<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(Mark One):
(x) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
For the year ended December 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the transition period from _________ to _____________
Commission File Number 1-12718
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
FOUNDATION HEALTH SYSTEMS, INC.
401(k) ASSOCIATE SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
FOUNDATION HEALTH SYSTEMS, INC.
21650 OXNARD STREET
WOODLAND HILLS, CALIFORNIA 91367
C. Exhibits. Exhibit Index
23.1 Consent of Deloitte & Touche LLP, a copy of which
is filed herewith.
99.1 Financial Statements as of and for the Years Ended
December 31, 1998 and 1997 and Independent
Auditors' Report of Foundation Health
Systems, Inc. 401(k) Associate Savings Plan
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Foundation Health Systems,
Inc. (i) Registration Statement No. 33-74780 on Form S-8, (ii) Registration
Statement No. 333-24621 on Form S-8, (iii) Registration Statement No.
33-90976 on Form S-8, (iv) Registration Statement No. 333-35193 on Form S-8,
(v) Registration Statement No. 333-48969 on Form S-8 and (vi) Registration
Statement No. 333-68387 on Form S-8, of our report dated June 29, 1999,
appearing in this Annual Report on Form 11-K of the Foundation Health
Systems, Inc. 401(k) Associate Savings Plan for the year ended December 31,
1998.
Sacramento, California
June 29, 1999
<PAGE>
EXHIBIT 99.1
FOUNDATION HEALTH SYSTEMS, INC.
401(K) ASSOCIATE SAVINGS PLAN
Financial Statements as of and for the
Years Ended December 31, 1998 and 1997,
Supplemental Schedules as of and for
the Year Ended December 31, 1998 and
Independent Auditors' Report
<PAGE>
FOUNDATION HEALTH SYSTEMS, INC.
401(K) ASSOCIATE SAVINGS PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PAGE(S)
<S> <C>
INDEPENDENT AUDITORS' REPORT 1-2
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Plan Benefits as of December 31, 1998 and 1997 3
Statements of Changes in Net Assets Available for Plan Benefits for the Years
Ended December 31, 1998 and 1997 4
Notes to Financial Statements 5-13
SUPPLEMENTAL SCHEDULES:
Item 27a - Schedule of Assets Held for Investment Purposes as of December 31, 1998 14
Item 27d - Schedule of Reportable Transactions for the Year Ended December 31, 1998 15
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Participants of the
Foundation Health Systems, Inc.
401(k) Associate Savings Plan
We have audited the accompanying statements of net assets available for plan
benefits of the Foundation Health Systems, Inc. 401(k) Associate Savings Plan
(the "Plan") as of December 31, 1998 and 1997, and the related statements of
changes in net assets available for plan benefits for the years ended
December 31, 1998 and 1997, listed in the Table of Contents. 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.
Except as explained in the following paragraph, 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.
As permitted by 29 CFR 2520.103-8 of the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974, investment assets held by First Trust Institutional
Trust Group, the former custodian of the Plan, and transactions in those
assets were excluded from the scope of our audit of the Plan's 1997 financial
statements, except for comparing the information provided by the custodian,
which is summarized in Note 6, with the related information included in the
financial statements.
Because of the significance of the information that we did not audit, we are
unable to, and do not, express an opinion on the Plan's financial statements
as of December 31, 1997. The form and content of the information included in
the 1997 financial statements, other than that derived from the information
certified by the custodian, have been audited by us and, in our opinion, are
presented in compliance with the Department of Labor's Rules and Regulations
for Reporting and Disclosure under the Employee Retirement Income Security
Act of 1974.
In our opinion, the 1998 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 changes in the net assets available
for plan benefits for the year then ended in conformity with generally
accepted accounting principles.
<PAGE>
Our audit of the Plan's financial statements as of and for the year ended
December 31, 1998, was conducted for the purpose of forming an opinion on the
1998 financial statements taken as a whole. The supplemental schedules listed
in the foregoing Table of Contents 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 audit of the basic 1998
financial statements, and, in our opinion, are fairly stated in all material
respects in relation to the basic 1998 financial statements taken as a whole.
The Plan has not presented the Schedule of Loans in Default as of December
31, 1998. Disclosure of this information is required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974.
