|
Table of Contents
|
||
|
Page
|
||
|
December 31, 2011
|
December 31, 2010
|
|||||||
|
ASSETS
|
||||||||
|
Cash
|
$ | 5,366 | $ | 252 | ||||
|
Investments, at fair value
|
||||||||
|
Artesian Resources Corp. Class A non-voting common stock
|
3,655,603 | 3,322,338 | ||||||
|
Collective trusts
|
2,391,683 | --- | ||||||
|
Mutual funds
|
21,562,485 | --- | ||||||
|
Total investments, at fair value
|
27,609,771 | 3,322,338 | ||||||
|
Due from broker, net
|
--- | 23,994,000 | ||||||
|
Participants’ notes receivable
|
269,931 | 221,266 | ||||||
|
Contributions receivable
|
||||||||
|
Employer
|
133,028 | 164,261 | ||||||
|
Participants
|
6,250 | 42,636 | ||||||
|
Total contributions receivable
|
139,278 | 206,897 | ||||||
|
Total assets
|
28,024,346 | 27,744,753 | ||||||
|
NET ASSETS AVAILABLE FOR BENEFITS
|
$ | 28,024,346 | $ | 27,744,753 | ||||
|
See accompanying notes to financial statements.
|
||||||||
|
2011
|
||||
|
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
|
||||
|
Net investment income
|
||||
|
Artesian Resources Corp. Class A non-voting common stock dividends
|
$ | 134,125 | ||
|
Interest and dividend income from other investments
|
616,099 | |||
|
Net depreciation in fair value of investments
|
(1,089,485 | ) | ||
|
Total net investment income (loss)
|
(339,261 | ) | ||
|
Interest income from participant’s notes receivable
|
17,236 | |||
|
Contributions
|
||||
|
Employer contributions
|
979,923 | |||
|
Participant contributions
|
1,252,911 | |||
|
Total contributions
|
2,232,834 | |||
|
Total additions
|
1,910,809 | |||
|
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
|
||||
|
Participant distributions
|
1,630,191 | |||
|
Administrative expenses
|
1,025 | |||
|
Total deductions
|
1,631,216 | |||
|
NET INCREASE
|
279,593 | |||
|
NET ASSETS AVAILABLE FOR BENEFITS - BEGINNING OF YEAR
|
27,744,753 | |||
|
NET ASSETS AVAILABLE FOR BENEFITS - END OF YEAR
|
$ | 28,024,346 | ||
|
See accompanying notes to financial statements.
|
||||
|
1.
|
General
|
|
|
Effective July 1, 1984, Artesian Resources Corporation (the “Company” or “Plan Sponsor” or “Employer”) established the Artesian Resources Corporation Retirement Plan (the “Plan”) as a defined contribution retirement plan for its employees, subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). Pursuant to Internal Revenue Code (IRC) Section 401(k), the Plan permits 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 six members appointed by the Company’s
Board of Directors. Plan administration expenses may be paid out of the Plan unless paid by the Company (Note C). The Plan was amended and restated as of January 1, 2011 as described below. The following description of the Plan provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions.
|
||
|
2.
|
Participation and Vesting
|
|
|
Beginning in 2011, all employees age 18 and over are eligible for Plan participation immediately after hire. Prior to 2011, employees were required to have one year of service and attained age 21 in order to participate in the Plan. Employees may elect to make tax-deductible contributions up to the IRC limitation, including “catch-up” contributions for participants age 50 and older. Beginning in 2011, participants are also able to designate part or all of their contributions as Roth 401(k) contributions, which are made on an after-tax basis. For every dollar an employee contributes up to 6% of compensation, the Company will provide a 50% matching
contribution. Beginning in January 2011, employee bonuses are now included in the definition of compensation. In each Plan year, the Company may make a discretionary contribution to the Plan based on up to 2% of compensation for all employees eligible to participate in the Plan. The full discretionary contribution was made for 2011. The total matching, discretionary, and service contributions in 2011 were $400,040, $315,769 and $264,114, respectively.
