UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS
AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X] For annual reports of employee stock purchase,
savings and similar plans pursuant to Section
15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2000
[ ] Transition report pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number 1-14768
NSTAR 401(k) PLAN
(formerly known as the Employees Savings Plan of
Commonwealth Energy System and Subsidiary Companies)
(Full title of the plan)
NSTAR
(Name of issuer of the securities held pursuant to the plan)
800 Boylston Street, Boston, Massachusetts 02199
(Address of principal executive offices)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Retirement Plans Committee:
In our opinion, the accompanying statements of net assets
available for benefits and the related statements of changes in
net assets available for benefits present fairly, in all material
respects, the net assets available for benefits of the NSTAR
401(k) Plan (the "Plan"), formerly known as the Employees Savings
Plan of Commonwealth Energy System and Subsidiary Companies, at
December 31, 2000 and 1999 and the changes in net assts available
for benefits for the year ended December 31, 2000 in conformity
with accounting principles generally accepted in the United
States of America. These financial statements are the
responsibility of the Plan's management; our responsibility is to
express an opinion on these financial statements based on our
audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the
United States of America, which 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, assessing
the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
Our audits were conducted for the purpose of forming an opinion
on the basic financial statements taken as a whole. The
supplemental schedule of assets held for investment purposes at
December 31, 2000 is presented for the purpose of additional
analysis and is not a required part of the basic financial
statements but is supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of
1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected
to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements
taken as a whole.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
June 28, 2001
NSTAR 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
(in thousands)
December 31,
2000 1999
Assets
Investments, at fair value:
Common shares of NSTAR $ 90,911 $ 101,282
Registered investment companies 192,497 225,500
Loans to participants 5,748 7,106
Total investments 289,156 333,888
Other assets:
Receivables -
Contributions 111 121
Net assets available for benefits $ 289,267 $ 334,009
========= ========
The accompanying notes are an integral part of these financial
statements.
NSTAR 401(k) PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILBLE FOR BENEFITS
For the Plan Year Ended December 31, 2000
(in thousands)
Additions to net assets attributed to:
Investment income
Interest and dividends -
Common Shares of NSTAR $ 4,571
Registered investment companies 15,656
Interest on participant loans 531
20,758
Net appreciation in fair value of investments 2,612
Contributions:
Employee 6,807
Employer 2,729
9,536
Total additions, net 32,906
Deductions from net assets attributed to:
Benefits paid to participants or beneficiaries 76,968
Deemed distributions from participant loans 665
Purchase fees 15
Total deductions 77,648
Net decrease in net assets (44,742)
Net assets available for benefits:
Beginning of year 334,009
End of year $289,267
========
The accompanying notes are an integral part of these financial
statements.
NSTAR 401(k) PLAN
Notes to Financial Statements
A. Summary
The following description of the NSTAR 401(k) Plan (the "Plan"),
formerly known as the Employees Savings Plan of Commonwealth
Energy System and Subsidiary Companies, provides only general
information. Participants' benefits under this Plan will be
determined in accordance with the Summary Plan Description
document. Effective January 1, 2000, the current Plan name was
adopted following a corporate merger as described below, and
replaced the former "Employees Savings Plan of Commonwealth
Energy System and Subsidiary Companies." Changes in features of
the Plan are also described below.
General
NSTAR is an energy delivery company serving approximately 1.3
million customers in Massachusetts including more than one
million electric customers in 81 communities and 244,000 gas
customers in 51 communities. NSTAR was created through the merger
of BEC Energy (BEC) and Commonwealth Energy System (COM/Energy)
on August 25, 1999 and is an exempt public utility holding
company. As a result of this merger, the NSTAR Stock Fund
replaced the Commonwealth Energy System Common Share Fund.
Common Shares of NSTAR are listed on the New York and Boston
stock exchanges under the trading symbol of NST.
The Plan was originally created in 1962 by Commonwealth Energy
System ("COM/Energy") and its subsidiary companies to assist
employees in adopting a regular savings program and by providing
additional security for their retirement. The Plan has been
amended or restated from time to time thereafter. The Plan is a
defined contribution plan subject to the rules and regulations of
the Employee Retirement Income Security Act of 1974 ("ERISA").
