SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 11-K
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(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 1-8608
-------------
NYNEX Corporation Savings and Security Plan
(Non-Salaried Employees)
-------------
NYNEX Corporation
1095 Avenue of the Americas, New York, New York 10036
<PAGE>
Item 1. Financial Statements and Exhibits.
(a) Financial Statements of the Plan* included herein:
Report of Independent Accountants
Financial Statements:
Statements of Net Assets Available for Plan Benefits as of
December 31, 1996 and 1995
Statements of Changes in Net Assets Available for Plan Benefits
for the Years Ended December 31, 1996 and 1995
Notes to Financial Statements
(b) Exhibits:
(23) Consent of Coopers & Lybrand L.L.P.
- ----------
* This and certain other capitalized terms used but not defined herein shall
have their respective meanings as defined in the Plan Prospectus.
2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Employees' Benefit Committee
of NYNEX Corporation:
We have audited the Statements of Net Assets Available for Plan Benefits of the
NYNEX Corporation Savings and Security Plan (Non-Salaried Employees) as of
December 31, 1996 and 1995, and the related Statements of Changes in Net Assets
Available for Plan Benefits for each of the two years in the period ended
December 31, 1996. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the NYNEX
Corporation Savings and Security Plan (Non-Salaried Employees) as of December
31, 1996 and 1995 and the changes in net assets available for plan benefits for
each of the two years in the period ended December 31, 1996, 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 Fund Information in the Statements of
Net Assets Available for Plan Benefits as of December 31, 1996 and 1995 and the
Statements of Changes in Net Assets Available for Plan Benefits for each of the
two years in the period ended December 31, 1996 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
Fund Information 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.
COOPERS & LYBRAND L.L.P.
New York, New York
June 20, 1997
3
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
Statement of Net Assets Available for Plan Benefits
December 31, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
Fund Information
--------------------------------------------------------------
NYNEX Diversified
Shares Telecommunications Government Equity
Fund Fund Obligations Fund Portfolio
---- ---- ---------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Investments at market (see Notes 2 and 3)
Allocated Share of Master Trust net assets $1,272,991 $ 136,574 $ 5,811 $ 164,600
Temporary cash investments -- -- -- 988
Receivable for loans to participants -- -- -- --
-------------------------------------------------------------
Total Investments 1,272,991 136,574 5,811 165,588
Dividends and interest receivable -- -- -- 8
-------------------------------------------------------------
Net Assets Available for Plan Benefits
(Notes 1 and 2) $1,272,991 $ 136,574 $ 5,811 $ 165,596
=============================================================
</TABLE>
See notes to financial statements.
4
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
Statement of Net Assets Available for Plan Benefits (Continued)
December 31, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
Fund Information
--------------------------------------------------------------
Active U.S.
Interest Income Loan Equity U.S. Balanced
Fund Fund Fund Fund
---- ---- ---- ----
ASSETS
<S> <C> <C> <C> <C>
Investments at market (see Notes 2 and 3)
Allocated Share of Master Trust net assets $456,886 $ -- $ 28,220 $ 12,968
Temporary cash investments -- -- 170 78
Receivable for loans to participants -- 108,864 -- --
--------------------------------------------------------
Total Investments 456,886 108,864 28,390 13,046
Dividends and interest receivable -- -- 1 1
--------------------------------------------------------
Net Assets Available for Plan Benefits
(Notes 1 and 2) $456,886 $108,864 $ 28,391 $ 13,047
========================================================
</TABLE>
See notes to financial statements.
5
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
Statement of Net Assets Available for Plan Benefits (Continued)
December 31, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
Fund Information
----------------------------------------------------------------
Global International
Balanced Equity U.S. Small
Fund Fund Cap Fund Total
---- ---- -------- -----
<S> <C> <C> <C> <C>
ASSETS
Investments at market (see Notes 2 and 3)
Allocated Share of Master Trust net assets $12,993 $11,164 $16,684 $2,118,891
Temporary cash investments 78 67 100 1,481
Receivable for loans to participants -- -- -- 108,864
----------------------------------------------------------------
Total Investments 13,071 11,231 16,784 2,229,236
Dividends and interest receivable 1 1 1 13
----------------------------------------------------------------
Net Assets Available for Plan Benefits
(Notes 1 and 2) $13,072 $11,232 $16,785 $2,229,249
================================================================
</TABLE>
See notes to financial statements.
6
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
Statement of Net Assets Available for Plan Benefits
December 31, 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
Fund Information
---------------------------------------------------------------
NYNEX Diversified
Shares Telecommunications Government Equity
Fund Fund Obligations Fund Portfolio
---- ---- ---------------- ---------
<S> <C> <C> <C> <C>
Investments at market (see Notes 2 and 3)
NYNEX Corporation common shares $1,344,336 $ 7,430 $ -- $ --
Government Obligations pooled fund -- -- 4,719 --
Contracts with insurance companies
and other financial institutions -- -- -- --
Telecommunications Fund common shares,
excluding NYNEX Corporation common shares -- 136,274 -- --
Value of Plan's participation in
Master Trust (Note 3) -- -- -- 87,630
Temporary cash investments 9,197 1,074 -- --
Receivable for loans to participants -- -- -- --
-------------------------------------------------------------
Total Investments 1,353,533 144,778 4,719 87,630
Allotments and contributions receivable (Note 1) 2,042 52 15 376
InterFund, interPlan and other
transfers receivable-net -- 115 69 109
Dividends and interest receivable 38 569 -- --
Other receivables -- -- -- --
-------------------------------------------------------------
Total Assets 1,355,613 145,514 4,803 88,115
LIABILITIES
Expenses payable & other payables 173 15 -- 12
InterFund, interPlan and other transfers
payable - net 370 -- -- --
Payable for securities purchased -- 144 -- --
-------------------------------------------------------------
Total Liabilities 543 159 -- 12
-------------------------------------------------------------
Net Assets Available for Plan Benefits
(Notes 1 and 2) $1,355,070 $145,355 $4,803 $88,103
=============================================================
</TABLE>
See notes to financial statements.
7
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
Statement of Net Assets Available for Plan Benefits (Continued)
December 31, 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
Fund Information
----------------------------------------------------------------
Active U.S.
Interest Income Loan Equity U.S. Balanced
Fund Fund Fund Fund
---- ---- ---- ----
<S> <C> <C> <C> <C>
ASSETS
Investments at market (see Notes 2 and 3)
NYNEX Corporation common shares $ -- $ -- $ -- $ --
Government Obligations pooled fund -- -- -- --
Contracts with insurance companies
and other financial institutions 454,530 -- -- --
Telecommunications Fund common shares,
excluding NYNEX Corporation common shares -- -- -- --
Value of Plan's participation in
Master Trust (Note 3) -- -- 11,734 7,316
Temporary cash investments 5,203 -- -- --
Receivable for loans to participants -- 90,237 -- --
----------------------------------------------------------
Total Investments 459,733 90,237 11,734 7,316
Allotments and contributions receivable (Note 1) 1,155 -- 51 29
InterFund, interPlan and other
transfers receivable-net -- -- -- --
Dividends and interest receivable 29 -- -- --
Other receivables 5 -- -- --
----------------------------------------------------------
Total Assets 460,922 90,237 11,785 7,345
LIABILITIES
Expenses payable & other payables 54 -- 11 8
InterFund, interPlan and other transfers
payable - net 65 -- 50 19
Payable for securities purchased -- -- -- --
----------------------------------------------------------
Total Liabilities 119 -- 61 27
----------------------------------------------------------
Net Assets Available for Plan Benefits
(Notes 1 and 2) $460,803 $90,237 $11,724 $7,318
==========================================================
</TABLE>
See notes to financial statements.
