<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549-1004
Form 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996
Commission file number 1-7479
------
BAY STATE GAS COMPANY
EMPLOYEE SAVINGS PLAN
------------------------
(Full title of the plan)
BAY STATE GAS COMPANY
300 Friberg Parkway
Westborough, Massachusetts 01581-5039
---------------------------------------------
(Name and address of issuer of the securities
held pursuant to the plan)
<PAGE> 2
Index Page No.
----- --------
(a) Signatures 3
(b) Financial Statements
Independent Auditors' Report 4
Statements of Net Assets Available for
Plan Benefits of December 31, 1996 and 1995 5
Statements of Changes in Net Assets Available
for Plan Benefits for the years ended December 31,
1996, 1995 and 1994 6-8
Notes to Financial Statements 9-17
Schedule I: Item 27a - Schedule of Assets
Held for Investment Purposes 18
Schedule II: Item 27d - Schedule of Reportable
Transactions - Year Ended December 31, 1996 19
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Committee administering the Plan has duly caused this annual report to be signed
by the undersigned thereunto duly authorized.
BAY STATE GAS COMPANY
BENEFITS COMMITTEE
By /s/ Charles H. Tenney, III
--------------------------------------
Charles H. Tenney, III
Chairman
By /s/ Thomas W. Sherman
--------------------------------------
Thomas W. Sherman
Committee Member
By /s/ William D. MacGillivray
--------------------------------------
William D. MacGillivray
Committee Member
By /s/ Elizabeth A. Foley
--------------------------------------
Elizabeth A. Foley
Committee Member
Date: June 30, 1997
3
<PAGE> 4
Independent Auditors' Report
----------------------------
The Benefits Committee
Bay State Gas Company
We have audited the accompanying statements of Net Assets Available for Plan
Benefits of the Bay State Gas Company Employee Savings Plan as of December 31,
1996 and 1995, and the related statements of Changes in Net Assets Available for
Plan Benefits for each of the years in the three-year period ended December 31,
1996. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the Net Assets Available for Plan Benefits of the Bay
State Gas Company Employee Savings Plan at December 31, 1996 and 1995, and the
changes in Net Assets Available for Plan Benefits for each of the years in the
three-year period ended December 31, 1996 in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes and reportable transactions are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The supplemental schedules
have been subjected to the auditing procedures applied in the audits of the
basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
/s/ KPMG Peat Marwick LLP
Boston, Massachusetts KPMG Peat Marwick LLP
June 6, 1997
4
<PAGE> 5
<TABLE>
Bay State Gas Company Employee Savings Plan
Statements of Net Assets Available for Plan Benefits
December 31, 1996 and 1995
<CAPTION>
Assets
- ------
1996 1995
----------- -----------
<S> <C> <C>
Investments, at market value (note 4):
Company Stock Master Trust $13,216,392 $15,258,822
AIM Constellation Fund 4,033,829 2,001,128
Templeton Foreign Fund 7,593,679 6,504,203
MasterWorks S&P 500 Stock Fund 5,311,924 4,021,750
Wells Fargo LifePath Funds:
LifePath 2000 167,938 36,737
LifePath 2010 608,596 363,038
LifePath 2020 575,509 184,413
LifePath 2030 292,052 93,660
LifePath 2040 728,741 276,609
Stable Value Fund 9,196,092 7,812,999
Investments, at cost which approximates fair value:
Loan Fund 1,632,350 1,574,274
----------- -----------
Total investments 43,357,102 38,127,633
Contributions receivable from employees
and employer - 20,474
----------- -----------
Net Assets Available for Plan Benefits $43,357,102 $38,148,107
=========== ===========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
<TABLE>
Bay State Gas Company Employee Savings Plan
Statement of Changes in Net Assets Available for Plan Benefits
Year Ended December 31, 1996
<CAPTION>
Plan Interest in AIM LifePath LifePath LifePath LifePath
Company Stock Constellation 2000 2010 2020 2030
Master Trust Fund Fund Fund Fund Fund
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest - $ 136,994 - - - -
Net appreciation in the
fair value of investments - 317,154 $ 7,779 $ 40,913 $ 49,089 $ 22,457
Plan interest in Company Stock
Master Trust investment income $ 1,088,574 - - - - -
