Under accounting guidance, we are required to recognize all obligations related to defined benefit pension and other postretirement employee benefits (OPEB) plans and quantify the plans' funded status as an asset or liability on the Consolidated Balance Sheets. In accordance with accounting guidance, we measure the plans' assets and obligations that determine our funded status as of the end of our fiscal year, October 31. We are required to recognize as a component of OCI the changes in the funded status that occurred during the year that are not recognized as part of net periodic benefit cost; however, in 2006, we obtained regulatory treatment from the NCUC, the PSCSC and the TRA to record the amount that would have been recorded in accumulated OCI as a regulatory asset or liability as the future recovery of pension and OPEB costs is probable. To date, our regulators have allowed future recovery of our pension and OBEB costs. For the impact of this regulatory treatment, see the following table of actuarial plan information that specifies the amounts not yet recognized as a component of cost and recognized as a regulatory asset or liability. Our plans' assets are required to be accounted for at fair value.

We have a noncontributory, tax-qualified defined benefit pension plan (qualified pension plan) for our eligible employees. A defined benefit plan specifies the amount of benefit that an eligible participant eventually will receive upon retirement using information about that participant. An employee became eligible on the January 1 or July 1 following either the date on which he or she attained age 30 or attained age 21 and completed 1,000 hours of service during the 12-month period commencing on the employment date. Plan benefits are generally based on credited years of service and the level of compensation during the five consecutive years of the last ten years prior to retirement or termination during which the participant received the highest compensation. Our policy is to fund the plan in an amount not in excess of the amount that is deductible for income tax purposes. The qualified pension plan is closed to employees hired after December 31, 2007. Employees hired prior to January 1, 2008 continue to participate in the qualified pension plan. Employees are vested after five years of service and can be credited with up to a total of 35 years of service. When a vested employee leaves the company, his benefit payment will be calculated as the greater of the accrued benefit as of December 31, 2007 under a specific formula plus the accrued benefit calculated under a second formula for years of service after December 31, 2007, or the benefit for all years of service up to 35 years under the second formula.

The investment objectives of the qualified pension plan are oriented to meet both the current ongoing and future commitments to the participants and designed to grow at an acceptable rate of return for the risks permitted under the investment policy guidelines. Assets are structured to provide for both short-term and long-term needs and to meet the objectives of the qualified pension plan as specified by the Benefits Committee of the Board of Directors.

Our primary investment objective of the qualified pension plan is to generate sufficient assets to meet plan liabilities. The plan's assets will therefore be invested to maximize long-term returns in a manner that is consistent with the plan's liabilities, cash flow requirements and risk tolerance. The plan's liabilities are defined in terms of participant salaries. Given the nature of these liabilities and recognizing the long-term benefits of investing in return-generating assets, the qualified pension plan seeks to invest in a diversified portfolio to:

We consider the historical long-term return experience of our assets, the current and targeted allocation of our plan assets and the expected long-term rates of return. Investment advisors assist us in deriving expected long-term rates of return. These rates are generally based on a 20-year horizon for various asset classes, our expected investments of plan assets and active asset management instead of a passive investment strategy of an index fund.

The investment philosophy of the qualified pension plan is to maintain a balanced portfolio which is diversified across asset classes. The portfolio is primarily composed of equity and fixed income investments in order to provide diversification as to issuers, economic sectors, markets and investment instruments. Risk and quality are viewed in the context of the diversification requirements of the aggregate portfolio. We measure and monitor investment risk on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements and periodic asset/liability studies. We do not have a concentration of assets in a single entity, industry, country, commodity or class of investment fund.

The qualified pension plan maintains a 45% target allocation to fixed income securities, including U.S. treasuries, corporate bonds, high yield bonds, asset-backed securities and derivatives. The derivatives in the fixed income portfolio are fully collateralized. The investment guidelines limit liabilities created with derivatives in the fixed income portfolio to cash equivalents plus 10% of the portfolio's market value. The aggregate risk exposure of the plan can be no greater than that which could be achieved without using derivatives. The qualified pension plan maintains a 35% target allocation to equities, including exposure to large cap growth, large cap value and small cap domestic equity securities, as well as exposure to international equity. There is a 5% target allocation to real estate in a diversified global real estate investment trust (REIT) fund. The remaining 15% target allocation is for investments in other types of funds, including commodities, hedge funds and private equity funds that follow several diversified strategies.