|
||
|
Effective January 1, 2007, the Company’s Board of Directors, at its sole discretion, may make a Special Discretionary Stock Contribution to the Plan. A Special Discretionary Stock Contribution was not made for 2011.
|
||
|
The trust maintains separate accounts for each participant in the Plan. These accounts are credited with the participants’ contributions and Plan earnings and may be charged with certain administrative expenses. Participant contributions, and the related earnings, are fully vested. Company contributions, and the related earnings, vest as follows:
|
||
|
Years of Service
|
Vested 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
|
%
|
|
|
Any forfeitures of non-vested contributions may be offset against Company contributions or Plan administration expenses.
|
|
2.
|
Participation and Vesting (Continued)
The Company also sponsored another defined contribution plan for its employees, the Supplemental Plan, which was merged into the Plan on March 31, 2000. The contribution and vesting guidelines for the participants of the Supplemental Plan continued and consist of the following:
|
|
|
· Only employees as of April 26, 1994 are eligible for participation.
|
||
|
· A service contribution is made by the Company to the Plan for all eligible participants each quarter based upon each employee’s years of service and current compensation in accordance with the following schedule:
|
|
Years of Service
|
Percent of Compensation
|
||
|
1 - 5
|
2
|
%
|
|
|
6 - 10
|
4
|
%
|
|
|
11 - 20
|
5
|
%
|
|
|
over 20
|
6
|
%
|
|
|
· Participant contributions, and the related earnings thereon, are fully vested at all times. Company contributions, and the related earnings thereon, vest as follows:
|
||
|
Years of Service
|
Vested 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 may be offset against Company contributions or Plan administration expenses. Any participant who separates from the Company for any reason shall be entitled to receive the vested interest in their account.
|
||
|
3.
|
Investment Elections
|
|
|
Effective July 1, 2009, all future discretionary Company contributions, as well as all prior discretionary contributions and the corresponding earnings thereon, are participant directed. Prior to July 1, 2009, discretionary Company contributions were invested by the Trustee in a uniform manner for all participants.
|
||
|
Participants may allocate basic contributions among the various investments options, including the Company’s Class A non-voting common stock.
|
||
|
Participants may elect an allocation among one or more of the investment options in multiples of 1% with a minimum investment of 1% in any selected investment.
|
|
4.
|
Participant Notes Receivable
|
|
|
Participants may borrow from the Plan under the following guidelines:
|
||
|
· A participant may borrow as much as 50% of his or her vested account balance, subject to certain minimum and maximum limitations as defined in the Plan.
|
||
|
· Loans are repaid over a period not to exceed five years, unless the loan is to buy, build, or substantially rehabilitate the borrower’s principal residence.
|
||
|
· The participant’s account balance is secured as collateral when the loan is executed. If a participant defaults on a loan, the loan is treated as a distribution from the Plan to the participant.
|
||
|
· Interest rates on loans are prime plus 1% at the date of the loan. Interest rates on outstanding balances ranged from 4.25% to 9.75% for the year ended December 31, 2011.
|
||
|
· As loans are repaid to the Plan, the total payment, principal plus interest, is credited back to the participant’s account.
|
||
|
5.
|
Benefits
|
|
|
Participants are entitled to a benefit payment equal to the vested amount credited to their accounts upon retirement, upon permanent disability, at age 591/2, or upon termination of employment or death. In the event of death of a participant, a death benefit payment is made to the participant’s beneficiary. In the event of termination, distributions of less than $1,000 must be made in a lump sum. All other distributions may be made in the form of a joint and survivor annuity, installments, or in a lump sum subject to certain restrictions as
defined in the Plan.
|
||
|
6.
|
Plan 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 non-forfeitable. 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.
|
||
|
7.
|
Forfeitures
|
|
|
Forfeited balances are used to reduce the Plan sponsor’s future matching contribution obligations. During the year ended December 31, 2011, these forfeitures amounted to $21,024. Forfeitures totaling $20,018 were used in 2011 to reduce the Plan sponsor’s contribution obligations.
