Coca Cola 2008 Annual Report Download - page 124

THE COCA-COLA COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS (Continued)
During 2007, the Company amended its U.S. retiree medical plan to limit the Company’s exposure to
increases in retiree medical costs for both current and future retirees. As a result, the effects of a one percentage
point change in the assumed health care cost trend rate would not be significant to the Company.
The discount rate assumptions used to account for pension and other postretirement benefit plans reflect
the rates at which the benefit obligations could be effectively settled. Rates for each of our U.S. plans at
December 31, 2008 were determined using a cash flow matching technique whereby the rates of a yield curve,
developed from high-quality debt securities, were applied to the benefit obligations to determine the appropriate
discount rate. For our non-U.S. plans, we base the discount rate on comparable indices within each of those
countries. The rate of compensation increase assumption is determined by the Company based upon annual
reviews. We review external data and our own historical trends for health care costs to determine the health care
cost trend rate assumptions.
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:
Target
Asset
December 31, 2008 2007 Allocation
Equity securities147% 58% 55%
Debt securities 35 29 32
Real estate and other218 13 13
Total 100% 100% 100%
1As of December 31, 2008 and 2007, 3 percent of total pension plan assets were invested in common
stock of our Company.
2As of December 31, 2008 and 2007, 9 percent and 7 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, 2008, 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.
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