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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
For the fiscal year ended December 31, 1998
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 1-11416
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
Consumer Portfolio Services, Inc. 401(k) Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Consumer Portfolio Services, Inc.
16355 Laguna Canyon Road
Irvine, CA 92618
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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.
Consumer Portfolio Services, Inc. 401(k) Plan
Date: June 30, 1999 By: /s/ Doris F. Warren
------------------------- -------------------------------
Member, Administrative Committee
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Financial Statements and Supplemental Schedules
December 31, 1998 and 1997
(With Independent Auditors' Report Thereon)
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES
PAGE
Independent Auditors' Report 1
Statements of Net Assets Available for Plan Benefits - December 31, 1998 and 1997 2
Statements of Changes in Net Assets Available for Plan Benefits - Years ended
December 31, 1998 and 1997 3
Notes to Financial Statements 4
SCHEDULES
1 Item 27a - Schedule of Assets Held for Investment Purposes - December 31, 1998 14
2 Item 27d - Schedule of Reportable Transactions - Year ended December 31, 1998 15
INDEPENDENT AUDITORS' REPORT
The Administrator
Consumer Portfolio Services, Inc. 401(k) Plan:
We have audited the accompanying statements of net assets available for Plan
benefits of the Consumer Portfolio Services, Inc. 401(k) Plan (the Plan) as of
December 31, 1998 and 1997 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, 1998 and 1997 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 LLP
Orange County, California
June 4, 1999
CONSUMER PORTFOLIO SERVICES, INC. 401(K) PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 1998 and 1997
ASSETS 1998 1997
-------------- --------------
Investments, at fair value:
Money market fund $ 14,587 147,972
Guaranteed investment contract 209,836 126,085
Pooled separate accounts 1,605,032 858,206
Consumer Portfolio Services, Inc. common stock 558,372 260,664
Participant loans 91,537 31,475
-------------- --------------
2,479,364 1,424,402
Receivables:
Employees' individual rollover 16,198 5,088
Employers' contributions 4,303 --
-------------- --------------
20,501 5,088
-------------- --------------
Net assets available for Plan benefits $ 2,499,865 1,429,490
============== ==============
See accompanying notes to financial statements.
2
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Statements of Changes in Net Assets Available for Plan Benefits
Years ended December 31, 1998 and 1997
1998 1997
-------------- --------------
Additions to net assets attributed to:
Interest $ 8,731 7,041
Net (depreciation) appreciation in fair value of investments (306,893) 76,896
-------------- --------------
(298,162) 83,937
Contributions:
Employer 296,183 111,070
Employees 1,044,497 612,906
Employees' individual rollover 143,839 23,487
-------------- --------------
Total additions 1,186,357 831,400
Deductions from net assets attributed to - benefits paid to participants 115,982 154,521
-------------- --------------
Net increase 1,070,375 676,879
Net assets available for Plan benefits:
Beginning of year 1,429,490 752,611
-------------- --------------
End of year $ 2,499,865 1,429,490
============== ==============
See accompanying notes to financial statements.
3
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(1) DESCRIPTION OF THE PLAN
(a) GENERAL
The Consumer Portfolio Services, Inc. (the Plan Sponsor or CPS)
401(k) Plan (the Plan) was established as a profit sharing plan
with a cash or deferred arrangement on January 1, 1994. The Plan
was restated as of January 1, 1996 to permit investment in the
Plan Sponsor's common stock without regard to Section 407(a) of
ERISA. 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 the Plan Sponsor. It is subject
to the provisions of the Employee Retirement Income Security Act
of 1974 (ERISA).
(b) ADMINISTRATION OF THE PLAN
The Plan is administered by the Human Resources Department (the
Plan Administrator) of the Plan Sponsor. The Plan Administrator
consults with the Board of Directors and other key management of
the Plan Sponsor when managing the operations and the
administration of the Plan. The assets of the Plan are held in a
nondiscretionary trust by Charles Schwab Trust Company (Trustee)
and Aetna Life Insurance and Annuity Company (Insurance Company)
and are administered under an agreement which requires that the
Trustee and Insurance Company hold, administer and distribute the
funds of the Plan in accordance with the text of the Plan and the
instructions of the Plan Administrator or its designees.
(c) CONTRIBUTIONS
All employees of the Plan Sponsor are eligible to participate in
the Plan after they have completed 90 days of service. Each year
participants may contribute up to 15% of their compensation,
contributions are subject to certain limitations as defined in the
Plan. Participants may roll over into the Plan amounts
representing distributions from other qualified plans.