8
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
Statement of Net Assets Available for Plan Benefits (Continued)
December 31, 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
Fund Information
-----------------------------------------
Global International
Balanced Equity U.S. Small
Fund Fund Cap Fund Total
---- ---- -------- -----
<S> <C> <C> <C> <C>
ASSETS
Investments at market (see Notes 2 and 3)
NYNEX Corporation common shares $ -- $ -- $ -- $1,351,766
Government Obligations pooled fund -- -- -- 4,719
Contracts with insurance companies
and other financial institutions -- -- -- 454,530
Telecommunications Fund common shares,
excluding NYNEX Corporation common shares -- -- -- 136,274
Value of Plan's participation in
Master Trust (Note 3) 6,871 6,279 10,148 129,978
Temporary cash investments -- -- -- 15,474
Receivable for loans to participants -- -- -- 90,237
------------------------------------------------------------
Total Investments 6,871 6,279 10,148 2,182,978
Allotments and contributions receivable (Note 1) 31 36 55 3,842
InterFund, interPlan and other
transfers receivable-net -- 26 -- 319
Dividends and interest receivable -- -- -- 636
Other receivables -- -- -- 5
------------------------------------------------------------
Total Assets 6,902 6,341 10,203 2,187,780
LIABILITIES
Expenses payable & other payables 8 8 29 318
InterFund, interPlan and other transfers
payable - net 16 -- 33 553
Payable for securities purchased -- -- -- 144
------------------------------------------------------------
Total Liabilities 24 8 62 1,015
------------------------------------------------------------
Net Assets Available for Plan Benefits
(Notes 1 and 2) $6,878 $6,333 $10,141 $2,186,765
============================================================
</TABLE>
See notes to financial statements.
9
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
Statement of Changes in Net Assets Available for Plan Benefits
December 31, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
Fund Information
----------------------------------------------------------------
NYNEX Diversified
Shares Telecommunications Government Equity
Fund Fund Obligations Fund Portfolio
---- ---- ---------------- ---------
<S> <C> <C> <C> <C>
Additions:
Allotments, Contributions and Transfers:
Employee allotments $ 53,371 $ 4,546 $ 1,081 $ 23,972
Interfund transfers 21,116 (32,667) (38) 32,497
Employing company contributions (Note 1) 59,546 -- -- --
Loans to participants, net of transfers of
participants' balances (35,800) (862) (201) (5,762)
Loan repayments 27,932 1,105 205 5,070
----------------------------------------------------------------
Total allotments, contributions and transfers 126,165 (27,878) 1,047 55,777
Investment Income:
Allocated share of Master Trust investment
activities(Note 3) (129,676) 28,723 292 26,837
----------------------------------------------------------------
Total additions (3,511) 845 1,339 82,614
----------------------------------------------------------------
Deductions:
Administrative expenses 919 96 8 64
Distributions to participants 77,649 9,530 323 5,057
----------------------------------------------------------------
Total deductions 78,568 9,626 331 5,121
----------------------------------------------------------------
Net (decrease) increase (82,079) (8,781) 1,008 77,493
Net Assets Available for Plan Benefits:
Beginning of year - January 1, 1996 1,355,070 145,355 4,803 88,103
----------------------------------------------------------------
End of year - December 31, 1996 (Notes 1 and 2) $ 1,272,991 $ 136,574 $ 5,811 $ 165,596
===============================================================
</TABLE>
See notes to financial statements.
10
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
Statement of Changes in Net Assets Available for Plan Benefits (Continued)
December 31, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
Fund Information
-----------------------------------------------------------------
Active U.S.
Interest Income Loan Equity U.S. Balanced
Fund Fund Fund Fund
---- ---- ---- ----
<S> <C> <C> <C> <C>
Additions:
Allotments, Contributions and Transfers:
Employee allotments $ 46,937 $ -- $ 4,025 $ 1,819
Interfund Transfers (38,931) -- 9,186 2,714
Employing company contributions (Note 1) -- -- -- --
Loans to participants, net of transfers of
participants' balances (14,558) 59,409 (706) (267)
Loan repayments 10,960 (47,932) 812 353
-----------------------------------------------------------------
Total allotments, contributions and transfers 4,408 11,477 13,317 4,619
Investment Income:
Allocated share of Master Trust investment
activities (Note 3) 27,639 7,150 4,090 1,582
-----------------------------------------------------------------
Total additions 32,047 18,627 17,407 6,201
-----------------------------------------------------------------
Deductions:
Administrative expenses 342 -- 48 29
Distributions to participants 35,622 -- 692 443
-----------------------------------------------------------------
Total deductions 35,964 -- 740 472
-----------------------------------------------------------------
Net (decrease) increase (3,917) 18,627 16,667 5,729
Net Assets Available for Plan Benefits:
Beginning of year - January 1, 1996 460,803 90,237 11,724 7,318
-----------------------------------------------------------------
End of year - December 31, 1996 (Notes 1 and 2) $ 456,886 $ 108,864 $ 28,391 $ 13,047
=================================================================
</TABLE>
See notes to financial statements.
11
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
Statement of Changes in Net Assets Available for Plan Benefits (Continued)
December 31, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
Fund Information
-------------------------------------------
Global
Balanced International U.S. Small
Fund Equity Fund Cap Fund Total
---- ----------- -------- -----
<S> <C> <C> <C> <C>
Additions:
Allotments, Contributions and Transfers:
Employee allotments $ 2,124 $ 2,148 $ 3,220 $ 143,243
Interfund Transfers 2,918 1,899 1,306 --
Employing company contributions (Note 1) -- -- -- 59,546
Loans to participants, net of transfers of
participants' balances (333) (334) (586) --
Loan repayments 433 421 641 --
---------------------------------------------------------------
Total allotments, contributions and transfers 5,142 4,134 4,581 202,789
Investment Income:
Allocated share of Master Trust
investment activities (Note 3) 1,563 1,161 2,669 (27,970)
---------------------------------------------------------------
Total additions 6,705 5,295 7,250 174,819
---------------------------------------------------------------
Deductions:
Administrative expenses 32 37 99 1,674
Distributions to participants 479 359 507 130,661
---------------------------------------------------------------
Total deductions 511 396 606 132,335
---------------------------------------------------------------
Net (decrease) increase 6,194 4,899 6,644 42,484
Net Assets Available for Plan Benefits:
Beginning of year - January 1, 1996 6,878 6,333 10,141 2,186,765
---------------------------------------------------------------
End of year - December 31, 1996 (Notes 1 and 2) $ 13,072 $ 11,232 $ 16,785 $ 2,229,249
==============================================================
</TABLE>
See notes to financial statements.
