As filed with the Securities and Exchange Commission
on April 30, 1996
Registration No. 33-92990
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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)
(Primary Standard Industrial Classification Code Number)
(Not applicable)
I.R.S. Employer Identification No.)
c/o Teachers Insurance and Annuity Association of America
730 Third Avenue
New York, New York 10017-3206
(212) 490-9000
(Address including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Peter C. Clapman, Esquire
Teachers Insurance and Annuity Association of America
730 Third Avenue
New York, New York 10017-3206
(212) 490-9000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Paul J. Mason, Esquire
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 2004-2404
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of the registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: [X] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] _______
If this form is a post-effective amendment filed pursuant to Rule 461(c) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] ______
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: [ ]
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K Showing Location of Information Required by Form S-1 in Part I (Prospectus) of the Registration Statement
Item of Form S-1 Caption or Location in Prospectus
- ---------------- ---------------------------------
1. Forepart of the Registration Outside Front Cover Page
Statement of Outside Front
Cover Page of Prospectus
2. Inside Front Cover and Inside Front and Outside Back Cover Page
Outside Back Cover Page
of Prospectus
3. Summary Information, Risk Summary; The Real Estate Account and
Factors and Ratio of Earnings TIAA; Risk Factors
to Fixed Charges
4. Use of Proceeds (Not Applicable)
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5. Determination of Offering Price (Not Applicable)
6. Dilution (Not Applicable)
7. Selling Security Holders (Not Applicable)
8. Plan of Distribution Distribution of the Contracts
9. Description of Securities Summary; The Annuity Contracts;
to Be Registered Annuity Payments
10. Interests of Named Experts (Not Applicable)
and Counsel
11. Information with Respect to Summary; The Real Estate Account and TIAA;
the Registrant Investment Practices of the Account;
General Investment and Operating Policies;
Description of Properties; Risk Factors;
Role of TIAA; Conflicts of Interest;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Valuation of Assets; Management
and Investment Advisory Arrangements;
Federal Income Taxes; State Regulation;
Legal Matters; Experts; Legal Proceedings;
Financial Statements
12. Disclosure of Commission (Not Applicable)
Position on Indemnification
for Securities Act Liabilities
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PART I
INFORMATION REQUIRED IN PROSPECTUS
PROSPECTUS
TIAA REAL ESTATE ACCOUNT
A Variable Annuity Offered Through
Individual, Group and Tax-Deferred
Annuity Contracts
Issued By
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
This prospectus tells you about the TIAA Real Estate Account (the "Real Estate Account" or the "Account"), a variable annuity investment option being offered through individual, group and tax-deferred annuity contracts issued by Teachers Insurance and Annuity Association of America ("TIAA"). Read it carefully before investing and keep it for future reference.
The Real Estate Account is a segregated investment account of TIAA that provides variable individual and group annuities for retirement and tax-deferred savings plans at tax-exempt or publicly supported colleges, universities, and other educational and research institutions. The Account's main purpose is to accumulate, invest, and then disburse funds for your retirement, in the form of lifetime income or other payment options, by investing mainly in real estate and real estate-related investments.
The contracts also offer a traditional (guaranteed) annuity option through TIAA's general account.
As with all variable annuities, your accumulation and retirement income from the Account can increase or decrease, depending on how well the underlying investments do over time. TIAA does not guarantee the investment performance of the Account, and you bear the entire investment risk.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is May 1, 1996
TABLE OF CONTENTS
Page
DEFINITIONS................................................................ 4
SUMMARY.................................................................... 7
THE REAL ESTATE ACCOUNT AND TIAA........................................... 11
INVESTMENT PRACTICES OF THE ACCOUNT........................................ 12
GENERAL INVESTMENT AND OPERATING POLICIES.................................. 18
DESCRIPTION OF PROPERTIES.................................................. 19
RISK FACTORS............................................................... 19
ROLE OF TIAA............................................................... 26
CONFLICTS OF INTEREST...................................................... 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................ 30
VALUATION OF ASSETS........................................................ 32
MANAGEMENT AND INVESTMENT ADVISORY ARRANGEMENTS............................ 36
EXPENSE DEDUCTIONS......................................................... 37
THE ANNUITY CONTRACTS...................................................... 38
ANNUITY PAYMENTS........................................................... 53
FEDERAL INCOME TAXES....................................................... 55
GENERAL MATTERS............................................................ 59
DISTRIBUTION OF THE CONTRACTS.............................................. 61
PERIODIC REPORTS........................................................... 61
STATE REGULATION........................................................... 62
LEGAL MATTERS.............................................................. 62
EXPERTS.................................................................... 62
LEGAL PROCEEDINGS.......................................................... 62
ADDITIONAL INFORMATION..................................................... 62
FINANCIAL STATEMENTS....................................................... 63
INDEX TO FINANCIAL STATEMENTS.............................................. F-1
APPENDIX A--DESCRIPTION OF PROPERTIES...................................... A-1
APPENDIX B--MANAGEMENT OF TIAA............................................. B-1
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The Account is subject to the informational requirements of the Securities Exchange Act of 1934 and in accordance therewith files reports and other information with the Securities and Exchange Commission. All reports and information filed on behalf of the Account can be inspected and copied at the Public Reference Section of the Securities and Exchange Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at certain of its regional offices: 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center, Suite 1300, New York, New York 10048.
Reports to Participants. TIAA will mail to each participant in the Real Estate Account periodic reports relating to accumulations in the Account, and such other information as may be required by applicable law or regulation.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESMAN, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
DEFINITIONS
Throughout the prospectus, "TIAA," "we," and "our" refer to Teachers Insurance and Annuity Association of America. "You" and "your" mean any participant or any prospective participant.
Account - The TIAA Real Estate Account, a separate account of TIAA.
Accumulation - The total value of your accumulation units in the Real Estate Account.
Accumulation Fund - The assets of the Real Estate Account not dedicated to current retirement benefits or other liabilities.
Accumulation Period - The period that begins with your first premium and continues until the entire accumulation has been applied to purchase annuity income, transferred from the Account, or paid to you or a beneficiary.
Accumulation Unit - A share of participation in the Real Estate Account for someone in the accumulation period.
Annuity Fund - The assets in the Account that fund current retirement benefits.
Annuity Partner - Anyone you name under a survivor income option to receive lifetime annuity income if you die. Your annuity partner can be your spouse, child, or anyone else eligible under current TIAA practices, subject to any limitations under the IRC and ERISA.
Annuity Payments - Payments under any income option or method of payment.
Annuity Unit - A measure used to calculate the amount of annuity payments due a participant.
Beneficiary - Any person or institution named to receive benefits if you die during the accumulation period or if you (and your annuity partner, if you have one) die before any guaranteed period of your income-paying annuity ends. You don't have to name the same beneficiary for each of these two situations.
Business Day - Any day the New York Stock Exchange ("NYSE") is open for trading. A business day ends at 4 p.m. eastern time, or when trading closes on the NYSE, if earlier.
Calendar Day - Any day of the year. Calendar days end at the same time as business days.
Cash Withdrawal - Taking some or all of an accumulation as a single payment.
Commuted Value - The present value of annuity payments due under an income option or method of payment not based on life contingencies. Present value is calculated using the then-current value of the annuity unit, adjusted for investment gains or losses since the annuity unit value was last calculated.
Contract - The document that sets forth the terms of your Real Estate Account annuity. There are separate contracts for the accumulation period and for the income-paying period for each annuity.
CREF - The College Retirement Equities Fund, TIAA's companion organization.
Eligible Institution - A private or public institution in the United States that is non-proprietary and non-profit. Private institutions have to be ruled tax-exempt under IRC section 501(c)(3) or earlier versions of the section and cannot be private foundations. The main purpose of any eligible institution must be to offer instruction, conduct research, serve and support education or research, or perform ancillary functions for such institutions.
Employer - An eligible institution that maintains an employee retirement or tax-deferred annuity plan.
ERISA - The Employee Retirement Income Security Act of 1974, as amended.
General Account - All of TIAA's assets other than those allocated to the Real Estate Account or to other existing or future TIAA separate accounts.
Income Option - Any of the ways you can receive Real Estate Account retirement income.
Independent Fiduciary - The firm appointed by TIAA to provide independent fiduciary services to the Real Estate Account and which will be responsible for reviewing, approving, and/or monitoring certain aspects of the Account's operations.
Internal Revenue Code or IRC - The Internal Revenue Code of 1986, as amended.
Method of Payment - Any type of Real Estate Account death benefit available to a beneficiary.
Participant - Any person who owns a Real Estate Account contract. Under certain arrangements, an employer can be the owner of the contract.
Plan - An employer's retirement or tax-deferred annuity program.
Premium - The amount you or your employer sends to the Real Estate Account to purchase retirement benefits.
Survivor Income Option - An option that continues lifetime annuity payments to your annuity partner after you die.
TIAA - Teachers Insurance and Annuity Association of America.
Valuation Day - Any day the NYSE is open for trading, as well as the last calendar day of each month. Valuation days end as of the close of all U.S. national exchanges where securities or other investments of the Account are principally traded. Valuation days that aren't business days will end at 4 p.m. eastern time.
Valuation Period - The time from the end of one valuation day to the end of the next.
SUMMARY
The following summary of prospectus information should be read together with the detailed information contained elsewhere in this prospectus.
The TIAA Real Estate Account
This prospectus describes the TIAA Real Estate Account, a separate investment account of TIAA. Its investment objective is a favorable rate of return over the long term, primarily through rental income and capital appreciation from real estate investments owned by the Account. The majority of the Account's real estate investments will be ownership interests in income-producing office, industrial, retail, and multi-family residential properties. The Account can make other real estate-related investments, including mortgage loans and purchasing shares of real estate investment trusts and other entities engaged primarily in real estate-related activities. The Account will also invest in publicly-traded securities and other instruments to maintain liquidity to make distributions and cover capital expenditures and expenses. TIAA intends to provide additional liquidity to the Account as needed, according to its anticipated arrangement with the U.S. Department of Labor, as described on page 27. As with any variable account, we cannot assure you that the investment objective will be met. One factor critical to achieving the objective is whether we can find enough suitable investments for the Account at any particular time.
TIAA, a nonprofit New York insurance company, manages the investment and reinvestment of the Real Estate Account's assets. For these services, TIAA receives fees from the assets of the Account. You don't have the right to vote on the management and operation of the Account. For more information, see "Management and Investment Advisory Arrangements," on page 36.
Because the Account does not fall within the definition of "investment company" under the Investment Company Act of 1940, as amended (the "1940 Act"), it is neither registered as an investment company nor subject to regulation under the 1940 Act.
Risk Factors
Investment in the Account involves significant risks, which are fully described in "Risk Factors," page 19. These include fluctuations in real estate values and the possibility that the Account won't receive the appraised or estimated value of a real property investment when it is sold. The Account may also sometimes have trouble selling some of its real estate
investments on commercially acceptable terms, making it difficult to convert those investments into cash quickly.
The Account's assets can be adversely affected by changes in local, national, or foreign economic conditions. You should, therefore, view it as a long-term investment. Also, since the Account has existed only for a short time, there is little operating history to look to in assessing how the Account might respond to different market conditions.
Because it invests in real estate, the Account is also exposed to risks relating to environmental matters. For instance, if an investment property does not comply with certain environmental protection regulations, the liability for clean-up costs could exceed the Account's investment in the property (or the principal amount loaned by the Account as a mortgage lender).
Conflicts of Interest
The Account is managed by TIAA employees. TIAA employees who manage the Account's real estate-related investments may also manage real estate-related investments of TIAA's general account. Similarly, the part of the Account invested in securities and other instruments not related to real estate is managed by employees who may also manage investments of TIAA's general account and other accounts that are not related to real estate. These employees could therefore face various conflicts of interest (see "Conflicts of Interest," page 29).
TIAA's guarantee to provide liquidity for the Account under certain circumstances could also raise conflicts of interest (see "Liquidity Guarantee," page 26).
The Contracts
The Real Estate Account is available (subject to regulatory approval) as a variable component to a number of different TIAA accumulating annuity contracts. The annuity contracts are a Retirement Annuity ("RA"), a Group Retirement Annuity ("GRA"), a Supplemental Retirement Annuity ("SRA"), a Group Supplemental Retirement Annuity ("GSRA"), and a Rollover Individual Retirement Annuity ("Rollover IRA"). Subject to regulatory approval, we expect to offer a new individual retirement annuity that will accept both rollovers and direct contributions ("New IRA") and a Keogh Plan Annuity ("Keogh"). (We refer to the Rollover IRA and New IRA collectively as the "IRAs".) RAs, SRAs, IRAs and Keoghs are issued to you directly. GRAs and GSRAs are issued under the terms of a group contract.
The Real Estate Account is also available through a variety of income-paying annuity contracts. For details, see "Income Options," on page 48.
Subject to the conditions described in this prospectus, you can allocate all or part of your premiums to the Real Estate Account under the accumulating contracts, although your employer's plan may restrict your ability to allocate premiums to the Real Estate Account under an RA, GRA, or GSRA contract. The specific terms of your plan or relevant tax laws also may limit the amount of premiums you are allowed to contribute or that may be contributed on your behalf. See "Remitting Premiums," page 40, "Possible Restrictions on Acceptance of Premiums or Transfers," page 41, "Allocation of Premiums," page 42, and "Federal Income Taxes," page 55.
Expense Deductions. We make daily deductions from the net assets of the Real Estate Account to pay the Account's operating and investment management expenses. The Account also pays TIAA for bearing mortality and expense risks, and providing liquidity guarantees. The current annual expense deductions from the net assets of the Account total 0.70%: 0.40% for investment management services, 0.23% for administrative and distribution expenses, 0.05% for mortality and expense risks, and 0.02% for liquidity guarantees. We guarantee that these deductions, together, will never exceed 2.50% of the Account's average net assets annually. See "Expense Deductions," page 37.
Transfers and Withdrawals. You can transfer your accumulation in the Account to TIAA's traditional annuity or to CREF at any time. We permit withdrawals from SRAs, GSRAs, and IRAs at any time. However, your employer's plan can restrict your ability to withdraw funds from RA and GRA contracts. Federal income tax law may also restrict your ability to transfer or withdraw funds. You may have to pay a tax penalty if you want to make a cash withdrawal before age 59-1/2. (See "Federal Income Taxes," page 55.)
Selected Financial Data
The following selected financial data should be considered in conjunction with the financial statements and notes thereto for the Account provided herein.
July 3, 1995
(commencement
of operations) to
December 31, 1995
Investment income:
Real estate income, net:
Rental income................................... $165,762
----------
Real estate property level
expenses and taxes:
Operating expenses.............................. 29,173
Real estate taxes............................... 14,659
----------
Total real estate property level expenses
and taxes .................................... 43,832
----------
Real estate income, net 121,930
Dividends and interest..................................... 2,828,900
----------
Total investment income $2,950,830
==========
Net realized and unrealized
gain on investments...................................... $35,603
=======
Net increase in net assets
resulting from operations............................... $2,676,000
==========
Net increase in net assets
resulting from participant transactions..................$117,582,345
============
Net increase in net assets.................................. $120,258,345
===========
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December 31, 1995
Total assets.................................................$143,177,421
============
Total liabilities............................................ $22,919,076
============
Total net assets.............................................$120,258,345
============
Accumulation units outstanding............................... 1,172,498
=========
Accumulation unit value...................................... $102.57
=======
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THE REAL ESTATE ACCOUNT AND TIAA
On February 22, 1995, the Real Estate Account was established by resolution of TIAA's Board of Trustees as a separate investment account of TIAA under New York law. As part of TIAA, the Account is subject to regulation by the State of New York Insurance Department ("NYID") and the insurance departments of some other jurisdictions in which the contracts are offered (see "State Regulation," page 62).
Although TIAA owns the assets of the Real Estate Account, the Account's income, investment gains, and investment losses are credited to or charged against the assets of the Account without regard to TIAA's other income, gains, or losses. Under New York law, we cannot charge the Account with liabilities incurred by any other TIAA separate account or other business activity TIAA may undertake.
TIAA is a nonprofit stock life insurance company organized under the laws of New York State. It was founded on March 4, 1918, by the Carnegie Foundation for the Advancement of Teaching. All of the stock of TIAA is held by the TIAA Board of Overseers, a nonprofit New York membership corporation whose main purpose is to hold TIAA's stock. TIAA's headquarters are at 730 Third Avenue, New York, New York 10017-3206; there are also regional offices in Atlanta, Boston, Chicago, Dallas, Denver, Detroit, New York, Philadelphia, San Francisco, and Washington, D.C., and a service center in Denver. TIAA offers both traditional annuities, which guarantee principal and a specified interest rate while providing the opportunity for additional dividends, and variable annuities, whose return depends upon the performance of certain specified investments. TIAA also offers life, long-term disability, and long-term care insurance.
TIAA manages the investment of the Account's assets. TIAA has been making mortgage loans for over 50 years. We are currently one of the largest and most experienced investors in mortgages and real estate equity interests in the nation. As of December 31, 1995, TIAA employees managed for TIAA's general account a mortgage portfolio of $21.0 billion. The vast majority of the portfolio is secured by investment-grade properties located throughout the U.S. Almost three-quarters of the TIAA general account's mortgage portfolio consists of mortgage loans made on office buildings and retail properties (i.e., shopping centers, including malls).
As of December 31, 1995, TIAA employees oversaw for TIAA's general account a real estate equity portfolio of $7.0 billion, with properties located across the U.S. Office buildings and shopping centers comprise more than three-quarters of the real estate equity portfolio of the general account.
TIAA is the companion organization of the College Retirement Equities Fund ("CREF"), the first company in the United States to issue a variable annuity. CREF is a nonprofit membership corporation established in New York State in 1952. Together, TIAA and CREF form the principal retirement system for the nation's education and research communities and the largest retirement system in the U.S., based on assets under management. TIAA-CREF serves approximately 1.8 million people at about 5,800 institutions. As of December 31, 1995, TIAA's assets were approximately $79.8 billion; the combined assets for TIAA and CREF totalled approximately $160.6 billion (although CREF doesn't stand behind TIAA's guarantees).
TIAA currently has one other separate account. TIAA may offer new investment accounts with different investment objectives in the future, as permitted by law.
INVESTMENT PRACTICES OF THE ACCOUNT
General
The investment objective of the Real Estate Account is a favorable rate of return over the long term, 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 liquidity needed for capital expenditures and expenses and to make distributions. As with any variable account, we cannot assure you that its investment objective will be met. One critical factor to achieving the objective is whether we can find enough suitable investments for the Account at any particular time.
Usually, between 70% and 80% of the Account's assets will be invested directly in real estate or in real estate-related investments.
We expect the majority of the Account's real estate investments to be direct ownership interests in income-producing real estate, such as office, industrial, retail, and multi-family residential properties. The Account can also invest to a limited extent in other real estate-related investments, such as conventional mortgage loans, participating mortgage loans, and real estate partnerships. To a limited extent, the Account can also invest in real estate investment trusts, common or preferred stock of companies whose operations involve real estate (i.e., that own or manage real estate primarily), and collateralized mortgage obligations.
Normally, between 20% and 30% of the Account will be invested in government and corporate debt securities, short-term money market instruments or cash equivalents, and, to some extent, common or preferred stock of companies that don't primarily own or
manage real estate. In some circumstances, the Account can increase temporarily the portion of its assets invested in debt securities or money market instruments. This could happen because of a rapid influx of participants' funds, lack of suitable real estate investments, or a need for more liquidity.
We do not expect that the Account will invest in foreign real estate or other types of foreign real estate-related investments initially, but it may do so as it grows. The percentage of the Account's assets in foreign investments will vary, but we expect that foreign investments will not be more than 25% of the Account's portfolio.
In order not to be considered an "investment company" under the 1940 Act, the Account will limit its holdings of investment securities (as defined under the 1940 Act) to less than 40% of its total assets (not including U.S. Government securities and cash items). However, during its first year, the Account may keep a much larger part of its assets in short-term and other debt instruments or in equity securities.
TIAA can, in its discretion, decide to change the operating policies of the Account or wind it down. This could happen if, for instance, the Account is smaller than expected. If the Account is wound down, you may be required to transfer your accumulations to TIAA's traditional annuity or any CREF account available under your employer's plan. You will be notified in advance if we decide to change or wind down the Account.
Investments in Direct Ownership Interests in Real Estate
Acquisition. The Account's main investment policy is to acquire direct ownership interests in existing or newly-constructed income-producing real estate, including office buildings, multi-family residential properties, and retail and industrial properties. TIAA will invest a substantial part of the Account's assets in established properties that have existing rent and expense schedules or in new properties with predictable cash flows. The Account will usually acquire real estate that's ready for occupancy by tenants, which eliminates the development or construction risks inherent in buying unimproved real estate. However, from time to time the Account can, consistent with its objective, invest in a real estate development project. The Account can also buy recently-constructed properties that are subject to agreements with sellers that provide for certain minimum levels of income.
Purchase-Leaseback Transactions. Some of the Account's investments can be real property purchase-leaseback transactions ("leasebacks"). In these transactions, the Account typically will buy land and income-producing improvements on the land, and simultaneously lease the land and improvements. Leasebacks can be
for very long terms and may provide for increasing payments from the lessee.
Usually, under a leaseback, the lessee will operate, or arrange for someone else to operate, the property. The lessee is responsible generally for all operating costs, including taxes, mortgage debt service, maintenance and repair of the improvements, and insurance. The Account can also give the lessee an option to buy the land and improvements after a period of years. The option exercise price may be based on factors such as the fair market value of the property, as encumbered by the lease, the increase in the gross revenues from the property, or other objective criteria.
In some leasebacks, the Account may purchase only the land under an income-producing building and lease the land to the building owner. In those cases, the Account will often seek to share (or "participate") in any increase in property value from building improvements or in the lessee's gross revenues from the building above a base amount (which may be adjusted if real estate taxes or similar operating expenses increase or upon other events). The Account can invest in leasebacks that are subordinated to other interests in the land, buildings, and improvements. These interests include a first mortgage, other mortgage, or lien. In that case, the leaseback interest will be subject to greater risks.
Investments in Mortgages
The Account can make mortgage loans or hold interests in mortgage loans made by it or others, generally on the same types of properties it would otherwise purchase. These will include commercial mortgage loans that may pay fixed or variable rates of interest or have "participating" features (as defined below). The Account's mortgage loans usually will be secured by properties that have income-producing potential based on historical or projected data. Mortgage loans usually will be non-recourse, which means they won't be the borrower's personal obligations. They usually will not be insured or guaranteed by government agencies or anyone else. We expect most of the Account's mortgage loans to be secured by first mortgages on existing income-producing property. First mortgage loans are secured by mortgages which have first-priority liens on the real property. These loans may be amortized, or may provide for interest-only payments, with a balloon payment at maturity.
Participating Mortgage Loans. The Account may also seek to make
mortgage loans which, in addition to charging interest, permit the Account to
share (have a "participation") in the income from or appreciation of the
underlying property. These participations let the Account receive additional
interest, calculated as a percentage of the revenues the borrower receives from
(i) operating the property and/or (ii) selling or refinancing the property or
otherwise. Participations can also involve
granting the Account an option to buy the property securing the loan or an option to buy an undivided interest in the property securing the loan.
Managing Mortgage Loan Investments. When advisable and consistent with its investment objective, the Account can sell its mortgage loans, or portions of them, before maturity. TIAA can also extend the maturity of any mortgage loan made by the Account, consent to a sale of the property subject to a mortgage loan, finance the purchase of a property by making a new mortgage loan in connection with the sale of a property (either with or without requiring the repayment of the existing mortgage loan), renegotiate and restructure the terms of a mortgage loan, and otherwise manage the Account's mortgage loans.
Standards for Direct Ownership and Mortgage Loan Investments
In making direct ownership investments and mortgage loan investments, TIAA will consider relevant real property and financial factors. These include the location, condition, and use of the underlying property, its operating history, its future income-producing capacity, and the quality, operating experience, and creditworthiness of the unaffiliated borrower.
Before the Account acquires any direct ownership interest or makes a mortgage loan, TIAA will analyze the fair market value of the underlying real estate, taking into account the property's operating cash flow (derived from the historical and expected levels of rental and occupancy rates, and the historical and projected expenses of the property), supplemented by the general economic conditions in the area where the property is located. Ordinarily, each mortgage loan made by the Account will not exceed, when added to the amount of any existing debt, 85% of the appraised value of the mortgaged property, unless the Account is compensated for taking such additional risk.
Foreign Real Estate and Other Foreign Investments
We don't expect that the Account will buy foreign real estate or make real estate-related investments in foreign countries initially, but it might do so as it grows. It might also invest in securities or other instruments of foreign governmental or private issuers that are consistent with its investment objective and policies. Often, different factors affect foreign and domestic investment decisions. For example, foreign real estate markets have different liquidity and volatility attributes than U.S. markets. Changes in currency rates, currency exchange control regulations, possible expropriation or confiscatory taxation, political, social, and economic developments, and foreign regulations can also affect foreign real estate investments. It may be more difficult to obtain and collect a judgment on foreign investments than on domestic ones.
The value of investments that aren't denominated in U.S. dollars can go up or down as currency rates change. Rental income from those properties could be similarly affected by currency movements. Changes in currency exchange controls can also affect the value of the Account's foreign investments. The Account may seek to hedge its exposure to changes in currency rates and exchange control regulations, which could involve extra costs.
We will consider the above factors and others before investing in foreign real estate, and won't invest unless our standards and objectives are met. Depending on investment opportunities, the Account's foreign investments could at times be concentrated in one or two foreign countries. The percentage of the Account's foreign investments will vary. However, we expect that foreign investments will be no more than 25% of the Account's portfolio.
Other Real Estate-Related Investments
The Account can make other real estate-related investments, including holding shares of real estate investment trusts, common or preferred stock of companies whose business involves real estate, and collateralized mortgage obligations.
Real Estate Investment Trusts. Real estate investment trusts ("REITs") are publicly-owned entities that lease, manage, acquire, hold mortgages on, and develop real estate. REITs attempt to optimize share value by acquiring and developing new projects. They also refurbish, upgrade, and renovate existing properties to increase rental rates and occupancy levels. REITs seek higher cash flows by negotiating for rental increases on existing leases, replacing expiring leases with new ones at higher rates, and improving occupancy rates.
REITs must distribute 95% of their net earnings to shareholders in order to benefit from a special tax structure, which means they may pay high dividends. While a REIT's yield is relatively stable, its price fluctuates with interest rates. Other factors can also affect a REIT's price. For example, a REIT can be affected by such factors as cash flow dependency, the skill of its management team and defaults by lessees or borrowers. In the event of a default by a lessee or borrower, a REIT may experience delays in enforcing its rights as a lessor or mortgagee and may incur substantial costs associated with protecting its investments.
REITs invest in real property and mortgages, and therefore are subject to many of the same risks as the Real Estate Account. See "Risk Factors," page 19 and "Risks of REIT Investments," page 25.
Stock of Companies Involved in Real Estate Activities. The Account can invest in common or preferred stock of companies
whose business involves real estate. These stocks can be listed on one or more U.S. or foreign stock exchanges or traded over-the-counter in the U.S. or abroad. Like other equity securities, these stocks are subject to market risk -- their price can go up or down in response to changes in the financial markets. They are also subject to financial risk, which comes from the possibility that current earnings will fall or that overall financial soundness will decline, reducing the security's value.
Collateralized Mortgage Obligations. The Account can invest in collateralized mortgage obligations ("CMOs") that are fully collateralized by a portfolio of mortgages or mortgage-related securities. CMO issuers distribute principal and interest payments on the mortgages to holders of the CMOs according to the distribution schedules of each CMO. Some classes of CMOs may be entitled to receive mortgage prepayments before other classes do. Therefore, the prepayment risk for a particular CMO may be more or less than for other mortgage-related securities. CMOs may also be less marketable than other securities.
CMO interest rates can be fixed or variable. Variable-rate CMOs may be structured to adjust inversely with and more rapidly than short-term interest rates. As a result, their market value tends to be more volatile than other CMOs.
Other Investments
The Account can invest in securities issued or guaranteed by the U.S. Government or one of its agencies and instrumentalities, and debt securities of foreign governments or multinational organizations. The Account can also invest in corporate debt securities, asset-backed securities, and money market instruments or cash equivalents issued by domestic or foreign entities. It can also buy limited amounts of common or preferred stock of domestic or foreign companies that aren't involved primarily in real estate.
The Account will buy only investment-grade debt securities that are rated, at the time of purchase, within the top four categories by a nationally recognized rating organization or, if not rated, that are deemed to be of equivalent quality by TIAA.
The Account's money market instruments or cash equivalents will usually be high-quality short-term debt obligations. These investments include, but are not limited to, securities issued or guaranteed by the U.S. Government or one of its agencies and instrumentalities, commercial paper, certificates of deposit, bankers' acceptances, repurchase agreements, interest-bearing time deposits, and corporate debt securities.
From time to time, particularly during the Account's first year, a significant percentage of the Account may be invested
in liquid assets while we look for suitable real property investments. Liquid assets don't have to be real estate-related. The Account also can temporarily increase the percentage of its liquid assets under particular circumstances. These include the rapid influx of participants' funds, lack of suitable real estate investments, or a need for greater liquidity.
GENERAL INVESTMENT AND OPERATING POLICIES
The Account doesn't intend to buy and sell any direct ownership interests in properties, mortgage loans, leasebacks, or other real estate investments simply to make short-term profits by their sale. However, the Account may sell investments to raise cash, if market conditions dictate, or otherwise. The Account will reinvest any proceeds from sales of assets (and any cash flow from operations) that it doesn't need to pay operating expenses or to meet redemption requests (e.g., cash withdrawals or transfers).
Appraisals. When acquiring properties, leasebacks, or other real estate investments, the Account will rely on TIAA's analysis of the investment and usually won't receive an independent appraisal before an acquisition. However, the Account will get an independent appraisal when it makes mortgage loans. We expect that the Account's properties and participating mortgage loans will be appraised or valued annually by an independent state-certified appraiser who is a member of a professional appraisal organization.
Borrowing. Usually, the Account won't borrow money to purchase direct ownership interests in real properties -- i.e., these investments will be unleveraged. However, the Account may use a line of credit to meet short-term cash needs. While the properties the Account acquires ordinarily will be free and clear of mortgage indebtedness immediately after their acquisition, it is possible that the terms of a short-term line of credit may require the Account to secure a loan with one or more of its properties or other assets.
Joint Investments. While the Account will often own the entire fee interest in a property, it can also hold other ownership interests. The Account can hold property jointly through general or limited partnerships, joint ventures, leaseholds, tenancies-in-common, or other legal arrangements. The Account cannot hold real property jointly with TIAA or its affiliates.
Diversification. We have not placed percentage limitations on the type and location of properties that the Account can buy. However, the Account plans to diversify its investments by type of property and geographic location. How much the Account diversifies will depend upon the availability of suitable
investments and how much the Account has available for investment at any given time.
Discretion to Evict or Foreclose. TIAA can decide when it is in the best interests of the Account to evict defaulting tenants or to foreclose on defaulting borrowers. When deciding to evict or foreclose, TIAA will take a course of action that it concludes is in the best interests of the Account in order to maintain the value of an investment.
Property Management and Leasing Services. We usually will hire a management company to perform local property management services for properties the Account owns and operates. The local management company will be responsible for day-to-day management of the property, supervising any on-site personnel, negotiating maintenance and service contracts, and providing advice on major repairs, replacements, and capital improvements. The local manager will also review market conditions in order to recommend changes in rent schedules and create marketing and advertising programs to attain and maintain good occupancy rates by responsible tenants. The Account may also hire one or more leasing companies to perform leasing services for any property with actual or projected vacancies, if the property management company doesn't already provide those services. The leasing companies will coordinate with the property management company to provide marketing and leasing services. The fees paid to the local management company, along with any leasing commissions and expenses, will reduce the Account's cash flow from a property.
We won't usually need a management services company for mortgage loans (except for mortgage servicing), but we might decide that those services are desirable when we are foreclosing on a mortgage loan.
DESCRIPTION OF PROPERTIES
As of the date of this prospectus, the Account has purchased eight properties for its portfolio, consisting of two multi-family residential complexes, three neighborhood shopping centers, one office building and two industrial properties. These properties are described in detail in Appendix A. Real estate investments made on behalf of the Account after the date of this prospectus will be described in supplements to the prospectus, as appropriate.
RISK FACTORS
Participants should consider various risks before investing in the Account. These include valuation risks (see "Valuation of Assets," page 32), conflicts of interest (see "Conflicts of Interest," page 29), and the following:
Risks of Real Property Ownership
General Risks of Real Property Ownership. The Account will be subject to the risks inherent in owning real property. They include fluctuations in occupancy rates and operating expenses, unanticipated repairs and renovations (particularly in older structures), and variations in rental rates and property values. Many factors can adversely affect rental rates and property values. These include the state of the economy (local, national or global), changing supply and demand for the type of properties the Account invests in, natural disasters or man-made events, zoning laws, real property tax rates, and other governmental rates and fiscal policies.
Operating the Account's real property mainly involves renting to tenants. There are risks associated with rentals. For example if a lease is terminated because the tenant is unable to pay the rent (including when a bankruptcy court has rejected the tenant's lease), the Account's cash flow will be reduced. If we terminate a lease, we might not be able to find a new tenant without incurring a loss.
The inability to attract and retain tenants, which means that rental income declines, is another risk for the Account. Third parties in purchase-leaseback transactions may renege or default on rental agreements or rent guarantees. We also can't assure that operating a property will produce a satisfactory profit because operating costs can increase in relation to a property's gross rental income. In particular, property taxes and utility, maintenance, and insurance costs may go up. The Account may have to advance funds to third parties to protect its investment, or sell properties on disadvantageous terms in order to raise needed funds.
While the Account intends to reinvest cash flow from investments, we can't guarantee that those investments will generate enough income to pay the Account's operating and other expenses.
Resale of Real Property. Because the Account invests in real property, its investments may be illiquid compared to the readily-marketable securities held by other variable annuity accounts. A poor market for real estate can make it harder to sell any particular investment for its full value. This could lead to losses or reduced profits for the Account. The risk that resale will be difficult will vary with the size, location, and type of investment. The Account might not be able to sell a property at a particular time or price. Although the Account ordinarily would sell real property for cash, the Account may at times find it necessary to provide financing to purchasers.
Risks with Purchase-Leaseback Transactions. Risks under purchase-leaseback transactions relate to the ability of the lessee to make required payments to the Account. Because subleases are usually for shorter terms than the leaseback, the lessee's ability to make payments to the Account may depend on successfully renewing any subleases or finding new subtenants. If the leaseback interest is subordinate to other interests in the real property, such as a first mortgage or other lien, the risk to the Account increases because the lessee may have to pay the senior lienholder to prevent foreclosure before it pays the Account. If the lessee defaults or the leaseback is terminated prematurely, the Account might not recover its investment unless the property is sold or leased on favorable terms.
Properties Acquired Prior to Completion of Development and Construction and Recently-Constructed Properties. If the Account chooses to develop a real property, it faces the risk of delays or unexpected increases in the cost of property development and construction. These risks can come from over-building, which lowers demand for rentals. They can also be the result of slower growth in local economies, poor performance of local industries, higher interest rates, strikes, bad weather, material shortages, or increases in material and labor costs. We can't guarantee that once a property is developed it will operate at the income and expense levels we projected before developing it. We also can't guarantee that a property will be developed the same way we originally planned.
The Account may buy recently-constructed properties that are subject to agreements with sellers that provide for certain minimum levels of income. We can't guarantee that the sellers or other parties will be able to carry out their obligations under those agreements. We also can't assure you that when these agreements expire or the seller defaults, the operating income from the properties will be enough to produce as good a return as the Account was getting from those properties before the expiration or default.
Risks of Joint Ownership
Investing in joint venture partnerships or other forms of joint property ownership sometimes involves risks that don't apply when properties are owned directly. These risks include the co-venturer's bankruptcy or the co-venturer's having interests or goals inconsistent with those of the Account. If a co-venturer doesn't follow the Account's instructions or adhere to the Account's policies, the jointly-owned properties, and consequently the Account, might be exposed to greater liabilities than expected. A co-venturer also can make it harder for the Account to transfer its interest in the joint form of ownership. A co-venturer could have the right to decide whether and when to sell the property. As
a result, it could be hard for the Account to sell joint ownership investments.
Risks of Mortgage Loan Investments
General Risks of Mortgage Loans. The main risk of a mortgage loan investment is that the borrower defaults. If that happens, the Account would have to foreclose on the underlying property to protect the value of its mortgage loan, or pursue other remedies. Since the Account will usually make non-recourse mortgage loans, it will usually rely solely on the value of the underlying property for its security. Mechanics', materialmen's, governmental, and other liens on the property may have or obtain priority over the Account's security interest.
The unamortized principal amount due under a mortgage loan will be payable in a lump sum payment at the end of the loan term. Unless the borrower has large cash reserves, it may not be able to make this payment unless it can refinance the mortgage loan with another lender.
If interest rates are volatile during the investment period, the Account's variable-rate mortgage loans could have lower yields.
Prepayment Risks. The Account's mortgage loan investments will usually be subject to the risk that the borrower decides to prepay the loan. Prepayments can change the Account's return because we may be unable to reinvest the prepaid proceeds at as good an interest rate as the original mortgage loan rate.
Loan-to-Value Ratio. The larger the mortgage loan compared to the fair market value of the property securing it, the greater the loan's risk. The Account therefore usually won't make mortgage loans of more than 85% of the appraised value of the property. (It will make larger loans only if it's compensated for the extra risk.) However, we can't guarantee that if a borrower defaults, the Account will be able to sell the property for its estimated or appraised value.
Interest Limitations. Because state laws could change during the term of a loan or for other reasons, we might not always be able to determine with certainty whether the interest rate we are charging on mortgage loans complies with state usury laws that limit rates. If we inadvertently violate those laws, we could incur such penalties as restitution of excess interest, unenforceability of debt, and treble damages.
Risks of Participations. A participating mortgage loan could have a relatively low fixed interest rate and provide for payment of a percentage of revenues from the property or sale proceeds. In that case, if the property doesn't generate revenues
or appreciate in value, the Account will have given up a potentially greater fixed return without receiving the benefit of appreciation. It's also possible that in very limited circumstances, a court could characterize the Account's participation interest as a partnership or joint venture with the borrower. The Account would then lose the priority its security interest would otherwise have been given, or be liable for the borrower's debts.
General Risks of All Types of Real Estate-Related Investments
Appraisal Risks. We may rely on appraisals from real estate professionals to value properties. However, appraisals are only estimates based on the professional's opinion and may not be the amount the Account receives if it sells the property. If appraisals are too high, participants sending in premiums will be credited with fewer accumulation units than if the value were lower. Participants withdrawing funds or receiving income when appraisals are too high will receive more money than they would otherwise be entitled to, which hurts other participants. If appraisals are too low, participants sending in premiums would be credited with too many accumulation units, which hurts other participants. Payments to participants making cash withdrawals or receiving income would be lower when appraisals are too low than they would have been if the appraisals were higher.
Inaccurate appraisals can also affect the fees the Account pays to TIAA, since TIAA's fees are based on the Account's value (see "Conflicts of Interest," page 29).
Investment Opportunities; Size of Account. We can't guarantee that good investment opportunities will come up at the same time funds are available for investment. In addition, the Account may have to forego investment opportunities if it does not have sufficient money to invest.
It will be more difficult to diversify the Account's investments when the Account is small. Returns from the Account would, in that case, be more dependent on the performance of any one investment than if the Account were larger and more diversified.
Casualty Losses. We will try to arrange for, or require proof of, comprehensive insurance, including liability, fire, and extended coverage, for the Account's real property and properties securing mortgage loans or subject to purchase-leaseback transactions. However, some types of catastrophic losses are uninsurable or so expensive to insure against that it doesn't make sense to buy insurance for them. These may include losses from earthquakes, wars, nuclear accidents, floods, or environmental or industrial hazards or accidents. If a disaster that we haven't
insured against occurs, the Account could lose both invested principal and any future profits from the property affected.
Some leases may permit a tenant to terminate its obligations in certain catastrophic situations, regardless of whether those events are fully covered by insurance. In that case, the Account would not receive rental income from the property while that tenant's space is vacant.
Regulatory and Environmental Risks. The imposition of restrictive zoning regulations and land use controls, strict air and water quality standards, and noise pollution regulations by local, state, federal, and foreign governmental authorities could limit the availability of suitable investments for the Account and could increase any construction and operating costs of the Account.
In addition, changes in local, state, federal, or international environmental regulations on the use or presence of hazardous or toxic materials or waste could raise the cost of owning and maintaining properties. It could be harder for the Account to maintain, sell, rent, finance, or refinance properties or property interests affected by new environmental regulations because of the increased costs associated with regulatory compliance. Under some federal statutes, the Account's potential liability for environmental damage could exceed the value of the Account's investment in a property.
Under various federal, state, and local environmental regulations, a current or previous property owner or operator, and sometimes a mortgagee, may be liable for the cost of removing or cleaning-up hazardous or toxic substances on, in or released from a property. The Account could be liable for those costs on its properties, even if we didn't know of, and weren't responsible for, the presence or release of the hazardous or toxic substances. The presence of any hazardous or toxic substances, or the failure to clean up those substances properly, can limit an owner's ability to sell or rent a property. The Account could also be liable for the cost of removal or clean up of those substances at a disposal or treatment facility, even if we don't own the facility. Under current environmental regulations, the cost of any required clean-up and the liability of the owner, operator, or mortgagee is usually not limited and could exceed the property's value or the aggregate assets of the owner or operator. In an extreme case, the Account could be required to incur significant costs because of a single real estate investment if it were legally required to pay for cleaning up an environmental hazard.
Various environmental regulations also require property owners or operators to monitor business activities on their premises that affect the environment. Failure to comply with those requirements could make it difficult to lease or sell any affected property or subject the Account to monetary penalties.
Risks of REIT Investments
REITs invest in real property and mortgages, and therefore are subject to many of the same general risks associated with direct real property ownership. In particular, equity REITs may be affected by changes in the value of the underlying property owned by the trust, while mortgage REITs may be affected by the quality of any credit extended. In addition to these risks, because REIT investments are securities, they may be exposed to market risk -- price volatility due to changing conditions in the financial markets and, in particular, changes in overall interest rates.
Risks of Liquid Investments
The Account's investments in securities and other instruments are subject to several types of risks. One is financial risk, which for debt securities and other fixed-income instruments comes from the possibility the issuer won't be able to pay principal and interest when due. For common or preferred stock, it comes from the possibility that the issuer's current earnings will fall or that its overall financial soundness will decline. Another kind of risk is market risk -- price volatility due to changing conditions in the financial markets and, particularly for debt securities, changes in overall interest rates. Finally, volatile interest rates may affect current income from an investment.
Other Risks
Risk of Unspecified Investments. As of the date of this prospectus, the Account has invested only a portion of its assets in real estate and we can't tell you with certainty when and if the Account will be fully invested. While we intend to supplement this prospectus periodically to describe the Account's property investments, it is unlikely that supplements will be available for your review prior to the completion of a property acquisition. As a result, if you invest in the Account you won't have the opportunity to evaluate for yourself the economic merit of any property investments that the Account may make. You therefore must rely solely upon the judgment and ability of TIAA to select investments consistent with the Account's investment objective and policies.
Investment Company Act of 1940. We intend to operate the Account so that it will not have to register as an "investment company" under the 1940 Act. This will require monitoring the Account's portfolio so that it won't have more than 40% of total assets (other than U.S. Government securities and cash items) in investment securities (as defined under the 1940 Act). As a result, the Account may be unable to make some potentially profitable investments.
ROLE OF TIAA
TIAA plays a significant role in operating the Real Estate Account. The Account is managed by TIAA. In addition, TIAA's general account supplied the Account's initial capital, or "seed money." On an ongoing basis, TIAA's general account provides a liquidity guarantee -- i.e., TIAA ensures that the Account has funds available to meet transfer or cash withdrawal requests. (See "Liquidity Guarantee," page 26.)
Seed Money
On July 3, 1995, TIAA contributed $100 million to the Account in exchange for $100 million in accumulation units, to enable the Account to purchase a diverse portfolio of properties without having to wait to receive premiums.
TIAA will redeem a portion of its seed money investment monthly, according to a five-year fixed repayment schedule approved by the New York Insurance Department. This schedule requires TIAA to begin redeeming the seed money investment (1) on October 2, 1997, or (2) on the date the Account's assets first reach $200 million, whichever comes first.
TIAA's accumulation units will be redeemed at net asset value at the time of redemption.
Because of its seed money investment, TIAA owned accumulation units representing 85.3% of the Account's net assets, as of December 31, 1995.
Liquidity Guarantee
Subject to federal income tax considerations and, where applicable, the terms of your plan, you can redeem accumulation units daily by making cash withdrawals or transfers from the Account. If the Account's cash flow (from premiums and investment income) and liquid investments are insufficient to fund redemption requests, TIAA's general account intends to fund them by purchasing accumulation units, subject to Department of Labor approval. When TIAA purchases units to keep the Account liquid ("liquidity units") or TIAA sells liquidity units back to the Account, the number of accumulation units TIAA holds will go up or down. TIAA guarantees that you can redeem your accumulation units at their then current daily net asset value. Of course, you can only make a cash withdrawal consistent with the terms of your plan.
As TIAA buys liquidity units, it may end up owning more of the Real Estate Account than anticipated. An independent fiduciary (see below) will monitor whether liquidity units held by TIAA's general account have, together with the accumulation units representing TIAA's seed money investment (if still not redeemed),
exceeded a specific percentage of the Account's total outstanding accumulation units. If so, TIAA may be required to redeem some of its liquidity units. The independent fiduciary may require the number of liquidity units TIAA holds to be reduced when the Account has uninvested cash or liquid investments available. The independent fiduciary may also select properties for the Account to sell so that TIAA can redeem liquidity units. See "Role of the Independent Fiduciary," below.
The Account pays TIAA for the liquidity guarantee through a daily deduction from net assets. See "Liquidity Guarantee Deduction," page 37.
TIAA's ERISA Fiduciary Status
To the extent that assets of a plan subject to ERISA are allocated to the Account, TIAA will be acting as an "investment manager" (as that term is defined under ERISA) and a fiduciary under ERISA with respect to those assets.
Role of the Independent Fiduciary
TIAA's purchase and sale of liquidity units raises certain technical issues under ERISA. TIAA therefore filed an application for a prohibited transaction exemption with the U.S. Department of Labor ("DOL"). The exemption was issued in proposed form on April 4, 1996. Although we currently anticipate that the DOL will issue the requested exemption in final form, we can't assure you that it will do so on the terms and conditions requested by TIAA. In connection with the proposed exemption, TIAA has appointed an "independent fiduciary" for the Real Estate Account.
Institutional Property Consultants, Inc., a registered investment adviser in business since 1983, serves as the Account's independent fiduciary. The independent fiduciary's responsibilities include: (1) reviewing and approving the Account's investment guidelines and any changes to them; (2) monitoring whether the properties the Account buys conform to the investment guidelines; (3) reviewing and approving valuation procedures and any changes to them; (4) approving adjustments to any property valuations that change the value of the property or the Account as a whole above or below certain prescribed levels, or that are made within three months of the annual independent appraisal; (5) reviewing and approving how we value accumulation and annuity units; (6) approving the appointment of all independent appraisers; (7) reviewing the purchase and sale of units by TIAA to ensure that we use the correct unit values; and (8) reviewing the seed money redemption schedule. If the independent fiduciary believes that any of the properties have changed materially, or
that an additional appraisal is otherwise necessary to assure the Account has correctly valued a property, it can require appraisals besides those normally conducted.
After (and, if necessary, before) the period during which the Account must repay TIAA's seed money investment, the independent fiduciary will calculate the percentage of total accumulation units that TIAA's ownership shouldn't exceed (the "trigger point"). The independent fiduciary will also create a method for changing the trigger point. It must approve any adjustment of TIAA's interest in the Account and can require an adjustment. If TIAA's investment reaches the trigger point, the independent fiduciary may plan and participate in any program for selling the Account's assets. This can include selecting properties for sale, providing sales guidelines, and approving those sales that, in the independent fiduciary's opinion, are desirable to reduce TIAA's ownership in the Account or to facilitate winding down the Account.
The independent fiduciary will supervise the Account during any winding down of operations. It will review any program for selling the assets of the Account during that time. This review can include selecting the properties to be sold, providing sales guidelines, and approving the sale of the properties in the Account, if in the independent fiduciary's opinion, the sales would facilitate winding down.