Each quarter the Plan Sponsor makes a matching contribution equal
to 100% of the participant's pretax contributions not to exceed
$600 for the Plan year. Matching contributions shall be made in
the form of the Plan Sponsor's common stock.
(d) PARTICIPANT ACCOUNTS
Each participant's account is credited with the participant's
contributions, allocations of the Plan Sponsor's matching
contributions and the Plan's earnings and losses. Allocations are
based on participant earnings or account balances, as defined.
Forfeitures are reallocated to other Plan participants who
contributed to the Plan in the Plan year of allocation.
Reallocations shall be made on a pro-rata basis, based on each
participant's pretax contributions for the Plan year. For the year
ended December 31, 1998 and 1997, participant forfeitures totaled
$27,567 and $27,486, respectively.
4 (Continued)
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(e) VESTING
Participants are immediately vested in their contributions plus
actual earnings thereon. Vesting in the Plan Sponsor's matching
contributions plus actual earnings thereon is based on years of
continuous service. A participant vests at the rate of 20% after
two years of credited service and 20% each year thereafter until
100% is reached after six years of credited service.
(f) INVESTMENT OPTIONS
Contributions may be invested at the participant's direction into
the following options:
CPS Stock Fund - The fund provides Plan participants with an
opportunity to invest in Consumer Portfolio Services, Inc. common
stock.
Aetna Bond VP, formerly Aetna Income Shares - Seeks to maximize
total return over the long-term by investing primarily in
long-term debt securities.
Aetna Fixed Account - Guarantees a minimum rate of interest.
Aetna Growth and Income VP, formerly Aetna Variable Fund - Seeks
to maximize long-term total return by investing in a portfolio of
common stocks and securities convertible to common stock.
Aetna Balanced VP, formerly Aetna Investment Advisers Fund - Seeks
to maximize investment return consistent with reasonable safety of
principal by investing in a combination of asset classes.
Aetna Money Market VP, formerly Aetna Variable Encore Fund - Seeks
a high current return, consistent with the preservation of capital
and liquidity by investing in high-quality money market
instruments.
Portfolio Partners MFS Emerging Equities Portfolio - Seeks
long-term capital appreciation by investing in companies with
market capitalization.
Fidelity VIP Equity-Income Portfolio - Seeks reasonable income by
investing primarily in income-producing equity securities.
Fidelity VIP Growth Portfolio - Seeks capital appreciation by
investing primarily in common stock.
Fidelity VIP Overseas Portfolio - Seeks long-term growth of
capital primarily through investments in foreign securities.
Portfolio Partners Scudder International Growth Portfolio - Seeks
long-term growth of capital, primarily through diversified
holdings of marketable foreign equity investments.
Portfolio Partners MFS Research Growth Portfolio - Seeks capital
growth over time by investing primarily in common stock considered
by management to have better-than-average prospects for
appreciation.
(g) PARTICIPANTS LOANS
Participants may borrow from their fund accounts. 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 interest at a rate commensurate with local
prevailing rates as determined by the Plan Administrator. Loans
are limited to the lesser of $50,000 or 50% of the participants
vested account balance. Principal and interest are paid ratably
through payroll deductions.
5 (Continued)
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(h) PAYMENTS OF BENEFITS
Upon termination of service, a participant may elect to receive
either a single sum payment in cash 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 the participant's life expectancy.
(i) PLAN TERMINATION
Although they have not expressed any intent to do so, the Plan
Sponsor 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
(a) BASIS OF ACCOUNTING
The financial statements of the Plan have been prepared on the
accrual basis of accounting.
(b) INVESTMENTS
Publicly traded securities are carried at fair value based on the
published market quotations. The pooled separate account reflects
amounts which have been deposited with Aetna Life Insurance and
Annuity Company for which the carrying value of the investments
are adjusted to market value based upon quoted prices determined
by Aetna Life Insurance and Annuity Company at the end of each
year, and the investment return is reflected in the ending balance
of the investment. The guaranteed investment contract is valued at
fair value adjusted for changes in investment value plus credited
interest. Participant loans are valued at cost, which approximates
fair value. Purchases and sales of investments are recorded on a
trade-date basis. Dividends are recorded on the ex-dividend date.
(c) ADMINISTRATIVE EXPENSES
All administrative costs of the Plan are paid by the Plan Sponsor.
(d) 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.