Sacramento, California
June 29, 1999
<PAGE>
FOUNDATION HEALTH SYSTEMS, INC.
401(K) ASSOCIATE SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 1998 AND 1997
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS 1998 1997
<S> <C> <C>
INVESTMENTS, AT FAIR VALUE:
Stable Value Fund $10,664,762
Fidelity Magellan Fund 9,075,152
Dodge & Cox Balanced Fund 6,869,649
INVESCO Industrial Income Fund 6,083,484
Vanguard S&P 500 Index Fund 8,037,252
Company stock $ 6,053,957 3,758,233
Fidelity Growth Company Fund 5,052,893
INVESCO Select Income Fund 2,154,806
Franklin Small CAP Growth Fund 4,606,012 3,430,665
Fidelity OTC Portfolio Fund 2,175,006
AIM Equity Constellation Fund 7,099,410 2,451,427
Templeton Foreign Fund 22,103,649 1,357,016
Dodge & Cox Income Fund 443,225
Mass Investors Trust Fund 45,467,198
Davis New York Venture Fund 26,834,865
Merrill Lynch Capital Fund 24,142,173
Merrill Lynch Retirement Preservation Trust Fund 21,198,385
S&P 500 Stock Fund 15,284,798
Ivy Bond Fund 8,700,208
Templeton Developing Markets Fund 184,453
Other 460,434 680,977
Loans to participants 6,718,173 2,046,488
------------ -----------
Total investments 188,853,715 64,281,035
------------ -----------
Contributions receivable 1,575,850
Forfeitures payable (1,311,569)
------------ -----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS $189,117,996 $64,281,035
------------ -----------
------------ -----------
</TABLE>
See accompanying notes to financial statements.
-3-
<PAGE>
FOUNDATION HEALTH SYSTEMS, INC.
401(K) ASSOCIATE SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
ADDITIONS:
Contributions:
Employee $ 23,767,071 $ 9,476,029
Employer 8,650,573 1,890,974
Interest and dividends 9,558,045 633,333
Net appreciation (depreciation) in fair value of investments (4,259,119) 7,266,156
------------ -----------
Total additions 37,716,570 19,266,492
DEDUCTIONS:
Benefits paid to participants (14,266,906) (6,660,002)
NET INCREASE PRIOR TO TRANSFERS 23,449,664 12,606,490
TRANSFER IN FROM OTHER PLAN 101,387,297
NET ASSETS AVAILABLE FOR PLAN BENEFITS:
Beginning of year 64,281,035 51,674,545
------------ -----------
End of year $189,117,996 $64,281,035
------------ -----------
------------ -----------
</TABLE>
See accompanying notes to financial statements.
-4-
<PAGE>
FOUNDATION HEALTH SYSTEMS, INC.
401(K) ASSOCIATE SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
- --------------------------------------------------------------------------------
1. DESCRIPTION OF PLAN
The Foundation Health Systems, Inc. 401(k) Associate Savings Plan (the
"Plan") enables participants to save for retirement through voluntary
contributions and allows the participant to invest in a broad base of
funds. The following description of the Plan is provided for general
information purposes only. Participants should refer to the Plan
document for more complete information.
The Plan was implemented on January 1, 1995 as the Health Systems
International, Inc. (the former name of the Company) 401(k) Associate
Savings Plan, which Plan was amended and restated effective September
1, 1997, at which time the name was changed to the Foundation Health
Systems, Inc. 401(k) Associate Savings Plan. During 1998, the net
assets of the Foundation Health Corporation Profit Sharing and 401(k)
Plan merged into the Plan. Foundation Health Systems, Inc. (the
"Company" or "FHS") is the sponsor and administrator of the Plan.
CONTRIBUTIONS TO THE PLAN
Each eligible participant may elect a pre-tax contribution rate from 1% to
17% of his or her compensation subject to the annual cap on elective
deferrals set by the Internal Revenue Code ("IRC"). From January 1, 1997
to August 31, 1997, the Company made discretionary matching contributions
equal to 25% of up to the first 6% of each participant's compensation.
Effective September 1, 1997, the discretionary matching contribution
percentage changed from 25% to 50%. The Company also may make
discretionary nonmatching contributions.
