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 Year Ended December 31, 2001
of
DUKE ENERGY RETIREMENT SAVINGS PLAN
Commission File Number 1-4928
Issuer of Securities held pursuant to the Plan is
DUKE ENERGY CORPORATION, 422 South Church Street,
Charlotte, North Carolina 28202-1904
DUKE ENERGY
RETIREMENT SAVINGS PLAN
Financial Statements and Supplemental Schedule
with Independent Auditors' Report
December 31, 2001 and 2000
TABLE OF CONTENTS
Independent Auditors' Report 3
Financial Statements:
Statements of Net Assets Available for Benefits as of December 31,
2001 and 2000 4
Statement of Changes in Net Assets Available for Benefits 5
For the Year Ended December 31, 2001
Notes to Financial Statements 6 - 11
Supplemental Schedule
Form 5500, Schedule H, Line 4i - Schedule of Assets (Held at End of Year) 12
NOTE: The accompanying financial statements have been prepared for the purpose
of filing with Form 5500. Supplemental schedules required by 29 CFR
2520.103-10 of the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security
Act of 1974, other than the schedule listed above, are omitted because of
the absence of the conditions under which they are required.
2
INDEPENDENT AUDITORS' REPORT
To the Trustees and Participants of
Duke Energy Retirement Savings Plan
Charlotte, North Carolina
We have audited the accompanying statements of net assets available for benefits
of Duke Energy Retirement Savings Plan (the "Plan") as of December 31, 2001 and
2000, and the related statement of changes in net assets available for benefits
for the year ended December 31, 2001. 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 auditing standards generally accepted
in the United States of America. 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 net assets available for benefits of the Plan as of December 31,
2001 and 2000, and the changes in net assets available for benefits for the year
ended December 31, 2001 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 2001 financial statements and, in our opinion, is fairly stated in all
material respects when considered in relation to the basic financial statements
taken as a whole.
/s/ DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Charlotte, North Carolina
June 8, 2002
3
DUKE ENERGY
RETIREMENT SAVINGS PLAN
Statements of Net Assets Available for Benefits
December 31, 2001 and 2000
(IN THOUSANDS)
Assets: 2001 2000
------------- -------------
Investments (Notes 1, 2, 3, 4 and 5) $ 2,600,770 $ 2,709,289
------------- -------------
Receivables:
Due from broker for securities sold - 381
Accrued interest and dividends 724 1,827
Cash 16 -
------------- -------------
Total Assets 2,601,510 2,711,497
Liabilities:
Due to broker for securities purchased - 555
Other payables 451 784
------------- -------------
Total Liabilities 451 1,339
------------- -------------
Net assets available for benefits $ 2,601,059 $ 2,710,158
============= =============
See notes to financial statements.
4
DUKE ENERGY
RETIREMENT SAVINGS PLAN
Statement of Changes in Net Assets Available for Benefits
For the Year Ended December 31, 2001
(IN THOUSANDS)
Additions to net assets attributed to:
Investment loss: (Notes 2, 3 and 4)
Dividends $ 52,495
Interest 10,019
Net depreciation in fair value of investments (195,903)
----------------
Total investment loss, net (133,389)
----------------
Contributions:
Employer 67,002
Participants 104,880
Rollovers from other plans (Note 1) 688
----------------
Total contributions 172,570
----------------
Total additions 39,181
----------------
Deductions from net assets attributed to:
Distributions to participants 147,334
Administrative expenses 946
----------------
Total deductions 148,280
----------------
Net increase in net assets available for benefits 109,099
Net assets available for benefits, January 1, 2001 2,710,158
----------------
Net assets available for benefits, December 31, 2001 $ 2,601,059
================
See notes to financial statements.
5
DUKE ENERGY
RETIREMENT SAVINGS PLAN
Notes to Financial Statements
1. Description of the Plan:
The following description of the Duke Energy Retirement Savings Plan (the
"Plan") is provided for general information purposes only. Participants
should refer to the plan document for more complete information.
