<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT TO APPLICATION OR REPORT
Filed Pursuant to Section 12, 13, or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
---------------
Commission File Number 1-8609
PACIFIC TELESIS GROUP
---------------
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report for the fiscal year
ended December 31, 1996 on Form 10-K as set forth in the pages attached hereto:
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
Pacific Telesis Group
Dated: June 30, 1997 By /s/ William E. Downing
----------------------------
William E. Downing
Executive Vice President,
Chief Financial Officer and
Treasurer
<PAGE>
1
"Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K." is
hereby amended to add the following exhibits under the heading "(4)
Exhibits:"
Exhibit
Number Description
- ------- -------------------------------------------------------
23a Consent of Ernst & Young LLP, Independent Auditors
23b Consent of Coopers & Lybrand, L.L.P.
99a Annual report on Form 11-K for the Pacific Telesis Group
Supplemental Retirement and Savings Plan for Salaried Employees
for the year 1996.
99b Annual report on Form 11-K for the Pacific Telesis Group
Supplemental Retirement and Savings Plan for Nonsalaried
Employees for the year 1996.
<PAGE>
EXHIBIT INDEX
Exhibits identified in parentheses below, on file with the SEC, are incorporated
herein by reference as exhibits hereto.
Exhibit
Number Description
- ------- ------------------------------------------------------
23a Consent of Ernst & Young LLP, Independent Auditors
23b Consent of Coopers & Lybrand, L.L.P.
99a Annual report on Form 11-K for the Pacific Telesis Group
Supplemental Retirement and Savings Plan for Salaried Employees
for the year 1996.
99b Annual report on Form 11-K for the Pacific Telesis Group
Supplemental Retirement and Savings Plan for Nonsalaried
Employees for the year 1996.
<PAGE>
<PAGE>
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the registration statements of
Pacific Telesis Group as follows:
Form S-3: PacTel Capital Resources $500,000,000 Debt Securities and Guarantee
thereof by Pacific Telesis Group
Form S-3: Secondary Offering of 137,504 shares of Pacific Telesis Group Common
Stock
Form S-3: Shareowner Dividend Reinvestment and Stock Purchase Plan
Form S-3: Pacific Telesis Group and Pacific Telesis Financing I, II, and III,
$1 billion of Trusts' Preferred Securities and Other Securities
Form S-3: 2,576,494 shares of Pacific Telesis Group Common Stock
Form S-3: SBC Communications Inc. Dividend Reinvestment Plan
Form S-4: ABI American Businessphones, Inc. Merger
Form S-4: SBC Communications Inc. Merger
Form S-8: Nonemployee Director Stock Option Plan
Form S-8: Supplemental Retirement and Savings Plan for Salaried Employees
Form S-8: Supplemental Retirement and Savings Plan for Nonsalaried Employees
Form S-8: Stock Option and Stock Appreciation Rights Plan
Form S-8: Stock Incentive Plan
of our reports dated June 25, 1997 with respect to the financial statements of
the Pacific Telesis Group Supplemental Retirement and Savings Plan for Salaried
Employees, Pacific Telesis Group Supplemental Retirement and Savings Plan for
Nonsalaried Employees and the accompanying supplemental schedules of assets held
for investment purposes and reportable transactions, filed as part of Exhibits
99a and 99b, respectively, to the Amendment No. 1 to the Annual Report on Form
10-K (Form 11-K) of Pacific Telesis Group for the year ended December 31, 1996.
San Jose, California
June 25, 1997
<PAGE>
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Pacific Telesis Group as follows:
Form S-3: PacTel Capital Resources $500,000,000 Debt Securities and Guarantee
thereof by Pacific Telesis Group
Form S-3: Secondary Offering of 137,504 shares of Pacific Telesis Group Common
Stock
Form S-3: Shareowner Dividend Reinvestment and Stock Purchase Plan
Form S-3: Pacific Telesis Group and Pacific Telesis Financing I, II, and III,
$1 billion of Trusts' Preferred Securities and Other Securities
Form S-4: ABI American Businessphones, Inc. Merger
Form S-4: SBC Communications Inc. Merger
Form S-8: Nonemployee Director Stock Option Plan
Form S-8: Supplemental Retirement and Savings Plan for Salaried Employees
Form S-8: Supplemental Retirement and Savings Plan for Nonsalaried Employees
Form S-8: Stock Option and Stock Appreciation Rights Plan
Form S-8: PacTel Corporation Retirement Plan
Form S-8: Stock Incentive Plan
of our reports dated May 17, 1996 on our audits of the financial statements of
the Pacific Telesis Group Supplemental Retirement and Savings Plan for Salaried
Employees, Pacific Telesis Group Supplemental Retirement and Savings Plan for
Nonsalaried Employees, filed as part of Exhibits 99a and 99b, respectively, to
the Annual Report on Form 10-K of Pacific Telesis Group for the year ended
December 31, 1995.
San Francisco, California
June 30, 1997
<PAGE>
<PAGE>
Exhibit 99a
Form 10-K for 1996
File No. 1-8609
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1996
Commission File Number 1-8609
---------------
PACIFIC TELESIS GROUP
SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED EMPLOYEES
---------------
PACIFIC TELESIS GROUP
130 Kearny Street, San Francisco, California 94108
<PAGE>
TABLE OF CONTENTS
Description
-----------
Item Page
1. Financial Statements and Exhibits . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
<PAGE>
2
Item 1. Financial Statements and Exhibits
(a) Financial Statements of the Plan included herein:
Report of Ernst & Young LLP Independent Auditors
Financial Statements:
Statements of Net Assets Available for Benefits with
Fund Information - December 31, 1996 and 1995
Statements of Changes in Net Assets Available for
Benefits with Fund Information For the Years Ended
December 31, 1996, 1995 and 1994
Notes to Financial Statements
Schedules:
Schedule of Assets Held for Investment Purposes
Schedule of Reportable Transactions
(b) Exhibits:
None
<PAGE>
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
Savings Plans Committee
Pacific Telesis Group Supplemental Retirement
and Savings Plan for Salaried Employees:
We have audited the accompanying statement of net assets available for benefits
of the Pacific Telesis Group Supplemental Retirement and Savings Plan for
Salaried Employees as of December 31, 1996, and the related statement of changes
in net assets available for benefits for the year then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on the 1996 financial statements based on our audit.
The statement of net assets available for benefits as of December 31, 1995 and
the related statements of changes in net assets available for benefits for each
of the two years in the period ended December 31, 1995 were audited by other
auditors whose report dated May 17, 1996, expressed an unqualified opinion on
those statements.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the 1996 financial statements referred to above present fairly,
in all material respects, the net assets available for benefits of the Pacific
Telesis Group Supplemental Retirement and Savings Plan for Salaried Employees as
of December 31, 1996, and the changes in net assets available for benefits for
the year then ended, in conformity with generally accepted accounting
principles.
Our audit was performed for the purpose of forming an opinion on the 1996
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes as of December 31, 1996 and of reportable transactions
for the year ended December 31, 1996 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
statement of net assets available for benefits and the statement of changes in
net assets available for benefits is presented for purposes of additional
analysis rather than to present the net assets available for benefits and
changes in net assets available for benefits of each fund. The supplemental
schedules and Fund Information have been subjected to the auditing procedures
applied in our audit of the basic 1996 financial statements and, in our opinion,
are fairly stated in all material respects in relation to the basic 1996
financial statements taken as a whole.
San Jose, California
June 25, 1997
<PAGE>
<TABLE>
10
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
December 31, 1996
(Dollars in thousands)
<CAPTION>
Company AirTouch Interest
Stock Stock Equity Income Bond
Fund Fund Fund Fund Fund
-----------------------------------------------------------
<C> <C> <C> <C> <C>
<S>
Assets:
Investments at fair value:
Common stock:
Pacific Telesis Group
common shares $ 413,673 $ - $ - $ - $ -
AirTouch Communications,
Inc. - 203,338 - - -
common shares
Common/commingled trust
funds:
State Street S&P 500 Fund - - 544,706 - -
State Street Long Bond Fund - - - - 36,465
State Street Money Market - - - - -
Fund
State Street Balanced Fund - - - - -
Short-term Investment Fund 1,514 444 143 20,528 23
Investments at contract value:
Contracts with insurance
companies and banks - - - 192,313 -
-----------------------------------------------------------
Total Investments 415,187 203,782 544,849 212,841 36,488
Employee contributions 1,304 - 1,892 - 177
receivable
Dividends and interest 3,556 2 3 1,123 -
receivable
Receivable for investments sold - - - 1,742 -
-----------------------------------------------------------
Total Assets 420,047 203,784 546,744 215,706 36,665
-----------------------------------------------------------
Liabilities:
Payable for investments - - - - -
purchased
Fees payable 30 14 60 39 5
-----------------------------------------------------------
Total Liabilities 30 14 60 39 5
===========================================================
Net assets available for $ 420,017 $ 203,770 $ 546,684 $ 215,667 $ 36,660
benefits
===========================================================
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
December 31, 1996
(Dollars in thousands)
<CAPTION>
Money
Market Balanced
Fund Fund Other Total
--------------------------------------------------
<C> <C> <C> <C>
<S>
Assets:
Investments at fair value:
Common stock:
Pacific Telesis Group common shares $ - $ - $ - $ 413,673
AirTouch Communications, Inc.
common shares - - - 203,338
Common/commingled trust funds:
State Street S&P 500 Fund - - - 544,706
State Street Long Bond Fund - - - 36,465
State Street Money Market Fund 83,494 - - 83,494
State Street Balanced Fund - 297,767 - 297,767
Short-term Investment Fund 1,418 92 6,834 30,996
Investments at contract value:
Contracts with insurance companies and - - - 192,313
banks
--------------------------------------------------
Total Investments 84,912 297,859 6,834 1,802,752
Employee contributions receivable 434 1,134 - 4,941
Dividends and interest receivable 354 2 30 5,070
Receivable for investments sold - - - 1,742
--------------------------------------------------
Total Assets 85,700 298,995 6,864 1,814,505
--------------------------------------------------
Liabilities:
Payable for investments purchased 349 - - 349
Fees payable 12 39 - 199
--------------------------------------------------
Total Liabilities 361 39 - 548
==================================================
Net assets available for benefits $ 85,339 $ 298,956 $ 6,864 $ 1,813,957
==================================================
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
December 31, 1995
(Dollars in thousands)
<CAPTION>
Company AirTouch Interest
Stock Stock Equity Income Bond
Fund Fund Fund Fund Fund
------------------------------------------------------------
<C> <C> <C> <C> <C>
<S>
Assets:
Investments at fair value,
except for contracts with
insurance companies and
banks, which are at contract
value:
Pacific Telesis Group
common shares $ 385,356 $ - $ - $ - $ -
AirTouch shares - 263,152 - - -
State Street S&P 500 Fund - - 443,957 - -
State Street Long Bond Fund - - - - 38,379
State Street Money Market
Fund - - - - -
State Street Balanced Fund - - - - -
Contracts with insurance
companies and banks - - - 215,161 -
Short-term investments 4,831 1,643 2,274 14,490 220
------------------------------------------------------------
Total Investments 390,187 264,795 446,231 229,651 38,599
Employee contributions 1,308 - 1,625 - 195
receivable
Dividends and interest 6,285 4 1 1,262 -
receivable
Receivable for investments sold 24 - - - -
------------------------------------------------------------
Total Assets 397,804 264,799 447,857 230,913 38,794
------------------------------------------------------------
Liabilities:
Fund transfers - net 2,884 375 (2,479) 695 (135)
Payable for investments - - 19 - -
purchased
Fees payable 67 56 97 74 10
------------------------------------------------------------
Total Liabilities 2,951 431 (2,363) 769 (125)
============================================================
Net assets available for $ 394,853 $ 264,368 $ 450,220 $ 230,144 $ 38,919
benefits
============================================================
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
December 31, 1995
(Dollars in thousands)
<CAPTION>
Money
Market Balanced
Fund Fund Total
------------------------------------
<C> <C> <C>
<S>
Assets:
Investments at fair value, except for contracts with insurance companies and
banks, which are at contract value:
Pacific Telesis Group common shares $ - $ - $ 385,356
AirTouch shares - - 263,152
State Street S&P 500 Fund - - 443,957
State Street Long Bond Fund - - 38,379
State Street Money Market Fund 74,605 - 74,605
State Street Balanced Fund - 265,009 265,009
Contracts with insurance companies and - - 215,161
banks
Short-term investments 1,272 1,404 26,134
------------------------------------
Total Investments 75,877 266,413 1,711,753
Employee contributions receivable 486 1,091 4,705
Dividends and interest receivable 1 1 7,554
Receivable for investments sold 366 - 390
------------------------------------
Total Assets 76,730 267,505 1,724,402
------------------------------------
Liabilities:
Fund transfers - net (310) (1,030) -
Payable for investments purchased 366 5 390
Fees payable 19 64 387
------------------------------------
Total Liabilities 75 (961) 777
====================================
Net assets available for benefits $ 76,655 $ 268,466 $ 1,723,625
====================================
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
For the year ended December 31, 1996
(Dollars in thousands)
<CAPTION>
Company AirTouch Interest
Stock Stock Equity Income Bond
Fund Fund Fund Fund Fund
------------------------------------------------------------
<C> <C> <C> <C> <C>
<S>
Net assets available for
benefits, January 1, 1996 $ 394,853 $ 264,368 $ 450,220 $ 230,144 $ 38,919
------------------------------------------------------------
Employee contributions 19,124 - 23,950 - 2,564
Employee rollover contributions 603 - 2,629 - 138
Investment income:
Dividends on Pacific
Telesis Group common 17,108 - - - -
shares
Interest 131 32 16 14,146 1
Net appreciation
(depreciation) of 33,309 (26,580) 103,289 - 1,359
investments
Interfund transfers, net (7,966) (11,083) 11,143 (8,415) (1,325)
------------------------------------------------------------
Total additions (deductions), 62,309 (37,631) 141,027 5,731 2,737
net
Less: Distributions to 36,916 22,831 44,181 19,875 4,964
participants
Fees 229 136 382 333 32
------------------------------------------------------------
------------------------------------------------------------
Net increase (decrease) 25,164 (60,598) 96,464 (14,477) (2,259)
============================================================
Net assets available for
benefits, December 31, 1996 $ 420,017 $ 203,770 $ 546,684 $ 215,667 $ 36,660
============================================================
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
For the year ended December 31, 1996
(Dollars in thousands)
<CAPTION>
Money
Market Balanced
Fund Fund Other Total
--------------------------------------------------
<C> <C> <C> <C>
<S>
Net assets available for
benefits, January 1, 1996 $ 76,655 $ 268,466 $ - $ 1,723,625
--------------------------------------------------
Employee contributions 5,651 15,271 $ 711 67,271
Employee rollover contributions 1,935 2,337 5,614 13,256
Investment income:
Dividends on Pacific
Telesis Group common - - - 17,108
shares
Interest 4,016 13 69 18,424
Net appreciation
(depreciation) of - 33,694 - 145,071
investments
Interfund transfers, net 11,060 8,872 (2,286) -
--------------------------------------------------
Total additions (deductions), 22,662 60,187 4,108 261,130
net
Less: Distributions to 13,918 29,485 (2,756) 169,414
participants
Fees 60 212 - 1,384
--------------------------------------------------
--------------------------------------------------
