<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One):
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 (NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996)
For the fiscal year ended December 31, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (NO FEE REQUIRED)
For the transition period from _______ to _______
Commission File No. 0-8898
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
Midcoast Energy Resources, Inc. 401(k) Plan
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
Midcoast Energy Resources, Inc.
1000 Louisiana, Suite 2950
Houston, Texas 77002
<PAGE>
Midcoast Energy Resources Inc. 401(k) Plan
Index to Financial Statements
Item 4
(a) Financial Statements
Report of Independent Accountants
Statements of Net Assets Available for Benefits at December 31, 1999
and 1998
Statements of Changes in Net Assets Available for Benefits for the Year
Ended December 31, 1999
Notes to Financial Statements
(b) Supplemental Schedule*
Form 5500--Schedule of Assets Held for Investment Purposes at End of
Year (Schedule I)
(c) Exhibits
23.1--Consent of Independent Accountants
<PAGE>
Midcoast Energy Resources, Inc. 401(k) Plan
Index to Financial Statements and Supplemental Schedule
<TABLE>
Page
<S> <C>
Report of Independent Accountants 1
Financial Statements:
Statements of Net Assets Available for Benefits at December 31, 1999 and 1998 2
Statement of Changes in Net Assets Available for Benefits for the Year
Ended December 31, 1999 3
Notes to Financial Statements 4 - 9
Supplemental Schedule*:
Form 5500 - Schedule of Assets Held for Investment Purposes at End of Year
(Schedule I) 10
</TABLE>
* Other schedules required by Section 2520.103-10 of the Department of
Labor's Rules and Regulations for Reporting and Disclosure under ERISA have
been omitted since they are not applicable.
<PAGE>
Report of Independent Accountants
To the Participants and the Trustees of the
Midcoast Energy Resources, Inc. 401(k) Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Midcoast Energy Resources, Inc. 401(k) Plan (the Plan) at December 31,
1999 and 1998, and the changes in net assets available for benefits for the year
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States. 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 of these
statements in accordance with auditing standards generally accepted in the
United States, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of Assets Held
for Investment Purposes at End of Year is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is 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. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
PricewaterhouseCoopers LLP
Houston, Texas
June 30, 2000
<PAGE>
Midcoast Energy Resources, Inc. 401(k) Plan
Statements of Net Assets Available for Benefits
<TABLE>
<CAPTION>
December 31,
--------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Assets:
Cash $ 213,897 $ -
Investments, at fair value:
Midcoast Energy Resources, Inc. common stock 1,115,425 690,816
Other corporate stocks - 5,416
Mutual funds 3,402,726 925,722
Contributions receivable:
Participants - 17,668
Employer 85,543 54,650
Participant loans 247,805 117,444
----------- ----------
Total assets 5,065,396 1,811,716
Liabilities:
Fees payable 11,787 537
----------- ----------
Net assets available for benefits $ 5,053,609 $1,811,179
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
-2-
<PAGE>
Midcoast Energy Resources, Inc. 401(k) Plan
Statement of Changes in Net Assets Available for Benefits
<TABLE>
<CAPTION>
Year Ended
December 31,
1999
--------------
<S> <C>
Additions attributed to:
Interest and dividend income $ 163,822
Net appreciation on investments 188,272
Contributions:
Participants 708,179
Employer 324,463
------------
Total additions 1,384,736
------------
Deductions attributed to:
Withdrawals 681,717
Administrative and investment expenses 20,125
------------
Total deductions 701,842
------------
Net increase in net assets available for
benefits before rollovers from other plans 682,894
Rollovers from other plans 2,559,536
------------
Net increase in net assets available for benefits 3,242,430
Net assets available for benefits, beginning of year 1,811,179
------------
Net assets available for benefits, end of year $ 5,053,609
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
Midcoast Energy Resources, Inc. 401(k) Plan
Notes to Financial Statements
1. Description of Plan
The following brief description of the provisions of the Midcoast
Energy Resources, Inc. 401(k) Plan (the Plan) is provided for general
information purposes only. Participants should refer to the plan
document for a more complete description of the Plan's provisions.
