<PAGE>
================================================================================
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, 1998
A. Full title of the plan and the address of the plan, if
different from that of the issuer named below:
Computer Network Technology Corporation
Salary Savings Plan
B. Name of issuer of the securities held pursuant to the plan
and the address of its principal executive office:
Computer Network Technology Corporation
605 North Highway 169
Minneapolis, MN 55441
612-797-6000
================================================================================
<PAGE>
REQUIRED INFORMATION
1. Not Applicable.
2. Not Applicable.
3. Not Applicable.
4. The Computer Network Technology Corporation Salary Savings Plan (the
Plan) is subject to the requirements of the Employee Retirement Income
Security Act of 1974 (ERISA). Attached hereto is a copy of the most
recent financial statements and schedules of the Plan prepared in
accordance with the financial reporting requirements of ERISA.
2
<PAGE>
COMPUTER NETWORK TECHNOLOGY CORPORATION
401(k) SALARY SAVINGS PLAN
FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 1998 AND 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 4
FINANCIAL STATEMENTS
Statement of Net Assets Available for Benefits - December 31, 1998 5
Statement of Net Assets Available for Benefits - December 31, 1997 6
Statement of Changes in Net Assets Available for Benefits For the Year
Ended December 31, 1998 7
Statement of Changes in Net Assets Available for Benefits For the Year
Ended December 31, 1997 8
NOTES TO FINANCIAL STATEMENTS 9
SUPPLEMENTARY SCHEDULES
Schedule I: Item 27a - Schedule of Assets Held for Investment Purposes 16
Schedule II: Item 27d - Schedule of Reportable Transactions 17
SIGNATURE 18
EXHIBITS 19
Exhibit 23.01 - Consent of Independent Certified Public Accountants 20
</TABLE>
3
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Plan Sponsor
Computer Network Technology Corporation
401(k) Salary Savings Plan
We have audited the accompanying statements of net assets available for
benefits of Computer Network Technology Corporation 401(k) Salary Savings Plan
(the Plan) as of December 31, 1998 and 1997, and the related statements of
changes in net assets available for benefits for the years then ended. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe 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
Computer Network Technology Corporation 401(k) Salary Savings Plan as of
December 31, 1998 and 1997, and the changes in net assets available for benefits
for the years then ended, 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 schedules listed
in the accompanying index 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 for 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 statements of changes in net assets available for
benefits is presented for purposes of additional analysis rather than to present
the net assets available for plan benefits and changes in net assets available
for plan benefits of each fund. The supplemental 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.
/s/ GRANT THORNTON LLP
Minneapolis, Minnesota
April 21, 1999
4
<PAGE>
Computer Network Technology Corporation
401(k) Salary Savings Plan
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 1998
<TABLE>
<CAPTION>
* Computer * CIGNA
Network * Fidelity Charter
Technology * Fidelity Advisor * Fidelity Large CIGNA
Corporation Advisor Growth Advisor Company Charter
ASSETS Common Equity Opportunities Balanced Stock Growth and
Stock Fund Growth Fund Fund Fund Index Fund Income Fund
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Cash $ -- $ -- $ -- $ -- $ -- $ --
Investments
Fair value 2,790,891 -- -- -- -- --
Estimated fair value -- 1,743,940 5,041,241 1,386,846 2,278,093 674,269
Contract value -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
2,790,891 1,743,940 5,041,241 1,386,846 2,278,093 674,269
Receivables
Employee elective deferral
contributions 6,215 -- 22,151 6,217 12,579 7,108
Employer match contributions 33,997 -- 106,048 27,308 49,205 18,953
