UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the year ended December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission File Number 001-09120
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
THRIFT AND TAX-DEFERRED SAVINGS PLAN
80 PARK PLAZA
NEWARK, NEW JERSEY 07102
MAILING ADDRESS: P.O. Box 1171
NEWARK, NEW JERSEY 07101-1171
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
N/A
INDEX
PAGE
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INDEPENDENT AUDITORS' REPORT 3
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 2002 AND 2001 4
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR
BENEFITS FOR THE YEAR ENDED DECEMBER 31, 2002 5
NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 2002
AND 2001 AND FOR THE YEAR ENDED DECEMBER 31, 2002 6
SIGNATURES 15
EXHIBIT INDEX 16
2
INDEPENDENT AUDITORS' REPORT
Employee Benefits Committee of
Public Service Enterprise Group Incorporated:
We have audited the accompanying statements of net assets available for benefits
of the Public Service Enterprise Group Incorporated Thrift and Tax-Deferred
Savings Plan (Plan) as of December 31, 2002 and 2001, and the related statement
of changes in net assets available for benefits for the year ended December 31,
2002. 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 in accordance with auditing standards generally accepted
in the United States of America. 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, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan at December 31, 2002
and 2001, and the changes in net assets available for benefits for the year
ended December 31, 2002 in conformity with accounting principles generally
accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
Parsippany, New Jersey
June 13, 2003
3
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
THRIFT AND TAX-DEFERRED SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
As of December 31,
------------------------------------------
2002 2001
-------------- ----------------
ASSETS
Investments, at fair value-
Plan interest in Master Employee Benefit Plan Trust $647,126,221 $670,560,000
Receivables:
Deposits and Contributions - employee 1,387,863 2,008,314
Deposits and Contributions - employer 452,689 570,304
Receivables from investments sold 242,460 175,379
Interest and dividends 1,694 3,292
------------ ------------
649,210,927 673,317,289
------------ ------------
LIABILITIES
Payable for investments purchased 40,989 35,646
Accrued expenses 752,654 299,038
------------ ------------
793,643 334,684
------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $648,417,284 $672,982,605
============ ============
See notes to financial statements.
4
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
THRIFT AND TAX-DEFERRED SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS
AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2002
ADDITIONS:
Net Investment loss
Plan Interest in Master Employee Benefit Plan Trust $(56,981,954)
Deposits and Contributions
Employee 38,424,702
Employer 13,160,761
------------
Total Deposits and Contributions 51,585,463
Transfer from the Wisvest 401(k) Plan 4,223,854
Transfer from Employee Savings Plan--net 1,455,462
------------
5,679,316
------------
Total Additions 282,825
------------
DEDUCTIONS
Benefit Payments to participants 23,802,641
Administrative expenses 1,045,505
------------
Total Deductions 24,848,146
------------
DECREASE IN NET ASSETS AVAILABLE FOR BENEFITS (24,565,321)
NET ASSETS AVAILABLE FOR BENEFITS
BEGINNING OF YEAR 672,982,605
------------
NET ASSETS AVAILABLE FOR BENEFITS
END OF YEAR $648,417,284
============
See notes to financial statements.
5
NOTES TO FINANCIAL STATEMENTS
As of December 31, 2002 and 2001 and
for the year ended December 31, 2002
1. DESCRIPTION OF THE PLAN
General
The following description of the Public Service Enterprise Group Incorporated
(Company) Thrift and Tax-Deferred Savings Plan (Plan) is provided for general
information purposes only. Participants (any person who has an interest in the
Trust Fund) should refer to the Plan Document for more complete information.
The Plan is a defined contribution plan covering substantially all
non-bargaining unit employees of the Company, and its Participating affiliates,
who are eligible on the date of hire. The Company's Employee Benefits Committee
is the named fiduciary of the Plan and controls and manages its operation and
administration. Deutsche Bank Trust Company Americas (Trustee) serves as the
trustee of the Plan. Hewitt Associates is the recordkeeper of the Plan. The Plan
is subject to the provisions of the Employee Retirement Income Security Act of
1974 (ERISA).
The majority of the Plan's investment assets are held in a trust account by the
Trustee and consist of an undivided interest in an investment account of the
Master Employee Benefit Trust (Master Trust), a master trust established by the
Company and the Trustee.
