11-K 1 nstarsavings11k2002.txt FORM 11K NSTAR SAVING PLAN FOR YEAR ENDED 12/31/02 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