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, 1996
[ ] 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 33-92990
TIAA REAL ESTATE ACCOUNT
(Exact name of registrant as specified in its charter)
NEW YORK
(State or other jurisdiction of
incorporation or organization)
NOT APPLICABLE
(IRS Employer Identification No.)
C/O TEACHERS INSURANCE AND
ANNUITY ASSOCIATION OF AMERICA
730 THIRD AVENUE
NEW YORK, NEW YORK
(address of principal executive offices)
10017-3206
(Zip code)
(212) 490-9000
(Registrant's telephone number including area code)
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 such 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>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
INDEX TO UNAUDITED FINANCIAL STATEMENTS
OF THE TIAA REAL ESTATE ACCOUNT
JUNE 30, 1996
Page
Statements of Assets and Liabilities .................. 3
Statements of Operations .............................. 4
Statements of Changes in Net Assets ................... 5
Statements of Cash Flows .............................. 6
Notes to Financial Statements ......................... 7
Statement of Investments .............................. 13
2
<PAGE>
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
Investments, at value:
Real estate properties
(Cost: $85,317,574 and $43,989,665) ....................... $ 85,885,380 $ 43,989,665
Marketable securities
(Amortized cost: $82,753,934
and $73,972,831) ......................................... 82,854,516 73,992,569
Cash ........................................................ 346,203 396,787
Receivable from securities transactions ..................... 10,700,000 23,150,000
Other ....................................................... 2,456,867 1,648,400
------------ ------------
TOTAL ASSETS 182,242,966 143,177,421
------------ ------------
LIABILITIES
Payable for securities transactions ......................... 10,832,809 22,788,035
Other ....................................................... 2,341,829 131,041
------------ ------------
TOTAL LIABILITIES 13,174,638 22,919,076
------------ ------------
NET ASSETS
Accumulation Fund ........................................... 166,106,139 120,258,345
Annuity Fund ................................................ 2,962,189 --
------------ ------------
TOTAL NET ASSETS $169,068,328 $120,258,345
============ ============
NUMBER OF ACCUMULATION UNITS
OUTSTANDING--Notes 6 and 7 .................................. 1,561,082 1,172,498
============ ============
NET ASSET VALUE,
PER ACCUMULATION UNIT--Note 6 ............................... $106.40 $102.57
============ ============
</TABLE>
See notes to financial statements.
3
<PAGE>
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended Months Ended
June 30, 1996 June 30, 1996
------------- -------------
<S> <C> <C>
INVESTMENT INCOME
Income:
Real estate income, net:
Rental income .................................. $2,271,715 $3,933,580
---------- ----------
Real estate property level expenses and
taxes:
Operating expenses ............................ 511,017 828,888
Real estate taxes ............................. 212,886 405,405
---------- ----------
Total real estate property
level expenses and taxes 723,903 1,234,293
---------- ----------
Real estate income, net 1,547,812 2,699,287
Interest ........................................ 1,137,192 2,283,539
Dividends ....................................... 50,825 60,825
---------- ----------
TOTAL INCOME 2,735,829 5,043,651
---------- ----------
Expenses--Note 3:
Investment advisory .............................. 136,267 180,588
Administrative ................................... 48,135 123,311
Mortality and expense risk charges ............... 14,687 18,094
Liquidity guarantee charges ...................... (901) 803
---------- ----------
TOTAL EXPENSES 198,188 322,796
---------- ----------
INVESTMENT INCOME, NET 2,537,641 4,720,855
---------- ----------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain (loss) on
marketable securities .......................... (370) 40,235
---------- ----------
Net change in unrealized appreciation on:
Real estate properties ......................... 483,125 567,806
Marketable securities .......................... 174,079 80,844
---------- ----------
Net change in unrealized appreciation 657,204 648,650
---------- ----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS 656,834 688,885
---------- ----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $3,194,475 $5,409,740
========== ==========
</TABLE>
See notes to financial statements.
4
<PAGE>
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended Months Ended
June 30, 1996 June 30, 1996
------------- -------------
<S> <C> <C>
FROM OPERATIONS
Investment income, net ............................. $ 2,537,641 $ 4,720,855
Net realized gain (loss) on
marketable securities ............................. (370) 40,235
Net change in unrealized appreciation
on investments .................................... 657,204 648,650
------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 3,194,475 5,409,740
------------ ------------
FROM PARTICIPANT TRANSACTIONS
Premiums ........................................... 1,735,461 3,052,001
Disbursements and transfers:
Net transfers from TIAA ........................... 2,494,392 4,335,446
Net transfers from CREF Accounts .................. 16,068,204 36,273,968
Annuity and other periodic payments ............... (41,036) (42,370)
Withdrawals ....................................... (142,905) (192,124)
Death benefits .................................... -- (26,678)
------------ ------------
INCREASE IN NET ASSETS RESULTING
FROM PARTICIPANT TRANSACTIONS 20,114,116 43,400,243
------------ ------------
NET INCREASE IN NET ASSETS 23,308,591 48,809,983
NET ASSETS
Beginning of period ................................ 145,759,737 120,258,345
------------ ------------
End of period ...................................... $169,068,328 $169,068,328
============ ============
</TABLE>
See notes to financial statements.
5
<PAGE>
TIAA REAL ESTATE ACCOUNT
STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended Months Ended
June 30, 1996 June 30, 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in net assets
resulting from operations ........................... $ 3,194,475 $ 5,409,740
Adjustments to reconcile net increase
in net assets resulting from operations
to net cash used in operating activities:
Increase in investments ............................ (23,340,824) (50,757,662)
Decrease in receivable from securities
transactions ..................................... 7,530,000 12,450,000
Increase in other assets ........................... (846,361) (808,467)
Decrease in payable for securities
transactions ..................................... (7,452,143) (11,955,226)
Increase in other liabilities ...................... 1,146,940 2,210,788
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (19,767,913) (43,450,827)
------------ ------------
CASH FLOWS FROM PARTICIPANT TRANSACTIONS
Premiums ............................................. 1,735,461 3,052,001
Disbursements and transfers:
Net transfers from TIAA ............................. 2,494,392 4,335,446
Net transfers from CREF Accounts .................... 16,068,204 36,273,968
Annuity and other periodic payments ................. (41,036) (42,370)
Withdrawals ......................................... (142,905) (192,124)
Death benefits ...................................... -- (26,678)
------------ ------------
NET CASH PROVIDED BY
PARTICIPANT TRANSACTIONS 20,114,116 43,400,243
------------ ------------
NET INCREASE (DECREASE) IN CASH 346,203 (50,584)
CASH
Beginning of period .................................. -- 396,787
------------ ------------
End of period ........................................ $ 346,203 $ 346,203
============ ============
</TABLE>
See notes to financial statements.
