EX 99-c
Form 10-K for 1998
File No. 1-8610
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 11-K
ANNUAL REPORT
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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
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SBC SAVINGS AND SECURITY PLAN
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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.............16
Item 27d - Schedule of Reportable Transactions.......................17
Exhibits:
23-a Consent of Ernst & Young LLP
REPORT OF INDEPENDENT AUDITORS
SBC Communications Inc., Plan Administrator for the
SBC Savings and Security Plan
We have audited the accompanying statements of net assets available for plan
benefits of the SBC Savings and Security 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 AND SECURITY 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 $ 658,591 $ - $ - $ - $ - $ - $ - $ - $ 658,591
Unallocated 124,209 - - - - - - - 124,209
Other - 1,027,260 - - - - - - 1,027,260
Barclays Global Investors Government/
Corporate Bond Index Fund F - - 6,984 - - - - - 6,984
Barclays Global Investors
Equity Index Fund F - - - 137,537 - - - - 137,537
Contracts with insurance companies
and other financial institutions - - - - 140,705 - - - 140,705
Barclays Global Investors U.S.
Tactical Asset Allocation Fund F - - - - - 8,232 - - 8,232
Barclays Global Investors U.S.
Equity Market Fund F - - - - - - 10,001 - 10,001
Barclays Global Investors EAFE
Equity Index Fund E - - - - - - 2,672 - 2,672
Loans to plan participants - - - - - - - 108,585 108,585
Temporary cash investments 7,454 21,055 31 609 35,228 49 97 17 64,540
--------- --------- ------ --------- ------- ------- ------ ------- ---------
Total Investments 790,254 1,048,315 7,015 138,146 175,933 8,281 12,770 108,602 2,289,316
--------- --------- ------ --------- ------- ------- ------ ------- ---------
SBC SAVINGS AND SECURITY 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 32 110 - 3 15 - - - 160
Transfers receivable from
other funds and plans - 572 20 - - 3 3 220 818
Receivable for investments sold 264 1,000 - - - - - - 1,264
--------- --------- ------ --------- ------- ------- ------ ------- ---------
Total Assets 790,550 1,049,997 7,035 138,149 175,948 8,284 12,773 108,822 2,291,558
--------- --------- ------ --------- ------- ------- ------ ------- ---------
LIABILITIES
Transfers payable to other
funds and plans - 161 - 206 472 - 2 1,133 1,974
Payable for investments purchased - 7,499 - - 854 - - - 8,353
Administrative expenses payable 61 93 1 14 19 2 3 - 193
Interest payable 2,963 - - - - - - - 2,963
Long-term debt 40,402 - - - - - - - 40,402
--------- --------- ------ --------- ------- ------- ------ ------- ---------
Total Liabilities 43,426 7,753 1 220 1,345 2 5 1,133 53,885
--------- --------- ------ --------- ------- ------- ------ ------- ---------
Net Assets Available for
Plan Benefits $ 747,124 $ 1,042,244 $ 7,034 $ 137,929 $ 174,603 $ 8,282 $ 12,768 $ 107,689 $ 2,237,673
========= ========= ====== ========= ======= ======= ====== ======= =========
See Notes to Financial Statements.
SBC SAVINGS AND SECURITY 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 $ 428,507 $ - $ - $ - $ - $ - $ - $ - $ 428,507
Unallocated 122,189 - - - - - - - 122,189
Other - 701,288 - - - - - - 701,288
Barclays Global Investor Government/
Corporate Bond Index Fund F - - 4,672 - - - - - 4,672
Barclays Global Investors
Equity Index Fund F - - - 111,746 - - - - 111,746
Contracts with insurance companies
and other financial institutions - - - - 161,250 - - - 161,250
Barclays Global Investors U.S.
Tactical Asset Allocation Fund F - - - - - 4,710 - - 4,710
Barclays Global Investors U.S.
