UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[x] Annual Report Pursuant to Section 15(D) of the Securities Exchange Act
of 1934
For the fiscal year ended December 31, 2004
-----------------
OR
[ ] Transition Report Pursuant to Section 15(D) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________.
Commission File Number: 1-10709
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
PS 401(k) PROFIT SHARING PLAN
701 Western Avenue
Glendale, CA 91201-2349
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
PS BUSINESS PARKS, INC.
701 Western Avenue
Glendale, CA 91201-2349
PS 401(k) PROFIT SHARING PLAN
FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULES
TABLE OF CONTENTS
Page
Report of Independent Registered Public Accounting Firm 1
Financial Statements:
Statements of Net Assets Available
for Plan Benefits 2
Statements of Changes in Net Assets
Available for Plan Benefits 3
Notes to Financial Statements 4 - 8
Supplemental Information:
Schedule I - Schedule of Assets (Held at End of Year) 9
Schedule II - Schedule of Reportable Transactions 10
1
Report of Independent Registered Public Accounting Firm
-------------------------------------------------------
To the Administrative Committee
PS 401(k) Profit Sharing Plan
Glendale, California
We have audited the accompanying statements of net assets available for plan
benefits of PS 401(k) Profit Sharing Plan (the "Plan") as of December 31, 2004
and 2003, and the related statements of changes in net assets available for plan
benefits for each of the years in the three year period ended December 31, 2004.
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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits 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, 2004 and 2003, and the changes in net assets available for plan
benefits for each of the years in the three year period ended December 31, 2004
in conformity with accounting principles generally accepted in the United States
of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
(held at end of year) and reportable transactions, together referred to as
"supplemental information", 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. This supplemental information is the responsibility of the
Plan's management. The supplemental information has 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.
LINK, MURREL & COMPANY
Irvine, California
May 25, 2005
1
PS 401(k) PROFIT SHARING PLAN
STATEMENTS OF NET ASSETS AVAILABLE
FOR PLAN BENEFITS
December 31, 2004 and 2003
2004 2003
-------------- ------------
ASSETS
Investments at fair value..................................... $58,377,895 $52,811,901
Cash.......................................................... 24,041 1,972
Receivables:
Participant contributions.................................. 96,350 96,547
Employer contributions..................................... 121,060 109,212
Dividends.................................................. 267,074 279,785
-------------- ------------
Total receivables............................................. 484,484 485,544
-------------- ------------
Total assets.................................................. 58,886,420 53,299,417
============== ============
LIABILITIES
Accrued expenses.............................................. 43,696 33,369
-------------- ------------
Total liabilities............................................. 43,696 33,369
-------------- ------------
Net assets available for plan benefits........................ $58,842,724 $53,266,048
============== ============
See accompanying notes.
2
PS 401(k) PROFIT SHARING PLAN
STATEMENTS OF CHANGES IN NET ASSETS
AVAILABLE FOR PLAN BENEFITS
For the Years Ended December 31, 2004, 2003 and 2002
2004 2003 2002
-------------- ------------- ----------------
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income:
Net appreciation (depreciation) in fair value of
investments.................................... $ 7,082,444 $ 9,869,662 $ (4,438,271)
Interest income................................... 62,308 25,244 8,395
Dividend income................................... 1,070,226 1,253,965 1,493,190
-------------- ------------- ----------------
8,214,978 11,148,871 (2,936,686)
Contributions:
Participant....................................... 2,664,501 2,822,413 2,935,842
Employer.......................................... 2,743,248 2,607,288 2,457,646
-------------- ------------- ----------------
5,407,749 5,429,701 5,393,488
-------------- ------------- ----------------
Total additions..................................... 13,622,727 16,578,572 2,456,802
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Benefits paid to participants....................... 7,982,392 4,787,947 3,328,933
Administrative expenses............................. 63,659 116,672 154,071
-------------- ------------- ----------------
Total Deductions.................................... 8,046,051 4,904,619 3,483,004
-------------- ------------- ----------------
Net increase (decrease) in net assets available for
benefits............................................. 5,576,676 11,673,953 (1,026,202)
Net assets available for benefits - beginning of year... 53,266,048 41,592,095 42,618,297
-------------- ------------- ----------------
Net assets available for benefits - end of year......... $ 58,842,724 $ 53,266,048 $ 41,592,095
============== ============= ================
See accompanying notes.
3
PS 401(k) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
1. Summary of Significant Accounting Principles
--------------------------------------------
Basis of Presentation
PS 401(k) Profit Sharing Plan (the "Plan") encompasses Public Storage,
Inc., PS Business Parks, Inc. and their majority owned subsidiaries
(the "Company").
