EX-99.1(A) 4 f91304exv99w1xay.txt EXHIBIT A EXHIBIT A DOMINICK'S FINER FOODS, INC. 401(K) RETIREMENT PLAN FOR UNION EMPLOYEES FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002, AND 2001, SUPPLEMENTAL SCHEDULE AS OF DECEMBER 31, 2002 AND INDEPENDENT AUDITORS' REPORT DOMINICK'S FINER FOODS, INC. 401(K) RETIREMENT PLAN FOR UNION EMPLOYEES TABLE OF CONTENTS
PAGE INDEPENDENT AUDITORS' REPORT 1 FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001: Statements of Net Assets Available for Benefits 2 Statements of Changes in Net Assets Available for Benefits 3 Notes to Financial Statements 4-6 SUPPLEMENTAL SCHEDULE AS OF DECEMBER 31, 2002 - Form 5500, Schedule H, Part IV, Line 4i - Supplemental Schedule of Assets Held for Investment Purposes 7
Deloitte & Touche LLP 50 Fremont Street San Francisco, California 94105-2230 Tel: (415)783-4000 Fax: (415)783-4329 www.deloitte.com [DELOITTE & TOUCHE LOGO] INDEPENDENT AUDITORS' REPORT Plan Administrator Dominick's Finer Foods, Inc. 401(k) Retirement Plan for Union Employees: We have audited the accompanying statements of net assets available for benefits of Dominick's Finer Foods, Inc. 401(k) Retirement Plan for Union Employees (the "Plan") as of December 31, 2002 and 2001, and the related statement of changes in net assets available for benefits in 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 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, 2002 and 2001, and the changes in net assets available for benefits 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 as 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 2002 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 & TOUCH LLP June 20, 2003 -------- DELOITTE Touche Tohmatsu -------- DOMINICK'S FINER FOODS, INC. 401(k) RETIREMENT PLAN FOR UNION EMPLOYEES STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS DECEMBER 31, 2002 AND 2001
2002 2001 ASSETS: Investments at fair value: Guaranteed Long Term Fund $ 77,960,193 $ 66,956,370 Mutual Funds 44,511,270 56,445,003 Safeway Stock Account 1,638,280 2,985,394 Short-term investment funds 144 3,656 Participant loans 5,431,002 5,450,512 ------------- ------------- Total investments 129,540,889 131,840,935 NET ASSETS AVAILABLE FOR BENEFITS $ 129,540,889 $ 131,840,935 ============= =============
See notes to financial statements. - 2 - DOMINICK'S FINER FOODS, INC. 401(k) RETIREMENT PLAN FOR UNION EMPLOYEES STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001 ADDITIONS TO NET ASSETS AVAILABLE FOR BENEFITS: Investment (loss) income: Net depreciation in fair value of investments $ (12,261,034) $ (9,006,280) Interest income 4,223,458 3,979,930 Loan interest income 426,105 475,220 ------------- ------------- Total investment loss (7,611,471) (4,551,130) Participant contributions 9,614,870 10,194,190 ------------- ------------- Total 2,003,399 5,643,060 ------------- ------------- DEDUCTIONS FROM NET ASSETS AVAILABLE FOR BENEFITS: Benefits paid to participants 4,269,902 8,062,741 Management and custodial fees 33,543 43,271 ------------- ------------- Total 4,303,445 8,106,012 ------------- ------------- TRANSFER OF NET ASSETS FROM NONUNION PLAN (Note 1) - 143,518 ------------- ------------- TRANSFER OF NET ASSETS TO NONUNION PLAN (Note 1) - (739,356) ------------- ------------- NET DECREASE (2,300,046) (3,058,790) NET ASSETS AVAILABLE FOR BENEFITS: Beginning of year 131,840,935 134,899,725 ------------- ------------- End of year $ 129,540,889 $ 131,840,935 ============= =============
See notes to financial statements. - 3 - DOMINICK'S FINER FOODS, INC. 401(K) RETIREMENT PLAN FOR UNION EMPLOYEES NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2002 AND 2001 1. DESCRIPTION OF THE PLAN The following description of the Dominick's Finer Foods, Inc. 401(k) Retirement Plan for Union Employees (the "Plan") is provided for general information only. Participants should refer to the Summary Plan Description for more complete information about the Plan's provisions. The following description reflects all Plan amendments through December 31, 2002. GENERAL - The Plan is a defined contribution plan available to Dominick's Finer Foods, Inc. (the "Company") union