<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] 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 33-13375
IDS LIFE ACCOUNT RE
OF
IDS LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0823832
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
IDS TOWER 10, MINNEAPOLIS, MINNESOTA 55440-0010
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 671-3309
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
<PAGE>
The Registrant is a separate account of IDS Life Insurance Company (IDS Life)
established pursuant to the insurance laws of the State of Minnesota for the
purposes of funding real estate variable annuity contracts. Unless otherwise
specifically noted, the information set forth herein only relates to the
operations of the Registrant (the "Account") and not to the operations of IDS
Life.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
BALANCE SHEETS
<TABLE>
June 30, December 31,
1998 1997
(Unaudited)
-------------- ----------------
Assets:
<S> <C> <C>
Cash $ 88,686 $ 82,887
Investments in securities, at value (Note 1)
(identified cost of $1,296,013 and $5,282,201
at June 30, 1998 and December 31, 1997,
respectively) 5,083,039 5,282,201
Investments in unconsolidated joint ventures,
at fair value (cost of $36,245,210 and
$36,218,770 at June 30, 1998
and December 31, 1997, respectively) 23,161,203 23,134,763
---------------- --------------
Total assets $ 28,332,928 $ 28,499,851
================ ===============
Liabilities:
Payable to IDS Life for:
Operating expenses $ 100,831 $ 72,008
Contract terminations - 22,567
Accrued mortality and expense risk fee 27,531 28,961
Accrued asset management fee 34,414 36,200
---------------- --------------
Total liabilities $ 162,776 $ 159,736
================ ==============
Contract Owners' Equity:
Net assets applicable to Variable Annuity
contracts in accumulation period $ 28,170,152 $ 28,340,115
================= ==============
Accumulation units outstanding 26,384,346 27,339,211
================= ==============
Net asset value per accumulation unit $1.07 $1.04
================= ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
For the three months ended
-------------------- --------------------
June 30, June 30,
1998 1997
-------------------- --------------------
Income: <C> <C>
<S>
Interest income $ 73,224 $ 141,708
Account's equity in earnings of
unconsolidated joint ventures 539,323 592,603
-------------------- --------------------
Total income $ 612,547 $ 734,311
-------------------- --------------------
Expenses:
Asset management fee $ 98,438 $ 113,845
Mortality and expense risk fee 78,750 91,075
Other operating expenses 12,436 3,721
-------------------- --------------------
Total expenses $ 189,624 $ 208,641
-------------------- --------------------
Net income $ 422,923 $ 525,670
==================== ====================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
For the six months ended
----------------------- -------------------
June 30, June 30,
1998 1997
----------------------- -------------------
Income:
<S> <C> <C>
Interest income $ 146,462 $ 279,853
Account's equity in earnings of
unconsolidated joint ventures 1,086,300 1,190,864
Other income -- 54,258
----------------------- -------------------
Total income $ 1,232,762 $ 1,524,975
------------------------- --------------------
Expenses:
Asset management fee 195,899 227,259
Mortality and expense risk fee 156,719 181,807
Other operating expenses 41,632 27,350
------------------------- -----------------
Total expenses $ 394,250 $ 436,416
------------------------- -----------------
Net income $ 838,512 $ 1,088,559
========================= =================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
For the six months ended
June 30, June 30,
1998 1997
------------------------- --------------------
Cash flows from operating activities:
<S> <C> <C>
Net Income $ 838,512 $ 1,088,559
Adjustments to reconcile net income to net cash used in operating
activities:
Account's equity in earnings of unconsolidated
joint ventures (1,086,300) (1,190,864)
Change in other assets -- 4,277
Change in payable to IDS Life for operating expenses 28,823 (25,934)
Change in accrued mortality and expense risk fee (1,430) (2,402)
Change in accrued asset management fee (1,786) (3,002)
Change in payables and other liabilities related
to wholly-owned real estate property -- (79,090)
-------------------- ------------------
Total adjustments to net income (1,060,693) (1,297,015)
-------------------- ------------------
Net cash used in operating activities (222,181) (208,456)
-------------------- ------------------
Cash flows from investing activities:
Net sales (purchases) of short-term securities 199,162 1,471,217
Distributions received from joint ventures 1,059,860 1,322,170
--------------------- -------------------
Net cash provided by investing activities 1,259,022 2,793,387
--------------------- -------------------
Cash flows from financing activities:
Proceeds from sales of contracts 3,054 14,077
Payments for contract terminations (1,034,096) (2,565,222)
--------------------- -------------------
Net cash used in financing activities (1,031,042) (2,551,145)
--------------------- -------------------
Net increase in cash 5,799 33,786
Balance of cash at beginning of year 82,887 102,737
--------------------- -------------------
Balance of cash at end of period $ 88,686 $ 136,523
Supplemental cash flow disclosure:
Cash paid for mortgage interest & revolving loan $ -- $ --
====================== ==================
See accompanying notes to financial statements.
