1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT TO APPLICATION OR REPORT
Filed Pursuant to Section 12, 13, or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
SUN COMPANY, INC.
--------------------------------------------------
(Exact name of registrant as specified in charter)
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items of its
Annual Report on Form 10-K for the fiscal year ended December 31, 1997 as
set forth in the pages attached hereto:
Part II. Item 8. Financial Statements and Supplementary Data
Part IV. Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by
the undersigned, thereunto duly authorized.
SUN COMPANY, INC.
BY s/Thomas W. Hofmann
------------------------------
Thomas W. Hofmann
Comptroller
(Principal Accounting Officer)
DATE June 25, 1998
2
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pursuant to General Instruction F to Form 10-K and Rule 15(d)-21 under the
Securities Exchange Act of 1934, the financial statements required by
Form 11-K with respect to the Sun Company, Inc. Capital Accumulation Plan
are furnished as part of the Sun Company, Inc. Annual Report on Form 10-K
for the fiscal year ended December 31, 1997. As permitted by the rules
with respect to Form 11-K, plan financial statements for the Sun Company,
Inc. Capital Accumulation Plan are furnished in accordance with the
financial reporting requirements of the Employee Retirement Income Security
Act of 1974, as amended (ERISA).
3
REPORT OF INDEPENDENT AUDITORS
Plan Administrator
Sun Company, Inc. Capital Accumulation Plan
We have audited the accompanying statements of net assets available for
plan benefits of the Sun Company, Inc. Capital Accumulation Plan (Plan) as
of December 31, 1997 and 1996, and the related statements of changes in net
assets available for plan 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 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, the financial statements referred to above present fairly,
in all material respects, the net assets available for plan benefits of the
Plan as of December 31, 1997 and 1996 and the changes in its net assets
available for plan benefits for the years then ended, in conformity with
generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the
basic financial statements taken as a whole. The accompanying supplemental
schedule of Assets Held for Investment Purposes at December 31, 1997 is
presented for purposes of complying with the Department of Labor's Rules
and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974, and is not a required part of the basic
financial statements. The Fund Information in the statements of net assets
available for plan benefits and the statements of changes in net assets
available for plan benefits is presented for purposes of additional
analysis rather than to present the net assets available for plan benefits
and changes in net assets available for plan benefits of each fund. The
supplemental schedule and Fund Information 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 in relation
to the basic financial statements taken as a whole.
Philadelphia, Pennsylvania
June 24, 1998
4
SUN COMPANY, INC. CAPITAL ACCUMULATION PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION
AT DECEMBER 31, 1997
U.S. DIVERSIFIED CAPITAL
EQUITY INDEX EXTENDED MARKET INTERNATIONAL INVESTMENTS PRESERVATION
ASSETS FUND EQUITY FUND FUND FUND FUND
- ------ ------------- --------------- -------------- ------------- --------------
Investment in Sun Company, Inc.
Defined Contribution Master
Trust (Notes 1 and 2) $197,092,425 $14,010,708 $11,521,107 $104,101,360 $228,702,986
Loans receivable from participants,
including accrued interest (Note 1) -- -- -- -- --
Other receivables 3,524 -- -- 5,154 20,033
Interfund transfer receivable (payable) 1,208,559 1,098,746 (161,780) (318,672) 1,550,878
------------ ----------- ----------- ------------ ------------
Total assets 198,304,508 15,109,454 11,359,327 103,787,842 230,273,897
------------ ----------- ----------- ------------ ------------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS (Notes 3 and 5) $198,304,508 $15,109,454 $11,359,327 $103,787,842 $230,273,897
============ =========== =========== ============ ============
See accompanying notes to financial statements.
5
SUN COMPANY, INC. CAPITAL ACCUMULATION PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION - Continued
AT DECEMBER 31, 1997
SUN
COMMON STOCK
ASSETS FUND ESOP FUND LOAN FUND TOTAL
- ------ ------------ ----------- ------------ ------------
Investment in Sun Company, Inc.
Defined Contribution Master
Trust (Notes 1 and 2) $52,821,963 $93,634,159 $ -- $701,884,708
Loans receivable from participants,
including accrued interest (Note 1) -- -- 15,182,095 15,182,095
Other receivables 11 19 -- 28,741
Interfund transfer receivable (payable) (1,970,156) (1,407,575) -- --
----------- ----------- ----------- ------------
Total assets 50,851,818 92,226,603 15,182,095 717,095,544
----------- ----------- ----------- ------------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS (Notes 3 and 5) $50,851,818 $92,226,603 $15,182,095 $717,095,544
=========== =========== =========== ============
See accompanying notes to financial statements.
6
SUN COMPANY, INC. CAPITAL ACCUMULATION PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1997
U.S. DIVERSIFIED CAPITAL
EQUITY INDEX EXTENDED MARKET INTERNATIONAL INVESTMENTS PRESERVATION
FUND EQUITY FUND FUND FUND FUND
------------ --------------- -------------- ------------ -------------
Additions (deductions):
Employees' contributions $ 6,974,064 $ 541,452 $ 405,338 $ 4,358,663 $ 7,618,710
Employers' contributions 4,039,971 313,730 234,904 2,524,403 4,412,342
Transfers and rollovers from
tax-qualified plans (Note 1) 2,161,493 659,184 474,302 1,219,391 4,462,623
Interfund transfers 12,567,635 8,354,673 8,484,974 (4,071,807) (1,253,037)
Interest income (Note 3) -- -- -- -- --
Increase in value of participation in
Sun Company, Inc. Defined Contribution
Master Trust (Notes 1 and 3) 47,468,111 1,856,386 102,413 20,261,576 15,951,023
Benefits paid to participants (Note 5) (17,327,709) (677,408) (895,497) (11,617,811) (42,793,158)
Administrative expenses (Note 2) (92,891) (5,767) (4,498) (161,288) (432,184)
------------ ----------- ----------- ------------ ------------
Net additions (deductions) 55,790,674 11,042,250 8,801,936 12,513,127 (12,033,681)
Net assets available for plan benefits,
January 1, 1997 142,513,834 4,067,204 2,557,391 91,274,715 242,307,578
------------ ----------- ----------- ------------ ------------
Net assets available for plan benefits,
December 31, 1997 $198,304,508 $15,109,454 $11,359,327 $103,787,842 $230,273,897
============ =========== =========== ============ ============
See accompanying notes to financial statements.
