Graco 2010 Annual Report Download - page 73

Newell Rubbermaid Inc. 2010 Annual Report
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NEWELL RUBBERMAID 2010 Annual Report 69
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 international pension plans are as follows as of
December 31, 2010:
Target
Asset Category U.S. International
Equity 45% 23%
Fixed income 40 14
Insurance contracts 5 24
Cash and equivalents — 21
Other investments(1) 10 18
Total 100% 100%
(1) Other investments include private equity funds, hedge funds and real estate funds.
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 reviews 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.
Other Postretirement Benefit Plans
Several of the Company’s subsidiaries currently provide retiree health care and life insurance benefits for certain employee groups.
The following provides a reconciliation of benefit obligations and funded status of the Company’s other postretirement benefit
plans as of December 31, (in millions, except percentages):
2010 2009
Change in benefit obligation:
Benefit obligation at beginning of year $ 168.1 $ 162.5
Service cost 1.5 1.5
Interest cost 9.2 9.6
Actuarial loss 2.3 10.3
Benefi ts paid, net (14.6) (15.8)
Benefit obligation at end of year $ 166.5 $ 168.1
Funded status and net liability recognized at December 31 $ (166.5) $ (168.1)
Amounts recognized in the Consolidated Balance Sheets:
Accrued current benefit cost, included in other accrued liabilities $ (15.1) $ (16.0)
Accrued noncurrent benefi t cost, included in other noncurrent liabilities (151.4) (152.1)
Total $ (166.5) $ (168.1)
Amounts recognized in AOCI:
Prior service credit $ 13.3 $ 15.7
Net loss (27.5) (26.1)
AOCI, pretax $ (14.2) $ (10.4)
2010 2009
Weighted-average assumptions used to determine benefit obligation:
Discount rate 5.25% 5.75%
Long-term health care cost trend rate 4.50% 4.50%
There are no plan assets associated with the Company’s other postretirement benefit plans.