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96
Fair Value of Pension and PBOP Plan Assets: Pension and PBOP funds are held in external trusts. Trust assets, including
accumulated earnings, must be used exclusively for Pension and PBOP payments. NU's investment strategy for its Pension and PBOP
Plans is to maximize the long-term rates of return on these plans' assets within an acceptable level of risk. The investment strategy for
each asset category includes a diversification of asset types, fund strategies and fund managers and establishes target asset
allocations that are routinely reviewed and periodically rebalanced. In 2013 and 2012, PBOP assets were comprised of specific assets
within the defined benefit pension plan trust (401(h) assets) as well as assets held in the PBOP Plans. The investment policy and
strategy of the 401(h) assets is consistent with those of the defined benefit pension plans, which are detailed below. NU's expected
long-term rates of return on Pension and PBOP Plan assets are based on these target asset allocation assumptions and related
expected long-term rates of return. In developing its expected long-term rate of return assumptions for the Pension and PBOP Plans,
NU evaluated input from consultants, as well as long-term inflation assumptions and historical returns. For the year ended
December 31, 2013, management has assumed long-term rates of return of 8.25 percent for the Pension and PBOP Plan assets.
These long-term rates of return are based on the assumed rates of return for the target asset allocations as follows:
As of December 31,
2013
2012
NUSCO and NSTAR Pension
NUSCO Pension
and Tax-Exempt PBOP Plans(1)
and PBOP Plans
NSTAR Pension Plan
NSTAR PBOP Plan
Target
Assumed
Target
Assumed
Target
Assumed
Target
Assumed
Asset
Rate
Asset
Rate
Asset
Rate
Asset
Rate
Allocation
of Return
Allocation
of Return
Allocation
of Return
Allocation
of Return
Equity Securities:
United States
24%
9%
24%
9%
25%
8.3%
25%
8.3%
International
10%
9%
13%
9%
13%
8.6%
20%
8.6%
Emerging Markets
6%
10%
3%
10%
5%
8.8%
5%
8.8%
Private Equity
10%
13%
12%
13%
-
-
-
-
Debt Securities:
Fixed Income
15%
5%
20%
5%
21%
4.6%
30%
4.6%
High Yield Fixed Income
9%
7.5%
3.5%
7.5%
9%
6.5%
-
-
Emerging Markets Debt
6%
7.5%
3.5%
7.5%
4%
6.4%
-
-
Real Estate and Other Assets
9%
7.5%
8%
7.5%
10%
7.9%
10%
7.9%
Hedge Funds
11%
7%
13%
7%
13%
8.4%
10%
8.4%
(1) The Taxable PBOP Plans have a target asset allocation of 70 percent equity securities and 30 percent fixed income securities.
The following table presents, by asset category, the Pension and PBOP Plan assets recorded at fair value on a recurring basis by the
level in which they are classified within the fair value hierarchy:
NU Pension Plans
Fair Value Measurements as of December 31,
(Millions of Dollars)
2013
2012
Asset Category:
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Equity Securities:
United States
(1)
$
294.6
$
597.7
$
194.0
$
1,086.3
$
336.5
$
302.8
$
270.6
$
909.9
International
(1)
32.2
362.6
61.5
456.3
42.0
362.6
52.1
456.7
Emerging Markets
(1)
-
211.8
-
211.8
-
135.3
-
135.3
Private Equity
96.4
-
300.3
396.7
26.7
-
267.9
294.6
Fixed Income(2)
11.6
605.1
589.5
1,206.2
54.9
629.2
315.1
999.2
Real Estate and Other Assets
-
88.2
288.5
376.7
-
78.9
235.4
314.3
Hedge Funds
-
-
416.9
416.9
-
-
418.9
418.9
Total Master Trust Assets
$
434.8
$
1,865.4
$
1,850.7
$
4,150.9
$
460.1
$
1,508.8
$
1,560.0
$
3,528.9
Less: 401(h) PBOP Assets
(3)
(165.0)
(117.6)
Total Pension Assets
$
3,985.9
$
3,411.3