FORM 11-K ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Plan period ended December 31, 1998 Commission File Number 1-812 UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN UNITED TECHNOLOGIES CORPORATION One Financial Plaza Hartford, Connecticut 06101
FINANCIAL STATEMENTS OF THE UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN REPORT OF INDEPENDENT ACCOUNTANTS To the Participants and Administrator of the United Technologies Corporation Employee Savings Plan In our opinion, the accompanying statements 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 United Technologies Corporation Employee Savings Plan at December 31, 1998 and December 31, 1997, and the changes in net assets available for benefits for the period ended December 31, 1998, 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 audits. We conducted our audits 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 audits provide a reasonable basis for the opinion expressed above. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The fund information in the 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 plan benefits and changes in net assets available for benefits of each fund. The fund information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Hartford, Connecticut June 28, 1999
UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN Statement of Net Assets Available for Benefits With Fund Information December 31, 1998 (Thousands of Dollars, except unit amounts) Small UTC INVESCO Company International Common Total Income Equity Stock Index Equity Index Global Stock Return Fund Fund Fund Fund Fund Fund Fund Assets: Investments, at fair value: Beneficial interests in Bankers Trust Company Pyramid: Large Capitalization Equity Index Fund $ - $ 985,696 $ - $ - $ 29,820 $ - $ - Russell 2000 Equity Index Fund - - 21,589 - - - - Daily Japanese Equity Index Fund - - - 1,427 - - - Daily Non Japanese Equity Index Fund - - - 5,357 - - - Government/Corporate Fixed Income Index Fund - - - - 24,304 - - Daily International Equity Index Fund - - - - 29,505 - - United Technologies Corporation Common Stock - - - - - 457,714 - United Technologies Corporation ESOP Preferred Stock - - - - - - - Shares of respective registered investment companies - - - - - - 15,879 Investments, at contract value or cost: Beneficial interests in investment contracts, at contract value 3,205,795 - - - - - - Participant loans, at cost - - - - - - - Temporary investments, at cost plus accrued interest - - - - - 2,282 - Total Investments 3,205,795 985,696 21,589 6,784 83,629 459,996 15,879 Plan receivables 2,859 249 7 2 31 5,243 6 Accrued ESOP contribution receivable - - - - - - - Total Assets 3,208,654 985,945 21,596 6,786 83,660 465,239 15,885 Liabilities: Accrued expenses - - - - - 1,172 - Loans payable, net - - - - - - - Accrued interest on ESOP debt and notes payable - - - - - - - ESOP debt - - - - - - - Notes payable to United Technologies Corporation - - - - - - - Total Liabilities - - - - - 1,172 - Net Assets Available for Benefits $3,208,654 $ 985,945 $ 21,596 $ 6,786 $ 83,660 $ 464,067 $ 15,885 Units of participation 47,947,610 36,435,523 1,810,201 535,194 29,149,693 25,470,182 506,543 Unit value $ 66.92 $ 27.06 $ 11.93 $ 12.68 $ 2.87 $ 18.22 $ 31.36 The accompanying notes are an integral part of these financial statements.
UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN Statement of Net Assets Available for Benefits With Fund Information (Continued) December 31, 1998 (Thousands of Dollars, except unit amounts) Putnam Fidelity Putnam New SoGen Growth & Fund for Fidelity Low- PBHG Opportun- Interna- Income Growth Fidelity Priced Stock Growth ities tional Portfolio and Income Contrafund Fund Fund Fund Fund, Inc. Assets: Investments, at fair value: Beneficial interests in Bankers Trust Company Pyramid: Large Capitalization Equity Index Fund $ - $ - $ - $ - $ - $ - $ - Russell 2000 Equity Index Fund - - - - - - - Daily Japanese Equity Index Fund - - - - - - - Daily Non Japanese Equity Index Fund - - - - - - - Government/Corporate Fixed Income Index Fund - - - - - - - Daily International Equity Index Fund - - - - - - - United Technologies Corporation Common Stock - - - - - - - United Technologies Corporation ESOP Preferred Stock - - - - - - - Shares of respective registered investment companies 154,316 29,538 56,616 36,572 40,472 60,762 8,299 Investments, at contract value or cost: Beneficial interests in investments contracts, at contract value - - - - - - - Participant loans, at cost - - - - - - - Temporary investments, at cost plus accrued interest - - - - - - - Total investments 154,316 29,538 56,616 36,572 40,472 60,762 8,299 Plan receivables 113 19 35 17 31 42 4 Accrued ESOP contribution receivable - - - - - - - Total Assets 154,429 29,557 56,651 36,589 40,503 60,804 8,303 Liabilities: Accrued expenses - - - - - - - Loans payable, net - - - - - - - Accrued interest on ESOP debt and notes payable - - - - - - - ESOP debt - - - - - - - Notes payable to United Technologies Corporation - - - - - - - Total Liabilities - - - - - - - Net Assets Available for Benefits $ 154,429 $ 29,557 $ 56,651 $ 36,589 $ 40,503 $ 60,804 $ 8,303 Units of participation 3,368,880 1,440,398 997,554 1,601,271 1,585,848 1,028,135 360,521 Unit value $ 45.84 $ 20.52 $ 56.79 $ 22.85 $ 25.54 $ 59.14 $ 23.03 The accompanying notes are an integral part of these financial statements.
UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN Statement of Net Assets Available for Benefits With Fund Information (Continued) December 31, 1998 (Thousands of Dollars, except unit amounts) Templeton Templeton Developing Foreign Markets Fund A Trust A Loan Fund ESOP Fund Total Assets: Investments, at fair value: Beneficial interests in Bankers Trust Company Pyramid: Large Capitalization Equity Index Fund $ - $ - $ - $ - $1,015,516 Russell 2000 Equity Index Fund - - - - 21,589 Daily Japanese Equity Index Fund - - - - 1,427 Daily Non Japanese Equity Index Fund - - - - 5,357 Government/Corporate Fixed Income Index Fund - - - - 24,304 Daily International Equity Index Fund - - - - 29,505 United Technologies Corporation Common Stock - - - 336 458,050 United Technologies Corporation ESOP Preferred Stock - - - 2,736,411 2,736,411 Shares of respective registered investment companies 15,458 7,677 - - 425,589 Investments, at contract value or cost: Beneficial interests in investment contracts, at contract value - - - - 3,205,795 Participant loans, at cost - - 62,640 - 62,640 Temporary investments, at cost plus accrued interest - - - 4,023 6,305 Total Investments 15,458 7,677 62,640 2,740,770 7,992,488 Plan receivables 6 4 - 87 8,755 Accrued ESOP contribution receivable - - - 101,138 101,138 Total Assets 15,464 7,681 62,640 2,841,995 8,102,381 Liabilities: Accrued expense - - - 30 1,202 Loans payable, net - - - - - Accrued interest on ESOP debt and notes payable - - - 2,206 2,206 ESOP debt - - - 372,600 372,600 Notes payable to United Technologies Corporation - - - 104,033 104,033 Total Liabilities - - - 478,869 480,041 Net Assets Available for Benefits $ 15,464 $ 7,681 $ 62,640 $ 2,363,126 $7,622,340 Units of participation 1,843,164 745,681 62,639,478 258,919,085 Unit value $ 8.39 $ 10.30 $ 1.00 $ 9.13 The accompanying notes are an integral part of these financial statements.
UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN Statement of Net Assets Available for Benefits With Fund Information December 31, 1997 (Thousands of Dollars, except unit amounts) Small UTC INVESCO Company International Common Total Income Equity Stock Index Equity Index Global Stock Return Fund Fund Fund Fund Fund Fund Fund Assets: Investments, at fair value: Beneficial interests in Bankers Trust Company Pyramid: Large Capitalization Equity Index Fund $ - $ 809,958 $ - $ - $ 29,900 $ - $ - Russell 2000 Equity Index Fund - - 20,980 - - - - Daily Japanese Equity Index Fund - - - 1,227 - - - Daily Non Japanese Equity Index Fund - - - 3,681 - - - Government/Corporate Fixed Income Index Fund - - - - 24,463 - - Daily International Equity Index Fund - - - - 28,688 - - United Technologies Corporation Common Stock - - - - - 388,403 - United Technologies Corporation ESOP Preferred Stock - - - - - - - Shares of respective registered investment companies - - - - - - 11,352 Investments, at contract value or cost: Beneficial interests in investment contracts, at contract value 2,815,491 - - - - - - Participant loans, at cost - - - - - - - Temporary investments, at cost plus accrued interest - - - - - 5,833 - Total Investments 2,815,491 809,958 20,980 4,908 83,051 394,236 11,352 Plan receivables 1,996 676 25 8 88 1,078 17 Accrued ESOP contribution receivable - - - - - - - Total Assets 2,817,487 810,634 21,005 4,916 83,139 395,314 11,369 Liabilities: Accrued expenses - - - - - 2,509 - Loans payable, net - - - - - - - Accrued interest on ESOP debt and notes payable - - - - - - - ESOP debt - - - - - - - Notes payable to United Technologies Corporation - - - - - - - Total Liabilities - - - - - 2,509 - Net Assets Available for Benefits $2,817,487 $ 810,634 $ 21,005 $ 4,916 $ 83,139 $ 392,805 $ 11,369 Units of participation 45,664,290 38,564,887 1,735,924 466,827 34,932,354 32,516,958 390,823 Unit value $ 61.70 $ 21.02 $ 12.10 $ 10.53 $ 2.38 $ 12.08 $ 29.09 The accompanying notes are an integral part of these financial statements.
UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN Statement of Net Assets Available for Benefits With Fund Information (Continued) December 31, 1997 (Thousands of Dollars, except unit amounts) Putnam Fidelity Putnam New SoGen Growth & Fund for Fidelity Low- PBHG Opportun- Interna- Income Growth Fidelity Priced Stock Growth ities tional Portfolio and Income Contrafund Fund Fund Fund Fund, Inc. Assets: Investments, at fair value: Beneficial interests in Bankers Trust Company Pyramid: Large Capitalization Equity Index Fund $ - $ - $ - $ - $ - $ - $ - Russell 2000 Equity Index Fund - - - - - - - Daily Japanese Equity Index Fund - - - - - - - Daily Non Japanese Equity Index Fund - - - - - - - Government/Corporate Fixed Income Index Fund - - - - - - - Daily International Equity Index Fund - - - - - - - United Technologies Corporation Common Stock - - - - - - - United Technologies Corporation ESOP Preferred Stock - - - - - - - Shares of respective registered investment companies 88,982 29,327 35,471 38,276 55,770 42,073 9,434 Investments, at contract value or cost: Beneficial interests in investments contracts, at contract value - - - - - - - Participant loans, at cost - - - - - - - Temporary investments, at cost plus accrued interest - - - - - - - Total investments 88,982 29,327 35,471 38,276 55,770 42,073 9,434 Plan receivables 127 42 60 53 107 72 18 Accrued ESOP contribution receivable - - - - - - - Total Assets 89,109 29,369 35,531 38,329 55,877 42,145 9,452 Liabilities: Accrued expenses - - - - - - - Loans payable, net - - - - - - - Accrued interest on ESOP debt and notes payable - - - - - - - ESOP debt - - - - - - - Notes payable to United Technologies Corporation - - - - - - - Total Liabilities - - - - - - - Net Assets Available for Benefits $ 89,109 $ 29,369 $ 35,531 $ 38,329 $ 55,877 $ 42,145 $ 9,452 Units of participation 2,338,837 1,501,494 761,983 1,525,236 2,200,755 858,340 371,399 Unit value $ 38.10 $ 19.56 $ 46.63 $ 25.13 $ 25.39 $ 49.10 $ 25.45 The accompanying notes are an integral part of these financial statements.
UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN Statement of Net Assets Available for Benefits With Fund Information (Continued) December 31, 1997 (Thousands of Dollars, except unit amounts) Templeton Templeton Developing Foreign Markets Fund A Trust A Loan Fund ESOP Fund Total Assets: Investments, at fair value: Beneficial interests in Bankers Trust Company Pyramid: Large Capitalization Equity Index Fund $ - $ - $ - $ - $ 839,858 Russell 2000 Equity Index Fund - - - - 20,980 Daily Japanese Equity Index Fund - - - - 1,227 Daily Non Japanese Equity Index Fund - - - - 3,681 Government/Corporate Fixed Income Index Fund - - - - 24,463 Daily International Equity Index Fund - - - - 28,688 United Technologies Corporation Common Stock - - - 340 388,743 United Technologies Corporation ESOP Preferred Stock - - - 1,897,956 1,897,956 Shares of respective registered investment companies 17,216 8,766 - - 336,667 Investments, at contract value or cost: Beneficial interests in investment contracts, at contract value - - - - 2,815,491 Participant loans, at cost - - 62,048 - 62,048 Temporary investments, at cost plus accrued interest - - - 1,402 7,235 Total Investments 17,216 8,766 62,048 1,899,698 6,427,037 Plan receivables 31 18 - 962 5,378 Accrued ESOP contribution receivable - - - 87,188 87,188 Total Assets 17,247 8,784 62,048 1,987,848 6,519,603 Liabilities: Accrued expenses - - - 171 2,680 Loans payable, net - - - - - Accrued interest on ESOP debt and notes payable - - - 2,271 2,271 ESOP debt - - - 408,900 408,900 Notes payable to United Technologies Corporation - - - 89,633 89,633 Total Liabilities - - - 500,975 503,484 Net Assets Available for Benefits $ 17,247 $ 8,784 $ 62,048 $ 1,486,873 $6,016,119 Units of participation 1,733,322 678,876 62,047,682 263,507,383 Unit value $ 9.95 $ 12.94 $ 1.00 $ 5.64 The accompanying notes are an integral part of these financial statements.
UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN Statement of Changes in Net Assets Available for Benefits With Fund Information Period Ended December 31, 1998 (Thousands of Dollars) Small Company UTC INVESCO Stock International Common Total Income Equity Index Equity Index Global Stock Return Fund Fund Fund Fund Fund Fund Fund Additions to net assets attributed to: Investment Income: Net appreciation / (depreciation) in fair value of investments $ - $222,116 $ (59) $ 1,016 $ 15,291 $178,423 $ 902 Interest 244,567 - - - - - - Dividends - - - - - - 774 Total Investment Income 244,567 222,116 (59) 1,016 15,291 178,423 1,676 Contributions Participants' 73,266 42,835 2,159 647 5,605 17,683 1,396 Employer's 149 51 4 1 8 7 4 Total Contributions 73,415 42,886 2,163 648 5,613 17,690 1,400 Repayments on loans 17,879 7,517 232 86 1,056 3,258 142 Deductions from net assets attributed to: Distributions to participants 156,463 34,952 415 51 3,731 16,731 381 Loans to participants 16,040 7,610 208 38 872 3,966 54 Administrative expenses 123 21 2 - 5 5 - Interest expense - - - - - - - Total Deductions 172,626 42,583 625 89 4,608 20,702 435 Net increase / (decrease) prior to transfers 163,235 229,936 1,711 1,661 17,352 178,669 2,783 Inter-fund transfers 224,272 (54,781) (1,120) 209 (16,832) (107,439) 1,733 Assets transferred into Plan 3,660 156 - - 1 32 - Net increase / (decrease) 391,167 175,311 591 1,870 521 71,262 4,516 Net Assets Available for Benefits December 31, 1997 2,817,487 810,634 21,005 4,916 83,139 392,805 11,369 Net Assets Available for Benefits December 31, 1998 $3,208,654 $985,945 $21,596 $ 6,786 $ 83,660 $464,067 $ 15,885 The accompanying notes are an integral part of these financial statements.
UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN Statement of Changes in Net Assets Available for Benefits With Fund Information (Continued) Period Ended December 31, 1998 (Thousands of Dollars) Putnam Fidelity Putnam New SoGen Growth & Fund Fidelity Low- PBHG Opportun- Interna- Income for Growth Fidelity Priced Stock Growth ities tional Portfolio and Income Contrafund Fund Fund Fund Fund, Inc. Additions to net assets attributed to: Investment Income: Net appreciation / (depreciation) in fair value of investments $ 22,710 $ 1,275 $ 7,738 $ (3,280) $ (164) $ 8,265 $ (894) Interest - - - - - - - Dividends 7,819 2,777 4,162 3,211 - 1,861 850 Total Investment Income 30,529 4,052 11,900 (69) (164) 10,126 (44) Contributions: Participants' 11,207 3,118 4,788 3,860 5,669 5,433 1,002 Employer's 24 4 8 6 6 7 1 Total Contributions 11,231 3,122 4,796 3,866 5,675 5,440 1,003 Repayments on loans 1,170 365 471 361 660 663 81 Deductions from net assets attributed to: Distributions to participants 4,887 1,441 1,793 1,018 1,254 1,641 426 Loans to participants 1,026 261 368 293 467 419 68 Administrative expenses - 1 1 13 3 1 - Interest expense - - - - - - - Total Deductions 5,913 1,703 2,162 1,324 1,724 2,061 494 Net increase / (decrease) prior to transfers 37,017 5,836 15,005 2,834 4,447 14,168 546 Inter-fund transfers 28,300 (5,649) 6,113 (4,575) (19,822) 4,490 (1,695) Assets transferred into Plan 3 1 2 1 1 1 - Net increase / (decrease) 65,320 188 21,120 (1,740) (15,374) 18,659 (1,149) Net Assets Available for Benefits December 31, 1997 89,109 29,369 35,531 38,329 55,877 42,145 9,452 Net Assets Available for Benefits December 31, 1998 $ 154,429 $ 29,557 $ 56,651 $ 36,589 $ 40,503 $ 60,804 $ 8,303 The accompanying notes are an integral part of these financial statements.
UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN Statement of Changes in Net Assets Available for Benefits With Fund Information (Continued) Period Ended December 31, 1998 (Thousands of Dollars) Templeton Templeton Developing Foreign Markets Fund A Trust A Loan Fund ESOP Fund Total Additions to net assets attributed to: Investment Income: Net appreciation / (depreciation) in fair value of investments $ (2,721) $ (1,859) $ - $ 920,706 $1,369,465 Interest - - 5,431 555 250,553 Dividends 1,649 180 - 61,274 84,557 Total Investment Income (1,072) (1,679) 5,431 982,535 1,704,575 Contributions: Participants' 1,770 1,056 - - 181,494 Employer's 3 2 - 16,673 16,958 Total Contributions 1,773 1,058 - 16,673 198,452 Repayments on loans 174 113 (34,228) - - Deductions from net assets attributed to: Distributions to participants 667 196 2,463 32,048 260,558 Loans to participants 98 64 (31,852) - - Administrative expenses - - - - 175 Interest expense - - - 39,931 39,931 Total Deductions 765 260 (29,389) 71,979 300,664 Net increase / (decrease) prior to transfers 110 (768) 592 927,229 1,602,363 Inter-fund transfers (1,893) (335) - (50,976) - Assets transferred into Plan - - - - 3,858 Net increase / (decrease) (1,793) (1,103) 592 876,253 1,606,221 Net Assets Available for Benefits December 31, 1997 17,247 8,784 62,048 1,486,873 6,016,119 Net Assets Available for Benefits December 31, 1998 $ 15,464 $ 7,681 $ 62,640 $ 2,363,126 $7,622,340 The accompanying notes are an integral part of these financial statements.
UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN Notes to Financial Statements NOTE 1 - DESCRIPTION OF THE PLAN General. The United Technologies Corporation (UTC) Employee Savings Plan (the Plan) is a defined contribution savings plan administered by UTC. It is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Generally, non-represented employees in participating business units of UTC are eligible to participate in the Plan after completing one year of service. The following is a brief description of the Plan. For more complete information, participants should refer to the Plan document which is available from UTC. Contributions and Vesting. Participants may elect to contribute, through payroll deductions, between 2 and 16 percent of their total compensation. Participant contributions, plus actual earnings thereon, are fully vested at all times under the Plan. UTC has established a leveraged Employee Stock Ownership Plan (ESOP) to fund the employer matching contributions to the Plan. The ESOP is primarily invested in UTC Series A ESOP Convertible Preferred Stock. UTC will match 60 percent of a participant's contributions, up to specified limits, in ESOP Preferred Stock (See Note 4). However, participants who have reached at least age 55 and have completed at least 10 years of continuous service may direct up to 50 percent, in multiples of 25 percent, of their ESOP account balances and future employer contributions to be invested in the other investment funds offered through the Plan (See Note 10). Generally, employer contributions, plus actual earnings thereon, become fully vested after two years of Plan participation. Participant Accounts. Each participant's account is credited with the participant's contributions and allocations of (a) UTC's contributions based on a percentage of the participant's contribution and (b) Plan earnings based on account balances. The benefit to which a participant is entitled is the benefit that can be provided from the participant's vested account. Forfeited balances of terminated participants' nonvested amounts are used to reduce future UTC contributions. For the period ended December 31, 1998, approximately $482,000 of forfeitures were used to fund UTC's contributions. In addition, approximately $26,000 of forfeitures is available to offset future UTC contributions. Trustee and Recordkeeper. All of the Plan's assets are held by Bankers Trust Company, the Plan Trustee. Fidelity Institutional Retirement Services Company performs participant account recordkeeping responsibilities. Investment Options. Participants may elect to allocate their contributions in any whole percentage among the following funds. Participants are permitted to transfer their accounts between investment funds daily in any whole percentage or whole dollar amount. The investment funds are as follows: . The Income Fund invests in contracts issued by five insurance companies. See Note 3. In December of 1997, UTC approved a reverse unit split of the units of participation and the unit value of the Income Fund effective as of January 1, 1998. As a result, the units of participation and the unit value was decreased and increased, respectively, by a factor of ten. All units of participation and unit value amounts presented herein have been restated to reflect the reverse unit split. . The Equity Fund invests in a portfolio of common stocks replicating the Standard & Poor's Composite Index of 500 stocks (S&P 500). . The Small Company Stock Index Fund invests in a portfolio of common stocks replicating the Russell 2000 Index. . The International Equity Index Fund invests in the equities of a mix of stock markets outside the U.S. . The Global Fund invests in both U.S. and foreign investments to replicate the performance, in approximately equal portions, of