<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, 1996
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 $2 par value 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 17, 1997: $473,652,872
Common Shares outstanding at March 17, 1997: 21,529,676 shares
Document Incorporated by Reference Part in Form 10-K
Notice of 1997 Annual Meeting and
Proxy Statement, dated March 28, 1997
(pages as specified herein) Part III
<PAGE 2>
COMMONWEALTH ENERGY SYSTEM
The undersigned registrant hereby amends the following item of its Annual
Report for 1996 on Form 10-K as set forth on page 3.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Exhibit 10. Material Agreements:
Incorporated herein by reference:
10.3.2.2 Second Amendment to the Employees Savings Plan of Commonwealth
Energy System and Subsidiary Companies, as amended and restated
January 1, 1993, effective April 1, 1996 (Exhibit 1 to
Commonwealth Energy System's Form 11-K (April 30, 1996), File
No. 1-7316).
Filed herewith as Exhibit 1:
10.3.2.3 Third Amendment to the Employees Savings Plan of Commonwealth
Energy System and Subsidiary Companies, as amended and restated
January 1, 1993, effective January 1, 1997.
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 JAMES D. RAPPOLI
James D. Rappoli,
Financial Vice President
and Treasurer
Date: April 29, 1997
<PAGE 3>
INFORMATION REQUIRED BY FORM 11-K ANNUAL REPORT
For the Fiscal Year Ended December 31, 1996
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 Net Assets Available for Benefits
at December 31, 1996 and 1995 5 - 12
Statements of Changes in Net Assets Available for Benefits
for the Years Ended December 31, 1996, 1995 and 1994 13 - 23
Notes to Financial Statements 24 - 32
Schedule I - Schedule of Investments at December 31, 1996 33
Schedule II - Schedule of Reportable Transactions
for the Year Ended December 31, 1996 34
(b) Exhibits filed herewith:
Number
in SEC
Exhibit Exhibit
Table Description Number
10 Third Amendment to the Employees Savings Plan 1
of Commonwealth Energy System and Subsidiary
Companies, as amended and restated
January 1, 1993, effective January 1, 1997.
<PAGE 4>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
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 net assets available for
benefits of the EMPLOYEES SAVINGS PLAN OF COMMONWEALTH ENERGY SYSTEM AND
SUBSIDIARY COMPANIES as of December 31, 1996 and 1995, and the related
statements of changes in net assets available for benefits for each of the
three years in the period ended December 31, 1996. These financial statements
and the supplemental schedules referred to below are the responsibility of the
plan administrator. Our responsibility is to express an opinion on these
financial statements and supplemental 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 net assets available for benefits of the
Employees Savings Plan of Commonwealth Energy System and Subsidiary Companies
as of December 31, 1996 and 1995, and its changes in net assets available for
benefits for each of the three years in the period ended December 31, 1996, 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 II are
presented for purposes of additional analysis and are not a required part of
the basic financial statements, but are supplemental information required by
the Department of Labor's Rules and Regulations for Reporting and Disclosure
under the Employee Retirement Income Security Act of 1974. The Fund
Information in the statement of net assets available for benefits and the
statement of changes in net assets available for benefits is presented for
purposes of additional analysis rather than to present the net assets
available for benefits and changes in net assets available for benefits of
each fund. The supplemental schedules and Fund Information 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 LLP
Boston, Massachusetts
April 18, 1997
<PAGE 5>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM
AND SUBSIDIARY COMPANIES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1996
(Page 1 of 5)
Commonwealth Vanguard
Energy System Money Market
Common Share Reserves-Prime
Total Fund Portfolio
Assets
Investments, at quoted market
value (Schedule I):
Common Shares of
Commonwealth Energy System $ 74,929,586 $74,929,586 $ -
Mutual funds 175,881,535 131,517 28,548,919
Total investments 250,811,121 75,061,103 28,548,919
Other assets:
Loans to participants 9,548,801 - -
Receivables -
Loan repayments 47,821 14,099 6,400
Interest 1,548 1,548 -
Contributions 151,177 40,134 16,505
Total other assets 9,749,347 55,781 22,905
Total assets 260,560,468 75,116,884 28,571,824
Liability:
Accounts payable 30,255 30,255 -
Net assets available for
benefits $260,530,213 $75,086,629 $28,571,824
The accompanying notes are an integral part of these financial statements.
<PAGE 6>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM
AND SUBSIDIARY COMPANIES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1996
(Page 2 of 5)
Vanguard
Fixed Income
Securities Fund-
Vanguard Short-Term Vanguard
Windsor II Corporate Wellington
Fund Portfolio Fund
Assets
Investments, at quoted market
value (Schedule I):
Common Shares of
Commonwealth Energy System $ - $ - $ -
Mutual funds 86,105,135 5,726,307 37,062,570
Total investments 86,105,135 5,726,307 37,062,570
Other assets:
Loans to participants - - -
Receivables -
Loan repayments 14,263 934 7,907
Interest - - -
Contributions 46,950 3,701 28,500
Total other assets 61,213 4,635 36,407
Total assets 86,166,348 5,730,942 37,098,977
Liability:
Accounts payable - - -
Net assets available for
benefits $ 86,166,348 $ 5,730,942 $37,098,977
The accompanying notes are an integral part of these financial statements.
