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UTC (UK) Pension Scheme - Annual Report & Chair's Statement

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UTC (UK) Pension Scheme - Annual Report & Chair's Statement

UTC (UK) PENSION SCHEME ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

Registrar of Occupational and Personal Pension Schemes Registration Number 00723633RR

UTC (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2020 CONTENTS

2 to 3

Trustee and advisers

4 to 12

Trustee’s report

13 to 22

Statement regarding DC governance

Actuarial certificate

24 to 26

Independent auditors’ report

Fund account

Statement of net assets available for benefits

29 to 41

Notes to the financial statements

Independent auditors’ statement about contributions

Summary of contributions

44 to 45

Members’ information

UTC Common Investment Fund – Accounts Implementation Statement

APPENDIX I APPENDIX II

UTC (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2020 TRUSTEE AND ADVISERS UTC Pension Trust Limited The directors of the Trustee company are as follows: J Fazzino I Hayward * S Hill K Levine G Smart (Chairman) AR Smith * * Member nominated directors

Trustee

Secretary to the Trustee

J Beake

Principal employer

Ceesail Limited

Participating employers

Carrier Refrigeration UK Limited** Chubb Fire Limited** Claverham Limited** Crompton Technology Group Limited Delavan Limited Goodrich Actuation Systems Limited Goodrich Control Systems Hamilton Sundstrand International Corporation** HS Marston Aerospace Limited

Kidde Graviner Limited** Kidde Products Limited** Otis Limited** Page Aerospace Limited**

Rosemount Aerospace Limited UTC Fire & Security UK Limited** ** Ceased participation on 31 March 2020

Actuary

O McCulloch FIA, Barnett Waddingham

Scheme administrator

Buck Consultants (Administration & Investment) Limited Mercer Limited (in respect of the Goodrich section)

Independent auditors

PricewaterhouseCoopers LLP

Bankers

Lloyds Bank Plc

Covenant Advisers

Lincoln Pensions

Legal advisers

Shoosmiths LLP

UTC (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2020 TRUSTEE AND ADVISERS

Committees

Benefits Sub-Committee

Investment custodians

Bank of New York Mellon

Investment adviser

Barnett Waddingham LLP – Investment advisers to the UTC Common Investment Fund

Investment managers

UTC Pension Trust Limited – Administrator to the UTC Common Investment Fund BlackRock Investment Management (UK) Limited First Eagle Investment Management LLC Insight Investment Management Legal & General Assurance (Pensions Management) Limited M & G Investment Management Limited Phoenix Life Ruffer LLP Aviva Life & Pensions UK Limited Legal & General Assurance (Pensions Management) Limited Phoenix Life Prudential Scottish Widows Standard Life Assurance Limited Utmost Life & Pensions (until July 2020)

AVC providers

UTC (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2020 TRUSTEE’S REPORT

Introduction The Trustee is pleased to present its report on the UTC (UK) Pension Scheme ("the Scheme") for the year ended 31 December 2020. The Scheme was established on 2 January 2009 as a vehicle for consolidating a number of legacy pension arrangements which had existed through various UK based companies within the United Technologies Corporation (‘UTC’) group. In accordance with HMRC requirements the Scheme is registered under Chapter 2, Part 4 of the Finance Act 2004. As a consequence both employee and employer contributions are normally eligible for tax relief and income and capital gains earned by the Scheme receive preferential tax treatment. Closure of the Scheme to the future accrual of benefits The participating employers of the Scheme commenced consultation with active members in September 2019 with regard to a proposal to close the Scheme to the future accrual of benefits. The consultation process concluded in November 2019 (Carrier and Otis businesses) and December 2019 (Collins Aerospace businesses), following a 60 day consultation period as required by law. Following a period of reflection the participating employers decided to proceed with the closure which became effective on 31 March 2020. The affected members were informed of this decision in notices issued by the participating employers in December 2019. The Principal employer issued a formal notice of termination of the Scheme to the future accrual of benefits to the Trustee on 17 January 2020. As a consequence from 31 March 2020 no further benefits will accrue in the Scheme. Separation of United Technologies Corporation In November 2018 UTC announced that it was separating into three separate businesses comprising of Carrier, Otis and UTC. The separation took place on 3 April 2020. On the same date UTC merged with Raytheon Company to form Raytheon Technologies Corporation. In light of the UTC separation, the Trustee negotiated a revised parent guarantee, to replace the parent guarantee previously provided by Ceesail Limited. The replacement guarantee was executed on 31 March 2020 and is provided by United Technologies Corporation (now Raytheon Technologies Corporation). A Deed of Release was also executed on 31 March 2020, releasing Ceesail Limited from the parent guarantee that was previously in place. In conjunction with the negotiations in respect of the revised parent guarantee, and the closure of the Scheme to the future accrual of benefits on 31 March 2020, a number of the Scheme’s participating employers ceased to participate in the Scheme with effect from that date, as noted on page 2. Flexible Apportionment Arrangements were executed as at the same date, to apportion the liabilities of the ceasing participating employers to HS Marston Aerospace Limited, a remaining participating employer.

