1
EXHIBIT 28.E
Securities and Exchange Commission
Washington, D.C., 20549
Form 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the calendar year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
BELL COMMUNICATIONS RESEARCH SAVINGS PLAN FOR SALARIED EMPLOYEES
(Full Title of Plan)
Bell Communications Research, Inc.
445 South Street, Morristown NJ 07960
(Name of issuer of the securities held pursuant to
the Plan and the address of its principal executive office)
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Departmental Benefits Committee of the Bell Communications Research Savings
Plan for Salaried Employees, duly caused this annual report to be signed on its
behalf by the undersigned hereunto duly authorized.
BELL COMMUNICATIONS RESEARCH
SAVINGS PLAN FOR SALARIED
EMPLOYEES
DATE 4-11-98 s/ Richard Schooley
-----------------------------------------
Richard Schooley
Chairman, Departmental Benefits Committee
3
BELL COMMUNICATIONS RESEARCH
SAVINGS PLAN FOR SALARIED EMPLOYEES
INDEX TO FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULES
----------
Pages
-----
REPORT OF INDEPENDENT ACCOUNTANTS F-2
FINANCIAL STATEMENTS:
Statements of Net Assets Available for
Benefits, with Fund Information
as of December 31, 1997 and 1996 F-3 - F-4
Statement of Changes in Net Assets Available
for Benefits, with Fund Information
for the years ended December 31, 1997 and 1996 F-5 - F-6
NOTES TO FINANCIAL STATEMENTS F-7 - F-11
SUPPLEMENTAL SCHEDULES:
Schedule I: Item 27a - Schedule of Assets Held for Investment Purposes
as of December 31, 1997 F-12 - F-14
Schedule II: Item 27b - Schedule of Loans or Fixed Income Obligations
as of December 31, 1997 F-15
Schedule III: Item 27d - Schedule of Reportable Transactions
for the year ended December 31, 1997 F-16
Other schedules required by section 2520.103-10 of the Department of Labor
Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974 have been omitted because they are
not applicable.
F-1
4
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and the Administrative Committee
of the Bell Communications Research Savings Plan for Salaried Employees
In our opinion, the accompanying statement of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Bell Communications Research Savings Plan for Salaried Employees (the
Plan) at December 31, 1997 and the changes in net assets available for benefits
for the year then ended, in conformity with generally accepted accounting
principles. 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 audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed
above.
The financial statements of the Plan as of and for the year ended December 31,
1996 were audited by other independent accountants whose report dated June 19,
1997 expressed an unqualified opinion on those statements. Their report also
contained an explanatory paragraph on supplemental information required by the
Employee Retirement Income Security Act of 1974 (ERISA).
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information included in
Schedules I through III is presented for purposes of additional analysis and is
not a required part of the basic financial statements but is additional
information required by ERISA. The fund information in the statement of net
assets available for benefits and the statement of changes in net assets
available for benefits is presented for purposes of additional analysis rather
than to present the net assets available for benefits and the changes in net
assets available for benefits of each fund. Schedules I through III and the fund
information have been subjected to the auditing procedures applied in the 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.
PRICE WATERHOUSE LLP
New York, New York
April 3, 1998
F-2
5
BELL COMMUNICATIONS RESEARCH
SAVINGS PLAN FOR SALARIED EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
AS OF DECEMBER 31, 1997
(Thousands of Dollars)
Bellcore Bellcore Bellcore Vanguard Vanguard
SAIC SAIC Telephone Diversified Interest International Index
Stock Exchangeable Equity Telephone Income Growth Trust-500
Purchase Stock Fund Portfolio Fund Portfolio Portfolio
---------- ---------- ---------- ---------- ---------- ---------- ----------
ASSETS:
Investments, at fair value:
Telephone Equity Fund common shares $ 153,496
Diversified Telephone Portfolio
common shares $ 18,332
SAIC Common Shares $ 40,899
Shares in Registered
Investment Companies $ 48,410 $ 266,802
Temporary cash investments $ 1,244 4,385 2,345 250 $ 9,973
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,244 45,284 155,841 18,582 9,973 48,410 266,802
Investment contracts with insurance
companies, at contract value 232,236
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total investments 1,244 45,284 155,841 18,582 242,209 48,410 266,802
Receivables:
Company Contributions 1,603
Loans to participants
Securities 13 1,430 167
Dividends
Interest 3 9 209 39
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total assets 2,850 45,306 157,480 18,788 242,209 48,410 266,802
LIABILITIES:
Securities payable 690 799
Trustee fees payable 21 2 14
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total liabilities 711 2 813
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net assets available for
plan benefits $ 2,850 $ 45,306 $ 156,769 $ 18,786 $ 241,396 $ 48,410 $ 266,802
========== ========== ========== ========== ========== ========== ==========
Vanguard
Vanguard Vanguard Total Bond Vanguard Vanguard
Explorer PRIMECAP Market Wellington Windsor II Loan
Fund Fund Portfolio Fund Fund Fund Total
---------- ---------- ---------- ---------- ---------- ---------- ----------
ASSETS:
Investments, at fair value:
Telephone Equity Fund common shares $ 153,496
Diversified Telephone Portfolio
common shares 18,332
SAIC Common Shares 40,899
Shares in Registered
Investment Companies $ 15,252 $ 51,583 $ 11,854 $ 62,721 $ 104,619 561,241
Temporary cash investments 18,197
---------- ---------- ---------- ---------- ---------- ---------- ----------
