UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
FOR
ANNUAL REPORTS OF EMPLOYEE STOCK REPURCHASE
SAVINGS AND SIMILAR PLANS PURSUANT TO SECTION 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2006
OR
o TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 1-9044
A. Full title of the plan and the address of the plan, if different from that of the issuer named below:
DUKE 401(k) PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
DUKE REALTY CORPORATION
600 East
96th Street, SUITE 100
INDIANAPOLIS, INDIANA 46240
DUKE 401(k) PLAN
Financial Statements with Supplemental Schedule
December 31, 2006 and 2005
(With Report of Independent Registered Public Accounting Firm)
DUKE 401(k) PLAN
Table of Contents
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Financial Statements: |
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Schedule H, Line 4i Schedule of Assets (Held at End of Year) |
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Report of Independent Registered Public Accounting Firm
The Associate
Benefits Committee
Duke 401(k) Plan:
We have audited the accompanying statements of assets available for plan benefits of Duke 401(k) Plan (the Plan) as of December 31, 2006 and 2005, and the related statements of changes in assets available for plan benefits for the years then ended. These financial statements are the responsibility of the Plans management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits 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, 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 assets available for plan benefits of Duke 401(k) Plan as of December 31, 2006 and 2005, and the changes in assets available for plan benefits for the years then ended in conformity with U.S. generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule, Schedule H, Line 4i Schedule of Assets (Held at End of Year), 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 Labors Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plans 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.
/s/ KPMG LLP |
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Indianapolis, Indiana |
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June 28, 2007 |
DUKE 401(k) PLAN
Statements of Assets Available for Plan Benefits
December 31, 2006 and 2005
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2006 |
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2005 |
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Assets held by Trustee: |
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Investments, at fair value: |
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Money market funds |
$ |
3,000,019 |
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2,375,427 |
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Mutual funds |
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53,035,315 |
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41,257,539 |
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Common stock |
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29,789,591 |
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24,274,697 |
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U.S. Treasury Notes |
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14,867 |
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14,966 |
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Loans to participants |
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1,718,087 |
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1,387,227 |
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Contributions receivable: |
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Participant |
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151,159 |
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123,577 |
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Employer |
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1,485,167 |
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915,741 |
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Other receivable: |
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Unsettled trades |
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563 |
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108,236 |
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Assets available for plan benefits |
$ |
89,194,768 |
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70,457,410 |
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See accompanying notes to financial statements.
2
DUKE 401(k) PLAN
Statements of Changes in Assets Available for Plan Benefits
Years ended December 31, 2006 and 2005
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2006 |
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2005 |
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Additions to assets attributed to: |
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Contributions: |
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Participants salary deferral |
$ |
5,586,079 |
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5,023,247 |
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Employer matching of salary deferral |
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2,407,949 |
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2,232,848 |
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Employer discretionary contribution |
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1,227,782 |
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1,037,540 |
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Participants rollover |
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1,881,857 |
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746,871 |
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11,103,667 |
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9,040,506 |
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Investment income: |
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Net appreciation in fair value of investments |
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8,271,673 |
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1,526,930 |
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Interest and dividends |
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4,337,688 |
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3,722,602 |
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12,609,361 |
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5,249,532 |
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Total additions |
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23,713,028 |
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14,290,038 |
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Deductions from assets attributed to: |
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Benefits paid to participants |
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4,936,721 |
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5,271,265 |
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Administrative fees |
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38,949 |
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30,741 |
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Total deductions |
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4,975,670 |
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5,302,006 |
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Net increase |
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18,737,358 |
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8,988,032 |
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Assets available for plan benefits: |
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Beginning of year |
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70,457,410 |
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61,469,378 |
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End of year |
$ |
89,194,768 |
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70,457,410 |
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See accompanying notes to financial statements.
3
DUKE 401(k) PLAN
December 31, 2006 and 2005
(1) Description of Plan
The following description of the Duke 401(k) Plan (the Plan) provides only general information. Participants should refer to the Plan agreement for a more complete description of the Plans provisions.
