attssp11k.htm

 
SECURITIES AND EXCHANGE COMMISSION
 
 
  
 
Washington, D.C. 20549
 
  
(Mark One)
  
 
FORM 11-K
 
  
x
ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
  
     
 
For the fiscal year ended December 31, 2008
 
  
 
OR
 
  
¨
TRANSITION REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
  
 
For the transition period from              to
 
  
 
Commission File Number:1-8610
 
 
  
 
A. Full title of the plan and the address of the plan, if different from that of the issuer named below:
  
     
 
 
AT&T SAVINGS AND
SECURITY PLAN
 
  
     
 
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
  
 
 
AT&T INC.
 
  
 
208 S. Akard, Dallas, Texas 75202
 
  

 

 

 
 
 

Financial Statements, Supplemental Schedule and Exhibit
Table of Contents
Page


Report of Independent Registered Public Accounting Firm
1
   
Financial Statements:
  
   
Statements of Net Assets Available for Benefits as of December 31, 2008 and 2007
2
Statement of Changes in Net Assets Available for Benefits for the
  
Year Ended December 31, 2008
3
Notes to Financial Statements
4
   
Supplemental Schedule:
  
   
Schedule H, Line 4(i) – Schedule of Assets (Held at End of Year)
12  
   
Exhibit:
  
   
23 – Consent of Independent Registered Public Accounting Firm
  


 
 
 

 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



AT&T Inc., Plan Administrator
for AT&T Savings and Security Plan


We have audited the accompanying statements of net assets available for benefits of AT&T Savings and Security Plan as of December 31, 2008 and 2007, and the related statement of changes in net assets available for benefits for the year ended December 31, 2008. 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 the standards of the Public Company Accounting Oversight Board (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. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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 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, 2008 and 2007, and the changes in its net assets available for benefits for the year ended December 31, 2008, in conformity with US generally accepted accounting principles.

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, 2008, is presented for purposes 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, is fairly stated in all material respects in relation to the financial statements taken as a whole.



/s/ ERNST & YOUNG LLP

Dallas, Texas
June 26, 2009


1 
 
 

AT&T SAVINGS AND SECURITY PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
(Dollars in Thousands)


   
December 31,
  
   
2008
    
2007
  
ASSETS
            
             
Cash
   $ 2     $ -  
                 
Investments (at fair value)
     5,071,713       7,105,534  
Market value of securities on loan
     267,790       173,988  
Total Investments (See Notes 3 and 4)
     5,339,503       7,279,522  
                 
Securities lending collateral
     272,599       177,620  
Receivable for investments sold
     908       1,183  
Contributions receivable
     190       -  
Dividends and interest receivable
     119       144  
                 
Total Assets
     5,613,321       7,458,469  
                 
                 
LIABILITIES
                
                 
Overdrafts
     -       4,178  
Payable for security purchased
     -       2,416  
Administrative expenses payable
     5,702       2,497  
Securities lending payable
     279,911       177,620  
                 
Total Liabilities
     285,613       186,711  
                 
Net assets reflecting investments at fair value
     5,327,708       7,271,758  
                 
Adjustment from fair value to contract value for fully benefit-responsive investment contracts
     1,348       (4,213 )
                 
Net Assets Available for Benefits
   $ 5,329,056     $ 7,267,545  
                 
See Notes to Financial Statements.
                


2 
 
 

AT&T SAVINGS AND SECURITY PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2008
(Dollars in Thousands)


Net Assets Available for Benefits, December 31, 2007
   $ 7,267,545  
         
Additions to Net Assets:
        
Contributions:
        
Participant contributions
     308,838  
Employer contributions
     159,949  
      468,787  
         
Investment Income (Loss):
        
Net depreciation in value of investments
     (1,923,050 )
Dividends on AT&T common shares
     148,923  
Interest
     63,773  
Income on collateralized securities
     2,219  
      (1,708,135 )
Total Additions, net of investment loss
     (1,239,348 )
         
Deductions from Net Assets:
        
Administrative expenses
     7,653  
Distributions
     662,576  
         
Total Deductions
     670,229  
         
Net decrease before transfers
     (1,909,577 )
         
Transfer out to affiliated plans (See Note 1)
     (28,912 )
         
Net Assets Available for Benefits, December 31, 2008
   $ 5,329,056  
         
See Notes to Financial Statements.
        
         
         




3 
 
 
AT&T SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
(Dollars in Thousands)
 

 
1.
Plan Description - The AT&T Savings and Security Plan (Plan) was established by SBC Communications Inc. (SBC) to provide a convenient way for eligible employees to save for retirement on a regular and long-term basis. In connection with the November 2005 merger of AT&T Corp., SBC changed its name to AT&T Inc. (AT&T or the Company).The majority of eligible employees are represented by the Communications Workers of America or the International Brotherhood of Electrical Workers who are employed by participating companies of AT&T. 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 text and prospectus include complete descriptions of these and other Plan provisions. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA).

Bank of New York (BNY Mellon) serves as the trustee for the Plan.

In 2008, the Plan was amended to transfer out the participant account balances and assets of certain classifications of employees to the AT&T Retirement Savings Plan (AT&T RSP).  Approximately $28,912 was transferred to the AT&T RSP due to this amendment.

During 2008, participants could invest their contributions in one or more of seven funds in 1% increments:

· AT&T Shares Fund
· Global Equity Fund
· Bond Fund
· Mid and Small Cap Stock Fund
· Large Cap Stock Fund
· International Stock Fund
· Interest Income Fund
  

Participants contribute to the Plan on a pre-tax basis through payroll allotments.  The Company contributes to the Plan by matching the participants’ contributions based on the provisions of the Plan. Company matching contributions are made solely in the form of shares of AT&T’s common stock held in an Employee Stock Ownership Plan (ESOP) which is a separate investment account of this Plan.

