UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 OR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________
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COMMISSION FILE NUMBER: 0-8084
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SAVINGS PLAN OF THE CONNECTICUT WATER COMPANY
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CONNECTICUT WATER SERVICE, INC.
93 WEST MAIN STREET
CLINTON, CONNECTICUT 06413
(860) 669-8636
SAVINGS PLAN OF THE CONNECTICUT WATER COMPANY
Financial Statements and Supplemental Schedule
As of December 31, 2001 and 2000
Index Page
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS
Statements of Net Assets Available for Benefits
As of December 31, 2001 and 2000 2
Statements of Changes in Net Assets Available for Benefits
For the Years Ended December 31, 2001 and 2000 3
NOTES TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULE 4-7
SUPPLEMENTAL SCHEDULE
Schedule H - Item 4(i) - Schedule of Assets Held for Investment Purposes
As of December 31, 2001 9
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of the
Savings Plan of the Connecticut Water Company:
We have audited the accompanying statements of net assets available for benefits
of Savings Plan of The Connecticut Water Company as of December 31, 2001 and
2000, and the related statements of changes in net assets available for benefits
for the years then ended. These financial statements and the schedule referred
to below are the responsibility of the Plan's management. Our responsibility is
to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2001 and 2000, and the changes in its net assets available for
benefits for the years then ended, in conformity with accounting principles
generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets held
for investment purposes is presented for the purposes of additional analysis and
is not a required part of the basic financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The supplemental schedule has been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen
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Hartford, Connecticut
April 24, 2002
SAVINGS PLAN OF THE CONNECTICUT WATER COMPANY
Statements of Net Assets Available for Benefits
As of December 31, 2001 and 2000
2001 2000
ASSETS:
Investments, at fair value:
Mutual funds $ 4,075,738 $ 4,021,951
Connecticut Water Service, Inc. common stock 1,016,128 664,257
Commingled fund 522,146 377,527
Participant loan accounts 124,923 105,169
Cash management assets 919 31,444
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Total investments 5,739,854 5,200,348
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Receivables:
Employee contributions 9,317 42,090
Employer contributions 43,679 10,456
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NET ASSETS AVAILABLE FOR BENEFITS $ 5,792,850 $ 5,252,894
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The accompanying notes are an integral part of these financial statements.
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SAVINGS PLAN OF THE CONNECTICUT WATER COMPANY
Statements of Changes in Net Assets Available for Benefits
For the Years Ended December 31, 2001 and 2000
2001 2000
ADDITIONS:
Net depreciation in fair value of investments $ (175,694) $ (503,950)
Interest 10,669 156,246
Dividends 98,988 284,355
Employee contributions (including rollover contributions) 584,816 514,086
Employer contributions 225,310 131,692
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Total additions 744,089 582,429
DEDUCTIONS:
Distributions to participants 203,173 47,867
Administrative expenses 960 2,399
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Total deductions 204,133 50,266
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NET INCREASE 539,956 532,163
NET ASSETS AVAILABLE FOR BENEFITS, beginning of year 5,252,894 4,720,731
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NET ASSETS AVAILABLE FOR BENEFITS, end of year $ 5,792,850 $ 5,252,894
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The accompanying notes are an integral part of these financial statements.
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SAVINGS PLAN OF THE CONNECTICUT WATER COMPANY
Notes to Financial Statements and Supplemental Schedule
December 31, 2001 and 2000
(1) DESCRIPTION OF THE PLAN
The following description of Savings Plan (the Plan) of The Connecticut
Water Company (the Company) provides only general information.
Participants should refer to the Plan document for a more complete
description of the Plan's provisions. The Company is a wholly-owned
subsidiary of Connecticut Water Service, Inc.
The Plan was established by the Board of Directors of the Company in
1985 and was amended and restated since that date. The Plan is a
trusteed, defined contribution plan covering all eligible employees of
the Company.
Effective April 1, 2001, eligible employees of Crystal Water Company
and Gallup Water Service, Inc., which are both wholly-owned
subsidiaries of Connecticut Water Service, Inc., became able to
participate in the Plan. Effective December 14, 2001, eligible
employees of The Barnstable Water Company, a wholly-owned indirect
subsidiary of Connecticut Water Service, Inc., became able to
participate in the Plan.
PW Trust Company (the Trustee) is the trustee of the Plan, and
PaineWebber Incorporated is the Plan's recordkeeper.
The Plan includes the following provisions, summarized from the Plan
document:
(a) The Company match is 50% of each participant's employee salary deferral
contribution not to exceed 4% of compensation.
(b) The Plan includes the potential for a profit sharing contribution of up
to 1% of compensation linked to successful completion of specific
strategic initiatives. Profit sharing contributions have additional
requirements and restrictions.
(c) Deferrals are made on a pre-tax basis of between 1% and 15% maximum for
all employees.
(d) The waiting period for new employee enrollment into the plan is six
months.
(e) Participants are eligible to receive Company matching contributions
after six months.
Once eligible, employees can elect to enter into a written salary
deferral agreement. Participant loans and hardship withdrawals are
permitted. Changes in deferrals are allowed quarterly. Additional
after-tax contributions are allowed.