During 2002, through a subsidiary, the Company acquired Wisvest Connecticut LLC.
As a result of this transaction, the savings plan of the acquired company was
merged with and into the Plan and the PSEG Employee Savings Plan (Savings Plan),
effective December 31, 2002, and Participant account balances of $4,223,854 were
transferred into the Plan as of December 31, 2002.
The Plan was amended effective January 1, 2002. Effective with that date,
catch-up contributions of an additional $1,000 in pre-income tax deposits for
employees age 50 or older in 2002 were permitted, maximum permitted employee
contribution increased from 25% to 50%, acceptance of after-tax rollovers and
rollovers from financial institutions were permitted, Internal Revenue Service
(IRS) minimum distribution requirements were adopted for post age 70 1/2
distributions, the suspension period for making deposits to the Plan after a
hardship withdrawal was decreased from one year to six months and the Enterprise
Stock Fund was converted to an Employee Stock Ownership Plan (ESOP) with the
result that Participants were permitted to have dividends on Company stock held
in that Fund made in cash.
Contributions
A Participant's Employer begins matching contributions when that Participant has
completed a Year of Service, as defined in the Plan, with his/her employer.
6
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Each year, Participants may contribute from 1% to 8 % of their pretax annual
compensation, as defined in the Plan, subject to certain Internal Revenue Code
(IRC) limitations. The Company contributes 50% as its matching contribution to
the Plan. Participants may also contribute amounts representing distributions
from other qualified defined benefit or defined contribution plans.
Prior to March 1, 2002, employer contributions in excess of 6% and up to 8% of
compensation were made in shares of the Company's Common Stock, and were not
available for transfer to any other investment fund or withdrawal from the Plan
prior to the Participant's termination of employment.
Effective March 1, 2002, employer contributions are made in cash and invested
according to the Participant's then current investment election and all shares
of Company Stock held in a Participant's account are eligible for transfer to
any other investment fund. In addition, a Participant may elect to make
supplemental deposits to such Funds in increments of 1% of compensation up to an
additional 42% (17% prior to January 1, 2002) of compensation (Supplemental
Deposits), subject to certain limitations, without any corresponding matching
Employer Contribution. Participants may designate such Basic and/or Supplemental
Deposits as post-income tax contributions (Nondeferred Deposits) or pre-income
tax contributions (Deferred Deposits).
Each Participant may, within any Plan Year, make one or more additional lump sum
deposits on a nondeferred basis in minimum amounts of $250 and in such total
amounts which, when aggregated with such Participant's Basic Deposits and
Supplemental Deposits, do not exceed 50% of his or her Compensation for that
Plan Year and subject to the limitations of the IRC. Prior to January 1, 2002,
the maximum permitted annual employee contribution was limited to 25%.
Participant Accounts
Individual accounts are maintained for each Plan Participant. Each Participant's
account is credited with the Participant's contributions, the Company's matching
contributions, and Plan earnings, and charged with withdrawals and an allocation
of Plan losses and administrative expenses. Allocations are based on Participant
earnings or account balances, as defined. The benefit to which a Participant is
entitled under the Plan is the accrued vested balance of his/her individual
account as of any date.
Employee Stock Ownership Plan Fund (ESOP Fund) Participants receive quarterly
payments directly from the Trustee equal to the dividends paid to the Trustee on
the shares of the Company's Common Stock held for their account in the ESOP
Fund.
7
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Participant Loans
Participants may borrow from their fund accounts up to a maximum of $50,000
reduced by the highest outstanding loan balance during the past twelve months,
whichever is less. The loans are secured by the balance in the Participant's
account and bear interest at rates commensurate with local prevailing rates.
Principal and interest is paid ratably through payroll deductions. During 2002,
the rate of interest on loans granted to Participants was 4.75%. During 2001,
the rate of interest on loans ranged from 6.0% to 9.5%.
No amounts may be loaned directly from any ESOP Account, from any portion of a
Participant's Savings Account attributable to transfers from the Cash Balance
Plan of Public Service Enterprise Group Incorporated (Cash Balance Plan), from
assets held in the Schwab Personal Choice Retirement Account (PCRA) Fund, or,
prior to March 1, 2002, from any portion of the Enterprise Common Stock Fund
attributable to employer contributions made in shares of Company Common Stock.
No Participant may have more than two loans outstanding at any time.