|
|
8.
|
Administrative Expenses
|
|
|
Certain administrative expenses of the Plan are paid by the Employer. The Plan pays for certain member requested services and investment fees which totaled $1,025 for the year ended December 31, 2011. The fees for participant requested services are charged to the accounts of participants requesting the transaction. Investment fees are allocated to participants’ accounts based on a specified basis point per investment through the investments’ earnings.
|
||
|
1.
|
Basis of Accounting
|
|
|
For financial reporting purposes, the assets and liabilities of the Plan are reflected on the accrual basis of accounting.
|
||
|
2.
|
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 assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and changes therein. Actual results could differ from those estimates.
|
||
|
3.
|
Investment Valuation and Income Recognition
|
|
|
Plan assets held in mutual funds (shares of registered investment companies) and the Company’s Class A non-voting common stock are unsecured and are traded on national securities exchanges. Mutual funds are valued at net asset value (“NAV”) and common stock is valued at market value at December 31, 2011 and 2010.
|
||
|
Plan assets held in collective trusts are unsecured and are valued at trading unit prices, which approximates fair value. The collective trust fund represents investments in the PNC Investment Contract Fund. As described in Accounting Standards Codification (ASC) 962-325, Plan Accounting—Defined Contribution Pension Plans/Investments—Other, investment contracts are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts,
because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan. Units held are valued at the unit value which is based on contract value and approximates fair value in accordance with the audited financial statements of the investment contract fund as of December 31, 2011.
|
||
|
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 and includes the Plan’s gains and losses on investments bought and sold as well as held during the year.
|
|
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.
|
||
|
4.
|
Due from Broker
|
|
|
As described in Note A (2), the Plan was amended and restated effective January 1, 2011. In addition to the Plan amendments noted above, the Company changed their Plan custodian effective January 1, 2011. Under the new custodian, the previously held mutual fund and stable value fund shares existing at the old custodian were not available as participant directed investment options.
|
||
|
Therefore, on December 31, 2010, all mutual fund and stable value fund investments were sold for cash, subsequently used to purchase investments through the new custodian, which were settled on January 3, 2011. The Plan follows trade-date accounting, which requires the sold, but not yet settled mutual fund shares to be presented as “Due from broker” in the financial statements. The Artesian Resources Corporation Common Stock was available under the new custodian, and was therefore transferred on December 31, 2010 and is presented as an investment.
|
||
|
5.
|
Notes Receivable – Participant Loans
|
|
|
Participant loans are reclassified as participants’ notes receivable, and are measured at the unpaid principal balance plus unpaid accrued interest. The Plan classifies loans in default for various events, including failure to pay timely installments. Defaulted loans are deemed distributed and recorded as benefits paid to participants in the statement of changes in net assets available for benefits. There were no amounts recorded as deemed distributions in 2011.
|
||
|
6.
|
Benefit Payments and Participant Distributions
|
|
|
Participant distributions are recorded when paid.
|
||
|
7.
|
Income Taxes
|
|
|
The Internal Revenue Service has determined and informed the Company by letters dated March 19, 2002 and January 4, 2012 that the original Plan plus amendments is qualified and the trust established under the Plan is tax exempt under the appropriate sections of the Internal Revenue Code. The Plan has been amended since receiving the March 19, 2002 determination letter. However, the Plan administrator and the Plan’s tax counsel believe that the Plan was designed and being operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, no provision for income taxes has been included in the financial statements.
|
||
|
The Plan Sponsor has analyzed the tax positions taken by the Plan and has concluded that, as of December 31, 2011, no uncertain tax positions are taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, currently no audits are in progress for any tax periods. The Plan administrator believes it is no longer subject to income tax examinations for years prior to 2008.
|
||
|
8.
|
Cash and Cash Equivalents
|
|
|
Cash and cash equivalents include cash and short-term interest-bearing investments with initial maturities of three months or less.
