Pitney Bowes 2007 Annual Report Download - page 87

PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)
69
Foreign Pension Plans’ Investment Strategy
Our foreign pension plan assets are managed by outside investment managers and monitored regularly by local trustees, in
conjunction with our corporate personnel. The investment strategies adopted by our foreign plans vary by country and plan,
with each strategy tailored to achieve the expected rate of return within an acceptable or appropriate level of risk, depending
upon the liability profile of plan participants, local funding requirements, investment markets and restrictions. Our largest
foreign pension plan is the U.K. plan, which represents 76% of the non-U.S. pension assets. The U.K. pension plan’ s
investment strategy supports the objectives of the fund, which are to maximize returns within reasonable and prudent levels
of risk, to achieve and maintain full funding of the accumulated benefit obligations and the actuarial liabilities, and to earn a
nominal rate of return of at least 7.75%. The fund has established a strategic asset allocation policy to achieve these
objectives. Investments are diversified across asset classes and within each class to minimize the risk of large losses and are
periodically rebalanced. Derivatives, such as swaps, options, forwards and futures contracts may be used for market
exposure, to alter risk/return characteristics and to manage foreign currency exposure. The pension plans’ liabilities,
investment objectives and investment managers are reviewed periodically.
The expected long-term rate of return on plan assets is based on historical and projected rates of return for current and
planned asset classes in the plans’ investment portfolio after analyzing historical experience and future expectations of the
returns and volatility of the various asset classes. The overall expected rate of return for the portfolio was determined based
on the target asset allocations for each asset class, adjusted for historical and expected experience of active portfolio
management results, when compared to the benchmark returns.
The target allocation for 2008 and the asset allocation for the U.K. pension plan at December 31, 2007 and 2006, by asset
category, are as follows:
Target Allocation Percentage of Plan Assets at December 31,
Asset category 2008 2007 2006
U.K. equities ................................................................. 30% 29% 36%
Non-U.K. equities ......................................................... 40% 43% 36%
Fixed income ................................................................ 30% 25% 26%
Cash .............................................................................. -% 3% 2%
Total.............................................................................. 100% 100% 100%
The fair value of plan assets was $403 million and $364 million at December 31, 2007 and 2006, respectively, and the
expected long-term rate of return on these plan assets was 7.75% and 8.00% in 2007 and 2006, respectively.
Nonpension Postretirement Benefits
We provide certain health care and life insurance benefits to eligible retirees and their dependents. The cost of these benefits
is recognized over the period the employee provides credited services to the Company. Substantially all of our U.S. and
Canadian employees become eligible for retiree health care benefits after reaching age 55 and with the completion of the
required service period. U.S. employees hired after January 1, 2005, and Canadian employees hired after April 1, 2005, are
not eligible for retiree health care benefits.