Employees hired or rehired after December 31, 2007 (or December 31, 2008 for employees covered by the bargaining unit contract in Nashville, Tennessee) cannot participate in the qualified pension plan but are participants in the Money Purchase Pension (MPP) plan, a defined contribution pension plan that allows the employee to direct the investments and assume the risk of investment returns. A defined contribution plan specifies the amount of the employer's annual contribution to individual participant accounts established for the retirement benefit. Eligible employees who have completed 30 days of continuous service and have attained age 18 are eligible to participate. Under the MPP plan, we annually deposit a percentage of each participant's pay into an account of the MPP plan. This contribution equals 4% of the participant's compensation plus an additional 4% of compensation above the social security wage base up to the Internal Revenue Service (IRS) compensation limit. The participant is vested in this plan after three years of service. During the year ended October 31, 2012, we contributed $.5 million to the MPP plan.

We provide certain postretirement health care and life insurance benefits to eligible retirees. The liability associated with such benefits is funded in irrevocable trust funds that can only be used to pay the benefits. Employees are first eligible to retire and receive these benefits at age 55 with ten or more years of service after the age of 45. Employees who met this requirement in 1993 or who retired prior to 1993 are in a “grandfathered” group for whom we pay the full cost of the retiree's coverage. Retirees not in the grandfathered group have a portion of the cost of retiree coverage paid by us, subject to certain annual contribution limits. Retirees are responsible for the full cost of dependent coverage. Effective January 1, 2008 (January 1, 2009 for new employees covered under the bargaining unit contract in Nashville, Tennessee), new employees have to complete ten years of service after age 50 to be eligible for benefits, and no benefits are provided to those employees after age 65 when they are automatically eligible for Medicare benefits to cover health costs. Our OPEB plan includes a defined dollar benefit to pay the premiums for Medicare Part D. Employees who meet the eligibility requirements to retire also receive a life insurance benefit. For employees who retire after July 1, 2005, this benefit is $15,000. The life insurance amount for employees who retired prior to this date was calculated as a percentage of their basic life insurance prior to retirement.

OPEB plan assets are comprised of mutual funds within a 401(h) and Voluntary Employees' Beneficiary Association trusts. The investment philosophy is similar to the qualified pension plan as discussed above. We target an OPEB allocation of 45% to fixed income securities, including U.S. treasuries, corporate bonds, high yield bonds and asset-backed securities. The OPEB plan maintains a 47% target allocation to equities, which includes exposure to large cap growth, large cap value and small cap domestic equity, as well as exposure to international equity. The OPEB plan maintains a 5% target allocation to real estate in a diversified global REIT fund and a 3% target allocation to cash. We do not have a concentration of assets in a single entity, industry, country, commodity or class of investment fund.

We have pension liabilities related to supplemental executive retirement plans (SERPs) for certain former employees, non-employee directors or surviving spouses. There are no assets related to these SERPs, and no additional benefits accrue to the participants. Payments to the participants are made from operating funds during the year. Actuarial information for these nonqualified plans is presented below.

We have a non-qualified defined contribution restoration plan (DCR plan) for certain Company officers where benefits payable under the plan are informally funded through a rabbi trust with a bank as the trustee. We contribute 13% of the total cash compensation (base salary, short-term incentive and MVP incentive) that exceeds the IRS compensation limit to the DCR plan account of each covered executive. Participants may not contribute to the DCR plan. Vesting under the DCR plan is five-year cliff vesting, including service prior to adoption of the plan on January 1, 2009, of annual company contributions, and prospective five-year cliff vesting for the one-time opening balances of four Vice Presidents to compensate them for the loss of future benefits under this DCR plan as compared with a terminated SERP. If the officer severs employment before the expiration of the relevant five-year period, he or she receives nothing from that portion of the DCR plan. Participants in the DCR plan may provide instructions to us for the deemed investment of their plan accounts. Distribution will occur upon separation of service or death of the participant.

