ISCO, INC. RETIREMENT PLU$ PLAN
Financial Statements And Supplemental
Schedules For The Years Ended
July 31, 1996 And 1995
And Independent Auditors' Report
39
ISCO, INC. RETIREMENT PLU$ PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
AND INDEPENDENT AUDITORS' REPORT
TABLE OF CONTENTS
Page
FINANCIAL STATEMENTS:
Independent Auditors' Report 41
Statements of Net Assets Available for Benefits 42
Statements of Changes in Net Assets Available for Benefits 43
Notes to Financial Statements 44
SUPPLEMENTAL SCHEDULES:
Item 27a - Schedule of Assets Held for Investment
Purposes - July 31, 1996 50
Item 27d - Schedule of Reportable Transactions -
Year Ended July 31, 1996 51
Schedules not filed herein are omitted because of
the absence of the conditions under which they are
required.
40
INDEPENDENT AUDITORS' REPORT
Plan Committee
Isco, Inc. Retirement Plu$ Plan
Lincoln, Nebraska
We have audited the accompanying statements of net assets available for benefits
of the Isco, Inc. Retirement Plu$ Plan as of July 31, 1996 and 1995 and the
related statements of changes in net assets available for benefits for the years
then ended. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on the financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit also 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, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Isco, Inc. Retirement
Plu$ Plan as of July 31, 1996 and 1995, and the changes in net assets available
for benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of (1) assets
held for investment purposes as of July 31, 1996, and (2) reportable
transactions for the year ended July 31, 1996, are presented for the purpose of
additional analysis and are not a required part of the basic financial
statements, but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. The supplemental information by fund in
the statements of net assets available for benefits and the statements of
changes in net assets available for benefits is presented for the purpose of
additional analysis rather than to present the net assets available for benefits
and changes in net assets available for benefits of the individual funds. The
supplemental schedules and supplemental information by fund is the
responsibility of the Plan's management. Such supplemental schedules and
supplemental information by fund have been subjected to the auditing procedures
applied in our audit of the basic 1996 financial statements and, in our opinion,
are fairly stated in all material respects when considered in relation to the
basic financial statements taken as a whole.
Deloitte & Touche LLP
Lincoln, Nebraska
October 9, 1996
41
ISCO, INC. RETIREMENT PLU$ PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
(amounts in thousands)
July 31, 1996 July 31, 1995
-------------------------------- -------------------------------
Supplemental Information Supplemental Information
by Fund by Fund
------------------------ -----------------------
Employer Participant Employer Participant
Directed Directed Total Directed Directed Total
-------- ----------- ------- -------- ----------- -------
Investments, at fair
value as deter-
mined by quoted
market prices
(Note C):
Money market funds $271 $ 1,687 $ 1,958 $ -- $ -- $ --
Mutual funds -- 12,706 12,706 226 13,388 13,614
Isco, Inc. common
stock fund -- 643 643 -- 741 741
Investments, at
estimated fair
value:
Other investments 88 -- 88 117 -- 117
---- ------- ------- ----- ------- -------
359 15,036 15,395 343 14,129 14,472
Participant loans -- 513 513 -- 442 442
---- ------- ------- ----- ------- -------
Total investments 359 15,549 15,908 343 14,571 14,914
Employer contributions
receivable -- 97 97 -- 383 383
Accrued income 1 -- 1 6 -- 6
---- ------- ------- ----- ------- -------
Net assets available
for benefits $360 $15,646 $16,006 $349 $14,954 $15,303
---- ------- ------- ----- ------- -------
---- ------- ------- ----- ------- -------
The accompanying notes are an integral part of the financial statements
42
ISCO, INC. RETIREMENT PLU$ PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
(amounts in thousands)
July 31, 1996 July 31, 1995
-------------------------------- --------------------------------
Supplemental Information Supplemental Information
by Fund by Fund