12
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
Statement of Changes in Net Assets Available for Plan Benefits
December 31, 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
Fund Information
-------------------------------------------------------------------
NYNEX Diversified
Shares Telecommunications Government Equity
Fund Fund Obligations Fund Portfolio
---- ---- ---------------- ---------
<S> <C> <C> <C> <C>
Additions:
Allotments, Contributions and Transfers:
Employee allotments $ 48,883 $ 872 $1,014 $17,014
Employing company contributions (Note 1) 61,983 -- -- --
Loans to participants, net of transfers of
participants' balances (47,532) (2,903) 1,092 15,649
-------------------------------------------------------------------
Total allotments, contributions
and transfers 63,334 (2,031) 2,106 32,663
Investment Income:
Dividends on NYNEX Corporation common shares 43,080 219 -- --
Other dividends -- 4,564 -- --
Interest 450 57 -- --
Net appreciation in the fair value
of investments 422,947 38,607 355 --
Allocated share of Master Trust investment
activities (Note 3) -- -- -- 17,961
-------------------------------------------------------------------
Total additions 529,811 41,416 2,461 50,624
-------------------------------------------------------------------
Deductions:
Administrative expenses 462 64 5 29
Distributions to participants 75,036 11,209 340 2,577
-------------------------------------------------------------------
Total deductions 75,498 11,273 345 2,606
-------------------------------------------------------------------
Net increase 454,313 30,143 2,116 48,018
Net Assets Available for Plan Benefits:
Beginning of year - January 1, 1995 900,757 115,212 2,687 40,085
-------------------------------------------------------------------
End of year - December 31, 1995 (Notes 1 and 2) $ 1,355,070 $ 145,355 $4,803 $88,103
===================================================================
</TABLE>
See notes to financial statements.
13
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
Statement of Changes in Net Assets Available for Plan Benefits (Continued)
December 31, 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
Fund Information
----------------------------------------------------------------
Active U.S.
Interest Income Loan Equity U.S. Balanced
Fund Fund Fund Fund
---- ---- ---- ----
<S> <C> <C> <C> <C>
Additions:
Allotments, Contributions and Transfers:
Employee allotments $ 59,527 $ -- $ 1,956 $1,136
Employing company contributions (Note 1) -- -- -- --
Loans to participants, net of transfers of
participants' balances (20,290) 18,994 8,138 5,341
----------------------------------------------------------------
Total allotments, contributions
and transfers 39,237 18,994 10,094 6,477
Investment Income:
Dividends on NYNEX Corporation common shares -- -- -- --
Other dividends -- -- -- --
Interest 29,115 -- -- --
Net appreciation in the fair
value of investments -- -- -- --
Allocated share of Master Trust
investment activities (Note 3) -- -- 1,906 1,022
----------------------------------------------------------------
Total additions 68,352 18,994 12,000 7,499
----------------------------------------------------------------
Deductions:
Administrative expenses 191 -- 26 23
Distributions to participants 40,809 -- 250 158
----------------------------------------------------------------
Total deductions 41,000 -- 276 181
----------------------------------------------------------------
Net increase 27,352 18,994 11,724 7,318
Net Assets Available for Plan Benefits:
Beginning of year - January 1, 1995 433,451 71,243 -- --
----------------------------------------------------------------
End of year - December 31, 1995 (Notes 1 and 2) $ 460,803 $90,237 $11,724 $7,318
================================================================
</TABLE>
See notes to financial statements.
14
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
Statement of Changes in Net Assets Available for Plan Benefits (Continued)
December 31, 1995
(Dollars in Thousands)
<TABLE>
<CAPTION>
Fund Information
-----------------------------------------
Global
Balanced International U.S. Small
Fund Equity Fund Cap Fund Total
---- ----------- -------- -----
<S> <C> <C> <C> <C>
Additions:
Allotments, Contributions and Transfers:
Employee allotments $1,429 $2,067 $ 2,081 $ 135,979
Employing company contributions (Note 1) -- -- -- 61,983
Loans to participants, net of transfers of
participants' balances 4,593 4,025 7,545 (5,348)
--------------------------------------------------------------
Total allotments, contributions
and transfers 6,022 6,092 9,626 192,614
Investment Income:
Dividends on NYNEX Corporation common shares -- -- -- 43,299
Other dividends -- -- -- 4,564
Interest -- -- -- 29,622
Net appreciation in the fair
value of investments -- -- -- 461,909
Allocated share of Master Trust
investment activities (Note 3) 1,009 424 846 23,168
--------------------------------------------------------------
Total additions 7,031 6,516 10,472 755,176
--------------------------------------------------------------
Deductions:
Administrative expenses 23 19 67 909
Distributions to participants 130 164 264 130,937
--------------------------------------------------------------
Total deductions 153 183 331 131,846
--------------------------------------------------------------
Net increase 6,878 6,333 10,141 623,330
Net Assets Available for Plan Benefits:
Beginning of year - January 1, 1995 -- -- -- 1,563,435
--------------------------------------------------------------
End of year - December 31, 1995 (Notes 1 and 2) $6,878 $6,333 $10,141 $ 2,186,765
==============================================================
</TABLE>
See notes to financial statements.
15
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
NOTES TO FINANCIAL STATEMENTS
(Dollars in Thousands)
1. Plan Description
----------------
The Plan* was established by NYNEX Corporation ("NYNEX") on January 1, 1984
to provide a convenient way for non-salaried employees to save on a regular
and long-term basis. Participants are able to invest in one or more
combinations of the following funds (referred to herein individually as a
"Fund" and collectively as the "Funds"): NYNEX Shares Fund,
Telecommunications Fund, Government Obligations Fund, Diversified Equity
Portfolio, Interest Income Fund, Active U.S. Equity Fund, U.S. Balanced
Fund, Global Balanced Fund, International Equity Fund and U.S. Small Cap
Fund.
Allotments and Contributions
----------------------------
An Eligible Employee may authorize a basic pre-tax or after-tax allotment
from 1% to 6% of such Eligible Employee's Compensation. A pre-tax or
after-tax supplementary allotment of not more than 10% of such Eligible
Employee's Compensation may be authorized by employees electing the maximum
6% basic allotment. Employing Company matching contributions are made based
upon an amount equal to 66 2/3% of the Basic Allotment of each
Participating Employee. Such matching contributions are invested only in
the NYNEX Shares Fund.
Contributions are subject to applicable rules set forth in the Internal
Revenue Code (the "Code") and the regulations thereunder.
Participating Employees are immediately vested in their contributions plus
actual earnings thereon. A Participating Employee shall be vested in
his/her accrued benefit derived from Employing Company contributions after
completing three years of service. Non-vested Employing Company
contributions which are forfeited are applied as a credit to reduce
subsequent contributions of the Employing Company. At December 31, 1996,
forfeited non-vested accounts were $43.
Termination Priorities
----------------------
Although it has not expressed intent to do so, in the event that the Plan
is terminated by NYNEX, subject to conditions set forth in the Employee
Retirement Income Security Act of 1974, as amended, the Plan provides that
the net assets shall be distributed to Participating Employees in an amount
equal to their respective vested interests in such assets.
