United Technologies 2011 Annual Report Download - page 75

Download and view the complete annual report

Please find page 75 of the 2011 United Technologies annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 96

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The estimated amount that will be amortized from
accumulated other comprehensive loss into net periodic
pension cost in 2012 is as follows:
(Dollars in millions)
Net actuarial loss $722
Prior service credit (12)
Transition obligation 1
$ 711
Major assumptions used in determining the benefit obligation
and net cost for pension plans are presented in the following
table as weighted-averages:
BENEFIT
OBLIGATION NET COST
2011 2010 2011 2010 2009
Discount rate 4.7% 5.4% 5.4% 5.9% 6.1%
Salary scale 4.3% 4.4% 4.4% 4.4% 4.4%
Expected return on plan assets ——7.9% 8.0% 8.2%
In determining the expected return on plan assets, we
consider the relative weighting of plan assets, the historical
performance of total plan assets and individual asset classes,
and economic and other indicators of future performance. In
addition, we may consult with and consider the opinions of
financial and other professionals in developing appropriate
capital market assumptions. Return projections are also
validated using a simulation model that incorporates yield
curves, credit spreads and risk premiums to project long-term
prospective returns.
The plan’s investment management objectives include
maintaining an adequate level of diversification, to reduce
interest rate and market risk, and to provide adequate
liquidity to meet immediate and future benefit payment
requirements. The overall investment strategy targets a mix
of 65% growth seeking assets and 35% income generating
assets using a wide diversification of asset types, fund
strategies and investment managers. The growth seeking
allocation consists of global public equities in developed and
emerging countries, private equity, real estate and balanced
market risk strategies. Within public equities, 9% of the
portfolio is an enhanced equity strategy that invests in
publicly traded equity and fixed income securities, derivatives
and foreign currency. Investments in private equity are
primarily via limited partnership interests in buy-out
strategies with smaller allocations in distressed debt funds.
The real estate strategy is principally concentrated in directly
held U.S. core investments with some smaller investments in
international, value-added and opportunistic strategies.
Within the income generating assets, the fixed income
portfolio consists of a broadly diversified portfolio of
corporate bonds, global government bonds and U.S. Treasury
STRIPS. These investments are designed to hedge 40% of the
interest rate sensitivity of the pension plan liabilities.
2011 ANNUAL REPORT 73