SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Commission file number 1-8951
M.D.C. Holdings, Inc.
401(k) Savings Plan
3600 South Yosemite
Suite 900
Denver, Colorado 80237
(Full Title and Address of the Plan)
M.D.C. Holdings, Inc.
(Name of Issuer of Securities held pursuant to the Plan)
3600 South Yosemite Street
Suite 900
Denver, Colorado 80237
(Address of Principal Executive Office of Issuer
of the Securities Held Pursuant to the Plan)
<PAGE>
REQUIRED INFORMATION
1. Audited Statements of Net Assets Available for Benefits (with Fund
Information) as of December 31, 1998 and 1997 (incorporated by
reference to the M.D.C. Holdings, Inc. 401(k) Savings Plan Financial
Statements and Additional Information attached hereto as Exhibit 99.1).
2. Audited Statements of Changes in Net Assets Available for Benefits
(with Fund Information) for the years ended December 31, 1998 and 1997
(incorporated by reference to the M.D.C. Holdings, Inc. 401(k) Savings
Plan Financial Statements and Additional Information attached hereto as
Exhibit 99.1).
3. Notes to Financial Statements (with Fund Information) (incorporated by
reference to the M.D.C. Holdings, Inc. 401(k) Savings Plan Financial
Statements and Additional Information attached hereto as Exhibit 99.1).
4. Schedule 1 - Item 27a - Schedule of Assets Held for Investment purposes
as of December 31, 1998 (incorporated by reference to the M.D.C.
Holdings, Inc. 401(k) Savings Plan Financial Statements and Additional
Information attached hereto as Exhibit 99.1).
5. Schedule 2 - Item 27d - Schedule of Reportable Transactions for the
year ended December 31, 1998 (incorporated by reference to the M.D.C.
Holdings, Inc. 401(k) Savings Plan Financial Statements and Additional
Information attached hereto as Exhibit 99.1).
Pursuant to the requirements of the Securities Exchange Act of 1934, the
administrator of the Plan has duly caused this annual report to be signed by the
undersigned thereunto duly authorized.
Date: June 30, 1999 M.D.C. Holdings, Inc. 401(k) Savings
Plan
By: /s/ Daniel S. Japha
-----------------------
Daniel S. Japha
Plan Administrator
<PAGE>
EXHIBITS
Exhibit Description
- ------- -----------
23.1 Consent of PricewaterhouseCoopers LLP.
99.1 M.D.C. Holdings, Inc. 401(k) Savings Plan Financial Statements
and Additional Information
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 of M.D.C. Holdings, Inc. of our report dated June 28, 1999
appearing on page 1 of the Financial Statements of the M.D.C. Holdings,
Inc. 401(k) Savings Plan for the year ended December 31, 1998 which appears in
this Form 11-K.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Denver, Colorado
June 30, 1999
EXHIBIT 99.1
M.D.C. Holdings, Inc.
401(k) Savings Plan
Financial Statements and
Additional Information
December 31, 1998 and 1997
<PAGE>
M.D.C. Holdings, Inc.
401(k) Savings Plan
Index
Page
Financial Statements:
Report of Independent Accountants 1
Statement of Net Assets Available for Benefits, with
Fund Information 2-3
Statement of Changes in Net Assets Available for Benefits,
with Fund Information 4-6
Notes to Financial Statements 7-12
Additional Information:
Schedule I - Schedule of Assets Held for Investment Purposes 13
Schedule II - Schedule of Reportable Transactions 14
<PAGE>
Report of Independent Accountants
To the Participants and Administrator
of the M.D.C. Holdings, Inc. 401(k) Savings Plan
In our opinion, the accompanying statements of net assets available for
benefits, with fund information and the related statements of changes in net
assets available for benefits, with fund information, present fairly, in all
material respects, the net assets available for benefits of the M.D.C. Holdings,
Inc. 401(k) Savings Plan at December 31, 1998 and 1997, and the changes in net
assets available for benefits for the years then ended, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Plan's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards 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.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets held
for investment purposes and reportable transactions are presented for the
purpose of additional analysis and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The fund information in the
statements of net assets available for benefits and the statements of changes in
net assets available for benefits is presented for the purposes of additional
analysis rather than to present the net assets available for plan benefits and
changes in net assets available for benefits of each fund. These supplemental
schedules and fund information are the responsibility of the Plan's management.
