EX-99 5 ex99c.htm AIT SAVINGS & SECURITY PLAN Ameritech Savings and Security Plan for Non-Salaried Employees

EX 99-c
Form 10-K for 2001
File No. 1-8610

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 11-K

ANNUAL REPORT


Pursuant to Section 15(d) of the
Securities Exchange Act of 1934

For the fiscal year ended December 31, 2001

Commission File Number l-8610


Ameritech Savings and Security Plan for Non-Salaried Employees


SBC COMMUNICATIONS INC.

175 E. Houston, San Antonio, Texas 78205






Financial Statements, Supplemental Schedule and Exhibit Table of Contents Page Report of Independent Auditors: Ernst & Young LLP........................... 1 Financial Statements: Statements of Net Assets Available for Benefits as of December 31, 2001 and 2000............................................. 2 Statement of Changes in Net Assets Available for Benefits for the Year Ended December 31, 2001........................................... 3 Notes to Financial Statements.......................................... 4 Supplemental Schedule: Schedule H, Line 4i - Schedule of Assets (Held at End of Year)......... 8 Exhibit: 23-a Consent of Ernst & Young LLP REPORT OF INDEPENDENT AUDITORS Ameritech Corporation, Plan Administrator for the Ameritech Savings and Security Plan for Non-Salaried Employees We have audited the accompanying statements of net assets available for benefits of the Ameritech Savings and Security Plan for Non-Salaried Employees as of December 31, 2001 and 2000, and the related statement of changes in net assets available for benefits for the year ended December 31, 2001. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2001 and 2000, and the changes in its net assets available for benefits for the year ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2001 is presented for the purpose of additional analysis and is not a required part of the financial statements, but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to auditing procedures applied in our audits of the financial statements, and in our opinion, are fairly stated in all material respects in relation to the financial statements taken as a whole. ERNST & YOUNG LLP San Antonio, Texas June 21, 2002 AMERITECH SAVINGS AND SECURITY PLAN FOR NON-SALARIED EMPLOYEES STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS (Dollars in Thousands) December 31, -------------------------- 2001 2000 ----------- ---------- ASSETS Investments (See Note 5) $ 2,074,371 $ 2,562,090 Employer contributions receivable 3,656 8,029 Participant contributions receivable 7,014 8,651 Dividends and interest receivable 524 759 Receivable for investments sold - net 265 3,067 ----------- ---------- Total Assets 2,085,830 2,582,596 ----------- ---------- LIABILITIES Other payable - net 45 11,830 Administrative expenses payable 655 237 ----------- ---------- Total Liabilities 700 12,067 ----------- ---------- Net Assets Available for Benefits $ 2,085,130 $ 2,570,529 =========== ========== See Notes to Financial Statements. AMERITECH SAVINGS AND SECURITY PLAN FOR NON-SALARIED EMPLOYEES STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED DECEMBER 31, 2001 (Dollars in Thousands) Net Assets Available for Benefits, December 31, 2000 $ 2,570,529 Additions to Net Assets: Contributions: Participant contributions 89,072 Employer contributions 44,168 ----------- 133,240 ----------- Investment Income: Dividends 43,404 Interest 16,223 ----------- 59,627 ----------- Total Additions 192,867 ----------- Deductions from Net Assets: Net depreciation in value of investments 357,435 Administrative expenses 3,442 Interplan transfers 1,252 Distributions 316,137 ----------- Total Deductions 678,266 ----------- Net Assets Available for Benefits, December 31, 2001 $ 2,085,130 =========== See Notes to Financial Statements. AMERITECH SAVINGS AND SECURITY PLAN FOR NON-SALARIED EMPLOYEES NOTES TO FINANCIAL STATEMENTS (Dollars in Thousands) 1. Merger of Plan Sponsor - In October 1999, Ameritech Corporation (Ameritech) and a wholly owned subsidiary of SBC Communications Inc. (SBC) merged, resulting in Ameritech becoming a wholly owned subsidiary of SBC (the merger). As a result of the merger, each share of Ameritech common stock held by the Ameritech Savings and Security Plan for Non-Salaried Employees (the Plan) was automatically converted to 1.316 shares of SBC common stock. The conversion did not represent a Plan transaction and no gain or loss was recognized. 