<PAGE>
As filed with the Securities and Exchange Commission on March 30, 1998
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 33-50601
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
Savings Fund Plan for Employees of
Pacific Gas and Electric Company
B. Name of issuer of the securities held pursuant to the Plan and the
address of its principal executive office:
PG&E Corporation
One Market, Spear Tower
Suite 2400
San Francisco, CA 94105
<PAGE>
REQUIRED INFORMATION
1. The financial statements of the Savings Fund Plan Master Trust and
the Savings Fund Plan Parts I and II as of December 31, 1997 and 1996, the
statements of net assets as of December 31, 1997 and 1996, the statements of
changes in the net assets of the Plans for the year ended December 31, 1997 and
the Savings Fund Plan Master Trust schedule of assets held for investment
purposes as of December 31, 1997 and the schedule of reportable transactions for
the year ended December 31, 1997, together with the reports of Arthur Andersen
LLP, independent accountants, are contained in Exhibit 1 to this Annual Report.
2. The Consent of Arthur Andersen LLP, independent accountants, is
contained in Exhibit 2 to this Annual Report.
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
SAVINGS FUND PLAN FOR EMPLOYEES OF PACIFIC
GAS AND ELECTRIC COMPANY
Date: March 30, 1998 By: Bruce R. Worthington
----------------------------
Bruce R. Worthington
Chairman, Employee Benefit Committee
<PAGE>
EXHIBIT 1
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN MASTER TRUST
FINANCIAL STATEMENTS
TABLE OF CONTENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
FINANCIAL STATEMENTS
Statement of Net Assets - December 31, 1997 and 1996
Statement of Changes in Net Assets for the Year Ended December 31, 1997
Notes to Financial Statements - December 31, 1997
SCHEDULES
Schedule I: Line 27(a) - Schedule of Assets Held for Investment
Purposes - December 31, 1997
Schedule II: Line 27(d) - Schedule of Reportable Transactions for the
Year Ended December 31, 1997
<PAGE>
[LETTERHEAD OF ARTHUR ANDERSEN LLP]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Employee Benefit Committee of PG&E Corporation,
Pacific Gas and Electric Company, and Participants in the
Pacific Gas and Electric Company Savings Fund Plans:
We have audited the accompanying statements of net assets of Pacific Gas and
Electric Company Savings Fund Plan Master Trust (the Trust) as of December 31,
1997 and 1996, and the related statement of changes in net assets for the year
ended December 31, 1997. These financial statements and the schedules referred
to below are the responsibility of the Trust's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying statements are those of the Trust established under the Pacific
Gas and Electric Company Savings Fund Plan Master Trust. These statements do not
purport to present the financial statements of the individual employee benefit
plans and do not contain disclosures necessary for a fair presentation of the
financial statements of the individual employee benefit plans in conformity with
generally accepted accounting principles. Furthermore, these statements do not
purport to satisfy the Department of Labor's Rules and Regulations for Reporting
and Disclosure under the Employee Retirement Income Security Act of 1974
relating to financial statements of employee benefit plans. Reference should be
made to the Form 5500s and related financial statements of the individual
employee benefit plans that have been prepared and filed pursuant to these
reporting rules and regulations.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets of the Trust as of December 31, 1997 and
1996, and the changes in net assets for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
Our audits were made of the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental schedules of assets held for
investment purposes as of December 31, 1997, and of reportable transactions for
the year ended December 31, 1997, are presented for purposes of additional
analysis and are not a required part of the basic financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The fund information in the statements of net assets and
changes in net assets is presented for purposes of additional analysis rather
than to present the net assets and changes in net assets of each fund. The
supplemental schedules and fund information have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, are fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
San Francisco, California
February 27, 1998
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN MASTER TRUST
STATEMENT OF NET ASSETS
December 31, 1997
Fund Information
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Small
PG&E United Company
Corporation States Bond Stable Stock
Stock Bond Index Value Index
Fund Fund Fund Fund Fund
--------------- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
(in thousands)
ASSETS
Investments, at fair value
PG&E Corporation common stock $ 1,054,786 $ - - $ - $ -
United States government securities - 4,555 - 485 -
Insurance company general accounts - - - 242,148 -
Corporate debt instruments - - - 40,506 -
State Street Global Advisors
Bond Market Index Fund - - 57,147 - -
Daily EAFE Strategy Fund - - - - -
Russell Special Small Company - - - - 86,134
S&P 500 Strategy Fund - - - - -
Interest bearing accounts 27,270 - - 20,081 -
--------------- --------- ----------- ------------ ------------
Total Investments 1,082,056 4,555 57,147 303,220 86,134
--------------- --------- ----------- ------------ ------------
Receivables
Dividends and interest 10,237 - - 1,236 -
Other receivables - - - 424 -
--------------- --------- ----------- ------------ ------------
Total Receivables 10,237 - - 1,660 -
--------------- --------- ----------- ------------ ------------
Total Assets 1,092,293 4,555 57,147 304,880 86,134
--------------- --------- ----------- ------------ ------------
LIABILITIES 3,032 - 13 3,778 25
--------------- --------- ----------- ------------ ------------
NET ASSETS $ 1,089,261 $ 4,555 57,134 $ 301,102 $ 86,109
=============== ========= =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
Large
Company International Conservative Moderate Aggressive
Stock Stock Asset Asset Asset
Index Index Allocation Allocation Allocation
Fund Fund Fund Fund Fund Total
--------- -------- -------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
(in thousands)
ASSETS
Investments, at fair value
PG&E Corporation common stock $ - $ - $ - $ - $ $ 1,054,786
United States government securities - - - - - 5,040
Insurance company general accounts - - - - - 242,148
Corporate debt instruments - - - - - 40,506
State Street Global Advisors
Bond Market Index Fund - - 14,224 64,138 10,835 146,344
Daily EAFE Strategy Fund - 23,087 1,211 16,389 8,305 48,992
Russell Special Small Company - - 2,466 25,027 11,272 124,899
S&P 500 Strategy Fund 1,034,267 - 6,162 58,355 25,342 1,124,126
Interest bearing accounts - - - - - 47,351
---------- --------- --------- ------------- --------------- --------------
Total Investments 1,034,267 23,087 24,063 163,909 55,754 2,834,192
---------- --------- --------- ------------- --------------- --------------
Receivables
Dividends and interest 8 - - - - 11,481
Other receivables 7 - - - - 431
---------- --------- --------- ------------- --------------- --------------
Total Receivables 15 - - - - 11,912
---------- --------- --------- ------------- --------------- --------------
Total Assets 1,034,282 23,087 24,063 163,909 55,754 2,846,104
---------- --------- --------- ------------- --------------- --------------
LIABILITIES 104 8 3 25 8 6,996
---------- --------- --------- ------------- --------------- --------------
NET ASSETS $1,034,178 $ 23,079 $ 24,060 $ 163,884 $ 55,746 $ 2,839,108
========== ======== ======== ============= =============== ==============
</TABLE>
The accompanying Notes to the Financial Statements are an integral part of this
statement.
1
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN MASTER TRUST
STATEMENT OF NET ASSETS
December 31, 1996
Fund Information
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
PG&E United
Corporation States Guaranteed Diversified Bond
Stock Bond Income Equity Index
Fund Fund Fund Fund Fund
----------- --------- --------------- ------------- ----------
(in thousands)
ASSETS
<S> <C> <C> <C> <C> <C>
Investments, at fair value
PG&E Corporation common stock $ 830,689 $ - $ - $ - $ -
United States government securities - 4,542 - 1,193 -
Corporate stocks - common - - - 740,165 -
Corporate debt instruments - - 35,582 - -
Insurance company general accounts - - 224,294 - -
Registered investment companies
Vanguard Bond Index Fund - - - - 28,369
Columbia Balanced Fund - - - - -
Mellon Bank Utility Stock Fund - - - - -
Interest bearing accounts 24,230 - 11,603 22,926 -
----------- --------- --------------- ------------- ----------
Total Investments 854,919 4,542 271,479 764,284 28,369
----------- --------- --------------- ------------- ----------
Receivables
Dividends and interest 11,939 - 1,376 1,445 159
Other receivables - - - 537 -
----------- --------- --------------- ------------- ----------
Total Receivables 11,939 - 1,376 1,982 159
----------- --------- --------------- ------------- ----------
Total Assets 866,858 4,542 272,855 766,266 28,528
----------- --------- --------------- ------------- ----------
LIABILITIES 1,505 - - 420 -
----------- --------- --------------- ------------- ----------
NET ASSETS $ 865,353 $ 4,542 $ 272,855 $ 765,846 $ 28,528 -
=========== ========= =============== ============= ==========
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Stock and Utility
Bond Stock
Fund Fund Total
------------ ----------- --------------
<S> <C> <C> <C>
(in thousands)
ASSETS
<S>
Investments, at fair value
PG&E Corporation common stock $ - $ $ 830,689
United States government securities - - 5,735
Corporate stocks - common - - 740,165
Corporate debt instruments - - 35,582
Insurance company general accounts - - 224,294
Registered investment companies
Vanguard Bond Index Fund - - 28,369
Columbia Balanced Fund 151,074 - 151,074
Mellon Bank Utility Stock Fund - 40,436 40,436
Interest bearing accounts - - 58,759
------------- ----------- --------------
Total Investments 151,074 40,436 2,115,103
------------- ----------- --------------
Receivables
Dividends and interest - - 14,919
Other receivables - - 537
------------- ----------- --------------
Total Receivables - - 15,456
------------- ----------- --------------
Total Assets 151,074 40,436 2,130,559
------------- ----------- --------------
LIABILITIES
- - 1,925
------------- ----------- --------------
NET ASSETS
$ 151,074 $ 40,436 $ 2,128,634
============= =========== ==============
</TABLE>
The accompanying Notes to the Financial Statements are an integral part of this
statement.