Net increase (decrease) 8,684 30,490 6,864 90,332
==================================================
Net assets available for
benefits, December 31, 1996 $ 85,339 $ 298,956 $ 6,864 $ 1,813,957
==================================================
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
For the year ended December 31, 1995
(Dollars in thousands)
<CAPTION>
Company AirTouch Interest
Stock Stock Equity Income Bond
Fund Fund Fund Fund Fund
------------------------------------------------------------
<C> <C> <C> <C> <C>
<S>
Net assets available for
benefits, January 1, 1995 $ 343,642 $ 299,797 $ 308,572 $ 237,772 $ 30,252
------------------------------------------------------------
Employee contributions 20,421 36 21,912 - 2,541
Investment income:
Dividends on Pacific
Telesis Group common 25,600 - - - -
shares
Interest 148 39 22 15,522 3
Net appreciation
(depreciation) of 57,927 (9,823) 116,907 - 5,768
investments (Note 6)
Transfers of participants'
balances, net (27,436) (6,343) 22,150 (6,430) 1,924
Transfers to/from other plans, (1,272) (130) 3,316 (494) 419
net
------------------------------------------------------------
Total additions (deductions), 75,388 (16,221) 164,307 8,598 10,655
net
Less: Distributions to
participants (Note 2) 23,837 18,937 22,482 16,094 1,964
Fees 340 271 177 132 24
------------------------------------------------------------
------------------------------------------------------------
Net increase (decrease) 51,211 (35,429) 141,648 (7,628) 8,667
============================================================
Net assets available for
benefits, December 31, 1995 $ 394,853 $ 264,368 $ 450,220 $ 230,144 $ 38,919
============================================================
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
For the year ended December 31, 1995
(Dollars in thousands)
<CAPTION>
Money
Market Balanced
Fund Fund Total
--------------------------------------
<C> <C> <C>
<S>
Net assets available for
benefits, January 1, 1995 $ 64,216 $ 204,089 $ 1,488,340
--------------------------------------
Employee contributions 6,474 15,688 67,072
Investment income:
Dividends on Pacific
Telesis Group common - - 25,600
shares
Interest 4,583 14 20,331
Net appreciation
(depreciation) of - 52,345 223,124
investments (Note 6)
Transfers of participants'
balances, net 7,278 8,857 -
Transfers to/from other plans, 842 2,791 5,472
net
--------------------------------------
Total additions (deductions), 19,177 79,695 341,599
net
Less: Distributions to
participants (Note 2) 6,695 15,200 105,209
Fees 43 118 1,105
--------------------------------------
--------------------------------------
Net increase (decrease) 12,439 64,377 235,285
======================================
Net assets available for
benefits, December 31, 1995 $ 76,655 $ 268,466 $ 1,723,625
======================================
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
12
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
For the year ended December 31, 1994
(Dollars in thousands)
<CAPTION>
Company AirTouch Interest
Stock Stock Equity Income Bond
Fund Fund Fund Fund Fund
------------------------------------------------------------
<C> <C> <C> <C> <C>
<S>
Net assets available for
benefits, January 1, 1994 $ 593,005 $ - $ 295,043 $ 247,676 $ 34,034
------------------------------------------------------------
Employee contributions 20,665 (24) 19,949 - 2,604
Investment income:
Dividends on Pacific
Telesis Group common 24,848 - - - -
shares
Interest 134 40 14 15,633 2
Net appreciation
(depreciation) of (145,171) 176,142 4,355 - (918)
investments (Note 6)
Transfers of participants'
balances, net 24,924 (39,251) 7,389 (10,111) (1,927)
Transfers to/from other plans, (140,621) 147,355 6,289 1,993 481
net
------------------------------------------------------------
Total additions (deductions), (215,221) 284,262 37,996 7,515 242
net
Less: Distributions to
participants (Note 2) 33,766 (15,769) 24,118 17,145 3,978
Fees 376 234 349 274 46
------------------------------------------------------------
------------------------------------------------------------
Net increase (decrease) (249,363) 299,797 13,529 (9,904) (3,782)
============================================================
Net assets available for
benefits, December 31, 1994 $ 343,642 $ 299,797 $ 308,572 $ 237,772 $ 30,252
============================================================
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
For the year ended December 31, 1994
(Dollars in thousands)
<CAPTION>
Money
Market Balanced
Fund Fund Total
--------------------------------------
<C> <C> <C>
<S>
Net assets available for
benefits, January 1, 1994 $ 54,074 $ 188,212 $ 1,412,044
--------------------------------------
Employee contributions 6,124 14,959 64,277
Investment income:
Dividends on Pacific
Telesis Group common - - 24,848
shares
Interest 2,289 12 18,124
Net appreciation
(depreciation) of - 2,371 36,779
investments (Note 6)
Transfers of participants'
balances, net 6,748 12,228 -
Transfers to/from other plans, 2,530 4,576 22,603
net
--------------------------------------
Total additions (deductions), 17,691 34,146 166,631
net
Less: Distributions to
participants (Note 2) 7,471 18,018 88,727
Fees 78 251 1,608
--------------------------------------
--------------------------------------
Net increase (decrease) 10,142 15,877 76,296
======================================
Net assets available for
benefits, December 31, 1994 $ 64,216 $ 204,089 $ 1,488,340
======================================
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
24
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1. Plan Description
The following description of the Pacific Telesis Group Supplemental
Retirement and Savings Plan for Salaried Employees (the "Plan") provides
only general information. Participants should refer to the Plan document
for a more comprehensive description of the Plan's provisions.
A. General
The Plan is a defined contribution plan covering all salaried employees of
Pacific Telesis Group (the "Corporation") and its participating
subsidiaries (the "Employing Company") who have completed six months of
service. It is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
B. Employee Contributions and Employing Company Matching Allocations
Employee Contributions - Eligible employees may authorize a basic
contribution of up to 6% of salary in 1% increments. If the employee has
authorized the maximum basic contribution of 6%, a supplemental
contribution may also be authorized which, when added to the basic
contribution of 6%, results in a total contribution of not more than 16% of
salary. Basic and supplemental contributions may be made on an after-tax or
before-tax basis, as elected by the employee. Once each month, the employee
may change the rate of employee contributions. The change will be effective
as of the first payroll period ending in the next month provided the
employee requests the change at least five business days before the end of
the month.
Employee contributions on a before-tax basis are limited to an annual
maximum, adjusted for inflation ($9,500 for 1996, $9,240 for 1995 and
$9,240 for 1994). Salary eligible for contributions is limited to an annual
maximum, adjusted for inflation ($150,000 for 1996, 1995 and 1994).
Employing Company Matching Allocations - Each participant receives a
"matching" allocation equal to 66-2/3% of the employee's basic
contributions. A matching allocation is not made with respect to
supplemental contributions. The Plan and the Pacific Telesis Group
Supplemental Retirement and Savings Plan for Nonsalaried Employees
incorporate a leveraged employee stock ownership plan called the Pacific
Telesis Group Supplemental Retirement and Savings Plan for Salaried and
Nonsalaried Employees (LESOP) (the "LESOP") to provide for company matching
allocations.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
1. Plan Description (Continued)
B. Employee Contributions and Employing Company Matching Allocations
(Continued)
Employing Company matching contributions made for periods before March 1,
1990 were credited to matching accounts under the Plan. Thereafter, the
Employing Company matching contributions are made through the LESOP.
Transfers to/from Other Plans - Salaried employees with less than one year
of service may elect to roll over a distribution from another qualified
plan to the Plan. Participants who retire and elect a cashout from the
Pacific Telesis Group Pension Plan for Salaried Employees (renamed the
Pacific Telesis Group Cash Balance Pension Plan for Salaried Employees) or
the Pacific Telesis Group Pension Plan may roll over the cashout to the
Plan. The amount rolled over will be credited to the employee's account as
of the last day of the month in which the rollover was received.
C. Investment Directions
Employees may elect that their payroll deductions be invested in any of the
following funds, in 1% (10% in plan years 1995 and 1994) increments, with
elections totaling 100%:
(a) the Company Stock Fund;
(b) the Equity Fund;
(c) the Bond Fund;
(d) the Money Market Fund;
(e) the Balanced Fund.
Net assets available for benefits also includes assets invested in the
Interest Income Fund which was closed to new contributions and investment
transfers in, as of December 31, 1992 and the AirTouch Stock Fund described
below. The Other account is comprised of amounts pending distribution to
participants and rollover contributions pending allocation to the fund as
directed by the participant.
Once in any three-month period, participants can transfer all or a portion
of their investment in an investment fund to another permitted investment
fund or combination of investment funds. Transfer requests are effective as
of the last day of a month if the employee makes the request before the
close of business on the New York Stock Exchange on the last day of such
month. Transfers may be made by telephoning the Participant Service Center
(PSC). Participants may make transfers among certain funds in 1%
increments. However, participants cannot transfer assets to the LESOP.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
1. Plan Description (Continued)
C. Investment Directions (Continued)
Effective April 1, 1994, AirTouch Communications, Inc. ("ATI") (formerly,
PacTel Corporation) and its subsidiaries separated their corporate
affiliation with the Corporation and its other subsidiaries. Effective as
of March 21, 1994, the record date, each shareowner of Pacific Telesis
Group shares became a shareowner of ATI with eligibility to receive one ATI
share for each share of Pacific Telesis Group.
The Corporation amended the Plan to add a new investment fund, the AirTouch
Stock Fund. This fund consisted initially of the AirTouch shares
attributable to the shares of Pacific Telesis Group held in the Company
Stock Fund and ATI common shares transferred from the LESOP. The Plan
allows fund transfers out of the AirTouch Stock Fund to any other
investment fund option, except the Interest Income Fund, as of the end of
any month. The once-every-three-months transfer limit described above will
continue to apply to the other investment funds. The AirTouch Stock Fund
was closed to new contributions and investment transfers in as of April 1,
1994.
D. Vesting and Forfeitures
Employee deduction accounts are always fully vested and nonforfeitable.
Employing Company matching accounts (the Plan's matching account and the
LESOP's Savings Match Stock account) attributable to employees' before-tax
basic deductions are also fully vested and nonforfeitable. Employing
Company matching accounts attributable to employees' after-tax basic
deductions are fully vested after a participant either completes three
years of service or reaches age 65 while employed. Such accounts are also
fully vested upon termination of employment due to retirement, disability,
death, termination under certain severance pay plans, or termination due to
a layoff.
The nonvested part of the Employing Company matching accounts attributable
to after-tax deductions is forfeited upon termination of employment.
Generally, a rehired employee may restore any forfeiture caused by a
distribution upon termination of employment by making a lump sum payment
within five years equal to the portion of the distribution attributable to
after-tax deductions and related Employing Company matching allocations.
Forfeitures are automatically restored if the employee did not receive a
distribution upon termination of employment and is reemployed within five
years. Forfeitures from the LESOP's Savings Match Stock Accounts are
applied toward subsequent matching allocations.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
1. Plan Description (Continued)
E. Withdrawals and Distributions
In-Service Withdrawals - Once in any six-month period, a participant while
still employed may elect to withdraw all or part of his or her account as
follows:
o The value of after-tax supplemental deductions, after-tax basic
deductions made more than two calendar years before the year of
withdrawal, after-tax vested Employing Company matching allocations
made more than two calendar years before the year of withdrawal, and
rollover contributions may be withdrawn without penalty. After-tax
basic deductions made in the current two preceding plan years may be
withdrawn only in a total withdrawal of all available after-tax
accounts. If a total withdrawal is made, Employing Company matching
allocations will be suspended for six months following the withdrawal
date. However, participants may continue their own deductions during
the suspension period. A partial withdrawal must be a minimum of $300.
Employees do not need to specify the actual dollar amount of a total
after-tax withdrawal.
o In addition to the amount described above, the value of before-tax
deductions and before-tax Employing Company matching allocations may
be withdrawn, in total or in a partial withdrawal of at least $300, by
employees who have attained age 59-1/2. However, such withdrawals may
not be made by employees who have not yet attained age 59-1/2, except
in the event of a hardship which is created by the purchase cost of a
primary residence, the next twelve months of expenses of
post-secondary education, eviction or foreclosure on a principal
residence, unreimbursed medical expenses, and certain federal and
state income taxes attributable to post-1992 hardship withdrawals. The
employee must demonstrate that no other resources are available to
meet the need, and the reason given and amount requested must be
approved by the Savings Plans Committee. A hardship withdrawal must be
at least $300. Post-1988 earnings on employee before-tax deductions
are not available for hardship withdrawal.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
1. Plan Description (Continued)
E. Withdrawals and Distributions (Continued)
Distribution upon Termination of Employment - A participant who has
terminated employment is entitled to a distribution of his or her vested
accounts as follows:
o If the employee terminated employment for reasons other than
retirement under the rule of 75 described below or disability, the
employee may elect to receive a distribution in a single sum payment
at any time between termination and attainment of age 65. However, if
the employee's vested account has a value of $3,500 or less, the
account is distributed automatically on March 31 of the plan year
following the year in which the employee terminated employment,
provided the value continues to be $3,500 or less at that date.
o If the employee terminates employment due to disability or retirement
with not less than 10 years of service and combined age and service
that equal or exceed 75 (the "rule of 75"), the employee may elect to
receive a distribution in a single sum payment or in annual
installments over a period of years not to exceed the employee's life
expectancy, commencing at any time between termination of employment
and April 1 following the attainment of age 70-1/2. Participants on
leaves of absence after expiration of short-term disability benefits
are treated as though their employment terminated, and they are
eligible for a distribution.
o An employee who terminates for any reason may elect to transfer all or
part of his or her account, except for the amount of the employee's
after-tax contributions, installment payments that are part of a
series that extends over 10 or more years, and distributions required
after age 70-1/2, from the Plan to another qualified plan or to an
Individual Retirement Account (IRA) in a trustee to trustee transfer,
in lieu of receiving a direct distribution.
