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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
For the fiscal year ended December 31, 1997
or
[_] Transition Report Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the transition period from Commission file number
_______ to _________ 1-8607
BellSouth Retirement Savings Plan
BELLSOUTH CORPORATION
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000-0000
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BELLSOUTH RETIREMENT SAVINGS PLAN
TABLE OF CONTENTS
ITEM PAGE
---- ----
0.Xxxxxxxxx Statements.................................................... 2
Report of Independent Accountants....................................... 2
Consent of Independent Accountants...................................... 3
Statement of Net Assets Available for Plan Benefits With Fund
Information as of December 31, 1997.................................... 4
Statement of Net Assets Available for Plan Benefits With Fund
Information as of December 31, 1996.................................... 6
Statement of Changes in Net Assets Available for Plan Benefits With Fund
Information for the Year ended December 31, 1997....................... 8
Statement of Changes in Net Assets Available for Plan Benefits With Fund
Information for the Year ended December 31, 1996....................... 10
Statement of Changes in Net Assets Available for Plan Benefits With Fund
Information for the Year ended December 31, 1995....................... 12
Notes to Financial Statements........................................... 14
2.Supplemental Schedule................................................... S-1
Item 27a--Schedule of Assets Held for Investment Purposes............... S-1
1
REPORT OF INDEPENDENT ACCOUNTANTS
Management Savings Plan Committee of the
BellSouth Retirement Savings Plan:
We have audited the accompanying statements of net assets available for plan
benefits with fund information of the BellSouth Retirement Savings Plan (the
Plan), formerly the BellSouth Management Savings and Employee Stock Ownership
Plan, as of December 31, 1997 and 1996, and the related statements of changes
in net assets available for plan benefits with fund information for each of
the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets available for plan benefits of the
Plan as of December 31, 1997 and 1996, and the changes in net assets available
for plan benefits for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule of Assets
Held for Investment Purposes is presented for the purpose of additional
analysis and is not a required part of the basic financial statements. The
fund information in the statements of net assets available for plan benefits
and the statements of changes in net assets available for plan benefits is
presented for purposes of additional analysis rather than to present the net
assets available for plan benefits and changes in net assets available for
plan benefits of each fund. The supplemental schedule and fund information
have been subjected to the auditing procedures applied in the audits 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.
Coopers & Xxxxxxx L.L.P.
Atlanta, Georgia
June 22, 1998
2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of BellSouth Corporation on Form S-8 (File Nos. 33-30773, 33-38264 and 33-
26518) of our report dated June 22, 1998, on our audits of the financial
statements of the BellSouth Retirement Savings Plan, formerly the BellSouth
Management Savings and Employee Stock Ownership Plan, as of December 31, 1997
and 1996, and for each of the three years in the period ended December 31,
1997,which report is included in this Annual Report on Form 11-K.
Coopers & Xxxxxxx L.L.P.
Atlanta, Georgia
June 29, 1998
3
BELLSOUTH RETIRE
STATEMENT OF NET ASSETS AVAILABLE FOR
DECEMBER
(IN THO
FIDELITY
BELLSOUTH INTEREST INDEXED GROWTH
STOCK INCOME STOCK BALANCED BOND & INCOME
FUND FUND FUND FUND FUND PORTFOLIO
ASSETS ---------- -------- ---------- -------- -------- ---------
Allocated share of Trust
net assets............. $1,149,889 $893,461 $1,040,749 $105,201 $109,987 $160,583
Investment in BellSouth
Retirement Savings
Employee Stock Owner-
ship Plan Trust:
Shares of BellSouth
common stock allocated
to participants....... -- -- -- -- -- --
Shares of BellSouth
common stock held for
future allocation..... -- -- -- -- -- --
Temporary cash invest-
ments................. -- -- -- -- -- --
---------- -------- ---------- -------- -------- --------
Total Investments..... 1,149,889 893,461 1,040,749 105,201 109,987 160,583
Contributions receiv-
able................... 1,137 1,072 1,648 278 160 512
Fund, BellSouth Savings
and Security Plan and
other transfers
receivable--net........ 4,753 1,910 -- -- -- --
---------- -------- ---------- -------- -------- --------
Total Assets.......... 1,155,779 896,443 1,042,397 105,479 110,147 161,095
---------- -------- ---------- -------- -------- --------
LIABILITIES
Distributions payable... 294 441 304 60 15 17
Fund, BellSouth Savings
and Security Plan and
other transfers
payable--net........... -- -- 1,397 106 100 --
Notes payable........... -- -- -- -- -- --
---------- -------- ---------- -------- -------- --------
Total Liabilities..... 294 441 1,701 166 115 17
---------- -------- ---------- -------- -------- --------
Net Assets Available for
Plan Benefits.......... $1,155,485 $896,002 $1,040,696 $105,313 $110,032 $161,078
========== ======== ========== ======== ======== ========
The accompanying notes are an integ
4
MENT SAVINGS PLAN
PLAN BENEFITS WITH FUND INFORMATION
31, 1997
USANDS)
VANGUARD
INDEX X. XXXX DFA U.S. EMPLOYEE STOCK
DFA U.S. TRUST PRICE LARGE CAP DFA OWNERSHIP PLAN
6-10 VALUE GROWTH MID-CAP VALUE II INTERNATIONAL PARTICIPANT ---------------------
PORTFOLIO II PORTFOLIO GROWTH FUND VALUE II FUND LOANS OTHER ALLOCATED UNALLOCATED TOTAL
------------ --------- ------- --------- ------------- ----------- ------- --------- ----------- ----------
$101,890 $46,140 $40,806 $37,863 $31,881 $60,840 $14,234 $ -- $ -- $3,793,524
-- -- -- -- -- -- -- 663,342 -- 663,342
-- -- -- -- -- -- -- -- 570,293 570,293
-- -- -- -- -- -- -- 3,858 14,106 17,964
-------- ------- ------- ------- ------- ------- ------- -------- -------- ----------
101,890 46,140 40,806 37,863 31,881 60,840 14,234 667,200 584,399 5,045,123
176 185 90 64 69 -- -- 4,711 -- 10,102
337 247 135 -- -- 88 -- -- -- 7,470
-------- ------- ------- ------- ------- ------- ------- -------- -------- ----------
102,403 46,572 41,031 37,927 31,950 60,928 14,234 671,911 584,399 5,062,695
-------- ------- ------- ------- ------- ------- ------- -------- -------- ----------
89 20 30 36 2 11 6,286 188 -- 7,793
-- -- -- 135 131 -- 7,948 147 -- 9,964
-- -- -- -- -- -- -- -- 356,477 356,477
-------- ------- ------- ------- ------- ------- ------- -------- -------- ----------
89 20 30 171 133 11 14,234 335 356,477 374,234
-------- ------- ------- ------- ------- ------- ------- -------- -------- ----------
$102,314 $46,552 $41,001 $37,756 $31,817 $60,917 $ -- $671,576 $227,922 $4,688,461
======== ======= ======= ======= ======= ======= ======= ======== ======== ==========
ral part of these financial statements.
