Coca Cola 2007 Annual Report Download - page 112

THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued)
Plan Assets
Pension Benefit Plans
The following table sets forth the actual asset allocation and weighted-average target asset allocation for our U.S.
and non-U.S. pension plan assets:
December 31, 2007 2006 Target Asset Allocation
Equity securities158% 58% 56%
Debt securities 29 31 34
Real estate and other213 11 10
Total 100% 100% 100%
1As of December 31, 2007 and 2006, 3 percent and 2 percent, respectively, of total pension plan
assets were invested in common stock of our Company.
2As of December 31, 2007 and 2006, 7 percent and 6 percent, respectively, of total pension plan
assets were invested in real estate.
Investment objectives for the Company’s U.S. pension plan assets, which comprise 66 percent of total pension
plan assets as of December 31, 2007, are to:
(1) optimize the long-term return on plan assets at an acceptable level of risk;
(2) maintain a broad diversification across asset classes and among investment managers;
(3) maintain careful control of the risk level within each asset class; and
(4) focus on a long-term return objective.
Asset allocation targets promote optimal expected return and volatility characteristics given the long-term time
horizon for fulfilling the obligations of the pension plans. Selection of the targeted asset allocation for U.S. plan assets
was based upon a review of the expected return and risk characteristics of each asset class, as well as the correlation of
returns among asset classes.
Investment guidelines are established with each investment manager. These guidelines provide the parameters
within which the investment managers agree to operate, including criteria that determine eligible and ineligible
securities, diversification requirements and credit quality standards, where applicable. Unless exceptions have been
approved, investment managers are prohibited from buying or selling commodities, futures or option contracts, as well
as from short selling of securities. Furthermore, investment managers agree to obtain written approval for deviations
from stated investment style or guidelines.
As of December 31, 2007, no investment manager was responsible for more than 10 percent of total U.S. plan
assets. In addition, diversification requirements for each investment manager prevent a single security or other
investment from exceeding 10 percent, at historical cost, of the individual manager’s portfolio.
The expected long-term rate of return assumption for U.S. plan assets is based upon the target asset allocation and
is determined using forward-looking assumptions in the context of historical returns and volatilities for each asset class,
as well as correlations among asset classes. We evaluate the rate of return assumption on an annual basis. The expected
long-term rate of return assumption used in computing 2007 net periodic pension cost for the U.S. plans was
8.5 percent. As of December 31, 2007, the 10-year annualized return on U.S. plan assets was 8.3 percent, the 15-year
annualized return was 11.2 percent, and the annualized return since inception was 12.7 percent.
Plan assets for our pension plans outside the United States are insignificant on an individual plan basis.
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