Northrop Grumman 2011 Annual Report Download - page 104

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NORTHROP GRUMMAN CORPORATION
The changes in the fair value of the pension and VEBA plan trust assets measured using Level 3 significant
unobservable inputs during 2011 and 2010, are as follows:
$ in millions
Domestic
equities
Asset
Backed
High yield
debt
Hedge
funds
Private
equities
Real
Estate Total
Balance as of December 31, 2009 $ 2 $4 $ 59 $ 1,282 $ 1,651 $ 870 $ 3,868
Actual return on plan assets:
Assets still held at reporting date 2 18 120 200 103 443
Assets sold during the period (9) (9)
Purchases, sales, and settlements (2) 89 63 405 555
Changes in asset allocation mix 1 30 31 33 95
Balance as of December 31, 2010 $ 2 $4 $ 78 $ 1,521 $ 1,945 $ 1,402 $ 4,952
Actual return on plan assets:
Assets still held at reporting date (2) (43) 19 198 172
Assets sold during the period 25 (13) (4) 8
Purchases 10 413 503 460 1,386
Sales (45) (511) (356) (268) (1,180)
Balance as of December 31, 2011 $ 2 $4 $ 41 $1,405 $2,098 $1,788 $ 5,338
Generally, investments are valued based on information in financial publications of general circulation, statistical
and valuation services, records of security exchanges, appraisal by qualified persons, transactions and bona fide
offers. Domestic and international equities consist primarily of common stocks and institutional common trust
funds. Investments in common and preferred shares are valued at the last reported sales price of the stock on the
last business day of the reporting period. Units in common trust funds and hedge funds are valued based on the
redemption price of units owned by the trusts at year-end. Fair value for real estate and private equity partnerships
is primarily based on valuation methodologies that include third party appraisals, comparable transactions,
discounted cash flow valuation models, and public market data.
Non-government fixed income securities are invested across various industry sectors and credit quality ratings.
Generally, investment guidelines are written to limit securities, for example, to no more than 5 percent of each
trust account, and to exclude the purchase of securities issued by the company. The number of real estate and
private equity partnerships is 162 and the unfunded commitments are $882 million and $1.2 billion as of
December 31, 2011, and 2010, respectively. For alternative investments that cannot be redeemed, such as limited
partnerships, the typical investment term is ten years. For alternative investments that permit redemptions, such
redemptions are generally made quarterly and require a 90-day notice. The company is generally unable to
determine the final redemption date and amount until the request is processed by the investment fund and
therefore categorizes such alternative investments as Level 3 assets. In 2011, the asset allocation policy for certain
plans was changed, and on a consolidated basis, this change had no impact on overall trust assets.
At December 31, 2011, and 2010, the defined benefit pension and VEBA trusts did not hold any Northrop
Grumman common stock.
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