<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
SAVINGS PLAN FOR
OPERATING EMPLOYEES
------------------------
(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 9-16
Schedule I: Item 27a - Schedule of Assets
Held for Investment Purposes 17
Schedule II: Item 27d - Schedule of Reportable
Transactions - Year Ended December 31, 1996 18
<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 Savings Plan for Operating Employees 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 Savings Plan for Operating Employees 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
KPMG Peat Marwick LLP
Boston, Massachusetts
June 6, 1997
4
<PAGE> 5
<TABLE>
Bay State Gas Company Savings Plan for Operating Employees
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 $ 4,552,194 $4,212,658
AIM Constellation Fund 1,096,304 526,326
Templeton Foreign Fund 1,579,169 1,119,908
MasterWorks S&P 500 Stock Fund 1,264,374 691,980
Wells Fargo LifePath Funds:
LifePath 2000 80,772 46,300
LifePath 2010 143,395 56,751
LifePath 2020 126,801 63,325
LifePath 2030 128,847 43,653
LifePath 2040 154,613 41,854
Stable Value Fund 1,614,508 1,286,331
Investments, at cost which approximates fair value:
Loan Fund 651,503 483,401
----------- ----------
Total investments 11,392,480 8,572,487
Contributions receivable from employees
and employer 345 69,027
----------- ----------
Net Assets Available for Plan Benefits $11,392,825 $8,641,514
=========== ==========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
<TABLE>
BAY STATE GAS COMPANY
EMPLOYEE SAVINGS PLAN FOR OPERATING EMPLOYEES
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 - $ 36,376 - - - -
Dividends - - - - - -
Net appreciation
in the fair value of investments - 72,432 $ 4,096 $ 10,544 $ 10,887 $ 11,003
Plan interest in Company Stock
Master Trust investment income $ 276,519 - - - - -
----------------------------------------------------------------------------------
Total investment income 276,519 108,808 4,096 10,544 10,887 11,003
Contributions:
Employee 458,335 275,385 24,068 54,538 39,410 39,450
Employer 114,118 55,820 4,986 6,640 7,120 7,749
----------------------------------------------------------------------------------
Total contributions 572,453 331,205 29,054 61,178 46,530 47,199
Total additions 848,972 440,013 33,150 71,722 57,417 58,202
----------------------------------------------------------------------------------
Benefits Paid (65,826) (1,838) (3,021) (645) (1,501) (391)
Administrative Fees (1,150) (345) (4) (18) (58) (28)
Transfers between funds (462,992) 121,005 3,099 13,460 5,904 25,901
----------------------------------------------------------------------------------
Net increase 319,004 558,835 33,224 84,519 61,762 83,684
Net Assets Available for Plan Benefits:
Beginning of year 4,233,423 537,476 47,549 58,876 65,039 45,170
----------------------------------------------------------------------------------
End of year $4,552,427 $1,096,311 $80,773 $143,395 $126,801 $128,854
==================================================================================
<CAPTION>
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 - $ 62,773 $ 38,532 $ 86,383 $ 53,173 $ 277,237
Dividends - - - - - -
Net appreciation
in the fair value of investments $ 15,799 157,640 157,259 - - 439,660
Plan interest in Company Stock
Master Trust investment income - - - - - 276,519
----------------------------------------------------------------------------
Total investment income 15,799 220,413 195,791 86,383 53,173 993,416
Contributions:
Employee 62,923 224,532 202,753 177,911 - 1,559,305
Employer 8,538 50,101 42,964 59,033 - 357,069
----------------------------------------------------------------------------
Total contributions 71,461 274,633 245,717 236,944 - 1,916,374
Total additions 87,260 495,046 441,508 323,327 53,173 2,909,790
----------------------------------------------------------------------------
Benefits Paid - (27,815) (6,222) (19,596) (28,897) (155,752)
Administrative Fees (47) (402) (241) (434) - (2,727)
Transfers between funds 23,964 (17,847) 129,200 14,480 143,826 -
----------------------------------------------------------------------------
Net increase 111,177 448,982 564,245 317,777 168,102 2,751,311
Net Assets Available for Plan Benefits:
Beginning of year 43,436 1,130,201 700,204 1,296,739 483,401 8,641,514
----------------------------------------------------------------------------
End of year $154,613 $1,579,183 $1,264,449 $1,614,516 $651,503 $11,392,825
