OG&E 2009 Annual Report Download - page 87

Asset Class Comparative Benchmark(s)
Fixed Income Barclays Capital Aggregate Index
Equity Index S&P 500 Index
Value Equity Russell 1000 Value Index – Short-term
S&P 500 Index – Long-term
Growth Equity Russell 1000 Growth Index – Short-term
S&P 500 Index – Long-term
Mid-Cap Equity S&P 400 Midcap Index
Small-Cap Equity Russell 2000 Index
International Equity Morgan Stanley Capital International Europe, Australia and Far East
Index
The fixed income manager is expected to use discretion over the asset mix of the trust assets in its efforts to maximize risk-
adjusted performance. Exposure to any single issuer, other than the U.S. government, its agencies, or its instrumentalities (which have
no limits) is limited to five percent of the fixed income portfolio as measured by market value. At least 75 percent of the invested
assets must possess an investment grade rating at or above Baa3 or BBB- by Moody’s Investors Service (“Moody’s”), Standard &
Poor’s or Fitch Ratings (“Fitch”). The portfolio may invest up to 10 percent of the portfolio’s market value in convertible bonds as
long as the securities purchased meet the quality guidelines. The purchase of any of OGE Energy’s equity, debt or other securities is
prohibited.
The domestic value equity managers focus on stocks that the manager believes are undervalued in price and earn an average
or less than average return on assets, and often pays out higher than average dividend payments. The domestic growth equity manager
will invest primarily in growth companies which consistently experience above average growth in earnings and sales, earn a high
return on assets, and reinvest cash flow into existing business. The domestic mid-cap equity portfolio manager focuses on companies
with market capitalizations lower than the average company traded on the public exchanges with the following characteristics: price/
earnings ratio at or near the S&P 400 Midcap Index, small dividend yield, return on equity at or near the S&P 400 Midcap Index and
earnings per share growth rate at or near the S&P 400 Midcap Index. The domestic small-cap equity manager will purchase shares of
companies with market capitalizations lower than the average company traded on the public exchanges with the following
characteristics: price/earnings ratio at or near the Russell 2000, small dividend yield, return on equity at or near the Russell 2000 and
earnings per share growth rate at or near the Russell 2000. The international global equity manager invests primarily in non-dollar
denominated equity securities. Investing internationally diversifies the overall trust across the global equity markets. The manager is
required to operate under certain restrictions including: regional constraints, diversification requirements and percentage of U.S.
securities. The Morgan Stanley Capital International Europe, Australia and the Far East Index (“EAFE”) is the benchmark for
comparative performance purposes. The EAFE Index is a market value weighted index comprised of over 1,000 companies traded on
the stock markets of Europe, Australia, New Zealand and the Far East. All of the equities which are purchased for the international
portfolio are thoroughly researched. Only companies with a market capitalization in excess of $100 million are allowable. No more
than five percent of the portfolio can be invested in any one stock at the time of purchase. All securities are freely traded on a
recognized stock exchange and there are no 144-A securities and no over-the-counter derivatives. The following investment
categories are excluded: options (other than traded currency options), commodities, futures (other than currency futures or currency
hedging), short sales/margin purchases, private placements, unlisted securities and real estate (but not real estate shares).
For all domestic equity investment managers, no more than eight percent (five percent for mid-cap and small-cap equity
managers) can be invested in any one stock at the time of purchase and no more than 16 percent (10 percent for mid-cap and small-cap
equity managers) after accounting for price appreciation. A minimum of 95 percent of the total assets of an equity manager’s portfolio
must be allocated to the equity markets. Options or financial futures may not be purchased unless prior approval of the Investment
Committee is received. The purchase of securities on margin is prohibited as is securities lending. Private placement or venture
capital may not be purchased. All interest and dividend payments must be swept on a daily basis into a short-term money market fund
for re-deployment. The purchase of any of OGE Energy’s equity, debt or other securities is prohibited. The purchase of equity or
debt issues of the portfolio manager’s organization is also prohibited. The aggregate positions in any company may not exceed one
percent of the fair market value of its outstanding stock.
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