7
SUN COMPANY, INC. CAPITAL ACCUMULATION PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1997
SUN
COMMON STOCK
FUND ESOP FUND LOAN FUND TOTAL
------------ ------------ ------------ -------------
Additions (deductions):
Employees' contributions $ 2,708,158 $ -- $ -- $ 22,606,385
Employers' contributions 1,570,139 -- -- 13,095,489
Transfers and rollovers from
tax-qualified plans (Note 1) 179,474 262 -- 9,156,729
Interfund transfers (3,787,466) (21,010,548) 715,576 --
Interest income (Note 3) -- -- 1,182,598 1,182,598
Increase in value of participation in
Sun Company, Inc. Defined Contribution
Master Trust (Notes 1 and 3) 23,321,263 47,677,820 -- 156,638,592
Benefits paid to participants (Note 5) (1,484,836) (2,765,207) (1,185,369) (78,746,995)
Administrative expenses (Note 2) (20,571) (38,615) -- (755,814)
----------- ------------ ----------- ------------
Net additions (deductions) 22,486,161 23,863,712 712,805 123,176,984
Net assets available for plan benefits,
January 1, 1997 28,365,657 68,362,891 14,469,290 593,918,560
----------- ------------ ----------- ------------
Net assets available for plan benefits,
December 31, 1997 $50,851,818 $ 92,226,603 $15,182,095 $717,095,544
=========== ============ =========== ============
See accompanying notes to financial statements.
8
SUN COMPANY, INC. CAPITAL ACCUMULATION PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION
AT DECEMBER 31, 1996
U.S. DIVERSIFIED CAPITAL
EQUITY INDEX EXTENDED MARKET INTERNATIONAL INVESTMENTS PRESERVATION
ASSETS FUND EQUITY FUND FUND FUND FUND
- ------ ------------- --------------- -------------- ------------- --------------
Investment in Sun Company, Inc.
Defined Contribution Master
Trust (Notes 1 and 2) $143,058,220 $2,922,949 $1,929,784 $92,107,260 $242,129,588
Loans receivable from participants,
including accrued interest (Note 1) -- -- -- -- --
Other receivables 1,330 25 17 837 2,193
Interfund transfer receivable (payable) (481,364) 1,145,184 628,296 (639,030) 331,049
------------ ---------- ---------- ----------- ------------
Total assets 142,578,186 4,068,158 2,558,097 91,469,067 242,462,830
------------ ---------- ---------- ----------- ------------
LIABILITIES
- -----------
Miscellaneous payables 64,352 954 706 194,352 155,252
------------ ---------- ---------- ----------- ------------
Total liabilities 64,352 954 706 194,352 155,252
------------ ---------- ---------- ----------- ------------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS (Notes 3 and 5) $142,513,834 $4,067,204 $2,557,391 $91,274,715 $242,307,578
============ ========== ========== =========== ============
See accompanying notes to financial statements.
9
SUN COMPANY, INC. CAPITAL ACCUMULATION PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION - Continued
AT DECEMBER 31, 1996
SUN
COMMON STOCK
ASSETS FUND ESOP FUND LOAN FUND TOTAL
- ------ ------------ ----------- ------------ ------------
Investment in Sun Company, Inc.
Defined Contribution Master
Trust (Notes 1 and 2) $28,494,427 $69,258,517 $ -- $579,900,745
Loans receivable from participants,
including accrued interest (Note 1) -- -- 14,469,290 14,469,290
Other receivables 270 609 -- 5,281
Interfund transfer receivable (payable) (117,093) (867,042) -- --
----------- ----------- ----------- ------------
Total assets 28,377,604 68,392,084 14,469,290 594,375,316
----------- ----------- ----------- ------------
LIABILITIES
- -----------
Miscellaneous payables 11,947 29,193 -- 456,756
----------- ----------- ----------- ------------
Total liabilities 11,947 29,193 -- 456,756
----------- ----------- ----------- ------------
NET ASSETS AVAILABLE FOR PLAN
BENEFITS (Notes 3 and 5) $28,365,657 $68,362,891 $14,469,290 $593,918,560
=========== =========== =========== ============
See accompanying notes to financial statements.
10
SUN COMPANY, INC. CAPITAL ACCUMULATION PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1996
U.S. DIVERSIFIED CAPITAL
EQUITY INDEX EXTENDED MARKET INTERNATIONAL INVESTMENTS PRESERVATION
FUND EQUITY FUND FUND FUND FUND
------------ --------------- -------------- ------------ -------------
Additions (deductions):
Employees' contributions $ 6,192,751 $ 25,145 $ 13,961 $ 4,655,168 $ 9,368,919
Employers' contributions 3,598,330 14,684 8,045 2,705,194 5,454,203
Transfers and rollovers from
tax-qualified plans (Note 1):
Atlantic Savings Plan 8,899,969 -- -- -- 8,867,434
Other 1,174,089 126,982 84,054 865,286 1,237,215
Interfund transfers 14,308,465 3,857,544 2,411,794 (1,898,697) (10,464,316)
Dividends on Sun Common Stock (Note 3) -- -- -- -- --
Interest income (Note 3) -- -- -- -- --
Income from collective trust funds (Note 3) -- -- -- -- --
Increase in value of participation in
Sun Company, Inc. Defined Contribution
Master Trust (Notes 1 and 3) 23,795,755 46,856 41,325 10,529,681 16,092,422
Net depreciation in fair value of Sun
Common Stock (Note 3) -- -- -- -- --
Benefits paid to participants (Note 5) (6,806,323) (2,973) (1,026) (6,662,378) (25,750,267)
Administrative expenses (Note 2) (128,657) (1,034) (762) (291,107) (448,779)
------------ ---------- ---------- ----------- ------------
Net additions (deductions) 51,034,379 4,067,204 2,557,391 9,903,147 4,356,831
Net assets available for plan benefits,
January 1, 1996 91,479,455 -- -- 81,371,568 237,950,747
------------ ---------- ---------- ----------- ------------
Net assets available for plan benefits,
December 31, 1996 $142,513,834 $4,067,204 $2,557,391 $91,274,715 $242,307,578
============ ========== ========== =========== ============
See accompanying notes to financial statements.
