EXHIBIT 99.1
RESORTQUEST SAVINGS &
RETIREMENT PLAN
Financial Statements as of December 31, 2002 and
2001, and for the Year Ended December 31, 2002, and
Supplemental Schedule as of December 31, 2002, and
Independent Auditors' Reports
RESORTQUEST SAVINGS & RETIREMENT PLAN
TABLE OF CONTENTS
PAGE
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INDEPENDENT AUDITORS' REPORTS 1-2
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as of December 31, 2002 and 2001 3
Statement of Changes in Net Assets Available for Benefits for the Year Ended December 31, 2002 4
Notes to Financial Statements 5-8
SUPPLEMENTAL SCHEDULE:
Form 5500, Schedule H, Part IV, Line 4i--Schedule of Assets (Held at End of Year)
as of December 31, 2002 9
All other schedules required by Section 2520.103-10 of the Department of Labor's
Rules and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974 have been omitted because they are not applicable.
INDEPENDENT AUDITORS' REPORT
To The Advisory Committee of the
ResortQuest Savings & Retirement Plan:
We have audited the accompanying statement of net assets available for benefits
of the ResortQuest Savings & Retirement Plan (the "Plan") as of December 31,
2002, 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 auditing standards generally accepted
in the United States of America. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the 2002 financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
2002, and the changes in net assets available for benefits for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.
Our audit was conducted 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, 2002 is presented for the purpose of
additional analysis and is not a required part of the basic 2002 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 schedule is the responsibility of
the Plan's management. Such schedule has been subjected to the auditing
procedures applied in the audit of the basic 2002 financial statements and, in
our opinion, is fairly stated in all material respects when considered in
relation to the basic 2002 financial statements taken as a whole.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Memphis, Tennessee
June 24, 2003
INDEPENDENT AUDITORS' REPORT
To The Advisory Committee
ResortQuest Savings & Retirement Plan
Memphis, Tennessee
We have audited the accompanying statement of net assets available for benefits
of the ResortQuest Savings & Retirement Plan as of December 31, 2001. This
financial statement is the responsibility of 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 auditing standards generally accepted
in the United States of America. 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 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 for the ResortQuest
Savings & Retirement Plan as of December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America.
/s/ Cannon & Company
Certified Public Accountants
Memphis, Tennessee
June 14, 2002
RESORTQUEST SAVINGS & RETIREMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2002 AND 2001
2002 2001
------------ ------------
ASSETS:
Cash $ 128,748 $ 968
------------ ------------
Investments:
Investments, at fair value (Note 3) 21,192,405 20,832,559
Investments, at contract value (Notes 3 and 4) 41,257 115,282
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21,233,662 20,947,841
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Receivables:
Employer contribution 72,997 63,929
Participant contributions 206,091 172,378
Receivable for securities sold 41,239 --
Accrued investment income -- 84
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Total receivables 320,327 236,391
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Total assets 21,682,737 21,185,200
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LIABILITIES:
Accrued administrative expenses (51,114) (38,788)
------------ ------------
NET ASSETS AVAILABLE FOR BENEFITS $ 21,631,623 $ 21,146,412
============ ============
See notes to financial statements.
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RESORTQUEST SAVINGS & RETIREMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2002
ADDITIONS:
Contributions:
Participant contributions $ 3,791,571
Employer contributions 1,193,327
------------
Total contributions 4,984,898
------------
Net transfers into plan (Note 1) 105,969
------------
Total additions 5,090,867
------------
DEDUCTIONS:
Investment income (loss):
Net depreciation in fair value of investments (2,880,766)
Interest and dividends 639,985
------------
Net investment loss (2,240,781)
------------
Benefits paid to participants (2,238,910)
Administrative expenses (125,965)
------------
Total deductions (4,605,656)
------------
INCREASE IN NET ASSETS 485,211
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of year 21,146,412
------------
End of year $ 21,631,623
============
See notes to financial statements.
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RESORTQUEST SAVINGS & RETIREMENT PLAN
NOTES TO FINANCIAL STATEMENTS AS OF
DECEMBER 31, 2002 AND 2001, AND FOR THE
YEAR ENDED DECEMBER 31, 2002
1. DESCRIPTION OF THE PLAN
The following description of the ResortQuest Savings & Retirement Plan
(the "Plan") is provided for general information purposes only.
Participants should refer to the Plan Document for more complete
information.
GENERAL--The Plan is a defined contribution plan covering substantially
all full-time salaried and hourly employees of ResortQuest
International, Inc. and its wholly-owned subsidiaries (the "Company")
beginning on January 1 or July 1 after the employee has completed 1,000
hours of service during their first year of employment and who are at
least 21 years old. The Advisory Committee of the Board of Directors of
the Company control and manage the operation and administration of the
Plan. Union Planters Bank, N.A. serves as the trustee of the Plan. The
Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA").
