Report
of
Independent Registered Public Accounting Firm
To
the Participants
and Savings Plan Committee of the
FirstEnergy
Corp.
Savings Plan
Akron,
Ohio
We
conducted our
audits in accordance with the standards of Public Company Accounting Oversight
Board (United States). Those standards 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.
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, the
financial statements referred to above present fairly, in all material respects,
the net assets available for plan benefits of FirstEnergy Corp. Savings Plan
as
of December 30, 2004 and 2003 and the changes in its net assets available for
plan benefits for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
BOBER,
MARKEY,
FEDOROVICH & COMPANY
June
6,
2005
FirstEnergy
Corp. Savings Plan
Statements
of Net Assets Available for Plan Benefits
At
December
30, 2004 and 2003
|
Assets
|
|
2004
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
in
FirstEnergy Corp. Savings Plan Master Trust
|
|
$
|
1,853,724,935
|
|
$
|
1,686,661,351
|
|
|
Participant
loans
|
|
|
33,342,687
|
|
|
30,412,933
|
|
|
Net assets available for benefits
|
|
$
|
1,887,067,622
|
|
$
|
1,717,074,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying
notes are an integral part of these financial statements.
FirstEnergy
Corp. Savings Plan
Statements
of Changes in Net Assets Available for Plan Benefits
For
the
Years Ended December 30, 2004 and 2003
|
|
|
2004
|
|
2003
|
|
|
|
|
|
|
|
|
|
Additions:
|
|
|
|
|
|
|
Contributions:
|
|
|
|
|
|
|
Employee
|
|
$
|
74,444,070
|
|
$
|
76,674,175
|
|
|
Employer
|
|
|
35,508,355
|
|
|
31,398,910
|
|
|
Total contributions
|
|
|
109,952,425
|
|
|
108,073,085
|
|
|
|
|
|
|
|
|
|
|
|
Investment
income:
|
|
|
|
|
|
|
|
|
Interest and dividends
|
|
|
67,559,695
|
|
|
51,151,845
|
|
|
Net appreciation in fair value
|
|
|
|
|
|
|
|
|
of investments (Note 5)
|
|
|
129,549,163
|
|
|
202,582,607
|
|
|
Total investment income
|
|
|
197,108,858
|
|
|
253,734,452
|
|
|
|
|
|
|
|
|
|
|
|
Transfer of assets from other plans, net (Note 10)
|
|
|
-
|
|
|
622,421,986
|
|
|
|
|
|
|
|
|
|
|
|
Total additions
|
|
|
307,061,283
|
|
|
984,229,523
|
|
|
|
|
|
|
|
|
|
|
|
Deductions:
|
|
|
|
|
|
|
|
|
Distributions to Participants
|
|
|
(125,626,144
|
)
|
|
(85,489,592
|
)
|
|
ESOP interest
|
|
|
(9,655,000
|
)
|
|
(12,585,000
|
)
|
|
Fees
|
|
|
(1,786,801
|
)
|
|
(1,818,910
|
)
|
|
Total deductions
|
|
|
(137,067,945
|
)
|
|
(99,893,502
|
)
|
|
|
|
|
|
|
|
|
|
|
Increase
in
net assets available for benefits
|
|
|
169,993,338
|
|
|
884,336,021
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets
available for plan benefits, beginning of year
|
|
|
1,717,074,284
|
|
|
832,738,263
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets
available for plan benefits, end of year
|
|
$
|
1,887,067,622
|
|
$
|
1,717,074,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying
notes are an integral part of these financial statements
FirstEnergy
Corp. Savings Plan
Notes
to
Financial Statements
December
30, 2004 and 2003
|
1.
|
Description
of the Plan
|
The
FirstEnergy
Corp. Savings Plan (the "Plan") provides eligible employees of FirstEnergy
Corp.
