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
(Mark One)
{X} ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED) for the
fiscal year ended December 30, 2002
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED) for the transition period
from _________ to 5313 __________.
Commission file number 333-21011
A. Full title of the plan and the address of the plan, if
different from that of the issuer named below:
FIRSTENERGY CORP. SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the plan and
the address of its principal executive office:
FIRSTENERGY CORP.
76 SOUTH MAIN STREET
AKRON, OH 44308
FirstEnergy Corp. Savings Plan
Report on Audits of Financial Statements and
Supplemental Schedules
December 30, 2002 and 2001
Wp/F/First Energy/Savingsfs-
FirstEnergy Corp. Savings Plan
Index
December 30, 2002 and 2001
-------------------------------------------------------------------------------
Page
Report of Independent Auditors 1
Statements of Net Assets Available for Plan Benefits at
December 30, 2002 and 2001 2
Statements of Changes in Net Assets Available for Plan Benefits
for the Years Ended December 30, 2002 and 2001 3
Notes to Financial Statements 4-12
Supplemental Schedules:
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
for the Year Ended December 30, 2002 13
Schedule H, Line 4k - Schedule of Reportable Transactions
for the Year Ended December 30, 2002 14
All other supplemental schedules are omitted as they are not applicable or are
not required based on the disclosure requirements of the Employee Retirement
Income Security Act of 1974 and applicable regulations issued by the Department
of Labor.
Report of Independent Auditors
To the Participants and Savings Plan Committee of the
FirstEnergy Corp. Savings Plan
In our opinion, the accompanying statements of net assets available for plan
benefits and the related statements of changes in net assets available for plan
benefits present fairly, in all material respects, the net assets available for
plan benefits of the FirstEnergy Corp. Savings Plan (the "Plan") at December 30,
2002 and 2001, and the changes in net assets available for plan benefits for the
years then ended in conformity with accounting principles generally accepted in
the United States of America. 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 of these
statements in accordance with auditing standards generally accepted in the
United States of America, which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
(held at end of year) and reportable transactions are presented for the purpose
of additional analysis and are not a required part of the basic financial
statements but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. These supplemental schedules are the
responsibility of the Plan's management. The supplemental schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ PricewaterhouseCoopers LLP
Cleveland, OH
June 20, 2003
FirstEnergy Corp. Savings Plan
Statements of Net Assets Available for Plan Benefits
At December 30, 2002 and 2001
-----------------------------------------------------------------------------
Assets 2002 2001
------ ---- ----
Cash and cash equivalents ................ $ 2,122,300 $ 2,343,342
FirstEnergy common stock ................. 413,047,769 457,493,010
Capital preservation investments ......... 197,456,856 163,168,296
Domestic equity stocks ................... 238,326,911 299,137,692
International equity stocks .............. 35,268,919 40,982,416
Other equities ........................... 18,893,250 23,568,020
Bonds .................................... 29,884,888 13,963,399
Participant loans ........................ 19,762,708 18,125,574
Interest receivable ...................... 940,951 868,023
Employee contributions receivable ........ 2,209,914 1,758,988
Pending sale transactions ................ 830,930 55,538
------------ --------------
Total assets .......................... 958,745,396 1,021,464,298
Liabilities
Pending purchase transactions ............ 138,287 345,932
ESOP loan balance ........................ 125,850,000 149,550,000
Accrued fees ............................. 18,846 505
------------ --------------
Total liabilities ..................... 126,007,133 149,896,437
------------ --------------
Net assets available for plan benefits ... $832,738,263 $ 871,567,861
============ ==============
The accompanying notes are an integral part of these financial statements.
2
FirstEnergy Corp. Savings Plan
Statements of Changes in Net Assets Available for Plan Benefits
For the Years Ended December 30, 2002 and 2001
-----------------------------------------------------------------------------
2002 2001
---- ----
Additions:
Contributions:
Employee ............................ $ 51,490,830 $ 45,395,654
Employer ............................ 24,200,635 20,272,285
------------- ------------
Total contributions ............... 75,691,465 65,667,939
Investment (loss) income:
Interest and dividends .............. 33,601,245 34,356,550
Net depreciation in fair value
of investments .................... (113,347,156) (18,006,428)
------------- ------------
Total investment (loss) income .. (79,745,911) 16,350,122
Conversion transfers, net ............. 18,949,093 100,958
------------- ------------
Total additions .............. 14,894,647 82,119,019
Deductions:
Distributions to Participants ......... (35,304,079) (37,084,543)
ESOP interest ......................... (14,955,570) (16,825,000)
Fees .................................. (677,964) (579,137)
ESOP transfers to other benefit plan .. (2,786,632) (102,485)
------------- ------------
Total deductions ............. (53,724,245) (54,591,165)
------------- ------------
(Decrease) increase in net assets ......... (38,829,598) 27,527,854
Net assets available for plan benefits,
beginning of year ....................... 871,567,861 844,040,007
------------- ------------
Net assets available for plan benefits,
end of year ............................. $ 832,738,263 $871,567,861
============= ============
The accompanying notes are an integral part of these financial statements.