6
<PAGE>
TIAA REAL ESTATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS (Unaudited)
Note 1--Organization
The TIAA Real Estate Account ("Account") is a segregated investment account of
Teachers Insurance and Annuity Association of America ("TIAA") and was
established by resolution of TIAA's Board of Trustees on February 22, 1995 under
the insurance laws of the State of New York for the purpose of funding variable
annuity contracts issued by TIAA.
The Account commenced operations on July 3, 1995 with a $100,000,000 seed money
investment by TIAA. TIAA purchased 1,000,000 Accumulation Units in the Account
and such Units share in the pro rata investment experience of the Account and
are subject to the same valuation procedures and expense deductions as all other
Accumulation Units of the Account. The initial registration statement of the
Account filed by TIAA with the Securities and Exchange Commission ("Commission")
under the Securities Act of 1933 became effective on October 2, 1995. The
Account began to offer Accumulation Units and Annuity Units to participants
other than TIAA starting October 2, and November 1, 1995, respectively. At June
30, 1996, amounts retained by TIAA in the Account remained at 1,000,000
Accumulation Units with a total value of $106,404,500.
TIAA will redeem a portion of its seed money Accumulation Units monthly (at the
net asset value at the time of redemption), according to a five year repayment
schedule approved by the State of New York Insurance Department. This schedule
requires TIAA to begin redeeming the seed money Accumulation Units on October 2,
1997, or on the date the Account's net assets first reach $200 million,
whichever comes first.
The investment objective of the Account is a favorable long-term rate of return
primarily through rental income and capital appreciation from real estate
investments owned by the Account. The Account will also invest in
publicly-traded securities and other instruments to maintain adequate liquidity
for operating expenses and capital expenditures and to make benefit payments.
TIAA employees, under the direction of TIAA's Board of Trustees and its Mortgage
Committee, manage the investment of the Account's assets pursuant to investment
management procedures adopted by TIAA for the Account. TIAA's investment
management decisions for the Account are subject to review by the Account's
independent fiduciary, Institutional Property Consultants, Inc. TIAA also
provides all portfolio accounting and related services for the Account.
TIAA-CREF Individual & Institutional Services, Inc. ("Services"), a subsidiary
of TIAA which is registered with the Commission as a broker-dealer and is a
member of the National
7
<PAGE>
Association of Securities Dealers, Inc., provides administrative and
distribution services pursuant to a Distribution and Administrative Services
Agreement with the Account.
Note 2--Significant Accounting Policies
The following is a summary of the significant accounting policies followed by
the Account, which are in conformity with generally accepted accounting
principles.
Valuation of Real Estate Properties: Investments in real estate properties are
stated at fair value, as determined in accordance with procedures approved by
the Mortgage Committee of the Board of Trustees and in accordance with the
responsibilities of the Board as a whole; accordingly, the Account does not
record depreciation. Fair value for real estate properties is defined as the
most probable price for which a property will sell in a competitive market under
all conditions requisite to a fair sale. Determination of fair value involves
subjective judgement because the actual market value of real estate can be
determined only by negotiation between the parties in a sales transaction. Real
estate properties owned by the Account are initially valued at their respective
purchase prices (including acquisition costs). Subsequently, independent
appraisers value each real estate property at least once a year. The independent
fiduciary must approve all independent appraisers that the Account uses. The
independent fiduciary can also require additional appraisals if it believes that
a property's value has changed materially or otherwise to assure that the
Account is valued correctly. TIAA performs a valuation review of each real
estate property on a quarterly basis and updates the property value if it
believes that the value of the property has changed since the previous valuation
review or appraisal. The independent fiduciary reviews and approves any such
valuation adjustments which exceed certain prescribed limits. TIAA continues to
use the revised value to calculate the Account's net asset value until the next
valuation review or appraisal.
Valuation of Marketable Securities: Equity securities listed or traded on any
United States national securities exchange are valued at the last sales price as
of the close of the principal securities exchange on which such securities are
traded or, if there is no sale, at the mean of the last bid and asked prices.
Short-term money market instruments are stated at market value. Portfolio
securities for which market quotations are not readily available are valued at
fair value as determined in good faith under the direction of the Mortgage
Committee of the Board of Trustees and in accordance with the responsibilities
of the Board as a whole.
8
<PAGE>
Accounting for Investments: Real estate transactions are accounted for as of the
date on which the purchase or sale transactions for the real estate properties
close (settlement date). Rent from real estate properties consists of all
amounts earned under tenant operating leases, including base rent, recoveries of
real estate taxes and other expenses and charges for miscellaneous services
provided to tenants. Rental income is recognized in accordance with the billing
terms of the lease agreements. The Account bears the direct expenses of the real
estate properties owned. These expenses include, but are not limited to, fees
paid to local property management companies, property taxes, utilities,
maintenance, repairs, insurance and other operating and administrative costs. An
estimate of the net operating income earned from each real estate property is
accrued by the Account on a daily basis and such estimates are adjusted as soon
as actual operating results are determined. Realized gains and losses on real
estate transactions are accounted for under the specific identification method.
Securities transactions are accounted for as of the date the securities are
purchased or sold (trade date). Interest income is recorded as earned and, for
short-term money market instruments, includes accrual of discount and
amortization of premium. Dividend income is recorded on the ex-dividend date.
