þ | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
A. | Full title of the plan and the address of the plan, if different from that of the issuer named below: |
B. | Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: |
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FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 2008 AND 2007: |
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NOTE: All other schedules required by Section 2520.103-10 of the Department of Labors Rules
and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act
of 1974 have been omitted because they are not applicable. |
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EX-23.1 |
Deloitte & Touche LLP 155 E. Broad Street 18th floor Columbus, OH 43215-3611 USA Tel: +1 614 221 1000 Fax: +1 614 229 4647 www.deloitte.com |
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2008 | 2007 | |||||||
ASSETS: |
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Investments: |
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Mutual funds |
$ | 4,796,565 | $ | 7,123,563 | ||||
Common stock |
2,093,569 | 1,968,478 | ||||||
Common collective trust fund |
1,409,483 | 1,357,888 | ||||||
Total investments |
8,299,617 | 10,449,929 | ||||||
Receivables employers profit-sharing contributions |
308,549 | 282,659 | ||||||
NET ASSETS AVAILABLE FOR BENEFITS AT FAIR VALUE |
8,608,166 | 10,732,588 | ||||||
ADJUSTMENT FROM FAIR VALUE TO CONTRACT VALUE
FOR FULLY BENEFIT-RESPONSIVE INVESTMENT
CONTRACTS |
79,544 | 11,129 | ||||||
NET ASSETS AVAILABLE FOR BENEFITS |
$ | 8,687,710 | $ | 10,743,717 | ||||
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2008 | 2007 | |||||||
ADDITIONS: |
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Contributions: |
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Participant contributions |
408,464 | 344,621 | ||||||
Rollover contributions |
62,982 | 12,757 | ||||||
Employer contributions |
480,714 | 445,745 | ||||||
Total contributions |
952,160 | 803,123 | ||||||
Investment income (loss): |
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Net appreciation (depreciation) in fair value of investments |
(3,002,310 | ) | (46,554 | ) | ||||
Interest and Dividends |
$ | 275,134 | $ | 736,957 | ||||
Net investment income (loss) |
(2,727,176 | ) | 690,403 | |||||
DEDUCTIONS: |
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Benefits paid to participants |
280,991 | 171,881 | ||||||
Total deductions |
280,991 | 171,881 | ||||||
INCREASE (DECREASE) IN NET ASSETS |
(2,056,007 | ) | 1,321,645 | |||||
NET ASSETS AVAILABLE FOR BENEFITS: |
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Beginning of year |
10,743,717 | 9,422,072 | ||||||
End of year |
$ | 8,687,710 | $ | 10,743,717 | ||||
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1. | DESCRIPTION OF PLAN | |
The following description of the PICO Holdings, Inc. Employees 401(k) Retirement Plan and Trust (the Plan) provides only general information. Participants should refer to the Plan document for a more complete description of the Plans provisions. | ||
General The Plan is a defined contribution 401(k) profit-sharing plan covering eligible employees as defined in the Plan Agreement of PICO Holdings, Inc. (the Plan Sponsor). The Plan was adopted to provide retirement benefits to employees of the Plan Sponsor. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA) and has been determined to be qualified for tax-exempt status by the Internal Revenue Service (IRS). | ||
Contributions Each year, participants may contribute up to the maximum allowed by law of pretax annual compensation, as defined in the Plan, currently $15,500. The Plan Sponsor matches up to 5% of the elective deferral of base compensation that a participant contributes to the Plan. The Plan Sponsors matching contribution does not begin until the first day of the quarter after an employee completes one year of service. Additional amounts which represent profit sharing, as defined in the Plan, may be contributed at the option of the Plan Sponsors board of directors. | ||
Participant Accounts Each participants account is credited with the participants contributions, employer matching contributions and allocations of (a) the Plan Sponsors discretionary profit-sharing contributions and (b) Plan earnings, and debited for withdrawals as applicable. Forfeited balances of terminated participants nonvested accounts are used to first reinstate previously forfeited account balances of reemployed participants, and any remainder will be used to reduce the Plan Sponsors discretionary profit-sharing contribution for the current or subsequent Plan year in which the forfeiture occurs. Forfeitures of $12,550 and $7,700 for the years ended December 31, 2008 and 2007, respectively, were used to reduce the Plan Sponsors discretionary profit-sharing contribution. | ||
Vesting Participants are immediately vested in their contributions, the employer matching contributions, plus earnings thereon. Effective January 1, 2007, the vesting schedule for discretionary employer contributions to the Plan was amended, allowing participants to become partially vested after two years of service and fully vested after six years of service. | ||
