Twenty-First Century Fox 2011 Annual Report Download - page 34

Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)
The expected long-term rate of return is based on an asset allocation assumption of 50% equities, 39% fixed-income securities and 11% in cash
and other investments.
The discount rate reflects the market rate for high-quality fixed-income investments on the Company’s annual measurement date of June 30
and is subject to change each fiscal year. The discount rate assumptions used to account for pension and other postretirement benefit plans reflect
the rates at which the benefit obligations could be effectively settled. The rate was determined by matching the Company’s expected benefit
payments for the primary plans to a hypothetical yield curve developed using a portfolio of several hundred high-quality non-callable corporate
bonds.
The key assumptions used in developing the Company’s fiscal 2011, 2010 and 2009 net periodic pension expense (income) for its plans consist
of the following:
2011 2010 2009
($ in millions)
Discount rate used to determine net periodic benefit cost 5.7% 7.0% 6.7%
Assets:
Expected rate of return 7.0% 7.0% 7.0%
Expected return $ 171 $ 138 $ 143
Actual return $ 326 $ 237 $ (230)
Gain/(Loss) $ 155 $ 99 $ (373)
One year actual return 13.7% 12.7% (10.8)%
Five year actual return 4.4% 3.9% 3.5%
The weighted average discount rate is volatile from year to year because it is determined based upon the prevailing rates in the United States, the
United Kingdom and Australia as of the measurement date. The Company will utilize a weighted average discount rate of 5.7% in calculating the fiscal
2012 net periodic pension expense for its plans. The Company will continue to use a weighted average long-term rate of return of 7% for fiscal 2012
based principally on a combination of asset mix and historical experience of actual plan returns. The accumulated net losses on the Company’s pension
plans at June 30, 2011 were $835 million which decreased from $940 million at June 30, 2010. This decrease of $105 million was due primarily to an
actual plan asset return of 13.7% in fiscal 2011, which was higher than the expected rate of return of 7%, and loss amortization in fiscal 2011. The net
accumulated losses at June 30, 2011 were primarily the result of changes in discount rates and deferred asset losses. Lower discount rates increase
present values of benefit obligations and increase the Company’s deferred losses and also increase subsequent-year pension expense. Higher discount
rates decrease the present values of benefit obligations and reduce the Company’s accumulated net loss and also decrease subsequent-year pension
expense. These deferred losses are being systematically recognized into future net periodic pension expense in accordance with ASC 715
“Compensation–Retirement Benefits.” Unrecognized losses in excess of10%ofthegreaterofthemarket-relatedvalueofplanassetsortheplans
projected benefit obligation are recognized over theaveragefutureserviceoftheplanparticipants.
The Company made contributions of $158 million, $338 million and $214 million to its pension plans in fiscal 2011, 2010 and 2009,
respectively. The majority of these contributions were voluntarily made to improve the funding status of the plans which were impacted by the
economic conditions noted above. Future plan contributions are dependent upon actual plan asset returns, statutory requirements and interest rate
movements. Assuming that actual plan returns are consistent with the Company’s expected plan returns in fiscal 2011 and beyond, and that
interest rates remain constant, the Company would not be required to make any material statutory contributions to its primary U.S. pension plans
for the immediate future. The Company will continue to make voluntary contributions as necessary to improve funded status.
32 News Corporation