<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
[x] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ of ______________
Commission file number 1-11690
------------
DEVELOPERS DIVERSIFIED REALTY CORPORATION PROFIT
------------------------------------------------
SHARING PLAN AND TRUST
----------------------
(Exact name of Plan)
001
------------------
Plan Number
DEVELOPERS DIVERSIFIED REALTY CORPORATION
---------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-1723097
---------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
34555 Chagrin Boulevard, Moreland Hills, Ohio 44022
---------------------------------------------------------------
(Address of principal executive offices - zip code)
(440) 247-4700
---------------------------------------------------------------
(Registrant's telephone number, including area code)
---------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
<PAGE> 2
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROFIT SHARING PLAN AND TRUST
DECEMBER 31, 1997
TABLE OF CONTENTS
Statement of Net Assets Available for Plan Benefits with Fund Information
at December 31, 1997 and 1996 . . . . . . . . . . . . . . 1 - 2
Statement of Changes in Net Assets Available for Plan Benefits with Fund
Information for the year-ended December 31, 1997 and 1996 . . . . . 3 - 4
Notes to the Financial Statements. . . . . . . . . . . . . . 5 - 8
Schedule I - Item 27a Schedule of Assets held for Investment at
December 31, 1997 . . . . . . . . . . . . . . 9
Schedule II - Item 27d Schedule of Reportable Transactions for the year
ended December 31, 1997 . . . . . . . . . . . . . . . . . 10
<PAGE> 3
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROFIT SHARING PLAN AND TRUST
Statement of Net Assets Available for Plan Benefits with Fund Information
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Money U.S. Equity Employer
Market Government Income Global Growth Discovery Stock Loan
Fund Fund Fund Fund Fund Fund Fund Fund Total
------- ------- -------- -------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Common stock of
Developers Diversified
Realty Corporation $269,792 $269,792
Smith Barney Money Funds $32,647 293 32,940
Oppenheimer Securities:
U.S. Government Trust $43,221 43,221
Equity income fund $147,849 147,849
Global fund $129,151 129,151
Growth fund $170,176 170,176
Discovery fund $26,738 26,738
------- ------- -------- -------- -------- ------- -------- ------- --------
32,647 43,221 147,849 129,151 170,176 26,738 270,085 819,867
Participant Notes
receivable $17,671 17,671
Inter fund receivable
(payable) (14,317) 860 3,439 2,695 6,118 1,077 137 (9) -
Participants contributions
receivable 1,869 1,869
Employer contributions
receivable 1,509 1,509
------- ------- -------- -------- -------- ------- -------- ------- --------
Net assets available for
plan benefits $18,330 $44,081 $151,288 $131,846 $176,294 $27,815 $273,600 $17,662 $840,916
======= ======= ======== ======== ======== ======= ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements
-1-
<PAGE> 4
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROFIT SHARING PLAN AND TRUST
Statement of Changes in Net Assets Available for Plan Benefits with Fund
Information
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Money U.S. Equity Employer
Market Government Income Global Growth Discovery Stock Loan
Fund Fund Fund Fund Fund Fund Fund Fund Total
------- ------- ------- ------- ------- ------ -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Common stock of
Developers Diversified
Realty Corporation $176,997 $176,997
Smith Barney Money Funds $18,966 1,220 20,186
Oppenheimer Securities:
U.S. Government Trust $25,859 25,859
Equity income fund $77,970 77,970
Global fund $67,892 67,892
Growth fund $73,209 73,209
Discovery fund $8,033 8,033
Prudential Securities:
U.S. Government investment 4,067 4,067
Global Genesis investment 11,026 11,026
Growth Opportunity
investment 11,256 11,256
------- ------- ------- ------- ------- ------- -------- ------- --------
18,966 29,926 77,970 78,918 84,465 8,033 178,217 476,495
Participant Notes
receivable $21,469 21,469
Inter fund receivable
