<PAGE>
-------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 11-K
(Mark One)
[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
COMMISSION FILE NUMBER 0-23181
PAULA FINANCIAL AND SUBSIDIARIES
401(K) RETIREMENT SAVINGS PLAN
(Full title of Plan)
PAULA FINANCIAL
300 NORTH LAKE AVENUE, SUITE 300
PASADENA, CA 91101
(Name of issuer of the securities held pursuant to the Plan and address of its
principal executive office.)
-------------------------------------------------------------------------------
<PAGE>
PAULA FINANCIAL AND SUBSIDIARIES
401(K) RETIREMENT SAVINGS PLAN
INDEX TO FINANCIAL STATEMENTS, SUPPLEMENTAL SCHEDULES AND EXHIBIT
ITEM
Independent Auditor's Report
Statement of Net Assets Available for Plan Benefits as of December 31, 1999
Statement of Net Assets Available for Plan Benefits as of December 31, 1998
Statement of Changes in Net Assets Available for Plan Benefits for the Year
Ended December 31, 1999
Notes to Financial Statements
Schedule G Part I - Schedule of Loans or Fixed Income Obligations In Default
or Classified as Uncollectible - December 31, 1999
Schedule H Item 4i - Schedule of Assets Held for Investment Purposes at End of
Year - December 31, 1999
Signatures
Exhibit 23 - Consent of Independent Auditor
<PAGE>
PAULA FINANCIAL AND SUBSIDIARIES
401(K) RETIREMENT SAVINGS PLAN
FINANCIAL STATEMENTS
AND
SUPPLEMENTARY DATA
DECEMBER 31, 1999
<PAGE>
PAULA FINANCIAL AND SUBSIDIARIES
401(K) RETIREMENT SAVINGS PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
Page
----
Independent Auditor's Report..................................................1
Statement of Net Assets Available for Plan
Benefits as of December 31, 1999.............................................2
Statement of Net Assets Available for Plan
Benefits as of December 31, 1998.............................................4
Statement of Changes in Net Assets Available for Plan
Benefits for the year ended December 31, 1999..............................6
Notes to Financial Statements.................................................8
Schedule
--------
Schedule G Part 1- Schedule of Loans or Fixed Income Obligations
In Default or Classified as Uncollectible - December 31, 1999................1
Schedule H Item 4i - Schedule of Assets Held for Investment
Purposes At End of Year- December 31, 1999...................................2
All other supplemental schedules omitted are not applicable or are not required
based on disclosure requirements of the Employee Retirement Income Security Act
of 1974 and regulations issued by the Department of Labor.
<PAGE>
[LETTERHEAD OF PETER T. MANAHAN]
INDEPENDENT AUDITOR'S REPORT
To the Administrative Committee of
The PAULA Financial And Subsidiaries
401(K) Retirement Savings Plan
I have audited the accompanying statements of net assets available for plan
benefits of PAULA Financial and Subsidiaries 401(K) Retirement Savings Plan
as of December 31, 1999 and 1998, and the related statement of changes in net
assets available for plan benefits for the year ended December 31, 1999. These
financial statements are the responsibility of the Plan's management. My
responsibility is to express an opinion on these statements based on my audits.
I conducted my audits in accordance with generally accepted auditing
standards. Those standards require that I 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
presentation. I believe that my audits provide a reasonable basis for my
opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of PAULA
Financial and Subsidiaries 401(K) Retirement Savings Plan as of December 31,
1999 and 1998, and the changes in net assets for plan benefits for the year
ended December 31, 1999, in conformity with generally accepted accounting
principles.
My audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of (1) loans
or fixed income obligations in default or classified as uncollectible and (2)
assets held for investments purposes at end of year are presented for the
purpose of additional analysis and are not 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 my opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ Peter T. Manahan
Peter T. Manahan
Certified Public Accountant
Pasadena, California
June 9, 2000
<PAGE>
PAULA FINANCIAL AND SUBSIDIARIES
401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Fund 1 Fund 2 Fund 3 Fund 4 Fund 5 Fund 6
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Assets
Investments:
Group annuity contracts,
at contract value $3,900,216 - - - - -
Pooled separate accounts,
at fair value - 1,062,328 405,241 1,560,151 576,145 5,155,905
Loans to participants - - - - - -
--------------------------------------------------------------------------------------
3,900,216 1,062,328 405,241 1,560,151 576,145 5,155,905
Receivables:
Employer's contribution 5,263 2,714 686 3,006 815 1,630
Participants' contributions 11,227 6,469 2,576 8,183 1,626 2,062
Accrued interest 7,295 - - - - -
--------------------------------------------------------------------------------------
23,785 9,183 3,262 11,189 2,441 3,692
--------------------------------------------------------------------------------------
Total assets 3,924,001 1,071,511 408,503 1,571,340 578,586 5,159,597
Liabilities - - - - - -
--------------------------------------------------------------------------------------
Net assets available for
Plan benefits $3,924,001 1,071,511 408,503 1,571,340 578,586 5,159,597
======================================================================================
</TABLE>
-CONTINUED-
2
<PAGE>
PAULA FINANCIAL AND SUBSIDIARIES
401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Fund 7 Fund 8 Fund 9 Fund 10 Fund 11 Total
------ ------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Assets
Investments:
Group annuity contracts,
at contract value - - - - - 3,900,216
Pooled separate accounts,
at fair value 93,142 181,374 605,522 977,734 - 10,617,542
Loans to participants - - - - 636,699 636,699
--------------------------------------------------------------------------------------
93,142 181,374 605,522 977,734 636,699 15,154,457
Receivables:
Employer's contribution 220 490 1,485 1,896 - 18,205
Participants' contributions 614 1,455 5,217 5,275 - 44,704
Accrued interest - - - - - 7,295
--------------------------------------------------------------------------------------
834 1,945 6,702 7,171 - 70,204
--------------------------------------------------------------------------------------
Total assets 93,976 183,319 612,224 984,905 636,699 15,224,661
Liabilities - - - - - -
--------------------------------------------------------------------------------------
Net assets available for
Plan benefits 93,976 183,319 612,224 984,905 636,699 15,224,661
======================================================================================
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
PAULA FINANCIAL AND SUBSIDIARIES
401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Fund 1 Fund 2 Fund 3 Fund 4 Fund 5 Fund 6
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Assets
Investments:
Group annuity contracts,
at contract value $3,535,837 - - - - -
Pooled separate accounts,
at fair value - 874,448 371,923 750,993 415,324 549,930
Loans to participants - - - - - -
--------------------------------------------------------------------------------------
3,535,837 874,448 371,923 750,993 415,324 549,930
Receivables:
Employer's contribution 3,988 1,222 503 1,183 584 633
Participants' contributions 9,206 3,161 1,660 3,298 1,350 999
Accrued interest 5,890 - - - - -
--------------------------------------------------------------------------------------
19,084 4,383 2,163 4,481 1,934 1,632
--------------------------------------------------------------------------------------
Total assets 3,554,921 878,831 374,086 755,474 417,258 551,562
Liabilities - - - - - -
--------------------------------------------------------------------------------------
Net assets available for
Plan benefits $3,554,921 878,831 374,086 755,474 417,258 551,562
======================================================================================
</TABLE>
-CONTINUED-
4
<PAGE>
PAULA FINANCIAL AND SUBSIDIARIES
401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS (CONTINUED)
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Fund 7 Fund 8 Fund 9 Fund 10 Fund 11 Total
------ ------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Assets
Investments:
Group annuity contracts,
at contract value - - - - - 3,535,837
Pooled separate accounts,
at fair value 27,687 77,909 323,491 275,196 - 3,666,901
Loans to participants - - - - 492,025 492,025
--------------------------------------------------------------------------------------
27,687 77,909 323,491 275,196 492,025 7,694,763
Receivables:
Employer's contribution 32 236 587 537 - 9,505
Participants' contributions 72 779 1,844 1,580 - 23,949
Accrued interest - - - - - 5,890
--------------------------------------------------------------------------------------
104 1,015 2,431 2,117 - 39,344