11
SUN COMPANY, INC. CAPITAL ACCUMULATION PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1996
SUN
COMMON STOCK
FUND ESOP FUND LOAN FUND TOTAL
------------ ------------ ------------ -------------
Additions (deductions):
Employees' contributions $ 3,263,908 $ -- $ -- $ 23,519,852
Employers' contributions 1,896,712 -- -- 13,677,168
Transfers and rollovers from
tax-qualified plans (Note 1):
Atlantic Savings Plan -- -- -- 17,767,403
Other 121,245 -- -- 3,608,871
Interfund transfers (836,114) (13,240,866) 5,862,190 --
Dividends on Sun Common Stock (Note 3) 697,398 2,278,133 -- 2,975,531
Interest income (Note 3) -- -- 929,200 929,200
Income from collective trust funds (Note 3) 11,121 35,314 -- 46,435
Increase in value of participation in
Sun Company, Inc. Defined Contribution
Master Trust (Notes 1 and 3) 1,187,242 2,915,066 -- 54,608,347
Net depreciation in fair value of Sun
Common Stock (Note 3) (3,494,254) (10,193,483) -- (13,687,737)
Benefits paid to participants (Note 5) (210,941) (2,004,478) (253,926) (41,692,312)
Administrative expenses (Note 2) (38,837) (109,222) -- (1,018,398)
----------- ------------ ----------- ------------
Net additions (deductions) 2,597,480 (20,319,536) 6,537,464 60,734,360
Net assets available for plan benefits,
January 1, 1996 25,768,177 88,682,427 7,931,826 533,184,200
----------- ------------ ----------- ------------
Net assets available for plan benefits,
December 31, 1996 $28,365,657 $ 68,362,891 $14,469,290 $593,918,560
=========== ============ =========== ============
See accompanying notes to financial statements.
12
SUN COMPANY, INC. CAPITAL ACCUMULATION PLAN
NOTES TO FINANCIAL STATEMENTS
1. GENERAL DESCRIPTION
-------------------
The Sun Company, Inc. Capital Accumulation Plan (Plan) is a combined
profit-sharing and employee stock ownership plan. The Plan provides
eligibility for membership for certain employees of Sun Company, Inc.
and its participating subsidiary companies (collectively, Sun) who are
paid in U.S. dollars and who have completed at least 1,000 hours of
service with Sun in a twelve-month period. An eligible employee can
join the Plan at any time starting with the first payroll period which
begins on or next following the day after he or she gives written
notice to the Plan Administrator. The ESOP Fund is an employee stock
ownership plan, while the remaining funds form a profit-sharing plan.
The Plan provides an individual account for each participant. Amounts
disbursed to participants or transferred among funds are based solely
upon amounts contributed to each participant's account adjusted to
reflect any withdrawals and distributions, investment earnings
attributable to such account balances, and appreciation or
depreciation of the market value of the account balance.
Contributions:
-------------
In general, a participant may make Basic Contributions to the Plan of
up to 5% in whole percentages of base pay on a pre-tax basis (Basic
Pre-Tax Contributions) or on a post-tax basis (Basic Post-Tax
Contributions). The participant also may elect to make additional
contributions up to 10% of base pay provided, however, that Basic Pre-
Tax or Basic Post-Tax Contributions are at least 5% of base pay. The
additional 10% may be contributed either on a pre-tax basis
(Additional Pre-Tax Contributions), post-tax basis (Additional Post-
Tax Contributions) or any combination thereof. For certain
participants, limitations imposed by the Internal Revenue Code of
1986, as amended (Code), as described below, restrict their ability to
make Basic Pre-Tax Contributions or Additional Pre-Tax Contributions.
However, such participants may make Basic Post-Tax Contributions and
Additional Post-Tax Contributions such that the sum of their total and
employer contributions do not exceed other limits imposed by the Plan
or the Code.
For every dollar a participant contributes as Basic Contributions, Sun
contributes another full dollar (Matching Employer Contributions).
Pre-tax contributions by each participant may not exceed an annual
limit which is subject to annual upward adjustment for increases in
the cost of living as determined under Internal Revenue Service (IRS)
regulations. This limit was $9,500 for both 1997 and 1996.
13
SUN COMPANY, INC. CAPITAL ACCUMULATION PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
1. GENERAL DESCRIPTION (Continued)
------------------------------
The pre-tax contributions and combined Basic Post-Tax Contributions,
Additional Post-Tax Contributions and Matching Employer Contributions
of participants who come within the classification of "highly
compensated employees" as defined in the Code, may not exceed certain
technical limits under the Code. Generally, the allowable percentage
of such contributions for the highly compensated employees is
dependent upon the percentage of contributions made by all other
employees. These limitations may have the effect of reducing the
level of contributions initially selected by the highly compensated
employees. In addition, the total employer and employee contributions
which may be allocated to a participant's account may be limited by
Section 415 of the Code.