Basis of Accounting
-------------------
The financial statements of the Plan are prepared under the accrual
basis of accounting.
Estimates
---------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
the Plan administrator to make estimates and assumptions that affect
certain reported amounts and disclosures. Accordingly, actual results
may differ from those estimates.
Income Tax Status
-----------------
The Plan obtained its latest determination letter on March 14, 2003, in
which the Internal Revenue Service stated that the Plan, as then
designed, was in compliance with the applicable requirements of the
Internal Revenue Code. The Plan has been amended since receiving the
determination letter. However, the Plan administrator and the Plan's
tax counsel believe that the Plan is currently designed and being
operated in compliance with the applicable requirements of the Internal
Revenue Code. Therefore, no provision for income taxes has been
included in the Plan's financial statements.
Investment Valuation
--------------------
Investments in cash equivalents (liquid funds, money market funds and
time deposits) are valued at cost, which approximates fair value.
Investments in mutual funds are stated at fair value. All other
securities are valued at the last reported sale price on the last
business day of the Plan year or at the quoted market price. Interest
income is recognized when earned. Dividends are recorded on the
ex-dividend date.
2. Description of the Plan
-----------------------
The following description of the plan provides only general
information. Participants should refer to the Summary Plan Description
for a more complete description of the Plan's provisions. Note 9
contains information on key changes to the Plan which were effective
January 1, 2005, and impact the topics on eligibility and the Company's
contribution.
The PS 401(k) Profit Sharing Plan is a defined contribution plan for
the benefit of all permanent employees of the Company who have
completed at least one year of service and attained 21 years of age.
The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA). Although it has not expressed the
intention to do so, the Company has the right to terminate the Plan
subject to ERISA provisions. The Plan allows interim allocations of
Company contributions and earnings or losses of trust fund assets among
participants. Major provisions of the Plan, are as follows:
Contributions
-------------
Employee contributions to the Plan (voluntary contributions) are
deferrals of the employee's compensation made through a direct
reduction of compensation in each payroll period. The maximum annual
tax deferred contribution, excluding catch-up contributions, amount is
limited to $13,000 for 2004 and $12,000 for 2003. Participants may also
contribute amounts representing distributions from other qualified
benefit or defined contribution plans. The Company contributes 3% of
the employee's compensation for all participants in the Plan.
Additional profit sharing amounts may be contributed at the option of
the Company's board of directors. Contributions are subject to certain
limitations.
4
PS 401(k) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
Participant Accounts
--------------------
Each participant's account is credited with the participant's
contribution, the guaranteed Company contribution and allocations of
(a) the Company's profit sharing contribution and (b) Plan earnings,
and charged with an allocation of administrative expenses. Allocations
are based on participant earnings or account balances, as defined. The
benefit to which a participant is entitled is the benefit that can be
provided from the participant's vested account.
Vesting
-------
Employee deferrals and the 3% guaranteed Company contribution are 100%
vested and non-forfeitable. Profit sharing Company contribution
balances vest over a seven year period.
Generally, each participant's account becomes 10 percent vested
(non-forfeitable) after two years of service (as defined), 20 percent
after three years of service and an additional 20 percent for each
additional year of service thereafter.
Upon death, severance by reason of disability, or the attainment of the
participant's sixty-fifth birthday, a participant automatically becomes
fully vested to the extent of the balance in their account. In the
event the Plan is terminated or contributions are completely
discontinued, each participant becomes fully vested.
Investment Options
------------------
For the year ended December 31, 2004, upon enrollment in the Plan, a
participant may direct contributions in any of the following twenty-two
investment options:
1. Highmark Div. Money Market 12. American Funds Growth Fund R3
2. Strong Government Securities 13. AIM Opportunities A
3. BGI Lifepath Income Fund R 14. AIM Small CAP Growth A
4. BGI Lifepath 2010 Class R 15. Oakmark International II
5. BGI Lifepath 2020 Class R 16. Fidelity Advisor Equity Growth
6. BGI Lifepath 2030 Class R 17. Ivy Science & Technology Y
7. BGI Lifepath 2040 Class R 18. PIMCO Real Return Bond
8. MFS Value A 19. Public Storage Common Stock
9. Federated Capital Appreciation 20. Public Storage Preferred Stock
10. Dreyfus S&P 500 Index 21. P.S. Business Parks Stock
11. Janus Adv CAP Appreciation 22. Scudder Real Estate
Participants may change their investment options at any time.
