E-Z-GO 2006 Annual Report Download - page 84

In addition to the plans in the above table, we have plans with the projected benefit obligation in excess of the fair value of plan assets at year-end
as follows:
(In millions) 2006 2005
Projected benefit obligation $ 1,449 $ —
Accumulated benefit obligation $ 1,336 $ —
Fair value of plan assets $ 1,350 $ —
Pension Assets
We invest our pension assets with the objective of achieving a total rate of return, over the long term, sufficient to fund future pension obligations
and to minimize future pension contributions. We are willing to tolerate a commensurate level of risk to achieve this objective based on the funded
status of the plans and the long-term nature of our pension liability. Risk is controlled by maintaining a portfolio of assets that is diversified across
a variety of asset classes, investment styles and investment managers. All of the assets are managed by external investment managers, and the
majority of the assets are actively managed. Where possible, investment managers are prohibited from owning our stock in the portfolios that they
manage on our behalf.
For U.S. plan assets, comprising the majority of plan assets, asset allocation target ranges were established consistent with the investment
objectives, and the assets are rebalanced periodically. The expected long-term rate of return on plan assets was determined based on a variety of
considerations, including the established asset allocation targets and expectations for those asset classes, historical returns of the plans’ assets
and the advice of outside advisors. At December 30, 2006, the target allocation range is 44% to 70% for equity securities, 13% to 33% for debt
securities and 7% to 13% for each of real estate and other alternative assets. For foreign plan assets, allocations are based on expected cash flow
needs and assessments of the local practices and markets. The percentages of the fair value of total pension plan assets by major category are
as follows:
December 30, December 31,
Asset Category 2006 2005
Equity securities 59% 58%
Debt securities 22% 23%
Real estate 10% 9%
Other 9% 10%
Total 100% 100%
Estimated Future Cash Flow Impact
Defined benefits under salaried plans are based on salary and years of service. Hourly plans generally provide benefits based on stated amounts
for each year of service. Our funding policy is consistent with applicable laws and regulations. In 2007, we expect to contribute in the range of $45
million to $50 million to fund our qualified pension plans. We do not expect to contribute to our other postretirement benefit plans. The benefit
payments provided below reflect expected future employee service, as appropriate, that are expected to be paid, net of estimated participant con-
tributions. The benefit payments are based on the same assumptions used to measure our benefit obligation at the end of fiscal 2006. While pen-
sion benefit payments primarily will be paid out of qualified pension trusts, we will pay postretirement benefits other than pensions out of our
general corporate assets as follows:
Post-
retirement Expected
Benefits Medicare
Pension Other Than Part D
(In millions) Benefits Pensions Subsidy
2007 $ 292 $ 79 $ (6)
2008 298 75 (6)
2009 305 76 (6)
2010 311 77 (7)
2011 316 77 (7)
2012 - 2016 1,792 352 (34)
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