UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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, 2001
OR
| ¨ | | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 1-13664
A. Full title of the plan and the address of the plan, if different from that of the issuer named below:
PMI Alternate 401(k) Plan
B. Name of issuer of the securities held pursuant to the Plan and the address of its principal executive office:
The PMI Group, Inc.
3003 Oak Road
Walnut Creek, California 94597
PMI Alternate 401(k) Plan
Financial Statements
and Supplemental Schedule
(Modified Cash Basis)
As of December 31, 2001 and 2000 and for the year ended December 31, 2001
With Report of Independent Auditors
Contents
Report of Independent Auditors
The Participants of the PMI Alternate 401(k) Plan
and Board of Directors of The PMI Group, Inc.
We have audited the accompanying statements of net assets available for benefits (modified cash basis) of the PMI Alternate 401(k) Plan as of December 31, 2001 and 2000, and the related statement of changes in net assets available for benefits (modified cash basis) for the year ended December 31, 2001. 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.
Except as explained in the following paragraph, we conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As permitted by 29 CFR 2520.103-8 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, investment assets held by Merrill Lynch Trust Company, the trustee of the Plan, and transactions in those assets were excluded from the scope of our audit of the Plan’s 2000 financial statements, except for comparing the information provided by the trustee, which is summarized in Note 3, with the related information included in the financial statements.
As described in Note 2, the financial statements and supplemental schedules were prepared on a modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States.
Because of the significance of the information that we did not audit, we are unable to, and do not, express an opinion on the Plan’s financial statements as of December 31, 2000. The form and content of the information included in the 2000 financial statements, other than that derived from the information certified by the trustee have been audited by us and, in our opinion, are presented in compliance with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits (modified cash basis) of the Plan at December 31, 2001, and changes in its net assets available for benefits (modified cash basis) for the year then ended in conformity with accounting principles generally accepted in the United States.
Our audit of the Plan’s financial statements as of and for the year ended December 31, 2001, was made for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental schedule of assets (held at end of year) (modified cash basis) as of December 31, 2001 is presented for the purpose of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule (modified cash basis) has been subjected to the auditing procedures applied in the audit of the financial statements for the year ended December 31, 2001, and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.
/s/ Ernst & Young LLP
May 5, 2003
Los Angeles, California
PMI Alternate 401(k) Plan
Statements of Net Assets Available for Benefits
(Modified Cash Basis)
| | | December 31 |
| | | 2001
| | | 2000
|
Assets | | | | | | | |
Cash (overdraft) | | $ | (64 | ) | | $ | — |
Investments, at fair value | | | 1,767,132 | | | | 966,518 |
| | |
|
|
| |
|
|
Net assets available for benefits | | $ | 1,767,068 | | | $ | 966,518 |
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|
| |
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|
See accompanying notes.
3
PMI Alternate 401(k) Plan
Statement of Changes in Net Assets Available for Benefits
(Modified Cash Basis)
Year ended December 31, 2001
Additions | | | | |
Investment income (loss): | | | | |
Net depreciation in fair value of investments | | $ | (42,210 | ) |
Interest and dividends | | | 32,180 | |
| | |
|
|
|
| | | | (10,030 | ) |
Contributions: | | | | |
Participants | | | 869,171 | |
Rollover | | | 41,912 | |
| | |
|
|
|
Total contributions | | | 911,083 | |
| | |
|
|
|
Total additions | | | 901,503 | |
| |
Deductions | | | | |
Benefits paid directly to participants | | | 100,503 | |
| | |
|
|
|
Net increase | | | 800,550 | |
| | | | | |
Net assets available for benefits: | | | | |
Beginning of year | | | 966,518 | |
| | |
|
|
|
End of year | | $ | 1,767,068 | |
| | |
|
|
|
See accompanying notes.
4
PMI Alternate 401(k) Plan
Notes to Financial Statements (Modified Cash Basis)
December 31, 2001
1. Description of the Plan
The following description of the PMI Alternate 401(k) 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 covering substantially all temporary full-time and part-time employees of The PMI Group, Inc. (the Company), other than those classes of employees specifically excluded by the plan document. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Effective January 1, 2000, the Plan was amended to state that all covered employees as of December 31, 1999 shall become eligible on January 1, 2000. Further, all covered employees hired on or after January 1, 2000 are eligible to participate in the Plan on the first day of the next payroll period after their date of employment. Effective October 1, 2001, all eligible covered employees must be at least 18 to participate in the Plan.
