<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, 1998
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
BAY STATE GAS COMPANY
SAVINGS PLAN FOR OPERATING EMPLOYEES
<TABLE>
<CAPTION>
INDEX PAGE
<S> <C>
(a) Signatures 1
(b) Financial Statements:
Independent Auditors' Report 2
Statements of Net Assets Available for Plan Benefits
as of December 31, 1998 and 1997 3
Statements of Changes in Net Assets Available for Plan Benefits
for the years ended December 31, 1998 and 1997 4 - 5
Notes to Financial Statements 6 - 12
Schedule 1: Line 27a - Schedule of Assets Held for Investment Purposes 13
Schedule 2: Line 27d - Schedule of Reportable Transactions -
Year ended December 31, 1998 14
</TABLE>
<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
/s/ Thomas W. Sherman
By _________________________________
Thomas W. Sherman
Committee Member
/s/ William D. MacGillivray
By _________________________________
William D. MacGillivray
Committee Member
/s/ Elizabeth A. Foley
By _________________________________
Elizabeth A. Foley
Committee Member
Date: June 30, 1999
<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, 1998 and 1997, and the related statements of changes in net assets
available for plan benefits, with fund information, for each of the years in the
two-year period ended December 31, 1998. 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, 1998 and
1997, and the changes in net assets available for plan benefits for each of the
years in the two-year period ended December 31, 1998 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.
/s/ KPMG LLP
Boston, Massachusetts
June 11, 1999
<PAGE> 5
BAY STATE GAS COMPANY
SAVINGS PLAN FOR OPERATING EMPLOYEES
<TABLE>
<CAPTION>
Statements of Net Assets Available for Plan Benefits
December 31, 1998 and 1997
1998 1997
----------- ----------
<S> <C> <C>
Investments, at market value (note 4):
Company Stock Master Trust (note 5) $ 6,281,048 5,778,711
AIM Constellation Fund 2,072,548 1,535,362
Templeton Foreign Fund 1,536,967 1,909,390
Masterworks S&P 500 Stock Fund 3,884,260 2,365,532
Life Path Funds
LifePath 2000 99,031 76,523
LifePath 2010 326,940 215,379
LifePath 2020 352,843 231,616
LifePath 2030 290,087 232,839
LifePath 2040 671,308 425,033
Stable Value Fund 2,186,604 1,788,696
Investments, at cost which approximates fair value:
Loan Fund 868,314 756,305
----------- ----------
Total investments 18,569,950 15,315,386
Contributions receivable from employees and employer 38,583 704
----------- ----------
Net assets available for plan benefits $18,608,533 15,316,090
=========== ==========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 6
<TABLE>
<CAPTION>
BAY STATE GAS COMPANY
SAVINGS PLAN FOR OPERATING EMPLOYEES
Statement of Changes in Net Assets Available for Plan Benefits, with Fund Information
Year ended December 31, 1998
PLAN
INTEREST IN
COMPANY
STOCK AIM LIFEPATH LIFEPATH LIFEPATH LIFEPATH
MASTER CONSTELLATION 2000 2010 2020 2030
TRUST FUND FUND FUND FUND FUND
----------- ------------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest and other investment income $ -- 50,954 -- -- -- --
Net appreciation (depreciation) in fair
market value of investments -- 255,241 9,016 36,511 47,714 45,362
Plan interest in Company Stock Master
Trust investment income (note 5) 636,833 -- -- -- -- --
----------- --------- ------ ------- ------- -------
Total investment income 636,833 306,195 9,016 36,511 47,714 45,362
Contributions:
Employee 354,423 304,935 15,193 60,077 54,445 53,413
Employer 74,748 57,794 2,769 8,149 9,252 8,686
----------- --------- ------ ------- ------- -------
Total contributions 429,171 362,729 17,962 68,226 63,697 62,099
Total additions 1,066,004 668,924 26,978 104,737 111,411 107,461
----------- --------- ------ ------- ------- -------
Benefits paid (453,895) (29,654) (11,001) (219) (27,634) (10,110)
Administrative fees (note 11) (1,390) (641) (2) (84) (77) (102)
Transfers between funds (100,959) (95,126) 6,861 8,381 38,621 (38,964)
----------- --------- ------ ------- ------- -------
Net increase (decrease) 509,760 543,503 22,836 112,815 122,321 58,285
Net assets available for plan benefits:
Beginning of year 5,778,962 1,535,507 76,523 215,379 231,634 232,878
----------- --------- ------ ------- ------- -------
End of year $ 6,288,722 2,079,010 99,359 328,194 353,955 291,163
=========== ========= ====== ======= ======= =======
<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 -- 178,152 215,565 118,373 77,333 640,377
Net appreciation (depreciation) in fair
market value of investments 119,338 (268,783) 533,814 -- -- 778,213
Plan interest in Company Stock Master
Trust investment income (note 5) -- -- -- -- -- 636,833
------- --------- --------- --------- ------- ----------
Total investment income 119,338 (90,631) 749,379 118,373 77,333 2,055,423