("FirstEnergy") and its subsidiaries, collectively referred to as the
"Companies", a mechanism through which they can save and invest part of their
income on a tax deferred basis at regular intervals. Additionally, the Companies
currently match employee contributions with shares of FirstEnergy common stock
(see Note 7) held in the Employee Stock Ownership Plan ("ESOP") except for
former GPU union participants that are currently matched in cash. However,
according to the Plan, the Companies can alternatively make all contributions
in
cash. Employees may invest their contributions in other investment options
(the
"Funds") and all contributions made to employees' accounts are fully and
immediately vested in the Plan. The purpose of the Plan is to encourage
employees to adopt a regular savings program and to provide additional security
for retirement. The following is a brief description of the Plan and is provided
for general information purposes only. Employees should refer to the Plan
documents for more complete information.
The
Plan is a
qualified profit-sharing plan under Section 401(a) of the Internal Revenue
Code
of 1986, as amended (the "Code"), and provides for salary reduction
contributions under Section 401(k) of the Code. In general, plans established
pursuant to Section 401(k) of the Code permit eligible employees to defer
current federal and, subject to applicable laws, state and local income taxes
on
the portion of their current compensation represented by the amount of the
salary reduction elected. The amounts, as elected by the employees, are
contributed to the Plan by the Companies through payroll
deductions.
The
Plan is subject
to Title I of the Employee Retirement Income Security Act of 1974 ("ERISA"),
but
not Title IV as it is an "individual account plan." Title I establishes
reporting and disclosure requirements, minimum standards for participation,
vesting and benefit accrual, prohibitions governing the conduct of fiduciaries
and provides that ERISA pre-empts other federal, state and local statutes
relating to employee benefits. The protective benefits of Title IV which relate
to insuring pension benefits by the Pension Benefit Guaranty Corporation are
not
applicable to individual account plans.
Every
permanent
FirstEnergy employee is eligible to become a participant in the Plan, herein
referred to as "employee" or "Participant", immediately at commencement of
employment.
Employees
may
participate in one or more of the Funds through deferral of compensation. The
choice of investments (except the Companies' matching contributions in the
form
of FirstEnergy common stock) is the responsibility of the individual employee.
Transfers between funds are the responsibility of the employee and may be made
on a daily basis.
Securities
in the ESOP Account
The
ESOP purchased
a total of 10,654,114 shares of Ohio Edison ("OE") common stock from November
1990 to December 1991 for the purpose of funding the Companies'
matching
contribution to the Plan. On November 8, 1997, pursuant to the merger of OE
and
Centerior Energy Corporation that created FirstEnergy ("Merger"), shares of
OE
common stock were converted into shares of FirstEnergy common stock on a
one-for-one basis.
FirstEnergy
Corp. Savings Plan
Notes
to
Financial Statements
December
30, 2004 and 2003
The
Plan borrowed
$200 million, referred to herein as the "ESOP Loan", at a rate of 10% from
OE to
fund the purchase of the stock. The ESOP Loan is collateralized by the
unallocated FirstEnergy common stock acquired with the proceeds of the ESOP
Loan. The ESOP Loan is expected to be repaid by December 2005. Interest payments
on the loan are made annually. Additionally, principal payments may be made
sooner if additional shares of FirstEnergy common stock are needed for
distributions to Participants. At December 30, 2004 and 2003, the ESOP
Loan
balance was $60,850,000 and $96,550,000, respectively.
ESOP
Allocation
As
principal and interest payments are made on the ESOP Loan, shares of FirstEnergy
common stock are released from the ESOP Unallocated Fund to the ESOP Allocated
Fund where they are made available for contribution to Participants’ accounts.
The Plan made interest payments of $9,655,000 in 2004 and $12,585,000 in 2003,
which released 228,386 shares in 2004 and 297,695 shares in 2003. In December
2004, a principal payment of $35,700,000 was made which led to the release
of
844,474 shares. In December 2003, a principal payment of $29,300,000 was made
which led to the release of 693,083 shares.
The
Companies’
matching contribution to each Participant's account is computed the Thursday
following the end of each pay period based on the Companies' matching
contribution percentages (see Note 7) and on the quoted market price of
FirstEnergy common stock when contributed. During 2004 and 2003, there were
913,135 and 968,431 ESOP shares, respectively contributed to Participants’
accounts. In 2004 and 2003, respectively, 232,746 and 254,833 ESOP shares were
realized related to the reinvestment of dividends on the ESOP shares.
