<PAGE>
March 26, 1997
TO OUR SHAREHOLDERS:
We extend our personal invitation to join us at the Annual
Meeting of Shareholders on May 19, 1997.
The formal Notice of Meeting and Proxy Statement appear on the
following pages and contain details of the business to be conducted
at the Annual Meeting.
It is important that you promptly sign and return the enclosed
proxy card for the annual election of Trustees.
We appreciate your attention to this important action and look
forward to seeing you at our Annual Meeting.
Sincerely,
DONALD G. PARDUS
CHAIRMAN OF THE BOARD
<PAGE>
NOTICE OF ANNUAL MEETING
March 26, 1997
TO OUR SHAREHOLDERS:
Notice is hereby given that the Annual Meeting of the Shareholders of
Eastern Utilities Associates, a voluntary association formed under a Declaration
of Trust dated April 2, 1928, as amended, will be held in the Enterprise Room on
the 5th floor of the State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts, on Monday, May 19, 1997, at 9:30 a.m., for the following
purposes:
1. To elect eleven (11) Trustees of the Association for the ensuing year.
2. To transact such other business as may properly come before the meeting.
Only Common Shareholders of record on the transfer books of the Association
at the close of business March 21, 1997 will be entitled to vote at the meeting
of which notice is hereby given and at any and all adjournments thereof. In the
election of Trustees, the holders of common shares have the right of cumulative
voting as provided in Article 28 of the Declaration of Trust, as amended.
You are urged to sign, date and return the enclosed proxy at your earliest
convenience to The First National Bank of Boston, c/o Boston EquiServe, Proxy
Services, P.O. Box 9377, Boston, Massachusetts 02205-9952. An envelope is
enclosed for that purpose.
You are invited to be present at the meeting and in the event you do attend,
any proxy previously signed may be revoked and your shares voted in person at
the meeting.
By Order of the Trustees,
CLIFFORD J. HEBERT, JR., SECRETARY
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 19, 1997
March 26, 1997
The accompanying proxy is solicited on behalf of the Trustees of Eastern
Utilities Associates for use at the Annual Meeting of the Shareholders to be
held in the Enterprise Room on the 5th floor of the State Street Bank and Trust
Company, 225 Franklin Street, Boston, Massachusetts, on Monday, May 19, 1997 for
the purposes set forth in the foregoing Notice of Annual Meeting and at any and
all adjournments thereof.
The person giving such proxy may revoke it at any time before it is voted,
by a later dated proxy delivered pursuant to this solicitation, by other written
revocation received by the Secretary, or by oral revocation in person at the
meeting.
An Annual Report, including financial statements, accompanies this
statement.
There are outstanding 20,435,997 common shares, the holders of which are
entitled, for each share held of record at the close of business on March 21,
1997, to one vote per share in person or by proxy, on all matters acted on at
the meeting, except that, as provided in Article 28 of the Declaration of Trust,
as amended, the election of Trustees will be by cumulative voting, namely, each
holder of common shares will be entitled to as many votes as will equal the
number of his shares multiplied by the number of Trustees to be elected, and he
may cast all of such votes in person or by proxy for a single candidate or
distribute them among any two or more candidates as he shall elect. The only
candidates eligible for election as Trustees will be those who have been
nominated by notice given in writing to the Secretary at least twenty-four (24)
hours prior to the time fixed for calling to order of the meeting at which the
vote is to be taken.
The Association's Declaration of Trust provides that a quorum for the
meeting shall consist of the representation in person or by proxy at the meeting
of shareholders entitled to a majority of the votes that could be cast at the
meeting. The election of Trustees is by plurality vote, such that the 11
nominees with the highest vote totals will be elected. Withheld votes as to a
particular nominee affect vote totals for that nominee. Broker non-votes will
not affect the outcome of the election. If an individual has signed a proxy card
but has not voted on a particular matter, such proxy will be voted in favor of
management's recommendation with respect to such matter in accordance with the
discretion granted to the proxies.
<PAGE>
ELECTION OF TRUSTEES AND OWNERSHIP OF COMMON SHARES
It is proposed to elect eleven (11) Trustees to serve for the ensuing year
until the next Annual Meeting of the Shareholders or until succeeding Trustees
have been chosen and qualified. Unless otherwise directed, the persons named on
the accompanying proxy will vote for the election of the eleven nominees listed
below as Trustees of the Association. If, for any reason, any of the nominees
should become unavailable to serve, the persons named on the accompanying proxy
will vote for such other nominees as a majority of the Trustees may approve. In
addition, the persons named on the accompanying proxy may cast, at their
discretion, any or all votes cumulatively among any number of such nominees.
