Archer Daniels Midland 2007 Annual Report Download - page 74

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66
Archer Daniels Midland Company
Notes to Consolidated Financial Statements (Continued)
Note 13. Employee Benefit Plans (Continued)
Plan Assets
The following table sets forth the actual asset allocation for the Company’s global pension plan assets as of the
measurement date:
20071 2006
Equity securities2
54% 50%
Debt securities 40% 49%
Other
6% 1%
Total
100% 100%
1. The Company’s U.S. pension plans contain approximately 63% of the Company’s global pension plan
assets. The target asset allocation for the Company’s U.S. pension plans consists of 60% equity securities,
30% debt securities, and 10% real estate. The actual asset allocation for the U.S. pension plans as of the
measurement date consists of 62% equity securities, 28% debt securities, and 10% in real estate. The actual
asset allocation for the Company’s foreign pension plans as of the measurement date consists of 40% equity
securities, 59% debt securities, and 1% in other investments. The target asset allocation for the Company’s
foreign pension plans is approximately the same as the actual asset allocation.
2 The Company’s pension plans held 3.2 million shares of Company common stock as of the measurement
date, March 31, 2007, with a market value of $119 million. Cash dividends received on shares of Company
common stock by these plans during the twelve-month period ended March 31, 2007, were $1 million.
Investment objectives for the Company’s plan assets are to:
• Optimize the long-term return on plan assets at an acceptable level of risk.
• Maintain a broad diversification across asset classes and among investment managers.
• Maintain careful control of the risk level within each asset class.
• 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 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. The U.S. pension plans target asset allocation was also based on an
asset and liability study concluded in January 2005.
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. In some countries,
derivatives may be used to gain market exposure in an efficient and timely manner; however, derivatives may
not be used to leverage the portfolio beyond the market value of underlying investments.