CONNECTICUT NATURAL GAS CORPORATION
-----------------------------------
EMPLOYEE SAVINGS PLAN
---------------------
FINANCIAL STATEMENTS
--------------------
AS OF DECEMBER 31, 1993, 1992 AND 1991
--------------------------------------
TOGETHER WITH
--------------
AUDITORS' REPORT
----------------
CONNECTICUT NATURAL GAS CORPORATION
-----------------------------------
EMPLOYEE SAVINGS PLAN
---------------------
INDEX
-----
PAGE
----
Report of Independent Public Accountants 1
Financial Statements:
Statement of Net Assets Available for Plan
Benefits as of December 31, 1993 2
Statement of Net Assets Available for Plan
Benefits as of December 31, 1992 3
Statement of Changes in Net Assets Available for Plan Benefits
for the Year Ended December 31, 1993 4
Statement of Changes in Net Assets Available for Plan Benefits
for the Year Ended December 31, 1992 5
Statement of Changes in Net Assets Available for Plan Benefits
for the Year Ended December 31, 1991 6
Notes to Financial Statements 7
Schedules:
Schedule I - Item 27a - Schedule of Assets Held for Investment
Purposes as of December 31, 1993 11
Schedule II - Item 27d - Schedule of Reportable Transactions for the
Year Ended December 31, 1993 12
ARTHUR ANDERSEN & CO.
HARTFORD, CT.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To Connecticut Natural Gas Corporation
Employee Savings Plan:
We have audited the accompanying statements of net assets available for
benefits of Connecticut Natural Gas Corporation Employee Savings Plan (the
Plan) as of December 31, 1993 and 1992, and the related statement of
changes in net assets available for benefits for each of the three years in
the period ended December 31, 1993. 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 benefits of the Plan
as of December 31, 1993 and 1992, and the changes in its net assets
available for benefits for each of the three years in the period ended
December 31, 1993, 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 purposes 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.
By Arthur Andersen & Co.
------------------------
Arthur Andersen & Co.
Hartford, Connecticut
June 15, 1994
-2-
CONNECTICUT NATURAL GAS CORPORATION
-----------------------------------
EMPLOYEE SAVINGS PLAN
---------------------
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
---------------------------------------------------
AS OF DECEMBER 31, 1993
------------------------
Non-
Participant
Participant Directed Directed
------------------------------------------------------- -----------
The Putnam
Putnam Fiduciary Putnam U.S. The George Fund for Common Common
Trust Company Government Putnam Fund Growth and Stock Stock
GIC Fund Income Trust of Boston Income Fund Fund Total
---------------- ------------- ------------ ---------- ---------- ---------- --------
Assets
------
Investments, at
current value $ 824,473 $ 1,442,808 $ 2,384,557 $ 2,831,408 $ 2,964,501 $ 8,663,752 $19,111,499
Cash and temporary
investments 3,474 - - - 47,557 145,942 196,973
--------- ----------- ----------- ----------- ----------- ----------- -----------
Total Assets 827,947 1,442,808 2,384,557 2,831,408 3,012,058 8,809,694 19,308,472
--------- ----------- ----------- ----------- ----------- ----------- -----------
Liabilities
-----------
Accounts payable to
broker - - - - (39,678) (113,672) (153,350)
--------- ----------- ----------- ----------- ----------- ----------- -----------
Net Assets
Available for
Plan Benefits $ 827,947 $ 1,442,808 $ 2,384,557 $ 2,831,408 $ 2,972,380 $ 8,696,022 $19,155,122
========= =========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of this financial statement.
-3-
CONNECTICUT NATURAL GAS CORPORATION
-----------------------------------
EMPLOYEE SAVINGS PLAN
---------------------
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
---------------------------------------------------
AS OF DECEMBER 31, 1992
-----------------------
Fixed Common
Income Stock
Fund Fund Total
----------- ----------- --------
Assets
------
Investments, at current
value:
Common stock $ - $ 9,569,547 $ 9,569,547
Fixed income investments 6,762,869 - 6,762,869
Cash and temporary
investments 57,287 172,395 229,682
----------- ----------- -----------
Total Assets 6,820,156 9,741,942 16,562,098
----------- ----------- -----------
Net Assets Available
for Plan Benefits $ 6,820,156 $ 9,741,942 $16,562,098
=========== =========== ===========
The accompanying notes are an integral part of this financial statement.
