UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Northeast Utilities, Inc
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(Name of Registrant as Specified In Its Charter)
Northeast Utilities, Inc.
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[LOGO] NORTHEAST LOGO
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2002 ANNUAL MEETING OF SHAREHOLDERS
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Dear Shareholder:
It is my pleasure to invite you to attend the 2002 Annual Meeting of
Shareholders of Northeast Utilities on Tuesday, May 14, 2002, at 10:30 a.m., at
The Event Center at C.R. Sparks, Bedford, New Hampshire (directions are on the
reverse side).
Information concerning the matters to be acted upon at the meeting is
provided in the accompanying Notice of Annual Meeting and Proxy Statement. In
addition, our meeting agenda will include a discussion of the operations of
Northeast Utilities system companies and a question and answer period.
Whether or not you plan to attend the meeting, it is important that you
complete, date, sign and return your proxy in the enclosed envelope as soon as
possible. This will ensure that your shares will be represented at the meeting
in accordance with your wishes.
On behalf of your Board of Trustees, thank you for your continued support
and interest in Northeast Utilities.
Very truly yours,
/s/ MICHAEL G MORRIS
Michael G. Morris
Chairman of the Board, President and
Chief Executive Officer
March 25, 2002
[MAP] BEDFORD
From I-93 (coming from the South; e.g. Boston / Andover / Salem):
Pass New Hampshire, Exit #5. Take left Exit onto I-293 North. Cross bridge over
Merrimack River and stay left, continue on 101 West. Pass Everett Turnpike Exit
"Toll Road"--DO NOT TAKE THIS EXIT! Take next Exit, Route 3 (Daniel Webster
Highway). Turn left at light--Macy's is directly in front of you. Follow road
to first light, then turn left onto Kilton Road. C.R. Sparks Restaurant is on
your left.
From I-93 (coming from the North; e.g. Concord / Bow / I-89):
Take I-93 South to I-293 South. Take Exit 101 West. Take next immediate Exit,
Route 3 (Daniel Webster Highway). Turn left at light--Macy's is directly in
front of you. Follow road to first light, then turn left onto Kilton Road. C.R.
Sparks Restaurant is on your left.
From Route 3 South/Daniel Webster Highway (coming from the South; e.g.
Merrimack):
Follow Route 3 until you pass under Route 101. Pass light at Macy's. Go to next
light, then turn left onto Kilton Road. C.R. Sparks Restaurant is on your left.
From Route 101 West (coming from the West; e.g. Bedford Center / Goffstown):
Take Route 101 East. Exit at Route 3 (Daniel Webster Highway) to Meetinghouse
Road. Bear left and follow to light. Turn left, pass Macy's. Go to next light,
then turn left onto Kilton Road. C.R. Sparks Restaurant is on your left.
From the Everett Turnpike (coming from the South; e.g. Merrimack / Nashua /
Massachusetts):
Pass Bedford Toll. Take 2nd Exit, 101 West (Bedford/Milford). Pass Everett
Turnpike Exit "Toll Road"--DO NOT TAKE THIS EXIT! Take next Exit, Route 3
(Daniel Webster Highway). Turn left at light--Macy's is directly in front of
you. Follow road to first light, then turn left onto Kilton Road. C.R. Sparks
Restaurant is on your left.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on May 14, 2002
To the Shareholders of Northeast Utilities:
The Annual Meeting of Shareholders of Northeast Utilities will be held on
Tuesday, May 14, 2002, at 10:30 a.m., at The Event Center, Bedford, New
Hampshire, for the following purposes:
1. To elect Trustees for the ensuing year;
2. To ratify the selection of Deloitte & Touche LLP as independent
auditors for 2002; and
3. To transact any other business that may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on March 15, 2002 are
entitled to receive notice of and to vote at the meeting or any adjournment
thereof. You are cordially invited to be present at the meeting and to vote.
Whether or not you plan to attend the meeting, please complete, date and sign
the enclosed proxy card and return it in the envelope enclosed for that purpose.
By order of the Board of Trustees,
/s/ GREGORY BUTLER
107 Selden Street Gregory B. Butler
Berlin, Connecticut Vice President, Secretary
and General Counsel
Mailing Address:
Post Office Box 270
Hartford, Connecticut
06141-0270
March 25, 2002
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IMPORTANT
Shareholders can help avoid the necessity and expense of follow-up letters
to ensure that a quorum is present at the Annual Meeting by promptly returning
the enclosed proxy. The enclosed envelope requires no postage, if mailed in the
United States.
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PROXY STATEMENT
The accompanying proxy is solicited on behalf of the Board of Trustees of
Northeast Utilities for use at the Annual Meeting of Shareholders to be held on
May 14, 2002, and at any adjournment thereof.
Please read this proxy statement and fill in, date, sign and return the
enclosed form of proxy. The proxy may be revoked at any time before it is voted
by filing a letter with the Secretary of Northeast Utilities or by a duly
executed proxy card bearing a later date. Properly executed proxies not revoked
will be voted according to their terms.
Only holders of common shares of record at the close of business on March
15, 2002 (the record date) are entitled to receive notice of and to vote at the
meeting or any adjournment thereof. On the record date, there were 133,672,283
common shares outstanding. Each such share is entitled to one vote on each
matter to be voted on at the Annual Meeting of Shareholders.
The principal office of Northeast Utilities is located at 174 Brush Hill
Avenue, West Springfield, Massachusetts. The general offices of Northeast
Utilities and its subsidiaries are located at 107 Selden Street, Berlin,
Connecticut (mailing address: Post Office Box 270, Hartford, Connecticut
06141-0270). This proxy statement and the accompanying proxy card are being
mailed to shareholders commencing March 25, 2002.
An affirmative vote of a majority of the common shares outstanding as of
the record date will be required to elect the nominees named below.
1. ELECTION OF TRUSTEES
Unless a shareholder specifies otherwise, the enclosed proxy will be voted
to elect the nominees named below as Trustees to serve until the next Annual
Meeting and until their successors have been elected and shall have qualified.
Each nominee has been previously elected as a Trustee by shareholders and is
currently serving as a Trustee except for Messrs. Richard H. Booth and James F.
Cordes, who were elected to the Board in 2001 to fill vacancies. Mr. William J.
Pape II, who was first elected a Trustee by shareholders in 1974, retired from
the Board in 2001 and is not a candidate for re-election. Mr. John F. Turner,
who was first elected a Trustee by shareholders in 1995, resigned from the
Board in 2001 to accept a position with the Federal government.
If one or more of the nominees should become unavailable for election, the
proxy may be voted for a substitute person or persons, but not more than the
nominees proposed. In accordance with Northeast Utilities' Declaration of
Trust, the number of Trustee positions will continue to be thirteen, as set by
the shareholders in 2000, in order to afford the Board of Trustees flexibility
to add targeted expertise as appropriate between Annual Meetings of
Shareholders.
1
The Board of Trustees recommends that shareholders vote FOR election of the
nominees listed below.
Set forth below is each nominee's name, age, date first elected as a
Trustee, and a brief summary of the nominee's business experience during the
past five years.
