SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-----------------------
FORM 10-KSB
[X] Annual Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended June 30, 2000.
[ ] Transition Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______ to ______
Commission file number 1-10324
THE INTERGROUP CORPORATION
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(Name of Small Business Issuer in its Charter)
Delaware 13-3293645
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
820 Moraga Drive, Los Angeles, California 90049-1632
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(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number: (310) 889-2500
Securities registered under Section 12(b) of the Exchange Act:
Common Stock-$.01 Par Value Pacific Exchange, Inc.
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Title of Each Class Name of Each Exchange On Which Registered
Securities registered under Section 12(g) of the Exchange Act:
Common Stock - Par Value $.01 Per Share
---------------------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [X] No
[ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [X]
The issuer's revenues for its most recent fiscal year were $36,538,000.
<PAGE> 1 of 42
The aggregate market value of the common equity held by non-affiliates of
issuer, computed by reference to the price the common equity was sold on
September 15, 2000 was $15,656,000.
The number of shares outstanding of the issuer's Common Stock, $.01 par
value, as of September 15, 2000 was 1,932,987.
DOCUMENTS INCORPORATED BY REFERENCE: None
Transitional Small Business Disclosure Format (check one): Yes No [X]
TABLE OF CONTENTS
PART I PAGE
Item 1. Description of Business 3
Item 2. Description of Properties 4
55
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 10
PART II
Item 5. Market For Common Equity and Related Stockholder Matters 10
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 7. Financial Statements 14
Item 8. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure 29
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance With Section 16(a) of the Exchange Act 30
Item 10. Executive Compensation 32
Item 11. Security Ownership of Certain Beneficial Owners
and Management 36
Item 12. Certain Relationships and Related Transactions 38
Item 13. Exhibits and Reports on Form 8-K 39
SIGNATURES 41
<PAGE> 2 of 42
PART I
Item 1. Description of Business.
BUSINESS DEVELOPMENT
The InterGroup Corporation ("InterGroup" or the "Company") is a Delaware
corporation formed in 1985, as the successor to Mutual Real Estate Investment
Trust ("M-REIT"), a New York real estate investment trust created in 1965.
The Company has been a publicly-held company since M-REIT's first public
offering of shares in 1966 and has been a reporting company pursuant to
Section 12(g) of the Securities Exchange Act of 1934 since that time.
The Company was organized to buy, develop, operate, rehabilitate and dispose
of real property of various types and descriptions, and to engage in such
other business and investment activities as would benefit the Company and its
shareholders. The Company was founded upon, and remains committed to, social
responsibility. Such social responsibility was originally defined as
providing decent and affordable housing to people without regard to race. In
1985, after examining the impact of federal, state and local equal housing
laws, the Company determined to broaden its definition of social
responsibility. The Company changed its form from a REIT to a corporation so
that it could pursue a variety of investments beyond real estate and broaden
its social impact to engage in any opportunity which would offer the potential
to increase shareholder value within the Company's underlying commitment to
social responsibility, which it redefined to encompass investments in any area
which can have a socially redeeming value and promote the establishment of a
fair, equal and better society.
During the past three years the Company's principal sources of revenue have
been, and continue to be, derived from the operations of its multi-family
residential properties, from the sales and disposition of its real property
assets and from the investment of its cash and securities assets.
The Company has the power to vote 54.3% of the voting shares of Santa Fe
Financial Corporation ("Santa Fe"), a public company (Nasdaq SmallCap: SFEF).
Santa Fe's revenue is primarily generated through its 68.8% interest in
Portsmouth Square, Inc. ("PSI"), which derives its revenue primarily through
its 49.8% interest in Justice Investors ("Justice"), a California limited
partnership. Justice owns the land, improvements and leaseholds known as the
Holiday Inn Financial District/Chinatown, a 566-room hotel in San Francisco,
California.
BUSINESS OF ISSUER
The Company's principal business is the ownership and management of
multifamily residential properties. Those properties include twelve apartment
complexes located throughout the United States. The Company also has
investments in unimproved real property that is held for sale or development.
The Company acquires its investments in real estate and other investments
utilizing cash, securities or debt, subject to approval or guidelines of the
Board of Directors. See Item 2 for a description of the Company's current
investments in and investment policies concerning real property.
A portion of the Company's assets are invested under the direction of Mr. John
V. Winfield ("Mr. Winfield"), the Company's Chairman and President, in
securities and partnerships. The Company considers investing in equity and
debt securities of companies which are either publicly or privately held if
such an investment will offer growth or profit potential and not conflict with
<PAGE> 3 of 42
management's perception of social responsibility. The Company's general
investment strategy regarding marketable securities is to identify both
national and international companies which management considers to be
currently out of favor or undervalued because of being misunderstood by the
general investing community and/or companies that potentially could go through
restructuring or reorganization. The Company will also invest in start up
entities, especially those involved in technologies where potential for growth
is perceived. Although the majority of the Company's marketable securities
investments are listed on either the New York or American Stock Exchanges, the
overall investment portfolio and the Company's investment strategies could be
viewed as highly risky and the market values of the portfolio may be subject
to large fluctuations.
The Company may realize gains and losses in its overall investment portfolio
from time to time to take advantage of market conditions and/or manage the
portfolio's resources and the Company's tax liability. The Company may also
assume short positions in marketable securities. Short sales are used by the
Company to potentially offset normal market risks undertaken in the course of
its investing activities or to provide additional return opportunities. In
addition, the Company utilizes margin for its marketable securities purchases
through the use of standard margin agreements with national brokerage firms.
The use of available leverage is guided by the business judgment of
management.
The Company also has a controlling interest in Santa Fe, which derives its
revenue primarily through an indirect interest in a 566-room Holiday Inn in
San Francisco, California. In addition, Santa Fe's operations include a
marketable securities portfolio and an interest in an apartment complex.
For further information see Item 6 Management's Discussion and Analysis of
Financial Condition and Results of Operations and Notes to Consolidated
Financial Statements.
COMPETITION
All of the properties owned by the Company are in areas where there is
substantial competition. However, management believes that the apartments and
hotel are generally in a competitive position in their respective communities.
The Company intends to continue upgrading and improving the physical condition
of its existing properties and to consider selling existing properties and re-
investing in properties that may require renovation but that offer greater
appreciation potential.
EMPLOYEES
As of June 30, 2000, the Company had a total of 16 full-time employees.
The employees and the Company are not party to any collective bargaining
agreement, and the Company believes that its employee relations are
satisfactory.
Item 2. Description of Properties.
PROPERTIES
At June 30, 2000, the Company's investment in real estate consisted of
properties located throughout the United States. These properties include
eleven apartment complexes wholly owned by the Company, an apartment complex
owned by the Company and its majority owned subsidiary Santa Fe, and a
commercial real estate property that serves as the Company's corporate
headquarters. All apartment complexes are completed, operating properties.
<PAGE> 4 of 42
The Company also owns approximately 6.4 acres of unimproved real estate in
Texas. In the opinion of management, each of the properties is adequately
covered by insurance. None of the properties are subject to foreclosure
proceedings or litigation other than that incurred in the normal course of
business. The Company's rental property leases are short-term leases, with no
lease extending beyond one year.
Morris County, New Jersey. The Morris County property is a two-story garden
apartment complex that was completed in June 1964 with 151 units on
approximately 8 acres of land. The Company acquired the complex on September
15, 1967 at an initial cost of approximately $1,600,000. Real estate property
taxes for the year ended June 30, 2000 were approximately $214,000.
Depreciation is recorded on the straight-line method, based upon an estimated
useful life of 40 years. The outstanding mortgage balance was approximately
$5,070,000 at June 30, 2000 and the maturity date of the mortgage is January
1, 2006.
St. Louis, Missouri. The Company's St. Louis properties consist of two
apartment complexes. The first apartment complex is a two-story project with
264 units on approximately 17.5 acres. The Company acquired the complex on
November 1, 1968 at an initial cost of $2,328,000. For the year ended June
30, 2000, real estate property taxes were approximately $112,000.
Depreciation is recorded on the straight-line method, based upon an estimated
useful life of 35 years. The outstanding mortgage balance was approximately
$5,873,000 at June 30, 2000 and the maturity date of the mortgage is July 1,
2008. The second apartment complex is a two-story project with 176 units on
approximately 14 acres. The Company reacquired the complex through
foreclosure on May 11, 1989, and recorded the asset at $3,480,000 representing
the Company's total cost of the mortgage note receivable. For the year ended
June 30, 2000, real estate property taxes were approximately $68,000.
Depreciation is recorded on the straight-line method, based upon an estimated
useful life of 30 years. The outstanding mortgage balance was approximately
$4,655,000 at June 30, 2000 and the maturity date of the mortgage is April 1,
2003.
Florence, Kentucky. The Florence property is a three-story apartment complex
with 157 units on approximately 6.0 acres. The Company acquired the property
on December 20, 1972 at an initial cost of approximately $1,995,000. For the
year ended June 30, 2000, real estate property taxes were approximately
$24,000. Depreciation is recorded on the straight-line method, based upon an
estimated useful life of 40 years. The outstanding mortgage balance was
approximately $2,930,000 at June 30, 2000 and the maturity date of the
mortgage is May 1, 2006.
Irving, Texas. The Irving property is a two-story apartment with 224 units on
approximately 9.9 acres. The Company acquired the property on September 16,
1994 at an initial cost of approximately $4,150,000. For the year ended June
30, 2000, real estate property taxes were approximately $215,000.
Depreciation is recorded on the straight-line method, based upon an estimated
useful life of 30 years. The outstanding mortgage balance was approximately
$4,506,000 at June 30, 2000 and the maturity date of the mortgage is January
1, 2008.
San Antonio, Texas. The San Antonio property is a two-story project with 132
units on approximately 4.3 acres. The Company acquired the complex on June
29, 1993 for $2,752,000. For the year ended June 30, 2000, real estate taxes
were approximately $88,000. Depreciation is recorded on the straight-line
method, based upon an estimated useful life of 30 years. The outstanding
mortgage balance was approximately $3,219,000 at June 30, 2000 and the
maturity date of the mortgage is December 1, 2008.
<PAGE> 5 of 42
Houston, Texas. The Houston property is a two-story apartment complex with
442 units on approximately 23.4 acres. The Company acquired the complex in
March 1998 for an initial cost of $4,970,000. For the year ended June 30,
2000, real estate taxes were approximately $118,000. Depreciation is recorded
on the straight-line method, based upon an estimated useful life of 30 years.
The outstanding mortgage balance was approximately $3,800,000 at June 30, 2000
and the maturity date of the mortgage is June 13, 2003. The Company also owns
approximately 5 acres of unimproved land adjacent to this property. The land
was purchased initially for $267,000 in July 1997.
Austin, Texas. The Austin property is a 169,000 square foot, two-story project
with 190 units. The Company acquired the complex on November 18, 1999 for
$4,150,000. For the year ended June 30, 2000, real estate taxes were
approximately $3,000. Depreciation is recorded on the straight-line method,
based upon an estimated useful life of 30 years. The outstanding mortgage
balance was approximately $3,300,000 at June 30, 2000 and the maturity date of
the mortgage is November 9, 2001.
Los Angeles, California. The Company owns one commercial property and five
apartment complexes in Los Angeles.
The Los Angeles commercial property is a 5,500 square foot, two story building
that serves as the Company's corporate offices. The Company acquired the
complex on March 4, 1999 for $1,876,000. The property taxes for the year ended
June 30, 2000 were approximately $23,000. Depreciation is recorded on the
straight-line method, based upon an estimated useful life of 30 years. The
outstanding mortgage balance was approximately $1,286,000 at June 30, 2000 and
the maturity date of the mortgage is April 15, 2009.
The first Los Angeles apartment complex is a 10,600 square feet two-story
apartment with 12 units. The Company acquired the property on July 30, 1999
at an initial cost of approximately $1,305,000. For the year ended June 30,
2000, real estate property taxes were approximately $4,000. Depreciation is
recorded on the straight-line method, based upon an estimated useful life of
30 years. The outstanding mortgage balance was approximately $774,000 at June
30, 2000 and the maturity date of the mortgage is August 1, 2029.
