<PAGE>
Atlantic Electric 401(k) Savings and Investment Plan - B
Report on Audits of Financial Statements as of December 30, 1999 and 1998 and
for the year ended December 30, 1999 and Supplemental Schedules for the year
ended December 30, 1999
<PAGE>
Atlantic Electric 401(k) Savings and Investment Plan - B
Table of Contents as of December 30, 1999 and 1998 and for the year ended
December 30, 1999 and Supplemental Schedules for the year ended December 30,
1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
Report of Independent Accountants 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:
Assets Held for Investment Purposes at End of Year Schedule H Item 4(i)*
Reportable Transactions Schedule H Item 4(j)*
</TABLE>
* Refers to item numbers in Form 5500 (Annual
Return Report of Employee Benefit Plan) for the
Plan year ended December 30, 1999, which
schedules are incorporated herein by reference.
<PAGE>
Report of Independent Accountants
To the Personnel and Compensation
Committee 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,
1999 and 1998, and the changes in its net assets available for benefits for the
year ended December 30, 1999, 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 audits 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 performed for the purpose of forming an opinion on the financial
statements taken as a whole. The supplemental schedules of Assets Held for
Investment 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 audit 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
-----------------------------------
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
June 9, 2000
<PAGE>
Atlantic Electric 401(k) Savings and Investment Plan - B
Statements of Net Assets Available for Benefits
December 30, 1999 and 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Investments (see Note 4) $ 43,787,006 $ 38,136,432
Receivables:
Employer contributions 13,516 26,299
Participant contributions 43,572 73,333
-------------- --------------
Net assets available for benefits $ 43,844,094 $ 38,236,064
-------------- --------------
</TABLE>
See accompanying notes to financial statements.
-2-
<PAGE>
Atlantic Electric 401(k) Savings and Investment Plan - B
Statement of Changes in Net Assets Available for Benefits
For the year ended December 30, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Additions:
Employee contributions $ 2,440,532
Employer contributions 674,155
Interest income 766,695
Dividends received 1,607,365
Net appreciation in fair value of investments 2,057,412
---------------
Total additions 7,546,159
---------------
Deductions:
Benefits paid to participants 1,936,579
Administrative fees 1,550
---------------
Total deductions 1,938,129
---------------
Increase in net assets available for benefits 5,608,030
Net assets available for benefits, at beginning of year 38,236,064
---------------
Net assets available for benefits, at end of year $ 43,844,094
---------------
</TABLE>
See accompanying notes to financial statements.
-3-
<PAGE>
Atlantic Electric 401(k) Savings and Investment Plan - B
Notes to Financial Statements
December 30, 1999 and 1998
--------------------------------------------------------------------------------
1. Description of Plan
General
The following description of the Atlantic Electric 401(k) Savings and
Investment Plan - B, a defined contribution plan (the "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).
On March 1, 1998, Atlantic Energy, Inc., the former parent company of
Atlantic City Electric Company, and Delmarva Power & Light Company
consummated a merger transaction to form Conectiv (the "Merger").
Contributions
All full-time bargaining unit employees of the Atlantic City Electric
Company (the "Company"), 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 six
investment options. Options available to the employee, prior to the Merger
were the Custom Stable Value Fund, Atlantic Energy, Inc. Common Stock Fund,
Equity Index Fund, Equity Income Fund, International Stock Fund, and
Spectrum Growth Fund. Subsequent to the Merger, the Atlantic Energy, Inc.
option was replaced by the Conectiv Class A Common Stock Fund and Conectiv
Common Stock. 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. 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. Income is recorded
as earned. Distributions to participants are recorded in the period in
which distributions are made. 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. In the event of Plan termination, participants
remain 100 percent vested in their accounts.
-4-
<PAGE>
Atlantic Electric 401(k) Savings and Investment Plan - B
Notes to Financial Statements
December 30, 1999 and 1998
--------------------------------------------------------------------------------
Administration Costs
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 transactions are treated as a transfer from the investment
fund to the participant loan fund. 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. The interest rate for 1999 and 1998 was 9%.
Principal and interest is paid ratably through weekly payroll deductions.
Certain prior year amounts have been reclassified to conform to the current
year presentation.
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. Participant loans
are valued at cost which approximates fair 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.
The Plan presents in the Statement of Changes in Net Assets Available for
Benefits the net appreciation in the fair value of its investments which
consists of the realized gains or losses and the unrealized appreciation
(depreciation) on those investments.
Investments in Common Collective Trust
The Custom Stable Value Common Trust 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.
The Trust's investment contracts are reported at their estimated fair
value. The investment contracts are nontransferable but provide for benefit
responsive withdrawals by plan participants at contract value. Benefit
responsive withdrawals are provided for on a proportional basis by the
issuers of the investment contracts. In determining fair value, the Plan's
trustee's valuation committee primarily considers such factors as the
benefit responsiveness of the investment contract and the ability of the
parties to the investment contract to perform in accordance with the terms
of the contract. Generally, fair value approximates contract value
(contributions made plus interest accrued at the current rate, less
withdrawals and fees). If, however, an event has occurred that may impair
the ability of the
-5-
<PAGE>
Atlantic Electric 401(k) Savings and Investment Plan - B
Notes to Financial Statements
December 30, 1999 and 1998
--------------------------------------------------------------------------------
contract issuer to perform in accordance with the contract terms, fair
value may be less than contract value. The contract value of the Fund at
December 30, 1999 and 1998 is $12,119,187 and $11,401,168, respectively.