We have a voluntary deferred compensation plan for the benefit of all director-level employees and officers, where we make no contributions to this plan. Benefits under this plan, known as the Voluntary Deferral Plan, are also informally funded through a rabbi trust with a bank as the trustee. Participants may defer up to 50% of base salary with elections made by December 31 prior to the upcoming calendar year, and up to 95% of annual incentive pay with elections made by April 30. Vesting is immediate and deferrals are held in the rabbi trust. Participants may provide instructions to us for the deemed investment of their plan accounts. Distributions can be made from the Voluntary Deferral Plan on a specified date that is at least two years from the date of deferral, on separation of service or upon death.

The funding to the DCR plan accounts for the years ended October 31, 2012 and 2011, and the amounts recorded as liabilities for these deferred compensation plans as of October 31, 2012 and 2011 are presented below.

We provide term life insurance policies for certain officers at the vice president level and above who were former participants in a terminated SERP; the level of the insurance benefit is dependent upon the level of the benefit provided under the terminated SERP. These life insurance policies are owned exclusively by each officer. Premiums on these policies are paid and expensed, as grossed up for taxes to the individual officer. We also provide a term life insurance benefit equal to $200,000 to all officers and director-level employees for which we bear the cost of the policies. The cost of these premiums is presented below.

A reconciliation of changes in the plans' benefit obligations and fair value of assets for the years ended October 31, 2012 and 2011, and a statement of the funded status and the amounts reflected in the Consolidated Balance Sheets for the years ended October 31, 2012 and 2011 are presented below.

	Qualified Pension				Nonqualified Pension				Other Benefits
In thousands	2012		2011		2012		2011		2012		2011

Accumulated benefit obligation at year end	$	245,361	$	205,159	$	5,569	$	5,219		N/A		N/A

Change in projected benefit obligation:
Obligation at beginning of year	$	236,632	$	211,003	$	5,219	$	5,039	$	31,900	$	31,919
Service cost		9,573		8,508		39		45		1,387		1,398
Interest cost		10,640		11,024		203		209		1,347		1,495
Plan amendments		-		-		-		290		-		-
Actuarial (gain) loss		54,852		16,896		629		130		2,630		(327)
Participant contributions		-		-		-		-		788		898
Administrative expenses		(420)		(391)		-		-		-		-
Benefit payments		(17,950)		(10,408)		(521)		(494)		(3,222)		(3,483)
Obligation at end of year		293,327		236,632		5,569		5,219		34,830		31,900

Change in fair value of plan assets:
Fair value at beginning of year		259,511		228,345		-		-		22,045		21,636
Actual return on plan assets		31,196		19,965		-		-		1,972		792
Employer contributions		-		22,000		521		494		2,080		2,202
Participant contributions		-		-		-		-		788		898
Administrative expenses		(420)		(391)		-		-		-		-
Benefit payments		(17,950)		(10,408)		(521)		(494)		(3,222)		(3,483)
Fair value at end of year		272,337		259,511		-		-		23,663		22,045
Funded status at year end - (under) over	$	(20,990)	$	22,879	$	(5,569)	$	(5,219)	$	(11,167)	$	(9,855)

Noncurrent assets	$	-	$	22,879	$	-	$	-	$	-	$	-
Current liabilities		-		-		(502)		(517)		-		-
Noncurrent liabilities		(20,990)		-		(5,067)		(4,702)		(11,167)		(9,855)
Net amount recognized	$	(20,990)	$	22,879	$	(5,569)	$	(5,219)	$	(11,167)	$	(9,855)

Amounts Not Yet Recognized as a Component
of Cost and Recognized in a Deferred
Regulatory Account:
Unrecognized transition obligation	$	-	$	-	$	-	$	-	$	(667)	$	(1,334)
Unrecognized prior service (cost) credit		19,441		21,638		(277)		(358)		-		-
Unrecognized actuarial loss		(137,633)		(99,653)		(1,521)		(941)		(2,633)		(424)
Regulatory asset		(118,192)		(78,015)		(1,798)		(1,299)		(3,300)		(1,758)
Cumulative employer contributions in
excess of cost		97,202		100,894		(3,771)		(3,920)		(7,867)		(8,097)
Net amount recognized	$	(20,990)	$	22,879	$	(5,569)	$	(5,219)	$	(11,167)	$	(9,855)

In 2006 with the implementation of accounting guidance for employers' accounting for defined benefit pension and other postretirement plans, the NCUC, the PSCSC and the TRA approved our request to place certain defined benefit postretirement obligations in a deferred regulatory account instead of OCI as presented above. The regulators have allowed future recovery of our pension and OPEB costs to this date.

