M.D.C. Holdings, Inc.
401(k) Savings Plan
Financial Statements and
Additional Information
December 31, 1999 and 1998
<PAGE>
M.D.C. Holdings, Inc.
401(k) Savings Plan
Index
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Page
Financial Statements:
Report of Independent Accountants 1
Statement of Net Assets Available for Benefits 2
Statement of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4-9
Additional Information:
Schedule I - Schedule of Assets Held for Investment Purposes 10
Schedule II - Schedule of Reportable Transactions 11
<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
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the M.D.C. Holdings, Inc. 401(k) Savings Plan (the "Plan") at December 31,
1999 and 1998, and the changes in net assets available for benefits for the
years then ended, in conformity with accounting principles generally accepted in
the United States. 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 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.
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. These supplemental
schedules are the responsibility of the Plan's management. The supplemental
schedules have been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
Denver, Colorado
June 21, 2000
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M.D.C. Holdings, Inc.
401(k) Savings Plan
Statement of Net Assets Available for Benefits
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<TABLE>
<CAPTION>
December 31,
-------------------------------------------
1999 1998
------------------ ------------------
<S> <C> <C>
Assets
Investments at fair value $ 21,739,229 $ 15,574,144
Participant notes receivable 803,465 463,831
Contributions receivable
Employer 1,961,124 1,497,447
Employee 118,730 108,387
------------------ ------------------
Total contributions receivable 2,079,854 1,605,834
------------------ ------------------
Net assets available for benefits $ 24,622,548 $ 17,643,809
================== ==================
</TABLE>
See accompanying Notes to Financial Statements.
2
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M.D.C. Holdings, Inc.
401(k) Savings Plan
Statement of Changes in Net Assets Available for Benefits
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
-------------------------------------------
1999 1998
------------------ ------------------
<S> <C> <C>
Additions to net assets available for
benefits attributed to:
Investment income
Interest and dividends $ 271,019 $ 218,929
Net appreciation in fair value of investments 1,125,745 2,212,608
------------------ ------------------
Total investment income 1,396,764 2,431,537
Contributions
Employer 1,961,124 1,423,748
Employee 4,879,974 3,153,261
------------------ ------------------
Total contributions 6,841,098 4,577,009
------------------ ------------------
Total additions 8,237,862 7,008,546
Deductions from net assets available for
benefits attributed to:
Benefit payments (1,215,451) (1,379,509)
Transaction charges and administrative expenses (26,054) (6,565)
Participant notes receivable terminated due to
withdrawal of participants (17,618) (23,186)
------------------ ------------------
Total deductions (1,259,123) (1,409,260)
------------------ ------------------
Net increase in net assets available for benefits 6,978,739 5,599,286
Net assets available for benefits at beginning of year 17,643,809 12,044,523
------------------ ------------------
Net assets available for benefits at end of year $ 24,622,548 $ 17,643,809
================== ==================
</TABLE>
See accompanying Notes to Financial Statements.
3
<PAGE>
M.D.C. Holdings, Inc.
401(k) Savings Plan
Notes to Financial Statements
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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 document 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, as amended ("ERISA").
Contributions
Participants may contribute an amount up to 15 percent, in whole
percentages, of their pretax annual compensation to a maximum amount of
$10,000 in accordance with Internal Revenue Service regulations.
The Company may make matching contributions in a discretionary amount to
be determined by resolution of the Company's 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%
4
<PAGE>
M.D.C. Holdings, Inc.
401(k) Savings Plan
Notes to Financial Statements
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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 options:
o EuroPacific Growth Fund - a fund which seeks long-term capital growth
by investing in companies based outside the U.S.
o Fidelity Advisor Growth Opportunities Fund - a fund which seeks
capital growth by investing primarily in common stocks and
securities convertible into common stocks.
o The Income Fund of America - a fund which seeks current income and,
secondarily, growth of capital.
o INVESCO Dynamics Fund - a fund which seeks long-term capital
appreciation by investing in equity securities of mid-sized
core growth companies.
o NeubergerBerman Genesis Fund - a fund which seeks capital
appreciation by investing primarily in equity securities of companies
with small market capitalization.
o 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.
o Washington Mutual Investor Fund, Inc. - a fund which seeks current
income and an opportunity for growth of principal.
o The Bond Fund of America, Inc. - a fund which seeks a high level of
current income as is consistent with preservation of capital.
o 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.
o M.D.C. Stock Fund - funds are invested solely in shares of M.D.C.
Holdings, Inc. common stock.
Participants may change or transfer their investments at any time.
5
<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 document.
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% 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 8.75% 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 in the notes to financial statements.
Investments
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. Shares of the Company's common stock are valued at their 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.
Expenses
The Plan's administrative expenses are paid either by the Plan or the
Company, as provided by the Plan document.
6
<PAGE>
M.D.C. Holdings, Inc.
401(k) Savings Plan
Notes to Financial Statements
--------------------------------------------------------------------------------
2. Summary of Accounting Policies (continued)
Reclassifications
Certain reclassifications of prior year information have been made to
conform with current year presentation.
New Accounting Pronouncement
In September 1999, the American Institute of Certified Public Accountants
issued Statement of Position 99-3, Accounting for and Reporting of
Certain Defined Contribution Plan Investments and Other Disclosure
Matters ("SOP 99-3"). SOP 99-3 eliminates certain disclosure requirements
for certain defined contribution investments. SOP 99-3 is effective for
plan years ending after December 15, 1999. Accordingly, the Company has
elected to adopt SOP 99-3, and these financials statements reflect the
resulting changes herein.
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. Investments
Investments that represent five percent or more of the Plan's net assets
are separately identified below.
