Notes to Financial Statements
Note 1. Description of the Plan
The following description of Piedmont Natural Gas Company, Inc. (the Company) 401(k) Plan (the Plan) is provided for general
information purposes only. Participants should refer to the Plan document for more complete information.
General
: The Plan is a
defined contribution plan providing benefits to participating employees or their beneficiaries upon retirement, death or termination of employment (following a break in service, as defined in the Plan). As a result of a plan merger effective on
October 1, 2001, participants accounts in the Companys employee stock ownership plan (ESOP) were transferred into the Plan. Former ESOP participants may remain invested in Piedmont Natural Gas Company, Inc. (Piedmont)
common stock in the Plan or may sell the common stock at any time and reinvest the proceeds in other available investment options.
Employees
become eligible to participate in the Plan after they have completed thirty days of continuous service with the Company and attained age 18. The Benefits Committee of the Board of Directors of the Company controls and manages the operation and
administration of the Plan. The Benefits Committee establishes an organizational structure with respect to the management, administration and investments of the Plan including the designation of a Benefit Plan Committee to serve as the named
fiduciary of the Plan and to manage the day-to-day operational and administrative aspects of the Plan. The Benefit Plan Committee determines the appropriateness of the Plans investment offerings, monitors investment performance and reports to
the Benefits Committee. Wells Fargo Bank, N.A. (Wells Fargo) serves as the trustee of the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Plan administration
: The Plan is administered by the Benefits Committee. Effective January 1, 2011, the Company entered into an agreement
with Wells Fargo to create the Piedmont Natural Gas Company, Inc. Master Trust (the Master Trust). The Master Trust included the investment assets of each of the benefit plans maintained by the Company as further described in more detail
in Note 4. Effective December 31, 2012, the Master Trust was disbanded. Accordingly, the Plans investment assets were no longer included in the Master Trust as of that date. Wells Fargo is responsible for the custody and management of the
Plans assets.
Contributions
: Employees are able to contribute up to 50% of eligible pay to the Plan on a pre-tax basis, up to
the Tax Code annual contribution limit. Employees are able to receive a company match of 100% up to the first 5% of eligible pay contributed. The Company automatically enrolls all newly eligible employees in the Plan at a 2% contribution rate unless
the employee chooses not to participate by notifying the Plan trustee. For employees who are automatically enrolled in the Plan, the Company will automatically increase their contributions by 1% each year to a maximum of 5% unless the employee
chooses to opt out of the automatic increase by contacting the trustee. If the employee does not make an investment election, employee contributions and matches are automatically invested in a diversified portfolio of stocks and bonds. Participants
may invest in Piedmont common stock up to a maximum of 20% of their account. Employees may change their contribution rate and investments at any time. Additional amounts may be contributed by the Company at the discretion of the Companys Board
of Directors. There were no discretionary Company contributions during the year ended December 31, 2012. Participants may also contribute amounts representing distributions from other qualified defined benefit or defined contribution plans.
4
Piedmont Natural Gas Company, Inc. 401(k) Plan
Notes to Financial Statements
Note 1. Description of the Plan (Continued)
Participant accounts
: Individual accounts are maintained for each Plan participant. Each
participants account is credited with the participants contribution, the Companys matching contribution, and allocations of Company discretionary contributions, if applicable, and Plan earnings, and charged with any benefit
payments and allocations of Plan losses and expenses. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participants
vested account.
Investments
: Participants direct the investment of their contributions into various investment options offered by the
Plan. Currently, the Plan offers eleven mutual funds, one common trust fund, one common collective trust fund, and one common stock fund as investment options for participants.
Vesting
: All participant contributions and earnings thereon are fully vested and nonforfeitable upon allocation to the participants accounts. A participant will become 100% vested in his
employer matching contributions after the participant completes six months of service.
Notes receivable from participants
:
Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum of $50,000 or 50% of their account balances, whichever is less. Loans must be entirely repaid within 5 years unless the loan is for the purchase of a primary
residence. The loans are secured by the balance in the participants account. Principal and interest are paid ratably through payroll deductions. Interest rates on loans range from 6.77% to 7.00% at December 31, 2012.
Payment of benefits
: The Plan allows distributions for retirement, long-term disability, termination of employment, hardship or death. The vested
balance of a participants account will be paid to the participant, or, in the case of death, to the spouse or beneficiary, if any, in a single, lump sum of cash or common stock as permitted by the Plan.
Note 2. Summary of Significant Accounting Policies
Basis of accounting
: The accompanying financial statements of the Plan are prepared under the accrual method of accounting.