2. Plan Description - The Plan was established by Ameritech to provide a convenient way for eligible non-salaried employees of participating Ameritech companies to save for retirement on a regular and long-term basis. The following description of the Plan provides only general information. The Plan has detailed provisions covering participant eligibility, participant allotments from pay, participant withdrawals, participant loans, employer contributions and related vesting of contributions and Plan expenses. The Plan is summarized in the Summary Plan Description, which has been distributed to all participants. Participants should refer to the official Plan documents for a more complete description of the Plan's provisions. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). During 2001, participants could invest in various combinations of five funds: the SBC Shares Fund, the Equities Market Plus Fund, the Fixed Income Fund, the Balanced Fund and the Diversified Telephone Portfolio (DTP) Fund, or for members of the International Brotherhood of Electrical Workers (IBEW) only, in the Union-sponsored International Brotherhood of Electrical Workers Locals Savings and Retirement Trust Fund (IBEW Fund - see Note 4). In addition, Communications Workers of America (CWA) members could elect to contribute to the CWA Savings and Retirement Trust Fund (CWA Fund). Such contributions are made by the employee directly to the fund, rather than by payroll deduction. The CWA Fund is not part of the Plan's financial statements. Company matching contributions are made solely in the form of shares of SBC common stock which are acquired weekly on an as needed basis. Although it has not expressed any intent to do so, Ameritech has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA and any applicable collective bargaining agreements. In the event that the Plan is terminated, subject to conditions set forth in ERISA, the Plan provides that the net assets will be distributed to participants whose employment has terminated in an amount equal to their respective interests in such assets; assets attributable to participants whose employment has not terminated will remain in the Plan until such employment terminates. 3. Accounting Policies - The financial statements of the Plan are prepared using the accrual method of accounting. The values of investments are determined as follows: SBC common shares on the basis of the closing price as reported on the New York Stock Exchange; contracts with insurance companies and other financial institutions at principal plus reinvested interest; common/collective trusts and other group trusts at net asset values per share obtained from published sources or fund manager; and temporary cash investments and participant loans at cost, which approximates fair value. Purchases and sales of securities are reflected as of the trade date. Dividend income is recognized on the ex-dividend date. Interest earned on investments is recognized on the accrual basis. The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. In June 1998, the Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" (FAS 133), which requires all derivatives to be recorded on the statement of net assets available for benefits at fair value, and requires changes in the fair value of the derivatives to be recorded on the statement of changes in net assets available for benefits. The Plan adopted FAS 133 on January 1, 2001, as a one-time, noncash cumulative effect of accounting change. However, because of the Plan's minimal use of derivatives, the adoption of this standard did not have a significant effect on the Plan's financial position or results of operations. 4. IBEW Fund - In order to allow eligible employees to participate in the IBEW Fund investment option, the Plan adopted the provisions of the IBEW Savings and Retirement Group Trust (IBEW Group Trust) effective January 1, 1988, for the limited purpose of and for specifically complying with the requirements of Revenue Ruling 81-100 related to group trusts. The Plan, by agreement, participates in the IBEW Group Trust with respect to participant eligibility, contribution, distribution and withdrawal requirements as administered by Ameritech (the Participating Employer), and with respect to maintaining participant records and IBEW Fund accounting through the Trustee. The Plan's equitable interest in the IBEW Group Trust at December 31, 2001 and 2000 was 2.41% and 2.30%, of the net assets available for benefits of the IBEW Group Trust. The Plan's interest is valued on a per unit basis, changes in which represent periodic investment income, net of expenses related to administration of the IBEW Group Trust and investment management services. 