UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 1-1401
PECO Energy Company
Employee Savings Plan
(Full title of the plan)
PECO Energy Company
P. O. Box 8699
2301 Market Street
Philadelphia, PA 19101
(Name of the issuer of the securities held pursuant to the
plan and the address of its principal executive offices)
REQUIRED INFORMATION
FINANCIAL STATEMENTS
Statements of Net Assets Available for Benefits as of December 31, 1999 and
1998
Statement of Changes in Net Assets Available for Benefits for the Years
Ended December 31, 1999 and 1998
EXHIBITS
Consent of Independent Accountants
CONTENTS
Pages
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Report of Independent Accountants 2
Financial Statements:
Statements of Net Assets Available for Benefits,
as of December 31, 1999 and 1998 3
Statements of Changes in Net Assets Available for
Benefits for the years ended December 31, 1999 and 1998 4
Notes to Financial Statements 5-10
Supplemental Schedules:
Schedule of Assets Held for Investment Purposes as of
December 31, 1999, Schedule H, Part IV, Item 4i, Form 5500 11
List of Exhibits 12
Signature 13
Report of Independent Accountants
To the Participants and Administrator of the
PECO Energy Company Employee Savings Plan:
In our opinion, the accompanying statements of net assets available for
benefits, and the related statements of changes in net assets available for
benefits present fairly, in all material respects, the net assets available for
benefits of the PECO Energy Company Employee Savings Plan (the "Plan") at
December 31, 1999 and 1998, and the changes in net assets available for benefits
for the years then ended, in conformity with accounting principles generally
accepted in the United States. 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, 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 the opinion expressed above.
Our audits were conducted 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 as of December 31, 1999, Schedule H, Part IV, Item 4i,
Form 5500 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.
/s/PricewaterhouseCoopers LLP
Philadelphia, PA 19103
June 26, 2000
2
PECO ENERGY COMPANY EMPLOYEE SAVINGS PLAN
Statement of Net Assets Available for Benefits
as of December 31, 1999 and 1998
1999 1998
------------ ------------
Investments $812,725,928 $687,323,082
------------ ------------
Net assets available for benefits $812,725,928 $687,323,082
============ ============
See notes to financial statements.
3
PECO ENERGY COMPANY EMPLOYEE SAVINGS PLAN
Statement of Changes in Net Assets Available for Benefits
for the years ended December 31, 1999 and 1998
1999 1998
------------- -------------
Additions:
Employee contributions $ 32,677,666 $ 31,934,765
Employer contributions 7,112,506 6,655,284
------------- -------------
Total contributions 39,790,172 38,590,049
Investment income:
Interest 3,918,621 3,167,891
Dividends 54,898,793 27,654,438
Net appreciation in fair value
of investments 70,936,190 125,540,832
Interest on loan repayments 1,183,195 1,106,290
------------- -------------
170,726,971 196,059,500
Deductions:
Distributions (45,324,125) (29,135,458)
------------- -------------
Net additions 125,402,846 166,924,042
Net assets available for benefits:
Beginning of year 687,323,082 520,399,040
------------- -------------
End of year $ 812,725,928 $ 687,323,082
============= =============
See notes to financial statements.
4
PECO ENERGY COMPANY EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
1. Description of the PECO Energy Company Employee Savings Plan:
The following description of the PECO Energy Company Employee Savings Plan
(Plan) provides only general information. Participants should refer to the
Plan agreement for a complete description of the Plan's provisions.
General - The Plan is a trusteed defined contribution plan. The Plan was
formed on January 1, 1984 for the purpose of allowing eligible employees of
PECO Energy Company and subsidiaries (the Company) to reduce their taxable
income pursuant to Section 401(k) of the Internal Revenue Code. The Plan is
subject to the provisions of the Employee Retirement Income Security Act of
1974 (ERISA).
All employees classified as "regular," "part-time" or "probationary" become
eligible to participate in the Plan immediately upon completion of six
months of service.
Contributions - Participants elect to have the Company make contributions
to the Plan on their behalf. Such contributions are made by authorizing the
Company to withhold from the participant's salary an amount equal to the
contribution to be made. Participants may elect to authorize the Company to
contribute from 1% to 17% of their base salary depending upon their salary
level, up to certain IRS limits.
Effective January 1, 1997, the Plan was amended to reflect the addition of
employer matching contributions. The Company will make a matching
contribution of 50 cents on each dollar of employee contributions up to 4%
of an employee's base salary deposited into the Plan. Effective July 1,
1999, the Company's matching contribution was increased from 4% to 5%.
Employees are always fully vested on employer contributions.
Effective October 1, 1997, Fidelity Investments assumed the role and
responsibility of Record Keeper and Trustee for the Plan.
