Form 11-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549-1004

 

 

FORM 11-K

 

 

 

x ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2010

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 001-32686

 

 

VIACOM 401(k) PLAN

(Full title of the Plan)

 

 

VIACOM INC.

(Name of issuer of the securities held pursuant to the plan)

1515 Broadway

New York, NY 10036

(Address of principal executive offices)

 

 

 


VIACOM 401(k) PLAN

FINANCIAL STATEMENTS, SUPPLEMENTAL SCHEDULE AND EXHIBIT

DECEMBER 31, 2010

INDEX

 

     Page  

Report of Independent Registered Public Accounting Firm

     1   

Financial Statements:

  

Statements of Net Assets Available for Benefits at December 31, 2010 and 2009

     2   

Statement of Changes in Net Assets Available for Benefits for the Year ended December 31, 2010

     3   

Notes to Financial Statements

     4   
     Schedule  

Supplemental Schedule:

  

Schedule H, line 4i—Schedule of Assets Held at End of Year

     S-1   

All other schedules required by Section 2520.103-10 of the Department of Labor Rules and Regulations for Reporting and Disclosure Under the Employee Retirement Income Security Act of 1974 are omitted as not applicable or not required.

  

Signatures

     S-6   

Exhibit:

  

23.1 Consent of Independent Registered Public Accounting Firm

  


Report of Independent Registered Public Accounting Firm

To the Participants and Administrator of

Viacom 401(k) Plan:

In our opinion, the accompanying statements of net assets available for benefits and the related statement of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of the Viacom 401(k) Plan (the “Plan”) at December 31, 2010 and 2009, and the changes in net assets available for benefits for the year ended December 31, 2010 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets held at end of year is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

/S/ PRICEWATERHOUSECOOPERS LLP

New York, New York

June 23, 2011

 

1


VIACOM 401(k) PLAN

STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS

(In thousands)

 

     December 31,  
     2010     2009  
ASSETS     

Cash and cash equivalents

   $      $   

Investments:

    

Investments, at fair value

     547,319        418,139   

Fully benefit-responsive investment contracts, at fair value

     89,687        83,277   
                

Total investments

     637,006        501,416   

Receivables:

    

Employee contributions

     284        1,044   

Employer contributions

     1        457   

Participant loans receivable

     9,083        7,101   

Due from broker for securities sold

     148        98   

Investment income

     99        81   
                

Total receivables

     9,615        8,781   
                

Total assets

     646,621        510,197   
                
LIABILITIES     

Accrued expenses and other liabilities

     310        220   

Due to broker for securities purchased

     371        126   
                

Total liabilities

     681        346   
                

Net assets reflecting all investments at fair value

     645,940        509,851   
                

Adjustment from fair value to contract value for fully benefit-responsive investment contracts

     (4,139     (2,656
                

Net assets available for benefits

   $ 641,801      $ 507,195   
                

See accompanying notes to financial statements.

 

2


VIACOM 401(k) PLAN

STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS

(In thousands)

 

 

    Year Ended
    December 31, 2010    
 

Additions to net assets attributed to:

 

Investment income:

 

Dividends

  $ 4,490   

Interest

    3,443   

Net appreciation in fair value of investments

    77,506   
       

Total investment gain

    85,439   

Interest income on participant loans receivable

    461   

Contributions:

 

Employee

    53,432   

Employer

    21,713   

Rollover

    2,301   
       

Total contributions

    77,446   
       

Plan transfers (Note 1)

    19,954   
       

Total additions attributed to investments, contributions, and plan transfers

    183,300   
       

Deductions from net assets attributed to:

 

Benefits paid to participants

    46,559   

Plan expenses

    2,135   
       

Total deductions

    48,694   
       

Net increase in net assets available for benefits

    134,606   
       

Net assets available for benefits, beginning of year

    507,195   
       

Net assets available for benefits, end of year

  $     641,801   
       

 

See accompanying notes to financial statements.

 

3


VIACOM 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS

(Tabular dollars in thousands)

NOTE 1—PLAN DESCRIPTION

Viacom Inc. (“Viacom” or the “Company”) established the Viacom 401(k) Plan (the “Plan”), effective on January 1, 2006.

The following is a brief description of the Plan and is provided for general information only. Participants should refer to the Plan document and the Summary Plan Description made available to them for more complete information regarding the Plan.

The Plan, sponsored by the Company, is a defined contribution plan offered on a voluntary basis to substantially all of the Company’s employees. The Plan is subject to the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and is administered by the Viacom Retirement Committee, the members of which are appointed by the Company’s Board of Directors (the “Board”) or its designee.

JPMorgan Chase Bank, N.A. (the “Trustee”) is the trustee and custodian of the Plan and JPMorgan Retirement Plan Services LLC (“JPM RPS”) is the recordkeeper for the Plan.

Related Party Transactions

Certain short term investments for the Plan are invested in a fund managed by JPMorgan Asset Management, an affiliate of the Trustee, and are considered a “party-in-interest” as such term is defined in ERISA. In addition, certain Plan investments are in shares of Class A and Class B common stock of the Company and qualify as a party-in-interest. During the year ended December 31, 2010, the Plan sold shares of Viacom Class A and Class B common stock for total proceeds of $11.1 million and purchased Viacom Class B common stock at a cost of $5.5 million. During the year ended December 31, 2010, Viacom Class A and Class B common stock appreciated $19.1 million related to the net of realized and unrealized gains and losses.