The second Los Angeles apartment complex is a 29,000 square feet three-story
apartment with 27 units. This complex is held by Intergroup Woodland Village,
Inc. ("Woodland Village"), which is 55.4% and 44.6% owned by Santa Fe and the
Company, respectively. The property was acquired on September 29, 1999 at an
initial cost of approximately $4,075,000. For the year ended June 30, 2000,
real estate property taxes were approximately $31,000. Depreciation is
recorded on the straight-line method, based upon an estimated useful life of
30 years. The outstanding mortgage balance was approximately $1,944,000 at
June 30, 2000 and the maturity date of the mortgage is October 1, 2029.
The third Los Angeles apartment complex is a 12,700 square feet apartment with
14 units. The Company acquired the property on October 20, 1999 at an initial
cost of approximately $2,150,000. For the year ended June 30, 2000, real
estate property taxes were approximately $4,000. Depreciation is recorded on
the straight-line method, based upon an estimated useful life of 30 years.
The outstanding mortgage balance was approximately $1,144,000 at June 30, 2000
and the maturity date of the mortgage is November 1, 2029.
The fourth Los Angeles apartment complex is a 10,500 square feet apartment
with 9 units. The Company acquired the property on November 10, 1999 at an
initial cost of approximately $1,675,000. For the year ended June 30, 2000,
real estate property taxes were approximately $9,000. Depreciation is
recorded on the straight-line method, based upon an estimated useful life of
30 years. The outstanding mortgage balance was approximately $854,000 at June
30, 2000 and the maturity date of the mortgage is December 31, 2029.
<PAGE> 6 of 42
The fifth Los Angeles apartment complex is a 26,100 square feet two-story
apartment with 31 units. The Company acquired the property on May 26, 2000 at
an initial cost of approximately $7,500,000. Depreciation is recorded on the
straight-line method, based upon an estimated useful life of 30 years. The
outstanding mortgage balance was approximately $2,300,000 at June 30, 2000 and
the maturity date of the mortgage is June 1, 2030.
REAL ESTATE INVESTMENT POLICIES
The most significant investment activity of the Company has been to acquire,
renovate, operate and, when appropriate, sell income-producing residential
real estate. The Company's focus is on owning and operating integrated multi-
family apartment buildings. Through its marketable securities portfolio the
Company has indirectly invested in additional real estate related investments
such as hotels, office buildings and shopping centers where financial benefit
could inure to its shareholders.
The Company is presently looking for new real estate investment opportunities
and plans to continue to concentrate its real estate investments in developed
properties. The acquisition of new real estate investments will depend on the
Company's ability to find suitable investment opportunities and the
availability of sufficient financing to acquire such investments. The Company
plans to borrow funds to leverage its investment capital. The amount of the
mortgage debt will depend on a number of factors including, but not limited
to, the availability of financing and the ability of projected property cash
flows to support its operations and debt service.
MORTGAGES
Information with respect to mortgage notes payable of the Company is set forth
in Note 6 of the Notes to Consolidated Financial Statements.
POTENTIAL RENTAL RATES AND PHYSICAL OCCUPANCY RATES
The Company leases units in its residential rental properties on a short-term
basis, with no lease extending beyond one year. The effective annual rental
rate per unit (gross annual rental revenues based on 100% occupancy divided by
the total number of apartment units) and the occupancy rate (total gross
potential rent less vacancy loss divided by total gross potential rent) for
each of the Company's properties for fiscal year ended June 30, 2000 are
provided below.
Effective Annual Physical
Property Rental Rate Per Unit Occupancy Rate
-------- -------------------- --------------
1. Morris County, NJ $10,284 99%
2. St. Louis County, MO (1) $ 5,224 89%
3. St. Louis County, MO (2) $ 7,648 98%
4. Florence, KY $ 6,343 93%
5. Irving, TX $ 7,027 95%
6. San Antonio, TX $ 5,996 96%
7. Houston, TX $ 6,069 82%
8. Los Angeles, CA (1) $ 9,414 100%
9. Los Angeles, CA (2) $11,519 98%
10. Los Angeles, CA (3) $13,317 100%
11. Los Angeles, CA (4) $13,267 100%
12. Los Angeles, CA (5) $16,377 82%
MANAGEMENT OF THE PROPERTIES
All properties are managed the Company.
<PAGE> 7 of 42
Item 3. Legal Proceedings
Guinness Peat Group plc, et al. v. Robert N. Gould, et al., Case No. 685760,
filed on February 22, 1995 in the Superior Court of the State of California
for the County of San Diego. As previously reported, the trial court entered
summary judgment in favor of the Company on December 31, 1996. That summary
judgment, including a subsequent award of attorneys' fees and costs in favor
of the Company in the amount of $296,000, plus interest at the statutory rate
of 10%, was appealed by plaintiffs. On December 15, 1999, the California
Supreme Court entered an order denying review of the Court of Appeal's Opinion
affirming the award of attorneys' fees in favor of the Company. On March 3,
2000, the Company was awarded an additional $78,000 by the trial court for the
attorneys' fees and costs expended in its successful defense of that judgment
on appeal. Including interest, the total amount of the attorney fee awards
was in excess of $465,000 as of May 25, 2000. On June 30, 2000, the Company
received $250,000 on a security bond posted by plaintiffs and have levied on
various accounts of plaintiffs to collect the balance due on its judgment.
On January 21, 2000, the Court of Appeal also affirmed an award of attorneys'
fees and costs in favor of the Company's subsidiary, Santa Fe, and the
director defendants in the amount of $936,000, plus interest at the statutory
rate of 10%. On March 1, 2000, the plaintiffs filed a Petition for Review of
that decision with the California Supreme Court. On September 20, 2000, the
California Supreme Court dismissed that Petition for Review.
On March 27, 1998, a wrongful termination action was filed in the Los Angeles
County Superior Court entitled, Howard A. Jaffe v. The InterGroup Corporation,
et al., Case No. BC188323. The Complaint was filed by an ex-employee, officer
and director against the Company and its President and Chairman. The
Complaint, as originally filed, sought an award of back and future pay,
employee benefits, restitution, unspecified punitive and special damages and
attorneys' fees. In June of 1998, a demurrer to the Complaint was sustained
without leave to amend, with respect to plaintiff's tort claim for breach of
implied covenant of good faith. On or about August 3, 1998, a demurrer to a
First Amended Complaint was sustained without leave to amend with respect to
plaintiff's claim of violation of section 17200 et seq. of the California
Business and Professions Code. Plaintiff's petitions challenging that ruling
were summarily denied by the Court of Appeal and the California Supreme Court.
Plaintiff also filed an appeal from an order denying his motion to disqualify
the law firm representing the Company and its Chairman and President. The
filing of that appeal resulted in a stay of all trial court proceedings in the
case. On January 6, 2000, the Court of Appeal issued an opinion affirming the
trial court's order. Due to the delay caused by plaintiff's appeal, the case
is still in its early stages and discovery has just recently recommenced. It
is not possible to predict the outcome at this time.
As an officer and director, the Company's President and Chairman has requested
indemnification from the Company as permitted by law and under the Bylaws and
Articles of the Company. The case will be vigorously defended and there may
be insurance coverage for all or part of the costs of the defense of this
action and for all or part of any liability that may be imposed on the
Company.
7709 Lankershim Ltd. v. Carreon Villa Apartments I, et al., Riverside County
Superior Court Case No. 088325 was filed on March 27, 1996 against the Company
and others. The action arises out of alleged construction defects in two
Indio, California apartment complexes formerly owned by the Company. The
Complaint alleges damages in an amount of $2,000,000. The Company has filed
cross-complaints against numerous sub-contractors. The case is still in the
discovery phase and expert witness depositions are scheduled to commence in
<PAGE> 8 of 42
October 2000. Two mediation sessions have been held and a third is expected
to take place in early October 2000. A trial date has been set for January
18, 2001. It is not possible to assess what exposure, if any, the Company may
have at this time; however, it appears that there is insurance coverage for
all or part of the costs of defense and for all or part of any liability that
may be imposed on the Company.
On October 15, 1997, a related action for Declaratory Relief was filed by the
insurance carrier entitled, Truck Insurance Exchange v. Carreon Villa
Apartments I, et al., Riverside County Superior Court Case No. 004158. On
July 31, 2000, a settlement agreement was entered into in that action whereby
the parties agreed to a dismissal of the action, without prejudice, a mutual
release of certain claims, a partial reimbursement of attorneys' fees expended
by InterGroup in the defense of the action and that Truck Insurance would
continue to provide a full defense of the Company under a reservation of
rights.
Woodlake Management, Inc., et al. v. Intergroup Whisperwood, Inc. et al.,
Pennsylvania Court of Common Pleas, Philadelphia County, Case No. 001642. On
June 16, 1999, a complaint was filed against the Company's wholly-owned
subsidiary Intergroup Whisperwood, Inc. ("Whisperwood") and the Company's
former property manager, Pinnacle Realty Management Company ("Pinnacle")
alleging breach of contract, misrepresentation and fraud in connection with
the sale of the Whisperwood Apartments. The complaint sought an award of
compensatory, consequential and special damages in excess of $50,000, punitive
damages and an award of costs and attorneys' fees. Following a trial in that
action, a decision was enetered by the court in favor of the Company and
Pinnacle and against the plaintiffs, who have subsequently filed for certain
post trial relief.
Wayne Prosser, Matthew Prosser and Rodney John Young v. Intergroup Cross Keys,
Inc., The InterGroup Corporation and Pinnacle Realty Management Company, State
of Missouri Department of Labor and Industrial Relations, Division of Workers'
Compensation, Claims Nos. 99-036816, 98-171801 and 98-171806. In April 1999,
three Workers' Compensation claims were filed with the Missouri Department of
Labor and Industrial Relations for injuries suffered by claimants while
performing work at the Cross Keys Apartments owned by the Company's wholly-
owned subsidiary, Intergroup Cross Keys, Inc. ("Cross-Keys"). Also named as a
defendant in that action is the Company's former property manager, Pinnacle.
Claimants alleged that they suffered permanent and total disability as a
result of receiving electrical shock from coming in contact with power lines
on the property. On July 20, 2000, the claimants dismissed, without
prejudice, their Workers' Compensation actions in order to pursue the civil
action discussed below.
As previously reported, claimants also filed a separate civil action against
Union Electric in the Circuit Court of St. Louis, Missouri as Case No. 98-
209048. In March 2000, InterGroup, Cross Keys and Pinnacle were named as
defendants in that action. A motion to dismiss that action was held on
September 14, 2000, but no decision has been rendered to date. The action is
being defended by the Company's insurance carriers and the Company believes
that that it has sufficient liability insurance to cover such claims.
The Company is a defendant or co-defendant in various other legal actions
involving various claims incident to the conduct of its business. Most of
these claims are covered by insurance. Management does not anticipate the
Company to suffer any material liability by reason of such actions.
<PAGE> 9 of 42
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
MARKET
The Company's Common Stock is traded on The National Market System of the
Nasdaq Stock Market, Inc. ("Nasdaq-NMS") and is also listed on the Pacific
Exchange, Inc. The following table sets forth the high and low sales prices
(adjusted for stock splits) for the Company's common shares for each quarter
of the last two fiscal years as reported by the National Quotation Bureau
Incorporated or Nasdaq, Inc.
Fiscal 2000 High Low
----------- ---- ----
First Quarter 7/1 - 9/30 $12.25 $11.67
Second Quarter 10/1 - 12/31 $19.33 $15.00
Third Quarter 1/1 - 3/31 $21.87 $14.00
Fourth Quarter 4/1 - 6/30 $22.37 $16.00
Fiscal 1999 High Low
----------- ---- ----
First Quarter 7/1 - 9/30 $18.70 $11.25
Second Quarter 10/1 - 12/31 $15.75 $10.00
Third Quarter 1/1 - 3/31 $15.75 $11.50
Fourth Quarter 4/1 - 6/30 $13.75 $11.86
As of June 30, 2000, there were approximately 956 shareholders of record.
STOCK SPLIT IN THE FORM OF A DIVIDEND
On August 31, 1998, the Company's Board of Directors approved a three-for-two
forward stock split of the Company's $.01 par value Common Stock in the form
of a stock dividend. The dividend was paid in shares of the Company's Common
Stock on October 9, 1998 to shareholders of record as of September 23, 1998.
