-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KXdQ/G4ZfJMkUfgR5aIYLtWmf/3VHtWldjQF3l8k926O8O5EU4Zt8TBnnbRlbEMO NiWS39tilPK8zHTfcG0yHA== 0000950123-99-005971.txt : 19990628 0000950123-99-005971.hdr.sgml : 19990628 ACCESSION NUMBER: 0000950123-99-005971 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990625 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LORAL SPACE & COMMUNICATIONS LTD CENTRAL INDEX KEY: 0001006269 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 133867424 STATE OF INCORPORATION: D0 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 11-K SEC ACT: SEC FILE NUMBER: 001-14180 FILM NUMBER: 99652480 BUSINESS ADDRESS: STREET 1: 600 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2126971105 MAIL ADDRESS: STREET 1: 600 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10016 11-K 1 LORAL SPACE & COMMUNICATIONS LTD. 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 YEAR ENDED DECEMBER 31, 1998 ------------------------- COMMISSION FILE NUMBER 1-14180 ------------------------- LORAL SAVINGS PLAN ------------------------- LORAL SPACE & COMMUNICATIONS LTD. 600 THIRD AVENUE NEW YORK, NEW YORK 10016 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Savings Committee has duly caused this annual report to be signed by the undersigned thereunto duly authorized. LORAL SAVINGS PLAN -------------------------------------- (Plan) BY: STEPHEN L. JACKSON ----------------------------------- Stephen L. Jackson Committee Member Date: June 22, 1999 3 LORAL SAVINGS PLAN TABLE OF CONTENTS -------------------------
PAGE ---- Report of Independent Accountants........................... 1 Financial Statements Statements of Net Assets Available For Plan Benefits With Fund Information as of December 31, 1998 and 1997...... 2 Statements of Changes in Net Assets Available For Plan Benefits With Fund Information for the years ended December 31, 1998 and 1997............................. 3 Notes to Financial Statements............................... 4 Supplemental Schedules Item 27a -- Schedule of Assets Held for Investment Purposes as of December 31, 1998....................... 12 Item 27d -- Schedule of Reportable Transactions for the year ended December 31, 1998........................... 13 Exhibit Consent of Independent Accountants........................ 14
4 INDEPENDENT ACCOUNTANTS' REPORT To the Participants and Plan Administrator of the Loral Savings Plan We have audited the accompanying statements of net assets available for plan benefits of the Loral Savings Plan (the Plan) as of December 31, 1998 and 1997, and the related statement of changes in net assets available for plan benefits for the years ended December 31, 1998 and 1997. 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 generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 plan benefits of the Plan as of December 31, 1998 and 1997, and the changes in net assets available for plan benefits for the years ended December 31, 1998 and 1997, in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of "Assets Held for Investment Purposes" and "Reportable Transactions" are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are 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. These supplemental schedules are the responsibility of the Plan's management. The fund information in the statement of net assets available for plan benefits and statement of changes in net assets available for plan benefits is presented for purposes of additional analysis rather than to represent the net assets available for plan benefits and changes in net assets available for plan benefits of each fund. The supplemental schedules and the fund information have been subjected to the auditing procedures applied in the audits of the basic financial statements and in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. MOHLER, NIXON & WILLIAMS Accountancy Corporation Campbell, California June 22, 1999 1 5 LORAL SAVINGS PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION AS OF DECEMBER 31, 1998 AND 1997 (IN THOUSANDS)
1998 1997 -------- -------- Assets Investments at fair value: Participant directed: Fidelity Blue Chip Growth Fund....................... $ 66,390 $ 50,009 Fidelity Magellan Fund............................... 16,962 10,606 Fidelity Growth & Income Portfolio................... 38,993 30,356 Fidelity Asset Manager............................... 5,631 4,037 Fidelity Overseas Fund............................... 4,324 3,577 Fidelity Intermediate Bond Fund...................... 3,504 1,973 Fidelity Retirement Money Market Portfolio........... 41,833 42,952 Fidelity Blended Income Fund......................... -- 19,502 Fidelity Puritan Fund................................ 183 -- Fidelity Managed Income Portfolio II................. 20,463 -- Spartan US Equity Index.............................. 1,637 -- Morgan Stanley Global Equity......................... 172 -- PIMCO Total Return................................... 482 -- PIMCO Capital Appreciation........................... 190 -- PIMCO Mid Cap Growth................................. 489 -- PIMCO High Yield..................................... 360 -- Loral Stock Fund..................................... 93,960 112,600 Participant Loans.................................... 5,818 5,513 Non-Participant Directed: Loral Stock Fund..................................... 11,466 8,003 Globalstar Stock Fund................................ 583 168 Associates Stock Fund................................ 15,231 -- Ford Stock Fund...................................... 40,851 38,272 -------- -------- Total Investments at fair value................... 369,522 327,568 -------- -------- Net assets available for Plan benefits.................... $369,522 $327,568 ======== ========
The accompanying notes are an integral part of these financial statements. 2 6 LORAL SAVINGS PLAN STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND INFORMATION FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 (IN THOUSANDS)
