<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-K/A
AMENDMENT TO APPLICATION ON REPORT FILED
PURSUANT TO SECTION 12, 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
[GENERAL DYNAMICS CORPORATION LOGO]
3190 Fairview Park Drive
Falls Church, Virginia 22042-4253
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its 1997 Annual Report on Form 10-K as
set forth in the pages attached hereto:
Index to Exhibits
Exhibit 99D Annual Report on Form 11-K
for the General Dynamics Corporation Savings
and Stock Investment Plan
Exhibit 99E Annual Report on Form 11-K
for the General Dynamics Corporation Hourly
Employees Savings and Stock Investment Plan
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned and thereunto duly authorized.
GENERAL DYNAMICS CORPORATION
(Registrant)
By /s/ D. A. Savner
---------------------------
D. A. Savner
Secretary
Date June 26, 1998
<PAGE> 2
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Note Exhibit
Number Number Description
- ------ ------ -----------
<S> <C> <C>
(5) 3-1A --Restated Certificate of Incorporation, effective May 21, 1991
3-2D --Bylaws as amended effective October 1, 1997
(11) 4 --Letter re agreement to furnish copy of indenture
(1) 10-1A --Amendment of Mining Leases between American National Bank and Trust
of Chicago, Trustee, and La Salle National Bank, Trustee, to Freeman Coal Mining
Corporation, dated January 1, 1960
(1) 10-1B --Amendatory Agreement between Freeman United Coal Mining Company and
American National Bank and Trust Company, as Trustee, and La Salle National Bank,
as Trustee, dated January 1, 1975
(3) 10-6A --General Dynamics Corporation Incentive Compensation Plan adopted February 3, 1988,
approved by the shareholders on May 4, 1988
(4) 10-6B --General Dynamics Corporation Incentive Compensation Plan (as amended),
approved by shareholders on May 1, 1991
(4) 10-7E --Facilities Contract DAAE07-90-E-A001 dated June 24, 1990, between General
Dynamics Land Systems, Inc. and the United States relating to government-owned
facilities and equipment at the Lima Army Tank Plant, Lima, Ohio
(7) 10-8B --General Dynamics Corporation Retirement Plan for Directors adopted March 6, 1986,
as amended May 5, 1993
(11) 10-14A --Lease Agreement dated December 20, 1996, between Electric Boat Corporation and the
Rhode Island Economic Development Corporation
(6) 10-18 --Employment Agreement between the company and James R. Mellor dated as of
March 17, 1993
(9) 10-18A --Amendment to employment agreement between the company and James R. Mellor
dated as of October 3, 1995
(11) 10-18B --Amendment to employment agreement between the company and James R. Mellor
dated as of November 5, 1996
(6) 10-22 --Form of Agreement entered into in 1993 between the company and Corporate Officers
who were being retained in employment with the company
(8) 10-24 --Asset Purchase Agreement, dated August 17, 1995, between the company and Bath
Iron Works Corporation
(9) 10-25 --Lease Agreement dated January 14, 1982, between Bath Iron Works Corporation and
the City of Portland, Maine, relating to pier facilities in the Portland, Maine harbor
(9) 10-26 --Lease Agreement dated January 14, 1982, between Bath Iron Works Corporation and the
State of Maine, relating to a dry dock facility in the Portland, Maine harbor
(10) 10-28 --Asset Purchase and Sale Agreement, dated November 6, 1996, as amended December 20, 1996,
between the company and Lockheed Martin Corporation
(11) 10-29 --Employment agreement between the company and Nicholas D. Chabraja dated
November 12, 1996
(11) 10-30 --General Dynamics Corporation Incentive Compensation Plan adopted February 5, 1997,
approved by shareholders on May 7, 1997
10-31 --Retirement Benefit Agreement between the company and Gordon R. England dated
February 14, 1997
10-32 --Credit Enhancement Agreement between Bath Iron Works Corporation and the City of
Bath, Maine dated September 19, 1997, relating to the development program of
facilities in Bath, Maine
10-33 --Retirement Benefit Agreement between the company and Michael J. Mancuso dated
March 6, 1998
10-34 --Consulting agreement between the company and Paul G. Kaminski dated
August 18, 1997
10-35 --Salary and benefit continuation agreement between the company and
Michael W. Wynne dated February 7, 1997
</TABLE>
<PAGE> 3
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Note Exhibit
Number Number Description
- ------ ------ -----------
<S> <C> <C>
13 --1997 Shareholder Report (pages 18 through 40)
21 --Subsidiaries
23 --Consent of Independent Public Accountants
24 --Power of Attorney of the Board of Directors
27 --Financial Data Schedule
27A --Restated Financial Data Schedule for the nine months
ended September 28, 1997
27B --Restated Financial Data Schedule for the six months ended June 29, 1997
27C --Restated Financial Data Schedule for the three months
ended March 30, 1997
27D --Restated Financial Data Schedule for the year ended December 31, 1996
27E --Amended and Restated Financial Data Schedule for the nine months ended
September 29, 1996
27F --Restated Financial Data Schedule for the six months
ended June 30, 1996
27G --Restated Financial Data Schedule for the three months ended March 31, 1996
27H --Restated Financial Data Schedule for the year ended December 31, 1995
99D --1997 Annual Report on Form 11-K for the General Dynamics Corporation Savings and
Stock Investment Plan
99E --1997 Annual Report on Form 11-K for the General Dynamics Corporation Hourly
Employees Savings and Stock Investment Plan
</TABLE>
NOTES
(1) Filed as an exhibit to the company's annual report on Form 10-K for the
year ending December 31, 1980, and filed with the Commission March 31,
1981, and incorporated herein by reference.
(2) Not used.
(3) Filed as an exhibit to the company's annual report on Form 10-K for the
year ending December 31, 1987, and filed with the Commission March 17,
1988, and incorporated herein by reference.
(4) Filed as an exhibit to the company's annual report on Form 10-K for the
year ending December 31, 1990, and filed with the Commission March 29,
1991, and incorporated herein by reference.
(5) Filed as an exhibit to the company's annual report on Form 10-K for the
year ending December 31, 1991, and filed with the Commission March 26,
1992, and incorporated herein by reference.
(6) Filed as an exhibit to the company's annual report on Form 10-K for the
year ending December 31, 1992, and filed with the Commission March 30,
1993, and incorporated herein by reference.
(7) Filed as an exhibit to the company's annual report on Form 10-K for the
year ending December 31, 1994, and filed with the Commission March 9,
1995, and incorporated herein by reference.
(8) Filed as an exhibit to the company's current report on Form 8-K filed
with the Commission September 28, 1995, and incorporated herein by
reference.
(9) Filed as an exhibit to the company's annual report on Form 10-K for the
year ending December 31, 1995, and filed with the Commission March 21,
1996, and incorporated herein by reference.
(10) Filed as an exhibit to the company's current report on Form 8-K filed
with the Commission January 15, 1997, and incorporated herein by
reference.
(11) Filed as an exhibit to the company's annual report on Form 10-K for the
year ending December 31, 1996, and filed with the Commission March 21,
1997, and incorporated herein by reference.
<PAGE> 1
- --------------------------------------------------------------------------------
ANNUAL EXHIBIT 99D TO
ANNUAL REPORT ON FORM 10-K
OF GENERAL DYNAMICS CORPORATION
SEC FILE NO. 1-3671
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 19 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED December 31, 1997
A. Full title of the Plan and the address of the Plan, if different from
the issuer named below:
GENERAL DYNAMICS CORPORATION
SAVINGS AND STOCK INVESTMENT PLAN
B. Name of the issuer of the securities held pursuant to the Plan and the
address of the principal executive office:
GENERAL DYNAMICS CORPORATION
3190 FAIRVIEW PARK DRIVE
FALLS CHURCH, VIRGINIA 22042-4253
<PAGE> 2
GENERAL DYNAMICS CORPORATION
INDEX OF FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
Pages of this
Exhibit 99D
<S> <C>
(a) FINANCIAL STATEMENTS
Report of Independent Public Accountants 2
Statements of Net Assets Available for Benefits,
As of December 31, 1997 and 1996 3-4
Statement of Changes in Net Assets Available for Benefits,
For the Year Ended December 31, 1997 5
Notes to Financial Statements 6-10
Schedule I - Statement of Investments
In Master Trust Funds 11-13
Schedule II - Schedule of Loans or Fixed Income Obligations 14-20
(b) SIGNATURE 21
(c) EXHIBITS
Consent of Independent Public Accountants 22
</TABLE>
<PAGE> 3
GENERAL DYNAMICS CORPORATION
SAVINGS AND STOCK INVESTMENT PLAN
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997 AND 1996
TOGETHER WITH AUDITORS' REPORT
-1-
<PAGE> 4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To General Dynamics Corporation:
We have audited the accompanying statements of net assets available for benefits
of the General Dynamics Corporation Savings and Stock Investment Plan as of
December 31, 1997 and 1996, and the related statement of changes in net assets
available for benefits for the year ended December 31, 1997. These financial
statements and the schedules referred to below are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements and schedules 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 benefits of the General
Dynamics Corporation Savings and Stock Investment Plan as of December 31, 1997
and 1996, and the changes in its net assets available for benefits for the year
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 statement of investments
in master trust funds (schedule I) and schedule of loans or fixed income
obligations (schedule II), are presented for the purpose of additional analysis
and are not a required part of the basic financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The Fund Information in the statements of net assets
available for benefits and the statement of changes in net assets available for
benefits is presented for purposes of additional analysis rather than to present
the net assets available for benefits and changes in net assets available for
benefits of each fund. The supplemental schedules and Fund Information are the
responsibility of the Plan's management. The supplemental schedules 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.
