TECHNICOLOR_REGISTRATION_DOCUMENT_2017

6 - FINANCIAL STATEMENTS

Notes to the consolidated financial statements

Plan assets 9.2.4. Funding policy and strategy 9.2.4.1.

Periodically an asset-liability analysis is performed in which the consequences of the strategic investment policies are analyzed in terms of risk-and-return profiles: in the U.S., as the pension plan is frozen, the investment strategy ■ aims to increase the funded ratio toward termination liability while simultaneously attempting to minimize the volatility of the funded ratio (currently funded ratio is above 75%). Asset mix is fully based on bonds and cash equivalents. Over the past several years, the return of the plan has on average exceeded the expected return; in the UK., the funded status is above 75%. Asset mix is based on ■ 34% of insurance contracts that cover obligations with pensioners, 44% of bonds and cash equivalents, 17% of equity instruments, and 5% of properties. The annualized performance of the plan exceeds the expected return on a 3-year basis.

When defined benefit plans are funded, mainly in the U.S. and in the UK., the investment strategy of the benefit plans aims to match the investment portfolio to the membership profile. In the UK., contributions are negotiated with the Trustees as per the triennial valuation. Trustees are advised by an external leading global provider of risk management services regarding investment policy. The average yearly funding contribution is GBP 2 million (€2 million at 2017 average rate). In the U.S., Technicolor’s policy is to contribute on an annual basis in an amount that is at least sufficient to meet the minimum requirements of the U.S. law. The average yearly contribution is 5 million of U.S. dollars (€4 million at 2017 average rate).

Disaggregation of the fair value by category 9.2.4.2.

Plan assets allocation at December 31

Fair value of plan assets at December 31

2017

2016

2017

2016

(in % and € in millions)

Cash and cash equivalents

2% 8%

2% 8%

5

4

Equity investments

17

16

Debt securities

69%

64%

135

125

Properties

2%

7%

5

13 38

Annuity contracts

18%

19%

35

TOTAL

100%

100%

197

196

The fair value of the above equity and debt instruments is determined based on quoted market prices in active markets. The fair value of the plan assets did not include any Technicolor’s own financial instruments or any asset used by the Group. The 2017 actual return on plan assets amounts to €13 million (less than €17 million in 2016).

234

TECHNICOLOR REGISTRATION DOCUMENT 2017