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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 Commission file number
period from __ to ___ 1-8607
BellSouth Savings and Security Plan
BELLSOUTH CORPORATION
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000-0000
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BELLSOUTH SAVINGS AND SECURITY PLAN
TABLE OF CONTENTS
ITEM PAGE
---- ----
1. Financial 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 Savings and Security Plan:
We have audited the accompanying statements of net assets available for plan
benefits with fund information of the BellSouth Savings and Security Plan (the
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. 33-30772 and 33-38265) of our
report dated June 22, 1998, on our audits of the financial statements of the
BellSouth Savings and Security 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 SAVINGS
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............. $1,162,928 $349,378 $181,838 $22,155 $7,754 $62,019
Investment in BellSouth
Savings and Security
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...... 1,162,928 349,378 181,838 22,155 7,754 62,019
Contributions receiv-
able................... 1,625 1,133 496 72 39 159
Fund, BellSouth
Retirement Savings Plan
and other transfers
receivable--net........ 2,424 433 39 142 -- 183
---------- -------- -------- ------- ------ -------
Total Assets........... 1,166,977 350,944 182,373 22,369 7,793 62,361
---------- -------- -------- ------- ------ -------
LIABILITIES
Distributions payable... 165 94 48 -- -- 97
Fund, BellSouth
Retirement Savings Plan
and other transfers
payable--net........... -- -- -- -- 30 --
Notes payable .......... -- -- -- -- -- --
---------- -------- -------- ------- ------ -------
Total Liabilities...... 165 94 48 -- 30 97
---------- -------- -------- ------- ------ -------
Net Assets Available for
Plan Benefits.......... $1,166,812 $350,850 $182,325 $22,369 $7,763 $62,264
========== ======== ======== ======= ====== =======
The accompanying notes are an integ
4
AND SECURITY PLAN
PLAN BENEFITS WITH FUND INFORMATION
31, 1997
USANDS)
VANGUARD
INDEX X. XXXX DFA U.S. DFA EMPLOYEE STOCK
DFA U.S. TRUST PRICE LARGE CAP INTERNATIONAL OWNERSHIP PLAN
6-10 VALUE GROWTH MID-CAP VALUE II VALUE II PARTICIPANT ---------------------
PORTFOLIO II PORTFOLIO GROWTH FUND FUND LOANS OTHER ALLOCATED UNALLOCATED TOTAL
------------ --------- ------- --------- ------------- ----------- ------ --------- ----------- ----------
$24,737 $19,712 $11,154 $13,583 $4,725 $23,121 $6,222 $ -- $ -- $1,889,326
-- -- -- -- -- -- -- 582,136 -- 582,136
-- -- -- -- -- -- -- -- 279,149 279,149
-- -- -- -- -- -- -- 5,727 7,897 13,624
------- ------- ------- ------- ------ ------- ------ -------- -------- ----------
24,737 19,712 11,154 13,583 4,725 23,121 6,222 587,863 287,046 2,764,235
67 56 33 37 18 -- -- 4,504 -- 8,239
233 154 -- 59 -- 19 -- -- -- 3,686
------- ------- ------- ------- ------ ------- ------ -------- -------- ----------
25,037 19,922 11,187 13,679 4,743 23,140 6,222 592,367 287,046 2,776,160
------- ------- ------- ------- ------ ------- ------ -------- -------- ----------
-- -- -- -- -- -- 3,720 89 -- 4,213
-- -- 118 -- 32 -- 2,502 -- -- 2,682
-- -- -- -- -- -- -- -- 177,959 177,959
------- ------- ------- ------- ------ ------- ------ -------- -------- ----------
-- -- 118 -- 32 -- 6,222 89 177,959 184,854
------- ------- ------- ------- ------ ------- ------ -------- -------- ----------
$25,037 $19,922 $11,069 $13,679 $4,711 $23,140 $ -- $592,278 $109,087 $2,591,306
======= ======= ======= ======= ====== ======= ====== ======== ======== ==========
ral part of these financial statements.