three indices: the S&P 500, the EAFE Index (an international stock index of large companies in Europe, Australia and the Far East), and the Lehman Brothers Government/Corporate Index. . The UTC Common Stock Fund consists principally of 4,208,868 and 5,334,294 shares of UTC Common Stock at December 31, 1998 and 1997 respectively. See Note 10. . The INVESCO Total Return Fund, a registered investment company, principally invests in both equity and fixed or variable income securities to achieve a moderate total return from capital appreciation and current income. . The Fidelity Growth & Income Portfolio, a registered investment company, principally invests in U.S. and foreign equity securities that pay current dividends and show potential earnings growth. . The Putnam Fund for Growth and Income, a registered investment company, principally invests in equity securities of companies that pay regular dividends to shareowners. . The Fidelity Contrafund, a registered investment company, principally invests in equity securities of U.S. and foreign companies believed to be undervalued or out of favor. . The Fidelity Low-Priced Stock Fund, a registered investment company, principally invests in equity securities of companies believed to be undervalued, overlooked or out of favor, which are generally priced at $35 or less. . The PBHG Growth Fund, a registered investment company, principally invests in equity securities of companies believed to have an outlook for strong earnings growth. . The Putnam New Opportunities Fund, a registered investment company, principally invests in equity securities of companies in certain emerging industry groups. . The SoGen International Fund, Inc., a registered investment company, invests in U.S. and foreign equity, fixed income and gold-related securities and cash. . The Templeton Foreign Fund A (formerly the Templeton Foreign Fund I), a registered investment company, principally invests in equity securities of companies in developed and developing countries outside the U.S. . The Templeton Developing Markets Trust A (formerly the Templeton Developing Markets I), a registered investment company, principally invests in equity securities of companies in developing countries. Participant Loans. Participants with at least two years of Plan participation are allowed to borrow up to 50 percent of their vested account balances (excluding their ESOP account balance). Loan amounts can range from $1,000 to $50,000 and must be repaid within 5 years. The loans are secured by the balance in the participant's account and bear interest at Bankers Trust's prime rate plus one percent. Principal and interest are paid ratably through payroll deductions. Payment of Benefits. Generally, benefits are paid in a lump sum to a terminating participant. A participant terminating due to retirement may elect to receive benefits in installments over two to twenty years. At the participant's election, the portion of a lump sum distribution attributable to the UTC Common Stock Fund and ESOP may be paid in shares of UTC Common Stock instead of cash. Distributions in UTC Common Stock for the period ended December 31,1998 were approximately $5,439,000. Other. Participants who transfer to a new UTC location with a different savings plan may have the option of transferring their account balances in accordance with the provisions of the new savings plan. NOTE 2 - SUMMARY OF ACCOUNTING PRINCIPLES Basis of Accounting. The financial statements of the Plan are prepared under the accrual method of accounting, except for benefits which are recorded when paid. Master Trust. The Plan's assets are kept in a Master Trust maintained by the Trustee. Under the Master Trust agreement, the assets of certain employee savings plans of UTC and its subsidiaries are combined. Participating Plans purchase units of participation in the investment funds based on their contribution to such funds and the unit value of the applicable investment fund at the end of the trading day in which a transaction occurs. The unit value of each fund is determined at the close of each day by dividing the sum of uninvested cash, accrued income and the current value of investments by the total number of outstanding units in such funds. Income from the funds' investments increases the Plans' unit values. Distributions to participants reduce the number of participation units held by the Plans. At December 31, 1998, the Plan's interest in the Master Trust comprised 476,384,961 units of the 522,172,913 total units of participation, or 91.23%. At December 31, 1997, the Plan's interest in the Master Trust comprised 491,797,370 units of the total 534,787,672 units of participation, or 91.96%. Investment Valuation. The Income Fund's investment contracts are stated at contract value which represents contributions plus earnings, less Plan withdrawals. The ESOP Preferred Stock's fair value is the higher of the guaranteed value ($65) or, prior to the May 17, 1999 stock split, twice the market value of UTC's Common Stock (See Notes 4 and 10). All other funds are stated at fair value, as determined by the Trustee, typically by reference to published market data. Plan Expenses. Plan administrative expenses, including Trustee and recordkeeper fees were paid directly by the employer in 1998. The employer also paid