True Value 2009 Annual Report Download - page 42

Notes To Consolidated Financial Statements
($ in thousands)
2009 Financial Report 27
As of September 30, 2008 all True Value sponsored pension plans
were frozen; therefore, the rate of compensation increase was no
longer applicable for fiscal year 2009 as shown in the chart above.
PLAN ASSETS
Plan assets are invested in a diversified portfolio consisting pri-
marily of common stocks, bonds and cash equivalents, which
reflect varying rates of return. The overall rate of return objective
for the plan assets is a reasonable rate consistent with risk levels
established by True Value. It has also been True Value’s policy to
maintain plan assets sufficient to avoid the benefit restrictions
under the Internal Revenue Code section 436.
Plan assets are diversified across several investment managers
and are generally invested in liquid funds that are selected to
track broad market equity and bond indices. Investment risk is
also controlled by monitoring plan assets against target allo-
cations on a periodic basis and with continual monitoring of
investment managers’ performance relative to the investment
guidelines established with each investment manager. True Value
utilizes an investment consultant to facilitate meeting its invest-
ment objectives.
The target asset allocation of the plan assets and the actual split
by asset category is as follows for the years ended:
January 2, January 3,
Asset Category Target 2010 2009
Domestic fixed income –
Investment grade 40.0% 38.7% 26.7%
Domestic equities – Large cap 35.0% 35.7% 43.1%
Domestic equities – Mid cap 7.5% 7.8% 9.6%
Domestic equities – Small cap 7.5% 7.6% 9.8%
Foreign equities –
International, Large cap 7.0% 6.9% 7.0%
Foreign equities –
Emerging Markets, Large cap 3.0% 3.1% 2.9%
Cash Equivalents 0.0% 0.2% 0.9%
Total 100.0% 100.0% 100.0%
A fair value hierarchy prioritizes valuation techniques used in
measuring fair value into three levels. The three levels in order
of priority are as follows: Level 1) unadjusted quoted prices in
active markets for identical assets; Level 2) quoted prices in mar-
kets that are not considered active or asset valuations for which
all significant inputs are observable, either directly or indirectly;
and Level 3) prices or valuations that require significant unob-
servable inputs.
The following table sets forth by level, within the fair value hier-
archy, the Plan’s investments at fair value as of January 2, 2010.
Investments at Fair Value at January 2, 2010
($ in thousands) Level 1 Level 2 Level 3 Total
Investment Funds:
Domestic equities –
Large cap $ 18,902 $ – $ – $ 18,902
Domestic equities –
Mid cap 4,122 – – 4,122
Domestic equities –
Small cap 2,144 – – 2,144
Foreign equities –
International,
Large cap – 3,684 – 3,684
Foreign equities –
Emerging Markets,
Large cap – 1,632 – 1,632
Domestic fixed income –
Investment grade – 20,507 – 20,507
Equity Securities –
Domestic – Small cap 1,850 42 – 1,892
Cash Equivalents – 93 – 93
Total assets at fair value $ 27,018 $ 25,958 $ – $ 52,976
CONTRIBUTIONS
True Value expects to contribute $5,000 to its qualified pension
plan and $435 to its SRP plan in 2010. True Value also partic-
ipates in union-sponsored defined contribution plans. Costs
related to these plans were $128, $122 and $100 for 2009, 2008
and 2007, respectively.
ESTIMATED FUTURE BENEFIT PAYMENTS
The following benefit payments are expected to be paid:
($ in thousands) Pension Benefits
2010 $ 6,794
2011 6,649
2012 6,733
2013 7,077
2014 6,825
2015 – 2019 29,950
The assumptions used to determine True Value’s pension obliga-
tions for all plans were as follows for the years ended:
January 2, January 3,
2010 2009
Weighted average assumptions:
Discount rate 5.50% 6.25%
Lump sum rate 5.00% 5.00%