SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
--------------------------------
(Mark One)
(X) Annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934 [NO FEE REQUIRED].
For the fiscal year ended December 31, 1998
or
( ) Transition report pursuant to Section 15(d) of the Securities
exchange Act of 1934 [NO FEE REQUIRED].
For the transition period from _________________ to ___________________
Commission File No. 000-21193
A. Full title and address of the plan, if different from that of the
issuer named below:
SUNTERRA CORPORATION PROFIT SHARING AND SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
SUNTERRA CORPORATION
1781 PARK CENTER DRIVE
ORLANDO, FLORIDA 32835
(407) 532-1281
<PAGE>
TABLE OF CONTENTS
PAGE
----
FINANCIALS
Item 1. Report of Independent Certified
Public Accountants......................... 1
Item 2. Statements of Net Assets Available for
Benefits................................... 2
Item 3. Statement of Changes in Net Assets Available
for Benefits, with Fund Information........ 3
Item 4. Notes to Financial Statements................ 5
SCHEDULES
Schedule I. Assets Held for Investment................... 10
Schedule II. Reportable Transactions..................... 11
Schedule III. Non-Exempt Transactions.................... 12
Signatures............................................... 13
EXHIBITS
Exhibit Index............................................ 14
<PAGE>
REQUIRED INFORMATION
The following financial statements and schedules, copies of which are included
herewith, have been prepared in accordance with the financial reporting
requirements of the Employee Retirement Income Security Act of 1974, as amended:
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Trustees of the Sunterra Corporation
Profit Sharing and Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of the Sunterra Corporation (formerly Signature Resorts, Inc.) Profit Sharing
and Savings Plan as of December 31, 1998 and 1997, and the related statement of
changes in net assets available for benefits for the year ended December 31,
1998. These financial statements and the supplemental schedules referred to
below are the responsibility of the Plan's management. Our responsibility is to
express an opinion on these financial statements and supplemental schedules
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 benefits of the Plan as of
December 31, 1998 and 1997, and the changes in its net assets available for
benefits for the year ended December 31, 1998, 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, reportable transactions and non-exempt 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. The Fund Information in the
statement of changes in net assets available for benefits is presented for
purposes of additional analysis rather than to present the changes in net assets
available for benefits of each fund. The supplemental schedules and 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.
/s/ ARTHUR ANDERSEN LLP
Orlando, Florida,
June 30, 1999
1
<PAGE>
SUNTERRA CORPORATION PROFIT SHARING AND SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
INVESTMENTS (Notes 2 and 3):
At fair value-
AIM Constellation Fund $ 421,528 $ 208,306
The American Funds Group SMALLCAP World Fund 190,294 83,891
The American Funds Group New Perspective Fund 167,664 56,794
AIM Weingarten Fund 308,256 123,268
Merrill Lynch Basic Value Fund 162,202 68,337
Merrill Lynch Global Allocation Fund 113,639 44,093
AIM Charter Fund 185,487 58,193
AIM Intermediate Government Fund 38,867 14,955
Merrill Lynch Ready Assets Trust 209,951 102,709
Sunterra Common Stock 268,046 112,526
Index funds 85,651 --
CMA Money Fund 59,600 12,488
Participant loans 15,919 8,475
---------- ----------
Total investments 2,227,104 894,035
CASH 401 --
EMPLOYER CONTRIBUTIONS RECEIVABLE 8,907 --
PARTICIPANTS' CONTRIBUTIONS RECEIVABLE 142,385 21,126
---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS $2,378,797 $ 915,161
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
SUNTERRA CORPORATION PROFIT SHARING AND SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR
BENEFITS, WITH FUND INFORMATION,
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
THE THE
AMERICAN AMERICAN
FUNDS FUNDS
AIM GROUP GROUP NEW AIM
CONSTELLATION SMALLCAP PERSPECTIVE WEINGARTEN
FUND WORLD FUND FUND FUND
------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
ADDITIONS:
Interest and dividends $ 10,138 $ 10,087 $ 11,548 $ 17,536