Washington, D.C.
June 15, 1998
-2-
<PAGE> 5
GENERAL DYNAMICS CORPORATION
SAVINGS AND STOCK INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
STOCK FIXED INCOME BOND INDEX
TOTAL FUND FUND FUND
----------------- --------------- ----------------- ------------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in Master Trust $ 2,236,325,051 $ 455,779,945 $ 1,060,772,264 $ 95,296,407
Loans receivable 18,656,039 - - -
----------------- --------------- ----------------- ------------------
Total assets 2,254,981,090 455,779,945 1,060,772,264 95,296,407
----------------- --------------- ----------------- ------------------
LIABILITIES:
Fund transfers - 489,669 (675,999) (61,797)
Amounts payable to BIW Hourly Plan (Note 10) 1,496,305 - - -
Amounts payable to General Dynamics Corporation 93,915 - - -
Administrative fees payable 1,141,512 61,066 144,372 17,126
----------------- --------------- ----------------- ------------------
Total liabilities 2,731,732 550,735 (531,627) (44,671)
----------------- --------------- ----------------- ------------------
Net assets available for benefits $ 2,252,249,358 $ 455,229,210 $ 1,061,303,891 $ 95,341,078
================= =============== ================= ==================
<CAPTION>
BALANCED S&P 500 STOCK INTERNATIONAL SMALL CAP
FUND INDEX FUND INDEX FUND INDEX FUND
-------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in Master Trust $ 39,550,914 $ 537,364,113 $ 8,975,722 $ 35,352,123
Loans receivable - - - -
-------------- ---------------- ------------- ---------------
Total assets 39,550,914 537,364,113 8,975,722 35,352,123
-------------- ---------------- ------------- ---------------
LIABILITIES:
Fund transfers 144,953 (30,018) 370,971 (237,779)
Amounts payable to BIW Hourly Plan (Note 10) - - - -
Amounts payable to General Dynamics Corporation - - - -
Administrative fees payable 8,816 71,952 1,565 6,314
-------------- ---------------- ------------- ---------------
Total liabilities 153,769 41,934 372,536 (231,465)
-------------- ---------------- ------------- ---------------
Net assets available for benefits $ 39,397,145 $ 537,322,179 $ 8,603,186 $ 35,583,588
============== ================ ============= ===============
<CAPTION>
DISTRIBUTION LOAN
ACCOUNT FUND
-------------- --------------
<S> <C> <C>
ASSETS:
Investment in Master Trust $ 3,233,563 $ -
Loans receivable - 18,656,039
-------------- --------------
Total assets 3,233,563 18,656,039
-------------- --------------
LIABILITIES:
Fund transfers - -
Amounts payable to BIW Hourly Plan (Note 10) 1,496,305 -
Amounts payable to General Dynamics Corporation 93,915 -
Administrative fees payable 830,301 -
-------------- --------------
Total liabilities 2,420,521 -
-------------- --------------
Net assets available for benefits $ 813,042 $ 18,656,039
============== ==============
</TABLE>
The accompanying notes are an integral part of this financial statement.
-3-
<PAGE> 6
GENERAL DYNAMICS CORPORATION
SAVINGS AND STOCK INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
STOCK GOVERNMENT
TOTAL FUND BOND FUND
----------------- --------------- --------------
<S> <C> <C> <C>
ASSETS:
Investment in Master Trust $ 2,096,063,730 $ 370,474,739 $ 97,703,893
Loans receivable (payable) 15,130,746 59,405 (90,380)
----------------- --------------- --------------
Total assets 2,111,194,476 370,534,144 97,613,513
----------------- --------------- --------------
LIABILITIES:
Fund transfers (3,008) 2,205,381 659,735
Amounts payable to (receivable from) General Dynamics Corporation 18,232 30,519 1,656
Administrative fees payable 189,656 17,557 4,553
----------------- --------------- --------------
Total liabilities 204,880 2,253,457 665,944
----------------- --------------- --------------
Net assets available for benefits $ 2,110,989,596 $ 368,280,687 $ 96,947,569
================= =============== ==============
<CAPTION>
DIVERSIFIED FIXED INCOME SPECIAL DISTRIBUTION
FUND FUND FUND
----------------- ------------------- ---------------
<S> <C> <C> <C>
ASSETS:
Investment in Master Trust $ 352,149,275 $ 1,255,348,014 $ 20,387,809
Loans receivable (payable) (182,096) (937,500) (23,697)
----------------- ------------------- ---------------
Total assets 351,967,179 1,254,410,514 20,364,112
----------------- ------------------- ---------------
LIABILITIES:
Fund transfers (1,286,389) (1,686,422) 104,687
Amounts payable to (receivable from) General Dynamics Corporation (4,124) (9,819) -
Administrative fees payable 109,146 55,911 2,489
----------------- ------------------- ---------------
Total liabilities (1,181,367) (1,640,330) 107,176
----------------- ------------------- ---------------
Net assets available for benefits $ 353,148,546 $ 1,256,050,844 $ 20,256,936
================= =================== ===============
<CAPTION>
LOAN
FUND
--------------
<S> <C>
ASSETS:
Investment in Master Trust $ -
Loans receivable (payable) 16,305,014
--------------
Total assets 16,305,014
--------------
LIABILITIES:
Fund transfers -
Amounts payable to (receivable from) General Dynamics Corporation -
Administrative fees payable -
--------------
Total liabilities -
--------------
Net assets available for benefits $ 16,305,014
==============
</TABLE>
The accompanying notes are an integral part of this financial statement.
-4-
<PAGE> 7
GENERAL DYNAMICS CORPORATION
SAVINGS AND STOCK INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR
BENEFITS FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
STOCK FIXED INCOME BOND INDEX
TOTAL FUND FUND FUND
---------------- --------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Participation in income (loss) of Master Trust $ 262,996,369 $ 89,461,448 $ 43,245,430 $ 6,999,741
---------------- --------------- ----------------- ---------------
ADD (DEDUCT):
Rollover contributions 4,122,849 1,341,127 624,871 189,447
Contributions by participants 34,873,142 21,600,043 5,797,806 535,383
Contributions by General Dynamics Corporation 22,272,622 22,273,917 271 -
Loan repayments 1,227,261 5,821,761 2,164,194 167,556
Loans issued - (1,195,402) (5,550,957) (340,615)
Transfers among funds - (14,153,376) (119,750,051) 92,493,574
Distributions to withdrawn participants (216,889,828) (35,001,428) (140,581,943) (4,594,719)
Plan expenses (3,996,252) (530,876) (1,924,913) (109,291)
BIW Salary Plan merger 38,565,565 - 20,711,648 -
Other (1,911,966) (2,668,691) 516,691 2
---------------- --------------- ----------------- ---------------
Net increase (decrease) 141,259,762 86,948,523 (194,746,953) 95,341,078
---------------- --------------- ----------------- ---------------
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 2,110,989,596 368,280,687 1,256,050,844 -
---------------- --------------- ----------------- ---------------
End of year $ 2,252,249,358 $ 455,229,210 $ 1,061,303,891 $ 95,341,078
================ =============== ================= ===============
<CAPTION>
BALANCED S&P 500 STOCK INTERNATIONAL SMALL CAP LOAN
FUND INDEX FUND INDEX FUND INDEX FUND FUND
-------------- ---------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Participation in income (loss) of Master Trust $ 1,732,459 $ 68,478,362 $ (719,613) $ 1,782,839 $ -
-------------- ---------------- --------------- -------------- --------------
ADD (DEDUCT):
Rollover contributions 277,812 880,361 36,870 230,222 -
Contributions by participants 467,993 3,662,363 99,436 231,147 -
Contributions by General Dynamics Corporation - - - - -
Loan repayments 46,795 627,823 9,665 19,599 (8,175,704)
Loans issued (268,794) (3,071,265) (28,099) (141,311) 11,293,081
Transfers among funds 35,029,463 486,831,153 9,300,187 33,813,640 -
Distributions to withdrawn participants (739,233) (19,727,320) (87,217) (325,779) (765,857)
Plan expenses (43,796) (375,722) (8,043) (26,769) -
BIW Salary Plan merger 2,894,446 - - - -
Other - 16,424 - - (495)
-------------- ---------------- --------------- -------------- --------------
Net increase (decrease) 39,397,145 537,322,179 8,603,186 35,583,588 2,351,025
-------------- ---------------- --------------- -------------- --------------
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year - - - - 16,305,014
-------------- ---------------- --------------- -------------- --------------
End of year $ 39,397,145 $ 537,322,179 $ 8,603,186 $ 35,583,588 $ 18,656,039
============== ================ =============== ============== ==============
<CAPTION>
GOVERNMENT DIVERSIFIED SPECIAL DISTRIBUTION DISTRIBUTION
BOND FUND FUND FUND ACCOUNT
------------- -------------- ------------------- ---------------
<S> <C> <C> <C> <C>
Participation in income (loss) of Master Trust $ 2,716,258 $ 49,328,708 $ 268,450 $ (297,713)
------------- -------------- ------------------- ---------------
ADD (DEDUCT):
Rollover contributions 160,721 382,504 - (1,086)
Contributions by participants 390,870 2,118,463 - (30,362)
Contributions by General Dynamics Corporation (1,503) (63) - -
Loan repayments 130,962 410,772 - 3,838
Loans issued (137,173) (517,391) (42,074) -
Transfers among funds (96,834,214) (406,904,581) (19,825,795) -
Distributions to withdrawn participants (3,322,906) (12,143,455) (654,814) 1,054,843
Plan expenses (60,462) (913,677) (2,703) -
BIW Salary Plan merger - 14,959,471 - -
Other 9,878 130,703 - 83,522
------------- -------------- ------------------- ---------------
Net increase (decrease) (96,947,569) (353,148,546) (20,256,936) 813,042
------------- -------------- ------------------- ---------------
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 96,947,569 353,148,546 20,256,936 -
------------- -------------- ------------------- ---------------
End of year $ - $ - $ - $ 813,042
============= ============== =================== ===============
</TABLE>
The accompanying notes are an integral part of this financial statement.