The Plan is qualified under section 401(a) of the Internal
Revenue Code (the "Code") and utilizes the special federal income
tax deferral features of section 401(k) of the Code. The latest
Plan amendments became effective January 1, 2000 with the
following changes: 1) the Plan name was changed to the "NSTAR
401(k) Plan", and 2) the NSTAR or a participating NSTAR
subsidiary company unit matching contribution feature of the Plan
was amended to equal 50% of the first 8% of a Participant's
eligible compensation invested in the Plan. Effective with this
amendment, the matching funds were restricted and invested only
in the NSTAR Stock Fund and any contributions and earnings
thereon were restricted from being transferred to other Vanguard
Plan funds. Refer to Note H for subsequent changes to the Plan.
Vanguard Fiduciary Trust Company of Valley Forge, Pennsylvania,
has acted as Trustee for the Plan ("Vanguard" or "Plan Trustee")
since January 1, 1989. Refer to Note H for subsequent changes to
the Plan. The Trustee retains the Plan assets and provides
records of Plan activity to a Plan Agent designated by the NSTAR
Retirement Plans Committee ("Committee") that is appointed by the
Trustees of NSTAR and by the directors of its subsidiary
companies. The Committee is responsible (except for the duties
specifically vested in the Plan Trustee) for the administration
of the Plan.
On December 30, 1998, COM/Energy sold substantially all of its
electric generating facilities to affiliates of Southern Energy
New England, L.L.C., an affiliate of The Southern Company of
Atlanta, Georgia (Buyer). As a result of this sale, approximately
150 Plan Participants transferred employment to the Buyer. The
Buyer advised the Committee that it would not accept a trustee-to-
trustee transfer (within the meaning of Section 414(1) of the
Code) of all assets from the Plan attributable to these
Participants. The Plan filed for a ruling with the Internal
Revenue Service ("IRS") in 1999. In February 2000, in a private
letter ruling, the IRS determined that the Plan may distribute to
those transferred Participants amounts attributable to their
elective contributions as a result of the sale without adversely
affecting the qualified status of the Plan's cash or deferred
arrangement under Section 401(k) of the Code and of the Plan
under Section 401(a) of the Code.
The NSTAR subsidiary company units participating in the Plan are
Cambridge Electric Light Company, NSTAR Gas Company, COM/Energy
Services Company, Commonwealth Electric Company and Advanced
Energy Systems, Inc.
Participation
Any employee of a participating company unit, except an employee
who is classified as a "temporary employee," is eligible to
participate in the Plan. A regular employee becomes eligible to
participate in the Plan on the first day of the second month
following his or her initial date of employment. The NSTAR
subsidiary company unit matching contribution begins with the
first payroll period of the calendar month an employee completes
one year of service. A Participant is fully vested in and has a
nonforfeitable right to the value of his or her Member, Pay
Deferral and Company Accounts at all times.
Contribution Policy
Participants in the Plan elect to make contributions of at least
1% but not more than 16% of their pretax eligible compensation as
defined in the Plan. Effective January 1, 2000, the applicable
NSTAR company unit will make a matching contribution to the NSTAR
Stock Fund equal to 50% on the first 8% of eligible compensation
that a Participant contributes. Any matching funds cannot be
transferred. Certain Participants also have a matching
contribution of 100% on the initial 4% of eligible compensation
or 5% for Participants who are ineligible for postretirement
health care. Refer to Note H for a subsequent change to the
Plan.
Investments
Investments in the Plan are directed by the individual Plan
Participants. Currently there are twelve investment choices
offered under the Plan: eleven mutual funds managed by Vanguard
(Prime Money Market Fund, Windsor II Fund, Short-Term Corporate
Fund, Wellington Fund, International Growth Fund, Extended
Market Index Fund, Explorer Fund, LifeStrategy Funds consisting
of four funds (Income Fund, Conservative Growth Fund, Moderate
Growth Fund and Growth Fund) and the NSTAR Stock Fund. Refer to
Note H for a subsequent change to the Plan.
