<PAGE>
NEW ENGLAND ELECTRIC SYSTEM
25 RESEARCH DRIVE
WESTBOROUGH, MASSACHUSETTS 01582
March 10, 1997
Re: NEES Companies Incentive Thrift Plan I
NEES Companies Incentive Thrift Plan II
Yankee Thrift Plan
Yankee Thrift Plan II
Dear NEES Shareholder:
---------------------
Under the thrift plans, NEES common shares are
held by the trustee. As beneficial owner of NEES
common shares through one or more of the plans, you
have a right to direct the trustee how to vote at the
1997 New England Electric System Annual Meeting of
shareholders. Shareholders who own NEES common shares
directly vote through a proxy. Plan participants have
a somewhat different procedure. Included in this
package is a voting instruction card on which you
instruct the trustee how to vote. Your share balance
in each of the plans in which you participate appears
at the top of the enclosed voting instruction card.
Please note that all of the shares in the plans must be
voted. Therefore, the trustee will vote shares for
which it does not receive instructions in the same
proportion as those for which it does.
We would appreciate your voting on the election of
directors and other matters as set forth in the
accompanying proxy statement. Please take the time to
review the proxy material, complete your voting
instruction card, and mail the card in the enclosed
envelope. Your voting instruction will be kept
confidential by an independent proxy tabulator.
Sincerely,
(Facsimile Signature) (Facsimile Signature)
JOAN T. BOK JOHN W. ROWE
Chairman President and
of the Board Chief Executive Officer
<PAGE>
NEW ENGLAND ELECTRIC SYSTEM
25 RESEARCH DRIVE
WESTBOROUGH, MASSACHUSETTS 01582
March 10, 1997
Dear Shareholder:
The directors and officers of New England Electric
System invite you to attend the Annual Meeting of
shareholders to be held on Tuesday, April 29, 1997, at
10:30 A.M. at the Casino in Roger Williams Park,
Providence, Rhode Island. The historic Casino building
is located next to the Roger Williams Park Zoo. The
Casino has on-site parking and is handicapped
accessible.
The business part of the meeting is fully
described in the accompanying Notice of Annual Meeting
and Proxy Statement. At the conclusion of the formal
portion of the meeting, there will be a discussion of
the Company's operations, followed by a question and
answer period.
We would appreciate your voting, signing, and
dating the proxy, and mailing it promptly in the
enclosed postage-paid envelope, even if you plan to
attend the meeting in person. If you do plan to
attend the meeting, a map showing the location of Roger
Williams Park and the Casino appears at the back of the
proxy statement.
Sincerely,
(Facsimile Signature) (Facsimile Signature)
JOAN T. BOK JOHN W. ROWE
Chairman President and
of the Board Chief Executive Officer
<PAGE>
NEW ENGLAND ELECTRIC SYSTEM
25 RESEARCH DRIVE
WESTBOROUGH, MASSACHUSETTS 01582
NOTICE OF ANNUAL MEETING
The 1997 Annual Meeting of the shareholders of New
England Electric System will be held at the Casino in
Roger Williams Park, Providence, Rhode Island, on
Tuesday, April 29, 1997, at 10:30 A.M., E.D.S.T., for
the following purposes, all as set forth in the
accompanying proxy statement:
1. To fix the number of directors;
2. To elect directors;
3. To consider and vote on a shareholder
proposal if presented at the meeting;
and
4. To transact such other business as may
properly come before the meeting or any
adjournment thereof.
Shareholders of record at the close of business on
March 10, 1997, will be entitled to vote at the
meeting.
By order of the Board of Directors,
(Facsimile Signature)
Cheryl A. LaFleur,
Secretary
March 10, 1997
<PAGE>
PROXY STATEMENT
NEW ENGLAND ELECTRIC SYSTEM
25 RESEARCH DRIVE
WESTBOROUGH, MASSACHUSETTS 01582
ANNUAL MEETING OF SHAREHOLDERS, APRIL 29, 1997
The Board of Directors of New England Electric
System is soliciting proxies in the accompanying form.
Proxies may be revoked at any time prior to being used
by completing a new proxy, by notifying the Company in
writing of such revocation, or by voting in person at
the Annual Meeting. All shares represented by properly
executed proxies will be voted at the Annual Meeting or
any adjournment thereof as specified in such proxies.
The Company's annual report for 1996, which
includes financial statements and a summary of
important developments during 1996, has been mailed to
shareholders on or about March 10, 1997. The
approximate date on which the proxy statement and form
of proxy are first being sent is March 19, 1997.
Holders of common shares of record at the close of
business on March 10, 1997, are entitled to vote at the
Annual Meeting. At that date there are 64,826,067
common shares outstanding and each share is entitled to
one vote.
An affirmative vote of a majority of the shares
present in person or represented by proxy at the
meeting and entitled to vote is required for approval
of each of the items being submitted to the
shareholders for their consideration. Votes for
directors will be counted by the Company as (i) For or
(ii) Withhold Authority; abstentions have the same
effect as "Withhold Authority" votes. Votes concerning
other matters will be counted by the Company as (i)
For, (ii) Against, or (iii) Abstain; abstentions are
counted separately, but have the same effect as
"Against" votes. Broker non-votes (shares held by
brokers or nominees as to which instructions have not
been received from the beneficial owners and the broker
or nominee does not have discretionary voting power on
a particular matter) are counted as not represented at
the meeting for all matters.
<PAGE>
1. FIXING THE NUMBER OF DIRECTORS
The Board of Directors recommends a vote IN FAVOR
of this proposal.
The persons named on the accompanying proxy will
vote, unless otherwise directed, to fix the number of
directors at twelve. The Company's Agreement and
Declaration of Trust provides that the Board may fix
the number of directors at a number between eleven and
sixteen until the next annual meeting of shareholders.
2. ELECTION OF DIRECTORS
The persons named on the accompanying proxy will
vote, unless otherwise directed, for the election of
the twelve nominees listed below as directors of the
Company. All of the elected directors will hold office
until the next annual meeting of shareholders or the
special meeting held in lieu thereof and until their
respective successors are chosen and qualified.
All of the nominees for election as directors,
except William M. Bulger, were elected directors by the
shareholders at the 1996 Annual Meeting. Mr. Bulger
was elected a director by the Board of Directors on
July 17, 1996.
The Company knows of no reason why any of the
nominees would be unable to act as a director, but, if
any of them should become unavailable to serve, the
persons named on the accompanying proxy have the
authority to vote for any other person nominated and
recommended by the Nominating Committee. If an
alternative nominee is not recommended by the
Nominating Committee, the number of directors will be
reduced.
Certain information regarding each nominee for
director is given below. This information has been
furnished to the Company by the respective nominees.
<PAGE>
Joan T. Bok Director since 1979
Chairman of the Board. Mrs. Bok, 67 years of age,
was elected Chairman in 1984 and held that
position through 1993. From July 26, 1988 until
February 13, 1989, she also served as President
and Chief Executive Officer. Mrs. Bok is a
director of each of the Company's direct
subsidiaries, including Massachusetts Electric
Company, The Narragansett Electric Company, and
New England Power Company. She is also a director
of Avery Dennison Corporation, John Hancock Mutual
Life Insurance Company, and Monsanto Company, and
is a Trustee of the Boston Athenaeum.