-------------------------------------------------------------------------------------
Total investment income 1,088,574 454,148 7,779 40,913 49,089 22,457
Contributions:
Employee 378,033 492,349 30,483 79,046 95,045 66,199
Employer 160,568 209,503 9,789 32,966 46,424 23,347
-------------------------------------------------------------------------------------
Total contributions 538,601 701,852 40,272 112,012 141,469 89,546
-------------------------------------------------------------------------------------
Total additions 1,627,175 1,156,000 48,051 152,925 190,558 112,003
-------------------------------------------------------------------------------------
Benefits Paid (574,627) (94,884) (31,602) (4,106) (7,015) (6,457)
Administrative Fees (4,932) (1,967) (56) (247) (431) (206)
Transfers between funds (3,094,081) 969,651 114,732 96,106 206,959 92,724
-------------------------------------------------------------------------------------
Net increase (decrease) (2,046,465) 2,028,800 131,125 244,678 390,071 198,064
Net Assets Available for Plan Benefits:
Beginning of year 15,262,857 2,005,029 36,813 363,918 185,438 93,988
-------------------------------------------------------------------------------------
End of year $13,216,392 $4,033,829 $167,938 $608,596 $575,509 $292,052
=====================================================================================
LifePath Templeton MasterWorks Stable
2040 Foreign S&P 500 Value Loan
Fund Fund Stock Fund Fund Fund Total
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest - $ 316,269 $ 173,196 $ 500,316 $ 141,327 $ 1,268,102
Net appreciation in the
fair value of investments $ 80,732 842,010 787,346 - - 2,147,480
Plan interest in Company Stock
Master Trust investment income - - - - - 1,088,574
-------------------------------------------------------------------------------------
Total investment income 80,732 1,158,279 960,542 500,316 141,327 4,504,156
Contributions:
Employee 74,127 338,160 284,196 256,966 - 2,094,604
Employer 32,940 156,195 101,489 136,782 - 910,003
-------------------------------------------------------------------------------------
Total contributions 107,067 494,355 385,685 393,748 - 3,004,607
-------------------------------------------------------------------------------------
Total additions 187,799 1,652,634 1,346,227 894,064 141,327 7,508,763
-------------------------------------------------------------------------------------
Benefits Paid (6,626) (342,150) (404,186) (748,176) (62,851) (2,282,680)
Administrative Fees (265) (3,013) (2,023) (3,948) - (17,088)
Transfers between funds 270,840 (221,070) 348,021 1,236,518 (20,400) -
-------------------------------------------------------------------------------------
Net increase (decrease) 451,748 1,086,401 1,288,039 1,378,458 58,076 5,208,995
Net Assets Available for Plan Benefits:
Beginning of year 276,993 6,507,278 4,023,885 7,817,634 1,574,274 38,148,107
-------------------------------------------------------------------------------------
End of year $728,741 $7,593,679 $5,311,924 $9,196,092 $1,632,350 $43,357,102
=====================================================================================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 7
<TABLE>
Bay State Gas Company Employee Savings Plan
Statement of Changes in Net Assets Available for Plan Benefits
Year ended December 31, 1995
<CAPTION>
Plan Interest in AIM LifePath
Selection Index Templeton Company Stock Constellation 2000
Fund Fund Fund Master Trust Fund Fund
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest $ 126,204 - $ 82 - $ 63,544 -
Dividends - - - - - -
-
Net appreciation (depreciation) in the
fair value of investments - $ 279,802 259,137 - (39,398) $ 1,718
Plan interest in Company Stock
Master Trust investment income - - - $ 2,231,119 - -
-----------------------------------------------------------------------------------------
Total investment income 126,204 279,802 259,219 2,231,119 24,146 1,718
Contributions:
Employee 112,799 56,898 136,242 327,587 344,513 28,894
Employer 51,272 26,667 62,333 131,553 139,003 9,576
-----------------------------------------------------------------------------------------
Total contributions 164,071 83,565 198,575 459,140 483,516 38,470
-----------------------------------------------------------------------------------------
