Johnson Controls 2013 Annual Report Download - page 90

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90
be obligated to make up any shortfall in funds. Moreover, if the Company were to exit certain markets or otherwise cease making
contributions to these funds, the Company could trigger a withdrawal liability. Currently, the Company is not aware of any significant
multiemployer benefit plans for which it is probable or reasonably possible that the Company will withdraw from the plan. Any
accrual for a shortfall or withdrawal liability will be recorded when it is probable that a liability exists and it can be reasonably
estimated.
Plan Assets
The Company’s investment policies employ an approach whereby a mix of equities, fixed income and alternative investments are
used to maximize the long-term return of plan assets for a prudent level of risk. The investment portfolio primarily contains a
diversified blend of equity and fixed income investments. Equity investments are diversified across domestic and non-domestic
stocks, as well as growth, value and small to large capitalizations. Fixed income investments include corporate and government
issues, with short-, mid- and long-term maturities, with a focus on investment grade when purchased and a target duration close
to that of the plan liability. Investment and market risks are measured and monitored on an ongoing basis through regular investment
portfolio reviews, annual liability measurements and periodic asset/liability studies. The majority of the real estate component of
the portfolio is invested in a diversified portfolio of high-quality, operating properties with cash yields greater than the targeted
appreciation. Investments in other alternative asset classes, including hedge funds and commodities to diversify the expected
investment returns relative to the equity and fixed income investments. As a result of our diversification strategies, there are no
significant concentrations of risk within the portfolio of investments.
The Company’s actual asset allocations are in line with target allocations. The Company rebalances asset allocations as appropriate,
in order to stay within a range of allocation for each asset category.
The expected return on plan assets is based on the Company’s expectation of the long-term average rate of return of the capital
markets in which the plans invest. The average market returns are adjusted, where appropriate, for active asset management returns.
The expected return reflects the investment policy target asset mix and considers the historical returns earned for each asset category.