The supplemental schedules and fund information have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
The schedule of assets held for investment purposes and the schedule of
reportable transactions that accompany the Plan's financial statements do not
disclose the historical cost of certain plan assets. Disclosure of this
information is required by the Department of Labor Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974.
Denver, Colorado
June 28, 1999
<PAGE>
The accompanying notes are an integral part of these financial statements.
M.D.C. Holdings, Inc.
401(k) Savings Plan
Statement of Net Assets Available for Benefits, with Fund Information
As of December 31, 1998
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
Investments Employer Employee
Assets at Fair Value Receivable Receivable Total
<S> <C> <C> <C> <C>
EuroPacific Growth Fund $ 61,734 - $ 3,325 $ 65,059
Fidelity Advisor Growth Opportunities Fund 5,529,960 - 20,834 5,550,794
The Income Fund of America 1,854,298 - 7,770 1,862,068
INVESCO Dynamics Fund 277,892 - 16,982 294,874
NeubergerBerman Genesis Fund 160,202 - 6,245 166,447
The Victory Stock Index Fund; Class A Shares 2,908,888 - 18,822 2,927,710
Washington Mutual Investor Fund, Inc. 204,632 - 12,593 217,225
The Bond Fund of America, Inc. 61,954 - 3,272 65,226
EB Managed Guaranteed Investment Contract 2,926,706 - 10,877 2,937,583
Participant Notes Receivable 463,831 - - 463,831
M.D.C. Stock Fund 1,587,878 $ 1,497,447 7,667 3,092,992
----------- ----------- -------- -----------
Net assets available for benefits $16,037,975 $ 1,497,447 $108,387 $17,643,809
=========== =========== ======== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
M.D.C. Holdings, Inc.
401(k) Savings Plan
Statement of Net Assets Available for Benefits, with Fund Information
As of December 31, 1997
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets Investments Employer Employee
at Fair Value Receivable Receivable Total
<S> <C> <C> <C> <C>
CIGNA Charter Guaranteed Long-Term Fund $ 2,494,051 - $ 12,868 $ 2,506,919
CIGNA Charter Guaranteed Short-Term Fund 259,658 - 2,396 262,054
CIGNA Charter Large Company Stock Index Fund 1,799,913 - 13,283 1,813,196
CIGNA Charter Balanced Fund 274,378 - 2,723 277,101
CIGNA Fidelity Advisor Growth Opportunities Fund 4,221,105 - 23,521 4,244,626
CIGNA Fidelity Advisor Balanced Fund 1,431,268 - 6,148 1,437,416
Participant Notes Receivable 284,420 - - 284,420
M.D.C. Stock Fund 651,897 $ 565,427 1,467 1,218,791
----------- ------------- ------------ -----------
Net assets available for benefits $11,416,690 $ 565,427 $ 62,406 $12,044,523
=========== ============= ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
M.D.C. Holdings, Inc.
401(k) Savings Plan
Statement of Changes in Net Assets Available for Benefits, with Fund Information
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31, 1998
Participant Directed
----------------------------------------------------------------------------------------
Charter Charter
Guaranteed Guaranteed Charter Large Fidelity
Long-Term Short-Term Company Stock Charter Advisor
Fund Fund Index Fund Balanced Fund Balanced Fund
<S> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income
Interest and dividends $ 69,514 $ 5,077 $ - $ - $ -
Net appreciation (depreciation) in
fair value of investments - - 352,347 34,059 172,448
------------ ------------ ------------ ------------ ------------
69,514 5,077 352,347 34,059 172,448
------------ ------------- ------------ ------------ ------------
Contributions
Employer - - - - -
Employee 220,733 29,852 283,560 48,088 138,972
------------ ------------ ------------ ------------ ------------
220,733 29,852 283,560 48,088 138,972
------------ ------------ ------------ ------------ ------------
Total additions 290,247 34,929 635,907 82,147 311,420
Deductions from net assets attributed to:
Benefit payments (148,929) (12,226) (115,802) (6,907) (127,091)
Transaction charge (295) (139) (258) (41) (149)
Participant notes receivable
terminated due to withdrawal of
participants - - - - -
------------ ------------ ------------ ------------ ------------
Total deductions (149,224) (12,365) (116,060) (6,948) (127,240)
Change in forfeitures (52,303) (166) (3,437) (668) (2,557)
------------ ------------ ------------ ------------ -------------
Net increase (decrease) prior to fund
transfers 88,720 22,398 516,410 74,531 181,623
Interfund transfers, net (171,705) (17,576) 124,195 11,039 (127,823)
Transfer of assets between Trustees, net (2,423,934) (266,876) (2,453,801) (362,671) (1,491,216)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets (2,506,919) (262,054) (1,813,196) (277,101) (1,437,416)