General
Midcoast Energy Resources, Inc. (the Company) established the Midcoast
Energy Resources, Inc. 401(k) Plan (the Plan) in December 1996. On
February 22, 1999, the Plan was amended and restated to effectively
eliminate the six-month service requirement for participant
eligibility.
The Plan is a defined contribution plan. All domestic and expatriate
employees are eligible to enroll in the Plan. The Plan is subject to
the provisions of the Employee Retirement Income Security Act of 1974
(ERISA), as amended, and is administered by the Plan's Trustees and
Investment Review Committee, whose members are appointed by the
Company.
Effective October 1998, Charles Schwab & Sons, Inc. was appointed
Custodian of the Plan's assets and MBM Advisors Inc. became the Plan's
third-party administrator. Under the terms of the Plan, the Custodian,
on behalf of the Plan's Trustees, acquires, holds and disposes of
securities, including the common stock of the Company owned by the
Plan.
Contributions
Participants may contribute on a pre-tax basis up to 15% (up to a limit
of $10,000 in 1999) of their base compensation to the Plan. After-tax
contributions are not permitted by the Plan.
For each Plan year, the Company may contribute to the Plan an amount of
matching contributions determined by the employer at its discretion.
The Company may choose not to make matching contributions for a
particular Plan year. The Company's matching contributions are
allocated based on each participant's share of total participant
contributions and are made on a quarterly basis. Participants must have
completed 1,000 hours of service during the Plan year and be employed
by the Company on the last day of the Plan year to be eligible for
employer matching contributions. During 1999, the Company elected to
match 60% of participant contributions up to a maximum of 7.5% of
participant compensation.
In addition, the Plan allows for nonelective contributions to the Plan
each year in the amount determined by the Company at its discretion.
The Company made no such contributions in 1999.
Termination
The Company reserves the right to amend or terminate the Plan, subject
to the provisions of ERISA. Upon notice of termination or permanent
suspension of contributions, the accounts of all participants affected
thereby will become fully vested and in the event of termination, will
be distributed in accordance with the provisions of the Plan.
Loans
A participant has the ability to borrow funds from the employee's
vested pre-tax and rollover amounts. A loan is secured by the
participant's account balance and bears interest at a fixed rate of
prime plus 1%. Interest rates on loans outstanding range from 7%
to 10%. Participants may borrow a maximum amount equal to the lesser of
(i) 50% of each participant's vested account balance under the Plan or
(ii) $50,000, reduced by the excess, if any, of the highest outstanding
loan balance outstanding in the previous year over the loan balance
currently outstanding. All loans are repayable within five years.
Repayment of the principal and interest of a loan is invested according
to the participant's current investment directions for future pre-tax
contributions to the Plan. Upon leaving the Company, the Plan
participant may repay the outstanding loan balance with a lump sum
payment. In the event the loan can not be paid by the participant, the
loan balance will be defaulted and become taxable to the participant.
-4-
<PAGE>
Midcoast Energy Resources, Inc. 401(k) Plan
Notes to Financial Statements
During 1999, $150,913 of new loans were made to participants.
Withdrawals
Withdrawals are permitted in the event of termination of employment,
retirement, permanent disability, death or financial hardship, as
defined in the Plan. In-service withdrawals may be made from a
participant's account. Additionally, vested participants may make in-
service withdrawals from the Company's matching account.
At December 31, 1999, $190,762 of the Plan's net assets available for
benefits relate to benefit claims which had been processed and approved
for payment by the Plan, but which were unpaid as of December 31, 1999.
Participant Accounts
Separate accounts are maintained for each participant. Participant
accounts are credited with pre-tax contributions, rollover
contributions, the Company's matching contributions and an allocation
of investment earnings, losses, and investment expenses. Furthermore,
participant accounts are adjusted for withdrawals and transfers among
investment options, if any.
Participants have an option as to the manner in which their
contributions may be invested. Separate funds are maintained and
participants may direct their investments in 1% increments. A brief
description of the Plan's investment options for the Plan year ended
December 31, 1999 follows. For a detailed description of investment
options and risk profiles, refer to the respective fund prospectus.
