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 September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ________________________ to _____________________
Commission File Numbers 33-92990, 333-13477 and 333-22809
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 CONSOLIDATED FINANCIAL STATEMENTS
OF THE TIAA REAL ESTATE ACCOUNT
September 30, 1998
Page
----
Consolidated Statements of Assets and Liabilities...................... 3
Consolidated Statements of Operations.................................. 4
Consolidated Statements of Changes in Net Assets....................... 5
Consolidated Statements of Cash Flows.................................. 6
Notes to Consolidated Financial Statements............................. 7
Consolidated Statement of Investments.................................. 12
2
<PAGE>
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
-------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Investments, at value:
Real estate properties
(cost: $604,241,994 and $510,096,015) ................... $ 644,366,431 $521,284,091
Marketable securities
(cost: $430,119,544 and $270,910,952 .................... 421,674,242 280,002,042
Cash ..................................................... 6,555 407,598
Other .................................................... 14,235,675 14,067,094
-------------- ------------
TOTAL ASSETS 1,080,282,903 815,760,825
-------------- ------------
LIABILITIES
Payable for securities transactions ...................... -- 10,463
Accrued real estate property level expenses and taxes .... 10,692,179 10,343,593
Security deposits held ................................... 1,601,973 1,305,958
-------------- ------------
TOTAL LIABILITIES 12,294,152 11,660,014
-------------- ------------
MINORITY INTEREST ......................................... 19,637,742 18,282,096
-------------- ------------
NET ASSETS
Accumulation Fund ........................................ 1,022,468,547 772,059,676
Annuity Fund ............................................. 25,882,462 13,759,039
-------------- ------------
TOTAL NET ASSETS $1,048,351,009 $785,818,715
============== ============
NUMBER OF ACCUMULATION UNITS OUTSTANDING--Notes 6 and 7 ... 7,867,999 6,313,015
============== ============
NET ASSET VALUE, PER ACCUMULATION UNIT--Note 6 ........... $ 129.95 $ 122.30
============== ============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Real estate income, net:
Rental income .................................................. $20,564,416 $13,625,915 $58,220,663 $29,954,582
----------- ----------- ----------- -----------
Real estate property level expenses and taxes:
Operating expenses ........................................... 4,428,664 2,741,224 12,556,909 6,039,473
Real estate taxes ............................................ 2,440,211 1,121,839 6,786,316 2,883,175
----------- ----------- ----------- -----------
Total real estate property level expenses and taxes 6,868,875 3,863,063 19,343,225 8,922,648
----------- ----------- ----------- -----------
Real estate income, net 13,695,541 9,762,852 38,877,438 21,031,934
Interest ......................................................... 4,097,962 2,594,221 11,323,545 9,057,943
Dividends ........................................................ 2,256,331 1,328,459 6,113,150 2,639,569
----------- ----------- ----------- -----------
TOTAL INCOME 20,049,834 13,685,532 56,314,133 32,729,446
----------- ----------- ----------- -----------
Expenses -- Note 3:
Investment advisory charges .................................... 827,691 454,451 2,350,238 1,114,884
Administrative and distribution charges ........................ 642,375 352,340 1,867,980 937,738
Mortality and expense risk charges ............................. 181,414 109,859 481,849 290,522
Liquidity guarantee charges .................................... 19,415 31,989 69,009 87,561
----------- ----------- ----------- -----------
TOTAL EXPENSES 1,670,895 948,639 4,769,076 2,430,705
----------- ----------- ----------- -----------
INVESTMENT INCOME, NET 18,378,939 12,736,893 51,545,057 30,298,741
----------- ----------- ----------- -----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on marketable securities ................ (2,736,288) 850,966 (2,405,079) 939,027
----------- ----------- ----------- -----------
Net change in unrealized appreciation on:
Real estate properties ......................................... 16,112,956 4,037,677 28,936,361 4,502,488
Marketable securities .......................................... (10,132,955) 5,844,617 (17,536,392) 7,145,013
----------- ----------- ----------- -----------
Net change in unrealized appreciation on investments 5,980,001 9,882,294 11,399,969 11,647,501
----------- ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 3,243,713 10,733,260 8,994,890 12,586,528
----------- ----------- ----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS BEFORE MINORITY INTEREST 21,622,652 23,470,153 60,539,947 42,885,269
Minority interest in net increase in net assets
resulting from operations ..................................... (1,396,577) (861,322) (2,972,932) (1,162,703)
----------- ----------- ----------- -----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $20,226,075 $22,608,831 $57,567,015 $41,722,566
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
1998 1997 1998 1997
-------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Investment income, net ....................................... $ 18,378,939 $ 12,736,893 $ 51,545,057 $ 30,298,741