The Plan contains a special provision designed to permit the Plan to
borrow money to purchase a significant number of shares of Sun Common
Stock. Such borrowing could only occur upon the action of the Board
of Directors of Sun Company, Inc. If this should occur, the
securities purchased with the proceeds of such a loan will not be
allocated immediately to the accounts of Plan participants but will be
held by the Plan in an unallocated suspense account. Securities will
be released from the suspense account as the loan is repaid and will
be allocated to participants' accounts according to the ratio which
the participant's compensation bears to the compensation of all
participants in the Plan. No participant contributions will be
required or permitted in paying off the loan. Further, subject to
applicable limitations imposed by Section 415 of the Code and
limitations on allocations as set forth in the Plan, any securities
which are allocated to participants' accounts as a result of the
repayment of the loan may, in the discretion of the Plan
Administrator, be used to satisfy Sun's obligation with respect to any
Matching Employer Contributions. As of December 31, 1997, no
borrowings had been approved.
Effective April 1, 1998, a participant's account is credited daily
with units representing interests held in each of the funds described
below. Prior to this date, such crediting occurred at the end of each
month. A participant's account balance is immediately 100% vested.
Investment of Employees' Contributions:
--------------------------------------
Bankers Trust Company is the Trustee for investments. The participant
has the option of investing contributions in any one or more of six
funds: the Equity Index Fund; the U.S. Extended Market Equity Fund;
the International Fund; the Diversified Investments Fund; the Capital
Preservation Fund; or, the Sun Common Stock Fund. Participants'
accounts earn a blended rate, or weighted average, of all of the
investments held in the respective funds. These funds and the ESOP
Fund are currently invested in corresponding funds with the same
investment objectives in the Sun Company, Inc. Defined Contribution
14
SUN COMPANY, INC. CAPITAL ACCUMULATION PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
1. GENERAL DESCRIPTION (Continued)
------------------------------
Master Trust (Master Trust). The Master Trust also includes
investments from other Sun tax-qualified defined contribution plans.
Each plan's relative interest in the individual Master Trust funds and
the related income and administrative expense is determined on a basis
proportionate to each plan's past contributions adjusted to reflect
distributions, transfers and prior investment earnings to such funds.
The following table sets forth each fund's respective share of the
total net assets of the corresponding Master Trust fund at
December 31, 1997 and 1996:
1997 1996
Equity Index Fund 99.3226% 99.4841%
U.S. Extended Market Equity
Fund* 100.0000% 100.0000%
International Fund* 100.0000% 100.0000%
Diversified Investments Fund 98.4328% 98.7513%
Capital Preservation Fund 92.5522% 93.2341%
Sun Common Stock Fund** 100.0000% 100.0000%
ESOP Fund** 100.0000% 100.0000%
-------------
*Established as an investment alternative in October 1996.
**The Plan's investments in the Sun Common Stock Fund and the ESOP
Fund were transferred to the Master Trust on September 1, 1996.
Set forth below is a brief description of these funds:
Equity Index Fund - a fund to be invested by investment managers in
a broadly diversified portfolio of common stocks, other types of
equity investments and/or an index fund of large, established,
well-known corporations. The fund may not be invested in any Sun
Company, Inc. securities except that an index fund may contain Sun
Company, Inc. securities. Effective January 23, 1998, the Equity
Index Fund of the Master Trust is invested in an index fund
maintained by Bankers Trust Company which is designed to
approximate the performance of the Standard & Poor's 500 Composite
Stock Index; however, alternate stock market indices and/or an
actively managed portfolio could be substituted at any time. Prior
to January 23, 1998, such index fund was maintained by Barclays
Global Investors or its predecessor, Wells Fargo Institutional
Trust Company.
U.S. Extended Market Equity Fund - a fund to be invested by
investment managers in a portfolio of common stocks, other types of
equity investments and/or an index fund of small and medium-sized
United States companies diversified across a broad range of
industry sectors. Effective January 23, 1998, the U.S. Extended
15
SUN COMPANY, INC. CAPITAL ACCUMULATION PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
1. GENERAL DESCRIPTION (Continued)
------------------------------
Market Equity Fund of the Master Trust is invested in an index fund
maintained by Bankers Trust Company which is designed to
approximate the performance of the Russell 2500 Index; however,
alternate stock market indices and/or an actively managed portfolio
could be substituted at any time. Prior to January 23, 1998, the
U.S. Extended Market Equity Fund was invested in an index fund
designed to approximate the Wilshire 4500 Index maintained by
Barclays Global Investors or its predecessor, Wells Fargo
Institutional Trust Company.
International Fund - a fund to be invested by investment managers
in a diversified portfolio of common stocks, other types of equity
investments and/or an index fund of companies based outside the
United States. This fund is subject to foreign currency exchange
rate risk and "single country" investment risk since it is invested
in the Japanese market, which comprises a significant portion of
the total international equity market. The International Fund of
the Master Trust is currently invested in an actively managed
portfolio which is managed by the Capital Guardian Trust Company.
Diversified Investments Fund - a fund to be invested by investment
managers in a combination of equity investments (diversified common
stocks, other types of equity investments and/or an index fund of
large, established, well-known corporations) and fixed income
securities, including U.S Treasury bonds and money market
instruments. The fund may not be invested in any Sun Company, Inc.
securities except that an index fund may contain Sun Company, Inc.
securities. The Diversified Investments Fund of the Master Trust
is currently invested in a tactical asset allocation fund
maintained by Barclays Global Investors.