Dividends on shares in the AT&T Shares Fund and the ESOP can either be reinvested in the AT&T Shares Fund on a quarterly basis, or paid into a separate fund known as a Dividend Fund Account (DFA) for distribution at the end of the year. At the end of the year, dividends held in the DFA are paid out to the participant. Interest earned on dividends held in the DFA purchases additional units of the AT&T Shares Fund in the participant’s account. During 2008, Plan participants elected to receive $33,639 in dividend distributions. This amount is included in distributions on the statement of changes in net assets.

Although it has not expressed any intent to do so, AT&T 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 collective bargaining obligations. In the event that the Plan is terminated, subject to the conditions set forth by ERISA, the account balances of all participants shall be 100% vested.

2.
Accounting Policies - The accompanying financial statements were prepared in conformity with U.S. generally accepted accounting principles, which require management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Benefits are recorded when paid.

Investments are stated at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See Note 3 for discussion of fair value measurements.  Investments in securities traded on a national securities exchange are valued at the last reported sales price on the last business day of the year. If no sale was reported on that date, they are valued at the last reported bid price. Over-the-counter securities and government obligations are valued at the bid price or the average of the bid and asked price on the last business day of the year from published sources where available and, if not available, from other sources considered reliable. Cash and temporary assets are stated at fair value. The guaranteed investment contracts (GICs) and the Synthetic GICs hold asset backed securities.
 
Common/collective trust funds are valued at quoted redemption values that represent the net asset values of units held at year-end which management has determined approximates fair value. Participant loans are reported at cost, which approximates fair value. 

4 
 
 
AT&T SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
(Dollars in Thousands)
 
As required by Financial Accounting Standards Board Staff Position AAG INV-1 and SOP 94-4-1, “Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans” (the FSP), investment contracts held by a defined contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan. The Plan invests in fully benefit-responsive synthetic investment contracts (Synthetic GICs). The underlying investments of the Synthetic GICs are valued at quoted redemption values on the last business day of the Plan’s year-end. The fair value of the wrap contracts for the Synthetic GICs is determined using the market approach discounting methodology that incorporates the difference between current market level rates for contract level wrap fees and the wrap fee being charged. The difference is calculated as a dollar value and discounted by the prevailing interpolated swap rate as of period end. The contract value of the fully benefit-responsive investment contracts represents contributions plus earnings, less participant withdrawals and administrative expenses.

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 reasonable expenses of plan administration may be charged to the Plan in accordance with procedures adopted by the plan administrator (as defined by the Plan). Brokerage fees, transfer taxes and other expenses incident to the purchase or sale of securities by the Trustee shall be deemed to be part of the cost of such securities, or deducted in computing the proceeds, as the case may be. Taxes, if any, on any assets held or income received by the Trustee will be charged appropriately against the accounts of Plan participants as determined by the plan administrator. To the extent that expenses incident to the administration of the Plan are paid from the Trust, the plan administrator will determine which expenses are to be charged to and paid from participant’s individual accounts, which expenses are to be charged to and paid from the accounts of all participants (and how they are to be allocated among such accounts), and which expenses are to be charged to and paid from the accounts of one or more identified groups of participants (and how they are to be allocated among such accounts).All expenses of administering the Plan that are not charged to the Plan will be borne by the respective participating companies in the Plan as determined by the plan administrator.

3. 
Fair Value Measurements – In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157 Fair Value Measurements (FASB Statement No. 157).  FASB Statement No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements.  The provisions of FASB Statement No. 157 are effective for fiscal years beginning after November 15, 2007.  The Plan adopted this standard as of January 1, 2008 and the impact of the adoption was not significant.

The FASB Statement No. 157 framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  The three levels of the fair value hierarchy under FAS Statement No. 157 are described below:

Level 1
Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access.
   
Level 2
Inputs to the valuation methodology include:
· Quoted prices for similar assets and liabilities in active markets;
· Quoted prices for identical or similar assets or liabilities in inactive markets;
· Inputs other than quoted market prices that are observable for the asset or liability;
· Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
   
 
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
   
Level 3
Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
 

5 
 
 
AT&T SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
(Dollars in Thousands)
The asset’s or liability’s fair value measurement level with the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.  Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The valuation methodologies described in Note 2 may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.  Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.  There have been no changes in the methodologies used at December 31, 2008 and 2007.

The following table sets forth by level, within the fair value hierarchy, the Plan’s assets at fair value as of December 31, 2008 and 2007.
 
   
Plan Assets at Fair Value as of December 31, 2008
  
   
Level 1
    
Level 2
    
Level 3
    
Total
  
                         
Common stock
   $ 2,610,853     $ -     $ -     $ 2,610,853  
Common/collective trust funds
     -       1,518,352       -       1,518,352  
Synthetic GIC wrappers
     -       1,581       -       1,582  
Fixed Income Securities
     -       846,365       -       846,365  
Participant loans
     -       -       362,352       362,352  
                                 
Total assets at fair value
   $ 2,610,853     $ 2,366,298     $ 362,352     $ 5,339,503  

 
The $272,599 for the Securities lending collateral is classified as Level 2.   There are no realized or unrealized gains or losses on participant loans. The change from the December 31, 2007 balance of $357,219 consists solely of net issuances and settlements.



