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, 2005
-----------------
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 SCHEDULE
TABLE OF CONTENTS
Page
Report of Independent Registered Public Accounting Firm - 2005 1
Report of Independent Registered Public Accounting Firm - 2004 2
Financial Statements:
Statements of Net Assets Available
for Benefits at December 31, 2005 and 2004 3
Statement of Changes in Net Assets
Available for Benefits for the year ended December 31, 2005 4
Notes to Financial Statements 5 - 9
Supplemental Information:
Schedule I - Schedule of Assets (Held at End of Year) 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 statement of net assets available for benefits
of PS 401(k) Profit Sharing Plan as of December 31, 2005, and the related
statement of changes in net assets available for benefits for the year 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 audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Plan's internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Plan's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides 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 benefits of the Plan at
December 31, 2005, and the changes in its net assets available for benefits for
the year then ended, in conformity with U.S. generally accepted accounting
principles.
Our audit was performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of assets
(held at end of year) as of December 31, 2005, is presented for purposes of
additional analysis and is not a required part of the financial statements but
is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in our audit of the financial statements and, in our opinion,
is fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/ Ernst & Young LLP
Los Angeles, California
June 27, 2006
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 statement of net assets available for benefits
of PS 401(k) Profit Sharing Plan (the "Plan") as of December 31, 2004. This
financial statement is the responsibility of the Plan's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 2004, in conformity with U.S. generally accepted accounting
principles.
/s/ Link, Murrel & Co.
Irvine, California
June 27, 2006
2
PS 401(k) PROFIT SHARING PLAN
STATEMENTS OF NET ASSETS AVAILABLE
FOR BENEFITS
At December 31,
---------------------------------
2005 2004
-------------- -------------
ASSETS
Investments at fair value..................................... $61,939,817 $58,377,895
Cash.......................................................... - 24,041
Receivables:
Participant contributions.................................. 121,045 96,350
Employer contributions..................................... 139,461 121,060
Dividends.................................................. - 267,074
-------------- -------------
Total receivables............................................. 260,506 484,484
-------------- -------------
Total assets.................................................. 62,200,323 58,886,420
LIABILITIES
Accrued expenses.............................................. 19,860 43,696
-------------- -------------
Total liabilities............................................. 19,860 43,696
-------------- -------------
Net assets available for benefits............................. $62,180,463 $58,842,724
============== =============
See accompanying notes.
3
PS 401(k) PROFIT SHARING PLAN
STATEMENT OF CHANGES IN NET ASSETS
AVAILABLE FOR BENEFITS
For the Year Ended December 31, 2005
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
Investment income:
Net appreciation (depreciation) in fair value of investments..... $ 5,412,644
Interest income.................................................. 230,277
Dividend income.................................................. 2,077,759
---------------
7,720,680
Contributions:
Participant...................................................... 3,219,655
Participant rollovers............................................ 720,548
Employer......................................................... 1,540,661
---------------
5,480,864
---------------
Total additions.................................................... 13,201,544
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Benefits paid to participants...................................... 9,847,989
Administrative expenses............................................ 15,816
---------------
Total deductions................................................... 9,863,805
---------------
Net increase in net assets available for benefits...................... 3,337,739
Net assets available for benefits - beginning of year.................. 58,842,724
---------------
Net assets available for benefits - end of year........................ $ 62,180,463
===============
See accompanying notes.
4
PS 401(k) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2005 and 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 collectively,
(the "Company"). The financial statements and supplemental schedule are
prepared in accordance with the financial reporting requirements of the
Employee Retirement Income Security Act ("ERISA").
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 U.S. generally
accepted accounting principles 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 has received a determination letter from the Internal Revenue
Service dated March 13, 2003, stating that the Plan is qualified under
Section 401(a) of the Internal Revenue Code (the "Code") and, therefore, the
related trust is exempt from taxation. Subsequent to this determination by
the Internal Revenue Service, the Plan was amended and restated. Once
qualified, the Plan is required to operate in conformity with the Code to
maintain its qualification. The plan administrator believes the Plan is
being operated in compliance with the applicable requirements of the Code
and, therefore, believes that the Plan, as amended and restated is qualified
and the related trust is tax exempt. The Company has indicated it will take
the necessary steps, if any, to maintain the Plan's qualified status.
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 valued at quoted market prices which represent the net
asset value of shares held by the Plan at year-end. 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 Plan documentation for a more complete
description of the Plan's provisions.
The Plan is a defined contribution plan for the benefit of all permanent
employees of the Company who have completed at least 30 days of service and
are 21 years of age. The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974. 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.
The Company appoints a committee to administer the Plan. At December 31,
2005, the Plan Administrative Committee is comprised of seven officers of
the Company with Union Bank of California acting as Trustee (the "Trustee").