(e) BENEFITS DUE TO TERMINATED PARTICIPANTS
Fund balances for employees that have been terminated but have yet
to be paid have been included in net assets available for plan
benefits. They will be reflected in the statements of changes in
net assets available for plan benefits when actually paid. At
December 31, 1998 and 1997, the amount due to terminated employees
is $211,364 and $21,520, respectively.
6 (Continued)
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(3) NET ASSETS AVAILABLE FOR PLAN BENEFITS
The following presents net assets available for Plan benefits for each
fund as of December 31, 1998:
PARTICIPANT DIRECTED
------------------------------------------------------------------------------------------------------
PORTFOLIO
PARTNERS FIDELITY
AETNA MFS VIP FIDELITY
AETNA GROWTH AETNA AETNA EMERGING EQUITY- VIP
AETNA FIXED AND BALANCED MONEY EQUITIES INCOME GROWTH
BOND VP ACCOUNT INCOME VP VP MARKET VP PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Assets
Investments at fair value:
Money Market fund $ -- -- -- -- -- -- -- --
Guaranteed investment
contract -- 209,836 -- -- -- -- -- --
Pooled separate accounts 49,419 -- 264,217 176,910 64,280 269,277 190,224 365,402
Consumer Portfolio
Services, Inc.
common stock -- -- -- -- -- -- -- --
Participant loans -- -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
49,419 209,836 264,217 176,910 64,280 269,277 190,224 365,402
Receivables:
Employees' individual
rollover 5,343 -- 10,151 235 -- -- -- 234
Employers' contributions -- -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
5,343 -- 10,151 235 -- -- -- 234
Net assets
available for
Plan benefits $ 54,762 209,836 274,368 177,145 64,280 269,277 190,224 365,636
=========== =========== =========== =========== =========== =========== =========== ===========
(Continued from Above)
PARTICIPANT DIRECTED
---------------------------------------------------------------
PORTFOLIO
PARTNERS PORTFOLIO NON-
SCUDDER PARTNERS PARTICIPANT
FIDELITY INTER- MFS DIRECTED
VIP NATIONAL RESEARCH -----------
OVERSEAS GROWTH GROWTH CPS PARTICIPANT CPS
PORTFOLIO PORTFOLIO PORTFOLIO STOCK FUND LOANS STOCK FUND TOTAL
----------- ----------- ----------- ----------- ----------- ----------- -----------
Assets
Investments at fair value:
Money Market fund $ -- -- -- 7,136 -- 7,451 14,587
Guaranteed investment
contract -- -- -- -- -- -- 209,836
Pooled separate accounts 62,949 90,279 72,075 -- -- -- 1,605,032
Consumer Portfolio
Services, Inc.
common stock -- -- -- 338,885 -- 219,487 558,372
Participant loans -- -- -- -- 91,537 -- 91,537
----------- ----------- ----------- ----------- ----------- ----------- -----------
62,949 90,279 72,075 346,021 91,537 226,938 2,479,364
Receivables:
Employees' individual -- -- -- 235 -- -- 16,198
rollover
Employers' contributions -- -- -- -- -- 4,303 4,303
----------- ----------- ----------- ----------- ----------- ----------- -----------
-- -- -- 235 -- 4,303 20,501
Net assets
available for
Plan benefits $ 62,949 90,279 72,075 346,256 91,537 231,241 2,499,865
=========== =========== =========== =========== =========== =========== ===========
7 (Continued)
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
The following presents net assets available for Plan benefits for each
fund as of December 31, 1997:
PARTICIPANT DIRECTED
------------------------------------------------------------------------------------------------------
PORTFOLIO
PARTNERS FIDELITY
AETNA AETNA MFS VIP FIDELITY
AETNA AETNA AETNA INVESTMENT VARIABLE EMERGING EQUITY - VIP
INCOME FIXED VARIABLE ADVISERS ENCORE EQUITIES INCOME GROWTH
SHARES ACCOUNT FUND FUND FUND PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Assets
Investments at fair value:
Money market fund $ -- -- -- -- -- -- -- --
Guaranteed investment
contract -- 126,085 -- -- -- -- -- --
Pooled separate accounts 27,859 -- 159,039 113,050 39,311 157,453 88,216 157,318
Consumer Portfolio
Services, Inc.