Net periodic benefit cost for the years ended October 31, 2012, 2011 and 2010 includes the following components.

	Qualified Pension						Nonqualified Pension						Other Benefits
In thousands	2012		2011		2010		2012		2011		2010		2012		2011		2010

Service cost	$	9,573	$	8,508	$	8,069	$	39	$	45	$	38	$	1,387	$	1,398	$	1,337
Interest cost		10,640		11,024		10,898		203		209		243		1,347		1,495		1,906
Expected return on plan
assets		(20,289)		(20,608)		(18,773)		-		-		-		(1,551)		(1,534)		(1,381)
Amortization of transition
obligation		-		-		-		-		-		-		667		667		667
Amortization of prior
service cost (credit)		(2,198)		(2,198)		(2,198)		81		20		20		-		-		-
Amortization of net loss		5,966		3,547		1,998		49		41		9		-		-		236
Net periodic benefit
(income) cost		3,692		273		(6)		372		315		310		1,850		2,026		2,765
Other changes in plan
assets and benefit
obligation recognized
through regulatory asset
or liability:
Prior service cost		-		-		-		-		290		-		-		-		-
Net loss (gain)		43,945		17,539		(6,587)		629		130		420		2,209		415		(5,229)
Amounts recognized as a
component of net periodic
benefit cost:
Transition obligation		-		-		-		-		-		-		(667)		(667)		(667)
Amortization of net loss		(5,966)		(3,547)		(1,998)		(49)		(41)		(9)		-		-		(236)
Prior service (cost) credit		2,198		2,198		2,198		(81)		(20)		(20)		-		-		-
Total recognized in
regulatory asset (liability)		40,177		16,190		(6,387)		499		359		391		1,542		(252)		(6,132)
Total recognized in net
periodic benefit cost and
regulatory asset (liability)	$	43,869	$	16,463	$	(6,393)	$	871	$	674	$	701	$	3,392	$	1,774	$	(3,367)

The 2013 estimated amortization of the following items, which are recorded as a regulatory asset or liability instead of accumulated OCI discussed above, and expected refunds for our plans are as follows.

The discount rate has been separately determined for each plan by projecting the plan's cash flows and developing a zero-coupon spot rate yield curve using non-arbitrage pricing and Moody's Investors Service's AA or better-rated non-callable bonds that produces similar results to a hypothetical bond portfolio. The discount rate can vary from plan year to plan year. As of October 31, 2012, the benchmark by plan was as follows.

Equity market performance has a significant effect on our market-related value of plan assets. In determining the market-related value of plan assets, we use the following methodology: The asset gain or loss is determined each year by comparing the fund's actual return to the expected return, based on the disclosed expected return on investment assumption. Such asset gain or loss is then recognized ratably over a five-year period. Thus, the market-related value of assets as of year end is determined by adjusting the market value of assets by the portion of the prior five years' gains or losses that has not yet been recognized, meaning that 20% of the prior five years' asset gains and losses are recognized each year. This method has been applied consistently in all years presented in the consolidated financial statements.

We amortize unrecognized prior-service cost over the average remaining service period for active employees. We amortize the unrecognized transition obligation over the average remaining service period for active employees expected to receive benefits under the plan as of the date of transition. We amortize gains and losses in excess of 10% of the greater of the benefit obligation and the market-related value of assets over the average remaining service period for active employees. The amortization period used for the purposes mentioned above for the NCNG SERP and the Piedmont SERP is an expected future lifetime as there are no active members in these plans. The method of amortization in all cases is straight-line.

