ITEM 3. LEGAL PROCEEDINGS
Williston Basin --
Williston Basin has been named as a defendant in a legal action primarily related to certain natural gas price and volume issues. Such suit was filed by Moncrief.
In addition, Williston Basin has been named as a defendant in a legal action related to a natural gas purchase contract. Such suit was filed by Apache and Snyder.
Also, Williston Basin and over 70 other natural gas pipeline companies have been named as defendants in a legal action related to measurement of the heating content or volume of natural gas purchased by the defendants. Such suit was filed by Grynberg.
The above legal actions are described under Items 1 and 2 -- "Business and Properties -- Natural Gas Transmission Operations and Property (Williston Basin)." The Company's assessment of the proceedings are included in the respective descriptions of the litigation.
Knife River --
The Company and Knife River have been named as defendants in a legal action primarily related to coal pricing issues at the Coyote Station. The suit has been stayed by the State District Court pending arbitration. Such suit was filed by the Co-owners of the Coyote Station.
Hawaiian Cement has been named as a defendant in a legal action primarily related to dust emissions from Hawaiian Cement's cement manufacturing plant at Kapolei, Hawaii. Such suit was filed by Unitek. In addition, the EPA has issued a NOV to Hawaiian Cement.
The above legal actions are described under Items 1 and 2 -- "Business and Properties -- Construction Materials and Mining Operations and Property (Knife River)." The Company's assessment of the proceedings is included in the respective descriptions of the litigation.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter of 1996.
PART II
ITEM 5.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the New York Stock Exchange and the Pacific Stock Exchange under the symbol "MDU". The price range of the Company's common stock as reported by The Wall Street Journal composite tape during 1996 and 1995 and dividends declared thereon were as follows:
Common Common Common Stock Stock Price Stock Price Dividends (High) (Low) Per Share
First Quarter $23.00 $19.88 $0.2725 Second Quarter 23.50 20.13 0.2725 Third Quarter 22.38 20.75 0.2775 Fourth Quarter 23.38 21.25 0.2775 $1.1000
1995* First Quarter $18.67 $17.17 $0.2666 Second Quarter 20.00 17.75 0.2666 Third Quarter 21.33 19.08 0.2725 Fourth Quarter 23.08 19.63 0.2725 $1.0782
_______________________ * Adjusted for October 1995 three-for-two common stock split.
As of December 31, 1996, the Company's common stock was held by over 14,600 stockholders.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
Reference is made to Selected Financial Data on pages 48 and 49 of the Company's Annual Report which is incorporated herein by reference. ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
The following table (in millions of dollars) summarizes the contribution to consolidated earnings by each of the Company's businesses.
Years ended December 31, Business 1996 1995 1994 Electric $ 11.4 $ 12.0 $ 11.7 Natural gas distribution 4.9 1.6 .3 Natural gas transmission 2.5 8.4 6.1 Construction materials and mining 11.5 10.8 11.6 Oil and natural gas production 14.4 8.0 9.3 Earnings on common stock $ 44.7 $ 40.8 $ 39.0
Earnings per common share $ 1.57 $ 1.43 $ 1.37
Return on average common equity 13.0% 12.3% 12.1%
Earnings for 1996 increased $3.9 million from the comparable period a year ago due primarily to higher oil and natural gas production and prices at the oil and natural gas production businesses. Increased retail sales at the electric and natural gas distribution businesses, primarily the result of 14 percent colder weather than the comparable period a year ago, also added to the increase in earnings. Increased transportation of natural gas held under the repurchase commitment and increased volumes transported to storage, combined with the benefits of a favorable rate change implemented in January 1996, at the natural gas transmission business further improved earnings. In addition, earnings from Baldwin and Hawaiian Cement, businesses acquired in April 1996, and September 1995, respectively, contributed to the earnings increase. The write-down to the then current market price of the natural gas available under the repurchase commitment partially offset the earnings increase. The write-down, which approximated $21.1 million, or $12.9 million after tax, was significantly offset by the reversal of certain reserves for tax and other contingencies at the natural gas transmission and oil and natural gas production businesses, aggregating $7.4 million and $1.8 million after tax, respectively. The net effect of these items resulted in a $3.7 million, or 13 cent per common share, net charge to earnings for the year. Also somewhat offsetting the earnings improvement was the nonrecurring effect of a favorable FERC order received in April 1995. The order allowed for the one-time billing of customers for $2.2 million after tax, including interest, to recover a portion of the amount previously refunded in July 1994. In addition, increased purchased power demand charges at the electric business and increased operating costs at the electric, natural gas transmission and oil and natural gas production businesses partially offset the earnings improvement. Higher interest expense at the construction materials and mining and oil and natural gas production businesses also somewhat offset the earnings increase. The effects of lower coal sales to the Big Stone Station due to the expiration of the coal contract in August 1995 and the resulting closure of the Gascoyne mine also partially offset the earnings improvement.
Earnings for 1995 increased $1.8 million from the comparable period a year earlier due primarily to increased retail sales at the electric business and increased throughput at the natural gas distribution and natural gas transmission businesses. Increased oil prices and oil and natural gas production at the oil and natural gas production business combined with the benefits derived from favorable rate changes at the natural gas distribution and transmission businesses also increased earnings. The favorable rate change at the natural gas transmission business resulted from the previously described FERC order received in April 1995 on a rehearing request relating to a 1989 general rate proceeding. Income from Hawaiian Cement also contributed to the earnings increase. 1994 earnings included the benefit of a $4.5 million gain (after tax) realized on the sale of an equity investment in General Atlantic Resources, Inc. (GARI). Additionally, the effects of decreased natural gas prices at the natural gas transmission and oil and natural gas production businesses, lower coal sales to the Big Stone Station due to the expiration of a coal contract in August 1995, and increased costs associated with rainy West Coast weather at the construction materials operations partially offset the earnings increase.
________________________________
Reference should be made to Items 1 and 2 -- "Business and Properties" and Notes to Consolidated Financial Statements for information pertinent to various commitments and contingencies.
Financial and operating data
The following tables (in millions, where applicable) are key financial and operating statistics for each of the Company's business units.