Distributions Upon Death - The designated beneficiary or beneficiaries of
participants who die before the effective date of the distribution will
receive the entire amount of the deceased participant's vested accounts, as
soon as practicable after the participant's death, in a single sum payment,
or in certain circumstances, in two annual installments.
Age 70-1/2 Distributions During Employment - Employees who remain employed
after attaining age 70-1/2 in 1996 or a prior year will automatically
receive distributions in annual installments beginning not later than April
1 of the following year.
Form of Payment - Distributions as well as withdrawals are valued as of the
end of the month in which they are effective. Withdrawals and distributions
are made in cash, except a participant or beneficiary may choose to receive
cash or shares from amounts invested in the Company Stock Fund or the
LESOP. A participant or beneficiary may also choose to receive cash or
shares from amounts invested in the AirTouch Stock Fund.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
1. Plan Description (Continued)
F. Tax Consequences of Participation
Employees may designate their basic and supplemental deductions as
before-tax or after-tax, or as a combination of both. The before-tax basic
and supplemental deductions are intended as contributions under a salary
deferral arrangement qualified under Section 401(k) of the Internal Revenue
Code. Under such an arrangement, the employee's before-tax deductions are
considered a reduction in taxable compensation and are treated as employer
contributions to the Plan (rather than employee contributions). Before-tax
deductions reduce the employee's W-2 compensation for federal income tax
purposes and for the income tax purposes of California and most other
states. However, withdrawals of before-tax contributions are subject to
severe restrictions while the employee is in-service (see "Withdrawals and
Distributions").
Employees will not have taxable income as a result of Employing Company
contributions (including the employee's before-tax deductions that are
treated as employer contributions or allocations) or earnings on Plan
assets before the amounts are distributed from the Plan. When a
distribution is received from the Plan other than in a direct rollover
transfer, it may be partially or fully subject to federal and state income
taxes depending on the extent it represents a return of the employee's
after-tax contributions and on whether the participant has elected to
receive shares of appreciated stock.
In addition to any regular income tax that may be due, a 10% additional
federal tax (and a similar 2-1/2% additional California tax) generally
applies to taxable distributions received prior to age 59-1/2 to the extent
they are not rolled over to another qualified plan or an IRA. Five-or
ten-year averaging may be available in some circumstances to determine the
income tax on the taxable portion of a lump sum distribution, but only if
no part of the distribution is rolled over.
2. Summary of Accounting Policies
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires the use of management's estimates.
Actual results could differ from those estimates.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
2. Summary of Accounting Policies (Continued)
Investments
Investments are carried at their estimated fair values or contract values
determined as follows:
o Pacific Telesis Group common shares in the Company Stock Fund and ATI
common shares in the AirTouch Stock Fund are valued at the last
published sales prices at the end of each plan year as reported on the
composite tape of the New York Stock Exchange.
o The Plan's investments in the Bond Fund, Money Market Fund, Balanced
Fund, and Equity Fund are stated at the fair values of the total units
of participation held by the Plan in each of these common/commingled
trust funds. The fair values of the units of participation held by the
Plan are established by the Plan's trustee, and reflect the market
values of each fund's underlying assets, as reported by the investment
manager, State Street Global Advisors, a subsidiary of State Street
Bank and Trust. The Bond Fund invests primarily in long-term
obligations, including U.S. Government and government agency debts,
and corporate bonds; the Money Market Fund invests primarily in
short-term debts of U.S. Government agencies and corporations; the
Balanced Fund invests in a predetermined mix of large U.S. and
international company stocks, high quality bonds, and money market
instruments; the Equity Fund invests primarily in a broad mix of U.S.
company common stocks.
The Plan's investments in the Interest Income Fund are valued at the
amount of contributed principal plus reinvested interest less
distributions. The Interest Income Fund invests in fully
benefit-responsive investment contracts with insurance companies,
banks or other financial institutions, savings accounts, certificates
of deposit, obligations of the United States government or other
credit worthy organizations, commercial paper, corporate bond or other
debt obligations, as well as other fixed income investments (subject
to any guidelines adopted by the Corporation) which guarantee by
agreement the repayment of principal plus interest. The Plan adopted
the American Institute of Certified Public Accountants (AICPA)
Statement of Position (SOP) 94-4, Reporting of Investment Contracts
held by Health and Welfare Benefit Plans and Defined-Contribution
Pension Plans for the year ended December 31, 1995. Under SOP 94-4,
the Plan reports fully benefit-responsive investment contracts at
contract value, which may or may not equal fair value and all other
investment contracts at fair value. The Plan investments in the
Interest Income Fund were carried at contract value at December 31,
1996 and 1995. The Plan investments in the Interest Income Fund were
carried at fair value at December 31,1994. There was no impact to the
change in accounting for the Interest Income Fund because at December
31, 1995 and 1994, contract value and fair value of such contracts
were equivalent. At December 31, 1996, the contract value approximated
fair value. Fair value has been estimated based on a discounted cash
flow analysis using a current market rate at year end.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
2. Summary of Accounting Policies (Continued)
Investments (Continued)
At December 31, 1996, the crediting interest rates of the Plan's fully
benefit-responsive investment contracts ranged from 4.98% to 7.51% per
annum. The average yield for the contracts was 6.3% for 1996.
o In accordance with the Plan's accounting policy of stating investments
at fair value, net unrealized appreciation (depreciation), in addition
to realized gains and losses, is included in the net change in
appreciation(depreciation)of investments presented in the accompanying
financial statements, where appropriate for the asset being valued.
o Dividend income is recorded on the ex-dividend date. Interest earned
on investments is recorded on the accrual basis.
o Purchases and sales of securities are reflected as of the trade date.
o Amounts allocated to accounts of participants who have elected to
withdraw from the Plan but who were not paid as of the year-end are
excluded from the Statement of Net Assets Available For Benefits.
Benefits Payable
The Department of Labor requires amounts allocated to accounts of
participants who have elected to withdraw from the Plan to be reported as a
liability on the Form 5500. The following table reconciles net assets
available for benefits between these financial statements and the Form 5500
as of December 31 (dollars in thousands):
1996 1995
-----------------------------
Net assets available for plan benefits per $ 1,813,957 $1,723,625
financial statements
Benefits due for participant (97,955) (23,782)
withdrawal/distribution
=============================
Net assets available for plan benefits
per Form 5500 $ 1,716,002 $1,699,843
=============================
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
2. Summary of Accounting Policies (continued)
Benefits Payable (Continued)
Similarly, the distributions to participants amount reflected in the
statement of changes in net assets available for benefits is reconciled to
the Form 5500 as follows (dollars in thousands):
1996 1995
-----------------------------
Distributions to participants per financial $ 169,414 $ 105,209
statements
Benefits due:
Beginning of year (23,782) (19,503)
End of year 97,955 23,782
=============================
Distributions to participants per Form 5500 $ 243,587 $ 109,488
=============================
3. Participant Accounts
Employee deductions are credited to the employee's before-tax basic
account, before-tax supplemental account, after-tax basic account and
after-tax supplemental account, as appropriate.
An employee's interest in the accounts is represented by units of
participation ("Units") in each investment fund in which the employee
participates. Monthly, a participant's account is credited with Units in
each fund to which the participant's payroll deductions have been directed.
The number of Units credited is based upon each respective fund's current
Unit value which is determined as of the end of each month. A fund's Unit
value is based upon the value of the underlying assets and will reflect any
unrealized appreciation or depreciation of the fund's assets. The
determination of the end of month Unit values also results in an allocation
to the participant's account of a proportionate share of the monthly
earnings (or losses) of each fund based upon the extent of the employee's
participation (number of Units held) relative to the number of Units held
by all participants in the respective fund.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
3. Participant Accounts (Continued)
During 1996, the Plan discontinued reporting the number and value of units
to participants.
The number and value of Units at December 31, 1995 were as follows:
December 31, 1995
------------------------------
Number of Value per
Units Unit
(in
thousands)
------------------------------
Company Stock Fund 86,138 $ 4.5161
AirTouch Stock Fund 79,359 $ 3.2864
Equity Fund 30,798 $14.4322
Interest Income Fund 47,850 $ 4.7531
Bond Fund 29,362 $ 1.3099
Money Market Fund 63,225 $ 1.1801
Balanced Fund 178,083 $ 1.4883
4. Participation by Investment Direction
The number of employees contributing to the Plan as of December 31, 1996
and 1995 by each investment direction were as follows:
December 31,
1996 1995
------------------------
Entirely in the Company Stock Fund 2,007 1,959
Entirely in the Equity Fund 1,207 1,076
Entirely in the Bond Fund 19 20
Entirely in the Money Market Fund 488 440
Entirely in the Balanced Fund 507 568
Increments totaling 100% in the Company Stock Fund and
the Equity Fund 941 885
Increments totaling 100% in the Company Stock Fund and
the Money Market Fund 630 556
Increments totaling 100% in the Company Stock Fund and
the Bond Fund 32 30
Increments totaling 100% in the Company Stock Fund and the
Balanced Fund 343 384
Increments totaling 100% in the Equity Fund and the Money
Market Fund 191 209
Increments totaling 100% in the Equity Fund and the Bond
Fund 99 112
Increments totaling 100% in the Equity Fund and the
Balanced Fund 1,628 1,542
Increments totaling 100% in the Money Market and the
Bond Fund 31 32
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
4. Participation by Investment Direction (Continued)
<TABLE>
<CAPTION>
December 31,
1996 1995
-------------------------
<S> <C> <C>
Increments totaling 100% in the Money Market and
the Balanced Fund 77 95
Increments totaling 100% in the Bond Fund and the 38 68
Balanced Fund
Increments totaling 100% in the Company Stock
Fund, the Equity Fund and the Money Market Fund 305 290
Increments totaling 100% in the Company Stock
Fund, the Equity Fund and the Bond Fund 77 60
Increments totaling 100% in the Company Stock
Fund, the Equity Fund and the Balanced Fund 1,087 1,038
Increments totaling 100% in the Company Stock
Fund, the Money Market Fund and the Bond Fund 15 16
Increments totaling 100% in the Company Stock
Fund, the Money Market Fund and the Balanced 93 94
Fund
Increments totaling 100% in the Company Stock
Fund, the Bond Fund and the Balanced Fund 47 50
Increments totaling 100% in the Equity Fund, the
Money Market Fund and the Bond Fund 37 46
Increments totaling 100% in the Equity Fund, the
Money Market Fund and the Balanced Fund 169 158
Increments totaling 100% in the Equity Fund, the
Bond Fund and the Balanced Fund 372 390
Increments totaling 100% in the Money Market Fund,
the Bond Fund and the Balanced Fund 31 43
Increments totaling 100% in the Company Stock
Fund, the Equity Fund, the Money Market Fund 45 31
and the Bond Fund
Increments totaling 100% in the Company Stock
Fund, the Equity Fund, the Money Market Fund 187 185
and the Balanced Fund
Increments totaling 100% in the Company Stock
Fund, the Equity Fund, the Bond Fund and the 271 257
Balanced Fund
Increments totaling 100% in the Company Stock
Fund, the Money Market Fund, the Bond Fund and 23 21
the Balanced Fund
Increments totaling 100% in the Equity Fund, the
Money Market Fund, the Bond Fund and the 216 219
Balanced Fund
Increments totaling 100% in the Company Stock
Fund, the Equity Fund, the Money Market Fund,
the Bond Fund and the Balanced Fund 434 347
=========================
Total Employees Contributing 11,647 11,221
=========================
</TABLE>
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
5. Tax Status
The Internal Revenue Service has determined and informed the Corporation by
a letter dated July 18, 1995, that the Plan, and related Trust are designed
in accordance with applicable sections of the Internal Revenue Code (the
"Code"). The Plan has been amended since receiving the determination
letter. However, the Plan administrator believes that the Plan is designed
and is currently being operated in compliance with the applicable
requirements of the Code.