---------------------- -----------------------
Employer Participant Employer Participant
Directed Directed Total Directed Directed Total
-------- ----------- ------- -------- ----------- -------
Investment income (Note C and G):
Dividends, interest, and other income $ 34 $ 1,168 $ 1,202 $ 26 $ 719 $ 745
Net realized and unrealized
appreciation(depreciation) in fair
value of investments (4) (520) (524) -- 1,509 1,509
---- ------- ------- ------ ------- -------
Net investment income 30 648 678 26 2,228 2,254
---- ------- ------- ------ ------- -------
Contributions:
Employer annual profit sharing -- 97 97 -- 383 383
Employer 401(k) matching -- 148 148 -- 140 140
Participant -- 774 774 -- 730 730
---- ------- ------- ------ ------- -------
-- 1,019 1,019 -- 1,253 1,253
---- ------- ------- ------ ------- -------
Total additions 30 1,667 1,697 26 3,481 3,507
Benefits paid (19) (975) (994) (15) (472) (487)
Transfers -- -- -- (804) 804 --
---- ------- ------- ------ ------- -------
Increase (decrease)in net assets
available for benefits 11 692 703 (793) 3,813 3,020
Net assets available for benefits:
Beginning of year 349 14,954 15,303 1,142 11,141 12,283
---- ------- ------- ------ ------- -------
End of year $360 $15,646 $16,006 $ 349 $14,954 $15,303
---- ------- ------- ------ ------- -------
---- ------- ------- ------ ------- -------
The accompanying notes are an integral part of the financial statements
43
ISCO, INC. RETIREMENT PLU$ PLAN
NOTES TO FINANCIAL STATEMENTS
Years ended July 31, 1996 and 1995
(Columnar amounts in thousands, except share data)
A. DESCRIPTION OF PLAN
General - The following brief description of the Isco, Inc. Retirement
Plu$ Plan (the Plan) is provided for general information purposes only.
Participants should refer to the Plan document for more complete
information. The Plan was established effective August 1, 1972 to
provide retirement benefits for the employees of Isco, Inc. (the
Company). The Plan was last amended effective August 1, 1995. Effective
August 1, 1987, a 401(k) salary reduction option was incorporated into
the Plan. Employees are eligible for participation after they have
completed one year of service and are at least 21 years of age. A year
of service is defined as the accumulation of 1,000 hours of credited
service during a one-year period beginning on the employment date.
Participant contributions, employer 401(k) matching contributions, and
employer annual profit sharing contributions, are invested at Twentieth
Century Investors under the direction of the plan participants.
Funding - Contributions to the Plan are provided from the following
sources:
Employer Annual Profit Sharing Contribution (Participant Directed) - The
Employer is required to contribute an amount equal to the lesser of 7% of
the current net profit of the Company or the maximum amount allowed by
the Internal Revenue Code. The contributed amount received by each
participant is based on their percentage of total eligible compensation.
Participant Contributions (Participant Directed) - Plan participants may
elect to reduce their compensation by a maximum of 12%, subject to IRS
limitations. The Employer then contributes the amount of reduction in
compensation to the Plan on behalf of each participant.
Employer 401(k) Matching Contribution (Participant Directed) - The
Employer is required to match 20% of the contribution made on behalf of
each participant electing salary reductions up to a maximum of 10% of the
participant's eligible compensation.
Participant Accounts - Each participant's account is credited with the
participant's contribution, the Company's matching contribution and the
allocated portion of: the Company's annual contribution, and the
forfeited portion of terminated participants' non-vested accounts. Any
401(k) forfeitures are allocated, based on a participant's contributions
to the 401(k) plan during the year. The Company's annual contribution
and forfeitures are allocated to each participant's account based on the
percentage of the participant's eligible compensation for the plan year
to the total compensation of all eligible participants for the plan year.
Earnings are credited directly to each investment option in which the
participant had an investment on the record date of the dividend or
interest distribution.