<PAGE 7>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM
AND SUBSIDIARY COMPANIES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1996
(Page 3 of 5)
Vanguard
Vanguard Index Trust-
International Extended Vanguard
Growth Market Explorer
Portfolio Portfolio Fund
Assets
Investments, at quoted market
value (Schedule I):
Common Shares of
Commonwealth Energy System $ - $ - $ -
Mutual funds 9,243,462 5,029,383 2,312,633
Total investments 9,243,462 5,029,383 2,312,633
Other assets:
Loans to participants - - -
Receivables -
Loan repayments 2,784 913 299
Interest - - -
Contributions 8,282 4,021 1,854
Total other assets 11,066 4,934 2,153
Total assets 9,254,528 5,034,317 2,314,786
Liability:
Accounts payable - - -
Net assets available for
benefits $ 9,254,528 $ 5,034,317 $ 2,314,786
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 NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1996
(Page 4 of 5)
Vanguard LIFEStrategy Funds-
Conservative Moderate
Income Growth Growth
Portfolio Portfolio Portfilio
Assets
Investments, at quoted market
value (Schedule I):
Common Shares of
Commonwealth Energy System $ - $ - $ -
Mutual funds 264,846 179,641 688,642
Total investments 264,846 179,641 688,642
Other assets:
Loans to participants - - -
Receivables -
Loan repayments 5 - 96
Interest - - -
Contributions 3 86 409
Total other assets 8 86 505
Total assets 264,854 179,727 689,147
Liability:
Accounts payable - - -
Net assets available for
benefits $ 264,854 $ 179,727 $ 689,147
The accompanying notes are an integral part of these financial statements.
<PAGE 9>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM
AND SUBSIDIARY COMPANIES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1996
(Page 5 of 5)
Vanguard
LIFEStrategy
Funds-
Growth Loan
Portfolio Fund
Assets
Investments, at quoted market
value (Schedule I):
Common Shares of
Commonwealth Energy System $ - $ -
Mutual funds 588,480 -
Total investments 588,480 -
Other assets:
Loans to participants - 9,548,801
Receivables -
Loan repayments 121 -
Interest - -
Contributions 732 -
Total other assets 853 9,548,801
Total assets 589,333 9,548,801
Liability:
Accounts payable - -
Net assets available for
benefits $ 589,333 $ 9,548,801
The accompanying notes are an integral part of these financial statements.
<PAGE 10>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM
AND SUBSIDIARY COMPANIES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1995
(Page 1 of 3)
Commonwealth Vanguard
Energy System Money Market
Common Share Reserves-Prime
Total Fund Portfolio
Assets
Investments, at quoted market
value:
Common Shares of
Commonwealth Energy System $ 75,692,483 $75,692,483 $ -
Mutual funds 144,116,194 - 27,312,540
Total investments 219,808,677 75,692,483 27,312,540
Other assets:
Loans to participants 8,557,638 - -
Receivables -
Proceeds from securities sold 98,820 98,820 -
Loan repayments 81,575 25,388 11,951
Interest 591 591 -
Contributions 304,417 86,546 39,883
Total other assets 9,043,041 211,345 51,834
Total assets 228,851,718 75,903,828 27,364,374
Liability:
Accounts payable 164,607 164,607 -
Net assets available for
benefits $228,687,111 $75,739,221 $27,364,374
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 NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1995
(Page 2 of 3)
Vanguard
Fixed Income
Securities Fund-
Vanguard Short-Term Vanguard
Windsor II Corporate Wellington
Fund Portfolio Fund
Assets
Investments, at quoted market
value:
Common Shares of
Commonwealth Energy System $ - $ - $ -
Mutual funds 68,643,492 5,868,083 31,149,835
Total investments 68,643,492 5,868,083 31,149,835
Other assets:
Loans to participants - - -
Receivables -
Proceeds from securities sold - - -
Loan repayments 23,513 2,506 13,122
Interest - - -
Contributions 90,782 8,814 55,539
Total other assets 114,295 11,320 68,661
Total assets 68,757,787 5,879,403 31,218,496
Liability:
Accounts payable - - -
Net assets available for
benefits $ 68,757,787 $ 5,879,403 $31,218,496
The accompanying notes are an integral part of these financial statements.
<PAGE 12>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM
AND SUBSIDIARY COMPANIES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1995
(Page 3 of 3)
Vanguard
Vanguard Index Trust-
International Extended
Growth Market Loan
Portfolio Portfolio Fund
Assets
Investments, at quoted market
value:
Common Shares of
Commonwealth Energy System $ - $ - $ -
Mutual funds 7,290,725 3,851,519 -
Total investments 7,290,725 3,851,519 -
Other assets:
Loans to participants - - 8,557,638
Receivables -
Proceeds from securities sold - - -
Loan repayments 3,776 1,319 -
Interest - - -
Contributions 14,972 7,881 -
Total other assets 18,748 9,200 8,557,638
Total assets 7,309,473 3,860,719 8,557,638
Liability:
Accounts payable - - -
Net assets available for
benefits $ 7,309,473 $ 3,860,719 $8,557,638
The accompanying notes are an integral part of these financial statements.
