Staples 2012 Annual Report Download - page 147

C-35
STAPLES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
2010
Pension Plans
Post-retirement
Benefit Plan
U.S.
Plans International Plans
Weighted-average assumptions used to measure net periodic
pension cost:
Discount rate 5.9% 4.6% 5.9%
Expected return on plan assets 7.0% 6.4% —%
Rate of compensation increase —% 2.2% 3.0%
Weighted-average assumptions used to measure benefit
obligations at year-end:
Discount rate 5.7% 4.8% 5.9%
Rate of compensation increase —% 2.1% 3.0%
Rate of pension increase —% 1.1% —%
The following table shows the effect on pension obligations at February 2, 2013 of a change in discount rate and other
assumptions (in thousands):
Change in Discount Rate
(0.25)% No change 0.25%
Change in rate of compensation increase:
(0.25)% $ 37,887 $ (2,547)$ (40,562)
No change 40,533 — (38,100)
0.25% 43,505 2,650 (35,749)
Change in rate of pension increase:
(0.25)% $ 7,219 $ (31,677)$ (68,400)
No change 40,533 — (38,100)
0.25% 76,197 33,404 (6,833)
The discount rate used is the interest rate on high quality (AA rated) corporate bonds that have a maturity approximating
the term of the related obligations. In estimating the expected return on plan assets, appropriate consideration is taken into account
of the historical performance for the major asset classes held, or anticipated to be held, by the applicable pension funds and of
current forecasts of future rates of return for those asset classes.
Staples' investment strategy for worldwide pension plan assets is to seek a competitive rate of return relative to an
appropriate level of risk depending on the funded status of each plan. The majority of the plans' investment managers employ
active investment management strategies with the goal of outperforming the broad markets in which they invest. Risk management
practices include diversification across asset classes and investment styles and periodic rebalancing toward asset allocation targets.
A portion of the currency risk related to investments in equity securities, real estate and debt securities is hedged.
The target allocation reflects a risk/return profile Staples feels is appropriate relative to each plan's liability structure and
return goals. Staples conducts periodic asset-liability studies for the plan assets in order to model various potential asset allocations
in comparison to each plan's forecasted liabilities and liquidity needs.
Outside the United States, asset allocation decisions are typically made by an independent board of trustees. As in the
U.S., investment objectives are designed to generate returns that will enable the plan to meet its future obligations. In some countries
local regulations require adjustments in asset allocation, typically leading to a higher percentage in fixed income than would
otherwise be deployed. Staples acts in a consulting and governance role via its board representatives in reviewing investment
strategy, with final decisions on asset allocation and investment managers made by local trustees.