Equity Market Fund F - - - - - - 8,446 - 8,446
Barclays Global Investors EAFE
Equity Index Fund E - - - - - - 2,327 - 2,327
Loans to plan participants - - - - - - - 89,538 89,538
Temporary cash investments 7,049 13,645 3 62 10,801 2 6 14 31,582
--------- --------- ------ --------- ------- ------- ------ ------- ---------
Total Investments 557,745 714,933 4,675 111,808 172,051 4,712 10,779 89,552 1,666,255
--------- --------- ------ --------- ------- ------- ------ ------- ---------
Contributions receivable:
Employer 4,770 - - - - - - - 4,770
--------- --------- ------ --------- ------- ------- ------ ------- ---------
Total Contributions Receivable 4,770 - - - - - - - 4,770
--------- --------- ------ --------- ------- ------- ------ ------- ---------
SBC SAVINGS AND SECURITY 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 34 75 - 1 6 - - - 116
Transfers receivable from
other funds and plans - 572 26 - - 47 - 110 755
Receivable for investments sold 110 802 - 57 - - 1 - 970
--------- --------- ------ --------- ------- ------- ------ ------- ---------
Total Assets 562,659 716,382 4,701 111,866 172,057 4,759 10,780 89,662 1,672,866
--------- --------- ------ --------- ------- ------- ------ ------- ---------
LIABILITIES
Transfers payable to other
funds and plans - 96 1 33 647 1 - - 778
Payable for investments purchased - 3,046 23 - 891 46 - - 4,006
Administrative expenses payable 53 93 1 16 27 1 2 - 193
Interest payable 2,750 - - - - - - - 2,750
Other payables - 76 - - - - - - 76
Long-term debt 63,871 - - - - - - - 63,871
--------- --------- ------ --------- ------- ------- ------ ------- ---------
Total Liabilities 66,674 3,311 25 49 1,565 48 2 - 71,674
--------- --------- ------ --------- ------- ------- ------ ------- ---------
Net Assets Available for
Plan Benefits $ 495,985 $ 713,071 $ 4,676 $ 111,817 $ 170,492 $ 4,711 $ 10,778 $ 89,662 $ 1,601,192
========= ========= ====== ========= ======= ======= ====== ======= =========
See Notes to Financial Statements.
SBC SAVINGS AND SECURITY 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 $ 495,985 $ 713,071 $ 4,676 $ 111,817 $ 170,492 $ 4,711 $ 10,778 $ 89,662 $ 1,601,192
Additions to Net Assets:
Contributions and transfers:
Participant contributions - 38,667 749 14,133 12,578 943 1,931 - 69,001
Employer contributions 11,043 - - - - - - - 11,043
Transfers of participants'
balances - net - 342 1,661 (11,874) (1,817) 1,739 (1,689) 11,581 (57)
Forfeitures 49 - - - - - - - 49
Loan transfer 23,469 - - - - - - - 23,469
--------- --------- ------ --------- ------- ------- ------ ------- ---------
34,561 39,009 2,410 2,259 10,761 2,682 242 11,581 103,505
--------- --------- ------ --------- ------- ------- ------ ------- ---------
Investment Income:
Dividends on SBC common shares 13,739 18,005 - - - - - - 31,744
Interest 266 1,031 - 6 10,141 - 1 8,490 19,935
--------- --------- ------ --------- ------- ------- ------ ------- ---------
14,005 19,036 - 6 10,141 - 1 8,490 51,679
--------- --------- ------ --------- ------- ------- ------ ------- ---------
Net appreciation in
value of investments 250,386 328,378 482 30,281 26 1,459 2,246 - 613,258
--------- --------- ------ --------- ------- ------- ------ ------- ---------
Total Net Additions 298,952 386,423 2,892 32,546 20,928 4,141 2,489 20,071 768,442
--------- --------- ------ --------- ------- ------- ------ ------- ---------
SBC SAVINGS AND SECURITY 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 623 1,061 8 156 212 22 22 - 2,104
Forfeitures 49 - - - - - - - 49
Interest expense 5,213 - - - - - - - 23,469
Loan payment-principal 23,469 - - - - - - - 5,213
Distributions to participants 18,459 56,189 526 6,278 16,605 548 477 2,044 101,126
--------- --------- ------ --------- ------- ------- ------ ------- ---------
Total Deductions 47,813 57,250 534 6,434 16,817 570 499 2,044 131,961
--------- --------- ------ --------- ------- ------- ------ ------- ---------
Net Assets Available for Plan
Benefits, December 31, 1998 $ 747,124 $ 1,042,244 $ 7,034 $ 137,929 $ 174,603 $ 8,282 $ 12,768 $ 107,689 $ 2,237,673
========= ========= ====== ========= ======= ======= ====== ======= =========
See Notes to Financial Statements.