2
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN MASTER TRUST
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Small
PG&E United Company
Corporation States Bond Stable Stock
Stock Bond Index Value Index
Fund Fund Fund Fund Fund
--------------- ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
(in thousands)
BALANCE, JANUARY 1, 1997 $865,353 $4,542 $28,528 $272,855 $-
--------------- ---------- ------------- ------------ ------------
ADDITIONS
Participating plans contributions
Participant 36,193 - 1,365 6,161 1,242
Employer 12,616 - 469 2,039 347
--------------- ---------- ------------- ------------ ------------
Total participating plans contributions 48,809 - 1,834 8,200 1,589
--------------- ---------- ------------- ------------ ------------
Earnings from investments
Dividends 44,831 - 1,343 - -
Interest 1,208 129 - 18,523 -
Other income 26 - - - -
--------------- ---------- ------------- ------------ ------------
Total earnings
from investments 46,065 129 1,343 18,523 -
Gain (loss) on securities
Realized on sale or distribution 12,750 - 549 (93) (673)
Unrealized appreciation (depreciation) 318,785 - 1,370 - (903)
--------------- ---------- ------------- ------------ ------------
Net appreciation (depreciation) in fair value
of assets held 331,535 - 1,919 (93) (1,576)
--------------- ---------- ------------- ------------ ------------
Total additions (reductions) 426,409 129 5,096 26,630 13
--------------- ---------- ------------- ------------ ------------
DEDUCTIONS
Withdrawals paid to participating plans 41,266 116 1,574 26,319 439
--------------- ---------- ------------- ------------ ------------
TRANSFERS between investment funds (161,235) - 25,084 27,936 86,535
--------------- ---------- ------------- ------------ ------------
CHANGE IN NET ASSETS 223,908 13 28,606 28,247 86,109
--------------- ---------- ------------- ------------ ------------
BALANCE, DECEMBER 31, 1997 $1,089,261 $4,555 $57,134 $301,102 $86,109
=============== ========== ============= ============ ============
<CAPTION>
Large
Company International Conservative Moderate Aggressive
Stock Stock Asset Asset Asset
Index Index Allocation Allocation Allocation
Fund Fund Fund Fund Fund
-------------- --------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
(in thousands)
BALANCE, JANUARY 1, 1997 $- $- $- $- $-
-------------- --------------- ---------------- ------------- -------------
ADDITIONS
Participating plans contributions
Participant 10,749 412 166 1,805 819
Employer 3,399 119 55 580 241
-------------- --------------- ---------------- ------------- -------------
Total participating plans contributions 14,148 531 221 2,385 1,060
-------------- --------------- ---------------- ------------- -------------
Earnings from investments
Dividends 1,277 - - - -
Interest - - - - -
Other income - - - - -
-------------- --------------- ---------------- ------------- -------------
Total earnings
from investments 1,277 - - - -
Gain (loss) on securities
Realized on sale or distribution 628 (315) 7 (186) (62)
Unrealized appreciation (depreciation) 27,174 (1,692) 386 1,851 171
-------------- --------------- ---------------- ------------- -------------
Net appreciation (depreciation) in fair value
of assets held 27,802 (2,007) 393 1,665 109
-------------- --------------- ---------------- ------------- -------------
Total additions (reductions) 43,227 (1,476) 614 4,050 1,169
-------------- --------------- ---------------- ------------- -------------
DEDUCTIONS
Withdrawals paid to participating plans 12,959 96 62 1,465 141
-------------- --------------- ---------------- ------------- -------------
TRANSFERS between investment funds 1,003,910 24,651 23,508 161,299 54,718
-------------- --------------- ---------------- ------------- -------------
CHANGE IN NET ASSETS 1,034,178 23,079 24,060 163,884 55,746
-------------- --------------- ---------------- ------------- -------------
BALANCE, DECEMBER 31, 1997 $1,034,178 $23,079 $24,060 $163,884 $55,746
============== =============== ================ ============= =============
</TABLE>
The accompanying Notes to the Financial Statements are an integral part of this
statement.
3
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN MASTER TRUST
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Diversified Stock and Utility
Equity Bond Stock
Fund Fund Fund Total
-------------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
(in thousands)
BALANCE, JANUARY 1, 1997 $765,846 $151,074 $40,436 $2,128,634
-------------- ------------- ----------- ---------------
ADDITIONS
Participating plans contributions
Participant 30,167 5,896 1,707 96,682
Employer 10,012 1,982 534 32,393
-------------- ------------- ----------- ---------------
Total participating plans contributions 40,179 7,878 2,241 129,075
-------------- ------------- ----------- ---------------
Earnings from investments
Dividends 11,671 - 1,565 60,687
Interest 1,075 39 - 20,974
Other income 75 39 - 140
-------------- ------------- ----------- ---------------
Total earnings
from investments 12,821 78 1,565 81,801
Gain (loss) on securities
Realized on sale or distribution 412,473 67,521 (308) 492,291
Unrealized appreciation (depreciation) (183,386) (44,020) 1,020 120,756
-------------- ------------- ----------- ---------------
Net appreciation (depreciation) in fair value
of assets held 229,087 23,501 712 613,047
-------------- ------------- ----------- ---------------
Total additions (reductions) 282,087 31,457 4,518 823,923
-------------- ------------- ----------- ---------------
DEDUCTIONS
Withdrawals paid to participating plans 23,851 3,771 1,390 113,449
-------------- ------------- ----------- ---------------
TRANSFERS between investment funds (1,024,082) (178,760) (43,564) -
-------------- ------------- ----------- ---------------
CHANGE IN NET ASSETS (765,846) (151,074) (40,436) 710,474
-------------- ------------- ----------- ---------------
BALANCE, DECEMBER 31, 1997 $- $- $- $2,839,108
============== ============= =========== ===============
</TABLE>
The accompanying Notes to the Financial Statements are an integral part of this
statement.
4
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN MASTER TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1: Master Trust Description
Pacific Gas and Electric Company (the Company) established the
Savings Fund Plan Master Trust (the Master Trust) on January 1, 1988, to hold
the assets of the Company Savings Fund Plans. The Pacific Service Employees
Association also participates in the Master Trust. The Employee Benefit
Committee (EBC) of the Company's parent company, PG&E Corporation, administers
the Master Trust. The EBC retains State Street Bank and Trust Company as the
Trustee (the Trustee).
Interest income, dividends, investment management fees, where
appropriate, and the net appreciation or depreciation in the fair value of
investments held by the Master Trust are allocated to the individual
participating plans each day based upon their proportional share of the fund
balances.
Although the Company has not expressed any intent to do so, its
Board of Directors reserves the right to amend or terminate the Master Trust at
any time by giving written notice to the Trustee. If the Master Trust is
terminated, the Master Trust assets will be paid out to each separate
participating plan in proportion to its interest in the Master Trust.
NOTE 2: Summary of Significant Accounting Policies
Basis of Accounting
The financial statements of the Master Trust are prepared in
conformity with generally accepted accounting principles. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions. These estimates and
assumptions affect the reported amounts of additions, deductions, assets, and
liabilities and the disclosure of contingencies. Actual results could differ
from these estimates. These financial statements do not purport to present the
net assets available for benefits or the change in net assets available for
benefits of any of the individual participating retirement plans and do not
include all disclosures necessary for a fair presentation of the financial
statements of the individual participating plans in conformity with generally
accepted accounting principles.
NOTE 3: Federal Income Taxes
The Company received favorable tax determination letters from the
Internal Revenue Service (IRS) in November of 1995. The Master Trust is exempt
from federal income taxes under Section 501(a) of the Internal Revenue Code.
Accordingly, no provision for federal income taxes has been made in the
financial statements. The Plan sponsor believes that the Master Trust continues
to be designed and operated in accordance with IRS requirements.
5
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN MASTER TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 4: Investments
The Trustee invests a significant portion of the contributions
from the participating plans in the common stock of PG&E Corporation, as
directed by participants. The Company pays certain costs of administering the
Master Trust, including fees and expenses of the Trustee and investment
management fees.
Individual plan participants designate the way in which their
contributions are invested and may change their investment designation at any
time. Effective October 1, 1997, the Plan offered nine new investment funds to
plan participants to allow more investment options and greater diversification.
Participants were asked to re-direct funds by September 30, 1997. However, those
balances not re-directed rolled into the new funds are indicated below in
parenthesis. Participants may elect to have their contributions invested in one
or more of the following funds:
.PG&E Corporation Stock Fund
The Fund is structured to maximize the investment of
participants' contributions in shares of PG&E Corporation
common stock, while holding an appropriate level
(approximately one to five percent) of short-term
investments to meet daily liquidity requirements.
.Bond Index Fund (The previous Bond Index Fund rolled into
this fund)
The Fund invests primarily in government, corporate,
mortgage-backed, and asset-backed securities. The Fund
invests in a well-diversified portfolio that is
representative of the broad domestic bond market.