Total additions 290,275 363,367 457,794 2,690,259 507,662 40,188
-----------------------------------------------------------------------------------------
Benefits Paid (339,425) (23,877) (450,486) (386,246) (838) (6,010)
Administrative fees (7,500) (3,000) (1,250) (3,701) (909) (15)
Transfers between funds (7,808,137) (3,282,789) (6,419,651) 12,962,545 1,499,114 2,650
-----------------------------------------------------------------------------------------
Net increase (decrease) (7,864,787) (2,946,299) (6,413,593) 15,262,857 2,005,029 36,813
Net Assets Available for Plan Benefits:
Beginning of year 7,864,787 2,946,299 6,413,593 - - -
-----------------------------------------------------------------------------------------
End of year - - - $15,262,857 $2,005,029 $36,813
=========================================================================================
<CAPTION>
LifePath LifePath LifePath LifePath Templeton
2010 2020 2030 2040 Foreign
Fund Fund Fund Fund Fund
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest - - - - $ 417,490
Dividends - - - - -
Net appreciation (depreciation) in the
fair value of investments $ 10,508 $ 9,741 $ 5,063 $ 20,019 212,509
Plan interest in Company Stock
Master Trust investment income - - - - -
------------------------------------------------------------------
Total investment income 10,508 9,741 5,063 20,019 629,999
Contributions:
Employee 62,545 62,166 43,092 40,899 282,690
Employer 25,976 27,210 12,557 17,067 125,482
------------------------------------------------------------------
Total contributions 88,521 89,376 55,649 57,966 408,172
------------------------------------------------------------------
Total additions 99,029 99,117 60,712 77,985 1,038,171
------------------------------------------------------------------
Benefits Paid 18,778 (514) (1,143) - (103,966)
Administrative fees (131) (209) (95) (98) (2,039)
Transfers between funds 246,242 87,044 34,514 199,106 5,575,112
------------------------------------------------------------------
Net increase (decrease) 363,918 185,438 93,988 276,993 6,507,278
Net Assets Available for Plan Benefits:
Beginning of year - - - - -
------------------------------------------------------------------
End of year $363,918 $185,438 $93,988 $276,993 $6,507,278
==================================================================
<CAPTION>
Stagecoach Stable Company
S&P 500 Value Stock Loan
Stock Fund Fund Fund Fund Total
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest $ 119,707 $ 381,729 $ 957 $ 116,848 $ 1,226,561
Dividends - - 212,155 - 212,155
Net appreciation (depreciation) in the
fair value of investments 629,654 - 322,290 - 1,711,043
Plan interest in Company Stock
Master Trust investment income - - - - 2,231,119
-----------------------------------------------------------------------------------
Total investment income 749,361 381,729 535,402 116,848 5,380,878
Contributions:
Employee 162,179 266,589 130,412 - 2,057,505
Employer 64,375 109,523 60,736 - 863,330
-----------------------------------------------------------------------------------
Total contributions 226,554 376,112 191,148 - 2,920,835
-----------------------------------------------------------------------------------
Total additions 975,915 757,841 726,550 116,848 8,301,713
-----------------------------------------------------------------------------------
Benefits Paid (100,318) (368,106) (727,498) (15,156) (2,504,805)
Administrative fees (1,250) (2,913) (3,600) (4) (26,714)
Transfers between funds 3,149,538 7,430,812 (13,780,941) 104,841 -
-----------------------------------------------------------------------------------
Net increase (decrease) 4,023,885 7,817,634 (13,785,489) 206,529 5,770,194
Net Assets Available for Plan Benefits:
Beginning of year - - 13,785,489 1,367,745 32,377,913
-----------------------------------------------------------------------------------
End of year $4,023,885 $7,817,634 - $1,574,274 $38,148,107
===================================================================================
</TABLE>
See accompanying notes to financial statements
7
<PAGE> 8
<TABLE>
Bay State Gas Company Employee Savings Plan
Statement of Changes in Net Assets Available for Plan Benefits
Year ended December 31, 1994
<CAPTION>
Templeton Company
Selection Index Growth Stock
Fund Fund Fund Fund