Montana-Dakota -- Electric Operations
Years ended December 31, 1996 1995 1994 Operating revenues: Retail sales $128.8 $ 124.4 $ 123.2 Sales for resale and other 10.0 10.2 10.7 138.8 134.6 133.9 Operating expenses: Fuel and purchased power 44.0 41.8 43.2 Operation and maintenance 41.4 40.1 41.0 Depreciation, depletion and amortization 17.1 16.3 15.5 Taxes, other than income 6.8 6.5 6.6 109.3 104.7 106.3
Operating income 29.5 29.9 27.6
Retail sales (kWh) 2,067.9 1,993.7 1,955.1 Sales for resale (kWh) 374.6 408.0 444.5 Average cost of fuel and purchased power per kWh $ .017 $ .016 $ .017
Montana-Dakota -- Natural Gas Distribution Operations
Years ended December 31, 1996 1995 1994 Operating revenues: Sales $151.5 $ 146.8 $ 151.7 Transportation and other 3.5 3.7 3.6 155.0 150.5 155.3 Operating expenses: Purchased natural gas sold 102.7 102.6 111.3 Operation and maintenance 30.0 30.4 30.0 Depreciation, depletion and amortization 6.9 6.7 6.1 Taxes, other than income 3.9 3.9 4.0 143.5 143.6 151.4
Operating income 11.5 6.9 3.9
Volumes (dk): Sales 38.3 33.9 31.8 Transportation 9.4 11.1 9.3 Total throughput 47.7 45.0 41.1
Degree days (% of normal) 116.2% 101.6% 96.7% Average cost of natural gas, including transportation, per dk $ 2.67 $ 3.02 $ 3.50
Williston Basin -- Natural Gas Transmission Operations
Years ended December 31, 1996 1995 1994 Operating revenues: Transportation $ 60.4* $ 54.1* $ 52.6* Storage 10.7 12.6 10.6 Natural gas production and other 7.5 5.2 7.7 78.6 71.9 70.9 Operating expenses: Operation and maintenance 37.2* 35.7* 38.8* Depreciation, depletion and amortization 6.7 7.0 6.6 Taxes, other than income 4.5 3.8 4.2 48.4 46.5 49.6
Operating income 30.2 25.4 21.3
Volumes (dk): Transportation-- Montana-Dakota 43.4 35.4 33.0 Other 38.8 32.6 30.9 82.2 68.0 63.9
Produced (Mdk) 6,073 4,981 4,732
* Includes amortization and related recovery of deferred natural gas contract buy-out/ buy-down and gas supply realignment costs $ 10.6 $ 11.4 $ 12.8
Knife River -- Construction Materials and Mining Operations
Years ended December 31, 1996** 1995** 1994 Operating revenues: Construction materials $ 99.5 $ 73.1 $ 71.0 Coal 32.7 39.9 45.6 132.2 113.0 116.6 Operating expenses: Operation and maintenance 105.8 87.8 88.2 Depreciation, depletion and amortization 7.0 6.2 6.4 Taxes, other than income 3.3 4.5 5.4 116.1 98.5 100.0
Operating income 16.1 14.5 16.6
Sales (000's): Aggregates (tons) 3,374 2,904 2,688 Asphalt (tons) 694 373 391 Ready-mixed concrete (cubic yards) 340 307 315 Coal (tons) 2,899 4,218 5,206
** Does not include information related to Knife River's 50 percent ownership interest in Hawaiian Cement which was acquired in September 1995 and is accounted for under the equity method.
Fidelity Oil -- Oil and Natural Gas Production Operations
Years ended December 31, 1996 1995 1994 Operating revenues: Oil $ 39.0 $ 30.1 $ 20.9 Natural gas 29.3 18.7 17.1 68.3 48.8 38.0 Operating expenses: Operation and maintenance 15.6 13.7 12.0 Depreciation, depletion and amortization 25.0 18.6 13.5 Taxes, other than income 3.5 2.6 3.7 44.1 34.9 29.2
Operating income 24.2 13.9 8.8
Production (000's): Oil (barrels) 2,149 1,973 1,565 Natural gas (Mcf) 14,067 12,319 9,228
Average sales price: Oil (per barrel) $17.91 $ 15.07 $ 13.14 Natural gas (per Mcf) 2.09 1.51 1.84
Amounts presented in the above tables for natural gas operating revenues, purchased natural gas sold and operation and maintenance expenses will not agree with the Consolidated Statements of Income due to the elimination of intercompany transactions between Montana-Dakota's natural gas distribution business and Williston Basin's natural gas transmission business. The amounts relating to the elimination of intercompany transactions for natural gas operating revenues, purchased natural gas sold and operation and maintenance expenses were $58.2 million, $53.8 million and $4.4 million, respectively, for 1996, $54.6 million, $49.2 million and $5.4 million, respectively, for 1995, and $65.2 million, $58.5 million and $6.7 million, respectively, for 1994.
1996 compared to 1995
Montana-Dakota -- Electric Operations
Operating income at the electric business decreased primarily due to increased fuel and purchased power costs, resulting primarily from both higher purchased power demand charges and increased net sales. The increase in demand charges, related to a participation power contract, is the result of the pass-through of periodic maintenance costs as well as the purchase of an additional five megawatts of capacity beginning in May 1996, which brings the total level of capacity available under this contract to 66 megawatts. Also contributing to the operating income decline were higher operation expenses, primarily resulting from higher transmission and payroll-related costs due to establishing certain contingency reserves, and higher depreciation expense, due to an increase in average depreciable plant. Increased revenues, primarily higher retail sales due to increased weather-related demand from residential and commercial customers in the first and fourth quarters, largely offset the operating income decline. Lower sales for resale volumes due to line capacity restrictions within the regional power pool were more than offset by higher average realized rates also partially offsetting the operating revenue increase.
Earnings for the electric business decreased due to the operating income decline, and decreased service and repair income and lower investment income, both included in Other income -- net.
