UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS
AND SIMILAR PLANS PURSUANT TO SECTION 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 30, 2001
[_] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number 1-3559
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
Atlantic Electric 401(K) Savings and Investment Plan-B
800 King Street
P.O. Box 231
Wilmington, DE 19899
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
Custom Stable Value Fund Spectrum Growth Fund
T. Rowe Price Associates, Inc. T. Rowe Price Associates, Inc.
100 East Pratt Street 100 East Pratt Street
Baltimore, MD 21202 Baltimore, MD 21202
Equity Income Fund Conectiv Class A Common Stock Fund
T. Rowe Price Associates, Inc. Conectiv
100 East Pratt Street 800 King Street
Baltimore, MD 21202 Wilmington, DE 19899-0231
International Stock Fund Conectiv Common Stock Fund
T. Rowe Price Associates, Inc. Conectiv
100 East Pratt Street 800 King Street
Baltimore, MD 21202 Wilmington, DE 19899-0231
Equity Index Fund
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, MD 21202
Atlantic Electric 401(k)
Savings and Investment
Plan - B
As of December 30, 2001 and 2000 and for the
Year Ended December 30, 2001 and
Supplemental Schedules
Atlantic Electric 401(k) Savings and Investment Plan - B
Table of Contents
December 30, 2001 and 2000
Page(s)
Report of Independent Accountants 1
Financial Statements:
Statements of Net Assets Available for Benefits at
December 30, 2001 and 2000 2
Statement of Changes in Net Assets Available for Benefits for the
Year Ended December 30, 2001 3
Notes to Financial Statements 4-8
Supplemental Schedules:
Schedule of Assets (Held at End of Year) - Schedule H - Item 4(i) 10
Schedule of Reportable Transactions - Schedule H - Item 4(j) 11
Signature 12
Report of Independent Accountants
To the Personnel and Compensation
Committee of the Board of Directors of Conectiv
In our opinion, the accompanying statements of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Atlantic Electric 401(k) Savings and Investment Plan - B at December 30,
2001 and 2000, and the changes in its net assets available for benefits for the
year ended December 30, 2001, in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Plan's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of Assets
(Held at End of Year) and Reportable Transactions are presented for the purpose
of additional analysis and are not a required part of the basic financial
statements but are 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. These supplemental schedules are the
responsibility of the Plan's management. The supplemental schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ PricewaterhouseCoopers LLP
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PricewaterhouseCoopers LLP
May 21, 2002
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Atlantic Electric 401(k) Savings and Investment Plan - B
Statements of Net Assets Available for Benefits
At December 30, 2001 and 2000
2001 2000
Investments $43,630,471 $43,282,975
Receivables:
Employer contributions 14,491 13,929
Participant contributions 51,883 46,489
----------- -----------
Net assets available for benefits $43,696,845 $43,343,393
=========== ===========
The accompanying notes are an integral part of these financial statements.
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Atlantic Electric 401(k) Savings and Investment Plan - B
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 30, 2001
Additions:
Participant contributions $ 2,985,953
Employer contributions 722,005
Interest income 127,504
Dividend income 1,587,346
Net depreciation in fair value of investments (2,817,215)
------------
Total additions 2,605,593
------------
Deductions:
Benefits paid to participants 2,249,891
Administrative fees 2,250
------------
Total deductions 2,252,141
------------
Net increase in net assets available for benefits 353,452
Net assets available for benefits, at beginning of year 43,343,393
------------
Net assets available for benefits, at end of year $ 43,696,845
============
The accompanying notes are an integral part of these financial statements.
-3-
Atlantic Electric 401(k) Savings and Investment Plan - B
Notes to Financial Statements
December 30, 2001 and 2000
1. Description of Plan
General
The following description of the Atlantic Electric 401(k) Savings and
Investment Plan - B (the "Plan"), a defined contribution plan, provides
only general information. Participants should refer to the Plan document
for a more comprehensive description of the Plan's provisions. The Plan is
subject to the provisions of the Employee Retirement Income Security Act of
1974 (ERISA).
Contributions
All full-time bargaining unit employees of the Atlantic City Electric
Company (the "Company"), a wholly-owned subsidiary of Conectiv, Inc., are
eligible to participate in the Plan. Additionally, any employee who is not
a regular full-time employee shall be eligible to participate upon
completion of 1,000 hours of service. Employees may contribute up to 10% of
base pay. Upon enrollment in the Plan, a participant may direct employee
contributions in any of seven investment options. The tax savings portion
of participant contributions (up to 6% of an employee's base pay) is
matched by the Company at a rate of 50% not to exceed 3% of the employee's
compensation. The Company's matching contribution is invested in the Custom
Stable Value Fund. Beginning in December 2000, an employee who elects to
invest in Conectiv's common stock and holds the common stock for one year
will receive an employer match of 15%, which will be invested in Conectiv's
common stock. At December 30, 2001, $12,536 was included in Conectiv's
common stock that related to employee contributions under the one year
holding period.
