<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, 1997
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, 1997 and 1996 5
Statements of Changes in Net Assets Available
for Plan Benefits for the years ended December 31,
1997, 1996 and 1995 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, 1997 18
-2-
<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, 1998
-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, 1997 and 1996, 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, 1997. 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, 1997 and
1996, and the changes in Net Assets Available for Plan Benefits for each of the
years in the three-year period ended December 31, 1997 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 fund information in the statements of
changes in net assets available for plan benefits is presented for purposes of
additional analysis rather than to present the changes in net assets available
for plan benefits of each fund. 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 fund information and 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.
KPMG Peat Marwick LLP
Boston, Massachusetts
June 5, 1998
-4-
<PAGE> 5
Bay State Gas Company Savings Plan for Operating Employees
Statements of Net Assets Available for Plan Benefits
December 31, 1997 and 1996
Assets
- ------
1997 1996
----------- -----------
Investments, at market value (note 4):
Company Stock Master Trust $ 5,778,711 $ 4,552,194
AIM Constellation Fund 1,535,362 1,096,304
Templeton Foreign Fund 1,909,390 1,579,169
MasterWorks S&P 500 Stock Fund 2,365,532 1,264,374
Life Path Funds:
LifePath 2000 76,523 80,772
LifePath 2010 215,379 143,395
LifePath 2020 231,616 126,801
LifePath 2030 232,839 128,847
LifePath 2040 425,033 154,613
Stable Value Fund 1,788,696 1,614,508
Investments, at cost which approximates fair value:
Loan Fund 756,305 651,503
----------- -----------
Total investments 15,315,386 11,392,480
Contributions receivable from employees
and employer 704 345
----------- -----------
Net Assets Available for Plan Benefits $15,316,090 $11,392,825
=========== ===========
See accompanying notes to financial statements.
-5-
<PAGE> 6
BAY STATE GAS COMPANY
EMPLOYEE SAVINGS PLAN FOR OPERATING EMPLOYEES
Statement of Changes in Net Assets Available for Plan Benefits, with Fund
Information
Year ended December 31, 1997
<TABLE>
<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 and other investment income $ - $ 110,262 $ - $ - $ - $ -
Net appreciation
(depreciation) in fair market
value of investments - 30,420 8,505 24,398 28,580 37,287
Plan interest in Company Stock
Master Trust investment income 1,550,637 - - - - -
-------------------------------------------------------------------------------
Total investment income 1,550,637 140,682 8,505 24,398 28,580 37,287
Contributions:
Employee 369,494 288,386 18,806 55,887 51,570 41,633
Employer 66,851 57,015 3,966 7,862 7,145 7,845
-------------------------------------------------------------------------------
Total contributions 436,345 345,401 22,772 63,749 58,715 49,478
Total additions 1,986,982 486,083 31,277 88,147 87,295 86,765
-------------------------------------------------------------------------------
Benefits Paid (223,821) (45,847) (4,538) (608) (172) (30,838)
Administrative Fees (Note 11) (1,382) (655) (14) (36) (98) (88)
Transfers between funds (535,244) (385) (30,975) (15,519) 17,808 48,185
-------------------------------------------------------------------------------
Net increase (decrease) 1,226,535 439,196 (4,250) 71,984 104,833 104,024
Net Assets Available for Plan Benefits:
Beginning of year 4,552,427 1,096,311 80,773 143,395 126,801 128,854
-------------------------------------------------------------------------------
End of year $5,778,962 $1,535,507 $ 76,523 $215,379 $231,634 $232,878
===============================================================================
<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 and other investment income $ - $ 203,373 $ 79,731 $ 105,305 $ 63,850 $ 562,521
Net appreciation
(depreciation) in fair market
value of investments 50,112 (97,805) 412,027 - - 493,524
Plan interest in Company Stock
Master Trust investment income - - - - - 1,550,637
-----------------------------------------------------------------------------------
Total investment income 50,112 105,568 491,758 105,305 63,850 2,606,682
Contributions:
Employee 74,067 241,061 287,336 240,837 - 1,669,077
Employer 11,305 48,005 54,040 74,668 - 338,702
-----------------------------------------------------------------------------------
Total contributions 85,372 289,066 341,376 315,505 - 2,007,779
Total additions 135,484 394,634 833,134 420,810 63,850 4,614,461
-----------------------------------------------------------------------------------
Benefits Paid (1,698) (99,657) (61,011) (172,906) (45,596) (686,692)
Administrative Fees (Note 11) (170) (661) (669) (731) - (4,504)
Transfers between funds 136,843 35,979 329,753 (72,993) 86,548 -
-----------------------------------------------------------------------------------
Net increase (decrease) 270,459 330,295 1,101,207 174,180 104,802 3,923,265
Net Assets Available for Plan Benefits:
Beginning of year 154,613 1,579,183 1,264,449 1,614,516 651,503 11,392,825
-----------------------------------------------------------------------------------
End of year $425,072 $1,909,478 $2,365,656 $1,788,696 $756,305 $15,316,090
===================================================================================
</TABLE>
See accompanying notes to financial statements.