Other significant provisions of the Plan are as follows:
5
PS 401(k) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2005 and 2004
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 employee
contribution amount is based upon Internal Revenue Code rules with respect
to 401(k) plans, which are generally limited, subject to certain exceptions,
to $14,000 for 2005. Participants may also contribute amounts representing
distributions from other qualified benefit or defined contribution plans.
The Company contributes one dollar ($1.00) for each dollar deferred by a
participant up to three percent (3%) of compensation, as defined. The
Company also contributes an additional fifty cents ($.50) for each dollar
that each participant defers in excess of three percent (3%) of compensation
but not more than five percent (5%) of compensation, subject to certain
limitations as described in the Plan document. The matching contribution is
100% vested. Additional amounts may be contributed at the option of the
Company.
Vesting
-------
Since January 1, 2005 employee deferrals and the Company's matching
contribution are 100% vested and non-forfeitable. Prior to January 1, 2005,
the Company contributed a guaranteed 3% to all eligible Plan participants;
these amounts vested over a seven year period.
With respect to Company contributions before January 1, 2005, each
participant's account became 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
------------------
From January 1, 2004 through December 19, 2005, upon enrollment in the Plan,
a participant had the option of directing their 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. PS Business Parks Stock
11. Janus Adv CAP Appreciation 22. Scudder Real Estate
Since December 19, 2005, upon enrollment in the Plan, a participant may
direct their contributions in any of the following fourteen investment
options:
6
PS 401(k) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2005 and 2004
1. Dodge & Cox International 8. T. Rowe Price Equity Income
2. EuroPacific Growth Fund/R5 9. UBOC Stable Value B
3. Growth Fund of America /R5 10. Vanguard Explorer/ Admrl
4. Oakmark Equity & Income I 11. Vanguard Extended Market Index/Inv
5. PIMCO Total Return Inst 12. Vanguard 500 Index/Admrl
6. Scudder RREEF Real Estate A 13. Vanguard Short Term Federal
7. Selected American D 14. Vanguard Windsor II
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; however, if the participant's
vested account balance exceeds $5,000, payment may be deferred at the
election of the participant 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.
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 (i) as a
non-elective allocation to all eligible Plan participants, (ii) to reduce
the Company's safe harbor matching contribution or (iii) reduce Plan
expenses. During 2005, a total of $949,000 in non-vested amounts were
forfeited and will be allocated to eligible Plan participants in 2006.
During 2005, $1,265,000 was allocated to eligible Plan participants based
upon the extent an individual participant's compensation bears to the total
eligible compensation of all such eligible participants in the Plan year the
amounts were forfeited. These amounts were comprised of forfeitures totaling
$606,000 and $648,000 during 2003 and 2004, respectively and earnings during
2005 on those assets of approximately $11,000.
3. Investments
-----------
Union Bank has custody of the investments under a non-discretionary
trust agreement with the Plan.
7
PS 401(k) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2005 and 2004
The following presents the fair value of investments at December 31, 2005
and 2004 that represent five percent (5%) or more of the Plan's net assets
available for benefits:
2005 2004
----------------- -----------------
Money Market Funds $ 8,371,508 $ 8,498,252
Mutual Funds:
Oakmark Equity & Income I 8,307,289 -
Vanguard Index 500 8,045,759 -
Growth Fund of America 5,158,086 -
Dreyfus S&P 500 Index - 8,615,718
Strong Government Securities - 3,230,585
Public Storage, Inc. Common 17,901,822 22,846,009
Public Storage, Inc. Preferred 3,837,069 3,643,129
During 2005, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) appreciated in
value as follows:
2005
--------------
Mutual Funds........................ $ 3,203,709
Common and Preferred Stock.......... 2,208,935
--------------
Totals $ 5,412,644
==============
4. Administration Fees
-------------------
For the Plan year ended December 31, 2005, the Plan paid a quarterly
participant fee of $1.50 per eligible participant and certain transaction
related expenses incurred for the administration of the Plan. The Company
directly paid for trustee fees and all other expenses related to the Plan.
5. Related Party Transactions
--------------------------
Prior to December 19, 2005, participants had the option of directing
contributions to the Company's securities. The Company is the Plan sponsor
as defined by the Plan document. Though participants no longer have the
option of directing contributions to the Company's securities, the Plan held
the following shares in the Company's securities from contributions prior to
December 19, 2005:
At December 31, 2005 At December 31, 2004
-------------------------- --------------------------
Shares Amount Shares Amount
---------- ------------- --------- -------------
Public Storage, Inc. Common 264,351 $ 17,901,822 409,794 $ 22,846,009
Public Storage, Inc. Preferred 138,673 3,837,069 126,894 3,643,129
PS Business Parks, Inc. Common 10,126 498,187 13,584 612,653
---------- ------------- --------- -------------
Totals 413,150 $ 22,237,078 550,272 $ 27,101,791
========== ============= ========= =============
Ronald Havner Jr., the Vice-Chairman, Chief Executive Officer and President
of Public Storage, Inc. and Chairman of the Board of PS Business Parks,
Inc., is a member of the Board of Directors of Union BanCal Corporation,
which is the parent company of the Trustee.