All of the nominees in the following table are at present Trustees of the
Association and were elected to their present term of office at the Annual
Meeting of Shareholders on May 20, 1996.
Each of the nominees has served in the capacity indicated in the list for
more than five years, with the exception of Russell A. Boss, who was Chief
Operating Officer of A.T. Cross Company until April 1993, and Jacek Makowski,
who was Chairman and Chief Executive Officer of J. Makowski Company prior to
1996.
In addition to their principal occupations in the table below, the nominees
are trustees or directors of publicity held companies as follows: Mr. Boss is a
Director of A.T. Cross Company and Brown & Sharpe Manufacturing Co.; Mr.
Choquette is a Director of Fleet Financial Group and Carlisle Companies, Inc.;
Mr. Freeman is a Trustee or Director of Providence Journal Company, Amica Mutual
Insurance Company, Amica Life Insurance Company and of thirteen of the
registered mutual funds for which Scudder, Stevens & Clark is investment
advisor; Mr. Liebenow is a Director of Quaker Fabric Corporation; Mr. Marple is
a Trustee of thirteen of the registered mutual funds for which Scudder, Stevens
& Clark is investment advisor; Ms. Stapleton is a Director of Colonial Gas
Company; and Mr. Thorndike is a Director of Courier Corporation, Data General
Corporation, Providence Journal Company and Bradley Real Estate Inc. and a
Trustee of the Putnam Funds. In February 1994, Mr. Thorndike accepted
appointment as a successor trustee of private trusts in which he has no
beneficial interest, and concurrently became, serving until October 1994,
Chairman of the Board of two privately owned corporations controlled by such
trusts that filed voluntary petitions for relief under chapter 11 of the United
States Bankruptcy Code in August 1994.
Various Trustees also are directors of subsidiaries of the Association
having registered securities outstanding as follows: Mr. Pardus, Blackstone
Valley Electric Company and Eastern Edison Company; and Mr. Stevens, Blackstone
Valley Electric Company and Eastern Edison Company.
2
<PAGE>
The table below also sets forth the information concerning beneficial
ownership by the nominees, by each of the executive officers named in the
Summary Compensation Table on page 4 and by all Trustees and executive officers
as a group.
<TABLE>
<CAPTION>
COMMON
SHARES OF THE
ASSOCIATION
BENEFICIALLY
AGE AT OWNED AT
DECEMBER 31, TRUSTEE JANUARY 3,
NAME 1996 PRINCIPAL OCCUPATION SINCE 1997(A)
- ------------------------------ ----------------- ---------------------------------------------- ----------- -------------
<S> <C> <C> <C> <C>
<CAPTION>
Russell A. Boss (A,P)......... 58 President and Chief Executive Officer, A.T. 1989 1,000(b)
Cross Company (writing instruments
manufacturer), Lincoln, Rhode Island
<S> <C> <C> <C> <C>
Richard M. Burns.............. 59 Comptroller of the Association -- 4,866(c)
John D. Carney................ 52 Executive Vice President of the Association -- 7,525(c)
Paul J. Choquette, Jr. (C,F).. 58 President of Gilbane Building Company 1992 1,608(f)
(building construction), Providence, Rhode
Island
Peter S. Damon (A,P).......... 61 President and Chief Executive Officer, Bank of 1991 1,110(d)
Newport, Newport, Rhode Island
Peter B. Freeman (F,P)........ 64 Corporate Director and Trustee, Providence, 1979 2,379
Rhode Island
Larry A. Liebenow (A,C)....... 53 President and Chief Executive Officer of 1994 1,000
Quaker Fabric Corporation (upholstery
manufacturer), Fall River, Massachusetts
Jacek Makowski (F,P).......... 66 Chairman, Poseidon Resources Corporation 1995 200
(origination and development of major
capital projects), Stamford, Connecticut
Wesley W. Marple, Jr. (A,C)... 64 Professor of Business Administration, 1976 1,885(e)
Northeastern University, Boston,
Massachusetts
Donald G. Pardus.............. 56 Chairman of the Board of Trustees and Chief 1982 40,049(c)
Executive Officer of the Association
Robert G. Powderly............ 49 Executive Vice President of the Association -- 9,810(c)
Margaret M. Stapleton (A,F)... 60 Vice President, John Hancock Mutual Life 1977 1,449
Insurance Company, Boston, Massachusetts
John R. Stevens............... 56 President and Chief Operating Officer of the 1990 24,676(c)
Association
W. Nicholas Thorndike (C,F)... 63 Corporate Director and Trustee, Brookline, 1991 2,146
Massachusetts
Trustees and executive officers as a group.................................................................... 106,317(g)
</TABLE>
- --------------------------
(A), (C), (F) and (P) indicate member of Audit, Compensation and Nominating,
Finance or Pension Trust Committees, respectively.
