Mercedes 2006 Annual Report Download - page 205

Consolidated Financial Statements | Notes to the Consolidated Balance Sheets | 189
Plan assets. At December 31, 2006, plan assets were invested
in diversified portfolios that consisted primarily of debt and
equity securities. Assets and income accruing on all pension trust
and relief funds are used solely to pay benefits and to adminis-
ter the plans. The Group’s other benefit plan asset allocation at
December 31, 2006 and 2005 and target allocations for 2007
are as follows:
Asset allocation is based on a benchmark portfolio designed
to diversify investments among the following primary asset class-
es: US equity, international equity and US fixed income. The
objective of the benchmark portfolio is to achieve a reasonable
balance between risk and return.
The investment process is overseen by Investment Committees
which consist of senior financial management and other appro-
priate executives. The Investment Committees meet regularly to
approve the asset allocations and review the risks and results
of the funds and approve the selection and retention of external
managers for specific portfolios.
The majority of investments reflect the asset classes designated
by the benchmark portfolio. To maintain a wide range of diversi-
fication and improve return possibilities, a small percentage of
assets is allocated to hedge funds and real estate. Internal control-
ling units regularly monitor all investments. External depositary
banks provide safekeeping of securities as well as reporting on
transactions and assets.
Estimated future subsidies due to the Medicare Act. The
total estimated future subsidies due to the Medicare Act for the
next 10 years approximate €642 million and are expected to
be received as follows:
Contributions. Contributions to the Group’s other postretirement
plans were €5 million for the year ended December 31, 2006.
DaimlerChrysler did not make any contributions to its other postre-
tirement plans in 2005. Employer cash contributions to the
Group’s other postretirement plans are expected to approximate
€6 million in 2007.
Assumptions. The measurement date for the Group’s accumu-
lated other postretirement benefit obligations and plan assets is
generally December 31. The measurement date for the Group’s
net periodic postretirement benefit cost is principally January 1.
Assumed discount rates and rates of increase in remuneration
used in calculating the accumulated postretirement benefit oblig-
ations together with long-term rates of return on plan assets
vary according to the economic conditions of the country in which
the plans are situated.
2005
20062007
planned
65
23
7
5
67
33
–
–
67
23
6
4
Equity securities
Debt securities
Alternative investments
Real estate
(in % of plan assets)
2012-
201620112010200920082007
45 49 53 57 61 377Medicare Act
(in millions of €)