5
BELLSOUTH SAVINGS
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.............. $948,885 $328,749 $102,271 $15,011 $6,997 $18,808
Investment in BellSouth
Savings and Security
Employee Stock Ownership
Plan Trust:
Shares of BellSouth
common stock allocated
to participants........ -- -- -- -- -- --
Shares of BellSouth
common stock held for
future allocation ..... -- -- -- -- -- --
Temporary cash
investments............ -- -- -- -- -- --
-------- -------- -------- ------- ------ -------
Total Investments...... 948,885 328,749 102,271 15,011 6,997 18,808
Contributions receivable. 1,537 1,300 425 76 35 75
Fund, BellSouth
Retirement Savings Plan
and other transfers
receivable--net......... -- 1,530 448 1 -- 497
-------- -------- -------- ------- ------ -------
Total Assets........... 950,422 331,579 103,144 15,088 7,032 19,380
-------- -------- -------- ------- ------ -------
LIABILITIES
Distributions payable.... 1,288 190 -- 3 19 3
Fund, BellSouth
Retirement Savings Plan
and other transfers
payable--net............ 2,798 -- -- -- 35 --
Notes payable............ -- -- -- -- -- --
-------- -------- -------- ------- ------ -------
Total Liabilities...... 4,086 190 -- 3 54 3
-------- -------- -------- ------- ------ -------
Net Assets Available for
Plan Benefits........... $946,336 $331,389 $103,144 $15,085 $6,978 $19,377
======== ======== ======== ======= ====== =======
The accompanying notes are an inte
6
AND SECURITY PLAN
PLAN BENEFITS WITH FUND INFORMATION
31, 1996
USANDS)
DFA U.S. DFA AMERICAN EMPLOYEE STOCK
DFA U.S. LARGE CAP INTERNATIONAL XXXXXX CENTURY/TWENTIETH OWNERSHIP PLAN
6-10 VALUE VALUE II VALUE II 100 CENTURY GROWTH PARTICIPANT ---------------------
PORTFOLIO II FUND FUND FUND INVESTORS FUND LOANS OTHER ALLOCATED UNALLOCATED TOTAL
------------ --------- ------------- ------- ----------------- ----------- ------ --------- ----------- ----------
$7,120 $5,916 $3,122 $13,498 $5,761 $17,906 $2,012 $ -- $ -- $1,476,056
-- -- -- -- -- -- -- 385,762 -- 385,762
-- -- -- -- -- -- -- -- 234,722 234,722
-- -- -- -- -- -- -- 4,513 8,055 12,568
------ ------ ------ ------- ------ ------- ------ -------- -------- ----------
7,120 5,916 3,122 13,498 5,761 17,906 2,012 390,275 242,777 2,109,108
21 10 8 30 10 -- -- 1,694 -- 5,221
220 38 100 104 9 27 16 125 -- 3,115
------ ------ ------ ------- ------ ------- ------ -------- -------- ----------
7,361 5,964 3,230 13,632 5,780 17,933 2,028 392,094 242,777 2,117,444
------ ------ ------ ------- ------ ------- ------ -------- -------- ----------
-- -- -- -- -- 200 1,901 119 -- 3,723
-- -- -- -- -- -- -- -- -- 2,833
-- -- -- -- -- -- -- -- 199,757 199,757
------ ------ ------ ------- ------ ------- ------ -------- -------- ----------
-- -- -- -- -- 200 1,901 119 199,757 206,313
------ ------ ------ ------- ------ ------- ------ -------- -------- ----------
$7,361 $5,964 $3,230 $13,632 $5,780 $17,733 $ 127 $391,975 $ 43,020 $1,911,131
====== ====== ====== ======= ====== ======= ====== ======== ======== ==========
gral part of these financial statements.
