EX 99-b
Form 10-K for 1998
File No. 1-8610
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 11-K
ANNUAL REPORT
------------------
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1998
Commission File Number l-8610
---------------------
SBC SAVINGS PLAN
---------------------
SBC COMMUNICATIONS INC.
175 E. Houston, San Antonio, Texas 78205
Financial Statements, Supplemental Schedules and Exhibits
Table of Contents
Page
Report of Independent Auditors..............................................1
Financial Statements:
Statement of Net Assets Available for Plan Benefits as of
December 31, 1998...................................................2
Statement of Net Assets Available for Plan Benefits as of
December 31, 1997...................................................4
Statement of Changes in Net Assets Available for Plan Benefits
for the Year Ended December 31, 1998................................6
Statement of Changes in Net Assets Available for Plan Benefits
for the Year Ended December 31, 1997................................8
Notes to Financial Statements........................................10
Supplemental Schedules:
Item 27a - Schedule of Assets Held for Investment Purposes...........14
Item 27b - Schedule of Loans or Fixed Income Obligations.............17
Item 27d - Schedule of Reportable Transactions.......................18
Exhibits:
23-a Consent of Ernst & Young LLP
REPORT OF INDEPENDENT AUDITORS
SBC Communications Inc., Plan Administrator for the SBC Savings Plan
We have audited the accompanying statements of net assets available for plan
benefits of the SBC Savings Plan (the Plan) as of December 31, 1998 and 1997,
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 at
December 31, 1998 and 1997, 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 financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment purposes and of loans or fixed income obligations as of
December 31, 1998, and reportable transactions for the year then ended, are
presented for purpose of additional analysis and are not a required part of the
financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. These supplemental
schedules are the responsibility of the Plan's management. 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 schedules and fund information have been subjected to auditing
procedures applied in our audits of the financial statements and, in our
opinion, are fairly stated in all material respects in relation to the financial
statements taken as a whole.
ERNST & YOUNG LLP
San Antonio, Texas
June 24, 1999
SBC SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 1998
(Dollars in Thousands)
Employee
Stock SBC Diversified Interest Asset Global
Ownership Shares Bond Equity Income Allocation Equity Loan
Plan Fund Fund Portfolio Fund Fund Fund Fund Total
--------- --------- ------ --------- ------- ------- ------ ------ ---------
ASSETS
Investments:
SBC common shares:
Allocated $ 1,193,222 $ - $ - $ - $ - $ - $ - $ - $ 1,193,222
Unallocated 363,368 - - - - - - - 363,368
Other - 2,054,632 - - - - - - 2,054,632
Barclays Global Investors
Equity Index Fund F - - 99,744 - - - - - 99,744
BZW Barclays Equity Index Fund F - - - 1,371,187 - - - - 1,371,187
Contracts with insurance companies
and other financial institutions - - - - 459,899 - - - 459,899
Barclays Global Investors U.S.
Tactical Asset Allocation Fund F - - - - - 409,007 - - 409,007
Barclays Global Investors U.S.