UTC (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2020 TRUSTEE’S REPORT

Payments Deed As a consequence of the closure of the Scheme to future accrual, the new parent guarantee provided by Raytheon Technologies Corporation, and finalisation of the actuarial valuation at 31 December 2018, a revised Payments Deed was executed on 31 March 2020 setting out the contributions required to be paid by the Company to the Scheme in light of these events. Rule changes A deed of amendment was executed on and became effective from 1 September 2020. In summary the rules were amended to: - Alter the definition of Civil Partner and rules to include civil partnerships of the opposite sex in light of the Civil Partnership (Opposite Sex) Regulations 2019; - To enable the Trustee to review ill health early retirements before Normal Retirement Date where the member has retired from deferred status; Trustee The Trustee of the Scheme is a company called UTC Pension Trust Limited (‘the Trustee’). The directors of the Trustee have essentially the same responsibilities as if they were individual trustees. The Trustee has responsibility for setting the strategy and for managing the Scheme and the directors usually meet at least four times a year for this purpose. Further or fewer meetings may be scheduled depending on matters requiring consideration by the Trustee during the year. All occupational pension schemes must implement arrangements that provide for at least one-third of the total number of directors of the Trustee company to be member-nominated. The arrangements for the nomination and selection must be proportionate, fair and transparent. The Articles of Association of the Trustee contain provisions for the appointment and removal of Trustee company directors and the board ordinarily comprises of six directors. Four of these individuals are appointed by Ceesail Limited, the Principal employer of the Scheme, and are employer nominated. The remaining two positions are filled by member nominated directors who are appointed in accordance with the nomination and selection procedures applicable under Section 242 of the Pensions Act 2004. A list of the directors is shown on page 2 of this report. Trustee fees are shown in note 9 to the financial statements. The Trustee periodically reviews registers of risks and conflicts to ensure that appropriate internal controls are in place and remain effective and have appointed professional advisers to support them in delivering the Scheme objectives. These professionals are detailed on pages 2 and 3. The Trustee has also established a Benefits Sub-committee (‘BSC’) which comprises of a minimum of three individuals. Currently three directors of UTC Pension Trust Limited and the Secretary to the Trustee are appointed to the BSC. The BSC has full delegated authority from the Trustee Board to initiate, conclude and action a number of powers or decisions without the need for further consultation with, or authorisation from the Trustee Board, including, but not limited to, the exercise of Trustee discretions regarding the distribution of death benefits and determining ill health retirements, and to oversee administrative matters relating to the Scheme.

UTC (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2020 TRUSTEE’S REPORT

Financial development of the Scheme The financial statements have been prepared and audited in compliance with regulations made under section 41 (1) and (6) of the Pensions Act 1995. Significant developments affecting the financial position of the Scheme during the year include:

 The overall value increased by £189.5m from £2,377.7m to £2,567.2m comprising; o Return on investments £271.4m. o Reduction from dealing with members £81.9m.

Membership Changes in membership of the Scheme during the year were as follows: Defined Benefits Members Active members Deferred

Dependants/ beneficiaries

Pensioners Pensioners

Total

Members at 31 December 2019

877 (7) 870

3,718 (13) 3,705

4,109

659

9,363 (10) 9,353

Prior year adjustment

Adjusted membership at 1 January 2020

4,110

668

Members retiring

(24)

(177)

201

- - - -

Death in service/deferment

(1)

(6) 845 (58)

- - -

(7)

Members leaving prior to pensionable age Members leaving with refund/transfer out Pensioners who died in the year New spouse and dependent pensions Dependent pensions ceasing in the year Trivial commutations

(845)

- - - - -

(58) (11) (136)

(6)

(1)

(4)

- - -

(111)

(25)

- -

54 (4)

Membership as at 31 December 2020

4,303

4,199

689

9,191

Prior year adjustments primarily refer to members who have leave dates in the previous accounting year who are processed after the year end. Typically this is leavers in December. The above include 7 (2019: 7) members for whom the Scheme is in receipt of annuity payments. Transfer values Cash equivalents paid during the year with respect to transfers have been calculated and verified in the manner prescribed by the Pensions Schemes Act 1993 and do not include any allowance for discretionary benefits.

UTC (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2020 TRUSTEE’S REPORT

Pension increases Increases to pensions in payment for defined benefit members in the period are dependent upon the rules of their legacy pension arrangement and when the benefits were accrued and the minimum and maximum rates of increase for each section are set out in the table below. Deferred pensions are increased in accordance with statutory requirements. None of the increases were discretionary.

Minimum level of increase

Maximum level of increase

Section

Claverham

1.7% 1.7% 2.4% 1.7% 2.4% 1.7% 0.5% 1.7% 2.4% 1.7% 1.7%

2.4% 5.0% 3.0% 2.4% 2.4% 2.8% 1.6% 5.0% 3.0% 3.0% 5.0%

Goodrich

Haskel

HMD

HSIC

H S Marston [IMI]

H S Marston [Facsimile]

