ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2006

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
 
Commission file number: 002-29180

 

 

 

 

 

 

 

 

Exhibit:

Assets:

Investments, at fair value:

ProLogis common stock

Common collective trust

Mutual funds

Self directed brokerage account

Participant loans

 

Total investments, at fair value

 

 

Receivables:

Pending trade receivable

 

Total receivables

 

Liabilities:

Pending trade payable

Payable to the Catellus Development Corporation Profit Sharing and Savings Plan

 

Net assets available for plan benefits at fair value

 

Adjustment from fair value to contract value for fully benefit-responsive contracts

 

Net assets available for plan benefits

 

Additions:

Contributions:

Employer

Participants

Rollover

 

Total contributions

 

Investment income:

Net appreciation in fair value of investments

Interest and dividends

 

Total investment income

 

Assets transferred from the Catellus Development Corporation Profit Sharing and Savings Plan

 

 

Total additions

 

Deductions:

Benefits paid to participants

Administrative expenses

Assets transferred to the Catellus Development Corporation Profit Sharing and Savings Plan

 

Total deductions

 

 

Net increase during the year

 

Net assets available for plan benefits:

Beginning of year

 

End of year

 

The following description of the ProLogis 401(k) Savings Plan (the Plan) 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 defined contribution plan established by ProLogis (ProLogis, the Company, us and/or ours). The Plan covers all eligible employees of the Company who have attained the age of 21. Eligibility to participate begins with the date of hire and participation is voluntary. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), as amended.

On September 15, 2005, Catellus Development Corporation, a publicly traded real estate investment trust, (Catellus) merged with and into Palmtree Acquisition Corporation, one of the Company’s subsidiaries, pursuant to an Agreement and Plan of Merger dated as of June 6, 2005, as amended (the Merger). Eligible employees of Catellus began participating in the Plan after September 15, 2005. Catellus maintained the Catellus Development Corporation Profit Sharing and Savings Plan (Catellus Plan) prior to the Merger. The Catellus Plan merged into the Plan effective January 3, 2006. A portion of the total assets of the Catellus Plan totaling $4,520,021, comprised of $4,376,408 in ProLogis common stock and $143,613 in participant loans, were transferred to the Plan prior to December 31, 2005 in anticipation of the January 3, 2006 merger date. However, for financial reporting purposes, the legal right to these assets belonged to the Catellus Plan until January 3, 2006. As such, the Plan recorded a payable to the Catellus Plan to reflect the effective transfer of these assets back to the Catellus Plan. Total assets of $30,523,960 were transferred from the Catellus Plan to the Plan by January 3, 2006. Any benefits accrued under the Catellus Plan shall be preserved under the Plan and shall not be affected, reduced or eliminated as a result of the merger of the Catellus Plan into the Plan.

Participants may contribute up to 75% of their pretax annual compensation, as defined in the Plan, not to exceed $15,000 and $14,000 ($20,000 and $18,000 if age 50 or older) in 2006 and 2005, respectively. Participants may also contribute amounts representing rollovers from other qualified plans. The Company matches 50% of participants’ contributions up to a maximum of 6% of eligible compensation. The Plan also provides for discretionary Company contributions, which are allocated to participants’ accounts based on the relative compensation of participants. There were no discretionary Company contributions during 2006 and 2005.

Each participant’s account is credited with the participant contributions, Company contributions, and an allocation of Plan earnings. Earnings of the Plan are allocated to all participants’ accounts proportionately based on each participant’s account balance.

Participants are immediately vested in their contributions and any income or loss thereon.

Company contributions vest based upon the following schedule:

Less than 1 year

1 year 

2 years

3 years

4 years

5 or more years

Upon enrollment in the Plan, a participant may direct employee contributions into various investment options. Participant contributions may be invested in any or all of the investment options.

For 2006 and 2005, Company matching contributions are invested in the Company’s common stock. Beginning February 1, 2007, the Company match deposited to the participant’s account follows the investment allocation of the participant’s elective deferral and participants are allowed to exchange out of the stock immediately.

Participants are entitled to receive benefit payments in the form of a lump-sum payment, an annuity or installment equal to 100% of their accrued benefit upon attainment of age 59¹/2, termination of employment, or upon death or disability. The accrued benefit includes the sum of the value of participants’ contributions, allocation of earnings (losses), and the vested portion of Company contributions.

