<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended December 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
-------------- --------------
----------------------------
COMMISSION FILE NUMBER
[Prior to March 7, 1995]: 0-9691
[As of March 7, 1995 and thereafter] = 1-7534
----------------------------
A. Full title of the plan and the address of the plan, if different from that of
the issuer named below:
NETWORK SYSTEMS CORPORATION SAVINGS
AND STOCK OWNERSHIP PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of
its principal executive offices:
[Prior to March 7, 1995]:
NETWORK SYSTEMS CORPORATION
7600 Boone Avenue North
Minneapolis, Minnesota 55428
[As of March 7, 1995 and thereafter]:
STORAGE TECHNOLOGY CORPORATION
2270 South 88th Street
Louisville, Colorado 80028-4309
<PAGE> 2
[PRICE WATERHOUSE LOGO]
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
FINANCIAL STATEMENTS
AND ADDITIONAL INFORMATION
DECEMBER 31, 1994 AND 1993
<PAGE> 3
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Financial Statements:
Report of Independent Accountants 1 - 2
Statement of Net Assets Available for Benefits, with Fund Information 3 - 4
Statement of Changes in Net Assets Available for Benefits,
with Fund Information 5 - 6
Notes to Financial Statements 7 - 17
Additional Information:*
Schedule I - Item 27a Form 5500 - Schedule of Assets Held for
Investment Purposes 18 - 19
Schedule II - Item 27d Form 5500 - Schedule of Reportable Transactions 20
</TABLE>
* Other schedules required by Section 2520.103-10 of the Department of Labor
Rules and Regulations for Reporting and Disclosure under ERISA have not been
presented because they are not applicable.
<PAGE> 4
[PRICE WATERHOUSE LLP LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
June 2, 1995
To the Participants and
Administrator of the
Network Systems Corporation
Savings and Stock Ownership Plan
In our opinion, the accompanying statement of net assets available for benefits,
with fund information and the related statement of changes in net assets
available for benefits, with fund information present fairly, in all material
respects, the net assets available for benefits of the Network Systems
Corporation Savings and Stock Ownership Plan (the Plan) at December 31, 1994 and
the changes in net assets available for benefits for the year then ended, in
conformity with generally accepted accounting principles. 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. We
conducted our audit of these statements in accordance with generally accepted
auditing standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The additional information included in Schedules I
and II is presented for purposes of additional analysis and is not a required
part of the basic financial statements but is additional information required by
ERISA. 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 the 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 audits of basic financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
/s/ Price Waterhouse LLP
-1-
<PAGE> 5
[ERNST & YOUNG LLP LETTERHEAD]
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Network Systems Corporation
The Network Systems Corporation
Savings and Stock Ownership Plan
We have audited the accompanying statement of net assets available for benefits,
with fund information of Network Systems Corporation Savings and Stock Ownership
Plan as of December 31, 1993, and the related statement of changes in net assets
available for benefits, with fund information 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.
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 Plan at
December 31, 1993, and the changes in its net assets available for benefits for
the year then ended, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
May 6, 1994
<PAGE> 6
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Fund Information
------------------------------------------------------------------------------------------------------------
First Trust Fidelity Management Trust Company
---------------------------------------------------------- -----------------------------------------------
Retirement
Network Blended IAI Growth and Intermediate Money
Systems Rate Fidelity Regional Loan Magellan Income Bond Market
Stock Fund Fund Fund Fund Fund Fund Fund Fund Fund
---------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Receivables:
Employer's
contributions $ (1,241) $ 265,474 $ 228,760 $ 99,029
Employees' loan
repayments 34,317 21,001 7,946 $(63,264)
Accrued interest 68 237,594 239 159 241
---------- ----------- ---------- ---------- -------- -------- -------- -------- --------
Total receivables (1,173) 537,385 250,000 107,134 (63,023)
Investments (Note 4) 1,086,847 13,883,810 6,435,168 2,918,654 771,391 $906,813 $693,071 $139,050 $468,527
---------- ----------- ---------- ---------- -------- -------- -------- -------- --------
Net assets available
for plan benefits $1,085,674 $14,421,195 $6,685,168 $3,025,788 $708,368 $906,813 $693,071 $139,050 $468,527
========== =========== ========== ========== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Fund Information
---------------------------------
Fidelity Management Trust Company
---------------------------------
Asset
Manager Loan
Fund Fund Total
