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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
COMMISSION FILE NO. 0-23087
STARTEC GLOBAL COMMUNICATIONS CORPORATION
STARTEC EMPLOYEE 401(k) PLAN
STARTEC GLOBAL COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 52-2099559
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
10411 MOTOR CITY DRIVE
BETHESDA, MD 20817
(Address of principal executive offices) (Zip Code)
301-365-8959
(Registrant's telephone number, including area code)
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STARTEC GLOBAL COMMUNICATIONS CORPORATION
STARTEC EMPLOYEE 401(k) PLAN
FORM 11-K
AS OF DECEMBER 31, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL STATEMENTS
<S> <C> <C>
Item 1. Report of Independent Public Accountants .................................................. 3
Item 2. Financial Statements
Statements of Net Assets Available for Benefits
As of December 31, 1999 and 1998 ..................................................... 4
Statement of Changes in Net Assets Available for Benefits
For the year ended December 31, 1999................................................... 5
Item 3. Notes to Financial Statements ............................................................. 6
Item 4. Supplemental Schedules
Schedule of Assets Held for Investment Purposes
As of December 31, 1999.................................................................. 11
Schedule of Reportable Transactions
For the year ended December 31, 1999..................................................... 12
Schedule of Nonexempt Transactions
For the year ended December 31, 1999................................................... 13
Schedules omitted because there were no such items For the
year ended December 31, 1999:
Loans or Fixed - Income Obligations
Leases in Default or Classified as Uncollectible
</TABLE>
2
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Trustees of the
Startec Employee 401(k) Plan:
We have audited the accompanying statements of net assets available for benefits
of the Startec Employee 401(k) Plan (the "Plan") as of December 31, 1999 and
1998, and the related statement of changes in net assets available for benefits
for the year ended December 31, 1999. These financial statements and the
schedules referred to below are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with accounting standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. 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 benefits of the Plan as of
December 31, 1999 and 1998, and the changes in net assets available for benefits
for the year ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States.
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 (Schedule I), reportable transactions (Schedule II), and
nonexempt transactions (Schedule III) 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 supplemental schedules 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.
Arthur Anderson LLP
Vienna, Virginia
June 23, 2000
3
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STARTEC EMPLOYEE 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
ASSETS: DECEMBER 31,
----------------------------------------
1999 1998
------------------ ------------------
<S> <C> <C>
Investments $ 1,587,577 $ 280,831
Receivables:
Participant contributions 30,219 29,540
Employer contributions 1,511 1,461
------------------ ------------------
Total receivables 31,730 31,001
------------------ ------------------
Total assets 1,619,307 311,832
------------------ ------------------
LIABILITIES:
Excess contributions payable 52,187 --
------------------ ------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 1,567,120 $ 311,832
================== ==================
</TABLE>
The accompanying notes are an integral part of these statements.
4
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STARTEC EMPLOYEE 401(k) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1999
----------------------
<S> <C>
ADDITIONS:
Additions to net assets attributed to:
Investment income:
Net appreciation in fair value of
investments $ 360,280
Interest and dividend income 71,845
Contributions:
Participant 660,256
Employer 34,257
Rollover 216,671
----------------------
Total additions 1,343,309
----------------------
DEDUCTIONS:
Deductions from net assets attributed to:
Benefits paid to participants (88,021)
----------------------
Net increase in net assets 1,255,288
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 311,832
----------------------
End of year $ 1,567,120
======================
</TABLE>
The accompanying notes are an integral part of this statement.
5
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STARTEC EMPLOYEE 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS AND SCHEDULES
AS OF DECEMBER 31, 1999 AND 1998
1. DESCRIPTION OF THE PLAN:
The following description of the Startec Employee 401(k) Plan (the "Plan") is
provided for general information purposes only. Participants should refer to the
Plan document for a complete description of the Plan's provisions.
GENERAL - The Plan, which was adopted on January 1, 1998, is a defined
contribution plan covering all full-time employees over the age of twenty.
Employees become eligible to participate in the Plan on the first day of the
month following employment. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA").
CONTRIBUTIONS - Participants may contribute, subject to certain restrictions, up
to 15 percent of their compensation to the Plan. These contributions are
invested at the participant's direction into funds administered by John Hancock
Funds, Inc. ("John Hancock" or the "Custodian").
