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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_]Confidential, for Use of the
Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SEMPRA ENERGY
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X]No fee required.
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_]Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
[GRAPHIC]
Annual Meeting 2002
SEMPRA ENERGY
-----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 7, 2002
-----------------
To our shareholders:
The Annual Meeting of Shareholders of Sempra Energy will be held on Tuesday,
May 7, 2002 at 10:00 a.m. at the Irvine Marriott Hotel, 18000 Von Karman
Avenue, Irvine, California. The following items of business will be discussed
and voted upon at the meeting:
1. The election of four directors for a term of three years.
2. Such other matters that may properly come before the meeting.
Only shareholders may attend the Annual Meeting. If your shares are
registered in your name or held through our Direct Stock Purchase Plan or
Employee Savings Plans, an admission ticket is attached to the enclosed proxy
card. If you plan to attend the meeting, please bring this ticket with you. It
will admit you and a guest or family member.
If you do not bring an admission ticket, you must establish share ownership
at our admission desk to be admitted to the meeting. If your shares are
registered in your name, we will be able to verify your share ownership from
the Company's share register upon your presentation of appropriate
identification. If your shares are not registered in your name (which is likely
to be the case if they are held by a bank, brokerage firm, employee benefit
plan or other account custodian), your name will not appear in our share
register and you must present proof of beneficial share ownership (such as a
brokerage account or employee benefit plan statement showing shares held in
your account) and appropriate identification to our admission attendants.
To help us plan for the Annual Meeting, please check the attendance box on
the enclosed proxy card if you plan to attend the meeting in person. Seating is
limited and will be on a first-come, first-served basis. Doors will open at
9:00 a.m.
Thomas C. Sanger
Corporate Secretary
March 15, 2002
San Diego, California
The Board of Directors has fixed March 11, 2002 as the record date to
determine shareholders entitled to notice of, and to vote at, the Annual
Meeting or any adjournment or postponement. Whether or not you plan to attend
the Annual Meeting, please vote your shares promptly by completing and mailing
the accompanying proxy or voting instruction or, if available to you, by
submitting it over the Internet or by telephone. Please refer to "Voting
Information--How You Can Vote" on page 3 of the accompanying Proxy Statement.
TABLE OF CONTENTS
Page
Proxy Statement........................................ 1
About Sempra Energy.................................... 1
Voting Information..................................... 2
Shares Outstanding.................................. 2
Voting of Shares.................................... 2
Confidential Voting................................. 2
Required Votes...................................... 3
How You Can Vote.................................... 3
Revocation of Proxies and Voting Instructions....... 4
Other Information................................... 4
Governance of the Company.............................. 5
Independent Auditors................................... 8
Audit Committee Report................................. 9
Share Ownership........................................ 10
Election of Directors.................................. 11
Compensation Committee Report on Executive Compensation 15
Executive Compensation................................. 18
Comparative Shareholder Total Returns.................. 23
General Information.................................... 24
SEMPRA ENERGY
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PROXY STATEMENT
-----------------
Your Board of Directors is soliciting proxies for the Annual Meeting of
Shareholders to be held on May 7, 2002. We are soliciting proxies to give all
shareholders an opportunity to vote on matters to be considered at the meeting.
This Proxy Statement and the accompanying proxy or voting instruction card for
the Annual Meeting are being mailed to shareholders beginning March 21, 2002.
ABOUT SEMPRA ENERGY
Sempra Energy, based in San Diego, is a Fortune 500 energy services company.
Our shares are traded on the New York and Pacific Stock Exchanges under the
symbol ''SRE'' and we have approximately 175,000 shareholders.
Through two regulated utility subsidiaries, Southern California Gas Company
and San Diego Gas & Electric Company, we serve over 21 million consumers, the
largest customer base of any gas, electric or combination gas and electric
utility in the United States. We provide natural gas service throughout
Southern California and portions of Central California and electric service
throughout San Diego County and portions of Orange County, both in Southern
California.
Through other subsidiaries, we also provide other energy-related products
and services. Our subsidiaries include Sempra Energy Trading, Sempra Energy
Resources, Sempra Energy International and Sempra Energy Solutions.
We are headquartered at:
101 Ash Street
San Diego, California 92101-3017
Telephone (Toll-Free):.......... (877) 736-7721
In San Diego:................... (619) 696-2034
Sempra Energy was formed in connection with a business combination of
Pacific Enterprises and Enova Corporation in which the shareholders of the
combining companies became shareholders of Sempra Energy. The combination was
completed and our shares began trading in June 1998.
1
VOTING INFORMATION
Shares Outstanding
A majority of our outstanding shares must be present, either in person or
represented by proxy, to conduct the Annual Meeting. On March 11, 2002, our
outstanding shares were 207,723,644 shares of Common Stock.
Voting of Shares
All registered holders of Sempra Energy Common Stock at the close of
business of March 11, 2002 are entitled to vote at the Annual Meeting. Each
share is entitled to one vote on each matter properly brought before the
meeting. All shares represented by properly submitted proxies and voting
instructions that are timely received, and not revoked or superseded, will be
voted in accordance with the instructions specified.
If you properly submit a proxy or voting instruction but do not specify how
your shares are to be voted, they will be voted in favor of the election of all
director nominees listed on the enclosed proxy or voting instruction card. The
proxy holders will vote at their discretion on any other matter that may
properly come before the meeting.
If you own shares that are registered in your name, you may vote them by
signing and returning the enclosed proxy card or by attending the Annual
Meeting and voting in person. You may also vote these shares by submitting your
proxy over the Internet or by telephone. Please refer to "How You Can Vote" on
page 3 of this Proxy Statement.
If you own shares that are not registered in your name, you may vote them by
instructing the registered owner to do so on your behalf. The enclosed voting
instruction card will instruct the registered owner how to vote your shares. If
your shares are held through a broker or bank that participates in the Internet
and telephone voting programs provided by ADP Investor Communication Services
you may also submit your voting instructions over the Internet or by telephone.
Please refer to "How You Can Vote" on page 3 of this Proxy Statement.
Shares that you own through a brokerage firm or bank are usually registered
in the name of an account custodian. If you do not instruct the custodian how
you want these shares to be voted by returning the enclosed voting instruction
card or providing other proper voting instructions, the registered owner may be
authorized to vote your shares in its own discretion on some or all of the
matters to be considered at the meeting.
If you participate in the Sempra Energy Direct Stock Purchase Plan, your
proxy card represents shares that you own through the plan as well as any other
shares that are registered in the same name.
If you participate in the Sempra Energy Savings Plan, San Diego Gas &
Electric Savings Plan, Southern California Gas Company Retirement Savings Plan
or Sempra Energy Trading Retirement Savings Plan, your proxy card represents
the number of shares held in your plan account, as well as any other shares
that are registered in the same name. The proxy card will instruct the plan
trustees how to vote your plan shares. If your voting instructions are not
timely received by the trustees, your plan shares will be voted in the same
manner and proportion as shares for which voting instructions are received from
other plan participants.
Confidential Voting
The Employee Savings Plans of Sempra Energy and its subsidiaries
automatically provide for confidential voting. Other shareholders may elect
that their identity and individual vote be held confidential. Confidentiality
elections will not apply to the extent that voting disclosure is required by
law or is appropriate to assert or defend any claim relating to shareholder
voting. They also will not apply with respect to any matter for which
2
shareholder votes are solicited in opposition to the director nominees or
voting recommendations of the Board of Directors unless the persons engaged in
the opposing solicitation provide shareholders with voting confidentiality
comparable to that which we provide.
Required Votes
Directors are elected by a plurality of votes. Consequently, the nominees
for the four director positions who receive the greatest number of votes will
be elected directors. Each share is entitled to one vote for each of the four
director positions, but cumulative voting is not permitted. Shares for which
votes are withheld for the election of one or more director nominees will not
be counted in determining the number of votes cast for those nominees.
