SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 11-K (X) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO 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 1-9779 NIPSCO INDUSTRIES, INC. TAX DEFERRED SAVINGS PLAN (Full title of plan) NIPSCO INDUSTRIES, INC. (Issuer of the Securities) 5265 Hohman Avenue, Hammond, Indiana 46320-1775 (Address of Principle Executive Office) REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Tax Deferred Savings Plan Committee of NIPSCO Industries, Inc.: We have audited the accompanying statements of net assets available for benefits of the NIPSCO Industries, Inc. Tax Deferred Savings Plan (the Plan) as of December 31, 1996 and 1995, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements and the supplemental schedules referred to below are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements and supplemental 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 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, 1996 and 1995, and the changes in its net assets available for benefits for the years then ended, in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets held for investment purposes and reportable transactions are presented for purposes of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The Fund Information in the statements of net assets available for benefits and the statements of changes in net assets available for benefits is presented for purposes of additional analysis rather than to present the net assets available for benefits and changes in net assets available for benefits of each fund. The supplemental schedules and Fund Information 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/ Arthur Andersen LLP Chicago, Illinois June 20, 1997 NIPSCO Industries, Inc. Tax Deferred Savings Plan Statements of Net Assets Available for Benefits December 31, 1996 1995 ASSETS Investments, at fair value (Notes 1 and 2 and Schedule of Assets Held for Investment Purposes) Fixed Income Fund $ 4,857,198 $ 5,169,844 Company Common Stock Fund 18,038,820 17,442,889 Equity Fund 33,335,390 32,726,131 Interest Bearing Cash Fund 9,358,607 9,338,718 Growth and Income Fund 16,169,131 9,924,053 Overseas Fund 1,449,505 488,844 Total Investments $83,208,651 $75,090,479 Loans to Participants (Note 1) 1,283,772 1,141,965 Net Assets Available for Benefits $84,492,423 $76,232,444 <FN> The accompanying notes to financial statements are an integral part of these statements. </FN> NIPSCO Industries, Inc. Tax Deferred Savings Plan Statement of Changes in Net Assets Available for Benefits For the Year Ended December 31, 1996 Fixed Company Income Common Fund Stock Fund =========== ============ Net Assets Available for Benefits, Beginning of year $ 5,169,844 $ 17,442,889 ------------ ------------ Changes in Net Assets Available for Benefits: Contributions from participants (Note 1) 291,851 1,617,552 Contributions from employer (Note 1) - 177,523 Rollover from other qualified employer plans (Note 3) 23,025 20,244 Investment income 339,483 749,380 Net unrealized appreciation (depreciation) in fair value of investments (Note 2) (126,385) 689,523 Net realized gain (loss) on disposition of investments (Note 2) (34,262) (35,141) Benefits paid to participants (Note 1) (484,775) (1,232,313) Transfers of participants' balances, net (Note 1) (318,203) (1,473,126) Transfers to/from loan fund, net (Note 1) (14,491) (19,461) Interest on participant loans 3,822 30,987 Other 7,289 70,763 Total Changes in Net Assets Available for Benefits (312,646) 595,931 NET ASSETS AVAILABLE FOR BENEFITS, End of year $ 4,857,198 $ 18,038,820 ============ ============ Interest Equity Bearing Fund Cash Fund =========== ============ Net Assets Available for Benefits, Beginning of year $32,726,131 $ 9,338,718 ------------ ------------ Changes in Net Assets Available for Benefits: Contributions from participants (Note 1) 1,596,601 368,287 Contributions from employer (Note 1) - - Rollover from other qualified employer plans (Note 3) 38,861 - Investment income 5,315,787 457,509 Net unrealized appreciation (depreciation)in fair value of investments (Note 2) (1,097,684) - Net realized gain (loss) on disposition of investments (Note 2) (537,584) - Benefits paid to participants (Note 1) (1,700,598) (1,207,472) Transfers of participants' balances, net (Note 1) (3,044,347) 461,604 Transfers to/from loan fund, net (Note 