-4-
Page 1 of 2
CONNECTICUT NATURAL GAS CORPORATION
----------------------------------
EMPLOYEE SAVINGS PLAN
---------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
---------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1993
-------------------------------------
Participant Directed
---------------------------------------------------------------------
Putnam The Putnam
Fixed Fiduciary Putnam U.S. The George Fund for Common
Income Trust Company Government Putnam Fund Growth and Stock
Fund GIC Fund Income Trust of Boston Income Fund
----------- ------------- ------------- ------------- ----------- ----------
Additions to net assets
attributed to:
Dividends and interest income $ - $ 102,066 $ 71,892 $ 171,272 $ 179,236 $ 145,056
----------- ---------- ----------- ----------- ----------- -----------
Realized gains
(losses), net - - (1,434) (1,161) 1,587 108,447
----------- ---------- ----------- ----------- ----------- -----------
Unrealized appreciation
(depreciation) of investments - - (31,912) (25,583) 37,148 160,130
----------- ---------- ----------- ----------- ----------- -----------
Contributions:
Employees - 192,987 74,513 189,661 316,561 136,268
Employer - - - - - -
----------- ---------- ----------- ----------- ----------- -----------
Total contributions - 192,987 74,513 189,661 316,561 136,268
----------- ---------- ----------- ----------- ----------- -----------
Transfers, net (6,897,892) 602,769 1,435,183 2,186,042 2,431,592 295,129
----------- ---------- ----------- ----------- ----------- -----------
Other, net 77,736 (1,169) (618) (6,721) (2,440) 14,953
----------- ---------- ----------- ----------- ----------- -----------
Total additions (deductions) (6,820,156) 896,653 1,547,624 2,513,510 2,963,684 859,983
----------- ---------- ----------- ----------- ----------- -----------
Deductions from net assets
attributed to:
Benefits paid to participants - (68,706) (104,816) (128,953) (132,276) (254,463)
----------- ---------- ----------- ----------- ----------- -----------
Net increase (decrease) (6,820,156) 827,947 1,442,808 2,384,557 2,831,408 605,520
----------- ---------- ----------- ----------- ----------- -----------
Net Assets Available
for Plan Benefits:
Beginning of year 6,820,156 - - - - 2,366,860
----------- ---------- ----------- ----------- ----------- -----------
End of year $ - $ 827,947 $ 1,442,808 $ 2,384,557 $ 2,831,408 $ 2,972,380
=========== ========== =========== =========== =========== ===========
-4-
Page 2 of 2
CONNECTICUT NATURAL GAS CORPORATION
----------------------------------
EMPLOYEE SAVINGS PLAN
---------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
---------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1993
-------------------------------------
Non-Participant
Directed
---------------
Common
Stock
Fund Total
----------- ---------
Additions to net assets
attributed to:
Dividends and interest income $ 404,265 $ 1,073,787
----------- -----------
Realized gains
(losses), net 337,916 445,355
----------- -----------
Unrealized appreciation
(depreciation) of investments 456,800 596,583
----------- -----------
Contributions:
Employees - 909,990
Employer 490,017 490,017
----------- -----------
Total contributions 490,017 1,400,007
----------- -----------
Transfers, net 34,971 87,794
----------- -----------
Other, net 40,590 122,331
----------- -----------
Total additions (deductions) 1,764,559 3,725,857
----------- -----------
Deductions from net assets
attributed to:
Benefits paid to participants (443,619) (1,132,833)
----------- -----------
Net increase (decrease) 1,320,940 2,593,024
----------- -----------
Net Assets Available
for Plan Benefits:
Beginning of year 7,375,082 16,562,098
----------- -----------
End of year $ 8,696,022 $19,155,122
=========== ===========
The accompanying notes are an integral part of this financial statement.
-5-
CONNECTICUT NATURAL GAS CORPORATION
-----------------------------------
EMPLOYEE SAVINGS PLAN
---------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
--------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1992
------------------------------------
Fixed Common
Income Stock
Fund Fund Total
--------- -------- --------
Additions to net assets
attributed to:
Dividends $ - $ 478,460 $ 478,460
Interest 606,275 502 606,777
----------- ----------- -----------
Total investment income 606,275 478,962 1,085,237
----------- ----------- -----------
Realized gains, net - 88,960 88,960
----------- ----------- -----------
Unrealized appreciation
of investments - 2,215,808 2,215,808
----------- ----------- -----------
Contributions:
Employees 648,679 94,015 742,694
Employer - 439,736 439,736
----------- ----------- -----------
Total contributions 648,679 533,751 1,182,430
----------- ----------- -----------
Total additions 1,254,954 3,317,481 4,572,435
----------- ----------- -----------
Deductions from net
assets attributed to:
Benefits paid to participants (215,229) (165,391) (380,620)
----------- ----------- -----------
Net increase 1,039,725 3,152,090 4,191,815
Net Assets Available for
Plan Benefits:
Beginning of year 5,780,431 6,589,852 12,370,283
----------- ----------- -----------
End of year $ 6,820,156 $ 9,741,942 $16,562,098
=========== =========== ===========
The accompanying notes are an integral part of this financial statement.
