PAGE 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549-1004 Form 10-K/A AMENDMENT NO. 1 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1993 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ________________ to ________________ Commission file number 1-7316 COMMONWEALTH ENERGY SYSTEM (Exact name of registrant as specified in its Declaration of Trust) Massachusetts 04-1662010 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Main Street, Cambridge, Massachusetts 02142-9150 (Address of principal executive offices) (Zip Code) (617) 225 4000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Shares of Beneficial New York Stock Exchange, Inc. Interest $4 par value Boston Stock Exchange, Inc. Pacific Stock Exchange, Inc. Securities registered pursuant to Section 12(g) of the Act: Title of Class None Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES x NO Aggregate market value of the voting stock held by non-affiliates of the registrant as of March 15, 1994: $448,741,224 Common Shares outstanding at March 15, 1994: 10,345,619 shares Document Incorporated by Reference Part in Form 10-K Notice of 1994 Annual Meeting, Proxy State- ment and 1993 Financial Information, dated April 1, 1994 (pages as specified herein) Parts I, II and III PAGE 2 COMMONWEALTH ENERGY SYSTEM The undersigned registrant hereby amends the following item of its Annual Report for 1993 on Form 10-K as set forth in the page attached hereto: Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K Exhibit 99. Additional Exhibit: Pursuant to Rule 15(d)-21 of the Securities Exchange Act of 1934, information, financial statements and exhibits required in Form 11-K with respect to: (1) Employees Savings Plan of Commonwealth Energy System and Subsidiary Companies Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. COMMONWEALTH ENERGY SYSTEM (Registrant) By JOHN A. WHALEN John A. Whalen, Comptroller Date: April 27, 1994 PAGE 3 INFORMATION REQUIRED BY FORM 11-K ANNUAL REPORT For the Fiscal Year Ended December 31, 1993 A. Full title of plan: Employees Savings Plan of Commonwealth Energy System and Subsidiary Companies (hereinafter referred to as the "Plan"). B. Name of issuer of the securities held pursuant to the Plan and the address of its principal executive office: Commonwealth Energy System One Main Street Cambridge, Massachusetts 02142-9150 Item 1. Financial Statements and Exhibits (a) Financial Statements and Schedules attached hereto: Page Report of Independent Public Accountants 4 Statements of Financial Position at December 31, 1993 and 1992 5 - 10 Statements of Income and Changes in Participants' Equity for the Years Ended December 31, 1993, 1992 and 1991 11 - 19 Notes to Financial Statements 20 - 26 Schedule I, Investments 27 - 30 Schedule II, Allocation of Plan Assets and Liabilities to Investment Programs Not Required Schedule III, Allocation of Plan Income and Changes in Plan Equity to Investment Programs Not Required Schedule IV, Reportable Transactions 31 (b) Exhibits filed herewith: None PAGE 4 Report of Independent Public Accountants To the Savings Plan Board of the Employees Savings Plan of Commonwealth Energy System and Subsidiary Companies: We have audited the accompanying statements of financial position of the EMPLOYEES SAVINGS PLAN OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES as of December 31, 1993 and 1992, and the related statements of income and changes in participants' equity for each of the three years in the period ended December 31, 1993. These financial statements and schedules referred to below are the responsibility of the plan administrator. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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, the financial statements referred to above present fairly, in all material respects, the financial position of the Employees Savings Plan of Commonwealth Energy System and Subsidiary Companies as of December 31, 1993 and 1992, and its income and changes in participants' equity for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. Supplemental Schedules I and IV are presented for purposes of complying with the Securities and Exchange Commission's rules and regulations under the Securities Exchange Act of 1934 and the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 and are not a required part of the basic financial statements. Such schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects, in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN & CO. Boston, Massachusetts, April 15, 1994. PAGE 5 EMPLOYEES SAVINGS PLAN OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES STATEMENT OF FINANCIAL POSITION DECEMBER 31, 1993 (Page 1 of 3) CES Vanguard Common Share Money Market Total Fund Reserves INVESTMENTS, at quoted market value (Schedule I): Common Shares of Commonwealth Energy System $ 76 129 967 $76 129 967 $ - Mutual funds 105 015 523 262 203 25 986 113 181 145 490 76 392 170 25 986 113 OTHER ASSETS: Loans to participants 8 420 027 - - Receivables - Loan repayments 82 532 30 533 15 797 Interest 1 182 1 182 - Contributions 291 064 102 461 47 143 8 794 805 134 176 62 940 PARTICIPANTS' EQUITY $189 940 295 $76 526 346 $26 049 053 PAGE 6 EMPLOYEES SAVINGS PLAN OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES STATEMENT OF FINANCIAL POSITION DECEMBER 31, 1993 (Page 2 of 3) Vanguard Vanguard Vanguard Windsor II Short-term Wellington Fund Bond Fund Fund INVESTMENTS, at quoted market value (Schedule I): Common Shares of Commonwealth Energy System $ - $ - $ - Mutual funds 48 605 330 6 282 019 20 502 435 48 605 330 6 282 019 20 502 435 OTHER ASSETS: Loans to participants - - - Receivables - Loan repayments 20 230 2 529 12 192 Interest - - - Contributions 79 483 10 363 46 447 99 713 12 892 58 639 PARTICIPANTS' EQUITY $48 705 043 $ 6 294 911 $20 561 074 PAGE 7 EMPLOYEES SAVINGS PLAN OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES STATEMENT OF FINANCIAL POSITION DECEMBER 31, 1993 (Page 3 of 3) Vanguard Vanguard International Extended Growth Market Loan Portfolio Portfolio Fund INVESTMENTS, at quoted market value (Schedule I): Common Shares of Commonwealth Energy System $ - $ - $ - Mutual funds 2 776 377 601 046 - 2 776 377 601 046 - OTHER ASSETS: Loans to participants - - 8 420 027 Receivables - Loan repayments 1 071 180 - Interest - - - Contributions 3 978 1 189 - 5 049 1 369 8 420 027 PARTICIPANTS' EQUITY $ 2 781 426 $ 602 415 $ 8 420 027 The accompanying notes are an integral part of these financial statements. PAGE 8 EMPLOYEES SAVINGS PLAN OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES STATEMENT OF FINANCIAL POSITION DECEMBER 31, 1992 (Page 1 of 3) CES Vanguard Common Share Money Market Total Fund Reserves INVESTMENTS, at quoted market value (Schedule I): Common Shares of Commonwealth Energy System $ 80 062 921 $80 062 921 $ - Mutual funds 91 143 312 333 620 30 176 453 171 206 233 80 396 541 30 176 453 OTHER ASSETS: Loans to participants 7 977 734 - - Receivables - Loan repayments 30 434 11 764 6 307 Interest 561 561 - Contributions 277 501 103 560 55 076 8 286 230 115 885 61 383 PARTICIPANTS' EQUITY $179 492 463 $80 512 426 $30 237 836 PAGE 9 EMPLOYEES SAVINGS PLAN OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES STATEMENT OF FINANCIAL POSITION DECEMBER 31, 1992 (Page 2 of 3) Vanguard Vanguard Vanguard Windsor II Short-term Wellington Fund Bond Fund Fund INVESTMENTS, at quoted market value (Schedule I): Common Shares of Commonwealth Energy System $ - $ - $ - Mutual funds 42 130 976 5 865 825 12 636 438 42 130 976 5 865 825 12 636 438 OTHER ASSETS: Loans to participants - - - Receivables - Loan repayments 7 262 1 072 4 029 Interest - - - Contributions 69 378 10 267 39 220 76 640 11 339 43 249 PARTICIPANTS' EQUITY $42 207 616 $ 5 877 164 $12 679 687 PAGE 10 EMPLOYEES SAVINGS PLAN OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES STATEMENT OF FINANCIAL POSITION DECEMBER 31, 1992 (Page 3 of 3) Loan Fund INVESTMENTS, at quoted market value (Schedule I): Common Shares of Commonwealth Energy System $ - Mutual funds - - OTHER ASSETS: Loans to participants 7 977 734 Receivables - Loan repayments - Interest - Contributions 7 977 734 7 977 734 PARTICIPANTS' EQUITY $ 7 977 734 The accompanying notes are an integral part of these financial statements. PAGE 11 EMPLOYEES SAVINGS PLAN OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES STATEMENT OF INCOME AND CHANGES IN PARTICIPANTS' EQUITY DECEMBER 31, 1993 (Page 1 of 3) CES Vanguard Common Share Money Market Total Fund Reserves NET INVESTMENTS INCOME: Cash dividends - Common Shares of Commonwealth Energy System $ 5 121 101 $ 5 121 101 $ - Registered investment company shares 5 286 472 10 312 875 818 Interest on loans 629 576 - - 11 037 149 5 131 413 875 818 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 11 065 753 6 888 012 - 22 102 902 12 019 425 875 818 CONTRIBUTIONS: Employee 8 107 135 2 713 918 1 335 111 Employer 4 245 181 1 462 206 749 377 12 352 316 4 176 124 2 084 488 DISTRIBUTIONS TO PARTICIPANTS 24 001 390 7 900 315 6 817 531 TRANSFERS BETWEEN FUNDS - (12 281 314) (331 558) PURCHASE FEES (5 996) - - Net change during