Montana-Dakota -- Natural Gas Distribution Operations
Operating income at the natural gas distribution business improved largely as a result of increased sales revenue. The sales revenue improvement resulted primarily from a 3.6 million decatherm increase in volumes sold due to 14% colder weather and increased sales resulting from the addition of over 3,600 customers. Also contributing to the sales revenue improvement were the effects of a general rate increase placed into effect in Montana in May 1996. However, the pass-through of lower average natural gas costs partially offset the sales revenue improvement. Decreased operations expense due to lower payroll-related costs also added to the operating income improvement. Lower transportation revenues, primarily decreased volumes transported to large industrial customers, somewhat offset the operating income improvement. Industrial transportation declined due to lower volumes transported to two agricultural processing facilities, one which closed in September 1995, and one which experienced lower production, and to a cement manufacturing facility due to its use of alternate fuel.
Natural gas distribution earnings increased due to the operating income improvement, decreased interest expense and higher service and repair income. The decline in interest expense resulted from lower average long-term debt and natural gas costs refundable through rate adjustment balances.
Williston Basin -- Natural Gas Transmission Operations
Operating income at the natural gas transmission business increased primarily due to an improvement in transportation revenues resulting from increased transportation of natural gas held under the repurchase commitment, increased volumes transported to storage and the reversal of certain reserves for regulatory contingencies of $3.9 million ($2.4 million after tax). The benefits derived from a favorable rate change implemented in January 1996, also added to the revenue improvement. The nonrecurring effect of a favorable FERC order received in April 1995, on a rehearing request relating to a 1989 general rate proceeding partially offset the transportation revenue improvement. The order allowed for the one-time billing of customers for approximately $2.7 million ($1.7 million after tax) to recover a portion of the amount previously refunded in July 1994. In addition, reduced recovery of deferred natural gas contract buy- out/buy-down and gas supply realignment costs partially offset the increase in transportation revenue. An increase in natural gas production revenue, due to both higher volumes and prices, also contributed to the operating income improvement. Decreased storage revenues, due primarily to the implementation of lower rates in January 1996, partially offset the increase in operating income. Operation expenses increased primarily due to higher payroll- related costs and production royalties but were slightly offset by reduced amortization of deferred natural gas contract buy-out/buy- down costs.
Earnings for this business decreased due to the write-down to the then current market price of the natural gas available under the repurchase commitment. The effect of the write-down, which was $21.1 million, or $12.9 million after tax, was significantly offset by the reversal of certain income tax reserves aggregating $4.8 million. Decreased interest income, largely related to $583,000 (after tax) of interest on the previously discussed 1995 refund recovery combined with higher company production refunds (both included in Other income -- net), also added to the earnings decline. Increased net interest expense ($366,000 after tax), largely resulting from higher average reserved revenue balances partially offset by decreased long-term debt expense due to lower average borrowings, further reduced earnings. The earnings decrease was somewhat offset by the increase in operating income.
Knife River -- Construction Materials and Mining Operations
Construction Materials Operations --
Construction materials operating income increased $3.3 million due to higher revenues. The revenue improvement is largely due to revenues realized as a result of the Baldwin and Medford acquisitions. Revenues at most other construction materials operations decreased as a result of lower aggregate and asphalt sales due to lower demand, and lower construction sales due to the nature of work being performed this year as compared to last year, offset in part by increased building materials sales and aggregate and ready-mixed concrete prices. Operation and maintenance expenses increased due to the above acquisitions but were somewhat offset by a reduction at other construction materials operations resulting from lower volumes sold and less work involving the use of subcontractors.
Coal Operations --
Operating income for coal operations decreased $1.7 million primarily due to decreased revenues, largely the result of the expiration of the coal contract with the Big Stone Station in August 1995, and the resulting closure of the Gascoyne Mine. Higher average sales prices due to price increases at the Beulah Mine partially offset the decreased coal revenues. Decreased operation and maintenance expenses, depreciation expense and taxes other than income, largely due to the mine closure, partially offset the decline in operating income.
Consolidated --
Earnings increased due to the increase in construction materials operating income and income from Hawaiian Cement of $1.7 million as compared to $1.0 million in 1995(included in Other income -- net). Higher interest expense ($1.4 million after tax), resulting mainly from increased long-term debt due to the acquisition of Hawaiian Cement, Baldwin and Medford, and the decline in coal operating income somewhat offset the increase in earnings.
Fidelity Oil -- Oil and Natural Gas Production Operations
Operating income for the oil and natural gas production business increased primarily as a result of higher oil and natural gas revenues. Higher oil revenue resulted from a $5.6 million increase due to higher average prices and a $3.2 million increase due to improved production. The increase in natural gas revenue was due to a $7.0 million increase arising from higher prices and a $3.6 million improvement resulting from higher production. Increased operation and maintenance expenses, largely due to higher production, and higher taxes other than income, primarily the result of higher prices, both partially offset the operating income improvement. Also reducing operating income was increased depreciation, depletion and amortization expense resulting from increased average rates and higher production. Depreciation, depletion and amortization rates increased in part due to the accrual of estimated future well abandonment costs ($515,000 after tax).
Earnings for this business unit increased due to the operating income improvement and lower income taxes due to the reversal of certain tax reserves aggregating $1.8 million. Increased interest expense ($815,000 after tax), resulting mainly from higher average borrowings, and lower tax benefits somewhat offset the earnings improvement.
1995 compared to 1994
Montana-Dakota -- Electric Operations
Operating income at the electric business increased primarily due to higher retail sales revenues and lower fuel and purchased power costs. Higher average usage by residential and commercial customers, due to more normal weather, contributed to the revenue improvement. Reduced demand by oil producers and refiners contributed to a decline in industrial sales, which somewhat offset the retail sales revenue improvement. Fuel and purchased power costs decreased due to changes in generation mix between lower and higher cost generating stations. This decrease was partially offset by higher purchased power demand charges. The increase in demand charges, related to a participation power contract, is the result of the purchase of an additional five megawatts of capacity beginning in May 1995, offset in part by the pass-through of periodic maintenance costs during 1994. Decreased maintenance expenses at the Coyote Station, due to less scheduled downtime, partially offset by increased turbine, generator and boiler maintenance at the Heskett Station, also improved operating income. Increased depreciation expense, due to higher average depreciable plant, and lower sales for resale due to a surplus of low-cost hydroelectric energy available from the Western Area Power Administration during August through November 1995 partially offset the increase in operating income.
Earnings for the electric business improved due to the operating income increase, partially offset by higher income taxes.
