Mercedes 2004 Annual Report Download - page 144
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Investment Policies and Strategies. At December 31, 2004,
plan assets were invested in diversified portfolios that consisted
primarily of debt and equity securities, including 2,570,150 of
DaimlerChrysler Ordinary Shares in a German Plan with a market
value of €91 million. Assets and income accruing on all pension
trust and relief funds are used solely to pay pension benefits and
administer the plans. The Group’s pension asset allocation at
December 31, 2004 and 2003, and target allocation for the year
2005, are as follows:
Every 3-5 years, or more frequently if appropriate, Daimler-
Chrysler conducts asset-liability studies for the major pension
funds. DaimlerChrysler uses the expertise of external investment
and actuarial advisors. These studies are intended to determine
the optimal long-term asset allocation with regard to the liability
structure. The resulting Model Portfolio allocation aims at mini-
mizing the economic cost of defined benefit schemes. At the
same time the risks should be limited to an appropriate level.
The Model Portfolio is then expanded to a Benchmark Portfolio.
The Benchmark Portfolio matches the asset class weights in the
Model portfolio and expands the asset classes by adding of sub-
asset-classes with corresponding weights to implement an actual
portfolio. By application of Modern Portfolio Theory an optimal
one year target allocation is determined. This target allocation is
then implemented and the performance in the current year is
tracked against the benchmark portfolio.
The entire process is overseen by investment committees which
consist of senior financial management especially from treasury
and other appropriate executives. The Investment Committees
meet regularly to approve the asset allocations, and review the
risks and results of the major pension funds and approve the
selection and retention of external managers of specific portfo-
lios.
The majority of investments are in international blue chip equities
on the one hand and high quality government and corporate
bonds on the other hand. To maintain a wide range of diversifica-
tion and to improve return opportunities, up to approximately
20% of assets are allocated to highly promising markets such as
Private Equity, High Yield Debt, Convertibles and Emerging Mar-
kets. Internal controlling units monitor all investments strictly
and regularly. External depositary banks provide safekeeping of
securities as well as reporting of transactions and assets.
140
65
30
4
1
67
23
6
4
66
28
4
2
2004
Plan Assets German Plans
2003 2005
planned
2004
Plan Assets Non-German Plans
2003
2005
planned
57
36
3
4
57
36
2
5
57
37
3
3
Equity securities
Debt securities
Real estate
Other
(in % of plan assets)