Participants may elect that their contributions be invested in one or more
of the following generic fund categories - Growth, Growth and Income,
Balanced, Equity Income, Small Capitalization Growth, Foreign, Money
Market, Fixed Income, or Company Stock. (See Note 3)
By giving notice to the Plan Record Keeper and subject to rules established
by the Plan Administrator, participants may suspend or change the amount of
their contributions and exchange their investments among the investment
funds.
Distributions and exchanges can be made on a daily basis provided the
market is open and the request is confirmed by the Record Keeper prior to
4:00 p.m. EST.
5
PECO ENERGY COMPANY EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
1. Description of the PECO Energy Company Employee Savings Plan, Continued:
Participant Accounts - Each participant's account is credited with the
participant's contribution, the Company's contribution and an allocation of
Plan earnings.
Payment of Benefits - Upon termination of service a participant receives a
lump-sum amount equal to the value in his or her account.
Participant Loans - The Plan allows participants to obtain loans.
Participants may borrow up to 50% of their account balances subject to a
minimum of $500 and a maximum of $50,000. Loans have terms of up to 30
years for the purchase of a primary residence or one to four years for
other purposes and bear interest at rates determined by the Plan
Administrator based on similar rates charged by regional commercial
lenders. Loans are repayable in equal installments by means of payroll
deductions. A participant may not have more than one loan outstanding at
any time or take more than one loan in a plan year.
2. Summary of Significant Accounting Policies:
Valuation of Investments and Income Recognition
-----------------------------------------------
Investments in mutual funds are valued at the reported net asset value on
the last day of the year. The Fidelity Money Market Fund is valued at the
cost of contributions made plus earnings less withdrawals. The PECO Energy
Common Stock Fund is valued primarily using the Company's closing stock
price. The insurance contracts are benefit-responsive guaranteed investment
contracts and are valued at contract value. Contract value represents the
cost of contributions made under the contract plus earnings at the contract
rate less withdrawals. Purchases and sales of investments are reflected on
a trade-date basis. Dividend income is recorded when declared payable.
Net Appreciation/(Depreciation) in Investments
----------------------------------------------
The Plan presents in the statement of changes in net assets available for
benefits the net appreciation/(depreciation) in the fair value of its
investments which consists of the realized gains or losses and the
unrealized appreciation/(depreciation) on those investments.
Distributions
-------------
Distributions are recorded when paid.
6
PECO ENERGY COMPANY EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
2. Summary of Significant Accounting Policies, Continued:
Concentration of Credit Risk
----------------------------
The Plan invests in benefit-responsive guaranteed investment contracts with
two insurance companies and is subject to credit risk with respect to these
insurance companies. This risk is mitigated by the fact that these
companies are rated A and A+ by A.M. Best.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities and
changes therein, and disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
Risk 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. 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 would materially affect
participants' account balances and the amounts reported in the statement of
net assets available for benefits and the statement of changes in net
assets available for benefits.
3. Investments:
The Plan investments consist of the following funds:
Growth - The growth mutual fund invests primarily in U.S. and foreign
common stocks of companies that are considered undervalued or out of favor
and whose products show potential for improvement. Investments can include
any type of security that may produce capital growth. The goal of these
funds is to provide capital growth over the long-term.
Growth and Income - The growth and income mutual fund invests primarily in
common stocks, focusing on larger, more established companies. Investments
are spread out across many different kinds of companies and industries. The
goal of these funds is to provide capital growth and income over the
long-term.
7
PECO ENERGY COMPANY EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
3. Investments, Continued:
Small Capitalization - The small capitalization growth fund invests
primarily in stocks of companies which have market capitalization of less
than $1 billion at the time of investment. The fund tries to keep at least
one-third of its assets in stocks of companies with market capitalizations
of $550 million or less and also invests up to 25% of its assets in foreign
securities. This fund's goal is to provide capital growth over the
long-term.
Equity Income - The equity income mutual fund invests primarily in
attractively priced, dividend paying, income-producing equity securities;
including common and preferred stocks, convertible securities, and debt
securities (bonds). The goal of this fund is to invest for capital growth
and current income.
Foreign - The foreign fund invests primarily in common stocks of companies
in any foreign country, developed or developing. The goal of this fund is
to provide capital growth over the long-term by investing internationally.
Money Market Fund - The money market fund invests primarily in high
quality, investment grade, short-term, U.S. dollar denominated money market
securities of domestic and foreign issuers. Investments include short-term
corporate obligations, U.S. government obligations, and certificates of
deposit. The goal of this fund is to preserve participants' investments,
maintain a stable price, and provide current income.
Fixed Income Fund - This fund is comprised of both contracted rate
investments through a managed income portfolio as well as insurance
contracts. The contract rate is established at the commencement of the
contract and remains fixed (except for certain conditions) at that rate
until maturity. The contract rate reflects market and other conditions at
the commencement of the contract.