Approval of other matters that may come before the meeting would require the
favorable vote of a majority of the votes cast on the matter, and the favorable
majority vote must also represent more than 25% of our outstanding shares.
Under certain circumstances, brokers and other registered owners of our
shares are prohibited from exercising discretionary voting authority for
beneficial owners who have not provided them with voting instructions. In cases
of these "broker non-votes" and in cases where the shareholder abstains from
voting on a particular matter, these shares will be counted only for the
purpose of determining if a quorum is present and not as votes cast on the
matter.
How You Can Vote
You may vote your shares by signing the enclosed proxy or voting instruction
card and returning it in a timely manner. Please mark the appropriate boxes on
the card and sign, date and return the card promptly. A postage-paid return
envelope is enclosed for your convenience.
If your shares are registered in your name or held through our Direct Stock
Purchase Plan or Employee Savings Plans, you may also vote your shares over the
Internet or by telephone. You may submit your proxy at any time (24 hours a
day, seven days a week) over the Internet at the following address on the World
Wide Web:
http://www.eproxyvote.com/sre
or by using a touch-tone telephone and calling the following toll-free number
from anywhere in the U.S. or Canada:
1-877-779-8683
Proxies submitted over the Internet or by telephone must be received by
12:00 midnight, Eastern Standard Time, on Monday, May 6, 2002. However, proxies
that include shares held in the Employee Savings Plans of Sempra Energy and its
subsidiaries must be received by that time on Thursday, May 2, 2002, to provide
timely instructions for voting shares held in the plans.
If your shares are held in an account at a brokerage firm or bank that
participates in a voting program provided by ADP Investor Communication
Services, you may submit your voting instruction at any time (24 hours a day,
seven days a week) over the Internet at the following address on the World Wide
Web:
http://www.proxyvote.com
or by using a touch-tone telephone and calling from anywhere in the United
States, the toll-free number shown on your voting instruction card.
3
There may be costs associated with electronic access, such as usage charges
from Internet access providers and telephone companies, charged to you when you
submit your proxy or voting instructions over the Internet. There are no
charges to use telephone voting procedures. If you submit your proxy or voting
instruction over the Internet or by telephone, you need not mail the enclosed
card.
If your shares are held through a broker, bank or other account custodian
that does not participate in a voting program provided by ADP Investor
Communication Services, you may vote your shares only by signing and timely
returning the enclosed voting instruction card or providing other proper voting
instructions to the registered owner of your shares.
Your vote is important. Please vote your shares promptly
even if you plan to attend the Annual Meeting in person.
Revocation of Proxies and Voting Instructions
If you own shares that are registered in your name, you may revoke your
proxy at any time before it is voted by timely submitting a proxy bearing a
later date or by attending the Annual Meeting in person and casting a ballot.
If your shares are not registered in your name, you may revoke or change
your voting instructions to the registered owner of your shares only by timely
providing a proper notice or other proper voting instructions to the registered
owner.
Other Information
Attendance at Annual Meetings
If you plan to attend the Annual Meeting and your shares are registered in
your name or held through our Direct Stock Purchase Plan or Employee Savings
Plans, please retain the admission ticket attached to the enclosed proxy card
and bring it with you to the meeting. If you do not bring your admission
ticket, you must establish share ownership at our admission desk to be
admitted. If your shares are registered in your name, we will be able to verify
your share ownership from the Company's share register upon your presentation
of proper identification.
If your shares are not registered in your name (which is likely to be the
case if they are held by a bank, brokerage firm, employee benefit plan or other
account custodian), your name will not appear in our share register and you
must present proof of beneficial share ownership (such as a brokerage or
employee benefit plan statement showing shares held for your account) and
proper identification at our admission desk to be admitted to the meeting.
Duplicate Annual Reports
If you hold shares in more than one shareholder account, you may be
receiving duplicate copies of our Annual Report to Shareholders. You can save
the Company money by directing us to discontinue mailing reports by marking the
appropriate box on the enclosed proxy or voting instruction card. Eliminating
duplicate mailings will not affect your receipt of future Proxy Statements and
proxy or voting instruction cards. To resume the mailing of an Annual Report to
a particular account, you may call Sempra Energy Shareholder Services
at 1-877-736-7727.
4
GOVERNANCE OF THE COMPANY
Board of Directors
Sempra Energy's business and affairs are managed under the direction of its
Board of Directors in accordance with the California General Corporation Law as
implemented by the Company's Articles of Incorporation and Bylaws. Our Board of
Directors also has adopted Corporate Governance Guidelines for the governance
of the Company.
We keep our directors informed through various reports that we routinely
send to them as well as through strategic, operating and financial
presentations made at board and committee meetings by officers and others. All
of our directors are independent, non-employee directors except Stephen L.
Baum, who is the Chairman, President and Chief Executive Officer of the Company.
Shareholders who wish to suggest qualified candidates for consideration by
the Corporate Governance Committee as directors of Sempra Energy should write
to: Corporate Secretary, Sempra Energy, 101 Ash Street, San Diego, CA
92101-3017, stating in detail the qualifications of the suggested candidates.
During 2001, the Board of Directors held 21 meetings. The committees listed
below assisted the board in carrying out its duties.
Committees of the Board
Audit Compensation Corporate Governance
------------------------- ------------------------- -------------------------
Daniel W. Derbes, Wilford D. Godbold, Jr., William G. Ouchi,
Chair Chair Chair
James G. Brocksmith, Jr. Ralph R. Ocampo Hyla H. Bertea
Herbert L. Carter William G. Ouchi James G. Brocksmith, Jr.
Richard A. Collato William C. Rusnack Ralph R. Ocampo
William D. Jones William P. Rutledge Thomas C. Stickel
Thomas C. Stickel
Executive Finance Technology
------------------------- ------------------------- -------------------------
Stephen L. Baum, William D. Jones, Stephen L. Baum,
Chair Chair Chair
Daniel W. Derbes Hyla H. Bertea Daniel W. Derbes
Wilford D. Godbold, Jr. Daniel W. Derbes Wilford D. Godbold, Jr.
William D. Jones Wilford D. Godbold, Jr. William G. Ouchi
William G. Ouchi William C. Rusnack Thomas C. Stickel
Diana L. Walker
Audit Committee
The Audit Committee met four times in 2001. Its duties and responsibilities
include:
. Assisting the Board of Directors in fulfilling its oversight
responsibilities for management's conduct of the Company's financial
reporting processes.
. Recommending to the board the selection of independent auditors.
5
Compensation Committee
The Compensation Committee met seven times in 2001. Its duties and
responsibilities include:
. Establishing overall strategy with respect to compensation for directors
and senior officers.
. Evaluating the performance of the Chairman, President and Chief
Executive Officer for compensation purposes.
. Reviewing and approving individual salary adjustments and awards under
incentive plans for senior officers.
. Overseeing executive succession plans.
Corporate Governance Committee
The Corporate Governance Committee met eleven times in 2001. Its duties and
responsibilities include:
. Reviewing and recommending nominees for election as directors.
. Assessing the performance of the Board of Directors.
. Developing guidelines for board composition.
. Reviewing and administering the Company's Corporate Governance
Guidelines and considering other issues relating to corporate governance.
Executive Committee
The Executive Committee did not meet in 2001. The committee meets on call by
the Chairman of the Board during the intervals between board meetings and,
subject to some limitations, has all the authority of the board.
Finance Committee
The Finance Committee met four times in 2001. The Committee was dissolved in
2002 and its duties and responsibilities will be performed by the Board of
Directors. Those duties and responsibilities included:
. Reviewing long term and short term financial requirements and financing
plans.
. Reviewing trading operations, financial guarantees, and derivatives
positions and exposure.
. Reviewing pension plan investment results and insurance coverages.
Technology Committee
The Technology Committee did not meet in 2001. Its duties and
responsibilities include:
. Reviewing the application of technology to long term strategic goals and
objectives.
. Reviewing the Company's major technology positions and strategies
relative to emerging technologies.