Net assets available for benefits at
beginning of year 2,506,919 262,054 1,813,196 277,101 1,437,416
------------ ------------ ------------ ------------ ------------
Net assets available for benefits at end of $ - $ - $ - $ - $ -
year ============ ============ ============ ============ =============
For the Year Ended December 31, 1998
Participant Directed
-----------------------------------------------------------------
Fidelity Advisor
Growth The Income
EuroPacific Opportunities Fund of
Growth Fund Fund America
<S> <C> <C> <C>
Additions to net assets attributed to:
Investment income
Interest and dividends $ 1,793 $ 217,355 $ 165,035
Net appreciation (depreciation) in
fair value of investments 2,163 827,709 (126,901)
------------ -------------- ------------
3,956 1,045,064 38,134
------------ -------------- ------------
Contributions
Employer - - -
Employee 59,994 813,945 144,638
------------ -------------- ------------
59,994 813,945 144,638
------------ -------------- ------------
Total additions 63,950 1,859,009 182,772
Deductions from net assets attributed to:
Benefit payments (169) (585,187) (81,824)
Transaction charge (18) (2,049) (552)
Participant notes receivable
terminated due to withdrawal of
participants - - -
------------ -------------- ------------
Total deductions (187) (587,236) (82,376)
Change in forfeitures - (6,374) -
------------ -------------- ------------
Net increase (decrease) prior to fund
transfers 63,763 1,265,399 100,396
Interfund transfers, net 1,296 40,769 (93,684)
Transfer of assets between Trustees, net - - 1,855,356
------------ -------------- ------------
Net increase (decrease) in net assets 65,059 1,306,168 1,862,068
Net assets available for benefits at
beginning of year - 4,244,626 -
------------ -------------- ------------
Net assets available for benefits at end of
year $ 65,059 $ 5,550,794 $ 1,862,068
============ ============== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
M.D.C. Holdings, Inc.
401(k) Savings Plan
Statement of Changes in Net Assets Available for Benefits with Fund Information
(continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31, 1998
Participant Directed
---------------------------------------------------------------------------------------
The Victory
Stock Washington EB Managed
Neuberger- Index Fund; Mutual The Bond Guaranteed
INVESCO Berman Class A Investor Fund, Fund Of Investment
Dynamics Genesis Fund Shares Inc. America, Inc. Contract
Fund
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income
Interest and dividends $ 18,571 $ 2,258 $ 261,099 $ 15,512 $ 1,311 $ -
Net appreciation (depreciation) in
fair value of investments 24,167 6,464 (57,090) (148) (180) 82,920
------------ ------------ ------------ ------------ ------------ ------------
42,738 8,722 204,009 15,364 1,131 82,920
------------ ------------ ------------ ------------ ------------ ------------
Contributions
Employer - - - - - -
Employee 240,130 145,732 348,270 167,468 54,525 221,044
------------ ------------ ------------ ------------ ------------ ------------
240,130 145,732 348,270 167,468 54,525 221,044
------------ ------------ ------------ ------------ ------------ ------------
Total additions 282,868 154,454 552,279 182,832 55,656 303,964
Deductions from net assets attributed to:
Benefit payments (1,060) (767) (103,089) (1,229) (404) (101,364)
Transaction charge (81) (46) (874) (61) (18) (870)
Participant notes receivable
terminated due to withdrawal of
participants - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
Total deductions (1,141) (813) (103,963) (1,290) (422) (102,234)
Change in forfeitures - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) prior to fund
transfers 281,727 153,641 448,316 181,542 55,234 201,730
Interfund transfers, net 12,230 12,405 25,192 34,251 9,992 49,663
Transfer of assets between Trustees, net 917 401 2,454,202 1,432 - 2,686,190
------------ ------------ ------------- ------------ ------------ -------------
Net increase (decrease) in net assets 294,874 166,447 2,927,710 217,225 65,226 2,937,583
Net assets available for benefits at
beginning of year - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
Net assets available for benefits at end
of year $ 294,874 $ 166,447 $ 2,927,710 $ 217,225 $ 65,226 $ 2,937,583
============ ============ ============ ============ ============ ============
For the Year Ended December 31, 1998
Participant Directed
---------------------------------------------------------------
Participant
Notes M.D.C.