Realized gains and losses on security transactions are accounted for on the
average cost basis.
Federal Income Taxes: Based on provisions of the Internal Revenue Code, no
federal income taxes are attributable to the net investment experience of the
Account.
Note 3--Management Agreements
All services necessary for the operation of the Account are provided, at cost,
by TIAA and Services. TIAA provides investment management services for the
Account, while distribution and administrative services are provided by Services
in accordance with a Distribution and Administrative Services Agreement between
the Account and Services. TIAA also provides a liquidity guarantee to the
Account, for a fee, to ensure that funds are available to meet participant
transfer and cash withdrawal requests in the event that the Account's cash flows
and liquid investments are insufficient to fund such requests. TIAA also
receives a fee for assuming certain mortality and expense risks.
Fee payments are made from the Account on a daily basis to TIAA and Services
according to formulas established each year with the objective of keeping the
fees as close as possible to the Account's actual expenses. Any differences
between actual expenses and daily charges are adjusted quarterly.
9
<PAGE>
Note 4--Real Estate Properties
Had the Account's real estate properties which were purchased in 1996 been
acquired at the beginning of the current period (January 1, 1996), rental income
and real estate property level expenses and taxes for the six months ended June
30, 1996 would have increased by approximately $1,532,000 and $615,000,
respectively. In addition, interest income for the six months ended June 30,
1996 would have decreased by approximately $746,000. Accordingly, the total pro
forma effect on the Account's net investment income for the six months ended
June 30, 1996 would have been an increase of approximately $171,000, if the real
estate properties acquired during 1996 had been acquired at the beginning of the
period.
Note 5--Leases
The Account's real estate properties are leased to tenants under operating lease
agreements which expire on various dates through 2015. Aggregate minimum annual
rentals for the properties owned, excluding short-term residential leases, are
as follows:
Years Ending
December 31,
------------
1996 $ 4,113,000
1997 3,971,000
1998 3,814,000
1999 3,558,000
2000 3,149,000
Thereafter 17,398,000
-----------
Total $36,003,000
===========
Certain leases provide for additional rental amounts based upon the recovery of
actual operating expenses in excess of specified base amounts.
10
<PAGE>
Note 6--Condensed Financial Information
Selected condensed financial information for an Accumulation Unit of the Account
is presented below.
July 3, 1995
For the Six (Commencement
Months Ended of Operations) to
June 30, 1996 December 31, 1995
------------- -----------------
(Unaudited)
Per Accumulation Unit Data:
Rental income .................................. $ 2.819 $ 0.159
Real estate property
level expenses and taxes ...................... .884 0.042
-------- --------
Real estate income, net 1.935 0.117
Dividends and interest ......................... 1.680 2.716
-------- --------
Total income 3.615 2.833
Expense charges (1) ............................ .231 0.298
-------- --------
Investment income, net 3.384 2.535
Net realized and unrealized
gain on investments ........................... .455 0.031
-------- --------
Net increase in
Accumulation Unit Value ........................ 3.839 2.566
Accumulation Unit Value:
Beginning of period ............................ 102.566 100.000
-------- --------
End of period .................................. $106.405 $102.566
======== ========
Total return .................................... 3.74% 2.57%
Ratios to Average Net Assets:
Expenses (1) .................................. .22% 0.30%
Investment income, net ......................... 3.26% 2.51%
Portfolio turnover rate:
Real estate properties ......................... 0% 0%
Securities ..................................... 19.67% 0%
Thousands of Accumulation Units
outstanding at end of period ................... 1,561 1,172
(1) Expense charges per Accumulation Unit and the Expenses Ratio to Average Net
Assets exclude real estate property level operating expenses and taxes. If
included, the expense charge per Accumulation Unit for the six months ended
June 30, 1996 would be $1.115 ($0.340 for the period July 3, 1995 through
December 31, 1995) and the Expenses Ratio to Average Net Assets for the six
months ended June 30, 1996 would be 1.07% (0.34% for the period July 3, 1995
through December 31, 1995).
11
<PAGE>
Note 7--Accumulation Units
Changes in the number of Accumulation Units outstanding were as follows:
July 3, 1995
For the Six (Commencement
Months Ended of Operations) to
June 30, 1996 December 31, 1995
------------- ------------------
(Unaudited)
Accumulation Units:
Credited for premiums
and TIAA seed money investment ....... 29,214 1,004,905
Credited for net transfers
and disbursements .................... 359,370 167,593
Outstanding:
Beginning of period ................... 1,172,498 --
--------- ---------
End of period ......................... 1,561,082 1,172,498
========= =========
Note 8--Commitments
During the normal course of business, the Account enters into discussions and
agreements to purchase or sell real estate properties. As of June 30, 1996, the
Account had outstanding commitments to purchase real estate properties (subject
to various closing conditions) of approximately $20.5 million. Of that amount, a
purchase of real estate property totalling approximately $13.0 million was
closed in July 1996.
12
<PAGE>
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS (Unaudited)
JUNE 30, 1996
REAL ESTATE PROPERTIES--50.90%
Location Description Value
-------- ----------- -----
Atlanta, Georgia(1) Apartments ................. $15,705,000
El Paso, Texas(2) Industrial building ........ 4,500,000
Fridley, Minnesota(1) Industrial building ........ 4,150,000
Littleton, Colorado(1) Apartments ................. 17,664,248
Ocoee, Florida(1) Shopping center ............ 7,365,000
Orlando, Florida(1) Apartments ................. 12,529,106
Phoenix, Arizona(1) Office building ............ 10,500,000
Raleigh, North Carolina(1) Shopping center ............ 6,769,308
Raleigh, North Carolina(1) Shopping center ............ 6,702,718
-----------
TOTAL REAL ESTATE PROPERTIES
(Cost $85,317,574) ................................. 85,885,380
-----------
- ----------
(1) Fee interest
(2) Leasehold interest
MARKETABLE SECURITIES--49.10%
Shares Issuer Value
------ ------ -----
REAL ESTATE INVESTMENT TRUSTS--2.93%:
30,000 Associated Estates Realty Corporation . . . . . 630,000
25,000 Avalon Properties, Inc. . . . . . . . . . . . . 543,750
25,000 Camden Property Trust . . . . . . . . . . . . . 593,750
29,000 Cali Realty Corporation . . . . . . . . . . . . 703,250
29,000 CBL & Associates Properties, Inc. . . . . . . . 648,875
20,000 Colonial Properties Trust . . . . . . . . . . . 485,000
25,000 Hospitality Properties Trust . . . . . . . . . 668,750
26,000 Weeks Corporation . . . . . . . . . . . . . . . 676,000
---------
TOTAL REAL ESTATE INVESTMENT TRUSTS
(Cost $4,825,683) . . . . . . . . . . . . . . . . . 4,949,375
---------
See notes to financial statements.