Participation and Purpose
The Duke Energy Corporation Retirement Savings Plan is sponsored by Duke
Energy Corporation and its participating affiliates which are Crescent
Resources, Inc., Duke Engineering & Services, Inc. (including its
wholly-owned subsidiaries DE&S Northwest, Inc. and Intera, Inc.), Nantahala
Power and Light Company (Nantahala), Duke Energy International, Inc., Duke
Project Services, Inc., and DukeSolutions, Inc. (collectively referred to
as the "Employing Company").
The purpose of the Plan is to provide an opportunity for eligible employees
of the Employing Company to enhance their long-range financial security
through tax deferred savings with the benefit of contributions by the
Employing Company, to diversify their investments under the Plan among
certain common trust funds, and to acquire an investment interest in common
stock of Duke Energy Corporation (Common Stock), thus enhancing the ability
of employees to share in the corporation's success. This defined
contribution plan is subject to the applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended (ERISA).
Generally, employees of the Employing Company are eligible to enter and
participate in the Plan if they 1) have attained the age of eighteen, and
2) have been an employee throughout the three immediately preceding
calendar months or have accrued 1,000 hours of service within a plan year.
Trustee
Effective February 1, 2000, Wachovia Bank sold its master trust and
institutional custody lines of business to State Street Bank and Trust
Company ("State Street"). State Street replaced Wachovia Bank as the Plan's
trustee.
6
Contributions
Participants may authorize payroll reductions from eligible earnings in the
form of Employing Company-matched deferrals and non-Employing Company
matched deferrals. Employees may elect payroll reductions (subject to
certain limitations) of up to 15% of eligible earnings without regard to
years of service. Various provisions of the Internal Revenue Code may limit
the deferrals of some highly compensated employees. All deferrals are
exempt, up to the allowed maximum, from federal and state income tax
withholding in the year they are deferred, but are subject to payroll
taxes. Participant deferrals are intended to satisfy the requirements of
Section 401(k) of the Internal Revenue Code. The Employing Company
contributes (subject to certain limitations) an amount equal to 100% of the
first 6% deferred in any pay period. Employing Company matching
contributions are intended to satisfy the requirements of Section 401(m) of
the Internal Revenue Code.
Rollovers from Other Plans
Rollovers from other plans represent amounts recorded when new employees
who elect enrollment in the Plan transfer account balances from other
eligible, tax-qualified plans. Rollovers of $688,371 in 2001 were from
various new hires and business acquisitions.
Investments
Subject to limitations discussed below, participants may invest their
accounts in any or all of the investment funds offered in the Plan.
Participants who continue to hold U.S. Savings Bonds are restricted to
investing in Duke Energy Corporation Common Stock. Participant accounts
invest in "units" of a fund based on its market price. The value of an
account is updated daily. Throughout the plan year, seven funds were
offered for investment.
Duke Energy Corporation reserves the right to change the investment funds
offered from time to time. Units in any fund that is deleted would be
liquidated and transferred to another fund of the participant's choice.
Participant balances that are attributable to contributions to the Duke
Energy Corporation Employees' Stock Ownership Plan or the Tax Credit
Employee Stock Ownership Plan of PanEnergy Corp. and participating
Affiliates may only be invested in the Duke Energy Corporation Common Stock
Fund.
Participants' Accounts
Individual accounts are maintained for plan participants. The deferrals are
invested as directed by the participant. The selection from available
investment funds is the sole responsibility of each participant, and the
Plan is intended to satisfy the requirements of section 404(c) of ERISA.
Employing Company matching contributions are invested in the Duke Energy
Corporation Common Stock Fund. Shares and Common Stock dividends are
allocated to individual participant accounts in proportion to the amounts
of their deferrals and related employer contributions.
Vesting and Distribution
All participant deferrals and Employing Company matching contributions,
plus earnings thereon, are 100% vested for all participants. A participant
may elect to receive distributions from his Employing Company matching
contribution account to the extent Employing Company contributions have
matured. Employing Company matching contributions mature at the end of the
24th month following the month in which the contributions are made to the
accounts. A participant may request a distribution from his deferral
account, including his rollover account, made on a pretax basis, only if he
suffers a hardship or is at least age 59 1/2. A hardship distribution must
comply with Section 401(k) of the Internal Revenue Code.