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Interest $ 505,443 $ 126 $ 1,881 $ 1,340
Dividends - - 540,519 622,724
Net appreciation (depreciation) in the
fair value of investments - 42,626 (527,097) (1,478,062)
-------------------------------------------------------------
Total investment income(loss) 505,443 42,752 15,303 (853,998)
Contributions:
Employee 472,331 222,333 519,766 612,186
Employer 208,090 105,251 216,600 263,287
-------------------------------------------------------------
Total contributions 680,421 327,584 736,366 875,473
-------------------------------------------------------------
Total additions 1,185,864 370,336 751,669 21,475
-------------------------------------------------------------
Benefits Paid (303,234) (146,830) (86,594) (216,344)
Administrative fees (37,924) (15,719) (8,495) (18,617)
Transfers between funds (295,889) (99,822) 986,830 5,271,860
Transfers out to other plans (439,676) (133,279) (217,870) (613,872)
-------------------------------------------------------------
Net increase (decrease) 109,141 (25,314) 1,425,540 4,444,502
Net Assets Available for Plan Benefits:
Beginning of year 7,755,646 2,971,613 4,988,053 9,340,987
-------------------------------------------------------------
End of year $7,864,787 $2,946,299 $6,413,593 $13,785,489
=============================================================
<CAPTION>
Company
PAYSOP Loan
Fund Fund Total
----------------------------------------------
<S> <C> <C> <C>
Investment income:
Interest $ 65 $ 83,144 $ 591,999
Dividends 170,116 - 1,333,359
Net appreciation (depreciation) in the
fair value of investments (902,599) - (2,865,132)
----------------------------------------------
Total investment income(loss) (732,418) 83,144 (939,774)
Contributions:
Employee - - 1,826,616
Employer - - 793,228
----------------------------------------------
Total contributions - - 2,619,844
----------------------------------------------
Total additions (732,418) 83,144 1,680,070
----------------------------------------------
Benefits Paid (68,142) - (821,144)
Administrative fees (12,072) - (92,827)
Transfers between funds (5,911,575) 48,596 -
Transfers out to other plans - (112,786) (1,517,483)
----------------------------------------------
Net increase (decrease) (6,724,207) 18,954 (751,384)
Net Assets Available for Plan Benefits:
Beginning of year 6,724,207 1,348,791 33,129,297
----------------------------------------------
End of year - $1,367,745 $32,377,913
==============================================
</TABLE>
See accompanying notes to financial statements
8
<PAGE> 9
BAY STATE GAS COMPANY
EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
December 31, 1996, 1995 and 1994
1) DESCRIPTION OF PLAN
(a) GENERAL
The Bay State Gas Company Employee Savings Plan ("the Plan") is a
defined contribution payroll reduction savings plan. The Plan is
subject to the provisions of the Employee Retirement Income Security
Act of 1974 ("ERISA"). Participants should refer to the Plan document
for more complete information.
(b) ELIGIBILITY
Substantially all non-union employees of Bay State Gas Company ("the
Company") and its wholly-owned subsidiaries, Northern Utilities, Inc.
and Granite State Gas Transmission, Inc., are eligible for
participation in the Plan. Beginning July 1, 1996, participation begins
on the first day of the next month after the employee has completed 60
days of service. Employees may participate in the Plan until death,
retirement, or withdrawal of the entire contributed balance.
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION
The accompanying financial statements have been prepared on the accrual
basis of accounting.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements. Certain amounts of reported revenues and expenses
are also affected by these estimates and assumptions. Actual results
could differ from those estimates.
9
<PAGE> 10
BAY STATE GAS COMPANY
EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
December 31, 1996, 1995 and 1994
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) TRUSTEE
Barclays Global Investors serves as Trustee of the Plan and has
discretionary authority concerning purchases and sales of investments
for the Plan. In 1995, Wells Fargo Bank served as Trustee. Plan assets
are held in safekeeping by both Barclays Global Investors and Wells
Fargo Bank.
