UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
or
[ ] 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 SAVINGS PLAN
(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 office)
NSTAR SAVINGS PLAN
TABLE OF CONTENTS
Page
Report of Independent Auditors 3
Financial Statements -
Statements of Net Assets Available for Benefits -
December 31, 2002 and 2001 4
Statement of Changes in Net Assets Available for Benefits
Plan Year Ended December 31, 2002 5
Notes to Financial Statements and Schedules 6 - 13
Schedule Supporting Financial Statements -
Supplemental Schedule I: Schedule H, Line 4i -
Form 5500 - Schedule of Assets (Held at End of Year) -
December 31, 2002 14
Signature 15
EXHIBIT INDEX
Exhibit No. 23 - Consent of Independent Accountants
Exhibit No. 99.1 - Certification Statement of Senior Vice-
President - Human Resources of NSTAR pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
Exhibit No. 99.2 - Certification Statement of Chief Accounting
Officer of NSTAR pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
REPORT OF INDEPENDENT AUDITORS
To the Retirement Plans Committee:
In our opinion, the accompanying statements of net assets
available for benefits and the related statement of changes in
net assets available for benefits present fairly, in all material
respects, the net assets available for benefits of the NSTAR
Savings Plan (the "Plan") at December 31, 2002 and 2001, and the
changes in net assets available for benefits for the year ended
December 31, 2002, 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 at end of year) at December
31, 2002 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 25, 2003
NSTAR SAVINGS PLAN
Statements of Net Assets Available for Benefits
(in thousands)
December 31,
2002 2001
Assets
Investments, at fair value:
Registered investment company shares $ 290,207 $ 334,124
NSTAR Common Share Fund 163,548 171,120
Fidelity Brokerage Link 13,416 14,922
Loans to participants 13,620 12,964
Total investments 480,791 533,130
Other assets:
Receivables -
Employee contributions 541 262
Employer contributions 181 165
Total other assets 722 427
Net assets available for benefits $ 481,513 $ 533,557
========== ==========
The accompanying notes are an integral part of these financial
statements.
NSTAR SAVINGS PLAN
Statement of Changes in Net Assets Available for Benefits
Plan year ended December 31, 2002
(in thousands)
Additions to net assets attributed to:
Investment income
Interest and dividends -
Registered investment company shares $ 5,712
NSTAR Common Share Fund 7,506
Interest on participant loans 1,077
14,295
Contributions:
Employee 23,352
Employer 8,801
32,153
Total additions 46,448
Deductions from net assets attributed to:
Net depreciation in fair value of mutual fund investments 56,856
Benefits paid to participants or beneficiaries 35,531
Net depreciation in Fidelity Brokerage Link holdings 4,776
Net depreciation in fair value of common stock 1,312
Administrative expenses 17
Total deductions 98,492
Net decrease in assets available for benefits (52,044)
Net assets available for benefits:
Beginning of year 533,557
End of year $481,513
========
The accompanying notes are in integral part of these financial
statements.
NSTAR SAVINGS PLAN
Notes to Financial Statements and Schedules
A. Description of the Plan
General
The following description of the NSTAR Savings Plan (the "Plan")
provides only general information. Eligible employees'
("Participants") benefits under this Plan are determined in
accordance with the Plan document. Features of the Plan are
described below.
The Plan is administered by the Retirement Plans Committee
("Committee") of NSTAR, which is empowered to decide questions of
eligibility and make other interpretations under the Plan in its
discretion, and in general to administer the Plan. The
fiduciaries with respect to the Plan are NSTAR, the Executive
Personnel Committee of the Board of Trustees of NSTAR, the
Pension Management Committee, the Committee, and the Trustee as
defined below. NSTAR (or the "Company") has the sole
responsibility for determining who has the power to amend and
terminate the Plan and certain other duties. Members of the
Executive Personnel Committee select investment funds, appoint
investment managers and generally establish policies, including
funding and investment policies, for the Plan. The Pension
Management Committee has the responsibility to monitor the
performance and operations of the Trustee and any investment
manager, to implement funding and investment policies established
by the Executive Personnel Committee and to advise that
Committee.
The Plan investments are held in trust by Fidelity Management
Trust Company ("Fidelity"), the Plan's Trustee and record keeper.
The Trustee retains the Plan assets, provides records of Plan
activity and makes distributions as instructed by the Committee
or its designee. The Executive Personnel Committee, the Plan
sponsor, has the responsibility to appoint and remove the Plan
Trustee.