Participant Accounts
Each participant account is credited with the Participant's
contribution and an allocation of (a) the NSTAR subsidiary
company units' contribution and (b) Plan earnings (based on the
Participant's account balance). The Committee maintains for each
Participant in the Plan, under each Fund in which all or part of
his or her contributions and the applicable subsidiary company
units' 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 Committee also maintains a separate Subsidiary
Company Unit Account for each Participant that includes company
unit contributions made on behalf of Participants. These Accounts
reflect the portion of each Participant's interest in the Fund
that 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.
Vesting
Participants are fully vested at all times in the entire balance
of their own contributions to the Plan and are immediately vested
in the company unit match.
Payments of Benefits
Benefits paid to Participants on termination of service due to
death, disability, retirement, or other reasons are paid in a
lump-sum amount equal to the value of the vested interest in a
Participant's account.
Plan Termination
The Plan has been established with the intention of continuing it
indefinitely, but NSTAR reserves the right to terminate, suspend,
withdraw, amend or modify the Plan in whole or in part for any
reason at any time subject to applicable laws. If the Plan is
terminated or there is a complete discontinuance of
contributions, Participants will continue to be fully vested in
their account balances. Distributions will be made upon Plan
termination to the extent consistent with continued qualification
of the Plan under the Code of 1986, as amended. The Code places
restrictions on plan termination distributions in the case of a
plan such as the Plan, if the employer continues to maintain
another similar plan.
Because Participant benefits depend solely on the amount in
individual accounts, the Plan is not insured by the Pension
Benefit Guaranty Corporation under Title IV of ERISA.
Participant Loans
Participants in the Plan may obtain up to two loans as long as
there is an account balance of $2,000 or more. A loan may not be
less than $1,000 nor exceed the lesser of $50,000 or 50% of the
market value of the Participant's elective contribution account.
Loans must be repaid to the Participant's account over a period
not to exceed five years (unless the loan is for the purchase of
a principal residence) via payroll deductions. The annual
interest rate will be the prime rate in effect on January 1,
April 1, July 1, or October 1, preceding the date of the loan.
B. Summary of Significant Accounting Policies
Basis of Accounting
The Plan's financial statements have been prepared under the
accrual method of accounting and in accordance with the rules and
regulations of ERISA.
Risks and Uncertainties
The Plan provides for various investment options in any
combination of stock, bonds, fixed income securities, mutual
funds and other investment securities. Investment securities are
exposed to various risks, such as interest rate, market and
credit. Due to the level of risk associated with certain
investment securities and the level of uncertainty related to
changes in the value of investment securities, it is at least
reasonably possible that changes in risks in the near term would
materially affect Participants' account balances and the amounts
reported in the statement of net assets available for plan
benefits and the statement of changes in net assets available for
plan benefits.
Investments Valuation
Plan investments held by Vanguard are stated at fair value. Fair
value of shares of registered investment companies represent the
net asset value of such shares as of the close of business on the
last business day of the year. Fair value of NSTAR shares are
based on the last quoted market price as of the close of business
on the last day of the year. Participant loans receivable are
valued at cost plus interest, which approximates fair value.
Income Recognition
Income of the NSTAR Stock Fund consists primarily of dividends on
its common shares. The allocation of each Plan investment fund's
earnings to a Participant's account is based on the percentage of
the Participant's units in that Plan investment fund and is
allocated daily. Capital gain distributions are included in
dividend income. Dividend income is recorded on the ex-dividend
date. Interest income is recorded on the accrual basis.
Purchases and sales of securities are recorded on a trade-date
basis.
Net Appreciation/(Depreciation) in the Fair Value of Investments
Gains and losses are realized upon distributions (including
withdrawals) to Participants and the transfer of all or a portion
of a Participant's account between investment choices. The Plan
presents in the statement of changes in net assets the net
appreciation (depreciation) in the fair value of its investments,
which consists of the realized gains or losses, and the
unrealized appreciation or depreciation on those investments.