Receivable Stock Fund Total
<S> <C> <C> <C>
Additions to net assets attributed to:
Investment income
Interest and dividends $ 16,831 $ 10,687 $ 785,043
Net appreciation (depreciation) in
fair value of investments - 328,536 1,646,494
------------ ------------ ------------
16,831 339,223 2,431,537
------------ ------------ ------------
Contributions
Employer - 1,497,448 1,497,448
Employee - 236,310 3,153,261
------------ ------------ ------------
- 1,733,758 4,650,709
------------ ------------ ------------
Total additions 16,831 2,072,981 7,082,246
Deductions from net assets attributed to:
Benefit payments - (93,461) (1,379,509)
Transaction charge - (1,114) (6,565)
Participant notes receivable
terminated due to withdrawal of
participants (23,186) - (23,186)
------------ ------------ ------------
Total deductions (23,186) (94,575) (1,409,260)
Change in forfeitures - (8,195) (73,700)
------------ ------------ ------------
Net increase (decrease) prior to fund
transfers (6,355) 1,970,211 5,599,286
Interfund transfers, net 185,766 (96,010) -
Transfer of assets between Trustees, net - - -
------------ ------------ ------------
Net increase (decrease) in net assets 179,411 1,874,201 5,599,286
Net assets available for benefits at
beginning of year 284,420 1,218,791 12,044,523
------------ ------------ ------------
Net assets available for benefits at end
of year $ 463,831 $ 3,092,992 $ 17,643,809
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
M.D.C. Holdings, Inc.
401(k) Savings Plan
Statement of Changes in Net Assets Available for Benefits, with Fund Information
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 31, 1997
Participant Directed
---------------------------------------------------------------------------------------
Fidelity
Charter Charter Charter Large Advisor Fidelity
Guaranteed Guaranteed Company Charter Growth Advisor
Long-Term Short-Term Stock Index Balanced Opportunities Balanced
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income
Interest and dividends $ 124,977 $ 10,843 $ - $ - $ - $ -
Net appreciation in fair value of
investments - - 371,870 37,805 882,319 247,742
------------ ------------ ------------ ------------ ------------ ------------
124,977 10,843 371,870 37,805 882,319 247,742
------------ ------------ ------------ ------------ ------------ ------------
Contributions
Employer 90 - 48 - 1,431 345
Employee 601,244 94,409 474,247 96,197 855,399 274,481
------------ ------------ ------------ ------------ ------------ ------------
601,334 94,409 474,295 96,197 856,830 274,826
------------ ------------ ------------ ------------ ------------ ------------
Total additions 726,311 105,252 846,165 134,002 1,739,149 522,568
Deductions from net assets attributed to:
Benefit payments (162,499) (20,186) (108,099) (16,895) (510,743) (130,097)
Transaction charge (1,022) (161) (1,182) (157) (899) (179)
Participant notes receivable
terminated due to withdrawal of
participants - - - - - -
Transfer to affiliated plan (25,470) (12,665) (94,333) - (50,431) (34,163)
------------ ------------ ------------ ------------ ------------ ------------
Total deductions (188,991) (33,012) (203,614) (17,052) (562,073) (164,439)
Change in forfeitures 14,172 (1,082) (4,012) (2,506) (14,774) (5,969)
------------ ------------ ------------ ------------ ------------ -------------
Net increase (decrease) prior to fund
transfers 551,492 71,158 638,539 114,444 1,162,302 352,160
Interfund transfers, net (25,719) (51,133) 70,332 (7,828) (78,831) (41,831)
------------ ------------ ------------ ------------ ------------ ------------
Net increase in net assets 525,773 20,025 708,871 106,616 1,083,471 310,329
Net assets available for benefits at
beginning of year 1,981,146 242,029 1,104,325 170,485 3,161,155 1,127,087
------------ ------------ ------------ ------------ ------------ ------------
Net assets available for benefits at end
of year $ 2,506,919 $ 262,054 $ 1,813,196 $ 277,101 $ 4,244,626 $ 1,437,416
============ ============ ============ ============ ============ ============
For the Year Ended December 31, 1997
Participant Directed
--------------------------------------------------------------
Participant
Notes M.D.C.
