Raytheon 2012 Annual Report Download - page 120

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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is included in deferred losses. If we significantly change our long-term investment allocation or strategy, then our long-term
ROA assumption could change.
The long-term ROA 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 our Pension Benefits plans.
The effect of a 1% increase or (decrease) in the assumed health care trend rate for each future year for the aggregate of service
cost and interest cost is less than $1 million and for the accumulated postretirement benefit obligation is $10 million or $(9)
million, respectively.
Plan Assets
Substantially all our domestic Pension Benefit Plan (Plan) assets, which consist of investments in cash and cash equivalents,
publicly traded U.S. and international equity securities, private equity funds, private real estate funds, fixed-income securities,
commingled funds and other investments such as insurance contracts, derivatives and repurchase agreements, are held in a
master trust, which was established for the investment of assets of our Company-sponsored retirement plans. The assets of
the master trust are overseen by our Investment Committee comprised of members of senior management drawn from
appropriate diversified levels of the executive management team.
The Investment Committee is responsible for setting the policy that provides the framework for management of the Plan
assets. In accordance with its responsibilities and charter, the Investment Committee meets on a regular basis to review the
performance of the Plan assets and compliance with the investment policy. The policy sets forth an investment structure for
managing Plan assets, including setting the asset allocation ranges, which are expected to provide an appropriate level of
overall diversification and total investment return over the long term while maintaining sufficient liquidity to pay the benefits
of the Plan. Asset allocation ranges are set to produce the highest return on investment taking into account investment risks
that are prudent and reasonable given prevailing market conditions. In developing the asset allocation ranges, third party asset
allocation studies are periodically performed that consider the current and expected positions of the plan assets and funded
status. Based on these studies and other appropriate information, the Investment Committee establishes asset allocation ranges
taking into account acceptable risk targets and associated returns.
The investment policy asset allocation ranges for the Plan, as set by the Investment Committee, for the year ended December 31,
2012 were as follows:
Asset Category
U.S. equities 25% - 35%
International equities 15% - 25%
Fixed-income securities 25% - 40%
Cash and cash equivalents 1% - 10%
Private equity and private real estate 3% - 10%
Other (including absolute return funds) 5% - 20%
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 reasonably limit 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 managers'
policies and processes. The Plan also utilizes funds that track an index and are highly liquid. Investment performance is