year 10 447 832 (3 986 080) (4 188 783) PARTICIPANTS' EQUITY, beginning of year 179 492 463 80 512 426 30 237 836 PARTICIPANTS' EQUITY, end of year $189 940 295 $76 526 346 $26 049 053 PAGE 12 EMPLOYEES SAVINGS PLAN OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES STATEMENT OF INCOME AND CHANGES IN PARTICIPANTS' EQUITY DECEMBER 31, 1993 (Page 2 of 3) Vanguard Vanguard Vanguard Windsor II Short-term Wellington Fund Bond Fund Fund NET INVESTMENTS INCOME: Cash dividends - Common Shares of Commonwealth Energy System $ - $ - $ - Registered investment company shares 2 770 033 411 151 1 184 562 Interest on loans - - - 2 770 033 411 151 1 184 562 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 3 046 550 9 202 936 094 5 816 583 420 353 2 120 656 CONTRIBUTIONS: Employee 2 301 097 319 714 1 398 249 Employer 1 135 390 171 711 709 041 3 436 487 491 425 2 107 290 DISTRIBUTIONS TO PARTICIPANTS 5 384 634 1 169 334 2 517 355 TRANSFERS BETWEEN FUNDS 2 628 991 675 303 6 170 796 PURCHASE FEES - - - Net change during year 6 497 427 417 747 7 881 387 PARTICIPANTS' EQUITY, beginning of year 42 207 616 5 877 164 12 679 687 PARTICIPANTS' EQUITY, end of year $ 48 705 043 $ 6 294 911 $20 561 074 PAGE 13 EMPLOYEES SAVINGS PLAN OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES STATEMENT OF INCOME AND CHANGES IN PARTICIPANTS' EQUITY DECEMBER 31, 1993 (Page 3 of 3) Vanguard Vanguard International Extended Growth Market Loan Portfolio Portfolio Fund NET INVESTMENTS INCOME: Cash dividends - Common shares of Commonwealth Energy System $ - $ - $ - Registered investment company shares 22 121 12 475 - Interest on loans - - 629 576 22 121 12 475 629 576 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 190 765 (4 870) - 212 886 7 605 629 576 CONTRIBUTIONS: Employee 27 804 11 242 - Employer 12 183 5 273 - 39 987 16 515 - DISTRIBUTIONS TO PARTICIPANTS - - 212 221 TRANSFERS BETWEEN FUNDS 2 528 553 584 291 24 938 PURCHASE FEES - (5 996) - Net change during year 2 781 426 602 415 442 293 PARTICIPANTS' EQUITY, beginning of year - - 7 977 734 PARTICIPANTS' EQUITY, end of year $ 2 781 426 $ 602 415 $ 8 420 027 The accompanying notes are an integral part of these financial statements. PAGE 14 EMPLOYEES SAVINGS PLAN OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES STATEMENT OF INCOME AND CHANGES IN PARTICIPANTS' EQUITY DECEMBER 31, 1992 (Page 1 of 3) CES Vanguard Common Share Money Market Total Fund Reserves NET INVESTMENTS INCOME: Cash dividends - Common shares of Commonwealth Energy System $ 5 629 229 $ 5 629 229 $ - Registered investment company shares 3 913 994 24 445 1 060 480 Interest on loans 627 514 - - 10 170 737 5 653 674 1 060 480 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 9 156 891 6 545 520 - 19 327 628 12 199 194 1 060 480 CONTRIBUTIONS: Employee 8 062 328 2 925 048 1 600 519 Employer 4 134 469 1 523 359 861 463 12 196 797 4 448 407 2 461 982 DISTRIBUTIONS TO PARTICIPANTS 8 594 499 2 749 359 2 891 671 TRANSFERS BETWEEN FUNDS - (9 427 585) 774 201 Net change during year 22 929 926 4 470 657 1 404 992 PARTICIPANTS' EQUITY, beginning of year 156 562 537 76 041 769 28 832 844 PARTICIPANTS' EQUITY, end of year $179 492 463 $80 512 426 $30 237 836 PAGE 15 EMPLOYEES SAVINGS PLAN OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES STATEMENT OF INCOME AND CHANGES IN PARTICIPANTS' EQUITY DECEMBER 31, 1992 (Page 2 of 3) Vanguard Vanguard Vanguard Windsor II Short-term Wellington Fund Bond Fund Fund NET INVESTMENTS INCOME: Cash dividends - Common shares of Commonwealth Energy System $ - $ - $ - Registered investment company shares 1 851 631 381 080 596 358 Interest on loans - - - 1 851 631 381 080 596 358 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 2 487 334 (70 941) 194 978 4 338 965 310 139 791 336 CONTRIBUTIONS Employee 2 046 627 294 106 1 196 028 Employer 996 633 153 924 599 090 3 043 260 448 030 1 795 118 DISTRIBUTIONS TO PARTICIPANTS 1 854 109 294 672 657 933 TRANSFERS BETWEEN FUNDS 1 347 578 1 866 509 3 828 481 Net change during year 6 875 694 2 330 006 5 757 002 PARTICIPANTS' EQUITY, beginning of year 35 331 922 3 547 158 6 922 685 PARTICIPANTS' EQUITY, end of year $ 42 207 616 $ 5 877 164 $12 679 687 PAGE 16 EMPLOYEES SAVINGS PLAN OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES STATEMENT OF INCOME AND CHANGES IN PARTICIPANTS' EQUITY DECEMBER 31, 1992 (Page 3 of 3) Loan Fund NET INVESTMENTS INCOME: Cash dividends - Common shares of Commonwealth Energy System $ - Registered investment company shares - Interest on loans 627 514 627 514 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS - 627 514 CONTRIBUTIONS: Employee - Employer - - DISTRIBUTIONS TO PARTICIPANTS 146 755 TRANSFERS BETWEEN FUNDS 1 610 816 Net change during year 2 091 575 PARTICIPANTS' EQUITY, beginning of year 5 886 159 PARTICIPANTS' EQUITY, end of year $ 7 977 734 The accompanying notes are an integral part of these financial statements. PAGE 17 EMPLOYEES SAVINGS PLAN OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES STATEMENT OF INCOME AND CHANGES IN PARTICIPANTS' EQUITY DECEMBER 31, 1991 (Page 1 of 3) CES Vanguard Common Share Money Market Total Fund Reserves NET INVESTMENTS INCOME: Cash dividends - Common shares of Commonwealth Energy System $ 5 557 689 $ 5 557 689 $ - Registered investment company shares 4 646 068 56 572 1 721 178 Interest on loans 547 180 - - 10 750 937 5 614 261 1 721 178 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 17 784 002 11 434 407 - 28 534 939 17 048 668 1 721 178 CONTRIBUTIONS: Employee 7 649 713 2 894 385 1 804 715 Employer 3 902 661 1 484 246 943 612 11 552 374 4 378 631 2 748 327 DISTRIBUTIONS TO PARTICIPANTS 13 773 717 5 753 278 4 800 624 TRANSFERS BETWEEN FUNDS - (4 011 536) 251 547 Net change during year 26 313 596 11 662 485 (79 572) PARTICIPANTS' EQUITY, beginning of year 130 248 941 64 379 284 28 912 416 PARTICIPANTS' EQUITY, end of year $156 562 537 $76 041 769 $28 832 844 PAGE 18 EMPLOYEES SAVINGS PLAN OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES STATEMENT OF INCOME AND CHANGES IN PARTICIPANTS' EQUITY DECEMBER 31, 1991 (Page 2 of 3) Vanguard Vanguard Vanguard Windsor II Short-term Wellington Fund Bond Fund Fund NET INVESTMENTS INCOME: Cash dividends - Common shares of Commonwealth Energy System $ - $ - $ - Registered investment company shares 2 337 627 167 106 363 585 Interest on loans - - - 2 337 627 167 106 363 585 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 5 550 112 120 885 678 598 7 887 739 287 991 1 042 183 CONTRIBUTIONS: Employee 1 750 632 243 253 956 728 Employer 855 465 135 804 483 534 2 606 097 379 057 1 440 262 DISTRIBUTIONS TO PARTICIPANTS 2 728 857 139 861 230 312 TRANSFERS BETWEEN FUNDS (54 523) 1 579 054 1 376 605 Net change during year 7 710 456 2 106 241 3 628 738 PARTICIPANTS' EQUITY, beginning of year 27 621 466 1 440 917 3 293 947 PARTICIPANTS' EQUITY, end of year $ 35 331 922 $ 3 547 158 $ 6 922 685 PAGE 19 EMPLOYEES SAVINGS PLAN OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES STATEMENT OF INCOME AND CHANGES IN PARTICIPANTS' EQUITY DECEMBER 31, 1991 (Page 3 of 3) Loan Fund NET INVESTMENTS INCOME: Cash dividends - Commonwealth Energy System common shares $ - Registered investment company shares - Interest on loans 547 180 547 180 REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS - 547 180 CONTRIBUTIONS: Employee - Employer - - DISTRIBUTIONS TO PARTICIPANTS 120 785 TRANSFERS BETWEEN FUNDS 858 853 Net change during year 1 285 248 PARTICIPANTS' EQUITY, beginning of year 4 600 911 PARTICIPANTS' EQUITY, end of year $ 5 886 159 The accompanying notes are an integral part of these financial statements. PAGE 20 NOTES TO FINANCIAL STATEMENTS (1) General The Employees Savings Plan of Commonwealth Energy System and Subsidiary Companies (the Plan) was originally created in 1962 by Commonwealth Energy System (the System) and its subsidiaries for the benefit of its employees. The Plan has been amended or restated from time to time thereafter. At December 31, 1993, there were 2,338 participants in the Plan; of these, 2,115 were participating in the CES Common Share Fund, 1,464 in the Vanguard Money Market Reserves Fund, 1,888 in the Vanguard Windsor II Fund, 555 in the Vanguard Short-Term Bond Fund, 1,320 in the Vanguard Wellington Fund, 187 in the Vanguard International Growth Portfolio, 82 in the Vanguard Extended Market Portfolio and 1,042 in the Loan Fund. See Note 4 for additional information on current investment options. A three-member Savings Plan Board (the Board) has been appointed by the Trustees of the System and by the directors of its subsidiary companies and is responsible (except for the duties specifically vested in the Plan Trustee) for the administration of the Plan. The Board has selected Vanguard Fiduciary Trust Company of Valley Forge, PA to act as Trustee for the Plan. The Trustee retains the Plan assets and provides records of Plan activity to a Plan Agent designated by the Board. (2) Significant Accounting Policies Basis of Accounting The Trustee's records are maintained on a cash basis. The accompanying financial statements include all adjustments necessary to