Net realized gain (loss) on marketable securities ............ (2,736,288) 850,966 (2,405,079) 939,027
Net change in unrealized appreciation on investments ......... 5,980,001 9,882,294 11,399,969 11,647,501
Minority interest in net increase in net assets
resulting from operations .................................. (1,396,577) (861,322) (2,972,932) (1,162,703)
-------------- ------------ -------------- ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 20,226,075 22,608,831 57,567,015 41,722,566
-------------- ------------ -------------- ------------
FROM PARTICIPANT TRANSACTIONS
Premiums ..................................................... 19,966,212 10,670,779 66,137,439 32,029,340
TIAA seed money withdrawn -- Note 1 .......................... (12,511,192) (5,839,091) (68,304,733) (17,133,600)
Net transfers (to) from TIAA ................................. (1,483,703) 10,312,903 21,100,141 31,511,310
Net transfers from CREF Accounts ............................. 26,228,774 63,135,131 198,210,094 237,473,219
Annuity and other periodic payments .......................... (543,326) (225,881) (1,495,244) (570,143)
Withdrawals .................................................. (4,440,177) (1,998,754) (10,098,269) (4,834,503)
Death benefits ............................................... (450,061) (400) (584,149) (43,386)
-------------- ------------ -------------- ------------
NET INCREASE IN NET ASSETS RESULTING
FROM PARTICIPANT TRANSACTIONS 26,766,527 76,054,687 204,965,279 278,432,237
-------------- ------------ -------------- ------------
NET INCREASE IN NET ASSETS 46,992,602 98,663,518 262,532,294 320,154,803
NET ASSETS
Beginning of period .......................................... 1,001,358,407 591,186,338 785,818,715 369,695,053
-------------- ------------ -------------- ------------
End of period ................................................ $1,048,351,009 $689,849,856 $1,048,351,009 $689,849,856
============== ============ ============== ============
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- ---------------------------
1998 1997 1998 1997
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in net assets resulting from operations ................. $20,226,075 $22,608,831 $ 57,567,015 $ 41,722,566
Adjustments to reconcile net increase in net assets resulting
from operations to net cash used in operating activities:
Increase in investments ............................................ (44,457,246) (97,908,370) (264,754,540) (336,085,803)
Decrease (increase) in receivable from securities transactions ..... -- (405,236) -- 47,074,764
Decrease (increase) in other assets ................................ 68,076 (8,695,097) (168,581) (21,296,365)
Increase (decrease) in payable for securities transactions ......... (4,723,995) 224,875 (10,463) (51,094,744)
Increase in other liabilities ...................................... 466,011 5,034,180 644,601 19,651,962
Increase in minority interest ...................................... 1,043,889 686,502 1,355,646 17,613,643
----------- ----------- ------------ ------------
NET CASH USED IN
OPERATING ACTIVITIES (27,377,190) (78,454,315) (205,366,322) (282,413,977)
----------- ----------- ------------ ------------
CASH FLOWS FROM PARTICIPANT TRANSACTIONS
Premiums ............................................................. 19,966,212 10,670,779 66,137,439 32,029,340
TIAA seed money withdrawn -- Note 1 .................................. (12,511,192) (5,839,091) (68,304,733) (17,133,600)
Net transfers from TIAA .............................................. (1,483,703) 10,312,903 21,100,141 31,511,310
Net transfers from CREF Accounts ..................................... 26,228,774 63,135,131 198,210,094 237,473,219
Annuity and other periodic payments .................................. (543,326) (225,881) (1,495,244) (570,143)
Withdrawals .......................................................... (4,440,177) (1,998,754) (10,098,269) (4,834,503)
Death benefits ....................................................... (450,061) (400) (584,149) (43,386)
----------- ----------- ------------ ------------
NET CASH PROVIDED BY
PARTICIPANT TRANSACTIONS 26,766,527 76,054,687 204,965,279 278,432,237
----------- ----------- ------------ ------------
NET DECREASE IN CASH (610,663) (2,399,628) (401,043) (3,981,740)
CASH
Beginning of period .................................................. 617,218 2,399,628 407,598 3,981,740
----------- ----------- ------------ ------------
End of period ........................................................ $ 6,555 $ -- $ 6,555 $ --
=========== =========== ============ ============
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
TIAA REAL ESTATE ACCOUNT
NOTES TO CONSOLIDATED 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. Teachers REA, LLC, a wholly-owned
subsidiary of the Account, began operations in July 1996 and holds one property
in Virginia. Light Street Partners, L.P. ("Light Street"), a partnership in
which the Account holds a 90% interest, began operations in March 1997 and holds
eight office buildings throughout the United States. Teachers REA II, Inc., a
wholly-owned subsidiary of the Account, began operations in October 1997 and
holds one property in Pennsylvania. Teachers REA III, LLC, a wholly-owned
subsidiary of the Account, began operations in July 1998 and holds one property
in Florida.