Kidde

Linde

Otis

Page

Report on actuarial liabilities As required by Financial Reporting Standard 102, ‘The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland’ (FRS 102), the financial statements do not include liabilities in respect of promised retirement benefits. Under section 222 of the Pensions Act 2004, every scheme is subject to the Statutory Funding Objective, which is to have sufficient and appropriate assets to cover its technical provisions, which represent the present value of benefits to which members are entitled based on pensionable service to the valuation date. This is assessed at least every three years using assumptions agreed between the Trustee and the employers and set out in the Statement of Funding Principles, a copy of which is available to members on request. The latest valuation as at 31 December 2018 was signed on 13 March 2020. A summary of the funding position, in accordance with the Statutory Funding Objective, at the valuation date, was as follows: Value of assets available to meet technical provisions £2,140m Value of technical provisions £2,086m Past service surplus £54m Funding ratio 103%

UTC (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2020 TRUSTEE’S REPORT

The value of technical provisions is based on Pensionable Service to the valuation date and assumptions about various factors that will influence the Scheme in the future. The following significant actuarial assumptions have been used in the calculations;  Discount interest rate: Determined by taking into account market indicators of the returns available at the date of the valuation and the long-term strategic allocation of assets agreed by the Trustee after taking professional advice. The return on Government bonds will be taken as a suitable market index yield. As a proportion of the Scheme’s funds are invested in assets such as equities which would be expected to outperform Government bonds over the long term, an allowance will be made for this in the discount rate. The allowance is determined by the Trustee based on information provided by its professional advisers. For the period 2019 – 2027 the discount rate is the Bank of England Gilt Yield plus 1.18% pa. From 2028 the discount rate reduces every three years reaching the Bank of England Gilt Yield plus 0.70% pa in 2046.  Future Retail Price inflation: By looking at the cost of investing in Government bonds with payments linked to inflation compared to the cost of investing in Government bonds not linked to inflation, it is possible to arrive at a figure for the average market view of future price inflation. This will then be compared to the latest Treasury targets for inflation in the UK, when deriving the assumption to use. A deduction may be made for the inflation risk premium implicit within Government bonds.  Future consumer Price inflation: The CPI inflation assumption will be based on the RPI inflation assumption less a deduction of 0.7% to reflect the expected difference between RPI and CPI inflation over the long-term.  Pension increases: Derived from the term dependent rates for future retail prices and consumer price inflation allowing for the caps and floors on pension increases according to the provisions in the Scheme’s rules.  Pay increases: Salaries will normally be assumed to increase by 1.25% more than the RPI inflation assumption. This assumption may be adjusted following discussion with the Employer as to likely future salary increases.  Mortality: The rates of mortality assumed will reflect the latest reports published by the Continuous Mortality Investigation Bureau most relevant to the membership of the Scheme, with allowance for expected future improvements in longevity. This assumption may be adjusted on the advice of the Scheme Actuary or in the light of evidence relating to the actual mortality experience of the Scheme, the industry in which the members work, or the distribution of pension payment amounts. For the period pre and post retirement, standard tables S3PMA with a scaling factor of 95% for males and S3PFA with a scaling factor of 105% for females was used. If the Scheme had no shortfall (or surplus) and its assets were exactly equal to the technical provisions, contributions would still be required to cover the cost of benefits expected to accrue to members in the future. The Projected Unit Method has been used to calculate this future service contribution rate. United Technologies Corporation (now Raytheon Technologies) and the participating employers are required to pay or procure the payment of contributions to the Scheme, or to make such other payments as are from time to time required, by the most recent Schedule of Contributions and Payments Deed as amended from time to time. As shown above the actuarial valuation at 31 December 2018 revealed a funding surplus of £54m. Consequently no deficit reducing contributions are currently payable.

UTC (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2020 TRUSTEE’S REPORT

Unless the Scheme funding level at 31 August each year (as estimated by the Scheme Actuary) is equal to or more than 115%, the Employers are required to pay contributions towards the Scheme expenses. In the year to 31 December 2020 this resulted in a contribution of £2.1m being received. Additional employer contributions are also required to cover the cost of the risk and scheme based Pension Protection Fund Levy payments and any benefit augmentations requested by an employer and approved by the Trustee. The next actuarial valuation is due as at 31 December 2021. Equalisation of GMP liabilities The Scheme is required to equalise GMP liabilities which will result in an increase in liabilities to provide benefits and the funding deficit. A reserve of 1% of the total liabilities of the Scheme has been included in the actuarial valuation at 31 December 2018. The reserve has deliberately been set prudently, given there remains significant uncertainty over how this might be implemented in practice. A detailed estimate of the past service element, which would be applicable for the Scheme financial statements, has yet to be estimated and the Trustee considers that it is likely to be immaterial. Investments The Trustee has produced a Statement of Investment Principles as required by Section 35 of the Pensions Act 1995 and a copy is available on request. All Scheme investments are held within the UTC Common Investment Fund (‘CIF’) except for Asset Backed Funding arrangements and Insurance policies relating to Sutrak section members as detailed below and AVCs. The day to day management and the safe custody of the Scheme's investments has been delegated by the Trustee to UTC Pension Trust Limited, the Administrator of the CIF (‘the CIF Administrator’) as shown on page 3 of this report. The CIF Administrator oversees the CIF on behalf of participating pension plans in the United Kingdom. The Statement of Investment Principles agreed by the Trustee of the Scheme determines the parameters within which the Administrator of the CIF must act in respect of the Scheme. Having regard to the Scheme’s Statement of Investment Principles, the CIF Administrator prepared an Investment Implementation Policy. A copy of the latest Investment Implementation Policy agreed by the CIF Administrator is dated August 2020 and a copy is available on request. The Trustee holds separately identifiable assets within the CIF rather than a single holding representing the total value of the combined asset classes. This gives the Scheme flexibility in the selection of asset classes. The CIF financial statements for the year ended 31 December 2020 are appended to these financial statements. The investment managers are remunerated on a fee basis, based on the value of investments under their management. Investment manager fees are reviewed on a periodic basis by the CIF Administrator. As previously reported, the Trustee has agreed to implement a pooled Liability Driven Investment (LDI) mandate with Insight Investment Management (‘Insight’) in order to de-risk the investment portfolio of the Scheme. The implementation of LDI has been phased in during the year.

