11-K 1 a11-k.txt FORM 11-K ================================================================================ 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) ================================================================================ STARTEC GLOBAL COMMUNICATIONS CORPORATION STARTEC EMPLOYEE 401(k) PLAN FORM 11-K AS OF DECEMBER 31, 1999 TABLE OF CONTENTS
PART I. FINANCIAL STATEMENTS 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
2 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 STARTEC EMPLOYEE 401(k) PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
ASSETS: DECEMBER 31, ---------------------------------------- 1999 1998 ------------------ ------------------ 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 ================== ==================
The accompanying notes are an integral part of these statements. 4 STARTEC EMPLOYEE 401(k) PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 1999 ---------------------- 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 ======================
The accompanying notes are an integral part of this statement. 5 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 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 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:
1999 1998 -------------------------------------- INVESTMENTS AT QUOTED MARKET VALUES: 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 ================= ===============
* 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: Mutual funds $ 312,256 Common stock 48,024 ---------------- $ 360,280 ================
8 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:
DECEMBER 31, -------------------------------------- 1999 1998 ----------------- ---------------- Net Assets: Common stock $ 69,987 $ 5,281 Money market 2,195 - ----------------- ---------------- $ 72,182 $ 5,281
YEAR ENDED DECEMBER 31, 1999 ------------------- 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 ===================
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 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 SCHEDULE I STARTEC EMPLOYEE 401(k) PLAN SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AS OF DECEMBER 31, 1999
Identity of Issue, Borrower, Lessor, or Similar Party Description of Investment Cost Market Value ---------------------------------------- ---------------------------------- ------------------ ------------------ PARTICIPANT-DIRECTED: 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 ==================
* 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 SCHEDULE II STARTEC EMPLOYEE 401(k) PLAN SCHEDULE OF REPORTABLE TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 1999
EXPENSE INCURRED PURCHASE SELLING WITH IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET PRICE PRICE TRANSACTION -------------------------- -------------------- ----- ----- ----------- 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 --
MARKET VALUE OF ASSET ON NET GAIN OR TRANSACTION (LOSS) ON EACH IDENTITY OF PARTY INVOLVED COST OF ASSET DATE TRANSACTION -------------------------- ------------- ------------ -------------- 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
*These accounts include both participant and nonparticipant-directed funds. The accompanying notes are an integral part of this schedule. 12 SCHEDULE III STARTEC EMPLOYEE 401(k) PLAN SCHEDULE OF NONEXEMPT TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 1999
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 ----------------------------------------------------------------------------------------------------------------------------------- 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 ============ ============
The accompanying notes are an integral part of this schedule. 13 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