CONTRIBUTIONS--Each year, participants may contribute up to 100 percent
of their pretax annual compensation, as defined in the Plan, subject to
certain Internal Revenue Code limitations. For each plan year, the
Company may contribute to the Plan on behalf of Plan participants an
amount of matching contributions, up to 6 percent of employee
compensation, as determined by the Company at its discretion. For the
years ended December 31, 2002 and 2001, the Company contributed 50
percent of the first 6 percent of base compensation that a participant
contributed to the Plan. Participants may also contribute amounts
representing distributions from other qualified defined benefit or
defined contribution plans.
PLAN MERGER--On January 1, 2001, the Company acquired Florida Vacation
Accommodations, Inc. As a result of the transaction, the Florida
Vacation Accommodations, Inc. 401(k) Plan was merged into the Plan.
Participant account balances of $105,969 were transferred to the Plan
on May 1, 2002.
PARTICIPANT ACCOUNTS--Individual accounts are maintained for each Plan
participant. Each participant's account is credited with the
participant's contribution, the Company's matching contribution, and
Plan earnings, and charged with withdrawals and an allocation of Plan
losses and 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.
INVESTMENTS--Participants direct the investment of their contributions,
both employee deferrals and employer match, into various investment
options offered by the Plan. The Plan currently offers mutual funds, a
group annuity contract, and the Company's common stock as investment
options for participants.
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VESTING--Participants are vested immediately in their contributions
plus actual earnings thereon. Vesting in the Company's contribution
portion of their accounts is based on years of continuous service. A
participant is 50 percent vested after two years of credited service
and 100 percent vested after three years of credited service. In the
event of death, disability, or normal retirement, participants become
100 percent vested in all account balances. Forfeited balances of
terminated participants are used to reduce future Company
contributions.
PARTICIPANT LOANS--Participants may borrow from their fund accounts up
to a maximum of $50,000 or 50 percent of their account balance,
whichever is less. The loans are secured by the balance in the
participant's account and bear interest at rates commensurate with
local prevailing rates as determined by the Plan administrator.
Principal and interest is paid ratably through payroll deductions.
PAYMENT OF BENEFITS--On termination of service due to death,
disability, or retirement, a participant may elect to receive either a
lump-sum amount equal to the value of the participant's vested interest
in his or her account, partial payments, annual installments, or a
joint and 50 percent survival annuity.
FORFEITED ACCOUNTS--At December 31, 2002 and 2001, forfeited nonvested
accounts totaled $61,674 and $74,044, respectively. During the year
ended December 31, 2002, employer contributions were reduced by $61,674
for forfeited nonvested accounts.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING--The accompanying financial statements have been
prepared in accordance with accounting principles generally accepted in
the United States of America.
USE OF ESTIMATES--The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires Plan management to make estimates and assumptions that
affect the reported amounts of net assets available for benefits and
changes therein. Actual results could differ from those estimates. 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.
INVESTMENT VALUATION AND INCOME RECOGNITION--The Plan's investments are
stated at fair value except for its benefit-responsive investment
contract, which is valued at contract value (Note 4). Quoted market
prices are used to value investments. Shares of mutual funds are valued
at quoted market prices, which represent the net asset value of shares
held by the Plan at year end. Participant loans are valued at the
outstanding loan balances.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are
recorded on the ex-dividend date.
Management fees and operating expenses charged to the Plan for
investments in the mutual funds are deducted from income earned on a
daily basis and are not separately reflected. Consequently, management
fees and operating expenses are reflected as a component of net
appreciation (depreciation) in fair market value of investments for
such investments.
ADMINISTRATIVE EXPENSES--Administrative expenses of the Plan, are paid
by the Plan as provided in the Plan Document.
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PAYMENT OF BENEFITS--Benefit payments to participants are recorded upon
distribution.
3. INVESTMENTS
The Plan's investments that represented five percent or more of the
Plan's net assets available for benefits as of December 31, 2002 and
2001, are as follows:
2002 2001
---------- ----------
Federated Capital Preservation Fund $8,801,533 $7,155,643
MFS Research Fund A 1,632,055 2,146,765
Dreyfus S&P 500 Index Fund 1,759,261 2,075,776
Berger Balanced Fund 1,429,975 2,028,937
Janus Worldwide Fund C 1,081,646 1,308,884
Janus Enterprise Fund * 1,370,861
Federated Capital Appreciation Fund A * 1,196,260
*Does not exceed 5 percent of net assets at December 31, 2002.
