Proctor and Gamble 2008 Annual Report Download - page 72

Amountsinmillionsofdollarsexceptpershareamountsorasotherwisespecied.
70 TheProcter&GambleCompany NotestoConsolidatedFinancialStatements
Assumptions. Wedetermineouractuarialassumptionsonanannual
basis.Theseassumptionsareweightedtoreecteachcountrythat
mayhaveanimpactonthecostofprovidingretirementbenets.
Theweightedaverageassumptionsforthedenedbenetandother
retireebenetcalculations,aswellasassumedhealthcaretrend
rates,wereasfollows:
 PensionBenets  OtherRetireeBenets
YearsendedJune30   2007  2007



(1)
Discountrate   5.5%  6.3%
Rateofcompensation
increase   3.1%  —



(2)
Discountrate   5.2%  6.3%
Expectedreturnon
planassets   7.2%  9.3%
Rateofcompensation
increase   3.0%  —


Healthcarecosttrendrates
assumedfornextyear   —  9.0%
Ratetowhichthehealthcare
costtrendrateisassumedto
decline(ultimatetrendrate)  —  5.1%
Yearthattheratereachesthe
ultimatetrendrate   —  2013
(1)Determinedasofendofyear.
(2)Determinedasofbeginningofyearandadjustedforacquisitions.
Severalfactorsareconsideredindevelopingtheestimateforthelong-
termexpectedrateofreturnonplanassets.Forthedenedbenet
retirementplans,theseincludehistoricalratesofreturnofbroadequity
andbondindicesandprojectedlong-termratesofreturnobtained
frompensioninvestmentconsultants.Theexpectedlong-termrates
ofreturnforplanassetsare8%–9%forequitiesand5%–6%for
bonds.Forotherretireebenetplans,theexpectedlong-termrateof
returnreectsthefactthattheassetsarecomprisedprimarilyof
Companystock.TheexpectedrateofreturnonCompanystockisbased
onthelong-termprojectedreturnof9.5%andreectsthehistorical
patternoffavorablereturns.
Assumedhealthcarecosttrendratescouldhaveasignicanteffect
ontheamountsreportedfortheotherretireebenetplans.Aone-
percentagepointchangeinassumedhealthcarecosttrendrates
wouldhavethefollowingeffects:
   One-Percentage One-Percentage
   PointIncrease PointDecrease
Effectontotalofserviceandinterest
costcomponents   $ 60 $ (46)
Effectonpostretirementbenet
obligation   505 (411)
Plan Assets. OurtargetassetallocationfortheyearendedJune30,
2008,andactualassetallocationbyassetcategoryasofJune30,2008
and2007,wereasfollows:
 TargetAssetAllocation
AssetCategory PensionBenets OtherRetireeBenets
Equitysecurities
(1)   48%  96%
Debtsecurities   52%  4%
   100%  100%
 AssetAllocationatJune30
 PensionBenets  OtherRetireeBenets
AssetCategory   2007  2007
Equitysecurities
(1) 56%  96%
Debtsecurities   39%  4%
Cash   3%  —
Realestate   2%  —
 100%  100%
(1)EquitysecuritiesforotherretireeplanassetsincludeCompanystock,netofSeriesBESOP
debtof$2,809and$2,932asofJune30,2008and2007,respectively.
Ourinvestmentobjectivefordenedbenetretirementplanassetsis
tomeettheplans’benetobligations,whileminimizingthepotential
forfuturerequiredCompanyplancontributions.Theinvestment
strategiesfocusonassetclassdiversication,liquiditytomeetbenet
paymentsandanappropriatebalanceoflong-terminvestmentreturn
andrisk.Targetrangesforassetallocationsaredeterminedbymatch-
ingtheactuarialprojectionsoftheplans’futureliabilitiesandbenet
paymentswithexpectedlong-termratesofreturnontheassets,
takingintoaccountinvestmentreturnvolatilityandcorrelationsacross
assetclasses.Planassetsarediversied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
carefullycontrolledwithplanassetsrebalancedtotargetallocations
onaperiodicbasisandcontinualmonitoringofinvestmentmanagers’
performancerelativetotheinvestmentguidelinesestablishedwith
eachinvestmentmanager.