SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
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þ
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ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2010.
OR
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¨
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TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from __________ to __________
Commission File No. 1-31690
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A.
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Full title of the plan and the address of the plan, if different from that of the issuer named below:
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Non Union Plan #46840 – TransCanada 401(k) and Savings Plan
TransCanada USA Services Inc., 717 Texas Street, Suite 2400
Houston, Texas 77002
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B.
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Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
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TransCanada Corporation
450 – 1 Street S.W., Calgary, Alberta, T2P 5H1, Canada
NON UNION PLAN #46840 – TRANSCANADA 401(K) AND SAVINGS PLAN
TABLE OF CONTENTS
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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2
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FINANCIAL STATEMENTS
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3
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Statements of Net Assets Available for Benefits as of December 31, 2010 and 2009
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Statements of Changes in Net Assets Available for Benefits for the Year Ended December 31, 2010 and 2009
Notes to Financial Statements
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SUPPLEMENTAL SCHEDULE
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10 | ||
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Schedule H, Part IV, Line 4i
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Schedule of Assets (Held at End of Year) as of December 31, 2010
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SIGNATURE
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EXHIBITS
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The following exhibits are filed herewith:
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Exhibit 23.1 Consent of Independent Registered Public Accounting Firm
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NOTE:
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All other schedules required by Section 2520.103-10 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 have been omitted because they are not applicable.
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TRANSCANADA 401(K) AND SAVINGS PLAN
FINANCIAL STATEMENTS AS OF AND FOR THE
YEARS ENDED DECEMBER 31, 2010 AND 2009 AND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Plan Administrator
TransCanada 401(k) and Savings Plan
We have audited the accompanying statements of net assets available for benefits of the TransCanada 401(k) and Savings Plan (the Plan) as of December 31, 2010 and 2009, 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 these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the TransCanada 401(k) and Savings Plan as of December 31, 2010 and 2009, and the changes in net assets available for benefits for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Our audit was performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information included in schedule H, line 4i – schedule of assets (held at end of year) at December 31, 2010 is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is 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. This supplemental schedule is the responsibility of the Plan’s management. This supplemental schedule has been subjected to the auditing procedures applied in the audit of the 2010 basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ KPMG LLP
Omaha, Nebraska
June 23, 2011
Page 2
TRANSCANADA 401(K) AND SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
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December 31 (thousands of dollars)
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2010
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2009
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Assets
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||||||
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Investments at fair value (Note 3)
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114,088
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86,550
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Notes receivable from participants
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3,555
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2,739
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Employer contribution receivable
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323
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341
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Net Assets Available for Benefits
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117,966
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89,630
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The accompanying notes to the financial statements are an integral part of these statements.
Page 3
TRANSCANADA 401(K) AND SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
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Year ended December 31 (thousands of dollars)
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2010
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2009
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Additions
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Contributions
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Employee contributions
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12,456
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11,813
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Employer contributions
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8,702
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8,238
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Employee rollover
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496
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749
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21,654
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20,800
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Investment Income
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Net increase in fair value of investments (Note 3)
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11,091
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16,135
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Interest and dividend income
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2,019
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1,543
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Total Additions
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34,764
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38,478
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Deductions
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Benefits paid to participants
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6,382
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3,388
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Administrative expenses
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46
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40
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Total Deductions
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6,428
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3,428
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Increase in Net Assets Available for Benefits
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28,336
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35,050
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Net Assets Available for Benefits
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Beginning of Year
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89,630
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54,580,
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End of Year
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117,966
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89,630
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The accompanying notes to the financial statements are an integral part of these statements.
Page 4
TRANSCANADA 401(K) AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1: DESCRIPTION OF PLAN
The TransCanada 401(k) and Savings Plan (the Plan) is a defined contribution plan that provides retirement benefits for employees of TransCanada USA Services Inc. (TCUSA or the Company) or its subsidiaries that have attained the age of 21 and are not covered by a collective bargaining agreement. The Plan excludes employees hired under the Company’s student program, non-resident persons with no income from a United States source and non-resident persons who have been non-residents for a period of not less than 183 days. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
The Board of Directors of TCUSA has appointed Fidelity Management Trust Company (Fidelity or the Trustee) as custodian and trustee of the Plan’s assets.
Vesting
Participants are immediately vested in their contributions, including rollovers, employer contributions and any earnings thereon. Employee rollovers are amounts transferred to the Plan from another qualified plan at the participant’s request.