SBC SAVINGS AND SECURITY 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 $ 321,258 $ 532,326 $ 3,221 $ 57,791 $ 168,541 $ 1,449 $ 3,445 $ 74,761 $ 1,162,792
Additions to Net Assets:
Contributions and transfers:
Participant contributions - 32,716 652 10,759 14,669 519 1,443 - 60,758
Employer contributions 17,309 - - - - - - - 17,309
Transfers of participants'
balances - net - (33,456) 750 24,675 (8,390) 2,278 4,924 9,606 387
Forfeitures 62 - - - - - - - 62
Loan transfer 22,281 - - - - - - - 22,281
--------- --------- ------ --------- ------- ------- ------ ------- ---------
39,652 (740) 1,402 35,434 6,279 2,797 6,367 9,606 100,797
--------- --------- ------ --------- ------- ------- ------ ------- ---------
Investment Income:
Dividends on SBC common shares 13,533 17,729 - - - - - - 31,262
Other dividends - - - - - - - - -
Interest 254 544 1 13 10,616 1 2 6,920 18,351
--------- --------- ------ --------- ------- ------- ------ ------- ---------
13,787 18,273 1 13 10,616 1 2 6,920 49,613
--------- --------- ------ --------- ------- ------- ------ ------- ---------
Net appreciation in
value of investments 162,066 209,642 350 22,484 - 624 1,331 - 396,497
--------- --------- ------ --------- ------- ------- ------ ------- ---------
Total Net Additions 215,505 227,175 1,753 57,931 16,895 3,422 7,700 16,526 546,907
--------- --------- ------ --------- ------- ------- ------ ------- ---------
SBC SAVINGS AND SECURITY 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 488 865 6 146 266 12 17 - 1,800
Forfeitures 62 - - - - - - - 62
Interest expense 5,979 - - - - - - - 5,979
Loan payment-principal 22,281 - - - - - - - 22,281
Distributions to participants 11,968 45,565 292 3,759 14,678 148 350 1,625 78,385
--------- --------- ------ --------- ------- ------- ------ ------- ---------
Total Deductions 40,778 46,430 298 3,905 14,944 160 367 1,625 108,507
--------- --------- ------ --------- ------- ------- ------ ------- ---------
Net Assets Available for Plan
Benefits, December 31, 1997 $ 495,985 $ 713,071 $ 4,676 $ 111,817 $ 170,492 $ 4,711 $ 10,778 $ 89,662 $ 1,601,192
========= ========= ====== ========= ======= ======= ====== ======= =========
See Notes to Financial Statements.
SBC SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS
(Dollars in Thousands, Except per Unit Amounts)
1. Plan Description - The SBC Savings and Security 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
majority of eligible employees are represented by the Communications Workers
of America. 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 is 8.41%.
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 trustee for the Plan.
Effective March 24, 1997, dividends on shares in the SBC Shares Fund (Fund)
were paid into a separate fund known as a Dividend Fund Account (DFA). The
DFA fund activity and balances as of December 31, 1998 and 1997 are included
in the SBC Shares Fund. 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 $8.8 million and $7.6 million in
dividend distributions.