Plan Transfers

Effective January 1, 2010, employees of Black Entertainment Television, LLC (“BET”) became participants of the Plan. Assets of approximately $20.0 million were transferred into the Plan from the BET 401(k) Plan in February 2010.

Eligibility

Eligible full-time employees may become participants in the Plan following the attainment of age 21. Eligible part-time employees participate in the Plan on the first of the month after attainment of age 21 and completion of one thousand hours of service within the consecutive twelve-month period beginning with their date of hire or within any plan year (January 1 through December 31) thereafter.

Participant Accounts

Each participant’s account is credited with the participant’s contributions, the employer matching contributions and the participant’s share of the Plan’s income or losses in the investment options selected, net of certain plan expenses.

Plan participants have the option of investing their contributions and existing account balances among fifteen investment options. These investment options include separately managed investment portfolios, common/collective trust funds, registered investment companies (mutual funds) and Viacom Class B common stock. Some plan participants are invested in Viacom Class A common stock, but that fund is closed to new investment. The securities held by these investment options are described in greater detail in Note 2.

 

4


VIACOM 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS

(Tabular dollars in thousands)

 

Contributions

Participants are permitted to contribute up to 50% of annual compensation, on a before-tax basis, subject to applicable Code limitations discussed below. Participants may also contribute eligible rollover amounts into the Plan. Prior to 2010, participants were allowed to make limited contributions on an after-tax basis.

Any eligible employee is deemed to have authorized the Company to make before-tax contributions in the Plan in an amount equal to 6% of the employee’s eligible compensation upon his or her date of hire. Deemed authorization takes effect following the 30th day the employee becomes eligible to participate in the Plan unless the employee elects not to participate in the Plan or to participate at a different contribution rate.

The Code limited the amount of annual participant contributions that can be made on a before-tax basis to $16,500 for 2010. Compensation considered under the Plan based on Code limits could not exceed $245,000 for 2010. The Code also limited annual aggregate participant and employer contributions to the lesser of $49,000 or 100% of compensation in 2010. All contributions made to the Plan on an annual basis may be further limited due to certain non-discrimination tests prescribed by the Code.

All participants who have attained age 50 before the close of the calendar year are eligible to make catch-up contributions if the participants made the maximum contribution permitted under the Plan for a plan year. The limit for catch-up contributions was $5,500 in 2010.

The employer matching contribution is equal to 100% of the first 1% and 50% of the next 5% of eligible compensation contributed and employer matching contributions are invested according to the participant’s investment elections. Catch-up contributions are not treated as matchable contributions.

Vesting

Participants in the Plan are immediately vested in their own contributions and earnings thereon. Employer matching contributions vest at 100% after two years of service. In the case of a participant who was an employee on March 31, 2009, employer matching contributions vest at 20% after one year of service and 100% after two years of service. Transition rules apply to participants of plans that were merged into the Plan.

If participants terminate employment prior to being vested in their employer matching contributions, upon distribution of the vested portion of their account, the non-vested portion of their account is forfeited and may be applied to future employer matching contributions and/or to pay administrative expenses. As of December 31, 2010, the Company had forfeitures of approximately $1.4 million available to be used as noted above, which includes interest earned on forfeitures of approximately $0.1 million. Employer matching contributions of approximately $0.6 million were forfeited in 2010 and the Company utilized forfeitures of approximately $0.6 million and $1.0 million in 2010 to pay administrative expenses and employer matching contributions, respectively.

Participant Loans Receivable

Participants may request a loan of up to the lesser of 50% of the participant’s vested account balance or $50,000, reduced by the highest outstanding balance of any Plan loan made to the participant during the twelve-month period ending on the day before the loan is made. The minimum loan available to a participant is $500. The interest rate on participant loans is one percentage point above the annual prime commercial rate (as published in The Wall Street Journal) on the first day of the calendar month in which the loan is approved, with principal and interest payable not less than quarterly through payroll deductions. Only one loan may be outstanding at any time. Participants may elect repayment periods from 12 to 60 months commencing as soon as

 

5


VIACOM 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS

(Tabular dollars in thousands)

 

administratively possible following the distribution of the loan. The Plan allows participants to elect a repayment period of up to 300 months for loans used for the acquisition of a principal residence. Repayments of loan principal and interest are allocated in accordance with the participant’s then current investment elections.

Included in the Statements of Net Assets Available for Benefits are Participant loans receivable of $9.1 million and $7.1 million which carried interest rates ranging from 3.25% to 12.0% and 4.25% to 12% as of December 31, 2010 and 2009 respectively.

Distributions and Withdrawals

Earnings on both employee and employer contributions are not subject to income tax until they are distributed or withdrawn from the Plan.

Participants in the Plan, or their beneficiaries, may receive their vested account balances in a lump sum or in installments over a period of up to 20 years in the event of retirement, termination of employment, disability or death. Participants must receive a required minimum distribution upon attainment of age 70 1/2 unless they are still employed.

Participants in the Plan may withdraw certain eligible contributions at any time. Upon attainment of age 59 1/2, participants may withdraw all or part of their vested account. The Plan limits participants to a maximum of two withdrawals in each calendar year.

A participant may obtain a financial hardship withdrawal of the employee’s before-tax contributions provided that the requirements for hardship are met and only to the extent required to relieve such financial hardship. Additionally, the vested portion of employer matching contributions through December 31, 2009 may be used toward a financial hardship withdrawal. There is no restriction on the number of hardship withdrawals permitted.