<PAGE 13>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM
AND SUBSIDIARY COMPANIES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1996
(Page 1 of 5)
Commonwealth Vanguard
Energy System Money Market
Common Share Reserves-Prime
Total Fund Portfolio
Assets
Additions to net assets
attributed to:
Net investment income
Dividends -
Common Shares of
Commonwealth Energy System $ 5,113,157 $ 5,113,157 $ -
Registered investment
company shares 11,654,177 - 1,408,836
Interest on loans 675,349 - -
17,442,683 5,113,157 1,408,836
Realized and unrealized
gain (loss) on investments 17,828,551 3,951,273 -
Contributions:
Employees' 8,294,889 1,975,041 761,184
Employers' 4,053,049 1,039,431 442,636
12,347,938 3,014,472 1,203,820
Total additions, net 47,619,172 12,078,902 2,612,656
Deductions
Deductions from net assets
attributed to:
Benefits paid to participants 15,766,572 3,979,714 4,672,998
Purchase fees 9,498 - -
Total deductions 15,776,070 3,979,714 4,672,998
Net increase (decrease) prior to
interfund transfers 31,843,102 8,099,188 (2,060,342)
Interfund transfers - (8,751,780) 3,267,792
Net increase (decrease) 31,843,102 (652,592) 1,207,450
Net assets available for benefits:
Beginning of year 228,687,111 75,739,221 27,364,374
End of year $260,530,213 $ 75,086,629 $28,571,824
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 CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1996
(Page 2 of 5)
Vanguard
Fixed Income
Securities Fund-
Vanguard Short-Term Vanguard
Windsor II Corporate Wellington
Fund Portfolio Fund
Assets
Additions to net assets
attributed to:
Net investment income
Dividends -
Common Shares of
Commonwealth Energy System $ - $ - $ -
Registered investment
company shares 6,056,337 346,159 2,893,328
Interest on loans - - -
6,056,337 346,159 2,893,328
Realized and unrealized
gain (loss) on investments 10,665,917 (92,444) 2,215,457
Contributions:
Employees' 2,678,605 228,352 1,688,196
Employers' 1,247,197 116,897 783,045
3,925,802 345,249 2,471,241
Total additions, net 20,648,056 598,964 7,580,026
Deductions
Deductions from net assets
attributed to:
Benefits paid to participants 3,941,035 277,681 1,872,076
Purchase fees - - -
Total deductions 3,941,035 277,681 1,872,076
Net increase (decrease) prior to
interfund transfers 16,707,021 321,283 5,707,950
Interfund transfers 701,540 (469,744) 172,531
Net increase (decrease) 17,408,561 (148,461) 5,880,481
Net assets available for benefits:
Beginning of year 68,757,787 5,879,403 31,218,496
End of year $ 86,166,348 $ 5,730,942 $37,098,977
The accompanying notes are an integral part of these financial statements.
<PAGE 15>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM
AND SUBSIDIARY COMPANIES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1996
(Page 3 of 5)
Vanguard
Vanguard Index Trust-
International Extended Vanguard
Growth Market Explorer
Portfolio Portfolio Fund
Assets
Additions to net assets
attributed to:
Net investment income
Dividends -
Common Shares of
Commonwealth Energy System $ - $ - $ -
Registered investment
company shares 396,605 369,401 116,347
Interest on loans - - -
396,605 369,401 116,347
Realized and unrealized
gain (loss) on investments 787,700 345,278 (57,811)
Contributions:
Employees' 569,446 277,279 85,954
Employers' 255,699 119,339 36,125
825,145 396,618 122,079
Total additions, net 2,009,450 1,111,297 180,615
Deductions
Deductions from net assets
attributed to:
Benefits paid to participants 289,952 363,550 77,579
Purchase fees - 9,498 -
Total deductions 289,952 373,048 77,579
Net increase (decrease) prior to
interfund transfers 1,719,498 738,249 103,036
Interfund transfers 225,557 435,349 2,211,750
Net increase (decrease) 1,945,055 1,173,598 2,314,786
Net assets available for benefits:
Beginning of year 7,309,473 3,860,719 -
End of year $ 9,254,528 $ 5,034,317 $ 2,314,786
The accompanying notes are an integral part of these financial statements.
<PAGE 16>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM
AND SUBSIDIARY COMPANIES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1996
(Page 4 of 5)
Vanguard LIFEStrategy Funds-
Conservative Moderate
Income Growth Growth
Portfolio Portfolio Portfolio
Assets
Additions to net assets
attributed to:
Net investment income
Dividends -
Common Shares of
Commonwealth Energy System $ - $ - $ -
Registered investment
company shares 10,885 8,159 26,245
Interest on loans - - -
10,885 8,159 26,245
Realized and unrealized
gain (loss) on investments (3,056) 767 (3,545)
Contributions:
Employees' 800 1,867 7,950
Employers' 333 645 3,681
1,133 2,512 11,631
Total additions, net 8,962 11,438 34,331
Deductions
Deductions from net assets
attributed to:
Benefits paid to participants - - -
Purchase fees - - -
Total deductions - - -
Net increase (decrease) prior to
interfund transfers 8,962 11,438 34,331
Interfund transfers 255,892 168,289 654,816
Net increase (decrease) 264,854 179,727 689,147
Net assets available for benefits:
Beginning of year - - -
End of year $ 264,854 $ 179,727 $ 689,147
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 CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1996
(Page 5 of 5)
Vanguard
LIFEStrategy
Funds-
Growth Loan
Portfolio Fund
Assets
Additions to net assets
attributed to:
Net investment income
Dividends -
Common Shares of
Commonwealth Energy System $ - $ -
Registered investment
company shares 21,875 -
Interest on loans - 675,349
21,875 675,349
Realized and unrealized
gain (loss) on investments 19,015 -
Contributions:
Employees' 20,215 -
Employers' 8,021 -
28,236 -
Total additions, net 69,126 675,349
Deductions
Deductions from net assets
attributed to:
Benefits paid to participants 79 291,908
Purchase fees - -
Total deductions 79 291,908
Net increase (decrease) prior to
interfund transfers 69,047 383,441
Interfund transfers 520,286 607,722
Net increase (decrease) 589,333 991,163
Net assets available for benefits:
Beginning of year - 8,557,638
End of year $ 589,333 $ 9,548,801
The accompanying notes are an integral part of these financial statements.