Receivable Stock Fund Total
<S> <C> <C> <C>
Additions to net assets attributed to:
Investment income
Interest and dividends $ 23,520 $ 3,979 $ 163,319
Net appreciation in fair value of
investments - 277,335 1,817,071
------------ ------------ ------------
23,520 281,314 1,980,390
------------ ------------ ------------
Contributions
Employer - 565,263 567,177
Employee - 31,656 2,427,633
------------ ------------ ------------
- 596,919 2,994,810
------------ ------------ ------------
Total additions 23,520 878,233 4,975,200
Deductions from net assets attributed to:
Benefit payments - (78,680) (1,027,199)
Transaction charge - (1,382) (4,982)
Participant notes receivable
terminated due to withdrawal of
participants (29,004) - (29,004)
Transfer to affiliated plan - - (217,062)
------------ ------------ -------------
Total deductions (29,004) (80,062) (1,278,247)
Change in forfeitures - (7,638) (21,809)
------------ ------------ ------------
Net increase (decrease) prior to fund
transfers (5,484) 790,533 3,675,144
Interfund transfers, net 63,302 71,708 -
------------ ------------ ------------
Net increase in net assets 57,818 862,241 3,675,144
Net assets available for benefits at
beginning of year 226,602 356,550 8,369,379
------------ ------------ ------------
Net assets available for benefits at end
of year $ 284,420 $ 1,218,791 $ 12,044,523
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
M.D.C. Holdings, Inc.
401(k) Savings Plan
Notes to Financial Statements
- -------------------------------------------------------------------------------
1. Description of Plan
The following description of the M.D.C. Holdings, Inc. 401(k) Savings
Plan (the "Plan") provides only general information. Participants
should refer to the Plan agreement for a more complete description of
the Plan's provisions.
General
The Plan is a defined contribution plan established effective January 1,
1992 and most recently amended effective July 1, 1998. All employees of
M.D.C. Holdings, Inc. (the "Company") become eligible to participate upon
completing six months of service and attaining the age of 21. The Plan is
subject to the provisions of the Employee Retirement Income Security Act
of 1974 ("ERISA").
Contributions
Participants may contribute an amount equal to, but not less than 1
percent, nor more than 15 percent of their pretax annual compensation, up
to a maximum amount of $10,000 and $9,500 in 1998 and 1997, respectively,
in accordance with Internal Revenue Service regulations.
The Company may make matching contributions in a discretionary amount to
be determined by resolution of the Board of Directors, on an annual
basis. The Company may make a discretionary profit sharing contribution
without regard to the current or accumulated net profits of the Company
for the taxable year ending with, or within the plan year. The Company's
matching and profit sharing contributions may be made in cash or in
shares of M.D.C. Holdings, Inc. common stock.
Participant Accounts
Each participant's account is credited with the participant's
contribution, allocations of the Company's contributions, if any, and
Plan earnings. Plan earnings are allocated by fund based on the ratio of
a participant's account invested in a particular fund to all
participants' investments in that fund. Forfeited balances of terminated
participants' non-vested accounts are used first to pay the expenses to
administer the plan, and are then allocated to reduce future
contributions by the Company. The benefit to which a participant is
entitled is the benefit that can be provided from the participant's
account.
Vesting
The interest of any participant in contributions made by the Company, and
earnings thereon, will become vested to the extent of the following
percentages:
Years of Service Vested %
Less than 2 years 0%
After 2 years 40%
After 3 years 60%
After 4 years 80%
After 5 years 100%
7
<PAGE>
M.D.C. Holdings, Inc.
401(k) Savings Plan
Notes to Financial Statements
- -------------------------------------------------------------------------------
1. Description of Plan (continued)
If a participant dies, suffers disability or attains the normal
retirement age while still employed by the Company, the participant
becomes 100% vested without regard to length of service.
Investment Options
Upon enrollment in the Plan, a participant may currently direct
contributions among any of the following investment option:
* EuroPacific Growth Fund - a fund which seeks long-term capital
growth by investing in companies based outside the U.S.
* Fidelity Advisor Growth Opportunities Fund - a fund which seeks
capital growth by investing primarily in common stocks and
securities convertible into common stocks.
* The Income Fund of America - a fund which seeks current income and,
secondarily, growth of capital.