common stock -- -- -- -- -- -- -- --
Participant loans -- -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
27,859 126,085 159,039 113,050 39,311 157,453 88,216 157,318
Receivables - employees'
individual rollover -- -- 1,696 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net assets available
for Plan benefits $ 27,859 126,085 160,735 113,050 39,311 157,453 88,216 157,318
=========== =========== =========== =========== =========== =========== =========== ===========
(Continued from Above)
PARTICIPANT DIRECTED
---------------------------------------------------------------
PORTFOLIO
PARTNERS PORTFOLIO NON-
SCUDDE PARTNERS PARTICIPANT
FIDELITY INTER- MFS DIRECTED
VIP NATIONAL RESEARCH --------
OVERSEAS GROWTH GROWTH CPS PARTICIPANT CPS
PORTFOLIO PORTFOLIO PORTFOLIO STOCK FUND LOANS STOCK FUND TOTAL
----------- ----------- ----------- ----------- ----------- ----------- -----------
Assets
Investments at fair value:
Money market fund $ -- -- -- 76,508 -- 71,464 147,972
Guaranteed investment
contract -- -- -- -- -- -- 126,085
Pooled separate accounts 29,716 48,318 37,926 -- -- -- 858,206
Consumer Portfolio
Services, Inc.
common stock -- -- -- 159,726 -- 100,938 260,664
Participant loans -- -- -- -- 31,475 -- 31,475
----------- ----------- ----------- ----------- ----------- ----------- -----------
29,716 48,318 37,926 236,234 31,475 172,402 1,424,402
Receivables - employees'
individual rollover -- -- -- 3,392 -- -- 5,088
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net assets available
for Plan benefits $ 29,716 48,318 37,926 239,626 31,475 172,402 1,429,490
=========== =========== =========== =========== =========== =========== ===========
8 (Continued)
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(4) CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
The following presents changes in net assets available for Plan benefits
for each fund for the year ended December 31, 1998:
PARTICIPANT DIRECTED
------------------------------------------------------------------------------------------------------
PORTFOLIO
PARTNERS FIDELITY
AETNA MFS VIP FIDELITY
AETNA GROWTH AETNA AETNA EMERGING EQUITY- VIP
AETNA FIXED AND BALANCED MONEY EQUITIES INCOME GROWTH
BOND VP ACCOUNT INCOME VP VP MARKET VP PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Additions to net assets
attributed to:
Interest $ -- 8,731 -- -- -- -- -- --
Net appreciation
(depreciation) in fair
value of investments 2,604 -- 23,001 20,493 2,525 50,067 13,039 84,504
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
2,604 8,731 23,001 20,493 2,525 50,067 13,039 84,504
Contributions:
Employer -- -- -- -- -- -- -- --
Employees 24,578 66,746 116,410 61,181 34,261 90,297 85,635 153,550
Employees' individual
rollover 7,479 4,496 46,211 8,264 1,319 22,159 23,730 10,048
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total additions 34,661 79,973 185,622 89,938 38,105 162,523 122,404 248,102
Deductions from net assets
attributed to - benefits
paid to participants -- -- -- -- -- -- -- --
Interfund transfer (7,758) 3,778 (71,989) (25,843) (13,136) (50,699) (20,396) (39,784)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase 26,903 83,751 113,633 64,095 24,969 111,824 102,008 208,318
Net assets available for
Plan benefits:
Beginning of year 27,859 126,085 160,735 113,050 39,311 157,453 88,216 157,318
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
End of year $ 54,762 209,836 274,368 177,145 64,280 269,277 190,224 365,636
=========== =========== =========== =========== =========== =========== =========== ===========
(Continued from Above)
PARTICIPANT DIRECTED
---------------------------------------------------------------
PORTFOLIO
PARTNERS PORTFOLIO NON-
SCUDDER PARTNERS PARTICIPANT
FIDELITY INTER- MFS DIRECTED
VIP NATIONAL RESEARCH -----------
OVERSEAS GROWTH GROWTH CPS PARTICIPANT CPS
PORTFOLIO PORTFOLIO PORTFOLIO STOCK FUND LOANS STOCK FUND TOTAL
----------- ----------- ----------- ----------- ----------- ----------- -----------
Additions to net assets
attributed to:
Interest $ -- -- -- -- -- -- 8,731
Net appreciation
(depreciation) in fair
value of investments 3,404 9,025 9,709 (294,760) 5,064 (235,568) (306,893)
----------- ----------- ----------- ----------- ----------- ----------- -----------
3,404 9,025 9,709 (294,760) 5,064 (235,568) (298,162)
Contributions:
Employer -- -- -- -- -- 296,183 296,183
Employees 43,036 45,929 39,111 283,763 -- -- 1,044,497
Employees' individual 1,506 1,169 272 17,186 -- -- 143,839
rollover