<PAGE 18>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM
AND SUBSIDIARY COMPANIES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1995
(Page 1 of 3)
Commonwealth Vanguard
Energy System Money Market
Common Share Reserves-Prime
Total Fund Portfolio
Assets
Additions to net assets
attributed to:
Net investment income:
Dividends -
Common Shares of
Commonwealth Energy System $ 5,219,181 $ 5,219,181 $ -
Registered investment
company shares 7,757,823 - 1,569,762
Interest on loans 647,206 - -
13,624,210 5,219,181 1,569,762
Realized and unrealized
gain on investments 36,861,646 14,531,777 -
Contributions:
Employees' 8,679,077 2,397,221 1,082,525
Employers' 4,392,730 1,270,786 618,671
13,071,807 3,668,007 1,701,196
Total additions, net 63,557,663 23,418,965 3,270,958
Deductions
Deductions from net assets
attributed to:
Benefits paid to participants 16,118,786 3,733,426 6,012,404
Purchase fees 9,949 - -
Total deductions 16,128,735 3,733,426 6,012,404
Net increase (decrease) prior to
interfund transfers 47,428,928 19,685,539 (2,741,446)
Interfund transfers - (6,736,395) 3,354,465
Net increase (decrease) 47,428,928 12,949,144 613,019
Net assets available for benefits:
Beginning of year 181,258,183 62,790,077 26,751,355
End of year $228,687,111 $ 75,739,221 $27,364,374
The accompanying notes are an integral part of these financial statements.
<PAGE 19>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM
AND SUBSIDIARY COMPANIES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1995
(Page 2 of 3)
Vanguard
Fixed Income
Securities Fund-
Vanguard Short-term Vanguard
Windsor II Corporate Wellington
Fund Portfolio Fund
Assets
Additions to net assets
attributed to:
Net investment income:
Dividends -
Common Shares of
Commonwealth Energy System $ - $ - $ -
Registered investment
company shares 4,014,071 352,866 1,517,817
Interest on loans - - -
4,014,071 352,866 1,517,817
Realized and unrealized
gain on investments 14,943,396 316,587 5,839,233
Contributions:
Employees' 2,585,284 263,787 1,628,304
Employers' 1,248,079 141,641 791,068
3,833,363 405,428 2,419,372
Total additions, net 22,790,830 1,074,881 9,776,422
Deductions
Deductions from net assets
attributed to:
Benefits paid to participants 3,000,179 761,498 1,916,861
Purchase fees - - -
Total deductions 3,000,179 761,498 1,916,861
Net increase (decrease) prior to
interfund transfers 19,790,651 313,383 7,859,561
Interfund transfers 216,246 669,127 2,255,071
Net increase (decrease) 20,006,897 982,510 10,114,632
Net assets available for benefits:
Beginning of year 48,750,890 4,896,893 21,103,864
End of year $ 68,757,787 $ 5,879,403 $31,218,496
The accompanying notes are an integral part of these financial statements.
<PAGE 20>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM
AND SUBSIDIARY COMPANIES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1995
(Page 3 of 3)
Vanguard
Vanguard Index Trust-
International Extended
Growth Market Loan
Portfolio Portfolio Fund
Assets
Additions to net assets
attributed to:
Net investment income:
Dividends -
Common Shares of
Commonwealth Energy System $ - $ - $ -
Registered investment
company shares 194,489 108,818 -
Interest on loans - - 647,206
194,489 108,818 647,206
Realized and unrealized
gain on investments 682,362 548,291 -
Contributions:
Employees' 533,713 188,243 -
Employers' 238,129 84,356 -
771,842 272,599 -
Total additions, net 1,648,693 929,708 647,206
Deductions
Deductions from net assets
attributed to:
Benefits paid to participants 337,375 96,424 260,619
Purchase fees - 9,949 -
Total deductions 337,375 106,373 260,619
Net increase (decrease) prior to
interfund transfers 1,311,318 823,335 386,587
Interfund transfers (645,280) 1,377,434 (490,668)
Net increase (decrease) 666,038 2,200,769 (104,081)
Net assets available for benefits:
Beginning of year 6,643,435 1,659,950 8,661,719
End of year $ 7,309,473 $ 3,860,719 $ 8,557,638
The accompanying notes are an integral part of these financial statements.
<PAGE 21>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM
AND SUBSIDIARY COMPANIES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1994
(Page 1 of 3)
Commonwealth Vanguard
Energy System Money Market
Common Share Reserves-Prime
Total Fund Portfolio
Assets
Additions to net assets
attributed to:
Net investment income:
Dividends -
Common Shares of
Commonwealth Energy System $ 4,962,431 $ 4,962,431 $ -
Registered investment
company shares 5,466,258 18,774 1,064,295
Interest on loans 608,616 - -
11,037,305 4,981,205 1,064,295
Realized and unrealized loss
on investments (21,792,845) (16,553,656) -
Contributions:
Employees' 8,417,407 2,540,138 1,112,452
Employers' 4,302,027 1,349,700 633,952
12,719,434 3,889,838 1,746,404
Total additions, net 1,963,894 (7,682,613) 2,810,699
Deductions
Deductions from net assets
attributed to:
Benefits paid to participants 10,632,937 3,105,327 3,916,251
Purchase fees 13,069 - -
Total deductions 10,646,006 3,105,327 3,916,251
Net increase (decrease) prior to
interfund transfers (8,682,112) (10,787,940) (1,105,552)
Interfund transfers - (2,948,329) 1,807,854
Net increase (decrease) (8,682,112) (13,736,269) 702,302
Net assets available for benefits:
Beginning of year 189,940,295 76,526,346 26,049,053
End of year $181,258,183 $ 62,790,077 $26,751,355
The accompanying notes are an integral part of these financial statements.