-5-
<PAGE> 8
GENERAL DYNAMICS CORPORATION
SAVINGS AND STOCK INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997 AND 1996
1. The General Dynamics Corporation Savings and Stock Investment Plan (the
"Plan") is a defined contribution plan covering eligible salaried employees
of General Dynamics Corporation (the "Company"). The following is a brief
description of the Plan provided for general information purposes.
Participants should refer to the Plan agreement for more complete
information.
Generally, a participant may contribute from 1% to 10% of the first $25,000
of base earnings and 1% to 6% of base earnings in excess of $25,000. In
addition, non-highly compensated participants, as determined by the Plan
Administrator, may also contribute another 1% to 4% of base earnings on an
unmatched basis. Participants at Bath Iron Works, Armament Systems, Defense
Systems and Advanced Technology Systems may contribute 1% to 15% of their
salary on a pre-tax basis.
Each participant shall direct his contributions to be invested in one
percent increments into all funds. Participants can change their investment
elections daily and can make an unlimited number of investment election
changes each year.
All Company matching contributions to the Plan are invested in Company
common stock. Generally, participants that are 100 percent invested in the
General Dynamics Stock Fund receive a 100 percent Company matching
contribution in Company common stock. Participants that are less than 100
percent invested in the General Dynamics Stock Fund receive a 50 percent
Company matching contribution in Company common stock. The matching
contributions vary from 50% to 100% for participants at Bath Iron Works,
Armament Systems, Defense Systems and Advanced Technology Systems.
Participants are eligible to participate in the Plan upon hire, and their
contributions are always 100 percent vested. Company matching contributions
are fully vested upon five years of service. Contributions invested in the
General Dynamics Stock Fund must be maintained in that fund for 5 years
before becoming eligible for transfer to any other fund. Therefore, a
portion of the balance in the General Dynamics Stock Fund represents
non-participant-directed investments due to the match. With the exception
of the General Dynamics Stock Fund, all other investment funds are
completely participant-directed.
The Plan permits active participants and employed inactive participants to
borrow up to 50% of the vested amount in their accounts (as limited by the
Plan) and to repay the loan by regular payroll deductions over a period of
up to five years. Loans are issued at prime rate of interest.
-6-
<PAGE> 9
In the event the Plan is terminated, each participant will automatically be
vested in the undistributed Company contributions. Each participant will
receive payments based on the specific dollar amounts and shares of Company
stock in his account.
2. During June 1997, the Company extended the investment options for plan
participants. Two of the options offered in 1996 remain available to
participants: the General Dynamics Stock Fund and the Fixed Income Fund.
The five options added in 1997 include: Bond Index Fund, Balanced Fund, S&P
500 Stock Index Fund, International Index Fund and Small Cap Index Fund.
These investment options will offer participants the opportunity to invest
in a broader range on the risk/return spectrum for actively traded
securities.
According to the Plan documents, the seven funds may hold the following
types of investments:
a) General Dynamics Stock Fund - The fund invests only in common stock of
the Company.
b) Fixed Income Fund - The fund invests in General Account and Separate
Account Guaranteed Investment Contracts ("GICs"). General account GICs
are deposits with an insurance company that earn a contractually
specified rate of return over a defined period. These contracts are
secured by the issuer's general account (a broadly diversified
portfolio of fixed income assets) and the net worth of the insurance
company. Separate account GICs are deposits with an insurance company,
but are invested in a separate portfolio of high-quality securities.
The GICs are not guaranteed by General Dynamics Corporation or any
government agency.
c) Bond Index Fund - The fund invests in government, corporate,
mortgage-backed and asset-backed securities. The fund also invests in
high-quality bonds, as defined.
d) Balanced Fund - The fund is a mixed portfolio of commingled stocks and
bond funds. The fund is made up of international equities, U.S. large
cap equities, fixed income securities and U.S. small cap equities.
e) S&P 500 Stock Index Fund - The fund invests in all 500 U.S. common
stocks in the S&P 500 Index in proportion to their weighting in the
Index. It may also hold 2% to 5% of its value in S&P 500 futures
contracts.
f) International Index Fund - The fund invests in over 1,000 stocks in
major markets outside the United States and Canada. Investments are
made in all stocks in the MSCI EAFE Index in approximate proportion to
the weighting in the Index.
g) Small Cap Index Fund - The fund attempts to invest in all 2,000 stocks
in the Russell 2000 Index in proportion to their weighting in the
Index. The Russell Index represents the smallest two-thirds of the
3,000 largest U.S. companies. It may also hold 2% to 5% of its value
in Russell 2000 Index futures contracts.
-7-
<PAGE> 10
All of the above funds may hold a small cash balance for purposes of
liquidity and expense control that is maintained in The Northern Trust
Company Collective Short-Term Investment Fund.
3. The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of additions and deductions
from net assets available for benefits during the reporting period. Actual
results could differ from those estimates.
4. The accompanying financial statements are prepared on the accrual basis of
accounting. Certain reclassifications have been made to balances on the
December 31, 1996 statement of net assets available for benefits to conform
with the current year presentation.
5. The Company has received a determination from the Internal Revenue Service
that the Plan, including all amendments through June 20, 1994, is a
qualified profit sharing plan under Section 401 (a) of the Internal Revenue
Code. The trust formed thereunder is exempt from Federal income tax under
Section 501 (a). The Plan administrator and Plan's tax counsel believe that
the Plan is currently designed and being operated in compliance with the
applicable requirements of the Internal Revenue Code. Therefore, they
believe that the Plan was qualified and the related trust was tax exempt as
of the financial statement date.
6. The Plan's investments are in the General Dynamics Corporation Savings and
Stock Investment Plan Master Trust (the "Master Trust"), which was
established for the investment of assets of the Plan and the Hourly
Employees Savings and Stock Investment Plan (the "Plans"). Each
participating plan has an undivided interest in the Master Trust. The
assets of the Master Trust are held by The Northern Trust Company
("Trustee"). At December 31, 1997 and 1996, the Plan's interest in the net
assets of the Master Trust was approximately 83.2% and 82.5%, respectively.
Net assets and net participation in the income of the Master Trust are
allocated to the Plans according to their percentage interest in various
funds included in the Master Trust.
The following table presents the reported value of investments for the
Master Trust.
<TABLE>
<CAPTION>
December 31,
----------------------------------
1997 1996
-------------- -------------
<S> <C> <C>
General Dynamics Common Stock $ 513,911,736 $ 419,069,977
Investments in registered investment companies 901,907,398 -
U.S. government bonds and other securities - 589,912,139
Cash and cash equivalents 14,594,902 36,819,637
Loans receivable 22,839,462 16,401,791
Guaranteed investment contracts 1,255,533,974 1,496,248,785
-------------- -------------
Total $2,708,787,472 $2,558,452,329
============== ==============
</TABLE>
-8-
<PAGE> 11
Investment income for the Master Trust is as follows:
<TABLE>
<CAPTION>
Year Ended
December 31, 1997
--------------------
<S> <C>
Investment Income:
Dividends $ 11,294,041
Interest 110,306,765
Net realized and unrealized gain on assets 192,193,228
--------------------
$ 313,794,034
====================
</TABLE>
Administrative expenses are primarily paid by the Plan, although certain
administrative functions are performed by employees of the Company.
Although no costs were reimbursed by the Company in 1997, the Plan document
provides that these costs may be reimbursed by the Company.
7. In accordance with generally accepted accounting principles, amounts
allocated to accounts of participants who have elected to withdraw from the
Plan but have not yet been paid as of year end are not reported as
liabilities on the Statements of Net Assets Available for Benefits.
However, the Department of Labor requires that these amounts be reported as
liabilities on Form 5500. At December 31, 1997 and 1996, amounts payable on
withdrawals and distributions were $370,328 and $30,544,627, respectively.
In addition, on the statement of changes in net assets available for
benefits, 1997 distributions to withdrawn participants would have been
$186,715,437 instead of $216,889,828 if the December 31 amounts payable on
withdrawals and distributions had been included.
8. Most investments held by the Master Trust are recorded at quoted market
value, as stated on public exchanges as of December 31, 1997 and 1996. The
Company values the GICs in the Fixed Income Fund in accordance with AICPA
Statement of Position No. 94-4, "Reporting of Investment Contracts Held by
Health and Welfare Benefit Plans and Defined Contribution Pension Plans."
As of December 31, 1997, the GICs included in the Master Trust are reported
at contract value because they have been determined to be fully benefit
responsive. For example, participants may ordinarily direct the withdrawal
or transfer of all or a portion of their investment at contract value.
There are no reserves against contract value for credit risk of the
contract issuers or otherwise. As of December 31, 1996, the GICs were
included in the financial statements of the Master Trust at fair value as
certain provisions of the Plans restricted the benefit-responsiveness of
the GICs. These provisions were changed during 1997. The fair value of the
GICs at December 31, 1997 was approximately $1.32 billion. The average
yield and crediting interest rates ranged from 5.62 percent to 10.25 for
1997.