Payment of Benefits
On termination of service due to death, disability, or retirement, a Participant
may elect to receive a lump-sum amount equal to the value of the Participant's
vested interest in his or her account.
Forfeitures
Any nonvested portion of the Participant's Account, determined as of the date of
severance from employment, shall be forfeited and shall be applied thereafter to
reduce a subsequent contribution or contributions of the Employer as provided in
the Plan. If such former Participant is rehired by an Employer on or before the
end of and is employed by an Employer at the end of the fifth Plan Year after
the Plan Year in which such severance occurred, then such nonvested portion of
the Participant's Account shall be reinstated by the Employer and the
Participant's right thereto shall be determined as if the Participant had not
terminated employment, provided that the Participant repays to the Plan the
amount of any distribution paid to him or her on account of the severance from
employment. Unallocated forfeitures are used to reduce future Employer
Contributions. For the years ending December 31, 2002 and 2001, these
forfeitures amounted to $194,090 and $152,786, respectively.
Vesting
Except for amounts transferred from the Cash Balance Plan into the Plan,
Employer Contributions to a Participant's Thrift Account are fully vested.
Amounts transferred from the Cash Balance Plan follow the Cash Balance Plan
vesting regulations and vest upon the earliest of a Participant's completion of
five years of service with an Employer. All amounts credited to a Participant's
ESOP Fund are fully vested.
8
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Penalties Upon Withdrawal
If a Participant withdraws vested Employer Contributions and/or Deposits before
they have been in the Plan for twenty-four months, such Participant will lose
the matching Employer Contributions on Deposits made during the subsequent three
months. Distributions to Participants electing to withdraw Nondeferred Deposits
and Employer Contributions are made as soon as practicable after such elections
are received by the Plan's Record Keeper. Nondeferred Deposits may be withdrawn
at any time but certain penalties may apply. Deferred Deposits may not be
withdrawn during employment prior to age 59-1/2 except for reasons of
extraordinary financial hardship and to the extent permitted by the IRC
(hardship withdrawals). Distributions to Participants of approved hardship
withdrawals are made as soon as practicable after such approval.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The financial statements of the Plan have been prepared on an accrual basis in
accordance with accounting principles generally accepted in the United States of
America.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of net assets
available for benefits and changes therein. Actual results could differ from
those estimates.
Risks and Uncertainties
The Plan provides for various investment options. The mutual funds invest in
various securities including U.S. Government securities, corporate debt
instruments and corporate stocks. Investment securities, in general, are exposed
to various risks, such as interest rate, credit and overall market volatility.
Due to the level of risk associated with certain investment securities, it is
reasonably 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 amount reported in the statement of net
assets available for Plan benefits.
Investment Valuation and Income Recognition (Master Trust Fund)
The investments in the Master Trust are stated at fair value except for its
benefit-responsive investment contracts with the Stable Value Fund, which are
recorded at contract value, which
9
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
approximates fair value. The Plan's investments in the guaranteed annuity
contracts of the Stable Value Fund are with various insurance companies and
other financial institutions, and are recorded at contract value, which
approximates fair value, and is calculated as cost plus accumulated interest
less withdrawals. Quoted market prices are used to value all other investments.
Shares of mutual funds are valued at the net asset value of shares held by the
Plan at year-end. Purchases and sales of securities are recorded on a trade-date
basis. Temporary investments are stated at cost, which approximates fair market
value. Dividend income is recorded on the ex-dividend date. The loans to
Participants are valued at outstanding principal balance plus accrued interest,
which approximates fair value.
Investment gains and losses from securities transactions are computed using an
adjusted cost basis as prescribed by the Department of Labor's (DOL) Rules and
Regulations for Reporting and Disclosure.
Payment of Benefits
Benefit payments to Participants are recorded upon distribution. Amounts
allocated to accounts of persons who have elected to withdraw from the plan but
have not yet been paid were $286,795 and $396,747 as of December 31, 2002 and
2001, respectively.
Administrative Expenses of Plan
All expenses incurred for the administration of the Plan, including taxes and
brokerage costs, are deducted from the Master Trust Fund.
