================================================================================
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 of 1934
[Fee Required]
For the fiscal year ended December 31, 1997
OR
[ ] Transition Report pursuant to Section 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the transition period from to
----- -----
Commission File Number 1-13578
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
DOWNEY FINANCIAL CORP.
3501 Jamboree Road
Newport Beach, CA 92660
================================================================================
REQUIRED INFORMATION
I. Financial Statements.
Financial statements and schedules prepared in accordance with the
financial reporting requirements of the Employee Retirement Income Security
Act of 1974, together with independent auditors' report thereon.
II. Exhibits:
Consent of Independent Auditors.
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.
DOWNEY SAVINGS AND LOAN
ASSOCIATION, F.A. EMPLOYEES'
RETIREMENT AND SAVINGS PLAN
Date: June 26, 1998 By: /s/ THOMAS E. PRINCE
------------------------- ----------------------------------
Thomas E. Prince
Member, Administrative Committee
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Financial Statements and Supplemental Schedules
December 31, 1997 and 1996
(With Independent Auditors' Report Thereon)
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Index to Financial Statements and Supplemental Schedules
Page
Independent Auditors' Report..................................... 1
Statements of Net Assets Available for Plan Benefits -
December 31, 1997 and 1996...................................... 2
Statements of Changes in Net Assets Available for Plan Benefits -
Years ended December 31, 1997 and 1996.......................... 3
Notes to Financial Statements.................................... 4
Schedule
Line 27a - Schedule of Assets Held for Investment Purposes -
December 31, 1997............................................... 1
Line 27d - Schedule of Reportable Transactions - Year ended
December 31, 1997............................................... 2
INDEPENDENT AUDITORS' REPORT
The Administrative Committee
Downey Savings and Loan Association, F.A.
Employees' Retirement and Savings Plan:
We have audited the accompanying statement of net assets available for plan
benefits of the Downey Savings and Loan Association, F.A. Employees' Retirement
and Savings Plan (the Plan) as of December 31, 1997 and 1996 and the related
statements of changes in net assets available for Plan benefits for the years
then ended. 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 in accordance with generally accepted auditing
standards. 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for Plan benefits of the Plan as
of December 31, 1997 and 1996 and the changes in net assets available for Plan
benefits for the years then ended in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental 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. 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.
/s/ KPMG Peat Marwick
Los Angeles, California
June 26, 1998
1
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 1997 and 1996
ASSETS 1997 1996
------------ ------------
Cash ............................................ $ -- 5,961
------------ ------------
Investments, at fair value:
Mutual funds ................................... 10,060,539 6,803,984
Money market funds ............................. 3,901,857 3,253,991
Downey Financial Corp. common stock ............ 3,587,931 1,917,726
Participant loans .............................. 586,675 439,034
------------ ------------
18,137,002 12,414,735
------------ ------------
Receivables:
Employer's contribution ........................ 1,266,521 1,174,191
Employees' contributions ....................... 73,028 54,556
Investment income .............................. 930 3,183
Other .......................................... 1,998 6,202
------------ ------------
1,342,477 1,238,132
------------ ------------
Total assets ............................... 19,479,479 13,658,828
------------ ------------
LIABILITIES
Other ........................................... (19,958) (1,348)
------------ ------------
Total liabilities ......................... (19,958) (1,348)
------------ ------------
Net assets available for Plan benefits..... $ 19,459,521 13,657,480
============ ============
See accompanying notes to financial statements.
2
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Statements of Changes in Net Assets Available for Plan Benefits
Years ended December 31, 1997 and 1996
1997 1996
------------ ------------
Additions to net assets attributed to:
Dividends ............................ $ 38,117 29,518
Interest and realized and unrealized
gains and losses .................... 3,318,069 1,373,202
------------ ------------
3,356,186 1,402,720
Contributions:
Employer ............................. 1,507,150 1,336,683
Employee ............................. 1,920,928 1,556,387
------------ ------------
Total additions .................... 6,784,264 4,295,790
------------ ------------
Deductions from net assets attributed
to benefits paid to participants ..... (982,223) (1,110,007)
------------ ------------
Total deductions .................. (982,223) (1,110,007)
------------ ------------
Net increase ...................... 5,802,041 3,185,783
Net assets available for Plan benefits:
Beginning of year .................... 13,657,480 10,471,697
------------ ------------
End of year .......................... $ 19,459,521 13,657,480
============ ============
See accompanying notes to financial statements.