Use of estimates
: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the financial
statements and accompanying notes. Actual results could differ from those estimates.
Investment contracts
: As described in the
authoritative guidance, fully benefit-responsive investment contracts held by a defined contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets
available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of
the plan.
The Plan invests in investment contracts through a collective trust in the Wells Fargo Stable Return Fund (N) for 2012 and
Wells Fargo Stable Return Fund (G) for 2011. As required by the guidance, the statements of net assets available for benefits present the fair value of the investments in the collective trust as well as the adjustment of the investment in the
collective trust from fair value to contract value relating to the investment contracts. The statement of changes in net assets available for benefits is prepared on a contract value basis.
5
Piedmont Natural Gas Company, Inc. 401(k) Plan
Notes to Financial Statements
Note 2. Summary of Significant Accounting Policies (Continued)
Investment valuation and income recognition
: Investments are reported at fair value. Fair value
is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See Note 8 for disclosure of the Plans fair value measurements.
The Plan utilizes market data or assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily
observable, market corroborated or generally observable. The Plan primarily applies the market approach for recurring fair value measurements and endeavor to utilize the best available information. Accordingly, the Plan uses valuation techniques
that maximize the use of observable inputs and minimize the use of unobservable inputs. The Plan is able to classify fair value balances based on the observance of those inputs into the fair value hierarchy levels as set forth in the fair value
accounting guidance.
Following is a description of the valuation methodologies used for the Plans investment assets measured at fair
value. There have been no changes in the methodologies used at December 31, 2012 and 2011.
Cash equivalents
: Valued at the
net asset value (NAV) of the funds in which it participates at year-end.
Common stock
: Valued at the closing price
reported on the active market on which individual securities are traded.
Common stock fund
: Calculated based on the
closing price reported on the active market on which the securities in the fund are traded.
Mutual funds and net assets held in 401(h)
account
: Valued at the NAV of shares held by the Plan and Master Trust at year-end.
Long duration mutual bond fund
:
V
alued using pricing models that consider various observable inputs, such as benchmark yields, reported trades, broker quotes and issuer spreads.
Derivatives
: V
alued using broker quotes on a non-active market.
Common trust
funds, commodities fund, and hedge fund of funds
: Valued at the NAV of the funds in which it participates at year-end.
Private
equity fund of funds
: Valued based on a quarterly compilation of the financial statements from the underlying partnerships in which the fund invests. The target allocation for this investment was 5% but was still being funded through capital
calls; $9.7 million of the original $12 million subscription remained unfunded at December 31, 2011. The investment is in various funds that invest in North American companies, allocate capital to private equity funds, and invest in venture
capital partnerships and private equity partnerships in emerging markets.
Corporate bonds, collateralized mortgage obligations,
government and agency bonds, and municipal bonds
: Valued based on a compilation of primary observable market information or a broker quote in a non-active market.
Common collective trust fund
: Valued at NAV based on information provided by the trustee and using the audited financial statements of the common collective trust at year-end.
6
Piedmont Natural Gas Company, Inc. 401(k) Plan
Notes to Financial Statements
Note 2. Summary of Significant Accounting Policies (Continued)
Level 1 inputs are quoted prices (unadjusted) or NAVs in active markets that can be accessed as of the
reporting date and consist of investments in cash equivalents, common stock, a common stock fund, and mutual funds. Level 2 inputs are inputs other than quoted prices in active markets included in Level 1, which are either directly or
indirectly corroborated or observable as of the reporting date and generally use valuation methodologies, and consist of common trust funds, long duration mutual bond funds, various fixed income investment types, hedge fund of funds, commodities
funds, derivatives and a common collective trust fund as discussed in Investment contracts above. These investments are classified as Level 2 as their fair value is estimated using pricing models and discounted cash flows that consider
standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, and credit spreads. Level 3 inputs include significant pricing inputs that are generally less observable from objective
sources and consist of private equity fund of funds.
The preceding methods described may produce a fair value calculation that may not be
indicative of net realizable value or reflective of future fair values. Furthermore, although the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to
determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
The
Plans Benefit Plan Committee determines the Plans valuation policies utilizing information provided by its investment advisors, custodians, and insurance company.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Net appreciation includes the
Plans gains and losses on investments bought and sold as well as held during the year.
Management fees and operating expenses charged
to the Plan for investments in the mutual funds and common trust fund are deducted from income earned on a daily basis and are not separately reflected.
Consequently, management fees and operating expenses are reflected as a reduction of investment return for such investments.
