<PAGE>
ARTESIAN RESOURCES CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
FINANCIAL STATEMENTS
DECEMBER 31, 1999
<PAGE>
ARTESIAN RESOURCES CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
FINANCIAL STATEMENTS
DECEMBER 31, 1999
INDEX
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------- --------
Page
------------------------------------------------------------------------------------------------------------- --------
------------------------------------------------------------------------------------------------------------- --------
<S> <C>
Independent Auditors' Report 1-2
------------------------------------------------------------------------------------------------------------- --------
------------------------------------------------------------------------------------------------------------- --------
FINANCIAL STATEMENTS
------------------------------------------------------------------------------------------------------------- --------
------------------------------------------------------------------------------------------------------------- --------
Statement of Net Assets Available for
Benefits, December 31, 1999 3
------------------------------------------------------------------------------------------------------------- --------
------------------------------------------------------------------------------------------------------------- --------
Statement of Net Assets Available for
Benefits, December 31, 1998 4
------------------------------------------------------------------------------------------------------------- --------
------------------------------------------------------------------------------------------------------------- --------
Statement of Changes in Net Assets
Available for Benefits, Year
Ended December 31, 1999 5
------------------------------------------------------------------------------------------------------------- --------
------------------------------------------------------------------------------------------------------------- --------
Notes to the Financial Statements 6-11
------------------------------------------------------------------------------------------------------------- --------
------------------------------------------------------------------------------------------------------------- --------
SUPPLEMENTAL SCHEDULES
------------------------------------------------------------------------------------------------------------- --------
------------------------------------------------------------------------------------------------------------- --------
Schedule of Assets Held for Investment
Purposes 12
------------------------------------------------------------------------------------------------------------- --------
------------------------------------------------------------------------------------------------------------- --------
Schedule of Reportable Transactions (Series
of Transactions in One Issue Aggregating
5 Percent or More of Net Assets) for the
Year Ended December 31, 1999 13
------------------------------------------------------------------------------------------------------------- --------
</TABLE>
<PAGE>
Independent Accountants' Report
Participants, Board of Trustees and
Administrator
Artesian Resources Corporation
Supplemental Retirement Plan
We have audited the accompanying statements of net assets available for benefits
of Artesian Resources Corporation Supplemental Retirement Plan as of December
31, 1999 and 1998, and the related statement of changes in net assets available
for benefits for the year ended December 31, 1999. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Artesian
Resources Corporation Supplemental Retirement Plan as of December 31, 1999 and
1998, and the changes in net assets available for plan benefits for the year
then ended in conformity with generally accepted accounting principles.
-1-
<PAGE>
As discussed in Note 1 to the financial statements, on March 31, 2000 the Board
of Directors of the Company and the Board of Trustees of the Plan agreed to
merge the Plan into another defined contribution plan sponsored by the Company.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules 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. The fund information in the
statements of net assets available for plan benefits and the statement of
changes in net assets available for plan benefits is presented for purposes of
additional analysis rather than to present the net assets available for plan
benefits and changes in net assets available for plan benefits of each fund. The
supplemental schedules and fund information 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.
Wilmington, Delaware
February 24, 2000, except as to Note 1,
for which the date is March 31, 2000
-2-
<PAGE>
ARTESIAN RESOURCES CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
STATEMENT OF NET ASSETS
AVAILABLE FOR BENEFITS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Participant Directed
--------------------------------------------------------------------------------------
Fidelity Family of Mutual Funds
---------------------------------------------------------------------
Managed
Equity Aggressive Income Intermediate Artesian
Income II Growth Puritan Portfolio Bond A Total
---------- ----------- ---------- ---------- -------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Cash $ - $ - $ - $ 4 $ - $ - $ 4
Investments, at
fair value- - - - 88,725 - - 88,725
Common/Collective
Trusts
Registered Investment
Companies 721,674 764,994 65,448 - 74,659 - 1,626,775
Employer Securities - - - - - 307,940 307,940
--------- --------- -------- -------- --------- --------- ----------
Total investments 721,674 764,994 65,448 88,729 74,659 307,940 2,023,444
Amounts due from
employer 48,691 - - - - - 48,691
--------- --------- -------- -------- --------- --------- ----------
Net assets available
for benefits $ 770,365 $ 764,994 $ 65,448 $ 88,729 $ 74,659 $ 307,940 $2,072,135
========= ========= ======== ======== ========= ========= ==========
</TABLE>
See accompanying notes to the financial statements.
