SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------------------------------
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE STOCK PURCHASE, SAVINGS
AND SIMILAR PLANS PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
--------------------------------------------------------
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
FOR YEAR ENDED DECEMBER 31, 1998
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 NUMBER 0-17605
A. Full title of the plan and the address of the plan, if
different from that of the issuer named below:
YANKEE ENERGY SYSTEM, INC.
401(k) EMPLOYEE STOCK OWNERSHIP PLAN
B. Name of issuer of the securities held pursuant to the plan
and the address of its principal executive office:
YANKEE ENERGY SYSTEM, INC.
599 Research Parkway
Meriden, CT 06450
YANKEE ENERGY SYSTEM, INC.
401(k) EMPLOYEE STOCK OWNERSHIP PLAN
FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 1998 AND 1997
INDEX
PAGE
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS:
Statement of Net Assets Available for
Benefits as of December 31, 1998 2
Statement of Net Assets Available for
Benefits as of December 31, 1997 4
Statement of Changes in Net Assets Available
for Benefits for the Year Ended December 31, 1998 5
Statement of Changes in Net Assets Available
for Benefits for the Year Ended December 31, 1997 7
NOTES TO FINANCIAL STATEMENTS AND SCHEDULES 8-13
SUPPLEMENTAL SCHEDULES:
Schedule I: Item 27a - Schedule of Assets Held
for Investment Purposes as of
December 31, 1998 14
Schedule II: Item 27d - Schedule of Reportable
Transactions for the
Year Ended December 31, 1998 15
All schedules, except as set forth above,
are omitted as not applicable or not required.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of the
Yankee Energy System, Inc.
401(k) Employee Stock Ownership Plan:
We have audited the accompanying statements of net assets available for
benefits of Yankee Energy System, Inc. 401(k) Employee Stock Ownership Plan
(the Plan) as of December 31, 1998 and 1997, and the related statements of
changes in net assets available for benefits for the years then ended. These
financial statements and schedules referred to below are the responsibility
of the Plan administrator. 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, 1998 and 1997, and the changes in net assets available for
benefits for the years then ended 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
reportable transactions and assets held for investment purposes 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 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 audit
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.
Arthur Andersen LLP
Hartford, Connecticut
June 15, 1999
YANKEE ENERGY SYSTEM, INC.
401(k) EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1998
MERRILL
LYNCH GROWTH
FUND
MERRILL LYNCH INVESTMENT
RETIREMENT AND NORTHEAST MERRILL LYNCH
CASH PRESERVATION RETIREMENT UTILITIES BASIC VALUE
FUND TRUST CLASS A STOCK FUND FUND CLASS A
--------- ---------- ------------ ---------- -------------
ASSETS:
Short term investments $ - $8,563,481 $ - $ - $ -
Mutual funds - - 5,300,316 - 5,543,301
Common stock - - - 1,242,714 -
Employer contributions
receivable - 6,400 3,564 - 2,722
Employee contributions
receivable - 50,131 42,889 - 35,004
Accrued interest receivable 10,043 - - - -
--------- ---------- ---------- ---------- ----------
Total assets 10,043 8,620,012 5,346,769 1,242,714 5,581,027
--------- ---------- ---------- ---------- ----------
LIABILITIES:
Overdraft 240,257 - - - -
Note payable - current - - - - -
--------- ---------- ---------- ---------- ----------
NET ASSETS AVAILABLE FOR
BENEFITS $(230,214) $8,620,012 $5,346,769 $1,242,714 $5,581,027
--------- ---------- ---------- ---------- ----------
--------- ---------- ---------- ---------- ----------
MERRILL LYNCH
MERRILL LYNCH GLOBAL YES, INC.
CAPITAL FUN YES, INC. ALLOCATION ALLOCATION
CLASS A LOAN FUND FUND CLASS A FUND
---------- ---------- ------------- ----------
ASSETS:
Short term investments $ - $1,050,604 $ - $ -
Mutual funds 2,610,466 - 626,544 -
Common stock - - - 4,476,024
Employer contributions
receivable 1,957 - 582 775,986
Employee contributions
receivable 18,725 - 5,912 -
Accrued interest receivable - - - -
---------- ---------- -------- ----------
Total assets 2,631,148 1,050,604 633,038 5,252,010
---------- ---------- -------- ----------
LIABILITIES:
Overdraft - - - -
Note payable - current - - - -
---------- ---------- -------- ----------
NET ASSETS AVAILABLE FOR
BENEFITS $2,631,148 $1,050,604 $633,038 $5,252,010
========== ========== ======== ==========
The accompanying notes are an integral part of these financial statements.