44
Vesting - Participant contributions (i.e. employee salary reduction
amounts) and participant rollover contributions are immediately fully
vested and nonforfeitable. Employer profit sharing contributions and the
Employer 401(k) matching contributions vest 20% upon completion of three
years of credited service, increasing 20% per year until fully vested
upon completion of seven years of credited service.
Plan participants are eligible for normal retirement at age 65 but may
elect to retire at a later date. Upon attainment of 65 years of age,
death, or determination of disability, a participant becomes 100% vested
regardless of the number of credited years of service completed.
Plan Expenses - As an additional benefit to the participants, the
Employer, without reimbursement, pays for all costs required to
administer the Plan. These costs are not reflected in the financial
statements.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Valuation of Investments - Investments are stated at fair value. Fair
value of marketable securities is determined by reference to the closing
quoted price by the exchange on which the security is listed or the
closing net asset value as reported by the mutual fund. Participant
loans are stated at their outstanding principal balance. The amounts
shown in Note C for securities that do not have a quoted market price
represent fair value estimated by an independent third party.
Investment transactions are recognized on a settlement date basis. The
net realized and unrealized appreciation (depreciation) of investments is
recognized in the statements of changes in net assets available for
benefits. The fair value at the beginning of the plan year, or the
purchased cost if acquired during the year, is used in determining
realized and unrealized gains and losses on the sale of each investment.
Employer Directed - Employer directed funds are invested in the
Restricted Fund, which is managed by the employer. Assets in the
Restricted Fund at July 31, 1996 include: Balcor Pension Investors II
and III, Bankers Trust Stable Value Government Trust, and Chase
Manhattan Bank Pooled Investment. Transfers from the Restricted Fund to
the Unrestricted Fund are directed by the Plan Committee.
Participant Directed - Participant directed contributions may be invested
in one or more of seven funds. A summary description of each investment
alternative follows:
Bankers Trust Stable Value Government Trust Fund - A fund which seeks to
provide current income while maintaining a stable share price. It is
managed by Bankers Trust Company Investment Management Group.
Twentieth Century Premium Managed Bond Fund - A fund which seeks a high
level of income from a portfolio of longer-term bonds and other debt
obligations. The fund pays a reduced management fee.
Twentieth Century Balanced Investors Fund - A fund which seeks capital
growth and current income by investing in equity securities with
prospects for growth and in investment grade bonds and other fixed income
securities.
45
Twentieth Century Select Investors Fund - A fund comprised primarily of
income-producing equity securities of larger companies possessing
potential for appreciation.
Twentieth Century Ultra Investors Fund - A fund comprised primarily of
equity securities of medium and smaller companies with the potential for
appreciation.
Twentieth Century International Equity Fund - A fund which seeks capital
growth by investing primarily in an internationally diversified portfolio
of common stocks.
Isco, Inc. Common Stock Fund - A fund invested primarily in Isco, Inc.
common stock. Isco, Inc. is a related party and sponsor of the Plan.
Benefits Payable - The Plan's policy is to record benefit payments upon
distribution to the participants. Benefits payable to retired and
terminated participants were $830,203 and $34,039 at July 31, 1996 and
1995, respectively.
Contributions - Employer profit sharing contributions are computed as of
the end of the Employer's fiscal year and are recorded by the Plan in the
corresponding period, but allocated to participants' accounts in the plan
quarter in which the profit sharing contribution is made to the Plan.
Participant contributions are recorded in the period in which the bi-
weekly payroll deductions are made. The Employer 401(k) matching
contributions are also recorded in the period that the payroll deductions
are made.
46
C. INVESTMENTS
The following schedule presents the fair values of investments.