The weighted average assumptions used in the measurement of the benefit obligation as of October 31, 2012 and 2011 are presented below.

The weighted average assumptions used to determine the net periodic benefit cost as of October 31, 2012, 2011 and 2010 are presented below.

	Qualified Pension			Nonqualified Pension
	2012	2011	2010	2012	2011	2010

Discount rate	4.67%	5.47%	5.99%	4.10%	4.37%	5.28%
Expected long-term rate of return on plan assets	8.00%	8.00%	8.00%	N/A	N/A	N/A
Rate of compensation increase	3.78%	3.87%	3.92%	N/A	N/A	N/A

	Other Benefits
	2012	2011	2010

Discount rate	4.36%	4.85%	5.58%
Expected long-term rate of return on plan assets	8.00%	8.00%	8.00%
Rate of compensation increase	N/A	N/A	N/A

We anticipate that we will contribute the following amounts to our plans in 2013.

The Pension Protection Act of 2006 (PPA) specified funding requirements for single employer defined benefit pension plans. The PPA established a 100% funding target for plan years beginning after December 31, 2007, and we are in compliance.

Benefit payments, which reflect expected future service, as appropriate, are expected to be paid for the next ten years ending October 31 as follows.

The assumed health care cost trend rates used in measuring the accumulated OPEB obligation for the medical plans for all participants as of October 31, 2012 and 2011 are presented below.

The health care cost trend rate assumptions could have a significant effect on the amounts reported. A change of 1% would have the following effects.

Mutual funds are valued at the quoted NAV per share, which is computed as of the close of business on our balance sheet date. Mutual funds with a publicly quoted NAV per share are classified as Level 1; mutual funds with a NAV per share that is not publicly available are classified as Level 2.

Following is a description of the valuation methodologies used for assets measured at fair value in our qualified pension plan.

Cash and cash equivalents – These are Level 1 assets valued at face value as they are primarily cash or cash equivalents. The assets that are Level 2 assets have been valued at the market value of the shares held by the plan at the valuation date for a money market mutual fund.

U.S. treasuries – These are Level 2 assets whose values are based on observable market information including quotes from a quotation reporting system, established market makers or pricing services. This asset class includes long duration fixed income investments.

Long duration bonds – These are Level 2 assets in an actively managed private series long duration fixed income fund valued using pricing models that consider various observable inputs, such as benchmark yields, reported trades, broker quotes and issuer spreads.

Corporate bonds, collateralized mortgage obligations, municipals – These are Level 2 assets valued based on primarily observable market information or broker quotes on a non-active market. This class includes long duration fixed income investments.

High yield bonds – These are Level 1 assets valued at the quoted NAV of high yield fixed income mutual fund shares.

Derivatives – The Level 1 assets were valued using a compilation of observable market information on an active market. The Level 2 assets were valued using broker quotes on a non-active market.

Large cap core index – These are Level 1 assets valued at the quoted NAV of the low-cost equity index mutual fund that tracks the Standard & Poor's 500 Stock Index (S&P 500 Index).

Large cap value and small cap value – These are Level 1 assets valued at the market price of the active market on which the individual security is traded.

Large cap growth, international value and global REIT – These are Level 1 assets valued at the quoted NAV of mutual fund shares in managed equity funds.

Common trust fund - International growth – These are Level 2 assets held in a common trust fund in which we own an interest and valued at the NAV of the funds as traded on international exchanges. Currently there are no restrictions on redemptions for the fund.

Hedge fund of funds – This is a Level 2 asset with the value of our investment based on the estimated fair value of the underlying holdings in the portfolio at a NAV. These investments are across a variety of markets through investment funds or managed accounts that invest in equities, equity-related instruments, fixed income and other debt-related instruments. Currently there are no restrictions on redemptions for the fund.

Private equity fund of funds – This is a Level 3 asset invested in hedge fund of funds valued based on a quarterly compilation of the financial statements from the underlying partnerships in which the fund invests. There are currently redemption restrictions for this fund. The target allocation for this investment is 5% but is still being funded through capital calls; $8.5 million of the original $12 million subscription remains unfunded. Until a 5% allocation can be achieved, the balance of the 5% allocation is invested in a low-cost equity index fund that tracks the S&P 500 Index. Our investment is in various funds that invests in North American companies; allocate capital to private equity funds; invest in venture capital partnerships; and private equity partnerships in emerging markets.