Montana-Dakota -- Natural Gas Distribution Operations
Operating income increased at the natural gas distribution business due to the effect of $2.3 million in general rate increases and improved sales. The sales improvement resulted from the addition of over 5,100 customers and more normal weather than 1994. The pass-through of lower average natural gas costs and the effects of a Wyoming Supreme Court order granting recovery in 1994 of a prior refund made by Montana-Dakota reduced revenues. The effect of higher volumes transported were largely offset by lower average transportation rates. Higher operation expenses, due primarily to higher payroll-related costs somewhat offset by lower sales expenses, partially offset the operating income improvement. Increased depreciation expense, due to higher average depreciable plant, also partially offset the increase in operating income.
Natural gas distribution earnings increased due to the improvement in operating income. A decreased return realized on net storage gas inventory and deferred demand costs partially offset the earnings increase. This return decline of approximately $619,000 (after tax) results from decreases in the net book balance on which the natural gas distribution business is allowed to earn a return.
Williston Basin -- Natural Gas Transmission Operations
Natural gas transmission operating income increased primarily due to an increase in transportation and storage revenues. The transportation revenue increase resulted primarily from the benefits of the favorable FERC order received in April 1995 on a rehearing request relating to a 1989 general rate proceeding as previously discussed. In addition, higher demand revenues associated with the storage enhancement project completed in late 1994, and increased volumes transported to storage, somewhat offset by decreased transportation of natural gas held under the repurchase commitment and reduced recovery of deferred natural gas contract buy-out/buy-down and gas supply realignment costs, added to the transportation revenue improvement. Lower operation and maintenance expenses, primarily lower production royalty expenses and reduced amortization of deferred natural gas contract buy- out/buy-down and gas supply realignment costs, and lower taxes other than income, largely lower production taxes, further contributed to the increase in operating income. A decline in natural gas production revenue, primarily due to a 54 cent per decatherm decline in realized natural gas prices, somewhat reduced by increased volumes produced, partially offset the increase in operating income. Increased depreciation expense, resulting from higher average depreciable plant, also somewhat reduced the operating income improvement.
Earnings for this business improved due primarily to the increase in operating income, higher interest income, lower company production refunds (included in Other income -- net) and lower interest expense. Higher interest income of $583,000 (after tax) is related to the previously described refund recovery. The decline in interest expense aggregating $623,000 (after tax) is primarily due to long-term debt retirements and lower interest rates. Increased carrying costs on the natural gas repurchase commitment, due to higher average interest rates, partially offset the earnings increase.
Knife River -- Construction Materials and Mining Operations
Construction Materials Operations --
Construction materials operating income declined $636,000 primarily due to higher operation expenses. Operation expenses increased due primarily to additional work required to be subcontracted, due to unusually wet weather, and increased sales volumes. Increased revenues due to higher aggregate sales volumes, increased cement sales volumes at higher prices, increased soil remediation volumes, higher ready-mixed concrete prices, higher construction and aggregate delivery revenues and increased steel fabrication sales volumes, partially offset the operating income decline. Lower asphalt sales, due to increased competition, lower ready-mixed concrete sales and lower average soil remediation prices partially offset the revenue improvement.
Coal Operations --
Operating income for the coal operations decreased $1.5 million primarily due to decreased coal revenues, primarily the result of lower sales to the Big Stone Station due to the expiration of the coal contract in August 1995 and the resulting closure of the Gascoyne Mine. Decreased operation expenses, resulting primarily from lower sales volumes and lower depreciation expense and lower taxes other than income, both due primarily to the closure of the Gascoyne Mine, partially offset the decline in operating income.
Consolidated --
Earnings decreased due to the decline in coal and construction materials operating income and increased interest expense, due to increased long-term debt borrowings. Income from the 50 percent interest in Hawaiian Cement acquired in September 1995 and gains from the sale of equipment relating to the Gascoyne Mine closure, partially offset the decline in earnings. These items are reflected in Other income -- net.
Fidelity Oil -- Oil and Natural Gas Production Operations
Operating income for the oil and natural gas production business increased primarily as a result of higher oil revenues, $5.4 million of which was due to increased production, and $3.8 million of which stemmed from higher average oil prices. Also, increased natural gas revenue, $5.7 million of which was due to higher natural gas volumes produced partially offset by a $4.1 million revenue decrease resulting from lower natural gas prices, contributed to the operating income improvement. Also adding to operating income was decreased production taxes, stemming largely from the timing of payments in 1995 as compared to 1994. Operation expenses increased, as a result of higher production but were somewhat offset by lower average production costs, partially offsetting the operating income improvement. Also reducing operating income was increased depreciation, depletion and amortization expense largely due to higher production.
Earnings for this business declined due to the 1994 realization of a $4.5 million gain (after tax) related to the sale of an equity investment in GARI. The increase in operating income partially offset the earnings decrease.
Safe Harbor for Forward-Looking Statements
The Company is including the following cautionary statement in this Form 10-K to make applicable and to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of, the Company. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions (many of which are based, in turn, upon further assumptions) and other statements which are other than statements of historical facts. From time to time, the Company may publish or otherwise make available forward-looking statements of this nature. All such subsequent forward-looking statements, whether written or oral and whether made by or on behalf of the Company, are also expressly qualified by these cautionary statements.
Forward-looking statements involve risks and uncertainties which could cause actual results or outcomes to differ materially from those expressed. The Company's expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, including without limitation management's examination of historical operating trends, data contained in the Company's records and other data available from third parties, but there can be no assurance that the Company's expectations, beliefs or projections will be achieved or accomplished. Furthermore, any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances that occur after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the Company's business or the extent to which any such factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.
Regulated Operations--
In addition to other factors and matters discussed elsewhere herein, some important factors that could cause actual results or outcomes for the Company and its regulated operations to differ materially from those discussed in forward-looking statements include prevailing governmental policies and regulatory actions with respect to allowed rates of return, financings, or industry and rate structures, weather conditions, acquisition and disposal of assets or facilities, operation and construction of plant facilities, recovery of purchased power and purchased gas costs, present or prospective generation, wholesale and retail competition (including but not limited to electric retail wheeling and transmission costs), availability of economic supplies of natural gas, and present or prospective natural gas distribution or transmission competition (including but not limited to prices of alternate fuels and system deliverability costs).