7
Payment of Benefits
On termination of service for any reason a participant or, if the
participant is dead, his beneficiary, may request the distribution of the
balance in all of his accounts. Distributions are made as soon as
practicable after the occasion for the distribution, except that a
participant may elect that a distribution be delayed until no later than
April 1 of the calendar year following the calendar year in which he
attains age 70 1/2. A beneficiary of a deceased participant may elect that
a distribution be delayed until a date that follows the occasion for
distribution by not more than one year.
Employee Loans Receivable
Participants may borrow, with some limitations, from their accounts a
minimum of $1,000 up to a maximum equal to the lesser of $50,000 minus the
highest outstanding loan balance during the 12-month period prior to the
new loan, or 50% of their account balances. Loan terms range from 1-5 years
or up to 15 years for the purchase of a primary residence. The loans are
secured by the balance in the participant's account and bear interest at
the rate charged by the trustee of the Plan on similar commercial loans.
Principal and interest is paid ratably through monthly payroll deductions.
Loan receipts will be reinvested based on the participant's investment
election for deferrals at the time of repayment.
Plan Termination
The Employing Company expects and intends to continue the Plan
indefinitely, but has reserved the right to amend, suspend or terminate the
Plan subject to provisions set forth in ERISA. In the event of termination
of the Plan, the net assets of the Plan would be distributed to
participants based on the balances in their individual accounts at the date
of termination.
2. Summary of Significant Accounting Policies:
Basis of Accounting
The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America.
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 available for benefits and changes therein. Actual
results could differ from those estimates. The Plan utilizes various
investment instruments. 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 certain investment
securities, it is reasonably possible that changes in the values of
investment securities will occur in the near term and that such change
could materially affect the amounts reported in the financial statements.
Investment Valuation and Income Recognition
Investments are reported at fair market value. Investments in common trust
funds (`funds') are stated at estimated fair values, which have been
determined based on the unit values of the funds. Unit values are
determined by the organization sponsoring such funds by dividing the fund's
net assets at fair value by its units outstanding at each valuation date.
Duke Energy Corporation common stock is valued at the quoted market price
at year-end. Participant loans are valued at cost plus accrued interest,
which approximates fair value.
8
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis and dividends are recorded
on the ex-dividend date.
Payment of Benefits Benefits are recorded when paid.
Administrative Expenses
Administrative expenses are paid by the Plan to third party vendors.
3. Investments:
The following presents investments that represent 5% or more of the Plan's
net assets available for benefits (in thousands):
December 31,
2001 2000
------------- -------------
Duke Energy Corporation common stock, 47,144 and 43,206 $ 1,850,879* $ 1,841,861*
shares, respectively
Barclay's Global Investors Equity Index Fund, 11,715 and 12,697
shares, respectively 179,360 220,548
State Street Bank Short Term Investment Fund, 191,740 and 243,238
shares, respectively 191,740* 243,238*
* Nonparticipant - directed
The number of shares outstanding at December 31, 2000 (shown above) have
been restated to reflect the effects of the 2 for 1 stock split that was
effective January 26, 2001.
From the date of the financial statements, December 31, 2001 to the date of
the audit opinion, June 8, 2002, the fair market value of the Duke Energy
Common Stock decreased by $9.26 per share from $39.26 at December 31, 2001
to $30.00 on June 7, 2002. The effect on the fair market value of the
47,144,000 shares held by the Plan as of December 31, 2001 was a decrease
in the fair market value of the shares by approximately $436,000,000.
During 2001, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) depreciated
in value by $(195,903) as follows (in thousands):
Common stock $ (163,093)
Common trust funds (33,960)
Other securities 1,150
---------------
$ (195,903)
===============
9
4. Nonparticipant-Directed Investments:
Information about the net assets and significant components of the changes
in net assets relating to the nonparticipant-directed investments is as
follows (in thousands):
December 31,
2001 2000
------------- -------------
Net Assets:
Common stock $ 1,850,879 $ 1,841,861
Short-term investment funds 191,740 243,238
------------- -------------
$ 2,042,619 $ 2,085,099
============= =============
Year ended
December 31, 2001
------------------
Changes in Net Assets:
Contributions $ 67,002
Dividends 52,495
Net depreciation in fair value of investments (141,226)
Distributions to participants (92,230)
Transfers from participant-directed investments 156,439
------------------
$ 42,480
==================
5. Related Party Transactions:
Certain Plan investments are shares of a money market fund managed by State
Street. State Street is the trustee as defined by the Plan and, therefore,
these transactions qualify as party-in-interest transactions. Fees paid by
the Plan for the investment administrative expenses amounted to $946,000
for the year ended December 31, 2001. Also included in the Plan's
investments are shares of Duke Energy Corporation, the Plan's sponsor,
which qualify as party-in-interest transactions.
