SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 11-K

 

Annual Report Pursuant to Section 15(d) of the
Securities Exchange Act of 1934

For the fiscal year ended December 31, 2003

 

Commission File Number 1-14201

 

A.                                   Full title of the Plans and the address of the Plans, if different from that of the issuer named below:
Sempra Energy Savings Plan, San Diego Gas & Electric Company Savings Plan, Southern California Gas Company Retirement Savings Plan, Sempra Energy Trading Retirement Savings Plan, Twin Oaks Savings Plan and Mesquite Power LLC Savings Plan

 

B.                                     Name of issuer of the securities held pursuant to the Plans and the address of its principal executive office:
Sempra Energy,
101 Ash Street, San Diego, CA 92101-3017

 

 



 

TABLE OF CONTENTS

 

 

 

AUDITED FINANCIAL STATEMENTS

Sempra Energy Savings Plan

San Diego Gas & Electric Company Savings Plan

Southern California Gas Company Retirement Savings Plan

Sempra Energy Trading Retirement Savings Plan

Twin Oaks Retirement Savings Plan

Mesquite Power LLC Savings Plan

SIGNATURES

EXHIBITS

23.1

Consent of Deloitte & Touche LLP

99.1

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 



 

Sempra Energy Savings Plan

 

Financial Statements as of and for the Years Ended December 31, 2003 and 2002, Supplemental Schedule as of December 31, 2003 and Report of Independent Registered Public Accounting Firm

 



 

SEMPRA ENERGY SAVINGS PLAN

 

TABLE OF CONTENTS

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

FINANCIAL STATEMENTS AS OF DECEMBER 31, 2003 AND 2002 AND FOR THE YEARS THEN ENDED:

 

 

 

Statements of Assets Available for Benefits

 

 

 

Statements of Changes in Assets Available for Benefits

 

 

 

Notes to Financial Statements

 

 

 

SUPPLEMENTAL SCHEDULE AS OF DECEMBER 31, 2003:

 

 

 

Form 5500, Schedule H, Line 4i—Schedule of Assets (Held at End of Year)

 

 

 

NOTE:

Other schedules required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 are omitted because of the absence of conditions under which they are required or as they are filed by the trustee of the Master Trust in which the Plan participates.

 

 



 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Sempra Energy Savings Plan

 

We have audited the accompanying statements of assets available for benefits of Sempra Energy Savings Plan (the “Plan”) as of December 31, 2003 and 2002, and the related statements of changes in assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). 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 audits provide a reasonable basis for our opinion.

 

In our opinion, such financial statements present fairly, in all material respects, the assets available for benefits of the Plan at December 31, 2003 and 2002, and the changes in assets available for benefits of the Plan for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule listed in the Table of Contents is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is 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. This schedule is the responsibility of the Plan’s management. Such schedule has been subjected to the auditing procedures applied in our audit of the basic 2003 financial statements and, in our opinion, is fairly stated in all material respects when considered in relation to the basic 2003 financial statements taken as a whole.

 

/s/ DELOITTE & TOUCHE LLP

 

San Diego, California

June 18, 2004

 

1



 

SEMPRA ENERGY SAVINGS PLAN

 

STATEMENTS OF ASSETS AVAILABLE FOR BENEFITS

DECEMBER 31, 2003 AND 2002

(DOLLARS IN THOUSANDS)

 

 

 

2003

 

2002

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS

 

$

14

 

$

 

 

 

 

 

 

 

INVESTMENT:

 

 

 

 

 

At fair value:

 

 

 

 

 

Investment in Master Trust

 

108,863

 

90,069

 

 

 

 

 

 

 

RECEIVABLES:

 

 

 

 

 

Dividends

 

361

 

386

 

Employer contributions

 

879

 

687

 

 

 

 

 

 

 

Total receivables

 

1,240

 

1,073

 

 

 

 

 

 

 

ASSETS AVAILABLE FOR BENEFITS

 

$

110,117

 

$

91,142

 

 

See notes to financial statements.

 

2



 

SEMPRA ENERGY SAVINGS PLAN

 

STATEMENTS OF CHANGES IN ASSETS AVAILABLE FOR BENEFITS

YEARS ENDED DECEMBER 31, 2003 AND 2002

(DOLLARS IN THOUSANDS)

 

 

 

2003

 

2002

 

 

 

 

 

 

 

ADDITIONS:

 

 

 

 

 

Net investment income (loss):

 

 

 

 

 

Plan interest in the Sempra Energy Savings Plan Master Trust investment income (loss)

 

$

22,234

 

$

(10,231

)

Investment expenses

 

(27

)

(33

)

 

 

 

 

 

 

Net investment income (loss)

 

22,207

 

(10,264

)

 

 

 

 

 

 

Contributions:

 

 

 

 

 

Employer

 

3,467

 

3,350

 

Participating employees

 

8,943

 

11,191

 

 

 

 

 

 

 

Total contributions

 

12,410

 

14,541

 

 

 

 

 

 

 

Transfers from plans of related entities

 

1,888

 

1,819

 

 

 

 

 

 

 

Net additions

 

36,505

 

6,096

 

 

 

 

 

 

 

DEDUCTIONS:

 

 

 

 

 

Distributions to participants or their beneficiaries

 

7,757

 

5,787

 

Transfers to plans of related entities

 

9,773

 

41,992

 

 

 

 

 

 

 

Total deductions

 

17,530

 

47,779

 

 

 

 

 

 

 

NET INCREASE (DECREASE)

 

18,975

 

(41,683

)

 

 

 

 

 

 

ASSETS AVAILABLE FOR BENEFITS—Beginning of year

 

91,142

 

132,825

 

 

 

 

 

 

 

ASSETS AVAILABLE FOR BENEFITS—End of year

 

$

110,117

 

$

91,142

 

 

See notes to financial statements.

 

3



 

SEMPRA ENERGY SAVINGS PLAN

 

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2003 AND 2002

 

1.                      PLAN DESCRIPTION AND RELATED INFORMATION

 

The following description of the Sempra Energy Savings Plan (the “Plan”) is provided for general information purposes only. Participants should refer to the Plan document for a more complete description of the Plan’s provisions.

 

General—The Plan is a defined contribution plan that provides employees of Sempra Energy or any affiliate who has adopted this Plan (the “Company” or “Employer”) with retirement benefits. Employees may participate immediately in the Plan and, after one year in which they complete 1,000 hours of service, receive an employer matching contribution. Employees may make regular savings investments in Sempra Energy common stock and other optional investments permitted by the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).

 

The Plan was amended to allow Employer contributions to be funded, in part, from the Sempra Energy Stock Ownership Plan and Trust, effective January 1, 2000.

 

The Plan was amended, effective June 1, 2000, to allow for automatic deferrals for employees who neither elect a specific deferral percentage nor elect not to participate in the Plan. The automatic deferral is an amount equal to 3% of eligible pay and the investment vehicle is the T. Rowe Price Retirement Strategy Trust – Balanced, from the date of the amendment through December 31, 2003. On December 31, 2003, the balance in that trust was transferred to the T. Rowe Price Personal Strategy Balanced Fund, and effective January 1, 2004, that will be the investment vehicle for automatic deferrals.

 

Effective July 1, 2000, Sempra Energy Services Savings Plan assets held in the Sempra Energy Savings Master Trust (the “Master Trust”) at T. Rowe Price Trust Company (“T. Rowe Price”) merged with the Sempra Energy Savings Plan. All remaining assets of the Sempra Energy Services Savings Plan transferred into the Plan in April 2002.

 

On September 20, 2001, the California Public Utilities Commission approved Sempra Energy’s request to integrate the management teams of its two California utility subsidiaries. The decision retains the separate identities of each utility and is not a merger. Instead, utility integration is a reorganization that consolidates senior management functions of the two utilities and returns to utilities the majority of shared support services previously provided by Sempra Energy’s centralized corporate center.  The resulting transfer of employees took place on April 1, 2002. The Plan assets of the employees who returned a written request to have their assets transferred from the Plan were transferred to the plan of the receiving utility throughout the year following receipt of their request.

 

The Plan was amended, effective October 1, 2003, to allow participants who have attained age 55 and have ten years of service with the Company as of October 1, to direct up to 10% of the shares in the employer matching account or the statutorily calculated amount of the ESOP shares, whichever is greater, into any of the Plan’s designated investments.

 

4



 

Employees transfer between the Company and related entities for various reasons. These transfers follow Federal Affiliated Compliance Guidelines and result in the transfer of participant assets from one plan to another.

 

Administration—Certain administrative functions are performed by officers or employees of the Company.  No such officer or employee receives compensation from the Plan. Certain administrative expenses are paid directly by the Company, such as legal and accounting fees. All investment expenses are paid by the participants, including recordkeeping, trustee, loan, and investment management fees.

 

Contributions—Contributions to the Plan can be made under the following provisions:

 

Participating Employee Contributions—Pursuant to Section 401(a) of the Internal Revenue Code (the “IRC”), participants may contribute up to 25% of eligible pay on a pre-tax basis, an after-tax basis, or a combination. The IRC limited total individual pre-tax contributions to $12,000 and $11,000, in 2003 and 2002, respectively. On January 1, 2002, catch-up contributions were permitted for participants of at least 50 years of age. The catch-up provision provided these participants the opportunity to contribute an additional $2,000 and $1,000 on a pre-tax basis in 2003 and 2002, respectively (increasing to $3,000 in 2004, $4,000 in 2005, and $5,000 in 2006, with inflation adjustments after that until December 31, 2010).

 

Employer Nonelective Matching Contributions—The Company makes matching contributions to the Plan equal to 50% of each participant’s contribution, up to the first 6% of eligible pay, each pay period. The Company’s matching contributions are invested in Sempra Energy common stock. Employer contributions are funded, in part, from the Sempra Energy Stock Ownership Plan and Trust. Total Employer nonelective matching contributions for the years ended December 31, 2003 and 2002 were $2,193,555 and $2,663,439, respectively.

 

Discretionary Incentive Contribution—If established performance goals and targets of Sempra Energy are met in accordance with the terms of the incentive match guidelines established each year, the Company will make an additional matching contribution as determined by the Board of Directors of Sempra Energy. Incentive contributions of 1.000% and 0.814% of eligible compensation were made for 2003 and 2002, respectively. The incentive contributions were made on March 15, 2004 and March 14, 2003 to all employees employed on December 31, 2003 and 2002, respectively. For both years, the contributions were made in the form of newly issued shares of Sempra Energy common stock. Total discretionary incentive contributions for the years ended December 31, 2003 and 2002 were $879,260 and $686,912, respectively.

 

Participant Accounts—A separate account is established and maintained in the name of each participant and reflects the participant’s contributions and the Employer’s nonelective matching and discretionary incentive contributions, and the earnings and losses attributed to, each investment fund less administrative expenses.  Participants are allocated a share of each fund’s investment earnings net of investment fees on a daily basis, based upon their account balance as a percentage of the total fund balance.  Investment expenses, except those for a specific transaction, are allocated quarterly to individual funds based on either fund balance or a participant’s pro rata share, as defined in the Plan document.

 

Vesting—All participant accounts are fully vested and nonforfeitable at all times.

 

Investment Options—All investments are held by the Sempra Energy Master Trust (the “Master Trust”) (see Note 5). Employees elect to have their contributions invested in increments of 1% in Sempra Energy common stock, specific mutual funds offered by T. Rowe Price and Fidelity Investment

 

5



 

Managers, or a broad range of funds through a brokerage account. Participants may invest a maximum of 50% of the value of their accounts (excluding the employer matching account) in the brokerage account.

 

Payment of Dividends—Active employees’ cash dividends on the shares of Sempra Energy common stock are reinvested in the Sempra Energy common stock fund.  Cash dividends are paid to former employees who have elected to leave their accounts in the Plan.

 

Payment of Benefits—Participants receive their vested account balance in a single lump sum payment in cash or Company stock for any portion of their account held in Company stock at their termination of employment with the Company, retirement, or permanent disability, or to a named beneficiary(ies) in the event of death.

 

Plan Termination—Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of termination, the assets of the Plan will be distributed to the participants.

 

Related Party Transactions—Certain Plan investments are shares of mutual funds managed by T. Rowe Price, the Plan’s recordkeeper; therefore, these transactions qualify as party-in-interest transactions. Fees paid by the Plan to the recordkeeper for investment management services were $26,853 and $32,626 for the years ended December 31, 2003 and 2002, respectively.

 

At December 31, 2003 and 2002, the Plan held 1,448,903 and 1,555,125 shares, respectively, of common stock of Sempra Energy, the sponsoring employer, with a cost basis of $34,619,365 and $37,525,007, respectively. During the year ended December 31, 2003 and 2002, the Plan recorded dividend income of $1,481,303 and $1,737,691, respectively.

 

2.                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Accounting—The Plan maintains its financial statements on the accrual basis of accounting.

 

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 net assets and disclosures at the date of the financial statements and the reported changes in net assets during the reporting period. Actual results could differ from those estimates.

 

Investment Valuation and Income Recognition—The Plan’s investments are stated at fair value based on quoted market prices. Loans are carried at cost plus accrued interest, which approximates fair value. Purchases and sales of securities are recorded on trade date. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

 

Benefit Payments—Payments are recorded when paid.