<PAGE>
26
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
6. Net Appreciation (Depreciation) of Investments
During the years ended December 31, 1996, 1995 and 1994, the net
appreciation (depreciation) of investments, including both net realized and
unrealized amounts, was as follows ( dollars in thousands):
<CAPTION>
Company AirTouch
Stock Stock Equity
Fund Fund Fund
---------------------------------------
<C> <C> <C>
<S>
1996
Common Stock $ 33,309 $ (26,580) $ 103,289
Bank Common and Commingled Trust Funds - - -
Insurance Contracts - - -
=======================================
Net Appreciation (depreciation) $ 33,309 $ (26,580) $ 103,289
=======================================
1995
Common Stock $ 57,927 $ (9,823) $ -
Bank Common and Commingled Trust Funds - - 116,907
Insurance Contracts - - -
---------------------------------------
Net Appreciation (depreciation) $ 57,927 $ (9,823) $ 116,907
=======================================
1994
Common Stock $ (145,171) $ 176,142 $ 4,355
Bank Common and Commingled Trust Funds - - -
Insurance Contracts - - -
=======================================
Net Appreciation (depreciation) $ (145,171) $ 176,142 $ 4,355
=======================================
</TABLE>
<PAGE>
<TABLE>
===============================================================================================
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
6. Net Appreciation (Depreciation) of Investments (Continued)
During the years ended December 31, 1996, 1995 and 1994, the net
appreciation (depreciation) of investments, including both net realized and
unrealized amounts, was as follows (dollars in
thousands):
<CAPTION>
Interest Money
Income Bond Market Balanced
Fund Fund Fund Fund Total
-----------------------------------------------------
<C> <C> <C> <C> <C>
<S>
1996
Common Stock $ - $ - $ - $ - $ 6,729
Bank Common and Commingled
Trust Funds - 1,359 - 33,694 138,342
Insurance Contracts - - - - -
=====================================================
Net Appreciation $ - $ 1,359 $ - $ 33,694 $ 145,071
=====================================================
1995
Common Stock $ - $ - $ - $ - $ 48,104
Bank Common and Commingled
Trust Funds - 5,768 - 52,345 175,020
Insurance Contracts - - - - -
-----------------------------------------------------
Net Appreciation (depreciation) $ - $ 5,768 $ - $ 52,345 $ 223,124
=====================================================
1994
Common Stock $ - $ - $ - $ - $ 30,971
Bank Common and Commingled
Trust Funds - (918) - 2,371 5,808
Insurance Contracts - - - - -
=====================================================
Net Appreciation (depreciation) $ - $ (918) $ - $ 2,371 $ 36,779
=====================================================
</TABLE>
<PAGE>
31
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
7. Plan Termination
The Corporation, by action of the Board of Directors, may at any time
terminate the making of deductions from salaries of all participating
employees and of contributions by the Employing Company in connection with
the Plan. If at any time the current or accumulated profits of the
Corporation and of the subsidiaries of the Corporation which are joined (or
could be joined) with it in a consolidated federal income tax return shall
be less than twice the combined contributions of all such companies under
the LESOP, the Pacific Telesis Group Supplemental Retirement and Savings
Plan for Salaried Employees and the Pacific Telesis Group Supplemental
Retirement and Savings Plan for Nonsalaried Employees since the preceding
January 1, the making of deductions from salaries and wages of all
participating employees in the Plan and of contributions by the Employing
Company shall be terminated. No termination shall have the effect of
diverting the amounts held by the Trustee for purposes other than as
provided in the Plan.
8. LESOP Provisions of the Plan
See note to financial statements of Pacific Telesis Group Supplemental
Retirement and Savings Plan for Salaried and Nonsalaried Employees (LESOP).
9. Related Party Transactions
Trustee fees, other than fees attributable to the LESOP Savings Match Stock
accounts, are charged to the applicable Plan fund or prorated among all
Plan funds, except the LESOP as appropriate. Investment manager fees, fees
charged by financial institutions in connection with the investment of any
funds under the Plan, and certain administrative fees applicable to the
Plan are charged to the applicable Plan fund(s). Brokerage fees, transfer
taxes and other expenses incidental to the purchase or sale of securities
are considered part of the cost of the securities or a reduction in the
sales price. Trustee fees and certain administrative fees with respect to
the LESOP are paid by the Employing Company.
10. Subsequent Event
On April 1, 1997, the Corporation became a wholly-owned subsidiary of SBC
Communications Inc.(SBC). Each share of common stock of the Corporation was
exchanged for 0.73145 of a share of SBC common stock. The shares of stock
of the Corporation held under the Plan in the Company Stock Fund were also
exchanged.
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1996
(Dollars and shares or units in thousands)
<CAPTION>
(c) Description of
(b) Identity of issue investment including
borrower, lessor or maturity date, (e) Current
(a) similar party collateral, par or (d) Cost Value
maturity value
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
* Pacific Telesis Group 11,256 common shares $263,892 $413,673
* Northern Trust Collective
Short Term Investment Fund Money Market Fund 1,514 1,514
=================================
$265,406 $415,187
=================================
* Air Touch Communications, 8,053 common shares $114,264 $203,338
Inc.
* Northern Trust Collective
Short Term Investment Fund Money Market Fund 444 444
---------------------------------
$114,708 $203,782
=================================
* State Street S&P 500 Fund - 4,562
common/commingled trust
shares $294,453 $544,706
* Northern Trust Collective
Short Term Investment Fund Money Market Fund 143 143
=================================
$294,596 $544,849
=================================
* State Street Bond Fund - 2,654
common/commingled trust
shares $ 28,467 $ 36,465
* Northern Trust Collective
Short Term Investment Fund Money Market Fund 23 23
---------------------------------
$ 28,490 $ 36,488
=================================
* State Street Money Market Fund $ 83,494 $ 83,494
* Northern Trust Collective
Short Term Investment Fund Money Market Fund 1,418 1,418
=================================
$ 84,912 $ 84,912
=================================
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1996
(CONTINUED)
(Dollars and shares or units in thousands)
<CAPTION>
(c) Description of
(b) Identity of issue investment including
borrower, lessor or maturity date, (e) Current
(a) similar party collateral, par or (d) Cost Value
maturity value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
* State Street Balanced Fund - 17,651
common/commingled trust
shares $193,915 $297,767
* Northern Trust Collective
Short Term Investment Fund Money Market Fund 92 92
===================================
$194,007 $297,859
===================================
* Northern Trust Collective
Short Term Investment Fund Money Market Fund $ 6,834 $ 6,834
===================================
$ 6,834 $ 6,834
===================================
Contracts with insurance companies and banks:
Aetna $16,750 principal
amount, 5.74% due $ 13,491 $ 13,491
December 31, 1998
AIL $10,000 principal
amount, 6.22% due June 3,878 3,878
30, 1997
Allstate $10,000 principal
amount, 6.81% due July 6,203 6,203
5, 2000
Cigna $21,100 principal
amount, 6.05% due 19,146 19,146
December 31, 1999
Citibank $11,500 principal
amount, 7.23% due 9,204 9,204
December 31, 1998
Citibank $14,400 principal
amount, 5,761 5,761
4.98% due December 31,
1997
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1996
(CONTINUED)
(Dollars and shares or units in thousands)
<CAPTION>
(c) Description of
(b) Identity of issue investment including
borrower, lessor or maturity date, (e) Current
(a) similar party collateral, par or (d) Cost Value
maturity value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CNA $22,500 principal
amount, $ 21,029 $ 21,029
6.75% due June 30, 1999
CNA $13,522 principal
amount, 6.02% due June 12,647 12,647
30, 1999
Jackson National $12,950 principal
amount, 12,122 12,122
6.79% due June 30, 2000
Life of Georgia $10,000 principal
amount, 6.89% due 5,361 5,361
December 31, 1997
MBL Life $1,300 principal
amount, 6.89% due 1,346 1,346
December 31, 1997
NY Life $12,950 principal
amount, 6.74% due June 12,122 12,122
30, 2001
Provident $15,400 principal
amount, 6.33% due 10,331 10,331
December 31, 1997
Provident $8,000 principal
amount, 6.60% due 5,333 5,333
January 2, 1998
Prudential $14,450 principal
amount, 5.29% due 8,959 8,959
December 31, 1998
Prudential $15,000 principal
amount, 6.94% due June 13,707 13,707
30, 1999
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR SALARIED EMPLOYEES
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1996
(CONTINUED)
(Dollars and shares or units in thousands)
<CAPTION>
(c) Description of
(b) Identity of issue investment including
borrower, lessor or maturity date, (e) Current
(a) similar party collateral, par or (d) Cost Value
maturity value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Prudential $11,000 principal
amount, 7.51% due June $ 10,242 $ 10,242
30, 1999
Lotsoff $25,254 principal
amount, 5.14% due June
30, 2000 21,006 21,006
(synthetic contract)
Security Life of Wrapper for Lotsoff
Denver Synthetic Contract 425 425
-----------------------------------
Total contracts with
insurance companies and $ 192,313 $ 192,313
banks
-----------------------------------
* Northern Trust Collective
Short Term Investment Fund Money Market Fund $ 20,528 $ 20,528
-----------------------------------
$ 212,841 $ 212,841
===================================
GRAND TOTAL $1,201,794 $1,802,752
===================================
* A party-in-interest to the Plan.
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN FOR SALARIED EMPLOYEES
Line 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
For the Year Ended December 31, 1996
(Dollars in thousands)
<CAPTION>
Category (iii)
Current
Description Number of Purchase Selling Cost of Value of Net/Gain
Identity of Party Involved of Assets Transactions Price Price Asset Asset on (Loss)
Transaction
Date
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Northern Trust Collective
Short-Term Investment Fund Money Market Fund 303 $200,133 N/A $200,133 $200,163 N/A
Northern Trust Collective
Short-Term Investment Fund Money Market Fund 323 N/A $169,136 169,136 N/A $ -0-
<FN>
</FN>
</TABLE>
There were no category (i), (ii) or (iv) reportable transactions during 1996.
<PAGE>
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
Savings Plans Committee
Pacific Telesis Group Supplemental Retirement and Savings Plan for Salaried and
Nonsalaried Employees (LESOP):
We have audited the accompanying statement of net assets available for benefits
of the Pacific Telesis Group Supplemental Retirement and Savings Plan for
Salaried and Nonsalaried Employees (LESOP) as of December 31, 1996, and the
related statement of changes in net assets available for benefits for the year
then ended. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The financial statements for the year ended
December 31, 1995 were audited by other auditors whose report dated May 17,
1996, expressed an unqualified opinion on those statements.
We conducted our audit 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 audit provides 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 Pacific
Telesis Group Supplemental Retirement and Savings Plan for Salaried and
Nonsalaried Employees (LESOP) as of December 31, 1996, and the changes in net
assets available for benefits for the year then ended, in conformity with
generally accepted accounting principles.
Our audit was performed for the purpose of forming an opinion on the 1996
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes as of December 31, 1996 and of reportable transactions
for the year ended December 31, 1996, are presented for the purpose 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 supplemental schedules
have been subjected to the auditing procedures applied in our audit of the basic
1996 financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic 1996 financial statements taken as a whole.
San Jose, California
June 25, 1997
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED AND NONSALARIED EMPLOYEES (LESOP)
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 1996 and 1995
(Dollars in thousands)
1996 1995
--------------- ----------------
ASSETS
Investment - at fair value
Pacific Telesis Group Common Shares, at
fair value,
Cost $567, 387 and $604,239, for 1996 $677,014 $663,567
and 1995, respectively
Employer Receivable 62,367 70,530
Dividend and Interest Receivable 5,913 10,960
Short-Term Investments 24,353 33,692
--------------- ----------------
Total Assets 769,647 778,749
LIABILITIES
Interest Payable 13,582 21,052
Note Payable 206,975 301,191
--------------- ----------------
Total Liabilities 220,557 322,243
--------------- ----------------
Net Assets Available For Benefits $549,090 $456,506
=============== ================
NET ASSETS AVAILABLE FOR BENEFITS
Net Assets Allocated to Participants $462,343 $382,284
Net Assets Available for Future Allocations 86,747 74,222
--------------- ----------------
Net Assets Available For Benefits $549,090 $456,506
=============== ================
See accompanying notes.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED AND NONSALARIED EMPLOYEES (LESOP)
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
For the years ended December 31, 1996 and 1995
(Dollars in thousands)
1996 1995
--------------- ----------------
Net Assets Available for Benefits, $456,506 $289,656
January 1,
--------------- ----------------
Additions to Net Assets Attributed to:
Investment Income:
Dividends on Pacific Telesis Group
Common Shares 28,437 43,720
Interest Income 880 941
Net Appreciation of Investments in
Pacific Telesis Group Common 61,720 99,170
Shares
--------------- ----------------
Employer Contributions 62,367 70,530
--------------- ----------------
Total Additions 153,404 214,361
--------------- ----------------
Deductions from Net Assets Attributed
to:
Distributions to Participants 47,238 26,459
Interest Expense 13,582 21,052
--------------- ----------------
Total Deductions 60,820 47,511
--------------- ----------------
Net Increase 92,584 166,850
--------------- ----------------
Net Assets Available for Benefits, $549,090 $456,506
December 31
=============== ================
See accompanying notes.
<PAGE>
CIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED AND NONSALARIED EMPLOYEES (LESOP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1. Plan Description
The following description of the Pacific Telesis Group Supplemental
Retirement and Savings Plan for Salaried and Nonsalaried Employees (LESOP)
provides only general information. Participants should refer to the plan
document for a more comprehensive description of the Plan's provisions.
A. General
The Pacific Telesis Group (the "Corporation") originally adopted a
leveraged employee stock ownership plan (the "LESOP" or the "Plan"),
effective December 1, 1989, in conjunction with the Pacific Telesis Group
Supplemental Retirement and Savings Plan for Salaried Employees and the
Pacific Telesis Group Supplemental Retirement and Savings Plan for
Nonsalaried Employees (the "Savings Plans"). On December 28, 1989, the
LESOP borrowed $691,052,400 from the Corporation pursuant to a loan
agreement and promissory note. Bankers Trust Company, as Trustee of the
Pacific Telesis Group Employee Stock Ownership Plan, using the proceeds of
the loan, purchased 13,900,000 of the Corporation's treasury shares
("Shares") at a total price of $691,052,400, or $49.25 per share plus
accrued dividends. The Shares were credited to a suspense account as
required by Treasury Regulations Section 54.4975-11(c).
Effective April 1, 1994, PacTel Corporation separated from Pacific Telesis
Group with PacTel Corporation renamed AirTouch Communications, Inc.
("ATI"). Consequently, the Plan was amended to reflect that for each share
of Pacific Telesis Group common stock held by the Plan as of March 21,
1994, the Plan received an equivalent number of shares of common stock of
ATI. Participants had the option of transferring the ATI stock in their
accounts to the ATI Stock Fund in the Savings Plans; or converting the ATI
stock to Pacific Telesis Group stock.
B. Employee Contributions and Employing Company Matching Allocations
Under the Savings Plans, a participant can make basic contributions of one
to six percent of the participant's earnings for a month, which are matched
by the Corporation and its participating subsidiaries (the "Employing
Company"). These matching contributions are used to repay the loan
described above in sufficient amounts to release Shares from the suspense
account so that the value of matching allocations will be 66-2/3% of the
participants' basic contributions to the Savings Plans for each month.