3
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements
December 31, 1997 and 1996
(1) DESCRIPTION OF THE PLAN
GENERAL
The Downey Savings and Loan Association, F.A. Employees' Retirement and
Savings Plan (the Plan) was established as a profit sharing plan on January
1, 1978 and was originally called the Employees' Profit Sharing Plan of
Downey Savings and Loan Association. The Plan was amended and restated in
its entirety as of October 1, 1997, and continues to qualify as both a
profit sharing plan and a qualified cash or deferred arrangement under
Internal Revenue Code Sections 401(a) and 401(k). The following description
provides only general information. Participants should refer to the Plan
agreement for a more complete description of the Plan's provisions.
The Plan is a defined contribution plan which provides retirement benefits
for eligible employees of Downey Savings and Loan Association, F.A., its
affiliates and subsidiaries (Downey). It is subject to the provisions of
the Employee Retirement Income Security Act of 1974 (ERISA).
ADMINISTRATION OF THE PLAN
The Plan is administered by Downey (the Plan Administrator). Downey Savings
and Loan Association, F.A. Administrative Committee (the Committee) also
administers the Plan and consists of at least three members and has the
authority to control and manage the operation and administration of the
Plan. The assets of the Plan are held in a nondiscretionary trust by
Fidelity Management Trust Company as trustee and are administered under a
trust agreement which requires that the trustee hold, administer and
distribute the funds of the Plan in accordance with the text of the Plan
and the instructions of the Plan Administrator, the Committee or its
designees.
CONTRIBUTIONS
All employees of Downey are eligible to participate in the Plan provided
they are 21 years of age and have completed one year of service. Each year,
participants may contribute up to 15% of their compensation, as defined in
the Plan. Participants may roll over into the Plan amounts representing
distributions from other qualified plans.
Downey makes a matching contribution equal to 25% of the participant's
pretax contributions which do not exceed 4% of the participant's
compensation. In addition, Downey makes annual contributions based upon the
participant's annual compensation and a participant age weighted factor.
Contributions are subject to certain limitations.
PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's contributions
and allocations of Downey's matching and discretionary contributions and
the Plan's earnings and losses. Allocations are based on participant
earnings or account balances, as defined. Forfeitures reduce the amount of
employer contributions. For the years ended December 31, 1997 and 1996,
participant forfeitures totaled $53,483 and $30,646, respectively.
4
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements, Continued
VESTING
Participants are immediately vested in their contributions plus actual
earnings thereon. Vesting in Downey's matching and discretionary
contributions plus actual earnings thereon is based on years of continuous
service. A participant vests at the rate of 20% after one year of credited
service and 20% each year thereafter until 100% vesting is reached after
five years of credited service.
INVESTMENT OPTIONS
As part of the amended and restated Plan as of October 1, 1997, the
investment options available to the Plan's participants changed whereby
contributions may be invested at the participant's direction as follows:
Stock Fund - The fund provides Plan participants with an opportunity to
invest in Downey Financial Corp. stock.
Fidelity Retirement Money Market Fund - The fund seeks to preserve capital
and maintain a high degree of liquidity while providing income. The fund
invests in high quality, short-term U.S. dollar denominated money market
instruments of domestic and foreign issuers.
PIMCO Low Duration Inst. Fund - The fund seeks total return - both income
and capital appreciation - consistent with prudent investment management.
Templeton Foreign Fund - The fund seeks long-term growth of capital.
Fidelity Puritan Fund - The fund seeks income consistent with preservation
of capital
Fidelity Growth & Income Fund - The fund seeks long term growth, current
income and growth of income, consistent with reasonable investment risk.
Fidelity Low-Priced Stock Fund - The fund seeks capital appreciation.
PARTICIPANT LOANS
From the beginning of the Plan and through September 30, 1997, participants
could borrow from their fund accounts in the event of financial hardship,
as defined within the Plan. Beginning October 1, 1997 and thereafter, based
on the amended and restated Plan, participants may borrow from their fund
accounts for general purposes, as defined within the Plan. Participant
loans are limited to 50% of the participant's current vested fund balance.
Loan transactions are treated as a transfer to (from) the investment funds.