Vesting in the Plan Sponsors discretionary profit-sharing contribution portion of their accounts plus actual earnings thereon is based on years of credited service in accordance with the following schedule: |
Years of Service | Percentage | |||
Less than 2 |
| % | ||
2 |
20 | |||
3 |
40 | |||
4 |
60 | |||
5 |
80 | |||
6 or more |
100 |
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Investment Options Upon enrollment in the Plan, a participant may direct 100% of elective deferrals, employer matching contributions, and discretionary profit-sharing amounts. A participant chooses from a number of different mutual fund options, including common collective trust funds. In addition, participants are able to invest in the stock of the Plan Sponsor. | ||
Loans to Participants Loans to participants are not permitted under the Plan. | ||
Payment of Benefits Upon termination of service, a participant may elect to receive either a lump-sum amount equal to the value of the participants vested interest in his or her account or annual installments. If the value of the participants account is $1,000 or less, the Trustee shall distribute the entire vested account to the participant. No such amounts were payable at December 31, 2008 and 2007. | ||
2. | FAIR VALUE MEASUREMENTS | |
Effective January 1, 2008, the Plan adopted Statement of Financial Accounting Standards Board (SFAS) No. 157, Fair Value Measurements for all financial assets and liabilities disclosed at fair value in the financial statements on a recurring basis. SFAS No. 157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS No. 157 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: |
Level 1 | Quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access at the measurement date. An active market for the asset or liability is a market in which the transaction for the asset or liability occurs with sufficient frequency and volume to provide pricing information on an ongoing basis. | ||
Level 2 | Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted market prices in markets that are not active; or model-derived valuations or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | ||
Level 3 | Unobservable inputs for the asset or liability. These inputs reflect our own assumption about the assumptions a market participant would use in pricing the asset or liability. The Plan does not currently hold any Level 3 Assets. |
The assets fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. | ||
The table below shows the level and measurement of our assets measured at fair value: |
Fair Value | Quoted Prices in Active | Significant | ||||||||||||||
Measurements | Markets for Identical | Significant Other | Unobservable | |||||||||||||
Description of Financial Instrument | December 31, | Assets | Observable Inputs | Inputs | ||||||||||||
(In thousands) | 2008 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Mutual Funds |
$ | 4,796,565 | $ | 4,796,565 | $ | | $ | | ||||||||
Common Stock |
2,093,569 | 2,093,569 | | | ||||||||||||
Alternative Investment |
1,409,483 | | 1,409,483 | | ||||||||||||
Total |
$ | 8,299,617 | $ | 6,890,134 | $ | 1,409,483 | $ | | ||||||||
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3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation The accounting records of the Plan are maintained on the accrual basis. Purchases and sales of securities are recorded on the trade date. Interest income is recorded as earned and dividend income is recorded on the ex-dividend date. The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). | ||
Investment Valuation Investments in mutual funds and Plan Sponsor common stock fund are valued at quoted market prices. Common collective trust funds are stated at fair value as determined by the issuer of the common/collective trust funds based on the fair market value of the underlying investments. Common collective trust funds with underlying investments in investment contracts are valued at fair market value of the underlying investments and then adjusted by the issuer to contract value. | ||
The Union Bond and Trust Company Stable Value Fund may invest in fixed interest insurance investment contracts, money market funds, corporate and government bonds, mortgage-backed securities, bond funds, and other fixed income securities. Participants may ordinarily direct the withdrawal or transfer of all or a portion of their investment at contract value. Contract value represents contributions made to the fund, plus earnings, less participant withdrawals. | ||
Administrative Expenses The Plans expenses are paid by the Plan Sponsor. | ||
Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of net assets and the changes in net assets during the reporting period and disclosure of contingent assets at the date of the financial statements. Actual results could differ from those estimates. | ||
Investment Risk The Plan utilizes various investment instruments. Investment securities, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the financial statements. | ||