When a participant terminates employment with the Company, the full value of the employee contributions and earnings thereon plus the value of all vested employer matching contributions and earnings thereon can be rolled over to a tax qualified retirement plan or an Individual Retirement Account or remain in the Plan rather than being distributed. If the vested account balance is $1,000 or less and the participant does not make an election to roll over the vested balance, it will be automatically paid in a single lump sum cash payment and taxes will be withheld from the distribution.

Plan Expenses

The fees for investment of Plan assets are charged to the Plan’s investment funds. Certain administrative expenses such as legal and accounting fees may be paid by the Plan using forfeitures as described above or may be paid by the Company. Recordkeeping fees may be paid by the Company, paid by the Plan using forfeitures, or paid from participant accounts. Trustee fees are paid from participant accounts. For 2010, $1.3 million was paid to JPM RPS for recordkeeping services.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The financial statements are prepared on the accrual basis of accounting.

In September 2010, the Financial Accounting Standards Board issued new guidance which clarifies how loans to participants should be classified and measured by defined contribution benefit plans. For reporting purposes, participant loans shall be segregated from plan investments and classified as Participant Notes Receivable on the Statement of Net Assets Available for Benefits. In addition, notes receivable from participants

 

6


VIACOM 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS

(Tabular dollars in thousands)

 

are required to be measured at their unpaid principal balance plus accrued unpaid interest and are no longer subject to the fair value measurement disclosure requirement. This new guidance was effective for periods ending after December 15, 2010 and applied retrospectively to all prior periods presented.

As a result of the adoption, participant loan balances of $9.1 million and $7.1 million have been reclassified from Investments, at fair value to Participant Loans Receivable on the Statement of Net Assets Available for Benefits for 2010 and 2009, respectively.

Fair Value Measurements and Income Recognition

Financial Accounting Standards Board (“FASB”) provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). The three levels of the fair value hierarchy under the FASB guidance are described as follows:

 

   

Level 1—Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access.

 

   

Level 2—Inputs to the valuation methodology include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; inputs other than quoted prices that are observable for the asset or liability; inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

 

   

Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The following is a description of the valuation methodology used for assets measured at fair value including the general classification of such instruments pursuant to the valuation hierarchy. There have been no changes in the methodologies used at December 31, 2010 and 2009.

Common Stocks: Common stocks are reported at fair value based on quoted market prices on national securities exchanges. Substantially all common stocks are classified within level 1 of the valuation hierarchy.

Common/Collective Trust Funds: The fair values of investments in common/collective trust funds are based on their net asset values (“NAV”) reported by the investment advisor in the financial statements of the common/collective trusts at year-end. Each common/collective trust provides for daily participant redemptions by the Plan at reported net asset values per share, with no advance notice requirement. The NAV is a quoted price in a market that is not active and classified within level 2 of the valuation hierarchy.

Registered Investment Companies (Mutual Funds): Investments in registered investment companies are stated at the respective funds’ NAV, which is determined based on market values at the closing price on the last business day of the year. The NAV is a quoted price in an active market and classified within level 1 of the valuation hierarchy.

 

7


VIACOM 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS

(Tabular dollars in thousands)

 

Guaranteed Investment Contracts: The fair value of the synthetic guaranteed investment contracts (“GICs”) is based on the underlying investments. The underlying investments are common/collective trust funds, which are public investment vehicles, valued at the NAV as described above. Because the NAV is a quoted price in a market that is not active, they are classified within level 2 of the valuation hierarchy. The related wrapper contracts have a fair value of $105,190 and $38,212 at December 31, 2010 and 2009 respectively. The wrapper contracts are valued by INVESCO, the administrator of the fund using other significant observable inputs in a valuation model and are classified within level 2 of the valuation hierarchy. See Note 7 for further information on INVESCO and these contracts.

U.S. Government Securities: Short-term money market obligations are valued at $1.00 per share and are classified within level 2 of the valuation hierarchy.

 

8


VIACOM 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS

(Tabular dollars in thousands)

 

The following tables set forth by level, within the fair value hierarchy, the Plan’s investments at fair value as of December 31, 2010 and 2009 respectively. The Plan has no investments classified within level 3 of the valuation hierarchy.

 

 

     Investments at Fair Value as of December 31, 2010  
(in thousands)   

Quoted Prices In

Active Markets for

Identical Assets

Level 1

     Significant Other
Observable
Inputs
Level 2
     Total  

Common Stocks

        

Consumer

   $ 92,355       $       $ 92,355   

Information Technology

     33,225                 33,225   

Financial

     13,236                 13,236   

Industrial

     10,601                 10,601   

Health Care

     8,885                 8,885   

Energy

     8,805                 8,805   

Other

     5,645                 5,645   
                          

Total Common Stocks

   $ 172,752       $       $ 172,752   
                          

Common / Collective Trust Funds

        

Index

   $       $ 116,918       $ 116,918   

Growth

             70,999         70,999   

Fixed Income

             40,511         40,511   

Other

             4,088         4,088   
                          

Total Common/Collective Trust Funds

   $       $ 232,516       $ 232,516   
                          

Registered Investment Companies

        

Growth

   $ 59,296       $       $ 59,296   

Balanced Funds

     70,911                 70,911   

Index

     3,652                 3,652   
                          

Total Registered Investment Companies

   $ 133,859       $       $ 133,859   
                          

Synthetic Guaranteed Investment Contracts

   $       $ 89,687       $ 89,687   

U.S. Government Securities

             8,192         8,192   
                          

Total Investments At Fair Value

   $ 306,611       $ 330,395       $ 637,006   
                          

 

