<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>8
<FILENAME>ex9905.txt
<TEXT>
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Exhibit 99.5
Nordstrom Direct, Inc.
401(k) Plan
Financial Statements for the
Years Ended December 31, 2002 and 2001,
and Independent Auditors' Report
<page>
NORDSTROM DIRECT, INC. 401(k) PLAN
TABLE OF CONTENTS
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Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 2002 AND 2001:
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4-8
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INDEPENDENT AUDITORS' REPORT
Nordstrom, Inc. Retirement Committee
Nordstrom Direct, Inc. 401(k) Plan
Seattle, Washington
We were engaged to audit the statements of net assets available for benefits
of the Nordstrom Direct, Inc. 401(k) Plan (the "Plan") as of December 31,
2002 and 2001, and the related statements of changes in net assets available
for benefits for the years then ended. The financial statements are the
responsibility of the Plan's management.
As permitted by Section 2520.103-8 of the Department of Labor's ("DOL") Rules
and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974 ("ERISA"), the Plan administrator instructed us
not to perform, and we did not perform, any auditing procedures with respect
to the information summarized in Note 3 to the financial statements, which
was certified by Putnam Fiduciary Trust Company, the trustee of the Plan,
except for comparing the information with the related information included in
the financial statements. We have been informed by the Plan administrator
that the trustee holds the Plan's investment assets and executes investment
transactions. The Plan administrator has obtained certifications from the
trustee that the information as of and for the years ended December 31, 2002
and 2001, provided to the Plan administrator by the trustee is complete and
accurate.
As described in Note 2, these financial statements were prepared on a
modified cash basis of accounting, which is a comprehensive basis of
accounting other than accounting principles generally accepted in the United
States of America.
As discussed in Note 1 to the financial statements, Nordstrom Direct, Inc.,
the Plan's sponsor, decided to terminate the Plan and merge the entire net
assets of the Plan into the Nordstrom, Inc. Profit Sharing and 401(k) Plan
effective December 31, 2002.
Because of the significance of the information that we did not audit, we are
unable to, and do not, express an opinion on the accompanying financial
statements taken as a whole. The form and content of the information
included in the financial statements, other than that derived from the
information certified by the trustee, have been audited by us in accordance
with auditing standards generally accepted in the United States of America
and, in our opinion, are presented in compliance with the DOL's Rules and
Regulations for Reporting and Disclosure under ERISA.
/s/ Deloitte & Touche LLP
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June 13, 2003
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NORDSTROM DIRECT, INC. 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2002 AND 2001
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<table>
<caption>
2002 2001
<s> <c> <c>
ASSETS:
Investments-at fair value $ - $14,994,889
Participant loans 845,457
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NET ASSETS AVAILABLE FOR BENEFITS $ - $15,840,346
============ ===========
See notes to financial statements.
</table>
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NORDSTROM DIRECT, INC. 401(k) PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2002 AND 2001
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<table>
<caption>
2002 2001
<s> <c> <c>
ADDITIONS:
Employer contributions $ 797,823 $ 573,459
Participant contributions 2,280,569 1,984,609
Transfer from Nordstrom, Inc. Profit Sharing
and 401(k) Plan-net-investments 6,432,647
Other 74,186 152,053
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Total contributions 3,152,578 9,142,768
Investment income (loss):
Interest and dividends 71,008 71,263
Net realized and unrealized depreciation
in fair value of investments (1,862,942) (896,917)
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Investment loss (1,791,934) (825,654)
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Total additions 1,360,644 8,317,114
DEDUCTIONS:
Benefit payments to participants 936,511 1,146,028
Administrative expenses 6,911 15,671
Transfer to Nordstrom, Inc. Profit Sharing and
401(k) Plan-net-investments 16,257,568
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Total deductions 17,200,990 1,161,699
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NET (DEDUCTIONS) ADDITIONS (15,840,346) 7,155,415
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 15,840,346 8,684,931
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End of year $ - $15,840,346
============ ===========
See notes to financial statements.
</table>
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NORDSTROM DIRECT, INC. 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2002 AND 2001
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1. THE PLAN
Plan Termination-Effective December 31, 2002, the net assets available for
benefits of the Nordstrom Direct, Inc. 401(k) Plan (the "Plan"), formerly the
Nordstrom.com, Inc. 401(k) Plan, were merged into the Nordstrom, Inc. Profit
Sharing and 401(k) Plan (the "Nordstrom, Inc. Plan") and the Plan was
terminated.
General-The following description of the Plan provides only general
information of the Plan as it was operated through its termination on
December 31, 2002. Participants should refer to the Plan document for a more
complete description of the Plan's provisions. The Plan is a defined
contribution 401(k) plan established by Nordstrom Direct, Inc. (the
"Company," the "Plan sponsor," or the "employer") effective January 1, 2000,
and subject to the provisions of Sections 401(a) and 401(k) of the Internal
Revenue Code of 1986 and the Employee Retirement Income Security Act of 1974.