PARTICIPANT DIRECTED -------------------------------------------------------------------- GROWTH BLUE CHIP & INTERMEDIATE GROWTH MAGELLAN INCOME ASSET OVERSEAS BOND FUND FUND PORTFOLIO MANAGER FUND FUND --------- -------- --------- ------- -------- ------------ For the Year ended December 31, 1998 Additions Contributions Rollovers.......................................... $ 381 $ 227 $ 429 $ 34 $ 35 $ 7 Employer........................................... 34 11 37 4 2 4 Participant........................................ 3,765 1,673 3,018 578 551 284 Loan repayments..................................... 503 154 282 62 49 23 Investment Income Interest and dividends............................. 2,661 735 2,051 1,001 82 164 Net investment gain (loss) from registered investment company................................ 1,316 536 1,770 75 108 10 Net appreciation (depreciation) in fair value of investments....................................... 12,956 2,568 4,658 (342) 207 7 ------- ------- ------- ------ ------ ------ Total additions (reductions)........................ 21,616 5,904 12,245 1,412 1,034 499 ------- ------- ------- ------ ------ ------ Deductions Benefits paid to participants....................... (4,167) (1,356) (4,023) (771) (400) (453) Loan withdrawals.................................... (482) (130) (322) (88) (47) (43) Administrative expenses............................. (3) (1) (7) (2) -- (1) ------- ------- ------- ------ ------ ------ Total deductions.................................... (4,652) (1,487) (4,352) (861) (447) (497) ------- ------- ------- ------ ------ ------ Interfund transfers.................................. (1,539) 256 74 480 (145) 1,380 Transfers from other Plans, net...................... 956 1,683 670 563 305 149 ------- ------- ------- ------ ------ ------ Net increase (decrease).............................. 16,381 6,356 8,637 1,594 747 1,531 Net assets available for Plan benefits at December 31, 1997............................................ 50,009 10,606 30,356 4,037 3,577 1,973 ------- ------- ------- ------ ------ ------ Net assets available for Plan benefits at December 31, 1998............................................ $66,390 $16,962 $38,993 $5,631 $4,324 $3,504 ======= ======= ======= ====== ====== ====== For the Year ended December 31, 1997 Additions Contributions Rollovers.......................................... $ 467 $ 464 $ 836 $ 47 $ 333 $ 185 Employer........................................... 21 5 29 1 3 2 Participant........................................ 3,365 1,069 2,307 382 491 190 Loan repayments..................................... 445 103 234 29 39 13 Investment Income Interest and dividends............................. 2,479 626 1,356 338 189 100 Net investment gain (loss) from registered investment company................................ 1,622 560 1,657 70 140 2 Net appreciation (depreciation) in fair value of investments....................................... 6,772 649 3,157 222 (33) 15 ------- ------- ------- ------ ------ ------ Total additions (reductions)........................ 15,171 3,476 9,576 1,089 1,162 507 ------- ------- ------- ------ ------ ------ Deductions Benefits paid to participants....................... (4,801) (1,334) (2,583) (46) (280) (55) Loan withdrawals.................................... (572) (99) (289) (75) (50) (72) Administrative expenses............................. (4) (1) (7) (1) -- (1) ------- ------- ------- ------ ------ ------ Total deductions.................................... (5,377) (1,434) (2,879) (122) (330) (128) ------- ------- ------- ------ ------ ------ Interfund transfers.................................. (906) 2,277 5,317 690 (58) 290 Transfers (to) from other Plans, net................. 27 -- 31 -- -- -- ------- ------- ------- ------ ------ ------ Net increase......................................... 8,915 4,319 12,045 1,657 774 669 Net assets available for Plan benefits at December 31, 1996............................................ 41,094 6,287 18,311 2,380 2,803 1,304 ------- ------- ------- ------ ------ ------ Net assets available for Plan benefits at December 31, 1997............................................ $50,009 $10,606 $30,356 $4,037 $3,577 $1,973 ======= ======= ======= ====== ====== ====== PARTICIPANT DIRECTED --------------------------------------------------------------------------- RETIREMENT SPARTAN MORGAN MONEY BLENDED MANAGED US STANLEY PIMCO MARKET INCOME PURITAN INCOME EQUITY GLOBAL TOTAL PORTFOLIO FUND FUND PORTFOLIO II INDEX EQUITY RETURN ---------- -------- ------- ------------ ------- ------- ------ For the Year ended December 31, 1998 Additions Contributions Rollovers.......................................... $ 765 $ -- $ 13 $ 13 $ 18 $ 4 $ -- Employer........................................... 314 6 -- 5 -- -- -- Participant........................................ 1,840 497 9 350 59 11 7 Loan repayments..................................... 287 41 1 45 13 -- 1 Investment Income Interest and dividends............................. 3,540 699 8 493 6 2 24 Net investment gain (loss) from registered investment company................................ -- -- -- -- (2) -- 1 Net appreciation (depreciation) in fair value of investments....................................... -- -- 11 -- 192 15 (14) ------- -------- ---- ------- ------ ---- ---- Total additions (reductions)........................ 6,746 1,243 42 906 286 32 19 ------- -------- ---- ------- ------ ---- ---- Deductions Benefits paid to participants....................... (7,149) (803) -- (488) -- (11) -- Loan withdrawals.................................... (384) -- -- (48) -- -- -- Administrative expenses............................. (18) (1) -- -- -- -- -- ------- -------- ---- ------- ------ ---- ---- Total deductions.................................... (7,551) (804) -- (536) -- (11) -- ------- -------- ---- ------- ------ ---- ---- Interfund transfers.................................. (1,094) (19,948) 141 20,092 1,351 151 463 Transfers from other Plans, net...................... 780 7 -- 1 -- -- -- ------- -------- ---- ------- ------ ---- ---- Net increase (decrease).............................. (1,119) (19,502) 183 20,463 1,637 172 482 Net assets available for Plan benefits at December 31, 1997............................................ 