-6-
CONNECTICUT NATURAL GAS CORPORATION
-----------------------------------
EMPLOYEE SAVINGS PLAN
---------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
--------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1991
------------------------------------
Fixed Common
Income Stock
Fund Fund Total
--------- --------- -------
Additions to net assets
attributed to:
Dividends $ - $ 417,922 $ 417,922
Interest 477,131 681 477,812
----------- ----------- -----------
Total investment income 477,131 418,603 895,734
----------- ----------- -----------
Realized gains, net - (1,245) (1,245)
----------- ----------- -----------
Unrealized appreciation
of investments - 1,069,322 1,069,322
----------- ----------- -----------
Contributions:
Employees 607,884 74,343 682,227
Employer - 419,596 419,596
----------- ----------- -----------
Total contributions 607,884 493,939 1,101,823
----------- ----------- -----------
Total additions 1,085,015 1,980,619 3,065,634
----------- ----------- -----------
Deductions from net
assets attributed to:
Benefits paid to participants (338,365) (302,180) (640,545)
----------- ----------- -----------
Net increase 746,650 1,678,439 2,425,089
Net Assets Available
for Plan Benefits:
Beginning of year 5,033,781 4,911,413 9,945,194
----------- ----------- -----------
End of year $ 5,780,431 $ 6,589,852 $12,370,283
=========== =========== ===========
The accompanying notes are an integral part of this financial statement.
-7-
CONNECTICUT NATURAL GAS CORPORATION
-----------------------------------
EMPLOYEE SAVINGS PLAN
---------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
1. Description of the Plan:
------------------------
The following description of the Connecticut Natural Gas Corporation
Employee Savings Plan (the Plan) is provided for general information
purposes only. More complete information regarding the Plan's
provisions may be found in the Plan document.
a. General -
-------
The Plan is a defined contribution thrift plan open to non-union
employees of Connecticut Natural Gas Corporation and subsidiaries
(the Company). The Plan was established by the Company under the
provisions of Section 401(a) of the Internal Revenue Code (IRC), and
it includes a qualified deferred arrangement as described in Section
401(k) of the IRC for the benefit of eligible employees of the
Company. The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA). The Plan
Administrator is the Company. The Compensation and Fringe Benefits
Committee of the Company's Board of Directors appointed an
Administrative Committee to serve as manager of the Plan.
b. Eligibility -
-----------
Employees are eligible to participate when the following criteria
are met:
(1) Are at least age 21.
(2) Are employed by the Company for one year or more.
(3) Have completed 1,000 hours or more of service in a 12-month
period beginning with date of hire.
(4) Are on the management payroll or are subject to the Salary
Administration Program.
The number of employees participating in the Plan as of December 31,
1993 and 1992 were 323 and 305, respectively.
c. Contributions -
-------------
Eligible employees may elect to participate in the Plan and
authorize payroll deductions of not less than 1% and not greater
than 20% of basic earnings as savings contributions to their
accounts during each year.
The Company will match a percentage of an employee's compensation
depending on age or years of continuous service. The amount of the
Company contribution will be determined according to the schedule
below. However, if an employee's elected savings allotment is less
than the percentage contained in the schedule, the Company will
match no more than the percentage contributed by the employee.
As of December 31, 1993, if an employee's:
-8-
Years of Continuous
Service is Or Age is The Company Will Contribute
-------------------- -- ------ ---------------------------
30 50 6% of compensation
20 45 4-1/2% of compensation
10 35 3% of compensation
Less than l0 Under 35 2% of compensation
d. Investment Options -
------------------
Plan participants direct their contributions among five investment
options in 5% increments, and they may elect to change their
investment options once during each calendar quarter. A description
of each investment option is provided below:
(1) PUTNAM FIDUCIARY TRUST COMPANY GIC FUND - This mutual fund seeks
to preserve principal and achieve relatively high current income
through a diversified portfolio of high-quality investment
contracts.