YANKEE ENERGY SYSTEM, INC.
401(k) EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1998
YES, INC. MFS ALLIANCE
VOLUNTARY STRATEGIC PREMIER LORD ABBETT
STOCK INCOME GROWTH DEVELOPING
FUND FUND FUND GROWTH FUND
--------- --------- -------- -----------
ASSETS:
Short term investments $ - $ - $ - $ -
Mutual funds - 189,693 1,107,981 470,064
Common stock 1,920,345 - - -
Employer contributions
receivable 1,494 156 593 219
Employee contributions
receivable 10,580 3,767 13,355 5,945
Accrued interest receivable - - - -
---------- -------- ---------- --------
Total assets 1,932,419 193,616 1,121,929 476,228
---------- -------- ---------- --------
LIABILITIES:
Overdraft - - - -
Note payable - current - - - -
---------- -------- ---------- --------
NET ASSETS AVAILABLE FOR
BENEFITS $1,932,419 $193,616 $1,121,929 $476,228
========== ======== ========== ========
MERRILL
AIM LYNCH
INTERNATIONAL S&P 500 LOAN 1998
EQUITY FUND INDEX FUND SUSPENSE TOTAL
------------- ----------- --------- -----
ASSETS:
Short term investments $ - $ - $ - $ 9,614,085
Mutual funds 198,860 794,594 - 16,841,819
Common stock - - 1,828,736 9,467,819
Employer contributions
receivable 95 413 - 794,181
Employee contributions
receivable 3,544 8,314 - 198,166
Accrued interest receivable - - - 10,043
-------- -------- ---------- -----------
Total assets 202,499 803,321 1,828,736 36,926,113
-------- -------- ---------- -----------
LIABILITIES:
Overdraft - - - 240,257
Note payable - current - - 200,000 200,000
-------- -------- ---------- -----------
NET ASSETS AVAILABLE FOR
BENEFITS $202,499 $803,321 $1,628,736 $36,485,856
======== ======== ========== ===========
The accompanying notes are an integral part of these financial statements.
YANKEE ENERGY SYSTEM, INC.
401(k) EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1997
MERRILL
LYNCH GROWTH
FUND
MERRILL LYNCH INVESTMENT
RETIREMENT AND NORTHEAST MERRILL LYNCH MERRILL LYNCH
CASH PRESERVATION RETIREMENT UTILITIES BASIC VALUE CAPITAL FUND
FUND TRUST CLASS A STOCK FUND FUND CLASS A CLASS A
---- ------------ ------------- ---------- ------------- -------------
ASSETS:
Cash $90,629 $ - $ - $ - $ - $ -
Short term investments - 7,910,067 - - - -
Mutual funds - - 6,984,408 - 4,394,646 2,213,837
Common stock - - - 1,047,860 - -
Employer contributions
receivable - 7,212 4,202 - 2,506 2,076
Employee contributions
receivable - 44,590 53,412 - 30,682 18,051
Accrued interest receivable 8,950 - - - - -
------- ---------- ---------- ---------- ---------- ----------
Total assets 99,579 7,961,869 7,042,022 1,047,860 4,427,834 2,233,964
------- ---------- ---------- ---------- ---------- ----------
LIABILITIES:
Note payable - long term - - - - - -
Note payable - current - - - - - -
------- ---------- ---------- ---------- ---------- ----------
Total liabilities - - - - - -
------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AVAILABLE FOR
BENEFITS $99,579 $7,961,869 $7,042,022 $1,047,860 $4,427,834 $2,233,964
======= ========== ========== ========== ========== ==========
MERRILL LYNCH YES, INC.
