Dominion Power 2003 Annual Report Download - page 86

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84.Dominion 2003
Notes to Consolidated Financial Statements, Continued
Dominion’s overall objective for investing its pension and other
postretirement plan assets is to achieve the best possible long-
term rates of return commensurate with prudent levels of risk. To
minimize risk, funds are broadly diversified among asset classes,
investment strategies and investment advisors. The strategic target
asset allocation for Dominion’s pension fund is 45% U.S. equity
securities; 8% non-U.S. equity securities; 22% debt securities;
and 25% other, such as real estate and private equity invest-
ments. Financial derivatives may be used to obtain or manage
market exposures and to hedge assets and liabilities. Dominion’s
pension plans and other postretirement plans asset allocations at
December 31, 2003 and 2002 are as follows:
Pension Plans Other Postretirement Plans
Year ended December 31, 2003 2002 2003 2002
Fair % of Fair % of Fair % of Fair % of
Value Total Value Total Value Total Value Total
(millions)
Equity securities:
U.S. $1,658 44 $1,156 38 $251 43 $174 39
International 407 11 264 8 62 11 43 10
Debt securities 859 23 893 29 205 35 170 38
Real estate 264 7 242 8 14 2 12 3
Other 546 15 519 17 55 9 44 10
Total $3,734 100 $3,074 100 $587 100 $443 100
The components of the provision for net periodic benefit cost were as follows:
Pension Benefits Other Postretirement Benefits
Year Ended December 31, 2003 2002 2001 2003 2002 2001
(millions)
Service cost $86 $77 $71 $55 $44 $40
Interest cost 182 177 173 79 68 63
Expected return on plan assets (332) (349) (331) (33) (34) (32)
Amortization of prior service cost 21 2 1 (1)
Amortization of transition obligation (2) (4) (4) 911 10
Amortization of net loss 20 2320 5
Settlement loss 7
Special termination benefits 15
Curtailment loss 2
Net periodic benefit cost (credit) $ (44) $ (96) $ (62) $130 $95 $80
Significant assumptions used in determining the net periodic cost recognized in the Consolidated Statements of Income were as
follows, on a weighted-average basis:
Pension Benefits Other Postretirement Benefits
2003 2002 2001 2003 2002 2001
Discount rate 6.75% 7.25% 7.50% 6.75% 7.25% 7.50%
Expected return on plan assets 8.75% 9.50% 9.50% 7.78% 7.82% 7.88%
Rate of increase for compensation 4.70% 4.60% 5.00% 4.70% 4.60% 5.00%
Medical cost trend rate 9.00% 9.00% 9.00%
Decreasing to
4.75% in 2007
and years
thereafter
Significant assumptions used in determining the projected pension benefit and postretirement benefit obligations recognized in the
Consolidated Balance Sheets were as follows, on a weighted-average basis:
Other Postretirement
Pension Benefits Benefits
2003 2002 2003 2002
Discount rate 6.25%6.75% 6.25%6.75%
Rate of increase for compensation 4.70%4.70% 4.70%4.70%