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 prices 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 100,393 290,249,726 $ 2.2766 33,243 230,000,263 $ 1.5237
SBC Shares Fund 30,449 49,709,209 $ 20.9373 28,324 49,413,198 $ 14.3459
Bond Fund 1,866 3,577,108 $ 1.9663 1,460 2,602,546 $ 1.7966
Diversified Equity
Portfolio 13,049 30,542,160 $ 4.5160 11,087 31,810,231 $ 3.5151
Interest Income Fund 16,886 30,119,379 $ 5.7970 18,575 31,277,546 $ 5.4510
Asset Allocation Fund 1,909 4,970,482 $ 1.6662 1,170 3,575,519 $ 1.3175
Global Equity Fund 3,297 7,691,961 $ 1.6600 2,691 7,942,641 $ 1.3569
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 $ 658,591 $ 428,507
Unallocated $ 124,209 $ 122,189
SBC Shares Fund
---------------
SBC common shares $ 1,027,260 $ 701,288
Diversified Equity Portfolio
----------------------------
Barclays Global Investors Equity Index Fund $ 137,537 $ 111,746
Loan Fund
---------
Loans to Plan Participants $ 108,585 $ 89,538
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 6.30% and 6.33% respectively.
At December 31, 1998, the fixed crediting interest rates on these contracts
ranged from 5.91% to 7.91%. At December 31, 1997, the fixed crediting
interest rates on these contracts ranged from 4.85% to 7.91%.
For the year ended December 31, 1997, the Interest Income fund included an
investment in a guaranteed investment contract with Prudential Asset
Management (Prudential). The Prudential contract matured on December 31,
1998. The investment contract was recorded at contract value of $8,888, 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 and 2000 are $24,546 and $15,856.
The carrying amount and the estimated fair value of the ESOP and refinancing
notes as of December 31 were:
1998 1997
--------- ---------
Carrying Amount $ 40,402 $ 63,871
========= =========
Fair Value $ 42,257 $ 66,494
========= =========
The fair values of the 8.41% ESOP Notes were estimated based on quoted prices
and the fair value of the 9.40% ESOP notes were estimated based on discounted
future cash flows using current interest rates.
6. Tax Status - The Internal Revenue Service issued a determination letter on
March 10, 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 $ 2,237,673 $ 1,601,192
Less: Distribution payable to participants 423 258
----------- -----------
Net assets available for plan benefits per the
Form 5500 $ 2,237,250 $ 1,600,934
=========== ===========
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 $ 101,126
Add: Distributions payable to participants
at December 31, 1998 423
Less: Distributions payable to participants
at December 31, 1997 258
--------
Distributions to participants per the
Form 5500 $ 101,291
========
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.
8. Subsequent Event - Effective January 1, 1999, the assets and liabilities of
Pacific Telesis Group's (PAC), a wholly-owned subsidiary of SBC, Supplemental
Retirement and Savings Plan for Nonsalaried Employees were transferred to the
Plan. In addition, the assets attributable to the accounts of bargained
employees of PAC in the Pacific Telesis Group 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.
SBC SAVINGS AND SECURITY PLAN
EIN 43-1301883, PLAN NO. 004
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 12,281,411 shares $ 175,151 $ 658,591
Unallocated 2,316,259 shares 31,821 124,209
*Bankers Trust Company Temporary cash investment 7,454 7,454
--------- ----------
Total Employee Stock Ownership Plan 214,426 790,254
--------- ----------
SBC Shares Fund
* SBC common shares: 19,156,358 shares 292,769 1,027,260
* Bankers Trust Company Temporary cash investment 21,055 21,055
--------- ----------
Total SBC Shares Fund 313,824 1,048,315
--------- ----------
Bond Fund
* Barclays Global Investors Government/
Corporate Bond Index Fund F 596,293 units 6,526 6,984
* Bankers Trust Company Temporary cash investment 31 31
--------- ----------
Total Bond Fund 6,557 7,015
--------- ----------
Diversified Equity Portfolio
* Barclays Global Investors
Equity Index Fund F 8,710,289 units 102,057 137,537
* Bankers Trust Company Temporary cash investment 609 609
--------- ----------
Total Diversified Equity Portfolio 102,666 138,146
--------- ----------
Interest Income Fund (a)
The Prudential Insurance Company
Of America 6.85%-7.91%, 14,567 14,567
12/31/98-6/30/00
John Hancock 6.36%-6.86%, 35,904 35,904
12/31/99-6/29/01
Principal Mutual 6.35%, 6/29/99 6,846 6,846
Peoples Security Insurance 6.28%, 6/30/01 10,063 10,063
Continental Assurance Company 6.01%-6.40%, 13,117 13,117
7/01/99-12/31/00
New York Life 5.91%, 12/31/99 6,440 6,440
Metropolitan Contract 6.16%-6.32%, 46,899 46,899
12/31/00-7/01/02
Jackson National Life 6.77%, 12/31/99 6,869 6,869
--------- ----------
140,705 140,705
* Bankers Trust Company Temporary cash investment 35,228 35,228
--------- ----------
Total Interest Income Fund 175,933 175,933
--------- ----------
SBC SAVINGS AND SECURITY PLAN
EIN 43-1301883, PLAN NO. 004
Item 27a-SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1998
(Dollars in Thousands)
Description of Current
Identity of Issue Investment Cost Value
------------------------------------- --------------------------- --------- ----------
Asset Allocation Fund
* Barclays Global Investors U.S.