GLOBAL YES, INC. VOLUNTARY
YES, INC. ALLOCATION FUND ALLOCATION STOCK LOAN 1997
LOAN FUND CLASS A FUND FUND SUSPENSE TOTAL
--------- --------------- ---------- ---------- -------- ------
ASSETS:
Cash $ - $ - $ - $ - $ - $ 90,629
Short term investments 951,067 - - - - 8,861,134
Mutual funds - 712,512 - - - 14,305,403
Common stock - - 3,980,953 1,936,395 2,224,355 9,189,563
Employer contributions
receivable - 670 531,686 1,869 - 550,221
Employee contributions
receivable - 7,096 - 11,622 - 165,453
Accrued interest receivable - - - - - 8,950
-------- -------- ---------- ---------- ---------- -----------
Total assets 951,067 720,278 4,512,639 1,949,886 2,224,355 33,171,353
-------- -------- ---------- ---------- ---------- -----------
LIABILITIES:
Note payable - long term - - - - 200,000 200,000
Note payable - current - - - - 400,000 400,000
-------- -------- ---------- ---------- ---------- -----------
Total liabilities - - - - 600,000 600,000
-------- -------- ---------- ---------- ---------- -----------
NET ASSETS AVAILABLE FOR
BENEFITS $951,067 $720,278 $4,512,639 $1,949,886 $1,624,355 $32,571,353
======== ======== ========== ========== ========== ===========
The accompanying notes are an integral part of these financial statements.
YANKEE ENERGY SYSTEM, INC.
401(k) EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1998
PARTICIPANT DIRECTED
-----------------------------------------------------------------------------
MERRILL MERRILL
LYNCH LYNCH MERRILL
MERRILL LYNCH GROWTH FUND NORTHEAST BASIC LYNCH
RETIREMENT INVESTMENT AND UTILITIES VALUE CAPITAL
CASH PRESERVATION RETIREMENT STOCK FUND FUND
FUND TRUST CLASS A FUND CLASS A CLASS A
---- ------------- --------------- --------- --------- -------
ADDITIONS:
Employee contributions
and rollovers $ 274 $1,327,051 $ 1,433,080 $ - $ 937,339 $ 507,752
Employer contributions - 67,841 40,410 - 27,897 20,909
Interfund transfers in 1,463,108 692,961 - 926,078 259,499
Earnings -
Interest/other income 194,120 26,827 24,527 - 12,208 8,210
Dividends - 525,128 113,723 27,033 453,496 168,267
Realized gain (loss) - - (36,619) (71,131) 190,936 28,215
Unrealized gain (loss) - - (1,815,510) 451,777 (71,460) (56,849)
--------- ---------- ----------- ---------- ---------- ----------
Total additions 194,394 3,409,955 452,572 407,679 2,476,494 936,003
--------- ---------- ----------- ---------- ---------- ----------
DEDUCTIONS:
Interfund transfers out - 1,653,563 1,596,628 63,942 1,096,501 421,154
Benefit distributions 524,187 1,098,249 551,197 148,883 226,800 117,665
--------- ---------- ----------- ---------- ---------- ----------
Total deductions 524,187 2,751,812 2,147,825 212,825 1,323,301 538,819
--------- ---------- ----------- ---------- ---------- ----------
Net increase (decrease) (329,793) 658,143 (1,695,253) 194,854 1,153,193 397,184
NET ASSETS AVAILABLE FOR
BENEFITS, beginning of year 99,579 7,961,869 7,042,022 1,047,860 4,427,834 2,233,964
--------- ---------- ----------- ---------- ---------- ----------
NET ASSETS AVAILABLE FOR
BENEFITS, end of year $(230,214) $8,620,012 $ 5,346,769 $1,242,714 $5,581,027 $2,631,148
========= ========== =========== ========== ========== ==========
PARTICIPANT
DIRECTED
-----------
MERRILL
LYNCH
YES, INC. GLOBAL YES, INC.
LOAN ALLOCATION ALLOCATION
FUND FUND CLASS A FUND
--------- -------------- ------------
ADDITIONS:
Employee contributions
and rollovers $ (428,937) $194,358 $ -
Employer contributions - 6,437 791,478
Interfund transfers in - 70,676 -
Earnings -
Interest/other income 116,725 1,984 -
Dividends - 75,894 -
Realized gain (loss) - (9,814) 38,096
Unrealized gain (loss) - (59,219) 318,167
---------- -------- ----------
Total additions (312,212) 280,316 1,147,741
---------- -------- ----------
DEDUCTIONS:
Interfund transfers out - 289,244 1,508
Benefit distributions (411,749) 78,312 406,862
---------- -------- ----------
Total deductions (411,749) 367,556 408,370
---------- -------- ----------
Net increase (decrease) 99,537 (87,240) 739,371
NET ASSETS AVAILABLE FOR
BENEFITS, beginning of year 951,067 720,278 4,512,639
---------- -------- ----------
NET ASSETS AVAILABLE FOR
BENEFITS, end of year $1,050,604 $633,038 $5,252,010
========== ======== ==========
The accompanying notes are an integral part of these financial statements.