Transfers of the ESOP Fund to Thrift Account
Participants are permitted to transfer all, but not less than all, of the shares
of the Company's Common Stock from their ESOP Fund to their Thrift Accounts. To
effect such transfers, the Trustee will sell the shares of the Company's Common
Stock held in the ESOP Fund and invest the proceeds in the Thrift Account
Investment Funds designated by the Participant. The cash value of each share of
the Company's Common Stock transferred will be equal to the price per share of
the Company's Common Stock actually received by the Trustee. Any such transfer
is treated as a rollover contribution.
3. INVESTMENT OF THE PLAN AND SAVINGS PLAN IN THE MASTER TRUST
Certain of the Plan's investment assets are held in a trust account by the
Trustee and consist of an undivided interest in an investment account of the
Master Trust. Use of the Master Trust permits the commingling of trust assets
with the assets of the Thrift Plan for investment and administrative purposes.
Although assets of both plans are commingled in the Master Trust, the Trustee
maintains supporting records for the purpose of allocating the net gain or loss
of the
10
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
investment account to the participating plans. The net investment income of the
investment assets is allocated by the Trustee to each participating plan based
on the relationship of the interest of each plan to the total of the interests
of the participating plans. As of December 31, 2002 and 2001, the Plan's
interests in such assets of the Master Trust were approximately 61%.
December 31,
----------------------------------------------
2002 2001
------------------ ---------------
Investments at fair value:
Participant loans $32,248,249 $31,729,786
Cash and cash equivalents 35,714,345 21,516,751
Common Stock of
Public Service Enterprise Group Incorporated 131,765,788 151,220,984
Mutual funds 386,914,157 470,642,487
Guaranteed Investment Contracts 449,586,297 392,214,802
Schwab PCRA Fund (a) 20,363,052 24,676,728
-------------- --------------
Total Investments $1,056,591,888 $1,092,001,538
============== ==============
December 31,
2002
-----------------
Investment (loss)/income:
Net depreciation in fair value of Mutual Funds $(87,376,771)
Net depreciation in fair value of Common Stock
of Public Service Enterprise Group Incorporated (33,891,406)
Net depreciation in fair value of Schwab PCRA Fund (a) (8,570,434)
Interest on Participant Loans 2,320,310
Interest from Enterprise Common Stock Funds 54,809
Interest from Guaranteed Investment Contracts 21,153,762
Dividends from Common Stock of Public
Service Enterprise Group Incorporated 8,067,846
------------
Total Investment loss, net $(98,241,884)
============
(a) Amounts primarily relate to equity investments in stocks and through
mutual funds. The net depreciation in fair value is primarily
comprised of realized/unrealized gains or losses and dividends earned
on these equity investments.
The Master Trust includes the following GIC's in the Stable Value Fund as of
December 31, 2002 and 2001:
A. Thrift Account Investment Funds
(1) The assets of the Stable Value Fund are primarily invested in
Traditional GICs or Synthetic GICs with additional investments in the
Trustee's short-term investment fund. All GIC contract values
approximate fair values.
11
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
At December 31, 2002, the Stable Value Fund was comprised of the
following:
Issuer Type Expiration Effective Rate Contract Value
-------------------------------------------- ------------- ---------------------- ---------------- -------------------
Prudential Life Insurance Company Traditional November 30, 2005 6.99% $5,749,978.05
Caisse des Depots Synthetic February 3, 2003 2.89% 3,013,846.78
Bank of America (A) Synthetic Open-Ended 5.69% 25,453,497.34
Bank of America (B) Synthetic Open-Ended 4.31% 34,948,400.84
Bank of America (B) Synthetic Open-Ended 4.94% 32,412,640.98
Continental Assurance Company (B) Synthetic Open-Ended 4.94% 6,451,015.04
ING Life Insurance & Annuity Co.(B) Synthetic Open-Ended 2.44% 18,059,081.75
Allstate Life Insurance Company Synthetic Open-Ended 5.54% 47,559,808.29
State Street Bank and Trust Company Synthetic Open-Ended 4.63% 58,362,323.63
John Hancock Synthetic Open-Ended 5.62% 10,234,629.91
Monumental Life Synthetic Open-Ended 5.89% 56,631,169.28
JP Morgan Chase (B) Synthetic Open-Ended 4.25% 51,136,404.43
JP Morgan Chase (B) Synthetic Open-Ended 4.81% 27,812,584.88
JP Morgan Chase (A) Synthetic Open-Ended 6.71% 21,987,437.85
UBS AG Synthetic Open-Ended 6.45% 49,773,477.51
---------------
Total GICs $449,586,296.56
Investment in Bankers Trust Short Term Investment Fund (1.36%) 19,501,794.94
---------------
Total Stable Value Fund $469,088,091.50
===============
(A) Managed by PIMCO Investment Management Company
(B) Managed by INVESCO Institutional, Inc.