Startec Global Communications Corporation (the "Company" or the "Sponsor") may
make discretionary contributions and/or matching contributions at the option of
the Company's board of directors, subject to certain restrictions. There is no
minimum number of hours of service requirement to receive employer contributions
if the participant is employed on the last day of the Plan year. If the
participant leaves the Company prior to the end of the Plan year, the
participant must have completed at least 500 hours of service during the Plan
year in order to receive employer matching contributions and/or discretionary
contributions. Effective November 1998, the Company matches up to five percent
of participants' contributions to the Plan, which is initially invested in the
Company's common stock, but may be transferred at the participant's discretion
into other investment vehicles offered under the Plan. Prior to November 1998,
the Company matched three percent of the participants' contributions into
investment vehicles designated by the participants. There were no discretionary
contributions made for the Plan year ended December 31, 1999.
PARTICIPANT ACCOUNTS - Each participant's account is credited with the
participant's contribution, the Company's contribution, and an allocation of the
Plan's earnings. Allocations are based on participant earnings or account
balances, as defined. The benefit to which a participant is entitled is the
benefit that can be provided from the participant's vested account.
VESTING - Participants are immediately vested in their contributions plus actual
earnings thereon. A participant becomes vested at the rate of 20 percent per
year in all employer contributions starting with the participant's hire date and
is fully vested after five years of continuous employment with the Company.
6
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FORFEITURES - A participant's nonvested employer contribution may be forfeited
if employment is terminated for any reason other than disability, death, or
normal retirement. If forfeiture occurs, the forfeited amount is first used to
pay the Plan's administrative expenses and the remaining balance is used to
reduce future employer contributions. There were forfeitures in the amount of
$2,195 for the year ended December 31, 1999. There were no forfeitures for the
year ended December 31, 1998.
BENEFITS - Participants are eligible to receive funds from their accounts under
the following circumstances:
- Attainment of normal retirement age
- Termination of employment
- Hardship withdrawal of elective deferrals
- Death or disability
If a participant's vested interest in the account is no more than $5,000,
benefits will be paid in a lump-sum amount. If a participant's vested balance is
more than $5,000, payouts will be in the form of an annuity unless the annuity
option is waived. Benefits are recorded when paid.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
USE OF ESTIMATES - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires the
Plan's management to make estimates and assumptions that affect the reported
amounts of assets, liabilities and changes therein, and disclosure of contingent
assets and liabilities. Actual results could differ from those estimates.
BASIS OF ACCOUNTING - The financial statements have been prepared on the accrual
basis of accounting in accordance with accounting principles generally accepted
in the United States.
EXCESS CONTRIBUTIONS PAYABLE - Employee contributions include excess
contributions, which will be refunded to participants subsequent to year-end, as
the contributions were determined to be in excess of maximum contribution levels
for certain participants. A liability for excess contributions payable has been
reflected in the statements of net assets available for benefits of $52,187 and
$0 as of December 31, 1999 and 1998, respectively.
NEW ACCOUNTING PRONOUNCEMENT - In 1999, the Accounting Standards Executive
Committee issued Statement of Position 99-3, "Accounting for and Reporting of
Certain Defined Contribution Plan Investments and Other Disclosure
Matters"(the "SOP"), which eliminates the requirement for a defined
contribution plan to disclose participant-directed investment programs. The
SOP was adopted for the 1999 financial statements, and as such, the 1998
financial statements have been revised to eliminate the participant-directed
fund investment program disclosures.
INVESTMENT VALUATION AND INCOME RECOGNITION - The Plan's investments are stated
at fair value. John Hancock uses quoted market prices to value investments in
the Plan. Purchases and sales of securities
7
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are recorded on a trade-date basis. Interest income is recorded on the accrual
basis. Dividends are recorded on the ex-dividend date.
ADMINISTRATIVE EXPENSES - Administrative expenses of the Plan are paid by the
Company in accordance with the Plan document. Administrative fees paid by the
Company totaled $ 8,475 for 1999.
3. PLAN TERMINATION:
While it has expressed no intent to do so, the Company has the right under the
Plan to discontinue contributions and terminate the Plan at any time subject to
the provisions of ERISA. Upon termination of the Plan, all participants would
become fully vested and the assets of the Plan would be distributed in
accordance with the Plan document.