Non-regulated Operations--
Certain important factors which could cause actual results or outcomes for the Company and all or certain of its non-regulated operations to differ materially from those discussed in forward- looking statements include the level of governmental expenditures on public projects and project schedules, changes in anticipated tourism levels, competition from other suppliers, oil and natural gas commodity prices, drilling successes in oil and natural gas operations, ability to acquire oil and natural gas properties, and the availability of economic expansion or development opportunities.
Factors Common to Regulated and Non-Regulated Operations--
The business and profitability of the Company are also influenced by economic and geographic factors, including political and economic risks, changes in and compliance with environmental and safety laws and policies, weather conditions, population growth rates and demographic patterns, market demand for energy from plants or facilities, changes in tax rates or policies, unanticipated project delays or changes in project costs, unanticipated changes in operating expenses or capital expenditures, labor negotiations or disputes, changes in credit ratings or capital market conditions, inflation rates, inability of the various counterparties to meet their obligations with respect to the Company's financial instruments, changes in accounting principles and/or the application of such principles to the Company, changes in technology and legal proceedings.
New Accounting Standard
In October 1996, the American Institute of Certified Public Accountants issued Statement of Position 96-1, "Environmental Remediation Liabilities" (SOP 96-1). SOP 96-1 provides authoritative guidance for the recognition, measurement, display and disclosure of environmental remediation liabilities in financial statements. The Company will adopt SOP 96-1 on January 1, 1997, and the adoption is not expected to have a material effect on the Company's financial position or results of operations.
Liquidity and Capital Commitments
The Company's net capital expenditures (in millions of dollars) for 1994 through 1996 and as anticipated for 1997 through 1999 are summarized in the following table, which also includes the Company's capital needs for the retirement of maturing long-term securities.
Actual Estimated 1994 1995 1996 Capital Expenditures-- 1997 1998 1999 Montana-Dakota: $ 14.2 $19.7 $18.7 Electric $17.0 $17.8 $20.1 13.2 8.9 6.3 Natural Gas Distribution 9.5 8.1 8.1 27.4 28.6 25.0 26.5 25.9 28.2 14.4 9.7 10.1 Williston Basin* 12.6 13.3 29.3 3.6 36.8 25.0 Knife River 35.4 13.9 11.1 38.6 39.9 51.8 Fidelity 55.0 55.0 60.0 1.0 2.6 .8 Prairielands * * * 85.0 117.6 112.7 129.5 108.1 128.6 Net proceeds from sale or (3.6) (2.8) (11.8) disposition of property (5.5) (4.4) (4.3) 81.4 114.8 100.9 Net capital expenditures 124.0 103.7 124.3
Retirement of Long-term Debt/Preferred Stock-- 28.3 10.4 35.4 Montana-Dakota 11.4 6.4 6.4 7.5 10.0 7.5 Williston Basin .5 .4 .5 --- --- --- Fidelity --- 7.7 8.3 --- .1 .5 Prairielands * * * 35.8 20.5 43.4 11.9 14.5 15.2 $117.2 $135.3 $144.3 Total $135.9 $118.2 $139.5
* Effective January 1, 1997, information related to Prairielands is included with Williston Basin.
In reconciling net capital expenditures to investing activities per the Consolidated Statements of Cash Flows, the net capital expenditures for Prairielands, which is not considered a major business segment, are not reflected in investing activities in the Consolidated Statements of Cash Flows for 1994, 1995 and 1996. In addition, the 1994 capital expenditures for Montana-Dakota's natural gas distribution business are reflected net of $5.8 million of storage gas purchased from Williston Basin while the 1994 Williston Basin amount is reflected in the table above net of the sale of storage gas of $8.3 million.
In 1996 Montana-Dakota provided all the funds needed for its net capital expenditures and securities retirements, excluding the $25 million discussed below, from internal sources. Montana-Dakota expects to provide all of the funds required for its net capital expenditures and securities retirements for the years 1997 through 1999 from internal sources, through the use of its $30 million revolving credit and term loan agreement, $30 million of which was outstanding at December 31, 1996, and through the issuance of long- term debt, the amount and timing of which will depend upon the Company's needs, internal cash generation and market conditions. In June 1996, the Company redeemed $25 million of its 9 1/8% Series first mortgage bonds, due May 15, 2006. The funds required to retire the 9 1/8% Series first mortgage bonds were provided by Williston Basin's repayment of $27.5 million of intercompany debt payable to the Company.
Williston Basin's 1996 net capital expenditures and securities retirements were met through internally generated funds and the issuance of long-term debt as discussed below. Williston Basin expects to meet its net capital expenditures for the years 1997 through 1999 with a combination of internally generated funds, short-term lines of credit aggregating $40.4 million, $2 million of which was outstanding at December 31, 1996, and through the issuance of long-term debt, the amount and timing of which will depend upon Williston Basin's needs, internal cash generation and market conditions. In May 1996, Williston Basin privately placed $20 million of notes with the proceeds and cash on hand used to repay the $27.5 million of intercompany debt payable to the Company. In addition, in November 1996, Williston Basin privately placed $15 million of notes with the proceeds used to replace other maturing long-term debt.
Knife River's 1996 net capital expenditures including the acquisitions of Baldwin and Medford, were met through funds on hand, funds generated from internal sources, short-term lines of credit and a revolving credit agreement. It is anticipated that funds generated from internal sources, short-term lines of credit aggregating $11 million, none of which was outstanding at December 31, 1996, a revolving credit agreement of $55 million, $47 million of which was outstanding at December 31, 1996, and the issuance of long-term debt and the Company's equity securities will meet the needs of this business unit for 1997 through 1999. In April 1996, amounts available under the revolving credit agreement were increased from $40 million to $55 million. Also in April 1996, amounts available under the short-term lines of credit were increased from $6 million to $8 million and in August 1996, were further increased from $8 to $11 million.
Fidelity Oil's 1996 net capital expenditures related to its oil and natural gas acquisition, development and exploration program were met through funds generated from internal sources and long- term credit facilities. Fidelity's borrowing base, based on proven and producing reserves, is currently $65 million, which consists of $23 million of issued notes, $7 million in an uncommitted note shelf facility, and a $35 million revolving line of credit, $14.8 million of which was outstanding at December 31, 1996. In April 1996, the borrowing base was increased from $55 million to $65 million and concurrently the amount available under the revolving line of credit was increased from $25 million to $35 million. It is anticipated that Fidelity's 1997 through 1999 net capital expenditures and debt retirements will be met from internal sources and existing long-term credit facilities.