.Stable Value Fund (The Utility Stock Fund rolled into this
fund)
The Fund invests in a diversified portfolio of investment
contracts issued by insurance companies, banks, and other
financial institutions.
.Small Company Stock Index Fund
The Fund attempts to invest in all of the stocks in the
Russell Special Small Company Index in proportion to their
weighting in the Index.
.Large Company Stock Index Fund (The Diversified Equity Fund
rolled into this fund)
The Fund invests in all 500 stocks in the S&P 500 Index in
proportion to their weighting in the Index.
.International Stock Index Fund
The Fund typically invests in all the stocks in the Morgan
Stanley Capital International Europe Asia Far East (EAFE)
Index in proportion to their weighting in the Index.
.Conservative Asset Allocation Fund
The Fund is a portfolio of commingled stock and bond funds.
The Fund invests approximately 60 percent in the Bond Index
Fund, 25 percent in the Large Company Stock Index Fund, 10
percent in the Small Company Stock Index Fund, and 5
percent in the International Stock Index Fund.
.Moderate Asset Allocation Fund (The Stock and Bond Fund
rolled into this fund)
The Fund is a portfolio of commingled stock and bond funds.
The Fund invests approximately 40 percent in the Bond Index
Fund, 35 percent in the Large Company Stock Index Fund, 15
percent in the Small Company Stock Index Fund, and 10
percent in the International Stock Index Fund.
.Aggressive Asset Allocation Fund
The Fund is a portfolio of commingled stock and bond funds.
The Fund invests approximately 20 percent in the Bond Index
Fund, 45 percent in the Large Company Stock Index Fund, 20
percent in the Small Company Stock Index Fund, and 15
percent in the International Stock Index Fund.
6
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN MASTER TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 4: Investments (Continued)
The United States Bond Fund was closed to new contributions on
July 1, 1991.
A participant's interest in the investment funds is represented
by participation units allocated on the basis of contributions and assigned a
unit value on the basis of the total value of each fund. For investments in the
United States Savings Bond Fund, a unit is one bond.
Valuation of Investments
All investments (other than the Stable Value Fund) held by the
Master Trust are stated at fair value based on published market quotations.
Investments in the Stable Value Fund are valued at cost which approximates fair
value.
The net appreciation in fair value of investments in the
accompanying statement of changes in net assets reflects the net difference
between fair value and cost of investments bought during the year and the net
difference between the beginning of the year fair value and the fair value of
the assets held, sold, or distributed.
Financial Investments with Off-Balance Sheet Risk
The Employee Benefit Committee has adopted a "Position Statement
on Risk Management and the Use of Derivatives" which applies to the Master
Trust. This statement recognizes that derivatives be used by the Master Trust's
investment managers to achieve their investment objectives. However, the Master
Trust assets will not be exposed to risks through derivatives that would be
inappropriate in their absence. At December 31, 1997, the Master Trust held no
direct investments in derivatives.
NOTE 5: Holding Company Formation
On January 1, 1997, the Company became a subsidiary of its new
parent holding company, PG&E Corporation. The Company's outstanding common stock
was converted on a share-for-share basis into PG&E Corporation common stock. All
stock held by the Company Stock Fund is now PG&E Corporation common stock.
7
<PAGE>
SAVINGS FUND PLAN
FOR EMPLOYEES OF PACIFIC GAS AND ELECTRIC COMPANY
LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1997
<TABLE>
SHARES OR CURRENT
NAME OF ISSUER AND DESCRIPTION US BONDS COST VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
PG&E CORPORATION STOCK FUND
*PG&E CORPORATION COMMON STOCK 34,654,169 $783,017 $1,054,786
INTEREST BEARING ACCOUNTS
STATE STREET BANK + TRUST CO
SHORT TERM INVESTMENT FUND 27,269,724 27,270 27,270
------------------- ----------------- -----------------
TOTAL PG&E CORPORATION STOCK FUND 61,923,893 $810,287 $1,082,056
=================== ================= =================
UNITED STATES BOND FUND
UNITED STATES SAVINGS BONDS, SERIES E
(UNITS OF $18.75 COST AND $25.00 MATURITY) 5,020 $94 $400
UNITED STATES SAVINGS BONDS, SERIES EE
(UNITS OF $25.00 COST AND $50.00 MATURITY) 76,163 1,904 3,498
UNITED STATES SAVINGS BONDS, SERIES EE
(UNITS OF $50.00 COST AND $100.00 MATURITY) 8,844 442 657
------------------- ----------------- -----------------
TOTAL UNITED STATES BOND FUND 90,027 $2,440 $4,555
=================== ================= =================
BOND INDEX FUND
STATE STREET GLOBAL ADVISORS BOND MARKET INDEX FUND 5,572,580 $55,882 $57,147
=================== ================= =================
</TABLE>
<TABLE>
<CAPTION>
STABLE VALUE FUND (1)
US GOVERNMENT SECURITIES - TREASURY NOTES 08/99 6.0% 485,526 $485 $485
------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
INSURANCE COMPANY GENERAL ACCOUNTS
ALLSTATE LIFE INSURANCE CO 10/98 6.8% N/A $2,033 $2,033
ALLSTATE LIFE INSURANCE CO 11/99 8.3% N/A 6,338 6,338
ALLSTATE LIFE INSURANCE CO 02/02 Variable N/A 26,167 26,167
CDC INVESTMENT MGMT CORP 12/99 5.3% N/A 3,000 3,000
CROWN LIFE INS CO GIC 03/98 Variable N/A 183 183
JOHN HANCOCK MUTUAL LIFE 06/20 Variable N/A 3,001 3,001
JOHN HANCOCK MUTUAL LIFE 12/99 Variable N/A 14,974 14,974
JOHN HANCOCK MUTUAL LIFE 09/00 6.7% N/A 4,070 4,070
LIFE INSURANCE CO OF VIRGINIA 02/00 6.4% N/A 4,258 4,258
MASS MUTUAL LIFE INS 11/03 6.0% N/A 13,814 13,814
METROPOLITAN LIFE INS CO 12/99 Variable N/A 11,110 11,110
MET LIFE INS GAC 08/99 7.4% N/A 9,743 9,743
NEW YORK LIFE INS CO 10/00 7.1% N/A 10,365 10,365
NEW YORK LIFE INS CO 12/98 6.2% N/A 788 788
NEW YORK LIFE INS CO 12/99 Variable N/A 1,762 1,762
PACIFIC MUTUAL LIFE INS CO 02/00 6.4% N/A 5,305 5,305
PEOPLES SECURITY LIFE 09/03 6.0% N/A 49,768 49,768
PEOPLES SECURITY LIFE 12/99 6.4% N/A 5,534 5,534
PEOPLES SECURITY LIFE 12/99 7.1% N/A 4,359 4,359
PEOPLES SECURITY LIFE 12/99 6.5% N/A 4,049 4,049
PRUDENTIAL INS CO OF AMER 09/98 6.1% N/A 599 599
PROVIDENT LIFE + ACCIDENT 03/99 6.6% N/A 17,960 17,960
STATE STREET BANK + TRUST CO 05/01 Variable N/A 5,276 5,276
STATE STREET BANK 01/01 6.3% N/A 1,409 1,409
</TABLE>
8
<PAGE>
SAVINGS FUND PLAN
FOR EMPLOYEES OF PACIFIC GAS AND ELECTRIC COMPANY
LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES OR CURRENT
NAME OF ISSUER AND DESCRIPTION US BONDS COST VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INSURANCE COMPANY GENERAL ACCOUNTS CONT'D
STATE STREET BANK + TRUST CO 09/01 6.8% N/A $5,805 $5,805
STATE STREET BANK + TRUST CO 05/00 7.2% N/A 4,497 4,497
STATE STREET BANK NYEG 10/02 6.8% N/A 1,842 1,842
STATE STREET BANK MIDLAND 04/03 7.3% N/A 1,360 1,360
SECURITY LIFE OF DENVER 10/99 Variable N/A 5,065 5,065
SECURITY LIFE OF DENVER 08/98 Variable N/A 4,530 4,530
STATE STREET BANK LEHMAN 10/00 7.2% N/A 6,053 6,053
STATE STREET BANK 11/00 7.1% N/A 4,026 4,026
UNITED OMAHA LIFE INS 07/00 5.9% N/A 2,006 2,006
U S DEPT VETERAN AFFAIRS REMIC 12/09 6.8% N/A 1,099 1,099
------------------ ----------------- ----------------
TOTAL INSURANCE COMPANY GENERAL ACCOUNTS N/A $242,148 $242,148
------------------ ----------------- ----------------
CORPORATE DEBT INSTRUMENTS
AMRESCO COML MTG FDG I CORP 06/29 6.7% N/A $5,421 $5,421
AMRESCO 10/00 6.9% N/A 1,896 1,896
CAISSE DES DEPOTS 10/02 6.0% N/A 7,086 7,086
CAISSE DES DEPOTS 12/99 5.3% N/A 9 9
CAISSE DES DEPOTS 06/98 6.2% N/A 3,077 3,077
CAISSE DES DEPOTS 12/99 6.2% N/A 2,238 2,238
CAISSE DES DEPOTS 09/00 6.2% N/A 4,004 4,004
CDC INVESTMENT MGMT CORP 06/98 7.1% N/A 4,046 4,046
CDC INVESTMENT MGMT CORP 10/99 7.6% N/A 3,036 3,036
CDC INVESTMENT MGMT CORP 12/20 6.5% N/A 2,800 2,800
CHASE MANHATTAN AUTO OWNER TR 02/01 6.4% N/A 2,419 2,419
FLEETWOOD CR GRANTOR TR 09/12 Variable N/A 774 774