The loans are secured by the balance in the participant's account and bear
a fixed rate of interest equal to prime plus 2% at the time the loan is
originated. Principal and interest are paid ratably through payroll
deductions.
PAYMENTS OF BENEFITS
Upon termination of service, a participant may elect to receive either a
single sum payment in cash or Downey Stock equal to the value of the vested
interest in his or her account, or a series of substantially equal annual
or more frequent installments over a period not to exceed five years.
5
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements, Continued
PLAN TERMINATION
Although it has not expressed any intent to do so, Downey has the right
under the Plan to discontinue 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% vested in their accounts.
(2) SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Plan have been prepared on the accrual
basis of accounting.
INVESTMENTS
Publicly traded securities are carried at fair value based on published
market quotations. Purchases and sales of investments are recorded on a
trade-date basis.
PARTICIPANT LOANS
Participant loans are included in the statements of net assets available
for Plan benefits at cost, which approximates fair value of the notes. The
notes are payable through payroll deductions.
ADMINISTRATIVE EXPENSES
All administrative costs of the Plan, excluding investment management fees,
are paid by Downey.
USE OF ESTIMATES
The Plan Administrator has made a number of estimates and assumptions
relating to the reporting of assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Accordingly, actual results may differ from those estimates.
RECLASSIFICATION
Certain reclassifications of the prior year's reported amounts have been
made to conform to the current year's reporting format.
6
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements, Continued
(3) NET ASSETS AVAILABLE FOR PLAN BENEFITS
The following presents net assets available for Plan benefits for each fund
as of December 31, 1997:
RETIREMENT FIDELITY
MONEY PIMCO LOW TEMPLETON FIDELITY GROWTH FIDELITY
STOCK MARKET DURATION FOREIGN PURITAN & INCOME LOW-PRICED LOAN
FUND FUND INST. FUND FUND FUND FUND STOCK FUND FUND TOTAL
---------- ---------- ---------- -------- ---------- ---------- ---------- -------- -----------
ASSETS:
Investments at
fair value:
Mutual funds ... $ -- -- 967,968 252,402 2,871,334 4,994,272 974,563 -- 10,060,539
Money market
funds ......... 209,620 3,692,237 -- -- -- -- -- -- 3,901,857
Downey Financial
Corp.common
stock ......... 3,587,931 -- -- -- -- -- -- -- 3,587,931
Participant
loans ......... -- -- -- -- -- -- -- 586,675 586,675
---------- ---------- ---------- -------- ---------- ---------- ---------- -------- -----------
3,797,551 3,692,237 967,968 252,402 2,871,334 4,994,272 974,563 586,675 18,137,002
---------- ---------- ---------- -------- ---------- ---------- ---------- -------- -----------
Receivables:
Employer's
contribution .... 198,859 237,594 61,348 71,778 180,957 371,618 144,367 -- 1,266,521
Employees'
contributions ... 12,726 11,005 3,402 4,735 8,900 21,200 11,060 -- 73,028
Investment income 930 -- -- -- -- -- -- -- 930
Other ............ 356 329 155 136 207 617 198 -- 1,998
---------- ---------- ---------- -------- ---------- ---------- ---------- -------- -----------
212,871 248,928 64,905 76,649 190,064 393,435 155,625 -- 1,342,477
---------- ---------- ---------- -------- ---------- ---------- ---------- -------- -----------
Total assets .. 4,010,422 3,941,165 1,032,873 329,051 3,061,398 5,387,707 1,130,188 586,675 19,479,479
Liabilities - other (19,958) -- -- -- -- -- -- -- (19,958)
---------- ---------- ---------- -------- ---------- ---------- ---------- -------- -----------
Net assets
available for Plan
benefits ......... $3,990,464 3,941,165 1,032,873 329,051 3,061,398 5,387,707 1,130,188 586,675 19,459,521
========== ========== ========== ======== ========== ========== ========== ======== ===========
7
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements, Continued
The following presents net assets available for Plan benefits for each fund
as of December 31, 1996:
SCHWAB NEUBERGER DODGE & WASATCH
MONEY PIMCO LOW FIDELITY & BERMAN COX AGGRESSIVE
STOCK MARKET DURATION BALANCED GUARDIAN LOAN BALANCED EQUITY