(2) PUTNAM U.S. GOVERNMENT INCOME TRUST - This mutual fund seeks
current income through a portfolio of securities backed by the
full faith and credit of the United States Government.
(3) THE GEORGE PUTNAM FUND OF BOSTON - This mutual fund seeks a
balance of capital growth and current income through a
diversified portfolio of common stocks and bonds.
(4) THE PUTNAM FUND FOR GROWTH AND INCOME - This mutual fund seeks
capital growth and current income through a portfolio of income-
producing common stocks.
(5) COMMON STOCK FUND - This fund seeks to provide current income
and capital appreciation through investment in the common stock
of the Company purchased at not more than fair market value.
All Company matching contributions are invested in the Common Stock
Fund.
e. Vesting -
-------
Participants are fully vested in their contributions and the
earnings thereon. Participants are vested in the Company matching
contributions and the earnings thereon as follows:
Years of Continuous Service is Percentage Vested
------------------------------ -----------------
Less than 1 0%
1 but less than 2 20
2 but less than 3 40
3 but less than 4 60
4 but less than 5 80
5 or more 100
Participants also become fully vested in their Company matching
contribution account if any one of the following occurs:
(1) Death
(2) Disability
(3) Attainment of age 65 (normal retirement date)
(4) Total or partial termination of the Plan
(5) Discontinuance of Company contributions to the Plan
-9-
Upon termination of employment before full vesting, the non-vested
Company match portion of a participant's common stock account shall
be forfeited and applied as a credit against the employer's future
contributions.
f. Benefits -
--------
Upon termination of employment due to retirement, disability, or
death, a participant (or his/her beneficiary) may elect to receive a
lump-sum distribution equal to the value of the participant's vested
interest in his/her account as soon as practicable following the
termination date or defer the distribution to some future date.
Participants may request the withdrawal of certain account balances
prior to termination of employment. Application for withdrawal of
after-tax contributions and employee IRA contributions may be made
once a year. There are no Plan penalties for such withdrawals.
Participant benefits under the Plan are excluded from insurance
coverage of the Pension Benefit Guarantee Corporation.
g. Participant Accounts -
--------------------
Individual accounts are maintained for each of the Plan's
participants to reflect the participant's share of the Plan's income
and the participant's and the Company's contributions. Allocations
of Plan income are based on the share balances in the participants'
accounts.
2. Transfer of Plan Assets to New Trustee:
--------------------------------------
In January 1993, the Trustee of the Plan was changed from Fleet Bank,
Connecticut (Fleet) to Putnam Fiduciary Trust Company (PFTC). All
assets held in trust by Fleet, consisting of common stock of the Company
and three Hartford Life Insurance Company immediate participation
guarantee contracts, together with associated cash and temporary
investments, were transferred to PFTC and placed in the Common Stock
Fund and the PFTC GIC Fund, respectively. The balances of the immediate
participation guarantee contracts and associated cash on January 1, 1993
are reflected in the "Fixed Income Fund" column on the accompanying
statement of changes in net assets for the year ended December 31, 1993.
In April 1993, transfers of assets from the participant directed portion
of the Common Stock Fund and the PFTC GIC Fund to the five investment
funds described in Note 1 were completed based upon investment elections
made by the Plan's participants.
3. Summary of Significant Accounting Policies:
------------------------------------------
a. Basis of Accounting -
-------------------
The accompanying financial statements are prepared on the accrual
basis of accounting.
b. Income Recognition -
------------------
Dividend income is recorded on the ex-dividend date. Interest
income is recorded as earned on the accrual basis.
c. Investment Valuation -
--------------------
The Plan's investments are reflected at current value. The shares
of the Common Stock Fund and the Putnam mutual funds owned by the
Plan, with the exception of the PFTC GIC Fund, are valued at market
as determined by the quoted market price as of the last business day
of the year. The latter fund is valued at cost plus accumulated
-10-
earnings. Purchases and sales of securities are reflected on a
trade date basis. Realized and unrealized appreciation/depreciation
presented in the statement of changes in net assets available for
plan benefits are computed based on the historical cost of the Plan
assets.
d. Administrative Expenses -
-----------------------
Administrative expenses of the Plan may be paid by either the
Company or the Plan. During 1993, 1992 and 1991 the Company paid
all administrative expenses relating to the Plan.