6 
 
 
AT&T SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
(Dollars in Thousands)

 
4.
Investments - Investments representing 5% or more of Plan net assets at December 31 were:

   
2008
    
2007
  
Employee Stock Ownership Plan *
            
AT&T common shares
   $ 1,300,396     $ 1,909,818  
                 
AT&T Shares Fund
                
AT&T common shares
     1,310,457       2,000,334  
                 
Large Cap Stock Fund
                
Barclays Global Investors Equity Index Fund F
     513,270       898,683  
                 
Bond Fund
                
Barclays Global Investors Intermediate Government/Credit Bond Index Fund F
     321,355       **  
                 
Mid and Small Cap Stock Fund
                
Barclays Global Investors EAFE Equity Extended Equity Market Fund F
     **       365,035  
                 
International Fund
Barclays Global Investors EAFE Equity Index Fund F
     **       402,308  

*     Nonparticipant-directed
** Investment balance did not exceed 5% at year-end

During 2008, 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:

Common stock
   $ (1,217,166 )
Common/collective trust funds
     (705,884 )
Total
   $ (1,923,050 )

Fully Benefit-Responsive Investment Contracts
The Interest Income Fund consists of fully benefit-responsive investment 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 periodically reset. The Interest Income Fund invests in Synthetic GICs, also referred to as wrapper contracts. The assets supporting the Synthetic GICs are owned by the Plan and generally consist of high quality fixed income securities. At December 31, 2008 the underlying assets had a fair value of $990,496 and a contract value of $991,844. At December 31, 2007 the underlying assets had a fair value of and a contract value of $846,296 and $842,083. For the years ended December 31, 2008 and 2007, the average yield earned by the Plan on these contracts was 3.99% and 4.31%, and, the average yield earned by the Plan adjusted to reflect actual interest rate credited to participants, was 3.98% and 4.73%. No valuation reserves were recorded to adjust contract amounts as of December 31, 2008 or 2007.

A bank or insurance company issues a wrapper contract that provides preservation of principal, maintains a stable interest rate and provides daily liquidity at contract value for participant directed transactions, in accordance with the provisions of the Plan. Wrapper contracts amortize the realized and unrealized gains and losses on the underlying fixed income investments through adjustments to the future interest crediting rate. The issuer of the wrapper contract provides assurance that the adjustments to the interest crediting rate do not result in a future interest crediting rate that is less than zero, which would result in a loss of principal or accrued interest. The fair value of the wrapper contracts were $1,581 at December 31, 2008 and $0 at December 31, 2007.
 
7 
 
 
AT&T SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
(Dollars in Thousands)
Wrapper contracts’ interest crediting rates are typically reset on a monthly or quarterly basis and are based on the characteristics of the underlying fixed income securities. Other key factors that influence the interest crediting rates are market interest rates, the amount and timing of participant transactions into and out of the wrapper contract, investment returns on the underlying fixed income securities and the duration of those investments. All wrapper contracts provide for minimum interest crediting rate of zero percent. In the event that the interest crediting rate should fall to zero and the requirements of the wrapper contract are satisfied, the wrapper issuer will pay the Plan the shortfall needed to maintain the rate at zero, ensuring participants’ principal and accrued interest is protected.

Changes in market interest rates can affect the yield to maturity and the market value of the underlying investment, and can have a material impact on the wrapper contract’s interest crediting rate. Additionally, participant withdrawals and transfers from the Interest Income Fund are paid at contract value but funded through the market value liquidation of the underlying investments, which also impacts the interest crediting rate. The resulting gains and losses in the market value of the underlying investments relative to the wrapper contract value are represented on the Plan’s Statements of Net Assets Available for Benefits as the “Adjustment from fair value to contract value for fully-benefit responsive investment contracts,” and totaled $1,348 at December 31, 2008 and $(4,213) at December 31, 2007. If this adjustment is positive, it indicates that the wrapper contract value is greater than the market value of the underlying investments and the embedded market value losses will be amortized in the future through a lower interest crediting rate. If the adjustment is negative, the embedded market gains would cause the future interest crediting rate to be higher.

In certain circumstances, the amount withdrawn from the wrapper contract could be payable at fair value rather than at contract value. These events include termination of the Plan, a material adverse change to the provisions of the Plan, if AT&T elects to withdraw from a wrapper contract in order to switch to a different investment provider or, in the event of a spin-off or sale of a division, if the terms of the successor plan do not meet the contract issuers’ underwriting criteria for issuance of a clone wrapper contract. Events that would permit a wrapper contract issuer to terminate a wrapper contract upon short notice include the Plan’s loss of its qualified status, un-cured material breaches of responsibilities or material and adverse changes to the provisions of the Plan. The Company does not believe any of the events are probable of occurring in the foreseeable future.

Securities Lending
The Plan is authorized to engage in the lending of certain Interest Income Fund assets. Securities lending is an investment management enhancement that utilizes the existing securities (fixed income investments) of the Plan to earn additional income. Securities lending involves the loaning of securities to a selected group of approved banks and broker-dealers. In return for the loaned securities, the trustee, prior to or simultaneous with delivery of the loaned securities to the borrower, receives collateral in the form of cash or U.S. Government securities as a safeguard against possible default of any borrower on the return of the loan. Each loan is initially collateralized, in the case of: (a) loaned securities denominated in U.S. dollars or whose primary trading market is located in the U.S. to the extent of 102% of the market value of loaned securities, or (b) loaned securities not denominated in U.S. dollars or whose primary trading market is not located in the U.S. to the extent of 105% of the market value of the loaned securities. The collateral is marked to market on a daily basis. Securities on loan and collateral held under this program at December 31, 2008 and 2007 are reported on the accompanying statements of net assets available for benefits. The reported collateral includes noncash holdings of $37,592 and $8,534 at December 31, 2008 and 2007. Income earned on securities lending is used to offset the administrative expenses of the Plan and was $2,219 for the year ended December 31, 2008.