 

9


VIACOM 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS

(Tabular dollars in thousands)

 

 

     Investments at Fair Value as of December 31, 2009  
(in thousands)   

Quoted Prices In

Active Markets for

Identical Assets

Level 1

     Significant Other
Observable
Inputs
Level 2
     Total  

Common Stocks

        

Consumer

   $ 75,898       $       $ 75,898   

Information Technology

     26,285                 26,285   

Financial

     10,987                 10,987   

Industrial

     9,399                 9,399   

Health Care

     8,806                 8,806   

Energy

     7,785                 7,785   

Other

     3,877                 3,877   
                          

Total Common Stocks

   $ 143,037       $       $ 143,037   
                          

Common / Collective Trust Funds

        

Index

   $       $ 86,378       $ 86,378   

Growth

             58,470         58,470   

Fixed Income

             33,072         33,072   

Other

             3,470         3,470   
                          

Total Common/Collective Trust Funds

   $       $ 181,390       $ 181,390   
                          

Registered Investment Companies

        

Growth

   $ 42,318       $       $ 42,318   

Balanced Funds

     45,269                 45,269   

Index

     3,086                 3,086   
                          

Total Registered Investment Companies

   $ 90,673       $       $ 90,673   
                          

Synthetic Guaranteed Investment Contracts

   $       $ 83,277       $ 83,277   

U.S. Government Securities

             3,039         3,039   
                          

Total Investments At Fair Value

   $ 233,710       $ 267,706       $ 501,416   
                          

 

 

10


VIACOM 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS

(Tabular dollars in thousands)

Securities Transactions

Purchases and sales of securities are recorded on the trade date. The average cost basis is used to determine gains or losses on dispositions of securities.

Interest income is accrued as earned and dividend income is recorded on the ex-dividend date.

Included in the Statement of Changes in Net Assets Available for Benefits is the net appreciation in the fair value of the Plan’s investments, which consists of the realized gains or losses and the unrealized appreciation (depreciation) on those investments.

Payment of Benefits

Benefits are recorded when paid.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Plan to make estimates and assumptions, such as those regarding the fair value of investments, that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of changes in net assets available for benefits during the reporting period. Estimates are based on past experience and other considerations reasonable under the circumstances. Actual results could differ from those estimates.

NOTE 3—RISKS AND UNCERTAINTIES

The Plan provides for various investment options that, along with the underlying securities, are exposed to various risks such as market, interest rate, and credit risks. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of such securities, it is at least reasonably possible that changes in risks in the near term could materially affect participants’ account balances and the amounts reported in the Statements of Net Assets Available for Benefits.

NOTE 4—INVESTMENTS

Individual investments representing 5% or more of the Plan’s net assets available for benefits are identified below:

 

 

     At December 31,  
     2010      2009  

Blackrock Equity Index Fund

   $ 82,005       $ 64,330     

Viacom Class B Common Stock

   $ 73,816       $ 60,796     

EB CIS Non-SL Aggregate Bond Index Fund

   $ 40,511       $        (2 ) 

EB CIS Aggregate Bond Index Fund of The Bank of NY Mellon

   $       $ 33,072        (2 ) 

Vanguard LifeStrategy Conservative Growth

   $ 39,899       $        (1 ) 

Capital Guardian International Equity Fund

   $ 35,681       $ 29,935     

Capital Guardian Emerging Markets Equity Fund

   $ 35,318       $ 28,535     

Blackrock Mid Cap Equity Index Fund

   $ 34,913       $        (1 ) 

Vanguard LifeStrategy Growth

   $ 32,490       $        (1 ) 

 

 

 

(1) 

Represents less than 5% during the respective year.

(2) 

Assets in the EB CIS Aggregate Bond Index Fund were transferred to the EB CIS Non-SL Aggregate Bond Index Fund in November 2010 which was a new Fund created by the Bank of NY Mellon.

 

11


VIACOM 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS

(Tabular dollars in thousands)

 

During the year ended December 31, 2010 the Plan’s investments (including gains and losses on investments bought, sold and held during the year) appreciated as follows:

 

          

Registered investment companies

   $ 15,242   

Common stocks

     32,930  

Common/Collective trust funds

     29,334  
        

Net appreciation in fair value of investments

   $ 77,506   
        
          

NOTE 5—INCOME TAX STATUS

On October 9, 2008, the Plan received a determination from the Internal Revenue Service (“IRS”) that the Plan satisfies the requirements of Section 401(a) of the Code and that the trust thereunder is exempt from federal income taxes under the provisions of Section 501(a) of the Code. Certain amendments have been made to the Plan since receiving the determination letter. However, the Plan Administrator and the Plan’s counsel believe that the Plan is designed and is currently being operated in compliance with the applicable provisions of the Code.

NOTE 6—TERMINATION PRIORITIES

Although the Company anticipates that the Plan will continue indefinitely, it reserves the right by action of the Board of Directors to amend or terminate the Plan provided that such action does not retroactively reduce earned participant benefits. In the event of Plan termination, participants become fully vested. Upon termination, the Plan provides that the net assets of the Plan would be distributed to participants based on their respective account balances.