The independent fiduciary will also review any other transactions or matters involving the Account that TIAA submits for review to determine whether those transactions are fair and in the Account's best interest.
TIAA appointed the independent fiduciary for a five-year term, and has established a special subcommittee of its Board of Trustees with authority to renew the appointment or remove the independent fiduciary. When the term ends, the independent fiduciary will not be reappointed unless more than 75% of the subcommittee members approve. Before the term ends, the independent fiduciary can be removed by the vote of the majority of subcommittee members after at least 180 days' written notice. In addition, the independent fiduciary can resign after at least 180 days' written notice. If the independent fiduciary resigns or is removed, TIAA will appoint a successor.
TIAA pays the independent fiduciary directly. The investment management charge deducted from the Account's assets and paid to TIAA includes TIAA's costs for retaining the independent fiduciary. The independent fiduciary will receive less than 5% of its annual income, including payment for services to the Real Estate Account during its term as independent fiduciary, from TIAA.
Your decision as a participant or plan fiduciary to invest in the Account will constitute your approval and acceptance of Institutional Property Consultants, Inc. or any successor to serve as the Account's independent fiduciary, after full and fair disclosure has been made by TIAA, including the disclosure in this prospectus.
CONFLICTS OF INTEREST
TIAA is a nonprofit company and will not accept acquisition or placement fees for services provided to the Account. However, the same people who oversee the Account's real estate and non-real estate investments may also buy, sell, and manage the real estate-related and other investments of TIAA's general account. This could create conflicts of interest.
The potential for conflicts of interest can arise because TIAA's general account may sometimes compete with the Real Estate Account in the purchase or sale of investments. However, we do not expect many conflicts to arise because the Real Estate Account and TIAA's general account will normally have different investment and sale objectives and will generally not be in the market to purchase or sell the same types of properties at the same time. Whenever the investment or sale objectives of the Real Estate Account and TIAA's general account are similar, we will use the following procedures to eliminate conflicts of interest: The decision, in the first instance, as to whether the Real Estate Account or TIAA's general account will purchase or sell a property will be determined by such factors as which account has cash available to make the purchase, the effect the purchase or sale will have on the diversification of each account's portfolio, the estimated future cash flow of the portfolios with regard to both purchases or sales, and other relevant legal or investment policy factors. If this analysis does not clearly determine which account should participate in a transaction, a rotation system will be used.
Potential conflicts of interest could also arise because some properties in TIAA's general account may compete for tenants with properties the Account owns or has an interest in.
The decision as to whether properties owned by the Account or TIAA's general account will lease space to a tenant will be determined by such factors as the tenant's preference between the two properties, how much the tenant is willing to pay for rent, and which property can best afford to pay any required costs associated with such leasing.
Many of the personnel of TIAA involved in performing services to the Real Estate Account will have competing demands on their time. The personnel will devote such time to the affairs of the Account as TIAA's management determines, in its sole discretion exercising good faith, is necessary to properly service the
Account. TIAA believes that it has sufficient personnel to discharge its responsibility to both the general account and the Account and to avoid conflicts of interest.
Indemnification
The Account has agreed to indemnify TIAA and its affiliates, including its officers and directors, against certain liabilities, including liabilities under the Securities Act of 1933. The Account may make such indemnification out of its assets.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 December 31, 1995, the Account acquired a total of five real estate properties, including two industrial properties, one neighborhood shopping center, and two apartment complexes. Since December 31, 1995, the Account has purchased an office property and two neighborhood shopping centers. The Account is in various stages of negotiations with a number of prospective sellers for additional real estate purchases.
Results of Operations
From July 3 to December 31, 1995, the Account's net investment income, after deduction of all expenses, was $2,640,397. In addition, the Account had net realized and unrealized gains on investments of $35,603. This resulted in a cumulative total return of 2.57% for that six month period. Much of the Account's investment income received during 1995 was generated by short-term investments. However, as the Account approaches its objective 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 underlying economic conditions, this increase in real estate holdings should have a positive impact on the Account's total return.
Interest income on the Account's short-term investments totaled $2,820,229 and its dividend income totaled $8,671 through December 31, 1995. Gross real estate income through this same date was $165,762. Total property-level expenses through December 31, 1995 were $43,832 and were comprised of real estate taxes and other operating expenses. Through December 31, 1995, the Account also incurred expenses of $228,136 for investment management services provided by TIAA, $66,320 for administrative and distribution
services provided by TIAA-CREF Individual and Institutional Services, Inc., and $16,582 for the mortality and expense risks and liquidity guarantee provided by TIAA. Because the Account began accepting contributions from participants on October 2, 1995, the charges for administrative and distribution services, as well as for mortality and expense risks and the liquidity guarantee only began as of that date.
Liquidity and Capital Resources
In addition to TIAA's initial $100 million seed money investment, through December 31, 1995 the Account has received over $17.5 million in premiums and net participant transfers from accumulations in other TIAA and CREF accounts and has earned $2,640,397 in net investment income. Real estate properties totaling $43,989,665 were purchased during November and December 1995. At December 31, 1995, the Account's liquid assets (cash and short-term investments) were $73,948,731. 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 short-term instruments to meet expense needs and redemption requests (e.g., cash withdrawals or transfers).
If the Account's cash flow from operations (e.g., premiums and investment income) and from available liquid assets is not enough to meet its cash needs including redemption requests, the Account will fund redemptions by having TIAA's general account purchase liquidity units, in accordance with the liquidity guarantee.
TIAA will begin redeeming the accumulation units related to its seed money investment on October 2, 1997, or the date the Account's assets first reach $200 million, whichever comes first. After that, TIAA will redeem 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 five properties purchased during 1995 were made in 1995 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 to incur any major construction costs or leasing commissions in order to re-lease that space. For the apartment complexes, we expect 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.
VALUATION OF ASSETS
We value the Account's assets as of the close of each valuation day. The Account's net asset value at the end of any valuation day is equal to the sum of: (i) the value of the Account's cash, cash equivalents, and short-term and other debt instruments; (ii) the value of any of the Account's other securities investments; (iii) the value of the individual real properties and other real estate-related investments owned by the Account, determined as described below; and (iv) an estimate of the accrued net operating income earned by the Account from real properties and certain other real estate-related investments, reduced by the Account's liabilities, including the daily investment management fee and certain other expenses attributable to operating the Account (see "Expense Deductions," page 37).
Your premiums purchase accumulation units. The Account calculates
accumulation unit values daily. Accumulation unit value depends on the Account's
net investment income and any realized and unrealized capital gains or losses
from its investments. Your retirement income is based on annuity units. We
calculate annuity unit values for each year on March 31, but each month we also
calculate interim annuity unit values that remain in effect until the next March
31 (for more, see "Annuity Payments," page 53).
Our valuation procedures are described below. The independent fiduciary approves these procedures and any changes to them (see page 27).
Valuing Real Estate-Related Investments
Valuation Methods for Real Property. Individual real properties including purchase-leasebacks and joint ventures will initially be valued at their purchase prices. (Prices include all expenses related to purchase, such as acquisition fees, legal fees and expenses, and other closing costs.) However, we could use a different value in appropriate circumstances.
After this initial valuation, an independent appraiser will value properties at least once a year. The independent fiduciary must approve all independent appraisers that the Account hires. The independent fiduciary can require additional appraisals
if it believes that a property has changed materially or otherwise to assure that the Account is valued correctly.
Quarterly, we will conduct an internal review of each of the Account's properties. We'll adjust a valuation if we believe that the value of the property has changed since the previous valuation. We'll continue to use the revised value to calculate the Account's net asset value until the next review or appraisal. However, we can adjust the value of a property in the interim to reflect what we believe are actual changes in property value.
The Account's net asset value will include the current value of any note receivable (an amount that someone else owes the Account) from selling a real estate-related investment. We'll estimate the value of the note by applying a discount rate appropriate to then-current market conditions.
Valuation Methods for Conventional Mortgages. Individual mortgages will initially be valued at their face amount. Thereafter, quarterly, we'll value the Account's fixed interest mortgage loans by discounting payments of principal and interest to their present value (using a rate at which commercial lenders would make similar mortgage loans of comparable maturity). We'll also use this method for foreign mortgages with conventional terms.
We'll adjust mortgage values quarterly using this formula, unless we believe that it's necessary to adjust them more frequently. We'll get information about commercial lenders by surveying typical lending institutions and from other sources.
Valuation Methods for Participating Mortgages. Individual mortgages will initially be valued at their face amount. Thereafter, quarterly, we'll calculate the values of the Account's mortgage loans with participation features. To do so we'll make various assumptions about occupancy rates, rental rates, expense levels, capitalization rates upon sale, and other things. We'll use these assumptions to project the cash flow from each investment over the term of the loan, or sometimes over a shorter period. For these purposes, cash flow includes fixed interest, the participation feature, and any anticipated share in sale proceeds. To calculate asset value, we'll assume that the real property underlying each investment will be sold at the end of the period used in the valuation at a price based on market assumptions for the time of the projected sale. Although we use this time period to calculate asset values, it doesn't mean that the Account will actually hold the investment for that period. We chose it simply as a frame of reference for estimating asset values.
After we calculate estimated cash flows and sale proceeds, we discount them to their present value (using rates appropriate to then-current market conditions). We can then estimate the value of the mortgage.
Net Operating Income. The Account usually receives operating income from its real properties and other real estate-related investments intermittently, not daily. We believe it is fairer to participants to estimate the Account's net operating income rather than applying it when we actually receive it. Therefore, we assume that the Account has earned (accrued) a proportionate amount of that estimated amount daily. However, because these estimates might not turn out to be accurate, you bear the risk that, until we adjust the estimates, we could be under- or overvaluing the Account.
The Account's estimated net operating income from real estate assets will be based on estimates of revenues and expenses for each property. Every year, we'll prepare a month-by-month estimate of the revenues and expenses ("estimated net operating income") for each of the Account's properties. Each day, we'll add the appropriate fraction of the estimated net operating income for the month to the Account's net asset value, as determined above. In effect, the Account will have a daily accrued receivable equal to the estimated net operating income from each of its properties.
Every month, the Account will receive a report of actual operating results for each property ("actual net operating income"). We will then recognize the actual net operating income on the accounting records of the Account. We will also adjust accordingly the daily accrued receivable that is then outstanding. As the Account actually receives cash from a property, we'll adjust the daily accrued receivable and other accounts appropriately.
Appraisals and Realizable Value of Investments
The Account's net asset value won't necessarily reflect the true or realizable value of the Account's assets (i.e., what the Account would get if it sold them). We believe that we use reasonable assumptions, estimates, and formulas to calculate the values of the Account's investments. However, we can't guarantee the Account will receive that amount when it sells a property. We also expect that the Account will sell some of its real properties for cash and notes (i.e., promises to pay in the future), rather than cash alone. In the future, the amount of the note could be greater or less than the amount of the cash.
TIAA will use annual independent appraisals of the real properties in calculating asset values. However, appraisals are only estimates and don't necessarily reflect an investment's true or realizable value. If necessary, TIAA will have properties appraised more frequently than currently planned.
Adjustments. We can adjust the values of an investment if we believe events or market conditions have increased or decreased the realizable value of that investment. We might do so, for example, if an event directly affects a property or its
surrounding area. We could also make adjustments for events that affect a borrower's or lessee's ability to make payments on a mortgage loan or leaseback. We can't assure that we will always become aware of each event that might require a valuation adjustment. Also, because our evaluation is based on subjective factors and interpretations, we cannot assure you that we will make adjustments in all cases where changing conditions could affect the value of the real property investments, mortgage loans, or leasebacks.
The independent fiduciary will approve any adjustments to any
valuation of one or more properties which results in an increase or decrease of:
(1) more than 6% of the value of any of the Account's properties since the last
independent annual appraisal; (2) more than 2% in the value of the Account since
the prior month; or (3) more than 4% in the value of the Account within any
quarter. The independent fiduciary will also approve adjustments to any property
valuation that are made within three months of the annual independent appraisal.
Right to Change Valuation Methods. If we decide that a different valuation method would reflect the value of an investment more accurately, we may use that method if the independent fiduciary consents. Changes in TIAA's valuation methods could change the Account's net asset value. This, in turn, could change the values at which participants purchase Account interests.
Valuing Liquid Investments
Debt Securities and Money Market Instruments. We value fixed-income securities (including money market instruments) for which market quotations are readily available at the most recent bid price or the equivalent quoted yield for those securities (or those of comparable maturity, quality, and type). We obtain values for money market instruments with maturities of one year or less either from one or more of the major market makers for those securities or from one or more financial information services. We use an independent pricing service to value securities with maturities longer than one year except when we believe prices do not accurately reflect the fair value of these securities.
Equity Securities. We value equity securities listed or traded on the New York Stock Exchange or the American Stock Exchange at their last sale price on the valuation day. If no sale is reported that day, we use the mean of the closing bid and asked prices. Equity securities listed or traded on any other exchange are valued in a comparable manner on the principal exchange where traded.
We value equity securities traded on the NASDAQ Stock Market's National Market at their last sale price on the valuation day. If no sale is reported that day, we use the mean of the
closing bid and asked prices. Other U.S. over-the-counter equity securities are valued at the mean of the closing bid and asked prices.
Foreign Securities. To value investments traded on a foreign exchange or in foreign markets, we use their closing values under the generally accepted valuation method in the country where traded, as of the valuation date. We convert this to U.S. dollars at the exchange rate in effect on the valuation day.
Investments Lacking Current Market Quotations. We value securities or other assets for which market quotations are not readily available at fair value as determined in good faith under the direction of the Mortgage Committee of TIAA's Board of Trustees and in accordance with the responsibilities of TIAA's Board as a whole.
MANAGEMENT AND INVESTMENT ADVISORY ARRANGEMENTS
The Account doesn't have its own management or board of directors. Rather, TIAA employees, under the direction and control of TIAA's Board of Trustees and Mortgage Committee, manage the investment and reinvestment of the Account's assets pursuant to investment management procedures adopted by TIAA for the Account. You don't have the right to vote on the management and operation of the Account directly; however, you may send ballots to advise the TIAA Board of Overseers about voting for nominees for the TIAA Board of Trustees.
TIAA's investment management responsibilities include research and recommending and placing orders for securities, real estate-related investments, and other investments. TIAA's investment management decisions for the Account may be subject to review and approval by the Account's independent fiduciary (see page 27).
TIAA also provides all portfolio accounting, custodial, and related services for the Account. In performing these services, TIAA employees will act consistent with the Account's investment objective, policies, and restrictions (see page 12).
TIAA provides all services to the Account at cost. For more about the charge for investment management services, see "Investment Management Expense Deduction," below.
For information about the Trustees and principal executive officers of TIAA, see Appendix B to this prospectus.
EXPENSE DEDUCTIONS
Deductions are made each valuation day from the net assets of the Account for various services required to manage investments, administer the Account and the contracts, and to cover certain risks borne by TIAA. Services are performed at cost by TIAA and TIAA-CREF Individual & Institutional Services, Inc. ("Services"), a non-profit subsidiary of TIAA. Because services are provided at cost, we expect that expense deductions will be relatively low. TIAA guarantees that in the aggregate, the expense charges will never be more than 2.50% of average net assets per year.
Investment Management Expense Deduction
This deduction is for TIAA's investment advice, portfolio accounting, and custodial and similar services, including independent fiduciary and appraisal services. The current daily deduction is equivalent to 0.40% of net assets annually.
Administrative and Distribution Expense Deduction
This deduction is for Services' administrative expenses, such as allocating premiums and paying annuity income, and for expenses related to the distribution of the contracts. The current daily deduction for the Account is equivalent to 0.23% of net assets annually, of which 0.20% is for administrative services and 0.03% is for distribution services.
Mortality and Expense Risk Deduction
TIAA imposes a daily charge as compensation for bearing certain mortality and expense risks. The current daily deduction is equal to 0.05% of net assets annually. Accumulations and annuity payments aren't affected by changes in actual mortality experience or by TIAA's actual expenses.
Liquidity Guarantee Deduction
This deduction is for TIAA's liquidity guarantees. The current daily deduction for the Account is equivalent to 0.02% of net assets annually.
Quarterly Adjustment
Normally within 30 days after the end of every quarter, we reconcile how much we deducted as discussed above with the expenses the Account actually incurred. If there's a difference, we add it to or deduct it from the Account in equal daily installments over the remaining days in the quarter. TIAA's board can revise the deduction rates from time to time to keep deductions as close as possible to actual expenses.
No Deductions from Premiums or on Withdrawals
Currently there are no expense deductions from your premiums or amounts you withdraw in cash, although TIAA reserves the right to deduct expenses in the future.
Brokerage Fees and Related Transaction Expenses
Brokers' commissions, transfer taxes, and other portfolio fees are charged directly to the Real Estate Account.
THE ANNUITY CONTRACTS
TIAA offers the Real Estate Account as a variable component of a number of different accumulating annuity contracts: a Retirement Annuity ("RA"); a Group Retirement Annuity ("GRA"); a Supplemental Retirement Annuity ("SRA"); a Group Supplemental Retirement Annuity ("GSRA"); and a Rollover Individual Retirement Annuity ("Rollover IRA"). Subject to regulatory approval, we plan to offer an Individual Retirement Annuity that accepts both direct contributions and rollovers (the "New IRA") and a Keogh Plan Annuity ("Keogh"). (We refer to the Rollover IRA and New IRA collectively as the "IRAs".) The availability of the Account under the contracts also may be subject to state regulatory approval.
RAs, SRAs, IRAs, and Keoghs are issued to you directly. GRAs and GSRAs are issued under the terms of a group contract. Neither you nor your beneficiaries can assign your ownership of a TIAA contract to anyone else, except as a result of a qualified domestic relations order as defined by the IRC. Currently TIAA makes no deductions from your premiums, but we reserve the right to do so in the future.
TIAA also offers the Real Estate Account through various types of income-paying contracts. These are described beginning on page 38. In addition, the Account may be available under certain unallocated TIAA group annuity contracts issued to employers.
Right to Cancel Contract
You can cancel any TIAA RA, SRA, GSRA, IRA or Keogh contract up to 30 days after you first receive it, unless it's one under which annuity payments have begun. This right to cancel applies only if you don't have an existing TIAA contract, not simply if you're receiving a Real Estate Account contract rider for the first time. To cancel a contract, mail or deliver it and a signed Notice of Cancellation to TIAA's home office. If asked to cancel the contract, TIAA will do so as of its date of issue, then send the entire current accumulation, including premiums, deductions (if any), and investment gains or losses, back to the
premium remitter (although in some states we are required to send back your entire premium and any deductions, without accounting for any interim investment results). If you're considering canceling a TIAA contract, consult your employer.
RA and GRA Contracts
RA and GRA contracts are used mainly for employer-sponsored retirement plans set up under sections 401(a), 403(a), and 403(b) of the IRC. Your rights under these contracts may be subject to vesting requirements under your employer's plan. Occasionally we issue RA or GRA contracts to employers to meet deferred compensation obligations. If you have a deferred compensation agreement, ask your employer about your rights and obligations.
Depending on the terms of your plan, RA premiums can be paid by your employer, you, or both. If your RA premiums include contributions by both you and your employer, the employer usually remits them in a single combined payment. If you're paying some or all of the periodic premium, your contributions can be in either pre-tax dollars, by salary reduction (i.e., your employer periodically reduces your taxable compensation by a specified sum, and sends an equal amount to TIAA); or after-tax dollars, by payroll deduction -- in either case, subject to your employer's plan. For RAs only, you can make single, non-recurring contributions in any amount directly to TIAA.
GRA premiums can also include contributions from your employer or both you and your employer. Like an RA, the GRA lets you make pre-tax contributions by salary reduction and after-tax contributions by payroll deduction -- again subject to your employer's plan. You can't make payments directly; your employer has to send them for you. You can also transfer accumulations from another investment choice under your employer's retirement plan to your RA or GRA contract (see page 45).
SRA and GSRA Contracts
SRA and GSRA contracts are used mainly for voluntary tax-deferred annuity ("TDA") plans set up under section 403(b) of the IRC. The SRA contract is issued directly to you, while the GSRA contract is issued through an agreement between TIAA and your employer. For both SRAs and GSRAs, you pay all premiums in pre-tax dollars via salary reduction. You can't pay premiums directly, though you can transfer amounts from another TDA plan (see below).
Rollover IRA Contracts
TIAA's Rollover Individual Retirement Annuity ("IRA") is issued under IRC section 408(b). You currently can use it only for tax-deferred funds previously held in an eligible institution's retirement plan or in individual retirement accounts that were themselves set up with amounts originally in an eligible institution-sponsored plan. Subject to regulatory approval, we expect to expand eligibility, so that you or your spouse can also set up a Rollover IRA with funds rolled over from any retirement plan or individual retirement account, as long as such a rollover is permitted by the IRC and as long as you are currently employed by or retired from an eligible institution.
New IRA Contracts
We plan to issue, subject to regulatory approval, a New IRA contract that accepts the same type of funds that the Rollover IRA currently accepts, the funds it would accept under the expanded eligibility just described, as well as other types of funds. These are:
(1) Direct payments from anyone employed by an eligible institution or married to an employee. The IRC limits the amount you can contribute, usually to $2,000. See Federal Income Taxes, page 56.
(2) Contributions to a Simplified Employee Pension (SEP) plan. You can use the New IRA to fund your SEP plan if you have income from self-employment and you're currently employed by or retired from an eligible institution. If you open your IRA when you are retired, or if you have a SEP plan, your contributions must be from "qualified income." Qualified income is income from a work related to your primary academic or research career. You can also use the IRA to accept contributions from an eligible institution's SEP plan. For more information, please contact TIAA.
Keogh Plan Contracts
Subject to regulatory approval, we expect to offer Keogh certificates. They will be issued under IRC sections 401(a) and 403(a). If you own an unincorporated business, you can use them to fund your Keogh plan if you are currently employed by or retired from an eligible institution. The IRC limits the amount you can contribute each year, and contributions must be from qualified income (see above). See Federal Income Taxes, page 55.
Remitting Premiums
We'll issue you a TIAA contract as soon as we receive your completed application or enrollment form. If you already have a TIAA contract, you will receive a rider permitting you to allocate premiums to the Real Estate Account. You may remit
premiums to the Account under RAs, GRAs, or GSRAs only if permitted under your employer's plan. Your premiums will be credited to the Real Estate Account as of the business day we receive them.
If we receive premiums from your employer before your application or enrollment form, we'll credit the premiums to the CREF Money Market Account until we receive your form. We'll transfer and credit the amount you've specified to the Real Estate Account as of the business day we receive your completed application or enrollment form.
If the allocation instructions on your application or enrollment form are incomplete, violate plan restrictions, or don't total 100%, we'll credit your premiums to the CREF Money Market Account until we do receive complete instructions. Any amounts that we credited to the CREF Money Market Account before we received correct instructions will be transferred to the Real Estate Account only on request, and will be credited as of the business day we receive that request.
TIAA doesn't restrict the amount or frequency of premiums to your RA, GRA, and IRA contracts, although we reserve the right to impose restrictions in the future. Your employer's retirement plan may limit your premium amounts, while the IRC limits the total annual premiums to plans qualified for favorable tax treatment (see page 55).
Ordinarily (subject to any temporary restriction on acceptance of premiums, described below), TIAA will accept premiums to an accumulating contract at any time. Once your first premium has been paid, your TIAA contract can't lapse or be forfeited for nonpayment of premiums. However, TIAA can stop accepting future payments to both the GRA and GSRA contract at any time.
Employees or retirees of eligible institutions can also purchase at any time a contract to begin receiving annuity income starting the first day of the following month.
Possible Restrictions on Acceptance of Premiums or Transfers
TIAA may, from time to time, temporarily stop accepting premiums for or transfers to the Real Estate Account (e.g., if sufficient opportunities are not presented for real estate-related investments at that time). If a decision is made to stop accepting premiums or transfers, all participants in the Real Estate Account will be provided with advance notice and requested to inform us whether they wish to change their allocation instructions. Absent directions to the contrary, amounts that would otherwise be allocated to the Account will be allocated
to the CREF Money Market Account. When restrictions on the Real Estate Account have been removed, amounts arising from premiums allocated to the CREF Money Market Account will remain in that account unless we receive instructions to transfer them to the Real Estate Account (or other permissible TIAA-CREF or unaffiliated funding vehicles). Allocations to the Account will resume as of the date restrictions are removed.
Allocation of Premiums
You can allocate all or part (whole percentages) of your premiums to the Real Estate Account. Allocations are subject to the terms of your employer's plan. TIAA reserves the right to refuse to allocate premiums where the allocation is not consistent with an employer's plan. Amounts can also be allocated to TIAA's traditional annuity or one or more of the investment accounts offered under the companion variable annuity certificates issued by CREF.
You can change your allocation for future premiums at any time by writing to our home office or calling 1 800 842-2252; however, we reserve the right to suspend or terminate your right to change your allocation by telephone.
Accumulation Units
Your premiums purchase accumulation units. When you pay premiums or make transfers into the Account, the number of your units will increase; when you take a cash withdrawal, transfer from the Account, or apply funds to begin annuity income, the number of your units will decrease. We calculate how many accumulation units to credit by dividing the amount allocated to the Account by its accumulation unit value for the business day when we received your premium. To determine how many accumulation units to subtract for cash withdrawals and transfers, we use the unit value for the business day when we receive your completed transaction request and all required information and documents (unless you ask for a later date). For amounts applied to begin annuity income or death benefits, the accumulation unit value will be the one for the valuation period that ends on the last day of the month that contains the business day when we receive all required information and documentation, unless you or your beneficiary ask for a later date. See "The Annuity Period," page 47, and "Death Benefits," page 50.
The value of the accumulation units reflects the Account's investment experience (i.e., its accrued real estate net operating income, dividends, interest and other income accrued), realized and unrealized capital gains and losses, as well as expense charges against the Account's assets (see page 37). We
calculate the accumulation unit values at the end of each valuation day. To do that, we multiply the previous day's values by the net investment factor for the Account. The net investment factor is calculated as A divided by B, where A and B are defined as:
A. The value of the Account's net assets at the end of the current valuation period, less premiums received during the current valuation period.
B. The value of the Account's net assets at the end of the previous valuation period, plus the net effect of transactions made at the start of the current valuation period.
The valuation of accumulation units will be reviewed and approved by the independent fiduciary (see page 27).
The General Account and TIAA's Traditional Annuity
This prospectus provides information mainly about the Real Estate Account, your TIAA contract's variable component. Premiums remitted under your TIAA contract to TIAA's traditional annuity become part of the general account of TIAA, which includes all TIAA assets, except those in the Real Estate Account or any other TIAA separate investment account. Unlike an investment in the Real Estate Account, in which you bear the investment risk, TIAA bears the full investment risk for all accumulations in TIAA's traditional annuity. For more about TIAA's traditional annuity, see the contract itself.
Transfers Between the Real Estate Account and TIAA's Traditional Annuity or
CREF
Subject to the conditions below, you can transfer some or all of
your accumulation in the Real Estate Account to TIAA's traditional annuity or to
a CREF certificate. Transfers generally must be for at least $1,000 at a time
(or the entire part of your accumulation permitted to be withdrawn, if less).
(This minimum doesn't apply to transfers to the TIAA Retirement Loan Contract.)
Under RAs, GRAs, and GSRAs, transfers to certain CREF accounts may be restricted
by your plan. For more information, contact TIAA (see page 60).
Similarly, you can transfer some or all of your accumulation in TIAA's traditional annuity or in your CREF certificate to the Real Estate Account (although your employer's plan may restrict your right to transfer any accumulations to the Real Estate Account under RA, GRA, and GSRA contracts). These transfers generally must be for at least $1,000 per account at a time. Transfers from TIAA's traditional annuity to the Real Estate Account under RA and GRA contracts take place in roughly equal installments over a ten-year period via a TIAA transfer payout
annuity, or "TPA". There are no similar restrictions on transfers from TIAA's traditional annuity under SRA, GSRA, or IRA contracts, as long as you are transferring at least $1,000 at a time.
Currently, you can authorize a transfer at any time during your accumulation period, although we reserve the right to limit transfer frequency in the future. You can also transfer on a limited basis during the annuity period (see page 48). Currently, we don't charge you for transfers to CREF or to TIAA's traditional annuity.
Transfers to Other Companies and Cash Withdrawals from the Real Estate Account
If you have a TIAA RA, GRA, or GSRA contract, your ability to move funds from the Real Estate Account to a company other than TIAA or CREF will depend upon the terms of your employer's plan. If the plan permits, you can move some or all of your accumulation to any company approved by your employer. Under a TIAA SRA or IRA contract, however, you may transfer funds from the Real Estate Account to any company without similar plan limitations. If you do transfer some or all of your accumulation to another company, you bear the risk of the investment and tax consequences of your decision.
Cash withdrawals from your SRA, GSRA, or IRA Real Estate Account accumulation may be made at any time during the accumulation period, subject to any tax law restrictions. Cash withdrawals from your RA or GRA Real Estate Account accumulation may be limited by the terms of your employer's plan. Cash withdrawals usually must be for at least $1,000 (or the entire part of your accumulation permitted to be withdrawn, if less). For more information, see "General Considerations for all Cash Withdrawals and Transfers," below, "Tax Issues," page 46 and "Federal Income Taxes," page 55.
Currently, TIAA does not charge you for transfers to other companies or for cash withdrawals.
Rules on transfers and cash withdrawals vary depending on an institution's plan, so consult your past, current and potential future employer(s) for more detailed information.
Systematic Withdrawals and Transfers
You can arrange to have TIAA execute withdrawals and transfers for you automatically. At your request, we will withdraw from your accumulation as cash, or transfer to TIAA's traditional annuity, a CREF certificate, or another company, any fixed number of accumulation units or dollar amount or percentage of
accumulation that you specify until you tell us to stop or until your accumulation is exhausted. Currently, the initial amount must be at least $100. The availability of the service is subject to any restrictions in your employer's retirement plan.
Transfers to TIAA from Other Plans
Ordinarily you can make single-sum transfers from another 403(b) retirement plan to a TIAA contract. Likewise, if your TIAA contract is part of a 401(a) or 403(a) arrangement, you can make single-sum transfers to it from other 401(a) or 403(a) plans if the plan using TIAA and the other 401(a) or 403(a) plan so provide. Amounts transferred from another company to TIAA may still be subject to provisions of the original retirement plan. Under current federal tax law, you can also transfer funds from certain 401(a), 403(a), and 403(b) plans, or from an IRA containing funds originally contributed to such plans, to a TIAA IRA.
General Considerations for All Cash Withdrawals and Transfers
Current federal tax law restricts the availability of cash withdrawals from any part of your accumulation under voluntary salary reduction agreements (including investment earnings). Such withdrawals are available only if you reach age 59-1/2, leave your job, become disabled, or die. If permitted by your employer's plan, you may also be able to take a cash withdrawal if you encounter hardship, as defined by the IRS, but hardship withdrawals can be from contributions only, not investment earnings. These restrictions don't apply to withdrawals from any IRA. For more about tax consequences, see "Tax Issues" below and page 55.
You can tell us how much you want to transfer or withdraw in dollars, accumulation units, or as a percentage of the accumulation in the Real Estate Account. Ordinarily, you can't transfer or withdraw any part of an accumulation from which you've already begun receiving annuity income.
Cash withdrawals and transfers are effective at the end of the business day we receive your withdrawal or transfer request and any required information and documentation. You can instead choose to have transfers and withdrawals take effect at the close of any future business day or the last calendar day of the current or any future month, even if it's not a business day. You can request a transfer to CREF or TIAA's traditional annuity by telephone, or a cash withdrawal of less than $3,500 by telephone or fax. If you do that at any time other than during a business day, it will be effective at the close of the next business day. Transfers to TIAA's traditional annuity begin participating on the next day.
To request a transfer, write to TIAA's home office or call us at 1 800 842-2252. We reserve the right to suspend or terminate your right to make transfers by telephone. For more about telephone transfers, see page 59.
Tax Issues
Make sure you understand the possible federal and other income tax consequences of transfers and cash distributions. Transfers between retirement plans set up under the same section of the IRC aren't ordinarily considered taxable distributions; nor are transfers from 401(a), 403(a), and 403(b) plans to any TIAA IRA. Cash withdrawals are usually taxed at the rates for ordinary income. In addition, cash withdrawals also may subject you to early distribution taxes if made prior to age 59 1/2, as well as excess distribution taxes for distributions in excess of $155,000 in one year. For details, see "Federal Income Taxes," page 55.
Texas ORP Restrictions
If you're in the Texas Optional Retirement Program, section 36.15 of the Texas Education Code says you (or your beneficiary) can redeem some or all of your accumulation only if you retire, die, or leave your job in the state's public institutions of higher education. You're also subject to other distribution restrictions outlined elsewhere in this prospectus.
Spousal Rights
If you're married, the Retirement Equity Act of 1984 ("REACT") or
your employer's plan may require you to get advance written consent from your
spouse before certain transactions. They include (1) a cash withdrawal (except
from most IRAs); (2) a payment of a retirement transition benefit (see page 50);
(3) a transfer to a retirement plan not covered by ERISA; and (4) a rollover
directly from a plan to another plan or an IRA (you don't receive a check). In
addition, if you're married at your annuity starting date, REACT or your
employer's plan may require that you choose an income option that provides
survivor annuity income to your spouse, unless he or she waives that right in
writing (see "The Annuity Period," page 47). There are limited exceptions to the
waiver requirement -- contact TIAA for more information.
For more on spousal rights, see "Death Benefits," page 50.
Portability of Benefits
Once you're fully vested under your employer's RA or GRA plan, you can't lose the benefits you've earned. Length-of-service and other rules vary considerably from plan to plan, so check with your employer to find out your vesting status. Benefits under SRAs, GSRAs, and IRAs are immediately vested and can't be forfeited under any circumstances.
Under RA contracts, you may also be able to continue paying premiums on your own, subject to federal income tax limits
(see page 55). Whether or not we're receiving premiums to your contract(s), your accumulation will go on participating in the Real Estate Account. You'll retain all rights under your contract until you apply your entire accumulation to begin annuity (or survivor) benefits, transfer it to another company, or take it as a cash withdrawal.
The Annuity Period
The Real Estate Account is available through a variety of income options. See "Income Options," on page 48. Subject to certain federal tax law restrictions, you can receive income from all or just a part (but not less than $10,000) of your accumulation, so it's possible for you to be both accumulating and receiving retirement benefits at the same time. You can also pick a different income option for different portions of your accumulation, but currently once you've started payments you can't change your income option (except if you picked the Minimum Distribution Option annuity) or annuity partner (if you named one) for that payment stream.
Usually income payments are monthly. You can choose quarterly, semi-annual, and annual payments as well. TIAA has the right to not make payments at any interval that would cause the initial payment to be less than $25.
The value of the accumulation upon which payments are based will be set at the end of the last calendar day of the month before your annuity starting date. Your payments will vary each year according to the investment results of the Account. For the formulas used to calculate the amount of TIAA annuity payments, see page 55. The total value of your annuity payments may be more or less than your total premiums.
We'll send your payments by mail to your home address or (on your request) by mail or electronic funds transfer to your bank. If the address or bank where you want your payments sent changes, it's your responsibility to let us know.
Annuity Starting Date
Generally you pick an annuity starting date (it has to be the first day of a month) when you first apply for a TIAA contract. If you don't, we'll tentatively assume your annuity starting date will be the first day of the month after your 65th birthday. You can change your annuity starting date at any time before annuity payments begin (see page 59). Ordinarily your annuity starting date can't be later than April 1 of the calendar year following the calendar year when you reach age 70-1/2, even if you expect to work
beyond then, although there are exceptions if you're in a public institution's plan or certain church plans.
Ordinarily, annuity payments begin when your annuity starting date arrives; however, the terms of your employer's plan can restrict when you can begin retirement income. For payments to begin on the annuity starting date, we must have received all premiums due under your plan, as well as all information and documentation necessary for the income option you've picked. (For more information, contact TIAA -- see page 60.) If we haven't received all your premiums and the necessary information, we'll defer your annuity starting date until the first day of the month after the premiums and information have reached us. Your first annuity check may be delayed while we process your choice of income options and calculate the amount of your initial payment.
Allocation and Transfer for Annuity Payments
Before starting payments from your accumulation, you can transfer (at least $1,000 or the entire accumulation, if less) to TIAA's traditional annuity or to CREF on either an accumulating or income-paying basis. Under RA, GSRA, and GRA contracts, you can transfer to investment vehicles offered by other companies approved for your employer's plan. Under the SRA and IRA contracts, there are no restrictions on transfers to other companies, but be sure to consider the federal and other income tax consequences of the transaction.
Transfers During the Annuity Period
Once a year after you begin receiving annuity income, you can transfer all or part of the future annuity income payable (i) from the Real Estate Account into a "comparable annuity" (see below) payable from a CREF account or TIAA's traditional annuity, or (ii) from a CREF account into a comparable annuity payable from the Real Estate Account. Comparable annuities are those which have the same income option, first and second annuitant (if any), remaining guaranteed period (if any), and payment mode.
All transfers during the annuity period will take place on March 31. We must receive your transfer request before the end of the last business day in March in the year you want the transfer to occur. A transfer from a CREF account to the Real Estate Account or vice versa will affect your annuity payments beginning May 1 following the effective date of the transfer. Transfers into TIAA's traditional annuity will be effective on the current April 1. For the formula used to calculate the increase in the number of annuity units in the account you transfer to, see "Calculation of the Number of Annuity Units Payable," page 53.
Income Options
Both the number of annuity units you purchase and the amount of your income payments will depend on which income option(s) you pick. Your employer's plan, the IRC and ERISA may limit which income options you can use to receive income from an RA or GRA. Ordinarily you'll choose your income option(s) just before you want payments to begin; however, you can make or change your choice(s) at any time before your annuity starting date. Once annuity payments start, you can't change the income option (except in the case of the Minimum Distribution Option annuity, see below) for the accumulation or fraction of accumulation on which they're based.
If you haven't picked an income option when the annuity starting date arrives for your RA, GRA, SRA, or GSRA, TIAA will assume you want the One-Life Annuity with 10-Year Guaranteed Period if you're unmarried, paid from TIAA's traditional annuity. If you're married, we may assume for you a Survivor Annuity with Half-Benefit to Annuity Partner and 10-Year Guaranteed Period, with your spouse as your annuity partner, paid from TIAA's traditional annuity. See below and "Spousal Rights," page 46.
If you haven't picked an income option when the annuity starting date arrives for your IRA, we may assume you want the Minimum Distribution Option annuity.
All Real Estate Account income options are variable, and the amount of income you receive will depend in part on the number and value of your accumulation units being converted.
The current options are:
One-Life Annuity with or without Guaranteed Period (a One-Life Annuity). Pays income as long as you live. If you opt for a guaranteed period and you die before it's over, income payments will continue to your beneficiary until the end of the period. If you don't opt for a guaranteed period, all payments end at your death -- so that it would be possible, for example, for you to receive only one payment if you died less than a month after your income started.
Survivor Annuity Options. Pays income to you as long as you live, then continues at either the same or a reduced level for the life of your annuity partner. There are three types of survivor annuities, all available with or without a guaranteed period -- Full Benefit to Survivor (a Last Survivor Life Annuity), Two-Thirds Benefit to Survivor (a Joint and Survivor Life Annuity), and a Half-Benefit to Annuity Partner (a Last Survivor Life Annuity).
Minimum Distribution Option ("MDO") Annuity. Generally available only if you must begin annuity payments under the IRC minimum distribution requirements (see page 58). The option pays an amount designed to fulfill the distribution requirements under federal tax law. You must apply your entire accumulation under a contract if you want to use the MDO annuity. Some employer plans allow you to elect this option earlier -- contact TIAA for more information. See "Contacting TIAA," page 60.
Under the MDO annuity, it's possible you won't receive income for life. Up to age 90, you can apply any remaining part of an accumulation applied to the MDO annuity to any other income option for which you're eligible. Using the option won't affect your right to take a cash withdrawal of any remaining accumulation not yet distributed.
With respect to any of the income options described above, current federal tax law says that your guaranteed period can't exceed the joint life expectancy of you and your beneficiary or annuity partner (if you have one).
Other income options may become available in the future, subject to the terms of your retirement plan and relevant federal and state laws. For more information about any annuity option, please contact TIAA. See "Contacting TIAA," page 60.
Retirement Transition Benefit. Under TIAA's current practice, you may be able to get a "transition benefit" of up to 10% of the value of any part of an RA or GRA accumulation being converted to annuity income. The benefit is paid in a single sum on the annuity starting date. Of course, if your employer allows cash withdrawals, you can take a larger amount (up to 100%) of your accumulation as a cash payment (see page 44).
Keep in mind that the retirement transition benefit will be subject to current federal income tax requirements and possible early-distribution penalties. See "Federal Income Taxes," page 55, as well as "Spousal Rights," page 46.
Death Benefits
You can add, remove, or change a beneficiary at any time before you die, although under certain circumstances you may need your spouse's written consent. Under a survivor annuity, your annuity partner can change the beneficiary after you die, unless you've stipulated otherwise.
You can choose in advance the method by which death benefits should be paid, or you can leave it up to your beneficiaries. You can later change the method of payment you've chosen, and you can stipulate that your beneficiary not change the method you've specified in advance. (To choose, change, or
restrict the method by which death benefits are to be paid, you or your beneficiary has to notify us in writing.) We can require that any death benefit be paid under a method that provides an initial monthly payment of at least $25. (We'll calculate the actual amount using formulas you can find on page 55.) You or your beneficiary can use more than one method of payment, but each has to meet the same $25 minimum payment requirement. Once death benefits start under a lifetime annuity (see above), the method of payment can't be changed.
Ordinarily a beneficiary has to request that death benefits begin within a year of your death. Otherwise we'll start them automatically on the first day of the month in which the first anniversary of your death occurs, making payments over five years unless a beneficiary opts otherwise.
If you're married at the time of your death, even if you name a beneficiary who isn't your spouse, federal law or your plan may require that your spouse receive an amount actuarially equivalent to one-half the value of any part of your accumulation subject to REACT. Your spouse may, however, consent in writing to waive the right to death benefits. For more on spousal beneficiary rights, contact us or consult your employer's benefits office.
Unless your employer's plan provides otherwise, if you die before converting your entire accumulation to annuity income and without naming a beneficiary, your surviving spouse (if any) will receive a death benefit, available under any method of payment (see below), actuarially equivalent to half the value of your accumulation. The other half will go to your estate in a single sum. If there is no surviving spouse, the entire death benefit will go in one sum to your estate.
If you and your annuity partner, if any, die with payments still due under a lifetime annuity with a guaranteed period, your beneficiary(ies) can take the remaining payments as scheduled or as a single-sum payment equal to their commuted value. If you name an estate as your beneficiary, if you haven't named a beneficiary, or if your beneficiary has died, TIAA will pay the commuted value of your payments to your estate in a single sum. Under a survivor annuity, such benefits go to the estate of you or your annuity partner, whoever lives longer. If your beneficiary dies before receiving all payments due, we'll pay the commuted value of the remaining payments to anyone else named to receive it. If no one has been named, the commuted value will be paid to the estate of the last person to receive payments.
To pay a death benefit, TIAA must have received all necessary forms and documentation. For more information, contact TIAA (see page 60). Your accumulation will continue participating in the investment experience of your account up to
and including the day when your beneficiary's chosen method of payment becomes effective. Single-sum payments are effective at the end of the business day when TIAA has received all the required information and documentation from your beneficiary -- or if he or she chooses, at the end of the last calendar day of the current or any future month. Death benefits under any other method of payment will be calculated on the last day of the calendar month when we receive all required information and documentation -- or if your beneficiary prefers, the last day of a future month. Payments will actually begin on the first day of the month after they've been calculated. (Your first check could be delayed while we process your choice of method of payment.)
Methods of Payment
TIAA limits the methods of payment for death benefits to those
suitable under federal income tax law for annuity contracts. (For more
information, see "Taxation of Annuity Benefits," page 56.) With methods offering
periodic payments, benefits are usually monthly, but your beneficiary can
request to receive them quarterly, semi-annually, or annually instead. Federal
law may restrict the availability of certain methods to your beneficiary. At
present, the available methods of payment for TIAA death benefits are:
Single-Sum Payment, in which the entire death benefit is paid to your
beneficiary at once; One-Life Annuity with or without Guaranteed Period, in
which the death benefit is paid monthly for the life of the beneficiary or
through the guaranteed period; Accumulation-Unit Deposit Option (described
below); and the Minimum Distribution Option (described below).
Accumulation-Unit Deposit Option ("AUDO"). Pays your beneficiary a lump sum at the end of a fixed period, ordinarily two to five years, during which period the accumulation units deposited participate in investment experience of the Real Estate Account. To use the AUDO method, the value of the death benefit must be at least $5,000 at the time it takes effect. Special rules apply if your spouse is the beneficiary. Contact TIAA for more information about this option and other methods of payment. See "Contacting TIAA," page 60.
Minimum Distribution Option ("MDO"). Available only to beneficiaries who must receive income under the IRC's minimum distribution requirements. The MDO death benefit is governed generally by the same rule as the Real Estate Account's MDO annuity (see page 49), but there are additional restrictions under federal income tax law. Under the MDO death benefit, it's possible that your beneficiary won't receive income for life.
Transfers by a Beneficiary. At the time death benefits begin, or during the AUDO period, your beneficiary can transfer some (at least $1,000, or the entire accumulation if less) or all
of the assets in the Real Estate Account to TIAA's traditional annuity or to
CREF.
The beneficiary of an employee at an eligible institution who used another company for his retirement plan savings also may transfer death benefits from the other company to the Real Estate Account for payout under any of the available methods of payment for death benefits.
Transfers are effective on the last calendar day of the month when we receive all required information and documentation; however, your beneficiary can have us make the transfer effective on the last day of any future month instead. (With the AUDO method, it can be any day of the month.) Currently beneficiaries can make transfers at no charge. We also reserve the right to limit how often a beneficiary can transfer Real Estate Account units and to decline any transfer that would reduce the value of the units still on deposit to less than $5,000.
For tax issues concerning death benefits, especially those paid as single sums, see "Taxation of Annuity Benefits," page 56.
ANNUITY PAYMENTS
The amount of annuity payments paid to you or your beneficiary
("annuitant") will depend upon the number and the basic value of the annuity
units payable. The number of annuity units is initially determined prior to the
start of annuity payments. The basic value of an annuity unit is redetermined on
March 31 each year, with the resulting changes in annuity payments beginning May
1. These changes reflect the net investment experience of the Real Estate
Account. Annuitants bear no mortality risk under their contracts. The net
investment experience for the twelve months following each March 31
redetermination of the Account's basic annuity unit value will be reflected in
the following year's value.
The formulas for calculating the number and value of annuity units payable are set forth below.
Calculation of the Number of Annuity Units Payable
When a participant or a beneficiary converts the value of all or a portion of his or her accumulation into an income-paying contract, the number of annuity units payable from the Real Estate Account is determined by dividing the value of the accumulation in the Account to be applied to provide the annuity payments by the product of the annuity unit value and an annuity factor. The annuity factor at the end of any month is the value of an annuity in the amount of $1.00 per month beginning on the first day of the following month and continuing for as long as such annuity units are payable.
The annuity factor will reflect interest assumed at the effective
annual rate of 4%, and the mortality assumptions for the person(s) on whose life
(lives) the annuity payments will be based. Mortality assumptions will be based
on the then-current settlement mortality schedules for this Account. TIAA
guarantees that actual mortality experience will not reduce annuity payments
after they have started. TIAA does, however, reserve the right to change, from
time to time, the mortality assumptions used to determine the number of annuity
units payable for any future conversions of accumulations to provide annuity
payments.
Any transfer during the annuity period from a CREF account to the Real Estate Account or from the Real Estate Account to a CREF account, as described under "Transfers During the Annuity Period," page 48, reduces the number of annuity units in the account you transfer from by the number of annuity units transferred, and increases the number of annuity units in the account you transfer to. The number of annuity units added to the account you transfer to will be based on the formula below.
When you or any beneficiary receiving annuity income transfers annuity units from a CREF account to the Real Estate Account or vice versa as of any March 31, the number of annuity units added to the account to which units are being transferred will be determined by multiplying the number of annuity units to be transferred by A and B and then dividing that result by the product of C and D as follows:
A. the annuity unit value, determined on the transfer date, for the account from which annuity units are being transferred.
B. the value as of March 31, of an annuity in the amount of $1.00 per month beginning on May 1 and continuing for as long as such annuity units are payable. This annuity factor will reflect the mortality assumptions then in use in the Account from which the transfer is being made.