YANKEE ENERGY SYSTEM, INC.
401(k) EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1998
PARTICIPANT DIRECTED
-------------------------------------------------------------------------------------------------
MERRILL
YES, INC. ALLIANCE LORD AIM LYNCH
VOLUNTARY MFS PREMIER ABBETT INTERNATIONAL S&P 500
STOCK STRATEGIC GROWTH DEVELOPING EQUITY INDEX
FUND INCOME FUND FUND GROWTH FUND FUND FUND
--------- ----------- ---------- ----------- ------------- --------
ADDITIONS:
Employee contributions
and rollovers $ 218,102 $ 33,376 $ 234,051 $151,014 $ 36,978 $ 72,223
Employer contributions 17,986 778 2,901 1,168 453 1,351
Interfund transfers in 94,791 202,930 930,401 446,402 211,854 789,154
Earnings -
Interest/other income 11,217 230 461 577 445 174
Dividends 95,681 7,208 21,238 - 3,209 31,357
Realized gain (loss) 71,850 (1,110) (15,763) (16,904) (308) (2,333)
Unrealized gain (loss) 97,237 (9,039) 116,049 39,646 (6,318) 20,009
---------- -------- ---------- -------- -------- --------
Total additions 606,864 234,373 1,289,338 621,903 246,313 911,935
---------- -------- ---------- -------- -------- --------
DEDUCTIONS:
Interfund transfers out 460,334 40,741 166,251 145,625 43,774 108,589
Benefit distributions 163,997 16 1,158 50 40 25
---------- -------- ---------- -------- -------- --------
Total deductions 624,331 40,757 167,409 145,675 43,814 108,614
---------- -------- ---------- -------- -------- --------
Net increase (decrease) (17,467) 193,616 1,121,929 476,228 202,499 803,321
NET ASSETS AVAILABLE FOR
BENEFITS, beginning of year 1,949,886 - - - - -
---------- -------- ---------- -------- -------- --------
NET ASSETS AVAILABLE FOR
BENEFITS, end of year $1,932,419 $193,616 $1,121,929 $476,228 $202,499 $803,321
========== ======== ========== ======== ======== ========
LOAN 1998
SUSPENSE TOTAL
-------- -----
ADDITIONS:
Employee contributions
and rollovers $ - $ 4,716,661
Employer contributions (147,178) 832,431
Interfund transfers in - 6,087,854
Earnings -
Interest/other income - 397,705
Dividends - 1,522,234
Realized gain (loss) - 175,115
Unrealized gain (loss) 151,559 (823,951)
---------- -----------
Total additions 4,381 12,908,049
---------- -----------
DEDUCTIONS:
Interfund transfers out - 6,087,854
Benefit distributions - 2,905,692
---------- -----------
Total deductions - 8,993,546
---------- -----------
Net increase (decrease) 4,381 3,914,503
NET ASSETS AVAILABLE FOR
BENEFITS, beginning of year 1,624,355 32,571,353
---------- -----------
NET ASSETS AVAILABLE FOR
BENEFITS, end of year $1,628,736 $36,485,856
========== ===========
The accompanying notes are an integral part of these financial statements.
YANKEE ENERGY SYSTEM, INC.
