchy.
Commingled funds — The fair values are determined
using NAV provided by the administrator of the fund. The
NAV is based on the value of the underlying assets owned
by the trust/entity, minus its liabilities, and then divided by
the number of shares outstanding. When quoted in an
active market, these investments are classified within
Level 1 of the valuation hierarchy. When the market is not
active, these investments are generally classified within
Level 2. When the market is not active and some inputs
are unobservable, these investments are generally classi-
fied within Level 3.
Insurance contracts — These instruments are issued by
insurance companies. The fair value is based on negoti-
ated value and the underlying investment held in separate
account portfolios as well as considering the creditworthi-
ness of the issuer. The underlying investments are primarily