<PAGE> 1
Page 1 of 19 Pages
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE PLAN YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 0-11527 .
A. MPSI SYSTEMS INC. MATCHING INVESTMENT PLAN
B. MPSI SYSTEMS INC.
4343 SOUTH 118TH EAST AVENUE
TULSA, OKLAHOMA 74146
<PAGE> 2
INDEX
<TABLE>
Page No.
<S> <C> <C>
(a) Financial Statements:
(1) Independent Auditors' Report.............................................................. 3
(2) Statements of Net Assets Available for Benefits, With Fund Information at
December 31, 1997 and 1996 ............................................................... 4
(3) Statements of Changes in Net Assets Available for Benefits, With Fund
Information for the years ended December 31, 1997, 1996 and 1995 ......................... 7
(4) Notes to Financial Statements ............................................................ 10
(5) Schedules to Financial Statements:
Line 27d - Schedule of Reportable Transactions................................... 16
Line 27a - Schedule of Assets Held for Investment Purposes....................... 17
(b) Signatures....................................................................................... 18
(c) Exhibits
23.1 Auditors' Consent......................................................................... 19
</TABLE>
2
<PAGE> 3
INDEPENDENT AUDITORS' REPORT
Administrative Committee
MPSI Systems Inc. Matching Investment Plan
We have audited the accompanying statements of net assets available for benefits
of the MPSI Systems Inc. Matching Investment Plan (the "Plan") as of December
31, 1997 and 1996, and the related statements of changes in net assets available
for benefits for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 1997 and 1996, and the changes in its net assets available for
benefits for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
of assets held for investment purposes as of December 31, 1997, and reportable
transactions for the year then ended, are presented for purposes of complying
with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974, and are
not a required part of the basic financial statements. 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 the 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 have been subjected to the auditing procedures
applied in our 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.
ERNST & YOUNG LLP
Tulsa, Oklahoma
June 12, 1998
3
<PAGE> 4
MPSI SYSTEMS INC.
MATCHING INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
J. HANCOCK
GLOBAL MERRILL LYNCH SPECIAL
PHOENIX ALLOCATION MPSI STOCK CORPORATE MLRP TRUST EQUITY INDEX EQUITIES
FUND FUND FUND BOND FUND FUND TRUST FUND
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENTS AT FAIR VALUE:
ML PHOENIX FUND INC
(51,768 UNITS VALUED AT
$12.09 PER UNIT) $ 625,879 -- -- -- -- -- --
ML GLOBAL ALLOCATION FUND
INC. (86,772 UNITS VALUED
AT $13.94 PER UNIT) -- 1,209,604 -- -- -- -- --
COMMON STOCK ($.05 PAR
VALUE) OF MPSI SYSTEMS
INC.. (139,256 SHARES
VALUED AT $4.63/SHARE) -- -- 644,061 -- -- -- --
ML CORPORATE BOND FUND
(7,257 UNITS AT $11.56
PER UNIT) -- -- -- 83,898 -- -- --
ML RETIREMENT PRESERVA-
TION TRUST FUND -- -- -- -- 459,886 -- --
ML EQUITY INDEX TRUST
(3,813 UNITS VALUED AT
$65.37 PER UNIT) -- -- -- -- -- 249,259 --
JOHN HANCOCK SPECIAL
EQUITIES FUND (3,474 UNITS
VALUED AT $25.92 PER UNIT) -- -- -- -- -- -- 90,051
ML GROWTH FUND (CLASS B)
(4,654 UNITS VALUED AT
$26.42 PER UNIT) -- -- -- -- -- -- --
OPPENHEIMER TOTAL RETURN
(6,853 UNITS VALUED AT
$11.00 PER UNIT) -- -- -- -- -- -- --
AIM BALANCED (3,460 UNITS
VALUED AT $25.78 PER UNIT) -- -- -- -- -- -- --
LOANS TO PARTICIPANTS -- -- -- -- -- -- --
