OG&E 2011 Annual Report Download - page 75

OGE Energy Corp. 73
Asset Class Comparative Benchmark(s)
Core Fixed Income Barclays Capital Aggregate Index
Interest Rate Sensitive Fixed Income Barclays Capital Aggregate Index
Long Duration Fixed Income Barclays Capital Aggregate Index
Equity Index Standard & Poor’s 500 Index
All-Cap Equity Russell 3000 Index
Russell 3000 Value Index
Mid-Cap Equity Russell Midcap Index
Russell Midcap Value Index
Small-Cap Equity Russell 2000 Index
Russell 2000 Value Index
International Equity Morgan Stanley Capital International ACWI ex-US
The fixed income manager is expected to use discretion over the asset
mix of the trust assets in its efforts to maximize risk-adjusted perform-
ance. 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 Services,
Standard & Poor’s Ratings Services or Fitch Ratings. 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 the Company’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 Russell
Midcap Index, small dividend yield, return on equity at or near the
Russell Midcap Index and an earnings per share growth rate at or near
the Russell 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 an earn-
ings 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 All Country World ex-US Index is the benchmark
for comparative performance purposes. The Morgan Stanley Capital
International All Country World ex-US Index is a market value weighted
index designed to measure the combined equity market performance of
developed and emerging markets countries, excluding the United States.
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. Options or financial futures may not
be purchased unless prior approval of the Company’s Investment
Committee is received. The purchase of securities on margin is prohib-
ited 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 the Company’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.
Plan Investments
The following tables summarize the Pension Plan’s investments that are
measured at fair value on a recurring basis at December 31, 2011 and
2010. There were no Level 3 investments held by the Pension Plan at
December 31, 2011 and 2010.
(In millions, December 31) 2011 Level 1 Level 2
Common stocks
U.S. common stocks $179.7 $179.7 $÷÷÷«–
Foreign common stocks 59.5 59.5 –
Bonds, debentures and notes(A)
Corporate fixed income and
other securities 95.3 – 95.3
Mortgage-backed securities 17.2 – 17.2
U.S. Government obligations
U.S. treasury notes and bonds(B) 118.8 118.8 –
Mortgage-backed securities 72.0 – 72.0
Other securities 1.0 – 1.0
Commingled fund(C) 38.5 – 38.5
Common/collective trust(D) 29.6 – 29.6
Foreign government bonds 2.9 – 2.9
Interest-bearing cash 2.1 2.1 –
U.S. municipal bonds 1.7 – 1.7
Preferred stocks (foreign) 0.6 0.6 –
Total Plan investments $618.9 $360.7 $258.2
Receivable from broker for securities sold 4.8
Interest and dividends receivable 3.1
Payable to broker for securities purchased (37.0)
Total Plan assets $589.8