Investment Risk
Investments held by the Plan are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investments, it is at least reasonably possible that changes in the values of investments could occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefit. Plan participants’ accounts that are invested in the Company stock fund option are exposed to market risk in the event of a significant decline in the value of AT&T stock.

Additionally, the Plan invests in securities with contractual cash flows, such as asset backed securities, collateralized mortgage obligations and commercial mortgage backed securities, including securities backed by subprime mortgage loans. The value, liquidity and related income of these securities are sensitive to changes in economic conditions, including real estate value, delinquencies or defaults, or both, and may be adversely affected by shifts in the market’s perception of the issuers and changes in interest rate.

8 
 
 
AT&T SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
(Dollars in Thousands)
 
5.
 Related Party Transactions – Plan assets are invested in AT&T stock directly. Because the Company is the plan sponsor, transactions involving the Company’s stock qualify as party-in-interest transactions.  In addition, certain investments held by the Plan are managed by Mellon and Fidelity as trustee and record keeper, respectively, as defined by various agreements. Therefore, these transactions and fees paid to these entities qualify as parties-in-interest transactions.  All of these transactions are exempt from the prohibited transactions rules.

 
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 as of December 31 is as follows:

   
2008
    
2007
  
Assets
            
AT&T common shares
   $ 1,300,396     $ 1,909,818  
Temporary cash investments
     2,968       1,766  
Dividends and interest receivable
     2       10  
Receivable for investments sold
     908       869  
Total Assets
     1,304,274       1,912,463  
                 
Liabilities
                
Overdrafts
     -       503  
Administrative expenses payable
     471       418  
Payables for securities purchased
     -       2,416  
Total Liabilities
     471       3,337  
                 
Net Assets Available for Benefits
   $ 1,303,803     $ 1,909,126  


   
2008
  
       
Net Assets Available for Benefits, December 31, 2007
   $ 1,909,126  
         
Employer contributions 1
     160,089  
Interest income
     40  
Dividends
     -  
Net depreciation in fair value of investments
     (596,914 )
Administrative expenses
     (1,603 )
Distributions
     (122,267 )
Transfers to other fund(s)
     (44,668 )
      (605,323 )
         
Net Assets Available for Benefits, December 31, 2008
   $ 1,303,803  

1  
Employer contributions includes forfeitures allocated from the AT&T Shares Fund.

7.     Tax Status - The Plan has received a determination letter from the Internal Revenue Service (IRS) dated
March 25, 2004, stating that the Plan is qualified under Section 401(a) of the Internal Revenue Code (IRC) and, therefore, the related trust is exempt from taxation. Subsequent to this determination by the IRS, the Plan was amended. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its qualification. The plan administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan, as amended, is qualified and the related trust is tax exempt. In addition, the Plan was filed with the Internal Revenue Service for a new favorable determination letter on February 2, 2009 pursuant to, and as part of, the IRS determination letter filing program (Cycle C).

9
 
 
AT&T SAVINGS AND SECURITY PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
(Dollars in Thousands)


8.
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:

   
2008
    
2007
  
             
Net Assets Available for Benefits per the financial statements
   $ 5,329,056     $ 7,267,545  
                 
Adjustment from contract value to fair value for fully benefit-responsive investment contracts
     (1,348 )     4,213  
                 
Distribution payable to participants
     -       (196 )
                 
Net Assets Available for Benefits per the Form 5500
   $ 5,327,708     $ 7,271,562  

The following is a reconciliation of benefits paid to participants per the financial statements to the Form 5500 for the year ended December 31, 2008:
       
Distributions to participants per the financial statements
   $ 662,576  
         
Distributions payable to participants at December 31, 2008
     -  
         
Distributions payable to participants at December 31, 2007
     (196 )
         
Distributions to participants per the Form 5500
   $ 662,380  

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.

The following is a reconciliation of total additions per the financial statements to total income per the Form 5500 for the year ended December 31, 2008:
       
Total additions per the financial statements
   $ (1,239,348 )
         
Adjustment from contract value to fair value for fully benefit-responsive investment contracts at December 31, 2008
     (1,348 )
         
Adjustment from contract value to fair value for fully benefit-responsive investment contracts at December 31, 2007
     (4,213 )
         
Total income per the Form 5500
   $ (1,244,909 )

Fully benefit-responsive contracts are recorded on the Form 5500 at fair value versus contract value on the financial statements.



9.  
Subsequent Event - Effective January 1, 2009, vested Company contributions made to the Plan that are invested in the ESOP can be immediately diversified into any of the fund options described in Note 1 above.  Prior to January 1, 2009, participants could only diversify their vested Company match account beginning with the year following the year they attained age 55.  Company contributions made to the Plan prior to January 1, 2009, can be diversified into other fund options as described below. If a participant is not age 55, the Company match account balance that accrued as of December 31, 2008 can be exchanged into another investment fund as follows:
                   ·  
Effective January 1, 2009, up to 33% of the vested account
                  ·  
Effective January 1, 2010, up to 66% of the vested account
                  ·  
Effective January 1, 2011, up to 100% of the vested account

10 
 
 
AT&T SAVINGS AND SECURITY PLAN
EIN 43-1301883, PLAN NO. 004

SCHEDULE H, LINE 4(i) - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
December 31, 2008
(Dollars in Thousands)

