Hasbro 2006 Annual Report Download - page 75

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The provisions of Statement of Financial Accounting Standards No. 87, “Employers’ Accounting for
Pensions”, prior to the statement being amended by SFAS 158, required the Company to record an additional
minimum pension liability for certain of the Company’s plans of $53,329 at December 25, 2005. This liability
represented the amount by which the accumulated benefit obligation exceeds the sum of the fair market value
of plan assets and accrued amounts previously recorded. The additional minimum pension liability was offset
by an intangible asset to the extent of previously unrecognized prior service cost. An intangible asset in the
amount of $3,550 is included in other intangibles on the balance sheet as of December 25, 2005. The
remaining amount of $49,779 was recorded as components of accumulated other comprehensive earnings,
along with related deferred taxes of $18,916 at December 25, 2005.
The assets of the funded plans are managed by investment advisors and consist of the following:
Asset Category 2006 2005
Large Cap Equity .................................................... 30% 31%
Small Cap Equity .................................................... 14 13
International Equity................................................... 20 17
Domestic Core Fixed Income ........................................... 9 10
Domestic High Yield Fixed Income ....................................... 11 11
Total Return Fund .................................................... 16 17
Cash.............................................................. — 1
100% 100%
Hasbro’s two major funded plans (the “Plans”) are defined benefit pension plans intended to provide
retirement benefits to participants in accordance with the benefit structure established by the Company. The
Plans’ investment managers, who exercise full investment discretion within guidelines outlined in the Plans’
Investment Policy, are charged with managing the assets with the care, skill, prudence and diligence that a
prudent investment professional in similar circumstance would exercise. Investment practices, at a minimum,
must comply with the Employee Retirement Income Security Act (ERISA) and any other applicable laws and
regulations.
The Plans’ shared primary investment goal is maximum total return, consistent with prudent investment
management. The Plans’ asset allocations are structured to meet a long-term targeted total return consistent
with the ongoing nature of the Plans’ liabilities. The shared long-term total return goal, presently 8.75%,
includes income plus realized and unrealized gains and/or losses on the Plans’ assets. Utilizing generally
accepted diversification techniques, the Plans’ assets, in aggregate and at the individual portfolio level, are
invested so that the total portfolio risk exposure and risk-adjusted returns best meet the Plans’ long-term
liabilities to employees. Plan asset allocations are reviewed at least quarterly and rebalanced to achieve target
allocation among the asset categories when necessary.
The Plans’ investment managers are provided specific guidelines under which they are to invest the assets
assigned to them. In general, investment managers are expected to remain fully invested in their asset class
with further limitations of risk as related to investments in a single security, portfolio turnover and credit
quality.
The Plans’ Investment Policy restricts the use of derivatives associated with leverage and speculation, or
investments in securities issued by Hasbro, Inc., except through index-related strategies (e.g. an S&P 500
Index Fund) and/or commingled funds. In addition, unless specifically approved by the Investment Committee
(which is comprised of members of management, established by the Board to manage and control pension
plan assets), certain securities, strategies, and investments are ineligible for inclusion within the Plans.
64
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)