Commission File No. 000-33049 |
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Savings Plan for Non-Bargaining Unit, Non-Exempt Employees Report, Financial Statements and Additional Information June 30, 2002 and 2001 |
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Potomac Electric Power Company |
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Page No. |
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Financial Statements: |
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Report of Independent Accountants |
1 |
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Statement of Net Assets Available for Benefits |
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Statement of Changes in Net Assets Available for Benefits |
3 |
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Notes to Financial Statements |
4 |
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Additional Information:* |
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Schedule H, Line 4i - Schedule of Assets (Held at End of |
18 |
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* |
All other schedules required by 29 CFR 2520.103-10 of the Department of Labor's Rules and Regulations for Reporting and Disclosure under ERISA are not applicable and are therefore omitted. |
Report of Independent Accountants |
Washington, DC December 20, 2002 |
Potomac Electric Power Company |
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June 30, |
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2002 |
2001 |
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Investments: |
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Interest in Pepco Retirement Savings Plan |
$3,657,709 |
$ - |
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Pepco Common Stock Fund |
- |
1,528,619 |
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Participant Directed Investments |
- |
3,113,027 |
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Loans to Participants |
446,813 |
- |
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Net Assets Available for Benefits |
$4,104,522 |
$4,641,646 |
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The accompanying notes are an integral part of these financial statements. |
Potomac Electric Power Company |
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Year Ended June 30, |
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2002 |
2001 |
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Additions: |
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Contributions: |
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Employer |
$ 49,629 |
$ 64,260 |
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Participants |
177,575 |
240,686 |
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Total Contributions |
227,204 |
304,946 |
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Investment Income (Loss): |
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Interest |
31,990 |
109,908 |
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Dividends on Pepco Common Stock |
- |
108,186 |
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Interest in the Net Investment Loss in the Pepco |
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Net Depreciation on Investments |
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(622,254) |
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Total Net Investment Loss |
(6,835) |
(404,160) |
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Total Additions (Deductions) |
220,369 |
(99,214) |
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Deductions: |
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Distributions to Participants and Beneficiaries |
663,896 |
223,367 |
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Brokerage and Investment Management Fees |
2,129 |
2,523 |
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Total Deductions |
666,025 |
225,890 |
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Net Decrease Prior to Transfer From (To) Another Plan |
(445,656) |
(325,104) |
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Transfer To Another Plan |
(91,468) |
(690,606) |
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Net Decrease |
(537,124) |
(1,015,710) |
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Net Assets Available for Benefits at Beginning of Year |
4,641,646 |
5,657,356 |
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Net Assets Available for Benefits at End of Year |
$4,104,522 |
$4,641,646 |
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The accompanying notes are an integral part of these financial statements. |
Potomac Electric Power Company |
NOTE 1 - General Description of Plan |
Potomac Electric Power Company |
Also, effective April 1, 2002, the Plan was further amended to allow participants to diversify their vested Company Matching Contributions regardless of age or years of participation in the Plan. The Plan's Trustee is Fidelity Management Trust Company ("Fidelity") of Boston, MA. Designation of Recordkeeper: Fidelity Investments Institutional Operations Company serves as recordkeeper of the Plan records. Contributions and Investment Elections: Each participant may elect to contribute, through payroll redirection or deductions, from 1% to 6% (basic), in multiples of 1%, of their annual rate of salary as basic contributions to the Plan. Participants making the maximum 6% basic contribution may elect to contribute an additional 1% to 13% (amended July 1, 2002 to increase the 13% to 44%; see Note 9) of their annual rate of salary, in multiples of 1%, as supplemental contributions to the Plan. Participants may contribute savings under the Cash or Deferred Arrangement ("CODA") within the meaning of Section 401(k) of the Internal Revenue Code of 1986, as amended, up to a maximum of $11,000 per calendar year (effective January 1, 2002) and/or after-tax ("Thrift") elections. Prior to this amendment participants could contribute savings up to a maximum of $10,500. The sum of the elected percentages for CODA and Thrift contributions and the Company matching contributions may not exceed 19% (amended July 1, 2002 to increase the 19% to 50%; see Note 9) of a participant's annual salary. The Company contributes to the Plan by matching the participant's basic (first 6%) contributions. The Company contributes either cash, which is used exclusively for the purchase of Company common stock in a timely manner after date of receipt, or Company common stock. The Company matches 40% of basic CODA contributions. The Company matches 40% of basic Thrift contributions. Participants' supplemental contributions are not matched by the Company. Non-vested Company contributions which are forfeited by participants are used to reduce future Company contributions that would otherwise be required. |
Potomac Electric Power Company |
Each participant's account is credited with the participant's contributions and allocations of (a) the Company's contribution and (b) Plan earnings (losses), and charged with an allocation of certain administration expenses. Allocations are based on participant earnings or account balances, as defined in the Pepco Retirement Savings Plan Master Trust (Master Trust Agreement). Participants may request, at any time, the withdrawal of Thrift account balances attributable to their own contributions and vested Company contribution account balances. The withdrawal of participant basic CODA and Thrift contributions, prior to the vesting of related Company contributions, will result in the forfeiture of related matching Company contributions. The withdrawal of CODA contributions, prior to a participant's having reached age 59 1/2 or having terminated from the Company, is permissible only in circumstances involving financial hardship. If a participant retires, qualifies for long-term disability, or dies while employed, all Company contributions which have been made on their behalf, and earnings thereon, become immediately vested and their entire interest in the Plan may be distributed to them or their designated beneficiary. Participants who are eligible to retire under the Company's General Retirement Plan may elect to have their Savings Plan balances remain in the Plan and have their balances paid to them annually over a period of ten years or their projected life expectancy (or joint life expectancy of the employee and spouse). |
Potomac Electric Power Company |
Distributions from the Pepco Common Stock Fund are made in shares of Company common stock unless the participant elects to receive cash. Savings bonds purchased with CODA or Thrift contributions are reinvested at maturity and can only be withdrawn from the Plan upon termination of employment or attainment of age 59 1/2. U.S. Savings Bond Funds are distributed in cash or bonds as elected by the employee. Distributions from any of the other Plan funds are made in cash. Loans are available to participants from amounts attributable to CODA contributions, subject to U.S. Department of Labor and Internal Revenue Service (the "IRS") limitations. The Plan requires that a minimum of $1,000 be borrowed by a participant. The number and amount of loans allowed to a participant are restricted by the Plan. A participant can have up to four loans outstanding at any time. The prevailing prime rate is applied as the interest rate for the loan. Loan repayments are made through payroll deductions. Upon termination from the Company, a participant can elect to continue to make loan repayments. If the loan repayments are not made for a period of three months, the loan is in default and is converted to a distribution. A one time loan fee of $50 is deducted from the participant's account with Fidelity at the time of distribution. Plan Administration and Termination: The Plan is administered by an Administrative Board which is appointed by the Company's Board of Directors. All contributions to the Plan are held in trust by Fidelity, the Plan Trustee, for the exclusive benefit of the participants. Trustee fees and other administrative expenses of the Plan are generally paid by the Company. Brokerage fees, investment management fees and other investment transaction costs are paid by the Plan. The Plan is a defined contribution plan. Interests in the Plan are not insured by the Company and are not guaranteed by the Pension Benefit Guaranty Corporation, an agency of the United States government. |
Potomac Electric Power Company |
Although the Company intends to continue the Plan indefinitely, it reserves the right to terminate or amend the Plan at any time. In the event of the termination of the Plan, all Company contributions become immediately vested to Plan participants. |
Potomac Electric Power Company |
NOTE 2 - Significant Accounting Policies |
Potomac Electric Power Company |
The Plan held Guaranteed Insurance Contracts with the following Companies as of June 30: |
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Contract |
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Metropolitan Life Insurance Company; maturity date of July 2, 2002 |
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Principal Mutual Life Insurance Co.; maturity date of July 2, 2001 |
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Travelers Insurance Company; maturity date of July 2, 2001 |
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Total |
$ 46,100 |
$ 610,030 |