- ----------
* This and certain other capitalized terms used but not defined herein shall
have their respective meanings as defined in the Plan Prospectus.
16
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in Thousands)
1. Plan Description (Continued)
----------------------------
Fund Options
------------
The NYNEX Shares Fund invests primarily in the common stock of NYNEX.
The Telecommunications Fund replaced the Diversified Telephone Portfolio
("DTP") on May 1, 1995. Investment assets in the DTP Fund were transferred
from Bankers Trust Company to Mellon Bank, N.A. on May 2, 1995. The Fund's
portfolio was restructured and is now comprised of thirty-two North
American telephone utility and telecommunications companies each with a
minimum market value of approximately $1 billion. Among the thirty-two
companies are the eight companies that comprised the DTP. Unlike the DTP,
the Telecommunications Fund is open to new contributions and allotments and
its earnings are reinvested in the Fund. The Fund is a market weighted
index fund and since May 2, 1995, has been managed by NYNEX Asset
Management Company ("NAMCO").
The Diversified Equity Portfolio invests in an equity index fund which,
since January 3, 1995, has been managed by NAMCO. This Fund is principally
a portfolio of common stocks that is structured and maintained with the
objective of providing investment results which approximate the overall
performance of the common stocks included in the Standard and Poors
Composite Index of 500 stocks.
The Government Obligations Fund invests in a Bankers Trust Company pooled
Short Government Bond Index Fund. This Fund invests primarily in fixed
income securities of the United States Government or any agency thereof
with the objective of providing investment results which approximate the
overall performance of the securities included in the Lehman Brothers Inc.
1-3 year Government Index. The Fund is managed by Bankers Trust Company.
The Interest Income Fund invests primarily in a diversified portfolio of
guaranteed insurance contracts issued by insurance companies ("GICs"). Some
of the assets of the Fund are also invested in pools of asset-backed
securities, corporate bonds, and obligations of the United States
Government and its agencies ("Synthetic Guaranteed Investment Contract").
As an integral part of the purchase of each pool of these investments, a
financial institution agrees to protect the pool, via a wrapper contract,
to the extent its market value and/or interest return fluctuates but not in
the event of a default of any security in the pool. The Plan is exposed to
credit risk in the event of nonperformance by the entities with whom the
contracts are placed. The Plan seeks to minimize credit risk by
diversifying among a group of GIC issuers and other financial institutions
which meet certain investment criteria established by NAMCO. These
contracts guarantee (i) a fixed rate of interest for a fixed period of time
or (ii) a fixed rate of interest for a fixed or indefinite period of time
combined with the right to participate in income earned above such fixed
rate. Such interest is not guaranteed by any of the Employing Companies.
The Fund is managed by NAMCO. (For further discussion on this Fund see Note
2.)
17
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in Thousands)
1. Plan Description (Continued)
----------------
The following five Funds commenced operations on January 3, 1995: U.S.
Balanced Fund, Global Balanced Fund, Active U.S. Equity Fund, International
Equity Fund and U.S. Small Cap Fund. In addition to the Diversified Equity
Portfolio, each of these Funds invests in the assets of the unitized
investment advisor account(s) of the NYNEX Master Trust ("Master Trust"),
as designated by NAMCO.
The U.S. Balanced Fund invests in stocks and bonds of U.S. corporations in
a variety of industries. This Fund has invested approximately 60 percent in
stocks with most of the remainder in bonds. As of December 31, 1996, NAMCO
had selected the following unitized investment advisor account(s) of the
Master Trust ("Master Trust pooled accounts") for the Fund: Fidelity
Management Trust Company, Franklin Portfolio Associates, Inc., Miller,
Anderson & Sherrerd, LLP, Palisade Capital Management, L.L.C., Standish
Ayer & Wood, Inc., State Street Research and Management Company, TCW Asset
Management Company, Trinity Investment Management Corporation and Western
Asset Management Company. Effective January 1, 1997, Wilshire Associates
Incorporated was named as an additional manager. In addition, effective May
1, 1997, the assets previously managed by TCW Asset Management Company were
transferred to Wilshire Associates Incorporated.
The Global Balanced Fund primarily invests in a diversified array of
international capital market stocks and bonds. The Fund has investments in
a variety of developed countries in Europe and the Pacific. The Fund has
invested approximately 65 percent in stocks with most of the remainder in
bonds. The portfolio holdings may include both large and small
capitalization stocks. As of December 31, 1996, NAMCO had selected the
following Master Trust pooled accounts for the Fund: Capital Guardian Trust
Company, Fidelity Management Trust Company, Franklin Portfolio Associates,
Inc., Miller, Anderson & Sherrerd, LLP, Morgan Stanley Asset Management
Inc., Palisade Capital Management, L.L.C., Standish Ayer & Wood, Inc.,
State Street Global Advisors, State Street Research and Management Company,
TCW Asset Management Company, Trinity Investment Management Corporation,
Western Asset Management Company and WorldInvest Limited. Effective January
1, 1997, Wilshire Associates Incorporated was named as an additional
manager. In addition, effective May 1, 1997, the assets previously managed
by TCW Asset Management Company were transferred to Wilshire Associates
Incorporated.
The Active U.S. Equity Fund invests primarily in domestic common stocks. As
of December 31, 1996, NAMCO had selected the following Master Trust pooled
accounts for the Fund: Fidelity Management Trust Company, Franklin
Portfolio Associates, Inc., Miller, Anderson & Sherrerd, LLP, Palisade
Capital Management, L.L.C., TCW Asset Management Company and Trinity
Investment Management Corporation. Effective January 1, 1997, Wilshire
Associates Incorporated was named as an additional manager. In addition,
effective May 1, 1997, the assets previously managed by TCW Asset
Management Company were transferred to Wilshire Associates Incorporated.
18
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in Thousands)
1. Plan Description (Continued)
----------------
The International Equity Fund invests in twenty international equity
markets of developed countries in Europe and the Pacific; it has
investments in many industries. The portfolio holdings may include both
large and small capitalization stocks. As of December 31, 1996, NAMCO had
selected Capital Guardian Trust Company, Morgan Stanley Asset Management
Inc. and State Street Global Advisors as the Master Trust pooled accounts
for the Fund.
The U.S. Small Cap Fund invests in the domestic stocks of smaller-sized
companies, generally with market capitalization under $1 billion at the
time of purchase. As of December 31, 1996, NAMCO had selected the following
Master Trust pooled accounts for the Fund: Columbus Circle Investors,
Gardner Lewis Asset Management, L.P., Investment Counselors of Maryland,
Inc., and the Boston Company Asset Management, Inc.
The Master Trust pooled accounts selected as of May 31, 1997, were the same
as those described above.
Pursuant to the Plan, loans were initially made available to certain
Participating Employees effective January 1, 1989. The amount that a
Participating Employee may borrow is limited by certain factors, including
the Employee's vested interest in the respective Employee's pre-tax
account. Generally, the amount can be no less than $1 and no greater than
$50. An Employee may not have more than two loans outstanding. Except under
certain circumstances, the loans provide for periodic repayments over a
period not to exceed five years, at an interest rate determined under the
Plan. Effective September 1, 1993, Participating Employees also may prepay
the entire loan at any time, after the first of the month following the
loan effective date. Loans are collateralized by the Participating
Employee's vested account and are recorded in the Loan Fund. In the event
of a default, all of the Participating Employee's contributions to the Plan
shall be suspended.