If a participant is not 100% vested and receives a distribution of Company contributions, the dollars left in the Plan are called forfeitures. Unused forfeitures totaled approximately $528,000 and $89,000 at December 31, 2006 and 2005, respectively. Forfeiture allocations from Company discretionary contributions are used to reduce future Company discretionary contributions. There were no forfeiture amounts used for future Company discretionary contributions during 2006 or 2005. Forfeiture allocations from Company match contributions are used to reduce future Company match contributions. In 2006 and 2005, the amount of forfeitures used for Company match contributions was approximately $1,108,700 and $42,800, respectively.

The Plan permits loans to participants in an amount not to exceed the lesser of $50,000 or 50% of their vested account balance. Loan terms range from one to five years. The loans are secured by the participant’s account balance. Interest rates on participant’s loans range from 5% to 9.25% at December 31, 2006 and 5% to 8.75% at December 31, 2005. Principal and interest is paid ratably through regular payroll deductions.

Participants may receive hardship withdrawals for reasons of financial hardship. Contributions from participants receiving a hardship withdrawal are disallowed for six months following the receipt of the hardship withdrawal.

The financial statements of the Plan are prepared using the accrual basis of accounting.

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, liabilities, and changes therein, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of additions and deductions in net assets during the reporting period. Actual results may differ from those estimates.

As of December, 31, 2006, the Plan adopted Financial Accounting Standards Board (FASB) Staff Position FSP AAG INV-1 and Statement of Position No. 94-4-1, Reporting of Fully Benefit Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans (the FSP). The FSP requires the Statement of Net assets Available for Plan Benefits present the fair value of the Plan’s investments as well as the adjustment from fair value to contract value for the fully benefit-responsive investment contracts. The Statement of Changes in Net Assets Available for Plan Benefits is prepared on a contract value basis for the fully-benefit responsive investment contracts. The FSP was applied retroactively to the prior period presented on the Statement of Net Assets Available for Benefits as of December 31, 2005.

The Plan’s investments are stated at fair value. The shares of mutual funds and common stock are based on quoted market prices. Participant loans are valued at their outstanding balances, which approximate fair value.

The investment contracts included in the common collective trust are presented at fair value on the statement of net assets available for plan benefits. The investments in the fully benefit-responsive investment contracts are also stated at contract value which is equal to principal balance plus accrued interest. As provided in the FSP, an investment contract is generally valued at contract value, rather than fair value, to the extent it is fully benefit-responsive. The fair value of fully benefit-responsive investment contracts is calculated using a discounted cash flow model which considers recent fee bids as determined by recognized dealers, discount rate and the duration of the underlying portfolio securities.

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.

Net realized and unrealized gains and losses, as reported in the accompanying Statement of Changes in Net Assets Available for Plan Benefits, is the cumulative difference between the fair value and the related cost of the Plan’s investments. Such income (loss) is allocated to participants’ accounts based on relative participant account balances.

The majority of administrative expenses of the Plan are paid by the Company. Unless paid by the Company, such expenses will be a charge upon Plan assets and deducted by the trustee to the extent permitted by applicable law.

Benefits paid to participants are recorded when paid.

The investments that represent 5% or more of the Plan’s net assets at December 31, 2006 and 2005 are as follows:

ProLogis common stock

Vanguard Balanced Index Fund Investor Shares

Vanguard Growth Index Fund Investor Shares

Vanguard Value Index Fund Investor Shares

Vanguard 500 Index Fund Investor Shares

Vanguard Retirement Savings Trust

Not greater than 5% of net assets at respective year end.

Represents contract value at December 31, 2006.

Mutual funds

ProLogis common stock

Self directed brokerage account

 

 

 

The Company common stock is an investment option that contains both participant-directed and nonparticipant-directed activity. Information about the net assets and the significant components of the changes in net assets relating to this investment option is as follows:

Net assets:

ProLogis common stock

 

Changes in net assets:

Employer contributions

Participant contributions, including loan repayments

Net appreciation in fair value

Interest and dividends

Asset transfers in (see Note 1(b))

Benefits paid to participants

Net interfund transfers

Administrative expenses

 

 

 

Although the Company has not expressed any intention to terminate the Plan, it may do so at any time. In the event of termination of the Plan, participants will become fully vested in their accounts and the Plan’s trustee would distribute the assets in the Plan to participants.

Additionally, the Plan’s sponsor may amend the Plan at any time without the consent of any participant or any beneficiary, provided that no amendment deprives any participant of the participant’s vested accrued benefit.