--------------------------------------------------------------------------------------
Total assets 27,791 78,924 325,922 277,313 492,025 7,734,107
Liabilities - - - - - -
--------------------------------------------------------------------------------------
Net assets available for
Plan benefits 27,791 78,924 325,922 277,313 492,025 7,734,107
======================================================================================
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
PAULA FINANCIAL AND SUBSIDIARIES
401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Fund 1 Fund 2 Fund 3 Fund 4 Fund 5 Fund 6
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Contributions:
Participants $ 266,237 103,400 53,610 123,706 39,751 40,942
Employer 104,817 39,787 14,560 41,761 15,285 22,868
Rollover 12,911 90,266 - 104,704 11,204 286
--------------------------------------------------------------------------------------
383,965 233,453 68,170 270,171 66,240 64,096
Transfer from ESOP Plan: 403,211 - - - - 4,964,825
Investment income:
Interest and dividends 190,531 - - - - 40,982
Net appreciation (depreciation)
in fair value of pooled
separate accounts - 35,771 (8,298) 417,516 172,059 (284,052)
--------------------------------------------------------------------------------------
190,531 35,771 (8,298) 417,516 172,059 (243,070)
Participant loan activity:
Repayment 104,980 16,253 5,569 24,633 8,093 5,507
Issuance (201,620) (30,695) (7,915) (58,262) (14,187) (3,418)
--------------------------------------------------------------------------------------
(96,640) (14,442) (2,346) (33,629) (6,094) 2,089
Benefits and expenses:
Benefits (211,895) (41,241) (7,824) (54,492) (12,397) (23,393)
Administrative expenses (1,242) (198) (35) (235) (54) (3,166)
Net transfer in (out) (298,850) (20,663) (15,250) 216,535 (58,426) (153,346)
--------------------------------------------------------------------------------------
(511,987) (62,102) (23,109) 161,808 (70,877) (179,905)
--------------------------------------------------------------------------------------
Net increase in net
assets available for Plan
benefits 369,080 192,680 34,417 815,866 161,328 4,608,035
Net assets available for Plan
Benefits:
Beginning of year 3,554,921 878,831 374,086 755,474 417,258 551,562
--------------------------------------------------------------------------------------
End of year $3,924,001 1,071,511 408,503 1,571,340 578,586 5,159,597
======================================================================================
</TABLE>
-CONTINUED-
6
<PAGE>
PAULA FINANCIAL AND SUBSIDIARIES
401(K) RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS (CONTINUED)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Fund 7 Fund 8 Fund 9 Fund 10 Fund 11 Total
------ ------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Contributions:
Participants 6,089 21,968 72,542 73,725 801,970
Employer 2,317 6,830 23,265 21,627 293,117
Rollover 2,809 3,160 114,365 112,609 - 452,314
--------------------------------------------------------------------------------------
11,215 31,958 210,172 207,961 - 1,547,401
Transfer from ESOP Plan: - - - - - 5,368,036
Investment income:
Interest and dividends - - - - 45,055 276,568
Net appreciation (depreciation)
in fair value of pooled
separate accounts 11,996 22,368 84,543 341,644 - 793,547
--------------------------------------------------------------------------------------
11,996 22,368 84,543 341,644 45,055 1,070,115
Participant loan activity:
Repayment 345 48,388 3,608 26,688 (244,064) -
Issuance - (16,531) (13,604) (63,984) 410,216 -
--------------------------------------------------------------------------------------
345 31,857 (9,996) (37,296) 166,152 -
Benefits and expenses:
Benefits (694) (9,227) (90,316) (16,780) (21,478) (489,737)
Administrative expenses - (35) (61) (235) - (5,261)
Net transfer in (out) 43,323 27,474 91,960 212,298 (45,055) -
--------------------------------------------------------------------------------------
42,629 18,212 1,583 195,283 (66,533) (494,998)
--------------------------------------------------------------------------------------
Net increase in net
assets available for Plan
benefits 66,185 104,395 286,302 707,592 144,674 7,490,554
Net assets available for Plan
Benefits:
Beginning of year 27,791 78,924 325,922 277,313 492,025 7,734,107
--------------------------------------------------------------------------------------
End of year 93,976 183,319 612,224 984,905 636,699 15,224,661
======================================================================================
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
PAULA FINANCIAL AND SUBSIDIARIES
401(K) RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(1) PLAN DESCRIPTION
The PAULA Financial and Subsidiaries 401(K) Retirement Savings Plan (the
Plan) is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA). The Plan is a voluntary defined
contribution retirement savings plan which qualifies as a salary deferral
plan under Sections 401(k) of the Internal Revenue Code and is sponsored
by PAULA Financial on behalf of itself and its various subsidiaries (the
Company). The Plan offers tax deferral, payroll deduction and several
options for investing. Plan participants should refer to the Plan
agreement for more complete information.
