Pitney Bowes 2008 Annual Report Download - page 91

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PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)
72
The fair value of plan assets was $1.2 billion and $1.7 billion at December 31, 2008 and 2007, respectively, and the expected long-
term rate of return on these plan assets was 8.50% in 2008 and 2007.
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 75% 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 7.25%. 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 2009 and the asset allocation for the U.K. pension plan at December 31, 2008 and 2007, by asset category,
are as follows:
Target
Allocation Percentage of Plan Assets at
December 31,
Asset category 2009 2008 2007
U.K. equities 30% 34% 29%
Non-U.K. equities 35% 29% 43%
Fixed income 35% 33% 25%
Cash -% 4% 3%
Total 100% 100% 100%
The fair value of plan assets was $234 million and $403 million at December 31, 2008 and 2007, respectively, and the expected long-
term rate of return on these plan assets was 7.25% and 7.75% in 2008 and 2007, 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.