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 prorata 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 on October 2, and November 1, 1995, respectively. In August
1996, the Account's net assets first reached $200 million and, as required under
a five year repayment schedule approved by the New York State Insurance
Department ("NYID"), TIAA began to redeem its seed money Accumulation Units in
monthly installments of 16,667 Units beginning in September 1996. Since the
Account's assets have been growing rapidly, TIAA in October 1997, with NYID
approval, modified the seed money redemption schedule by increasing the monthly
redemption of Units at a level equal to the value of 25% of the Account's net
asset growth for the prior month, with no fewer than 16,667 Units and no more
than 100,000 Units to be redeemed each month. These withdrawals are made at
prevailing daily net asset values and are reflected in the accompanying
consolidated financial statements. At September 30, 1998, TIAA retained 64,501
Accumulation Units, with a total value of $8,382,086.
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 also invests in publicly-traded
securities and other instruments to maintain adequate liquidity for operating
expenses, capital expenditures and to make benefit payments.
TIAA employees, under the direction of TIAA's Board of Trustees and its
Investment 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 also 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 Association of Securities Dealers, Inc.,
provides administrative and distribution services pursuant to a Distribution and
Administrative Services Agreement with the Account.
7
<PAGE>
Note 2--Significant Accounting Policies
The preparation of financial statements may require management to make estimates
and assumptions that affect the reported amounts of assets, liabilities, income,
expenses and related disclosures. Actual results may differ from those
estimates. The following is a summary of the significant accounting policies
followed by the Account, which are in conformity with generally accepted
accounting principles.
Basis of Presentation: The accompanying consolidated financial statements
include the Account, Teachers REA, LLC, Teachers REA II, Inc. and Teachers REA
III, LLC, its wholly-owned subsidiaries, and Light Street, in which the Account
holds a 90% interest. The 10% minority interest in Light Street is reflected
separately in the accompanying financial statements. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Valuation of Real Estate Properties: Investments in real estate properties are
stated at fair value, as determined in accordance with procedures approved by
the Investment 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 used by the Account. 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's appraisal staff 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 on
such exchange. 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
Investment Committee of the Board of Trustees and in accordance with the
responsibilities of the Board as a whole.
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 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 securities 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.
8
<PAGE>
Note 3--Management Agreements
Under established management agreements, various 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. An affiliate of the minority partner in Light Street provides certain
management services for the properties owned by Light Street. The charges for
such services, for the nine months ended September 30, 1998, amounted to
$689,749 for investment advisory expenses and $77,307 for administrative
expenses which are recorded accordingly in the accompanying consolidated
statement of operations. TIAA also provides a liquidity guarantee to the
Account, for a fee, to ensure that sufficient 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.
Note 4--Real Estate Properties
Had the Account's real estate properties which were purchased during the nine
months ended September 30, 1998 been acquired at the beginning of the period
(January 1, 1998), rental income and real estate property level expenses and
taxes for the nine months ended September 30, 1998 would have increased by
approximately $2,854,000 and $1,156,000, respectively. In addition, interest
income for the nine months ended September 30, 1998 would have decreased by
approximately $2,224,000. Accordingly, the total proforma effect on the
Account's net investment income for the nine months ended September 30, 1998
would have been a decrease of approximately $526,000, if the real estate
properties acquired during the nine months ended September 30, 1998 had been
acquired at the beginning of the period. Several of these properties had little
or no rental activity prior to purchase by the Account because they were newly
or recently constructed. In such cases, there was little or no net real estate
income to offset the proforma decline in interest income, resulting in a net
decrease in net investment income from this calculation. This decrease is not
indicative of expected future results because all of these properties were
substantially rented at the time of purchase.
Note 5--Leases
The Account's real estate properties are leased to tenants under operating lease
agreements which expire on various dates through 2021. Aggregate minimum annual
rentals for the properties owned, excluding short-term residential leases, are
as follows:
Years Ending
December 31,
------------
1998 $ 45,314,000
1999 43,547,000
2000 40,651,000
2001 34,338,000
2002 30,219,000
Thereafter 106,733,000
------------
Total $300,802,000
============
Certain leases provide for additional rental amounts based upon the recovery of
actual operating expenses in excess of specified base amounts.
9
<PAGE>
Note 6--Condensed Consolidated Financial Information
Selected condensed consolidated financial information for an Accumulation Unit
of the Account is presented below.