 

3.                      TAX STATUS

 

On November 14, 2002, the Internal Revenue Service issued the Plan a favorable determination letter stating that the Plan, as then designed, was in compliance with the applicable sections of the IRC, and the underlying trust is therefore exempt from taxation under Section 501(a) of the IRC.

 

6



 

4.                      PARTICIPANT LOANS

 

The Plan permits participants to borrow against the balances in their individual accounts within the Master Trust. A participant is limited to borrowing a maximum of 50% of the value of his/her account balance or $50,000, whichever is less. The minimum amount that can be borrowed is $1,000 and the fee charged for processing a loan is paid by the participant who takes out the loan. Participants may have up to two loans outstanding, one of which can be a primary residence loan. Primary residence loans are amortized over 15 years and other loans have a maximum repayment period of five years. All loans bear interest at 1% above the prime rate, as published in the Wall Street Journal, at the time the loan is made. For the years ended December 31, 2003 and 2002, interest rates on loans ranged from 5.00% to 10.5% and had maturity dates through January 2019.

 

5.                      INVESTMENTS IN THE MASTER TRUST (DOLLARS IN THOUSANDS)

 

The Plan’s assets are held in a trust account at T. Rowe Price, the trustee of the Plan, and consist of an interest in the Master Trust. Use of the Master Trust permits the commingling of the trust assets of two or more similar employee benefit plans sponsored by Sempra Energy for investment and administrative purposes. The Plan’s interest in the net assets of the Master Trust is based on the individual plan participants’ investment balances. Investment income is allocated on a daily basis through a valuation performed by the Trustee. Expenses relating to the Master Trust are allocated to the individual funds based upon each participant’s pro-rata share, per share calculation, or transaction to individual funds. At December 31, 2003 and 2002, the Plan’s interest in the net assets of the Master Trust was approximately 9% and 10%, respectively.

 

The assets available for benefits of the Master Trust at December 31, 2003 and 2002 are summarized as follows:

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Sempra Energy common stock

 

$

675,022

 

$

532,653

 

Common/collective trusts

 

287,518

 

253,055

 

Mutual funds

 

229,130

 

125,883

 

Participant loans

 

27,642

 

24,880

 

 

 

 

 

 

 

Assets available for benefits

 

$

1,219,312

 

$

936,471

 

 

Net appreciation (depreciation), and dividend and interest income of the Master Trust for the years ended December 31, 2003 and 2002 is summarized as follows:

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Net appreciation (depreciation) of investments:

 

 

 

 

 

Sempra Energy common stock

 

$

145,639

 

$

(16,142

)

Common/collective trusts

 

64,051

 

(50,847

)

Mutual funds

 

21,848

 

(12,802

)

Dividends

 

25,238

 

23,088

 

Interest

 

1,754

 

1,933

 

 

7



 

The following presents investments that represent 5% or more of the Plan’s assets at December 31, 2003 and 2002:

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Sempra Energy common stock

 

$

43,554

 

$

36,779

 

T. Rowe Price Equity Index Trust

 

23,077

 

18,491

 

T. Rowe Price Small-Cap Stock Fund

 

12,055

 

9,068

 

T. Rowe Price Personal Strategy Balanced Fund

 

7,498

 

 

T. Rowe Price Retirement Strategy Trust - Balanced

 

 

5,761

 

T. Rowe Price Stable Value Fund

 

 

5,333

 

 

The Plan and Master Trust invest in various securities as detailed above. Investment securities, in general, are exposed to various risks such as interest rate, credit, and overall market volatility. Due to the level of risk associated with investment securities, it is reasonably possible that changes in the values of certain investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statements of assets available for plan benefits.

 

6.                      NON-PARTICIPANT DIRECTED INVESTMENTS (DOLLARS IN THOUSANDS)

 

The Company’s contributions to the Plan are invested solely in Sempra Energy common stock. These contributions are classified as non-participant directed investments. Information about the Plan’s assets and the significant components of the Plan’s changes in assets relating to the non-participant directed investments for the years ended December 31, 2003 and 2002 are as follows:

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

Sempra Energy common stock

 

$

30,813

 

$

24,923

 

Employer contribution receivable

 

879

 

687

 

 

 

 

 

 

 

Total non-participant directed assets

 

$

31,692

 

$

25,610

 

 

 

 

 

 

 

Changes in Assets:

 

 

 

 

 

Contributions

 

$

3,078

 

$

3,350

 

Net investment income

 

7,410

 

(1,229

)

Distributions to participants or their beneficiaries

 

(2,313

)

(1,619

)

Transfers to plans of related entities

 

(2,093

)

(10,301

)

 

 

 

 

 

 

Total changes in assets

 

$

6,082

 

$

(9,799

)

 

******

 

8



 

SEMPRA ENERGY SAVINGS PLAN

 

FORM 5500, SCHEDULE H, LINE 4i

SCHEDULE OF ASSETS (HELD AT END OF YEAR)

DECEMBER 31, 2003

 

(a)

 

(b)
Identity of Issue, Borrower, Lessor
or Similar Party

 

(c)
Description of Investment
Including Maturity, Date,
Rate of Interest, Collateral

 

(d)
Cost

 

(e)
Current
Value

 

*

 

Participant loans

 

Interest rates from 5.00%-10.5%; maturities from January 2004 through January 2019

 

**

 

$

1,715,255

 

 


*   Indicates party-in-interest to the Plan

** Cost not applicable—participant directed investments

 

9



 

San Diego Gas & Electric Company Savings Plan

 

Financial Statements as of and for the Years Ended December 31, 2003 and 2002, Supplemental Schedule as of December 31, 2003 and Report of Independent Registered Public Accounting Firm

 



 

SAN DIEGO GAS & ELECTRIC COMPANY SAVINGS PLAN

 

TABLE OF CONTENTS

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

FINANCIAL STATEMENTS AS OF DECEMBER 31, 2003 AND 2002 AND FOR THE YEARS THEN ENDED:

 

 

 

Statements of Assets Available for Benefits

 

 

 

Statements of Changes in Assets Available for Benefits

 

 

 

Notes to Financial Statements

 

 

 

SUPPLEMENTAL SCHEDULE AS OF DECEMBER 31, 2003:

 

 

 

Form 5500, Schedule H, Line 4i—Schedule of Assets (Held at End of Year)

 

 

NOTE:               Other schedules required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 are omitted because of the absence of conditions under which they are required or as they are filed by the trustee of the Master Trust in which the Plan participates.

 



 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

San Diego Gas & Electric Company Savings Plan

 

We have audited the accompanying statements of assets available for benefits of San Diego Gas & Electric Company Savings Plan (the “Plan”) as of December 31, 2003 and 2002, and the related statements of changes in assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). 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 audits provide a reasonable basis for our opinion.

 

In our opinion, such financial statements present fairly, in all material respects, the assets available for benefits of the Plan at December 31, 2003 and 2002, and the changes in assets available for benefits of the Plan for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule listed in the Table of Contents is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is 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. This schedule is the responsibility of the Plan’s management. Such schedule has been subjected to the auditing procedures applied in our audit of the basic 2003 financial statements and, in our opinion, is fairly stated in all material respects when considered in relation to the basic 2003 financial statements taken as a whole.

 

/s/ DELOITTE & TOUCHE LLP

 

San Diego, California

June 18, 2004

 

1



 

SAN DIEGO GAS & ELECTRIC COMPANY SAVINGS PLAN

 

STATEMENTS OF ASSETS AVAILABLE FOR BENEFITS

DECEMBER 31, 2003 AND 2002

(DOLLARS IN THOUSANDS)

 

 

 

2003

 

2002

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS

 

$

55

 

$

7

 

 

 

 

 

 

 

INVESTMENT:

 

 

 

 

 

At fair value:

 

 

 

 

 

Investment in Master Trust

 

452,981

 

338,826

 

 

 

 

 

 

 

RECEIVABLES:

 

 

 

 

 

Dividends

 

1,682

 

1,672

 

Employer contributions

 

2,472

 

1,778

 

 

 

 

 

 

 

Total receivables

 

4,154

 

3,450

 

 

 

 

 

 

 

ASSETS AVAILABLE FOR BENEFITS

 

$

457,190

 

$

342,283

 

 

See notes to financial statements.

 

2



 

SAN DIEGO GAS & ELECTRIC COMPANY SAVINGS PLAN

 

STATEMENTS OF CHANGES IN ASSETS AVAILABLE FOR BENEFITS

YEARS ENDED DECEMBER 31, 2003 AND 2002

(DOLLARS IN THOUSANDS)

 

 

 

2003

 

2002

 

ADDITIONS:

 

 

 

 

 

Net investment income (loss):

 

 

 

 

 

Plan interest in the Sempra Energy Savings Plan Master Trust investment income (loss)

 

$

97,459

 

$

(21,826

)

Investment expenses

 

(132

)

(112

)

 

 

 

 

 

 

Net investment income (loss)

 

97,327

 

(21,938

)

 

 

 

 

 

 

Contributions:

 

 

 

 

 

Employer

 

12,518

 

7,115

 

Participating employees

 

27,926

 

22,634

 

 

 

 

 

 

 

Total contributions

 

40,444

 

29,749

 

 

 

 

 

 

 

Transfers from plans of related entities

 

10,559

 

42,097

 

 

 

 

 

 

 

Net additions

 

148,330

 

49,908

 

 

 

 

 

 

 

DEDUCTIONS:

 

 

 

 

 

Distributions to participants or their beneficiaries

 

30,766

 

25,600

 

Transfers to plans of related entities

 

2,657

 

942

 

 

 

 

 

 

 

Total deductions

 

33,423

 

26,542

 

 

 

 

 

 

 

NET INCREASE

 

114,907

 

23,366

 

 

 

 

 

 

 

ASSETS AVAILABLE FOR BENEFITS—Beginning of year

 

342,283

 

318,917

 

 

 

 

 

 

 

ASSETS AVAILABLE FOR BENEFITS—End of year

 

$

457,190

 

$

342,283

 

 

See notes to financial statements.

 

3



 

SAN DIEGO GAS & ELECTRIC COMPANY SAVINGS PLAN

 

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2003 AND 2002

 

1.             PLAN DESCRIPTION AND RELATED INFORMATION

 

The following description of the San Diego Gas & Electric Company Savings Plan (the “Plan”) is provided for general information purposes only. Participants should refer to the Plan document for a more complete description of the Plan’s provisions.

 

General—The Plan is a defined contribution plan that provides employees of San Diego Gas & Electric Company (the “Company” or “Employer”) with retirement benefits. Employees may participate immediately in the Plan and, after one year in which they complete 1,000 hours of service, receive an employer matching contribution. Employees make regular savings investments in common stock of Sempra Energy, the parent company of the Employer, and other optional investments permitted by the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).

 

The Plan was amended, effective June 1, 2000, to allow for automatic deferrals for employees who neither elect a specific deferral percentage nor elect not to participate in the Plan. The automatic deferral is an amount equal to 3% of eligible pay and the investment vehicle for all participants was the T. Rowe Price Retirement Strategy Trust –Balanced, from the date of amendment through December 31, 2003. On December 31, 2003, the balance in that trust for non-represented participants was transferred to the T. Rowe Price Personal Strategy Balanced Fund, and effective January 1, 2004, that will be their investment vehicle for automatic deferrals. There were no changes for the represented participants.

 

On September 20, 2001, the California Public Utilities Commission approved Sempra Energy’s request to integrate the management teams of the Company and an affiliated California utility. The decision retains the separate identities of each utility and is not a merger. Instead, utility integration is a reorganization that consolidates senior management functions of the two utilities and returns to utilities the majority of shared support services previously provided by Sempra Energy’s centralized corporate center. The resulting transfer of employees took place on April 1, 2002. The Plan assets of the employees who returned a written request to have their assets transferred to the Plan from the Sempra Energy Savings Plan were transferred to the Plan throughout the year following receipt of their request.

 

On September 15, 2003, the Company, as part of the IRS Voluntary Compliance Program, made $3.5 million in contributions for certain participants to correct Plan defects that existed prior to June 26, 1998, the date of the business combination that created the Company’s current parent company. This included $2.4 million in corrective employee contributions and $1.1 million in corrective Company matching contributions.

 

The Plan was amended, effective October 1, 2003, to allow non-represented participants who have attained age 55 and have ten years of service with the Company as of October 1, to direct up to 10% of the shares in the employer matching account or the statutorily calculated amount of ESOP shares, whichever is greater, into any of the Plan’s designated investments.

 

Employees transfer between the Company and related entities for various reasons. These transfers follow Federal Affiliated Compliance Guidelines and result in the transfer of participant assets from one plan to another.

 

4



 

Administration—Certain administrative functions are performed by officers or employees of the Company. No such officer or employee receives compensation from the Plan. Certain administrative expenses are paid directly by the Company, such as legal and accounting fees. All investment expenses are paid by the participants, including recordkeeping, trustee, loan, and investment management fees.

 

Contributions—Contributions to the Plan can be made under the following provisions:

 

Participating Employee Contributions—Pursuant to 401(a) of the Internal Revenue Code (the “IRC”), participants may contribute up to 25% of eligible pay on a pre-tax basis, an after-tax basis, or a combination. The IRC limited total individual pre-tax contributions to $12,000 and $11,000 in 2003 and 2002, respectively. On January 1, 2002, catch-up contributions were permitted for participants of at least 50 years of age. The catch-up provision provided these participants the opportunity to contribute an additional $2,000 and $1,000 on a pre-tax basis in 2003 and 2002, respectively (increasing to $3,000 in 2004, $4,000 in 2005, and $5,000 in 2006, with inflation adjustments after that until December 31, 2010).