MERRILL LYNCH MTG INVS INC 09/20 6.7% N/A 1,799 1,799
MONEY STORE HOME IMPT LN TR 10/13 Variable N/A 1,901 1,901
------------------ ----------------- ----------------
TOTAL CORPORATE DEBT INSTRUMENTS N/A $40,506 $40,506
------------------ ----------------- ----------------
INTEREST BEARING ACCOUNTS
GENERAL ELEC CAP CORP DISC 12,000,000 $11,942 $11,942
STATE STREET BANK + TRUST CO 8,138,740 8,139 8,139
------------------ ----------------- ----------------
TOTAL INTEREST BEARING ACCOUNTS 20,138,740 $20,081 $20,081
------------------ ----------------- ----------------
TOTAL STABLE VALUE FUND 20,624,266 $303,220 $303,220
================== ================= ================
</TABLE>
9
<PAGE>
SAVINGS FUND PLAN
FOR EMPLOYEES OF PACIFIC GAS AND ELECTRIC COMPANY
LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
SHARES OR CURRENT
NAME OF ISSUER AND DESCRIPTION US BONDS COST VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SMALL COMPANY STOCK INDEX FUND
STATE STREET GLOBAL ADVISORS RUSSELL SPECIAL SMALL CO. 8,074,857 $87,038 $86,134
================== ================= ================
LARGE COMPANY STOCK INDEX FUND
STATE STREET GLOBAL ADVISORS S&P 500 STRATEGY FUND 79,890,842 $1,007,092 $1,034,267
================== ================= ================
INTERNATIONAL STOCK INDEX FUND
STATE STREET GLOBAL ADVISORS DAILY EAFE STATEGY FUND 2,456,541 $24,780 $23,087
================== ================= ================
CONSERVATIVE ASSET ALLOCATION FUND
STATE STREET GLOBAL ADVISORS BOND MARKET INDEX FUND 1,386,990 $13,917 $14,224
STATE STREET GLOBAL ADVISORS DAILY EAFE STATEGY FUND 128,850 1,283 1,211
STATE STREET GLOBAL ADVISORS RUSSELL SPECIAL SMALL C 231,175 2,469 2,466
STATE STREET GLOBAL ADVISORS S&P 500 STRATEGY FUND 475,994 6,008 6,162
------------------ ----------------- ----------------
TOTAL CONSERVATIVE ASSET ALLOCATION FUND 2,223,009 $23,677 $24,063
================= ================= ================
MODERATE ASSET ALLOCATION FUND
STATE STREET GLOBAL ADVISORS BOND MARKET INDEX FUND 6,254,297 $62,370 $64,138
STATE STREET GLOBAL ADVISORS DAILY EAFE STATEGY FUND 1,743,926 17,754 16,389
STATE STREET GLOBAL ADVISORS RUSSELL SPECIAL SMALL CO. 2,346,184 25,136 25,027
STATE STREET GLOBAL ADVISORS S&P 500 STRATEGY FUND 4,507,570 56,798 58,355
------------------ ----------------- ---------------
TOTAL MODERATE ASSET ALLOCATION FUND 14,851,977 $162,058 $163,909
================== ================= ===============
AGGRESSIVE ASSET ALLOCATION FUND
STATE STREET GLOBAL ADVISORS BOND MARKET INDEX FUND 1,056,593 $10,583 $10,835
STATE STREET GLOBAL ADVISORS DAILY EAFE STATEGY FUND 883,735 8,925 8,305
STATE STREET GLOBAL ADVISORS RUSSELL SPECIAL SMALL CO. 1,056,695 11,346 11,272
STATE STREET GLOBAL ADVISORS S&P 500 STRATEGY FUND 1,957,500 24,729 25,342
------------------ ----------------- ---------------
TOTAL AGGRESSIVE ASSET ALLOCATION FUND 4,954,523 $55,583 $55,754
================== ================= ===============
TOTAL INVESTMENTS 200,662,515 $2,532,057 $2,834,192
================== ================= ================
</TABLE>
(1) The Stable Value Fund is not measured in number of shares and is not
applicable (N/A)
*A party-in-interest as defined by ERISA
=============
10
<PAGE>
SAVINGS FUND PLAN
FOR EMPLOYEES OF PACIFIC GAS AND ELECTRIC COMPANY
LINE 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
For The Year Ended December 31, 1997
PG&E CORPORATION STOCK FUND
(dollars in thousands)
BEGINNING NET ASSET VALUE: $865,353
5% OF ASSET VALUE: $43,268
<TABLE>
<CAPTION>
PURCHASE SALE 5500 TOTAL COST/
SECURITY DESCRIPTION #PURCH. COST #SALES PROCEEDS GAIN TOTAL# PROCEEDS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON AND PREFERRED 40 $92,203 186 $200,124 $24,488 226 $292,327
FIXED INCOME 123 $197,458 126 $193,935 $0 249 $391,393
REPORTABLE TRANSACTION TOTALS 163 $289,661 312 $394,059 $24,488 475 $683,720
</TABLE>
11
<PAGE>
SAVINGS FUND PLAN
FOR EMPLOYEES OF PACIFIC GAS AND ELECTRIC COMPANY
LINE 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
For The Year Ended December 31, 1997
BOND INDEX FUND
(dollars in thousands)
BEGINNING NET ASSET VALUE: $28,528
5% OF ASSET VALUE: $1,426
<TABLE>
<CAPTION>
PURCHASE SALE 5500 TOTAL COST/
SECURITY DESCRIPTION #PURCH. COST #SALES PROCEEDS GAIN TOTAL# PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON AND PREFERRED 154 $70,257 110 $43,410 $667 264 $113,667
REPORTABLE TRANSACTION TOTALS 154 $70,257 110 $43,410 $667 264 $113,667
</TABLE>
12
<PAGE>
SAVINGS FUND PLAN
FOR EMPLOYEES OF PACIFIC GAS AND ELECTRIC COMPANY
LINE 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
For The Year Ended December 31, 1997
STABLE VALUE FUND
(dollars in thousands)
BEGINNING NET ASSET VALUE: $272,855
5% OF ASSET VALUE: $13,643
<TABLE>
<CAPTION>
PURCHASE SALE 5500 TOTAL COST/
SECURITY DESCRIPTION #PURCH. COST #SALES PROCEEDS LOSS TOTAL# PROCEEDS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FIXED INCOME 194 $387,354 215 $339,225 ($36) 409 $726,579
REPORTABLE TRANSACTION TOTALS 194 $387,354 215 $339,225 ($36) 409 $726,579
NON-REPORTABLE TRANSACTION TOTALS 291 $98,820 420 $119,702 $0 711 $218,522
</TABLE>
13
<PAGE>
SAVINGS FUND PLAN
FOR EMPLOYEES OF PACIFIC GAS AND ELECTRIC COMPANY
LINE 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
For The Year Ended December 31, 1997
SMALL COMPANY STOCK INDEX FUND
(dollars in thousands)
BEGINNING NET ASSET VALUE: $52,536
5% OF ASSET VALUE: $2,627
<TABLE>
<CAPTION>
PURCHASE SALE 5500 TOTAL COST/
SECURITY DESCRIPTION #PURCH. COST #SALES PROCEEDS LOSS TOTAL# PROCEEDS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON AND PREFERRED 35 $101,069 31 $13,384 ($648) 66 $114,453
- --------------------
REPORTABLE TRANSACTION TOTALS 35 $101,069 31 $13,384 ($648) 66 $114,453
- -----------------------------
</TABLE>
14
<PAGE>
SAVINGS FUND PLAN
FOR EMPLOYEES OF PACIFIC GAS AND ELECTRIC COMPANY
LINE 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
For The Year Ended December 31, 1997
LARGE COMPANY STOCK INDEX FUND
(dollars in thousands)
BEGINNING NET ASSET VALUE: $1,081,599
5% OF ASSET VALUE: $54,080
<TABLE>
<CAPTION>
PURCHASE SALE 5500 TOTAL COST/
SECURITY DESCRIPTION #PURCH. COST #SALES PROCEEDS GAIN TOTAL# PROCEEDS
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON AND PREFERRED 29 $162,505 50 $156,146 $733 79 $318,651
- --------------------
REPORTABLE TRANSACTION TOTALS 29 $162,505 50 $156,146 $733 79 $318,651
- -----------------------------
</TABLE>
15
<PAGE>
SAVINGS FUND PLAN
FOR EMPLOYEES OF PACIFIC GAS AND ELECTRIC COMPANY
LINE 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
For The Year Ended December 31, 1997
INTERNATIONAL STOCK INDEX FUND
(dollars in thousands)
BEGINNING NET ASSET VALUE: $15,145
5% OF ASSET VALUE: $757
<TABLE>
<CAPTION>
PURCHASE SALE 5500 TOTAL COST/
SECURITY DESCRIPTION #PURCH. COST #SALES PROCEEDS LOSS TOTAL# PROCEEDS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON AND PREFERRED 41 $29,156 25 $4,068 ($308) 66 $33,224
- --------------------
REPORTABLE TRANSACTION TOTALS 41 $29,156 25 $4,068 ($308) 66 $33,224
- -----------------------------
</TABLE>
16
<PAGE>
SAVINGS FUND PLAN
FOR EMPLOYEES OF PACIFIC GAS AND ELECTRIC COMPANY
LINE 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
For The Year Ended December 31, 1997
CONSERVATIVE ASSET ALLOCATION FUND
(dollars in thousands)
BEGINNING NET ASSET VALUE: $12,564
5% OF ASSET VALUE: $628
<TABLE>
<CAPTION>
PURCHASE SALE 5500 TOTAL COST/
SECURITY DESCRIPTION #PURCH. COST #SALES PROCEEDS GAIN TOTAL# PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON AND PREFERRED 181 $30,107 67 $6,440 $10 248 $36,547
- --------------------
REPORTABLE TRANSACTION TOTALS 181 $30,107 67 $6,440 $10 248 $36,547
- -----------------------------
</TABLE>
17
<PAGE>
SAVINGS FUND PLAN
FOR EMPLOYEES OF PACIFIC GAS AND ELECTRIC COMPANY
LINE 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
For The Year Ended December 31, 1997
MODERATE ASSET ALLOCATION FUND
(dollars in thousands)
BEGINNING NET ASSET VALUE: $176,510
5% OF ASSET VALUE: $8,826
<TABLE>
<CAPTION>
PURCHASE SALE 5500 TOTAL COST/
