Raytheon 2004 Annual Report Download - page 104

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86
Notes to Consolidated Financial Statements (Continued)
The strategic asset allocation of the Company’s domestic Pension Benefits and Other Benefits plans is diversified
with an average and moderate level of risk consisting of investments in equity securities (including domestic and
international equities and the Company’s common stock), debt securities, real estate, and other areas such as
private equity and cash. The Company seeks to produce a return on investment over the long-term commensurate
with levels of investment risk which are prudent and reasonable given the prevailing capital market expectations.
Policy range allocations are 50 to 76 percent for equity securities, 20 to 40 percent for debt securities, 2 to 7 percent
for real estate, and 2 to 17 percent for other areas. The long-term return on asset assumption for the Company’s
domestic Pension Benefits and Other Benefits plans for 2005 is 8.75%. The long-term return on asset assumption
for the Company’s domestic Pension Benefits plans was 8.75% in 2004 and 2003 and 9.50% in 2002. The long-term
return on asset assumption for the Company’s Other Benefits plans was 7.75% in 2004 and 2003 and 8.50% in
2002. To develop the expected long-term rate of return on asset assumptions, the Company considered the current
level of expected returns on risk free investments, the historical level of the risk premium associated with the other
asset classes in which the Company has invested domestic Pension Benefits and Other Benefits plan assets, and the
expectations for future returns of each asset class. Since the Company’s investment policy is to employ active
management strategies in all asset classes, the potential exists to outperform the broader markets, therefore, the
expected returns were adjusted upward. The expected return for each asset class was then weighted based on the
target asset allocation to develop the long-term return on asset assumptions.
The long-term return on asset assumptions for foreign Pension Benefits plans are based on the asset allocations
and the economic environment prevailing in the locations where the Pension Benefits plans reside. Foreign pension
assets do not make up a significant portion of the total assets for all of the Company’s Pension Benefits plans.
The tables below detail assets by category for the Company’s domestic and foreign Pension Benefits and Other
Benefits plans. These assets consist primarily of publicly-traded equity securities and publicly-traded fixed income
securities.
Pension Benefits Asset Information Percent of Plan Assets at
Asset categories December 31,
2004
October 31,
2003
Equity securities 68% 66%
Debt securities 23 27
Real estate 43
Other 54
Total 100% 100%
Other Benefits Asset Information Percent of Plan Assets at
Asset categories December 31,
2004
October 31,
2003
Equity securities 68% 45%
Debt securities 27 41
Real estate 11
Other 413
Total 100% 100%