5
BELLSOUTH RETIRE
STATEMENT OF NET ASSETS AVAILABLE FOR
DECEMBER
(IN THO
FIDELITY
BELLSOUTH INTEREST INDEXED GROWTH
STOCK INCOME STOCK BALANCED BOND & INCOME
FUND FUND FUND FUND FUND PORTFOLIO
ASSETS ---------- -------- -------- -------- -------- ---------
Allocated share of Trust
net assets............. $1,073,729 $806,543 $758,978 $81,953 $119,943 $55,838
Investment in BellSouth
Retirement Savings
Employee Stock
Ownership Plan Trust:
Shares of BellSouth
common stock allocated
to participants....... -- -- -- -- -- --
Shares of BellSouth
common stock held for
future allocation..... -- -- -- -- -- --
Temporary cash invest-
ments................. -- -- -- -- -- --
---------- -------- -------- ------- -------- -------
Total Investments..... 1,073,729 806,543 758,978 81,953 119,943 55,838
Contributions receiv-
able................... 1,153 900 1,674 221 177 164
Fund, BellSouth Savings
and Security Plan and
other transfers
receivable--net........ -- 19,960 1,502 194 -- 615
---------- -------- -------- ------- -------- -------
Total Assets.......... 1,074,882 827,403 762,154 82,368 120,120 56,617
---------- -------- -------- ------- -------- -------
LIABILITIES
Distributions payable... 1,042 940 927 20 151 --
Fund, BellSouth Savings
and Security Plan and
other transfers
payable--net........... 21,541 -- -- -- 331 --
Notes payable........... -- -- -- -- -- --
---------- -------- -------- ------- -------- -------
Total Liabilities..... 22,583 940 927 20 482 --
---------- -------- -------- ------- -------- -------
Net Assets Available for
Plan Benefits.......... $1,052,299 $826,463 $761,227 $82,348 $119,638 $56,617
========== ======== ======== ======= ======== =======
The accompanying notes are an integ
6
MENT SAVINGS PLAN
PLAN BENEFITS WITH FUND INFORMATION
31, 1996
USANDS)
DFA U.S. AMERICAN EMPLOYEE STOCK
DFA U.S. LARGE CAP DFA XXXXXX CENTURY/TWENTIETH OWNERSHIP PLAN
6-10 VALUE VALUE II INTERNATIONAL 100 CENTURY GROWTH PARTICIPANT ---------------------
PORTFOLIO II FUND VALUE II FUND FUND INVESTORS FUND LOANS OTHER ALLOCATED UNALLOCATED TOTAL
------------ --------- ------------- ------- ----------------- ----------- ------ --------- ----------- ----------
$39,643 $19,502 $27,939 $39,771 $15,054 $59,228 $6,893 $ -- $ -- $3,105,014
-- -- -- -- -- -- -- 449,992 -- 449,992
-- -- -- -- -- -- -- -- 472,927 472,927
-- -- -- -- -- -- -- 2,688 14,779 17,467
------- ------- ------- ------- ------- ------- ------ -------- -------- ----------
39,643 19,502 27,939 39,771 15,054 59,228 6,893 452,680 487,706 4,045,400
76 24 48 55 22 -- -- 1,907 -- 6,421
287 183 35 -- 29 216 -- 743 -- 23,764
------- ------- ------- ------- ------- ------- ------ -------- -------- ----------
40,006 19,709 28,022 39,826 15,105 59,444 6,893 455,330 487,706 4,075,585
------- ------- ------- ------- ------- ------- ------ -------- -------- ----------
2 -- -- -- 6 1,169 6,300 249 -- 10,806
-- -- -- 21 -- -- 363 -- -- 22,256
-- -- -- -- -- -- -- -- 394,577 394,577
------- ------- ------- ------- ------- ------- ------ -------- -------- ----------
2 -- -- 21 6 1,169 6,663 249 394,577 427,639
------- ------- ------- ------- ------- ------- ------ -------- -------- ----------
$40,004 $19,709 $28,022 $39,805 $15,099 $58,275 $ 230 $455,081 $ 93,129 $3,647,946
======= ======= ======= ======= ======= ======= ====== ======== ======== ==========
ral part of these financial statements.
7
BELLSOUTH RETIRE
STATEMENT OF CHANGES
FOR PLAN BENEFITS WI
YEAR ENDED DEC
(IN THO
FIDELITY
BELLSOUTH INTEREST INDEXED GROWTH DFA U.S.
STOCK INCOME STOCK BALANCED BOND & INCOME 6-10 VALUE
FUND FUND FUND FUND FUND PORTFOLIO PORTFOLIO II
---------- -------- ----------- --------- -------- --------- ------------
Net Assets Available for
Plan Benefits,
December 31, 1996...... $1,052,299 $826,463 $ 761,227 $ 82,348 $119,638 $ 56,617 $40,004
---------- -------- ----------- --------- -------- -------- --------
Employee contributions.. 34,434 36,179 55,032 9,858 5,541 14,476 6,088
Transfer of
participants'
balances--net.......... (228,972) 82,261 39,775 3,014 (13,621) 67,796 42,050
Employing company
contributions.......... -- -- -- -- -- -- --
Supplemental
contributions.......... -- -- -- -- -- -- --
Allocation of shares to
participants........... -- -- -- -- -- -- --
Transfer of loan
repayment.............. -- -- -- -- -- -- --
---------- -------- ----------- --------- -------- -------- --------
Total Contributions,
Allocations and
Transfers.............. (194,538) 118,440 94,807 12,872 (8,080) 82,272 48,138
Allocated share of Trust
investment activities.. 392,729 54,817 255,306 18,321 8,987 28,682 17,555
---------- -------- ----------- --------- -------- -------- --------
Total Additions......... 198,191 173,257 350,113 31,193 907 110,954 65,693
---------- -------- ----------- --------- -------- -------- --------
Less: Distributions to
participants...... 95,005 103,718 70,644 8,228 10,513 6,493 3,383
Interest on notes
payable............ -- -- -- -- -- -- --
---------- -------- ----------- --------- -------- -------- --------
Net Assets Available for
Plan Benefits,
December 31, 1997...... $1,155,485 $896,002 $ 1,040,696 $ 105,313 $110,032 $161,078 $102,314
========== ======== =========== ========= ======== ======== ========
The accompanying notes are an integ
8
MENT SAVINGS PLAN
IN NET ASSETS AVAILABLE
TH FUND INFORMATION
EMBER 31, 1997
USANDS)
VANGUARD
INDEX X. XXXX DFA U.S. AMERICAN EMPLOYEE STOCK
TRUST PRICE LARGE CAP DFA CENTURY/TWENTIETH OWNERSHIP PLAN
GROWTH MID-CAP VALUE II INTERNATIONAL XXXXXX CENTURY GROWTH PARTICIPANT ----------------------
PORTFOLIO GROWTH FUND VALUE II FUND 100 FUND INVESTORS FUND LOANS OTHER ALLOCATED UNALLOCATED TOTAL
--------- ------- --------- ------------- -------- ----------------- ----------- ------- --------- ----------- ----------
$ -- $ -- $19,709 $28,022 $ 39,805 $ 15,099 $58,275 $ 230 $455,081 $ 93,129 $3,647,946
------- ------- ------- ------- -------- -------- ------- ------- -------- -------- ----------
1,195 1,061 2,633 3,355 2,725 1,194 -- -- -- -- 173,771
44,262 39,161 10,590 2,685 (46,616) (19,486) 1,464 (1,106) (14,367) -- 8,890
-- -- -- -- -- -- -- -- 7,224 -- 7,224
-- -- -- -- -- -- -- -- -- 44,536 44,536
-- -- -- -- -- -- -- -- 71,595 (71,595) --
-- -- -- -- -- -- -- -- (11,878) 11,878 --
------- ------- ------- ------- -------- -------- ------- ------- -------- -------- ----------
45,457 40,222 13,223 6,040 (43,891) (18,292) 1,464 (1,106) 52,574 (15,181) 234,421
1,570 1,046 7,193 (503) 6,506 4,809 4,293 1,050 197,965 185,174 1,185,500
------- ------- ------- ------- -------- -------- ------- ------- -------- -------- ----------
47,027 41,268 20,416 5,537 (37,385) (13,483) 5,757 (56) 250,539 169,993 1,419,921
------- ------- ------- ------- -------- -------- ------- ------- -------- -------- ----------
475 267 2,369 1,742 2,420 1,616 3,115 174 34,044 -- 344,206
-- -- -- -- -- -- -- -- -- 35,200 35,200
------- ------- ------- ------- -------- -------- ------- ------- -------- -------- ----------
$46,552 $41,001 $37,756 $31,817 $ -- $ -- $60,917 $ -- $671,576 $227,922 $4,688,461
======= ======= ======= ======= ======== ======== ======= ======= ======== ======== ==========
ral part of these financial statements.
9
BELLSOUTH RETIRE
STATEMENT OF CHANGES
FOR PLAN BENEFITS WI
YEAR ENDED DEC
(IN THO
FIDELITY
BELLSOUTH INTEREST INDEXED GROWTH DFA U.S.