SECURITY DESCRIPTION #PURCH. COST #SALES PROCEEDS LOSS TOTAL# PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON AND PREFERRED 102 $264,911 162 $102,693 ($161) 264 $367,604
- --------------------
REPORTABLE TRANSACTION TOTALS 102 $264,911 162 $102,693 ($161) 264 $367,604
- -----------------------------
</TABLE>
18
<PAGE>
SAVINGS FUND PLAN
FOR EMPLOYEES OF PACIFIC GAS AND ELECTRIC COMPANY
LINE 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
For The Year Ended December 31, 1997
AGGRESSIVE ASSET ALLOCATION FUND
(dollars in thousands)
BEGINNING NET ASSET VALUE: $35,782
5% OF ASSET VALUE: $1,789
<TABLE>
<CAPTION>
PURCHASE SALE 5500 TOTAL COST/
SECURITY DESCRIPTION #PURCH. COST #SALES PROCEEDS LOSS TOTAL# PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON AND PREFERRED 160 $77,318 101 $21,681 ($54) 261 $98,999
- --------------------
REPORTABLE TRANSACTION TOTALS 160 $77,318 101 $21,681 ($54) 261 $98,999
- -----------------------------
</TABLE>
19
<PAGE>
SAVINGS FUND PLAN
FOR EMPLOYEES OF PACIFIC GAS AND ELECTRIC COMPANY
LINE 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
For The Year Ended December 31, 1997
DIVERSIFIED EQUITY FUND
(dollars in thousands)
BEGINNING NET ASSET VALUE: $765,846
5% OF ASSET VALUE: $38,292
<TABLE>
<CAPTION>
PURCHASE SALE 5500 COST/
SECURITY DESCRIPTION #PURCH. COST #SALES PROCEEDS GAIN TOTAL# EEDS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON AND PREFERRED 11 $1,141,194 9 $141,840 $646 20 $1,283,034
- --------------------
FIXED INCOME 103 $218,365 78 $242,471 $0 181 $460,836
- ------------
REPORTABLE TRANSACTION TOTALS 114 $1,359,559 87 $384,311 $646 201 $1,743,870
- -----------------------------
NON-REPORTABLE TRANSACTION TOTALS 1,688 $432,633 1,328 $1,386,966 $223,929 3,016 $1,819,599
- ---------------------------------
</TABLE>
20
<PAGE>
SAVINGS FUND PLAN
FOR EMPLOYEES OF PACIFIC GAS AND ELECTRIC COMPANY
LINE 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
For The Year Ended December 31, 1997
STOCK AND BOND FUND
(dollars in thousands)
BEGINNING NET ASSET VALUE: $151,074
5% OF ASSET VALUE: $7,554
<TABLE>
<CAPTION>
PURCHASE SALE 5500 TOTAL COST/
SECURITY DESCRIPTION #PURCH. COST #SALES PROCEEDS GAIN TOTAL# PROCEEDS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON AND PREFERRED 89 $192,750 110 $368,020 $24,196 199 $560,770
- --------------------
FIXED INCOME 3 $87,540 3 $87,540 $0 6 $175,080
- ------------
REPORTABLE TRANSACTION TOTALS 92 $280,290 113 $455,560 $24,196 205 $735,850
- -----------------------------
</TABLE>
21
<PAGE>
SAVINGS FUND PLAN
FOR EMPLOYEES OF PACIFIC GAS AND ELECTRIC COMPANY
LINE 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
For The Year Ended December 31, 1997
UTILITY STOCK FUND
(dollars in thousands)
BEGINNING NET ASSET VALUE: $40,436
5% OF ASSET VALUE: $2,022
<TABLE>
<CAPTION>
PURCHASE SALE 5500 TOTAL COST/
SECURITY DESCRIPTION #PURCH. COST #SALES PROCEEDS GAIN TOTAL# PROCEEDS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON AND PREFERRED 68 $6,107 131 $46,731 $188 199 $52,838
- --------------------
REPORTABLE TRANSACTION TOTALS 68 $6,107 131 $46,731 $188 199 $52,838
- -----------------------------
</TABLE>
22
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART I
FINANCIAL STATEMENTS
TABLE OF CONTENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
FINANCIAL STATEMENTS
Statement of Net Assets Available for Benefits - December 31, 1997
and 1996
Statement of Changes in Net Assets Available for Benefits for the
Year Ended December 31, 1997
Notes to Financial Statements - December 31, 1997
<PAGE>
[LETTERHEAD OF ARTHUR ANDERSEN LLP]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Employee Benefit Committee of PG & E Corporation,
Pacific Gas and Electric Company, and Participants in the
Pacific Gas and Electric Company Savings Fund Plan:
We have audited the accompanying statements of net assets available for benefits
of Pacific Gas and Electric Company Savings Fund Plan - Part I (the Plan) as of
December 31, 1997 and 1996, and the related statement of changes in net assets
available for benefits for the year ended December 31, 1997. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 1997 and 1996, and the changes in its net assets available for
benefits for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California
February 27, 1998
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART I
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- --------------
(in thousands)
<S> <C> <C>
ASSETS:
Investment in Pacific Gas and Electric Company
Savings Fund Plan Master Trust, at fair value $1,329,770 $1,024,375
------------- --------------
NET ASSETS AVAILABLE FOR BENEFITS $1,329,770 $1,024,375
============== ==============
</TABLE>
The accompanying Notes to the Financial Statements are an integral part of this
statement.
1
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART I
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
(in thousands)
ADDITIONS:
<S> <C>
Participant contributions $37,769
Employer contributions 16,715
Interplan transfers 6
Net investment gain from Pacific Gas and Electric
Company Savings Fund Plan Master Trust 308,198
-----------
Total Additions 362,688
-----------
DEDUCTIONS:
Benefits paid directly to participants or beneficiaries 57,293
-----------
Total Deductions 57,293
-----------
Increase in Net Assets Available for Benefits 305,395
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of the year 1,024,375
------------
End of the year $1,329,770
============
The Accompanying Notes to the Financial Statements are an integral part of this statement.
</TABLE>
2
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART 1
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1: Plan Description
The Pacific Gas and Electric Company Savings Fund Plan - Part I
(the Plan) is a defined contribution plan and is subject to the provisions of
the Employee Retirement Income Security Act of 1974. The Plan covers all
eligible non-union employees of Pacific Gas and Electric Company (the Company)
and the non-union employees of any other entity designated by the Company's
Board of Directors. The Plan participates in the Pacific Gas and Electric
Company Savings Fund Plan Master Trust (the Master Trust). The Employee Benefit
Committee (EBC) of the Company's parent Corporation, PG&E Corporation,
administers the Master Trust. The EBC retains State Street Bank and Trust
Company as the Trustee (the Trustee).
Although the Company has not expressed any intent to do so, its
Board of Directors reserves the right to amend or terminate the Plan at any
time. Participants should refer to the Plan document for a complete description
of the Plan's provisions. In addition, the financial statements of the Master
Trust provide information regarding the activities and transactions of the
various investment options offered by the Plan.
All participants' contributions and their share of all employer
contributions, and the earnings, and losses resulting from such contributions
are immediately vested.
Employees are eligible to participate in the Plan immediately at
employment. The Company matches employee contributions, up to a maximum of 6
percent of covered compensation, as defined, and depending on length of service,
at a 75 percent rate.
Eligible employees may elect to contribute to the Plan up to 15
percent of their covered compensation on a pre-tax or after-tax basis. This
amount may be deferred compensation (401(k)), or after-tax contributions
(non-401(k)). 401(k) contributions are not subject to federal or state income
tax until withdrawn or distributed from the Plan.
All contributions made to the Plan prior to October 1, 1984, are
considered to be non-401(k) contributions. As provided under the Tax Reform Act
of 1986, employee 401(k) contributions may not exceed $9,500 for 1997, and total
contributions to a participant's account may not exceed the lesser of 25 percent
of compensation or $30,000 a year. The annual 401(k) limitation, as indexed, may
be adjusted each year to reflect changes in the cost of living.