At
December 30, 2004 and 2003, there were 2,389,530 and 2,656,189 shares,
respectively, held in the ESOP Unallocated Fund at market values of $94,410,350
and $93,497,853, respectively, and 7,201,364 and 6,553,214 shares, respectively,
held in the ESOP Allocated Fund at market values of $284,525,899 and
$230,673,148. The market value of the ESOP common stock is measured by the
quoted market price.
PAYSOP
A
component of the Plan consists of a qualified payroll-based tax credit employee
stock ownership plan ("PAYSOP") under Section 401(a) and Section 501(a) of
the
Code.
Under
the Economic
Recovery Tax Act of 1981, effective January 1, 1983, tax credits were based
upon
eligible employee compensation. The regulation permitted the Companies to
contribute to the fund a maximum of one-half of one percent of the aggregate
compensation of eligible employees and claim a tax credit on its consolidated
federal income tax return equal to this amount. The amounts allocated to
eligible employees were based upon the proportion of their wages and salaries
(to a maximum of $100,000) to the wages and salaries of total employees for
the
year.The Tax Reform Act of 1986 eliminated the PAYSOP tax credit with respect
to
compensation earned in 1987 or later years. As a result, the Companies have
not
contributed to the PAYSOP since the 1986 contribution other than for the
reimbursement of PAYSOP administrative expenses.
On
November 8, 1997, pursuant to the Merger, shares of OE common stock held in
the
PAYSOP were converted into shares of FirstEnergy common stock on a one-for-one
basis.
Prior
to
February 11, 2002, dividends were paid annually to Participants in the
PAYSOP. The market value of the common stock in the PAYSOP is measured by the
quoted market price. As of February 11, 2002, dividends are payable
quarterly to Participants and Participants will also have the option to reinvest
dividends back into the PAYSOP Fund. The market value of the PAYSOP Fund was
$3,735,901 and $3,347,085 at December 30, 2004 and 2003
respectively.
FirstEnergy
Corp. Savings Plan
Notes
to
Financial Statements
December
30, 2004 and 2003
|
2.
|
Summary
of Accounting Policies
|
The
financial
statements have been prepared on the accrual basis of accounting.
The
amount shown
herein as the investment in the FirstEnergy Corp. Savings Plan Master Trust
(the
"Trust") as of December 30, 2004 and 2003 reflects the fair value of
the
assets held in such Trust and the Plan’s relative interest in the Trust. The
Plan’s participation is measured at its value at the beginning of the valuation
period plus net external cash flow (contributions, distributions, etc.)
experienced by the Plan during the valuation period. Investment income, net
realized gain (loss) on investments and net unrealized appreciation
(depreciation) of investments are allocated to each participating plan based
upon its accumulated monthly balance for each investment option.
Investment
income
from the Trust for the years ended December 30, 2004 and 2003, consists of
interest and dividend income. The net appreciation (depreciation) in the fair
value of investments consists of realized gains or losses and the unrealized
appreciation (depreciation) on those investments in the Trust.
The
market value of
the Fund is measured at the market value per share determined by the investment
manager except for funds A, B, L and N. See note 4 for the methodology used
to
determine fair value for each of these funds.
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 amounts recorded in the financial statements and
accompanying notes. Actual results may differ from these estimates.
Expenses
for the
administration of the Plan are paid for by the Plan unless otherwise paid for
by
the Companies.
Certain
amounts
from the prior year have been reclassified in order to conform to the current
presentation.
Although
the
Companies have not expressed any intent to do so, the Companies reserve the
right to discontinue or terminate the Plan at any time. If the Plan should
be
terminated, in whole or in part, Participants will be entitled to withdraw
the
full value of their accounts, to the extent allowed by law.