 
Identity of Issue
  
Description of Investment
  
Cost
  
Current Value



Employee Stock Ownership Plan
          
*
AT&T common shares
  
45,627,934 shares
$
1,173,387
$
1,300,396
*
Mellon Trust of New England, National
            
 
Association Total Employee Stock
            
 
Ownership Plan
  
Common/Collective Trust Fund
  
2,968
  
2,968
 
Total Employee Stock Ownership Plan
      
1,176,355
  
1,303,364
               
AT&T Shares Fund
            
*
AT&T common shares
  
45,980,946 shares
      
1,310,457
*
Mellon Trust of New England, National
            
 
Association
  
Common/Collective Trust Fund
      
9,520
 
Total Shares Fund
      
**
  
1,319,977
               
Bond Fund
            
*
Barclays Global Investors Intermediate
            
 
Government/Credit Bond Index Fund F
  
15,729,578 units
  
**
  
321,355
               
Large Cap Stock Fund
            
*
Barclays Global Investors Equity Index
        
 
Fund F
  
37,166,553 units
  
**
  
513,270
               
Interest Income Fund
            
 
State Street Bank & Trust Co. Wrapper
  
Synthetic GIC
        
     
#99039, IR, ***
      
507
 
ING Life Insurance Company Wrapper
  
Synthetic GIC
        
     
#60127,IR, *** 
      
110
 
JP Morgan Chase Bank Wrapper
  
Synthetic GIC
        
     
ASBCSS-01,IR, *** 
      
221
 
Adjustable Rate Mortgage Trust
  
Nag PT Arm
      
3,409
 
Amex Optima CC MT
  
Monoline Credit Card; 4.35%; Maturity Date 12/15/2011
      
5,464
 
Bear Stearns Commercial Mortgage
  
Non-Agency Comml Mort Backed; 5.29% Maturity Date 9/11/2041
      
6,589
 
Countrywide Asset-Backed Certificates
  
Home Equity; 4.74%; Maturity Date 5/25/2035
      
3,593
 
Countrywide Home Loans
  
Collateralized Mtg Obligation; 4.50%; Maturity Date 6/25/2019
      
4,746
 
Capital Auto Receivables Asset
  
Car Loans; 5.30%; Maturity Date 5/15/2014
      
7,159
 
Capital One Master Trust
  
Monoline Credit Card; 4.05%; Maturity Date 3/13/2013
      
7,594
 
Capital One Auto Finance Trust
  
SubPrime Auto; 5.45%; Maturity Date 2/15/2011
      
1,188
 
Carmax Auto Owner Trust
  
NonPrime Auto; 4.35%; Maturity date 3/15/2010
      
714
 
Chase Insurance Trust
  
Bank Credit Card; 4/65%; Maturity Date 12/17/2012
      
7,686
 
Commercial Mtg Acceptance Corp
  
Collateralitzed Mtg Obligation; 5.60%; Maturity Date 12/10/2049
      
6,227
 
John Deere Owner Trust
  
Large Equipment Loan; 4.16%; Maturity Date 5/15/2012
      
3,775
 
 Discover Card Master Trust
  
Credit Card; 5/10%; Maturity Date 10/15/2013
      
3,383
 
 Discover Card Master Trust
  
Credit Card; 5.65%; Maturity Date 12/15/2015
      
7,368
 
Federal Home - Adj Rate Mtg.
  
Agency Passthru; 4.20%; Maturity Date 12/1/2035
      
6,915
 
Federal Home Loan Mtg - Adj Rate Mtg
  
Agency Hybrid; 5/25% Maturity Date 9/1/2031
      
47
 
Federal Home Loan Bank
  
Government Sponsored; 3.63%; Maturity Date 5/29/2013
      
15,862
 
Federal Home Loan Mortgage Corporation
  
Agency Debenture; 7.30%; Maturity Date 5/25/2010
      
8,521
 
Freddie Mac
  
Agency Owned - No Guarantee; 4.13%; Maturity Date 9/27/2013
      
13,268
 
Federal National Mtge Assn GTD Remic
  
Agency Fix; 4.50%; Maturity Date 9/1/2003
      
2,876
 
Federal National Mtg Assn Whole Loan
  
Home Equity Agency; 6/00%; Maturity Date 5/25/2032
      
1,482
 
Federal National Mtge Assn
  
Agency Debenture; 5.34%; Maturity Date 4/25/2012
      
8,610
 
Federal National Mtg Assn Whole Loan
  
Home Equity Agency; 4.91%; Maturity Date 11/25/2032
      
1,526
 
Federal National Mtg Assn. - GTD REMIC.
  
Agency MF Fix; 3.81%; Maturity Date 11/25/2012
      
3,850
 
Federal National Mtg Assn. - GTD REMIC.
  
Agency MF Fix; 4.63%; Maturity Date 5/25/2033
      
1,463
 
Federal National Mtg Assn. - GTD REMIC.
  
Agency MF Fix; 3.50%; Maturity Date 12/25/2025
      
5,923
 
Federal National Mtge Assn Whole Loan
  
Agency RP ARM; 5.62%; Maturity Date 6/25/02043
      
844
 
Federal Home Loan Mtg Multiclass
  
Agency; 4.00%; Maturity Date 6/15/2013
      
2,811
 
Federal National Mtg Assn GTD Remic
  
Home Equity Agency; 5.45%; Maturity Date 8/25/2034
      
3,266
 
Federal National Mtg Assn. - GTD REMIC.
  