3
FirstEnergy Corp. Savings Plan
Notes to Financial Statements
December 30, 2002 and 2001
-----------------------------------------------------------------------------
1. Description of the Plan
The FirstEnergy Corp. Savings Plan (the "Plan") provides eligible
employees of FirstEnergy Corp. ("FirstEnergy" or "FE") and its
subsidiaries, collectively referred to as the "Companies", a mechanism
through which they can save and invest part of their income on a tax
deferred basis at regular intervals. Additionally, the Companies
currently match employee contributions with shares of FirstEnergy common
stock (see Note 7) held in the Employee Stock Ownership Plan ("ESOP").
However, according to the Plan, the Companies can alternatively make the
contributions in cash. Employees may invest their contributions in other
investment options (the "Funds") and all contributions made to employees'
accounts are fully and immediately vested in the Plan. The purpose of the
Plan is to encourage employees to adopt a regular savings program and to
provide additional security for retirement. The following is a brief
description of the Plan and is provided for general information purposes
only. Employees should refer to the Plan documents for more complete
information.
The Plan is a qualified profit-sharing plan under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and provides for
salary reduction contributions under Section 401(k) of the Code. In
general, plans established pursuant to Section 401(k) of the Code permit
eligible employees to defer current federal and, subject to applicable
laws, state and local income taxes on the portion of their current
compensation represented by the amount of the salary reduction elected.
The amounts, as elected by the employees, are contributed to the Plan by
the Companies through payroll deductions.
The Plan is subject to Title I of the Employee Retirement Income Security
Act of 1974 ("ERISA") but not Title IV as it is an "individual account
plan". Title I establishes reporting and disclosure requirements, minimum
standards for participation, vesting and benefit accrual, prohibitions
governing the conduct of fiduciaries and provides that ERISA pre-empts
other federal, state and local statutes relating to employee benefits.
The protective benefits of Title IV which relate to insuring pension
benefits by the Pension Benefit Guaranty Corporation are not applicable
to individual account plans.
Every permanent FirstEnergy employee is eligible to become a participant
in the Plan, herein referred to as "employee" or "Participant",
immediately at commencement of employment.
Employees may participate in one or more of the Funds through deferral of
compensation. The choice of investments (except the Companies' matching
contributions, which are in the form of FirstEnergy common stock) is the
responsibility of the individual employee. Transfers between funds are
the responsibility of the employee and may be made on a daily basis.
Securities in the ESOP Account
The ESOP purchased a total of 10,654,114 shares of Ohio Edison ("OE")
common stock from November 1990 to December 1991 for the purpose of
funding the Companies' matching contribution to the Plan. On November 8,
1997, pursuant to the merger of OE and Centerior Energy Corporation that
created FirstEnergy ("Merger"), shares of OE common stock were converted
into shares of FirstEnergy common stock on a one-for-one basis.
The Plan borrowed $200 million, referred to herein as the "ESOP Loan", at
a rate of 10% from OE to fund the purchase of the stock. The ESOP Loan is
collateralized by the unallocated FirstEnergy
4
FirstEnergy Corp. Savings Plan
Notes to Financial Statements
December 30, 2002 and 2001
-----------------------------------------------------------------------------
common stock acquired with the proceeds of the ESOP Loan. The ESOP Loan is
expected to be repaid by December 2005. Interest payments on the loan are
made annually. Additionally, principal payments may be made sooner if
additional shares of FirstEnergy common stock are needed for distributions
to Participants. At December 30, 2002 and 2001, the ESOP Loan balance was
$125,850,000 and $149,550,000, respectively.