FirstEnergy
Corp. Savings Plan
Notes
to
Financial Statements
December
30, 2004 and 2003
The
following are
brief descriptions of the Funds available to Participants at December 30,
2004:
Fund
A -
Company Common Stock Fund
This
Fund consists
entirely of shares of FirstEnergy common stock. The Fund provides an opportunity
for employees to increase their common ownership stake in FirstEnergy. The
objective for this Fund is the growth of capital through both appreciation
and
dividend income. The Fund also holds the Companies' pre-ESOP matching
contribution in FirstEnergy common stock. The common stock is purchased by
the
Trustee on the open market. The market value of the common stock is measured
by
the quoted market price.
Fund
B -
Capital Preservation Fund
This
Fund consists
of guaranteed fixed income contracts issued by insurance companies and banks,
collateralized mortgage obligations, and short-term money market instruments.
These contracts guarantee interest for a fixed period and the principal amount
of all investments. The market value of the Capital Preservation Fund is
measured at the contract value as determined by the insurers and banks.
Fund
C -
S&P 500 Index Fund
This
Fund is a
common/collective trust investing in the S&P 500 stocks. The objective of
this Fund is the growth of capital through both appreciation and dividend
income.
Fund
D -
Small Cap Value Fund
This
Fund invests
primarily in securities of well-financed small cap companies at a substantial
discount to what the manager believes are takeover values. The manager is
National City Bank and the mutual fund name is Armada Small Cap Value. The
objective of the Fund is to match or exceed the returns of the Russell 2000
Value Index over time.
Fund
E -
Large Cap Value Fund
The
Fund seeks
long-term capital appreciation and income by focusing on domestic large company
equities that are selling at modest prices to earnings multiples. Shares are
usually held for the long-term. Only extreme valuations or major changes to
a
company’s fundamentals will trigger a sale. The portfolio manager is Davis
Selected Advisors, L.P. and the mutual fund name is Selected American Fund.
The
performance objective is to match or exceed the S&P/Barra Large Cap Value
Index over time.
Fund
F -
Mid Cap Value Fund
The
Fund seeks
long-term capital appreciation by investing in mid-sized companies that are
less
closely monitored by the investment community as evidenced by low institutional
ownership and analyst coverage. The goal is to find well-managed companies
that
have sustainable growth prospects but that are selling at prices below their
private market value. The manager believes that these factors may cause shares
to be undervalued. The manager may sell a stock when its price no longer
compares favorably with the company’s private market value. The portfolio
manager is Lord Abbett Management and the mutual fund name is Lord Abbett Mid
Cap Value Fund.
FirstEnergy
Corp. Savings Plan
Notes
to
Financial Statements
December
30, 2004 and 2003
Fund
G -
Mid Cap Growth Fund
The
Fund seeks
long-term capital appreciation by investing in mid cap companies that are
leaders in attractive growth markets and in securities of higher risk
accelerating growth companies. These securities are driven by product cycles,
favorable sector conditions or other company specific factors expected to
produce rapid sales and earnings growth. The Fund’s investments are usually
bought and sold relatively frequently. The portfolio manager is Invesco Funds
Group, Inc. and the mutual fund name is Invesco Dynamics Fund.
Fund
H -
Small Cap Growth Fund
The
Fund seeks long
term capital appreciation by investing in small companies that are positioned
for above-average growth in revenues, earnings or assets. Both qualitative
and
quantitative analysis is used to evaluate companies for distinct and sustainable
competitive advantages which are likely to lead to growth in earnings and share
price. The portfolio manager is Franklin Advisers, Inc. The mutual fund name
is
Franklin Small Cap Growth II Fund.
Fund
I -
Bond Fund
The
Fund seeks to
maximize total return consistent with the preservation of capital by investing
at least 65% of its assets in a diversified portfolio of intermediate term
fixed
income investments of varying maturities. The Fund invests primarily in
investment grade debt but may invest up to 10% of its assets in high yield
securities rated B or higher. The Fund may invest up to 20% of assets in
securities denominated in foreign currencies. The portfolio manager is PIMCO
and
the mutual fund name is PIMCO Total Return Fund.
Fund
J -
Self Managed Fund
Participants
may
invest in a self-managed brokerage account available through State Street
Brokerage Services, Inc. Options include mutual funds along with any security
that is listed on the NYSE, ASE and NASDAQ.