Agency MF Fix; 5.50%; Maturity Date 4/25/2030
      
3,495
 
Federal Home Loan Mtg Multiclass
  
Agency; 5.00%;  Maturity Date 4/15/2034
      
3,554
 
Federal Home Loan Mortgage Corporation
  
Agency Debenture; 4.50%; Maturity Date 10/15/2034
      
7,806
 
Federal Home Loan Mtg Multiclass
  
Agency; 5.00%; Maturity Date 11/15/2034
      
5,902
 
Federal Home Loan Mtg Multiclass
  
Agency; 4.50%; Maturity Date 9/15/2018
      
8,140
 
Federal Home Loan Mortgage Company
  
Agency CMO; 4.50%; Maturity Date 6/15/2019
      
3,698
 
Federal Home Loan Mtg Multiclass
  
Agency; 4.60%; Maturity Date 8/15/2029
      
4,599
 
Federal Home Loan Mortgage Company
  
Agency CMO; 4.50% Maturity Date 3/15/2035
      
6,997
 
Federal National Mtge Assn
  
Agency Debenture; 4.54%; Maturity Date 4/1/2033
      
888
 
Federal National Mtg Assn. - Adj Rate Mtg.
  
Agency Hybrid; 5.61%; Maturity Date 12/1/2033
      
1,803
 
Federal National Mtg Assn - Adj Rate Mtg
  
Agency HYB PP; 4.22%; Maturity Date 3/1/2034
      
3,287
 
Federal National Mtg Assn - Adj Rate Mtg
  
Agency HYB PP; 4.23%; Maturity Date 3/1/2034
      
4,321
 
Federal National Mtge Assn
  
Agency Debenture; 6.26%; Maturity Date 5/1/2036
      
5,464
 
GE Commercial Mortgage Corp.
  
Conduit; 6.70%; Maturity Date 6/10/2038
      
7,478
 
GSAA Home Equity Trust
  
Collateralitzed Mtg Obligation; 4.32%; Maturity Date 6/25/2009
      
3,096
 
General Electric Cap Corporation
  
Finance Company; 5/25%; Maturity Date 10/19/2012
      
4,029
 
General Electric Cap Corporation
  
Government Guarantee; 3.00%; Maturity Date 12/9/2011
      
2,378
 
Greenwich Capital Commercial Funding Corp.
  
Non-Agency Comm Mort Bkd; 4.57%; Maturity Date 8/10/2042
      
6,499
 
HSBC USA Inc.
  
Government Guarantee; 3.13%; Maturity Date 12/16/2011
      
2,389
 
Household Automotive Trust
  
Car Loans; 5.61%; Maturity Date 8/17/2011
      
3,345
 
JP Morgan Chase Commercial Mortgage
  
Collateralitzed Mtg Obligation Commercial/Corporate; 5.86%; Maturity Date 2/12/2051
      
6,286
 
MBNA Master Credit Card Trust
  
Monoline Credit Card; 4.50%; Maturity Date 1/15/2013
      
5,743
 
Marriot Vacation Club Owner
  
Collateralitzed Mtg Obligation Commercial/Corporate; 4.62%; Maturity Date 5/20/2026
      
527
 
Nissan Auto Lease Trust
  
Auto Lease; 5.20%; Maturity Date 5/17/2010
      
7,955
 
Nissan Auto Receivables Trust
  
Prime Auto; 3.82%; Maturity Date 7/15/2010
      
1,508
 
Nomura Asset Securities Corporation
  
Conduit; 6.59%; Maturity Date 3/15/2030
      
291
 
 Regions Bank
  
Government Guarantee; 3.25%; Maturity Date 12/9/2011
      
2,393
 
Res Asset Mtg Products
  
Home Equity Monoline; 4.75%; Maturity Date 9/25/2032
      
1,429
 
Res Asset Mtg Products
  
Home Equity Monoline; 3.83%; Maturity Date 2/25/2033
      
3,152
 
Sierra Timeshare Receivables Funding, LLC
  
Collateralized Mtg Obligation Commercial/Corporate; 5.84%; Maturity Date 5/20/2018
      
1,842
 
Structured Adjustable Rate Mortgage Loan
  
Collateralitzed Mtg Obligation Commercial/Corporate; 4.99%; Maturity Date 3/25/2034
      
