Emerson 2010 Annual Report Download - page 48

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Future benefit payments for U.S. plans are estimated to be $164 in 2011, $173 in 2012, $184 in 2013, $194 in 2014,
$203 in 2015 and $1,137 in total over the five years 2016 through 2020. Based on foreign currency exchange rates
as of September 30, 2010, future benefit payments for non-U.S. plans are estimated to be $47 in 2011, $41 in 2012,
$46 in 2013, $48 in 2014, $55 in 2015 and $295 in total over the five years 2016 through 2020. In 2011, the Company
expects to contribute approximately $150 to its retirement plans.
The weighted-average assumptions used in the valuations of pension benefits were as follows:
u.s. plans non-u.s. plans
2008 2009 2010 2008 2009 2010
Assumptions used to determine
net pension expense:
Discount rate 6.25% 6.50% 5.50% 5.3% 5.9% 5.3%
Expected return on plan assets 8.00% 8.00% 8.00% 7.3% 6.0% 5.9%
Rate of compensation increase 3.25% 3.25% 3.00% 3.5% 3.5% 3.9%
Assumptions used to determine
benefit obligations:
Discount rate 6.50% 5.50% 5.00% 5.9% 5.3% 4.6%
Rate of compensation increase 3.25% 3.00% 3.00% 3.5% 3.9% 3.5%
The discount rate for the U.S. retirement plans was 5.0 percent as of September 30, 2010. An actuarially determined,
company-specific yield curve is used to determine the discount rate. Defined benefit pension plan expense for 2011 is
expected to be approximately $145 versus $132 in 2010. The expected return on plan assets assumption is determined
by reviewing the investment returns of the plans for the past 10 years and historical returns of an asset mix approxi-
mating Emerson’s asset allocation targets and periodically comparing these returns to expectations of investment
advisors and actuaries to determine whether long-term future returns are expected to differ significantly from the past.
The Company’s asset allocations at September 30, 2010 and 2009, and weighted-average target allocations are
as follows:
u.s. plans non-u.s. plans
2009 2010 target 2009 2010 target
Equity securities 64% 65% 60-70% 53% 51% 50-60%
Debt securities 32% 29% 25-35% 31% 31% 25-35%
Other 4% 6% 3-10% 16% 18% 10-20%
Total 100% 100% 100% 100% 100% 100%
The primary objective for the investment of plan assets is to secure participant retirement benefits while earning a
reasonable rate of return. Plan assets are invested consistent with the provisions of the prudence and diversification
rules of ERISA and with a long-term investment horizon. The Company continuously monitors the value of assets
by class and routinely rebalances to remain within target allocations. The strategy for equity assets is to minimize
concentrations of risk by investing primarily in companies in a diversified mix of industries worldwide, while targeting
neutrality in exposure to market capitalization levels, growth versus value profile, global versus regional markets, fund
types and fund managers. The approach for bonds emphasizes investment-grade corporate and government debt with
maturities matching a portion of the longer duration pension liabilities. The bonds strategy also includes a high yield
element which is generally shorter in duration. A small portion of U.S. plan assets is allocated to private equity partner-
ships and real asset fund investments for diversification, providing opportunities for above market returns. Leveraging
techniques are not used and the use of derivatives in any fund is limited to exchange-traded futures contracts and is
inconsequential.