NSTAR is an energy delivery company serving approximately 1.4
million customers in Massachusetts including approximately 1.1
million electric customers in 81 communities and 300,000 gas
customers in 51 communities. Common Shares of NSTAR are listed
on the New York and Boston stock exchanges under the trading
symbol of NST.
Effective January 1, 2000, the current Plan name was adopted
following a corporate merger in August 1999 and replaced the
former Boston Edison Savings Plan that was established in 1986.
The Plan provides retirement benefits for participating eligible
employees through a program of salary-reduction contributions and
limited matching employer contributions. The Plan has been
amended from time to time. 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.
As further discussed in this report, the Plan was amended,
effective April 1, 2001, to allow Participants the ability to
reallocate their investments in the NSTAR Common Share Fund to
other investment options. Effective January 1, 2002, as a result
of the Economic Growth and Tax Relief Reconciliation Act of 2001
("EGTRRA"), the Plan was further amended to allow for increased
maximum annual pre-tax contributions and additional "catch-up"
pre-tax contributions for Participants age 50 or older,
acceptance of other types of "roll-over" pre-tax funds from other
plans, shortened suspension period after hardship distributions
and the option of Participants reinvesting NSTAR common share
dividends allocated to the NSTAR Common Share Fund or receiving
the distribution of those dividends in cash, or both.
Participation
Active NSTAR employees who are full-time or part-time who are
regularly scheduled to work at least twenty hours per week, are
eligible to participate in the Plan.
Contribution Policy
Effective January 1, 2002, Participants in the Plan may
contribute from 1% to 50% of their compensation on a pretax
basis, up to the annual Internal Revenue Service ("IRS") limit of
$11,000 in 2002. For the 2001 Plan year, the maximum amount was
17%, up to the IRS limit of $10,500. This limit will increase by
$1,000 each year beyond 2002 until it reaches $15,000 in 2006.
After 2006, the maximum amount will be adjusted for inflation in
$500 increments. Participants can change contributions at any
time. The employer matching contribution feature of the Plan is
equal to 50% up to the first 8% of a Participant's eligible
compensation, or other employer matching contribution schedule in
accordance with a collective bargaining agreement, invested
through payroll deductions directed into the Plan. Effective
January 1, 2003, the employer matching contribution feature of
the Plan for all Participants is equal to 50% up to the first 8%
of a Participant's eligible compensation. The matching funds are
immediately invested in the NSTAR Common Share Fund and there are
no restrictions on Participants transferring these funds to other
Plan investments.
Pursuant to the EGTRRA, effective April 1, 2002, Participants are
able to elect pre-tax "catch-up" contributions to the Plan.
Catch-up contributions are additional pre-tax contributions for
Participants who are at least age 50 or older during the plan
year and are contributing the maximum IRS limit ($11,000 for
deferral in 2002) or the Plan's pre-tax contribution limit (50%
of eligible compensation in 2002). In 2002, the maximum annual
pre-tax catch-up contribution was $1,000. The catch-up
contribution will increase to $2,000 in 2003, $3,000 in 2004,
$4,000 in 2005, and $5,000 in 2006. After 2006, the catch-up
contribution will be adjusted for inflation in $500 increments.
Participants are permitted by the EGTRRA to "roll-over" eligible
pre-tax contributions from other employer sponsored plans such as
401(a) and 401(k) plans, governmental 457(b) plans, and from
Conduit and Non-Conduit IRAs to the Plan.
Investment Options
The Plan offers twelve investment options: eight Fidelity-managed
investment funds (Asset Manager, Magellan, Retirement Government
Money Market, Spartan U.S. Equity Index, Intermediate Bond,
International Growth and Income, Growth Company and Mid-Cap
Stock), the Morgan Stanley Institutional Fund, Inc. - Small
Company Growth Portfolio - Class B ("the MSI Fund"), the Vanguard
Fiduciary Trust Company's Windsor II (a growth and income mutual
fund), Fidelity Brokerage Link and the NSTAR Common Share Fund.
Fidelity Brokerage Link is a self-directed brokerage account
through which Participants are able to invest in a variety of
securities, including stock, bonds, mutual funds and certificates
of deposit. Participant contributions and investment earnings
remain available for Participant direction.
