EXHIBIT 99
ISCO, INC. RETIREMENT PLU$ PLAN
Financial Statements And Supplemental
Schedules For The Years Ended
July 31, 1999 and 1998
And Independent Auditors' Report
42
ISCO, INC. RETIREMENT PLU$ PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
AND INDEPENDENT AUDITORS' REPORT
TABLE OF CONTENTS
Page
FINANCIAL STATEMENTS:
Independent Auditors' Report 44
Statements of Net Assets Available for Benefits 45
Statements of Changes in Net Assets Available for Benefits 46
Notes to Financial Statements 47
SUPPLEMENTAL SCHEDULES:
Item 27a - Schedule of Assets Held for Investment Purposes - July 31, 1999 53
Item 27d - Schedule of Reportable Transactions - Year Ended July 31, 1999 54
Schedules not filed herein are omitted because of the absence of the
conditions under which they are required.
43
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, 1999 and 1998 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 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, 1999 and 1998, 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, 1999, and (2) reportable
transactions for the year ended July 31, 1999, 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 employer
directed and participant directed 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 employer directed and participant directed fund is the
responsibility of the Plan's management. Such supplemental schedules and
supplemental information by employer directed and participant directed fund have
been subjected to the auditing procedures applied in our audit of the basic
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 1, 1999
44
ISCO, INC. RETIREMENT PLU$ PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
(amounts in thousands)
July 31, 1999 July 31, 1998
---------------------------------- -------------------------
Supplemental Supplemental
Information by Fund Information by Fund
------------------------ -------------------------
Employer Participant Employer Participant
Directed Directed Total Directed Directed Total
Investments, at fair value as determined
by quoted market prices (Note C):
Money market funds $ 132 $ 2,563 $ 2,695 $228 $ 1,864 $ 2,092
Mutual funds -- 24,201 24,201 -- 20,845 20,845
Bank collective funds -- -- -- -- 428 428
Isco, Inc. common stock fund -- 464 464 -- 442 442
Investments, at estimated fair
value (Note C):
Other investments 13 -- 13 13 -- 13
--------- -------- --------- ----- --------- -------
145 27,228 27,373 241 23,579 23,820
Participant loans -- 450 450 -- 501 501
--------- -------- --------- ----- --------- -------
Total investments 145 27,678 27,823 241 24,080 24,321
--------- -------- --------- ----- --------- -------
Net assets available for benefits $ 145 $27,678 $27,823 $241 $24,080 $24,321
--------- -------- --------- ----- --------- -------
--------- -------- --------- ----- --------- -------
The accompanying notes are an integral part of the financial statements
45
ISCO, INC. RETIREMENT PLU$ PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
(amounts in thousands)
July 31, 1999 July 31, 1998
---------------------------------- ------------------------------------
Supplemental Supplemental
Information by Fund Information by Fund
------------------------ ---------------------------
Employer Participant Employer Participant
Directed Directed Total Directed Directed Total
----------- ----------- ----- --------- ----------- -----
Investment income (Notes C):
Dividends, interest,
and other income $ 11 $ 2,874 $ 2,885 $ 29 $ 2,893 $ 2,922
Net realized and unrealized
appreciation (depreciation) in
fair value of investments -- 581 581 (28) 340 312
----- -------- -------- ------ -------- --------
Net investment income 11 3,455 3,466 1 3,233 3,234
----- -------- -------- ------ -------- --------
Contributions:
Employer annual profit sharing -- -- -- -- -- --
Employer 401(k) matching -- 163 163 -- 152 152
Participant -- 857 857 -- 802 802
----- -------- -------- ------ -------- --------
-- 1,020 1,020 -- 954 954
----- -------- -------- ------ -------- --------
Total additions 11 4,475 4,486 1 4,187 4,188
Benefits paid (6) (978) (984) (6) (792) (798)
Transfers (101) 101 -- -- -- --
Increase (decrease) in net assets ------ -------- -------- ------ -------- --------
available for benefits (96) 3,598 3,502 (5) 3,395 3,390
Net assets available for benefits:
Beginning of year 241 24,080 24,321 246 20,685 20,931
----- -------- -------- ------ -------- --------
End of year $ 145 $ 27,678 $ 27,823 $ 241 $ 24,080 $ 24,321
----- -------- -------- ------ -------- --------
----- -------- -------- ------ -------- --------
The accompanying notes are an integral part of the financial statements
46
ISCO, INC. RETIREMENT PLU$ PLAN
NOTES TO FINANCIAL STATEMENTS
Years ended July 31, 1999 and 1998
(Columnar amounts in thousands, except share/unit data)
NOTE 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 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 American Century
Investments under the direction of the plan participants.