William M. Bulger Director since 1996
President of the University of Massachusetts,
Boston, Massachusetts. Mr. Bulger, 63 years of
age, served as President of the Massachusetts
State Senate from July 1978 to January 1996. He
also serves as a director of Citizens Bank and is
a Trustee of Massachusetts General Hospital, the
Boston Public Library, and the Museum of Fine
Arts. He is a corporator of the Children's Museum
and the Winsor School and is on the board of
overseers of the Boston Symphony Orchestra.
Paul L. Joskow Director since 1987
Professor of Economics and Management and Head,
Department of Economics, Massachusetts Institute
of Technology, Cambridge, Massachusetts. Professor
Joskow, 49 years of age, teaches and conducts
research in the fields of industrial organization,
government regulation, antitrust law and
economics, and energy economics. He was named
Chairman of the Economics Department in 1994.
Professor Joskow is a director of State Farm
Indemnity Company and the Whitehead Institute for
Biomedical Research. He is also President of the
Yale University Council and a Special Consultant
to National Economic Research Associates, Inc.
John M. Kucharski Director since 1989
Chairman, President, and Chief Executive Officer
of EG&G, Inc., Wellesley, Massachusetts. Mr.
Kucharski, 61 years of age, is a director of State
Street Boston Corporation, Nashua Corporation, and
Eagle Industry Co., Ltd. He also serves as
Trustee of George Washington University and
Marquette University.
<PAGE>
Edward H. Ladd Director since 1974
Chairman of Standish, Ayer & Wood, Inc.
(investment counselors), Boston, Massachusetts.
Mr. Ladd, 59 years of age, is a director of
Harvard Management Company and Greylock Management
Company. He is also a Trustee of Wheelock
College.
Joshua A. McClure Director since 1978
Former President of American Custom Kitchens,
Inc., Providence, Rhode Island. Mr. McClure, 65
years of age, is a member of the Westerly
Substance Abuse Task Force, the Westerly Housing
Authority Task Force, and the Washington County
Housing Authority.
John W. Rowe Director since 1989
President and Chief Executive Officer. Mr. Rowe,
51 years of age, served as President and Chief
Executive Officer of Central Maine Power Company
from 1984 until joining the Company as Chief
Executive Officer in February, 1989. He is a
director of a number of the Company's
subsidiaries, including Massachusetts Electric
Company, The Narragansett Electric Company, and
New England Power Company. Mr. Rowe is also a
director of Bank of Boston Corporation and UNUM
Corporation. He is a director and past Chairman
of the Massachusetts Business Roundtable and a
director of Jobs for Massachusetts, Inc., the
Alliance to Save Energy, and the Edison Electric
Institute. Mr. Rowe is also a Trustee of Bryant
College.
George M. Sage Director since 1975
President and Treasurer of Bonanza Bus Lines,
Inc., Providence, Rhode Island. Mr. Sage, 65 years
of age, is a director of Collette Travel, Inc. and
Business Development of Rhode Island. Mr. Sage
also serves as a director of United Way of
Southeastern New England and is a director and
member of the Executive Committee of Business
Development of Rhode Island.
Charles E. Soule Director since 1994
President and Chief Executive Officer of Paul
Revere Insurance Group, Worcester, Massachusetts.
The Paul Revere Insurance Group is a subsidiary of
<PAGE>
Textron Inc. Mr. Soule, 62 years of age, serves
as a director of the Paul Revere Investment
Management Company and Trustee for the Westboro
Savings Bank. He was a member of the
Massachusetts Electric Company Board of Directors
from 1991 to 1993.
Anne Wexler Director since 1981
Chairman of The Wexler Group (management
consultants), Washington, D.C. The Wexler Group
is a subsidiary of Hill and Knowlton. Ms. Wexler,
67 years of age, served as Assistant to the
President of the United States from 1978 to 1981
with responsibility for liaison with the business
community and other major interest groups. She is
a director of Alumax, Inc., Comcast Corporation,
Dreyfus Index Funds, Dreyfus Mutual Funds, and
NOVA Corporation.
James Q. Wilson Director since 1982
Professor of Strategy and Organization at The
University of California at Los Angeles, Los
Angeles, California. Professor Wilson is 65 years
of age. He is a director of State Farm Insurance
Company and a Trustee of the American Enterprise
Institute, the RAND Corporation, and the Randolph
Foundation.
James R. Winoker Director since 1991
Chief Executive Officer of Belvoir Properties,
Inc. (real estate investment), Providence, Rhode
Island. Mr. Winoker, 65 years of age, has served
as Chief Executive Officer of Belvoir Properties,
Inc. since 1994. He was Treasurer of Belvoir
Properties, Inc. from 1980 to 1994 and President
of B.B. Greenberg Co. (jewelry manufacturers) from
1970 to 1994. A receiver was appointed for B.B.
Greenberg Co. in 1994. Mr. Winoker is also a
director of Original Bradford Soap Works, Inc.
BOARD STRUCTURE AND COMPENSATION
The Company has an Executive Committee, an Audit
Committee, a Compensation Committee, a Corporate
Responsibility Committee, and a Nominating Committee.
The committee memberships listed below are as of
January 1, 1997.
<PAGE>
The members of the Executive Committee are Mrs.
Bok, Mr. Ladd, Mr. Rowe, Mr. Sage, and Ms. Wexler.
Mrs. Bok serves as the Chairman of this Committee.
During the intervals between meetings of the Board of
Directors, the Executive Committee has all the powers
of the Board that may be delegated.
The members of the Audit Committee are Messrs.
Bulger, Joskow, Soule, and Winoker. Mr. Joskow serves
as the Chairman of this Committee. The Audit Committee
reviews with the independent public accountants the
scope of their audit and management's financial
stewardship for the current and prior years. This
Committee also recommends to the Board of Directors'
and to the boards of the subsidiaries the independent
public accountants to be engaged for the coming year.
The members of the Compensation Committee are
Messrs. Kucharski, Sage, and Winoker. Mr. Sage serves
as the Chairman of this Committee. The Compensation
Committee is responsible for executive compensation,
including the administration of certain of the
Company's incentive compensation plans.
The members of the Corporate Responsibility
Committee are Mrs. Bok, Mr. McClure, Mr. Rowe, Ms.
Wexler, and Mr. Wilson. Mr. Wilson serves as the
Chairman of this Committee. The Corporate
Responsibility Committee reviews compliance with laws
and regulations, offers guidance in considering public
policy issues, and helps to assure ethical conduct.
The members of the Nominating Committee are Mr.
Ladd, Mr. Sage, and Ms. Wexler. Mr. Ladd serves as
Chairman of this Committee. The Nominating Committee
considers and evaluates director candidates, determines
criteria and procedures for selecting nonmanagement
directors, and conducts periodic reviews of director
performance. This Committee also considers written
recommendations from shareholders for nominees to the
Board.
The Chairman of the Executive Committee receives
an annual retainer of $7,000. Other members of the
Executive Committee, except Mr. Rowe, receive an annual
retainer of $5,000. The Chairmen of the Audit,
Compensation, and Corporate Responsibility Committees
each receive an annual retainer of $6,000. Other
members of these Committees, except Mr. Rowe, receive
annual retainers of $4,000. The Chairman of the
Nominating Committee receives an annual retainer of
$2,000. There is no retainer for the other members of
<PAGE>
the Nominating Committee. All directors participating
in a Committee meeting, except Mr. Rowe, receive a
meeting fee of $850 plus expenses.
