Kraft 2007 Annual Report Download - page 85

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The following weighted-average assumptions were used to determine our net pension cost for the years ended December 31:
U.S. Plans Non-U.S. Plans
2007 2006 2005 2007 2006 2005
Discount rate 5.90% 5.60% 5.75% 4.67% 4.44% 5.18%
Expected rate of return on
plan assets 8.00% 8.00% 8.00% 7.53% 7.57% 7.82%
Rate of compensation
increase 4.00% 4.00% 4.00% 3.00% 3.11% 3.11%
Our expected rate of return on plan assets is determined by the plan assets’ historical long-term investment performance, current
asset allocation and estimates of future long-term returns by asset class.
We sponsor and contribute to employee savings plans. These plans cover eligible salaried, non-union and union employees. Our
contributions and costs are determined by the matching of employee contributions, as defined by the plans. Amounts charged to
expense for defined contribution plans totaled $83 million in 2007, $84 million in 2006 and $94 million in 2005.
Plan Assets:
The percentage of fair value of pension plan assets at December 31, 2007 and 2006 was:
U.S. Plans Non-U.S. Plans
Asset Category 2007 2006 2007 2006
Equity securities 70% 72% 56% 57%
Debt securities 30% 28% 38% 35%
Real estate - - 3% 3%
Other - - 3% 5%
Total 100% 100% 100% 100%
Our investment strategy is based on an expectation that equity securities will outperform debt securities over the long term.
Accordingly, the composition of our U.S. plan assets is broadly characterized as a 70%/30% allocation between equity and debt
securities. The strategy uses indexed U.S. equity securities, actively managed international equity securities and actively
managed investment grade debt securities (which constitute 80% or more of debt securities) with lesser allocations to high yield
and international debt securities.
For the plans outside the U.S., the investment strategy is subject to local regulations and the asset / liability profiles of the plans
in each individual country. These specific circumstances result in a level of equity exposure that is typically less than the U.S.
plans. In aggregate, the actual asset allocations of the non-U.S. plans are virtually identical to their respective asset policy
targets.
We attempt to mitigate investment risk by rebalancing between equity and debt asset classes as we make contributions and
monthly benefit payments.
We primarily make contributions to our U.S. and non-U.S. pension plans to the extent that they are tax deductible and do not
generate an excise tax liability. Based on current tax law, we plan to make contributions of approximately $15 million to our
U.S. plans and approximately $160 million to our non-U.S. plans in 2008. However, our actual contributions may be different
due to many factors, including changes in tax and other benefit laws, pension asset performance that differs significantly from
the expected performance, or significant changes in interest rates.
The estimated future benefit payments from our pension plans at December 31, 2007 were:
U.S. Plans Non-U.S. Plans
(in millions)
2008 $ 412 $ 227
2009 407 227
2010 425 232
2011 445 239
2012 471 244
2013 - 2017 2,743 1,275
70