[PHOTO] RICHARD H. BOOTH
(55 years) 2001
RICHARD BOOTH
President and Chief Executive Officer and a Director of HSB Group, Inc.
and Chairman, President and Chief Executive Officer and a Director of
Hartford Steam Boiler Inspection & Insurance Company since January
2000. From 1994 until 2000, Executive Vice President and a Director of
Phoenix Home Life Mutual Insurance Company. Mr. Booth is a Director of
CuraGen Corporation, 454 Corporation, and Aberdeen American Monthly
Income Trust Limited. He is a member of the Boards of St. Francis Hospital,
the Connecticut Business and Industry Association and the Greater
Hartford Arts Council as well as the Governor's Council on Economic
Competitiveness and Technology and an executive committee member of
the World Affairs Council. He is a member of the American Institute of
Certified Public Accountants, the Connecticut Society of CPAs, the Hartford
Society of Financial Analysts, the Hartford Chapter of the American Society
of Chartered Life Underwriters and the Financial Analysts Federation.
[PHOTO] COTTON MATHER CLEVELAND
(49 years) 1992
COTTON
MATHER President of Mather Associates, New London, New Hampshire (a firm
CLEVELAND specializing in leadership and organizational development for corporate and
nonprofit organizations). From 1991 until 1998, founding Executive Director
of Leadership New Hampshire. Ms. Cleveland is a Director of The National
Grange Mutual Insurance Company and of the Ledyard National Bank and
serves on the Board of the New Hampshire Center for Public Policy. She is
the moderator of the Town of New London, New Hampshire. She has
served on the University System of New Hampshire Board of Trustees as
Chair, Vice Chair and a member and served on the Bank of Ireland First
Holdings Board of Directors from 1986 to 1996. She was formerly Co-Chair
of the Governor's Commission on New Hampshire in the 21st Century and
an Incorporator for the New Hampshire Charitable Foundation.
[PHOTO] SANFORD CLOUD, JR.
(57 years) 2000
SANFORD
President and Chief Executive Officer of The National Conference for
Community and Justice, New York, New York. From 1993 to 1994, he was
a partner in the law firm of Robinson and Cole, Hartford, Connecticut.
Previously Vice President of Aetna Life and Casualty Company and served
for two terms as a state senator of Connecticut. Mr. Cloud is a Director of
The Phoenix Companies, Inc. and Tenet Healthcare Corporation and
Chairman of the Board of Ironbridge Mezzanine Fund, L.P.
2
[PHOTO] JAMES F. CORDES
(61 years) 2001
JAMES CORDES
Formerly Executive Vice President of The Coastal Corporation and
President of the Natural Gas Group of The Coastal Corporation (retired
1997). Mr. Cordes was responsible for Coastal's interstate and intrastate
natural gas pipelines and storage facilities, natural gas and electricity
marketing and risk management activities. He joined American Natural
Resources Company, headquartered in Detroit, in 1977 after twelve years
with Northern Natural Gas Corporation. He was elected President of ANR
Pipeline in 1983 and was named President of American Natural Resources
Company in 1985. He was elected Senior Vice President and a Director of
The Coastal Corporation after its merger with ANR in 1985. He was named
Executive Vice President of Coastal in 1986. Mr. Cordes is also a Director
of Comerica Incorporated and Comerica Bank, Texas, and has served as a
Director and member of the Executive Committees of the Houston
Symphony and the Detroit Symphony. He is a past chairman of the
Interstate Natural Gas Association of America and has served as a Director
and member of the Executive Committee of the American Gas Association.
[PHOTO] E. GAIL DE PLANQUE
(57 years) 1995
E GAIL
DE PLANQUE President, Strategy Matters, Inc., and Director, Energy Strategies
Consultancy, Ltd. From 1991 to 1995, Dr. de Planque was a Commissioner
with the United States Nuclear Regulatory Commission. In 1967, Dr. de
Planque joined the Health and Safety Laboratory of the United States
Atomic Energy Commission. She served at the Laboratory, now known as
the Environmental Measurements Laboratory, until December 1991, as
Deputy Director beginning in 1982 and as Director in 1987. Dr. de Planque
is a Fellow and past President of the American Nuclear Society, a member
of the National Academy of Engineering and the National Council on
Radiation Protection and Measurements, a Director of British Nuclear
Fuels, plc., a Director of British Nuclear Fuels, Inc. and a Director of
Landauer, Inc. She is a member of the Texas Utilities Electric Operations
Review Committee; the Diablo Canyon Independent Safety Committee; the
External Advisory Committee, Amarillo National Resource Center for
Plutonium; the visiting Committee for the Department of Nuclear
Engineering, Massachusetts Institute of Technology; and a consultant to the
United Nation's International Atomic Energy Agency.
3
[PHOTO] JOHN H. FORSGREN
(55 years) 2000
JOHN FORSGREN
Vice Chairman of NU since May 2001 and Executive Vice President
and Chief Financial Officer of NU since February 1996. Previously
Managing Director of the Chase Manhattan Bank from 1995 to 1996
and Senior Vice President of The Walt Disney Company from 1990 to
1994. Mr. Forsgren is a Director of NEON Communications, Inc. and
The Circle Trust Company and a member of the Board of Regents of
Georgetown University.
[PHOTO] RAYMOND L. GOLDEN
(64 years) 1999
RAYMOND GOLDEN
Independent Consultant. Previously served as Chairman Emeritus of
BT Wolfensohn, New York, New York, a business unit of BT Alex Brown
Incorporated. From August 1996 to December 1997, he was Chairman
of BT Wolfensohn. Prior to that, he served as President of Wolfensohn
& Company. Mr. Golden serves as a Trustee on the National Wildlife
Federation Endowment and the Board of the Jewish Federation of Palm
Beach County, Florida.
[PHOTO] ELIZABETH T. KENNAN
(64 years) 1980
ELIZABETH KENNAN
President Emeritus of Mount Holyoke College, South Hadley,
Massachusetts. Previously President of Mount Holyoke College. Dr.
Kennan is a Director of The Putnam Funds and Talbots. She is a
member of the Trustees of the Reservations, the Board of Centre
College and is Chairman of Cambus Kenneth Bloodstock, Inc.
[PHOTO] MICHAEL G. MORRIS
(55 years) 1997
MICHEAL MORRIS
Chairman of the Board, President and Chief Executive Officer of NU.
Previously President and Chief Executive Officer of Consumers Power
Company from 1994 to 1997 and Executive Vice President and Chief
Operating Officer of Consumers Power Company from 1992 to 1994.
Mr. Morris is a Director of the Institute of Nuclear Power Operations, the
Nuclear Energy Institute, the Edison Electric Institute, the Association
of Edison Illuminating Companies, the American Gas Association,
Nuclear Electric Insurance Limited, Connecticut Business & Industry
Association, the Webster Financial Corporation, and the Spinnaker
Exploration Co. Mr. Morris is also a Regent of Eastern Michigan
University.