<PAGE 22>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM
AND SUBSIDIARY COMPANIES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1994
(Page 2 of 3)
Vanguard
Fixed Income
Securities Fund-
Vanguard Short-term Vanguard
Windsor II Corporate Wellington
Fund Portfolio Fund
Assets
Additions to net assets
attributed to:
Net investment income:
Dividends -
Common Shares of
Commonwealth Energy System $ - $ - $ -
Registered investment
company shares 2,991,591 302,990 955,792
Interest on loans - - -
2,991,591 302,990 955,792
Realized and unrealized loss
on investments (3,597,124) (314,911) (1,104,997)
Contributions:
Employees' 2,438,780 272,838 1,540,882
Employers' 1,187,818 147,193 756,284
3,626,598 420,031 2,297,166
Total additions, net 3,021,065 408,110 2,147,961
Deductions
Deductions from net assets
attributed to:
Benefits paid to participants 1,916,160 370,461 1,111,006
Purchase fees - - -
Total deductions 1,916,160 370,461 1,111,006
Net increase (decrease) prior to
interfund transfers 1,104,905 37,649 1,036,955
Interfund transfers (1,059,058) (1,435,667) (494,165)
Net increase (decrease) 45,847 (1,398,018) 542,790
Net assets available for benefits:
Beginning of year 48,705,043 6,294,911 20,561,074
End of year $ 48,750,890 $ 4,896,893 $21,103,864
The accompanying notes are an integral part of these financial statements.
<PAGE 23>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM
AND SUBSIDIARY COMPANIES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1994
(Page 3 of 3)
Vanguard
Vanguard Index Trust-
International Extended
Growth Market Loan
Portfolio Portfolio Fund
Assets
Additions to net assets
attributed to:
Net investment income:
Dividends -
Common Shares of
Commonwealth Energy System $ - $ - $ -
Registered investment
company shares 87,669 45,147 -
Interest on loans - - 608,616
87,669 45,147 608,616
Realized and unrealized loss
on investments (147,733) (74,424) -
Contributions:
Employees' 393,654 118,663 -
Employers' 172,814 54,266 -
566,468 172,929 -
Total additions, net 506,404 143,652 608,616
Deductions
Deductions from net assets
attributed to:
Benefits paid to participants 36,356 19,182 158,194
Purchase fees - 13,069 -
Total deductions 36,356 32,251 158,194
Net increase (decrease) prior to
interfund transfers 470,048 111,401 450,422
Interfund transfers 3,391,961 946,134 (208,730)
Net increase (decrease) 3,862,009 1,057,535 241,692
Net assets available for benefits:
Beginning of year 2,781,426 602,415 8,420,027
End of year $ 6,643,435 $ 1,659,950 $ 8,661,719
The accompanying notes are an integral part of these financial statements.
<PAGE 24>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
(1) General Information
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 to assist employees in adopting a
regular savings program and to help employees by providing additional security
for their retirement. The Plan has been amended or restated from time to time
thereafter. The latest Plan amendment was made as of January 1, 1997.
Since January 1, 1989, Vanguard Fiduciary Trust Company of Valley Forge,
Pennsylvania, has acted as Trustee for the Plan (Plan Trustee). The Trustee
retains the Plan assets and provides records of Plan activity to a Plan Agent
designated by a three-member Savings Plan Board (the Board) that is appointed
by the Trustees of the System and by the directors of its subsidiary
companies. The Board is responsible (except for the duties specifically
vested in the Plan Trustee) for the administration of the Plan.
The term "Participant" shall be deemed to include Members, Inactive
Members or Former Members, all as defined in the Plan.
The Employers participating in the Plan consist of certain subsidiary
companies of Commonwealth Energy System, as follows: Cambridge Electric Light
Company, Canal Electric Company, Commonwealth Gas Company, COM/Energy Services
Company and Commonwealth Electric Company (Employers). The Employers are
wholly-owned by the System.
Each eligible employee, upon joining the Plan, shall specify in 1%
increments his or her contributions and the applicable Employer contributions
to be invested in each of twelve separate Investment Funds (Fund(s)) that are
collectively referred to as the Trust Fund (Trust Fund). Effective April 1,
1996, five additional Investment Funds were made available to Participants.
These Funds include the Vanguard Explorer Fund and the four Vanguard
LIFEStrategy Funds which are designed to match the objectives and risk
tolerances of a Participant's various life stages. These and the Plan's other
Funds are further described in Note 4.
Participants may change their Fund allocation contribution daily by
contacting Vanguard Participant Services. However, not more than 50% of a
Participant's contributions and the applicable Employer contributions may be
allocated to the System's Common Share Fund.
The Plan is subject to provisions of the Employee Retirement Income
Security Act of 1974 (ERISA), the Retirement Equity Act of 1984, the Tax
Reform Act of 1986 and the Omnibus Budget Reconciliation Act of 1993 relating
to plans of this type.
The number of shares of Commonwealth Energy System Common Share Fund
purchased, sold or distributed and held by the Plan at December 31, have been
restated for 1995 and 1994 to reflect a two-for-one stock split that became
effective June 5, 1996.
<PAGE 25>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
(2) Significant Accounting Policies
(a) Principles of Accounting
The Plan 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 System's Common Share Fund and the 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.
(b) Federal Income Taxes
The Plan is subject to certain provisions of the Internal Revenue Code
(IRC) and qualifies under Section 401(a) and 401(k) of the Code. The Internal
Revenue Service (IRS) has issued a favorable determination letter, applicable
to Plan years beginning after January 1, 1993 and for amendments adopted on
January 15, 1993, which indicates that the Plan was designed in accordance
with applicable IRC requirements. 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 distributions are made.
(c) 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 Plan Trustee and charged to the Trust Fund or to the Investment
Fund or Funds to which the litigation relates. Expenses and charges incurred
in the administration of the Plan are generally paid by the Employers. An
administrative fee relating to the issuance of Plan loans under the Loan Fund
is paid by Plan Participants.