--------- --------- ------- ------ ------- ------- ------
TOTAL INVESTMENTS $ 625,879 1,209,604 644,061 83,898 459,886 249,259 90,051
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
ML GROWTH
FUND OPPENHEIMER AIM
(CLASS B) TOTAL RETURN BALANCED LOAN FUND TOTAL
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INVESTMENTS AT FAIR VALUE:
ML PHOENIX FUND INC
(51,768 UNITS VALUED AT
$12.09 PER UNIT) -- -- -- -- $ 625,879
ML GLOBAL ALLOCATION FUND
INC. (86,772 UNITS VALUED
AT $13.94 PER UNIT) -- -- -- -- 1,209,604
COMMON STOCK ($.05 PAR
VALUE) OF MPSI SYSTEMS
INC.. (139,256 SHARES
VALUED AT $4.63/SHARE) -- -- -- -- 644,061
ML CORPORATE BOND FUND
(7,257 UNITS AT $11.56
PER UNIT) -- -- -- -- 83,898
ML RETIREMENT PRESERVA-
TION TRUST FUND -- -- -- -- 459,886
ML EQUITY INDEX TRUST
(3,813 UNITS VALUED AT
$65.37 PER UNIT) -- -- -- -- 249,259
JOHN HANCOCK SPECIAL
EQUITIES FUND (3,474 UNITS
VALUED AT $25.92 PER UNIT) -- -- -- -- 90,051
ML GROWTH FUND (CLASS B)
(4,654 UNITS VALUED AT
$26.42 PER UNIT) 122,969 -- -- -- 122,969
OPPENHEIMER TOTAL RETURN
(6,853 UNITS VALUED AT
$11.00 PER UNIT) -- 75,383 -- -- 75,383
AIM BALANCED (3,460 UNITS
VALUED AT $25.78 PER UNIT) -- -- 89,210 -- 89,210
LOANS TO PARTICIPANTS -- -- -- 164,814 164,814
------- ------ ------ ------- ----------
TOTAL INVESTMENTS 122,969 75,383 89,210 164,814 $3,815,014
</TABLE>
4
<PAGE> 5
Statement of Net Assets Available for Benefits
December 31, 1997 (continued)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
J. HANCOCK
GLOBAL MERRILL LYNCH SPECIAL
PHOENIX ALLOCATION MPSI CORPORATE MLRP TRUST EQUITY INDEX EQUITIES
FUND FUND STOCK FUND BOND FUND FUND TRUST FUND
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
RECEIVABLES:
EMPLOYER CONTRIBUTION 39,013 57,833 -- 3,800 24,906 11,219 7,648
EMPLOYEE CONTRIBUTIONS 9,510 13,871 -- 943 5,774 2,532 1,726
ACCRUED INTEREST /
DIVIDENDS 35,923 13,523 -- 365 2,159 -- --
--------- --------- ------- ------ ------- ------- ------
TOTAL RECEIVABLES 84,446 85,227 -- 5,108 32,839 13,751 9,374
--------- --------- ------- ------ ------- ------- ------
NET ASSETS AVAILABLE
FOR BENEFITS
AT 12/31/97 $ 710,325 1,294,831 644,061 89,006 492,725 263,010 99,425
========= ========= ======= ====== ======= ======= ======
<CAPTION>
- --------------------------------------------------------------------------------------------------
ML GROWTH
FUND OPPENHEIMER AIM
(CLASS B) TOTAL RETURN BALANCED LOAN FUND TOTAL
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RECEIVABLES:
EMPLOYER CONTRIBUTION 6,292 3,247 2,742 -- 156,700
EMPLOYEE CONTRIBUTIONS 1,420 733 619 -- 37,128
ACCRUED INTEREST /
DIVIDENDS 2,404 2,232 933 -- 57,539
------- ------ ------ ------- -----------
TOTAL RECEIVABLES 10,116 6,212 4,294 -- 251,367
------- ------ ------ ------- -----------
NET ASSETS AVAILABLE
FOR BENEFITS
AT 12/31/97 133,085 81,595 93,504 164,814 $ 4,066,381
======= ====== ====== ======= ===========
</TABLE>
See accompanying notes to financial statements
5
<PAGE> 6
MPSI SYSTEMS INC.
MATCHING INVESTMENT PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Global MPSI
Phoenix Allocation Stock Capital
Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------
Investments at fair value:
Merrill Lynch Phoenix Fund Inc.
(47,445 units valued at
$12.83 per unit) $ 608,723 -- -- --
Merrill Lynch Global Allocation
Fund Inc. (82,127 units
valued at $14.36 per unit) -- 1,179,363 -- --
154,838 shares of $.05 par value
Common Stock of MPSI Systems
Inc. valued at $1.75 per share -- -- 270,967 --
Merrill Lynch Corporate Bond
Fund Inc. (8,595 units at
$11.32 per unit) -- -- -- --
Merrill Lynch Capital Fund Inc.