July 31, 1996
- ------------------------------------------------------------------------
Number of
Shares/ Fair
Units Value
--------- -------
Investments at fair value as determined
by quoted market price:
Money Market:
Bankers Trust Stable Value Government Trust Fund 1,945,541 $ 1,946
Chase Manahattan Bank Pooled Investment 12,036 12
Mutual Funds:
Twentieth Century - International Equity Fund 129,942 1,034
Twentieth Century - Ultra Investors Fund 118,544 3,066
Twentieth Century - Select Investors Fund 139,150 5,066
Twentieth Century - Balanced Investors Fund 155,797 2,649
Twentieth Century - Premium Managed Bond Fund 91,224 891
Other Investments:
Isco, Inc. Common Stock Fund 66,354 643
Investments at estimated fair value:
Balcor Pension Investors II 101 43
Balcor Pension Investors III 202 45
-------
Total Investments at Fair Value $15,395
-------
-------
July 31, 1995
- ------------------------------------------------------------------------
Number of
Shares/ Fair
Units Value
--------- -------
Investments at fair value as determined
by quoted market price:
Money Market:
Bankers Trust Stable Value Government Trust Fund 1,577,744 $ 1,578
Mutual Funds:
Twentieth Century - International Equity Fund 148,010 1,109
Twentieth Century - Ultra Investors Fund 101,631 2,701
Twentieth Century - Select Investors Fund 119,573 4,772
Twentieth Century - Balanced Investors Fund 148,411 2,594
Twentieth Century - Premium Managed Bond Fund 87,278 860
Other Investments:
Isco, Inc. Common Stock Fund 69,472 741
Investments at estimated fair value:
Balcor Pension Investors II 101 47
Balcor Pension Investors III 202 70
-------
Total Investments at Fair Value $14,472
-------
-------
47
C. INVESTMENTS (continued)
During the years ended July 31, 1996 and 1995, the Plan's investments
appreciated(depreciated) by $(523,908) and $1,509,435 respectively, as
follows:
Net Realized and Unrealized Appreciation (Depreciation) in Fair Value
Year Ended July 31,
-------------------
1996 1995
------ ------
Investments at fair value as determined by
quoted market price:
Mutual Funds:
Twentieth Century - International Equity Fund $ 61 $ 6
Twentieth Century - Ultra Investors Fund (42) 682
Twentieth Century - Select Investors Fund (406) 402
Twentieth Century - Balanced Investors Fund (70) 294
Twentieth Century - Premium Managed Bond Fund (8) 30
Other Investments:
Isco, Inc. Common Stock Fund (55) 97
Investments at estimated fair value:
Other (4) (2)
----- ------
$(524) $1,509
----- ------
----- ------
D. PLAN TERMINATION
Although the Company has not expressed any intent to terminate the Plan,
it may do so at any time by giving 30 days notice to the Plan Committee,
the Plan Administrator, and the Trustee. In the event of such
termination, Plan assets would be valued and participants' accounts would
be adjusted to reflect the allocation of net gains and losses of the
underlying investments. At that time, participants' accounts would
become fully vested and nonforfeitable.
E. FEDERAL INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue
Service dated September 7, 1995, which states that the Plan, as amended
June 17, 1994, meets the requirements of Section 401(a) of the Internal
Revenue Code and is, therefore, exempt from Federal income tax under
Section 501(a) of the Code. The Plan administrator believes that the
Plan is in compliance with current regulations. Therefore, no provision
for income taxes is provided in the financial statements of the Plan.
Plan income, participant pretax contributions, and employer contributions
represent taxable income to the participating employees at the time of
distribution.
48
F. FUND INFORMATION
Participant contributions, benefit payments, and dividends, interest and
other income by fund are as follows for the years ended July 31, 1996 and
1995.