Members of the Board of Directors, except Mr.
Rowe, receive annually a retainer of $14,000 and 300
common shares of the Company, and receive a meeting fee
of $850 plus expenses for each meeting attended.
The Company permits directors to defer all or a
portion of any cash retainers, meeting fees, and
retainer shares under a deferred compensation plan. A
director may elect to defer to a Company Share Account
or a Prime Rate Account. While deferred, the shares do
not have voting rights or other rights associated with
ownership. At the time of electing to defer
compensation, the director also elects whether to
receive payment after ten years or upon retirement,
and, if upon retirement, whether in ten payments or a
lump sum. A special account is maintained on the
Company's books showing the amounts deferred and the
interest accrued thereon. This plan also provides
certain death and disability benefits. Group life
insurance of $80,000 is provided to each member of the
Board of Directors. Director contributions to
qualified charities are matched by the Company under a
matching gift program, which has a maximum limit of
$3,500.
Pursuant to a director retirement plan,
nonemployee directors who have served on the Board of
the Company for 5 years or more will receive a
retirement benefit upon the later of the director's
retirement from the Board or age 60. The benefit level
is 100% of the annual retainer for directors who served
on the Board for 10 or more years and 75% of the annual
retainer for directors who served between 5 and 10
years. There are no death benefits under the plan.
The Board of Directors held 10 meetings in 1996.
The Executive, Audit, Compensation, Corporate
Responsibility, and Nominating Committees held 2, 3, 3,
3, and 2 meetings, respectively, in 1996.
During 1996, Mr. Joskow did consulting work for
the Company or subsidiaries of the Company under a
separate consulting contract for which he was paid
approximately $41,000. These consulting services were
not related to his duties as a Board member. The
Company and its subsidiaries retain from time to time
National Economic Research Associates, Inc. (NERA).
During 1996, NERA invoiced subsidiaries of the Company
<PAGE>
for approximately $245,000.00 to prepare testimony and
reports on regulatory matters. Mr. Joskow is a special
consultant to NERA.
Mrs. Bok serves as a consultant to the Company.
Under the terms of her contract, she receives an annual
retainer of $100,000. Mrs. Bok also serves as a
director for each of the Company's direct subsidiaries.
She has agreed to waive the normal fees and annual
retainers otherwise payable for services by
nonemployees on these boards and receives in lieu
thereof a single annual stipend of $60,000.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Mr. Winoker served as a member of the Company's
Compensation Committee during 1996. A subsidiary of
the Company entered into a three-year lease for office
space in 1996 with Belvoir Properties, Inc. (Belvoir)
with an annual rent of $36,000. Belvoir also entered
into a twenty-year lease with a subsidiary of the
Company for a parcel of land in Providence, Rhode
Island with an initial annual rent of $30,000.
TOTAL COMMON EQUITY BASED HOLDINGS
The following table lists the holdings of Company
common shares and deferred shares by the Company's
directors, the executive officers named in the Summary
Compensation Table, and for directors and all executive
officers as a group. The information includes all
whole shares beneficially owned, directly or
indirectly, as of March 1, 1997.
<PAGE>
Name Shares Deferred
Beneficially Share
Owned (a) Equivalents(b)
---- ----------- --------------
Joan T. Bok 17,111
William M. Bulger 100 129
Alfred D. Houston 13,235 8,892
Paul L. Joskow 2,719
John M. Kucharski 2,500
Edward H. Ladd 5,789
Cheryl A. LaFleur 2,543 4,603
Joshua A. McClure 2,010 251
John W. Rowe 22,677 20,419
George M. Sage 3,300
Richard P. Sergel 8,413 6,692
Charles E. Soule 1,196 2,875
Jeffrey D. Tranen 8,141 6,764
Anne Wexler 2,176
James Q. Wilson 3,002
James R. Winoker 1,500
All of the above and
other executive 100,244(c) 55,404
officers, as a group
(17 persons)
(a) Number of shares beneficially owned includes: (i)
shares directly owned by certain relatives with
whom directors or officers share voting or
investment power; (ii) shares held of record
individually by a director or officer or jointly
with others or held in the name of a bank, broker,
or nominee for such individual's account; (iii)
shares in which certain directors or officers
maintain exclusive or shared investment or voting
power whether or not the securities are held for
their benefit; and (iv) with respect to the
<PAGE>
executive officers of the Company, allocated
shares in the Incentive Thrift Plan described
below.
(b) Deferred share equivalents are held under the
Company's Deferred Compensation Plan or pursuant
to individual deferral agreements. Under the Plan
or deferral agreements, executives may elect to
defer cash compensation and share awards. There
are various deferral periods available under the
plans. At the end of the deferral period, the
compensation may be paid out in the Company's
common shares, cash, or a combination thereof.
The rights of the executives to payment are those
of general, unsecured creditors. While deferred,
the shares do not have voting rights or other
rights associated with ownership. As cash
dividends are declared, the number of deferred
share equivalents will be increased as if the
dividends were reinvested in the Company's common
shares. Deferred share equivalents for directors
are held under the Directors Deferred Compensation
Plan. See Board Structure and Compensation for a
description of that plan.
Potential share awards under the Long-Term
Performance Share Award Plan are not included in
this table.
(c) Amount is less than 1% of the total number of
shares of the Company outstanding.
Listed below are the only persons or groups known
to the Company as of March 10, 1997 to beneficially own
5% or more of the Company's common shares. However, T.
Rowe Price Trust Company disclaims beneficial ownership
of all such shares. The quantity of shares listed
below is as of December 31, 1996.
<PAGE>
Amount and Nature
Name and Address of of Beneficial Percent of
Beneficial Owner Ownership Common Shares
________________ _______________ ___________
T. Rowe Price Trust 5,268,184 shares 8.1%
Company as trustee for
100 East Pratt StreetCompany employee
Baltimore, MD 21202 benefits plans,
including those
discussed herein.
Franklin 4,592,700 shares 7.1%
Resources, Inc.
777 Mariners
Island Blvd
San Mateo, CA
94403-7777
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's total compensation package is designed to
attract, retain, and reward superior managers who are committed to
solid financial performance and who can also successfully lead the
Company as our industry becomes increasingly competitive. The
compensation package reflects the fact that these managers'
backgrounds are not necessarily limited to our Company or industry.
Total compensation consists of Base Salary, Incentive Compensation
(performance based, at risk compensation), and Benefits. The
Committee periodically reviews each component of the Company's
executive compensation program to ensure that pay levels and
incentive opportunities are competitive and that incentive
opportunities are linked to Company performance. The Company's
general compensation philosophy is that (1) the Base Salary ranges
should be competitive, with individual salaries reflecting
performance and experience; (2) a significant portion of management
compensation should be tied to achievement of corporate goals in
order to maintain a sharp focus on corporate performance; (3)
substantial portions of incentive compensation should be in shares
so as to consistently align the interest of management and the
Company's shareholders and customers; and (4) an ever higher
percentage of total compensation should be at risk and share based
as one moves upward through management. The compensation of Mr.
Rowe, the Chief Executive Officer, is based on these
considerations.
