þ | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR THE FISCAL YEAR ENDED DECEMBER 31, 2005 |
o | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________ |
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Other supplemental schedules required by Section 2520.103-10 of the Department of Labors
Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act (ERISA) of 1974 have been omitted because they are not applicable. |
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EX-23: CONSENT OF PRICEWATERHOUSECOOPERS LLP |
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2005 | 2004 | |||||||
Assets |
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Investments, at fair value |
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Mutual funds |
$ | 8,252,123 | $ | 7,063,667 | ||||
Connecticut Water Service, Inc. common stock |
1,034,130 | 922,355 | ||||||
Collective investment trust |
1,091,357 | 967,868 | ||||||
Participant loan accounts |
263,545 | 288,464 | ||||||
Cash and cash equivalents |
70,741 | 70,168 | ||||||
Total investments |
10,711,896 | 9,312,522 | ||||||
Receivables |
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Employee contributions |
24,448 | 23,932 | ||||||
Employer contributions |
58,747 | 56,888 | ||||||
Due from brokers |
| 35,000 | ||||||
Total assets |
10,795,091 | 9,428,342 | ||||||
Liabilities |
||||||||
Due to brokers |
| (43,959 | ) | |||||
Net assets available for benefits |
$ | 10,795,091 | $ | 9,384,383 | ||||
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2005 | 2004 | |||||||
Additions |
||||||||
Interest |
$ | 14,716 | $ | 23,274 | ||||
Dividends |
291,959 | 119,017 | ||||||
Net appreciation in fair value of investments |
371,221 | 623,816 | ||||||
Employee contributions (including rollover contributions) |
773,826 | 838,521 | ||||||
Employer contributions |
221,524 | 223,682 | ||||||
Total additions |
1,673,246 | 1,828,310 | ||||||
Deductions |
||||||||
Distributions to participants |
257,436 | 196,750 | ||||||
Administrative expenses |
5,102 | 2,320 | ||||||
Total deductions |
262,538 | 199,070 | ||||||
Net increase |
1,410,708 | 1,629,240 | ||||||
Net assets available for benefits, beginning of year |
9,384,383 | 7,755,143 | ||||||
Net assets available for benefits, end of year |
$ | 10,795,091 | $ | 9,384,383 | ||||
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1. | Description of the Plan | |
The following description of the Savings Plan (the Plan) of the Connecticut Water Company (the Company) provides only general information. Participants should refer to the plan document for a more complete description of the Plans provisions. The Company is a wholly-owned subsidiary of Connecticut Water Service, Inc. The Plan was established by the Board of Directors of the Company in 1985 and was amended and restated since that date. The Plan is a trusteed, defined contribution plan covering all eligible employees of the Company. | ||
Effective April 1, 2001, eligible employees of Crystal Water Company and Gallup Water Service, Inc., which are both wholly-owned subsidiaries of Connecticut Water Service, Inc., became eligible to participate in the Plan. Effective December 14, 2001, eligible employees of The Barnstable Water Company, a wholly-owned indirect subsidiary of Connecticut Water Service, Inc., became eligible to participate in the Plan. | ||
Riggs Bank was Trustee from June 1, 2002 through September 9, 2004 and Wachovia Bank become Trustee starting September 10, 2004. WYSTAR Global Retirement Solutions, a subsidiary of Wachovia Bank, is the Plans recordkeeper. | ||
The Plan includes the following provisions, as described below: |
(a) | The Company match is 50% of each participants employee salary contribution not to exceed 4% of compensation. | ||
(b) | The Plan includes a profit-sharing contribution of up to 1% of compensation linked to successful completion of specific strategic initiatives. Profit-sharing contributions have additional requirements and restrictions. Contributions of approximately $53,000 and $51,000 were made for Plan years 2005 and 2004, respectively. | ||
(c) | Deferrals are made on a pre-tax basis of between 1% and 15% maximum of salary for all employees. | ||
(d) | New employees are eligible to enroll in the Plan after six months and at least 1,000 hours worked. Enrollment will take place on the first day of the next plan year quarter following the date on which such eligibility requirements are satisfied. | ||
(e) | Participants are eligible to receive Company matching contributions upon plan enrollment. |
Once eligible, employees can elect to enter into a written salary deferral agreement. Participant loans and hardship withdrawals are permitted. Changes in deferrals are allowed quarterly. | ||