(a) General
The Plan is a defined contribution plan sponsored by Duke Realty Corporation (the Employer) covering all employees who are age 21 years or older and have met the service requirement as defined by the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
(b) Contributions
Eligible participants may elect to defer a percentage of their compensation to be contributed to their Employee Deferral Account. The Plan stipulates the minimum and maximum percent that may be contributed, not to exceed 75% of a participants compensation for each plan year, subject to limitations imposed by the Internal Revenue Service. The Plan currently offers each participant investment options including nineteen mutual funds, common stock of the Employer, a money market fund, and a self directed fund, which allows participants to direct their contributions into investments of their choice. The Employer matches participant contributions annually up to 3% of total compensation, for participants with less than 10 years of service. The Employer matches participant contributions annually up to 5% of total compensation for participants with at least 10 years of service and not at a management level of senior vice president or higher. The Employer matching contribution is limited to a participants first $220,000 of compensation ($210,000 in 2005), and the contribution is invested in the common stock of the Employer. The Employer may also make discretionary contributions to the Plan to be invested in the common stock of the Employer. Participants are also able to move all Employer contributions to an investment option of their choice.
(c) Participant Accounts
Each participants account is credited with the participants contribution, the Employer matching contribution, allocations of the Employers discretionary contribution (when applicable), and Plan earnings. 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 participants vested account.
(d) Vesting
Participants are immediately vested in elective salary reduction contributions and the actual earnings thereon. Vesting in discretionary contributions, matching contributions and the earnings thereon is based upon the years of service of the participant. A year of service means a plan year in which the participant completes at least 1,000 hours of service. A participant becomes 20% vested after one year of service and vests an additional 20% for each year of service thereafter and is 100% vested after five years of service. Participants who terminate employment due to retirement after age 59½, by death, or by total or permanent disability are automatically considered fully vested.
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DUKE 401(k) PLAN
Notes to Financial Statements
December 31, 2006 and 2005
(e) Benefits
Upon termination of service or retirement, a participants vested account balance is to be distributed in a lump sum payment, and/or they can receive Employer stock for the portion of their vested account balance that was in Employer stock within 90 days of written request.
(f) Forfeitures
Participants who terminate employment forfeit any non-vested portion of their account. Forfeitures are used to reduce the Employer matching contributions. In 2006 and 2005, Employer contributions were reduced by $241,110 and $91,907, respectively, from forfeited non-vested accounts. As of December 31, 2006 and 2005, there is $61,560 and $15,586, respectively, of additional forfeitures that have not yet been used to reduce Employer matching contributions.
(2) Summary of Significant Accounting Policies
(a) Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
(b) Basis of Accounting
The Plans financial statements are prepared on the accrual basis of accounting, except for the cash basis recording of benefits paid.
(c) Investment Valuation
Mutual fund and common stock investments are stated at fair market value as determined by quoted market prices. The money market funds and U.S. Treasury Notes are stated at fair market value as reported by the trustee. Loans to participants are stated at the loaned amount, net of repayments, which approximates fair value. Purchases and sales of securities are recorded on a trade date basis.
(d) Administrative Expenses
In service withdrawal fees, participant loan origination fees, participant loan maintenance fees, Employer stock trustee fees, and Employer stock sale/purchase fees are charged to participants accounts as incurred.
(e) Loans
Participant loans are limited to the lesser of $50,000 or 50% of the participants vested account balance. Under terms of the loan agreements, loans must be repaid in not more than five years, unless used to acquire a principal residence. Interest rates are fixed at the prime rate plus 1%, and range from 5% to 9.5%.
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DUKE 401(k) PLAN
Notes to Financial Statements
December 31, 2006 and 2005
(3) Plan Termination
Although it has not expressed any intent to do so, the Employer has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination by the Employer, participants will become 100% vested in their accounts.
(4) Investments
The following table represents the fair value of individual investments which exceed five percent of the Plans assets available for plan benefits as of December 31:
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2005 |
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Ariel Appreciation Fund |
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N/A |
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5,086,191 |
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Calamos Growth Fund |
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N/A |
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3,591,325 |
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Fidelity Balanced Fund |
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5,211,375 |
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4,310,889 |
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Fidelity Diversified International Fund |
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7,942,101 |
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5,473,257 |
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Fidelity Spartan Total Market Index Fund |
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5,270,015 |
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4,356,213 |
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Goldman Sachs Mid Cap Value CL A |
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5,244,564 |
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N/A |
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Growth Fund of America |
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7,702,674 |
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6,312,606 |
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Van Kampen Growth and Income Fund |
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5,356,855 |
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3,881,728 |
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Duke Realty Corporation Common Stock |
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28,242,512 |
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22,927,401 |
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The Plans investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated (depreciated) in value as follows:
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2006 |
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2005 |
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Common stock |
$ |
5,420,837 |
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(312,752) |
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Mutual funds |
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2,850,935 |
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1,839,660 |
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U.S. Treasury Notes |
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(99) |
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22 |
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$ |
8,271,673 |
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1,526,930 |
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(5) Non participant Directed Investments
The Plan was amended effective March 1, 2002, to allow participants to transfer all or any part of their non participant directed investments to participant directed investments.