Share Ownership Guidelines
- --------------------------
The Company has long recognized the importance of consistent
alignment of executive interests with those of shareholders. In
<PAGE>
1995, the Committee voted that it is expected that executives will
own shares or share equivalents to certain minimum levels within
five years of being subject to the requirement. For Mr. Rowe, the
level is 40,000 shares. In February 1997, the Committee voted that
Mr. Houston's level be raised to 25,000 shares. For the other
executives listed in the Executive Compensation Summary Table, the
level is 15,000 shares. Other executives are expected to hold from
2,000 to 7,000 shares depending on their compensation levels and
bonus plans. In 1996, the Board of Directors voted that members of
the Board were expected to own 2,500 shares within five years of
being subject to that requirement.
To further reinforce the importance of executive share
ownership, the Committee has amended the Incentive Share Plan and
the Long-Term Performance Share Award Plan to provide that all
shares awarded to Company officers are restricted for five years,
unless deferred, at the officer's option, until termination of
service or ten years.
Compensation Decisions
- ----------------------
The Board of Directors votes the compensation of Mr. Rowe,
acting upon recommendations of the Compensation Committee, which is
described on page 5. The Committee reports its decisions to the
Board of Directors. After meeting in executive session without Mr.
Rowe, and discussing the reports made by the Committee, the Board
of Directors has unanimously accepted each of the recommendations
described below made in 1996 and to date in 1997. The Compensation
Committee votes the compensation of all other Company executive
officers listed in the Summary Compensation Table, as well as other
senior employees. The Board has ratified the compensation
decisions for these executive officers. Although Company
management may be present during Committee discussions of officers'
compensation, Committee decisions with respect to the compensation
of Mr. Rowe are reached in executive session. No decision on the
compensation of any executive officer is made in his or her
presence.
Under Section 162(m) of the Internal Revenue Code, tax
deductions are limited for compensation above $1 million. Mr.
Rowe's total compensation of $832,700 in cash and $377,068 in
shares for 1996 exceeds $1 million; however, the limitation of the
Code does not apply to amounts deferred. Given the mandatory
deferral of his special and plan share bonuses, the Internal
Revenue Code provisions do not currently impact the Company.
Compensation for each of the other executive officers is well below
the $1 million threshold. The Committee has not, therefore, had to
<PAGE>
address issues related to Section 162(m) and does not expect to in
the near future, but will continue to monitor these issues.
Base Salary
- -----------
Base Salary levels are established after consideration of the
appropriate market to determine the salary range for a position.
Extensive salary survey analyses are compiled annually and
presented to the Committee for review. Salary ranges are then
defined on the basis of those market surveys. These surveys may
include some of the same companies included in incentive
compensation plan comparisons or in the corporate performance
chart.
In October 1996, after consideration of multiple surveys
prepared by various consulting organizations and industry groups,
and taking into account Mr. Rowe's experience, success, and record
as a utility CEO, the Committee recommended the base salary for Mr.
Rowe be set at $597,600 for 1997. (Mr. Rowe's base salary was last
changed effective January 1995.) The Board adopted this
recommendation.
In November 1996, the Committee reviewed the performance of
each individual in the compensation group below Mr. Rowe and the
relative position of these individuals compared to the market
surveys discussed above, and, after the Committee's subjective
analysis of the performance of those individuals, the Committee
adopted salaries for this group.
Performance Based Incentive Compensation
- ----------------------------------------
Performance Based Incentive Compensation (at risk compensation
or bonus) is designed to deliver rewards above base salary, if the
Company and the individual executives perform well.
Annual Target Plans
- -------------------
The incentive components of the annual target compensation
plans are based on formulae with difficult threshold targets.
Under the formulae, in order for any plan bonuses to be awarded,
the Company must achieve a return on equity that places the Company
in the top 50% of the approximately 90 electric utilities listed in
the utility group formerly tracked by Duff & Phelps (the National
Grouping) or in the top 50% of the New England/New York regional
utilities (the Regional Grouping). See the Return on Equity graph,
below. The Board of Directors, in response to extraordinary
events, may enhance or curtail the actual return on equity used to
determine whether the Company met the targets. They did not do so
for 1996. On February 24, 1997, the Committee voted the bonuses
<PAGE>
under these plans.
For the maximum incentive to be awarded, the Company must
achieve a return on equity in the top 25% of both the National and
Regional Groupings and the Company's cost per kilowatt-hour must be
the lowest or next lowest of a selected group of New England
electric utilities. In 1996, if only one of the return on equity
targets had been met, Mr. Rowe would have received a formula bonus
of 12% of base pay in cash and 7.2% in shares. The maximum would
have been 50% of base pay in cash and 30% in shares. Based on the
performance described below, his formula bonus (cash and shares)
was 49.34% of base pay in cash and 29.58% in shares.
For purposes of determining the bonus amount for 1996, the
Company placed in the 72nd and the 88th percentiles in return on
shareholder equity of the National and Regional Groupings,
respectively. The Company placed second in the Regional Grouping
with respect to customer cost per kilowatt-hour in 1996.
No bonus awards would be made under the plans if earnings are
not sufficient to cover dividends, even if the return on equity
targets had been met.
Mr. Rowe's bonus under the plan is directly related to
achievement of the above described corporate targets. For 1996,
the incentive compensation plan bonuses of the other executives
were additionally dependent upon the achievement of individual
goals.
The participants in the incentive compensation plans are
awarded common shares of the Company under the Incentive Share
Plan, approved by the shareholders in 1990. No discretion is
exercised by the Committee in the awarding of shares generated by
the formulae. An individual's award of shares under the Incentive
Share Plan is a fixed percentage of her or his cash award for that
year from the incentive compensation plan in which she or he
participates. For Mr. Rowe, the percentage is 60%. If no cash
award is made, no shares are distributed under the formulae.
Further, total plan awards of shares in any calendar year cannot
exceed one-half of one percent (0.5%) of the number of outstanding
shares at the end of the previous calendar year. (The incentive
plan shares awarded, including those restricted or deferred, for
1996 were approximately 0.08% of the number of outstanding shares.)
As noted above, the Committee has restricted the share awards of
Company officers. The Committee voted to approve the bonuses upon
which the share awards are based on February 24, 1997.
Special Share Award
- -------------------
The Committee believes that during 1996 certain officers of
the Company accomplished significant results in leading industry
restructuring in New England in a way which protects the Company's
<PAGE>
shareholders at a time when utility investments are exposed to
increased risk. In recognition of these efforts, the Committee
recommended to the Board a special share award of 6,000 shares for
Mr. Rowe. This share award was conditioned on being deferred until
Mr. Rowe's termination of service with the Company. The other
officers listed in the summary table were also awarded shares that
were also mandatorily deferred.
Three-Year Target Plan
- ----------------------
In order to increase executive focus on multi-year
performance, in 1995 the Company established the Long-Term
Performance Share Award Plan described below. No payout was made
in 1996 nor will be made under this plan until the Spring of 1999.
Under this plan, awards are based upon various measures of
Company performance over a three-year period. Each award factor or
measurement functions independently. The factors change from year
to year and include financial and operating performance. The
factors may be related to those in the incentive plans. The factors
are established by the Committee at the beginning of each cycle.
All participants share the same factors and factor weights.