Net realized and unrealized appreciation
(depreciation) in fair value of investments 48,545 (9,093) 14,495 45,364
Participants' contributions 255,110 136,325 99,324 170,419
Employer contributions -- -- -- --
---------- ---------- ---------- ----------
Total additions 313,793 137,319 125,367 233,319
DEDUCTIONS:
Benefits paid to participants 92,591 22,735 13,138 46,548
NET ASSETS TRANSFERRED BETWEEN
INVESTMENT FUNDS (7,980) (8,181) (1,359) (1,783)
---------- ---------- ---------- ----------
NET INCREASE 213,222 106,403 110,870 184,988
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year 208,306 83,891 56,794 123,268
---------- ---------- ---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ 421,528 $ 190,294 $ 167,664 $ 308,256
========== ========== ========== ==========
MERRILL MERRILL
LYNCH LYNCH AIM
BASIC GLOBAL AIM INTERMEDIATE
VALUE ALLOCATION CHARTER GOVERNMENT
FUND FUND FUND FUND
---------- ---------- ---------- ----------
ADDITIONS:
Interest and dividends $ 9,784 $ 10,891 $ 7,060 $ 1,603
Net realized and unrealized appreciation
(depreciation) in fair value of investments (54) (10,609) 21,724 623
Participants' contributions 112,349 83,648 116,264 32,194
Employer contributions -- -- -- --
---------- ---------- ---------- ----------
Total additions 122,079 83,930 145,048 34,420
DEDUCTIONS:
Benefits paid to participants 29,845 17,027 26,368 8,080
NET ASSETS TRANSFERRED BETWEEN
INVESTMENT FUNDS 1,631 2,643 8,614 (2,428)
---------- ---------- ---------- ----------
NET INCREASE 93,865 69,546 127,294 23,912
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year 68,337 44,093 58,193 14,955
---------- ---------- ---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ 162,202 $ 113,639 $ 185,487 $ 38,867
========== ========== ========== ==========
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
MERRILL
LYNCH
READY SUNTERRA
ASSETS COMMON INDEX PARTICIPANT
TRUST STOCK FUNDS LOANS
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
ADDITIONS:
Interest and dividends $ 7,108 $ 568 $ 4,336 $ 148
Net realized and unrealized appreciation
(depreciation) in fair value of investments -- 3,881 6,926 --
Participants' contributions 147,135 145,130 65,239 --
Employer contributions -- -- -- --
---------- ---------- ---------- ----------
Total additions 154,243 149,579 76,501 148
DEDUCTIONS:
Benefits paid to participants 13,024 20,245 188 --
NET ASSETS TRANSFERRED BETWEEN
INVESTMENT FUNDS (33,977) 26,186 9,338 7,296
---------- ---------- ---------- ----------
NET INCREASE 107,242 155,520 85,651 7,444
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year 102,709 112,526 -- 8,475
---------- ---------- ---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ 209,951 $ 268,046 $ 85,651 $ 15,919
========== ========== ========== ==========
OTHER TOTAL
---------- ----------
ADDITIONS:
Interest and dividends $ -- $ 90,807
Net realized and unrealized appreciation
(depreciation) in fair value of investments -- 121,802
Participants' contributions 168,772 1,531,909
Employer contributions 8,907 8,907
---------- ----------
Total additions 177,679 1,753,425
DEDUCTIONS:
Benefits paid to participants -- 289,789
NET ASSETS TRANSFERRED BETWEEN
INVESTMENT FUNDS -- --
---------- ----------
NET INCREASE 177,679 1,463,636
NET ASSETS AVAILABLE FOR BENEFITS,
beginning of year 33,614 915,161
---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS,
end of year $ 211,293 $2,378,797
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE>
SUNTERRA CORPORATION PROFIT SHARING AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
1. PLAN DESCRIPTION:
GENERAL
The Sunterra Corporation (formerly Signature Resorts, Inc.) Profit Sharing and
Savings Plan (the "Plan"), established effective January 1, 1996, is a defined
contribution plan under which substantially all employees who are at least 18 or
21 years of age, depending on the age of maturity of the state of the
participant's residence, are eligible to participate. The Plan is intended to
assist Sunterra Corporation and its subsidiaries (the "Employer") in its efforts
to attract and retain competent employees by enabling eligible employees to
share in the profits of the Employer and to supplement retirement income. The
Plan is subject to the provisions of the Employee Retirement Income Security Act
of 1974 (ERISA). Effective January 1, 1998, the name of the Plan was changed to
the Sunterra Corporation Profit Sharing and Savings Plan.