Contributions
: Contributions from employees of the Plan Sponsor and matching contributions from the Plan Sponsor are recorded in the year in which the employee contributions are withheld along with
the applicable matching contribution. All employee and employer contributions are participant-directed.
Notes from participants
: Notes
from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Interest income is recorded on the accrual basis. Related fees are recorded as administrative expenses and are expensed as they are incurred. No
allowance for credit losses has been recorded as of December 31, 2012 or 2011. Delinquent notes from participants are treated as distributions based upon the terms of the plan document.
Payment of benefits
: Benefit payments to participants are recorded when paid.
Expenses
: As provided by the Plan document, administrative expenses of the Plan are paid by the Plan.
Subsequent events
: The Plan monitors significant events occurring after the balance sheet date and prior to the issuance of the financial
statements to determine the impact, if any, of events on the financial statements to be issued. All subsequent events of which the Plan is aware were evaluated through the filing date of this Form 11-K.
7
Piedmont Natural Gas Company, Inc. 401(k) Plan
Notes to Financial Statements
Note 2. Summary of Significant Accounting Policies (Continued)
Accounting pronouncements
: In May, 2011, the FASB issued an amendment (ASU 2011-04),
Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS
, which provides guidance to improve the comparability of fair value measurements presented and disclosed in
financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards (IFRS). The amendments are not intended to change the application of the current fair value requirements, but to clarify the application of
existing requirements. The guidance does change particular principles or requirements for measuring fair value or disclosing information about fair value measurements. To improve consistency, language has been changed to ensure that U.S. GAAP and
IFRS fair value measurement and disclosure requirements are described in the same way. ASU 2011-04 was effective for annual periods beginning after December 15, 2011. ASU 2011-04 did not materially impact the Plans fair value disclosures.
In October, 2012, the FASB issued ASU 2012-04, Technical Corrections and Improvements. This ASU makes certain incremental improvements to
U.S. GAAP, including, among other revisions, conforming amendments that identify when the use of fair value should be linked to the definition of fair value in ASC 820. The majority of the amendments in ASU 2012-04 were effective upon issuance on
October 1, 2012, for both public entities and nonpublic entities. For public entities, the more substantive amendments that are subject to transition guidance are effective for fiscal periods beginning after December 15, 2012. This ASU did
not substantially impact the Plans disclosures.
Note 3. Investments
The Plans investments that represent 5% or more of net assets available for benefits as of December 31, 2012, which includes the fully benefit-responsive contracts as described in Note 2,
are as follows:
|
|
|
|
|
|
|
2012
|
|
Wells Fargo Enhanced Stock Market Fund (N) - 162,436 units
|
|
$
|
18,755,379
|
|
Wells Fargo Stable Return Fund (N)** - 729,711 units
|
|
|
37,549,694
|
|
American Europacific Growth Fund (A) - 276,883 shares
|
|
|
11,413,098
|
|
Dodge & Cox Stock Fund - 127,945 shares
|
|
|
15,596,553
|
|
Harbor Capital Appreciation Investment - 411,124 shares
|
|
|
17,250,769
|
|
Munder Mid-Cap Core Growth Fund (A) - 339,707 shares
|
|
|
10,850,239
|
|
Dodge & Cox Income Fund - 1,535,881 shares
|
|
|
21,287,315
|
|
The Master Trusts investments that represent 5% or more of net assets available for benefits as of
December 31, 2011, which includes the fully benefit-responsive contracts as described in Note 2, are as follows:
|
|
|
|
|
|
|
2011
|
|
Wells Fargo Stable Return Fund (G) ** - 695,298 shares
|
|
$
|
34,941,345
|
|
Paps Long Duration Corporate Bond Fund - 5,650,385 shares
|
|
|
65,487,958
|
|
**
|
Represents fully benefit-responsive investment contracts.
|
8
Piedmont Natural Gas Company, Inc. 401(k) Plan
Notes to Financial Statements
Note 3. Investments (Continued)
As of December 31, 2011, the Plan held 694,588 shares of the Wells Fargo Stable Return Fund
(G) with a fair value of $34,905,675 which represented 5% or more of the Master Trusts net assets available for benefits.
The Plan
invests in a fully benefit-responsive investment contract through the Wells Fargo Stable Return Fund in 2012 and 2011. The accounts are maintained in a general account. The account is credited with earnings on the underlying investments and charged
for participant withdrawals and administrative expenses. The objective of the Fund is to protect principal while providing a higher rate of return than shorter maturity investments, such as money market funds or certificates of deposit. To achieve
this, the Fund invests in instruments which are not expected to experience significant price fluctuations in most economic or interest rate environments. However, there is no assurance that this objective can be achieved.