6
Directors' Compensation
Directors who are not employees of Sempra Energy receive the following fees:
Annual retainer............................................ $35,000
Attendance fee for each Board meeting...................... $ 1,000
Attendance fee for each Committee meeting.................. $ 1,000
Additional meeting fee for each Committee meeting chaired.. $ 1,000
During 2001, Mr. Godbold served as lead director of the board for which he
received an additional $1,000 fee for each board meeting. The board has
discontinued this position.
A minimum of $9,000 of each director's annual fees is paid in shares or
deferred into phantom shares of Sempra Energy Common Stock. Directors may also
elect to receive the balance of their fees in shares or to defer the balance
into an interest-bearing account, a phantom investment fund, or phantom shares.
Upon becoming a director, each non-employee director is granted a ten-year
stock option to purchase 15,000 shares of Sempra Energy Common Stock. At each
annual meeting (other than the annual meeting that coincides with or first
follows the director's election to the board) each non-employee director who
continues to serve as a director is granted an additional ten-year option for
5,000 shares. Each option is granted at an option exercise price equal to the
fair market value of the option shares at the date the option is granted and
becomes fully exercisable commencing with the first annual meeting following
the date of the grant or upon the director's earlier death, disability,
retirement or involuntary termination of board service other than for cause.
Non-employee directors who were directors of Enova Corporation or Pacific
Enterprises at the time of the business combination of the two companies
(currently ten of the Company's thirteen non-employee directors) continue to
accrue retirement benefits (subject to certain maximum years of service credit)
for service as non-employee directors of Sempra Energy. Annual benefits
commence upon the later of retirement as a director or attaining age 65 and
continue for a maximum period equal to the director's combined years of service
as a director of Sempra Energy and Enova Corporation or Pacific Enterprises.
The annual benefit is the sum of Sempra Energy's then current annual retainer
and ten times the then current board meeting fee. Upon retirement, directors
may elect to receive the actuarial equivalent of the annual benefit as a single
lump sum payment.
7
INDEPENDENT AUDITORS
Representatives of Deloitte & Touche LLP, our independent auditors, are
expected to be present at the Annual Meeting. They will have the opportunity to
make a statement if they desire to do so and to respond to appropriate
questions from shareholders.
Audit Fees
Fees of Deloitte & Touche LLP for audit services provided to the Company and
its subsidiaries for 2001 were $3,887,000. These services consist of (i)
auditing our consolidated financial statements - $1,854,000; (ii) auditing
financial statements of our subsidiaries - $1,546,000; and (iii) implementing
new accounting pronouncements - $487,000.
All Other Fees
Fees of Deloitte & Touche LLP for all other services provided to the Company
and its subsidiaries for 2001 were $3,026,000. These services were for:
Audit Related Services - $890,000 consisting of (i) audits of employee
benefit plans - $303,000; (ii) foreign statutory reports and audit reports
for lenders and regulators - $293,000; (iii) co-sourcing with Internal Audit
- $207,000; and (iv) procedures in connection with Securities and Exchange
Commission filings, consents and comfort letters - $87,000.
Non-Audit Services - $2,136,000 consisting of (i) tax services -
$1,079,000; (ii) energy trading risk management consultation - $880,000; and
(iii) merger and acquisition assistance - $177,000.
The Audit Committee of the Board of Directors has considered whether the
provision of these services is compatible with maintaining the independence of
Deloitte & Touche LLP.
8
AUDIT COMMITTEE REPORT
In accordance with its written charter, the Audit Committee of the Board of
Directors assists the board in fulfilling its oversight responsibilities for
management's conduct of Sempra Energy's financial reporting processes. The
committee consists of five independent directors.
The Audit Committee has reviewed the audited financial statements of the
Company for the year ended December 31, 2001, with management and Deloitte &
Touche LLP, the Company's independent auditors.
The Audit Committee has discussed and reviewed with Deloitte & Touche LLP
all the matters required to be discussed by Statement on Auditing Standards No.
61 (Communication with Audit Committees). It has also received the written
disclosures and the letter from Deloitte & Touche LLP required by Independence
Standards Board Standard No. 1 (Independence Discussions with Audit Committees)
and has discussed with Deloitte & Touche LLP their independence.
Based on this review and discussions, the Audit Committee recommended to the
Board of Directors that the Company's audited financial statements be included
in its Annual Report on Form 10-K for the year ended December 31, 2001, for
filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
Daniel W. Derbes, Chair
James G. Brocksmith, Jr.
Herbert L. Carter
Richard A. Collato
William D. Jones
March 4, 2002
9
SHARE OWNERSHIP
The following table shows the number of shares of Sempra Energy Common Stock
beneficially owned at March 1, 2002 by each director, by each of our executive
officers named in the executive compensation tables in this Proxy Statement,
and by all of our directors and executive officers as a group. These shares,
upon giving effect to exercisable options, total less than 2% of our
outstanding shares.
Shares
Current Subject To
Beneficial Exercisable Phantom
Name Holdings Options(A) Shares(B) Total
---- ---------- ----------- --------- ---------
Stephen L. Baum................................................. 87,791 1,106,475 114,916 1,309,182
Hyla H. Bertea.................................................. 9,630 30,000 6,141 45,771
James G. Brocksmith, Jr......................................... -0- 15,000 802 15,802
Herbert L. Carter............................................... 1,668 25,000 9,134 40,802
Richard A. Collato.............................................. 5,114 30,000 -0- 35,802
Daniel W. Derbes (C)............................................ 6,390 30,000 483 36,873
Donald E. Felsinger............................................. 67,541 341,220 43,136 451,897
Wilford D. Godbold, Jr.......................................... 3,006 30,000 3,685 36,691
Edwin A. Guiles................................................. 22,619 169,740 16,477 208,836
William D. Jones................................................ 3,063 30,000 -0- 33,063
John R. Light................................................... 18,285 235,015 18,435 271,735
Ralph R. Ocampo................................................. 14,856 30,000 10,848 55,704
William G. Ouchi................................................ 10,091 30,000 392 40,483
William C. Rusnack.............................................. 4,091 15,000 90 19,181
William P. Rutledge............................................. 180 15,000 -0- 15,180
Neal E. Schmale................................................. 21,847 282,454 45,509 349,810
Thomas C. Stickel............................................... 2,067 30,000 483 32,550
Diana L. Walker................................................. 1,026 30,000 483 31,509
Directors and Executive Officers as a group (22 persons)........ 361,841 2,998,505 280,284 3,640,630
--------
(A) Shares which may be acquired through the exercise of stock options that are
currently exercisable or will become exercisable on or before May 15, 2002.
(B) Represents deferred compensation deemed invested in shares of Sempra Energy
Common Stock. These phantom shares cannot be voted or transferred but track
the performance of Sempra Energy Common Stock.
(C) Mr. Derbes will retire as director before the Annual Meeting and the
authorized number of directors will be reduced to thirteen to reflect his
retirement.
10
The Board of Directors has established share ownership guidelines for
directors and officers to further strengthen the link between Company
performance and officer/director compensation. For non-employee directors the
guideline is ownership of a number of shares having a market value equal to
four times the annual retainer. For officers, the guidelines are:
Share Ownership
Executive Level Guidelines
--------------- ---------------
Chief Executive Officer...... 4 X Base Salary
Group Presidents............. 3 X Base Salary
Executive Vice Presidents.... 3 X Base Salary
Senior Vice Presidents....... 2 X Base Salary
Other Vice Presidents........ 1 X Base Salary
In setting the guidelines the board considered then current share ownership
levels and the desirability of encouraging further share ownership. The officer
guidelines were established in 1998 and the director guidelines in 2000. They
are expected to be met or exceeded within five years from adoption. For
purposes of the guidelines, shares owned include phantom shares into which
compensation is deferred and the vested portion of certain in-the-money stock
options as well as shares owned directly or through benefit plans.