STOCK INCOME STOCK BALANCED BOND & INCOME 6-10 VALUE
FUND FUND FUND FUND FUND PORTFOLIO PORTFOLIO II
---------- -------- -------- -------- -------- --------- ------------
Net Assets Available for
Plan Benefits,
December 31, 1995...... $1,076,272 $754,760 $490,665 $52,760 $124,036 $ -- $12,576
---------- -------- -------- ------- -------- ------- -------
Employee contributions.. 46,536 48,145 56,662 12,487 8,141 3,952 1,486
Transfer-in of merged
plan assets--net....... 117,707 67,608 89,075 6,984 13,409 -- 2,796
Transfer of partici-
pants' balances--net... (91,381) (19,131) 33,011 6,627 (20,774) 50,569 18,305
Employing company con-
tributions............. -- -- -- -- -- -- --
Supplemental contribu-
tions.................. -- -- -- -- -- -- --
Allocation of shares to
participants........... -- -- -- -- -- -- --
Transfer of loan repay-
ment................... -- -- -- -- -- -- --
---------- -------- -------- ------- -------- ------- -------
Total Contributions,
Allocations and
Transfers.............. 72,862 96,622 178,748 26,098 776 54,521 22,587
Allocated share of Trust
investment activities.. (17,652) 48,774 133,869 9,048 4,826 3,140 5,395
---------- -------- -------- ------- -------- ------- -------
Total Additions......... 55,210 145,396 312,617 35,146 5,602 57,661 27,982
---------- -------- -------- ------- -------- ------- -------
Less: Distributions to
participants........... 79,183 73,693 42,055 5,558 10,000 1,044 554
Interest on notes
payable.............. -- -- -- -- -- -- --
---------- -------- -------- ------- -------- ------- -------
Net Assets Available for
Plan Benefits,
December 31, 1996...... $1,052,299 $826,463 $761,227 $82,348 $119,638 $56,617 $40,004
========== ======== ======== ======= ======== ======= =======
The accompanying notes are an integ
10
MENT SAVINGS PLAN
IN NET ASSETS AVAILABLE
TH FUND INFORMATION
EMBER 31, 1996
USANDS)
DFA U.S. DFA AMERICAN EMPLOYEE STOCK
LARGE CAP INTERNATIONAL XXXXXX CENTURY/TWENTIETH OWNERSHIP PLAN
VALUE II VALUE II 100 CENTURY GROWTH PARTICIPANT ----------------------
FUND FUND FUND INVESTORS FUND LOANS OTHER ALLOCATED UNALLOCATED TOTAL
--------- ------------- ------- ----------------- ----------- ----- --------- ----------- ----------
$ 6,268 $13,851 $25,849 $ 9,970 $41,287 $-- $434,796 $161,553 $3,204,643
------- ------- ------- ------- ------- ---- -------- -------- ----------
812 1,235 1,483 722 -- -- -- -- 181,661
616 2,839 4,544 1,423 7,561 -- -- -- 314,562
9,349 8,797 4,004 1,923 8,807 (64) -- -- 10,042
-- -- -- -- -- -- 6,518 -- 6,518
-- -- -- -- -- -- -- 42,299 42,299
-- -- -- -- -- -- 58,923 (58,923) --
-- -- -- -- -- -- (10,405) 10,405 --
------- ------- ------- ------- ------- ---- -------- -------- ----------
10,777 12,871 10,031 4,068 16,368 (64) 55,036 (6,219) 555,082
2,966 1,760 5,170 1,544 2,284 306 (9,681) (23,852) 167,897
------- ------- ------- ------- ------- ---- -------- -------- ----------
13,743 14,631 15,201 5,612 18,652 242 45,355 (30,071) 722,979
------- ------- ------- ------- ------- ---- -------- -------- ----------
302 460 1,245 483 1,664 12 25,070 -- 241,323
-- -- -- -- -- -- -- 38,353 38,353
------- ------- ------- ------- ------- ---- -------- -------- ----------
$19,709 $28,022 $39,805 $15,099 $58,275 $230 $455,081 $ 93,129 $3,647,946
======= ======= ======= ======= ======= ==== ======== ======== ==========
ral part of these financial statements.
11
BELLSOUTH RETIRE
STATEMENT OF CHANGES
FOR PLAN BENEFITS WI
YEAR ENDED DE
(IN THO
BELLSOUTH INTEREST INDEXED DFA U.S.
STOCK INCOME STOCK BALANCED BOND 6-10 VALUE
FUND FUND FUND FUND FUND PORTFOLIO II
---------- -------- -------- -------- -------- ------------
Net Assets Available for
Plan Benefits,
December 31, 1994...... $ 775,501 $693,284 $336,907 $26,311 $110,380 $ 5,294
---------- -------- -------- ------- -------- -------
Employee contributions.. 35,329 44,854 33,282 4,683 7,175 --
Transfer of
participants'
balances--net.......... (107,464) 37,729 21,487 15,265 (1,145) 5,324
Employing company
contributions.......... -- -- -- -- -- --
Supplemental
contributions.......... -- -- -- -- -- --
Allocation of shares to
participants........... -- -- -- -- -- --
Transfer of loan
repayment.............. -- -- -- -- -- --
---------- -------- -------- ------- -------- -------
Total Contributions,
Allocations and
Transfers.............. (72,135) 82,583 54,769 19,948 6,030 5,324
Allocated share of Trust
investment activities.. 439,651 51,877 127,372 8,794 16,168 1,958
---------- -------- -------- ------- -------- -------
Total Additions......... 367,516 134,460 182,141 28,742 22,198 7,282
---------- -------- -------- ------- -------- -------
Less: Distributions to
participants........... 66,745 72,984 28,383 2,293 8,542 --
Interest on notes
payable.............. -- -- -- -- -- --
---------- -------- -------- ------- -------- -------
Net Assets Available for
Plan Benefits,
December 31, 1995...... $1,076,272 $754,760 $490,665 $52,760 $124,036 $12,576
========== ======== ======== ======= ======== =======
The accompanying notes are an integ
12
MENT SAVINGS PLAN
IN NET ASSETS AVAILABLE
TH FUND INFORMATION
CEMBER 31, 1995
USANDS)
DFA U.S. AMERICAN EMPLOYEE STOCK
LARGE CAP DFA XXXXXX CENTURY/TWENTIETH OWNERSHIP PLAN
VALUE II INTERNATIONAL 100 CENTURY GROWTH PARTICIPANT ----------------------
FUND VALUE II FUND FUND INVESTORS FUND LOANS ALLOCATED UNALLOCATED TOTAL
--------- ------------- ------- ----------------- ----------- --------- ----------- ----------
$1,153 $ 6,687 $14,719 $3,748 $28,858 $233,325 $(44,022) $2,192,145
------ ------- ------- ------ ------- -------- -------- ----------
-- -- -- -- 752 -- -- 126,075
4,371 6,059 7,232 5,362 9,000 -- -- 3,220
-- -- -- -- -- 7,217 -- 7,217
-- -- -- -- -- -- 41,313 41,313
-- -- -- -- -- 49,927 (49,927) --
-- -- -- -- -- (8,701) 8,701 --
------ ------- ------- ------ ------- -------- -------- ----------
4,371 6,059 7,232 5,362 9,752 48,443 87 177,825
744 1,107 3,898 860 2,763 165,489 246,577 1,067,258
------ ------- ------- ------ ------- -------- -------- ----------
5,115 7,166 11,130 6,222 12,515 213,932 246,664 1,245,083
------ ------- ------- ------ ------- -------- -------- ----------
-- 2 -- -- 86 12,461 -- 191,496
-- -- -- -- -- -- 41,089 41,089
------ ------- ------- ------ ------- -------- -------- ----------
$6,268 $13,851 $25,849 $9,970 $41,287 $434,796 $161,553 $3,204,643
====== ======= ======= ====== ======= ======== ======== ==========
ral part of these financial statements.
13
BELLSOUTH RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT UNIT VALUES AND PER-PARTICIPANT AMOUNTS)
1. PLAN DESCRIPTION
GENERAL
The following description of the BellSouth Retirement Savings Plan (the
Plan), formerly the BellSouth Management Savings and Employee Stock Ownership
Plan, provides only general information. For additional information,
participants should refer to the Plan Prospectus/Summary Plan Description, as
supplemented (SPD). A copy of the SPD can be obtained by calling the BellSouth
Participant Service Center at 0-000-000-0000 or 0-000-000-0000 via company
telephone. In addition, copies of the Plan agreement and other related
documents which include details of the Plan can be obtained by writing to:
Secretary, BellSouth Savings Plan Committee, Room 13C09, 0000 Xxxxxxxxx
Xxxxxx, X.X., Xxxxxxx, Xxxxxxx 00000-0000.
The Plan was established by BellSouth Corporation (BellSouth) to provide a
convenient way for employees to save for their retirement on a long-term basis
and to acquire an ownership interest in BellSouth. The Plan consists of two
parts: one is a profit sharing plan which includes a qualified cash or
deferred arrangement and which is intended to qualify as such under sections
401(a), 401(k) and 401(m) and related sections of the Internal Revenue Code of
1986, as amended (the Code); the second part is an employee stock ownership
plan (ESOP) which is designed as a stock bonus plan to invest primarily in
shares of BellSouth common stock and which is intended to qualify under
sections 401(a), 401(m) and 4975(e)(7) and related sections of the Code. All
regular full-time and part-time employees of participating BellSouth companies
who are not covered by a collective bargaining agreement, have attained the
age of 21, and have completed at least six months of service are eligible to
participate. The Plan is subject to the Employee Retirement Income Security
Act of 1974, as amended (ERISA).
PLAN MERGER, AMENDMENT AND RESTATEMENT
Prior to April 1, 1996, the Plan operated as the BellSouth Management
Savings and Employee Stock Ownership Plan. Effective April 1, 1996, the Plan
was renamed; at the same time, another BellSouth plan, the BellSouth
Enterprises Retirement Savings Plan (RSP), was merged with and into the Plan.
Participants of the former RSP became participants in the Plan on April 1,
1996. These participants were credited with beginning account balances in the
Plan which equaled their March 31, 1996 ending account balances within the
RSP. As a result, both participant account and investment activity which
occurred within the RSP prior to April 1, 1996 are excluded from the
accompanying financial statements.
Effective July 1, 1996, the Plan document was amended and restated.
Significant changes included a change in investment valuation methods (see
below) and changes to various service functions provided by the Plan's
recordkeeper and service center provider.