---------- ---------- ---------- ---------- ---------- ----------
40,212 -- 128,199 33,525 61,784 26,061
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AVAILABLE FOR
PLAN BENEFITS $2,831,103 $1,743,940 $5,169,440 $1,420,371 $2,339,877 $ 700,330
========== ========== ========== ========== ========== ==========
Number of units outstanding
at end of year 223,271 21,128 65,625 43,683 36,895 23,336
Unit value $ 12.50 $ 82.54 $ 76.82 $ 31.75 $ 61.75 $ 28.89
* CIGNA
Neuberger Charter
AIM Founders * Janus Berman Guaranteed
Constellation Growth Worldwide Partners Long-Term Participant
Fund Fund Fund Fund Fund Loan Fund Totals
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
$ -- $ -- $ -- $ -- $ -- $ -- $ --
-- -- -- -- -- -- 2,790,891
313,836 494,904 1,132,164 449,767 -- 537,064 14,052,124
-- -- -- -- 2,016,157 -- 2,016,157
----------- ----------- ----------- ----------- ----------- ----------- -----------
313,836 494,904 1,132,164 449,767 2,016,157 537,064 18,859,172
4,273 8,018 10,461 4,336 5,572 -- 86,930
12,218 17,423 34,699 11,290 85,565 -- 396,706
----------- ----------- ----------- ----------- ----------- ----------- -----------
16,491 25,441 45,160 15,626 91,137 -- 483,636
----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 330,327 $ 520,345 $ 1,177,324 $ 465,393 $ 2,107,294 $ 537,064 $19,342,808
=========== =========== =========== =========== =========== =========== ===========
9,044 18,362 21,116 21,218 57,430
$ 34.70 $ 26.95 $ 53.62 $ 21.20 $ 35.11
</TABLE>
* Total investment represent 5% or more of the Plan's net assets available for
benefits.
The accompanying notes are an integral part of this statement.
5
<PAGE>
Computer Network Technology Corporation
401(k) Salary Savings Plan
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 1997
<TABLE>
<CAPTION>
* Computer * CIGNA
Network * Fidelity Charter
Technology * Fidelity Advisor * Fidelity Large CIGNA
Corporation Advisor Growth Advisor Company Charter
ASSETS Common Equity Opportunities Balanced Stock Growth and
Stock Fund Growth Fund Fund Fund Index Fund Income Fund
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Cash $ 640 $ -- $ -- $ -- $ -- $ --
Investments
Fair value 929,194 -- -- -- -- --
Estimated fair value -- 1,678,999 3,710,247 1,273,515 1,353,906 180,338
Contract value -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
929,194 1,678,999 3,710,247 1,273,515 1,353,906 180,338
Receivables
Employee elective deferral
contributions 8,119 4,155 26,646 7,262 12,775 --
Employer match contributions 44,426 11,868 131,472 33,107 55,126 --
---------- ---------- ---------- ---------- ---------- ----------
52,545 16,023 158,118 40,369 67,901 --
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AVAILABLE FOR
BENEFITS $ 982,379 $1,695,022 $3,868,365 $1,313,884 $1,421,807 $ 180,338
========== ========== ========== ========== ========== ==========
Number of units outstanding
at end of year 265,484 28,146 59,732 46,196 28,406 7,963
Unit value $ 3.50 $ 59.65 $ 62.11 $ 27.57 $ 47.66 $ 22.65
* CIGNA
Neuberger Charter
AIM Founders Janus Berman Guaranteed
Constellation Growth Worldwide Partners Long-Term Participant
Fund Fund Fund Fund Fund Loan Fund Totals
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
$ -- $ -- $ -- $ -- $ -- $ -- $ 640
-- -- -- -- -- -- 929,194
111,573 163,303 407,642 343,408 -- 499,422 9,722,353
-- -- -- -- 983,503 -- 983,503
----------- ----------- ----------- ----------- ----------- ----------- -----------
111,573 163,303 407,642 343,408 983,503 499,422 11,635,050
3,244 4,176 7,688 6,807 8,884 -- 89,756
8,883 10,099 27,022 17,196 28,467 -- 367,666
----------- ----------- ----------- ----------- ----------- ----------- -----------
12,127 14,275 34,710 24,003 37,351 -- 457,422
----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 123,700 $ 177,578 $ 442,352 $ 367,411 $ 1,020,854 $ 499,422 $12,093,112
=========== =========== =========== =========== =========== =========== ===========
3,805 7,546 9,517 17,101 29,584
$ 29.32 $ 21.64 $ 42.83 $ 20.08 $ 33.24
</TABLE>
* Total investment represent 5% or more of the Plan's net assets available for
benefits.