C. the annuity unit value, determined on the transfer date, for the account to which the annuity units are being transferred.
D. an annuity factor calculated in the same manner as that described in item B. above, except reflecting the mortality assumptions then in use in the account to which the transfer is being made.
The value of annuity units transferred from the Real Estate Account to TIAA's traditional annuity as of any March 31 is equal to the number of annuity units multiplied by the annuity unit value determined on the transfer date and by an annuity factor. The annuity factor as of March 31 is the value of an annuity in the
amount of $1.00 per month beginning on May 1 and continuing for as long as such annuity units are payable. The annuity factor will reflect the mortality assumptions then in use for the Real Estate Account.
Value of Annuity Units
The value of the Real Estate Account's annuity units will be determined as of the last calendar day of each month by multiplying the value of the annuity unit as of the last calendar day of the previous month by the net investment factor (as defined on page 43) for the current month and then dividing by the value of $1.00 accumulated with interest at the effective annual rate of 4% for the number of days in the current month. This result is then multiplied by A and divided by B, where A and B are defined as follows:
A. the value of the annuity fund at the end of the day minus the dollar amount of payments scheduled to be made from the Account on the following day.
B. the value of the annuity fund at the end of the day minus the product of the value of one annuity unit just prior to this calculation and the number of annuity units scheduled to be paid from the Account on the following day.
The initial value of the annuity unit for a new annuitant is equal to the value determined as of the day before annuity payments start. For participants who have already begun receiving annuity payments as of any March 31, the basic value of the annuity unit for payments due on and after the next succeeding May 1 is equal to the annuity unit value determined as of March 31.
Modification and Review
TIAA reserves the right, subject to approval by the Board of Trustees, to modify the manner in which the number and/or value of annuity units is calculated in the future. The valuation of annuity units will be reviewed and approved by the independent fiduciary (see page 27).
FEDERAL INCOME TAXES
The contracts are designed as annuity contracts under sections 72 and 403 of the Internal Revenue Code ("IRC").
As a nonprofit educational institution, TIAA's pension business is exempt from federal income tax under section 501(c)(3) of the IRC. Investment income and gains from our pension business are tax-free unless they are unrelated business income, and we conduct our operations to avoid realizing such unrelated
business income. If necessary to maintain our tax-exempt status, we can limit the size of premiums paid to TIAA and the circumstances in which they're paid. Any federal or other tax TIAA does incur with respect to the Real Estate Account will affect the value of your accumulation and/or annuity units.
403(b) Plans
The contracts are tailored for retirement plans set up under section 403(b) of the IRC. Your total annual contributions to section 403(b) annuities can't exceed certain limits. The annual limit for all of your contributions and your employer's contributions on your behalf is the lower of (a) $30,000, (b) 25% of your compensation or (c) your "maximum exclusion allowance". Your maximum exclusion allowance is generally 20% of your compensation multiplied by your years of service, less certain prior tax deferred retirement plan contributions. You can usually exclude salary reduction contributions of up to $9,500 from your gross taxable income. There are exceptions to this -- contact your tax advisor for more information.
401(a) and 403(a) Plans
RA and GRA contracts are also available for 401(a) and 403(a) retirement plans. In a defined-contribution plan meeting certain IRC requirements, the employer contributions to all current 401(a) and 403(a) plans of that employer can't exceed an annual contribution limit: again, $30,000 or 25% of your compensation, whichever is less.
Individual Retirement Annuities
IRC Section 408 permits eligible individuals to contribute to an individual retirement program known as an Individual Retirement Annuity or Individual Retirement Account. The amount you can contribute annually is usually limited to $2,000. The New IRA will be designed for these contributions. IRC section 408 also allows money from certain qualified plans to be "rolled-over" to an IRA without losing its tax-deferred status. The Rollover IRA is designed for these rollovers. (The New IRA will also accept them.) There is no limit on the amount that can be rolled over to a Rollover IRA. You can revoke any TIAA IRA up to seven days after you establish it.
Taxation of Annuity Benefits
Once you take a cash withdrawal or begin annuity payments, the amount you receive is usually included in your gross income for the year and taxed at the rate for ordinary income. You can exclude from your gross income any part of your payment(s) that represents the return of premiums paid in after-tax dollars, but not the part that comes from the tax-deferred earnings of after-tax premiums.
Withholding on Distributions
We must withhold federal tax at the rate of 20% from the taxable part of most plan distributions paid directly to you. If, however, you tell us to "roll over" the distribution directly to an IRA (offered by TIAA or any other company) or similar employer plan (i.e., to send a check directly to the other company and not to you), we will not withhold any federal tax. The required 20% withholding doesn't apply to payments from IRAs, lifetime annuity payments, substantially equal periodic payments over your life expectancy or over ten or more years, or minimum distribution payments ("noneligible payments").
For the taxable part of noneligible payments, we usually will withhold federal taxes unless you tell us not to. Usually, you have the right to tell us not to withhold federal taxes from your noneligible payments. However, if you tell us not to withhold but we don't have your taxpayer identification number on file, we still have to deduct taxes.
Non-resident aliens who pay U.S. taxes are subject to different withholding rules. Contact TIAA for more information.
Early Distributions
If you want to withdraw funds or begin income from any 401(a),
403(a), or 403(b) retirement plan or an IRA before you reach age 59-1/2, you may
have to pay an extra 10% "early distribution" tax on the taxable amount.
However, you won't have to pay an early distribution tax on any part of a
withdrawal if:
(1) the distribution is because you are disabled;
(2) you separated from your job at or after age 55 and take your withdrawal after that time (not applicable for IRAs);
(3) you begin annuity income after you leave your job (termination isn't required for IRAs), as long as your annuity income consists of a series of regular substantially equal payments at regular intervals (at least annually) over your lifetime or life expectancy or the joint lives or life expectancies of you and your beneficiary;
(4) the withdrawal is less than or equal to your medical expenses in excess of 7-1/2% of your adjusted gross income (not applicable for IRAs); or
(5) you are required to make a payment to someone besides yourself under a Qualified Domestic Relations Order (e.g., a divorce settlement) (not applicable for IRAs).
If you die before age 59-1/2, your beneficiary(ies) won't have to pay the early distribution penalty.
Current federal tax law restricts the availability of cash withdrawals and annuity payments from any part of your accumulation under salary reduction agreements (including earnings). These withdrawals and annuity payments are available only if you reach age 59-1/2, leave your job, become disabled, or die. If your employer's plan permits, you may also be able to take a cash withdrawal if you encounter hardship, as defined by the IRS, but hardship withdrawals can be from contributions only, not investment earnings. These restrictions don't apply to withdrawals from an IRA. Any part of your accumulation that has been transferred from a custodial account under section 403(b)(7) will be subject to additional restrictions.
"Excess" Distributions
If your combined withdrawals or payments from 401(a), 403(a), and 403(b) retirement plans, IRAs, and other tax-deferred savings programs are more than $155,000 in one year, you may have to pay an "excess distribution" tax of 15% of the amount over $155,000.
Death Benefits
Ordinarily, death benefits are subject to federal estate tax (see "Tax Advice," page 59). Under some retirement programs, an additional 15% estate tax may be imposed on the portion of your accumulation above a certain amount at the time of your death.
Minimum Distribution Requirements and Taxes
In most cases, payments have to begin from 401(a), 403(a), and 403(b) plans and IRAs by April 1 of the calendar year after the calendar year when you reach age 70-1/2, even if you haven't yet retired. Under the terms of certain retirement plans, the plan administrator may direct us to make the minimum distributions required by law to you even if you don't elect to receive them. In addition, if you don't begin distributions on time, you'll be subject to a 50% excise tax on the amount you should have received but didn't. (See "Minimum Distribution Option Annuity," page 49.)
Deferred Compensation Plans
TIAA RA contracts are also available for deferred compensation plans. RAs issued under these plans are owned by your employer and subject to the claims of its general creditors. Since special tax rules may apply to these plans, consult with a qualified tax advisor for more information about them.
Tax Advice
What we tell you here about federal and other taxes isn't comprehensive and is for general information only. It doesn't cover every situation. Taxation varies depending on the circumstances, and state and local taxes may also be involved. For complete information on your personal tax situation, check with a qualified tax advisor.
GENERAL MATTERS
Choices and Changes
As long as your contract permits, you (or your annuity partner, beneficiary, or any other payee) can choose or change any of the following: (1) an annuity starting date; (2) an income option; (3) a transfer; (4) a method of payment for death benefits; (5) a date when the commuted value of an annuity becomes payable; (6) an annuity partner, beneficiary, or other person named to receive payments; (7) a cash withdrawal or other distribution; and (8) a repurchase.
You have to make your choices or changes via a written notice satisfactory to us and received at our home office (see below). Transfers to TIAA's traditional annuity and CREF can currently be made by telephone (see "Contacting TIAA," below). You can change the terms of a transfer, cash withdrawal, repurchase, or other cash distribution only before they're scheduled to take place. When we receive a notice of a change in beneficiary or other person named to receive payments, we'll execute the change as of the date it was signed, even if the signer dies in the meantime. We execute all other changes as of the date received. As already mentioned, we will delay the effective date of some transactions until we receive additional documentation (see page 48).
Telephone Transactions
You can use our Automated Telephone Service ("ATS") to check your account balance, transfer to TIAA's traditional annuity or CREF, and/or allocate future premiums among the Real Estate Account, TIAA's traditional annuity, and CREF. (Beginning later in 1996, we expect that participants will be able to execute these transactions over the Internet.) To use the ATS you need a touch-tone phone. You will be asked to enter your Personal Identification Number ("PIN") and contract number. Please contact us if you have not received a PIN and we will send you one (see "Contacting TIAA," below). The ATS will prompt you through whatever transactions you select. We will use reasonable procedures to confirm that instructions given by telephone are genuine. All calls to the ATS are recorded as a routine part of verification.
Contacting TIAA
We won't consider any notice, form, request, or payment to have been received by TIAA until it reaches our home office: Teachers Insurance and Annuity Association, 730 Third Avenue, New York, New York 10017-3206. You can ask questions by calling toll- free 1 800 842-2776.
Electronic Prospectus
If you received this prospectus electronically and would like a paper copy, please call 1 800 842-2733, extension 5509, and we will send it to you.
Signature Requirements
For some transactions, we may require your signature to be notarized or guaranteed by a commercial bank or a member of a national securities exchange.
Overpayment of Premiums
If your employer mistakenly sends more premiums on your behalf than you're entitled to under your employer's retirement plan or the IRC, we'll refund them to your employer as long as we're requested to do so (in writing) before you start receiving annuity income. Any time there's a question about premium refunds, TIAA will rely on information from your employer. If you've withdrawn or transferred the amounts involved from your accumulation, we won't refund them.
Payment to an Estate, Guardian, Trustee, etc.
We reserve the right to pay in one sum the commuted value of any benefits due an estate, corporation, partnership, trustee, or other entity not a natural person. Neither TIAA nor the Account will be responsible for the conduct of any executor, trustee, guardian, or other third party to whom payment is made.
Benefits Based on Incorrect Information
If the amounts of benefits provided under a contract were based on information that is incorrect, benefits will be recalculated on the basis of the correct data. If any overpayments or underpayments have been made by the Account, appropriate adjustments will be made.
Proof of Survival
We reserve the right to require satisfactory proof that anyone named to receive benefits under a contract is living on the date payment is due. If this proof is not received after a request in writing, the Account will have the right to make reduced payments or to withhold payments entirely until such proof is received.
DISTRIBUTION OF THE CONTRACTS
The contracts are offered continuously by the personnel of TIAA-CREF Individual & Institutional Services, Inc. ("Services"), which is registered with the Securities and Exchange Commission (the "SEC") as a broker-dealer and is a member of the National Association of Securities Dealers, Inc. ("NASD"). Teachers Personal Investors Services, Inc. ("TPIS"), which is also registered with the SEC and is a member of the NASD, may also participate in the distribution of the contracts on a limited basis. As already noted, distribution costs are covered by a deduction from the assets of the Account; no commissions are paid in connection with the distribution of the contracts. Anyone distributing the contracts must be a registered representative of Services or TPIS, whose main offices are both at 730 Third Avenue, New York, New York 10017-3206.
PERIODIC REPORTS
As long as you have an accumulation in the Account, you will be sent a statement each quarter which sets forth the following:
(1) premiums paid during the quarter;
(2) the number and dollar value of accumulation units in the Real Estate Account credited to you during the quarter and in total;
(3) cash withdrawals from the Account during the quarter;
(4) any transfers between the Account and TIAA's traditional annuity or CREF during the quarter;
(5) any repurchase or transfer to a funding vehicle other than TIAA or CREF during the quarter, if an amount remains in your accumulation after those transactions; and
(6) the amount applied to begin annuity payments during the quarter.
STATE REGULATION
TIAA, the Real Estate Account, and the contracts are subject to regulation by the New York Insurance Department as well as by the insurance regulatory authorities of certain other states and jurisdictions.
TIAA and the Real Estate Account must file with the NYID both quarterly and annual statements. The Account's books and assets are subject to review and examination by the NYID at all times, and a full examination into the affairs of the Account is made at least every five years. In addition, a full examination of the Real Estate Account operations is usually conducted periodically by some other states.
LEGAL MATTERS
All matters involving the application of state law to the contracts, including TIAA's right to issue the contracts, have been passed upon by Charles H. Stamm, Executive Vice President and General Counsel of TIAA. Legal matters relating to the federal securities laws have been passed upon by Sutherland, Asbill & Brennan, Washington, D.C.
EXPERTS
The financial statements of the Real Estate Account and certain properties purchased by the Account included in this prospectus, the schedule to such financial statements and the financial statements of TIAA incorporated herein by reference have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports which appear herein or are incorporated herein by reference, and have been so included or incorporated in reliance upon the reports of such firm, given upon their authority as experts in accounting and auditing.
LEGAL PROCEEDINGS
The assets of the Real Estate Account are not subject to any legal actions. TIAA is not involved in any legal action that we consider material to its obligations to the Real Estate Account.
ADDITIONAL INFORMATION
A registration statement under the Securities Act of 1933 has been filed with the SEC by TIAA on behalf of the Real Estate Account related to the offering described in this prospectus. This prospectus does not include all the information set forth in the registration statement. The omitted information may be obtained at the SEC's principal office in Washington, D.C., upon payment of the prescribed fee.
Further information may be obtained from TIAA at Teachers Insurance and Annuity Association of America, 730 Third Avenue, New York, New York 10017-3206.
FINANCIAL STATEMENTS
Audited financial statements of the Real Estate Account and certain properties purchased by the Account and condensed unaudited financial statements of TIAA follow. The full audited financial statements of TIAA are incorporated into this prospectus by reference, and are available upon request by calling 1 800 842-2733, extension 5509.
The financial statements of TIAA should be distinguished from the financial statements of the Real Estate Account and should be considered only as bearing on the ability of TIAA to meet its obligations under the contracts. They should not be considered as bearing upon the assets held in the Real Estate Account.
INDEX TO FINANCIAL STATEMENTS
Page
TIAA REAL ESTATE ACCOUNT
Audited Financial Statements: Report of Management Responsibility.........................................F-2 Report of Independent Auditors..............................................F-3 Statement of Assets and Liabilities - December 31, 1995....................F-4 Statement of Operations (For Period from July 3, 1995 (commencement of operations) to December 31, 1995).....................................................F-5 Statement of Changes in Net Assets (For Period from July 3, 1995 (commencement of operations) to December 31, 1995).....................................................F-6 Statement of Cash Flows (For Period from July 3, 1995 (commencement of operations) to December 31, 1995).....................................................F-7 Notes to Financial Statements...............................................F-8 Statement of Investments - December 31, 1995................................F-14 Proforma Condensed Financial Statements: Proforma Condensed Statement of Assets and Liabilities -- December 31, 1995......................................F-16 Proforma Condensed Statement of Operations (For Period from July 3, 1995 (commencement of operations) to December 31, 1995).....................................................F-16 Notes to Proforma Condensed Financial Statements ...........................F-17 The Greens at Metrowest Apartments and Brixworth-Atlanta Apartments: Independent Auditors' Report................................................F-18 Combined Statement of Revenues and Certain Expenses (For Year Ended December 15, 1994)........................................F-19 Notes to Combined Statement of Revenues and Certain Expenses......................................................F-20 The Millbrook Collection and The Lynnwood Collection Retail Centers: Independent Auditors' Report................................................F-21 Combined Statement of Revenues and Certain Expenses (For Year Ended December 15, 1995)........................................F-22 Notes to Combined Statement of Revenues and Certain Expenses......................................................F-23 TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA Condensed Unaudited Financial Statements....................................F-25 Supplemental Information to Condensed Unaudited Financial Statements........F-27 |
To the Participants of the
TIAA Real Estate Account:
The accompanying financial statements of the TIAA Real Estate Account
("Account") of Teachers Insurance and Annuity Association of America ("TIAA")
are the responsibility of TIAA's management. They have been prepared in
accordance with generally accepted accounting principles and have been presented
fairly and objectively in accordance with such principles.
TIAA has established and maintains a strong system of internal controls designed to provide reasonable assurance that assets are properly safeguarded and transactions are properly executed in accordance with management's authorization, and to carry out the ongoing responsibilities of management for reliable financial statements. In addition, TIAA's internal audit personnel provide a continuing review of the internal controls and operations of TIAA, including its separate account operations. The internal Auditor regularly reports to the Audit Committee of the TIAA Board of Trustees.
The accompanying financial statements have been audited by the independent auditing firm of Deloitte & Touche LLP. The independent auditors' report, which appears on the following page, expresses an independent opinion on the fairness of presentation of these financial statements.
The Audit Committee of the TIAA Board of Trustees, consisting of trustees who are not officers of TIAA, meets regularly with management, representatives of Deloitte & Touche LLP and internal auditing personnel to review matters relating to financial reporting, internal controls and auditing.
Executive Vice President and Principal Accounting Officer
[letterhead]
Deloitte &
Touche LLP [LOGO) Two World Financial Center Telephone: (212) 436-2000
New York, New York 10281-1414 Facsimile: (212) 436-5000
|
REPORT OF INDEPENDENT AUDITORS
To the Participants of the
TIAA Real Estate Account
and the Board of Trustees of
Teachers Insurance and Annuity Association of America:
We have audited the accompanying statement of assets and liabilities of the TIAA Real Estate Account ("Account") of Teachers Insurance and Annuity Association of America ("TIAA"), including the statement of investments, as of December 31, 1995, and the related statements of operations, changes in net assets and cash flows for the period July 3, 1995 (commencement of operations) to December 31, 1995. These financial statements are the responsibility of TIAA's management. Our responsibility is to express an opinion on the financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned at December 31, 1995, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of the Account as of December 31, 1995, the results of its operations, the changes in its net assets and its cash flows for the above-stated period, in conformity with generally accepted accounting principles.
Investments in real estate properties are stated at fair value at December 31, 1995, as discussed in Note 2 to the financial statements. Determination of fair value involves subjective judgment because the actual market value of real estate can be determined only by negotiation between the parties in a sales transaction.
DELOITTE & TOUCHE LLP
New York, New York
March 8, 1996
TIAA REAL ESTATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
ASSETS
Investments, at value:
Real estate properties (Cost: $43,989,665)...................................................... $ 43,989,665
Marketable securities
(Amortized cost: $73,972,831)................................................................... 73,992,569
Cash.............................................................................................. 396,787
Receivable from securities transactions........................................................... 23,150,000
Other............................................................................................. 1,648,400
------------
TOTAL ASSETS 143,177,421
------------
LIABILITIES
Payable for securities transactions............................................................... 22,788,035
Other............................................................................................. 131,041
------------
TOTAL LIABILITIES 22,919,076
------------
NET ASSETS - Accumulation Fund..................................................................... $120,258,345
============
NUMBER OF ACCUMULATION UNITS
OUTSTANDING--Notes 6 and 7.......................................................................... 1,172,498
=========
NET ASSET VALUE, PER ACCUMULATION UNIT--Note 6....................................................... $102.57
=======
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See notes to financial statements.
TIAA REAL ESTATE ACCOUNT
STATEMENT OF OPERATIONS
FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1995
INVESTMENT INCOME
Income:
Real estate income, net:
Rental income...................................................................................... $ 165,762
----------
Real estate property level expenses and taxes:
Operating expenses............................................................................... 29,173
Real estate taxes................................................................................ 14,659
----------
Total real estate property level expenses and taxes 43,832
----------
Real estate income, net 121,930
Interest............................................................................................. 2,820,229
Dividends............................................................................................ 8,671
----------
TOTAL INCOME 2,950,830
----------
Expenses--Note 3:
Investment advisory.................................................................................. 228,136
Administrative....................................................................................... 66,320
Mortality and expense risk charges................................................................... 8,291
Liquidity guarantee charges.......................................................................... 8,291
----------
TOTAL EXPENSES 311,038
Fees paid indirectly................................................................................. (605)
----------
NET EXPENSES 310,433
----------
INVESTMENT INCOME, NET 2,640,397
----------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on investments..................................................................... 15,865
Net change in unrealized appreciation
on investments .................................................................................... 19,738
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 35,603
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,676,000
==========
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See notes to financial statements.
TIAA REAL ESTATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1995
FROM OPERATIONS
Investment income, net................................................................................. $ 2,640,397
Net realized gain on investments....................................................................... 15,865
Net change in unrealized appreciation
on investments....................................................................................... 19,738
------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 2,676,000
------------
FROM PARTICIPANT TRANSACTIONS
TIAA seed money contributed--Note 1.................................................................... 100,000,000
Premiums............................................................................................... 500,421
Disbursements and transfers:
Net transfers from TIAA.............................................................................. 2,901,675
Net transfers from CREF Accounts..................................................................... 14,204,597
Annuity and other periodic payments.................................................................. (718)
Withdrawals.......................................................................................... (23,630)
------------
INCREASE IN NET ASSETS RESULTING
FROM PARTICIPANT TRANSACTIONS 117,582,345
------------
NET INCREASE IN NET ASSETS 120,258,345
NET ASSETS
Beginning of period.................................................................................... -
------------
End of period.......................................................................................... $120,258,345
============
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See notes to financial statements.
TIAA REAL ESTATE ACCOUNT
STATEMENT OF CASH FLOWS
FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net increase in net assets
resulting from operations............................................................................ $ 2,676,000
Adjustments to reconcile net increase
in net assets resulting from operations
to net cash used in operating activities:
Increase in investments............................................................................ (117,982,234)
Increase in receivable from securities transactions................................................ (23,150,000)
Increase in other assets........................................................................... (1,648,400)
Increase in payable for securities transactions.................................................... 22,788,035
Increase in other liabilities...................................................................... 131,041
------------
NET CASH USED IN OPERATING ACTIVITIES (117,185,558)
------------
CASH FLOWS FROM PARTICIPANT TRANSACTIONS
TIAA seed money contributed............................................................................ 100,000,000
Premiums............................................................................................... 500,421
Disbursements and transfers:
Net transfers from TIAA.............................................................................. 2,901,675
Net transfers from CREF Accounts..................................................................... 14,204,597
Annuity and other periodic payments.................................................................. (718)
Withdrawals.......................................................................................... (23,630)
------------
NET CASH PROVIDED BY PARTICIPANT TRANSACTIONS 117,582,345
------------
NET INCREASE IN CASH 396,787
CASH
Beginning of period.................................................................................... -
------------
End of period.......................................................................................... $ 396,787
============
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See notes to financial statements.
TIAA REAL ESTATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
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 December 31, 1995, amounts retained by TIAA in the Account remained at 1,000,000 units with a total value of $102,565,900.
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 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
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 will 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 will perform a valuation review of each real estate property on a quarterly basis and will update the property value if it believes that the value of the property has changed since the previous valuation review or appraisal. The independent fiduciary will review and approve any such valuation adjustments which exceed certain prescribed limits. TIAA will continue 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.
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.
TIAA and Services generally pay directly for all third-party services provided for the benefit of the Account. "Soft-dollar" arrangements for brokerage and other services are generally not utilized by the Account. However, certain custodial fees are reduced based on the level of average cash balances on deposit with a custodian bank during the period. The amount by which custodial fees were reduced under these expense offset agreements is reflected in the accompanying Statement of Operations as "Fees paid indirectly".
Note 4--Real Estate Properties
Had the Account's real estate properties been acquired at the beginning of the current period (July 3, 1995), rental income and real estate property level expenses and taxes would have increased by approximately $2,538,000 and $889,000, respectively. In addition, interest income would have decreased by approximately $1,082,000. Accordingly, the total pro forma effect on the Account's net investment income would have been an increase of approximately $567,000, if the real estate properties 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 $ 1,653,336
1997 1,653,336
1998 1,638,541
1999 1,513,600
2000 1,461,217
Thereafter 7,673,670
-----------
Total $15,593,700
===========
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Certain leases provide for additional rental amounts based upon the recovery of actual operating expenses in excess of specified base amounts.
Note 6--Condensed Financial Information
Selected condensed financial information for an Accumulation Unit of the Account is presented below.
July 3, 1995
(Commencement
of Operations) to
December 31, 1995
------------------
Per Accumulation Unit Data:
Rental income....................................................................................... $ 0.159
Real estate property level expenses and taxes....................................................... 0.042
--------
Real estate income, net 0.117
Dividends and interest.............................................................................. 2.716
--------
Total income 2.833
Expense charges (1)................................................................................. 0.298
--------
Investment income, net 2.535
Net realized and unrealized gain on investments..................................................... 0.031
--------
Net increase in Accumulation Unit Value............................................................... 2.566
Accumulation Unit Value:
Beginning of period.................................................................................. 100.000
--------
End of period........................................................................................ $102.566
========
Cumulative total return................................................................................ 2.57%
Ratios to Average Net Assets:
Expenses (1)......................................................................................... 0.30%
Investment income, net............................................................................... 2.51%
Portfolio turnover rate............................................................................... 0%
Thousands of Accumulation Units outstanding
at end of period..................................................................................... 1,172
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(1) Expense charges per Accumulation Unit and the expense ratio to Average Net Assets exclude real estate property level operating expenses and taxes. If included, the expense charge per Accumulation Unit would be $0.340 and the expense ratio to Average Net Assets would be 0.34%.
Note 7--Accumulation Units
Changes in the number of Accumulation Units outstanding were as follows:
July 3, 1995
(Commencement
of Operations) to
December 31, 1995
-----------------
Accumulation Units:
Credited for premiums and TIAA seed money investment......... 1,004,905
Credited for net transfers and disbursements................. 167,593
Outstanding:
Beginning of period.......................................... -
---------
End of period................................................ 1,172,498
=========
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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 December 31, 1995, the Account had outstanding commitments to purchase real estate properties (subject to various closing conditions) of $23,550,000. Of that amount, a purchase of real estate property totalling $10,050,000 was closed on February 27, 1996.
TIAA REAL ESTATE ACCOUNT
STATEMENT OF INVESTMENTS
DECEMBER 31, 1995
REAL ESTATE PROPERTIES--37.28%
Location Description Value
- -------- ----------- -----------
Fridley, Minnesota(1) Industrial building......................... $ 4,166,787
Orlando, Florida(1) Apartments.................................. 12,490,895
El Paso, Texas(2) Industrial building......................... 4,431,166
Atlanta, Georgia(1) Apartments.................................. 15,574,647
Ocoee, Florida(1) Shopping center............................. 7,326,170
-----------
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(1) Fee interest
(2) Leasehold interest
MARKETABLE SECURITIES--62.72%
REAL ESTATE INVESTMENT TRUST--.37%:
Shares Issuer Value
- ------ ------ --------
15,000 Reckson Associates Realty................................ 440,625
--------
TOTAL REAL ESTATE INVESTMENT TRUST
(Cost $402,000).......................................... 440,625
--------
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See notes to financial statements.
COMMERCIAL PAPER--18.17%:
Par Value Issuer Value
- --------- ------ ------------
14,360,000 AT&T Capital Corporation
5.64% 02/01/96................................... $ 14,285,025
7,150,000 Corporate Asset Funding Company, Inc.
5.80% 01/02/96................................... 7,148,022
------------
TOTAL COMMERCIAL PAPER
(Amortized cost $21,439,106)........................... 21,433,047
------------
GOVERNMENT AGENCIES--44.18%:
5,930,000 Federal Home Loan Bank
5.60% 01/08/96....................................... 5,922,505
15,700,000 Federal Home Loan Bank
5.48% 01/22/96....................................... 15,645,015
5,000,000 Federal Home Loan Bank
5.38% 02/22/96....................................... 4,958,793
25,670,000 Federal National Mortgage Association
5.67% 01/19/96....................................... 25,592,584
----------
TOTAL GOVERNMENT AGENCIES
(Amortized cost $52,131,725)........................... 52,118,897
----------
TOTAL MARKETABLE SECURITIES
(Amortized cost $73,972,831).................................... 73,992,569
------------
TOTAL INVESTMENTS
(Amortized cost $117,962,496)................................... $117,982,234
============
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See notes to financial statements.
TIAA REAL ESTATE ACCOUNT
PROFORMA CONDENSED
STATEMENT OF ASSETS AND LIABILITIES (Unaudited)
DECEMBER 31, 1995
Proforma
Historical Adjustments Proforma
---------- ----------- --------
ASSETS
Investments, at value:
Real estate properties ....................$ 43,989,665 $23,520,946 (a) $ 67,510,611
Marketable securities ..................... 73,992,569 (23,520,946)(a) 50,471,623
Other ...................................... 25,195,187 25,195,187
------------ ----------- ------------
TOTAL ASSETS ................................ 143,177,421 - 143,177,421
LIABILITIES ................................. 22,919,076 - 22,919,076
------------ ----------- ------------
NET ASSETS - Accumulation Fund ..............$120,258,345 $ - $120,258,345
============ =========== ============
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TIAA REAL ESTATE ACCOUNT
PROFORMA CONDENSED
STATEMENT OF OPERATIONS (Unaudited)
FOR THE PERIOD JULY 3, 1995 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1995
Proforma
Historical Adjustments Proforma
---------- ----------- --------
INVESTMENT INCOME
Income:
Real estate income, net:
Rental income .............................$ 165,762 $ 3,573,016 (b) $ 3,738,778
Real estate property level ----------- ----------- ------------
expenses and taxes:
Operating expenses ....................... 29,173 879,547 (b) 908,720
Real estate taxes ........................ 14,659 337,947 (b) 352,606
----------- ----------- ------------
Total real estate property
level expenses and taxes .................. 43,832 1,217,494 1,261,326
----------- ----------- ------------
Real estate income, net .................... 121,930 2,355,522 2,477,452
Interest and dividends ..................... 2,828,900 (1,702,630)(c) 1,126,270
----------- ----------- ------------
TOTAL INCOME ................................. 2,950,830 652,892 3,603,722
EXPENSES ..................................... 310,433 - 310,433
----------- ----------- ------------
INVESTMENT INCOME-NET ........................ 2,640,397 652,892 3,293,289
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS ......................... 35,603 - 35,603
----------- ----------- ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ...................$ 2,676,000 $ 652,892 $ 3,328,892
============ =========== ============
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TIAA REAL ESTATE ACCOUNT
NOTES TO PROFORMA CONDENSED FINANCIAL STATEMENTS
Note 1--Purpose
The proforma condensed statement of assets and liabilities has been prepared in order to reflect the TIAA Real Estate Account ("Account") assuming that real estate properties purchased during the period January 1, 1996 through the date of this prospectus were purchased as of December 31, 1995. The proforma condensed statement of operations has been prepared in order to reflect the Account assuming that all real estate properties purchased during the period July 3, 1995 (commencement of operations) to the date of this prospectus were owned for the period July 3, 1995 through December 31, 1995.
Note 2--Management's Assumptions
The following assumptions were made in preparing the proforma adjustments to reflect the purpose described in Note 1.
Proforma Condensed Statement of Assets and Liabilities
(a) To record the cost of the properties purchased during the period January 1, 1996 through the date of this prospectus assuming such properties were purchased as of December 31, 1995.
Proforma Condensed Statement of Operations
(b) To record the rental income and real estate property level expenses of the real estate properties purchased during the period July 3, 1995 through the date of this prospectus assuming such properties were owned for the period July 3, 1995 through December 31, 1995.
(c) To record the decrease in the interest and dividend income resulting from having less cash invested in marketable securities by assuming the real estate properties purchased during the period July 3, 1995 to the date of this prospectus had been purchased as of July 3, 1995.
[letterhead]
Deloitte &
Touche LLP [LOGO] Two World Financial Center Telephone: (212) 436-2000
New York, New York 10281-1414 Facsimile: (212) 436-5000
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of
Teachers Insurance and Annuity Association of America:
We have audited the combined statement of revenues and certain expenses of the properties known as The Greens at Metrowest Apartments ("Metrowest") and Brixworth-Atlanta Apartments ("Brixworth") (collectively, the "Properties") for the year ended December 15, 1994. This financial statement is the responsibility of TIAA Real Estate Account's management. Our responsibility is to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion.
The accompanying combined statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in the registration statement on Form S-1 of TIAA Real Estate Account) and as described in Note 2 is not intended to be a complete presentation of the Properties' revenues and expenses.
In our opinion, the financial statement referred to above presents fairly, in all material respects, the combined statement of revenues and certain expenses of the Properties as described in Note 2 for the year ended December 15, 1994, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
March 8, 1996
THE GREENS AT METROWEST APARTMENTS AND
BRIXWORTH-ATLANTA APARTMENTS
Combined Statement of Revenues and Certain Expenses
Year Ended December 15, 1994
Revenues:
Rental income $3,673,718
Other 89,066
----------
Total revenues 3,762,784
----------
Certain expenses:
Building operating expenses 653,459
Real estate taxes 405,440
Management fees 303,801
----------
Total expenses 1,362,700
----------
Revenues in excess of certain expenses $2,400,084
==========
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See notes to combined statement of revenues and certain expenses.
THE GREENS AT METROWEST APARTMENTS AND
BRIXWORTH-ATLANTA APARTMENTS
Notes to Combined Statement of Revenues and Certain Expenses Year Ended December 15, 1994
1. DESCRIPTION OF PROPERTIES
The combined statement of revenues and certain expenses relates to the properties known as The Greens at Metrowest Apartments ("Metrowest") and Brixworth-Atlanta Apartments ("Brixworth") (collectively, the "Properties"). Metrowest and Brixworth were acquired on December 15, 1995 and December 28, 1995, respectively, by TIAA Real Estate Account (the "Account").
2. BASIS OF PRESENTATION
The accompanying financial statement is presented in conformity with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission. Accordingly, the financial statement is not representative of the actual operations for the year ended December 15, 1994 as certain expenses, which may not be comparable to the expenses expected to be incurred in the future operations of the Properties have been excluded. Expenses excluded consist of interest, depreciation and amortization and other costs not directly related to the future operations of the Properties.
3. SIGNIFICANT ACCOUNTING POLICIES
Rental Income - Rental income is recognized when due in accordance with the terms of the respective leases.
Income Taxes - Based on provisions of the Internal Revenue Code, no federal income taxes are attributable to the net investment experience of the Account.
. Building Operating Expenses - Expenses consist primarily of utilities, insurance, security and safety, cleaning and other rental expenses of the Properties.
[letterhead]
Deloitte &
Touche LLP [LOGO] Two World Financial Center Telephone: (212) 436-2000
New York, New York 10281-1414 Facsimile: (212) 436-5000
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees
Teachers Insurance and Annuity Association of America:
We have audited the combined statement of revenues and certain expenses of the properties known as The Millbrook Collection ("Millbrook") and The Lynnwood Collection Retail Centers ("Lynnwood") (collectively, the "Properties") for the year ended December 15, 1995. This financial statement is the responsibility of TIAA Real Estate Account's management. Our responsibility is to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion.
The accompanying combined statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in the registration statement on Form S-1 of TIAA Real Estate Account) and as described in Note 2 is not intended to be a complete presentation of the Properties' revenues and expenses.
In our opinion, the financial statement referred to above presents fairly, in all material respects, the combined statement of revenues and certain expenses of the Properties as described in Note 2 for the year ended December 15, 1995 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
April 12, 1996
THE MILLBROOK COLLECTION AND
THE LYNNWOOD COLLECTION RETAIL CENTERS
Combined Statement of Revenues and Certain Expenses Year Ended December 15, 1995
Revenues:
Rental income $1,403,947
Other 364,641
----------
Total revenues 1,768,588
----------
Certain expenses:
Building operating expenses 348,117
Real estate taxes 146,537
Management fees 79,539
----------
Total expenses 574,193
----------
Revenues in excess of certain expenses $1,194,395
==========
|
See notes to combined statement of revenues and certain expenses.
THE MILLBROOK COLLECTION AND
THE LYNNWOOD COLLECTION RETAIL CENTERS
Notes to Combined Statement of Revenues and Certain Expenses Year Ended December 15, 1995
1. DESCRIPTION OF PROPERTIES
The combined statement of revenues and certain expenses relates to the properties known as The Millbrook Collection ("Millbrook") and The Lynnwood Collection Retail Centers ("Lynnwood") (collectively, the "Properties"). Millbrook and Lynnwood, located in Raleigh, North Carolina, were acquired on March 29, 1996 by TIAA Real Estate Account (the "Account").
2. BASIS OF PRESENTATION
The accompanying financial statement is presented in conformity with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission. Accordingly, the financial statement is not representative of the actual operations for the year ended December 15, 1995 as certain expenses, which may not be comparable to the expenses expected to be incurred in the future operations of the Properties have been excluded. Expenses excluded consist of depreciation, amortization, ground lease, and other costs not directly related to the future operations of the Properties.
3. SIGNIFICANT ACCOUNTING POLICIES
Rental Income - Rental income is recognized when due in accordance with the terms of the respective leases.
Income Taxes - Based on provisions of the Internal Revenue Code, no federal income taxes are attributable to the net investment income of the Account.
Building Operating Expenses - Expenses consist primarily of utilities, insurance, security and safety, cleaning and other rental expenses of the Properties.
4. LEASES
At December 15, 1995, future minimum base rentals to be received for fiscal years ending 1996 through 2000, and the aggregate amount thereafter, under noncancellable operating leases in effect are as follows:
1996 $ 1,285,984
1997 1,191,705
1998 1,054,190
1999 905,454
2000 820,880
Aggregate amount thereafter 8,300,455
-----------
$13,558,668
===========
|
Rental income from one tenant, which operates a supermarket in each property, amounted to approximately 46% of the total rental income for the year ended December 15, 1995.
5. MANAGEMENT FEES
In accordance with the terms of the management agreement, the Properties pay a monthly management fee based on 5% of total monthly collections from the Properties' tenants. These monthly collections include base rent, common area maintenance, real estate taxes, insurance, and other miscellaneous income.
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
CONDENSED UNAUDITED FINANCIAL STATEMENTS
(Condensed unaudited financial statements have been derived from audited financial statements which are available upon request.)
TIAA Condensed Balance Sheets
as of December 31
(in thousands)
ASSETS 1995 1994
- -----------------------------------------------------------------------------
Bonds $48,835,831 $43,778,518
Mortgages 21,000,279 20,216,879
Real estate 7,013,053 7,075,385
Stocks 223,028 163,284
Other long-term investments 476,804 383,816
Cash and short-term investments 713,051 431,446
Investment income due and accrued 1,118,708 1,073,386
Separate Account assets 209,170 30,563
Other assets 204,689 194,557
----------- -----------
Total Assets $79,794,613 $73,347,834
=========== ===========
LIABILITIES
- -----------------------------------------------------------------------------
Policy and contract reserves $70,983,831 $65,656,735
Dividends declared for
the following year 1,493,744 1,382,681
Asset Valuation Reserve 1,860,868 1,664,696
Interest Maintenance Reserve 621,366 544,660
Separate Account liabilities 106,512 5,293
Other liabilities 672,112 655,945
----------- -----------
Total Liabilities $75,738,433 $69,910,010
----------- -----------
CAPITAL & CONTINGENCY RESERVES
- -----------------------------------------------------------------------------
Capital $ 2,500 $ 2,500
----------- -----------
Contingency reserves:
For group life insurance 7,762 6,822
For investment losses,
annuity and insurance
mortality, and other risks 4,045,918 3,428,502
----------- -----------
Total contingency reserves 4,053,680 3,435,324
----------- -----------
Total Capital and
Contingency Reserves 4,056,180 3,437,824
----------- -----------
Total Liabilities, Capital
and Contingency Reserves $79,794,613 $73,347,834
=========== ===========
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TIAA Condensed Statements of Operations and Changes in Contingency Reserves for the Years
Ended December 31 (in thousands)
INCOME 1995 1994
- ------------------------------------------------------------------------------
Insurance and annuity
premiums and deposits $2,854,600 $2,785,546
Transfers from CREF, net 351,869 191,583
Annuity dividend additions 1,943,614 1,844,417
Net investment income 6,108,497 5,486,071
Supplementary contract considerations 150,976 105,000
----------- -----------
Total Income $11,409,556 $10,412,617
=========== ===========
DISTRIBUTION OF INCOME
- ------------------------------------------------------------------------------
Policy and contract benefits $1,718,597 $1,538,302
Dividends 3,098,931 2,874,077
Increase in policy and contract reserves 5,329,040 5,043,786
Operating expenses 241,795 216,465
Net transfers to separate accounts 92,995 4,271
Federal income taxes 9,488 9,844
Other, net (4,380) (2,972)
Increase in contingency reserves 923,090 728,844
----------- -----------
Total Distribution of Income $11,409,556 $10,412,617
=========== ===========
CHANGES IN CONTINGENCY RESERVES
- ------------------------------------------------------------------------------
From operations $923,090 $728,844
Net realized capital loss on investments (56,265) (95,071)
Net unrealized capital gain (loss) on
investments 52,706 38,907
Transfer to Interest Maintenance Reserve (114,840) (170,430)
Transfers from (to) the
Asset Valuation Reserve:
Required formula contribution (302,387) (249,405)
Net capital losses absorbed 106,215 226,639
Voluntary contribution (193,508)
Increase in nonadmitted assets
other than investments (803) (22,195)
Change in valuation basis of
policy reserves 2,314
Other, net 10,640 1,522
---------- ----------
Net Change in Contingency Reserves 618,356 267,617
Contingency reserves at beginning of year 3,435,324 3,167,707
---------- ----------
Contingency Reserves at
End of Year $4,053,680 $3,435,324
========== ==========
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TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
SUPPLEMENTAL INFORMATION TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
VALUATION OF INVESTMENTS: Bonds and short-term investments (debt securities with maturities of one year or less at the time of acquisition) not in default are generally stated at amortized cost; medium to highest quality preferred stocks at cost; common stocks at market value; and all other bond, short-term and preferred stock investments at the lower of cost or market value. Mortgages are stated at amortized cost, and directly-owned real estate at depreciated cost (net of encumbrances). Investments in wholly-owned real estate subsidiaries, real estate limited partnerships and securities limited partnerships are stated at TIAA's equity in the net assets of the underlying entities. Policy loans are stated at outstanding principal amounts. All investments are stated net of any permanent impairments, which are determined on an individual asset basis. Depreciation is generally computed over a 40 year period on the constant yield method for properties acquired prior to 1991, and on the straight-line method for properties acquired thereafter.
ADDITIONAL INFORMATION:
1995 1994
---- ----
As a percentage of total bond investments:
Below investment grade bonds 5% 6%
As a percentage of total mortgage investments:
Below investment grade mortgage loans 4% 5%
Total mortgage investments in California 24% 26%
Total mortgage investments in office buildings 41% 42%
Total mortgage investments in shopping centers 31% 31%
As a percentage of total real estate investments:
Total real estate investments in Minnesota 12% 12%
Total real estate investments in California 12% 12%
Total real estate investments in office buildings 62% 60%
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ASSET SWAP AND INTEREST RATE SWAP CONTRACTS: TIAA enters into asset swap and interest rate swap contracts with counterparties. TIAA is exposed to the risk of default of such counterparties, although TIAA does not anticipate non-performance by the counterparties. At December 31, 1995 and 1994, TIAA had interest rate swap contracts with commercial banks related to $110,000,000 and $105,000,000, respectively, par value of variable interest rate notes, and asset swap contracts outstanding related to $245,462,000 and $115,211,000, respectively, of investments denominated in foreign currencies.
APPENDIX A
DESCRIPTION OF PROPERTIES
MULTI-FAMILY RESIDENTIAL COMPLEXES
Brixworth Apartments -- Atlanta, Georgia
On December 28, 1995, the Account purchased the fee interest (i.e., ownership of underlying land and all buildings and other improvements on the land) in Brixworth Apartments, a first class garden apartment complex located in Atlanta, Georgia, for a purchase price of approximately $15.6 million. The property is not subject to a mortgage.
Brixworth Apartments was built in 1989 and is located on approximately 10.8 acres of land. The complex contains 271 one- and two- bedroom apartment units in 11 three story buildings, with each unit containing such amenities as a washer and dryer and a patio or balcony. Building exteriors are brick and wood. There are 420 parking spaces in the complex. Residents have use of an on-site clubhouse, which includes a fitness center and swimming pool. Brixworth Apartments is currently 97% occupied, and according to the Seller, has experienced between 93% and 97% occupancy over the prior five year period. Average monthly rents are $699 per unit. Rents are comparable with competitive communities and are not subject to rent regulation. The Account will be responsible for the expenses of operating the property.
Brixworth Apartments is located in northeast Atlanta in DeKalb County, near several shopping facilities and employment centers. Atlanta has experienced positive population and employment growth over the last 15 years and serves as the financial and administrative center for the southeastern United States.
The Greens at Metrowest Apartments -- Orlando, Florida
On December 15, 1995, the Account purchased the fee interest in The Greens at Metrowest, a luxury garden apartment complex located in Orlando, Florida, for a purchase price of approximately $12.5 million. The property is not subject to a mortgage.
The Greens at Metrowest Apartments was built in 1990, and is located on approximately 16.7 acres of land. The complex consists of 200 one- and two- bedroom units in 27 two story buildings, with each unit containing such amenities as a washer and dryer, a screened porch, and, in many of the units, a fireplace and vaulted ceilings. Building exteriors are stucco with concrete tiled roofs. There are 402 parking spaces in the complex. Residents have use of an on-site clubhouse, which includes an exercise facility and swimming pool. The complex is currently 93% occupied, with monthly
rents averaging $778 per unit. Rents are comparable with competitive complexes and are not subject to rent regulation. The Account will be responsible for the expenses of operating the property.
The complex is located in the 1,800 acre master planned development of Metrowest which contains an 18 hole golf course. Its proximity to several major highways gives residents easy access to Orlando's major employment centers. Orlando has experienced strong population and employment growth during the last decade. While tourism and entertainment account for 40% of local jobs, the region's economy is diversifying by attracting "high-tech" industries and is growing in importance as a warehouse and distribution location.
OFFICE BUILDINGS
Southbank Business Park - Phoenix, Arizona
On February 27, 1996, the Account purchased the fee interest in a 122,609 square foot office/service building in Phoenix, Arizona, for a purchase price of approximately $10.05 million. The property is not subject to a mortgage.
The building, completed in 1995, is located on approximately 9.9 acres of land with 638 parking spaces. It is currently 100% occupied by four tenants in the service industry, with rents averaging $8.77 per square foot. None of the leases expire until the year 2000, when leases on 65% of the space expire; those leases together represent total annual rent payments of approximately $684,907. Although the terms vary under each lease, most of the expenses for operating the property are either borne or reimbursed by the tenants.
The building is located within the Southbank Business Park adjacent to the Phoenix Airport and is easily accessible from either side of the Phoenix metropolitan area. Phoenix has experienced positive population and employment growth over the last 15 years. Over 29% of its employment base is comprised of employees in the service industry.
NEIGHBORHOOD SHOPPING CENTERS
The Lynnwood Collection -- Raleigh, North Carolina
On March 29, 1996, the Real Estate Account purchased the fee interest in The Lynnwood Collection, an 86,362 square foot neighborhood shopping center located in Raleigh, North Carolina, for a purchase price of approximately $6.5 million. The property is not subject to a mortgage.
The center, which was built in 1988, is located on approximately 10.3 acres of land and has space for 426 cars. It is currently 98% occupied, and is anchored by a 52,337 square foot Kroger supermarket, a national supermarket chain. Rents average $12.72 per square foot. Although the terms vary under each lease, most of the expenses for operating the property are either borne or reimbursed by the tenants. Over the next five years, leases on 35% of the center's space expire; those leases together represent total annual rent payments of $362,749 in the year of their expiration. The Kroger lease expires in the year 2015.
