ISCO, INC. RETIREMENT PLU$ PLAN
Financial Statements And Supplemental
Schedules For The Years Ended
July 31, 1997 and 1996
And Independent Auditors' Report
38
ISCO, INC. RETIREMENT PLU$ PLAN
FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
AND INDEPENDENT AUDITORS' REPORT
TABLE OF CONTENTS
Page
FINANCIAL STATEMENTS:
Independent Auditors' Report 40
Statements of Net Assets Available for Benefits 41
Statements of Changes in Net Assets Available for Benefits 42
Notes to Financial Statements 43
SUPPLEMENTAL SCHEDULES:
Item 27a - Schedule of Assets Held for Investment
Purposes - July 31, 1997 51
Item 27d - Schedule of Reportable Transactions -
Year Ended July 31, 1997 52
Schedules not filed herein are omitted because of
the absence of the conditions under which they are
required.
39
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, 1997 and 1996
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, 1997 and 1996, 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, 1997, and (2) reportable
transactions for the year ended July 31, 1997, 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 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
September 26, 1997
40
ISCO, INC. RETIREMENT PLU$ PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
(amounts in thousands)
July 31, 1997 July 31, 1996
---------------------------------------------------------------------------------
Supplemental Information Supplemental Information
by Fund 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 $204 $ 1,666 $ 1,870 $271 $ 1,687 $ 1,958
Mutual funds -- 17,612 17,612 -- 12,706 12,706
Bank collective funds -- 303 303 -- -- --
Isco, Inc. common stock fund -- 503 503 -- 643 643
Investments, at estimated fair value:
Other investments 41 -- 41 88 -- 88
----- ------ ------- ---- -------- -------
245 20,084 20,329 359 15,036 15,395
Participant loans -- 489 489 -- 513 513
----- ------ ------- ---- -------- -------
Total investments 245 20,573 20,818 359 15,549 15,908
Employer contributions
receivable -- 112 112 -- 97 97
Accrued income 1 -- 1 1 -- 1
----- ------ ------- ---- -------- -------
Net assets available
for benefits $246 $20,685 $20,931 $360 $15,646 $16,006
===== ======= ======= ==== ======= =======
The accompanying notes are an integral part of the financial statements
41
ISCO, INC. RETIREMENT PLU$ PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
(amounts in thousands)
July 31, 1997 July 31, 1996
---------------------------------------------------------------------------------
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 $ 1,329 $ 1,363 $ 34 $ 1,168 $ 1,202
Net realized and unrealized
appreciation (depreciation) in fair
value of investments (21) 4,153 4,132 (4) (520) (524)
----- ------ ------- ---- -------- -------
Net investment income 13 5,482 5,495 30 648 678
----- ------ ------- ---- -------- -------
Contributions:
Employer annual profit sharing -- 112 112 -- 97 97
Employer 401(k) matching -- 138 138 -- 148 148
Participant -- 729 729 -- 774 774
----- ------ ------- ---- -------- -------
-- 979 979 -- 1,019 1,019
----- ------ ------- ---- -------- -------
Total additions 13 6,461 6,474 30 1,667 1,697
Benefits paid (26) (1,523) (1,549) (19) (975) (994)
Transfers (101) 101 -- -- -- --
----- ------ ------- ---- -------- -------
Increase (decrease) in net assets
available for benefits (114) 5,039 4,925 11 692 703
Net assets available for benefits:
Beginning of year 360 15,646 16,006 349 14,954 15,303
End of year $246 $20,685 $20,931 $360 $15,646 $16,006
===== ======= ======= ==== ======= =======
The accompanying notes are an integral part of the financial statements
42
ISCO, INC. RETIREMENT PLU$ PLAN
NOTES TO FINANCIAL STATEMENTS
Years ended July 31, 1997 and 1996
(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 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 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.
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
43
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.
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.
Payment of Benefits--On termination of service due to death, disability or
retirement, a participant with a vested balance greater than $3,500 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 $3,500 is entitled to receive a lump sum payment equal to
the participant's vested account balance.
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, except for loan origination and
loan maintenance fees, required to administer the Plan. These costs are not
reflected in the 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, 1997 include: Balcor Pension Investors II and III, Benham Stable
Value Government Fund, and Chase Manhattan Bank Pooled Investment. Transfers
from the Restricted Fund to the Unrestricted Fund are directed by the Plan
Committee.