9. In April 1997, the assets of the Bath Iron Works Corporation Tax Deferred
Savings Plan for Salaried Employees merged into the Savings and Stock
Investment Plan and the related Master Trust.
-9-
<PAGE> 12
10. During 1997, $1,496,305 of assets were transferred to the Trust in error by
Chase Manhattan Bank, trustee for the Bath Iron Works ("BIW") Plans. The
amount represents an asset of the Bath Iron Works Hourly Plan. Therefore,
the amount has been appropriately included as a liability of the Trust on
the Statement of Net Assets Available for Benefits as of December 31, 1997.
-10-
<PAGE> 13
Schedule I
Page 1 of 3
GENERAL DYNAMICS CORPORATION
SAVINGS AND STOCK INVESTMENT PLAN
STATEMENT OF INVESTMENTS IN MASTER TRUST FUNDS
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
QUOTED
MARKET/CONTRACT
COST VALUE
------------------ ------------------
<S> <C> <C>
GENERAL DYNAMICS STOCK FUND:
Investment in common stock of
General Dynamics Corporation * $ 184,594,747 $ 513,911,736
Temporary Investments in
The Northern Trust Company
Collective Short-Term Investment Fund * 3,501,934 3,501,934
------------------ ------------------
Total $ 188,096,681 $ 517,413,670
================== ==================
PROPORTIONATE INTEREST $ 455,779,945
==================
FIXED INCOME FUND:
Investment in the Fixed Income Fund $ 1,255,533,974 $ 1,255,533,974
Temporary Investments in
The Northern Trust Company
Collective Short-Term Investment Fund * 7,575,428 7,575,428
------------------ ------------------
Total $ 1,263,109,402 $ 1,263,109,402
================== ==================
PROPORTIONATE INTEREST $ 1,060,772,264
==================
BOND INDEX FUND:
Investment in the Bond Index Fund $ 144,116,679 $ 156,111,648
Temporary Investments in
The Northern Trust Company
Collective Short-Term Investment Fund * 283,267 283,267
------------------ ------------------
Total $ 144,399,946 $ 156,394,915
================== ==================
PROPORTIONATE INTEREST $ 95,296,407
==================
</TABLE>
* denotes party-in-interest
-11-
The accompanying notes are an integral part of this schedule.
<PAGE> 14
Schedule I
Page 2 of 3
GENERAL DYNAMICS CORPORATION
SAVINGS AND STOCK INVESTMENT PLAN
STATEMENT OF INVESTMENTS IN MASTER TRUST FUNDS
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
QUOTED
MARKET/CONTRACT
COST VALUE
------------------ ------------------
<S> <C> <C>
BALANCED FUND:
Investment in the Balanced Fund $ 44,433,401 $ 46,302,809
================= =====================
PROPORTIONATE INTEREST $ 39,550,914
=====================
S&P 500 STOCK INDEX FUND:
Investment in the S&P 500 Stock Index Fund $ 516,044,858 $ 647,682,968
Temporary Investments in
The Northern Trust Company
Collective Short-Term Investment Fund * 710 710
----------------- ---------------------
Total 516,045,568 647,683,678
================= =====================
PROPORTIONATE INTEREST $ 537,364,113
=====================
INTERNATIONAL INDEX FUND:
Investment in the International Index Fund $ 10,554,112 $ 10,030,495
================= =====================
PROPORTIONATE INTEREST $ 8,975,722
=====================
SMALL CAP INDEX FUND:
Investment in the Small Cap Index Fund $ 39,754,999 $ 41,779,478
================= =====================
PROPORTIONATE INTEREST $ 35,352,123
=====================
DISTRIBUTION ACCOUNT:
Temporary Investments in
The Northern Trust Company
Collective Short-Term Investment Fund * $ 3,233,563 $ 3,233,563
================= =====================
PROPORTIONATE INTEREST $ 3,233,563
=====================
</TABLE>
* denotes party-in-interest
-12-
The accompanying notes are an integral part of this schedule.
<PAGE> 15
Schedule I
Page 3 of 3
GENERAL DYNAMICS CORPORATION
SAVINGS AND STOCK INVESTMENT PLAN
STATEMENT OF INVESTMENTS IN MASTER TRUST FUNDS
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
QUOTED
MARKET/CONTRACT
COST VALUE
------------------ ------------------
<S> <C> <C>
LOAN FUND:
Loans Receivable $ 22,839,462 $ 22,839,462
================= ===================
PORPORTIONATE INTEREST $ 18,656,039
===================
</TABLE>
-13-
The accompanying notes are an integral part of this schedule.
<PAGE> 16
SCHEDULE II
GENERAL DYNAMICS SAVINGS AND STOCK INVESTMENT PLAN
LINE 27b -- SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS
<TABLE>
<CAPTION>
Amount received (e) Unpaid
(b) Original during reporting year balance at
(a) Identity of obligator amount of loan (c) Principal (d) Interest end of year
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Participant Loan $4,000.00 $0.00 $0.00 $3,213.80
Participant Loan $25,000.00 $2,916.69 $652.75 $19,999.96
Participant Loan $5,000.00 $0.00 $0.00 $5,000.00
Participant Loan $20,000.00 $2,265.11 $318.24 $2,318.10
Participant Loan $7,000.00 $632.35 $112.02 $2,634.21
Participant Loan $9,800.00 $1,262.01 $209.11 $1,351.04
Participant Loan $7,600.00 $686.52 $121.65 $1,846.68
Participant Loan $6,000.00 $176.41 $44.36 $5,323.59
</TABLE>
<TABLE>
<CAPTION>
(f) Detailed description of loan
including dates of making and
maturity, interest rate, the type and
value of collateral, any renegotiation
of the loan and terms of the renegotiation Amount overdue
and other material items (g) Principal (h) Interest
- -----------------------------------------------------------------------
<S> <C> <C>
Date of making: 6/30/94 $2,547.40 $331.80
Maturity: 5/98
Rate: 6.25%
Date of making: 8/31/96 $1,250.01 $279.75
Maturity: 7/02
Rate: 8.25%
Date of making: 8/1/97 $166.68 $38.46
Maturity: 7/02
Rate: 8.50%
Date of making: 12/31/93 $1,484.92 $159.03
Maturity: 11/97
Rate: 6.0%
Date of making: 5/31/94 $417.68 $56.01
Maturity: 4/99
Rate: 6.0%
Date of making: 5/31/93 $534.74 $78.21
Maturity: 4/98
Rate: 6.0%
Date of making: 9/30/93 $453.51 $60.78
Maturity: 8/98
Rate: 6.0%
Date of making: 9/30/96 $823.59 $133.08
Maturity: 8/00
Rate: 8.25%
</TABLE>
The accompanying notes are an integral part of this schedule.
- 14 -
<PAGE> 17
SCHEDULE II
GENERAL DYNAMICS SAVINGS AND STOCK INVESTMENT PLAN
LINE 27b -- SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS
<TABLE>
<CAPTION>
Amount received (e) Unpaid
(b) Original during reporting year balance at
(a) Identity of obligator amount of loan (c) Principal (d) Interest end of year
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Participant Loan $20,000.00 $1,000.02 $426.61 $5,999.78
Participant Loan $2,200.00 $15.40 $5.87 $351.10
Participant Loan $7,400.00 $0.00 $0.00 $6,566.62
Participant Loan $2,000.00 $100.02 $49.11 $1,133.19
Participant Loan $15,500.00 $1,291.68 $365.72 $9,365.08
Participant Loan $17,000.00 $0.00 $0.00 $1,010.10
Participant Loan $3,000.00 $0.00 $0.00 $2,437.50
Participant Loan $8,000.00 $1,066.67 $261.97 $4,399.87
</TABLE>
<TABLE>
<CAPTION>
(f) Detailed description of loan
including dates of making and
maturity, interest rate, the type and
value of collateral, any renegotiation
of the loan and terms of the renegotiation Amount overdue
and other material items (g) Principal (h) Interest
- --------------------------------------------------------------------------
<S> <C> <C>
Date of making: 3/31/94 $2,666.73 $159.91
Maturity: 2/99
Rate: 6.0%
Date of making: 11/30/92 $277.96 $41.09
Maturity: 10/97
Rate: 6.0%
Date of making: 10/31/95 $2,866.70 $523.98
Maturity: 9/99
Rate: 8.75%
Date of making: 5/31/95 $200.04 $24.51
Maturity: 4/00
Rate: 9.0%
Date of making: 11/30/95 $807.90 $30.52
Maturity: 10/99
Rate: 8.75%
Date of making: 4/30/92 $1,010.10 $148.24
Maturity: 3/97
Rate: 6.5%
Date of making: 4/30/96 $375.00 $66.60
Maturity: 3/00
Rate: 8.25%
Date of making: 6/30/95 $400.07 $98.17
Maturity: 5/00
Rate: 9.0%
</TABLE>
The accompanying notes are an integral part of this schedule.
