Exhibit 99.1
HOME PROPERTIES
RETIREMENT SAVINGS PLAN
FINANCIAL REPORT
DECEMBER 31, 2004
HOME PROPERTIES
RETIREMENT SAVINGS PLAN
ROCHESTER, NEW YORK
TABLE OF CONTENTS
Report of Independent Registered Public Accounting Firm 1
Statements of Net Assets Available for Benefits 2
Statement of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4 - 7
Schedule of Assets (Held at End of Year) 8
HOME PROPERTIES
RETIREMENT SAVINGS PLAN
ROCHESTER, NEW YORK
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Home Properties, Inc. 401(k)
Administrative Committee and Participants
of the Home Properties Retirement Savings Plan
We have audited the accompanying statements of net assets available for benefits
of Home Properties Retirement Savings Plan as of December 31, 2004 and 2003, and
the related statement of changes in net assets available for benefits for the
year 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 auditing 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, 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 benefits of Home Properties
Retirement Savings Plan as of December 31, 2004 and 2003, and the changes in net
assets available for benefits for the year ended December 31, 2004, in
conformity with U.S. generally accepted accounting principles.
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
at end of year) as of December 31, 2004, 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 United States
Department of Labor 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 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.
Respectfully Submitted,
/s/ Insero, Kasperski, Ciaccia and Co., P.C.
Insero, Kasperski, Ciaccia and Co., P.C.
Certified Public Accountants
Rochester, New York
May 11, 2005
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2004 AND 2003
ASSETS 2004 2003
Investments at Fair Value
Cash $ 82,925 $ 155,762
Money Market Funds 38,683 45,992
Common Stock 2,196,913 2,104,319
Mutual Funds 10,986,538 8,949,800
Common/Collective Trust 2,769,882 2,515,080
Participant Notes 590,805 600,469
----------------- ------------------
Total Investments at Fair Value 16,665,746 14,371,422
Receivables
Employer Contributions 759,731 911,609
----------------- ------------------
Total Assets 17,425,477 15,283,031
----------------- ------------------
LIABILITIES
Employee Excess Contributions Payable 22,456 -
----------------- ------------------
Net Assets Available for Benefits $ 17,403,021 $ 15,283,031
================= ==================
See Notes to Financial Statements.
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2004
Additions to Net Assets Attributed to:
Interest and Dividends $ 160,947
Net Appreciation in Fair Value of Investments 1,500,359
-----------------
1,661,306
-----------------
Contributions
Employer 765,582
Participant 1,996,644
Rollover 95,221
-----------------
2,857,447
-----------------
Total Additions 4,518,753
-----------------
Deductions from Net Assets Attributed to:
Benefits Paid to Participants 2,398,763
-----------------
Net Increase 2,119,990
Net Assets Available for Benefits - Beginning 15,283,031
-----------------
Net Assets Available for Benefits - Ending $ 17,403,021
=================
See Notes to Financial Statements.
HOME PROPERTIES
RETIREMENT SAVINGS PLAN
ROCHESTER, NEW YORK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
Note 1 Description of Plan
The following description of the Home Properties Retirement
Savings Plan (the Plan) is provided for general information
purposes only. Participants should refer to the Plan document, as
amended, for a more complete description of the Plan's
provisions.
General
The Plan is a defined contribution plan covering all employees of
Home Properties, Inc. (the Company) who have attained age 21. The
Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA).
National Bank of Geneva acts as the Trustee of the Plan. Fidelity
Investment serves as the custodian and Burke Group serves as the
third party administrator for the Plan.
Contributions
Each year, participants may contribute up to 50 percent of pretax
annual compensation and separate elective deferrals out of any
bonus, up to 100% of each bonus, subject to statutory
limitations, as defined in the Plan. Participants may also
contribute amounts representing distributions from other
qualified defined benefit or defined contribution plans.
Participants direct the investment of their contributions into
various investment options offered by the Plan. The Company
contributes 75% of salary-reduction contributions up to a maximum
of 3% of participant compensation. Additional profit sharing
amounts may be contributed at the option of the Company's board
of directors. Contributions are subject to certain limitations.
Participant Accounts
A separate account is maintained for each of the participants.
Each participant's account is credited with an allocation of: (1)
his or her contributions, (2) the Company's contributions, and
(3) the Plan earnings. Allocations are based on participant
earnings or account balances, as defined in the Plan document.
The benefit to which a participant is entitled is the benefit
that can be provided from the participant's vested account.
Vesting
Participants are immediately vested in their contributions plus
actual earnings thereon. The Plan provides for vesting in the
employer contribution account of 20% after one year, 40% after
two years, 60% after three years, 80% after four years, and 100%
after five years of service.