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. In 1996, the name of this fund was Bankers Trust Stable Value Government
Trust Fund.
Benham Premium 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. In 1996, the name of this fund was Twentieth Century
Premium Managed Bond Fund.
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. In 1996, the name
of this fund was Twentieth Century Balanced Investors Fund.
44
Twentieth Century Select Fund--A fund comprised primarily of income-producing
equity securities of larger companies possessing potential for appreciation.
In 1996, the name of this fund was Twentieth Century Select Investors Fund.
Twentieth Century Ultra Fund--A fund comprised primarily of equity securities
of medium and smaller companies with the potential for appreciation. In
1996, the name of this fund was Twentieth Century Ultra Investors Fund.
Twentieth Century International Growth Fund--A fund which seeks capital
growth by investing primarily in an internationally diversified portfolio of
common stocks. In 1996, the name of this fund was Twentieth Century
International Equity Fund.
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 S&P 500 Index by investing in most of the same companies. Assets in the
fund consist of Barclays U.S. Tactical Asset Allocation Fund J.
American Century Strategic Allocation: Conservative--A fund seeking to
provide regular income through its emphasis on 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 in equity
securities but maintaining a sizable stake in bonds and money market
securities.
American Century Strategic Allocation: Aggressive--A fund emphasizing in
equity securities, but maintaining a 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.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting--The financial statements of the Plan are prepared under
the accrued method of accounting.
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.
45
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 $35,614 and $830,202 at July 31, 1997 and 1996,
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 schedules present the fair values of investments.
July 31, 1997
______________________________________________________________________________
Number of
Shares/ Fair
Units Value
---------- ---------
Investments at fair value as determined
by quoted market price:
Money Market:
Benham Stable Value Government Fund 1,819,342 $ 1,819
Chase Manahattan Bank Pooled Investment 50,767 51
Mutual Funds:
Twentieth Century International Growth Fund 144,894 1,459
Twentieth Century Ultra Fund 134,306 4,874
Twentieth Century Select Fund 129,518 6,550
American Century Balanced Fund 135,438 2,693
Benham Premium Bond Fund 69,283 703
American Century Value Fund 73,929 580
Twentieth Century Vista Fund 25,255 372
American Century Strategic Allocation:
Conservative 9,340 52
American Century Strategic Allocation:
Moderate 34,308 204
American Century Strategic Allocation:
Aggressive 19,795 125
Other Investments:
Isco, Inc. Common Stock Fund 61,910 503
Bank Collective Funds:
Barclays Equity Index Fund 13,590 303
Investments at estimated fair value:
Balcor Pension Investors II 101 14
Balcor Pension Investors III 202 27
-------
Total Investments at Fair Value $20,329
=======
47
July 31, 1996
______________________________________________________________________________
Number of
Shares/ Fair
Units Value
--------- -----
Investments at fair value as determined
by quoted market price:
Money Market:
Benham Stable Value Government Fund 1,945,541 $ 1,946
Chase Manhattan Bank Pooled Investment 12,036 12
Mutual Funds:
Twentieth Century International Growth Fund 129,942 1,034
Twentieth Century Ultra Fund 118,544 3,066
Twentieth Century Select Fund 139,150 5,066
American Century Balanced Fund 155,797 2,649
Benham Premium 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
=======
______________________________________________________________________________
During the years ended July 31, 1997 and 1996, the Plan's investments
appreciated(depreciated) by $4,131,854 and $(523,908) respectively, as
follows:
Net Realized and Unrealized Appreciation (Depreciation) in Fair Value
______________________________________________________________________________
Year Ended July 31,
-------------------
1997 1996
---- ----
Investments at fair value as determined by
quoted market price:
Mutual Funds:
Twentieth Century International Growth Fund $ 308 $ 61
Twentieth Century Ultra Fund 1,348 (42)
Twentieth Century Select Fund 1,922 (406)
American Century Balanced Fund 399 (70)
Benham Premium Bond Fund 28 (8)
American Century Value Fund 81 --
Twentieth Century Vista Fund 78 --
American Century Strategic Allocation: Conservative 4 --
American Century Strategic Allocation: Moderate 17 --
American Century Strategic Allocation: Aggressive 17 --
Bank Collective Funds:
Barclays Equity Index Fund 50 --
Other Investments:
Isco, Inc. Common Stock Fund (99) (55)
Investments at estimated fair value:
Other (21) (4)
------ -----
$4,132 $(524)
====== =====
48
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.
