Docusign Envelope ID: 7C50003C-051D-4E0C-907A-F452AD5C4EA2
UNITED TECHNOLOGIES CORPORATION (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2023
NOTES TO THE FINANCIAL STATEMENTS
Included within the cash deposits and other net investment assets is an asset of £1,329k (2022: £5,334k) in respect of initial and variation margins arising from open futures contracts at the year end.
Forward foreign currency contracts
Fair value Assets
Fair value Liability
Currency bought
Currency sold
Number of contracts
Expires within
Nominal value
5,496
- -
GBP GBP USD
USD Euro GBP
7 2 1
3 months 3 months 3 months
162,979
36
6,172
-
(8)
169
5,532
(8)
The nominal value represents the sterling value of the foreign currency amount of the contract translated at the year end spot rate.
Swaps
Type of swap
Fair value Assets
Fair value Liability
Expires within
Notional principal
UK interest rate swap
1 – 33 years 1 – 39 years
145,800 152,600
-
(19,323)
Overseas interest rate swap
16,028
(67)
16,028
(19,390)
The notional principle of the swap is the amount used to determine the swapped receipts or payments. Collateral of £2,984k (2022: (£2,516k)) is held for the unrealised gain on swaps, comprising cash. This is held in accounts with seven (2022; seven) different banking institutions and is not included within the Scheme assets.
13 Asset Backed Funding
In June 2016, United Technologies Corporation, now known as RTX Corporation (RTC), the ultimate parent undertaking of the principal employer of the Scheme, established two Asset Backed Funding arrangements (“ABFs”), both in favour of the Scheme, with one f unded by Goodrich Aftermarket Services Limited and the other funded by Goodrich Controls Holdings Limited. The total contributed funding to the Scheme amounted to £320m and this contribution was then invested in two Special Purpose Vehicles (“SPVs”) backed by unsecured, interest-bearing loan notes at a total cost of £320m. The Scheme is the sole investor in the SPVs. The loan notes pay interest at a coupon rate of 4.1% pa (approximately £13.1m pa). Interest is paid half yearly in May and November and is subject to a deduction for expenses of up to £50k pa. The loan notes are redeemable at the total cost of £320m in June 2036. The ABF/SPV arrangements have in place a ‘Trigger - off mechanism’ which switches off cash flows to the Scheme in certain circumstances. The Trigger-off mechanism is activated when the funding level of the Scheme is equal to or exceeds 95% (including the value of the ABF/SPV) on an actuarial buy-out basis. The coupon/interest on the loan notes are then suspended until the sooner of the funding level on the relevant basis falling below 95% or the end of the arrangements in June 2036. In terms of the latter, the Scheme has the right to the principal amount of the loan notes (£320m) and any suspended income payments not paid to the Scheme, subject to the total amount being capped by the value (at that time) of the buy-out deficit in the Scheme. The valuation of the ABF/SPV arrangements recognises the expected economic benefit the Scheme derives from the related cash flows. The cash flows largely reflect the profile of payments associated with the loan notes, namely the annual coupon/interest under the loan notes and the bullet (re)payment of £320m at the end
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