 

Employer Nonelective Matching Contributions—The Company makes matching contributions to the Plan equal to 50% of each participant’s contribution, up to 6% of eligible pay, each pay period. The Company’s matching contributions are invested in Sempra Energy common stock. Total Employer nonelective matching contributions for the years ended December 31, 2003 and 2002 were $6,500,766 and $5,337,170, respectively.

 

Discretionary Incentive Contribution—If established performance goals and targets of Sempra Energy are met in accordance with the terms of the incentive match guidelines established each year, the Company will make an additional incentive contribution as determined by the Board of Directors of Sempra Energy. Incentive contributions of 1.000% and 0.814% of eligible compensation were made for 2003 and 2002, respectively. The incentive contributions were made on March 15, 2004 and March 14, 2003 to all employees employed on December 31, 2003 and 2002, respectively. For both years, the contributions were made in the form of newly issued shares of Sempra Energy common stock. Total discretionary incentive contributions for the years ended December 31, 2003 and 2002 were $2,471,669 and $1,777,760, respectively.

 

Participant Accounts—A separate account is established and maintained in the name of each participant and reflects the participant’s contributions and the Employer’s nonelective matching and discretionary incentive contributions, and the earnings and losses attributed to each investment fund less administrative expenses. Participants are allocated a share of each fund’s investment earnings net of investment fees on a daily basis, based upon their account balance as a percentage of the total fund balance. Investment expenses, except those for a specific transaction, are allocated quarterly to individual funds based on either fund balance or a participant’s pro rata share, as defined in the Plan document.

 

Vesting—All participant accounts are fully vested and nonforfeitable at all times.

 

Investment Options—All investments are held by the Sempra Energy Master Trust (the “Master Trust”) (see Note 5). Employees elect to have their contributions invested in increments of 1% in Sempra Energy common stock, specific mutual funds offered by T. Rowe Price and Fidelity Investment Managers, or a broad range of funds through a brokerage account. Participants may invest a maximum of 50% of the value of their accounts (excluding the employer matching account) in the brokerage account.

 

5



 

Payment of Dividends—Active employees have the option to receive distributions of cash dividends on the shares of Sempra Energy common stock in their account balances or to reinvest the dividends in Sempra Energy common stock fund. Cash dividends are paid to former employees who have elected to leave their accounts in the Plan.

 

Payment of Benefits—Participants receive their vested account balance in a single lump sum payment in cash or Sempra Energy common stock for any portion of their account held in Sempra Energy common stock at their termination of employment with the Company, retirement, or permanent disability, or to the named beneficiary(ies) in the event of death.

 

Termination of the Plan—Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions and to terminate the Plan at any time subject to the provisions of ERISA. In the event of termination, the assets of the Plan will be distributed to the participants.

 

Related Party Transactions—Certain Plan investments are shares of mutual funds managed by T. Rowe Price, the Plan’s recordkeeper; therefore, these transactions qualify as party-in-interest transactions. Fees paid by the Plan to the recordkeeper for investment management services were $132,210 and $112,151 for the years ended December 31, 2003 and 2002, respectively.

 

At December 31, 2003 and 2002, the Plan held 7,791,076 and 7,721,523 shares, respectively, of common stock of Sempra Energy, the sponsoring employer, with a cost basis of $186,518,179 and $184,512,545, respectively. During the year ended December 31, 2003 and 2002, the Plan recorded dividend income of $6,840,260 and $6,295,043, respectively.

 

2.                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Accounting—The Plan’s financial statements are prepared on the accrual basis of accounting.

 

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 net assets and disclosures at the date of the financial statements and the reported changes in net assets during the reporting period. Actual results may differ from those estimates.

 

Investment Valuation and Income Recognition—The Plan’s investments are stated at fair value based on quoted market prices. Loans are carried at cost plus accrued interest, which approximates fair value. Purchases and sales of securities are recorded on the trade date. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

 

Benefit Payments—Payments are recorded when paid.

 

3.                      TAX STATUS

 

On November 14, 2002, the Internal Revenue Service issued the Plan a favorable determination letter stating that the Plan, as then designed, was in compliance with the applicable sections of the IRC, and the underlying trust is therefore exempt from taxation under Section 501(a) of the IRC.

 

6



 

4.                      PARTICIPANT LOANS

 

The Plan permits participants to borrow against the balances in their individual accounts within the Master Trust. A participant is limited to borrowing a maximum of 50% of the value of his/her account balance or $50,000, whichever is less. The minimum amount that can be borrowed is $1,000 and the fee charged for processing a loan is paid by the participant who takes out the loan. Participants may have up to two loans outstanding, one of which can be a primary residence loan. Primary residence loans are amortized over 15 years and other loans have a maximum repayment period of five years. All loans bear interest at 1% above the prime rate, as published in the Wall Street Journal, at the time the loan is made. For the years ended December 31, 2003 and 2002, interest rates on loans ranged from 5.00% to 10.5% and had maturity dates through January 2019.

 

5.                      INVESTMENTS IN THE MASTER TRUST (DOLLARS IN THOUSANDS)

 

The Plan’s assets are held in a trust account at T. Rowe Price, the trustee of the Plan, and consist of an interest in the Master Trust. Use of the Master Trust permits the commingling of the trust assets of two or more similar employee benefit plans sponsored by Sempra Energy for investment and administrative purposes. The Plan’s interest in the net assets of the Master Trust is based on the individual plan participants’ investment balances. Investment income is allocated on a daily basis through a valuation performed by the Trustee.  Expenses relating to the Master Trust are allocated to the individual funds based upon each participant’s pro-rata share, per share calculation, or transaction to individual funds. At December 31, 2003 and 2002, the Plan’s interest in the net assets of the Master Trust was approximately 37% and 36%, respectively.

 

The assets available for benefits of the Master Trust at December 31, 2003 and 2002 are summarized as follows:

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Sempra Energy common stock

 

$

675,022

 

$

532,653

 

Common/collective trusts

 

287,518

 

253,055

 

Mutual funds

 

229,130

 

125,883

 

Participant loans

 

27,642

 

24,880

 

 

 

 

 

 

 

Assets available for benefits

 

$

1,219,312

 

$

936,471

 

 

Net appreciation (depreciation), and dividend and interest income for the Master Trust for the years ended December 31, 2003 and 2002 are as follows:

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Net appreciation (depreciation) of investments:

 

 

 

 

 

Sempra Energy common stock

 

$

145,639

 

$

(16,142

)

Common/collective trusts

 

64,051

 

(50,847

)

Mutual funds

 

21,848

 

(12,802

)

Dividends

 

25,238

 

23,088

 

Interest

 

1,754

 

1,933

 

 

7



 

The following investments represent 5% or more of the Plan’s assets at December 31, 2003 and 2002:

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Sempra Energy common stock

 

$

234,200

 

$

182,614

 

T. Rowe Price Equity Index Trust

 

82,114

 

58,090

 

T. Rowe Price Small-Cap Stock Fund

 

48,162

 

33,346

 

Fidelity U.S. Bond Index Fund

 

 

17,219

 

 

The Plan and Master Trust invest in various securities as detailed above.  Investment securities, in general, are exposed to various risks such as interest rate, credit, and overall market volatility. Due to the level of risk associated with investment securities, it is reasonably possible that changes in the values of certain investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statements of assets available for plan benefits.

 

6.                      NON-PARTICIPANT DIRECTED INVESTMENTS (DOLLARS IN THOUSANDS)

 

The Company’s contributions to the Plan are invested solely in Sempra Energy common stock. These contributions are classified as non-participant directed investments. Information about the Plan’s assets and the significant components of the Plan’s changes in assets relating to the Sempra Energy common stock for the years ended December 31, 2003 and 2002 are as follows:

 

 

 

2003

 

2002

 

Assets:

 

 

 

 

 

Sempra Energy common stock in the Master Trust

 

$

129,981

 

$

97,912

 

Employer contribution receivable

 

2,472

 

1,778

 

 

 

 

 

 

 

Total non-participant directed assets

 

$

132,453

 

$

99,690

 

 

 

 

 

 

 

Changes in Assets:

 

 

 

 

 

Contributions

 

$

8,968

 

$

7,115

 

Net investment income

 

31,706

 

1,762

 

Distributions to participants or their beneficiaries

 

(9,908

)

(7,609

)

Transfers from plans of related entities

 

1,997

 

10,371

 

 

 

 

 

 

 

Total changes in assets

 

$

32,763

 

$

11,639

 

 

******

 

8



 

SAN DIEGO GAS & ELECTRIC COMPANY SAVINGS PLAN

 

FORM 5500, SCHEDULE H, LINE 4i

SCHEDULE OF ASSETS (HELD AT END OF YEAR)

DECEMBER 31, 2003

 

(a)

 

(b)
Identity of Issue, Borrower, Lessor
or Similar Party

 

(c)
Description of Investment
Including Maturity, Date,
Rate of Interest, Collateral

 

(d)
Cost

 

(e)
Current
Value

 

 

 

 

 

 

 

 

 

 

 

*

 

Participant loans

 

Interest rates from 5.00%-10.5%; maturities from January 2004 through January 2019

 

**

 

$

8,080,016 

 

 


*     Indicates party-in-interest to the Plan

**  Cost not applicable-participant directed investments

 

 

(2034792)

 

9



 

 

Southern California Gas Company Retirement Savings Plan

 

Financial Statements as of and for the Years Ended December 31, 2003 and 2002, Supplemental Schedule as of December 31, 2003 and Report of Independent Registered Public Accounting Firm

 



 

SOUTHERN CALIFORNIA GAS COMPANY RETIREMENT SAVINGS PLAN

 

TABLE OF CONTENTS

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

FINANCIAL STATEMENTS AS OF DECEMBER 31, 2003 AND 2002 AND FOR THE YEARS THEN ENDED:

 

 

 

Statements of Assets Available for Benefits

 

 

 

Statements of Changes in Assets Available for Benefits

 

 

 

Notes to Financial Statements

 

 

 

SUPPLEMENTAL SCHEDULE AS OF DECEMBER 31, 2003:

 

 

 

Form 5500, Schedule H, Line 4i—Schedule of Assets (Held at End of Year)

 

 

NOTE:               Other schedules required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 are omitted because of the absence of conditions under which they are required or as they are filed by the trustee of the Master Trust in which the Plan participates.

 



 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Southern California Gas Company Retirement Savings Plan

 

We have audited the accompanying statements of assets available for benefits of Southern California Gas Company Retirement Savings Plan (the “Plan”) as of December 31, 2003 and 2002, and the related statements of changes in assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). 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 audits provide a reasonable basis for our opinion.

 

In our opinion, such financial statements present fairly, in all material respects, the assets available for benefits of the Plan at December 31, 2003 and 2002, and the changes in assets available for benefits of the Plan for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule listed in the Table of Contents is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is 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. This schedule is the responsibility of the Plan’s management. Such schedule has been subjected to the auditing procedures applied in our audit of the basic 2003 financial statements and, in our opinion, is fairly stated in all material respects when considered in relation to the basic 2003 financial statements taken as a whole.

 

/s/ DELOITTE & TOUCHE LLP

 

San Diego, California

June 18, 2004

 

 

1



 

SOUTHERN CALIFORNIA GAS COMPANY RETIREMENT SAVINGS PLAN

 

STATEMENTS OF ASSETS AVAILABLE FOR BENEFITS

DECEMBER 31, 2003 AND 2002

(DOLLARS IN THOUSANDS)

 

 

 

2003

 

2002

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS

 

$

354

 

$

96

 

 

 

 

 

 

 

INVESTMENT:

 

 

 

 

 

At fair value:

 

 

 

 

 

Investment in Master Trust

 

634,784

 

494,335

 

 

 

 

 

 

 

RECEIVABLES:

 

 

 

 

 

Dividends

 

2,747

 

2,803

 

Employer contributions

 

1,035

 

781

 

 

 

 

 

 

 

Total receivables

 

3,782

 

3,584

 

 

 

 

 

 

 

ASSETS AVAILABLE FOR BENEFITS

 

$

638,920

 

$

498,015

 

 

See notes to financial statements.