ELIGIBILITY AND VESTING
All employees of the Company and certain subsidiaries who are not covered
by a collective bargaining agreement and have met specified service
requirements are eligible to participate in the Plan. All participants are
immediately 100% vested in their contributions plus any investment
earnings thereon. Participants vest in employer contributions at the rate
of 25% per year beginning the first year of service. An employee shall be
credited with one year of service for each fiscal year in which the
employee is employed by the Company.
In addition, all participants who have attained the age of 55, or who are
terminated from employment by reason of death or disability become 100%
vested in employer contributions and investment earnings thereon.
INVESTMENT OPTIONS
Participants can direct their contributions into one or more mutual
funds maintained by Merrill Lynch Trust Company ("Merrill Lynch" or
"ML"), as well as the common stock of the Company.
BENEFITS
Benefits are distributable from Plan assets upon retirement, death,
disability, termination of employment, termination of the Plan or in
certain cases of hardship. Benefits are based upon the participant's
vested share of Plan assets. Upon termination of employment, other than as
described under "Eligibility and vesting" above, the unvested portion of
employer contributions and investment earnings thereon is forfeited by the
participant and can be used to reduce future employer contributions.
-5-
<PAGE>
PARTICIPANT LOANS
A participant may borrow up to one-half of the value of the vested
portion of his or her account in the form of a loan with a minimum
principal of $1,000 and subject to a maximum of $50,000. Loans
bear interest and generally must be repaid within five years.
ALLOCATION OF EARNINGS
Earnings of each investment fund are allocated on a daily basis to
that fund's participants in proportion to each participant's share of
fund assets.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Plan are prepared under the accrual
method.
INVESTMENTS
Investments are stated at their fair market value measured by quoted
market prices. Gains or losses on the sale of investments are recorded
on the trade date as the difference between proceeds received and
current value at the beginning of the year or cost if acquired during
the year determined by the specific identification method. Net
appreciation or depreciation in the fair value of investments includes
net unrealized market appreciation and depreciation of investments and
net realized gains and losses on the sale of investments during the
period, and is net of investment expenses. Investment income includes
dividends and interest paid on the Plan's investments.
DISTRIBUTIONS OF BENEFITS TO PARTICIPANTS
Benefits are recorded when paid.
ADMINISTRATIVE EXPENSES
Certain administrative expenses of the Plan are borne by the Company.
ACCOUNTING ESTIMATES
In preparing the financial statements of the Plan, estimates and
assumptions are made which affect the reported amounts of net assets
available for benefits at the date of the financial statements and the
reported amounts of changes in net assets available for benefits during
the reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1997 financial statements
to conform with the 1998 presentation.
-6-
<PAGE>
3. INCOME TAXES
The Plan Administrator believes that the Plan is currently designed to
be and, other than the deficiencies taken into account under the
Internal Revenue Service's Voluntary Compliance Resolution Program, is
being operated in compliance with the applicable requirements of the
IRC and the Employee Retirement Income Security Act of 1974 ("ERISA").
Therefore, the Plan Administrator believes that the trust, which forms a
part of the Plan, is exempt from income tax. Accordingly, no provision
has been made for federal or state income taxes.
In 1998, the Company became aware of certain technical deficiencies in the
operation of the Plan. During August 1998, the Plan filed to enter the
Voluntary Compliance Resolution Program, established by the Internal
Revenue Service as a method of curing operational defects which could
otherwise disqualify the Plan.
4. RELATED PARTY TRANSACTIONS
Certain Plan investments are in shares of Merrill Lynch mutual funds.
Merrill Lynch is the trustee as defined by the Plan and, therefore, these
transactions qualify as party-in-interest transactions. In addition,
transactions in the Company's common stock, which is offered to
participants as a Plan investment option, qualify as party-in-interest
transactions. Such transactions, however, are exempt from the prohibited
transaction rules of the ERISA and IRC.