The accompanying notes are an integral part of this statement.
6
<PAGE>
Computer Network Technology Corporation
401(k) Salary Savings Plan
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
For the year ended December 31, 1998
<TABLE>
<CAPTION>
Computer CIGNA
Network Fidelity Charter
Technology Fidelity Advisor Fidelity Large CIGNA
Corporation Advisor Growth Advisor Company Charter
Common Equity Opportunities Balanced Stock Growth and
Stock Fund Growth Fund Fund Fund Index Fund Income Fund
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ADDITIONS
Investment income
Net appreciation in fair value of
investments $ 2,602,120 $ 538,397 $ 914,900 $ 196,581 $ 452,095 $ 101,391
Interest and dividends -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
2,602,120 538,397 914,900 196,581 452,095 101,391
Contributions
Employee elective deferrals 220,405 -- 819,537 240,427 471,944 195,924
Employee rollovers 8,447 -- 63,620 15,011 131,568 78,841
Employer match 33,997 -- 106,048 27,308 49,205 18,953
----------- ----------- ----------- ----------- ----------- -----------
262,849 -- 989,205 282,746 652,717 293,718
----------- ----------- ----------- ----------- ----------- -----------
Total additions 2,864,969 538,397 1,904,105 479,327 1,104,812 395,109
DEDUCTIONS
Distribution of benefits (94,625) (255,831) (681,135) (237,033) (130,977) (11,714)
Forfeitures (648) -- (5,726) (537) (3,045) (618)
----------- ----------- ----------- ----------- ----------- -----------
(95,273) (255,831) (686,861) (237,570) (134,022) (12,332)
Net additions 2,769,696 282,566 1,217,244 241,757 970,790 382,777
INTERFUND TRANSFERS (920,972) (233,648) 83,831 (135,270) (52,720) 137,215
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 982,379 1,695,022 3,868,365 1,313,884 1,421,807 180,338
----------- ----------- ----------- ----------- ----------- -----------
End of year $ 2,831,103 $ 1,743,940 $ 5,169,440 $ 1,420,371 $ 2,339,877 $ 700,330
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
CIGNA
Neuberger Charter
AIM Founders Janus Berman Guaranteed
Constellation Growth Worldwide Partners Long-Term Participant
Fund Fund Fund Fund Fund Loan Fund Totals
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$ 36,766 $ 68,094 $ 142,894 $ 24,684 $ -- $ -- $ 5,077,922
-- -- -- -- 73,161 48,802 121,963
------------ ------------ ------------ ------------ ------------ ------------ ------------
36,766 68,094 142,894 24,684 73,161 48,802 5,199,885
119,433 158,353 306,206 174,088 191,581 -- 2,897,898
32,406 59,744 33,821 60,652 90,613 -- 574,723
12,218 17,423 34,699 11,290 85,565 -- 396,706
------------ ------------ ------------ ------------ ------------ ------------ ------------
164,057 235,520 374,726 246,030 367,759 -- 3,869,327
------------ ------------ ------------ ------------ ------------ ------------ ------------
200,823 303,614 517,620 270,714 440,920 48,802 9,069,212
(16,723) (29,284) (110,915) (23,754) (179,318) (48,207) (1,819,516)
(725) (527) (956) (50) 12,832 -- --
------------ ------------ ------------ ------------ ------------ ------------ ------------
(17,448) (29,811) (111,817) (23,804) (166,486) (48,207) (1,819,516)
183,375 273,803 405,749 246,910 274,434 595 7,249,696
23,252 68,964 329,223 (148,928) 812,006 37,047 --
123,700 177,578 442,352 367,411 1,020,854 499,422 12,093,112
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 330,327 $ 520,345 $ 1,177,324 $ 465,393 $ 2,107,294 $ 537,064 $ 19,342,808
============ ============ ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
7
<PAGE>
Computer Network Technology Corporation
401(k) Salary Savings Plan
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
