Graco 2009 Annual Report Download - page 69

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Newell Rubbermaid Inc. 2009 Annual Report
67
A reconciliation of the change in the fair value measurement of the defined benefit plans’ consolidated assets using significant unobservable inputs
(Level 3) for the year ended December 31, 2009 is as follows (in millions):
Venture
Capital and Real
Partnerships Estate Other Total
Fair Value as of January 1, 2009 $33.2 $36.9 $12.5 $ 82.6
Realized gains (losses) — 0.6 (1.8) (1.2)
Unrealized gains (losses) (4.6) (9.0) (0.4) (14.0)
Purchases, Sales and Settlements, Net 6.3 (3.3) (4.2) (1.2)
Fair Value as of December 31, 2009 $34.9 $25.2 $ 6.1 $66.2
Investment Strategy
The Company has established formal investment policies for the assets associated with its pension plans. The objectives of the investment strategies
generally include maximizing long-term return at acceptable risk levels, diversifying among asset classes, if appropriate, as well as establishing relevant
risk parameters within each asset class. Investment policies reflect the unique circumstances of the respective plans, and risk tolerance is established
through consideration of plan liabilities, plan funded status and corporate financial condition. Asset allocation targets are based on periodic asset liability
and/or risk budgeting study results which help determine the appropriate investment strategies for acceptable risk levels. The investment policies permit
variances from the targets within certain parameters.
The target asset allocations for the Company’s U.S. pension plan and primary non-U.S. pension plans are as follows as of December 31, 2009:
Target
Asset Category U.S. Non-U.S.
Equity 45% 22%
Fixed income 40 14
Insurance contracts — 27
Cash and equivalents — 20
Other investments (1) 15 17
Total 100% 100%
(1) Other investments include private equity funds, hedge funds and real estate funds.
The Company recently adopted an updated target investment allocation for its primary U.S. pension plan, and as of December 31, 2009, the Company
was in the process of reallocating the assets in the U.S. pension plan to align with the updated target investment allocation.
Expected Long-term Rate of Return on Plan Assets
The Company employs a building block approach in determining the long-term rate of return for plan assets. Historical markets are studied and long-term
historical relationships between equities and fixed-income are preserved consistent with the widely accepted capital market principle that assets with higher
volatility generate a greater return over the long run. Current market factors, such as inflation and interest rates, are evaluated before long-term capital
market assumptions are determined. The long-term portfolio return is established giving consideration to investment diversification and rebalancing. Peer data
and historical returns are reviewed to assess for reasonableness and appropriateness.
The weighted average expected long-term rates of return are based on a January 2010 review of the target investment allocation and the historical and
expected rates of return of the asset classes included in the pension plans’ target asset allocations.