(c) INVESTMENTS
Investments in the AIM Constellation Fund, Masterworks S & P 500 Stock
Fund, LifePath Funds and the Templeton Foreign Fund are stated at
market value. Market values are based on quotations from national
securities exchanges for the various investments as of the close of
business on the last day of the year.
The fair value of the Plan's interest in the Company Stock Master Trust
(Master Trust) is based on the beginning of year value of the Plan's
interest in the trust plus actual contributions and allocated
investment income less actual distributions and allocated
administrative expenses (Note 5). Quoted market prices are used to
value investments in the Master Trust.
Guaranteed Investment Contracts ("GICs") held in the Stable Value Fund
are valued at contract value. Contract value represents contributions
made under the contract plus interest at the contract rate. The
crediting interest rates are fixed for GICs and averaged 6.64% at
December 31, 1996. At December 31, 1996, the fair value of the GICs is
$4,709,167.
The Income Accumulation Fund is stated at market value which is based
on the fair value of its underlying securities as follows: GICs and
synthetic GICs, which are all benefit responsive, are stated at
contract value, publicly traded U.S. Government notes and bonds are
stated at quoted market value and money market securities are stated at
cost which approximates fair value.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are
recorded on the ex-dividend date. Net appreciation (depreciation) in
the fair value of investments includes both realized and unrealized
gains and losses.
10
<PAGE> 11
BAY STATE GAS COMPANY
EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
December 31, 1996, 1995 and 1994
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(d) PAYMENT OF BENEFITS
Benefits are recorded when paid.
3) PLAN ADMINISTRATION
(a) ADMINISTRATION
The Plan is administered by the Bay State Gas Company Benefits
Committee ("the Committee"), which is comprised of three or more
individuals selected by the Board of Directors of the Company. The
Committee carries out the provisions of the Plan, replies to questions,
and resolves disputes arising under the Plan. Members of the Committee
do not receive compensation for service.
(b) EXPENSES
The plan charges a monthly loan processing fee of $3.50 to participants
borrowing from their accounts and a $10 fee for each participant's
change of investment instructions in excess of 10 in any calendar year.
Prior to January 1, 1994, all other administrative expenses of the Plan
were paid by the Company. Effective January 1, 1994, all such expenses
are paid by the Plan and allocated to participants' accounts.
4) INVESTMENTS
All contributions are remitted to the Trustee for investment in
accordance with the instructions of the participants. Participants may
allocate their contributions (in 25% multiples) to various investment
funds. Allocation percentages, as well as investment options among the
investment funds, may be changed daily by the participant.
The following investment funds are offered to active participants of
the Plan.
COMPANY STOCK MASTER TRUST - Funds are invested in the common stock of
Bay State Gas Company.
11
<PAGE> 12
BAY STATE GAS COMPANY
EMPLOYEE SAVINGS PLAN
Notes to the Financial Statements
December 31, 1996, 1995 and 1994
4) INVESTMENTS (CONTINUED)
AIM CONSTELLATION FUND - Funds are invested principally in common
stocks with emphasis on medium-sized and smaller emerging growth
companies.
TEMPLETON FOREIGN FUND - Funds are invested in stocks and debt
obligations of companies and governments outside of the United States.
MASTERWORKS S & P 500 STOCK FUND - Funds are invested in domestic debt
and equity securities designed to approximate, as closely as
practicable, the capitalizatoin-weighted total rate of return of the
S & P 500 Index.
WELLS FARGO LIFEPATH FUNDS - Funds are invested in a changing mix of
U.S. and international stocks, bonds and money market instruments. The
target dates of each fund refers to the year when investors plan to
retire or begin to withdraw portions of their investment. Each fund
accepts higher risk early on, and adjusts its asset mix to lower-risk
investments over time.
STABLE VALUE FUND - Funds are invested in a combination of guaranteed
investment contracts (GICs) and shares of the Wells Fargo Income
Accumulation Fund. The Wells Fargo Income Accumulation Fund is a pooled
stable value fund that invests in a variety of fixed-income securities
including; GIC's, synthetic GICs, publicly traded U.S. Government notes
and bonds and money market securities.