 

2



 

SOUTHERN CALIFORNIA GAS COMPANY RETIREMENT SAVINGS PLAN

 

STATEMENTS OF CHANGES IN ASSETS AVAILABLE FOR BENEFITS

YEARS ENDED DECEMBER 31, 2003 AND 2002

(DOLLARS IN THOUSANDS)

 

 

 

2003

 

2002

 

 

 

 

 

 

 

ADDITIONS:

 

 

 

 

 

Net investment income (loss):

 

 

 

 

 

Plan interest in the Sempra Energy Savings Plan Master Trust investment income (loss)

 

$

134,577

 

$

(21,885

)

Investment expenses

 

(192

)

(194

)

 

 

 

 

 

 

Net investment income (loss)

 

134,385

 

(22,079

)

 

 

 

 

 

 

Contributions:

 

 

 

 

 

Employer

 

9,142

 

8,285

 

Participating employees

 

28,250

 

25,396

 

 

 

 

 

 

 

Total contributions

 

37,392

 

33,681

 

 

 

 

 

 

 

Transfers from plans of related entities

 

1,035

 

753

 

 

 

 

 

 

 

Net additions

 

172,812

 

12,355

 

 

 

 

 

 

 

DEDUCTIONS:

 

 

 

 

 

Distributions to participants or their beneficiaries

 

30,855

 

19,835

 

Transfers to plans of related entities

 

1,052

 

1,010

 

 

 

 

 

 

 

Total deductions

 

31,907

 

20,845

 

 

 

 

 

 

 

NET  INCREASE (DECREASE)

 

140,905

 

(8,490

)

 

 

 

 

 

 

ASSETS AVAILABLE FOR BENEFITS—Beginning of year

 

498,015

 

506,505

 

 

 

 

 

 

 

ASSETS AVAILABLE FOR BENEFITS—End of year

 

$

638,920

 

$

498,015

 

 

See notes to financial statements.

 

3



 

SOUTHERN CALIFORNIA GAS COMPANY RETIREMENT SAVINGS PLAN

 

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2003 AND 2002

 

1.                    PLAN DESCRIPTION AND RELATED INFORMATION

 

The following description of the Southern California Gas Company Retirement Savings Plan (the “Plan”) is provided for general information purposes only. Participants should refer to the Plan document for a more complete description of the Plan’s provisions.

 

General—The Plan is a defined contribution plan that provides employees of Southern California Gas Company (the “Company” or “Employer”) with retirement benefits. Effective January 1, 2001, all employees may participate immediately in the Plan and, after one year in which they complete 1,000 hours of service, receive an employer matching contribution. Employees may make regular savings investments in common stock of Sempra Energy, the parent company of the Employer, and other optional investments permitted by the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).

 

The Plan was amended effective June 1, 2000, to allow for automatic deferrals for employees who neither elect a specific deferral percentage nor elect not to participate in the Plan. The automatic deferral is an amount equal to 3% of eligible pay and the investment vehicle is the T. Rowe Price Retirement Strategy Trust – Balanced, from the date of amendment through December 31, 2003. On December 31, 2003, the balance in that trust was transferred to the T. Rowe Price Personal Strategy Balanced Fund and effective January 1, 2004 that will be the investment vehicle for automatic deferrals.

 

On September 20, 2001, the California Public Utilities Commission approved Sempra Energy’s request to integrate the management teams of the Company and an affiliated California utility. The decision retains the separate identities of each utility and is not a merger. Instead, utility integration is a reorganization that consolidates senior management functions of the two utilities and returns to utilities the majority of shared support services previously provided by Sempra Energy’s centralized corporate center. The resulting transfer of employees took place on April 1, 2002. The Plan assets of the employees who returned a written request to have their assets transferred to the Plan from the Sempra Energy Savings Plan were transferred to the Plan throughout the year following receipt of their request.

 

The Plan was amended, effective October 1, 2003, to allow participants who have attained age 55 and have ten years of services with the Company as of October 1, to direct up to 10% of the shares in the employer matching account or the statutorily calculated amount for the ESOP shares, whichever is greater, into any of the Plan’s designated investments.

 

Employees transfer between the Company and related entities for various reasons. These transfers follow Federal Affiliated Compliance Guidelines and result in the transfer of participant assets from one plan to another.

 

Administration—Certain administrative functions are performed by officers or employees of the Company. No such officer or employee receives compensation from the Plan. Certain administrative expenses are paid directly by the Company, such as legal and accounting fees. All investment expenses are paid by the participants, including recordkeeping, trustee, loan, and investment management fees.

 

4



 

Contributions—Contributions to the Plan can be made under the following provisions:

 

Participating Employee Contributions: Non-Represented and Represented Employees—Pursuant to Section 401(a) of the Internal Revenue Code (the “IRC”), participants may contribute up to 25% of eligible pay on a pre-tax basis, an after-tax basis, or a combination. The IRC limited total individual pre-tax contributions to $12,000 and $11,000 in 2003 and 2002, respectively. On January 1, 2002, catch-up contributions were permitted for participants of at least 50 years of age. The catch-up provision provided these participants the opportunity to contribute an additional $2,000 and $1,000 on a pre-tax basis in 2003 and 2002, respectively (increasing to $3,000 in 2004, $4,000 in 2005, and $5,000 in 2006, with inflation adjustments after that until December 31, 2010).

 

Employer Nonelective Matching Contribution—The Company makes matching contributions to the Plan equal to 50% of each participant’s contribution, up to the first 6% of eligible pay, each pay period. The Company’s matching contributions are invested in Sempra Energy common stock. Employer contributions are funded in part from the Sempra Energy Employee Stock Ownership Plan and Trust. Total Employer nonelective matching contributions for the years ended December 31, 2003 and 2002 were $8,073,986 and $7,505,545, respectively.

 

Discretionary Incentive Contribution—If established performance goals and targets of Sempra Energy are met in accordance with the terms of the incentive match guidelines established each year, the Company will make an additional incentive contribution as determined by the Board of Directors of Sempra Energy for non-represented employees. Incentive contributions of 1.000% and 0.814% of eligible compensation were made for 2003 and 2002, respectively. The incentive contributions were made on March 15, 2004 and March 14, 2003 to all employees employed on December 31, 2003 and 2002, respectively. For both years, the contributions were made in the form of newly issued shares of Sempra Energy common stock. Total discretionary incentive contributions for the years ended December 31, 2003 and 2002 were $1,034,588 and $780,750, respectively.

 

Participant Accounts—A separate account is established and maintained in the name of each participant and reflects the participant’s contributions and the Employer’s nonelective matching and discretionary incentive contributions, and the earnings and losses attributed to each investment fund less administrative expenses. Participants are allocated a share of each fund’s investment earnings net of investment fees on a daily basis, based upon their account balance as a percentage of the total fund balance.  Investment expenses, except those for a specific transaction, are allocated quarterly to individual funds based on either fund balance or a participant’s pro rata share, as defined in the Plan document.

 

Vesting—All participant accounts are fully vested and nonforfeitable at all times.

 

Investment Options—All investments are held by the Sempra Energy Master Trust (the “Master Trust”) (see Note 5). Employees elect to have their contributions invested in increments of 1% in Sempra Energy common stock, specific mutual funds offered by T. Rowe Price and Fidelity Investment Managers, or a broad range of funds through a brokerage account. Participants may invest a maximum of 50% of the value of their accounts (excluding the employer matching account) in the brokerage account.

 

Payment of Dividends—Active employees have the option to receive distributions of cash dividends on the shares of Sempra Energy common stock in their account balances or to reinvest the dividends in Sempra Energy common stock. Cash dividends are paid to former employees who elected to leave their accounts in the Plan.

 

5



 

Payment of Benefits—Participants receive their vested account balance in a single lump sum payment in cash or Sempra Energy common stock for any portion of their account held in Sempra Energy common stock at their termination of employment with the Company, retirement, or permanent disability, or to the named beneficiary(ies) in the event of death.

 

Plan Termination—Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions and to terminate the Plan at any time subject to the provisions of ERISA. In the event of termination, the assets of the Plan will be distributed to the participants.

 

Related Party Transactions—Certain Plan investments are shares of mutual funds managed by T. Rowe Price, the Plan’s recordkeeper; therefore, these transactions qualify as party-in-interest transactions. Fees paid by the Plan to the recordkeeper for investment management services were $192,490 and $193,657 for the years ended December 31, 2003 and 2002, respectively.

 

At December 31, 2003 and 2002, the Plan held 12,940,668 and 13,050,054 shares, respectively, of common stock of Sempra Energy, the sponsoring employer, with a cost basis of $310,027,017 and $316,024,126, respectively. During the year ended December 31, 2003 and 2002, the Plan recorded dividend income of $11,141,645 and $10,548,064 respectively.

 

2.                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Accounting—The Plan maintains its financial statements on the accrual basis of accounting.

 

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 net assets and disclosures at the date of the financial statements and the reported changes in net assets during the reporting period. Actual results could differ from those estimates.

 

Investment Valuation and Income Recognition—The Plan’s investments are stated at fair value based on quoted market prices. Loans are carried at cost plus accrued interest which approximates fair value. Purchases and sales of securities are recorded on the trade date. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

 

Benefit Payments—Payments are recorded when paid.

 

3.                    TAX STATUS

 

On November 14, 2002, the Internal Revenue Service issued the Plan a favorable determination letter stating that the Plan, as then designed, was in compliance with the applicable sections of the IRC, and the underlying trust is therefore exempt from taxation under Section 501(a) of the IRC.

 

4.                      PARTICIPANT LOANS

 

The Plan permits participants to borrow against the balances in their individual accounts within the Master Trust. A participant is limited to borrowing a maximum of 50% of the value of his/her account balance or $50,000, whichever is less. The minimum amount that can be borrowed is $1,000 and the fee charged for processing a loan is paid by the participant who takes out the loan. Participants may have up to two loans outstanding, one of which can be a primary residence loan. Primary residence loans have a

 

6



 

maximum repayment period of 15 years and other loans have a maximum repayment period of five years. All loans bear interest at 1% above the prime rate, as published in the Wall Street Journal, at the time the loan is made. For years ended December 31, 2003 and 2002, interest rates on loans ranged from 5.00% to 10.5% and had maturity dates through January 2019.

 

5.                      INVESTMENTS IN THE MASTER TRUST (DOLLARS IN THOUSANDS)

 

The Plan’s assets are held in a trust account at T. Rowe Price and consist of an interest in the Master Trust. Use of the Master Trust permits the commingling of the trust assets of two or more similar employee benefit plans sponsored by Sempra Energy for investment and administrative purposes. The Plan’s interest in the net assets of the Master Trust is based on the individual plan participants’ investment balances. Investment income is allocated on a daily basis through a valuation performed by the Trustee. Expenses relating to the Master Trust are allocated to the individual funds based upon each participant’s pro-rata share, per share calculation, or transaction to individual funds. At December 31, 2003 and 2002, the Plan’s interest in the net assets of the Master Trust was approximately 52% and 53%, respectively.

 

The assets available for benefits of the Master Trust at December 31, 2003 and 2002 are summarized as follows:

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Sempra Energy common stock

 

$

675,022

 

$

532,653

 

Common/collective trusts

 

287,518

 

253,055

 

Mutual funds

 

229,130

 

125,883

 

Participant loans

 

27,642

 

24,880

 

 

 

 

 

 

 

Assets available for benefits

 

$

1,219,312

 

$

936,471

 

 

Net appreciation (depreciation), and dividend and interest income for the Master Trust for the years ended December 31, 2003 and 2002 are as follows:

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Net appreciation (depreciation) of investments:

 

 

 

 

 

Sempra Energy common stock

 

$

145,639

 

$

(16,142

)

Common/collective trusts

 

64,051

 

(50,847

)

Mutual funds

 

21,848

 

(12,802

)

Dividends

 

25,238

 

23,088

 

Interest

 

1,754

 

1,933

 

 

The following investments represent 5% or more of the Plan’s assets at December 31, 2003 and 2002:

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Sempra Energy common stock

 

$

388,996

 

$

308,634

 

T. Rowe Price Equity Index Trust

 

91,165

 

66,238

 

T. Rowe Price Stable Value Fund

 

34,225

 

27,919

 

 

7



 

The Plan and Master Trust invest in various securities as detailed above. Investment securities, in general, are exposed to various risks such as interest rate, credit, and overall market volatility. Due to the level of risk associated with investment securities, it is reasonably possible that changes in the values of certain investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statements of assets available for plan benefits.

 

6.                      NON-PARTICIPANT DIRECTED INVESTMENTS (DOLLARS IN THOUSANDS)

 

The Company’s contributions to the Plan are invested solely in Sempra Energy common stock. These contributions are classified as non-participant directed investments. Information about the Plan’s assets and the significant components of the Plan’s changes in assets relating to the non-participant directed investments for the years ended December 31, 2003 and 2002 are as follows:

 

 

 

2003

 

2002

 

Assets:

 

 

 

 

 

Sempra Energy common stock in the Master Trust

 

$

190,254

 

$

145,160

 

Employer contribution receivable

 

1,035

 

781

 

 

 

 

 

 

 

Total non-participant directed assets

 

$

191,289

 

$

145,941

 

 

 

 

 

 

 

Changes in Assets:

 

 

 

 

 

Contributions

 

$

9,082

 

$

8,266

 

Net investment income

 

45,579

 

715

 

Distributions to employees, retirees, or their beneficiaries

 

(9,409

)

(5,898

)

Transfers from (to) plans of related entitiles

 

96

 

(71

)

 

 

 

 

 

 

Total changes in assets

 

$

45,348

 

$

3,012

 

 

******

 

8



 

SOUTHERN CALIFORNIA GAS COMPANY RETIREMENT SAVINGS PLAN

 

FORM 5500, SCHEDULE H, LINE 4i

SCHEDULE OF ASSETS (HELD AT END OF YEAR)

DECEMBER 31, 2003

 

(a)

 

(b)
Identity of Issue, Borrower, Lessor
or Similar Party

 

(c)
Description of Investment
Including Maturity, Date,
Rate of Interest, Collateral

 

(d)
Cost

 

(e)
Current
Value

 

 

 

 

 

 

 

 

 

 

 

*

 

Participant loans

 

Interest rates from 5.00%-10.5%; maturities from January 2004 through January 2019

 

**

 

$

17,451,058 

 

 


*              Indicates party-in-interest to the Plan

**       Cost not applicable—participant directed investments

 

 

9


 

Sempra Energy Trading Retirement Savings Plan

Financial Statements as of and for the Years Ended December 31, 2003 and 2002, Supplemental Schedule as of December 31, 2003 and Report of Independent Registered Public Accounting Firm

 



 

SEMPRA ENERGY TRADING RETIREMENT SAVINGS PLAN

 

TABLE OF CONTENTS

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

FINANCIAL STATEMENTS AS OF DECEMBER 31, 2003 AND 2002 AND FOR THE YEARS THEN ENDED:

 

 

 

Statements of Assets Available for Benefits

 

 

 

Statements of Changes in Assets Available for Benefits

 

 

 

Notes to Financial Statements

 

 

 

SUPPLEMENTAL SCHEDULE AS OF DECEMBER 31, 2003:

 

 

 

Form 5500, Schedule H, Line 4i—Schedule of Assets (Held at End of Year)

 

 

 

NOTE:

Other schedules required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 are omitted because of the absence of conditions under which they are required or as they are filed by the trustee of the Master Trust in which the Plan participates.