============================================================================
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 7
<TABLE>
BAY STATE GAS COMPANY
EMPLOYEE SAVINGS PLAN FOR OPERATING EMPLOYEES
Statement of Changes in Net Assets Available for Plan Benefits
Year Ended December 31, 1995
<CAPTION>
Templeton Plan Interest in AIM LifePath
Selection Index Growth Company Stock Constellation 2000
Fund Fund Fund Master Trust Fund Fund
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest $ 17,609 - $ 50 - $ 17,129 -
Dividends - - - - - -
Net appreciation
(depreciation) in the fair
value of investments - $ 36,104 38,752 - (3,698) $ 2,068
Plan interest in Company Stock
Master Trust investment income - - - $ 600,970 - -
----------------------------------------------------------------------------------
Total investment income 17,609 36,104 38,802 600,970 13,431 2,068
Contributions:
Employee 44,528 18,493 67,254 352,809 160,257 20,527
Employer 13,871 4,672 16,376 70,160 36,280 3,803
----------------------------------------------------------------------------------
Total contributions 58,399 23,165 83,630 422,969 196,537 24,330
Total additions 76,008 59,269 122,432 1,023,939 209,968 26,398
----------------------------------------------------------------------------------
Benefits Paid (278) - - (49,812) (2,418) -
Administrative Fees - - - (458) (106) -
Transfers between funds (1,118,090) (373,897) (995,518) 3,259,754 330,032 21,151
----------------------------------------------------------------------------------
Net increase (decrease) (1,042,360) (314,628) (873,086) 4,233,423 537,476 47,549
Net Assets Available for Plan Benefits:
Beginning of year 1,042,360 314,628 873,086 - - -
----------------------------------------------------------------------------------
End of year - - - $4,233,423 $537,476 $47,549
==================================================================================
<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 - - - - $ 68,272
Dividends - - - - -
Net appreciation
(depreciation) in the fair
value of investments $ 2,880 $ 3,906 $ 2,714 $ 3,147 28,247
Plan interest in Company Stock
Master Trust investment income - - - - -
----------------------------------------------------------
Total investment income 2,880 3,906 2,714 3,147 96,519
Contributions:
Employee 34,023 24,581 18,071 22,034 169,213
Employer 7,701 4,751 3,939 4,323 39,805
----------------------------------------------------------
Total contributions 41,724 29,332 22,010 26,357 209,018
Total additions 44,604 33,238 24,724 29,504 305,537
----------------------------------------------------------
Benefits Paid (348) - - - (2,466)
Administrative Fees (3) (16) (7) (13) (159)
Transfers between funds 14,623 31,817 20,453 13,945 827,289
----------------------------------------------------------
Net increase (decrease) 58,876 65,039 45,170 43,436 1,130,201
Net Assets Available for Plan Benefits:
Beginning of year - - - - -
----------------------------------------------------------
End of year $58,876 $65,039 $45,170 $43,436 $1,130,201
==========================================================
<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 $ 18,905 $ 58,317 $ 32 $ 29,987 $ 210,301
Dividends - - 47,639 - 47,639
Net appreciation
(depreciation) in the fair
value of investments 87,118 - 83,414 - 284,652
Plan interest in Company Stock
Master Trust investment income - - - - 600,970
-------------------------------------------------------------------
Total investment income 106,023 58,317 131,085 29,987 1,143,562
Contributions:
Employee 120,657 198,345 160,994 - 1,411,786
Employer 27,995 67,418 36,703 - 337,797
-------------------------------------------------------------------
Total contributions 148,652 265,763 197,697 - 1,749,583
Total additions 254,675 324,080 328,782 29,987 2,893,145
-------------------------------------------------------------------
Benefits Paid (894) (26,466) (6,920) (5,419) (95,021)
Administrative Fees (60) (148) - - (970)
Transfers between funds 446,483 999,273 (3,670,469) 193,154 -
-------------------------------------------------------------------
Net increase (decrease) 700,204 1,296,739 (3,348,607) 217,722 2,797,154
Net Assets Available for Plan Benefits:
Beginning of year - - 3,348,607 265,679 5,844,360
-------------------------------------------------------------------
End of year $700,204 $1,296,739 - $483,401 $8,641,514
===================================================================
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 8