Fund
K -
EuroPacific Fund
This
Fund is an
actively managed portfolio of foreign common stocks managed by Capital Research
& Management Co. The objective of the Fund is the growth of capital through
appreciation.
Fund
L -
Loan Fund
The
Plan allows
Participants to borrow from their before-tax, after-tax and rollover accounts
for certain approved purposes. When loans are made, they are recorded as
interfund transfers. The repayments of principal and interest are credited
to
the Participants' account balances within the respective funds. The employee
repays the loan and all related interest through payroll
deductions.
Participants
may
borrow up to 50 percent of their total account balance or 100 percent of their
before-tax account, whichever is less. The interest rate charged is based on
the
prime rate plus 1 percent, and range from 5.0% to 10.79%. Participants may
have
up to two loans outstanding at one time. The minimum loan amount is $1,000
and
must be repaid within 6 and 60 months. If the loan is for the purchase of a
principal residence, the loan repayment period can be extended to 30 years.
The
maximum loan amount is $50,000.
FirstEnergy
Corp. Savings Plan
Notes
to
Financial Statements
December
30, 2004 and 2003
Fund
M -
Armada Equity Growth Fund
This
is an actively
managed Fund specializing in large capitalization growth-oriented stock issues
managed by National City Bank. The objective of the Fund is the growth of
capital through appreciation.
Fund
N -
DQE Frozen Stock Fund
This
Fund consists
entirely of shares of Duquesne Light Holdings, Inc. ("DQE") common stock. These
investments were transferred from the former Beaver Valley Power Station 401(k)
Plan. The market value of the common stock is measured by the quoted market
price. The Fund is frozen to contributions from Participants and allows
withdrawals by Participants in accordance with the Plan document.
Fund
O -
Fidelity Puritan Fund
This
Fund seeks
capital appreciation by investing in a combination of equities and fixed income
vehicles. Approximately 60% of assets are invested in stocks and 40% in bonds
and other debt securities. The market value of this Fund is measured by the
quoted market price.
Fund
P -
Conservative Balanced Fund
This
Fund seeks
capital appreciation by investing in a combination of equities and fixed income
vehicles and is appropriate for the participant with a lower risk tolerance.
The
market value of this Fund is measured by the quoted market price.
Fund
Q -
Moderate Balanced Fund
This
Fund seeks
capital appreciation by investing in a combination of equities and fixed income
vehicles and is appropriate for the participant with moderate risk tolerance.
The market value of this Fund is measured by the quoted market
price.
Fund
R -
Aggressive Balanced Fund
This
Fund seeks
capital appreciation by investing in a combination of equities and fixed income
vehicles and is appropriate for the participant with a high level of risk
tolerance. The market value of this Fund is measured by the quoted market
price.
|
|
|
The
Plan’s
investments are maintained in investment funds and shares of common
stock
of FirstEnergy and DQE, as described in Note 4.
|
The
investments
reflected in the December 30, 2004 and 2003 Statement of Net Assets Available
for Benefits represent the Plan’s 98.0% and 98.1% share of total investments
held in the Trust, respectively, at December 30, 2004 and 2003.
