PG&E 2007 Annual Report Download - page 125

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123
ASSET ALLOCATIONS
The asset allocation of PG&E Corporation’s and the Utility’s pension and other benefi t plans at December 31, 2007 and
2006, and target 2008 allocation, were as follows:
Pension Benefi ts Other Benefi ts
2008 2007 2006 2008 2007 2006
Equity securities
U.S. equity 32% 30% 38% 37% 36% 49%
Non-U.S. equity 18% 18% 18% 18% 19% 20%
Global equity 5% 5% 5% 4% 4% 4%
Absolute return 5% 5% 0% 4% 3% 0%
Fixed income securities 40% 41% 39% 36% 37% 27%
Cash 0% 1% 0% 1% 1% 0%
Total 100% 100% 100% 100% 100% 100%
Equity securities include a small amount (less than 0.1%
of total plan assets) of PG&E Corporation common stock.
During 2007, the duration of fi xed income assets was
extended to better align with the interest rate sensitivity
of the benefi t plan liability. The maturity of fi xed income
securities at December 31, 2007 ranged from zero to 60 years
and the average duration of the bond portfolio was approxi-
mately 10.5 years. The maturity of fi xed income securities
at December 31, 2006 ranged from zero to 60 years and the
average duration of the bond portfolio was approximately
4.6 years.
PG&E Corporation’s investment strategy for all plans is
to maintain actual asset weightings within 0.5% to 5.5% of
target asset allocations varying by asset class. A rebalancing
review is triggered whenever the actual weighting falls outside
of the specifi ed range.
A benchmark portfolio for each asset class is set based
on market capitalization and valuations of equities and
the durations and credit quality of fi xed income securities.
Investment managers for each asset class are retained to
either passively or actively manage the combined portfolio
against the benchmark. Active management covers approxi-
mately 70% of the U.S. equity, 80% of the non-U.S. equity,
and virtually 100% of the fi xed income and global security
portfolios.
During 2007, PG&E Corporation began extending the
benchmarks of its fi xed income managers and began using
interest rate swaps for certain plans in order to better match
the interest rate sensitivity of the plans’ assets with that of
the plans’ liabilities. Changes in the value of these invest-
ments will affect future contributions to the trust and net
periodic benefi t cost on a lagged basis.
CASH FLOW INFORMATION
Employer Contributions
PG&E Corporation and the Utility contributed approxi-
mately $139 million to the pension benefi ts, including
$134 million to the qualifi ed defi ned benefi t pension plan,
and approximately $38 million to the other benefi t plans
in 2007. These contributions are consistent with PG&E
Corporation’s and the Utility’s funding policy, which is to
contribute amounts that are tax-deductible and consistent
with applicable regulatory decisions and federal minimum
funding requirements. None of these pension or other
benefi ts were subject to a minimum funding requirement in
2007. The Utility’s pension benefi ts met all the funding
requirements under the Employee Retirement Income Security
Act of 1974, as amended. PG&E Corporation and the
Utility expect to make total contributions of approximately
$176 million annually during 2008, 2009, and 2010 to the
pension plan and expect to make contributions of approxi-
mately $58 million annually for the years 2008, 2009, and
2010 to other postretirement benefi t plans.