LOAN FUND - Funds are comprised of amounts borrowed by participants
from their account balances (see Note 7).
At December 31, 1996, each of the investment funds had the following
number of participating accounts:
<TABLE>
<CAPTION>
Fund Name Participants
--------- ------------
<S> <C>
AIM Constellation Fund 307
LifePath 2000 Fund 18
LifePath 2010 Fund 55
LifePath 2020 Fund 76
LifePath 2030 Fund 47
LifePath 2040 Fund 68
Templeton Foreign Fund 356
S & P 500 Stock - Masterworks Fund 316
Stable Value Fund 369
Company Stock Master Trust 470
</TABLE>
12
<PAGE> 13
BAY STATE GAS COMPANY
EMPLOYEE SAVINGS PLAN
Notes to the Financial Statements
December 31, 1996, 1995 and 1994
All funds, with the exception of the Loan Fund and the LifePath Funds,
represented more than five percent of Net Assets Available for Plan
Benefits at December 31, 1996. All funds, with the exception of the
Loan Fund and the LifePath Funds, represented more than five percent of
Net Assets Available for Plan Benefits at December 31, 1995.
During August 1994, all participant account balances in the PAYSOP Fund
were transferred to the Company Stock Fund. The PAYSOP investments,
consisting entirely of Company Stock, were subsequently transferred to
the Company Stock Fund on January 27, 1995.
5) INTEREST IN BAY STATE GAS COMPANY STOCK MASTER TRUST
A portion of the Plan's investments are in the Company Stock Master
Trust (Master Trust) which was established for the investment of assets
of the Plan and the Bay State Gas Company Savings Plan for Operating
Employees. Each plan has an undivided interest in the Master Trust. The
assets of the Master Trust are held by Wells Fargo Bank. At December
31, 1996 and 1995, the Plan's interest in the net assets of the Master
Trust was approximately 74% and 78%, respectively. Investment income
and administrative expenses relating to the Master Trust are allocated
to the individual plans based upon average monthly balances invested by
each plan. The following table presents the fair values of investments
for the Master Trust.
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Bay State Gas Company Stock $17,768,586 $19,471,480
=========== ===========
</TABLE>
Investment income for the Master Trust is as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
---------- ----------
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Net appreciation in fair value of Bay
State Gas Company Stock $ 304,698 $2,040,202
Interest 8,279 8,424
Dividends 1,052,116 783,463
---------- ----------
$1,365,093 $2,832,089
========== ==========
</TABLE>
13
<PAGE> 14
BAY STATE GAS COMPANY
EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
December 31, 1996, 1995 and 1994
6) CONTRIBUTIONS
(a) PARTICIPANT CONTRIBUTIONS
Participants may designate a percentage of their annual compensation to
be contributed to the Plan on their behalf by entering into the salary
reduction agreement, thereby reducing their compensation by 1% to 15%
of their annual eligible compensation. This compensation reduction was
limited to a maximum amount of $9,500 per year in 1996 (indexed
annually from $7,000 commencing January 1, 1987). In 1996, for
employees whose earnings are in excess of $66,000 (indexed annually
from $50,000 commencing January 1, 1987), contributions are limited to
8% of their annual compensation. Participants' salary payments will be
reduced accordingly. A participant's eligible compensation for any
given year generally consists of straight time wages, certain
supplementary compensation and 75% of sales commissions paid or
accrued. All overtime, bonuses, some supplementary compensation
payments, deferred compensation, retirement benefits and other forms of
nonrecurring compensation are excluded.
(b) COMPANY CONTRIBUTIONS
Company contributions begin on the first day of the next month after
completion of a 12-month eligibility period in which the employee is
credited with at least 1,000 hours of service during that period.
Beginning October 1, 1992, for participants under the age of 45 on
January 1, 1992, and all employees hired after September 1, 1990, the
Company changed the amount of its contribution to each participant's
account to an amount equal to 100% of the first 2-1/2% of the
participant's eligible compensation contributed and 50% of the next 5%
of the participant's eligible compensation contributed, provided that
total Company contributions did not exceed 5% of the participant's
eligible compensation. For participants not meeting this criteria, the
Company contributes 50% of the first 5% of the participant's eligible
compensation contributed.
