As part of the acquisition of Baxalta, the Company assumed certain pension and other post-employment benefit (“OPEB”) plan obligations and plan assets. The following is a summary of the fair value of the pension and OPEB-related balances assumed as of June 3, 2016, the acquisition date.


	U.S. Pension	International pension	OPEB
(in millions)
Projected Benefit Obligation and Plan Assets Assumed
Projected benefit obligation	441.6	503.8	23.5
Plan assets	218.0	140.5	-
Funded status as of June 3, 2016	(223.6)	(363.3)	(23.5)

Amounts Recognized in the Consolidated Balance Sheet
Other current liabilities	(0.2)	(3.1)	0.0
Other non-current liabilities	(223.4)	(360.2)	(23.5)
Net liability recognized as of June 3, 2016	(223.6)	(363.3)	(23.5)

The pension obligation information in the table above represents the projected benefit obligation (“PBO”) assumed as of June 3, 2016. The PBO incorporates assumptions relating to future compensation levels. The accumulated benefit obligation (“ABO”) is the same as the PBO except that it includes no assumptions relating to future compensation levels. The ABO for all of the Company's U.S. pension plans was $369.2 million as of June 3, 2016. The ABO for all of the Company's International pension plans was $386.8 million as of June 3, 2016.

The information in the funded status table above represents the totals for all of the Company's pension plans. The following is information relating to the individual plans as of June 3, 2016 in the funded status table above that have an ABO in excess of plan assets.


	U.S. Pension	International pension	OPEB
	$'M	$'M	$'M
2016 (after June 3, 2016)	0.9	7.3	-
2017	3.6	14.7	0.2
2018	5.4	14.6	0.3
2019	7.3	16.2	0.4
2020	9.3	16.7	0.5
2021 through 2025	75.6	104.8	3.5
Total expected benefit payments for next 10 years	102.1	174.3	4.9

The expected net benefit payments above reflect the Company's share of the total net benefits expected to be paid from the plans' assets (for funded plans) or from the Company's assets (for unfunded plans). The federal subsidies relating to the Medicare Prescription Drug, Improvement and Modernization Act are not expected to be significant.

The net periodic benefit cost presented below is from the June 3, 2016 assumption of the obligations to June 30, 2016.

Weighted-Average Assumptions Used in Determining Benefit Obligations at the Measurement Date

The assumptions above, which were used in calculating the June 3, 2016 measurement date benefit obligations, are used in the calculation of net periodic benefit cost in 2016 along with the expected return on plan asset assumption. The Company establishes the expected return on plan assets assumption primarily based on a review of historical compound average asset returns, both Company-specific and relating to the broad market (based on the Company's asset allocation), as well as an analysis of current market and economic information and future expectations. The Company plans to use weighted-average assumptions of 7.0% and 4.5% for its U.S. and International funded plans, respectively, for the remainder of 2016.

A committee of members of senior management is responsible for supervising, monitoring and evaluating the invested assets of the Company's funded pension plans. The committee abides by policies and procedures relating to investment goals, targeted asset allocations, risk management practices, allowable and prohibited investment holdings, diversification, use of derivatives, the relationship between plan assets and benefit obligations, and other relevant factors and considerations. In the United States, Goldman Sachs Asset Management acts as an outsourced chief investment officer (“oCIO”) to perform the day-to-day management of pension assets.

• Targeted long-term performance expectations relative to applicable market indices, such as Standard & Poor's, Russell, MSCI EAFE, and other indices;

• Targeted asset allocation percentage ranges (summarized below), and periodic reviews of these allocations;

• Specified investment holding and transaction prohibitions (for example, private placements or other restricted securities, securities that are not traded in a sufficiently active market, short sales, certain derivatives, commodities and margin transactions);

• Specified portfolio percentage limits on holdings in a single corporate or other entity (generally 5%, except for holdings in U.S. government or agency securities);

• Specified average credit quality for the fixed-income securities portfolio (at least A- by Standard & Poor's or A3 by Moody's);

Plan assets are invested using a total return investment approach whereby a mix of equity securities, debt securities and other investments are used to preserve asset values, diversify risk and exceed the planned benchmark investment return. Investment strategies and asset allocations are based on consideration of plan liabilities, the plans' funded status and other factors, such as the plans' demographics and liability durations. Investment performance is reviewed on a quarterly basis and asset allocations are reviewed at least annually.

