FORM 10-K/A AMENDMENT TO FORM 10-K ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 AMENDMENT NO. 1 [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period ended___________________________ Commission File Number 1-7211 Ionics, Incorporated (Exact name of registrant as specified in it charter) Massachusetts 04-2068530 State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification Number) 65 Grove Street, Watertown, Massachusetts 02172 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 617-926-2500 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, $1 par value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None (Title of Class) /1 The undersigned registrant hereby amends the following items, financial statements, exhibits or other portions of its Annual Report on Form 10-K for the fiscal year ended December 31, 1996 as set forth in the pages attached hereto: 1. Item 14(a) 3. of Part IV of said report on form 10-K is amended to list Form 11-K, Annual Report of the Ionics Section 401(k) Stock Savings Plan for the year ended December 31, 1996, as Exhibit 13(b) thereto. The Annual Report of the Ionics Section 401(k) Stock Savings Plan on Form 11-K for the year ended December 31, 1996 is hereby filed pursuant to rule 15d-21 and General Instruction F to Form 10-K as an Exhibit to said Annual Report on Form 10-K. Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. IONICS, INCORPORATED (Registrant) Date: June 23, 1997 By /s/Stephen Korn Stephen Korn Vice President and General Counsel /2 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements See Index to Financial Statements and Financial Statement Schedules on page IV-7. The Financial Statement Schedules are filed as part of this Annual Report on Form 10-K. 2. Financial Statement Schedules See Index to Financial Statements and Financial Statement Schedules on page IV-7. 3. Exhibits Exhibit Page No. Description No. 3.0 Articles of Organization and By-Laws 3.1 Restated Articles of Organization (filed * as Exhibit 3(a) to Form 10-K for year ended December 31, 1986). 3.1(a) Amendment to the Restated Articles of * Organization (filed as Exhibit 3(b) to Form 10-K for year ended December 31, 1987). 3.1(b) Amendment to Restated Articles of * Organization (filed as Exhibit 3.1(b) to Registration Statement No. 33-38290 on Form S-2 effective January 24, 1991). 3.2 By-Laws, as amended (filed as Exhibit 19 to * Form 10-Q for the quarter ended September 30, 1989). 4.0 Instruments defining the rights of security holders, including indentures 4.1 Rights Agreement, dated as of December 22, 1987, * as amended and restated as of August 15, 1989, between Registrant and The First National Bank of Boston (filed as Exhibit 1 to Registrant's Current Report on Form 8-K dated August 30, 1989). /3 IV-1 4.2 Indenture, dated as of December 22, 1987, between * Registrant and The First National Bank of Boston, relating to Rights Agreement (filed as Exhibit 2 to Registrant's Current Report on Form 8-K dated December 22, 1987). 4.3 Form of Common Stock Certificate (filed as Exhibit * 4.10 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1990). 10. Material Contracts 10.1 1979 Stock Option Plan, as amended through * February 22, 1996 (filed as Exhibit 10.1 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.2 1986 Stock Option Plan for Non-Employee Directors, * as amended through February 19, 1997 (filed as Exhibit 10.2 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996). 10.3 Amended and Restated Credit Agreement between * Registrant and the First National Bank of Boston dated as of December 31, 1992 (filed as Exhibit 10.3 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992). 10.3(1) Amendment Agreement No. 1, dated as of * December 31, 1995, to Amended and Restated Credit Agreement between Registrant and The First National Bank of Boston (filed as Exhibit 10.3(1) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995). 10.4 Operating Agreement dated as of September 27, * 1989 between Registrant and Aqua Cool Enterprises, Inc. (filed as Exhibit 10.4 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1989). 