For the year ended December 31, 1997
<TABLE>
<CAPTION>
Computer
Network Fidelity CIGNA
Technology Fidelity Advisor Fidelity Charter CIGNA
Corporation Advisor Growth Advisor Large Charter
Common Equity Opportunities Balanced Company Growth and
Stock Fund Growth Fund Fund Fund Index Fund Income Fund
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ADDITIONS
Investment income (loss)
Net appreciation (depreciation) in
fair value of investments $ (369,052) $ 448,333 $ 771,405 $ 239,478 $ 270,390 $ 8,805
Interest and dividends -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
(369,052) 448,333 771,405 239,478 270,390 8,805
Contributions
Employee elective deferrals 237,872 291,236 710,693 236,815 325,795 27,636
Employee rollovers 31,926 49,448 184,223 62,434 34,380 54,639
Employer match 44,426 11,868 131,472 33,107 55,126 --
----------- ----------- ----------- ----------- ----------- -----------
314,224 352,552 1,026,388 332,356 415,301 82,275
----------- ----------- ----------- ----------- ----------- -----------
Total additions (deductions) (54,828) 800,885 1,797,793 571,834 685,691 91,080
DEDUCTIONS
Distribution of benefits (30,465) (241,534) (243,805) (145,268) (126,044) --
----------- ----------- ----------- ----------- ----------- -----------
Net additions (deductions) (85,293) 559,351 1,553,988 426,566 559,647 91,080
INTERFUND TRANSFERS 160,453 (792,267) (215,046) (162,235) 127,717 89,258
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 907,219 1,927,938 2,529,423 1,049,553 734,443 --
----------- ----------- ----------- ----------- ----------- -----------
End of year $ 982,379 $ 1,695,022 $ 3,868,365 $ 1,313,884 $ 1,421,807 $ 180,338
=========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
CIGNA
Neuberger Charter
AIM Founders Janus Berman Guaranteed
Constellation Growth Worldwide Partners Long-Term Participant
Fund Fund Fund Fund Fund Loan Fund Totals
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$ (3,488) $ (134) $ (3,982) $ 9,019 $ -- $ -- $ 1,370,774
-- -- -- -- 58,308 43,530 101,838
------------ ------------ ------------ ------------ ------------ ------------ ------------
(3,488) (134) (3,982) 9,019 58,308 43,530 1,472,612
22,952 30,144 86,500 54,775 203,121 -- 2,227,539
859 6,179 13,709 6,179 2,580 -- 446,556
8,883 10,099 27,022 17,196 28,467 -- 367,666
------------ ------------ ------------ ------------ ------------ ------------ ------------
32,694 46,422 127,231 78,150 234,168 -- 3,041,761
------------ ------------ ------------ ------------ ------------ ------------ ------------
29,206 46,288 123,249 87,169 292,476 43,530 4,514,373
-- -- (16,358) -- (334,774) (32,416) (1,170,664)
------------ ------------ ------------ ------------ ------------ ------------ ------------
29,206 46,288 106,891 87,169 (42,298) 11,114 3,343,709
94,494 131,290 335,461 280,242 (103,859) 54,492 --
-- -- -- -- 1,167,011 433,816 8,749,403
------------ ------------ ------------ ------------ ------------ ------------ ------------
$ 123,700 $ 177,578 $ 442,352 $ 367,411 $ 1,020,854 $ 499,422 $ 12,093,112
============ ============ ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
8
<PAGE>
Computer Network Technology Corporation
401(k) Salary Savings Plan
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies for Computer Network
Technology Corporation 401(k) Salary Savings Plan (the Plan) consistently
applied in the preparation of the accompanying financial statements follows:
Valuation of Investments
------------------------
The Computer Network Technology Corporation Common Stock Fund (the common
stock of the Plan Sponsor) is valued utilizing the last quoted market price
on the last business day of the year.