UTC (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2020 TRUSTEE’S REPORT

During the period from February to November 2020 Insight purchased additional gilts and entered in to ‘repo’ contracts in order to gradually increase the inflation and interest rate hedging of the Scheme from approximately 40% and 45% respectively, up to 65% overall of the liabilities on a self-sufficiency basis (using a discount rate of gilts plus 0.375%), or 75% of the Technical Provisions liabilities. A subsequent decision was made by the Trustee to increase this hedging further to 75% of the overall liabilities on a self-sufficiency basis over the period January to June 2021. From 1 June 2016 the Scheme entered into Asset Backed Funding arrangements which involved the investment in two loan notes with an aggregate value of £320m. The Asset Backed Funding arrangements are not held and managed within the CIF and are not included in the benchmark asset allocations. The Scheme’s former defined contribution investments in respect of the Sutrak section are held and managed by Phoenix Life Limited outside the CIF. AVC arrangements are also managed by the providers shown on page 3 of this report outside the CIF. The Scheme's investments are made in accordance with the Occupational Pension Schemes (Investment) Regulations 2005. Custodians The CIF Administrator is responsible for appointing and replacing custodians. Bank of New York Mellon has been the overall custodian since 11 November 2009. The Trustee is satisfied that the CIF has controls in place to ensure that the investment management and the custody are adequately controlled. Investment performance The returns for the UTC (UK) Pension Scheme assets held within the CIF have been as follows:  Year to 31 December 2020 – 10.63% increase.  3 years to 31 December 2020 – 5.96% increase. Employer related investments At 31 December 2020, 0.02% of the Scheme assets were indirectly invested in the employer through pooled investment vehicles with Legal & General and BlackRock. Environmental, Social and Governance considerations The Trustee believes that Environmental, Social and Governance (“ESG”) factors, including but not limited to climate-related risks, are potentially financially material and therefore has a policy to take these into account, alongside other factors, in the selection, retention and realisation of investments. However, these factors do not take precedence over other financial and non-financial factors, including but not limited to historical performance or fees. The Trustee may consider both financial and non-financial factors when selecting or reviewing the Scheme’s investments. The Trustee does not apply any specific ethical criteria to its investments. Decisions relating to the financial materiality of ESG considerations are delegated to the investment managers used by the Scheme. The Trustee is aware of the approach that each of the investment managers take in relation to ESG considerations.

UTC (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2020 TRUSTEE’S REPORT

The Trustee believes that good stewardship and positive engagement can lead to improved governance and better risk-adjusted investor returns. The Trustee delegates the exercise of rights (including voting rights) attached to the Scheme’s investments to the investment managers. The managers are all signatories to the UK Stewardship Code and/or UN Principles of Responsible Investment. In selecting, monitoring and reviewing the investment managers, where appropriate, the Trustee will consider investment managers’ policies on engagement and how these policies have been implemented. The Trustee has not considered it appropriate to take into account individual members’ views when establishing the policy on ESG factors, engagement and voting rights. The Statement of Investment Principles of the Scheme was updated with effect from 1 October 2019 and was updated further with effect from 1 October 2020 to reflect the Trustee’s policy on ESG, as detailed above. Implementation Statement In conjunction with the Scheme investment adviser the Trustee has prepared an Implementation Statement covering the voting and engagement policies and the actions of investment fund managers used by the Scheme. A copy of this Implementation Statement is provided at Appendix II to these financial statements. COVID-19 Since March 2020, Covid-19 has had a profound effect on domestic and global economies, with disruption and volatility in the financial markets. The Trustee, in conjunction with their advisers, monitor the situation closely and review any actions that are deemed to be necessary. This includes monitoring the employer covenant, the operational impact on the Scheme and the Scheme’s investment portfolio. The extent of the impact on the Scheme’s investment portfolio, including financial performance, will depend on future developments in financial markets and the overall economy, all of which are uncertain and cannot be predicted.

Statement of Trustee’s responsibilities The Trustee’s responsibilities in respect of the financial statements

The financial statements, which are prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including the Financial Reporting Standard applicable in the UK and Republic of Ireland (“FRS 102”), are the responsibility of the Trustee. Pension scheme regulations require, and the Trustee is responsible for ensuring, that those financial statements:  show a true and fair view of the financial transactions of the Scheme during the Scheme year and of the amount and disposition at the end of the Scheme year of its assets and liabilities, other than liabilities to pay pensions and benefits after the end of the Scheme year; and  contain the information specified in Regulation 3A of the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, including making a statement whether the financial statements have been prepared in accordance with the relevant financial reporting framework applicable to occupational pension schemes.