MASTER TRUST
For investment purposes, the assets of the Plan are held in the BellSouth
Master Savings Trust (the Master Savings Trust). In addition, the Master
Savings Trust also holds all assets of the BellSouth Savings and Security Plan
(SSP). Prior to its merger with the Plan, assets of the RSP were also held by
the Master Savings Trust.
INVESTMENT OPTIONS
At December 31, 1997, the Plan's assets were comprised of the following
investment vehicles: BellSouth Stock Fund, Interest Income Fund, Indexed Stock
Fund, Balanced Fund, Bond Fund and mutual funds which include the Fidelity
Growth & Income Portfolio, DFA U.S. 6-10 Value Portfolio II, Vanguard Index
Trust Growth Portfolio, X. Xxxx Price Mid-Cap Growth, DFA U.S. Large Cap Value
II Fund, and DFA International Value II Fund.
14
BELLSOUTH RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT UNIT VALUES AND PER-PARTICIPANT AMOUNTS)
1. PLAN DESCRIPTION--(CONTINUED)
Effective July 8, 1996, all investments are valued on a daily basis. Prior
to this date, all Plan investment funds other than the mutual funds were
valued on a monthly basis. Since they were added as investment options, the
mutual funds have been valued on a daily basis.
Prior to July 8, 1996, the assets of the Xxxxxx 100 Fund, American
Century/Twentieth Century Growth Investors Fund, and the three DFA Funds were
contained within a mutual fund window account. In conjunction with the
conversion of investment valuation to a daily basis, these mutual funds were
established as separate investment funds. For further discussion, see Note 3.
Also, on July 8, 1996, the Fidelity Growth & Income Portfolio was added as a
new investment option.
During September 1997, the Xxxxxx 100 Fund and the American
Century/Twentieth Century Growth Investors Fund were replaced by the X. Xxxx
Price Mid-Cap Growth and the Vanguard Index Trust Growth Portfolio as
investment options. All participant balances in, and subsequent contributions
to, the replaced funds were reallocated according to participant direction or
into the Interest Income Fund in the absence of such direction.
CONCENTRATIONS OF RISK
At December 31, 1997 and 1996, the Plan's assets were significantly
concentrated in shares of BellSouth common stock, the value of which is
subject to fluctuations related to corporate, industry and economic factors.
VESTING
All participant and employing company contributions vest immediately.
PARTICIPANT LOANS (WHOLE DOLLARS)
Participants may borrow from their fund accounts a minimum of $1,000 up to
the lesser of $50,000 or 50 percent of their before-tax account balances as
defined by the Plan document and any amounts rolled over to the Plan from
other qualified plans. Loan balances are secured by the assets allocated to
the participants' accounts and bear interest at various rates which ranged
from 7.0% to 12.5% at December 31, 1997. Principal and interest are paid
ratably through periodic payroll deductions for active employees and by coupon
for nonactive employees.
SERVICE PROVIDER
Bankers Trust Company is the Trustee for the Master Savings Trust and,
through December 31, 1997, also served as the recordkeeper and service center
provider for the Plan. Beginning January 1, 1998, Metropolitan Life Insurance
Company will serve as the recordkeeper and service center provider for the
Plan.
2. ACCOUNTING POLICIES
The financial statements of the Plan have been prepared in accordance with
generally accepted accounting principles. Such financial statements include
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities and the amounts
of revenues and expenses. Actual results could differ from those estimates.
Certain amounts in prior period financial statements have been reclassified to
conform to the current year's presentation.
With respect to the statements of net assets available for plan benefits for
the years presented, allocated share of Trust net assets includes investments
at fair value, accrued interest income, accrued dividends, receivables for
investments sold, payables for investments purchased and accrued
administrative expenses of the Master Savings Trust.
With respect to the statements of changes in net assets available for plan
benefits for the years presented, allocated share of Trust investment
activities includes the sum of realized gains, net of realized losses, the net
15
BELLSOUTH RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT UNIT VALUES AND PER-PARTICIPANT AMOUNTS)
2. ACCOUNTING POLICIES--(CONTINUED)
change in unrealized appreciation/(depreciation) on the fair value of the
investments, interest income, dividends, investment manager fees and other
administrative fees paid by the Master Savings Trust.
The values of investments in the Master Savings Trust are determined as
follows:
. Shares of BellSouth common stock and equity securities underlying the
Indexed Stock Fund are valued on the basis of the closing price per
share on December 31, 1997 and 1996, as reported on the New York Stock
Exchange or, if no sales were made on that date, at the closing price on
the next preceding day on which sales were made;
. The values of mutual funds, all of which are traded on a national
securities exchange, are based on published daily closing net asset
values as reported by the respective securities exchanges;
. Over-the-counter securities and government obligations are valued based
on the bid prices on December 31, 1997 and 1996 from published sources
where available and, if not available, from other sources considered
reliable; and
. Contracts with insurance companies are valued at principal plus
reinvested interest.
Purchases and sales of securities are reflected as of the trade date.
Realized gains and losses on sales of investments are determined on the
basis of average cost.
Dividend income is recognized on the ex-dividend date. Interest earned on
investments is recognized on the accrual basis.
3. MUTUAL FUNDS
MUTUAL FUND WINDOW
During 1994, the Xxxxxx 100 Fund, the American Century/Twentieth Century
Growth Investors Fund, and the three DFA mutual funds were established as
investment options. Amounts could only be directed to these mutual funds
through transfers from the other core funds. Liquidation of these mutual funds
as a result of changing investment elections, transfers or participant
withdrawals could occur on any day. However, the five core funds in the Plan
(BellSouth Stock Fund, Interest Income Fund, Indexed Stock Fund, Balanced Fund
and Bond Fund) were still valued on a monthly basis. As a result, a "Mutual
Fund Window" or MFW was established. The MFW consisted of the five mutual
funds and a temporary holding account into which any cash generated as a
result of mutual fund liquidations during a month would be placed and held
until the end of the month. At the end of the month, transfers out of the MFW
would be effected with the five core funds, valued and recorded according to
the month-end unit value of the core fund(s).
As discussed in Note 1, on July 8, 1996 the Plan converted to a daily
valuation basis for all of its investment options. This allowed transactions
between the mutual funds and the five core funds to be effected and recorded
on the same day at any time during the month. As a result, subsequent to that
date, the MFW was eliminated and separate investment accounts for each mutual
fund were established. With the elimination of the MFW, participants are
allowed to make contributions directly to the mutual funds.
4. UNITS OF THE PLAN
Participants in the Plan can direct their contributions among 11 investment
options as described in Note 1. The interests of participants in each type of
investment of the Plan are represented by units as described in Section 8 of
the Plan document. Unit values are based on a beginning value of $1.00 as of
January 1, 1994 and are adjusted based on the performance of the underlying
investments in each period.
16
BELLSOUTH RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT UNIT VALUES AND PER-PARTICIPANT AMOUNTS)
4. UNITS OF THE PLAN--(CONTINUED)
Prior to July 8, 1996, participant accounts and the related unit values for
investments other than mutual funds were valued on a monthly basis. As
previously discussed in Notes 1 and 3, the Plan converted to a daily unit
valuation method for all participant accounts and investments on July 8, 1996.
The number and value of units for investments, other than mutual funds, as
of December 31, 1997 and 1996 were as follows:
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------------ ------------------------------
TYPE OF INVESTMENT NUMBER OF UNITS VALUE PER UNIT NUMBER OF UNITS VALUE PER UNIT
------------------ --------------- -------------- --------------- --------------
BellSouth Stock Fund.... 515,367,597 $2.2379 669,121,965 $1.5659
Interest Income Fund.... 689,444,667 1.2978 678,111,231 1.2177
Indexed Stock Fund...... 454,449,668 2.2833 443,980,017 1.7112
Balanced Fund........... 60,582,302 1.7313 57,850,389 1.4196
Bond Fund............... 84,282,694 1.3023 99,790,033 1.1971
The number and value of units by quarter for each investment, other than
mutual funds, during 1997 were as follows:
BELLSOUTH STOCK FUND INTEREST INCOME FUND
-------------------- --------------------
NUMBER OF VALUE NUMBER OF VALUE
1997 UNITS PER UNIT UNITS PER UNIT
---- ----------- -------- ----------- --------
March................................. 592,238,246 $1.6506 690,822,435 $1.2367
June.................................. 568,569,014 1.8247 693,851,427 1.2566
September............................. 558,586,028 1.8309 675,973,855 1.2772
December.............................. 515,367,597 2.2379 689,444,667 1.2978
INDEXED STOCK FUND BALANCED FUND
-------------------- -------------------
NUMBER OF VALUE NUMBER OF VALUE
1997 UNITS PER UNIT UNITS PER UNIT
---- ----------- -------- ---------- --------
March.................................. 449,743,497 $1.7575 59,945,425 $1.4391
June................................... 452,220,908 2.0653 59,218,361 1.5910
September.............................. 451,452,864 2.2201 59,518,543 1.6768
December............................... 454,449,668 2.2833 60,582,302 1.7313
BOND FUND
--------------------
NUMBER OF VALUE
1997 UNITS PER UNIT
---- ----------- --------
March.................................. 92,627,982 $1.1917
June................................... 87,196,772 1.2310
September.............................. 82,880,551 1.2681
December............................... 84,282,694 1.3023
The values of mutual funds, all of which are traded on a national securities
exchange, are based on published daily closing net asset values as reported by
the respective securities exchanges.