NOTE 7—INVESTMENT IN FULLY BENEFIT-RESPONSIVE INVESTMENT CONTRACTS

The Plan accounts for guaranteed investment contracts in accordance with the accounting and reporting guidance related to Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans. Contract value is the relevant measurement attribute for that portion of the net assets available for plan benefits of a defined-contribution plan attributable to fully benefit-responsive contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan. The Plan invests in investment contracts through the INVESCO Fund. As required by the guidance, the Statements of Net Assets Available for Benefits present the fair value of the investment in the INVESCO Fund from fair value to contract value for fully benefit-responsive investment contracts. The Statements of Net Assets Available for Benefits are prepared on a contract value basis.

The INVESCO Fund (the “Fund”) invests primarily in fully benefit-responsive investment contracts such as traditional GICs and wrapper contracts (also known as synthetic GICs). In a traditional GIC, the issuer takes a deposit from the Fund and purchases investments that are held in the issuer’s general account. The issuer is contractually obligated to repay the principal and a specified rate of interest guaranteed to the Fund. The fair value of the investment contracts use a formula that is based on the characteristics of the underlying fixed income portfolio under each contract, as further described below.

In a wrapper contract structure, the underlying investments are owned by the Fund and held in trust for plan participants and are of high quality fixed income securities or investment funds. The Fund purchases a wrapper contract from an insurance company or bank. The wrapper contract amortizes the realized and unrealized gains and losses on the underlying fixed income investments, typically over the expected duration of

 

12


VIACOM 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS

(Tabular dollars in thousands)

 

the investment through adjustments to the future interest crediting rate (which is the rate earned by participants in the fund for the underlying investments which resets on a monthly basis). The issuer of the wrapper contract provides assurance that the adjustments to the interest crediting rate do not result in a future interest crediting rate that is less than zero. An interest crediting rate less than zero would result in a loss of principal or accrued interest.

The key factors that influence future interest crediting rates for a wrapper contract include: the level of market interest rates, the amount and timing of participant activity into/out of the wrapper contract, the investment returns generated by the fixed income investments that back the wrapper contract, and the duration of the underlying investments backing the wrapper contract.

Changes in market interest rates affect the yield to maturity and the market value of the underlying investments; therefore, they can have a material impact on the wrapper contract’s interest crediting rate. In addition, participant withdrawals and transfers from the Fund are paid at contract value but funded through the market value liquidation of the underlying investments, which also impacts the interest credit rating. The resulting gains and losses in the market value of the underlying investments relative to the wrapper contract value are represented on the Statements of Net Assets Available for Benefits as the Adjustment from fair value to contract value for fully benefit-responsive investment contracts. If the adjustment from fair value to contract value is positive for a given contract, this indicates that the wrapper contract value is greater than the market value of the underlying investments. The embedded market value losses will be amortized in the future through a lower interest crediting rate than would otherwise be the case. If the adjustment from fair value to contract value is negative, this indicates that the wrapper contract value is less than the market value of the underlying investments. The amortization of the embedded market value gains will cause the future interest crediting rate to be higher than it otherwise would have been.

All wrapper contracts provide for a minimum interest crediting rate of zero percent. In the event that the interest crediting rate should fall to zero and the requirements of the wrapper contract are satisfied, the wrapper issuers will pay to the Plan the shortfall needed to maintain the interest crediting rate at zero. This ensures that participants’ principal and accrued interest are protected.

 

13


VIACOM 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS

(Tabular dollars in thousands)

 

The following table details the individual synthetic guaranteed investment contracts at fair value and their adjustment to contract value of $85.5 million held by the INVESCO Fund at December 31, 2010:

 

 

 

Contract Issuer

 

Security Name

  Issuer
Ratings
    Investments at
Fair Value
    Wrap Contracts
at Fair Value
    Adjustment to
Contract Value
 

Bank of America NA

  Wrapper     A+/Aa3        $ 49     
 

IGT INVESCO

Short-term Bond Fund

    $ 20,589       
                           
        20,589        49      $ (847

ING Life & Annuity

  Wrapper     A/A2          0     
 

IGT INVESCO Multi-Mgr A or

Better Intermediate G/C Fund

      18,384       
                           
        18,384        0        (969

Monumental Life Insurance Co

  Wrapper     AA-/A1          27     
 

IGT INVESCO

Multi-Mgr A or Better

Intermediate G/C Fund

      15,923       
                           
        15,923        27        (985

Pacific Life Insurance Co

  Wrapper     A+/A1          29     
 

IGT INVESCO

Multi-Mgr A or Better Core Fund

      14,197       
                           
        14,197        29        (543

State Street Bank

  Wrapper     AA/Aa2          0     
 

IGT INVESCO

Short-term Bond Fund

      20,489       
                           
        20,489        0        (795
                           

Total

      $ 89,582      $ 105      $ (4,139
                           

 

 

14


VIACOM 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS

(Tabular dollars in thousands)

 

The following table details the individual synthetic guaranteed investment contracts at fair value and their adjustment to contract value of $80.6 million held by the INVESCO Fund at December 31, 2009:

 

 

Contract Issuer

 

Security Name

  Issuer
Ratings
    Investments at
Fair Value
    Wrap Contracts
at Fair Value
    Adjustment to
Contract Value
 