10.5 Term Lease Master Agreement dated as of * September 27, 1989 between Registrant and Aqua Cool Enterprises, Inc. (filed as Exhibit 10.5 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1989). 10.6 Option Agreement dated as of September 27, 1989 * among Registrant, Aqua Cool Enterprises, Inc. and the other parties named therein (filed as Exhibit 10.6 to Registrant's registration statement on Form S-2, No. 33-38290, effective January 24, 1991). /4 IV-2 10.7 Agreement for Privatization of Water Supplies * dated as of September 18, 1990 between the Company and the City of Santa Barbara, California (filed as Exhibit 10.7 to Registrant's registration statement on Form S-2, No. 33-38290, effective January 24, 1991). 10.8 Amendment No. 1, dated as of January 3, 1992, to * Agreement for Privatization of Water Supplies dated as of September 18, 1990 between the Company and the City of Santa Barbara, California (filed as Exhibit 10.8 to Registrant's annual report on Form 10-K for the year ended December 31, 1991). 10.9 Amendment No. 2, dated as of January 19, 1993, * to Agreement for Privatization of Water Supplies dated as of September 18, 1990 between the Company and the City of Santa Barbara, California (filed as Exhibit 10.9 to the Registrant's annual report on Form 10-K for the year ended December 31, 1992). 10.10 Amendment No. 3, dated June 28, 1994, to Agreement * for Privatization of Water Supplies dated as of September 18, 1990, between the Company and the City of Santa Barbara, California (filed as Exhibit 10.1 to the Registrant's Form 10-Q for the period ended June 30, 1994). 10.11 1994 Restricted Stock Plan (filed as Exhibit 10.12 * to Registrant's Annual Report on Form 10-K for the year ended December 31, 1994). 10.12 1997 Stock Incentive Plan (filed as Exhibit 10.12 * to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996). 11. Statement re Computation of Earnings Per Share. * 13.(a) Annual Report to Stockholders of the Registrant for * the year ended December 31, 1996 (only pages 16 through 32 and the inside back cover constitute an exhibit to this report). 13.(b) Form 11-K, Annual Report of the Ionics Section 401(k) 7 Stock Savings Plan for the year ended December 31, 1996. 21. Subsidiaries of the Registrant. * /5 IV-3 23. Consents 23.1 Consent of Coopers & Lybrand L.L.P. to incorporation * by reference of that firm's report dated February 18, 1997, which is included on page 18 of the Registrant's Annual Report to Stockholders for the year ended December 31, 1996. 24. Power of Attorney. * 27. Financial Data Schedule ** ________________________________ * incorporated herein by reference ** for electronic purposes only /6 IV-4 Exhibit No. 13(b) to Annual Report on Form 10-K of Ionics, Incorporated for the year ended December 31, 1996 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K (Mark One) [X] Annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934 (Fee Required) For the fiscal year ended ________December 31, 1996 _________ 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 1-7211 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: Ionics Section 401(k) Stock Savings Plan B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: IONICS, INCORPORATED 65 Grove Street Watertown, Massachusetts 02172 /7 IONICS SECTION 401(k) STOCK SAVINGS PLAN INDEX OF FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES For the years ended December 31, 1996 and 1995 ________ Page(s) Independent Auditors Report 2 Financial Statements: Statements of Net Assets Available for Plan Benefits at December 31, 1996 and 1995 3-4 Statements of Changes in Net Assets Available for Plan Benefits for the years ended December 31, 1996 and 1995 5-6 Notes to Financial Statements 7-11 Supplemental Schedules: Schedule of Assets Held for Investment Purposes, at December 31, 1996 12 Schedule of Reportable Transactions for the year ended December 31, 1996 13 /8 INDEPENDENT AUDITOR'S REPORT Administrators Ionics Section 401(k) Stock Savings Plan Watertown, Massachusetts We have audited the accompanying statements of net assets available for plan benefits of the Ionics Section 401(k) Stock Savings Plan (the Plan) as of December 31, 1996 and 1995, and the related statement of changes in net assets available for plan benefits for the years then ended. These financial statements and the schedules referred to below are the responsibility of the plan administrator. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for plan benefits of the Plan as of December 31, 1996 and 1995 and the changes in its net assets available for plan 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 assets held for investment purposes and reportable transactions are presented for purposes of complying with the Department of Labor Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 and are not a required part of the basic financial statements. Such 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. /s/BELANGER & COMPANY, P.C. CERTIFIED PUBLIC ACCOUNTANTS Chelmsford, Massachusetts June 12, 1997 -2- /9 IONICS SECTION 401(K) STOCK SAVINGS PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS DECEMBER 31, 1996 PARTICIPANT - DIRECTED FUNDS IONICS, INC. ASSET BT PARTIC- COMMON PURITAN MANAGER CONTRAFUND PYRAMID IPANT CASH/ STOCK FUND FUND FUND FUND GIC FUND LOANS OTHER TOTAL ASSETS: INVESTMENTS, AT MARKET (SEE NOTES 2,3 & 7) IONICS, INCORPORATED COMMON STOCK: 310,613 SHARES @ $48.00 PER SHARE $14,909,424 $14,909,424 FIDELITY INVESTMENTS: PURITAN FUND: 89,866.814 SHARES @ $17.24 PER SHARE $1,549,304 1,549,304 ASSET MANAGER FUND: 22,679.732 SHARES @ $16.47 PER SHARE $ 373,535 373,535 CONTRAFUND FUND: 59,558.237 SHARES @ $42.15 PER SHARE $ 2,510,380 2,510,380 BT PYRAMID GIC FUND $ 868,421 868,421 CASH AND CASH EQUIVALENTS 61 $ 537,187 537,248 AMOUNTS RECEIVABLE FROM IONICS, INCORPORATED AND PLAN PARTICIPANTS 195,938 195,938 LOANS RECEIVABLE FROM PLAN PARTICIPANTS $ 644,327 644,327 TOTAL ASSETS $14,909,485 $1,549,304 $ 373,535 $ 2,510,380 $ 868,421 $ 644,327 $ 733,125 $21,588,577 LIABILITIES -0- -0- -0- -0- -0- -0- -0- -0- NET ASSETS AVAILABLE FOR PLAN BENEFITS $14,909,485 $1,549,304 $ 373,535 $ 2,510,380 $ 868,421 $ 644,327 $ 733,125 $21,588,577 The accompanying notes are an integral part of these financial statements. -3- /10 IONICS SECTION 401(K) STOCK SAVINGS PLAN STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS DECEMBER 31, 1995 PARTICIPANT - DIRECTED FUNDS IONICS, INC. ASSET BT PARTIC- COMMON PURITAN MANAGER CONTRAFUND PYRAMID IPANT CASH/ STOCK FUND FUND FUND FUND GIC FUND LOANS OTHER TOTAL ASSETS: INVESTMENTS, AT MARKET (SEE NOTES 2,3 & 7) IONICS, INCORPORATED COMMON STOCK: 293,324 SHARES @ $43.50 PER SHARE $12,759,594 $12,759,594 FIDELITY INVESTMENTS: PURITAN FUND: 62,398.762 SHARES @ $17.01 PER SHARE $1,061,403 1,061,403 ASSET MANAGER FUND: 17,230.408 SHARES @ $15.85 PER SHARE $ 273,102 273,102 CONTRAFUND FUND: 30,468.567 SHARES @ $38.02 PER SHARE $ 1,158,415 1,158,415 BT PYRAMID GIC FUND $ 750,252 750,252 CASH AND CASH EQUIVALENTS 132,604 $ 47,261 179,865 AMOUNTS RECEIVABLE FROM IONICS, INCORPORATED AND PLAN PARTICIPANTS 211,864 211,864 LOANS RECEIVABLE FROM PLAN PARTICIPANTS $ 387,065 387,065 TOTAL ASSETS $12,892,198 $1,061,403 $ 273,102 $ 1,158,415 $ 750,252 $ 387,065 $ 259,125 $16,781,560 LIABILITIES -0- -0- -0- -0- -0- -0- -0- -0- NET ASSETS AVAILABLE FOR PLAN BENEFITS $12,892,198 $1,061,403 $ 273,102 $ 1,158,415 $ 750,252 $ 387,065 $ 259,125 $16,781,560 The accompanying notes are an integral part of these financial statements. -4- /11 IONICS SECTION 401(K) STOCK SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS FOR THE YEAR ENDED DECEMBER 31, 1996 PARTICIPANT - DIRECTED FUNDS IONICS, INC. ASSET BT PARTIC- COMMON PURITAN MANAGER CONTRAFUND PYRAMID IPANT CASH/ STOCK FUND FUND FUND FUND GIC FUND LOANS OTHER TOTAL NET ASSETS AVAILABLE FOR PLAN BENEFITS - BEGINNING OF YEAR $ 12,892,198 $ 1,061,403 $ 273,102 $1,158,415 $ 750,252 $ 387,065 $ 259,125 $16,781,560 NET INVESTMENT INCOME, PRINCIPALLY INTEREST AND