Annual Review 2012 - Luxottica

Consolidated financial statements - NOTES
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to these categories as described in the table below.
Asset Class as a Percent of Total Assets
Asset Category Minimum Maximum
Large Cap U.S. Equity 37% 43%
Small Cap U.S. Equity 8% 12%
International Equity 13% 17%
Fixed Income Securities 32% 38%
Cash and Equivalents 0% 5%
The actual allocation percentages at any given time may vary from the targeted amounts
due to changes in stock and bond valuations as well as timing of contributions to, and
benefit payments from, the pension plan trusts. The Lux Pension Plan’s investment policy
intends that any divergence from the targeted allocations should be of a short duration,
but the appropriate duration of the divergence will be determined by the Investment
Subcommittee of the Luxottica Group Employee Retirement Income Security Act of 1974
(“ERISA”) Plans Compliance and Investment Committee with the advice of investment
managers and/or investment consultants, taking into account current market conditions.
During 2011, the Committee reviewed the Lux Pension Plan’s asset allocation monthly
and if the allocation was not within the above ranges, the Committee re-balanced the
allocations if appropriate based on current market conditions.
Plan assets are invested in diversified portfolios consisting of an array of asset classes
within the above target allocations and using a combination of active and passive
strategies. Passive strategies involve investment in an exchange traded fund that
closely tracks an index fund. Active strategies employ multiple investment management
firms. Risk is controlled through diversification among asset classes, managers, styles,
market capitalization (equity investments) and individual securities. Certain transactions
and securities are prohibited from being held in the Lux Pension Plan’s trusts, such as
ownership of real estate other than real estate investment trusts, commodity contracts,
and American Depositary Receipts (“ADR”) or common stock of the Group. Risk is further
controlled both at the asset class and manager level by assigning benchmarks and excess
return targets. The investment managers are monitored on an ongoing basis to evaluate
performance against the established market benchmarks and return targets.
Quoted market prices are used to measure the fair value of plan assets, when available. If
quoted market prices are not available, the inputs utilized by the fund manager to derive
net asset value are observable and no significant adjustments to net asset value were
necessary.
Contributions - US Holdings expects to contribute Euro 38.8 million to its pension plan
and Euro 2.2 million to the SERP in 2013.
Other benefits - US Holdings provides certain post-employment medical, disability and life
insurance benefits. The Group’s accrued liability related to this obligation as of December
31, 2012 and 2011, was Euro 1.2 million and Euro 1.3 million, respectively.