1) (27,125) (81,378) Interest on participant loans 32,739 9,915 Other 32,609 11,424 Total Changes in Net Assets Available for Benefits 609,259 19,889 NET ASSETS AVAILABLE FOR BENEFITS, End of year $33,335,390 $ 9,358,607 =========== ============ Growth and Income Overseas Fund Fund =========== ============ Net Assets Available for Benefits, Beginning of year $ 9,924,053 $ 488,844 ------------ ------------ Changes in Net Assets Available for Benefits: Contributions from participants (Note 1) 765,799 118,198 Contributions from employer (Note 1) - - Rollover from other qualified employer plans (Note 3) 64,227 8,452 Investment income 735,364 86,704 Net unrealized appreciation (depreciation) in fair value of investments (Note 2) 1,558,663 26,648 Net realized gain (loss) on disposition of investments (Note 2) 116,649 10,598 Benefits paid to participants (Note 1) (602,811) (22,167) Transfers of participants' balances, net (Note 1) 3,644,322 729,750 Transfers to/from loan fund, net (Note 1) (46,995) 7,008 Interest on participant loans 9,668 2,470 Other 192 (7,000) Total Changes in Net Assets Available for Benefits 6,245,078 960,661 NET ASSETS AVAILABLE FOR BENEFITS, End of year $16,169,131 $ 1,449,505 =========== ============ Loan Fund Total =========== ============ Net Assets Available for Benefits, Beginning of year $ 1,141,965 $ 76,232,444 ------------ ------------ Changes in Net Assets Available for Benefits: Contributions from participants (Note 1) - 4,758,288 Contributions from employer (Note 1) - 177,523 Rollover from other qualified employer plans (Note 3) - 154,809 Investment income - 7,684,227 Net unrealized appreciation (depreciation) in fair value of investments (Note 2) - 1,050,765 Net realized gain (loss) on disposition of investments (Note 2) - (479,740) Benefits paid to participants (Note 1) (40,632) (5,290,768) Transfers of participants' balances, net (Note 1) - - Transfers to/from loan fund, net (Note 1) 182,442 - Interest on participant loans - 89,601 Other (3) 115,274 Total Changes in Net Assets Available for Benefits 141,807 8,259,979 NET ASSETS AVAILABLE FOR BENEFITS, End of year $ 1,283,772 $ 84,492,423 =========== ============ <FN> The accompanying notes to financial statements are an integral part of this statement. </FN> NIPSCO Industries, Inc. Tax Deferred Savings Plan Statement of Changes in Net Assets Available for Benefits For the Year Ended December 31, 1995 Fixed Company Income Common Fund Stock Fund =========== ============ Net Assets Available for Benefits, Beginning of year $ 4,580,571 $ 13,385,658 ------------ ------------ Changes in Net Assets Available for Benefits: Contributions from participants (Note 1) 300,670 1,433,905 Contributions from employer (Note 1) - 156,441 Rollover from other qualified employer plans (Note 3) 2,721 - Investment income 317,238 699,540 Net unrealized appreciation in fair value of investments (Note 2) 254,401 3,632,258 Net realized gain on disposition of investments (Note 2) 29,924 228,102 Benefits paid to participants (Note 1) (374,853) (1,131,688) Transfers of participants' balances, net (Note 1) 52,344 (1,081,576) Transfers to/from loan fund, net (Note 1) (15,533) 90,768 Interest on participant loans 3,981 23,019 Other 18,380 6,462 Total Changes in Net Assets Available for Benefits 589,273 4,057,231 NET ASSETS AVAILABLE FOR BENEFITS, End of year $ 5,169,844 $ 17,442,889 =========== ============= Interest Equity Bearing Fund Cash Fund =========== ============ Net Assets Available for Benefits, Beginning of year $24,931,083 $ 8,829,311 ------------ ------------ Changes in Net Assets Available for Benefits: Contributions from participants (Note 1) 1,552,702 431,656 Contributions from employer (Note 1) - - Rollover from other qualified employer plans (Note 3) 24,697 - Investment income 1,894,761 531,826 Net unrealized appreciation in fair value of investments (Note 2) 6,204,549 - Net realized gain on disposition of investments (Note 2) 802,354 - Benefits paid to participants (Note 1) (1,525,065) (1,253,893) Transfers of participants' balances, net (Note 1) (1,219,014) 816,318 Transfers to/from loan fund, net (Note 1) (19,835) (33,008) Interest on participant loans 35,153 14,059 Other 44,746 2,449 Total Changes in Net Assets Available for Benefits 7,795,048 509,407 NET ASSETS AVAILABLE FOR BENEFITS, End of year $32,726,131 $ 9,338,718 =========== ============ Growth and Income Overseas Fund Fund =========== ============ Net Assets Available for Benefits, Beginning of year $ 6,290,359 $ - Changes in Net Assets Available for Benefits: Contributions from participants (Note 1) 606,204 59,366 Contributions from employer (Note 1) - - Rollover from other qualified employer plans (Note 3) 22,208 9,538 Investment income 470,172 10,612 Net unrealized appreciation in fair value of investments (Note 2) 1,796,366 24,093 Net realized gain on disposition of investments (Note 2) 179,694 1,502 Benefits paid to participants (Note 1) (530,789) - Transfers of participants' balances, net (Note 1) 1,063,211 368,717 Transfers to/from loan fund, net (Note 1) (7,971) 13,415 Interest on participant loans 6,510 2,121 Other 28,089 (520) Total Changes in Net Assets Available for Benefits 3,633,694 488,844 NET ASSETS AVAILABLE FOR BENEFITS, End of year $ 9,924,053 $ 488,844 =========== ============ Loan Fund Total =========== ============ Net Assets Available for Benefits, Beginning of year $ 1,227,254 $ 59,244,236 ------------ ------------ Changes in Net Assets Available for Benefits: Contributions from participants (Note 1) - 4,384,503 Contributions from employer (Note 1) - 156,441 Rollover from other qualified employer plans (Note 3) - 59,164 Investment income - 3,924,149 Net unrealized appreciation in fair value of investments (Note 2) - 11,911,667 Net realized gain on disposition of investments (Note 2) - 1,241,576 Benefits paid to participants (Note 1) (64,397) (4,880,685) Transfers of participants' balances, net (Note 1) - - Transfers to/from loan fund, net (Note 1) (27,836) - Interest on participant loans - 84,843 Other 6,944 106,550 Total Changes in Net Assets Available for Benefits (85,289) 16,988,208 NET ASSETS AVAILABLE FOR BENEFITS, End of year $ 1,141,965 $ 76,232,444 =========== ============ <FN> The accompanying notes to financial statements are an integral part of this statement. </FN> NIPSCO Industries, Inc. Tax Deferred Savings Plan Notes to Financial Statements (1) Description of the Plan- The following brief description of the NIPSCO Industries, Inc. Tax Deferred Savings Plan (the Plan) is provided for general information purposes only. Participants should refer to the Plan document for a more complete description of the Plan. (a) General- The Plan was established effective May 1, 1984. It is a defined contribution plan subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). The Plan is available to all active non-bargaining unit employees of NIPSCO Industries, Inc. (the Company) and its subsidiaries who adopt the Plan, who have been employed by the Company or any adopting subsidiary for at least six consecutive months. There were 1,566 participants in the Plan as of December 31, 1996. (b) Plan Administration- The Company serves as administrator and sponsor of the Plan as those terms are used in ERISA. The Company maintains an administrative committee appointed by the Board of Directors which has the responsibility to assist the Company in administering the Plan. The Company has entered into a trust agreement dated October 10, 1987 with Fidelity Management Trust Company (the Trustee) of Boston, Massachusetts, pursuant to which the Trustee holds the Plan's assets and executes investment transactions. (c) Investment Funds- There are six investment alternatives available for the investment of contributions to the Plan. The interest bearing cash fund which is invested in Fidelity's Retirement Money Market Fund, offers a fixed interest return for a stated period of time. The equity fund is a pooled account which invests in Fidelity's Magellan Fund and seeks capital appreciation by investing primarily in common stock and securities convertible into common stock. The fixed income fund invests in corporate and government bonds through Fidelity's Intermediate Bond Fund. The Company common stock fund invests solely in common shares of NIPSCO Industries, Inc. The overseas fund is a pooled account which invests in Fidelity's Overseas Fund. The growth and Income fund is a pooled account which invests in Fidelity's Growth and Income Fund. Participants may invest their contributions to the Plan in any one or more of the investment funds and may request the transfer of their contributions among the funds through direct communication with the Trustee on a daily basis, excluding the Company common stock fund, for which transfers can be made on a