</TABLE>
<PAGE>
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
June 30, 1998
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. GENERAL
In the opinion of the management of IDS Life, the accompanying
unaudited financial statements for IDS Life Account RE (the
"Account") contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly its balance
sheets as of June 30, 1998 and December 31, 1997; statements of
operations for the three and six months ended June 30, 1998 and
1997; and the statements of cash flows for the six months ended June
30, 1998 and 1997. These statements are condensed and therefore do
not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statement disclosure. The statements should be read in conjunction
with the Account's financial statements as of and for the year ended
December 31, 1997 and the notes thereto contained in the Account's
prospectus dated April 30, 1998. The results of operations for the
six months ended June 30, 1998 are not necessarily indicative of the
results expected for the full year.
2. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
Unconsolidated Joint Ventures - Summary Information
Summary information for the Account of its investments in unconsolidated
joint ventures for the six months ended June 30, 1998 and 1997 is as
follows:
For the six months ended
June 30
1998 1997
---- ----
Account's share of net
investment income from
unconsolidated joint ventures $ 1,086,300 $ 1,190,864
Total net investment income of
unconsolidated joint ventures $ 13,294,951 $ 14,426,910
Total income of unconsolidated
joint ventures $ 22,772,000 $ 22,986,000
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition and Results of Operations
For the Six Months Ended June 30, 1998 Compared to the Six Months Ended
June 30, 1998 -
Net assets decreased from $28,499,851 at December 31, 1997 to $28,332,928 at
June 30, 1998. During this same time period, the accumulation unit value
increased from $1.04 to $1.07. The Account experienced net terminations
amounting to $1,031,043 for the six months ended June 30, 1998 compared to net
terminations of $2,551,145 for the six months ended June 30, 1997. In the six
months ended June 30, 1998 and the six months ended June 30, 1997, IDS Life had
not purchased any accumulation units.
Recorded net income for the six months ended June 30, 1998 was $838,512 compared
to $1,088,559 for the six months ended June 30, 1997.
Interest income represents income earned in 1998 on the Account's investment in
short-term securities. Interest generated from short-term investments was
$146,464 for the six months ended June 30, 1998. Interest income for the six
months ended June 30, 1997 was $279,853. Interest income for the six months
ended June 30, 1998 compared to the six months ended June 30, 1997 was due
primarily to an increase in the average short-term balance in 1997. Short term
investments decreased towards the end of 1997 due primarily to net account
terminations as discussed below.
For the six months ended June 30, 1998, the Account's recorded equity in
earnings of its unconsolidated joint ventures (N/S Associates, Monmouth
Associates and 1225 Connecticut) was $1,086,300 compared to $1,190,864 for the
six months ended June 30, 1997. The decrease is due primarily to lower rental
income achieved at Southridge and Northridge Malls due to lower effective rents.