(a) Unless otherwise indicated, beneficial ownership is based on sole investment
and voting power. Each nominee's ownership represents less than two-tenths
of one percent of the outstanding common shares of the Association.
(b) In addition, Mr. Boss owns 5 shares of Blackstone Valley Electric Company's
4.25% Preferred Stock.
(c) Jointly owned with spouse except for 615, 1,387, 5,134, 1,854, and 1,944
shares held under the Association's Employees' Savings Plan for Messrs.
Burns, Carney, Pardus, Powderly and Stevens, respectively, as to which each
has voting power, and 3,886, 6,138, 24,194, 6,357 and 16,905 shares held
under the Eastern Utilities Associates Restricted Stock Plan by Messrs.
Burns, Carney, Pardus, Powderly and Stevens, respectively, as to which each
has voting power. Also included are 364, 2,642, 1,387, and 1,326 shares
individually owned by Messrs. Burns, Pardus, Powderly and Stevens.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
3
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
(d) Jointly owned with spouse, except for 200 shares held individually.
(e) In addition, Mr. Marple's spouse owns 263 common shares. Mr. Marple
disclaims any beneficial interest in such shares.
(f) In addition, Mr. Choquette's spouse owns 150 common shares.
(g) Represents approximately five-tenths of one percent of total outstanding
common shares.
The Association was informed by statements filed on Schedule 13G and 13D
that the groups listed in the table below were the beneficial owners of 5% or
more of the Association's outstanding common shares. The table sets forth
information concerning such ownership as of December 31, 1996.
<TABLE>
<CAPTION>
AMOUNT OF % OF
OUTSTANDING SHARES OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED COMMON SHARES
- ----------------------------------------------------------------------------- ------------------ -----------------
<S> <C> <C>
Capital Research and Management Company(1)................................... 1,027,100 5.0%
333 South Hope Street
Los Angeles, CA 90071
</TABLE>
- --------------------------
(1) Sole dispositive power.
COMPENSATION AND OTHER TRANSACTIONS
SUMMARY COMPENSATION TABLE
Information is set out below as to compensation paid by the Association and
its subsidiaries for the years 1994, 1995 and 1996, to each of the five highest
paid executive officers of the Association whose aggregate cash compensation for
1996 exceeded $100,000.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION -------------
--------------------------------------------------- RESTRICTED
INCENTIVE OTHER ANNUAL STOCK ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS COMPENSATION(1) AWARDS(2) COMPENSATION(3)
- ------------------------------------ ----------- --------- --------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Donald G. Pardus.................... 1996 $ 412,025 -- $ 12,383 -- $ 10,275
Chairman and Chief Executive 1995 400,025 $ 85,000 13,696 $ 319,400 10,000
Officer 1994 390,025 100,000 13,083 -- 9,750
John R. Stevens..................... 1996 $ 321,125 -- $ 8,636 -- $ 8,015
President and Chief Operating 1995 312,025 $ 68,000 7,300 $ 202,561 7,800
Officer 1994 300,025 80,000 13,475 -- 7,500
Robert G. Powderly.................. 1996 $ 176,025 -- $ 10,210 -- $ 4,383
Executive Vice President 1995 168,025 $ 32,787 9,790 $ 71,024 4,200
1994 156,025 40,999 8,350 -- 3,900
John D. Carney...................... 1996 $ 169,525 -- $ 10,018 -- $ 4,103
Executive Vice President 1995 155,775 $ 32,787 4,025 $ 72,750 3,894
1994 140,025 34,207 4,229 -- 3,500
Richard M. Burns.................... 1996 $ 140,525 -- -- -- $ 3,513
Comptroller 1995 134,525 $ 18,785 -- $ 50,577 3,363
1994 130,025 22,005 -- -- 3,245
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
4
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)
(1) Represents amount reimbursed for tax liability accruing as a result of
personal use of company-owned automobiles.