4. Federal Income Tax Status:
-------------------------
Although the Plan has received a favorable determination letter dated
March 20, 1985 from the Internal Revenue Service, it has not been
updated for the latest Plan restatement to meet the requirements of the
Tax Reform Act of 1986. However, the Plan Administrator and management
believe that the Plan was designed and operated in compliance with the
applicable requirements of the IRC. Therefore, they believe that the
Plan was qualified and the related trust was tax-exempt through the year
ended December 31, 1993.
5. Investments:
-----------
Putnam Fiduciary Trust Company, trustee of the Plan, holds the Plan's
investments and executes transactions therein.
The fair market values of individual assets that represent 5% of more of
the Plan's net assets as of December 31, 1993 and 1992 are as follows:
1993:
Connecticut Natural Gas Corporation
common stock $11,628,253
The Putnam Fund for Growth and Income 2,831,408
The George Putnam Fund of Boston 2,384,557
Putnam U.S. Government Income Trust 1,442,808
1992:
Connecticut Natural Gas Corporation
common stock $ 9,569,547
Hartford Life Insurance Company
Immediate Participation Guarantee
Contract #2931A 6,125,681
6. Concentration of Credit Risk:
----------------------------
All the Plan's assets are invested in the mutual funds managed by
Putnam Investments, Inc. described in Note 1 and the Company's common
stock. In the event of any uncertainties in the financial marketplace
the Plan may be exposed to financial risks.
-11-
Schedule I
CONNECTICUT NATURAL GAS CORPORATION
-----------------------------------
EMPLOYEE SAVINGS PLAN
---------------------
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
----------------------------------------------------------
AS OF DECEMBER 31, 1993
------------------------
(Employer Identification Number - 06-0383860)
---------------------------------------------
Current
Identity of Issue or Party Involved Description of Investment Cost Value
----------------------------------- ------------------------- --------- ----------
Putnam Fiduciary Trust Company GIC Fund Mutual fund comprised of
investment contracts $ 824,473 $ 824,473
Cash 3,474 3,474
----------- -----------
827,947 827,947
----------- -----------
Putnam U.S. Government Income Trust Mutual fund comprised of U.S.
Government securities 1,466,492 1,442,808
----------- -----------
The George Putnam Fund of Boston Mutual fund comprised of
common stocks and bonds 2,389,392 2,384,557
----------- -----------
The Putnam Fund for Growth and Income Mutual fund comprised of
common stocks 2,760,075 2,831,408
----------- -----------
*Connecticut Natural Gas Corporation Participant directed -
Common stock 1,814,878 2,964,501
Temporary investments 47,557 47,557
----------- -----------
1,862,435 3,012,058
----------- -----------
Non-participant directed -
Common stock 5,303,982 8,663,752
Temporary investments 145,942 145,942
----------- -----------
5,449,924 8,809,694
----------- -----------
Total Common Stock Fund 7,312,359 11,821,752
----------- -----------
Total Investments $14,756,265 $19,308,472
=========== ===========
* Represents a party in interest for the year ended December 31, 1993.
The accompanying notes are an integral part of this schedule.
-12-
Schedule II
CONNECTICUT NATURAL GAS CORPORATION
EMPLOYEE SAVINGS PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
(Employer Identification Number - 06-0383860)
Purchases Sales
----------------------- ------------------------------------------
Identity of Description Number of Purchase Number of Selling Cost of Net Gain
Party Involved of Asset Transactions Price Transactions Price Asset or (Loss)
-------------- -------- ------------ --------- ------------ --------- --------- --------
Putnam Fiduciary Trust Mutual fund
Company GIC Fund comprised of
investment contracts 39 $ 469,413 14 $6,539,360 $6,539,360 $ -
Putnam U.S. Government Mutual fund comprised
Income Trust of U.S. Government
securities 29 1,631,109 27 154,955 156,389 (1,434)
The George Putnam Mutual fund comprised
Fund of Boston of common stocks and
bonds 30 2,560,732 19 149,431 150,600 (1,169)
The Putnam Fund for Mutual fund comprised
Growth and Income of common stocks 35 2,952,416 23 159,744 158,157 1,587
Connecticut Natural
Gas Corporation Common stock 27 2,198,938 45 1,401,386 955,024 446,362
Note: For the purpose of this schedule, a reportable transaction is defined as a transaction or a series
of transactions of the same issue or with the same person which involves an amount in excess of 5%
of the current value of plan assets at the beginning of the plan year.
The accompanying notes are an integral part of this schedule.