Requirements for maturing long-term debt are as follows:
2003 ........... $29,300,000
2004 ........... 35,700,000
2005 ........... 60,850,000
------------
$125,850,000
ESOP Allocation
As principal and interest payments are made on the ESOP Loan, shares of
FirstEnergy common stock are released from the ESOP Unallocated Fund to
the ESOP Allocated Fund where they are made available for contribution to
Participants' accounts. The Plan made interest payments of $14,955,000 in
2002 and $35,100,000 in 2001, which released 353,756 shares in 2002 and
812,272 shares in 2001. In December 2002, a principal payment of
$23,700,000 was made which led to the release of 560,617 shares. In
December 2001, a principal payment of $18,700,000 was made which led to
the release of 442,343 shares.
The Companies' matching contribution to each Participant's account is
computed the Thursday following the end of each pay period based on the
Companies' matching contribution percentages (see Note 7) and on the
quoted market price of FirstEnergy common stock when contributed. During
2002 and 2001, there were 688,740 and 548,888 ESOP shares, respectively
contributed to Participants' accounts. In 2002 and 2001, respectively,
207,989 and 197,077 ESOP shares were realized related to the reinvestment
of dividends on the ESOP shares.
At December 30, 2002 and December 30, 2001, there were 3,646,967 and
4,561,340 shares, respectively, held in the ESOP Unallocated Fund at
market values of $120,240,502 and $159,555,675, respectively, and
5,690,142 and 5,041,555 shares, respectively, held in the ESOP Allocated
Fund at market values of $187,604,005 and $176,352,004. The market value
of the ESOP common stock is measured by the quoted market price.
PAYSOP
A component of the Plan consists of a qualified payroll-based tax credit
employee stock ownership plan ("PAYSOP") under Section 401(a) and Section
501(a) of the Code.
Under the Economic Recovery Tax Act of 1981, effective January 1, 1983,
tax credits were based upon eligible employee compensation. The
regulation permitted the Companies to contribute to the fund a maximum of
one-half of one percent of the aggregate compensation of eligible
employees and claim a tax credit on its consolidated federal income tax
return equal to this amount. The amounts allocated to eligible employees
were based upon the proportion of their wages and salaries (to a maximum
of $100,000) to the wages and salaries of total employees for the year.
5
FirstEnergy Corp. Savings Plan
Notes to Financial Statements
December 30, 2002 and 2001
-----------------------------------------------------------------------------
The Tax Reform Act of 1986 eliminated the PAYSOP tax credit with respect
to compensation earned in 1987 or later years. As a result, the Companies
have not contributed to the PAYSOP since the 1986 contribution other than
for the reimbursement of PAYSOP administrative expenses.
On November 8, 1997, pursuant to the Merger, shares of OE common stock
held in the PAYSOP were converted into shares of FirstEnergy common stock
on a one-for-one basis.
Dividends are paid annually to Participants in the PAYSOP. The market
value of the common stock in the PAYSOP is measured by the quoted market
price. As of February 11, 2002, dividends will be payable quarterly to
Participants and Participants will also have the option to reinvest
dividends back into the PAYSOP Fund. The market value of the Paysop Fund
was $3,114,477 and $3,301,054 at December 30, 2002 and 2001,
respectively.
2. Summary of Accounting Policies
The financial statements have been prepared on the accrual basis of
accounting.
The Plan presents, in the Statements of Changes in Net Assets Available
for Plan Benefits, the net appreciation (depreciation) in the fair value
of its investments, which consists of realized gains or losses and
unrealized appreciation or depreciation. All investment management fees
are deducted from investment income. The market value of the Fund is
measured at the market value per share determined by the investment
manager except for funds A, B, L and N. See footnote 4 for the
methodology used to determine fair value for each of these funds.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts
recorded in the financial statements and accompanying notes. Actual
results may differ from these estimates.
The Companies pay all expenses associated with administering the Plan,
including State Street Bank & Trust Company ("Trustee") fees and
brokerage commission on purchases and transfers between the funds.
3. Plan Termination
Although the Companies have not expressed any intent to do so, the
Companies reserve the right to discontinue or terminate the Plan at any
time. If the Plan should be terminated, in whole or in part, Participants
will be entitled to withdraw the full value of their accounts, to the
extent allowed by law.