Northridge Mall continues to be adversely affected by the perception that it is
an unsafe place to shop. This perception has resulted in declining sales and
occupancy over a three-year period. Compounding the problem of declining sales
are the high operating costs for tenants at the mall. Occupancy has also been
affected by tenant bankruptcies over the past years. As of June 30, 1998,
occupancy of the mall shops was approximately 59%, including temporary tenants
under short term leases.
To counter the negative perception of Northridge Mall, N/S Associates
implemented certain capital improvements and operational programs to improve the
shopping center's safety and appearance, as well as instituted certain marketing
and public relation efforts to enhance its image. Certain recent positive sales
trends appear to indicate a modest improvement; however, elimination of the
negative perception is expected to take some time. In addition, N/S Associates
is seeking to increase occupancy at the shopping center by aggressively
marketing space for new and renewal tenants through leasing incentives, as well
as continuing to cooperate with existing tenants who need short-term rent
reductions in order to retain occupancy of their space. Part of the leasing
strategy includes targeting certain well-recognized retailers as a group that
would become tenants at the shopping center. It is expected that the draw of
this group of tenants would help the shopping center gain leasing momentum and
aid in future leasing efforts.
As of June 30, 1998, occupancy of Southridge Mall which is owned by N/S
Associates was approximately 88%, including temporary tenants under short-term
leases.
The Account paid asset management and mortality expense risk fees of $352,618
and $409,066 for the six months ended June 30, 1998 and 1997, respectively.
Liquidity and Capital Resources
For the Three Months Ended June 30, 1998 Compared to the Three Months Ended
June 30, 1997 -
At June 30, 1998, the Account had cash of approximately $89,000 as compared to
approximately $83,000 at December 31, 1997.
The liquidity requirements of the Account have generally been met by funds
provided from the Account's short-term investments, cash distributions from
unconsolidated joint ventures, operating cash flow, interest income, proceeds
from the sale of West Springfield Terrace apartments, the loan repayment from
Riverpoint Center, proceeds from sales of contracts, and borrowings under the
line of credit from IDS Life and purchases of accumulation units by IDS Life
discussed below. The primary uses of funds currently are expected to be for
asset management and mortality and expense risk fees and payments for contract
terminations and redemption units held by IDS Life.
Effective May 1, 1995, new contract sales of the Account were discontinued.
Additional purchase payments continue to be accepted for existing contracts in
amounts specified in the Account's prospectus, whether by means of the
previously established bank authorizations or otherwise. Existing contracts also
continue to be serviced and surrender requests will be honored.
IDS Life has purchased accumulation units in order to maintain the Account and
its liquidity. IDS Life made these payments so that no contract holder would be
disadvantaged because sales of new contracts have been discontinued. The initial
payments for accumulation units that IDS Life made into the Account were used to
pay off the amount that the Account had borrowed under its revolving line of
credit. As of June 30, 1998, IDS Life had purchased approximately 26,400,000
accumulation units.
By purchasing accumulation units, IDS Life has an ownership interest in the
Account. Since IDS Life does not purchase a contract, it is not subject to
surrender charges. However, IDS Life, as holder of accumulation units,
participates in the increase or decrease in the value of the Account's
investments just as other owners of accumulation units do. IDS Life may realize
a gain or loss on its accumulation units when redeemed.
IDS Life currently expects to hold the accumulation units it purchases until the
surrender of all outstanding contracts or until the Account's liquidity improves
(through, for example, one or more sales of real estate related investments)
thereby permitting the Account to satisfy its anticipated contract obligations.
Because IDS Life may purchase a significant amount of accumulation units, IDS
Life may be subject to certain conflicts of interest it would not otherwise have
if it had not purchased such accumulation units, including, among other things,
a conflict in approving periodic valuations of real estate investments made by
the Investment Adviser.