(payable) (4,154) 544 1,282 1,057 1,578 48 (96) (259) -
Participant contributions
receivable 1,114 1,114
Employer
contributions
receivable 1,002 1,002
------- ------- ------- ------- ------- ------- -------- ------- --------
Net assets available for
plan benefits $14,812 $30,470 $79,252 $79,975 $86,043 $8,081 $180,237 $21,210 $500,080
======= ======= ======= ======= ======= ====== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements
-2-
<PAGE> 5
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROFIT SHARING PLAN AND TRUST
Statement of Changes in Net Assets Available for Plan Benefits with Fund
Information
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Money U.S. Equity
Market Government Income Global Growth
Fund Fund Fund Fund Fund
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Additions (deductions):
Employer contributions
Participants contributions $ 6,356 $ 12,290 $ 38,089 $ 26,582 $ 60,514
Participants rollover 10,358 7,545 10,511
Loan repayments 307 16 2,325 2,252 2,546
Investment income 1,239 2,165 11,081 17,162 19,245
Interest on loans
Net realized and unrealized
appreciation (loss) in fair
value of investments 1,305 17,440 616 (986)
--------- --------- --------- --------- ---------
Total additions (deductions) 7,902 15,776 79,293 54,157 91,830
--------- --------- --------- --------- ---------
Deductions:
Distributions to participants (3,384) (2,165) (5,757) (2,286) (1,579)
Participant loans (1,000) (1,500)
--------- --------- --------- --------- ---------
Total deductions (4,384) (2,165) (7,257) (2,286) (1,579)
--------- --------- --------- --------- ---------
Net additions (deductions) 3,518 13,611 72,036 51,871 90,251
Net assets available for plan
benefits beginning of year 14,812 30,470 79,252 79,975 86,043
--------- --------- --------- --------- ---------
NET ASSETS AVAILABLE FOR
PLAN BENEFITS END OF YEAR $ 18,330 $ 44,081 $ 151,288 $ 131,846 $ 176,294
========= ========= ========= ========= =========
<CAPTION>
Employer
Discovery Stock Loan
Fund Fund Fund Total
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Additions (deductions):
Employer contributions $ 36,354 $ 36,354
Participants contributions $ 7,082 34,419 185,332
Participants rollover 9,451 5,990 43,855
Loan repayments 294 $ (7,740) -
Investment income 528 14,741 66,161
Interest on loans 1,692 1,692
Net realized and unrealized
appreciation (loss) in fair
value of investments 2,379 5,533 26,287
--------- --------- --------- ---------
Total additions (deductions) 19,734 97,037 (6,048) 359,681
--------- --------- --------- ---------
Deductions:
Distributions to participants (3,674) (18,845)
Participant loans 2,500 -
--------- --------- --------- ---------
Total deductions - (3,674) 2,500 (18,845)
--------- --------- --------- ---------
Net additions (deductions) 19,734 93,363 (3,548) 340,836
Net assets available for plan
benefits beginning of year 8,081 180,237 21,210 500,080
--------- --------- --------- ---------
NET ASSETS AVAILABLE FOR
PLAN BENEFITS END OF YEAR $ 27,815 $ 273,600 $ 17,662 $ 840,916
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
-3-
<PAGE> 6
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROFIT SHARING PLAN AND TRUST
Statement of Net Assets Available for Plan Benefits with Fund Information
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Money U.S. Equity
Market Government Income Global Growth
Fund Fund Fund Fund Fund
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Additions (deductions):
Employer contributions
Participants contributions $ 3,078 $ 12,950 $ 27,343 $ 21,814 $ 30,950
Participants rollover 4,834 4,691 10,461 11,614 10,305
Interfund transfers (1,322) 1,322
Loan repayments 45 830 3,135 2,096
Investment income 705 758 4,323 2,901 6,825
Interest on loans
Net realized and unrealized
appreciation (loss) in fair value
of investments 883 354 5,207 3,231 2,085
--------- --------- --------- --------- ---------
Total additions (deductions) 9,545 17,431 48,164 42,695 53,583
--------- --------- --------- --------- ---------
Deductions:
Distributions to participants 2,669 (8,239) (7,405) (2,629)
Participant loans (320) (1,200) (1,920)