present the statements on an accrual basis of accounting. Quoted market prices are used to value the CES Common Share Fund and the various Vanguard funds. In addition, certain prior period amounts are reclassified from time to time to conform with the presentation used in the current year's financial statements. Federal Income Taxes The Plan is subject to the Employee Retirement Income Security Act of 1974 and certain provisions of the Internal Revenue Code ("IRC"). The Plan is intended to qualify under Section 401(a) of the Code and the Internal Revenue Service has issued a favorable determination letter ruling that the plan was designed in accordance with applicable IRC requirements as of the date of its letter. Management believes that the Plan is currently designed and operated in accordance with applicable IRC requirements. As a result, the Plan has not provided for Federal income taxes. Generally, participants are not subject to taxes on contributions or the earned income until such time as a distribution is made. The taxability of a distribution to a participant will depend on the form of payment. Expenses Brokerage fees, commissions, stock transfer taxes and other expenses in connection with the purchase, sale or distribution of securities for each investment fund may be charged to such fund. Any expense of litigation may be paid by the Trustee and charged to the entire Trust Fund or to the investment PAGE 21 NOTES TO FINANCIAL STATEMENTS (Continued) fund or funds to which the litigation relates. All other expenses and charges incurred in the administration of the Plan are paid by the participating system companies. Realized Gain (Loss) on Investments Sold or Distributed Pursuant to rules issued by the Department of Labor (DOL), realized gain (loss) was computed comparing the market value of the securities distributed or sold with the market value of said securities at the beginning of the Plan year. The CES Common Share Fund realized gains (losses) of $1,199,274, $128,246 and ($76,847) on the distribution of 296,171, 145,177 and 118,591 Common Shares of Commonwealth Energy System (the System) in 1993, 1992 and 1991, respectively. A summary of realized gains (losses) on securities sold or distributed during the three-year period ended December 31, 1993 is set forth below: Quoted Market Price Quoted Market Price Gain or Proceeds Beginning of Year (Loss) 1993 CES Common Share Fund $13 823 563 $12 624 289 $1 199 274 Vanguard Money Market Reserves 16 089 894 16 089 894 - Vanguard Windsor II Fund 11 755 590 11 121 195 634 395 Vanguard Short-Term Bond Fund 3 979 976 3 959 379 20 597 Vanguard Wellington Fund 4 942 133 4 740 977 201 156 Vanguard International Growth Portfolio* 180 199 167 669 12 530 Vanguard Extended Market Portfolio* 6 068 6 067 1 $50 777 423 $48 709 470 $2 067 953 1992 CES Common Share Fund $ 5 826 443 $ 5 698 197 $ 128 246 Vanguard Money Market Reserves 9 740 825 9 740 825 - Vanguard Windsor II Fund 6 016 480 5 847 939 168 541 Vanguard Short-Term Bond Fund 2 174 410 2 191 316 (16 906) Vanguard Wellington Fund 1 847 942 1 843 462 4 480 $25 606 100 $25 321 739 $ 284 361 1991 CES Common Share Fund $ 3 866 304 $ 3 943 151 $ (76 847) Vanguard Money Market Reserves 9 779 863 9 779 863 - Vanguard Windsor II Fund 6 287 854 5 559 545 728 309 Vanguard Short-Term Bond Fund 469 994 461 959 8 035 Vanguard Wellington Fund 881 083 828 539 52 544 $21 285 098 $20 573 057 $ 712 041 * Available to Participants since October 1, 1993 PAGE 22 NOTES TO FINANCIAL STATEMENTS (Continued) Unrealized Appreciation (Depreciation) of Investments The Plan provides that the market value of each investment fund shall be determined by the Trustee each quarter. Pursuant to the rules issued by the DOL, unrealized appreciation (depreciation) shall equal the difference between market value at the beginning of the Plan year and the quoted market price of the investments at the applicable valuation date in determining the value of each fund. The change in unrealized appreciation (depreciation) during the years ended December 31, 1993, 1992 and 1991 is set forth below: Unrealized Appreciation Beginning of Year End of Year (Depreciation) 1993 CES Common Share Fund $38 813 565 $44 502 303 $ 5 688 738 Vanguard Windsor II Fund 6 297 836 8 709 991 2 412 155 Vanguard Short-Term Bond Fund 74 378 62 983 (11 395) Vanguard Wellington Fund 635 925 1 370 863 734 938 Vanguard International Growth Portfolio* - 178 235 178 235 Vanguard Extended Market Portfolio* - (4 871) (4 871) $45 821 704 $54 819 504 $ 8 997 800 1992 CES Common