Raytheon 2010 Annual Report Download - page 112

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Investment Committee appoints the investment fiduciary, who is responsible for making investment decisions
within the framework of the Investment Policy and for supervising the internal pension investment team. The pension
investment team is comprised of experienced financial managers, who are all employees of the Company. The investment
fiduciary reports back to the Investment Committee. During times of unusual market conditions, the investment
fiduciary may seek authorization from the Investment Committee to change the investing allocation ranges to prevent
excessive volatility or other undesirable consequences.
Taking into account the asset allocation ranges, the investment fiduciary determines the specific allocation of the Plan’s
investments within various asset classes. The Plan utilizes select investment strategies which are executed through
separate account or fund structures with external investment managers who demonstrate experience and expertise in the
appropriate asset classes and styles. The selection of investment managers is done with careful evaluation of all aspects of
performance and risk, due diligence of internal operations and controls, reputation, systems evaluation and a review of
investment manager’s policies and processes. The Plan also utilizes unleveraged exchange traded funds that track an
index and highly liquid short term instruments. Investment performance is monitored frequently against appropriate
benchmarks and tracked to compliance guidelines with the assistance of third party performance evaluation tools and
metrics.
Consistent with the objective of maximizing return while minimizing risk, multiple investment strategies are employed to
diversify risk such that no single investment or manager holding presents a significant exposure to the total investment
portfolio. Plan assets are invested in numerous diversified strategies with the intent to minimize correlations. This allows
for diversification of returns. As of December 31, 2010, no individual investment strategy represented more than 5% of
the total assets of the Plan. Further, within each strategy, guidelines are established which set forth the list of authorized
investments, the typical portfolio characteristics and diversification required by limiting the amount that can be invested
by sector, country and issuer. As a result, the Plan is not significantly exposed to any single entity, investment manager,
sector or international location.
The Plan’s investments are stated at fair value. Investments in equity securities (common and preferred) are valued at the
last reported sales price when an active market exists. Investments in fixed-income securities are generally valued using
methods based upon market transactions for comparable securities and various relationships between securities which
are generally recognized by institutional traders. Investments in private equity funds, hedge funds and private real estate
funds are estimated at fair market value which primarily utilizes net asset values reported by the investment manager. The
pension investment team reviews independently appraised values, audited financial statements and additional pricing
information to evaluate the net asset values. For the very limited group of securities and other assets for which market
quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value,
additional information is obtained from the investment manager and evaluated internally to determine whether any
adjustments are required to reflect fair value.
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