On August 31, 1998 the Board of Directors authorized an amendment to the
Company's Certificate of Incorporation which increased the number of shares of
$.01 par value per share, Common Stock, that the Company is authorized to
issue from 1,500,000 shares to 4,000,000 shares. The amendment also increased
the authorized number of shares of Preferred Stock from 100,000 shares to
2,500,000 shares and changed the par value of the Preferred Stock from $0.10
to $0.01. In addition, the amendment gave the Company the authorization to
issue 2,500,000 shares of $0.01 par value, Class A Common Stock.
These actions were taken to help the Company achieve and sustain long term
compliance with the applicable maintenance criteria for continued listing on
the NMS.
The Company has not declared any cash dividends on its common stock and does
not foresee issuing cash dividends in the near future.
<PAGE> 10 of 42
Item 6. Management Discussion and Analysis of Financial Condition
and Results of Operations.
INTRODUCTION
The discussion below and elsewhere in the Report includes forward-looking
statements about the future business results and activities of the Company,
which, by their very nature, involve a number of risks and uncertainties. When
used in this discussion, the words "estimate", "project", "anticipate" and
similar expressions, are subject to certain risks and uncertainties, such as
changes in general economic conditions, local real estate markets, and
competition, as well as uncertainties relating to uninsured losses, securities
markets, and litigation, including those discussed below that could cause
actual results to differ materially from those projected. Readers are
cautioned not to place undue reliance on these forward-looking statements.
The Company undertakes no obligation to publicly release the results of any
revisions to those forward-looking statements which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
RESULTS OF OPERATIONS
For the Year Ended June 30, 2000 as compared to June 30, 1999.
Income from real estate operations was $12,581,000 for the year ended June 30,
2000 compared to $3,687,000 for the year ended June 30, 1999. The increase is
primarily attributable to the increase in gains on sale of real estate to
$11,837,000 from $2,884,000. During the year, the Company sold four properties
located in St. Louis, Missouri, Middleton, Ohio, Cincinnati, Ohio, and San
Antonio, Texas, respectively, for a total of $17,596,000 and recognized a
total gain on sale of real estate of $11,837,000. Net proceeds from the sale
of the properties were used to purchase five other properties in tax deferred
exchanges. Four of the five properties purchased are located in Los Angeles,
California and are significantly smaller than the properties sold. They
contain approximately between 9 to 30 units. The fifth property is located in
Austin, Texas and it consists of 190 units. As the result of the property
exchanges, rental income decreased to $11,817,000 from $12,764,000 and
property operating expenses decreased accordingly to $5,215,000 from
$6,027,000. All other property rental expenses remained consistent with the
prior year.
Income from investment transactions was $23,987,000 for the year ended June
30, 2000 compared to a loss of $4,108,000 for the year ended June 30, 1999.
The increase is due to the change in net investment gains(losses) to net
investment gains of $20,968,000 from a net loss of $6,450,000, the increase in
dividend income to $2,150,000 from $945,000, and increase in equity income
from Justice Investors to $3,935,000 from $3,093,000. The increases are
offset by the increase in margin interest, trading and management expenses to
$3,066,000 from $1,696,000.
The increase in dividend and interest income to $2,150,000 from $945,000 is a
result of management's efforts to invest in more income producing investments.
The change in net investment gains (losses) to net investment gains of
$20,968,000 from a net investment loss of $6,450,000 is due to the inclusion
of $15,266,000 in net unrealized gains in current earnings as compared to a
net unrealized loss of $3,700,000 that was included in the prior year
earnings. The increase in net investment gains is also due to management's
<PAGE> 11 of 42
efforts to reposition the portfolio. During the prior year, the Company
increased the turnover of its investment portfolio and engaged in increased
trading activities designed to maximize the overall return on investment
activities in the near term. This resulted in portions of the Company's
investments in marketable securities being classified as "trading" for
generally accepted accounting principles. After consultation with the
Investment Committee of the Board of Directors, management has determined that
the classification of the entire portfolio as trading beginning July 1, 1999
would be more consistent with Company's overall investment objectives and
activities. As a result, beginning July 1, 1999, all unrealized gains and
losses on the Company's investment portfolio are recorded through the income
statement. Recognized investment gains and losses may fluctuate significantly
from period to period, with a meaningful effect upon the Company's net
earnings. However, in the opinion of management, the amount of recognized
investment gain or loss for any given period has no predictive value, and
variations in amounts from period to period have no practical analytical
value.
The increase in margin interest, trading and management expenses to $3,066,000
from $1,696,000 is due to the maintenance of a larger margin balance during
the year and the increased size of the Company's portfolio.
The increase in equity income from Justice Investors to $3,935,000 from
$3,093,000 is primarily attributable to a 27% increase in hotel rental income
due to an increase in the average daily room rate without a significant
reduction in occupancy rates.
General and administrative expenses increased to $1,868,000 from $1,636,000
primarily due to the increase in salaries and bonuses as a result of the
increase in the number of employees from 11 to 16 full-time employees and the
increase in administrative related expenses as a result of the increase size
of the Company.
Other income (expense) changed to income of $1,350,000 compared to an expense
of $438,000 is primarily due to a $1,000,000 settlement received in December
1999 related to a disputed claim pertaining to certain royalty rights held by
InterGroup, a $250,000 payment received from GPG in connection with the award
of attorney fees, and a reduction in legal expenses during the current period.
The provision for income taxes changed to a tax expense of ($15,934,000) from
a tax benefit of $1,005,000 primarily due to the significantly greater income
generated in the current period.
Minority interest increased to ($2,862,000) from $51,000 primarily due to the
increase in income generated by the Company's subsidiaries Santa Fe and
Portsmouth.
FINANCIAL CONDITION AND LIQUIDITY
The Company's cash flows are generated primarily from its real estate
activities, sales of investment securities and borrowings related to both.
The Company generated cash flow of $489,000 from operating activities, used
net cash flow of $1,641,000 for investing activities and generated net cash
flow of $1,298,000 from financing activities during the year ended June 30,
2000.
<PAGE 12 of 42
During the year ended June 30, 2000, the Company sold four of its properties
and received proceeds of $17,596,000. After the repayment of debt of
$9,172,000, the majority of the net proceeds were used to purchase four
properties in Los Angeles, California and a property in Austin, Texas for a
total of $20,978,000. As a part of the purchases, the Company obtained new
mortgages totaling $14,141,000. Management will pursue refinancing
opportunities as considered necessary or when deemed economically favorable to
the Company.
During the year, the Company also improved properties in the aggregate amount
of $1,476,000. Management believes the improvements to the properties should
enhance market values, maintain the competitiveness of the Company's
properties and potentially enable the Company to obtain a higher yield through
higher rents.
The Company's Board of Directors has given the Company the authority to
repurchase, from time to time, up to a total of 333,000 shares of its Common
Stock. Such repurchases may be made at the discretion of management and
depending upon market conditions. During the year ended June 30, 2000, the
Company acquired an additional 89,900 shares of its Common Stock for
$1,356,000.
Management anticipates that its net cash flow from real estate operations,
securities transactions and real estate financing activities will be
sufficient to fund any property acquisitions, property improvements, debt
service requirements and operating expenses in fiscal year 2001. Management
also anticipates that the net cash flow generated from future operating
activities will be sufficient to meet its long-term debt service requirements.
IMPACT OF INFLATION
The Company's residential rental properties provide income from short-term
operating leases and no lease extends beyond one year. Rental increases are
expected to offset anticipated increased property operating expenses.
The Company's revenue from its interest in Justice is primarily dependent on
hotel revenues. Hotel room rates are typically impacted by supply and demand
factors, not inflation, because rental of a hotel room is usually for a
limited number of nights. Room rates are usually adjusted to account for
inflationary cost increases, therefore; the impact of inflation should be
minimal.
<PAGE> 13 of 42
Item 7. Financial Statements.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page
----
Report of Independent Accountants 14
Consolidated Balance Sheet at June 30, 2000 15
Consolidated Statements of Operations and Comprehensive
Income for the years ended June 30, 2000 and June 30, 1999 16
Consolidated Statements of Shareholders' Equity for the years
ended June 30, 2000 and June 30, 1999 17
Consolidated Statements of Cash Flows for the years ended
June 30, 2000 and June 30, 1999 18
Notes to Consolidated Financial Statements 19
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and the Shareholders of
The Intergroup Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations and comprehensive income, of
shareholders' equity and of cash flows present fairly, in all material
respects, the financial position of The Intergroup Corporation and its
subsidiaries ("the Company") at June 30, 2000 and the results of its
operations and its cash flows for each of the two years in the period ended
June 30, 2000, in conformity with accounting principles generally accepted in
the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
September 22, 2000
<PAGE> 14 of 42
<TABLE>
<CAPTION>
THE INTERGROUP CORPORATION
CONSOLIDATED BALANCE SHEET
As of June 30, 2000
-----------
ASSETS
<S> <C>
Investment in real estate, at cost:
Land $ 15,772,000
Buildings, improvements and equipment 39,213,000
Property held for sale or development 319,000
-----------
55,304,000
Less: accumulated depreciation (13,387,000)
-----------
41,917,000
Cash and cash equivalents 660,000
Restricted cash 981,000
Investment in marketable securities 87,092,000
Investment in Justice 10,640,000
Other investments 817,000
Rent and other receivables 194,000
Prepaid expenses and other assets 1,869,000
-----------
Total Assets $ 144,170,000
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $ 41,656,000
Obligation for securities sold 29,366,000
Due to securities brokers 29,976,000
Accounts payable and other liabilities 2,126,000
Deferred income taxes 9,950,000
----------
Total Liabilities 113,074,000
----------
Minority Interest 10,728,000
----------
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, $.01 par value, 2,500,000 shares
authorized; none issued -
Common stock - Class A, $.01 par value, 2,500,000
shares authorized: none issued -
Common stock, $.01 par value, 4,000,000 shares
authorized; 2,129,288 shares issued and 1,932,987
outstanding 21,000
Additional paid-in capital 8,686,000
Retained earnings 15,810,000
Note receivable - stock options (1,438,000)
Treasury stock, at cost, 196,301 shares (2,711,000)
-----------
Total Shareholders' Equity 20,368,000
-----------
Total Liabilities and Shareholders' Equity $144,170,000
===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 15 of 42
<TABLE>
<CAPTION>
THE INTERGROUP CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
<S> <C> <C>
For the Year Ended June 30, 2000 1999
Real estate operations: ----------- -----------
Rental income $ 11,817,000 $ 12,764,000
Rental expenses:
Mortgage interest expense 2,848,000 2,961,000
Property operating expenses 5,215,000 6,027,000
Real estate taxes 1,016,000 889,000
Depreciation 1,994,000 2,084,000
----------- -----------
744,000 803,000
Gain on sale of real estate 11,837,000 2,884,000
---------- -----------
Income from real estate operations 12,581,000 3,687,000
---------- -----------
Investment transactions:
Dividend and interest income 2,150,000 945,000
Net investment gains(losses) 20,968,000 (6,450,000)
Margin interest, trading and management
expenses (3,066,000) (1,696,000)
Equity in net income of Justice Investors 3,935,000 3,093,000
----------- ----------
Income(loss) from investment transactions 23,987,000 (4,108,000)
----------- ----------
Other income(expenses):
General and administrative expenses (1,868,000) (1,636,000)
Miscellaneous income(expenses) 1,350,000 (438,000)
----------- -----------
Other expenses (518,000) (2,074,000)
----------- -----------
Income(loss)before provision for income taxes 36,050,000 (2,495,000)
Provision for income tax (expense)benefit (15,934,000) 1,005,000
Minority interest (2,862,000) 51,000
---------- -----------
Income(loss) before extraordinary item 17,254,000 (1,439,000)
Extraordinary loss due to early extinguishment
of debt less applicable income tax benefit
of $199,000 in 1999 - (298,000)
---------- -----------
Net income(loss) $ 17,254,000 $ (1,737,000)
========== ===========
Earnings(loss) per share before
extraordinary item $ 8.75 $ (0.69)
Loss per share related to