Eligible employees may elect to contribute to the Plan any excess
funds from the FLEX benefits program, which is a cafeteria plan qualified under
Section 125 of the Internal Revenue Code (IRC). These funds, which are invested
in the participant's account in December, are considered 401(k) contributions
but are not eligible for matching employer contributions.
3
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART 1
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 2: Summary of Significant Accounting Policies
Basis of Accounting
The financial statements of the Plan are prepared in conformity
with generally accepted accounting principles. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions. These estimates and assumptions
affect the reported amounts of additions, deductions, assets, and liabilities
and the disclosure of contingencies. Actual results could differ from these
estimates.
The Plan's interest in the Master Trust is stated at fair value
based on the Plan's prorated interest in the Master Trust. The Master Trust
values investments in the Stable Value Fund at cost which approximates fair
value. Generally, all other investments are stated at fair value based on
published market quotations.
Interest income, dividends, investment management fees, where
appropriate, and the net appreciation or depreciation in the fair value of the
investments held by the Master Trust are allocated to the individual
participating plans each day based upon their proportional share of the fund
balances.
Benefits are recorded when paid.
Certain amounts in the prior year have been reclassified and
formatted to conform to the 1997 presentation.
NOTE 3: Federal Income Taxes
The Internal Revenue Service (IRS) has ruled that the Plan is a
qualified tax-exempt plan under Section 401(a) and Section 409(a) of the IRC and
the trust forming a part thereof is exempt under Section 501(a) of the IRC.
Accordingly, no provision for federal income taxes has been made in the
financial statements. Furthermore, participating employees are not liable for
federal income tax on amounts allocated to their accounts attributable to: (1)
employee 401(k) contributions, (2) dividends, earnings, and interest income on
both 401(k) contributions and non-401(k) contributions, or (3) employer
contributions, until the time that they withdraw such amounts from the Plan.
The Company received a favorable tax determination letter from
the IRS in November of 1995. Accordingly, the Plan sponsor believes that the
Plan continues to be designed and operated in accordance with IRS requirements.
4
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART 1
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 4: Investments
The Plan has a prorated interest in the net assets of the Master
Trust. The Master Trust Agreement allows the Company's Savings Fund Plans and
the Pacific Service Employees Association to participate in the Master Trust.
The Trustee invests a significant portion of the contributions
from the participating plans in the common stock of PG&E Corporation, as
directed by participants. The Company pays certain costs of administering the
Master Trust, including fees and expenses of the Trustee and investment
management.
Individual plan participants designate the way in which their
contributions are invested and may change their investment designation at any
time. Effective October 1, 1997, the Plan offered nine new investment funds to
plan participants to allow more investment options and greater diversification.
Participants were asked to re-direct funds by September 30, 1997. However, those
balances not re-directed rolled into the new funds as indicated below in
parenthesis. Participants may elect to have their contributions invested in one
or more of the following funds held by the Master Trust:
.PG&E Corporation Stock Fund
The Fund is structured to maximize the investment of
participants' contributions in shares of PG&E Corporation
common stock, while holding an appropriate level
(approximately one to five percent) of short-term
investments to meet daily liquidity requirements.
.Bond Index Fund (The previous Bond Index Fund rolled into
this fund)
The Fund invests primarily in government, corporate,
mortgage-backed, and asset-backed securities. The Fund
invests in a well-diversified portfolio that is
representative of the broad domestic bond market.
.Stable Value Fund (The Utility Stock Fund rolled into this
fund)
The Fund invests in a diversified portfolio of investment
contracts issued by insurance companies, banks, and other
financial institutions.
.Small Company Stock Index Fund
The Fund attempts to invest in all of the stocks in the
Russell Special Small Company Index in proportion to their
weighting in the Index.
.Large Company Stock Index Fund (The Diversified Equity Fund
rolled into this fund)
The Fund invests in all 500 stocks in the S&P 500 Index
in proportion to their weighting in the Index.
.International Stock Index Fund
The Fund typically invests in all the stocks in the Morgan
Stanley Capital International Europe Asia Far East (EAFE)
Index in proportion to their weighting in the Index.
5
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART 1
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 4: Investments (Continued)
.Conservative Asset Allocation Fund
The Fund is a portfolio of commingled stock and bond funds.
The Fund invests approximately 60 percent in the Bond Index
Fund, 25 percent in the Large Company Stock Index Fund, 10
percent in the Small Company Stock Index Fund, and 5
percent in the International Stock Index Fund.
.Moderate Asset Allocation Fund (The Stock and Bond Fund
rolled into this fund)
The Fund is a portfolio of commingled stock and bond
funds. The Fund invests approximately 40 percent in the
Bond Index Fund, 35 percent in the Large Company Stock
Index Fund, 15 percent in the Small Company Stock Index
Fund, and 10 percent in the International Stock Index
Fund.
.Aggressive Asset Allocation Fund
The Fund is a portfolio of commingled stock and bond funds.
The Fund invests approximately 20 percent in the Bond Index
Fund, 45 percent in the Large Company Stock Index Fund, 20
percent in the Small Company Stock Index Fund, and 15
percent in the International Stock Index Fund.
The United States Bond Fund was closed to new contributions on
July 1, 1991.
Participants should refer to the separate Master Trust financial
statements or their individual quarterly Savings Fund Plan account statements
for information relating to the activity in each of the investment options.
A participant's interest in the investment funds is represented
by participation units allocated on the basis of contributions and assigned a
unit value on the basis of the total value of each fund. For investments in the
United States Savings Bond Fund, a unit is one bond.
6
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART I
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 4: Investments (Continued)
The following summarizes the net assets and related investment gain of the
Master Trust and the Plan's allocated share of such amounts:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
ASSETS
1997
Investments, at fair value:
PG&E Corporation common stock $1,054,786
United States government securities 5,040
Insurance company general accounts 242,148
Corporate debt instruments 40,506
State Street Global Advisors
Bond Market Index Fund 146,344
Daily EAFE Strategy Fund 48,992
Russell Special Small Company 124,899
S&P 500 Strategy Fund 1,124,126
Interest bearing accounts 47,351
-------------
Total investments 2,834,192
-------------
Receivables:
Dividends and interest 11,481
Other receivables 431
-------------
Total receivables 11,912
-------------
Total assets 2,846,104
-------------
LIABILITIES 6,996
-------------
NET ASSETS $2,839,108
=============
Allocated to the Plan $1,329,770
Allocated to other plans 1,509,338
-------------
$2,839,108
=============
</TABLE>
7
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART I
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 4: Investments (Continued)
The following summarizes the net assets and related investment gain of the
Master Trust and the Plan's allocated share of such amounts:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
ASSETS
1996
Investments, at fair value:
PG&E Corporation common stock $ 830,689
United States government securities 4,542
Diversified Equity Fund
United States treasury bills 1,193
Corporate stocks - common 740,165
Guaranteed Income Fund
Corporate debt intruments 35,582
Insurance company general accounts 224,294
Registered investment companies
Vanguard Bond Index Fund 28,369
Columbia Balanced Fund 151,074
Mellon Bank Utility Stock Fund 40,436
Interest bearing accounts 58,759
--------------
Total investments 2,115,103
--------------
Receivables:
Dividends and interest 14,919
Other receivables 537
--------------
Total receivables 15,456
--------------
Total assets 2,130,559
--------------
LIABILITIES 1,925
--------------
NET ASSETS $ 2,128,634
==============
Allocated to the Plan $ 1,024,375
Allocated to other plans 1,104,259
--------------
$ 2,128,634
==============
</TABLE>
8
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART I
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 4: Investments (Continued)
The composition of the Master Trust investment income for the year ended
December 31, 1997:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Earnings from investments
Dividends $ 60,687
Interest 20,974
Other income 140
-------------
Total earnings from investments 81,801
-------------
Gain on securities
Realized on sale or distribution 492,291
Unrealized appreciation 120,756
-------------
Total gain on securities 613,047
-------------
Total investment gain $ 694,848
=============
Allocated to the Plan $ 308,198
Allocated to other plans 386,650
-------------
$ 694,848
=============
</TABLE>
9
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART I
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 4: Investments (Continued)
The net appreciation (depreciation) in fair value of investments of the
Master Trust by major investment category for the year ended December 31, 1997
is as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
PG&E Corporation Stock Fund $ 331,535
Bond Index Fund 1,919
Stable Value Fund (93)
Small Company Stock Index Fund (1,576)
Large Company Stock Index Fund 27,802
International Stock Index Fund (2,007)
Conservative Asset Allocation Fund 393
Moderate Asset Allocation Fund 1,665
Aggressive Asset Allocation Fund 109
Diversified Equity Fund 229,087
Stock and Bond Fund 23,501
Utility Stock Fund 712
-------------
Total appreciation $ 613,047
=============
Allocated to the Plan $ 273,033
Allocated to other plans 340,014
-------------
$ 613,047
=============
</TABLE>
10
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART I
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 4: Investments (Continued)
The net asset value per unit of the Funds is determined by dividing the
fair value of fund assets by the number of fund units outstanding. The total
number of units held by the Plan and the value per unit of the Funds for the
four quarters ended December 31, 1997 and 1996, are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
1997
----
<S> <C> <C> <C> <C>
March 31 June 30 September 30 December 31
- ------------------------------------------------------------------------------------------------------------
PG&E Corporation Stock Fund
Number of units 29,431,516 28,629,271 27,232,816 24,473,577
Value per unit $11.04 $11.52 $11.17 $14.69
Bond Index Fund
Number of units 1,349,024 1,368,616 1,483,166 2,439,334
Value per unit $14.32 $14.83 $15.34 $15.73
Stable Value Fund
Number of units 138,595,533 139,548,320 138,956,779 128,161,257
Value per unit $1.21 $1.14 $1.16 $1.18
Small Company Stock Index Fund
Number of units 5,164,507
Value per unit $9.90
Large Company Stock Index Fund
Number of units 3,371,278
Value per unit $167.07
International Stock Index Fund
Number of units 1,607,707
Value per unit $8.19
Conservative Asset Allocation Fund
Number of units 3,001,968
Value per unit $5.09
Moderate Asset Allocation Fund
Number of units 9,979,590
Value per unit $10.22
Aggressive Asset Allocation Fund
Number of units 2,304,445
Value per unit $15.04
Diversified Equity Fund
Number of units 3,581,542 3,661,539 3,750,526
Value per unit $127.28 $150.54 $162.36
Stock and Bond Fund
Number of units 11,342,316 11,200,710 11,270,203
Value per unit $8.71 $9.52 $10.11
Utility Stock Fund
Number of units 1,168,560 1,092,308 985,901
Value per unit $16.21 $17.02 $17.85
- ------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART I
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 4: Investments (Continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
1996
----
March 31 June 30 September 30 December 31
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PG&E Corporation Stock Fund
Number of units 32,838,726 31,699,494 31,317,822 30,249,894
Value per unit $9.93 $10.42 $9.99 $9.77
Diversified Equity Fund
Number of units 3,436,916 3,565,372 3,557,849 3,570,173
Value per unit $106.16 $110.52 $113.86 $124.11
Guaranteed Income Fund
Number of units 105,473,859 109,034,254 118,296,190 129,108,827
Value per unit $1.06 $1.07 $1.09 $1.11
Bond Index Fund
Number of units 1,359,087 1,315,660 1,351,415 1,339,088
Value per unit $13.63 $13.72 $13.96 $14.40
Stock and Bond Fund
Number of units 11,700,898 11,591,287 11,497,781 11,497,145
Value per unit $7.90 $8.13 $8.34 $8.72
Utility Stock Fund
Number of units 1,630,043 1,448,747 1,393,897 1,243,505
Value per unit $16.16 $16.55 $15.88 $16.72
- ------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART 1
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 5: Holding Company Formation
On January 1, 1997, the Company became a subsidiary of its new
parent holding company, PG&E Corporation. The Company's outstanding common stock
was converted on a share-for-share basis into PG&E Corporation common stock. All
stock held by the Company Stock Fund is now PG&E Corporation common stock.
