Commission File No. 001-31403 |
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SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 _______________________ |
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FORM 11-K ______________________ |
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ANNUAL REPORT Pursuant to Section 15(d) of the For the Fiscal Year Ended December 30, 2004 _______________________ |
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CONECTIV SAVINGS AND INVESTMENT PLAN |
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PEPCO HOLDINGS, INC. (Name of issuer of securities held pursuant to the plan) |
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701 NINTH STREET, N.W. |
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_____________________________________________________________________________ |
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Financial Statements and Supplemental Schedule |
December 30, 2004 and 2003 |
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CONECTIV SAVINGS AND INVESTMENT PLAN |
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Table of Contents |
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Page Number |
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Report of Independent Registered Public Accounting Firm |
1 |
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Financial Statements |
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Statements of Net Assets Available for Benefits |
2 |
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Statement of Changes in Net Assets Available for Benefits for the year ended December 30, 2004 |
3 |
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Notes to Financial Statements |
4 - 8 |
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Additional Information * |
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Schedule of Assets (Held at End of Year) - Schedule H - Line 4(i) |
9 |
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* Other supplemental schedules required by 29 CFR 2520.103-10 of the Department of Labor's Rules and Regulations |
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_____________________________________________________________________________ |
Report of Independent Registered Public Accounting Firm |
To the Participants and Administrator of |
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 Conectiv Savings and Investment Plan (the "Plan") at December 30, 2004 and 2003, and the changes in net assets available for benefits for the year ended December 30, 2004 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 the standards of the Public Company Accounting Oversight Board (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, 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 schedule of Schedule of Assets (Held at End of Year) is presented for the purpose 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. This supplemental schedule is the responsibility of the Plan's management. 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. |
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CONECTIV SAVINGS AND INVESTMENT PLAN |
Statements of Net Assets Available for Benefits |
As of December 30, |
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2004 |
2003 |
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Investments, at fair value |
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Registered investment companies: |
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Baron Asset Fund |
$ 3,784,904 |
$ 3,360,381 |
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T. Rowe Price International Stock Fund |
4,106,859 |
3,035,361 |
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Vanguard 500 Index Fund Investor Shares |
* |
35,075,677 |
* |
32,514,352 |
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Vanguard Growth and Income Fund Investor Shares |
* |
83,732,479 |
* |
79,661,836 |
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Vanguard LifeStrategy Growth Fund |
5,058,521 |
2,837,372 |
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Vanguard LifeStrategy Moderate Growth Fund |
7,464,466 |
5,833,499 |
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Vanguard Mid-Cap Index Fund |
7,480,354 |
4,325,409 |
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Vanguard PRIMECAP Fund |
* |
27,281,260 |
* |
20,865,386 |
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Vanguard Small-Cap Index Fund Investor Shares |
5,953,494 |
3,559,372 |
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Vanguard Total Bond Market Index Fund |
* |
34,470,924 |
* |
34,318,917 |
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Vanguard Value Index Fund Investor Shares |
3,846,238 |
1,903,548 |
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Vanguard Windsor II Fund Investor Shares |
1,875,069 |
1,650,047 |
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220,130,245 |
193,865,480 |
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Vanguard Retirement Savings Trust |
* |
76,775,897 |
* |
78,871,528 |
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Pepco Holdings, Inc. Common Stock Fund |
* |
46,906,875 |
* |
38,626,579 |
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Participant Loans |
5,783,630 |
5,230,431 |
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Total investments |
349,596,647 |
316,594,018 |
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Receivables |
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Employer's contributions |
158,498 |
132,051 |
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Participants' contributions |
557,711 |
447,308 |
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Dividends receivable |
911,284 |
753,479 |
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Total receivables |
1,627,493 |
1,332,838 |
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Net assets available for benefits |
$ 351,224,140 |
$ 317,926,856 |
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* Represents 5% or more of net assets available for benefits. |
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CONECTIV SAVINGS AND INVESTMENT PLAN |