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total additions 47,946 56,123 49,092 6,189 5,064 60,615 1,186,357
Deductions from net assets
attributed to - benefits
paid to participants -- -- -- 106,508 5,411 4,063 115,982
Interfund transfer (14,713) (14,162) (14,943) 206,949 60,409 2,287 --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase 33,233 41,961 34,149 106,630 60,062 58,839 1,070,375
Net assets available for
Plan benefits:
Beginning of year 29,716 48,318 37,926 239,626 31,475 172,402 1,429,490
----------- ----------- ----------- ----------- ----------- ----------- -----------
End of year $ 62,949 90,279 72,075 346,256 91,537 231,241 2,499,865
=========== =========== =========== =========== =========== =========== ===========
9 (Continued)
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
The following presents changes in net assets available for Plan benefits
for each fund for the year ended December 31, 1997:
PARTICIPANT DIRECTED
------------------------------------------------------------------------------------------------------
PORTFOLIO
PARTNERS FIDELITY
AETNA AETNA MFS VIP FIDELITY
AETNA AETNA AETNA INVESTMENT VARIABLE EMERGING EQUITY - VIP
INCOME FIXED VARIABLE ADVISERS ENCORE EQUITIES INCOME GROWTH
SHARES ACCOUNT FUND FUND FUND PORTFOLIO PORTFOLIO PORTFOLIO
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Additions to net assets
attributed to:
Interest $ -- 5,431 -- -- -- -- -- --
Net appreciation
(depreciation) in fair
value of investments 1,426 -- 29,189 17,012 1,445 16,995 14,882 22,035
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
1,426 5,431 29,189 17,012 1,445 16,995 14,882 22,035
Contributions:
Employer -- -- -- -- -- -- -- --
Employees 13,277 46,007 57,457 39,723 20,242 89,333 48,689 98,643
Employees' individual
rollover 408 1,309 2,909 824 941 2,892 1,799 5,066
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total additions 15,111 52,747 89,555 57,559 22,628 109,220 65,370 125,744
Deductions from net assets
attributed to - benefits
paid to participants
Interfund transfer (327) 2,162 (14,176) (9,938) (9,967) (85,584) (12,830) (42,124)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase
(decrease) 14,784 54,909 75,379 47,621 12,661 23,636 52,540 83,620
Net assets available for
Plan benefits:
Beginning of year 13,075 71,176 85,356 65,429 26,650 133,817 35,676 73,698
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
End of year $ 27,859 126,085 160,735 113,050 39,311 157,453 88,216 157,318
=========== =========== =========== =========== =========== =========== =========== ===========
(Continued from Above)
PARTICIPANT DIRECTED
---------------------------------------------------------------
PORTFOLIO
PARTNERS PORTFOLIO NON-
SCUDDER PARTNERS PARTICIPANT
FIDELITY INTER- MFS DIRECTED
VIP NATIONAL RESEARCH -----------
OVERSEAS GROWTH GROWTH CPS PARTICIPANT CPS
PORTFOLIO PORTFOLIO PORTFOLIO STOCK FUND LOANS STOCK FUND TOTAL
----------- ----------- ----------- ----------- ----------- ----------- -----------
Additions to net assets
attributed to:
Interest $ -- -- -- -- 1,610 -- 7,041
Net appreciation
(depreciation) in fair
value of investments 294 2,703 (2,505) (24,680) -- (1,900) 76,896
----------- ----------- ----------- ----------- ----------- ----------- -----------
294 2,703 (2,505) (24,680) 1,610 (1,900) 83,937
Contributions:
Employer -- -- -- -- -- 111,070 111,070
Employees 21,503 33,584 25,538 118,910 -- -- 612,906
Employees' individual
rollover -- 48 48 7,243 -- -- 23,487
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total additions 21,797 36,335 23,081 101,473 1,610 109,170 831,400
Deductions from net assets
attributed to - benefits
paid to participants -- -- -- 143,688 4,276 6,557 154,521
Interfund transfer 489 (15,237) (24,982) 175,625 32,638 4,251 --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net increase
(decrease) 22,286 21,098 (1,901) 133,410 29,972 106,864 676,879
Net assets available for
Plan benefits:
Beginning of year 7,430 27,220 39,827 106,216 1,503 65,538 752,611
----------- ----------- ----------- ----------- ----------- ----------- -----------
End of year $ 29,716 48,318 37,926 239,626 31,475 172,402 1,429,490
=========== =========== =========== =========== =========== =========== ===========
10 (Continued)
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(5) INVESTMENTS
In accordance with the terms of the Plan Document and determined by the
Plan Administrator, the Plan offers 12 investment options. Plan
participants select the options they prefer and allocate their
contributions between options as they deem appropriate.