The center is located in north Raleigh, the city's primary growth corridor. Raleigh is the capital of North Carolina and has experienced strong population growth. As part of what is referred to as the "Research Triangle," it has attracted major business and industries and has a large pool of highly educated workers.
The Millbrook Collection -- Raleigh, North Carolina
On March 29, 1996, the Account purchased the fee interest in The Millbrook Collection, a 102,221 square foot neighborhood shopping center located in Raleigh, North Carolina, for a purchase price of approximately $6.7 million. The property is not subject to a mortgage.
The center, which was built in 1988, is located on approximately 14.4 acres of land with space for 670 cars. The center is currently 93% occupied and is anchored by a 52,337 square foot Kroger supermarket. Rents average $10.84 per square foot. Although the terms vary under each lease, most of the expenses for operating the property are either borne or reimbursed by the tenants. Over the next five years, leases on 30% of the center's space expire; those leases together represent total annual rent payments of $310,249 in the year of their expiration. The Kroger lease expires in the year 2015.
The center is located within the city limits of Raleigh, North Carolina in a well-established neighborhood. The Raleigh area is discussed in the description of the Lynnwood Collection set forth above.
Plantation Grove Shopping Center -- Ocoee, Florida
On December 28, 1995, the Account purchased the fee interest in Plantation Grove Shopping Center, a 73,655 square foot neighborhood shopping center located near Orlando, Florida, for a purchase price of approximately $7.3 million. The property is not subject to a mortgage.
The center, built in 1995, is located on approximately 14 acres of land with space for 401 cars. It is currently 88% occupied and is anchored by a 47,955 square foot Publix supermarket, a regional supermarket chain. Rents, including a rent guarantee from the seller for the 12% of vacant space, average $10.00 per square foot. Although the terms vary under each lease, most of the expenses for operating the property are either borne or reimbursed by the tenants. Over the next five years, leases on 16% of the center's space expire; those leases together represent total annual rent payments of $162,900 in the year of their expiration. The Publix lease expires in the year 2015.
The Orlando, Florida area is discussed in the description of The Greens at Metrowest Apartments set forth immediately above.
INDUSTRIAL PROPERTIES
On November 22, 1995, the Account purchased the fee interest in a warehouse property located near Minneapolis, Minnesota for a purchase price of approximately $4.2 million. Rents on the property, including a rent guarantee from the seller for the 20% of vacant space, average $3.80 per square foot. On December 22, 1995, the Account purchased leasehold interests (i.e., interests in the leases on the underlying land and ownership of the buildings and other improvements on the land) in two warehouse properties located in El Paso, Texas for an aggregate purchase price of approximately $4.4 million dollars. Rents on the properties average $2.71 per square foot, after payment of the ground rent. Although the terms vary under each lease, most of the expenses for operating each of the properties are either borne or reimbursed by the tenants. None of the properties are subject to a mortgage.
Set forth below are further details relating to each facility:
Lease
Building Year Current Major Expira-
Property Size Built Occupancy Tenants tion Date
(sq. ft.)
Fridley,
Minnesota
Industrial Blvd. 100,584 1995 80% Packaging 2005
Materials,
Inc.
El Paso, Texas
Butterfield warehouse 80,000 1980 100% Rockwell 2000
Zane Gray warehouse 103,600 1981 100% D.J. Inc. 2003
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APPENDIX B
MANAGEMENT OF TIAA
The Trustees and principal executive officers of TIAA, and their principal occupations during the last five years, are as follows:
Trustees
David Alexander, 63.
American Secretary, Rhodes Scholarship Trust, and Trustees' Professor, Pomona
College. Formerly, President, Pomona College, until 1991.
Marcus Alexis, 64.
Board of Trustees, Professor of Economics and Professor of Management and
Strategy, Northwestern University.
A. Howard Amon, Jr., 68.
Retired Vice President and Director of Real Estate, J. C. Penney, Inc.
Jenne K. Britell, 53.
Executive Vice President, since June 1995, and Chief Lending Officer and General
Manager, Mortgage Banking, The Dime Savings Bank of New York, FSB, since 1993.
Formerly, Chairman and Chief Executive Officer, HomePower, Inc., from 1990 until
1993, and Chairman of the Management Board, Polish-American Mortgage Bank, Inc.
(Warsaw), from June 1992 until April 1993.
Willard T. Carleton, 61.
Karl L. Eller Professor of Finance, College of Business and Public
Administration, University of Arizona.
Robert C. Clark, 52.
Dean and Royall Professor of Law, Harvard Law School, Harvard University.
Flora Mancuso Edwards, 51.
Professor of English as a Second Language, Middlesex County College, since
October 1995. Formerly, President, Middlesex County College until October 1995.
Estelle A. Fishbein, 61.
General Counsel of The Johns Hopkins University since 1975. Elected Vice
President and General Counsel of the University, April 1991.
Frederick R. Ford, 60.
Executive Vice President and Treasurer, Purdue University.
Ruth Simms Hamilton, 58.
Professor, Department of Sociology and Urban Affairs Programs, and Director,
African Diaspora Research Project, Michigan State University.
Dorothy Ann Kelly, O.S.U., 66.
President, College of New Rochelle.
Robert M. O'Neil, 61.
Professor of Law, University of Virginia and Director, The Thomas Jefferson
Center for the Protection of Free Expression.
Leonard S. Simon, 59.
Chairman, President and Chief Executive Officer, RCSB Financial, Inc., since
September 1995. Formerly, Chairman and Chief Executive Officer, The Rochester
Community Savings Bank, from 1984 until September 1995.
Ronald L. Thompson, 46.
Chairman of the Board and Chief Executive Officer, Midwest Stamping Co.
Formerly, Chairman of the Board and President, The GR Group, until 1993.
Paul R. Tregurtha, 60.
Chairman, Chief Executive, and Director, Mormac Marine Group, Inc.; Vice
Chairman and Director, The Interlake Steamship Company; Chairman and Director,
Moran Transportation Company; and Chairman, MAC Acquisitions, Inc.
Charles J. Urstadt, 67.
Chairman and President, HRE Properties (a real estate investment trust).
William H. Waltrip, 58.
Chairman and Chief Executive Officer, Bausch & Lomb Inc., since January 1996.
Chairman and Chief Executive Officer, Technology Solutions Company, since 1993.
Formerly, Chairman and Chief Executive Officer, Biggers Brothers, Inc., and Vice
Chairman, Unifax, from 1991 until 1993.
Officer-Trustees
John H. Biggs, 59.
Chairman and Chief Executive Officer, TIAA and CREF, since 1993. Formerly,
President and Chief Operating Officer, TIAA and CREF.
Thomas W. Jones, 46.
Vice Chairman, TIAA and CREF, since 1995. President and Chief Operating Officer,
TIAA and CREF, since 1993. Formerly, Executive Vice President, Finance and
Planning, TIAA and CREF.
Martin L. Leibowitz, 59.
Vice Chairman and Chief Investment Officer, TIAA and CREF, since November 1995.
Executive Vice President, TIAA and CREF, from June 1995 to November 1995.
Formerly, Managing Director -- Director of Research and member of the Executive
Committee, Salomon Brothers, Inc.
Other Officers
Richard L. Gibbs, 49.
Executive Vice President, TIAA and CREF, since 1993, and Vice President,
TIAA-CREF Investment Management, Inc. ("Investment Management") and TIAA-CREF
Individual & Institutional Services, Inc. ("Services"), since 1992; Executive
Vice President, Teachers Advisors, ("Advisors") since 1995. Formerly, Vice
President, Finance, TIAA and CREF.
Albert J. Wilson, 63.
Vice President and Chief Counsel, Corporate Secretary, TIAA and CREF, since 1991. Formerly, Vice President, Secretary, and Associate General Counsel, TIAA and CREF.
Richard J. Adamski, 53.
Vice President and Treasurer, TIAA and CREF, since March 1991; Vice President and Treasurer, Investment Management and Services, since 1992; Vice President and Treasurer, Teachers Personal Investors Services, Inc. and Advisors, since 1994. Formerly, Treasurer, TIAA and CREF.
PART II
INFORMATION NOT REQUIRED IN A PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following reflects an estimate of the additional expenses associated with the issuance of the previously-registered securities covered by this post-effective amendment:
Costs of printing and
engraving $100,000
Legal fees 15,000
Accounting fees 35,000
Miscellaneous 10,000
--------
TOTAL $160,000
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Item 14. Indemnification of Directors and Officers.
Trustees, officers, and employees of TIAA may be indemnified against liabilities and expenses incurred in such capacity pursuant to Article Six of TIAA's bylaws (see Exhibit 3(B)). Article Six provides that, to the extent permitted by law, TIAA will indemnify any person made or threatened to be made a party to any action, suit or proceeding by reason of the fact that such person is or was a trustee, officer, or employee of TIAA or, while a trustee, officer, or employee of TIAA, served any other organization in any capacity at TIAA's request. To the extent permitted by law, such indemnification could include judgments, fines, amounts paid in settlement, and expenses, including attorney's fees. TIAA has in effect an insurance policy that will indemnify its trustees, officers, and employees for liabilities arising from certain forms of conduct.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to trustees, officers, or employees of TIAA, pursuant to the foregoing provision or otherwise, TIAA has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in that Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment of expenses incurred or paid by a trustee, officer, or employee in the successful defense of any action, suit or proceeding) is asserted by a trustee, officer, or employee in connection with the securities being registered, TIAA will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in that Act and will be governed by the final adjudication of such issue.
Item 15. Recent Sales of Unregistered Securities.
On July 3, 1995, the Account issued 1,000,000 accumulation units to TIAA, at $100 per unit, in consideration of TIAA's $100,000,000 seed money investment. This transaction was exempt from registration under Section 4(2) of the Securities Act of 1933.
II - 1
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
(1) Distribution and Administrative Services Agreement by and between TIAA and TIAA-CREF Individual & Institutional Services, Inc. (as amended)
(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 Contract Endorsements (B) Forms of Income-Paying Contracts
(5) Opinion and Consent of Charles H. Stamm, Esquire
(10) (A) Independent Fiduciary Agreement by and among TIAA, the Registrant, and Institutional Property Consultants, Inc. (as amended) (B) Custodial Services Agreement by and between TIAA and Morgan Guaranty Trust Company of New York with respect to the Real Estate Account
(23) (A) Opinion and Consent of Charles H. Stamm, Esquire
(filed as Exhibit 5)
(B) Consent of Sutherland, Asbill & Brennan
(C) Consent of Deloitte & Touche LLP
(27) Financial Data Schedule of the Account's Financial Statements for the period ended December 31, 1995
(b) Financial Statement Schedules
Schedule III -- Real Estate Owned
All other Schedules have been omitted because they are not required under the related instructions or are inapplicable.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:
II - 2
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement;
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
Following are the full audited financial statements of TIAA, which are incorporated by reference into the prospectus found in Part I of this Registration Statement.
II - 3
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
INDEX TO AUDITED FINANCIAL STATEMENTS
DECEMBER 31, 1995
Report of Management Responsibility ...................................... II-5 Report of Independent Auditors ........................................... II-6 Balance Sheets ........................................................... II-7 Statements of Operations ................................................. II-8 Statements of Changes in Contingency Reserves ............................ II-9 Statements of Cash Flows ................................................. II-10 Notes to Financial Statements ............................................ II-11 |
II - 4
To the Policyholders of
Teachers Insurance and Annuity
Association of America:
The accompanying financial statements of Teachers Insurance and Annuity Association of America ("TIAA") are the responsibility of management. They have been prepared on the basis of statutory accounting policies prescribed or permitted by the New York State Insurance Department. The financial statements of TIAA have been presented fairly and objectively in accordance with such policies.
TIAA has established and maintains a strong system of internal controls designed to provide reasonable assurance that assets are properly safeguarded and transactions are properly executed in accordance with management's authorization, and to carry out the ongoing responsibilities of management for reliable financial statements. In addition, TIAA's internal audit personnel provide a continuing review of the internal controls and operations of TIAA, and the internal Auditor regularly reports to the Audit Committee of the TIAA Board of Trustees.
The accompanying financial statements of TIAA have been audited by the independent auditing firm of Deloitte & Touche LLP. The independent auditors' report, which appears on the following page, expresses an independent opinion on the fairness of presentation of these financial statements.
The Audit Committee of the TIAA Board of Trustees, consisting of trustees who are not officers of TIAA, meets regularly with management, representatives of Deloitte & Touche LLP and internal auditing personnel to review matters relating to financial reporting, internal controls and auditing. In addition to the annual audit of the TIAA financial statements, the New York State Insurance Department and other state insurance departments regularly examine the financial statements of TIAA as part of their periodic corporate examinations.
/s/John H. Biggs
----------------------------
Chairman and
Chief Executive Officer
/s/Thomas W. Jones
------------------------------
Vice Chairman, President and
Chief Operating Officer
/s/Richard L. Gibbs
-------------------------------
Executive Vice President and
Principal Accounting Officer
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II - 5
[letterhead]
Deloitte &
Touche LLP [LOGO] Two World Financial Center Telephone: (212) 436-2000
New York, New York 10281-1414 Facsimile: (212) 436-5000
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REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees of
Teachers Insurance and Annuity
Association of America:
We have audited the accompanying balance sheets of Teachers Insurance and Annuity Association of America ("TIAA") as of December 31, 1995 and 1994 and the related statements of operations, changes in contingency reserves, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of TIAA's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of TIAA at December 31, 1995 and 1994 and the results of its operations, changes in its contingency reserves, and its cash flows for each of the three years in the period ended December 31, 1995 in conformity with accounting policies prescribed or permitted by the New York State Insurance Department, which practices, as to TIAA, also represent generally accepted accounting principles.
/s/Deloitte Touche LLP March 12, 1996 |
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
BALANCE SHEETS
December 31,
---------------------------------
1995 1994
--------------- ---------------
ASSETS
Bonds...................................................... $48,835,831,058 $43,778,517,616
Mortgages.................................................. 21,000,279,330 20,216,879,404
Real Estate................................................ 7,013,052,678 7,075,384,687
Stocks..................................................... 223,028,483 163,284,129
Other long-term investments................................ 476,803,951 383,815,668
Cash and short-term investments............................ 713,051,046 431,445,982
Investment income due and accrued.......................... 1,118,707,821 1,073,386,018
Separate Account assets.................................... 209,170,183 30,563,247
Other assets............................................... 204,688,878 194,557,100
--------------- ---------------
TOTAL ASSETS $79,794,613,428 $73,347,833,851
=============== ===============
LIABILITIES, CAPITAL AND CONTINGENCY RESERVES
Policy and contract reserves............................... $70,983,830,958 $65,656,734,942
Dividends declared for the following year.................. 1,493,744,768 1,382,680,655
Asset Valuation Reserve.................................... 1,860,867,891 1,664,695,698
Interest Maintenance Reserve............................... 621,365,961 544,660,224
Separate Account liabilities............................... 106,511,880 5,292,647
Other liabilities.......................................... 672,112,096 655,945,669
--------------- ---------------
Total Liabilities 75,738,433,554 69,910,009,835
--------------- ---------------
Capital: 2,500 shares of $1,000 par value common stock
issued and outstanding................................... 2,500,000 2,500,000
--------------- ---------------
Contingency reserves:
For group life insurance.................................. 7,761,722 6,821,939
For investment losses, annuity and insurance mortality,
and other risks......................................... 4,045,918,152 3,428,502,077
--------------- ---------------
Total Contingency Reserves 4,053,679,874 3,435,324,016
--------------- ---------------
Total Capital and Contingency Reserves 4,056,179,874 3,437,824,016
--------------- ---------------
TOTAL LIABILITIES, CAPITAL AND CONTINGENCY RESERVES $79,794,613,428 $73,347,833,851
=============== ===============
|
See notes to financial statements.
II - 7
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
STATEMENTS OF OPERATIONS
For the Years Ended December 31,
---------------------------------------------------
1995 1994 1993
--------------- --------------- ---------------
INCOME
Insurance and annuity premiums
and deposits......................... $ 2,854,599,816 $ 2,785,546,486 $ 2,677,251,204
Transfers from CREF, net............... 351,869,029 191,582,916 247,849,674
Annuity dividend additions............. 1,943,614,354 1,844,416,805 1,961,603,015
Net investment income.................. 6,108,496,984 5,486,071,238 5,164,006,195
Supplementary contract considerations.. 150,975,982 104,999,526 94,618,702
--------------- --------------- ---------------
TOTAL INCOME $11,409,556,165 $10,412,616,971 $10,145,328,790
=============== =============== ===============
DISTRIBUTION OF INCOME
Policy and contract benefits........... $ 1,718,596,923 $ 1,538,301,850 $ 1,334,612,551
Dividends.............................. 3,098,930,945 2,874,077,216 2,928,108,945
Increase in policy and contract
reserves............................. 5,329,040,178 5,043,786,384 5,167,901,788
Operating expenses..................... 241,795,245 216,465,411 192,124,351
Transfers to Separate Accounts, net.... 92,995,463 4,270,646
Federal income taxes................... 9,487,967 9,843,630 10,482,862
Other, net............................. (4,380,395) (2,972,008) 525,332
Increase in contingency reserves
from operations...................... 923,089,839 728,843,842 511,572,961
--------------- --------------- ---------------
TOTAL DISTRIBUTION OF INCOME $11,409,556,165 $10,412,616,971 $10,145,328,790
=============== =============== ===============
|
See notes to financial statements.
II - 8
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
STATEMENTS OF CHANGES IN CONTINGENCY RESERVES
For the Years Ended December 31,
------------------------------------------------
1995 1994 1993
-------------- -------------- --------------
CHANGES IN CONTINGENCY RESERVES:
From operations..................................... $ 923,089,839 $ 728,843,842 $ 511,572,961
Net realized capital loss on investments............ (56,264,893) (95,070,954) (36,426,429)
Net unrealized capital gain (loss) on investments... 52,706,109 38,906,936 (40,018,527)
Transfer to the Interest Maintenance Reserve........ (114,840,183) (170,430,156) (181,606,193)
Transfers from (to) the Asset Valuation Reserve:
Required formula contribution...................... (302,387,557) (249,405,235) (344,323,583)
Net capital losses absorbed........................ 106,215,365 226,638,932 255,224,945
Voluntary contribution............................. (193,508,281) (207,828,000)
Increase in non-admitted assets other than
investments....................................... (802,629) (22,194,906) (18,153,629)
Change in valuation basis of policy reserves........ 2,314,689 (1,224,324)
Other, net.......................................... 10,639,807 1,522,064
-------------- -------------- --------------
NET CHANGE IN CONTINGENCY RESERVES 618,355,858 267,616,931 (62,782,779)
CONTINGENCY RESERVES AT BEGINNING OF YEAR 3,435,324,016 3,167,707,085 3,230,489,864
-------------- -------------- --------------
CONTINGENCY RESERVES AT END OF YEAR $4,053,679,874 $3,435,324,016 $3,167,707,085
============== ============== ==============
|
See notes to financial statements.
II - 9
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
-------------------------------------------------------
1995 1994 1993
--------------- --------------- ---------------
CASH PROVIDED By operating activities:
Insurance and annuity premiums, deposits
and considerations....................... $ 2,999,426,179 $ 2,886,724,538 $ 2,766,077,897
Transfers from CREF, net.................. 351,869,029 191,582,916 247,849,674
Annuity dividend additions................ 1,943,614,354 1,844,416,805 1,961,603,015
Investment income, net.................... 5,998,015,040 5,372,299,141 5,219,656,004
--------------- --------------- ---------------
Total Receipts 11,292,924,602 10,295,023,400 10,195,186,590
--------------- --------------- ---------------
Policy and contract benefits.............. 1,715,727,236 1,500,323,250 1,312,182,472
Dividends................................. 2,987,866,832 2,819,852,489 2,879,831,053
Operating expenses........................ 240,323,235 214,008,001 192,147,540
Federal income taxes...................... 8,510,881 10,114,286 8,014,769
Transfers to Separate Accounts, net....... 159,017,898 29,164,199
Other, net................................ 6,823,917 6,798,405 (45,847,231)
--------------- --------------- ---------------
Total Disbursements 5,118,269,999 4,580,260,630 4,346,328,603
--------------- --------------- ---------------
Cash Provided by Operating Activities 6,174,654,603 5,714,762,770 5,848,857,987
--------------- --------------- ---------------
By investing activities:
Sales and redemptions of bonds and stocks. 3,863,412,778 3,810,787,301 6,413,280,415
Repayment of mortgage principal........... 1,166,625,456 1,684,113,871 1,639,165,691
Sales of real estate...................... 1,084,222,765 1,610,589,922 1,078,327,249
Other, net................................ 135,661,132 243,837,007 87,362,080
--------------- --------------- ---------------
Cash Provided By Investing Activities 6,249,922,131 7,349,328,101 9,218,135,435
--------------- --------------- ---------------
TOTAL CASH PROVIDED 12,424,576,734 13,064,090,871 15,066,993,422
--------------- --------------- ---------------
DISBURSEMENTS FOR NEW INVESTMENTS
Investments acquired:
Bonds and stocks.......................... 8,696,169,089 10,084,139,605 11,826,791,371
Mortgages................................. 2,352,232,441 2,217,021,154 1,043,674,867
Real Estate............................... 866,388,613 1,495,492,478 1,319,927,724
Other, net................................ 228,181,527 352,457,763 60,550,529
--------------- --------------- ---------------
TOTAL DISBURSEMENTS FOR
NEW INVESTMENTS 12,142,971,670 14,149,111,000 14,250,944,491
--------------- --------------- ---------------
INCREASE (DECREASE) IN CASH AND
SHORT-TERM INVESTMENTS 281,605,064 (1,085,020,129) 816,048,931
CASH AND SHORT-TERM INVESTMENTS
AT BEGINNING OF YEAR 431,445,982 1,516,466,111 700,417,180
--------------- --------------- ---------------
CASH AND SHORT-TERM INVESTMENTS
AT END OF YEAR $ 713,051,046 $ 431,445,982 $ 1,516,466,111
=============== =============== ===============
|
See notes to financial statements.
II - 10
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS
Note 1--Organization
Teachers Insurance and Annuity Association of America ("TIAA") was established as a legal reserve life insurance company under the insurance laws of the State of New York in 1918. TIAA was formed by the Carnegie Foundation for the Advancement of Teaching for the express purpose of aiding and strengthening nonprofit educational and research organizations by providing retirement and insurance benefits for their faculties and other staff members, and by counseling these organizations and their employees on benefit plans and other measures of economic security. All of the outstanding common stock of TIAA is collectively held by the TIAA Board of Overseers, a nonprofit corporation created solely for the purpose of holding the stock of TIAA.
Note 2--Significant Accounting Policies
TIAA's financial statements have been prepared on the basis of accounting policies prescribed or permitted by the New York State Insurance Department ("Department"), which policies, hereinafter referred to as statutory accounting policies, as to TIAA, also represent generally accepted accounting principles. (Refer to the separate sections, entitled "Permitted Statutory Accounting Policies" and "Generally Accepted Accounting Principles", within this note.) The preparation of TIAA's financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Actual results could differ from those estimates. The following is a summary of the significant accounting policies consistently followed by TIAA.
Valuation of Investments: Bonds and short-term investments (debt securities with maturities of one year or less at the time of acquisition) not in default are generally stated at amortized cost; medium to highest quality preferred stocks at cost; common stocks at market value; and all other bond, short-term and preferred stock investments at the lower of amortized cost or market value. Mortgages are stated at amortized cost, and directly-owned real estate at depreciated cost (net of encumbrances). Investments in wholly-owned real estate subsidiaries, real estate limited partnerships and securities limited partnerships are stated at TIAA's equity in the net assets of the underlying entities. Policy loans are stated at outstanding principal amounts. All investments are stated net of any permanent impairments, which are determined on an individual asset basis. Depreciation is generally computed over a 40 year period on the constant yield method for properties acquired prior to 1991, and on the straight-line method for properties acquired thereafter.
Accounting for Investments: Investment transactions are accounted for as of the date the investments are purchased or sold (trade date) for publicly traded common stocks and as of the date the investment transactions are settled (settlement date) for all other investments. Realized capital gains and losses on investment transactions are accounted for under the specific identification method.
Foreign Currency Transactions and Translation: Investments denominated in foreign currencies and asset swap contracts are valued in U.S. dollars, based on the exchange rate at the end of the period. Investment transactions in foreign currencies are recorded at the exchange rates prevailing on the respective transaction dates. All other asset and liability accounts that are denominated in a foreign currency are adjusted to reflect the exchange
II - 11
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 2--Significant Accounting Policies--(Continued)
rate at the end of the period. Realized and unrealized gains and losses due to foreign exchange transactions, and those due to translation adjustments, are not separately reported and are reflected in realized and unrealized capital gains and losses, respectively.
Securities Lending: TIAA has a securities lending program whereby it loans securities to qualified brokers in exchange for cash collateral, generally at least equal to 102% of the market value of the securities loaned. When securities are loaned, TIAA receives additional income on the collateral and continues to receive income on the securities loaned. The collateral liability is netted against the short-term investments in which the cash collateral is invested and such short-term investments and the equivalent liability are not reflected in the balance sheet caption, "Cash and short-term investments". TIAA may bear the risk of delay in recovery of, or loss of rights in, the securities loaned should a borrower of securities fail to meet contractual obligations.
Asset Swap Contracts: TIAA enters into asset swap contracts to exchange fixed and variable amounts of foreign currency at specified future dates and at specified rates to hedge against currency risks on investments denominated in foreign currencies. Changes in the value of the contracts related to foreign currency exchange rates are recognized at the end of the period as unrealized gains or losses. Asset swap contracts incorporate a series of swap transactions which result in the exchange of TIAA's fixed and variable foreign currency cash flows into fixed amounts of U.S. dollar cash flows. Asset swap contracts are entered into directly with a counterparty and TIAA is exposed to the risk of default of such counterparty, although TIAA does not anticipate non-performance by any of the counterparties. The maximum potential loss from such risk is equal to the change in the value of the asset swap during the term of the contract. In order to minimize the risk associated with potential counterparty default, TIAA monitors the credit quality of its counterparties.
Interest Rate Swap Contracts: TIAA enters into interest rate swap contracts with qualified commercial banks to hedge against the effect of interest rate fluctuations on certain variable interest rate bonds. These contracts allow TIAA to lock in a fixed interest rate and to transfer the risk of higher or lower interest rates. TIAA also enters into interest rate swap contracts to swap the cash flows on certain fixed interest rate bonds into variable interest rate cash flows in connection with certain adjustable rate products. These contracts subject TIAA to credit risk should the counterparties not perform according to the terms of the contracts. However, the maximum potential loss from such credit risk is much smaller than the par value of the related notes and TIAA does not anticipate non-performance by any of the counterparties. In order to minimize the risk associated with potential counterparty default, TIAA monitors the credit quality of its counterparties. Payments received and payments made under interest rate swap contracts are reflected in net investment income.
Covered Call Options Written: TIAA writes covered call options on selected bonds as part of TIAA's asset and liability management program for certain adjustable rate products. When an option is written, an amount equal to the premium received is recorded as a liability. Premiums received on options which expire are recorded as realized capital gains. Premiums received from writing options which are exercised are added to the proceeds from the sale of the underlying bond in recognizing the net realized capital gain or loss on the disposition. In writing
II - 12
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 2--Significant Accounting Policies--(Continued)
options, it is assumed that the option may be exercised at any time prior to the expiration of TIAA's obligation as a writer, and that in such circumstances the net proceeds of the sale of the underlying bond pursuant to the call option may be below the prevailing market value.
Investment Income Due and Accrued: Investment income due and accrued excludes non-admitted amounts of approximately $311,279,000 and $341,199,000 at December 31, 1995 and 1994, respectively.
Non-Admitted Assets Other than Investments: Certain non-investment assets, such as furniture and fixtures and various receivables, are designated as non-admitted assets by the Department and, as such, cannot be included in life insurance company balance sheets filed with the Department. Such non-admitted assets approximated $174,603,000 at December 31, 1995 and $173,867,000 at December 31, 1994.
Policy and Contract Reserves: TIAA offers a range of group and individual retirement annuities and group and individual life and other insurance products. Policy and contract reserves for such products are determined in accordance with standard valuation methods approved by the Department. Reserves are stated at account balances for annuities in the accumulation phase, at the present value of all future guaranteed benefits for annuities in the payout phase and, for insurance policies, are computed in accordance with standard actuarial formulas. The reserves established utilize assumptions for interest (at an average rate of approximately 3%), mortality and other risks insured. Such reserves establish a sufficient provision for all contractual benefits guaranteed under policy and contract provisions.
Dividends Declared for the Following Year: Dividends on insurance policies and pension annuity contracts in the payout phase are generally declared by the TIAA Board of Trustees ("Board") in November of each year, and such dividends are credited to policyholders in the following calendar year. Dividends on pension annuity contracts in the accumulation phase are generally declared by the Board in February of each year and such dividends on the various existing vintages of pension annuity contracts in the accumulation phase are credited to policyholders during the ensuing twelve month period beginning March 1.
Asset Valuation Reserve: The Asset Valuation Reserve ("AVR"), which covers all invested asset classes, is an explicit liability reserve required by the National Association of Insurance Commissioners ("NAIC") and is intended to provide for potential future credit and equity losses. Reserve components of the AVR are maintained for bonds, stocks, mortgages, real estate and other invested assets. Realized and unrealized credit and equity capital gains and losses, net of capital gains taxes, are credited to or charged against the related components of the AVR. Formula calculations determine the required contribution amounts for each component. Insurance companies may also make voluntary contributions to any component as long as the resulting ending balance does not exceed the computed maximum reserve for that component. TIAA makes voluntary contributions to the mortgage and real estate reserves of the AVR as necessary to keep the reserve balances at least equal to the aggregate differences between carrying value and the most recent valuation for mortgage and real estate investments under valuation review. Contributions to the AVR are reported as transfers from Contingency Reserves.
II - 13
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 2--Significant Accounting Policies--(Continued)
Interest Maintenance Reserve: The Interest Maintenance Reserve ("IMR") is a liability reserve required by the NAIC which accumulates realized capital gains and losses resulting from interest rate fluctuations. Such capital gains and losses are amortized out of the IMR as an adjustment to net investment income over the remaining lives of the assets sold.
Contingency Reserves: By Charter, TIAA operates without profit to the corporation or its sole shareholder, the TIAA Board of Overseers. As a result, all contingency reserves are held solely for the benefit of TIAA's policyholders.
Income and Expenses: Premiums, investment income and expenses are reported as incurred.
Federal Income Taxes: TIAA is a nonprofit educational organization exempt from federal income taxation under Section 501(c)(3) of the Internal Revenue Code. However, any nonpension related income is subject to federal income taxation as unrelated business income. The federal income tax provision in the accompanying statements of operations is based on taxes actually paid or anticipated to be paid with the tax return filing.
Separate Accounts: The balance sheet captions for Separate Account assets and liabilities (which include participant account values) are stated at market value. The Separate Accounts' operating results are reflected in the changes to these assets and liabilities.
TIAA Separate Account VA-1 ("VA-1") is a segregated investment account and was organized on February 16, 1994 under the insurance laws of the State of New York for the purpose of issuing and funding variable annuity contracts. VA-1 was registered with the Securities and Exchange Commission ("Commission") effective November 1, 1994 as an open-end, diversified management investment company under the Investment Company Act of 1940. Currently, VA-1 consists of a single investment portfolio, the Stock Index Account ("SIA"), which invests in a diversified portfolio of equity securities selected to track the overall United States stock market.
SIA was established on October 3, 1994 with a $25,000,000 seed money investment by TIAA. TIAA purchased 1,000,000 Accumulation Units of SIA and such units share in the pro rata investment experience of SIA and are subject to the same valuation procedures and expense deductions as all other Accumulation Units in SIA. On November 14, 1994, TIAA began to offer Accumulation Units of SIA to participants other than TIAA. At December 31, 1995 and 1994, the number of units retained by TIAA in SIA were 2,685 and 1,000,000 with a total value of approximately $92,000 and $25,271,000, respectively.
The TIAA Real Estate Account ("REA") is a segregated investment account and was organized on February 22, 1995 under the insurance laws of the State of New York for the purpose of funding variable annuity contracts. REA was registered with the Commission under the Securities Act of 1933 effective October 2, 1995. REA will ultimately invest primarily in real estate and real estate-related investments (70% to 80% of total REA assets) as well as publicly-traded securities to maintain adequate liquidity.
REA was established on July 3, 1995 with a $100,000,000 seed money investment by TIAA. TIAA purchased 1,000,000 Accumulation Units of REA and such units share in the pro rata investment experience of REA and
II - 14
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 2--Significant Accounting Policies--(Continued)
are subject to the same valuation procedures and expense deductions as all other Accumulation Units in REA. On October 2, 1995, TIAA began to offer Accumulation Units of REA to participants other than TIAA. At December 31, 1995 the number of units retained by TIAA in REA remained at 1,000,000 with a total value of approximately $102,566,000.
Permitted Statutory Accounting Policies: Statutory accounting policies prescribed by the Department include accounting practices reflected in New York State Insurance Laws and Regulations as well as in NAIC publications. Permitted statutory accounting policies encompass all accounting practices which are allowed by the Department but have not been prescribed. TIAA does not utilize any statutory accounting practices which depart from prescribed statutory accounting practices; however, TIAA does follow certain permitted statutory accounting practices. The following permitted statutory accounting policies have been approved by the Department: inclusion of real estate subsidiaries and real estate limited partnerships in the Real Estate caption in the accompanying balance sheets; determination of permanent impairments; and netting of securities lending collateral against short-term investments.
The NAIC issued prescribed accounting requirements for loan-backed securities, including collateralized mortgage obligations ("CMO's"), in 1993. The new accounting requirements stipulated that loan-backed securities should be accounted for using the interest method. Under the interest method, actual and anticipated cash flows of a security are utilized to determine the carrying value of that security. TIAA elected the prospective method for determining yields and carrying values for interest-only CMO's and the retrospective method for all other CMO's.
Certain provisions of these statutory accounting policies were required to be implemented in 1994; the remaining provisions were required for 1995. TIAA implemented the required provisions of the new accounting policies in 1994 and also adopted the provisions in 1994 for TIAA's public market CMO portfolio. This early adoption for public market CMO's represented a permitted accounting practice which was also approved by the Department. The required provisions of the new accounting policies for TIAA's private market CMO portfolio were implemented in 1995. The effect of this change in accounting in 1995 and 1994 was to increase contingency reserves by approximately $11 million and $50 million, respectively.
Generally Accepted Accounting Principles: The Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 40, entitled "Applicability of Generally Accepted Accounting Principles to Mutual Life Insurance and Other Enterprises" ("Interpretation"), in April 1993. The Interpretation clarifies that financial statements that are intended to be in conformity with generally accepted accounting principles should follow all authoritative accounting pronouncements except to the extent that a pronouncement explicitly exempts a particular type of enterprise or that enterprise does not have the transaction, event, or circumstance addressed in the pronouncement. The Interpretation, as amended, is effective for financial statements issued for fiscal years beginning after December 15, 1995.
The effect of the Interpretation will be that TIAA (and mutual life insurance and other enterprises) will not be permitted to refer to financial statements prepared in accordance with statutory accounting practices as having
II - 15
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 2--Significant Accounting Policies--(Concluded)
been prepared in accordance with generally accepted accounting principles ("GAAP") beginning in 1996. If TIAA elects to prepare GAAP financial statements, the effect of initially applying the Interpretation will be reported retroactively through restatement of all financial statements presented for comparative purposes, with the cumulative effect of adopting the Interpretation included in the earliest year restated. TIAA has analyzed those requirements of GAAP which differ from statutory accounting practices and is in the process of quantifying the effects of the potential application of the Interpretation on its financial statements.
Reclassifications: Certain amounts in the 1994 financial statements have been reclassified to conform with the 1995 presentation.
II - 16
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 3--Investments
Securities Investments: At December 31, 1995 and 1994, the carrying values (balance sheet amounts) and estimated market values of long-term bond investments, and gross unrealized gains and losses with respect to such market values, are shown below:
Gross Gross
Carrying Unrealized Unrealized Estimated
December 31, 1995 Value Gains Losses Market Value
- -------------------------------- ------------ ------------ ------------ -------------
U.S. Treasury securities and
obligations of U.S. government
agencies and corporations $ 805,105,863 $ 195,202,463 $ 1,000,308,326
Debt securities issued by
foreign governments 1,456,997,622 226,995,685 $ 1,494,536 1,682,498,771
Corporate securities 28,094,698,003 2,942,081,089 78,607,386 30,958,171,706
Mortgage-backed securities 15,163,886,154 1,547,907,663 45,110,081 16,666,683,736
Asset-backed securities 3,315,143,416 317,275,533 4,448,112 3,627,970,837
--------------- -------------- ------------ ---------------
Total $48,835,831,058 $5,229,462,433 $129,660,115 $53,935,633,376
=============== ============== ============ ===============
|
Gross Gross
Carrying Unrealized Unrealized Estimated
December 31, 1994 Value Gains Losses Market Value
- -------------------------------- ------------ ------------ ------------ -------------
U.S. Treasury securities and
obligations of U.S. government
agencies and corporations $ 867,096,984 $ 4,361,537 $ 170,252,620 $ 701,205,901
Debt securities issued by
foreign governments 1,468,763,896 25,553,121 92,875,437 1,401,441,580
Corporate securities 27,531,583,866 590,403,140 1,340,430,128 26,781,556,878
Mortgage-backed securities 11,307,671,148 302,144,903 1,064,037,897 10,545,778,154
Asset-backed securities 2,603,401,722 31,766,572 179,575,622 2,455,592,672
--------------- ------------ -------------- ---------------
Total $43,778,517,616 $954,229,273 $2,847,171,704 $41,885,575,185
=============== ============ ============== ===============
|
At December 31, 1995 and 1994, approximately 94.9% and 94.3%, respectively, of the long-term bond portfolio was comprised of investment grade securities. At December 31, 1995, outstanding forward commitments for future long-term bond investments approximated $1,281,939,000. It is estimated that $1,275,173,000 will be disbursed in 1996 and $6,766,000 in later years. The funding of bond commitments is contingent upon the continued favorable financial performance of the potential borrowers. Debt securities amounting to approximately $237,943,000 and $210,889,000 at December 31, 1995 and 1994, respectively, were on deposit with governmental authorities or trustees as required by law.
The carrying values and estimated market values of long-term bond investments at December 31, 1995, by contractual maturity, are shown below:
II - 17
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 3--Investments--(Continued)
Carrying Estimated
Value Market Value
------------ -------------
Due in one year or less $ 429,714,344 $ 433,016,648
Due after one year through five years 3,546,510,594 3,816,740,001
Due after five years through ten
years 11,965,866,370 12,939,511,409
Due after ten years 14,414,710,180 16,451,710,745
--------------- ---------------
Subtotal 30,356,801,488 33,640,978,803
Mortgage-backed securities 15,163,886,154 16,666,683,736
Asset-backed securities 3,315,143,416 3,627,970,837
--------------- ---------------
Total $48,835,831,058 $53,935,633,376
=============== ===============
|
Bonds not due at a single maturity date have been included in the preceding table based on the year of final maturity. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations, although prepayment premiums may be applicable.
At December 31, 1995 and 1994, the carrying values of long-term bond investments were diversified by industry classification as follows:
1995 1994
----- ------
Mortgage-backed securities 31.1% 25.8%
Public utilities 15.5 18.3
Manufacturing 14.0 15.0
Finance and financial
services 8.8 9.7
Asset-backed securities 6.8 6.0
Government 5.7 5.5
Retail and wholesale trade 5.1 5.1
Communications 4.3 5.6
Oil and gas 3.9 4.2
Other 4.8 4.8
----- ------
Total 100.0% 100.0%
===== ======
|
II - 18
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 3--Investments--(Continued)
The approximate carrying values and market values of debt securities loaned and the cash collateral received in connection therewith were as follows:
Carrying Market Cash
Value Value Collateral
----------- ----------- -------------
December 31,
1995 $1,345,534,000 $1,410,965,000 $1,482,603,000
December 31,
1994 $1,036,779,000 $ 957,529,000 $ 993,763,000
|
At December 31, 1995 and 1994, TIAA had interest rate swap contracts with commercial banks related to $110,000,000 and $105,000,000, respectively, par value of bonds. At December 31, 1995 and 1994, TIAA had asset swap contracts outstanding related to $245,462,000 and $115,211,000, respectively, of investments denominated in foreign currencies. The net change in unrealized losses on such asset swap contracts were approximately $(1,099,000) and $(7,635,000) for the years ended December 31, 1995 and 1994, respectively. During 1995, TIAA wrote two covered call options related to $13,500,000 par value of bonds and received premiums of approximately $142,000. The options were exercised and the premiums were recorded as additional proceeds on the dispositions. There were no outstanding covered call options at December 31, 1995.
Mortgage Loan and Real Estate Investments: TIAA makes mortgage loans, principally collateralized by commercial real estate, and direct investments in real estate. TIAA's mortgage underwriting standards generally limit mortgage investments to first mortgage liens on completed income-producing properties for which the loan-to-value ratio at the time of closing generally ranges between 65% and 75%. Current real estate market conditions in certain regions of the country are characterized by above-normal but improving vacancy rates and reduced but stabilizing real estate values. TIAA employs a system to monitor the effects of current and expected market conditions and other factors on the collectability of mortgage loans and the realizability of real estate investments. This system is utilized to identify and quantify any permanent impairments in value and to determine the appropriate level of mortgage and real estate reserves in the AVR.
II - 19
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 3--Investments--(Continued)
At December 31, 1995 and 1994, the carrying values of mortgage loan investments were diversified by property type and geographic region as follows:
Property Type 1995 1994
- ------------- ----- -------
Office buildings 41.1% 41.6%
Shopping centers 30.6 31.1
Mixed-use projects 9.9 10.4
Apartments 8.1 6.2
Hotels 4.6 4.7
Industrial buildings 3.9 4.1
Other 1.8 1.9
----- ------
Total 100.0% 100.0%
===== ======
Geographic Region
- -----------------
West 29.2% 30.1%
Northeast 23.1 22.7
Midwest 20.4 20.3
Southeast 17.1 17.5
Southwest/Plains 10.2 9.4
----- ------
Total 100.0% 100.0%
===== ======
|
At December 31, 1995 and 1994, approximately 24% and 26%, respectively, of the mortgage portfolio was invested in California and is included in the West region shown above.
At December 31, 1995, the contractual maturity schedule of mortgage loans is shown below:
Carrying
Value
-------------
Due in one year or less $ 1,628,678,100
Due after one year through five years 4,111,058,868
Due after five years through ten years 7,996,176,192
Due after ten years 7,264,366,170
---------------
Total $21,000,279,330
===============
|
Actual maturities may differ from contractual maturities because borrowers may have the right to prepay mortgage loans, although prepayment premiums may be applicable.
At December 31, 1995, outstanding forward commitments for future mortgage loan investments approximated $1,546,060,000, including commitments under litigation. Of this, $840,814,000 is scheduled for disbursement in 1996, $92,003,000 in 1997, $84,200,000 in 1998 and $529,043,000 in later years. The funding of mortgage loan commitments is contingent upon the underlying properties meeting specified construction, leasing, occupancy and other requirements. Of the total commitments scheduled for disbursement in 1996, $250,000,000 is related to a mortgage loan refinancing which occurred in 1993. In connection with the refinancing, a third party made a five year, interest-only loan to a TIAA borrower and the borrower made a partial repayment to TIAA. TIAA made
II - 20
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 3--Investments--(Continued)
a one year forward commitment to loan $250,000,000 to the borrower. The loan commitment may be extended, at TIAA's option, for additional one year periods, up to a total of five years, provided that the borrower's first mortgage to the third party is not in default at the time the loan commitment is extended. The loan commitment has been extended to 1996.
At December 31, 1995, 1994 and 1993, the aggregate carrying values of mortgages with restructured or modified terms, as defined by generally accepted accounting principles, were approximately $872,377,000, $913,551,000 and $771,038,000, respectively. For the years ended December 31, 1995, 1994 and 1993, the investment income earned on such mortgages was approximately $57,142,000, $41,643,000 and $47,003,000, respectively, which would have been approximately $96,625,000, $101,394,000 and $86,406,000, respectively, if they had performed in accordance with their original terms. When restructuring mortgage loans, TIAA generally requires participation features, yield maintenance stipulations, and/or the establishment of property specific escrow accounts funded by the borrowers.
At December 31, 1995 and 1994, the carrying values or real estate investments were diversified by property type and geographic region as follows:
Property Type 1995 1994
- ------------- ----- -------
Office buildings 61.7% 60.4%
Shopping centers 15.2 15.9
Mixed-use projects 7.3 6.2
Industrial buildings 3.4 4.0
Income-producing land underlying improved real
estate 3.3 3.4
Land held for future development 2.0 2.0
Apartments 0.7 2.0
Other 6.4 6.1
----- ------
Total 100.0% 100.0%
===== ======
Geographic Region
- -----------------
Midwest 34.8% 39.1%
Southeast 24.7 21.8
West 16.2 16.3
Northeast 14.2 13.9
Southwest/Plains 10.1 8.9
----- -----
Total 100.0% 100.0%
===== =====
|
At December 31, 1995 and 1994, approximately 12% and 13%, respectively, of the real estate portfolio was invested in Minnesota and is included in the Midwest region shown above; for both years, approximately 12% was invested in California and is included in the West region shown above.
At December 31, 1995, outstanding forward commitments for future real estate investments approximated $291,444,000. Under these commitments, it is estimated that $261,022,000 will be disbursed in 1996 and $30,422,000 in later years. The funding of real estate investment commitments is contingent upon the properties meeting specified construction, leasing, occupancy and other requirements.
II - 21
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 3--Investments--(Concluded)
Depreciation expense on real estate investments for the years ended December 31, 1995, 1994 and 1993, was approximately $98,198,000, $84,872,000 and $70,881,000, respectively; the amount of accumulated depreciation at December 31, 1995 was approximately $529,939,000.
Asset Valuation Reserves: The AVR balances at December 31, 1995 and 1994 were comprised of the following asset-specific reserves:
1995 1994
----------- -------------
Bonds and preferred
stock $ 673,859,636 $ 650,783,617
Mortgages 564,444,067 578,989,017
Real Estate 495,577,164 389,347,850
Common stock 62,372,040 22,592,888
Other invested assets 64,614,984 22,982,326
-------------- --------------
Total $1,860,867,891 $1,664,695,698
============== ==============
|
Note 4--Investment Income and Capital Gains and Losses
Net Investment Income: For the years ended December 31, 1995, 1994 and 1993, the components of net investment income were as follows:
1995 1994 1993
----------- ----------- -------------
Gross Investment Income:
Bonds $4,113,077,743 $3,591,625,656 $3,146,653,149
Mortgages 1,688,836,730 1,613,072,996 1,813,370,120
Real Estate (net of property
expenses,
taxes and depreciation) 279,016,562 298,290,866 222,457,480
Stocks 24,460,434 12,296,076 9,928,302
Other long-term investments 16,706,459 10,794,114 8,530,439
Cash and short-term investments 52,050,980 37,997,294 42,629,115
Other 8,500,640 9,894,077 6,082,027
-------------- -------------- --------------
Total 6,182,649,548 5,573,971,079 5,249,650,632
Less investment expenses (112,287,010) (102,523,873) (103,129,901)
-------------- -------------- --------------
Net investment income before
amortization of net IMR gains 6,070,362,538 5,471,447,206 5,146,520,731
Plus amortization of net IMR gains 38,134,446 14,624,032 17,485,464
-------------- -------------- --------------
Net investment income $6,108,496,984 $5,486,071,238 $5,164,006,195
============== ============== ==============
|
Participation income received on securities, mortgages and real estate included in the above table was approximately $28,088,000, $27,488,000 and $24,015,000 in 1995, 1994 and 1993, respectively.
II - 22
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 4--Investment Income and Capital Gains and Losses--(Concluded)
The net earned rates of investment income on total invested assets (computed as net investment income before amortization of net IMR gains divided by mean invested assets) were 8.29%, 8.11% and 8.32% in 1995, 1994 and 1993, respectively.
Future rental income expected to be received during the next five years under existing real estate leases in effect as of December 31, 1995 is approximately $491,476,000 in 1996, $430,958,000 in 1997, $368,419,000 in 1998, $311,099,000 in 1999 and $246,027,000 in 2000.
