PNC Bank 2005 Annual Report Download - page 98

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The Committee selects investment managers for the Trust
based on the contributions that their respective investment
styles and processes are expected to make to the investment
performance of the overall portfolio. The managers’
Investment Objectives and Guidelines, which are a part of
each manager’ s Investment Management Agreement,
document performance expectations and each manager’ s
role in the portfolio. The Committee uses the Investment
Objectives and Guidelines to establish, guide, control and
measure the strategy and performance for each manager.
The purpose of investment manager guidelines is to:
• Establish the investment objective and performance
standards for each manager,
• Provide the manager with the capability to evaluate
the risks of all financial instruments or other assets
in which the manager’ s account is invested, and
• Prevent the manager from exposing its account to
excessive levels of risk, undesired or inappropriate
risk, or disproportionate concentration of risk.
The guidelines also indicate which investments and
strategies the manager is permitted to use to achieve its
performance objectives, and which investments and
strategies it is prohibited from using.
Where public market investment strategies may include the
use of derivatives and/or currency management, language is
incorporated in the managers’ guidelines to define allowable
and prohibited transactions and/or strategies. Derivatives are
typically employed by investment managers to modify
risk/return characteristics of their portfolio(s), implement
asset allocation changes in a cost-effective manner, or
reduce transaction costs. Under the managers’ investment
guidelines, derivatives may not be used solely for
speculation or leverage. Derivatives are used only in
circumstances where they offer the most efficient economic
means of improving risk/reward profile of the portfolio.
BlackRock, PFPC and our Retail Banking business segment
receive compensation for providing investment management,
trustee and custodial services for the ma jority of the Trust
portfolio. Compensation for such services is paid by PNC.
Non-affiliate service providers for the Trust are compensated
from plan assets.
The following table provides information regarding our
estimated future cash flows related to our various plans:
Estimated Cash Flows
Postretirement Benefits
In millions Qualified
Pension
Nonqualified
Pension
Gross PNC
Benefit Payments
Reduction in
PNC Benefit
Payments Due
to Medicare Part
D Subsidy
Estimated 2006
employer
contributions None $7 $25 $2
Estimated future
benefit payments
2006 $97 $7 $25 $2
2007 103 7 25 2
2008 104 7 25 2
2009 111 8 25 2
2010 109 9 25 2
2011 – 2015 592 35 120 9
The qualified pension plan contributions are deposited into
the Trust, and the qualified pension plan benefit payments
are paid from the Trust. For the other plans, total
contributions and the benefit payments are the same and
represent expected benefit amounts, which are paid from
general assets. Postretirement benefits are net of participant
contributions.