Sempra Energy has approximately 175,000 shareholders. The only person known
to us to be the beneficial owner of more than 5% of our outstanding shares is
Barclays Global Investors, N.A. (45 Fremont Street, San Francisco, California
94105), which on February 8, 2002 reported that it and related entities held
11,393,523 shares as to which they had sole dispositive power (including
10,949,470 shares as to which they had sole voting power) in trust accounts for
the economic benefit of the beneficiaries of those accounts. These shares
represent approximately 5% of the outstanding Sempra Energy Common Stock.
Employee savings and stock ownership plans of Sempra Energy and its
subsidiaries held 24,241,792 shares of Sempra Energy Common Stock
(approximately 12% of the outstanding shares) for the benefit of employees at
March 11, 2002.
ELECTION OF DIRECTORS
Sempra Energy's Board of Directors will consist of 13 members upon giving
effect to the retirement of one director who will retire before the Annual
Meeting and a corresponding reduction in the authorized number of directors.
The board is divided into three classes whose terms are staggered so that the
term of one class expires at each Annual Meeting. Four directors will be
elected at the 2002 Annual Meeting for a three-year term expiring in 2005.
Nominees
The Corporate Governance Committee has selected and the Board of Directors
has approved the following four individuals, all of whom are currently
directors, as nominees for election as directors:
Hyla H. Bertea
Richard A. Collato
William C. Rusnack
William P. Rutledge
The proxies and voting instructions that the board is soliciting will be
voted for these four nominees unless other instructions are specified. If any
nominee should become unavailable to serve, the proxies may be voted for a
substitute nominee designated by the board or the board may reduce the
authorized number of directors. If you do not want your shares to be voted for
one or more of these nominees, you may so indicate in the space provided on
your proxy or voting instruction card.
11
Information concerning each director nominee and the directors serving
unexpired terms that will continue after the Annual Meeting is shown below. The
year shown as election as a director is that of first election as a director of
Sempra Energy or its predecessors. Unless otherwise indicated, each director
has held his or her principal occupation or other positions with the same or
predecessor organizations for at least the last five years.
Nominees for election for terms expiring in 2005:
[PHOTO] Hyla H. Bertea, 61, has been a director since 1988. She is a realtor with Prudential California, a
real estate sales company. She is a trustee of Lewis & Clark College, a director of Orange
HYLA H. BERTEA County Community Foundation, and a former commissioner of the California Horse Racing
Board. For a number of years she has been involved in leadership positions with various other
cultural, educational and health organizations in the Orange County and Los Angeles areas.
Mrs. Bertea was a co-commissioner of gymnastics and a member of the executive staff for the
1984 Olympics.
[PHOTO] Richard A. Collato, 58, has been a director since 1993. He is President and Chief Executive
Officer of the YMCA of San Diego County. He is a former director of Y-Mutual Ltd., a
RICHARD A. COLLATO reinsurance company, and The Bank of San Diego. Mr. Collato is a former trustee of Springfield
College, and currently is a trustee of the YMCA Retirement Fund and Bauce Foundation, and a
director of Micro Vision Optical, Inc. and Project Design Consultants.
[PHOTO] William C. Rusnack, 57, became a director in 2001. Until 2002 he was the President and Chief
WILLIAM C. RUSNACK Executive Officer and a director of Premcor, Inc., a privately owned independent oil refinery.
Prior to 1998, he was an executive of Atlantic Richfield Company. He is also a director of
Flowserve and Peabody Energy. He is a member of the American Petroleum Institute, the Dean's
Advisory Council of the Graduate School of Business at the University of Chicago and the
National Council of the Olin School of Business at the Washington University in St. Louis.
[PHOTO] William P. Rutledge, 60, became a director in 2001. He has been Chairman of Communications
and Power Industries since 1999. Prior to 1998, he was President and Chief Executive Officer of
WILLIAM P. RUTLEDGE Allegheny Teledyne. He is also a director of AECOM, Inc., Computer Sciences Corporation, and
First Federal Bank of California. He is a Trustee of Lafayette College, KCET Public Television
and St. John's Hospital and Health Center.
12
Directors whose terms expire in 2003:
[PHOTO] James G. Brocksmith, Jr., 61, became a director in 2001. He is an independent financial
consultant and the former Deputy Chairman and Chief Operating Officer for the U.S. operations
JAMES G. BROCKSMITH, JR. of KPMG Peat Marwick LLP. He is a director of AAR Corp., Nationwide Financial Services,
and Sunterra.
[PHOTO] Herbert L. Carter, DPA, 68, has been a director since 1991. He has served as President of
California State University, Dominguez Hills, and Executive Vice Chancellor Emeritus and
HERBERT L. CARTER Trustee Professor of Public Administration of the California State University System. He was
President and Chief Executive Officer of United Way of Greater Los Angeles from 1992 until
1995, and Executive Vice Chancellor of the California State University System from 1987 until
1992. Dr. Carter is a director of Golden State Mutual Insurance Company, and has served as a
member of the Board of Councilors of the School of Public Administration, University of
Southern California and the Board of Regents of Loyola Marymount University.
[PHOTO] William D. Jones, 46, has been a director since 1994. He is the President and Chief Executive
Officer and a director of CityLink Investment Corporation. From 1989 to 1993, he served as
WILLIAM D. JONES General Manager/Senior Asset Manager and Investment Manager with certain real estate
subsidiaries of The Prudential. Prior to joining The Prudential, he served as a San Diego City
Council member from 1982 to 1987. Mr. Jones is Chairman of the Board of the Los Angeles
Branch of the Federal Reserve Bank of San Francisco, and a trustee of the University of
San Diego. He is a former director of The Price Real Estate Investment Trust.
[PHOTO] Ralph R. Ocampo, M.D., F.A.C.S., 70, has been a director since 1983. He is a practicing
surgeon, a former Governor of the American College of Surgeons, past President of the
RALPH R. OCAMPO California Medical Association and a Clinical Professor of Surgery at the University of
California, San Diego.
[PHOTO] William G. Ouchi, Ph.D., 58, has been a director since 1998. He is the Sanford and Betty
Sigoloff Professor in Corporate Renewal in the Anderson Graduate School of Management at
WILLIAM G. OUCHI UCLA. Dr. Ouchi is a director of Allegheny Technologies, FirstFed Financial Corp. and Water-
Pik Technologies. He is a trustee of Williams College and a director of KCET Public Television.
13
Directors whose terms expire in 2004:
Stephen L. Baum, 61, has been a director since 1996. He is Chairman of the Board, President
[PHOTO] and Chief Executive Officer of Sempra Energy. Prior to the business combination of Enova
STEPHEN L. BAUM Corporation and Pacific Enterprises, Mr. Baum was the Chairman and Chief Executive Officer
of Enova Corporation. He is a director of Computer Sciences Corporation.
Wilford D. Godbold, Jr., 63, has been a director since 1990. He is the retired President and
Chief Executive Officer of ZERO Corporation, an international manufacturer primarily of
[PHOTO] enclosures and thermal management equipment for the electronics market. He is a director of
Ceradyne, Inc. and K2, Inc., a trustee of the Wellness Community, a past President of the Board
WILFORD D. GODBOLD, JR. of Trustees of Marlborough School, and a past Chairman of the Board of Directors of the
California Chamber of Commerce and The Employers Group.
Thomas C. Stickel, 52, has been a director since 1994. He is the Chairman, Chief Executive
Officer and founder of University Ventures Network and Virtual Capital of California, LLC. He
[PHOTO] previously was the Chairman, Chief Executive Officer and President of TCS Enterprises, Inc.
and the Bank of Southern California, both of which he founded. Mr. Stickel is Chairman of the
THOMAS C. STICKEL Board of Onyx Acceptance Corporation, a corporate director of Blue Shield of California and
Del Mar Thoroughbred Club and Chairman of the California Chamber of Commerce.