13
<PAGE>
Principal Issuer, Coupon and Maturity Date Value
- --------- -------------------------------- -----
COMMERCIAL PAPER--41.53%:
$6,279,000 Associates Corporation of North America
5.27% 07/03/96. . . . . . . . . . . . . . . . . $ 6,276,007
10,000,000 Coca-Cola Company
5.30% 07/29/96. . . . . . . . . . . . . . . . . 9,955,755
7,650,000 Conagra, Inc.
5.55% 07/29/96. . . . . . . . . . . . . . . . . 7,615,601
5,200,000 Dupont (E.I.) De Nemours & Co.
5.35% 07/24/96. . . . . . . . . . . . . . . . . 5,180,965
7,320,000 Goldman Sachs Group
5.33% 08/05/96. . . . . . . . . . . . . . . . . 7,279,826
4,860,000 Heinz Corporation
5.36% 07/11/96. . . . . . . . . . . . . . . . . 4,851,742
4,893,000 Phillip Morris Co.
5.28% 08/01/96. . . . . . . . . . . . . . . . . 4,869,111
9,120,000 Schering Corporation
5.27% 07/16/96. . . . . . . . . . . . . . . . . 9,097,681
5,000,000 UBS Finance, Inc.
5.58% 07/01/96. . . . . . . . . . . . . . . . . 4,999,234
10,000,000 Whirlpool Finance Corporation
5.38% 08/07/96. . . . . . . . . . . . . . . . . 9,941,545
------------
TOTAL COMMERCIAL PAPER
(Amortized cost $70,085,407) . . . . . . . . . . . . . . 70,067,467
------------
GOVERNMENT AGENCIES--4.64%:
8,000,000 Federal National Mortgage Association
5.20% 11/14/96. . . . . . . . . . . . . . . . . 7,837,674
------------
TOTAL GOVERNMENT AGENCIES
(Amortized cost $7,842,844). . . . . . . . . . . . . . . 7,837,674
------------
TOTAL MARKETABLE SECURITIES
(Amortized cost $82,753,934). . . . . . . . . . . . . . . . . 82,854,516
------------
TOTAL INVESTMENTS--100.00%
(Cost $168,071,508) . . . . . . . . . . . . . . . . . . . . . $168,739,896
============
See notes to financial statements.
14
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The TIAA Real Estate Account (the "Account") began operating on July 3,
1995 and interests in the Account began being offered to participants on October
2, 1995.
The Account's first real estate acquisition closed on November 22, 1995.
Through June 30, 1996, the Account acquired a total of nine real estate
properties, representing 50.90% of the Account's total investment portfolio,
including two industrial properties, three neighborhood shopping centers, one
office property and three apartment complexes. The Account purchased an
additional shopping center property in early July, 1996. The Account continues
to pursue suitable property acquisitions, and is currently in various stages of
negotiations with a number of prospective sellers. While attractive acquisition
prospects are available in the current market, significant competition exists
for the desirable properties.
As of June 30 1996, 49.10% of the Account's portfolio was invested in
marketable securities. These investments consisted of eight real estate
investment trusts (REITs), representing 2.93% of the portfolio, and various
short-term instruments, representing 46.17% of the portfolio.
Results of Operations
- ---------------------
The Account's net investment income, after deduction of all expenses, was
$2,537,641 for the three months ended June 30, 1996 and $4,720,855 for the six
months ended June 30, 1996. In addition, the Account had net realized and
unrealized gains on investments of $656,834 and $688,885 for the three month and
six month periods ended June 30, 1996, respectively. Net unrealized gains on
real estate properties accounted for approximately 74% and 88% of the net change
in unrealized appreciation for those periods. Such gains resulted from the
periodic revaluations of the Account's properties, which gains were based, in
part, on our experience in operating the properties providing us with better
estimates of future income and expenses, and, in part, to increasing prices for
certain property types held by the Account. The Account's total return was 2.03%
and 3.74% for the three month and six month periods ended June 30, 1996,
respectively, and its cumulative total return was 5.11% for the period from
October 2, 1995 (the initial effective date of the Account's registration
statement) to June 30, 1996.
Approximately 57% of the Account's total investment income received during
the quarter ended June 30, 1996 was generated by the Account's real estate
holdings, with the remainder generated by marketable securities investments.
However, as the Account
15
<PAGE>
approaches its goal of being approximately 70% to 80% invested in real estate,
the Account's future investment income will be affected to a greater degree by
its real estate holdings. Assuming little change in current economic conditions,
this anticipated increase in real estate holdings should have a positive impact
on the Account's total return.
Gross real estate income was $2,271,715 for the three months ended June 30,
1996 and $3,933,580 for the six months ended June 30, 1996. Interest income on
the Account's short-term investments for the three month and six month periods
ended June 30, 1996 totaled $1,137,192 and $2,283,539, respectively. Dividend
income on the Account's investments in REITs totaled $50,825 and $60,825,
respectively, for the same periods. Total property-level expenses for the three
month period were $723,903, of which $212,886 were attributable to real estate
taxes and $511,017 to other operating expenses. Total property-level expenses
for the six month period were $1,234,293 of which $405,405 were attributable to
real estate taxes and $828,888 to other operating expenses. The Account also
incurred expenses for the three month and six month periods ended June 30, 1996
of $136,267 and $180,588, respectively, for investment advisory services
provided by TIAA, $48,135 and $123,311, respectively, for administrative and
distribution services provided by TIAA-CREF Individual and Institutional
Services, Inc. and $13,786 and $18,897, respectively, for the mortality and
expense risks assumed and the liquidity guarantee provided by TIAA.