 

 



 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Sempra Energy Trading Retirement Savings Plan

 

We have audited the accompanying statements of assets available for benefits of Sempra Energy Trading Retirement Savings Plan (the “Plan”) as of December 31, 2003 and 2002, and the related statements of changes in assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). 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 audits provide a reasonable basis for our opinion.

 

In our opinion, such financial statements present fairly, in all material respects, the assets available for benefits of the Plan at December 31, 2003 and 2002, and the changes in assets available for benefits of the Plan for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule listed in the Table of Contents is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is 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. This schedule is the responsibility of the Plan’s management. Such schedule has been subjected to the auditing procedures applied in our audit of the basic 2003 financial statements and, in our opinion, is fairly stated in all material respects when considered in relation to the basic 2003 financial statements taken as a whole.

 

/s/ DELOITTE & TOUCHE LLP

 

San Diego, California

June 18, 2004

 

1



 

SEMPRA ENERGY TRADING RETIREMENT SAVINGS PLAN

 

STATEMENTS OF ASSETS AVAILABLE FOR BENEFITS

DECEMBER 31, 2003 AND 2002

(DOLLARS IN THOUSANDS)

 

 

 

2003

 

2002

 

 

 

 

 

 

 

INVESTMENT:

 

 

 

 

 

At fair value:

 

 

 

 

 

Investment in Master Trust

 

$

20,721

 

$

12,654

 

 

 

 

 

 

 

RECEIVABLES:

 

 

 

 

 

Dividends

 

65

 

48

 

Employer contributions

 

381

 

272

 

Participant contributions

 

38

 

 

 

 

 

 

 

 

Total receivables

 

484

 

320

 

 

 

 

 

 

 

ASSETS AVAILABLE FOR BENEFITS

 

$

21,205

 

$

12,974

 

 

See notes to financial statements.

 

2



 

SEMPRA ENERGY TRADING RETIREMENT SAVINGS PLAN

 

STATEMENTS OF CHANGES IN ASSETS AVAILABLE FOR BENEFITS

YEARS ENDED DECEMBER 31, 2003 AND 2002

(DOLLARS IN THOUSANDS)

 

 

 

2003

 

2002

 

 

 

 

 

 

 

ADDITIONS:

 

 

 

 

 

Net investment income (loss):

 

 

 

 

 

Plan interest in the Sempra Energy Savings Plan Master Trust investment income (loss)

 

$

4,041

 

$

(826

)

Investment expenses

 

(5

)

(4

)

 

 

 

 

 

 

Net investment income (loss)

 

4,036

 

(830

)

 

 

 

 

 

 

Contributions:

 

 

 

 

 

Employer

 

1,535

 

1,287

 

Participating employees

 

3,097

 

3,780

 

 

 

 

 

 

 

Total contributions

 

4,632

 

5,067

 

 

 

 

 

 

 

Transfers from plans of related entities

 

 

1

 

 

 

 

 

 

 

Total additions

 

8,668

 

4,238

 

 

 

 

 

 

 

DEDUCTIONS:

 

 

 

 

 

Distributions to participants or their beneficiaries

 

437

 

620

 

 

 

 

 

 

 

NET INCREASE

 

8,231

 

3,618

 

 

 

 

 

 

 

ASSETS AVAILABLE FOR BENEFITS—Beginning of year

 

12,974

 

9,356

 

 

 

 

 

 

 

ASSETS AVAILABLE FOR BENEFITS—End of year

 

$

21,205

 

$

12,974

 

 

See notes to financial statements.

 

3



 

SEMPRA ENERGY TRADING RETIREMENT SAVINGS PLAN

 

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2003 AND 2002

 

1.                      PLAN DESCRIPTION AND RELATED INFORMATION

 

The following description of the Sempra Energy Trading Retirement Savings Plan (the “Plan”) is provided for general information purposes only. Participants should refer to the Plan document for a more complete description of the Plan’s provisions.

 

General—The Plan is a defined contribution plan that provides employees of Sempra Energy Trading (the “Company” or “Employer”) with retirement benefits. Employees may participate immediately in the Plan and, after one year in which they complete 1,000 hours of service, receive an employer matching contribution. Employees may make regular savings investments in common stock of Sempra Energy, the parent company of the Employer, and other optional investments permitted by the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).

 

The Plan was amended, effective June 1, 2000, to allow for automatic deferrals for employees who neither elect a specific deferral percentage nor elect not to participate in the Plan. The automatic deferral is an amount equal to 3% of eligible pay and the investment vehicle is the T. Rowe Price Retirement Strategy Trust – Balanced, from the date of amendment through December 31, 2003. On December 31, 2003, the balance in that trust was transferred to the T. Rowe Price Personal Strategy Balanced Fund and effective January 1, 2004, that will be the investment vehicle for automatic deferrals.

 

The Plan was amended, effective October 1, 2003, to allow participants who have attained age 55 and have ten years of service with the Company as of October 1, to direct up to 10% of the shares in the employer matching account or the statutorily calculated amount of the ESOP shares, whichever is greater, into any of the Plan’s designated investments.

 

Employees transfer between the Company and related entities for various reasons. These transfers follow Federal Affiliated Compliance Guidelines and result in the transfer of participant assets from one plan to another.

 

Administration—Certain administrative functions are performed by officers or employees of the Company. No such officer or employee receives compensation from the Plan. Certain administrative expenses are paid directly by the Company, such as legal and accounting fees. All investment expenses are paid by the participants, including recordkeeping, trustee, loan, and investment management fees.

 

Contributions—Contributions to the Plan can be made under the following provisions:

 

Participating Employee Contributions—Pursuant to section 401(a) of the Internal Revenue Code (the “IRC”), participants may contribute up to 25% of eligible pay on a pre-tax basis, an after-tax basis, or a combination. The IRC limited total individual pre-tax contributions to $12,000 and $11,000 in 2003 and 2002, respectively. On January 1, 2002, catch-up contributions were permitted for participants of at least 50 years of age. The catch-up provision provided these participants the opportunity to contribute an additional $2,000 and $1,000 on a pre-tax basis in 2003 and 2002, respectively (increasing to $3,000 in 2004, $4,000 in 2005, and $5,000 in 2006, with inflation adjustments after that until December 31, 2010).

 

4



 

Employer Nonelective Matching Contribution—After one year of service in which an employee works at least 1,000 hours of service, the Company makes contributions to the Plan, each pay period, based on the participant’s contributions and years of service as follows:

 

Less than five years of service

 

1/3 of participant contributions up to 6% of eligible pay

Five to nine years of service

 

2/3 of participant contributions up to 6% of eligible pay

Ten years or more of service

 

100% of participant contributions up to 6% of eligible pay

 

The Company also provides an additional matching contribution of 15% of the participant’s total pre-tax contribution, subject to certain limitations described in the Plan document. The Company’s matching contributions are invested in Sempra Energy common stock. Total Employer nonelective matching contributions for the years ended December 31, 2003 and 2002 were $1,167,147 and $1,014,679, respectively.

 

Discretionary Incentive Contribution—If established performance goals and targets of Sempra Energy are met in accordance with the terms of the incentive match guidelines established each year, the Company will make an additional incentive contribution as determined by the Board of Directors of Sempra Energy. Incentive contributions of 1.000% and 0.814% of eligible compensation were made for 2003 and 2002, respectively. The incentive contributions were made on May 4, 2004 and March 14, 2003 to all employees employed on December 31, 2003 and 2002, respectively. For both years, the contributions were made in the form of newly issued shares of Sempra Energy common stock. Total discretionary incentive contributions for the years ended December 31, 2003 and 2002 were $367,621 and $272,019, respectively.

 

Participant Accounts—A separate account is established and maintained in the name of each participant and reflects the participant’s contributions and the Employer’s nonelective matching and discretionary incentive contributions, and the earnings and losses attributed to each investment fund less administrative expenses. Participants are allocated a share of each fund’s investment earnings net of investment fees on a daily basis, based upon their account balance as a percentage of the total fund balance. Investment expenses, except those for a specific transaction, are allocated quarterly to individual funds based on either fund balance or a participant’s pro rata share, as defined in the Plan document.

 

Vesting—All participant accounts are fully vested and nonforfeitable at all times.

 

Investment Options—All investments are held by the Sempra Energy Master Trust (the “Master Trust”) (see Note 5). Employees elect to have their contributions invested in increments of 1% in Sempra Energy common stock, specific mutual funds offered by T. Rowe Price and Fidelity Investment Managers, or a broad range of funds through a brokerage account. Participants may invest a maximum of 50% of the value of their accounts (excluding the employer matching account) in the brokerage account.

 

Payment of Dividends—Active employees’ cash dividends on the shares of Sempra Energy common stock are reinvested in the Sempra Energy common stock fund. Cash dividends are paid to former employees who have elected to leave their accounts in the Plan.

 

Payment of Benefits—Participants receive their vested account balance in a single lump sum payment in cash or Sempra Energy common stock for any portion of their account held in Sempra Energy common stock at their termination of employment with the Company, retirement date, or permanent disability, or to the named beneficiary(ies) in the event of death.

 

5



 

Plan Termination—Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions and to terminate the Plan at any time subject to the provisions of ERISA. In the event of termination, the assets of the Plan will be distributed to the participants.

 

Related Party Transactions—Certain Plan investments are shares of mutual funds managed by T. Rowe Price, the Plan’s recordkeeper; therefore, these transactions qualify as party-in-interest transactions. Fees paid by the Plan to the recordkeeper for investment management services were $4,656 and $3,656 for the years ended December 31, 2003 and 2002, respectively.

 

At December 31, 2003 and 2002, the Plan held 259,592 and 193,304 shares, respectively, of common stock of Sempra Energy, the sponsoring employer, with a cost basis of $6,257,535 and $4,633,871, respectively. During the year ended December 31, 2003 and 2002, the Plan recorded dividend income of $247,552 and $179,406, respectively.

 

2.                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Accounting—The Plan maintains its financial statements on the accrual basis of accounting.

 

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 net assets and disclosures at the date of the financial statements and the reported changes in net assets during the reporting period. Actual results could differ from those estimates.

 

Investment Valuation and Income Recognition—The Plan’s investments are stated at fair value based on quoted market prices. Loans are carried at cost plus accrued interest, which approximates fair value. Purchases and sales of securities are recorded on the trade date. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

 

Benefit Payments—Payments are recorded when paid.

 

3.                      TAX STATUS

 

On November 14, 2002, the Internal Revenue Service issued the Plan a favorable determination letter stating that the Plan, as then designed, was in compliance with the applicable sections of the IRC, and the underlying trust is therefore exempt from taxation under Section 501(a) of the IRC.

 

4.                      PARTICIPANT LOANS

 

The Plan permits participants to borrow against the balances in their individual accounts within the Master Trust. A participant is limited to borrowing a maximum of 50% of the value of his/her account balance or $50,000, whichever is less. The minimum amount that can be borrowed is $1,000 and the fee charged for processing a loan is paid by the participant who takes out the loan. Participants may have up to two loans outstanding, one of which can be a primary residence loan. Primary residence loans have a maximum repayment period of 15 years and other loans have a maximum repayment period of five years. All loans bear interest at 1% above the prime rate, as published in the Wall Street Journal, at the time the loan is made. For the years ended December 31, 2003 and 2002, interest rates on loans ranged from 5.00% to 10.5% and had maturity dates through December 2018.

 

6



 

5.                      INVESTMENTS IN THE MASTER TRUST (DOLLARS IN THOUSANDS)

 

The Plan’s assets are held in a trust account at T. Rowe Price, the trustee of the Plan, and consist of an interest in the Master Trust. Use of the Master Trust permits the commingling of the trust assets of two or more similar employee benefit plans sponsored by Sempra Energy for investment and administrative purposes. The Plan’s interest in the net assets of the Master Trust is based on the individual plan participants’ investment balances. Investment income is allocated on a daily basis through a valuation performed by the Trustee. Expenses relating to the Master Trust are allocated to the individual funds based upon each participant’s pro-rata share, per share calculation, or transaction to individual funds. At December 31, 2003 and 2002, the Plan’s interest in the net asses of the Master Trust was approximately 2% and 1%, respectively.