If Shares released from the suspense account by loan payments made within a
plan year are more valuable than 66-2/3% of the participants' basic
contributions, the excess value will be allocated as of the last day of the
plan year among those participants who made contributions during the last
month of the plan year in proportion to their pay or salary for such month.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED AND NONSALARIED EMPLOYEES (LESOP)
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
1. Plan Description (Continued)
C. Participant Accounts
Units representing shares of stock ("Units") released from the suspense
account on behalf of a participant are credited to a "Savings Match Stock"
account maintained for a participant under the Plan. Participants are
entitled to the same voting, tender and shareholder rights as any other
shareholder with respect to any shares credited to their Savings Match
Stock account. Shares are released from the suspense account on a monthly
basis prior to the actual payment of principal and interest on the Plan
loan. The market value of shares released from the suspense account for the
1996 plan year was $75,401,348. The final loan payment for any plan year is
determined as of the end of such year pursuant to the formula set forth in
Treasury Regulations Section 54.4975-7 (b) (8), based on the number of
shares of stock released during each month of such year.
Dividends on shares purchased with the Plan loan may be used to repay the
loan, which will cause the release of shares from the suspense account.
Whenever dividends on shares credited to participant's Savings Match Stock
account are used for this purpose, the Plan provides that shares with a
fair market value at least equal to the amount of the dividend are
allocated to the participant's Savings Match Stock account. These loan
payments and released shares are also taken into account when the final
calculation of principal and interest to be paid for the year is performed.
The IRS issued a private letter ruling to the Corporation providing that
Shares purchased with the sale proceeds of ATI shares received in
conjunction with the spin-off may be treated as shares purchased with the
Plan loan.
D. Vesting and Forfeitures
Savings Match Stock accounts are fully vested and nonforfeitable after a
participant either completes three years of service or reaches age 65 while
employed. However, the portion of a salaried participant's Savings Match
Stock account attributable to before-tax employee deductions is always
fully vested and nonforfeitable, regardless of age or service. Savings
Match Stock accounts are also fully vested upon termination of employment
due to retirement, disability, termination under certain severance pay
plans or termination due to layoff. Forfeitures from Savings Match Stock
accounts are allocated among participating employees.
E. Withdrawals and Distributions
The valuation, withdrawal and distribution rules governing Savings Match
Stock accounts generally are the same as the rules governing the Savings
Plans.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED AND NONSALARIED EMPLOYEES (LESOP)
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
1. Plan Description (Continued)
F. Tax Consequences of Participation
Employees will not have taxable income as a result of Employing Company
contributions or earnings on Plan assets before the amounts are distributed
from the Plan. When a distribution is received from the Plan, it may be
partially or fully subject to federal and state income taxes depending on
whether the participant elects to receive cash or shares of appreciated
stock.
In addition to any regular income tax that may be due, a 10% additional
federal tax (and a similar 2-1/2% additional California tax) generally
applies to the taxable amount of distributions received prior to age 59-1/2
to the extent they are not rolled over to another qualified plan or an IRA.
Five- or ten-year averaging may be available in some circumstances to
determine the regular income tax on the taxable portion of a lump sum
distribution but only if no part of the distribution is rolled over.
2. Summary of Accounting Policies
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires the use of management's estimates.
Actual results could differ from those estimates.
Investments
The Plan's investment in the Corporation's common shares is valued at the
last published sales price at the end of each plan year as reported on the
composite tape of the New York Stock Exchange.
In accordance with the accounting policy of stating investments at fair
value, the net unrealized appreciation (depreciation), in addition to
realized gains and losses, is included in the net appreciation
(depreciation) of investments presented in the accompanying financial
statements.
Dividend income is recorded on the ex-dividend date. Interest earned on
investments is recorded on the accrual basis. Purchases and sales of
securities are reflected as of the trade date.
Benefits Payable
In accordance with generally accepted accounting principles, amounts
allocated to accounts of participants who have elected to withdraw from the
Plan but who were not paid as of the year-end are excluded from net assets
available for benefits.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED AND NONSALARIED EMPLOYEES (LESOP)
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
2. Summary of Accounting Policies (Continued)
The Department of Labor requires these amounts to be reported as a
liability on Form 5500. The following table reconciles net assets available
for benefits between these financial statements and the Form 5500 as of
December 31 (dollars in thousands):
1996 1995
--------------- ---------------
Net assets available for plan benefits
per financial $549,090 $456,506
statements
Benefits due for participant (6,914) (7,682)
withdrawal/distribution
=============== ===============
Net assets available for Plan benefits $542,176 $448,824
per Form 5500
=============== ===============
Similarly, the following table is a reconciliation of distributions to
participants from the statement of changes of net assets available for
benefits to the Form 5500 as of December 31 (dollars in thousands):
1996 1995
--------------- ---------------
Distribution to participants per $47,238 $26,459
financial statements
Benefits due:
Beginning of year (7,682) (6,100)
End of year 6,914 7,682
=============== ===============
Distributions to participants per Form $46,470 $28,041
5500
=============== ===============
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED AND NONSALARIED EMPLOYEES (LESOP)
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
3. Investment
The Plan invests its assets in the Corporation's common shares. As of
December 31, 1996 and 1995, total investment, including common shares in
the Savings Stock Match account and shares held in the suspense account, is
as follows (dollars in thousands):
1996 Units Cost Fair Value
---- ----- ---- ----------
Savings Stock Match Accounts 12,442,831 $380,167 $457,274
Suspense Account 5,979,320 187,220 219,740
-------------------------------------------
Total 18,422,151 $567,387 $677,014
===========================================
1995 Units Cost Fair Value
---- ----- ---- ----------
Savings Stock Match Accounts 11,228,756 $339,247 $376,164
Suspense Account 8,579,204 264,992 287,403
-------------------------------------------
Total 19,807,960 $604,239 $663,567
===========================================
4. Tax Status
The Internal Revenue Service has determined and informed the Corporation by
a letter dated July 18, 1995, that the Plan and related Trust are designed
in accordance with applicable sections of the Internal Revenue Code (the
"Code"). The Plan has been amended since receiving the determination
letter. However, the Plan administrator believes that the Plan is designed
and is currently being operated in compliance with the applicable
requirements of the Code.
5. Plan Termination
The Corporation, by action of the Board of Directors, may at any time
terminate the making of contributions by all Employing Companies in
connection with the Plan. If at any time the current or accumulated profits
of the Corporation and of the subsidiaries of the Corporation which are
joined (or could be joined) with it in a consolidated federal income tax
return shall be less than twice the combined contributions of all such
companies under the Plan and the Savings Plans since the preceding January
1, the making of contributions by all Employing Companies shall be
terminated. No termination shall have the effect of diverting the amounts
held by the trustee to purposes other than as provided in the Plan.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED AND NONSALARIED EMPLOYEES (LESOP)
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
5. Plan Termination (Continued)
Following such a termination of contributions by all Employing Companies,
common shares held in the suspense account shall be redeemed by the
Corporation or sold to satisfy any outstanding indebtedness of the Plan.
Any balance remaining in the suspense account shall be allocated among
participating employees in proportion to their pay or salary in the year
the termination occurs. Upon the termination of contributions, the Plan may
remain in existence, but the Savings Match Stock accounts shall become
nonforfeitable.
6. Note Payable
The 15-year promissory note is payable to the Corporation and matures
January 2, 2005. The interest rate on the note is based on the London
Interbank Offered Rate (LIBOR) and is adjusted quarterly (6.53% at December
31, 1996). The Plan paid $21,052,000 and $10,263,000 in interest and
$94,216,000 and $46,763,000 in principal on the outstanding loan balance
during the year ended December 31, 1996 and 1995, respectively.
In accordance with the terms of the promissory note payable, principal
payments of $10,522,600, $80,600,000 and $115,852,400 are due in years
2003, 2004, and 2005, respectively.
Repayment of principal in subsequent years will follow the terms of the
note or may be accelerated according to management's discretion.
7. Related Party Transactions
Administrative expenses of the Plan are paid by the Employing Company,
except that trustee fees and certain administrative expenses in connection
with the Plan may be charged to the income earned in the suspense account.
Brokerage fees, transfer taxes and other expenses incident to the purchase
or sale of securities are considered part of the cost of the securities or
a reduction in the sales price. Transfer taxes applicable to distributions
of shares are paid by the Employing Company.
8. Subsequent Event
On April 1, 1997, the Corporation became a wholly-owned subsidiary of SBC
Communications Inc. ("SBC"). Each share of common stock of the Corporation
was exchanged for 0.73145 of a share of SBC common stock.
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED AND NONSALARIED EMPLOYEES (LESOP)
LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1996
(Dollars and shares or units in thousands)
<CAPTION>
(c) Description of
(b) Identity of issue investment including
borrower, lessor or maturity date, rate of
(a) similar party interest, collateral, (d) Cost (e) Current
par or maturity value Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
* Pacific Telesis Group
Common Shares 18,422 Common Shares $567,387 $677,014
--------------------------------
$567,387 $677,014
--------------------------------
* Northern Trust
Collective Short
Term Money Market Fund $ 24,353 $ 24,353
Investment Fund
--------------------------------
$ 24,353 $ 24,353
--------------------------------
<FN>
* A party-in-interest to the Plan.
</FN>
</TABLE>
.
<PAGE>
- ---------------
43
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED AND NONSALARIED EMPLOYEES (LESOP)
LINE 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
For the Year Ended December 31, 1996
(Dollars in thousands)
<CAPTION>
Category (iii) reportable transactions
(g) Current
Value of
(a) Identity of (b) Description (c) Number (d) (e) Selling (f) Cost of Asset on (h) Net
Party involved of Asset of Purchase Price Asset Transaction Gain or
Transactions Price Date (Loss)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Pacific Telesis Group Pacific Telesis
Common Shares Group 31 N/A $48,273 $36,852 $48,273 11,421
Common Shares
Bankers Trust Pyramid
Directed Account Short-term
Cash Fund Investments 9 19,463 N/A 19,463 19,463 N/A
Bankers Trust Pyramid
Directed Account Short-term
Cash Fund Investments 7 N/A 53,155 53,155 53,155 --
<FN>
Note: There were no category (i), (ii) or (iv) reportable transactions during 1996.
</FN>
</TABLE>
<PAGE>
44
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Savings Plans Committee has duly caused this annual report to be signed by
the undersigned thereunto duly authorized.
PACIFIC TELESIS GROUP
SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN
FOR SALARIED EMPLOYEES
By Savings Plans Committee
By: /s/R. P. McGahan
-------------------------------
R. P. McGahan
Member of the Committee
Dated: June 30, 1997
<PAGE>
Exhibit 99b
Form 10-K for 1996
File No. 1-8609
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1996
Commission File Number 1-8609
----------
PACIFIC TELESIS GROUP
SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN FOR NONSALARIED EMPLOYEES
----------
PACIFIC TELESIS GROUP
130 Kearny Street, San Francisco, California 94108
<PAGE>
TABLE OF CONTENTS
Description
Item Page
1. Financial Statements and Exhibits.......................................1
<PAGE>
2
Item 1. Financial Statements and Exhibits
(a) Financial Statements of the Plan included herein:
Report of Independent Ernst & Young LLP Auditors
Financial Statements:
Statements of Net Assets Available for Benefits, with Fund
Information - December 31, 1996 and 1995
Statements of Changes in Net Assets Available for Benefits,
with Fund Information For the Years Ended December 31, 1996,
1995 and 1994
Notes to Financial Statements
Schedules:
Schedule of Assets Held for Investment Purposes
Schedule of Reportable Transactions
(b) Exhibits:
None
<PAGE>
REPORT OF INDEPENDENT ERNST & YOUNG LLP AUDITORS
Savings Plans Committee
Pacific Telesis Group Supplemental Retirement
and Savings Plan for Nonsalaried Employees:
We have audited the accompanying statement of net assets available for benefits
of the Pacific Telesis Group Supplemental Retirement and Savings Plan for
Nonsalaried Employees as of December 31, 1996, and the related statement of
changes in net assets available for benefits for the year then ended. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on the 1996 financial statements based
on our audit. The statement of net assets available for benefits as of December
31, 1995 and the related statements of changes in net assets available for
benefits for each of the two years in the period ended December 31, 1995 were
audited by other auditors whose report dated May 17, 1996 expressed an
unqualified opinion on those statements.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the 1996 financial statements referred to above present fairly,
in all material respects, the net assets available for benefits of the Pacific
Telesis Group Supplemental Retirement and Savings Plan for Nonsalaried Employees
at December 31, 1996, and the changes in net assets available for benefits for
the year ended December 31, 1996, in conformity with generally accepted
accounting principles.
Our audit was performed for the purpose of forming an opinion on the 1996
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes as of December 31, 1996 and of reportable transactions
for the year ended December 31, 1996 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
statement of net assets available for benefits and the statement of changes in
net assets available for benefits is presented for purposes of additional
analysis rather than to present the net assets available for benefits and
changes in net assets available for benefits of each fund. The supplemental
schedules and Fund Information have been subjected to the auditing procedures
applied in the audit of the basic 1996 financial statements and, in our opinion,
are fairly stated in all material respects in relation to the basic 1996
financial statements taken as a whole.
