<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 11-K
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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
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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 22, 1999
<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, 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
</TABLE>
<PAGE> 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
<PAGE> 5
LORAL SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
WITH FUND INFORMATION
AS OF DECEMBER 31, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
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
======== ========
</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 YEARS ENDED DECEMBER 31, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARTICIPANT DIRECTED
--------------------------------------------------------------------
GROWTH
BLUE CHIP & 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, 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
======= ======= ======= ====== ====== ======
<CAPTION>
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
---------- -------- ------- ------------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
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 $ -- $ -- $ -- $ -- $ --
======= ======== ==== ======= ====== ==== ====
<CAPTION>
PARTICIPANT DIRECTED
-------------------------------------------------------
PIMCO PIMCO PIMCO LORAL
CAPITAL MID CAP HIGH STOCK PARTICIPANT
APPRECIATION GROWTH YIELD FUND LOANS
------------ ------- ----- -------- -----------
<S> <C> <C> <C> <C> <C>
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
==== ==== ==== ======== =======
<CAPTION>
NON-PARTICIPANT DIRECTED
--------------------------------------------------------
LORAL GLOABALSTAR ASSOCIATES FORD
STOCK STOCK STOCK STOCK
FUND FUND FUND FUND TOTAL
------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
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
======= ==== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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):
<TABLE>
<CAPTION>
DECEMBER 31, 1998
---------------------------------------------
FACE AMOUNT FAIR/
OR SHARES/UNITS CONTRACT VALUE COST
--------------- -------------- --------
<S> <C> <C> <C>
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
========
</TABLE>
- ---------------
* Represents greater than 5% of net assets available for plan benefits.
** Includes both participant directed and non-participant directed amounts.
10
<PAGE> 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
<PAGE> 15
LORAL SAVINGS PLAN
ITEM 27a -- SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
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)
- --- ---------------------------- --------------------------------------------------------- -------- --------
<C> <S> <C> <C> <C>
* 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
========
</TABLE>
- ---------------
* Party-in-interest
12
<PAGE> 16
LORAL SAVINGS PLAN
ITEM 27d -- SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
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)
- ------------------- -------------------------- ------------ ------------ ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
*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
</TABLE>
- ---------------
* Party-in-interest
13
<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 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
