<PAGE> 1
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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, 1997
------------------------
COMMISSION FILE NUMBER 1-14180
------------------------
LORAL SAVINGS PLAN
------------------------
LORAL SPACE & COMMUNICATIONS LTD.
600 THIRD AVENUE
NEW YORK, NEW YORK 10016
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<PAGE> 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 26, 1998
<PAGE> 3
LORAL SAVINGS PLAN
TABLE OF CONTENTS
------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... 1
Financial Statements
Statements of Net Assets Available For Plan Benefits With
Fund Information
as of December 31, 1997 and 1996....................... 2
Statements of Changes in Net Assets Available For Plan
Benefits With Fund Information
for the year ended December 31, 1997 and for the period
April 23, 1996 (date of inception) through December 31,
1996................................................... 3
Notes to Financial Statements............................. 4
Supplemental Schedules
Item 27a -- Schedule of Assets Held For Investment
Purposes as of December 31, 1997....................... 10
Item 27d -- Schedule of Reportable Transactions for the
year ended December 31, 1997........................... 11
Exhibit
Consent of Independent Accountants........................ 12
</TABLE>
<PAGE> 4
INDEPENDENT ACCOUNTANTS' REPORT
To the Participants and
Plan Administrator of the
Loral Savings Plan
We were engaged to audit the financial statements and supplemental
schedules of the Loral Savings Plan (the Plan) as of December 31, 1997 and 1996
and for the year ended December 31, 1997 and the period April 23, 1996
(inception) to December 31, 1996. These financial statements and schedules 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 audits 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 the
Plan's 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, 1997 and 1996, and the changes in net assets available for
plan benefits for the year ended December 31, 1997 and the period April 23, 1996
(inception) to December 31, 1996 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 information is
presented for the purpose of additional analysis and is not a required part of
the basic 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
information is the responsibility of the Plan's management. The fund information
in the statement of changes in net assets available for plan benefits is
presented for purposes of additional analysis rather than to present the changes
in net assets available for plan benefits for each fund. The supplemental
information and fund information have been subjected to the auditing procedures
applied in the audit 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 26, 1998
1
<PAGE> 5
LORAL SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
WITH FUND INFORMATION
AS OF DECEMBER 31, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Assets
Investments:
Participant directed:
Fidelity Blue Chip Growth Fund....................... $ 50,009 $ 41,094
Fidelity Magellan Fund............................... 10,606 6,287
Fidelity Growth & Income Portfolio................... 30,356 18,311
Fidelity Asset Manager............................... 4,037 2,380
Fidelity Overseas Fund............................... 3,577 2,803
Fidelity Intermediate Bond Fund...................... 1,973 1,304
Fidelity Retirement Money Market Portfolio........... 42,952 41,284
Fidelity Blended Income Fund......................... 19,502 18,818
Loral Stock Fund..................................... 112,600 99,680
Participant Loan Fund................................ 5,513 4,416
Non-Participant Directed:
Loral Stock Fund..................................... 8,003 3,173
Globalstar Stock Fund................................ 168 --
Ford Stock Fund...................................... 38,272 28,807
-------- --------
Total investments................................. 327,568 268,357
-------- --------
Net assets available for plan benefits.................... $327,568 $268,357
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 6
LORAL SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS WITH FUND
INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1997 AND FOR THE PERIOD APRIL 23, 1996 (DATE OF
INCEPTION) THROUGH DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARTICIPANT DIRECTED
--------------------------------------------------------------------
FIDELITY
--------------------------------------------------------------------
BLUE CHIP GROWTH & INTERMEDIATE
GROWTH MAGELLAN INCOME ASSET OVERSEAS BOND
FUND FUND PORTFOLIO MANAGER FUND FUND
--------- -------- --------- ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
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................ 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........ 27 -- 31 -- -- --
------- ------- ------- ------ ------ ------
Net increase........................... 8,915 4,319 12,045 1,657 774 669
Net assets available at December 31,
1996................................. 41,094 6,287 18,311 2,380 2,803 1,304
------- ------- ------- ------ ------ ------
Net assets available at December 31,
1997................................. $50,009 $10,606 $30,356 $4,037 $3,577 $1,973
======= ======= ======= ====== ====== ======
For the period April 23, 1996 (date of
inception) through December 31, 1996
Additions:
Contributions:
Rollovers.......................... $ 307 $ 174 $ 262 $ 55 $ 49 $ 5
Employer........................... 9 3 13 -- 1 1
Participant........................ 1,955 522 741 131 180 101
Investment Income:
Interest and dividends............. -- -- -- -- -- --
Net investment gain (loss) from
registered investment company...... 2,900 71 693 166 165 54
Net appreciation (depreciation) in
fair value of investments.......... 1,032 403 896 (9) (14) 11
------- ------- ------- ------ ------ ------
Total additions................ 6,203 1,173 2,605 343 381 172
------- ------- ------- ------ ------ ------
Deductions:
Benefits paid to participants........ (1,242) (119) (458) (6) (6) (12)
Administrative expenses.............. -- -- -- -- -- --
------- ------- ------- ------ ------ ------
Total deductions............... (1,242) (119) (458) (6) (6) (12)
------- ------- ------- ------ ------ ------
Interfund transfers.................... 84 (48) 5,187 785 554 3
Transfers from Prior Plans............. 36,049 5,281 10,977 1,258 1,874 1,141
------- ------- ------- ------ ------ ------
Net increase........................... 41,094 6,287 18,311 2,380 2,803 1,304
Net assets available at April 23,
1996................................. -- -- -- -- -- --
------- ------- ------- ------ ------ ------
Net assets available at December 31,
1996................................. $41,094 $ 6,287 $18,311 $2,380 $2,803 $1,304
======= ======= ======= ====== ====== ======
<CAPTION>
PARTICIPANT DIRECTED
-----------------------------------------------
FIDELITY NON-PARTICIPANT DIRECTED
---------------------- ----------------------------------------
RETIREMENT BLENDED LORAL PARTICIPANT LORAL GLOBALSTAR FORD
MONEY MARKET INCOME STOCK LOAN STOCK STOCK STOCK
PORTFOLIO FUND FUND FUND FUND FUND FUND TOTAL
------------ ------- -------- ----------- ------ ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the year ended December 31, 1997
Additions:
Contributions:
Rollovers.......................... $ 1,507 $ 144 $ 922 $ -- $ -- $ -- $ -- $ 4,905
Employer........................... 440 8 -- 5,106 157 5,772
Participant........................ 1,899 943 5,567 -- -- -- -- 16,213
Loan repayments...................... 451 121 1,029 (2,046) -- 418
Investment Income:
Interest and dividends............. 3,530 1,197 -- -- -- 9,815
Net investment gain (loss) from
registered investment company.... -- -- (465) -- 50 -- 10,479 14,115
Net appreciation (depreciation) in
fair value of investments........ -- -- 17,553 -- -- 12 3,328 31,675
------- ------- -------- ------- ------ ---- ------- --------
Total additions................ 7,827 2,413 24,606 (2,046) 5,156 169 13,807 82,913
------- ------- -------- ------- ------ ---- ------- --------
Deductions:
Benefits paid to participants........ (5,221) (1,326) (5,118) (38) -- (1) (2,906) (23,709)
Loan withdrawals..................... (740) (16) (999) 3,181 (249) -- (20) --
Administrative expenses.............. (35) (1) (7) -- -- -- -- (57)
------- ------- -------- ------- ------ ---- ------- --------
Total deductions............... (5,996) (1,343) (6,124) 3,143 (249) (1) (2,926) (23,766)
------- ------- -------- ------- ------ ---- ------- --------
Interfund transfers.................... (358) (385) (5,425) -- (26) -- (1,416) --
Transfers (to) from other plans........ 195 (1) (137) -- (51) -- -- 64
------- ------- -------- ------- ------ ---- ------- --------
Net increase........................... 1,668 684 12,920 1,097 4,830 168 9,465 59,211
Net assets available at December 31,
1996................................. 41,284 18,818 99,680 4,416 3,173 -- 28,807 268,357
------- ------- -------- ------- ------ ---- ------- --------
Net assets available at December 31,
1997................................. $42,952 $19,502 $112,600 $ 5,513 $8,003 $168 $38,272 $327,568
======= ======= ======== ======= ====== ==== ======= ========
For the period April 23, 1996 (date of
inception) through December 31, 1996
Additions:
Contributions:
Rollovers.......................... $ 1,134 $ 45 $ 359 $ -- $ -- $ -- $ -- $ 2,390
Employer........................... 435 4 -- -- 2,678 -- 3,144
Participant........................ 1,452 670 3,024 -- -- -- -- 8,776
Investment Income:
Interest and dividends............. 2,295 626 -- 178 -- -- -- 3,099
Net investment gain (loss) from
registered investment company...... -- -- -- -- -- -- -- 4,049
Net appreciation (depreciation) in
fair value of investments.......... -- -- 18,331 -- 524 -- 3,439 24,613
------- ------- -------- ------- ------ ---- ------- --------
Total additions................ 5,316 1,345 21,714 178 3,202 -- 3,439 46,071
------- ------- -------- ------- ------ ---- ------- --------
Deductions:
Benefits paid to participants........ (1,389) (910) (1,244) (95) -- -- (490) (5,971)
Administrative expenses.............. (7) -- (1) -- -- -- -- (8)
------- ------- -------- ------- ------ ---- ------- --------
Total deductions............... (1,396) (910) (1,245) (95) -- -- (490) (5,979)
------- ------- -------- ------- ------ ---- ------- --------
Interfund transfers.................... (7,548) 376 1,175 162 (29) -- (701) --
Transfers from Prior Plans............. 44,912 18,007 78,036 4,171 -- -- 26,559 228,265
------- ------- -------- ------- ------ ---- ------- --------
Net increase........................... 41,284 18,818 99,680 4,416 3,173 -- 28,807 268,357
Net assets available at April 23,
1996................................. -- -- -- -- -- -- -- --
------- ------- -------- ------- ------ ---- ------- --------
Net assets available at December 31,
1996................................. $41,284 $18,818 $ 99,680 $ 4,416 $3,173 $ -- $28,807 $268,357
======= ======= ======== ======= ====== ==== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 7
LORAL SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
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").