DISTRIBUTIONS AND BENEFITS PAID
Benefits under the Plan are payable upon normal retirement (age 62, not to
exceed age 65) or early retirement (after age 59-1/2 with at least two completed
years of service), death, disability, severe financial hardship or termination
of the Plan, and are based on the balance in the participant's account. Benefits
are recorded when paid. Distributions of vested account balances will be made in
lump sums of cash or property.
ADMINISTRATION
Information about the plan agreement, such as provisions for allocations to
participant's accounts, vesting, benefits and withdrawals, is contained in the
SUMMARY PLAN DESCRIPTION. California Pension Administrators and Consultants,
Inc. is the recordkeeper of the Plan, and Merrill Lynch (the "Custodian") is the
asset custodian for the Plan.
ADMINISTRATIVE EXPENSES
Substantially all administrative expenses are paid by the Employer. During the
years ended December 31, 1998 and 1997, the Employer paid approximately $52,000
and $31,600, respectively, for recordkeeping fees.
5
<PAGE>
CONTRIBUTIONS
Participants may elect to defer, subject to certain limitations, an amount not
to exceed 15 percent of compensation as contributions to the Plan (Deferrals).
The contribution percentage was increased from 9 percent to 15 percent effective
January 1, 1998. Participants may also make "Rollover Contributions" to the Plan
(of amounts representing distributions from other tax-qualified retirement
plans). Participants may change the amount of their Deferrals twice a year, on
January 1 and July 1, and may suspend their Deferrals at any time. Participants
can recommence their Deferrals only on the next January 1 or July 1.
The Employer may make discretionary and/or matching contributions to the Plan
equal to a discretionary percentage, to be determined by the Employer, of the
participant's salary reductions.
VESTING
Participants are immediately vested in their voluntary contributions plus actual
earnings thereon. Vesting in the employer matching contributions, including
profit sharing contributions, is based on years of credited service and is
subject to the following vesting schedule:
YEARS OF SERVICE PERCENTAGE
---------------- ----------
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
Notwithstanding the above schedule, participants become fully vested if, while
employed by the Employer, the participant becomes disabled, dies or reaches age
59.
Forfeitures of nonvested accounts are retained in the Plan and are used first,
to restore the accounts of former participants and second, to allocate to the
employer contribution accounts of other participants. For the years ended
December 31, 1998 and 1997, there were no forfeited nonvested accounts.
6
<PAGE>
PLAN TERMINATION
Although it has not expressed any intent to do so, the Employer may amend or
terminate the Plan at any time. Upon termination, all individuals who are
employed by the Employer on that date will become fully vested in their
accounts.
2. USE OF ESTIMATES AND SIGNIFICANT ACCOUNTING POLICIES:
USE OF 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 disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of additions to and deductions from the net assets
available for benefits during the reporting period. Actual results could differ
from those estimates.
BASIS OF ACCOUNTING
The accompanying financial statements of the Plan are presented on the accrual
basis of accounting in accordance with generally accepted accounting principles.
INVESTMENT VALUATION AND INCOME RECOGNITION
Securities owned are reflected in the accounts of the Plan at fair value, which
is based on quoted market prices. Changes in fair value of securities owned are
included in net appreciation (depreciation) in the accompanying statement of
changes in net assets available for benefits.
7
<PAGE>
3. INVESTMENT PROGRAMS:
INVESTMENTS
As of December 31, 1998 and 1997, contributions to the Plan are invested in one
or more of 10 separate investment funds at the direction of each participant.