4
[PHOTO] ROBERT E. PATRICELLI
(62 years) 1993
ROBERT PATRICELLI
Chairman, President and Chief Executive Officer of Women's Health
USA, Inc. (provides women's health care services), and of Evolution
Health, LLC (provides employee benefit services), both of Avon,
Connecticut. From 1987 to 1997, he was Chairman, President and
Chief Executive Officer of Value Health, Inc., Avon, Connecticut.
Previously Executive Vice President of CIGNA Corporation and
President of CIGNA's Affiliated Businesses Group. He has held various
positions in the federal government, including White House Fellow in
1965; counsel to a United States Senate Subcommittee; Deputy
Undersecretary of the Department of Health, Education and Welfare;
and Administrator of the United States Urban Mass Transportation
Administration. Mr. Patricelli is a Director of Curagen Corporation, the
Connecticut Business & Industry Association, and The Bushnell, and a
Trustee of Wesleyan University.
[PHOTO] JOHN F. SWOPE
(63 years) 1992
JOHN SWOPE
Previously President and Chief Executive Officer, Public Broadcasting
Service, Alexandria, Virginia from 1999 to March 1, 2000. Retired in
1997 as of counsel to the law firm of Sheehan Phinney Bass + Green,
Professional Association, Manchester, New Hampshire. Previously
President of Chubb Life Insurance Company of America, Concord, New
Hampshire (retired December 1994). Mr. Swope is a Director of the
Public Broadcasting Service, PBS Enterprises and the New Hampshire
Business Committee for the Arts. He is President of The Currier Gallery
of Art and a Trustee of Tabor Academy.
5
BOARD COMMITTEES AND RESPONSIBILITIES
The Board of Trustees of Northeast Utilities has Audit, Compensation,
Corporate Affairs, Corporate Governance, Executive, Finance and Nuclear
Committees. The Board of Trustees does not have a Nominating Committee. The
Board of Trustees has adopted a written charter for each such Committee.
The Audit Committee meets independently with the internal and independent
auditors of Northeast Utilities and its subsidiaries to review the auditors'
activities, procedures and recommendations. Following each meeting, the
Committee reports to the full Board. The Committee recommends annually the
appointment of Northeast Utilities' independent auditors for the coming year.
The Audit Committee met five times in 2001. The members of the Committee are
Messrs. Swope (Chair), Booth (Vice Chair), and Golden and Drs. de Planque and
Kennan, none of whom is an employee of Northeast Utilities or its subsidiaries.
A report from the Audit Committee is included in this proxy statement.
The Compensation Committee reviews and adjusts, as appropriate, the
compensation policies of Northeast Utilities and its subsidiaries and
establishes and implements an evaluation process for the Chief Executive
Officer in conjunction with the Corporate Governance Committee. Following each
meeting, the Committee reports to the full Board. The Compensation Committee
met nine times in 2001. The members of the Committee are Messrs. Patricelli
(Chair), Swope (Vice Chair), Cloud and Golden, Ms. Cleveland, and Drs. de
Planque and Kennan, none of whom is an employee of Northeast Utilities or its
subsidiaries. A report from this Committee with respect to executive
compensation is included in this proxy statement.
The Corporate Affairs Committee reviews the policies and practices of
Northeast Utilities and its subsidiaries on public issues in areas such as
health, safety, environment and equal employment opportunity. Following each
meeting, the Committee reports to the full Board. The Corporate Affairs
Committee met twice in 2001. The members of the Committee are Ms. Cleveland
(Chair), Messrs. Cloud (Vice Chair), Golden and Swope, and Dr. Kennan, none of
whom is an employee of Northeast Utilities or its subsidiaries.
The Corporate Governance Committee recommends criteria for new Trustees and
identifies prospective Board candidates. The Committee also evaluates the
Board's performance and, in conjunction with the Compensation Committee,
establishes and implements an evaluation process for the Chief Executive
Officer. Following each meeting, the Committee reports to the full Board. The
Corporate Governance Committee met four times in 2001. The members of the
Committee are Dr. Kennan (Chair), Ms. Cleveland (Vice Chair) and Messrs. Cloud
and Cordes, none of whom is an employee of Northeast Utilities or its
subsidiaries.
The Executive Committee is empowered to exercise all the authority of the
Board, subject to certain limitations set forth in Northeast Utilities'
Declaration of Trust, during the intervals between meetings of the Board. The
Executive Committee met twice in 2001. The members of the Executive Committee
are Mr. Morris (Chair), Dr. Kennan (Vice Chair), Messrs. Patricelli and Swope
and Dr. de Planque. Other than Mr. Morris, no Committee member is an employee
of Northeast Utilities or its subsidiaries.
The Finance Committee assists the Board in fulfilling its fiduciary
responsibilities relating to financial plans, policies and programs for
Northeast Utilities and its subsidiaries. Following each meeting, the Committee
reports to the full Board. The Finance Committee met six times in 2001. The
members of the Finance Committee are Messrs. Golden (Chair), Morris (Vice
Chair), Booth, Cloud, Cordes, Forsgren and Patricelli and Dr. Kennan. Other
than Messrs. Forsgren and Morris, no Committee member is an employee of
Northeast Utilities or its subsidiaries.
6
The Nuclear Committee provides the Board with an independent basis for
overseeing the safety and effectiveness of the nuclear program of the Northeast
Utilities system. More recently, specific attention has been given to operation
of Seabrook Unit 1; decommissioning activities of Connecticut Yankee Atomic
Power Station; management's attention to nuclear safety; progress in resolving
issues with the Nuclear Regulatory Commission, the Institute of Nuclear Power
Operations and other independent evaluations of nuclear operations; and
progress in resolving employee and community concerns. Following each meeting
the Committee reports to the full Board. The Nuclear Committee met ten times in
2001. The members of the Committee are Dr. de Planque (Chair), Ms. Cleveland
(Vice Chair), Messrs. Cordes and Swope, and Dr. Kennan, none of whom is an
employee of Northeast Utilities or its subsidiaries.
In 2001, the Board of Trustees held 19 meetings and the Board and Committees
of the Board held a total of 57 meetings. All of the nominees for Trustee
attended 75 percent or more of the aggregate number of meetings of the Board
and the Committees of which they were members.
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table provides, as of February 27, 2002, information with
respect to persons who are known to Northeast Utilities to beneficially own
more than five percent of the common shares of Northeast Utilities. Northeast
Utilities has no other class of voting securities.
Name and Address Amount and Nature of Percent of
of Beneficial Owner Beneficial Ownership Class
------------------- -------------------- ----------
FMR Corp........................ 13,190,520 (1) 9.86%
82 Devonshire Street
Boston, MA 02109
Barrow, Hanley, Mewhinney
& Strauss, Inc................ 11,952,148 (2) 8.94%
One McKinney Plaza
3232 McKinney Avenue, 15th Floor
Dallas, TX 75204-2429
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(1) According to a Statement on Schedule 13G dated February 14, 2002, FMR
Corp., through its subsidiaries Fidelity Management & Research Company,
Fidelity Management Trust Company and various investment adviser and
investment company subsidiaries, is the beneficial owner of 13,190,520
common shares of Northeast Utilities. According to the Schedule 13G, FMR
Corp. has sole voting power for 897,880 shares and sole dispositive power
for 13,190,520 shares. These shares include 93,600 shares beneficially
owned by Fidelity International Limited, an independent former subsidiary
of Fidelity Management & Research Company, as to which FMR Corp. does not
claim beneficial ownership.