Equity Market Fund F - - - - - - 62,169 - 62,169
Barclays Global Investors EAFE
Equity Index Fund E - - - - - - 15,757 - 15,757
Loans to plan participants - - - - - - - 96,363 96,363
Temporary cash investments 17,291 24,921 63 705 77,600 175 127 5 120,887
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Total Investments 1,573,881 2,079,553 99,807 1,371,892 537,499 409,182 78,053 96,368 6,246,235
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Contributions receivable:
Employer 4,566 - - - - - - - 4,566
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Total Contributions Receivable 4,566 - - - - - - - 4,566
--------- --------- ------ --------- ------- ------- ------ ------ ---------
SBC SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 1998
(Dollars in Thousands)
Employee
Stock SBC Diversified Interest Asset Global
Ownership Shares Bond Equity Income Allocation Equity Loan
Plan Fund Fund Portfolio Fund Fund Fund Fund Total
--------- --------- ------ --------- ------- ------- ------ ------ ---------
(Continued)
Dividends and interest receivable 75 169 2 28 39 2 1 11 327
Transfers receivable from
other funds and plans - 2,226 - - - 14 - - 2,240
Receivable for investments sold 247 3,275 - - - - - - 3,522
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Total Assets 1,578,769 2,085,223 99,809 1,371,920 537,538 409,198 78,054 96,379 6,256,890
--------- --------- ------ --------- ------- ------- ------ ------ ---------
LIABILITIES
Transfers payable to other
funds and plans - 43 166 112 1,875 - 156 449 2,801
Payable for investments purchased - 2,260 2 - 2,598 - - - 4,860
Administrative expenses payable 41 14 6 53 20 90 7 5 236
Interest payable 3,870 - - - - - - - 3,870
Long-term debt 113,652 - - - - - - - 113,652
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Total Liabilities 117,563 2,317 174 165 4,493 90 163 454 125,419
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Net Assets Available for Plan
Benefits $ 1,461,206 $ 2,082,906 $ 99,635 $ 1,371,755 $ 533,045 $ 409,108 $ 77,891 $ 95,925 $ 6,131,471
========== ========= ====== ========= ======= ======= ====== ====== =========
See Notes to Financial Statements
SBC SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 1997
(Dollars in Thousands)
Employee
Stock SBC Diversified Interest Asset Global
Ownership Shares Bond Equity Income Allocation Equity Loan
Plan Fund Fund Portfolio Fund Fund Fund Fund Total
--------- --------- ------ --------- ------- ------- ------ ------ ---------
ASSETS
Investments:
SBC common shares:
Allocated $ 488,259 $ - $ - $ - $ - $ - $ - $ - $ 488,259
Unallocated 231,694 - - - - - - - 231,694
Other - 682,750 - - - - - - 682,750
Barclays Global Investors
Government/Corporate Bond
Index Fund F - - 36,626 - - - - - 36,626
Barclays Global Investors
Equity Index Fund F - - - 469,666 - - - - 469,666
Contracts with insurance companies
and other financial institutions - - - - 224,452 - - - 224,452
Barclays Global Investors U.S.
Tactical Asset Allocation Fund F - - - - - 30,653 - - 30,653
Barclays Global Investors U.S.
Equity Market Fund F - - - - - - 50,326 - 50,326
Barclays Global Investors
EAFE Equity Index Fund E - - - - - - 13,005 - 13,005
Loans to plan participants - - - - - - - 80,927 80,927
Temporary cash investments 8,956 17,590 11 142 25,008 9 19 3 51,738
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Total Investments 728,909 700,340 36,637 469,808 249,460 30,662 63,350 80,930 2,360,096
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Contributions receivable:
Employer 1,065 - - - - - - - 1,065
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Total Contributions Receivable 1,065 - - - - - - - 1,065
--------- --------- ------ --------- ------- ------- ------ ------ ---------
SBC SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 1997
(Dollars in Thousands)
Employee
Stock SBC Diversified Interest Asset Global
Ownership Shares Bond Equity Income Allocation Equity Loan
Plan Fund Fund Portfolio Fund Fund Fund Fund Total
--------- --------- ------ --------- ------- ------- ------ ------ ---------
(Continued)
Dividends and interest receivable 44 88 - 4 10 - - - 146
Transfers receivable from other
funds and plans - 1,971 - - - 189 - 30 2,190
Receivable for investments sold - - 661 1,442 - - 559 - 2,662
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Total Assets 730,018 702,399 37,298 471,254 249,470 30,851 63,909 80,960 2,366,159
--------- --------- ------ --------- ------- ------- ------ ------ ---------
LIABILITIES
Transfers payable to other
funds and plans - 37 605 1,062 446 - 43 - 2,193
Payable for investments purchased - 9,571 - - 1,362 180 500 - 11,613
Administrative expenses payable 27 41 3 36 19 7 8 - 141
Interest payable 4,935 - - - - - - - 4,935
Other payables 90 305 - - - - - - 395
Long-term debt 121,743 - - - - - - - 121,743
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Total Liabilities 126,795 9,954 608 1,098 1,827 187 551 - 141,020
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Net Assets Available for Plan
Benefits $ 603,223 $ 692,445 $ 36,690 $ 470,156 $ 247,643 $ 30,664 $ 63,358 $ 80,960 $ 2,225,139
========= ========= ====== ========= ======= ======= ====== ====== =========
See Notes to Financial Statements.