Assets in the Fidelity Advisor Equity Growth Fund, Fidelity Advisor Growth
Opportunities Fund, Fidelity Advisor Balanced Fund, CIGNA Charter Large
Company Stock Index Fund, CIGNA Charter Growth and Income Fund, AIM
Constellation Fund, Founders Growth Fund, Janus Worldwide Fund, and Neuberger
Berman Partners Fund represent the Plan's share of the value of certain
assets held in the insurance company's separate accounts. Such assets are
stated at estimated fair value as determined by the insurance company based
upon the fair value of the funds underlying assets. Income from these funds
represents the Plan's share of income from the separate accounts.
Assets in the CIGNA Charter Guaranteed Long-Term Fund represent the contract
value, which approximates fair value, of a guaranteed investment contract
held with an insurance company. The crediting interesst rate and average
yield for the guaranteed fund was 5.6% from January 1, 1998 through December
31, 1998 and 5.5% from January 1, 1997 through June 30, 1997 and 5.6% from
July 1, 1997 through December 31, 1997. The crediting interest rate is
determined semi-annually by Connecticut General Life Insurance Company
(CIGNA) based upon market conditions.
Participant loans are valued at the estimated fair value of the loan.
All investments are participant directed.
Plan and Administrative Expenses
--------------------------------
All investment fees incurred with regard to the purchase and sale of
investments are paid by the Plan and are netted with investment income.
During 1998 and 1997, $19,529 and $16,176 of investment fees were paid by the
Plan and netted with investment income. Other administrative expenses are
paid by the Plan Sponsor, Computer Network Technology Corporation.
9
<PAGE>
Computer Network Technology Corporation
401(k) Salary Savings Plan
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Net Appreciation (Depreciation) in Fair Value of Investments
------------------------------------------------------------
Net appreciation (depreciation) in the fair value of investments represents
the net realized gains or losses and the net unrealized appreciation or
depreciation of investments. Realized gains or losses are the differences
between the proceeds and the cost, determined on an average cost basis, of
investments sold. Unrealized appreciation or depreciation is the change in
the difference between fair value and the cost of investments.
Benefit Paid
------------
Benefits are recorded when paid.
Use of Estimates
----------------
In preparing financial statements in conformity with generally accepted
accounting principles, Plan management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and asset additions to and deductions from
net assets available for benefits during the reporting periods. Actual
results could differ from those estimates.
NOTE B - PLAN DESCRIPTION
The following description of the Plan provides only general information.
Participants should refer to the Plan agreement for a more complete
description of the Plan's provisions.
General
-------
The Plan is a defined contribution plan subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA). The Plan was
established effective January 1, 1991 and salary deferrals were first
permitted beginning July 1, 1991. During 1998, the Plan was restated
effective January 1, 1997 to incorporate all amendments and tax compliance
provisions.
Plan assets are held by a trustee, CG Trust Company.
10
<PAGE>
Computer Network Technology Corporation
401(k) Salary Savings Plan
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE B - PLAN DESCRIPTION - Continued
Eligibility
-----------
All employees of Computer Network Technology Corporation (the Company) are
eligible to participate in the Plan beginning on the first day of the
calendar quarter following one month of employment. Employees are eligible
for discretionary employer matching contributions when they become
participants in the Plan, provided they are employees of the Company as of
December 31.
Vesting
-------
Employee elective deferral contributions are 100% vested regardless of length
of service. Employer match contributions vest 50% after two years of service
and 25% for each subsequent year of service, becoming 100% vested at the end
of four years.
Funding Policy
--------------
Contributions made pursuant to employee salary deferrals are permitted up to
15% of the participant's compensation, subject to limits established by law.