<TABLE>
<CAPTION>
July 3, 1995
For the For the Years Ended (Commencement of
Nine Months December 31, Operations) to
Ended ----------------------- December 31,
September 30, 1998 (1) 1997 1996 1995 (1)
--------------------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C>
Per Accumulation Unit Data:
Rental income .......................... $ 7.885 $ 7.288 $ 6.012 $ 0.159
Real estate property
level expenses and taxes ............. 2.620 2.218 1.850 0.042
-------- -------- -------- --------
Real estate income, net 5.265 5.070 4.162 0.117
Dividends and interest ................. 2.362 2.709 3.309 2.716
-------- -------- -------- --------
Total income 7.627 7.779 7.471 2.833
Expenses charges (2) ................... 0.646 0.580 0.635 0.298
-------- -------- -------- --------
Investment income, net 6.981 7.199 6.836 2.535
Net realized and unrealized
gain on investments .................. 0.675 3.987 1.709 0.031
-------- -------- -------- --------
Net increase in
Accumulation Unit Value .............. 7.656 11.186 8.545 2.566
Accumulation Unit Value:
Beginning of period .................. 122.297 111.111 102.566 100.000
-------- -------- -------- --------
End of period ........................ $129.953 $122.297 $111.111 $102.566
======== ======== ======== ========
Total return ............................ 6.26% 10.07% 8.33% 2.57%
Ratios to Average Net Assets:
Expenses (2) ......................... 0.50% 0.58% 0.61% 0.30%
Investment income, net ............... 5.45% 7.25% 6.57% 2.51%
Portfolio turnover rate:
Real estate properties ............... 0% 0% 0% 0%
Securities ........................... 16.64% 7.67% 15.04% 0%
Thousands of Accumulation Units
outstanding at end of period ......... 7,868 6,313 3,296 1,172
</TABLE>
(1) The percentages shown for this period are not annualized.
(2) Expense charges per Accumulation Unit and the Ratio of Expenses to Average
Net Assets include the portion of expenses related to the 10% minority
interest in Light Street and exclude real estate property level expenses and
taxes. If the real estate property level expenses and taxes were included,
the expense charge per Accumulation Unit for the nine months ended September
30, 1998 would be $3.266 ($2.798 and $2.485 for the years ended December 31,
1997 and 1996, respectively, and $0.340 for the period July 3, 1995 through
December 31, 1995) and the Ratio of Expenses to Average Net Assets for the
nine months ended September 30, 1998 would be 2.55% (2.82% and 2.39% for the
years ended December 31, 1997 and 1996, respectively, and 0.34% for the
period July 3, 1995 through December 31, 1995).
10
<PAGE>
Note 7--Accumulation Units
Changes in the number of Accumulation Units outstanding were as follows:
Nine Months Year
Ended Ended
September 30, December 31,
1998 1997
--------- ---------
(Unaudited)
Accumulation Units:
Credited for premiums ............................ 526,530 448,822
Credited for transfers, net of disbursements and
amounts applied to the Annuity Fund ........... 1,028,454 2,568,407
Outstanding:
Beginning of period ........................... 6,313,015 3,295,786
--------- ---------
End of period ................................. 7,867,999 6,313,015
========= =========
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 September 30, 1998,
the Account had three outstanding commitments to purchase real estate properties
totaling approximately $42.5 million. Of that amount, two purchases of real
estate properties totaling approximately $31.5 million were closed in October
1998.
11
<PAGE>
TIAA REAL ESTATE ACCOUNT
CONSOLIDATED STATEMENT OF INVESTMENTS (Unaudited)
September 30, 1998
REAL ESTATE PROPERTIES--60.44%
Location Description Value
-------- ----------- -----
Arizona:
Phoenix Office building..................... $12,398,045
California:
Sacramento Office building..................... 29,574,048(2)
San Diego Industrial building................. 12,400,000
Westlake Village Apartments.......................... 14,509,855
Colorado:
Boulder Industrial building................. 11,500,000
Douglas County Apartments.......................... 28,500,000
Littleton Apartments.......................... 19,500,000
Florida:
Coral Springs Industrial building................. 6,200,000
Ocoee Shopping center..................... 7,185,459
Orlando Apartments.......................... 14,300,000
Seminole County Apartments.......................... 28,063,107
Sunrise Office building..................... 13,850,000
West Palm Beach Apartments.......................... 16,000,000
Georgia:
Atlanta Apartments.......................... 16,800,713
Illinois:
Bolingbrook Industrial building................. 7,222,421
Glendale Heights Industrial building................. 15,279,508
Joliet Industrial building................. 9,325,422
Oakbrook Terrace Office building..................... 52,100,970(2)
Rolling Meadows Shopping center..................... 12,650,000
Rosemont Office building..................... 40,000,000
Iowa:
Urbandale Industrial building................. 14,106,885
Maryland:
Aberdeen Industrial building................. 29,350,000
Hunt Valley Office building..................... 27,246,622(2)
Massachusetts:
Newton Office building..................... 19,600,000(2)
Minnesota:
Eagan Industrial building................. 6,100,000
Fridley Industrial building................. 4,300,000
New Jersey:
Piscataway Office building..................... 15,500,000
North Carolina:
Raleigh Shopping center..................... 7,500,000
Raleigh Shopping center..................... 7,198,762
Ohio:
Blue Ash Office building..................... 11,405,014(2)
Oregon:
Lake Oswego Office building..................... 18,736,501(2)
Pennsylvania:
Lafayette Hill Apartments.......................... 22,606,417
Texas:
El Paso Industrial building................. 4,800,000(1)
El Paso Apartments.......................... 9,400,000
Plano Apartments.......................... 29,200,000
Utah:
Salt Lake City Office building..................... 8,840,436(2)
12
<PAGE>
<TABLE>
<S> <C> <C>
Virginia:
Arlington Office building.................... $ 28,516,246(2)
Woodbridge Shopping center.................... 12,600,000
------------
TOTAL REAL ESTATE PROPERTIES (Cost $604,241,994)...... 44,366,431
------------
</TABLE>
(1) Leasehold interest only.