5. Investments - Investments representing 5% or more of Plan net assets at either December 31, 2001 or 2000 were: 2001 2000 --------- ---------- Employee Stock Ownership Plan - Special Stock Fund* --------------------------------------------------- SBC common shares: Allocated $ 471,063 $ 601,131 SBC Shares Fund --------------- SBC common shares $ 1,076,394 $ 1,430,296 Equities Market Plus Fund ------------------------- IRT Ameritech Collective Equity Fund $ 134,463 $ 129,856 * Nonparticipant-directed During 2001, the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) depreciated in value as follows: SBC Common Stock $ (350,465) Common Collective Trusts (6,970) ---------- Total $(357,435) ========== The Fixed Income Fund consists of contracts with various financial institutions and insurance companies that promise to repay principal plus accrued income at contract maturity, subject to the creditworthiness of the issuer. Interest crediting rates are generally established when the contract is purchased and are not reset. For the year ended December 31, 2001, the average interest rate earned on these contracts was 6.11%. At December 31, 2001 the fixed crediting interest rates on these contracts ranged from 4.41% to 7.25%. At December 31, 2000, the fixed crediting interest rates on these contracts ranged from 5.38% to 7.52%. No valuation reserves were recorded to adjust contract amounts as of December 31, 2001 or 2000. The Fixed Income Fund invests in both guaranteed investment contracts (GICs) and synthetic investment contracts (SICs). SICs differ from GICs in that the assets supporting the SICs are owned by the Plan. A bank or insurance company issues a wrapper contract that allows participant directed transactions to be made at contract value. Wrapper contracts are valued as the difference between the fair value of the supporting assets and the contract value. The assets supporting the SICs generally consist of high quality fixed income securities. 6. Nonparticipant-Directed Investments - Information about the net assets and the significant components of the changes in net assets relating to the nonparticipant-directed investments (held in the Special Stock Fund) as of December 31 is as follows: 2001 2000 --------- ---------- Assets ------ SBC common shares: Allocated $ 471,063 $ 601,131 Temporary cash investments 1,055 45 Employer Contributions receivable 3,656 8,029 Dividends and interest receivable 8 37 --------- --------- Total Assets 475,782 609,242 --------- --------- Liabilities ----------- Other payable-net 550 2,776 Administrative expenses payable - 11 --------- --------- Total Liabilities 550 2,787 --------- --------- Net Assets Available for Benefits $ 475,232 $ 606,455 ========= ========= 2001 --------- Net Assets Available for Benefits, December 31, 2000 $ 606,455 Contributions 44,168 Dividends and interest 12,433 Net depreciation in value of investments (110,431) Transfers of participants' balances - net (11,573) Administrative expenses (55) Distributions to participants (65,765) --------- (131,223) --------- Net Assets Available for Benefits, December 31, 2001 $ 475,232 ========= 8. Tax Status - The Internal Revenue Service issued a determination letter on April 16, 1996, stating that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code (IRC). The Plan has been amended since the determination letter was received. The Plan Administrator believes that the Plan is currently designed and is operating in compliance with the applicable requirements of the IRC. On February 28, 2002, the Plan filed for, but has not yet received, a new tax determination letter from the IRS to reflect legally required changes and other changes made to the Plan since the previous determination letter was issued. 9. 