Market value events may limit the ability of the Funds to transact at contract value with the issuer. Such events may include but are not limited to:
Fund administration is amended or changed, merger or consolidation of investors, group terminations or layoffs, implementation of an early retirement program, termination or partial termination of the Fund, and failure to meet certain tax
qualifications. The Plan does not believe that such events are likely to occur.
The fair value of the investment contract at
December 31, 2012 was $37,549,694 in the Plan and at December 31, 2011 was $34,941,345 in the Master Trust. The average yield earned based on actual earnings was 1.9% for 2012.
The Plans participants invest in various investment securities offered by the Plan. These investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to
the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur and that such changes could materially affect participants account balances and the
amounts reported in the financial statements.
Note 4. Plan Interest in Master Trust
Effective January 1, 2011, the Plans assets were held in a Master Trust. On December 31, 2012, the Master Trust was disbanded and the
Plans assets were no longer included in the Master Trust as of that date. However, all investment activity during the year was through the Master Trust. The Master Trust held the assets of the Piedmont Natural Gas Company, Inc. 401(k) Plan,
the Piedmont Natural Gas Company, Inc. Money Purchase Pension Plan, and the Retirement Plan of Piedmont Natural Gas Company, Inc. (collectively the Plans). The investment in the Piedmont Natural Gas Stock Fund represented a specific
interest to the Plan, as the Plan is the sole owner of this investment. The Plans record keeper maintained supporting records for the purpose of allocating net assets and net gains or losses of the investments to each of the Plans and to each
participants account, as necessary. The net investment income or loss of the investment assets was allocated by the record keeper to each Plan and to each participants account based on the investment held in participant directed
balances.
9
Piedmont Natural Gas Company, Inc. 401(k) Plan
Notes to Financial Statements
Note 4. Plan Interest in Master Trust (Continued)
The net assets of the Master Trust at December 31, 2011 consisted of the following:
|
|
|
|
|
|
|
2011
|
|
Assets
|
|
|
|
|
Investments at fair value:
|
|
|
|
|
Participant-directed investments
|
|
$
|
153,139,333
|
|
Non-participant-directed investments
|
|
|
268,641,197
|
|
|
|
|
|
|
|
|
|
421,780,530
|
|
|
|
|
|
|
Receivables:
|
|
|
|
|
Due from broker for securities sold
|
|
|
4,376,381
|
|
Participant loans
|
|
|
6,680,260
|
|
|
|
|
|
|
|
|
|
11,056,641
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
Cash
|
|
|
1,385
|
|
Accrued interest and dividends
|
|
|
482,759
|
|
Net assets held in 401(h)
|
|
|
5,239,203
|
|
|
|
|
|
|
|
|
|
5,723,347
|
|
|
|
|
|
|
Total assets
|
|
|
438,560,518
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Due to broker for securities purchased
|
|
|
17,754,956
|
|
Amounts related to obligation of 401(h) account
|
|
|
5,239,203
|
|
|
|
|
|
|
|
|
|
22,994,159
|
|
|
|
|
|
|
Net assets available for benefits at fair value
|
|
|
415,566,359
|
|
|
|
Adjustment from fair value to contract value for interest in common collective trust relating to fully benefit-responsive
investment contracts
|
|
|
(872,470
|
)
|
|
|
|
|
|
Net assets available for benefits
|
|
$
|
414,693,889
|
|
|
|
|
|
|
10
Piedmont Natural Gas Company, Inc. 401(k) Plan
Notes to Financial Statements
Note 4. Plan Interest in Master Trust (Continued)
|
|
|
|
|
|
|
2011
|
|
Net assets in Master Trust - by Plan
|
|
|
|
|
Piedmont Natural Gas Company, Inc. 401(k) Plan
|
|
|
|
|
Net assets in Master Trust
|
|
$
|
158,259,915
|
|
Plans percentage interest in net assets of the Master Trust
|
|
|
38.2
|
%
|
Piedmont Natural Gas Company, Inc. Money Purchase Pension Plan
|
|
|
|
|
Net assets in Master Trust
|
|
$
|
687,962
|
|
Plans percentage interest in net assets of the Master Trust
|
|
|
0.2
|
%
|
Retirement Plan of Piedmont Natural Gas Company, Inc.