Commodities fund of funds – This is a Level 2 asset with the value of our investment based on the estimated fair value of the various holdings in the portfolio as reported in the financial statements at a NAV. Currently there are no restrictions on redemptions for the fund. These investments are in commodities fund of funds that are actively managed through a well-diversified group of underlying managers.

As stated above, some of our investments for the qualified pension plan have redemption limitations, restrictions and notice requirements which are further explained below.

			Redemptions
	Redemption		Notice
Investment	Frequency	Other Redemption Restrictions	Period

Common trust fund -	Monthly	None	30 days
International growth

Hedge fund of funds	Quarterly	Redeemed in whole or part but not less than the minimum redemption amount for each currency. Redemption within one year of purchase is subject to 1.5% redemption fee. Redeemed on "first in first out" basis. None of our investment is subject to the redemption fee. Fund's Board of Directors may limit or suspend share redemptions until a further notification ending suspension. No such notification has been received as of October 31, 2012.	65 days

Private equity fund of funds	Limited	Investors have only very limited withdrawal rights for specific legal or regulatory reasons. Any transfer of interest will be subject to approval.	(1)

Commodities fund of funds	Monthly	Redemption within one year of purchase is subject to 1% redemption fee. None of our investment is subject to the redemption fee. 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.	35 days

(1) The investment cannot be redeemed. We receive distributions only through the liquidation of the underlying assets. The assets are expected to be liquidated over the next 10 to 12 years.

The qualified pension plan's asset allocations by level within the fair value hierarchy at October 31, 2012 and 2011 are presented below. Our 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 placement within the fair value hierarchy levels. For further information on a description of the fair value hierarchy, see “Fair Value Measurements” in Note 1 to the consolidated financial statements.

	Qualified Pension Plan as of October 31, 2012
			Significant
	Quoted Prices		Other		Significant
	in Active		Observable		Unobservable		Total
	Markets		Inputs		Inputs		Carrying		% of
In thousands	(Level 1)		(Level 2)		(Level 3)		Value		Total

Cash and cash equivalents	$	5,346	$	-	$	-	$	5,346	2%
Fixed Income Securities:									45%
U.S. treasuries		-		17,544		-		17,544	6%
Long duration bonds		-		63,565		-		63,565	23%
Corporate bonds		-		26,368		-		26,368	10%
High yield bonds		13,777		-		-		13,777	5%
Collateralized mortgage
obligations		-		1,513		-		1,513	1%
Municipals		-		345		-		345	-\%
Derivatives		(3)		(86)		-		(89)	-\%
Equity Securities:									36%
Large cap core index		10,260		-		-		10,260	4%
Large cap value		10,427		-		-		10,427	4%
Large cap growth		15,252		-		-		15,252	6%
Small cap value		26,335		-		-		26,335	10%
International value		14,376		-		-		14,376	5%
Common trust fund - International
growth		-		18,678		-		18,678	7%
Real Estate:									6%
Global REIT		16,252		-		-		16,252	6%
Other Investments:									11%
Hedge fund of funds		-		16,995		-		16,995	6%
Private equity fund of funds		-		-		3,522		3,522	1%
Commodities fund of funds		-		11,871		-		11,871	4%
Total assets at fair value	$	112,022	$	156,793	$	3,522	$	272,337	100%
Percent of fair value hierarchy		41%		58%		1%		100%

	Qualified Pension Plan as of October 31, 2011
				Significant
		Quoted Prices		Other		Significant
		in Active		Observable		Unobservable		Total
		Markets		Inputs		Inputs		Carrying	% of
In thousands		(Level 1)		(Level 2)		(Level 3)		Value	Total