Performance is rated on rolling three-year periods, with a new
cycle beginning each year. An individual's potential award under
the plan is a fixed percentage of her or his base pay on the
January 1 of the first year of the plan measurement period. For
Mr. Rowe, that percentage was 50%. Percentages for other
executives range from 15% to 50%. No dividends accrue on the
allocated shares until awarded. At the end of the three-year
cycle, the participant receives actual shares based upon the
performance against the various factors. For example, for the
first cycle, 20% of the shares are dependent upon total shareholder
return compared to other regional utilities. See Estimated Future
Payouts under Non-Stock Price-Based Plans, below.
Benefits
- --------
The executive benefits are designed both to provide a
competitive package and to retain Company flexibility in staffing
management to meet changing conditions.
Severance
- ---------
In November 1996 the Committee reviewed management severance
benefits in light of the changes in the utility industry. The
Committee determined that, executive officers (including those
listed in the Summary Compensation Table, but excluding Messrs.
Rowe and Houston) would receive a benefit equal to one and one-half
times annual compensation, for a severance other than one for cause
<PAGE>
or following a change in control.
New England Electric System Compensation Committee
John M. Kucharski
George M. Sage
James R. Winoker
<PAGE>
CORPORATE PERFORMANCE
Total Return
The following graph shows total shareholder return for the
Company (capital appreciation plus reinvested dividends) for the
years 1991 through 1996, as compared to the Standard & Poor's 500
Index and the Edison Electric Institute (EEI) Index of 100
investor-owned electric companies, assuming the investment of $100
on December 31, 1991.
<TABLE>
<CAPTION>
NEES S & P 500 EEI Index
---- --------- ---------
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 127.84 137.11 107.50
1993 137.11 118.46 119.58
1994 120.25 120.03 105.74
1995 158.87 165.13 138.55
1996 149.20 203.05 140.22
</TABLE>
Note: The share price performance shown on the graph above is
not necessarily indicative of future price performance.
<PAGE>
Return on Equity
The following graph shows the return on equity of Company common
shares for the years 1992 through 1996 compared to a national
grouping of approximately 90 electric utilities (those utilities
listed in the utility group formerly tracked by Duff & Phelps) and
a regional grouping of utilities in the New York and New England
area. As discussed in the report of the Compensation Committee,
return on equity is a key driver of the Company's incentive
compensation program.
<TABLE>
<CAPTION>
NEES National Regional
Grouping Grouping
---- -------- --------
<S> <C> <C> <C>
1992 12.58% 11.32% 11.84%
1993 12.64% 11.90% 11.41%
1994 12.73% 11.42% 11.40%
1995 12.78% 11.72% 10.43%
1996 12.58% 11.41% 11.13%
</TABLE>
Note: The return on equity shown for each grouping is the
median at the date of incentive compensation
determination. The earnings performance shown on
the graph above is not necessarily indicative of
future performance.
<PAGE>
EXECUTIVE COMPENSATION
The following table gives information with respect to all
compensation for services in all capacities for the Company and its
subsidiaries for the years 1994 through 1996 to or for the benefit
of the Chief Executive Officer and the four other most highly
compensated executive officers of the Company.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term
Compen-
Annual Compensation (b) sation
_______________________ __________
Other Restricted
Name and Annual Share All Other
Principal Salary Bonus Compensa- Awards Compensa-
Position (a) Year ($) ($)(c) tion ($)(d) ($)(e) tion ($)(f)
- ------------ ---- ------ ------ ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
John W. Rowe, 1996 537,600 287,896 9,093 370,288 4,891 (g)
President 1995 537,600 427,213 9,568 0 4,750
and Chief 1994 501,156 284,540 9,517 160,974 4,526
Executive
Officer
Alfred D. 1996 335,016 167,306 6,265 182,267 4,649 (h)
Houston, 1995 262,800 177,663 5,753 0 4,180
Executive 1994 244,860 132,370 5,501 62,040 4,027
Vice
President
Jeffrey D. 1996 220,116 110,284 5,486 138,020 3,684 (i)
Tranen, 1995 200,100 143,254 5,268 0 3,578
Senior Vice 1994 187,356 98,357 5,049 45,804 3,466
President
Richard P. 1996 212,700 110,724 5,366 138,376 3,535 (j)
Sergel, 1995 184,956 139,373 4,877 0 3,424
Senior Vice 1994 168,600 94,801 4,934 44,352 3,324
President
Cheryl A. 1996 165,624 89,477 4,059 106,020 3,251 (k)
LaFleur, 1995 125,616 107,617 116 0 2,721
Vice 1994 113,344 71,117 116 25,609 2,633
President and
Secretary
</TABLE>
<PAGE>
(a) Officers of the Company also hold various
positions with subsidiary companies.
Compensation for these positions is included in
this table.
(b) Includes deferred compensation in category and
year earned.
(c) The bonus figures represent: cash bonuses under
an incentive compensation plan; the all-employee
goals program; the variable match of the
Incentive Thrift Plan including related deferred
compensation plan matches; special cash bonuses;
and unrestricted shares under the Incentive Share
Plan. See descriptions under Plan Summaries.
In 1996 and 1994 the bonus amounts were all cash
or contributions to the Incentive Thrift Plan,
including related deferred compensation plan
matches. In 1995 Mr. Rowe's bonus was $276,728
cash and contributions, and $150,485 in shares;
Mr. Houston's bonus was $123,160 cash and
contributions and $54,503 in shares; Mr. Tranen's
bonus was $99,403 cash and contributions and
$43,851 in shares; Mr. Sergel's bonus was $96,649
in cash and contributions and $42,724 in shares;
and Ms. LaFleur's bonus was $84,370 in cash and
contributions and $23,247 in shares.
(d) Includes amounts reimbursed by the Company for
the payment of taxes on certain noncash benefits.
(e) As more fully described in the Compensation
Committee Report on Executive Compensation,
special share bonus awards were made in 1996.
Under the terms of those awards, the share values
were mandatorily deferred until the executive's
termination of employment.
No awards vested during 1996 under the Company's Long-
Term Performance Share Award Plan. See Long Term
Incentive Plan - Awards in Last Fiscal Year.
The incentive share awards for the named executives
made for 1994 and 1996 were in the form of restricted
shares (with a five-year restriction) or deferred share
equivalents, deferred for receipt for at least five
years, at the executive's option. As cash dividends
are declared, the number of deferred share equivalents
will be increased as if the dividends were reinvested
in shares. See also Payments Upon a Change in Control
below. The shares awarded for 1995 were not restricted
and the value of the awards is included in the bonus
column.
<PAGE>
As of December 31, 1996, the following executive
officers held the amount of restricted and deferred
share equivalents with the value indicated: Mr. Rowe
27,022 shares, $942,392 value; Mr. Houston 10,014
shares, $349,238 value; Mr. Tranen 7,719 shares,
$269,200 value; and Mr. Sergel 7,471 shares, $260,551
value; and Ms. LaFleur 4,774 shares, $166,493 value.
The value was calculated by multiplying the closing
market price on December 31, 1996, by the number of
shares.
(f) Includes Company contributions to life insurance
and the Incentive Thrift Plan that are not bonus
contributions including related deferred
compensation plan match. See description under
Plan Summaries. The life insurance contribution
is calculated based on the value of term life
insurance for the named individuals. The premium
costs for most of these policies have been or
will be recovered by the Company.
