Time Warner Cable 2008 Annual Report Download - page 138

points, from 6.00% to 5.75%, while holding all other assumptions constant, would have resulted in an increase in the
Company’s pension expense of approximately $13 million in 2008.
In developing the expected long-term rate of return on assets, the Company considered the pension portfolio’s
composition, past average rate of earnings and discussions with portfolio managers. The expected long-term rate of
return is based on an asset allocation assumption of 75% equity securities and 25% fixed-income securities. A
decrease in the expected long-term rate of return of 25 basis points, from 8.00% to 7.75%, while holding all other
assumptions constant, would have resulted in an increase in the Company’s pension expense of approximately
$3 million in 2008.
Effective October 31, 2008, the assets of the TWC defined benefit pension plans held in a master trust with the
plan assets of other Time Warner defined benefit pension plans (the “Time Warner Master Trust”), were transferred
to a new master trust established to hold the assets of the TWC defined benefit pension plans (the “TWC Master
Trust”).
The Company’s investment policy for its defined benefit pension plans is to maximize the long-term rate of
return on plan assets within an acceptable level of risk while maintaining adequate funding levels. The Company’s
current broad long-term strategic targets are to have a pension-assets portfolio comprised of 75% equity securities
and 25% fixed-income securities, both within a target range of +/— five percentage points. Within equity securities,
the Company’s objective is to achieve asset diversity in order to increase return and reduce volatility. The Company
has asset allocation policy target ranges for growth and value U.S. equity securities; large, mid, and small
capitalization U.S. equity securities; international equity securities; and alternative investments.
As of December 31, 2008, the TWC Master Trust’s assets included 1.7 million shares of Time Warner common
stock in the amount of $17 million (approximately 2% of total plan assets held in the TWC Master Trust). The TWC
Master Trust’s weighted-average asset allocation by asset category as of December 31, 2008 is as follows: 49%
equity securities, 23% fixed-income securities, 25% cash and equivalents and 3% other investments. The actual
asset allocation as of December 31, 2008 differs from the broad long-term strategic target allocation primarily due
to contributions made in late 2008 that will be invested in 2009. As of December 31, 2007, the Time Warner Master
Trust’s assets included 4.4 million shares of Time Warner common stock in the amount of $73 million (approx-
imately 2% of total plan assets held in the Time Warner Master Trust). The Time Warner Master Trust’s weighted-
average asset allocation by asset category as of December 31, 2007 was as follows: 74% equity securities, 21%
fixed-income securities, 4% cash and equivalents and 1% other investments. A portion of the fixed-income
securities allocation is reserved in short-term cash investments to provide for expected pension benefits to be paid in
the short term.
The Company continuously monitors the performance of the overall pension-assets portfolio, asset-allocation
policies, and the performance of individual pension-asset managers and makes adjustments and changes, as
required. Every five years, or more frequently if appropriate, the Company conducts a broad strategic review of its
portfolio construction and asset allocation policies. The Company does not manage any assets internally, does not
have any passive investments in index funds, and does not directly utilize futures, options, or other derivative
instruments or hedging with regards to the defined benefit pension plans; however, the investment mandate of some
pension-assets managers allows the use of derivatives as components of their standard portfolio-management
strategies.
After considering the funded status of the Company’s defined benefit pension plans, movements in the
discount rate, investment performance and related tax consequences, the Company may choose to make contri-
butions to its pension plans in any given year. As of December 31, 2008, there were no minimum required
contributions for the Company’s funded plans. The Company made $400 million of discretionary cash contributions
to its funded defined benefit pension plans during the year ended December 31, 2008, and subject to market
conditions and other considerations, the Company expects to make additional discretionary cash contributions of at
least $150 million to its defined benefit pension plans during 2009. For the Company’s unfunded plan, contributions
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TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)