- 15 -
<PAGE> 18
SCHEDULE II
GENERAL DYNAMICS SAVINGS AND STOCK INVESTMENT PLAN
LINE 27b -- SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS
<TABLE>
<CAPTION>
Amount received (e) Unpaid
(b) Original during reporting year balance at
(a) Identity of obligator amount of loan (c) Principal (d) Interest end of year
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Participant Loan $36,000.00 $2,616.00 $671.86 $4,800.00
Participant Loan $5,000.00 $586.32 $127.54 $4,163.66
Participant Loan $25,500.00 $189.94 $101.49 $22,595.20
Participant Loan $12,000.00 $1,851.40 $377.60 $6,898.60
Participant Loan $22,000.00 $1,100.01 $175.95 $3,299.83
Participant Loan $17,000.00 $1,700.01 $356.07 $8,499.83
Participant Loan $5,000.00 $500.04 $119.16 $3,499.88
</TABLE>
<TABLE>
<CAPTION>
(f) Detailed description of loan
including dates of making and
maturity, interest rate, the type and
value of collateral, any renegotiation
of the loan and terms of the renegotiation Amount overdue
and other material items (g) Principal (h) Interest
- --------------------------------------------------------------------------
<S> <C> <C>
Date of making: 4/30/93 $1,884.00 $47.99
Maturity: 3/98
Rate: 6.0%
Date of making: 10/31/96 $247.08 $58.86
Maturity: 9/01
Rate: 8.25%
Date of making: 06/30/96 $3,470.20 $659.31
Maturity: 3/01
Rate: 8.25%
Date of making: 12/31/95 $1,101.40 $118.00
Maturity: 12/99
Rate: 8.75%
Date of making: 1/31/93 $1,833.35 $293.25
Maturity: 12/98
Rate: 6.0%
Date of making: 1/31/95 $850.05 $177.99
Maturity: 12/00
Rate: 7.75%
Date of making: 1/31/96 $250.02 $59.58
Maturity: 12/01
Rate: 8.76%
</TABLE>
The accompanying notes are an integral part of this schedule.
- 16 -
<PAGE> 19
SCHEDULE II
GENERAL DYNAMICS SAVINGS AND STOCK INVESTMENT PLAN
LINE 27b -- SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS
<TABLE>
<CAPTION>
Amount received (e) Unpaid
(b) Original during reporting year balance at
(a) Identity of obligator amount of loan (c) Principal (d) Interest end of year
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Participant Loan $15,000.00 $1,000.00 $160.00 $6,000.00
Participant Loan $17,000.00 $3,777.84 $499.60 $12,277.70
Participant Loan $11,000.00 $1,100.01 $230.43 $5,499.83
Participant Loan $10,000.00 $999.96 $160.08 $999.88
Participant Loan $6,000.00 $1,750.00 $154.42 $2,500.00
Participant Loan $21,000.00 $1,400.00 $254.16 $9,100.00
Participant Loan $38,400.00 $2,571.38 $398.14 $5,211.00
Participant Loan $17,000.00 $283.34 $69.56 $11,616.54
</TABLE>
<TABLE>
<CAPTION>
(f) Detailed description of loan
including dates of making and
maturity, interest rate, the type and
value of collateral, any renegotiation
of the loan and terms of the renegotiation Amount overdue
and other material items (g) Principal (h) Interest
- --------------------------------------------------------------------------
<S> <C> <C>
Date of making: 5/31/94 $1,000.00 $160.00
Maturity: 4/99
Rate: 6.0%
Date of making: 11/30/96 $1,416.69 $187.35
Maturity: 10/99
Rate: 8.25%
Date of making: 1/31/95 $550.05 $115.17
Maturity: 12/00
Rate: 7.75%
Date of making: 1/31/93 $500.07 $79.95
Maturity: 12/98
Rate: 6.0%
Date of making: 6/30/96 $750.00 $66.18
Maturity: 5/98
Rate: 8.25%
Date of making: 7/31/94 $1,400.00 $253.44
Maturity: 6/99
Rate: 6.75%
Date of making: 11/30/92 $5,211.00 $728.04
Maturity: 10/97
Rate: 6.0%
Date of making: 7/31/95 $2,266.72 $556.48
Maturity: 6/00
Rate: 9.0%
</TABLE>
The accompanying notes are an integral part of this schedule.
- 17 -
<PAGE> 20
SCHEDULE II
GENERAL DYNAMICS SAVINGS AND STOCK INVESTMENT PLAN
LINE 27b -- SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS
<TABLE>
<CAPTION>
Amount received (e) Unpaid
(b) Original during reporting year balance at
(a) Identity of obligator amount of loan (c) Principal (d) Interest end of year
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Participant Loan $5,000.00 $1,250.01 $56.35 $1,249.97
Participant Loan $28,800.00 $1,440.00 $332.64 $17,280.00
Participant Loan $16,000.00 $2,333.34 $427.32 $6,333.18
Participant Loan $3,000.00 $535.64 $84.46 $1,047.58
Participant Loan $20,000.00 $2,473.24 $426.71 $2,526.46
Participant Loan $15,000.00 $500.00 $111.88 $13,555.94
Participant Loan $15,000.00 $0.00 $0.00 $6,500.00
Participant Loan $31,000.00 $0.00 $0.00 $6,122.19
</TABLE>
<TABLE>
<CAPTION>
(f) Detailed description of loan
including dates of making and
maturity, interest rate, the type and
value of collateral, any renegotiation
of the loan and terms of the renegotiation Amount overdue
and other material items (g) Principal (h) Interest
- ---------------------------------------------------------------------------
<S> <C> <C>
Date of making: 7/31/96 $1,249.97 $56.59
Maturity: 6/97
Rate: 8.25%
Date of making: 4/30/95 $2,880.00 $665.28
Maturity: 3/00
Rate: 8.50%
Date of making: 3/31/95 $1,666.74 $305.16
Maturity: 2/99
Rate: 8.50%
Date of making: 8/31/95 $47.74 $0.00
Maturity: 7/98
Rate: 9.0%
Date of making: 4/30/93 $193.48 $0.00
Maturity: 3/98
Rate: 6.0%
Date of making: 8/31/96 $1,930.94 $363.61
Maturity: 7/01
Rate: 8.25%
Date of making: 3/31/94 $625.00 $100.00
Maturity: 2/99
Rate: 6.0%
Date of making: 8/31/92 $6,122.19 $988.99
Maturity: 7/97
Rate: 6.5%
</TABLE>
The accompanying notes are an integral part of this schedule.
- 18 -
<PAGE> 21
SCHEDULE II
GENERAL DYNAMICS SAVINGS AND STOCK INVESTMENT PLAN
LINE 27b -- SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS
<TABLE>
<CAPTION>
Amount received (e) Unpaid
(b) Original during reporting year balance at
(a) Identity of obligator amount of loan (c) Principal (d) Interest end of year
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Participant Loan $2,000.00 $125.01 $23.61 $1,333.28
Participant Loan $15,000.00 $1,750.00 $341.60 $6,500.00
Participant Loan $23,200.00 $2,706.61 $433.03 $1,933.23
Participant Loan $18,000.00 $0.00 $0.00 $8,400.00
Participant Loan $9,000.00 $750.00 $130.50 $150.00
Participant Loan $3,300.00 $275.00 $47.90 $110.00
Participant Loan $4,400.00 $176.19 $42.96 $2,243.63
Participant Loan $6,000.00 $0.00 $0.00 $3,900.00
</TABLE>
<TABLE>
<CAPTION>
(f) Detailed description of loan
including dates of making and
maturity, interest rate, the type and
value of collateral, any renegotiation
of the loan and terms of the renegotiation Amount overdue
and other material items (g) Principal (h) Interest
- ---------------------------------------------------------------------------
<S> <C> <C>
Date of making: 12/31/95 $229.18 $43.28
Maturity: 11/99
Rate: 8.75%
Date of making: 10/31/94 $1,000.00 $195.20
Maturity: 9/99
Rate: 7.25%
Date of making: 1/31/94 $386.75 $61.77
Maturity: 12/97
Rate: 6.0%
Date of making: 5/31/94 $2,550.00 $408.00
Maturity: 4/99
Rate: 6.0%
Date of making: 6/30/92 $150.00 $26.10
Maturity: 5/97
Rate: 6.5%
Date of making: 8/31/92 $110.00 $19.16
Maturity: 7/97
Rate: 6.5%
Date of making: 10/31/94 $447.20 $78.76
Maturity: 9/99
Rate: 7.25%
Date of making: 1/31/95 $400.00 $83.76
Maturity: 12/99
Rate: 7.75%
</TABLE>
The accompanying notes are an integral part of this schedule.
- 19 -
<PAGE> 22
SCHEDULE II
GENERAL DYNAMICS SAVINGS AND STOCK INVESTMENT PLAN
LINE 27b -- SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS
<TABLE>
<CAPTION>
Amount received (e) Unpaid
(b) Original during reporting year balance at
(a) Identity of obligator amount of loan (c) Principal (d) Interest end of year
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Participant Loan $2,100.00 $42.58 $0.00 $42.58
Participant Loan $29,900.00 $0.00 $0.00 $23,421.58
Participant Loan $10,000.00 $0.00 $0.00 $5,735.42
Participant Loan $12,200.00 $0.00 $0.00 $6,132.32
Participant Loan $5,000.00 $83.34 $14.50 $499.64
</TABLE>
<TABLE>
<CAPTION>
(f) Detailed description of loan
including dates of making and
maturity, interest rate, the type and
value of collateral, any renegotiation
of the loan and terms of the renegotiation Amount overdue
and other material items (g) Principal (h) Interest
- ---------------------------------------------------------------------------
<S> <C> <C>
Date of making: 1/31/92 $35.00 $7.58
Maturity: 12/96
Rate: 8.0%
Date of making: 10/31/95 $2,491.70 $593.60
Maturity: 9/00
Rate: 8.75%
Date of making: 4/30/92 $5,735.42 $1,014.65
Maturity: 3/97
Rate: 6.5%
Date of making: 5/31/94 $1,049.22 $130.08
Maturity: 4/99
Rate: 6.0%
Date of making: 8/31/92 $166.58 $29.00
Maturity: 7/97
Rate: 6.5%
</TABLE>
The accompanying notes are an integral part of this schedule.
- 20 -
<PAGE> 23
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Plan Administrator has caused this Annual Report to be signed by the
undersigned thereunto duly authorized.