Federal income taxes on these contributions and the related income are
deferred until withdrawn. Benefits from the tax savings portion of the Plan
can be withdrawn upon the attainment of age 59-1/2, retirement, separation
from service, death or in special financial hardship situations. In
addition, employees may contribute up to an additional 10% of base pay on
an after-tax basis to the supplemental savings portion of the Plan, which
also earns income that is not subject to Federal income tax until
withdrawn. These contributions may be withdrawn once a quarter subject to
the provisions of the Internal Revenue Code.
Participant Accounts
Participants' contributions are recorded in the period of the related
payroll deductions. The Company's matching contributions are recorded in
the period of the related participants' contributions. Participants are
fully vested in employee and employer contributions in their respective
accounts at all times.
Termination of Plan
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time subject
to the provisions of ERISA.
Administration Fees
Certain professional fees and administrative expenses incurred in
connection with the Plan are paid by the Company. The facilities of the
Company are used by the Plan at no charge. Loan processing fees are paid by
the participants and deducted from Plan assets.
-4-
Atlantic Electric 401(k) Savings and Investment Plan - B
Notes to Financial Statements
December 30, 2001 and 2000
Participant Loans Receivable
Participants may borrow from their fund accounts a minimum of $1,000 up to
a maximum equal to the lesser of $50,000 or 50 percent of their account
balance. Loan terms range from one to five years and up to fifteen years
for the purchase of a primary residence. The loans are secured by the
balance in the participant's account and bear interest at a rate
commensurate with local prevailing rates as determined quarterly by the
Plan Administrator. Principal and interest is paid ratably through weekly
payroll deductions.
2. Summary of Significant Accounting Policies
Basis of Accounting
The financial statements of the Plan are prepared under the accrual basis
of accounting.
Investment Valuation and Income Recognition
The Plan's investments are stated at fair value. Shares of registered
investment companies are valued at quoted market prices which represent the
net asset value of shares held by the Plan at year end. The carrying value
of participant loans approximates fair value. Common stock is valued at
closing price on its principal exchange, shares of common collective trusts
are valued at net asset value.
Purchases and sales of investments are recorded on the trade-date. Interest
income is accrued when earned. Dividend income is recorded on the
ex-dividend date.
Investment in Common/Collective Trust
The Custom Stable Value Fund invests in various term guaranteed insurance
contracts and maintains a cash reserve balance with all excess funds. The
average yield and the weighted average crediting interest rate are based on
the underlying contracts.
Payment of Benefits
Benefits are recorded when paid.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires the Plan's
management to make estimates and assumptions that affect the reported
amounts in the financial statements. Actual results could differ from those
estimates.
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Atlantic Electric 401(k) Savings and Investment Plan - B
Notes to Financial Statements
December 30, 2001 and 2000
Risks and Uncertainties
The Plan provides for various investment options in any combination of
stocks, bonds, fixed income securities, mutual funds, and other investment
securities. 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 and the level of uncertainty related to
changes in the value of investment securities, it is at least reasonably
possible that changes in risks in the near term could materially affect
participants' account balances and the amounts reported in the Statements
of Net Assets Available for Benefits and the Statements of Changes in Net
Assets Available for Benefits.
3. Investments
The investment options available to plan participants have the following
objectives:
(i) T. Rowe Price Custom Stable Value Fund - to provide principal
stability and a high level of monthly income;
(ii) T. Rowe Price Equity Income Fund - to provide substantial dividend
income and secondarily, long-term capital appreciations;
(iii) T. Rowe Price Equity Index Fund - to match the performance of the
Standard & Poor's Stock Index;
(iv) T. Rowe Price International Stock Fund - to provide the
diversifications of an international fund as well as the opportunity
for long-term capital growth;
(v) T. Rowe Price Spectrum Growth Fund - to provide long-term growth of
capital;
(vi) Conectiv Common Stock - to provide maximum capital appreciation and
dividend income from Conectiv Common Shares;
(vii) Conectiv Class A Common Stock - to provide maximum capital
appreciation and dividend income from Conectiv Class A Common Shares.