Liquidity and Capital Resources
- -------------------------------
In addition to TIAA's initial $100 million seed money investment, the
Account has received over $61.2 million in premiums and net participant
transfers from accumulations in other TIAA and CREF accounts since it commenced
operations through June 30, 1996, and has earned $7,361,252 in net investment
income. Real estate properties costing $85,317,574 million have been purchased
through June 30, 1996. At June 30, 1996, the Account's liquid assets (i.e., its
short-term investments, REITs and cash) had a value of $83,200,719. It is
anticipated that much of this amount will be used by the Account to purchase
additional suitable real estate properties. The remaining assets will continue
to be invested in marketable securities to meet expense needs and redemption
requests (e.g., cash withdrawals or transfers).
If the Account's cash flows from operating activities, participant
transactions and liquid investments are not enough to meet its cash needs
including redemption requests, TIAA's general account will purchase liquidity
units in accordance with the liquidity guarantee.
16
<PAGE>
TIAA has agreed to begin redeeming the Accumulation Units related to its
seed money investment on October 2, 1997, or on the date the Account's net
assets reach $200 million, whichever comes first. We expect the Account's net
assets to reach the $200 million threshold shortly. At such time, TIAA will
begin redeeming a portion of the Accumulation Units related to its seed money
investment monthly, according to a five-year repayment schedule approved by the
New York Insurance Department.
No major capital expenditures for any of the properties purchased through
June 30, 1996 have been made or are expected to be made in 1996. There are no
leases expiring in the industrial or office properties in 1996 and only a small
portion of the leased space in the neighborhood shopping centers is due to
expire in 1996. We do not expect the Account to incur any major construction
costs or leasing commissions in order to re-lease that space. For the apartment
complexes, we expect the Account to incur only routine recurring costs to
re-lease apartments that become vacant, i.e. painting and carpet cleaning or
replacement.
Effects of Inflation
- --------------------
In recent years, inflation has been modest. To the extent that inflation
may increase property operating expenses in the future, such increases can
generally be billed to tenants either through contractual lease provisions in
office, industrial, and retail properties or through rent increases in apartment
complexes. However, to the extent there is unrented space in a property, the
Account may not be able to recover the full amount of such increases in
operating expenses.
17
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
There are no material current or pending legal proceedings that the Account
is a party to, or to which the Account'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 5. OTHER INFORMATION.
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
(3) (A) Charter of TIAA (as amended) *
(B) Bylaws of TIAA (as amended)
(4) (A) Forms of RA, GRA, GSRA, SRA, and IRA Real Estate Account
Endorsements *
(B) Forms of Income-Paying Contracts *
(10) (A) Independent Fiduciary Agreement by and among TIAA, the Registrant,
and Institutional Property Consultants, Inc. *
(B) Custodial Services Agreement by and between TIAA and Morgan
Guaranty Trust Company of New York with respect to the Real Estate
Account *
(C) Distribution and Administrative Services Agreement by and between
TIAA and TIAA-CREF Individual & Institutional Services, Inc. (as
amended) (filed previously as Exhibit (1)) *
(27) Financial Data Schedule of the Account's Financial Statements for
the three months ended June 30, 1996
- ----------
* Incorporated herein by reference to Post-Effective Amendment No. 2 to the
Account's Registration Statement on Form S-1 filed April 30, 1996 (File No.
33-92990).
18
<PAGE>
(b) REPORTS ON 8-K. The Account filed reports on Form 8-K on on June
24, 1996 under Item 5 of the form with respect to the acquisition
of a property for its portfolio.
19
<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.
DATE: August 8, 1996
TIAA REAL ESTATE ACCOUNT
By: TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By: /s/ Peter C. Clapman
------------------------------
Peter C. Clapman
Senior Vice President and
Chief Counsel, Investments
DATE: August 8, 1996
By: /s/ Richard L. Gibbs
------------------------------
Richard L. Gibbs
Executive Vice President
(Principal Accounting Officer)
20
BYLAWS
OF
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
As Amended February 21, 1996
ARTICLE ONE
Stockholders
Section 1. Annual Meeting. The annual meeting of stockholders for the
election of trustees and for the transaction of such other business as may
properly come before the meeting shall be held in the month of November each
year at the office of the Association in the City of New York on a day and at an
hour specified by notice mailed at least thirty days in advance. The notice
shall be in writing and shall be signed by the chairman, or the president, or a
vice president, or the secretary.
Special meetings of the stockholders may be held at the said office of the
Association whenever called by the chairman, or by the president, or by order of
the board of trustees, or by the holders of at least one-third of the
outstanding shares of stock of the Association, or may be held subject to the
provisions of the emergency bylaws of the Association.
Section 2. Notice. It shall be the duty of the secretary not less than ten
nor more than forty days prior to the date of each meeting of the stockholders
to cause a notice of the meeting to be mailed to each stockholder.
Section 3. Voting. At all meetings of stockholders each stockholder shall
be entitled to one vote upon each share of stock owned by him of record on the
books of the Association ten days before the meeting. Stockholders may vote in
person or by proxy appointed in writing.
Section 4. Quorum. The presence in person or by proxy of the holders of a
majority of the shares in the Association shall be necessary to constitute a
quorum at any meeting of stockholders.
Section 5. Telephonic Participation. At all meetings of stockholders or any
committee thereof, stockholders may participate by means of a conference
telephone or similar communications equipment allowing all persons participating
in the meeting to hear each other at the same time. Participation by such means
shall constitute presence in person at a meeting.
ARTICLE TWO
Trustees
Section 1. General Management. The general management of the property,
business and affairs of the Association shall be vested in the board of trustees
provided by the charter. A trustee need not be a stockholder.