 

The assets available for benefits of the Master Trust at December 31, 2003 and 2002 are summarized as follows:

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Sempra Energy common stock

 

$

675,022

 

$

532,653

 

Common/collective trusts

 

287,518

 

253,055

 

Mutual funds

 

229,130

 

125,883

 

Participant loans

 

27,642

 

24,880

 

 

 

 

 

 

 

Assets available for benefits

 

$

1,219,312

 

$

936,471

 

 

Net appreciation (depreciation), and dividend and interest income for the Master Trust for the years ended December 31, 2003 and 2002 are as follows:

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Net appreciation (depreciation) of investments:

 

 

 

 

 

Sempra Energy common stock

 

$

145,639

 

$

(16,142

)

Common/collective trusts

 

64,051

 

(50,847

)

Mutual funds

 

21,848

 

(12,802

)

Dividends

 

25,238

 

23,088

 

Interest

 

1,754

 

1,933

 

 

The following investments represent 5% or more of the Plan’s assets at December 31, 2003 and 2002:

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Sempra Energy Common Stock

 

$

7,803

 

$

4,572

 

T. Rowe Price Equity Index Trust

 

3,145

 

1,833

 

T. Rowe Price Small-Cap Stock Fund

 

2,293

 

1,341

 

T. Rowe Price Stable Value Fund

 

1,585

 

1,180

 

T. Rowe Price Personal Strategy Balanced Fund

 

1,231

 

 

Fidelity Select International Fund

 

1,218

 

636

 

T. Rowe Price Personal Strategy Growth Fund

 

1,196

 

 

T. Rowe Price Retirement Strategy Trust - Conservative Growth

 

 

744

 

T. Rowe Price Retirement Strategy Trust - Balanced Fund

 

 

740

 

Fidelity US Bond Index Fund

 

 

715

 

 

7



 

The Plan and Master Trust invest in various securities as detailed above. Investment securities, in general, are exposed to various risks such as interest rate, credit, and overall market volatility. Due to the level of risk associated with investment securities, it is reasonably possible that changes in the values of certain investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statements of assets available for plan benefits.

 

6.                      NON-PARTICIPANT DIRECTED INVESTMENTS (DOLLARS IN THOUSANDS)

 

The Company’s contributions to the Plan are invested solely in Sempra Energy common stock. These contributions are classified as non-participant directed investments. Information about the Plan’s assets and the significant components of the Plan’s changes in assets relating to the non-participant directed investments for the years ended December 31, 2003 and 2002 are as follows:

 

 

 

2003

 

2002

 

Assets:

 

 

 

 

 

Sempra Energy common stock in the Master Trust

 

$

6,662

 

$

3,875

 

Employer contribution receivable

 

381

 

272

 

 

 

 

 

 

 

Total non-participant directed assets

 

$

7,043

 

$

4,147

 

 

 

 

 

 

 

Changes in Assets:

 

 

 

 

 

Contributions

 

$

1,535

 

$

1,287

 

Net investment income

 

1,557

 

79

 

Distributions to participants or their beneficiaries

 

(196

)

(162

)

Transfers from plans of related entities

 

 

1

 

 

 

 

 

 

 

Total changes in assets

 

$

2,896

 

$

1,205

 

 

******

 

8



 

SEMPRA ENERGY TRADING RETIREMENT SAVINGS PLAN

 

FORM 5500, SCHEDULE H, LINE 4i

SCHEDULE OF ASSETS (HELD AT END OF YEAR)

DECEMBER 31, 2003

 

(a)

 

(b)
Identity of Issue, Borrower, Lessor
or Similar Party

 

(c)
Description of Investment
Including Maturity Date,
Rate of Interest, Collateral

 

(d)
Cost

 

(e)
Current
Value

 

*

 

Participant loans

 

Interest rates from 5.00%-10.5%; maturities from January 2004 through December 2018

 

**

 

$

281,522

 

 


*   Indicates party-in-interest to the Plan

** Cost not applicable—participant directed investments

 

 

9



 

 

Twin Oaks Savings Plan

 

Financial Statements as of December 31, 2003 and 2002, and for the year ended December 31, 2003 and the period from November 1, 2002 (Inception of Plan) through December 31, 2002 and Supplemental Schedule as of December 31, 2003 and Report of Independent Registered Public Accounting Firm

 



 

TWIN OAKS SAVINGS PLAN

 

TABLE OF CONTENTS

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

FINANCIAL STATEMENTS:

 

 

 

Statements of Assets Available for Benefits as of December 31, 2003 and 2002

 

 

 

Statements of Changes in Assets Available for Benefits for the year ended December 31, 2003 and for the period from November 1, 2002 (inception of Plan) through December 31, 2002

 

 

 

Notes to Financial Statements

 

 

 

SUPPLEMENTAL SCHEDULE AS OF DECEMBER 31, 2003:

 

 

 

Form 5500, Schedule H, Line 4i—Schedule of Assets (Held at End of Year)

 

 

NOTE:               Other schedules required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 are omitted because of the absence of conditions under which they are required or as they are filed by the trustee of the Master Trust in which the Plan participates.

 



 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

Twin Oaks Savings Plan

 

We have audited the accompanying statements of assets available for benefits of Twin Oaks Savings Plan (the “Plan”) as of December 31, 2003 and 2002 and the related statements of changes in assets available for benefits for the year ended December 31, 2003 and the period from November 1, 2002 (inception of Plan) through December 31, 2002. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). 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 audits provide a reasonable basis for our opinion.

 

In our opinion, such financial statements present fairly, in all material respects, the assets available for benefits of the Plan at December 31, 2003 and 2002, and the changes in assets available for benefits of the Plan for the year ended December 31, 2003 and for the period from November 1, 2002 (inception of Plan) through December 31, 2002 in conformity with accounting principles generally accepted in the United States of America.

 

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule listed in the Table of Contents is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is 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. This schedule is the responsibility of the Plan’s management. Such schedule has been subjected to the auditing procedures applied in our audit of the basic 2003 financial statements and, in our opinion, is fairly stated in all material respects when considered in relation to the basic 2003 financial statements taken as a whole.

 

/s/ DELOITTE & TOUCHE LLP

 

San Diego, California

June 18, 2004

 

1



 

TWIN OAKS SAVINGS PLAN

 

STATEMENTS OF ASSETS AVAILABLE FOR BENEFITS

AS OF DECEMBER 31, 2003 AND DECEMBER 31, 2002

 

 

 

2003

 

2002

 

 

 

 

 

 

 

INVESTMENT:

 

 

 

 

 

At fair value:

 

 

 

 

 

Investment in Master Trust

 

$

1,625,215

 

$

583,769

 

 

 

 

 

 

 

OTHER ASSETS:

 

 

 

 

 

Dividends receivable

 

3,519

 

361

 

Employer’s contribution receivable

 

155,417

 

 

 

 

 

 

 

 

Total other assets

 

158,936

 

361

 

 

 

 

 

 

 

ASSETS AVAILABLE FOR BENEFITS

 

$

1,784,151

 

$

584,130

 

 

See notes to financial statements.

 

2



 

TWIN OAKS SAVINGS PLAN

 

STATEMENTS OF CHANGES IN ASSETS AVAILABLE FOR BENEFITS

FOR THE YEAR ENDED DECEMBER 31, 2003 AND FOR THE PERIOD FROM

NOVEMBER 1, 2002 (INCEPTION OF PLAN) THROUGH DECEMBER 31, 2002

 

 

 

2003

 

2002

 

 

 

 

 

 

 

ADDITIONS:

 

 

 

 

 

Net investment income (loss):

 

 

 

 

 

Plan interest in the Sempra Energy Savings Plan

 

 

 

 

 

Master Trust investment income (loss)

 

$

197,129

 

$

(1,612

)

Investment expenses

 

(300

)

 

 

 

 

 

 

 

Net investment income (loss)

 

196,829

 

(1,612

)

 

 

 

 

 

 

Contributions:

 

 

 

 

 

Employer

 

350,644

 

29,532

 

Participating employees

 

700,724

 

556,210

 

 

 

 

 

 

 

Total contributions

 

1,051,368

 

585,742

 

 

 

 

 

 

 

Total additions

 

1,248,197

 

584,130

 

 

 

 

 

 

 

DEDUCTIONS:

 

 

 

 

 

Distributions to employees, retirees or their beneficiaries

 

48,176

 

 

 

 

 

 

 

 

NET INCREASE

 

1,200,021

 

584,130

 

 

 

 

 

 

 

ASSETS AVAILABLE FOR BENEFITS—Beginning of period

 

584,130

 

 

 

 

 

 

 

 

ASSETS AVAILABLE FOR BENEFITS—End of period

 

$

1,784,151

 

$

584,130

 

 

See notes to financial statements.

 

3



 

TWIN OAKS SAVINGS PLAN

 

NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD

YEAR ENDED DECEMBER 31, 2003 AND FROM
NOVEMBER 1, 2002 (INCEPTION OF PLAN) THROUGH DECEMBER 31, 2002

 

1.                    PLAN DESCRIPTION AND RELATED INFORMATION

 

The following description of the Twin Oaks Savings Plan (the “Plan”) is provided for general information purposes only. Participants should refer to the Plan document for a more complete description of the Plan’s provisions.

 

General—The Plan, adopted November 1, 2002, is a defined contribution plan that provides employees of Twin Oaks or any affiliate who has adopted this Plan (the “Company” or “Employer”) with retirement benefits. Employees may participate immediately in the Plan and, after one year in which they complete 1,000 hours of service, receive an employer matching contribution. Employees may make regular savings investments in common stock of Sempra Energy, the parent company of the Employer, and other optional investments permitted by the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).

 

The Plan was amended, effective October 1, 2003, to allow participants who have attained age 55 and have ten years of service with the Company as of October 1, to direct up to 10% of the shares in the employer matching account into any of the Plan’s designated investments.

 

The Plan allows for automatic deferrals for employees who neither elect a specific deferral percentage nor elect not to participate in the Plan. The automatic deferral is an amount equal to 3% of eligible pay and the investment vehicle is the T. Rowe Price Stable Value Fund.

 

Administration—Certain administrative functions are performed by officers or employees of the Company. No such officer or employee receives compensation from the Plan. Certain administrative expenses are paid directly by the Company, such as legal and accounting fees. All investment expenses are paid by the participants, including recordkeeping, trustee, loan and investment management fees.

 

Contributions—Contributions to the Plan can be made under the following provisions:

 

Participating Employee Contributions—Pursuant to Section 401(a) of the Internal Revenue Code (the “IRC”), each participant may contribute up to 15% of eligible pay on a pre-tax basis, an after-tax basis, or a combination. The IRC limited total individual pre-tax contributions to $12,000 and $11,000 in 2003 and 2002, respectively. Catch-up contributions are permitted for participants of at least 50 years of age. The catch-up provision provided these participants the opportunity to contribute an additional $2,000 and $1,000 on a pre-tax basis in 2003 and 2002, respectively (increasing to $3,000 in 2004, $4,000 in 2005, and $5,000, in 2006, with inflation adjustments after that until December 31, 2010).

 

Employer Nonelective Matching Contribution—After one year of service in which an employee works at least 1,000 hours of service, the Company makes contributions to the Plan based on the participant’s contributions up to 6% of eligible pay, each pay period. The Company’s matching contributions are invested in Sempra Energy common stock. Total Employer nonelective matching

 

4



 

contributions for the year ended December 31, 2003 and the period from November 1, 2002 (inception of Plan) through December 31, 2002 were $195,227 and $29,532, respectively.

 

Discretionary Incentive Contribution—If established performance goals and targets of the Company are met in accordance with the terms of the incentive match guidelines established each year, the Company will make an additional incentive contribution of not less than 3% and not more than 6% of the participant’s eligible pay. For 2003 the incentive contribution was 5.82%, and there was no incentive contribution made for 2002. The 2003 contribution was made on April 23, 2004.  This contribution was made in the form of cash, which then was used to purchase newly issued shares of Sempra Energy common stock. Total discretionary incentive contribution for the year ended December 31, 2003 was $155,417. There was no discretionary incentive contribution for the period from November 1, 2002 (inception of Plan) through December 31, 2002.

 

Participant Accounts—A separate account is established and maintained in the name of each participant and reflects the participant’s contributions and the Employer’s nonelective matching and discretionary incentive contributions, and the earnings and losses attributed to each investment fund less administrative expenses. Participants are allocated a share of each fund’s investment earnings net of investment fees on a daily basis, based upon their account balance as a percentage of the total fund balance. Investment expenses, except those for a specific transaction, are allocated quarterly to individual funds based on either fund balance or a participant’s pro rata share, as defined in the Plan document.

 

Vesting—All participant accounts are fully vested and nonforfeitable at all times.

 

Investment Options—All investments are held by the Sempra Energy Master Trust (the “Master Trust”) (see Note 5). Employees elect to have their contributions invested in increments of 1% in Sempra Energy common stock or specific mutual funds offered by T. Rowe Price and Fidelity Investment Managers.

 

Payment of Dividends—Active employees’ cash dividends on the shares of Sempra Energy common stock are reinvested in the Sempra Energy common stock fund. Cash dividends are paid to former employees who have elected to leave their accounts in the Plan.