Realized Capital Gains and Losses: For the years ended December 31, 1995, 1994 and 1993, the net realized capital gains (losses) on sales, redemptions and writedowns of investments computed under the specific identification method were as follows:
1995 1994 1993
----------- ----------- --------------
Bonds $ 32,698,203 $ 23,169,838 $ 84,338,721
Mortgages (204,033,034) (103,763,171) (137,342,068)
Real Estate 99,207,556 (24,555,825) 5,859,835
Stocks 9,808,562 5,435,716 (8,149,796)
Other long-term investments 7,885,199 1,550,624 19,014,949
Cash and short-term investments (758,274) 2,377,735 (148,608)
Other 1,360,695 714,129 538
------------- ------------- --------------
Total realized gains (losses)
before capital gains tax (53,831,093) (95,070,954) (36,426,429)
Less capital gains tax (2,433,800) 0 0
------------- ------------- --------------
Total $ (56,264,893) $ (95,070,954) $ (36,426,429)
============= ============= ==============
|
Proceeds from sales and redemptions of long-term bond investments during 1995, 1994 and 1993 were approximately $3,822,394,000, $3,685,078,000 and $6,391,828,000, respectively. Gross gains of approximately $122,093,000, $96,579,000 and $358,273,000 and gross losses of approximately $49,736,000, $75,097,000 and $75,475,000 were realized on these sales and redemptions during 1995, 1994 and 1993, respectively.
Unrealized Capital Gains and Losses: For the years ended December 31, 1995, 1994 and 1993, the net changes in unrealized capital gains (losses) on investments, resulting in a net increase (decrease) in the valuation of investments, were as follows:
1995 1994 1993
----------- ----------- -------------
Bonds $ 51,534,565 $ 64,026,744 $ 18,250,130
Mortgages (1,807,561) (3,125,696) (6,673,961)
Real Estate (42,391,326) (37,141,679) (67,998,555)
Stocks 26,290,762 19,432,861 27,435,407
Other long-term investments 23,553,601 8,458,998 (7,607,109)
Cash and short-term
investments 0 1,285,511 (762,703)
Other (4,473,932) (14,029,803) (2,661,736)
------------ ------------ -------------
Total $ 52,706,109 $ 38,906,936 $(40,018,527)
============ ============ =============
|
II - 23
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 5--Disclosures About Fair Value of Financial Instruments
The estimated fair value amounts of financial instruments presented in the following tables have been determined by TIAA using market information available as of December 31, 1995 and 1994, and appropriate valuation methodologies. However, considerable judgment is necessarily required to interpret market data in developing the estimates of fair value for financial instruments for which there are no available market value quotations. The estimates presented are not necessarily indicative of the amounts TIAA could have realized in a market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
Notional Carrying Estimated
December 31, 1995 Amount Value Fair Value
- ----------------- ----------- ------------ --------------
Assets
Bonds $48,835,831,058 $53,935,633,376
Mortgages 21,000,279,330 22,600,402,237
Stocks 223,028,483 223,028,483
Cash and short-term investments 713,051,046 713,051,046
Policy loans 134,538,623 134,538,623
Liabilities
Teachers Personal Annuity--Fixed
Account 580,720,683 580,720,683
Other financial instruments
Asset swap contracts $238,063,450 (7,398,975) (27,116,738)
Interest rate swap contracts 110,000,000 15,152,000
Stock warrants 6,532,500
December 31, 1994
- -----------------
Assets
Bonds $43,778,517,616 $41,885,575,185
Mortgages 20,216,879,404 19,627,287,444
Stocks 163,284,129 163,284,129
Cash and short-term investments 431,445,982 431,445,982
Policy loans 97,262,920 97,262,920
Liabilities
Teachers Personal Annuit--Fixed
Account 358,987,888 358,987,888
Other financial instruments
Asset swap contracts $108,911,004 (6,300,443) (12,348,000)
Interest rate swap contracts 105,000,000 2,813,000
Stock warrants 1,722,000
|
II - 24
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 5--Disclosures About Fair Value of Financial Instruments--(Concluded)
Bonds: Fair values for publicly traded long-term bond investments were determined using quoted market prices. For privately placed long-term bond investments without a readily ascertainable market value, such values were determined with the assistance of an independent pricing service utilizing a discounted cash flow methodology based on coupon rates, maturity provisions and assigned credit ratings. The aggregate carrying values and estimated fair values of publicly traded and privately placed bonds at December 31, 1995 and 1994 were as follows:
1995 1994
---------------------------- ------------------------------
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
------------ ------------ ------------ --------------
Publicly traded bonds $28,152,735,556 $31,029,476,823 $25,330,827,112 $24,008,853,534
Privately placed bonds 20,683,095,502 22,906,156,553 18,447,690,504 17,876,721,651
--------------- --------------- --------------- ----------------
Total $48,835,831,058 $53,935,633,376 $43,778,517,616 $41,885,575,185
=============== =============== =============== ================
|
Mortgages: The fair value of mortgages was determined with the assistance of an independent pricing service utilizing a discounted cash flow methodology based on coupon rates, maturity provisions and assigned credit ratings.
Stocks, Cash and Short-Term Investments, and Policy Loans: The carrying values are reasonable estimates of fair values.
Teachers Personal Annuity-Fixed Account: The carrying values of the liabilities are reasonable estimates of fair values.
Asset Swap Contracts: The fair value of asset swap contracts (used for hedging purposes) is the estimated net gain or (loss) that TIAA would record if the asset swaps were liquidated at year-end. The fair value of asset swap contracts was estimated by external institutions, including our counterparties, based on future cash flows and anticipated exchange relationships, and such values were reviewed internally for reasonableness.
Interest Rate Swap Contracts: The fair value of interest rate swap contracts (used for hedging purposes) is the estimated net gain or (loss) that TIAA would record if the interest rate swaps were liquidated at year-end. The swap agreements have no carrying value. The fair value of interest rate swap contracts was estimated internally using modeling software developed by independent third parties.
Stock Warrants: The fair value of stock warrants represents the excess of the market value of the related stock over the exercise price associated with the stock warrant. The stock warrants have no carrying value.
Commitments to Extend Credit or Purchase Investments: TIAA does not charge commitment fees on these agreements, and the related interest rates reflect market levels at the time of the commitments.
Insurance and Annuity Contracts: TIAA's insurance and annuity contracts, other than the Teachers Personal Annuity - Fixed Account disclosed above, entail mortality risks and are, therefore, exempt from the fair value disclosure requirements related to financial instruments.
II - 25
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 6--Management Agreements
All services necessary for the operation of College Retirement Equities Fund (CREF), a companion organization, are provided, at cost, by two subsidiaries of TIAA, TIAA-CREF Investment Management, Inc. ("Investment Management") and TIAA-CREF Individual & Institutional Services, Inc. ("Services"), which provide investment advisory, administrative and distribution services for CREF. Such services are provided in accordance with an Investment Management Services Agreement between CREF and Investment Management, and in accordance with a Principal Underwriting and Administrative Services Agreement between CREF and Services. Investment Management is registered with the Commission as an investment adviser; Services is registered with the Commission as a broker-dealer and is a member of the National Association of Securities Dealers, Inc. Investment Management and Services receive management fee payments from each CREF account on a daily basis according to formulas established each year with the objective of keeping the management fees as close as possible to each account's actual expenses. Any differences between actual expenses and the management fees are adjusted quarterly. Such fees and the equivalent allocated expenses, which amounted to approximately $226,645,000, $199,396,000 and $171,411,000 in 1995, 1994 and 1993, respectively, are not included in the statements of operations and had no effect on TIAA's operations.
All services necessary for the operation of REA are provided, at cost, by TIAA and Services. TIAA provides investment management services for REA, while distribution and administrative services are provided by Services in accordance with a Distribution and Administrative Services Agreement between REA and Services. TIAA also provides a liquidity guarantee to REA, for a fee, to ensure that funds are available to meet participant transfer and cash withdrawal requests in the event that REA'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 REA on a daily basis to TIAA and Services according to formulas established annually. Any differences between actual expenses and daily charges are adjusted quarterly.
Teachers Advisors, Inc. ("Advisors"), a subsidiary of TIAA VA Holdings, Inc. ("Holdings"), which is itself a wholly-owned subsidiary of TIAA, provides investment advisory services for VA-1 in accordance with an Investment Management Agreement between TIAA, Advisors and VA-1. TIAA provides all administrative services for VA-1 in accordance with an Administrative Services Agreement with VA-1 and also receives a fee for assuming certain mortality and expense risks. Teachers Personal Investors Services, Inc. ("TPIS"), a subsidiary of Holdings, distributes contracts for VA-1. Expense deductions are made from VA-1 on a daily basis. Advisors is registered with the Commission as an investment adviser; TPIS is registered with the Commission as a broker-dealer and is a member of the National Association of Securities Dealers, Inc.
II - 26
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 7--Pension Plan and Postretirement Benefits
TIAA maintains a qualified, noncontributory defined contribution pension plan covering substantially all employees. All pension plan liabilities are fully funded through individually owned retirement annuity contracts. Contributions are made semi-monthly to each participant's contract based on a percentage of salary, with the applicable percentage varying by attained age. All contributions are fully vested for employees hired before 1988. For employees hired after 1987, contributions are vested after five years of service. Forfeitures arising from terminations prior to vesting are used to reduce future employer contributions. The accompanying statements of operations include contributions to the pension plan of approximately $19,467,000, $17,828,000 and $16,167,000 in 1995, 1994 and 1993, respectively.
In addition to the pension plan, TIAA provides certain other postretirement life and health insurance benefits to eligible retired employees who meet prescribed age and service requirements. The cost of such benefits reflected in the accompanying statements of operations were approximately $2,273,000, $2,307,000 and $1,641,000 for 1995, 1994 and 1993, respectively. TIAA also maintains a deferred compensation plan for non-officer trustees and members of the TIAA Board of Overseers. Under this plan, an eligible board member who has served at least five years is eligible for a single-sum payment upon leaving the board equal to 50% of the annual stipend in effect during the last term multiplied by the number of years of credited service, up to a maximum of 20 years.
Note 8--Unconsolidated Subsidiaries and Other Affiliates
TIAA's wholly-owned subsidiaries primarily involve real estate investment activities and are primarily included in real estate assets on the accompanying balance sheets. At December 31, 1995 and 1994, the carrying values of TIAA's investments in real estate subsidiaries were approximately $4,599,673,000 and $4,963,164,000, respectively. Subsidiary assets, liabilities and gross rental income, of real estate subsidiaries, as of and for the years ended December 31, 1995 and 1994, were approximately as follows:
1995 1994
----------- -------------
Assets $5,523,739,000 $5,893,047,000
Liabilities 981,438,000 926,695,000
Gross rental
income 841,970,000 804,576,000
|
Earnings from primarily real estate subsidiaries in 1995, 1994 and 1993, of approximately $164,676,000, $210,302,000 and $166,144,000, respectively, are included in net investment income in the accompanying statements of operations.
Some of the real estate subsidiaries referred to above are partners in joint ventures. At December 31, 1995 and 1994, the carrying values of TIAA real estate subsidiaries that are partners in joint ventures were approximately $2,371,931,000 and $2,945,089,000. Joint venture total assets, liabilities and gross rental income, as of and for the years ended December 31, 1995 and 1994, were approximately as follows:
II - 27
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
NOTES TO FINANCIAL STATEMENTS--(Concluded)
Note 8--Unconsolidated Subsidiaries and Other Affiliates--(Concluded)
1995 1994
----------- -------------
Assets $3,437,761,000 $3,770,043,000
Liabilities 1,233,262,000 746,584,000
Gross rental income 608,507,000 550,225,000
|
The subsidiaries' equity share in these assets, liabilities and gross rental income were approximately as follows:
1995 1994
----------- -------------
Assets $3,307,523,000 $3,549,882,000
Liabilities 937,673,000 621,281,000
Gross rental income 551,259,000 486,563,000
|
Net income earned by the subsidiaries from joint venture investments was approximately $60,689,000, $92,342,000 and $48,299,000 in 1995, 1994 and 1993, respectively. Some of the real estate joint ventures have mortgage loans from TIAA. At December 31, 1995 and 1994, the unpaid principal of such mortgage loans was approximately $826,216,000 and $539,769,000, respectively.
Note 9--Contingencies
It is the opinion of management that any liabilities which might arise from litigation, state guaranty fund assessments, and other matters, over and above amounts already provided for in the financial statements, are not considered material in relation to TIAA's financial position or the results of its operations.
Note 10--Subsequent Event
Effective January 1, 1996, TIAA ceased conducting insurance and annuity operations in Canada and reinsured all existing business with an independent third party insurer under an assumption reinsurance agreement. Under this agreement, TIAA transferred approximately $129 million (US) of assets to the independent third party insurer, and, under the reinsurance agreement, this transfer released all of TIAA's Canadian policy reserves and other liabilities. TIAA will have no continuing material obligation associated with its withdrawal from the Canadian insurance market.
II - 28
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, TIAA Real Estate Account, has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in New York, New York, on the 24th day of April, 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
|
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons, trustees and officers of Teachers Insurance and Annuity Association of America, in the capacities and on the dates indicated.
/s/ John H. Biggs
- ---------------------- Chairman of the Board and Chief Executive 4-24-96
John H. Biggs Officer (Principal Executive Officer)
/s/ Thomas W. Jones
- ----------------------
Thomas W. Jones Vice Chairman, President and Chief 4-24-96
Operating Officer (Principal Financial
Officer) and Trustee
/s/ Richard L. Gibbs
- ----------------------
Richard L. Gibbs Executive Vice President 4-24-96
(Principal Accounting Officer)
|
II - 29
Signature of Trustee Date Signature of Trustee Date
- -------------------- ---- -------------------- ----
/s/ Martin L. Leibowitz 4-24-96 /s/ Frederick R. Ford 4-24-96
- ----------------------------- --------------------------
Martin L. Leibowitz Frederick R. Ford
/s/ David Alexander 4-24-96
- ----------------------------- --------------------------
David Alexander Ruth Simms Hamilton
/s/ Marcus Alexis 4-24-96 /s/ Dorothy Ann Kelly 4-24-96
- ----------------------------- --------------------------
Marcus Alexis Dorothy Ann Kelly, O.S.U.
/s/ A. Howard Amon, Jr. 4-24-96 /s/ Ronald L. Thompson 4-24-96
- ----------------------------- --------------------------
A. Howard Amon, Jr. Ronald L. Thompson
/s/ Jenne K. Britell 4-21-96 /s/ Robert M. O'Neil 4-24-96
- ----------------------------- --------------------------
Jenne K. Britell Robert M. O'Neil
/s/ Willard T. Carleton 4-24-96 /s/ Leonard S. Simon 4-24-96
- ----------------------------- --------------------------
Willard T. Carleton Leonard S. Simon
/s/ Robert C. Clark 4-24-96 /s/ Paul R. Tregurtha 4-24-96
- ----------------------------- --------------------------
Robert C. Clark Paul R. Tregurtha
/s/ Flora Mancuso Edwards 4-24-96 /s/ Charles J. Urstadt 4-24-96
- ----------------------------- --------------------------
Flora Mancuso Edwards Charles J. Urstadt
/s/ William H. Waltrip 4-24-96
- ----------------------------- --------------------------
Estelle A. Fishbein William H. Waltrip
|
II - 30
[letterhead]
Deloitte &
Touche LLP [LOGO] Two World Financial Center Telephone: (212) 436-2000
New York, New York 10281-1414 Facsimile: (212) 436-5000
|
REPORT OF INDEPENDENT AUDITORS
To the Participants of the TIAA Real Estate Account and the Board of Trustees of Teachers Insurance and Annuity Association of America:
We have audited the financial statements of the TIAA Real Estate Account ("Account") of Teachers Insurance and Annuity Association of America ("TIAA") as of December 31, 1995, and for the period July 3, 1995 (commencement of operations) to December 31, 1995, and have issued our report thereon dated March 8, 1996 (included elsewhere in this Registration Statement). Our audit also included the financial statement schedule - Schedule III - Real Estate Owned. This financial statement schedule is the responsibility of the TIAA's management. Our responsibility is to express an opinion based on our audit. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
March 8, 1996
SCHEDULE III - REAL ESTATE OWNED
TIAA REAL ESTATE ACCOUNT
DECEMBER 31, 1995
Costs
Initial Cost Capitalized Value at Year
Encum- to Acquire Subsequent December 31, Construction Date
Description brances Property to Acquisition 1995 Completed Acquired
River Road Distribution Center $-0- $ 4,166,787 $-0- $ 4,166,787 1995 11/22/95
Industrial Building
Fridley, Minnesota (1)
The Greens At Metrowest -0- 12,490,895 -0- 12,490,895 1990 12/15/95
Apartments
Orlando, Florida (1)
Butterfield Industrial Park -0- 4,431,166 -0- 4,431,166 1980 12/22/95
Industrial Building
El Paso, Texas (2)
Brixworth Apartments -0- 15,574,647 -0- 15,574,647 1989 12/28/95
Apartments
Atlanta, Georgia (1)
Plantation Grove Shopping Center -0- 7,326,170 -0- 7,326,170 1995 12/28/95
Shopping Center
Ocoee, Florida (1)
____ ___________ ____ ____________
$-0- $43,989,665 $-0- $43,989,665
|
(1) Fee interest
(2) Leasehold interest
Reconciliation of investment property owned: Balance at beginning of period $ -- Acquisitions 43,989,665 Capital improvements and carrying costs -- Balance at end of period $43,989,665 |
DISTRIBUTION AND ADMINISTRATIVE SERVICES AGREEMENT
THIS AGREEMENT made this 29th day of September, 1995, by and between Teachers Insurance and Annuity Association of America, a nonprofit New York stock life insurance company ("TIAA"), on its own behalf and with respect to the TIAA Real Estate Account ("Real Estate Account"), and TIAA-CREF Individual & Institutional Services, Inc. ("T-C Services"), a Delaware non-profit corporation.
WITNESSETH:
WHEREAS, TIAA has established the Real Estate Account to segregate assets funding certain variable annuity contracts issued by TIAA and designed for use under retirement as tax-deferred annuity plans ("Contracts"), as well as other contracts that may be offered by TIAA in the future; and
WHEREAS, a registration statement for the Contracts has been filed with the Securities and Exchange Commission ("Commission") under the Securities Act of 1933, as amended (the "1933 Act"), and sales of the Contracts shall commence only after such registration statement becomes effective; and
WHEREAS, T-C Services is engaged principally in the business of distributing variable annuity contracts issued by TIAA and the College Retirement Equities Fund ("CREF"), and is registered as a broker-dealer under the Securities and Exchange Act of 1934 (the "1934 Act") and is a member of the National Associations of Securities Dealers, Inc. ("NASD"); and
WHEREAS, TIAA desires to retain T-C Services to distribute the Contracts and T-C Services is willing to distribute the Contracts in the manner and on the terms set forth herein.
NOW THEREFORE, in consideration of the promises and mutual covenants herein contained, the parties hereby agree as follows:
1. Distribution of the Contracts
(a) TIAA hereby grants to T-C Services the right, subject to the requirements of the 1933 Act and the 1934 Act, and the terms set forth herein, to distribute the Contracts during the term of this Agreement. T-C Services agrees to use its best efforts to distribute the Contracts, and to advise owners of Contracts in connection therewith.
(b) To the extent necessary to offer the Contracts, T-C Services shall be duly registered or otherwise qualified
under the securities laws of any state or other jurisdiction in which such Contracts may lawfully be sold and in which T-C Services is licensed or otherwise authorized to sell the Contracts. T-C Services shall be responsible for the training, supervision and control of its registered representatives for the purpose of the NASD Rules of Fair Practice and federal and state securities law requirements applicable in connection with the offer and sale of the Contracts. In this connection, T-C Services shall obtain written supervisory procedures in compliance with Section 27 of the NASD Rules of Fair Practice.
(c) T-C Services agrees to offer the Contracts for sale in accordance with the then-current prospectus therefor filed with the Commission.
(d) TIAA shall furnish T-C Services with copies of all prospectuses, financial statements and other documents which T-C Services reasonably requires for use in connection with the distribution of the Contracts. T-C Services will be entitled to rely on all documentation and information furnished to it by TIAA's management.
(e) It is understood that no payments made under the Contracts shall be paid or remitted to T-C Services.
2. Selling Agreements
T-C Services is hereby authorized to enter into separate written agreements, on such terms and conditions as T-C Services determines are not inconsistent with this Agreement, with such organizations that are related to TIAA or CREF that agree to participate as broker-dealers in the distribution of the Contracts and to use their best efforts to solicit applications for Contracts. Any such broker-dealer shall be both registered as a broker-dealer under the 1934 Act and a member of the NASD.
3. Books and Records
(a) TIAA and T-C Services shall cause to be maintained and preserved all required books of account and related financial records as are required by the 1934 Act, the NASD and any other applicable laws and regulations. All the books and records maintained by TIAA (on behalf of T-C Services) in connection with the offer and sale of the Contracts shall be maintained and preserved in conformity with the requirements of Rules 17a-3 and 17a-4 under the 1934 Act or the corresponding provisions of any future federal securities laws or regulations, to the extent that such requirements and applicable to sales of the Contracts. All such books and records shall be maintained and held by TIAA on behalf of and as agent for T-C Services, whose property they are and shall remain. Such books and records shall be at all times
subject to inspection by the Commission in accordance with Section 17(a) of the 1934 Act.
(b) T-C Services shall have the responsibility for maintaining the records of sales representatives licensed, registered and otherwise qualified to sell the Contracts.
4. Reports
T-C Services shall cause TIAA to be furnished with such reports as TIAA may reasonably request for the purpose of meeting reporting and recordkeeping requirements under the insurance laws of the State of New York and any other applicable states or jurisdictions.
5. Administrative Services
Subject to the supervision, direction and control of the Board of Trustees of TIAA and its Mortgage Committee, T-C Services will, directly or through its agents, perform all administrative services in connection with the operation of the Real Estate Account, other than such services as are provided in connection with the management of the Real Estate Account's assets. These services include allocating premiums and making annuity payments as they become due and related functions.
Nothing in this Section shall be construed to restrict T-C Services' ability, at its own expense, to hire its own employees or to contract for services to be performed by third parties.
6. Staff, Facilities and Services
TIAA shall provide T-C Services, at T-C Services' expense, the staff, facilities and services necessary to meet T-C Services' obligations hereunder in connection with the distribution of the Contracts. TIAA's providing of staff, facilities and services for such purpose shall in no way diminish any obligation or liability of T-C Services hereunder.
7. Expenses and Reimbursement
(a) T-C Services shall be responsible for all expenses in connection with furnishing distribution and administrative services with respect to the Real Estate Account. The Real Estate Account shall reimburse T-C Services for the cost of such services and the amount of such expenses through daily payments (as described below) based on the annual rate agreed upon from time to time between the Real Estate Account and T-C Services reflecting estimates of the cost of such services and expenses with the objective of keeping the payments as close as possible to actual expenses. As soon as is practicable after the end of
each quarter (usually within 30 days), the amount necessary to correct any differences between the payments and the expenses actually incurred will be determined. This amount will be paid by or credited to T-C Services, as the case may be, in equal daily installments over the remaining days in the quarter.
(b) T-C Services shall be responsible for all expenses relating to the distribution of the contracts, including but not limited to:
(i) the costs and expenses of providing the necessary facilities, personnel, office equipment and supplies, telephone services, and other utility services necessary to carry out its obligations hereunder;
(ii) charges and expenses of outside legal counsel retained with respect to activities related to the distribution of the Contracts;
(iii) the costs and expenses of underwriting and issuance of the Contracts;
(iv) the costs and expenses of printing definitive prospectuses and any supplements thereto for prospective purchasers;
(v) expenses incurred in connection with T-C Services' registration as a broker or dealer or in the registration or qualification of its officers, directors or representatives under federal or state securities laws;
(vi) the costs of promotional, sales and advertising material, and
(vii) any other expenses incurred by T-C Services or its representative in connection with performing the obligations of T-C Services under this Agreement.
Notwithstanding any other provisions of this Agreement, it is understood and agreed that TIAA shall at all times retain the ultimate responsibility for, and control of, all functions performed pursuant to this Agreement, and for marketing Contracts, and reserves the right to direct, approve or disapprove any action hereunder taken on its behalf by T-C Services.
(c) For the expenses incurred in connection with distribution of the Contracts as provided herein, the amount currently payable from the net assets of the Real Estate Account each Valuation Day for each Calendar Day of the Valuation Period ending on that Valuation Day will by .0000822% (corresponding to an annual rate of .03% of average daily net assets).
(d) For the expenses incurred in connection with administrative services as provided in Section 5 and otherwise herein, the amount currently payable from the net assets of each Account each Valuation Day for each Calendar Day of the Valuation Period ending on that Valuation Day will be .0005753% (corresponding to an annual rate of 0.21% of average daily net assets).
For the purposes of this Agreement, "Valuation Day," "Calendar Day," and "Valuation Period" shall each be defined as specified in the Real Estate Account's current Registration Statement.
8. Non-Exclusivity
TIAA agrees that the services to be provided to TIAA with respect to the Real Estate Account by T-C Services hereunder are not to be deemed exclusive, and T-C Services is free to act as distributor of other variable insurance products or investment company shares issued by TIAA or CREF, or any entity affiliated therewith. T-C Services shall, for all purposes herein, be deemed to be an independent contractor and shall, unless otherwise approved or authorized, have no authority to act for or represent TIAA or the Real Estate Account in any way or otherwise be deemed an agent of TIAA or the Real Estate Account other than in furtherance of its duties and responsibilities as set forth in this Agreement.
9. Liability
T-C Services will not be liable for any error of judgment or mistake of law or for any loss suffered by the Real Estate Account in connection with the matters to which this Agreement relates. Nothing herein contained shall be construed to protect T-C Services against any liability resulting from the willful misfeasance, bad faith, or gross negligence of T-C Services in the performance of its obligations and duties or from reckless disregard of its obligations and duties under this Agreement or by virtue of violation of any applicable law.
10. Regulation
(a) This Agreement shall be subject to the provisions of the 1933 Act and the 1934 Act, and the rules, regulations and rulings thereunder, and of the NASD, as in effect from time to time, including such exemptions and other relief as the Commission, its staff, or the NASD may grant, and the terms hereof shall be interpreted and construed in accordance therewith.
(b) T-C Services shall submit to all regulatory and administrative bodies having jurisdiction over the present and
future operations of the Real Estate Account, any information, reports or other material which any such body by reason of this Agreement may request or require pursuant to applicable laws or regulations. Without limiting the generality of the foregoing, T-C Services shall furnish the Commission, the State of New York Secretary of State and/or the Superintendent of Insurance with any information or reports which the Commission, the Secretary of State and/or the Superintendent of Insurance may request in order to ascertain whether the operations of the Real Estate Account are being conducted in a matter consistent with applicable laws or regulations.
11. Investigation and Procedures
(a) TIAA and T-C Services agree to cooperate fully in any insurance or securities regulatory inspection, inquiry, investigation or proceeding or any judicial proceeding with respect to TIAA, the Real Estate Account, or T-C Services, their affiliates and their representatives to the extent that such inspection, inquiry, investigation, or proceeding is in connection with the Contracts distributed under this Agreement.
(b) In the case of a customer complaint, TIAA and T-C Services will cooperate in investigating such compliant and shall arrive at a mutually satisfactory response.
12. Duration and Termination of the Agreement
(a) This Agreement shall become effective with respect to the Contracts as of the date first written above, and shall continue in effect indefinitely.
(b) This Agreement may be terminated, without the payment of any penalty, by TIAA or T-C Services on sixty (60) days' written notice to the other party. This Agreement shall automatically terminate in the event of its assignment. Upon termination of this Agreement, all authorizations, rights and obligations shall cease except the obligation to settle accounts hereunder and the agreements contained in paragraph 11 hereunder.
13. Further Actions
Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof.
14. Governing Law
The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of New York, as at the time in effect, and the applicable
provisions of federal laws and regulations which may be applicable. To the extent that the applicable laws of the State of New York, or any of the provisions herein, conflict with the applicable provisions of federal laws and regulations which may be applicable, the latter shall control.
15. Counterparts
This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall be deemed one instrument.
16. Notices
All notices and other communications provided for hereunder shall be in writing and shall be delivered by hand or mailed first class, postage prepaid, addressed as follows:
(a) If to TIAA:
Teachers Insurance and Annuity
Association of America
730 Third Avenue
New York, New York 10017-3206
Attention: Mr. John H. Biggs
(b) If to T-C Services:
TIAA-CREF Individual &
Institutional Services, Inc.
730 Third Avenue
New York, New York 10017-3206
Attention: Mr. John J. McCormack
or to such other address or individual as TIAA or T-C Services shall designate by written notice to the other.
17. Miscellaneous
(a) Captions in this Agreement are included for convenience or reference only and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect.
(b) If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers on the day and year first above written.
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By: /s/ Peter C. Clapman
------------------------------
Title: Senior Vice President
and Chief Counsel, Investments
ATTEST:
/s/ Lisa Snow
- ------------------------------
Secretary
|
TIAA-CREF INDIVIDUAL
& INSTITUTIONAL SERVICES, INC.
By: /s/ John J. McCormack
------------------------------
Title: President
ATTEST:
/s/ Lisa Snow
- -------------------------------
Secretary
|
AMENDMENT TO THE DISTRIBUTION AND
ADMINISTRATIVE SERVICES AGREEMENT
Amendment to the Distribution and Administrative Services Agreement (the "Agreement"), dated September 29, 1995 by and between Teachers Insurance and Annuity Association of America ("TIAA") on its own behalf and with respect to the TIAA Real Estate Account ("Real Estate Account"), and TIAA-CREF Individual and Institional Services, Inc. ("Services"). TIAA and Services mutually agree that upon execution of this Amendment, the Agreement shall be amended as set forth below:
Sections 7(c) and 7(d) of the Agreement are hereby amended to read as follows:
(c) For the expenses incurred in connection with distribution of the Contracts as provided herein, the amount currently payable from the net assets of the Real Estate Account each Valuation Day for each Calendar Day of the Valuation Period ending on that Valuation Day will by 0.0000822% (corresponding to an annual rate of 0.03% of average daily net assets).
(d) For the expenses incurred in connection with administrative services as provided in Section 5 and otherwise herein, the amount currently payable from the net assets of each Account each Valuation Day for each Calendar Day of the Valuation Period ending on that Valuation Day will be 0.00005479% (corresponding to an annual rate of 0.20% of average daily net assets).
IN WITNESS WHEREOF, TIAA and Services have caused this Amendment to the Agreement to be executed in their names and on their behalf as of this 16th day of April, 1996 by and through their duly authorized officers.
ATTEST TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
/s/Stewart Greene By:/s/Peter C. Clapman
- ---------------------------------- ----------------------------------
Assistant Secretary Title: Senior Vice President and
Chief Counsel, Investments
ATTEST TIAA-CREF INDIVIDUAL &
INSTITUTIONAL SERVICES, INC.
/s/Stewart Greene By: /s/Lisa Snow
- ---------------------------------- ----------------------------------
Assistant Secretary Title: Secretary
|
CHARTER
OF
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
Originally Filed March 4, 1918
As Amended September 29, 1989
ARTICLE ONE
This corporation shall be named "Teachers Insurance and Annuity Association of America."
ARTICLE TWO
The place where the corporation is to be located and have its principal office for the transaction of business is the City of New York, State of New York.
ARTICLE THREE
The corporation shall have power to do any and all kinds of business specified in paragraphs 1, 2 and 3 of Section 46 of the Insurance Law of the State of New York, being Chapter 882 of the Laws of 1939, as amended, and any amendments to such paragraphs or provisions in substitution therefor which may be hereafter adopted, provided the corporation is qualified under such amendments to do such kinds of business, together with any other kind or kinds of business to the extent necessarily or properly incidental to the kinds of insurance business which the corporation is so authorized to do. The corporation shall also have the general rights, powers and privileges of a corporation, as the same now or hereafter are declared by the applicable laws of the State of New York and any and all other rights, powers and privileges now or hereafter granted by the Insurance Law of the State of New York or any other law or laws of the State of New York to life insurance companies having power to do the kinds of business hereinabove referred to. The corporation shall transact its business exclusively on a non-mutual basis and shall issue only nonparticipating policies.
ARTICLE FOUR
The corporate powers of the corporation shall be vested in and exercised by a board of trustees, and by such officers and agents as the board of trustees may from time to time elect or appoint.
ARTICLE FIVE
Section 1. The board of trustees shall consist of four classes of trustees, each class to consist of five trustees, and the trustees of one class shall be elected at the annual election in each year, each to serve for a term of four years. The term of office of each trustee so elected shall commence at the close of the meeting of the board of trustees next succeeding such election, and shall continue until a successor shall take office. A majority of trustees shall be citizens and residents of the United States, and not
less than three trustees shall be residents of the State of New York. A trustee need not be a stockholder. The number of trustees shall in no case be less than the minimum number of incorporators required to organize a life insurance corporation.
Section 2. The annual meeting of stockholders for the election of trustees shall be held each year in the month of November on a date and at an hour specified by notice mailed at least thirty days in advance. Any vacancy in the board of trustees occurring in an interval between the annual meetings of stockholders may be filled for the unexpired portion of such trustee's term by the board of trustees in such manner as the bylaws of the corporation may provide.
Section 3. The board of trustees shall have power to adopt bylaws providing for the appointment of an executive committee, not less than three in number, to exercise all the powers of the trustees in the intervals between meetings of the board of trustees, and prescribing such other rules and regulations, not inconsistent with law or this charter, for the conduct of the affairs of the corporation as may be deemed expedient, and such bylaws may be amended or repealed by them at pleasure. The board of trustees shall also have all other powers usually vested in boards of directors of life insurance companies not inconsistent with law or this charter, and may at any time accept or exercise any and all additional powers and privileges which may be conferred upon this corporation, or upon life insurance companies in general. One-third of the trustees shall constitute a quorum at all meetings of the board.
ARTICLE SIX
The board of trustees, at each annual meeting, shall elect the executive officers of the corporation as provided in the bylaws. Other officers may be elected or appointed as provided in the bylaws. One person may hold more than one office, except that no person shall be both president and secretary. The chairman and the president shall be members of the board of trustees, but no other officer need be a trustee.
ARTICLE SEVEN
The capital of the corporation shall be Two Million Five Hundred Thousand Dollars ($2,500,000) which shall be divided into two thousand five hundred (2,500) shares of One Thousand Dollars ($1,000) each.
ARTICLE EIGHT
The purpose of the corporation is to aid and strengthen nonproprietary and nonprofit-making colleges, universities and other institutions engaged primarily in education or research by providing annuities, life insurance, and sickness and accident benefits suited to the needs of such institutions and of the teachers and other persons employed by them on terms as advantageous to the holders and beneficiaries of such contracts and policies as shall be practicable, and by counselling such institutions and their employees concerning pension plans or other measures of security, all without profit to the corporation or its stockholders. The corporation may receive gifts and bequests to aid it in performing such services.
ARTICLE NINE
The fiscal year of the corporation shall commence on the first day of January and shall end on the thirty-first day of December.
BYLAWS
OF
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
As Amended November 17, 1993
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 com-mittee 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.
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
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.
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. No committee shall include more than two officers or salaried employees of the Association.
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.
(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.
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.
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.
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.
EXHIBIT 4(A)
TEACHERS INSURANCE AND ANNUITY ASSOCIATION
730 Third Avenue, New York, N.Y. 10017-3206
Telephone: 800-842-2733
Endorsement to Your TIAA Retirement Annuity Contract
Effective Date: [October 2, 1995]
This document, called an "endorsement," changes some of the provisions
of your TIAA Retirement Annuity Contract and becomes part of it. It does not
take away any of the rights established under your current contract. It is
important that you read the endorsement, and attach it to your current contract.
In addition to the fixed-dollar Traditional Annuity previously provided
under your Retirement Annuity contract, TIAA now offers you the option of
accumulating funds in the Real Estate Account. The Real Estate Account is a
Separate Account of TIAA and is available as of the effective date of this
endorsement. Its investment objective is a favorable rate of return over the
long term primarily through rental income and capital appreciation of real
estate investments owned by the Account. The Real Estate Account holds mainly
income-producing real estate properties and other real estate-related
investments. The annual charge for the Real Estate Account will never exceed
2.50% of the Account's average net assets.
From now on, unless we indicate otherwise, any references in your
contract to your TIAA "Accumulation" should be understood to mean the total
amount you have in the Traditional Annuity and the Real Estate Account combined.
When we're referring to one or the other, we'll specify it as your "Traditional
Annuity Accumulation" or your "Real Estate Account Accumulation".
You can allocate your future TIAA premiums to either the Traditional
Annuity or the Real Estate Account as described in this endorsement. When you
apply a premium to your Real Estate Account Accumulation, you'll purchase a
number of Accumulation Units representing a share in the Real Estate Account's
investment portfolio. You can transfer or withdraw some or all of your Real
Estate Account Accumulation subject to the limitations described in this
endorsement.
Your Traditional Annuity Accumulation will continue to be credited with
a guaranteed interest rate and any Additional Amounts declared by the TIAA Board
of Trustees. The earnings on your Real Estate Account Accumulation, if any, will
vary depending on investment results. Neither earnings nor the value of your
invested principal in the Real Estate Account are guaranteed, and the value of
the units you own may at any time be more or less than you paid for them.
If you have any questions about this contract or need help to resolve a problem,
you can contact us at the address or phone number above.
(Signature of John H. Biggs)
(Specimen Stamped)
Chairman and
Chief Executive Officer
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INDEX OF IMPORTANT TERMS AND PROVISIONS
Page
Accumulations
Real Estate Account.....................................E5
Traditional Annuity.....................................E3
Accumulation Units
Number of...............................................E5
Definition..............................................E5
Additional Amounts...............................................E4
Business Day.....................................................E3
Compliance with Laws and Regulations.............................E8
Death Benefit
Amount of...............................................E6
Payment of..............................................E6
Funding Vehicle..................................................E3
General Account..................................................E3
Income Benefit - Amount of.......................................E6
Income Options...................................................E6
Interest Payment and Retirement Annuity..........................E6
Net Investment Factor............................................E5
Premiums - Allocation of.........................................E4
Rate Schedule
Benefits bought under...................................E9
Change in...............................................E8
Definition..............................................E4
Retirement Plan..................................................E3
Separate Account
Charge..................................................E5
Definition..............................................E3
Deletion of.............................................E8
Insulation of...........................................E8
Transfers
Real Estate Account.....................................E7
Traditional Annuity.....................................E7
Valuation Day and Valuation Period ..............................E3
Spouse's Rights..................................................E8
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The term Accumulation is replaced with the following two terms:
Your Accumulation is equal to the sum of your Traditional Annuity Accumulation and your Real Estate Account Accumulation. Your Traditional Annuity Accumulation is guaranteed to earn interest at the rates described in your contract's Rate Schedule. Your Real Estate Account Accumulation is not guaranteed and you bear its investment risk. Your Accumulation will provide the benefits described in your contract.
Your Traditional Annuity Accumulation is the sum of:
A) all premiums allocated to the Traditional Annuity under your contract; plus
B) interest credited to the Traditional Annuity under the terms of your contract; plus
C) any Additional Amounts credited to the Traditional Annuity under your contract; plus
D) any Transfers to the Traditional Annuity under your contract; less
E) the amount of any Traditional Annuity Accumulation moved to a Transfer Payout Annuity; less
F) any charge for expenses and contingencies set forth in the Rate Schedule.
The following Terms Used in This Contract are added:
The General Account consists of all of TIAA's assets other than those in Separate Accounts.
Separate Account. All premiums credited to the Real Estate Account become part of a Separate Account. The Real Estate Separate Account is designated as VA-2 and was established by TIAA in accordance with New York law to provide benefits under this and other contracts. The assets and liabilities of Separate Account VA-2 are segregated from the assets and liabilities of the General Account.
A Business Day is any day that the New York Stock Exchange is open for trading. A Business Day ends at 4:00 p.m. Eastern time, or when trading closes on the New York Stock Exchange, if earlier.
A Valuation Day is any business day, as well as the last calendar day of each month. A Valuation Period is the time from the end of a valuation day to the end of the next valuation day.
A Retirement Plan is an employer's plan, qualifying under IRC Section
401(a), 403(a), or 403(b) for providing retirement benefits for
employees.
A Funding Vehicle is an annuity or an investment fund established to
provide retirement benefits from monies remitted under a Retirement
Plan.
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The Additional Amounts provision is replaced with the following:
Additional Amounts. TIAA may credit Additional Amounts to the Traditional Annuity under your contract. TIAA does not guarantee that there will be Additional Amounts. TIAA will determine at least annually if Additional Amounts will be credited.
Any Additional Amounts credited to your Traditional Annuity Accumulation will buy benefits for you based on the Rate Schedule in effect on the day the Additional Amounts are credited. Additional Amounts may also be paid with any Traditional Annuity benefits payable to you or your beneficiary.
Any Additional Amounts will be credited under a schedule of Additional Amount rates declared by TIAA. For a Traditional Annuity Accumulation in force as of the effective date of such a schedule, the Additional Amount rates will not be modified for a period of twelve months following the schedule's effective date. For any premiums, any Additional Amounts, and any transfers applied to the Traditional Annuity during the twelve-month period described in the preceding sentence, TIAA may declare Additional Amounts at rates which remain in effect through the end of such twelve-month period. Thereafter, any Additional Amount rates declared for such premiums, Additional Amounts and transfers will remain in effect for periods of twelve months or more.
The term Rate Schedule is replaced with the following:
The Rate Schedule is the part of the contract that sets forth the bases
for computing the Traditional Annuity Accumulation and the Income and
Death Benefits arising from it. To the extent permitted by law, TIAA may
change the Rate Schedule, after no less than three months' notice to
you, for any premiums, Additional Amounts, or transfers applied to the
Traditional Annuity after the change. No change of Rate Schedule will
affect benefits bought by premiums, Additional Amounts, or transfers
applied to the Traditional Annuity prior to the change.
A provision on Allocation of Premiums is added:
Allocation of Premiums. You can allocate premiums to either the
Traditional Annuity or the Real Estate Account. If you allocate premiums
to the Traditional Annuity they increase your Traditional Annuity
Accumulation. If you allocate premiums to the Real Estate Account they
purchase Accumulation Units in the Real Estate Account. You may change
your allocation at any time. TIAA will allocate premiums according to
the most recent valid instructions we have received from you in an
acceptable form.
A Retirement Plan may limit your right to allocate premiums
remitted under that plan to the Real Estate Account.
TIAA may stop accepting premiums and transfers to the Real Estate
Account at any time.
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Endorsement to Your TIAA
Page 5 of 10 Retirement Annuity Contract
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Part B-2: Real Estate Account Accumulations and Units is added to your contract:
PART B-2: REAL ESTATE ACCOUNT ACCUMULATIONS AND UNITS
Accumulation Unit. The value of one Accumulation Unit is calculated at the end of each Valuation Day. The value of an Accumulation Unit is equal to the previous day's value multiplied by the Net Investment Factor for the Real Estate Account.
Your Real Estate Account Accumulation is equal to the number of Accumulation Units you own multiplied by the value of one Accumulation Unit. Real Estate Account Accumulations are variable and are not guaranteed. They may increase or decrease depending on investment results.
Net Investment Factor. The net investment factor for the Real Estate Account for a valuation period is based on the amount of accrued real estate net operating income, dividends, interest and other income accrued during the current period, a deduction of expense charges, and both realized and unrealized capital gains and losses incurred during the current period. The precise formula for the net investment factor is A divided by B, as follows:
A: The value of the Real Estate Account's net assets at the
end of the current valuation period, less any premiums
received during the current period.
B: The value of the Real Estate Account's net assets at the
end of the previous valuation period, plus the net effect
of transactions (e.g. transfers, benefit payments) made by
the start of the current valuation period.
The Separate Account Charge covers mortality and expense risk, liquidity risk,
and administrative and investment advisory services. TIAA, at its discretion,
can increase or decrease the Separate Account Charge. The Separate Account
Charge is guaranteed not to exceed 2.50% per year of net assets. The Separate
Account Charge as of the effective date of this endorsement will be [0.75%] per
year of the Real Estate Account's average net assets.
Number of Accumulation Units. Each premium and each transfer applied to the Real
Estate Account on your behalf buys a number of Accumulation Units equal to the
amount of the premium or transfer divided by the value of one Accumulation Unit
as of the end of the Business Day in which the premium or transfer is credited.
The number of Accumulation Units under your contract will be decreased by the
application of any Accumulation Units to any benefits or transfers paid from the
Real Estate Account Accumulation under your contract. Such transactions will
decrease the number of Accumulation Units under your contract by an amount equal
to the dollar value of the transaction divided by the value of one Accumulation
Unit as of the end of the Valuation Day on which the transaction becomes
effective.
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The following is added to the Income Options provision:
The income options described in your contract are available from your Traditional Annuity Accumulation only. You can transfer some or all of your Real Estate Account Accumulation to your Traditional Annuity Accumulation to receive income benefits under these options.
The Interest Payment and Retirement Annuity provision of the Income Options section is replaced with the following:
Interest Payment and Retirement Annuity. A payment will be made to you each month until you die or convert to another Income Option. The amount of the payment will be equal to the interest that TIAA would otherwise credit to your Traditional Annuity Accumulation.
You must convert to another Income Option no later than the date on which your Accumulation becomes subject to any applicable minimum distribution requirements of the federal tax law.
If you die before converting, a Death Benefit equal to your Accumulation plus any accrued interest on your Traditional Annuity Accumulation since the last payment will be paid to the Beneficiary you name when electing this option.
This option is only available if you are at least age 55, but not older than age 69 1/2. The value of the Traditional Annuity Accumulation placed under this option must be at least $10,000.
Items A) and B) of the Amount of Your Monthly Income Benefit provision are replaced respectively with the following:
A) the amount of your Traditional Annuity Accumulation at that time;
B) the Rate Schedule or Schedules under which premiums, any Additional Amounts, and any Transfers were applied to your Traditional Annuity Accumulation;
The first sentence of the Payment of the Death Benefit provision is replaced with the following:
If you die before the Annuity Starting Date, TIAA will pay the Traditional Annuity Accumulation portion of the Death Benefit to your Beneficiary under one of the Methods of Payment set forth in the Methods of Payment provision of your contract. The Single- sum payment method is the only method available for payment of the Real Estate Account Accumulation portion of your Death Benefit. Your beneficiary can, however, transfer some or all of your Real Estate Account Accumulation to the Traditional Annuity in order to receive that portion of the Death Benefit under a Method of Payment available from the Traditional Annuity. Your beneficiary can also transfer some or all of your Real Estate Account Accumulation to CREF in order to receive that portion of the Death Benefit under a Method of Payment offered by CREF.
Items A) and B) of the Amount of Death Benefit Payments provision are replaced respectively with the following:
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A) the amount of your Traditional Annuity Accumulation as of the
date of your death;
B) the Rate Schedule or Schedules under which premiums, any
Additional Amounts, and any Transfers were applied to your
Traditional Annuity Accumulation;
|
The provision on Transfers is replaced with the following two provisions:
Traditional Annuity Transfers. You can choose to transfer your
Traditional Annuity Accumulation to CREF or to the Real Estate Account
under a Transfer Payout Annuity. For the portion of your Traditional
Annuity Accumulation purchased by premiums remitted under a Retirement
Plan, the Plan may limit your right to transfer to the Real Estate
Account.
Transfer Payout Annuity payments to your CREF Retirement
Unit-Annuity certificate or to your Real Estate Account Accumulation
will be made over a ten year period. The amount of each annuity payment
will be determined as of the Annuity Starting Date by:
A) the amount of your Traditional Annuity Accumulation; and
B) the interest rate(s) in the Rate Schedule(s) under which
premiums, any Additional Amounts, and any Transfers were
credited to the Traditional Annuity Accumulation.
Your request for a Transfer Payout Annuity must be made by
written notice to TIAA. If you die before all annuity payments have been
made, any remaining payments will continue to the beneficiary you name
when electing this option. Alternatively, a death benefit equal to the
commuted value of any remaining annuity payments may be elected.
Each payment to CREF is subject to the terms of your CREF
certificate and CREF's Rules of the Fund.
Real Estate Account Transfers. You can choose to transfer some or all of
your Real Estate Account Accumulation Units: (a) to purchase
Accumulation Units in one of the CREF Accounts, (b) to your TIAA
Traditional Annuity Accumulation, (c) to provide a cash withdrawal, or
(d) to a Funding Vehicle not offered by TIAA or CREF. Any transfer to
CREF is subject to the terms of your CREF certificate and CREF's Rules
of the Fund.
For Real Estate Account Accumulation Units purchased by premiums
remitted under a Retirement Plan, the plan may limit your right to a
cash withdrawal or to transfer to a Funding Vehicle not offered by TIAA
or CREF.