(2) Aggregate amount and value (including the value reflected in the table under
"Restricted Stock Awards") of shares held under the Association's Restricted
Stock Plan to the officers listed above are as follows: Mr. Pardus, 13,883
shares, $319,400; Mr. Stevens, 8,807 shares, $202,561; Mr. Powderly, 3,088
shares, $71,024; Mr. Carney, 3,163 shares, $72,750; and Mr. Burns, 2,199
shares, $50,577. Dividends are paid on these shares.
(3) Contributions made under the Association's Employees' Savings Plan.
The Employees' Retirement Plan of Eastern Utilities Associates and its
Affiliated companies (the "Pension Plan") is a tax-qualified defined benefit
plan available to employees who have completed one year of service and have
attained the age of twenty-one. All of the officers referred to in the Summary
Compensation Table above participate in the Pension Plan. Trustees who are not
also employees of the Association and its subsidiaries (the "EUA System") are
not covered by the Pension Plan. The benefits of participants become fully
vested after five years of service. Annual lifetime benefits are determined
under formulas applicable to all employees, regardless of position, and the
amounts depend on length of credited service and salaries prior to retirement.
Benefits are equal to one and six-tenths percent of salaries (averaged over the
four years preceding retirement) for each year of credited service up to
thirty-five, reduced for each year by one and two-tenths percent of the
participants' estimated age sixty-five Social Security benefit, plus
seventy-five hundredths percent of salaries for each year of credited service in
excess of thirty-five years up to the Pension Plan maximum of forty years.
Any contributions to provide benefits under the Pension Plan are made by the
EUA System in amounts determined by the Pension Plan's actuaries to meet the
funding standards established by the Employee Retirement Income Security Act of
1974, as amended. Any contributions are actuarially determined and cannot
appropriately be allocated to individual participants. The annual benefits shown
in the table below are straight life annuity amounts, without reduction for
primary Social Security benefits as described above. Federal law limits the
annual benefits payable from qualified pension plans in the form of a life
annuity, after reduction for Social Security benefits, to $125,000 (for 1997)
plus adjustments for increases in the cost of living. The number of years of
service credited at present under the Pension Plan to Messrs. Pardus, Stevens,
Carney, Powderly and Burns are thirty-four, thirty-one, thirty, seventeen and
twenty-one, respectively.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------------
AVERAGE ANNUAL SALARY 15 20 25 30 35 40
- ------------------------------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
$100,000................................... $ 24,000 $ 32,000 $ 40,000 $ 48,000 $ 56,000 $ 59,750
200,000................................... 48,000 64,000 80,000 96,000 112,000 119,500
300,000................................... 72,000 96,000 120,000 144,000 168,000 179,250
400,000................................... 96,000 128,000 160,000 192,000 224,000 239,000
500,000................................... 120,000 160,000 200,000 240,000 280,000 298,750
600,000................................... 144,000 192,000 240,000 288,000 336,000 358,500
</TABLE>
The Association has a Key Executive Plan for certain officers of the
Association and its subsidiaries. This plan provides for the annual payment of
supplemental retirement benefits equal to 25% of the officer's base salary when
he retires, for a period of fifteen (15) years following the date of retirement.
In addition, in the event of the death of the participant prior to retirement an
amount equal to 200% of the officer's base salary at that time will be paid to
his beneficiary. A grantor trust has been established by the Association to help
ensure the performance of its payment obligations under the Key Executive Plan.
Any amount not covered by trust payments or otherwise will be paid from funds
available to the EUA System.
5
<PAGE>
The Association maintains non-qualified, unfunded retirement plans (the
"Restoration Plans") to restore benefits under the qualified plans' formulas
which are not covered under the qualified plan trusts due to federal limitations
on either earnings, contributions or benefits. Payments or contributions which
exceed the applicable federal limitations are made outside the qualified plans
in the same manner and under the same conditions as are applicable to benefits
payable from, or contributions payable to, the qualified plans. A grantor trust
has been established by the Association to help ensure the performance of its
payment obligations under these plans. Any amounts covered by trust payments or
otherwise will be paid from funds available to the EUA System.
