Black & Decker 2015 Annual Report Download - page 103

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The expected rate of return on plan assets is determined considering the returns projected for the various asset classes and the
relative weighting for each asset class. The Company will use a 5.60% weighted-average expected rate of return assumption to
determine the 2016 net periodic benefit cost.
PENSION PLAN ASSETS — Plan assets are invested in equity securities, government and corporate bonds and other fixed
income securities, money market instruments and insurance contracts. The Company’s worldwide asset allocations at
January 2, 2016 and January 3, 2015 by asset category and the level of the valuation inputs within the fair value hierarchy
established by ASC 820 are as follows (in millions):
Asset Category 2015 Level 1 Level 2
Cash and cash equivalents ................................................................ $ 58.1 $ 39.7 $ 18.4
Equity securities
U.S. equity securities ........................................................................... 296.3 50.4 245.9
Foreign equity securities...................................................................... 269.0 43.2 225.8
Fixed income securities
Government securities ......................................................................... 696.7 248.3 448.4
Corporate securities ............................................................................. 716.9 — 716.9
Insurance contracts............................................................................ 33.2 — 33.2
Other ................................................................................................... 58.6 — 58.6
Total..................................................................................................... $ 2,128.8 $ 381.6 $ 1,747.2
Asset Category 2014 Level 1 Level 2
Cash and cash equivalents ................................................................. $ 98.6 $ 50.7 $ 47.9
Equity securities
U.S. equity securities............................................................................ 305.9 50.9 255.0
Foreign equity securities....................................................................... 280.5 41.3 239.2
Fixed income securities
Government securities .......................................................................... 791.7 261.1 530.6
Corporate securities .............................................................................. 676.5 — 676.5
Insurance contracts ............................................................................ 34.0 — 34.0
Other.................................................................................................... 102.6 — 102.6
Total...................................................................................................... $ 2,289.8 $ 404.0 $ 1,885.8
U.S. and foreign equity securities primarily consist of companies with large market capitalizations and to a lesser extent mid
and small capitalization securities. Government securities primarily consist of U.S. Treasury securities and foreign government
securities with de minimus default risk. Corporate fixed income securities include publicly traded U.S. and foreign investment
grade and to a small extent high yield securities. Assets held in insurance contracts are invested in the general asset pools of the
various insurers, mainly debt and equity securities with guaranteed returns. Other investments include diversified private equity
holdings. The level 2 investments are primarily comprised of institutional mutual funds that are not publicly traded; the
investments held in these mutual funds are generally level 1 publicly traded securities.
The Company's investment strategy for pension assets focuses on a liability-matching approach with gradual de-risking taking
place over a period of many years. The Company utilizes the current funded status to transition the portfolio toward
investments that better match the duration and cash flow attributes of the underlying liabilities. Assets approximating 50% of
the Company's current pension liabilities have been invested in fixed income securities, using a liability / asset matching
duration strategy, with the primary goal of mitigating exposure to interest rate movements and preserving the overall funded
status of the underlying plans. Plan assets are broadly diversified and are invested to ensure adequate liquidity for immediate
and medium term benefit payments. The Company’s target asset allocations include 25%-45% in equity securities, 50%-70% in
fixed income securities and up to 10% in other securities. In 2015, the funded status percentage (total plan assets divided by
total projected benefit obligation) of all global pension plans improved from 76% in 2014 to 77%.
CONTRIBUTIONS — The Company’s funding policy for its defined benefit plans is to contribute amounts determined
annually on an actuarial basis to provide for current and future benefits in accordance with federal law and other regulations.
The Company expects to contribute approximately $52 million to its pension and other post-retirement benefit plans in 2016.