Duke Energy 2012 Annual Report Download - page 247

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PART II
DUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • CAROLINA POWER & LIGHT COMPANY d/b/a PROGRESS
ENERGY CAROLINAS, INC. • FLORIDA POWER CORPORATION d/b/a PROGRESS ENERY FLORIDA, INC. • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, INC.
Combined Notes to Consolidated Financial Statements – (Continued)
Plan Assets
Duke Energy Master Retirement Trust.
Assets for both the qualifi ed pension and other post-retirement benefi ts
(excluding Progress Energy plans) are maintained in a Master Retirement Trust
(Duke Energy Master Trust). Approximately 97% of the Duke Energy Master
Trust assets were allocated to qualifi ed pension plans and approximately 3%
were allocated to other post-retirement plans, as of December 31, 2012 and
2011. The investment objective of the Duke Energy Master Trust is to achieve
reasonable returns, subject to a prudent level of portfolio risk, for the purpose of
enhancing the security of benefi ts for plan participants.
The asset allocation targets were set after considering the investment
objective and the risk profi le. U.S. equities are held for their high expected
return. Non-U.S. equities, debt securities, and real estate are held for
diversifi cation. Investments within asset classes are to be diversifi ed to achieve
broad market participation and reduce the impact of individual managers
or investments. Duke Energy regularly reviews its actual asset allocation
and periodically rebalances its investments to the targeted allocation when
considered appropriate.
Qualifi ed pension and other post-retirement benefi ts for Duke Energy
Carolinas, Duke Energy Ohio and Duke Energy Indiana are derived from the Duke
Energy Master Trust, as such, each are allocated their proportionate share of the
assets discussed below.
The following table includes the target asset allocations by asset class
at December 31, 2012 and the actual asset allocations for the Duke Energy
Master Trust.
Target
Allocation
Actual Allocation at December 31,
(percentages) 2012 2011
Duke Energy Master Trust
U.S. equity securities 28 28 28
Non-U.S. equity securities 15 15 15
Global equity securities 10 10 9
Global private equity securities 3 3 1
Debt securities 32 32 32
Hedge funds 4 4 3
Real estate and cash 4 4 9
Other global securities 4 4 3
Total 100 100 100
Progress Energy Master Trust.
Assets for Progress Energy qualifi ed pension benefi ts are maintained in
a trust (Progress Energy Master Trust).The primary objectives of the Progress
Energy Master Trust are to ensure suffi cient funds are available at all times
to fi nance promised benefi ts and to invest the funds such that contributions
are minimized, within acceptable risk limits. Progress Energy periodically
performs studies to analyze various aspects of our pension plans including asset
allocations, expected portfolio return, pension contributions and net funded
status. One key investment objective is to achieve a rate of return signifi cantly
in excess of the discount rate used to measure the plan liabilities over the
long term. Tactical shifts (plus or minus 5 percent) in asset allocation from
the target allocations are made based on the near-term view of the risk and
return tradeoffs of the asset classes. Domestic equity includes investments
across large, medium and small capitalized domestic stocks, using investment
managers with value, growth and core-based investment strategies and includes
both long only and long/short equity managers. International equity includes
investments in foreign stocks in both developed and emerging market countries,
using a mix of value and growth-based investment strategies and includes both
long only and long/short equity managers. Domestic fi xed income primarily
includes domestic investment grade long duration fi xed income investments.
Qualifi ed pension benefi ts for Progress Energy, Progress Energy Carolinas
and Progress Energy Florida are derived from the Progress Energy Master Trust. As
such, each are allocated their proportional share of the assets discussed below.
The following table includes the target asset allocations by asset class
at December 31, 2012 and the actual asset allocations for the Progress Energy
Master Trust.