--------- --------- --------- --------- ---------
Total deductions 2,669 (320) (9,439) (7,405) (4,549)
--------- --------- --------- --------- ---------
Net additions 12,214 17,111 38,725 35,290 49,034
Net assets available for plan
benefits beginning of year 2,598 13,359 40,527 44,685 37,009
--------- --------- --------- --------- ---------
NET ASSETS AVAILABLE FOR
PLAN BENEFITS END OF YEAR $ 14,812 $ 30,470 $ 79,252 $ 79,975 $ 86,043
========= ========= ========= ========= =========
<CAPTION>
Employer
Discovery Stock Loan
Fund Fund Fund Total
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Additions (deductions):
Employer contributions $ 25,415 $ 25,415
Participants contributions $ 568 27,069 123,772
Participants rollover 7,700 49,605
Interfund transfers -
Loan repayments $ (6,106) -
Investment income 589 9,656 25,757
Interest on loans 2,729 2,729
Net realized and unrealized
appreciation (loss) in fair value
of investments (776) 31,339 42,323
--------- --------- --------- ---------
Total additions (deductions) 8,081 93,479 (3,377) 269,601
--------- --------- --------- ---------
Deductions:
Distributions to participants (4,120) (19,724)
Participant loans 3,440 -
--------- --------- --------- ---------
Total deductions - (4,120) 3,440 (19,724)
--------- --------- --------- ---------
Net additions 8,081 89,359 63 249,877
Net assets available for plan
benefits beginning of year - 90,878 21,147 250,203
--------- --------- --------- ---------
NET ASSETS AVAILABLE FOR
PLAN BENEFITS END OF YEAR $ 8,081 $ 180,237 $ 21,210 $ 500,080
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
-4-
<PAGE> 7
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROFIT SHARING PLAN AND TRUST
Notes to Financial Statements
A. FORMATION OF PLAN AND SUMMARY OF ACCOUNTING POLICIES
Effective July 1, 1994 Developers Diversified Realty Corporation (the
"Company") formed the Developers Diversified Realty Corporation Profit
Sharing Plan and Trust (the "Plan"). Investments are stated at market
value on the last business day of the year. Securities which are traded
on a national securities exchange are valued at the last reported sales
price on the last business day of the year; securities traded on the
over-the-counter market and listed securities for which no sale was
reported on that date are valued at the average of the last reported
bid and ask prices.
The Company may, at its discretion, pay the administrative expenses of
the Plan. Any expenses not paid by the Company will be paid out of Plan
assets. In 1997 and 1996, all Plan expenses were paid for by the
Company.
The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
The accounting records of the Plan are maintained on the accrual basis.
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 the reported amounts of revenues and expenses during
the year. Actual results could differ from those estimates.
B. DESCRIPTION OF PLAN
The following brief description of the Plan provides only general
information. Participants should refer to the plan agreement for a more
complete description of the Plan's provisions.
The Plan covers all eligible employees, as defined, of the Company.
Participants may elect semi-annually to have the Company contribute a
percentage of their compensation to the Plan in accordance with the
Internal Revenue Code (IRC).
Participants shall have the right to direct the Trustee to invest their
contribution, in one or more permitted investment funds, as defined by
the Plan, as they may choose. Subject to provisions of the Plan, the
Company may contribute any amount up to 15% of the annual pay of all
participants entitled to an allocation for each plan year. The plan
currently provides that the Company shall make matching contributions
in an amount equal to 25% of the participants elective deferrals for
the plan year. However, the Company shall not match any elective
-5-
<PAGE> 8
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROFIT SHARING PLAN AND TRUST
Notes to Financial Statements - Continued
B. DESCRIPTION OF PLAN (CONTINUED)
deferrals which are in excess of 6% of a participant's compensation.