FUND FUND INST. FUND FUND FUND FUND FUND FUND TOTAL
----------- ---------- ---------- -------- ---------- -------- ---------- -------- -----------
ASSETS:
Cash .............. $ 4,385 1,386 -- -- 38 -- 152 -- 5,961
----------- ---------- ---------- -------- ---------- -------- ---------- -------- -----------
Investments at
fair value:
Mutual funds ... -- -- 958,470 105,393 2,927,325 -- 2,221,422 591,374 6,803,984
Money market
funds ......... 53,575 3,200,416 -- -- -- -- -- -- 3,253,991
Downey Financial
Corp. common
stock ......... 1,917,726 -- -- -- -- -- -- -- 1,917,726
Participant
loans ......... -- -- -- -- -- 439,034 -- -- 439,034
---------- ---------- -------- ---------- -------- ---------- -------- -----------
-----------
1,971,301 3,200,416 958,470 105,393 2,927,325 439,034 2,221,422 591,374 12,414,735
----------- ---------- ---------- -------- ---------- -------- ---------- -------- -----------
Receivables:
Employer's
contribution .... 147,531 309,270 91,763 10,188 277,325 -- 240,635 97,479 1,174,191
Employees'
contributions ... 6,168 13,182 4,023 963 14,548 -- 9,753 5,919 54,556
Investments sold
(purchased) ..... 17,842 -- -- -- (13,392) -- -- (4,450) --
Investment
income (loss) ... 3,009 -- 9 10 86 -- (21) 90 3,183
Other ............ 660 1,225 336 45 2,109 -- 1,513 314 6,202
----------- ---------- ---------- -------- ---------- -------- ---------- -------- -----------
175,210 323,677 96,131 11,206 280,676 -- 251,880 99,352 1,238,132
----------- ---------- ---------- -------- ---------- -------- ---------- -------- -----------
Total assets .. 2,150,896 3,525,479 1,054,601 116,599 3,208,039 439,034 2,473,454 690,726 13,658,828
Liabilities - other (835) (257) (50) -- (203) -- (3) -- (1,348)
----------- ---------- ---------- -------- ---------- -------- ---------- -------- -----------
Net assets
available for
Plan benefits $ 2,150,061 3,525,222 1,054,551 116,599 3,207,836 439,034 2,473,451 690,726 13,657,480
=========== ========== ========== ======== ========== ======== ========== ======== ===========
8
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements, Continued
(4) CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
The following presents changes in net assets available for Plan benefits
for each fund as of December 31, 1997:
NEUBERGER &
SCHWAB PIMCO LOW TEMPLETON BERMAN DODGE & COX WASATCH
STOCK MONEY MARKET DURATION FOREIGN GUARDIAN BALANCED AGGRESSIVE
FUND FUND INST. FUND FUND FUND FUND EQUITY FUND
----------- ----------- ----------- ----------- ----------- ----------- -----------
Additions to net assets
attributed to:
Dividends .................. $ 38,117 -- -- -- -- -- --
Interest and realized and
unrealized gains and losses 1,188,051 129,604 76,368 394 959,504 524,795 141,917
----------- ----------- ----------- ----------- ----------- ----------- -----------
1,226,168 129,604 76,368 394 959,504 524,795 141,917
Contributions:
Employer .................... 237,339 43,552 74,441 80,461 47,772 32,433 16,575
Employee .................... 303,002 297,994 101,892 74,042 382,399 257,434 143,217
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total additions .......... 1,766,509 471,150 252,701 154,897 1,389,675 814,662 301,709
Deductions from net assets
attributed to benefits paid
to participants ............. (141,939) (231,443) (117,141) (9,839) (113,739) (204,035) (32,138)
Interfund transfers .......... 215,833 (3,764,929) (157,238) 67,394 (4,483,772) (3,084,078) (960,297)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) .. 1,840,403 (3,525,222) (21,678) 212,452 (3,207,836) (2,473,451) (690,726)
Net assets available for Plan
benefits:
Beginning of year .......... 2,150,061 3,525,222 1,054,551 116,599 3,207,836 2,473,451 690,726
----------- ----------- ----------- ----------- ----------- ----------- -----------
End of year ................ $ 3,990,464 -- 1,032,873 329,051 -- -- --
=========== =========== =========== =========== =========== =========== ===========
FIDELITY FIDELITY
PIMCO LOW RETIREMENT FIDELITY GROWTH & LOW-PRICED
DURATION MONEY PURITAN INCOME STOCK
ADMIN. FUND MARKET FUND FUND FUND FUND LOAN FUND TOTAL
----------- ----------- ----------- ----------- ----------- ----------- -----------
Additions to net assets
attributed to:
Dividends .................. $ -- -- -- -- -- -- 38,117
Interest and realized and