(2) The full fair value of this property is reflected; however, the Account only
has a 90% interest in the property. The minority partner in Light Street has the
remaining 10% interest in the property.
MARKETABLE SECURITIES--39.56%
Shares Issuer Value
------ ------ -----
REAL ESTATE INVESTMENT TRUSTS--11.24%
89,900 AMB Property Corporation Series A .................. 2,112,650
200,000 Archstone Communities Tr (Series C) Pf ............. 4,950,000
104,513 Avalon Bay Communities, Inc. ....................... 3,559,974
30,000 Avalon Bay Communities, Inc. Pfd Series F .......... 757,500
170,000 Bradley Real Estate, Inc. .......................... 3,570,000
235,000 Brandywine Realty Trust ............................ 4,494,375
40,000 Cabot Industrial Trust ............................. 845,000
80,000 Camden Property Trust .............................. 2,235,000
200,000 Carramerica Realty Corporation, Pfd Series B ....... 4,762,500
70,000 Centerpoint Properties Corp. ....................... 2,537,500
95,000 Colonial Properties Trust .......................... 2,689,687
260,000 Cornerstone Properties, Inc. ....................... 3,932,500
125,000 Corporate Office Properties Trust, Inc. ............ 992,187
90,000 Developers Diversified Realty ...................... 2,126,250
140,000 Equity Office Properties Trust ..................... 3,430,000
200,000 Equity Office Properties Trust Pfd Series A ........ 5,100,000
130,000 Equity Residential Properties Trust ................ 5,484,375
100,000 Equity Residential Properties Trust, Pfd Series G .. 2,281,250
77,966 Excel Legacy Corporate ............................. 226,589
25,000 Federal Realty Investment Trust Pfd. ............... 606,250
100,000 First Industrial Realty Trust, Inc. Pfd ............ 2,500,000
100,000 Gables Residential Trust, Pfd Series A ............. 2,425,000
80,000 Hospitality Properties Trust ....................... 2,380,000
50,000 Irvine Apartment Communities, Inc. ................. 1,343,750
100,000 Lasalle Hotel Properties ........................... 1,300,000
90,000 Macerich Company ................................... 2,418,750
100,000 Merry Land & Investment Pfd Series E ............... 2,287,500
69,559 New Plan Excel Realty Trust ........................ 1,621,594
105,001 Patriot American Hospitality, Inc. ................. 1,338,763
100,000 Post Properties, Inc. .............................. 3,856,250
19,900 Prologis Trust-Pfd Series A ........................ 501,231
130,000 Public Storage, Inc. ............................... 3,485,625
20,000 Rouse Company ...................................... 538,750
205,000 Simon Debartolo Group, Inc. ........................ 6,098,750
100,000 Spieker Properties, Inc. ........................... 3,675,000
110,000 Starwood Hotels & Resorts Trust .................... 3,355,000
85,000 Storage USA, Inc. .................................. 2,943,125
150,000 Taubman Centers, Inc. .............................. 2,100,000
35,000 Taubman Centers, Inc Pfd Series A .................. 774,375
53,300 Tower Realty Trust, Inc. ........................... 1,059,338
121,000 Trinet Corporate Realty Trust, Inc. ................ 3,947,625
26,000 Trinet Corporate Realty Trust, Inc., Pfd Series B .. 643,500
100,000 United Dominion Realty Trust, Inc. ................. 2,537,500
105,000 Urban Shopping Centers, Inc. ....................... 3,451,875
50,000 Vornado Realty Trust, Pfd Series A ................. 2,475,000
135,000 Weeks Corp. ........................................ 4,033,125
-----------
TOTAL REAL ESTATE INVESTMENT TRUSTS (Cost $128,162,095)........ 119,785,013
-----------
13
<PAGE>
CORPORATE BONDS-- 0.57%
Principal Issuer, Coupon and Maturity Date
- --------- --------------------------------
$ 3,000,000 International Paper
6.87% 06/17/99 .............................. $ 3,032,280
3,000,000 Pepsico, Inc.