Contributions:
Employee 102,254 222,594 422,049 257,644 -- 1,847,027
Employer 13,637 42,641 71,816 53,894 -- 343,386
------- --------- --------- --------- ------- ----------
Total contributions 115,891 265,235 493,865 311,538 -- 2,190,413
Total additions 235,229 174,604 1,243,244 429,911 77,333 4,245,836
------- --------- --------- --------- ------- ----------
Benefits paid (3,096) (81,269) (145,596) (183,958) (1,389) (947,821)
Administrative fees (note 11) (257) (526) (877) (1,616) -- (5,572)
Transfers between funds 16,780 (461,163) 431,686 157,818 36,065 --
------- --------- --------- --------- ------- ----------
Net increase (decrease) 248,656 (368,354) 1,528,457 402,155 112,009 3,292,443
Net assets available for plan benefits:
Beginning of year 425,072 1,909,478 2,365,656 1,788,696 756,305 15,316,090
------- --------- --------- --------- ------- ----------
End of year 673,728 1,541,124 3,894,113 2,190,851 868,314 18,608,533
======= ========= ========= ========= ======= ==========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 7
<TABLE>
<CAPTION>
BAY STATE GAS COMPANY
SAVINGS PLAN FOR OPERATING EMPLOYEES
Statement of Changes in Net Assets Available for Plan Benefits, with Fund Information
Year ended December 31, 1997
PLAN
INTEREST IN
COMPANY
STOCK AIM LIFEPATH LIFEPATH LIFEPATH LIFEPATH
MASTER CONSTELLATION 2000 2010 2020 2030
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 (note 5) 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 (note 5) -- -- -- -- -- 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.
5
<PAGE> 8
BAY STATE GAS COMPANY
SAVINGS PLAN FOR OPERATING EMPLOYEES
Notes to Financial Statements
December 31, 1998 and 1997
(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 income and
expenses are also affected by these estimates and assumptions. Actual
results could differ from those estimates.
(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.
(Continued)
6
<PAGE> 9
BAY STATE GAS COMPANY
SAVINGS PLAN FOR OPERATING EMPLOYEES
Notes to Financial Statements
December 31, 1998 and 1997
Guaranteed Investment Contracts ("GICs") 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 7.48% and
7.18% at December 31, 1998 and 1997, respectively. At December 31,
1998, the fair value of the GICs held by the Stable Value Fund
approximates contract value.
The Merrill Lynch 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.
(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 to five
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 ten in
any calendar year.
(Continued)
7
<PAGE> 10
BAY STATE GAS COMPANY
SAVINGS PLAN FOR OPERATING EMPLOYEES
Notes to Financial Statements
December 31, 1998 and 1997
(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
the Bay State Gas Company.
* 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 Merrill Lynch Income Accumulation Fund. The Merrill
Lynch 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).
(Continued)
8
<PAGE> 11
BAY STATE GAS COMPANY
SAVINGS PLAN FOR OPERATING EMPLOYEES
Notes to Financial Statements
December 31, 1998 and 1997
At December 31, 1998, each of the investment funds had the following number
of participants:
<TABLE>
<S> <C>
Company Stock Master Trust 351
AIM Constellation Fund 230
Templeton Foreign Fund 237
MasterWorks S&P 500 Stock Fund 281
LifePath 2000 Fund 18
LifePath 2010 Fund 54
LifePath 2020 Fund 53
LifePath 2030 Fund 52
LifePath 2040 Fund 74
Stable Value Fund 223
</TABLE>
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, 1998 and 1997.
(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 Merrill Lynch. At December 31, 1998 and 1997, the
Plan's interest in the net assets of the Master Trust was approximately
31%. 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, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Bay State Gas Company common stock $20,183,148 18,493,079
=========== ==========
</TABLE>
Investment income for the Master Trust is as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Net appreciation in fair value of Bay
State Gas Company common stock $1,260,903 4,470,583
Interest 10,372 6,665
Dividends 801,891 905,878
---------- ---------
$2,073,166 5,383,126
========== =========
</TABLE>
(Continued)
9
<PAGE> 12
BAY STATE GAS COMPANY
SAVINGS PLAN FOR OPERATING EMPLOYEES
Notes to Financial Statements
December 31, 1998 and 1997
(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 $10,000 and $9,500 per
year in 1998 and 1997, respectively. 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.
(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.
(Continued)
10
<PAGE> 13
BAY STATE GAS COMPANY
SAVINGS PLAN FOR OPERATING EMPLOYEES
Notes to Financial Statements
December 31, 1998 and 1997
(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 the life expectancy of the
participant and his or her beneficiary.