15,252 51,583 11,854 62,721 104,619 792,165
Investment contracts with insurance
companies, at contract value 232,236
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total investments 15,252 51,583 11,854 62,721 104,619 1,024,401
Receivables:
Company Contributions 1,603
Loans to participants $ 10,113 10,113
Securities 1,610
Dividends
Interest 260
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total assets 15,252 51,583 11,854 62,721 104,619 10,113 1,037,987
LIABILITIES:
Securities payable 1,489
Trustee fees payable 37
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total liabilities 1,526
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net assets available for
plan benefits $ 15,252 $ 51,583 $ 11,854 $ 62,721 $ 104,619 $ 10,113 $1,036,461
========== ========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these finncial statement
F-3
6
BELL COMMUNICATIONS RESEARCH
SAVINGS PLAN FOR SALARIED EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
AS OF DECEMBER 31, 1996
(Thousands of Dollars)
Bellcore Bellcore Bellcore Vanguard Vanguard
Telephone Diversified Interest International Index Vanguard
Equity Telephone Income Growth Trust-500 Explorer
Fund Portfolio Fund Portfolio Portfolio Fund
-------- -------- -------- -------- -------- --------
ASSETS:
Investments, at fair value:
Telephone Equity Fund common shares $155,211
Diversified Telephone Portfolio
common shares $ 14,996
Shares in Registered
Investment Companies $ 48,812 $195,885 $ 9,658
Temporary cash investments 4,395 254 $ 20,951
-------- -------- -------- -------- -------- --------
159,606 15,250 20,951 48,812 195,885 9,658
Investment contracts with insurance
companies, at contract value 240,001
-------- -------- -------- -------- -------- --------
Total investments 159,606 15,250 260,952 48,812 195,885 9,658
Receivables:
Company Contributions 245 452 134 420 46
Loans to participants
Securities 446 101
Dividends 458 49
Interest 14 1
-------- -------- -------- -------- -------- --------
Total assets 160,769 15,401 261,404 48,946 196,305 9,704
LIABILITIES:
Securities payable 184 40 26
Trustee fees payable 20 2 14
-------- -------- -------- -------- -------- --------
Total liabilities 204 42 40
-------- -------- -------- -------- -------- --------
Net assets available for
plan benefits $160,565 $ 15,359 $261,364 $ 48,946 $196,305 $ 9,704
======== ======== ======== ======== ======== ========
Vanguard
Vanguard Total Bond Vanguard Vanguard
PRIMECAP Market Wellington Windsor II Loan
Fund Portfolio Fund Fund Fund Total
-------- -------- -------- -------- -------- --------
ASSETS:
Investments, at fair value:
Telephone Equity Fund common shares $155,211
Diversified Telephone Portfolio
common shares 14,996
Shares in Registered
Investment Companies $ 14,218 $ 7,504 $ 45,744 $ 71,133 392,954
Temporary cash investments 25,600
-------- -------- -------- -------- -------- --------
14,218 7,504 45,744 71,133 588,761
Investment contracts with insurance
companies, at contract value 240,001
-------- -------- -------- -------- -------- --------
Total investments 14,218 7,504 45,744 71,133 828,762
Receivables:
Company Contributions 96 18 137 218 1,766
Loans to participants $ 10,517 10,517
Securities 547
Dividends 507
Interest 15
-------- -------- -------- -------- -------- --------
Total assets 14,314 7,522 45,881 71,351 10,517 842,114
LIABILITIES:
Securities payable 250
Trustee fees payable 36
-------- -------- -------- -------- -------- --------
Total liabilities 286
-------- -------- -------- -------- -------- --------
Net assets available for
plan benefits $ 14,314 $ 7,522 $ 45,881 $ 71,351 $ 10,517 $841,828
======== ======== ======== ======== ======== ========
The accompanying notes are an integral part of these finncial statement
F-4
7
BELL COMMUNICATIONS RESEARCH
SAVINGS PLAN FOR SALARIED EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS,
WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1997
(Thousands of Dollars)
Bellcore Bellcore Bellcore Vanguard Vanguard
SAIC SAIC Telephone Diversified Interest International Index
Stock Exchangeable Equity Telephone Income Growth Trust-500
Purchase Stock Fund Portfolio Fund Portfolio Portfolio
---------- ---------- ---------- ---------- ---------- ---------- ---------
Additions (deductions) to net assets
attributable to:
Investment Income
Dividends $ 5,759 $ 424 $ 16,638 $ 2,052 $ 5,523
Interest 179 18
Net appreciation in fair value
of investments $ 4 $ 9 56,254 6,075 239 60,101
---------- ---------- ---------- ---------- ---------- ---------- ---------
Total investment earnings 4 9 62,192 6,517 16,638 2,291 65,624
---------- ---------- ---------- ---------- ---------- ---------- ---------
Contributions
Participant 431 4,272 6,707 3,082 9,835
Company 2,574 1,582 2,331 1,009 3,185
---------- ---------- ---------- ---------- ---------- ---------- ---------
3,005 5,854 9,038 4,091 13,020
---------- ---------- ---------- ---------- ---------- ---------- ---------
Transfer of participants' balances, net (159) 45,297 (60,839) (2,260) (24,318) (3,324) 6,350
---------- ---------- ---------- ---------- ---------- ---------- ---------
Total additions (deductions) 2,850 45,306 7,207 4,257 1,358 3,058 84,994
Deductions from net assets
attributable to:
Distributions to participants 10,931 822 21,154 3,592 14,494
Administrative expenses 72 8 172 2 3
---------- ---------- ---------- ---------- ---------- ---------- ---------
Net increase (decrease) 2,850 45,306 (3,796) 3,427 (19,968) (536) 70,497
Net assets available
for plan benefits:
Beginning of year 160,565 15,359 261,364 48,946 196,305
---------- ---------- ---------- ---------- ---------- ---------- ---------
End of year $ 2,850 $ 45,306 $ 156,769 $ 18,786 $ 241,396 $ 48,410 $ 266,802
========== ========== ========== ========== ========== ========== =========
Vanguard
Vanguard Vanguard Total Bond Vanguard Vanguard
Explorer PRIMECAP Market Wellington Windsor II Loan
Fund Fund Portfolio Fund Fund Fund Total