Matching contributions may be made in cash or in the Company's common
stock. During 1997 and 1996 all Company contributions were made with
the Company's common stock.
Plan participants are fully vested in all contributions to their
accounts, with the exception of the Company contributions, which vest
at the rate of 20% per year until fully vested. Participants were
credited with years of service prior to the formation of the plan for
vesting purposes.
Under the Plan, the Company has the right to discontinue such
contributions and terminate the Plan at any time. In the event of
termination, participants' accounts become fully vested if the
participant has not (1) incurred a five-year break in service, or (2)
received payment of their vested account balance. The Participants'
accounts are to be distributed to the participants according to the
directions of the Plan Advisory Committee administering the Plan.
At December 31, 1997 and 1996, participant distributions payable for
all payments processed and approved prior to year end were, $0 and
$4,279, respectively. This amount is reflected as a liability in the
Plan's Form 5500, in accordance with ERISA rules and regulations.
C. INVESTMENTS
The Trustee of the Plan maintains the following separate investment
accounts under the Plan in which participants may direct contributions.
EMPLOYER STOCK FUND - This fund is comprised of common stock
of the Company, Developers Diversified Realty Corporation
which is actively traded on the New York Stock Exchange.
Oppenheimer Securities:
U.S. GOVERNMENT TRUST - This fund seeks high current
income, preservation of capital and maintenance of liquidity
primarily through investments in debt securities issued or
guaranteed by the U.S. Government or its agencies or
instrumentalities.
EQUITY INCOME FUND - This fund's primary investment
objective is to seek as much current income as is compatible
with prudent investment. It has a secondary objective to
conserve principal while providing an opportunity for
capital appreciation. It invests primarily in well
established corporations who typically pay an above average
dividend yield.
-6-
<PAGE> 9
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROFIT SHARING PLAN AND TRUST
Notes to Financial Statements - Continued
C. INVESTMENTS (CONTINUED)
GROWTH FUND - This fund invests its assets to seek capital
appreciation for shareholders. It invests in large
corporations who have proven potential for earnings growth
over time.
GLOBAL FUND - This fund invests its assets with the objective
of capital appreciation. It invests in stocks from around the
world. It searches out growth oriented companies principally
involved in one or more key global trend sectors.
DISCOVERY FUND - This fund's investment objective is capital
appreciation. It invests in small emerging growth companies
for maximum capital appreciation.
Smith Barney:
MONEY MARKET FUND - This fund invests in short-term high
quality money market securities that provide current income
and safety of principle.
Prudential Securities:
U. S. GOVERNMENT FUND - This fund is a diversified portfolio
of longer-term securities, either issued or backed by the
United States Government or its agencies.
GLOBAL GENESIS FUND - This fund is a diversified portfolio of
common stock, common stock equivalents, and other equity
securities of smaller foreign and domestic companies typically
with small to medium sized market capitalization.
GROWTH OPPORTUNITY FUND - This fund is a portfolio of common
stocks with prospectus of high return and increasing earnings.
Effective May 1996, the Plan's investment manager was changed from Prudential
Securities to Smith Barney.
-7-
<PAGE> 10
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROFIT SHARING PLAN AND TRUST
Notes to Financial Statements - Continued
D. BENEFITS
Individual accounts are maintained for all participants, the sum of
which equals the fair value of Plan assets less unallocated forfeitures
($1,410 at December 31, 1997 and $372 at December 31, 1996). Forfeited
amounts are allocated to the other participants' accounts along with
the Company's contribution. The liability of the Plan for benefits to
participants is limited to the fair value of Plan assets. A participant
is entitled to receive the full value of his or her account at age 65,
death or disability prior to retirement, or upon termination of
employment. Upon retirement or termination, the participant is entitled
to receive a single-sum payment of his or her account balance.