Tactical Asset Allocation Fund F 540,967 units 6,592 8,232
* Bankers Trust Company Temporary cash investment 49 49
--------- -----------
Total Asset Allocation Fund 6,641 8,281
--------- -----------
Global Equity Fund
* Barclays Global Investors U.S.
Equity Market Fund F 377,297 units 7,905 10,001
* Barclays Global Investors EAFE
Equity Index Fund E 144,974 units 2,330 2,672
* Bankers Trust Company Temporary cash investment 97 97
--------- -----------
Total Global Equity Fund 10,332 12,770
--------- -----------
Loan Fund
* Loans to Plan Participants 8.75%-9.50% - 108,585
* Bankers Trust Company Temporary cash investment 17 17
--------- -----------
Total Loan Fund 17 108,602
--------- -----------
TOTAL $ 830,396 $ 2,289,316
========= ===========
* 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 6.30%.
17
SBC SAVINGS AND SECURITY PLAN
EIN 43-1301883, PLAN NO. 004
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
---------------- ------------- --------- ---------- ----------- ----------------------------- ----------- --------
W. Menzel $ 689 $ - $ - $ 689 2/25/97 Original Loan Date $ 689 $ -
Dittmer, MO 8/31/98 Maturity Date
9.25% Interest Rate
Secured by Non-LESOP Account
K. Bledsoe 9,800 83 40 4,758 8/31/95 Original Loan Date 4,758 -
Granite City, IL 9/30/99 Maturity Date
9.75% Interest Rate
Secured by Non-ESOP Account
D. Watson 2,700 - - 2,700 9/30/96 Original Loan Date 2,700 -
Oklahoma City, OK 10/31/99 Maturity Date
9.25% Interest Rate
Secured by Non-ESOP Account
G. Parra 41,000 - - 40,256 8/23/96 Original Loan Date 40,256 -
San Antonio, TX 9/30/01 Maturity Date
9.25% Interest Rate
Secured by Non-ESOP Account
M. Hill 18,396 - - 9,789 12/31/93 Original Loan Date 9,789 -
Royse City, TX 2/28/99 Maturity Date
6.75% Interest Rate
Secured by Non-ESOP Account
M. Courtois 16,000 - - 14,044 8/22/96 Original Loan Date 14,044 -
Mission, KS 9/30/01 Maturity Date
9.25% Interest Rate
Secured by Non-ESOP Account
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 AND SECURITY PLAN
EIN 43-1301883, PLAN NO. 004
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 Pyramid $ 521,180 $ - $ 521,180 $ 521,180 $ -
Account Cash Fund
Bankers Trust Bankers Trust Pyramid $ - $ 488,673 $ 488,673 $ 488,673 $ -
Account Cash Fund
Bankers Trust SBC Communications Inc. $ 65,573 $ - $ 65,573 $ 65,573 $ -
Common Stock
Bankers Trust SBC Communications Inc. $ - $ 82,400 $ 27,686 $ 82,400 $ 54,714
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 AND SECURITY 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) pertaining to the SBC
Savings and Security Plan of our report dated June 24, 1999, with respect
to the financial statements and supplemental schedules of the SBC Savings
and Security 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