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EXHIBIT 99I TO
ANNUAL REPORT ON FORM 10-K
COMMISSION FILE NO. 1-3671
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 1999
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 its principal executive office:
GENERAL DYNAMICS CORPORATION
3190 FAIRVIEW PARK DRIVE
FALLS CHURCH, VIRGINIA 22042-4253
<PAGE> 2
GENERAL DYNAMICS CORPORATION
HOURLY EMPLOYEES SAVINGS AND STOCK INVESTMENT PLAN
INDEX OF FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
Pages of this
Exhibit 99I
<S> <C> <C>
(a) FINANCIAL STATEMENTS
Report of Independent Public Accountants 1
Statements of Net Assets Available for Benefits,
As of December 31, 1999 and 1998 2
Statement of Changes in Net Assets Available for Benefits,
For the Year Ended December 31, 1999 3
Notes to Financial Statements as of December 31, 1999 and 1998 4-7
Schedule I - Statement of Investments in Master Trust Funds 8-9
As of December 31, 1999
(b) SIGNATURE 10
(c) EXHIBITS
Exhibit 23 - Consent of Independent Public Accountants 11
</TABLE>
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GENERAL DYNAMICS CORPORATION
HOURLY EMPLOYEES SAVINGS AND STOCK INVESTMENT PLAN
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
<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 (the "Plan") as of December 31, 1999 and 1998, and the related
statement of changes in net assets available for benefits for the year ended
December 31, 1999. These financial statements and the schedule referred to
below are the responsibility of the Plan's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 Plan as of
December 31, 1999 and 1998, and the changes in net assets available for
benefits for the year ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
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), is presented for the purpose of
additional analysis and is not a required part of the basic financial
statements but is 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 supplemental schedule is the
responsibility of the Plan's management. The supplemental schedule has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
Vienna, Virginia
June 1, 2000
1
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GENERAL DYNAMICS CORPORATION
HOURLY EMPLOYEES SAVINGS AND STOCK INVESTMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------------------------------
<S> <C> <C>
ASSETS:
Investment in Master Trust $596,401,492 $574,957,607
Loans receivable 10,626,395 8,732,055
Miscellaneous receivables 20,283 384,676
---------------- ----------------
Total assets 607,048,170 584,074,338
---------------- ----------------
LIABILITIES:
Accrued payables 81,057 151,539
---------------- ----------------
Total liabilities 81,057 151,539
---------------- ----------------
NET ASSETS AVAILABLE FOR BENEFITS $606,967,113 $583,922,799
================ ================
</TABLE>
The accompanying notes are an integral part of these statements.
2
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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, 1999
<TABLE>
<S> <C>
PARTICIPATION IN INCOME OF MASTER TRUST $ 40,385,323
----------------
ADD (DEDUCT):
Rollover contributions 585,683
Contributions by participants 20,740,801
Contributions by General Dynamics 7,719,846
Participating forfeitures (25,769)
Loan payments 751,972
Distributions to withdrawn participants (47,547,659)
Pending transactions 434,117
----------------
NET INCREASE 23,044,314
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 583,922,799
----------------
End of year $606,967,113
================
</TABLE>
The accompanying notes are an integral part of this statement.
3
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GENERAL DYNAMICS CORPORATION
HOURLY EMPLOYEES SAVINGS AND STOCK INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
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 percent of base earnings up
to $12.01 per hour and 1 to 6 percent of base earnings in excess of
$12.01 per hour up to $20.01 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 percent of base earnings up to $20.01 per
hour on an unmatched basis. Participants at Bath Iron Works, Armament
Systems, Defense Systems, Advanced Technology Systems and Information
Systems may contribute 1 to 15 percent of their salary on a pre-tax
basis.
Each participant shall direct his or her contributions to be invested
in 1 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 Bath Iron Works,
Armament Systems, Defense Systems, Advanced Technology Systems and
Information 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. Generally,
for participants from many of the Company's subsidiaries,
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 percent 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 the prime rate of interest.
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<PAGE> 8
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 common stock in his or her account.
