Mattel 2003 Annual Report Download - page 75

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The assumptions used in determining net pension expense (income) for Mattel’s domestic defined benefit
pension plans are as follows:
For the Year Ended
2003 2002 2001
Discount rate ..................................................... 6.5% 7.0% 7.5%
Weighted average rate of future compensation increases .................. 4.0% 4.0% 4.0%
Long-term rate of return on plan assets ................................ 8.0% 10.0% 11.0%
Discount rates, weighted average rates of future compensation increases, and long-term rates of return on
plan assets for Mattel’s international defined benefit plans differ from the assumptions used for Mattel’s
domestic defined benefit plans due to differences in local economic conditions in which the non-US plans are
based.
Mattel’s domestic defined benefit pension plan assets are invested as follows:
As of Year End
2003 2002
Cash .......................................................... 1% 1%
Debt securities .................................................. 28 35
Equity securities ................................................. 71 64
100% 100%
Mattel commissioned an actuarial study of the plans’ assets and liabilities to determine an asset allocation
that would best match cash flows from the plans’ assets to expected benefit payments. The Pension Committee of
the board of directors, together with Mattel’s Treasurer, monitors the returns earned by the plans’ assets and
reallocates investments as needed. Mattel’s defined benefit pension plan assets are not directly invested in Mattel
common stock. Mattel assumes that the overall expected long-term rate-of-return on plan assets of 8.0% is
reasonable based on historical returns, with an actual return on market value of plan assets of approximately 11%
over the last ten years.
During 1999, Mattel amended the Fisher-Price Pension Plan to convert it from a career-average plan to a
cash balance plan and applied for a determination letter from the IRS. In 2003, Mattel amended the Fisher-Price
Pension Plan to reflect recent changes in regulations and court cases associated with cash balance plans and
submitted a new application for a determination letter to the IRS. Mattel plans to convert the Fisher-Price
Pension Plan to a cash balance plan upon receipt of a determination letter.
Defined Contribution Retirement Plans
Domestic employees are eligible to participate in 401(k) savings plans sponsored by Mattel or its
subsidiaries, which are defined contribution plans satisfying ERISA requirements. Mattel makes company
contributions in cash and allows participants to allocate both individual and company contributions to a variety of
investment funds, including a fund that is fully invested in Mattel common stock (the “Mattel Stock Fund”).
Employees are not required to allocate any funds to the Mattel Stock Fund, which allows employees to limit their
exposure to market changes in Mattel’s stock price. Furthermore, Mattel’s plans limit a participant’s allocation to
the Mattel Stock Fund to a maximum of 50% of the participant’s total account balance. Participants may
generally reallocate their account balances on a daily basis. This reallocation is only limited for participants
classified as insiders or restricted personnel under Mattel’s insider trading policy that wish to change their
investment in the Mattel Stock Fund. Pursuant to Mattel’s insider trading policy, insiders and restricted personnel
are limited to certain window periods for making allocations into or out of the Mattel Stock Fund.
Certain non-US employees participate in defined contribution retirement plans with varying vesting and
contribution provisions.
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