ELIGIBILITY
The Plan covers all regular, full-time, salaried employees of the Company
provided they have attained age 21 and have completed one year of
eligible service.
CONTRIBUTIONS
Participants in the Plan may contribute, on a tax-deferred basis, from 1%
to 17% of their compensation (as defined by the Plan), limited to the
maximum amount allowable by the Internal Revenue Code. This limitation
amount is adjusted annually for inflation and is $10,000 for 1999.
Participants may suspend contributions or change their account balances
among investment options at any time. Participants can only resume
previously suspended contributions at the beginning of each fiscal
quarter. The Company provides a matching contribution of $0.50 per $1.00
contributed up to the first six percent of compensation contributed.
With the Plan administrator's approval, distributions from other
qualified plans can be deposited into a rollover account in the Plan.
Participants in the Plan are able to invest their deferred compensation,
Company matching contributions and rollover funds in various fund
alternatives. The following identifies the funds:
Fund 1 - CIGNA Guaranteed Income Fund
Fund 2 - Fidelity Advisor Growth Opportunities Fund
Fund 3 - Charter Balanced Fund 1 - INVESCO
Fund 4 - American Century Twentieth Century Ultra Fund
Fund 5 - Warburg Pincus Advisor Emerging Growth Fund
Fund 6 - PAULA Financial Common Stock
Fund 7 - CIGNA Lifetime 20
Fund 8 - CIGNA Lifetime 40
Fund 9 - CIGNA Stock Market Index
Fund 10 - Janus Worldwide
Fund 11 holds the participant loans.
8
<PAGE>
PAULA FINANCIAL AND SUBSIDIARIES
401(K) RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
VESTING
Participants become immediately vested in both their voluntary
tax-deferred contributions and the Company matching contributions.
BENEFITS
Upon retirement, attaining age 59 1/2, termination, death, permanent
disability or proven financial hardship, participants or their
beneficiaries are entitled to receive their vested benefits.
PARTICIPANT ACCOUNT BALANCES
Separate accounts are maintained for each participant's tax-deferred
contributions, Company matching contribution balances and rollover funds.
Earnings of the various funds are allocated to the participant balances
according to the ratio that a participant's account balance in a given
fund bears to the total of all account balances in the fund.
USE OF ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from
those estimates.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements have been prepared on an accrual
basis and present the net assets available for plan benefits and changes
in those net assets.
INVESTMENTS
Investments are stated at fair value as reported by Connecticut General
Life Insurance Company (CIGNA), the carrier of Plan investments. Net
appreciation or depreciation resulting from revaluation of investments to
fair value is reflected in the statements of changes in net assets
available for Plan benefits and includes investments bought and sold, as
well as held, during the year.
9
<PAGE>
PAULA FINANCIAL AND SUBSIDIARIES
401(K) RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS, CONTINUED
ADMINISTRATIVE EXPENSES
Administrative expenses relating specifically to the Plan for
maintenance, valuation and distribution of participants' account
balances, trustee fees, and other expenses relating to outside services
provided to the Plan are paid by the Company. Additionally, general
administrative expenses incurred by the Plan, such as salary and office
space costs, are absorbed by the Company.
(3) TRUST FUND
CG Trust Company (an affiliate of CIGNA) has been retained by the Plan as
the trustee for the Plan's trust fund. The trustee is authorized to act
on the directive of the Plan Committee which consists of seven employees
of the Company. CIGNA is the carrier for the Plan's investments.