Payment of Benefits
Participants are eligible to request a distribution of their vested amounts upon retirement, death, total and permanent disability, severance of employment with the Company or, in very limited circumstances, in the event of financial hardship. Distributions are made in the form of a lump-sum payment or a rollover to another qualified account.
A participant’s normal retirement age is 65, however, a participant may elect to withdraw all or a portion of their contributions after the age of 59½, subject to certain conditions. A participant may receive pension benefits commencing on or after the age of 55 provided they have terminated their employment with the Company.
Participants may elect to withdraw all or a portion of their vested matching and profit sharing contributions that have been in their account for at least 24 months and after they have at least 60 months of participation in the Plan.
Forfeitures
As participants are immediately 100 per cent vested in their account balance, there are no forfeitures.
Employee and Employer Contributions
Each year, participants may elect to defer a percentage of their eligible compensation into the Plan subject to an annual limit of the lesser of 60 per cent or $16,500 (2009 - $16,500), subject to certain limitations under the Internal Revenue Code (the Code). Participants age 50 or older who are making deferral contributions may also make catch-up contributions of up to $5,500. In addition, employees may contribute up to 100 per cent of bonuses paid by the Company. The Company will match 100 per cent of each participant’s contributions up to a maximum of five per cent of the participant’s compensation for the Plan year. The Company may make annual discretionary profit sharing contributions in an amount to be determined in its sole discretion. In 2010, the Company made discretionary contributions of $2.2 million (2009 - $1.9 million).
Page 5
Participant Accounts
Each participant’s account is credited with the participant’s contribution and an allocation of the Company’s contributions and Plan earnings. Earnings are allocated from a particular fund based on the ratio of a participant’s account invested in the fund to all participants’ investments in that fund. Plan expenses are generally paid by the Company, which is the Plan Sponsor. Participant accounts are charged an administration fee related to their outstanding loans.
Participants are responsible for investment decisions relating to the investment of assets in their account. The Trustee carries out all investing transactions on behalf of the participant.
Notes Receivable from Participants
Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50 per cent of their vested account balance, reduced by the highest outstanding note balance in their account during the prior 12 month period. Note terms range from one to five years for general notes or up to 15 years for the purchase of a primary residence. The notes are secured by the balance in the participant’s account and bear interest at a reasonable interest rate, as determined by TCUSA (the Plan Administrator), based on prevailing market interest rates at the time. Interest rates remain fixed throughout the duration of the term. Interest rates on notes outstanding at December 31, 2010 and 2009 ranged from 4.25 per cent to 9.25 per cent. Principal and interest are paid through payroll deductions.
A note receivable from a participant shall be considered in default if any scheduled repayment remains unpaid as of the last business day of the calendar quarter following the calendar quarter in which the note is initially considered past due. In the event of a default or termination of employment the entire outstanding note and accrued interest is considered to be a deemed distribution to the participant.
Investment in TransCanada Corporation
Stock of TransCanada Corporation (TransCanada), parent company to TCUSA, is available to participants in the Plan. A participant’s portfolio may consist of up to 10 per cent of TransCanada stock.
Administrative Expenses
The Plan Administrator is responsible for filing all required reports on behalf of the Plan. The Company provides or pays for certain accounting, legal and management services on behalf of the Plan. The Company has not charged the Plan for these expenses or services.
Plan Termination
Although it has not expressed any intent to do so, with approval from its Board of Directors, the Company has the right under the Plan to discontinue contributions at any time and to terminate the Plan, subject to the provisions of ERISA. In the event of Plan termination, participants would be 100 per cent vested in their accounts.
NOTE 2: SUMMARY OF ACCOUNTING POLICIES
Basis of Presentation
The financial statements of the Plan are prepared on a going concern basis and do not purport to reflect the financial status of the Plan if it were terminated. These financial statements present the aggregate financial status of the Plan and provide no information about the portion of assets attributable to any individual member or group of members. Amounts are stated in U.S. dollars.
Page 6
The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 these estimates.
Basis of Accounting
These financial statements are prepared using the accrual basis of accounting.
Investment Valuation and Income Recognition
The Plan’s investments are stated at fair value. The fair value of shares is determined by quoted prices in active markets using the closing sale price on the last business day of the Plan year.
Interest income is recorded on the accrual basis and dividends are recorded on the ex-dividend date.
Net Increase in Fair Value of Investments consists of: (1) the unrealized gains or losses on investments held during the year and (2) the realized gains or losses recognized on the sale of investments during the year.
