Hasbro 2010 Annual Report Download - page 82

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well as other private investment funds that are valued using the net asset values provided by the trust or fund.
Although these trusts and funds are not traded in an active market with quoted prices, the investments
underlying the net asset value are based on quoted prices. The Company believes that these investments could
be sold at amounts approximating the net asset values provided by the trust or fund. The Plans’ Level 3 assets
consist of an investment in a hedge fund which is valued using the net asset value provided by the investment
manager as well as an investment in a public-private investment fund which is also valued using the net asset
value provided by the investment manager. The hedge fund contains investments in financial instruments that
are valued using certain estimates which are considered unobservable in that they reflect the investment
manager’s own assumptions about the inputs that market participants would use in pricing the asset or liability.
The public-private investment fund, which is included in fixed income investments above, invests in
commercial mortgage-backed securities and non-agency residential mortgage-backed securities. These securi-
ties are valued using certain estimates which are considered unobservable in that they reflect the investment
manager’s own assumptions about the inputs that market participants would use in pricing the asset. The
Company believes that the net asset value is the best information available for use in the fair value
measurement of this fund. Of the activity in Level 3 assets for 2010 $7,126 relates to purchases of investments,
$2,102 relates to capital distributions and $8,276 relates to the return on plan assets still held at December 26,
2010.
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 Hasbro, Inc. 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’ 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 8.00%, 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 obligations to
employees. The Company’s asset allocation includes alternative investment strategies designed to achieve a
modest absolute return in addition to the return on an underlying asset class such as bond or equity indices.
These alternative investment strategies may use derivatives to gain market returns in an efficient and timely
manner; however, derivatives are not used to leverage the portfolio beyond the market value of the underlying
assets. These alternative investment strategies are included in other equity and fixed income asset categories at
December 26, 2010 and December 27, 2009. 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.
With the exception of the alternative investment strategies mentioned above, the Plans’ Investment Policy
restricts the use of derivatives associated with leverage or speculation. In addition, the Investment Policy also
restricts 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.
72
HASBRO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements — (Continued)
(Thousands of Dollars and Shares Except Per Share Data)