(13,472 units valued at
$30.46 per unit) -- -- -- 410,374
Merrill Lynch Retirement Preservation
Trust fund -- -- -- --
Loans to participants -- -- -- --
----------- --------- ------- -------
Total investments 608,723 1,179,363 270,967 410,374
Receivables:
Employer contribution -- -- 137,394 --
Employee contributions 8,612 9,998 834 5,517
Accrued interest and dividends 22,987 9,509 -- 12,769
----------- --------- ------- -------
Total receivables 31,599 19,507 138,228 18,286
Cash and cash equivalents (3,800) (24,584) (15,296) (201)
----------- --------- ------- -------
Net assets available for benefits
at December 31, 1996 $ 636,522 1,174,286 393,899 428,459
=========== ========= ======= =======
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Corporate MLRP
Bond Trust Loan
Fund Fund Fund Total
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investments at fair value:
Merrill Lynch Phoenix Fund Inc.
(47,445 units valued at
$12.83 per unit) -- -- -- $ 608,723
Merrill Lynch Global Allocation
Fund Inc. (82,127 units
valued at $14.36 per unit) -- -- -- 1,179,363
154,838 shares of $.05 par value
Common Stock of MPSI Systems
Inc. valued at $1.75 per share -- -- -- 270,967
Merrill Lynch Corporate Bond
Fund Inc. (8,595 units at
$11.32 per unit) 97,302 -- -- 97,302
Merrill Lynch Capital Fund Inc.
(13,472 units valued at
$30.46 per unit) -- -- -- 410,374
Merrill Lynch Retirement Preservation
Trust fund -- 290,152 -- 290,152
Loans to participants -- -- 106,742 106,742
------ ------- ------- -----------
Total investments 97,302 290,152 106,742 2,963,623
Receivables:
Employer contribution -- -- -- 137,394
Employee contributions 1,036 1,863 2,897 30,757
Accrued interest and dividends 478 1,193 -- 46,936
------ ------- ------- -----------
Total receivables 1,514 3,056 2,897 215,087
Cash and cash equivalents (1,298) (1,356) 33,012 (13,523)
------ ------- ------- -----------
Net assets available for benefits
at December 31, 1996 97,518 291,852 142,651 $ 3,165,187
====== ======= ======= ===========
</TABLE>
See accompanying notes to financial statements
6
<PAGE> 7
MPSI SYSTEMS INC.
MATCHING INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Global MPSI
Phoenix Allocation Stock Corporate MLRP Trust
Fund Fund Fund Capital Fund Bond Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends and interest $ 145,938 157,278 -- -- 4,264 24,645
Contributions:
Employer 39,013 57,833 -- -- 3,800 24,906
Employees 107,490 159,342 -- 17,507 10,470 68,623
Rollovers -- 5,977 -- -- -- --
Distributions: --
Cash (70,988) (116,002) (29) (30,903) (6,421) (130,064)
In kind (40,045) (54,784) -- -- -- --
MPSI Systems Inc. $.05
Common Stock -- -- (26,609) -- -- --
Other income (expense):
Net appreciation
(depreciation)
in fair value of
investments (42,420) (37,022) 409,392 10,846 489 --
Other expense -- -- (834) (12,720) -- --
Interfund transfers in
(out) (65,185) (52,077) (131,758) (413,189) (21,114) 212,763
----------- ----------- ----------- ----------- ----------- -----------
Change in net assets
available for
benefits during 1997 73,803 120,545 250,162 (428,459) (8,512) 200,873
Net assets available for
benefits at
December 31, 1996 636,522 1,174,286 393,899 428,459 97,518 291,852
----------- ----------- ----------- ----------- ----------- -----------
Net assets available for
benefits at
December 31, 1997 $ 710,325 1,294,831 644,061 -- 89,006 492,725
=========== =========== =========== =========== =========== ===========
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Merrill
Lynch J. Hancock ML Growth
Equity Index Special Fund (Class Oppenheimer AIM
Trust Equities Fund B) Total Return Balanced Loan Fund
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends and interest -- -- 12,125 10,382 4,523 10,555
Contributions:
Employer 11,219 7,648 6,292 3,247 2,742 --
Employees 30,911 21,073 17,336 8,945 6,187 --
Rollovers 5,977 -- -- 5,977 5,977 --
Distributions:
Cash (1,215) (1,499) (9,116) (502) -- --
In kind -- -- -- -- -- --
MPSI Systems Inc. $.05
Common Stock -- -- -- -- -- --
Other income (expense):
Net appreciation
(depreciation)
in fair value of
investments 33,391 19,291 2,744 2,465 5,547 --
Other expense -- -- -- -- -- --
Interfund transfers in
(out) 182,727 52,912 103,704 51,081 68,528 11,608
----------- ----------- ----------- ----------- ----------- -----------
Change in net assets
available for
benefits during
263,010 99,425 133,085 81,595 93,504 22,163
Net assets available for
benefits at
December 31, 1996 -- -- -- -- -- 142,651
----------- ----------- ----------- ----------- ----------- -----------
Net assets available for
benefits at
December 31, 1997 263,010 99,425 133,085 81,595 93,504 164,814
=========== =========== =========== =========== =========== ===========
<CAPTION>
- ---------------------------------------------
Total
- ---------------------------------------------
<S> <C>
Investment income:
Dividends and interest $ 369,710
Contributions:
Employer 156,700
Employees 447,884
Rollovers 23,908
Distributions:
Cash (366,739)
In kind (94,829)
MPSI Systems Inc. $.05
Common Stock (26,609)
Other income (expense):
Net appreciation
(depreciation)
in fair value of
investments 404,723
Other expense (13,554)
Interfund transfers in
(out) --
-----------
Change in net assets
available for
benefits during
901,194
Net assets available for
benefits at
December 31, 1996 3,165,187
-----------
Net assets available for
benefits at
December 31, 1997 $ 4,066,381
===========
</TABLE>
See accompanying notes to financial statements
7
<PAGE> 8
MPSI SYSTEMS INC.