Contributions
Each year, participants may contribute up to 17% of their annual pretax compensation, as defined in the Plan, subject to annual limitations defined by the Internal Revenue Code (the Code). The Company does not match employee contributions.
Upon enrollment, participants may direct all contributions to any of the Plan’s investment options. Participants may change their investment elections at any time during the year.
5
PMI Alternate 401(k) Plan
Notes to Financial Statements (Modified Cash Basis) (continued)
1. Description of the Plan (continued)
Participant Accounts
Each participant’s account is credited with the participant’s contributions and allocations of Plan earnings and may be charged with an allocation of administrative expenses, if any. Allocations are based on participant earnings or account balances, as defined in the Plan. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s account.
Vesting
Participants are immediately vested in their contributions plus actual earnings thereon.
Payment of Benefits
Upon termination of employment, death, disability, or retirement participants may elect to receive a lump-sum benefit equal to their account balance. In-service withdrawals may be available upon hardship or upon attainment of age 59 ½ in accordance with the Plan’s provisions.
Participant Loans
Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their account balance. Loan terms shall not exceed five years. The loans are secured by the balance in the participant’s account and bear interest rate at a rate equal to the prime rate published in the Wall Street Journal plus 1%. Principal and interest are paid ratably through payroll deductions.
6
PMI Alternate 401(k) Plan
Notes to Financial Statements (Modified Cash Basis) (continued)
1. Description of the Plan (continued)
Administrative Expenses
The Company pays substantially all administrative expenses of the Plan.
Plan Termination
Although it has not expressed any intention to do so, the Company has the right under the Plan to terminate the Plan subject to the provisions of ERISA. In the event of the Plan’s termination, participant’s will remain fully vested in their accounts.
2. Summary of Accounting Policies
Basis of Accounting
The financial statements and supplemental schedule of the Plan are prepared on the modified cash basis, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States. Under this basis, investment assets are reported at fair value, net realized and unrealized appreciation in fair value of investments is recognized, contributions are recognized when received rather than as earned, and benefits and expenses are recognized when paid rather than as incurred.
Investments Valuation and Income Recognition
The Plan’s investments are stated at fair value which equals the quoted market price on the last day of the plan year. The shares of registered investment companies are valued at quoted market prices which represent the net asset values of shares held by the Plan at year-end. Common collective trust funds are valued based on the quoted redemption values on the last business day of the plan year. Money market funds are valued at historical cost plus accrued interest, which approximates fair value. Participant loans are valued at their outstanding balances, which approximate fair value.
Purchases and sales of securities are recorded on a trade-date basis. Interest and dividends are recorded when received.
7
PMI Alternate 401(k) Plan
Notes to Financial Statements (Modified Cash Basis) (continued)
2. Summary of Accounting Policies (continued)
Use of Estimates
The preparation of financial statements in conformity with the modified cash basis of accounting requires management to make estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
3. Investments
All investment information disclosed in the accompanying financial statements at December 31, 2000 was obtained or derived from information supplied to the plan administrator and certified as complete and accurate by Merrill Lynch Trust Company, the trustee.