-1-
<PAGE>
Section 2. Quorum. One-third of the trustees shall constitute a quorum at
all meetings of the board. If less than a quorum shall be present at any
meeting, a majority of those present may adjourn the meeting from time to time
until a quorum shall attend. In case of a vacancy among the trustees of any
class through death, resignation or other cause, a successor to hold office for
the unexpired portion of the term may be elected at any meeting of the board at
which a quorum shall be present. Such successors shall not take office nor
exercise the duties thereof until ten days after written notice of their
election shall have been filed in the office of the Superintendent of Insurance
of the State of New York.
Section 3. Annual Meeting. There shall be a meeting of the board of
trustees in the month of November each year on a day and at an hour specified in
a notice mailed at least ten days and not more than twenty days in advance. This
shall be known as the annual meeting of the board of trustees. At this meeting
the board shall elect officers, appoint committees and transact such other
business as shall properly come before the meeting.
Section 4. Other Meetings. Stated meetings of the board of trustees shall
be held on such dates as the board by standing resolution may fix. No notice of
such stated meetings need be given. Special meetings of the board may be called
by order of the chairman, the president, or the executive committee by notice
mailed at least one week prior to the date of such meeting, and any business may
be transacted at the meeting.
Section 5. Telephonic Participation. At all meetings of the board of
trustees or any committee thereof, trustees may participate by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
Section 6. Action Without a Meeting. Where time is of the essence, but not
in lieu of a regularly scheduled meeting of the board of trustees or committee
thereof, any action required or permitted to be taken by the board, or any
committee thereof, may be taken without a meeting if all members of the board or
the committee consent in writing to the adoption of a resolution authorizing the
action. The resolution and the written consents thereto by the members of the
board or committee shall be filed with the minutes of the proceedings of the
board or committee.
Section 7. Trustees Compensation and Expenses. A trustee may be paid an
annual stipend and fees and such other compensation or emolument in any amount
first authorized by the board in accordance with Section 1 of Article Five
hereof, including, but not limited to, a deferred compensation benefit, for
meetings of the board that he/she attends and for services that he/she renders
on or for committees or subcommittees of the board; and each trustee shall be
reimbursed for transportation and other expenses incurred by him/her in serving
the Association.
Section 8. Chairman. The chairman, and in his absence the president, shall
preside at all meetings of the board.
ARTICLE THREE
Officers
Section 1. Election. At each annual meeting the board of trustees shall
elect the executive officers of the corporation including a chairman, a
president, one or more vice presidents, and such other executive officers as
they may determine. Each such executive officer shall hold office until the
close of the next annual meeting of the board
-2-
<PAGE>
or, if earlier, until his retirement, death, resignation or removal. The board
may appoint other officers and agents, assign titles to them and determine their
duties; such officers and agents shall hold office during the pleasure of the
board of trustees. It may appoint persons to act temporarily in place of any
officers of the Association who may be ab-sent, incapacitated, or for any other
reason unable to act or may delegate such authority to the chief executive
officer.
Section 2. Removal of Officers. Any officer elected by the board of
trustees may be removed by the affirmative votes of a majority of all the
trustees holding office. Any other officer may be removed by the affirmative
votes of a majority of all members of the executive committee holding office.
Section 3. Removal of Other Employees. All other agents and employees shall
hold their positions at the pleasure of the executive committee or of such
executive officer as the executive committee may clothe with the powers of
engaging and dismissing.
Section 4. Qualifications. The chairman and the president shall be members
of the board of trustees, but none of the other officers need be a trustee. One
person may hold more than one office, except that no person shall be both
president and secretary.
Section 5. Chief Executive Officer. The board of trustees shall designate
either the chairman or the president as chief executive officer. Subject to the
control of the board of trustees and the provisions of these bylaws, the chief
executive officer shall be charged with the management of the affairs of the
Association, and shall perform such duties as are not specifically delegated to
other officers of the Association. He shall be ex officio a member of all
standing committees except the nominating and personnel com-mittee, audit
committee and the committee on reimbursement agreements with CREF. He shall
report from time to time to the board of trustees on the affairs of the
Association.
Section 6. Chairman. The chairman, when present, shall preside at all
meetings of the stockholders and of the board. He shall be ex officio chairman
of the executive committee. He may appoint trustee committees, except those
appointed by the board of trustees, and may appoint members to fill vacancies on
trustee committees appointed by the board when such occur between meetings of
the trustees. If the chairman is not the chief executive officer, he shall, in
addition to the foregoing, perform such functions as are delegated to him by the
chief executive officer.
Section 7. President. The president, in the event of the absence or
disability of the chairman, shall perform the duties of the chairman. If the
president is not the chief executive officer, he shall assist the chief
executive officer in his duties and shall perform such functions as are
delegated to him by the chief executive officer.
Section 8. Absence or Disability of Chief Executive Officer. In the absence
or disability of the chief executive officer, the president, if he is not the
chief executive officer, or the chairman, if he is not the chief executive
officer, or if neither is available, a vice president so designated by the
executive committee or chief executive officer shall perform the duties of the
chief executive officer, unless the board of trustees otherwise provides and
subject to the provisions of the emergency bylaws of the Association.
Section 9. Secretary. The secretary shall give all required notices of
meetings of the board of trustees, and shall attend and act as secretary at all
meetings of the board and of the executive committee and keep the records
thereof. He shall keep the seal of the corporation, and shall perform all duties
incident to the office of secretary and such other duties as from time to time
may be assigned to him by the board of trustees, the executive committee, or the
chief executive officer.
-3-
<PAGE>
Section 10. Other Officers. The chief executive officer shall determine the
duties of the executive officers other than the chairman, president, and
secretary and of all officers other than executive officers, and he may assign
titles to and determine the duties of non-officers.