In May 1996, assets from two other tax-qualified 401(k) plans -- the Loral
Master Savings Plan and the Loral Aerospace Savings Plan (the "Prior
Plans") -- representing participants of the Prior Plans who were affected by the
spin-off, were transferred to the Plan.
On March 14, 1997, Loral acquired Skynet Satellite Services ("Skynet") from
AT&T. Skynet employees were eligible to join the plan from March 14, 1997.
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 of the Employer 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 invested in a diversified
portfolio of domestic and foreign common stocks of well-known and
established companies.
Fidelity Growth & Income Fund 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.
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.
Fidelity Magellan Fund -- Funds are invested for capital appreciation
in both well known and lesser known stocks of domestic, multinational, and
foreign companies that have significant activities and interests outside
the U.S.
Fidelity Overseas Fund -- Funds are invested in foreign securities
with the objective of long-term growth. The investments may include common
stocks, securities convertible into common stocks, as well as debt
instruments.
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.
4
<PAGE> 8
LORAL SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
Fidelity Intermediate Bond Fund -- Funds are invested in investment
grade fixed income securities which include corporate bonds, mortgage
securities, U.S. government and agency securities and bank obligations.
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.
Since August 1, 1997, the Globalstar Stock Fund reflects the employer match
for employees of Globalstar L.P. ("Globalstar") only. All funds are invested in
the stock of Globalstar Telecommunications Ltd. ("GTL") a general partner of
Globalstar.
As of December 31, 1997, there were approximately 3,000 participants in the
Plan.
Participant Accounts
A participant's account is credited with (a) the participant's
contribution, (b) the employer's matching contribution and (c) 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 year ended December 31, 1997 and for the nine months ended December 31
1996 were approximately $97,000 and $109,000, 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 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 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
5
<PAGE> 9
LORAL SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
contributions are invested in Loral Stock. Since August 1, 1997, for Globalstar
employees', the employer matching contributions are invested in the stock of
GTL. 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.
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 $3,500 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 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, to the extent not paid by 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%.
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 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 or contract value.
Investments in Loral Stock Fund, Globalstar Stock Fund and Ford Stock Fund
are valued at a net asset value per unit of participation.
6
<PAGE> 10
LORAL SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 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 statement 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 at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period.
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 statement of changes in net assets
available for plan benefits with fund information.
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.
7
<PAGE> 11
LORAL SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. INVESTMENTS
Plan investments as of December 31, 1997 and 1996 were as follows (dollars
in thousands):
<TABLE>
<CAPTION>
FACE AMOUNT FAIR/CONTRACT
OR SHARES/UNITS VALUE COST
--------------- ------------- -------
<S> <C> <C> <C>
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 Fund................. 796,742 30,356* 25,449
Fidelity Asset Manager Fund................... 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
Fund........................................ 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 Loan Fund......................... 5,513
--------
$327,568
========
December 31, 1996
Loral Stock Fund**............................ 8,403,053 $102,853* $84,759
Fidelity Blue Chip Growth Fund................ 1,257,068 41,094* 40,062
Fidelity Magellan Fund........................ 77,956 6,287 5,884
Fidelity Growth & Income Fund................. 595,870 18,311* 17,415
Fidelity Asset Manager Fund................... 144,473 2,380 2,389
Fidelity Overseas Fund........................ 90,897 2,803 2,817
Fidelity Intermediate Bond Fund............... 129,332 1,304 1,293
Fidelity Retirement Money Market Portfolio
Fund........................................ 41,284,107 41,284* 41,284
Blended Income Fund:
Fidelity Short Term Investment Fund......... 6,470,336 6,470 6,470
Fidelity Internal GIC Pool.................. 682,499 682 682
Guaranteed Investment Contracts:
Metropolitan Life Insurance Company,
7.96% matured December 31, 1997........ 2,402,498 2,402 2,402
Peoples Security Life, 5.47% matured
January 2, 1997........................ 9,263,786 9,264 9,264
--------
18,818 18,818
-------- -------
Ford Stock Fund............................... 3,303,545 28,807* 25,320
Participant Loan Fund......................... 4,416
--------
$268,357
========
</TABLE>
- ---------------
* Represents greater than 5% of net assets available for benefits.