Participant Loans
Participants may borrow from their accounts a minimum of $1,000
to a maximum equal to the lessor of $50,000 or 50% of their
vested account balance. Loan terms range from one to five years,
or longer for the purchase of a primary residence. The loans are
collateralized by the balance in the participant's account and
bear interest at the prime rate plus one percent (1%) in effect
on the first day of the month in which the loan is made. Interest
rates range from 5.00% to 10.5% and will mature between January
2005 and November 2014 for the current outstanding notes.
Principal and interest is paid ratably through weekly or
semi-monthly payroll deductions.
Note 1 Description of Plan - Continued
Payment of Benefits
The Plan provides for normal retirement benefits upon reaching
age 65 and has provisions for early retirement, disability,
death, hardship and termination benefits for those participants
who are eligible to receive such benefits.
Upon termination of service, a participant may elect to receive:
(1) A lump sum amount equal to the value of his or her account,
or
(2) Annual installments over a period of time not to exceed
participant's life expectancy.
Forfeitures
In accordance with the Plan document, forfeitures of non-vested
employer contributions are used to pay plan expenses then to
reduce future employer contributions. At December 31, 2004 and
2003, forfeited non-vested accounts totaled approximately $84,000
and $49,000, respectively.
Administrative Expenses
The Plan allows for payment of administrative expenses by the
Company.
Note 2 Significant Accounting Policies
Basis of Accounting
The accompanying financial statements have been prepared on the
accrual basis of accounting.
Plan Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of
the financial statements and revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Investment Valuation and Income Recognition
The Plan's investments are stated at fair value. Investments in
marketable equity securities are reported at fair value based on
quoted market prices. Shares of registered investment companies
are reported at fair value based on the quoted market price of
the fund which represents the net asset value of shares held by
the fund at year-end. Shares held in a common/collective trust
fund are reported at fair value based on the unit prices quoted
by the fund, representing the fair value of the underlying
investment. Participant notes receivable are valued at cost which
approximates fair value.
Purchases and sales of securities are recorded on a
settlement-date basis. Interest income is recorded on the accrual
basis. Dividends are recorded on the ex-dividend date.
Note 2 Significant Accounting Policies - Continued
Investment Valuation and Income Recognition - Continued
The Plan provides for investments which, in general, are exposed
to various risks, such as interest rate, credit and 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 such changes could materially affect the amounts reported in
the Statements of Net Assets Available for Benefits and the
Statement of Changes in Net Assets Available for Benefits.
Payment of Benefits
Benefits are recorded when paid.
Note 3 Investments
The following presents investments that represent 5 percent or
more of the Plan's net assets:
December 31,
2004 2003
Home Properties, Inc. $ 2,196,913 $ 2,104,319
Vanguard Index Trust S and P 500 Portfolio $ 2,548,620 $ 1,955,173
Vanguard Small Cap Index Fund $ 1,466,656 $ 1,031,540
Exeter Pro-Blend Moderate Term $ 1,535,149 $ 1,379,376
Exeter Pro-Blend Extended Term $ 2,730,818 $ 2,447,893
Exeter Pro-Blend Maximum Term $ 2,344,069 $ 1,884,752
Federated Capital Preservation Fund $ 2,769,882 $ 2,515,080
During 2004, the Plan's investments (including investments bought
and sold, as well as held during the year) appreciated in value
as follows:
Common Stock $ 117,846
-----------------
Mutual Funds 1,382,513
$ 1,500,359
=================
Note 4 Party-In-Interest Transactions
Certain Plan investments are shares of common stock of Home
Properties, Inc., the Plan Sponsor. Therefore, this investment
qualifies as a party-in-interest. The common stock is valued at
its quoted market price.
Note 5 Plan Termination
Although the Company has not expressed any intent to do so, the
Company 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 and all of the Plan assets
would be distributed to participants.
Note 6 Tax Status
The Plan adopted a standardized form of a prototype plan
sponsored by the Burke Group. The prototype plan has received an
opinion letter from the Internal Revenue Service as to the
prototype plan's qualified status; dated January 1993. 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. Management believes that the Plan is qualified and
the related trust is tax-exempt as of the financial statement
date.
HOME PROPERTIES
RETIREMENT SAVINGS PLAN
ROCHESTER, NEW YORK
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2004
Identity of Issue/ Current
Description of Investment Value
Cash $ 82,925
-----------------
Money Market Funds
Spartan Money Market 38,683
-----------------
Common Stock
*Home Properties, Inc. 2,196,913
-----------------
Mutual Funds
Vanguard Small Cap Index Fund 1,466,656
Vanguard Index Trust S and P 500 Portfolio 2,548,620
Vanguard Bond Index Fund 361,226
Exeter Pro-Blend Moderate Term 1,535,149
Exeter Pro-Blend Extended Term 2,730,818
Exeter Pro-Blend Maximum Term 2,344,069
-----------------
Total Interest in Mutual Funds 10,986,538
-----------------
Common/Collective Trust
Federated Capital Preservation Fund 2,769,882
-----------------
Participant Loans
*Participant Notes 590,805
-----------------
$ 16,665,746
=================
*Denotes Party in Interest