4. | TAX STATUS | |
The IRS has determined and informed the Company, by a letter dated September 17, 2003, 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 the latest determination letter. However, the Plan administrator believes the Plan, as currently designed, is in compliance and is being operated within the applicable requirements of the IRC. |
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5. | INVESTMENTS | |
The Plans investments which exceeded 5% of net assets available for benefits as of December 31, 2008 and 2007, consisted of the following: |
2008 | 2007 | |||||||
PICO Holdings, Inc., common stock |
$ | 2,093,569 | $ | 1,968,478 | ||||
Mutual funds: |
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Royce Premier Fund |
742,547 | 1,150,774 | ||||||
Columbia Intermediate Bond Z |
937,410 | 910,887 | ||||||
Washington Mutual Investors |
511,850 | 796,372 | ||||||
Europacific Growth Fund |
474,052 | 1,021,371 | ||||||
Growth Fund of America |
448,387 | 778,919 | ||||||
Dreyfus Emerging Markets |
623,270 | |||||||
Common Collective Trusts Stable Value Fund |
1,489,027 | |||||||
Common Collective Trusts MCM Stable Asset Value Fund |
1,369,017 |
During the years ended December 31, 2008 and 2007, the Plans investments (including gains and losses on investments bought and sold as well as held during the year) appreciated (depreciated) as follows: |
2008 | 2007 | |||||||
Net appreciation (depreciation) in fair value of investments
whose fair value was determined by quoted market price: |
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Common stock |
$ | (426,661 | ) | $ | (73,335 | ) | ||
Mutual funds |
(2,575,649 | ) | 26,781 | |||||
Total |
$ | (3,002,310 | ) | $ | (46,554 | ) | ||
6. | RELATED-PARTY TRANSACTIONS | |
Plan investments include common stock of PICO Holdings, Inc. PICO Holdings, Inc. is the Plan Sponsor, Smith Barney Corporate Trust Company is the Plan custodian, and ING Institutional Plan Services was the recordkeeper until December 31, 2008 when the company changed recordkeepers to Columbus Retirement Administrators. The Plan Sponsor pays all administrative expenses of the Plan. These totaled approximately $37,000 and $39,000 in 2008 and 2007, respectively. | ||
7. | EXEMPT PARTY-IN-INTEREST TRANSACTIONS | |
At December 31, 2008 and 2007, the Plan held 78,765 and 58,550 shares, respectively, of common stock of, the Plan Sponsor, with a cost basis of $1,487,272 and $939,944, respectively. During the year ended December 31, 2008, the Plan recorded no dividend income from such shares. | ||
8. | PLAN TERMINATION | |
Although it has not expressed any intention to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions set forth in ERISA. In the event that the Plan is terminated, participants would become 100% vested in their accounts. |
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Number | Fair | |||||||||||
of | Market | |||||||||||
Description | Shares | Cost | Value | |||||||||
INVESTMENTS: |
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Mutual funds: |
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AIM Energy Inv |
8,844 | $ | 409,092 | $ | 217,463 | |||||||
AIM Glbl Health Care |
6,853 | 196,021 | 137,330 | |||||||||
American Balanced Fn |
3,545 | 53,077 | 48,853 | |||||||||
Aston Montag & Caldwel |
5,968 | 149,055 | 103,542 | |||||||||
Baron Growth |
3,511 | 159,097 | 108,174 | |||||||||
Blackrock Intl Value |
3,005 | 85,222 | 49,164 | |||||||||
Cohen & Steers Realt |
3 | 94 | 98 | |||||||||
Columbia Intermed Bo |
119,873 | 1,063,243 | 937,410 | |||||||||
Dreyfus Emerg Mkts |
33,521 | 473,824 | 226,268 | |||||||||
Dreyfus US Treas Lng |
2,940 | 48,281 | 56,864 | |||||||||
Europacific Growth Fund |
17,003 | 629,401 | 474,052 | |||||||||
Gamco Gold Fund |
1,849 | 48,255 | 37,043 | |||||||||
Gamco Growth |
3,461 | 103,137 | 67,697 | |||||||||
Growth Fund of America |
22,045 | 693,941 | 448,387 | |||||||||
ING GNMA Income |
1,430 | 12,042 | 12,323 | |||||||||
Neub Berman Focus |
13,019 | 328,429 | 130,975 | |||||||||
Opp Commodity Strategy Total Return Fund |
14,643 | 123,663 | 45,540 | |||||||||
Royce Premier |
60,666 | 883,425 | 742,547 | |||||||||
T. Rowe Price Intl Bond |
25,041 | 249,235 | 239,396 | |||||||||
Wash Mutual Investor |
23,963 | 692,471 | 511,850 | |||||||||
Vanguard S&P 500 |
2,362 | 203,171 | 196,251 | |||||||||
Legg Mason S&P 500 |
587 | 4,998 | 5,338 | |||||||||
Total mutual funds |
6,609,174 | 4,796,565 | ||||||||||
Common collective trust fund UBT Stable
Value Fund |
68,394 | 1,501,203 | 1,489,027 | |||||||||
* PICO Holdings, Inc., common stock |
78,765 | 1,487,272 | 2,093,569 | |||||||||
TOTAL |
9,597,649 | 8,379,161 | ||||||||||
* | Party-in-interest. |
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PICO HOLDINGS, INC. EMPLOYEES
401(k) RETIREMENT PLAN AND TRUST |
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/s/ Maxim C. W. Webb | ||||
Date: June 25, 2009 | Chief Financial Officer and Treasurer | |||
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