UBOC Stable Value B, is a money market fund offered by the Plan's Trustee.
At December 31, 2005 and 2004, Plan participant's directed $8,371,508 and
$8,498,252, respectively, to this investment selection.
8
PS 401(k) PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2005 and 2004
6. 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.
7. Concentrations
--------------
Investments in the Company's securities comprised approximately of 36% and
46% of the Plan's total investments as of December 31, 2005 and 2004,
respectively.
8. 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 no longer offers the guaranteed three percent (3%)
contribution of compensation to each participant.
o The Company contributes one dollar ($1.00) for each dollar deferred by
a participant up to three percent (3%) of compensation. The Company
also contributes an additional fifty cents ($.50) for each dollar that
each participant defers in excess of three percent (3%) of
compensation but not more than five percent (5%) of compensation. The
matching contribution is 100% vested. Contributions are subject to
certain limitations.
Effective December 19, 2005, the Plan was amended to incorporate the
following changes:
o Participants no longer have the option to direct contributions to the
Company's securities Existing holdings of Company securities on
December 19, 2005, were either held or transferred to other Plan
investment alternatives at the option of each participant.
9
SUPPLEMENTAL INFORMATION
SCHEDULE I
PS 401(k) PROFIT SHARING PLAN
SCHEDULE H, LINE 4i -
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
December 31, 2005
Employer Identification Number: 95-3551121
Plan Number: 001
Description of
investment including
maturity date, rate
of interest, Current
collateral, par or Cost Value
Identity of issue, borrower, lessor, or similar party maturity date
----------------------------------------------------- --------------------- ----------- ------------
MONEY MARKET ACCOUNT
* UBOC Stable Value B. Money Market Money Market ** $ 8,371,508
MUTUAL FUNDS
Dodge & Cox International Mutual Fund ** 1,148,841
Dreyfus S&P 500 Index Mutual Fund ** 2,863
DWS RREEF Real Estate A Mutual Fund ** 199,600
EuroPacific Growth R5 Mutual Fund ** 19,530
Growth Fund of America R5 Mutual Fund ** 5,158,086
Oakmark Equity & Income I Mutual Fund ** 8,307,289
PIMCO Funds Real Return Bond Mutual Fund ** 12,283
PIMCO Total Return Institutional Mutual Fund ** 470,615
Selected American D Mutual Fund ** 1,530,767
Stock Liquidity Management Account Mutual Fund ** 3,274
T. Rowe Price Equity Income Mutual Fund ** 21
Vanguard Explorer AdmY Mutual Fund ** 1,916,519
Vanguard Extended Market Index Mutual Fund ** 95,648
Vanguard Index 500 Mutual Fund ** 8,045,759
Vanguard Short Term Fed Adm Mutual Fund ** 2,850,627
Vanguard Windsor II Mutual Fund ** 1,569,509
------------
Total Mutual Funds 31,331,231
Equity Securities
* Public Storage, Inc. Common Stock Common Stock ** 17,901,822
* Public Storage, Inc. Preferred Stock Preferred Stock ** 3,837,069
* PS Business Parks, Inc. Common Stock Common Stock ** 498,187
------------
Total Equity Securities 22,237,078
------------
Total Investments $ 61,939,817
============
* 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.
10
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-50274) pertaining to the PS 401(k) Profit Sharing Plan of PS
Business Parks, Inc. of our report dated June 27, 2006, with respect to the
financial statements and schedule of the PS 401(k) Profit Sharing Plan included
in this Annual Report (Form 11-K) for the year ended December 31, 2005.
/s/ Ernst & Young LLP
Los Angeles, California
June 28, 2006
11
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-50274) pertaining to the PS 401(k) Profit Sharing Plan of PS
Business Parks, Inc. of our report dated May 25, 2005, with respect to the
statement of net assets available for benefits of the PS 401(k) Profit Sharing
Plan as of December 31, 2004, which report appears in the December 31, 2005
Annual Report on Form 11-K for the PS 401(k) Profit Sharing Plan.
/s/ Link, Murrel & Co.
Irvine, California
June 27, 2006
12
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.
PS 401(k) PROFIT SHARING PLAN
Date: June 29, 2006
By: /s/ Candace Krol
----------------
Candace Krol
Chairman, Administrative Committee