Eligibility-All employees of the Company are eligible to participate in the
Plan on the first day of the month coinciding with or following their
employment date. Eligibility is not subject to a service hour requirement,
and participants are eligible to receive employer contributions on the
anniversary date of the Plan subject to their being employed on December 31.
Contributions-Participants may elect to defer 1% to 15% of eligible
compensation, as defined in the Plan, on a pretax basis. The Company's
contribution consists of a match of 50% of the participants' voluntary
contributions up to 8% of the participants' payroll calendar year
compensation, subject to regulatory limitations, regardless of the number of
hours worked during the year. The Company contribution is made on December
31 of each Plan year and an employee must be employed on December 31 to be
eligible to receive the Company contribution.
As a result of the Economic Growth and Tax Relief Reconciliation Act of 2001,
the Plan now offers an additional catch-up contribution for participants who
will be at least 50 years of age by the end of 2006. The maximum catch-up
contribution is $1,000 for 2002 and will continue to grow by $1,000
increments until 2006. The Plan now accepts rollovers of funds from other
qualified plans.
Description of Investments-Participants enrolled in the Plan are able to
direct their investments (including Company matching contributions) among the
following funds:
a. Nordstrom, Inc. common stock-Shares of common stock of Nordstrom, Inc.,
the parent company of the Plan sponsor. Invested amounts consist solely of
assets transferred from the Nordstrom, Inc. Plan to the Company.
Participants may not direct their new contributions to the Plan to Nordstrom,
Inc. common stock.
b. Putnam Money Market Fund-This fund invests in high quality money market
instruments and guaranteed investment contracts issued by insurance
companies, banks, and other financial institutions. The fund offers
stability while seeking a competitive rate of return.
c. Putnam Vista Fund-This fund seeks capital appreciation by investing
mainly in a variety of stocks that have the potential for above-average
growth, including those of widely traded larger companies; smaller, less
well-known companies; and, currently, mostly mid-size firms.
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d. Putnam Investors Fund-This fund seeks long-term growth of capital by
investing mainly in stock of blue-chip companies, which are large, well-
established companies, selected from a broad range of industries. The fund
targets companies that are enjoying rising sales and profits and that have
dominant positions within their industries. This fund was available through
the Plan until July 1, 2002.
e. PIMCO RCM Large-Cap Growth Fund-This fund seeks long-term capital
appreciation by investing in 45-85 equity securities of U.S. companies with
market capitalizations of at least $3 billion at the time of investment.
This fund became available through the Plan on July 1, 2002.
f. EuroPacific Growth Fund-This fund invests in stocks of companies located
outside the United States, primarily in Europe and the Pacific Basin. The
companies range from small firms to multinational corporations located in
major foreign markets. This is a high-risk investment with the potential for
high returns and long-term growth.
g. Putnam S&P 500 Index Fund-This fund is for investors seeking a return,
before the assessment of fees, that closely approximates the return of the
S&P 500 Index, which is an indicator of U.S. stock performance.
h. Putnam Fund for Growth and Income-This fund seeks capital growth and
current income by investing mainly in attractively priced stocks of mature
companies that offer long-term growth potential while also providing income.
i. George Putnam Fund of Boston-This fund seeks a balance of capital growth
and current income by investing in a well-diversified portfolio composed
mostly of stock and corporate and U.S. government bonds.
j. PIMCO Total Return Fund-This fund seeks maximum current income and price
appreciation consistent with preservation of capital and prudent investment
management. The fund targets intermediate-maturity fixed income securities
from all major sectors of the bond market.
k. Putnam Stable Value Fund-This fund invests in guaranteed investment
contracts issued by insurance companies and other types of bank investment
contracts.
l. Neuberger Berman Genesis Trust-This fund invests mainly in common stocks
of small-capitalization companies, which it defines as those with a total
market value of no more than $1.5 billion at the time the fund first invests
in them.
m. CFSB Direct Account (formerly DLJ Direct Brokerage Gateway Account)-This
investment alternative allows participants to purchase and sell equities with
assets funded from their retirement plan accounts. A participant is not
permitted to make direct contributions to his or her CFSB Direct Account.
Participants should refer to the Plan documents for specific terms and
restrictions.
Participation in Investment Activity-Individual accounts are credited with a
pro rata share of investment income (loss) experienced by the respective Plan
funds into which they have directed their account balances.
Vesting in the Plan-Employer contributions are 100% vested on the anniversary
date of the Plan. On termination of employment for reasons other than
retirement, disability, or death, participants retain the Company's matching
contributions if they are employed at December 31. All participants'
contributions are fully vested at all times.
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Method of Payment-On termination of service due to death, disability, or
retirement, a participant may elect to receive a lump-sum amount equal to the
value of his or her account balance, transfer his or her balance into another
qualified 401(k) plan or IRA, or combine the two options. For termination of
service due to other reasons, a participant will receive the value of the
vested interest in his or her account as a lump-sum distribution. When an
active participant reaches age 60 and continues to work for the Company, the
participant is eligible to receive a partial or full distribution of his or
her retirement benefits.