extraordinary item - (0.14)
---------- -----------
Basic earnings(loss) per share $ 8.75 $ (0.83)
========== ===========
Weighted average number of shares outstanding 1,971,322 2,092,297
========== ===========
Diluted earnings(loss) per share $ 8.13 $ (0.83)
========== ===========
Diluted weighted average number of shares
outstanding 2,121,022 2,092,297
========== ===========
Comprehensive income(loss):
Net income(loss) $ 17,254,000 $ (1,737,000)
Unrealized holding loss on
marketable securities - (4,924,000)
Reclassification adjustment for holding
loss included in net earnings - 6,450,000
Income tax benefit related to
other comprehensive income 5,387,000 1,407,000
Adjustment for reclassification of the
accumulated unrealized holding gains
prior to July 1, 1999 to current earnings (13,467,000) -
---------- ----------
Comprehensive income $ 9,174,000 $ 1,196,000
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 16 of 42
<TABLE>
<CAPTION>
THE INTERGROUP CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Accumulated
other
Additional comprehensive Note
Common paid-in Retained income, Treasury receivable
stock capital earnings net of taxes stock options Total
------ --------- --------- ------------ ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
June 30, 1998 $14,000 $8,686,000 $ 300,000 $ 5,147,000 $ ( 90,000) $(1,438,000) $12,619,000
Net loss (1,737,000) (1,737,000)
Purchase of
treasury stock (1,265,000) (1,265,000)
Three-for-two
Stock split 7,000 (7,000)
Unrealized holding
gain on marketable
securities,
net of tax 2,933,000 2,933,000
------- --------- --------- ----------- ---------- --------- ----------
Balance at
June 30, 1999 $21,000 $8,686,000 $(1,444,000) $ 8,080,000 $(1,355,000) $(1,438,000) $12,550,000
Net income 17,254,000 17,254,000
Purchase of
treasury stock (1,356,000) (1,356,000)
Reclass unrealized
holding gain, net
of tax, to income (8,080,000) (8,080,000)
------- --------- --------- ----------- ---------- --------- ----------
Balance at
June 30, 2000 $21,000 $8,686,000 $15,810,000 $ - $(2,711,000) $(1,438,000) $20,368,000
======= ========= ========== ========== ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 17 of 42
<TABLE>
<CAPTION>
THE INTERGROUP COPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended June 30, 2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income(loss) $17,254,000 $(1,737,000)
Adjustments to reconcile net income(loss)
to cash provided by operating
activities:
Depreciation of real estate 1,994,000 2,084,000
Other amortization - 142,000
Gain on sale of real estate (11,837,000) (2,884,000)
Net loss on sale of investments - 6,450,000
Net unrealized gain on investments (15,266,000) -
Equity in net income of Justice Investors (3,935,000) (3,093,000)
Minority Interest 2,862,000 (51,000)
Changes in assets and liabilities:
Restricted cash 478,000 272,000
Prepaid expenses and other assets 1,895,000 (1,952,000)
Investment in marketable securities (27,945,000) -
Other investments 2,194,000 -
Accounts payable and other liabilities (1,298,000) 449,000
Due to securities broker 12,220,000 -
Obligations for securities sold 15,418,000 -
Deferred taxes 6,455,000 449,000
----------- ------------
Net cash provided by operating activities 489,000 129,000
----------- ------------
Cash flows from investing activities:
Additions to buildings, improvements and
equipment (1,476,000) (1,566,000)
Investment in real estate (20,978,000) (1,937,000)
Proceeds from sale of real estate 17,596,000 7,232,000
Investment in Santa Fe - (61,000)
Investment in Portsmouth (199,000) -
Purchase of investment securities - (94,823,000)
Proceeds from the sale of investment
securities - 69,107,000
Decrease in other investments - (692,000)
Distributions from Justice Investors 3,416,000 2,493,000
----------- -----------
Net cash used in investing activities (1,641,000) (20,247,000)
---------- -----------
Cash flows from financing activities:
Principal payments on mortgage notes payable (9,360,000) (6,749,000)
Proceeds from real estate refinancing - 3,274,000
Borrowings from mortgage notes payable 14,141,000 1,306,000
(Payment of) borrowings from letter of
credit (2,000,000) 2,000,000
Increase in obligations for securities sold - 3,328,000
Increase in due to securities
brokers - 13,552,000
Dividends paid to minority shareholders (127,000) (127,000)
Purchase of treasury stock (1,356,000) (1,265,000)
----------- -----------
Net cash provided by financing activities 1,298,000 15,319,000
----------- -----------
Net increase(decrease) in cash and cash
equivalents 146,000 (4,799,000)
Cash and cash equivalents at beginning of
period 514,000 5,313,000
----------- -----------
Cash and cash equivalents at end of period $ 660,000 $ 514,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 18 of 42
THE INTERGROUP CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business and Significant Accounting Policies and Practices:
Description of the Business
The Intergroup Corporation ("Intergroup" or the "Company") was formed to buy,
develop, operate and dispose of real property and to engage in various
investment activities to benefit the Company and its shareholders.
As of June 30, 2000 and 1999, the Company had the power to vote 54.3% and
53.6%, respectively, of the voting shares of Santa Fe Financial Corporation
("Santa Fe"), a public company (Nasdaq SmallCap: SFEF). Santa Fe's revenue is
primarily generated through its 68.8% interest in Portsmouth Square, Inc.
("PSI"), which derives its revenue primarily through its 49.8% interest in
Justice Investors ("Justice"), a California limited partnership. Justice owns
the land, improvements and leaseholds known as the Holiday Inn Financial
District/Chinatown, a 566-room hotel in San Francisco, California.
On June 30, 1998, the Company's Chairman and President entered into a voting
trust giving the Company the power to vote the shares of Santa Fe common stock
that he owned. As a result of this agreement, the Company had the power to
vote on an additional 3.9% of the voting shares of Santa Fe.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its majority-owned subsidiaries. Material intercompany
transactions and balances have been eliminated in consolidation. Investments
in companies in which the Company maintains an ownership interest of 20% to
50% or exercises significant influence are accounted for under the equity
method. The cost method is used where the Company maintains ownership interest
of less than 20% and does not exercise significant influence over the
investee.
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 as of the date of the financial statements
and the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Investment in Real Estate
Investments in real estate are stated at cost. Depreciation of buildings,
improvements and equipment is provided on the straight-line method based upon
estimated useful lives of five to forty years for buildings and improvements
and five to ten years for equipment. Expenditures for repairs and maintenance
are charged to expense as incurred and improvements are capitalized.
The carrying value of real estate is assessed regularly by management based on
the operating performance of each property, including the review of occupancy
levels, operating budgets, estimated useful life and estimated future cash
flows. An impairment loss would be recognized when the sum of the expected
future net cash flows is less than the carrying amount of the asset. No such
impairment losses have been recognized during the years ended June 30, 2000
and 1999.
<PAGE> 19 of 42
Cash and Cash Equivalents
The Company considers all highly liquid financial instruments purchased with
an original maturity of three months or less to be cash equivalents.
Restricted Cash
Restricted cash is comprised of amounts held by lenders for payment of real
estate taxes, insurance, replacement reserves for the operating properties and
tenant security deposits that are invested in certificates of deposit.
Marketable Securities
Marketable securities are stated at market value as determined by the most
recently traded price of each security at the balance sheet date. Marketable
securities are classified as trading securities with all unrealized gains and
losses on the Company's investment portfolio recorded through the income
statement.
The cost of marketable securities sold is determined by the specific
identification method.
Obligation for Securities Sold
Obligation for securities sold represents the fair market value of shares sold
with the promise to deliver that security at some future date and the fair
market value of shares underlying the written call options with the obligation
to deliver that security when and if the option is exercised. The obligation
may be satisfied with current holdings of the same security or by subsequent
purchases of that security. Unrealized gains and losses from changes in the
obligation are included in earnings.
Rental Income
Rental income is recognized as earned. Revenue recognition from apartment
rentals commences when an apartment unit is placed in service and occupied by
a rent-paying tenant.
Income Taxes
Deferred income taxes are determined using the liability method. A deferred
tax asset or liability is determined based on the difference between the
financial statement and tax basis of assets and liabilities as measured by
statutory tax rates. Deferred tax expense is the result of changes in the
asset and/or liability for deferred taxes.
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, restricted cash, marketable
securities, other investments, prepaid expenses and other assets, accounts
payable and other liabilities approximates fair value. The fair value of
mortgage notes payable is estimated using discounted cash flows of future
payments based on the borrowing rates available to the Company for debt with
similar terms and maturities.
<PAGE> 20 of 42
Stock-Based Compensation Plans
Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting for
Stock-Based Compensation, encourages all entities to adopt a fair value based
method of accounting for employee stock compensation plans, whereby
compensation cost is measured at the grant date based the value of the award
and is recognized over the service period, which is usually the vesting
period. However, it also allows an entity to continue to measure compensation
cost for those plans using the intrinsic value based method of accounting
prescribed by Accounting Principles Board Opinion No.25 (APB 25), Accounting
for Stock Issued to Employees, whereby compensation cost is the excess, if
any, of the quoted market price of the stock at the grant date (or other
measurement date) over the amount an employee must pay to acquire the stock.
Stock options issued under the Company's stock option plan have no intrinsic
value at the grant date, and under APB 25 no compensation cost is recognized.
The Company has elected to continue with the accounting methodology in APB 25
and, as a result, has provided pro form disclosures of net income and earnings
per share and other disclosures, as if the fair value based method of
accounting had been applied.
Earnings Per Share
Basic earnings per share is computed by dividing net income available to
common stockholders by the weighted average number of common shares
outstanding. The computation of diluted earnings per share is similar to the
computation of basic earnings per share except that the weighted-average
number of common shares is increased to include the number of additional
common shares that would have been outstanding if potential dilutive common
shares had been issued. The Company's only potentially dilutive common shares
are stock options. Stock options are included in diluted earnings per share
by application of the treasury stock method. For the year ended June 30, 2000,
149,700 stock options were included diluted earnings per share. As the
Company reported a loss for the year ended June 30, 1999, the inclusion of
potentially dilutive common shares related to stock options (75,000 shares at
June 30, 1999), would be anti-dilutive. Therefore, basic and diluted earnings
per share for the year ended June 30, 1999 are the same.
2. Investment in Real Estate:
At June 30, 2000, investments in real estate consisted of eleven multi-family
apartment projects located throughout the United States, approximately 5.4
acres of unimproved land held for sale or development, an apartment complex
owned by the Company and its majority owned subsidiary Santa Fe, and a
commercial real estate property that serves as the Company's corporate
headquarters. All of the projects are completed operating properties that are
directly owned by the Company and its subsidiary, Santa Fe.
In May 2000, the Company sold the two-story, 224-unit apartment complex
located in San Antonio, Texas for $6,500,000 and realized a gain of
approximately $3,891,000. The Company received net proceeds of $4,382,000
after the repayment of the underlying mortgage of $1,823,000. In the same
month, the Company purchased a two-story, 30-unit apartment complex located in
Los Angeles, California for $7,500,000 in a tax-deferred exchange.
In September 1999, the Company sold the 22.4 acres of land located in St.
Louis, Missouri for $5,450,000 and realized a gain of approximately
$3,329,000. The Company received net proceeds of $3,185,000 after the
repayment of the $2,000,000 letter of credit. In October 1999 and November
1999, respectively, the Company purchased a 14-unit multi-family apartment
complex for $2,150,000 and a 9-unit multi-family apartment complex for
<PAGE> 21 of 42
$1,675,000 in connection with a 1031 tax-deferred exchange with the sale of
the land. Both properties are located in Los Angeles, California.
In July 1999, the Company sold the two-story, 150-unit apartment complex
located in Middletown, Ohio for $3,425,000 and realized a gain of
approximately $2,374,000. The Company received net proceeds of $815,000 after
the repayment of the underlying mortgage of $2,440,000. In November 1999, the
Company purchased a 190-unit multi-family apartment complex located in Austin,
Texas for $4,150,000 in connection with the 1031 tax-deferred exchange with
the Middletown, Ohio property.