7
BELLSOUTH SAVINGS
STATEMENT OF CHANGES
FOR PLAN BENEFITS WI
YEAR ENDED DEC
(IN THO
FIDELITY
BELLSOUTH INTEREST INDEXED GROWTH DFA U.S. 6-
STOCK INCOME STOCK BALANCED BOND & INCOME 10 VALUE
FUND FUND FUND FUND FUND PORTFOLIO PORTFOLIO II
---------- -------- --------- --------- ------ --------- ------------
Net Assets Available for
Plan Benefits,
December 31, 1996...... $ 946,336 $331,389 $ 103,144 $ 15,085 $6,978 $19,377 $ 7,361
---------- -------- --------- --------- ------ ------- -------
Employee contributions.. 36,523 23,987 13,185 2,159 847 3,967 1,202
Transfer of
participants'
balances--net.......... (108,974) 14,010 33,567 2,287 (80) 30,214 13,600
Employing company
contributions.......... -- -- -- -- -- -- --
Supplemental
contributions.......... -- -- -- -- -- -- --
Allocation of shares to
participants........... -- -- -- -- -- -- --
Transfer of loan
repayment.............. -- -- -- -- -- -- --
---------- -------- --------- --------- ------ ------- -------
Total Contributions,
Allocations and
Transfers.............. (72,451) 37,997 46,752 4,446 767 34,181 14,802
Allocated share of Trust
investment activities.. 370,107 21,201 39,525 3,667 581 10,896 3,508
---------- -------- --------- --------- ------ ------- -------
Total Additions......... 297,656 59,198 86,277 8,113 1,348 45,077 18,310
---------- -------- --------- --------- ------ ------- -------
Less: Distributions to
participants...... 77,180 39,737 7,096 829 563 2,190 634
Interest on notes
payable............ -- -- -- -- -- -- --
---------- -------- --------- --------- ------ ------- -------
Net Assets Available for
Plan Benefits,
December 31, 1997...... $1,166,812 $350,850 $ 182,325 $ 22,369 $7,763 $62,264 $25,037
========== ======== ========= ========= ====== ======= =======
The accompanying notes are an integ
8
AND SECURITY PLAN
IN NET ASSETS AVAILABLE
TH FUND INFORMATION
EMBER 31, 1997
USANDS)
VANGUARD
INDEX X. XXXX DFA U.S. DFA AMERICAN EMPLOYEE STOCK
TRUST PRICE LARGE CAP INTERNATIONAL XXXXXX CENTURY/TWENTIETH OWNERSHIP PLAN
GROWTH MID-CAP VALUE II VALUE II 100 CENTURY GROWTH PARTICIPANT ----------------------
PORTFOLIO GROWTH FUND FUND FUND INVESTORS FUND LOANS OTHER ALLOCATED UNALLOCATED TOTAL
--------- ------- --------- ------------- ------- ----------------- ----------- ----- --------- ----------- ----------
$ -- $ -- $ 5,964 $3,230 $13,632 $5,780 $17,733 $ 127 $391,975 $ 43,020 $1,911,131
------- ------- ------- ------ ------- ------ ------- ----- -------- -------- ----------
485 310 615 387 627 222 -- -- -- -- 84,516
18,920 10,672 5,029 1,405 (18,372) (7,639) 4,463 (356) (3,147) -- (4,401)
-- -- -- -- -- -- -- -- 20,053 -- 20,053
-- -- -- -- -- -- -- -- -- 23,857 23,857
-- -- -- -- -- -- -- -- 37,790 (37,790) --
-- -- -- -- -- -- -- -- (7,492) 7,492 --
------- ------- ------- ------ ------- ------ ------- ----- -------- -------- ----------
19,405 10,982 5,644 1,792 (17,745) (7,417) 4,463 (356) 47,204 (6,441) 124,025
728 248 2,430 (159) 4,531 1,813 1,481 239 173,364 90,257 724,417
------- ------- ------- ------ ------- ------ ------- ----- -------- -------- ----------
20,133 11,230 8,074 1,633 (13,214) (5,604) 5,944 (117) 220,568 83,816 848,442
------- ------- ------- ------ ------- ------ ------- ----- -------- -------- ----------
211 161 359 152 418 176 537 10 20,265 -- 150,518
-- -- -- -- -- -- -- -- -- 17,749 17,749
------- ------- ------- ------ ------- ------ ------- ----- -------- -------- ----------
$19,922 $11,069 $13,679 $4,711 $ -- $ -- $23,140 $ -- $592,278 $109,087 $2,591,306
======= ======= ======= ====== ======= ====== ======= ===== ======== ======== ==========
ral part of these financial statements.