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 as of December 31: 2001 2000 ----------- ----------- Net Assets Available for Benefits per the Financial Statements $ 2,085,130 $ 2,570,529 Less: Distributions payable to participants 9,794 66,274 ----------- ----------- Net Assets Available for Benefits per the Form 5500 $ 2,075,336 $ 2,504,255 =========== =========== The following is a reconciliation of distributions to participants per the financial statements to the Form 5500 for the year ended December 31: 2001 ----------- Distributions to participants per the Financial Statement $ 316,137 Add: Distributions payable to participants at December 31, 2001 9,794 Less: Distributions payable to participants at December 31, 2000 66,274 ----------- Distributions to participants per the Form 5500 $ 259,657 =========== Distributions payable to participants are recorded on the Form 5500 for benefit claims that have been processed and approved for payment prior to December 31, but not yet paid as of that date. AMERITECH SAVINGS AND SECURITY PLAN FOR NON-SALARIED EMPLOYEES EIN 36-3251481, PLAN NO. 004 SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR) December 31, 2001 (Dollars in Thousands) Description of Current Identity of Issue Investment Cost Value ------------------------------------ -------------------- ----------------- Employee Stock Ownership Plan - ------------------------------- Special Stock Fund ------------------ * SBC common shares: Allocated 12,026,123 shares $ 198,823 $ 471,063 * Boston Safe Deposit and Trust Temporary cash Company investments 1,055 1,055 ----------------- Total Special Stock Fund 199,878 472,118 ----------------- SBC Shares Fund --------------- * SBC common shares 27,480,065 shares 1,076,394 * Boston Safe Deposit and Trust Temporary cash Company investments 2,312 --------- Total SBC Shares Fund ** 1,078,706 --------- Fixed Income Fund ----------------- Allstate Life Insurance Company Synthetic contract wrapper 77079, 5.54%, *** (262) INVESCO Group Trust: Lambda I 10,232 --------- 9,970 Business Men's Assurance Company 5.75%, 11/17/03 2,381 CDC Financial Products 5.38%, 10/15/03 2,022 JP Morgan Chase Bank Synthetic contract wrapper #433420-T, 5.89%, *** (630) United States Treasury Treasury Note 6,930 Sears Credit Account Trust Retail Credit Card 4,232 Copelco Capital Funding Corporation Small Equipment Lease 3,727 Federal Home Loan Mortgage Agency Debentures 3,126 Federal National Mortgage FHA/VA Association Reperforming Pass 2,640 Federal National Mortgage FHA/VA Association Reperforming Pass 2,375 Federal National Mortgage FHA/VA Association Reperforming Pass 2,205 Daimler Crysler Auto Trust Prime Auto 1,865 Ford Auto Owners Trust Prime Auto 1,554 JP Morgan Chase Bank Cash on Hand 243 --------- 28,267 Continental Assurance Company Synthetic contract wrapper #63005611, 5.99%, *** (226) INVESCO Group Trust for Group Trust: Beta Retirement Savings 7,164 --------- 6,938 John Hancock Life Insurance 4.83%, 03/03/03 Company 4,015 Metropolitan Life Insurance Synthetic contract Company wrapper #28434, 6.48%, *** (1,614) Federal National Mortgage Association Agency Debentures 5,372 Federal Home Loan Mortgage Company Agency Debentures 4,853 Commercial Mortgage Asset Trust Conduit 4,352 Fleet Credit Card Master Trust II Bank Credit Card 3,768 Honda Auto Receivables Owner Trust Prime Auto 3,632 Nissan Auto Owners Trust Prime Auto 3,112 United States Treasury Treasury Note 2,168 Ford Credit Auto Owners Trust Prime Auto 1,957 MBNA Master Credit Card Trust USA Monoline Credit Card 1,610 Metropolitan Life Insurance Company Cash on Hand 196 ------ 29,406 Metropolitan Life Insurance Company 6.92%, 10/29/03 2,164 Metropolitan Life Insurance Company 6.99%, 11/21/03 2,156 Monumental Life Insurance Synthetic contract Company wrapper#76TR, 6.10%, *** (476) Federal Home Loan Mortgage Company Agency Debentures 5,211 American Express Credit Account Monoline Credit Master Trust Card 5,154 Pinnacle CBO Ltd. Cash Flow CBO 3,824 Keycorp Conduit 2,988 Home Ownership Funding Corporation Step Down Preferred 2,061 General Electric Capital Corporation Corporate Finance 2,165 Federal National Mortgage Association Multifamily Balloon 1,946 Home Ownership Funding Corporation II Step Down Preferred 1,719 CIT Equipment Collateral Small Equipment Lease 1,613 Premier Auto Trust Prime Auto 795 Monumental Life Insurance Company Cash on Hand 417 --------- 27,417 Monumental Life Insurance Company 7.25%, 09/02/03 2,194 Monumental Life Insurance Company 7.08%, 10/01/03 2,178 New York