Distributions from the Trust Fund
---------------------------------
Distributions of each participant's vested account balance upon
severance or death are made in a single lump sum payment; or if the
participant's vested account balance exceeds $5,000, payment may be
deferred until April 1st of the calendar year in which the participant
reaches 70 1/2 years of age.
Additionally, the Plan provides for hardship distributions (as defined)
at the discretion of the Plan Administrative Committee.
5
PS 401(k) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
Generally, distributions are made no later than 60 days after the close
of the Plan year in which the participant becomes eligible for such
distributions. Under certain circumstances, participants enrolled in
the Plan prior to and including December 31, 1983 may elect alternative
distribution methods.
Forfeited Accounts
------------------
Forfeitures of profit sharing contributions will be used to reduce the
Company's contribution for profit sharing contributions, guaranteed
Company contributions or guaranteed matching contributions. At December
31, 2004 and 2003, forfeited nonvested amounts were approximately
$1,254,000 and $729,000, respectively. These accounts will be allocated
to individual participant's accounts in the ratio that each such
eligible participant's compensation bears to the total compensation of
all such eligible participants in the plan year the forfeitures are
used.
3. Investments
-----------
Union Bank has custody of the investments under a non-discretionary
trust agreement with the Plan. The following table presents the fair
value of investments. Investments that represent five percent (5%) or
more of the Plan's net assets are separately identified. Quoted market
prices are used to value investments.
The fair value of investments held by the Plan are summarized below:
At December 31, 2004 At December 31, 2003
------------------------------ ------------------------------
Shares Amount Shares Amount
------------- --------------- ------------- --------------
Money Market Funds 8,498,252 $ 8,498,252 6,235,936 $ 6,235,936
Mutual Funds 1,021,263 22,777,852 1,096,492 22,968,239
Equity Securities:
Public Storage, Inc. Common 409,794 22,846,009 453,948 19,655,222
Public Storage, Inc. Preferred 126,894 3,643,129 115,441 3,451,686
PS Business Parks, Inc.
Common 13,584 612,653 11,520 500,818
------------- --------------- ------------- --------------
Total Equity Securities 550,272 27,101,791 580,909 23,607,726
------------- --------------- ------------- --------------
Total Investments 10,069,787 $ 58,377,895 7,913,337 $ 52,811,901
============= =============== ============= ==============
The following presents the fair value of investments at December 31,
2004 and 2003 that represent five percent (5%) or more of the Plan's
net assets:
2004 2003
---------------- ----------------
Money Market Funds $ 8,498,252 $ 6,235,936
Mutual Funds:
Dreyfus S&P 500 Index $ 8,615,718 $ 10,230,371
Strong Government Securities $ 3,230,585 $ 4,191,198
Public Storage, Inc. Common $ 22,846,009 $ 19,655,222
Public Storage, Inc. Preferred $ 3,643,129 $ 3,451,686
During 2004, 2003, and 2002 the Plan's investments (including gains and
losses on investments bought and sold, as well as held during the year)
appreciated (depreciated) in value as follows:
6
PS 401(k) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
2004 2003 2002
--------------- ------------- ---------------
Mutual Funds........................ $ 1,931,914 $ 4,260,474 $ (3,946,588)
Common Stock........................ 5,150,530 5,609,188 (491,683)
--------------- ------------- ---------------
Totals $ 7,082,444 $ 9,869,662 $ (4,438,271)
4. Plan Administration
-------------------
The Company's Board of Directors appoints a committee to administer the
Plan. The Plan Administrative Committee is now comprised of seven
officers and managers of the Company.
For the plan years ended December 31, 2004, 2003 and 2002, the Plan
paid certain trustee and administrative expenses incurred for the
administration of the Plan. The Company directly paid for all other
expenses related to the Plan.
5. Benefits Owed To Terminated Participants
----------------------------------------
For financial reporting purposes, disbursements to terminated
participants are reported when the check is written. Approximately
$20,590,000 and $16,200,000 were owed to terminated participants at
December 31, 2004 and 2003, respectively.
6. Related Party Transactions
--------------------------
Certain Plan investment options are the Company's securities. The
Company is the plan sponsor as defined by the Plan. The Plan held the
following shares in the Company's securities:
At December 31, 2004 At December 31, 2003
----------------------------- -----------------------------
Shares Amount Shares Amount
------------ -------------- ----------- --------------
Public Storage, Inc. Common 409,794 $ 22,846,009 453,948 $ 19,655,222
Public Storage, Inc. Preferred 126,894 3,643,129 115,441 3,451,686
PS Business Parks, Inc. Common 13,584 612,653 11,520 500,818
Totals 550,272 $ 27,101,791 580,909 $ 23,607,726
7. Risks and Uncertainties
-----------------------
The Plan provides for various investment options in any combination of
equity, fixed income, and other investment securities. Investment
securities are exposed to various risks, such as interest rate, market,
and credit. Due to the level of risk associated with certain investment
securities and the level of uncertainty related to changes in the value
of investment securities, it is at least reasonably possible that
changes in risks in the near term could materially affect participants'
account balances and the amounts reported in the statements of net
assets available for benefits and the statement of changes in net
assets available for benefits.