Since the Account has experienced substantial net contract terminations over the
past several years, the Account does not intend to acquire additional real
estate related investments. During 1996, the Account liquidated two real estate
related investments. Further, the Account intends to liquidate the real estate
related investments that it currently holds when it becomes advantageous or
necessary to do so. To the extent funds of the Account are not used to pay
obligations of the Account, including those under existing contracts, or the
redemption of accumulation units purchased by IDS Life, such funds will be
invested in short-term debt instruments and possibly intermediate-term bonds
with maturities of up to five years.
Through June 30, 1998, Monmouth Associates had funded approximately $25,905,000
of the renovation loan for Monmouth Mall. Fundings of principal on the loan have
been made from cash reserves held by Monmouth Associates, cash flow from
interest and ground rent payments received from the borrower/lessee and capital
contributions made to Monmouth Associates by its partners pro rata based upon
their respective interests. The aggregate amount of capital contributions to
finance the loan is approximately $9,830,000. The Account's share of these
capital contributions is approximately $685,000. The aggregate amount of the
renovation loan, including accrued and deferred interest of approximately
$1,300,000, is currently expected to be approximately $29,100,000. Remaining
fundings for the renovation loan are expected to be made from cash flow and
funds currently held by Monmouth Associates. Monmouth Associates may also be
required to make certain additional loans to pay a portion of the costs of
certain tenant improvements or other ordinary capital expenditures. In addition,
Monmouth Associates may provide additional financing to the borrower/lessee in
order to pay costs to be incurred in connection with the replacement of a
department store tenant at Monmouth Mall. However, it is not currently expected
that this would occur during 1998.
The renovation is nearing completion with tenant improvement work for one of the
larger tenants and retainage work remaining. The occupancy of mall shops and
outparcel space at the shopping center as of June 30, 1998 was approximately
86%. However, the mall shops and outparcel space are approximately 90% leased.
Leasing and occupancy at the shopping center have been adversely affected by
tenant bankruptcies occurring over the past several years.
N/S Associates currently expects that it will incur approximately $1,605,000 in
1998 for tenant improvement, asbestos removal and other capital items at
Northridge and Southridge Malls. Actual amounts expended in 1998 may vary
depending on a number of factors, including actual leasing activity, results of
property operations, liquidity considerations and market conditions over the
course of the year. N/S Associates undertakes asbestos removal from time to time
at portions of the Northridge and Southridge Malls as tenant spaces are vacated
and prior to occupancy by new tenants. The cost of tenant improvements, asbestos
removal and other capital items generally will be provided out of cash flows
from the properties. N/S Associates expended approximately $1,629,000 for tenant
improvements, asbestos removal and other capital projects in 1997.
In the first quarter of 1998, N/S Associates has selected a third-party broker
and is marketing the Northridge and Southridge Malls. However, there can be no
assurance that a sale of either of these malls will be consumated.
The 1225 investment corporation has committed to a plan to sell the property and
during the second quarter of 1998 began marketing the property for sale.
However, there can be no assurance that a sale transaction on acceptable terms
will be consumated.
At June 30, 1998, real property investments (through two unconsolidated joint
ventures, N/S Associates and 1225 Connecticut), land sale-leaseback investments
(through an unconsolidated joint venture, Monmouth Associates) and short-term
investments represented 51 percent, 30.6 percent and 18 percent of total assets,
respectively. At June 30, 1997, real property investments, mortgage loan and
land sale-leaseback investments and short-term investments represented 45
percent, 27 percent and 28 percent of total assets, respectively.
<PAGE>
PART II. OTHER INFORMATION
---------------------------
Item 1. LEGAL PROCEEDINGS
There are no material current or pending legal proceedings which the
Registrant is a party to, or to which the Registrant's assets are subject.
Item 2. CHANGES IN SECURITIES
Not applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
4.1 Form of Deferred Variable Annuity Contract is hereby incorporated
herein by reference to Exhibit 4 to the Account's Form S-1 (as amended),
File Number 33- 13375, filed July 17, 1987.
