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[ x ] | ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE |
SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ending December 31, 1999 | |
[ ] | TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE |
SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from ____ to ____ | |
Commission file number 333-27429 | |
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Independent Auditors' Report | |
Financial Statements: | |
Statements of Assets Available for Plan Benefits | |
Statement of Changes in Net Assets Available for | |
Plan Benefits | |
Notes to the Financial Statements | |
SUPPLEMENTAL INFORMATION: | |
Schedule of Assets Held for Investment | |
Signatures |
To the Trustees
The AERC 401(K) Savings Plan and Trust
We have audited the financial statements of the AERC 401(K) Savings Plan and Trust (the "Plan") as of December 31, 1999 and 1998 and for the year ended December 31, 1999 and the supplemental schedule as of December 31, 1999, as listed in the accompanying contents. 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 AERC 401(K) Savings Plan and Trust as of December 31, 1999 and 1998, and the changes in net assets available for plan benefits for the year ended December 31, 1999.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets held for investment as of December 31, 1999, is presented for the purpose of additional analysis and is not a required part of the basic 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. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ Reznick, Fedder & Silverman
Bethesda, Maryland
June 2, 2000
The AERC 401(K) Savings Plan and Trust
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
December 31, 1999 and December 31, 1998
ASSETS | ||
Investments, at fair value | ||
Stable Value fund | $1,095,444 | $ 561,781 |
Income fund | 460,830 | 286,528 |
Balanced portfolio | 333,062 | 120,734 |
Stock Index fund | 2,104,215 | 1,052,988 |
Growth and Income fund | 1,292,091 | 856,578 |
Associated Estates Realty | ||
Corporation (AERC) Stock fund | 151,994 | 78,204 |
Participant Notes Receivable | 212,406 | 162,355 |
Total investments | 5,650,042 | 3,119,168 |
Total assets | 5,650,042 | 3,119,168 |
Net assets available for plan benefits | $5,650,042 | $3,119,168 |
The AERC 401(K) Savings Plan and Trust
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
Year ended December 31, 1999
Additions to net assets attributed to: | ||
Investment income | ||
Net appreciation in fair value of | ||
investments | $ 263,373 | |
Realized gain | 45,380 | |
Interest and dividends | 249,477 | |
Contributions | ||
Employer | $ 193,782 | |
Participants | 1,329,801 | 1,523,583 |
Transfers into the Plan | 2,086,415 | |
Total additions | 4,168,228 | |
Deductions from net assets attributed to: | ||
Benefits paid to participants | 1,636,000 | |
Expenses paid | 1,354 | |
Total deductions | 1,637,354 | |
NET INCREASE | 2,530,874 | |
Net assets available for plan benefits | ||
Beginning of year | 3,119,168 | |
End of year | $5,650,042 |
The AERC 401(K) Savings Plan and Trust
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the AERC 401(K) Savings Plan and Trust have been prepared in conformity with generally accepted accounting principles as applied to profit-sharing trusts and in accordance with the terms of the Trust Agreement. A summary of the significant accounting policies consistently applied in the preparation of the accompanying financial statements follows:
1. Investment Valuation and Income Recognition
The Plan's investments are stated at fair value. Shares of registered investment companies are valued at quoted market prices, which represents the net asset value of shares held by the Plan at year-end.
2. Federal Income Taxes
The Plan has received a favorable determination letter from the Internal Revenue Service ("IRS") which classified the Plan as a qualified employee benefit plan, exempt from income taxes, under the Employee Retirement Income Security Act of 1994 (ERISA).
3. Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
NOTE B - DESCRIPTION OF PLAN
The following description of the AERC 401(K) Savings Plan and Trust 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 plan of a controlled group of corporations which became effective April 1, 1990 by execution of the counterparts to the National City Bank Master Savings Plan and
The AERC 401(K) Savings Plan and Trust
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1999
NOTE B - DESCRIPTION OF THE PLAN (Continued)
Trust Adoption Agreement. On July 1, 1997, an adoption agreement was executed whereby Scudder, Stevens & Clark ("Scudder") replaced National City Bank as Trustee of the Plan. Additionally, effective January 1, 1999, an adoption agreement was executed which increased both the maximum contribution a participant may elect and the percentage of the participant's contribution which will be matched by the employer.
Employees are eligible after one year of service, provided that they have reached an age of 21 and work more than 1,000 hours per year. Participants are immediately vested in their investment account which includes participant contributions to the Plan, employer matching contributions and account earnings. Pursuant to the adoption agreement effective January 1, 1999, participants may elect to contribute up to 15 percent of their gross wages and have the option of investing their accounts between six different investment funds. The Plan provides for an employer matching contribution equal to 25 percent of the participant's contribution up to a maximum participant contribution of six percent of their gross wages.
On termination of service, a participant may elect to receive either a lump sum amount equal to the value of his or her account, monthly payments over a period equal to the shorter of 120 months or the life expectancy of the participant and/or his or her beneficiary, installment payments of a fixed amount to be made until the balance of the participants's account is exhausted, distribution in kind (securities issued by Associated Estates Realty Corporation only), or any reasonable combination of the foregoing or any reasonable time or manner of distribution within the above stated limitations.
NOTE C - INVESTMENTS
The Plan's investments are held by Scudder. The following table presents the fair value of the investments. Investments that represent 5 percent or more of the Plan's net assets are separately identified.