<TABLE>
<CAPTION>
Fund Investments
------------------------------------ ------------------------------------------------------------------------
<S> <C>
Russell Lifepoints Aggressive Common stocks of small, growing companies.
Strategy Fund (LP Aggressive)
Russell Lifepoints Balanced Common stocks of domestic companies and debt obligations of
Strategy Fund (LP Balanced) domestic companies and the U.S. Government.
Russell Lifepoints Moderate Common stocks of medium to large-sized established companies.
Strategy Fund (LP Moderate)
Safeco Growth Fund (Safeco) Common stocks of small, growing companies.
Sound Shore Fund Common stocks of small to medium-sized companies that are expected
to demonstrate growth in earnings and revenue.
MFS Massachusetts Investors Common stocks of medium to large-sized companies that are expected
Growth Stock Fund-Class A (MFS) to demonstrate long-term growth in earnings and revenue.
Dreyfus Appreciation Fund Common stocks of both domestic and foreign companies and debt
(Dreyfus) securities of foreign governments.
Schwab 1000 Fund-Investor Shares Common stocks of the 1,000 largest publicly traded domestic
(Schwab 1000) companies.
Deutsche International Equity Fund Common stocks of foreign companies.
(Deutsche)
Strong Government Securities Fund- U.S. Government debt obligations, including Treasury and agency
Investor Class (Strong) issues.
Federated High-Yield High-yield corporate debt obligations.
(Federated)
Schwab Retirement Money Fund Money market instruments.
(Schwab Retirement)
</TABLE>
- 5 -
<PAGE>
Midcoast Energy Resources, Inc. 401(k) Plan
Notes to Financial Statements
<TABLE>
<S> <C>
</TABLE>
<TABLE>
<CAPTION>
Fund Investments
------------------------------------ ------------------------------------------------------------------------
<S> <C>
Schwab Institutional Advantage Money market instruments.
Money Fund (Schwab Institutional)
Midcoast Energy Resources, Inc. Midcoast Energy Resources, Inc. common stock.
</TABLE>
Unallocated forfeitures are maintained in the Schwab Retirement fund.
Unallocated forfeitures are segregated from all other participants'
records. Unallocated forfeitures of $15,983 at December 31, 1999 may be
used to reduce future Company matching contributions.
Vesting
A participant's contributions are 100% vested at all times.
Participants become vested in the Company's contributions and the
related earnings of such contributions after attainment of the years of
service specified below:
<TABLE>
<CAPTION>
Vested and nonforfeitable
Years percentage of employer's
of service contribution into the Plan
<S> <C>
1 20%
2 40%
3 60%
4 80%
5 100%
</TABLE>
In general, a participant will be deemed to have completed a "year of
service" for each calendar year during which the participant completes
at least 1,000 hours of service. In addition, a participant becomes
fully vested in the Company's matching contributions, regardless of
years of service, if employment is terminated due to total disability
or death.
2. Summary of Significant Accounting Policies
Basis of Accounting
The Plan's financial statements are prepared on the accrual basis of
accounting in conformity with accounting principles generally accepted
in the United States.
Investments
Investments traded on national securities exchanges are valued at
closing prices on the last business day of the year; investments traded
on the over-the-counter market are valued at an average of the last
reported bid and ask prices. The investments in the money market
mutual funds (short-term investments) are highly liquid; therefore, the
fair value approximates cost. The cost of investments sold is
determined on the basis of average cost. Investments in mutual funds
are valued on the basis of net asset value as reported by the
respective mutual fund companies.
Purchases and sales of securities are reflected on a trade-date basis.
Dividend income is recorded on the ex-dividend date. Income from other
investments is recorded as earned on an accrual basis.
The Plan presents in the statement of changes in net assets available
for benefits the net appreciation (depreciation) in the fair value of
its investments which consists of the realized gains or losses and the
unrealized appreciation (depreciation) on those investments.
