Motorola 2012 Annual Report Download - page 42

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contribute $100 million above and beyond our legal requirement to our U.S. pension plans over the next five years. We and the
PBGC entered into this agreement as we were in the process of separating Motorola Mobility and pursuing the sale of certain
assets of the Networks business. We made $250 million of pension contributions to our U.S. pension plans over the amounts
required in 2011, of which $100 million fulfilled the PBGC financial obligation. As a result, we have no further financial
obligations under this agreement with the PBGC. During 2013, we expect to make cash contributions of approximately $300
million to our U.S. pension plans and approximately $30 million to our non-U.S. pension plans.
Our pension deficit is impacted by the volatility of corporate bond rates which are used to determine the plan discount
rate as well as returns on the pension plan asset portfolio. The discount rate used to measure the U.S. liability at the end of
2012 was 4.35%, compared to 5.1% in the prior year. As a result of the decrease in the discount rate, net of contributions and
other factors, our total underfunded U.S. pension at year end increased to approximately $2.9 billion. As of December 31,
2012, changing the U.S. pension plans discount rate by one percentage point would change the U.S. pension plans net period
expense by:
1% Point
Increase
1% Point
Decrease
Increase (decrease) in:
U.S. pension plans net periodic pension expense $ (12)$ 8
Based on the December 31, 2012 valuation of the U.S. pension plans, we expect a decrease in net periodic pension costs
in 2013 as compared to 2012. The decrease is primarily due to changes in our loss amortization period, which was increased
from nine years, the previous estimated remaining service period, to 28 years, the average remaining participant lifetime. The
increase in amortization period reflects the change in mix of active and non-active employees remaining in the plan, as almost
all of our plan participants are no longer actively employed by the Company due to significant employee exits as a result of our
recent divestitures, including the distribution of Motorola Mobility and the sale of certain assets and liabilities of the Networks
business.
We maintained all of the U.S. pension liabilities and the majority of the non-U.S. pension liabilities following the
distribution of Motorola Mobility on January 4, 2011, and following the sale of certain assets and liabilities of the Networks
business to NSN on April 29, 2011. Retirement benefits are further discussed in the “Accounting Policies - Retirement
Benefits” section.
Investing Activities
Net cash provided by investing activities was $797 million in 2012, compared to $2.4 billion in 2011 and net cash
provided for investing activities of $523 million in 2010. The $1.6 billion decrease in net cash provided by investing activities
from 2011 to 2012 was primarily due to: (i) a $1.2 billion decrease in cash received from sales of investments and businesses
relating to the sale of certain assets and liabilities of the Networks business, and (ii) $433 million decrease in cash received
from net sales of Sigma Fund investments. The $1.9 billion increase in net cash provided by investing activities in 2011 from
2010 was primarily due to: (i) $1.1 billion increase in cash received from net sales of Sigma Fund investments, and (ii) $860
million increase in cash received from sales of investments and businesses relating to the sale of certain assets and liabilities of
the Networks business.
Sigma Fund: We and our wholly-owned subsidiaries invest most of our U.S. dollar-denominated cash in a fund (the
“Sigma Fund”) that allows us to efficiently invest our cash around the world. We had net proceeds of $1.1 billion from sales of
Sigma Fund investments in 2012, compared to $1.5 billion in net proceeds from sales of Sigma Fund investments in 2011 and
$453 million from sales of Sigma Fund investments in 2010. The aggregate fair value of Sigma Fund investments was $2.1
billion at December 31, 2012 (including $969 million held outside the U.S.), compared to $3.2 billion at December 31, 2011
(including $1.3 billion held outside the U.S.).
The Sigma Fund portfolio is managed by four independent investment management firms. The investment guidelines of
the Sigma Fund require that purchased investments must be in high-quality, investment grade (rated at least A/A-1 by Standard
& Poor's or A2/P-1 by Moody's Investors Service), U.S. dollar-denominated fixed income obligations, including certificates of
deposit, commercial paper, government bonds, corporate bonds and asset- and mortgage-backed securities. Under the Sigma
Fund's investment policies, except for obligations of the U.S. government, agencies and government-sponsored enterprises, no
more than 5% of the Sigma Fund portfolio is to consist of securities of any one issuer. The Sigma Fund's investment policies
further require that floating rate investments must have a maturity at purchase date that does not exceed thirty-six months with
an interest rate that is reset at least annually. The average interest rate reset of the investments held by the funds must be 120
days or less. The actual average maturity of the portfolio (excluding cash) was less than one month at both December 31, 2012,
and December 31, 2011.