In addition, the Employees' Benefit Committee (the "Committee") shall cause
the amount of unpaid debt to be deducted from any interest in, or payment
or distribution from, the Employee's account, subject to certain
limitations. If the amount of such interest, payment or distribution is not
sufficient to repay the unpaid balance of said debt, the Committee may
exercise the Plan's right, if any, to any non-Plan assets and to the extent
a loan balance remains, take whatever collection action, including suit,
the Committee determines necessary.
During 1995, Bankers Trust Company and Mellon Bank, N.A. were the Trustees
for the Plan. Beginning January 1, 1996, all of the assets of the Plan were
transferred to the Master Trust (see Note 3) for which Mellon Bank, N.A. is
the Trustee of all Master Trust assets.
Wellspring Resources,LLC was the recordkeeper for the Plan during 1996 and
1995.
For a complete description of the Plan, participants should refer to the
Plan Document.
19
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in Thousands)
2. Accounting Policies
-------------------
Investments
-----------
The NYNEX Master Pension Trust was established on January 1, 1984, and
through December 31, 1994, it served as the vehicle for the investment of
the assets of two defined benefit pension plans of NYNEX, the NYNEX Pension
Plan and the NYNEX Management Pension Plan. Effective January 1, 1995, the
NYNEX Master Pension Trust was renamed the NYNEX Master Trust ("Master
Trust") and amended to incorporate, in addition to the assets of such
defined benefit pension plans, the following: (1) as of January 1, 1995,
certain of the assets of the Plan and the NYNEX Corporation Savings Plan
for Salaried Employees(the "Salaried Plan") and (2) as of January 1, 1996,
all of the assets of the Plan and the Salaried Plan, except for assets of
the Employee Stock Ownership Plan-unallocated account.
Value of Investments Held In the Master Trust (see Note 3)
----------------------------------------------------------
The Trustee of the Master Trust values the investments in the Master Trust
as follows:
Investments in securities traded on national and foreign securities
exchanges are valued by the Trustee at the last reported sale prices on the
last business day of the year or, if no sales were reported on that date,
at the last reported bid prices. Over-the-counter securities and government
obligations are valued at the bid prices or the average of the bid and
asked prices on the last business day of the year from published sources
where available or, if not available, from other sources considered
reliable, generally broker quotes.
The value of each contract with an insurance company or other financial
institution included in the Interest Income Fund is reported at contract
value in the Statements of Net Assets Available for Plan Benefits based
upon the principal then invested in by the Fund plus the interest then
accrued on such principal, which approximates the fair value. In accordance
with Statement of Position 94-4 "Reporting of Investment Contracts Held by
Health and Welfare Benefit Plans and Defined Contribution Pension Plans"
and in connection with fully benefit-responsive investment contracts, the
following information is presented:
(i) The asset weighted crediting interest rate yielded a return of 6.7%
for the year ended December 31, 1996.
(ii) The crediting interest rates ranged from 4.4% to 8.2% at December 31,
1996.
(iii) The fair value, as determined either by discounting future cash flows
or by the market value of the underlying investments, at December 31,
1996 was approximately $422,122.
20
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in Thousands)
2. Accounting Policies (Continued)
-------------------
Forward currency contracts are accounted for as contractual commitments on
a trade-date basis and are carried at fair value derived by the Trustee at
the exchange rate prevailing on the last business day of the year. Index
futures contracts are recorded as contractual commitments on a trade-date
basis and are carried at fair value based on the closing index futures
price prevailing on the last business day of the year. Both exchange rates
and index futures prices are readily available from published sources.
Temporary cash investments are stated at redemption value which
approximates fair value.
Value of Investments Held Outside of the Master Trust During 1995
-----------------------------------------------------------------
The value of NYNEX shares, throughout the respective Funds, and the value
of the shares of each company in the Telecommunications Fund (DTP for 1994
and through April 28, 1995) are determined on the basis of the closing
price per share as quoted by the New York Stock Exchange Composite
Transactions listing on December 31 or, if no sales were made on that date,
at the closing price on the first preceding day on which sales were made.
The value of the Plan's investment in the pooled Short Government Bond
Index Fund included in the Government Obligations Fund is based on the
pooled Fund's respective per share value. The Trustee of the pooled Funds
determines per share value based upon fair value of the underlying
securities held by the Funds at December 31.
The value of each contract with an insurance company or other financial
institution included in the Interest Income Fund is reported at contract
value in the Statements of Net Assets Available for Plan Benefits based
upon the principal then invested in by the Fund plus the interest then
accrued on such principal, which approximates the fair value. In
accordance with Statement of Position 94-4 "Reporting of Investment
Contracts Held by Health and Welfare Benefit Plans and Defined Contribution
Pension Plans" and in connection with fully benefit-responsive investment
contracts, the following information is presented:
(i) The asset weighted crediting interest rate yielded a return of 6.8%
for the year ended December 31, 1995.
(ii) The crediting interest rates ranged from 5.0% to 8.8% at December 31,
1995.
(iii) The fair value, as determined either by discounting future cash flows
or by the market value of the underlying investments, at December 31,
1995 was approximately $811,852.
21
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in Thousands)
2. Accounting Policies (Continued)
-------------------
Purchases and Sales of Investments
----------------------------------
Purchases and sales of investments are reflected as of the trade date.
Realized gains and losses on sales of investments are determined on the
basis of average cost.
Investment Income
-----------------
Dividend income is recorded on the ex-dividend date. Interest earned on
investments is recorded on the accrual basis.
Net Appreciation (Depreciation) of Investments
----------------------------------------------
The Statements of Changes in Net Assets Available for Plan Benefits
reflects the net appreciation (depreciation) in the fair value of the
Plan's investments, which consists of the realized gains or losses and the
unrealized appreciation (depreciation) on those investments.
Distributions
-------------
Distributions elected to be withdrawn from the Plan by participants are
recorded when paid.
Plan Expenses
-------------
Effective January 1, 1993, the Plan pays certain administrative fees out of
Fund assets held in the Master Trust and, effective March 1, 1995, out of
interest income earned from the Plan's disbursement account, as held by the
Trustee, in accordance with Plan provisions and to the extent permitted by
law. Any fees not paid by the Plan are paid by NYNEX.
NYNEX's Use of Estimates
------------------------
The preparation of the Plan's financial statements in conformity with
generally accepted accounting principles requires NYNEX, as Plan
administrator, to make significant estimates and assumptions that affect
the reported amounts of net assets available for benefits at the date of
financial statements and the changes in net assets available for plan
benefits during the reporting period and, when applicable, the disclosure
of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
22
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in Thousands)
2. Accounting Policies (Continued)
-------------------
Risks and Uncertainties
-----------------------
The Plan provides for various participant investment options in any
combination of funds which can invest in any combination of stocks, bonds,
fixed income securities, mutual funds, and other investment securities.