ARTICLE FOUR
Committees
Section 1. Appointment. At each annual meeting of the board of trustees,
the board shall appoint an executive committee, a finance committee, a mortgage
committee, a nominating and personnel committee, an audit committee, a committee
on reimbursement agreements with CREF, a committee on products and services, and
a committee on corporate governance and social responsibility, each member of
which shall hold office until the close of the next annual meeting of the board
and until a successor shall be appointed or until the member shall cease to be a
trustee except that for the audit committee, the board may specify a different
period of membership. The board of trustees, the executive committee, or the
chairman may appoint such other trustee committees and subcommittees as may from
time to time be found necessary or convenient for the proper conduct of the
business of the Association, and designate their duties.
Section 2. Executive Committee. The executive committee shall consist of at
least seven trustees including the chairman and the president. Three members
shall constitute a quorum, among whom only one salaried officer may be counted
for that purpose. The executive committee shall meet in regular meeting as it
may from time to time determine, and in special meeting whenever called by the
chairman, and shall be vested with full powers of the board of trustees during
intervals between the meetings of the board in all cases in which specific
instructions shall not have been given by the board of trustees and, in
particular, said committee:
(a) shall have general supervision of the contracts issued by the
Association, and of all matters relating to the selection of risks, the
determination of premium rates, and of any other questions of detail in the
conduct of the business which may be referred to the executive committee by
resolutions of the board of trustees.
(b) Shall have supervision of the rules and methods for recording the
vouchers, accounts, receipts and disbursements of the Association.
(c) Shall, in the event of an acute emergency, as defined by Article
Seven-A--Insurance, of the New York State Defence Emergency Act, (Section 9177,
Unconsolidated Laws of New York) and any amendments thereof, be responsible for
the emergency management of the Association as provided in the emergency bylaws
of the Association.
Section 3. Finance Committee. The finance committee shall consist of the
chief executive officer, of three other trustees, and such additional trustees,
if any, as the board of trustees or the executive committee may appoint. Two
members shall constitute a quorum, among whom only one salaried officer of the
Association may be counted for that purpose.
(a) Subject to review by the board of trustees the finance committee shall
determine the investment policies of the Association.
-4-
<PAGE>
(b) The finance committee shall supervise the investment of the funds of
the Association -- other than investments in real estate and real estate loans
- -- including purchase, sale, exchange or conversion of securities and loans on
collateral. No loan or investment other than policy loans, real estate and real
estate mortgages shall be made or disposed of without authorization or approval
by the finance committee.
Section 4. Mortgage Committee. The mortgage committee shall consist of the
chief executive officer, of three other trustees, and such additional trustees,
if any, as the board of trustees or the executive committee may appoint. Two
members shall constitute a quorum, among whom only one salaried officer of the
Association may be counted for that purpose.
Subject to the provision of Article Four, Section 3 (a) the mortgage
committee shall supervise the investment of the funds of the Association in
loans secured by real estate mortgages and in real estate. No such investment
shall be made or disposed of without authorization or approval by the mortgage
committee.
Section 5. Nominating and Personnel Committee. The nominating and personnel
committee shall consist of five trustees who are not officers or salaried
employees of the Association and whose terms do not expire in the year following
their appointment. Three members shall constitute a quorum. In the year
following their appointment the committee shall nominate executive officers and
the standing committees for the annual meeting of the board of trustees, shall
designate the principal officers of the Association, shall recommend to the
board of trustees the annual compensation of the principal officers and of any
salaried employee if the level of compensation to be paid to such employee is
equal to, or greater than, the compensation received or to be received by any
principal officer, nominate trustees to fill interim vacancies and; if requested
by the TIAA Board of Overseers, shall recommend the names of persons for
election as trustees at the annual meeting of the stockholders. In addition, the
committee shall approve the titles and base salaries of all appointed officers
and the base salaries of executive officers, other than those designated as
principal officers or those officers to be paid on an equal or greater level of
compensation with principal officers, and shall recommend the provisions of any
incentive salary compensation program(s) and determine the amounts of any
incentive salary payments for those officers included in any incentive salary
plan.
Section 6. Audit Committee. The audit committee shall consist of at least
three, and not more than five, trustees who are not officers or salaried
employees of the Association. Two members shall constitute a quorum. The
committee shall itself, or through public accountants or otherwise, make such
audits and examinations of the records and affairs of the Association as it may
deem necessary.
Section 7. Committee on Reimbursement Agreements. The committee on
reimbursement agreements shall consist of three trustees who are not officers or
employees of the Association. The committee shall review the reimbursement
agreements among TIAA, CREF, TIAA-CREF Individual & Institutional Services,
Inc., and TIAA-CREF Investment Management, Inc., and make recommendations
regarding them to the board of trustees.
Section 8. Committee on Products and Services. The members of the committee
on products and services shall consist of at least seven trustees. A quorum
shall consist of a majority of the members and not less than a quorum shall meet
jointly with the CREF Committee on Products and Services to review and oversee
the design, development, improvement, and marketing of new and existing products
and services. In addition, the committee shall review the specifications for and
oversee the implementation stages of new technology-based services and computer
programs at participating institutions.
-5-
<PAGE>
Section 9. Committee on Corporate Governance and Social Responsibility. The
committee on corporate governance and social responsibility shall consist of not
less than five trustees and such additional trustees as the board of trustees
may appoint. No such trustee shall be an officer or salaried employee of TIAA.
A committee quorum shall consist of a majority of the members. The
committee is responsible for addressing all corporate social responsibility and
corporate governance issues including the voting of TIAA shares and the
initiation of appropriate shareholder resolutions. In addition, the committee
will develop and recommend specific corporate policy in these areas for
consideration by the TIAA board of trustees.
Section 10. Reports. Within a reasonable time after their meetings, all
such committees and subcommittees shall report their transactions to each
trustee.