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Statement of Changes in Net Assets Available for Benefits |
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Year Ended December 30, 2004 |
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Additions |
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Investment income: |
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Interest and dividend income, investments |
$ 9,439,378 |
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Interest income, participant loans |
392,965 |
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Net appreciation in fair value of investments |
23,164,506 |
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Net investment income |
32,996,849 |
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Contributions: |
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Employer |
3,686,655 |
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Participants |
13,293,598 |
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Total Contributions |
16,980,253 |
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Other Additions |
21,772 |
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Net additions |
49,998,874 |
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Deductions |
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Payment of benefits |
16,697,959 |
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Total deductions |
16,697,959 |
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Net increase before Transfer to another Plan |
33,300,915 |
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Transfer to another Plan |
(3,631) |
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Net increase |
33,297,284 |
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Net assets available for benefits: |
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Beginning of year |
317,926,856 |
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End of year |
$ 351,224,140 |
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The accompanying notes are an integral part of the financial statements. |
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CONECTIV SAVINGS AND INVESTMENT PLAN Notes to Financial Statements |
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The following description of the Conectiv Savings and Investment Plan (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"). |
Vanguard Fiduciary Trust Company ("VFTC") serves as the Plan's trustee. |
Participation All non-bargaining unit employees of Conectiv and subsidiaries (the "Company") and Local 210-5 Employees are eligible to participate upon hire. All Local 1238 Employees, Local 1307 Employees and Local 1307a Employees are eligible to participate once they have completed a period of service of six months. |
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"). |
Contributions |
Participant Accounts |
Vesting |
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CONECTIV SAVINGS AND INVESTMENT PLAN Notes to Financial Statements |
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Payment of Benefits |
While employed, a participant may make certain withdrawals upon written notice of basic and supplemental contributions for the reason of financial hardship, as defined in the Plan. Hardship withdrawals must be approved by the Committee. At the age of 59-1/2, the participant may withdraw any portion of this basic and supplemental contribution amounts. |
After making a hardship withdrawal of before-tax contributions, a participant is prohibited from making contributions or receiving Company matching contributions for a period of six months. A participant with less than 60 months of Plan participation will incur a six-month suspension period upon making any withdrawal of his or her after-tax contributions. During this suspension period, no matching contributions will be credited to the participant's account. Participants with 60 or more months of Plan participation will incur a six-month suspension of Company contributions. |
Plan Termination |
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES |
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CONECTIV SAVINGS AND INVESTMENT PLAN Notes to Financial Statements |
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Use of Estimates |
Investment Valuation and Income Recognition |
Purchases and sales of investments are recorded on a trade-date basis. Interest income is accrued when earned. Dividend income is recorded on the ex-dividend date. Capital gain distributions are included in dividend income. |
The Plan presents in the Statement of Changes in Net Assets Available for Benefits the net appreciation (depreciation) in the fair value of investments, which consists of the realized gains and losses and the unrealized appreciation (depreciation) on those investments. |
Risks and Uncertainties |
Payment of Benefits |
Contributions |
NOTE 3 - INVESTMENT CONTRACTS The Plan invests in guaranteed investment contracts through the Vanguard Retirement Savings Trust (the "Trust"). The Trust is a tax-exempt collective trust registered in the State of Pennsylvania, which invests primarily in investment contracts issued by insurance companies and commercial banks, and similar types of fixed-principal investments. The Trust intends to maintain a constant net asset value of $1.00 per unit. |
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CONECTIV SAVINGS AND INVESTMENT PLAN Notes to Financial Statements |
Information about the components of and the significant changes in net assets relating to the Plan's nonparticipant-directed investments are as follows: |
Years ended December 30, |
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2004 |
2003 |
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Pepco Holdings, Inc. Common Stock Fund |
46,906,875 |
38,626,579 |
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Changes in net assets: |
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Contributions |
$ 4,378,138 |
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Interest and dividend income |
165,607 |