If you are married and your Real Estate Account Accumulation is
subject to ERISA, your right to receive a cash withdrawal is subject to
the rights of your spouse as described in your contract. Federal tax law
may restrict distributions before age 59 1/2, as described in the
Restrictions on Distribution of Accumulation Arising from Elective
Deferrals provision of your contract.
If you choose to transfer from your Real Estate Account
Accumulation, the minimum amount you may transfer is $1,000, or the
entire Real Estate Account Accumulation eligible for transfer, if it is
less than $1,000. TIAA will determine all values as of the end of the
Business Day on which we receive, in an acceptable form:
A) your request for a transfer; and
B) verification of your eligibility for a cash withdrawal or
transfer to a Funding
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Vehicle not offered by TIAA or CREF for those Real Estate Account Accumulation Units purchased by premiums remitted on your behalf under a Retirement Plan; and
C) if your Real Estate Account Accumulation is subject to the ERISA requirements described in the Spouse's Right to Benefits provision in your contract, a Waiver of Spouse's Rights or proof that you aren't married.
You can choose to defer the effective date of the transfer until any Valuation Day following the date on which we receive the above requirements. TIAA will determine all values as of the end of such effective date. You cannot revoke a request for a transfer after its effective date. TIAA reserves the right to limit transfers from the Real Estate Account to not more than one in a calendar quarter.
The following is added to the Spouse's Rights to Benefits provision:
If your Real Estate Account Accumulation is subject to the provisions of the IRC and ERISA, your spouse must consent to a waiver of his or her right to survivor benefits before you can choose:
A) a Real Estate Account Transfer to provide a cash withdrawal; or
B) to the extent required by law, a transfer to a Funding Vehicle not offered by TIAA or CREF.
The following General Provisions are added:
Deletion of the Separate Account. TIAA reserves the right to delete the Real Estate Account. If you own Accumulation Units in the Real Estate Account and it is deleted, you must transfer them to CREF or to your Traditional Annuity Accumulation.
Insulation of Separate Account. TIAA owns the assets in Separate Account VA-2. To the extent permitted by law, the assets of the Separate Account will not be charged with liabilities arising out of any other business TIAA may conduct. All income, gains and losses, whether or not realized, of the Separate Account will be credited to or charged against only that Account without regard to TIAA's other income, gains or losses.
The first paragraph of the Compliance with Laws and Regulations provision is replaced with the following:
TIAA will administer your contract to comply with the restrictions of all laws and regulations pertaining to the terms and conditions of your contract. You cannot elect any benefit or exercise any right under your contract if the election of that benefit or exercise of that right is prohibited under an applicable state or federal law or regulation.
The Change of Rate Schedule provision is replaced with the following:
Change of Rate Schedule. We may, at any time and from time to time,
substitute a new Rate Schedule for the one in your current contract. A
new Rate Schedule will apply only
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to benefits arising from any premiums, Additional Amounts, and transfers applied to the Traditional Annuity while such Rate Schedule is in effect. Any change in the Rate Schedule will not affect the amount of benefits purchased prior to the change by any premiums, Additional Amounts, and transfers applied to the Traditional Annuity. A change in the Rate Schedule will be made only after we have given you three months' written notice of the change. Any such change will also be made to all other Retirement Annuity contracts of this form. Any change in the interest rate credited before the Annuity Starting Date or your prior death is subject to the minimum rate specified in the applicable state nonforfeiture law, if any, or if none, the applicable National Association of Insurance Commissioners model nonforfeiture law. Any change in the charge for expenses or contingencies must comply with any applicable state nonforfeiture law.
Any new Rate Schedule will specify:
A) the charges for expenses and contingencies; and
B) the interest rates and the mortality bases used for determining benefits arising from amounts applied to the Traditional Annuity.
Amounts applied to the Traditional Annuity (including your Traditional Annuity Accumulation as of the effective date of this endorsement) continue to receive the same guarantees specified by the Rate Schedule in effect prior to the effective date of this endorsement. The text of the Rate Schedule provision is replaced with the following.
Rate Schedule. The benefits bought by premiums allocated to the Traditional Annuity while this Rate Schedule is in effect will be computed on this basis:
(1) no deduction for expenses or contingencies;
(2) interest at the effective annual rate of 3% from the first day of the month in which the premium is paid to the Annuity Starting Date or your prior death, and at the effective annual rate of 2 1/2 % thereafter; and
(3) mortality according to 1983 Table a (TIAA Merged Gender
Mod A).
The benefits bought by Additional Amounts credited to the Traditional
Annuity while this Rate Schedule is in effect will be computed on the
same basis as for premiums.
The benefits bought by transfers from CREF or the Real Estate Account to
the Traditional Annuity will be computed on the same basis as for
premiums except that interest will be credited from the day TIAA's
General Account receives the funds transferred which is the day
following the date the funds are transferred out of CREF or the Real
Estate Account.
When Traditional Annuity payments start to you, or to your beneficiary
under an income method involving life contingencies, we will compute any
benefits provided by the portion of the Traditional Annuity Accumulation
resulting from amounts applied to the Traditional Annuity while this
Rate Schedule is in effect on whichever of these bases produces the
larger payments:
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(1) the applicable interest rate and mortality tables as
stated above; or
(2) the interest rate and mortality table in use by TIAA for
any individual single premium immediate annuities being
offered when the payments start.
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TEACHERS INSURANCE AND ANNUITY ASSOCIATION
730 Third Avenue, New York, N.Y. 10017-3206
Telephone: 800-842-2733
Endorsement to Your TIAA Group Retirement Annuity Certificate
Effective Date: [October 2, 1995]
This document, called an "endorsement," changes some of the provisions
of your TIAA Group Retirement Annuity Certificate and becomes part of it. It
does not take away any of the rights established under your current certificate.
It is important that you read the endorsement, and attach it to your current
certificate.
In addition to the fixed-dollar Traditional Annuity previously provided
under your Group Retirement Annuity certificate, TIAA now offers you the option
of accumulating funds in the Real Estate Account. The Real Estate Account is a
Separate Account of TIAA and is available as of the effective date of this
endorsement. Its investment objective is a favorable rate of return over the
long term primarily through rental income and capital appreciation of Real
Estate investments owned by the Account. The Real Estate Account holds mainly
income-producing real estate properties and other real estate-related
investments. The annual charge for the Real Estate Account will never exceed
2.50% of the Account's average net assets.
From now on, unless we indicate otherwise, any references in your
certificate to your TIAA "Accumulation" should be understood to mean the total
amount you have in the Traditional Annuity and the Real Estate Account combined.
When we're referring to one or the other, we'll specify it as your "Traditional
Annuity Accumulation" or your "Real Estate Account Accumulation".
You can allocate your future TIAA premiums to either the Traditional
Annuity or the Real Estate Account as described in this endorsement. When you
apply a premium to your Real Estate Account Accumulation, you'll purchase a
number of Accumulation Units representing a share in the Real Estate Account's
investment portfolio. You can transfer or withdraw some or all of your Real
Estate Account Accumulation subject to the limitations described in this
endorsement.
Your Traditional Annuity Accumulation will continue to be credited with
a guaranteed interest rate and any Additional Amounts declared by the TIAA Board
of Trustees. The earnings on your Real Estate Account Accumulation, if any, will
vary depending on investment results. Neither earnings nor the value of your
invested principal in the Real Estate Account are guaranteed, and the value of
the units you own may at any time be more or less than you paid for them.
If you have any questions about this contract or
need help to resolve a problem, you can contact
us at the address or phone number above.
(Signature of John H. Biggs)
(Specimen Stamped)
Chairman and
Chief Executive Officer
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INDEX OF IMPORTANT TERMS AND PROVISIONS
Accumulations
Real Estate Account.................................................E5
Traditional Annuity.................................................E3
Accumulation Unit
Number..............................................................E5
Definition..........................................................E5
Additional Amounts...........................................................E4
Business Day.................................................................E3
Compliance with Laws and Regulations.........................................E8
Death Benefit
Amount of...........................................................E6
Payment of..........................................................E6
Funding Vehicle..............................................................E3
General Account..............................................................E3
Income Benefit - Amount of...................................................E6
Income Options...............................................................E6
Interest Payment and Retirement Annuity......................................E6
Lump-sum Benefits
Availability of.....................................................E7
Payment of..........................................................E7
Net Investment Factor........................................................E5
Premiums - Allocation of.....................................................E4
Rate Schedule
Benefits bought under...............................................E10
Change in...........................................................E9
Definition..........................................................E4
Surrender charge....................................................E10
Separate Account
Charge..............................................................E5
Definition..........................................................E3
Deletion of.........................................................E8
Insulation of.......................................................E9
Transfers
Real Estate Account.................................................E8
Traditional Annuity.................................................E8
Valuation Day or Valuation Period............................................E3
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Page E2 G993 - GRA
ED. 10-95 TIAA GRA
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Endorsement to Your TIAA
Page 3 of 10 Group Retirement Annuity Certificate
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The term Accumulation is replaced with the following two terms:
Your Accumulation is equal to the sum of your Traditional Annuity Accumulation and your Real Estate Account Accumulation. Your Traditional Annuity Accumulation is guaranteed to earn interest at the rates described in the Contract's Rate Schedule. Your Real Estate Account Accumulation is not guaranteed and you bear its investment risk. Your Accumulation will provide the benefits described in your certificate.
Your Traditional Annuity Accumulation is the sum of:
A) all premiums allocated to the Traditional Annuity under your certificate; plus
B) interest credited to the Traditional Annuity under the terms of your certificate; plus
C) any Additional Amounts credited to the Traditional Annuity under your certificate; plus
D) any Transfers to the Traditional Annuity under your certificate; less
E) any charge for expenses and contingencies set forth in the Rate Schedule; less
F) the amount of any Traditional Annuity Accumulation moved to a Transfer Payout Annuity; less
G) the amount of any Lump-sum Benefit paid from the Traditional Annuity, plus any Surrender Charge.
The following Terms Used in This Certificate are added:
The General Account consists of all of TIAA's assets other than those in Separate Accounts.
The term Lump-sum Benefits is renamed Traditional Annuity Lump-sum Benefits.
Separate Account. All premiums credited to the Real Estate Account become part of a Separate Account. The Real Estate Account is designated as VA-2 and was established by TIAA in accordance with New York law to provide benefits under this and other contracts. The assets and liabilities of Separate Account VA-2 are segregated from the assets and liabilities of the General Account.
A Business Day is any day that the New York Stock Exchange is open for trading. A Business Day ends at 4:00 P.M. Eastern time, or when trading closes on the New York Stock Exchange, if earlier.
A Valuation Day is any business day, as well as the last calendar day of each month. A Valuation Period is the time from the end of a valuation day to the end of the next valuation day.
A Funding Vehicle is an annuity or an investment fund established to provide retirement benefits from monies remitted under a Retirement Plan.
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Endorsement to Your TIAA Group Retirement Annuity Certificate Page 4 of 10 - -------------------------------------------------------------------------------- |
The Additional Amounts provision is replaced with the following:
Additional Amounts. TIAA may credit Additional Amounts to the Traditional Annuity under your certificate. TIAA does not guarantee that there will be Additional Amounts. TIAA will determine at least annually if Additional Amounts will be credited.
Any Additional Amounts credited to your Traditional Annuity Accumulation will buy benefits for you based on the Rate Schedule in effect on the day the Additional Amounts are credited. Additional Amounts may also be paid with any Traditional Annuity benefits payable to you or your beneficiary.
Any Additional Amounts will be credited under a schedule of Additional Amount rates declared by TIAA. For a Traditional Annuity Accumulation in force as of the effective date of such a schedule, the Additional Amount rates will not be modified for a period of twelve months following the schedule's effective date. For any premiums, any Additional Amounts, and any transfers applied to the Traditional Annuity during the twelve-month period described in the preceding sentence, TIAA may declare Additional Amounts at rates which remain in effect through the end of such twelve-month period. Thereafter, any Additional Amount rates declared for such premiums, Additional Amounts and transfers will remain in effect for periods of twelve months or more.
The term Rate Schedule is replaced with the following:
The Rate Schedule is the part of the Contract that sets forth the bases
for computing the Traditional Annuity Accumulation and the Income and
Death Benefits arising from it. To the extent permitted by law, TIAA may
change the Rate Schedule, after no less than three months' notice to you
and the Contractholder, for any premiums, Additional Amounts, or
transfers applied to the Traditional Annuity after the change. No change
of Rate Schedule will affect benefits bought by premiums, Additional
Amounts, or transfers applied to the Traditional Annuity prior to the
change.
A provision on Allocation of Premiums is added:
Allocation of Premiums. You can allocate premiums to either the
Traditional Annuity or the Real Estate Account. If you allocate premiums
to the Traditional Annuity they increase your Traditional Annuity
Accumulation. If you allocate premiums to the Real Estate Account they
purchase Accumulation Units in the Real Estate Account. You may change
your allocation at any time. TIAA will allocate premiums according to
the most recent valid instructions we have received from you in an
acceptable form.
Your Employer's Retirement Plan may limit your right to allocate
premiums to the Real Estate Account.
TIAA may stop accepting premiums and transfers to the Real Estate
Account at any time.
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Endorsement to Your TIAA
Page 5 of 10 Group Retirement Annuity Certificate
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Part B-2: Real Estate Account Accumulations and Units is added to your certificate:
PART B-2: REAL ESTATE ACCOUNT ACCUMULATIONS AND UNITS
Accumulation Unit. The value of one Accumulation Unit is calculated at the end of each Valuation Day. The value of an Accumulation Unit is equal to the previous day's value multiplied by the Net Investment Factor for the Real Estate Account.
Your Real Estate Account Accumulation is equal to the number of Accumulation Units you own multiplied by the value of one Accumulation Unit. Real Estate Account Accumulations are variable and are not guaranteed. They may increase or decrease depending on investment results.
Net Investment Factor. The net investment factor for the Real Estate Account for a valuation period is based on the amount of accrued real estate net operating income, dividends, interest and other income accrued during the current period, a deduction of expense charges, and both realized and unrealized capital gains and losses incurred during the current period. The precise formula for the net investment factor is A divided by B, as follows:
A: The value of the Real Estate Account's net assets at the
end of the current valuation period, less any premiums
received during the current period.
B: The value of the Real Estate Account's net assets at the
end of the previous valuation period, plus the net effect
of transactions (e.g. transfers, benefit payments) made by
the start of the current valuation period.
The Separate Account Charge covers mortality and expense risk, liquidity risk,
and administrative and investment advisory services. TIAA, at its discretion,
can increase or decrease the Separate Account Charge. The Separate Account
Charge is guaranteed not to exceed 2.50% per year of net assets. The Separate
Account Charge as of the effective date of this endorsement will be [0.75%] per
year of the Real Estate Account's average net assets.
Number of Accumulation Units. Each premium and each transfer applied to the Real
Estate Account on your behalf buys a number of Accumulation Units equal to the
amount of the premium or transfer divided by the value of one Accumulation Unit
as of the end of the Business Day in which the premium or transfer is credited.
The number of Accumulation Units under your certificate will be decreased by the
application of any Accumulation Units to any benefits or transfers paid from the
Real Estate Account Accumulation under your certificate. Such transactions will
decrease the number of Accumulation Units under your certificate by an amount
equal to the dollar value of the transaction divided by the value of one
Accumulation Unit as of the end of the Valuation Day on which the transaction
becomes effective.
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TIAA GRA Ed. 10-95
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The following is added to the Income Options provision:
The income options described in your certificate are available from your Traditional Annuity Accumulation only. You can transfer some or all of your Real Estate Account Accumulation to your Traditional Annuity Accumulation to receive income benefits under these options.
The Interest Payment and Retirement Annuity provision of the Income Options section is replaced with the following:
Interest Payment and Retirement Annuity. A payment will be made to you each month until you die or convert to another Income Option. The amount of the payment will be equal to the interest that TIAA would otherwise credit to your Traditional Annuity Accumulation.
You must convert to another Income Option no later than the date on which your Accumulation becomes subject to any applicable minimum distribution requirements of the federal tax law.
If you die before converting, a Death Benefit equal to your Accumulation plus any accrued interest on your Traditional Annuity Accumulation since the last payment will be paid to the Beneficiary you name when electing this option.
This option is only available if you are at least age 55, but not older than age 69 1/2. The value of the Traditional Annuity Accumulation placed under this option must be at least $10,000.
Items A) and B) of the Amount of Your Monthly Income Benefit provision are replaced respectively with the following:
A) the amount of your Traditional Annuity Accumulation at that time;
B) the Rate Schedule or Schedules under which premiums, any Additional Amounts, and any Transfers were applied to your Traditional Annuity Accumulation;
The first sentence of the Payment of the Death Benefit provision is replaced with the following:
If you die before the Annuity Starting Date, TIAA will pay the Traditional Annuity Accumulation portion of the Death Benefit to your Beneficiary under one of the Methods of Payment set forth in the Methods of Payment provision of your contract. The Single- sum payment method is the only method available for payment of the Real Estate Account Accumulation portion of your Death Benefit. Your beneficiary can, however, transfer some or all of your Real Estate Account Accumulation to the Traditional Annuity in order to receive that portion of the Death Benefit under a Method of Payment available from the Traditional Annuity. Your beneficiary can also transfer some or all of your Real Estate Account Accumulation to CREF in order to receive that portion of the Death Benefit under a Method of Payment offered by CREF.
Items A) and B) of the Amount of Death Benefit Payments provision are replaced respectively with the following:
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Endorsement to Your TIAA
Page 7 of 10 Group Retirement Annuity Certificate
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A) the amount of your Traditional Annuity Accumulation as of the date of your death;
B) the Rate Schedule or Schedules under which premiums, any Additional Amounts, and any Transfers were applied to your Traditional Annuity Accumulation;
The Availability of Lump-sum Benefits provision is replaced with the following:
Availability of Lump-sum Benefits. Within 120 days after Termination of Employment and before the commencement of annuity payments, you can choose to withdraw some or all of your Traditional Annuity Accumulation as a Lump-sum Benefit. After the 120-day period expires the election of a Lump-sum Benefit from your Traditional Annuity Accumulation will never again be available. At any time you can choose to withdraw some or all of your Real Estate Account Accumulation as a Lump-sum Benefit. TIAA reserves the right to limit Lump-sum Benefits from your Real Estate Account Accumulation to not more than one in a calendar quarter.
For both the Traditional Annuity and the Real Estate Account, the portion of your Accumulation available to you as a Lump-sum Benefit may be limited by your Employer's Retirement Plan.
If you are married and some or all of your Accumulation is subject to ERISA, your right to receive a Lump-sum Benefit is subject to the rights of your spouse as described in your certificate. Federal tax law may restrict distributions before age 59 1/2, as described in your certificate.
The Payment of the Lump-sum Benefit provision is replaced with the following:
Payment of the Lump-sum Benefit. If you choose the Lump-sum Benefit, the
minimum amount you may withdraw is $1,000, unless the Lump-sum Benefit
is for the entire Real Estate Account Accumulation or the entire
Traditional Annuity Accumulation available to you for withdrawal.
Lump-sum Benefits paid from the Traditional Annuity Accumulation will be
reduced by any surrender charge in accordance with the applicable Rate
Schedule or Schedules. TIAA will determine all values as of the end of
the Business Day on which we receive, in an acceptable form:
A) your request for a Lump-sum Benefit;
B) verification from your Employer of your eligibility for a
Lump-sum Benefit, and certification of Termination of
Employment if the Lump-sum Benefit is requested from the
Traditional Annuity Accumulation; and
C) if your Accumulation is subject to the ERISA requirements
described in your certificate, a Waiver of Spouses's Rights,
or proof that you aren't married.
You can choose to defer the effective date of a Lump-sum Benefit
until any Valuation Day following the date on which we receive the above
requirements. In no event, however, can a Lump-sum Benefit from the
Traditional Annuity Accumulation be effective before the date of
Termination of Employment or more than 120 days after Termination of
Employment. TIAA will determine all values as of the end of the
effective date. You cannot revoke a request for a Lump-sum Benefit after
its effective date.
Payment of a Lump-sum Benefit reduces the accumulation from which
it is paid by
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G993 - GRA Page E7
TIAA GRA Ed. 10-95
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Endorsement to Your TIAA
Group Retirement Annuity Certificate Page 8 of 10
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the amount chosen. If you choose a Lump-sum Benefit from the Traditional
Annuity Accumulation and different Rate Schedules apply to different
parts of the Traditional Annuity Accumulation, the reduction will be
allocated among the parts on a pro rata basis.
If your entire Accumulation is paid as a Lump-sum Benefit, all
obligations of TIAA to you under the Contract are fulfilled.
TIAA may defer the payment of a Traditional Annuity Lump-sum
Benefit for up to six months.
The provision on Transfers is replaced with the following two provisions:
Traditional Annuity Transfers. You may choose to transfer your
Traditional Annuity Accumulation to CREF or to the Real Estate Account
under a Transfer Payout Annuity. Your Employer's Retirement Plan may
limit your right to transfer to the Real Estate Account.
Transfer Payout Annuity payments to your CREF Group Retirement
Unit-Annuity certificate or to your Real Estate Account Accumulation
will be made over a ten year period.
The amount of each annuity payment will be determined as of the Annuity
Starting Date by:
A) the amount of your Traditional Annuity Accumulation; and
B) the interest rate(s) in the Rate Schedule(s) under which
premiums, any Additional Amounts, and any Transfers were
credited to your Traditional Annuity Accumulation.
Each payment to CREF is subject to the terms of your CREF
certificate and CREF's Rules of the Fund. Your request for a Transfer
Payout Annuity must be made by written notice to TIAA.
If you die before all annuity payments have been made, any
remaining payments will continue to the beneficiary you name when
electing this option. Alternatively, a death benefit equal to the
commuted value of any remaining annuity payments may be elected.
Real Estate Account Transfers. You can choose to transfer your entire
Real Estate Account Accumulation, or any part of it not less than
$1,000, to your TIAA Traditional Annuity Accumulation or to purchase
Accumulation Units in one of the CREF Accounts.
A transfer will be effective, and TIAA will determine all values,
as of the business day in which TIAA receives your request for a
transfer in an acceptable form. You can choose to defer the effective
date of the transfer until any Valuation Day following the date on which
we receive your request. TIAA will determine all values as of the end of
such effective date. You cannot revoke a request for a transfer after
its effective date. TIAA reserves the right to limit transfers from the
Real Estate Account to not more than one in a calendar quarter.
The following General Provisions are added or revised:
Deletion of the Separate Account. TIAA reserves the right to delete the
Real Estate Account. If you own Accumulation Units in the Real Estate
Account and it is deleted, you
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Ed. 10-95 TIAA GRA
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Endorsement to Your TIAA
Page 9 of 10 Group Retirement Annuity Certificate
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must transfer them to your Traditional Annuity Accumulation or to CREF.
Insulation of Separate Account. TIAA owns the assets in Separate Account VA-2. To the extent permitted by law, the assets of the Separate Account will not be charged with liabilities arising out of any other business TIAA may conduct. All income, gains and losses, whether or not realized, of the Separate Account will be credited to or charged against only that Account without regard to TIAA's other income, gains or losses.
The first paragraph of the Compliance with Laws and Regulations provision is replaced with the following:
TIAA will administer your contract to comply with the restrictions of all laws and regualations pertaining to the terms and conditions of your contract. You cannot elect any benefit or exerise any right under your contract if the election of that benefit or exercise of that right is prohibited under an applicable state or federal law or regulation.
The Change of Rate Schedule provision is replaced with the following:
Change of Rate Schedule. We may, at any time and from time to time,
substitute a new Rate Schedule for the one in your current certificate.
A new Rate Schedule will apply only to benefits arising from any
premiums, Additional Amounts, and transfers applied to the Traditional
Annuity while such Rate Schedule is in effect. Any change in the Rate
Schedule will not affect the amount of benefits purchased prior to the
change by any premiums, Additional Amounts, and transfers applied to the
Traditional Annuity. A change in the Rate Schedule will be made only
after we have given you and the Contractholder three months' written
notice of the change. Any change in the interest rate credited before
the Annuity Starting Date or your prior death is subject to the minimum
rate specified in the applicable state nonforfeiture law, if any, or if
none, the applicable National Association of Insurance Commissioners
model nonforfeiture law. Any change in the charge for expenses or
contingencies must comply with any applicable state nonforfeiture law.
Any new Rate Schedule will specify:
A) the charges for expenses and contingencies;
B) the interest rates and the mortality bases used for determining
benefits arising from amounts applied to the Traditional
Annuity; and
C) any applicable Surrender Charges on Lump-sum Benefits arising
from amounts applied to the Traditional Annuity.
Amounts applied to the Traditional Annuity (including your Traditional Annuity
Accumulation as of the effective date of this endorsement) continue to receive
the same guarantees specified by the Rate Schedule in effect prior to the
effective date of this endorsement. The text of the Rate Schedule provision is
replaced with the following.
Rate Schedule. The benefits bought by premiums allocated to the
Traditional Annuity while this Rate Schedule is in effect will be
computed on this basis:
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Endorsement to Your TIAA
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(1) no deduction for expenses or contingencies;
(2) interest at the effective annual rate of 3 % from the
first day of the month in which the premium is paid to the
Annuity Starting Date or your prior death, and at the
effective annual rate of 2 1/2 % thereafter; and
(3) mortality according to 1983 Table a (TIAA Merged Gender Mod A).
The benefits bought by Additional Amounts credited to the Traditional
Annuity while this Rate Schedule is in effect will be computed on the
same basis as for premiums.
The benefits bought by transfers from CREF or the Real Estate Account to
the Traditional Annuity while this Rate Schedule is in effect will be
computed on the same basis as for premiums except that interest will be
credited from the day TIAA's General Account receives the funds
transferred which is the day following the date the funds are
transferred out of CREF or the Real Estate Account.
When Traditional Annuity payments start to you, or to your beneficiary
under an income method involving life contingencies, we will compute any
benefits provided by the portion of the Traditional Annuity Accumulation
resulting from amounts applied to the Traditional Annuity while this
Rate Schedule is in effect on whichever of these bases produces the
larger payments:
(1) the applicable interest rate and mortality tables as stated
above; or
(2) the interest rate and mortality table in use by TIAA for any
individual single premium immediate annuities being offered
when the payments start.
A Surrender Charge of 2.5% will be deducted from any Lump-sum Benefit
from the Traditional Annuity arising from amounts applied to the
Traditional Annuity while this Rate Schedule is in effect.
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Ed. 10-95 TIAA GRA
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Page 1 of 10
TEACHERS INSURANCE AND ANNUITY ASSOCIATION
730 Third Avenue, New York, N.Y. 10017-3206
Telephone: 800-842-2733
Endorsement to Your TIAA Group Supplemental Retirement Annuity Certificate
Effective Date: [October 2, 1995]
This document, called an "endorsement," changes some of the provisions
of your TIAA Group Supplemental Retirement Annuity Certificate and becomes part
of it. It does not take away any of the rights established under your current
certificate. It is important that you read the endorsement, and attach it to
your current certificate.
In addition to the fixed-dollar Traditional Annuity previously provided
under your Group Supplemental Retirement Annuity certificate, TIAA now offers
you the option of accumulating funds in the Real Estate Account. The Real Estate
Account is a Separate Account of TIAA and is available as of the effective date
of this endorsement. Its investment objective is a favorable rate of return over
the long term primarily through rental income and capital appreciation of Real
Estate investments owned by the Account. The Real Estate Account holds mainly
income-producing real estate properties and other real estate-related
investments. The annual charge for the Real Estate Account will never exceed
2.50% of the Account's average net assets.
From now on, unless we indicate otherwise, any references in your
certificate to your TIAA "Accumulation" should be understood to mean the total
amount you have in the Traditional Annuity and the Real Estate Account combined.
When we're referring to one or the other, we'll specify it as your "Traditional
Annuity Accumulation" or your "Real Estate Account Accumulation".
You can allocate your future TIAA premiums to either the Traditional
Annuity or the Real Estate Account as described in this endorsement. When you
apply a premium to your Real Estate Account Accumulation, you'll purchase a
number of Accumulation Units representing a share in the Real Estate Account's
investment portfolio. You can transfer or withdraw some or all of your Real
Estate Account Accumulation subject to the limitations described in this
endorsement. Loans will not be available from your Real Estate Account
Accumulation.
Your Traditional Annuity Accumulation will continue to be credited with
a guaranteed interest rate and any Additional Amounts declared by the TIAA Board
of Trustees. The earnings on your Real Estate Account Accumulation, if any, will
vary depending on investment results. Neither earnings nor the value of your
invested principal in the Real Estate Account are guaranteed, and the value of
the units you own may at any time be more or less than you paid for them.
If you have any questions about this contract or need help to resolve a problem,
you can contact us at the address or phone number above.
(Signature of John H. Biggs)
(Specimen Stamped)
Chairman and
Chief Executive Officer
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G993 - GSRA INDEX ON NEXT PAGE Page E1
TIAA GSRA Ed. 10-95
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INDEX OF IMPORTANT TERMS AND PROVISIONS
Page
Accumulations
Available.................................E3
Real Estate Account.......................E5
Traditional Annuity.......................E3
Accumulation Unit
Number....................................E6
Definition................................E5
Additional Amounts.................................E4
Business Day.......................................E3
Compliance with Laws and Regulations...............E8
Death Benefit
Amount of.................................E7
Payment of................................E6
General Account....................................E3
Income Benefit - Amount of.........................E6
Income Options.....................................E6
Loan
Amount of.................................E7
Collateral................................E4
Lump-sum Benefits
Definition................................E4
Availability of...........................E7
Payment of................................E7
Net Investment Factor..............................E5
Premiums - Allocation of...........................E5
Rate Schedule
Benefits bought under.....................E9
Change in.................................E9
Definition................................E4
Surrender charge..........................E9
Separate Account
Charge....................................E6
Definition................................E3
Deletion of...............................E8
Insulation of.............................E8
Surrender Charge - Defined.........................E5
Transfers..........................................E8
Valuation Day and Valuation Period.................E3
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Page E2 G993 - GSRA
Ed. 10-95 TIAA GSRA
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Endorsement to Your TIAA
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The term Accumulation is replaced with the following two terms:
Your Accumulation is equal to the sum of your Traditional Annuity Accumulation and your Real Estate Account Accumulation. Your Traditional Annuity Accumulation is guaranteed to earn interest at the rates described in the Contract's Rate Schedule. Your Real Estate Account Accumulation is not guaranteed and you bear its investment risk. Your Accumulation will provide the benefits described in your certificate.
Your Traditional Annuity Accumulation is the sum of:
A) all premiums allocated to the Traditional Annuity under your certificate; plus
B) interest credited to the Traditional Annuity under your certificate; plus
C) any Additional Amounts credited to the Traditional Annuity under the terms of your certificate; plus
D) any Transfers to the Traditional Annuity under your certificate; less
E) any charges for expenses and contingencies set forth in the Rate Schedule; less
F) the amount of any Lump-sum Benefits paid from the Traditional Annuity; less
G) upon foreclosure by TIAA, the amount of any Loan Default including any accrued interest thereon, or unpaid Loan (described in Section 43 of your certificate); less
H) any Surrender Charge assessed in the case of a Lump-sum Benefit or a foreclosure on all or part of a Loan Default or unpaid Loan (described in Section 43 of your certificate).
The term Available Accumulation is replaced with the following:
Your Available Accumulation is your Traditional Annuity
Accumulation less the Loan Collateral for any outstanding Loans
under this certificate.
The following Terms Used in This Certificate are added:
The General Account consists of all of TIAA's assets other than those in
Separate Accounts.
Separate Account. All Premiums credited to the Real Estate Account
become part of a Separate Account. The Real Estate Account is designated
as "VA-2" and was established by TIAA in accordance with New York law to
provide benefits under this and other contracts. The assets and
liabilities of Separate Account VA-2 are segregated from the assets and
liabilities of the General Account.
A Business Day is any day that the New York Stock Exchange is open for
trading. A Business Day ends at 4:00 P.M. Eastern time, or when trading
closes on the New York Stock Exchange, if earlier.
A Valuation Day is any business day, as well as the last calendar day of
each month. A Valuation Period is the time from the end of a valuation
day to the end of the next valuation day.
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The Additional Amounts provision is replaced with the following:
Additional Amounts. TIAA may credit Additional Amounts to the Traditional Annuity under your certificate. TIAA does not guarantee that there will be Additional Amounts. TIAA will determine at least annually if Additional Amounts will be credited.
Any Additional Amounts credited to your Traditional Annuity Accumulation will buy benefits for you based on the Rate Schedule in effect on the day the Additional Amounts are credited. Additional Amounts may also be paid with any Traditional Annuity benefits payable to you or your beneficiary.
Any Additional Amounts will be credited under a schedule of Additional Amount rates declared by TIAA. For a Traditional Annuity Accumulation in force as of the effective date of such a schedule, the Additional Amount rates will not be modified for a period of twelve months following the schedule's effective date. For any premiums, any Additional Amounts, and any transfers applied to the Traditional Annuity during the twelve-month period described in the preceding sentence, TIAA may declare Additional Amounts at rates which remain in effect through the end of such twelve-month period. Thereafter, any Additional Amount rates declared for such premiums, Additional Amounts and transfers will remain in effect for periods of twelve months or more.
The term Loan Collateral is replaced with the following:
The Loan Collateral for a Loan under this certificate is the portion of your Traditional Annuity Accumulation equal to 110% of the Outstanding Loan Balance and must be maintained in the Traditional Annuity Accumulation under this certificate at all times. The Loan Collateral will not be available to provide Income, Death, or Lump-sum Benefits, or other distributions while the Loan remains unpaid.
The term Lump-sum Benefit is replaced with the following:
A Lump-sum Benefit is a withdrawal in a single sum of all or part of your Available Accumulation or your Real Estate Account Accumulation. Federal tax law may restrict distributions before age 59 1/2, as outlined in Section 51 of your certificate. The amount of a Lump-sum Benefit paid from your Available Accumulation will be the amount withdrawn, less a Surrender Charge in accordance with the applicable Rate Schedule or Schedules. The provisions concerning Lump-sum Benefits are set forth in Part E of your certificate.
The term Rate Schedule is replaced with the following:
The Rate Schedule is the part of the Contract that sets forth the bases
for computing the Traditional Annuity Accumulation and the Income,
Death, and Lump-sum Benefits arising from it and the amount of Loan
Collateral used to foreclose on all or part of a Loan Default or unpaid
Loan (described in Section 43 of your certificate). To the extent
permitted by law, TIAA can change the Rate Schedule, after no less than
three months' notice to you and the Contractholder, for any premiums,
Additional Amounts, or transfers applied to the Traditional Annuity
after the change. No change of Rate Schedule will affect
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benefits bought by premiums, Additional Amounts, or transfers applied to the Traditional Annuity prior to the change.
The provisions concerning changes in the Rate Schedule are set forth in Section 60 of your certificate.
The term Surrender Charge is replaced with the following:
A Surrender Charge will be assessed against the portion of your Traditional Annuity Accumulation withdrawn to provide any Lump-sum Benefit and the portion of the Loan Collateral used to foreclose on all or part of any Loan Default or unpaid Loan (described in Section 43 of your certificate), as shown in the Rate Schedule.
A provision on Allocation of Premiums is added:
Allocation of Premiums. You can allocate premiums to either the Traditional Annuity or the Real Estate Account. If you allocate premiums to the Traditional Annuity they increase your Traditional Annuity Accumulation. If you allocate premiums to the Real Estate Account they purchase Accumulation Units in the Real Estate Account. You may change your allocation at any time. TIAA will allocate premiums according to the most recent valid instructions we have received from you in an acceptable form.
Your Employer's Tax Deferred Annuity Plan may limit your right to allocate premiums to the Real Estate Account.
TIAA may stop accepting premiums and transfers to the Real Estate Account at any time.
Part B-2: Real Estate Account Accumulations and Units is added to your certificate:
PART B-2: REAL ESTATE ACCOUNT ACCUMULATIONS AND UNITS
Accumulation Unit. The value of one Accumulation Unit is calculated at the end of each Valuation Day. The value of an Accumulation Unit is equal to the previous day's value multiplied by the Net Investment Factor for the Real Estate Account.
Your Real Estate Account Accumulation is equal to the number of Accumulation Units you own multiplied by the value of one Accumulation Unit. Real Estate Account Accumulations are variable and are not guaranteed. They may increase or decrease depending on investment results.
Net Investment Factor. The net investment factor for the Real Estate Account for a valuation period is based on the amount of accrued real estate net operating income, dividends, interest and other income accrued during the current period, a deduction of expense charges, and both realized and unrealized capital gains and losses incurred during the current period. The precise formula for the net investment factor is A divided by B, as follows:
A: The value of the Real Estate Account's net assets at the
end of the current valuation period, less any premiums
received during the current period.
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B: The value of the Real Estate Account's net assets at the end of the previous valuation period, plus the net effect of transactions (e.g. transfers, benefit payments) made by the start of the current valuation period.
The Separate Account Charge covers mortality and expense risk, liquidity risk, and administrative and investment advisory services. TIAA, at its discretion, can increase or decrease the Separate Account Charge. The Separate Account Charge is guaranteed not to exceed 2.50% per year of net assets. The Separate Account Charge as of the effective date of this endorsement will be [0.75%] per year of the Real Estate Account's average net assets.
Number of Accumulation Units. Each premium and each transfer applied to the Real Estate Account on your behalf buys a number of Accumulation Units equal to the amount of the premium or transfer divided by the value of one Accumulation Unit as of the end of the Business Day in which the premium or transfer is credited. The number of Accumulation Units under your certificate will be decreased by the application of any Accumulation Units to any benefits or transfers paid from the Real Estate Account Accumulation under your certificate. Such transactions will decrease the number of Accumulation Units under your certificate by an amount equal to the dollar value of the transaction divided by the value of one Accumulation Unit as of the end of the Valuation Day on which the transaction becomes effective.
The following is added to the Income Options provision:
The income options described in your certificate are available from your Traditional Annuity Accumulation only. You can transfer some or all of your Real Estate Account Accumulation to your Traditional Annuity Accumulation to receive income benefits under these options.
Item B) of the Amount of Your Monthly Income Benefit provision is replaced with
the following:
B) the Rate Schedule or Schedules under which premiums, any Additional Amounts, and any Transfers were applied to your Traditional Annuity Accumulation;
The first sentence of the Payment of the Death Benefit provision is replaced with the following:
If you die before the Annuity Starting Date, TIAA will pay the
Traditional Annuity Accumulation portion of the Death Benefit to your
Beneficiary under one of the Methods of Payment set forth in the Methods
of Payment provision of your contract. The Single-sum payment method is
the only method available for payment of the Real Estate Account
Accumulation portion of your Death Benefit. Your beneficiary can,
however, transfer some or all of your Real Estate Account Accumulation
to the Traditional Annuity in order to receive that portion of the Death
Benefit under a Method of Payment available from the Traditional
Annuity. Your beneficiary can also transfer some or all of your Real
Estate Account Accumulation to CREF in order to receive that portion of
the Death Benefit under a Method of Payment offered by CREF.
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Endorsement to Your TIAA
Page 7 of 10 Group Supplemental Retirement Annuity Certificate
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Items A) and B) of the Amount of Death Benefit Payments provision are replaced respectively with the following:
A) the amount of your Traditional Annuity Accumulation less the Outstanding Loan Balance for any outstanding Loan;
B) the Rate Schedule or Schedules under which premiums, any Additional Amounts, and any Transfers were applied to your Traditional Annuity Accumulation;
The first paragraph of the Availability of Lump-sum Benefit provision is replaced with the following:
Availability of Lump-sum Benefit. You can choose to withdraw as a Lump-sum Benefit all or part of your Available Accumulation or all or part of your Real Estate Account Accumulation. A withdrawal must be for at least $1,000 unless it is for your entire Available Accumulation or your entire Real Estate Account Accumulation available to you for withdrawal. TIAA reserves the right to limit Lump-sum Benefits from your Real Estate Account Accumulation to not more than one in a calendar quarter.
The Payment of the Lump-sum Benefit provision is replaced with the following:
Payment of the Lump-sum Benefit. If you choose the Lump-sum Benefit from your Real Estate Account Accumulation we will pay the amount you choose. If you choose the Lump-sum Benefit from your Available Accumulation we will pay the amount you choose less any Surrender Charge in accordance with the applicable Rate Schedule or Schedules.
Payment of a Lump-sum Benefit will be made as of the day we receive in an acceptable form:
A) your request for a Lump-sum Benefit; and
B) if your Accumulation is subject to the ERISA requirements in Part G of your certificate, a Waiver of Spouse's Rights or proof that you aren't married.
You can choose to defer the effective date of the Lump-sum Benefit until any Valuation Day following the date on which we receive the above requirements. TIAA will determine all values as of the end of such effective date. You cannot revoke a request for a Lump-sum benefit after its effective date.
Payment of a Lump-sum Benefit reduces the accumulation from which it is paid by the amount chosen. If you choose a Lump-sum Benefit from your Available Accumulation and different Rate Schedules apply to different parts of the Available Accumulation, the reduction will be allocated among the parts on a pro rata basis.
If your entire Accumulation is paid as a Lump-sum Benefit, all obligations of TIAA to you under the Contract are fulfilled.
TIAA may defer the payment of a Traditional Annuity Lump-sum Benefit for up to six months.
The first sentence of the Amount of a Loan provision is replaced with the following:
The Amount of a Loan cannot be less than $1,000, nor more than the
excess of 90% of
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your Traditional Annuity Accumulation under this certificate over the Outstanding Loan Balance for any other Loans from this certificate.
A provision on Transfers is added:
Transfers. You can choose to transfer between your Available Accumulation and your Real Estate Account Accumulation. Such transfers can be for all of an accumulation or for any part thereof not less than $1,000. Your Employer's Tax Deferred Annuity Plan may limit your right to transfer from your Available Accumulation to the Real Estate Account. If you choose to transfer from your Available Accumulation we will apply to the Real Estate Account the amount to be transferred less any Surrender Charge in accordance with the applicable Rate Schedule or Schedules. No surrender charge applies to any transfer from your Real Estate Accumulation.
TIAA will determine all values as of the end of the Business Day on which we receive your request for a transfer in an acceptable form. You can, however, choose to defer the effective date of the transfer until any Valuation Day following the date on which we receive your request. In that case TIAA will determine all values as of the end of such effective date. You cannot revoke a request for a transfer after its effective date. TIAA reserves the right to limit transfers to not more than one in a calendar quarter.
A transfer reduces the accumulation from which it is paid by the amount transferred. If you transfer from your Available Accumulation and different Rate Schedules apply to different parts of the Available Accumulation, the reduction will be allocated among the parts on a pro rata basis.
The following General Provisions are added:
Deletion of the Real Estate Account. TIAA reserves the right to delete the Real Estate Account. If you own Accumulation Units in the Real Estate Account and it is deleted, you must transfer them to your Traditional Annuity Accumulation or to CREF.
Insulation of Separate Account. TIAA owns the assets in Separate Account VA-2. To the extent permitted by law, the assets of the Separate Account will not be charged with liabilities arising out of any other business TIAA may conduct. All income, gains and losses, whether or not realized, of the Separate Account will be credited to or charged against only that Account without regard to TIAA's other income, gains or losses.
The first paragraph of the Compliance with Laws and Regulations provision is replaced with the following:
TIAA will administer your contract to comply with the restrictions of all laws and regulations pertaining to the terms and conditions of your contract. You cannot elect any benefit or exercise any right under your contract if the election of that benefit or exercise of that right is prohibited under an applicable state or federal law or regulation.
The Change of Rate Schedule provision is replaced with the following:
Change of Rate Schedule. We may, at any time and from time to time,
substitute a new
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Endorsement to Your TIAA
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Rate Schedule for the one in your current certificate. A new Rate Schedule will apply only to benefits arising from any premiums, Additional Amounts, and transfers applied to the Traditional Annuity while such Rate Schedule is in effect. Any change in the Rate Schedule will not affect the amount of benefits purchased prior to the change by any premiums, Additional Amounts, and transfers applied to the Traditional Annuity. A change in the Rate Schedule will be made only after we have given you and the Contractholder three months' written notice of the change. Any change in the interest rate credited before the Annuity Starting Date or your prior death is subject to the minimum rate specified in the applicable state nonforfeiture law, if any, or if none, the applicable National Association of Insurance Commissioners model nonforfeiture law. Any change in the charge for expenses or contingencies, or in the Surrender Charge, must comply with any applicable state nonforfeiture law.
Any new Rate Schedule will specify:
A) the charges for expenses and contingencies;
B) the interest rates and the mortality bases used for determining Traditional Annuity benefits arising from amounts applied to the Traditional Annuity; and
C) any applicable Surrender Charges on Lump-sum Benefits
arising from amounts applied to the Traditional Annuity
and on the amount of Loan Collateral used to foreclose on
all or part of a Loan Default or unpaid Loan (described in
Section 43 of your certificate).
Amounts applied to the Traditional Annuity (including your Traditional Annuity Accumulation as of the effective date of this endorsement) continue to receive the same guarantees specified by the Rate Schedule in effect prior to the effective date of this endorsement. The text of the Rate Schedule provision is replaced with the following.
Rate Schedule. The benefits bought by premiums,Additional Amounts, and transfers applied to the Traditional Annuity while this Rate Schedule is in effect will be computed on this basis:
(1) no deduction for expenses or contingencies;
(2) interest at the effective annual rate of 3 % from the day on which the premium is paid or the Additional Amount or transfer is credited to the Annuity Starting Date or your prior death, and at the effective annual rate of 2 1/2 % thereafter; and
(3) mortality according to 1983 Table a (TIAA Merged Gender
Mod C).
A Surrender Charge of 0% will be assessed against the portion of your
Traditional Annuity Accumulation withdrawn to provide any Lump-sum
Benefit (whether paid as cash, as a transfer, as a rollover, or in any
other form), and the amount of Loan Collateral used to foreclose on all
or part of a Loan Default or unpaid Loan (described in Section 43 of
your certificate) arising from premiums,Additional Amounts, and
transfers applied to the Traditional Annuity while this Rate Schedule is
in effect.
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Endorsement to Your TIAA
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When Traditional Annuity payments start to you, or to your beneficiary
under an income method involving life contingencies, we will compute any
benefits provided by the portion of the Traditional Annuity Accumulation
resulting from premiums, Additional Amounts, and transfers applied to
the Traditional Annuity while this Rate Schedule is in effect on
whichever of these bases produces the largest payments:
(1) the applicable interest rate and mortality tables as stated
above; or
(2) the interest rate and mortality table in use by TIAA for
any individual single premium immediate annuities being offered
when the payments start.
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Page 1 of 9
TEACHERS INSURANCE AND ANNUITY ASSOCIATION
730 Third Avenue, New York, N.Y. 10017-3206
Telephone: 800-842-2733
Endorsement to Your TIAA Supplemental Retirement Annuity Contract
Effective Date: [October 2, 1995]
This document, called an "endorsement," changes some of the provisions
of your TIAA Supplemental Retirement Annuity Contract and becomes part of it. It
does not take away any of the rights established under your current contract. It
is important that you read the endorsement, and attach it to your current
contract.
In addition to the fixed-dollar Traditional Annuity previously provided
under your Supplemental Retirement Annuity contract, TIAA now offers you the
option of accumulating funds in the Real Estate Account. The Real Estate Account
is a Separate Account of TIAA and is available as of the effective date of this
endorsement. Its investment objective is a favorable rate of return over the
long term primarily through rental income and capital appreciation of Real
Estate investments owned by the Account. The Real Estate Account holds mainly
income-producing real estate properties and other real estate-related
investments. The annual charge for the Real Estate Account will never exceed
2.50% of the Account's average net assets.
From now on, unless we indicate otherwise, any references in your
contract to your TIAA "Accumulation" should be understood to mean the total
amount you have in the Traditional Annuity and the Real Estate Account combined.
When we're referring to one or the other, we'll specify it as your "Traditional
Annuity Accumulation" or your "Real Estate Account Accumulation".
You can allocate your future TIAA premiums to either the Traditional
Annuity or the Real Estate Account as described in the provisions of this
endorsement. When you apply a premium to your Real Estate Account Accumulation,
you'll purchase a number of Accumulation Units representing a share in the Real
Estate Account's investment portfolio. You can transfer or withdraw some or all
of your Real Estate Account Accumulation subject to the limitations described in
this endorsement.
Your Traditional Annuity Accumulation will continue to be credited with
a guaranteed interest rate and any Additional Amounts declared by the TIAA Board
of Trustees. The earnings on your Real Estate Account Accumulation, if any, will
vary depending on investment results. Neither earnings nor the value of your
invested principal in the Real Estate Account are guaranteed, and the value of
the units you own may at any time be more or less than you paid for them.