MATCHING INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS,
WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
MPSI Global Corporate MLHP
Stock Phoenix Allocation Capital Bond Trust Loan
Fund Fund Fund Fund Fund Fund Fund Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends and interest $ -- 79,467 107,775 45,189 5,671 14,978 4,189 $ 257,269
Contributions:
Employers 137,394 -- -- -- -- -- -- 137,394
Employees 12,988 129,378 148,545 82,625 15,250 27,451 -- 416,237
Distributions:
Cash -- (52,968) (70,908) (42,877) (2,488) (20,933) -- (190,174)
In kind -- (1,501) (4,072) -- -- -- -- (5,573)
MPSI Systems Inc.$.05
Common Stock (38,295) -- -- -- -- -- -- (38,295)
Other income (expense):
Net appreciation (depreciation)
in fair value of investments (453,318) 13,094 48,461 6,546 (3,546) -- -- (388,763)
Other income -- -- -- -- -- -- (29) (29)
Interfund transfers in (out) (1,499) (18,488) (68,126) (27,870) (1,168) 18,334 98,817 --
- ------------------------------------------------------------------------------------------------------------------------------------
Change in net assets available
for benefits during 1996 (342,730) 148,982 161,675 63,613 13,719 39,830 102,977 188,066
Net assets available for benefits
at December 31, 1995 736,629 487,540 1,012,611 364,846 83,799 252,022 39,674 2,977,121
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets available for benefits
at December 31, 1996 $ 393,899 636,522 1,174,286 428,459 97,518 291,852 142,651 $3,165,187
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements
8
<PAGE> 9
MPSI SYSTEMS INC.
MATCHING INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS,
WITH FUND INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
MPSI Global Corporate MLHP
Stock Phoenix Allocation Capital Bond Trust Loan
Fund Fund Fund Fund Fund Fund Fund Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends and interest $ -- 27,346 76,427 36,919 4,472 15,504 2,354 $ 163,022
Contributions:
Employers 136,792 -- -- -- -- -- -- 136,792
Employees 9,981 110,595 135,652 54,394 14,397 26,696 -- 351,715
Distributions:
Cash (10,147) (69,321) (37,525) (20,831) (5,755) (122,742) -- (266,321)
In kind -- (6,149) (5,761) -- -- -- -- (11,910)
MPSI Systems Inc. $.05
Common Stock (96,860) -- -- -- -- -- -- (96,860)
Other income (expense):
Net appreciation (depreciation)
in fair value of investments 311,224 57,636 101,189 46,995 7,987 -- -- 525,031
Other income -- -- -- 706 -- -- -- 706
Interfund transfers in (out) (1,203) (2,420) (3,440) (841) (1,496) -- 9,400 --
- ------------------------------------------------------------------------------------------------------------------------------------
Change in net assets available
for benefits during 1995 349,787 117,687 266,542 117,342 19,605 (80,542) 11,754 802,175
Net assets available for benefits
at December 31, 1994 386,842 369,853 746,069 247,504 64,194 332,564 27,920 2,174,946
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets available for benefits
at December 31, 1995 $ 736,629 487,540 1,012,611 364,846 83,799 252,022 39,674 $ 2,977,121
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
9
<PAGE> 10
MPSI SYSTEMS INC.
MATCHING INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
The investment in $.05 par value Common Stock of MPSI Systems Inc.
(hereinafter "Common Stock") was stated at the average bid and offer
prices quoted by the National Quotation Bureau. Investments in equity
and bond funds were stated at aggregate unit values as published in a
widely accepted financial journal and as set forth in the periodic
valuation of each fund. Investments in money market funds were stated at
par value, which approximates fair value.