(2) According to an Amendment to Schedule 13G dated February 8, 2002, Barrow,
Hanley, Mewhinney & Strauss, Inc. is the beneficial owner of 11,952,148
common shares of Northeast Utilities. According to the Schedule 13G,
Barrow, Hanley, Mewhinney & Strauss, Inc. has sole voting power for
8,035,848 shares, shared voting power for 3,916,300 shares and sole
dispositive power for 11,952,148 shares.
7
COMMON STOCK OWNERSHIP OF MANAGEMENT
The following table provides information as of February 27, 2002, as to the
beneficial ownership of the common shares of Northeast Utilities by each
Trustee and nominee for Trustee, each of the five highest paid executive
officers of Northeast Utilities and its subsidiaries, and all Trustees,
nominees for Trustee and executive officers as a group. Unless otherwise noted,
each Trustee, nominee and executive officer has sole voting and investment
power with respect to the listed shares.
Name Amount and Nature of Percent
---- Beneficial Ownership of Class
Richard H. Booth................... 4,750 (1) (2)
Cotton Mather Cleveland............ 15,982 (3) (2)
Sanford Cloud, Jr.................. 15,487 (4) (2)
James F. Cordes.................... 10,250 (1) (2)
E. Gail de Planque................. 15,971 (3) (2)
John H. Forsgren................... 149,132 (5) (2)
Raymond L. Golden.................. 16,710 (6) (2)
Cheryl W. Grise.................... 78,813 (7) (2)
Elizabeth T. Kennan................ 17,100 (3) (2)
Bruce D. Kenyon.................... 133,710 (8) (2)
Michael G. Morris.................. 890,925 (9) (2)
Robert E. Patricelli............... 22,451 (3) (2)
Gary D. Simon...................... 114,081 (10) (2)
John F. Swope...................... 20,101 (3) (2)
All Trustees and Executive Officers
as a Group (16 persons)......... 1,570,155 (11) 1.17%
--------
(1) Includes 3,750 shares that could be acquired by the beneficial owner
pursuant to currently exercisable options.
(2) As of February 27, 2002, each Trustee and executive officer of Northeast
Utilities beneficially owned less than one percent of the Northeast
Utilities common shares outstanding.
(3) Includes 11,250 shares that could be acquired by the beneficial owner
pursuant to currently exercisable options.
(4) Includes 6,250 shares that could be acquired by Mr. Cloud pursuant to
currently exercisable options.
(5) Includes 141,035 shares that could be acquired by Mr. Forsgren pursuant to
currently exercisable options and 5,382 restricted shares as to which Mr.
Forsgren has sole voting and no dispositive power.
(6) Includes 8,750 shares that could be acquired by Mr. Golden pursuant to
currently exercisable options.
(7) Includes 56,626 shares that could be acquired by Mrs. Grise pursuant to
currently exercisable options, 4,844 restricted shares as to which Mrs.
Grise has sole voting and no dispositive power, and 265 shares held by Mrs.
Grise's husband as custodian for her children, with whom she shares voting
and dispositive power.
(8) Includes 66,705 shares that could be acquired by Mr. Kenyon pursuant to
currently exercisable options, 501 shares held by Mr. Kenyon under the
Northeast Utilities Employee Share Purchase Plan II, as to which Mr. Kenyon
has sole voting but no dispositive power, and 1,212 shares held in an ESOP
as to which Mr. Kenyon has sole voting power but no dispositive power.
8
COMMON STOCK OWNERSHIP OF MANAGEMENT (continued)
(9) Includes 816,258 shares that could be acquired by Mr. Morris pursuant to
currently exercisable options, 1,262 shares held by Mr. Morris under the
Northeast Utilities Employee Share Purchase Plan II, as to which Mr. Morris
has sole voting but no dispositive power, 23,407 restricted shares as to
which Mr. Morris has sole voting and no dispositive power, and 922 shares
held in an ESOP as to which Mr. Morris has sole voting power but no
dispositive power.
(10) Includes 108,090 shares that could be acquired by Mr. Simon pursuant to
currently exercisable options, and 564 shares held in an ESOP as to which
Mr. Simon has sole voting power but no dispositive power.
(11) Includes 49,158 shares that could be acquired by executive officers other
than those named in the table above pursuant to currently exercisable
options, and 1,371 shares held by them in an ESOP as to which they have
sole voting power but no dispositive power.
9
EXECUTIVE COMPENSATION
The following tables present the cash and non-cash compensation received by
the Chief Executive Officer and the next four highest paid executive officers
of Northeast Utilities, in accordance with rules of the SEC:
Summary Compensation Table
Long Term Compensation
----------------------------------
Annual Compensation Awards Payouts
-------------------------- ------------------------ ---------
Other
Annual Restricted Securities Long Term
Compen- Stock Underlying Incentive All Other
sation Award(s) Options/Stock Program Compensation
Name and Salary Bonus ($) ($) Appreciation Payouts ($)
Principal Position Year ($) ($) (Note 1) (Note 2) Rights (#) ($) (Note 3)
------------------ ---- ------- --------- -------- ---------- ------------- --------- ------------
Michael G. Morris 2001 900,000 869,805 -- -- 220,000 -- 27,000
Chairman of the 2000 830,770 1,200,000 -- -- 140,000 -- 27,326
Board, President 1999 783,173 1,253,300 92,243 348,611 118,352 -- 23,210
and Chief
Executive Officer
John H. Forsgren 2001 524,423 200,000 -- -- 98,000 -- 5,100
Vice Chairman, 2000 444,615 450,000 -- -- 36,000 -- 5,100
Executive Vice 1999 429,904 400,000 -- 122,682 32,852 87,003 12,888
President and
Chief Financial
Officer
Bruce D. Kenyon 2001 515,000 150,000 -- -- 34,000 -- 15,450
President-- 2000 504,616 475,000 -- -- 20,000 -- 16,274
Generation 1999 500,000 -- -- 77,690 20,804 462,500 15,000
Group
Cheryl W. Grise 2001 338,654 180,000 -- -- 76,000 -- 10,119
President-- 2000 279,616 290,000 -- -- 23,000 -- 8,795
Utility Group 1999 244,712 250,000 -- 73,612 19,712 -- 82,247
Gary D. Simon 2001 236,539 70,000 -- -- 14,000 -- 7,096
Senior Vice 2000 231,539 200,000 -- -- 18,000 -- 6,946
President-- 1999 226,635 200,000 -- 61,333 16,424 -- 4,982
Enterprise
Development
and Analysis of
Northeast
Utilities Service
Company
Option/SAR Grants in Last Fiscal Year
Grant Date
Individual Grants Value
----------------------------------------------------------------- -------------------
Number of Securities % of Total Options/
Underlying SARs Exercise Grant Date
Options/SARs Granted Granted to Employees or Base Expiration Present
Name (#) in Fiscal Year Price ($/sh) Date Value ($)
---- -------------------- -------------------- ------------ ---------- ---------
Michael G. Morris 120,000 14.47% 21.03 2/27/2011 1,006,800 (Note 4)
100,000 12.06% 20.06 6/28/2011 803,000 (Note 5)
John H. Forsgren 33,000 3.98% 21.03 2/27/2011 276,870 (Note 4)
65,000 7.84% 20.06 6/28/2011 521,950 (Note 5)
Bruce D. Kenyon 34,000 4.10% 21.03 2/27/2011 228,745 (Note 4)
Cheryl W. Grise 26,000 3.14% 21.03 2/27/2011 218,140 (Note 4)
50,000 6.03% 20.06 6/28/2011 401,500 (Note 5)
Gary D. Simon 14,000 1.69% 21.03 2/27/2011 117,460 (Note 4)
10
Aggregated Options/SAR Exercises In Last Fiscal Year
and FY-End Option/SAR Values
Number of Securities
Shares With Underlying Value of Unexercised In-the-
Respect to Which Unexercised Options/SARS Money Options/SARs at
SARs Were Value at Fiscal Year End (#) Fiscal Year-End ($)
Exercised Realized ------------------------- ----------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ---------------- -------- ----------- ------------- ----------- -------------
Michael G. Morris -- -- 698,475 344,451 4,256,831 83,783
John H. Forsgren. 50,471 326,800 107,085 132,950 155,390 29,483
Bruce D. Kenyon.. 38,253 260,312 41,772 54,268 65,323 18,670
Cheryl W. Grise.. 24,490 166,654 33,724 97,904 52,402 17,690
Gary D. Simon.... -- -- 73,198 50,226 170,384 61,713
Notes to Summary Compensation and Option/SAR Grants and Exercises Tables:
(1) Other annual compensation for Mr. Morris consists of 1999 relocation
expense reimbursements.