---- ---- -----
<S> <C> <C> <C>
Receivables:
Employer's
contributions $ 592,022
Employees' loan
repayments
Accrued interest 238,301
------- ------- -----------
Total receivables 830,323
Investments (Note 4) $14,173 $87,304 27,404,808
------- ------- -----------
Net assets available
for plan benefits $14,173 $87,304 $28,235,131
======= ======= ===========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
-3-
<PAGE> 7
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION
DECEMBER 31, 1993
<TABLE>
<CAPTION>
Fund Information
----------------------------------------------------------------
Network Blended IAI
Systems Rate Fidelity Regional First Trust
Stock Fund Fund Fund Fund Loan Fund Total
---------- ---- ---- ---- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Cash $ 1,258,384 $ 1,258,384
Receivables:
Employer's contributions $ 44,636 266,163 $ 152,661 $ 85,358 548,818
Employees' loan repayments 12,817 43,021 39,270 15,973 $(111,081)
Accrued interest 33 235,034 48 19 235,134
---------- ----------- ---------- ---------- --------- -----------
Total receivables 57,486 544,218 191,979 101,350 (111,081) 783,952
Investments (Note 4) 1,102,231 12,326,528 3,968,949 2,479,835 773,526 20,651,069
---------- ----------- ---------- ---------- --------- -----------
Net assets available for plan benefits $1,159,717 $14,129,130 $4,160,928 $2,581,185 $ 662,445 $22,693,405
========== =========== ========== ========== ========= ===========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
-4-
<PAGE> 8
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS,
WITH FUND INFORMATION
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Fund Information
--------------------------------------------------------------------------------------------------------
First Trust Fidelity Management Trust Company
------------------------------------------------------------- ---------------------------------------
Network Blended IAI Growth and Intermediate
Systems Rate Fidelity Regional Loan Magellan Income Bond
Stock Fund Fund Fund Fund Fund Fund Fund Fund
---------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Net realized
and unrealized
appreciation
(depreciation) in
fair value of
investments $ (210,932) $ 73,360 $ (241,607) $ (169,377) $ (85,130) $ (57,966) $ (26,618)
Interest and dividend
income 786 944,336 399,559 186,900 $ 2,216 56,469 80,627 19,658
Loan repayment
interest 2,066 22,911 13,292 4,712 2,155 1,742 1,794 385
---------- ----------- ---------- ---------- --------- ---------- ---------- ---------
(208,080) 1,040,607 171,244 22,235 4,371 (26,919) 24,455 (6,575)
Contributions:
By employer 270,822 228,785 98,864
By participants 221,119 1,452,093 1,352,865 621,273 58,743 48,481 8,038
---------- ----------- ---------- ---------- --------- ---------- ---------- ---------
221,119 1,722,915 1,581,650 720,137 58,743 48,481 8,038
Withdrawals by
participants (100,633) (1,284,055) (380,450) (216,294) (61,978) (687,363) (652,372) (226,115)
Transfers:
Between funds 4,505 (1,111,771) 1,181,667 (74,401) (56,285) (25,007) (14,730)
New loans (179,291) (94,277) (28,838) 302,406 (1,110) (4,667)
Loan principal
repayments 9,046 103,660 64,406 21,764 (198,876) 16,121 16,393 5,494
---------- ----------- ---------- ---------- --------- ---------- ---------- ---------
13,551 (1,187,402) 1,151,796 (81,475) 103,530 (40,164) (9,724) (13,903)
Net increases
(decreases) (74,043) 292,065 2,524,240 444,603 45,923 (695,703) (589,160) (238,555)
Transfer in of Vitalink
assets (Note 2) 1,602,516 1,282,231 377,605
Net assets at beginning
of year 1,159,717 14,129,130 4,160,928 2,581,185 662,445
---------- ----------- ---------- ---------- --------- ---------- ---------- ---------
Net assets at end
of year $1,085,674 $14,421,195 $6,685,168 $3,025,788 $ 708,368 $ 906,813 $ 693,071 $ 139,050
========== =========== ========== ========== ========= ========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
Fund Information
------------------------------------------
Fidelity Management Trust Company
------------------------------------------
Retirement
Money Asset
Market Manager Loan
Fund Fund Fund Total
---- ---- ---- -----
<S> <C> <C> <C> <C>
Investment income:
Net realized
and unrealized
appreciation
(depreciation) in
fair value of
investments $ (18,696) $ (736,966)
Interest and dividend
income $ 25,232 7,783 $ 150 1,723,716
Loan repayment
interest 648 49,705
--------- --------- ----------- ------------
25,880 (10,913) 150 1,036,455
Contributions:
By employer 598,471
By participants 27,982 1,660 3,792,254
--------- --------- ----------- ------------
27,982 1,660 4,390,725
Withdrawals by
participants (367,261) (192,518) (6,670) (4,175,709)
Transfers:
Between funds 98,679 (2,657) 0
New loans (4,223) 10,000 0
Loan principal
repayments 2,977 (40,985) 0
--------- --------- ----------- ------------
97,433 (2,657) (30,985) 0
Net increases
(decreases) (215,966) (204,428) (37,505) 1,251,471
Transfer in of Vitalink
assets (Note 2) 684,493 218,601 124,809 4,290,255
Net assets at beginning
of year 22,693,405
--------- --------- ----------- ------------
Net assets at end
of year $ 468,527 $ 14,173 $ 87,304 $ 28,235,131
========= ========= =========== ============
</TABLE>
The accompanying notes are an
integral part of these financial statements.