The AERC 401(K) Savings Plan and Trust
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1999
Investment at fair value as | ||
determined by Scudder | ||
Stable Value fund | $1,095,444 | $ 561,781 |
Income fund | 460,830 | 286,528 |
Balanced portfolio | 333,062 | 120,734 |
Stock Index fund | 2,104,215 | 1,052,988 |
Growth and Income fund | 1,292,091 | 856,578 |
Associated Estates Realty | ||
Corporation Stock fund | 151,994 | 78,204 |
$5,437,636 | $2,956,813 |
During the year ended December 31, 1999, the Plan's investments (including investments bought, sold and held during the year) appreciated in value by $263,373.
NOTE D - ACTIVITY BY FUND
The following table presents the changes in investments for the year ended December 31, 1999 by investment fund based on
options available to participants.
Stable | Stock | Growth & | AERC | Participant | |||||
Value | Income | Balanced | Index | Income | Stock | Notes | |||
Net assets available for | |||||||||
plan benefits as of | |||||||||
January 1, 1999 | $561,781 | $286,528 | $120,734 | $1,052,988 | $856,578 | $78,204 | $162,355 | $ - | $3,119,168 |
Investment income | |||||||||
Net appreciation | |||||||||
(depreciation) in fair | |||||||||
value of investments | - | (27,443) | 17,257 | 307,579 | 14,942 | (48,962) | - | - | 263,373 |
Realized gain (loss) | - | (4,091) | 4,063 | 38,926 | 12,790 | (6,308) | - | - | 45,380 |
Interest and dividends | 75,967 | 27,299 | 25,354 | - | 56,161 | 12,768 | 17,202 | 34,726 | 249,477 |
Contributions | |||||||||
Employer | 16,250 | 19,239 | 20,447 | 72,034 | 50,667 | 15,145 | - | - | 193,782 |
Benefits paid to | |||||||||
participants | 102,471 | 141,730 | 124,912 | 510,375 | 368,437 | 81,876 | - | - | 1,329,801 |
Benefits paid to | |||||||||
participants and fund | |||||||||
transfers | 339,500 | 17,672 | 20,420 | 122,513 | (67,143) | 19,282 | 32,849 | (34,678) | 450,415 |
Expenses paid | (525) | (104) | (125) | (200) | (341) | (11) | - | (48) | (1,354) |
Net assets available for | |||||||||
plan benefits as of | |||||||||
December 31, 1999 | $1,095,444 | $460,830 | $333,062 | $2,104,215 | $1,292,091 | $151,994 | $212,406 | $ - | $5,650,042 |
NOTE E - PARTICIPANT NOTES RECEIVABLE
During 1999, the Plan made loans to various employees from their respective interests in the Plan. These loans and loans made in prior years bear interest at rates varying from 8.5% to 9.5%, and are being amortized over the terms of the loans with bi-weekly payments of principal and interest. The notes have maturity dates equal to or less than five years (ten years if the loan funds are utilized to purchase a primary residence) from the date of the notes, face value equal or greater than $1,000, and do not exceed 50 percent of the present value of the borrowers' interest in the Plan.
NOTE F - PLAN TERMINATION
Although it has not expressed any intent to do so, the companies participating in the Plan have the right to discontinue their matching contributions at any time and to terminate the Plan subject to the provisions of ERISA.
NOTE G - TRANSFERS INTO THE PLAN
Effective January 1, 1999, the MIG Realty Advisors, Inc. 401(K) and Profit Sharing Plan merged with the Plan. Accordingly, on January 4, 1999, $2,016,306 in cash and $70,109 representing the fourteen outstanding participant loan balances as of January 4, 1999 were transferred into the Plan from the MIG Realty Advisors, Inc. 401(K) and Profit Sharing Plan.
NOTE H - RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for plan benefits per the financial statements to the IRS Form 5500:
NOTE H - RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500 - (Continued)
Net assets available for Plan benefits | |
per the financial statements | $ 5,650,042 |
Amounts allocated to withdrawing | |
participants at December 31, 1999 | (1,475) |
Net assets available for Plan benefits | |
per the IRS Form 5500 | $ 5,648,567 |
The following is a reconciliation of benefits paid to participants per the financial statements to the IRS Form 5500:
Benefits paid to participants per the | |
financial statements | $1,636,000 |
Add: Amounts allocated to withdrawing | |
participants at December 31, 1999 | 1,475 |
Less: Amounts allocated to withdrawing | |
participants at December 31, 1998 | (64,643) |
Benefits paid to participants per the | |
IRS Form 5500 | $1,572,832 |
Amounts allocated to withdrawing participants are recorded on the IRS Form 5500 for benefit claims that have been processed and approved for payment prior to December 31 but not yet paid as of that date.
Interest | |||||
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Scudder | Stable Value Fund | N/A | N/A | $ 1,095,444 | $ 1,095,444 |
Scudder | Income Fund | N/A | N/A | 488,272 | 460,830 |
Scudder | Pathway Balanced Portfolio | N/A | N/A | 315,805 | 333,062 |
Scudder | Growth and Income Fund | N/A | N/A | 1,277,149 | 1,292,091 |
Scudder | Stock Index Fund | N/A | N/A | 1,796,636 | 2,104,215 |
AERC | Stock Fund | N/A | N/A | 200,957 | 151,944 |
Participant loans | Participant loans | Various | 8.5%-9.5% | 0 | 212,406 |
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.
William T. Hughes | June 26, 2000 | |
Lita Weiss | June 26, 2000 | |
Nan Zieleniec | June 26, 2000 | |
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.
/s/ William T. Hughes | ||
William T. Hughes | June 26, 2000 | |
/s/ Lita Weiss | ||
Lita Weiss | June 26, 2000 | |
/s/ Nan Zieleniec | ||
Nan Zieleniec | June 26, 2000 |
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