The Company utilizes its short-term lines of credit aggregating $40 million, $2 million of which was outstanding on December 31, 1996, and its $30 million revolving credit and term loan agreement, all of which is outstanding at December 31, 1996, to meet its short-term financing needs and to take advantage of market conditions when timing the placement of long-term or permanent financing.
The Company's issuance of first mortgage debt is subject to certain restrictions imposed under the terms and conditions of its Indenture of Mortgage. Generally, those restrictions require the Company to pledge $1.43 of unfunded property to the Trustee for each dollar of indebtedness incurred under the Indenture and that annual earnings (pretax and before interest charges), as defined in the Indenture, equal at least two times its annualized first mortgage bond interest costs. Under the more restrictive of the two tests, as of December 31, 1996, the Company could have issued approximately $247 million of additional first mortgage bonds.
The Company's coverage of fixed charges including preferred dividends was 2.7 and 3.0 times for 1996 and 1995, respectively. Additionally, the Company's first mortgage bond interest coverage was 5.4 times in 1996 compared to 3.9 times in 1995. Common stockholders' investment as a percent of total capitalization was 54% and 57% at December 31, 1996 and 1995, respectively.
Effects of Inflation
The Company's consolidated financial statements reflect historical costs, thus combining the impact of dollars spent at various times. Such dollars have been affected by inflation, which generally erodes the purchasing power of monetary assets and increases operating costs. During times of chronic inflation, the loss of purchasing power and increased operating costs could potentially result in inadequate returns to stockholders primarily because of the lag in rate relief granted by regulatory agencies. Further, because the ratemaking process restricts the amount of depreciation expense to historical costs, cash flows from the recovery of such depreciation are inadequate to replace utility plant.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to Pages 23 through 47 of the Annual Report.
ITEM 9.

ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to Pages 1 through 5 and 18 and 19 of the Company's Proxy Statement dated March 3, 1997 (Proxy Statement) which is incorporated herein by reference.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
Reference is made to Pages 13 through 18 of the Proxy Statement.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to Page 19 of the Proxy Statement.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None. PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements, Financial Statement Schedules and Exhibits.
Index to Financial Statements and Financial Statement Schedules. Page 1. Financial Statements:
Report of Independent Public Accountants * Consolidated Statements of Income for each of the three years in the period ended December 31, 1996 * Consolidated Balance Sheets at December 31, 1996, 1995 and 1994 * Consolidated Statements of Capitalization at December 31, 1996, 1995 and 1994 * Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1996 * Notes to Consolidated Financial Statements *
2. Financial Statement Schedules (Schedules are omitted because of the absence of the conditions under which they are required, or because the information required is included in the Company's Consolidated Financial Statements and Notes thereto.)
____________________
* The Consolidated Financial Statements listed in the above index which are included in the Company's Annual Report to Stockholders for 1996 are hereby incorporated by reference. With the exception of the pages referred to in Items 6 and 8, the Company's Annual Report to Stockholders for 1996 is not to be deemed filed as part of this report.
3. Exhibits: 3(a) Composite Certificate of Incorporation of the Company, as amended to date, filed as Exhibit 3(a) to Form 10-K for the year ended December 31, 1994, in File No. 1-3480 * 3(b) By-laws of the Company, as amended to date ** 4(a) Indenture of Mortgage, dated as of May 1, 1939, as restated in the Forty-Fifth Supplemental Indenture, dated as of April 21, 1992, and the Forty-Sixth through Forty-Eighth Supplements thereto between the Company and the New York Trust Company (The Bank of New York, successor Corporate Trustee) and A. C. Downing (W. T. Cunningham, successor Co-Trustee), filed as Exhibit 4(a) in Registration No. 33-66682; and Exhibits 4(e), 4(f) and 4(g) in Registration No. 33-53896 * 4(b) Rights Agreement, dated as of November 3, 1988, between the Company and Norwest Bank Minnesota, N.A., Rights Agent, filed as Exhibit 4(c) in Registration No. 33-66682 * + 10(a) Executive Incentive Compensation Plan ** + 10(b) 1992 Key Employee Stock Option Plan, filed as Exhibit 10(f) in Registration No. 33-66682 * + 10(c) Restricted Stock Bonus Plan, filed as Exhibit 10(b) in Registration No. 33-66682 * + 10(d) Supplemental Income Security Plan, as amended to date ** + 10(e) Directors' Compensation Policy, filed as Exhibit 10(d) in Registration No. 33-66682 * + 10(f) Deferred Compensation Plan for Directors, filed as Exhibit 10(e) in Registration No. 33-66682 * + 10(g) Non-Employee Director Stock Compensation Plan, filed as Exhibit 10(g) to Form 10-K for the year ended December 31, 1995, in File No. 1-3480 * 12 Computation of Ratio of Earnings to Fixed Charges ** 13 Selected financial data, financial statements and supplementary data as contained in the Annual Report to Stockholders for 1996 ** 21 Subsidiaries of MDU Resources Group, Inc. ** 23(a) Consent of Independent Public Accountants ** 23(b) Consent of Engineer ** 23(c) Consent of Engineer ** 27 Financial Data Schedule ** ____________________ * Incorporated herein by reference as indicated. ** Filed herewith. + Management contract, compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to Item 14(c) of this report. SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MDU RESOURCES GROUP, INC.
Date: February 28, 1997 By: /s/ Harold J. Mellen, Jr. Harold J. Mellen, Jr. (President and Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the date indicated.