Purchases and sales of securities are recorded on a trade-date basis. Realized gains and losses from security transactions are reported on the average cost basis.
Notes Receivable
Notes Receivable from Participants include the unpaid principal balance plus any accrued interest.
Contributions and Payment of Benefits
Contributions are recorded in the period in which they become obligations of the Company. Benefits are recorded when paid.
NOTE 3: INVESTMENTS
The Plan utilizes various investments, including common stock and mutual funds. Investment securities are exposed to various risks, such as counterparty credit risk, liquidity risk and market risk. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in value of these investments, it is reasonably possible that changes in the values of investment securities may occur in the near term and that such changes could materially affect participant account balances and the amounts reported in the financial statements.
The Plan’s exposure to credit loss in the event of nonperformance of investments managed by the Trustee is limited to the carrying value of such instruments. The Plan’s concentrations of credit risk, interest rate risk and market risk are dictated by the Plan’s provisions as well as those of ERISA and the participants’ investment preference.
Fair Value Hierarchy
The Plan’s financial assets and liabilities recorded at fair value have been categorized into three categories based on a fair value hierarchy. In Level I, the fair value of assets and liabilities is determined by reference to quoted prices in active markets for identical assets and liabilities. In Level II, determination of the fair value of assets and liabilities includes valuations using inputs, other than quoted prices, for which all significant outputs are observable, directly or indirectly. This category includes fair value determined using valuation techniques, such as option pricing models and extrapolation using observable inputs. In Level III, determination of the fair value of assets and liabilities is based on inputs that are not readily observable and are significant to the overall fair value measurement. There were no Level II or Level III items or transfers between categories in 2010 or 2009. Financial assets measured at fair value on a recurring basis are classified in the Level I fair value category as follows.
Page 7
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Quoted Prices in Active Markets (Level I)
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December 31 (thousands of dollars)
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2010
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2009
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Mutual funds
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Equity
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66,871
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49,632
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Balanced
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26,810
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20,581
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Fixed income
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10,564
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8,307
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Money market
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7,592
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6,761
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111,837
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85,281
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Common stock and other
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2,251
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1,269
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Investments at Fair Value
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114,088
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86,550
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Significant Investments
The following is a summary of investments which represented five per cent or more of the Plan’s Net Assets Available for Benefits:
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December 31 (thousands of dollars)
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2010
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2009
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Fidelity® Diversified International Fund
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12,183
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10,143
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Fidelity® Equity Income Fund
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8,025
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6,066
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Baron Asset Fund
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7,919
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5,549
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Artisan Mid Cap Value Fund
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7,874
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5,880
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Fidelity® Retirement Money Market Fund
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7,592
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6,761
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Fidelity® U.S. Bond Index Fund
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6,658
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5,357
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Fidelity Freedom 2020 Fund ®
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6,388
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4,998
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Fidelity® Dividend Growth Fund
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6,323
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-
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RS Partners CL A
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5,914
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-
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Net Increase in Fair Value of Investments
Net Increase in Fair Value of Investments by major category (including investments purchased, sold and held during the year) was as follows:
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Year ended December 31 (thousands of dollars)
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2010
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2009
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Mutual funds
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10,896
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15,883
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Common stock and other
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195
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252
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Net Increase in Fair Value of Investments
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11,091
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16,135
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NOTE 4: INCOME TAXES
The Plan was a prototype plan designed by the Trustee. The Internal Revenue Service has determined and informed the Company, by a letter dated October 9, 2003, that the Plan and related trust are designed in accordance with applicable sections of the Code. Effective December 15, 2009, the Plan was restated to a volume submitter plan. A determination letter filing process is underway. The Plan Administrator and the Plan’s tax counsel believe that the Plan is designed and is currently being operated in compliance with the applicable requirements of the Code. The Plan is exempt from federal income taxes. Accordingly, no provision for federal income taxes has been made in the accompanying financial statements.
Page 8
The Plan Administrator has analyzed any income tax assets and liabilities of the Plan and has concluded that as of December 31, 2010 and 2009, there are no uncertain income tax positions taken or expected to be taken that would require recognition of a liability or asset, or disclosure in the financial statements. The Plan is subject to audits by taxing jurisdictions, however, there are currently no audits in progress for any tax periods. The Plan Administrator believes it is no longer subject to income tax examinations for years prior to 2007.