(g) For Mr. Rowe, the type and amount of compensation
in 1996 is as follows: $ 3,000 for contributions
to the thrift plan and $1,891 for life insurance.
(h) For Mr. Houston, the type and amount of
compensation in 1996 is as follows: $3,000 for
contributions to the thrift plan and $1,649 for
life insurance.
(i) For Mr. Tranen, the type and amount of
compensation in 1996 is as follows: $3,000 for
contributions to the thrift plan and $684 for
life insurance.
(j) For Mr. Sergel, the type and amount of
compensation in 1996 is as follows: $3,000 for
contributions to the thrift plan and $535 for
life insurance.
(k) For Ms. LaFleur, the type and amount of
compensation in 1996 is as follows: $3,000 for
contributions to the thrift plan and $251 for
life insurance.
PAYMENTS UPON A CHANGE OF CONTROL
The Company has agreements with certain of its
executives, including those named in the Summary
Compensation Table, which provide severance benefits in
the event of certain terminations of employment
following a Change in Control of the Company (as
<PAGE>
defined below). (Mr. Tranen's contracts also provides
severance benefits in the event of a divestiture of all
or a substantial portion of the Company's fossil fuel
generating assets.) The terms of the agreements are
for three years with automatic annual extensions,
unless terminated by the Company. If, following a
Change of Control, the executive's employment is
terminated other than for cause (as defined) or if the
executive terminates employment for good reason (as
defined), the Company will pay to the executive a lump
sum cash payment equal to three times (two times for
some executives) the sum of the executive's most recent
annual base compensation and the average of his or her
bonus amounts for the prior three years. If Mr. Rowe
receives payments under his severance agreement that
would subject him to any federal excise tax due under
section 280G of the Internal Revenue Code, he will
receive a cash "gross-up" payment so he would be in the
same net after-tax position he would have been in had
such excise tax not been applied. In addition, the
Company will provide disability and health benefits to
the executive for two to three years, provide such
post-retirement health and welfare benefits as the
executive would have earned within such two to three
years, and grant two or three additional years of
pension credit. Mr. Rowe would become eligible for
benefits under the Retirement Supplement Plan described
below prior to the five-year vesting term.
Change in Control, including potential change of
control, occurs (1) when any person becomes the
beneficial owner of 20% of the voting securities of the
Company, (2) when the prior members of the Board no
longer constitute a 2/3 majority of the Board, or (3)
the Company enters into an agreement that could result
in a Change in Control.
Upon a change in control a participant in the
deferred compensation plan has the option of receiving
a lump sum payment equal to the value of cash and share
accounts and the actuarial value of maximum value of
future benefits from the insurance related benefits
under a prior plan, all less 10%.
The Company's bonus plans, including the incentive
compensation plans described in the Compensation
Committee report, the Incentive Thrift Plan, and the
Goals Program, provide for payments equal to the
average of the bonuses for the three prior years in the
event of a Change of Control. This payment would be
made in lieu of the regular bonuses for the year in
which the Change in Control occurs. The Long-Term
Performance Share Award Plan provides for a cash
<PAGE>
payment equal to the value of the performance shares in
the participant's account times the average target
achievement percentage for the Incentive Thrift Plan
for the three prior years. The Company's Retirees
Health and Life Insurance Plan has provisions
preventing changes in benefits adverse to the
participants for three years following a Change in
Control. The Incentive Share Plan and related
Incentive Share Deferral Agreements provide that, upon
the occurrence of a change in control (defined more
narrowly than in the other plans), any restrictions on
shares and account balances would cease.
PLAN SUMMARIES
A brief description of the various plans through
which compensation and benefits are provided to the
named executive officers is presented below to better
enable shareholders to understand the information
presented in the tables shown earlier. The general
provisions of the incentive compensation plans are
described in the report of the Compensation Committee.
The amounts of compensation and benefits provided to
the named executive officers under the plans described
below are presented in the Summary Compensation Table.
Goals Program
The Goals Program covers all employees who have
completed one year of service with the Company's
subsidiaries. Goals are established annually. For
1996, these goals related to earnings per share,
customer costs, safety, absenteeism, demand-side
management results, generating station availability,
transmission reliability, environmental and OSHA
compliance, and customer satisfaction. Some goals
apply to all employees, while others apply to
particular functional groups. Depending upon the
number of goals met, and provided the minimum earnings
goal is met, employees may earn a cash bonus of 1% to
4-1/2% of their compensation.
Incentive Thrift Plan
The Incentive Thrift Plan (a 401(k) program)
provides for a match of 40% of up to the first 5% of
base compensation contributed to the Company's
Incentive Thrift Plan (shown under All Other
Compensation in the Summary Compensation Table) and,
based on an incentive formula tied to earnings per
share, may fully match the first 5% of base
compensation contributed (the additional amount, if
any, is shown under Bonus in the Summary Compensation
<PAGE>
Table). Under Federal law, contributions to these
plans are limited. In 1996, the contribution amount
was limited to $9,500.
Deferred Compensation Plan
The Deferred Compensation Plan offers executives
the opportunity to defer base pay and bonuses. The
plan offers the option of investing at the prime rate
or in Company Shares; however, share bonuses may only
be deferred in a share account. Under Federal law, the
Incentive Thrift Plan, described above, is required to
limit participant base compensation to $150,000 in
calculating the Company match. Under the Deferred
Compensation Plan, the Company will make a contribution
to an executive's share account equivalent to the
resultant reduction in his match under the Incentive
Thrift Plan.
Life Insurance
The Company has established for the named
executive officers life insurance plans funded by
individual policies. The combined death benefit under
these insurance plans is three times the participant's
annual salary. These plans are structured so that,
over time, the Company should recover the cost of the
insurance premiums.
After termination of employment, Messrs. Rowe and
Houston may elect, commencing at age 55 or later, to
receive an annuity income equal to 40% of annual
salary. In that event, the life insurance is reduced
over fifteen years to an amount equal to the
participant's final annual salary. Due to changes in
the tax law, this plan was closed to new participants,
and an alternative was established with only a life
insurance benefit.
Financial Counselling
The Company pays for personal financial
counselling for senior executives. As required by the
IRS, a portion of the amount paid is reported as
taxable income for the executive. Financial
counselling is also offered to other employees through
a limited number of seminars conducted at various
locations each year.
Other
The Company does not have any share option plans.
<PAGE>
LONG TERM INCENTIVE PLAN - AWARDS IN LAST FISCAL YEAR
The following table shows the potential awards,
for those executive officers named in the Summary
Compensation Table, under the Long-Term Performance
Share Award Plan (more fully described in the
Compensation Committee Report on page 12) for the
performance cycle commencing January 1, 1996. The
Company's performance will be measured over the three-
year period ending December 31, 1998.
Estimated Future Payouts
under Non-Stock Price-Based Plans
----------------------------------
Number of
Common
Share Performance
Name Equivalents(a) Period Threshold(b) Target(c)
- ---- ----------- --------- --------- ------
John W. Rowe 6,747 3 years 169 6,747
Alfred D. Houston 4,204 3 years 105 4,204
Jeffrey D. Tranen 2,763 3 years 69 2,763
Richard P. Sergel 2,670 3 years 67 2,670
Cheryl A. LaFleur 1,040 3 years 26 1,040
(a) Amounts are denominated in common share units. No dividends
are attributable to share units. At the end of the cycle,
awards are paid either in shares or in cash (valued at the
five-day average price prior to the January 15 following the
close of the performance cycle).