SBC SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1998
(Dollars in Thousands)
Employee
Stock SBC Diversified Interest Asset Global
Ownership Shares Bond Equity Income Allocation Equity Loan
Plan Fund Fund Portfolio Fund Fund Fund Fund Total
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Net Assets Available for Plan
Benefits, December 31, 1997 $ 603,223 $ 692,445 $ 36,690 $ 470,156 $ 247,643 $ 30,664 $ 63,358 $ 80,960 $ 2,225,139
Additions to Net Assets:
Contributions and transfers:
Participant contributions - 44,951 3,165 44,774 10,631 9,328 6,367 - 119,216
Employer contributions 31,827 - - - - - - - 31,827
Transfers of participants'
balances - net - (6,693) 13,390 (57,061) 51,529 (7,804) (2,900) 10,086 547
Transfers from Pacific Telesis
Group Supplemental Retirement
and Savings Plan for
Salaried Employees 235,304 852,014 44,850 779,929 242,097 350,939 - - 2,505,133
Forfeitures 194 - - - - - - - 194
Loan transfer 8,091 - - - - - - - 8,091
--------- --------- ------ --------- ------- ------- ------ ------ ---------
275,416 890,272 61,405 767,642 304,257 352,463 3,467 10,086 2,665,008
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Investment Income:
Dividends on SBC common shares 24,416 22,793 - - - - - - 47,209
Interest 464 1,392 40 399 21,005 141 4 7,140 30,585
--------- --------- ------ --------- ------- ------- ------ ------ ---------
24,880 24,185 40 399 21,005 141 4 7,140 77,794
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Net appreciation in
value of investments 638,211 555,081 5,911 188,569 - 39,985 13,550 - 1,441,307
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Total Net Additions 938,507 1,469,538 67,356 956,610 325,262 392,589 17,021 17,226 4,184,109
--------- --------- ------ --------- ------- ------- ------ ------ ---------
SBC SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1998
(Dollars in Thousands)
Employee
Stock SBC Diversified Interest Asset Global
Ownership Shares Bond Equity Income Allocation Equity Loan
Plan Fund Fund Portfolio Fund Fund Fund Fund Total
--------- --------- ------ --------- ------- ------- ------ ------ ---------
(Continued)
Deductions from Net Assets:
Administrative expenses 439 926 60 642 245 560 79 - 2,951
Forfeitures 194 - - - - - - - 194
Interest expense 8,092 - - - - - - - 8,092
Loan payment-principal 37,701 - - - - - - - 37,701
Distributions to participants 34,098 78,151 4,351 54,369 39,615 13,585 2,409 2,261 228,839
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Total Deductions 80,524 79,077 4,411 55,011 39,860 14,145 2,488 2,261 277,777
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Net Assets Available for Plan
Benefits, December 31, 1998 $ 1,461,206 $ 2,082,906 $ 99,635 $ 1,371,755 $ 533,045 $ 409,108 $ 77,891 $ 95,925 $ 6,131,471
========= ========= ====== ========= ======= ======= ====== ====== =========
See Notes to Financial Statements.