|
|
|
|
|
Net assets in Master Trust
|
|
$
|
255,746,012
|
|
Plans percentage interest in net assets of the Master Trust
|
|
|
61.6
|
%
|
Investment income of the Master Trust for the year ended December 31, 2012 consists of the following:
|
|
|
|
|
|
|
2012
|
|
Investment income:
|
|
|
|
|
Interest and dividends
|
|
$
|
14,407,958
|
|
|
|
|
|
|
Net appreciation (depreciation) in fair value of investments:
|
|
|
|
|
Cash equivalents
|
|
|
69
|
|
Fixed income
|
|
|
651,435
|
|
Hedging instruments
|
|
|
172,461
|
|
Mutual funds
|
|
|
27,385,866
|
|
Common stock
|
|
|
5,701,887
|
|
Common trust funds
|
|
|
6,649,704
|
|
Stable return fund
|
|
|
709,225
|
|
Common stock fund
|
|
|
(615,472
|
)
|
Other types
|
|
|
483,216
|
|
|
|
|
|
|
Total net investment appreciation
|
|
|
41,138,391
|
|
|
|
|
|
|
Net investment income
|
|
$
|
55,546,349
|
|
|
|
|
|
|
Net investment income from Master Trust - by Plan:
|
|
|
|
|
Piedmont Natural Gas Company, Inc. 401(k) Plan
|
|
$
|
17,708,083
|
|
Piedmont Natural Gas Company, Inc. Money Purchase Pension Plan
|
|
|
144,824
|
|
Retirement Plan of Piedmont Natural Gas Company, Inc.
|
|
|
37,693,442
|
|
|
|
|
|
|
|
|
$
|
55,546,349
|
|
|
|
|
|
|
11
Piedmont Natural Gas Company, Inc. 401(k) Plan
Notes to Financial Statements
Note 5. Federal Income Tax Status
The Internal Revenue Service has determined and informed the Company by a letter dated July 16, 2012, that the Plan was designed in accordance with the applicable regulations of the Internal Revenue
Code. The Plan has been amended since receiving the determination letter; however, the Benefits Committee believes the Plan is currently designed and is being operated in compliance with the applicable requirements of the IRC and that the Plan and
related trust continue to be tax exempt.
Accounting principles generally accepted in the United States of America require Plan management to
evaluate tax positions taken by the Plan. Management evaluated the Plans tax positions and concluded that the Plan had maintained its tax exempt status and had taken no uncertain tax positions that require recognition or disclosure in the
financial statements. With few exceptions, the Plan is no longer subject to income tax examinations by the U.S. federal, state, or local tax authorities for years before 2009.
Note 6. Plan Termination
Although it has not expressed any intention to do so, the Company
has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA.
Note 7. Exempt Party-in-Interest Transactions
Certain plan investments are units of participation in a common trust fund and common collective fund managed by Wells Fargo. Wells Fargo is the trustee as defined by the Plan, and therefore, these
transactions qualify as exempt party-in-interest transactions. Fees paid by the Plan to Wells Fargo for investment management services amounted to $256,365 for the year ended December 31, 2012 and are included in the expenses line item in the
Statement of Changes in Net Assets Available for Benefits. Additional expenses not paid to Wells Fargo include investment advisory fees and other various expenses.
At December 31, 2012 and 2011, the Plan held 395,871 and 369,628 units, respectively, of common stock of the Company, the sponsoring employer, with a cost basis of $6,770,832 and $6,083,657,
respectively, and fair value of $8,174,527 and $8,248,132, respectively.