Investments at fair value are summarized below:
(in thousands) December 31,
2002 2001
Registered Investment Companies:
Fidelity Asset Manager Fund* $ 52,773 $ 58,190
Fidelity Magellan Fund* 61,933 78,401
Fidelity Retirement Government
Money Market Portfolio* 46,482 43,710
Fidelity Spartan U.S. Equity Index Fund 18,082 22,397
Vanguard Windsor II Fund* 61,388 77,144
Other registered investment companies* 49,549 54,282
Total registered investment companies 290,207 334,124
Fidelity Brokerage Link 13,416 14,922
NSTAR Common Share Fund (a)* 163,548 171,120
Participant loans receivable 13,620 12,964
Total investments (b) $480,791 $533,130
======== ========
* Investments representing more than 5% of Plan assets.
(a) Fund was partially non-participant directed in 2001.
(b) All investments listed above represent parties-in-interest to the Plan,
except the Vanguard Windsor II Fund and the MSI Fund included in other
registered investment companies.
Participants' Accounts
Each Participant account is credited with its contribution and an
allocation of Plan earnings (based on the Participant's account
balance). The Company matching contribution is invested in the
NSTAR Common Share Fund that a Participant may transfer to any of
the Plan's other investment options.
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 match.
Receiving Payments from the Plan
Participants may be eligible to take a withdrawal from the Plan
depending on the assets in their Member Account, Rollover
Account, Company Account and Pay Deferral Account and their
particular circumstances. While an active employee at NSTAR,
withdrawals from accounts are restricted by the IRS due to the
Plan's tax advantages.
Upon termination of employment, Participant account balances may
be paid in a lump-sum or payment may be deferred until age
seventy and one-half.
In addition, effective January 1, 2002, Participants have the
option of receiving the NSTAR Common Share Fund dividends paid on
NSTAR Common Shares in cash, reinvesting them in the NSTAR Common
Share Fund, or a combination of the two. The accumulated
dividends of those Participants who elect to receive cash are
invested in the Fidelity Retirement Money Market Portfolio prior
to receiving an annual distribution by March 31 following the
year in which the dividends are credited to their account.
Earnings on these dividends are automatically reinvested in the
NSTAR Common Share Fund on an annual basis when the dividends are
distributed. Dividends received in cash are taxable to the
Participant as ordinary income in the year in which they are
received. Dividends are paid to the Plan four times a year on
February 1, May 1, August 1, and November 1.
Plan Termination
The Plan was established with the intent of continuing it
indefinitely. The Executive Personnel Committee 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 a loan from the balance in
their account. The 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 account. A Participant is permitted a maximum of
two outstanding loans at any one time. 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, in
which case the repayment period cannot exceed thirty years) via
payroll deductions. New loans are reflected as transfers out of
the investment funds and both the principal and interest on the
loan are repaid to the borrower's investment funds. Interest
rates ranged from 4.75% to 10.5% and 6% to 10.5% at December 31,
2002 and 2001, respectively.
B. Summary of Significant Accounting Policies
Basis of Accounting and Use of Estimates
The Plan's financial statements have been prepared under the
accrual method of accounting and in accordance with the rules and
regulations of ERISA. The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from these estimates.
Risks and Uncertainties
The Plan provides for various investment options in any
combination of stocks, 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 accompanying
Statement of Net Assets Available for Benefits and the
accompanying Statement of Changes in Net Assets Available for
Benefits.
Investments Valuation
Plan investments held by Fidelity, Vanguard and Morgan Stanley
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 at the end of the period. Fair value
of NSTAR common shares are based on the last quoted market price
as of the close of business at period end. Fair values of the
Fidelity Brokerage Link assets, which consist primarily of
registered investment companies, are determined using the methods
stated above. Participant loans are valued at cost plus interest
that approximates fair value.
Income Recognition
Income of the NSTAR Common Share 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 the fund's Plan
investment 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 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 accompanying Statement of Changes in Net Assets
Available for Benefits, the net depreciation in the fair value of
its investments that consists of the realized gains or losses and
the unrealized appreciation (depreciation) on those investments.
Contributions
Salary reduction contributions made on behalf of Participants and
matching Company contributions are recorded in the period payroll
deductions are made from Participants. Contributions receivable
at December 31, 2002 and 2001 represent amounts withheld from
Participants and the corresponding matching Company contributions
subsequently deposited to the Plan in the following month.
Distributions and Withdrawals
Distributions and withdrawal payments are recorded when paid.
Transfers Between Investment Choices
Plan Participants may, with certain limitations, elect to
transfer their elective contribution account balances from any
investment option or options to any of the other options offered
by the Plan on a daily basis.