-5-
<PAGE> 9
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS,
WITH FUND INFORMATION
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
Fund Information
----------------------------------------------------------------
Network Blended IAI
Systems Rate Fidelity Regional First Trust
Stock Fund Fund Fund Fund Loan Fund Total
---------- ---- ---- ---- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Net realized and unrealized appreciation
(depreciation) in fair value of investments $ (532,418) $ 19,612 $ (25,430) $ (538,236)
Interest and dividend income 591 $ 1,017,704 519,844 210,500 $ 850 1,749,489
Loan repayment interest 2,681 25,337 8,910 4,465 41,393
---------- ----------- ---------- ---------- --------- -----------
(529,146) 1,043,041 548,366 189,535 850 1,252,646
Contributions:
By employer 44,636 266,163 152,661 85,358 548,818
By participants 242,087 1,643,154 895,730 566,181 3,347,152
---------- ----------- ---------- ---------- --------- -----------
286,723 1,909,317 1,048,391 651,539 3,895,970
Withdrawals by participants (77,486) (1,055,924) (255,011) (141,515) (12,195) (1,542,131)
Transfers:
Between funds (43,407) (112,256) 165,419 (9,756)
New loans (241,061) (21,238) (42,801) 305,100
Loan principal repayments 18,767 142,003 60,424 27,586 (248,780)
---------- ----------- ---------- ---------- --------- -----------
(24,640) (211,314) 204,605 (24,971) 56,320
Net increases (decrease) (344,549) 1,685,120 1,546,351 674,588 44,975 3,606,485
Net assets at beginning of year 1,504,266 12,444,010 2,614,577 1,906,597 617,470 19,086,920
---------- ----------- ---------- ---------- --------- -----------
Net assets at end of year $1,159,717 $14,129,130 $4,160,928 $2,581,185 $ 662,445 $22,693,405
========== =========== ========== ========== ========= ===========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
-6-
<PAGE> 10
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
NOTE 1 - DESCRIPTION OF PLAN
General
The Network Systems Corporation Savings and Stock Ownership Plan (the Plan) is a
defined contribution plan to which eligible employees of Network Systems
Corporation (the Company) may elect to contribute stated percentages of their
compensation. Participation by eligible employees is voluntary. The Plan is
sponsored and administered by the Company. The following is not a comprehensive
description of the Plan and, therefore, does not include all situations and
limitations covered by the Plan. Participants should refer to the Plan agreement
for more complete information.
Contributions
Employees may have their annual compensation reduced by 1% to 15%, not to exceed
limitations under applicable IRS regulations, through automatic payroll
deductions (pretax saving contribution) and contributed to the Plan. Employees
may also make contributions through automatic payroll deductions on an after-tax
basis of from 1% to 8% of compensation. These after-tax saving contributions do
not reduce the employee's income for federal or state income tax purposes. The
Company may make a discretionary matching contribution to the Plan as a
percentage of the first 6% of the employee's pretax savings contributions. For
the 1994 and 1993 Plan years, the Company made matching contributions amounting
to $598,471 and $548,818, respectively, based on matching percentages of 30% of
the first 6%.