(d) Realized Gain (Loss) on Investments Sold or Distributed
Pursuant to rules issued by the Department of Labor (DOL), realized gain
(loss) was computed by 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 System's Common Share Fund realized gains (losses) of
$675,475, $1,027,097 and ($545,138) on the distribution or sale of 453,158,
414,822 and 195,734 System Common Shares in 1996, 1995 and 1994, respectively.
<PAGE 26>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
A summary of realized gains (losses) on securities sold or distributed
during the years ended December 31, 1996, 1995 and 1994 is set forth below:
Quoted
Quoted Market Price
Market Price Beginning of Gain
Investment Funds or Proceeds Year (Loss)
1996
Commonwealth Energy System
Common Share Fund $10,814,896 $10,139,421 $ 675,475
Vanguard Money Market Reserves-
Prime Portfolio 17,818,107 17,818,107 -
Vanguard Windsor II Fund 12,205,764 11,313,017 892,747
Vanguard Fixed Income Securities Fund-
Short-Term Corporate Portfolio 2,170,370 2,196,757 (26,387)
Vanguard Wellington Fund 6,174,856 5,962,417 212,439
Vanguard International Growth
Portfolio 3,791,405 3,632,606 158,799
Vanguard Index Trust-
Extended Market Portfolio 1,433,320 1,371,491 61,829
Vanguard Explorer Fund (1) 1,210,006 1,220,007 (10,001)
Vanguard LIFEStrategy Funds (1)(2) 116,672 114,869 1,803
$55,735,396 $53,768,692 $1,966,704
1995
Commonwealth Energy System
Common Share Fund $ 8,320,160 $ 7,293,063 $1,027,097
Vanguard Money Market Reserves-
Prime Portfolio 13,863,305 13,863,305 -
Vanguard Windsor II Fund 8,895,459 7,758,707 1,136,752
Vanguard Fixed Income Securities Fund-
Short-Term Corporate Portfolio 1,708,442 1,664,677 43,765
Vanguard Wellington Fund 4,213,461 3,690,865 522,596
Vanguard International Growth
Portfolio 3,897,722 3,816,016 81,706
Vanguard Index Trust-
Extended Market Portfolio 450,953 412,569 38,384
$41,349,502 $38,499,202 $2,850,300
1994
Commonwealth Energy System
Common Share Fund $ 3,981,245 $ 4,526,383 $ (545,138)
Vanguard Money Market Reserves-
Prime Portfolio 8,709,357 8,709,357 -
Vanguard Windsor II Fund 6,529,551 6,624,955 (95,404)
Vanguard Fixed Income Securities Fund-
Short-Term Corporate Portfolio 2,231,660 2,287,937 (56,277)
Vanguard Wellington Fund 4,428,748 4,544,012 (115,264)
Vanguard International Growth
Portfolio 1,382,971 1,368,400 14,571
Vanguard Index Trust-
Extended Market Portfolio 221,842 225,328 (3,486)
$27,485,374 $28,286,372 $ (800,998)
(1) Available to Participants since April 1, 1996
(2) Consists of four portfolios - Income, Conservative Growth, Moderate
Growth, and Growth
<PAGE 27>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
(e) 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, 1996, 1995 and 1994 is set forth below:
Unrealized
Beginning Appreciation
Investment Funds of Year End of Year (Depreciation)
1996
Commonwealth Energy System
Common Share Fund $41,998,465 $45,274,263 $ 3,275,798
Vanguard Windsor II Fund 19,014,915 28,788,085 9,773,170
Vanguard Fixed Income
Securities Fund-Short-Term
Corporate Portfolio 77,171 11,114 (66,057)
Vanguard Wellington Fund 5,697,767 7,700,785 2,003,018
Vanguard International
Growth Portfolio 616,587 1,245,488 628,901
Vanguard Index Trust-
Extended Market Portfolio 434,098 717,547 283,449
Vanguard Explorer Fund (1) - (47,810) (47,810)
Vanguard LIFEStrategy Funds (1)(2) - 11,378 11,378
$67,839,003 $83,700,850 $ 15,861,847
1995
Commonwealth Energy System
Common Share Fund $28,493,785 $41,998,465 $ 13,504,680
Vanguard Windsor II Fund 5,208,271 19,014,915 13,806,644
Vanguard Fixed Income
Securities Fund-Short-Term
Corporate Portfolio (195,651) 77,171 272,822
Vanguard Wellington Fund 381,130 5,697,767 5,316,637
Vanguard International
Growth Portfolio 15,931 616,587 600,656
Vanguard Index Trust-
Extended Market Portfolio (75,809) 434,098 509,907
$33,827,657 $67,839,003 $ 34,011,346
1994
Commonwealth Energy System
Common Share Fund $44,502,303 $28,493,785 $(16,008,518)
Vanguard Windsor II 8,709,991 5,208,271 (3,501,720)
Vanguard Fixed Income
Securities Fund-Short-Term
Corporate Portfolio 62,983 (195,651) (258,634)
Vanguard Wellington Fund 1,370,863 381,130 (989,733)
Vanguard International
Growth Portfolio 178,235 15,931 (162,304)
Vanguard Index Trust-
Extended Market Portfolio (4,871) (75,809) (70,938)
$54,819,504 $33,827,657 $(20,991,847)
(1) Available to Participants since April 1, 1996
(2) Consists of four portfolios - Income, Conservative Growth, Moderate
Growth, and Growth
<PAGE 28>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
(f) Income Recognition
Income of the System Common Share Fund consists primarily of dividends on
its Common Shares. The allocation of each Fund's earnings to a Participant's
account is based on the percent of the Participant's units in the Funds and is
allocated daily.