Diana L. Walker, 60, has been a director since 1989. Mrs. Walker is a partner and, since 1999,
General Counsel of the law firm of O'Melveny & Myers LLP. She is a former director of United
[PHOTO] Way of Greater Los Angeles, and Emeritus Governor and former Chair of the Board of
Governors of the Institute for Corporate Counsel, a former trustee of Marlborough School and a
DIANA L. WALKER member of various professional organizations. O'Melveny & Myers LLP provides legal services
to Sempra Energy and its subsidiaries.
14
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has the responsibility
for establishing compensation principles and strategies for Sempra Energy and
its subsidiaries, as well as designing a compensation program for the Chairman,
President and Chief Executive Officer and other senior executive officers of
the Company. Its responsibilities also include administering the Company's base
salary program, executive annual and long term incentive plans, and executive
benefit programs. The committee is comprised of six independent directors.
Compensation Principles and Strategies
In developing the Company's compensation principles and strategies, the
Compensation Committee considers the current and prospective business
environment for Sempra Energy and takes into account numerous factors,
including:
. The rapidly changing and increasingly competitive environment in which
Sempra Energy operates.
. The need to retain experienced executives of outstanding ability and to
motivate them to achieve superior performance.
. The need to attract executive talent from broader markets as the utility
and energy industries continue to rapidly evolve.
. The need to strongly link executive compensation to both annual and long
term corporate, business unit and individual performance.
. The need to strongly align the interests of executives with those of
shareholders.
To reflect these factors and assist Sempra Energy in realizing its key
objective of creating superior shareholder value, the Compensation Committee
has developed policies and programs that include the following elements:
. An emphasis on "pay-for-performance" with a substantial portion of total
compensation reflecting corporate, business unit and individual
performance.
. An emphasis on stock incentives closely aligning the interests of
executives with those of shareholders.
. An emphasis on total compensation with base salaries generally targeted
at or near median general industry levels for companies of comparable
size, with annual cash and long term equity incentives providing
opportunities to earn total compensation at significantly higher levels
for superior performance.
. An appropriate balance of short term and long term compensation to
retain talented executives, reward effective long term strategic results
and encourage share ownership.
. An emphasis on placing at risk, through equity and other
performance-based incentives, a greater portion of executive
compensation as levels of responsibility increase.
The Compensation Committee also takes into account provisions of the
Internal Revenue Code limiting to $1 million the annual amount of compensation
(other than compensation that qualifies as "qualified performance-based
compensation") that Sempra Energy and other publicly held corporations may
deduct for federal income tax purposes for each of certain executive officers.
The committee believes that tax deductibility is an important factor but only
one factor to be considered in evaluating any compensation program.
Accordingly, the committee expects to design and implement policies and
programs that will maximize the Company's federal income tax deductions for
compensation expense to the extent that doing so is consistent with the
Company's other compensation principles and strategies. The committee believes,
however, that there are circumstances in which the interests of the Company and
its shareholders may be best served by providing compensation that is not fully
15
tax deductible, and may exercise discretion to provide compensation that would
not qualify as a tax deductible compensation expense.
Compensation Program
The primary components of Sempra Energy's compensation program are base
salaries, annual cash incentive opportunities and long term equity and
equity-based incentive opportunities.
Base Salaries
Base salaries for executives are reviewed annually by the Compensation
Committee and generally targeted at the median of salaries at general industry
companies of similar size. The committee believes that this strategy, along
with annual and long term incentive opportunities at general industry levels,
allows the Company to retain and attract top quality executive talent. In
determining base salary adjustments, individual performance, executive
responsibilities, market characteristics and other factors are also taken into
account.
Survey data for assessing base salaries are based upon companies in the
Fortune 1000 and size-adjusted based upon Sempra Energy's revenues using
regression analysis. The Compensation Committee believes that Sempra Energy's
most direct competitors for executive talent are not limited to utility and
energy companies, and the Fortune 1000 appropriately reflects a broader group
with which the Company competes to attract and retain highly skilled and
talented executives.
Annual base salaries for Sempra Energy executive officers are set at the
approximate mid-point of these salary data. For 2001, an annual base salary of
$975,000 was set for Stephen L. Baum, the Company's Chairman, Chief Executive
Officer and President, with corresponding lesser amounts for other executive
officers.
Annual Incentives
Annual performance-based incentive opportunities are provided to executive
officers through cash bonuses under an Executive Incentive Plan approved by
shareholders in 1999. The plan permits the payment of bonuses based upon the
attainment of objective financial performance goals. Bonus opportunities vary
with the individual officer's position and prospective contribution to the
attainment of these goals and no bonuses are paid unless a threshold
performance level is attained for the related performance period. Bonus
opportunities increase for performance above the threshold level with
performance at targeted levels intended to produce bonuses at the mid-point of
those for comparable levels of responsibility at Fortune 1000 companies.
Executive Incentive Plan award levels for 2001 were based on attainment of
earnings per share goals with target award levels ranging from 100% of base
salary for Mr. Baum to 45% of base salary for Vice Presidents, and maximum
award levels ranging from 200% to 90% of base salary. The earnings per share
target for 2001 was $2.30, a 21.7% increase over the 2000 target of $1.89.
Earnings per share for 2001 were $2.52, a 22.3% increase over 2000 earnings
of $2.06. These results exceeded those required for maximum incentive bonus
payouts and resulted in a cash bonus of $1,950,000 for Mr. Baum, with
corresponding lesser amounts for other executive officers.
Long Term Incentives
Long term incentive opportunities are provided by performance-based awards
under a Long Term Incentive Plan approved by shareholders in 1999. The plan
permits a wide variety of equity and equity-based incentive awards to allow
Sempra Energy to respond to changes in market conditions and compensation
practices. During 2001, Sempra Energy granted to executives non-qualified stock
options to purchase Sempra Energy Common Stock under the Long Term Incentive
Plan. These option grants are described in this Proxy Statement under the
caption "Executive Compensation--Stock Options and Stock Appreciation Rights."
16
Share Ownership Guidelines
The Compensation Committee believes that a commitment to increased share
ownership by executives is an important element in aligning the interests of
executives with those of shareholders. This belief has influenced the design of
the Company's compensation plans and, in addition, the Board of Directors has
established share ownership guidelines to further strengthen the link between
Company performance and compensation. These guidelines are summarized under the
caption "Share Ownership."
COMPENSATION COMMITTEE
Wilford D. Godbold, Jr., Chair
Ralph R. Ocampo
William G. Ouchi
William C. Rusnack
William P. Rutledge
Thomas C. Stickel
March 5, 2002
17
EXECUTIVE COMPENSATION
Compensation Summary
The table below summarizes, for the last three years, the compensation paid
or accrued by Sempra Energy and its subsidiaries to each of the five named
executive officers.
Summary Compensation Table
Long Term Compensation
---------------------------
Awards Payouts
---------------- ----------
Annual Compensation Securities LTIP All Other
--------------------- Underlying Payouts Compensation
Name and Principal Position Year Salary ($) Bonus ($) Options/SARS (#) ($) (A)(B) ($) (C)
--------------------------- ---- ---------- ---------- ---------------- ---------- ------------
Stephen L. Baum............. 2001 $975,000 $1,950,000 663,500 $263,459 $233,781
Chairman, President and 2000 $913,231 $1,560,000 982,500 $174,643 $234,177
Chief Executive Officer 1999 $762,616 $ 915,600 297,900 $179,465 $144,516
Donald E. Felsinger......... 2001 $573,942 $ 805,000 357,900 $154,959 $108,413
Group President--Sempra 2000 $519,135 $ 728,000 143,700 $118,406 $ 77,599
Energy Global Enterprises 1999 $474,769 $ 498,750 153,700 $126,314 $ 79,600
Edwin A. Guiles (D)......... 2001 $490,596 $ 687,400 271,200 $ 51,418 $ 98,212
Group President--Regulated 2000 $373,740 $ 504,700 73,500 $ 35,685 $ 39,933
Business Units 1999 $304,731 $ 243,750 54,500 $ 46,273 $ 46,931
Neal E. Schmale............. 2001 $454,577 $ 546,000 193,000 $ 58,492 $ 89,149
Executive Vice President 2000 $432,912 $ 519,600 136,800 $ 0 $ 79,653
and Chief Financial Officer 1999 $415,754 $ 374,400 96,700 $ 0 $ 51,461
John R. Light............... 2001 $432,999 $ 519,600 183,700 $ 95,974 $ 43,804
Executive Vice President 2000 $432,672 $ 519,600 136,800 $ 32,618 $158,383
and General Counsel 1999 $415,754 $ 374,400 96,700 $ 29,308 $118,971
--------
(A) Long term incentive plan payouts represent the fair market value of
restricted shares for which forfeiture and transfer restrictions terminated
during the year based upon satisfaction of long term performance goals.