(c) VESTING
Employer and employee contributions vest immediately.
14
<PAGE> 15
BAY STATE GAS COMPANY
EMPLOYEE SAVINGS PLAN
Notes to the Financial Statements
December 31, 1996, 1995 and 1994
7) WITHDRAWALS, BORROWINGS AND DISTRIBUTIONS
(a) WITHDRAWALS
Participants may withdraw all or any portion of their contributions
made through November 1, 1983 on the last day of any month, upon 30
days notice to the Committee. Only one withdrawal may be made in any
twelve-month period and the withdrawal may not exceed the value of the
contributions in their account on that date.
Contributions made subsequent to November 1, 1983 may be withdrawn in
the event of financial hardship or the attainment of 59-1/2 years of
age.
(b) BORROWINGS
Participants may borrow from their accounts an amount which, together
with any outstanding loans from any other qualified plans of the
Company, does not exceed the lesser of (i) one-half of the amounts in
all of their accounts or (ii) an amount which, when added to any other
amounts borrowed under any other plan, does not exceed $50,000.
Further, effective January 1, 1987, as a result of the Tax Reform Act
of 1986, the $50,000 limitation will be reduced by the excess (if any)
of the highest outstanding loan balance of a participant in the
preceding twelve-month period ending on the day before the date on
which the loan was made, over the outstanding balance of loans from the
Plan on the date of the loan. Applications to borrow must be adequately
secured, must be for at least $1,000 and must be repaid at a rate of
interest equal to the prime interest rate, as published in THE WALL
STREET JOURNAL, at the time the loan is made, plus one percent. This
interest rate is applicable for the duration of the loan. Only two
loans may be outstanding to a participant at any time and must be
repaid within five years.
15
<PAGE> 16
BAY STATE GAS COMPANY
EMPLOYEE SAVINGS PLAN
Notes to the Financial Statements
December 31, 1996, 1995 and 1994
7) WITHDRAWALS, BORROWINGS AND DISTRIBUTIONS (CONTINUED)
(c) DISTRIBUTIONS
Distribution of a participant's entire account balance in the Plan will
be made upon retirement, termination of employment or death.
Distributions will be made to the participant or to the participant's
designated beneficiary in either a lump sum payment or in periodic
payments over a period not to exceed ten years for a spousal
beneficiary or over a period within five years in the case of a
non-spousal beneficiary.
Upon the death of a Plan participant, benefits to the participant's
spouse must commence no later than April 1st following the date the
participant would have been age 70-1/2. For any other beneficiary,
death benefits must commence within one year of the participant's
death.
Upon retirement or termination of employment, Plan participants
(thereby becoming inactive Plan participants) may elect to receive
their share of Net Assets Available for Plan Benefits in a lump sum or
in installments over a period not to exceed ten years.
8) INCOME TAX STATUS
The Internal Revenue Service has issued a determination letter dated
November 19, 1996 that the Plan qualified, in form, under Sections
401(a) and 401(k) of the Internal Revenue Code of 1986, as amended (the
"Code") and, the underlying trust was therefore, exempt from federal
income taxes under Section 501 (a) of Code. The Plan was required to
operate in accordance with the Code to maintain its tax qualification.
In the opinion of the Plan administrator and Plan's tax advisor, the
Plan remained qualified under the applicable provisions of the Code.
9) PLAN TERMINATION
(a) If the Plan is discontinued, all assets of the Plan must be used
for the exclusive benefit of participants of the Plan.
(b) The Company expects to continue the Plan indefinitely, however, it
may terminate the Plan at any time by giving written notice to the
Trustee. After termination, the Company will make no further
contributions to the Plan.