Participants may borrow at least $1,000 and the lesser of $50,000 or 50% of the vested amount of their accounts, excluding their interest in Connecticut Water Service, Inc. common stock, at a rate of interest of prime rate plus 1.0%. Loans must be repaid within five years, or before attaining age 65, whichever is shorter. Loans to purchase a principal residence may be repaid within fifteen years. | ||
A participant is fully vested at all times in the accrued balance of his or her account. |
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On a daily basis, the Trustee determines the total net earnings of each investment fund and allocates this amount to the accounts of the participants on the basis of the percentage each participant has invested in the investment fund. | ||
2. | Summary of Significant Accounting Policies | |
Basis of Accounting The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. |
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Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management of the Plan to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of additions and deductions during the reporting period. Actual results could differ from those estimates. |
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Party-in-Interest Transactions Section 3(14) of ERISA defines a party-in-interest to include among others, fiduciaries or employees of the Plan, any person who provides services to the Plan or an employer whose employees are covered by the Plan. Accordingly, loans to participants, and investments in Connecticut Water Service, Inc. common stock are considered party-in-interest transactions. |
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Administrative Expenses Administrative expenses and fees of the Plan are ordinarily paid by the Company unless the plan administrator directs the Trustee to pay these expenses utilizing plan assets. During 2005 and 2004, other administrative expenses of $5,102 and $2,320, respectively, were paid out of plan assets. |
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Valuation of Investments The investments in the accompanying statements of net assets available for plan benefits are stated at fair value. Securities traded on a national securities exchange are reported at fair value, at the last reported sales price on the last business day of the plan year. Investments traded in the over-the-counter market and listed securities for which no sales were reported on that date are valued at the average of the last reported bid and asked prices. The Plan participates in certain collective investment trusts. Investment units for these trusts are valued at the contract value of the underlying assets, which approximates fair value. Mutual funds are reported at net asset value. |
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Risks and Uncertainties The Plan provides for various investment options in mutual funds, collective investment trusts, and common stock. 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, it is 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 amounts reported in the accompanying financial statements and supplemental schedules. |
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Payments of Benefits Payments of benefits upon retirement at age 55 or later, or death, are, at the election of the participant, either made in a lump-sum payment, paid over a period of time not to exceed participants life expectancy, or paid out commencing at age 70-1/2. Payment of benefits in the event of death are made to the beneficiaries designated by the participant and initiated by the beneficiary. A retired participant who elects distributions commencing at age 70-1/2 may elect to receive periodic distributions at any time prior to taking a lump-sum payout. Subject to certain restrictions, distributions to participants under other circumstances are made in the form of lump-sum payments. |
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Participant Accounts Each participants account is credited with the participants contributions, the Companys profit-sharing and matching contributions and account earnings. Participants accounts are charged with an allocation of certain administrative expenses to the extent those expenses are not paid by the Company. Participants are permitted to invest in one or more of the investment options offered pursuant to the provisions of the Plan. |
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New Accounting Pronouncements On December 29, 2005, The Financial Accounting Standards Board (FASB) released FASB Staff Position Nos. AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans (FSP). The FSP clarifies the definition of fully benefit-responsive investment contracts for contracts held by defined contribution plans. The FSP also establishes enhanced financial statement presentation and disclosure requirements for defined contribution plans subject to the FSP effective for financial statements for issued for periods ending after December 15, 2006. |