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 in installments of
principal plus interest at rates of 10.00% - 10.50%, with final payments
due between May 1999 and December 2013, and are secured by the
participants' vested account balances.
The fair value of investments that represent 5% or more of the Plan's net
assets consisted of:
INVESTMENT 1998 1997
------------------------------------------------ ------------ ------------
CPS Stock Fund $ 558,372 260,664
Schwab Advantage Money Market Fund 14,587 147,972
Aetna Growth and Income VP, formerly Aetna
Variable Fund 264,217 159,039
Aetna Balanced VP, formerly Aetna Investment
Advisers Fund 176,910 113,050
Aetna Fixed Account 209,836 126,085
Portfolio Partners MFS Emerging Equities
Portfolio 269,277 157,453
Fidelity VIP Growth Portfolio 365,402 157,318
Fidelity VIP Equity-Income Portfolio 190,224 88,216
------------ ------------
$ 2,048,825 1,209,797
============ ============
(6) TAX STATUS
The Internal Revenue Service has determined and informed the Plan Sponsor
by a letter dated February 7, 1996, that the Plan and related trust are
designed in accordance with applicable sections of the Internal Revenue
Code (IRC). The Plan has been amended since receiving the determination
letter. However, the Plan Administrator believes that the Plan is
designed and is currently being operated in compliance with the
applicable requirements of the IRC.
(7) RELATED PARTY TRANSACTIONS
Certain Plan investments are units of a Variable Annuity Account managed
by Aeltus Investment Management, Inc., an affiliate of Aetna Life
Insurance and Annuity Company. Aetna Life Insurance and Annuity Company
is defined as an insurance company by ERISA Section 403(b) and,
therefore, these transactions qualify as party-in-interest. Fees for the
investment management services are paid by the Plan Sponsor. In addition,
the Plan held 144,096 and 27,082 shares of common stock of Consumer
Portfolio Services, Inc. at December 31, 1998 and 1997, respectively.
11 (Continued)
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(8) NET (DEPRECIATION) APPRECIATION IN FAIR VALUE OF INVESTMENTS
Included in net (depreciation) appreciation in fair value of investments
is $530,328 depreciation relating to the non-participant and participant
directed CPS Stock Funds. The plan held 144,096 and 27,082 shares of CPS
common stock which had a market value of approximately $3.88 and $9.62
per share at December 31, 1998 and 1997, respectively. At June 4, 1999,
CPS common stock had a market value of approximately $1.66 per share.
(9) LIQUIDITY OF THE PLAN SPONSOR
The Plan Sponsor's business requires substantial cash to support its
operating activities. The Plan Sponsor's primary sources of cash from
operating activities are amounts borrowed under its various warehouse
lines, servicing fees on portfolios of contracts previously sold,
proceeds from the sales of contracts, customer payments on contracts held
for sale, interest earned on contracts held for sale and releases of cash
from spread accounts. The Plan Sponsor's primary uses of cash are the
purchases of contracts, repayment of amounts borrowed under its various
warehouse lines, operating expenses such as employee, interest and
occupancy expenses, the establishment of and further contributions to
spread accounts and income taxes. As a result, the Plan Sponsor is
dependent on its warehouse lines of credit and its residual financing
facility in order to finance its continued operations. If the Plan
Sponsor's principal lenders decided to terminate or not to renew any of
these credit facilities with the Plan Sponsor, the loss of borrowing
capacity would have a material adverse effect on the Plan Sponsor's
results of operations unless the Plan Sponsor found a suitable
alternative source. Subsequent to December 31, 1998, one of the Plan
Sponsor's principal lenders has terminated its credit facility with the
Plan Sponsor.