If you have any questions about this contract or
need help to resolve a problem, you can contact
us at the address or phone number above.
(Signature of John H. Biggs)
(Specimen Stamped)
Chairman and
Chief Executive Officer
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993 - SRA INDEX ON NEXT PAGE Page E1
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INDEX OF IMPORTANT TERMS AND PROVISIONS
Page
----
Accumulations
Real Estate Account................................................E5
Traditional Annuity................................................E3
Accumulation Unit
Number.............................................................E5
Definition.........................................................E5
Additional Amounts..........................................................E4
Business Day................................................................E3
Compliance with Laws and Regulations........................................E8
Death Benefit
Amount of..........................................................E6
Payment of.........................................................E6
General Account.............................................................E3
General Description.........................................................E3
Income Benefit - Amount of..................................................E6
Income Options..............................................................E6
Lump-sum Benefits
Availability of....................................................E6
Payment of.........................................................E7
Net Investment Factor.......................................................E5
Premiums - Allocation of....................................................E4
Rate Schedule
Benefits bought under..............................................E9
Change in..........................................................E8
Definition.........................................................E4
Separate Account
Charge.............................................................E5
Definition.........................................................E3
Deletion of........................................................E8
Insulation of......................................................E8
Transfers...................................................................E7
Valuation Day and Valuation Period..........................................E3
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Page E2 993 - SRA
Ed. 10-95 TIAA SRA
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Endorsement to Your TIAA
Page 3 of 9 Supplemental Retirement Annuity Contract
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The first sentence of the General Description is replaced with the following:
All premiums for this contract must be remitted under the terms of a plan that qualifies under Section 403(b) of the Internal Revenue Code of 1986 as amended or hereafter amended.
The term Accumulation is replaced with the following two terms:
Your Accumulation is equal to the sum of your Traditional Annuity Accumulation and your Real Estate Account Accumulation. Your Traditional Annuity Accumulation is guaranteed to earn interest at the rates described in your contract's Rate Schedule. Your Real Estate Account Accumulation is not guaranteed and you bear its investment risk. Your Accumulation will provide the benefits described in your contract.
Your Traditional Annuity Accumulation is the sum of:
A) all premiums allocated to the Traditional Annuity under your contract; plus
B) interest credited to the Traditional Annuity under the terms of your contract; plus
C) any Additional Amounts credited to the Traditional Annuity under your contract; plus
D) any Transfers to the Traditional Annuity under your contract; less
E) any charges for expenses and contingencies set forth in the Rate Schedule; less
F) the amount of any Lump-sum Benefits paid from the Traditional Annuity.
The following Terms Used in This Contract are added:
The General Account consists of all of TIAA's assets other than those in Separate Accounts.
Separate Account. All Premiums credited to the Real Estate Account become part of a Separate Account. The Real Estate Account is designated as "VA-2" and was established by TIAA in accordance with New York law to provide benefits under this and other contracts. The assets and liabilities of Separate Account VA-2 are segregated from the assets and liabilities of the General Account.
A Business Day is any day that the New York Stock Exchange is open for trading. A Business Day ends at 4:00 P.M. Eastern time, or when trading closes on the New York Stock Exchange, if earlier.
A Valuation Day is any business day, as well as the last calendar day of each month. A Valuation Period is the time from the end of a valuation day to the end of the next valuation day.
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Endorsement to Your TIAA Supplemental Retirement Annuity Contract Page 4 of 9 - -------------------------------------------------------------------------------- |
The Additional Amounts provision is replaced with the following:
Additional Amounts. TIAA may credit Additional Amounts to the Traditional Annuity under your contract. TIAA does not guarantee that there will be Additional Amounts. TIAA will determine at least annually if Additional Amounts will be credited.
Any Additional Amounts credited to your Traditional Annuity Accumulation will buy benefits for you based on the Rate Schedule in effect on the day the Additional Amounts are credited. Additional Amounts may also be paid with any Traditional Annuity benefits payable to you or your beneficiary.
Any Additional Amounts will be credited under a schedule of Additional Amount rates declared by TIAA. For a Traditional Annuity Accumulation in force as of the effective date of such a schedule, the Additional Amount rates will not be modified for a period of twelve months following the schedule's effective date. For any premiums, any Additional Amounts, and any transfers applied to the Traditional Annuity during the twelve-month period described in the preceding sentence, TIAA may declare Additional Amounts at rates which remain in effect through the end of such twelve-month period. Thereafter, any Additional Amount rates declared for such premiums, Additional Amounts and transfers will remain in effect for periods of twelve months or more.
The term Rate Schedule is replaced with the following:
The Rate Schedule is the part of your contract that sets forth the bases for computing the Traditional Annuity Accumulation and the Income and Death Benefits arising from it. To the extent permitted by law, TIAA may change the Rate Schedule, after no less than three months' notice to you, for any premiums, Additional Amounts, or transfers applied to the Traditional Annuity after the change. No change of Rate Schedule will affect benefits bought by premiums, Additional Amounts, or transfers applied to the Traditional Annuity prior to the change.
A provision on Allocation of Premiums is added:
Allocation of Premiums. You can allocate premiums to either the Traditional Annuity or the Real Estate Account. If you allocate premiums to the Traditional Annuity they increase your Traditional Annuity Accumulation. If you allocate premiums to the Real Estate Account they purchase Accumulation Units in the Real Estate Account. You may change your allocation at any time. TIAA will allocate premiums according to the most recent valid instructions we have received from you in an acceptable form.
TIAA may stop accepting premiums and transfers to the Real Estate Account at any time.
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Endorsement to Your TIAA
Page 5 of 9 Supplemental Retirement Annuity Contract
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Part B-2: Real Estate Account Accumulations and Units is added to your contract:
PART B-2: REAL ESTATE ACCOUNT ACCUMULATIONS AND UNITS
Accumulation Unit. The value of one Accumulation Unit is calculated at the end of each Valuation Day. The value of an Accumulation Unit is equal to the previous day's value multiplied by the Net Investment Factor for the Real Estate Account.
Your Real Estate Account Accumulation is equal to the number of Accumulation Units you own multiplied by the value of one Accumulation Unit. Real Estate Account Accumulations are variable and are not guaranteed. They may increase or decrease depending on investment results.
Net Investment Factor. The net investment factor for the Real Estate Account for a valuation period is based on the amount of accrued real estate net operating income, dividends, interest and other income accrued during the current period, a deduction of expense charges, and both realized and unrealized capital gains and losses incurred during the current period. The precise formula for the net investment factor is A divided by B, as follows:
A: The value of the Real Estate Account's net assets at the end of the current valuation period, less any premiums received during the current period.
B: The value of the Real Estate Account's net assets at the end of the previous valuation period, plus the net effect of transactions (e.g. transfers, benefit payments) made by the start of the current valuation period.
The Separate Account Charge covers mortality and expense risk, liquidity risk, and administrative and investment advisory services. TIAA, at its discretion, can increase or decrease the Separate Account Charge. The Separate Account Charge is guaranteed not to exceed 2.50% per year of net assets. The Separate Account Charge as of the effective date of this endorsement will be [0.75%] per year of the Real Estate Account's average net assets.
Number of Accumulation Units. Each premium and each transfer applied to the Real Estate Account on your behalf buys a number of Accumulation Units equal to the amount of the premium or transfer divided by the value of one Accumulation Unit as of the end of the Business Day in which the premium or transfer is credited. The number of Accumulation Units under your contract will be decreased by the application of any Accumulation Units to any benefits or transfers paid from the Real Estate Account Accumulation under your contract. Such transactions will decrease the number of Accumulation Units under your contract by an amount equal to the dollar value of the transaction divided by the value of one Accumulation Unit as of the end of the Valuation Day on which the transaction becomes effective.
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Endorsement to Your TIAA Supplemental Retirement Annuity Contract Page 6 of 9 - -------------------------------------------------------------------------------- |
The following is added to the Income Options provision:
The income options described in your contract are available from your Traditional Annuity Accumulation only. You can transfer some or all of your Real Estate Account Accumulation to your Traditional Annuity Accumulation to receive income benefits under these options.
Items A) and B) of the Amount of Your Monthly Income Benefit provision are replaced respectively with the following:
A) the amount of your Traditional Annuity Accumulation at that time;
B) the Rate Schedule or Schedules under which premiums, any Additional Amounts, and any Transfers were applied to your Traditional Annuity Accumulation;
The first sentence of the Payment of the Death Benefit provision is replaced with the following:
If you die before the Annuity Starting Date, TIAA will pay the Traditional Annuity Accumulation portion of the Death Benefit to your Beneficiary under one of the Methods of Payment set forth in the Methods of Payment provision of your contract. The Single- sum payment method is the only method available for payment of the Real Estate Account Accumulation portion of your Death Benefit. Your beneficiary can, however, transfer some or all of your Real Estate Account Accumulation to the Traditional Annuity in order to receive that portion of the Death Benefit under a Method of Payment available from the Traditional Annuity. Your beneficiary can also transfer some or all of your Real Estate Account Accumulation to CREF in order to receive that portion of the Death Benefit under a Method of Payment offered by CREF.
Items A) and B) of the Amount of Death Benefit Payments will be determined by provision are replaced respectively with the following:
A) the amount of your Traditional Annuity Accumulation as of the date of your death;
B) the Rate Schedule or Schedules under which premiums, any Additional Amounts, and any Transfers were applied to your Traditional Annuity Accumulation;
The Cash Surrender provision, the Withdrawals provision, and the Date of Surrender or Withdrawal provision are replaced with the following two provisions:
Availability of Lump-sum Benefits. You can choose to withdraw, as a Lump-sum Benefit, all or a portion of your Traditional Annuity Accumulation or your Real Estate Account Accumulation. If you withdraw your entire Accumulation all of our obligations under this contract will be fulfilled.
TIAA reserves the right to limit withdrawals from your Accumulation to not more than one in a calendar quarter. A withdrawal must be for at least $1,000 unless it is for the entire Traditional
Annuity Accumulation or the entire Real Estate Account Accumulation
available to you for withdrawal.
If you are married and your Accumulation is subject to ERISA,
your right to receive a Lump-sum Benefit is subject to the rights of
your spouse as described in your contract.
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Endorsement to Your TIAA
Page 7 of 9 Supplemental Retirement Annuity Contract
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Federal tax law may restrict distributions before age 59 1/2, as described in the Restrictions on Distribution of Accumulation Arising from Elective Deferrals provision of your contract.
Payment of the Lump-sum Benefit. TIAA will determine all values as of the end of the Business Day on which we receive, in an acceptable form:
A) your request for a Lump-sum Benefit;
B) if your Accumulation is subject to the ERISA requirements described in your contract, a Waiver of Spouses's Rights and consent to that waiver by your spouse, or proof that you aren't married.
Payment of a Lump-sum Benefit reduces the accumulation from which it is paid by the amount chosen. If you choose a Lump-sum Benefit from your Traditional Annuity Accumulation and different Rate Schedules apply to different parts of the Traditional Annuity Accumulation, the reduction will be allocated among the parts on a pro rata basis.
You can choose to defer the effective date of the Lump-sum Benefit until any Valuation Day following the date on which we receive the above requirements. TIAA will determine all values as of the end of such effective date. You cannot revoke a request for a Lump-sum benefit after its effective date.
TIAA may defer the payment of a Traditional Annuity Lump-sum Benefit for up to six months. If we defer payment for ten working days or more, interest will be credited to the amount to be paid in accordance with the Rate Schedule or Schedules that apply, but in no event at a total rate less than the rate then applicable to the Interest Payments Method of paying Death Benefits.
A provision on Transfers is added:
Transfers. On or before the commencement of annuity payments you can choose to transfer between your Traditional Annuity Accumulation and your Real Estate Account Accumulation. Such transfers can be for all of an accumulation or for any part thereof not less than $1,000.
TIAA will determine all values as of the end of the Business Day on which we receive your request for a transfer in an acceptable form. You can, however, choose to defer the effective date of the transfer until Valuation Day following the date on which we receive your request for a transfer. In that case, TIAA will determine all values as of the end of such effective date. You cannot revoke a request for a transfer after its effective date. TIAA reserves the right to limit transfers to not more than one in a calendar quarter.
A transfer reduces the accumulation from which it is paid by the amount transferred. If you transfer from your Traditional Annuity Accumulation and different Rate Schedules apply to different parts of the Traditional Annuity Accumulation, the reduction will be allocated among the parts on a pro rata basis.
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Endorsement to Your TIAA Supplemental Retirement Annuity Contract Page 8 of 9 - -------------------------------------------------------------------------------- |
The following General Provisions are added:
Deletion of the Real Estate Account. TIAA reserves the right to delete the Real Estate Account. If you own Accumulation Units in the Real Estate Account and it is deleted, you must transfer them to your Traditional Annuity Accumulation or to CREF.
Insulation of Separate Account. TIAA owns the assets in Separate Account VA-2. To the extent permitted by law, the assets of the Separate Account will not be charged with liabilities arising out of any other business TIAA may conduct. All income, gains and losses, whether or not realized, of the Separate Account will be credited to or charged against only that Account without regard to TIAA's other income, gains or losses.
The first paragraph of the Compliance with Laws and Regulations provision is replaced with the following:
TIAA will administer your contract to comply with the restrictions of all laws and regulations pertaining to the terms and conditions of your contract. You cannot elect any benefit or exercise any right under your contract if the election of that benefit or exercise of that right is prohibited under an applicable state or federal law or regulation.
The Change of Rate Schedule provision is replaced with the following:
Change of Rate Schedule. We may, at any time and from time to time,
substitute a new Rate Schedule for the one in your current contract. A
new Rate Schedule will apply only to benefits arising from any premiums,
Additional Amounts, and transfers applied to the Traditional Annuity
while such Rate Schedule is in effect. Any change in the Rate Schedule
will not affect the amount of benefits purchased prior to the change by
any premiums, Additional Amounts, and transfers applied to the
Traditional Annuity. A change in the Rate Schedule will be made only
after we have given you three months' written notice of the change. Any
such change will also be made to all other Retirement Annuity contracts
of this form. Any change in the interest rate credited before the
Annuity Starting Date or your prior death is subject to the minimum rate
specified in the applicable state nonforfeiture law, if any, or if none,
the applicable National Association of Insurance Commissioners model
nonforfeiture law. Any change in the charge for expenses or
contingencies must comply with any applicable state nonforfeiture law.
Any new Rate Schedule will specify:
A) the charges for expenses and contingencies; and
B) the interest rates and the mortality bases used for determining
Traditional
Annuity benefits arising from amounts applied to the Traditional
Annuity.
Amounts applied to the Traditional Annuity (including your Traditional Annuity
Accumulation as of the effective date of this endorsement) continue to receive
the same guarantees specified by the Rate Schedule in effect prior to the
effective date of this endorsement. The text of the Rate Schedule provision is
replaced with the following.
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Page E8 993 - SRA
Ed. 10-95 TIAA SRA
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Endorsement to Your TIAA
Page 9 of 9 Supplemental Retirement Annuity Contract
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Rate Schedule. The benefits bought by premiums allocated to the Traditional Annuity while this Rate Schedule is in effect will be computed on this basis:
(1) no deduction for expenses or contingencies;
(2) interest at the effective annual rate of 3 % from the first day of the month in which the premium is paid to the Annuity Starting Date or your prior death, and at the effective annual rate of 2 1/2 % thereafter; and
(3) mortality according to 1983 Table a (TIAA Merged Gender Mod C).
The benefits bought by Additional Amounts credited to the Traditional Annuity while this Rate Schedule is in effect will be computed on the same basis as for premiums.
The benefits bought by transfers from CREF or the Real Estate Account to the Traditional Annuity while this Rate Schedule is in effect will be computed on the same basis as for premiums except that interest will be credited from the day TIAA's General Account receives the funds transferred which is the day following the date the funds are transferred out of CREF or the Real Estate Account.
When Traditional Annuity payments start to you, or your beneficiary under an income method involving life contingencies, we will compute any benefits provided by the portion of the Traditional Annuity Accumulation resulting from amounts applied to the Traditional Annuity while this Rate Schedule is in effect on whichever of these bases produces the larger payments:
(1) the applicable interest rate and mortality tables as stated above; or
(2) the interest rate and mortality table in use by TIAA for any individual single premium immediate annuities being offered when the payments start.
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Page 1 of 9
TEACHERS INSURANCE AND ANNUITY ASSOCIATION
730 Third Avenue, New York, N.Y. 10017-3206
Telephone: 800-842-2733
|
Endorsement to Your Rollover Individual Retirement Annuity Contract
Effective Date: [October 2, 1995]
This document, called an "endorsement," changes some of the provisions of your TIAA Rollover Individual Retirement Annuity Contract and becomes part of it. It does not take away any of the rights established under your current contract. It is important that you read the endorsement, and attach it to your current contract.
In addition to the fixed-dollar Traditional Annuity previously provided under your Rollover Individual Retirement Annuity contract, TIAA now offers you the option of accumulating funds in the Real Estate Account. The Real Estate Account is a Separate Account of TIAA and is available as of the effective date of this endorsement. Its investment objective is a favorable rate of return over the long term primarily through rental income and capital appreciation of Real Estate investments owned by the Account. The Real Estate Account holds mainly income-producing real estate properties and other real estate-related investments. The annual charge for the Real Estate Account will never exceed 2.50% of the Account's average net assets.
From now on, unless we indicate otherwise, any references in your contract to your TIAA "Accumulation" should be understood to mean the total amount you have in the Traditional Annuity and the Real Estate Account combined. When we're referring to one or the other, we'll specify it as your "Traditional Annuity Accumulation" or your "Real Estate Account Accumulation".
You can allocate your future TIAA premiums to either the Traditional Annuity or the Real Estate Account as described in the provisions of this endorsement. When you apply a premium to your Real Estate Account Accumulation, you'll purchase a number of Accumulation Units representing a share in the Real Estate Account's investment portfolio. You can transfer or withdraw some or all of your Real Estate Account Accumulation subject to the limitations described in this endorsement.
Your Traditional Annuity Accumulation will continue to be credited with a guaranteed interest rate and any Additional Amounts declared by the TIAA Board of Trustees. The earnings on your Real Estate Account Accumulation, if any, will vary depending on investment results. Neither earnings nor the value of your invested principal in the Real Estate Account are guaranteed, and the value of the units you own may at any time be more or less than you paid for them.
If you have any questions about this contract or need help to resolve a problem, you can contact us at the address or phone number above.
(Signature of John H. Biggs)
(Specimen Stamped)
Chairman and
Chief Executive Officer
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993 - IRA INDEX ON NEXT PAGE Page E1
TIAA Rollover IRA Ed.10-95
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INDEX OF IMPORTANT TERMS AND PROVISIONS
Page
Accumulations
Real Estate Account...................................................E5
Traditional Annuity...................................................E3
Accumulation Unit
Number................................................................E5
Definition............................................................E5
Additional Amounts..........................................................E3
Business Day................................................................E3
Compliance with Laws and Regulations........................................E7
Death Benefit
Amount of.............................................................E6
Payment of............................................................E6
General Account.............................................................E3
Income Benefit - Amount of..................................................E6
Income Options..............................................................E6
Lump-sum Benefits
Availability of.......................................................E6
Payment of............................................................E6
Net Investment Factor.......................................................E5
Premiums - Allocation of....................................................E4
Rate Schedule
Benefits bought under.................................................E8
Change in.............................................................E8
Definition............................................................E4
Surrender charge......................................................E8
Separate Account
Charge................................................................E5
Definition............................................................E3
Deletion of...........................................................E7
Insulation of.........................................................E7
Surrender Charge - Defined..................................................E4
Transfers...................................................................E7
Valuation Day or Valuation period...........................................E3
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Page E2 993 - IRA
Ed. 10-95 TIAA Rollover IRA
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Endorsement to Your TIAA
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The term Accumulation is replaced with the following two terms:
Your Accumulation is equal to the sum of your Traditional Annuity Accumulation and your Real Estate Account Accumulation. Your Traditional Annuity Accumulation is guaranteed to earn interest at the rates described in the Contract's Rate Schedule. Your Real Estate Account Accumulation is not guaranteed and you bear its investment risk. Your Accumulation will provide the benefits described in your contract.
Your Traditional Annuity Accumulation is equal to:
A) all premiums allocated to the Traditional Annuity under your contract; plus
B) interest credited to the Traditional Annuity under the terms of your contract; plus
C) any Additional Amounts credited to the Traditional Annuity under your contract; plus
D) any Transfers to the Traditional Annuity under your contract; less
E) any charges for expenses and contingencies set forth in the Rate Schedule; less
F) the amount of any Lump-sum Benefits paid from the Traditional Annuity Accumulation; less
G) any Surrender Charge assessed.
The following Terms Used in This Contract are added:
The General Account consists of all of TIAA's assets other than those in Separate Accounts.
Separate Account. All Premiums credited to the Real Estate Account become part of a Separate Account. The Real Estate Account is designated as "VA-2" and was established by TIAA in accordance with New York law to provide benefits under this contract and other contracts. The assets and liabilities of Separate Account VA-2 are segregated from the assets and liabilities of the General Account.
A Business Day is any day that the New York Stock Exchange is open for trading. A Business Day ends at 4:00 P.M. Eastern time, or when trading closes on the New York Stock Exchange, if earlier.
A Valuation Day is any business day, as well as the last calendar day of each month. A Valuation Period is the time from the end of a valuation day to the end of the next valuation day.
The Additional Amounts provision is replaced with the following:
Additional Amounts. TIAA may credit Additional Amounts to the Traditional
Annuity under your contract. TIAA does not guarantee that there will be
Additional Amounts. TIAA will determine at least annually if Additional
Amounts will be credited.
Any Additional Amounts credited to your Traditional Annuity
Accumulation will buy benefits for you based on the Rate Schedule in effect
on the day the Additional Amounts
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TIAA Rollover IRA Ed. 10-95
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Endorsement to Your TIAA Rollover Individual Retirement Annuity Contract Page 4 of 9 - -------------------------------------------------------------------------------- |
are credited. Additional Amounts may also be paid with any Traditional Annuity benefits payable to you or your beneficiary.
Any Additional Amounts will be credited under a schedule of Additional Amount rates declared by TIAA. For a Traditional Annuity Accumulation in force as of the effective date of such a schedule, the Additional Amount rates will not be modified for a period of twelve months following the schedule's effective date. For any premiums, any Additional Amounts, and any transfers applied to the Traditional Annuity during the twelve-month period described in the preceding sentence, TIAA may declare Additional Amounts at rates which remain in effect through the end of such twelve-month period. Thereafter, any Additional Amount rates declared for such premiums, Additional Amounts and transfers will remain in effect for periods of twelve months or more.
The term Rate Schedule is replaced with the following:
The Rate Schedule is the part of your contract that sets forth the bases for computing the Traditional Annuity Accumulation, and the Income, Death, and Lump-sum Benefits arising from it. To the extent permitted by law, TIAA may change the Rate Schedule, after no less than three months' notice to you, for any premiums, Additional Amounts, or transfers applied to the Traditional Annuity after the change. No change of Rate Schedule will affect benefits bought by premiums, Additional Amounts, or transfers applied to the Traditional Annuity prior to the change.
The provisions concerning changes in the Rate Schedule are set forth in Section 52 of your contract.
The term Surrender Charge is replaced with the following:
A Surrender Charge will be assessed against the portion of your Traditional
Annuity Accumulation withdrawn to provide any Lump-sum benefit, as shown in
the Rate Schedule.
A provision on Allocation of Premiums is added:
Allocation of Premiums. You can allocate premiums to either the Traditional
Annuity or the Real Estate Account. If you allocate premiums to the
Traditional Annuity they increase your Traditional Annuity Accumulation. If
you allocate premiums to the Real Estate Account they purchase Accumulation
Units in the Real Estate Account. You may change your allocation at any
time. TIAA will allocate premiums according to the most recent valid
instructions we have received from you in an acceptable form.
TIAA may stop accepting premiums and transfers to the Real Estate
Account at any time.
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Page E4 993 - IRA
Ed. 10-95 TIAA Rollover IRA
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Endorsement to Your TIAA
Page 5 of 9 Rollover Individual Retirement Annuity Contract
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|
Part B-2: Accumulations and Real Estate Account Unit-Annuities is added to your
Contract:
PART B-2: ACCUMULATIONS AND REAL ESTATE ACCOUNT UNITS
Accumulation Unit. The value of one Accumulation Unit is calculated at the end of each Valuation Day. The value of an Accumulation Unit is equal to the previous day's value multiplied by the Net Investment Factor for the Real Estate Account.
Your Real Estate Account Accumulation is equal to the number of Accumulation Units you own multiplied by the value of one Accumulation Unit. Real Estate Account Accumulations are variable and are not guaranteed. They may increase or decrease depending on investment results.
Net Investment Factor. The net investment factor for the Real Estate Account for a valuation period is based on the amount of accrued real estate net operating income, dividends, interest and other income accrued during the current period, a deduction of expense charges, and both realized and unrealized capital gains and losses incurred during the current period. The precise formula for the net investment factor is A divided by B, as follows:
A: The value of the Real Estate Account's net assets at the end of the
current valuation period, less any premiums received during the
current period.
B: The value of the Real Estate Account's net assets at the end of the
previous valuation period, plus the net effect of transactions (e.g.
transfers, benefit payments) made by the start of the current valuation
period.
The Separate Account Charge covers mortality and expense risk, liquidity risk,
and administrative and investment advisory services. TIAA, at its discretion,
can increase or decrease the Separate Account Charge. The Separate Account
Charge is guaranteed not to exceed 2.50% per year of net assets. The Separate
Account Charge as of the effective date of this endorsement will be [0.75%] per
year of the Real Estate Account's average net assets.
Number of Accumulation Units. Each premium and each transfer applied to the Real
Estate Account on your behalf buys a number of Accumulation Units equal to the
amount of the premium or transfer divided by the value of one Accumulation Unit
as of the end of the Business Day in which the premium or transfer is credited.
The number of Accumulation Units under your contract will be decreased by the
application of any Accumulation Units to any benefits or transfers paid from the
Real Estate Account Accumulation under your contract. Such transactions will
decrease the number of Accumulation Units under your contract by an amount equal
to the dollar value of the transaction divided by the value of one Accumulation
Unit as of the end of the Valuation Day on which the transaction becomes
effective.
The following is added to the Income Options provision:
The income options described in your contract are available from your
Traditional Annuity Accumulation only. You can transfer some or all of your
Real Estate Account Accumulation to your Traditional Annuity Accumulation
to receive income benefits under these options.
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Endorsement to Your TIAA Rollover Individual Retirement Annuity Contract Page 6 of 9 - -------------------------------------------------------------------------------- |
Items A) and B) of the Amount of Your Monthly Income Benefit provision are replaced respectively with the following:
A) the amount of your Traditional Annuity Accumulation;
B) the Rate Schedule or Schedules under which premiums, any Additional Amounts, and any Transfers were applied to your Traditional Annuity Accumulation;
The first sentence of the Payment of the Death Benefit provision is replaced with the following:
If you die before the Annuity Starting Date, TIAA will pay the Traditional Annuity Accumulation portion of the Death Benefit to your Beneficiary under one of the Methods of Payment set forth in the Methods of Payment provision of your contract. The Single-sum payment method is the only method available for payment of the Real Estate Account Accumulation portion of your Death Benefit. Your beneficiary can, however, transfer some or all of your Real Estate Account Accumulation to the Traditional Annuity in order to receive that portion of the Death Benefit under a Method of Payment available from the Traditional Annuity. Your beneficiary can also transfer some or all of your Real Estate Account Accumulation to CREF in order to receive that portion of the Death Benefit under a Method of Payment offered by CREF.
Items A) and B) of the Amount of Death Benefit Payments provision are replaced respectively with the following:
A) the amount of your Traditional Annuity Accumulation;
B) the Rate Schedule or Schedules under which premiums, any Additional Amounts, and any Transfers were applied to your Traditional Annuity Accumulation;
The Availability of Lump-sum Benefit provision is replaced with the following:
Availability of Lump-sum Benefit. You can choose to withdraw as a Lump-sum Benefit all of your Traditional Annuity Accumulation or all of your Real Estate Account Accumulation or any part of either not less than $1,000. TIAA reserves the right to limit Lump-sum Benefits from your Real Estate Account Accumulation to not more than one in a calendar quarter.
The Payment of the Lump-sum Benefit provision is replaced with the following:
Payment of the Lump-sum Benefit. If you choose the Lump-sum Benefit from
your Real Estate Account Accumulation we will pay the amount you choose. If
you choose the Lump-sum Benefit from your Traditional Annuity Accumulation
we will pay the amount you choose less any Surrender Charge in accordance
with the applicable Rate Schedule or Schedules.
Payment of a Lump-sum Benefit will be made as of the day we receive
your request for a Lump-sum Benefit in an acceptable form. You can choose
to defer the effective date of the Lump-sum Benefit until any Valuation Day
following the date on which we receive your request. TIAA will determine
all values as of the end of such effective date. You cannot revoke a
request for a Lump-sum benefit after its effective date.
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Page E6 993 - IRA
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Endorsement to Your TIAA
Page 7 of 9 Rollover Individual Retirement Annuity Contract
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Payment of a Lump-sum Benefit reduces the accumulation from which it is paid by the amount chosen. If you choose a Lump-sum Benefit from your Traditional Annuity Accumulation and different Rate Schedules apply to different parts of your Traditional Annuity Accumulation, the reduction will be allocated among the parts on a pro rata basis.
If your entire Accumulation is withdrawn as a Lump-sum Benefit, all obligations of TIAA to you under your contract are fulfilled. TIAA reserves the right to defer the payment of a Lump-sum Benefit from your Traditional Annuity Accumulation for up to six months.
A provision on Transfers is added:
Transfers. You can choose to transfer between your Traditional Annuity Accumulation and your Real Estate Account Accumulation. Such transfers can be for all of an accumulation or for any part thereof not less than $1,000. If you choose to transfer from your Traditional Annuity Accumulation we will apply to the Real Estate Account the amount to be transferred less any Surrender Charge in accordance with the applicable Rate Schedule or Schedules. No surrender charge applies to any transfer from your Real Estate Accumulation.
TIAA will determine all values as of the end of the Business Day on which we receive your request for a transfer in an acceptable form. You can, however, choose to defer the effective date of the transfer until any Valuation Day following the date on which we receive your request. In that case, TIAA will determine all values as of the end of such effective date. You cannot revoke a request for a transfer after its effective date. TIAA reserve the right to limit transfers to not more than one in a calendar quarter.
A transfer reduces the accumulation from which it is paid by the amount transferred. If you transfer from your Traditional Annuity Accumulation and different Rate Schedules apply to different parts of the Traditional Annuity Accumulation, the reduction will be allocated among the parts on a pro rata basis.
The following General Provisions are added:
Deletion of the Real Estate Account. TIAA reserves the right to delete the Real Estate Account. If you own Accumulation Units in the Real Estate Account and it is deleted, you must transfer them to your Traditional Annuity Accumulation or to CREF.
Insulation of Separate Account. TIAA owns the assets in Separate Account VA-2. To the extent permitted by law, the assets of the Separate Account will not be charged with liabilities arising out of any other business TIAA may conduct. All income, gains and losses, whether or not realized, of the Separate Account will be credited to or charged against only that Account without regard to TIAA's other income, gains or losses.
The first paragraph of the Compliance with Laws and Regulations provision is replaced with the following:
TIAA will administer your contract to comply with the restrictions of all
laws and regulations pertaining to the terms and conditions of your
contract. You cannot elect any benefit or exercise any right under your
contract if the election of that benefit or exercise
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993 - IRA Page E7
TIAA Rollover IRA Ed. 10-95
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Endorsement to Your TIAA Rollover Individual Retirement Annuity Contract Page 8 of 9 - ------------------------------------------------------------------------------ |
of that right is prohibited under an applicable state or federal law or regulation.
The Change of Rate Schedule provision is replaced with the following:
Change of Rate Schedule. We may, at any time and from time to time,
substitute a new Rate Schedule for the one in your current contract. A new
Rate Schedule will apply only to benefits arising from any premiums,
Additional Amounts , and transfers applied to the Traditional Annuity while
such Rate Schedule is in effect. Any change in the Rate Schedule will not
affect the amount of benefits purchased prior to the change by any
premiums, Additional Amounts, and transfers applied to the Traditional
Annuity. A change in the Rate Schedule will be made only after we have
given you three months' written notice of the change. Any change in the
interest rate credited before the Annuity Starting Date or your prior death
is subject to the minimum rate specified in the applicable state
nonforfeiture law, if any, or if none, the applicable National Association
of Insurance Commissioners model nonforfeiture law. Any change in the
charge for expenses or contingencies, or in the Surrender Charge, must
comply with any applicable state nonforfeiture law.
Any new Rate Schedule will specify:
A) the charges for expenses and contingencies;
B) the interest rates and the mortality bases used for determining
Traditional Annuity benefits arising from amounts applied to the
Traditional Annuity; and
C) any applicable Surrender Charges on Lump-sum Benefits arising from
amounts applied to the Traditional Annuity.
Amounts applied to the Traditional Annuity (including your Traditional Annuity
Accumulation as of the effective date of this endorsement) continue to receive
the same guarantees specified by the Rate Schedule in effect prior to the
effective date of this endorsement. The text of the Rate Schedule provision is
replaced with the following.
Rate Schedule. The benefits bought by premiums, Additional Amounts, and
transfers applied to the Traditional Annuity while this Rate Schedule is in
effect will be computed on this basis:
(1) no deduction for expenses or contingencies;
(2) interest at the effective annual rate of 3 % from the day on
which the premium is paid or the Additional Amount or transfer is
credited to the Annuity Starting Date or your prior death, and at
the effective annual rate of 2 1/2 % thereafter; and
(3) mortality according to 1983 Table a (TIAA Merged Gender Mod C).
A Surrender Charge of 0% will be assessed against the portion of your
Traditional Annuity Accumulation withdrawn to provide any Lump-sum Benefit
(whether paid as cash, as a transfer, as a rollover, or in any other form)
arising from premiums, Additional Amounts, and transfers applied to the
Traditional Annuity while this Rate Schedule is in
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Page E8 993 - IRA
Ed. 10-95 TIAA Rollover IRA
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Endorsement to Your TIAA
Page 9 of 9 Rollover Individual Retirement Annuity Contract
- --------------------------------------------------------------------------------
effect.
When Traditional Annuity payments start to you, or your beneficiary under
an income method involving life contingencies, we will compute any benefits
provided by the portion of the Traditional Annuity Accumulation resulting
from all premiums, Additional Amounts, and transfers applied to the
Traditional Annuity while this Rate Schedule is in effect on whichever of
these bases produces the largest payments:
(1) the applicable interest rate and mortality tables, as stated
above; or
(2) the interest rate and mortality table in use by TIAA for any
individual ingle premium immediate annuities being offered when
the payments start.
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993 - IRA Page E9
TIAA Rollover IRA Ed. 10-95
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EXHIBIT 4(B)
Teachers Insurance and Annuity Association 730 Third Avenue, New York, N.Y. 10017 Telephone: 800-842-2733
Real Estate Account Unit-Annuity Certain
Contract Date of Issue Frequency of Date of First Payment Date of Last Payment
Number Mo. Day Yr. Payment Mo. Day Yr. Mo. Day Yr.
[Y000000-R 10 02 1995 Monthly 10 02 1995 10 02 2015]
Annuitant [DOE, JANE M]
[1.256] [$100.00]
Annuity Units Amount of First
Payable Annuity Payment
|
This is a contract between you, as its owner and Annuitant, and Teachers Insurance and Annuity Association of America (TIAA). The main features of your contract are described here. The next pages detail the rights and obligations the contract establishes for both you and TIAA.
PLEASE READ YOUR CONTRACT. IT IS IMPORTANT.
GENERAL DESCRIPTION
Your contract creates a unit-annuity that will provide you with an
income, while you are living, for a specified period. If you die within this
period, unit-annuity payments will continue to your beneficiary until the end of
the period; or your beneficiary can take the "commuted" (discounted) value of
the remaining unit-annuity payments in one sum (unless otherwise indicated on
page 5). Unit-annuity payments start as of the date of first payment shown
above.
You or, after your death, your beneficiary(ies), will be paid an income
based on the number of annuity units payable. The number of annuity units
payable as of the date of issue is shown above. The amount payable per annuity
unit will vary depending on the investment results of the Real Estate Account.
Initial payments are calculated using an assumed net annual investment return of
4%. If net annual investment returns exceed 4%, the amount payable per annuity
unit will increase. If net annual investment returns are less than 4%, the
amount payable per annuity unit will decrease. Expense charges will reduce the
net annual investment return. The annual expense charge will never exceed 2.50%
of the average net annual assets of the Real Estate Account.
This contract does not guarantee any specific dollar amount of unit-annuity
payments. It cannot be assigned to anyone else and you cannot use it as
collateral for a loan.
If you have any questions about this contract or need help to resolve a problem,
you can contact us at the address or phone number above.
(Specimen Stamped)
John H. Biggs
Chairman and
Chief Executive Officer
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TIAA REA AC Ed. 10-95
|
INDEX OF IMPORTANT TERMS AND PROVISIONS
Section
Amount of Unit-Annuity Payments...............................................19
Annuity Unit Values...........................................................20
Assignment - No provision for.................................................23
Business day...................................................................5
Claims of Creditors - Protection against......................................27
Commuted Values...............................................................16
Consideration.............................................................Page 3
Correspondence and Requests for Benefits......................................30
Deletion of the Real Estate Account...........................................29
Endorsements and Amendments...................................................25
Final Payment..................................................................9
First Payment..................................................................8
Frequency of Payment..........................................................10
Annuity Units.................................................................18
General Account................................................................3
Loans - No provision for......................................................24
Naming Beneficiaries..........................................................14
Net Investment Factor..........................................................7
Ownership.....................................................................22
Payments
-- to an Estate, Trustee, etc...............................................28
-- to Annuitant.............................................................11
-- to Beneficiary...........................................................13
Procedure for Elections and Changes...........................................21
Proof of Survival.............................................................15
Real Estate Account............................................................1
Separate Account
-- defined...................................................................2
-- Charge...............................................................Page 3
-- Insulation of.............................................................4
Service of Process upon TIAA..................................................26
Unit-Annuity..................................................................17
Valuation Day or Valuation Period..............................................6
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Page 2 901 - REA
Ed 10-95 TIAA REA AC
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PART A: Annuitant Data
Contract Date of Issue Frequency of Date of First Payment Date of Last payment
Number Mo. Day Yr. Payment Mo. Day Yr. Mo. Day Yr.
------ --------------- ------- --------------- ---------------
[Y000000-R 10 02 1995 Monthly 10 02 1995 10 02 2015]
Date of Birth
Mo. Day Yr.
Annuitant [DOE, JANE M] [03 01 1927]
Amount of First Unit-Annuity Payment: $[100.00]
Annuitant's Social Security Number: [000-00-0000]
Number of Annuity Units Payable: [1.256]
|
Consideration. TIAA has issued this contract in exchange for proceeds of
[$10,000] from your accumulating ("pay-in") annuity under [TIAA contract number
x-xxxxxxx-x]. This fulfills all obligations under that contract for the amount
converted. TIAA has accepted the consideration for your contract at its home
office in New York, New York.
(following text bracketed in document)
or, for issues arising from post-retirement transfers:
Consideration. TIAA has issued this contract in exchange for applying the value of [4.758] annuity units payable [monthly] from the CREF [Stock] Account under your CREF Unit- Annuity Certain Certificate number [x-xxxxxx-x]. This fulfills all obligations of CREF under that certificate for those annuity units. TIAA has accepted the consideration for your contract at its home office in New York, New York.
(end of bracketed text)
Separate Account Charge. The separate account charge covers mortality and expense risk, liquidity risk and administrative and investment advisory services. TIAA, at its discretion, can increase or decrease the separate account charge. The separate account charge is guaranteed not to exceed 2.50% per year of net assets. The separate account charge as of the effective date of this contract is [0.75%] per year of the Real Estate Account's average net assets. - -------------------------------------------------------------------------------- 901 - REA Page 3 TIAA REA AC Ed 10-95 |
Your TIAA Real Estate Account Unit-Annuity Certain Contract - -------------------------------------------------------------------------------- |
This page is intentionally blank.
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Beneficiary Designation. You have named the following beneficiary(ies), effective as of your contract's date of issue. If you die before the end of your contract's guaranteed period, your beneficiary(ies) are entitled to receive continuing unit-annuity payments through the date of last payment or to take their commuted value in one sum unless otherwise specified below. See section for more information.
PRIMARY BENEFICIARY(IES)
NAME RELATIONSHIP TO YOU SOCIAL SECURITY NUMBER
[John Doe Husband 000-00-0000]
CONTINGENT BENEFICIARY(IES)
NAME RELATIONSHIP TO YOU SOCIAL SECURITY NUMBER
[Jim Doe Son 000-00-0000]
[Jane Doe Daughter 000-00-0000]
[The following provision will appear if the annuitant does not want a beneficiary to be able to choose a lump sum.] No Commuted Values: No beneficiary can elect a commuted value under this contract. [The following provision will appear if the beneficiary must receive a lump sum - - generally for an estate or institution as beneficiary.] Automatic Commuted Value: Each beneficiary under this contract will receive his or her share of the commuted value of any unit-annuity payments remaining due on the death of the annuitant. - -------------------------------------------------------------------------------- 901 - REA Page 5 TIAA REA AC Ed 10-95 |
Your TIAA Real Estate Account Unit-Annuity Certain Contract - -------------------------------------------------------------------------------- |
Additional Provisions
It is understood and agreed that if you designate a testamentary trustee or an inter vivos trustee as beneficiary:
(A) TIAA will not be obliged to inquire into the terms of any will or of any trust affecting this contract or its death benefits and will not be charged with knowledge of terms thereof.
(B) If benefits become payable to a testamentary trustee and:
(I) the will is not presented for probate within 90 days following the date of your death;
(II) the will has been presented for probate within the aforesaid 90 days and no qualified trustee makes claim for the benefits within nine months after your death; or
(III) if evidence satisfactory to TIAA is furnished TIAA within such nine-month period that no trustee can qualify to receive the benefits,
payment will be made to the successor beneficiary(ies) you designated on page 5, if any such beneficiary(ies) are designated and survive you; otherwise to the executors or administrators of your estate.
(C) If benefits become payable to an inter vivos trustee and:
(I) the trust agreement is not in effect;
(II) no trustee can qualify to receive the benefits; or
(III) the qualified trustee is not willing to accept the
benefits,
payment will be made to the successor beneficiary(ies) you designated
on page 5, if any such beneficiary(ies) are designated and survive you;
otherwise to the executors or administrators of your estate.
(D) Payment to and receipt by a trustee, successor beneficiary, executor,
or administrator, as provided for in (B) or (C) above, will fully
discharge TIAA from all liability to the extent of such payment. TIAA
will have no obligations as to the application of funds so paid. TIAA
will, in all dealings with a trustee, executor or administrator,
including but not limited to any consent, release or waiver of
interest, be fully protected against the claims or demands of any other
person or persons.
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PART B: The Real Estate Account
1. Real Estate Account. The Real Estate Account is a Separate Account of TIAA. Its investment objective is a favorable rate of return over the long term primarily through rental income and capital appreciation of real estate investments owned by the Account. The Real Estate Account holds mainly income-producing real estate properties and other real estate-related investments. The annual charge for the Real Estate Account will never exceed 2.50% of the Account's average net assets.
2. Separate Account. All considerations credited to the Real Estate Account become part of a separate account. The Real Estate Account is designated as VA-2 and was established by TIAA in accordance with New York law to provide benefits under this contract and other similar contracts. The assets and liabilities of separate account VA-2 are segregated from the assets and liabilities of the general account.
3. General Account. The general account consists of all of TIAA's assets other than those in separate accounts.
4. Insulation of Separate Account. TIAA owns the assets in separate account VA-2. To the extent permitted by law, the assets of the separate account will not be charged with liabilities arising out of any other business TIAA may conduct. All income, gains and losses, whether or not realized, of the separate account will be credited to or charged against only that Account without regard to TIAA's other income, gains or losses.
5. Business Day. A business day is any day that the New York Stock Exchange is open for trading. A business day ends at 4:00 p.m. Eastern time, or when trading closes on the New York Stock Exchange, if earlier.
6. Valuation Day. A valuation day is any business day, as well as the last calendar day of each month. A Valuation Period is the time from the end of a valuation day to the end of the next valuation day.
7. Net Investment Factor. The net investment factor for the Real Estate Account for a valuation period is based on the amount of accrued real estate net operating income, dividends, interest and other income accrued during the current period, a deduction of expense charges, and both realized and unrealized capital gains and losses incurred during the current period. The precise formula for the net investment factor is A divided by B, as follows:
A: The value of the Real Estate Account's net assets at
the end of the current valuation period, less any
premiums received during the current period.
B: The value of the Real Estate Account's net assets at
the end of the previous valuation period, plus the
net effect of transactions (e.g.
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transfers, benefit payments) made by the start of the
current valuation period.
PART C: When Unit-Annuity Payments Are Made
8. First Payment. This contract is effective as of the date of issue shown
on page 3, if you are then alive. Your unit-annuity payments will begin
as of the date of first payment shown on page 3.
9. Final Payment. The final unit-annuity payment under this contract will
be the one due on the date of last payment shown on page 3, unless you
die before that date, and your beneficiary(ies) take the commuted value
of the remaining unit-annuity payments in one sum.
10. Frequency of Payment. The frequency of unit-annuity payments, as of
your contract's date of issue, appears on page 3. You or, after your
death, your beneficiary(ies) can ask to change the frequency of
unit-annuity payments -- the choices are annually, semi-annually,
quarterly, or monthly. However, TIAA can decline changes that would
result in fewer unit-annuity payments per year. TIAA can also decline
any change that would result in unit-annuity payments of less than $25.
PART D: To Whom Unit-Annuity Payments Are Made
11. Payments Made to Annuitant. We will make unit-annuity payments to you
until the date of last payment, as long as you are alive.
12. Surrender Right. Unless otherwise specified on page 5, you may
surrender this contract for a one-sum payment. This payment will be
equal to the commuted value of all remaining unit-annuity payments. A
surrender may be made without regard to the interest of any
beneficiary.
13. Payments Made to Beneficiaries. If you die before the date of last
payment, we will make unit-annuity payments to your beneficiary or
beneficiaries until the date of last payment. Or in place of continuing
unit-annuity payments, beneficiaries can take the commuted (discounted)
value of the remaining unit-annuity payments in one sum (unless noted
otherwise on page 5).
If you die before the date of last payment but have outlived
all your beneficiaries, we will pay the commuted value of the remaining
unit-annuity payments to your estate. If you die and a beneficiary
subsequently dies before the date of last payment, we will pay the
commuted value of the remaining unit-annuity payments due to him or her
to any other surviving person or persons named to receive it. If no one
has been named or no one so named is then living, the commuted value
will go to such beneficiary's estate.
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14. Naming Beneficiaries. You can name two kinds or "classes" of
beneficiaries, primary and contingent, which set the order of payment.
If a class contains more than one person, any payments still
outstanding at your death will go in equal shares to the then living
persons in the class, unless you have explicitly provided otherwise.
For example, if you name your spouse as primary beneficiary and "my
children" as contingent beneficiaries, your spouse would get any
payments remaining if you die before the date of last payment. But if
your spouse had died before you, then your surviving children would
receive equal shares of your unit-annuity's remaining payments.
You can use the terms "children" or "my children" to name
either primary or contingent beneficiaries. Unless you specify
otherwise, we will interpret this to mean all children born of all your
marriages, as well as any children legally adopted by you. The term
"children" also has the same inclusive meaning if you use it to name
the children of your spouse, your child, your brother or your sister as
your beneficiaries.
The beneficiaries you named as of your unit-annuity contract's
date of issue appear on page 5. Unless you have made your beneficiary
designation irrevocable, you can change, add, or delete beneficiaries
as explained in section 21.
15. Proof of Survival. TIAA reserves the right to require satisfactory
proof that anyone you have named to receive payments under your
unit-annuity contract is alive on the date each payment is due. If we
do not receive such proof after we have requested it in writing, we can
withhold payments entirely until it has been provided.
16. Commuted Values. The commuted value of your unit-annuity is an amount
paid at once instead of as a series of payments. We calculate the
commuted value of a unit-annuity as of the end of a valuation day as
the present value, on the basis of interest at the effective annual
rate of 4%, of the unit-annuity payments due until the date of last
payment. The dollar values used for the payments in the calculation
assume that the annuity unit value will remain at the current level.