401(k) EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1997
PARTICIPANT DIRECTED
--------------------------------------------------------------------------------
MERRILL MERRILL
LYNCH LYNCH MERRILL
MERRILL LYNCH GROWTH FUND NORTHEAST BASIC LYNCH
RETIREMENT INVESTMENT AND UTILITIES VALUE CAPITAL
CASH PRESERVATION RETIREMENT STOCK FUND FUND
FUND TRUST CLASS A FUND CLASS A CLASS A
---- ------------- -------------- ---------- --------- --------
ADDITIONS:
Employee contributions
and rollovers $ - $ 594,352 $ 719,880 $ - $ 436,681 $ 242,693
Employer contributions - 80,099 40,609 - 23,753 20,299
Interfund transfers in - 724,513 497,689 - 503,271 131,415
Earnings -
Interest/other income 2,246 22,946 16,042 - 9,916 7,872
Dividends - 498,892 551,523 24,170 327,192 180,196
Realized gain (loss) - - 134,653 (176,425) 58,317 10,272
Unrealized gain (loss) - - 356,739 45,303 520,943 175,699
-------- ---------- ---------- ---------- ---------- ----------
Total additions 2,246 1,920,802 2,317,135 (106,952) 1,880,073 768,446
-------- ---------- ---------- ---------- ---------- ----------
DEDUCTIONS:
Interfund transfers out - 911,685 313,144 116,122 149,348 93,268
Benefit distributions (87,986) 595,566 449,074 75,491 206,417 73,226
-------- ---------- ---------- ---------- ---------- ----------
Total deductions (87,986) 1,507,251 762,218 191,613 355,765 166,494
-------- ---------- ---------- ---------- ---------- ----------
Net increase
(decrease) 90,232 413,551 1,554,917 (298,565) 1,524,308 601,952
NET ASSETS AVAILABLE FOR
BENEFITS, beginning of
year 9,347 7,548,318 5,487,105 1,346,425 2,903,526 1,632,012
-------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AVAILABLE FOR
BENEFITS, end of year $ 99,579 $7,961,869 $7,042,022 $1,047,860 $4,427,834 $2,233,964
======== ========== ========== ========== ========== ==========
PARTICIPANT PARTICIPANT
DIRECTED DIRECTED
----------- -----------
MERRILL
LYNCH YES, INC.
YES, INC. GLOBAL YES, INC. VOLUNTARY
LOAN ALLOCATION ALLOCATION STOCK LOAN 1997
FUND FUND CLASS A FUND FUND SUSPENSE TOTAL
--------- ------------ ---------- --------- -------- -----
ADDITIONS:
Employee contributions
and rollovers $(322,609) $138,761 $ - $ 175,453 $ - $ 1,985,211
Employer contributions - 7,004 531,686 20,572 (53,533) 670,489
Interfund transfers in - 165,405 - 40,137 - 2,062,430
Earnings -
Interest/other income - 1,787 - 57,613 - 118,422
Dividends - 89,538 - 100,870 - 1,772,381
Realized gain (loss) - 2,748 8,310 18,975 - 56,850
Unrealized gain (loss) - (36,449) 805,365 381,526 442,737 2,691,863
--------- -------- ---------- ---------- ---------- -----------
Total additions (322,609) 368,794 1,345,361 795,146 389,204 9,357,646
--------- -------- ---------- ---------- ---------- -----------
DEDUCTIONS:
Interfund transfers out - 21,422 13,554 443,887 - 2,062,430
Benefit distributions (632,142) 16,981 277,605 166,734 - 1,140,966
--------- -------- ---------- ---------- ---------- -----------
Total deductions (632,142) 38,403 291,159 610,621 - 3,203,396
--------- -------- ---------- ---------- ---------- -----------
Net increase
(decrease) 309,533 330,391 1,054,202 184,525 389,204 6,154,250
NET ASSETS AVAILABLE FOR
BENEFITS, beginning of
year 641,534 389,887 3,458,437 1,765,361 1,235,151 26,417,103
--------- -------- ---------- ---------- ---------- -----------
NET ASSETS AVAILABLE FOR
BENEFITS, end of year $ 951,067 $720,278 $4,512,639 $1,949,886 $1,624,355 $32,571,353
========= ======== ========== ========== ========== ===========
The accompanying notes are an integral part of these financial statements.
YANKEE ENERGY SYSTEM, INC.