(2) The aggregate restricted stock holdings by the five individuals named in
the table were, at December 31, 2001, 15,263 shares with a value of
$269,087. Awards shown for 1999 vested one-third on February 23, 2000,
one-third on February 23, 2001, and one-third on February 23, 2002. No
restricted shares were awarded to these individuals during 2001. Dividends
paid on restricted stock are either paid out or reinvested into additional
shares.
(3) "All Other Compensation" for 2001 consists of employer matching
contributions under the Northeast Utilities Service Company 401k Plan,
generally available to all eligible employees ($5,100 for each named
officer) and matching contributions under the Deferred Compensation Plan
for Executives (Mr. Morris--$21,900, Mrs. Grise--$5,019, Mr.
Kenyon--$10,350, and Mr. Simon--$1,996). "All Other Compensation" for Mr.
Simon for 2000 consists of $5,100 in 401k employer matching contributions
and $1,846 in deferred compensation matching contributions, and for 1999
consists of $4,800 in 401k matching contributions and $182 in deferred
compensation matching contributions.
(4) These options were granted on February 27, 2001 under the Incentive Plan.
All options granted vest one-third on February 27, 2002, one-third on
February 27, 2003 and one-third on February 27, 2004. Valued using the
Black-Scholes option pricing model, discounted by 5.71% to reflect the risk
of forfeiture, with the following assumptions: Volatility: 25.96 percent
(36 months of monthly data); Risk-free rate: 5.23 percent; Dividend yield:
0.94 percent; Exercise date: February 27, 2011.
(5) These options were granted on June 28, 2001 under the Incentive Plan. All
options granted vest one-third on June 28, 2002, one-third on June 28, 2003
and one-third on June 28, 2004. Valued using the Black-Scholes option
pricing model, discounted by 5.71% to reflect the risk of forfeiture, with
the following assumptions: Volatility: 26.38 percent (36 months of monthly
data); Risk-free rate: 5.63 percent; Dividend yield: 1.12 percent; Exercise
date: June 28, 2011.
11
PENSION BENEFITS
The tables on the following pages show the estimated annual retirement
benefits payable to an executive officer of Northeast Utilities upon
retirement, assuming that retirement occurs at age 65 and that the officer is
at that time not only eligible for a pension benefit under the Northeast
Utilities Service Company Retirement Plan (the Retirement Plan) but also
eligible for either the make-whole benefit or the make-whole benefit plus the
target benefit under the Supplemental Executive Retirement Plan for Officers of
Northeast Utilities System Companies (the Supplemental Plan). The Supplemental
Plan is a non-qualified pension plan providing supplemental retirement income
to system officers. The make-whole benefit under the Supplemental Plan,
available to all officers, makes up for benefits lost through application of
certain tax code limitations on the benefits that may be provided under the
Retirement Plan, and includes as "compensation" awards under the executive
incentive plans and deferred compensation (as earned). The target benefit
further supplements these benefits and is available to officers at the Senior
Vice President level and higher who are selected by the Board of Trustees to
participate in the target benefit and who remain in the employ of Northeast
Utilities companies until at least age 60 (unless the Board of Trustees sets an
earlier age).
Mr. Forsgren and Mrs. Grise are currently eligible for a make-whole plus a
target benefit. Messrs. Kenyon and Simon are eligible for the make-whole
benefit but not the target benefit.
Mr. Kenyon's Employment Agreement provides specially calculated retirement
benefits, based on his previous arrangement with South Carolina Electric and
Gas, which supplement his make-whole benefit under the Supplemental Plan. If
Mr. Kenyon retires with at least three years of service with the Company, he
will be deemed to have two extra years of service for purpose of his special
retirement benefit. If after achieving three years of service he voluntarily
terminates employment following a "substantial change in responsibilities
resulting from a material change in the business of Northeast Utilities", he
will be deemed to have an additional year of service for purpose of his special
retirement benefit, and if he retires with at least three years of service with
the Company, he will receive a lump sum payment of $500,000. Mr. Kenyon has met
these service-related milestones.
Mr. Morris's Employment Agreement provides that upon retirement after
reaching the fifth anniversary of his employment date (or upon disability or
termination without cause or following a change of control, as defined) he will
be entitled to receive a special retirement benefit calculated by applying the
benefit formula of the CMS Energy/Consumers Energy Company (CMS) Supplemental
Executive Retirement Plan to all compensation earned from the Northeast
Utilities system (the Company) and to all service rendered to the Company and
CMS. If Mr. Morris retires after age 60, his special retirement benefit will be
no less than that which he would have received had he been eligible for a
make-whole benefit plus a target benefit under the Supplemental Plan.
Mr. Forsgren's Employment Agreement provides for supplemental pension
benefits based on crediting up to ten years additional service and providing
payments equal to 25 percent of salary for up to 15 years following retirement,
reduced by four percentage points for each year that his age is less than 65
years at retirement. In addition, if Mr. Forsgren retires after age 58, he will
be eligible for a make-whole plus a target benefit under the Supplemental Plan
based on crediting three extra years of service, unreduced for early
commencement.