Investment securities are exposed to various risks, such as interest rate,
market, and credit risks. Due to the level of risk associated with certain
investment securities, it is at least reasonably possible that changes in
the values of investment securities will occur in the near term and that
such changes could materially affect participants' account balances and the
amounts reported in the Statements of Net Assets Available for Plan
Benefits.
3. Investments
-----------
The following table reflects the investments that represent 5% or more of
the net assets in the Master Trust:
1996 1995
---- ----
NYNEX Corporation common shares $2,220,164 $ --
The following table reflects the investments that represent 5% or more of
the net assets of the Plan held outside the Master Trust:
1996 1995
---- ----
NYNEX Corporation common shares $ -- $1,351,766
Investment in Master Trust
--------------------------
All of the investment assets in the Master Trust are managed by investment
advisors. The assets in the Master Trust are either (a) pooled between the
defined benefit plans, the Salaried Plan and the Plan, or (b) net assets
that are specific to the defined benefit plans, or (c) for the year ended
December 31, 1996, net assets specific to the Salaried Plan and the Plan.
The total value of the Master Trust at December 31, 1996 and 1995 is
$22,282,741 (of which net assets totalling $10,135,399 are specific to the
defined benefit pension plans for which separate financial statements are
prepared; and as of the date of these financial statements 35% of the
defined benefit pension plans' net assets are unaudited) and $20,951,623
respectively.
Investments Held in Pooled Accounts:
------------------------------------
The pooled investments are unitized, aggregated and reported by the Master
Trust with a carrying value of $8,107,361 and $4,340,668 at December 31,
1996 and 1995, respectively, with investment earnings of $1,253,840 and
$1,741,698 for the years ended December 31, 1996 and 1995 respectively.
Given that the pooled accounts include interests of the
23
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in Thousands)
3. Investments(Continued)
----------------------
Plan, the Salaried Plan and the defined benefit plans, the totals in each
respective statement do not equal the carrying value or net investment
income of/from the Master Trust pooled accounts in this accompanying
footnote.
The investments held in the Master Trust pooled accounts at December 31,
1996 and 1995 are as follows:
Fair Value (Note 2)
----------------------
1996 1995
---- ----
Description
Cash - non interest bearing $ 57 $ --
Receivables 512,740 17,386
Common Stock 6,342,696 3,173,098
NYNEX Corporation common shares 25,577 16,679
Preferred Stock 56,156 8,938
U.S. Government Securities 680,805 328,728
Corporate Debt - preferred and other 429,302 264,296
Real estate 65 --
Temporary cash investments 346,004 273,328
Forward currency sell contracts -- 151,124
Other investments* 259,666 310,098
---------- ----------
8,653,068 4,543,675
---------- ----------
Liabilities 545,707 203,007
---------- ----------
Total pooled net assets
in the Master Trust $8,107,361 $4,340,668
========== ==========
* Other investments include foreign investments, principally foreign
government debt.
The Plan's interests in the Master Trust pooled accounts carrying value and
investment income of the Master Trust pooled accounts are reported in each
respective Fund Option as the "Allocated share of Master Trust net assets"
in 1996 and "Value of the Plan's participation in the Master Trust" in 1995
in the Statement of Net Assets Available for Plan Benefits and "Allocated
share of Master Trust investment activities" in the Statements of Changes
in Net Assets Available for Plan Benefits as of December 31, 1996 and 1995,
respectively.
24
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in Thousands)
3. Investments (Continued)
-----------
For the year ended December 31, 1995, the Plan's sole investment in the
Master Trust is its Fund Options' undivided interest in the Master Trust
pooled accounts. Investments are allocated to the Plan's Fund Options in
accordance with their respective percentages of interest. The proportionate
interests of the Plan's Fund Options in the carrying value of the Master
Trust pooled accounts at December 31, 1996 and 1995 are as follows:
1996 1995
---- ----
Activity U.S. Equity Fund 0.3502% 0.2701%
U.S. Balanced Fund 0.1609% 0.1686%
Global Balanced Fund 0.1612% 0.1585%
International Equity Fund 0.1385% 0.1459%
U.S. Small Cap Fund 0.2070% 0.2336%
Diversified Equity Portfolio 2.0425% 2.0297%
Investments Held in Specific Accounts for the Plan and the Salaried Plan:
-------------------------------------------------------------------------
Effective January 1, 1996, all of the assets of the Plan and the Salaried
Plan were transferred into the Master Trust. As such, the net assets
specific to these plans are the NYNEX Shares Fund, Telecommunications Fund,
Government Obligations Fund, Interest Income Fund, Loan Fund and the
Employee Stock Ownership Plan-allocated account.
The investments held in the Master Trust specific accounts for the Plan and
the Salaried Plan at December 31, 1996 are as follows:
Description Fair Value
(Note 2)
----------
Cash - non interest bearing $ 40
Receivables 226,323
Common Stock 272,663
NYNEX Corporation common shares 2,194,587
Temporary cash investments 120,880
Fixed income obligations - insurance contract 1,104,453
Other investments 121,035
----------
Total net assets in the specific
accounts in the Master Trust $4,039,981
==========
25
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in Thousands)
3. Investments (Continued)
-----------
Investments are allocated to the Plan's Fund Options in accordance with
their respective percentages of interest. The proportionate interests of
the Plan and the Salaried Plan in the carrying value of the Master Trust
specific accounts at December 31, 1996 are as follows:
Plan Salaried Plan
---- -------------
NYNEX Shares Fund 67.1469% 32.8531%
Telecommunications Fund 46.6931% 53.3069%
Government Obligations Fund 4.7497% 95.2503%
Interest Income Fund 36.7599% 63.2401%
Loan Fund 55.9060% 44.0940%
Employee Stock Ownership Plan -- 100.0000%
26
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in Thousands)
3. Investments (Continued)
-----------
Investment Income:
------------------
Investment income and expenses are allocated to the Plan's Fund Options
daily in accordance with their respective daily percentages of interest in
the Master Trust's pooled accounts. Percentages of interest are based on
the daily ratio of units owned by each Plan's Fund Options to the total
units in the Master Trust pooled accounts. Investment income related to
investments held in specific accounts for the Plan and the Salaried Plan is
allocated to the Plan's Fund Options daily in accordance with each Plan's
respective percentage of interest. The allocated net investment income to
the Plan's Fund Options for the years ended December 31, 1996 and 1995 is
as follows:
Description
-----------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Dividends on Net
NYNEX Corporation Other Net appreciation Other income/ Investment
Interest common shares Dividends (depreciation) expenses-net Income
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1996:
NYNEX Shares Fund $ 38 $60,403 $ -- $(190,117) $-- $(129,676)
Telecommunications Fund -- -- 4,342 24,381 -- 28,723
Government Obligations Fund -- -- -- 292 -- 292
Diversified Equity Portfolio 738 -- 2,262 23,843 (6) 26,837
Interest Income Fund 30,686 -- -- (3,047) -- 27,639
Loan Fund 7,150 -- -- -- -- 7,150
Active U.S. Equity Fund 11 -- 406 3,673 -- 4,090
U.S. Balanced Fund 248 -- 131 1,204 (1) 1,582
Global Balanced Fund 182 -- 141 1,243 (3) 1,563
International Equity Fund 14 -- 170 995 (18) 1,161
U.S. Small Capital Fund 56 -- 107 2,506 -- 2,669
</TABLE>
27
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in Thousands)
3. Investments (Continued)
-----------
Investment Income:
Description
-----------
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Dividends on Net
NYNEX Corporation Other Net appreciation Other income/ Investment
Interest common shares Dividends (depreciation) expenses-net Income
-------- ------------- --------- -------------- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1995:
Active U.S. Equity Fund $ 1 $ 142 $-- $ 1,763 $-- $ 1,906
U.S. Balanced Fund 87 65 -- 868 2 1,022
Global Balanced Fund 108 53 -- 845 3 1,009
International Equity Fund 5 105 -- 314 -- 424
U.S. Small Capital Fund 27 64 -- 755 -- 846
Diversified Equity Portfolio 576 1,289 -- 16,095 1 17,961
</TABLE>
28
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in Thousands)
4. Derivative Financial Instruments
--------------------------------
Derivative financial instruments are used by the Master Trust's pooled
accounts primarily to rebalance fixed income/equity allocations, to
efficiently gain exposure to a specific underlying market, and to offset
the currency risk associated with foreign investments. Leveraging of the
Plan's assets and speculation are prohibited as stated in the Plan
documents. Offsetting currency positions are not permitted to exceed the
level of exposure in the Plan's foreign asset base. The derivatives most
commonly used by investment managers are highly-liquid, exchange-traded
equity and fixed income futures and over-the-counter foreign exchange
forward contracts.
