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| 1 | ||||
FINANCIAL STATEMENTS: |
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| 2 | ||||
| 3 | ||||
| 4-9 | ||||
SUPPLEMENTAL SCHEDULE: |
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| 11 | ||||
| NOTE: | Schedules not filed herewith are omitted because of the absence of the conditions under which they are required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. |
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| 2005 | 2004 | |||||||
ASSETS: |
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Investments—at fair value: |
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Mutual funds |
$ | 491,694,033 | $ | 457,104,996 | ||||
Money market funds |
126,209,823 | 140,194,857 | ||||||
Plan interest in Master Trust |
124,710,942 | — | ||||||
Common stock fund |
— | 140,589,143 | ||||||
Collective trusts |
3,960,795 | — | ||||||
Participant loans |
12,640,661 | 12,223,921 | ||||||
NET ASSETS AVAILABLE FOR BENEFITS |
$ | 759,216,254 | $ | 750,112,917 | ||||
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ADDITIONS: |
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Contributions: |
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Participant |
$ | 26,102,913 | ||
Employer |
11,846,678 | |||
Total contributions |
37,949,591 | |||
Investment income (loss): |
||||
Net appreciation in fair value of investments |
14,350,416 | |||
Dividends and interest |
28,179,568 | |||
Interest in losses of Master Trust |
(5,729,841 | ) | ||
Investment income, net |
36,800,143 | |||
Transfers—net |
260,673 | |||
Miscellaneous |
80,257 | |||
Total additions |
75,090,664 | |||
DEDUCTIONS: |
||||
Benefits paid to participants |
(65,922,150 | ) | ||
Administrative expenses |
(65,177 | ) | ||
Total deductions |
(65,987,327 | ) | ||
NET INCREASE |
9,103,337 | |||
NET ASSETS AVAILABLE FOR BENEFITS—Beginning of year |
750,112,917 | |||
NET ASSETS AVAILABLE FOR BENEFITS—End of year |
$ | 759,216,254 | ||
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| 1. | DESCRIPTION OF PLAN | |
| NiSource Inc. (the “Company”) is a holding company whose major subsidiary companies are Northern Indiana Public Service Company (“NIPSCO”), Columbia Energy Group, Bay State Gas Company, Northern Indiana Fuel and Light (“NIFL”), and Kokomo Gas (“Kokomo”). The following description of the NiSource Inc. Retirement Savings Plan (the “Plan”) provides general information regarding the Plan. Participants should refer to the Plan document for a more complete description of the Plan’s provisions. | ||
| General—The Plan is a defined contribution plan available to each eligible employee who works for the Company. It is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended. | ||
| Plan Administration—The Company serves as administrator and sponsor of the Plan. The Company maintains an administrative committee appointed by the Board of Directors, which has the responsibility to assist the Company in administering the Plan. Fidelity Management Trust Company (the “Trustee”) holds all of the Plan’s assets and executes all investment transactions. | ||
| Contributions—Each year, participants may contribute up to 50% of compensation (as defined in the Plan) on a pre-tax basis and 25% on an after-tax basis, up to 75% in total. Additionally, participants who are at least 50 years old can make catch-up contributions to the Plan. Contributions are subject to certain limitations. Participants direct the investment of their contributions into various investment options offered by the Plan. The Plan offers twenty-seven mutual funds, two money market funds and collective trusts, and one common stock fund held in a Master Trust as investment options for participants. Effective January 1, 2005, four of the twenty-seven mutual funds were closed to new investment. | ||
| The Company contributes an amount determined as follows: |
| a. | For the accounts of all participants who participate in the Final Pay Option of the Retirement Plan of Columbia Energy Group Companies, or any successor plan (as defined therein): |
| (1) | during the first 120 months of participation, an amount equal to 50% of the first 6% of the participant’s contribution; | ||
| (2) | from the 121st through the 240th month of participation, an amount equal to 75% of the first 6% of the participant’s contribution; | ||
| (3) | from the 241st month onward of participation, an amount equal to 100% of the first 6% of the participant’s contribution. |
| b. | For the accounts of all participants who participate in the Final Pay Option of the NiSource Inc. and NIPSCO Pension Plan Provisions Pertaining to Salaried and Non-Exempt Employees and Kokomo nonunion employees who participate in the Final Pay Option of the NiSource Inc. Subsidiary Pension Plan and Kokomo union employees, or any successor plans (as defined therein), an amount equal to 11.1% of all pre-tax contributions made by the participant to the Plan. |