6. Federal Income Tax Status:
The Internal Revenue Service has determined and informed Duke Energy
Corporation by a letter dated April 10, 1998, that the Plan is qualified
and the trust which forms a part of the Plan is exempt from federal income
tax under the provisions of Section 501(a) of the Internal Revenue Code.
The Plan is intended to be tax-qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended. The Plan has been amended since
receiving the determination letter. However, the Plan administrator and the
Plan's legal counsel believe the Plan is currently designed and being
operated in compliance with the applicable requirements of the Internal
Revenue Code and the Plan and the related trust continue to be tax exempt.
Therefore, no provision for income taxes has been included in the Plan's
financial statements.
7. Subsequent Events:
10
In early 2002, the Employing Company, Duke Energy Corporation, announced the
sale of Duke Engineering & Services, Inc. (DE&S) to Framatome ANP, Inc. and Duke
Solutions, Inc. to Ameresco, Inc. Two components of DE&S will remain with the
Employing Company. In April 2002, the Employing Company announced the sale of
the Anderson Water Company to the Anderson County Joint Municipal Water System
and the City of Anderson, South Carolina. Vested participants affected by these
divestures may leave their participant accounts in the Plan or they may elect to
roll them over to another qualified plan or receive a direct distribution. As of
June 8, 2002 withdrawals from the Plan by these affected employees are not
material to these financial statements.
11
Pursuant to the requirements of the Securities Exchange Act of 1934, the Duke
Energy Corporation Benefits Committee has duly caused this annual report to be
signed on its behalf by the undersigned thereunto duly authorized.
Duke Energy Retirement Savings Plan
Date: June 28, 2002 By: _______________________________________
Charlotte Wayland
Chairman, Benefits Committee
12
DUKE ENERGY
RETIREMENT SAVINGS PLAN
Form 5500, Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2001
(IN THOUSANDS)
Identity of Issue, Borrower, Lessor or Similar Party Description of Investment Number of Shares Cost
including Maturity Date, Rate of
Interest, Collateral, Par or
Maturity Value
* Duke Energy Corporation Common Stock 47,144 $927,276
Barclays' Global Investors Equity Index Fund Common Trust Fund 11,715 **
Capital Guardian Int'l. Equity Fund Common Trust Fund 4,518 **
BGI Russell 1000 Value Fund Common Trust Fund 3,631 **
J. P. Morgan Disciplined Equity Fund Common Trust Fund 3,407 **
US Large Cap Fund Common Trust Fund 5,797 **
Barclays' Global Investors Russell 2000 Equity Index Fund Common Trust Fund 6,174 **
MAS Funds Advisory MTG Portfolio Common Trust Fund 3,824 **
Morgan Stanley Bond Fund Bond Funds - **
* State Street Bank Short Term Investment Fund Money Market Fund 191,740 $191,740
* Employee Loans Receivable Participant Loans - **
Interest Rates 5.75% - 10.50%
Identity of Issue, Borrower, Lessor or Similar Party Current Market
Value
* Duke Energy Corporation $1,850,879
Barclays' Global Investors Equity Index Fund 179,360
Capital Guardian Int'l. Equity Fund 50,556
BGI Russell 1000 Value Fund 35,002
J. P. Morgan Disciplined Equity Fund 69,084
US Large Cap Fund 33,298
Barclays' Global Investors Russell 2000 Equity Index Fund 72,117
MAS Funds Advisory MTG Portfolio 37,925
Morgan Stanley Bond Fund 17,542
* State Street Bank Short Term Investment Fund 191,740
* Employee Loans Receivable 63,267
----------
$2,600,770
==========
* Permitted party-in-interest
** Cost information is not required for participant directed investments and,
therefore, is not included.
13