Commission File No. 001-31403 |
|
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 _______________________ |
|
FORM 11-K ______________________ |
|
ANNUAL REPORT Pursuant to Section 15(d) of the For the Fiscal Year Ended December 30, 2002 _______________________ |
|
ATLANTIC ELECTRIC 401(K) SAVINGS AND INVESTMENT PLAN - B |
|
PEPCO HOLDINGS, INC. (Name of issuer of securities held pursuant to the plan) |
|
701 NINTH STREET, N.W. |
Atlantic Electric 401(k) Supplemental Schedules December 30, 2002 and 2001 |
Atlantic Electric 401(k) Savings and Investment Plan - B December 30, 2002 and 2001 |
||
Page(s) |
||
Report of Independent Auditors |
1 |
|
Financial Statements |
|
|
Statements of Net Assets Available for Benefits |
2 |
|
Statement of Changes in Net Assets Available for Benefits |
3 |
|
Notes to Financial Statements |
4-8 |
|
Supplemental Schedules* |
||
Schedule of Assets (Held at End of Year) - Schedule H - Item 4(i) |
9 |
|
Schedule of Reportable Transactions - Schedule H - Item 4(j) |
10 |
|
* |
Other supplemental schedules required by Section 2520, 103-10 of the Department of Labor's Rules and Regulations for Reporting and Disclosures under the Employee Retirement Income Security Act of 1974 have been omitted because they are not applicable. |
Report of Independent Auditors |
To the Participants and Administrative Board of the |
|
Atlantic Electric 401(k) Savings and Investment Plan - B December 30, 2002 and 2001 |
2002 |
2001 |
|
Investments |
$39,116,633 |
$42,022,229 |
Participant loans |
1,633,128 |
1,608,242 |
Receivables |
||
Employer contributions |
15,247 |
14,491 |
Participant contributions |
52,493 |
51,883 |
Net assets available for benefits |
$40,817,501 |
$43,696,845 |
The accompanying notes are an integral part of these financial statements. 2 |
Atlantic Electric 401(k) Savings and Investment Plan - B Year Ended December 30, 2002 |
Additions |
|||
Participant contributions |
$3,247,426 |
||
Employer contributions |
794,039 |
||
Interest income |
118,939 |
||
Dividend income |
1,337,246 |
||
Net depreciation in fair value of investments |
(6,061,521) |
||
Plan transfers in |
117,550 |
||
Total additions |
(446,321) |
||
Deductions |
|||
Benefits paid to participants |
(2,430,730) |
||
Administrative fees |
(2,293) |
||
Total deductions |
(2,433,023) |
||
Net decrease in net assets available for benefits |
(2,879,344) |
||
Net assets available for benefits, at beginning of year |
43,696,845 |
||
Net assets available for benefits, at end of year |
$40,817,501 |
||
The accompanying notes are an integral part of these financial statements. 3 |
Atlantic Electric 401(k) Savings and Investment Plan - B December 30, 2002 and 2001 |
|
1. |
Description of Plan |
General Contributions All full-time bargaining unit employees of the Atlantic City Electric Company (the "Company"), a wholly-owned subsidiary of Conectiv, 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. During 2002, Potomac Electric Power Company ("Pepco") acquired Conectiv. In accordance with the Agreement and Plan Merger, Conectiv and Pepco became wholly owned subsidiaries of Pepco Holdings, Inc. ("PHI"). Employees may contribute up to 10 percent of base pay. Upon enrollment in the Plan, a participant may direct employee contributions in any of six investment options. The tax savings portion of participant contributions (up to 6 percent of an employee's base pay) is matched by the Company at a rate of 50 percent not to exceed 3 percent of the employee's compensation. Before May 31, 2002, the Company's matching contribution was invested in the Custom Stable Value Fund. On May 31, 2002, the Custom Stable Value Fund was discontinued and all assets were transferred to the T. Rowe Price Stable Value Fund ("TRP Stable Value Fund"), in which the Company's matching contributions are now invested. From December 2000 to July 31, 2002, an employee who elected to invest in Conectiv's common stock and held the common stock for one year received an employer match of 15 percent, which was invested in Conectiv's common stock. As a result of the merger, the outstanding common stock of Conectiv was cancelled and exchanged for PHI common stock. After August 1, 2002, an employee will receive a 15 percent employer match, which will be invested in PHI's common stock, if the PHI stock is held for one year. The holding period of the PHI common stock includes the holding period of the Conectiv common stock. At December 30, 2002, $10,318 was included in PHI'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 percent 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. |
|
|
Atlantic Electric 401(k) Savings and Investment Plan - B December 30, 2002 and 2001 |
|
Participant Accounts Termination of Plan Although it has not expressed any intent to do so, the Company has the right to terminate the Plan in whole or in part at any time for any reason. 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. 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 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 invested in various term guaranteed insurance contracts. The TRP Stable Value Fund invests in investment contracts. Payment of Benefits Benefits are recorded when paid. 5 |