12
Piedmont Natural Gas Company, Inc. 401(k) Plan
Notes to Financial Statements
Note 8. Fair Value
The investments reported in the Statement of Net Assets Available for Benefits, including participant- directed investments and
investments held in Master Trust, are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Plans assessment of the significance of a particular input to the fair value
measurement requires judgment and may affect the valuation of fair value assets and their consideration within the fair value hierarchy levels. The following tables set forth, by level within the fair value hierarchy, the assets measured at
fair value as of December 31, 2012 and 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
Quoted Prices
in Active
Markets
(Level 1)
|
|
|
Significant
Other Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
$
|
16,706,432
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
16,706,432
|
|
Small Cap
|
|
|
14,006,053
|
|
|
|
|
|
|
|
|
|
|
|
14,006,053
|
|
Mid Cap
|
|
|
14,787,259
|
|
|
|
|
|
|
|
|
|
|
|
14,787,259
|
|
Large Cap
|
|
|
32,847,323
|
|
|
|
|
|
|
|
|
|
|
|
32,847,323
|
|
Moderate Allocation
|
|
|
8,735,448
|
|
|
|
|
|
|
|
|
|
|
|
8,735,448
|
|
Bond funds - intermediate and inflation adjusted
|
|
|
23,512,475
|
|
|
|
|
|
|
|
|
|
|
|
23,512,475
|
|
Common trust fund:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enhanced stock
|
|
|
|
|
|
|
18,755,379
|
|
|
|
|
|
|
|
18,755,379
|
|
Common stock fund - energy
|
|
|
8,174,527
|
|
|
|
|
|
|
|
|
|
|
|
8,174,527
|
|
Common collective trust fund - Stable Return
|
|
|
|
|
|
|
37,549,694
|
|
|
|
|
|
|
|
37,549,694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
118,769,517
|
|
|
$
|
56,305,073
|
|
|
$
|
|
|
|
$
|
175,074,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
Piedmont Natural Gas Company, Inc. 401(k) Plan
Notes to Financial Statements
Note 8. Fair Value (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
|
Quoted Prices
in
Active
Markets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
|
Total
|
|
Cash and cash equivalents
|
|
$
|
8,130,894
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
8,130,894
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High yield bond
|
|
|
12,588,545
|
|
|
|
|
|
|
|
|
|
|
|
12,588,545
|
|
Long duration bond
|
|
|
|
|
|
|
65,487,958
|
|
|
|
|
|
|
|
65,487,958
|
|
Equity
|
|
|
10,870,261
|
|
|
|
|
|
|
|
|
|
|
|
10,870,261
|
|
Global real estate
|
|
|
14,325,093
|
|
|
|
|
|
|
|
|
|
|
|
14,325,093
|
|
International
|
|
|
26,817,557
|
|
|
|
|
|
|
|
|
|
|
|
26,817,557
|
|
Small Cap
|
|
|
12,628,834
|
|
|
|
|
|
|
|
|
|
|
|
12,628,834
|
|
Mid Cap
|
|
|
12,052,473
|
|
|
|
|
|
|
|
|
|
|
|
12,052,473
|
|
Large Cap
|
|
|
42,401,103
|
|
|
|
|
|
|
|
|
|
|
|
42,401,103
|
|
Moderate Allocation
|
|
|
7,582,506
|
|
|
|
|
|
|
|
|
|
|
|
7,582,506
|
|
Bond funds - intermediate and inflation adjusted
|
|
|
19,985,505
|
|
|
|
|
|
|
|
|
|
|
|
19,985,505
|
|
Fixed income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government and agencies
|
|
|
|
|
|
|
21,329,268
|
|
|
|
|
|
|
|
21,329,268
|
|
Corporate bonds
|
|
|
|
|
|
|
26,065,787
|
|
|
|
|
|
|
|
26,065,787
|
|
Municipal bonds
|
|
|
|
|
|
|
321,960
|
|
|
|
|
|
|
|
321,960
|
|
Collateralized Mortgage-Backed
|
|
|
|
|
|
|
1,468,301
|
|
|
|
|
|
|
|
1,468,301
|
|
Common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health care
|
|
|
2,863,296
|
|
|
|
|
|
|
|
|
|
|
|
2,863,296
|
|
Utilities
|
|
|
1,977,277
|
|
|
|
|
|
|
|
|
|
|
|
1,977,277
|
|
Financials
|
|
|
8,351,526
|
|
|
|
|
|
|
|
|
|
|
|
8,351,526
|
|
Consumer staples
|
|
|
990,413
|
|
|
|
|
|
|
|
|
|
|
|
990,413
|
|
Consumer discretionary
|
|
|
5,111,481
|
|
|
|
|
|
|
|
|
|
|
|
5,111,481
|
|
Materials
|
|
|
1,212,363
|
|
|
|
|
|
|
|
|
|
|
|
1,212,363
|
|
Energy
|
|
|
2,027,051
|
|
|
|
|
|
|
|
|
|
|
|
2,027,051
|
|
Information technology
|
|
|
2,676,271
|
|
|
|
|
|
|
|
|
|
|
|
2,676,271
|
|
Industrials
|
|
|
3,850,871
|
|
|
|
|
|
|
|
|
|
|
|
3,850,871
|
|
Telecommunication service
|
|
|
72,306
|
|
|
|
|
|
|
|
|
|
|
|
72,306
|
|
Miscellaneous
|
|
|
3,171,896
|
|
|
|
|
|
|
|
|
|
|
|
3,171,896
|
|
Common trust funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International
|
|
|
|
|
|
|
17,021,779
|
|
|
|
|
|
|
|
17,021,779
|
|
Enhanced stock
|
|
|
|
|
|
|
16,766,149
|
|
|
|
|
|
|
|
16,766,149
|
|
Common stock fund - energy
|
|
|
8,248,132
|
|
|
|
|
|
|
|
|
|
|
|
8,248,132
|
|
Common collective trust fund - Stable Return
|
|
|
|
|
|
|
34,941,345