UTC (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2020 STATEMENT REGARDING DC GOVERNANCE

The Occupational Pension Schemes (Scheme Administration) Regulations 1996 (the “Administration Regulations”) require the Trustee to include an annual statement regarding governance of money purchase benefits in the annual report. Money Purchase Benefits During the Scheme year the Scheme has contained the following money purchase benefits:  Benefits transferred into the Goodrich (UK) Pension Scheme (“Goodrich”) by members of Goodrich on a money purchase basis and held in “transfer accounts” for each member, and subsequently transferred into the UTC (UK) Pension Scheme (“the Scheme”) as part of the bulk transfer of assets and liabilities from Goodrich to the Scheme on 1 June 2016 (“TACC Benefits”). In addition, the Scheme provides a number of benefits to members which are subject to an underpin. There is a possibility that these underpin benefits could, in the appropriate circumstances and at certain times, be money purchase benefits. These benefits may be summarised as follows:  Some TACC Benefits are subject to a Guaranteed Minimum Pension (GMP) underpin, so that the minimum benefit which must be provided from the TACC Benefits is the member’s GMP. If the value of the TACC Benefits for an individual member is greater than the GMP, this benefit will be money purchase in nature. In these circumstances, the benefits will be treated in the same way as other TACC Benefits, and the comments below about TACC Benefits will apply equally to these benefits. The Trustee has been informed that, during the Scheme year, the underpinned TACC Benefits of four members were money purchase in nature.  The Scheme also has a number of AVC policies with four providers. The vast majority (97%) of the assets are held with three providers. As the TACC benefits are determined to have been money purchase in nature during this Scheme year these AVC policies are subject to extra reporting which we have included in this Statement. We have taken a proportionate approach and reported on those AVC providers that hold the vast majority of assets. During the Scheme year, the Trustee undertook an exercise to review all of the Scheme’s AVC policies in April 2020. TACC Benefits As noted above, TACC Benefits are any benefits which were transferred into Goodrich on a money purchase basis and subsequently transferred to the Scheme on a money purchase basis on 1 June 2016. TACC Benefits are invested in the Scottish Widows (previously Zurich Assurance) AVC policy applicable to the Goodrich Section of the Scheme. Members with TACC Benefits are able to choose from the same range of investments as are applicable to those who have made AVCs to Goodrich or to the Goodrich Section of the Scheme. This means that they may invest in the Lifestyle Investment Option or may self-select their funds from the range available under the policy. There is no default arrangement applying to TACC Benefits for the purposes of the Administration Regulations. As there is no default arrangement, the requirement for a Statement of Investment Principles (SIP) prepared in accordance with regulation 2A of the Occupational Pension Scheme (Investment) Regulations 2005 does not apply. The Scheme is not being used as a qualifying scheme for automatic enrolment purposes. However, as the majority of members of the AVC policy invest using the Lifestyle Investment Option, further details of this option are provided below. Under the Lifestyle Investment Option, prior to ten years before the member’s selected retirement date, a member’s fund is invested as follows:

UTC (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2020 STATEMENT REGARDING DC GOVERNANCE

 75% in the SW Aquila 50/50 Global Equity Index CS1 Fund; and  25% in the SW Mercer Diversified Growth CS1 Fund.

The SW Aquila 50/50 Global Equity Index CS1 Fund invests primarily in equities, both in the UK and overseas markets. The fund has approximately 50% invested in UK company shares. The remaining 50% is split equally between investments in US, Europe (excluding the UK) and Far East companies. The fund aims to provide returns consistent with the markets in which it invests and provides broad exposure to countries around the world. The SW Mercer Diversified Growth Fund is a mixed asset fund, the objective of which is to outperform cash by 3% to 4% per year over rolling three year periods. This fund invests in assets which tend to produce higher levels of return than cash but with higher risk. Ten years from the selected retirement date a member’s fund is progressively switched into the SW BlackRock Sterling Liquidity CSW Fund in accordance with the following table:

Prior to Selected Retirement Age

SW Aquila 50/50 Global Equity Index CS1

SW Mercer Diversified Growth Fund CS1

SW BlackRock Sterling Liquidity CSW

% 75 75 65 55 45 35 25 15

% 25 25 35 45 55 55 50 45 40 30 15

More than 10 years

0 0 0 0 0

10 years 9 years 8 years 7 years 6 years 5 years 4 years 3 years 2 years 1 year

10 25 40 55 70 85

5 0 0 0

Less than 1 year 100 The SW BlackRock Sterling Liquidity CSW Fund is a money market fund, which aims to achieve an investment in line with wholesale money market short-term interest rates (specifically, to better the return of Seven Day LIBID before fees). 0 By investing in this manner, the Trustee expects to deliver growth over the member’s lifetime within the Scheme without excessive risk taking, and with an increased focus over the final ten years of reducing volatility to enable members approaching retirement to make financial plans for the period after retirement. The Trustee considers this approach to be in the best interests of relevant members and beneficiaries. Processing scheme transactions The Trustee has a specific duty to secure that core financial transactions (including the transfer of member assets into and out of the Scheme, transfers between different investments within the Scheme and payments to and in respect of members) relating to money purchase benefits are processed promptly and accurately. TACC Benefits Transactions in respect of TACC Benefits are undertaken on the Trustee’s behalf by the administrator of the Goodrich Section of the Scheme, Mercer, and its investment manager Scottish Widows. The Trustee has reviewed the processes and controls implemented by those organisations and considers them to be suitably designed to achieve these objectives. The Trustee has also agreed service levels, both in terms of timeliness

UTC (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2020 STATEMENT REGARDING DC GOVERNANCE

and accuracy, and reporting of performance against those service levels. In addition, Mercer provides additional oversight of the services provided by Scottish Widows, including an annual review of their capabilities.