Signature Title Date
/s/ Harold J. Mellen, Jr. Chief Executive February 28, 1997 Harold J. Mellen, Jr. Officer (President and Chief Executive Officer) and Director
/s/ Douglas C. Kane Chief Operating February 28, 1997 Douglas C. Kane (Executive Vice President Officer and and Chief Operating Officer) Director
/s/ Warren L. Robinson Chief Financial February 28, 1997 Warren L. Robinson (Vice President, Officer Treasurer and Chief Financial Officer)
/s/ Vernon A. Raile Chief Accounting February 28, 1997 Vernon A. Raile (Vice President, Officer Controller and Chief Accounting Officer)
/s/ John A. Schuchart Director February 28, 1997 John A. Schuchart (Chairman of the Board)
/s/ San W. Orr, Jr. Director February 28, 1997 San W. Orr, Jr. (Vice Chairman of the Board)
/s/ Thomas Everist Director February 28, 1997 Thomas Everist
/s/ Richard L. Muus Director February 28, 1997 Richard L. Muus
/s/ Robert L. Nance Director February 28, 1997 Robert L. Nance
/s/ John L. Olson Director February 28, 1997 John L. Olson
/s/ Homer A. Scott, Jr. Director February 28, 1997 Homer A. Scott, Jr.
/s/ Joseph T. Simmons Director February 28, 1997 Joseph T. Simmons
/s/ Sister Thomas Welder Director February 28, 1997 Sister Thomas Welder


Item 4 Submission of Matters to a Vote of Security Holders............. 10
Part II
Item 5

Item 5 Market for Registrant's Common Equity and Related Stockholder Matters.............................................. 10
Item 6

Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations..............................................12
Item 8

Item 8 Financial Statements and Supplementary Data......................(See Item 14 below)
Item 9

Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...............................................Non- Applicable
Part III
The information called for by Part III (Items 10 through 13) is incorporated herein by reference from Andover's Definitive Notice of Annual Meeting and Proxy Statement for the 1997 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission.
Part IV
Item 14

Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Financial Statements -
Independent Auditors' Report.................................34
Consolidated Balance Sheets as of December 31, 1996 and 1995.........................................................35
Consolidated Statements of Operations for each of the years ended December 31, 1996, 1995 and 1994.................36
Consolidated Statements of Changes in Stockholders' Equity for each of the years ended December 31, 1996, 1995 and 1994.........................................................37
Consolidated Statements of Cash Flows for each of the years ended December 31, 1996, 1995 and 1994..............38-39
Notes to Consolidated Financial Statements................40-63
(2) All financial statement schedules are omitted because they are not applicable, the data is not significant, or the required information is shown elsewhere in this report.
(b) Reports on Form 8-K. There were no reports filed on Form 8-K during the three months ended December 31, 1996.
(c) List of Exhibits
Exhibits to the Form 10-K have been included only with the copies of the Form 10-K filed with the SEC. Upon request to Shareholder Relations, Andover Bancorp, Inc., 61 Main Street, Andover, Massachusetts 01810, copies of the individual exhibits will be furnished upon payment of a reasonable fee.
Exhibit No. Description of Exhibits - ----------- -----------------------
3.1 Restated Certificate of Incorporation of Andover (incorporated herein by reference to Exhibit 3.1 to Post-Effective Amendment No. 1 to Andover's Registration Statement on Form S-4 No. 33-11891 filed on March 5, 1987).
3.2 By-laws of Andover, as amended and restated, January 23, 1997.
4.1 Specimen of Andover Bancorp, Inc. common stock certificate (incorporated herein by reference to Exhibit 4 to Andover's Registration Statement on Form S-4, Registration No. 33-11891, filed on February 11, 1987).
4.2 Shareholder Rights Agreement between Andover Bancorp, Inc. and The First National Bank of Boston (incorporated herein by reference to an Exhibit to Andover's Current Report on Form 8-K dated February 21, 1989).
4.3 Amendment to Shareholder Rights Agreement between Andover Bancorp, Inc. and The First National Bank of Boston (incorporated herein by reference to Exhibit 4.2 to Andover's Current Report on Form 8-K dated February 12, 1990).
10.1 Employment Agreement between Andover, Andover Bank and Gerald T. Mulligan, dated May 16, 1991 (incorporated herein by reference to Exhibit 10.1 to Andover's Form 10-K for the fiscal year ended December 31, 1991).
10.2 Special Termination Agreement between Andover, Andover Bank and Gerald T. Mulligan, dated May 16, 1991, as amended and restated through January 23, 1997.
10.3 Special Termination Agreement between Andover, Andover Bank and Joseph F. Casey, dated December 17, 1992, as amended and restated through January 23, 1997.
10.4 Special Termination Agreement between Andover, Andover Bank and Michael J. Ecker, dated December 17, 1992, as amended and restated through January 23, 1997.
10.5 Special Termination Agreement between Andover, Andover Bank and John R. Heerwagen, dated December 17, 1992, as amended and restated through January 23, 1997.
10.6 Special Termination Agreement between Andover, Andover Bank and Octavio C. Bolivar, dated January 24, 1994, as amended and restated, January 23, 1997.
10.7 Andover Savings Bank Employees' Stock Ownership Plan and Trust Agreement and Amendment No. 1 (incorporated herein by reference to Exhibit 10(c) to Andover's Annual Report on Form 10-K for the fiscal year ended December 31, 1987).
10.8 Andover Bancorp, Inc. Stock Option Plan dated May 8, 1986, as amended May 22, 1986, January 29, 1987, and November 2, 1987 (incorporated herein by reference to Exhibit 10(h) to Andover's Annual Report on Form 10-K for the fiscal year ended December 31, 1987).
10.9 Special Termination Agreement between Andover, Andover Bank and Raymond P. Smith, dated December 12, 1995, as amended and restated, January 23, 1997.
10.10 Andover Bancorp, Inc. 1995 Stock Incentive Plan, dated February 16, 1995 (incorporated herein by reference to Exhibit 10.11 to Andover's Annual Report on Form 10-K for the fiscal year ended December 31, 1995).
10.11 Deferred Compensation Plan for Directors of Andover Bancorp, Inc. and its Subsidiaries, effective July 1, 1993, as amended and restated, February 22, 1996 (incorporated herein be reference to Exhibit 10.12 to Andover's Annual Report on Form 10-K for the fiscal year ended December 31, 1995).
10.12 Andover Bancorp, Inc. Special Termination Plan, effective January 23, 1997.
11 The computation of per share earnings can be readily determined from the material contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 1996.
12 As the Company does not have any debt securities registered under Section 12 of the Securities Act of 1933, no ratio of earnings to fixed charges appears in this Annual Report on Form 10-K.