All contributions are held in trust and invested by the Plan's trustees, First
Trust and Fidelity Management Trust Company. Contributions are initially
deposited by the trustees in either the First American Prime Obligations Fund or
a short-term U.S. government fund. Contributions are later reallocated in
accordance with the options selected by the participant or the requirements of
promissory note agreements. Any Company contributions on behalf of a participant
are invested by the trustees in the same fund or funds specified by the
participant, in direct proportion to the allocation of that individual's payroll
deduction contributions.
-7-
<PAGE> 11
Investment Fund Options
The Plan offers the following investment options:
- - The Network Systems Stock Fund consists of common stock of the Company. As
described in Note 7, as of March 7, 1995, the Network Systems stock was
exchanged for common stock of Storage Technology Corporation. Effective
after October 31, 1994, the Plan was amended so that no additional
contributions or investment fund transfers may be made to the Network
Systems Stock Fund.
- - The Blended Rate Fund (formerly the Guaranteed Interest Fund) invests in
insurance investment contracts that provide a fixed rate of return at the
rates and for the time periods indicated below:
<TABLE>
<CAPTION>
Applicable Fixed Interest Rate
For Years Ended December 31,
---------------------------------------
Year of
Contributions 1989 1990 1991 1992 1993 1994
------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
1989 9.09 9.09 9.09 9.09 9.09
1990 8.45 8.45 8.45 8.45 8.45
</TABLE>
Contributions and earnings from the 1988 and 1989 fixed rate insurance
contracts were transferred effective January 1, 1993 and 1994, respectively,
to the other investment funds in accordance with participants' investment
allocation directions.
Contributions to the Blended Rate Fund are invested in a pooled fund with a
single blended interest rate. The single blended interest rate is determined
quarterly based on the combined earnings of the underlying investments. The
underlying investments consist primarily of insurance investment contracts
that generally provide a fixed interest rate for a period up to five years.
Effective January 1, 1994, investments in the pooled fund also included
investments in the First Stable Value Fund, a First Trust Collective Fund.
The investment objective of the First Stable Value Fund is to provide stable
income relative to current interest rates. The Fund invests primarily in
high-quality fixed interest rate contracts issued by insurance companies and
banks.
- - The Fidelity Fund is a no-load fund managed by Fidelity Management Trust
Company. The Fidelity Fund seeks long-term capital growth by investing
primarily in common stock and securities convertible into common stock. The
Fidelity Fund may invest some of its assets in debt securities. The
percentage of assets invested in any one type of debt or equity security may
vary.
- - The IAI Regional Fund is a no-load fund managed by Investment Advisors, Inc.
The investment objective of the IAI Regional Fund is capital appreciation
with at least 80% of its equity investments in companies headquartered in
Minnesota, Illinois, Wisconsin, Iowa, Nebraska, Montana, North Dakota, and
South Dakota. The IAI Regional Fund may invest a portion of its assets in
short-term cash equivalents on a temporary basis.
-8-
<PAGE> 12
Investment Fund Transfers
Twice a year, participants may direct the Plan Administrator to transfer all or
a portion of their current account balances from one investment fund to other
investment funds in five percent increments.
Loans to Participants
Participants may borrow from their pretax savings contribution accounts. Loans
may not be less than $1,000 or greater than $50,000. In addition, loans may not
exceed one-half of the participant's pretax savings contribution account as of
the most recent quarter-end valuation. Participants are required to execute a
promissory note and security agreement giving the Savings and Stock Ownership
Plan a valid first lien against one-half of the participant's title to his
pretax savings contribution account. Promissory notes provide for a repayment of
principal and interest in equal pay period installments over a period up to five
years. Interest is based on the local bank prime or reference rate and is fixed
for the duration of the loan.
The portion of a participant's account that is invested in the Network Systems
Stock Fund is not available for withdrawal or loan during the employment of the
participant. The restrictions do not apply to distributions by the Network
Systems Stock Fund on termination of employment.
Loans made to participants are treated as a separate, segregated investment of
the participant. Accordingly, at the time the loans transaction is consummated,
the participant's allocated share of his pretax savings contribution account is
reduced on a pro rata basis by the principal amount of the loan. Repayments of
principal and payments of interest are credited to the investment funds in which
the participant's pretax savings contribution account is invested in the same
proportions specified by the participant in his most recently filed investment
direction.