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| c. | For the accounts of all participants who participate in the Final Pay Options of the Bay State Gas Company Pension Plan, or any successor plan (as defined therein), an amount equal to 100% of the first 21/2% of pre-tax participant contributions plus 50% of the next 5% of participant pre-tax contributions. Certain employees, who were 45 or older on September 1, 1990 and employed on that date, are grandfathered into a match of 50% of the first 5% of participant pre-tax contributions. | ||
| d. | For accounts of all employees of NIFL who participate in the Final Pay Option of the NiSource Inc. Subsidiary Pension Plan or any successor plan (as defined therein), an amount equal to 50% of the first 6% of participant pre-tax contributions. | ||
| e. | For the accounts of all participants who participate in the Account Balance Option of the Retirement Plan of Columbia Energy Group Companies, the NiSource Inc. and NIPSCO Pension Plan Provisions Pertaining to Salaried and Non-Exempt Employees, the NiSource Inc. Subsidiary Pension Plan, or the Bay State Gas Company Pension Plan, or any successor plans (as defined therein), an amount equal to 75% of the first 6% of participant contributions. Current exempt employees were given the opportunity to elect a new account balance pension design effective January 1, 2006. All current exempt employees who have not already elected the new account balance design as of January 1, 2011 will be automatically converted on that date. Under the new retirement income program, the match will increase to 100% of the first 6% of participant contributions. |
| The matching contribution is invested directly into the Plan Interest in the Master Trust. Employees may subsequently redirect matching contributions among any of the funds available in the Plan. | ||
| The Plan allows the Company to make additional discretionary profit sharing contributions to the Plan. These contributions may be up to 1.5% of each participant’s compensation. Such discretionary contributions are determined and credited in the year following the Plan year. No such contributions were made in 2005. | ||
| Rollovers from Other Qualified Employer Plans—The Plan allows for employees to transfer certain of their other qualified employer retirement plan assets to the Plan. These amounts are reflected in participant contributions in the accompanying statement of changes in net assets available for benefits. | ||
| Participant Accounts—Each participant’s account is credited with the participant’s contribution and allocations of the Company’s contribution and Plan earnings and charged with an allocation of Plan losses and certain administrative expenses. | ||
| Vesting—Participants are fully vested in their accounts at all times. | ||
| Participant Loans—Participants may borrow from their accounts a minimum of $1,000 up to a maximum of $50,000 or 50% of their account balance, whichever is less. The loans are secured by the balance in the participant’s account and bear interest at prime rate plus 1% based on the last day of the month prior to loan initiation. Interest rates on outstanding loans range from 4.75% to 11% at December 31, 2005. Principal and interest are paid ratably through payroll deductions over a period not to exceed five years, unless the loan is to purchase the participant’s primary residence which allows repayment up to 15 years (30 years prior to January 1, 2002). Effective July 1, 2005, participants who terminate employment on or after July 1, 2005 with an outstanding Plan loan may make loan repayments through direct payments from their bank accounts. Participants may have two loans outstanding at any given time. |
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| Participant Withdrawals—Withdrawals from the Plan are generally permitted when the participant terminates employment, retires, or becomes permanently disabled. The Plan offers the following options for withdrawals while still employed: |
| • | Age 591/2 withdrawals; | ||
| • | Voluntary withdrawals from after-tax, rollover and matching contributions; and | ||
| • | Hardship withdrawals, subject to the Plan rules. |
| A hardship withdrawal may result in the suspension of the participant’s deferral and Company matching contributions for six months. | ||
| Payment of Benefits—At the direction of the participant or beneficiary, distribution will be made in a lump sum payment in cash, or by such other method of payment as may be adopted by the administrative committee according to uniform standards. If the amount payable under the Plan to any participant or beneficiary is $5,000 or less, the administrative committee will direct that such amount be paid in a lump sum. | ||
| Transfers Between Plans—Transfers between plans occur when employees transfer in/out of a union but stay with NiSource Inc., which results in a transfer of any related balances between this Plan and other plans. Amounts are included in transfers, net on the accompanying statement of changes in net assets available for benefits. | ||
| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
| Basis of Accounting—The financial statements of the Plan were prepared in accordance with accounting principles generally accepted in the United States of America using the accrual basis of accounting. | ||
| Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. | ||