|
||
|
9.
|
New Accounting Pronouncements
|
|
|
In May 2011, the Financial Accounting Standards Board ("FASB") issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. ASU 2011-04 amended ASC 820, Fair Value Measurements and Disclosures, to provide a consistent definition of fair value and improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRSs. Some of the amendments clarify the application of existing fair value measurement and disclosure requirements, while other amendments change a
particular principle or requirement for measuring fair value or disclosing information about fair value measurements. The amendments are to be applied prospectively and are effective for annual periods beginning after December 15, 2011. Plan management does not expect this requirement to have a material impact on the Plan's financial statements.
|
||
|
2011
|
||||
|
Artesian Resources Corp. Class A non-voting common stock
|
$ | (23,385 | ) | |
|
Collective trusts
|
48,980 | |||
|
Mutual funds
|
(1,115,080 | ) | ||
| $ | (1,089,485 | ) | ||
|
2011
|
2010
|
|||||||
|
Common Stocks
|
||||||||
|
Artesian Resources Corp.
|
||||||||
|
Class A non-voting common stock
|
$ | 3,655,603 | $ | 3,322,338 | ||||
|
Collective Trusts
|
||||||||
|
PNC Investment Contract Fund
|
$ | 2,391,683 | * | |||||
|
Mutual Funds
|
||||||||
|
American Funds Growth
|
||||||||
|
Fund of America R5
|
$ | 4,566,442 | * | |||||
|
American Funds Century
|
||||||||
|
Equity Income Inv
|
$ | 4,271,877 | * | |||||
|
PIMCO Funds Total Return
|
||||||||
|
Fund Admin
|
$ | 3,925,520 | * | |||||
|
American Funds Fundamental
|
||||||||
|
Investors R5
|
$ | 2,973,419 | * | |||||
|
* Investments individually represent less than 5% of net assets.
|
||||||||
|
FASB Accounting Standards Codification (ASC) 820, Fair Value Measurements and disclosure defines fair value, establishes a framework for using fair value to measure assets and liabilities, and expands disclosures about fair value measurements. This framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy
under FASB ASC 820 are as follows:
|
||
|
· Level 1: unadjusted quoted prices in active markets for identical assets or liabilities that the Plan has the ability to access;
|
||
|
· Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted market prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in non-active markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; or
|
||
|
· Level 3: inputs that are unobservable and significant to the fair value measurement.
|
||
|
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
|
||
|
Investments at Fair Value as of December 31, 2011
|
||||||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
|
Mutual funds
|
||||||||||||||||
|
Large-Cap
|
$ | 8,817,336 | $ | --- | $ | --- | $ | 8,817,336 | ||||||||
|
Mid-Cap
|
5,758,932 | --- | --- | 5,758,932 | ||||||||||||
|
Small-Cap
|
903,279 | --- | --- | 903,279 | ||||||||||||
|
Balanced
|
1,612,100 | --- | --- | 1,612,100 | ||||||||||||
|
Fixed Income
|
3,302,695 | --- | --- | 3,302,695 | ||||||||||||
|
International
|
1,168,143 | --- | --- | 1,168,143 | ||||||||||||
|
Total mutual funds
|
21,562,485 | --- | --- | 21,562,485 | ||||||||||||
|
Artesian Resources Corporation Class A non-voting common stock
|
3,655,603 | --- | --- | 3,655,603 | ||||||||||||
|
Common collective fund
|
--- | 2,391,683 | --- | 2,391,683 | ||||||||||||
|
Total investments at fair value
|
$ | 25,218,088 | $ | 2,391,683 | $ | --- | $ | 27,609,771 | ||||||||
|
Investments at Fair Value as of December 31, 2010
|
||||||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
|
Artesian Resources Corporation Class A non-voting common stock
|
$ | 3,322,338 | $ | --- | $ | --- | $ | 3,322,338 | ||||||||
|
Total investments at fair value
|
$ | 3,322,338 | $ | -- | $ | -- | $ | 3,322,338 | ||||||||
|
Amounts allocated to withdrawing participants are reported on the Schedule H of Form 5500 for benefit claims that have been processed and approved for payment prior to December 31, but not yet paid as of that date.