Participants may contribute up to 10% of compensation on an after-tax basis.
Participants may also make rollover contributions to the Plan. Salary
deferral and after-tax (see note G) contribution percentages may be changed
on the first day of the calendar quarter.
Matching employer contributions are at the discretion of the Plan Sponsor.
The contribution is based on a matching percentage of eligible participant
contributions, not to exceed a dollar amount, as determined by the employer.
Investment Options
------------------
The Plan has established several investment options, each with a different
investment objective. The investment options are common stock of the Company,
various types of mutual funds, and a guaranteed investment contract. Each
participant in the Plan elects to have his or her contribution invested in
any one or any combination of the fund options. The following is a brief
description of the fund options available:
Computer Network Technology Corporation Common Stock Fund invests monies
in the common stock of the Company.
Fidelity Advisor Equity Growth Fund is a high risk stock fund seeking
long-term capital appreciation from predominantly domestic equities with
little or no current income.
Fidelity Advisor Growth Opportunities Fund is a high risk stock fund
seeking long-term capital appreciation from little-known or overlooked
growth equities, with little or no current income.
Fidelity Advisor Balanced Fund is a moderate risk balanced fund
seeking a combination of growth, income and capital preservation through
stocks, bonds and short-term investments.
CIGNA Charter Large Company Stock Index Fund is a moderate to high risk
stock fund seeking a combination of capital growth and current income
through investments in virtually all of the 500 stocks in the S&P 500
index.
CIGNA Charter Growth and Income Fund is a moderate to high risk stock fund
seeking a combination of capital growth and current income through
investment in a broad category of investments.
AIM Constellation Fund is a high risk stock fund seeking long-term capital
appreciation from equities with little or no current income through
investments in small or medium sized emerging growth companies.
Founders Growth Fund is a high risk stock fund seeking long-term capital
appreciation from predominantly domestic equities, with little or no
current income.
Janus Worldwide Fund is a high risk stock fund seeking potentially
increased returns from participation in foreign and domestic stock markets
as well as associated portfolio diversification benefits.
Neuberger Berman Partners Fund is a high risk stock fund seeking long-term
capital appreciation from predominantly domestic equities, with little or
no current income.
CIGNA Charter Guaranteed Long-Term Fund is a low risk guaranteed fund
seeking preservation of capital plus attractive intermediate-term fixed
income returns.
11
<PAGE>
Computer Network Technology Corporation
401(k) Salary Savings Plan
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE B - PLAN DESCRIPTION - Continued
Participants' Accounts
----------------------
Participants' accounts are credited with their employee contributions (salary
deferral, after-tax and rollover), discretionary employer matching
contributions and an allocation of Plan earnings. Allocations of Plan
earnings are based on participant account balances, as defined in the Plan.
The benefit to which a participant is entitled is the benefit which can be
provided from the vested portion of the participant's account.
Payment of Benefits
-------------------
On termination of service, a participant may elect to receive a lump-sum
distribution equal to the value of the participant's vested interest in his
or her account, net of tax, or to roll-over the entire vested portion to a
qualified plan. If the participant account is not fully distributed at
termination of service, an installment payment may be elected by the
participant.
Plan Termination
----------------
Although the Plan Sponsor has no current intention of terminating the Plan,
the Plan provides that upon termination, all amounts credited to a
participant's account vest 100%. Net assets of the Plan would be distributed
to the participants as prescribed in the Plan agreement.
Net Transfers Between Funds
---------------------------
Assets of the Plan are held in various funds, as defined in the Plan summary.
Participants may make transfers between these funds daily, except for the
Computer Network Technology Corporation Common Stock Fund and the participant
loan fund. Participants may make transfers in the Computer Network Technology
Corporation Common Stock Fund every thirty days (see note G).