Loans to participants are valued at cost, which approximates fair market value. Certain Plan investments are shares of mutual funds managed by Fidelity Investments Institutional Operations Company. The Fidelity Management Trust Company is the trustee as defined in the Plan and, therefore, these transactions qualify as party-in-interest. Fees paid by the Plan for the investment management services amounted to $2,129 and $2,523 for the plan years ended June 30, 2002 and 2001, respectively. The Company as Plan sponsor is a related party. At June 30, 2002 and 2001, the Plan held an investment of 67,234 and 72,722 shares of Potomac Electric Power Company common stock, respectively. The fair market value of the common stock at June 30, 2002 and 2001 was $1,444,204 and $1,528,619, respectively. Purchases of $199,510 and $253,688 and sales of $329,350 and $335,060 of Company common stock were made during the plan years ended June 30, 2002 and 2001, respectively. |
Potomac Electric Power Company |
NOTE 3 - Tax Status of the Plan |
Potomac Electric Power Company |
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NOTE 4 - Assets Held in a Master Trust at Fidelity Management Trust Company |
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At June 30, 2002, the Plan's investment assets were held in a trust account at Fidelity and consist of an interest in the Pepco Retirement Savings Plan Master Trust ("Master Trust"). The Master Trust also includes the investment assets of the Potomac Electric Power Company Savings Plan for Exempt Employees and the Potomac Electric Power Company Savings Plan for Bargaining Unit Employees. The following table represents the assets held by the Master Trust along with the related investment loss: |
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June 30, 2002 |
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Investments: |
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Interest Bearing Cash |
2,749,487 |
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U.S. Government Securities |
329,548 |
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Funds Held in Insurance Company General Accounts |
2,727,7898 |
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Interest in Common/Collective Trusts |
9,242,511 |
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Employer Securities (Pepco Common Stock Fund) |
101,772,845 |
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Interest in Registered Investment Companies |
156,302,222 |
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Net Assets in the Master Trust |
$273,124,402 |
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Net Investment Income (Loss): |
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Interest |
$3,932,057 |
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Dividends |
4,511,245 |
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Net Appreciation (Depreciation) on the Fair Value of Investments: |
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Pepco Common Stock Fund |
2,743,410 |
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Common Collective Trusts |
(2,132,120) |
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Mutual Funds |
(20,703,990) |
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Net Investment Loss |
$(11,649,398) |
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The Plan's specific interest in the Master Trust as a percentage of total assets of the Master Trust was 1.4% at June 30, 2002. |
Potomac Electric Power Company |
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NOTE 5 - Information About Non-Participant Directed Investments Relating to the |
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June 30, |
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2002 |
2001 |
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Investments: |
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Pepco Common Stock Fund |
$1,419,347 |
$1,490,339 |
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Cash |
24,857 |
38,280 |
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Total |
$1,444,204 |
$1,528,619 |
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Note: |
The Plan does not separately account for participant and non-participant directed investments in the Pepco Common Stock Fund, therefore, the information presented includes both participant and non-participant directed balances. |
Potomac Electric Power Company |
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NOTE 6 - Information About Non-Participant Directed Investments |
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Significant components of the Changes in Net Assets relating to the Pepco Common Stock Fund is as follows: |
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Year Ended June 30, |
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2002 |
2001 |
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Contributions: |
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Employer |
$ 49,629 |
$ 64,260 |
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Participants |
75,079 |
7nbsp;77,180 |
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Total Contributions |
124,708 |
141,440 |
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Investment Income (Loss): |
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Dividends on Pepco Common Stock |
67,142 |
108,186 |
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Interest |
4,055 |
5,034 |
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Net Appreciation (Depreciation) on Pepco |
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Net Investment Income (Loss) |
117,069 |
(171,381) |
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Distributions to Participants and Beneficiaries |