unrealized gains and losses 4 56,109 47,741 144,772 749 48,061 3,318,069
----------- ----------- ----------- ----------- ----------- ----------- -----------
4 56,109 47,741 144,772 749 48,061 3,356,186
Contributions:
Employer .................... 527 247,419 187,375 387,007 152,249 -- 1,507,150
Employee .................... 3,735 84,397 57,668 142,028 73,120 -- 1,920,928
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total additions .......... 4,266 387,925 292,784 673,807 226,118 48,061 6,784,264
Deductions from net assets
attributed to benefits paid
to participants ............. -- (68,058) (5,134) (3,283) (6,031) (49,443) (982,223)
Interfund transfers .......... (4,266) 3,621,298 2,773,748 4,717,183 910,101 149,023 --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) .. -- 3,941,165 3,061,398 5,387,707 1,130,188 147,641 5,802,041
Net assets available for Plan
benefits:
Beginning of year .......... -- -- -- -- -- 439,034 13,657,480
----------- ----------- ----------- ----------- ----------- ----------- -----------
End of year ................ $ -- 3,941,165 3,061,398 5,387,707 1,130,188 586,675 19,459,521
=========== =========== =========== =========== =========== =========== ===========
9
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements, Continued
The following presents changes in net assets available for Plan benefits
for each fund as of December 31, 1996:
SCHWAB NEUBERGER DODGE &
MONEY PIMCO LOW TEMPLETON FIDELITY & BERGER COX
MARKET DURATION FOREIGN BALANCED GUARDIAN BALANCED
STOCK FUND FUND INST. FUND FUND FUND FUND FUND
----------- ---------- ---------- ---------- ---------- ---------- ----------
Additions to net assets
attributed to:
Dividends .................. $ 29,518 -- -- -- -- -- --
Interest and realized and
unrealized gains and losses 474,033 156,878 50,324 8,411 (26,926) 431,941 36,973
----------- ---------- ---------- ---------- ---------- ---------- ----------
503,551 156,878 50,324 8,411 (26,926) 431,941 36,973
Contributions:
Employer .................... 163,672 349,465 106,814 10,880 9,854 318,736 --
Employee .................... 168,754 354,893 103,103 12,580 89,342 402,002 --
----------- ---------- ---------- ---------- ---------- ---------- ----------
Total additions .......... 835,977 861,236 287,241 31,871 72,270 1,152,679 36,973
Deductions from net assets
attributed to benefits paid
to participants ............. (270,092) (305,756) (89,610) -- (35,751) (184,383) (24,708)
Interfund transfers .......... 171,645 (99,071) (82,654) 84,728 (1,725,849) (74,530) 115,464
----------- ---------- ---------- ---------- ---------- ---------- ----------
Net increase (decrease) .. 737,530 456,409 114,977 116,599 (1,689,330) 893,766 127,729
Net assets available for Plan
benefits:
Beginning of year .......... 1,412,531 3,068,813 939,574 -- 1,689,330 2,314,070 311,305
----------- ---------- ---------- ---------- ---------- ---------- ----------
End of year ................ $ 2,150,061 3,525,222 1,054,551 116,599 -- 3,207,836 439,034
=========== ========== ========== ========== ========== ========== ==========
WASATCH
AGGRESSIVE
LOAN FUND EQUITY FUND TOTAL
----------- ----------- -----------
Additions to net assets
attributed to:
Dividends .................. $ -- -- 29,518
Interest and realized and
unrealized gains and losses 223,580 17,988 1,373,202
----------- ----------- -----------
223,580 17,988 1,402,720
Contributions:
Employer .................... 264,045 113,217 1,336,683
Employee .................... 228,549 170,164 1,556,387
----------- ----------- -----------
Total additions .......... 716,174 301,369 4,295,790
Deductions from net assets
attributed to benefits paid
to participants ............. (162,217) (37,490) (1,110,007)
Interfund transfers .......... 1,590,265 20,002 --
----------- ----------- -----------
Net increase (decrease) .. 2,144,222 283,881 3,185,783
Net assets available for Plan
benefits:
Beginning of year .......... 329,229 406,845 10,471,697
----------- ----------- -----------
End of year ................ $ 2,473,451 690,726 13,657,480
=========== =========== ===========
10
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements, Continued
(5) INVESTMENTS
In accordance with the terms of the Plan's Investment Policies, Guidelines
and Objectives, the Plan will offer a minimum of five investment options.