In July 1999, the Company sold the three-story, 100-unit apartment complex
located in Cincinnati, Ohio for $3,125,000 and realized a gain of
approximately $2,243,000. The Company received net proceeds of $1,736,000
after the repayment of the underlying mortgage of $1,216,000. In September
1999, the Company purchased a 27-unit multi-family apartment complex located
in Los Angeles, California for $4,075,000 in connection with the 1031 tax-
deferred exchange with the Cincinnati, Ohio property.
In July 1999, the Company purchased a 12-unit multi-family apartment complex
located in Los Angeles, California for $1,305,000.
On March 31, 1999, the Company terminated its agreement with the management
company and began to manage all the properties in-house. Prior to March 31,
1999, the Company utilized a third party management company to manage all of
the Company's properties.
3. Marketable Securities:
Marketable securities are stated at market value as determined by the most
recently traded price of each security at the balance sheet date. During
fiscal year 1999, the Company increased the turnover of its investment
portfolio and engaged in increased trading activities designed to maximize the
overall return on investment activities in the near term. This resulted in
portions of the Company's investments in marketable securities being
classified as "trading" as defined by generally accepted accounting
principles. After consultation with the Investment Committee of the Board of
Directors, management determined that the classification of the entire
portfolio as trading beginning July 1, 1999 would be more consistent with
Company's overall investment objectives and activities. As a result, all
unrealized gains and losses on the Company's investment portfolio were
recorded through the income statement. For the year ended June 30, 2000, net
unrealized gains on trading securities included in earnings were $15,266,000.
For the year ended June 30, 2000, net investment gains of $20,968,000 was
comprised of gross gains and losses of $45,089,000 and $24,121,000,
respectively. For the year ended June 30, 1999, net investment losses of
$6,450,000 were comprised of gross gains and losses of $14,369,000 and
$20,819,000, respectively.
Financial Instruments and Risk Management
The Company uses option contracts to hedge its investments in the underlying
common stock. The purpose of the hedge is to protect against adverse
movements in the underlying stock price. The Company sells call options
(writes covered calls) in order to hedge market exposure. As of June 30,
2000, the proceeds received from writing call options and the fair market
value of the obligation related to written call options aggregated $2,553,000
and $1,813,000, respectively. All unrealized gains or losses related to
written call options are included in current earnings.
<PAGE> 22 of 42
4. Investment in Justice:
The consolidated accounts include a 49.8% interest in Justice Investors
("Justice"), a limited partnership. Justice owns the land improvements and
leasehold known as the Financial District Holiday Inn, a 566-room hotel in San
Francisco, California. PSI is both a limited and general partner in Justice
and records its investment in Justice on the equity basis.
Condensed financial statements for Justice Investors are as follows:
Justice Investors
Condensed Balance Sheet as of June 30, 2000
Total current assets $ 2,304,000
Property, plant and equipment, net of accumulated
depreciation of $11,555,000 5,016,000
Loan fees and deferred lease costs, net of
accumulated amortization of $8,124 147,000
Total Assets -----------
$ 7,467,000
===========
Liabilities and partners' capital
Total current liabilities $ 237,000
Partners' capital 7,230,000
-----------
Total Liabilities and Partners' Capital $ 7,467,000
===========
Justice Investors
Condensed Results of Operations for the year ended June 30,
2000 1999
----------- -----------
Revenues $ 8,737,000 $ 7,107,000
Costs and expenses (835,000) (895,000)
----------- -----------
Net income $ 7,902,000 $ 6,212,000
=========== ===========
5. Other Investments:
Other investments primarily consist of investments in corporations and
securities that are not traded on any exchange. Other investments are stated
at cost, net of reserve for loss of $1,524,000, which approximates fair value.
6. Mortgage Notes Payable:
In July 1999, the Company obtained a $778,000 mortgage note related to the
purchase of the 12-unit apartment complex located in Los Angeles, California.
The note carries an interest rate of 7.93% and matures on August 1, 2029.
In October 1999, the Company obtained a $1,150,000 mortgage note related to
the purchase of the 14-unit apartment complex located in Los Angeles,
California. The note carries an interest rate of 7.89% and matures on
November 1, 2029.
In November 1999, the Company obtained a $858,000 mortgage note related to the
purchase of the 9-unit apartment complex located in Los Angeles, California.
The note carries an interest rate of 7.95% and matures on December 31, 2029.
<PAGE> 23 of 42
In November 1999, the Company obtained a $3,300,000 mortgage note related to
the purchase of the 190-unit apartment complex located in Austin, Texas. The
note is an interest only note that carries an interest rate of prime. As of
June 30, 2000, prime was 9.5%. The note matures on November 9, 2001.
In April 2000, the Company obtained a $2,300,000 mortgage note related to the
purchase of the 30-unit apartment complex located in Los Angeles, California.
The note carries an interest rate of 7.54% and matures on June 1, 2030.
In June 2000, the Company obtained a $3,800,000 mortgage note payable for the
442-unit apartment complex located in Houston, Texas to replace the $3,450,000
mortgage note that matured on June 1, 2000. The new note carries an interest
rate of 8.28% and matures on June 13, 2003.
In July 1999, the Company repaid the $2,440,000 mortgage note payable on the
150-unit apartment complex located in Middletown, Ohio as a result of its
sale.
In July 1999, the Company repaid the $1,216,000 mortgage note payable on the
100-unit apartment complex located in Cincinnati, Ohio as a result of its
sale.
In September 1999, the Company obtained a $1,955,000 mortgage note payable
related to the purchase of the 27-unit Los Angeles, California apartment
complex. The note carries an interest rate of 7.73% for the first 120 months
and matures on October 1, 2029.
In May 2000, the Company repaid the $1,861,000 mortgage note payable on the
228-unit apartment complex located in San Antonio, Texas as a result of its
sale.
At June 30, 2000, the Company had mortgage debt outstanding of $41,656,000.
The mortgages carry fixed rates ranging from 6.62% to 10.00%. Each mortgage
is secured by its respective land and building. The annual combined aggregate
principal payments on the mortgage notes payable for the five-year period
commencing July 1, 2000 are as follows:
Year ending June 30,
2001 $ 485,000
2002 518,000
2003 4,202,000
2004 541,000
2005 4,872,000
Thereafter 31,038,000
-----------
Total $41,656,000
===========
At June 30, 2000, the total outstanding mortgage balance approximates the
estimated fair value of the outstanding debt.
7. Letter of Credit
In September 1999, the Company repaid the $2,000,0000 line of credit in
conjunction with the sale of the 22.4 acres of land located in St. Louis,
Missouri for $5,450,000. The line of credit had an interest rate of prime. As
of June 30, 2000, the Company had no open line of credit.
8. Due to Securities Broker:
Various securities brokers have advanced funds to the Company for the purchase
of marketable securities under standard margin agreements.
<PAGE> 24 of 42
9. Income Taxes:
The provision for the Company's income tax (expense)/benefit is comprised of
the following:
Year Ended June 30,
2000 1999
---------- ----------
Current tax expense $ (2,683,000) $ (800,000)
Deferred tax (expense) benefit (13,251,000) 1,805,000
---------- ----------
$(15,934,000) $ 1,005,000
========== ==========
The components of the deferred tax liability as of June 30, 2000, are as
follows:
Deferred real estate gains $ 4,693,000
Unrealized gain on marketable securities 5,894,000
Depreciation and fixed asset differences 983,000
Equity earnings of subsidiaries 357,000
----------
Gross deferred tax liabilities 11,927,000
----------
Capital loss carryforwards (1,401,000)
Net operation loss carryforwards (699,000)
State income taxes (191,000)
Other (47,000)
----------
Gross deferred tax (assets) (2,338,000)
Valuation allowance 361,000
----------
Net deferred tax (assets) (1,977,000)
----------
Net deferred tax liability $ 9,950,000
==========
The provision for income taxes differs from the amount of income tax computed
by applying the federal statutory income tax rate to income before taxes as
a result of the following differences:
Year Ended June 30,
2000 1999
----------- -----------
Income tax at federal statutory rates $(12,149,000) $ 848,000
State income taxes, net of federal benefit (2,144,000) 138,000
Change in deferred liabilities and
valuation allowance (1,641,000) -
Other - 19,000
----------- -----------
Total income tax benefit(expense) $(15,934,000) $1,005,000
=========== ===========
As of June 30, 2000, the Company had a net operating losses available for
carryforward of approximately $3,922,000. The carryforward expires in varying
amounts through the year 2008. The Company also has capital losses available
for carryforward of $3,501,000 that expire in varying amounts through 2016.
<PAGE> 25 of 42
10. Supplemental Cash Flow Information:
Cash paid for margin interest for the year ended June 30, 2000 and 1999 was
$1,910,000 and $994,000, respectively. Cash paid for interest on mortgage
notes payable for the year ended June 30, 2000 and 1999 was $2,351,000 and
$2,567,000, respectively. Cash paid for income taxes aggregated $1,151,000
and $84,000 for the year ended June 30, 2000 and 1999, respectively.
11. Stock Options and Employee Stock Ownership Plan and Trust:
On December 8, 1998, the Company adopted and authorized a stock option plan
(the "1998 Non-employee Directors Plan") for non-employee directors. The
1998 Non-employee Directors Plan provides for the granting of stock options to
purchase shares of the Company's common stock to non-employee directors of the
Company. The aggregate number of shares to be delivered upon exercise of all
options granted under the Plan may not exceed 100,000. During fiscal years
2000 and 1999, the Company granted stock options of 10,000 and 32,000
respectively, to the directors of the Company. These options have exercise
prices of $12.25 and $12.00 per share, respectively. The options vest over a
period of 2 years and have a term of 10 years.
On December 22, 1998, the Company adopted and authorized a stock option plan
(the "1998 Key Officers Plan") for selected key officers. The 1998 Plan
provides for the granting of stock options to purchase shares of the Company's
common stock to key officers of the Company. The aggregate number of shares to
be delivered upon exercise of all options granted under the Plan may not
exceed 200,000. On December 22, 1998, the Board of Directors of the Company
granted a total of 150,000 stock options to the President and Chairman of the
Company at an exercise price of $11.875 per share. The options vest over a
period of 2 years and have a term of 10 years.
Information relating to the stock options during the fiscal years ended June
30, 2000 and 1999 are as follows:
Number of Weighted-average
Shares Exercise Price
---------- ---------------
Unexercised options
outstanding at June 30, 1998: 15,000 $35.11
Granted 182,000 $11.90
Exercised - -
Forfeited - -
-------- --------
Unexercised options
outstanding at June 30, 1999: 197,000 $14.02
Granted 10,000 $12.25
Exercised - -
Forfeited - -
-------- --------
Unexercised options
outstanding at June 30, 2000: 207,000 $13.60
======== ========
Range of Weighted Average Weighted Average
Exercise Options Exercise Price Exercise Price Remaining Life
---------------- -------------- ---------------- ----------------
June 30, 1999 $11.88-$44.44 $14.02 9.36 years
June 30, 2000 $11.88-$44.44 $13.60 8.36 years
<PAGE> 26 of 42
As required by FAS 123, the company has determined the pro-forma information
as if the company had accounted for stock options granted since January 1,
1998, under the fair value method of FAS 123. The Black-Scholes option pricing
model was used with the following weighted-average assumptions for 1999; risk-
free interest rate of 5.28%; dividend yield of 0%; expected Common Stock
market price volatility factor of 48.42; and a weighted-average expected life
of the options of 10 years. The weighted-average fair value of options granted
in fiscal years 2000 and 1999 were $17.01 and $7.87 per share, respectively.
The aggregate fair value of the options granted in fiscal years 2000 and 1999
were $170,000 and $1,433,000, respectively.