1996 1995
------ ----
Participant contributions:
Stable Value Government Trust $ 68 $ 65
International Equity Fund 87 89
Ultra Investors Fund 235 198
Select Investors Fund 206 205
Balanced Investors Fund 106 100
Premium Managed Bond Fund 30 30
Isco, Inc. Common Stock Fund 42 43
------ ----
Total $ 774 $730
------ ----
------ ----
Benefits paid:
Stable Value Government Trust $ 128 $ 7
International Equity Fund 53 22
Ultra Investors Fund 247 49
Select Investors Fund 237 156
Balanced Investors Fund 243 151
Premium Managed Bond Fund 21 50
Isco, Inc. Common Stock Fund 19 26
Participant loans 27 11
------ ----
Total $ 975 $472
------ ----
------ ----
Dividends, interest, and other income:
Stable Value Government Trust $ 86 $ 72
International Equity Fund 1 41
Ultra Investors Fund 145 59
Select Investors Fund 600 346
Balanced Investors Fund 226 107
Premium Managed Bond Fund 55 50
Isco, Inc. Common Stock Fund 13 13
Participant loans 42 31
------ ----
Total $1,168 $719
------ ----
------ ----
49
ISCO, INC. RETIREMENT PLU$ PLAN
PN 001
EIN #47-0461807
(amounts in thousands, except per share/unit data)
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
July 31, 1996
- ---------------------------------------------------------------------------------------------
Column B Column C Column D Column E
- -------- -------- -------- --------
Description of
investment including
collateral, rate of
Identity of issue, borrower, lessor or interest, maturity date, Current
similar party par or maturity value Cost Value
- -------------------------------------------- ------------------------ ------- --------
Money Market:
- -------------
*Bankers Trust Stable Value Government
Trust Fund 1,945,541 shares $1,944 $ 1,946
*Chase Manhattan Bank Pooled Investment 12,036 shares 12 12
Mutual Funds:
*Twentieth Century Select Investors Fund 139,150 shares 5,472 5,066
*Twentieth Century Balanced Investors Fund 155,797 shares 2,439 2,649
*Twentieth Century Premium Managed Bond 91,224 shares 911 891
*Twentieth Century Ultra Investors Fund 118,544 shares 2,690 3,066
*Twentieth Century International
Equity Fund 129,942 shares 953 1,034
Other Investments:
- ------------------
*Isco, Inc. Common Stock Fund 66,354 shares 721 643
*Participant loans Interest rates ranging
from 7.25% - 10.50%
maturing August 1996
- June 2001 -- 513
Balcor Pension Investors II 101 units 61 43
Balcor Pension Investors III 202 units 60 45
-------
*Party-in-interest $15,908
-----------------
-----------------
50
ISCO, INC. RETIREMENT PLU$ PLAN
PN 001
EIN #47-0461807
(amounts in thousands)
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
SINGLE TRANSACTIONS
FOR THE YEAR ENDED JULY 31, 1996
Column A Column B Column C Column D Column G Column H Column I
- ---------------- ----------------------------------- ---------- ---------- ---------- --------------- ---------
Current Value
Identity of Purchase Selling Cost of on Transaction Net Gain
Party Involved Description of Asset Price Price Asset Date or (Loss)
- ---------------- ----------------------------------- ---------- ---------- ---------- --------------- ---------
*Bankers Trust Stable Value Government Trust Fund $789 $ -- $789 $789 $ --
*Party-in-interest
51
ISCO, INC. RETIREMENT PLU$ PLAN
PN 001
EIN #47-0461807
(amounts in thousands, except number of transactions data)
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
SERIES OF TRANSACTIONS
FOR THE YEAR ENDED JULY 31, 1996
Column A Column B Column C Column D Column E Column F
- ------------------ ------------------------------- -------------- ------------- -------------- -----------
Total Dollar
Identity of Number of Value of Total Dollar Net Gain
Party Involved Description of Asset Transactions Purchases Value of Sales or (Loss)
- ------------------ ------------------------------- -------------- ------------- -------------- -----------
*Twentieth Century Select Investors Fund 71 $1,522 $ $
*Twentieth Century Select Investors Fund 65 822 (13)
*Twentieth Century Balanced Investors Fund 45 469
*Twentieth Century Balanced Investors Fund 60 345 41
*Twentieth Century Ultra Investors Fund 85 1,835
*Twentieth Century Ultra Investors Fund 62 1,428 155
*Bankers Trust Stable Value Government Trust Fund 108 2,807
*Bankers Trust Stable Value Government Trust Fund 59 2,439 --
*Party-in-interest
52