Withdrawal by Participants
Distribution may be made upon the occurrence of any of the following:
1. Termination of employment at or after attainment of age 65;
2. Termination of employment prior to attainment of age 65 when occasioned by
permanent or total disability;
3. Death; or
4. Any other termination of employment.
-9-
<PAGE> 13
Vesting and Forfeitures
Upon termination of employment, except for retirement, disability or death, the
participant's account and any related vested Company contributions become
payable to the participant. Company contributions vest in accordance with the
following schedule:
<TABLE>
<CAPTION>
Vesting
Years of Vested Service Percentage
- ----------------------- ----------
<S> <C>
Less than 2 years 0%
2 years 25%
3 years 50%
4 years 75%
5 or more years 100%
</TABLE>
Company contributions which have not vested are forfeited by the employee when a
distribution is elected upon termination of employment. Forfeited amounts are
allocated to the accounts of all other participants in the same manner as
employer matching contributions for the Plan year in which the forfeiture
occurs. For participants who terminate employment and who do not receive a
distribution, the nonvested portions of their accounts will be forfeited and
reallocated after five consecutive one-year breaks in service have been
incurred. During 1994 and 1993, forfeitures with respect to the Company's
contributions for prior years were allocated to the accounts of remaining
participants in amounts totaling $18,286 and $13,784, respectively. Withdrawals
under the Plan are permitted due to age or disability (as defined) and for
financial hardship. During 1993, there were hardship withdrawals amounting to
$4,374. There were no such withdrawals in 1994.
Administrative Costs
Administrative expenses are paid by the Company.
Plan Termination
As further discussed in Note 7, Network Systems Corporation merged with Storage
Technology Corporation (StorageTek) on March 7, 1995. Network Systems
Corporation and StorageTek have no plans at this time to terminate or merge the
Plan, but reserve the right to merge or terminate the Plan in its entirety at
any time. Upon termination, the accounts of each participant shall vest in full.
-10-
<PAGE> 14
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Method of Accounting
The Plan's financial statements are prepared on the accrual basis of accounting.
Accordingly, income is recorded in the period earned and expenses are recorded
in the period incurred.
Investment Valuation
Investments in common stock of Network Systems Corporation or Storage Technology
Corporation are valued at the closing sales price on the last business day of
the year based on the NASDAQ national market system closing quotation.
Investments in the First American Prime Obligations Fund (formerly the First
American Institutional Money Fund) are valued at the net asset value on the last
business day of the year based on quotations obtained from national securities
exchanges.
Investments in the Blended Rate Fund are valued as of the last business day of
the year at cost plus reinvested interest for group annuity contracts with
insurance companies and at net asset value for investments in the First Stable
Value Fund.
Investments in the Fidelity Fund and the IAI Regional Fund are valued at the net
asset value of the applicable fund on the last business day of the year.
Investments in the following Fidelity mutual funds are valued at the net asset
value of the applicable fund on the last business day of the year: the Magellan
Fund, the Growth and Income Fund, the Intermediate Bond Fund, the Retirement
Money Market Fund and the Asset Manager Fund.
Investments in the Loan Funds are valued at the amount of the participant loan
net of principal repayments.
Investments in the participant's account are valued upon withdrawal as of the
end of the quarter which next follows by at least 30 days the date on which the
Administrator receives a withdrawal application from the participant.
Investments in the participant's account are valued upon distribution as of the
end of the quarter which coincides with or last precedes that date of
distribution.
Investment Transactions
Purchases and sales of securities are reflected on a trade date basis (the date
the order to buy or sell is executed). Realized gains and losses are computed
using the average cost method.
Reclassification
Certain 1993 amounts have been reclassified to conform to the 1994 presentation.
-11-
<PAGE> 15
NOTE 3 - MERGER OF VITALINK COMMUNICATIONS CORPORATION 401(K) PLAN
Effective January 1, 1994, the Vitalink Communications Corporation 401(k) Plan
and Trust (the Vitalink Plan) was merged into the Network Systems Corporation
Savings and Stock Ownership Plan. The Vitalink Plan was a plan maintained by a
subsidiary of Network Systems Corporation. During 1994, the number of employees
participating in the Vitalink Plan fell below the minimum number required under
Section 401(a)(26) of the Internal Revenue Code. Accordingly, as provided by the
regulations, the Vitalink Plan was retroactively merged into the Plan effective
January 1, 1994.
The effect of the merger for 1994 is to include in the Plan additional
investment fund choices which are only available to the former participants of
the Vitalink Plan. The fund choices of the former Vitalink Plan are available
only through June 30, 1995 whereupon any amounts remaining in the investment
account balances for those funds will be automatically rolled over into the
Blended Rate Fund.