SBC SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1997
(Dollars in Thousands)
Employee
Stock SBC Diversified Interest Asset Global
Ownership Shares Bond Equity Income Allocation Equity Loan
Plan Fund Fund Portfolio Fund Fund Fund Fund Total
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Net Assets Available for Plan
Benefits, December 31, 1996 $ 378,124 $ 553,158 $ 32,700 $ 313,869 $ 224,935 $ 14,796 $ 35,224 $ 76,748 $ 1,629,554
Additions to Net Assets:
Contributions and transfers:
Participant contributions - 28,357 1,954 25,850 9,577 1,784 5,001 - 72,523
Employer contributions 18,876 - - - - - - - 18,876
Transfers of participants'
balances - net - (80,210) 748 39,407 17,394 10,500 14,804 (675) 1,968
Forfeitures 551 - - - - - - - 551
Proceeds from debt refinancing 10,500 - - - - - - - 10,500
Loan transfer 34,594 - - - - - - - 34,594
--------- --------- ------ --------- ------- ------- ------ ------ ---------
64,521 (51,853) 2,702 65,257 26,971 12,284 19,805 (675) 139,012
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Investment Income:
Dividends on SBC common shares 17,685 18,140 - - - - - - 35,825
Interest 301 751 4 35 14,769 2 6 6,664 22,532
--------- --------- ------ --------- ------- ------- ------ ------ ---------
17,986 18,891 4 35 14,769 2 6 6,664 58,357
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Net appreciation in
value of investments 212,080 211,407 3,055 109,619 - 4,380 9,988 - 550,529
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Total Net Additions 294,587 178,445 5,761 174,911 41,740 16,666 29,799 5,989 747,898
--------- --------- ------ --------- ------- ------- ------ ------ ---------
SBC SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1997
(Dollars in Thousands)
Employee
Stock SBC Diversified Interest Asset Global
Ownership Shares Bond Equity Income Allocation Equity Loan
Plan Fund Fund Portfolio Fund Fund Fund Fund Total
--------- --------- ------ --------- ------- ------- ------ ------ ---------
(Continued)
Deductions from Net Assets:
Administrative expenses 309 498 36 400 224 68 79 - 1,614
Forfeitures 551 - - - - - - - 551
Interest expense 9,393 - - - - - - - 9,393
Loan payment-principal 34,594 - - - - - - - 34,594
Refinanced long-term debt 10,500 - - - - - - - 10,500
Distributions to participants 14,141 38,660 1,735 18,224 18,808 730 1,586 1,777 95,661
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Total Deductions 69,488 39,158 1,771 18,624 19,032 798 1,665 1,777 152,313
--------- --------- ------ --------- ------- ------- ------ ------ ---------
Net Assets Available for Plan
Benefits, December 31, 1997 $ 603,223 $ 692,445 $ 36,690 $ 470,156 $ 247,643 $ 30,664 $ 63,358 $ 80,960 $ 2,225,139
========= ========= ====== ========= ======= ======= ====== ====== =========
See Notes to Financial Statements.
SBC SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(Dollars in Thousands, Except per Unit Amounts)
1. Plan Description - The SBC Savings Plan (Plan) was established by SBC
Communications Inc. (SBC) to provide a convenient way for eligible employees
to save for retirement on a regular and long-term basis. The following
description of the Plan provides only general information. The Plan has
detailed provisions covering participant eligibility, participant allotments
from pay, participant withdrawals, participant loans, employer contributions
and related vesting of contributions and Plan expenses. The Plan text and
prospectus include complete descriptions of these and other Plan provisions.
During 1998 and 1997, participants could invest their contributions in one
or more of the following funds in 1% increments: the SBC Shares Fund, the
Bond Fund, the Diversified Equity Portfolio, the Interest Income Fund, the
Asset Allocation Fund and the Global Equity Fund.
Company matching contributions are made solely in the form of shares of SBC's
common stock held in a leveraged Employee Stock Ownership Plan (ESOP).
The Plan prefunded the ESOP by borrowing Guaranteed Non-Salaried Employees'
ESOP Notes due 2005, the repayment of which is guaranteed by SBC. Funds
borrowed by the Plan were used to purchase shares of SBC's common stock held
in the open market (Financed Shares), which act as collateral for
reimbursement to SBC for any payments it makes under its guarantee of the
ESOP Notes. Dividends on Financed Shares and employer cash contributions are
used by the Plan to make the required principal and interest payments on the
ESOP Notes. As the ESOP Notes are paid down, the Financed Shares are released
from the collateral. The Financed Shares are allocated to participants'
accounts in the form of a company matching contribution. In lieu of dividends
on Financed Shares previously allocated to participants, additional Financed
Shares are allocated to participants' accounts. The interest rate on the
notes range from 8.41% to 6.95%.
To the extent insufficient shares have been released through payments on
outstanding notes net of amounts refinanced, additional employer
contributions are made to the ESOP to purchase shares necessary to meet any
shortfall in the company match or in the shares issued in lieu of dividends.