Participant Loans-Participants may borrow from their fund accounts a minimum
of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their
vested account balances. Loan terms are a maximum of 60 months or up to 20
years for the purchase of the principal residence of a participant. The
loans are secured by the balance in the participant's account and bear fixed
interest rates commensurate with prevailing rates but not less than 1% over
the then current prime rate at the employer's principal bank. Interest rates
for participant loans outstanding range from 5.25% to 10.50%. Principal and
interest are paid bimonthly through payroll deductions. A participant may
have no more than two loans outstanding at any one time, only one of which
may be for the purchase of a principal residence.
Trustee and Administrator of the Plan-The trustee of the Plan is Putnam
Fiduciary Trust Company.
The Plan is administered by the Nordstrom, Inc. Retirement Committee, which
comprises Mary D. Amundson, Jammie Baugh, D. Wayne Gittinger, Michael G.
Koppel, Bruce A. Nordstrom, Llynn (Len) A. Kuntz, and Delena M. Sunday.
Administrative services were provided to the Plan by Putnam Fiduciary Trust
Company.
2. SUMMARY OF ACCOUNTING POLICIES
Basis of Presentation-The Plan prepares its financial statements using a
modified cash basis, and as such there are no employer accounts receivable
recorded.
Use of Estimates-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 changes therein and disclosure
of contingent assets and liabilities. Actual results could differ from those
estimates.
Payment of Benefits-Benefits are recorded when paid.
Benefits Payable-As of December 31, 2002 and 2001, no benefits were due to
participants who had withdrawn from participation in the Plan.
Valuation of Investments and Income Recognition-The Plan's equity and mutual
fund investments are stated at fair value. The fair value of the Plan's
equity and mutual fund investments is based on quoted market values as of the
last business day of the Plan year. The Plan's common/collective investment
funds are valued at contract value as they are fully benefit responsive.
Participant loans are recorded at their outstanding balances, which
approximate fair value. Purchases and sales of securities are recorded on a
trade-date basis. Net unrealized gains and losses are calculated as the net
change in fair value of investments from the beginning of the Plan year or
purchase date (whichever is later) to the end of the Plan year. Realized and
unrealized gains and losses are combined and reported as net appreciation or
depreciation in the fair value of investments. Interest income is recorded
on the accrual basis. Dividends are recorded on the ex-dividend date.
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3. INVESTMENTS
All investment information disclosed in the accompanying financial
statements, including investments held at December 31, 2002 and 2001, and net
appreciation in fair value of investments, interest, dividends, and
investment management fees for the years ended December 31, 2002 and 2001,
were obtained or derived from information supplied to the Plan administrator
and certified as complete and accurate by the trustee, Putnam Fiduciary Trust
Company.
The following table presents the fair value of investments that represent 5%
or more of the Plan's net assets at December 31, 2002 and 2001:
<table>
<caption>
2002 2001
<s> <c> <c>
George Putnam Fund of Boston $ - $7,509,164
Putnam Fund for Growth and Income 1,459,707
Putnam Vista Fund 1,438,725
EuroPacific Growth Fund 1,370,021
Putnam Stable Value Fund 1,115,623
</table>
The 2002 ending balances are $-0- because all Plan assets were transferred to
the Nordstrom, Inc. Plan effective December 31, 2002, at which date the Plan
was terminated.
During 2002 and 2001, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) appreciated
(depreciated) in value as follows:
<table>
<caption>
2002 2001
<s> <c> <c>
Mutual funds $ (1,658,313) $ (944,180)
Nordstrom, Inc. common stock (18,712) 63,065
Brokerage assets 1,898 (14,609)
Common/collective trust (187,815) (1,193)
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$ (1,862,942) $ (896,917)
============= =============
</table>
4. TRANSFERS
Certain employees of the Company are former employees of Nordstrom, Inc.
Transfers from the Nordstrom, Inc. Plan in 2002 and 2001 represent account
balances, including earnings and losses, of all affected participants who
transferred from Nordstrom, Inc. to Nordstrom Direct, Inc. Included in the
transfer of assets is common stock of Nordstrom, Inc.
The Plan terminated on December 31, 2002, and the net assets were transferred
on this date to the Nordstrom, Inc. Plan. Transfers from the Plan represent
account balances, including earnings and losses, of all participants.
Included in the transfer of assets is common stock of Nordstrom, Inc.
5. RELATED PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by Putnam
Fiduciary Trust Company. Putnam Fiduciary Trust Company is the trustee as
defined by the Plan; therefore, these transactions qualify as party-in-
interest transactions. Fees paid by the Plan for investment management
services amounted to $6,911 and $15,671 for the years ended December 31, 2002
and 2001, respectively.
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The transfer of account balances to and from the Nordstrom, Inc. Plan to the
Plan represents a party-in-interest transaction, as Nordstrom, Inc. is the
parent company of the Company.
6. TAX STATUS
The Internal Revenue Service has determined and informed the Company by a
letter dated July 13, 2001, that the Plan under its present form meets the
requirements of Section 401(a) of the Internal Revenue Code and is exempt
from federal income taxes.
* * * * * *
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</DOCUMENT>