Plan assets are managed in a balanced equity and fixed income portfolio. The target allocations for plan assets are 75 percent in an equity portfolio and 25 percent in a fixed income portfolio. The documented policy includes an allocation range based on each individual investment type within the major portfolios that allows for a variance from the target allocations of approximately 5%. The equity portfolio may include common stock of U.S. and international companies, common/collective trust funds, mutual funds, hedge funds and real asset investments. The fixed income portfolio may include cash, money market funds with an original maturity of three months or less, U.S. and foreign government and governmental agency issues, common/collective trust funds, corporate bonds, municipal securities, derivative contracts and asset-backed securities.

While the committee provides oversight over plan assets for U.S. and international plans, the summary above is specific to the plans in the U.S. The plan assets for international plans are managed and allocated by the entities in each country, with input and oversight provided by the committee.

The following tables summarize the bases used to measure the pension plan assets and liabilities that are carried at fair value on a recurring basis for the U.S. funded plan.

		Basis of fair value measurement
	Balance at June 3, 2016	Quoted prices in active markets for identical assets (Level 1)	Significant other observable inputs (Level 2)	Significant unobservable inputs (Level 3)
	$'M	$'M	$'M	$'M
Assets
Fixed income
Cash equivalents	4.4	-	4.4	-
Common/collective trust funds	53.4	-	53.4	-
Equity
Common/collective trust funds	149.5	-	149.5	-
Hedge funds	10.7	-	10.7	-
Fair value of pension plan assets	218.0	-	218.0	-

The following tables summarize the bases used to measure the pension plan assets and liabilities that are carried at fair value on a recurring basis for the international funded plans.

		Basis of fair value measurement
(in millions)	Balance at June 3, 2016	Quoted prices in active markets for identical assets (Level 1)	Significant other observable inputs (Level 2)	Significant unobservable inputs (Level 3)

Assets
Fixed income
Cash and cash equivalents	9.7	9.7	-	-
Government agency issues	1.5	1.5	-	-
Corporate bonds	30.1	30.1	-	-
Mutual funds	40.5	40.5	-	-
Equity
Common stock:
Large cap	15.7	15.7	-	-
Mid cap	1.6	1.6	-	-
Total common stock	17.3	17.3	-	-
Mutual funds	21.5	21.5	-	-
Real estate funds	10.2	8.4	1.8	-
Other holdings	9.7	0.1	9.6	-
Fair value of pension plan assets	140.5	129.1	11.4	-

The assets and liabilities of the Company's pension plans are valued using the following valuation methods:


Investment category	Valuation methodology

Cash and cash equivalents	These largely consist of a short-term investment fund, U.S. dollars and foreign currency. The fair value of the short-term investment fund is based on the net asset value
Government agency issues	Values are based on quoted prices in an active market
Corporate bonds	Values are based on the valuation date in an active market
Common stock	Values are based on the closing prices on the valuation date in an active market on national and international stock exchanges
Mutual funds	Values are based on the net asset value of the units held in the respective fund which are obtained from national and international exchanges
Common/collective trust funds and hedge funds	Values are based on the net asset value of the units held at year end
Real estate funds	The value of these assets are either determined by the net asset value of the units held in the respective fund which are obtained from national and international exchanges or based on the net asset value of the underlying assets of the fund provided by the fund manager
Other holdings	The value of these assets vary by investment type and are primarily based on reputable pricing vendors that typically use pricing matrices or models

The Company's funding policy for its pension plans is to contribute amounts sufficient to meet legal funding requirements, plus any additional amounts that the Company may determine to be appropriate considering the funded status of the plans, tax deductibility, the cash flows generated by the company, and other factors. Volatility in the global financial markets could have an unfavorable impact on future funding requirements. The Company has no obligation to fund its principal plans in the U.S. in 2016. The Company continually reassesses the amount and timing of any discretionary contributions. The Company expects to make cash contributions to its pension plans of at least $4 million for the second half of 2016, primarily related to the Company's international plans. The Company expects to have net cash outflows relating to its OPEB plan of less than $1 million for the second half of 2016.

The table below details the funded status percentage of the Company's assumed pension plans from Baxalta as of the acquisition date, including certain plans that are unfunded in accordance with the guidelines of the Company's funding policy outlined above.


	United States		International
(in millions, except percentages)	Qualified plans	Nonqualified plans	Funded plans	Unfunded plans	Total

Fair value of plan assets	218.0	n/a	140.5	n/a	358.5
PBO	410.9	30.7	324.0	179.8	945.4
Funded status percentage	53%	n/a	43%	n/a	38%