<TABLE>
Savings Plan for Operating Employees
Statement of Changes in Net Assets Available for Plan Benefits
Year ended December 31, 1994
<CAPTION>
Templeton Company
Selection Index Growth Stock Loan
Fund Fund Fund Fund Fund Total
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest $ 59,914 $ 26 $ 380 $ 256 $ 10,668 $ 71,244
Dividends - - 81,999 162,298 - 244,297
Net appreciation (depreciation) in the
fair value of investments - 6,368 (90,424) (451,681) - (535,737)
------------------------------------------------------------------------------
Total investment income (loss) 59,914 6,394 (8,045) (289,127) 10,668 (220,196)
Contributions:
Employee 147,847 66,580 210,162 635,022 - 1,059,611
Employer 62,592 17,557 53,601 154,448 - 288,198
Transfers in from other plans 439,676 133,279 217,870 613,872 112,786 1,517,483
------------------------------------------------------------------------------
Total contributions 650,115 217,416 481,633 1,403,342 112,786 2,865,292
------------------------------------------------------------------------------
Total additions 710,029 223,810 473,588 1,114,215 123,454 2,645,096
------------------------------------------------------------------------------
Benefits Paid (18,512) (4,096) (7,973) (30,515) - (61,096)
Transfers between funds (80,053) (26,014) 122,919 (73,112) 56,260 -
------------------------------------------------------------------------------
Net increase 611,464 193,700 588,534 1,010,588 179,714 2,584,000
Net Assets Available for Plan Benefits:
Beginning of year 430,896 120,928 284,552 2,338,019 85,965 3,260,360
------------------------------------------------------------------------------
End of year $1,042,360 $314,628 $873,086 $3,348,607 $265,679 $5,844,360
==============================================================================
</TABLE>
See accompanying notes to financial statements.
8
<PAGE> 9
BAY STATE GAS COMPANY
SAVINGS PLAN FOR OPERATING EMPLOYEES
Notes to Financial Statements
December 31, 1996, 1995 and 1994
1) Description of Plan
-------------------
(a) General
-------
The Bay State Gas Company Savings Plan for Operating Employees ("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
-----------
All employees of the Company and its wholly-owned subsidiaries,
Northern Utilities, Inc. and Granite State Gas Transmission, Inc. who
are covered by a collective bargaining agreement between the Company
and any union that specifically provides for participation in the Plan
are eligible for participation. 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
SAVINGS PLAN FOR OPERATING EMPLOYEES
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 ("GIC's") 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
$831,030.
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
SAVINGS PLAN FOR OPERATING EMPLOYEES
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
SAVINGS PLAN FOR OPERATING EMPLOYEES
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 capitalization-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 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; GICs, 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 225
LifePath 2000 Fund 19
LifePath 2010 Fund 50
LifePath 2020 Fund 46
LifePath 2030 Fund 43
LifePath 2040 Fund 46
Templeton Foreign Fund 263
S & P 500 Stock - Masterworks Fund 226
Stable Value Fund 249
Company Stock Master Trust 395
</TABLE>
12
<PAGE> 13
BAY STATE GAS COMPANY
SAVINGS PLAN FOR OPERATING EMPLOYEES
Notes to the Financial Statements
December 31, 1996, 1995 and 1994
All funds, with the exception of 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 LifePath Funds,
represented more than five percent of Net Assets Available for Plan
Benefits at December 31, 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 Employee Savings Plan. 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 26% and 22%, 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
SAVINGS PLAN FOR OPERATING EMPLOYEES
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). A participant's
eligible compensation for any given year consists of straight time
wages, including shift differentials, Saturday/Sunday wages, including
premiums, compensation paid or accrued. All overtime, bonuses,
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. The
Company makes contributions to the Plan in accordance with the terms of
contracts negotiated with the various unions representing Company
employees. For certain employees, the Company makes no contribution.