Dividends on these shares are used to acquire additional shares which are
allocated to participants' accounts in the ESOP. Should shares released
exceed the required company matching contribution, the excess is considered
an additional employer contribution and is allocated to participants'
accounts based on each participant's proportionate share of actual plan year
ESOP contributions.
Bankers Trust Company is the Trustee for the Plan. Effective July 6, 1999,
Boston Safe Deposit and Trust Company will become the trustee for the Plan.
Effective January 1, 1997, dividends on shares in the SBC Shares Fund (Fund)
were paid into a separate fund known as a Dividend Fund Account (DFA). At the
end of the year, dividends held in the DFA are paid out to the participant.
Prior to the amendment, at the end of the year dividends paid with respect to
SBC Shares in the Fund were reinvested in the Fund, which increased the
value of the participants' units. Under the amendment, the dividends will
be paid to the participant, but the participant may elect reinvestment and
have the special Deferred-Tax Allotment offset the payout through the
purchase of additional units. Interest earned on dividends held in the DFA
will be paid into the SBC Shares Fund. During 1998 and 1997, Plan
participants elected to receive $15.8 million and $10.7 million in dividend
distributions.
Following the merger of SBC and Pacific Telesis Group (PAC) effective April
1, 1997, the Plan merged with the PAC Supplemental Retirement and Savings
Plan for Salaried Employes (PAC Plan) effective July 1, 1998. In conjunction
with the merger, all assets of the PAC Plan (with the exception of the SBC
stock and the guaranteed insurance contracts, which were transferred directly
to the plan) were sold and the cash was transferred to the Plan. In addition,
the assets attributable to the accounts of nonbargained employees of PAC in
the PAC Supplemental Retirement and Savings Plan for Salaried and Nonsalaried
Employees (Leveraged ESOP) were transferred to the Plan, together with a
proportionate amount of the unallocated SBC common shares and the remaining
liability under the loan agreement.
Although it has not expressed any intent to do so, SBC has the right under
the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of the Employee Retirement Income Security Act
of 1974 (ERISA). In the event that the Plan is terminated, subject to the
conditions set forth by ERISA, the account balances of all participants shall
be 100% vested.
2. Accounting Policies - The values of investments are determined as follows:
SBC common shares on the basis of the last published sales price as reported
on the composite tape of the New York Stock Exchange and other exchanges;
contracts with insurance companies and other financial institutions at
principal plus reinvested interest which approximates fair value; mutual
funds at net asset values per share obtained from published sources or fund
manager; and temporary cash investments at cost which approximates fair
value.
Purchases and sales of securities are reflected as of the trade date.
Dividend income is recognized on the ex-dividend date. Interest earned on
investments is recognized on the accrual basis.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
3. Participant Interest in the Plan - The interest of a participant in each of
the funds in the Plan, except for the Loan Fund, is represented by units (as
described in the Plan text). The number of participants, number of units and
the value per unit for each of these funds as of December 31 were:
1998 1997
------------------------------------ ------------------------------------
Number of Number of Value per Number of Number of Value per
Participants Units Unit Participants Units Unit
------------------------------------ ------------------------------------
ESOP 62,464 304,218,011 $ 3.9305 16,249 278,103,764 $ 1.7574
SBC Shares Fund 30,464 104,526,638 $ 19.9032 13,163 50,741,521 $ 13.6396
Bond Fund 6,437 7,949,989 $ 12.5327 2,587 3,207,692 $ 11.4381
Diversified Equity
Portfolio 26,168 48,753,134 $ 28.1368 11,271 21,485,630 $ 21.8824
Interest Income Fund 13,549 95,317,784 $ 5.5923 6,747 47,121,539 $ 5.2554
Asset Allocation Fund 11,932 210,837,904 $ 1.9404 1,843 20,004,398 $ 1.5329
Global Equity Fund 4,876 38,397,465 $ 2.0285 3,813 38,241,589 $ 1.6568
The total number of participants in the Plan was less than the sum of the
number of participants shown above because many participants were in more
than one fund.