42,952 19,502 -- -- -- -- -- ------- -------- ---- ------- ------ ---- ---- Net assets available for Plan benefits at December 31, 1998............................................ $41,833 $ -- $183 $20,463 $1,637 $172 $482 ======= ======== ==== ======= ====== ==== ==== For the Year ended December 31, 1997 Additions Contributions Rollovers.......................................... $ 1,507 $ 144 $ -- $ -- $ -- $ -- $ -- Employer........................................... 440 8 -- -- -- -- -- Participant........................................ 1,899 943 -- -- -- -- -- Loan repayments..................................... 451 121 -- -- -- -- -- Investment Income Interest and dividends............................. 3,530 1,197 -- -- -- -- -- Net investment gain (loss) from registered investment company................................ -- -- -- -- -- -- -- Net appreciation (depreciation) in fair value of investments....................................... -- -- -- -- -- -- -- ------- -------- ---- ------- ------ ---- ---- Total additions (reductions)........................ 7,827 2,413 -- -- -- -- -- ------- -------- ---- ------- ------ ---- ---- Deductions Benefits paid to participants....................... (5,221) (1,326) -- -- -- -- -- Loan withdrawals.................................... (740) (16) -- -- -- -- -- Administrative expenses............................. (35) (1) -- -- -- -- -- ------- -------- ---- ------- ------ ---- ---- Total deductions.................................... (5,996) (1,343) -- -- -- -- -- ------- -------- ---- ------- ------ ---- ---- Interfund transfers.................................. (358) (385) -- -- -- -- -- Transfers (to) from other Plans, net................. 195 (1) -- -- -- -- -- ------- -------- ---- ------- ------ ---- ---- Net increase......................................... 1,668 684 -- -- -- -- -- Net assets available for Plan benefits at December 31, 1996............................................ 41,284 18,818 -- -- -- -- -- ------- -------- ---- ------- ------ ---- ---- Net assets available for Plan benefits at December 31, 1997............................................ $42,952 $ 19,502 $ -- $ -- $ -- $ -- $ -- ======= ======== ==== ======= ====== ==== ==== PARTICIPANT DIRECTED ------------------------------------------------------- PIMCO PIMCO PIMCO LORAL CAPITAL MID CAP HIGH STOCK PARTICIPANT APPRECIATION GROWTH YIELD FUND LOANS ------------ ------- ----- -------- ----------- For the Year ended December 31, 1998 Additions Contributions Rollovers.......................................... $ 17 $ 9 $ 4 $ 820 $ -- Employer........................................... -- -- -- -- -- Participant........................................ 15 12 3 6,384 -- Loan repayments..................................... 1 -- 1 1,108 (2,109) Investment Income Interest and dividends............................. 13 21 7 -- -- Net investment gain (loss) from registered investment company................................ 5 1 -- 4,502 -- Net appreciation (depreciation) in fair value of investments....................................... 15 48 1 (21,547) -- ---- ---- ---- -------- ------- Total additions (reductions)........................ 66 91 16 (8,733) (2,109) ---- ---- ---- -------- ------- Deductions Benefits paid to participants....................... -- (2) -- (8,978) (148) Loan withdrawals.................................... -- -- -- (866) 2,429 Administrative expenses............................. -- -- -- (5) -- ---- ---- ---- -------- ------- Total deductions.................................... -- (2) -- (9,849) 2,281 ---- ---- ---- -------- ------- Interfund transfers.................................. 124 400 344 (290) -- Transfers from other Plans, net...................... -- -- -- 232 133 ---- ---- ---- -------- ------- Net increase (decrease).............................. 190 489 360 (18,640) 305 Net assets available for Plan benefits at December 31, 1997............................................ -- -- -- 112,600 5,513 ---- ---- ---- -------- ------- Net assets available for Plan benefits at December 31, 1998............................................ $190 $489 $360 $ 93,960 $ 5,818 ==== ==== ==== ======== ======= For the Year ended December 31, 1997 Additions Contributions Rollovers.......................................... $ -- $ -- $ -- $ 922 $ -- Employer........................................... -- -- -- -- -- Participant........................................ -- -- -- 5,567 -- Loan repayments..................................... -- -- -- 1,029 (2,046) Investment Income Interest and dividends............................. -- -- -- -- -- Net investment gain (loss) from registered investment company................................ -- -- -- (465) -- Net appreciation (depreciation) in fair value of investments....................................... -- -- -- 17,553 -- ---- ---- ---- -------- ------- Total additions (reductions)........................ -- -- -- 24,606 (2,046) ---- ---- ---- -------- ------- Deductions Benefits paid to participants....................... -- -- -- (5,118) (38) Loan withdrawals.................................... -- -- -- (999) 3,181 Administrative expenses............................. -- -- -- (7) -- ---- ---- ---- -------- ------- Total deductions.................................... -- -- -- (6,124) 3,143 ---- ---- ---- -------- ------- Interfund transfers.................................. -- -- -- (5,425) -- Transfers (to) from other Plans, net................. -- -- -- (137) -- ---- ---- ---- -------- ------- Net increase......................................... -- -- -- 12,920 1,097 Net assets available for Plan benefits at December 31, 1996............................................ -- -- -- 99,680 4,416 ---- ---- ---- -------- ------- Net assets available for Plan benefits at December 31, 1997............................................ $ -- $ -- $ -- $112,600 $ 5,513 ==== ==== ==== ======== ======= NON-PARTICIPANT DIRECTED -------------------------------------------------------- LORAL GLOABALSTAR ASSOCIATES FORD STOCK STOCK STOCK STOCK FUND FUND FUND FUND TOTAL ------- ----------- ---------- -------- -------- For the Year ended December 31, 1998 Additions Contributions Rollovers.......................................... $ -- $ -- $ -- $ -- $ 2,776 Employer........................................... 5,730 463 -- 6,610 Participant........................................ -- -- -- -- 19,056 Loan repayments..................................... -- -- 462 Investment Income Interest and dividends............................. -- -- -- 11,507 Net investment gain (loss) from registered investment company................................ 599 (209) 172 8,884 Net appreciation (depreciation) in fair value of investments....................................... (2,866) (40) 184 23,384 19,437 ------- ---- ------- -------- -------- Total additions (reductions)........................ 3,463 423 (25) 23,556 68,732 ------- ---- ------- -------- -------- Deductions Benefits paid to participants....................... -- (5) (731) (2,740) (32,225) Loan withdrawals.................................... -- -- (4) (15) -- Administrative expenses............................. -- -- -- -- (38) ------- ---- ------- -------- -------- Total deductions.................................... -- (5) (735) (2,755) (32,263) ------- ---- ------- -------- -------- Interfund transfers.................................. -- (3) 15,991 (18,228) -- Transfers from other Plans, net...................... -- -- -- 6 5,485 ------- ---- ------- -------- -------- Net increase (decrease).............................. 3,463 415 15,231 2,579 41,954 Net assets available for Plan benefits at December 31, 1997............................................ 8,003 168 -- 38,272 327,568 ------- ---- ------- -------- -------- Net assets available for Plan benefits at December 31, 1998............................................ $11,466 $583 $15,231 $ 40,851 $369,522 ======= ==== ======= ======== ======== For the Year ended December 31, 1997 Additions Contributions Rollovers.......................................... $ -- $ -- $ -- $ -- $ 4,905 Employer........................................... 5,106 157 -- 5,772 Participant........................................ -- -- -- -- 16,213 Loan repayments..................................... -- -- 418 Investment Income Interest and dividends............................. -- -- 9,815 Net investment gain (loss) from registered investment company................................ 50 -- -- 10,479 14,115 Net appreciation (depreciation) in fair value of investments....................................... -- 12 -- 3,328 31,675 ------- ---- ------- -------- -------- Total additions (reductions)........................ 5,156 169 -- 13,807 82,913 ------- ---- ------- -------- -------- Deductions Benefits paid to participants....................... -- (1) -- (2,906) (23,709) Loan withdrawals.................................... (249) -- -- (20) -- Administrative expenses............................. -- -- -- -- (57) ------- ---- ------- -------- -------- Total deductions.................................... (249) (1) -- (2,926) (23,766) ------- ---- ------- -------- -------- Interfund transfers.................................. (26) -- -- (1,416) -- Transfers (to) from other Plans, net................. (51) -- -- -- 64 ------- ---- ------- -------- -------- Net increase......................................... 4,830 168 -- 9,465 59,211 Net assets available for Plan benefits at December 31, 1996............................................ 3,173 -- -- 28,807 268,357 ------- ---- ------- -------- -------- Net assets available for Plan benefits at December 31, 1997............................................ $ 8,003 $168 $ -- $ 38,272 $327,568 ======= ==== ======= ======== ========
The accompanying notes are an integral part of these financial statements. 3 7 LORAL SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998 1. PLAN DESCRIPTION General The Loral Savings Plan (the "Plan") was established on April 23, 1996 following the spin-off and formation of Loral Space & Communications Ltd. ("Loral"). It was established for the benefit of employees of certain affiliates of Loral (collectively referred to as the "Employer"), and is sponsored by Space Systems/ Loral, Inc. ("SS/L"). On March 14, 1997, Loral acquired Skynet Satellite Services ("Skynet") from AT&T. On that date all Skynet employees were eligible to become participants of the Plan. On March 20, 1998, Loral acquired Orion Network Systems, Inc. ("Orion"). On that date all Orion employees were eligible to become participants of the Plan. On April 7, 1998, in accordance with the spin-off of Associates First Capital Corporation ("Associates") from the Ford Motor Company ("Ford"), the Associates Stock Fund was formed and the corresponding ownership interests (valued at approximately $16.8 million) were transferred from the Ford Stock Fund to the Associates Stock Fund. On August 1, 1998 the Fidelity Blended Income Fund was merged into the Fidelity Managed Income Portfolio II. The Plan is a defined contribution plan designed to provide eligible employees with systematic savings and tax-advantaged long-term savings for retirement. It is subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). Regular full-time and regular part-time employees are eligible to participate in the Plan as of their date of hire. A complete description of the Plan's provisions is contained in the Plan document. Investment Options Participants may direct their contributions in 5% increments in any of the following investment options: Loral Stock Fund -- Funds are primarily invested in Loral Space & Communications Ltd. Common Stock ("Loral Common Stock") and are reflected as participant directed in the accompanying financial statements. Assets invested in the Loral Stock Fund are expressed in units of participation rather than shares of Loral Common Stock. Such units represent a proportionate interest in all assets of the Loral Stock Fund, which includes Loral Common Stock and the Fidelity Short Term Interest Fund. A net asset value per unit of participation is determined daily for each outstanding unit of the Loral Stock Fund. Fidelity Blue Chip Growth Fund -- Funds are primarily invested in a diversified portfolio of domestic and foreign common stocks of well-known and established companies. The fund may also invest in companies with strong earnings and future growth potential. Fidelity Growth & Income Portfolio -- Funds are invested in domestic and foreign securities (common stocks, securities convertible into common stocks, preferred stocks and fixed income securities) of companies that offer potential growth of earnings while paying current dividends. The fund may also invest in bonds. Fidelity Asset Manager -- Funds are invested in stocks, bonds, short-term investments, and money market instruments, both in the U.S. and abroad, to blend the long-term performance of equity and fixed income investments. Over time the fund will generally aim for the following mix of investments: 50% stocks, 40% bonds and 10% money-market funds. 4 8 LORAL SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998 Fidelity Magellan Fund -- Funds are invested for capital appreciation in both well known and lesser known stocks of domestic, and foreign companies with above average growth potential and a corresponding high level of risk. The fund can invest up to 20% of its holdings in bonds of any quality. Fidelity Overseas Fund -- Funds are primarily invested in equity securities of issuers whose principal activities take place outside the U.S. with the objective of long-term growth. The majority of the assets are invested in stocks, but may also include debt securities of any quality. Fidelity Retirement Money Market Portfolio -- Funds are invested in a diversified portfolio of U.S. and foreign issuers of high-quality, interest-bearing, money market instruments with short-term maturities. Fidelity Managed Income Portfolio II -- Funds are invested in investment contracts offered by major insurance companies and other approved financial institutions and in certain types of fixed income securities. Investment contracts provide for the payment of a specified rate of interest to the fund and for the repayment of principal when the contract matures. Fidelity Blended Income Fund -- Funds are invested in guaranteed investment contracts with various insurance companies, the Fidelity Commingled Pool Fund, the Fidelity Institutional Money Market Fund, and the Fidelity Short-Term Interest Fund. The investment contracts have fixed rates of interest for fixed periods of time. Pending the purchase of investment contracts, funds are invested in the Fidelity Institutional Money Market Fund. This fund was discontinued effective August 1, 1998, when it merged into the Fidelity Managed Income Portfolio II. Fidelity Intermediate Bond Fund -- Funds are invested in all types of investment grade bonds, including foreign, U.S. government, and corporate issues with intermediate maturities. The fund normally maintains an average maturity of three to 10 years. Fidelity Puritan Fund -- Funds are invested in high-yielding U.S. and foreign securities, including common and preferred stocks, and bonds of any quality or maturity. PIMCO High Yield Fund -- Funds are invested primarily in U.S. dollar-denominated bonds of domestic and foreign issuers rated below investment grade, but with at least a B rating. PIMCO focuses its investments on the relatively higher-quality securities within the "junk bond" ratings. These investments may provide greater potential for higher earnings, but they may also have an increased risk of failure to repay principal or make interest payments. PIMCO Total Return Fund -- Funds are invested in all types of bonds, including U.S. government, corporate, mortgage and foreign. While the fund maintains an average portfolio duration of three to six years (approximately equal to an average maturity of five to twelve years), investments may also include short-term and long-term bonds. PIMCO Mid Cap Growth Fund -- Funds are invested in common stocks of companies worth at least $500 million (excluding the 250 companies with the highest market capitalization) with the potential for growth. Spartan U.S. Equity Index Fund -- Funds are invested primarily in the 500 companies that make up the S&P 500 and in other securities that are based on the value of the S&P 500. The fund's manager focuses on duplicating the composition and performance of the S&P 500, as opposed to a strategy of selecting attractive stocks. PIMCO Capital Appreciation Fund -- Funds are invested in common stocks of companies selected from the 1,000 largest stocks (measured by market capitalization) with the potential for growth. 