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Net appreciation in fair value of investments |
4,408,272 |
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Benefits paid to participants |
(2,015,518) |
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Transfers to participant-directed investments |
1,322,024 |
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Other |
21,773 |
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$ 8,280,296 |
NOTE 5 - INVESTMENTS During 2004, the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value as follows: |
Registered Investment Companies mutual funds |
$ 18,756,234 |
Common Stock |
4,408,272 |
$ 23,164,506 |
NOTE 6 - RELATED PARTY TRANSACTIONS The Plan invests in shares of mutual funds managed by an affiliate of VFTC. VFTC acts as trustee for the Plan assets, therefore transactions in such investments qualify as party-in-interest transactions. In addition, participant loans are related party transactions. |
Pepco Holdings, Inc., as the Plan sponsor, is also a related party. Purchases and sales of PHI common stock were made during the year. The amount of PHI common stock included in Investments was $46,906,875 and $38,626,579 at December 30, 2004 and 2003, respectively. |
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CONECTIV SAVINGS AND INVESTMENT PLAN Notes to Financial Statements |
All expenses incurred in the administration of the Plan are paid by the Company. |
NOTE 8 - TAX STATUS The Internal Revenue Service had determined and informed the Company by letter dated October 9, 2003 that the Plan was qualified under IRC Section 401(a). The Plan has been amended or restated since receiving the determination letter. However, the Company believes the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC. |
NOTE 9 - SUBSEQUENT EVENT Three amendments were made to the Plan, effective January 1, 2005. The first amendment is the Company's match will be changed to 100% on the first 3% of base pay and 50% of the next 3% as base pay, for non-bargaining unit employees and Local 210-5 Employees. The second amendment is the 15% stock match for employees that hold PHI Common Stock more than one year will be discontinued. The last amendment is in the event of a mandatory distribution greater than $1,000, if the participant does not elect to have such distribution paid directly to an eligible retirement plan specified by the participant in a direct rollover or to receive the distribution directly, then the Plan Administrator will pay the distribution in a direct rollover to an individual retirement plan designated by the Plan Administrator. |
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CONECTIV SAVINGS AND INVESTMENT PLAN Schedule H - Line 4(i) Schedule of Assets (Held at End of Year) As of December 30, 2004 |
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Conectiv, Inc. Savings and Investment Plan, EIN 52-2297449 |
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Attachment to Form 5500, Schedule H, Line 4(i): |
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(A) |
(B) |
(C) |
(D) |
(E) |
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Identity of Issue |
Description of Investment |
Cost |
Current Value |
* |
Baron Asset Fund |
Registered Investment Company |
$ 3,784,904 |
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* |
T. Rowe Price International Stock Fund |
Registered Investment Company |
4,106,859 |
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* |
Vanguard 500 Index Fund Investor Shares |
Registered Investment Company |
35,075,677 |
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* |
Vanguard Growth and Income Fund Investor Shares |
Registered Investment Company |
83,732,479 |
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* |
Vanguard LifeStrategy Growth Fund |
Registered Investment Company |
5,058,521 |
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* |
Vanguard LifeStrategy Moderate Growth Fund |
Registered Investment Company |
7,464,466 |
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* |
Vanguard Mid-Cap Index Fund |
Registered Investment Company |
7,480,354 |
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* |
Vanguard PRIMECAP Fund |
Registered Investment Company |
27,281,260 |
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* |
Vanguard Small-Cap Index Fund Investor Shares |
Registered Investment Company |
5,953,494 |
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* |
Vanguard Total Bond Market Index Fund |
Registered Investment Company |
34,470,924 |
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* |
Vanguard Value Index Fund Investor Shares |
Registered Investment Company |
3,846,238 |
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* |
Vanguard Windsor II Fund Investor Shares |
Registered Investment Company |
1,875,069 |
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* |
Vanguard Retirement Savings Trust |
Common/Collective Trust |
76,775,897 |
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* |
Pepco Holdings, Inc. Common Stock Fund |
Company Stock Fund |
37,032,402 |
46,906,875 |
* |
Participant Loans |
Interest rates of 5.34% - 10.29% |
5,783,630 |
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Total assets (held at year end) |
$349,596,647 |
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* |
Party in Interest, for which a statutory exemption exists. |
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Exhibits : |
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Exhibit 23 |
Consent of Independent Registered Public Accounting Firm -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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CONECTIV SAVINGS AND INVESTMENT PLAN By: /s/ D. R. Wraase Dennis R. Wraase, Chairman Administrative Board |
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CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-96673) of Pepco Holdings, Inc. of our report dated June 24, 2005 relating to the financial statements of the Conectiv Savings and Investment Plan, which appears in this Form 11-K. |
/s/ PricewaterhouseCoopers LLP |
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