The servicing agreements call for the requisite levels of the various
spread accounts to increase if the related receivables experience
delinquencies, repossessions or net losses in excess of certain
predetermined levels. At December 31, 1998, 18 of the Plan Sponsor's 22
securitized pools were at higher than original requisite levels due to
the delinquency, repossession or net loss performance of 13 of the 22
securitized pools. Such spread account balances therefore included
approximately $24.3 million more than would have been required at the
original requisite levels. The higher requisite spread account levels
ranged from 30% to 100% of the related outstanding balance of the
securitized pools. In April 1999, the Plan Sponsor entered into an
amendment with the certificate insurer of the Plan Sponsor's asset-backed
securities to cap the amount of cash retained in the spread accounts at
21% of the outstanding securities balance for 19 of the Plan Sponsor's 22
securitized pools. The effectiveness of the amendment is contingent upon
approval of certain subordinated certificateholders. This new cap on the
spread accounts described above is expected to provide cash flows to the
Plan Sponsor during 1999. The amendment is subject to certain performance
measures that may result in an increase in the cap from 21% to 25%. There
can be no assurance that such cash flows will occur. In addition to
requiring higher spread account levels, the servicing agreements provide
the certificate insurer with certain other rights and remedies, which
have been waived on a monthly basis by the certificate insurer.
On April 15, 1999, the Plan Sponsor issued $5.0 million of subordinated
promissory notes to Levine Leichtman Capital Partners, Inc. and received
proceeds (net of $250,000 of capitalized issuance costs) of approximately
$4.75 million. The debt includes certain covenants one of which is the
infusion of $15.0 million of debt during 1999 by Stanwich Financial
Services Corp. (SFSC). SFSC's commitment in turn has been collateralized
by certain assets pledged by the chairman of the Plan Sponsor's board of
directors and the president of the Plan Sponsor. Additionally, the $5.0
million has been personally guaranteed by the chairman of the Plan
Sponsor's board of directors and the president of the Plan Sponsor.
The Plan Sponsor did not sell any contracts in the first quarter of 1999.
During the second quarter of 1999 the Plan Sponsor sold $234 million of
the Plan Sponsor's contracts in a whole loan sale.
12 (Continued)
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Notes to Financial Statements
December 31, 1998 and 1997
In the event the Plan Sponsor incurs a net loss in two consecutive
quarters it would be in default of its agreements for the residual line.
Unless waived by the lender, the default could result in acceleration of
the residual line and a cross default on the warehouse lines. The lender
would receive any releases from spread accounts to retire outstanding
principal and interest. The Plan Sponsor believes that the lender would
waive the default. In the event the lender does not waive the default,
the Plan Sponsor believes that cash flows from operations would be
sufficient to fund its obligations as they become due and payable. There
can be no assurance, however, that the lender would waive the default or
that other cash flows will be sufficient to fund the Plan Sponsor's
operations.
(10) SUBSEQUENT EVENT
On April 1, 1999 the net assets available for plan benefits were
transferred from the Trustee and the Insurance Company to Prudential
Securities, Incorporated (the New Trustee) who will hold, administer and
distribute the funds of the Plan in accordance with the text of the Plan
and the instructions of the Plan Administrator or its designees.
13
SCHEDULE 1
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1998
DESCRIPTION OF INVESTMENT INCLUDING
IDENTITY OF ISSUER BORROWER, MATURITY DATE, RATE OF INTEREST,
LESSOR OR SIMILAR PARTY COLLATERAL, PAR OR MATURITY VALUE COST CURRENT VALUE
----------------------------------------- ----------------------------------------- -------------- --------------
* Consumer Portfolio Services, Inc. 144,096 shares common stock $ 1,115,845 558,372
* Charles Schwab Institutional Schwab Advantage Money Market
Fund, 14,587 units 14,587 14,587
* Aetna Life Insurance and Annuity Company Aetna Growth and Income VP, 11,678 units 264,217 264,217
* Aetna Life Insurance and Annuity Company Aetna Money Market VP, 5,046 units 64,280 64,280
* Aetna Life Insurance and Annuity Company Aetna Bond VP, 3,799 units 49,419 49,419
* Aetna Life Insurance and Annuity Company Aetna Balanced VP, 9,019 units 176,910 176,910
* Aetna Life Insurance and Annuity Company Aetna Fixed Account, 15,990 units 209,836 209,836
* Aetna Life Insurance and Annuity Company Portfolio Partners Scudder International
Growth Portfolio, 5,980 units 90,279 90,279
* Aetna Life Insurance and Annuity Company Portfolio Partners MFS Research Growth
Portfolio, 5,360 units 72,075 72,075
* Aetna Life Insurance and Annuity Company Portfolio Partners MFS Emerging
Equities Portfolio, 13,453 units 269,277 269,277
* Aetna Life Insurance and Annuity Company Fidelity VIP Overseas Portfolio, 4,413 units 62,949 62,949
* Aetna Life Insurance and Annuity Company Fidelity VIP Equity-Income Portfolio, 8,480 units 190,224 190,224
* Aetna Life Insurance and Annuity Company Fidelity VIP Growth Portfolio, 13,862 units 365,402 365,402
* Participant loans Participant loans; interest rate between
10.00% and 10.50%; maturing between
May 1999 and December 2013 91,537 91,537
-------------- --------------
$ 3,036,837 2,479,364
============== ==============
* Denotes a party-in-interest.