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Management intends to adopt the FSP in the Plans financial statements for the year ended December 31, 2006. The effect of the FSP on the Plans financial statements is expected to be enhanced financial statement presentation and disclosure requirements. | ||
3. | Investments | |
Participants direct the Trustee regarding the investment of amounts held in their accounts. The fair market value of investments that represent 5% or more of the Plans total net assets as of December 31, 2005 and 2004 are as follows: |
2005 | ||||
MFS Value Fund |
$ | 1,735,772 | ||
American Euro Pacific Growth Fund |
1,304,042 | |||
The Growth Fund of America |
1,135,184 | |||
Connecticut Water Service, Inc. common stock |
1,104,474 | |||
UBS Stable Value Fund |
1,091,357 | |||
PIMCO Total Return Fund |
1,055,144 | |||
Artisan Small Cap Fund |
947,417 | |||
Vanguard 500 Index |
739,404 | |||
American Balanced Fund |
648,346 | |||
Franklin Balance Sheet Investment Fund |
552,822 |
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2004 | ||||
Connecticut Water Service, Inc. common stock |
$ | 922,355 | ||
The Growth Fund of America |
880,614 | |||
American Euro Pacific Growth Fund |
1,007,331 | |||
Washington Mutual Investors Fund |
1,629,045 | |||
American Balanced Fund |
536,133 | |||
UBS Stable Value Fund |
967,868 | |||
Vanguard 500 Index |
694,032 | |||
PIMCO Total Return Fund |
941,412 | |||
Artisan Small Cap |
878,036 |
During 2005 and 2004, the Plans investments (including gains and losses on investments bought and sold as well as held during the year) appreciated in value, net of depreciation, by $371,221 and $623,816, respectively, as follows: |
2005 | 2004 | |||||||
Mutual Funds |
$ | 374,559 | $ | 610,231 | ||||
Common stock |
(32,848 | ) | (9,793 | ) | ||||
Collective investment trust |
29,510 | 23,378 | ||||||
$ | 371,221 | $ | 623,816 | |||||
4. | Employer Contribution | |
Employer match contributions are deposited into participants accounts based on the participant elected allocations. | ||
5. | Tax Status | |
The Plan obtained its latest determination letter on March 22, 2005, in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with the applicable requirements of the Internal Revenue Code (IRC). | ||
6. | Plan Termination | |
The Company may, for any reason and at any time, terminate the Plan, in part or in whole. Upon termination of the Plan, the plan administrator will make final allocations to all accounts, and then will distribute account balances in lump sum cash amounts. The Company has no intention to terminate the Plan at this time. |
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Description of Investment | ||||||||
Including Maturity Date, | ||||||||
Identity of Issuer, Borrower, | Rate of Interest, Collateral, | Current* | ||||||
Lessor, or Similar Party | Par, or Maturity Value | Value | ||||||
Mutual Funds |
||||||||
American EuroPacific Growth Fund |
31,729 | $ | 1,304,042 | |||||
American Balanced Fund |
36,383 | 648,346 | ||||||
Artisan Small Cap Fund |
54,575 | 947,417 | ||||||
Franklin Balance Sheet investment Fund |
8,955 | 552,822 | ||||||
The Growth Fund of America |
36,785 | 1,135,184 | ||||||
Vanguard 500 Index Fund |
6,434 | 739,404 | ||||||
Vanguard Value Index Fund |
3,357 | 74,826 | ||||||
Vanguard Small Cap Index Fund |
2,075 | 59,166 | ||||||
MFS Value Fund |
74,979 | 1,735,772 | ||||||
PIMCO Total Return Fund |
92,922 | 1,055,144 | ||||||
Total mutual funds |
8,252,123 | |||||||
Common Stock |
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* Connecticut Water Service, Inc. |
66,229 | 1,034,130 | ||||||
Collective Investment Trust |
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UBS Stable Value Fund |
65,480 | 1,091,357 | ||||||
Cash Management Assets |
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Federated Auto Cash Management Trust |
397 | 397 | ||||||
Cash |
70,344 | 70,344 | ||||||
* Participant Loans |
Interest rates ranging from 5.00% to 9.50%, maturing between 2006 and 2010 | 263,545 | ||||||
Total investments |
$ | 10,711,896 | ||||||
* | Indicates a party-in-interest | |
** | Cost information was omitted since all investments are participant directed. |
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SAVINGS PLAN OF THE CONNECTICUT WATER COMPANY |
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Date: June 28, 2006
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By: | /s/ David C. Benoit | ||
Name: | David C. Benoit | |||
Title: | Vice President and Chief Financial Officer, Connecticut Water Company, the Plan Administrator |
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Exhibit No. | Description | |
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Consent of PricewaterhouseCoopers LLP |