Bank of America NA

  Wrapper     A+/Aa3        $ 23     
 

IGT INVESCO

Short-term Bond Fund

    $ 19,968       
                           
        19,968        23      $ (514

ING Life & Annuity

  Wrapper     A+/A2          15     
 

IGT INVESCO Multi-Mgr A or

Better Intermediate G/C Fund

      15,225       
                           
        15,225        15        (689

Monumental Life Insurance Co

  Wrapper     AA-/A1          0     
 

IGT INVESCO

Multi-Mgr A or Better

Intermediate G/C Fund

      15,192       
                           
        15,192        0        (685

Pacific Life Insurance Co

  Wrapper     AA-/A1          0     
 

IGT INVESCO

Multi-Mgr A or Better Core Fund

      12,982       
                           
        12,982        0        (278

State Street Bank

  Wrapper     AA-Aa2          0     
 

IGT INVESCO

Short-term Bond Fund

      19,872       
                           
        19,872        0        (490
                           

Total

      $ 83,239      $ 38      $ (2,656
                           

 

The Company does not expect any employer initiated events that may cause premature liquidation of a contract at market value. The average yield to investments at fair value was approximately 2.17% and 3.13% for 2010 and 2009, respectively, and crediting interest rates to investments at fair value were approximately 3.73% and 4.15% at December 31, 2010 and 2009, respectively.

NOTE 8—RECONCILIATION OF FINANCIAL STATEMENTS TO IRS FORM 5500

The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:

 

 

     At December 31,  
     2010     2009  

Net assets available for benefits per the financial statements

   $ 641,801      $ 507,195   

Adjustment from fair value to contract value for fully benefit-responsive investment contracts

     4,139        2,656   

Amounts allocated to withdrawing participants

     (183     (145

Deemed distribution of participant loans

     (165     (262
                

Net assets available for benefits per the Form 5500

   $ 645,592      $ 509,444   
                

 

 

 

15


VIACOM 401(k) PLAN

NOTES TO FINANCIAL STATEMENTS

(Tabular dollars in thousands)

 

The following is a reconciliation of benefits paid to participants as reflected in the financial statements to the Form 5500:

 

 

     Year Ended
        December 31, 2010         
 

Benefits paid to participants per the financial statements

   $ 46,559   

Add: Amounts allocated to withdrawing participants at December 31, 2010

     183   

Less: Amounts allocated to withdrawing participants at December 31, 2009

     (145)   

Deemed loan offsets

     (108)   
        

Benefits paid to participants per the Form 5500

   $ 46,489   
        

 

Amounts allocated to withdrawing participants are recorded on the Form 5500 for benefit claims that were processed and approved for payment prior to December 31, 2010 but were not paid as of that date.

The following is a reconciliation of additions attributed to investments and contributions per the financial statements to the Form 5500:

 

 

 

     Year Ended
        December 31, 2010         
 

Total additions attributed to investments and contributions per the financial statements

   $ 183,300   

Adjustment from fair value to contract value for fully benefit-responsive investment contracts

     1,483   
        

Total income per the Form 5500 (including Plan transfers)

   $ 184,783   
        

 

The following is a reconciliation of net increase in net assets available for benefits per the financial statements to the Form 5500:

 

 

     Year Ended
        December 31, 2010         
 

Net increase in net assets available for benefits per the financial statements

   $ 134,606   

Adjustment from fair value to contract value for fully benefit-responsive investment contracts

     1,483   

Amounts allocated to withdrawing participants at December 31, 2010

     (183

Amounts allocated to withdrawing participants at December 31, 2009

     145   

Deemed loan offsets

     108 (1) 

Deemed distribution of participant loans

     (11
        

Net income per the Form 5500 (including Plan transfers)

   $ 136,148   
        

 

 

(1) 

Previously reported as a deemed loan distribution on 2009 Form 5500.

NOTE 9—SUBSEQUENT EVENTS

Effective February 14, 2011, the Vanguard Life Strategy funds and the Mellon EB DL Asset Allocation fund were replaced with JPMCB Smart Retirement funds. These funds are managed by JP Morgan Asset Management, an affiliate of the Trustee.

Effective March 15, 2011, assets of approximately $11.7 million were transferred from the Viacom 401(k) Plan for Project Based Employees to the Viacom 401k Plan.

 

16


Schedule H, line 4i

Page 1 of 5

 

VIACOM 401(k) PLAN

SCHEDULE OF ASSETS HELD AT END OF YEAR

DECEMBER 31, 2010

(In thousands)

 

Identity of issuer, borrower, lessor or similar party

  Description of investment including
maturity date, rate of interest,
collateral, par, or maturity value
    Cost(1)         Current Value      

Common Stocks

     

ACCENTURE PLS CLS ‘A’

        416   

AEGON NV AMER REGD CERT ADR

        184   

AGILENT TECHNOLOGIES INC COM STK

        453   

ALTERA CORP COM STK

        1,799   

AMERIPRISE FINANCIAL INC COM STK

        937   

AMETEK INC COM STK

        300   

AMGEN INC COM STK

        1,016   

ANADARKO PETROLEUM CORP COM STK

        601   

ANALOG DEVICES INC COM STK

        850   

AOL INC

        144   

APPLE INC COM STK

        3,068   

BAKER HUGHES INC COM STK

        972   

BANCO SANTANDER (BRAZIL) SA ADR

        511   

BANK OF NEW YORK MELLON CORP COM STK

        891   

BB&T CORP COM STK

        331   

BLACKROCK INC CLASS ‘A’ COM STK

        1,062   

BMC SOFTWARE INC COM STK

        1,224   

BOEING CO COM STK

        336   

BOSTON SCIENTIFIC CORP COM STK

        454   

BROADCOM CORP CLASS ‘A’ COM STK

        1,177   

CADENCE DESIGN SYSTEMS INC COM STK

        145   

CAPITAL ONE FINANCIAL CORP COM STK

        1,234   

CAREFUSION CORP

        257   

CARMAX INC COM STK

        191   

CATERPILLAR INC COM STK

        666   

CELGENE CORP COM STK

        373   

CEMEX S.A.B. DE C.V. ADR

        139   

CH ROBINSON WORLDWIDE INC COM STK

        285   

CHEVRON CORP COM STK

        730   

CISCO SYSTEMS INC COM STK

        652   

CITRIX SYSTEMS INC COM STK

        743   

COACH INC COM STK

        773   

COGNIZANT TECHNOLOGY SOLUTIONS CORP COM

        659   

COMCAST CORP COM CLS ‘A’