---------- ---------- ---------- ---------- ---------- ---------- ----------
Additions (deductions) to net assets
attributable to:
Investment Income
Dividends $ 1,483 $ 1,737 $ 574 $ 5,201 $ 9,352 $ 48,743
Interest $ 870 1,067
Net appreciation in fair value
of investments 114 5,108 243 5,811 15,233 149,191
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total investment earnings 1,597 6,845 817 11,012 24,585 870 199,001
---------- ---------- ---------- ---------- ---------- ---------- ----------
Contributions
Participant 1,314 3,791 578 3,221 5,272 92 38,595
Company 358 932 158 1,042 1,689 14,860
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,672 4,723 736 4,263 6,961 92 53,455
---------- ---------- ---------- ---------- ---------- ---------- ----------
Transfer of participants' balances, net 2,783 27,577 3,312 4,869 6,996 (6,284) 0
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total additions (deductions) 6,052 39,145 4,865 20,144 38,542 (5,322) 252,456
Deductions from net assets
attributable to:
Distributions to participants 503 1,876 533 3,300 5,273 (4,918) 57,560
Administrative expenses 1 4 1 263
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) 5,548 37,269 4,332 16,840 33,268 (404) 194,633
Net assets available
for plan benefits:
Beginning of year 9,704 14,314 7,522 45,881 71,351 10,517 841,828
---------- ---------- ---------- ---------- ---------- ---------- ----------
End of year $ 15,252 $ 51,583 $ 11,854 $ 62,721 $ 104,619 $ 10,113 $1,036,461
========== ========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these finncial statement
F-5
8
BELL COMMUNICATIONS RESEARCH
SAVINGS PLAN FOR SALARIED EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS,
WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1996
(Thousands of Dollars)
Bellcore Bellcore Bellcore Vanguard Vanguard
Telephone Diversified Interest International Index Vanguard Vanguard
Equity Telephone Income Growth Trust-500 Explorer PRIMECAP
Fund Portfolio Fund Portfolio Portfolio Fund Fund
--------- --------- --------- --------- --------- --------- ---------
Additions (deductions) to net assets
attributable to:
Investment Income
Dividends $ 7,109 $ 538 $ 15,896 $ 2,117 $ 4,163 $ 517 $ 388
Interest 126 10 1
Net appreciation/ (depreciation)
in fair value of investments (7,924) (1,275) 3,852 31,064 86 1,313
--------- --------- --------- --------- --------- --------- ---------
Total investment earnings (losses) (689) (727) 15,897 5,969 35,227 603 1,701
--------- --------- --------- --------- --------- --------- ---------
Contributions
Participant 6,068 7,454 3,110 8,552 1,007 1,942
Company 2,779 3,708 1,278 3,782 370 661
--------- --------- --------- --------- --------- --------- ---------
8,847 11,162 4,388 12,334 1,377 2,603
--------- --------- --------- --------- --------- --------- ---------
Transfer of participants' balances, net (18,774) (1,877) 10,232 3,670 5,853 8,093 10,405
--------- --------- --------- --------- --------- --------- ---------
Total additions (deductions) (10,616) (2,604) 37,291 14,027 53,414 10,073 14,709
Deductions from net assets
attributable to:
Distributions to participants 8,519 950 14,704 1,795 5,764 369 395
Administrative expenses 1 3 3 2
--------- --------- --------- --------- --------- --------- ---------
Net increase (decrease) (19,136) (3,554) 22,584 12,229 47,648 9,704 14,314
Net assets available for
plan benefits:
Beginning of year 179,701 18,913 238,780 36,717 148,657
--------- --------- --------- --------- --------- --------- ---------
End of year $ 160,565 $ 15,359 $ 261,364 $ 48,946 $ 196,305 $ 9,704 $ 14,314
========= ========= ========= ========= ========= ========= =========
Vanguard Vanguard
Short Term Total Bond Vanguard Vanguard
Federal Market Wellington Windsor II Loan
Portfolio Portfolio Fund Fund Fund Total
--------- --------- --------- --------- --------- ---------
Additions (deductions) to net assets
attributable to:
Investment Income
Dividends $ 3,487 $ 4,875 $ 39,090
Interest $ 468 $ 382 $ 916 1,903
Net appreciation/ (depreciation)
in fair value of investments (409) (113) 2,504 7,164 36,262
--------- --------- --------- --------- --------- ---------
Total investment earnings (losses) 59 269 5,991 12,039 916 77,255
--------- --------- --------- --------- --------- ---------
Contributions
Participant 377 2,921 4,097 35,528
Company 151 1,265 1,758 15,752
--------- --------- --------- --------- --------- ---------
528 4,186 5,855 51,280
--------- --------- --------- --------- --------- ---------
Transfer of participants' balances, net (36,313) 6,830 4,688 15,039 (715) 7,131
--------- --------- --------- --------- --------- ---------
Total additions (deductions) (36,254) 7,627 14,865 32,933 201 135,666
Deductions from net assets
attributable to:
Distributions to participants 437 105 2,019 2,454 683 38,194
Administrative expenses 1 1 11
--------- --------- --------- --------- --------- ---------
Net increase (decrease) (36,691) 7,522 12,845 30,478 (482) 97,461
Net assets available for
plan benefits:
Beginning of year 36,691 33,036 40,873 10,999 744,367
--------- --------- --------- --------- --------- ---------
End of year $ 0 $ 7,522 $ 45,881 $ 71,351 $ 10,517 $ 841,828
========= ========= ========= ========= ========= =========
The accompanying notes are an integral part of these finncial statement
F-6
9
BELL COMMUNICATIONS RESEARCH
SAVINGS PLAN FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
----------
A. PLAN DESCRIPTION:
The Bell Communications Research Savings Plan for Salaried Employees
(the Plan) was established by Bell Communications Research (the
Company) to provide a convenient way for employees to save on a regular
and long term basis. On November 14, 1997, the Company was sold to
Science Applications International Corporation (SAIC). Prior to the
sale, the Company was owned by the Regional Bell Operating Companies
(RBOC's). Changes to the Plan as a result of the sale are noted below.