F. FUND INFORMATION
Participant contributions, benefit payments, and dividends, interest and
other income by fund are as follows for the years ended July 31, 1997 and
1996.
______________________________________________________________________________
1997 1996
---- ----
Participant contributions:
Benham Stable Value Government Fund $ 53 $ 68
Twentieth Century International Growth Fund 80 87
Twentieth Century Ultra Fund 218 235
Twentieth Century Select Fund 181 206
American Century Balanced Fund 102 106
American Century Value Fund 9 --
Twentieth Century Vista Fund 7 --
American Century Strategic Allocation: Conservative 1 --
American Century Strategic Allocation: Moderate 2 --
American Century Strategic Allocation: Aggressive 2 --
Barclays Equity Index Fund 5 --
Isco, Inc. Common Stock Fund 41 42
Benham Premium Bond Fund 28 30
---- ----
Total $ 729 $ 774
====== =====
49
F. FUND INFORMATION (continued)
1997 1996
---- ----
Benefits paid:
Benham Stable Value Government Fund $ 68 $ 128
Twentieth Century International Growth Fund 141 53
Twentieth Century Ultra Fund 372 247
Twentieth Century Select Fund 331 237
American Century Balanced Fund 318 243
Benham Premium Bond Fund 144 21
Isco, Inc. Common Stock Fund 68 19
Participant loans 81 27
---- ----
Total $1,523 $ 975
====== ======
Dividends, interest, and other income:
Benham Stable Value Government Fund $ 93 $ 86
Twentieth Century International Growth Fund 123 1
Twentieth Century Ultra Fund 187 145
Twentieth Century Select Fund 542 600
American Century Balanced Fund 276 226
Benham Premium Bond Fund 49 55
American Century Value Fund 2 --
American Century Strategic Allocation: Conservative 1 --
American Century Strategic Allocation: Moderate 2 --
Isco, Inc. Common Stock Fund 13 13
Participant loans 41 42
---- ----
Total $1,329 $1,168
====== ======
______________________________________________________________________________
50
ISCO, INC. RETIREMENT PLU$ 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, 1997
_________________________________________________________________________________________________________________________________
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 1,819,342 shares $1,819 $ 1,819
*Chase Manhattan Bank Pooled Investment 50,767 shares 51 51
Mutual Funds:
- -------------
*Twentieth Century Select Fund 129,518 shares 5,139 6,550
*American Century Balanced Fund 135,438 shares 2,181 2,693
*Benham Premium Bond Fund 69,283 shares 691 703
*Twentieth Century Ultra Fund 134,306 shares 3,315 4,874
*Twentieth Century International Growth Fund 144,894 shares 1,114 1,459
*Twentieth Century Vista Fund 25,255 shares 294 372
*American Century Value Fund 73,929 shares 501 580
*American Century Strategic Allocation: Conservative 9,340 shares 48 52
*American Century Strategic Allocation: Moderate 34,308 shares 187 204
*American Century Strategic Allocation: Aggressive 19,795 shares 107 125
Bank Collective Funds:
- ----------------------
Barclays Equity Index Fund 13,590 Units 257 303
Other Investments:
- ------------------
*Isco, Inc. Common Stock Fund 61,910 shares 503
*Participant loans Interest rates ranging
from 7.25% to 10.25%
maturing August 1997
through June 2002 -- 489
Balcor Pension Investors II 101 units 61 14
Balcor Pension Investors III 202 units 60 27
------
*Party-in-interest $20,818
=======
51
ISCO, INC. RETIREMENT PLU$ 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, 1997
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 90 $1,712 $ -- $ --
*Twentieth Century Select Fund 68 -- 2,150 106
*American Century Balanced Fund 64 498 -- --
*American Century Balanced Fund 53 -- 853 97
*Twentieth Century Ultra Fund 99 1,757 -- --
*Twentieth Century Ultra Fund 62 -- 1,297 165
*Benham Stable Value
Government Fund 107 2,093 -- --
*Benham Stable Value
Government Fund 51 -- 2,220 --
*Party-in-interest
52