(b) The awards in this column represent the threshold number of
shares that could be earned if the minimum attainment level is
reached for one factor. The minimum payout upon failure to
achieve any of the goals would be 0.
(c) The awards in this column represent the target (and maximum)
number of shares that could be earned if the maximum
performance is achieved for all factors.
The Long-Term Performance Share Award Plan provides awards
based on various measures of Company performance over a three-year
period. Each award factor functions independently. The
performance targets for each cycle are set by the Compensation
Committee. The measures of performance for this cycle are: return
on equity compared to the national group (60th-75th percentile);
kilowatt-hour cost compared to regional group (67th-90th
percentile); total shareholder return compared to the regional
group (60th-75th percentile); maintenance or improvement of bond
<PAGE>
ratings; and system service levels, measured by customer
satisfaction, system reliability, system availability, and
regulatory compliance. The national grouping is the utility group
formerly tracked by Duff & Phelps. The regional grouping is
composed of New England/New York regional utilities.
RETIREMENT PLANS
The following chart shows estimated annual benefits payable to
executive officers under the qualified pension plan and the
supplemental retirement plan, assuming retirement at age 65 in
1997.
<PAGE>
<TABLE>
PENSION PLAN TABLE
<CAPTION>
FIVE-YEAR 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
AVERAGE SERVICE SERVICE SERVICE SERVICE SERVICE SERVICE
COMPENSATION
- ------------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$ 300,000 60,400 87,600 114,900 141,300 167,800 184,500
$ 400,000 81,100 117,700 154,300 189,800 225,400 248,000
$ 500,000 101,800 147,700 193,700 238,300 283,000 311,400
$ 600,000 122,500 177,800 233,100 286,800 340,600 374,900
$ 700,000 143,200 207,800 272,500 335,300 398,200 438,300
$ 800,000 163,900 237,900 311,900 383,800 455,800 501,800
$ 900,000 184,600 267,900 351,300 432,300 513,400 565,200
$1,000,000 205,300 298,000 390,700 480,800 571,000 628,700
$1,100,000 226,000 328,000 430,000 529,300 628,600 692,100
$1,200,000 246,700 358,100 469,500 577,800 686,200 755,600
$1,300,000 267,400 388,100 509,000 626,300 743,800 819,000
$1,400,000 288,100 418,200 548,300 674,800 801,400 882,500
</TABLE>
For purposes of the retirement plans, Messrs. Rowe, Houston,
Tranen, and Sergel and Ms. LaFleur currently have 19, 34, 27, 18
and 11 credited years of service, respectively.
Benefits under the pension plans are computed using formulae
based on percentages of highest average compensation computed over
five consecutive years. The compensation covered by the pension
plan includes salary, bonus, and incentive share awards. Long-Term
Performance Share Awards will not be included. The benefits listed
in the pension table are not subject to deduction for Social
Security and are shown without any joint and survivor benefits.
The pension plan table above does not include annuity payments
to be received in lieu of life insurance for Messrs. Rowe and
Houston. The policies are described above under Plan Summaries.
Under the Retirement Supplement Plan, participants receive an
annual adjustment to their pension benefits. The amount of the
adjustment is equal to the rate of interest on AAA bonds for the
prior year less two percent (but in no case more than the increase
in the cost of living). Mr. Rowe is the only active employee now
participating in this plan.
The Company covers the full cost of post-retirement health
benefits for the senior executives listed in the Summary
Compensation Table.
<PAGE>
2. SHAREHOLDER PROPOSAL REGARDING SPLITTING OF SHARES
Mr. and Mrs. Russell G. Gilmore, 100 Tamarack Drive, East
Greenwich, Rhode Island 02818, have stated their intention to
present a proposal concerning the splitting of the Company's shares
for consideration by the shareholders at the Annual Meeting.
Information on the number of shares of the Company owned by Mr. and
Mrs. Gilmore will be furnished by the Company to anyone requesting
the information promptly upon the receipt of any oral or written
request therefor.
The Board of Directors is opposed to Mr. and Mrs. Gilmore's
proposal.
The following are the text of the proposal and supporting
statement supplied by Mr. and Mrs. Gilmore:
Resolved:
That the shareholders of New England Electric System recommend
that the Board of Directors take the necessary action to split the
shares of NEES Stock.
Supporting Statement:
A stock split of any amount would lower the price per share of
NEES on the New York Stock Exchange. The Proponents consider that
the price of NEES common shares are above the price that a small
investor considers normal. The last time the Board of Directors
split the shares of NEES stock was January 24, 1986 after the
Proponents withdrew their proposal dated May 7, 1985 that a two-
for-one-share split be considered at the 1986 annual meeting. NEES
Treasurer's letter to the proponents dated January 22, 1986 stated
in part, "we now consider your proposal that a two-for-one share
split be considered at this year's annual meeting of shareholders
to have been withdrawn."
The proponents submitted a proposal to split the NEES stock
shares at the 1996 annual meeting. The final vote was 16.5% in
favor, 79% against, and 4.5% abstaining. The total number of cards
voting was 9,874 in favor, 28,096 against and 2,289 abstaining.
The percentage of shares that did not vote on the proposal
share split was 26.9%. If the number of cards voting in favor of
the proposal are combined with those who did not vote at all on the
proposal or abstaining, it is fair to say, that this would be over
50%. With this in mind the proponents are making a special plea to
those who did not vote or abstained, to vote in favor of this
<PAGE>
proposal. In addition the proponents are making a special plea to
ask the large institutional investors, such as pension funds,
mutual funds, insurance companies and the like to vote with the
small investors for reasons clearly stated in the proponents 1996
stock split proposal.
Although the proponents generally agree with the
recommendation of the Board of Directors to vote against the 1996
share split proposal we do take exception "that a share split may
not always result in increased liquidity and market price shares."
Recent studies have found the effects of stock splits on stocks
that are split two-for-one outperform stocks that are not split at
all.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote AGAINST the proposal.
The Board of Directors of the Company periodically considers
whether to split the Company's common shares. In fact, the Board
did take the necessary actions to split the Company's shares in
1986. The Company notes that a share split may not always result
in increased liquidity and market price of shares. In addition,
while a stock split may lower the brokerage costs for new
shareholders, existing shareholders may have to pay higher
brokerage fees to carry out transactions in the split shares. A
share split is also costly to carry out. Further, the Company
feels that a share split would be unwise at this time, when the
industry is undergoing a major restructuring and the Company plans
to divest its generating business. The Company carefully monitors
all the relevant financial information and will continue to
evaluate if and when it is appropriate to split the shares. The
Company carefully monitors all the relevant financial information
and will continue to evaluate if and when it is appropriate to
split the shares.
OTHER MATTERS
The Company is not aware of any matter that may properly be
presented for action at the meeting other than the matters set
forth herein. If any other matter should be presented at the
meeting upon which a vote properly may be taken, the proxies in the
accompanying form confer upon the persons named therein, or their
substitutes, discretionary authority to vote in respect of any such
matter in accordance with their judgment.