Capital Preservation Fund - a fund to be invested in: (1) a series
of contracts with insurance companies or other financial
institutions where the repayment of principal and payment of
interest at a fixed rate for a fixed period of time are backed by
the financial strength of such financial institutions (standard
investment contracts); (2) contracts with financial institutions
backed by the types of obligations described below (synthetic
investment contracts); (3) U.S. government-backed and agency
obligations; or (4) fixed income securities of corporations
primarily rated "investment grade" and high-quality asset-backed
securities primarily rated "AAA". The Capital Preservation Fund of
the Master Trust is currently managed by Certus Asset Advisors.
Sun Common Stock Fund - a fund to be invested principally in Sun
Common Stock. Cash contributions directed for investment in the
Sun Common Stock Fund are used by the Trustee to purchase Sun
Common Stock on securities exchanges, from Sun Company, Inc., or
from any other bona fide offeror of such Sun Common Stock, at the
lowest price obtainable at the time.
16
SUN COMPANY, INC. CAPITAL ACCUMULATION PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
1. GENERAL DESCRIPTION (Continued)
------------------------------
ESOP Fund - a fund to be invested principally in Sun Common Stock,
which constitutes an employee stock ownership plan under
Section 4975(e)(7) of the Code. Effective March 1, 1995, no
contributions are invested directly in the ESOP Fund; prior to such
date only company contributions were invested directly in the ESOP
Fund.
Each of the above funds may invest in short-term investments for
purposes of administering the funds, including satisfying the
transfer and withdrawal requests of participants.
At December 31, 1997 and 1996, the Capital Preservation Fund of the
Master Trust is principally invested in both standard and synthetic
investment contracts. Identified below are the insurance companies
and other financial institutions that have entered into standard
investment contracts as of December 31, 1997 and 1996 with the
Master Trust to pay interest on funds invested with them:
% of Master
Trust Capital
Effective Preservation
Annual Fund Net Assets
Interest at 12/31 Last
Rate (Net --------------- Maturity
Financial Institution of Expenses) 1997 1996 Date
- --------------------- ------------ ------------- --------
Hartford Life Insurance Company 8.31% -% 2% 7/15/97
Metropolitan Life Insurance
Company 7.41% 3 2 9/15/99
New York Life Insurance Co. 7.35% - 2 3/17/97
New York Life Insurance Co. 8.07% 3 4 10/16/00
Principal Mutual Life Insurance
Company 9.22% - 4 6/30/97
Protective Life Insurance Company 6.74% 2 - 6/15/01
Prudential Asset Management Co. 5.53% 2 5 1/13/99
Safeco Life Insurance Companies 7.05% 2 2 6/15/00
Safeco Life Insurance Companies 6.55% 2 - 12/15/01
Security Life of Denver 6.60% 2 - 9/16/02
--- ---
16%* 21%*
=== ===
- -------------
*The other 84% and 79% of net assets of the Capital Preservation Fund of
the Master Trust at December 31, 1997 and 1996, respectively, are
invested in synthetic investment contracts (77% and 72%) and in
collective trust funds (7% and 7%) maintained by Bankers Trust Company
and Barclays Global Investors. The collective trust funds are comprised
primarily of U.S. government-backed and agency obligations and short-term
investments.
17
SUN COMPANY, INC. CAPITAL ACCUMULATION PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
1. GENERAL DESCRIPTION (Continued)
------------------------------
The Plan's relative interest in the standard investment contracts
with insurance companies or other financial institutions described
above represents the maximum potential credit losses from
concentrations of credit risk in the Capital Preservation Fund in
accordance with the provisions of Statement of Financial Accounting
Standards No. 105, "Disclosure of Information about Financial
Instruments with Off-Balance-Sheet Risk and Financial Instruments
with Concentrations of Credit Risk" (SFAS No. 105). SFAS No. 105
requires that such potential credit losses be determined assuming
(1) complete nonperformance by the counterparties to the
transactions and (2) any related collateral has no value. There is
no collateral associated with the standard investment contracts in
the Capital Preservation Fund. Plan management believes that
future credit losses of the Plan's investment in the Capital
Preservation Fund of the Master Trust, if any, would not be
material in relation to the Capital Preservation Fund's net assets
available for plan benefits at December 31, 1997. There are no
other significant concentrations of credit risk in other Plan
assets.
The Master Trust also has entered into synthetic investment
contracts with Bankers Trust Company, National Westminster Bank
plc, People's Security Life Insurance Company and Transamerica Life
Companies. The synthetic investment contracts are composed of
underlying assets and "wrappers", which are contracts that enable
withdrawals to be made at contract value, rather than at the market
value of the underlying assets. The contracts have underlying
assets invested either directly or through collective trust funds
in government agency-backed collateralized mortgage obligation
issues, government and corporate bonds and other asset-backed
securities. The contracts are presented below in two separate
portfolios based upon the investment strategy for the underlying
assets. The assets in the "Buy and Hold Portfolios" are expected
to be held until maturity, while the "Managed Portfolios" are
actively managed to reflect changing market conditions. Interest
crediting rates for these contracts are reset at least quarterly,
as specified in the respective contracts. The following table
details for each contract respective interest crediting rates and
percentage of the net assets of the Capital Preservation Fund of
the Master Trust at December 31, 1997 and 1996:
18
SUN COMPANY, INC. CAPITAL ACCUMULATION PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
1. GENERAL DESCRIPTION (Continued)
------------------------------
% of Master Trust
Capital Preservation
Financial Institutions Average Interest Fund Net Assets
Providing Wrapper Crediting Rate at 12/31
---------------------- ---------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
Buy and Hold Portfolios:
-----------------------
Bankers Trust Company --% 8.25% --% 2%
National Westminster Bank plc 6.64% 6.64% 4 4
People's Security Life
Insurance Co. 5.90% 5.90% 7 7
Transamerica Life Companies 6.69% 6.68% 13 12
Managed Portfolios:
------------------
Bankers Trust Company 6.98% 6.80% 24 22
People's Security Life
Insurance Co. 6.85% 7.18% 20 17
Transamerica Life Companies 8.53% 8.05% 9 8
---- ----
77% 72%
==== ====
Over time, the contracts will earn the rate of return of the
underlying assets.