4. Descriptions of Funds
The following are brief descriptions of the Funds currently available to
Participants at December 30, 2002:
6
FirstEnergy Corp. Savings Plan
Notes to Financial Statements
December 30, 2002 and 2001
-----------------------------------------------------------------------------
Fund A - Company Common Stock Fund
This Fund consists entirely of shares of FirstEnergy common stock. The
Fund provides an opportunity for employees to increase their common
ownership stake in FirstEnergy. The objective for this Fund is the growth
of capital through both appreciation and dividend income. The Fund also
holds the Companies' pre-ESOP matching contribution in FirstEnergy common
stock. The common stock is purchased by the Trustee on the open market.
The market value of the common stock is measured by the quoted market
price.
Fund B - Capital Preservation Fund
This Fund consists of guaranteed fixed income contracts issued by
insurance companies and banks, collateralized mortgage obligations, and
short-term money market instruments. These contracts guarantee interest
for a fixed period and the principal amount of all investments. The
market value of the Capital Preservation Fund is measured at the contract
value as determined by the insurers and banks.
Fund C - S&P 500 Index Fund
This Fund is a common/collective trust investing in the S&P 500 stocks.
The objective of this Fund is the growth of capital through both
appreciation and dividend income.
Fund D - Small Cap Value Fund
This Fund invests primarily in securities of well-financed small cap
companies at a substantial discount to what the manager believes are
takeover values. The manager is EQSF Advisors, Inc. and the mutual fund
name is Third Avenue Value. The objective of the Fund is to match or
exceed the returns of the Russell 2000 Value Index over time.
Fund E - Large Cap Value Fund
The Fund seeks long-term capital appreciation and income by focusing on
domestic large company equities that are selling at modest prices to
earnings multiples. Shares are usually held for the long-term. Only
extreme valuations or major changes to a company's fundamentals will
trigger a sale. The portfolio manager is Davis Selected Advisors, L.P.
and the mutual fund name is Selected American Fund. The performance
objective is to match or exceed the S&P/Barra Large Cap Value Index over
time.
Fund F - Mid Cap Value Fund
The Fund seeks long-term capital appreciation by investing in mid-sized
companies that are less closely monitored by the investment community as
evidenced by low institutional ownership and analyst coverage. The goal
is to find well-managed companies that have sustainable growth prospects
but that are selling at prices below their private market value. The
manager believes that these factors may cause shares to be undervalued.
The manager may sell a stock when its price no longer compares favorably
with the company's private market value. The portfolio manager is Strong
Capital Management and the mutual fund name is Strong Opportunity Fund.
7
FirstEnergy Corp. Savings Plan
Notes to Financial Statements
December 30, 2002 and 2001
-----------------------------------------------------------------------------
Fund G - Mid Cap Growth Fund
The Fund seeks long-term capital appreciation by investing in mid cap
companies that are leaders in attractive growth markets and in securities
of higher risk accelerating growth companies. These securities are driven
by product cycles, favorable sector conditions or other company specific
factors expected to produce rapid sales and earnings growth. The Fund's
investments are usually bought and sold relatively frequently. The
portfolio manager is Invesco Funds Group, Inc. and the mutual fund name
is Invesco Dynamics Fund.
Fund H - Small Cap Growth Fund
The Fund seeks long term capital appreciation by investing in small
companies that are positioned for above-average growth in revenues,
earnings or assets. Both qualitative and quantitative analysis is used to
evaluate companies for distinct and sustainable competitive advantages
which are likely to lead to growth in earnings and share price. The
portfolio manager is Franklin Advisers, Inc. The mutual fund name is
Franklin Small/Mid Cap Growth Fund.
Fund I - Bond Fund
The Fund seeks to maximize total return consistent with the preservation
of capital by investing at least 65% of its assets in a diversified
portfolio of intermediate term fixed income investments of varying
maturities. The Fund invests primarily in investment grade debt but may
invest up to 10% of its assets in high yield securities rated B or
higher. The Fund may invest up to 20% of assets in securities denominated
in foreign currencies. The portfolio manager is PIMCO and the mutual fund
name is PIMCO Total Return Fund.
Fund J - Self Managed Fund
Participants may invest in a self-managed brokerage account available
through State Street Brokerage Services, Inc. Options include mutual
funds along with any security that is listed on the NYSE, ASE and NASDAQ.
Fund K - EuroPacific Fund
This Fund is an actively managed portfolio of foreign common stocks
managed by Capital Research & Management Co. The objective of the Fund is
the growth of capital through appreciation.
