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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
For Annual Report of Employee Stock Purchase, Savings and Similar Plans Pursuant
to Section 15(d) of the Securities Exchange Act of 1934
[x] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-11690
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A. Full title of the plan and the address of the plan, if different from that of
the issuer named below:
DEVELOPERS DIVERSIFIED REALTY CORPORATION PROFIT
SHARING PLAN AND TRUST
B. Name of issuer of the securities held pursuant of the plan and the address of
its principal executive office:
DEVELOPERS DIVERSIFIED REALTY CORPORATION
3300 Enterprise Parkway, Beachwood, Ohio 44122
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROFIT SHARING PLAN AND TRUST
DECEMBER 31, 1999
TABLE OF CONTENTS
Report of Independent Accountants ...........................................1
Statement of Net Assets Available for Benefits at December 31,
1999 and 1998 ..........................................................2
Statement of Changes in Net Assets Available for Benefits for the
year ended December 31, 1999 ...........................................3
Notes to the Financial Statements ...........................................4-9
Schedule I - Item 27a Schedule of Assets held for Investment Purposes at
December 31, 1999 ......................................................10
Schedule II - Item 27d Schedule of Reportable Transactions for the year
ended December 31, 1999 ................................................11
Note: All other schedules required by the Department of Labor Rules and
Regulations for Reporting and Disclosures under the Employee Retirement Income
Security Act of 1974 have been omitted because the conditions under which they
are required are not present.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and the Administrator
of the Developers Diversified Realty Corporation Profit Sharing Plan and Trust:
In our opinion, the accompanying statements of net assets available for plan
benefits and the related statement of changes in net assets available for
benefits present fairly, in all material respects, the net assets available for
plan benefits of the Developers Diversified Realty Corporation Profit Sharing
Plan and Trust (the "Plan") at December 31, 1999 and 1998, and the changes in
net assets available for benefits for the year ended December 31, 1999 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 performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of "Schedule
of Assets Held for Investment Purposes" and "Schedule of 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 audit 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.
PricewaterhouseCoopers LLP
Cleveland, Ohio
June 26, 2000
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROFIT SHARING PLAN AND TRUST
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
1999 1998
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Assets:
Investments (Note 3) $1,545,321 $1,091,162
Receivables:
Participants notes 21,480 41,512
Participants' contributions 2,318 1,695
Employer contributions 2,586 1,833
Dividends 9,014 5,999
Loan interest 460 --
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Total receivables 35,858 51,039
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Net assets available for plan benefits $1,581,179 $1,142,201
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The accompanying notes are an integral part of these financial statements.
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROFIT SHARING PLAN AND TRUST
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year Ended
December 31,
1999
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Additions:
Additions to net assets attributed to:
Investment income:
Dividends $ 117,139
Interest 2,231
Net appreciation in fair value of investments (Note 3) 76,197
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195,567
Less investment expenses (502)
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195,065
Contributions:
Employer 57,861
Participants 316,585
Participants' rollover 27,165
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401,611
Total additions 596,676
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Deductions:
Deductions from net assets attributed to:
Participants' benefits 153,870
Forfeitures 3,828
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Total deductions 157,698
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Net increase 438,978
Net assets available for plan benefits:
Beginning of year 1,142,201
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End of year $ 1,581,179
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The accompanying notes an integral part of these financial statements.
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROFIT SHARING PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
1. FORMATION OF PLAN AND SUMMARY OF ACCOUNTING POLICIES
Formation of Plan
Effective July 1, 1994 Developers Diversified Realty Corporation (the
"Company") formed the Developers Diversified Realty Corporation Profit
Sharing Plan and Trust (the "Plan").
Basis of Accounting
The financial statements of the Plan are prepared under the accrual
method of accounting.
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,
liabilities, changes therein, and disclosure of contingent assets and
liabilities. Actual results could differ from those estimates.
Investment Valuation and Income Recognition
The Plan's investments are stated at market value as of 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. Purchases and sales of securities are recorded on a
trade-date basis. Interest income is recorded on the accrual basis.
Dividends are recorded on the shareholder record date.