CONTRIBUTIONS. 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 Employer's matching contribution and the
allocated portion of the Employer's annual profit sharing contribution and the
forfeited portion of terminated participants' non-vested account balances. Any
401(k) forfeitures are allocated, based on a participant's contributions to the
401(k) plan during the plan year. The Employer's annual profit sharing
contribution and related 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.
VESTING. Participant contributions (i.e. employee salary reduction amounts) 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.
PAYMENT OF BENEFITS. On termination of service due to death, disability or
retirement, a participant with a vested balance greater than $5,000 may elect to
receive either a lump sum equal to the participant's vested interest in his or
her account, or monthly installments. A participant with a vested balance less
than $5,000 will receive a lump sum payment equal to the participant's vested
account balance.
47
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. The employer pays for all costs to administer the plan with the
exception of loan origination and loan maintenance fees. This provides an
additional benefit to the participant. The administration costs are not
reflected in the Plan's financial statements.
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, 1999
and 1998 include: Balcor Pension Investors II and III, Benham Stable Value
Government Fund, and Scout Prime Pooled Investment. Transfers from the
Restricted Fund to the Unrestricted Fund are directed by the Plan Committee.
PARTY IN INTEREST TRANSACTIONS. Certain investments are in funds managed by the
trustee of the Plan and therefore, qualify as party in interest.
INVESTMENT OPTIONS:
PARTICIPANT DIRECTED. Participant directed contributions may be invested in one
or more of thirteen funds. A brief summary description of each investment option
follows:
BENHAM STABLE VALUE GOVERNMENT FUND. A fund which seeks to provide current
income while maintaining a stable share price. It is managed by SEI Trust Co.
BENHAM PREMIUM BOND FUND. A fund which seeks a high level of income from a
portfolio of longer-term bonds and other debt obligations.
AMERICAN CENTURY BALANCED 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.
TWENTIETH CENTURY SELECT FUND. A fund comprised primarily of income-producing
equity securities of larger companies with the potential for appreciation.
TWENTIETH CENTURY ULTRA FUND. A fund comprised primarily of equity securities of
medium and smaller companies with the potential for appreciation.
TWENTIETH CENTURY INTERNATIONAL GROWTH FUND. A fund which seeks capital growth
by investing primarily in an internationally diversified portfolio of common
stocks.
BARCLAYS EQUITY INDEX FUND. A fund invested primarily in stocks of a broad array
of established U.S. Companies. It invests to match the performance of the
Standard & Poor's 500 Composite Price Index (S&P 500 Index) by investing in most
of the same companies. During plan year 1999, this investment option was
replaced by the American Century Equity Index Fund.
AMERICAN CENTURY EQUITY INDEX FUND. A fund which seeks long-term capital growth
by investing in stocks that comprise of the S&P 500 Index.
AMERICAN CENTURY STRATEGIC ALLOCATION: CONSERVATIVE. A fund seeking to provide
regular income through emphasizing investment in bonds and money market
securities combined with the potential for moderate long-term return as the
result of its stake in equity securities.
AMERICAN CENTURY STRATEGIC ALLOCATION: MODERATE. A fund emphasizing investment
in equity securities but maintaining a sizable stake in bonds and money market
securities.
48
AMERICAN CENTURY STRATEGIC ALLOCATION: AGGRESSIVE. A fund emphasizing investment
in equity securities, but maintaining a smaller portion of its assets in bonds
and money market securities.