13
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART II
FINANCIAL STATEMENTS
TABLE OF CONTENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
FINANCIAL STATEMENTS
Statement of Net Assets Available for Benefits - December 31, 1997
and 1996
Statement of Changes in Net Assets Available for Benefits for the
Year Ended December 31, 1997
Notes to Financial Statements - December 31, 1997
<PAGE>
[LETTERHEAD OF ARTHUR ANDERSEN LLP]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Employee Benefit Committee of PG&E Corporation,
Pacific Gas and Electric Company, and Participants in the
Pacific Gas and Electric Company Savings Fund Plan:
We have audited the accompanying statements of net assets available for benefits
of Pacific Gas and Electric Company Savings Fund Plan - Part II (the Plan) as of
December 31, 1997 and 1996, and the related statement of changes in net assets
available for benefits for the year ended December 31, 1997. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 1997 and 1996, and the changes in its net assets available for
benefits for the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California
February 27, 1998
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART II
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------------- --------------
<S> <C> <C>
(in thousands)
ASSETS:
Investment in Pacific Gas and Electric Company
Savings Fund Plan Master Trust, at fair value $1,502,351 $1,099,031
-------------- --------------
NET ASSETS AVAILABLE FOR BENEFITS $1,502,351 $1,099,031
=============== ==============
</TABLE>
The accompanying Notes to the Financial Statements are an integral part of this
statement.
1
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART II
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
(in thousands)
ADDITIONS:
<S> <C>
Participant contributions $58,694
Employer contributions 15,579
Net investment gain from Pacific Gas and Electric
Company Savings Fund Plan Master Trust 384,966
-----------
Total Additions 459,239
-----------
DEDUCTIONS:
Benefits paid directly to participants or beneficiaries 55,675
Interplan transfers 244
-----------
Total Deductions 55,919
-----------
Increase in Net Assets Available for Benefits 403,320
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of the year 1,099,031
-----------
End of the year $1,502,351
===========
The accompanying notes to the financial statements are an integral part of this statement.
</TABLE>
2
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART II
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1: Plan Description
The Pacific Gas and Electric Company Savings Fund Plan - Part II
(the Plan) is a defined contribution plan and is subject to the provisions of
the Employee Retirement Income Security Act of 1974. The Plan covers all
eligible union employees of Pacific Gas and Electric Company (the Company) and
the union employees of any other entity designated by the Company's Board of
Directors. The Plan participates in the Pacific Gas and Electric Company Savings
Fund Plan Master Trust (the Master Trust). The Employee Benefit Committee (EBC)
of the Company's parent Corporation, PG&E Corporation, administers the Master
Trust. The EBC retains State Street Bank and Trust Company as the Trustee (the
Trustee).
Although the Company has not expressed any intent to do so, its
Board of Directors reserves the right to amend or terminate the Plan at any
time. Participants should refer to the Plan document for a complete description
of the Plan's provisions. In addition, the financial statements of the Master
Trust provide information regarding the activities and transactions of the
various investment options offered by the Plan.
All participants' contributions and their share of all employer
contributions, and the earnings, and losses resulting from such contributions
are immediately vested.
Employees are eligible to participate in the Plan after six
months of service. The Company matches employee contributions, up to a maximum
of 6 percent of covered compensation, as defined, and depending on length of
service, at a 50 percent rate.
Eligible employees may elect to contribute to the Plan up to 15
percent of their covered compensation on a pre-tax or after-tax basis. This
amount may be deferred compensation (401(k)), or after-tax contributions
(non-401(k)). 401(k) contributions are not subject to federal or state income
tax until withdrawn or distributed from the Plan.
All contributions made to the Plan prior to October 1, 1984, are
considered to be non-401(k) contributions. As provided under the Tax Reform Act
of 1986, employee 401(k) contributions may not exceed $9,500 for 1997, and total
contributions to a participant's account may not exceed the lesser of 25 percent
of compensation or $30,000 a year. The annual 401(k) limitation, as indexed, may
be adjusted each year to reflect changes in the cost of living.
3
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART II
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 2: Summary of Significant Accounting Policies
Basis of Accounting
The financial statements of the Plan are prepared in conformity
with generally accepted accounting principles. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions. These estimates and assumptions
affect the reported amounts of additions, deductions, assets, and liabilities
and the disclosure of contingencies. Actual results could differ from these
estimates.
The Plan's interest in the Master Trust is stated at fair value
based on the Plan's prorated interest in the Master Trust. The Master Trust
values investments in the Stable Value Fund at cost which approximates fair
value. Generally, all other investments are stated at fair value based on
published market quotations.
Interest income, dividends, investment management fees, where
appropriate, and the net appreciation or depreciation in the fair value of the
investments held by the Master Trust are allocated to the individual
participating plans each day based upon their proportional share of the fund
balances.
Benefits are recorded when paid.
Certain amounts in the prior year have been reclassified and
formatted to conform to the 1997 presentation.
NOTE 3: Federal Income Taxes
The Internal Revenue Service (IRS) has ruled that the Plan is a
qualified tax-exempt plan under Section 401(a) and Section 409(a) of the
Internal Revenue Code (IRC) and the trust forming a part thereof is exempt under
Section 501(a) of the IRC. Accordingly, no provision for federal income taxes
has been made in the financial statements. Furthermore, participating employees
are not liable for federal income tax on amounts allocated to their accounts
attributable to: (1) employee 401(k) contributions, (2) dividends, earnings, and
interest income on both 401(k) contributions and non-401(k) contributions, or
(3) employer contributions, until the time that they withdraw such amounts from
the Plan.
The Company received a favorable tax determination letter from
the IRS in November of 1995. Accordingly, the Plan sponsor believes that the
Plan continues to be designed and operated in accordance with IRS requirements.
4
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART II
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 4: Investments
The Plan has a prorated interest in the net assets of the Master
Trust. The Master Trust Agreement allows the Company's Savings Fund Plans
and the Pacific Service Employees Association to participate in the Master
Trust.
The Trustee invests a significant portion of the contributions
from the participating plans in the common stock of PG&E Corporation, as
directed by participants. The Company pays certain costs of administering
the Master Trust, including fees and expenses of the Trustee and investment
management.
Individual plan participants designate the way in which their
contributions are invested and may change their investment designation at
any time. Effective October 1, 1997, the Plan offered nine new investment
funds to plan participants to allow more investment options and greater
diversification. Participants were asked to re-direct funds by September
30, 1997. However, those balances not re-directed rolled into the new funds
as indicated below in parenthesis. Participants may elect to have their
contributions invested in one or more of the following funds held by the
Master Trust:
.PG&E Corporation Stock Fund
The Fund is structured to maximize the investment of
participants' contributions in shares of PG&E Corporation
common stock, while holding an appropriate level
(approximately one to five percent) of short-term
investments to meet daily liquidity requirements.