C. NSTAR Common Share Fund
Information about the significant components of the change in net
assets relating to the NSTAR Common Share Fund for the year ended
December 31, 2002 is as follows:
(in thousands)
Fair Value, beginning of year $ 171,120
Changes in Net Assets -
Interest and dividends $ 7,880
Contributions 11,944
Net depreciation in fair value (1,312)
Benefits paid to Participants (9,617)
Loans to Participants (4,228)
Interfund transfers (12,239) (7,572)
Fair Value, end of year $ 163,548
=========
D. Expenses
Brokerage fees, commissions, stock transfer taxes and other
expenses in connection with the purchase, sale or distribution of
securities for each 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 Company.
There is no cost to initiate a loan.
E. Related Party Transactions
Certain Plan investments, as shares of mutual funds, and
Participant Plan loans are managed by an affiliate of Fidelity.
Fidelity is the trustee as defined by the Plan and, therefore,
these transactions qualify as party-in-interest as that term is
defined in section 3(14) of ERISA. Also included in the Plan's
investments are Common Shares of NSTAR, the Plan's sponsor, which
also qualify as party-in-interest transactions.
F. Reconciliation of Financial Statements to the Form 5500
The following is a reconciliation of net assets available for
benefits per the accompanying financial statements to the Form
5500 at December 31, 2002 and 2001:
(in thousands) 2002 2001
Net assets available for benefits per the
accompanying financial statements $481,513 $533,557
Less: Contributions receivable 722 427
Net assets available for benefits
per the Form 5500 $480,791 $533,130
======== ========
The following is a reconciliation of contributions received per
the accompanying financial statements to the Form 5500 for the
year ended December 31, 2002:
(in thousands) 2002
Contributions per these financial statements $ 32,153
Add: Contributions receivable at the
beginning of the year 427
Less: Contributions receivable at the end
of the year 722
Contributions per the Form 5500 $ 31,858
========
Contributions are recorded on the Form 5500 when received by the
Trustee.
G. Tax Status
The Internal Revenue Service has determined and informed
management by a letter dated May 15, 2002, that the Plan is
designed in accordance with applicable sections of the Internal
Revenue Code. The Plan administrator and tax counsel for the
Plan believe the Plan is designed and is currently being operated
in compliance with the applicable requirements of the Internal
Revenue Code. Therefore, no provision for income taxes has been
included in the accompanying Plan's financial statements.
Supplemental Schedule I
Employer Identification
Number: 04-3466300
Plan Number: 52709
NSTAR SAVINGS PLAN
Schedule of Assets (Held at End of Year)
(in thousands, except for units/shares)
Schedule H, Line 4i - Form 5500
December 31, 2002
Current
Name of Issuer and Title of Issue Units/Shares Value
Fidelity Mutual Funds*:
Asset Manager Fund 3,824 $ 52,773
Magellan Fund 784 61,933
Retirement Government Money Market Portfolio 46,482 46,482
Retirement Money Market Portfolio 220 220
Spartan U.S. Equity Index Fund 580 18,082
Intermediate Bond Fund 1,355 14,537
International Growth and Income Fund 617 10,377
Growth Company Fund 245 8,695
Mid-Cap Stock Fund 535 8,707
Total Fidelity Mutual Funds 221,806
Vanguard Windsor II Fund 2,951 61,388
Morgan Stanley Institutional Fund, Inc. -
Small Corporate Growth Portfolio - Class B 966 7,013
Fidelity Brokerage Link*:
Limited Partnerships -
Kinder Morgan Energy Partnership, L.P. 300 11
Stock Options -
Computer Associates International Jan 5 call 30 29
NASDAQ 100 Trust Jan 27 call 50 9
NASDAQ 100 Trust Jan 30 call 50 10
Other Fidelity Brokerage Link holdings 12,986 13,357
13,416
NSTAR Common Share Fund* 13,791 163,548
Participant Loans*
Rate of interest 4.75% to 10.5% 13,620
Total $ 480,791
=========
* 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 Savings Plan
has duly caused this annual report to be signed on its behalf by
the undersigned hereunto duly authorized.
NSTAR Savings Plan
Date: June 25, 2003 /s/ Timothy R. Manning
Timothy R. Manning
Senior Vice President - Human Resources
and Chair of the Retirement Plans
Committee on behalf of the NSTAR
Retirement Plans Committee