16
<PAGE> 17
BAY STATE GAS COMPANY
EMPLOYEE SAVINGS PLAN
Notes to Financial Statements
December 31, 1996, 1995 and 1994
10) RECONCILIATION OF ACCOMPANYING FINANCIAL STATEMENTS TO FEDERAL FORM 5500
The following is a reconciliation of benefits paid to participants per
accompanying financial statements to Federal Form 5500:
<TABLE>
<CAPTION>
Year ended December 31, 1995
----------------------------
<S> <C>
Benefits paid to participants per
accompanying financial statements $2,504,805
Benefits payable at December 31, 1994
per Federal Form 5500 786,044
----------
Benefits paid per Federal Form 5500 $1,718,761
==========
</TABLE>
Benefits payable were recorded on Federal Form 5500 for benefit claims
that had been processed and approved prior to December 31, 1994 but not
yet paid as of that date. Benefits payable are not required to be
accrued at the end of each year in the accompanying financial
statements in order to conform with generally accepted accounting
principles.
17
<PAGE> 18
<TABLE>
Bay State Gas Company Employee Savings Plan
Schedule I
----------
Item 27(a)
Schedule of Assets Held for Investment Purposes
December 31, 1996
<CAPTION>
Identity of Issue Description of Investment Cost Current Value
----------------- ------------------------- ----------- -------------
<S> <C> <C> <C>
* Company Stock Master Trust Master Trust; 1,122,888 units $11,185,076 $13,216,392
* Stable Value Fund Pooled Fund; 832,580 shares 9,196,092 9,196,092
AIM Constellation Fund Mutual Fund; 159,692 shares 3,846,906 4,033,829
Templeton Foreign Fund Mutual Fund; 732,981 shares 6,742,287 7,593,679
MasterWorks S&P 500 Stock Fund Mutual Fund; 333,873 shares 4,122,574 5,311,924
* LifePath 2000 Fund Collective Trust Fund; 13,902 shares 160,244 167,938
* LifePath 2010 Fund Collective Trust Fund; 46,246 shares 563,855 608,596
* LifePath 2020 Fund Collective Trust Fund; 41,255 shares 519,287 575,509
* LifePath 2030 Fund Collective Trust Fund; 20,197 shares 266,594 292,052
* LifePath 2040 Fund Collective Trust Fund; 47,943 shares 636,263 728,741
* LoLoanuFund Participant loans; 5.78% - 10.00% 1,632,350 1,632,350
----------- -----------
Total assets held for investment purposes $38,871,528 $43,357,102
=========== ===========
</TABLE>
* Party in interest
18
<PAGE> 19
<TABLE>
BAY STATE GAS COMPANY EMPLOYEE SAVINGS PLAN
Form 5500, Item 27(d)
Schedule of Reportable Transactions
Schedule II
-----------
Year Ended December 31, 1996
<CAPTION>
Identity of party Lease Expense
involved Description of asset Purchase price Selling price rental Incurred
(a) (b) (c) (d) (e) (f)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AIM Constellation Fund Mutual Fund - purchase $3,208,597 - - -
- sale - 1,493,050 - -
Templeton Foreign Fund Mutual Fund - purchase 1,798,566 - - -
- sale - 1,551,100 - -
MasterWorks S&P 500 Stock Fund Mutual Fund - purchase 1,345,855 - - -
- sale - 843,026 - -
Stable Value Fund* Pooled Fund - purchase 4,681,249 - - -
- sale - 3,798,471 - -
Company Stock Master Trust* Master Trust - purchase 4,070,976 - - -
- sale - 7,201,981 - -
<CAPTION>
Current value
Cost of of asset on Net gain
asset transaction date or (loss)
(g) (h) (i)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
AIM Constellation Fund $3,208,597 $3,208,597 -
1,405,014 1,493,050 88,036
Templeton Foreign Fund 1,798,566 1,798,566 -
1,429,222 1,551,100 121,878
MasterWorks S&P 500 Stock Fund 1,345,855 1,345,855 -
666,681 843,026 176,345
Stable Value Fund* 4,681,249 4,681,249 -
3,798,471 3,798,471 -
Company Stock Master Trust* 4,070,976 4,070,976 -
5,993,283 7,201,981 1,208,698
</TABLE>
* Party in interest.
19