Participants may borrow at least $1,000 and the lesser of $50,000, or
50%, of the vested amount of their accounts, excluding their interest
in Connecticut Water Service, Inc. common stock, at a rate of interest
of prime rate plus 1.0%. Loans must be repaid within
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five years, or before attaining age 65, whichever is shorter. Loans to
purchase a principal residence may be repaid within ten years.
Upon retirement, termination of employment, total disability, or death,
the entire accumulated amount of the account is paid in cash in one
lump sum amount.
A participant is fully vested at all times in the accrued balance of
his or her account.
On a daily basis, the Trustee determines the total net earnings of each
investment fund and allocates this amount to the accounts of the
participants on the basis of the percentage each participant has
invested in the investment fund.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The investments in the accompanying Statements of Net Assets Available
for Plan Benefits are stated at fair value. The accompanying financial
statements have been prepared on the accrual basis of accounting in
accordance with accounting principles generally accepted in the United
States.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States and the Department
of Labor Rules and Regulations For Reporting and Disclosure under the
Employee Retirement Income Security Act of 1974 requires management of
the Plan to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of additions and deductions during
the reporting period. Actual results could differ from those estimates.
ADMINISTRATIVE EXPENSES
The majority of the administrative expenses and fees of the Plan are
paid by the Company, unless the plan administrator directs the Trustee
to pay these expenses utilizing Plan assets. During 2001 and 2000, the
Plan paid administrative expenses of $960 and $2,399, respectively.
VALUATION OF INVESTMENTS
Securities traded on a national securities exchange are valued at the
last reported sales price on the last business day of the Plan year.
Investments traded in the over-the-counter market and listed securities
for which no sale was reported on that date are valued at the average
of the last reported bid and asked prices.
RISKS AND UNCERTAINTIES
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The Plan provides for various investment options in mutual funds and
common stock. 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 possible that
changes in the values of investment securities will occur in the near
term and that such changes could materially affect participants'
account balances and the amounts reported in the accompanying financial
statements and supplemental schedules.
(3) INVESTMENTS
Participants direct the Trustee regarding the investment of amounts
held in their accounts. As of December 31, 2001, investment options
were as follows:
PIMCO TOTAL RETURN FUND - This fund seeks maximum total return by
focusing on intermediate-term, high quality bonds.
AIM AGGRESSIVE GROWTH FUND - This fund seeks aggressive capital growth
by investing in small and mid-sized companies that fund management
believes will have earnings growth well in excess of the general
economy.
AIM BLUE CHIP FUND - This fund seeks long-term capital growth by
investing in large, established companies that are considered to be
market leaders. The companies must exhibit strong earnings growth
potential or be attractively valued relative to their fundamentals.
AMERICAN BALANCED FUND - This fund seeks conservation of capital,
current income and long-term growth of capital and income by investing
in stocks, bonds, and fixed-income securities.
DREYFUS FOUNDERS DISCOVERY FUND - This fund seeks capital appreciation
through the pursuit of targeting small and relatively unknown companies
with high growth potential.
EUROPACIFIC GROWTH FUND - This fund seeks long-term growth of capital
by investing in companies based outside the United States.
FRANKLIN BALANCE SHEET INVESTMENT FUND - This fund seeks capital
appreciation and/or high income primarily through investment in
securities that the portfolio managers believe are undervalued in the
marketplace and trading at a low price-to-book value.
MASSACHUSETTS INVESTORS GROWTH STOCK FUND - This fund seeks long-term
growth of capital and future income, rather than current income. The
fund invests primarily in common stocks exhibiting above-average
prospects for long-term growth.
OPPENHEIMER QUEST OPPORTUNITY VALUE FUND - This fund seeks long-term
growth of capital utilizing a flexible approach within the portfolio
which can contain stocks, bonds and cash equivalents.
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WASHINGTON MUTUAL INVESTORS FUND - This fund seeks current income and
an opportunity for growth of principal consistent with sound common
stock investing.
PAINEWEBBER TRUST COMPANY STABLE VALUE FUND - This fund seeks to
generate a total return in excess of the average monthly yield to
maturity of one-year Treasury bills and to provide stability of
principal while maximizing current income.
CONNECTICUT WATER SERVICE, INC. COMMON STOCK - Effective December 18,
2000, participants have the ability to direct the investment of amounts
held in their accounts into and out of Company stock.