Stock based compensation is accounted for under APB 25 and accordingly, no
compensation cost has been recognized for stock options in the financial
statements. Had compensation cost been determined based upon the fair value
of the stock options at grant date and consistent with FAS 123, the Company's
pro forma net loss and net loss per share (based on 47,500 and 102,200 options
vested for fiscal years 2000 and 1999, respectively) are as follows:
2000 1999
----------- ----------
Net income(loss) - as reported $17,254,000 ($1,737,000)
Net income(loss) - pro forma $16,415,000 ($2,529,000)
Earnings(loss) per share - as reported $8.13 ($0.83)
Earnings(loss) per share - pro forma $7.74 ($1.21)
In April 1986, the Company established an Employee Stock Ownership Plan and
Trust ("ESOP" or the "Plan"), effective July 1985, which enabled eligible
employees to receive an ownership interest in stock of the Company. The
Company did not make ESOP contributions during fiscal 2000 or 1999. The
Company distributed 1,680 shares (adjusted for stock split) to terminated
employees during fiscal 1998. Effective November 15, 1998, the Plan was
terminated and the interest of each participant was fully vested and
nonforfeitable. The Plan benefits will be distributed in due course following
appropriate governmental filings and approvals, notices to participants, and
other procedures and actions considered appropriate by the Company. The
termination of the Plan did not have a material effect on the financial
statements of the Company.
12. Commitments and Contingencies:
The lease on the Company's corporate headquarters expired on May 31, 1999.
Rent expense was approximately $127,000 in 1999.
On February 22, 1995, the Company was named as a defendant in a shareholders'
derivative suit filed against Santa Fe and certain directors of Santa Fe,
arising out of the Company's investment in Santa Fe. On December 31, 1996, a
final judgment was entered in favor of the Company. Effective as of April 25,
1997, the Company was awarded $296,000 in attorneys' fees and costs, plus
interest at the statutory rate of 10%, as a prevailing party in that
litigation. That award was subsequently affirmed on appeal. The Company made
<PAGE> 27 of 42
further application to the trial court for an award of attorneys' fees and
costs expended in its successful defense of that judgment on appeal, which was
granted, effective March 3, 2000, in the approximate amount of $78,000.
Including accrued interest, the total amount of the attorney fee awards was in
excess of $465,000 as of May 2000. On June 30, 2000, the Company received
$250,000 on a security bond posted by plaintiffs as partial payment and have
levied on various accounts of plaintiffs in an effort to collect the balance
due on its judgment. The remaining unpaid balance will not be recorded until
received.
On January 21, 2000, the Court of Appeal also affirmed an award of attorneys'
fees and costs in favor of the director defendants and Santa Fe in the amount
of $936,000, plus interest. On March 1, 2000, the plaintiffs filed a Petition
for Review of that decision with the California Supreme Court. On September
20, 2000, the California Supreme Court dismissed that Petition for Review.
The award of attorney's fees will not be recorded until received.
On March 27, 1998, a wrongful termination action was filed in the Los Angeles
County Superior Court by an ex-employee, officer and director against the
Company and its President and Chairman. The Complaint seeks an award of back
and future pay, employee benefits, restitution, unspecified punitive and
special damages and attorneys' fees. As an officer and director, the
Company's President and Chairman has requested indemnification from the
Company as permitted by law and under the Bylaws and Articles of the Company.
Due to a delay caused by plaintiff filing an unsuccessful appeal of an order
denying his motion to disqualify the law firm representing the defendants, the
case is still in its early stages and discovery has just recently recommenced.
It is not possible to predict the outcome at this time.
The case will be vigorously defended and there may be insurance coverage for
all or part of the costs of the defense of this action and for all or part of
any liability that may be imposed on the Company.
The Company is a defendant or co-defendant in various other legal actions
involving various claims incident to the conduct of its business. Most of
these claims are covered by insurance. Management does not anticipate the
Company to suffer any material liability by reason of such actions.
13. Related Party Transactions:
On April 26, 1999, the Executive Committee of the Company authorized a short-
term loan from the Company to the Company's Chairman and President in the
amount of $426,000 at an interest rate equal to the prime rate, as of the date
of the loan, plus one percent (8.75%). All principal and interest under the
loan was due on May 31, 1999. The loan was repaid in full with interest on
May 31, 1999.
On January 4, 1999, the Executive Committee of the Company authorized a short-
term loan from the Company to the Company's Chairman and President in the
amount of $350,000 at an interest rate equal to the prime rate, as of the date
of the loan, plus one percent (9.5%). All principal and interest under the
loan was due on March 31, 1999. The loan was repaid in full with interest on
March 31, 1999.
Gary N. Jacobs, a Director of the Company, is Of Counsel to the law firm of
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP. Through May
31, 2000 he was a senior partner of said firm, which provided legal services
to the Company during the years ended June 30, 2000 and 1999. During the
years ended June 30, 2000 and 1999, the Company made payments of approximately
$216,000 and $269,750, respectively to Christensen, Miller, Fink, Jacobs,
Glaser, Weil & Shapiro, LLP.
<PAGE> 28 of 42
In May 1996, the Company's Chairman and President exercised options to
purchase 187,500 shares of Common Stock at a price of $7.67 per share through
a full recourse note due the Company on demand, but in no event later than May
2001. The note bears interest floating at the lower of 10% or the prime rate
(9.50% at June 30, 2000) with interest payable quarterly. The balance of the
note receivable of $1,438,000 is reflected as a reduction of shareholders'
equity at June 30, 2000. During the fiscal year ended June 30, 2000 and 1999,
the President of the Company made interest payments of approximately $131,000
and $122,000, respectively, on the note.
14. Extraordinary Item:
During the year ended June 30, 1999 the Company sold two of its properties and
refinanced one of its properties. The Company incurred $399,000 in prepayment
penalties and $98,000 in expense related to the write-off of deferred loan
costs associated with loans paid off in connection with the sale of the two
properties and refinancing. These expenses are partially offset by a $199,000
income tax benefit.
15. Subsequent Events:
During July through September 2000, the Company completed the purchase of five
apartment complexes and an office building for a total of $10,465,000.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
<PAGE> 29 of 42
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
The following table sets forth certain information with respect to the
Directors and Executive Officers of the Company as of June 30, 2000:
<TABLE>
<CAPTION>
Position with
Name the Company Age Term to Expire
------------------ ------------------ --- -----------------
Class A Directors:
<S> <C> <C> <C>
John V. Winfield Chairman of the Board; 53 2000 Annual Meeting
(1)(4)(5)(6)(7)(8) President and Chief
Executive Officer
Josef A.
Grunwald (7) Director 52 2000 Annual Meeting
Class B Directors:
Gary N. Jacobs
(1)(6)(7)(8)(9) Secretary; Director 56 2001 Annual Meeting
William J. Nance (1)
(2)(3)(4)(5)(6)(7)(9) Treasurer; Director 56 2001 Annual Meeting
Class C Directors:
Mildred Bond
Roxborough (2) Director 73 2002 Annual Meeting
John C. Love Director 60 2002 Annual Meeting
(3)(4)(5)(9)
Other Executive
Officers:
Gregory C. McPherson Executive Vice 41 N/A
President;
Assistant Treasurer
Michael G. Zybala Vice President 48 N/A
Operations;
Assistant Secretary
------------------
</TABLE>
(1) Member of the Executive Committee
(2) Member of the Administrative and Compensation Committee
(3) Member of the Audit and Finance Committee
(4) Member of the Real Estate Investment Committee
(5) Member of the Nominating Committee
(6) Member of the Securities Investment Committee
(7) Member of the Special Strategic Options Committee
(8) Member of the Stock Option Administrative Committee (Non-employee
Director Plan)
(9) Member of the Stock option Administrative Committee (Key Officer,
Employee Plan)
<PAGE> 30 of 42
Business Experience:
The principal occupation and business experience during the last five
years for each of the Directors and Executive Officers of the Company
are as follows:
John V. Winfield -- Mr. Winfield was first appointed to the Board in
1982. He currently serves as the Company's Chairman of the Board,
President and Chief Executive Officer, having first been appointed as
such in 1987. Mr. Winfield also serves as President, Chairman and Chief
Executive Officer of Santa Fe Financial Corporation ("Santa Fe") and
Portsmouth Square, Inc. ("Portsmouth") and Chairman of the Board of
Healthy Planet Products, Inc. ("Healthy Planet"), and Etz Lavud, Ltd., all
public companies.
Josef A. Grunwald -- Mr. Grunwald is an industrial, commercial and
residential real estate developer. He serves as Chairman of PDG N.V.
(Belgium), a hotel management company, and President of I.B.E. Services
S.A. (Belgium), an international trading company. Mr. Grunwald was
first elected to the Board in 1987. Mr. Grunwald is also a Director of
Portsmouth and Etz Lavud, Ltd.
William J. Nance -- Mr. Nance is a Certified Public Accountant and
private consultant to the real estate and banking industries. He also
serves as President of Century Plaza Printer, Inc. Mr. Nance was first
elected to the Board in 1984. He was appointed Treasurer, Chief
Operating Officer and Chief Financial Officer in 1987. Mr. Nance
resigned as Chief Operating Officer and Chief Financial Officer in
January 1990 but continues to serve as Treasurer. Mr. Nance is also a
Director of Santa Fe, Portsmouth and Healthy Planet.
Mildred Bond Roxborough -- Ms. Roxborough was Director of Development
and Special Programs of the National Association for the Advancement of
Colored People (NAACP) from 1986 to 1997. She also served as Vice
Chairman of the Board of Directors of America's Charities Federation,
Chairman of its Membership and Personnel Committees and member of its
Long Range Planning Committee; and Member of the Board of Directors of
Morningside Health and Retirement Service, Member of Personnel Committee
of Morningside Heights Housing Corporation. Since 1997 Ms. Roxborough
has served as a consultant to the NAACP. Ms. Roxborough was first
appointed to the Company's Board in 1984 and served as Vice Chairman
from 1987 through 1994.
Gary N. Jacobs -- Mr. Jacobs was appointed to the Board and as Secretary
in 1998. Mr. Jacobs is Executive Vice President of MGM Mirage (NYSE: MGG) and
Of Counsel to the law firm of Christensen, Miller, Fink, Jacobs, Glaser, Weil
& Shapiro, LLP. Through May 31, 2000 he was a partner of said firm and the
head of the corporate department. Mr. Jacobs graduated summa cum laude from
Brandeis University and from Yale Law School, where he was Order of the
Coif. He is a Trustee of the Natural History Museum of Los Angeles
County and a member of the Board of Overseers of Brandeis University's
Graduate School of International Economics and Finance.
John C. Love -- Dr. Love was appointed to the Board in 1998. He is an
independent consultant to the hospitality and tourism industries and was
formerly a general partner in the national CPA and consulting firm of
Pannell Kerr Forster. He is Chairman Emeritus of the Board of Trustees
of Golden Gate University in San Francisco. Dr. Love is also a Director
of Santa Fe and Portsmouth.
Gregory C. McPherson -- Mr. McPherson joined the Company in 1993.
Prior to joining the Company, Mr. McPherson was a private financial and
strategic advisor, served as Vice President in the Investment Banking
<PAGE> 31 of 42
and Corporate Finance Department of Kemper Securities Group, Inc., was
with Prudential Bache Capital Funding in their Mergers and Acquisitions
and Financial Restructuring Group and was a manager at the public
accounting firm of PricewaterhouseCoopers LLP. Mr. McPherson received an
M.B.A. from the Harvard Business School and is a Certified Public
Accountant. Effective March 23, 2000, Mr. McPherson was named as Interim
President of Healthy Planet. He also serves as a special consultant to
Portsmouth.
Michael G. Zybala -- Mr. Zybala was appointed Vice President Operations and
Assistant Secretary of the Company on January 27, 1999. Mr. Zybala is an
attorney at law and has served as a special legal consultant to the Company.
Mr. Zybala is also the Vice President, Secretary and Treasurer of Santa Fe and
Portsmouth and has served as their General Counsel since 1995. Mr. Zybala has
provided legal services to Santa Fe and Portsmouth since 1978. Mr. Zybala is
also a Director of Healthy Planet and has served as its Secretary since August
1998.
Family Relationships: There are no family relationships among directors,
executive officers, or persons nominated or chosen by the Company to become
directors or executive officers.
Involvement in Certain Legal Proceedings: No director or executive officer,
or person nominated or chosen to become a director or executive officer, was
involved in any legal proceeding requiring disclosure.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and each beneficial owner of more than ten percent of
the Common Stock of the Company, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors
and greater than ten-percent shareholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that during fiscal 2000 all
filing requirements applicable to its officers, directors, and greater than
ten-percent beneficial owners were complied with.