E. PARTICIPANT NOTES RECEIVABLE
Under the terms of the Plan, participants may borrow from their
accounts to a maximum of $50,000 or 50% of their account balance. The
loans are secured by the balance in the participants' accounts and bear
interest at the prime rate plus 1% which is fixed at the time of the
loan, or 9.5% at December 31, 1997.
F. INCOME TAX STATUS
The Internal Revenue Service has determined and informed the Company by
a letter dated August 24, 1995, that the Plan qualifies under Section
401(a) of the Internal Revenue Code (IRC). In management's opinion, the
Plan is operating in compliance with the applicable provisions of the
IRC and other post-1986 legislation. The Plan administrator is not
aware of any course of action or series of events that have occurred
that might adversely affect the Plan's qualified status. The
application for tax exempt status of the Plan does not apply to the
taxability of distributions to participants under the Plan.
G. TRANSACTION WITH PARTIES-IN-INTEREST
Certain officers of the Company are participants in the Plan and
trustees of the Plan. One of the investment elections includes the
Company's common stock. At December 31, 1997 and 1996, the Plan held
investments in shares of mutual funds managed by Smith Barney, the Plan
investment advisor, with a total market value of $550,075 and $273,149,
respectively. During the year ended December 31, 1997, the Plan
purchased a total of $247,938 of mutual fund assets from Smith Barney.
These transactions are exempt party-in-interest transactions under
Section 408 of ERISA and the regulations thereunder.
-8-
<PAGE> 11
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROFIT SHARING PLAN AND TRUST
Schedule I
Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1997
<TABLE>
<CAPTION>
Fair
Cost Value
--------- ----------
<S> <C> <C> <C> <C>
* Smith Barney Money Funds Cash Portfolio Class A $ 32,940 $ 32,940
* Oppenheimer Funds U.S. Government Trust Class C 40,544 43,221
* Oppenheimer Funds Equity Income Fund Class C 123,896 147,849
* Oppenheimer Funds Global Fund Class C 122,493 129,151
* Oppenheimer Funds Growth Fund Class C 166,458 170,176
* Oppenheimer Funds Discovery Fund Class C 25,135 26,738
* Developers Diversified
Realty Corporation Common Stock 228,839 269,792
--------- ----------
$ 740,305 $ 819,867
========= ==========
*,** Participant Notes Receivable $ - $ 17,622
========= ==========
<FN>
* See Transactions with Parties-In-Interest (Note G)
** Interest Rate is based on the prime rate plus 1%
The outstanding loans' interest rates range from 9.25% to 9.5%
</TABLE>
-9-
<PAGE> 12
DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROFIT SHARING PLAN AND TRUST
Schedule II
Item 27d - Schedule of Reportable Transactions
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Current
Value on Net
Purchase Selling Expenses Cost of Transaction Gain
Price Price Incurred Asset Date or (loss)
-------- ------- -------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Oppenheimer Equity Income Fund Class C
35 aggregate purchases $ 61,090 - - - $ 61,090 -
Oppenheimer Global Genesis Fund Class C
35 aggregate purchases 64,889 - - - 64,889 -
Oppenheimer Growth Opportunity Fund Class C
36 aggregate purchases 104,405 - - - 104,405 -
Oppenheimer Discovery Fund Class C
31 aggregate purchases 25,375 - - - 25,375 -
Developers Diversified Realty
Corporation Stock
29 aggregate purchases 90,047 - - - 90,047 -
-------- ------- ------ ---- -------- ----
Total $345,806 $ - $ - $ - $345,806 $ -
======== ======= ====== ==== ======== ====
</TABLE>
-10-
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
Developers Diversified Realty Corporation
Profit Sharing Plan and Trust
Date June 29, 1998 /s/ Scott A. Wolstein
---------------------- --------------------------------------
Scott A. Wolstein
Trustee
Date June 29, 1998 /s/ James A. Schoff
---------------------- -------------------------------------
James A. Schoff
Trustee
Date June 29, 1998 /s/ Joan U. Allgood
---------------------- -------------------------------------
Joan U. Allgood
Trustee
-11-