12
ANNUAL BENEFIT FOR OFFICERS ELIGIBLE FOR MAKE-WHOLE BENEFIT
Final Average Compensation Years of Credited Service
-------------------------- --------------------------------------------
15 20 25 30 35
-------- -------- -------- -------- --------
$ 200,000......... $ 43,605 $ 58,139 $ 72,674 $ 87,209 $101,744
250,000......... 54,855 73,139 91,424 109,709 127,994
300,000......... 66,105 88,139 110,174 132,209 154,244
350,000......... 77,355 103,139 128,924 154,709 180,494
400,000......... 88,605 118,139 147,674 177,209 206,744
450,000......... 99,855 133,139 166,424 199,709 232,994
500,000......... 111,105 148,139 185,174 222,209 259,244
600,000......... 133,605 178,139 222,674 267,209 311,744
700,000......... 156,105 208,139 260,174 312,209 364,244
800,000......... 178,605 238,139 297,674 357,209 416,744
900,000......... 201,105 268,139 335,174 402,209 469,244
1,000,000........ 223,605 298,139 372,674 447,209 521,744
1,100,000........ 246,105 328,139 410,174 492,209 574,244
1,200,000........ 268,605 358,139 447,674 537,209 626,744
ANNUAL BENEFIT FOR OFFICERS ELIGIBLE FOR
MAKE-WHOLE PLUS TARGET BENEFIT
Final Average Compensation Years of Credited Service
-------------------------- --------------------------------------------
15 20 25 30 35
-------- -------- -------- -------- --------
$ 200,000......... $ 72,000 $ 96,000 $120,000 $120,000 $120,000
250,000......... 90,000 120,000 150,000 150,000 150,000
300,000......... 108,000 144,000 180,000 180,000 180,000
350,000......... 126,000 168,000 210,000 210,000 210,000
400,000......... 144,000 192,000 240,000 240,000 240,000
450,000......... 162,000 216,000 270,000 270,000 270,000
500,000......... 180,000 240,000 300,000 300,000 300,000
600,000......... 216,000 288,000 360,000 360,000 360,000
700,000......... 252,000 336,000 420,000 420,000 420,000
800,000......... 288,000 384,000 480,000 480,000 480,000
900,000......... 324,000 432,000 540,000 540,000 540,000
1,000,000........ 360,000 480,000 600,000 600,000 600,000
1,100,000........ 396,000 528,000 660,000 660,000 660,000
1,200,000........ 432,000 576,000 720,000 720,000 720,000
The benefits presented in the tables above are based on a straight life
annuity beginning at age 65 and do not take into account any reduction for
joint and survivorship annuity payments. Final average compensation for
purposes of calculating the target benefit is the highest average annual
compensation of the participant during any 36 consecutive months compensation
was earned. Final average compensation for purposes of calculating the
make-whole benefit is the highest average annual compensation of the
participant during any 60 consecutive months compensation was earned.
Compensation for these benefits takes into account the annual compensation
shown in the Summary Compensation Table and long term incentive compensation
but does not include employer matching contributions under the 401k Plan. In
the event that an officer's employment terminates because of disability, the
retirement benefits shown above would be offset by the amount of any disability
benefits payable to the recipient that are attributable to contributions made
by Northeast Utilities and its subsidiaries under long term disability plans
and policies.
13
As of December 31, 2001, the executive officers named in the Summary
Compensation Table had the following years of credited service for purposes of
the Supplemental Plan: Mr. Kenyon--7, Mr. Forsgren--5, Mrs. Grise--21, and Mr.
Simon--3. Mr. Morris had 23 years of service for purposes of his special
retirement benefit. In addition, Mr. Forsgren had 10 years of service for
purposes of his supplemental pension benefit and would have 25 years of service
for such purpose if he were to retire at age 65.
TRUSTEE COMPENSATION
During 2001, each Trustee who was not an employee of Northeast Utilities or
its subsidiaries was compensated at an annual rate of $20,000 cash plus 500
common shares of Northeast Utilities, and received $1,000 for each meeting
attended of the Board or its Committees. Effective January 1, 2002, the annual
payment of 500 shares was increased to 1,000 shares. A non-employee Trustee who
participates in a meeting of the Board or any of its Committees by conference
telephone receives $675 per meeting. Also, a non-employee Trustee who is asked
by either the Board of Trustees or the Chairman of the Board to perform extra
services in the interest of the Northeast Utilities system may receive
additional compensation of $1,000 per day plus necessary expenses. The Chairs
of the Audit, the Compensation, the Corporate Affairs, the Corporate
Governance, the Finance and the Nuclear Committees were compensated at an
additional annual rate of $3,500. In addition to the above compensation, Dr.
Kennan is paid at the annual rate of $30,000 for the extra services performed
as Lead Trustee. The Chair of the Nuclear Committee receives an additional
retainer at the rate of $25,000 per year.
Under the terms of the Northeast Utilities Incentive Plan (Incentive Plan)
adopted by shareholders at the 1998 Annual Meeting, each non-employee Trustee
is eligible for stock-based grants. During 2001 each such Trustee was granted
non-qualified options to purchase 2,500 common shares of Northeast Utilities.
Receipt of shares acquired on exercise of these options may be deferred
pursuant to the terms of the Northeast Utilities Deferred Compensation Plan for
Executives. In February 2002 each non-employee Trustee was granted
non-qualified options to purchase 2,500 common shares.
Prior to the beginning of each calendar year, each non-employee Trustee may
irrevocably elect to have all or any portion of their retainers and fees paid
in the form of common shares of Northeast Utilities. Pursuant to the Northeast
Utilities Deferred Compensation Plan for Trustees, each Trustee may also
irrevocably elect to defer receipt of some or all cash and/or share
compensation.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Trustees and
certain officers of Northeast Utilities and persons who beneficially own more
than ten percent of the outstanding common shares of Northeast Utilities to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission (SEC) and the New York Stock Exchange. Based on review of
copies of such forms furnished to Northeast Utilities, or written
representations that no Form 5 was required, Northeast Utilities believes that
for the year ended December 31, 2001, all such reporting requirements were
complied with in a timely manner except that Mrs. Grise and Mr. Kenyon each
reported the exercise of stock appreciation rights in September, 2001 on their
Form 5 for 2001 rather than on a Form 4 for September 2001.
14
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Northeast Utilities has entered into an employment agreement with Mr. Morris
and Northeast Utilities Service Company (NUSCO) has entered into employment
agreements with each of the other named executive officers except Mr. Simon.
Mr. Simon participates in the Special Severance Program for Officers of
Northeast Utilities Companies. The agreements and the Special Severance Program
are also binding on Northeast Utilities and on each majority-owned subsidiary
of Northeast Utilities.
Each agreement obligates the officer to perform such duties as may be
directed by the NUSCO Board of Directors or the Northeast Utilities Board of
Trustees, protect the Company's confidential information, and refrain, while
employed by the Company and for a period of time thereafter, from competing
with the Company in a specified geographic area. Each agreement provides that
the officer's base salary will not be reduced below certain levels without the
consent of the officer, and that the officer will participate in specified
benefits under the Supplemental Executive Retirement Plan or other supplemental
retirement programs (see Pension Benefits, above) and/or in certain executive
incentive programs at specified incentive opportunity levels.