CHANGE-IN-CONTROL ARRANGEMENTS
Severance agreements with executive officers of the Association and certain
of its affiliates provide that an officer's rate of compensation, benefits,
position, responsibilities and other conditions of employment will not be
reduced during the term of the agreement, which is thirty-six months commencing
upon the date on which a Change in Control, as defined in the agreements, of the
Association occurs. If within thirty-six months after a Change in Control the
officer's employment is terminated for any reason other than Cause, as defined
in the agreements, the Association will, (i) pay the officer within five
business days a lump-sum cash amount generally equal to the present value of the
additional wages and retirement benefits that the executive would have received
in return for completing an additional three years of service, (ii) continue or
vest certain fringe benefits and common share grants, (iii) reimburse legal fees
and expenses incurred as a result of the termination or to enforce the
provisions of the severance agreement and (iv) reimburse for a portion of the
taxes on certain of the foregoing payments, including any amount contributing a
"parachute payment" under the Internal Revenue Code. If the officer leaves the
employ of the Association or a subsidiary following a reduction in his position,
compensation, responsibilities, authority or other benefits existing prior to
the Change in Control, or suffers a relocation of regular employment of more
than fifty miles, such departure will be deemed to be a termination for reasons
other than Cause.
COMPENSATION OF TRUSTEES
Effective January 1, 1997, each non-management Trustee of the Association
receives, as a standard arrangement, a retainer fee for all services as a
Trustee in the amount of $16,000 annually, with an additional $850 fee for each
Trustees' or Committee meeting attended. In addition, each committee chairperson
receives an annual retainer fee in the amount of $2,500. Upon leaving the Board,
each non-management Trustee who has attained the age of sixty and who has served
as a member of the Board of Trustees for at least five years is entitled to an
annual amount, equal to the then current annual retainer paid to active
Trustees, for as many full years as that Trustee has served as a Trustee. In the
event of a change in control of the Association, a grantor trust has been
established by the Association to ensure the performance of its payment
obligations under this retirement plan.
REPORT OF THE COMPENSATION AND NOMINATING COMMITTEE
ON COMPENSATION OF EXECUTIVE OFFICERS
The compensation philosophy of the Board of Trustees' Compensation and
Nominating Committee (the "Committee") and the Association is to be competitive
with prevailing utility industry compensation norms when satisfactory results
are achieved and surpass market norms when exceptional results are reached.
(Since the total compensation for any executive is still significantly below the
$1 million threshold at which tax deductions are limited under the Internal
Revenue Code, the Committee has not had to address issues relative thereto.) The
Committee is composed entirely of independent, non-employee Trustees.
Compensation of executive officers, including the Chief Executive Officer
("CEO"), is a mix of three components, base salary, annual cash incentives and
long-term incentives ("Stock Grants"). In recent years, the Association has
moved toward placing a greater percentage of compensation at risk through the
use of annual cash incentives and Stock Grants. The incentives are designed to
reinforce the implementation of both short and long-term objectives needed to
build the Association's business and to retain the talent required to manage the
Association's business.
6
<PAGE>
BASE SALARY
The Committee, working with an independent compensation consultant, annually
reviews the base salary of the CEO and the four other executive officers named
in the Summary Compensation Table on page 4. Each executive officer, including
those named above, is assigned a salary range which is established using
compensation data for comparable officer positions in other utilities. These
other utilities: 1) generally have revenue at or about the same level of the
Association; 2) operate in generally the same geographic area as the
Association; and 3) have other characteristics similar to those of the
Association. None of the comparative utilities are included in the Standard &
Poor's 26 Electric Power Utilities Index ("S&P 26 Utilities Index") because
their level of annual revenue is less than those utilities included in that
Index.
Each salary range has a minimum amount, a position value (reasonable
equivalent to market value) and an excess amount which is 10% above the position
value. Base salary is limited to no more than the excess amount. Although no
specific measure of corporate performance is used in determining base salary,
the Committee sets the base salaries for each of the officers listed in the
Summary Compensation Table after considering all of the following factors: 1)
the financial and operational performance of the Association; 2) observed
individual performance; 3) time in current position; 4) existing base salary
relative to position value; and, 5) except for the CEO, input of the CEO.
Generally, the base salary of the CEO and the four other officers approximates
the averages for similar positions in the comparable utilities described above.