NYNEX's use of financial instruments for risk management purposes is
represented by notional amounts. These notional values represent solely
contractual amounts that serve as the basis or reference amounts upon which
contractually stipulated calculations are based. Therefore, these amounts
are intended to serve as general volume indicators only and do not
represent the potential gain or loss from market or credit risks.
Market risk arises from the potential for changes in the value of financial
instruments resulting from fluctuations in interest rates, foreign exchange
rates and prices of equity securities. Market risk is also affected by
changes in volatility and liquidity in the markets in which these
instruments are traded.
Equity price risk arises from the possibility that equity prices will
fluctuate, affecting the value of equity securities and derivative
financial instruments that derive their value from a stock index, a
particular stock or a defined basket of stocks.
The credit risk and amount of accounting loss of the Plan's forward
contracts is equal to any gains which have not yet settled as of the Plan's
year end. The credit exposure of the Plan's futures contracts is equal to
the posted margin plus any unsettled positive variation margin. The amount
of accounting loss at year end is equal to any variation margin owed to the
Plans.
All derivative activity relating to the Plan is within the Master Trust
pooled accounts. The Master Trust pooled accounts' derivative activity is
allocated to the Plan in accordance with the Plan's Fund Options'
respective percentages of interest (see Note 3). The following disclosures
regarding the notional values, fair values, average fair values and net
trading gains are reported per the Plan.
29
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in Thousands)
4. Derivative Financial Instruments (Continued)
--------------------------------
The notional values and fair values of the derivative activity used for
trading purposes held by the Plan at December 31, are as follows:
1996 1995
---- ----
Domestic Equity Futures Contracts:
Notional Values $392 $1,974
Fair Values 395 2,071
Fixed Income Futures Contracts:
Notional Values 88 54
Fair Values 88 54
Forward Foreign Currency Payable Contracts:
Notional Values 179 --
Fair Values 175 --
Forward Foreign Currency Receivable Contracts:
Notional Values 180 --
Fair Values 178 --
The average fair values of the derivative activity used for trading
purposes held by the Plan during the year ended December 31, are as
follows:
1996 1995
---- ----
Average Fair Values:
Domestic Equity Futures Contracts $3,268 $4,835
Fixed Income Futures Contracts 83 42
Forward Foreign Currency
Payable Contracts 223 --
Forward Foreign Currency
Receivable Contracts 222 --
The Plan was allocated $567 and $1,497 in 1996 and 1995, respectively, of
net trading gains from futures contracts. Net trading gains from foreign
exchange contracts totalled $43 in 1996.
30
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in Thousands)
5. Number and Value of Units
-------------------------
The interest of an employee in each Fund of the Plan, with the exception of
the Loan Fund, is represented by units as described in Section 8 of the
Plan. A Participant's unit value is determined daily by dividing each
Fund's adjusted net assets, as defined in the Plan, by the number of
outstanding units. The number and value of units at each month end in 1995,
which are all unaudited except at December 31, 1996 and 1995, carried to
the fourth decimal place, were as follows:
<TABLE>
<CAPTION>
December 31,1996 December 31,1995
---------------- ----------------
Number Value Number Value
------ ----- ------ -----
of Units per Unit of Units per Unit
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NYNEX Shares Fund 194,616,319 $6.5410 193,609,757 $6.9990
Telecommunications Fund 19,295,394 7.0781 21,091,705 6.8916
Government Obligations Fund 4,217,893 1.3777 3,663,503 1.3110
Diversified Equity Portfolio 74,986,293 2.2084 49,045,888 1.7963
Interest Income Fund 86,793,347 5.2641 93,007,915 4.9544
Active U.S. Equity Fund 16,971,200 1.6729 8,584,517 1.3657
U.S. Balanced Fund 8,764,221 1.4888 5,671,039 1.2904
Global Balanced Fund 8,892,181 1.4699 5,417,434 1.2696
International Equity Fund 9,157,688 1.2265 5,789,153 1.0939
U.S. Small Cap Fund 10,879,083 1.5428 7,951,932 1.2753
</TABLE>
31
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in Thousands)
<TABLE>
<CAPTION>
NYNEX Telecommunications Government Diversified
Shares Fund Fund Obligations Fund Equity Portfolio
----------- ---- ---------------- ----------------
Number Value Number Value Number Value Number Value
1996 of Units Per Unit of Units Per Unit of Units Per Unit of Units Per Unit
- ---- -------- -------- -------- -------- -------- -------- -------- --------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 193,184,402 7.0163 21,038,439 7.0416 3,663,871 1.3164 50,580,939 1.8534
February 194,265,058 6.7356 21,297,488 6.8078 3,663,560 1.3114 53,312,652 1.8702
March 195,058,426 6.5230 21,138,364 6.7279 3,646,656 1.3097 54,664,884 1.8878
April 196,293,717 6.5026 20,788,456 6.9189 3,521,693 1.3111 54,999,172 1.9137
May 196,020,328 6.1080 20,650,294 6.8944 3,613,419 1.3140 57,837,051 1.9620
June 196,024,030 6.2891 20,620,869 6.9504 3,625,423 1.3229 59,421,884 1.9704
July 196,129,157 6.0209 20,594,374 6.4178 3,662,262 1.3286 59,615,803 1.8831
August 196,537,655 5.7858 20,609,584 6.2871 3,746,869 1.3329 61,791,325 1.9215
September 196,535,763 5.8357 20,461,413 6.3731 3,682,699 1.3444 63,885,433 2.0287
October 196,485,485 6.0476 20,088,525 6.5030 3,880,023 1.3593 67,943,422 2.0848
November 195,178,778 6.3003 19,630,506 6.9004 4,019,014 1.3693 73,241,553 2.2428
<CAPTION>
Interest Income Fund Active U.S. Equity Fund U.S. Balanced Fund
-------------------- ----------------------- ------------------
Number Value Number Value Number Value
1996 of Units Per Unit of Units Per Unit of Units Per Unit
- ---- -------- -------- -------- -------- -------- --------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
January 91,433,043 4.9705 8,907,818 1.4042 5,939,733 1.3160
February 89,194,067 4.9978 9,914,412 1.4265 6,450,697 1.3194
March 88,374,032 5.0212 10,519,378 1.4342 6,663,791 1.3184
April 88,821,183 5.0487 10,994,749 1.4602 6,744,623 1.3262