Each agreement provides for a specified employment term and for automatic
one-year extensions of the employment term unless at least six months' notice
of non-renewal is given by either party. The employment term may also be ended
by the Company for "cause", as defined, at any time (in which case no
supplemental retirement benefit, if any, shall be due), or by the officer on
thirty days' prior written notice for any reason. Absent "cause", the Company
may remove the officer from his or her position on sixty days' prior written
notice, but in the event the officer is so removed and signs a release of all
claims against the Company, the officer will receive one or two years' base
salary and annual incentive payments, specified employee welfare and pension
benefits, and vesting of stock appreciation rights, options and restricted
stock.
Under the terms of the agreements and the Special Severance Program, upon
any termination of employment following a change of control, as defined,
between (a) the earlier of the date shareholders approve a change of control
transaction or a change of control transaction occurs and (b) the earlier of
the date, if any, on which the Board of Trustees abandons the transaction or
the date two years following the change of control, if the officer signs a
release of all claims against the Company, the officer will be entitled to
certain payments including a multiple (not to exceed three) of annual base
salary, annual incentive payments, specified employee welfare and pension
benefits, and vesting of stock appreciation rights, options and restricted
stock. Certain of the change of control provisions may be modified by the Board
of Trustees prior to a change of control, on at least two years' notice to the
affected officer(s).
Besides the terms described above, the agreements of Messrs. Morris, Kenyon
and Forsgren provide for a specified salary, cash, restricted stock and/or
stock options upon employment, special incentive programs and/or special
retirement benefits. See Pension Benefits, above, for further description of
these provisions. The agreements of Mr. Forsgren and Mrs. Grise were
supplemented during 2001 to provide for special deferred compensation of
$520,000 and $500,000, respectively, vesting in even installments (adjusted to
reflect investment performance) on June 28, 2002, 2003 and 2004, so long as
such officer remains in the employ of Northeast Utilities Service Company, and
vesting sooner in the event of a change of control of the Company or
involuntary termination without cause.
The descriptions of the various agreements set forth above are for purpose
of disclosure in accordance with the proxy and other disclosure rules of the
SEC and shall not be controlling on any party; the actual terms of the
agreements themselves determine the rights and obligations of the parties.
15
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Overview and Strategy
The Compensation Committee of the Board of Trustees (the Committee) is the
administrator of executive compensation for the executives of the Northeast
Utilities system (the Company) with authority to establish and interpret the
terms of the Company's executive salary and incentive programs. The goal of the
Committee's executive compensation program for 2001 was to provide a
competitive compensation package to enable the Company to attract and retain
key executives with an eye towards the future in a more competitive
environment. To help achieve this, the Committee drew upon information from a
variety of sources, including compensation consultants, utility and general
industry surveys, and other publicly available information, including proxy
statements. The Committee further sought to align executive interests with
those of Northeast Utilities' shareholders and with Company performance by
continuing with the use of share-based incentives as a significant part of
executives' compensation.
Base Salary
The Committee sets the annual base salary for each executive officer except
for the Chief Executive Officer (CEO), whose base salary is set by the Board of
Trustees following a recommendation by the Committee pursuant to an evaluation
process developed by the Committee in conjunction with the Corporate Governance
Committee of the Board of Trustees. The Committee periodically adjusts
officers' base salaries to reflect considerations such as changes in
responsibility, market sensitivity, individual performance and internal equity.
In 2001 the Committee reviewed the average salary growth of officers, as
reported by several national surveys, with the goal of maintaining the current
competitive salary positions. The CEO's base salary was not increased in 2001
based on the market review that supported a higher proportion of incentive
compensation in the CEO's total compensation.
Annual Incentive Awards
The Committee again implemented an Annual Incentive Program during 2001. The
Annual Incentive Program was designed to calculate actual aggregate payouts
based on the Company's performance against a net income goal and
pre-established individual goals. Individual awards were made in cash in
February 2002, except that for certain senior officers including the CEO, half
of the award was made in the form of restricted NU common shares. The CEO
received an award under this program of $434,903 and 23,407 restricted shares,
having an aggregate value equal to 97 percent of base pay. This total amount
was less than target for incentive compensation, given the Company's shortfall
in the fulfillment of its net income goals.
Long-Term Incentive Grants
Long-term stock-based incentive grants were made in February through June
2001 to each executive officer and other officers and certain key employees of
the Company. The Committee targeted these awards, which were made entirely in
the form of stock options, such that total incentive awards for the officer
group would be at the 50th percentile of general industry. The CEO's grant was
targeted at 259 percent of base salary based upon the Committee's dual goals of
market competitiveness and alignment with shareholder interests. The CEO
received options to purchase 120,000 shares at a price of $21.03 in February
2001 and options to purchase 100,000 shares at a price of $20.06 per share in
June 2001.
16
Internal Revenue Service Limitation on Deductibility of Executive Compensation
The Committee believes that its compensation program adequately responds to
issues raised by the deductibility cap placed on executive salaries by Section
162(m) of the Internal Revenue Code because of the use of stock options and
qualified performance-based compensation in Company incentive programs.
Respectfully submitted,
Robert E. Patricelli, Chair
John F. Swope, Vice Chair
Cotton Mather Cleveland
Sanford Cloud, Jr.
E. Gail de Planque
Raymond L. Golden
Elizabeth T. Kennan
Dated: February 25, 2002
17
SHARE PERFORMANCE CHART
The following chart compares the cumulative total return on an investment in
Northeast Utilities common shares with the cumulative total return of the S&P
500 Stock Index and the S&P Electric Companies Index over the last five fiscal
years, in accordance with the rules of the SEC, assuming $100 invested on
January 1, 1997 in Northeast Utilities (NU) common shares, S&P 500 Index and
S&P Electric Companies Index with all dividends reinvested. Total return of NU
common shares assumes reinvestment of all dividends on payment date. Values
shown are as of December 31 of each year.
[CHART]
1997 1998 1999 2000 2001
---- ---- ---- ---- ----
NU Common 93 126 162 195 145
S & P Electric Companies 126 146 118 203 174
S & P 500 133 171 208 189 165
18
2. RATIFICATION OF THE SELECTION OF AUDITORS
The firm of Deloitte & Touche LLP, independent public accountants, has been
recommended by the Audit Committee to the Board of Trustees to serve as
independent auditors of Northeast Utilities and its subsidiaries for 2002, and
the Board of Trustees recommends that shareholders ratify the selection by the
Board of Trustees of Deloitte & Touche LLP to audit the accounts of Northeast
Utilities and its subsidiaries for 2002. Representatives of Deloitte & Touche
LLP and Arthur Andersen LLP are expected to be present at the meeting. They
will have the opportunity to make a statement, if they desire to do so, and to
respond to appropriate questions raised at the meeting.