San Jose, California
June 25, 1997
<PAGE>
12
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
December 31, 1996
(Dollars in thousands)
<CAPTION>
Company AirTouch Interest Equity
Stock Fund Stock Fund Income Fund Fund
----------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments at fair value:
Common stock:
Pacific Telesis Group common shares $ 508,375 $ - $ - $ -
AirTouch Communications, Inc.
common shares - 207,415 - -
Common/commingled trust funds:
State Street S&P 500 Fund - - - 140,199
State Street Long Bond fund - - - -
State Street Money Market Fund - - - -
State Street Balanced Fund - - - -
Short-term Investment Fund 3,950 335 11,931 1,145
Investments at contract value:
Contracts with insurance companies and - - 113,420 -
banks
----------------------------------------------------
Total investments 512,325 207,750 125,351 141,344
Employee contributions receivable 242 - - 99
Dividends and interest receivable 4,368 2 693 2
Receivable for investments sold - - 6,339 -
----------------------------------------------------
Total assets 516,935 207,752 132,383 141,445
----------------------------------------------------
Liabilities:
Payable for investments purchased - - 694 -
Fees payable 64 35 41 24
----------------------------------------------------
Total liabilities 64 35 735 24
====================================================
Net assets available for benefits $ 516,871 $ 207,717 $131,648 $141,421
====================================================
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
December 31, 1996
(Dollars in thousands)
<CAPTION>
Money
Bond Market Balanced
Fund Fund Fund Other Total
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets:
Investments at fair value:
Common stock:
Pacific Telesis Group
common shares $ - $ - $ - $ - $ 508,375
AirTouch Communications,
Inc. common shares - - - - 207,415
Common/commingled trust
funds:
State Street S&P 500 Fund - - - - 140,199
State Street Long Bond fund 20,688 - - - 20,688
State Street Money Market - 50,735 - - 50,735
Fund
State Street Balanced Fund - - 112,663 - 112,663
Short-term Investment Fund 236 1,856 933 543 20,929
Investments at contract value:
Contracts with insurance
companies and banks - - - - 113,420
------------------------------------------------------------------
Total investments 20,924 52,591 113,596 543 1,174,424
Employee contributions 20 77 81 - 519
receivable
Dividends and interest - 219 1 4 5,289
receivable
Receivable for investments - - - - 6,339
sold
------------------------------------------------------------------
Total assets 20,944 52,887 113,678 547 1,186,571
------------------------------------------------------------------
Liabilities:
Payable for investments - 214 - - 908
purchased
Fees payable 3 9 19 - 195
------------------------------------------------------------------
Total liabilities 3 223 19 - 1,103
==================================================================
Net assets available for $ 20,941 $ 52,664 $113,659 $ 547 $ 1,185,468
benefits
==================================================================
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
December 31, 1995
(Dollars in thousands)
<CAPTION>
Company AirTouch Interest Equity
Stock Fund Stock Fund Income Fund Fund
----------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments at fair value, except for
contracts with insurance companies and
banks, which are at contract value:
Pacific Telesis Group common shares $ 460,264 $ - $ - $ -
AirTouch common shares - 268,833 - -
State Street S&P 500 Fund - - - 104,551
State Street Long Bond fund - - - -
State Street Money Market Fund - - - -
State Street Balanced Fund - - - -
Contracts with insurance companies and - - 134,907 -
banks
Short-term investments 9,916 3,936 8,412 2,302
----------------------------------------------------
Total investments 470,180 272,769 143,319 106,853
Employee contributions receivable 211 - - 124
Dividends and interest receivable 7,507 5 789 2
Receivable for investments sold - - - -
----------------------------------------------------
Total assets 477,898 272,774 144,108 106,979
----------------------------------------------------
Liabilities:
Fund transfers - net 3,556 477 255 (2,348)
Payable for investments purchased - 518 - -
Fees payable 149 153 94 27
----------------------------------------------------
Total liabilities 3,705 1,148 349 (2,321)
====================================================
Net assets available for benefits $ 474,193 $ 271,626 $143,759 $109,300
====================================================
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
December 31, 1995
(Dollars in thousands)
<CAPTION>
Money
Bond Market Balanced
Fund Fund Fund Total
----------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments at fair value, except for
contracts with insurance companies and
banks, which are at contract value:
Pacific Telesis Group common shares $ - $ - $ - $460,264
AirTouch common shares - - - 268,833
State Street S&P 500 Fund - - - 104,551
State Street Long Bond fund 20,587 - - 20,587
State Street Money Market Fund - 43,739 - 43,739
State Street Balanced Fund - - 97,438 97,438
Contracts with insurance companies and - - - 134,907
banks
Short-term investments 570 1,779 2,158 29,073
----------------------------------------------------
Total investments 21,157 45,518 99,596 1,159,392
Employee contributions receivable 21 91 87 534
Dividends and interest receivable - 1 2 8,306
Receivable for investments sold - 214 - 214
----------------------------------------------------
Total assets 21,178 45,824 99,685 1,168,446
----------------------------------------------------
Liabilities:
Fund transfers - net (1) (551) (1,388) -
Payable for investments purchased - 214 - 732
Fees payable 7 14 33 477
----------------------------------------------------
Total liabilities 6 (323) (1,355) 1,209
====================================================
Net assets available for benefits $ 21,172 $ 46,147 $101,040 $1,167,237
====================================================
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
For the year ended December 31, 1996
(Dollars in thousands)
<CAPTION>
Company AirTouch Interest Equity
Stock Fund Stock Fund Income Fund Fund
----------------------------------------------------
<S> <C> <C> <C> <C>
Net assets available for benefits, $ 474,193 $ 271,626 $143,759 $109,300
January 1, 1996
Employee contributions 36,704 - - 15,949
Employee rollover contributions 612 - - 836
Investment income:
Dividends on Pacific Telesis Group
common shares 20,510 - - -
Interest 176 46 8,649 18
Net appreciation (depreciation) of 42,064 (25,879) - 25,819
investments
Interfund transfers, net (5) (7,015) (2,822) 7,410
----------------------------------------------------
Total additions (deductions), net 100,061 (32,848) 5,827 50,032
Less: Distributions to participants 56,598 30,672 17,601 17,658
Fees 785 389 337 253
----------------------------------------------------
Net increase (decrease) 42,678 (63,909) (12,110) 32,121
====================================================
Net assets available for benefits,
December 31, 1996 $ 516,871 $ 207,717 $131,648 $141,421
====================================================
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
For the year ended December 31, 1996
(Dollars in thousands)
<CAPTION>
Money
Bond Market Balanced
Fund Fund Fund Other Total
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets available for
benefits, January 1, 1996 $ 21,172 $ 46,147 $101,040 $ - $ 1,167,237
Employee contributions 3,237 11,726 13,095 - 80,711
Employee rollover 140 886 983 556 4,013
contributions
Investment income:
Dividends on Pacific
Telesis Group common shares - - - - 20,510
Interest 4 2,798 15 18 11,724
Net appreciation
(depreciation) of 791 - 12,741 - 55,536
investments
Interfund transfers, net (1,180) 1,111 2,528 (27) -
------------------------------------------------------------------
Total additions (deductions), 2,992 16,521 29,362 547 172,494
net
Less: Distributions to 3,181 9,906 16,537 - 152,152
participants
Fees 43 98 206 - 2,111
------------------------------------------------------------------
Net increase (decrease) (231) 6,517 12,619 547 18,231
==================================================================
Net assets available for
benefits, December 31, 1996 $ 20,941 $ 52,664 $113,659 $ 547 $ 1,185,468
==================================================================
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
For the year ended December 31, 1995
(Dollars in thousands)
<CAPTION>
Company AirTouch Interest Equity
Stock Fund Stock Fund Income Fund Fund
----------------------------------------------------
<S> <C> <C> <C> <C>
Net assets available for benefits, $ 405,620 $ 320,503 $153,981 $ 59,163
January 1, 1995
Employee contributions 42,834 2 - 10,864
Investment income:
Dividends on Pacific Telesis Group
common shares 30,187 - - -
Interest 199 39 9,773 14
Net appreciation (depreciation) of
investments 68,635 (10,420) - 23,650
(Note 6)
Transfers of participants' balances, net (24,025) (4,969) (2,686) 19,766
Transfers to/from other plans, net (1,645) (360) (212) 2,966
----------------------------------------------------
Total additions (deductions), net 116,185 (15,708) 6,875 57,260
Less: Distributions to participants (Note 46,934 32,682 16,926 7,036
2)
Fees 678 487 171 87
----------------------------------------------------
Net increase (decrease) 68,573 (48,877) (10,222) 50,137
====================================================
Net assets available for benefits,
December 31, 1995 $ 474,193 $ 271,626 $143,759 $109,300
====================================================
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
For the year ended December 31, 1995
(Dollars in thousands)
<CAPTION>
Bond Money Balanced
Fund Market Fund Fund Total
----------------------------------------------------
<S> <C> <C> <C> <C>
Net assets available for benefits, $ 15,018 $ 33,930 $ 71,641 $1,059,856
January 1, 1995
Employee contributions 3,188 13,259 11,151 81,298
Investment income:
Dividends on Pacific Telesis Group
common shares - - - 30,187
Interest 3 2,529 12 12,569
Net appreciation (depreciation) of
investments 2,929 - 18,421 103,215
(Note 6)
Transfers of participants' balances, net 1,496 3,362 7,056 -
Transfers to/from other plans, net 286 988 2,248 4,271
----------------------------------------------------
Total additions (deductions), net 7,902 20,138 38,888 231,540
Less: Distributions to participants (Note 1,722 7,869 9,397 122,566
2)
Fees 26 52 92 1,593
----------------------------------------------------
Net increase (decrease) 6,154 12,217 29,399 107,381
====================================================
Net assets available for benefits,
December 31, 1995 $ 21,172 $ 46,147 $101,040 $1,167,237
====================================================
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
For the year ended December 31, 1994
(Dollars in thousands)
<CAPTION>
Company AirTouch Interest Equity
Stock Fund Stock Fund Income Fund Fund
----------------------------------------------------
<S> <C> <C> <C> <C>
Net assets available for benefits, $ 644,174 $ - $161,925 $ 45,531
January 1, 1994
Employee contributions 45,058 6 - 9,069
Investment income:
Dividends on Pacific Telesis Group
common shares 28,477 - - -
Interest 209 31 10,124 4
Net appreciation (depreciation) of
investments (157,015) 187,202 - 1,056
(Note 6)
Transfers of participants' balances, net 38,329 (47,353) (5,314) 5,738
Transfers to/from other plans, net (154,020) 166,249 1,191 1,519
----------------------------------------------------
Total additions (deductions), net (198,962) 306,135 6,001 17,386
Less: Distributions to participants (Note 38,809 (14,977) 13,603 3,630
2)
Fees 783 609 342 124
----------------------------------------------------
Net increase (decrease) (238,554) 320,503 (7,944) 13,632
====================================================
Net assets available for benefits,
December 31, 1994 $ 405,620 $ 320,503 $153,981 $ 59,163
====================================================
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS WITH FUND INFORMATION
For the year ended December 31, 1994
(Dollars in thousands)
<CAPTION>
Money
Bond Market Balanced
Fund Fund Fund Total
----------------------------------------------------
<S> <C> <C> <C> <C>
Net assets available for benefits, $ 14,725 $ 19,298 $ 56,159 $941,812
January 1, 1994
Employee contributions 3,396 13,811 10,312 81,652
Investment income:
Dividends on Pacific Telesis Group
common shares - - - 28,477
Interest 2 1,030 6 11,406
Net appreciation (depreciation) of
investments (389) - 931 31,785
(Note 6)
Transfers of participants' balances, net (1,898) 3,061 7,437 -
Transfers to/from other plans, net 334 1,129 1,885 18,287
----------------------------------------------------
Total additions (deductions), net 1,445 19,031 20,571 171,607
Less: Distributions to participants (Note 1,111 4,332 4,939 51,447
2)
Fees 41 67 150 2,116
----------------------------------------------------
Net increase (decrease) 293 14,632 15,482 118,044
====================================================
Net assets available for benefits,
December 31, 1994 $ 15,018 $ 33,930 $ 71,641 $1,059,856
====================================================
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
24
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
1. Plan Description
The following description of the Pacific Telesis Group Supplemental
Retirement and Savings Plan for Nonsalaried Employees (the "Plan") provides
only general information. Participants should refer to the Plan document
for a more comprehensive description of the Plan's provisions.
A. General
The Plan is a defined contribution plan covering all non-salaried employees
of Pacific Telesis Group (the "Corporation") and its participating
subsidiaries (the "Employing Company") who have completed one year of
service. It is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
B. Employee Contributions and Employing Company Matching Allocations
Employee Contributions - Eligible employees may authorize a basic
contribution of up to 6% of pay in 1% increments. If the employee has
authorized the maximum basic contribution, a supplemental contribution may
also be authorized which, when added to the basic contribution, results in
a total contribution of not more than 16% of the employee's pay. Basic and
supplemental contributions may be made on an after-tax or before-tax basis,
as elected by the employee. Once each month, the employee may change the
rate of employee contributions. The change will be effective as of the
first payroll period ending in the next month provided the employee
requests the change at least five business days before the end of the
month.
Employee contributions on a before-tax basis are limited to an annual
maximum, adjusted for inflation ($9,500 for 1996, $9,240 for 1995 and
$9,240 for 1994). Wages eligible for deductions is limited to an annual
maximum, adjusted for inflation ($150,000, $245,000 and $242,280 for 1996,
1995 and 1994, respectively).
Employing Company Matching allocations - Each participant receives a
"matching" allocation equal to 66-2/3% of the employee's basic
contributions. A matching allocation is not made with respect to
supplemental contributions. The Plan and the Pacific Telesis Group
Supplemental Retirement and Savings Plan for Salaried Employees incorporate
a leveraged employee stock ownership plan called the Pacific Telesis Group
Supplemental Retirement and Savings Plan for Salaried and Nonsalaried
Employees (LESOP) (the "LESOP") to provide for company matching
allocations.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
1. Plan Description (Continued)
B. Employee Contributions and Employing Company Matching Allocations
(Continued)
Employing Company matching contributions made for the periods before March
1, 1990 were credited to the matching accounts under the Plan. Thereafter,
the Employing Company matching contributions are made through the LESOP.
Transfers to/from Other Plans - Nonsalaried employees with less than one
year of service may elect to roll over a distribution from another
qualified plan to the Plan. Participants who retire and elect a cashout
from the Pacific Telesis Group Pension Plan or the Pacific Telesis Group
Pension Plan for Salaried Employees (renamed the Pacific Telesis Group Cash
Balance Pension Plan for Salaried Employees) may roll over the cashout to
the Plan. The amount rolled over will be credited to the employee's account
as of the last day of the month in which the rollover was received.
C. Investment Directions
Employees may direct that their payroll deductions be invested in any of
the following funds, in 1% (10% in plan years 1995 and 1994) increments,
with elections totaling 100%:
(a) the Company Stock Fund;
(b) the Equity Fund;
(c) the Bond Fund;
(d) the Money Market Fund;
(e) the Balanced Fund.
Net assets available for benefits also includes assets invested in the
Interest Income Fund which was closed to new contributions and investment
transfers in as of December 31, 1992, and the AirTouch Stock Fund described
below. The Other account is comprised of amounts pending distribution to
participants and rollover contributions pending allocation to the fund as
directed by the participant.