The following description of the Plan provides only general
information. Participants should refer to the Plan Prospectus for a
more complete description of the Plan's provisions.
1. General. The Plan is a defined contribution plan covering all
salaried employees of the Company who have one month of service
and are age twenty-one or older. It is subject to the provisions
of the Employee Retirement Income Security Act of 1974 (ERISA).
2. Contributions. Each year, participants may contribute up to 16
percent of pretax annual compensation, as defined in the Plan.
Participants may also contribute amounts representing
distributions from other qualified defined benefit or
contribution plans. After one year of service, the Company
contributes 70 percent of the first 6 percent of compensation
that a participant contributes to the Plan. In addition, after
one year of service, the Company makes a contribution of a 1/2
percent of compensation on behalf of each participant. Upon the
sale of the Company, this automatic contribution is deposited
into the SAIC Stock Purchase Fund until the quarterly trade date
and then into SAIC stock. This fund and related investment option
were also established upon the sale of the Company. Prior to the
sale of the Company, the automatic Company contribution was
deposited according to a participant's asset allocation at that
time; for participants who did not make a voluntary contribution,
the automatic contribution was deposited in the Interest Income
Fund. The contribution is made during the first quarter for
employee earnings of the previous calendar year. These automatic
Company contributions are immediately vested. Additional amounts
may be contributed at the option of the Company's Board of
Directors. Effective with the sale of the Company, 50 percent of
Company contributions are invested in SAIC stock and 50 percent
are invested in accordance with each participant's directed
allocation. Contributions are subject to certain IRS limitations.
3. Participant Accounts. Each participant's account is credited with
the participant's contribution and allocations of the Company's
contribution and fund earnings, and each participant's account is
charged with an allocation of administrative expenses.
Allocations are based on participant earnings, as defined. The
benefit to which a participant is entitled is the benefit that
can be provided from the participant's vested account.
4. Vesting. Participants are immediately vested in their
contributions plus actual earnings thereon. Vesting in the
Company's matching and discretionary contribution and actual
earnings thereon is based on years of continuous service. A
participant is 100 percent vested after five years of credited
service.
5. Investment Options. The Plan is comprised of the following
investments:
VANGUARD BOND INDEX FUND - Total Bond Market Portfolio: This
participant directed fund invests in United States treasury
obligations, federal agency mortgage backed obligations and
investment grade corporate obligations.
VANGUARD EXPLORER FUND: This participant directed fund invests
in the common stock of a diversified group of small
capitalization companies.
VANGUARD INDEX TRUST - 500 PORTFOLIO: This participant
directed fund invests in all of the 500 stocks that make up
the Standard & Poor's 500 Composite Stock Price Index.
VANGUARD INTERNATIONAL GROWTH PORTFOLIO: This participant
directed fund invests in the common stocks of companies based
outside of the United States.
F-7
10
BELL COMMUNICATIONS RESEARCH
SAVINGS PLAN FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS, continued
----------
VANGUARD / PRIMECAP FUND: This participant directed fund
invests in the common stock of medium capitalization
companies.
VANGUARD / WELLINGTON FUND: This participant directed fund
invests approximately 65 percent of its assets in common
stocks and the remaining 35 percent in bonds.
VANGUARD / WINDSOR II: This participant directed fund invests
in the common stock of large capitalization companies.
SAIC EXCHANGEABLE STOCK FUND: As previously stated, this fund
was created upon the sale of the Company. This fund invests
primarily in SAIC class A common stock and is participant
directed to the extent that participant contributions were
used to purchase SAIC stock. Also effective with the sale of
the Company, the SAIC Non-exchangeable Stock Fund, a
non-participant directed fund, was created to exclusively
invest 50% of the Company matching contribution in SAIC class
A common stock. There will be no activity in this fund until
the next quarterly SAIC stock trade date which will occur in
1998.
The SAIC STOCK PURCHASE FUND is not a participant directed
investment option; it is a temporary holding fund designed to
hold respective participant and Company contributions until
the following SAIC common stock quarterly trade date. Pending
the quarterly trade, the respective contributions are invested
in the Vanguard Money Market Reserves Portfolio.
BELLCORE INTEREST INCOME FUND: This participant directed fund
invests primarily in investment contracts issued by insurance
companies and banks.
