Virgin Media 2008 Annual Report Download - page 137

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 12—Employee Benefit Plans (Continued)
Assumptions
The weighted-average assumptions used to determine benefit obligations were as follows:
December 31,
2008 2007
Discount rate ......................................... 5.75% 5.75%
Rate of compensation increase ............................ 3.00% 3.50%
The weighted-average assumptions used to determine net periodic benefit costs were as follows:
December 31,
2008 2007
Discount rate ......................................... 5.75% 5.00%
Expected long term rate of return on plan assets ............... 6.68% 6.57%
Rate of compensation increase ............................ 3.50% 3.25%
Where investments are held in bonds and cash, the expected long term rate of return is taken to
be yields generally prevailing on such assets at the measurement date. A higher rate of return is
expected on equity investments, which is based more on realistic future expectations than on the
returns that have been available historically. The overall expected long term rate of return on plan
assets is then the average of these rates taking into account the underlying asset portfolios of the
pension plans.
Plan Assets
Our pension plan weighted-average asset allocations at December 31, 2008 and 2007 by asset
category were as follows:
December 31,
2008 2007
Asset Category
Equity Securities ..................................... 33.2% 50.8%
Debt Securities ...................................... 55.2% 43.5%
Real Estate ......................................... 1.9% 2.1%
Hedge Funds ....................................... 9.0% —%
Other ............................................. 0.7% 3.6%
Total ............................................. 100.0% 100.0%
The trustees of the main defined benefit pension plan, which makes up approximately 85% of the
assets of our two defined benefit pension plans, have in place an investment strategy that targets an
allocation of 40% equities, 10% hedge funds, 3% property and 47% bonds and cash, at December 31,
2008. The assets are managed by a number of fund managers, which means as markets move relative to
each other the assets move away from the target investment strategy. Relatively small deviations from
the target investment strategy are permitted; however rebalancing of the assets will be carried out from
time to time. As the main defined benefit pension scheme is now closed to new entrants, it is
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