Salary increases for 1996 were based on the factors outlined above.
ANNUAL CASH INCENTIVES
The Association has had an Annual Cash Incentive Plan since 1987. The 1996
version of the Plan applicable to officers, other than the CEO and COO,
contained two Performance Objectives which were approved by the Committee in
early 1996. One Objective measures Core Electric Business Earnings Per Average
Common Share against a target. A Threshold Core Electric Business Earnings Per
Share must be reached before any Annual Cash Incentive is paid. The second
Performance Objective measures the Cost of Service Per Customer against a peer
group of 20 New England utilities. Each Performance Objective represents 40% of
the total objectives.
Performance under the Cost of Service Per Customer Objective exceeded the
1996 target, however, because the Core Electric Business Earnings Per Share
Threshold was not met, no Cost of Service Per Customer award was made.
The remaining 20% of the total Objective was discretionary. Each officer had
several individual goals which formed the primary basis for determining the
level of their individual discretionary awards. Because the Threshold Core
Electric Business Earnings Per Share was not met, no discretionary awards were
made for 1996.
The Committee also considers and sets Annual Cash Incentive Awards to the
CEO and the COO. Four Performance Objectives were utilized for 1996 Awards:
System Earnings Per Average Common Share (20% weight); Total Return Versus the
S&P 26 Utilities Index (20% weight); Cost of Service Per Customer (20% weight)
and Discretion (40% weight).
A Threshold System Earnings Per Average Common Share must be met before any
Annual Cash Incentive Awards can be made to the CEO and COO. System Earnings Per
Average Common Share did not meet the Threshold amount necessary for an
incentive award, therefore no Cash Incentive Awards were made to the CEO and
COO. The Threshold for Total Return Versus the S&P 26 Utilities Index was not
met, while Performance under the Cost of Service Per Customer Objective exceeded
the 1996 target.
Any discretionary awards to the CEO and COO for 1996 were to be based on
several factors, including performance measured against a series of six specific
goals designed primarily to measure financial and operational performances. The
1996 goals related to Price/Earnings Ratio, Earnings Contribution from EUA
Cogenex, Profitable diversified operations, and three Qualitative measures.
Three of the six goals were met in 1996, however, no Cash Incentive Awards were
made to the CEO and COO because the Threshold System Earnings Per Average Common
Share was not met.
7
<PAGE>
LONG-TERM INCENTIVES (STOCK PLAN)
The Association established a restricted stock grant plan in 1989 which, as
amended since then, is now the Eastern Utilities Associates Restricted Stock
Plan. The purpose of the plan is to assist the Association in securing,
retaining and motivating key executives and to recognize their efforts on behalf
of the Association through awards of common shares of the Association. Such
grants may be awarded every third year and the currently outstanding awards vest
on the fifth anniversary of the date of the grant if the executive has continued
in the employment of the Association through that date. Restricted stock grant
awards were made in 1995 to the Executives listed in the Summary Compensation
Table on page 4. No stock grant awards were made in 1996.
<TABLE>
<S> <C>
COMPENSATION AND NOMINATING
COMMITTEE
Paul J. Choquette, Jr. Wesley W. Marple, Jr.
Larry A. Liebenow W. Nicholas Thorndike
</TABLE>
CORPORATE PERFORMANCE GRAPH
The following table compares total shareholder returns over the last five
fiscal years to the Standard & Poors 500 Stock Index ("S&P 500") and the S&P 26
Utilities Index. Total return values for the S&P 500, S&P 26 Utilities Index and
Eastern Utilities Associates were calculated based on cumulative total return
values assuming reinvestment of dividends.
TOTAL RETURN SUMMARY
BASED ON INITIAL INVESTMENT OF $100
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG EASTERN UTILITIES ASSOCIATES, THE S&P 500 INDEX
AND THE S&P 26 UTILITIES INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
EUA S&P 500 S&P 26 UTILITIES INDEX
<S> <C> <C> <C>
12/91 $ 100 $ 100 $ 100
12/92 128 108 106
12/93 152 119 118
12/94 127 120 104
12/95 146 165 136
12/96 117 203 136
</TABLE>
* $100 invested on 12/31/91 in stock or index--including reinvestment of
dividends. Fiscal Year ending December 31.