5 9 LORAL SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998 Morgan Stanley Dean Witter Global Equity Portfolio Class B -- Funds are invested in a diversified worldwide selection of stocks. Normally at least 20% of the portfolio's total assets will be invested in U.S. common stocks. The rest will be invested in stocks of issuers located throughout the world, primarily from stock exchanges of developed countries. The portfolio may also have some exposure to investments in emerging markets, which pose greater risk. The Ford Stock Fund is a carry-over fund resulting from the transfer of assets from a prior plan. Contributions and reinvestment of dividends into this fund are not permitted. Dividends received on Ford common stock are invested in the Fidelity Retirement Money Market Fund. Assets invested in the Ford Stock Fund are expressed in units of participation rather than shares of Ford common stock. Such units represent a proportionate interest in all assets of the Ford Stock Fund, which includes Ford common stock and the Fidelity Short Term Interest Fund. A net asset value per unit of participation is determined daily for each outstanding unit of the Ford Stock Fund (see Associates Stock Fund below). Associates Stock Fund -- This fund was formed pursuant to the spin-off of Associates from Ford (see Note 1 General). Contributions and reinvestment of dividends into this fund are not permitted. Dividends received on Associates common stock are invested in the Fidelity Retirement Money Market Fund. Assets invested in the Associates Stock Fund are expressed in units of participation rather than shares of Associates common stock. Such units represent a proportionate interest in all assets of the Associates Stock Fund, which includes Associates common stock and the Fidelity Short Term Interest Fund. A net asset value per unit of participation is determined daily for each outstanding unit of the Associates Stock Fund. The Globalstar Stock Fund reflects the employer match for employees of Globalstar L.P. ("Globalstar") only. Assets invested in the fund are expressed in units of participation rather than shares of Globalstar Telecommunications Ltd. common stock. Such units represent a proportionate interest in all assets of the Globalstar Stock Fund, which includes Globalstar common stock and the Fidelity Short Term Interest Fund. Participant contributions into this fund are not permitted. As of December 31, 1998, there were approximately 4,500 participants in the Plan. Participant Accounts A participant's account is credited with the participant's contribution, the employer's matching contribution and an allocation of Plan earnings or losses, net of certain investment management fees. Allocations are based on a participant's account balance as a percentage of the sum of all participants' account balances. Vesting and Forfeitures Participants are immediately vested in their contributions plus actual earnings thereon. Generally, participants vest 100% in employer contributions plus actual earnings thereon after completion of five years of service and, thereafter, vest immediately in all future employer contributions. On termination of service due to death, disability, or retirement, participants become fully vested. Non-vested employer contributions are forfeited upon termination or withdrawal. These amounts are used for certain Plan administrative expenses or to reduce future employer contributions. Forfeitures for the years ended December 31, 1998 and 1997 were approximately $389,000 and $97,000, respectively. Contributions The Plan has both a Tax-Efficient Savings ("TES") and a Regular Savings feature. Under the Plan, and subject to limits imposed by the Internal Revenue Code ("IRC"), participants, except for Skynet participants, may elect a reduction in eligible salary up to 15% with a corresponding TES contribution in the same amount made to the Plan by the Employer on their behalf. Such contributions are excluded from the participant's 6 10 LORAL SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998 taxable income. Subject to limits imposed by the IRC, participants may also contribute up to 10% of their base salaries to the Regular Savings feature of the Plan on an after-tax basis. Skynet participants may elect to contribute from 2% to 16% of eligible compensation which can be either on a TES or after-tax basis. Participants' contributions are generally matched at a rate of $.60 for each dollar of TES and/or Regular Savings contributions, up to 6% of a participant's base salary, unless the Employer determines to make a different contribution or no contribution. With the exception of Globalstar employees, all employer matching contributions are generally invested in the Loral Stock Fund. Since August 1, 1997, for Globalstar employees' the employer matching contributions are invested in the Globalstar Stock Fund. Employer contributions related to Globalstar employees may be transferred to any of the participant directed funds. All employer matching contributions remaining in the non-participant directed Loral Stock Fund or the Globalstar Stock Fund are reflected as non-participant directed in the accompanying financial statements. Participants who are 55 years old and have 10 years of service may direct their employer matching contributions to any available investment option except the Ford Stock Fund, the Associates Stock Fund and the Globalstar Stock Fund. Payment of Benefits Upon termination, participants receive the vested portion of their account balance as soon as practicable after termination. Terminated participants who have an account balance in excess of $5,000 may elect to leave their account balance in the Plan or withdraw it at any time up to age 65. Assets in a participant's TES account may be withdrawn only for financial hardship before termination of employment or before reaching age 59 and one-half. Financial hardship is determined pursuant to provisions of the IRC. Generally, a 10% penalty will be imposed on certain withdrawals of pre-tax assets made before the participant reaches age 59 and one-half. After age 59 and one-half, TES assets may be withdrawn in total or in part at any time. Assets in a participant's Regular Savings account may be withdrawn in total or in part at any time in accordance with the Plan provisions. Withdrawals of employer contributions for active participants are available at the end of the two-year period following the year in which the employer contributions were made, if they are vested. Payment of Administrative Expenses Most administrative expenses are paid by the Plan. The Plan permits the Employer to use forfeitures from participants' non-vested accounts to pay certain administrative expenses. Expenses not paid by the Plan are the responsibility of the Employer. Participant Loans The Plan permits active participants to borrow from assets