 

Payment of Benefits—Participants receive their vested account balance in a single lump sum payment in cash or Sempra Energy common stock for any portion of their account held in Sempra Energy common stock at their termination of employment with the Company, retirement, permanent disability or the named beneficiary(ies) in the event of death.

 

Plan Termination—Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions and to terminate the Plan at any time subject to the provisions of ERISA. In the event of termination, the assets of the Plan will be distributed to the participants.

 

Related Party Transactions—Certain Plan investments are shares of mutual funds managed by T. Rowe Price, the Plan’s recordkeeper; therefore, these transactions qualify as party-in-interest transactions. Fees paid by the Plan to the recordkeeper for investment management services were $300 and $0 for the periods ended December 31, 2003 and 2002, respectively.

 

5



 

At December 31, 2003 and 2002, the Plan held 14,412 and 2,336 shares, respectively, of common stock of Sempra Energy, the sponsoring employer, with a cost basis of $385,075 and $54,074, respectively. During the year ended December 31, 2003 and the period from November 1, 2002 (inception of Plan) through December 31, 2002, the Plan recorded dividend income of $9,084 and $0, respectively.

 

2.                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Accounting—The Plan maintains its financial statements on the accrual basis of accounting.

 

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 net assets and disclosures at the date of the financial statements and the reported changes in net assets during the reporting period. Actual results could differ from those estimates.

 

Investment Valuation and Income Recognition—The Plan’s investments are stated at fair value based on quoted market prices. Loans are carried at cost plus accrued interest, which approximates fair value. Purchases and sales of securities are recorded on the trade date. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

 

Benefit Payments—Payments are recorded when paid.

 

3.                    TAX STATUS

 

The Company is in the process of requesting from the Internal Revenue Service a determination letter stating that the Plan, as designed, is in compliance with the applicable requirements of the IRC. The Plan’s administrator and the Plan’s tax counsel believe that the Plan is designed and operated in accordance with the applicable sections of the IRC, and that the underlying trust is exempt from taxation under Section 501(a) of the IRC.

 

4.                      PARTICIPANT LOANS

 

The Plan permits participants to borrow against the balances in their individual accounts within the Master Trust. A participant is limited to borrowing a maximum of 50% of the value of his/her account balance or $50,000, whichever is less. The minimum amount that can be borrowed is $1,000 and the fee charged for processing a loan is paid by the participant who takes out the loan. Participants may have one loan outstanding. Primary residence loans have a maximum repayment period of 15 years and other loans have a maximum repayment period of five years. All loans bear interest at 1% above the prime rate, as published in the Wall Street Journal, at the time the loan is made. For the year ended December 31, 2003 and the period from November 1, 2002 (inception of Plan) through December 31, 2002, interest rates on loans range from 5.00% to 9.5% and had maturity dates through January 2019.

 

5.                      INVESTMENTS IN THE MASTER TRUST (DOLLARS IN THOUSANDS)

 

The Plan’s assets are held in a trust account at T. Rowe Price, the trustee of the Plan, and consist of an interest in the Master Trust. Use of the Master Trust permits the commingling of the trust assets of two or more similar employee benefit plans sponsored by Sempra Energy for investment and administrative purposes. The Plan’s interest in the net assets of the Master Trust is based on the individual plan participants’ investment balances. Investment income is allocated on a daily basis through a valuation performed by the Trustee. Expenses relating to the Master Trust are allocated to the individual funds

 

6



 

based upon each participant’s pro-rata share, per share calculation, or transaction to individual funds. At December 31, 2003 and 2002, the Plan had less than 1% interest in the net assets of the Master Trust.

 

The assets available for benefits of the Master Trust at December 31, 2003 and 2002 are summarized as follows:

 

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Sempra Energy common stock

 

$

675,022

 

$

532,653

 

Common/collective trusts

 

287,518

 

253,055

 

Mutual funds

 

229,130

 

125,883

 

Participant loans

 

27,642

 

24,880

 

 

 

 

 

 

 

Assets available for benefits

 

$

1,219,312

 

$

936,471

 

 

Net appreciation (depreciation), and dividend and interest income for the Master Trust for the years ended December 31, 2003 and 2002 are as follows:

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Net appreciation (depreciation) of investments:

 

 

 

 

 

Sempra Energy common stock

 

$

145,639

 

$

(16,142

)

Common/collective trusts

 

64,051

 

(50,847

)

Mutual funds

 

21,848

 

(12,802

)

Dividends

 

25,238

 

23,088

 

Interest

 

1,754

 

1,933

 

 

The following investments represent 5% or more of the Plan’s assets at December 31, 2003 and 2002:

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Sempra Energy Common Stock

 

$

433

 

$

55

 

T. Rowe Price Small-Cap Stock Fund

 

212

 

46

 

T. Rowe Price Stable Value Fund

 

203

 

142

 

T. Rowe Price Equity Index Trust

 

185

 

76

 

Fidelity U.S. Bond Index Fund

 

152

 

 

T. Rowe Price Personal Strategy Balanced Fund

 

150

 

 

Participant Loans

 

105

 

67

 

Summit Cash Reserve Fund

 

90

 

65

 

T. Rowe Price Retirement Strategy Trust - Balanced

 

 

89

 

 

The Plan and Master Trust invest in various securities as detailed above. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with investment securities, it is reasonably possible that changes in the values of certain investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statements of assets available for plan benefits.

 

7



 

6.                    NON-PARTICIPANT DIRECTED INVESTMENTS

 

The Company’s contributions to the Plan are invested solely in Sempra Energy common stock. These contributions are classified as non-participant directed investments. Information about the Plan’s assets and the significant components of the Plan’s changes in assets relating to the non-participant directed investments as of December 31, 2003 and 2002 and for the year ended December 31, 2003 and for the period from November 1, 2002 (inception of Plan) through December 31, 2002 are as follows:

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

Sempra Energy common stock in the Master Trust

 

$

254,676

 

$

30,568

 

Employer contribution receivable

 

155,417

 

 

 

 

 

 

 

 

Total non-participant directed assets

 

$

410,093

 

$

30,568

 

 

 

 

 

 

 

Changes in Assets:

 

 

 

 

 

Contributions

 

$

350,644

 

$

29,532

 

Net investment income

 

36,684

 

1,036

 

Distributions to employees, retirees or their beneficiaries

 

(7,803

)

 

 

 

 

 

 

 

Total changes in assets

 

$

379,525

 

$

30,568

 

 

******

 

8



 

TWIN OAKS SAVINGS PLAN

 

FORM 5500, SCHEDULE H, LINE 4i

SCHEDULE OF ASSETS (HELD AT END OF YEAR)

DECEMBER 31, 2003

 

(a)

 

(b)
Identity of Issue, Borrower, Lessor
or Similar Party

 

(c)
Description of Investment
Including Maturity, Date,
Rate of Interest, Collateral

 

(d)
Cost

 

(e)
Current
Value

 

 

 

 

 

 

 

 

 

 

 

*

 

Participant loans

 

Interest rates from 5.00%- 9.5%; maturities from January 2004 through January 2019

 

**

 

$

104,703

 

 


*     Indicates party-in-interest to the Plan

**  Cost not applicable—participant directed investments

 

9



 

Mesquite Power LLC Savings Plan

 

Financial Statements as of December 31, 2003 and 2002, and for the year ended December 31, 2003 and the period from November 1, 2002 (Inception of Plan) through December 31, 2002 and Supplemental Schedule as of December 31, 2003 and Report of Independent Registered Public Accounting Firm

 



 

MESQUITE POWER LLC SAVINGS PLAN

 

TABLE OF CONTENTS

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

FINANCIAL STATEMENTS:

 

 

 

Statements of Assets Available for Benefits as of December 31, 2003 and 2002

 

 

 

Statements of Changes in Assets Available for Benefits for the year ended December 31, 2003 and for the period from November 1, 2002 (inception of Plan) through December 31, 2002

 

 

 

Notes to Financial Statements

 

 

 

SUPPLEMENTAL SCHEDULE AS OF DECEMBER 31, 2003:

 

 

 

Form 5500, Schedule H, Line 4i—Schedule of Assets (Held at End of Year)

 

 

NOTE:               Other schedules required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 are omitted because of the absence of conditions under which they are required or as they are filed by the trustee of the Master Trust in which the Plan participates.

 



 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

Mesquite Power, LLC Retirement Savings Plan

 

We have audited the accompanying statements of assets available for benefits of Mesquite Power LLC Savings Plan (the “Plan”) as of December 31, 2003 and 2002 and the related statements of changes in assets available for benefits for the year ended December 31, 2003 and the period from November 1, 2002 (inception of Plan) through December 31, 2002. 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 audits in accordance with standards of the Public Company Accounting Oversight Board (United States). 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, such financial statements present fairly, in all material respects, the assets available for benefits of the Plan at December 31, 2003 and 2002, and the changes in assets available for benefits for the Plan for the year ended December 31, 2003 and for the period from November 1, 2002 (inception of Plan) through December 31, 2002 in conformity with accounting principles generally accepted in the United States of America.

 

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule listed in the Table of Contents is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is 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. This schedule is the responsibility of the Plan’s management. Such schedule has been subjected to the auditing procedures applied in our audit of the basic 2003 financial statements and, in our opinion, is fairly stated in all material respects when considered in relation to the basic 2003 financial statements taken as a whole.

 

/s/ DELOTTE & TOUCHE LLP

 

San Diego, California

June 18, 2004

 

1



 

MESQUITE POWER LLC SAVINGS PLAN

 

STATEMENTS OF ASSETS AVAILABLE FOR BENEFITS

AS OF DECEMBER 31, 2003 AND DECEMBER 31, 2002

 

 

 

2003

 

2002

 

 

 

 

 

 

 

INVESTMENT:

 

 

 

 

 

At fair value:

 

 

 

 

 

Investment in Master Trust

 

$

174,287

 

$

3,208

 

 

 

 

 

 

 

OTHER ASSETS:

 

 

 

 

 

Dividends receivable

 

260

 

 

Employer’s contribution receivable

 

46,262

 

 

 

 

 

 

 

 

Total other assets

 

46,522

 

 

 

 

 

 

 

 

ASSETS AVAILABLE FOR BENEFITS

 

$

220,809

 

$

3,208

 

 

See notes to financial statements.

 

2



 

MESQUITE POWER LLC SAVINGS PLAN

 

STATEMENTS OF CHANGES IN ASSETS AVAILABLE FOR BENEFITS

FOR THE YEAR ENDED DECEMBER 31, 2003 AND FOR THE PERIOD FROM

NOVEMBER 1, 2002 (INCEPTION OF PLAN) THROUGH DECEMBER 31, 2002

 

 

 

2003

 

2002

 

 

 

 

 

 

 

ADDITIONS:

 

 

 

 

 

Net investment income:

 

 

 

 

 

Plan interest in the Sempra Energy Savings Plan Master Trust investment income

 

$

10,349

 

$

 

Investment expenses

 

(150

)

 

 

 

 

 

 

 

Net investment income

 

10,199

 

 

 

 

 

 

 

 

Contributions:

 

 

 

 

 

Employer

 

56,038

 

 

Participating employees

 

152,676

 

3,208

 

 

 

 

 

 

 

Total contributions

 

208,714

 

3,208

 

 

 

 

 

 

 

Total additions

 

218,913

 

3,208

 

 

 

 

 

 

 

DEDUCTIONS:

 

 

 

 

 

Distributions to employees, retirees or their beneficiaries

 

1,312

 

 

 

 

 

 

 

 

NET INCREASE

 

217,601

 

3,208

 

 

 

 

 

 

 

ASSETS AVAILABLE FOR BENEFITS—Beginning of period

 

3,208

 

 

 

 

 

 

 

 

ASSETS AVAILABLE FOR BENEFITS—End of period

 

$

220,809

 

$

3,208

 

 

See notes to financial statements.

 

3



 

MESQUITE POWER, LLC RETIREMENT SAVINGS PLAN

 

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2003 AND FROM

NOVEMBER 1, 2002 (INCEPTION OF PLAN) THROUGH DECEMBER 31, 2002

 

1.                    PLAN DESCRIPTION AND RELATED INFORMATION

 

The following description of the Mesquite Power, LLC Retirement Savings Plan (the “Plan”) is provided for general information purposes only. Participants should refer to the Plan document for a more complete description of the Plan’s provisions.

 

General—The Plan, adopted November 1, 2002, is a defined contribution plan that provides employees of Mesquite Power LLC (the “Company” or “Employer”) with retirement benefits. Employees may participate immediately in the Plan and, after one year in which they complete 1,000 hours of service, receive an employer matching contribution. Employees may make regular savings investments in common stock of Sempra Energy, the parent company of the Employer, and other optional investments permitted by the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).

 

The Plan was amended, effective October 1, 2003, to allow participants who have attained age 55 and have ten years of service with the Company as of October 1, to direct up to 10% of the shares in the employer matching account into any of the Plan’s designated investments.

 

The Plan allows for automatic deferrals for employees who neither elect a specific deferral percentage, nor elect not to participate in the Plan. The automatic deferral is an amount equal to 3% of eligible pay and the investment vehicle is the T. Rowe Price Stable Value Fund.