* INVESCO Dynamics Fund - a fund which seeks long-term capital
appreciation by investing in equity securities of mid-sized
core growth companies.
* NeubergerBerman Genesis Fund - a fund which seeks capital
appreciation by investing primarily in equity securities of
companies with small market capitalization.
* The Victory Stock Index Fund; Class A Shares - a fund which seeks to
provide long-term capital appreciation by attempting to match the
performance of the Standard & Poor's 500 Composite Stock Price
Index.
* Washington Mutual Investor Fund, Inc. - a fund which seeks current
income and an opportunity for growth of principal.
* The Bond Fund of America, Inc. - a fund which seeks a high level of
current income as is consistent with preservation of capital.
* EB Managed Guaranteed Investment Contract - a fund which seeks a
reasonable level of income together with stability of capital by
investing in a diversified portfolio of insurance companies and
other investment contracts.
* M.D.C. Stock Fund - funds are invested solely in shares of M.D.C.
Holdings, Inc. common stock.
Investment options were changed in July of 1997 in conjunction with
the change in trustee, as discussed in Note 3. Participants may
change or transfer their investments at any time.
8
<PAGE>
M.D.C. Holdings, Inc.
401(k) Savings Plan
Notes to Financial Statements
- -------------------------------------------------------------------------------
1. Description of Plan (continued)
Payment of Benefits
A participant who has attained the age of 59 1/2, or has satisfied the
terms for a financial hardship, may elect to commence distributions
regardless of whether employed by the Company. The participant or
beneficiary may elect to receive a lump-sum distribution, an annuity, or
a combination of both. Distributions are subject to the applicable
provisions of the Plan agreement.
Participant Notes Receivable
Participants are permitted to borrow a portion of their vested benefits
under the Plan. Participants may borrow up to the lesser of (1) $50,000,
reduced by (a) the applicant's highest outstanding loan balance from the
Plan during the one year period ending on the day before the loan is
made, and (b) the applicant's outstanding loan balance from the Plan on
the day the loan is made, or (2) 50 percent of the present value of the
Participant's non-forfeitable accrued benefit. Loan transactions are
treated as a transfer between the investment fund and the loan fund. The
loans are secured by the participant's account balance and bear interest
at a fixed rate equal to the current prime rate plus 100 basis points at
the date the application is approved. Interest rates on outstanding loans
range from 6% to 10%. Principal and interest is paid ratably through
monthly payroll deductions.
2. Summary of Accounting Policies
Method of Accounting
The Plan's financial statements are prepared on the accrual basis of
accounting, and reflect management's estimates and assumptions, such as
those regarding fair value, that affect the recorded amounts. Significant
estimates used are discussed throughout the notes to financial
statements.
Investments
The Plan's investments in investment contracts are valued at market value
(Note 4). Shares of the EB Managed Guaranteed Investment Contract are
valued at the contract value of the underlying insurance contracts.
Shares of registered investment companies are valued at quoted market
prices, which represent the net asset value of shares held by the Plan at
year-end. The Company stock is valued at its quoted market price.
Participant notes receivable are valued at cost which approximates fair
value.
Use of Estimates
The preparation of these financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Payment of Benefits Benefits are recorded when paid.
9
<PAGE>
M.D.C. Holdings, Inc.
401(k) Savings Plan
Notes to Financial Statements
- -------------------------------------------------------------------------------
2. Summary of Accounting Policies (continued)
Expenses
The Plan's administrative expenses are paid either by the Plan or the
Company, as provided by the Plan document.
3. Administration of Plan Assets
The Company administers the Plan. Investments of Plan assets and payment
of benefits were previously managed under contract with CIGNA Retirement
and Investment Services ("CIGNA"), the Plan's former trustee and
record-keeper. During 1998, the Company appointed KeyTrust as the Plan's
trustee and record-keeper.
There was a two month "black-out" period during the transition when no
activity occurred. The transfer of Plan assets from CIGNA to KeyTrust was
completed in July of 1998, and participants re-allocated their account
balances to the new investment options.
4. Deposits with Insurance Company
The Plan participated in contracts with CG Life via investments in the
CIGNA Charter Guaranteed Long-Term and the CIGNA Charter Guaranteed
Short-Term Accounts during 1997 and through July 1998. Investments in the
CIGNA Charter Guaranteed Long-Term and CIGNA Guaranteed Short-Term
Accounts are non-fully benefit responsive and are recorded at contract
value which approximates fair value.