-3-
<PAGE>
ARTESIAN RESOURCES CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
STATEMENT OF NET ASSETS
AVAILABLE FOR BENEFITS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Participant Directed
------------------------------------------------------------------------------------
Fidelity Family of Mutual Funds
----------------------------------------------------------
Managed
Equity Aggressive Income Intermediate Artesian
Income II Growth Puritan Portfolio Bond A Total
----------- ---------- ---------- ---------- -------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments, at
fair value- $ - $ - $ - $63,085 $ - $ - $ 63,085
Common/Collective
Trusts
Registered Investment
Companies 582,648 411,560 59,410 - 104,203 - 1,157,821
Employer Securities - - - - - 209,080 209,080
-------- --------- ------- ------- --------- -------- ----------
Total investments 582,648 411,560 59,410 63,085 104,203 209,080 1,429,986
Amounts due from
employer - - - 14,802 - 36,241 51,043
-------- --------- ------- ------- --------- -------- ----------
Net assets available
for benefits $582,648 $ 411,560 $59,410 $77,887 $ 104,203 $245,321 $1,481,029
======== ========= ======= ======= ========= ======== ==========
</TABLE>
See accompanying notes to the financial statements.
-4-
<PAGE>
ARTESIAN RESOURCES CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS
AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Participant Directed
---------------------------------------------------------------------------------------
Fidelity Family of Mutual Funds
----------------------------------------------------------------
Managed
Equity Aggressive Income Intermediate Artesian
Income II Growth Puritan Portfolio Bond A Total
--------- --------- ------- ------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Additions to Net Assets
attributed to:
Investment income:
Net appreciation
(depreciation)
of investments $ 20,867 $ 396,131 $ (166) $ - $ (4,900) $ 52,448 $ 464,380
Dividends 7,863 - 2,055 - 5,567 10,078 25,563
Interest - - - 5,464 - - 5,464
Contributions:
Participant's 5,129 4,338 2,580 2,060 546 - 14,653
Employer 228,807 15,427 9,173 34 2,183 - 255,624
--------- --------- ------- ------- -------- --------- ----------
262,666 415,896 13,642 7,558 3,396 62,526 765,684
--------- --------- ------- ------- -------- --------- ----------
Deductions from Net Assets
attributed to:
Participant distributions 50,935 47,805 7,562 2,534 21,870 43,872 174,578
Expenses - - - - - - -
--------- --------- ------- ------- -------- --------- ----------
Total deductions 50,935 47,805 7,562 2,534 21,870 43,872 174,578
--------- --------- ------- ------- -------- --------- ----------
Net increase prior to
interfund transfers 211,731 368,091 6,080 5,024 (18,474) 18,654 591,106
Interfund transfers (24,014) (14,657) (42) 5,818 (11,070) 43,965 -
--------- --------- ------- ------- -------- --------- ----------
Net increase (decrease) in
plan assets 187,717 353,434 6,038 10,842 (29,544) 62,619 591,106
--------- --------- ------- ------- -------- --------- ----------
Net assets available for
benefits-beginning of year 582,648 411,560 59,410 77,887 104,203 245,321 1,481,029
--------- --------- ------- ------- -------- --------- ----------
Net assets available for
benefits-end of year $ 770,365 $ 764,994 $65,448 $88,729 $ 74,659 $ 307,940 $2,072,135
========= ========= ======= ======= ======== ========= ==========
</TABLE>
See accompanying notes to the financial statements.
