Union Pacific 2009 Annual Report Download - page 73

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73
Benefit Payments
The following table details expected benefit payments for the years 2010 through 2019:
Millions of Dollars Pension OPEB
2010 $ 139 $ 28
2011 144 28
2012 149 28
2013 155 28
2014 162 28
Years 2015 -2019 885 130
Asset Allocation Strategy
Our pension plan asset allocation at December 31, 2009 and 2008, and target allocation for 2010, are as
follows:
Target
Allocation
2010
P
ercentage of Plan Assets
December 31,
2009 2008
Equity securities 47% to 63% 61% 68%
Debt securities 30% to 40% 31 23
Real estate 2% to 8% 4 6
Commodities 4% to 6% 4 3
Total 100%100%
The investment strategy for pension plan assets is to maintain a broadly diversified portfolio designed to
achieve our target of an average long-term rate of return of 8%. While we believe we can achieve a long-
term average rate of return of 8%, we cannot be certain that the portfolio will perform to our expectations.
Assets are strategically allocated among equity, debt, and other investments in order to achieve a
diversification level that dampens fluctuations in investment returns. Asset allocation target ranges for
equity, debt, and other portfolios are evaluated at least every three years with the assistance of an
independent external consulting firm. Actual asset allocations are monitored monthly, and rebalancing
actions are executed at least quarterly, if needed.
The pension plan investments are held in a Master Trust, with The Northern Trust Company. The
majority of pension plan assets are invested in equity securities, because equity portfolios have
historically provided higher returns than debt and other asset classes over extended time horizons, and are
expected to do so in the future. Correspondingly, equity investments also entail greater risks than other
investments. Equity risks are balanced by investing a significant portion of the plan’ s assets in high
quality debt securities. The average credit rating of the debt portfolio exceeded A+ as of December 31,
2009 and 2008. The debt portfolio is also broadly diversified and invested primarily in U.S. Treasury,
mortgage, and corporate securities. The weighted-average maturity of the debt portfolio was 12 and 5
years at December 31, 2009 and 2008, respectively. The weighted-average maturity increased
significantly in 2009 as a new long-term bond allocation was added to the investment portfolio. This new
long-term bond allocation was established primarily to mitigate funding status risk associated with
potential interest rate changes.