Share Fund $32 396 291 $38 813 565 $ 6 417 274 Vanguard Windsor II Fund 3 979 043 6 297 836 2 318 793 Vanguard Short-Term Bond Fund 128 413 74 378 (54 035) Vanguard Wellington Fund 445 427 635 925 190 498 $36 949 174 $45 821 704 $ 8 872 530 1991 CES Common Share Fund $20 885 037 $32 396 291 $11 511 254 Vanguard Windsor II Fund (842 760) 3 979 043 4 821 803 Vanguard Short-Term Bond Fund 15 563 128 413 112 850 Vanguard Wellington Fund (180 627) 445 427 626 054 $19 877 213 $36 949 174 $17 071 961 * Available to Participants since October 1, 1993 Income Recognition Income of the CES Common Share Fund consists primarily of dividends on the Common Shares of the System. The allocation of each fund's earnings to a participant's account is based upon the percent of the participant's units in the funds. Earnings are allocated monthly. PAGE 23 NOTES TO FINANCIAL STATEMENTS (Continued) (3) Participating Companies and Contributions Employees are eligible to join the Plan after one year of service. Generally, employees electing to participate in the Plan are required to make contributions of at least 1% but not more than 16% of their compensation as defined in the Plan. Each participating system company contributes on behalf of each of its participating employees an amount equal to the participant's contributions up to a maximum of 4% of the employee's basic compensation rate. Effective January 1, 1993, the maximum participating system company contribution was increased to 5% for those non-bargaining employees who were less than 40 years of age or did not have 12 years of service at that date and, therefore, are no longer eligible for postretirement health benefits. In April 1993, certain bargaining employees also became eligible for the 5% system company matching contribution. The additional match has been made available to defray the cost of postretirement benefit costs to these employees. All employees in the Plan are participating under Section 401(k) of the Code and are fully vested. Effective January 1, 1993, those participants no longer eligible for postretirement health benefits may elect, on an annual basis, to contribute up to 40 percent of their system company matching contribution to a Retirement Health Benefit Account (RHBA). The use of RHBA funds is limited to paying eligible health insurance premiums. The participating system companies and contributions for the years ended December 31, 1993, 1992 and 1991 are summarized below: Employee Contributions 1993 1992 1991 Cambridge Electric Light Co. $ 670 016 $ 671 768 $ 630 038 Canal Electric Co. 558 858 485 682 468 981 Commonwealth Electric Co. 3 266 376 3 481 003 3 260 930 Commonwealth Gas Co. 2 760 996 2 542 710 2 415 208 COM/Energy Services Co. 850 889 881 165 874 556 $8 107 135 $8 062 328 $7 649 713 System Company Contributions 1993 1992 1991 Cambridge Electric Light Co. $ 320 738 $ 326 744 $ 315 683 Canal Electric Co. 234 040 196 875 184 668 Commonwealth Electric Co. 1 699 786 1 808 449 1 703 220 Commonwealth Gas Co. 1 443 731 1 283 655 1 207 243 COM/Energy Services Co. 546 886 518 746 491 847 $4 245 181 $4 134 469 $3 902 661 PAGE 24 NOTES TO FINANCIAL STATEMENTS (Continued) (4) Investments Participating employees must direct that contributions be invested in one or more of the following funds subject to the qualification that not more than 50% may be invested in the CES Common Share Fund: CES Common Share Fund - Consisting of Common Shares of Beneficial Interest of Commonwealth Energy System purchased on the open market or through the System's Dividend Reinvestment and Common Share Purchase Plan. The System's Common Shares may also be acquired directly from the System, if such Common Shares are made available by the Board of Trustees of the System, based on the fair market value at the time of acquisition. The Common Shares are acquired with employee contributions and participating system company contributions, dividends and interest income. The Trustee, at its discretion, will determine the manner in which such shares may be acquired. Vanguard Money Market Reserves - A mutual fund which consists of high quality money market instruments that mature in one year or less; such money market instruments include negotiable certificates of deposit, bankers' acceptances, commercial paper and short-term corporate obligations. Vanguard Windsor II Fund - A mutual fund which consists of common stocks (other than CES), which in the opinion of the investment adviser to the Windsor II Fund, are undervalued in the marketplace and may offer above average