4. Investments- Investments representing 5% or more of Plan net assets at either
December 31, 1998 or 1997 were:
1998 1997
--------- ---------
Employee Stock Ownership Plan
-----------------------------
SBC common shares:
Allocated $ 1,193,222 $ 488,259
Unallocated $ 363,368 $ 231,694
SBC Shares Fund
---------------
SBC common shares $ 2,054,632 $ 682,750
Diversified Equity Portfolio
----------------------------
Barclays Global Investors Equity Index Fund $ 1,371,187 $ 469,666
Asset Allocation Fund
---------------------
Barclays Global Investors U.S. Tactical
Asset Allocation Fund $ 409,007 $ 30,653
For the years ended December 31, 1998 and 1997, the average interest rates
earned on the Interest Income Fund's investments in contracts with insurance
companies and other financial institutions were 6.40% and 6.53% respectively.
At December 31, 1998, the fixed crediting interest rates on these contracts
ranged from 4.50% to 7.85%. At December 31, 1997, the fixed crediting
interest rates on these contracts ranged from 4.87% to 7.85%.
For the year ended December 31, 1998, the Interest Income fund included an
investment in a synthetic investment contract with Security Life of Denver as
the wrapper provider and Lotsoff Capital Management as the investment manager
for the underlying securities maturing on June 30, 2000. At December 31,
1998, the fair market value of the underlying securities and associated cash
was $12,729 and the fair market value of the investment contract was $12,831.
For the year ended December 31, 1997, the Interest Income fund included an
investment in a guaranteed investment contract with Metropolitan Life
Insurance (Metropolitan). The Metropolitan contract matured on December 31,
1998. The investment contract was recorded at contract value of $19,345,
which approximated fair value at December 31, 1997.
5. Long-Term Debt - Long-term debt consists of the ESOP Notes issued in
connection with the ESOP and the refinancing notes (as discussed in Note 1).
At December 31, 1998, the aggregate principal amounts of long-term debt
scheduled for repayment for the years 1999 through 2003 were $40,024,
$23,090, $4,302 and $4,616, and $4,952, respectively. The carrying amount and
the estimated fair value of the ESOP and refinancing notes as of December 31
were:
1998 1997
--------- ----------
Carrying Amount $ 113,652 $ 121,743
========= ==========
Fair Value $ 118,151 $ 126,254
========= ==========
The fair values of the ESOP Notes were estimated based on quoted prices. The
fair value of the refinancing notes were estimated based on discounted future
case flows using current interest rates.
6. Tax Status - The Internal Revenue Service issued a determination letter on
November 4, 1997, stating that the Plan and related trust are designed in
accordance with applicable sections of the Internal Revenue Code (IRC). The
Plan has been amended since the determination letter was received. The Plan
Administrator believes that the Plan is currently designed and is operating
in compliance with the applicable requirements of the IRC.
7. 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 Form 5500 as of December 31:
1998 1997
----------- -----------
Net assets available for plan benefit
per the financial statements $ 6,131,471 $ 2,225,139
Less: Distribution payable to participants 2,389 1,308
----------- -----------
Net assets available for plan benefits per the
Form 5500 $ 6,129,082 $ 2,223,831
=========== ===========
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500 for the year ended December 31, 1998:
1998
---------
Distributions to participants per the
financial statements $ 228,839
Add: Distributions payable to participants
at December 31, 1998 2,389
Less: Distributions payable to participants
at December 31, 1997 1,308
---------
Distributions to participants per the
Form 5500 $ 229,920
=========
Distributions payable to 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.