2. The investment options for Plan participants offer the opportunity
to invest in a broad range of markets. According to the Plan
documents, the seven funds may hold the following types of
investments:
GENERAL DYNAMICS STOCK FUND (THE "STOCK FUND") - The fund invests only
in common stock of the Company.
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 assets) and the net worth of the insurance company.
Separate Account GICs are insured deposits with Metlife, but are
invested in a separate portfolio of high-quality securities. The GICs
are not further guaranteed by the Company or any government agency.
BOND INDEX FUND - The fund invests in high-quality government, agency,
corporate, mortgage-backed and asset-backed securities.
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 and U.S. fixed income securities.
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
S&P 500 Index. It may also hold a small percentage of its value in S&P
500 futures contracts.
INTERNATIONAL INDEX FUND - The fund invests in over 1,000 stocks in
the major markets of Europe, Australia and the Far East. Investments
are made in all stocks in the MSCI EAFE Index in approximate
proportion to the weighting in the MSCI EAFE Index.
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
Russell 2000 Index as liquidity allows. The Russell 2000 Index
represents the smallest two-thirds of the 3,000 largest U.S.
companies. It may also hold a small percentage of its value in Russell
2000 Index futures contracts.
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
accounting principles generally accepted in the United States 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 an accrual
basis in accordance with accounting principles generally accepted in
the United States.
5
<PAGE> 9
5. The Company has received a determination from the Internal Revenue
Service ("IRS") that the Plan, including all amendments through March
18, 1999, 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). Although the Plan has been
amended subsequent to the date of the latest determination from the
IRS, 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's 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 (the "Trustee").
The recordkeeper is Hewitt Associates. At December 31, 1999 and 1998,
the Plan's interest in the net assets of the Master Trust was
approximately 17.7 and 18.3 percent, 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
------------------------------------
1999 1998
----------------- -----------------
<S> <C> <C>
General Dynamics Corporation common stock $ 780,090,277 $ 762,414,942
Investments in registered investment companies 1,280,694,154 1,138,026,273
Investments in U.S. Government Securities 33,051,643 --
Guaranteed investment contracts 1,239,132,103 1,218,525,581
Cash and cash equivalents 48,692,121 31,805,631
Loans receivable 41,281,187 28,704,785
Investments in Corporate Debt Securities & Other 3,728,819 --
-------------- --------------
Total $3,426,670,304 $3,179,477,212
============== ==============
Investment income for the Master Trust is as follows:
DECEMBER 31,
1999
--------------
Dividends $ 12,502,995
Interest 86,806,769
Net realized and unrealized gains on assets 105,486,635
--------------
$204,796,399
==============
</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 1999, the
Plan document provides that these costs may be reimbursed by the
Company.
7. In accordance with accounting principles generally accepted in the
United States, 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
6
<PAGE> 10
amounts be reported as liabilities on Form 5500. At December 31, 1999
and 1998, amounts payable on withdrawals and distributions were
$1,116,598 and $830,385, respectively. In addition, on the
accompanying 1999 statement of changes in net assets available for
benefits, distributions to withdrawn participants would have been
$47,833,872 instead of $47,547,659 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, 1999 and
1998. 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, 1999 and 1998,
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. The fair value of the GICs at December 31, 1999,
was $1,219,368,000 as compared to the contract value of
$1,239,132,103. The average yield and crediting interest rates ranged
from 5.7 to 10.0 percent for 1999.
9. The Accounting Standards Executive Committee issued Statement of
Position ("SOP") 99-3, "Accounting for and Reporting of Certain
Defined Contribution Plan Investments and Other Disclosure Matters,"
which eliminates the requirement for a defined contribution plan to
disclose participant directed investment programs. The SOP was adopted
for these financial statements.