(B) The aggregate holdings/value of restricted shares held on December 31, 2001
by the individuals listed in the table are: 21,018 shares/$515,992 for Mr.
Baum; 10,767 shares/$264,330 for Mr. Felsinger; 3,984 shares/$97,807 for
Mr. Guiles; 7,467 shares/$183,315 for Mr. Schmale; and 7,467
shares/$183,315 for Mr. Light. Regular quarterly dividends are paid on
restricted shares.
(C) All other compensation includes amounts paid as (i) interest on deferred
compensation above 120% of the applicable federal rate, (ii) life insurance
premiums, (iii) financial and estate planning services, (iv) contributions
to defined benefit plans and related supplemental plans, and (v) car
allowances. The respective amounts paid in 2001 were $30,817, $90,520,
$15,000, $86,348 and $11,096 for Mr. Baum; $20,651, $21,242, $10,000,
$45,424 and $11,096 for Mr. Felsinger; $192, $45,593, $7,163, $34,168 and
$11,096 for Mr. Guiles; $38,736, $1,460, $7,000, $31,455 and $10,498 for
Mr. Schmale; and $-0-, $-0-, $-0-, $33,306 and $10,498 for Mr. Light.
(D) Mr. Guiles became an executive officer in August 2000. Amounts for prior
periods reflect his compensation as an executive officer of subsidiaries.
18
Stock Options and Stock Appreciation Rights
The following table shows information as to stock options granted during
2001 to the executive officers named in the Summary Compensation Table. All
options were granted at an exercise price of 100% of the fair market value of
the option shares on the date of the grant, for a ten-year term subject to
earlier expiration following termination of employment, and are exercisable in
cumulative installments of one-fourth of the shares initially subject to the
option on each of the first four anniversaries of the date of grant.
OPTION/SAR GRANTS IN 2001
Number of % of Total
Shares Options/SARs
Underlying Granted to Exercise Grant Date
Options/SARs Employees Price Expiration Present
Name Granted (#) in 2001 ($/Share) Date Value(A)
---- ------------ ------------ --------- ---------- ----------
Stephen L. Baum......... 663,500 23.36% $22.50 1/1/11 $3,363,945
Donald E. Felsinger..... 277,900 9.79% $22.50 1/1/11 $1,408,953
80,000 2.82% $22.65 3/5/11 $ 399,200
Edwin A. Guiles......... 271,200 9.55% $22.50 1/1/11 $1,374,984
Neal E. Schmale......... 193,000 6.80% $22.50 1/1/11 $ 978,510
John R. Light........... 183,700 6.47% $22.50 1/1/11 $ 931,359
--------
(A) The Company used a modified Black-Scholes option pricing model to develop
the theoretical values set forth under the "Grant Date Present Value"
column. Grant date present value per option share for the options granted
at an exercise price of $22.50 was $5.07 based on the following
assumptions: share volatility-23.60%; dividend yield-4.21%; risk-free rate
of return-5.28%; and outstanding term-10 years. Grant date present value
per option share for the options granted at an exercise price of $22.65 was
$4.99 based on the following assumptions: share volatility-25.78% dividend
yield-5.01%; risk-free rate of return-5.25%; and outstanding term-10 years.
The following table shows information as to the exercise of stock options
and stock appreciation rights during 2001 and unexercised options and stock
appreciation rights held on December 31, 2001 by the executive officers named
in the Summary Compensation Table.
Option/SAR Exercises and Holdings
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Options/SARs Options/SARs
Acquired at Year-End (#) at Year-End ($)(A)
on Exercise Value ------------------------- -------------------------
Name (#) Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
Stephen L. Baum......... -0- -0- 770,500 1,341,300 $3,598,515 $4,735,674
Donald E. Felsinger..... -0- -0- 177,395 564,065 $ 469,956 $1,585,928
Edwin A. Guiles......... -0- -0- 69,965 361,655 $ 197,393 $ 955,018
Neal E. Schmale......... -0- -0- 175,829 360,005 $ 371,947 $1,130,310
John R. Light........... -0- -0- 130,715 350,705 $ 359,315 $1,111,245
--------
(A) The exercise price of outstanding options ranges from $18.19 to $26.31.
19
Pension Plans
The following table shows the estimated single life annual pension annuity
benefit to be provided to executive officers under the Sempra Energy
Supplemental Executive Retirement Plan (combined with benefits payable under
the Company's other pension plans in which the officers also participate) based
on the specified compensation levels and years of credited service and
retirement at age 65.
PENSION PLAN TABLE
($000's)
Years of Service
--------------------------------
Pension Plan Compensation 5 10 20 30 40
------------------------- ---- ------ ------ ------ ------
$ 750.......... $150 $ 300 $ 450 $ 469 $ 488
$1,000.......... $200 $ 400 $ 600 $ 625 $ 650
$1,250.......... $250 $ 500 $ 750 $ 781 $ 813
$1,500.......... $300 $ 600 $ 900 $ 938 $ 975
$1,750.......... $350 $ 700 $1,050 $1,094 $1,138
$2,000.......... $400 $ 800 $1,200 $1,250 $1,300
$2,250.......... $450 $ 900 $1,350 $1,406 $1,463
$2,500.......... $500 $1,000 $1,500 $1,563 $1,625
$2,750.......... $550 $1,100 $1,650 $1,719 $1,788
Pension benefits are based on average salary for the highest two years of
service and the average of the three highest annual bonuses during the last ten
years of service. Years of service for the executive officers named in the
Summary Compensation Table are 17 years for Mr. Baum, 29 years for Mr.
Felsinger, 29 years for Mr. Guiles, 4 years for Mr. Schmale, and 4 years for
Mr. Light.
Messrs. Baum, Felsinger, Guiles and Light are each entitled to pension
benefits at the greater of that provided by Sempra Energy's pension plans or
that to which they would have been entitled under the Enova Corporation pension
plans (including a supplemental pension plan) had those plans remained in
effect. Under the Enova Corporation plans and retirement after attaining age
62, Messrs. Baum, Felsinger and Guiles would each be entitled to a monthly
pension benefit of 60% of his final pay and Mr. Light to a monthly pension
benefit of 50% of his final pay. Final pay is defined as the monthly base pay
rate in effect during the month immediately preceding retirement, plus
one-twelfth of the average of the highest three years' gross bonus awards. The
plans provide for reduced pension benefits for retirement between the ages of
55 and 61, and surviving spouse and disability benefits equal to 50% and 100%,
respectively, of pension benefits.
Employment and Employment-Related Agreements
Employment Agreements
Sempra Energy has employment agreements with Stephen L. Baum and Donald E.
Felsinger. Each agreement provides for an initial employment term of five years
(subject to earlier mandatory retirement at age 65) which commenced on the June
26, 1998 completion of the business combination of Pacific Enterprises and
Enova Corporation. The term of each agreement is automatically extended by one
year on June 26, 2002 and on each June 26 thereafter unless the executive or
Sempra Energy elects not to extend it.