** Includes both participant directed and non-participant directed amounts.
8
<PAGE> 12
LORAL SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. GUARANTEED INVESTMENT CONTRACTS WITH INSURANCE COMPANIES
The Plan invests in several guaranteed investment contracts with insurance
companies, which are included in the Blended Income Fund. The guaranteed
investment contracts are stated at contract value, which approximates fair
value. The average yield for the guaranteed investment contracts for the year
ended December 31, 1997 and for the period from April 23, 1996 through December
31, 1996 was 7.96% and 5.8%, respectively. During the year ended December 31,
1997, the crediting interest rate for the sole investment contract was 7.96%.
During the period from April 23, 1996 through December 31, 1996, the crediting
interest rates for the investment contracts ranged from 5.47% to 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, 1997, approximately 50% of the Plan's assets were invested
in Fidelity mutual funds.
8. SUBSEQUENT EVENT
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.
9
<PAGE> 13
LORAL SAVINGS PLAN
ITEM 27a -- SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
IDENTITY OF ISSUE, BORROWER, DESCRIPTION OF INVESTMENT INCLUDING MATURITY
LESSOR OR SIMILAR PARTY DATE, RATE OF INTEREST, COLLATERAL, PAR OR MATURITY VALUE COST CURRENT/CONTRACT VALUE
(A) (B) (C) (D) (E)
--- ---------------------------- --------------------------------------------------------- ------- ----------------------
<C> <S> <C> <C> <C>
* Loral Stock Fund Common Stock $89,429 $120,603
Ford Stock Fund Common Stock 21,999 38,272
* Globalstar Stock Fund Common Stock 156 168
* Fidelity Management Trust Fidelity Blue Chip Growth Fund 41,915 50,009
Company
Fidelity Growth & Income Fund 25,449 30,356
Fidelity Asset Manager Fund 3,780 4,037
Fidelity Magellan Fund 9,380 10,606
Fidelity Overseas Fund 3,554 3,577
Fidelity Retirement Money Market Portfolio 42,952 42,952
Fidelity Intermediate Bond Fund 1,949 1,973
Fidelity Short-Term Investment Fund 16,472 16,472
Fidelity Internal GIC Pool 3,030 3,030
* Participant Loans Interest rates ranging from 6% to 10% 5,513
--------
$327,568
========
</TABLE>
- ---------------
* Party-in-interest
10
<PAGE> 14
LORAL SAVINGS PLAN
ITEM 27d -- SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DESCRIPTION OF ASSET
(INCLUDE INTEREST RATE AND TOTAL NUMBER TOTAL NUMBER TOTAL VALUE
IDENTITY OF PARTY INVOLVED MATURITY IN CASE OF LOAN) OF PURCHASES OF SALES OF PURCHASES
(A) (B) (C) (D) (E)
-------------------------- -------------------------- ------------ ------------ ------------
<C> <S> <C> <C> <C> <C>
* Fidelity Management Fidelity Blue Chip Growth Fund 251 231 $12,714
Trust Company
249 208 19,495
Fidelity Growth & Income
Portfolio
255 252 31,832
Fidelity Retirement Money
Market Fund
167 163 35,852
Blended Income Fund
* Loral Stock Fund Common Stock 253 250 41,825
<CAPTION>
TOTAL VALUE NET GAIN
OF SALES OR LOSS
(F) (L)
----------- --------
<C> <C> <C>
* $12,191 1,331
12,264 801
30,164 --
24,509 --
* 41,214 4,058
</TABLE>
- ---------------
* Party-in-interest
11
<PAGE> 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 26, 1998, on our audits
of the financial statements and schedules of the Loral Savings Plan for the year
ended December 31, 1997 and the period April 23, 1996 (inception) to December
31, 1996, 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 26, 1998
13