(2) The assets of the Enterprise Common Stock Fund are invested in the
Company's Common Stock.
B. ESOP Fund
During 2002 and 2001, no contributions to or transfers into the ESOP Fund
were permitted.
C. Schwab PCRA Fund
The Schwab PCRA Fund is a self-directed brokerage account in which
Participants can select and manage a wide selection of investments
including mutual funds, stocks and bonds. Deposits into the Schwab PCRA
Fund must come from balances transferred from the other options in the
Plan. Participants may transfer up to 100% of their account balance, less
$500 to pay for certain fees, to the Schwab PCRA Fund.
12
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. NON-PARTICIPANT DIRECTED INVESTMENTS
As stated previously, prior to March 1, 2002, Employer Contributions for
Participants with respect to Basic Deposits in excess of 6% and up to 8% of
Compensation were made in shares of the Company's Common Stock into the
Enterprise Common Stock Fund and were not available for transfer to any other
Investment Fund or withdrawal from the Plan prior to the Participant's
termination of employment. Information about the net assets and the significant
components of the changes in net assets relating to the Plan's interest in the
Enterprise Common Stock Fund is as follows:
As of December 31,
------------------- -- -----------------
2002 2001
------------------- ----------------
Net Assets:
Enterprise Common Stock Fund $ 70,715,733 $79,673,959
============= ===========
Changes in Net Assets:
Deposits and Contributions $ 4,695,877
Dividends and Interest 4,205,766
Net Depreciation (16,870,152)
Benefits paid to Participants (2,246,397)
Forfeitures (2,104)
Loan Repayments 835,589
Loans to Participants (786,377)
Administrative Expenses (112,910)
Transfers from participant-directed investments 1,322,482
-------------
Total Net Change $ (8,958,226)
=============
5. FEDERAL INCOME TAX STATUS
The Plan is intended to be qualified under Section 401(a) of the IRC and is
intended to be exempt under Section 501(a) of the IRC. The Plan received a
favorable IRS determination letter dated April 8, 1998. The Plan has since been
amended. The Plan filed an application for a determination letter with the IRS
in February 2002. To date, no action has been taken by the IRS on this
application. However, the Plan Administrator believes that the Plan is currently
being operated in compliance with the applicable requirements of the IRC.
6. RELATED PARTY TRANSACTIONS
Certain Plan investments are in the Company's Common Stock. As the Company is
the Plan Sponsor, these transactions qualify as party-in-interest transactions.
Certain administrative functions are performed by the officers and employees of
the Company (who may also be Participants in the Plan) at no cost to the Plan.
These transactions are not deemed prohibited
13
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
party-in-interest transactions, because they are covered by statutory or
administrative exemptions from ERISA's rules on prohibited transactions.
At December 31, 2002 and 2001, the Trust held 10,924,899 and 9,442,794 shares,
respectively, of the Common Stock of Public Service Enterprise Group
Incorporated, the sponsoring employer stock, with a cost basis per unit of
$11.48 and $15.03, respectively.
At December 31, 2002 and 2001, the Trust held 308,532 and 325,810 shares,
respectively, of the Common Stock of Public Service Enterprise Group
Incorporated in the ESOP Fund, the sponsoring employer stock, and with a cost
basis of $32.10 and $42.19 respectively.
During the year ended December 31, 2002, the Trust recorded dividend income of
$8 million from the Common Stock of Public Service Enterprise Group
Incorporated.
7. PLAN TERMINATION
Although it has not expressed any intention to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions set forth in ERISA. In the event that the Plan is
terminated, all Participants would become 100 percent vested in their account.
14
SIGNATURES
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 thereunto duly authorized.
Public Service Enterprise Group Incorporated
Employee Thrift and Tax-Deferred Savings Plan
(Name of Plan)
By: Margaret M. Pego
------------------------------------
Margaret M. Pego
Chairperson of Employee
Benefits Committee
Date: June 27, 2003
15
EXHIBIT INDEX
Exhibit Number
--------------
99 Independent Auditors' Consent
16