The fair market value per share of MPSI Systems Inc. Common Stock was
$4.63, $1.75, and $5.00 at December 31, 1997, 1996, and 1995,
respectively.
At June 12, 1998, the estimated market value of 139,256 shares of MPSI
Systems Inc. Common Stock was approximately $278,512.
INVESTMENT FUNDS
For 1995 and 1996, six investment funds as set forth below were
maintained by Merrill Lynch and were available to plan participants.
Phoenix Fund:
The primary objective of the mutual fund is long term capital
growth through a diversified portfolio of equity and fixed income
securities, including municipal securities, of issuers in weak
financial condition or experiencing poor operating results, that
the management of the fund believes to be undervalued relative to
fund management's assessment of the current or prospective
condition of the issuer.
Global Allocation Fund:
The fund is a non-diversified mutual fund seeking high total
investment return, consistent with prudent risk, through a fully
managed investment policy utilizing United States and foreign
equity, debt, and money market securities, the combination of
which will be varied from time to time both with respect to types
of securities and markets in response to changing market and
economic trends.
MPSI Systems Inc. Common Stock Fund:
This fund invests solely in the common stock of the registrant,
MPSI Systems Inc. Common stock may be purchased by the Trustee on
the open market or through private transactions, including direct
purchases from the company.
Capital Fund:
This mutual fund seeks to achieve the highest total investment
return consistent with prudent risk through a fully managed
investment policy utilizing equity, debt, and convertible
securities. This permits management of the fund to vary
investment policy based on its evaluation of changes in economic
and market trends.
10
<PAGE> 11
Corporate Bond Fund:
The fund is a professionally managed, diversified, open end
investment company consisting of three separate portfolios. The
primary objective of each Portfolio is to provide shareholders
with as high a level of current return as is consistent with the
investment policies of such Portfolio and with prudent investment
management.
Merrill Lynch Retirement Preservation Trust ("MLRP Trust Fund")
The fund is maintained by Merrill Lynch Trust Company, which
receives nondiscretionary advice from Merrill Lynch Asset
Management. The fund is a collective trust fund that invests
primarily in Guaranteed Investment Contracts and U.S. government
and U.S. government agency securities, as well as high quality
money market instruments. The fund seeks to provide safety of
principal, fiduciary comfort and administrative ease.
Beginning January 1, 1997, five new fund options were added to the Plan
and were available to participants. The fund options are described
below.
Merrill Lynch Equity Index Trust
This mutual fund seeks to provide results that replicate the
total return of the Standard and Poor's 500 Composite Stock Price
Index. In order to manage the Trust's cash flows efficiently,
management will utilize the Standard and Poor's 500 Index Futures
or combinations of index options as a method of investment.
Management will also participate in index arbitrage transactions
where deemed prudent.
John Hancock Special Equities Fund
This mutual fund seeks long-term capital appreciation. To pursue
this goal, the fund invests in small capitalization companies and
companies offering unusual or non-recurring opportunities. The
fund looks for companies that dominate an emerging industry or
hold a growing market share in a fragmented industry and that
have demonstrated annual earnings and revenue growth of at least
25%, self financing capabilities, and strong management.
Merrill Lynch Growth Fund (Class B)
The investment objectives of this mutual fund is to seek growth
of capital and, secondarily, income by investing in a diversified
portfolio of primarily equity securities placing principal
emphasis on those securities that management of the fund believes
to be undervalued. Undervalued issues include securities selling
at discounts from the price to book value ratios and
price/earnings ratios computed with respect to the popular stock
market averages (primarily Standard and Poors 400 Industrials
stock price index).
Oppenheimer Total Return
The fund is a mutual fund with the investment objective of
seeking high total return through investment in securities which
it believes will provide a high return, including investments
which are expected to provide opportunities for growth or to
produce income, or both. The fund is not restricted to any
specific type of security and may also use certain hedging
instruments to try to reduce risks of market fluctuations that
affect the value of the securities the fund holds.
AIM Balanced
This mutual fund's objective is to achieve as high a total return
to investors as possible, consistent with preservation of
capital, by investing in a broadly diversified portfolio of high
yielding securities, including common stocks, preferred stocks,
convertible securities and bonds. Although equity
11
<PAGE> 12
securities will be purchased primarily for capital appreciation
and fixed income securities primarily for income purposes, income
and capital appreciation potential will be considered in
connection with all investments.
Effective January 1, 1997, MPSI Systems Inc. Matching Investment Plan
closed the Capital Fund as an elective fund option available to
participants. As a result, existing account balances were transferred to
other fund options as directed by the participant. Also, effective
January 1, 1997, the Plan closed the MPSI Stock Fund to new
contributions. Existing account balances were permitted to remain in the
fund or transferred to other fund options as directed by the
participant.