Fund L - Loan Fund
The Plan allows Participants to borrow from their before-tax, after-tax
and rollover accounts for certain approved purposes. When loans are made,
they are recorded as interfund transfers. The repayments of principal and
interest are credited to the Participants' account balances within the
respective funds. The employee repays the loan and all related interest
through payroll deductions.
Participants may borrow up to 50 percent of their total account balance
or 100 percent of their before-tax account, whichever is less. The
interest rate charged is based on the prime rate plus 1 percent.
Participants may have up to two loans outstanding at one time. The
minimum loan amount is $1,000 and must be repaid within 6 and 60 months.
If the loan is for the purchase of a principal residence, the loan
repayment period can be extended to 30 years. The maximum loan amount is
$50,000.
8
FirstEnergy Corp. Savings Plan
Notes to Financial Statements
December 30, 2002 and 2001
-----------------------------------------------------------------------------
Fund M - Armada Equity Growth Fund
This is an actively managed Fund specializing in large capitalization
growth-oriented stock issues managed by National City Bank. The objective
of the Fund is the growth of capital through appreciation.
Fund N - DQE Frozen Stock Fund
This Fund consists entirely of shares of Duquesne Light Company ("DQE")
common stock. These investments were transferred from the former Beaver
Valley Power Station 401(k) Plan. The market value of the common stock is
measured by the quoted market price. The Fund is frozen to contributions
from Participants and allows withdrawals by Participants in accordance
with the Plan document.
5. Investments
The Plan's investments are maintained in investment funds and shares of
common stock of FirstEnergy and DQE, as described in Note 4.
Investment securities are exposed to various risks such as interest rate,
market and credit risks. Market values of securities fluctuate based on
the magnitude of changing market conditions; significant changes in
market conditions could materially affect plan investments.
The following presents the market value of investments that represent 5
percent or more of the Plan's net assets available for plan benefits at
December 30, 2002 and 2001:
2002 2001
ESOP Unallocated Fund - FE Common Stock $120,240,502 $159,555,675
ESOP Allocated Fund - FE Common Stock 187,604,005 176,352,004
Company Common Stock Fund - FE Common Stock 102,088,785 118,284,278
Capital Preservation Fund 197,456,856 163,168,296
S&P 500 Index Fund 121,527,709 148,298,557
Armada Equity Growth Fund 59,553,514 90,698,078
9
FirstEnergy Corp. Savings Plan
Notes to Financial Statements
December 30, 2002 and 2001
-----------------------------------------------------------------------------
The net depreciation of the Plan's investments for 2002 and 2001 was as
follows:
2002 2001
Bonds ..................... $ 328,438 $ (233,937)
Domestic stocks ........... (80,716,515) (54,987,797)
International stocks ...... (6,013,812) (6,970,511)
FirstEnergy common stock .. (26,945,267) 44,185,817
------------- ------------
Total $(113,347,156) $(18,006,428)
============= ============
6. Non-Participant Directed Investments
Net assets available for plan benefits and changes in net assets
available for plan benefits relating to non-participant directed
investments at December 30, 2002 and 2001 and for the years then ended
are as follows:
2002 2001
Assets:
FE common stock $ 166,624,040 $152,364,318
-------------- ------------
Net assets available for plan benefits $ 166,624,040 $152,364,318
============= ============
Changes in net assets available for plan benefits:
Employer contributions $ 24,200,635 $ 20,272,285
Interest and dividends 7,020,227 6,136,129
Net (depreciation) appreciation in fair value
of investments 3,077,491 19,778,176
Distributions to Participants (5,782,225) (5,092,242)
Transfers, net (12,359,514) (7,794,304)
Conversions (1,896,090)
-
Expenses
(802) (2,350)
------------- ------------
Increase in net assets available for plan benefits $ 14,259,722 $ 33,297,694
============= ============
10
FirstEnergy Corp. Savings Plan
Notes to Financial Statements
December 30, 2002 and 2001
-----------------------------------------------------------------------------
7. Contributions
Employer Contributions
The Companies pay a matching contribution of 50% on the first 6% of
compensation contributed by an employee. In addition, the Companies may
designate a number of performance objectives and contribute for each
objective achieved, an additional $.05, up to a maximum of $.25, on each
$1.00 of the first 6% of compensation contributed by an employee. The
Companies' contributions are always invested in FirstEnergy common stock.