(6) Tax Status
The Internal Revenue Service has determined and informed the Company by a letter dated November 23, 2005, that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code (IRC). Although the Plan has been amended since receiving the determination letter, the Plan administrator and the Plans tax counsel believe that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC.
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DUKE 401(k) PLAN
Notes to Financial Statements
December 31, 2006 and 2005
(7) Party in interest Transactions
The following investment funds are sponsored by Fidelity Investments, the Trustee: Fidelity Retirement Money Market Portfolio, Fidelity Balanced Fund, Fidelity Diversified International Fund, Fidelity Freedom Funds, Fidelity Freedom Income Fund, Fidelity Inflation-Protected Bond Fund, and Fidelity Spartan Total Market Index Fund. Participant loans are made with individual participants of the Plan and investments are made in the common stock of the Employer. Therefore, transactions in these investments are considered to be party in interest transactions.
(8) Concentrations
At December 31, 2006 and 2005, approximately 32% and 33%, respectively, of assets available for plan benefits are invested in the Employers common stock.
(9) Risks and Uncertainties
The Plan offers various investment options. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the value 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 statement of assets available for benefits.
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DUKE 401(k) PLAN
Schedule H, Line 4i Schedule of Assets (Held at End of Year)
December 31, 2006
Party-in- |
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Current |
interest |
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Identity |
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Description of investment |
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value |
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Money market funds: |
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* |
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Fidelity |
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Fidelity Retirement Money Market Portfolio |
$ |
2,707,895 |
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Mutual funds: |
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Calamos |
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Calamos Growth Fund |
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4,135,974 |
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Fidelity |
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Fidelity Balanced Fund |
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5,211,375 |
* |
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Fidelity |
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Fidelity Diversified International Fund |
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7,942,101 |
* |
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Fidelity |
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Fidelity Freedom 2005 Fund |
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56,503 |
* |
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Fidelity |
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Fidelity Freedom 2010 Fund |
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44,832 |
* |
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Fidelity |
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Fidelity Freedom 2015 Fund |
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395,409 |
* |
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Fidelity |
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Fidelity Freedom 2020 Fund |
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600,338 |
* |
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Fidelity |
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Fidelity Freedom 2025 Fund |
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356,155 |
* |
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Fidelity |
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Fidelity Freedom 2030 Fund |
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238,199 |
* |
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Fidelity |
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Fidelity Freedom 2035 Fund |
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358,757 |
* |
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Fidelity |
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Fidelity Freedom 2040 Fund |
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495,307 |
* |
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Fidelity |
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Fidelity Freedom Income Fund |
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80,609 |
* |
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Fidelity |
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Fidelity Inflation-Protected Bond Fund |
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2,197,767 |
* |
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Fidelity |
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Fidelity Spartan Total Market Index Fund |
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5,270,015 |
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American |
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Growth Fund of America |
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7,702,674 |
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Goldman Sachs |
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Goldman Sachs Mid-Cap Value CL A |
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5,244,564 |
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Pimco |
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Pimco Total Return Fund Admin Class |
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2,536,373 |
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Royce |
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Royce Low-Priced Stock Fund Inv Class |
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4,205,008 |
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Van Kampen |
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Van Kampen Growth and Income Fund |
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5,356,855 |
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$ |
52,428,815 |
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Common stock: |
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* |
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Duke Realty Corporation |
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Common stock |
$ |
28,242,512 |
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Participant Directed Brokerage |
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Account |
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$ |
2,460,570 |
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Loans to participants: |
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* |
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N/A |
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Participant loans at interest rates ranging |
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from 5% to 9.5% |
$ |
1,718,087 |
* |
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Denotes party-in-interest |
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See accompanying report of independent registered public accounting firm.
8
SIGNATURES
THE PLAN. 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.
DUKE 401(k) PLAN |
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Date: June 28, 2007 |
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/s/ Denise K. Dank |
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Denise K. Dank |
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Sr. Vice President of Human Resources |
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Chairman, Associate Benefits Committee |
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