GENERAL DYNAMICS CORPORATION
As Plan Administrator of the General Dynamics
Corporation Savings and Stock Investment Plan
By /s/ D. A. Savner
-----------------------------
D. A. Savner
Secretary
June 26, 1998
-21-
<PAGE> 24
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 11-K, into General Dynamics
Corporation's previously filed Registration Statement on Form S-8, File No.
2-23904.
By /s/ Arthur Andersen LLP
----------------------------------
Arthur Andersen LLP
Washington, D.C.
June 26, 1998
-22-
<PAGE> 1
- --------------------------------------------------------------------------------
ANNUAL EXHIBIT 99E TO
ANNUAL REPORT ON FORM 10-K
OF GENERAL DYNAMICS CORPORATION
SEC FILE NO. 1-3671
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 19 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED December 31, 1997
A. Full title of the Plan and the address of the Plan, if different from
the issuer named below:
GENERAL DYNAMICS CORPORATION
HOURLY EMPLOYEES
SAVINGS AND STOCK INVESTMENT PLAN
B. Name of the issuer of the securities held pursuant to the Plan and the
address of the principal executive office:
GENERAL DYNAMICS CORPORATION
3190 FAIRVIEW PARK DRIVE
FALLS CHURCH, VIRGINIA 22042-4253
<PAGE> 2
GENERAL DYNAMICS CORPORATION
INDEX OF FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
Pages of this
Exhibit 99E
<S> <C>
(a) FINANCIAL STATEMENTS
Report of Independent Public Accountants 2
Statements of Net Assets Available for Benefits,
As of December 31, 1997 and 1996 3-4
Statement of Changes in Net Assets Available for Benefits,
For the Year Ended December 31, 1997 5
Notes to Financial Statements 6-9
Schedule I - Statement of Investments in Master Trust Funds 10-11
Schedule II - Schedule of Loans or Fixed Income Obligations 12-13
(b) SIGNATURE 14
(c) EXHIBITS
Consent of Independent Public Accountants 15
</TABLE>
<PAGE> 3
GENERAL DYNAMICS CORPORATION
HOURLY EMPLOYEES SAVINGS AND STOCK INVESTMENT PLAN
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997 AND 1996
TOGETHER WITH AUDITORS' REPORT
-1-
<PAGE> 4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To General Dynamics Corporation:
We have audited the accompanying statements of net assets available for benefits
of the General Dynamics Corporation Hourly Employees Savings and Stock
Investment Plan as of December 31, 1997 and 1996, and the related statement of
changes in net assets available for benefits for the year ended December 31,
1997. These financial statements and the schedules referred to below are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements and schedules 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 benefits of the General
Dynamics Corporation Hourly Employees Savings and Stock Investment Plan as of
December 31, 1997 and 1996, and the changes in its net assets available for
benefits for the year 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 statement of investments
in master trust funds (schedule I) and schedule of loans or fixed income
obligations (schedule II), are presented for the purpose of additional analysis
and are not a required part of the basic financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The Fund Information in the statements of net assets
available for benefits and the statement of changes in net assets available for
benefits is presented for purposes of additional analysis rather than to present
the net assets available for benefits and changes in net assets available for
benefits of each fund. The supplemental schedules and Fund Information are the
responsibility of the Plan's management. The supplemental schedules 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.
Washington, D.C.
June 15, 1998
-2-
<PAGE> 5
GENERAL DYNAMICS CORPORATION
HOURLY EMPLOYEES SAVINGS AND STOCK INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
STOCK FIXED INCOME BOND INDEX BALANCED
TOTAL FUND FUND FUND FUND
--------------- -------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investment in Master Trust $ 449,622,959 $ 61,633,725 $ 202,337,138 $ 61,098,508 $ 6,751,895
Loans receivable 4,183,423 - - - -
--------------- -------------- --------------- -------------- -------------
Total assets 453,806,382 61,633,725 202,337,138 61,098,508 6,751,895
--------------- -------------- --------------- -------------- -------------
LIABILITIES:
Fund transfers - (49,547) 20,374 3,800 (17,156)
Administrative fees payable 64,124 8,080 27,539 10,981 1,505
--------------- -------------- --------------- -------------- -------------
Total liabilities 64,124 (41,467) 47,913 14,781 (15,651)
--------------- -------------- --------------- -------------- -------------
Net assets available for benefits $ 453,742,258 $ 61,675,192 $ 202,289,225 $ 61,083,727 $ 6,767,546
=============== ============== =============== ============== =============
<CAPTION>
S&P 500 STOCK INTERNATIONAL SMALL CAP LOAN
INDEX FUND INDEX FUND INDEX FUND FUND
--------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in Master Trust $ 110,319,565 $ 1,054,773 $ 6,427,355 $ -
Loans receivable - - - 4,183,423
--------------- -------------- ------------- -------------
Total assets 110,319,565 1,054,773 6,427,355 4,183,423
--------------- -------------- ------------- -------------
LIABILITIES:
Fund transfers 108,286 - (65,757) -
Administrative fees payable 14,771 184 1,064 -
--------------- -------------- ------------- -------------
Total liabilities 123,057 184 (64,693) -
--------------- -------------- ------------- -------------
Net assets available for benefits $ 110,196,508 $ 1,054,589 $ 6,492,048 $ 4,183,423
=============== ============== ============= =============
</TABLE>
The accompanying notes are an integral part of this financial statement.
-3-
<PAGE> 6
GENERAL DYNAMICS CORPORATION
HOURLY EMPLOYEES SAVINGS AND STOCK INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
STOCK GOVERNMENT DIVERSIFIED
TOTAL FUND BOND FUND FUND
--------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
ASSETS:
Investment in Master Trust $ 445,986,808 $ 48,595,238 $ 68,889,380 $ 75,165,683
Loans receivable (payable) 1,271,045 (6,116) (6,960) (33,208)
--------------- -------------- -------------- ----------------
Total assets 447,257,853 48,589,122 68,882,420 75,132,475
--------------- -------------- -------------- ----------------
LIABILITIES:
Fund transfers 3,008 78,562 453,805 (77,203)
Amounts payable to General Dynamics Corporation 606,271 133,202 86,638 125,345
Administrative fees payable 116,582 9,764 15,471 46,605
--------------- -------------- -------------- ----------------
Total liabilities 725,861 221,528 555,914 94,747
--------------- -------------- -------------- ----------------
Net assets available for benefits $ 446,531,992 $ 48,367,594 $ 68,326,506 $ 75,037,728
=============== ============== ============== ================
<CAPTION>
FIXED INCOME SPECIAL DISTRIBUTION LOAN
FUND FUND FUND
--------------- ---------------------- -------------
<S> <C> <C> <C>
ASSETS:
Investment in Master Trust $ 245,666,720 $ 7,669,787 $ -
Loans receivable (payable) (12,617) (3,096) 1,333,042
--------------- ---------------------- -------------
Total assets 245,654,103 7,666,691 1,333,042
--------------- ---------------------- -------------
LIABILITIES:
Fund transfers (458,792) 6,636 -
Amounts payable to General Dynamics Corporation 261,086 - -
Administrative fees payable 43,824 918 -
--------------- ---------------------- -------------
Total liabilities (153,882) 7,554 -
--------------- ---------------------- -------------
Net assets available for benefits $ 245,807,985 $ 7,659,137 $ 1,333,042
=============== ====================== =============
</TABLE>
The accompanying notes are an integral part of this financial statement.
-4-
<PAGE> 7
GENERAL DYNAMICS CORPORATION
HOURLY EMPLOYEES SAVINGS AND STOCK INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
STOCK FIXED INCOME BOND INDEX BALANCED
TOTAL FUND FUND FUND FUND
--------------- -------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Participation in income (loss) of Master Trust $ 50,797,665 $ 12,039,891 $ 7,737,041 $ 4,652,396 $ 206,020
--------------- -------------- --------------- -------------- -------------
ADD (DEDUCT):
Rollover contributions 881,410 260,491 180,826 9,777 76,958
Contributions by participants 11,238,056 2,146,025 4,600,385 644,874 104,913
Contributions by General Dynamics Corporation 5,248,211 1,701,381 1,855,832 251,140 40,011
Loan repayments 152,571 348,403 323,453 78,715 4,758
Loans issued - (153,580) (1,615,340) (520,653) (57,094)
Transfers among funds - 1,336,102 (20,127,354) 60,633,973 6,458,237
Distributions to withdrawn participants (63,384,235) (7,284,898) (36,117,954) (4,593,791) (61,049)
Plan expenses (759,343) (71,450) (355,971) (72,706) (5,208)
Other 3,035,931 2,985,233 322 2 -
--------------- -------------- --------------- -------------- -------------
Net increase (decrease) 7,210,266 13,307,598 (43,518,760) 61,083,727 6,767,546
--------------- -------------- --------------- -------------- -------------
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 446,531,992 48,367,594 245,807,985 - -
--------------- -------------- --------------- -------------- -------------
End of year $ 453,742,258 $ 61,675,192 $ 202,289,225 $ 61,083,727 $ 6,767,546
=============== ============== =============== ============== =============
<CAPTION>
S&P 500 STOCK INTERNATIONAL SMALL CAP GOVERNMENT DIVERSIFIED
INDEX FUND INDEX FUND INDEX FUND BOND FUND
---------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Participation in income (loss) of Master Trust $ 13,944,529 $ (105,832) $ 367,512 $ 1,873,867 $ 9,983,360
---------------- -------------- ------------- ------------- -------------
ADD (DEDUCT):
Rollover contributions 175,538 10,729 39,523 - 127,568
Contributions by participants 1,891,088 37,740 133,118 550,581 1,129,332
Contributions by General Dynamics Corporation 684,482 13,885 48,367 222,359 430,754
Loan repayments 142,295 1,764 7,573 32,121 40,550
Loans issued (1,239,407) (18,137) (69,727) (28,667) (94,383)
Transfers among funds 100,230,501 1,127,601 6,096,126 (66,073,888) (82,333,869)
Distributions to withdrawn participants (5,556,004) (11,978) (124,926) (4,863,453) (4,241,243)
Plan expenses (76,514) (1,183) (5,518) (41,711) (128,086)
Other - - - 2,285 48,289
---------------- -------------- ------------- ------------- -------------
Net increase (decrease) 110,196,508 1,054,589 6,492,048 (68,326,506) (75,037,728)
---------------- -------------- ------------- ------------- -------------
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year - - - 68,326,506 75,037,728
---------------- -------------- ------------- ------------- -------------
End of year $ 110,196,508 $ 1,054,589 $ 6,492,048 $ - $ -
================ ============== ============= ============= =============
<CAPTION>
SPECIAL DISTRIBUTION LOAN
FUND FUND
-------------------- -------------
<S> <C> <C>
Participation in income (loss) of Master Trust $ 98,881 $ -
-------------------- -------------
ADD (DEDUCT):
Rollover contributions - -
Contributions by participants - -
Contributions by General Dynamics Corporation - -
Loan repayments - (827,061)
Loans issued (6,228) 3,803,216
Transfers among funds (7,347,429) -
Distributions to withdrawn participants (403,365) (125,574)
Plan expenses (996) -
Other - (200)
-------------------- -------------
Net increase (decrease) (7,659,137) 2,850,381
-------------------- -------------
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 7,659,137 1,333,042
-------------------- -------------
End of year $ - $ 4,183,423
==================== =============
</TABLE>
The accompanying notes are an integral part of this financial statement.