FirstEnergy
Corp. Savings Plan
Notes
to Financial
Statements
December
30, 2004 and 2003
The
total fair
value of net assets held in the FirstEnergy Corp. Savings Plan Master Trust
is
summarized as follows:
|
|
|
2004
|
|
2003
|
|
|
|
|
|
|
|
|
|
Cash
and cash
equivalents
|
|
$
|
4,413,164
|
|
$
|
2,315,659
|
|
|
FirstEnergy
common stock
|
|
|
482,330,366
|
|
|
451,241,964
|
|
|
Capital
preservation investments
|
|
|
400,849,081
|
|
|
399,717,572
|
|
|
Domestic
equity stocks
|
|
|
650,220,569
|
|
|
592,993,503
|
|
|
International
equity stocks
|
|
|
81,428,430
|
|
|
62,551,072
|
|
|
Other
equities
|
|
|
44,696,947
|
|
|
41,968,897
|
|
|
Balanced
|
|
|
221,074,046
|
|
|
194,564,782
|
|
|
Bonds
|
|
|
64,422,141
|
|
|
69,085,404
|
|
|
Participant
Loans
|
|
|
34,432,222
|
|
|
31,392,124
|
|
|
Interest
receivable
|
|
|
1,960,698
|
|
|
1,803,494
|
|
|
Pending
sale
transactions
|
|
|
520,905
|
|
|
427,549
|
|
|
ESOP
liability
|
|
|
(60,850,000
|
)
|
|
(96,550,000
|
)
|
|
Accrued
Fees
|
|
|
(70,130
|
)
|
|
(92,269
|
)
|
|
Total investments at fair value
|
|
$
|
1,925,428,439
|
|
$
|
1,751,419,751
|
|
|
|
|
|
|
|
|
|
|
The
net investment
income in the FirstEnergy Corp. Savings Plan Trust for the years ended December
30, 2004 and 2003 was as follows:
|
|
|
2004
|
|
2003
|
|
|
|
|
|
|
|
|
|
Dividends
and
interest income
|
|
$
|
68,767,393
|
|
$
|
52,227,151
|
|
|
Net
appreciation in fair value of investments
|
|
|
131,305,351
|
|
|
206,270,785
|
|
|
Net
investment
gain
|
|
$
|
200,072,744
|
|
$
|
258,497,936
|
|
|
|
|
|
|
|
|
|
|
FirstEnergy
Corp. Savings Plan
Notes
to
Financial Statements
December
30, 2004 and 2003
The
net appreciation of the Trust’s
investments for 2004 and 2003 was as follows:
|
|
|
2004
|
|
2003
|
|
|
|
|
|
|
|
|
|
Bonds
|
|
$
|
(241,769
|
)
|
$
|
307,405
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
stocks
|
|
|
52,494,169
|
|
|
126,125,298
|
|
|
|
|
|
|
|
|
|
|
|
International
stocks
|
|
|
11,717,082
|
|
|
14,607,363
|
|
|
|
|
|
|
|
|
|
|
|
Balanced
Funds
|
|
|
12,502,349
|
|
|
27,625,478
|
|
|
|
|
|
|
|
|
|
|
|
FirstEnergy
common stock
|
|
|
54,833,520
|
|
|
29,874,694
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
131,305,351
|
|
$
|
198,540,238
|
|
|
|
|
|
|
|
|
|
|
The
following
presents the market value of investments that represent 5 percent or more of
the
Trust’s net assets are separately identified below as of December 30, 2004 and
2003:
|
|
|
2004
|
|
2003
|
|
|
|
|
|
|
|
|
|
FirstEnergy
Common Stock
|
|
$
|
425,558,024
|
|
$
|
357,453,913
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Preservation Fund
|
|
|
402,465,704
|
|
|
401,399,723
|
|
|
|
|
|
|
|
|
|
|
|
S&P
500
Index Fund
|
|
|
312,414,499
|
|
|
301,830,321
|
|
|
|
|
|
|
|
|
|
|
|
Armada
Equity
Growth Fund
|
|
|
103,503,938
|
|
|
122,663,398
|
|
|
|
|
|
|
|
|
|
|
|
Moderate
Growth Lifestyle Fund
|
|
|
119,698,151
|
|
|
110,678,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.
|
Non-Participant
Directed Investments
|
Net
assets
available for plan benefits and changes in net assets available for plan
benefits relating to non-participant directed investments of the Plan at
December 30, 2004 and 2003 and for the years then ended are as
follows:
FirstEnergy
Corp. Savings Plan
Notes
to
Financial Statements
December
30, 2004 and 2003
|
|
|
2004
|
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
FirstEnergy
common stock
|
|
$
|
289,984,482
|
|
|
|
$
|
231,085,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets available for plan benefits
|
|
$
|
289,984,482
|
*
|
|
|
$
|
231,085,956
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in net
assets available for plan benefits:
|
|
|
|
|
|
|
|
|
|
|
Employer
contributions
|
|
$
|
31,847,951
|
|
|
|
$
|
27,791,575
|
|
|
Interest
and
dividends
|
|
|
13,737,816
|
|
|
|
|
14,254,896
|
|
|
Net
appreciation in fair value
|
|
|
|
|
|
|
|
|
|
|
of
investments
|
|
|
39,831,042
|
|
|
|
|
22,840,018
|
|
|
Distributions
to Participants
|
|
|
(14,969,571
|
)
|
|
|
|
(8,022,813
|
)
|
|
Transfers,
net
|
|
|
(1,893,703
|
)
|
|
|
|
(2,135,415
|
)
|
|
Conversions
|
|
|
-
|
|
|
|
|
3,724,629
|
|
|
ESOP
interest
expense/Fees
|
|
|
(9,655,009
|
)
|
|
|
|
(12,585,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
in
net assets available for plan benefits
|
|
$
|
58,898,526
|
|
|
|
$
|
45,867,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
Net of ESOP
loan of $60.9 million and $96.6 million, respectively.