BELLCORE - DIVERSIFIED TELEPHONE PORTFOLIO STOCK FUND: This
fund invests primarily in common stock and has been frozen to
new participant directed contributions since 1984.
BELLCORE - TELEPHONE EQUITY FUND STOCK FUND: This fund invests
in the common stock of the RBOC's. Upon the sale of the
Company, the fund was frozen to new participant directed
contributions.
6. Participant Loans Receivable. Participants may borrow from their
fund accounts a minimum of $1,000 up to a maximum of the lesser
of (a) $50,000 less the participant's highest outstanding loan
balance during the preceding one year period; or (b) 50 percent
of their vested account balance. Upon the sale of the Company,
loans also may not exceed the vested value of the participant's
Plan account less vested amounts in the SAIC Stock Fund within
the Plan. Loan transactions are treated as a transfer to (from)
the investment fund from (to) the Loan Fund. Loan terms range
from 1 year to 56 months. The loans are secured by the balance in
the participant's account and bear interest at a rate
commensurate with local prevailing rates as determined monthly by
the Plan administrator. Interest rates ranged from 7 to 10
percent during 1997 and 1996. Principal and interest is paid
ratably through monthly payroll deductions.
7. Payment of Benefits. On termination of service due to death,
disability or retirement, a participant may elect to receive
either a lump-sum amount equal to the value of the participant's
vested interest in his or her account, or an amount not to exceed
the life expectancy of the participant and spouse, if applicable.
For termination of service due to other reasons, a participant
may receive the value of the vested interest in his or her
account as a lump-sum distribution, or maintain the account in
the Plan.
8. Forfeited Accounts. Forfeited accounts are used to reduce future
Company contributions. Company contributions were reduced by
$345,000 and $248,000 in 1997 and 1996, respectively.
F-8
11
BELL COMMUNICATIONS RESEARCH
SAVINGS PLAN FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS, continued
----------
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation - The accompanying financial statements have been
prepared on the accrual basis of accounting in accordance with
generally accepted accounting principles.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Investment Valuation and Income Recognition- The Plan's investments are
valued at fair value, except for its investment contracts which are
valued at contract value (Note C).
Shares of registered investment companies are valued at quoted market
prices which represent the net asset value of shares held by the Plan
at year end. Quoted market prices for the value of the common shares of
each company in the Telephone Equity Fund and the Diversified Telephone
Portfolio are obtained on the basis of the closing price on the New
York Stock Exchange on the year end date or, if no sales were made on
that date, at the closing price on the New York Stock Exchange on the
next preceding day on which sales were made.
Participant notes receivable are valued at outstanding principle
balance which approximates fair value.
A general public market for the SAIC class A common shares does not
exist; therefore, the fair value of the shares is determined pursuant
to a stock price formula and valuation process which includes an
appraisal prepared by an independent appraisal firm. Periodic
determinations of fair value of the common stock are made by the SAIC
Board of Directors, with the assistance of the independent appraisal
firm. The SAIC Board of Directors reserves the right to alter the
formula.
The gains and losses realized on distributions of investments and the
increases or decreases in unrealized appreciation are calculated as the
difference between the current fair value and the fair value of the
investments at the beginning of the year, or purchase price if
purchased during the year. As of December 31, 1997, the fair value of
the SAIC Company's Class A Common Stock was $34.78 and the Plan held
approximately 1,175,927 shares.
It is the policy of the Company to keep the SAIC Common Stock Fund
invested primarily in common stock, except for estimated reserves for
use in distributions and investment exchanges by participants. Such
reserves are invested in the Vanguard Money Market Reserves - Prime
Portfolio Fund. If reserves in the SAIC Common Stock Fund are less than
the amount required at any given time to make required distributions
and investment changes, investment exchanges out of the SAIC Common
Stock Fund by participants may have to be deferred.
Purchases and sales of securities are reflected as of the trade date.
Investments are valued on a daily basis. Dividend income is recorded on
the ex-dividend date. Interest earned on investments is recorded on the
accrual basis.
Payment of Benefits- Benefits are recorded when paid.
C. INVESTMENT CONTRACTS WITH INSURANCE COMPANIES:
The Plan maintains investments in fully benefit-responsive investment
contracts with a number of insurance companies and banks. (Benefit
responsiveness is the extent to which contract terms permit and require
withdrawals at contract value for benefit payments, loans, or transfers
to other investment options offered to the participants by the Plan).
The accounts are credited with earnings on the underlying investments
(principally bank certificates of deposit and other fixed income
products) and charged for Plan withdrawals and administrative expenses.
The contracts are included in the financial statements at contract
value, which approximates fair value, as reported to the Plan by the
provider. Contract value represents contributions made under the
contract, plus earnings, less Plan withdrawals and administrative
expenses. See Item 27a of the supplemental schedules for a complete
list of all contracts held in the Plan.
F-9
12
BELL COMMUNICATIONS RESEARCH
SAVINGS PLAN FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS, continued
----------
Approximately 22 percent and 29 percent of total net assets at December
31, 1997 and 1996, respectively, were invested in investment contracts.
These contracts are subject to credit risk. If any of the companies
fails to perform on the contracts held, the asset value of the Interest
Income Fund, and therefore the Plan, could be substantially impaired.