401(k) EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 1998 AND 1997
1. ESTABLISHMENT OF THE PLAN:
The Yankee Energy System, Inc. 401(k) Employee Stock Ownership Plan
(the Plan) was established and effective on July 1, 1989 (the
effective date) following the divestiture of the gas business of the
Connecticut Light and Power Company (CL&P), a wholly-owned subsidiary
of Northeast Utilities (NU), and the related creation of Yankee
Energy System, Inc. (YES). Each transferred gas employee
participating in the Northeast Utilities Tax Reduction Act Employee
Stock Ownership Plan (TRAESOP), Payroll Based Employee Stock
Ownership Plan (PAYSOP) or Supplemental Retirement Savings Plan
became a participant in the Plan effective July 1, 1989. Participant
account balances and $7,203,056 in assets were transferred to the
Plan on the effective date. The assets were comprised of NU common
stock and cash.
2. PLAN DESCRIPTION:
The following description of the Plan provides only general
information. Participants should refer to the Plan agreement for a
more complete description of the Plan's provisions.
GENERAL -
The Plan is a defined contribution 401(k) Employee Stock Ownership
Plan established to provide benefits to eligible employees.
Participation in the Plan is voluntary. Union employees become
eligible to participate on the first day of the month following the
completion of one year of service. Non-union employees become
eligible to participate on the first day of the month following the
completion of six months of service.
CONTRIBUTIONS -
Participants contribute between 1% and 15% of compensation subject to
limitations set forth by the Plan. Investment of employee
contributions in the various funds is at the employees' discretion.
YES matches 100% of non-union employee pre-tax contributions annually
up to 3% of compensation and 50% of union employee pre-tax
contributions each month up to 5% of compensation.
Effective January 1, 1998, YES began matching 100% of non-union
Yankee Energy Services Company employee pre-tax contributions
annually up to 5% of compensation.
BENEFIT PAYMENTS -
Unless a participant elects otherwise, benefit distributions are made
in a lump sum not later than sixty days following the end of the Plan
year following the later of the participant's 65th birthday, the 10th
anniversary of the date on which participation commenced or the
termination of employment. In the event of the death of a
participant prior to distribution, benefits will be paid to a
designated beneficiary in a lump sum.
VESTING -
Non-union employees become 100% vested upon commencing participation
in the Plan. Union employees shall at all times be fully vested in
employee contributions and will vest in the employer contributions in
accordance with the following schedule:
YEARS OF SERVICE VESTING %
1 20%
2 40%
3 60%
4 80%
5 or more 100%
The account balances of union employees, as of June 3, 1989, formerly
participating in the NU Supplemental Retirement Savings Plan and NU
TRAESOP and PAYSOP became fully vested on July 1, 1989.
Notwithstanding the foregoing, union participants shall be fully
vested in employer contributions upon reaching age 65 or in the event
of death or total disability. Any union employee forfeitures will be
used to reduce future employer contributions.
LOANS -
Participants may borrow up to the lesser of 50% of the participant's
vested interest in his total account or $50,000, reduced by the
highest outstanding balance of loans from the Plan during the
one-year period preceding the date of the loan.
INVESTMENT OPTIONS -
The Plan consists of fifteen funds as follows:
Cash Fund -
Represents a cash fund which is used as a temporary account
for overnight transactions and features an investment sweep
option to earn interest daily.
Merrill Lynch Retirement Preservation Trust -
Provides preservation of participants' investments, liquidity
and current income that is typically higher than money market
funds.
Merrill Lynch Growth Fund Investment and Retirement Class A -
Invests in securities, primarily equities.
Northeast Utilities Stock Fund -
Account maintains Northeast Utilities stock belonging to
transferred CL&P and Northeast Utilities Service Company
(NUSCO) employees formerly participating in the NU
Supplemental Retirement Savings Plan.
Merrill Lynch Basic Value Fund Class A -
Invests in securities, primarily equities.
Merrill Lynch Capital Fund Class A -
Invests in equity securities, corporate bonds and money
market securities.
YES, Inc. Loan Fund -
Represents a clearing account for participant loans.
Merrill Lynch Global Allocation Fund Class A -
Invests in U.S. and foreign equity, debt and money market
securities.
YES, Inc. Allocation Fund -
Represents the employer matching fund, which invests in
Yankee Energy System, Inc. common stock.
YES, Inc. Voluntary Stock Fund -
Invests in Yankee Energy System, Inc. common stock.
MFS Strategic Income Fund -
Invests in foreign and domestic fixed-income securities.
Alliance Premier Growth Fund -
Invests in a limited number of primarily large U.S.
company common stocks and other equity securities.