|
|
|
|
|
|
|
|
|
|
Employer
Contributions
The
Companies pay a
matching contribution of 50% on the first 6% of compensation contributed by
an
employee, except for the former GPU unions. The former GPU union participants
receive a match on the first 4% of eligible contributions. In addition, the
Companies may designate a number of performance objectives and contribute for
each objective achieved, an additional $0.05, up to a maximum of $0.25, on
each
$1.00 of the first 6% of compensation contributed by an employee. However,
the
former GPU union participants receive no bonus match. The Companies'
contributions are invested in FirstEnergy common stock, except for the former
GPU union participants that are matched in cash.
The
Companies'
contributions have been pre-funded by the FirstEnergy common stock held by
the
ESOP Unallocated Fund. These shares of FirstEnergy common stock earn dividend
income and are subject to unrealized appreciation and depreciation as the market
value of the FirstEnergy common stock fluctuates. The dividend income serves
to
pay the ESOP Loan and related interest, which results in the release of shares
to the ESOP Allocated Fund as the Companies' matching contribution. To the
extent dividend income is not sufficient to pay the ESOP Loan and interest,
the
Companies will contribute cash which is reflected as employer contributions
in
the Statements of Changes in Net Assets Available for Plan Benefits. Effective
February 11, 2002, Participants who are at least 55
years of age with
ten years in the ESOP are provided the ability to diversify a portion of
their
company matching portfolio. The first participants to elect this option became
eligible in 2002.
FirstEnergy
Corp. Savings Plan
Notes
to
Financial Statements
December
30, 2004 and 2003
Employee
Contributions
Employees
can
invest between 1% and 20% of their salary in the Plan. Employee contributions
may be made on a before-tax and/or after-tax basis. Under the before-tax option,
deposits are deducted from current taxable income but are taxable when they
are
withdrawn from the Plan. The Economic Growth and Tax Relief Reconciliation
Act
of 2001 limited the maximum annual before-tax contribution to $13,000 for 2004
and $12,000 for 2003. Participants who are at least 50 years of age can elect
to
defer an additional $1,000 annually. Prior to age 59-1/2, an active employee
may
withdraw before-tax deposits only under certain hardship conditions as defined
in the Plan document.
Employees
may make
rollover contributions to the Plan of funds held in other tax-qualified plans
of
which the employee was a participant prior to becoming employed by the
Companies. The rollover contributions must be the result of a qualified total
distribution from another tax-qualified plan and must be contributed to the
Plan
within 60 days after distribution to the employee.
Both
employer and
employee contributions under the Plan are held in a trust fund with the Trustee.
Employees may choose to invest their contributions in Funds A, B, C, D, E,
F, G,
H, I, J, K, M, O, P, Q or R (see Note 4) which are offered by the Plan.
Employees may also elect to borrow from their before-tax accounts for certain
approved purposes (Fund L).
The
Plan is exempt
from federal, state and local income taxes. The Plan received a favorable
determination letter, which was dated March 24, 2003. The federal, state
and local income tax treatments of distributions from the Plan depend upon
when
they are made and their form. The withdrawal of the principal amount of a
Participant's after-tax contribution is not, however, subject to tax. For tax
years beginning after December 31, 1986, the Tax Reform Act of 1986
requires that an additional tax of 10% be applied to employee withdrawals from
the Plan prior to death, disability, attainment of age 59-1/2, or under certain
other limited circumstances.