See accompanying independent auditors' report.
14
SCHEDULE 2
CONSUMER PORTFOLIO SERVICES, INC. 401(k) PLAN
Item 27d - Schedule of Reportable Transactions
Year ended December 31, 1998
SELLING/
IDENTITY OF PARTY DESCRIPTION PURCHASE REDEMPTION
INVOLVED NET GAIN PRICE PRICE LEASE RENTAL
------------------------------------------- ---------------------------------------- ------------ ------------ ------------
* Consumer Portfolio Services, Inc. CPS Stock Fund series of 27 purchases $ 835,708 -- --
* Schwab Advantage Money Market Fund Money market fund series of 53 purchases 810,760 -- --
* Schwab Advantage Money Market Fund Money market fund series of 44 sales -- 955,406 --
* Aetna Life Insurance and Annuity Company Aetna Growth and Income VP series of 63
purchases 157,323 -- --
* Aetna Life Insurance and Annuity Company Aetna Growth and Income VP series of 18
sales -- 75,146 --
* Aetna Life Insurance and Annuity Company Aetna Balanced VP series of 63 purchases 77,672 -- --
* Aetna Life Insurance and Annuity Company Aetna Balanced VP series of 16 sales -- 34,305 --
* Aetna Life Insurance and Annuity Company Aetna Fixed Account series of 59 purchases 91,662 -- --
* Aetna Life Insurance and Annuity Company Aetna Fixed Account series of 15 sales -- 16,642 --
* Aetna Life Insurance and Annuity Company Portfolio Partners MFS Emerging Equities
Portfolio series of 59 purchases 115,997 -- --
* Aetna Life Insurance and Annuity Company Portfolio Partners MFS Emerging Equities
Portfolio series of 15 sales -- 50,791 --
* Aetna Life Insurance and Annuity Company Fidelity VIP Equity-Income Portfolio
series of 62 purchases 110,729 -- --
* Aetna Life Insurance and Annuity Company Fidelity VIP Equity-Income Portfolio
series of 16 sales -- 21,351 --
* Aetna Life Insurance and Annuity Company Fidelity VIP Growth Portfolio series of
62 purchases 167,710 -- --
* Aetna Life Insurance and Annuity Company Fidelity VIP Growth Portfolio series
of 15 sales -- 40,630 --
============ ============ ============
(Continued from Above)
CURRENT VALUE
EXPENSE OF ASSET ON
IDENTITY OF PARTY INCURRED WITH TRANSACTION
INVOLVED TRANSACTION COST OF ASSET DATE NET GAIN(LOSS)
------------------------------------------- ------------ ------------ ------------ ------------
* Consumer Portfolio Services, Inc. 4,753 -- 835,708 --
* Schwab Advantage Money Market Fund -- -- 810,760 --
* Schwab Advantage Money Market Fund -- 955,406 -- --
* Aetna Life Insurance and Annuity Company
-- -- 157,323 --
* Aetna Life Insurance and Annuity Company
-- 75,146 -- --
* Aetna Life Insurance and Annuity Company -- -- 77,672 --
* Aetna Life Insurance and Annuity Company -- 34,305 -- --
* Aetna Life Insurance and Annuity Company -- -- 91,662 --
* Aetna Life Insurance and Annuity Company -- 16,642 -- --
* Aetna Life Insurance and Annuity Company
-- -- 115,997 --
* Aetna Life Insurance and Annuity Company
-- 50,791 -- --
* Aetna Life Insurance and Annuity Company
-- -- 110,729 --
* Aetna Life Insurance and Annuity Company
-- 21,351 -- --
* Aetna Life Insurance and Annuity Company
-- -- 167,710 --
* Aetna Life Insurance and Annuity Company
-- 40,630 -- --
============ ============ ============ ============
* Denotes a party-in-interest.
See accompanying independent auditors' report.
15