Lord Abbett Developing Growth Fund -
Invests in small company stocks.
AIM International Equity Fund -
Invests in primarily foreign equity securities.
Merrill Lynch S&P 500 Index Fund -
Invests in securities listed on Standard & Poor's 500 Index.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF ACCOUNTING -
The accompanying financial statements and schedules of the Plan have
been prepared on the accrual basis of accounting.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS -
The preparation of financial statements in conformity with generally
accepted accounting principles and the Department of Labor Rules and
Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974 requires management of the plan to make
estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the
reported amounts of income and expense during the reporting period.
Actual results could differ from those estimates.
RECLASSIFICATIONS -
Certain prior year amounts have been reclassified to conform with
current year classifications.
ADMINISTRATIVE EXPENSES -
Administrative expenses of the Plan are paid from the Plan assets
unless paid by YES. Administrative expenses of approximately $70,500
and $59,000 were paid by YES in 1998 and 1997, respectively.
VALUATION OF INVESTMENTS -
The Plan's investments are stated at fair value. Securities traded on
the national securities exchange are valued at the last reported sales
price on the last business day of the plan year. Investments traded in
the over-the-counter market and listed securities for which no sale was
reported on that date are valued at the last reported bid price.
4. INVESTMENTS:
The fair market value of individual investments that represent 5% or
more of the Plan's total net assets as of December 31, 1998 and 1997
are as follows:
1998 1997
---- ----
Yankee Energy System, Inc. common stock $8,225,105 $8,141,703
Merrill Lynch Growth Fund Investment
and Retirement Class A 5,300,316 6,984,408
Merrill Lynch Retirement Preservation Trust
Money Market 8,563,481 7,910,067
Merrill Lynch Basic Value Fund Class A 5,543,301 4,394,646
Merrill Lynch Capital Fund Class A 2,610,466 2,213,837
During 1998, the Plan's investments depreciated in fair value by
$(648,836) as follows:
NET (DEPRECIATION)
APPRECIATION
IN FAIR VALUE
DURING YEAR
-----------------
Fair value as determined by quoted market value:
Mutual funds $(1,706,391)
YES common stock 676,909
NU common stock 380,646
-----------
$ (648,836)
-----------
-----------
During 1997, the Plan's investments appreciated in fair value by
$2,748,713 as follows:
NET APPRECIATION
(DEPRECIATION)
IN FAIR VALUE
DURING YEAR
-----------------
Fair value as determined by quoted market value:
Mutual funds $ 1,222,922
YES common stock 1,656,913
NU common stock (131,122)
-----------
$ 2,748,713
-----------
-----------
5. NOTE PAYABLE:
The Plan has secured a $4,000,000 loan from a commercial bank to Fleet
Bank, N.A., the former trustee, the proceeds of which were used to buy
YES common stock for the Plan. YES has guaranteed the loan. The loan
will be repaid over a ten year period ending July 1, 1999 at $400,000
per year plus interest at a rate of 10.38%. Employer non-union matching
contributions are used to make annual principal payments. Interest is
paid from the earnings of the YES, Inc. allocation fund. As the loan
is paid down, an equivalent amount of YES stock, which serves as
collateral, is released and allocated to participants.
6. TAX STATUS:
The Plan obtained its latest determination letter on March 20, 1996 in
which the Internal Revenue Service stated that the form of the Plan, as
then designed, was in compliance with the applicable requirements of
the Internal Revenue Code. The Plan has been amended since the
determination letter was received. However, the Plan administrator
believes that the Plan is currently designed and being operated in
compliance with the applicable requirements of the Internal Revenue
Code. Therefore, the Plan administrator believes that the Plan is
qualified.
7. VOTING RIGHTS:
Each participant is entitled to exercise voting rights attributable to
the shares allocated to his account and is notified by Merrill Lynch
Trust Company (the Trustee) prior to the time that such rights are to
be exercised. The Trustee is not permitted to vote any share for which
instructions have not been given by a participant. The Trustee is
required, however, to vote any unallocated shares on behalf of the
collective best interest of plan participants and beneficiaries.
8. TERMINATION OF THE PLAN:
YES may suspend, terminate, or completely discontinue contributions
under the Plan with respect to its employees subject to the provisions
of the Employee Retirement Income Security Act of 1974 relating to plan
terminations.