Cash and cash equivalents	$	5,891	$	2	$	-	$	5,893	2%
Fixed Income Securities:									45%
U.S. treasuries		-		11,109		-		11,109	4%
Long duration bonds		66,824		-		-		66,824	26%
Corporate bonds		-		24,383		-		24,383	9%
High yield bonds		12,504		-		-		12,504	5%
Collateralized mortgage
obligations		-		1,448		-		1,448	1%
Municipals		-		324		-		324	-\%
Derivatives		(25)		437		-		412	-\%
Equity Securities:									35%
Large cap core index		11,206		-		-		11,206	4%
Large cap value		8,623		-		-		8,623	3%
Large cap growth		15,897		-		-		15,897	6%
Small cap value		23,827		-		-		23,827	9%
International value		13,770		-		-		13,770	6%
Common trust fund - International
growth		18,057		-		-		18,057	7%
Real Estate:									6%
Global REIT		14,909		-		-		14,909	6%
Other Investments:									12%
Hedge fund of funds		-		10,089		6,207		16,296	6%
Private equity fund of funds		-		-		1,925		1,925	1%
Commodities fund of funds		-		3,632		8,472		12,104	5%
Total assets at fair value	$	191,483	$	51,424	$	16,604	$	259,511	100%
Percent of fair value hierarchy		74%		20%		6%		100%

During the period, we transferred amounts from Level 3 to Level 2 for our investments in the hedge fund of funds and the commodities fund of funds because inputs became more observable. Long duration bonds and the common trust fund – international growth investments were classified as Level 1 assets as of October 31, 2011 and as Level 2 assets at October 31, 2012 due to changes in observable inputs. The following is a reconciliation of the assets in the qualified pension plan that are classified as Level 3 in the fair value hierarchy.

			Private
	Hedge Fund		Equity Fund		Commodities
In thousands	of Funds		of Funds		Fund of Funds			Total

Balance, October 31, 2010	$	5,196	$	580	$	-	$	5,776
Actual return on plan assets:
Relating to assets still held at the reporting date		(1,236)		66		(488)		(1,658)
Relating to assets sold during the period		-		-		-		-
Purchases, sales and settlements (net)		2,247		1,279		8,960		12,486
Transfer in/out of Level 3		-		-		-		-
Balance, October 31, 2011		6,207		1,925		8,472		16,604
Actual return on plan assets:
Relating to assets still held at the reporting date		-		13		-		13
Relating to assets sold during the period		-		145		-		145
Purchases, sales and settlements (net)		-		1,439		-		1,439
Transfer in/out of Level 3		(6,207)		-		(8,472)		(14,679)
Balance, October 31, 2012	$	-	$	3,522	$	-	$	3,522

During the year, the qualified pension plan raises cash from various plan assets in order to fund periodic and lump sum benefit payments. Cash is raised as needed primarily from investments that have exceeded their target allocation and is dependent upon the number of retirees seeking lump sum distributions.

There are significant unobservable inputs used in the fair value measurements of our investment in the private equity fund of funds' limited partnerships. We are subject to the business risks inherent in the markets in which the partnerships are invested. The success or failure of the underlying businesses of the various partnerships that have been funded would result in a higher or lower fair value measurement.

Following is a description of the valuation methodologies used for assets measured at fair value in our OPEB plan with all of the OPEB plan's assets invested in mutual funds.

Cash and cash equivalents – These are Level 1 assets having maturities of three months or less when purchased and are considered to be cash equivalents.

U.S. treasuries – These are Level 1 assets in an actively managed mutual fund measured at NAV.

Corporate bonds – These are Level 1 assets valued at the quoted NAV of mutual fund investments that are primarily invested in investment grade securities that mature within ten years. The OPEB plan maintains a 5% target allocation to a high yield bond fund.

Large cap value, large cap growth, small cap growth, small cap value – These are Level 1 assets valued at the quoted NAV as invested in mutual funds that invest by a specific style.

Large cap index – These are Level 1 assets valued at the NAV as invested in a low-cost equity index mutual fund that tracks the S&P 500 Index.

International blend – These are Level 1 assets valued at the quoted NAV of mutual fund shares in managed global equity funds outside of the United States whose styles include both growth and value investments.

Global REIT – These are Level 1 assets valued at the quoted NAV of mutual fund shares in a managed equity fund that invests globally but primarily in the United States.