On July 16, 1991, Mutual Benefit Life Insurance Company (MBL) was
placed in rehabilitation under the direction of the Insurance
Commissioner and Attorney General of the State of New Jersey. A Plan of
Rehabilitation was approved by the Superior Court of New Jersey on
January 24, 1994. This Plan provides that the full amount of principal
as of July 16, 1991 plus accrued interest is guaranteed by a
combination of the Life Insurance Company Guarantee Corporation of New
York (LICGCNY) and an insurance company consortium. Interest was
credited at contract rates through December 31, 1991. Interest for 1992
and subsequent years will be credited at rates which are based upon the
assets' investment performance but not less than approximately 1
percent on the total assets. At December 31, 1997, MBL paid 8.05
percent and 5.10 percent on the respective contracts that the Plan
currently holds. Amounts which are guaranteed by LICGCNY funds will be
completely distributed after December 31, 1999. Distributions from the
insurance consortium will be made in five installments beginning after
December 31, 1999. Payouts may be deferred after that date by the
consortium, but all payments must be made by December 31, 2010. Mutual
Benefit related assets represent approximately 3 percent of the total
Interest Income Fund assets and less than 1 percent of total Plan
assets.
D. PARTIES-IN-INTEREST:
Transactions involving cash, securities or assets of the Company, the
Trustee or other affiliated persons are considered to be
party-in-interest transactions under Section 2520.103-10 of the
Department of Labor Rules and Regulations for Reporting and Disclosure.
Reportable party-in-interest transactions for the year ended December
31, 1997 are summarized below:
NUMBER NUMBER OF
OF SHARES TRANSACTIONS COST
-------------------------------------------------
INVESTMENT PURCHASES
SAIC Class A Common Stock 1,175,927 1 $40,898,764
Certain Plan investments are shares of mutual funds managed by The
Vanguard Group. Vanguard Fiduciary Trust Company is the trustee as
defined by the Plan, and therefore these transactions qualify as
party-in-interest.
There were no known prohibited transactions with known parties in
interest as defined in ERISA Section 3(14) and regulations thereunder,
including those transactions set forth in ERISA Sections 406 and 407(a)
and Internal Revenue Code Section 4975(c). There was no known
relationship in which The Vanguard Fiduciary Trust Company had any
direct or indirect financial interest which would affect its capacity
to perform the necessary calculations.
Fees paid by the Plan for administrative expenses and investment
management services amounted to $263,000 and $11,000 for 1997 and 1996,
respectively. All other Plan expenses are paid by the Company.
E. PLAN TERMINATION POLICY:
The Company intends to continue the Plan indefinitely, but reserves the
right to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. If the Plan were to be
terminated, participants would be fully vested in their accounts;
Company contributions would not be subject to forfeiture.
F-10
13
BELL COMMUNICATIONS RESEARCH
SAVINGS PLAN FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS, continued
----------
F. RECONCILIATION TO FORM 5500:
The following is a reconciliation of net assets available for benefits
per the financial statements to the Form 5500:
December 31,
1997 1996
----------- -----------
Net assets available for benefits per the financial statements $ 1,036,461 $ 841,828
Amounts allocated to withdrawing participants (1,115) 0
----------- -----------
Net assets available for benefits per the Form 5500 $ 1,035,346 $ 841,828
=========== ===========
The following is a reconciliation of benefits paid to participants per
the financial statements to the Form 5500:
Year ended
December 31, 1997
-----------------
Benefits paid to participants per the financial statements $57,560
Add: Amounts allocated to withdrawing participants at December 31, 1997 1,115
Less: Amounts allocated to withdrawing participants at December 31, 1996 0
-------
Benefits paid to participants per the Form 5500 $58,675
=======
Amounts allocated to withdrawing participants are recorded on 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.
G. TAX STATUS:
On April 11, 1986, the Internal Revenue Service had determined that the
Plan is qualified under the requirements of Section 401(a) of the
Internal Revenue Code and is exempt from Federal income taxes under
Section 501(a) of the Code. The Plan obtained its latest determination
letter on August 1, 1995, in which the Internal Revenue Service stated
that the Plan, as amended through December 21, 1994, was in compliance
with the applicable requirements of the Internal Revenue Code. The Plan
has been amended since receiving such determination letter. However,
the Plan administrator and the Plan's counsel believe that the Plan is
currently designed and is being operated in compliance with the
applicable requirements of the Internal Revenue Code. Accordingly, no
provision for income taxes has been included in the Plan's financial
statements.