13 Andover Bancorp, Inc. 1996 Annual Report, which, except for those portions expressly incorporated herein by reference, is furnished only for the information of the Securities and Exchange Commission and is not deemed to be filed.
21 The Company has two subsidiaries, Andover Bank and Andover Bank NH. Andover Bank is a Massachusetts savings bank in stock form while Andover Bank NH is a New Hampshire guaranty savings bank in stock form. Both subsidiaries are included in the Consolidated Financial Statements filed in the Annual Report on Form 10-K for the fiscal year ended December 31, 1996.
23.1 Consent of KPMG Peat Marwick LLP.
SIGNATURES ----------
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ANDOVER BANCORP, INC.
March 14, 1997 By:/s/Gerald T. Mulligan ----------------------------- Gerald T. Mulligan, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
Signature Title Date - --------- ----- ----
/s/Gerald T. Mulligan President, Chief March 14, 1997 - ------------------------ Executive Officer and Gerald T. Mulligan Director (Principal Executive Officer)
/s/Joseph F. Casey Chief Financial Officer March 14, 1997 - ------------------------ and Treasurer (Principal Joseph F. Casey Financial and Accounting Officer)
/s/Thomas F. Caffrey Director March 14, 1997 - ------------------------ Thomas F. Caffrey
/s/Naomi A. Gardner Director March 14, 1997 - ------------------------ Naomi A. Gardner
/s/Cornelius J. McCarthy Director March 14, 1997 - ------------------------ Cornelius J. McCarthy
/s/Clifford E. Elias Director March 14, 1997 - ------------------------ Clifford E. Elias
/s/Fred P. Shaheen Director March 14, 1997 - ------------------------ Fred P. Shaheen
EXHIBITS TO FORM 10-K Andover Bancorp, Inc. ---------------------
EXHIBIT INDEX -------------
Exhibit No. Description of Exhibit Page No. - ----------- ---------------------- --------
3.1 Restated Certificate of Incorporation of Andover (incorporated herein by reference to Exhibit 3.1 to Post- Effective Amendment No. 1 to Andover's Registration Statement on Form S-4, No. 33-11891 filed on March 5, 1987). --
3.2 By-laws of Andover, as amended and restated, January 23, 1997. 9
4.1 Specimen of Andover Bancorp, Inc. common stock certificate (incorporated herein by reference to Exhibit 4 to Andover's Registration Statement on Form S-4, Registration No. 33-11891, filed on February 11, 1987). --
4.2 Shareholder Rights Agreement between Andover Bancorp, Inc. and The First National Bank of Boston (incorporated herein by reference to an Exhibit to Andover's Current Report on Form 8-K dated February 21, 1989). --
4.3 Amendment to Shareholder Rights Agreement between Andover Bancorp, Inc. and The First National Bank of Boston (incorporated herein by reference to Exhibit 4.2 to Andover's Current Report on Form 8-K dated February 12, 1990). --
10.1 Employment Agreement between Andover, Andover Bank and Gerald T. Mulligan, dated May 16, 1991 (incorporated herein by reference to Exhibit 10.1 to Andover's Form 10-K for the fiscal year ended December 31, 1991). --
10.2 Special Termination Agreement between Andover, Andover Bank and Gerald T. Mulligan, dated May 16, 1991, as amended and restated through January 23, 1997. 26
10.3 Special Termination Agreement between Andover, Andover Bank and Joseph F. Casey, dated December 17, 1992, as amended and restated through January 23, 1997. 32
10.4 Special Termination Agreement between Andover, Andover Bank and Michael J. Ecker, dated December 17, 1992, as amended and restated through January 23, 1997. 38
10.5 Special Termination Agreement between Andover, Andover Bank and John R. Heerwagen, dated December 17, 1992, as amended and restated through January 23, 1997. 44
10.6 Special Termination Agreement between Andover, Andover Bank and Octavio C. Bolivar, dated January 24, 1994 as amended and restated, January 23, 1997. 50
10.7 Andover Savings Bank Employees' Stock Ownership Plan and Trust Agreement and Amendment No. 1 (incorporated herein by reference to Exhibit 10(c) to Andover's Annual Report on Form 10-K for the fiscal year ended December 31, 1987). --
10.8 Andover Bancorp, Inc. Stock Option Plan dated May 8, 1986, as amended May 22, 1986, January 29, 1987 and November 2, 1987 (incorporated herein by reference to Exhibit 10(h) to Andover's Annual Report on Form 10-K for the fiscal year ended December 31, 1987). --
10.9 Special Termination Agreement between Andover, Andover Bank and Raymond P. Smith, dated December 12, 1995, as amended and restated, January 23, 1997. 56
10.10 Andover Bancorp, Inc. 1995 Stock Incentive Plan, dated February 16, 1995 (incorporated herein by reference to Exhibit 10.11 to Andover's Annual Report on Form 10-K for the fiscalyear ended December 31, 1995). --
10.11 Deferred Compensation Plan for Directors of Andover Bancorp, Inc. and its Subsidiaries, effective July 1, 1993, as amended and restated, February 22, 1996 (incorporated herein by reference to Exhibit 10.12 to Andover's Annual Report on Form 10-K for the fiscal year ended December 31, 1995). --
10.12 Andover Bancorp, Inc. Special Termination Plan, effective January 23, 1997. 62
11 The computation of per share earnings can be readily determined from the material contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 1996. --
12 As the Company does not have any debt securities registered under Section 12 of the Securities Act of 1933, no ratio of earnings to fixed charges appears in this Annual Report on Form 10-K. --
13 Andover Bancorp, Inc. 1996 Annual Report which, except for those portions expressly incorporated herein by reference, is furnished only for the information of the Securities and Exchange Commission and is not deemed to be filed. 66
21 The Company has two subsidiaries, Andover Bank and Andover Bank NH. Andover Bank is a Massachusetts savings bank in stock form while Andover Bank NH is a New Hampshire guaranty savings bank in stock form. Both subsidiaries are included in the Consolidated Financial Statements filed in the Annual Report on Form 10-K for the fiscal year ended December 31, 1996. --
23.1 Consent of KPMG Peat Marwick LLP. 142