- 6 -
<PAGE>
Midcoast Energy Resources, Inc. 401(k) Plan
Notes to Financial Statements
Benefits
Benefit claims are accrued when they have been processed and approved
for payment by the Plan. Claims processed and approved, but unpaid as
of the Plan's fiscal year end, are not shown as liabilities on the
statement of net assets available for benefits but are reflected as
liabilities on the Plan's Form 5500.
Expenses
Certain Plan administration expenses are paid by the Company. For the
year ended December 31, 1999, administrative expenses of $18,640 were
incurred by the Company on behalf of the Plan.
Excess Contributions Refundable to Employees
Excess contributions refundable to highly compensated employees
represent the refunds necessary to meet certain nondiscrimination
provisions of the Internal Revenue Code (the Code). There were no
excess contributions refundable to employees for the year ended
December 31, 1999.
Use of Estimates
The preparation of the Plan's financial statements in conformity with
accounting principles generally accepted in the United States requires
the Plan administrator to make estimates and assumptions that affect
the reported amounts of net assets available for benefits at the date
of the financial statements and the changes in net assets available for
benefits during the reporting period and, when applicable, disclosure
of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
Concentrations of Credit Risk
Certain financial instruments potentially subject the Plan to
concentrations of credit risk. These financial instruments consist of
various mutual funds and the common stock of the Company. The Plan does
not obtain or require collateral for these instruments. Changes in the
economic environment have a direct impact on the market value of these
instruments. It is reasonably possible that changes in the economic
environment will occur in the near term and that such changes will have
a material effect on the market value of the instruments included in
the Plan.
New Accounting Standard
Effective December 15, 1999, the Plan adopted Statement of Position 99-
3, "Accounting for and Reporting of Certain Defined Contribution Plan
Investments and Other Disclosure Matters" (the SOP). The SOP modifies
disclosures related to participant-directed investments, significant
investment holdings of the Plan and benefit-responsive investment
contracts. The Plan's financial statement disclosures, where
applicable, have been conformed to the SOP.
3. Tax Status
The Plan obtained its latest determination letter on February 16, 1999,
in which the Internal Revenue Service stated that the Plan, as then
designed, was in compliance with the applicable requirements of the
Internal Revenue Code. A favorable determination letter allows the
Company to take a business expense deduction for contributions paid
within a specified period and for participants' benefits not to be
taxed until received by them. In addition, since the trust fund of the
Plan is treated as an exempt organization, its income is not subject to
federal or state income taxes.
The Plan has been amended since receiving the determination letter.
However, the plan administrator and the plan's counsel believe that the
Plan is currently designed and being operated in compliance with the
applicable requirements of the Internal Revenue Code. Therefore, no
provision for income taxes has been included in the Plan's financial
statements.
4. Related Parties
The Trustes are authorized to invest in securities under their control.
Transactions resulting in Plan assets being transferred to, or used by,
a related party are prohibited under ERISA unless a specific exemption
exists. As of December 31, 1999 and for the year then ended, there were
no transactions with any "party-in-interest" as defined by ERISA for
which there was not a specific exemption.
- 7 -
<PAGE>
Midcoast Energy Resources, Inc. 401(k) Plan
Notes to Financial Statements
5. Investments
The following presents investments that represent 5% or more of the
Plan's net assets:
<TABLE>
<CAPTION>
December 31,
1999 1998
-------------------- ------------------
<S> <C> <C>
Midcoast Energy Resources, Inc. common stock,
66,593 and 32,509 shares, respectively $1,115,425 $ 690,816
LP Aggressive, 47,160 and 35,771 shares, respectively 526,775 355,567
LP Balanced, 42,924 and 7,574 shares, respectively 461,004 76,649 *
Dreyfus, 11,378 and 2,715 shares, respectively 520,312 114,201
MFS, 23,116 and 996 shares, respectively 469,952 15,844 *
Schwab Retirement, 577,626 and 89,048 shares, respectively 577,626 89,048 *
Schwab Institutional, 18,796 and 157,210 shares, respectively 18,796 * 157,210
Participant loans 247,805 * 117,444
</TABLE>
* Does not represent 5% or more of the Plan's net assets in the
corresponding year.