Mr. Baum's employment agreement provides that he will serve as the Chairman
of the Board, Chief Executive Officer and President of Sempra Energy at an
annual base salary of not less than $975,000. Mr. Felsinger's employment
agreement provides that he will serve as the President and Principal Executive
Officer of the businesses of Sempra Energy and its subsidiaries that are not
economically regulated by the California Public Utilities Commission at an
annual base salary of not less than $440,000. Each agreement also provides that
the executive is entitled to participate in (i) annual incentive compensation
plans and long term
20
compensation plans and awards providing him with the opportunity to earn on a
year-by-year basis, short term and long term compensation at least equal (in
terms of target, maximum and minimum awards expressed as a percentage of annual
base salary) to his opportunities in effect at Enova Corporation prior to the
completion of the business combination to form Sempra Energy and in the case of
Mr. Baum also at least equal to the awards granted to his predecessor as Chief
Executive Officer of Sempra Energy and (ii) all retirement and welfare benefit
plans applicable generally to employees or senior executive officers of Sempra
Energy.
The employment agreements provide that if Sempra Energy terminates the
executive's employment (other than for cause, death or disability) or the
executive terminates his employment for good reason, the executive will be
entitled to receive an amount equal to (i) the sum of his annual base salary
and annual incentive compensation (equal to the greater of his target bonus for
the year of termination or the average of the three years' highest gross bonus
awards in the five years preceding termination) multiplied by the number of
years remaining in the term of his agreement but in no event less than two,
provided that in the event of termination following a change in control the
multiplier will be three; (ii) a pro rata portion of the target amount payable
under any annual incentive compensation awards for the year or, if greater, the
average of the three years' highest gross bonus awards paid to the executive in
the five years preceding the year of termination; and (iii) an additional
retirement benefit equal to the present value of the benefits attributable to
additional years of age and service credit (but in no event less than two
years) for purposes of the calculation of retirement benefits under the Enova
Corporation Supplemental Executive Retirement Plan as if the executive had
remained employed for the remainder of the term of his agreement. Each
agreement also provides for immediate vesting and exercisability of all
equity-based long term incentive compensation awards; pro rata payment of
cash-based long term incentive awards at target performance; continued
participation in welfare benefit plans for three years; payment of compensation
previously deferred; and financial planning and outplacement services. The
agreements also provide for a gross-up payment to offset the effects of any
excise taxes imposed on the executive under Section 4999 of the Internal
Revenue Code.
Good reason is defined in the employment agreements to include an adverse
change in the executive's title, authority, duties, responsibilities or
reporting lines; a reduction in the executive's base salary or aggregate
annualized compensation and benefit opportunities other than across-the-board
reductions similarly affecting all executives whose compensation is directly
determined by the Compensation Committee of the Board of Directors; the
relocation of the executive's principal place of employment; and a substantial
increase in business travel obligations. A change in control is defined to
include the acquisition by one person or group of 20% or more of the voting
power of Sempra Energy's shares; the election of a new majority of the board
comprised of individuals who are not recommended for election by two-thirds of
the current directors or successors to the current directors who were so
recommended for election; certain mergers, consolidations or sales of assets
that result in the shareholders of the Company owning less than 60% of the
voting power of the Company or of the surviving entity or its parent; and
shareholder approval of the liquidation or dissolution of the Company.
Severance Agreements
Sempra Energy has entered into severance agreements with each of its
executive officers, other than Messrs. Baum and Felsinger for whom severance
arrangements are contained in their respective employment agreements summarized
above. The severance agreements provide for the payment of benefits in the
event Sempra Energy terminates the executive's employment (other than for
cause, death or disability) or the executive terminates his or her employment
for good reason.
The benefits payable under the severance agreements include (i) a lump sum
cash payment equal to the executive's annual base salary and average annual
bonus for the two years prior to termination which in certain cases, depending
upon the officer's position, is multiplied by as much as two; (ii) continuation
of health benefits for a period of two years; and (iii) financial planning and
outplacement services. In addition, if the termination occurs within two years
after a change in control of Sempra Energy, (i) the lump sum cash payment
multiple is increased to as much as three; (ii) all equity-based incentive
awards immediately vest and become exercisable or payable and all restrictions
on the awards immediately lapse; (iii) all deferred compensation is paid out in
a lump sum; (iv) a lump sum cash payment is made equal to the present value of
the executive's benefits under the Supplemental Executive Retirement Plan
calculated as if the executive had attained age 62 (or, if the executive is
21
older than 62, based on the executive's actual age) and applying certain early
retirement factors; and (v) continued life, disability, accident and health
insurance for three years. The agreements also provide for a gross up payment
to offset the effects of any excise tax imposed on the executive under Section
4999 of the Internal Revenue Code.
Good reason is defined in the severance agreements to include the assignment
to the executive of duties materially inconsistent with those appropriate for
an executive of the Company, a material reduction in the executive's overall
standing and responsibilities within the Company and a material reduction in
the executive's annualized compensation and benefit opportunities other than
across-the-board reductions affecting all similarly situated executives of
comparable rank. In addition, following a change in control of the Company,
good reason also includes an adverse change in the executive's title,
authority, duties, responsibilities or reporting lines, a 10% or greater
reduction in the executive's annualized compensation and benefit opportunities,
relocation of the executive's principal place of employment by more than 30
miles or a substantial increase in business travel obligations. A change in
control is defined in the same manner as in the employment agreements
summarized above.
22
COMPARATIVE SHAREHOLDER TOTAL RETURNS
Sempra Energy was formed in connection with a business combination of
Pacific Enterprises and Enova Corporation that was completed on June 26, 1998.
In the combination, the common shares of the combining companies were converted
into shares of Sempra Energy, which began trading on June 29, 1998.
The following graph compares the percentage change in the cumulative total
shareholder return on Sempra Energy Common Stock through December 31, 2001 with
the performance over the same period of the Standard & Poor's 500 Index, the
Standard & Poor's 500 Utilities Index and an Energy Company Index comprised of
energy and energy-related companies selected by Sempra Energy. These returns
were calculated assuming an initial investment of $100 in Sempra Energy Common
Stock, the S&P 500, the S&P Utilities and the Energy Company Index on June 29,
1998 (the date on which Sempra Energy Common Stock became publicly traded) and
the reinvestment of all dividends.
[CHART]
ENERGY
SEMPRA S&P 500 S&P 500 COMPANY
ENERGY UTILITIES INDEX INDEX
6/29/1998 $100 $100 $100 $100
12/31/1998 $94 $108 $109 $106
12/31/1999 $70 $98 $132 $94
12/31/2000 $98 $154 $120 $150
12/31/2001 $108 $107 $106 $104
The companies comprising the Energy Company Index are Cinergy Corp., CMS
Energy Corporation, Dominion Resources, Inc., DTE Energy Company, Duke Energy
Corp., Edison International, Enron Corp., FPL Group, Inc., Kinder Morgan, Inc.,
Nicor. Inc., NiSource, Inc., PG&E Corp., Reliant Energy, Inc., Southern
Company, Texas Utilities Company, and Western Resources, Inc. Cumulative total
returns have been weighted according to the companies' market capitalizations
at the beginning of the comparison period.
In prior years, Sempra Energy has on occasion used the companies comprising
the Energy Company Index as a peer group for purposes of determining
performance-based compensation. However, because of changes in our business and
the business of the other members of the group, we no longer believe that these
companies are an appropriate comparison group. Accordingly, for subsequent
proxy statements we intend to discontinue comparisons of our total shareholder
returns with that of the Energy Company Index and instead to compare our return
with those of the S&P 500 and the S&P Utilities.