-5-
<PAGE> 8
GENERAL DYNAMICS CORPORATION
HOURLY EMPLOYEES SAVINGS AND STOCK INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997 AND 1996
1. The General Dynamics Corporation Hourly Employees Savings and Stock
Investment Plan (the "Plan") is a defined contribution plan covering
eligible hourly employees of General Dynamics Corporation (the "Company").
The following is a brief description of the Plan provided for general
information purposes. Participants should refer to the Plan agreement for
more complete information.
A participant may contribute from 1% to 10% of base earnings up to $12.01
per hour and 1% to 6% of base earnings in excess of $12.01 per hour up to
$16.01 per hour. Maximum contributions for represented participants are
determined by the applicable collective bargaining agreements. In addition,
participants at some locations may contribute another 1% to 4% of base
earnings up to $16.01 per hour on an unmatched basis. Participants at
Armament Systems, Defense Systems and Advanced Technology Systems may
contribute 1% to 15% of their salary on a pre-tax basis.
Each participant shall direct his contributions to be invested in one
percent increments into all funds. Participants can change their investment
elections daily and can make an unlimited number of investment election
changes each year.
Most Company matching contributions to the Plan are invested in Company
common stock. However, at certain locations the Company match follows the
employee's election. Generally, participants that are eligible for the
Company matching contribution and are 100 percent invested in the General
Dynamics Stock Fund receive a 100 percent Company matching contribution in
Company common stock. Participants that are eligible for the Company
matching contribution but are less than 100 percent invested in the General
Dynamics Stock Fund receive a 50 percent Company matching contribution in
Company common stock. The matching contributions vary for participants at
Armament Systems, Defense Systems and Advanced Technology Systems.
Participants are eligible to participate in the Plan upon hire, and their
contributions are always 100 percent vested. Company matching contributions
are fully vested upon five years of service. Contributions invested in the
General Dynamics Stock Fund must be maintained in that fund for 5 years
before becoming eligible for transfer to any other fund. Therefore, a
portion of the balance in the General Dynamics Stock Fund represents
non-participant-directed investments due to the match. With the exception
of the General Dynamics Stock Fund, all other investment funds are
completely participant-directed.
The Plan permits active participants and employed inactive participants to
borrow up to 50% of the vested amount in their accounts (as limited by the
Plan) and to repay the loan by
-6-
<PAGE> 9
regular payroll deductions over a period of up to five years. Loans are
issued at prime rate of interest.
In the event the Plan is terminated, each participant will automatically be
vested in the undistributed Company contributions. Each participant will
receive payments based on the specific dollar amounts and shares of company
stock in his account.
2. During June 1997, the Company extended the investment options for plan
participants. Two of the options offered in 1996 remain available to
participants: the General Dynamics Stock Fund and the Fixed Income Fund.
The five options added in 1997 include: Bond Index Fund, Balanced Fund, S&P
500 Stock Index Fund, International Index Fund and Small Cap Index Fund.
These investment options will offer participants the opportunity to invest
in a broader range on the risk/return spectrum for actively traded
securities.
According to the Plan documents, the seven funds may hold the following
types of investments:
a) General Dynamics Stock Fund - The fund invests only in common stock of
the Company.
b) Fixed Income Fund - The fund invests in General Account and Separate
Account Guaranteed Investment Contracts ("GICs"). General account GICs
are deposits with an insurance company that earn a contractually
specified rate of return over a defined period. These contracts are
secured by the issuer's general account (a broadly diversified
portfolio of fixed income assets) and the net worth of the insurance
company. Separate account GICs are deposits with an insurance company,
but are invested in a separate portfolio of high-quality securities.
The GICs are not guaranteed by General Dynamics Corporation or any
government agency.
c) Bond Index Fund - The fund invests in government, corporate,
mortgage-backed and asset-backed securities. The fund also invests in
high-quality bonds, as defined.
d) Balanced Fund - The fund is a mixed portfolio of commingled stocks and
bond funds. The fund is made up of international equities, U.S. large
cap equities, fixed income securities and U.S. small cap equities.
e) S&P 500 Stock Index Fund - The fund invests in all 500 U.S. common
stocks in the S&P 500 Index in proportion to their weighting in the
Index. It may also hold 2% to 5% of its value in S&P 500 futures
contracts.
f) International Index Fund - The fund invests in over 1,000 stocks in
major markets outside the United States and Canada. Investments are
made in all stocks in the MSCI EAFE Index in approximate proportion to
the weighting in the Index.
g) Small Cap Index Fund - The fund attempts to invest in all 2,000 stocks
in the Russell 2000 Index in proportion to their weighting in the
Index. The Russell Index represents the smallest two-thirds of the
3,000 largest U.S. companies. It may also hold 2% to 5% of its value
in Russell 2000 Index futures contracts.
-7-
<PAGE> 10
All of the above funds may hold a small cash balance for purposes of
liquidity and expense control that is maintained in The Northern Trust
Company Collective Short-Term Investment Fund.
3. The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of additions and deductions
from net assets available for benefits during the reporting period. Actual
results could differ from those estimates.
4. The accompanying financial statements are prepared on the accrual basis of
accounting. Certain reclassifications have been made to balances on the
December 31, 1996 statement of net assets available for benefits to conform
with the current year presentation.
5. The Company has received a determination from the Internal Revenue Service
that the Plan, including all amendments through June 20, 1994, is a
qualified profit sharing plan under Section 401 (a) of the Internal Revenue
Code. The trust formed thereunder is exempt from Federal income tax under
Section 501 (a). The Plan administrator and Plan's tax counsel believe that
the Plan is currently designed and being operated in compliance with the
applicable requirements of the Internal Revenue Code. Therefore, they
believe that the Plan was qualified and the related trust was tax exempt as
of the financial statement date.
6. The Plan's investments are in the General Dynamics Corporation Savings and
Stock Investment Plan Master Trust (the "Master Trust"), which was
established for the investment of assets of the Plan and the Savings and
Stock Investment Plan (the "Plans"). Each participating plan has an
undivided interest in the Master Trust. The assets of the Master Trust are
held by The Northern Trust Company ("Trustee"). At December 31, 1997 and
1996, the Plan's interest in the net assets of the Master Trust was
approximately 16.8% and 17.5%, respectively. Net assets and net
participation in the income of the Master Trust are allocated to the Plans
according to their percentage interest in the Master Trust.
The following table presents the reported value of investments for the Master
Trust.
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1997 1996
----------------- -----------------
<S> <C> <C>
General Dynamics Common Stock $ 513,911,736 $ 419,069,977
Investments in registered investment companies 901,907,398 -
U.S. government bonds and other securities - 589,912,139
Cash and cash equivalents 14,594,902 36,819,637
Loans receivable 22,839,462 16,401,791
Guaranteed investment contracts 1,255,533,974 1,496,248,785
----------------- -----------------
Total $ 2,708,787,472 $ 2,558,452,329
================= =================
</TABLE>
-8-
<PAGE> 11
Investment income for the Master Trust is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-------------------
<S> <C>
Investment Income:
Dividends $ 11,294,041
Interest 110,306,765
Net realized and unrealized gain on assets 192,193,228
-------------------
$ 313,794,034
===================
</TABLE>
Administrative expenses are primarily paid by the Plan, although certain
administrative functions are performed by employees of the Company.
Although no costs were reimbursed by the Company in 1997, the Plan document
provides that these costs may be reimbursed by the Company.
7. In accordance with generally accepted accounting principles, amounts
allocated to accounts of participants who have elected to withdraw from the
Plan but have not yet been paid as of year end are not reported as
liabilities on the Statements of Net Assets Available for Benefits.