certain investment management fees for the Bankers Trust managed funds. All other administrative and investment expenses were paid out of Plan assets. Use of Estimates. The preparation of financial statements requires UTC to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ from those estimates. NOTE 3 - INVESTMENT CONTRACTS Under these contracts, each insurance company guarantees repayment in full of the principal amount invested plus interest credited at a fixed rate for a specified period. Interest is credited to each contract based on an annual interest rate set each year by the individual insurance companies. This rate, which differs among contracts, takes into account any difference between prior year credited interest and the actual amount of investment earnings allocable to the contract in accordance with the established allocation procedures of the insurance company. The interest rates earned for 1998 and 1997 were 8.5% and 8.1%, respectively. The following is a summary of the investment contracts held in the Income Fund and the portion allocable to the Plan: (Thousands of Dollars) December 31, December 31, 1998 1997 CIGNA $ 1,590,214 $ 1,456,404 Aetna 471,765 437,582 Travelers 398,146 367,509 Prudential 252,192 231,133 Metropolitan Life 1,019,272 780,096 $ 3,731,589 $ 3,272,724 Amount of the contracts allocable to the Plan $ 3,205,795 $ 2,815,491 NOTE 4 - EMPLOYEE STOCK OWNERSHIP PLAN The ESOP has purchased approximately 14.5 million shares of $1.00 par value Series A ESOP Convertible Preferred Stock ("ESOP Shares"), with a $4.80 per share annual dividend from UTC. Following the split of UTC Common Stock announced on April 30, 1999 and effective on May 17, each ESOP share is convertible into four shares of UTC's Common Stock. For 1998, ESOP shares were convertible into two shares of UTC's Common Stock. The ESOP financed the ESOP Share purchases with interest bearing promissory notes. See Notes 5 and 6. Participants are allocated ESOP Shares as they earn UTC's matching contributions. For the period ended December 31, 1998, participants were credited with matching contributions of $61.2 million representing approximately 332,800 shares. Additionally, in lieu of receiving cash, participants are allocated ESOP Shares for dividends paid on their shares. During 1998, participants earned dividends of approximately $32.7 million representing approximately 163,200 shares. ESOP Shares allocated are calculated at the higher of four times the daily ending price of UTC Common Stock (giving effect to the May 17, 1999 stock split) or the $65 guaranteed value. ESOP Shares are released for allocation to participants as principal and interest payments are made on the debt. The ESOP uses the ESOP Shares' cash dividends and additional contributions from UTC to repay the principal and interest. The Employer Contributions presented in the Statement of Changes in Net Assets Available for Benefits include approximately $3.4 million of additional cash contributions from UTC plus $13.3 million of Employer Contributions Receivable from UTC at December 31, 1998. The $ 13.3 million is due to share allocations exceeding share releases during 1998. The number of ESOP Shares allocated to participants' accounts is equal in value to the fixed matching contributions specified by the Plan. To the extent that ESOP Shares released through debt service payments are not sufficient to meet the matching contribution requirement, UTC will contribute additional ESOP Shares, UTC Common Stock or cash. To the extent that ESOP Shares released through debt service exceed the matching contribution requirement, the debt will be restructured so that the value of the released ESOP Shares does not exceed the Plan's matching contribution requirement. Shares allocated to a participant generally may not be distributed until the participant's termination, disability, retirement or death. Upon distribution, a participant may elect to receive either cash or four shares (giving effect to the May 17, 1999 stock split) of UTC Common Stock for each ESOP Share. Each ESOP share is valued at the higher of four times the market value of UTC's Common Stock (giving effect to the May 17,1999 stock split) or $65. A participant cannot elect to receive the distribution in ESOP Shares. The ESOP Fund's investment in ESOP Shares at period end is as follows: (Thousands of Dollars, December 31, 1998 December 31, 1997 except share amounts) Allocated Total Allocated Total Number of Shares 6,869,316 12,581,201 6,826,380 13,033,172 Guaranteed Value $ 446,506 $ 817,778 $ 443,715 $ 847,156 Market $ 1,494,076 $ 2,736,411 $ 994,092 $ 1,897,956 As discussed above, market value is represented by the higher of the guaranteed value of $65 per share or the daily closing price of four shares of UTC's Common Stock (giving effect to the May 17, 1999 stock split). As such, the market value of the ESOP Shares was $217.50 and $145.625 per share at December 31, 1998 and 1997, respectively. Further, the Net Assets Available for Benefits in the ESOP Fund at December 31, 1998 and 1997 include unrealized appreciation of approximately $1.9 billion and $1.05 billion, of which $871.1 million and $500.4 million is on unallocated shares. The ESOP Shares are redeemable, in whole or in part, at the option of UTC at a redemption price of $65.48 