Plan participants select the options they prefer and allocate their
contributions between options as they deem appropriate.
The fair value of investments that represent 5% or more of the Plan's net
assets consisted of:
INVESTMENT DESCRIPTION OF INVESTMENT 1997 1996
- -------------------------------- ---------------------------- ----------- -----------
Schwab Institutional Advantage
Money Fund Open-Ended Money Market Fund $ -- 3,253,991
Downey Financial Corp. Common stock ............... 3,587,931 1,917,726
PIMCO Low Duration Inst. Fund Open-Ended Mutual Fund ..... 967,968 958,470
Neuberger & Berman Guardian Fund Open-Ended Mutual Fund ..... -- 2,927,325
Dodge & Cox Balanced Fund Open-Ended Mutual Fund ..... -- 2,221,422
Fidelity Retirement Money Market
Fund Open-Ended Money Market Fund 3,901,857 --
Fidelity Puritan Fund Open-Ended Mutual Fund ..... 2,871,334 --
Fidelity Growth & Income Fund Open-Ended Mutual Fund ..... 4,994,272 --
Fidelity Low-Priced Stock Fund Open-Ended Mutual Fund ..... 974,563 --
----------- -----------
$17,297,925 11,278,934
=========== ===========
The following table presents the cost and fair value of Plan investments as
of December 31, 1997:
COST FAIR VALUE
----------- -----------
Mutual funds ...................... $10,080,335 10,060,539
Money Market Funds ................ 3,901,857 3,901,857
Downey Financial Corp. common stock 2,056,837 3,587,931
Participant loans ................. 586,675 586,675
----------- -----------
Total investments ........ $16,625,704 18,137,002
=========== ===========
11
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Notes to Financial Statements, Continued
The following table presents the cost and fair value of Plan investments as
of December 31, 1996:
COST FAIR VALUE
----------- -----------
Mutual funds ...................... $ 6,171,014 6,803,984
Money Market Funds ................ 3,253,991 3,253,991
Downey Financial Corp. common stock 1,230,755 1,917,726
Participant loans ................. 439,034 439,034
----------- -----------
Total investments ........ $11,094,794 12,414,735
=========== ===========
(6) FEDERAL INCOME TAXES
Downey received a favorable tax determination letter on May 4, 1998 from
the Internal Revenue Service stating that the Plan, as amended and adopted
on September 29, 1997, is qualified under Section 401 of the Internal
Revenue Code of 1954, and is exempt from Federal income taxes under
provisions of Section 401(a).
The Plan has been subsequently amended since September 29, 1997. The
subsequent amendment of the Plan was adopted on February 1, 1998. In the
opinion of management, the Plan continues to meet the requirements of the
Internal Revenue Code.
(7) RELATED PARTY TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by Fidelity
Management Research, which is affiliated with Fidelity Management Trust
Company, which is the trustee as defined by the Plan and, therefore, these
transactions qualify as party-in-interest. Fees for the trust management
services are paid by Downey.
12
Schedule 1
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Line 27a - Schedule of Assets Held for Investment Purposes
December 31, 1997
DESCRIPTION OF INVESTMENT
INCLUDING MATURITY DATE, RATE
IDENTITY OF ISSUE BORROWER, OF INTEREST, COLLATERAL,PAR, CURRENT
LESSOR OR SIMILAR PARTY OR MATURITY VALUE COST VALUE
------------------------------ --------------------------- ---------- ----------
* Fidelity Retirement Money
Market Fund Money Market Fund $3,901,857 3,901,857
* Downey Financial Corp. 126,169 shares common stock 2,056,837 3,587,931
PIMCO Low Duration Inst. Fund 94,991 shares mutual fund 969,001 967,968
Templeton Foreign Fund 25,367 shares mutual fund 297,201 252,402
* Fidelity Puritan Fund 148,160 shares mutual fund 2,914,035 2,871,334
* Fidelity Growth & Income Fund 131,083 shares mutual fund 4,903,631 4,994,272
* Fidelity Low-Priced Stock Fund 38,781 shares mutual fund 996,467 974,563
* Participant loans Participant loans -- 586,675
========== ==========
* Denotes a party-in-interest.