4. INVESTMENTS:
The following tables present the fair values of investments as of December 31,
1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
--------------------------------------
INVESTMENTS AT QUOTED MARKET VALUES:
<S> <C> <C>
John Hancock Global Technology Fund $ 469,490 * $ 41,465 *
John Hancock Large Cap Value Fund 353,566 * 84,211 *
John Hancock Small Cap Growth Fund 281,179 * 69,651 *
John Hancock Financial Industries Fund 145,720 * 51,992 *
Startec Company Stock ( Participant and nonparticipant-directed) 118,059 * --
John Hancock Money Market Fund ( Participant and nonparticipant-directed) 84,860 * 15,451
John Hancock Sovereign Investors Fund 70,798 446
John Hancock High Yield Bond Fund 52,933 17,615 *
Loans Receivable 10,972 --
----------------- ---------------
Total Investments $ 1,587,577 $280,831
================= ===============
</TABLE>
* The above investments represent 5% or more of the Plan's net assets as of
December 31, 1999 and 1998, respectively.
During 1999, the Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) appreciated in value by
$360,280 as follows:
<TABLE>
<S> <C>
Mutual funds $ 312,256
Common stock 48,024
----------------
$ 360,280
================
</TABLE>
8
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5. NONPARTICIPANT-DIRECTED INVESTMENTS:
Information about the net assets and the significant components of the changes
in net assets relating to the nonparticipant-directed investments is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1999 1998
----------------- ----------------
Net Assets:
<S> <C> <C>
Common stock $ 69,987 $ 5,281
Money market 2,195 -
----------------- ----------------
$ 72,182 $ 5,281
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1999
-------------------
<S> <C>
Changes in Net Assets:
Contribution $ 37,596
Net appreciation 48,024
Benefits paid to participants (5,554)
Transfers to participant-directed investments (13,165)
-------------------
$ 66,901
===================
</TABLE>
6. PARTICIPANT LOANS:
Participants may borrow up to 50 percent of their vested account or $50,000,
whichever is less, with a minimum loan requirement of $1,000. Loans must be
repaid within five years and are repaid in equal installments through payroll
deductions. Loan repayments of principal and interest are invested based on the
participant's current investment elections. The loans are secured by the balance
in the participant's account and bear interest at a rate equal to one percentage
point above the prime lending rate, as defined. The interest rate remains fixed
for the term of the loan. As of December 31, 1999, interest rates ranged from
8.75% to 9.00%. There were participant loans outstanding of $10,972 as of
December 31, 1999. There were no loans outstanding as of December 31, 1998.
7. INCOME TAX STATUS:
The Company's Plan is a prototype standardized profit sharing plan of John
Hancock Funds, Inc. with a cash or deferred arrangement, which has received a
favorable determination letter on March 4, 1997 from the Internal Revenue
Service stating that the Plan is designed in accordance with applicable
requirements of the Internal Revenue Code (the "IRC"). The Company's
management believes that the Plan is designed and is currently being operated
in compliance with the applicable requirements of the IRC.
9
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8. PROHIBITED TRANSACTION:
Effective February 3, 1997, the Department of Labor regulations require
employers who sponsor pension plans to remit employee contributions as of the
earliest date on which such contributions can reasonably be segregated from
the employer's general assets, but in no event more than 15 business days
following the month in which the participant contribution was withheld or
received by the employer. Failure to remit or untimely remittance of
participant contributions may constitute a use of plan assets for the benefit
of the employer or a prohibited extension of credit. The Company did not
remit participants' contributions in a timely manner on several occasions
during the year ended December 31, 1999 and 1998. Late remittances by the
employer to the Plan are presented on the accompanying schedule of nonexempt
transactions (Schedule III). The Company will pay all excise taxes and
interest on behalf of the Plan to the Department of Labor concurrent with the
Plan's Form 5330 filing in order to resolve these nonexempt transactions for
the year ended December 31, 1999. Concurrent with the Plan's Form 5330 filing
for the year ended December 31, 1998, the Company paid the Department of
Labor all excise taxes and interest accrued on the untimely remittances of
employee contributions.