Item 10. Executive Compensation.
The following table provides certain summary information concerning
compensation awarded to, earned by, or paid to the named Executive Officers
and one employee of the Company who earned more than $100,000 (salary and
bonus) for all services rendered to the Company and its subsidiaries for
fiscal years 2000, 1999 and 1998. There are currently no employment contracts
with the Executive Officers.
<PAGE> 32 of 42
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
------------------- ------------
Awards
------
Securities
Name and Principal Other Annual Underlying
Position Year Salary Bonus Compensation Options/SARs
------------------- ------ ------- ------ ------------- ------------
<S> <C> <C> <C> <C> <C>
John V. Winfield
Chairman; President 2000 $522,000(1) - $68,359(2) -
and Chief Executive 1999 $457,572(1) - $56,200(2) 150,000(3)
Officer 1998 $235,397(1) - $43,193(2) -
Gregory C. McPherson 2000 $158,006(4) $ 25,000 -
Executive Vice President; 1999 $170,331(4) $ 10,000 -
and Assistant Treasurer 1998 $185,856(4) $ 10,000 -
Michael G. Zybala 2000 $127,465(5) $ 20,000 -
Vice President Operations 1999 $118,850(5) $ 10,000 -
David C. Gonzalez 2000 $120,000 $100,000 $32,071(6)
Director of Real Estate 1999 $120,000 $ 55,000
1998 $105,000 $ 60,000
---------------------
</TABLE>
(1) Mr. Winfield also serves as President and Chairman of the Board of of the
Company's subsidiary, Santa Fe, and Santa Fe's subsidiary, Portsmouth. Mr.
Winfield received salary and directors fees of $252,000, $200,282, and
$133,319 from those entities during fiscal years 2000, 1999 and 1998,
respectively, which amounts are included in this item.
(2) Amounts include an auto allowance and compensation for a portion of the
salary of an assistant. The auto allowance was $29,700, $29,193 and $29,693
during fiscal years 1999, 1998 and 1997, respectively. The amount of
compensation related to the assistant was approximately $32,000, $26,500 and
$14,000 during fiscal years 2000, 1999 and 1998 respectively. During fiscal
2000 and 1999, the Company also paid annual premiums in the amount of $42,577
for a split dollar whole life insurance policy owned by, and the beneficiary
of which is, a trust for the benefit of Mr. Winfield's family. The Company
has a secured right to receive, from any proceeds of the policy, reimbursement
of all premiums paid prior to any payment to the beneficiary. During fiscal
years 2000 and 1999 Santa Fe and Portsmouth also paid annual premiums on split
dollar policies in the total amount of $41,500.
(3) On December 22, 1998 Mr. Winfield was granted options to purchase up to
150,000 shares of the Common Stock of the Company at an exercise price of
$11.875 per share, which was the closing price of the Common Stock on the date
of grant. The term of the options is for the period beginning December 22,
1998 and ending on December 21, 2008. No options may be exercised prior to
June 8, 1999 and vest according to the following schedule: December 22, 1998 -
37,500 shares; January 27, 1999 - 37,500 shares; December 22, 1999 - 37,500
shares; December 22, 2000 - 37,500 shares.
(4) Mr. McPherson is a consultant of Portsmouth and received annual consulting
fees of $88,200 during the fiscal years 2000, 1999 and 1998, which are
included in this item.
(5) Mr. Zybala became Vice President Operations in January 1999. His salary
and bonuses are allocated 30% to the Company and 70% to Santa Fe and
Portsmouth.
(6) Amounts shown relate to forgiveness of unpaid balance on promissory note
due to the Company.
<PAGE> 33 of 42
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
No stock option grants or Stock Appreciation Rights ("SARs") were made during
the fiscal year ended June 30, 2000 to any of the named executive officers of
the Company.
AGGREGATE OPTIONS/SAR EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
The following table contains information concerning each exercise of stock
options (or tandem SARs) and freestanding SARs during the last completed
fiscal year by each of the named executive officers and the fiscal year-end
value of unexercised options and SARs.
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired on Value Options/SARs as of In-the-Money Options/
Name Exercise (#) Realized ($) June 30, 2000 at June 30, 2000
---- ------------ ----------- ----------------------- --------------------
Exercisable/Unexercisable Exercisable/Unexercisable
------------------------- -------------------------
<S> <C> <C> <C> <C>
John V.
Winfield - $ - 112,500/37,500 $689,063/$229,688(1)
--------------
</TABLE>
(1) Based on the closing price of the Company's Common Stock on June 30, 2000
of $18.00 per share.
1998 Stock Option Plan for Non-Employee Directors
On December 8, 1998, the Board of Directors of the Company adopted, subject to
stockholder approval and ratification, a 1998 Stock Option Plan for Non-
employee Directors (the "Plan"). The stockholders ratified that plan on
January 27, 1999.
The stock to be offered under the Plan shall be shares of the Company's Common
Stock, par value $.01 per share, which may be unissued shares or treasury
shares. Subject to certain adjustments upon changes in capitalization, the
aggregate number of shares to be delivered upon exercise of all options
granted under the Plan shall not exceed 100,000 shares. The Plan shall
terminate on the earliest to occur of (i) the dates when all of the Common
Stock available under the Plan shall have been acquired through the exercise
of options granted under the Plan; (ii) 10 years after the date of adoption of
the Plan by the Board; or (iii) such other date that the Board may determine.
Pursuant the Plan, each non-employee director as of the adoption date of the
Plan shall be granted on the date thereof: (i) if he or she became a non-
employee director prior to January 1, 1998, an option to purchase 8,000 shares
of Common Stock; and (ii) if he or she became a non-employee director on or
after January 1, 1998, an option to purchase 4,000 shares of Common Stock.
Each new non-employee director who is elected to the Board shall automatically
be granted an option to purchase 4,000 shares of Common Stock upon the initial
<PAGE> 34 of 42
date of election to the Board. On each July 1 following the adoption date,
each non-employee director shall be granted an option to purchase 2,000 shares
of Common Stock provided he or she holds such position on that date and the
number of Common Shares available for grant under the Plan is sufficient to
permit such automatic grant.
The exercise price of the option shall be determined at the time of grant and
shall not be less than 100% of the fair market value of the Common Stock at
the time of the grant of the option. The term of the option shall be for ten
years. Options granted to any non-employee director will not vest 100% until
such person has been a member of the Board for four (4) years or more. Non-
employee directors who have been a member of Board less than four (4) years,
shall be vested with respect to 20% of the options on the date of grant and
20% on each anniversary of such person having become a member of the Board,
provided that the optionee is on each such date serving as a member of the
Board or as an employee or consultant to the Company.
Pursuant to the plan, the following non-employee directors of the Company were
granted options during fiscal 2000 to purchase shares of Common Stock: Josef
A. Grunwald (2,000 shares); William J. Nance (2,000 shares); Mildred Bond
Roxborough (2,000 shares); Gary N. Jacobs (2,000 shares); and John C. Love
(2,000 shares). The exercise price for the options is $12.25 per share, which
was the closing price of the Company's Common Stock on the Nasdaq National
Market System as of the date of grant on July 1, 1999.
1998 Stock Option Plan for Selected Key Officers,
Employees and Consultants
On December 8, 1998, the Board of Directors of the Company adopted, subject to
shareholder approval and ratification, a 1998 Stock Option Plan for selected
key officers, employees and consultants (the "Key Employee Plan"). The Key
Employee Plan was ratified by the stockholders on January 27, 1999.
The stock to be offered under the Key Employee Plan shall be shares of the
Company's Common Stock, par value $.01 per share, which may be unissued shares
or treasury shares. Subject to certain adjustments upon changes in
capitalization, the aggregate number of shares to be delivered upon exercise
of all options granted under the Key Employee Plan shall not exceed 200,000
shares. The Key Employee Plan shall terminate on the earliest to occur of (i)
the dates when all of the Common Stock available under the Key Employee Plan
shall have been acquired through the exercise of options granted under the Key
Employee Plan; (ii) 10 years after the date of adoption of the Key Employee
Plan by the Board; or (iii) such other date that the Board may determine.
The Key Employee Plan is administered by a Committee appointed by the
Board of Directors which consists of two or more disinterested persons
within the meaning of Rule 16b-3 promulgated pursuant to the Securities
Exchange Act of 1934 (the "Exchange Act"). Persons eligible to receive
options under the Key Employee Plan shall be employees who are selected by the
Committee. In determining the Employees to whom options shall be granted and
the number of shares to be covered by each option, the Committee shall take
into account the duties of the respective employee, their present and
potential contribution to the success of the Company, their anticipated number
of years of active service remaining and other factors as it deems relevant in
connection with accomplishing the purposes of the Key Employee Plan. An
employee who has been granted an option may be granted an additional option or
options as the Committee shall so determine.
The exercise price of the option shall be determined at the time of grant and
shall not be less than 100% of the fair market value of the Common Stock at
the time of the grant of the option. The term of the option shall not exceed
<PAGE> 35 of 42
10 years from the date on which the option is granted. The vesting schedule
for the options and the method or time that when the option may be exercised
in whole or in part shall be determined by the Committee. However, in no
event shall an option be exercisable within six months of the date of grant in
the case of an optionee subject to Section 16(b) of the Exchange Act. Subject
to certain exceptions, the option shall terminate six months after the
optionee's employment with the Company terminates. As discussed above,
options to purchase 150,000 shares were granted to the Company's CEO during
fiscal 1999 pursuant to the Key Employee Plan.
Employee Stock Ownership Plan and Trust ("ESOP")
In April 1986, the Company established an Employee Stock Ownership Plan
and Trust ("ESOP" or the "Plan"), effective July 1985, which enabled
eligible employees to receive an ownership interest in Common Stock of the
Company. The Company did not make any ESOP contributions during fiscal year
1999, made $816 in ESOP contributions during fiscal year 1998 and no
contributions in fiscal year 1997. The Company made distributions of 1,680
shares (adjusted for splits) to terminated employees during fiscal year 1998
and made no distributions during fiscal years 1999 and 1997. Effective
November 15, 1998, the Plan was terminated and the interest of each
participant was fully vested and nonforfeitable. The Plan benefits will be
distributed in due course following appropriate governmental filings and
approvals, notices to participants, and other procedures and actions
considered appropriate by the Company.
Compensation of Directors
Each director is paid a fee of $1,500 per quarter for a total annual
compensation of $6,000. The Chairman of the Board of Directors is eligible to
receive $9,000 per annum. Directors also are eligible to receive $500 for each
committee meeting attended and $600 for each committee meeting chaired.
Members of the Audit Committee receive a fee of $500 per quarter. Directors
who are also Executive Officers do not receive any fee for attending Board or
Committee meetings. As an Executive Officer, the Company's Chairman has also
elected to forego his annual board fee. The Directors are also eligible for
grants of options to purchase shares of the Company's Common Stock pursuant to
the 1998 Stock Option Plan for Non-Employee Directors.
Except for the foregoing, there are no other arrangements for compensation of
Directors and there are no employment contracts between the Company and its
Directors.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of September 15, 2000, certain
information with respect to the beneficial ownership of Common Stock
owned by (i) those persons or groups known by the Company to own more
than five percent of the outstanding shares of Common Stock, (ii) each
Director and Executive Officer, and (iii) all Directors and Executive
Officers as a group.
<PAGE> 36 of 42
Name and Address of Amount and Nature
Beneficial Owner of Beneficial Owner(1) Percentage(2)
-------------------- ---------------------- --------------
John V. Winfield 1,038,438(3) 50.1%
820 Moraga Drive
Los Angeles, CA 90049
Josef A. Grunwald 85,045(2) 4.4%
820 Moraga Drive
Los Angeles, CA 90049
William J. Nance 50,250(2) 2.6%
820 Moraga Drive
Los Angeles, CA 90049
Mildred Bond Roxborough 14,350(2) *
820 Moraga Drive
Los Angeles, CA 90049
Gary N. Jacobs 7,050(2)(4) *
820 Moraga Drive
Los Angeles, CA 90049
John C. Love 4,800(2) *
820 Moraga Drive
Los Angeles, CA 90049
Gregory C. McPherson 8,993(5) *
820 Moraga Drive
Los Angeles, CA 90049
Michael G. Zybala 0 *
820 Moraga Drive
Los Angeles, CA 90049
All Directors and
Executive Officers as a
Group (8 persons) 1,208,926 57.1%
------------------
* Ownership does not exceed 1%.