9
BELLSOUTH SAVINGS
STATEMENT OF CHANGES
FOR PLAN BENEFITS WI
YEAR ENDED DE
(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...... $1,051,289 $329,289 $ 56,642 $ 8,360 $6,730 $ -- $1,321
---------- -------- -------- ------- ------ ------- ------
Employee contributions.. 43,544 28,475 10,683 2,262 1,206 550 139
Transfer of
participants'
balances--net.......... (54,318) (18,290) 24,124 3,560 (773) 17,970 4,918
Employing company
contributions.......... -- -- -- -- -- -- --
Supplemental
contributions.......... -- -- -- -- -- -- --
Allocation of shares to
participants........... -- -- -- -- -- -- --
Transfer of loan
repayment.............. -- -- -- -- -- -- --
---------- -------- -------- ------- ------ ------- ------
Total Contributions,
Allocations and
Transfers.............. (10,774) 10,185 34,807 5,822 433 18,520 5,057
Allocated share of Trust
investment activities.. (37,102) 20,060 15,610 1,467 254 1,008 1,043
---------- -------- -------- ------- ------ ------- ------
Total Additions......... (47,876) 30,245 50,417 7,289 687 19,528 6,100
---------- -------- -------- ------- ------ ------- ------
Less: Distributions to
participants........... 57,077 28,145 3,915 564 439 151 60
Interest on notes
payable.............. -- -- -- -- -- -- --
---------- -------- -------- ------- ------ ------- ------
Net Assets Available for
Plan Benefits,
December 31, 1996...... $ 946,336 $331,389 $103,144 $15,085 $6,978 $19,377 $7,361
========== ======== ======== ======= ====== ======= ======
The accompanying notes are an inte
10
AND SECURITY PLAN
IN NET ASSETS AVAILABLE
TH FUND INFORMATION
CEMBER 31, 1996
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 OTHER ALLOCATED UNALLOCATED TOTAL
--------- ------------- ------- ----------------- ----------- ----- --------- ----------- ----------
$1,541 $ 968 $ 6,003 $2,690 $ 9,968 $-- $368,721 $ 78,837 $1,922,359
------ ------ ------- ------ ------- ---- -------- -------- ----------
78 59 267 69 -- -- -- -- 87,332
3,822 2,056 6,014 2,629 7,423 39 -- -- (826)
-- -- -- -- -- -- 17,906 -- 17,906
-- -- -- -- -- -- -- 25,322 25,322
-- -- -- -- -- -- 33,075 (33,075) --
-- -- -- -- -- -- (4,693) 4,693 --
------ ------ ------- ------ ------- ---- -------- -------- ----------
3,900 2,115 6,281 2,698 7,423 39 46,288 (3,060) 129,734
577 154 1,455 438 612 113 (11,084) (13,164) (18,559)
------ ------ ------- ------ ------- ---- -------- -------- ----------
4,477 2,269 7,736 3,136 8,035 152 35,204 (16,224) 111,175
------ ------ ------- ------ ------- ---- -------- -------- ----------
54 7 107 46 270 25 11,950 -- 102,810
-- -- -- -- -- -- -- 19,593 19,593
------ ------ ------- ------ ------- ---- -------- -------- ----------
$5,964 $3,230 $13,632 $5,780 $17,733 $127 $391,975 $ 43,020 $1,911,131
====== ====== ======= ====== ======= ==== ======== ======== ==========
gral part of these financial statements.