quarterly basis. Company matching contributions must be invested in the Company common stock fund. (d) Employee contributions- A participant may elect to enter into a written salary reduction agreement with the Company or the applicable subsidiary on a before-tax and after-tax basis. The terms of any such agreement shall provide that the participant consents to a reduction in salary from the Company, or the applicable subsidiary in whole dollar or percentage-based amounts not less than $10 or 1% of gross compensation per pay period, respectively, or in lump sum amounts from unused vacation pay, provided that any after-tax reduction does not exceed 10% of gross compensation and the participant's total reduction does not exceed 20% of gross compensation in accordance with the Plan's provisions. Individual tax deferred contributions were limited to $9500 in 1996. (e) Employer Matching Contributions A participant will receive a matching contribution from the Company or the applicable subsidiary equal to 1/9 th of his or her pre-tax contribution invested in the Company common stock fund. Matching contributions must remain invested in the Company common stock fund until final distribution. Matching contributions are not available for a hardship withdrawal or a loan but may be used to determine the amount available for a loan. (f) Payment of Benefits- Except for certain withdrawal rights under the Plan, distribution of Plan benefits is made commencing no earlier than the participant's retirement on or after age 65, disability, death or other termination of employment. All distributions from a participant's account shall be made in a lump sum amount of cash, except that a participant or beneficiary may elect a distribution from the portion of his or her account invested in the Company common stock fund to be in whole shares of common stock, with cash being paid for the remaining fractional share. The payment of benefits is to begin as soon as practible after termination. For account balances less than or equal to $3,500, the amount will be paid in a lump sum as soon as practicable, in full satisfaction and release of all further rights of the participant to receive any benefits under the Plan. For balances greater than $3,500, no payments can begin at any time prior to the first to occur of the participant's 65th birthday or death, without the participant's written consent. Participants who do not consent to a distribution of benefits shall be entitled to request a distribution of the entire balance, at any time prior to the first to occur of the participant's 65th birthday and the date of the participant's death by written instrument delivered to the administrative committee at least 120 days prior to the valuation date as to which the distribution is to be determined. Certain withdrawals can be made prior to termination of employment in the event of financial hardship or after age 59 1/2. After-tax contributions and rollover contributions can be withdrawn at any time. (g) Vesting- The interest of a participant or a former participant in his or her tax deferred and after-tax contribution account, including the Company matching portion, shall at all times be non-forfeitable and fully vested. (h) Loans to Participants- Loan provisions in the Plan enable participants to borrow against the tax deferred balances in their accounts in accordance with the following guidelines: Participant's Maximum Amount Account Balance of Loan $2,000 - $100,000 50% of account balance, not less than $1,000 $100,000 and over $50,000 No loans may be made from after-tax contribution accounts. Applicants must have participated in the Plan for at least one year to be eligible for a loan. The repayment period may not exceed five years unless the loan is used for the participant's residence, subject to certain restrictions. The interest rate is based on the prevailing rate charged by a commercial lender, subject to review periodically by the administrative committee. The range of interest rates on loans outstanding at December 31, 1996 is 6.0% to 11.0%. (i) Administrative Expenses - Administrative expenses of the Plan are paid by the Company or the applicable subsidiary. (2) Summary of Significant Accounting Policies (a) Method of Accounting - The accompanying financial statements of the Plan have been prepared on the accrual basis. (b) Investment Valuation - The assets invested