Balanced Fund - The balanced fund invests primarily in a diversified mix of
common and preferred stocks, and investment grade bonds. The fund is
diversified across many sectors and industries. The goal of this fund is to
provide regular income, conservation of principal and an opportunity for
long-term growth of principal and income.
PECO Energy Common Stock Fund - The Company stock fund invests in primarily
PECO Energy Company common stock and a small amount of short-term
investments which enables participants to buy or sell without the usual
trade settlement period of individual stock transactions.
8
PECO ENERGY COMPANY EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
3. Investments, Continued:
As of December 31, 1999 and 1998, respectively, the Plan held the following
investments, each of which accounted for more than 5% of the total net
assets available for benefits:
Investments 1999 1998
----------- ------------- -------------
Legg Mason NAV Value Trust Fund $ 331,945,229 $ 249,649,394
Fidelity Contrafund 207,589,326 183,395,100
Putnam Growth & Income Fund A 69,122,232 78,782,668
During 1999 and 1998, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) appreciated
by $70,936,190 and $125,540,832, respectively, as follows:
1999 1998
------------- -------------
Mutual Funds $ 75,902,582 $ 112,782,821
Common Stock (4,966,392) 12,758,011
------------- -------------
Total $ 70,936,190 $ 125,540,832
============= =============
As of December 31, 1999 and 1998, respectively, the Plan held insurance
contracts with interest rate ranges of 6.30% to 7.13% and 6.30% to 7.70%,
respectively.
4. Plan Termination:
While it is the Company's intention to continue the Plan in operation
indefinitely, the Company may terminate the Plan in whole or in part at any
time. Any such termination, partial termination or discontinuance of
contributions shall be effected only upon condition that such action is
taken as shall render it impossible for any part of the assets of the Plan
to be used for, or diverted to, purposes other than the exclusive benefit
of the Plan participants and their beneficiaries.
9
PECO ENERGY COMPANY EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
5. Tax Status:
The Internal Revenue Service has determined and informed the Company that
the Plan is qualified under Sections 401(a) and 401(k) of the Internal
Revenue Code and that the Plan is exempt from federal income tax under
Section 501(a) by letter dated April 15, 1995. The Plan has been amended
since receiving the original determination letter, however, the Company
believes that the Plan is designed and is currently being operated in
compliance with the applicable requirements of the Internal Revenue Code.
6. General and Administrative Expenses:
All administrative fees are paid by the Company on behalf of the Plan.
10
PECO ENERGY COMPANY EMPLOYEE SAVINGS PLAN
Schedule of Assets Held for Investment Purposes
as of December 31, 1999
Schedule H, Part IV, Item 4i, Form 5500
e. Current
a. b. Identity of Issuer, Lessor Similar Party c. Description of Investment d. Cost Value
- --- ----------------------------------------------- ------------------------------------------ -------------- ----------------
Legg Mason NAV Value Trust Mutual Fund $ 219,939,040 $ 331,945,229
* Fidelity Contrafund Mutual Fund 184,210,351 207,589,326
Putnam Fund Mutual Fund 78,163,986 69,122,232
Spartan Mutual Fund 19,726,619 24,960,256
Franklin Small Capitalization Fund Mutual Fund 11,996,439 17,793,289
Putnam Equity Income Fund Mutual Fund 2,489,813 2,196,170
* Fidelity Retirement Money Market Mutual Fund 33,045,196 33,045,196
Dodge & Cox Balanced Fund Mutual Fund 21,262,495 20,305,136
* Managed Income Portfolio II Mutual Fund 35,349,000 35,349,000
Continental Assurance Company (1997) Insurance Contract maturing 12/29/01, 7.13% 9,206,963 9,206,963
Continental Assurance Company (1996) Insurance Contract maturing 12/29/00, 6.30% 13,849,729 13,849,729
Principal Mutual Life Insurance Company (1995) Insurance Contract maturing 12/30/99, 7.70% 295 295
Templeton Foreign Fund Mutual Fund 3,675,674 4,121,993
* PECO Energy Company Common stock 19,262,912 27,741,632
Participant Loans Rates ranged from 6.30% to 8.75% -- 15,499,482
------------- -------------
$ 652,178,512 $ 812,725,928
============= =============
<FN>
* - Denotes parties in interest
</FN>
11
EXHIBITS
List of Exhibits:
- ----------------
Exhibit 23.1 - Consent of Independent Accountants
12
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the plan) have duly caused this
annual report to be signed by the undersigned hereunto duly authorized.
By: /s/ J. Barry Mitchell
--------------------------------------
J. Barry Mitchell
Vice President - Finance and Treasurer
Plan Administrator
13