 

Administration—Certain administrative functions are performed by officers or employees of the Company. No such officer or employee receives compensation from the Plan. Certain administrative expenses are paid directly by the Company, such as legal and accounting fees. All investment expenses are paid by the participant, including recordkeeping, trustee, loan, and investment management fees.

 

Contributions—Contributions to the Plan can be made under the following provisions:

 

Participating Employee Contributions—Pursuant to Section 401(a) of the Internal Revenue Code (the “IRC”), each participant may contribute up to 15% of eligible pay on a pre-tax basis. The IRC limited total individual pre-tax contributions to $12,000 and $11,000 in 2003 and 2002, respectively. Catch-up contributions are permitted for participants of at least 50 years of age. The catch-up provision provided these participants the opportunity to contribute an additional $2,000 and $1,000 on a pre-tax basis in years 2003 and 2002, respectively (increasing to $3,000 in 2004, $4,000 in 2005 and $5,000 in 2006, with inflation adjustments after that until December 31, 2010).

 

Employer Nonelective Matching Contribution—After one year of service in which an employee works at least 1,000 hours of service, the Company makes contributions to the Plan based on the participant’s contributions up to 6% of eligible pay, each pay period. The Company’s matching contributions are invested in Sempra Energy common stock. Total Employer nonelective matching

 

4



 

contribution for the year ended December 31, 2003 was $9,776. There was no Employer nonelective matching contribution for the period from November 1, 2002 (inception of Plan) through December 31, 2002.

 

Discretionary Incentive Contribution—If established performance goals and targets of the Company are met in accordance with the terms of the incentive match guidelines established each year, the Company will make an additional incentive contribution of between 0% to not more than 3% of the participant’s eligible pay. For 2003 the incentive contribution was 2.92%, and there was no incentive contribution made for 2002. The 2003 contribution was made on April 23, 2004.  This contribution was made in the form of cash, which then was used to purchase newly issued shares of Sempra Energy common stock. Total discretionary incentive contribution for the year ended December 31, 2003 was $46,262. There was no discretionary incentive contribution for the period from November 1, 2002 (inception of Plan) through December 31, 2002.

 

Participant Accounts—A separate account is established and maintained in the name of each participant and reflects the participant’s contributions and the Employer’s nonelective matching and discretionary incentive contributions, and the earnings and losses attributed to each investment fund less administrative expenses. Participants are allocated a share of each fund’s investment earnings net of investment fees on a daily basis, based upon their account balance as a percentage of the total fund balance. Investment expenses, except those for a specific transaction, are allocated quarterly to individual funds based on either fund balance or a participant’s pro rata share, as defined in the Plan document.

 

Vesting—All participant accounts are fully vested and nonforfeitable at all times.

 

Investment Options—All investments are held by the Sempra Energy Master Trust (the “Master Trust”) (see Note 5). Employees elect to have their contributions invested in increments of 1% in Sempra Energy common stock or specific mutual funds offered by T. Rowe Price and Fidelity Investment Managers.

 

Payment of Dividends—Active employees’ cash dividends on the shares of Sempra Energy common stock in their account balances are reinvested in the Sempra Energy common stock fund. Cash dividends are paid to former employees who have elected to leave their accounts in the Plans.

 

Payment of Benefits—Participants receive their vested account balance in a single lump sum payment in cash or Sempra Energy common stock for any portion of their account held in Sempra Energy common stock at their termination of employment with the Company, retirement, or permanent disability or the named beneficiary(ies) in the event of death.

 

Plan Termination—Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions and to terminate the Plan at any time subject to the provisions of ERISA. In the event of termination, the assets of the Plan will be distributed to the participants.

 

Related Party Transactions—Certain Plan investments are shares of mutual funds managed by T. Rowe Price, the Plan’s recordkeeper; therefore, these transactions qualify as party-in-interest transactions. Fees paid by the Plan to the recordkeeper for investment management services were $150 and $0 for the periods ended December 31, 2003 and 2002, respectively.

 

5



 

At December 31, 2003 and 2002, the Plan held 1,160 and 0 shares, respectively, of common stock of Sempra Energy, the sponsoring employer, with a cost basis of $32,654 and $0, respectively. During the year ended December 31, 2003 and the period from November 1, 2002 (inception of Plan) through December 31, 2002, the Plan recorded dividend income of $365 and $0, respectively.

 

2.                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Accounting—The Plan maintains its financial statements on the accrual basis of accounting.

 

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 net assets and disclosures at the date of the financial statements and the reported changes in net assets during the reporting period. Actual results could differ from those estimates.

 

Investment Valuation and Income Recognition—The Plan’s investments are stated at fair value based on quoted market prices. Loans are carried at cost plus accrued interest, which approximates fair value. Purchases and sales of securities are recorded on the trade date. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

 

Benefit Payments—Payments are recorded when paid.

 

3.                    TAX STATUS

 

The Company is in the process of requesting from the Internal Revenue Service a determination letter stating that the Plan, as designed, is in compliance with the applicable requirements of the IRC. The Plan’s administrator and the Plan’s tax counsel believe that the Plan is designed and operated in accordance with the applicable sections of the IRC, and that the underlying trust is exempt from taxation under Section 501(a) of the IRC.

 

4.                      PARTICIPANT LOANS

 

The Plan permits participants to borrow against the balances in their individual accounts within the Master Trust. A participant is limited to borrowing a maximum of 50% of the value of his/her account balance or $50,000, whichever is less. The minimum amount that can be borrowed is $1,000, and the fee charged for processing a loan is paid by the participant who takes out the loan. Participants may have one loan outstanding. Primary residence loans have a maximum repayment period of 15 years and other loans have a maximum repayment period of five years. All loans bear interest at 1% above the prime rate, as published in the Wall Street Journal, at the time the loan is made. For the year ended December 31, 2003 and the period from November 1, 2002 (inception of Plan) through December 31, 2002, the loans had an interest rate of 5% and maturity dates through January 2019.

 

6



 

5.                      INVESTMENTS IN THE MASTER TRUST (DOLLARS IN THOUSANDS)

 

The Plan’s assets are held in a trust account at T. Rowe Price, the trustee of the Plan, and consist of an interest in the Master Trust. Use of the Master Trust permits the commingling of the trust assets of two or more similar employee benefit plans sponsored by Sempra Energy for investment and administrative purposes. The Plan’s interest in the net assets of the Master Trust is based on the individual plan participants’ investment balance. Investment income is allocated on a daily basis through a valuation performed by the Trustee. Expenses relating to the Master Trust are allocated to the individual funds based upon each participant’s pro-rata share, per share calculation, or transaction to individual funds. At December 31, 2003 and 2002, the Plan had less than 1% interest in the net assets of the Master Trust.

 

The assets available for benefits of the Master Trust at December 31, 2003 and 2002 are summarized as follows:

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Sempra Energy common stock

 

$

675,022

 

$

532,653

 

Common/collective trusts

 

287,518

 

253,055

 

Mutual funds

 

229,130

 

125,883

 

Participant loans

 

27,642

 

24,880

 

 

 

 

 

 

 

Assets available for benefits

 

$

1,219,312

 

$

936,471

 

 

Net appreciation (depreciation), dividend, and interest income for the Master Trust for the years ended December 31, 2003 and 2002 are as follows:

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Net appreciation (depreciation) of investments:

 

 

 

 

 

Sempra Energy common stock

 

$

145,639

 

$

(16,142

)

Common/collective trusts

 

64,051

 

(50,847

)

Mutual funds

 

21,848

 

(12,802

)

Dividends

 

25,238

 

23,088

 

Interest

 

1,754

 

1,933

 

 

The following investments represent 5% or more of the Plan’s assets at December 31, 2003 and 2002:

 

 

 

2003

 

2002

 

 

 

 

 

 

 

T. Rowe Price Stable Value Fund

 

$

78

 

$

2

 

T. Rowe Price Small-Cap Stock Fund

 

42

 

1

 

Sempra Energy common stock

 

35

 

 

 

The Plan and Master Trust invest in various securities as detailed above. Investment securities, in general, are exposed to various risks, such as interest rate, credit and overall market volatility. Due to the level of risk associated with investment securities, it is reasonably possible that changes in the values of certain investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statements of assets available for plan benefits.

 

7



 

6.                NON-PARTICIPANT DIRECTED INVESTMENTS

 

The Company’s contributions to the Plan are invested solely in Sempra Energy common stock. These contributions are classified as non-participant directed investments. Information about the Plan’s assets and the significant components of the Plan’s changes in assets relating to the non-participant directed investments as of December 31, 2003 and 2002 and for the year ended December 31, 2003 and for the period from November 1, 2002 (inception of Plan) through December 31, 2002 are as follows:

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

Sempra Energy common stock in the Master Trust

 

$

10,377

 

$

 

Employer contribution receivable

 

46,262

 

 

 

 

 

 

 

 

Total non-participant directed assets

 

$

56,639

 

$

 

 

 

 

 

 

 

Changes in Assets:

 

 

 

 

 

Contributions

 

$

56,038

 

$

 

Net investment income

 

601

 

 

 

 

 

 

 

 

Total changes in assets

 

$

56,639

 

$

 

 

******

 

8



 

MESQUITE POWER LLC SAVINGS PLAN

 

FORM 5500, SCHEDULE H, LINE 4i

SCHEDULE OF ASSETS (HELD AT END OF YEAR)

DECEMBER 31, 2003

 

(a)

 

(b)
Identity of Issue, Borrower, Lessor
or Similar Party

 

(c)
Description of Investment
Including Maturity Date,
Rate of Interest, Collateral

 

(d)
Cost

 

(e)
Current
Value

 

 

 

 

 

 

 

 

 

 

 

*

 

Participant loans

 

Interest rate of 5.00%, maturities from January 2004 through January 2019

 

**

 

$

7,171

 

 


*              Indicates party-in-interest to the Plan

** Cost not applicable—participant directed investments

 

 

9



 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Plans’ sponsors have duly caused this annual report to be signed on their behalf by the undersigned thereunto duly authorized.

 

 

Sempra Energy Savings Plan

 

Date:

June 28, 2004

/s/ G. JOYCE ROWLAND

 

 

G. Joyce Rowland, Senior Vice President HR,
Sempra Energy

 

 

San Diego Gas & Electric Company Savings Plan

 

 

Date:

June 28, 2004

/s/ G. JOYCE ROWLAND

 

 

G. Joyce Rowland, Senior Vice President HR,
Sempra Energy

 

 

Southern California Gas Company Retirement Savings Plan

 

Date:

June 28, 2004

/s/ G. JOYCE ROWLAND

 

 

G. Joyce Rowland, Senior Vice President HR,
Sempra Energy

 

Sempra Energy Trading Retirement Savings Plan

 

Date:

June 28, 2004

/s/ G. JOYCE ROWLAND

 

 

G. Joyce Rowland, Senior Vice President HR,
Sempra Energy

 

 

Twin Oaks Retirement Savings Plan

 

Date:

June 28, 2004

/s/ G. JOYCE ROWLAND

 

 

G. Joyce Rowland, Senior Vice President HR,
Sempra Energy

 

 

Mesquite Power LLC Savings Plan

 

Date:

June 28, 2004

/s/ G. JOYCE ROWLAND

 

 

G. Joyce Rowland, Senior Vice President HR,
Sempra Energy

 

 


EXHIBIT 23.1

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

We consent to the incorporation by reference in Registration Statement Nos. 333-51309, 333-52192, 333-77843, 333-70640 and 333-103588 on Form S-3 and Registration Statement Nos. 333-56161, 333-50806 and 333-49732 on Form S-8 of Sempra Energy of our reports relating to Sempra Energy Savings Plan, Sempra Energy Trading Retirement Savings Plan, Southern California Gas Company Retirement Savings Plan, San Diego Gas & Electric Company Savings Plan, Twin Oaks Retirement Savings Plan, and Mesquite Power LLC Savings Plan dated June 18, 2004, appearing in this Annual Report on Form 11-K of Sempra Energy for the year ended December 31, 2003.

 

 

/s/ DELOITTE & TOUCHE LLP

 

 

 

San Diego, California

June 23, 2004

 


EXHIBIT 99.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. Sec. 1350

 

Pursuant to 18 U.S.C. Sec 1350, as created by Section 906 of the Sarbanes-Oxley Act 2002, the undersigned certify that:

 

(i)                                    the Annual Reports on Form 11-K of the Sempra Energy Savings Plan, San Diego Gas & Electric Company, Southern California Gas Company Retirement Savings Plan, Sempra Energy Trading Retirement Savings Plan,  Twin Oaks Retirement Savings Plan, and Mesquite Power LLC Savings Plan (collectively, the “Plans”) filed with the Securities and Exchange Commission for the year ended December 31, 2003 (the “Annual Reports”) fully comply with the requirements of Section 13 (a) or Section 15 (d), as applicable, of the Securities Exchange Act of 1934, as amended; and

 

(ii)                                 the information contained in the Annual Reports fairly presents, in all material respects, the financial condition and results of operations of the Plans.

 

June 28, 2004

/ s /  G. JOYCE ROWLAND

 

 

G. Joyce Rowland

 

Senior Vice President, Human Resources,
Sempra Energy

 

 

 

 

 

/ s /  NEAL E. SCHMALE

 

 

Neal E. Schmale

 

Chief Financial Officer, Sempra Energy