During 2001, the Plan’s investments (including investments purchased, sold as well as held during the year) appreciated (depreciated) in fair value as determined by quoted market prices as follows:
| | | Net Realized and Unrealized Appreciation (Depreciation) in Fair Value
of Investments
|
Registered investment companies | | $ (7,865) |
Common collective trust funds | | (34,895) |
Common stock | | 550 |
| | |
|
Total | | $(42,210) |
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|
8
PMI Alternate 401(k) Plan
Notes to Financial Statements (Modified Cash Basis) (continued)
3. Investments (continued)
Investments that represent 5% or more of the fair value of the Plan’s net assets are as follows:
| | | December 31 |
| | | 2001
| | 2000
|
Davis New York Venture Fund | | $ | 256,861 | | $ | 90,394 |
Massachusetts Investor Trust | | | * | | | 122,588 |
Merrill Lynch Capital Fund | | | * | | | 48,736 |
Merrill Lynch Retirement Reserves Money Market Fund | | | 490,110 | | | 197,074 |
Merrill Lynch S&P 500 Index Fund | | | * | | | 200,219 |
Merrill Lynch Corporate Bond Fund Intermediate Team Portfolio | | | * | | | 49,103 |
CMA Money Fund | | | * | | | 192,107 |
Merrill Lynch Fundamental Growth Fund | | | 211,615 | | | * |
BGI LifePath 2010 Fund | | | 188,936 | | | * |
BGI S&P 500 Stock Fund | | | 368,560 | | | * |
PIMCO Total Return Fund | | | 89,263 | | | * |
Van Kampen American Value Fund | | | 91,543 | | | * |
| * | | Fair value of these investments does not exceed 5% of the Plan’s net assets for year indicated. |
4. Income Tax Status
The Plan has not applied for nor received a determination letter from the Internal Revenue Service stating that the Plan is qualified under Section 401(a) of the Code. However, the plan administrator believes that the Plan is qualified and, therefore, the related trust is exempt from taxation.
5. Transactions with Parties-in-Interest
Transactions in shares of the Company’s common stock qualify as party-in-interest transactions under the provisions of ERISA. During 2001, the Plan made purchases of $4,788 and sales of $1,117 of the Plan Sponsor’s common stock.
9
Supplemental Schedule
PMI Alternate 401(k) Plan
EIN 94-3199675, Plan #004
Schedule H, Line 4i – Schedule of Assets (Held At End of Year)
Year ended December 31, 2001
| (a) | | (b) Identity of Issue, Borrower, Lessor, or Similar Party | | (c) Description of Investment
Including Maturity Date, Rate of
Interest, Collateral, Par or Maturity
Value | | (e) Current Value |
|
| | | Registered investment companies: | | | | | |
| | | Davis New York Venture Fund | | 10,101 shares | | $ | 256,861 |
| | | Van Kampen American Value Fund | | 4,862 shares | | | 91,543 |
| | | Van Kampen Aggressive Growth Fund | | 288 shares | | | 3,854 |
| | | PIMCO Total Return | | 8,534 shares | | | 89,263 |
| | | Templeton Foreign Fund | | 6,245 shares | | | 57,767 |
* | | Merrill Lynch Fundamental Growth Fund | | 11,849 shares | | | 211,615 |
| | | Common collective trust funds: | | | | | |
| | | BGI S&P 500 Stock Fund | | 8,125 shares | | | 368,560 |
| | | BGI MidCap Equity Index Fund | | 36 shares | | | 1,344 |
| | | BGI International Equity Fund | | 118 shares | | | 1,667 |
| | | BGI LifePath 2010 Fund | | 6 shares | | | 105 |
| | | BGI LifePath 2020 Fund | | 9,395 shares | | | 188,936 |
| | | BGI LifePath 2030 Fund | | 12 shares | | | 263 |
| | | BGI LifePath 2040 Fund | | 1 shares | | | 22 |
| | | Money market fund: | | | | | |
* | | Merrill Lynch Retirement Reserves Money Market Fund | | 490,110 shares | | | 490,110 |
| | | Common stock: | | | | | |
* | | The PMI Group, Inc. | | 63 shares | | | 4,222 |
* | | Participant loans | | Interest rate of 6.5%, maturing 2002 | | | 1,000 |
| | | | | | |
|
|
| | | Total investments | | | | $ | 1,767,132 |
| | | | | | |
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*Indicates a party-in-interest to the Plan.
Note: Cost information has been omitted as these investments are entirely participant-directed.
10
SIGNATURE
The Plan. 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.
| |
| |
| | | /s/ Charles F. Broom |
| |
|
| | | Charles F. Broom Plan Administrator |
Date: June 27, 2003
11
PMI ALTERNATE 401(k) PLAN
EXHIBIT INDEX
Exhibit Number:
| | Description:
|
| |
| 23 | | Consent of Ernst & Young LLP, independent auditors |