The trust fund consists of four types of assets: group annuity contracts,
pooled separate accounts, loans to participants and cash. Investments in
the above types of assets are made at the direction of the Plan
participants.
(4) ESOP PLAN MERGER
On September 29, 1999 the Board of Directors of the plan sponsor, PAULA
Financial authorized the merger of the PAULA Financial and Subsidiaries
Employees Stock Ownership Plan and its related PAULA Financial and
Subsidiaries Employee Stock Ownership Trust (collectively, the ESOP plan)
into the Plan and its related trust effective October 1, 1999. The merger
was completed by December 8, 1999. The ESOP Plan liabilities and pending
distributions to participants were paid and the remaining assets
consisting of cash ($403,211) and PAULA Financial Common Stock (802,396
shares) were transferred to the 401(K) trust. The PAULA Financial Common
Stock was transferred at the September 30, 1999 market value of $6.1875
per share.
(5) FEDERAL INCOME TAXES
The Plan has received a letter of determination from the Internal Revenue
Service that the Plan and related trust are designed in accordance with
applicable sections of the Internal Revenue Code.
(6) PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the
right to terminate the Plan subject to the provisions of ERISA.
10
<PAGE>
SCHEDULE 1
PAULA FINANCIAL AND SUBSIDIARIES
401(K) RETIREMENT SAVINGS PLAN
<TABLE>
<CAPTION>
SCHEDULE G PART 1 - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS IN DEFAULT OR CLASSIFIED AS UNCOLLECTIBLE
DECEMBER 31, 1999
EIN: 95-4640368
Plan 002
AMOUNT RECEIVED UNPAID DETAILED DESCRIPTION OF LOAN INCLUDING DATES OF MAKING
ORIGINAL DURING REPORTING BALANCE AND MATURITY, INTEREST RATE, THE TYPE AND VALUE OF
IDENTITY AND AMOUNT YEAR AT END OF COLLATERAL, ANY RENEGOTIATION OF THE LOAN AND TERMS OF
ADDRESS OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR THE RENEGOTIATION, AND OTHER MATERIAL ITEMS
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Delilah Ceballos $6,400 - - $2,811 Promissory note dated 1/2/93 payable in 60 monthly
20 Top Place ========================================= installments of $125.22 including interest at 6.5%.
Salinas, CA 93905 Note is secured by participant's vested account which
was $38,291 at 12/31/99. 1/2/96 was the last date
payment was received. A default occurs when any
payment is not made on time. The trustee can
declare the whole amount due and payable immediately.
The trustee issued a 1996 Form 1099-R.
Abednego DelRosario $7,000 - - $3,665 Promissory note dated 2/28/93 payable in 60 monthly
3008 Via Dolores ========================================= installments of $137.00 including interest at 6.5%.
Baldwin Park, Note is secured by participant's vested account which
CA 91706 was $30,810 at 12/31/99. 10/15/95 was the last date
payment was received. A default occurs when any
payment is not made on time. The trustee can
declare the whole amount due and payable immediately.
The trustee issued a 1996 Form 1099-R.
<CAPTION>
IDENTITY AND AMOUNT OVERDUE
ADDRESS OF OBLIGOR PRINCIPAL INTEREST
------------------------------------------
<S> <C> <C>
Delilah Ceballos $2,811 $730
20 Top Place ====================
Salinas, CA 93905
Abednego DelRosario $3,665 $940
3008 Via Dolores =====================
Baldwin Park,
CA 91706
</TABLE>
-Continued-
<PAGE>
SCHEDULE 1 (CONTINUED)
PAULA FINANCIAL AND SUBSIDIARIES
401(K) RETIREMENT SAVINGS PLAN
<TABLE>
<CAPTION>
SCHEDULE G PART 1 - SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS IN DEFAULT OR CLASSIFIED AS UNCOLLECTIBLE
DECEMBER 31, 1999
EIN: 95-4640368
Plan 002
AMOUNT RECEIVED UNPAID DETAILED DESCRIPTION OF LOAN INCLUDING DATES OF MAKING
ORIGINAL DURING REPORTING BALANCE AND MATURITY, INTEREST RATE, THE TYPE AND VALUE OF
IDENTITY AND AMOUNT YEAR AT END OF COLLATERAL, ANY RENEGOTIATION OF THE LOAN AND TERMS OF
ADDRESS OF OBLIGOR OF LOAN PRINCIPAL INTEREST YEAR THE RENEGOTIATION, AND OTHER MATERIAL ITEMS
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
George Palmer $17,500 - - $11,850 Promissory note dated 6/30/94 payable in 60 monthly