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1999 1998
----------------- -------------------
<S> <C> <C>
Fidelity Advisor Growth Opportunities Fund
units, 113,925; 110,071 $ 5,315,752 $ 5,529,960
The Income Fund of America
units, 107,399; 106,938 1,690,454 1,854,298
INVESCO Dynamics Fund
units, 100,299; N/A 2,593,726 N/A
The Victory Stock Index Fund; Class A Shares
units, 182,483; 136,953 4,458,048 2,908,888
EB Managed Guaranteed Investment Contract
units, 237,834; 227,688 3,234,547 2,926,706
M.D.C. Stock Fund
shares, 148,700; 73,470 2,333,106 1,587,878
</TABLE>
7
<PAGE>
M.D.C. Holdings, Inc.
401(k) Savings Plan
Notes to Financial Statements
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5. 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.
6. 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.
7. 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 Schedule H, Part I and II 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.
Additionally, net assets available for benefits include certain
delinquent loans at December 31. When a participant terminates
employment, the participant has 90 days from the date of termination to
repay any outstanding loan balance in the participant's account. If the
loan is not repaid, the participant receives a deemed distribution that
is reported on Form 1099 and is subject to federal and state income
taxes. The ending net asset balances are reconciled as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------------
1999 1998
----------------- ------------------
<S> <C> <C>
Net assets, per Form 5500 $ 22,524,228 $ 16,037,975
Add: Employer contributions receivable 1,961,124 1,497,447
Employee contributions receivable 118,730 108,387
Deemed distributions 18,466 -
----------------- ------------------
Net assets, per financial statements $ 24,622,548 $ 17,643,809
================= ==================
</TABLE>
8
<PAGE>
8. Forfeitures
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 document, amounts forfeited are added to the
forfeitures in the Plan. Forfeitures are available to offset
contributions or to pay Plan expenses, which would be otherwise payable
by the Company, in accordance with the Plan document. At December 31,
1999 and 1998, forfeited non-vested accounts included in the Plan's
investment in the EB Managed Guaranteed Investment Contract totaled
$35,708 and $18,553, respectively. These accounts will be used to pay
Plan expenses. Company contributions were reduced by $26,054 and $71,483
from forfeited non-vested accounts in 1999 and 1998, respectively.
9
<PAGE>
<TABLE>
M.D.C. Holdings, Inc. Additional Information
401(k) Savings Plan Schedule I
Schedule of Assets Held for Investment Purposes
December 31, 1999
-------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C>
Description of investment including
Identity of issue, borrower, maturity date, rate of interest, Current
lessor, or similar party collateral, par or maturity value Cost Value
The American Funds Group EuroPacific Growth Fund
$42.66/unit $ 546,184 $ 679,819
Fidelity Advisors Fidelity Advisor Growth Opportunities Fund
$46.66/unit 5,478,461 5,315,752
The American Funds Group The Income Fund of America
$15.74/unit 1,938,877 1,690,454
INVESCO Equity, Inc. INVESCO Dynamics Fund
$25.86/unit 1,872,804 2,593,726
NeubergerBerman Management, Inc. NeubergerBerman Genesis Fund
$13.17/unit 431,866 467,312
The Victory Portfolios The Victory Stock Index Fund; Class A Shares
$24.43/unit 4,028,045 4,458,048
Washington Mutual Investors, Inc. Washington Mutual Investor Fund, Inc.
$29.56/unit 836,382 747,198
The American Funds Group The Bond Fund of America, Inc.
$12.98/unit 225,144 219,267
* Key Bank EB Managed Guaranteed Investment Contract
$13.60/unit 3,033,178 3,234,547
Participant Notes Receivable Interest rates of 8.75% - 10.00% and
maturity dates of 1 to 15 years 803,465 803,465
* M.D.C. Holdings, Inc. M.D.C. Common Stock
$15.69/share 2,544,397 2,333,106
----------------------------------
$ 21,738,803 $ 22,542,694
==================================
* Indicates an identified entity known to be a party-in-interest to the Plan.
</TABLE>
10
<PAGE>
<TABLE>
M.D.C. Holdings, Inc. Additional Information
401(k) Savings Plan Schedule II
Form 5500 - Schedule of Reportable Transactions
Year Ended December 31, 1999
----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Current
Expense value of
incurred asset on
Identity of Purchase Selling with Cost of transaction Net gain
party involved Description of asset Date price price transaction asset date or (loss)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity Advisors Purchases into Fidelity
Advisor Growth Series $1,619,138 N/A N/A $1,619,138 $1,619,138 $ -
Opportunities Fund
Fidelity Advisors Sales from Fidelity
Advisor Growth Series N/A $1,483,902 N/A 1,407,566 1,483,902 76,336
Opportunities Fund
INVESCO Equity, Purchases into INVESCO
Inc. Dynamics Fund Series 1,815,998 N/A N/A 1,815,998 1,815,998 -
INVESCO Equity, Sales from INVESCO
Inc. Dynamics Fund Series N/A 236,816 N/A 197,167 236,816 39,649
The Victory Purchases into The
Portfolios Victory Stock Index Series 1,751,069 N/A N/A 1,751,069 1,751,069 -
Fund; Class A Shares
The Victory Sales from The Victory
Portfolios Stock Index Fund; Class Series N/A 700,243 N/A 673,981 700,243 26,262
A Shares
* M.D.C. Holdings, Purchases of M.D.C.
Inc. Common Stock Series 318,154 N/A N/A 318,154 318,154 -
* M.D.C. Holdings, Sales of M.D.C. Common
Inc. Stock Series N/A 352,775 N/A 318,539 352,775 34,236
* Indicates an identified entity known to be a party-in-interest to the Plan.
</TABLE>
11