AMERICAN CENTURY VALUE FUND. A fund investing primarily in equity securities of
well established companies with intermediate to large market capitalizations
that are believed by fund management to be undervalued at the time of purchase.
TWENTIETH CENTURY VISTA FUND. A fund investing primarily in medium sized and
smaller companies with above average prospects for appreciation.
ISCO, INC. COMMON STOCK FUND. A fund invested primarily in Isco, Inc. common
stock. Isco, Inc. is a party-in-interest and sponsor of the Plan.
NOTE B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING. The financial statements of the Plan are prepared under the
accrual method of accounting.
USE OF ESTIMATES. The preparation of the financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of net assets
available for benefits and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of changes in
net assets available for benefits during the reporting period. Actual results
could differ from those estimates.
INVESTMENT VALUATION AND INCOME RECOGNITION. 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.
PAYMENT OF BENEFITS. The Plan's policy is to record benefit payments upon
distribution to the participants. Benefits payable to retired and terminated
participants were $303,388 and $19,853 at July 31, 1999 and 1998, respectively.
CONTRIBUTIONS. The employer profit sharing contribution is computed as of the
end of the Employer's fiscal year and is recorded by the Plan in the
corresponding period, but is 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.
NEW ACCOUNTING PRONOUNCEMENTS. The Plan has elected to early adopt Statement of
Position 99-3 "Accounting and Reporting of Certain Defined Contribution Plan
Investments and Other Disclosure Matters". As a result, the Plan is no longer
required to disclose information by fund in the financial statements.
RECLASSIFICATIONS. Certain reclassifications have been made to the prior years'
financial statements to conform to the current years' presentation.
49
NOTE C. INVESTMENTS
The following schedules present the fair values of investments.
July 31, 1999
- -------------------------------------------------------------------------------------------------------------------
Number of
Shares/Units Fair Value
------------ ----------
Investments at fair value as determined by quoted market price:
Money Market:
Benham Stable Value Government Fund 2,659,593 $ 2,660
Scout Prime Pooled Investment 35,280 35
Mutual Funds:
Twentieth Century International Growth Fund 154,584 1,625
Twentieth Century Ultra Fund 192,846 7,006
Twentieth Century Select Fund 186,674 9,539
American Century Balanced Fund 169,391 3,179
Benham Premium Bond Fund 82,621 806
American Century Value Fund 90,342 604
Twentieth Century Vista Fund 29,613 390
American Century Equity Index Fund 100,247 537
American Century Strategic Allocation: Conservative 19,914 111
American Century Strategic Allocation: Moderate 35,061 226
American Century Strategic Allocation: Aggressive 25,140 178
Other Investments:
Isco, Inc. Common Stock Fund 78,159 464
Investments at estimated fair value:
Balcor Pension Investors II 101 8
Balcor Pension Investors III 202 5
----------
Total Investments at Fair Value $ 27,373
----------
----------
- -------------------------------------------------------------------------------------------------------------------
50
July 31, 1998
- ------------------------------------------------------------------------------------------------------------------
Number of
Shares/Units Fair Value
------------ ------------
Investments at fair value as determined by quoted market price:
Money Market:
Benham Stable Value Government Fund 2,027,891 $ 2,028
Chase Manahattan Bank Pooled Investment 64,480 64
Mutual Funds:
Twentieth Century International Growth Fund 165,207 1,763
Twentieth Century Ultra Fund 176,386 6,010
Twentieth Century Select Fund 154,747 7,884
American Century Balanced Fund 148,742 3,034
Benham Premium Bond Fund 78,246 797
American Century Value Fund 88,713 621
Twentieth Century Vista Fund 28,513 331
American Century Strategic Allocation: Conservative 12,873 72
American Century Strategic Allocation: Moderate 29,789 189
American Century Strategic Allocation: Aggressive 21,158 144
Bank Collective Funds:
Barclays Equity Index Fund 16,122 428