The service level agreement in place with the administrators covers the processing of contributions, investment of contributions, payments into and out of the Scheme and responses to general member enquiries. The administrator provides quarterly reports to detail the service performance in each of these areas, relative to the service level agreements in place. The Trustee monitors compliance with the service levels at regular Trustee meetings. AVCs The vast majority of transactions relating to the Scheme’s AVCs are undertaken on the Trustee’s behalf by Scottish Widows. The Trustee has agreed service levels with Scottish Widows, both in terms of timeliness and accuracy against those service levels, covering the processing of contributions, investment of contributions, payments into and out of the Scheme and responses to general member enquiries. Scottish Widows (via Mercer) provide quarterly reports to detail the service performance in each of these areas, relative to the service level agreements in place. The Trustee monitors compliance with the service levels at regular Trustee meetings. Issues occurring during the year From the processes the Trustee has put in place to monitor core financial transactions, during the Scheme year it was identified that Scottish Widows failed to meet agreed service levels relating to payments out of AVCs to members at-retirement in a timely manner. Following discussions with Scottish Widows, it was identified that the leading cause for the underperformance was due to a significant increase in the numbers of members across Scottish Widows’ business as a whole requesting to access or transfer their DC benefits, in part due to the Covid-19 pandemic. The Trustees continue to monitor the quality of Scottish Widows service delivery closely and take action where appropriate with a view to bringing Scottish Widows performance back to agreed service levels. Assessment In the light of the above, the Trustee believes that these measures enable it to effectively monitor the promptness and accuracy of the core financial transactions of the Scheme’s TACC benefits and AVCs. Taking

UTC (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2020 STATEMENT REGARDING DC GOVERNANCE

the above into consideration and the issues relating to AVCs noted above, the Trustee is confident that all other core financial transactions over the Scheme year have been processed promptly and correctly, and that the Administration Regulations have been met. Charges and transaction costs The Administration Regulations require the Trustee to make an assessment of charges and transaction costs borne by members in respect of money purchase benefits and the extent to which those charges and costs represent good value for money for members. TACC Benefits The Trustee makes available a range of seven investment funds which may be chosen by members as an alternative to the Lifestyle Investment Option. These funds allow members to take a more tailored approach to managing their own pension investments. Three of these funds (see table above) comprise the Lifestyle Investment Option. These funds attract annual investment management charges as shown in the table below. Investment Fund Expense ratio Transaction Costs Incurred During Scheme Year SW Mercer Diversified Growth CS1 0.495% 0.207% SW Aquila UK Equity Index CSW 0.243% 0.000% SW Aquila 50/50 Global Equity Index CS1 0.243% 0.000% SW Aquila World ex UK Equity Index CS1 0.245% 0.000% SW Aquila Over 15 Years UK Gilt Index CSW 0.244% -0.036%* SW Threadneedle Pension Property CS1 0.880% 0.090% SW BlackRock Sterling Liquidity CSW 0.250% 0.011% * in certain circumstances the methodology used for calculating transaction costs (known as slippage) can lead to negative costs being reported. This can be, for example, where other market activity pushes the price of the asset being traded down, whilst the transaction was in progress, resulting in the asset being purchased for a lower price than when the trade was initiated. Illustrative examples of the cumulative effect over time of the application of charges, based on the assumptions detailed therein, are provided under the heading ‘Demonstrating the impact of costs and charges’ below. Other AVC policies There are three other AVC providers in addition to Scottish Widows mentioned above. The two other main providers are Legal and General and Standard Life. These providers cover the vast majority of members and assets and we only report on these other main providers in this section. Legal and General

Investment Fund

Expense ratio

Transaction Costs Incurred During Scheme Year

Global Equity 70:30 Index Over 15 years Gilts Index

0.184% 0.100% 0.257% 0.132% 0.100% 0.224% 0.125% 0.870% 0.213%

-0.010% 0.019% 0.031% -0.022% 0.065% -0.002% 0.003% -0.509% 0.026%

Multi Asset

UK Equity Index

Over 5 year Index Linked Gilts World (ex UK) Equity Index

Cash

Managed Property

Global Equity Market Weights 30:70 GBP 75% Hedged

UTC (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2020 STATEMENT REGARDING DC GOVERNANCE