Life Insurance Company 4.41%, 06/02/03 2,007 Pruco Life Insurance Company 6.02%, 01/18/05 2,116 Pruco Life Insurance Company 6.03%, 08/11/03 2,434 Pruco Life Insurance Company 7.03%, 11/21/05 2,153 State Street Bank and Trust Synthetic contract Company wrapper #96041, 6.39%, *** (503) Federal Home Loan Mortgage Company Agency Debentures 6,253 Capital Auto Master Trust Prime Auto 4,047 Case New Holland Equipment Trust Large Equipment Loan 3,862 American Express Credit Account Master Trust Monoline Credit Card 3,135 Ford Credit Auto Owners Trust Prime Auto 3,006 Federal National Mortgage Company Agency Debentures 2,801 MBNA Master Credit Card Trust USA Monoline Credit Card 1,626 Toyota Auto Receivables Owner Trust Prime Auto 1,084 Green Tree Home Equity Loan Trust Home Equity Monoline 1,385 Sears Credit Account Master Trust Retail Credit Card 776 Providian Master Trust Monoline Credit Card 324 Sears Credit Account Master Trust Retail Credit Card 100 State Street Bank and Trust Company Cash on Hand 137 --------- 28,033 Union Bank of Switzerland AG Synthetic contract wrapper #5029, 5.96%, *** (504) Union Acceptance Corp. Sub Prime Auto 5,650 Residential Asset Securities Corporation Home Equity Senior Sub 4,516 Federal Home Loan Mortgage Company Agency Hybrid ARM 3,485 Federal National Mortgage Association Agency Debenture 3,361 Copelco Capital Funding Corporation Small Equipment Lease 3,104 Fleet Credit Card Master Trust II Bank Credit Card 3,077 AmeriCredit Auto Receivables Trust Sub Prime Auto 2,991 TIAA Retail Commercial Trust Conduit 2,815 Chase Credit Card Master Trust Bank Credit Card 2,552 Union Bank of Switzerland AG Cash on Hand 1,202 --------- 32,249 * Boston Safe Deposit and Trust Temporary cash Company investments 8,512 ----------------- Total Fixed Income Fund ** 196,612 ----------------- Equities Market Plus Fund ------------------------- IRT Ameritech Collective Equity Fund 4,647,871 units 134,463 * Boston Safe Deposit and Trust Temporary cash Company investments 532 ----------------- Total Equities Market Plus Fund ** 134,995 ----------------- Balanced Fund ------------- Bankers Trust Pyramid Balanced Fund 281,283 units 72,547 * Boston Safe Deposit and Trust Temporary cash Company investments 262 ----------------- Total Balanced Fund ** 72,809 ----------------- Diversified Telephone Portfolio ---------------------------------- (DTP) Fund ---------- AT&T Corporation common shares 262,611 shares 4,764 BellSouth Corporation common shares 285,810 shares 10,904 * SBC Communications common shares 536,295 shares 21,007 Verizon Communications common shares 225,901 shares 10,721 * Boston Safe Deposit and Trust Temporary cash Company investments 66 ----------------- Total DTP Fund ** 47,462 ----------------- IBEW Fund --------- IBEW Savings/Security Master Investment Fund 5,230,331 units 5,230 * Boston Safe Deposit and Trust Temporary cash Company investments 52 ----------------- Total IBEW Fund ** 5,282 ----------------- Loan Fund --------- * Loans to Plan Participants 6.00% - 8.00% 66,379 * Boston Safe Deposit and Trust Temporary cash Company investments 8 ----------------- Total Loan Fund ** 66,387 ----------------- TOTAL $ 2,074,371 ========= * Party-in-Interest. ** Participant-directed investment, cost not required. *** Synthetic investment, no stated maturity. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan Administrator for the Plan has duly caused this annual report to be signed by the undersigned thereunto duly authorized. AMERITECH SAVINGS AND SECURITY PLAN FOR NON-SALARIED EMPLOYEES By Ameritech Corporation, Plan Administrator for the Foregoing Plan By /s/ Karen E. Jennings Karen E. Jennings Senior Executive Vice President- Human Resources Date: June 28, 2002 EXHIBIT INDEX Exhibit identified below, is filed herein as exhibit hereto. Exhibit Number 23 Consent of Independent Auditors: Ernst & Young LLP. EX 23 Form 11-K for 2001 File No. l-8610 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8, No. 333-88667) pertaining to the Ameritech Savings and Security Plan for Non-Salaried Employees of our report dated June 21, 2002, with respect to the financial statements and supplemental schedule of the Ameritech Savings and Security Plan for Non-Salaried Employees included in this Annual Report (Form 11-K) for the year ended December 31, 2001. ERNST & YOUNG LLP San Antonio, Texas June 21, 2002