May 86,488,327 5.0750 11,859,350 1.4845 7,077,837 1.3460
June 86,545,150 5.0992 12,407,554 1.4788 7,333,646 1.3487
July 86,861,446 5.1268 12,598,709 1.4129 7,423,935 1.3104
August 86,702,428 5.1531 13,211,835 1.4490 7,642,691 1.3285
September 86,580,927 5.1812 13,808,331 1.5242 7,843,568 1.3833
October 86,975,159 5.2080 14,529,763 1.5736 7,965,560 1.4255
November 86,380,729 5.2345 16,335,716 1.6796 8,621,191 1.4961
Global Balanced Fund International Equity Fund U.S. Small Cap Fund
-------------------- ------------------------- -----------------------
Number Value Number Value Number Value
1996 of Units Per Unit of Units Per Unit of Units Per Unit
- ---- -------- -------- -------- -------- -------- --------
(Unaudited) (Unaudited) (Unaudited)
January 5,739,823 1.2924 6,480,278 1.0929 7,483,952 1.2342
February 6,089,911 1.2989 6,348,269 1.0999 7,544,558 1.2688
March 6,208,841 1.3013 6,494,465 1.1141 7,760,733 1.2954
April 6,323,314 1.3157 6,895,644 1.1544 8,640,293 1.4091
May 6,668,786 1.3348 7,113,737 1.1552 10,118,014 1.4536
June 7,030,985 1.3375 7,571,559 1.1629 10,312,974 1.3848
July 7,146,067 1.2972 7,627,394 1.1259 10,224,725 1.2909
August 7,389,397 1.3165 7,889,384 1.1392 10,428,921 1.3624
September 7,601,382 1.3689 8,181,847 1.1675 10,465,627 1.4236
October 7,917,792 1.4041 8,487,779 1.1654 10,303,230 1.4221
November 8,652,196 1.4750 8,876,170 1.2201 10,195,366 1.4913
</TABLE>
32
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in Thousands)
6. Federal Income Taxes
--------------------
The Internal Revenue Service has determined and informed NYNEX by a letter
dated September 25, 1995, that the Plan, as submitted, is qualified and the
Master Trust established under the Plan is tax-exempt, under the
appropriate sections of the Code. The Plan has been amended since receiving
the determination letter. However, the Plan administrator and the Plan's
tax counsel believe that the Plan is currently designed and being operated
in compliance with the applicable requirements of the Code. Therefore, they
believe that the Plan was qualified and the related Master Trust was
tax-exempt as of the date of the financial statements.
7. Related Party Transactions
--------------------------
NAMCO, a wholly owned subsidiary of NYNEX, is the investment advisor for
the Telecommunications Fund, Diversified Equity Portfolio and the Interest
Income Fund and therefore qualifies as a party-in-interest. NAMCO received
no compensation from the Plan for the investment advisory services rendered
to the Plan.
8. Concentrations of Credit Risk
-----------------------------
Financial instruments which potentially subject the Plan to concentrations
of credit risk consist principally of investment contracts with insurance
companies and other financial institutions.
The Plan places its investment contracts with high-credit quality insurance
companies and financial institutions in order to limit credit exposure.
9. Plan Amendments
---------------
Effective January 1, 1996, the Plan was changed to expand the "deemed"
hardship withdrawals to include payment of room and board expenses for
post-secondary education.
33
<PAGE>
NYNEX CORPORATION SAVINGS AND SECURITY PLAN (NON-SALARIED EMPLOYEES)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Dollars in Thousands)
10. Reconciliation of Financial Statements in Form 11-K to Form 5500
----------------------------------------------------------------
The Department of Labor requires that amounts allocated to accounts of
persons who have elected to withdraw from the Plan but have not yet been
paid be reported as liabilities on the Plan's Form 5500. In accordance with
the relevant American Institute of Certified Public Accountants audit and
accounting guide, benefit amounts should not be accrued as liabilities of
the Plan. The following is a reconciliation of distributions to
participants and net assets available for Plan benefits in the financial
statements to the amounts reported in Form 5500.
December 31,
1996 1995
---- ----
Aggregate distributions to participants
as presented in the Statement of Changes
in Net Assets Available for Plan Benefits $ 130,661 $ 130,937
Add: Current year benefits claims payable
presented in the Statement of Net Assets
Available for Plan Benefits in Form 5500
(see Note 2) 2,031 428
Less: Prior year benefits claims payable
presented in the Statement of Net Assets
Available for Plan Benefits in Form 5500
(see Note 2) 428 858
---------- ----------
Benefit payments and payments to provide
benefits directly to Participants and
beneficiaries presented in the Statement
of Changes in Net Assets Available for Plan
Benefits in Form 5500 $ 132,264 $ 130,507
========== ==========
Net assets available for Plan benefits
presented in the Statement of Net Assets
Available for Plan Benefits $2,229,249 $2,186,765
Less: Benefits claims payable presented
in the Statement of Net Assets Available
for Plan Benefits in Form 5500 (see Note 2) 2,031 428
---------- ----------
Net assets available for Plan benefits
presented in the Statement of Net Assets
Available for Plan Benefits in Form 5500 $2,227,218 $2,186,337
========== ==========
34
<PAGE>
Exhibit (23)
CONSENT OF INDEPENDENT ACCOUNTANTS
---------------------
We consent to the incorporation by reference in the registration statements on
Form S-8 (File Nos. 333-20079, 33-51897, 2-94110, 33-27802 and 33-16570) of
NYNEX Corporation of our report dated June 20, 1997 on our audits of the
financial statements of the NYNEX Corporation Savings and Security Plan
(Non-Salaried Employees) as of December 31, 1996 and 1995, and for each of the
two years in the period ended December 31, 1996 which are included in the Annual
Report on Form 11-K for the above referenced Plan filed, by amendment, to the
Annual Report on Form 10-K of NYNEX Corporation for the year ended December 31,
1996.
COOPERS & LYBRAND L.L.P.
New York, New York
June 24, 1997
35
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Savings
and Security Plan Committee of NYNEX Corporation has duly caused this annual
report to be signed by the undersigned thereunto duly authorized.
NYNEX CORPORATION SAVINGS and SECURITY PLAN
(NON-SALARIED EMPLOYEES)
/s/ By D.J. Sacco
-----------------------------
(D. J. Sacco, Chairman,
Employees' Benefit Committee)
Date: June 26, 1997
36