Standard Life

Investment Fund

Expense ratio

Transaction Costs Incurred During Scheme Year

Standard Life Money Market Pension Fund SL BlackRock Managed (50:50) Global Equity Pension Fund Standard Life Deposit and Treasury Pension Fund SL iShares Over 15 Year Gilt Index Pension Fund SL Vanguard FTSE Developed Europe ex UK Pension Fund SL Vanguard FTSE UK All Share Index Pension Fund Standard Life Property Pension Fund Standard Life FTSE Tracker Pension Fund Standard Life Overseas Equity Pension Fund SL Vanguard FTSE Developed World ex UK Pension Fund Standard Life Multi Asset Managed (20-60% Shares) Pension Fund Standard Life At Retirement (Multi Asset Universal) Pension Fund Pension 2 With Profits 2 Fund* Pension 2 With Profits 2 2006 Fund*

1.01% 1.02% 1.01% 1.02% 1.02% 1.02% 1.03% 1.01% 1.01% 1.02%

0.000% 0.592% 0.081% -0.022% -0.025% 0.203% 0.178% 0.064% 0.529% -0.025% 0.409% 0.409% 0.113% 0.217% 0.121%

0.0% 0.0%

1.02%

1.04% 1.02% 0.75%

Standard Life Managed Pension Fund Pension With Profits One Fund

0.409% * There are no explicit fund management charge or additional expenses but when Standard Life calculate a with Profits value they take into account deductions for costs. These deductions are broadly the same as the management charges and additional expenses for investment linked funs with similar assets. Standard Life also make deductions, which may vary, for the cost of providing guarantees. AVC Changes during the Scheme Year On 1 January 2020, AVCs previously held with Equitable Life were transferred to Utmost Life and Pensions (Utmost) and the Equitable Life With-Profits Fund was closed, as part of the wider transfer of business. The decision to transfer was led by the two providers and upon provision of proposals that were considered at a Policyholders’ Meeting and Extraordinary General Meeting on 1 November 2019 where a vote was held. Ultimately, policyholders voted overwhelmingly in favour of the proposals, which also received High Court approval on 4 December 2019. The transfer of assets from Equitable Life to Utmost took place on 1 January 2020. Members invested in the Equitable Life With-Profits Fund received an uplift in value to compensate for guarantees lost as part of the unitisation process and were invested in the Utmost Secure Cash Fund up to the end of June 2020, from which the Trustee took the decision to provisionally invest these AVCs in the Utmost Money Market Fund so as to protect members from market volatility in the lead up to being transferred elsewhere. There were no explicit costs to members for the transition, either in selling units in the Equitable Life funds or buying units in the Utmost Funds. Therefore, members’ fund values immediately before and immediately after the transition were the same. In April 2020, the Trustee took advice from its advisers on the continued suitability of the Scheme’s AVC providers (including Utmost) and following this review, the Trustee determined that members would experience better value for money by having their Utmost AVCs invested in the Scottish Widows AVC arrangement.

UTC (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2020 STATEMENT REGARDING DC GOVERNANCE

Following a communication exercise in June 2020, on 20 July 2020 Utmost AVC funds were transferred into the Scottish Widows AVC arrangement and invested in the Lifestyle Investment Option. For completeness, details of the charges and transaction costs quoted by Utmost for the funds used by members during the Scheme Year are provided in the table below:

Utmost Fund (Citi Code)

Fund Annual Management Charge %pa

Annualised Reporting Period

Underlying Open Ended Investment Company “OEIC” Net Transaction Cost %pa [1]

Stocklending %pa [2]

Utmost Fund Transaction Cost %pa [3]

Utmost Total Charges Impact %pa [4]

0.50 0.50

Money Market UK Secure Cash Pension

0.50 0.50

31/12/2020 31/12/2020

0.001048 0.000000

0.000000 0.000000

Notes: [1] The costs for the underlying OEICs held by each Fund are now being calculated on the full arrival price slippage methodology. [2] When an Aberdeen Standard Investment fund lends stock it is entitled to receive 85% of the income earned. The remaining 15% belongs to the stocklending agent. When a JP Morgan fund lends stock it is entitled to receive 90% of the income earned. The remaining 10% belongs to the stocklending agent. The costs suffered by the fund are disclosed but not the income in accordance with regulations. [3] This is the cost incurred on the Fund when it purchases or sells the underlying asset (OEIC) as the price may include a dilution adjustment. The purpose of dilution is to ensure the OEIC performance is not impacted by large investments or disinvestments. [4] The total charges impact to policyholders on each Utmost Fund of costs at both Fund and underlying OEIC level and includes the annual management charge. Demonstrating the impact of costs and charges To demonstrate the impact of the costs and charges applied through the Scheme’s Scottish Widows AVC policy (of which TACC Benefits are invested alongside), illustrations have been produced in line with statutory guidance and the February 2018 guidance from the Department for Work & Pensions entitled “Cost and charge reporting: guidance for trustees and managers of occupational schemes”. These illustrations are set out on the following two pages, and are designed to cater for representative cross-sections of the membership. For each individual illustration, each savings pot has been projected twice; firstly to allow for the assumed investment return gross of the costs and charges of the fund, and then again, but adjusted for the cumulative effect of the costs and charges of the fund. To determine the parameters used in these illustrations, the Trustee has analysed the members invested over the reporting period and has taken into consideration the range of investment options offered to members. As a result of this analysis the Trustee has presented the following tables with accompanying notes and guidance. Given that the majority of assets are invested within Scottish Widows, the Trustee has decided not to include illustrations for any other provider.