The funds are (1) AIM Constellation Fund, (2) The American Funds Group SMALLCAP
World Fund, (3) The American Funds Group New Perspective Fund, (4) AIM
Weingarten Fund, (5) Merrill Lynch Basic Value Fund, (6) Merrill Lynch Global
Allocation Fund, (7) AIM Charter Fund, (8) AIM Intermediate Government Fund, (9)
Merrill Lynch Ready Assets Trust and (10) Sunterra Common Stock. The CMA Money
Fund is an interest-bearing holding account for participants' payroll
withholdings prior to the funds being invested in the participants' accounts. In
1998, the Merrill Lynch S&P 500 Index Fund and Merrill Lynch Small Cap Index
Fund were added to the investment options available to participants.
In the accompanying statements of net assets available for benefits as of
December 31, 1998 and 1997, and statement of changes in net assets available for
benefits for the year ended December 31, 1998, the Merrill Lynch S&P 500 Index
Fund and the Merrill Lynch Small Cap Index Fund are aggregated into the Index
Funds. The remaining options are shown individually in the accompanying
statements of net assets available for benefits and changes in net assets
available for benefits.
INVESTMENT INCOME AND EXPENSES
Each participant's account shall be allocated the investment income and expenses
of each fund based on the value of each participant's account invested in each
fund, in proportion to the total value of all accounts in each fund, taking into
account any contributions to or distributions from the participant's account.
General expenses, if any, of the Plan not attributable to any particular fund
shall be allocated among participant's accounts in proportion to the value of
each account, taking into consideration the participant's contributions and
distributions.
PARTICIPANT LOANS
A participant may, with the approval of the Employer, borrow from his or her
own account, a minimum of $1,000, up to a maximum equal to the lesser of (a)
$50,000 or (b) 50 percent of the participant's vested account balance. The
maximum repayment period of the loan is five years, unless the loan proceeds are
used to purchase the participant's principal residence. Loans are to be repaid
through payroll withholdings. The rate of interest to be charged on the loan
will be 10 percent compounded annually, which will be fixed for the term of the
loan.
4. PARTY-IN-INTEREST TRANSACTIONS:
The Plan's Merrill Lynch investments are managed by the Plan's Custodian, a
party-in-interest.
8
<PAGE>
5. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500:
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Net assets available for benefits per the
financial statements $2,378,797 $ 915,161
Benefits payable (15,856) --
Other -- 124,028
---------- ----------
Net assets available for benefits
per the Form 5500 $2,362,941 $1,039,189
========== ==========
</TABLE>
The following is a reconciliation of benefits paid to participants for the year
ended December 31, 1998, per the financial statements to the Form 5500:
<TABLE>
<CAPTION>
Amount
--------
<S> <C>
Benefits paid to participants for financial reporting purposes $289,789
Add- Benefits payable at December 31, 1998 15,856
--------
Benefits paid to participants per the Form 5500 $305,645
========
</TABLE>
Amounts allocated to withdrawing participants are recorded on the Form 5500 for
benefit claims that have been processed and approved for payment prior to
December 31, but not yet paid as of that date.
6. FEDERAL INCOME TAX STATUS:
The Plan obtained its latest determination letter on May 18, 1998, in which the
Internal Revenue Service stated that the Plan was in compliance with the
applicable sections of the Internal Revenue Code (IRC). The Plan has been
amended since receiving the determination letter. However, the Plan's management
believes that the Plan is designed and is currently being operated in compliance
with the applicable requirements of the IRC.
7. SUPPLEMENTAL SCHEDULES:
The following supplemental schedules of assets held for investment, reportable
transactions and non-exempt transactions are included as required schedules
under ERISA.