CG Life commingles the assets of the CIGNA Charter Guaranteed Long-Term
Account with other assets. For the Plan's investment in the CIGNA Charter
Guaranteed Long-Term Account, the Plan is credited with interest at the
rate specified in the contract which was 5.90% for the year ended
December 31, 1997, net of asset charges. For the Plan's investment in the
CIGNA Charter Guaranteed Short-Term Account, the Plan is credited with
interest at a yield which averaged 4.90% for the year ended December 31,
1997, net of asset charges.
10
<PAGE>
5. Investments
Investments that represent 5 percent or more of the Plan's net assets are
separately identified below.
<TABLE>
<CAPTION>
December 31,
1998 1997
<S> <C> <C>
Fidelity Advisor Growth Opportunities Fund
units, 110,071; 68,181 $ 5,529,960 $ 4,221,105
EB Managed Guaranteed Investment Contract
units, 227,688; 0 2,926,706 -
The Victory Stock Index Fund; Class A Shares
units, 136,953; 0 2,908,888 -
The Income Fund of America
units, 106,938; 0 1,854,298 -
M.D.C. Stock Fund
shares, 73,470; 43,287 1,587,878 651,897
CIGNA Charter Guaranteed Long-Term Fund
interest rate, 5.90% - 2,494,051
CIGNA Charter Large Company Stock Index Fund
units, 0; 37,576 - 1,799,913
CIGNA Fidelity Advisor Balanced Fund
units, 0; 52,084 - 1,431,268
</TABLE>
6. Plan Termination
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. In the event of
Plan termination, participants will become 100 percent vested in their
accounts.
7. Income Taxes
The Internal Revenue Service has determined and informed the Company by a
letter dated August 2, 1995, that the Plan and related trust are designed
in accordance with applicable sections of the Internal Revenue Code
("IRC"). The Plan has been amended since receiving the determination
letter. However, the Plan's administrator and tax counsel believe that
the Plan is designed and is currently being operated in compliance with
the applicable requirements of the IRC. Therefore, no provision for
income taxes has been included in the Plan's financial statements.
11
<PAGE>
M.D.C. Holdings, Inc.
401(k) Savings Plan
Notes to Financial Statements
- -------------------------------------------------------------------------------
8. Reconciliation of Plan Financial Statements to the Form 5500
The Annual Return/Report of Employee Benefit Plan (the "Form 5500") is
prepared on the modified cash basis. Accordingly, certain balances
included on lines 31 and 32 of the Form 5500 differ from those included
in these financial statements. Contributions in the statement of changes
in net assets available for benefits differ from contributions on the
Form 5500 by the amount of contributions accrued at December 31. The
ending net asset balances are reconciled as follows:
<TABLE>
<CAPTION>
December 31,
1998 1997
<S> <C> <C>
Net assets, per Form 5500 $ 16,037,975 $ 11,416,690
Add: Employer contributions receivable 1,497,447 565,427
Employee contributions receivable 108,387 62,406
-------------- --------------
Net assets, per financial statements $ 17,643,809 $ 12,044,523
============== ==============
9. Transfer to Affiliated Plan
Effective January 14, 1997, certain employees and their participant
balances were transferred from the Plan to the Financial Asset
Management LLC 401(k) Plan.
10. Forfeitures
The net change in forfeitures represents the net change in the available
forfeitures balance from the prior year plus the current year forfeitures
generated. Forfeitures result from non-vested benefit payments remaining
in the Plan for all terminated employees. Upon reaching the
break-in-service, as determined in the Plan agreement, amounts forfeited
are added to the forfeitures in the Plan. Forfeitures of $18,553 at
December 31, 1998 are included in the Plan's investment in the EB Managed
Guaranteed Investment Contract. Forfeitures are available to offset
contributions or to pay Plan expenses, which would be otherwise payable
by the Company, in accordance with the Plan agreement. In 1998, Company
cash contributions were reduced by $71,483 from forfeited non-vested
accounts.