.Bond Index Fund (The previous Bond Index Fund rolled into
this fund)
The Fund invests primarily in government, corporate,
mortgage-backed, and asset-backed securities. The Fund
invests in a well-diversified portfolio that is
representative of the broad domestic bond market.
.Stable Value Fund (The Utility Stock Fund rolled into this
fund)
The Fund invests in a diversified portfolio of investment
contracts issued by insurance companies, banks, and other
financial institutions.
.Small Company Stock Index Fund
The Fund attempts to invest in all of the stocks in the
Russell Special Small Company Index in proportion to their
weighting in the Index.
.Large Company Stock Index Fund (The Diversified Equity Fund
rolled into this fund)
The Fund invests in all 500 stocks in the S&P 500 Index in
proportion to their weighting in the Index.
International Stock Index Fund
The Fund typically invests in all the stocks in the Morgan
Stanley Capital International Europe Asia Far East (EAFE)
Index in proportion to their weighting in the Index.
5
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART II
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 4: Investments (Continued)
.Conservative Asset Allocation Fund
The Fund is a portfolio of commingled stock and bond funds.
The Fund invests approximately 60 percent in the Bond Index
Fund, 25 percent in the Large Company Stock Index Fund, 10
percent in the Small Company Stock Index Fund, and 5
percent in the International Stock Index Fund.
.Moderate Asset Allocation Fund (The Stock and Bond Fund
rolled into this fund)
The Fund is a portfolio of commingled stock and bond funds.
The Fund invests approximately 40 percent in the Bond Index
Fund, 35 percent in the Large Company Stock Index Fund, 15
percent in the Small Company Stock Index Fund, and 10
percent in the International Stock Index Fund.
.Aggressive Asset Allocation Fund
The Fund is a portfolio of commingled stock and bond funds.
The Fund invests approximately 20 percent in the Bond Index
Fund, 45 percent in the Large Company Stock Index Fund, 20
percent in the Small Company Stock Index Fund, and 15
percent in the International Stock Index Fund.
The United States Bond Fund was closed to new contributions on
July 1, 1991.
Participants should refer to the separate Master Trust financial
statements or their individual quarterly Savings Fund Plan account statements
for information relating to the activity in each of the investment options.
A participant's interest in the investment funds is represented
by participation units allocated on the basis of contributions and assigned a
unit value on the basis of the total value of each fund. For investments in the
United States Savings Bond Fund, a unit is one bond.
6
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART II
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 4: Investments (Continued)
The following summarizes the net assets and related investment gain of the
Master Trust and the Plan's allocated share of such amounts:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
ASSETS
1997
Investments, at fair value:
PG&E Corporation common stock $ 1,054,786
United States government securities 5,040
Insurance company general accounts 242,148
Corporate debt instruments 40,506
State Street Global Advisors
Bond Market Index Fund 146,344
Daily EAFE Strategy Fund 48,992
Russell Special Small Company 124,899
S&P 500 Strategy Fund 1,124,126
Interest bearing accounts 47,351
-------------
Total investments 2,834,192
-------------
Receivables:
Dividends and interest 11,481
Other receivables 431
-------------
Total receivables 11,912
-------------
Total assets 2,846,104
-------------
LIABILITIES 6,996
-------------
NET ASSETS $ 2,839,108
=============
Allocated to the Plan $ 1,502,351
Allocated to other plans 1,336,757
-------------
$ 2,839,108
=============
</TABLE>
7
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART II
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 4: Investments (Continued)
The following summarizes the net assets and related investment gain of the
Master Trust and the Plan's allocated share of such amounts:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
ASSETS
1996
Investments, at fair value:
PG&E Corporation common stock $ 830,689
United States government securities 4,542
Diversified Equity Fund
United States treasury bills 1,193
Corporate stocks - common 740,165
Guaranteed Income Fund
Corporate debt intruments 35,582
Insurance company general accounts 224,294
Registered investment companies
Vanguard Bond Index Fund 28,369
Columbia Balanced Fund 151,074
Mellon Bank Utility Stock Fund 40,436
Interest bearing accounts 58,759
-------------
Total investments 2,115,103
-------------
Receivables:
Dividends and interest 14,919
Other receivables 537
-------------
Total receivables 15,456
-------------
Total assets 2,130,559
-------------
LIABILITIES 1,925
-------------
NET ASSETS $ 2,128,634
=============
Allocated to the Plan $ 1,099,031
Allocated to other plans 1,029,603
--------------
$ 2,128,634
==============
</TABLE>
8
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART II
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 4: Investments (Continued)
The composition of the Master Trust investment income for the year ended
December 31, 1997:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Earnings from investments
Dividends $ 60,687
Interest 20,974
Other income 140
-------------
Total earnings from investments 81,801
-------------
Gain on securities
Realized on sale or distribution 492,291
Unrealized appreciation 120,756
-------------
Total gain on securities 613,047
-------------
Total investment gain $ 694,848
=============
Allocated to the Plan $ 384,966
Allocated to other plans 309,882
-------------
$ 694,848
=============
</TABLE>
9
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART II
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 4: Investments (Continued)
The net appreciation (depreciation) in fair value of investments of the
Master Trust by major investment category for the year ended December 31, 1997
is as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
PG&E Corporation Stock Fund $ 331,535
Bond Index Fund 1,919
Stable Value Fund (93)
Small Company Stock Index Fund (1,576)
Large Company Stock Index Fund 27,802
International Stock Index Fund (2,007)
Conservative Asset Allocation Fund 393
Moderate Asset Allocation Fund 1,665
Aggressive Asset Allocation Fund 109
Diversified Equity Fund 229,087
Stock and Bond Fund 23,501
Utility Stock Fund 712
-------------
Total appreciation $ 613,047
=============
Allocated to the Plan $ 338,538
Allocated to other plans 274,509
-------------
$ 613,047
=============
</TABLE>
10
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART II
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 4: Investments (Continued)
The net asset value per unit of the Funds is determined by dividing the
fair value of fund assets by the number of fund units outstanding. The total
number of units held by the Plan and the value per unit of the Funds for the
four quarters ended December 31, 1997 and 1996, are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
1997
March 31 June 30 September 30 December 31
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PG&E Corporation Stock Fund
Number of units 56,177,799 55,159,165 52,608,016 49,574,376
Value per unit $11.04 $11.52 $11.17 $14.69
Bond Index Fund
Number of units 706,478 714,756 779,001 1,200,481
Value per unit $14.32 $14.83 $15.34 $15.73
Stable Value Fund
Number of units 128,327,265 127,995,930 127,353,820 128,839,586
Value per unit $1.21 $1.14 $1.16 $1.18
Small Company Stock Index Fund
Number of units 3,528,262
Value per unit $9.90
Large Company Stock Index Fund
Number of units 2,784,302
Value per unit $167.07
International Stock Index Fund
Number of units 1,173,974
Value per unit $8.19
Conservative Asset Allocation Fund
Number of units 1,710,786
Value per unit $5.09
Moderate Asset Allocation Fund
Number of units 6,015,125
Value per unit $10.22
Aggressive Asset Allocation Fund
Number of units 1,370,045
Value per unit $15.04
Diversified Equity Fund
Number of units 2,644,628 2,783,685 2,978,818
Value per unit $127.28 $150.54 $162.36
Stock and Bond Fund
Number of units 5,792,633 5,805,366 6,038,255
Value per unit $8.71 $9.52 $10.11
Utility Stock Fund
Number of units 1,129,888 1,045,093 991,508
Value per unit $16.21 $17.02 $17.85
- ------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART II
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 4: Investments (Continued)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
1996
March 31 June 30 September 30 December 31
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PG&E Corporation Stock Fund
Number of units 63,389,025 61,220,121 60,397,336 58,053,463
Value per unit $9.93 $10.42 $9.99 $9.77
Diversified Equity Fund
Number of units 2,144,428 2,321,084 2,323,059 2,561,391
Value per unit $106.16 $110.52 $113.86 $124.11
Guaranteed Income Fund
Number of units 98,413,714 104,866,489 113,460,916 119,383,240
Value per unit $1.06 $1.07 $1.09 $1.11
Bond Index Fund
Number of units 608,823 620,942 621,454 638,297
Value per unit $13.63 $13.72 $13.96 $14.40
Stock and Bond Fund
Number of units 5,078,215 5,356,303 5,348,842 5,777,039
Value per unit $7.90 $8.13 $8.34 $8.72
Utility Stock Fund
Number of units 1,377,472 1,285,129 1,250,050 1,173,291
Value per unit $16.16 $16.55 $15.88 $16.72
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</TABLE>
12
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PACIFIC GAS AND ELECTRIC COMPANY
SAVINGS FUND PLAN - PART II
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 5: Holding Company Formation
On January 1, 1997, the Company became a subsidiary of its new
parent holding company, PG&E Corporation. The Company's outstanding common stock
was converted on a share-for-share basis into PG&E Corporation common stock. All
stock held by the Company Stock Fund is now PG&E Corporation common stock.
13
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EXHIBIT 2
[LETTERHEAD OF ARTHUR ANDERSEN LLP]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporatation of
our reports dated February 27, 1998, included in this Form 11-K, into the
previously filed Registration Statement File No. 33-50601.
ARTHUR ANDERSEN LLP
San Francisco, California
March 30, 1998