The average interest crediting rates at December 31, 1997 and 1996
for all standard and synthetic investment contracts in the
aggregate were 6.95% and 7.09%, respectively. The average yields
for the years ended December 31, 1997 and 1996 for such contracts
in the aggregate were 6.90% and 7.01%, respectively.
Investment of Employers' Contributions:
--------------------------------------
Employer contributions are invested in each of the funds in the
same proportion as the participant's contributions are invested in
such funds.
Investment Earnings Reinvestment/Distribution:
---------------------------------------------
Earnings from dividends and interest in all funds (except the ESOP
Fund) are retained by the Trustee and reinvested in the same fund.
A participant who has funds in the ESOP Fund may elect to receive a
payment equal to the dividends due on all Sun Common Stock
attributable to his account in the ESOP Fund (dividend equivalents)
if they exceed $10. Dividends on Sun Common Stock in the ESOP
19
SUN COMPANY, INC. CAPITAL ACCUMULATION PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
1. GENERAL DESCRIPTION (Continued)
------------------------------
Fund for which a participant has not elected to receive an
equivalent distribution, or which are not eligible for payment, are
credited to his account in the ESOP Fund and are reinvested in Sun
Common Stock by the Trustee.
Rollovers, Withdrawals and Transfers:
------------------------------------
Certain employees of Sun may roll over the taxable portion of a
distribution from a tax-qualified plan of a previous employer into
the Plan, provided certain conditions imposed by the Plan
Administrator are met. Effective July 1, 1996, the Atlantic
Savings Plan was merged into the Plan and all participants in the
Atlantic Savings Plan became participants in the Plan. Such
transfers are separately reflected by fund in the statement of
changes in net assets available for plan benefits.
Employees who terminate employment and elect to defer the
distribution of their Plan account may also directly roll over the
taxable portion of distributions from other Sun tax-qualified plans
into the Plan.
Upon retirement or other termination of employment, the balances
credited to a participant's account will be held in the Plan until
the participant reaches age 70 1/2, unless the participant elects
an earlier distribution. Alternatively, a participant who
terminates service may request that the account balance be
transferred directly to an individual retirement account or annuity
or a defined contribution plan maintained by a successor employer.
Retirees or terminated vested persons, regardless of age, may elect
to take periodic distributions either through withdrawals every six
months in varying amounts or in substantially equal payments every
six months over the participant's remaining life expectancy.
A participant, during employment, may withdraw up to 100% of
Matching Employer Contributions, including any earnings thereon,
and his ESOP sub-account under the ESOP Fund, if any, provided that
such contributions have been in the Plan for two years. In
addition, a participant may withdraw up to 100% of Additional Post-
Tax Contributions including any earnings thereon. Withdrawals are
permitted once every six months.
20
SUN COMPANY, INC. CAPITAL ACCUMULATION PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
1. GENERAL DESCRIPTION (Continued)
------------------------------
Withdrawals from the Equity Index Fund, U.S. Extended Market
Equity Fund, International Fund and Diversified Investments Fund
are made in cash only while those from the Capital Preservation
Fund may be made in cash or as an annuity. Withdrawals from the
Sun Common Stock Fund and the ESOP Fund are made in the form of
Sun Common Stock or cash at the participant's discretion.
Effective April 1, 1998, withdrawals of Sun Common Stock are
valued at the closing market prices on the last business day of
the week in which the notice of withdrawal has been processed by
the Plan. Prior to this date, withdrawals of Sun Common Stock
were valued at the closing market prices of the month in which the
notice of withdrawal had been processed. Withdrawals will be
distributed from participants accounts in the following order:
Capital Preservation Fund
Diversified Investments Fund
Equity Index Fund
U.S. Extended Market Equity Fund
International Fund
Sun Common Stock Fund
ESOP Fund
While actively employed, a participant generally is not entitled
to withdraw Basic Pre-Tax Contributions, Basic Post-Tax
Contributions or Additional Pre-Tax Contributions, including
earnings thereon.
A participant may transfer investments among all Funds (except the
Loan Fund), subject generally to the following rules. A
participant may elect to change the investment allocation
percentage for any Fund (except the Loan Fund) or elect to
transfer a specified dollar amount from the Equity Index Fund,
U.S. Extended Market Equity Fund, International Fund, Diversified
Investments Fund and Capital Preservation Fund or share
equivalents from the Sun Common Stock and ESOP Funds. Effective
April 1, 1998, transfers or changes in fund allocation percentages
may be made daily. Prior to this date, such transfers or changes
in fund allocation percentages were permitted on a monthly basis.
Should total withdrawals or transfers from a fund during a month cause
the Trustee to liquidate securities, resulting in a gain or loss to
the fund, such gain or loss will be allocated, pro rata, among the
participants who made such withdrawals or transfers during that month.
Withdrawals and transfers of Sun Common Stock are subject to a maximum
500,000 shares per month limitation except that there is no limit in
the number of shares which may be withdrawn from the Plan.
Notwithstanding the foregoing, benefit payments shall be made in
accordance with the Code and IRS regulations and shall be made to a
participant and/or his designated beneficiary not later than April 1
of the calendar year following the calendar year in which the
participant attains 70 1/2 years of age.
21
SUN COMPANY, INC. CAPITAL ACCUMULATION PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
1. GENERAL DESCRIPTION (Continued)
------------------------------
Loans to Participants
---------------------
The Plan Administrator has the authority, in his sole discretion, to
direct the Trustee to lend a participant an amount not exceeding
certain portions of the participant's account balance in the Plan.
