Northrop Grumman 2012 Annual Report Download - page 80

Download and view the complete annual report

Please find page 80 of the 2012 Northrop Grumman annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 104

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104

NORTHROP GRUMMAN CORPORATION
-70-
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 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, 2012:
Asset Allocation Ranges
Domestic equities 10% - 30%
International equities 5% - 25%
Fixed income securities 30% - 50%
Alternative investments 15% - 30%
The table below provides the fair values of the company’s pension and VEBA trust plan assets at December 31,
2012, and 2011, 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 based
on quoted market prices, but for which the funds are not valued on a quoted market basis, and fixed income
securities that are valued using model based pricing services.
Level 1 Level 2 Level 3 Total
$ in millions 2012 2011 2012 2011 2012 2011 2012 2011
Asset category
Domestic equities $3,657 $3,849 $ 318 $ 1 $ 2 $ 2 $ 3,977 $ 3,852
International equities 1,700 1,266 2,319 1,716 4,019 2,982
Fixed income securities
Cash and cash equivalents(1) 92 75 1,748 1,528 1,840 1,603
U.S. Treasuries 1,780 1,872 1,780 1,872
U.S. Government Agency 968 965 968 965
Non-U.S. Government 401 324 401 324
Corporate debt 4,123 3,686 4,123 3,686
Asset backed 528 525 44532 529
High yield debt 1,139 977 28 41 1,167 1,018
Bank loans 223 150 223 150
Alternative Investments
Hedge funds 758 1,405 758 1,405
Private equities 1,980 2,098 1,980 2,098
Real estate 2,256 1,788 2,256 1,788
Other (5) 514 —14
Fair value of plan assets at the
end of the year $5,444 $5,190 $13,552 $11,758 $5,028 $5,338 $24,024 $22,286
(1) Cash and cash equivalents are predominantly held in money market funds.