10
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SCHEDULE I
STARTEC EMPLOYEE 401(k) PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
Identity of Issue, Borrower,
Lessor, or Similar Party Description of Investment Cost Market Value
---------------------------------------- ---------------------------------- ------------------ ------------------
PARTICIPANT-DIRECTED:
<S> <C> <C> <C>
John Hancock Funds* Global Technology Fund $ ** $ 469,490
John Hancock Funds* Large Cap Value Fund ** 353,566
John Hancock Funds* Small Cap Growth Fund ** 281,179
John Hancock Funds* Financial Industries Fund ** 145,720
John Hancock Funds* Money Market Fund ** 82,665
John Hancock Funds* Sovereign Investors Fund ** 70,798
John Hancock Funds* High Yield Bond Fund ** 52,933
John Hancock Funds* Startec Company Stock ** 48,072
------------------
Total participant-directed 1,504,423
------------------
NONPARTICIPANT-DIRECTED:
John Hancock Funds* Money Market Fund 2,195 2,195
John Hancock Funds* Startec Company Stock 35,401 69,987
------------------ ------------------
Total nonparticipant-directed $ 37,596 72,182
================== ------------------
Participant Loans* Maturing at various dates; ** 10,972
interest rates ranging from ------------------
TOTAL 8.75% to 9.00% $ 1,587,577
==================
</TABLE>
* Party-in-interest
** Historical cost is only required for nonparticipant-directed investments
according to the Department of Labor Regulations.
The accompanying notes are an integral part of this schedule.
11
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SCHEDULE II
STARTEC EMPLOYEE 401(k) PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
EXPENSE
INCURRED
PURCHASE SELLING WITH
IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET PRICE PRICE TRANSACTION
-------------------------- -------------------- ----- ----- -----------
<S> <C> <C> <C> <C>
John Hancock Funds Sovereign Investors Fund Class A $108,228 $ 17,336 $ --
John Hancock Funds Money Market Fund Class A 108,240 25,256 --
John Hancock Funds Large Cap Value Fund Class A 335,989 63,854 --
John Hancock Funds High Yield Bond Fund Class A 72,487 36,086 --
John Hancock Funds Small Cap Growth Fund Class A 186,322 27,725 15
John Hancock Funds Financial Industries Fund Class A 168,544 73,090 --
John Hancock Funds Technology Fund Class A 337,089 47,678 69
John Hancock Funds *Startec Global Costk Cash Vehicle 97,243 97,243 --
John Hancock Funds *Startec Company Stock 97,242 12,166 --
</TABLE>
<TABLE>
<CAPTION>
MARKET VALUE
OF ASSET ON NET GAIN OR
TRANSACTION (LOSS) ON EACH
IDENTITY OF PARTY INVOLVED COST OF ASSET DATE TRANSACTION
-------------------------- ------------- ------------ --------------
<S> <C> <C> <C>
John Hancock Funds $125,735 $125,564 $ (171)
John Hancock Funds 133,496 133,496 --
John Hancock Funds 394,862 399,843 4,981
John Hancock Funds 108,667 108,573 (94)
John Hancock Funds 209,300 214,047 4,762
John Hancock Funds 241,856 241,634 (222)
John Hancock Funds 376,422 384,767 8,414
John Hancock Funds 194,486 194,486 --
John Hancock Funds 106,297 109,408 3,111
</TABLE>
*These accounts include both participant and nonparticipant-directed funds.
The accompanying notes are an integral part of this schedule.
12
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SCHEDULE III
STARTEC EMPLOYEE 401(k) PLAN
SCHEDULE OF NONEXEMPT TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
RELATIONSHIP TO PLAN, DESCRIPTION OF TRANSACTIONS, INCLUDING INTEREST
IDENTITY OF EMPLOYER, OR MATURITY DATE, RATE OF INTEREST, COLLATERAL, EARNED ON
PARTY INVOLVED OTHER PARTY-IN-INTEREST AND PAR OR MATURITY VALUE AMOUNT LOANED LOAN
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Startec Global Sponsor Lending of money from the Plan to the employer
Communications (contributions not remitted on a timely basis
Corporation to the Plan), as follows:
Deemed loan dated January 15, 1999
maturing February 23, 1999 with interest
at 8.88% per annum. $19,109 $ 127
Deemed loan dated January 29,1999,
maturing February 23, 1999, with interest
at 8.88% per annum. 18,611 78
============ ============
$37,720 $ 205
============ ============
</TABLE>
The accompanying notes are an integral part of this schedule.
13
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this annual report to be signed on its behalf by the
undersigned thereunto duly authorized.
STARTEC GLOBAL COMMUNICATIONS
CORPORATION
RETIREMENT SAVINGS PLAN
By: /s/ PRABHAV V. MANIYAR
------------------------------------
Chief Financial Officer and Director
(Principal Financial and Accounting Office)
Date: June 28, 2000