Upon termination or partial termination of the Plan, the rights of all
affected participants to their accounts to the date of such termination
shall be fully vested to the extent funded.
9. SUBSEQUENT EVENT:
On June 15, 1999, YES announced that it entered into an agreement to be
acquired by NU. The effect of the acquisition on the Plan has not yet
been determined.
SCHEDULE I
EIN# 06-1236430
PLAN# 001
YANKEE ENERGY SYSTEM, INC.
401(k) EMPLOYEE STOCK OWNERSHIP PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1998
(c) Description of
investment, including
maturity date, rate of
(b) Identity of issue, borrower, interest, collateral, (e) Current
(a) lessor or similar party par or maturity value (d) Cost value
- --- -------------------------------- ---------------------- -------- -----------
Common Stock:
-------------
* Yankee Energy System, Inc. 282,406 shares $ 6,191,382 $ 8,225,105
* Northeast Utilities 77,669 shares 1,663,548 1,242,714
----------- -----------
Total common stock 7,854,930 9,467,819
----------- -----------
Mutual Funds:
-------------
* Merrill Lynch Growth Fund
Investment and Retirement
Class A 246,412 shares 6,107,616 5,300,316
* Merrill Lynch Basic Value Fund
Class A 145,799 shares 4,816,572 5,543,301
* Merrill Lynch Capital Fund
Class A 75,863 shares 2,453,768 2,610,466
* Merrill Lynch Global Allocation
Fund Class A 49,686 shares 720,054 626,544
* Merrill Lynch S&P 500 Index Fund 51,934 shares 774,585 794,594
Lord Abbett Developing Growth
Fund 30,406 shares 430,419 470,064
AIM International Equity Fund 8,952 shares 205,178 198,860
Alliance Premier Growth Fund 36,615 shares 991,932 1,107,981
MFS Strategic Income Fund 25,600 shares 198,732 189,693
----------- -----------
Total mutual funds 16,698,856 16,841,819
----------- -----------
Short-Term Investments:
-----------------------
* Merrill Lynch Retirement
Preservation Trust 8,563,481 shares 8,563,481 8,563,481
* YES, Inc. Loan Fund 1,050,604 shares 1,050,604 1,050,604
----------- -----------
Total short-term
investments 9,614,085 9,614,085
----------- -----------
Total investments $34,167,871 $35,923,723
=========== ===========
*Indicates a party in interest.
The accompanying notes are an integral part of this schedule.
SCHEDULE II
EIN# 06-1236430
PLAN# 001
YANKEE ENERGY SYSTEM, INC.
401(k) EMPLOYEE STOCK OWNERSHIP PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(a) Identity of (b) Description (c) Purchase (d) Selling (e) Lease (f) Expense incurred
party involved of asset Price price rental with transaction
- --------------- --------------- --------------- ------------- ----------- ---------------------
Merrill Lynch Retirement Preservation
Trust $2,285,640 $ - $ - $ -
Merrill Lynch Retirement Preservation
Trust - 1,886,195 - -
(h) Current value
(g) Cost of of asset on (i) Net gain
asset transaction date or (loss)
- ----------- ------------------- -------------
$2,285,640 $2,285,640 $ -
1,886,195 1,886,195 -
The accompanying notes are an integral part of this schedule.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
YANKEE ENERGY SYSTEM, INC.
401 (K) EMPLOYEE STOCK OWNERSHIP PLAN
-------------------------------------
(Name of the Plan)
Date June 29, 1999 By /s/ James M. Sepanski
-----------------------------
James M. Sepanski
Vice President, Chief Financial
Officer and Treasurer
Date June 29, 1999 By /s/ Robin H. Planco
------------------------------
Robin H. Planco
Administrator of the Plan
Director of Human Resources
Date June 29, 1999 By /s/ Mary J. Healey
-------------------------------
Mary J. Healey
Vice President, General Counsel
and Secretary
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation of
our report dated June 15, 1999 included in this Form 11-K into Yankee Energy
System, Inc. 401 (k) Employee Stock Ownership Plan's previously filed
Registration Statement File No. 33-52077.
/s/ Arthur Andersen LLP
Hartford, Connecticut
June 25, 1999