-6-
Atlantic Electric 401(k) Savings and Investment Plan - B
Notes to Financial Statements
December 30, 2001 and 2000
The following presents investments that represent 5 percent or more of the
Plan's net assets:
December 30,
----------------------------
2001 2000
Custom Stable Value Fund $13,147,024 $11,294,587
Equity Index Fund 12,870,493 14,889,604
Equity Income Fund 12,175,782 10,824,727
Spectrum Growth Fund 2,389,247 2,921,336
----------- -----------
$40,582,546 $39,930,254
=========== ===========
During 2001, the Plan's investments (including investments bought, sold and
held during the year) depreciated in value by $2,817,215 as follows:
Registered investment companies $(2,943,190)
Conectiv common stock 125,975
-----------
$(2,817,215)
===========
4. Nonparticipant-Directed Investments
Information about the net assets and the significant components of the
changes in net assets relating to the nonparticipant-directed investments
is as follows:
December 30,
----------------------------
2001 2000
Net assets:
Custom Stable Value Fund $13,173,448 $11,318,415
Conectiv common stock 199,369 111,587
----------- -----------
$13,372,817 $11,430,002
=========== ===========
-7-
Atlantic Electric 401(k) Savings and Investment Plan - B
Notes to Financial Statements
December 30, 2001 and 2000
Year Ended
December 30,
2001
Changes in net assets:
Contributions $ 1,504,477
Interest income 36,136
Dividend income 660,170
Benefits paid to participants (1,232,322)
Net appreciation 31,676
Administrative fees (1,108)
Net transfers from participant-directed investments 943,786
-----------
$ 1,942,815
===========
5. Tax Status
The Plan obtained its latest determination letter on March 23, 1995, in
which the Internal Revenue Service (IRS) stated that the Plan was in
compliance with the applicable requirements of the Internal Revenue Code.
The Plan has been amended since receiving the determination letter.
However, the Plan Administrator and the Plan's tax counsel believe that the
Plan is currently designed and being operated in compliance with the
applicable requirements of the Internal Revenue Code.
6. Merger
On February 9, 2001, the Boards of Directors of Conectiv, Inc and Potomac
Electric Power Company (Pepco) approved an Agreement and Plan of Merger
(the "Merger") under which Pepco will acquire Conectiv for a combination of
cash and stock and Conectiv and Pepco will become wholly-owned subsidiaries
of Pepco Holdings, Inc. Under the Merger, holders of Conectiv common stock
and Conectiv Class A common stock may elect to exchange their shares for
cash, Pepco Holdings, Inc. common stock, or a combination of cash and Pepco
Holdings, Inc. common stock. Management currently expects the Merger to
close in the third quarter of 2002, subject to timely receipt of various
statutory and regulatory approvals.
-8-
Supplemental Schedules
-9-
Atlantic Electric 401(k) Savings and Investment Plan - B
EIN#: 51-0377417, PLAN#: 003
Schedule H - Item 4(i)
Schedule of Assets (Held at End of Year)
December 30, 2001
Current
Identity of Issue Investment Type Cost Value
T. Rowe Price:
Custom Stable Value Fund Common/Collective Trust $13,147,024 $13,147,024
Equity Index Fund Mutual Fund 11,226,479 12,870,493
Equity Income Fund Mutual Fund 11,952,991 12,175,782
Spectrum Growth Fund Mutual Fund 2,683,241 2,389,247
International Stock Fund Mutual Fund 1,429,408 1,002,588
Conectiv* Common Stock 163,111 198,980
Conectiv Class A Common Stock* Common Stock 238,875 238,115
Participant Loans Various loans ranging from 7.74%
to 9.00% maturing January 2002
through October 2015 - 1,608,242
----------- -----------
Total $40,841,129 $43,630,471
=========== ===========
* Parties-in-interest
-10-
Atlantic Electric 401(k) Savings and Investment Plan - B
EIN#: 51-0377417, PLAN#: 003
Schedule H - Item 4(j)
Schedule of Reportable Transactions*
For the Year Ended December 30, 2001
Current
Value of
Asset on Historical
Identity of Purchase Selling Historical Transaction Gain/
Party Involved Description of Assets Price Price Cost Date Loss
T. Rowe Price Custom Stable Value Fund:
Purchases $6,387,635 $6,387,635 $6,387,635
Sales $4,535,197 4,535,197 4,535,197
* Non-participant directed transactions or series of transactions in excess
of 5% of the current value of the Plan's assets as of the beginning of the
Plan year as defined in Section 2520.103-6 of the Department of Labor Rules
and Regulations for Reporting and Disclosure under ERISA.
-11-
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned
thereunto duly authorized.
Atlantic Electric 401(K) Savings and Investment Plan-B
Date: June 25, 2002 /s/ John C. van Roden
------------- ------------------------------------------
John C. van Roden, Chief Financial Officer
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