UTC (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2020 STATEMENT REGARDING DC GOVERNANCE

Value for Members The Regulations require the Trustee to assess the extent to which the charges and transaction costs borne by members represent good value. These member borne deductions cover the cost of providing the investment management services, administration services and communications. Other costs including the cost of advice to support the governance of the Scheme are paid for by the employer. The Scottish Widows policy is overseen by Mercer as Investment Consultant and it is subject to their investment monitoring and their Operational Governance Reports. Mercer regularly report to the Trustee on the performance of the fund and of Scottish Widows as a provider of the largest AVC policy. Mercer look at many different factors in assessing that Scottish Widows continue to be a leading provider of pension benefits. Specifically for the purpose of this Governance Statement Mercer have confirmed that the charges are reasonable for each of the fund options that members can choose from and the performance of the funds, in absolute terms and relative to their objectives, delivered an improvement in outcomes for members who are invested. The provision of a lifestyle option and a number of self-select options enables members to tailor their investment to their individual circumstances. Also, Mercer have confirmed that the value provided by the quality of the administration services is evident from the quarterly governance reports which help the Trustee effectively monitor service level agreements. Whilst there have been administrative issues experienced during the year, the Trustee continues to monitor Scottish Widows’ service levels and note that there has been very few member complaints. Consequently, the Trustee is satisfied with the performance of the investment funds and the Scheme’s wider offering to members. It is worth noting the assessment considered just those services for which members bear or share the costs and with this in mind the Trustee believes that the Scheme represents good value for its members. During the Scheme Year, the Trustee undertook a wider review of the Scheme’s AVC arrangements in April 2020 and December 2020 to establish their considered suitability. The review determined that all of the Scheme’s AVC arrangements included in the review provided value for members or that members would be worse-off if transferred elsewhere. The only exception to this outcome was the Scheme’s Utmost AVC arrangement which the Trustee determined did not provide value for members and was subsequently transferred into the Scheme’s primary AVC arrangement with Scottish Widows on 20 July 2020. Trustee knowledge and understanding The Trustee Board comprises six trustee directors. Sections 247 and 248 of the Pensions Act 2004 set out the requirement for Trustee Directors to have appropriate knowledge and understanding of the law relating to pensions and trusts, the funding of occupational pension schemes, investment of scheme assets and other matters to enable them to exercise their functions as trustees properly. This requirement is underpinned by guidance in the Pension Regulator’s Code of Practice 07. The comments in this section relate to the Trustee as a body in dealing with the whole Scheme and are not restricted to money purchase benefits. The Trustee aims to remain conversant with the Scheme’s trust deed and rules as well as all other Scheme documents such as the Statement of Investment Principles (SIP), the risk register and current policies, e.g. conflicts of interest. They do so through their experience in governing the Scheme, as well as specific activities over the scheme year and access to professional advice. The Trustee aims to achieve and maintain knowledge and understanding of the law relating to pensions and trusts, the funding of occupational schemes and investment of scheme assets through a combination of training, taking professional advice and the inclusion of a professional trustee as a trustee director and chair. The Trustee has put in place arrangements for ensuring that directors take personal responsibility for keeping themselves up-to-date with relevant developments and carry out a self-assessment of training needs which includes a questionnaire. The Secretary to the Trustee reviews the self-assessments and arranges for training

UTC (UK) PENSION SCHEME YEAR ENDED 31 DECEMBER 2020 ACTUARIAL CERTIFICATE

GARRTER (UK) PENSTON SCHEME YEAR ENDED 31 DECEMBER 2O2O Independent auditors'report to the Trustee of Carrier (UK) Pension Scheme

Report on the audit of the financial statements Opinion ln our opinion, Carrier (UK) Pension Scheme's financial statements:

show a true and fair view of the financial transaction$ of the $cheme during the year ended 31 December 2020, and of the amount and disposition at that date of its assets and liabilities, other than liabilities to pay pensions and benefits after the end of the year; have been properly prepared in accordance with United Kingdom Gengrally Accepted Accounting Practice (United Kingdom Accounting Standards comprising FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of lreland", and applicable law), and contain the information specified in Regulation 34 of the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996.

We have audited the financial statements, included in the Annual Report and Financial Statements, which comprise: the statement of net assets available for benefits as at 31 December 2020; the fund account for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies. Basis for opiniorr We conducted our audit in accerdance with lnternational Standards on Auditing (UK) ("lSAs (UK)") and applicable law. Our responsibilities under lSAs (UK) are further described in the Auditors' responsibilities for the audit of the financial statements section gf our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. -* We remained independent of the Scheme in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the FRC's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. Conclusions relating to going eoncern Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Scheme's ability to continue as a going concern for a period of at least twelve months from when the financial staternents are authorised for issue. Independence

ln auditing the financial statements, we have concluded that the Trustee's use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the Scheme's ability to continue as a going concern.

Our responsibilities and the responsibilities of the Trustee with respect to going concern are described in the relevant sections of this report.

Reporting on other information The other information comprises all the information in the Annual Report and Financial $tatements other than the financial statements, our auditors' report thereqn and our auditors' statement about contributions. The Trustee is respOnsible fgr the ether information. Our oipinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or any form of assurance thereon.