DIVIDENDS 1,007 160,277 28,669 166,481 46,127 43,179 12,164 457,904 NET APPRECIATION (DEPRECIATION) IN THE FAIR VALUE OF INVESTMENTS 1,195,185 32,320 13,512 221,456 1,462,473 CONTRIBUTIONS: PARTICIPANTS 2,171,648 2,171,648 EMPLOYER 605,473 605,473 ACQUISITIONS 55,591 1,171,972 1,227,563 LOAN PAYMENTS (256,903) 58,613 (198,290) TRANSFERS 955,807 295,304 58,252 964,028 74,370 (2,347,761) -0- WITHDRAWALS BY AND DISTRIBUTIONS TO PARTICIPANTS (134,712) (2,328) 415,395 (1,198,109) (919,754) NET INCREASE(DECREASE) 2,017,287 487,901 100,433 1,351,965 118,169 257,262 474,000 4,807,017 NET ASSETS AVAILABLE FOR PLAN BENEFITS - END OF YEAR $14,909,485 $1,549,304 $ 373,535 $2,510,380 $ 868,421 $ 644,327 $ 733,125 $21,588,577 The accompanying notes are an integral part of these financial statements. -5- /12 IONICS SECTION 401(K) STOCK SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS FOR THE YEAR ENDED DECEMBER 31, 1995 PARTICIPANT - DIRECTED FUNDS IONICS, INC. ASSET BT PARTIC- COMMON PURITAN MANAGER CONTRAFUND PYRAMID IPANT CASH/ STOCK FUND FUND FUND FUND GIC FUND LOANS OTHER TOTAL NET ASSETS AVAILABLE FOR PLAN BENEFITS - BEGINNING OF YEAR $ 8,703,166 $ 868,168 $ 204,286 $ 584,272 $ 788,297 $ 235,321 $ 153,700 $11,537,210 NET INVESTMENT INCOME, PRINCIPALLY INTEREST AND DIVIDENDS 1,055 55,579 7,559 88,968 43,738 27,937 7,059 231,895 NET APPRECIATION (DEPRECIATION) IN THE FAIR VALUE OF INVESTMENTS 3,434,179 130,909 33,916 158,075 3,757,079 CONTRIBUTIONS: PARTICIPANTS 1,881,968 1,881,968 EMPLOYER 433,127 433,127 LOAN PAYMENTS (155,467) 45,955 (109,512) TRANSFERS 768,943 6,747 27,341 327,100 (79,621) (1,050,510) -0- WITHDRAWALS BY AND DISTRIBUTIONS TO PARTICIPANTS (15,145) (2,162) 279,274 (1,212,174) (950,207) NET INCREASE(DECREASE) 4,189,032 193,235 68,816 574,143 (38,045) 151,744 105,425 5,244,350 NET ASSETS AVAILABLE FOR PLAN BENEFITS - END OF YEAR $12,892,198 $1,061,403 $ 273,102 $1,158,415 $ 750,252 $ 387,065 $ 259,125 $16,781,560 The accompanying notes are an integral part of these financial statements. -6- /13 IONICS SECTION 401(K) STOCK STOCK SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 Note 1: THE PLAN AND ITS PROVISIONS The Ionics Section 401(k) Stock Savings Plan (the "Plan") became effective January 1, 1986. Effective May 1, 1994, the Plan was amended to provide a broader range of investment selections for Plan participants and the opportunity to change investment elections on a quarterly basis. Other amendments to the Plan were also adopted, including provisions to permit participants to borrow from their accounts. In addition, the Plan trustee was changed from the Bank of Boston to the PNC Bank, New England. Participants should refer to the Summary Plan Description for a more complete description of the Plan's provisions. General The Plan is a defined contribution plan qualified under Section 401(k) of the U.S. Internal Revenue Code covering all permanent employees of Ionics, Incorporated, (the "Company") working at least 20 hours per week who have completed one year of service. The Plan was established to provide benefits to participants upon retirement, termination of employment, death, permanent and total disability, or demonstration of financial hardship. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974. Investment Options The following investment options are available to participants: Ionics, Incorporated Common Stock Fund - This fund invests directed contributions solely in common stock of the Company. Fidelity Puritan Fund - This mutual fund maintains a broadly based conservatively managed diversified investment portfolio which is primarily income oriented with a secondary emphasis on growth. Its portfolio consists principally of high yielding common and preferred stocks and corporate bonds. Fidelity Contrafund - This mutual fund invests primarily in common stocks and securities convertible into common stocks, and has capital appreciation as its investment objective. Fidelity Asset Manager Fund - This mutual fund maintains an investment portfolio of stocks, bonds