| Investment Valuation and Income Recognition—The Plan’s investments are stated at fair value. Quoted market prices are used to value investments. The fair value of the collective trusts is based on quoted redemption values as of the last day of the Plan year. The Plan’s investment in the Master Trust (see Note 6) is presented at fair value, which has been determined based on the fair value of the underlying investments of the Master Trust. Participant loans are valued at cost, which approximates fair value. Purchases and sales of securities are recorded on a trade-date basis. Dividends are recorded on the record date. | ||
| Payment of Benefits—Benefits are recorded when paid. | ||
| Administrative Expenses—Most administrative expenses of the Plan are paid by the Company. Certain other expenses of the Plan such as investment manager and broker fees are paid by the Plan. Certain loan administration fees are paid from the individual participant accounts. |
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| 3. | INVESTMENTS | |
| The following presents investments that represent 5% or more of the Plan’s net assets: |
| December 31 | ||||||||||||
| 2005 | 2004 | |||||||||||
Fidelity Retirement Money Market Fund |
$ | 130,170,618 | $ | 140,194,857 | ||||||||
Fidelity Magellan Fund |
66,637,725 | 74,637,856 | ||||||||||
Fidelity Contrafund |
49,259,114 | 35,302,680 | ||||||||||
Fidelity Growth Fund |
42,750,812 | 41,558,666 | ||||||||||
Fidelity Growth and Income Fund |
49,848,993 | 54,303,423 | ||||||||||
Fidelity Spartan U.S. Equity Index Fund |
54,254,589 | 56,535,438 | ||||||||||
| * | Plan interest in Master Trust |
124,710,942 | — | |||||||||
| * | Nisource Inc. Common Stock Fund |
— | 140,589,143 | |||||||||
| * | Includes nonparticipant-directed and participant-directed investments |
| During 2005, the Plan’s mutual fund investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value by $14,350,416. | ||
| The Plan provides for investments in mutual funds and common stock that, in general, are exposed to various risks, such as interest rate, credit and overall market volatility risks. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the accompanying statements of net assets available for benefits. | ||
| 4. | RELATED-PARTY TRANSACTIONS | |
| Certain Plan investments are shares of mutual funds managed by the Fidelity Management Trust Company. Fidelity Management Trust Company is the Trustee, as defined by the Plan; therefore, these transactions qualify as party-in-interest transactions. See Note 6 for additional related party information. | ||
| 5. | PLAN TERMINATION | |
| Although it has not expressed any intention to do so, the Company reserves the right under the Plan document to terminate the Plan at any time, subject to the provisions of ERISA. In the event of Plan termination, the rights of each participant to all amounts then credited to the participant’s account will continue to be nonforfeitable. | ||
| 6. | INTEREST IN MASTER TRUST | |
| Description of the Master Trust—The Master Trust was established for the investment of assets of the Plan and several other NiSource Inc. sponsored defined contribution retirement plans. Each participating retirement plan has an undivided interest in the Master Trust. The assets and liabilities of the Master Trust are held by the Trustee. At December 31, 2005, the Plan’s interest in the net assets of the Master Trust was approximately 85%. Investment income (losses) and certain administrative expenses relating to the Master Trust are allocated to the individual plans based upon average daily balances invested by each plan. |
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| Summary of Significant Accounting Policies | ||
| Valuation of Investments—The Master Trust consists solely of investment in the NiSource Inc. Common Stock Fund, which is stated at fair value, measured by quoted market price in an active market. | ||
| Employee Stock Ownership Plan—The NiSource Inc. Common Stock Fund operates as an Employee Stock Ownership Plan (“ESOP”). As an ESOP, under the terms of this plan, participants may diversify their investment attributable to employer match at any time. Participants may also elect to have dividends paid to them in cash or reinvested in the fund. | ||
| Voting and Tendering Rights of NiSource Inc. Common Stock Fund Participants—Each participant in the NiSource Inc. Common Stock Fund is entitled to direct the Trustee as to the manner of voting at each meeting of shareholders. A participant’s interest is represented by the value of the participant’s interest in the NiSource Inc. Common Stock Fund. | ||
| Payment of Benefits—Any distribution consisting of units in the Plan interest in the Master Trust may be paid in cash or in whole shares of common stock represented by such units plus a cash amount equal to the fair market value of any fraction of a share of the common stock fund. | ||
| Other—Purchases and sales of stock held in the Master Trust are reflected as of the trade date. Pending sales and purchases of investments of the Master Trust include receivables and payables, respectively, related to transactions that have not been settled at year-end. | ||
