Emerson 2012 Annual Report Download - page 48

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46 | 2012 Annual Report
The discount rate for the U.S. retirement plans was 4.0 percent as of September 30, 2012. An actuarially determined,
company-specific yield curve is used to determine the discount rate. The expected return on plan assets assumption is
determined by reviewing the investment returns of the plans for the past 10 years plus longer-term historical returns
of an asset mix approximating the Company’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. Defined benefit pension plan expense for 2013 is expected to be approximately $230,
versus $173 in 2012.
The Company’s asset allocations at September 30, 2012 and 2011, and weighted-average target allocations are as follows:
u.s. plans non-u.s. plans
2011 2012 target 2011 2012 target
Equity securities 62% 64% 60-70% 50% 55% 50-60%
Debt securities 30% 27% 25-35% 32% 30% 25-35%
Other 8% 9% 3-10% 18% 15% 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
partnerships 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.
The fair values of defined benefit plan assets as of September 30, organized by asset class and by the fair value
hierarchy of ASC 820 as outlined in Note 1, follow:
leVel 1 leVel 2 leVel 3 total percentage
2012
U.S. equities $ 926 559 129 1,614 35%
International equities 442 495 937 21%
Emerging market equities 68 197 265 6%
Corporate bonds 528 528 12%
Government bonds 551 551 12%
High yield bonds 148 148 3%
Other 183 181 121 485 11%
Total $1,619 2,659 250 4,528 100%
2011
U.S. equities $ 766 443 145 1,354 35%
International equities 476 291 767 20%
Emerging market equities 59 128 187 5%
Corporate bonds 522 522 14%
Government bonds 509 509 13%
High yield bonds 130 130 3%
Other 120 161 122 403 10%
Total $1,421 2,184 267 3,872 100%