and short-term investments of U.S. and foreign issuers, and has a primary objective of high total return with reduced risk over the long term. -7- /14 Note 1: THE PLAN AND ITS PROVISIONS (Continued) BT Pyramid GIC Fund - This fund, administered by The Bankers Trust Company, invests primarily in Guaranteed Investment Contracts and Bank Investment Contracts and Bankers Trust Commingled short-term investment funds, and has as its objectives safety of principal, stability, superior yields and a predictable annual return. The fund sets an estimated range of return on an annual basis, but because results can be affected by economic or market conditions, it does not guarantee the rate. All cash transactions, including contributions, fund purchases, fund liquidations, loans, distributions, etc. are made through a conduit account, which is an interest bearing cash account with the PNC Bank, New England. Participant Contributions Employees who meet certain length of service requirements may elect to become participants in the Plan and contribute, on a pre- tax basis, from 1% to 12% of their compensation as defined by the Plan. The annual amounts so contributed by employees are subject to certain federal income tax limitations. Contributions made by employees to the Plan may be used to purchase either common stock of the Company or may be directed to be invested in any of the available investment funds. Participant Accounts Each participant's account is credited with the participant's contribution and an allocation of Plan earnings. Allocations are based on total investment earnings and average participant investment balances, as defined. Company Contribution The terms and conditions of the Plan provide for the Company to contribute 50% of the first 6% an employee elects to invest in common stock of the Company (subject to certain limitations). The maximum annual amount that the Company may contribute on behalf of employees is currently $750,000, and that limit is set by the Board of Directors of the Company. Matching Company contributions under the Plan are invested solely in common stock of the Company. Non-vested Company contributions may, subject to certain restrictions, be forfeited upon withdrawal of the employee from the Plan and be used as a credit to reduce future Company contributions. -8- /15 Note 1: THE PLAN AND ITS PROVISIONS (Continued) Vesting All participant contributions are 100% vested when made. Company matching contributions are vested in increasing percentages based on the years of service of the individual employee, from 33 1/3% after two years to 100% after four years. Plan Expenses The Plan provides that all expenses of the Plan and its administration shall be paid by the Company. Withdrawals A participant can make a hardship withdrawal of his or her own contributions, subject to Internal Revenue Service restrictions. A participant may withdraw the entire vested amount due to his or her own contributions after attaining age 59 1/2. Loans A participant can borrow money from his or her vested account subject to certain rules including a minimum amount of $1,000 and a maximum amount not to exceed the lesser of 50% of the participant's total vested account balance or $50,000. Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying financial statements are presented on the accrual basis of accounting. Valuation of Investments Investment of the Plan in Ionics, Incorporated common stock is stated at market, market being the last sale price on December 31, 1996 of Ionics, Incorporated common stock as reported on the New York Stock Exchange. Investments in the Plan of the three (3) Fidelity Funds and the BT Pyramid GIC Fund are stated at the Net Asset Value of the funds reported as of December 31, 1996. -9- /16 The Plan presents in the statement of changes in net assets available for plan benefits the net appreciation (depreciation) in the fair value of its investments which consist of realized gains or losses and the unrealized appreciation (depreciation) of these investments. Payment