The firm of Coopers & Lybrand L.L.P. is the independent
certified public accountant selected by the Board of Directors for
the Company for the current calendar year. Representatives of
<PAGE>
Coopers & Lybrand L.L.P. are expected to be present at the Annual
Meeting and available to respond to appropriate questions on the
financial statements of the Company and may make a statement if
they so desire.
The expense of preparing and mailing this proxy statement and
other incidental expenses of solicitation will be paid by the
Company. Arrangements will be made with brokerage houses and other
custodians, nominees, and fiduciaries to send proxies and proxy
material to their principals, and the Company will reimburse them
for the expense of doing so. Officers and regular employees of a
subsidiary of the Company may solicit proxies through the use of
the mails or by telephone, facsimile, or electronic mail.
Georgeson & Company Inc., New York, New York has been retained to
assist the Company in the solicitation of proxies, primarily from
brokers, banks, and other nominees, at an estimated initial cost
of $11,000 plus reimbursement of reasonable out-of-pocket expenses.
By completing the enclosed proxy you are voting the shares of
the Company held in your name and, in the event you are
participating therein, those held by you under the dividend
reinvestment and common share purchase plan and restricted shares
under the Incentive Share Plan. In the event common shares are
held in trust for you as a participant in one or more thrift plans,
you will receive a separate form for instructing the trustee how to
vote those shares.
SHAREHOLDER PROPOSALS
From time to time shareholders present proposals which may be
proper subjects for inclusion in the proxy statement and for
consideration at the annual meeting. In order for a shareholder
proposal to be considered for inclusion in the proxy statement for
the Company's next regularly scheduled annual meeting of
shareholders, it must be received by the Company on or before
November 12, 1997. Please forward any proposal to the Secretary of
the Company.
<PAGE>
The name "New England Electric System" means the trustee or
trustees for the time being (as trustee or trustees but not
personally) under an agreement and declaration of trust dated
January 2, 1926, as amended, which is hereby referred to, and a
copy of which as amended has been filed with the Secretary of The
Commonwealth of Massachusetts. Any agreement, obligation or
liability made, entered into or incurred by or on behalf of New
England Electric System binds only its trust estate, and no
shareholder, director, trustee, officer or agent thereof assumes or
shall be held to any liability therefor.
By order of the Board of Directors
(Facsimile Signature)
Cheryl A. LaFleur,
Secretary
March 10, 1997
For shareholder information or assistance, write or call
Shareholder Services at: New England Electric System, Shareholder
Services, P. O. Box 770, Westborough, MA 01581, toll-free number 1
(800) 466-7215, fax (508) 836-0276, or e-mail [email protected].
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
NEW ENGLAND ELECTRIC SYSTEM
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS ON APRIL 29, 1997
The Shareholder(s) listed on the reverse side appoints JOAN
T. BOK, CHERYL A. LAFLEUR, and JOHN W. ROWE, and each of them,
Proxies, with full power of substitution, to represent the
Shareholder(s) at the above annual meeting, and at any and all
adjournments thereof, and to vote thereat the number of shares
which the Shareholder(s) would be entitled to vote if then
personally present, with all the powers the Shareholder(s) would
then possess, but especially, without limiting the foregoing, to
vote as specified herein on the proposals set forth in the proxy
statement:
Election of Directors--The twelve nominees are J. T. Bok,
W. M. Bulger, P. L. Joskow, J. M. Kucharski, E. H. Ladd, J. A.
McClure, J. W. Rowe, G. M. Sage, C. E. Soule, A. Wexler, J. Q.
Wilson, and J. R. Winoker.
To withhold authority to vote for any nominee, print that
nominee's name in the space provided below:
_____________________________________________________________
(PLEASE SIGN and DATE ON REVERSE SIDE)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2 AND
AGAINST ITEM 3
1. Fix the number of Directors at 12.
FOR AGAINST ABSTAIN
/ / / / / /
2. Election of the Nominees (except those I have
listed on the reverse side).
FOR WITHHOLD AUTHORITY
/ / / /
3. Shareholder proposal regarding the splitting of
shares.
FOR AGAINST ABSTAIN
/ / / / / /
<PAGE>
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NOT SPECIFIED ABOVE,
THE PROXIES WILL VOTE "FOR" ITEMS 1 AND 2 AND "AGAINST" ITEM 3.
A majority of the Proxies present and acting at the meeting
in person or by substitute (or, if only one shall be so
present, then that one) shall have and may exercise all of
the powers of said Proxies hereunder.
Dated: ___________, 1997
Signed: __________________
Signed:___________________
(Sign exactly as name
appears to the left.)
When signing as attorney, executor, administrator, trustee, or
guardian, please give full title as such. If more than one name
is shown, including the case of joint tenants, each party should
sign.
IMPORTANT: WE URGE YOU TO VOTE, SIGN, DATE AND MAIL THIS PROXY
PROMPTLY TO ASSURE YOUR REPRESENTATION AT THE MEETING.
<PAGE>
THIS VOTING INSTRUCTION CARD IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
NEW ENGLAND ELECTRIC SYSTEM
FOR THE ANNUAL MEETING OF SHAREHOLDERS ON APRIL 29, 1997
To: T. ROWE PRICE, Trustee under the Thrift Plans.
As a participant in one or more of the thrift plans, I
hereby direct T. Rowe Price, Trustee, to vote or to give a proxy
to vote, in accordance with my directions on the reverse side,
the common shares of New England Electric System which are
allocated to my account (also a proportionate number of those
shares which have not been allocated to participants or for
which no instruction cards are received) at the above annual
meeting, and at any and all adjournments thereof, and in the
Trustee's discretion it is authorized to vote or to give a proxy
to vote upon such other business as may properly come before the
meeting.
Election of Directors -- The twelve nominees are J. T. Bok,
W. M. Bulger, P. L. Joskow, J. M. Kucharski, E. H. Ladd, J. A.
McClure, J. W. Rowe, G. M. Sage, C. E. Soule, A. Wexler, J. Q.
Wilson, and J. R. Winoker.
To withhold authority to vote for any nominee, print that
nominee's name in the space provided below:
(PLEASE SIGN and DATE ON REVERSE SIDE)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2 AND
AGAINST ITEM 3
1. Fix the number of Directors at 12.
FOR AGAINST ABSTAIN
/ / / / / /
2. Election of the Nominees (except those I have listed
on the reverse side).
FOR WITHHOLD AUTHORITY
/ / / /
3. Shareholder proposal regarding the splitting of
shares.
FOR AGAINST ABSTAIN
/ / / / / /
<PAGE>
THIS INSTRUCTION CARD WILL BE VOTED AS SPECIFIED. IF NOT
SPECIFIED ABOVE, THE SHARES REPRESENTED BY THIS CARD WILL BE
VOTED "FOR" ITEMS 1 AND 2 AND "AGAINST" ITEM 3.
________________________________________________________________
Dated: , 1997
Signed:
(Sign exactly as name
appears to the left.)
When signing as attorney, executor, administrator, trustee, or
guardian, please give full title as such.
IMPORTANT: WE URGE YOU TO VOTE, SIGN, DATE AND MAIL THIS CARD
PROMPTLY TO ASSURE YOUR REPRESENTATION AT THE MEETING.