per share plus accrued and unpaid dividends. The redemption price decreases annually until it reaches $65. However, upon notice to the Trustee of UTC's intention to redeem, the Trustee can convert each preferred share into four shares, (giving effect to the May 17, 1999 stock split) of UTC Common Stock if more beneficial to participants. NOTE 5 - ESOP DEBT In 1990, the Master Trust, with UTC as guarantor, executed a Note and Guaranty Agreement and issued $660,000,000 of Series A, B, C and D notes (described below) representing the ESOP's permanent financing. The amounts outstanding under the Agreement, with interest rates and maturity dates, are as follows at December 31, 1998: Principal Rate of Note Series (000's) Interest Due A $ 36,000 7.24% 1999 B 286,600 7.68% 2000 - 2008 C 17,300 7.68% 2008 D 32,700 7.68% 2009 $ 372,600 Required payments on these Notes, in aggregate, for the next five plan years are $36.0 million in 1999, $35.5 million in 2000, $35.0 million in 2001, $34.5 million in 2002, and $34.0 million in 2003. NOTE 6 - NOTES PAYABLE In conjunction with the ESOP financing discussed in Note 5, UTC issued a promissory note in 1990 bearing interest at 10.5%, and due over the period 1999 to 2009. At December 31, 1998, $70,033,000 was outstanding. Required principal payments on the Note for the next five plan years are $4.8 million in 1999, $4.9 million in 2000, $5.0 million in 2001, $ 5.2 million in 2002, and $5.5 million in 2003. The Trustee executed an additional $15,000,000 and $19,000,000 promissory note to UTC on December 10, 1997 and 1998, respectively. The notes bear an interest rate of 6.35% and 5.50% and mature on December 10, 2007 and 2008, respectively. Both promissory notes replace a portion of the 1990 ESOP Debt notes described in Note 5 above. NOTE 7 - PLAN TERMINATION Although it has not expressed any intent to do so, UTC 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 to certain Plan provisions that limit this right when certain ESOP loans remain outstanding. In the event of Plan termination, participants will become 100 percent vested in their accounts. NOTE 8 - RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500 The following are reconciliations of net assets available for benefits and benefits paid from the financial statements to the Form 5500: (Thousands of Dollars) December 31, 1998 1997 Net assets available for benefits per the financial statements $ 7,622,340 $ 6,016,119 Amounts allocated to participant withdrawals (659) (907) Net assets available for benefits per Form 5500 $ 7,621,681 $ 6,015,212 Year Ended December 31, 1998 Benefits paid to participants per the financial statements $ 260,558 Add: Amounts allocated to participant withdrawals at December 31, 1998 659 Less: Amounts allocated to participant withdrawals at December 31, 1997 (907) Benefits paid to participants per Form 5500 $ 260,310 Amounts allocated to participant withdrawals are recorded on 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. NOTE 9 - TAX STATUS The Internal Revenue Service has determined and informed UTC by letter dated September 23, 1996 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 receiving the determination letter. However, the Plan administrator and tax counsel believe that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC. NOTE 10 - SUBSEQUENT EVENTS Effective January 1, 1999, the Plan was amended to allow all new salaried employees to participate in the Plan immediately after date of hire. In addition, non-highly compensated participants in the Plan may elect to contribute up to 20% of their compensation, effective January 1, 1999. On January 1, 1999, the Employee Stock Ownership Plan (ESOP) was amended to no longer require participants to complete at least 10 years of continuous service prior to directing their ESOP account balances and future employer contributions in other investment funds offered through the Plan. On April 30, 1999, the Board of Directors of UTC declared a 2 for 1 stock split in the form of a stock dividend payable May 17, 1999 to shareowners of record at the close of business on May 7, 1999. The share amounts reflected herein do not reflect the stock split. On May 4, 1999, UTC completed the sale of its UT Automotive Corporation (UTA) subsidiary to Lear Corporation. Plan participants include employees of UTA. UTA employees have the option to transfer their account balances or leave their investments in the Plan. These employees were permitted to continue making contributions to the Plan through May 31, 1999.
SIGNATURES The Plan (or persons who administer the employee benefit plan), pursuant to the requirements of the Securities Exchange Act of 1934, has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. UNITED TECHNOLOGIES CORPORATION EMPLOYEE SAVINGS PLAN Dated: June 28, 1999 By: /s/ Daniel P. O'Connell Daniel P. O'Connell Corporate Director, Employee Benefits and Human Resources Systems United Technologies Corporation
Exhibit 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-26627) of United Technologies Corporation of our report dated June 28, 1999 appearing in the United Technologies Corporation Employee Savings Plan's Annual Report on Form 11-K for the year ended December 31, 1998. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Hartford, Connecticut June 28, 1999