ARTICLE FIVE
Salaries, Compensation and Pensions
to Trustees, Officers and Employees
Section 1. Salaries and Pensions. The Association shall not pay any salary,
compensation or emolument in any amount to any officer, deemed by a committee or
committees of the board to be a principal officer pursuant to subsection (b) of
Section 1202 of the Insurance Law of the State of New York, or to any salaried
employee of the Association if the level of compensation to be paid to such
employee is equal to, or greater than, the compensation received by any of its
principal officers, or to any trustee thereof, unless such payment be first
authorized by a vote of the board of trustees of the Association. The
Association shall not make any agreement with any of its officers or salaried
employees whereby it agrees that for any services rendered or to be rendered he
shall receive any salary, compensation or emolument that will extend beyond a
period of thirty-six months from the date of such agreement, except as
specifically permitted by the Insurance Law of the State of New York. No
principal officer or employee of the class described in the first sentence of
this section, who is paid a salary for his services shall receive any other
compensation, bonus or emolument from the Association, directly or indirectly,
except in accordance with a plan recommended by a committee of the board
pursuant to subsection (b) of Section 1202 of the Insurance Law of the State of
New York and approved by the board of trustees. The Association shall not grant
any pension to any officer or trustee, or to any member of his family after his
death, except that the Association may pursuant to the terms of a retirement
plan and other appropriate staff benefit plans adopted by the board provide for
any person who is or has been a salaried officer or employee, a pension payable
at the time of retirement by reason of age or disability and also life
insurance, health insurance and disability benefits.
Section 2. Prohibitions. No trustee or officer of the Association shall
receive, in addition to fixed salary or compensation, any money or valuable
thing, either directly or indirectly, or though any substantial interest in any
other corporation or business unit, for negotiating, procuring, recommending or
aiding in any purchase or sale of property, or loan, made by the Association or
any affiliate or subsidiary thereof, nor be pecuniarily interested either as
principal, coprincipal, agent or beneficiary, either directly or indirectly, or
through any substantial interest in any other corporation or business unit, in
any such purchase, sale or loan; provided that nothing herein contained shall
prevent the Association from making a loan upon a policy held therein by the
borrower not in excess of the net reserve value thereof.
-6-
<PAGE>
ARTICLE SIX
Indemnification of Trustees, Officers and Employees
The Association shall indemnify, in the manner and to the full extent
permitted by law, each person made or threatened to be made a party to any
action, suit or proceeding, whether or not by or in the right of the
Association, and whether civil, criminal, administrative, investigative or
otherwise, by reason of the fact that he or his testator or intestate is or was
a trustee, officer or employee of the Association or, while a trustee, officer
or employee of the Association, served any other corporation or organization of
any type or kind, domestic or foreign, in any capacity at the request of the
Association. To the full extent permitted by law such indemnification shall
include judgments, fines, amounts paid in settlement, and expenses, including
attorneys' fees. No payment of indemnification, advance or allowance under the
foregoing provisions shall be made unless a notice shall have been filed with
the Superintendent of Insurance of the State of New York not less than thirty
days prior to such payment specifying the persons to be paid, the amounts to be
paid, the manner in which payment is authorized and the nature and status, at
the time of such notice, of the litigation or threatened litigation.
ARTICLE SEVEN
Execution of Instruments
The board of trustees or the executive committee shall designate who is
authorized to execute certificates of stock, proxies, powers of attorney, deeds,
leases, releases of mortgages, satisfaction pieces, checks, drafts, contracts
for insurance or annuity and instruments relating thereto, and all other
contracts and instruments in writing necessary for the Association in the
management of its affairs, and to attach the Association's seal thereto; and may
further authorize the extent to which such execution may be done by facsimile
signature.
ARTICLE EIGHT
Disbursements
No disbursements of $100 or more shall be made unless the same be evidenced
by a voucher signed by or on behalf of the person, firm or corporation receiving
the money and correctly describing the consideration for the payment, and if the
same be for services and disbursements, setting forth the services rendered and
an itemized statement of the disbursements made, and if it be in connection with
any matter pending before any legislative or public body, or before any
department or officer of any government, correctly describing in addition the
nature of the matter and of the interest of such corporation therein, or if such
voucher cannot be obtained, by an affidavit stating the reasons therefor and
setting forth the particulars above mentioned.
ARTICLE NINE
Corporate Seal
The seal of the Association shall be circular in form and shall contain the
words "Teachers Insurance and Annuity Association of America, New York,
Corporate Seal, 1918," which seal shall be kept in the custody of the secretary
of the Association and be affixed to all instruments requiring such corporate
seal.
-7-
<PAGE>
ARTICLE TEN
Amendments
Article One of these bylaws can be amended or repealed only by the
affirmative vote of the holders of a majority of the outstanding shares of the
capital stock of the Association, such vote being cast at a meeting held upon
notice stating that such meeting is to vote upon a proposed amendment or repeal
of such bylaw.
Any other bylaw may be amended or repealed at any meeting of the board of
trustees provided notice of the proposed amendment or repeal shall have been
mailed to each trustee at least one week and not more than two weeks prior to
the date of such meeting.
-8-
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000946155
<NAME> TIAA REAL ESTATE ACCOUNT
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 168,071,508
<INVESTMENTS-AT-VALUE> 168,739,896
<RECEIVABLES> 10,700,000
<ASSETS-OTHER> 2,803,070
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 182,242,966
<PAYABLE-FOR-SECURITIES> 10,832,809
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,341,829
<TOTAL-LIABILITIES> 13,174,638
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 1,561,082
<SHARES-COMMON-PRIOR> 1,396,994
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 169,068,328
<DIVIDEND-INCOME> 50,825
<INTEREST-INCOME> 1,137,192
<OTHER-INCOME> 1,547,812
<EXPENSES-NET> (198,188)
<NET-INVESTMENT-INCOME> 2,537,641
<REALIZED-GAINS-CURRENT> (370)
<APPREC-INCREASE-CURRENT> 657,204
<NET-CHANGE-FROM-OPS> 3,194,475
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 164,088
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 23,308,591
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 136,267
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 198,188
<AVERAGE-NET-ASSETS> 153,634,108
<PER-SHARE-NAV-BEGIN> 104.291
<PER-SHARE-NII> 1.685
<PER-SHARE-GAIN-APPREC> 0.429
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 106.405
<EXPENSE-RATIO> 0.129
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