NOTE 5: PARTY-IN-INTEREST AND RELATED PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by Fidelity, the Trustee, therefore these transactions qualify as party-in-interest.
In 2010, the Company incurred $29,981 (2009 - $39,649) of administrative expenses, as described in Note 1, on behalf of the Plan. The Company has not charged the Plan for these expenses.
At December 31, 2010, Plan investments included $2.3 million (2009 – $1.3 million) of TransCanada common stock and $1,212 (2009 – $1,128) in a TransCanada stock purchase account.
NOTE 6: SUBSEQUENT EVENTS
Subsequent events have been assessed up to the date the financial statements were available for issuance.
Page 9
TRANSCANADA 401(K) AND SAVINGS PLAN
EIN #: 98-0460263
PLAN #: 001
FORM 5500 SCHEDULE H, PART IV, LINE 4i – SCHEDULE OF ASSETS (HELD AT END OF YEAR)
AS OF DECEMBER 31, 2010
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(a)
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(b)
Identity of Issuer, Borrower,
Lessor or Similar Party
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(c)
Description of Investment
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(e)
Current
Value
(US dollars)
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*
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Fidelity® Diversified International Fund
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Mutual Fund
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12,183,009
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*
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Fidelity® Equity Income Fund
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Mutual Fund
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8,024,796
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Baron Asset Fund
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Mutual Fund
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7,918,823
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Artisan Mid Cap Value Fund
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Mutual Fund
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7,873,813
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*
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Fidelity® Retirement Money Market Fund
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Mutual Fund
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7,591,836
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*
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Fidelity® U.S. Bond Index Fund
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Mutual Fund
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6,657,735
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*
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Fidelity Freedom 2020 Fund®
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Mutual Fund
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6,387,883
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*
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Fidelity® Dividend Growth Fund
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Mutual Fund
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6,323,204
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RS Partners CL A
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Mutual Fund
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5,913,665
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*
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Fidelity® Export & Multinational Fund
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Mutual Fund
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5,697,494
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*
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Spartan® 500 Index Fund
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Mutual Fund
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4,612,472
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*
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Fidelity Freedom 2025 Fund®
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Mutual Fund
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4,164,313
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*
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Fidelity Freedom 2015 Fund®
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Mutual Fund
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3,985,127
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*
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Fidelity Freedom 2030 Fund®
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Mutual Fund
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3,916,543
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*
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Fidelity® Growth Strategies Fund
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Mutual Fund
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3,299,248
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*
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Fidelity® Fund
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Mutual Fund
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3,185,066
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*
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Fidelity Inflation-Protected Bond Fund
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Mutual Fund
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3,064,730
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*
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Fidelity Freedom 2035 Fund®
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Mutual Fund
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2,747,884
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*
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Fidelity Freedom 2010 Fund®
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Mutual Fund
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1,844,410
|
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Hartford Growth CL Y
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Mutual Fund
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1,839,066
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*
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Fidelity Freedom 2040 Fund®
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Mutual Fund
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1,623,530
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*
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Fidelity Freedom Income Fund®
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Mutual Fund
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841,240
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*
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Fidelity Freedom 2050 Fund®
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Mutual Fund
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807,826
|
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*
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Fidelity Freedom 2045 Fund®
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Mutual Fund
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794,156
|
||||
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*
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Fidelity Freedom 2000 Fund®
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Mutual Fund
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351,663
|
||||
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*
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Fidelity Freedom 2005 Fund®
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Mutual Fund
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187,273
|
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Total Mutual Funds
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111,836,805
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*
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TransCanada Corporation
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Common Stock
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2,250,143
|
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*
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TransCanada Corporation
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Stock Purchase Account
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1,212
|
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*
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Participant Loans
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Interest rates ranging from 4.25% to 9.25% maturing through 2025
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3,555,308
|
||||
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Total Investments
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117,643,468
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* Represents a party-in-interest (Note 5).
See accompanying Report of Independent Registered Public Accounting Firm.
Page 10
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, TransCanada USA Services Inc. as Plan Administrator, has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: June 23, 2011
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Non Union Plan #46840–TransCanada 401(k) and Savings Plan
|
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By:
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/s/ Wendy L. Hanrahan
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Wendy L. Hanrahan
Vice-President
TransCanada USA Services Inc., the Plan Administrator
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EXHIBIT INDEX
|
|
23.1
|
Consent of Independent Registered Public Accounting Firm to incorporation by reference in Form S-8.
|