|
|
|
|
|
|
|
|
34,941,345
|
|
Other types of instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
|
|
|
|
|
124,246
|
|
|
|
|
|
|
|
124,246
|
|
Multi-strategy hedge funds
|
|
|
|
|
|
|
16,296,961
|
|
|
|
|
|
|
|
16,296,961
|
|
Hedge fund of funds
|
|
|
|
|
|
|
|
|
|
|
2,353,300
|
|
|
|
2,353,300
|
|
Commodities funds
|
|
|
|
|
|
|
11,667,822
|
|
|
|
|
|
|
|
11,667,822
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
207,935,654
|
|
|
$
|
211,491,576
|
|
|
$
|
2,353,300
|
|
|
$
|
421,780,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets held in 401(h) accounts
|
|
$
|
5,239,203
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
5,239,203
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
Piedmont Natural Gas Company, Inc. 401(k) Plan
Notes to Financial Statements
Note 8. Fair Value (Continued)
The long duration bond mutual fund and derivatives were reclassified from Level 1 to a Level 2
investment as of December 31, 2011 due to the fact that these investments are not traded on an active exchange. This reclassification has no effect on the prior year net assets available for benefits.
Included in the preceding table are the following assets and corresponding fair values that represent a 100% specific interest to the Plan at
December 31, 2011: Wells Fargo Enhanced Stock Market Fund $16,766,149, Piedmont Natural Gas Stock Fund $8,248,132, American Funds Balanced Fund (A) $7,582,506, and American Century Inflation Adjustment Bond Fund Advisor $1,805,237.
As of December 31, 2011, the fair value of the Plans portion of investments held in the Master Trust was $152,450,480. See Note 4
for further discussion on the Master Trust.
The changes in the Master Trusts Level 3 assets measured at fair value are summarized as
follows:
|
|
|
|
|
|
|
Private Equity
Fund of Funds
|
|
Balance, beginning of year
|
|
$
|
2,353,300
|
|
Purchases
|
|
|
1,548,000
|
|
Sales
|
|
|
(149,454
|
)
|
Realized gains
|
|
|
180,095
|
|
Unrealized gains
|
|
|
(111,737
|
)
|
Transfer out of Master Trust
|
|
|
(3,820,204
|
)
|
|
|
|
|
|
Balance, end of year
|
|
$
|
|
|
|
|
|
|
|
Note 9. Net Asset Value Per Share
The following table sets forth additional disclosures of the investments whose fair value is estimated using net asset value per share (or its equivalent) as of December 31, 2012 for the Plan
and December 31, 2011 for the Master Trust:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Estimated Using Net Asset Value per Share
|
|
|
December 31, 2012
|
Investment
|
|
Fair Value
|
|
|
Unfunded
Commitment
|
|
|
Redemption
Frequency
|
|
Other
Redemption
Restrictions
|
|
Redemption
Notice
Period
|
Common collective trust fund - Stable Return (a)
|
|
$
|
37,549,694
|
|
|
$
|
|
|
|
Daily
|
|
Written notice
|
|
12 months
|
Common trust fund Enhanced Stock (b)
|
|
|
18,755,379
|
|
|
|
|
|
|
Daily
|
|
None
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
56,305,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
Piedmont Natural Gas Company, Inc. 401(k) Plan
Notes to Financial Statements
Note 9. Net Asset Value Per Share (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Estimated Using Net Asset Value per Share
|
|
|
December 31, 2011
|
Investment
|
|
Fair Value
|
|
|
Unfunded
Commitment
|
|
|
Redemption
Frequency
|
|
Other
Redemption
Restrictions
|
|
Redemption
Notice
Period
|
Common collective trust fund (a)
|
|
$
|
34,941,345
|
|
|
$
|
|
|
|
Daily
|
|
Written notice
|
|
12 months
|
Common trust funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enhanced Stock (b)
|
|
|
16,766,149
|
|
|
|
|
|
|
Daily
|
|
None
|
|
None
|
International (c)
|
|
|
17,021,779
|
|
|
|
|
|
|
Monthly
|
|
None
|
|
30 days
|
Hedge fund of funds (d)
|
|
|
16,296,961
|
|
|
|
|
|
|
Quarterly
|
|
None
|
|
65 days
|
Private equity fund of funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US (e)
|
|
|
1,293,083
|
|
|
|
|
|
|
Limited
|
|
**
|
|
(1)
|
Global (f)
|
|
|
561,255
|
|
|
|
|
|
|
Limited
|
|
**
|
|
(1)
|
Direct (g)
|
|
|
419,028
|
|
|
|
|
|
|
Limited
|
|
**
|
|
(1)
|
Emerging (h)
|
|
|
79,934
|
|
|
|
|
|
|
Limited
|
|
**
|
|
(1)
|
Commodities fund (i)
|
|
|
11,667,822
|
|
|
|
|
|
|
Monthly
|
|
*
|
|
35 days
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
99,047,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The investment cannot be redeemed. Distributions are received only through the liquidation of the underlying assets. The assets are expected to be liquidated over the
next 10 to 12 years.
