Sysco 2012 Annual Report Download - page 86

Download and view the complete annual report

Please find page 86 of the 2012 Sysco annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 111

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111

SYSCO CORPORATION-Form10-K 63
PARTII
ITEM8Financial Statements and Supplementary Data
The company’s target and actual investment allocation as of June30,2012 is as follows:
Target Asset
Allocation Range
Actual Asset
Allocation
U.S. equity 23 - 31% 31%
International equity 23 - 31 30
Core fi xed income 11 - 17 12
Long duration fi xed income 10 - 18 15
High yield fi xed income 7 - 11 9
Alternative investments 5 - 15 3
100%
Sysco’s investment strategy is implemented through a combination of balanced and specialist investment managers, passive investment funds and actively-
managed investment funds. U.S. equity consists of both large-cap and small-to-mid-cap securities. Core fi xed income investments include intermediate
range U.S. government and agency securities, corporate bonds from diversifi ed industries, asset-backed securities, mortgage-backed securities, other
debt securities and derivative securities. Long duration fi xed income investments include U.S. government and agency securities, corporate bonds
from diversifi ed industries, asset-backed securities, mortgage-backed securities, other debt securities and derivative securities. High yield fi xed income
consists of below investment grade corporate debt securities and may include derivative securities. Alternative investments may include private equity,
private real estate, timberland, and commodities investments. Investment funds are selected based on each fund’s stated investment strategy to align with
Sysco’s overall target mix of investments. Actual asset allocation is regularly reviewed and periodically rebalanced to the target allocation when considered
appropriate. As of June30,2012, actual asset allocation varied from the stated target in certain categories, as alternative investment funding, primarily in
private equity funds require contributions over a multi-year period. Until such capital is required, the company has chosen to invest these amounts in U.S.
and international equities.
As discussed above, the Retirement Plan’s investments in equity, fi xed income and alternative investments provide a range of returns and also expose the
plan to investment risk. However, the investment policies put in place by the company require diversifi cation of plan assets across issuers, industries and
countries. As such, the Retirement Plan does not have signifi cant concentrations of risk in plan assets.
Fair Value of Plan Assets
Fair value is defi ned as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date (i.e. an exit price). See Note4, “Fair Value Measurements,” for a description of the fair value hierarchy that prioritizes the inputs
to valuation techniques used to measure fair value. The following is a description of the valuation methodologies used for assets and liabilities measured
at fair value.
Cash and cash equivalents: Valued at amortized cost, which approximates fair value. Cash and cash equivalents is included as a Level2 measurement
in the table below.
Equity securities: Valued at the closing price reported on the exchange market. If a stock is not listed on a public exchange, such as an American Depository
Receipt or some preferred stocks, the stock is valued using an evaluated bid price based on a compilation of observable market information. Inputs used
include yields, the underlying security “best price”, adjustments for corporate actions and exchange prices of underlying and common stock of the same
issuer. Equity securities valued at the closing price reported on the exchange market are classifi ed as a Level1 measurement in the table below; all other
equity securities are included as a Level2 measurement.
Fixed income securities: Valued using evaluated bid prices based on a compilation of observable market information or a broker quote in a non-active
market. Inputs used vary by type of security, but include spreads, yields, rate benchmarks, rate of prepayment, cash fl ows, rating changes and collateral
performance and type. All fi xed income securities are included as a Level2 measurement in the table below.
Investment funds: Valued at the net asset value (NAV) provided by the manager of each fund. The NAV is calculated as the underlying net assets owned
by the fund, divided by the number ofshares outstanding. The NAV is based on the fair value of the underlying securities within the fund. The real estate
funds are valued at the NAV ofshares held by the Retirement Plan, which is based on the valuations of the underlying real estate investments held by each
fund. Each real estate investment is valued on the basis of a discounted cash fl ow approach. Inputs used include future rental receipts, expenses and
residual values from a market participant view of the highest and best use of the real estate as rental property. All investment funds, with the exception of
the real estate funds and private equity funds, are included as a Level2 measurement in the table below. The real estate funds and private equity funds
are included as Level3 measurements.