        1,501   

COMPUTER SCIENCES CORP COM STK

        407   

COMPUWARE CORP COM STK

        292   

CONSOL ENERGY INC COM STK

        565   

COVIDIEN PLC SHS

        768   

 

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Schedule H, line 4i

Page 2 of 5

 

Identity of issuer, borrower, lessor or similar party

  Description of investment including
maturity date, rate of interest,
collateral, par, or maturity value
    Cost(1)         Current Value      

CREDIT SUISSE GROUP ADR

        81   

CUMMINS INC COM STK

        860   

DIAGEO ADR

        186   

DIRECTV

        81   

DISH NETWORK CORP CLASS ‘A’ COM STK

        187   

DOLBY LABORATORIES INC COM STK

        452   

DOMTAR CORPORATION COM STK

        79   

DOW CHEMICAL CO COM STK

        867   

DUN & BRADSTREET CORP (DELAWARE) COM STK

        123   

EATON CORP COM

        657   

EBAY INC COM STK

        1,933   

ELECTRONIC ARTS COM STK

        287   

EMC CORP COM STK

        1,478   

ENSCO PLC

        524   

EOG RESOURCES INC COM STK

        682   

ERICSSON(LM) TEL ADR

        277   

FEDEX CORP COM STK

        1,023   

FORD MOTOR CO COM STK

        1,049   

FREEPORT-MCMORAN COPPER & GOLD INC COM STK

        787   

GENERAL ELECTRIC CO. COM STK

        1,280   

GENWORTH FINANCIAL INC COM STK

        164   

GILEAD SCIENCES INC COM STK

        109   

GLAXOSMITHKLINE ADR

        784   

GOLDMAN SACHS GROUP INC COM STK

        1,345   

GOOGLE INC COM STK CLS ‘A’

        1,633   

GREEN MOUNTAIN COFFEE ROASTERS INC COM STK

        760   

HARLEY DAVIDSON COM STK

        802   

HARTFORD FINANCIAL SERVICES GRP INC COM STK

        969   

HEWLETT-PACKARD CO COM STK

        1,579   

HOME DEPOT INC COM STK

        631   

HSBC HLDGS ADR

        240   

ILLINOIS TOOL WORKS INC COM STK

        722   

INGERSOLL-RAND PLC

        928   

INTERPUBLIC GROUP COMPANIES INC COM STK

        212   

ITAU UNIBANCO HLDG SA ADR

        559   

JOHNSON CONTROLS INC COM STK

        1,089   

JOY GLOBAL INC COM STK

        756   

JUNIPER NETWORKS COM STK

        1,003   

LAS VEGAS SANDS CORP COM STK

        367   

LEGG MASON INC COM STK

        181   

LIBERTY GLOBAL INC COM STK SERIES ‘C’

        102   

 

S-2


Schedule H, line 4i

Page 3 of 5

 

Identity of issuer, borrower, lessor or similar party

  Description of investment including
maturity date, rate of interest,
collateral, par, or maturity value
    Cost(1)         Current Value      

LIBERTY GLOBAL INC COM STK SER ‘A’

        99   

LIBERTY MEDIA HOLDING COM STK ‘A’

        405   

LOEWS CORP COM STK

        236   

LOWES COMPANIES INC COM STK

        696   

LULULEMON ATHLETICA INC COM STK

        136   

MACY’S INC COM STK

        58   

MAXIM INTEGRATED PRODUCTS COM STK

        591   

MCCGRAW-HILL COS IN (THE) COM STK

        127   

MEDTRONIC INCCOM STK

        223   

MERCK & CO INC(NEW) COM STK

        1,171   

MICROSOFT CORP COM STK

        2,024   

MOLEX INC CLASS ‘A’ N.VTG COM STK

        236   

MONSANTO CO COM STK

        914   

MOTOROLA INC

        1,088   

NATIONAL OILWELL VARCO INC COM STK

        583   

NETAPP INC COM

        1,340   

NEWS CORP CLASS ‘A’ NON VTG COM STK

        1,811   

NIKE INC CLASS ‘B’ COM STK

        343   

NOKIA CORP ADR

        129   

NOVARTIS AG ADR

        1,179   

OCCIDENTAL PETROLEUM CORP COM

        1,463   

ORACLE CORP COM STK

        2,028   

PACCAR INC COM STK

        1,213   

PANASONIC CORP ADR

        416   

PFIZER INC COM STK

        963   

PITNEY BOWES INC COM STK

        242   

POLO RALPH LAUREN CORP CLASS ‘A’ COM STK

        745   

PRECISION CASTPARTS CORP COM

        337   

PRICELINE.COM INC COM STK

        959   

PROGRESSIVE CORP (OHIO) COM STK

        179   

QUALCOMM INC COM STK

        1,165   

RIO TINTO ADR

        559   

ROVI CORP COM

        637   

ROYAL DUTCH SHELL ADR

        240   

SANOFI-AVENTIS ADR

        774   

SCHLUMBERGER COM STK

        2,445   

SCHWAB (CHARLES) CORP COM STK

        428   

SIEMENS AG ADR

        519   

SLM CORP COM STK

        271   

SONY CORP ADR

        643   

SPRINT NEXTEL CORP FON COM STK

        508   

STAPLES INC COM STK

        537   

STARBUCKS CORP COM STK

        433   

SUNTRUST BANKS INC COM STK

        201   

SYMANTEC CORP COM STK

        485   

 