For the years ended December 30, 1999 and 1998, the guaranteed insurance
contracts of the Custom Stable Value Common Trust Fund, in aggregate, had
an average yield of 6.21% and 6.11% and a weighted average crediting
interest rate of 6.36% and 6.36%, respectively.
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 management to
make estimates and assumptions that affect the reported amounts of net
assets available for benefits at the date of financial statements and the
changes in net assets available for benefits during the reporting period
and, where applicable, disclosures of contingent assets and liabilities at
the date of 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. Investment Options
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;
-6-
<PAGE>
Atlantic Electric 401(k) Savings and Investment Plan - B
Notes to Financial Statements
December 30, 1999 and 1998
--------------------------------------------------------------------------------
(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.
4. Investments
The following presents investments that represent 5 percent or more of the
Plan's net assets:
<TABLE>
<CAPTION>
December 30,
1999 1998
<S> <C> <C>
Investments at Fair Value:
Custom Stable Value Fund* $ 12,119,187 $ 11,401,168
Equity Index Fund 15,686,163 11,974,309
Equity Income Fund 11,309,115 10,975,135
Spectrum Growth Fund 2,214,291 1,829,097
Other 2,458,250 1,956,723
---------------- ----------------
$ 43,787,006 $ 38,136,432
================ ================
</TABLE>
* Nonparticipant directed
During 1999, the Plan's investments (including investments bought, sold and
held during the year) appreciated (depreciated) in value by $2,057,412 as
follows:
<TABLE>
<S> <C>
Equity Index Fund $ 2,393,018
Equity Income Fund (642,186)
Spectrum Growth Fund 155,708
International Stock Fund 202,735
Conectiv Common Stock Fund (37,307)
Conectiv Class A Common Stock Fund (14,556)
----------------
$ 2,057,412
================
</TABLE>
-7-
<PAGE>
Atlantic Electric 401(k) Savings and Investment Plan - B
Notes to Financial Statements
December 30, 1999 and 1998
--------------------------------------------------------------------------------
5. Nonparticpant-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:
<TABLE>
<CAPTION>
December 30,
1999 1998
<S> <C> <C>
Net assets:
Custom stable value fund $ 12,141,663 $ 11,444,037
================ ================
</TABLE>
<TABLE>
<CAPTION>
Year ended
December 30,
1999
<S> <C>
Changes in net assets:
Contributions $ 1,271,410
Interest income 709,946
Benefits paid to participants (720,053)
Administrative fees (487)
Transfers to participant-directed investments (563,190)
----------------
$ 697,626
================
</TABLE>
6. Tax Status:
The Plan obtained its latest determination letter on March 23, 1995, in
which the Internal Revenue Service 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.
-8-
<PAGE>
SUPPLEMENTAL SCHEDULES
<PAGE>
Atlantic Electric 401(k) Savings and Investment Plan - B
Schedule H - Item 4(i) - Schedule of Assets Held for Investment
Purposes at End of Year
December 30, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Identity of Issue* Investment Type Cost Value
<S> <C> <C> <C>
T. Rowe Price:
Custom Stable Value Fund Guaranteed Insurance Contracts $ 12,119,187 $ 12,119,187
Equity Index Fund Mutual Fund 9,589,567 15,686,163
Equity Income Fund Mutual Fund 10,481,930 11,309,115
Spectrum Growth Fund Mutual Fund 1,976,017 2,214,291
International Stock Fund Mutual Fund 761,632 975,300
*Conectiv Class A Common Stock Common Stock 242,934 242,213
*Conectiv Common Stock 88,782 78,775
Participant Loans Various loans at 9.00% maturing
June 1999 through April 2014 - 1,161,962
--------------- ---------------
Total assets held for investment $ 35,260,049 $ 43,787,006
=============== ===============
</TABLE>
*Parties-in-interest
<PAGE>
Atlantic Electric 401(k) Savings and Investment Plan - B
Schedule H - Item 4(j) - Schedule of Reportable Transactions
for the year ended December 30, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of (c) Purchase (d) Selling (i) Gain/
(b) Description Transactions Price Price (g) Cost Loss
<S> <C> <C> <C> <C> <C>
Custom Stable Value Fund:
Purchases 93 $ 7,153,746 - $ 7,153,746 -
Sales 129 - $ 6,435,727 6,435,727 -
</TABLE>
<PAGE>
SIGNATURES
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.
Date: June 28, 2000 /s/ John C. van Roden
---------------------------------------------
John C. van Roden, Senior Vice President
and Chief Financial Officer