7.625% 11/01/98 ............................. 3,005,670
-------------
TOTAL CORPORATE BONDS (Cost $6,116,430)...................... 6,037,950
-------------
GOVERNMENT AGENCIES--13.12%
Principal Issuer, Coupon and Maturity Date Value
- --------- -------------------------------- -----
44,400,000 Federal Home Loan Bank
5.25% 10/1/98 ............................... 44,393,340
14,790,000 Federal Home Loan Mortgage Corporation
5.44% 10/6/98 ............................... 14,777,306
24,560,000 Federal Home Loan Mortgage Corporation
5.44% 10/15/98 .............................. 24,507,606
10,000,000 Federal National Mortgage Association
5.40% 10/7/98 ............................... 9,989,986
10,000,000 Federal National Mortgage Association
5.42% 10/14/98 .............................. 9,980,089
23,600,000 Federal National Mortgage Association
5.42% 11/3/98 ............................... 23,487,442
12,800,000 Federal National Mortgage Association
5.40% 11/20/98 .............................. 12,708,426
--------------
TOTAL GOVERNMENT AGENCIES (Amortized cost $139,845,042) ..... 139,844,195
--------------
COMMERCIAL PAPER--14.63%
16,850,000 American Express Credit Corporation
5.50 10/6/98 ................................ 16,833,627
15,900,000 Caterpillar Financial Service Corporation
5.45% 02/12/99 .............................. 15,595,316
13,395,000 Ciesco LP
5.50% 10/14/98 .............................. 13,367,392
17,575,000 Corporate Asset Funding Corporation, Inc.
5.50% 10/9/98 ............................... 17,551,713
15,000,000 Delaware Funding Corporation
5.47% 10/26/98 .............................. 14,942,909
9,000,000 Dupont (E.I.) De Nemours & Company
5.51% 10/9/98 ............................... 8,988,075
10,000,000 Eastman Kodak Company
5.50% 10/22/98 .............................. 9,967,794
10,000,000 Ford Motor Credit Company
5.22% 12/18/98 .............................. 9,886,767
1,290,000 National Rural Utilities
5.33% 12/7/98 ............................... 1,277,330
20,000,000 Park Avenue Receivables Corporation
5.55% 10/27/98 .............................. 19,920,950
13,865,000 Walt Disney Company
5.23% 12/18/98 .............................. 13,708,002
14,000,000 Xerox Capital (Europe) Plc
5.53% 10/16/98 .............................. 13,967,209
--------------
TOTAL COMMERCIAL PAPER (Amortized cost $155,995,977) ......... 156,007,084
--------------
TOTAL MARKETABLE SECURITIES (Cost $430,119,544)................ 421,674,242
--------------
TOTAL INVESTMENTS--100.00% (Cost $1,034,361,538)............. $1,066,040,673
==============
See notes to consolidated financial statements.
14
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The TIAA Real Estate Account began operating on July 3, 1995 and interests
in the Account were first offered to participants on October 2, 1995.
Through September 30, 1998, the Account had acquired a total of 38 real
estate properties, including twelve office properties, eleven industrial
properties, five neighborhood shopping enters and ten apartment complexes. As of
September 30, 1998, these properties represented 60.44% of the Account's total
investment portfolio.
The Account purchased one apartment property during the third quarter of
1998 and has purchased two additional apartment properties since the end of the
quarter. 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 most desirable properties.
As of September 30, 1998, the Account also held commercial paper,
representing 14.63% of the portfolio, investments in U.S. government agencies,
representing 13.12% of the portfolio, real estate investment trusts (REITs),
representing 11.24% of the portfolio, and corporate bonds, representing .57% of
the portfolio.
The Account owns a controlling 90% interest in a partnership which owns
eight office buildings throughout the U.S. Consistent with generally accepted
accounting principles (GAAP), the Account's consolidated financial statements
and all financial data discussed in this report reflect 100% of the value of the
partnership's assets. The 10% interest of the other partner in the partnership
is reflected as a minority interest in the Account's consolidated financial
statements.
Results of Operations-Nine Months Ended September 30, 1998 Compared to
Nine Months Ended September 30, 1997
The Account's total net return was 6.26% for the nine months ended
September 30, 1998 and 7.38% for the same period in 1997. This decline was due
to the reduced amount of realized and unrealized gains on investments during the
1998 period. The Account's net investment income, after deduction of all
expenses, was $51,545,057 for the nine months ended September 30, 1998 and
$30,298,741 for the same period in 1997, a 70% increase. This increase was
primarily the result of a 52% increase in net assets from September 30, 1997 to
September 30, 1998. The Account had net realized and unrealized gains on
investments of $8,994,890 and $12,586,528 for the nine months ended September
30, 1998 and 1997, respectively. This decrease was primarily the result of price
declines of the Account's REITs which diminished the unrealized appreciation on
the Account's real estate properties. While the Account posted net unrealized
gains on its real estate investments of $28,936,361 and $4,502,488,
respectively, in the first nine months ended September 30, 1998 and 1997, it
posted net unrealized losses on its marketable securities of $17,536,392 for the
1998 period
15
<PAGE>
versus net unrealized gains of $7,145,013 for the 1997 period, resulting
primarily from fluctuations in market value of the Account's REIT holdings.