Participants are eligible to borrow if they are on the active payroll
of Sun and have a Plan account balance of at least $2,000. The
minimum loan amount is $1,000, while the maximum loan amount is the
lesser of (a) $50,000 adjusted downward by the highest outstanding
loan balance in the past twelve months or (b) one-half the value of
the participant's account balance. Participants are permitted to
borrow only once in a twelve-month period and to have no more than two
loans outstanding at any time. Loan proceeds are withdrawn from each
fund in which the participant has an account balance on a pro rata
basis and are not taxable to the participant when received. Any loan
which is not repaid is in default and the outstanding loan balance
(including accrued interest thereon) is treated as a distribution from
the Plan. Loans and related activity are reflected in the Loan Fund
in the accompanying financial statements. As loans receivable
(including interest thereon) are repaid, amounts are transferred into
the funds in the same proportion as the participant's current
contributions.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Use of Estimates:
----------------
Certain amounts included in the accompanying financial statements and
related footnotes reflect the use of estimates based on assumptions
made by the Plan's management. Actual amounts could differ from these
estimates.
Investments:
-----------
The valuation of the Plan's interests in collective trust funds or its
relative interest in such funds held by the Master Trust is based on
the closing market price on the last business day of the year of the
assets held in the funds; the Plan's relative interest in such funds
is determined by the Trustee on a unit-method basis. The Plan's
relative interest in investments in both standard and synthetic
investment contracts with insurance companies or other financial
22
SUN COMPANY, INC. CAPITAL ACCUMULATION PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
-----------------------------------------------------
institutions held by the Master Trust are stated at contract value.
Contract value represents contributions made under the contract plus
interest accrued at the contract rate less any withdrawals. Standard
investment contracts earn interest at fixed rates while synthetic
investment contracts earn interest at rates that are reset at least
quarterly as specified in the respective contract. The Master Trust's
management believes that the contract value of all of its investment
contracts approximates fair value. However, since there is no
significant secondary market for these investments, contract value may
not be indicative of amounts that could be realized in a current
market exchange. The valuation of Sun Common Stock is based on the
closing market price reported on the New York Stock Exchange on the
last business day of the Plan year.
Purchases and sales of securities are reflected on a trade-date basis.
Dividend income is reported on the ex-dividend date; interest income
is recorded as earned on an accrual basis. The net appreciation
(depreciation) in the fair value of Sun Common Stock, which consists
of realized gains (losses) and unrealized appreciation (depreciation),
is reported as a separate line item in the statements of changes in
net assets available for plan benefits, prior to the transfer of the
Plan's investments in Sun Common Stock to the Master Trust on
September 1, 1996. Beginning on September 1, 1996, the net
appreciation in the fair value of Sun Stock is reflected as a
component of the increase in value of participation in the Sun
Company, Inc. Defined Contribution Master Trust (Note 3).
Benefits Paid to Participants:
-----------------------------
Benefits paid to participants, which include withdrawals and
distributions, are recorded upon distribution.
Administrative Expenses:
-----------------------
All brokerage fees, taxes and other expenses related to the purchase
and sale of securities in all funds are paid out of the respective
assets of such funds. All other costs and expenses (other than the
cost of services provided by Sun employees which are paid by Sun)
incurred in administering the Plan are generally charged, pro rata, to
each of the respective funds.
23
SUN COMPANY, INC. CAPITAL ACCUMULATION PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
3. SUPPLEMENTAL INFORMATION
------------------------
The net asset value per unit and the number of units in the Plan at
December 31, 1997 and 1996, respectively, are as follows:
At December 31, 1997 At December 31, 1996
-------------------- --------------------
Net Asset Number Net Asset Number
Value of Value of
Per Unit Units Per Unit Units
-------- ------- -------- -------
Equity Index Fund $10.579 18,745,109 $7.929 17,973,746
U.S. Extended Market
Equity Fund $1.293 11,685,579 $1.025 3,968,004
International Fund $1.131 10,043,614 $1.039 2,461,395
Diversified Investments
Fund $5.727 18,122,550 $4.656 19,603,676
Capital Preservation
Fund $3.937 58,489,687 $3.689 65,683,811
Sun Common Stock Fund $1.132 44,922,101 $ .657 43,174,516
ESOP Fund $2.491 37,023,927 $1.447 47,244,569
Net asset value per unit is computed on a monthly basis by dividing
the value of all members' accounts by the units outstanding.
24
SUN COMPANY, INC. CAPITAL ACCUMULATION PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
3. SUPPLEMENTAL INFORMATION (Continued)
------------------------------------
The increase in value of participation in the Sun Company, Inc.