1,393
 
United States Treasury
  
Treasury Note; 4.25%; Maturity Date 11/15/2013
      
1,256
 
United States Treasury
  
Treasury Note; 4/25%; Maturity Date 8/15/2014
      
9,198
 
United States Treasury
  
Treasury Note; 4.88%; Maturity Date 5/31/2011
      
7,697
 
United States Treasury
  
Treasury Note; 4.63%; Maturity Date 2/29/2012
      
8,775
 
United States Treasury
  
Treasury Note; 4.50%; Maturity Date 3/31/2012
      
11,054
 
United States Treasury
  
Treasury Note; 4.88%; Maturity Date 6/30/2012
      
11,243
 
United States Treasury
  
Treasury Note; 3.38%; Maturity Date 11/20/2012
      
15,808
 
United States Treasury
  
Treasury Note; 2.13%; Maturity Date 1/31/2010
      
10,186
 
United States Treasury
  
Treasury Note; 2.00%; Maturity Date 2/28/2010
      
10,183
 
United States Treasury
  
Treasury Note; 1.75%; Maturity Date 3/31/2010
      
10,168
 
United States Treasury
  
Treasury Note; 2.50%; Maturity Date 3/31/2013
      
10,599
 
United States Treasury
  
Treasury Note; 2.13%; Maturity Date 4/30/2010
      
10,242
 
United States Treasury
  
Treasury Note; 3.13%; Maturity Date 4/30/2013
      
10,827
 
United States Treasury
  
Treasury Note; 2.38%; Maturity Date 8/31/2010
      
10,307
 
United States Treasury
  
Treasury Note; 3.13%; Maturity Date 8/31/2013
      
7,550
 
United States Treasury
  
Treasury Note; 2.75%; Maturity Date 10/31/2031
      
18,993
 
United States Treasury
  
Treasury Note; 2.00%; Maturity Date 11/15/2013
      
13,341
 
United States Treasury
  
Treasury Note; 1.75%; Maturity Date 11/15/2011
      
4,226
 
United States Treasury
  
Treasury Note; 1.50%; Maturity Date 12/31/2013
      
4,990
 
Wachovia Auto Owner Trust
  
Prime Auto; 4.27%; Maturity Date 10/22/2012
      
9,637
 
 Well Fargo & Company
  
Government Guarantee; 3.00%; Maturity Date 12/9/2011 
      
1,663
 
WFS Financial Owner Trust
  
Non-Agency MBS Floating; 4.37%; Maturity Date 9/25/2034
      
2,612
 
Cash on Hand
  
Cash
      
2,988
             
472,227
               
 
Bank of America Wrapper
  
Synthetic GIC
        
     
#99-086, IR, ***
      
743
 
Bank of America Credit Card Trust
  
Credit Card; 5.59%; Maturity Date 11/17/2014
      
11,230
 
Citigroup/Deutsch Bank Commercial
  
Collateralitzed Mtg Obligation Commercial/Corporate; 5.21%; Maturity Date 12/11/2049
      
12,965
 
Countrywide Asset-Backed Certificates
  
Home Equity; 4.58%; Maturity Date 7/25/2035
      
835
 
Countrywide Asset-Backed Certificates
  
Home Equity; 4.69%; Maturity Date 11/25/2035
      
5,453
 
Capital One Master Trust
  
Monoline Credit Card; 5.30%; Maturity  Date 11/25/2035
      
7,418
 
Cendant Timeshare Receivables Funding
  
Collateralitzed Mtg Obligation Commercial/Corporate; 3.67%; Maturity Date 5/20/2016
      
140
 
Chase Insurance Trust
  
Bank Credit Card; 4.55%; 3/15/2013
      
7,613
 
Chase Insurance Trust
  
Bank Credit Card; 5.12%; 1015/2014
      
11,392
 
Chase Manhattan First Union
  
Conduit; 7.44%; Maturity Date 8/15/2031
      
6,907
 
Citibank Credit Card IT
  
Bank Credit Card; 4.85%; Maturity Date 3/10/2017
      
5,020
 
Commercial Mtg Acceptance Corp
  
Collateralitzed Mtg Obligation; 5.60%; Maturity Date 12/10/2049 
      
11,720
 
Credit Suisse First Boston
  
Collateralitzed Mtg Obligation; 4.18% ; Maturity Date 11/15/2037
      
2,341
 
Federal Home Loan Mtg - Adj Rate Mtg.
  
Agency Hybrid; 5.90%; Maturity Date 1/1/2034
      
542
 
Federal Home - Adj Rate Mtg.
  
Agency Passthru; 4.20%; Maturity Date 12/1/2035
      
6,915
 
 Freddie Mac
  
Agency Owned - No Guarantee; 4.50%; Maturity Date 6/1/2013
      
3,640
 
Federal Home Loan Bank
  
Government Sponsored; 3.38%; Maturity Date 6/24/2011
      
8,377
 
Federal Home Loan Mtg Corp
  
Agency Hybrid; 5.38%; Maturity Date 8/1/2031
      
52
 
Federal Home - Adj Rate Mtg.
  
Agency Passthru; 4.33%; Maturity Date 11/1/2033
      
1,587
 
Fannie Mae Grantor Trust
  
Agency MF Fix; 6.02%; Maturity Date 11/25/2010
      
8,507
 
Federal National Mtg Assn Debs
  
Agency Debenture; 4.88%; Maturity Date 12/15/2016
      
5,822
 
 Freddie Mac
  
Agency Owned - No Guarantee; 4.88%; Maturity Date 6/13/2018 
      
13,805
 
Federal National Mtg Assn
  
US Agency; 6.63%; Maturity Date 8/1/09
      
4,425
 
Federal National Mtg Assn Whole Loan
  
Home Equity Agency; 6.00%; Maturity Date 5/25/2032
      
1,482
 
Federal National Mtg Assn Whole Loan
  
Home Equity Agency; 4.91%; Maturity Date 11/25/2032
      
3,052
 
Federal National Mtg Assn. - GTD REMIC.
  
Agency MF Fix; 5.50%; Maturity Date 4/25/2028
      
3,285
 
Federal Home Loan Mtg Multiclass
  
Agency; 4.94%; Maturity Date 12/25/2032
      
1,137
 
Federal Home Loan Mtg Multiclass
  
Agency; 3.62%; Maturity Date 9/27/2012
      
781
 
Federal National Mtg Assn Whole Loan
  
Home Equity Agency; 5.50%; Maturity Date 8/25/2033
      
400
 
Federal National Mtg Assn Whole Loan
  
Home Equity Agency; 7.00%; Maturity Date 12/25/2033
      
2,109
 
Federal National Mtg Assn. - GTD REMIC.
  
Agency MF Fix; 5.50%; Maturity Date 7/25/2034
      
5,362
 
Federal Home Loan Mtg Multiclass
  
Agency; 4.50%; Maturity Date 5/15/2033
      
10,467
 
FHR
  
Agency NAS; 4.50%; Maturity Date 7/15/2019
      
4,852
 
Federal Home Loan Mtg Corp
  
Agency Hybrid; 4.50%; Maturity Date 3/15/2035
      
5,689
 
 Federal Home Loan Mtg Multiclass
  
Agency; 4.50%;  Maturity Date 10/15/2015
      
3,007
 
Federal National Mtg Assn - Adj Rate Mtg.
  