For the year ended December 31, 1999, the Plan's investments (including
gains and losses on investments bought and sold, as well as held during
the year) appreciated/(depreciated) in value as follows:
<TABLE>
<S> <C>
Common stock $ (64,952)
Mutual funds 253,224)
------------------------
$ 188,272)
------------------------
</TABLE>
As of December 31, 1999 and 1998, the Plan held no nonparticipant
directed investments.
- 8 -
<PAGE>
Midcoast Energy Resources, Inc. 401(k) Plan
Notes to Financial Statements
6. Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for benefits
per the financial statements at December 31 to the applicable
Form 5500:
<TABLE>
<CAPTION>
December 31,
----------------------------------
1999 1998
<S> <C> <C>
Net assets available for benefits per the financial
statements $ 5,053,609 $ 1,811,179
Contributions receivable (72,318)
Fees payable 537
Benefit payments payable (190,762)
--------------- ------------
Net assets available for benefits per the Form 5500 $ 4,862,847 $ 1,739,398
--------------- ------------
</TABLE>
- 9 -
<PAGE>
Midcoast Energy Resources, Inc. 401(k) Plan Schedule I
Schedule of Assets Held for Investment Purposes At End of Year
<TABLE>
<CAPTION>
(c) (e)+
(b) Description Number of Current
(a) Identity of issue Of Investment Shares value
<S> <C> <C> <C> <C>
* Midcoast Energy Resources, Inc. Common stock 66,593 $1,115,425
Lifepoints Aggressive Strategy Mutual fund 47,160 526,775
Lifepoints Balanced Strategy Mutual fund 42,924 461,004
Lifepoints Moderate Strategy Mutual fund 14,768 154,479
Deutsche International Equity Mutual fund 4,314 137,919
Safeco Growth Mutual fund 3,514 81,887
Sound Shore Mutual fund 5,358 157,893
Dreyfus Appreciation Mutual fund 11,378 520,312
MFS Massachusetts Investors
Growth Stock A Mutual fund 23,116 469,952
Schwab 1000 Investor Mutual fund 3,828 154,139
Federated High-yield Mutual fund 11,952 98,726
Strong Government Securities
Investor Mutual fund 4,288 43,218
Schwab Retirement Money Fund Mutual fund 577,626 577,626
Schwab Institutional Advantage
Money Fund Mutual fund 18,796 18,796
* Participant loans Loans, interest rates
ranging from 7% - 10% 247,805 247,805
--------------
Total assets held for investment purposes $4,765,956
==============
</TABLE>
* Indicates party-in-interest transaction, for which a statutory exemption
exists.
+ Column (d) has been omitted since it is not applicable.
<PAGE>
Signatures
In accordance with Section 15 (d) of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
MIDCOAST ENERGY RESOURCES, INC.
(Registrant)
BY: /S/ DAN C. TUTCHER
-----------------------
Dan C. Tutcher
Chief Executive Officer
Date: July 13, 2000
In accordance with the Securities and Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity in Which Signed Date
--------- ------------------------ ----
<S> <C> <C>
/S/ DAN C. TUTCHER Chairman of the Board July 13, 2000
------------------
(Dan C. Tutcher) Chief Executive Officer
and President
/S/ I. J. BERTHELOT, II Executive Vice President, July 13, 2000
-----------------------
(I. J. Berthelot, II) Chief Operating Officer
and Director
/S/ TED COLLINS, JR. Director July 13, 2000
--------------------
(Ted Collins, Jr.)
/S/ CURTIS J. DUFOUR III. Director July 13, 2000
-------------------------
(Curtis J. Dufour, III.)
/S/ RICHARD N. RICHARDS Director July 13, 2000
-----------------------
(Richard N. Richards)
/S/ RICHARD A. ROBERT Treasurer, Principal Financial Officer July 13, 2000
---------------------
(Richard A. Robert) Principal Accounting Officer
/S/ BRUCE WITHERS Director July 13, 2000
-----------------
(Bruce Withers)
</TABLE>