5. INVESTMENTS
The following table presents the fair values of investments that
represent 5% or more of the Plan's net assets available for plan
benefits, as of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Stable Value Fund $10,664,762
Fidelity Magellan Fund 9,075,152
Vanguard S&P 500 Index Fund 8,037,252
Dodge & Cox Balanced Fund 6,869,649
INVESCO Industrial Income Fund 6,083,484
Fidelity Growth Company Fund 5,052,893
Company stock 3,758,233
Franklin Small CAP Growth Fund 3,430,665
Mass Investors Trust Fund $45,467,198
Davis New York Venture Fund 26,834,865
Merrill Lynch Capital Fund 24,142,173
Templeton Foreign Fund 22,103,649
Merrill Lynch Retirement Preservation Trust Fund 21,198,385
S&P 500 Stock Fund 15,284,798
</TABLE>
6. INFORMATION CERTIFIED BY THE PLAN CUSTODIAN (UNAUDITED)
Information contained in the accompanying financial statements that
were certified by the custodian, First Trust, as to completeness and
accuracy, includes:
- Details (cost, market and contract value) and summaries of
investments held at December 31, 1997.
- Summaries of investment income and transactions for the year ended
December 31, 1997.
-7-
<PAGE>
7. BY FUND INFORMATION - YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
DODGE & INVESCO
STABLE FIDELITY COX INDUSTRIAL
VALUE MAGELLAN BALANCED INCOME
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
ADDITIONS TO NET ASSETS
AVAILABLE FOR BENEFITS:
Investment income:
Net appreciation
(depreciation) in fair
value of investments $ 1,359,569 $ 423,365 $ 606,692
Interest and dividends $ 103,207 427
------------ ------------ ----------- -----------
Total investment income 103,207 1,359,569 423,365 607,119
------------ ------------ ----------- -----------
Contributions:
Participant 262,964 267,808 197,991 63,973
Employer 108,042 106,533 70,238 123,724
------------ ------------ ----------- -----------
Total contributions 371,006 374,341 268,229 187,697
------------ ------------ ----------- -----------
TOTAL ADDITIONS 474,213 1,733,910 691,594 794,816
DEDUCTIONS FROM NET
ASSETS AVAILABLE
FOR BENEFITS:
Payments to participants (304,801) (258,310) (250,178) (121,983)
------------ ------------ ----------- -----------
NET INCREASE (DECREASE)
PRIOR TO TRANFERS 169,412 1,475,600 441,416 672,833
Interfund transfers (10,834,174) (10,550,752) (7,311,065) (6,756,317)
Transfers from other Plan
------------ ------------ ----------- -----------
NET INCREASE (DECREASE) (10,664,762) (9,075,152) (6,869,649) (6,083,484)
NET ASSETS AVAILABLE
FOR BENEFITS:
Beginning of year 10,664,762 9,075,152 6,869,649 6,083,484
------------ ------------ ----------- -----------
End of year $ - $ - $ - $ -
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
<CAPTION>
- -----------------------------------------------------------------------------------------------------
VANGUARD FIDELITY INVESCO FRANKLIN
S&P 500 GROWTH SELECT SMALL CAP
INDEX COMPANY COMPANY INCOME GROWTH
FUND STOCK FUND FUND FUND
<S> <C> <C> <C> <C> <C>
ADDITIONS TO NET ASSETS
AVAILABLE FOR BENEFITS:
Investment income:
Net appreciation
(depreciation) in fair
value of investments $ 1,135,979 $(7,109,885) $ 626,458 $ 16,362 $ 204,382
Interest and dividends 33,825 50,744 23,145 75,834
----------- ----------- ----------- ----------- -----------
Total investment income 1,135,979 (7,076,060) 677,202 39,507 280,216
----------- ----------- ----------- ----------- -----------
Contributions:
Participant 356,706 1,114,679 195,735 66,434 1,128.668
Employer 137,199 398,401 73,872 25,208 311,373
----------- ----------- ----------- ----------- -----------
Total contributions 493,905 1,513,080 269,607 91,642 1,440,041
----------- ----------- ----------- ----------- -----------
TOTAL ADDITIONS 1,629,884 (5,562,980) 946,809 131,149 1,720,257
DEDUCTIONS FROM NET
ASSETS AVAILABLE
FOR BENEFITS:
Payments to participants (117,011) (412,422) (171,082) (44,461) (305,786)
NET INCREASE (DECREASE)
PRIOR TO TRANFERS 1,512,873 (5,975,402) 775,727 86,688 1,414,471
Interfund transfers (9,550,125) 630,949 (5,828,620) (2,241,494) (239,124)
Transfers from other Plan 7,640,177
----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE) (8,037,252) 2,295,724 (5,052,893) (2,154,806) 1,175,347
NET ASSETS AVAILABLE
FOR BENEFITS:
Beginning of year 8,037,252 3,758,233 5,052,893 2,154,806 3,430,665
----------- ----------- ----------- ----------- -----------
End of year $ - $ 6,053,957 $ - $ - $ 4,606,012
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
-8-
<PAGE>
7. BY FUND INFORMATION (CONTINUED) - YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
MASS DODGE & AIM
INVESTORS COX EQUITY TEMPLETON
TRUST INCOME CONSTELLATION FOREIGN
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
ADDITIONS TO NET ASSETS
AVAILABLE FOR BENEFITS:
Investment income:
Net appreciation
(depreciation) in fair
value of investments $ 1,865,081 $ 27 $ 837,021 $(5,567,836)
Interest and dividends 2,170,952 199,840 2,524,357
----------- --------- ---------- -----------
Total investment income 4,036,033 27 1,036,861 (3,043,479)
----------- --------- ---------- -----------
Contributions:
Participant 5,319,627 44,932 1,378,952 3,225,271
Employer 1,706,110 14,395 378,176 1,118,526
----------- --------- ---------- -----------
Total contributions 7,025,737 59,327 1,757,128 4,343,797
----------- --------- ---------- -----------
TOTAL ADDITIONS 11,061,770 59,354 2,793,989 1,300,318
DEDUCTIONS FROM NET
ASSET AVAILABLE
FOR BENEFITS:
Payments to participants (2,243,686) (14,085) (304,941) (1,357,112)
----------- --------- ---------- -----------
NET INCREASE (DECREASE)
PRIOR TO TRANSFERS 8,818,084 45,269 2,489,048 (56,794)
Interfund transfers 14,567,937 (488,494) 2,158,935 (3,380,336)
Transfers from other Plan 22,081,177 24,183,763
----------- --------- ---------- -----------
NET INCREASE (DECREASE) 45,467,198 (443,225) 4,647,983 20,746,633
NET ASSETS AVAILABLE
FOR BENEFITS:
Beginning of year - 443,225 2,451,427 1,357,016
----------- --------- ---------- -----------
End of year $45,467,198 $ - $7,099,410 $22,103,649
----------- --------- ---------- -----------
----------- --------- ---------- -----------
<CAPTION>
- -------------------------------------------------------------------------------------------------------
MERRILL
LYNCH
FIDELITY RETIREMENT MERRILL
OTC IVY PRESERVATION LYNCH S&P
PORTFOLIO BOND TRUST CAPITAL 800 STOCK
FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
ADDITIONS TO NET ASSETS
AVAILABLE FOR BENEFITS:
Investment income:
Net appreciation
(depreciation) in fair
value of investments $ 430,361 $ (560,738) $ (3,606) $(1,278,454) $ 1,102,668
Interest and dividends 519,516 1,013,084 1,403,821 726,122
----------- ---------- ----------- ----------- -----------
Total investment income 430,361 (41,222) 1,009,478 125,367 1,828,790
----------- ---------- ----------- ----------- -----------
Contributions:
Participant 96,869 1,150,670 2,128,022 1,784,653 2,134,336
Employer 34,521 388,034 707,571 873,298 556,868
----------- ---------- ----------- ----------- -----------
Total contributions 131,390 1,538,704 2,835,593 2,657,951 2,691,204
----------- ---------- ----------- ----------- -----------
TOTAL ADDITIONS 561,751 1,497,482 3,845,071 2,783,318 4,519,994
DEDUCTIONS FROM NET
ASSET AVAILABLE
FOR BENEFITS:
Payments to participants (74,854) (498,650) (2,035,632) (2,176,304) (874,204)
----------- ---------- ----------- ----------- -----------
NET INCREASE (DECREASE)
PRIOR TO TRANSFERS 486,897 998,832 1,809,439 607,014 3,645,790
Interfund transfers (2,661,903) 2,251,860 12,980,293 7,363,181 11,639,008
Transfers (to) from other
Plan 5,449,516 6,408,653 16,171,978
----------- ---------- ----------- ----------- -----------
