Kodak 2004 Annual Report Download - page 85

Financials
83
2004 SUMMARY ANNUAL REPORT
The increase (decrease) in the additional minimum liability (net of the change in the intangible asset) included in other comprehensive income for the
major funded and unfunded U.S. and Non-U.S. defi ned benefi t plans is as follows:
2004 2003
U.S. Non-U.S. U.S. Non-U.S.
Increase (decrease) in the additional minimum liability
(net of the change in the intangible asset) included in
other comprehensive income $ 5 $ 56 $ 14 $ (175)
The weighted-average assumptions used to determine the benefi t obligation amounts for all major funded and unfunded U.S. and Non-U.S. defi ned
benefi t plans were as follows:
2004 2003
U.S. Non-U.S. U.S. Non-U.S.
Discount rate 5.75% 5.02% 6.00% 5.40%
Salary increase rate 4.25% 3.29% 4.25% 3.20%
The weighted-average assumptions used to determine net pension (income) expense for all the major funded and unfunded U.S. and Non-U.S.
defi ned benefi t plans were as follows:
2004 2003
U.S. Non-U.S. U.S. Non-U.S.
Discount rate 5.95% 5.27% 6.50% 5.40%
Salary increase rate 4.25% 3.20% 4.25% 3.30%
Expected long-term rate of return on plan assets 9.00% 7.86% 9.00% 7.90%
Of the total plan assets attributable to the major U.S. defi ned benefi t
plans at December 31, 2004 and 2003, 98% and 98%, respectively, relate
to the KRIP plan. The expected long-term rate of return on plan assets
assumption (EROA) is determined from the plan’s asset allocation using
forward-looking assumptions in the context of historical returns, correla-
tions and volatilities. The plan lowered its EROA from 9.5% in 2002 to 9.0%
in 2003 based on an asset and liability modeling study that was completed
in September 2002. A 9.0% EROA was maintained for 2004.
The investment strategy is to manage the assets of the U.S. plans to
meet the long-term liabilities while maintaining suffi cient liquidity to pay
current benefi ts. This is primarily achieved by holding equity-like invest-
ments while investing a portion of the assets in long duration bonds in
order to match the long-term nature of the liabilities. The Company will
periodically undertake an asset and liability modeling study because of a
material shift in the plan’s liability profi le or changes in the capital markets.
The expected return on plan assets for the major non-U.S. pen-
sion plans range from 4.5% to 9.0% for 2004. Every three years or when
market conditions have changed materially, the Company will undertake
new asset and liability modeling studies for each of its larger pension plans.
The asset allocations and expected return on plan assets are individu-
ally set to meet each pension plan’s liabilities within each country’s legal
investment constraints. The investment strategy is to manage the assets of
the non-U.S. plans to meet the long-term liabilities while maintaining suf-
fi cient liquidity to pay current benefi ts. This is primarily achieved by holding
equity-like investments while investing a portion of the assets in long dura-
tion bonds in order to partially match the long-term nature of the liabilities.
The Company’s weighted-average asset allocations for its major U.S.
defi ned benefi t pension plans at December 31, 2004 and 2003, by asset
category, are as follows:
Asset Category 2004 2003 Target
Equity securities 41% 43% 40%-46%
Debt securities 32% 34% 31%-37%
Real estate 7% 6% 6%-7%
Other 20% 17% 23%-10%
Total 100% 100% 100%
The Company’s weighted-average asset allocations for its major
non-U.S. Defi ned Benefi t Pension Plans at December 31, 2004, by asset
category, are as follows:
Asset Category 2004 2003 Target
Equity securities 39% 38% 36%-42%
Debt securities 33% 36% 33%-39%
Real estate 9% 8% 8%-10%
Other 19% 18% 23%-9%
Total 100% 100% 100%
The Other asset category in the table above is primarily composed of
private equity, venture capital, cash and other investments.