The OPEB plan's asset allocations by level within the fair value hierarchy at October 31, 2012 and 2011 are presented below. Our 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 placement within the fair value hierarchy levels. For further information on a description of the fair value hierarchy, see “Fair Value Measurements” in Note 1 to the consolidated financial statements.

	Other Benefits as of October 31, 2012
			Significant
	Quoted Prices		Other		Significant
	in Active		Observable		Unobservable		Total
	Markets		Inputs		Inputs		Carrying		% of
In thousands	(Level 1)		(Level 2)		(Level 3)		Value		Total

Cash and cash equivalents	$	926	$	-	$	-	$	926	4%
Fixed Income Securities:									46%
U.S. treasuries		2,345		-		-		2,345	10%
Corporate bonds / Asset-backed
securities		8,474		-		-		8,474	36%
Equity Securities:									45%
Large cap value		1,221		-		-		1,221	5%
Large cap growth		1,149		-		-		1,149	5%
Small cap value		1,177		-		-		1,177	5%
Small cap growth		1,155		-		-		1,155	5%
Large cap index		2,148		-		-		2,148	9%
International blend		3,907		-		-		3,907	16%
Real Estate:									5%
Global REIT		1,161		-		-		1,161	5%
Total assets at fair value	$	23,663	$	-	$	-	$	23,663	100%
Percent of fair value hierarchy		100%		-\%		-\%		100%

	Other Benefits as of October 31, 2011
			Significant
	Quoted Prices		Other		Significant
	in Active		Observable		Unobservable		Total
	Markets		Inputs		Inputs		Carrying		% of
In thousands	(Level 1)		(Level 2)		(Level 3)		Value		Total

Cash and cash equivalents	$	1,011	$	-	$	-	$	1,011	5%
Fixed Income Securities:									45%
U.S. treasuries		2,162		-		-		2,162	10%
Corporate bonds / Asset-backed
securities		7,790		-		-		7,790	35%
Equity Securities:									45%
Large cap value		1,108		-		-		1,108	5%
Large cap growth		1,107		-		-		1,107	5%
Small cap value		1,092		-		-		1,092	5%
Small cap growth		1,131		-		-		1,131	5%
Large cap index		1,996		-		-		1,996	9%
International blend		3,557		-		-		3,557	16%
Real Estate:									5%
Global REIT		1,091		-		-		1,091	5%
Total assets at fair value	$	22,045	$	-	$	-	$	22,045	100%
Percent of fair value hierarchy		100%		-\%		-\%		100%

We maintain a 401(k) plan that is a profit-sharing plan under Section 401(a) of the Internal Revenue Code of 1986, as amended (the Tax Code), which includes qualified cash or deferred arrangements under Tax Code Section 401(k). The 401(k) plan is subject to the provisions of the Employee Retirement Income Security Act. Eligible employees who have completed 30 days of continuous service and have attained age 18 are eligible to participate. Participants may defer a portion of their base salary and cash incentive payments to the plan, and we match a portion of their contributions. Employee contributions vest immediately, and company contributions vest after six months of service.

Employees receive a company match of 100% up to the first 5% of eligible pay contributed. Employees may contribute up to 50% of eligible pay to the 401(k) on a pre-tax basis, up to the Tax Code annual contribution and compensation limits. We automatically enroll all eligible non-participating employees in the 401(k) plan at a 2% contribution rate unless the employee chooses not to participate by notifying our record keeper. For employees who are automatically enrolled in the 401(k) plan, we 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 our record keeper. 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 direct up to 20% of their contributions and company matching contributions as an investment in the Piedmont Stock Fund. Employees may change their contribution rate and investments at any time. For the years ended October 31, 2012, 2011 and 2010, we made matching contributions to participant accounts as follows.

As a result of a plan merger effective in 2001, participants' accounts in our employee stock ownership plan (ESOP) were transferred into the participants' 401(k) accounts. Former ESOP participants may remain invested in Piedmont common stock in their 401(k) plan or may sell the common stock at any time and reinvest the proceeds in other available investment options. The tax benefit of any dividends paid on ESOP shares still in participants' accounts is reflected in the Consolidated Statement of Stockholders' Equity as an increase in retained earnings.