The Companies' contributions have been pre-funded by the FirstEnergy
common stock held by the ESOP Unallocated Fund. These shares of
FirstEnergy common stock earn dividend income and are subject to
unrealized appreciation and depreciation as the market value of the
FirstEnergy common stock fluctuates. The dividend income serves to pay
the ESOP Loan and related interest, which results in the release of
shares to the ESOP Allocated Fund as the Companies' matching
contribution. To the extent dividend income is not sufficient to pay the
ESOP Loan and interest, the Companies will contribute cash which is
reflected as employer contributions in the Statements of Changes in Net
Assets Available for Plan Benefits. No such contributions were made in
2002 or 2001. Effective February 11, 2002, Participants who are at least
55 years of age with ten years in the ESOP are provided the ability to
diversify a portion of their company matching portfolio. The first
participants to elect this option became eligible in 2002.
Employee Contributions
During 2001, employees could invest between 1% and 16% of their salary in
the Plan. Effective January 1, 2002, the maximum contribution rate was
increased from 16% to 20%. Employee contributions may be made on a
before-tax and/or after-tax basis. Under the before-tax option, deposits
are deducted from current taxable income but are taxable when they are
withdrawn from the Plan. The Tax Reform Act of 1986 limited the maximum
annual before-tax contribution to $11,000 for 2002 and $10,500 for 2001.
Participants who are at least 50 years of age can elect to defer an
additional $1,000 annually. Prior to age 59-1/2, an active employee may
withdraw before-tax deposits only under certain hardship conditions as
defined in the Plan document.
Employees may make rollover contributions to the Plan of funds held in
other tax-qualified plans which the employee was a participant of prior
to becoming employed by the Companies. The rollover contributions must be
the result of a qualified total distribution from another tax-qualified
plan and must be contributed to the Plan within 60 days after
distribution to the employee.
Both employer and employee contributions under the Plan are held in a
trust fund with the Trustee. Employees may choose to invest their
contributions in Funds A, B, C, D, E, F, G, H, I, J, K or M (see Note 4)
which are offered by the Plan. Employees may also elect to borrow from
their before-tax accounts for certain approved purposes (Fund L).
8. Tax Considerations
The Plan is exempt from federal, state and local income taxes. The Plan
received a favorable determination letter, which was dated March 24,
2003. The federal, state and local income tax
11
FirstEnergy Corp. Savings Plan
Notes to Financial Statements
December 30, 2002 and 2001
-----------------------------------------------------------------------------
treatments of distributions from the Plan depend upon when they are made
and their form. The withdrawal of the principal amount of a Participant's
after-tax contribution is not, however, subject to tax. For tax years
beginning after December 31, 1986, the Tax Reform Act of 1986 requires that
an additional tax of 10% be applied to employee withdrawals from the Plan
prior to death, disability, attainment of age 59-1/2, or under certain
other limited circumstances.
In the case of withdrawal by a Participant employed by the Companies
prior to the attainment of age 59-1/2, the excess of the value of the
withdrawal over the total amount of the Participant's after-tax
contributions, is taxable at ordinary income tax rates. The value of the
Companies common stock withdrawn is considered to be its fair value on
the date it is withdrawn.
In the case of a distribution that qualifies as a lump-sum distribution
upon a Participant's termination of employment with the Companies or
after attaining the age of 59-1/2, only the excess of the value of the
lump sum distribution over the amount of the Participant's after-tax
contributions to the Plan (less withdrawals) is taxable at ordinary
income tax rates. In determining the value of the lump-sum distribution,
the FirstEnergy common stock distributed in-kind or in cash shall be
valued at fair value on the date it is withdrawn.
9. Conversion Transfers
On April 30, 2002, the FirstEnergy Corp. 401(K) Retirement Savings Plan
for IBEW Employees at the Beaver Valley Nuclear Power Plant was merged
into the Plan. Net assets with a value of $18,949,093 were transferred to
the Plan.
10. Subsequent Event
Effective January 1, 2003, the GPU Non-Bargaining Savings Plan
participants were transferred into the Plan.