Agency Hybrid; 4.82%; Maturity Date 7/1/2033
      
477
 
Federal National Mtg Assn - Adj Rate Mtg
  
Agency HYB PP; 4.66%; Maturity Date 9/1/2033
      
4,208
 
Federal Nationl Mtg Assn - Adj Rate Mtg
  
Agency HYB PP; 4.67%; Maturity Date 10/1/2033
      
781
 
GMACC Commercial MTG Securities
  
Conduit; 6.47%; Maturity Date 4/15/2034
      
7,333
 
GSR Mortgage Loan Trust
  
Nag PT Arm; 4.56%; Maturity Date 9/25/2035
      
4,156
 
Genereal Electric Capital Corp
  
Government Guarantee; 3.00%; Maturity Date 12/9/2011
      
1,861
 
HSBC USA Inc.
  
Government Guarantee; 3.13%; Maturity Date 12/16/2011
      
1,869
 
Household Automotive Trust
  
Car Loans; 5.43%; Maturity Date 6/17/2011
      
2,547
 
JP Morgan Chase Commercial Mortgage Sec.
  
Non-Agency Comm Mort Bkd; 5.42%; Maturity Date 1/15/2049
      
5,573
 
 Johnson & Johnson
  
Consumer Non-Cyclical; 5.15%; Maturity Date 7/15/2018
      
8,809
 
LB-UBS Commercial Mortgage Trust
  
Non-Agency Comm Mortg; 5.30%; Maturity Date 11/15/2038
      
4,916
 
MBNA Master Trust
  
Monoline Credit Card; 4.10%; Maturity Date 10/15/2012
      
5,394
 
New Century Home Equity Loan
  
Home Equity Monoline; 5.47%; Maturity Date 8/25/2034
      
2,394
 
Pinnacle CBO Ltd
  
Corp Fin Other; 6.65%; Maturity Date 12/9/2011
      
26
 
Regions Bank
  
Government Guarantee; 3.25%; Maturity Date 12/9/2011 
      
1,873
 
Res Asset Mtg Products
  
Home Equity Monoline; 4.75%; Maturity Date 9/25/2032
      
1,905
 
Sallie Mae Student Loan Trust
  
Agency Student Loan; 4.25%; Maturity Date 1/25/2028
      
5,434
 
USAA Auto Owners Trust
  
Prime Auto; 4.63%
      
5,108
 
United States Treasury
  
Treasury Note; 4.25%; Maturity Date 11/15/2013
      
1,027
 
United States Treasury
  
Treasury Note; 4.00%; Maturity Date 2/15/2014
      
9,637
 
United States Treasury
  
Treasury Note; 4.63%; Maturity Date 12/31/2011
      
3,102
 
United States Treasury
  
Treasury Note; 3.50%; Maturity Date 5/31/2013
      
24,652
 
United States Treasury
  
Treasury Note; 3.38%; Maturity Date 6/30/2013
      
28,356
 
United States Treasury
  
Treasury Note; 2.38%; Maturity Date 8/31/2010
      
9,276
 
United States Treasury
  
Treasury Note; 2.75%; Maturity Date 10/31/2013
      
7,444
 
Well Fargo & Company
  
Government Guarantee; 3.00%; Maturity Date 12/9/2011 
      
1,300
 
Wells Fargo Mortgage-backed Securities Trust
  
Nag PT Arm 4.19%; Maturity Date 12/25/2034
      
5,291
 
Wells Fargo Mortgage-backed Securities Trust
  
Nag PT Arm; 4.64%; Maturity Date6/25/2035
      
3,372
 
Cash on Hand
  
Cash
      
38,526
             
375,719
               
*
Mellon Trust of New England, National
            
 
Association
  
Temporary cash investment
      
142,550
               
 
Total Interest Income Fund
          
990,496
               
Global Equity Fund
            
*
Barclays Global Investors U.S. Equity
            
 
Market Fund F
  
3,586,489 units
      
91,204
*
Barclays Global Investors EAFE Equity
            
 
Index Fund F
  
1,726,762 units
      
34,086
 
Total Global Equity Fund
          
125,290
               
Mid and Small Cap Stock Fund
            
*
Barclays Global Investors EAFE Equity
            
 
Extended Equity Market Fund F
  
12,454,675 units
      
205,876
               
International Stock Fund
            
*
Barclays Global Investors EAFE Equity
            
 
Index Fund F
  
10,006,243 units
      
197,523
               
Loan Fund
            
*
Loans to Plan Participants
  
4.25% - 7.50%
      
362,352
               
 
TOTAL
        
$
5,339,503


 
*           Party-in-Interest.
**         Participant-directed investment, cost not required
***       Synthetic Insurance Contracts, no stated maturity.
****    Investment balances have been adjusted to include the market value of securities on loan, which are reclassified for financial statement presentation.

18 
 
 

SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the trustee (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed by the undersigned thereunto duly authorized.
 


 
AT&T SAVINGS AND SECURITY PLAN
   
 
By AT&T Inc.,
Plan Administrator for the Foregoing Plan





By
 /s/ John J. Stephens
 
John J. Stephens
 
Senior Vice President and Controller




Date: June 26, 2009
 
 
 
 
 
 
 
EXHIBIT INDEX

 
Exhibit identified below, Exhibit 23 is filed herein as an exhibit hereto.

Exhibit
Number                 

23  
Consent of Independent Registered Public Accounting Firm