The Plan presents in the statement of changes in net assets available
for benefits the net appreciation (depreciation) in the fair value of
its investments which is comprised of the realized gains or losses and
the unrealized appreciation (depreciation) on those investments.
Payment of Benefits
Benefits are recorded when paid.
Administrative Expenses
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 1999 and 1998, all Plan expenses were paid for by the
Company.
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROFIT SHARING PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS
Risks and Uncertainties
The Plan generates a significant portion of its income from investments
in domestic and international mutual funds, bonds and Developers
Diversified Realty Corporation common stock. As a result, the Plan's
revenues and net assets available for plan benefits could vary based on
the performance of the financial markets.
Fair Value Disclosure of Financial Instruments
Management has determined that the carrying amount of financial
instruments, as reported on the Statement of Net Assets Available for
Benefits, approximates fair value.
New Accounting Standard
Effective December 31, 1999, the Plan adopted Statement of Position
99-3, which eliminated the requirement to present earnings and expenses
by investment fund option for participant-directed investments.
Therefore, all participant-directed investments are shown in the
aggregate in the accompanying Statement of Changes in Net Assets
Available for Benefits. The 1998 financial statements have been
restated to conform to the 1999 presentation.
2. 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.
General
The Plan is a defined contribution plan that covers all eligible
employees, as defined, of the Company. The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974
("ERISA").
Contributions
Participants have the right to direct the Trustee to invest their
contributions, in one or more permitted investment funds, as defined by
the Plan, as they may choose. Participants may contribute up to 15% of
their annual compensation, not to exceed $10,000 per Plan year. The
Plan provides that the Company will match participant's contributions
in an amount equal to 25% of the participant's elective deferrals for
the plan year. However, the Company shall not match any elective
deferrals which are in excess of 6% of a participant's annual
compensation. Matching contributions may be made in cash or in the
Company's common stock. During 1999 and 1998, all Company contributions
were made with the Company's common stock. Subject to provisions of the
Plan, the Company has the option to contribute any amount up to 15% of
the annual pay of all participating and vested participants for each
Plan year. During 1999 and 1998, there were no such contributions made
by the Company related to this provision.
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROFIT SHARING PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Participant Accounts
Each participant's account is credited with the participant's
contribution and allocations of (a) the Company's contributions and (b)
Plan earnings. Allocations are based upon participant earnings or
account balances, as defined. Forfeited balances of terminated
participants' nonvested accounts are used to reduce future Company
contributions ($2,487 and $2,752 at December 31, 1999 and 1998,
respectively).
Vesting
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 service year until fully vested. Participants
were credited with years of service prior to the formation of the Plan
for vesting purposes.
Participants Notes Receivable
Under the terms of the Plan, participants may borrow from their
accounts up to a maximum of $50,000 or 50% of their vested 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% and 8.8% at December 31, 1999 and 1998,
respectively. The outstanding notes' interest rates range from 8.75%
and 9.5%.
Payment of Benefits
The liability of the Plan for benefits to participants is limited to
the fair value of the Plan assets. A participant is entitled to receive
the full value of his or her vested account at age 65, death or
disability, prior to retirement, or upon termination of employment.
Upon retirement or termination, the participant may elect to receive a
single lump sum payment of his or her account balance. If a
participant's employment terminates as a result of a permanent physical
or mental disability, the participant will be fully vested as of the
date of the disability. Benefits payable at December 31, 1999 and 1998
for all processed and approved, but unpaid claims were $0 and $4,549,
respectively. This amount is reflected as a liability in the Plan's
Form 5500 in accordance with ERISA rules and regulations.
3. INVESTMENTS
The Trustee of the Plan maintains the following separate investment
accounts under the Plan in which participants may direct contributions.
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROFIT SHARING PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Employer Stock Fund - The 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.
Capital Income Fund - This fund's primary investment objective is to
maximize current income, 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.
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.
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.
Discovery Fund - This fund's investment objective is capital
appreciation. It invests in small emerging growth companies for maximum
capital appreciation.
Main Street Growth and Income Fund - This Fund is predominantly a
large-cap blend fund, with the ability to invest in companies of all
sizes and utilize a combination of both growth and value styles.
Salomon Smith Barney:
Money Fund - This fund invests in short-term high quality money market
securities that provide current income and safety of principle.