In
the case of withdrawal by a Participant employed by the Companies prior to
the
attainment of age 59-1/2, the excess of the value of the withdrawal over the
total amount of the Participant's after-tax contributions, is taxable at
ordinary income tax rates. The value of FirstEnergy’s common stock withdrawn is
considered to be its fair value on the date it is withdrawn.
In
the case of a distribution that qualifies as a lump-sum distribution upon a
Participant's termination of employment with the Companies or after attaining
the age of 59-1/2, only the excess of the value of the lump sum distribution
over the amount of the Participant's after-tax contributions to the Plan (less
withdrawals) is taxable at ordinary income tax rates. In determining the value
of the lump-sum distribution, the FirstEnergy common stock distributed in-kind
or in cash shall be valued at fair value on the date it is
withdrawn.
FirstEnergy
Corp. Savings Plan
Notes
to
Financial Statements
December
30, 2004 and 2003
|
9.
|
Party-In-Interest
Transactions
|
Certain
plan
investments are shares of mutual funds managed by State Street Investments.
State Street Bank and Trust Company, a related company, is the trustee as
defined by the Plan and therefore, these transactions qualify as
party-in-interest transactions.
|
10.
|
Transfers
of Net Assets into the
Plan
|
On
January 7, 2003, the GPU Savings Plans merged into the FirstEnergy Corp.
Savings Plan Trust. Assets of $623 million transferred into the Plan. On
September 11, 2003, the Northeast Ohio Natural Gas Savings Plan transferred
$1.1 million of assets out of the Plan.
|
11.
|
Guaranteed
Investment Contract
|
The
Plan holds
fully benefit-responsive guaranteed investment contracts ("GICs"), which are
presented at contract value in the Statements of Net Assets Available for Plan
Benefits as previously stated in Note 4. The fair values of the GICs at
December 30, 2004 and 2003 were $419,583,137 and $425,947,397,
respectively. The average yield of the contracts was 4.20% and 5.15% for the
years 2004 and 2003, respectively. The crediting interest rate as of December
30, 2004 and 2003 was 4.44% and 4.30%, respectively. The GICs are measured
at
the contract value as determined by the insurers and banks and no valuation
reserve in relation to the contract value is deemed necessary. The GICs in
the
Plan are of various types and have zero minimum crediting interest rates. There
are fixed crediting interest rates and variable crediting interest rates that
reset on a monthly or quarterly basis.
|
12.
|
Risks
and Uncertainties
|
The
various
investment options are in professionally managed funds that purchase stocks
and
bonds of publicly traded companies, U.S. Government obligations as well as
money
market funds. Such investments are exposed to various risks such as interest
rate, market and credit. Due to the level of risk associated with such
investments and the level of uncertainty related to changes in the value of
such
investments, 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.
In
an amendment to the Plan dated June 21, 2004, the Plan year-end was
changed
from December 30
th
to December
31
st
, commencing
December 31, 2005.
For
the Plan
year beginning December 31, 2005, a one-day Plan year will be in effect.
For Plan years beginning after December 31, 2005, the twelve month period
beginning on January 1
st
and ending
December 31
st
will constitute
the Plan’s year.
EXHIBIT
INDEX
FIRSTENERGY
CORP.
SAVINGS PLAN
Exhibit
Number
|
23
|
Consent
of
Independent Registered Public Accounting
Firm
|
SIGNATURE
Pursuant
to the
requirements of the Securities Exchange Act of 1934, the Savings Plan Committee,
the administrator of the FirstEnergy Corp. Savings Plan, has duly caused this
annual report to be signed on its behalf by the undersigned hereunto duly
authorized.
|
|
FIRSTENERGY
CORP.
|
|
|
SAVINGS
PLAN
|
|
|
|
|
|
|
|
June
24,
2005
|
|
|
Date
|
|
|
|
By:
/s/
Wendy
E.Stark
|
|
|
Wendy E.Stark
|
|
|
Chairperson
|
|
|
Savings Plan Committee
|