eircom Main Superannuation Fund Case Study (Part 2) Fund De Risking Jim Foley, Group Pensions Director, eircom Ltd

eircom Main Superannuation Fund Case Study (Part 2) Fund De Risking Jim Foley, Group Pensions Director, eircom Ltd

2010 Case Study Deficit Remediation through Industrial Relations Agreement Industrial Relations Agreements Accord 1 May 2009 Pensions Accord Mar 2010

2011 Update 2010 Case Study Industrial Relations Agreements Accord 1 May 2009 Pensions Accord Mar 2010 Recovery Plan May 2011 Trustee Activity Funding Valuation Sept 2010 Fund De Risking Mar - May 2011

Pension Impacts of IR Industrial Relations Agreements Accord 1 May 2009 Pensions Accord Mar 2010 Recovery Plan May 2011 Pension impacts Pay freeze to June 11 Pensionable Pay freeze to Dec 13 + Caps Pay freeze to Dec 13 + reduced working time

Cash flow profile (4) 500.0 450.0 400.0 Actives Future Service Actives Past Service Deferred Pensioners Pensioners 350.0 Millions 300.0 250.0 200.0 150.0 100.0 50.0-2010 2013 2016 2019 2022 2025 2028 2031 2034 2037 2040 2043 2046 2049 2052 2055 2058 2061 Years 2064 2067 2070 2073 2076 2079 2082 2085 2088 2091 2094 2097 2100 2103 2106 2109

500 450 400 Benefit payments ( millions) 350 300 250 200 150 Potential significant future shortfall of assets if no action taken 4,500 Assets w ith 5.5% pa returns (right hand scale) 4,000 3,500 With 5.5% pa returns, assets would run out in 2039 3,000 2,500 2,000 1,500 Assets ( millions) 100 1,000 50 500 0 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100 0

IR Agreement (1) Formal closure of DB Scheme to new entrants Scheme remains open to future accrual for existing members No change to discretionary treatment of pensions in payment No increase in member contributions or Normal Retirement Age Company contribution for 3 years to Dec 2013 floor of 8.5% pa or 20m pa final outcome to be determined by Sept 10 Funding Valuation

IR Agreement (2) Pensionable pay freeze to Dec 2013 (follows previously agreed pay freeze to June 2011) From Jan 2014 Cap on growth of pensionable pay at lowest of actual pay increase or annual rate of Consumer Price Index or annual cap of (i) 4% for 2014,2015,2016,2017 (ii) 3.25% for 2018,2019,2020 and (iii) 2.5% thereafter

500 Impact of Agreement 4,500 Benefit payments ( millions) 450 400 350 300 250 200 150 assets w ith 5.5% pa return (right hand scale) Fund more secure, less risky Current deficit eliminated Potential for asset de-risking by Trustees Costs contained 4,000 3,500 3,000 2,500 2,000 1,500 Assets ( millions) 100 50 Benefit payments (left hand scale) With 5.5% pa returns over scheme lifetime benefits met in full 1,000 500 0 0 2010 2014 2018 2022 2026 2030 2034 2038 2042 2046 2050 2054 2058 2062 2066 2070 2074 2078 2082 2086 2090 2094 2098 2102 2106

Funding Valuation Sept 10 MFS satisfied at Valuation date and at Fund Year end (31 Mar 11) Small Past Service Surplus on ongoing funding basis Increased provision for longevity + more conservative discount rate Future Funding rate set at 9.4% Employer + 6.8% Employee, subject to a floor on employer contribution of 20m pa for 3 years to 31 Dec 2013

Fund De risking Trustee decision to De risk fund following elimination of deficit Trustee Investment Sub Committee formed a Joint Working Group with Company Joint review of de risking opportunity (NB investment strategy remains at all times decision and responsibility of full Trustee Board)

Fund De risking Maturity Profile of Fund Increasing uncertainties Inflation Market performance Interest rates longevity Review & analysis of options Trustees Decided to de risk to fullest extent possible consistent with Actuarial Valuation results Further de risking to be undertaken should market conditions permit

MAIN FUND SIPP Before De Risking After De Risking % Weight % Weight Equities 65% 35% Property 5% 5% Other 1% 1% Return Seeking Assets 71% 41% Fixed Interest 25% 57% Cash 4% 2% Liability Driven Investments 29% 59% 100% 100%

MAIN FUND SIPP Before De Risking After De Risking % Weight % Weight Equities 65% 35% Property 5% 5% Other 1% 1% Return Seeking Assets 71% 41% Fixed Interest 25% 57% Cash 4% 2% Liability Driven Investments 29% 59% 100% 100% Implementation March / April 11 = Sale of 840m Equities + 160m Bonds May 11 = Purchase of 1bn Bonds

Equities Property Other Bonds Cash 20/10/11 Sep-11 Asset Class Split May-11 Mar-11 2010 Valuation Mar-10 Mar-09 2008 valuation 2005 valuation 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% De risking started in 2007 reduction in property exposure

100% 90% 80% 70% 60% Growth / Matching Mix 50% 40% 30% 20% 10% 0% 2005 valuation 2008 valuation Mar-09 Dec-09 Mar-10 2010 Valuation Dec-10 Mar-11 May-11 Sep-11 Oct-11 Growth Assets Matching Assets

2900 2800 Volatility Reduced Significantly 2700 2600 Main Fund Assets m 2500 2400 2300 2200 2100 2000 1900 Mar '05 valuation May '08 valuation Mar-09 Dec-09 Mar-10 Sept '10 Valuation Dec-10 Mar-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 20/10/11

Fund Performance 9 Months YTD Concensus Managed Fund MSCI World Equity ( ) eircom Main Superannuation Fund 2.0% 0.0% -2.0% -4.0% -6.0% +1.1% -8.0% -9.4% -10.0% -12.0% -11.8% Consensus Managed Fund MSCI World Equity ( ) eircom Superannuation Fund

Strong Governance Model in place Trustees & Company Company & Trade Unions Volatility & Costs Reduced Triggers agreed for further de risking if opportunity presents Ongoing & active review of Fund and Market Performance Current Position

THANK YOU Jim Foley, Eircom