12
<PAGE>
M.D.C. Holdings, Inc. Additional Information
401(k) Savings Plan Schedule I
Schedule of Assets Held for Investment Purposes
December 31, 1998
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Identity of issue, borrower, Description of investment including Cost Current
lessor, or similar party maturity date, rate of interest, value
collateral, par or maturity value
<S> <C> <C> <C>
The American Funds Group EuroPacific Growth Fund
$28.40/unit $ 59,373 $ 61,734
Fidelity Advisors Fidelity Advisor Growth Opportunities Fund
$50.24/unit 5,266,889 5,529,960
The American Funds Group The Income Fund of America
$17.34/unit 1,974,577 1,854,298
INVESCO Equity, Inc. INVESCO Dynamics Fund
$15.75/unit 253,973 277,892
NeubergerBerman Management, Inc. NeubergerBerman Genesis Fund
$12.70/unit 151,711 160,202
The Victory Portfolios The Victory Stock Index Fund; Classs A Shares
$21.24/unit
2,950,956 2,908,888
Washington Mutual Investors, Inc. Washington Mutual Investor Fund, Inc.
$32.91/unit 204,855 204,632
The American Funds Group The Bond Fund of America, Inc.
$13.61/unit 62,139 61,954
* Key Bank EB Managed Guaranteed Investment Contract
$12.85/unit 2,850,379 2,926,706
Participant Notes Receivable Interest rates of 6.00% - 10.00% and maturity
dates of 1 to 30 years 463,831 463,831
* M.D.C. Holdings, Inc. M.D.C. Common Stock
$21.38/share ** 1,587,878
* Indicates an identified person known to be a party-in-interest to the Plan.
** Cost information is not presently available from the custodian.
</TABLE>
13
<PAGE>
M.D.C. Holdings, Inc. Additional Information
401(k) Savings Plan Schedule II
Form 5500 - Schedule of Reportable Transactions
Year Ended December 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Current
Expense value of
incurred asset on
Identity of party Purchase Selling Lease with Cost of transaction Net gain
involved Description of asset price Price rental transaction asset date or (loss)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Connecticut Purchases into CIGNA
General Life Charter Guaranteed
Insurance Company Long-Term Account $377,824 N/A N/A N/A $377,824 $377,824 $
-
Connecticut Sales from CIGNA Charter
General Life Guaranteed Long-Term
Insurance Company Account N/A $2,941,389 N/A N/A 3,023,619 2,941,389 (82,230)
Connecticut Purchases into CIGNA
General Life Fidelity Advisor Balanced
Insurance Company Fund 218,807 N/A N/A N/A 218,807 218,807 -
Connecticut Sales from CIGNA Fidelity
General Life Advisor Balanced Fund
Insurance Company N/A 1,822,523 N/A N/A 1,649,926 1,822,523 172,597
Connecticut Purchases into CIGNA
General Life Charter Large Company
Insurance Company Stock Index Fund 459,956 N/A N/A N/A 459,956 459,956 -
Connecticut Sales from CIGNA Charter
General Life Large Company Stock Index
Insurance Company Fund N/A 2,612,216 N/A N/A 2,259,611 2,612,216 352,605
Fidelity Advisors Purchases into Fidelity
Advisor Growth 1,218,543 N/A N/A N/A 1,218,543 1,218,543 -
Opportunities Fund
Fidelity Advisors Sales from Fidelity
Advisor Growth N/A 954,752 N/A N/A 757,617 954,752 197,135
Opportunities Fund
The American Purchases into The Income
Funds Group Fund of America 2,000,701 N/A N/A N/A 2,000,701 2,000,701 -
The American Sales from the Income
Funds Group Fund of America N/A 184,537 N/A N/A 169,509 184,537 15,028
The Victory Purchases into The
Portfolios Victory Stock Index 2,939,038 N/A N/A N/A 2,939,038 2,939,038 -
Fund; Class A Shares
The Victory Sales from The Victory
Portfolios Stock Index Fund; Class A N/A 234,159 N/A N/A 206,198 234,159 27,961
Shares
Key Bank Purchases into the EB
Managed Guaranteed N/A N/A N/A 3,141,746 -
Investment Contract 3,141,746 3,141,746
Key Bank Sales from the EB Managed
Guaranteed Investment N/A 297,960 N/A N/A 246,935 297,960 51,025
Contract
M.D.C. Holdings, Purchases into
Inc. M.D.C. common stock 835,557 N/A N/A N/A 835,557 835,557 -
M.D.C. Holdings, Sales from
Inc. M.D.C. common stock N/A 238,799 N/A N/A * 238,799 *
</TABLE>
* Cost information is presently not available from the custodian
14
