DuPont 2011 Annual Report Download - page 80

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Table of Contents E. I. du Pont de Nemours and Company
Notes to the Consolidated Financial Statements (continued)
(Dollars in millions, except per share)
Assumed health care cost trend rates at December 31, 2011 2010
Health care cost trend rate assumed for next year 8% 8%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) 5% 5%
Year that the rate reaches the ultimate trend rate 2015 2014
Assumed health care cost trend rates have a modest effect on the amount reported for the health care plan. A one-percentage point change in assumed health
care cost trend rates would have the following effects:
1-Percentage
Point Increase 1-Percentage
Point Decrease
Increase (decrease) on total of service and interest cost $ 6 $ (5)
Increase (decrease) on post-retirement benefit obligation 84 (80)
Plan Assets
All pension plan assets in the U.S. are invested through a single master trust fund. The strategic asset allocation for this trust fund is selected by management,
reflecting the results of comprehensive asset liability modeling. The general principles guiding U.S. pension asset investment policies are those embodied in
the Employee Retirement Income Security Act of 1974 (ERISA). These principles include discharging the company's investment responsibilities for the
exclusive benefit of plan participants and in accordance with the "prudent expert" standard and other ERISA rules and regulations. The company establishes
strategic asset allocation percentage targets and appropriate benchmarks for significant asset classes with the aim of achieving a prudent balance between
return and risk. Strategic asset allocations in other countries are selected in accordance with the laws and practices of those countries. Where appropriate, asset
liability studies are utilized in this process. U.S. plan assets and a portion of non-U.S. plan assets are managed by investment professionals employed by the
company. The remaining assets are managed by professional investment firms unrelated to the company. The company's pension investment professionals
have discretion to manage the assets within established asset allocation ranges approved by senior management of the company. Additionally, pension trust
funds are permitted to enter into certain contractual arrangements generally described as "derivatives." Derivatives are primarily used to reduce specific
market risks, hedge currency and adjust portfolio duration and asset allocation in a cost-effective manner.
The weighted-average target allocation for plan assets of the company's U.S. and non-U.S. pension plan is summarized as follows:
Target allocation for plan assets at December 31, 2011 2010
U.S. equity securities 27% 30%
Non-U.S. equity securities 20 22
Fixed income securities 29 29
Hedge funds 2 —
Private market securities 14 12
Real estate 8 7
Total 100% 100%
Equity securities include varying market capitalization levels. U.S. equity investments are primarily large-cap companies. Fixed income investments include
corporate-issued, government-issued and asset-backed securities. Corporate debt investments include a range of credit risk and industry diversification. U.S.
fixed income investments are weighted heavier than non-U.S fixed income securities. Other investments include hedge funds, real estate and private market
securities such as interests in private equity and venture capital partnerships.
Fair value calculations may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the company believes its
valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value
of certain financial instruments could result in a different fair value measurement at the reporting date.
F-31