The Board of Trustees recommends that shareholders vote FOR this proposal.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Prior to 2002, Arthur Andersen LLP had been the independent accounting firm
that audits the financial statements of Northeast Utilities and its
subsidiaries since 1977. In March 2002, following an evaluation of several
auditing firms, Deloitte & Touche LLP was selected by the Board to audit the
accounts of Northeast Utilities and its subsidiaries for 2002.
Audit services performed by Arthur Andersen LLP for fiscal year 2001
consisted of an audit and report on the financial statements of Northeast
Utilities and its principal subsidiaries with respect to filings with
government agencies such as the Securities and Exchange Commission, the Federal
Energy Regulatory Commission, and the Connecticut Department of Public Utility
Control.
The Audit Committee has considered whether the provision of non-audit
services by Arthur Andersen LLP is compatible with maintaining auditor
independence.
During fiscal year 2001, Northeast Utilities retained Arthur Andersen LLP to
provide services in the following categories and amounts:
Audit fees.................................................. $1,045,000
Financial information systems design and implementation fees 0
All other fees:
Audit-related fees*...................................... $ 515,900
Other fees, primarily tax consultations.................. 447,100
----------
Total all other fees..................................... $ 963,000
==========
--------
* Audit-related fees include benefit plan financial statement audits,
financings-comfort letters and consents, accounting consultation, agreed-upon
procedures and advisor to internal controls committee.
19
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is responsible for oversight of the relationship of
Northeast Utilities with its independent accountants on behalf of the Board of
Trustees. As part of its responsibilities, the Audit Committee has received the
written disclosures and the letter from the independent accountants required by
the Independence Standards Board, has discussed these matters and the
independent accountant's independence with the independent accountants as
required pursuant to generally accepted auditing standards, and has reviewed
and discussed the audited financial statements of Northeast Utilities for the
year ended December 31, 2001 with management. The Audit Committee is aware of
the recent increased scrutiny of financial statement disclosures of publicly
held companies and related disclosure guidance issued by the Securities and
Exchange Commission. The Audit Committee has discussed the appropriateness and
adequacy of disclosures in the financial statements with management and the
independent auditors in light of this guidance. Based on the review and
discussions referred to above, the Audit Committee recommended to the Board of
Trustees that the audited financial statements be included in Northeast
Utilities' Annual Report on Form 10-K for the year ended December 31, 2001 for
filing with the Securities and Exchange Commission.
Respectfully submitted,
John F. Swope, Chair
Richard H. Booth, Vice Chair
E. Gail de Planque
Raymond L. Golden
Elizabeth T. Kennan
Dated: February 26, 2002
3. OTHER MATTERS
The Board of Trustees knows of no matters other than the foregoing to come
before the meeting. However, if any other matters come before the meeting, the
persons named in the enclosed proxy will vote in their discretion with respect
to such other matters.
ANNUAL REPORT
Northeast Utilities' Annual Report to Shareholders for the year ended
December 31, 2001, including financial statements, is being mailed with or
prior to this proxy statement. An additional copy of the Annual Report will be
mailed to any shareholder upon request.
20
COST OF SOLICITATION OF PROXIES
The cost of soliciting proxies on behalf of the Board of Trustees will be
borne by Northeast Utilities. In addition to the use of the mails, proxies may
be solicited by personal interview, telephone or telegraph, by Trustees,
officers or employees of Northeast Utilities or Northeast Utilities Service
Company, by employees of The Bank of New York, Transfer Agent and Registrar, or
by an independent company, Morrow & Co., Inc., which has been retained to
assist in the solicitation of proxies from banks, brokerage firms, nominees and
individual shareholders for a fee of $12,000 plus reimbursement for expenses.
Arrangements will be made to reimburse brokerage firms, nominees, custodians
and fiduciaries for expenses incurred in forwarding solicitation materials to
the beneficial owners of common shares held as of March 15, 2002.
SHAREHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
To be included in the proxy statement and form of proxy for the 2003 Annual
Meeting of Shareholders, proposals by shareholders must be received no later
than December 1, 2002, and must satisfy the conditions established by the SEC.
Shareholder proposals submitted to be considered at the 2003 Annual Meeting
without inclusion in next year's proxy materials must be received no later than
February 14, 2003. If Northeast Utilities is not notified of a shareholder
proposal by February 14, 2003, then proxies held by management may provide the
discretion to vote against such proposal, even though such proposal is not
discussed in the proxy statement. Proposals should be addressed to O. Kay
Comendul, Assistant Secretary, Northeast Utilities, Post Office Box 270,
Hartford, Connecticut 06141-0270.
By order of the Board of Trustees,
/s/ GREGORY BUTLER
Gregory B. Butler
Vice President, Secretary
and General Counsel
ANNUAL REPORT ON FORM 10-K
Northeast Utilities will provide shareholders with a copy of its 2001 Annual
Report on Form 10-K to the SEC, including the financial statements and
schedules thereto, without charge, upon receipt of a written request sent to:
O. Kay Comendul
Assistant Secretary
Northeast Utilities
Post Office Box 270
Hartford, Connecticut 06141-0270
21
PROXY PROXY
NORTHEAST UTILITIES
Proxy for Annual Meeting of Shareholders - May 14, 2002
The undersigned appoints MICHAEL G. MORRIS and ELIZABETH T. KENNAN, and either
of them, proxies of the undersigned, with power of substitution, to act for and
to vote all common shares of the undersigned at the Annual Meeting of
Shareholders of Northeast Utilities to be held on May 14, 2002, and any
adjournment thereof, upon the matters set forth in the notice of said meeting as
indicated below. The proxies are further authorized to vote, in their
discretion, upon such other business as may properly come before the meeting or
any adjournment thereof.
When properly executed, this proxy will be voted as specified by the
undersigned. Unless otherwise instructed, this proxy will be voted FOR
proposals 1 and 2.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
(Continued and to be dated and signed on the reverse side.)
DETACH PROXY CARD HERE
--------------------------------------------------------------------------------
[ ] (Please sign, date and return [X]
this proxy in the enclosed Votes must be indicated
postage prepaid envelope.) (x) in Black of Blue ink.
The Board of Trustees recommends a vote FOR proposals 1 and 2.
1. Election of the eleven Trustees Nominated
FOR ALL [ ] WITHHOLD FOR ALL [ ] EXCEPTIONS [ ]
To vote for all nominees, mark the "FOR" box. To withhold voting for a
particular nominee(s), mark the "FOR ALL EXCEPT AS MARKED" box and strike a line
through the name of the nominee(s) in the list below. To withhold voting on all
nominees, mark the "WITHHELD" box.
Nominees: Richard H. Booth, Cotton Mather Cleveland, Sanford Cloud, Jr., James
F. Cordes, E. Gail de Planque, John H. Forsgren, Raymond L. Golden,
Elizabeth T. Kennan, Michael G. Morris, Robert E. Patricelli and
John F. Swope.
2. Ratification of Deloitte & Touche LLP as independent auditors for 2002.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
To change your address, please mark this box. [ ]
Signature: Date:
-------------------------- ---------------