|
*
|
If 95% or more of the balance is requested, 95% of the balance will be paid within 30 days. Any outstanding balance or interest owed will be paid after the annual audit
is complete.
|
**
|
Investors will have only very limited withdrawal rights for specific legal or regulatory reasons, and any transfer of an interest will be subject to approval.
|
(a)
|
The objective of the Fund is to protect principal while providing a higher rate of return than shorter maturity investments, such as money market funds or certificates
of deposit. To achieve this, the Fund invests in instruments which are not expected to experience significant price fluctuation in most economic or interest rate environments. However, there is no assurance that this objective can be achieved.
|
(b)
|
The objective of the Fund is to achieve long-term total return greater than the return on the S&P 500 Index while maintaining risk characteristics similar to the
risk characteristics of the stocks in the S&P 500 Index.
|
(c)
|
The Fund seeks to outperform the MSCI EAFE Index on average by 2-7% per annum over a full market cycle by investing in securities of issuers domiciled outside the
United States.
|
16
Piedmont Natural Gas Company, Inc. 401(k) Plan
Notes to Financial Statements
Note 9. Net Asset Value Per Share (Continued)
(d)
|
The Fund seeks to generate capital appreciation over the long term through a portfolio having a diversified risk profile with relatively low volatility and a low
correlation with traditional equity and fixed income markets.
|
(e)
|
The Fund seeks global and regional strategies. Over a three to four-year period, the US strategy typically invests in 60-75 total funds that invest a substantial
portion of their assets in North American companies.
|
(f)
|
The Funds strategy allocates capital to private equity investments that invest a substantial portion of their assets in companies primarily located in Western
Europe with a primary focus on buyout and growth equity.
|
(g)
|
The Funds strategy is to leverage relationships with venture, growth, and equity, and buyout general partners around the globe to generate differentiated deal
flow.
|
(h)
|
The Funds strategy is to invest in a diversified portfolio of private equity partnerships that in turn will invest principally in companies based in emerging
markets.
|
(i)
|
The fund seeks to produce attractive long-term risk adjusted returns in excess of traditional commodity index exposure.
|
Note 10. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
|
|
2012
|
|
|
2011
|
|
Net assets available for benefits as presented in these financial statements
|
|
$
|
181,522,227
|
|
|
$
|
158,259,915
|
|
Adjustment from contract value to fair value for fully benefit-responsive investment contracts
|
|
|
1,058,299
|
|
|
|
871,579
|
|
Differences in:
|
|
|
|
|
|
|
|
|
Receivable-participant loans held in Master Trust
|
|
|
|
|
|
|
(6,680,260
|
)
|
Investment in participant loans
|
|
|
|
|
|
|
6,680,260
|
|
|
|
|
|
|
|
|
|
|
Net assets available for benefits per the Form 5500
|
|
$
|
182,580,526
|
|
|
$
|
159,131,494
|
|
|
|
|
|
|
|
|
|
|
17
Piedmont Natural Gas Company, Inc. 401(k) Plan
Notes to Financial Statements
Note 10. Reconciliation of Financial Statements to Form 5500 (Continued)
The following is a reconciliation of the net increase in net assets available for benefits per the
financial statements to the Form 5500:
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2012
|
|
Total net increase per the financial statements
|
|
$
|
23,262,312
|
|
Change in adjustment from contract value to fair value for fully benefit-responsive investment contracts
|
|
|
186,720
|
|
|
|
|
|
|
Total net income per the Form 5500
|
|
$
|
23,449,032
|
|
|
|
|
|
|
18