11
BELLSOUTH SAVINGS
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...... $ 646,155 $313,647 $32,245 $3,975 $5,113 $ 458
---------- -------- ------- ------ ------ ------
Employee contributions.. 37,421 31,484 7,008 1,243 1,235 --
Transfer of
participants'
balances--net.......... (3,835) (13,087) 6,132 1,900 (55) 697
Employing company
contributions.......... -- -- -- -- -- --
Supplemental
contributions.......... -- -- -- -- -- --
Allocation of shares to
participants........... -- -- -- -- -- --
Transfer of loan
repayment.............. -- -- -- -- -- --
---------- -------- ------- ------ ------ ------
Total Contributions,
Allocations and
Transfers.............. 33,586 18,397 13,140 3,143 1,180 697
Allocated share of Trust
investment activities.. 414,437 21,737 13,156 1,354 799 166
---------- -------- ------- ------ ------ ------
Total Additions......... 448,023 40,134 26,296 4,497 1,979 863
---------- -------- ------- ------ ------ ------
Less: Distributions to
participants........... 42,889 24,492 1,899 112 362 --
Interest on notes
payable.............. -- -- -- -- -- --
---------- -------- ------- ------ ------ ------
Net Assets Available for
Plan Benefits,
December 31, 1995...... $1,051,289 $329,289 $56,642 $8,360 $6,730 $1,321
========== ======== ======= ====== ====== ======
The accompanying notes are an inte
12
AND SECURITY 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
--------- ------------- ------ ----------------- ----------- --------- ----------- ----------
$ 224 $582 $3,009 $ 945 $5,935 $199,491 $(28,813) $1,182,966
------ ---- ------ ------ ------ -------- -------- ----------
-- -- -- -- 155 -- -- 78,546
1,156 308 2,185 1,538 3,555 -- -- 494
-- -- -- -- -- 23,397 -- 23,397
-- -- -- -- -- -- 24,861 24,861
-- -- -- -- -- 26,904 (26,904) --
-- -- -- -- -- (5,381) 5,381 --
------ ---- ------ ------ ------ -------- -------- ----------
1,156 308 2,185 1,538 3,710 44,920 3,338 127,298
161 81 826 210 508 132,087 125,572 711,094
------ ---- ------ ------ ------ -------- -------- ----------
1,317 389 3,011 1,748 4,218 177,007 128,910 838,392
------ ---- ------ ------ ------ -------- -------- ----------
-- 3 17 3 185 7,777 -- 77,739
-- -- -- -- -- -- 21,260 21,260
------ ---- ------ ------ ------ -------- -------- ----------
$1,541 $968 $6,003 $2,690 $9,968 $368,721 $ 78,837 $1,922,359
====== ==== ====== ====== ====== ======== ======== ==========
gral part of these financial statements.
13
BELLSOUTH SAVINGS AND SECURITY 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 Savings and Security Plan (the
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 non-salaried 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 non-management employees who are active, regular full-time or part-time
employees of a BellSouth company participating in the Plan and have completed
one year of service are eligible to participate. The Plan is subject to the
Employee Retirement Income Security Act of 1974, as amended (ERISA).
PLAN AMENDMENT AND RESTATEMENT
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 Retirement Savings Plan
(BRSP) (formerly the BellSouth Management Savings and Employee Stock Ownership
Plan and the BellSouth Enterprises Retirement Savings Plan).
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.
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
14
BELLSOUTH SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT UNIT VALUES AND PER-PARTICIPANT AMOUNTS)
1. PLAN DESCRIPTION--(CONTINUED)
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
Participant contributions vest immediately. Employing company matching
contributions vest upon a participant's completion of three years of service.
One year of vesting service is earned upon a participant's completion of 1,000
work hours during any year.
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
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.
15
BELLSOUTH SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT UNIT VALUES AND PER-PARTICIPANT AMOUNTS)
2. ACCOUNTING POLICIES--(CONTINUED)
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
the 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.
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.
16
BELLSOUTH SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT UNIT VALUES AND PER-PARTICIPANT AMOUNTS)
4. UNITS OF THE PLAN--(CONTINUED)
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.... 520,097,143 $2.2379 601,614,144 $1.5659
Interest Income Fund.... 268,888,234 1.2978 271,398,023 1.2177
Indexed Stock Fund...... 79,366,846 2.2833 60,033,796 1.7112
Balanced Fund........... 12,824,578 1.7313 10,572,766 1.4196
Bond Fund............... 5,907,819 1.3023 5,801,441 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................................. 566,419,422 $1.6506 274,060,866 $1.2367
June.................................. 553,720,509 1.8247 273,004,704 1.2566
September............................. 540,395,097 1.8309 263,798,745 1.2772
December.............................. 520,097,143 2.2379 268,888,234 1.2978
INDEXED STOCK FUND BALANCED FUND
-------------------- --------------------
NUMBER OF VALUE NUMBER OF VALUE
1997 UNITS PER UNIT UNITS PER UNIT
---- ----------- -------- ----------- --------
March................................. 67,997,078 $1.7575 11,886,630 $1.4391
June.................................. 72,008,795 2.0653 12,117,010 1.5910
September............................. 77,076,223 2.2201 12,382,835 1.6768
December.............................. 79,366,846 2.2833 12,824,578 1.7313
BOND FUND
--------------------
NUMBER OF VALUE
1997 UNITS PER UNIT
---- ----------- --------
March................................. 5,813,857 $1.1917
June.................................. 5,579,194 1.2310
September............................. 5,413,192 1.2681
December.............................. 5,907,819 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 SAVINGS AND SECURITY 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............................... 11,864
Entirely in Indexed Stock Fund................................. 2,093
Entirely in Interest Income Fund............................... 8,836
Equally in BellSouth Stock Fund and Indexed Stock Fund......... 1,855
Equally in BellSouth Stock Fund and Interest Income Fund....... 4,859
Equally in Indexed Stock Fund and Interest Income Fund......... 377
Equally in Indexed Stock Fund and Fidelity Growth & Income
Fund.......................................................... 554
Various fund combinations*..................................... 6,532
------
Total Participants........................................... 36,970
======
--------
* Includes all other investment directions, each having less than 1% of
participants.