(3) Participating Companies and Contributions
Employees are eligible to join the Plan upon completion of one-thousand
(1,000) hours of service in a twelve-month period and are fully vested upon
Plan entry. Generally, Participants 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. However, the maximum amount a Participant may defer
annually is $9,500 currently (as increased from time to time by the Secretary
of the Treasury in accordance with the cost of living adjustment factor
prescribed in Section 402(g)(1) of the IRC). Compensation is defined to be an
employee's authorized basic salary (including any "lump sum payment" under the
authorized basic compensation pay program), except that in the case of sales
personnel compensated in whole or in part by commissions, compensation shall
be considered to equal 90% of the average compensation earned by such employee
in the preceding four calendar quarters but not less than each employee's
authorized basic compensation. Salary deferral contributions by employees are
made to the Plan by payroll deduction. The Employer contributes an additional
amount equal to each employee's contribution, up to a maximum of four percent
of each employee's basic compensation rate, as previously defined, and up to
five percent for those employees no longer eligible for postretirement health
benefits.
Effective January 1, 1997, any eligible employee may change his or her
contribution percentage as of the first day of any month by contacting
Vanguard Participant Services by the 15th day of the preceding month.
Previously, as of April 1, 1996, changes to the contribution percentage were
only permitted quarterly as of January 1, April 1, July 1 or October 1 in each
calendar year (but not retroactively), at least thirty (30) days prior to the
beginning of any quarter.
<PAGE 29>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
The participating system companies and contributions for the years ended
December 31, 1996, 1995 and 1994 are summarized below:
Employee Contributions
1996 1995 1994
Cambridge Electric Light Company $ 658,553 $ 654,474 $ 688,568
Canal Electric Company 684,476 642,435 609,812
Commonwealth Electric Company 3,814,155 3,687,316 3,482,617
Commonwealth Gas Company 2,134,806 2,749,403 2,759,444
COM/Energy Services Company 1,002,899 945,449 876,966
$8,294,889 $8,679,077 $8,417,407
Employer Contributions
1996 1995 1994
Cambridge Electric Light Company $ 310,388 $ 317,289 $ 325,109
Canal Electric Company 260,990 258,375 249,749
Commonwealth Electric Company 1,788,366 1,813,432 1,745,722
Commonwealth Gas Company 1,108,006 1,439,253 1,447,005
COM/Energy Services Company 585,299 564,381 534,442
$4,053,049 $4,392,730 $4,302,027
Participation by employees is voluntary and, effective January 1, 1997,
may begin as of the first day of any month by notifying the respective
employer in writing on or before the fifteenth day of the preceding month
coincident with or next following eligibility. Previously, salary deferral
changes were only permitted on a quarterly basis. Of the 2,090 current
eligible employees as of December 31, 1996, 2,055 (98.3%) members were
participating in the Plan.
(4) Investments
(a) Investment Funds Descriptions
The following is a description of the twelve Investment Funds in which a
Participant may allocate his or her contributions and matching Employer
contributions:
Common Shares of Commonwealth Energy System - Consists 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 Employer
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-Prime Portfolio - A mutual fund that seeks
the maximum current income that is consistent with preservation of capital and
<PAGE 30>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
liquidity. Value is added primarily by emphasizing specific issues and
sectors of the money market that appear to be attractively priced based upon
historical yield spread relationships. Average maturity for the Fund is
normally maintained in the range of 30-70 days, and the Fund can own no
security with a maturity longer than one year. Such money market instruments
include domestic certificates of deposit and bankers' acceptances, commercial
paper, U.S. Treasury and Government agency securities and repurchase
agreements on such securities and up to 50% of net assets can be invested in
Eurodollar certificates of deposit issued by approved U.S. banks.
Vanguard Windsor II - A mutual fund having a primary objective to provide
long-term growth of capital and income. As a secondary objective, the Fund
seeks a reasonable level of current income. The Fund is a value-oriented
growth and income fund seeking investment opportunities primarily in common
stocks that are out of favor or undervalued.
Vanguard Fixed Income Securities Fund-Short-Term Corporate Portfolio - A
mutual fund which seeks to provide a high level of current income consistent
with a two to three-year average maturity. By investing in relatively short
maturity investment-grade bonds, the Portfolio is designed to help preserve
capital.
Vanguard Wellington Fund - A mutual fund designed to pursue conservation
of capital, reasonable current income and profits without undue risk.
Conservatively structured, the Fund uses a balanced investment approach
allocating 60%-70% of net assets to equities and the remainder to fixed income
securities. The fixed income securities reduce the Fund's exposure to risks
of common stocks while common stocks are selected from dividend-paying medium
and large-capitalization stocks whose prospects are improving. The objective
is to identify these companies before their values are recognized in the
marketplace.
Vanguard International Growth Portfolio - A mutual fund which seeks long-
term capital growth by investing in capital stocks of companies based outside
the United States that have above-average growth potential.
Vanguard Index Trust-Extended Market Portfolio - A mutual fund that
attempts to duplicate the investment results of the broad universe of publicly
traded United States stocks not included in the Standard & Poor's 500
Composite Stock Price 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. Investors are charged a .5%
transaction fee (reduced from 1% on January 1, 1995) on shares purchased that
is paid directly to the Portfolio.
Vanguard Explorer Fund - A mutual fund which seeks long-term growth of
capital by investing primarily in common stocks of small and emerging growth
companies.
<PAGE 31>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
Vanguard LIFEStrategy Funds - Consist of four Portfolios that attempt to
maximize total investment return (i.e. capital growth and income), subject to
different investment guidelines and asset allocation policies. These Funds
invest in other Vanguard mutual funds, representing different combinations of
stocks, bonds and reserves, and reflecting varying degrees of investment risk
and reward. The four Portfolios are:
The Income Portfolio seeks to provide current income.
The Conservative Growth Portfolio seeks to provide current income and low
to moderate growth of capital.