employees who have attained age 21 and completed one month of employment. In November 1998, the Company was acquired by Safeway Inc., which assumed sponsorship of the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). TRUSTEE - The trustee and recordkeeper of the Plan is Connecticut General Life Insurance Company. Transactions of the Plan have been executed by the Trustee under the terms of the trust agreement. The Trustee keeps account of all investments, receipts and disbursements, and other transactions and provides the Company with reports detailing such information. CONTRIBUTIONS - The Plan is funded through participant contributions. Employees may elect to contribute between 1% to 18% of their eligible pay, up to a maximum contribution of $11,000 and $10,500 for the years ended December 31, 2002 and 2001, respectively. Participant contributions are not currently taxable to participants pursuant to Section 401(k) of the Internal Revenue Code. Distributions after age 59 1/2 are taxed as ordinary income and are subject to withholding. Employer contributions are not permitted. TRANSFERS FROM/TRANSFERS TO NONUNION PLAN - During 2002, the Dominick's Finer Foods, Inc. 401(k) Retirement Plan for Nonunion Employees ("Nonunion Plan") was merged into the Safeway 401(k) Plan & Trust and, therefore, all transfers to or from the Nonunion Plan were discontinued. During 2001, when a participant transferred to or from a union position to or from a nonunion position in the Company, the participant's account balance was transferred to or from the Plan to or from the Dominick's Finer Foods, Inc. 401(k) Retirement Plan for Nonunion Employees or its successor plan ("Nonunion Plan"). PARTICIPANT ACCOUNTS - Each participant's account is credited with the participant's contributions and income thereon. The benefit to which a participant is entitled is the benefit that can be provided from the participant's vested account. VESTING - Participants are fully vested in their account balances. INVESTMENT OPTIONS - Participants may direct their contributions to any one or combination of seven investment funds, as elected by the participant. The guaranteed long term fund invests in a diversified portfolio primarily consisting of commercial mortgages and privately placed and publicly traded debt securities, including corporate bonds, and asset backed securities. This account is fully benefit-responsive. The guaranteed interest rate was 5.89% and 6.58% as of and for the years ended December 31, 2002 and 2001, respectively. Participants may change their investment options on a daily basis. - 4 - PAYMENT OF BENEFITS - Upon termination of employment, a participant may elect (a) to leave the balance of his or her account in the Plan until April 1 of the year following the year in which the participant turns age 70 1/2, (b) to receive an immediate lump sum distribution as cash, as Safeway Stock (to the extent invested in the Safeway Stock Fund) or as a rollover to another qualified plan or Individual Retirement Account, or (c) receive a series of payments over a period of years not to exceed the participant's life expectancy if such balance exceeds $5,000. If a participant's balance is less than $5,000, the participant must receive an immediate lump sum distribution. LOANS - Participants may borrow a minimum of $1,000 up to a maximum of the lesser of $50,000 or 50% of their account balance. The loan term cannot exceed 5 years except loans used to purchase a primary residence may have terms up to 15 years. Any outstanding balance is due and payable upon termination of employment, disability, or death. Loans are secured by the participant's account and bear interest at the prime rate as published in the Wall Street Journal on the first business day of each week in which the loan originated, plus 1%. Principal and interest payments are made through payroll deductions. Participants may only have one loan outstanding at a time and are charged a $10.50 servicing fee each quarter for the term of the loan. At December 31, 2002 and 2001, respectively, there were 1,260 and 1,319 loans outstanding with interest rates ranging from 5.75% to 10.50%. PLAN TERMINATION - Although the Company has not expressed any intent to terminate the Plan, it may do so at any time. In the event of termination of the Plan, the assets of the Plan would be distributed to the participants in accordance with the value of their individual investment accounts. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING - The accompanying financial statements of the Plan are prepared on the accrual method of accounting. INVESTMENT VALUATION AND INCOME RECOGNITION - The Plan's investments are stated at fair value. The fair values of the Plan's other investments are determined based on quoted market prices which represent the net asset value of shares held by the Plan at year-end. Participant loans are stated at amortized cost, 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. EXPENSES OF THE PLAN - Certain administrative expenses of the Plan are paid by the Company. USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of additions to and deductions from net assets available for benefits during the reporting period. Actual results could differ from these estimates. PAYMENT OF BENEFITS - Benefits are recorded when paid. INCOME TAXES - The Plan obtained its latest determination letter, dated August 3, 1995, in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with the applicable requirements of the Internal Revenue Code. The Plan has been amended since receiving this determination letter. The plan administrator and Plan's tax counsel believe that the Plan is currently - 5 - designed and being operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, no provision for income taxes has been included in the Plan's financial statements. 3. INVESTMENTS The fair values of individual investments that represent 5% or more of the Plan's net assets at December 31, 2002 and 2001 were as follows:
2002 2001 Guaranteed Long Term Fund $77,960,193 $66,956,370 S&P 500 Stock Index Account 16,480,808 22,257,581 Fidelity Advisor Growth Opportunities Account 10,816,312 14,181,699 Balanced Income/Wellington Management Account 9,108,878 10,732,690
During the years ended December 31, 2002 and 2001, net depreciation of assets recorded at fair value, including net realized gains and losses, was as follows:
2002 2001 CIGNA Common trust accounts: S&P 500 Stock Index Account $ 5,055,077 $ 3,383,056 Fidelity Advisor Growth Opportunities Account 3,235,776 2,663,339 Credit Suisse International Equity Account 827,040 1,168,400 Balanced Income/Wellington Management Account 1,197,223 303,359 CIGNA Lifetime Fund Accounts 639,685 339,789 Safeway Inc. common stock 1,306,233 1,148,337 ----------- ----------- Net depreciation in fair value of investments $12,261,034 $ 9,006,280 =========== ===========
4. PARTY-IN-INTEREST TRANSACTIONS The Plan's investments include Safeway Inc. common stock representing party-in-interest transactions that qualify as exempt prohibited transactions. Certain Plan investments are shares of common trust accounts managed by CIGNA Retirement and Investment Services ("CIGNA"). CIGNA is an affiliate of the trustee as defined by the Plan and, therefore, these transactions qualify as party-in-interest transactions. ****** - 6 - \ DOMINICK'S FINER FOODS, INC. 401(k) RETIREMENT PLAN FOR UNION EMPLOYEES FORM 5500, SCHEDULE H, PART IV, LINE 4i - SUPPLEMENTAL SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES DECEMBER 31, 2002
NUMBER OF CURRENT UNITS VALUE Common Trust Accounts: * Guaranteed Long Term Fund 1,892,989 $ 77,960,193 * S&P 500 Stock Index Account 338,234 16,480,808 * Fidelity Advisor Growth Opportunities Account 248,873 10,816,312 * Credit Suisse International Equity Account 199,888 3,231,563 * Balanced Income/Wellington Management Account 279,528 9,108,878 * Lifetime 20 Account 74,806 1,386,553 * Lifetime 30 Account 60,172 1,148,193 * Lifetime 40 Account 61,745 1,138,989 * Lifetime 50 Account 50,190 935,891 * Lifetime 60 Account 14,382 264,083 * Short Term Investment Funds 144 144 * Safeway Common Stock 69,891 1,638,280 * Participant Loans (1,260 loans, interest rates ranging from 5.25% to 10.5%) 5,431,002 ------------ TOTAL $129,540,889 ============
* Represents a party-in-interest transaction - 7 -