-5-
<PAGE>
ARTESIAN RESOURCES CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 DESCRIPTION OF THE PLAN
General
Effective October 1, 1994, Artesian Resources Corporation (the
"Company") established the Artesian Resources Corporation
Supplemental Retirement Plan (the "Plan") as a defined
contribution retirement plan for its employees. Pursuant to
Internal Revenue Code ("IRC") Section 401(k), the Plan permits
certain eligible employees to exclude contributions to the
Plan from their current taxable income, subject to certain
limits. The Plan is administered by a Committee of Trustees
which consists of five members appointed by the Company's
Board of Directors. Plan expenses may be paid out of the plan
unless paid by the Company. The Company has paid all such
expenses incurred during 1999 and 1998.
Merger
The Company also sponsors another defined contribution
retirement plan for its employees, the Artesian Resources
Corporation Retirement Plan ("the Retirement Plan"). On March
31, 2000 the Board of Directors of the Company and the Board
of Trustees of the Plan unanimously approved the merger of the
Plan into the Retirement Plan. The trustees expect to merge
the Plan into the Retirement Plan during 2000. This will
eliminate the Plan as a separate plan. The net assets
available for benefits of the Retirement Plan as of December
31, 1999 were $13,910,686.
-6-
<PAGE>
ARTESIAN RESOURCES CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999
DESCRIPTION OF THE PLAN (Cont'd.)
Participation, Vesting and Withdrawals
Generally, all employees as of April 26, 1994 are eligible for
Plan participation.
A service contribution is made by the Company to the Plan for
all eligible participants each year based upon each employee's
years of service and current compensation in accordance with
the following schedule:
Years of Service % of Compensation
---------------- -----------------
1-5 2%
6-10 4%
11-20 5%
over 20 6%
Employees aged 50 to 59 on January 1, 1994 (Transition Group),
may elect to make tax deductible contributions up to a maximum
of 3 percent of their compensation, however, such
contributions may not exceed the IRC limitation of $10,000 for
all deferrals under all plans in 1998 (the basic
contribution). For every dollar an employee in the Transition
Group contributes, the Company will provide a matching
contribution based on the following schedule. The Company
elected to discontinue this matching contribution as of
October 31, 1999.
Company Match for
Years of Service Each Participants' $1
---------------- ---------------------
1-20 $3
21-30 $4
over 30 $5
-7-
<PAGE>
ARTESIAN RESOURCES CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999
DESCRIPTION OF THE PLAN (Cont'd.)
Participation, Vesting and Withdrawals (Cont'd.)
Participant contributions, and the related earnings thereon,
are fully vested at all times. Company contributions, and the
related earnings thereon, vest as follows:
Years Vested
of Service Percentage
---------- ----------
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 years or more 100%
Forfeitures are offset against required Company contributions.
Any participant who separates from the Company for any reason,
shall be entitled to receive the vested interest in their
account.
Investment Elections
Participants in the transition group may allocate basic and
matching contributions among the various Fidelity Family of
Mutual Funds or Artesian Resources Class A non-voting common
stock. Participants in the transition group may elect an
allocation among one or more investment funds in multiples of
5 percent with a minimum investment of 10 percent in any
selected fund. Service contributions are invested by the
Trustee in a uniform manner for all participants.
-8-
<PAGE>
ARTESIAN RESOURCES CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999
DESCRIPTION OF THE PLAN (Cont'd.)
Loans
The Plan does not contain a participant loan provision.
Termination
The Company may amend or terminate the Plan. In the event of
Plan termination, the accounts of all participants affected
shall become fully vested and nonforfeitable. Assets remaining
in the Plan may be immediately distributed to the
participants, inactive participants and beneficiaries in
proportion to their respective account balances; or the trust
may be continued with distributions made at such time and in
such manner as though the Plan had not been terminated.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
For financial reporting purposes, the assets and liabilities
of the Plan are reflected on the accrual basis of accounting.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principals requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities,
-9-
<PAGE>
ARTESIAN RESOURCES CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999
SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Use of Estimates (Cont'd.)
and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Investment Valuation and Income Recognition
Plan assets held in the Fidelity Family of Mutual Funds and
the Artesian Resources Class A non-voting common stock are
valued at fair value based on quoted market prices. In
accordance with the policy of stating investments at fair
value, net unrealized appreciation (depreciation) for the year
is included in the statement of changes in net assets
available for benefits.
