Avon 2015 Annual Report Download - page 122

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Non-U.S. Pension Plans
Asset Category Level 1 Level 2 Level 3 Total
Equity Securities:
Domestic equity $ – $ 93.5 $ – $ 93.5
International equity – 277.2 – 277.2
– 370.7 – 370.7
Fixed Income Securities:
Corporate bonds – 82.1 – 82.1
Government securities – 111.8 – 111.8
Other – 28.8 – 28.8
– 222.7 – 222.7
Other:
Cash 12.6 – – 12.6
Real estate – – 1.0 1.0
Other – – .9 .9
12.6 – 1.9 14.5
Total $12.6 $593.4 $1.9 $607.9
Amounts associated with the pension plan in Canada, which are included in discontinued operations, have been excluded from all amounts
in the table above.
A reconciliation of the beginning and ending balances for our Level 3 investments is provided in the table below:
Amount
Balance as of January 1, 2014 $2.3
Actual return on plan assets held (.3)
Foreign currency changes (.1)
Balance as of December 31, 2014 1.9
Actual return on plan assets held .1
Foreign currency changes (.2)
Balance as of December 31, 2015 $1.8
Investments in equity securities classified as Level 1 in the fair value hierarchy are valued at quoted market prices. Investments in equity
securities classified as Level 2 in the fair value hierarchy include collective funds that are valued at quoted market prices for non-active
securities. Fixed income securities are based on broker quotes for non-active securities. Mutual funds are valued at quoted market prices.
Real estate is valued by reference to investment and leasing transactions at similar types of property, supplemented by third party appraisals.
Derivative instruments held by our U.S. pension trust are not publicly traded and each derivative contract is specifically negotiated with a
unique financial counterparty. The derivative instruments are valued based upon valuation statements received from the financial
counterparties, which use underlying yield curves or market indices.
The overall objective of the PRA is to provide the means to pay benefits to participants and their beneficiaries in the amounts and at the
times called for by the plan. This is expected to be achieved through the investment of our contributions and other trust assets and by
utilizing investment policies designed to achieve adequate funding over a reasonable period of time.
Beginning in 2014, we have adopted an investment strategy for the PRA which is designed to match the movements in the pension liability
through an increased allocation towards debt securities. In addition, we also have begun to utilize derivative instruments to achieve the
desired market exposures or to hedge certain risks. Derivative instruments may include, but are not limited to, futures, options, swaps or
swaptions. Investment types, including the use of derivatives are based on written guidelines established for each investment manager and
monitored by the plan’s investment committee. In 2015, similar investment strategies were implemented in some of our non-U.S. defined
benefit pension plans.
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