12
<PAGE>
Computer Network Technology Corporation
401(k) Salary Savings Plan
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE B - PLAN DESCRIPTION - Continued
Participant Loans
-----------------
The Plan allows participants to direct the investment of certain assets in
their accounts by providing loans to participants. Participants may borrow
from their fund accounts up to a maximum of the lesser of $50,000 or 50% of
their vested account balance. Loan transactions are treated as transfers to
(from) the investment funds from (to) the participant loan fund. Such loans
bear interest at the "prime rate" plus 1%. For years ended December 31, 1998
and 1997, interest rates ranged from 7.00% to 9.75% and 6.99% to 9.75%.
Principal and interest are paid ratably through payroll deductions.
Forfeitures
-----------
The Plan allows for forfeitures of terminated participants' non-vested
amounts to be transferred to the CIGNA Charter Guaranteed Long-Term Fund
account at the time of the terminated participant's distribution or after a
five year break-in-service period. Prior to the five year break-in-service
limit, the forfeitures are held in the respective funds in a time restricted
account on behalf of the Plan Sponsor. The Plan Sponsor may use these funds
to offset administrative expenses.
NOTE C - INCOME TAX STATUS
The Plan obtained its latest determination letter on December 18, 1998, in
which the Internal Revenue Service stated that the Plan, as then designed,
was in compliance with the applicable requirements of the Internal Revenue
Code.
13
<PAGE>
Computer Network Technology Corporation
401(k) Salary Savings Plan
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE D - EMPLOYEE CONTRIBUTIONS
The Plan allows for employee salary deferral, rollover, and after-tax
contributions. The components of contributions were as follows for the years
ended December 31:
1998 1997
------ ------
Employee salary deferral $2,798,546 $2,169,863
Rollover 574,723 446,556
After-tax 99,352 57,676
------- -------
$3,472,621 $2,674,095
========= =========
NOTE E - RELATED PARTIES
Certain Plan investments are separate accounts managed by CG Trust Company,
affiliated with CIGNA, and therefore, these transactions qualify as
party-in-interest.
NOTE F - RISKS AND UNCERTAINTIES
The Year 2000 issue relates to limitations in computer systems and
applications that may prevent proper recognition of the year 2000. The
potential effect of the Year 2000 issue on the Plan and relevant third
parties will not be fully determinable until the year 2000 and thereafter. If
year 2000 modifications are not properly completed either by the Plan or
entities with whom the Plan conducts business, the Plan's investments and
financial condition could be adversely impacted.
Management of the Plan sponsor has assessed the external risks associated
with the year 2000 and has prepared a contingency plan in the event of a
systems interruption.
NOTE G - SUBSEQUENT EVENTS
Subsequent to year end, the after-tax employee contribution option was
discontinued. Additionally, the 30-day restriction for transfers in Computer
Network Technology Corporation Common Stock Fund was eliminated.
14
<PAGE>
SUPPLEMENTARY SCHEDULES
15
<PAGE>
Computer Network Technology Corporation
401(k) Salary Savings Plan
EIN: 41-1356476
Plan No: 001
LINE 27(a) - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1998
<TABLE>
<CAPTION>
(b) Identity of issuer, borrower, (e) Fair
(a) lessor or similar party (c) Description of investment (d) Cost value
--- --------------------------------------- -------------------------------- ------------ -----------
<S> <C> <C> <C> <C>
(*) Computer Network Technology Corporation Computer Network Technology
Corporation Common Stock Fund $1,227,910 $ 2,790,891
(*) CG Trust Company Fidelity Advisor Equity Growth
Fund 884,184 1,743,940
(*) CG Trust Company Fidelity Advisor Growth
Opportunities Fund 3,336,999 5,041,241
(*) CG Trust Company Fidelity Advisor Balanced Fund 1,004,846 1,386,846
(*) CG Trust Company CIGNA Charter Large Company Stock
Index Fund 1,558,301 2,278,093
(*) CG Trust Company CIGNA Charter Growth and Income
Fund 565,858 674,269
(*) CG Trust Company AIM Constellation Fund 279,530 313,836
(*) CG Trust Company Founders Growth Fund 429,919 494,904
(*) CG Trust Company Janus Worldwide Fund 1,006,626 1,132,164
(*) CG Trust Company Neuberger Berman Partners Fund 425,794 449,767
(*) CG Trust Company CIGNA Charter Guaranteed
Long-Term Fund 2,016,157 2,016,157
Participant loans Interest ranging from 7.00% to
9.75% 537,064 537,064
-----------
$18,859,172
===========
</TABLE>
(*) Represents a party-in-interest to the Plan.