in their TES accounts. The minimum loan amount is $1,000. The maximum loan permitted is the lesser of: (1) $50,000 minus the highest outstanding loan balance during the last twelve months, (2) 50% of the vested account balance, or (3) the assets in the TES Account which are eligible for a loan. The amounts in (2) and (3) are reduced by any loan balance outstanding. Participants may have only one outstanding loan at a time. No new loans will be made until all outstanding loans are repaid. The interest rate for a loan is the prime rate as defined in the Plan document, and remains the same for the term of the loan. Interest rates for outstanding loans range from 6% to 10 1/2%. The term of a loan can be up to five years except for loans to purchase a primary residence, which can have a term of up to 10 years. Loan repayment is made through payroll deductions. Repayment of the entire 7 11 LORAL SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998 loan balance is permitted at any time. All loan repayments are allocated to the investment funds elected by a participant for current TES Contributions. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The financial statements of the Plan are prepared under the accrual method of accounting. Investment Valuation and Income Recognition The Plan's investments are stated at fair value or contract value. Investments in Loral Stock Fund, Globalstar Stock Fund, Associates Stock Fund and Ford Stock Fund are valued at net asset value per unit of participation. Shares of registered investment company funds are valued at quoted market prices which represent the net asset value of shares held by the Plan at year-end. Loans receivable from participants are valued at cost which approximates fair value. Guaranteed investment contracts with various insurance companies held in the Blended Income Fund at December 31, 1997, are stated at contract value as reported by the insurance companies. Contract value represents contributions made under the contract, plus earnings at the contract rate, less withdrawals and expenses (see Note 4). The Plan presents in the statements of changes in net assets available for plan benefits with fund information, the net appreciation (depreciation) in the fair value of its investments which consists of the realized gains or losses and the unrealized appreciation (depreciation) of those investments. Investment transactions are accounted for on a trade date basis. Dividend income is recorded on the ex-dividend date. Interest income is recorded when earned. Payment of Benefits Benefits are recorded when paid. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the changes therein, and the disclosure of contingent assets and liabilities. Actual results could differ from estimates. Risks and Uncertainties The Plan provides for various investment options in any combination of stocks, bonds, fixed income securities, mutual funds, and other investment securities. Investment securities are exposed to various risks, such as interest rate, market and credit. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term would materially affect participants' account balances and the amounts reported in the statement of net assets available for plan benefits with fund information and the statements of changes in net assets available for plan benefits with fund information. 8 12 LORAL SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998 Financial Instruments Fidelity may enter into forward foreign currency contracts to protect securities and related receivables and payables against fluctuations in future foreign currency rates. A forward contract is an agreement to buy or sell currencies of different countries on a specified future date at a specified rate. Risks associated with such contracts include the movement in the value of the foreign currency relative to the U.S. dollar and the ability of the counterparty to perform. The market value of the contract will fluctuate with changes in currency exchange rates. Fidelity may invest in futures and option contracts solely for the purpose of managing its exposure to the stock and bond markets and fluctuations in interest rates. The use of futures and option transactions involves the risk of imperfect correlation in movements in the price of futures and option contracts; interest rates and the underlying hedged assets, and the possible inability of counterparties to meet the term of their contracts. When the contract is closed, a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed is recorded. 9 13 LORAL SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998 3. INVESTMENTS Plan investments as of December 31, 1998 and 1997 were as follows (dollars in thousands):
DECEMBER 31, 1998 --------------------------------------------- FACE AMOUNT FAIR/ OR SHARES/UNITS CONTRACT VALUE COST --------------- -------------- -------- Loral Stock Fund**........................... 8,837,031 $105,426* $101,619 Fidelity Blue Chip Growth Fund............... 1,317,517 66,390* 46,122 Fidelity Magellan Fund....................... 140,387 16,962 13,123 Fidelity Growth & Income Portfolio........... 851 38,993* 29,526 Fidelity Asset Manager....................... 323,809 5,631 5,753 Fidelity Overseas Fund....................... 120,185 4,324 4,042 Fidelity Intermediate Bond Fund.............. 341,196 3,504 3,464 Fidelity Retirement Money Market Portfolio... 41,833,345 41,833* 41,833 Fidelity Managed Income Portfolio II......... 20,463,180 20,463* 20,463 Fidelity Puritan Fund........................ 9,101 183 173 Spartan U.S. Equity Index Fund............... 1,637,487 1,637 1,450 Morgan Stanley Dean Witter Global Equity Portfolio.................................. 8,355 172 158 PIMCO Total Return Fund...................... 45,762 482 496 PIMCO Capital Appreciation Fund.............. 7,672 190 180 PIMCO Mid Cap Growth Fund.................... 21,257 489 438 PIMCO High Yield Fund........................ 31,810 360 359 Associates Stock Fund........................ 663,352 15,231 6,317 Globalstar Stock Fund........................ 48,271 583 611 Ford Stock Fund.............................. 2,588,781 40,851* 12,846 Participant Loans............................ 