The following table shows the employee participation in the various
investment options:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Number of Participants at December 31,
1997 1996
- ------------------------------------------------------------------------
<S> <C> <C>
Phoenix Fund 93 110
Global Allocation Fund 120 135
MPSI Systems Inc. Common Stock Fund 130 164
Capital Fund -- 98
Corporate Bond Fund 34 37
Merrill Lynch Retirement Preservation Trust 25 51
Merrill Lynch Equity Index Trust 26 --
John Hancock Special Equities Fund 22 --
Merrill Lynch Growth Fund (Class B) 29 --
Oppenheimer Total Return 24 --
AIM Balanced 17 --
Total Participants 160 176
- ------------------------------------------------------------------------
</TABLE>
INCOME TAXES
The Internal Revenue Service has determined by notice dated April 24,
1986 that the Plan as amended and restated effective January 1, 1985 was
in compliance with the Retirement Equity Act of 1984 and the Tax Reform
Act of 1984 and was qualified under Section 401 of the Internal Revenue
Code. The Plan, as amended in compliance with the Tax Reform Act of 1986
and as amended and restated effective January 1, 1990 is intended to
comply with Section 401(a) of the Internal Revenue Code. The Company was
notified on June 8, 1995 that the Plan (adopted on May 11, 1994) was
deemed to be a qualified plan under the applicable code section. The
Company is not aware of anything that would adversely impact the
qualified status of the Plan. Under a qualified plan, amounts
contributed by the Company including salary deferrals will not be taxed
to the employee until the employee receives a distribution from the Plan
and further, any appreciation in value of Common Stock distributed to an
employee upon termination of employment will not be taxed to the
employee until disposal of such shares.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those
estimates.
(2) PARTICIPANTS AND CONTRIBUTIONS
All employees of MPSI Systems Inc. (herein after referred to as the
"Company") meeting eligibility requirements set forth in the Plan
participate in the Plan as of January 1 and July 1 of the Plan year next
following their completion of a six-month period of service.
Participants may contribute as salary deferrals
12
<PAGE> 13
up to 16% of their annual earnings. Participant contributions in excess
of 9% of a participant's salary may also be made subject to certain
limitations as designed to prevent the Plan from failing Annual Tax
Compliance Testing. A participant's interest in salary deferrals and
voluntary contributions is at all times fully vested. A participant's
interest in amounts attributable to employer contributions is fully
vested when employment terminates due to (1) retirement at age 65, (2)
total and permanent disability or (3) death. When a participant's
employment terminates prior to meeting the above conditions, the
participant is fully vested in employer contributions only if the
participant either has completed five years of vesting service or has
satisfied one of the Plan's grandfathered vesting rules. The remaining
balance in the participant's "Company Contributions Account" is
forfeited and used to reduce Company contributions, although if the
participant is rehired within five years, the forfeited amounts may be
restored to the participant's accounts under certain circumstances.
MPSI Systems Inc. (the "Employer") made contributions under the Plan
during the three years ended December 31, 1997 based upon a Matching
Percentage applied to the participants' qualifying contributions.
Participants' qualifying contributions equal the aggregate of each
participant's salary deferral, contributions up to 6% of that
participant's earnings for the Plan year. The Employers' Matching
Percentage relative to qualifying participant contributions is based
upon the Operating Income Ratio of the Employers (the ratio of the
operating income for the Employers' fiscal year ending with or within
the Plan year to the average operating income in the three prior fiscal
years), is as follows:
<TABLE>
<CAPTION>
Matching
Operating Income Ratio Percentage
---------------------- ----------
<S> <C>
Under 1.01 50%
1.01, but less than 1.50 60%
1.50, but less than 1.75 70%
1.75, but less than 2.00 80%
2.00, but less than 2.25 90%
2.25 or over 100%
</TABLE>
During 1995 and 1996 the Employers Match was made in the form of newly
issued shares of MPSI common stock. In 1997, the Employer Match was made
in cash and allocated to participant accounts based upon contribution
elections made by the participant.
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. In the event of
Plan termination, participants will become 100 percent vested in their
accounts.