8
<PAGE>
THE FOREGOING REPORT OF THE COMMITTEE AND THE CORPORATE PERFORMANCE GRAPH
THAT APPEARS IMMEDIATELY AFTER SUCH REPORT SHALL NOT BE DEEMED TO BE SOLICITING
MATERIAL OR TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 OR INCORPORATED BY
REFERENCE IN ANY DOCUMENT SO FILED.
COMMITTEES
In addition to eleven meetings of the Trustees, meetings were held in 1996
of each of the four standing Committees of the Association: Audit Committee
(two); Compensation and Nominating Committee (four); Finance Committee (four);
and Pension Trust Committee (three). Each of the Trustees, except Mr. Makowski,
attended at least 75% of the total number of meetings of the Trustees and of
Committees on which he or she served. All members of the Committees are
non-management Trustees; the Chief Executive Officer of the Association serves
as Secretary of each Committee.
The general function of each standing Committee is outlined below.
The Audit Committee recommends the selection or retention of independent
auditors, consults with them with respect to the plan of audit, reviews with
them their audit report and consults with them and with the Association's
internal audit staff as to the adequacy of internal controls.
The Finance Committee monitors and reviews financial matters, including
financial forecasts. It makes recommendations to the Trustees with respect to
changes in dividend policy, the capital structures of the Association and of its
subsidiaries, and other financial issues.
The Pension Trust Committee reviews recommendations as to amendments to the
Retirement Plan and the Employees' Savings Plan, monitors the performance of the
investment managers for each plan's trust fund, determines overall objectives of
the trust funds, reviews the annual actuarial report, reviews the
appropriateness of certain actuarial assumptions and makes recommendations to
the Trustees.
The Compensation and Nominating Committee reviews the compensation of the
Chairman, the President, the Executive Vice Presidents and the Comptroller and
the amount of fees to be paid to Trustees, monitors the Annual Cash Incentive
Plan and the Restricted Stock Plan, considers candidates (including candidates
recommended by Shareholders) to fill vacancies among the Trustees, reviews
membership on Committees of the Trustees and makes recommendations to the
Trustees. Shareholder recommendations should be submitted in writing to the
Chairman or the Secretary of the Association. This Committee would recommend a
successor to the Chief Executive Officer if that office became vacant and would
also deliberate on any plan in which officers or Trustees as a class would be
eligible to receive any additional compensation or related benefit such as
deferred compensation or stock options. All members are non-employee Trustees
and none has any direct or indirect material interest in or relationship with
the Association outside of his or her position as Trustee.
AUDITORS
Coopers & Lybrand L.L.P., Certified Public Accountants, are the
Association's auditors. Audit services of Coopers & Lybrand L.L.P. for 1996
included the examination, reporting and certification of the consolidated
financial statements of the Association contained in the Annual Report to
Shareholders and services related to certain filings with the Securities and
Exchange Commission.
Representatives of Coopers & Lybrand L.L.P. will be present at the Annual
Meeting, will have an opportunity to make a statement, and will be available to
answer appropriate questions.
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OTHER MATTERS
Management does not intend to bring before the meeting any matters other
than those specified and has no knowledge of any other matters which may be
brought up by other persons. However, if any other matters not now known
properly come before the meeting or any adjournment thereof, the persons named
in the enclosed form of proxy, including any substitutes, are expected to vote
said proxy in accordance with their judgment on such matters.
EXPENSES
The expenses in connection with the solicitation of the enclosed form of
proxy will be borne by the Association. In order to obtain the requisite quorum
at the Annual Meeting, it may be necessary to solicit proxies by telephone,
telegraph or personal interview. The Association does not expect to pay any
compensation for the solicitation of proxies, but will pay brokers and other
persons holding shares in their names or in the names of nominees their
expenses, nominal in amount, for sending proxy material to principals and
obtaining their proxies.
SHAREHOLDER PROPOSALS
The 1998 Annual Meeting of Shareholders is tentatively scheduled to be held
on or about May 18, 1998. Proposals of Shareholders intended to be presented at
the meeting must be received by the Association on or before November 28, 1997.
THE ASSOCIATION WILL FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM
10-K, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO, REQUIRED TO BE FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION FOR FISCAL YEAR 1996 UPON WRITTEN
REQUEST TO CLIFFORD J. HEBERT, JR., TREASURER AND SECRETARY, EASTERN UTILITIES
ASSOCIATES, P.O. BOX 2333, BOSTON, MASSACHUSETTS 02107.
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