5,818 -------- $369,522 ======== DECEMBER 31, 1997 --------------------------------------------- Loral Stock Fund**........................... 8,469,315 $120,603* $ 89,429 Fidelity Blue Chip Growth Fund............... 1,267,337 50,009* 41,915 Fidelity Magellan Fund....................... 111,322 10,606 9,380 Fidelity Growth & Income Portfolio........... 796,742 30,356* 25,449 Fidelity Asset Manager....................... 219,986 4,037 3,780 Fidelity Overseas Fund....................... 109,918 3,577 3,554 Fidelity Intermediate Bond Fund.............. 194,045 1,973 1,949 Fidelity Retirement Money Market Portfolio... 42,952,470 42,952* 42,952 Blended Income Fund: Fidelity Commingled Pool................... 16,471,973 16,472* 16,472 Fidelity Institutional Money Market........ 3,029,719 3,030 3,030 -------- -------- 19,502 19,502 Globalstar Stock Fund........................ 11,408 168 156 Ford Stock Fund.............................. 2,895,038 38,272* 21,999 Participant Loans............................ 5,513 -------- $327,568 ========
- --------------- * Represents greater than 5% of net assets available for plan benefits. ** Includes both participant directed and non-participant directed amounts. 10 14 LORAL SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) DECEMBER 31, 1998 4. GUARANTEED INVESTMENT CONTRACTS WITH INSURANCE COMPANIES The Plan had invested in several guaranteed investment contracts with insurance companies, which were included in the Blended Income Fund. The guaranteed investment contracts are stated at contract value, which approximates fair value. As of December 31, 1998, the Plan had no investments in such contracts. For the year ended December 31, 1997, the crediting interest rate for the sole investment contract was 7.96%. 5. PLAN TERMINATION Although the Employer has not expressed an intent to do so, the Employer can discontinue its contributions at any time and terminate the Plan subject to the provisions of ERISA. In the event of a discontinuance and/or termination of the Plan, participants will become 100% vested and the net assets of the Plan will be allocated among the participants and their beneficiaries in accordance with the provisions of ERISA. 6. TAX STATUS The Employer intends to seek a determination from the Internal Revenue Service that the Plan and related trust are designed in accordance with applicable sections of the IRC. Based upon present applicable laws and regulations, participants will not be subject to Federal income tax on the TES contributions or Employer contributions made on their behalf or on the earnings credited to their account until such time as they are withdrawn. 7. CONCENTRATION OF CREDIT RISK At December 31, 1998 and 1997, approximately 54% and 50%, respectively, of the Plan's assets were invested in Fidelity Funds and 29% and 37%, respectively, in the Loral Stock Fund. 11 15 LORAL SAVINGS PLAN ITEM 27a -- SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AS OF DECEMBER 31, 1998 (DOLLARS IN THOUSANDS)
IDENTITY OF ISSUE, BORROWER, DESCRIPTION OF INVESTMENT INCLUDING MATURITY CURRENT LESSOR OR SIMILAR PARTY DATE, RATE OF INTEREST, COLLATERAL, PAR OR MATURITY VALUE COST VALUE (a) (b) (c) (d) (e) - --- ---------------------------- --------------------------------------------------------- -------- -------- * Loral Stock Fund Common Stock $101,619 $105,426 Ford Stock Fund Common Stock 12,846 40,851 Associates Stock Fund Common Stock 6,317 15,231 * Globalstar Stock Fund Common Stock 611 583 * Fidelity Management Trust Company Blue Chip Growth Fund 46,122 66,390 Growth & Income Fund 29,526 38,993 Asset Manager 5,753 5,631 Magellan Fund 13,123 16,962 Overseas Fund 4,042 4,324 Retirement Money Market Portfolio 41,833 41,833 Intermediate Bond Fund 3,464 3,504 Managed Income Portfolio II 20,463 20,463 Puritan Fund 173 183 Spartan U.S. Equity Index 1,450 1,637 Morgan Stanley-Dean Witter Global Equity Portfolio Class B 158 172 PIMCO Total Return Fund 496 482 Capital Appreciation Fund 180 190 Mid Cap Growth Fund 438 489 High Yield Fund 359 360 * Participant Loans Interest rates ranging from 6% to 10 1/2% 5,818 -------- $369,522 ========
- --------------- * Party-in-interest 12 16 LORAL SAVINGS PLAN ITEM 27d -- SCHEDULE OF REPORTABLE TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 1998 (DOLLARS IN THOUSANDS)
DESCRIPTION OF ASSET IDENTITY OF (INCLUDE INTEREST RATE AND TOTAL NUMBER TOTAL NUMBER TOTAL VALUE TOTAL VALUE NET GAIN PARTY INVOLVED MATURITY IN CASE OF LOAN) OF PURCHASES OF SALES OF PURCHASES OF SALES OR LOSS (a) (b) (c) (d) (e) (f) (g) - ------------------- -------------------------- ------------ ------------ ------------ ----------- -------- *Fidelity Management Trust Company Blue Chip Growth Fund 250 234 $15,686 $13,576 $2,097 Growth & Income Fund 247 227 22,960 20,752 1,869 Magellan Fund 244 201 9,877 6,625 491 Retirement Money Market Portfolio 256 252 47,974 49,093 -- Managed Income Portfolio II 74 60 21,874 1,411 -- Blended Income Fund 105 96 4,751 24,253 -- *Loral Stock Fund Common Stock 252 251 66,109 61,974 8,156 Associates Stock Fund Common Stock 91 87 16,758 1,503 648
- --------------- * Party-in-interest 13 EX-23 2 CONSENT OF INDEPENDENT ACCOUNTANTS 1 CONSENT OF INDEPENDENT ACCOUNTANTS As independent public accountants, we consent to the incorporation by reference in the registration statement of Loral Space & Communications Ltd. on Form S-8 (File No. 333-14863) of our report dated June 22, 1999, on our audits of the financial statements and schedules of the Loral Savings Plan for the years ended December 31, 1998 and 1997, which report is included in the Annual Report on Form 11-K which is filed with the Securities and Exchange Commission. MOHLER, NIXON & WILLIAMS Accountancy Corporation Campbell, California June 22, 1999 14 -----END PRIVACY-ENHANCED MESSAGE-----