Contributions
Salary reduction contributions made on behalf of Participants and
matching contributions are recorded in the period payroll
deductions are made from Participants. Contributions receivable
at December 31 represent amounts withheld from Participants and
the corresponding matching contributions subsequently deposited
to the Plan in the following month.
Distributions and Withdrawals
Distributions and withdrawal payments are recorded when paid.
Transfers Between Investment Funds
Plan Participants may, with certain limitations, elect to
transfer their elective contribution account balances from any
investment fund or funds to any of the other available funds
offered by the Plan.
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 that 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. The subsidiary company units
generally pay expenses and charges incurred in the administration
of the Plan. An administrative fee relating to the issuance of
Plan loans under the Loan Fund is paid by Plan Participants.
D. Related Party Transactions
Certain Plan fund investments are shares of mutual funds managed
by Vanguard. Vanguard is the trustee as defined by the Plan and,
therefore, these transactions qualify as party-in-interest.
NSTAR and the Vanguard Funds are parties-in-interest as that term
is defined in section 3(14) of ERISA.
E. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for
benefits per these financial statements to the Form 5500 at
December 31, 2000 and 1999: (in thousands)
2000 1999
Net assets available for benefits
per these financial statements $289,266 $334,009
Less: Contributions receivable 111 121
Net assets available for
benefits per the Form 5500 $289,155 $333,888
======== ========
The following is a reconciliation of contributions received per
these financial statements to the Form 5500 for the year ended
December 31, 2000: (in thousands)
2000
Contributions per these financial $ 9,536
statements
Add: Contributions receivable at the
beginning of the year 121
Less: Contributions receivable at the end
of the year 111
Contributions per the Form 5500 $ 9,546
=======
Contributions are recorded on the Form 5500 when received.
F. Tax Status
The IRS has determined and issued a favorable determination
letter, applicable for Plan amendments executed on December 6,
1994 and February 26, 1996, that the Plan is designed in
accordance with applicable sections of the Code. The Committee
believes the Plan is designed and is currently being operated in
compliance with the applicable requirements of the IRC.
Therefore, no provision for income taxes has been included in the
Plan's financial statements.
H. Subsequent Events
Effective April 2, 2001, Fidelity Investments, Inc. (Fidelity)
became the Plan Trustee replacing Vanguard as the provider of
record keeping, trustee services, and investment options. The
Plan's investment options have changed. Plan enhancements include
expedited eligibility, a Participant contribution level of up to
17% of eligible pay, more flexibility in changing the deferral
contribution percentage, and the restrictions on transferring
funds into and out of the NSTAR Common Share Fund are removed.
Employer Identification
Number: 04-3466300
Plan Number: 091187
NSTAR 401(k) PLAN
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2000
(in thousands)
Market Value
at End of
Name of Issuer and Period
Title of Issue
NSTAR Stock Fund
Common Shares of NSTAR* $ 90,911
Vanguard Funds*:
Prime Money Market 27,779
Windsor II Fund 80,941
Short-Term Corporate Fund 4,130
Wellington Fund 36,192
International Growth Fund 10,871
Extended Market Index Fund 10,614
Explorer Fund 11,323
LifeStrategy Income Fund 657
LifeStrategy Conservative Growth Fund 562
LifeStrategy Moderate Growth Fund 2,990
LifeStrategy Growth Fund 6,438
Total Vanguard Funds 192,497
Total Investments $283,408
========
Loans to Participants* (8.75% - 10.5%) $ 5,748
========
* Represent parties in interest to the Plan
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Retirement Plans Committee of the NSTAR 401(k) Plan has
caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: June 29, 2001 /s/ TIMOTHY R. MANNING
Timothy R. Manning
Vice President - Human Resources
and on behalf of the NSTAR
Retirement Plans Committee
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Registration Statement on Form S-8 (File No. 333-85559) of the
Employees Savings Plan of Commonwealth Energy System and
Subsidiary Companies of our report dated June 28, 2001 relating
to the financial statements of the NSTAR 401(k) Plan, which
appears in this Form 11-K.
/s/PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
June 28, 2001