|
||
|
At December 31, 2011 and 2010, there were no net assets available for plan benefits for distributions to participants who have requested a distribution from the Plan prior to the end of the Plan year.
|
||
|
Artesian Resources Corporation and its employees are parties-in-interest to the Plan. On December 31, 2011, the Plan’s assets included $3,655,603 of Artesian Resources Corporation Class A non-voting stock and $269,931 of participant notes receivable. Additionally, certain plan investments totaling $2,391,683 represent investments managed by PNC Advisors. PNC Advisors is the custodian as defined by the Plan and, therefore, these transactions qualify as party-in-interest transactions. Transactions in these assets are exempt from the prohibited transaction rules.
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
|||||
|
Identity of issuer, borrower, lessor, or similar party
|
Description of investment, including maturity date, rate of interest, collateral, par, or maturity value
|
Cost**
|
Current Value
|
||||||
| * |
Common Stock -
|
||||||||
|
Artesian Resources Corporation
|
Class A non voting common stock
|
$ | 3,655,603 | ||||||
| * |
PNC Investment Contract Fund Y
|
Common/Collective Trust
|
2,391,683 | ||||||
|
Mutual Funds -
|
|||||||||
|
Growth Fund of America R5
|
Mutual Fund
|
4,566,442 | |||||||
|
American Cent Equity Income Inv
|
Mutual Fund
|
4,271,877 | |||||||
|
Pimco Total Return Fund - Adm
|
Mutual Fund
|
3,295,520 | |||||||
|
American Fundamental Inv R5
|
Mutual Fund
|
2,973,419 | |||||||
|
American EuroPacific Growth R5
|
Mutual Fund
|
1,168,143 | |||||||
|
Goldman Sachs Growth Oppor Ir
|
Mutual Fund
|
930,938 | |||||||
|
Royce Low Price Stock
|
Mutual Fund
|
840,104 | |||||||
|
T Rowe Growth Stock Adv
|
Mutual Fund
|
816,032 | |||||||
|
Perkins MidCap Value Fd Cls T
|
Mutual Fund
|
556,116 | |||||||
|
Janus Balanced Fund Class T
|
Mutual Fund
|
548,068 | |||||||
|
Livestrong 2025 Portfolio Inv
|
Mutual Fund
|
538,059 | |||||||
|
American Cent MidCap Value Inv
|
Mutual Fund
|
461,444 | |||||||
|
Livestrong 2035 Portfolio Inv
|
Mutual Fund
|
275,164 | |||||||
|
Livestrong 2045 Porfolio Inv
|
Mutual Fund
|
150,359 | |||||||
|
Livestrong 2015 Portfolio Inv
|
Mutual Fund
|
100,450 | |||||||
|
MFS New Discovery
|
Mutual Fund
|
63,175 | |||||||
|
Federated Total Return Govt Bond
|
Mutual Fund
|
7,175 | |||||||
|
Participants Notes Receivables -
|
|||||||||
| * |
Various Participants
|
Interest rates range from 4.25% to 9.75%
|
269,931 | ||||||
| $ | 27,879,702 | ||||||||
| * |
Identifies the party as a "Party in Interest" as defined by ERISA.
|
||||||||
| ** |
Cost information is not required for participant directed investments and is therefore not included.
|
||||||||
|
See accompanying Report of Independent Registered Public Accounting Firm.
|
|||||||||
|
ARTESIAN RESOURCES CORPORATION RETIREMENT PLAN
|
|||
|
Date: June 22, 2012
|
By:
|
/s/ Joseph A. DiNunzio
|
|
|
Joseph A. DiNunzio
|
|||
|
Executive Vice President and Corporate Secretary
|
|||
|
Exhibit No.
|
Description
|
|
*
|
Filed herewith.
|