Lockheed Martin 2011 Annual Report Download - page 81

As of December 31, 2011 and 2010, the assets associated with our foreign defined benefit pension plans were not
material and have not been included in the table above.
The following table presents the changes during 2011 and 2010 in the fair value of plan assets categorized as Level 3 in
the preceding table:
(In millions)
Private
Equity
Funds
Real
Estate
Funds
Hedge
Funds Other Total
Balance at January 1, 2010 $1,730 $125 $ 750 $ 58 $2,663
Actual return on plan assets:
Realized gains, net 123 — 1 2 126
Unrealized gains, net 103 7 13 — 123
Purchases, sales, and settlements, net 129 32 261 65 487
Transfers into (out of) Level 3 — — — 1 1
Balance at December 31, 2010 $2,085 $164 $1,025 $126 $3,400
Actual return on plan assets:
Realized gains (losses), net 171 25 (4) 2 194
Unrealized gains (losses), net 7 22 (11) (9) 9
Purchases, sales, and settlements, net 23 67 (183) 21 (72)
Transfers into (out of) Level 3 — — (2) 25 23
Balance at December 31, 2011 $2,286 $278 $ 825 $165 $3,554
Valuation techniques – Cash equivalents are mostly comprised of short-term money-market instruments and are valued
at cost, which approximates fair value.
U.S. equity securities and international equity securities categorized as Level 1 are traded on active national and
international exchanges and are valued at their closing prices on the last trading day of the year. For U.S. equity securities
and international equity securities not traded on an active exchange, or if the closing price is not available, the trustee obtains
indicative quotes from a pricing vendor, broker, or investment manager. These securities are categorized as Level 2 if the
custodian obtains corroborated quotes from a pricing vendor or categorized as Level 3 if the custodian obtains
uncorroborated quotes from a broker or investment manager.
Commingled equity funds are public investment vehicles valued using the Net Asset Value (“NAV”) provided by the
fund manager. The NAV is the total value of the fund divided by the number of shares outstanding. Commingled equity
funds are categorized as Level 1 if traded at their NAV on a nationally recognized securities exchange or categorized as
Level 2 if the NAV is corroborated by observable market data (e.g., purchases or sales activity).
Fixed income securities categorized as Level 2 are valued by the trustee using pricing models that use verifiable
observable market data (e.g. interest rates and yield curves observable at commonly quoted intervals), bids provided by
brokers or dealers, or quoted prices of securities with similar characteristics.
Private equity funds, real estate funds, hedge funds, and fixed income securities categorized as Level 3 are valued based
on valuation models that include significant unobservable inputs and cannot be corroborated using verifiable observable
market data. Valuations for private equity funds and real estate funds are determined by the general partners, while hedge
funds are valued by independent administrators. Depending on the nature of the assets, the general partners or independent
administrators use both the income and market approaches in their models. The market approach consists of analyzing
market transactions for comparable assets while the income approach uses earnings or the net present value of estimated
future cash flows adjusted for liquidity and other risk factors.
Commodities categorized as Level 1 are traded on an active commodity exchange and are valued at their closing prices
on the last trading day of the year. Commodities categorized as Level 2 represent shares in a commingled commodity fund
valued using the NAV, which is corroborated by observable market data.
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