(274,934) |
(94,651) |
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Brokerage and Investment Management Fees |
(448) |
(847) |
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Net Interfund Transfers |
(34,797) |
(13,856) |
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Transfer To (From) Plan |
(16,013) |
(227,523) |
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Net Increase (Decrease) |
(84,415) |
(366,818) |
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Net Assets Available for Benefits at Beginning of Year |
1,528,619 |
1,895,437 |
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Net Assets Available for Benefits at End of Year |
$1,444,204 |
$1,528,619 |
Note: |
The Plan does not separately account for participant and non-participant directed investments in the Pepco Common Stock Fund, therefore, the information presented includes both participant and non-participant directed balances. |
Potomac Electric Power Company |
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NOTE 7 - Investments Greater Than 5% of Net Assets |
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The fair market value of individual investments that represent 5% or more of the Plan's net assets as follows: |
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June 30, |
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2002 |
2001 |
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Interest in Pepco Retirement Savings Plan |
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Pepco Common Stock Fund |
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$1,528,619 |
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Fidelity Blue Chip Fund |
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$ 499,796 |
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Fidelity U.S. Equity Index Fund |
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$ 174,581 |
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Fidelity Short-Term Investments Fund |
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$1,259,705 |
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Loans to Participants |
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$ 438,560 |
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Pepco Common Stock Fund consists of participant and non-participant directed investments. |
Potomac Electric Power Company |
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NOTE 8 - Net Depreciation in Fair Value of Plan's Investments |
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Year Ended |
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Pepco Common Stock Fund |
$(284,601) |
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Investments in Registered Investment |
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Common Collective Trust |
(37,732) |
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Net Depreciation |
$(622,255) |
Potomac Electric Power Company |
NOTE 9 - Subsequent Event |
Potomac Electric Power Company |
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Schedule H, Line 4i - Schedule of Assets (Held at End of Year) |
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June 30, 2002 |
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(a) (b) (c) Identity of Issuer, Description |
(d) Cost |
(e) Current Value |
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Interest in the Pepco Retirement Savings |
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Participant Loans * (Loans to Participants, |
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Total Assets Held for Investment Purposes |
$4,104,522 |
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Party-in-Interest |
Exhibits : |
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Exhibit 23 |
Consent of Independent Accountants - Filed herewith. |
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Exhibit 99 |
Certificate Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) - Filed herewith. |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the Administrative Board has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized. |
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POTOMAC ELECTRIC POWER COMPANY SAVINGS PLAN FOR NON-BARGAINING UNIT, NON-EXEMPT EMPLOYEES |
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EXHIBIT 23 |
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We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (Number 333-96687) of Pepco Holdings, Inc. of our report dated December 20, 2002, relating to the financial statements of Potomac Electric Power Company Savings Plan for Non-Bargaining Unit, Non-Exempt Employees, appearing on page 1 of this Form 11-K. |
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PricewaterhouseCoopers LLP |
Exhibit 99 |
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Certificate |
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I, Dennis R. Wraase, Chairman, Administrative Board, of Pepco Holdings, Inc., certify that, to the best of my knowledge, the Annual Report on Form 11-K of Pepco Holdings, Inc. relating to the Potomac Electric Power Company Savings Plan for Non-Bargaining Unit, Non-Exempt Employees for the year ended June 30, 2002, filed with the Securities and Exchange Commission on the date hereof (i) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (ii) the information contained therein fairly presents, in all material respects, the financial condition and results of operations of the Potomac Electric Power Company Savings Plan for Non-Bargaining Unit, Non-Exempt Employees. |
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Dennis R. Wraase Chairman, Administrative Board |