Defined Contribution Master Trust by fund for the years ended
December 31, 1997 and 1996 was composed of the following:
1997
--------------------------------------------------------------------------------
Equity U.S. Extended Diversified Capital
Index Market Equity International Investments Preservation
Fund Fund Fund Fund Fund
------------ -------------- ------------- ----------- -------------
Dividend income $ -- $ -- $ -- $ -- $ --
Interest income -- -- -- -- 14,993,486
Income from collective trust funds 908,540 140,548 118,720 4,041,864 913,405
Net appreciation (depreciation)
in fair value of instruments 46,559,571 1,715,838 (16,307) 16,219,712 44,132
----------- ---------- -------- ----------- -----------
$47,468,111 $1,856,386 $102,413 $20,261,576 $15,951,023
=========== ========== ======== =========== ===========
1997
----------------------------------------------
Sun Common
Stock Fund ESOP Fund Total
-------------- ---------- -----------
Dividend income $ 1,241,879 $ 2,562,420 $ 3,804,299
Interest income -- -- 14,993,486
Income from collective trust funds 23,251 38,475 6,184,803
Net appreciation (depreciation)
in fair value of instruments 22,056,133 45,076,925 131,656,004
----------- ----------- ------------
$23,321,263 $47,677,820 $156,638,592
=========== =========== ============
25
3. SUPPLEMENTAL INFORMATION (Continued)
------------------------------------
1996
--------------------------------------------------------------------------------
Equity U.S. Extended Diversified Capital
Index Market Equity International Investments Preservation
Fund Fund Fund Fund Fund
------------ -------------- ------------- ----------- -------------
Dividend income $ -- $ -- $ -- $ -- $ --
Interest income 19,357 533 17 9,471 15,002,951
Income from collective trust funds 2,629,387 13,048 280 3,955,878 1,207,889
Net appreciation (depreciation)
in fair value of instruments 21,147,011 33,275 41,028 6,564,332 (118,418)
----------- ------- ------- ----------- -----------
$23,795,755 $46,856 $41,325 $10,529,681 $16,092,422
=========== ======= ======= =========== ===========
1996
----------------------------------------------
Sun Common
Stock Fund* ESOP Fund* Total
-------------- ---------- -----------
Dividend income $ 286,140 $ 726,309 $ 1,012,449
Interest income -- -- 15,032,329
Income from collective trust funds 4,372 11,152 7,822,006
Net appreciation (depreciation)
in fair value of instruments 896,730 2,177,605 30,741,563
---------- ---------- -----------
$1,187,242 $2,915,066 $54,608,347
========== ========== ===========
- -------------
*Reflects the increase in value of participation in the Master Trust from September 1, 1996 (the date the Sun
Common Stock was transferred to the Master Trust) to December 31, 1996. Prior to the transfer, the individual components of
the increase (decrease) in value are separately reflected in the statement of changes in net assets available for plan
benefits.
26
SUN COMPANY, INC. CAPITAL ACCUMULATION PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
4. TAX STATUS
----------
By letter dated September 16, 1995, the IRS ruled that the Plan is
qualified as a tax-exempt plan with an underlying trust under
Sections 401(a), 401(k) and 501(a) of the Code and as an employee
stock ownership plan under Section 4975 (e)(7) of the Code.
5. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
---------------------------------------------------
The following is a reconciliation of net assets available for plan
benefits per the financial statements to the Internal Revenue Service
Form 5500 at December 31, 1997 and 1996:
1997 1996
------------ ------------
Net assets available for plan
benefits per the financial
statements $717,095,544 $593,918,560
Less: Benefit payments requested
by participants which have not
yet been paid at December 31 (4,384,000) (4,459,637)
------------ ------------
Net assets available for plan
benefits per the Form 5500 $712,711,544 $589,458,923
============ ============
27
SUN COMPANY, INC. CAPITAL ACCUMULATION PLAN
NOTES TO FINANCIAL STATEMENTS (Continued)
5. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500 (Continued)
---------------------------------------------------------------
The following is a reconciliation of benefits paid to participants per
the financial statements to the Internal Revenue Service Form 5500 for
the years ended December 31, 1997 and 1996:
1997 1996
------------ ------------
Benefits paid to participants per
the financial statements $78,746,995 $41,692,312
Add: Benefit payments requested by
participants which have not yet
been paid at December 31 4,384,000 4,459,637
Less: Benefit payments requested by
participants during the preceding
year which were paid during the
current year (4,459,637) (3,362,844)
----------- -----------
Benefits paid to participants per
the Form 5500 $78,671,358 $42,789,105
=========== ===========
Withdrawals requested by participants are recorded on the Form 5500
for benefit claims that have been processed and approved for payment
prior to December 31 but not yet paid as of that date.
6. YEAR 2000 INFORMATION PROCESSING (UNAUDITED)
--------------------------------------------
A program is currently underway to evaluate and implement changes that
will be necessary for the Plan to accurately process information at
and beyond the Year 2000. The program consists of an evaluation of
and changes to the Plan's information technology environment as well
as an assessment of the ability of the Plan's major service providers
to conduct business. Management expects that all of the Plan's
systems will be Year 2000 compliant by mid-1999 and that the costs
associated with this project will not be significant to the Plan.
Furthermore, the Plan has not identified any material adverse Year
2000 consequences to date in connection with any of its third-party
relationships.
28
SUN COMPANY, INC.
CAPITAL ACCUMULATION PLAN
PN 002
E.I. 23-1743282
SCHEDULE G
PART I - ASSETS HELD FOR INVESTMENT PURPOSES
FOR IRS FORM 5500 - ITEM 27(a)
AT DECEMBER 31, 1997
Description of Investment,
Including Maturity Date,
Identity of Issue, Borrower, Lessor Rate of Interest, Par Cost Current
or Similar Party or Maturity Value Value Value
----------------------------------- -------------------------- ----- -------
LOANS RECEIVABLE FROM PARTICIPANTS 8.25% - 8.50% with various $ -- $ 15,182,095
maturity dates (last maturity ------------ ------------
date - 12/31/07)
VALUE OF INTEREST IN MASTER TRUST
--------------------------------
Sun Company, Inc. Defined Contribution Master Trust
Equity Index Fund 18,745,109 units 101,327,040 197,092,425
U.S. Extended Market Equity Fund 11,685,579 units 12,261,596 14,010,708
International Fund 10,043,614 units 11,552,434 11,521,107
Diversified Investments Funds 18,122,550 units 102,733,763 104,101,360
Capital Preservation Fund 58,489,687 units 228,742,129 228,702,986
Sun Common Stock Fund 44,922,101 units 37,259,188 52,821,963
ESOP Fund 37,023,927 units 60,569,204 93,634,159
------------ ------------
554,445,354 701,884,708
------------ ------------
$554,445,354 $717,066,803
============ ============
/TABLE
29
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) The following document is filed as part of this report:
3. Exhibits:
23.1 - Consent of Ernst & Young LLP for the Sun Company,
Inc. Capital Accumulation Plan.