income yields and below average price-earnings ratios relative to the stock market in general. Vanguard Short-Term Bond Fund - A mutual fund which consists of investment grade bonds with maturities ranging from less than one year to four years and may include U.S. Treasury and agency obligations, short and intermediate-term corporate debt securities, bank obligations (time deposits, certificates of deposit and bankers' acceptances), commercial paper and repurchase agreements. Vanguard Wellington Fund - A mutual fund which follows a "balanced investment plan" with 60%-70% of its assets invested in common stocks (other than Common Shares of CES or the common stock of any of its subsidiaries) and the remainder invested in fixed income securities. The fixed income securities are held for relative stability of income and principal while common stocks are selected principally on the basis of capital appreciation and income growth. PAGE 25 NOTES TO FINANCIAL STATEMENTS (Continued) Vanguard International Growth Fund - A mutual fund which consists of a diversified group of securities of corporations located outside the United States. The portfolio includes common stocks of seasoned foreign companies with the potential for capital appreciation. Vanguard Extended Market Portfolio - A mutual fund which attempts to duplicate the investment results of the broad universe of publicly traded United States stocks not included in the S&P 500 Index. The Extended Market Portfolio is a market-capitalization- weighted "benchmark portfolio" consisting of more than 4,500 regularly traded stocks that are represented by the Wilshire 4500 Index. The Portfolio will invest in a sample of stocks in the benchmark portfolio selected on the basis of market capitalization, industry weightings and fundamental investment characteristics. Participants are charged a 1% transaction fee on each purchase of shares. (5) Party in Interest Commonwealth Energy System is a "party in interest" as that term is defined in Section 3.14 of the Employee Retirement Income Security Act of 1974. Certain transactions involving the acquisition and distribution of securities, are made at the direction of participants in the Plan who elect to participate in the CES Common Share Fund as one of their investment options. These transactions are reflected in the accompanying financial statements at market value and are net of brokerage commissions relating to the acquisition of these securities. During the years ended December 31, 1993, 1992 and 1991, the Plan Trustee purchased Common Shares of Commonwealth Energy System, made distributions of Common Shares to participants and sold Common Shares to accommodate cash distributions as follows: Common Shares of Commonwealth Energy System Shares Shares Sold and Distributed Purchased Cost Shares Aggregate Value 1993 63 915 $3 031 010 296 171 $7 302 526 1992 86 700 3 314 560 145 177 3 503 717 1991 109 097 3 725 969 118 591 2 765 466 Vanguard Fiduciary Trust Company also represents a party in interest to the Plan due to the Plan's investments in various Vanguard Funds. PAGE 26 NOTES TO FINANCIAL STATEMENTS (Continued) (6) Loans to Plan Participants Participants may request a loan from the Plan. The amount of the loan shall not exceed the lesser of $50,000 or fifty percent (50%) of the balance of the participant's total value in the various funds of the Plan. Effective January 1, 1993 the minimum loan amount was reduced to $1,000 (formerly $2,500). The interest rate on a loan is based on the prime rate at Bank of Boston on the first day of the quarter preceding the loan request plus one percent. Participants may choose a repayment period of one to five years. A participant may not have more than one outstanding loan at any time. PAGE 27 Schedule I EMPLOYEES SAVINGS PLAN OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES INVESTMENTS DECEMBER 31, 1993 Market Value Name of Issuer and Number of at End of Title of Issue Shares or Units Cost Period CES COMMON SHARE FUND: Common Shares of Beneficial Interest - Commonwealth Energy System* 1 646 053 $ 41 450 849 $ 76 129 967 Temporary Investments - Vanguard Money Market Reserves* 262 203 262 203 262 203 41 713 052 76 392 170 VANGUARD FUNDS*: Money Market Reserves 25 986 113 25 986 113 25 986 113 Windsor II 2 852 425 41 701 321 48 605 330 Short-Term Bonds 576 332 6 265 580 6 282 019 Wellington 1 005 021 19 281 192 20 502 435 International Growth Portfolio 205 505 2 598 141 2 776 377 Extended Market Portfolio 30 934 605 916 601 046 Total Investments $138 151 315 $181 145 