Boeing 2008 Annual Report Download - page 105

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Asset allocations are monitored and rebalanced on a regular basis. Actual investment allocations vary
from target allocations due to periodic investment strategy changes, market value fluctuations, and the
length of time it takes to complete investments in asset classes such as private equity, real estate, real
assets, and other investments. Additionally, actual and target allocations vary due to the timing of
benefit payments or contributions made on or near the measurement date.
Pension investment managers are retained with a specific investment role and corresponding
investment guidelines. Investment managers have the ability to purchase securities on behalf of the
pension fund and invest in derivatives, such as equity or bond futures, swaps, options, or currency
forwards. Derivatives generally are used to achieve the desired market exposure of a security or an
index, transfer value-added performance between asset classes, achieve the desired currency
exposure, adjust portfolio duration, or rebalance the total portfolio to the target asset allocation.
The actual allocations for the pension assets at December 31, 2008 and September 30, 2007, and
target allocations by asset category, are as follows:
Percentage of Plan Assets Target Allocations
December 31 September 30 December 31 September 30
Asset Category 2008 2007 2008 2007
Equity 28% 38% 28% 28%
Debt 55 46 45 45
Real estate and real assets 4410 10
Private equity 5466
Hedge funds 3366
Global strategies 5555
100% 100% 100% 100%
Equity includes domestic and international equity securities, such as common, preferred or other
capital stock, as well as equity futures, currency forwards and residual cash allocated to the equity
managers. Plan assets did not include any of our common stock at December 31, 2008 and
September 30, 2007. Equity and currency management derivatives based on net notional amounts
totaled 7.9% and 1.9% of plan assets at December 31, 2008 and September 30, 2007.
Debt includes domestic and international debt securities, such as U.S. Treasury securities, U.S.
government agency securities, corporate bonds; cash equivalents; and investments in bond derivatives
such as bond futures, options, swaps and currency forwards. Bond derivatives based on net notional
amounts totaled 5.2% and 16.6% of plan assets at December 31, 2008 and September 30, 2007.
Additionally, Debt includes “To-Be-Announced” mortgage-backed securities (TBA) and treasury
forwards which have delayed, future settlement dates. Debt included $410 and $2,478 related to TBA
securities and treasury forwards at December 31, 2008 and September 30, 2007.
Private equity represents private market investments which are generally limited partnerships. Real
estate includes investments in private and public real estate. Real assets include investments in
natural resources (such as energy and timber) and infrastructure. Hedge funds include event driven,
relative value, long-short and market neutral strategies. Global strategies seek to identify inefficiencies
across various asset classes and markets, using long-short positions in physical securities and
derivatives.
We held $79 and $96 in trust fund assets for OPB plans at December 31, 2008 and September 30,
2007. Most of these funds are invested in a balanced index fund which is comprised of approximately
60% equities and 40% debt securities. The expected rate of return on these assets does not have a
material effect on the net periodic benefit cost.
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