See accompanying independent auditors' report.
Schedule 2
DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A.
EMPLOYEES' RETIREMENT AND SAVINGS PLAN
Line 27d - Schedule of Reportable Transactions
Year ended December 31, 1997
(a) (b) (c) (d) (e) (f) (g) (h) (i)
CURRENT
EXPENSE VALUE OF
INCURRED ASSET ON
IDENTITY OF PARTY DESCRIPTION PURCHASE SELLING LEASE WITH COST OF TRANSACTION NET GAIN
INVOLVED OF ASSETS PRICE PRICE RENTAL TRANSACTION ASSETS DATE OR (LOSS)
- ------------------ ------------------ ---------- ---------- ------ ----------- ---------- ----------- ----------
Templeton Foreign Mutual fund series
Fund of 92 purchases $ 576,704 -- -- -- 576,704 576,704 --
Templeton Foreign Mutual fund series
Fund of 38 sales -- 132,720 -- -- 131,615 132,720 1,105
Neuberger & Berman Mutual fund series
Guardian Fund of 110 purchases 1,723,288 -- -- -- 1,723,288 1,723,288 --
Neuberger & Berman Mutual fund series
Guardian Fund of 70 sales -- 885,711 -- -- 663,906 885,711 221,805
PIMCO Low Duration Mutual fund series
Inst. Fund of 89 purchases 1,270,171 -- -- -- 1,270,171 1,270,171 --
PIMCO Low Duration Mutual fund series
Inst. Fund of 70 sales -- 352,192 -- -- 350,596 352,192 1,596
Dodge & Cox Mutual fund series
Balanced Fund of 93 purchases 958,181 -- -- -- 958,181 958,181 --
Dodge & Cox Mutual fund series
Balanced Fund of 71 sales -- 828,734 -- -- 718,086 828,734 110,648
Downey Financial Common Stock series
Corp of 80 purchases 2,799,879 -- -- 62 2,799,879 2,799,879 --
Downey Financial Common Stock series
Corp of 41 sales -- 422,691 -- 82 259,134 422,773 163,557
Wasatch Aggressive Mutual fund series
Equity Fund of 73 purchases 535,591 -- -- -- 535,591 535,591 --
Wasatch Aggressive Mutual fund series
Equity Fund of 59 sales -- 459,163 -- -- 433,829 459,163 25,334
Schwab
Institutional
Advantage Mutual fund series
Money Fund of 136 purchases 1,554,133 -- -- -- 1,554,133 1,554,133 --
Schwab
Institutional Money Market Fund
Advantage series of
Money Fund 111 sales -- 964,348 -- -- 964,348 964,348 --
Fidelity Money Money Market Fund
Market Fund series of 20
purchases 324,330 -- -- -- 324,330 324,330 --
Fidelity Money Money Market Fund
Market Fund series of 10 sales -- 114,709 -- -- 114,709 114,709 --
Puritan Fund Mutual fund series
of 22 purchases 2,990,482 -- -- -- 2,990,482 2,990,482 --
Puritan Fund Mutual fund series
of 10 sales -- 76,851 -- -- 76,511 76,851 340
Growth and Income Mutual fund series
Fund of 21 purchases 4,961,873 -- -- -- 4,961,873 4,961,873 --
Growth and Income Mutual fund series
Fund of 10 sales -- 58,730 -- -- 58,041 58,730 689
Low-Priced Stock Mutual fund series
Fund of 20 purchases 1,008,738 -- -- -- 1,008,738 1,008,738 --
Low-Priced Stock Mutual fund series
Fund of sales -- 12,227 -- -- 12,326 12,227 (99)
Retirement Money Money Market Fund
Market 6 series of 25
purchases 3,927,333 -- -- -- 3,927,333 3,927,333 --
Retirement Money Money Market Fund
Market series of 13
purchases -- 235,096 -- -- 235,096 235,096 --
========== ========== ====== =========== ========== =========== ==========
See accompanying independent auditors' report.