490 Loans to Participants $8 420 027 $8 420 027 * Represent parties in interest to the Plan The accompanying notes are an integral part of this schedule. PAGE 28 Schedule I (Continued) EMPLOYEES SAVINGS PLAN OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES INVESTMENTS DECEMBER 31, 1993 Note: The CES Common Share Fund requires investment in Common Shares of Commonwealth Energy System. However, funds are invested in Van- guard Money Market Reserves on a short-term basis pending the purchase of CES Common Shares or distribution to participants. The remaining investment options require investment in the appropriate Vanguard mutual fund for which each option is named. Percentage of quoted market price over cost: CES Common Share Fund 83.6% Vanguard Money Market Reserves - Vanguard Windsor II Fund 16.6 Vanguard Short-Term Bond Fund 0.3 Vanguard Wellington Fund 6.3 Vanguard International Growth Portfolio 6.9 Vanguard Extended Market Portfolio (0.8) The Plan Trustee accounts for members' interests in the mutual funds available as investment options on a unit basis. The Plan Trustee also uses a unit basis in accounting for the CES Common Share Fund. At December 31, 1993 the value per unit of each of the investment options was as follows: Investment Option Unit Value CES Common Share Fund $18.65 Vanguard Money Market Reserves 1.00 Vanguard Windsor II Fund 17.04 Vanguard Short-Term Bond Fund 10.90 Vanguard Wellington Fund 20.40 Vanguard International Growth Portfolio 13.51 Vanguard Extended Market Portfolio 19.43 The closing market price of the System's Common Shares as listed on the New York Stock Exchange composite transactions was $46.25, $42.625 and $39.25 for December 31, 1993, 1992 and 1991, respectively. The accompanying notes are an integral part of this schedule. PAGE 29 Schedule I EMPLOYEES SAVINGS PLAN OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES INVESTMENTS DECEMBER 31, 1992 Market Value Name of Issuer and Number of at End of Title of Issue Shares or Units Cost Period CES COMMON SHARE FUND: Common Shares of Beneficial Interest - Commonwealth Energy System* 1 878 309 $ 45 722 365 $ 80 062 921 Temporary Investments - Vanguard Money Market Reserves* 333 620 333 620 333 620 46 055 985 80 396 541 VANGUARD FUNDS*: Money Market Reserves 30 176 453 30 176 453 30 176 453 Windsor II 2 648 081 36 713 264 42 130 976 Short-Term Bonds 539 634 5 842 426 5 865 825 Wellington 659 522 12 040 896 12 636 438 Total Investments $130 829 024 $171 206 233 Loans to Participants $7 977 734 $7 977 734 * Represent parties in interest to the Plan The accompanying notes are an integral part of this schedule. PAGE 30 Schedule I (Continued) EMPLOYEES SAVINGS PLAN OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES INVESTMENTS DECEMBER 31, 1992 Note: The CES Common Share Fund requires investment in Common Shares of Commonwealth Energy System. However, funds are invested in Van- guard Money Market Reserves on a short-term basis pending the purchase of CES Common Shares or distribution to participants. The remaining investment options require investment in the appropriate Vanguard mutual fund for which each option is named. Percentage of quoted market price over cost: CES Common Share Fund 75.1% Vanguard Money Market Reserves - Vanguard Windsor II Fund 14.8 Vanguard Short-Term Bond Fund 0.4 Vanguard Wellington Fund 4.9 The Plan Trustee accounts for members' interests in the mutual funds available as investment options on a unit basis. The Plan Trustee also uses a unit basis in accounting for the CES Common Share Fund. At December 31, 1992 the value per unit of each of the investment options was as follows: Investment Option Unit Value CES Common Share Fund $17.23 Vanguard Money Market Reserves 1.00 Vanguard Windsor II Fund 15.91 Vanguard Short-Term Bond Fund 10.87 Vanguard Wellington Fund 19.16 The accompanying notes are an integral part of this schedule. PAGE 31 Schedule IV EMPLOYEES SAVINGS PLAN OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES REPORTABLE TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 1993 Number of Cost of PURCHASES Purchases Asset Vanguard Money Market Reserves* 221 $11 899 554 Vanguard Windsor II Fund* 220 $15 183 395 Vanguard Wellington Fund* 207 $11 872 036 Number of Proceeds Gain on SALES Sales from Sales Sales Vanguard Money Market Reserves* 184 $16 089 894 $ - Vanguard Windsor II Fund* 118 $11 755 590 $ 634 395 Vanguard Wellington Fund* 93 $4 942 133 $ 201 156 * Represent parties in interest to the Plan The accompanying notes are an integral part of this schedule.