Once in any three-month period, participants can transfer all or a portion
of their investment in an investment fund to another permitted investment
fund or combination of investment funds. Transfer requests are effective as
of the last day of a month if the employee makes the request before the
close of business in the New York Stock Exchange on the last day of such
month. Transfers may be made by telephoning the Participant Service Center
(PSC). Participants may make transfers among certain funds in 1%
increments. However, participants cannot transfer assets to the LESOP.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
1. Plan Description (Continued)
C. Investment Directions (Continued)
Effective April 1, 1994, AirTouch Communications, Inc. ("ATI") (formerly,
PacTel Corporation) and its subsidiaries separated their corporate
affiliation with the Corporation and its other subsidiaries. Effective as
of March 21, 1994, the record date, each shareowner of Pacific Telesis
Group shares became a shareowner of ATI with eligibility to receive one ATI
share for each share of Pacific Telesis Group.
The Corporation amended the Plan to add a new investment fund, the AirTouch
Stock Fund. This fund consisted initially of the AirTouch shares
attributable to the shares of Pacific Telesis Group held in the Company
Stock Fund and ATI common shares transferred from the LESOP. The Plan
allows fund transfers out of the AirTouch Stock Fund to any other
investment fund option, except the Interest Income Fund, as of the end of
any month. The once-every-three-months transfer limit described above
applies to the other investment funds. The AirTouch Stock Fund was closed
to new contributions and investment transfers in as of April 1, 1994.
D. Vesting and Forfeitures
Employee deduction accounts are always fully vested and nonforfeitable.
Employing Company matching accounts (the Plan's matching account and the
LESOP's Savings Match Stock account) deductions are also fully vested after
a participant either completes three years of service or reaches age 65
while employed. Employing Company matching accounts are also fully vested
upon termination of employment due to retirement, disability, death,
termination under certain severance pay plans or termination due to layoff.
The nonvested Employing Company matching accounts attributable to
deductions are forfeited upon termination of employment. Generally, a
rehired employee may restore any forfeiture caused by a distribution upon
termination of employment by making a lump sum payment within five years
equal to the portion of the distribution attributable to employee
deductions and related Employing Company matching allocations. Forfeitures
are automatically restored if the employee did not receive a distribution
upon termination of employment and is reemployed within five years.
Forfeitures from the LESOP's Savings Match Stock Accounts are applied
toward subsequent matching allocations.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
1. Plan Description (Continued)
E. Withdrawals and Distributions
In-Service Withdrawals - Once in any six-month period, a participant while
still employed may elect to withdraw all or part of his or her account as
follows:
o The value of after-tax supplemental deductions, after-tax basic
deductions made more than two calendar years before the year of
withdrawal, after-tax and before-tax vested Employing Company matching
allocations made more than two calendar years before the year of
withdrawal, and rollover contributions may be withdrawn without penalty.
After-tax basic deductions made in the current and two preceding plan
years may be withdrawn only in a total withdrawal of available after-tax
accounts and before-tax Employing Company matching allocations. If a
total withdrawal is made, Employing Company matching allocations will be
suspended for six months following the withdrawal date. However,
participants may continue their own deductions during the suspension
period. A partial withdrawal must be a minimum of $300. Employees do not
need to specify the actual dollar amount of a total after-tax
withdrawal.
o In addition to the amount described above, the value of before-tax
deductions and the value of vested Employing Company matching
allocations made more than two calendar years before the year of the
withdrawal may be withdrawn, in total or in a partial withdrawal of at
least $300, by employees who have attained age 59-1/2. Before-tax
deductions may not be withdrawn by employees who have not yet attained
age 59-1/2 except in the event of a hardship created by the purchase
cost of a primary residence, the next twelve months of expenses of
post-secondary education, eviction or foreclosure on a principal
residence, unreimbursed medical expenses, and certain federal and state
income taxes attributable to post-1992 hardship withdrawals. The
employee must demonstrate that no other resources are available to meet
the need, and the reason given and amount requested must be approved by
the Savings Plans Committee. A hardship withdrawal must be at least
$300. Post-1988 earnings on employee before-tax deductions are not
available for hardship withdrawal.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
1. Plan Description (Continued)
E. Withdrawals and Distributions (Continued)
Distribution upon Termination of Employment - A participant who has
terminated employment is entitled to a distribution of his or her vested
accounts as follows:
o If the employee terminated employment for reasons other than retirement
(termination of employment after meeting the age and service
requirements for a service pension under the Pacific Telesis Group
Pension Plan) or disability, the employee may elect to receive a
distribution in a single sum payment at any time between termination
and attainment of age 65. However, if the employee's vested account has
a value of $3,500 or less, the account is distributed automatically on
March 31 of the plan year following the year in which the employee
terminated employment, provided the value continues to be $3,500 or
less at that date.
o If the employee terminates employment due to retirement or disability,
the employee may elect to receive a distribution in a single sum
payment or in annual installments over a period of years not to exceed
the employee's life expectancy, commencing at any time between
termination of employment and April 1 following the attainment of age
70-1/2. Participants on leaves of absence after expiration of
short-term disability benefits are treated as though their employment
has terminated, and they are eligible for a distribution.
o An employee who terminates for any reason may elect to transfer all or
part of his or her account, except for the amount of the employee's
after-tax contributions, installment payments that are part of a series
that extends over 10 or more years, and distributions required after
age 70-1/2, from the Plan to another qualified plan or to an Individual
Retirement Account (IRA), in a trustee to trustee transfer, in lieu of
receiving a direct distribution.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
1. Plan Description (Continued)
E. Withdrawals and Distributions (Continued)
Distribution Upon Death - The designated beneficiary or beneficiaries of
participants who die before the effective date of the distribution will
receive the entire amount of the deceased participant's vested accounts, as
soon as practicable after the participant's death, in a single sum payment,
or in certain circumstances, in two annual installments.
Age 70-1/2 Distributions During Employment - Employees who remain employed
after attaining age 70-1/2 in 1996 or a prior year will automatically
receive distributions in annual installments beginning not later than April
1 of the following year.
Form of Payment - Distributions as well as withdrawals are valued as of the
end of the month in which they are effective. Withdrawals and distributions
are made in cash, except a participant or beneficiary may choose to receive
cash or shares from amounts invested in the Company Stock Fund or the
LESOP. A participant or beneficiary may also choose to receive cash or
shares from amounts invested in the AirTouch Stock Fund.
F. Tax Consequences of Participation
Employees may designate their basic and supplemental deductions as
before-tax or after-tax, or as a combination of both. The before-tax basic
and supplemental deductions are intended as contributions under a salary
deferral arrangement qualified under Section 401(k) of the Internal Revenue
Code. Under such an arrangement, the employee's before-tax deductions are
considered a reduction in taxable compensation and are treated as employer
contributions to the Plan (rather than employee contributions). Before-tax
deductions reduce the employee's W-2 compensation for federal income tax
purposes and for the income tax purposes of California and most other
states. However, withdrawals of before-tax contributions are subject to
severe restrictions while the employee is in-service (see "Withdrawals and
Distributions").
Employees will not have taxable income as a result of Employing Company
contributions (including the employee's before-tax deductions that are
treated as employer contributions or allocations) or earnings on Plan
assets before the amounts are distributed from the Plan. When a
distribution is received from the Plan other than in a direct rollover
transfer, it may be partially or fully subject to federal and state income
taxes depending on the extent it represents a return of the employee's
after-tax contributions and on whether the participant elects to receive
shares of appreciated stock.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
1. Plan Description (Continued)
F. Tax Consequences of Participation (Continued)
In addition to any regular income tax that may be due, a 10% additional
federal tax (and a similar 2-1/2% additional California tax) generally
applies to the taxable distributions received prior to age 59-1/2 to the
extent they are not rolled over to another qualified plan or an IRA. Five-
or ten-year averaging may be available in some circumstances to determine
the income tax on the taxable portion of a lump sum distribution but only
if no part of the distribution is rolled over.
2. Summary of Accounting Policies
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires the use of management's estimates.
Actual results could differ from those estimates.
Investments
Investments are carried at their estimated fair values or contract values
determined as follows:
o Pacific Telesis Group common shares in the Company Stock Fund and ATI
common shares in the AirTouch Stock Fund are valued at the last
published sales prices at the end of each plan year as reported on the
composite tape of the New York Stock Exchange.
o The Plan's investments in the Bond Fund, Money Market Fund, Balanced
Fund, and Equity Fund are stated at the fair values of the total units
of participation held by the Plan in each of these common/commingled
trust funds. The fair values of the units of participation held by the
Plan are established by the Plan's trustee, and reflect the market
values of each fund's underlying assets, as reported by the investment
manager, State Street Global Advisors, a subsidiary of State Street
Bank and Trust. The Bond Fund invests primarily in long-term
obligations, including U.S.Government and government agency debts, and
corporate bonds; the Money Market Fund invests primarily in short-term
debts of U.S. Government agencies and corporations; the Balanced Fund
invests in a predetermined mix of large U.S. and international company
stocks, high quality bonds, and money market instruments; the Equity
Fund invests primarily in a broad mix of U.S. company common stocks.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
2. Summary of Accounting Policies (Continued)
Investments (Continued)
o The Plan's investments in the Interest Income Fund are valued at the
amount of contributed principal plus reinvested interest less
distributions. The Interest Income Fund invests in fully
benefit-responsive investment contracts with insurance companies, banks
or other financial institutions, savings accounts, certificates of
deposit, obligations of the United States government or other credit
worthy organizations, commercial paper, corporate bond or other debt
obligations, as well as other fixed income investments (subject to any
guidelines adopted by the Corporation) which guarantee by agreement the
repayment of principal plus interest. The Plan adopted the American
Institute of Certified Public Accountants (AICPA) Statement of Position
(SOP) 94-4, Reporting of Investment Contracts Held by Health and Welfare
Benefit Plans and Defined-Contribution Pension Plans for the year ended
December 31, 1995. Under SOP 94-4, the Plan reports fully
benefit-responsive investment contracts at contract value, which may or
may not be equal to fair value and all other investment contracts at
fair value. The Plan investments in the Interest Income Fund were
carried at contract value at December 31, 1996 and 1995. The Plan
investments in the Interest Income Fund were carried at fair value at
December 31, 1994. There was no impact to the change in accounting for
the Interest Income Fund because at December 31, 1995 and 1994, contract
value and fair value of such contracts were equivalent. At December 31,
1996, contract value approximated fair value. Fair value has been
estimated based on a discounted cash flow analysis using a current
market rate at year end.
At December 31, 1996, the crediting interest rates of the Plan's fully
benefit-responsive investment contracts ranged from 4.98% to 7.55% per
annum. The average yield for these contracts was 6.3% for 1996.
o In accordance with the accounting policy of stating investments at fair
value, net unrealized appreciation (depreciation), in addition to
realized gains and losses, is included in the net change in appreciation
(depreciation) of investments presented in the accompanying financial
statements, where appropriate for the asset being valued.
o Dividend income is recorded on the ex-dividend date. Interest earned on
investments is recorded on the accrual basis.
o Purchases and sales of securities are reflected as of the trade date.
o Amounts allocated to accounts of participants who have elected to
withdraw from the Plan but who were not paid as of the year-end are
excluded from the Statement of Net Assets Available For Benefits.
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
2. Summary of Accounting Policies (Continued)
Benefits Payable
The Department of Labor requires amounts allocated to accounts of
participants who have elected to withdraw from the Plan to be reported as a
liability on the Form 5500. The following table reconciles net assets
available for benefits between these financial statements and the Form 5500
as of December 31 (dollars in thousands):
1996 1995
--------------------------
Net assets available for plan benefits per $ 1,185,468 $ 1,167,237
financial statements
Benefits due for participant withdrawal/distribution (19,660) (34,719)
=========================
Net assets available for plan benefits per $ 1,165,808 $ 1,132,518
Form 5500 =========================
Similarly, the distributions to participants amount reflected in the
statement of changes in net assets available for benefits is reconciled to
the Form 5500 as follows (dollars in thousands):
1996 1995
--------------------------
Distributions to participants per
financial statements $ 152,152 $ 122,566
Benefits due:
Beginning of year (34,719) (36,555)
End of year 19,660 34,719
--------------------------
==========================
Distributions to participants per Form 5500 $ 137,093 $ 120,730
==========================
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
3. Participant Accounts
Employee deductions are credited to the employees' before tax basic
account, before tax supplemental account, after-tax basic account and
after-tax supplemental account, as appropriate.
An employee's interest in the accounts is represented by units of
participation ("Units") in each investment fund in which the employee
participates. Monthly, a participant's account is credited with Units in
each fund to which the participant's payroll deductions have been directed.
The number of Units credited is based upon each respective fund's current
Unit value which is determined as of the end of each month. A fund's Unit
value is based upon the value of the underlying assets and will reflect any
unrealized appreciation or depreciation of the fund's assets. The
determination of the end of month Unit values also results in an allocation
to the participant's account of a proportionate share of the monthly
earnings (or losses) of each fund based upon the extent of the employee's
participation (number of Units held) relative to the number of Units held
by all participants in the respective fund.
During 1996, the Plan discontinued reporting the number and value of units
to participants.