Purchases and sales of securities are recorded on a trade-date
basis. Interest income is recorded on the accrual basis.
Dividends are recorded on the ex-dividend date.
Participant Distributions
Participant distributions are recorded when paid.
-10-
<PAGE>
ARTESIAN RESOURCES CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1999
SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Income Taxes
The Internal Revenue Service has determined and informed the
Company by a letter dated March 31, 1996, that the Plan is
qualified and the trust established under the Plan is
tax-exempt, under the appropriate sections of the 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
Code. Therefore, they believe that the Plan was qualified and
the related trust was tax-exempt as of the financial statement
date.
NOTE 3 INVESTMENTS REPRESENTING 5% OR MORE OF NET ASSETS
AVAILABLE FOR BENEFITS
The following investments each represent 5% or more of the net
assets available for benefits at December 31, 1999:
Fidelity Family of Funds
Equity Income II
Aggressive Growth
-11-
<PAGE>
SUPPLEMENTAL SCHEDULES
<PAGE>
ARTESIAN RESOURCES CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
EIN: 51-0280061
PLAN NO.: 004
SCHEDULE H, PART IV, LINE 4i: SCHEDULE OF ASSETS HELD FOR
INVESTMENT PURPOSES
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
------ -------------------------------------- -------------------------------------------------------- ----------- ----------
(a) (b) Identity of issue, borrower, (c)Description of investment including maturity data, (d)Cost (e)Current
lessor or similar party rate of interest, collateral, par or maturity value Value
------ -------------------------------------- -------------------------------------------------------- ----------- ----------
<S> <C> <C> <C> <C>
Fidelity Family of Mutual Funds Equity Income II $ 709,103 $ 721,674
------ -------------------------------------- -------------------------------------------------------- ----------- ----------
Aggressive Growth 371,686 764,994
------ -------------------------------------- -------------------------------------------------------- ----------- ----------
Puritan 64,720 65,448
------ -------------------------------------- -------------------------------------------------------- ----------- ----------
Managed Income Portfolio 88,729 88,729
------ -------------------------------------- -------------------------------------------------------- ----------- ----------
Intermediate Bond 76,556 74,659
---------- ----------
------ -------------------------------------- -------------------------------------------------------- ----------- ----------
------ -------------------------------------- -------------------------------------------------------- ----------- ----------
Total mutual funds 1,310,794 1,715,504
---------- ----------
------ -------------------------------------- -------------------------------------------------------- ----------- ----------
------ -------------------------------------- -------------------------------------------------------- ----------- ----------
* Artesian Resources Corporation Class A non-voting common stock 199,867 307,940
---------- ----------
------ -------------------------------------- -------------------------------------------------------- ----------- ----------
------ -------------------------------------- -------------------------------------------------------- ----------- ----------
$1,510,661 $2,023,444
---------- ----------
------ -------------------------------------- -------------------------------------------------------- ----------- ----------
</TABLE>
-12-
<PAGE>
ARTESIAN RESOURCES CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
EIN: 51-0280061, PLAN NO.: 004
SCHEDULE H, PART IV, LINE 4j: SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1999
(Series of transactions in one issue
aggregating 5 percent or more of net assets)
<TABLE>
<CAPTION>
-------------------- --------------------- --------------- ------------- ------------ -----------
(a)Identify of (b)Description (c)Purchase (d)Selling (g)Cost of (i)Net gain
Party Involved of asset Price Price asset or (loss)
--------------- --------------- ----------- ---------- ---------- -----------
-------------------- --------------------- --------------- ------------- ------------ -----------
-------------------- --------------------- --------------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Fidelity Family
of Funds: Equity Income II $274,299 $ 74,950 $ 62,895 $12,055
-------------------- --------------------- --------------- ------------- ------------ -----------
-------------------- --------------------- --------------- ------------- ------------ -----------
Aggressive Growth $ 86,615 $ 80,945 $ 51,967 $28,978
-------------------- --------------------- --------------- ------------- ------------ -----------
</TABLE>
-13-