(1) Unless otherwise indicated and subject to applicable community
property laws, each person has sole voting and investment power with
respect to the shares beneficially owned.
(2) Percentages are calculated on the basis of 1,929,237 shares of
Common Stock outstanding at September 15, 2000, plus any securities that
person has the right to acquire within 60 days pursuant to options, warrants,
conversion privileges or other rights. The following options are included in
directors shares: Joseph Grunwald - 12,000 shares; William J. Nance - 12,000
shares; Mildred Bond Roxborough - 12,000 shares; Gary N. Jacobs 4,800 shares;
John C. Love 4,800 shares.
(3) Includes 31,113 shares allocated to Mr. Winfield under the ESOP and
112,500 shares of which Mr. Winfield has the right to acquire pursuant to
options. Does not include an additional 15,151 shares held by the ESOP with
respect to which Mr. Winfield, as trustee, would have the power to vote if
voting instructions are not provided by the participants on a timely basis.
(4) Other than his options, all shares of Mr. Jacobs are held by the Gary and
Robin Jacobs Family Trust.
(5) Includes 3,594 shares allocated to Mr. McPherson under the ESOP.
<PAGE> 37 of 41
Item 12. Certain Relationships and Related Transactions.
On April 26, 1999, the Executive Committee of the Company authorized a short-
term loan from the Company to the Company's Chairman and President in the
amount of $426,000 at an interest rate equal to the prime rate, as of the date
of the loan, plus one percent (8.75%). All principal and interest under the
loan was due on May 31, 1999. The loan was repaid in full with interest on
May 31, 1999.
On January 4, 1999, the Executive Committee of the Company authorized a short-
term loan from the Company to the Company's Chairman and President in the
amount of $350,000 at an interest rate equal to the prime rate, as of the date
of the loan, plus one percent (9.5%). All principal and interest under the
loan was due on March 31, 1999. The loan was repaid in full with interest on
March 31, 1999.
On December 4, 1998, the Administrative and Compensation Committee authorized
the Company to obtain whole life and split dollar insurance policies covering
the Company's President and Chief Executive Officer, Mr. Winfield. During
fiscal 2000 and 1999, the Company paid annual premiums in the amount of
$42,577 for the split dollar whole life insurance policy owned by, and the
beneficiary of which is, a trust for the benefit of Mr. Winfield's family.
The Company has a secured right to receive, from any proceeds of the policy,
reimbursement of all premiums paid prior to any payments to the beneficiary.
On June 30, 1998, the Company's Chairman and President entered into a voting
trust agreement with the Company giving the Company the power to vote on his
3.7% interest in the outstanding shares of the Santa Fe common stock.
In May 1996, the Company's Chairman and President exercised options to
purchase 421,875 shares (adjusted for stock splits) of Common Stock at a price
of $3.41(adjusted for stock splits) per share through a full recourse note due
the Company on demand, but in no event later than May 2001. The note bears
interest floating at the lower of 10% or the prime rate (9.50% at June 30,
2000) with interest payable quarterly. The balance of the note receivable of
$1,438,000 is reflected as a reduction of shareholders' equity at June 30,
2000. During the fiscal years ended June 30, 2000 and 1999, the President of
the Company made interest payments of approximately $131,000 and $122,000,
respectively in connection with the note relating to his 1996 exercise of
stock options.
The Company's Chairman and President directs the investment activity of
the Company, Santa Fe and Portsmouth in public and private markets
pursuant to authority granted by the Board of Directors of each entity.
Depending on certain market conditions and various risk factors, the
President and members of his immediate family may at times invest in the
same companies in which the Company, Santa Fe and Portsmouth invest.
The Company, Santa Fe and Portsmouth encourage such investments because
it places personal resources of the President and his family members at
risk in connection with investment decisions made on behalf of the
Company, Santa Fe and Portsmouth. Following allegations concerning the
President made by a former officer and director of the Company, the
Board of Directors authorized committees of the Board to conduct a
thorough and independent review of such matters, including the Company's
practices in this regard. The committee advised the Board of Directors
that it found the material allegations of improprieties made by the
former officer and director could not be substantiated. The committee
made recommendations that the Company institute certain modifications to
its existing procedures to reduce the potential for conflicts of
interest. The Company's Board of Directors has adopted these
recommendations.
<PAGE> 38 of 42
Gary N. Jacobs, a Director of the Company, is Of Counsel to the law firm of
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP. Through May
31, 2000 he was a senior partner of said firm, which provided legal services
to the Company during the years ended June 30, 2000 and 1999. During the
years ended June 30, 2000 and 1999, the Company made payments of approximately
$216,000 and $269,750, respectively to Christensen, Miller, Fink, Jacobs,
Glaser, Weil & Shapiro, LLP.
Item 13. Exhibits, List and Reports on Form 8-K.
(a) Exhibits:
3. Certificate of Incorporation and By-Laws **
Restated Certificate of Incorporation dated February 20, 1998 is
incorporated herein by reference to the Company's Form 10-QSB Report
filed with the Securities and Exchange Commission on May 15, 1998.
4. Instruments defining the rights of security holders, including
Indentures **
9. Voting Trust Agreement
Voting Trust Agreement dated June 30, 1998 between John V. Winfield and
The Intergroup Corporation is incorporated by reference to the Company's
Form 10-KSB Annual Report filed with the Securities and Exchange
Commission on September 28, 1998.
10. Material Contracts
(a) Stock Option Agreement dated December 19, 1984 between the Trust and
John V. Winfield *
(b) Share of Beneficial Interest Unit Plan ("phantom stock program")
as approved by the shareholders on February 11, 1985 *
(c) Employee Stock Ownership Plan and Trust Agreement ***
(d) Stock Appreciation Rights Agreement dated April 22, 1987 as approved
by shareholders on August 1, 1988 ****
(e) Note and Exercise Agreement from Mr. John V. Winfield dated May 17,
1996 *****
(f) 1998 Stock Option Plan for Non-Employee Directors approved by the
Board of Directors on December 8, 1998 and ratified by the
shareholders on January 27, 1999 ******
(g) 1998 Stock Option Plan for Selected Key Officers, Employees and
Consultants approved by the Board of Directors on December 8, 1998
and ratified by the shareholders on January 27, 1999 ******
21. Subsidiaries:
(1) Intergroup Summit Hills, Inc. (incorporated on August 12, 1993 in TX)
(2) Intergroup Mariposa, Inc. (incorporated on June 23, 1994 in TX)
(3) Intergroup Arlington Arms, Inc. (incorporated on August 5, 1993 in TX)
(4) Intergroup Woodland Village, Inc. (incorporated on August 5, 1993 in OH)
(5) Intergroup Cross Keys, Inc. (incorporated on April 1, 1994 in MO)
(6) Intergroup Bridgeton, Inc. (incorporated on May 12, 1994 in MO)
<PAGE> 39 of 42
(7) Intergroup Whisperwood, Inc. (incorporated on June 20, 1994 in PA)
(8) Intergroup Eagle Creek, Inc. (incorporated on April 15, 1994 in TX)
(9) Intergroup Entertainment Corp. (incorporated on December 23, 1993 in DE)
(10) Mutual Real Estate Corp. (incorporated on March 10, 1994 in TX)
(11) WinGroup Capital (incorporated on September 21, 1994 in CA)
(12) Broadview Enterprises, Inc. (incorporated April 14, 1995 in MO)
(13) Wayward, Inc. (incorporated April 18, 1995 in MO)
(14) Golden West Entertainment, Inc. (incorporated February 15, 1990 in CA)
(15) Golden West Television Productions, Inc. (incorporated September 17, 1991
in CA)
(16) Golden West Television Productions, Inc. (incorporated March 17, 1986 in
NY)
(17) Intergroup The Trails, Inc. (incorporated on September 14, 1994 in TX)
(18) Intergroup Meadowbrook Gardens, Inc. (incorporated on June 23, 1994 in
NJ)
(19) Intergroup Pine Lake, Inc. (incorporated on February 9, 1996 in KY)
(20) Bellagio Capital Fund, LLC (established on June 18, 1997 in CA)
(21) Intergroup Casa Maria, Inc. (incorporated on April 3, 1997 in TX)
(22) Casa Maria Limited Partnership (established August 19, 1993 in KS)
(23) Healthy Planet Communications, Inc. (incorporated July 3, 1997 in CA)
(24) Santa Fe Financial Corporation (incorporated July 25, 1967 in NV)
(25) Portsmouth Square, Inc. (incorporated July 6, 1967 in CA)
(26) 2301 Bel-Air Equity, Inc. (incorporated May 25, 2000 in CA)
(27) 11378 Ovada Properties, Inc. (incorporated June 21, 2000 in CA)
(28) 11371 Ovada Properties, Inc. (incorporated May 25, 2000 in CA)
(29) 11361 Ovada Properties, Inc. (incorporated June 1, 2000 in CA)
(30) 11680 Bellagio Properties, Inc. (incorporated May 25, 2000 in CA)
(31) North Sepulveda Properties, Inc. (incorporated June 21, 2000 in CA)
27. Financial Data Schedule
* All Exhibits marked by an asterisk are incorporated herein by reference to
the Trust's Form 10-K Annual Report filed with the Securities and Exchange
Commission on September 20, 1985.
** All Exhibits marked by two asterisks are incorporated herein by reference
to the Trust's Registration Statement on Form S-4 as filed with the Securities
and Exchange Commission on September 6, 1985, Amendment No. 1 to Form S-4 as
filed with the Securities and Exchange Commission on October 23, 1985, Exhibit
14 to Form 8 Amendment No. 1 to Form 8 filed with the Securities & Exchange
Commission November 1987 and Form 8 Amendment No. 1 Item 4 filed with the
Securities & Exchange Commission October 1988.
*** All Exhibits marked by three asterisks are incorporated herein by
reference to the Company's Form 10-K Annual Report filed with the Securities
and Exchange Commission on September 26, 1986.
**** All Exhibits marked by four asterisks are incorporated herein by
reference to the Company's Form 10-K Annual Report filed with the Securities
and Exchange Commission on September 28, 1988.
***** All Exhibits marked by five asterisks are incorporated herein by
reference to the Company's Form 10-KSB Annual Report filed with the Securities
and Exchange Commission on September 16, 1996.
****** All Exhibits marked by six asterisks are incorporated herein by
reference to the Company's Schedule 14A filed with the Securities and
Exchange Commission on December 21, 1998.
<PAGE> 40 of 42
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
THE INTERGROUP CORPORATION
(Registrant)
Date: September 25, 2000 by /s/ John V. Winfield
------------------ ---------------------------------------
John V. Winfield, Chairman of the Board,
President and Chief Executive Officer
Date: September 25, 2000 by /s/ Gregory C. McPherson
------------------ --------------------------------------
Gregory C. Mc Pherson,
Executive Vice President
Date: September 25, 2000 by /s/ Michael G. Zybala
------------------ --------------------------------------
Michael G. Zybala,
Vice President Operations
Date: September 25, 2000 by /s/ David Nguyen
------------------ --------------------------------------
David Nguyen, Controller
(Principal Accounting Officer)
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Date: September 25, 2000 /s/ John V. Winfield
-------------------- ---------------------------------------
John V. Winfield, Chairman of the Board,
President and Chief Executive Officer
Date: September 25, 2000 /s/ Josef A. Grunwald
------------------ ---------------------------------------
Josef A. Grunwald, Director
Date: September 25, 2000 /s/ Gary N. Jacobs
------------------ ----------------------------------------
Gary N. Jacobs, Director
Date: September 25, 2000 /s/ John C. Love
------------------ ----------------------------------------
John C. Love, Director
Date: September 25, 2000 /s/ William J. Nance
------------------ ---------------------------------------
William J. Nance, Director
Date: September 25, 2000 /s/ Mildred Bond Roxborough
------------------ ---------------------------------------
Mildred Bond Roxborough
<PAGE> 41 of 42