However, the Department of Labor requires that these amounts be reported as
liabilities on Form 5500. At December 31, 1997 and 1996, amounts payable on
withdrawals and distributions were $85,013 and $8,898,407, respectively. In
addition, on the statement of changes in net assets available for benefits,
1997 distributions to withdrawn participants would have been $54,570,841
instead of $63,384,235 if the December 31 amounts payable on withdrawals
and distributions had been included.
8. Most investments held by the Master Trust are recorded at quoted market
value as stated on public exchanges as of December 31, 1997 and 1996. The
Company values the GICs in the Fixed Income Fund in accordance with AICPA
Statement of Position No. 94-4, "Reporting of Investment Contracts Held by
Health and Welfare Benefit Plans and Defined Contribution Pension Plans."
As of December 31, 1997, the GICs included in the Master Trust are reported
at contract value because they have been determined to be fully benefit
responsive. For example, participants may ordinarily direct the withdrawal
or transfer of all or a portion of their investment at contract value.
There are no reserves against contract value for credit risk of the
contract issuers or otherwise. As of December 31, 1996, the GICs were
included in the financial statements of the Master Trust at fair value as
certain provisions of the Plans restricted the benefit-responsiveness of
the GICs. These provisions were changed during 1997. The fair value of the
GICs at December 31, 1997 was approximately $1.32 billion. The average
yield and crediting interest rates ranged from 5.62 percent to 10.25
percent for 1997.
9. During 1998, the assets of the Bath Iron Works Hourly Plan were merged into
the General Dynamics Hourly Savings and Stock Investment Plan and the
related Master Trust.
-9-
<PAGE> 12
Schedule I
Page 1 of 2
GENERAL DYNAMICS CORPORATION
HOURLY EMPLOYEES SAVINGS AND STOCK INVESTMENT PLAN
STATEMENT OF INVESTMENTS IN MASTER TRUST FUNDS
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
QUOTED
MARKET/CONTRACT
COST VALUE
----------------- -----------------
<S> <C> <C>
GENERAL DYNAMICS STOCK FUND:
Investment in common stock of
General Dynamics Corporation * $ 184,594,747 $ 513,911,736
Temporary Investments in
The Northern Trust Company
Collective Short-Term Investment Fund * 3,501,934 3,501,934
----------------- -----------------
Total $ 188,096,681 $ 517,413,670
================= =================
PROPORTIONATE INTEREST $ 61,633,725
=================
FIXED INCOME FUND:
Investment in the Fixed Income Fund $ 1,255,533,974 $ 1,255,533,974
Temporary Investments in
The Northern Trust Company
Collective Short-Term Investment Fund * 7,575,428 7,575,428
----------------- -----------------
Total $ 1,263,109,402 $ 1,263,109,402
================= =================
PROPORTIONATE INTEREST $ 202,337,138
=================
BOND INDEX FUND:
Investment in the Bond Index Fund $ 144,116,679 $ 156,111,648
Temporary Investments in
The Northern Trust Company
Collective Short-Term Investment Fund * 283,267 283,267
----------------- -----------------
Total $ 144,399,946 $ 156,394,915
================= =================
PROPORTIONATE INTEREST $ 61,098,508
=================
</TABLE>
* denotes party-in-interest
-10-
The accompanying notes are an integral part of this schedule.
<PAGE> 13
Schedule I
Page 2 of 2
GENERAL DYNAMICS CORPORATION
HOURLY EMPLOYEES SAVINGS AND STOCK INVESTMENT PLAN
STATEMENT OF INVESTMENTS IN MASTER TRUST FUNDS
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
QUOTED
MARKET/CONTRACT
COST VALUE
----------------- -----------------
<S> <C> <C>
BALANCED FUND:
Investment in the Balanced Fund $ 44,433,401 $ 46,302,809
================= =================
PROPORTIONATE INTEREST $ 6,751,895
=================
S&P 500 STOCK INDEX FUND:
Investment in the S&P 500 Stock Index Fund $ 516,044,858 $ 647,682,968
Temporary Investments in
The Northern Trust Company
Collective Short-Term Investment Fund * 710 710
----------------- -----------------
Total 516,045,568 647,683,678
================= =================
PROPORTIONATE INTEREST $ 110,319,565
=================
INTERNATIONAL INDEX FUND:
Investment in the International Index Fund $ 10,554,112 $ 10,030,495
================= =================
PROPORTIONATE INTEREST $ 1,054,773
=================
SMALL CAP INDEX FUND:
Investment in the Small Cap Index Fund $ 39,754,999 $ 41,779,478
================= =================
PROPORTIONATE INTEREST $ 6,427,355
=================
LOAN FUND:
Loans Receivable $ 22,839,462 $ 22,839,462
================= =================
PORPORTIONATE INTEREST $ 4,183,423
=================
</TABLE>
* denotes party-in-interest
-11-
The accompanying notes are an integral part of this schedule.
<PAGE> 14
SCHEDULE II
GENERAL DYNAMICS HOURLY SAVINGS AND STOCK INVESTMENT PLAN
LINE 27b -- SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS
<TABLE>
<CAPTION>
Amount received (e) Unpaid
(b) Original during reporting year balance at
(a) Identity of obligator amount of loan (c) Principal (d) Interest end of year
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Participant Loan $20,000.00 $236.96 $53.32 $7,096.40
Participant Loan $8,000.00 $25.34 $56.76 $7,974.66
Participant Loan $9,500.00 $1,108.38 $247.94 $7,490.02
Participant Loan $7,500.00 $375.00 $97.60 $3,449.70
Participant Loan $10,200.00 $0.00 $0.00 $10,200.00
Participant Loan $10,000.00 $0.00 $0.00 $9,096.58
Participant Loan $5,000.00 $67.18 $35.39 $3,039.91
Participant Loan $2,000.00 $0.00 $0.00 $987.64
</TABLE>
<TABLE>
<CAPTION>
(f) Detailed description of loan
including dates of making and
maturity, interest rate, the type and
value of collateral, any renegotiation
of the loan and terms of the renegotiation Amount overdue
and other material items (g) Principal (h) Interest
- -------------------------------------------------------------------------
<S> <C> <C>
Date of making: 11/30/93 $2,430.04 $373.24
Maturity: 10/98
Rate: 6.0%
Date of making: 8/1/97 $374.68 $92.55
Maturity: 7/02
Rate: 8.5%
Date of making: 7/31/96 $760.97 $159.39
Maturity: 6/01
Rate: 8.25%
Date of making: 8/31/94 $875.00 $146.40
Maturity: 9/99
Rate: 7.25%
Date of making: 9/1/97 $340.00 $78.60
Maturity: 8/02
Rate: 8.50%
Date of making: 4/30/95 $3,930.01 $695.88
Maturity: 3/00
Rate 8.5%
Date of making: 8/1/97 $67.18 $35.59
Maturity: 7/02
Rate: 8.50%
Date of making: 9/1/97 $111.12 $15.24
Maturity: 8/00
Rate: 8.50%
</TABLE>
The accompanying notes are an integral part of this schedule.
- 12 -
<PAGE> 15
SCHEDULE II
GENERAL DYNAMICS HOURLY SAVINGS AND STOCK INVESTMENT PLAN
LINE 27b -- SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS
<TABLE>
<CAPTION>
Amount received (e) Unpaid
(b) Original during reporting year balance at
(a) Identity of obligator amount of loan (c) Principal (d) Interest end of year
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Participant Loan $1,600.00 $0.00 $0.00 $503.35
Participant Loan $10,000.00 $333.34 $79.42 $7,499.95
Participant Loan $5,700.00 $95.00 $15.20 $1,045.00
Participant Loan $45,500.00 $382.14 $318.01 $44,740.06
Participant Loan $6,200.00 $281.87 $53.94 $291.64
Participant Loan $8,000.00 $0.00 $0.00 $4,287.80
Participant Loan $3,700.00 $0.00 $0.00 $2,219.92
</TABLE>
<TABLE>
<CAPTION>
(f) Detailed description of loan
including dates of making and
maturity, interest rate, the type and
value of collateral, any renegotiation
of the loan and terms of the renegotiation Amount overdue
and other material items (g) Principal (h) Interest
- ------------------------------------------------------------------------
<S> <C> <C>
Date of making: 8/31/92 $503.35 $83.90
Maturity: 7/97
Rate: 6.5%
Date of making: 12/31/95 $1,083.36 $258.12
Maturity: 11/00
Rate: 8.75%
Date of making: 12/31/92 $807.50 $129.20
Maturity: 11/97
Rate: 6.0%
Date of making: 8/1/97 $233.38 $0.00
Maturity: 7/02
Rate: 8.50%
Date of Making: 9/30/92 $291.64 $72.32
Maturity: 8/97
Rate: 6.5%
Date of making: 5/31/94 $688.02 $85.28
Maturity: 4/00
Rate: 6.0%
Date of making: 9/30/94 $308.35 $60.15
Maturity: 8/99
Rate: 7.25%
</TABLE>
The accompanying notes are an integral part of this schedule.
- 13 -
<PAGE> 16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Plan Administrator has caused this Annual Report to be signed by the
undersigned thereunto duly authorized.
GENERAL DYNAMICS CORPORATION
As Plan Administrator of the General Dynamics
Corporation Hourly Employees Savings and
Stock Investment Plan
By /s/ D. A. Savner
-----------------------
D. A. Savner
Secretary
June 26, 1998
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<PAGE> 17
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 11-K, into General Dynamics
Corporation's previously filed Registration Statement on Form S-8, File No.
2-23904.
By /s/ Arthur Andersen LLP
-------------------------------
Arthur Andersen LLP
Washington, D.C.
June 26, 1998
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