The Internal Revenue Service has determined and informed the Company, by a letter dated April 10, 2002, that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code (IRC). Although the Plan has been subsequently amended, the plan administrator believes that the Plan is currently designed and being operated in compliance with the applicable requirements of the IRC. Therefore, the plan administrator believes that the Plan is qualified and the related trust is tax-exempt as of December 31, 2006 and 2005.

Certain Plan investments represent shares of a common collective trust, common stock, self directed brokerage account and mutual funds managed by Vanguard Fiduciary Trust Company (Vanguard) as of December 31, 2006 and 2005, respectively. Vanguard is the trustee as defined by the Plan and therefore, these investments and investment transactions qualify as party-in-interest transactions.

Certain Plan investments represent shares of common stock of the Company as of December 31, 2006 and 2005. The Company is the plan sponsor as defined by the Plan and therefore, these investments and investment transactions qualify as party-in-interest transactions.

The Plan provides for various investment options in stocks and other investment securities. Investment securities, in general, are exposed to various risks such as, significant world events, 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 participants’ account balances and the amounts reported in the statements of net assets available for plan benefits and the statements of changes in net assets available for plan benefits.

The Plan has a concentration of investments in ProLogis common stock. A change in the value of the Company common stock could cause the value of the Plan’s net assets available for plan benefits to change due to this concentration.

The Plan was amended effective February 1, 2007 to direct the Company match deposited to the participant’s account to follow the investment allocation of the participant’s elective deferral. See note 1(f) for further description.

 

ProLogis common stock*

 

 

Common Collective Trust:

Vanguard Retirement Savings Trust*

 

 

Mutual Funds:

ABN AMRO Growth*

American Beacon International Equity Fund*

Ariel Appreciation Fund*

Artisan International Fund*

Cohen & Steers Realty Shares*

Davis New York Venture Fund*

Harbor Capital Appreciation Fund*

Hotchkis Mid-Cap Value Fund*

ICAP Equity Fund*

Julius Baer International Equity Fund*

PIMCO CCM Emerging Companies Fund*

PIMCO CCM Mid-Cap Fund*

PIMCO Total Return Fund*

Turner Small-Cap Growth Fund*

Third Avenue Small Cap Value Fund*

Turner Mid-Cap Growth Fund*

Mid-Cap Equity Portfolio*

Vanguard 500 Index Fund Investor Shares*

Vanguard Balanced Index Fund Investor Shares*

Vanguard Growth Index Fund Investor Shares*

Vanguard Intermediate-Term Bond Index Fund*

Vanguard Mid-Cap Index Fund*

Vanguard REIT Index Fund*

Vanguard Small-Cap Growth Index*

Vanguard Small-Cap Value Index*

Vanguard Target Retirement 2005*

Vanguard Target Retirement 2015*

Vanguard Target Retirement 2025*

Vanguard Target Retirement 2035*

Vanguard Target Retirement 2045*

Vanguard Target Retirement Inc*

Vanguard Total International Stock Index*

Vanguard Value Index Fund Investor Shares*

 

 

Total mutual funds

 

Represents a party-in-interest transaction.

Cost information is omitted for investments that are fully participant-directed.

See accompanying Report of Independent Registered Public Accounting Firm.

 

Self Directed Brokerage Account — VGI Brokerage Option:*

Common Stocks:

Crucell N V Sponsored ADR*

Deep Field Technologies Inc.*

Dell Inc.*

EMC Corp. (Mass) *

Hewlett-Packard CA*

Invoice Technology Inc. Cl A*

Ivoice Inc.*

JDS Uniphase Corp.*

Level 3 Communications Inc.*

Monterey Pasta Co*

Mylan Laboratories Inc.*

Omnicare Inc.*

Qualcomm Inc.*

Sabmiller PLC Sponsored ADR*

Speechswitch Inc. Cl A*

Starbuck’s Corp.*

Stryker Corp.*

Teva Pharmaceutical Industries Ltd. ADR*

Trey Res. Inc. Cl A*

Wireless Facs Inc.*

 

Mutual Funds:

Wells Fargo Government Money Market Fund*

Baron Small Cap Fund*

Loomis Sayles Bond Fund Retail*

Pimco Commodity Realreturn Strategy Fund*

UMB Scout Worldwide Fund*

 

Total self directed brokerage account

 

 

Participant Loans, 5% to 9.25%*

 

 

Total investments, at fair value

 

Represents a party-in-interest.

Cost information is omitted for investments that are fully participant-directed.

ProLogis

ProLogis

Exhibit 23.2