10. Information about the net assets and the significant components of
the changes in net assets relating to the nonparticipant-directed
investments is as follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------
1999 1998
---------------- -------------
<S> <C> <C>
General Dynamics Corporation Common Stock $110,484,824 $101,368,611
================ =============
Change in net assets:
Investment in Master Trust $(11,796,611)
Rollover contributions 251,228
Contributions by participants 5,324,799
Contributions by the Company 3,230,246
Participating forfeitures (10,625)
Loan payments 1,365,893
Interportfolio transfers 19,109,796
Distributions to withdrawn participants (7,700,429)
New loans issued (658,084)
---------------
Net increase $ 9,116,213
===============
</TABLE>
7
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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, 1999
<TABLE>
<CAPTION>
QUOTED
MARKET/CONTRACT
COST VALUE
---------------- ----------------
<S> <C> <C>
GENERAL DYNAMICS STOCK FUND:
Investment in General Dynamics Corporation
Common Stock* $ 476,494,592 $ 780,090,277
Temporary Investments in The Northern Trust
Company Collective Short-Term Investment Fund* 15,367,784 15,367,784
---------------- ----------------
Total $ 491,862,376 $ 795,458,061
================ ================
Proportionate interest $ 110,538,935
================
FIXED INCOME FUND:
Investment in the Fixed Income Fund $ 1,239,132,103
Temporary Investments in The Northern Trust
Company Collective Short-Term Investment Fund* 24,672,133
----------------
Total $ 1,263,804,236
================
Proportionate interest $ 210,108,460
================
BOND INDEX FUND:
Investment in the Bond Index Fund $ 135,538,702
================
Proportionate interest $ 47,354,933
================
BALANCED FUND:
Investment in the Balanced Fund $ 98,582,679
Temporary Investments in The Northern Trust
Company Collective Short-Term Investment Fund* 1,962,399
----------------
Total $ 100,545,078
================
Proportionate interest $ 16,201,513
S&P 500 STOCK INDEX FUND: ================
Investment in the S&P 500 Index Fund $ 999,056,181
Temporary Investments in The Northern Trust
Company Collective Short-Term Investment Fund* 611
----------------
Total $ 999,056,792
================
Proportionate interest $ 201,071,778
================
</TABLE>
*Denotes party-in-interest
The accompanying notes are an integral part of this schedule
8
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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, 1999
<TABLE>
<CAPTION>
QUOTED
MARKET/CONTRACT
COST VALUE
----------------- ---------------------
<S> <C> <C>
INTERNATIONAL INDEX FUND:
Investment in the International Index Fund $36,940,721
Temporary Investments in The Northern Trust Company Collective
Short-Term Investment Fund* 109
------------
Total $36,940,830
============
Proportionate Interest $ 3,766,966
============
SMALL CAP INDEX FUND:
Investment in the Small Cap Index Fund $47,356,332
============
Proportionate Interest $ 6,422,467
============
LOAN FUND:
Loans Receivable $41,281,187
Temporary Investments in The Northern Trust Company Collective
Short-Term Investment Fund* 230
------------
Total $41,281,417
============
Proportionate Interest $10,626,395
============
DISTRIBUTION ACCOUNT:
Distribution account $ 6,688,854
============
Proportionate Interest $ 936,440
============
</TABLE>
*Denotes party-in-interest
The accompanying notes are an integral part of this schedule
9
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Plan Administrator has duly caused this annual report to be signed on its
behalf by the undersigned hereunto duly authorized.
GENERAL DYNAMICS CORPORATION
As Plan Administrator of the General Dynamics
Corporation Hourly Employees Savings and
Stock Investment Plan
By /s/ David A. Savner
-----------------------------------
David A. Savner
Secretary
Dated: June 27, 2000
10
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EXHIBIT 23
GENERAL DYNAMICS CORPORATION
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report incorporated by reference into this Form 10-K/A for
the year ended December 31, 1999, into the company's previously filed
Registration Statements File Numbers 33-23448, 2-23904, 2-23032, 2-28952,
2-50980, 2-24270, 33-42799, 33-80213 and 33-81051.
/s/ ARTHUR ANDERSEN LLP
-----------------------
ARTHUR ANDERSEN LLP
Vienna, Virginia
June 28, 2000