17
BELLSOUTH RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT UNIT VALUES AND PER-PARTICIPANT AMOUNTS)
4. UNITS OF THE PLAN--(CONTINUED)
At December 31, 1997, the number of participants currently enrolled within
the Plan by investment direction as described in Section 7 of the Plan
document was as follows:
NUMBER OF
FUND DESCRIPTION PARTICIPANTS
---------------- ------------
Entirely in BellSouth Stock Fund............................... 3,126
Entirely in Indexed Stock Fund................................. 2,820
Entirely in Interest Income Fund............................... 1,819
Entirely in Fidelity Growth & Income Portfolio................. 261
Equally in BellSouth Stock Fund and Indexed Stock Fund......... 1,314
Equally in BellSouth Stock Fund and Interest Income Fund....... 783
Equally in Indexed Stock Fund and Interest Income Fund......... 517
Equally in Indexed Stock Fund and Balanced Fund................ 293
Equally in Indexed Stock Fund and Fidelity Growth & Income
Portfolio..................................................... 435
Various fund combinations*..................................... 11,317
------
Total Participants........................................... 22,685
======
--------
* Includes all other investment directions, each having less than 1% of
participants.
All employing company contributions are made either to the ESOP or, for
certain Plan participants who were formerly participants in the RSP, to the
BellSouth Stock Fund. As such, all employees currently contributing to the
Plan are participants in either the ESOP or the BellSouth Stock Fund. For more
information, refer to Schedule A of the Plan Document.
5. CONTRIBUTIONS
Employee contributions to the plan are recorded based on basic contributions
of up to 6% and, for those participants wishing to contribute additional
amounts, supplemental contributions of up to 9%, such that total contributions
may not exceed 15% of compensation. Contributions are designated by the
participants as before-tax or after-tax, subject to certain IRS limitations on
before-tax contributions. Prior to January 1, 1996, the before-tax component
of contributions was limited to 12% of compensation.
As discussed in Section 3 of the Plan document, participants may also
rollover amounts into the Plan from other qualified plans.
The employing company makes matching contributions to the ESOP or the
BellSouth Stock Fund, as appropriate, in respect of each participant's
authorized basic contributions. Employing company matching contributions vest
immediately. The rate of the employing company matching contributions remains
in effect for a twelve-month period from April 1 through March 31. The
employing company matches 100% of a participant's first 2% of basic
contributions. Basic contributions in excess of 2% are matched at a variable
rate that vary company to company. The range of matching rates for basic
contributions in excess of 2% for the three years ended December 31, 1997 were
as follows:
1997 1996 1995
--------- --------- ---------
January-March............................... 25% - 75% 25% - 74% 50% - 81%
April-December.............................. 25% - 85% 25% - 75% 25% - 74%
18
BELLSOUTH RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT UNIT VALUES AND PER-PARTICIPANT AMOUNTS)
6. PLAN EXPENSES
Each participant in the Plan is charged a flat annual fee for Plan
administrative expenses, including recordkeeping, trustee and other expenses
considered reasonable by the Plan administrator. The fee is divided on a pro
rata basis among each investment option of the participant. The per-
participant fee for 1997, 1996 and 1995 was $30.00, $26.40 and $22.00,
respectively. Additional fees are also charged to individual participants for
various services provided by the Plan's recordkeeper and the BellSouth
Participant Service Center.
Investment manager fees are paid by the Master Savings Trust. Investment
manager fees, included in allocated share of Trust investment activities in
the statements of changes in net assets available for plan benefits for the
years presented, were as follows:
FOR THE YEAR ENDED
DECEMBER 31,
--------------------
1997 1996 1995
------ ------ ------
Interest Income Fund........................................ $ 426 $ 346 $ 337
Indexed Stock Fund.......................................... 190 138 107
Balanced Fund............................................... 114 71 37
Bond Fund................................................... 367 367 275
------- ----- -----
$1,097 $922 $756
======= ===== =====
For the mutual funds, investment manager fees are not paid directly from the
Master Savings Trust. However, these investments are subject to mutual fund
management fees, which reduce the overall return of the respective mutual
fund. Such fees, expressed as percentages of fund assets, which were assessed
against the mutual funds by their respective managers were as follows:
FOR THE YEAR
ENDED
DECEMBER 31,
-----------------
1997 1996 1995
----- ----- -----
Fidelity Growth & Income Portfolio............................ 0.75% 0.74% --
DFA U.S. 6-10 Value Portfolio II.............................. 0.75% 0.85% 0.96%
Vanguard Index Trust Growth Portfolio*........................ 0.20% -- --
X. Xxxx Price Mid-Cap Growth*................................. 1.04% -- --
DFA U.S. Large Cap Value II Fund.............................. 0.75% 0.82% 0.96%
DFA International Value II Fund............................... 0.75% 0.86% 0.96%
Xxxxxx 100 Fund*.............................................. 1.41% 1.42% 1.47%
American Century/Twentieth Century Growth Investors Fund*..... 1.00% 1.00% 1.00%
--------
* During September 1997, the Xxxxxx 100 Fund and the American
Century/Twentieth Century Growth Investors Fund were replaced by the X. Xxxx
Price Mid-Cap Growth and the Vanguard Index Trust Growth Portfolio. For
additional information, see Note 1.
For the three years ended December 31, 1997, no fees were paid to investment
managers for management of the BellSouth Stock Fund.
7. TAX STATUS
The Internal Revenue Service has determined and informed BellSouth by letter
dated April 14, 1998, that the Plan and related Trust meet the requirements of
Section 401(a) of the Code and are exempt from federal income taxes under
Section 501(a) of the Code.
For information on the federal income tax effects on the employees with
respect to the Plan, participants should refer to the SPD.
19
BELLSOUTH RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT UNIT VALUES AND PER-PARTICIPANT AMOUNTS)
8. TERMINATION PRIORITIES
BellSouth intends to continue the Plan indefinitely but reserves the right
to terminate or amend it. In the event the Plan is terminated, if BellSouth or
its subsidiaries sponsors another defined contribution plan, the participants
may elect to have their units transferred to the other plan. If BellSouth or
its subsidiaries do not sponsor such a plan, the participants would receive a
lump-sum distribution of their units.
9. INTEREST IN BELLSOUTH MASTER SAVINGS TRUST
The assets of the Plan are held in the Master Savings Trust and are
commingled with the assets of the SSP. Prior to April 1, 1996, the Plan's
assets were also commingled with the assets of the RSP, which was merged with
and into the Plan on April 1, 1996. Effective July 1, 1993, the BellSouth
Employee Stock Ownership Plan (PAYSOP) was amended to allow it to be added as
a participating plan under the Master Savings Trust. However, the PAYSOP is a
sub-trust under the Master Savings Trust and the PAYSOP assets are not
commingled with the assets of the Master Savings Trust. This sub-trust is not
included in the following Master Savings Trust information.