Since all employing company contributions are made to the ESOP, all
employees currently contributing to the Plan are participants in the ESOP.
5. CONTRIBUTIONS
Employee contributions to the Plan are recorded based upon authorized basic
and supplemental contributions. The maximum basic contribution rate was $55
per week for 1997 and 1996 and $50 per week for 1995. Participants may
contribute up to 15% (12% prior to January 1, 1996) of their eligible
compensation to the Plan on a before-tax basis. Total before-tax and after-tax
contributions may not exceed 15% of compensation for all periods.
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 in respect of
each participant's authorized basic contribution. Employing company matching
contributions will vest upon a participant's completion of three years of
service. One year of vesting service is earned upon a participant's completion
of 1,000 work hours during any year. The rate of the employing company
matching contribution remains in effect for a twelve-month period from April 1
through March 31. The employing company makes a matching contribution that is
a percentage of the employee's basic contribution. The matching contribution
rates for the three years ended December 31, 1997 were as follows:
1997 1996 1995
--------- --------- ---------
January-March............................... 71% - 76% 59% - 69% 76%
April-December.............................. 76% - 86% 71% - 76% 59% - 69%
6. PLAN EXPENSES
Each participant in the Plan is charged a flat annual fee for Plan
administrative expenses, including record keeping, 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
18
BELLSOUTH SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT UNIT VALUES AND PER-PARTICIPANT AMOUNTS)
6. PLAN EXPENSES--(CONTINUED)
$31.50, $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....................................... $ 147 $ 146 $ 142
Indexed Stock Fund......................................... 25 16 11
Balanced Fund.............................................. 17 12 6
Bond Fund.................................................. 22 21 14
------ ------ ------
$ 211 $ 195 $ 173
====== ====== ======
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 SAVINGS AND SECURITY 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 BRSP. Prior to April 1, 1996, the Plan's
assets were also commingled with the assets of the BellSouth Enterprises
Retirement Savings Plan, which was merged with and into the BellSouth
Retirement Savings 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 33.24611%
and 32.24280%, 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.................................... 50.28189% 46.91167%
Interest Income Fund.................................... 28.11128% 28.94570%
Indexed Stock Fund...................................... 14.87323% 11.87296%
Balanced Fund........................................... 17.39634% 15.46374%
Bond Fund............................................... 6.58568% 5.50809%
Fidelity Growth & Income Portfolio...................... 27.86083% 25.27740%
DFA U.S. 6-10 Value Portfolio II ....................... 19.53536% 15.50804%
Vanguard Index Trust Growth Portfolio................... 29.93390% --
X. Xxxx Price Mid-Cap Growth ........................... 21.46665% --
DFA U.S. Large Cap Value II Fund........................ 26.40233% 22.27917%
DFA International Value II Fund......................... 12.90886% 10.13969%
Xxxxxx 100 Fund......................................... -- 27.85832%
American Century/Twentieth Century Growth Investors
Fund................................................... -- 27.84984%
Participant Loans....................................... 27.53754% 23.52051%
Other................................................... 30.41913% 23.33251%
20
BELLSOUTH SAVINGS AND SECURITY 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 SAVINGS AND SECURITY 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 SAVINGS AND SECURITY 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 SAVINGS AND SECURITY 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 investments. 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%, 01/15/24....... $ 1,475 $ 1,382 $ 1,462
Government Natl. Mtg. Assn., 6.5%, 02/15/24....... $ 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