The Account's real estate holdings generated approximately 69% and 64% of
the Account's total investment income (before deducting Account level expenses)
during the nine months ended September 30, 1998 and September 30, 1997,
respectively. The remaining portion of the Account's total investment income was
generated by marketable securities investments.
Gross real estate rental income was $58,220,663 for the nine months ended
September 30, 1998 and $29,954,582 for the same period in 1997. This increase
was primarily due to the increase in the number of properties owned by the
Account from 28 properties as of September 30, 1997 to 38 properties as of
September 30, 1998. Interest income on the Account's short- and intermediate-
term investments for the nine months ended September 30, 1998 and 1997 totaled
$11,323,545 and $9,057,943, respectively. This increase was due primarily to the
growth in the Account's assets. Dividend income on the Account's investments in
REITs totaled $6,113,150 and $2,639,569, respectively, for the same periods.
Shares of REITs totaled 11.24% of the Account investments as of September 30,
1998 and 13.90% as of September 30, 1997. The general growth in the Account's
assets accounted for the increased dividend income for first nine months of
1998, as compared with the same period in 1997.
Total property level expenses for the nine months ended September 30, 1998
were $19,343,225, of which $6,786,316 was attributable to real estate taxes and
$12,556,909 represented operating expenses. Total property level expenses for
the nine months ended September 30, 1997 were $8,922,648, of which $2,883,175
was attributable to real estate taxes and $6,039,473 was attributable to
operating expenses. The increase in property level expenses during the first
nine months of 1998 reflected the increased number of properties in the Account.
The Account also incurred expenses for the nine months ended September 30,
1998 and 1997 of $2,350,238 and $1,114,884, respectively, for investment
advisory services, $1,867,980 and $937,738, respectively, for administrative and
distribution services and $550,858 and $378,083, respectively, for the mortality
and expense risks assumed and the liquidity guarantee. Such expenses increased
as a result of the larger net asset base in the Account for the first nine
months of 1998 over the first nine months of 1997.
Three Months Ended September 30, 1998 Compared to
Three Months Ended September 30, 1997
The Account's total net return was 2.00% for the three months ended
September 30, 1998 and 3.54% for the same period in 1997. This decline was
attributable to the reduced amount of realized and unrealized gains on
investments for the period. The Account's net investment income, after deduction
of all expenses, was $18,378,939 for the three months ended September 30, 1998
and $12,736,893 for the same period in 1997, a 44% increase. This increase was
the result of the growing base of net assets from September 30, 1997 to
16
<PAGE>
September 30, 1998. The Account had net realized and unrealized gains on
investments of $3,243,713 and $10,733,260 for the three months ended September
30, 1998 and 1997, respectively. This decrease was primarily the result of the
net realized and unrealized losses of the Account's marketable securities. While
the Account posted net unrealized gains on its real estate investments of
$16,112,956 and $4,037,677, respectively, in the three months ended September
30, 1998 and 1997, it posted net unrealized losses on its marketable securities
for the 1998 period of $10,132,955 versus net unrealized gains of $5,844,617 for
the 1997 period, resulting primarily from fluctuations in market value of the
Account's REIT holdings.
The Account's real estate holdings generated approximately 68% and 71% of
the Account's total investment income (before deducting Account level expenses)
during the three months ended September 30, 1998 and September 30, 1997,
respectively. The remaining portion of the Account's total investment income was
generated by investments in marketable securities.
Gross real estate rental income was $20,564,416 for the three months ended
September 30, 1998 and $13,625,915 for the same period in 1997. The higher real
estate income for the 1998 period was due primarily to the increase in the
number of properties owned by the Account. Interest income on the Account's
short- and intermediate-term investments for the three months ended September
30, 1998 and 1997 totaled $4,097,962 and $2,594,221, respectively. This increase
was due primarily to the growth in the Account's assets. Dividend income on the
Account's investments in REITs totaled $ 2,256,331 and $1,328,459, respectively,
for the same periods. This increase was primarily due to the general growth in
the Account's assets for the period.
Total property level expenses for the three months ended September 30,
1998 were $6,868,875, of which $2,440,221 was attributable to real estate taxes
and $4,428,664 represented operating expenses. Total property level expenses for
the three months ended September 30, 1997 were $3,863,063, of which $1,121,839
was attributable to real estate taxes and $2,741,224 was attributable to
operating expenses. The increase in property level expenses during the three
month period ended September 30, 1998 reflected the increased number of
properties in the Account.