The assets of the Master Savings Trust are allocated to the Plan based upon
the total of each individual plan participant's share of the Master Savings
Trust's assets. The Plan's allocated share of the total net assets of all
funds in the Master Savings Trust at December 31, 1997 and 1996 was 66.75389%
and 67.75720%, respectively. The Plan's allocated share of the net assets of
each fund in the Master Savings Trust at December 31, 1997 and 1996 were as
follows:
1997 1996
--------- ---------
BellSouth Stock Fund.................................... 49.71811% 53.08833%
Interest Income Fund.................................... 71.88872% 71.05430%
Indexed Stock Fund...................................... 85.12677% 88.12704%
Balanced Fund........................................... 82.60366% 84.53626%
Bond Fund............................................... 93.41432% 94.49191%
Fidelity Growth & Income Portfolio...................... 72.13917% 74.72260%
DFA U.S. 6-10 Value Portfolio II........................ 80.46464% 84.49196%
Vanguard Index Trust Growth Portfolio................... 70.06610% --
X. Xxxx Price Mid-Cap Growth............................ 78.53335% --
DFA U.S. Large Cap Value II Fund........................ 73.59767% 77.72083%
DFA International Value II Fund......................... 87.09114% 89.86031%
Xxxxxx 100 Fund......................................... -- 72.14168%
American Century/Twentieth Century Growth Investors
Fund................................................... -- 72.15016%
Participant Loans....................................... 72.46246% 76.47949%
Other................................................... 69.58087% 76.66749%
20
BELLSOUTH RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT UNIT VALUES AND PER-PARTICIPANT AMOUNTS)
9. INTEREST IN BELLSOUTH MASTER SAVINGS TRUST--(CONTINUED)
The financial position of the Master Savings Trust at December 31, 1997 and
1996 was as follows:
1997 1996
---- ----
Assets:
Investments at value:
BellSouth Stock Fund:
Shares of BellSouth common stock...................... $2,284,295 $2,009,039
Temporary cash investments............................ 28,464 490
Distributable shares.................................. 69 397
Interest Income Fund:
Contracts............................................. 1,180,628 1,088,329
Temporary cash investments............................ 61,963 46,790
Indexed Stock Fund:
Equity Index Fund..................................... 1,218,854 862,465
Temporary cash investments............................ 50 86
Balanced Fund:
Securities............................................ 114,364 86,837
Temporary cash investments............................ 12,927 10,116
Bond Fund:
Securities............................................ 113,050 121,647
Temporary cash investments............................ 2,791 4,223
Fidelity Growth & Income Portfolio:
Securities............................................ 222,255 75,746
Temporary cash investments............................ 1 2
DFA U.S. 6-10 Value Portfolio II:
Securities............................................ 126,866 48,291
Temporary cash investments............................ 1 2
Vanguard Index Trust Growth Portfolio:
Securities............................................ 66,199 --
X. Xxxx Price Mid-Cap Growth:
Securities............................................ 51,856 --
Temporary cash investments............................ 1 --
DFA U.S. Large Cap Value II Fund:
Securities............................................ 51,246 26,424
DFA International Value II Fund:
Securities............................................ 36,359 31,884
Xxxxxx 100 Fund:
Securities............................................ -- 55,121
Temporary cash investments............................ -- 8
American Century/Twentieth Century Growth Investors
Fund:
Securities............................................ -- 20,883
Participant Loans:
Loans to participants.................................. 83,956 73,981
Temporary cash investments............................. 99 141
Contribution Account+:
Temporary cash investments............................. 8,994 123
Distribution Account+:
Temporary cash investments............................. 10,006 6,831
Expense Account+:
Temporary cash investments............................. 1,456 1,505
Mutual Fund Window+:
Temporary cash investments............................. -- 856
Dividends and interest income receivable................ 2,236 2,346
Receivable for investments sold......................... 50,270 12,402
Other receivables....................................... 20,918 2,404
Variation margin receivable............................. 51 18
---------- ----------
5,750,225 4,589,387
Liabilities:
Payable for investments purchased....................... 67,167 7,182
Variation margin payable................................ 14 95
Administrative fees payable............................. 194 1,040
---------- ----------
Trust net assets (excluding ESOP Trusts)................ 5,682,850 4,581,070
21
BELLSOUTH RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT UNIT VALUES AND PER-PARTICIPANT AMOUNTS)
9. INTEREST IN BELLSOUTH MASTER SAVINGS TRUST--(CONTINUED)
1997 1996
---- ----
Investment in ESOP Trusts:
Shares of BellSouth common stock allocated to partici-
pants.................................................. 1,245,401 835,717
Distributable shares.................................... 77 37
Shares of BellSouth common stock held for future alloca-
tion................................................... 849,442 707,649
Temporary cash investments.............................. 31,588 30,035
---------- ----------
Total investments....................................... 7,809,358 6,154,508
Liabilities:
Notes payable........................................... 534,436 594,334
---------- ----------
Trust net assets........................................ $7,274,922 $5,560,174
========== ==========
Investments at cost..................................... $5,298,067 $4,329,557
========== ==========
--------
+ These accounts are included as "Other" in the accompanying financial
statements.
Distributions payable in shares at year end are reclassed from BellSouth
common stock and ESOP--BellSouth common stock held for future allocation to
the respective "Distributable Shares" line.
See Item 27a, BellSouth Master Savings Trust Schedule of Assets Held for
Investment Purposes.
Assets in the BellSouth Stock Fund, Bond Fund, Indexed Stock Fund, mutual
funds and some of the assets in the Balanced Fund are invested in securities
which fluctuate in market value, and the values of the units fluctuate daily.
Assets in the Interest Income Fund are invested in a number of investment
contracts with diversified groups of high quality financial institutions. The
value of the Interest Income Fund is based upon the principal invested and the
interest credited, and the value of the units should increase as of the end of
each day. Some of these contracts are unsecured, general obligations of such
companies. Their security is subject to the ability of the insurance companies
or other financial institutions to repay their debts generally as they come
due. Other contracts are backed specifically by high quality, fixed income
assets. Therefore, many of the new investment contracts have the underlying
assets held in a separate account of an insurance company or in a trust fund.
These assets are protected from the general creditors of the contract issuer.
The contracts held by the Trust in the Interest Income Fund are considered
fully benefit-responsive in accordance with AICPA Statement of Position 94-4.
A fully benefit-responsive investment contract provides a liquidity guarantee
by a financially responsible third party of principal and previously accrued
interest for liquidations, transfers, loans or hardship withdrawals initiated
by plan participants exercising their rights to withdraw, borrow or transfer
funds under the terms of the ongoing plan. The fair value of these investment
contracts as of December 31, 1997 and 1996 was $1,226,434 and $1,098,227,
respectively.
The crediting interest rate at December 31, 1997 and 1996, was 6.65% and
6.57%, respectively. The average yield for the years ended December 31, 1997
and 1996, was 6.64% and 6.52%, respectively. Interest rates are reset on a
semi-annual, quarterly or monthly basis, whereby, such rates are reset to move
the current book value of these investments toward the projected future market
value over the life of the contract.
During 1990, the BellSouth Management Savings and Employee Stock Ownership
Plan Trust and the BellSouth Savings and Security ESOP Trust (the ESOP Trusts)
issued medium-term notes in the aggregate amounts of $850 million to fund the
purchase of BellSouth common stock to be utilized at later dates to fulfill
match obligations. Shares purchased with such funds are released for
allocation to participant accounts based on a prescribed schedule coinciding
with payments on the ESOP notes.
22
BELLSOUTH RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT UNIT VALUES AND PER-PARTICIPANT AMOUNTS)
9. INTEREST IN BELLSOUTH MASTER SAVINGS TRUST--(CONTINUED)
Assets held in the Master Savings Trust are generally unavailable to service
the ESOP debt; however, the notes are guaranteed by and are subject to direct
recourse against BellSouth. BellSouth contributes to the ESOP Trusts an amount
necessary, net of ESOP dividends and interest, to service the ESOP notes. Such
contributions are classified as Supplemental Contributions in the accompanying
Statements of Changes in Net Assets Available for Plan Benefits With Fund
Information. These contributions are subject to the claims of holders of debt
securities issued by the ESOP Trusts but are held at BellSouth and paid to the
ESOP Trusts twice yearly to fund, on a same day basis, required payments by
the ESOP Trusts on the notes. Such contributions would not remain in the Plan
Trusts unless there were a default on the debt securities by the ESOP Trustee
after having received the required contributions from BellSouth. Therefore,
holders of the debt securities should not rely on the assets of the ESOP
Trusts in arriving at an investment decision with respect to the debt
securities.
In addition to Supplemental Contributions, BellSouth contributes amounts
necessary to purchase any additional shares required to meet the match
obligations after shares released by the ESOP Trusts have been used. Such
contributions are classified as Employing Company Contributions in the
accompanying Statements of Changes in Net Assets Available for Plan Benefits
With Fund Information.
In lieu of dividends earned on shares of BellSouth common stock which have
been allocated to participants from the ESOP Trusts, participant accounts are
credited with equivalent shares of BellSouth common stock. Dividends on the
related ESOP shares are transferred to the Unallocated ESOP Fund and are
applied towards the service of the ESOP notes. The transfer of these earnings
is classified as Transfer of Loan Repayment in the accompanying Statements of
Changes in Net Assets Available for Plan Benefits With Fund Information.
For the years ended December 31, 1997 and 1996, BellSouth made cash
contributions to the ESOP Trusts in the amount of $68,392 and $67,621,
respectively, for the purpose of servicing the guaranteed debt, and cash
contributions in the amount of $21,675 and $23,539, respectively, to purchase
additional shares to meet the match obligations.