The investment fund choices available to participants in the former Vitalink
Plan are the following Fidelity mutual funds:
- - The Magellan Fund seeks capital appreciation by investing in common stocks or
securities convertible into common stocks.
- - The Growth and Income Fund seeks long-term growth with a reasonable level of
current income by investing in common stocks of companies which offer growth
of earnings potential while paying current dividends.
- - The Intermediate Bond Fund seeks high current income by investing in high and
upper-medium grade, fixed income securities.
- - The Retirement Money Market Fund seeks high current income with preservation
of capital and liquidity.
- - The Asset Manager Fund seeks high total return with reduced risk by
allocating its assets among domestic and foreign equities, bonds and
short-term investments.
-12-
<PAGE> 16
NOTE 4 - INVESTMENTS
The following table presents the fair values of investments:
<TABLE>
<CAPTION>
Balance (Shares
or Face Amount)
Held at Value at
December 31, December 31,
Name of Issuers and Title of Issuers 1994 Cost 1994
------------------------------------ ---- ---- ----
<S> <C> <C> <C>
First Trust
Network Systems Corporation common stock 153,874 shares $ 1,569,201 $ 1,077,118
First American Prime Obligations Fund 9,729 9,729 9,729
----------- ------------
Total Network Systems Stock Fund 1,578,930 1,086,847
New York Life Insurance Company
Group Annuity Contract 2,424,296 2,424,296 2,424,296
Sun Life Insurance Company of
American Group Annuity Contract 4,275,603 4,275,603 4,275,603
John Hancock Mutual Life Insurance
Company Group Annuity Contract 2,141,182 2,141,182 2,141,182
Metropolitan Life Insurance Company
Group Annuity Contract 1,698,847 1,698,847 1,698,847
Protective Life Insurance Company
Group Annuity Contract 1,548,123 1,548,123 1,548,123
First Stable Value Fund, a First Trust
Collective Fund 105,990 shares 1,643,610 1,707,132
First American Prime Obligations Fund 88,627 88,627 88,627
----------- ------------
Total Blended Rate Fund 13,820,288 13,883,810
Fidelity Fund 345,492 shares 6,580,163 6,384,690
First American Prime Obligations Fund 50,478 50,478 50,478
----------- ------------
Total Fidelity Fund 6,630,641 6,435,168
IAI Regional Fund 143,549 shares 3,027,323 2,892,508
First American Prime Obligations Fund 26,146 26,146 26,146
----------- ------------
Total IAI Regional Fund 3,053,469 2,918,654
Investments in loans to employee participants 707,609 707,609
First American Prime Obligations Fund 63,782 63,782 63,782
----------- ------------
Total loan fund 771,391 771,391
</TABLE>
-13-
<PAGE> 17
<TABLE>
<CAPTION>
Balance (Shares
or Face Amount)
Held at Value at
December 31, December 31,
Name of Issuers and Title of Issuers 1994 Cost 1994
------------------------------------ ---- ---- ----
<S> <C> <C> <C>
Fidelity Management Trust Company
Magellan Fund 13,575 shares $ 928,826 $ 906,813
Growth and Income Fund 32,863 shares 691,668 693,071
Intermediate Bond Fund 14,146 shares 147,420 139,050
Retirement Money Market Fund 468,527 shares 468,527 468,527
Asset Manager Fund 1,025 shares 14,597 14,173
Loan Fund 87,304 87,304
----------- -----------
Total investments $28,193,061 $27,404,808
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Balance (Shares
or Face Amount)
Held at Value at
December 31, December 31,
Name of Issuers and Title of Issuers 1993 Cost 1993
------------------------------------ ---- ---- ----
<S> <C> <C> <C>
Network Systems Corporation common stock 128,582 shares $ 1,428,811 $ 1,092,947
First American Prime Obligations Fund 9,284 9,284 9,284
----------- -----------
Total Network Systems Stock Fund 1,438,095 1,102,231
New York Life Insurance Company Group
Annuity Contract 2,705,267 2,705,267 2,705,267
Sun Life Insurance Company of America
Group Annuity Contract 4,260,583 4,260,583 4,260,583
John Hancock Mutual Life Insurance
Company Group Annuity Contract 2,174,524 2,174,524 2,174,524
Metropolitan Life Insurance Company