NET INCREASE (DECREASE) (2,175,006) 8,700,208 21,198,385 24,142,173 15,284,798
NET ASSETS AVAILABLE
FOR BENEFITS:
Beginning of year 2,175,006 - - - -
----------- ---------- ----------- ----------- -----------
End of year $ - $8,700,208 $21,198,385 $24,142,173 $15,284,798
----------- ---------- ----------- ----------- -----------
----------- ---------- ----------- ----------- -----------
</TABLE>
-9-
<PAGE>
7. BY FUND INFORMATION (CONTINUED) - YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
TEMPLETON DAVIS
DEVELOPING NEW YORK LOANS
MARKETS VENTURE TO
FUND FUND PARTICIPANTS OTHER TOTAL
<S> <C> <C> <C> <C> <C>
ADDITIONS TO NET ASSETS
AVAILABLE FOR BENEFITS:
Investment income:
Net appreciation
(depreciation) in fair
value of investments $ 10,185 $ 1,644,407 $ (1,157) $ (4,259,119)
Interest and dividends 2,302 704,830 6,039 9,558,045
----------- ----------- ---------- ----------- ------------
Total investment income 12,487 2,349,237 4,882 5,298,926
----------- ----------- ---------- ----------- ------------
Contributions:
Participant 77,907 3,736,923 (966,049) 23,767,071
Employer 12,845 1,166,495 339,144 8,650,573
----------- ----------- ---------- ----------- ------------
Total contributions 90,752 4,903,418 (626,905) 32,417,644
----------- ----------- ---------- ----------- ------------
TOTAL ADDITIONS 103,239 7,252,655 (622,023) 37,716,570
DEDUCTIONS FROM NET
ASSET AVAILABLE
FOR BENEFITS:
Payments to participants (423) (1,483,112) (1,217,869) (14,266,906)
----------- ----------- ---------- ----------- ------------
NET INCREASE (DECREASE)
PRIOR TO TRANSFERS 102,816 5,769,543 (1,839,892) 23,449,664
Interfund transfers 81,637 7,312,458 $ 605,571 250,575
Transfers from other Plan 13,752,864 4,066,114 1,633,055 101,387,297
----------- ----------- ---------- ----------- ------------
NET INCREASE (DECREASE) 184,453 26,834,865 4,671,685 43,738 124,836,961
NET ASSETS AVAILABLE
FOR BENEFITS:
Beginning of year - - 2,046,488 680,977 64,281,035
----------- ----------- ---------- ----------- ------------
End of year $ 184,453 $26,834,865 $6,718,173 $ 724,715 $189,117,996
----------- ----------- ---------- ----------- ------------
----------- ----------- ---------- ----------- ------------
</TABLE>
-10-
<PAGE>
7. BY FUND INFORMATION (CONTINUED) - YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
DODGE & INVESCO
STABLE FIDELITY COX INDUSTRIAL
VALUE MAGELLAN BALANCED INCOME
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
ADDITIONS TO NET ASSETS
AVAILABLE FOR BENEFITS:
Investment income:
Net appreciation
(depreciation) in fair
value of investments $1,868,013 $1,150,497 $1,331,381
Interest and dividends $ 633,333
----------- ---------- ---------- ----------
Total investment income 633,333 1,868,013 1,150,497 1,331,381
----------- ---------- ---------- ----------
Contributions:
Participant 1,228,470 1,318,396 882,072 614,548
Employer 291,257 311,619 203,128 131,657
----------- ---------- ---------- ----------
Total contributions 1,519,727 1,630,015 1,085,200 746,205
----------- ---------- ---------- ----------
TOTAL ADDITIONS 2,153,060 3,498,028 2,235,697 2,077,586
DEDUCTIONS FROM NET
ASSETS AVAILABLE
FOR BENEFITS:
Payments to participants (1,296,165) (766,397) (687,850) (626,761)
----------- ---------- ---------- ----------
NET INCREASE (DECREASE)
PRIOR TO INTERFUND
TRANFERS 856,895 2,731,631 1,547,847 1,450,825
Interfund transfers (483,964) (585,106) 28,386 (560,627)
----------- ---------- ---------- ----------
NET INCREASE (DECREASE) 372,931 2,146,525 1,576,233 890,198
NET ASSETS AVAILABLE
FOR BENEFITS:
Beginning of year 10,291,831 6,928,627 5,293,416 5,193,286
----------- ---------- ---------- ----------
End of year $10,664,762 $9,075,152 $6,869,649 $6,083,484
----------- ---------- ---------- ----------
----------- ---------- ---------- ----------
<CAPTION>