A description of each debt issue is as follows:
BellSouth Management Savings and Employee Stock Ownership Plan Trust:
TITLE AMOUNT INTEREST RATE DUE DATE
----- -------- ------------- ------------
Amortizing Medium-Term Notes, Series A...... $275,000 9.125% July 1, 2003
Amortizing Medium-Term Notes, Series A...... $275,000 9.19% July 1, 2003
--------
Total..................................... $550,000
========
BellSouth Savings and Security ESOP Trust:
TITLE AMOUNT INTEREST RATE DUE DATE
----- -------- ------------- ------------
Amortizing Medium-Term Notes, Series A...... $300,000 9.125% July 1, 2003
Maturities of the ESOP Trusts' long-term debt outstanding at December 31,
1997 were as follows:
1998 1999 2000 2001 2002 2003 TOTAL
------- ------- ------- ------- -------- -------- --------
Maturities.......... $67,418 $75,589 $84,470 $94,128 $104,648 $108,183 $534,436
======= ======= ======= ======= ======== ======== ========
23
BELLSOUTH RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT UNIT VALUES AND PER-PARTICIPANT AMOUNTS)
9. INTEREST IN BELLSOUTH MASTER SAVINGS TRUST--(CONTINUED)
Investment activities of the Master Savings Trust are allocated to the Plan
based upon the total of each individual plan participant's share of the Master
Savings Trust investment activities during the period ended December 31, 1997.
The Master Savings Trust investment activities for the years ended December
31, 1997, 1996 and 1995 were as follows:
FOR THE YEAR ENDED
DECEMBER 31,
---------------------------------
1997 1996 1995
---------- --------- ----------
Investment Activities:
Dividends on shares of BellSouth common
stock..................................... $ 117,861 $ 129,554 $ 123,588
Interest Income Fund income................ 77,381 69,519 77,893
Other interest............................. 38,778 25,723 18,523
Net change in unrealized
appreciation/(depreciation) on invest-
ments..................................... 689,077 (237,602) 1,581,522
Net realized gain on investments........... 991,088 153,494 62,815
Investment manager fees.................... (1,308) (1,143) (1,017)
Other fees................................. (2,960) (2,035) (1,994)
---------- --------- ----------
Net investment activities................... $1,909,917 $ 137,510 $1,861,330
========== ========= ==========
24
BELLSOUTH MASTER SAVINGS TRUST
EMPLOYER IDENTIFICATION NUMBER: 00-0000000
ITEM 27A--SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
(IN THOUSANDS)
DECEMBER 31, 1997
-------------------------------
NUMBER OF
SHARES OR
PRINCIPAL CARRYING
NAME OF ISSUER AND TITLE OF ISSUE AMOUNT COST VALUE
--------------------------------- --------- ---------- ----------
BELLSOUTH STOCK FUND
SHARES OF BELLSOUTH COMMON STOCK*#--98.8%........ 40,565 $1,083,898 $2,284,364
---------- ----------
TEMPORARY CASH INVESTMENTS--1.2%................. 14,097 $ 28,380 $ 28,464
---------- ----------
Total BellSouth Stock Fund--100.0%............. $1,112,278 $2,312,828
---------- ----------
INTEREST INCOME FUND
ANNUITY CONTRACTS WITH INSURANCE COMPANIES--95.0%+
Aetna Life Insurance Company
(7.07%)........................................ $ 70,860 $ 70,860 $ 70,860
Allstate Life Insurance Company
(5.74%-6.48%).................................. $ 56,265 $ 56,265 $ 56,265
BT Basic
(7.11%)........................................ $111,987 $ 111,987 $ 111,987
CDC Investment Management Corp.
(5.96%-7.61%).................................. $ 60,381 $ 60,381 $ 60,381
Commonwealth Life Insurance Co.
(6.05%)........................................ $ 1,286 $ 1,286 $ 1,286
Continental Assurance
(5.78%-5.97%).................................. $112,500 $ 112,500 $ 112,500
Hartford Life
(8.70%)........................................ $ 8,781 $ 8,781 $ 8,781
Xxxxxxx National Life
(6.28%)........................................ $ 57,801 $ 57,801 $ 57,801
Xxxx Xxxxxxx Mutual Life
(4.45%-6.98%).................................. $178,087 $ 178,087 $ 178,087
MBL Life Assurance Corp.
(5.10%-9.75%).................................. $ 3,651 $ 3,651 $ 3,651
Massachusetts Mutual
(6.28%-6.78%).................................. $ 31,647 $ 31,647 $ 31,647
Metropolitan Life Insurance Co.
(5.79%-6.80%).................................. $ 93,843 $ 93,843 $ 93,843
New York Life Insurance Co.
(5.46%-6.80%).................................. $ 27,607 $ 27,607 $ 27,607
Peoples Security Life Insurance Co.
(6.91%)........................................ $113,871 $ 113,871 $ 113,871
Prudential Insurance Company of America
(5.90%-9.83%).................................. $ 11,776 $ 11,776 $ 11,776
Rabobank Nederland
(6.16%-7.63%).................................. $102,221 $ 102,221 $ 102,221
Sun Life Association, Canada
(5.78%-5.79%).................................. $ 25,418 $ 25,418 $ 25,418
TransAmerican Life & Annuity
(6.58%-7.00%).................................. $ 70,841 $ 70,841 $ 70,841
Union Bank of Switzerland
(7.28%-8.30%).................................. $ 41,805 $ 41,805 $ 41,805
---------- ----------
$1,180,628 $1,180,628
---------- ----------
TEMPORARY CASH INVESTMENTS--5.0%................. $ 61,963 $ 61,963 $ 61,963
---------- ----------
Total Interest Income Fund--100.0%............. $1,242,591 $1,242,591
---------- ----------
S-1
BELLSOUTH MASTER SAVINGS TRUST
EMPLOYER IDENTIFICATION NUMBER: 00-0000000
ITEM 27A--SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES--(CONTINUED)
(IN THOUSANDS)
DECEMBER 31, 1997
-------------------------------
NUMBER OF
SHARES OR
PRINCIPAL CARRYING
NAME OF ISSUER AND TITLE OF ISSUE AMOUNT COST VALUE
--------------------------------- --------- ---------- ----------
INDEXED STOCK FUND
BANKERS TRUST PYRAMID EQUITY INDEX FUND*#--99.9%... 537 $1,062,987 $1,218,854
---------- ----------
TEMPORARY CASH INVESTMENTS--0.1%................... 25 $ 49 $ 50
---------- ----------
Total Indexed Stock Fund--100.0%............... $1,063,036 $1,218,904
---------- ----------
BALANCED FUND
BT EQUITY INDEX FUND--54.0%........................ 30 $ 59,405 $ 68,751
---------- ----------
BT BROAD MARKET FIXED INCOME FUND--35.4%........... 22,381 $ 38,097 $ 45,034
---------- ----------
U.S. TREASURY XXXX, EXP. 01/08/98--0.5%............ $ 605 $ 579 $ 579
---------- ----------
TEMPORARY CASH INVESTMENTS--10.1%.................. 6,403 $ 12,657 $ 12,927
---------- ----------
Total Balanced Fund--100.0%...................... $ 110,738 $ 127,291
---------- ----------
BOND FUND
U.S. GOVERNMENT TREASURY NOTES--43.0%
U.S. Treasury Notes, 7.125%, 02/29/00............. $ 1,675 $ 1,785 $ 1,723
U.S. Treasury Notes, 6.875%, 03/31/00............. $ 7,850 $ 8,300 $ 8,044
U.S. Treasury Notes, 8.875%, 05/15/00............. $ 2,550 $ 2,899 $ 2,729
U.S. Treasury Notes, 6.250%, 05/31/00............. $ 7,025 $ 7,270 $ 7,113
U.S. Treasury Notes, 6.125%, 07/31/00............. $ 8,400 $ 8,707 $ 8,487
U.S. Treasury Notes, 8.750%, 08/15/00............. $ 225 $ 256 $ 241
U.S. Treasury Notes, 5.750%, 11/30/02............. $ 5,700 $ 5,709 $ 5,704
U.S. Treasury Notes, 6.500%, 08/15/05............. $ 2,975 $ 2,898 $ 3,104
U.S. Treasury Notes, 7.000%, 07/15/06............. $ 2,300 $ 2,314 $ 2,483
U.S. Treasury Notes, 6.250%, 02/15/07............. $ 9,900 $ 9,749 $ 10,216
---------- ----------
$ 49,887 $ 49,844
---------- ----------
U.S. GOVERNMENT TREASURY BONDS--20.9%
U.S. Treasury Bonds, 11.625%, 11/15/04............ $ 600 $ 799 $ 796
U.S. Treasury Bonds, 9.375%, 02/15/06............ $ 11,000 $ 12,334 $ 13,525
U.S. Treasury Bonds, 7.250%, 05/15/16............ $ 7,800 $ 7,420 $ 8,885
U.S. Treasury Bonds, 7.500%, 11/15/16............ $ 825 $ 869 $ 963
---------- ----------
$ 21,422 $ 24,169
---------- ----------
FEDERAL AGENCY OBLIGATIONS--14.7%
Government Natl. Mtg. Assn., 6.5%, 10/15/23....... $ 3,495 $ 3,283 $ 3,466
Government Natl. Mtg. Assn., 6.5%, 11/15/23....... $ 1,831 $ 1,702 $ 1,817
Government Natl. Mtg. Assn., 6.5%, 12/15/23....... $ 5,301 $ 4,987 $ 5,260
Government Natl. Mtg. Assn., 6.5%, 1/15/24........ $ 1,475 $ 1,382 $ 1,462
Government Natl. Mtg. Assn., 6.5%, 2/15/24........ $ 2,465 $ 2,299 $ 2,444
Government Natl. Mtg. Assn., 7.0%, 07/15/24....... $ 2,541 $ 2,419 $ 2,571
---------- ----------
$ 16,072 $ 17,020
---------- ----------
S-2
BELLSOUTH MASTER SAVINGS TRUST
EMPLOYER IDENTIFICATION NUMBER: 00-0000000
ITEM 27A--SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES--(CONTINUED)
(IN THOUSANDS)
DECEMBER 31, 1997
---------------------------
NUMBER OF
SHARES OR
PRINCIPAL CARRYING
NAME OF ISSUER AND TITLE OF ISSUE AMOUNT COST VALUE
--------------------------------- --------- -------- --------
DOMESTIC CORPORATE OBLIGATIONS--19.0%
Texas Utilities
9.50%, 08/01/99.................................... $ 600 $ 637 $ 629
Philadelphia Elec. Co.