For other employees, the Company makes contributions equal to 2.5% to
3.5% of eligible compensation.
(c) Vesting
-------
Employer and employee contributions vest immediately.
14
<PAGE> 15
BAY STATE GAS COMPANY
SAVINGS PLAN FOR OPERATING EMPLOYEES
Notes to the Financial Statements
December 31, 1996, 1995 and 1994
7) Withdrawals, Borrowings and Distributions
-----------------------------------------
(a) Withdrawals
-----------
Contributions can 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.
(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.
15
<PAGE> 16
BAY STATE GAS COMPANY
SAVINGS PLAN FOR OPERATING EMPLOYEES
Notes to the Financial Statements
December 31, 1996, 1995 and 1994
7) Withdrawals, Borrowings and Distributions (continued)
-----------------------------------------------------
(c) Distributions (continued)
-------------------------
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
<TABLE>
Bay State Gas Company Savings Plan for Operating Employees
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; 386,762 units $ 3,791,193 $ 4,552,194
* Stable Value Fund Pooled Fund; 146,172 shares 1,614,508 1,614,508
AIM Constellation Fund Mutual Fund; 43,401 shares 1,034,549 1,096,304
Templeton Foreign Fund Mutual Fund; 152,429 shares 1,414,448 1,579,169
MasterWorks S&P 500 Stock Fund Mutual Fund; 79,470 shares 1,030,724 1,264,374
* LifePath 2000 Fund Collective Trust Fund; 6,686 shares 74,869 80,772
* LifePath 2010 Fund Collective Trust Fund; 10,896 shares 131,809 143,395
* LifePath 2020 Fund Collective Trust Fund; 9,090 shares 113,496 126,801
* LifePath 2030 Fund Collective Trust Fund; 8,911 shares 117,029 128,847
* LifePath 2040 Fund Collective Trust Fund; 10,172 shares 137,244 154,613
* Loan Fund Participant loans; 5.80% - 10.00% 651,503 651,503
----------- -----------
Total assets held for investment purposes $10,111,372 $11,392,480
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</TABLE>
* Party in interest
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<TABLE>
<CAPTION>
BAY STATE GAS COMPANY
EMPLOYEE SAVINGS PLAN FOR OPERATING EMPLOYEES
Schedule II
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Form 5500, Item 27(d)
Schedule of Reportable Transactions
Year Ended December 31, 1996
Current value
Identity of party Description Purchase Selling Lease Expense Cost of of asset on Net gain
involved of asset Price Price rental Incurred asset transaction date or (loss)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AIM Constellation Fund Mutual Fund-purchase $588,381 -- -- -- $588,381 $588,381 --
-sale -- 90,835 -- -- 85,930 90,835 4,905
Templeton Foreign Fund Mutual Fund-purchase 412,686 -- -- -- 412,686 412,686 --
-sale -- 111,066 -- -- 103,183 111,066 7,883
MasterWorks S&P 500 Mutual Fund-purchase 470,730 -- -- -- 470,730 470,730 --
Stock Fund -sale -- 55,595 -- -- 46,027 55,595 9,568
Stable Value Fund* Pooled Fund-purchase 396,279 -- -- -- 396,279 396,279 --
-sale -- 154,484 -- -- 154,484 154,484 --
Company Stock Master Master Trust-purchase 736,276 -- -- -- 736,276 736,276 --
Trust* -sale -- 673,259 -- -- 563,721 673,259 109,538
</TABLE>
* Party in interest.
18