Atlantic Electric 401(k) Savings and Investment Plan - B December 30, 2002 and 2001 |
||
Contributions 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. 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 |
|
(i) |
T. Rowe Price 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) |
PHI Common Stock - to provide maximum capital appreciation and dividend income from Common Shares; |
|
The following presents investments that represent 5 percent or more of the Plan's net assets: |
||
|
Atlantic Electric 401(k) Savings and Investment Plan - B December 30, 2002 and 2001 |
||
2002 |
2001 |
|
Custom Stable Value Fund |
$ - |
$13,147,024 |
TRP Stable Value Fund |
15,963,187 |
- |
Equity Index Fund |
9,686,634 |
12,870,493 |
Equity Income Fund |
10,377,710 |
12,175,782 |
Spectrum Growth Fund |
2,016,293 |
2,389,247 |
38,043,824 |
$40,582,546 |
|
During 2002, the Plan's investments (including investments bought, sold and held during the year) depreciated in value by $6,061,521 as follows: |
Registered investment companies |
$ (6,082,140) |
||
Conectiv common stock |
(10,747) |
||
PHI common stock |
31,366 |
||
$ (6,061,521) |
|||
Certain plan investments are shares of registered investment companies managed by T. Rowe Price. T. Rowe Price is the trustee as defined by the Plan; therefore, these transactions qualify as party-in-interest transactions and are exempt from the prohibited transaction rules. |
|||
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: |
2002 |
2001 |
||
Net assets |
|||
Custom Stable Value Fund |
$ - |
$13,173,448 |
|
TRP Stable Value Fund |
15,978,434 |
- |
|
$15,978,434 |
$13,173,448 |
Year Ended |
|
Changes in net assets |
|
Contributions |
$ 1,728,816 |
Interest income |
47,580 |
Dividend income |
724,004 |
Benefits paid to participants |
(1,456,075) |
Administrative fees |
(943) |
Net transfers from participant-directed investments |
1,761,604 |
$ 2,804,986 |
|
7 |
Atlantic Electric 401(k) Savings and Investment Plan - B December 30, 2002 and 2001 |
|
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. The Plan has filed an application for a new determination letter, which is currently pending. 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. |
|
|
Supplemental Schedules
Atlantic Electric 401(k) Savings and Investment Plan - B EIN#: 52-2297449, PLAN#: 003 Schedule H - Item 4(i) Schedule of Assets (Held at End of Year) December 30, 2002 |
|
|
|
Current |
|
T. Rowe Price |
||||
TRP Stable Value Fund* |
Common/Collective Trust |
$15,963,187 |
$15,963,187 |
|
Equity Index Fund* |
Mutual Fund |
10,885,315 |
9,686,634 |
|
Equity Income Fund* |
Mutual Fund |
12,070,570 |
10,377,710 |
|
Spectrum Growth Fund* |
Mutual Fund |
2,754,416 |
2,016,293 |
|
International Stock Fund* |
Mutual Fund |
1,305,718 |
791,261 |
|
PHI* |
Common Stock |
254,679 |
281,548 |
|
Participant Loans |
Various loans ranging from 7.41% |
|
|
|
$43,233,885 |
$40,749,761 |
|||
*Parties-in-interest |
||||
|
Atlantic Electric 401(k) Savings and Investment Plan - B EIN#: 52-2297449, PLAN#: 003 Schedule H - Item 4(j) Schedule of Reportable Transactions* For the Year Ended December 30, 2002 |
||||||||||
|
|
|
|
|
Current |
|
||||
T. Rowe Price |
Custom Stable Value Fund |
|||||||||
Purchases |
$1,883,704 |
$ - |
$ 1,883,704 |
$ 1,883,704 |
||||||
Sales |
- |
15,030,730 |
15,030,730 |
15,030,730 |
||||||
T. Rowe Price |
TRP Stable Value Fund |
|||||||||
Purchases |
$17,625,617 |
$ - |
$ 17,625,617 |
$17,625,617 |
||||||
Sales |
- |
1,646,394 |
1,646,394 |
1,646,394 |
||||||
* |
Non-participant directed transactions or series of transactions in excess of 5 percent 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. |
|||||||||
|
||||||||||
Exhibits : |
||||||||||
Exhibit 23 |
Consent of Independent Accountants - Filed herewith. |
|||||||||
Exhibit 99 |
Certificate Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) - Furnished herewith. |
|||||||||
SIGNATURE |
||||||||||
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. |
||||||||||
ATLANTIC ELECTRIC 401(K) SAVINGS
By:
/s/ Dennis R. Wraase
|
||||||||||
Date: June 30, 2003 |
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (Number 333-96673) of Pepco Holdings, Inc. of our report dated June 23, 2003, relating to the financial statements of
the Atlantic Electric 401(k) Savings and Investment Plan - B, appearing on page 1 of this Form 11-K./s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Philadelphia, PA
June 30, 2003
Exhibit 99
Certificate
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350)
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 Atlantic Electric 401(k) Savings and Investment Plan - B for the year ended December 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 Atlantic Electric 401(k) Savings and Investment Plan - B.
Dated: June 30, 2003
/s/ Dennis R. Wraase