4.2 Copy of mortgage loan documents relating to West Springfield Terrace
Apartments is hereby incorporated herein by reference to Exhibit 4.2 to
the Account's Form S-1 (as amended), File Number 33-13375, filed April 12,
1990.
4.3 Copy of the line of credit agreement, dated March 30, 1994 between IDS
Life and the Account (including a copy of the executed promissory note,
dated March 30, 1994) is hereby incorporated by reference to Exhibit 4.3
to the Account's Form 10-K Report for the year ended December 31, 1993,
File Number 33-13375, filed April 5, 1994.
10.1 Copy of Investment Advisory Agreement between IDS Life and JMB
Annuity Advisors is hereby incorporated herein by reference to Exhibit
10.1 to the Account's Form S-1 (as amended), File Number 33-13375, filed
April 29, 1988.
10.2 Copy of N/S Associates Joint Venture Agreement together with certain
documents relating to the purchase of an interest in Northridge Mall is
hereby incorporated herein by reference to Exhibit 10.2 to the Account's
Form S-1 (as amended), File Number 33-13375, filed April 29, 1988.
10.2.1 Copy of Second Amended and Restated Articles of Partnership of N/S
Associates hereby incorporated herein by reference to Exhibit 10.2.1 to
the Account's Form S-1 (as amended), File Number 33-13375, filed April 20,
1989.
10.3 Copy of N/S Associates Joint Venture Agreement together with certain
documents relating to the purchase of an interest in Southridge Mall is
hereby incorporated herein by reference to Exhibit 10.3 to Form S-1 (as
amended), File Number 33-13375, filed April 29, 1988.
10.4 Copy of Commitment Letter relating to the funding of a participating
mortgage loan secured by Riverpoint Center is hereby incorporated herein
by reference to Exhibit 10.4 to Form S-1 (as amended), File Number
33-13375, filed October 11, 1988. 10.5 Copy of Amended and Restated
Articles of Partnership of Monmouth Associates are hereby incorporated
herein by reference to Exhibit 10.5 to the Account's Form S-1 (as
amended), File Number 33-13375, filed April 12, 1990.
10.6 Copy of Agreement together with certain other documents relating to
the purchase of West Springfield Terrace Apartments is hereby incorporated
herein by reference to Exhibit 10.6 to Form S-1 (as amended), File Number
33-13375, filed October 16, 1989.
10.7 Copy of Agreement together with certain documents relating to the
purchase of an interest in 1225 Connecticut Avenue is hereby incorporated
herein by reference to the Account's Form S-1 (as amended), File Number
33-13375, filed June 29, 1990.
10.8 Copy of Purchase Agreement for the sale of the West Springfield
Terrace Apartments is hereby incorporated herein by reference to the
Accounts Report on Form 10-Q (File No. 33-13375) for September 30, 1996
dated November 14, 1996.
27.1 Financial Data Schedule of the Account for the period ended June 30,
1998 is filed herewith.
(B) Report on Form 8-K
No reports on Form 8-K were required to be filed by the Registrant for the
six months ended June 30, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
------------------------------
(Registrant)
Date: August 14, 1998 /S/ Stuart Sedlacek
--------------------
Stuart A. Sedlacek
Executive Vice President
and Controller
<PAGE>
IDS Life Account RE
File No. 33-13375
EXHIBIT INDEX
Exhibit 27.1: Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE REGISTRANT'S FORM 10-Q FOR THE
THREE MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN
SUCH REPORT.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 88686
<SECURITIES> 28244242
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 28332928
<CURRENT-LIABILITIES> 162776
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 28170152
<TOTAL-LIABILITY-AND-EQUITY> 28332928
<SALES> 0
<TOTAL-REVENUES> 1232762
<CGS> 0
<TOTAL-COSTS> 237531
<OTHER-EXPENSES> 156719
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 838512
<INCOME-TAX> 838512
<INCOME-CONTINUING> 838512
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 838512
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
