Dow Chemical 2009 Annual Report Download - page 165

Table of Contents
Estimated Future Benefit Payments
The estimated future benefit payments, reflecting expected future service, as appropriate, are presented in the following table:
Estimated Future Benefit Payments at December 31, 2009
In millions
Defined Benefit
Pension
Plans
Other
Postretirement
Benefits
2010 $ 1,226 $ 192
2011 1,236 194
2012 1,147 189
2013 1,163 181
2014 1,183 174
2015 through 2019 6,402 786
Total $ 12,357 $ 1,716
Plan Assets
Plan assets consist mainly of equity and fixed income securities of U.S. and foreign issuers, and may include alternative investments such as real estate,
private equity funds and absolute return strategies. At December 31, 2009, plan assets totaled $14.6 billion and included Company common stock with a
value of $11 million (less than 1 percent of total plan assets). At December 31, 2008, plan assets totaled $11.6 billion and included Company common stock
with a value of $7 million (less than 1 percent of total plan assets).
Investment Strategy and Risk Management for Plan Assets
The Company’s investment strategy for the plan assets is to manage the assets in relation to the liability in order to pay retirement benefits to plan participants
while minimizing cash contributions from the Company over the life of the plans. This is accomplished by identifying and managing the exposure to various
market risks, diversifying investments in various asset classes and earning an acceptable long-term rate of return consistent with an acceptable degree of risk,
while considering the liquidity needs of the plans.
The plans are permitted to use derivative instruments for investment purposes, as well as for hedging the underlying asset and liability exposure and
rebalancing the asset allocation. The plans use value at risk, stress testing, scenario analysis and Monte Carlo simulation to monitor and manage risk in the
portfolios.
Equity securities primarily include investments in large-cap companies located in the United States or developed non-U.S. markets. Fixed income
securities are primarily invested in investment grade corporate bonds of companies from diversified industries, U.S. treasuries, non-U.S. developed market
securities and U.S. agency mortgage backed securities. Alternative investments primarily include investments in real estate, private equity funds and absolute
return strategies. Other significant investment types include insurance contracts and interest rate, equity and foreign exchange derivative investments and
hedges.
Strategic Weighted-Average Target Allocation of Plan Assets for All
Significant Plans
Asset Category Target Allocation
Equity securities 45%
Fixed Income securities 35%
Alternative investments 15%
Other investments 5%
Total 100%
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