The Moderate Growth Portfolio seeks to provide growth of capital and a
reasonable level of current income.
The Growth Portfolio seeks to provide growth of capital.
(b) Investment Funds Accounts
The Savings Plan Board maintains for each Participant in the Plan, under
each Fund in which all or part of his or her contributions and the applicable
Employer contributions are invested, a separate Member Account that includes a
Pay Deferral Account for current pre-tax contributions. In addition, the
Member Account may include previous after-tax contributions. The Savings Plan
Board also maintains a separate Company Account (for each Participant) that
includes Employer contributions made on behalf of Participants. These
Accounts reflect the portion of each Participant's interest in the Investment
Fund which is attributable to the contributions to such Accounts.
The Plan permits Participants to transfer amounts between Funds on a
daily basis, subject to certain limitations.
The Plan Trustee may, at its discretion, temporarily invest funds
designated for a particular Fund in short-term interest-bearing securities or
may retain certain amounts of cash in each Fund without interest being
credited thereon, for the purpose of more effectively timing the purchase of
investments or liquidity needs for the several Funds. All contributions are
transmitted weekly to the Plan Trustee.
A Participant's choice of contribution allocation to eligible Funds will
continue until changed by such Participant. Investment designations may be
changed once a day by contacting a Vanguard Participant Services
representative.
All interest, dividends, and other income, as well as any cash from the
sale or exchange of securities or other property produced by each of the Funds
will be reinvested in the same Fund which produced such interest, dividends
and other income.
(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
<PAGE 32>
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
NOTES TO FINANCIAL STATEMENTS
securities are made at the direction of participants in the Plan who elect to
participate in the System 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, 1996, 1995 and 1994, 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:
Commonwealth Energy System Common Share Fund
Shares Shares Sold and Distributed
Purchased Cost Shares Aggregate Value
1996 258,747 $9,134,782 453,158 $8,876,352
1995 360,946 7,226,244 414,822 5,706,748
1994 340,408 6,902,558 195,734 2,540,623
The Plan Trustee also represents a party in interest to the Plan due to
the Plan's investments in several Vanguard Funds.
(6) Loans to Plan Participants
Participants may request a loan from the Plan for a minimum amount of
$1,000. 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. 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. For the years 1996, 1995 and 1994, the interest rates ranged
from 7% to 10%.
Effective April 1, 1996, eligible Participants have the option of
securing a second loan from the Plan including requests for up to a thirty
(30) year loan to purchase a primary residence. Prior to that date,
Participants were restricted to one outstanding loan at any one time.
(7) Reportable Transactions
Under ERISA, transactions which, individually or in the aggregate with
the same issuer, exceed 5% of the current value of Plan assets at the
beginning of the Plan year are "reportable transactions." Details of these
reportable transactions are set forth in Schedule II of this report.
<PAGE 33>
Schedule I
Employer Identification
Number: 04-1662010
Plan Number: 091187
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
INVESTMENTS
DECEMBER 31, 1996
Market Value
Name of Issuer and Number of at End of
Title of Issue Shares or Units Cost Period
Commonwealth Energy System
Common Share Fund:
Common Shares of
Beneficial Interest -
Commonwealth Energy System* 3,188,493 $ 46,916,680 $ 74,929,586
Temporary Investments -
Vanguard Money Market
Reserves - Prime Portfolio* 131,517 131,517 131,517
47,048,197 75,061,103
Vanguard Funds*:
Money Market Reserves-
Prime Portfolio 28,548,919 28,548,919 28,548,919
Windsor II 3,613,308 61,766,141 86,105,135
Fixed Income Securities Fund-
Short-Term Corporate Portfolio 532,680 5,743,978 5,726,307
Wellington 1,417,307 30,437,450 37,062,570
International Growth Portfolio 561,572 8,137,088 9,243,462
Index Trust-
Extended Market Portfolio 192,034 4,376,105 5,029,383
Vanguard Explorer Fund 42,962 2,360,443 2,312,633
Vanguard LIFEStrategy Fund -
Income Portfolio 22,930 267,506 264,846
Vanguard LIFEStrategy Fund -
Conservative Growth Portfolio 14,797 179,468 179,641
Vanguard LIFEStrategy Fund -
Moderate Growth Portfolio 53,095 692,187 688,642
Vanguard LIFEStrategy Fund -
Growth Portfolio 43,018 571,071 588,480
Total Vanguard Funds 143,080,356 175,750,018
Total Investments $190,128,553 $250,811,121
Loans to Participants $ 9,548,801 $ 9,548,801
* Represent parties in interest to the Plan
The accompanying notes are an integral part of this schedule.
<PAGE 34>
Schedule II
Employer Identification
Number: 04-1662010
Plan Number: 091187
EMPLOYEES SAVINGS PLAN
OF COMMONWEALTH ENERGY SYSTEM AND SUBSIDIARY COMPANIES
REPORTABLE TRANSACTIONS (a)
FOR THE YEAR ENDED DECEMBER 31, 1996
Number of Cost of
PURCHASES Purchases Asset
Vanguard Money Market Reserves-
Prime Portfolio (b) 210 $19,054,544
Vanguard Windsor II Fund (b) 210 19,001,432
Vanguard Wellington Fund (b) 174 9,872,135
Number of Proceeds Gain on
SALES Sales from Sales Sales
Vanguard Money Market Reserves-
Prime Portfolio (b) 216 $17,818,107 $ -
Vanguard Windsor II Fund (b) 205 12,205,764 892,747
Vanguard Wellington Fund (b) 187 6,174,856 212,439
(a) Fund investments with total transactions exceeding 5% of beginning Plan
assets.
(b) Represent parties in interest to the Plan
The accompanying notes are an integral part of this schedule.