SBC SAVINGS PLAN
EIN 43-1301883, PLAN NO. 002
Item 27a-SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1998
(Dollars in Thousands)
Description of Current
Identity of Issue Investment Cost Value
------------------------------------- --------------------------- --------- ----------
Employee Stock Ownership Plan
*SBC common shares:
Allocated 22,248,546 shares $ 382,405 $ 1,193,222
Unallocated 6,776,103 shares 110,883 363,368
*Bankers Trust Company Temporary cash investment 17,291 17,291
---------- ----------
Total Employee Stock Ownership Plan 510,579 1,573,881
---------- ----------
SBC Shares Fund
* SBC common shares 38,310,086 shares 868,368 2,054,632
* Bankers Trust Company Temporary cash investment 24,921 24,921
---------- ----------
Total SBC Shares Fund 893,289 2,079,553
---------- ----------
Bond Fund
* Barclays Global Investors Government/
Corporate Bond Index Fund F 8,514,911 units 92,935 99,744
* Bankers Trust Company Temporary cash investment 63 63
---------- ----------
Total Bond Fund 92,998 99,807
---------- ----------
Diversified Equity Portfolio
* Barclays Global Investors Equity
Index Fund F 86,827,210 units 1,150,392 1,371,187
* Bankers Trust Company Temporary cash investment 705 705
---------- ----------
Total Diversified Equity Portfolio 1,151,097 1,371,892
---------- ----------
SBC SAVINGS PLAN
EIN 43-1301883, PLAN NO. 002
Item 27a-SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES - (continued)
December 31, 1998
(Dollars in Thousands)
Description of Current
Identity of Issue Investment Cost Value
------------------------------------- -------------------------- ---------- ----------
Interest Income Fund (a)
Allstate Life Insurance 6.81%, 7/5/00 4,831 4,831
Cigna Life Insurance Company 6.05%, 12/31/99 14,490 14,490
CNA 6.02% - 6.75%, 6/30/99 7,322 7,322
Continental Assurance Company 6.01% - 6.40%, 18,862 18,862
7/01/99 - 12/31/00
Jackson National Life 6.93%, 12/29/00 38,223 38,223
John Hancock Insurance 6.25% - 6.72%, 78,293 78,293
12/31/99 - 12/31/01
Lotsoff Synthetic 5.10%, 6/30/00 12,831 12,831
Metropolitan Life Insurance Company 6.16% - 7.85%, 170,686 170,686
12/31/98 - 12/31/01
Mutual Benefit Life Insurance 4.50%, 12/31/03 1,525 1,525
New York Life Insurance Company 6.10% - 6.74%, 40,452 40,452
6/30/01 - 6/28/02
People Security 6.28% - 6.78%, 28,440 28,440
6/30/01 - 12/31/01
Principal Mutual 6.35%, 6/29/99 11,129 11,129
The Prudential Insurance Company 5.29% - 7.51%, 32,815 32,815
6/30/98 - 6/30/00
---------- ----------
459,899 459,899
* Bankers Trust Company Temporary cash investment 77,600 77,600
---------- ----------
Total Interest Income Fund 537,499 537,499
---------- ----------
Asset Allocation Fund
* Barclays Global Investors U.S.
Tactical Asset Allocation Fund F 26,876,027 units 366,575 409,007
* Bankers Trust Company Temporary cash investment 175 175
---------- ----------
Total Asset Allocation Fund 366,750 409,182
---------- ----------
Global Equity Fund
* Barclays Global Investors U.S.
Equity Market Fund F 2,345,138 units 48,019 62,169
* Barclays Global Investors EAFE
Equity Index Fund E 854,815 units 13,319 15,757
* Bankers Trust Company Temporary cash investment 127 127
---------- ----------
Total Global Equity Fund 61,465 78,053
---------- ----------
SBC SAVINGS PLAN
EIN 43-1301883, PLAN NO. 002
Item 27a-SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES - (continued)
December 31, 1998
(Dollars in Thousands)
Description of Current
Identity of Issue Investment Cost Value
------------------------------------- -------------------------- ---------- ----------
Loan Fund
* Loans to Plan Participants 8.75% - 9.50% - 96,363
* Bankers Trust Company Temporary cash investment 5 5
---------- ----------
Total Loan Fund 5 96,368
---------- ----------
TOTAL $ 3,613,682 $ 6,246,235
========== ==========
* Party-in-Interest
(a) Investments in this fund consist of guaranteed investment contracts with
insurance companies and similar contracts with other financial institutions
which provide for the payment of principal plus accrued interest and are
collateralized by obligations of other organizations. The average interest rate
earned on these investment contracts during 1998 was 6.40%.