2928 Weald Way ========================================== installments of $352.86 including interest at 7.75%.
#1423 Note is secured by participant's vested account which
Sacramento, was $77,581 at 12/31/99. 4/30/96 was the last date
CA 95833 payment was received. A default occurs when any
payment is not made on time. The trustee can
declare the whole amount due and payable immediately.
The trustee issued a 1996 Form 1099-R.
<CAPTION>
IDENTITY AND AMOUNT OVERDUE
ADDRESS OF OBLIGOR PRINCIPAL INTEREST
------------------------------------------
<S> <C> <C>
George Palmer $11,850 $3,371
2928 Weald Way ===================
#1423
Sacramento,
CA 95833
</TABLE>
See accompanying independent auditor's report.
<PAGE>
SCHEDULE 2
PAULA FINANCIAL AND SUBSIDIARIES
401(K) RETIREMENT SAVINGS PLAN
SCHEDULE H ITEM 4i - SCHEDULE OF ASSETS HELD
FOR INVESTMENT PURPOSES AT END OF YEAR
DECEMBER 31, 1999
<TABLE>
<CAPTION>
EIN: 95-4640368
Plan 002
IDENTITY OF ISSUE,
BORROWER, LESSOR CURRENT
OR SIMILAR PARTY DESCRIPTION COST VALUE
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GROUP ANNUITY CONTRACTS
Connecticut General Asset Fund
General Life Guaranteed Income Fund -
Insurance Co. Contribution period 7/1/95 to
(CIGNA) 12/31/99, annual effective interest
rate for 1999 is 5.6% $3,900,216 $3,900,216
-----------------------------
Total General Asset Fund 3,900,216 $3,900,216
-----------------------------
POOLED SEPARATE ACCOUNTS
Fidelity Advisor Growth
Opportunities Fund 791,716 1,062,328
Charter Balanced Fund 1 - INVESCO 348,042 405,241
American Century Twentieth Century Ultra Fund 1,000,702 1,560,151
Warburg Pincus Advisor Emerging Growth Fund 354,331 576,145
PAULA Financial Common Stock 5,569,399 5,155,905
CIGNA Lifetime 20 79,962 93,142
CIGNA Lifetime 40 156,209 181,374
CIGNA Stock Market Index 506,294 605,522
Janus Worldwide 643,698 977,734
-----------------------------
Total Pooled Separate Accounts 9,450,353 10,617,542
</TABLE>
-Continued-
<PAGE>
SCHEDULE 2 (CONTINUED)
PAULA FINANCIAL AND SUBSIDIARIES
401(K) RETIREMENT SAVINGS PLAN
SCHEDULE H ITEM 4i - SCHEDULE OF ASSETS HELD
FOR INVESTMENT PURPOSES AT END OF YEAR
DECEMBER 31, 1999
<TABLE>
<CAPTION>
EIN: 95-4640368
Plan 002
IDENTITY OF ISSUE,
BORROWER, LESSOR CURRENT
OR SIMILAR PARTY DESCRIPTION COST VALUE
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PARTICIPANT LOANS
76 Notes receivable from partici-
pants, secured by participants'
vested interests in Plan, interest
rates at December 31, 1999 range
from 6.5% to 9.5%, principal and
interest due through August 2009 636,699 636,699
-----------------------------
Total investments $13,987,278 $15,154,457
=============================
</TABLE>
See accompanying independent auditor's report.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the Plan) have duly caused this
annual report to be signed on its behalf by the undersigned hereunto duly
authorized.
Date: June 23, 2000 PAULA FINANCIAL AND SUBSIDIARIES
401(K) RETIREMENT SAVINGS PLAN
By: /s/ James A. Nicholson
------------------------------------------------
Senior Vice President and Chief Financial Officer
2