During 2002, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year)
depreciated in value by $ 2,880,766 during the year ended December 31,
2002, as follows:
Mutual Funds $(2,703,562)
ResortQuest International, Inc. Common Stock (177,204)
-----------
Net depreciation in fair value of investments $(2,880,766)
===========
4. INVESTMENT CONTRACT WITH INSURANCE COMPANY
The Plan has entered into a benefit-responsive investment contract with
Travelers Insurance Company ("Travelers"). Travelers maintains the
contributions in a general account, which is credited with earnings on
the underlying investments and charged for participant withdrawals and
administrative expenses. The contract is included in the financial
statements at contract value as reported to the Plan by Travelers.
Contract value represents contributions made under the contract, plus
earnings, less participant withdrawals and administrative expenses.
Participants may ordinarily direct the withdrawal or transfer of all or
a portion of their investment at contract value.
There are no reserves against contract value for credit risk of the
contract issuer or otherwise. The crediting interest rate was 1.34
percent at December 31, 2002. The crediting interest rate is based on a
formula agreed upon with the issuer. Such interest rates are reviewed
on a quarterly basis for resetting. The average yield for the year
ended December 31, 2002 was 1.35 percent.
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5. RELATED-PARTY TRANSACTIONS
At December 31, 2002 and 2001, the Plan held 163,909 and 103,895 units,
respectively, of common stock of the Company, the sponsoring employer,
with a cost basis of $796,560 at December 31, 2002.
6. PLAN TERMINATION
Although it has not expressed any intention to do so, the Company has
the right under the Plan to terminate the Plan subject to the
provisions set forth in ERISA. In the event that the Plan is
terminated, participants would become 100 percent vested in their
account.
7. FEDERAL INCOME TAX STATUS
The Plan uses a prototype plan document sponsored by Union Planters
Bank, N.A. Union Planters Bank, N.A. received an opinion letter from
the Internal Revenue Service (IRS), dated November 19, 2001, which
states that the prototype document satisfies the applicable provisions
of the Internal Revenue Code (IRC). The Plan itself, prior to certain
amendments, received a determination letter form the IRS dated January
7, 2000. The Plan's management believes that the Plan is currently
designed and being operated in compliance with the applicable
requirements of the IRC. Therefore, no provision for income tax has
been included in the Plan's financial statements.
8. SUBSEQUENT EVENT
Effective May 1, 2003, the Company's Board of Directors decided to
suspend Company matching contributions to the Plan for an unspecified
period of time for all participants, except for participants located in
Hawaii. Hawaii participants will continue to receive Company matching
contributions due to local Hawaii competition and union negotiations.
******
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RESORTQUEST SAVINGS & RETIREMENT PLAN
FORM 5500, SCHEDULE H, PART IV, LINE 4i--
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2002
DESCRIPTION OF INVESTMENT, INCLUDING
IDENTITY OF ISSUE, BORROWER, MATURITY DATE, RATE OF INTEREST, CURRENT
LESSOR OR SIMILAR PARTY COLLATERAL, PAR OR MATURITY VALUE VALUE
---------------------------- ------------------------------------ -----------
* ResortQuest International, Inc. Common Stock Common Stock $ 635,776
Berger Balanced Fund Mutual Fund 1,429,975
Berger Large Cap Growth Fund Mutual Fund 2,160
Dreyfus Midcap Value Fund Mutual Fund 25,286
Dreyfus S&P 500 Index Fund Mutual Fund 1,759,261
Federated Capital Appreciation Fund A Mutual Fund 917,239
Federated Capital Preservation Fund Mutual Fund 8,801,533
Federated GNMA Trust Mutual Fund 336,466
Federated Income Trust Mutual Fund 879,291
Federated Mid-Cap Fund Mutual Fund 118,860
Invesco Dynamics Fund Mutual Fund 71,572
Janus Enterprise Fund Mutual Fund 999,010
Janus Worldwide Fund C Mutual Fund 1,081,646
Leader Intermediate Government Bond Fund Mutual Fund 896,825
MFS Large Cap Growth Fund A Mutual Fund 37,717
MFS Limited Maturity Fund A Mutual Fund 81,009
MFS Mid Cap Growth Fund A Mutual Fund 106,899
MFS Research Fund A Mutual Fund 1,632,055
MFS Value Fund A Mutual Fund 202,580
RS Diversified Growth Fund Mutual Fund 15,433
Travelers Insurance Company Group Variable Annuity Contract Group Annuity Contract 41,257
Turner Small Cap Value Fund Mutual Fund 82,440
* Loans to Participants Participant Loans with interest
rates from 6% to 11.5% 1,079,372
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Total $21,233,662
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* Party-in-interest.
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