11. Guaranteed Investment Contracts
The Plan holds fully benefit-responsive guaranteed investment contracts
("GICs"), which are presented at contract value in the Statements of Net
Assets Available for Plan Benefits as previously stated in Note 4. The
fair values of the GICs at December 30, 2002 and 2001 were $209,520,197
and $169,892,523, respectively. The average yield of the contracts was
5.36% and 5.97% for the years 2002 and 2001, respectively. The crediting
interest rate as of December 30, 2002 and 2001 was 4.87% and 5.51%,
respectively. The Capital Preservation Fund is measured at the contract
value as determined by the insurers and banks and no valuation reserve in
relation to the contract value is deemed necessary. The GICs in the Plan
are of various types and have zero minimum crediting interest rates.
There are fixed crediting interest rates and variable crediting interest
rates that reset on a monthly or quarterly basis.
12
FirstEnergy Corp. Savings Plan
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
EIN: 34-1843785 PN: 002
For the Year Ended December 30, 2002
------------------------------------------------------------------------------
Fair
Identity of Issue Description Cost Value
----------------- ----------- ---- -----
State Street STIF Fund Money Market Fund $ 2,122,300 $ 2,122,300
ESOP Unallocated Fund * FE Common Stock 68,462,023 120,240,502
ESOP Allocated Fund * FE Common Stock 108,340,100 187,604,005
PAYSOP Fund * FE Common Stock 1,641,227 3,114,477
Company Common Stock Fund * FE Common Stock 82,663,397 102,088,785
Capital Preservation Fund GICs, CMOs 197,456,856 197,456,856 **
S&P 500 Index Fund S&P 500 Stocks 125,117,165 121,527,709
(Common/Collective Trust)
Small Cap Value Fund Domestic Small Cap Stocks 34,618,761 29,551,891
(Retail Mutual Fund)
Large Cap Value Fund Large Cap Value Stocks 9,486,256 7,581,388
(Retail Mutual Fund)
Mid Cap Value Fund Mid Cap Value Stocks 13,341,586 9,922,135
(Retail Mutual Fund)
Mid Cap Growth Fund Mid Cap Growth Stocks 4,514,828 3,297,146
(Retail Mutual Fund)
Small Cap Growth Fund Small Cap Growth Stocks 5,179,118 3,937,421
(Retail Mutual Fund)
Bond Fund Bonds 29,809,903 29,884,888
(Retail Mutual Fund)
Self Managed Fund Equities, Fixed Income 18,893,250 18,893,250
EuroPacific Fund International Stocks 46,399,250 35,268,919
(Mutual Fund)
Loan Fund Participant Loans 19,762,708 19,762,708
Armada Equity Growth Fund Equities 88,103,746 59,553,514
(Mutual Fund)
DQE Frozen Stock Fund DQE Common Stock 4,097,832 2,955,707
------------ ------------
$860,010,306 $954,763,601
============ ============
* Party-in-interest
** GIC's are carried at contract value which is cost.
13
FirstEnergy Corp. Savings Plan
Schedule H, Line 4k - Schedule of Reportable Transactions
------------------------------------------------------------------------------
EIN: 34-1843785 PN: 002
For the Year Ended December 30, 2002
Number of Total Number Total
Description Purchase Value of of Sale Selling Cost of
of Assets Transactions Purchase Transactions Price Assets Sold Gain
----------- ------------ -------- ------------ ------- ----------- ----
FirstEnergy Common Stock 427 $51,519,918 611 $80,305,993 $73,188,599 $ 7,117,394
14
Exhibit A
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8(No. 333-21011) of FirstEnergy Corp. of our report dated
June 20, 2003 relating to the financial statements of the FirstEnergy Corp.
Savings Plan, which appears in this Form 11-K.
/s/ PricewaterhouseCoopers LLP
Cleveland,OH
June 20, 2003
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Savings Plan Committee, the administrator of the FirstEnergy Corp. Savings Plan,
has duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
FIRSTENERGY CORP.
SAVINGS PLAN
June 20, 2003
-------------
Date
By: /s/ Stephen J. Mileski
----------------------
Stephen J. Mileski
Chairman
Savings Plan Committee
June 27, 2003
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: FirstEnergy Corp. Savings Plan
Gentlemen:
We transmit herewith for electronic filing with the Securities and Exchange
Commission, pursuant to the Securities Act of 1934, as amended, an annual report
on Form 11-K of the FirstEnergy Corp. Savings Plan.
Please address any comments regarding the above to the undersigned at 76 S.
Main Street, Akron, OH 44308 (330) 384-5504.
Very truly yours,
FirstEnergy Corp.
By: /s/ Edward J. Udovich
-----------------------------
Edward J. Udovich
Assistant Corporate Secretary