Group Annuity Contract 1,424,238 1,424,238 1,424,238
Protective Life Insurance Company Group
Annuity Contract 1,573,712 1,573,712 1,573,712
First American Prime Obligations Fund 188,204 188,204 188,204
---------- ----------
Total Guaranteed Interest Fund 12,326,528 12,326,528
Fidelity Fund 202,969 shares 3,872,068 3,911,217
First American Prime Obligations Fund 57,732 57,732 57,732
----------- -----------
Total Fidelity Fund 3,929,800 3,968,949
</TABLE>
-14-
<PAGE> 18
<TABLE>
<CAPTION>
Balance (Shares
or Face Amount)
Held at Value at
December 31, December 31,
Name of Issuers and Title of Issuers 1993 Cost 1993
------------------------------------ ---- ---- ----
<S> <C> <C> <C>
IAI Regional Fund 114,358 shares $ 2,431,829 $ 2,452,983
First American Prime Obligations Fund 26,852 26,852 26,852
----------- -----------
Total IAI Regional Fund 2,458,681 2,479,835
Investments in loans to employee participants 661,928 661,928
First American Prime Obligations Fund 111,598 111,598 111,598
----------- -----------
Total First Trust loan fund 773,526 773,526
----------- -----------
Total investments $20,926,630 $20,651,069
=========== ===========
</TABLE>
NOTE 5 - FEDERAL INCOME TAXES
The Plan has received a determination letter from the Internal Revenue Service
dated May 1, 1995 stating that the Plan is qualified under section 401(a) of the
Internal Revenue Code of 1986 (the Code) and, therefore, is exempt from
taxation. Once qualified, the Plan is required to operate in conformity with the
Code of ERISA to maintain its tax-exempt status. The administrator is not aware
of any course of action or series of events that have occurred that might
adversely affect the Plan's qualified status.
NOTE 6 - RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
December 31,
------------
1994 1993
---- ----
<S> <C> <C>
Net assets available for benefits per the financial statements $ 28,235,131 $ 22,693,405
Amounts allocated to withdrawing participants (844,832) (387,788)
------------ ------------
Net assets available for benefits per the Form 5500 $ 27,390,299 $ 22,305,617
============ ============
</TABLE>
-15-
<PAGE> 19
Amounts allocated to withdrawing participants by fund option is as follows:
<TABLE>
<CAPTION>
December 31,
------------
1994 1993
---- ----
<S> <C> <C>
Network Systems Stock Fund $ 7,277 $ 32,042
Blended Rate (Guaranteed Interest) Fund 560,935 293,884
Fidelity Fund 126,886 35,745
IAI Regional Fund 12,574 18,874
Loan Fund 17,944 7,243
Magellan Fund 29,569
Growth and Income Fund 32,018
Intermediate Bond Fund 22,250
Retirement Money Market Fund 34,882
Asset Manager Fund 497
-------- --------
$844,832 $387,788
======== ========
</TABLE>
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1994 1993
---- ----
<S> <C> <C>
Benefits paid to participants per the financial statements $4,175,709 $1,542,131
Add: Amounts allocated to withdrawing participants
in current year 844,832 387,788
Less: Amounts allocated to withdrawing participants
in prior years (495,383) (135,707)
-------- ----------
Benefits paid to participants per the Form 5500 $4,525,158 $1,794,212
========== ==========
</TABLE>
Amounts allocated to withdrawing participants are recorded on the Form 5500 for
benefit claims that have been processed and approved for payment prior to
year-end but not yet paid.
-16-
<PAGE> 20
NOTE 7 - SUBSEQUENT EVENT
On March 7, 1995, Network Systems Corporation (NSC) merged with StorageTek. In
connection with the merger, each outstanding share of common stock of NSC was
converted into .2618 shares of StorageTek common stock. In addition, at the
effective time of merger, NSC redeemed from its stockholders all of the rights
outstanding under its Amended and Restated Rights Agreement at a redemption
price of $0.05 per right.
As a result of the merger, shares of NSC stock held by the Network Systems Stock
Fund were converted into StorageTek common stock and investments in the First
American Prime Obligations Fund effective March 7, 1995.