F-11
14
BELL COMMUNICATIONS RESEARCH
SAVINGS PLAN FOR SALARIED EMPLOYEES
SCHEDULE I: ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
---------------
TELEPHONE EQUITY FUND
(Dollars in Thousands)
DECEMBER 31, 1997
------------------------------------------------
NUMBER FAIR
NAME OF ISSUER AND TITLE OF ISSUE OF SHARES COST VALUE
--------- -------- --------
Common Shares:
Ameritech Corporation 324,524 $ 11,136 $ 26,124
Bell Atlantic Corporation 411,358 20,095 37,434
BellSouth Corporation 372,913 10,101 21,000
SBC Communications, Inc. 660,785 20,750 48,403
US West Communications, Inc. 455,082 11,918 20,535
Total Common Shares 74,000 153,496
Temporary cash investments 2,345 2,345
-------- --------
Total Telephone Equity Fund $ 76,345 $155,841
======== ========
DIVERSIFIED TELEPHONE PORTFOLIO
(Dollars in Thousands)
DECEMBER 31, 1997
----------------------------------------------
NUMBER FAIR
NAME OF ISSUER AND TITLE OF ISSUE OF SHARES COST VALUE
--------- ------- -------
Common Shares:
AT&T Corporation 64,762 $ 760 $ 3,967
Air Touch Communications, Inc. 14,400 84 599
Ameritech Corporation 26,561 311 2,138
Bell Atlantic Corporation 31,980 613 2,910
BellSouth Corporation 46,040 505 2,593
Lucent Technologies Corporation 20,967 310 1,675
NCR Corporation 4,089 38 114
SBC Communications, Inc. 42,070 438 3,082
US West Communications Group, Inc. 16,936 156 764
US West Media Group 17,016 108 490
Total Common Shares 3,323 18,332
Temporary cash investments 250 250
------- -------
Total Diversified Telephone Portfolio $ 3,573 $18,582
======= =======
F-12
15
BELL COMMUNICATIONS RESEARCH
SAVINGS PLAN FOR SALARIED EMPLOYEES
SCHEDULE I: ITEM 27A SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES, Continued
----------
INTEREST INCOME FUND
(Dollars in Thousands)
DECEMBER 31, 1997
------------------------------------------------------------
PRINCIPAL CONTRACT
NAME OF ISSUER AND TITLE OF ISSUE AMOUNT VALUE FAIR VALUE
------------ ------------ ------------
Contracts with Insurance Companies:
AIG
6.95% due 5/15/01 $ 8,773 $ 8,773 $ 8,773
AIG FP
7.07% due 6/30/01 $ 8,807 $ 8,807 $ 8,807
Bankers Trust Company
6.39% due 12/31/01 $ 15,012 $ 15,012 $ 15,012
Canada Life Insurance Company
5.47% due 12/31/98 $ 6,863 $ 6,863 $ 6,863
Deutche Bank
6.13% no maturity date $ 11,445 $ 11,445 $ 11,445
6.49% due on 3/31/01 $ 8,860 $ 8,860 $ 8,860
6.49% due on 3/31/00 $ 8,839 $ 8,839 $ 8,839
John Hancock
6.93% due on 11/15/01 $ 8,263 $ 8,263 $ 8,263
6.35% due on 8/15/02 $ 6,036 $ 6,036 $ 6,036
Morgan Guaranty
6.50% due on 9/30/01 $ 5,128 $ 5,128 $ 5,128
Mutual Benefit Life Insurance Company
8.05% due 12/31/99 $ 5,670 $ 5,670 $ 5,670
8.05% due 12/31/99 $ 379 $ 379 $ 379
5.10% due 12/31/99 $ 1,257 $ 1,257 $ 1,257
5.10% due 12/31/99 $ 84 $ 84 $ 84
New York Life Insurance Company
8.04% due 9/30/98 $ 10,589 $ 10,589 $ 10,589
7.20% due 7/31/99 $ 8,699 $ 8,699 $ 8,699
7.05% due 4/15/00 $ 7,215 $ 7,215 $ 7,215
Principal Mutual Life Insurance Company
7.71% due 10/31/99 $ 8,684 $ 8,684 $ 8,684
7.02% due 4/15/00 $ 8,252 $ 8,252 $ 8,252
Rabobank Nederland
6.56% no maturity date $ 8,834 $ 8,834 $ 8,834
5.92% due 12/31/00 $ 17,823 $ 17,823 $ 17,823
Sun Life Insurance Company of America
6.65% due 3/31/99 $ 14,974 $ 14,974 $ 14,974
7.19% due 6/30/99 $ 10,003 $ 10,003 $ 10,003
Union Bank of Switzerland
6.87% no maturity date $ 14,837 $ 14,837 $ 14,837
7.19% no maturity date $ 12,210 $ 12,210 $ 12,210
6.40% no maturity date $ 14,700 $ 14,700 $ 14,700
------------ ------------ ------------
Total Contracts with Insurance Companies $ 232,236 $ 232,236 $ 232,236
Temporary Cash Investments $ 9,973 $ 9,973 $ 9,973
------------ ------------ ------------
Total Interest Income Fund $ 242,209 $ 242,209 $ 242,209
============ ============ ============
F-13
16
BELL COMMUNICATIONS RESEARCH
SAVINGS PLAN FOR SALARIED EMPLOYEES
SCHEDULE I: ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES,
Continued
VANGUARD MUTUAL FUNDS
(Dollars in Thousands)
DECEMBER 31, 1997
----------------------------------------------------------------------
NUMBER OF FAIR
NAME OF ISSUER AND TITLE OF ISSUE SHARES COST VALUE
------------------- ----------------- -------------------
* Vanguard Index Trust-500 Portfolio 2,962,165 $162,031 $266,802
* Vanguard Windsor II Fund 3,655,447 $82,496 $104,619
* Vanguard International Growth Fund 2,953,612 $44,443 $48,410
* Vanguard Wellington Fund 2,129,733 $53,408 $62,721
* Vanguard Explorer Fund 275,811 $15,484 $15,252
* Vanguard PRIMECAP Fund 1,303,597 $46,448 $51,583
* Vanguard Total Bond Market Portfolio 1,174,858 $11,693 $11,854
LOAN FUND
(Dollars in Thousands)
Participant loans
7% to 10% $10,113 $10,113
SAIC FUNDS
(Dollars in Thousands)