8. Concentrations
--------------
Investments in the Company's securities comprised approximately of 46%
and 45% of the Plan's total investments as of December 31, 2004 and
2003, respectively.
7
PS 401(k) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
9. Plan Amendments
---------------
Effective January 1, 2005, the Plan was amended to incorporate the
following changes:
o An employee is eligible to participate in the Plan if he or she is at
least 21 years old and has completed 30 days of employment.
o The Company will no longer offer the guaranteed three percent (3%)
contribution of compensation to each participant. o The Company will
contribute one dollar ($1.00) for each dollar saved by a participant
up to three percent (3%) of compensation.
o The Company will also contribute an additional fifty cents ($.50) for
each dollar that each participant saves in excess of three percent
(3%) of compensation but not more than five percent (5%) of
compensation. The matching contribution is 100% vested.
8
SUPPLEMENTAL INFORMATION
SCHEDULE I
PS 401(k) PROFIT SHARING PLAN
SCHEDULE H, LINE 4i -
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
December 31, 2004
Employer Identification Number: 95-3551121
Plan Number: 001
(a) (b) (c) (d) (e)
Description of investment
including maturity date,
rate of interest, collateral Current
Identity of issue, borrower, lessor, or similar party par or maturity date Cost Value
----------------------------------------------------------- --------------------------- ----------- -------------
MONEY MARKET ACCOUNT
Highmark Div. Money Market Money Market $8,498,252 $ 8,498,252
MUTUAL FUNDS
Aim Investment - Opportunities Mutual Fund ** 167,463
Aim Investment - Small Cap Growth A Mutual Fund ** 1,435,303
American Funds Group - Growth Fund of
America R3 Mutual Fund ** 251,509
Barclays Global Investors - LifePath Income Mutual Fund ** 20,666
Barclays Global Investors - LifePath 2010 Class R Mutual Fund ** 241,302
Barclays Global Investors - LifePath 2020 Class R Mutual Fund ** 7,155
Barclays Global Investors - LifePath 2030 Class R Mutual Fund ** 36,130
Barclays Global Investors - LifePath 2040 Class R Mutual Fund ** 6,293
Dreyfus Investment - S&P 500 Index Mutual Fund ** 8,615,718
Federated Investment - Capital Appreciation A Mutual Fund ** 2,323,630
Fidelity Advisor Investment - Equity Growth Mutual Fund ** 8,069
Ivy - Science & Technology Y Mutual Fund ** 1,084,153
Janus Advisor Funds - Capital Appreciation A Mutual Fund ** 2,832,518
MFS Investment - Value A Mutual Fund ** 1,418,745
Oakmark Funds - International II Mutual Fund ** 774,384
PIMCO Investment - Real Return Bond Mutual Fund ** 304,558
Scudder Investment - Real Estate Mutual Fund ** 19,671
Strong Funds - Government Securities Inv. Mutual Fund ** 3,230,585
--------------
Total Mutual Funds 22,777,852
Equity Securities
* Public Storage, Inc. Common Stock Common Stock ** 22,846,009
* Public Storage, Inc. Preferred Stock Preferred Stock ** 3,643,129
* PS Business Parks, Inc. Common Stock Common Stock ** 612,653
--------------
Total Equity Securities 27,101,791
--------------
Total Investments $ 58,377,895
==============
* Indicates a party-in-interest of the Plan.
** Pursuant to paragraph 2520.103-11, specifically, the special rule for certain
participant directed transactions cost information is omitted as the Plan's
investments are participant directed.
9
SUPPLEMENTAL INFORMATION
SCHEDULE II
PS 401(k) PROFIT SHARING PLAN
SCHEDULE H, LINE 4j -
SCHEDULE OF REPORTABLE TRANSACTIONS
December 31, 2004
Employer Identification Number: 95-3551121
Plan Number: 001
A schedule of reportable transactions has not been presented because there were
no such transactions noted for the year ended December 31, 2004.
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
PS 401(k) PROFIT SHARING PLAN
Date: July 11, 2005
By: /s/ Alan Herd
-------------
Alan Herd
Chairman, Administrative Committee