- ----------------------------------------------------------------------------------------------------
VANGUARD FIDELITY INVESCO FRANKLIN
S&P 500 GROWTH SELECT SMALL CAP
INDEX COMPANY COMPANY INCOME GROWTH
FUND STOCK FUND FUND FUND
<S> <C> <C> <C> <C> <C>
ADDITIONS TO NET ASSETS
AVAILABLE FOR BENEFITS:
Investment income:
Net appreciation
(depreciation) in fair
value of investments $1,581,618 $ (414,636) $ 738,786 $ 230,779 $ 335,491
Interest and dividends
---------- ---------- ---------- ---------- ----------
Total investment income 1,581,618 (414,636) 738,786 230,779 335,491
---------- ---------- ---------- ---------- ----------
Contributions:
Participant 1,420,085 960,990 280,551 700,843
Employer 280,160 208,113 61,655 136,695
---------- ---------- ---------- ---------- ----------
Total contributions 1,700,245 1,169,103 342,206 837,538
---------- ---------- ---------- ---------- ----------
TOTAL ADDITIONS 3,281,863 (414,636) 1,907,889 572,985 1,173,029
DEDUCTIONS FROM NET
ASSETS AVAILABLE
FOR BENEFITS:
Payments to participants (1,032,063) (231,328) (506,505) (339,016) (210,783)
---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE)
PRIOR TO INTERFUND
TRANFERS 2,249,800 (645,964) 1,401,384 233,969 962,246
Interfund transfers 1,248,026 283,000 (242,617) (320,220) 519,242
---------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) 3,497,826 (362,964) 1,158,767 (86,251) 1,481,488
NET ASSETS AVAILABLE
FOR BENEFITS:
Beginning of year 4,539,426 4,121,197 3,894,126 2,241,057 1,949,177
---------- ---------- ---------- ---------- ----------
End of year $8,037,252 $3,758,233 $5,052,893 $2,154,806 $3,430,665
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
-11-
<PAGE>
7. BY FUND INFORMATION (CONTINUED) - YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
DODGE & AIM FIDELITY
COX EQUITY TEMPLETON OTC LOANS
INCOME CONSTELLATION FOREIGN PORTFOLIO TO
FUND FUND FUND FUND PARTICIPANTS OTHER TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
ADDITIONS TO NET ASSETS
AVAILABLE FOR BENEFITS:
Investment income:
Net appreciation
(depreciation) in fair
value of investments $ 33,364 $ 194,405 $ 39,051 $ 168,970 $ 8,437 $ 7,266,156
Interest and dividends 633,333
-------- ---------- ---------- ---------- ---------- --------- -----------
Total investment income 33,364 194,405 39,051 168,970 8,437 7,899,489
-------- ---------- ---------- ---------- ---------- --------- -----------
Contributions:
Participant 183,942 697,129 466,849 470,222 251,932 9,476,029
Employer 31,139 133,755 79,719 101,126 (79,049) 1,890,974
-------- ---------- ---------- ---------- ---------- --------- -----------
Total contributions 215,081 830,884 546,568 571,348 172,883 11,367,003
-------- ---------- ---------- ---------- ---------- --------- -----------
TOTAL ADDITIONS 248,445 1,025,289 585,619 740,318 181,320 19,266,492
DEDUCTIONS FROM NET
ASSETS AVAILABLE
FOR BENEFITS:
Payments to participants (54,351) (270,292) (116,962) (283,310) (238,219) (6,660,002)
-------- ---------- ---------- ---------- ---------- --------- -----------
NET INCREASE (DECREASE)
PRIOR TO INTERFUND
TRANFERS 194,094 754,997 468,657 457,008 (56,899) 12,606,490
Interfund transfers 23,024 92,833 173,418 (212,467) $ 37,396 (324)
-------- ---------- ---------- ---------- ---------- --------- -----------
NET INCREASE (DECREASE) 217,118 847,830 642,075 244,541 37,396 (57,223) 12,606,490
NET ASSETS AVAILABLE
FOR BENEFITS:
Beginning of year 226,107 1,603,597 714,941 1,930,465 2,009,092 738,200 51,674,545
-------- ---------- ---------- ---------- ---------- --------- -----------
End of year $443,225 $2,451,427 $1,357,016 $2,175,006 $2,046,488 $ 680,977 $64,281,035
-------- ---------- ---------- ---------- ---------- --------- -----------
-------- ---------- ---------- ---------- ---------- --------- -----------
</TABLE>
-12-
<PAGE>
SUPPLEMENTAL SCHEDULES
-13-
<PAGE>
FOUNDATION HEALTH SYSTEMS, INC.