-6-
<PAGE> 7
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
<TABLE>
<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.
-7-
<PAGE> 8
BAY STATE GAS COMPANY
EMPLOYEE SAVINGS PLAN FOR OPERATING EMPLOYEES
Statement of Changes in Net Assets Available for Plan Benefits, with Fund
Information
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Templeton Plan Interest in AIM LifePath LifePath LifePath
Selection Index Growth Company Stock Constellation 2000 2010 2020
Fund Fund Fund Master Trust Fund Fund Fund Fund
----------------------------------------------------------------------------------------------------
<S> <C> <C> <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 $ 2,880 $ 3,906
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 2,880 3,906
Contributions:
Employee 44,528 18,493 67,254 352,809 160,257 20,527 34,023 24,581
Employer 13,871 4,672 16,376 70,160 36,280 3,803 7,701 4,751
----------------------------------------------------------------------------------------------------
Total contributions 58,399 23,165 83,630 422,969 196,537 24,330 41,724 29,332
Total additions 76,008 59,269 122,432 1,023,939 209,968 26,398 44,604 33,238
----------------------------------------------------------------------------------------------------
Benefits Paid (278) - - (49,812) (2,418) - (348) -
Administrative Fees - - - (458) (106) - (3) (16)
Transfers between funds (1,118,090) (373,897) (995,518) 3,259,754 330,032 21,151 14,623 31,817
----------------------------------------------------------------------------------------------------
Net increase (decrease) (1,042,360) (314,628) (873,086) 4,233,423 537,476 47,549 58,876 65,309
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 $58,876 $65,309
====================================================================================================
<CAPTION>
LifePath LifePath Templeton Stagecoach Stable Company
2030 2040 Foreign S&P 500 Value Stock Loan
Fund Fund Fund Stock Fund Fund Fund Fund Total
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Interest - - $68,272 $ 18,905 $ 58,317 $ 32 $ 29,987 $ 210,301
Dividends - - - - - 47,639 - 47,639
Net appreciation
(depreciation) in the fair
value of investments $ 2,714 $ 3,147 28,247 87,118 - 83,414 - 284,652
Plan interest in Company
Stock Master Trust
investment income - - - - - - - 600,970
-----------------------------------------------------------------------------------------------------
Total investment income 2,714 3,147 96,519 106,023 58,317 131,085 29,987 1,143,562
Contributions:
Employee 18,071 22,034 169,213 120,657 198,345 160,994 - 1,411,786
Employer 3,939 4,323 39,805 27,995 67,418 36,703 - 337,797
-----------------------------------------------------------------------------------------------------
Total contributions 22,010 26,357 209,018 148,652 265,763 197,697 - 1,749,583
Total additions 24,724 29,504 305,537 254,675 324,080 328,782 29,987 2,893,145
-----------------------------------------------------------------------------------------------------
Benefits Paid - - (2,466) (894) (26,466) (6,920) (5,419) (95,021)
Administrative Fees (7) (13) (159) (60) (148) - - (970)
Transfers between funds 20,453 13,945 827,289 446,483 999,273 (3,670,469) 193,154 -
-----------------------------------------------------------------------------------------------------
Net increase (decrease) 45,170 43,436 1,130,201 700,204 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 $45,170 $43,436 $1,130,201 $700,204 $1,296,739 - $483,401 $8,641,514
=====================================================================================================
</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, 1997, 1996 and 1995
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. Participation begins in accordance with the terms of
contracts negotiated with the various unions representing Company
employees. 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, 1997, 1996 and 1995
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) INVESTMENTS
Investments in the AIM Constellation Fund, MasterWorks S & P 500 Stock
Fund, LifePath Funds, Company Stock Master Trust 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.
Guaranteed Investment Contracts ("GIC's") held by 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 7.18% at
December 31, 1997. At December 31, 1997, the fair value of the GICs held
by the Stable Value Fund approximates contract value.
The Barclays Global Investors Income Accumulation Fund, held by the
Stable Value 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.
Participant loans are valued 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, 1997, 1996 and 1995
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(c) 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.
4) INVESTMENTS
All contributions are remitted to the Plan Trustee for investment in
accordance with the instructions of the participants. Participants may
allocate their contributions (in 10% 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, 1997, 1996 and 1995
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.
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 Barclays Global Investors Income Accumulation Fund. The
Barclays Global Investors 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, 1997, each of the investment funds had the following
number of participants:
AIM Constellation Fund 229
LifePath 2000 Fund 16
LifePath 2010 Fund 48
LifePath 2020 Fund 49
LifePath 2030 Fund 50
LifePath 2040 Fund 65
Templeton Foreign Fund 271
S & P 500 Stock - MasterWorks Fund 266
Stable Value Fund 232
Company Stock Master Trust 354
-12-
<PAGE> 13
BAY STATE GAS COMPANY
SAVINGS PLAN FOR OPERATING EMPLOYEES
Notes to the Financial Statements
December 31, 1997, 1996 and 1995
4) INVESTMENTS (CONTINUED)
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, 1997 and 1996.