23
GENERAL INFORMATION
Other Matters to Come Before the Annual Meeting
Sempra Energy has received notice from a shareholder representative that at
the Annual Meeting he intends to introduce proposals for company policies that
"auditors not perform any work for the company in addition to auditing" and the
company "name annually the directors who have philanthropic links to the
company and the latest annual sum." We believe the auditor proposal is overly
broad and, among other things, would preclude our auditors from providing
audit-related services which they are particularly well-qualified to perform in
a cost-effective manner. We will provide the information contemplated by the
"philanthropic links" proposal to any shareholder who requests it but we
believe this information is of insufficient general shareholder interest and
deals with amounts too insignificant to mandate annual disclosure to all
shareholders. Accordingly, if these proposals are properly presented at the
meeting, we intend to vote the shares represented by the proxies solicited by
this Proxy Statement against their approval.
We do not know of any other matter that may be voted upon at the Annual
Meeting that is not described in this Proxy Statement other than shareholder
proposals that have been excluded from this Proxy Statement in accordance with
the rules of the Securities and Exchange Commission. The holders of the proxies
are authorized to vote the shares represented by the proxies solicited by this
Proxy Statement in accordance with their best judgment on these excluded
proposals and any other matter that may be voted upon at the meeting as well as
on matters incident to the conduct of the meeting.
Shareholder Proposals for the 2003 Proxy Statement
Any shareholder satisfying Securities and Exchange Commission eligibility
requirements who wishes to submit a proposal to be included in the Proxy
Statement for the 2003 Annual Meeting of Shareholders should do so in writing
to the Corporate Secretary, Sempra Energy, 101 Ash Street, San Diego,
California 92101-3017. The Company must receive the proposal by November 21,
2002 to consider it for inclusion in the Proxy Statement for the meeting.
Director Nominees or Other Business for Presentation at Annual Meetings
Shareholders who wish to present director nominations or other business at
an annual meeting are required to notify the Corporate Secretary of their
intention to do so at least 60 days, but not more than 120 days, before the
date corresponding to the date of the last annual meeting and the notice must
provide information as required in the Bylaws. A copy of these Bylaw
requirements will be provided upon request in writing to the Corporate
Secretary, Sempra Energy, 101 Ash Street, San Diego, California 92101-3017. The
deadline for notification of these matters for the 2002 Annual Meeting has
passed. The period for notification for the 2003 Annual Meeting will begin on
January 7, 2003 and end on March 8, 2003. This requirement does not apply to
the deadline for submitting shareholder proposals for inclusion in the Proxy
Statement that is described above or to questions a shareholder may wish to ask
at the meeting.
Share Ownership Reporting Compliance
Our directors and executive officers are required to file with the
Securities and Exchange Commission reports regarding their ownership of Sempra
Energy Common Stock. Based solely on a review of copies of the reports that
have been furnished to us and written representations from directors and
officers that no other reports were required, we believe that all filing
requirements were met during 2001.
Other Information
Sempra Energy's consolidated financial statements are included in our
Financial Report that is being mailed to shareholders together with this Proxy
Statement and our Annual Report to Shareholders. Other information regarding
the Company is included in our Annual Report on Form 10-K which we file with
the Securities and
24
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The Form
10-K, as well as other reports we file with the SEC and other information
regarding the Company are available at our home page on the Internet's World
Wide Web at http://www.sempra.com.
We will furnish a copy of the 2001 Form 10-K (excluding exhibits) without
charge to any shareholder who requests the report. Shareholders may also
obtain, without charge, a copy of the Company's Articles of Incorporation,
Bylaws and Corporate Governance Guidelines. To request any of these, please
write to the Corporate Secretary, Sempra Energy, 101 Ash Street, San Diego,
California 92101-3017.
Solicitation of Proxies
We will pay the cost of soliciting proxies. We have retained Morrow & Co.,
Inc. to assist us in the solicitation. Morrow & Co. may solicit proxies by
mail, in person or by telephone at an estimated cost to us of $12,500 plus
reimbursement of reasonable out-of-pocket expenses. Our employees may also
solicit proxies on behalf of the Company.
-----------------
This Notice of Annual Meeting and Proxy Statement are sent by order of the
Sempra Energy Board of Directors.
Thomas C. Sanger
Corporate Secretary
Dated: March 15, 2002
25
[GRAPHIC]
MAP
[GRAPHIC]
SEMPRA ENERGY
SEMPRA ENERGY
CORRECTION TO 2002 PROXY STATEMENT
The share ownership totals for Dr. Carter and Mr. Collato printed on page 10 of
the accompanying Proxy Statement are incorrect. The correct totals are 35,802
shares and 35,114 shares, respectively.
March 19, 2002
1
PROXY
P Solicited on Behalf of the Board of Directors of
R SEMPRA ENERGY
Annual Meeting of Shareholders -- May 7, 2002
O
X STEPHEN L. BAUM, JOHN R. LIGHT and THOMAS C. SANGER, jointly or
individually and with full power of substitution, are authorized to represent
Y and vote the shares of the undersigned at the 2002 Annual Meeting of
Shareholders of Sempra Energy, and at any adjournment or postponement
thereof, in the manner directed on the reverse side of this card and in their
discretion on all other matters that may properly come before the meeting.
This card also provides voting instructions for shares held in the Sempra
Energy Direct Stock Purchase Plan and Employee Savings Plans of Sempra Energy
and its subsidiaries, as described under "Voting Information" in the
accompanying Proxy Statement.
(Continued and to be signed on other side)
SEE REVERSE
SIDE
--------------------------------------------------------------------------------
FOLD AND DETACH HERE
[GRAPHIC OF SEMPRA ENERGY]
2002 ANNUAL MEETING
OF SHAREHOLDERS
----------------
ADMISSION TICKET
----------------
ANNUAL MEETING: Tuesday, May 7, 2002 . 10:00 A.M.
Irvine Marriott Hotel, Irvine, California
(See map in proxy statement for directions)
-------------------------------
ADMIT ONE SHAREHOLDER AND GUEST
-------------------------------
YOUR VOTE IS IMPORTANT:
Even if you plan to attend the Annual Meeting in person,
please vote your shares.
Doors will open at 9:00 A.M.
Cameras, tape recorders and similar devices will not be allowed in the meeting
rooms.
3278
X Please mark your
votes as in this
example.
This Proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholder(s). If no direction is made, this Proxy will be
voted FOR Item 1 the election of directors.
The Board of Directors recommends a vote "FOR" the Nominees.
FOR WITHHELD
1. ELECTION OF NOMINEES:
DIRECTORS 01. HYLA H. BERTEA Please check here if you plan to attend the Annual
02. RICHARD A. COLLATO Meeting in person:
03. WILLIAM C. RUSNACK
04. WILLIAM P. RUTLEDGE
For, except vote withheld from the following nominee(s): Please check here if you want confidential voting.
------------------------------------------------------- Please check here if you receive more than one
Annual Report and do not wish to receive the extra
copy(ies). This will not affect the distribution
of dividends or proxy statements.
SIGNATURE(S) DATE
--------------------------------- -----------------------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trusted or
guardian, please give full title as such.
--------------------------------------------------------------------------------
FOLD AND DETACH HERE
[LOGO OF SEMPRA ENERGY]
PROXY VOTING INSTRUCTION CARD
Your vote is important. You may vote the shares held in this account in any
one of the following three ways.
. Vote by Internet. Access the Web site at http://www.eproxyvote.com/sre
24 hours a day, 7 days a week.
. Vote by phone. Call toll-free, 1-877-PRX-VOTE (1-877-779-8683)
24 hours a day, 7 days a week from the U.S. and Canada to vote your
proxy.
. Vote by mail. Complete, date, sign and mail your proxy card (above) in
the enclosed postage-paid envelope or, otherwise, return it to Sempra
Energy c/o EquiServe Trust Company, N.A., P.O. Box 8543, Edison,
New Jersey 08818-9410.
If you vote by telephone or via the Internet, please have your social security
number and this proxy card readily available. Your social security number and
the control number printed above (below the perforation) will be necessary to
verify your vote. A telephone or Internet vote authorizes the named proxies to
vote your shares in the same manner as if you marked, signed and returned this
proxy card.
If you vote by phone or vote using the Internet, there is no need for you to
mail back your proxy card.