401(K) ASSOCIATE SAVINGS PLAN
ITEM 27a - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
CURRENT
DESCRIPTION OF INVESTMENTS COST VALUE
<S> <C> <C>
Merrill Lynch Funds:
Mass Investors Trust Fund $43,436,856 $45,467,198
Davis New York Venture Fund 25,103,056 26,834,865
Merrill Lynch Capital Fund 25,154,919 24,142,173
Merrill Lynch Retirement Preservation Trust Fund 21,198,385 21,198,385
S&P 500 Stock Fund 14,193,672 15,284,798
Ivy Bond Fund 9,198,321 8,700,208
Franklin Small CAP Growth Fund 4,691,653 4,606,012
AIM Equity Constellation Fund 6,548,373 7,099,410
Templeton Foreign Fund 26,716,742 22,103,649
Templeton Developing Markets Fund 174,757 184,453
Company stock 12,891,254 6,053,957
Other 460,434 460,434
Loans to participants (loans to participants are secured by
participant's account, have terms of up to five years, and
bear interest at varying rates) $ 6,718,173 $ 6,718,173
</TABLE>
-14-
<PAGE>
FOUNDATION HEALTH SYSTEMS, INC.
401(K) ASSOCIATE SAVINGS PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1998
- -----------------------------------------------------------------------------
SERIES OF TRANSACTIONS EXCEEDING 5% OF BEGINNING NET ASSETS
<TABLE>
<CAPTION>
COST
PURCHASE SELLING OF NET
PRICE PRICE ASSET GAIN/(LOSS)
<S> <C> <C> <C> <C>
Company Stock $14,461,724
Merrill Lynch Retirement Preservation
Trust Fund 24,545,978 $3,347,593 $3,347,593
Franklin Small CAP Growth Fund 5,482,333
S&P 500 Stock Fund 15,632,248
Ivy Bond Fund 10,385,395
Templeton Foreign Fund 32,335,470 4,497,261 5,618,729 $(1,121,468)
Mass Investors Trust Fund 48,341,884 4,747,028 4,905,028 (158,000)
Merrill Lynch Capital Fund 28,308,350
Davis New York Venture Fund 28,336,552 3,150,088 3,233,496 (83,408)
Stable Value Fund 10,834,174
Fidelity Magellan Fund 10,550,752
Dodge & Cox Balanced Fund 7,311,065
INVESCO Industrial Income Fund 6,756,317
Vanguard S&P 500 Index Fund 9,550,125
Fidelity Growth Company Fund 5,828,620
</TABLE>
-15-
<PAGE>
SIGNATURES
THE PLAN. Pursuant to the requirements of the Securities and Exchange Act
of 1934, the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
FOUNDATION HEALTH SYSTEMS INC.
401(k) ASSOCIATE SAVINGS PLAN
7/14/99 /s/ Steven P. Erwin
-------------------- ---------------------------
Date Steven P. Erwin
Executive Vice President and
Chief Financial Officer of
Foundation Health Systems, Inc. and
Member of the Plan's Administrative
Committee
-16-