* SAIC Exchangeable
SAIC Class A Common Stock 1,175,927 $40,899 $40,899
Temporary Cash Investments $4,385 $4,385
----------------- -------------------
Total SAIC Exchangeable Stock Fund $45,284 $45,284
* SAIC Stock Purchase Fund
Temporary Cash Investments $1,244 $1,244
----------------- -------------------
Total SAIC Stock Purchase Fund $1,244 $1,244
-13-
* Represents party-in-interest
F-14
17
Bell Communications Research
Savings Plan for Salaried Employees
Schedule II: Item 27b - Schedule of Loans or Fixed Income Obligations
as of December 31, 1997
AMOUNT RECEIVED
DURING REPORTING YEAR UNPAID
ORIGINAL ----------------------------------- BALANCE AT
NAME AND ADDRESS LOAN AMOUNT PRINCIPAL INTEREST END OF YEAR
------------------ ----------- ---------- ---------- ----------
DeGraffinreed, Cheryl $ 2,370.00 $ -- $ -- $ 1,432.86
9001 Sussex Ave
East Orange, NJ 07018 $ 1,182.04 $ -- $ -- $ 506.05
Delle Donne, Frances $15,000.00 $ -- $ -- $15,000.00
237 Rankin Ave
Cranford, NJ 07016
Brantle, Thomas $18,000.00 $ 2,791.21 $ 1,002.29 $11,796.00
260 Ocean Ave. - Apt. 18B
Sea Bright, NJ 07760 $16,257.71 $ 2,361.02 $ 901.66 $11,004.58
Kaeten, Karl $ 7,000.00 $ 1,227.08 $ 146.68 $ 1,971.09
1 Larison Lane
Ringoes, NJ 08551
Young, William $30,000.00 $ 4,438.88 $ 739.20 $10,923.25
31 Tilton Rd
Middletown, NJ 07748 $16,800.00 $ 2,042.95 $ 921.37 $13,781.68
AMOUNT OVERDUE*
NAME AND ADDRESS DETAILED DESCRIPTION OF LOSS PRINCIPAL INTEREST
---------------- ---------------------------- --------- --------
DeGraffinreed, Cheryl Loan date-06/12/95; Loan Maturity-06/11/97; $ 1,626.54 $ 248.46
9001 Sussex Ave. Interest rate-10%, Collateral - vested balance
East Orange, NJ 07018 Loan date-01/26/96; Loan Maturity-01/22/97; $ 1,182.04 $ 61.76
Interest rate-9.5%, Collateral - vested balance
Delle Donne, Frances Loan date-10/29/96; Loan Maturity-06/26/01; $ 2,694.92 $ 1,275.16
237 Rankin Ave. Interest rate-9.25%, Collateral - vested balance
Cranford, NJ 07016
Brantle, Thomas Loan date-05/15/95; Loan Maturity-01/13/00; $ 976.92 $ 286.96
260 Ocean Ave. - Apt. 18B Interest rate-10%, Collateral - vested balance
Sea Bright, NJ 07760 Loan date-12/11/95; Loan Maturity-08/10/00; $ 826.00 $ 261.56
Interest rate-9.75%, Collateral - vested balance
Kaeten, Karl Loan date-07/29/94; Loan Maturity-07/26/98; $ 477.78 $ 37.38
1 Larison Lane Interest rate-8.25%, Collateral - vested balance
Ringoes, NJ 08551
Young, William Loan date-06/23/94; Loan Maturity-02/22/99; $ 2,303.36 $ 276.88
31 Tilton Rd. Interest rate-8.25%, Collateral - vested balance
Middletown, NJ 07748 Loan date-08/14/96; Loan Maturity-04/12/01; $ 1,061.33 $ 420.83
Interest rate-9.25%, collateral - vested balance
* During 1998, the Company instructed the Plan's recordkeeper to issue Form 1099
to the obligors listed above in the amount of the principal and interest
balance outstanding at December 31, 1997.
F-15
18
Bell Communications Research
Savings Plan for Salaried Employees
Schedule III: Item 27d - Schedule of Reportable Transactions *
Series of Transactions
For the Year Ended December 31, 1997
IDENTITY OF PARTY INVOLVED DESCRIPTION OF NUMBER OF PURCHASE SELLING
ASSET TRANSACTIONS PRICE PRICE
- --------------------------------------------------------------------------------------------------------------------------------
The Vanguard Group Index Trust-500 Portfolio 252 $95,527,730.22
The Vanguard Group Index Trust-500 Portfolio 251 $84,712,266.83
The Vanguard Group International Growth Portfolio 243 56,105,649.98
The Vanguard Group International Growth Portfolio 249 56,746,971.56
The Vanguard Group Vanguard/PRIMECAP Fund 248 63,724,803.79
The Vanguard Group Vanguard/PRIMECAP Fund 224 31,467,707.17
The Vanguard Group Vanguard/Windsor II 247 52,207,895.70
The Vanguard Group Vanguard/Windsor II 243 33,955,420.31
N/A SAIC Exch. Stock Fund 1 45,297,111.55
IDENTITY OF PARTY INVOLVED COST OF CURRENT VALUE ON NET
ASSET TRANSACTION DATE GAIN / (LOSS)
- --------------------------------------------------------------------------------------------
The Vanguard Group $95,527,730.22
The Vanguard Group $69,674,079.47 84,712,266.83 $15,038,187.36
The Vanguard Group 56,105,649.98
The Vanguard Group 53,839,913.51 56,746,971.56 2,907,058.05
The Vanguard Group 63,724,803.79
The Vanguard Group 30,302,816.91 31,467,707.17 1,164,890.26
The Vanguard Group 52,207,895.70
The Vanguard Group 29,606,090.65 33,955,420.31 4,349,329.66
N/A 45,297,111.55
* Transactions or series of transactions in excess of 5 percent of the current
value of the Plan's assets as of December 31, 1997 as defined in Section
2520.103-106 of the Department of Labor Rules and Regulations for Reporting and
Disclosure under ERISA.
F-16