7.500%, 01/15/99................................... $ 875 $ 890 $ 886
Puget Sound PWR & LT Co.
6.500%, 09/14/99................................... $2,000 $ 2,005 $ 2,017
National Rural Utilities
6.030%, 11/18/99................................... $1,500 $ 1,500 $ 1,500
Washington Nat. Gas
7.080%, 01/15/99................................... $1,000 $ 1,015 $ 1,011
Philadelphia Elec. Co.
5.375%, 08/15/98................................... $1,300 $ 1,287 $ 1,296
Virginia Elec. & Pwr. Co.
6.350%, 06/08/98................................... $1,000 $ 1,004 $ 1,002
Union Oil
7.24%, 04/01/99 ................................... $1,600 $ 1,635 $ 1,626
Ryder SYS Inc.
7.50%, 04/29/98.................................... $ 177 $ 180 $ 177
USX Corp.
6.375%, 07/15/98................................... $1,850 $ 1,846 $ 1,853
Columbia/HCA
6.500%, 03/15/99................................... $ 600 $ 601 $ 000
Xxxxx Xxx. Corp.
6.250%, 03/15/99................................... $2,200 $ 2,206 $ 2,201
Xxxxxx Xxxxxx
7.375%, 02/15/99................................... $1,150 $ 1,169 $ 1,164
AT&T
6.26%, 02/18/99.................................... $1,700 $ 1,700 $ 1,704
Chrysler Finl. Corp.
6.52%, 07/21/99.................................... $ 200 $ 202 $ 201
Chrysler Finl. Corp.
9.5%, 12/15/99..................................... $ 900 $ 967 $ 956
General Mtrs. Accept. Corp.
6.050%, 10/04/99................................... $3,200 $ 3,196 $ 3,197
-------- --------
$ 22,040 $ 22,017
-------- --------
TEMPORARY CASH INVESTMENTS--2.4%..................... 1,382 $ 2,779 $ 2,791
-------- --------
Total Bond Fund--100.0%............................ $112,200 $115,841
-------- --------
S-3
BELLSOUTH MASTER SAVINGS TRUST
EMPLOYER IDENTIFICATION NUMBER: 00-0000000
ITEM 27A--SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES--(CONTINUED)
(IN THOUSANDS)
DECEMBER 31, 1997
-------------------------------
NUMBER OF
SHARES OR
PRINCIPAL CARRYING
NAME OF ISSUER AND TITLE OF ISSUE AMOUNT COST VALUE
--------------------------------- --------- ---------- ----------
FIDELITY GROWTH & INCOME PORTFOLIO
SHARES OF FIDELITY GROWTH & INCOME PORTFOLIO--
99.9%........................................... 5,833 $ 190,331 $ 222,255
---------- ----------
TEMPORARY CASH INVESTMENTS--0.1%................. $ 1 $ 1 $ 1
---------- ----------
Total Fidelity Growth & Income Portfolio--
100.0%........................................ $ 190,332 $ 222,256
---------- ----------
DFA U.S. 6-10 VALUE PORTFOLIO II
SHARES OF DIMENSIONAL FUND ADVISORS U.S. 6-10
VALUE II--99.9%................................. 6,880 $ 109,489 $ 126,866
---------- ----------
TEMPORARY CASH INVESTMENTS--0.1%................. $ 1 $ 1 $ 1
---------- ----------
Total DFA U.S. 6-10 Value Portfolio II--100.0%. $ 109,490 $ 126,867
---------- ----------
VANGUARD INDEX TRUST GROWTH PORTFOLIO
SHARES OF VANGUARD INDEX TRUST GROWTH PORTFOLIO--
100.0%.......................................... 2,938 $ 64,830 $ 66,199
---------- ----------
Total Vanguard Index Trust Growth Portfolio--
100.0%........................................ $ 64,830 $ 66,199
---------- ----------
X. XXXX PRICE MID-CAP GROWTH
SHARES OF X. XXXX PRICE MID-CAP GROWTH--99.9%.... 1,813 $ 51,072 $ 51,856
---------- ----------
TEMPORARY CASH INVESTMENTS--0.1%................. $ 1 $ 1 $ 1
---------- ----------
Total X. Xxxx Price Mid-Cap Growth--100.0%..... $ 51,073 $ 51,857
---------- ----------
DFA U.S. LARGE CAP VALUE II FUND
SHARES OF DIMENSIONAL FUND ADVISORS U.S. LARGE
CAP VALUE II--100.0%............................ 2,849 $ 43,196 $ 51,246
---------- ----------
Total DFA U.S. Large Cap Value II Fund--100.0%. $ 43,196 $ 51,246
---------- ----------
DFA INTERNATIONAL VALUE II FUND
SHARES OF DIMENSIONAL FUND ADVISORS INTERNATIONAL
VALUE II--100.0%................................ 3,547 $ 38,021 $ 36,359
---------- ----------
Total DFA International Value II Fund--100.0%.. $ 38,021 $ 36,359
---------- ----------
PARTICIPANT LOANS
LOANS TO PARTICIPANTS (7%-12.5%)--99.9%.......... $83,956 $ 83,956 $ 83,956
---------- ----------
TEMPORARY CASH INVESTMENTS--0.1%................. $ 99 $ 99 $ 99
---------- ----------
Total Loan Fund--100.0%........................ $ 84,055 $ 84,055
---------- ----------
S-4
BELLSOUTH MASTER SAVINGS TRUST
EMPLOYER IDENTIFICATION NUMBER: 00-0000000
ITEM 27A--SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES--(CONTINUED)
(IN THOUSANDS)
DECEMBER 31, 1997
-------------------------------
NUMBER OF
SHARES OR
PRINCIPAL CARRYING
NAME OF ISSUER AND TITLE OF ISSUE AMOUNT COST VALUE
--------------------------------- --------- ---------- ----------
CONTRIBUTION ACCOUNT++
TEMPORARY CASH INVESTMENTS--100.0%............... 4,454 $ 8,992 $ 8,994
---------- ----------
Total Contribution Acct.--100.0%............... $ 8,992 $ 8,994
---------- ----------
DISTRIBUTION ACCOUNT++
TEMPORARY CASH INVESTMENTS--100.0%............... 4,956 $ 9,993 $ 10,006
---------- ----------
Total Distribution Acct.--100.0%............... $ 9,993 $ 10,006
---------- ----------
EXPENSE ACCOUNT++
TEMPORARY CASH INVESTMENTS--100.0%............... 721 $ 1,425 $ 1,456
---------- ----------
Total Expense Acct.--100.0%.................... $ 1,425 $ 1,456
---------- ----------
EMPLOYEE STOCK OWNERSHIP PLAN
SHARES OF BELLSOUTH COMMON STOCK*#--98.5%........ 37,202 $1,024,701 $2,094,920
---------- ----------
TEMPORARY CASH INVESTMENTS--1.5%................. 15,644 $ 31,116 $ 31,588
---------- ----------
Total Employee Stock Ownership Fund--100.0%.... $1,055,817 $2,126,508
---------- ----------
TOTAL INVESTMENTS.............................. $5,298,067 $7,803,258
========== ==========
--------
NOTES
Percentages represent the percentage of the investments of each fund of the
Master Savings Trust.
* This investment is a security issued by a party-in-interest to the Plan.
# Investment represents 5% or more of the Net Assets of the Master Savings
Trust.
+ The contracts with these insurance companies (interest rates indicated in
parentheses) guarantee the repayment of principal and the crediting of
interest resulting in a composite effective annual interest rate of 6.64%
for the year 1997. The timing of the remittance of participating employee
contributions and other participating employee-directed transactions may
cause the actual yield to vary from this rate. The composite interest rate
is subject to annual adjustment.
++ These accounts are included as "other" in the Plan's Financial Statements.
S-5