Upon the death of a Plan participant, benefits to the participant's
spouse must commence no later than the end of the calendar year that
includes the first anniversary of the participant's death or the end
of the calendar year in which the participant would have been age 70
1/2. For any other beneficiary, death benefits must either be
completed by the end of the calendar year containing the fifth
anniversary of the participant's death or begin by the end of the
calendar year containing the first anniversary 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,
in partial payments, or in installments over a period not to exceed
the life expectancy of the participant and his or her beneficiary.
(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.
(Continued)
11
<PAGE> 14
BAY STATE GAS COMPANY
SAVINGS PLAN FOR OPERATING EMPLOYEES
Notes to Financial Statements
December 31, 1998 and 1997
(10) SUBSEQUENT EVENT
On May 27, 1998, the shareholders of the Bay State Gas Company approved an
Agreement and Plan of Merger whereby the Bay State Gas Company will be
merged into NiSource Inc. (formerly known as NIPSCO Industries, Inc.). On
February 12, 1999, the acquisition was completed. Currently, it is not
known how the Plan may be merged into a NiSource plan.
(11) RELATED PARTY TRANSACTIONS
Certain Plan investments are managed by the Trustee of the Plan and
therefore qualify as party-in-interest. Fees paid by the Plan for the
investment management services amounted to $5,572 and $4,504 for the years
ended December 31, 1998 and 1997, respectively.
12
<PAGE> 15
SCHEDULE 1
<TABLE>
<CAPTION>
BAY STATE GAS COMPANY
SAVINGS PLAN FOR OPERATING EMPLOYEES
Line 27a - Schedule of Assets Held for Investment Purposes
December 31, 1998
(c)
DESCRIPTION OF INVESTMENT,
(b) INCLUDING MATURITY DATE, (e)
IDENTITY OF ISSUE, BORROWER, RATE OF INTEREST, COLLATERAL, PAR (d) CURRENT
(a) LESSOR OR SIMILAR PARTY OR MATURITY VALUE COST VALUE
- --- ---------------------------- -------------------------------------- ------------ -----------
<S> <C> <C> <C>
* Company Stock Master Trust Master Trust; 350,505 units $ 3,747,364 6,281,048
* Stable Value Fund Pooled Fund; 175,240 shares 2,186,604 2,186,604
AIM Constellation Fund Mutual Fund; 67,908 shares 1,757,238 2,072,548
Templeton Foreign Fund Mutual Fund; 183,190 shares 1,752,136 1,536,967
* MasterWorks S&P 500 Stock Fund Mutual Fund; 157,833 shares 2,865,523 3,884,260
* LifePath 2000 Fund Collective Trust Fund; 6,811 shares 86,570 99,031
* LifePath 2010 Fund Collective Trust Fund; 18,898 shares 265,669 326,940
* LifePath 2020 Fund Collective Trust Fund; 18,039 shares 271,700 352,843
* LifePath 2030 Fund Collective Trust Fund; 13,562 shares 222,432 290,087
* LifePath 2040 Fund Collective Trust Fund; 28,676 shares 513,943 671,308
* Loan Fund Participant loans; interest at 7%-10% 868,314 868,314
----------- ----------
Total assets held for investment purposes $14,537,493 18,569,950
=========== ==========
</TABLE>
* Party-in-interest
13
<PAGE> 16
<TABLE>
<CAPTION>
BAY STATE GAS COMPANY
SAVINGS PLAN FOR OPERATING EMPLOYEES
Line 27d - Schedule of Reportable Transactions
Year ended December 31, 1998
(h)
(f) CURRENT (i)
EXPENSE (g) VALUE NET
(b) (c) (d) (e) INCURRED COST OF ASSET ON GAIN
(a) DESCRIPTION PURCHASE SELLING LEASE WITH OF TRANSACTION OR
IDENTITY OF PARTY INVOLVED OF ASSETS PRICE PRICE RENTAL TRANSACTION ASSET DATE (LOSS)
- -------------------------- ---------------------- -------- ------- ------ ----------- ------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AIM Constellation Fund Mutual Fund - purchase $536,838 -- -- -- 536,838 536,838 --
- sale -- 254,892 -- -- 246,392 254,892 8,500
Templeton Foreign Fund Mutual Fund - purchase 449,101 -- -- -- 449,101 449,101 --
- sale -- 552,741 -- -- 571,183 552,741 (18,442)
* MasterWorks S&P 500 Stock Fund Mutual Fund - purchase 1,407,302 -- -- -- 1,407,302 1,407,302 --
- sale -- 422,388 -- -- 324,091 422,388 98,297
* Stable Value Fund Pooled Fund - purchase 755,538 -- -- -- 755,538 755,538 --
- sale -- 475,966 -- -- 475,966 475,966 --
* Company Stock Master Trust Master Trust - purchase 567,326 -- -- -- 567,326 567,326 --
- sale -- 701,823 -- -- 428,257 701,823 273,566
* Party-in-interest
</TABLE>
14