The Company's matching percentage was 50 percent for Plan years 1997,
1996, and 1995 resulting in contributions of $156,700, $137,394, and
$136,792, respectively, as calculated below:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Year Ended December 31,
1997 1996 1995
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net employee contributions
(including nonelective contributions) $ 447,884 $ 416,237 $ 351,715
Nonqualifying contributions (134,484) (141,449) (78,131)
--------------------------------------------------------------------------------------------------
Qualifying employee contributions 313,400 274,788 273,584
Applicable matching percentage x 50% x 50% x 50%
--------------------------------------------------------------------------------------------------
Required company contribution $ 156,700 $ 137,394 $ 136,792
==================================================================================================
</TABLE>
13
<PAGE> 14
(3) EXPENSES
All costs and expenses incurred in administering the Plan, including the
expenses of the Administrative Committee, the fees and expenses of the
Trustee, the fees of its counsel, and other administrative expenses, are
borne by the Company and amounted to approximately $13,786, $16,158, and
$11,567 for 1997, 1996, and 1995, respectively.
(4) INVESTMENTS
The fair value of individual investments that represent 5% or more of
the Plan's net assets are as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
December 31, December 31,
1997 1996
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Phoenix Fund $ 625,879 $ 608,723
Global Allocation Fund 1,209,604 1,179,363
MPSI Systems Inc. Common Stock Fund 644,061 270,967
Capital Fund -- 410,374
Corporate Bond Fund 83,898 97,302
Merrill Lynch Retirement Preservation Trust 459,886 290,152
Merrill Lynch Equity Index Trust 249,259 --
John Hancock Special Equities Fund 90,051 --
Merrill Lynch Growth Fund (Class B) 122,969 --
Oppenheimer Total Return 75,383 --
AIM Balanced 89,210 --
MPSI Matching Investment Plan Employee Loan Fund 164,814 106,742
-------------------------------------------------------------------------------------------------
</TABLE>
(5) DIFFERENCES BETWEEN FINANCIAL STATEMENTS AND FORM 5500
The following is a reconciliation of net assets available for benefits
per the financial statements to the Form 5500:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
December 31, 1997
-----------------------------------------------------------------------------------
<S> <C>
Net assets available for benefits per the financial statements $ 4,066,381
Amounts shown on the Form 5500
Benefit Claims Payable (13,987)
-----------------------------------------------------------------------------------
Net assets available for benefits per the Form 5500 $ 4,052,394
===================================================================================
</TABLE>
14
<PAGE> 15
The following is a reconciliation of benefits paid per the financial
statements to the Form 5500:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Year Ended December 31, 1997
Benefits Paid
- --------------------------------------------------------------------------------
<S> <C>
Amounts distributed to participants per statement of
changes in net assets $ 488,177
Add amounts allocated to withdrawing participants at
December 31, 1997 13,987
Less amounts allocated to withdrawing participants at
December 31, 1996 (245,742)
- --------------------------------------------------------------------------------
Amounts distributed to participants per the Form 5500 $ 256,422
================================================================================
</TABLE>
Amounts allocated to withdrawing participants are recorded on the Form
5500 for benefit claims that have been processed and approved for
payment prior to December 31 but not yet paid as of that date.
(6) YEAR 2000 ISSUE (UNAUDITED)
The Company has developed a plan to modify its internal information
technology to be ready for the year 2000 and has begun converting
critical data processing systems. The project also includes determining
whether third party service providers have reasonable plans in place to
become year 2000 compliant. The Company currently expects the project to
be substantially complete by early 1999. The Company does not expect
this project to have a significant effect on plan operations.
15
<PAGE> 16
MPSI SYSTEMS INC.
MATCHING INVESTMENT PLAN
LINE 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (g)
Identity
of Party Description No. of Purchase Selling Cost of
Involved* of Assets Shares Price Price Asset
- ----------------------------------------------------------------------------------------------------------------------
Category (iii) - Series of Transactions in Excess of 5% of Plan Assets
<S> <C> <C> <C> <C> <C>