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROFIT SHARING PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS, CONTINUED
The following presents investments that represent 5 percent or more of
the Plan's net assets:
INVESTMENTS AT FAIR VALUE
December 31,
1999 1998
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Oppenheimer Securities Capital Income Fund, 19,111
and 15,022 shares, respectively $223,795 $212,411
Oppenheimer Securities Global Fund, 4,865 and
3,953 shares, respectively 299,722 166,366
Oppenheimer Securities Growth Fund, 9,273 and
7,274 shares, respectively 437,799 251,738
Oppenheimer Securities Discovery Fund 1,445 and
1,020 shares, respectively 91,352 45,192
Developers Diversified Realty Corporation Common
Stock, 25,743 and 18,514 shares, respectively 331,438* 328,630*
* Non participant-directed
During 1999, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year)
appreciated in value by $76,197 as follows:
NET CHANGE IN FAIR VALUE
Investment at Fair Value as Year Ended
determined by Quoted Market Price December 31, 1999
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Mutual Funds $ 179,644
Common Stock (103,447)
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Net change in Fair Value $ 76,197
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4. NONPARTICIPANT-DIRECTED INVESTMENTS
Information about the net assets and the significant components of the
changes in net assets relating to the nonparticipant-directed
investments is as follows:
December 31,
Net assets: 1999 1998
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Common Stock $331,438 $328,630
Money Fund 1,523 4,869
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$332,961 $333,499
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROFIT SHARING PLAN AND TRUST
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Year Ended
December 31, 1999
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Changes in Net Assets:
Employer contributions $ 57,861
Participants' contributions 48,103
Participants' rollovers 1,868
Receivables (4,391)
Dividends 33,183
Net depreciation (103,447)
Benefits paid to participants (31,202)
Transfers to participant-directed investments 1,817
Forfeitures (3,828)
Investment expense (502)
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$ (538)
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5. 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, 1999 and 1998, the Plan held
investments in shares of mutual funds managed by Smith Barney, the Plan
investment advisor. These transactions are considered exempt
party-in-interest transactions under Section 408 of ERISA and the
regulations thereunder.
6. PLAN TERMINATION
Under the Plan, the Company has the right to discontinue contributions
and terminate the Plan at any time, although the Company has not
expressed any interest to do so. 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.
7. 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") and therefore is exempt
from federal income taxes. 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.
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROFIT SHARING PLAN AND TRUST
Schedule I
Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1999
Fair
Identity of Issuer or Borrower Value
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* Smith Barney Money Funds Cash Portfolio Class A $ 19,855
Oppenheimer Funds U.S. Government Trust Class C 65,174
Oppenheimer Funds Capital Income Fund Class C 223,795
Oppenheimer Funds Global Fund Class C 299,722
Oppenheimer Funds Growth Fund Class C 437,799
Oppenheimer Funds Discovery Fund Class C 91,352
Oppenheimer Funds Main Street Growth and Income Fund
Class C 76,186
Developers Diversified
Realty Corporation Common Stock (Cost $419,216) 331,438
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$1,545,321
==========
Participant Notes Receivable (The outstanding Notes'
interest range from 8.75% to 9.5%.) $ 21,480
==========
* Designates Parties-In-Interest
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROFIT SHARING PLAN AND TRUST
Schedule II
Item 27d - Schedule of Reportable Transactions
For the Year Ended December 31, 1999
Purchase Selling Gain
Price Price or (loss)
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* Developers Diversified Realty
Corporation Common Stock
24 aggregate purchases $104,567 -- --
* Designates Party-In-Interest
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DEVELOPERS DIVERSIFIED REALTY CORPORATION
PROFIT SHARING PLAN AND TRUST
EXHIBITS
--------
23.0 Consent of Independent Accountants
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other person who administer the employee benefit plan) have duly
cause 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 26, 2000 /s/ Scott A. Wolstein
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Scott A. Wolstein
Trustee
Date June 26, 2000 /s/ James A. Schoff
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James A. Schoff
Trustee
Date June 26, 2000 /s/ Joan U. Allgood
-------------------- ----------------------------------------------
Joan U. Allgood
Trustee