The fair market value of investments that represent 5% or more of the
Plan's total net assets as of December 31, 2001 and 2000 are as
follows:
2001:
Connecticut Water Service, Inc. Common Stock $ 1,016,128
Massachusetts Investors Growth Stock Fund 714,087
Oppenheimer Quest Opportunity Value Fund 664,716
Washington Mutual Investors Fund 627,144
PIMCO Total Return Fund 597,328
PaineWebber Trust Company Stable Value Fund 522,146
EuroPacific Growth Fund 454,637
Dreyfus Founders Discovery Fund 424,527
2000:
Massachusetts Investors Growth Stock Fund $ 1,017,036
Oppenheimer Quest Opportunity Value Fund 767,556
Connecticut Water Service, Inc. Common Stock 664,257
Washington Mutual Investors Fund 617,511
Dreyfus Founders Discovery Fund 527,631
PaineWebber Trust Company Stable Value Fund 454,660
EuroPacific Growth Fund 397,626
PIMCO Total Return Fund 377,527
(4) EMPLOYER CONTRIBUTION
Effective January 1, 1998, the Plan allows employer contributions of
Connecticut Water Service, Inc., the parent company of the Company, in
the form of cash or shares of Connecticut Water Service, Inc. stock to
the Plan. A participant may elect such employer contributions be paid
in the form of cash or shares of Connecticut Water Service, Inc. stock.
If the stock election is taken by an employee, certain matching
guidelines apply based on Connecticut Water Service, Inc.'s earnings
per average common share (EPS) and dividends. If EPS in the prior year
exceeds 110% of dividends paid per common share, the applicable
percentage is 50%; otherwise the match is 25%. For 2001 and 2000, the
Company did not contribute any shares to the Plan.
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(5) TAX STATUS
The Plan obtained its latest determination letter on May 2, 1997, in
which the Internal Revenue Service stated that the Plan, as then
designed, was in compliance with the applicable requirements of the
Internal Revenue Code (IRC). The Plan has been amended since the date
of the IRS determination letter. However, the plan administrator
believes that the Plan is currently designed and being operated in
compliance with the applicable requirements of the IRC. Therefore, the
plan administrator believes the Plan was qualified and the related
trust was tax exempt as of the financial statement date.
(6) PLAN TERMINATION
The Company may, for any reason and at any time, terminate the Plan, in
part or in whole. Upon termination of the Plan, the plan administrator
will make final allocations to all accounts, and then will distribute
account balances in lump sum cash amounts.
(7) RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for Plan
benefits per the financial statements to the Form 5500 as of December
31, 2001:
Net assets available for Plan benefits per financial statements $ 5,792,850
Receivable - employee contributions (9,317)
Receivable - employer contributions (43,679)
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Net Assets Available for Benefits per Form 5500 $ 5,739,854
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The following are reconciliations of employer and employee deferral
contributions per the financial statements to the Form 5500 for the
year ended December 31, 2001:
Employee contributions per financial statements $ 584,816
Less: December 31, 2001 receivable - employee contribution (9,317)
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Employee contributions per Form 5500 $ 575,499
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Employer deferral contributions per financial statements $ 225,310
Less: December 31, 2001 receivable - employer contribution (43,679)
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Employer deferral contributions per Form 5500 $ 181,631
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SCHEDULE I
EIN: 06-0713930
Plan No.: 003
SAVINGS PLAN OF THE CONNECTICUT WATER COMPANY
Schedule H - Item 4(i) - Schedule of Assets Held for Investment Purposes As of
December 31, 2001
(c) DESCRIPTION OF
INVESTMENT INCLUDING
(b) IDENTITY OF ISSUE, MATURITY DATE, RATE OF
BORROWER, LESSOR, OR INTEREST, COLLATERAL, (e) CURRENT
(a) SIMILAR PARTY PAR OR MATURITY VALUE (d) COST VALUE
Mutual Funds:
Mass Investors Growth Stock Fund 55,398 shares $ 1,061,388 $ 714,087
Oppenheimer Quest Opportunity
Value Fund 35,660 shares 676,966 664,716
Washington Mutual Investors Fund 21,200 shares 649,794 627,144
PIMCO Total Return Fund 28,381 shares 591,779 597,328
Euro Pacific Growth Fund 16,920 shares 559,966 454,637
Dreyfus Founders Discovery Fund 14,896 shares 451,401 424,527
AIM Blue Chip Fund 15,175 shares 199,490 186,190
AIM Aggressive Growth Fund 55,785 shares 165,907 143,405
American Balanced Fund 15,324 shares 139,806 142,103
Franklin Balanced Sheet Investment Fund 3,039 shares 115,660 121,601
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Total mutual funds 4,612,157 4,075,738
Common Stock:
* Connecticut Water Service, Inc. 55,785 shares 746,333 1,016,128
Commingled Fund:
* Paine Webber Stable Value 2,299 shares 509,328 522,146
Cash Management Assets:
Riggs Prime Money Market 919 shares 919 919
* Participant Loans Interest rates ranging from
7.00% to 10.75% 124,923 124,923
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Total investments $ 5,993,660 $ 5,739,854
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* Indicates a party-in-interest.
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SIGNATURES
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934,
the Plan Administrator has duly caused this annual report to be signed on its
behalf by the undersigned hereunto duly authorized.
SAVINGS PLAN OF THE CONNECTICUT WATER
COMPANY
Date: June 11, 2002 By: /s/ David C. Benoit
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Name: David C. Benoit
Title: Vice President and Chief Financial
Officer, Connecticut Water Company,
the Plan Administrator
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EXHIBIT INDEX
Exhibit No. Description
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23 Consent of Arthur Andersen LLP
99 Temporary Note 3T to Article 3 of Regulation S-X