The number and value of Units at December 31,1995 were as follows:
Number of Value Per
Units Unit
------------- -------------
(In Thousands)
Company Stock Fund 100,687 $ 4.5707
AirTouch Stock Fund 79,236 $ 3.3284
Equity Fund 69,579 $ 1.5232
Interest Income Fund 28,332 $ 4.9375
Bond Fund 16,404 $ 1.2531
Money Market Fund 38,667 $ 1.1424
Balanced Fund 68,634 $ 1.4276
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
4. Participation by Investment Direction
The number of employees contributing to the Plan as of December 31, 1996 and
1995 by each investment direction were as
follows:
<CAPTION>
December 31
1996 1995
--------------------------
<S> <C> <C>
Entirely in the Company Stock Fund 8,571 8,385
Entirely in the Equity Fund 794 686
Entirely in the Bond Fund 66 68
Entirely in the Money Market Fund 2,764 2,615
Entirely in the Balanced Fund 732 768
Increments totaling 100% in the Company Stock Fund and
the Equity Fund 1,279 1,039
Increments totaling 100% in the Company Stock Fund and
the Money Market Fund 4,235 3,870
Increments totaling 100% in the Company Stock Fund and
the Bond Fund 157 186
Increments totaling 100% in the Company Stock Fund and
the Balanced Fund 969 1,010
Increments totaling 100% in the Equity Fund and
the Money Market Fund 121 109
Increments totaling 100% in the Equity Fund and
the Bond Fund 187 205
Increments totaling 100% in the Equity Fund and
the Balanced Fund 1,784 1,567
Increments totaling 100% in the Money Market Fund and
the Bond Fund 53 54
Increments totaling 100% in the Money Market Fund and
the Balanced Fund 142 142
Increments totaling 100% in the Bond Fund and
the Balanced Fund 81 97
Increments totaling 100% in the Company Stock Fund,
the Equity Fund and Money Market Fund 241 204
Increments totaling 100% in the Company Stock Fund,
the Equity Fund and the Bond Fund 257 296
Increments totaling 100% in the Company Stock Fund,
the Equity Fund and the Balanced Fund 2,044 1,809
</TABLE>
<PAGE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
4. Participation by Investment Direction (Continued)
<CAPTION>
December 31
1996 1995
--------------------------
<S> <C> <C>
Increments totaling 100% in the Company Stock Fund,
the Money Market Fund and the Bond Fund 109 117
Increments totaling 100% in the Company Stock Fund,
the Money Market Fund and the Balanced Fund 216 214
Increments totaling 100% in the Company Stock Fund,
the Bond Fund and the Balanced Fund 166 175
Increments totaling 100% in the Equity Fund,
the Money Market Fund and the Bond Fund 76 88
Increments totaling 100% in the Equity Fund,
the Money Market Fund and the Balanced Fund 219 221
Increments totaling 100% in the Equity Fund,
the Bond Fund and the Balanced Fund 536 579
Increments totaling 100% in the Money Market Fund,
the Bond Fund and the Balanced Fund 56 65
Increments totaling 100% in the Company Stock Fund,
the Equity Fund, the Money Market Fund and the Bond 125 129
Fund
Increments totaling 100% in the Company Stock Fund,
the Equity Fund, the Money Market Fund and the Balanced Fund 368 320
Increments totaling 100% in the Company Stock Fund,
the Equity Fund, the Bond Fund and the Balanced Fund 761 738
Increments totaling 100% in the Company Stock Fund,
the Money Market Fund, the Bond Fund and the Balanced Fund 65 59
Increments totaling 100% in the Equity Fund,
the Money Market Fund, the Bond Fund and the Balanced Fund 303 332
Increments totaling 100% in the Company Stock Fund, the
Equity Fund, 1,254 1,136
the Money Market Fund, the Bond Fund and the Balanced Fund
==========================
Total employees contributing 28,731 27,283
==========================
</TABLE>
5. Tax Status
The Internal Revenue Service has determined and informed the Corporation by
a letter dated May 16, 1996, that the Plan, and related Trust are designed
in accordance with applicable sections of the Internal Revenue Code (the
"Code"). The Plan has been amended since receiving the determination
letter. However, the Plan administrator believes that the Plan is designed
and currently being operated in compliance with the applicable requirements
of the Code.
<PAGE>
26
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
6. Net Appreciation (Depreciation) of Investments
During the years ended December 31, 1996, 1995 and 1994, the net
appreciation (depreciation) of investments, including both net realized and
unrealized amounts, was as follows (dollars in thousands):
<CAPTION>
Company AirTouch Interest
Stock Stock Income
Fund Fund Fund
----------------------------------------
<S> <C> <C> <C>
1996
Common stock $ 42,064 $ (25,879) $ -
Bank common and commingled trust funds - - -
Insurance contracts - - -
========================================
Net appreciation (depreciation) $ 42,064 $ (25,879) $ -
========================================
1995
Common stock $ 68,635 $ (10,420) $ -
Bank common and commingled trust funds - - -
Insurance contracts - - -
========================================
Net appreciation (depreciation) $ 68,635 $ (10,420) $ -
========================================
1994
Common stock $ (157,015) $ 187,202 $ -
Bank common and commingled trust funds - - -
Insurance contracts - - -
========================================
Net appreciation (depreciation) $ (157,015) $ 187,202 $ -
========================================
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
6. Net Appreciation (Depreciation) of Investments
During the years ended December 31, 1996, 1995 and 1994, the net
appreciation (depreciation) of investments, including both net realized and
unrealized amounts, was as follows (dollars in thousands):
<CAPTION>
Money
Equity Bond Market Balanced
Fund Fund Fund Fund Total
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996
Common stock $ - $ - $ - $ - $ 16,185
Bank common and
commingled trust funds 25,819 791 - 12,741 39,351
Insurance contracts - - - - -
==================================================================
Net appreciation $ 25,819 $ 791 $ - $ 12,741 $ 55,536
(depreciation)
==================================================================
1995
Common stock $ - $ - $ - $ - $ 58,215
Bank common and
commingled trust funds 23,650 2,929 - 18,421 45,000
Insurance contracts - - - - -
==================================================================
Net appreciation $ 23,650 $ 2,929 $ - $ 18,421 $ 103,215
(depreciation)
==================================================================
1994
Common stock $ - $ - $ - $ - $ 30,187
Bank common and
commingled trust funds 1,056 (389) - 931 1,598
Insurance contracts - - - - -
==================================================================
Net appreciation $ 1,056 $ (389) $ - $ 931 $ 31,785
(depreciation)
==================================================================
</TABLE>
<PAGE>
31
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
7. Plan Termination
The Corporation, by action of the Board of Directors, may at any time
terminate the making of deductions from pay of all participating employees
and of contributions by the Employing Company in connection with the Plan.
If at any time the current or accumulated profits of the Corporation and of
the subsidiaries of the Corporation which are joined (or could be joined)
with it in a consolidated federal income tax return shall be less than
twice the combined contributions of all such companies under the LESOP, the
Pacific Telesis Group Supplemental Retirement and Savings Plan for Salaried
Employees and the Pacific Telesis Group Supplemental Retirement and Savings
Plan for Nonsalaried Employees since the preceding January 1, the making of
deductions from salaries and wages of all participating employees in the
Plan and of contributions by the Employing Company shall be terminated. No
termination shall have the effect of diverting the amounts held by the
Trustee for purposes other than as provided in the Plan.
8. LESOP Provisions of the Plan
See note to financial statements of the Pacific Telesis Group Supplemental
Retirement and Savings Plan for Salaried and Nonsalaried Employees (LESOP).
9. Related Party Transactions
Trustee fees, other than fees attributable to the LESOP Savings Match Stock
accounts, are charged to the applicable Plan fund or prorated among all
Plan funds, except the LESOP fund, as appropriate. Investment manager fees,
fees charged by financial institutions in connection with the investment of
any funds under the Plan, and certain administrative fees applicable to the
Plan are charged to the applicable Plan fund(s). Brokerage fees, transfer
taxes and other expenses incident to the purchase or sale of securities are
considered part of the cost of the securities or a reduction in the sales
price. Trustee fees and certain administrative fees with respect to the
LESOP are paid by the Employing Company.
10. Subsequent Event
On April 1, 1997, the Corporation became a wholly-owned subsidiary of SBC
Communications Inc. (SBC). Each share of common stock of the Corporation
was exchanged for 0.73145 of a share of SBC common stock. The shares of
stock of the Corporation held under the Plan in the Company Stock Fund were
also exchanged.
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
December 31, 1996
(Dollars and shares or units in thousands)
<CAPTION>
(c) Description of
Investment Including
Maturity Date,
(b) Identity of Issue, Rate of Interest, (e) Current
(a) Borrower, Lessor or Similar Collateral, Par or (d) Cost Value
Party Maturity Value
- ----- ----------------------------- ------------------------- -------------- -------------
<S> <C> <C> <C> <C>
* Pacific Telesis Group 13,833 common shares $ 336,440 $ 508,375
* Northern Trust Collective
Short-Term Investment Fund Money Market Fund 3,950 3,950
--------------
=============
$ 340,390 $ 512,325
============== =============
* AirTouch Communications, 8,214 common shares $ 119,150 $ 207,415
Inc.
* Northern Trust Collective
Short-Term Investment Fund Money Market Fund 335 335
============== =============
$ 119,485 $ 207,750
============== =============
* State Street S&P 500 Fund - 1,174
common/commingled
Trust shares $ 88,384 $ 140,199
* Northern Trust Collective
Short-Term Investment Fund Money Market Fund 1,145 1,145
============== =============
$ 89,529 $ 141,344
============== =============
* State Street Bond Fund - 1,506
common/commingled
Trust shares $ 17,105 $ 20,688
* Northern Trust Collective
Short-Term Investment Fund Money Market Fund 236 236
============== =============
$ 17,341 $ 20,924
============== =============
* State Street Money Market Fund $ 50,735 $ 50,735
* Northern Trust Collective
Short-Term Investment Fund Money Market Fund 1,856 1,856
============== =============
$ 52,591 $ 50,735
============== =============
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
(CONTINUED)
December 31, 1996
(Dollars and shares or units in thousands)
<CAPTION>
(c) Description of
Investment Including
Maturity Date,
(b) Identity of Issue, Rate of Interest, (e) Current
(a) Borrower, Lessor or Similar Collateral, Par or (d) Cost Value
Party Maturity Value
- ----- ----------------------------- ------------------------- -------------- -------------
<S> <C> <C> <C> <C>
* State Street Balanced Fund - 6,678
Common/Commingled
Trust shares $ 78,479 $ 112,663
* Northern Trust Collective
Short-Term Investment Fund Money Market Fund 933 933
--------------
=============
$ 79,412 $ 113,596
============== =============
* Northern Trust Collective
Short-Term Investment Fund Money Market Fund $ 543 $ 543
============== =============
$ 543 $ 543
============== =============
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
(CONTINUED)
December 31, 1996
(Dollars and share or units in thousands)
<CAPTION>
(c) Description of
Investment Including
Maturity Date,
(b) Identity of Issue, Rate of Interest, (e) Current
(a) Borrower, Lessor or Collateral, Par or (d) Cost Value
Similar Party Maturity Value
- ---- -------------------------- ------------------------------ -------------- -------------
<S> <C> <C> <C> <C>
Contracts with insurance companies and banks:
American Int. Life $10,500 principal amount,
6.67% due June 30, 1997 $ 5,075 $ 5,075
Allstate $10,000 principal amount,
6.80% due July 5, 2000 6,027 6,027
Cigna $6,500 principal amount,
6.00% due 5,623 5,623
December 31, 1999
Citibank $14,400 principal amount,
4.98% due December 31, 1989 8,801 8,801
CNA $9,300 principal amount,
6.75% due June 30, 1999 8,401 8,401
CNA $12,005 principal amount,
6.02% due June 30, 1999 11,246 11,246
Jackson National $7,750 principal amount,
6.80% due June 30, 1999 7,108 7,108
Life of Georgia $10,500 principal amount,
7.01% due December 31, 1997 5,711 5,711
Met Life $13,000 principal amount,
7.25% due December 31, 1997 8,672 8,672
New York Life $7,750 principal amount,
6.72% due June 30, 2001 7,106 7,106
</TABLE>
<PAGE>
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
LINE 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
(CONTINUED)
December 31, 1996
(Dollars and share or units in thousands)
<CAPTION>
(c) Description of
Investment Including
Maturity Date,
(b) Identity of Issue, Rate of Interest, (e) Current
(a) Borrower, Lessor or Collateral, Par or (d) Cost Value
Similar Party Maturity Value
- ----- --------------------------- ---------------------------- ------------- -------------
<S> <C> <C> <C> <C>
Contracts with insurance companies and banks (continued):
Principal $9,572 principal amount,
5.58% due December 31, $ 5,616 $ 5,616
1998
Provident $11,000 principal amount,
6.60% due January 2, 1998 5,500 5,500
Prudential $16,500 principal amount,
7.55% due June 30, 1999 14,303 14,303
Lotsoff $17,608 principal amount,
5.24% due June 30, 2000
(Synthetic Contract) 13,968 13,968
Security Life of Denver Wrapper for Lotsoff
Synthetic Contract 264 264
------------- -------------
Total contracts with insurance companies and banks $ 113,420 $ 113,420
---------------------------
* Northern Trust Collective
Short-Term Investment Money Market Fund $ 11,931 $ 11,931
Fund
------------- -------------
125,351 125,351
------------- -------------
Grand total $ 824,642 $ 1,174,424
============= =============
<FN>
* Party-in-interest to the Plan.
</FN>
</TABLE>
<PAGE>
32
<TABLE>
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND
SAVINGS PLAN FOR NONSALARIED EMPLOYEES
LINE 27d - SCHEDULE OF REPORTABLE
TRANSACTIONS For the Year Ended
December 31, 1996
(Dollars in thousands)
<CAPTION>
(h)
-------- --------- --------- --------- Current ---------
Value of
(a) (b) Asset on
Identity of Description Number (c) (d) (g) Cost Transaction(i) Net
Party of Asset of Purchase Selling of Asset Date Gain/(Loss)
Involved TransactionsPrice Price
- ------------- ------------
<S> <S> <C> <C> <C> <C> <C> <C>
- -------------
Pacific Pacific
Telesis Telesis
Group Group 41 $ 62,653 N/A $ 62,653 $ 62,653 N/A
common
shares
- -------------
Pacific Pacific
Telesis Telesis
Group Group 23 N/A $ 56,606 41,701 56,606 $ 14,905
common
shares
- -------------
Northern Collective
Trust Short-Term
Investment
Fund -
Money
Market 295 167,101 N/A 167,101 167,101 N/A
Instruments
- -------------
Northern Collective
Trust Short-Term
Investment
Fund -
Money
Market 331 N/A 146,172 146,172 146,172 -
Instruments
</TABLE>
<PAGE>
33
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Savings Plans Committee has duly caused this annual report to be signed by
the undersigned thereunto duly authorized.
PACIFIC TELESIS GROUP SUPPLEMENTAL RETIREMENT AND SAVINGS PLAN FOR
NONSALARIED EMPLOYEES
By Savings Plans Committee
By:/s/ R. P. McGahan
R. P. McGahan
Member of the Committee
Dated: June 30, 1997
<PAGE>