9
<PAGE>
SCHEDULE I
SUNTERRA CORPORATION PROFIT SHARING AND SAVINGS PLAN
SCHEDULE OF ASSETS HELD FOR INVESTMENT
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
IDENTITY AND DESCRIPTION OF ISSUES COST FAIR VALUE
- --------------------------------------------------------- -------- -----------
<S> <C> <C>
AIM Constellation Fund $391,345 $ 421,528
The American Funds Group SMALLCAP World Fund 202,811 190,294
The American Funds Group New Perspective Fund 158,791 167,664
AIM Weingarten Fund 282,076 308,256
Merrill Lynch Basic Value Fund* 165,058 162,202
Merrill Lynch Global Allocation Fund* 127,065 113,639
AIM Charter Fund 168,352 185,487
AIM Intermediate Government Fund 38,070 38,867
Merrill Lynch Ready Assets Trust* 209,951 209,951
Sunterra Common Stock 262,667 268,046
CMA Money Fund 59,600 59,600
Participant loans (bearing interest at 10 percent) 15,919 15,919
Merrill Lynch S&P 500 Index Fund* 67,061 73,779
Merrill Lynch Small Cap Index Fund* 11,585 11,872
-----------
$ 2,227,104
===========
</TABLE>
*Managed by the Custodian, a party-in-interest (Note 4).
The preceding notes are an integral part of this schedule.
10
<PAGE>
SCHEDULE II
SUNTERRA CORPORATION PROFIT SHARING AND SAVINGS PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
REALIZED
PURCHASE SELLING COST OF (LOSS)
DESCRIPTION OF ASSETS PRICE PRICE ASSETS GAIN
- ------------------------------------------------------------ -------- ---------- -------- --------
<S> <C> <C> <C> <C>
AIM Constellation Fund $285,120 $ -- $285,120 $ --
The American Funds Group SMALLCAP
World Fund 153,542 -- 153,542 --
The American Funds Group New
Perspective Fund 118,011 -- 118,011 --
AIM Weingarten Fund 209,060 -- 209,060 --
Merrill Lynch Basic Value Fund* 133,290 -- 133,290 --
Merrill Lynch Global Allocation Fund* 100,501 -- 100,501 --
AIM Charter Fund 139,064 -- 139,064 --
Merrill Lynch Ready Assets Trust* 144,749 -- 144,749 --
Sunterra Common Stock 191,612 -- 191,612 --
Merrill Lynch S&P 500 Index Fund* 67,186 -- 67,186 --
AIM Constellation Fund -- 120,443 124,148 (3,705)
The American Funds Group SMALLCAP
World Fund -- 38,046 41,613 (3,567)
The American Funds Group New
Perspective Fund -- 21,636 19,906 1,730
AIM Weingarten Fund -- 69,436 63,852 5,584
Merrill Lynch Basic Value Fund* -- 39,371 37,711 1,660
Merrill Lynch Global Allocation Fund* -- 20,346 22,172 (1,826)
AIM Charter Fund -- 33,494 33,997 (503)
Merrill Lynch Ready Assets Trust* -- 37,507 37,507 --
Sunterra Common Stock -- 39,973 54,591 (14,618)
Merrill Lynch S&P 500 Index Fund* -- 90 125 (35)
</TABLE>
* Managed by the Custodian, a party-in-interest (Note 4).
The preceding notes are an integral part of this schedule.
11
<PAGE>
SCHEDULE III
SUNTERRA CORPORATION PROFIT SHARING AND SAVINGS PLAN
SCHEDULE OF NON-EXEMPT TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
RELATIONSHIP TO PLAN,
EMPLOYER OR OTHER TRANSACTION INTEREST
IDENTITY OF PARTY INVOLVED PARTY-IN-INTEREST DESCRIPTION OF TRANSACTION AMOUNT INCURRED
- -------------------------- ----------------- -------------------------- ------ --------
<S> <C> <C> <C> <C>
Sunterra Corporation Employer/Sponsor Certain employee
contributions for the year
ended December 31, 1998,
were not remitted to the
Plan in a timely manner. $80,613 $869
</TABLE>
The preceding notes are an integral part of this schedule.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities 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.
SUNTERRA CORPORATION PROFIT SHARING
AND SAVINGS PLAN
Date: July 14, 1999 By: /s/ CHARLES C. FREY
-------------------------------------
Charles C. Frey, Trustee
13
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. PAGE NO.
- ----------- --------
23 Consent of Arthur Andersen LLP 16
14
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report included in this Form 11-K, into Sunterra
Corporation's (formerly Signature Resorts, Inc.) previously filed Registration
Statement File No. 333-47215.
/s/ ARTHUR ANDERSEN LLP
July 12, 1999
Orlando, Florida