-17-
<PAGE> 21
SCHEDULE I
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
ITEM 27a FORM 5500 - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Current
Name of Issuers Shares or Face Market
and Title of Issue Amount Held Cost Value
------------------ ----------- ---- -----
<S> <C> <C> <C>
First Trust
Network Systems Corporation common stock 153,874 shares $ 1,569,201 $ 1,077,118
First American Prime Obligations Fund 9,729 9,729 9,729
----------- -----------
Total Network Systems Stock Fund 1,578,930 1,086,847
New York Life Insurance Company Group
Annuity Contract 2,424,296 2,424,296 2,424,296
Sun Life Insurance Company of America
Group Annuity Contract 4,275,603 4,275,603 4,275,603
John Hancock Mutual Life Insurance
Company Group Annuity Contract 2,141,182 2,141,182 2,141,182
Metropolitan Life Insurance Company
Group Annuity Contract 1,698,847 1,698,847 1,698,847
Protective Life Insurance Company Group
Annuity Contract 1,548,123 1,548,123 1,548,123
First Stable Value Fund, First Trust
Collective Fund 105,990 shares 1,643,610 1,707,132
First American Prime Obligations Fund 88,627 88,627 88,627
----------- -----------
Total Blended Rate Fund 13,820,288 13,883,810
Fidelity Fund 345,492 shares 6,580,163 6,384,690
First American Prime Obligations Fund 50,478 50,478 50,478
----------- -----------
Total Fidelity Fund 6,630,641 6,435,168
IAI Regional Fund 143,549 shares 3,027,323 2,892,508
First American Prime Obligations Fund 26,146 26,146 26,146
----------- -----------
Total IAI Regional Fund 3,053,469 2,918,654
Investments in loans to employee participants 707,609 707,609
First American Prime Obligations Fund 63,782 63,782 63,782
----------- -----------
Total loan fund 771,391 771,391
</TABLE>
-18-
<PAGE> 22
<TABLE>
<CAPTION>
Current
Name of Issuers Shares or Face Market
and Title of Issue Amount Held Cost Value
------------------ ----------- ---- -----
<S> <C> <C> <C>
Fidelity Management Trust Company
Magellan Fund 13,575 shares $ 928,826 $ 906,813
Growth and Income Fund 32,863 shares 691,668 693,071
Intermediate Bond Fund 14,146 shares 147,420 139,050
Retirement Money Market Fund 468,527 shares 468,527 468,527
Asset Manager Fund 1,025 shares 14,597 14,173
Loan Fund 87,304 87,304
----------- -----------
Total investments $28,193,061 $27,404,808
=========== ===========
</TABLE>
-19-
<PAGE> 23
SCHEDULE II
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
ITEM 27d FORM 5500 - SCHEDULE OF REPORTABLE TRANSACTIONS*
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Identity of Purchase Selling Cost of
Party Involved Description of Assets Price Price Asset
-------------- --------------------- ----- ----- -----
<S> <C> <C> <C> <C>
First Trust National First American Prime Obligations Fund;
Association Purchased 7,748,486 units in 375 transactions $7,748,486
Sold 7,814,132 units in 196 transactions $7,814,132 $7,814,132
First Trust National First Stable Value Fund, a First Trust Collective Fund
Association Purchased 149,328 shares in 41 transactions 2,304,778
Sold 43,338 shares in 8 transactions 671,006 661,168
First Trust National Fidelity FD Inc. Com.;
Association Purchased 159,397 shares in 48 transactions 3,029,996
Sold 16,874 shares in 4 transactions 314,916 321,901
</TABLE>
<TABLE>
<CAPTION>
Current Value
of Asset on Net
Identity of Transaction Gain
Party Involved Date (Loss)
-------------- ---- -----
<S> <C> <C>
First Trust National
Association $7,748,486
7,814,132 -
First Trust National
Association 2,304,778
671,006 $ 9,838
First Trust National
Association 3,029,996
314,916 (6,985)
</TABLE>
* Transactions or series of transactions in excess of 5 percent of the current
value of the Plan's assets as of December 31, 1993 as defined in Section
2520-103.6 of the Department of Labor Rules and Regulations for Reporting and
Disclosure under ERISA.
-20-
<PAGE> 24
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the Plan) have duly caused the annual
report to be signed by the undersigned thereunto duly authorized.
NETWORK SYSTEMS CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
BY: NETWORK SYSTEMS CORPORATION
June 29, 1995 /s/ MICHAEL F. G. ASHBY
- ------------------------- -------------------------------
(Date) Michael F. G. Ashby
Chief Executive Officer
Network Systems Corporation