Merrill Lynch Retirement Preservation Trust 222,919 $ -- $222,919 $222,919
MPSI Systems Inc. Common Stock 17,708 -- 38,794 32,327
Merrill Lynch Phoenix Fund - Class B 18,835 -- 240,025 242,262
Merrill Lynch Global Allocation Fund 23,510 -- 349,951 339,358
Merrill Lynch Capital Fund 14,309 -- 447,408 436,562
Merrill Lynch Equity Index Trust 34 -- 2,182 2,050
John Hancock Special Equities Fund 1,766 -- 43,956 35,240
Merrill Lynch Growth Fund (Class B) 382 -- 10,559 10,007
Oppenheimer Total Return 364 -- 4,265 3,750
Merrill Lynch Corporate Bond Fund 3,167 -- 35,476 36,082
Merrill Lynch Retirement Preservation Trust 392,653 392,653
MPSI Systems Inc. Common Stock 2,126 2,496
Merrill Lynch Phoenix Fund - Class B 23,158 299,602
Merrill Lynch Global Allocation Fund 28,155 417,214
Merrill Lynch Capital Fund 837 26,188
Merrill Lynch Equity Index Trust 3,847 218,050
John Hancock Special Equities Fund 5,240 114,716
Merrill Lynch Growth Fund (Class B) 5,036 130,784
Oppenheimer Total Return 7,217 77,183
AIM Balanced 3,460 83,663
Merrill Lynch Corporate Bond Fund 10,425 21,583
<CAPTION>
- --------------------------------------------------------------------------------------------
(a) (b) (h) (i)
Identity Current Value
of Party Description of Asset on Net Gain
Involved* of Assets Transaction Date or (Loss)
- --------------------------------------------------------------------------------------------
Category (iii) - Series of Transactions in Excess of 5% of Plan Assets
<S> <C> <C> <C>
Merrill Lynch Retirement Preservation Trust $222,919 $ 0
MPSI Systems Inc. Common Stock 38,794 6,467
Merrill Lynch Phoenix Fund - Class B 240,025 (2,237)
Merrill Lynch Global Allocation Fund 349,951 10,593
Merrill Lynch Capital Fund 447,408 10,846
Merrill Lynch Equity Index Trust 2,182 132
John Hancock Special Equities Fund 43,956 8,716
Merrill Lynch Growth Fund (Class B) 10,559 552
Oppenheimer Total Return 4,265 515
Merrill Lynch Corporate Bond Fund 35,476 (606)
Merrill Lynch Retirement Preservation Trust $392,653
MPSI Systems Inc. Common Stock 2,496
Merrill Lynch Phoenix Fund - Class B 299,602
Merrill Lynch Global Allocation Fund 417,214
Merrill Lynch Capital Fund 26,188
Merrill Lynch Equity Index Trust 218,050
John Hancock Special Equities Fund 114,716
Merrill Lynch Growth Fund (Class B) 130,784
Oppenheimer Total Return 77,183
AIM Balanced 83,663
Merrill Lynch Corporate Bond Fund 21,583
</TABLE>
There were no Category (i), (ii), or (iv) Reportable Transactions During 1997.
Columns (e) and (f) are not applicable.
*Party in Interest
16
<PAGE> 17
MPSI SYSTEMS INC.
MATCHING INVESTMENT PLAN
LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Description of Investment,
Identity of Issue, Borrower, Lessor Including Maturity Date, Rate of Current
of Similar Party* Interest, Par or Maturity Value Cost Value
- ---------------------------------------------------------------------------------------------------------------------------------
MUTUAL FUNDS
<S> <C> <C> <C>
Merrill Lynch Phoenix Fund 51,768 Class B Shares $ 657,709 $ 625,879
Merrill Lynch Global Allocation Fund 86,772 Class B Shares 1,183,448 1,209,604
Merrill Lynch Corporate Bond Fund 7,257 Class B Shares 81,638 83,898
Merrill Lynch Equity Index Trust 3,813 Class B Shares 216,000 249,259
John Hancock Special Equities Fund 3,474 Class A Shares 79,476 90,051
Merrill Lynch Growth Fund (Class B) 4,654 Class B Shares 120,777 122,969
Oppenheimer Total Return 6,853 Class A Shares 73,432 75,383
AIM Balanced 3,460 Class A Shares 83,663 89,210
MONEY FUNDS
Merrill Lynch Retirement Preservation Trust 459,886 Units 459,886 459,886
COMMON STOCKS
MPSI Systems Inc. 139,256 Common Shares 1,042,846 644,061
LOANS TO PARTICIPANTS 7.75% to 9.50% interest rate -- 164,814
</TABLE>
*Party in Interest
17
<PAGE> 18
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934,
the Administrative Committee of the MPSI Systems Inc. Matching Investment Plan
has duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
MPSI SYSTEMS INC. MATCHING INVESTMENT PLAN
Name of Plan
Date June 23, 1998 By /s/ William H. Webb, Jr.
----------------------------------------
William H. Webb, Jr., Chairman
Administrative Committee
18
<PAGE> 19
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
23.1 Auditor's Consent
<PAGE> 1
Exhibit 23.1 to 1997 Form 11-K
MPSI Systems Inc.
Matching Investment Plan
AUDITORS' CONSENT
The Board of Directors
MPSI Systems Inc.:
We consent to incorporation by reference in the Registration Statement (Form S-8
No. 33-32503) pertaining to the MPSI Systems Inc. Matching Investment Plan and
in the related Prospectus of our report dated June 12, 1998, with respect to the
financial statements and supplemental schedules of the MPSI Systems Inc.
Matching Investment Plan included in this Annual Report (Form 11-K) for the year
ended December 31, 1997.
ERNST & YOUNG LLP
Tulsa, Oklahoma
June 23, 1998
19