16
<PAGE>
Computer Network Technology Corporation
401(k) Salary Savings Plan
EIN: 41-1356476
Plan Number: 001
LINE 27(d) SCHEDULE OF REPORTABLE TRANSACTIONS
Year ended December 31, 1998
<TABLE>
<CAPTION>
<S> <C>
(a) Identity of party involved (b) Description of assets
- ------------------------------------------- ------------------------------------------------
Category (iii) - a series of transactions in excess of 5% of Plan assets
- ------------------------------------------------------------------------
Computer Network Technology Corporation Computer Network Technology Corporation
Common Stock Fund
Computer Network Technology Corporation Computer Network Technology Corporation
Common Stock Fund
CG Trust Company Fidelity Advisor Balanced Fund
CG Trust Company Fidelity Advisor Balanced Fund
CG Trust Company Fidelity Advisor Growth Opportunities Fund
CG Trust Company Fidelity Advisor Growth Opportunities Fund
CG Trust Company CIGNA Charter Guaranteed Long-Term Fund
CG Trust Company CIGNA Charter Guaranteed Long-Term Fund
CG Trust Company Janus Worldwide Fund
CG Trust Company Janus Worldwide Fund
CG Trust Company CIGNA Charter Large Company Stock Index Fund
CG Trust Company CIGNA Charter Large Company Stock Index Fund
</TABLE>
There were no category (i), (ii) or (iv) transactions during the year ended
December 31, 1998.
(h) Fair value
(c) Purchase (d) Selling (g) Cost of of asset on (i) Realized
price price asset transaction date gain
------------ ----------- ----------- ---------------- ------------
$ 711,019 $ - $ 711,019 $ 711,019 $ -
- 1,460,964 982,242 1,460,964 478,722
347,470 - 347,470 347,470 -
- 431,398 319,956 431,398 111,442
1,586,638 - 1,586,638 1,586,638 -
- 1,176,108 823,344 1,176,108 352,764
1,489,201 - 1,489,201 1,489,201 -
- 531,804 531,804 531,804 -
783,404 - 783,404 783,404 -
- 202,284 189,610 202,284 12,674
831,149 - 831,149 831,149 -
- 360,576 264,669 360,576 95,907
17
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
COMPUTER NETWORK TECHNOLOGY CORPORATION
401(K) SALARY SAVINGS PLAN
By: COMPUTER NETWORK TECHNOLOGY CORPORATION,
PLAN ADMINISTRATOR
By: /s/ Kristine E. Ochu
------------------------------------
Kristine E. Ochu
Vice President of Human Resources
Date: June 25, 1999
18
<PAGE>
EXHIBIT INDEX
Exhibit Description Page
- ------- ----------- ----
23.01 Consent of Independent Certified
Public Accountants . . . . . . . . . . . . . Electronically Filed
19
<PAGE>
Exhibit 23.01
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated April 21, 1999, accompanying the financial
statements of the Computer Network Technology Corporation 401(k) Salary Savings
Plan included in the Form 11-K of Computer Network Technology Corporation for
the year ended December 31, 1998. We hereby consent to the incorporation by
reference of said report in the Registration Statement of Computer Network
Technology Corporation on Form S-8 (File No. 33-42750), effective September 16,
1991.
/s/ GRANT THORNTON LLP
Minneapolis, Minnesota
June 23, 1999