in the Company common stock fund, the equity fund, the growth and income fund, the fixed income fund and the overseas fund are stated at fair value. The interest bearing cash fund is valued at cost, which approximates fair value. Realized and unrealized gains and losses are calculated as the difference between fair value at the beginning of the year, or date of purchase if subsequent to the beginning of the year, and fair value at date of sale or year-end, respectively. (c) Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management 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 expenses during the reporting period. Actual results could differ from those estimates. (3) Rollovers from Other Qualified Employer Plans The Plan allows for employees to transfer other qualified employer retirement plan assets to the Plan. These amounts are reflected as Rollovers from other qualified employer plans in the accompanying Statements of Changes in Net Assets Available for Benefits. (4) Income Tax Status The Internal Revenue Service has issued a determination dated June 20, 1996, stating that the Plan is qualified under applicable sections of the Internal Revenue Code (IRC). The Plan has been amended since receiving the determination letter. However, the Plan administrator and the Plan's tax counsel believe that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC. (5) Plan Termination Although it has not expressed any intent to do so, the Company reserves the right under the Plan agreement to terminate the Plan at any time, subject to the provisions of ERISA. In the event of Plan termination, the rights of each particpant to the amounts then credited to his or her account shall continue to be non-forfeitable. (6) Plan Amendment The Plan was amended effective May 1,1996 to entitle part-time employees to participate in the Plan. Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the the Vice President of Human Resources, who administers the Plan, has duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized. NIPSCO Industries, Inc. Tax Deferred Savings Plan (Name of Plan) BY: /s/ Owen Johnson Vice President of Human Resources NIPSCO Industries, Inc. Date: June 30, 1997 NIPSCO Industries, Inc. Tax Deferred Savings Plan Question 27(a) - Schedule of Assets Held for Investment Purposes as of December 31, 1996 Plan 002 Employer I.D. #35-1719974 Share Fair Investments Balance Price Cost Value Fidelity Intermediate Bond Fund (b) $ 481,865 $ 10.08 $ 4,915,264 $ 4,857,198 NIPSCO Industries, Inc. Common Shares (a)(b) 455,238 39.62 9,561,123 18,038,820 Fidelity Magellan Fund (b) 413,334 80.65 27,082,385 33,335,390 Retirement Money Market Fund (b) 9,358,607 1.00 9,358,607 9,358,607 Fidelity Growth and Income Fund (b) 526,168 30.73 12,832,115 16,169,131 Fidelity Overseas Fund (b) 47,001 30.84 1,397,395 1,449,505 Total Investments $ 65,146,889 $83,208,651 Loans to Participants (c) - 1,283,772 Total Assets Held for Investment $ 65,146,889 $84,492,423 <FN> (a) Excludes cost of shares transferred from the NIPSCO Industries, Inc. Employee Stock Purchase Plan in 1989. (b) Party-in-interest transactions. (c) The range of interest rates on loans outstanding at December 31, 1996 is 11% - highest and 6% - lowest. The accompanying notes to financial statements are an integral part of this schedule. </FN> NIPSCO Industries, Inc. Tax Deferred Savings Plan Question 27(d) - Schedule of Reportable Transactions (a) For the Year Ended December 31, 1996 Plan 002 Employer I.D. #35-1719974 Description of Number of Purchase Selling Cost of Realized Transactions Transactions Price Price Asset Gain NIPSCO Industries, Inc. Common Shares (b) Purchases 92 $2,872,337 $ - $2,872,337 $ - Sales 39 - 2,930,789 1,735,927 1,194,862 Fidelity Magellan Fund (b) Purchases 181 8,290,611 - 8,290,611 - Sales 126 - 6,046,084 5,190,160 855,924 Retirement Money Market Fund (b) Purchases 130 3,783,462 - 3,783,462 - Sales 140 - 3,763,572 3,763,572 - Fidelity Growth and Income Fund (b) Purchases 177 6,504,215 - 6,504,215 - Sales 60 - 1,934,449 1,681,856 252,593 <FN> (a) This schedule includes series of transactions involving securities of the same issue which, in the aggregate, amount to more than 5% of the current value of Plan assets at the beginning of the Plan year. (b) Party-in-Interest transactions. The accompanying notes to financial statements are an integral part of this schedule. </FN>