S-3


Schedule H, line 4i

Page 4 of 5

 

Identity of issuer, borrower, lessor or similar party

  Description of investment including
maturity date, rate of interest,
collateral, par, or maturity value
    Cost(1)         Current Value      

SYNOPSYS INC COM STK

        342   

TEVA PHARMACEUTICAL INDUSTRIES ADR

        361   

TEXAS INSTRUMENTS INC COM STK

        831   

THE MOSAIC COMPANY

        871   

TIME WARNER CABLE INC

        720   

TIME WARNER INC

        966   

TRAVELERS COS INC/THE

        446   

TYCO ELECTRONICS LTD SWITZERLD SHS

        389   

TYCO INTERNATIONAL LTD.

        352   

US BANCORP DELAWARE COM STK

        229   

VERISIGN COM STK

        361   

* VIACOM INC CLASS A

        615   

* VIACOM INC CLASS B

        73,816   

VMWARE INC CLS ‘A’ COM STK

        298   

VODAFONE GROUP SPON ADR

        700   

VULCAN MATERIALS CO COM STK

        222   

WALGREEN CO COM STK

        467   

WAL-MART STORES INC COM STK

        431   

WELLS FARGO & CO COM STK

        2,559   

WESTERN UNION COMPANY (THE) COM STK

        429   

XEROX CORP COM STK

        634   
           

Total Common Stocks

        172,752   
           

Registered Investment Companies

     

DFA U.S. Small Cap Fund

        26,806   

Vanguard FTSE Social Index Fund

        3,652   

Vanguard Lifestrategy Conservative Growth Fund

        39,899   

Vanguard Lifestrategy Moderate Growth Fund

        31,012   

Vanguard Lifestrategy Growth Fund

        32,490   
           

Total Registered Investment Companies

        133,859   
           

Common/Collective Trusts, U.S. Government Securities and GICs

     

Blackrock Equity Index Fund

        82,005   

Blackrock Mid Cap Equity Index Fund

        34,913   

Capital Guardian Emerging Markets Equity Fund

        35,318   

Capital Guardian International Equity Fund

        35,681   

* JP Morgan U.S. Government Fund

        8,192   

EB DL Asset Allocation Fund of the Bank of New York Mellon

        4,088   

EB CIS Non-SL Aggregate Bond Index Fund

        40,511   

Bank of America – Contract #05-066

   
 
IGT INVESCO Shrt Trm Bond;
Evergreen
  
  
      20,589   

 

S-4


Schedule H, line 4i

Page 5 of 5

 

Identity of issuer, borrower, lessor or similar party

  Description of investment including
maturity date, rate of interest,
collateral, par, or maturity value
    Cost(1)         Current Value      

Bank of America Wrapper at Fair Value, plus Adjustment to Contract Value, Synthetic GIC

        (798 ) (2) 

ING Life & Annuity – Contract #60125

    IGT MxMgr A+ Int G/C; Evergreen          18,384   

ING Life & Annuity Wrapper at Fair Value, plus Adjustment to Contract Value, Synthetic GIC

        (969 ) (2) 

Monumental – Contract #MDA00730TR

    IGT MxMgr A+ Int G/C; Evergreen          15,923   

Monumental Wrapper at Fair Value, plus Adjustment to Contract Value, Synthetic GIC

        (958 ) (2) 

Pacific Life In – Contract #G-27279.01.0001

    IGT MxMgr A+ Core; Evergreen          14,197   

Pacific Life In Wrapper at Fair Value, plus Adjustment to Contract Value, Synthetic GIC

        (514 ) (2) 

State Street Bank – Contract #106001

   
 
IGT INVESCO ShrtTrm Bond;
Evergreen
  
  
      20,489   

State Street Bank Wrapper at Fair Value, plus Adjustment to Contract Value, Synthetic GIC

        (795 ) (2) 
           

Total Common/Collective Trusts, U.S. Government Securities and GICs

        330,395  (3) 
           

Loans to Participants

   
 
Various maturities and interest
rates ranging from 3.25% to 12.0%
  
  
      9,083   
           

Grand Total

      $ 646,089   
           

 

* Identified as a party-in-interest to the Plan.
(1) There are no non-participant directed investments.
(2) Amounts include wrappers at fair value of $105 and adjustment to contract value of ($4,139).
(3) Adjustment to contract value of ($4,139) is not included in the total Common/Collective Trusts, U.S. Government Securities and GICs balance of $330,395.

 

S-5


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the persons who administer the Plan have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

 

     VIACOM 401(k) PLAN

Date: June 23, 2011

     By:  

/S/    JOHN R. JACOBS        

       John R. Jacobs
       Member of the Viacom Retirement Committee

 

S-6