5) INTEREST IN BAY STATE GAS COMPANY STOCK MASTER TRUST
A portion of the Plan's investments are invested 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 Barclays Global Investors. At December 31,
1997 and 1996, the Plan's interest in the net assets of the Master Trust
was approximately 31% and 26%, 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. Contributions and benefit payments to Plan participants
directly increase/decrease the assets of the Master Trust allocated to
the Plan. The following table presents the fair values of investments
for the Master Trust.
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
----------------- -----------------
<S> <C> <C>
Bay State Gas Company Stock $18,493,079 $17,768,586
=========== ===========
</TABLE>
Investment income for the Master Trust is as follows:
<TABLE>
<CAPTION>
Year ended Year ended
----------------- -----------------
December 31, 1997 December 31, 1996
----------------- -----------------
<S> <C> <C>
Net appreciation in fair value of Bay
State Gas Company Stock $4,470,583 $ 304,698
Interest 6,665 8,279
Dividends 905,878 1,052,116
---------- ----------
$5,383,126 $1,365,093
========== ==========
</TABLE>
-13-
<PAGE> 14
BAY STATE GAS COMPANY
SAVINGS PLAN FOR OPERATING EMPLOYEES
Notes to Financial Statements
December 31, 1997, 1996 and 1995
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 a 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 1997. 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, 1997, 1996 and 1995
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.
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, 1997, 1996 and 1995
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 the Code. The Plan is 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 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.
10) SUBSEQUENT EVENT
On May 27, 1998, the shareholders of Bay State Gas Company approved an
Agreement and Plan of Merger whereby Bay State Gas Company will be
merged into NIPSCO Industries, Inc. Currently, it is not known whether
the Plan will continue in existence or be merged into a NIPSCO plan.
11) RELATED PARTY TRANSACTIONS
Certain Plan investments are managed by the Trustee of the Plan and
therefore quality as party-in-interest. Fees paid by the Plan for the
investment management services amounted to $4,504 and $2,727 for the
years ended December 31, 1997 and 1996, respectively.
-16-
<PAGE> 17
Bay State Gas Company Savings Plan for Operating Employees
Schedule I
----------
Item 27 (a)
Schedule of Assets Held for Investment Purposes
December 31, 1997
<TABLE>
<CAPTION>
Identity of Issue Description of Investment Cost Current Value
----------------- ------------------------- ----------- -------------
<S> <C> <C> <C>
* Company Master Trust Master Trust; 358,703 units $ 3,608,294 $ 5,778,711
Stable Value Fund Pooled Fund; 152,380 shares 1,788,696 1,788,696
AIM Constellation Fund Mutual Fund; 58,202 shares 1,466,791 1,535,362
Templeton Foreign Fund Mutual Fund; 191,899 shares 1,874,217 1,909,390
* MasterWorks S&P 500 Stock Fund Mutual Fund; 116,014 shares 1,782,313 2,365,532
* LifePath 2000 Fund Collective Trust Fund; 5,771 shares 69,276 76,523
* LifePath 2010 Fund Collective Trust Fund; 14,254 shares 186,994 215,379
* LifePath 2020 Fund Collective Trust Fund; 14,003 shares 191,379 231,616
* LifePath 2030 Fund Collective Trust Fund; 13,214 shares 192,116 232,839
* LifePath 2040 Fund Collective Trust Fund; 22,596 shares 365,010 425,033
* Loan Fund Participant loans; 5.80% - 10.00% 756,305 756,305
----------- -----------
Total assets held for investment purposes $12,281,391 $15,315,386
=========== ===========
</TABLE>
* Party in interest
-17-
<PAGE> 18
BAY STATE GAS COMPANY
EMPLOYEE SAVINGS PLAN FOR OPERATING EMPLOYEES
Schedule II
-----------
Item 27(d)
Schedule of Reportable Transactions
Year ended December 31, 1997
<TABLE>
<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 $728,518 - - -
- sale - 319,880 - -
Templeton Foreign Fund Mutual Fund - purchase 649,458 - - -
- sale - 221,431 - -
MasterWorks S&P 500 Stock Fund Mutual Fund - purchase 936,216 - - -
- sale - 247,085 - -
Stable Value Fund Pooled Fund - purchase 644,928 - - -
- sale - 576,045 - -
Company Stock Master Trust * Master Trust - purchase 531,905 - - -
- sale - 856,026 - -
<CAPTION>
Current value
Identity of party Cost of of asset on Net gain
involved Description of asset asset transaction date or (loss)
(a) (b) (g) (h) (i)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM Constellation Fund Mutual Fund - purchase $728,518 $728,518 -
- sale 296,275 319,880 23,605
Templeton Foreign Fund Mutual Fund - purchase 649,458 649,458 -
- sale 189,689 221,431 31,742
MasterWorks S&P 500 Stock Fund Mutual Fund - purchase 936,216 936,216 -
- sale 184,628 247,085 62,457
Stable Value Fund Pooled Fund - purchase 644,298 644,928 -
- sale 576,045 576,045 -
Company Stock Master Trust * Master Trust - purchase 531,905 531,905 -
- sale 714,804 856,026 141,222
</TABLE>
* Party-in-interest
-18-