| Dividend income on stock held in the Master Trust is recorded on the ex-dividend date. Interest earned in the Master Trust is recorded on the accrual basis. | ||
| Net appreciation (depreciation) in the fair value of investments held by the Master Trust include unrealized gains and losses associated with changes in the fair values of assets held at year-end as well as realized gains and losses on investments that were sold during the year. | ||
| Investments in the NiSource Inc. Common Stock Fund are exposed to various risks such as interest rate, credit and overall market volatility crisis. Due to the level of risk associated with the investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the accompanying statements of net assets available for benefits. | ||
| Related Party Transactions—The Master Trust invests in shares of the NiSource Inc. Common Stock Fund, which is managed by the Trustee that holds the assets of the Master Trust, and therefore, these transactions qualify as party-in-interest transactions. |
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| The net assets for the Master Trust consist of investments at a fair value of $147,587,948 as of December 31, 2005. | ||
| Investment income (loss) for the Master Trust is as follows for the year ended December 31, 2005: |
Net appreciation (depreciation) in fair value of investments |
$ | (13,310,998 | ) | |
Interest and dividends |
6,538,137 | |||
Investment loss, net |
$ | (6,772,861 | ) | |
| 7. | TAX STATUS | |
| The Internal Revenue Service (the “IRS”) has issued a determination letter dated February 25, 2004, stating that the Plan is qualified under applicable sections of the Internal Revenue Code (the “IRC”). The Plan has been amended since receiving the determination letter. However, the Plan administrator believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC. |
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| Identity of Issuer, | Description of Investment, | |||||||||||
| Borrower, Lessor, | Including Maturity Date, Rate of Interest, | Fair | ||||||||||
| or Similar Party | Collateral and Par or Maturity Value | Cost ** | Value | |||||||||
| * | NiSource Inc. | Plan interest in Master Trust |
$ | 100,924,576 | $ | 124,710,942 | ||||||
| * | Fidelity Investments | Retirement Money Market Fund |
130,170,618 | |||||||||
| * | Fidelity Investments | Managed Income Portfolio |
3,960,795 | |||||||||
| * | Fidelity Investments | Magellan Fund |
66,637,725 | |||||||||
| * | Fidelity Investments | Contrafund |
49,259,114 | |||||||||
| * | Fidelity Investments | Equity Income Fund |
11,589,938 | |||||||||
| * | Fidelity Investments | Growth Fund |
42,750,812 | |||||||||
| * | Fidelity Investments | Growth and Income Fund |
49,848,993 | |||||||||
| * | Fidelity Investments | Intermediate Bond Fund |
29,221,386 | |||||||||
| * | Fidelity Investments | Overseas Fund |
19,086,722 | |||||||||
| * | Fidelity Investments | Europe Fund |
6,631,711 | |||||||||
| * | Fidelity Investments | Pacific Basin Fund |
3,177,416 | |||||||||
| * | Fidelity Investments | Balanced Fund |
32,552,042 | |||||||||
| * | Fidelity Investments | Puritan Fund |
3,257,231 | |||||||||
| * | Fidelity Investments | Small Cap Independent Fund |
6,773,511 | |||||||||
| * | Fidelity Investments | Spartan U.S. Equity Index Fund |
54,254,589 | |||||||||
| * | Fidelity Investments | Freedom Income Fund |
683,359 | |||||||||
| * | Fidelity Investments | Freedom 2010 Fund |
5,106,943 | |||||||||
| * | Fidelity Investments | Freedom 2020 Fund |
6,305,450 | |||||||||
| * | Fidelity Investments | Freedom 2030 Fund |
2,551,127 | |||||||||
| * | Fidelity Investments | Freedom 2040 Fund |
1,548,485 | |||||||||
| PIMCO Investments | Total Return Fund (institutional) |
11,697,661 | ||||||||||
| PIMCO Investments | Long-Term Government Fund |
10,207,810 | ||||||||||
| PIMCO Investments | Low-Duration Fund (institutional) |
6,665,332 | ||||||||||
| PIMCO Investments | StockPLUS Fund (institutional) |
3,451,838 | ||||||||||
| Janus Investments | SmallCap Value Fund (institutional) |
26,085,246 | ||||||||||
| Dreyfus Investments | Emerging Leaders Fund |
9,192,108 | ||||||||||
| Morgan Stanley Investments | U.S. SmallCap Core Fund |
7,500,340 | ||||||||||
| Vanguard Investments | U.S. Growth Investor Shares Fund |
3,902,883 | ||||||||||
| American Funds Investments | EuroPacific Growth Fund |
17,793,466 | ||||||||||
| * | Various Plan participants | Participant loans, with interest rates ranging
from 4.75% to 11% and maturity dates
ranging from January 2006 to August 2031. |
12,640,661 | |||||||||
| TOTAL ASSETS (HELD AT END OF YEAR) | $ | 759,216,254 | ||||||||||
| * | Denotes a party-in-interest | |
| ** | Cost omitted for participant-directed investments |
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| NISOURCE INC. RETIREMENT SAVINGS PLAN | ||||
By
|
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| Vice President & Treasurer, NiSource Inc. | ||||
| Member, Administrative Committee | ||||
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/s/ Robert C. Skaggs, Jr.
|
/s/ Michael W. O’Donnell | |
President and
|
Executive Vice President and | |
Chief Executive Officer
|
Chief Financial Officer |
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