Other Investments:
Isco, Inc. Common Stock Fund 68,021 442
Investments at estimated fair value:
Balcor Pension Investors II 101 8
Balcor Pension Investors III 202 5
----------
Total Investments at Fair Value $ 23,820
----------
----------
- ------------------------------------------------------------------------------------------------------------------
During the years ended July 31, 1999 and 1998, the Plan's investments
appreciated (depreciated) as follows:
Net Realized and Unrealized Appreciation (Depreciation) in Fair Value
- ------------------------------------------------------------------------------------------------------------------
1999 1998
---- ----
Investments at fair value as determined by quoted market price:
Mutual Funds:
Twentieth Century International Growth Fund $ (23) $ 144
Twentieth Century Ultra Fund 519 (20)
Twentieth Century Select Fund 253 287
American Century Balanced Fund (229) 106
Benham Premium Bond Fund (37) 3
American Century Value Fund (30) (65)
Twentieth Century Vista Fund 49 (82)
American Century Equity Index Fund 42 --
American Century Strategic Allocation: Conservative 1 --
American Century Strategic Allocation: Moderate 5 8
American Century Strategic Allocation: Aggressive 8 10
Bank Collective Funds:
Barclays Equity Index Fund 57 65
Other Investments:
Isco, Inc. Common Stock Fund (34) (116)
Investments at estimated fair value:
Balcor Pension Investors II -- (6)
Balcor Pension Investors III -- (22)
------ -------
$ 581 $ 312
------ -------
------ -------
- ------------------------------------------------------------------------------------------------------------------
51
NOTE D. PLAN TERMINATION
Although Isco, Inc. 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.
NOTE 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.
52
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, 1999
- -------------------------------------------------------------------------------------------------------------------
Column B Column C Column D Column E
- -------- ---------------------- --------- --------------
Description of
investment including
collateral, rate of
interest, maturity date, Current
Identity of issue, borrower, lessor or similar party par or maturity value Cost value
- ---------------------------------------------------- ------------------------ --------- --------------
MONEY MARKET:
*Benham Stable Value Government Fund 2,659,593 shares $2,660 $2,660
*Scout Prime Bank Pooled Investment 35,280 shares 35 35
MUTUAL FUNDS:
*Twentieth Century Select Fund 186,674 shares 7,785 9,539
*American Century Balanced Fund 169,391 shares 2,854 3,179
*Benham Premium Bond Fund 82,621 shares 828 806
*Twentieth Century Ultra Fund 192,846 shares 5,140 7,006
*Twentieth Century International Growth Fund 154,584 shares 1,238 1,625
*Twentieth Century Vista Fund 29,613 shares 345 390
*American Century Equity Index Fund 100,247 shares 453 537
*American Century Value Fund 90,342 shares 604 604
*American Century Strategic Allocation: Conservative 19,914 shares 106 111
*American Century Strategic Allocation: Moderate 35,061 shares 207 226
*American Century Strategic Allocation: Aggressive 25,140 shares 143 178
OTHER INVESTMENTS:
*Isco, Inc. Common Stock Fund 78,159 shares 464
*Participant loans Interest rates ranging
from 9.00% to 10.25%
maturing October 1999
through June 2004 -- 450
Balcor Pension Investors II 101 Units 61 8
Balcor Pension Investors III 202 Units 60 5
-------
*Party-in-interest $27,823
-------
-------
53
ISCO, INC. RETIREMENT PLU$ 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, 1999
Column A Column B Column C Column D Column E Column F
- -------------------- ------------------- -------------- ---------- -------------- -------------
Total Dollar
Identity of Number of Value of Total Dollar
Party Involved Description of Asset Transactions Purchases Value Of Sales Net Gain
- ----------------------- ------------------------------- -------------- ----------- --------------- ----------
*Twentieth Century Select Fund 96 $2,881 $ -- $ --
*Twentieth Century Select Fund 57 -- 1,479 116
*Twentieth Century Ultra Fund 85 1,749 -- --
*Twentieth Century Ultra Fund 62 -- 1,272 144
*Benham Stable Value Government Fund 78 3,154 -- --
*Benham Stable Value Government Fund 43 -- 2,455 --
*Party-in-interest
54