Northrop Grumman 2010 Annual Report Download - page 109

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A one-percentage-point change in the initial through the ultimate health care cost trend rates would have the
following effects:
$ in millions
1-Percentage-
Point Increase
1-Percentage-
Point Decrease
Increase (Decrease) From Change In Health Care Cost Trend Rates To
Post-retirement benefit expense $ 6 $ (7)
Post-retirement benefit liability 74 (86)
Plan Assets and Investment Policy
Plan assets are invested in various asset classes that are expected to produce a sufficient level of diversification and
investment return over the long term. The investment goal is to exceed the assumed actuarial rate of return over
the long term within reasonable and prudent levels of risk. Liability studies are conducted on a regular basis to
provide guidance in setting investment goals with an objective to balance risk. Risk targets are established and
monitored against acceptable ranges.
All investment policies and procedures are designed to ensure that the plans’ investments are in compliance with
ERISA. Guidelines are established defining permitted investments within each asset class. Derivatives are used for
transitioning assets, asset class rebalancing, managing currency risk, and for management of fixed income and
alternative investments. For the majority of the plans’ assets, the investment policies require that the asset
allocation be maintained within the following ranges as of December 31, 2010:
Asset Allocation Ranges
Domestic equities 10% – 30%
International equities 10% – 30%
Fixed income securities 30% – 50%
Real estate and other 10% – 30%
The table below provides the fair values of the company’s pension and VEBA trust plan assets at December 31,
2010, and 2009, by asset category. The table also identifies the level of inputs used to determine the fair value of
assets in each category (see Note 1 for definition of levels). The significant amount of Level 2 investments in the
table results from including in this category investments in pooled funds that contain investments with values
-99-
NORTHROP GRUMMAN CORPORATION