SBC SAVINGS PLAN
Item 27b - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS
For the year ended December 31, 1998
Name & Original 1998 1998 Unpaid Detail Description
Address Amount Principal Interest Balance at of Principal Interest
(Identity) of Loan Paid Paid Year End Loan Overdue Overdue
---------------- ------------- --------- ---------- ----------- -------------------------- ----------- --------
D. Shea $ 1,200.00 - - $ 1,200.00 09-15-97 Orig. Loan Date $ 1,200.00 -
Nashua, NH 10-31-02 Maturity Date
09.50% Interest Rate
Secured by non-LESOP Acct
J. MacIntosh $ 5,100.00 - - $ 3,337.31 06-10-96 Orig. Loan Date $ 3,337.31 -
Pocasset, MA 07-31-99 Maturity Date
09.25% Interest Rate
Secured by non-LESOP Acct
T. Smith $ 5,100.00 - - $ 4,110.83 05-20-96 Orig. Loan Date $ 4,110.83 -
Liverpool, NY 06-30-01 Maturity Date
09.25% Interest Rate
Secured by non-LESOP Acct
D. Jones $ 2,800.00 - - $ 2,800.00 09-26-97 Orig. Loan Date $ 2,800.00 -
Odessa, TX 10-31-00 Maturity Date
09.50% Interest Rate
Secured by non-LESOP Acct
A. Correa $ 1,000.00 $ 76.30 $ 15.52 $ 923.70 09-12-97 Orig. Loan Date $ 923.70 -
San Antonio, TX 10-31-99 Maturity Date
09.50% Interest Rate
Secured by non-LESOP Acct
NOTE: No loans were renegotiated during the year. All loans are secured
by the participant's account. The Plan will collect overdue amounts
upon a distributable event.
SBC SAVINGS PLAN
EIN 43-1301883, PLAN NO. 002
Item 27d-SCHEDULE OF REPORTABLE TRANSACTIONS
For the year ended December 31, 1998
Current
Value of
Asset on
Description of Purchase Selling Cost of Transaction Net Gain
Identity of Party Involved Assets Price Price Asset Date or (Loss)
------------------------------ ------------------------ ---------- ---------- ---------- ---------- -----------
Category (iii) transactions
------------------------------
Bankers Trust Bankers Trust Directed $ 990,059 $ - $ 990,059 $ 990,059 $ -
Account Cash Fund
Bankers Trust Bankers Trust Directed $ - $ 921,504 $ 921,504 $ 921,504 $ -
Account Cash Fund
Bankers Trust Barclays Global Investors $ 836,251 $ - $ 836,251 $ 836,251 $ -
Equity Index Fund
Bankers Trust Barclays Global Investors $ - $ 123,297 $ 113,031 $ 123,297 $ 10,266
Equity Index Fund
Bankers Trust SBC Communications Inc. $ 190,848 $ - $ 190,848 $ 190,848 $ -
Common Stock
Bankers Trust SBC Communications Inc. $ - $ 248,448 $ 113,965 $ 248,448 $ 134,483
Common Stock
There were no category (i), (ii) or (iv) transactions.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan
Administrator for the Plan has duly caused this annual report to be signed by
the undersigned thereunto duly authorized.
SBC SAVINGS PLAN
By SBC Communications Inc., Plan
Administrator for the Foregoing
Plan
By /s/ Karen E. Jennings
------------------------
Karen E. Jennings
Senior Vice President-
Human Resources
Date: June 29, 1999
EXHIBIT INDEX
Exhibit identified below, is filed herein as exhibit hereto.
Exhibit
Number......................................................
23-a Consent of Independent Auditors Ernst & Young LLP.
EX 23-a
Form 11-K for 1998
File No. l-8610
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements (Form S-8, No. 333-24295 and 333-66105 and) pertaining to the SBC
Savings Plan of our report dated June 24, 1999, with respect to the financial
statements and supplemental schedules of the SBC Savings Plan included in this
Annual Report (Form 11-K) for the year ended December 31, 1998.
ERNST & YOUNG LLP
San Antonio, Texas
June 24, 1999