of Benefits Benefits are recorded when paid. Note 3: INVESTMENTS The following is a summary of investments at December 31, 1996 and 1995, respectively: Market Value Cost Fund 1996 1995 1996 1995 Investments At Fair Value As Determined By Quoted Market Price Ionics, Incorporated Common Stock $14,909,424 $12,759,594 $ 6,744,813 $ 5,135,085 Fidelity funds: Puritan 1,549,304 1,061,403 1,453,418 977,269 Asset Manager 373,535 273,102 346,486 251,317 Contrafund 2,510,380 1,158,415 2,165,766 999,208 BT Pyramid GIC Fund 868,421 750,252 868,421 750,252 Other Investments Participant Loans 644,327 387,065 644,327 387,065 $20,855,391 $16,389,831 $12,223,231 $ 8,500,196 Note 4: INCOME TAX STATUS The Internal Revenue Service has determined and informed the Company by a letter dated September 12, 1995 that the Plan is qualified and the trust established under the Plan is tax-exempt, under the appropriate sections of the Code. -10- /17 Note 5: PLAN TERMINATION Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100 percent vested in their accounts. Note 6: RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500 The following is a reconciliation of net assets available for benefits per the financial statements at December 31, 1996 and 1995 to Form 5500: 1996 1995 Net assets available for benefits per the financial statements $21,588,577 $16,781,560 Amounts allocated to withdrawing participants (316,115) (178,505) Net assets available for benefits per the form 5500 $21,272,462 $16,603,055 The following is a reconciliation of benefits paid to participants per the financial statements for the year ended December 31, 1996 to Form 5500: Benefits paid to participants per the financial statements $ 919,754 Add: Amounts allocated to withdrawing participants at December 31, 1996 316,115 Less: Amounts allocated to withdrawing participants at December 31, 1995 (178,505) Benefits paid to participants per Form 5500 $1,057,364 Amounts allocated to withdrawing participants are recorded on the Form 5500 for benefit claims that have been processed and approved for payment prior to December 31 but not yet paid as of that date. Note 7: STOCK SPLIT The investment in Ionics, Incorporated common stock reflects a 2-for-1 stock split effected by a 100% stock dividend paid on January 6, 1995. -11- /18 ATTACHMENT TO FORM 5500 EIN: 04-2068530 PN: 003 SCHEDULE I IONICS SECTION 401(K) STOCK SAVINGS PLAN ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES DECEMBER 31, 1996 Face Amount, Shares or Current Description of Investment Rate Cost Value Cash and Cash Equivalents $ 537,248 $ 537,248 Ionics, Incorporated Common Stock 310,613 6,744,813 14,909,424 Fidelity Investments: Puritan Fund 89,867 1,453,418 1,549,304 Asset Manager Fund 22,680 346,486 373,535 Contrafund 59,558 2,165,766 2,510,380 BT Pyramid GIC Fund 868,421 868,421 Participant Loans (Rate of Interest 8.25% to 10.5%) -0- 644,327 Total Funds Invested $12,116,152 $21,392,639 The accompanying notes are an integral part of these supplemental schedules. -12- /19 ATTACHMENT TO FORM 5500 SCHEDULE II EIN: 04-2068530 PN: 003 IONICS SECTION 401(K) STOCK SAVINGS PLAN ITEM 27D - SCHEDULE OF REPORTABLE TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 1996 Current Value Of Asset On Purchase Selling Cost of Transaction Net Gain Description of Asset Price Price Asset Date (Loss) INDIVIDUAL TRANSACTIONS None SERIES OF TRANSACTIONS Purchase: Fidelity Investments 32,574 shares of Contrafund $1,270,821 Company Stock 49,772 shares of Ionics, Inc. Common Stock 2,229,171 Sale: Fidelity Investments 3,485 shares of Contrafund $ 140,313 $104,264 $ 140,313 $ 36,049 Company Stock 32,483 shares of Ionics, Inc. Common Stock 1,274,527 619,444 1,274,527 655,083 The accompanying notes are an integral part of these supplemental schedules. -13- /20 SIGNATURES Ionics Section 401(k) Stock Savings Plan. 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. IONICS SECTION 401(K) STOCK STOCK SAVINGS PLAN Date: June 20, 1997 By /s/Marianne Manzon Winsser Marianne Manzon Winsser Administrator -14- /21