The Account also incurred expenses for the three months ended September
30, 1998 and 1997 of $827,691 and $454,451, respectively, for investment
advisory services, $642,375 and $352,340, respectively, for administrative and
distribution services and $200,829 and $141,848, respectively, for the mortality
and expense risks assumed and the liquidity guarantee. Such expenses increased
as a result of the larger net asset base of the Account for the three months
ended September 30, 1998 over the three months ended September 30, 1997.
Liquidity and Capital Resources
Since September 16, 1996, TIAA has been redeeming the accumulation units
related to its $100 million seed money investment in the Account in accordance
with a repayment schedule approved by the New York Insurance Department. As of
September 30, 1998, the
17
<PAGE>
Account had redeemed 935,499 accumulation units at prevailing daily unit values,
amounting to $ 113,514,057 in total redemption payments to TIAA, leaving it
holding 64,501 units at September 30, 1998 with a value of $8,382,086. TIAA
expects to complete the redemption of its seed money investment by November
1998.
For the nine months ended September 30, 1998 and 1997, the Account
received $66,137,439 and $32,029,340, respectively, in premiums and $219,310,235
and $268,984,529, respectively, in net participant transfers from other TIAA and
CREF accounts. The increase in premium income is primarily due to the growing
number of participants in the Account.
At September 30, 1998 and 1997, the Account's liquid assets (i.e., its
REITs, short- and intermediate-term investments, government securities and cash)
had a value of $421,680,797 and $305,841,926 respectively. The REIT holdings at
September 30, 1998 and 1997 were $119,785,013 and $97,869,963, respectively. We
plan to use much of the Account's liquid assets, exclusive of the REITs, to
purchase additional suitable real estate properties. The remaining liquid
assets, exclusive of the REITs, will continue to be available to meet expense
needs and redemption requests (e.g., cash withdrawals or transfers).
If the Account's liquid assets and its cash flow from operating activities
and participant transactions are not sufficient to meet its cash needs,
including redemption requests, TIAA's general account will purchase liquidity
units in accordance with TIAA's liquidity guarantee to the Account.
Year 2000 Issues
Many computer software systems in use today cannot recognize the year 2000
and may revert to 1900 or some other date because of the way in which dates were
encoded and calculated. The Account could be adversely affected if its computer
systems, its property computer systems, or those of its external service
providers do not properly process and calculate date-related information and
data on and after January 1, 2000. We have been actively working on necessary
changes to affected computer systems to prepare for the Year 2000 and have also
obtained reasonable assurances from our service providers that they are taking
comparable steps with respect to their computer systems. However, the steps we
are taking do not guarantee complete success or eliminate the possibility that
interaction with outside computer systems may have an adverse impact on the
Account.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
There are no material current or pending legal proceedings to which the
Account is a party or to which the Account's assets are subject.
Item 2. CHANGES IN SECURITIES.
18
<PAGE>
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 September 30, 1998
- ----------
* - Previously filed and 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).
19
<PAGE>
** - Previously filed and incorporated herein by reference to the Account's Form
10-K Annual Report for the year ended December 31, 1996 (File No. 33-92990).
*** - Previously filed and incorporated herein by reference to Pre-Effective
Amendment No. 1 to the Account's Registration Statement on Form S-1 filed
April 29, 1997 (File No. 333- 22809).
(b) REPORTS ON 8-K. None.
20
<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: November 12, 1998
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: November 12, 1998
By: /s/ Richard L. Gibbs
--------------------------------
Richard L. Gibbs
Executive Vice President
(Principal Accounting Officer)
21
<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-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 1,034,361,538
<INVESTMENTS-AT-VALUE> 1,066,040,673
<RECEIVABLES> 0
<ASSETS-OTHER> 14,235,675
<OTHER-ITEMS-ASSETS> 6,555
<TOTAL-ASSETS> 1,080,282,903
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31,931,894
<TOTAL-LIABILITIES> 31,931,894
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 7,867,999
<SHARES-COMMON-PRIOR> 7,692,125
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,048,351,009
<DIVIDEND-INCOME> 2,256,331
<INTEREST-INCOME> 4,097,962
<OTHER-INCOME> 12,298,964
<EXPENSES-NET> (1,670,895)
<NET-INVESTMENT-INCOME> 16,982,362
<REALIZED-GAINS-CURRENT> (2,736,288)
<APPREC-INCREASE-CURRENT> 5,980,001
<NET-CHANGE-FROM-OPS> 20,226,075
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 175,874
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 46,992,602
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 827,691
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,670,895
<AVERAGE-NET-ASSETS> 1,016,344,369
<PER-SHARE-NAV-BEGIN> 127.409
<PER-SHARE-NII> 2.350
<PER-SHARE-GAIN-APPREC> 0.194
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 129.953
<EXPENSE-RATIO> 0.160
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