PART E: How Are Unit-Annuity Payment Amounts Determined
17. Unit-Annuity. A Real Estate Account unit-annuity is a series of
payments based on a number of annuity units whose value changes based
on the investment performance of the Real Estate Account. The actual
mortality and expense experience of the Real Estate Account will not
reduce the amount payable per annuity unit.
18. Annuity Units. The annuity unit is the basic unit of payment for a Real
Estate Account unit-annuity. As of your contract's date of issue, the
number of annuity units payable to you in each unit-annuity payment as
of the date of issue is shown on page 3.
19. Amount of Unit-Annuity Payments. The dollar amount of each unit-annuity
payment will be based on the number of annuity units payable under your
contract. The initial amount of your unit-annuity payments, as shown on
page 3, is equal to the number of annuity units payable under your
contract, as of its date of issue, multiplied by the
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annuity unit value calculated as of the day before the date of issue. Thereafter, the amount payable per annuity unit will be redetermined each year. Each May 1, the unit- annuity payment amount will be reset
to equal the number of annuity units payable under your contract
multiplied by the annuity unit value calculated as of the preceding
March 31. The amount payable per annuity unit will then remain at that
level through the following April 30.
20. Annuity Unit Values. The Real Estate Account's annuity unit value as of
the end of each month will be determined by multiplying the annuity
unit value at the end of the previous month by the Real Estate
Account's net investment factor for the month, and dividing the result
by the value of $1.00 accumulated with interest over the month at an
effective annual rate of 4%. The resulting value is then further
adjusted to account for the difference between the unit-annuity
payments the Real Estate Account will actually make the next day, and
the unit-annuity payments that would have been made if all unit-annuity
payments were based on the current annuity unit value.
PART F: General Provisions
21. Procedure for Elections and Changes. You (or your beneficiary(ies)
after you've died) have to make any choice or changes available under
your contract in a form acceptable to TIAA at our home office in New
York, NY. If you (or your beneficiary(ies) after you've died) send us a
notice changing your beneficiary or other persons named to receive
payments, it will take effect as of the date it was signed even if you
(or other signer) should then die before the notice actually reaches
TIAA. Any other notice will take effect as of the date TIAA receives
it. If TIAA takes any action in good faith before receiving your
notice, we will not be subject to liability even if our acts were
contrary to what you told us in the notice.
22. Ownership. You own this contract. During your lifetime you can exercise
every right given by it without the consent of any other person, to the
extent permitted by law.
23. No Assignment. Neither you nor any other person may assign, pledge, or
transfer ownership of this contract or any benefits under its terms.
Any such action will be void and of no effect.
24. No Loans. You cannot use this contract to secure a loan.
25. Endorsements and Amendments. Any endorsement or amendment of this
contract or waiver of any of its provisions will be valid only if in
writing and signed by an Executive Officer or Registrar of TIAA.
26. Service of Process upon TIAA. We will accept service of process in
actions or suits against us on this contract in any court of competent
jurisdiction in the United States or Puerto Rico provided the process
is properly made. We will also accept process sent to
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us by registered mail if the plaintiff is a resident of the state,
district, territory, or province in which the action or suit is
brought. This section does not waive any of our rights, including the
right to remove such action or suit to another court.
27. Protection Against Claims of Creditors. Your benefits and rights under
your contract are exempt from the claims of creditors or legal process
to the fullest extent permitted by law.
28. Payment to an Estate, Trustee, etc. TIAA reserves the right to pay in
one sum the commuted value of any unit-annuity payments due an estate,
corporation, partnership, trustee or other entity not a natural person.
TIAA will not be responsible for the acts or neglects of any executor,
trustee, guardian, or other third party receiving payments under your
contract.
29. Deletion of the Real Estate Account. TIAA reserves the right to stop
providing unit- annuities in the Real Estate Account. If the Real
Estate Account stops providing unit - annuities, any remaining
unit-annuity payments due under this contract must be converted to a
TIAA fixed-dollar Annuity Certain or a CREF Unit-Annuity Certain with
the same date of last payment as under this contract.
30. Correspondence and Requests for Benefits. TIAA deems notices,
applications, forms, or requests for benefits as received only when
they reach our home office. Please send any questions about your
contract or TIAA products and services to:
TIAA
730 Third Avenue
New York, NY 10017-3206
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Teachers Insurance and Annuity Association
730 Third Avenue, New York, N.Y. 10017
Telephone: 800-842-2733
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Real Estate Account One-Life Unit-Annuity
Contract Date of Issue Frequency of Guaranteed Date of First Payment
Number Mo. Day Yr. Payment Period Mo. Day Yr.
[Y000000-R 10 02 1995 Monthly NONE 10 02 1995]
Annuitant [DOE, JANE M]
[1.256] [$100.00]
Annuity Units Amount of First
Payable Annuity Payment
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This is a contract between you, as its owner and annuitant, and Teachers Insurance and Annuity Association of America (TIAA). The main features of your contract are described here. The next pages detail the rights and obligations the contract establishes for both you and TIAA.
PLEASE READ YOUR CONTRACT. IT IS IMPORTANT.
GENERAL DESCRIPTION
Your contract creates a unit-annuity that will provide you with an
income for life. Unit-annuity payments start as of the date of first payment
shown above. If you've opted for a guaranteed period and you die before it's
over, unit-annuity payments will continue to your beneficiary until the end of
the period; or your beneficiary can take the "commuted" (discounted) value of
the remaining unit-annuity payments in one sum (unless otherwise indicated on
page 5). If your contract doesn't have a guaranteed period, no further payments
will go to anyone after your death.
You (or, after your death, your beneficiary(ies)) will be paid an
income based on the number of annuity units payable. The number of annuity units
payable as of the date of issue is shown above. The amount payable per annuity
unit will vary depending on the investment results of the Real Estate Account.
Initial payments are calculated using an assumed net annual investment return of
4%. If net annual investment returns exceed 4%, the amount payable per annuity
unit will increase. If net annual investment returns are less than 4%, the
amount payable per annuity unit will decrease. Expense charges will reduce the
net annual investment return. The annual expense charge will never exceed 2.5%
of the average net annual assets of the Real Estate Account.
This contract does not guarantee any specific dollar amount of unit-annuity
payments. It cannot be assigned to anyone else and you cannot use it as
collateral for a loan.
If you have any questions about this contract or need help to resolve a problem,
you can contact us at the address or phone number above.
(Signature of John H. Biggs)
(Specimen Stamped)
Chairman and
Chief Executive Officer
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INDEX OF PROVISIONS
Section
Amount of Unit-Annuity Payments...............................................19
Annuity Unit Values...........................................................20
Assignment - No provision for.................................................24
Business day.................................................................. 5
Claims of Creditors - Protection against......................................28
Commuted Values...............................................................16
Consideration.............................................................Page 3
Correspondence and Requests for Benefits......................................31
Deletion of the Real Estate Account...........................................30
Endorsements and Amendments...................................................26
Final Payment.................................................................10
First Payment................................................................. 8
Frequency of Payment..........................................................11
Annuity Units.................................................................18
General Account............................................................... 3
Guaranteed Period............................................................. 9
Loans - No provision for......................................................25
Naming Beneficiaries..........................................................14
Net Investment Factor......................................................... 7
Ownership.....................................................................23
Payments
-- Based on Incorrect Data..................................................21
-- to an Estate, Trustee, etc...............................................29
-- to Annuitant.............................................................12
-- to Beneficiary...........................................................13
Procedure for Elections and Changes...........................................22
Proof of Survival.............................................................15
Real Estate Account........................................................... 1
Separate Account
-- defined.................................................................. 2
-- Charge...............................................................Page 3
-- Insulation of............................................................ 4
Service of Process upon TIAA..................................................27
Unit-Annuity..................................................................17
Valuation Day or Valuation Period............................................. 6
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PART A: Annuitant Data
Contract Date of Issue Frequency of Guaranteed Date of First Payment Number Mo. Day Yr. Payment Period Mo. Day Yr.
[Y000000-R 10 02 1995 Monthly NONE 10 02 1995]
Date of Birth Mo. Day Yr.
Annuitant [DOE, JANE M] [03 01 1927]
Amount of First Unit-Annuity Payment: [$ 100.00]
Annuitant's Social Security Number: [000-00-0000]
Number of Annuity Units Payable: [1.256]
Consideration. TIAA has issued this contract in exchange for proceeds of
[$10,000] from your accumulating ("pay-in") annuity under [TIAA contract number
x-xxxxxx-x]. This fulfills all obligations under that contract for the amount
converted. TIAA has accepted the consideration for your contract at its home
office in New York, New York.
(following text bracketed in document)
or, for issues arising from post-retirement transfers:
Consideration. TIAA has issued this contract in exchange for the value of
[4.758] annuity units payable [monthly] from the CREF [Stock] Account under your
CREF One Life Unit-Annuity Certificate number [x-xxxxxx-x]. This fulfills all
obligations of CREF under that certificate for those annuity units. TIAA has
accepted the consideration for your contract at its home office in New York, New
York.
(end of bracketed text)
Separate Account Charge. The separate account charge covers mortality and expense risk, liquidity risk and administrative and investment advisory services. TIAA, at its discretion, can increase or decrease the separate account charge. The separate account charge is guaranteed not to exceed 2.50% per year of net assets. The separate account charge as of the effective date of this contract is [0.75%] per year of the Real Estate Account's average net assets. - -------------------------------------------------------------------------------- 1009 - REA Page 3 TIAA REA OLA Ed 10-95 |
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Beneficiary Designation. Because your contract doesn't have a guaranteed period, no beneficiary designation is applicable.
[If there is no guaranteed period the rest of the page will not appear]
Beneficiary Designation. You've named the following beneficiary(ies), effective as of your contract's date of issue. If you die before the end of your contract's guaranteed period, your beneficiary(ies) are entitled to receive continuing unit-annuity payments until the end of the guaranteed period, or to take their commuted value in one sum unless otherwise specified below. See section for more information.
PRIMARY BENEFICIARY(IES)
NAME RELATIONSHIP TO YOU SOCIAL SECURITY NUMBER
[John Doe Husband 000-00-0000]
CONTINGENT BENEFICIARY(IES)
NAME RELATIONSHIP TO YOU SOCIAL SECURITY NUMBER
[Jim Doe Son 000-00-0000] [Jane Doe Daughter 000-00-0000] [The following provision will appear if the annuitant does not want a beneficiary to be able to choose a lump sum.] No Commuted Values: No beneficiary can elect a commuted value under this contract. [The following provision will appear if the beneficiary must receive a lump sum - - generally for an estate or institution as beneficiary.] Automatic Commuted Value: Each beneficiary under this contract will receive his or her share of the commuted value of any unit-annuity payments remaining due on the death of the annuitant. - -------------------------------------------------------------------------------- 1009 - REA Page 5 TIAA REA OLA Ed 10-95 |
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(this page will not appear if there is no guaranteed period)
Additional Provisions
It is understood and agreed that if you designate a testamentary trustee or an inter vivos trustee as beneficiary:
(A) TIAA will not be obliged to inquire into the terms of any will or of any trust affecting this contract or its death benefits and will not be charged with knowledge of terms thereof.
(B) If benefits become payable to a testamentary trustee and:
(I) the will is not presented for probate within 90 days following the date of your death;
(II) the will has been presented for probate within the aforesaid 90 days and no qualified trustee makes claim for the benefits within nine months after your death; or
(III) if evidence satisfactory to TIAA is furnished TIAA within such nine-month period that no trustee can qualify to receive the benefits,
payment will be made to the successor beneficiary(ies) you designated on page 5, if any such beneficiary(ies) are designated and survive you; otherwise to the executors or administrators of your estate.
(C) If benefits become payable to an inter vivos trustee and:
(I) the trust agreement is not in effect;
(II) no trustee can qualify to receive the benefits; or
(III) the qualified trustee is not willing to accept the
benefits,
payment will be made to the successor beneficiary(ies) you designated
on page 5, if any such beneficiary(ies) are designated and survive you;
otherwise to the executors or administrators of your estate.
(D) Payment to, and receipt by, a trustee, successor beneficiary, executor,
or administrator, as provided for in (B) or (C) above, will fully
discharge TIAA from all liability to the extent of such payment. TIAA
will have no obligations as to the application of funds so paid. TIAA
will, in all dealings with a trustee, executor or administrator,
including but not limited to any consent, release or waiver of
interest, be fully protected against the claims or demands of any other
person or persons.
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PART B: The Real Estate Account
1. Real Estate Account. The Real Estate Account is a Separate Account of TIAA. Its investment objective is a favorable rate of return over the long term primarily through rental income and capital appreciation of real estate investments owned by the Account. The Real Estate Account holds mainly income-producing real estate properties and other real estate-related investments. The annual charge for the Real Estate Account will never exceed 2.50% of the Account's average net assets.
2. Separate Account. All considerations credited to the Real Estate Account become part of a separate account. The Real Estate Account is designated as VA-2 and was established by TIAA in accordance with New York law to provide benefits under this contract and other similar contracts. The assets and liabilities of separate account VA-2 are segregated from the assets and liabilities of the general account.
3. General Account. The general account consists of all of TIAA's assets other than those in separate accounts.
4. Insulation of Separate Account. TIAA owns the assets in separate account VA-2. To the extent permitted by law, the assets of the separate account will not be charged with liabilities arising out of any other business TIAA may conduct. All income, gains and losses, whether or not realized, of the separate account will be credited to or charged against only that Account without regard to TIAA's other income, gains or losses.
5. Business Day. A business day is any day that the New York Stock Exchange is open for trading. A business day ends at 4:00 p.m. Eastern time, or when trading closes on the New York Stock Exchange, if earlier.
6. Valuation Day. A valuation day is any business day, as well as the last calendar day of each month. A Valuation Period is the time from the end of a valuation day to the end of the next valuation day.
7. Net Investment Factor. The net investment factor for the Real Estate Account for a valuation period is based on the amount of accrued real estate net operating income, dividends, interest and other income accrued during the current period, a deduction of expense charges, and both realized and unrealized capital gains and losses incurred during the current period. The precise formula for the net investment factor is A divided by B, as follows:
A: The value of the Real Estate Account's net assets at
the end of the current valuation period, less any
premiums received during the current period.
B: The value of the Real Estate Account's net assets at
the end of the previous valuation period, plus the
net effect of transactions (e.g.
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transfers, benefit payments) made by the start of the current valuation period.
PART C: When Unit-Annuity Payments Are Made
8. First Payment. This contract is effective as of the date of issue shown on page 3, if you are then alive. Your unit-annuity payments will begin as of the date of first payment shown on page 3.
9. Guaranteed Period. A guaranteed period is the period of time for which unit-annuity payments under your contract will continue regardless of whether you are alive. It begins on the contract's date of issue. The guaranteed period you've chosen, if any, appears on page 3.
10. Final Payment. The final unit-annuity payment under this contract will be the last one due on or before the date of your death, unless you die before the end of a guaranteed period. In that case unit-annuity payments will continue to your beneficiary(ies), and the final payment will be the last one due on or before the end of the guaranteed period. Unit-annuity payments to a beneficiary will stop if he or she takes the commuted value of the remaining unit-annuity payments in one sum.
11. Frequency of Payment. The frequency of unit-annuity payments, as of your contract's date of issue, appears on page 3. You (or your
beneficiary(ies), if you've died) can ask to change the frequency of
unit-annuity payments -- the choices are annually, semi-annually,
quarterly, or monthly. However, TIAA can decline changes that would
result in fewer unit-annuity payments per year. TIAA can also decline
any change that would result in unit-payments of less than $25.
PART D: To Whom Unit-Annuity Payments Are Made
12. Payments Made to Annuitant. We'll make unit-annuity payments to you for
as long as you live.
13. Payments Made to Beneficiaries. If you die before the end of a
guaranteed period, we'll make unit-annuity payments to your
beneficiary(ies) until the guaranteed period ends. Or, in place of
continuing unit-annuity payments, your beneficiary(ies) can take the
commuted (discounted) value of the remaining unit-annuity payments in
one sum (unless noted otherwise on page 5).
If you die before the end of a guaranteed period but have
outlived all your beneficiaries, we'll pay the commuted value of any
remaining unit-annuity payments to your estate. If you die and a
beneficiary subsequently dies before the end of a guaranteed period,
we'll pay the commuted value of any remaining unit-annuity payments due
to him or her to any other surviving person or persons named to receive
it. If no one has been
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named or no one so named is then living, the commuted value will go to
such beneficiary's estate.
14. Naming Beneficiaries. You can name two kinds or "classes" of
beneficiaries, primary and contingent, which set the order of payment.
If a class contains more than one person, any payments still
outstanding at your death will go in equal shares to the then living
persons in the class, unless you've explicitly provided otherwise. For
example, if you name your spouse as primary beneficiary and "my
children" as contingent beneficiaries, your spouse would get any
payments remaining if you die before the end of a guaranteed period.
But if your spouse had died before you, then your surviving children
would receive equal shares of your unit-annuity's remaining payments.
You can use the terms "children" or "my children" to name
either primary or contingent beneficiaries. Unless you specify
otherwise, we'll interpret this to mean all children born of all your
marriages, as well as any children legally adopted by you. The term
"children" also has the same inclusive meaning if you use it to name
the children of your spouse, your child, your brother or your sister as
your beneficiaries.
The beneficiaries you named as of your unit-annuity contract's
date of issue appear on page 5. Unless you've made your beneficiary
designation irrevocable, you can change, add, or delete beneficiaries
as explained in section 22.
15. Proof of Survival. TIAA reserves the right to require satisfactory
proof that anyone you've named to receive payments under your
unit-annuity contract is alive on the date each payment is due. If we
don't receive such proof after we've requested it in writing, we can
withhold payments entirely until it has been provided.
16. Commuted Values. The commuted value of your unit-annuity is an amount
paid at once instead of as a series of payments. The option of taking
the commuted value of future unit-annuity payments is available only to
your beneficiary after your death. We calculate the commuted value of a
unit-annuity as of the end of a valuation day as the present value, on
the basis of interest at the effective annual rate of 4%, of the
unit-annuity payments due for the remainder of the guaranteed period.
The dollar values used for the payments in the calculation assume that
the annuity unit value will remain at the current level.
PART E: How Are Unit-Annuity Payment Amounts Determined
17. Unit-Annuity. A Real Estate Account unit-annuity is a series of
payments based on a number of annuity units whose value changes based
on the investment performance of the Real Estate Account. The actual
mortality and expense experience of the Real Estate Account will not
reduce the amount payable per annuity unit.
18. Annuity Units. The annuity unit is the basic unit of payment for a Real
Estate Account unit-annuity. As of your contract's date of issue, the
number of annuity units payable to you in each unit-annuity payment as
of the date of issue is shown on page 3.
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1009 - REA Page 9
TIAA REA OLA Ed 10-95
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Your TIAA Real Estate Account One-Life Unit-Annuity Contract
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19. Amount of Unit-Annuity Payments. The dollar amount of each unit-annuity
payment will be based on the number of annuity units payable under your
contract. The initial amount of your unit-annuity payments, as shown on
page 3, is equal to the number of annuity units payable under your
contract, as of its date of issue, multiplied by the annuity unit value
calculated as of the day before the date of issue. Thereafter, the
amount payable per annuity unit will be redetermined each year. Each
May 1, the unit-annuity payment amount will be reset to equal the
number of annuity units payable under your contract multiplied by the
annuity unit value calculated as of the preceding March 31. The amount
payable per annuity unit will then remain at that level through the
following April 30.
20. Annuity Unit Values. The Real Estate Account's annuity unit value as of
the end of each month will be determined by multiplying the annuity
unit value at the end of the previous month by the Real Estate
Account's net investment factor for the month, and dividing the result
by the value of $1.00 accumulated with interest over the month at an
effective annual rate of 4%. The resulting value is then further
adjusted to account for the difference between the unit-annuity
payments the Real Estate Account will actually make the next day, and
the unit-annuity payments that would have been made if all unit-annuity
payments were based on the current annuity unit value.
PART F: General Provisions
21. Payments Based on Incorrect Data. If any information about your age or
any other factor that we use to determine the amount of your payments
turns out to be incorrect, we'll recalculate your payments as
necessary. TIAA will make up for any underpayments as soon as we've
recalculated based on accurate information; overpayments will be
charged against payments due after the correction is made. Any
corrections to be paid or charged will include interest compounded at
an effective annual rate of 6 percent.
22. Procedure for Elections and Changes. You (or the beneficiary(ies) after
you've died) have to make any choice or changes available under your
contract in a form acceptable to TIAA at our home office in New York,
NY. If you (or your beneficiary(ies), if you've died) send us a notice
changing your beneficiary or other persons named to receive payments,
it will take effect as of the date it was signed even if you (or other
signer) should then die before the notice actually reaches TIAA. Any
other notice will take effect as of the date TIAA receives it. If TIAA
takes any action in good faith before receiving your notice, we won't
be subject to liability even if our acts were contrary to what you told
us in the notice.
23. Ownership. You own this contract. During your lifetime you can exercise
every right given by it without the consent of any other person, to the
extent permitted by law.
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Your TIAA Real Estate Account One-Life Unit-Annuity Contract
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24. No Assignment. Neither you nor any other person may assign, pledge, or
transfer ownership of this contract or any benefits under its terms.
Any such action will be void and of no effect.
25. No Loans. You can't use this contract to secure a loan.
26. Endorsements and Amendments. Any endorsement or amendment of this
contract or waiver of any of its provisions will be valid only if in
writing and signed by an Executive Officer or Registrar of TIAA.
27. Service of Process upon TIAA. We'll accept service of process in
actions or suits against us on this contract in any court of competent
jurisdiction in the United States or Puerto Rico provided the process
is properly made. We'll also accept process sent to us by registered
mail if the plaintiff is a resident of the state, district, territory,
or province in which the action or suit is brought. This section
doesn't waive any of our rights, including the right to remove such
action or suit to another court.
28. Protection Against Claims of Creditors. Your benefits and rights under
your contract are exempt from the claims of creditors or legal process
to the fullest extent permitted by law.
29. Payment to an Estate, Trustee, etc. TIAA reserves the right to pay in
one sum the commuted value of any unit-annuity payments due an estate,
corporation, partnership, trustee or other entity not a natural person.
TIAA won't be responsible for the acts or neglects of any executor,
trustee, guardian, or other third party receiving payments under your
contract.
30. Deletion of the Real Estate Account. TIAA reserves the right to stop
providing unit-annuities in the Real Estate Account. If the Real Estate
Account stops providing unit-annuities, any remaining unit-annuity
payments due under this contract must be converted to a TIAA
fixed-dollar annuity or to a CREF unit-annuity. The conversion must be
to a One-Life annuity or unit-annuity with same annuitant and remaining
guaranteed period, if any.
31. Correspondence and Requests for Benefits. TIAA deems notices,
applications, forms, or requests for benefits as received only when
they reach our home office. Please send any questions about your
contract or TIAA products and services to:
TIAA
730 Third Avenue
New York, NY 10017-3206
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1009 - REA Page 11
TIAA REA OLA Ed 10-95
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Teachers Insurance and Annuity Association
730 Third Avenue, New York, N.Y. 10017
Telephone: 800-842-2733
|
Real Estate Account Joint and Survivor Life Unit-Annuity
Contract Date of Issue Frequency of Guaranteed Date of First Payment
Number Mo. Day Yr. Payment Period Mo. Day Yr.
[Y000000-R 10 02 1995 Monthly NONE 10 02 1995]
First Annuitant [DOE, JANE M]
Second Annuitant [DOE, JOHN]
[1.256] [0.628] [$100.00]
Annuity Units Payable Annuity Units Payable Amount of First
While Both Annuitants to Surviving Annuitant Annuity Payment
are Alive or to Beneficiary
|
This is a contract between you, as its owner and Annuitant, and Teachers Insurance and Annuity Association of America (TIAA). The main features of your contract are described here. The next pages detail the rights and obligations the contract establishes for both you and TIAA
PLEASE READ YOUR CONTRACT. IT IS IMPORTANT.
GENERAL DESCRIPTION
Your ontract creates a unit-annuity that will provide you with an income for life. It will also provide an income to the second annuitant for as long as he or she survives you. Unit- annuity payments start as of the date of first payment shown above. If you've opted for a guaranteed period and both you and the second annuitant die before it's over, unit-annuity payments will continue to your beneficiary until the end of the period; or your beneficiary can take the "commuted" (discounted) value of the remaining unit-annuity payments in one sum (unless otherwise indicated on page 5). If your contract doesn't have a guaranteed period, no further payments will go to anyone after both you and the second annuitant have died.
You, your second annuitant, or your beneficiary(ies) will be paid an income based on the number of annuity units payable. As of the date of issue the number of annuity units payable to you while both you and the second annuitant are alive or, after the death of one of the annuitants, to the surviving annuitant or your beneficiary(ies), is shown above. The amount payable per annuity unit will vary depending on the investment results of the Real Estate Account. Initial payments are calculated using an assumed net annual investment return of 4%. If net annual investment returns exceed 4%, the amount payable per annuity unit will increase. If net annual investment returns are less than 4%, the amount payable per annuity unit will decrease. Expense charges will reduce the net annual investment return. The annual expense charge will never exceed 2.5% of the average net assets of the Real Estate Account.
This contract does not guarantee any specific dollar amount of unit-annuity payments. It cannot be assigned to anyone else and you cannot use it as collateral for a loan.
If you have any questions about this contract or need help to resolve a problem, you can contact us at the address or phone number above.
(Signature of John H. Biggs)
(Specimen Stamped)
Chairman and
Chief Executive Officer
- ------------------------------------------------------------------------------ 1019 - REA INDEX ON NEXT PAGE Page 1 TIAA REA JS Ed. 10-95 |
INDEX OF PROVISIONS
Section
Amount of Unit-Annuity Payments..............................................19
Annuity Unit Values..........................................................20
Assignment - No provision for................................................24
Business day..................................................................5
Claims of Creditors - Protection against.....................................28
Commuted Values..............................................................16
Consideration............................................................Page 3
Correspondence and Requests for Benefits.....................................31
Deletion of the Real Estate Account..........................................30
Endorsements and Amendments..................................................26
Final Payment................................................................10
First Payment.................................................................8
Frequency of Payment.........................................................11
Annuity Units................................................................18
General Account...............................................................3
Guaranteed Period.............................................................9
Loans - No provision for.....................................................25
Naming Beneficiaries.........................................................14
Net Investment Factor.........................................................7
Ownership....................................................................23
Payments
-- Based on Incorrect Data.................................................21
-- to an Estate, Trustee, etc..............................................29
-- to Annuitant............................................................12
-- to Beneficiary..........................................................13
Procedure for Elections and Changes..........................................22
Proof of Survival............................................................15
Real Estate Account...........................................................1
Separate Account
-- defined..................................................................2
-- Charge..............................................................Page 3
-- Insulation of............................................................4
Service of Process upon TIAA.................................................27
Unit-Annuity.................................................................17
Valuation Day or Valuation Period.............................................6
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Your TIAA Real Estate Account Joint and Survivor Life Unit-Annuity Contract
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PART A: Annuitant Data
Contract Date of Issue Frequency of Guaranteed Date of First Payment
Number Mo. Day Yr. Payment Period Mo. Day Yr.
[Y0000000-R 10 02 1995 Monthly NONE 10 02 1995]
Date of Birth
Mo. Day Yr.
Annuitant [DOE, JANE M] [03 01 1927]
Second Annuitant [DOE, JOHN] [04 01 1926]
|
Amount of First Annuity Payment: [$ 100.00]
First Annuitant's Social Security Number: [000-00-0000] Second Annuitant's Social Security Number: [000-00-0000]
Number of Annuity Units Payable to First Annuitant While Both Annuitants are Alive: [1.256]
Number of Annuity Units Payable to Surviving Annuitant (or Beneficiary) After the Death of Either Annuitant: [0.837]
Consideration. TIAA has issued this contract in exchange for proceeds of
[$10,000] from your accumulating ("pay-in") annuity under [TIAA contract number
x-xxxxxxx-x]. This fulfills all obligations under that contract for the amount
converted. TIAA has accepted the consideration for your contract at its home
office in New York, New York.
(following text bracketed in document)
or, for issues arising from post-retirement transfers:
Consideration. TIAA has issued this contract in exchange for applying the value of [4.758] annuity units payable [monthly] from the CREF [Stock] Account under your CREF Joint and Survivor Life Unit-Annuity Certificate number [x-xxxxxx-x]. This fulfills all obligations of CREF under that certificate for those annuity units. TIAA has accepted the consideration for your contract at its home office in New York, New York.
(end of bracketed text)
Separate Account Charge. The separate account charge covers mortality and expense risk, liquidity risk and administrative and investment advisory services. TIAA, at its discretion, can increase or decrease the separate account charge. The separate account charge is guaranteed not to exceed 2.50% per year of net assets. The separate account charge as of the effective date of this contract is [0.75%] per year of the Real Estate Account's average net assets. - ------------------------------------------------------------------------------- 1019 - REA Page 3 TIAA REA JS Ed 10-95 |
This page is intentionally blank.
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Beneficiary Designation. Because your contract doesn't have a guaranteed period, no beneficiary designation is applicable.
[If there is no guaranteed period the rest of the page will not appear]
Beneficiary Designation. You've named the following beneficiary(ies), effective as of your contract's date of issue. If both you and the second annuitant die before the end of your contract's guaranteed period, your beneficiary(ies) are entitled to receive continuing unit- annuity payments until the end of the guaranteed period, or to take their commuted value in one sum unless otherwise specified below. See section for more information.
PRIMARY BENEFICIARY(IES)
NAME RELATIONSHIP TO YOU SOCIAL SECURITY NUMBER
[Jim Doe Son 000-00-0000]
[Jane Doe Daughter 000-00-0000]
CONTINGENT BENEFICIARY(IES)
NAME RELATIONSHIP TO YOU SOCIAL SECURITY NUMBER
[The following provision will appear if the annuitant does not want a beneficiary to be able to choose a lump sum.]
No Commuted Values: No beneficiary can elect a commuted value under this contract.
[The following provision will appear if the beneficiary must receive a lump sum
- - generally for an estate or institution as beneficiary.]
Automatic Commuted Value: Each beneficiary under this contract will receive his or her share of the commuted value of any unit-annuity payments remaining due on the death of the survivor of the annuitant and the second annuitant.
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(this page will not appear if there is no guaranteed period)
Additional Provisions
It is understood and agreed that if you designate a testamentary trustee or an inter vivos trustee as beneficiary:
(A) TIAA will not be obliged to inquire into the terms of any will or of any trust affecting this contract or its death benefits and will not be charged with knowledge of terms thereof.
(B) If benefits become payable to a testamentary trustee and:
(I) the will is not presented for probate within 90 days following the date of the last surviving annuitant's death;
(II) the will has been presented for probate within the aforesaid 90 days and no qualified trustee makes claim for the benefits within nine months after the last surviving annuitant's death; or
(III) if evidence satisfactory to TIAA is furnished TIAA within such nine-month period that no trustee can qualify to receive the benefits,
payment will be made to the successor beneficiary(ies) you designated on page 5, if any such beneficiary(ies) are designated and survive the last surviving annuitant; otherwise to the executors or administrators of the estate of the last surviving annuitant.
(C) If benefits become payable to an inter vivos trustee and:
(I) the trust agreement is not in effect;
(II) no trustee can qualify to receive the benefits; or
(III) the qualified trustee is not willing to accept the
benefits,
payment will be made to the successor beneficiary(ies) you designated
on page 5, if any such beneficiary(ies) are designated and survive the
last surviving annuitant; otherwise to the executors or administrators
of the estate of the last surviving annuitant.
(D) Payment to and receipt by a trustee, successor beneficiary, executor,
or administrator, as provided for in (B) or (C) above, will fully
discharge TIAA from all liability to the extent of such payment. TIAA
will have no obligations as to the application of funds so paid. TIAA
will, in all dealings with a trustee, executor or administrator,
including but not limited to any consent, release or waiver of
interest, be fully protected against the claims or demands of any other
person or persons.
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PART B: The Real Estate Account
1. Real Estate Account. The Real Estate Account is a Separate Account of TIAA. Its investment objective is a favorable rate of return over the long term primarily through rental income and capital appreciation of real estate investments owned by the Account. The Real Estate Account holds mainly income-producing real estate properties and other real estate-related investments. The annual charge for the Real Estate Account will never exceed 2.50% of the Account's average net assets.
2. Separate Account. All considerations credited to the Real Estate Account become part of a separate account. The Real Estate Account is designated as VA-2 and was established by TIAA in accordance with New York law to provide benefits under this contract and other similar contracts. The assets and liabilities of separate account VA-2 are segregated from the assets and liabilities of the general account.
3. General Account. The general account consists of all of TIAA's assets other than those in separate accounts.
4. Insulation of Separate Account. TIAA owns the assets in separate account VA-2. To the extent permitted by law, the assets of the separate account will not be charged with liabilities arising out of any other business TIAA may conduct. All income, gains and losses, whether or not realized, of the separate account will be credited to or charged against only that Account without regard to TIAA's other income, gains or losses.
5. Business Day. A business day is any day that the New York Stock Exchange is open for trading. A business day ends at 4:00 p.m. Eastern time, or when trading closes on the New York Stock Exchange, if earlier.
6. Valuation Day. A valuation day is any business day, as well as the last calendar day of each month. A Valuation Period is the time from the end of a valuation day to the end of the next valuation day.
7. Net Investment Factor. The net investment factor for the Real Estate Account for a valuation period is based on the amount of accrued real estate net operating income, dividends, interest and other income accrued during the current period, a deduction of expense charges, and both realized and unrealized capital gains and losses incurred during the current period. The precise formula for the net investment factor is A divided by B, as follows:
A: The value of the Real Estate Account's net assets at
the end of the current valuation period, less any
premiums received during the current period.
B: The value of the Real Estate Account's net assets at
the end of the previous valuation period, plus the
net effect of transactions (e.g.
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Your TIAA Real Estate Account Joint and Survivor Life Unit-Annuity Contract
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transfers, benefit payments) made by the start of
the current valuation period.
PART C: When Unit-Annuity Payments Are Made
8. First Payment. This contract is effective as of the date of issue
shown on page 3, if both you and the second annuitant are then alive.
Your unit-annuity payments will begin as of the date of first payment
shown on page 3.
9. Guaranteed Period. A guaranteed period is the period of time for which
unit-annuity payments under your contract will continue regardless of
whether you or the second annuitant are alive. It begins on the
contract's date of issue. The guaranteed period you've chosen, if any,
appears on page 3.
10. Final Payment. The final unit-annuity payment under this contract will
be the last one due on or before the later of the date of your death
or the date of the second annuitant's death, unless both you and the
second annuitant die before the end of a guaranteed period. In that
case unit-annuity payments will continue to your beneficiary(ies), and
the final payment will be the last one due on or before the end of the
guaranteed period. Unit-annuity payments to a beneficiary will stop if
he or she takes the commuted value of the remaining unit-annuity
payments in one sum.
11. Frequency of Payment. The frequency of unit-annuity payments, as of
your contract's date of issue, appears on page 3. You (or after your
death, the second annuitant, or your beneficiary(ies), if both you and
the second annuitant have died) can ask to change the frequency of
payments -- the choices are annually, semi-annually, quarterly, or
monthly. However, TIAA can decline changes that would result in fewer
unit-annuity payments per year. TIAA can also decline any change that
would result in unit-annuity payments of less than $25.
PART D: To Whom Unit-Annuity Payments Are Made
12. Payments Made to Annuitant. We'll make unit-annuity payments to you
for as long as you live. After you've died we'll make unit-annuity
payments to the second annuitant for as long as he or she survives
you.
13. Payments Made to Beneficiaries. If both you and the second annuitant
die before the end of a guaranteed period, we'll make unit-annuity
payments to your beneficiary(ies) until the guaranteed period ends. Or
in place of continuing unit-annuity payments, beneficiaries can take
the commuted (discounted) value of the remaining unit-annuity payments
in one sum (unless noted otherwise on page 5) . If both you and the
second annuitant die before the end of a guaranteed period but have
outlived all your beneficiaries, we'll pay the commuted value of any
remaining unit- annuity payments to your estate. If both you and the
second annuitant die and a
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beneficiary subsequently dies before the end of a guaranteed period, we'll pay the commuted value of any remaining unit-annuity payments due to him or her to any other surviving person or persons named to receive it. If no one has been named or no one so named is then living, the commuted value will go to such beneficiary's estate.
14. Naming Beneficiaries. You can name two kinds or "classes" of beneficiaries, primary and contingent, which set the order of payment. If a class contains more than one person, any payments still outstanding at your death will go in equal shares to the then living persons in the class, unless you've explicitly provided otherwise. For example, if you name your spouse as primary beneficiary and "my children" as contingent beneficiaries, your spouse would get any payments remaining if both you and the second annuitant die before the end of a guaranteed period. But if your spouse had died before you and the second annuitant had both died, then your surviving children would receive equal shares of your unit-annuity's remaining payments.
You can use the terms "children" or "my children" to name either primary or contingent beneficiaries. Unless you specify otherwise, we'll interpret this to mean all children born of all your marriages, as well as any children legally adopted by you. The term "children" also has the same inclusive meaning if you use it to name the children of your spouse, your child, your brother or your sister as your beneficiaries.
The beneficiaries you named as of your annuity contract's date of issue appear on page 5. Unless you've made your beneficiary
designation irrevocable, you, or after your death the second
annuitant, can change, add, or delete beneficiaries as explained in
section 22.
15. Proof of Survival. TIAA reserves the right to require satisfactory
proof that anyone you've named to receive payments under your
unit-annuity contract is alive on the date each payment is due. If we
don't receive such proof after we've requested it in writing, we can
withhold payments entirely until it has been provided.
16. Commuted Values. The commuted value of your unit-annuity is an amount
paid at once instead of as a series of payments. The option of taking
the commuted value of future unit-annuity payments is available only
to your beneficiary after your death and the death of the second
annuitant. We calculate the commuted value of a unit-annuity as of the
end of a valuation day as the present value, on the basis of interest
at the effective annual rate of 4%, of the unit-annuity payments due
for the remainder of the guaranteed period. The dollar values used for
the payments in the calculation assume that the annuity unit value
will remain at the current level.
PART E: How Are Unit-Annuity Payment Amounts Determined
17. Unit-Annuity. A Real Estate Account unit-annuity is a series of
payments based on a number of annuity units whose value changes based
on the investment performance of the Real Estate Account. The actual
mortality and expense experience of the Real Estate Account will not
reduce the amount payable per annuity unit.
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1019 - REA Page 9
TIAA REA JS Ed 10-95
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18. Annuity Units. The annuity unit is the basic unit of payment for a Real Estate Account unit-annuity. As of your contract's date of issue, the number of annuity units payable in each unit-annuity payment to you while both annuitants are alive, to the surviving annuitant after one of the annuitants has died, or to the beneficiary after both you and the second annuitant have died is shown on page 3.
19. Amount of Unit-Annuity Payments. The dollar amount of each unit-annuity payment will be based on the number of annuity units payable under your contract. The initial amount of your unit-annuity payments, as shown on page 3, is equal to the number of annuity units payable under your contract, as of its date of issue, multiplied by the annuity unit value calculated as of the day before the date of issue. Thereafter, the amount payable per annuity unit will be redetermined each year. Each May 1, the unit- annuity payment amount
will be reset to equal the number of annuity units payable under your
contract multiplied by the annuity unit value calculated as of the
preceding March 31. The amount payable per annuity unit will then
remain at that level through the following April 30.
20. Annuity Unit Values. The Real Estate Account's annuity unit value as
of the end of each month will be determined by multiplying the annuity
unit value at the end of the previous month by the Real Estate
Account's net investment factor for the month, and dividing the result
by the value of $1.00 accumulated with interest over the month at an
effective annual rate of 4%. The resulting value is then further
adjusted to account for the difference between the unit-annuity
payments the Real Estate Account will actually make the next day, and
the unit-annuity payments that would have been made if all
unit-annuity payments were based on the current annuity unit value.
PART F: General Provisions
21. Payments Based on Incorrect Data. If any information about your age or
any other factor that we use to determine the amount of your payments
turns out to be incorrect, we'll recalculate your payments as
necessary. TIAA will make up for any underpayments as soon as we've
recalculated based on accurate information; overpayments will be
charged against payments due after the correction is made. Any
corrections to be paid or charged will include interest compounded at
an effective annual rate of 6 percent.
22. Procedure for Elections and Changes. You, the second annuitant after
your death, (or the beneficiary(ies) after both you and the second
annuitant have died) have to make any choices or changes available
under your contract in a form acceptable to TIAA at our home office in
New York, NY. If you or the second annuitant after your death (or your
beneficiary(ies) if you've both died) send us a notice changing your
beneficiary or other persons named to receive payments, it will take
effect as of the date it was signed even if you (or other signer)
should then die before the notice actually reaches TIAA. Any other
notice will take effect as of the date TIAA receives it. If TIAA takes
any action in
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Your TIAA Real Estate Account Joint and Survivor Life Unit-Annuity Contract
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good faith before receiving the notice, we won't be subject to
liability even if our acts were contrary to what you told us in the
notice.
23. Ownership. You own this contract. If the second annuitant survives
you, he or she becomes the owner of the contract at your death. The
owner can, during his or her lifetime, exercise every right given by
it without the consent of any other person, to the extent permitted by
law.
24. No Assignment. Neither you nor any other person may assign, pledge, or
transfer ownership of this contract or any benefits under its terms.
Any such action will be void and of no effect.
25. No Loans. You can't use this contract to secure a loan.
26. Endorsements and Amendments. Any endorsement or amendment of this
contract or waiver of any of its provisions will be valid only if in
writing and signed by an Executive Officer or Registrar of TIAA.
27. Service of Process upon TIAA. We'll accept service of process in
actions or suits against us on this contract in any court of competent
jurisdiction in the United States or Puerto Rico provided the process
is properly made. We'll also accept process sent to us by registered
mail if the plaintiff is a resident of the state, district, territory,
or province in which the action or suit is brought. This section
doesn't waive any of our rights, including the right to remove such
action or suit to another court.
28. Protection Against Claims of Creditors. Your benefits and rights, and
those of any other person under your annuity contract, are exempt from
the claims of creditors or legal process to the fullest extent
permitted by law.
29. Payment to an Estate, Trustee, etc. TIAA reserves the right to pay in
one sum the commuted value of any unit-annuity payments due an estate,
corporation, partnership, trustee or other entity not a natural
person. TIAA won't be responsible for the acts or neglects of any
executor, trustee, guardian, or other third party receiving payments
under your contract.
30. Deletion of the Real Estate Account. TIAA reserves the right to stop
providing unit-annuities in the Real Estate Account. If the Real
Estate Account stops providing unit- annuities, any remaining
unit-annuity payments due under this contract must be converted to a
TIAA fixed-dollar annuity or to a CREF unit-annuity. The conversion
must be to a Joint and Survivor Life annuity or unit-annuity with the
same first annuitant, second annuitant, remaining guaranteed period
(if any) and ratio of annuity payments or annuity units payable while
both annuitants are alive to those payable after one annuitant has
died.
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1019 - REA Page 11
TIAA REA JS Ed 10-95
|
31. Correspondence and Requests for Benefits. TIAA deems notices, applications, forms, or requests for benefits as received only when they reach our home office. Please send any questions about your contract or TIAA products and services to:
TIAA
730 Third Avenue
New York, NY 10017-3206
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Page 12 1019 - REA
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Teachers Insurance and Annuity Association 730 Third Avenue, New York, N.Y. 10017 Telephone: 800-842-2733
Real Estate Account Last Survivor Life Unit-Annuity
Contract Date of Issue Frequency of Guaranteed Date of First Payment
Number Mo. Day Yr. Payment Period Mo. Day Yr.
[Y000000-R 10 02 1995 Monthly 10 Years 10 02 1995]
First Annuitant [DOE, JANE M]
Second Annuitant [DOE, JOHN]
[1.256] [0.628] [$100.00]
Annuity Units Payable Annuity Units Payable Amount of First
While First Annuitant After Death of First Annuitant Annuity Payment
is Alive to Second Annuitant
or to Beneficiary
|
This is a contract between you, as its owner and annuitant, and Teachers
Insurance and Annuity Association of America (TIAA). The main features of your
contract are described here. The next pages detail the rights and obligations
the contract establishes for both you and TIAA.
PLEASE READ YOUR CONTRACT. IT IS IMPORTANT.
GENERAL DESCRIPTION
Your contract creates a unit-annuity that will provide you with an income for life. It will also provide an income after your death to the second annuitant for as long as he or she survives you. Unit-annuity payments start as of the date of first payment shown above. If you've opted for a guaranteed period and both you and the second annuitant die before it's over, unit-annuity payments will continue to your beneficiary until the end of the period; or your beneficiary can take the "commuted" (discounted) value of the remaining unit-annuity payments in one sum (unless otherwise indicated on page 5). If your contract doesn't have a guaranteed period, no further payments will go to anyone after both you and the second annuitant have died.
You, your second annuitant, or your beneficiary(ies) will be paid an income based on the number of annuity units payable. The number of annuity units payable as of the date of issue to you or, after your death, to your second annuitant or your beneficiary(ies), is shown above. The amount payable per annuity unit will vary depending on the investment results of the Real Estate Account. Initial payments are calculated using an assumed net annual investment return of 4%. If net annual investment returns exceed 4%, the amount payable per annuity unit will increase. If net annual investment returns are less than 4%, the amount payable per annuity unit will decrease. Expense charges will reduce the net annual investment return. The annual expense charge will never exceed 2.5% of the average net assets of the Real Estate Account.
This contract does not guarantee any specific dollar amount of unit-annuity payments. It cannot be assigned to anyone else and you cannot use it as collateral for a loan.
If you have any questions about this contract or Chairman and need help to resolve a problem, you can contact Chief Executive Officer us at the address or phone number above.
(Signature of John H. Biggs)
(Specimen Stamped)
Chairman and
Chief Executive Officer
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INDEX OF PROVISIONS
Section
Amount of Unit-Annuity Payments...............................................19
Annuity Unit Values...........................................................20
Assignment - No provision for.................................................24
Business day.................................................................. 5
Claims of Creditors - Protection against......................................28
Commuted Values...............................................................16
Consideration.............................................................Page 3
Correspondence and Requests for Benefits......................................31
Deletion of the Real Estate Account...........................................30
Endorsements and Amendments...................................................26
Final Payment.................................................................10
First Payment................................................................. 8
Frequency of Payment..........................................................11
Annuity Units.................................................................18
General Account............................................................... 3
Guaranteed Period............................................................. 9
Loans - No provision for......................................................25
Naming Beneficiaries..........................................................14
Net Investment Factor......................................................... 7
Ownership.....................................................................23
Payments
-- Based on Incorrect Data..................................................21
-- to an Estate, Trustee, etc...............................................29
-- to Annuitant.............................................................12
-- to Beneficiary...........................................................13
Procedure for Elections and Changes...........................................22
Proof of Survival.............................................................15
Real Estate Account........................................................... 1
Separate Account
-- defined.................................................................. 2
-- Charge...............................................................Page 3
-- Insulation of............................................................ 4
Service of Process upon TIAA..................................................27
Unit-Annuity..................................................................17
Valuation Day or Valuation Period............................................. 6
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PART A: Annuitant Data
Contract Date of Issue Frequency of Guaranteed Date of First Payment
Number Mo. Day Yr. Payment Period Mo. Day Yr.
[Y000000-R 10 02 1995 Monthly NONE 10 02 1995]
Date of Birth
Mo. Day Yr.
Annuitant [DOE, JANE M] [03 01 1927]
Second Annuitant [DOE, JOHN] [04 01 1926]
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Amount of First Annuity Payment: [$ 100.00]
First Annuitant's Social Security Number: [000-00-0000] Second Annuitant's Social Security Number: [000-00-0000]
Number of Annuity Units Payable to First Annuitant: [1.256]
Number of Annuity Units Payable to Second Annuitant (or Beneficiary) after death of First Annuitant [0.628]
Consideration. TIAA has issued this contract in exchange for proceeds of
[$10,000] from your accumulating ("pay-in") annuity under [TIAA contract number
x-xxxxxxx-x]. This fulfills all obligations under that contract for the amount
converted. TIAA has accepted the consideration for your contract at its home
office in New York, New York.
(following text in brackets)
(end of bracketed text)
Separate Account Charge. The separate account charge covers mortality and expense risk, liquidity risk and administrative and investment advisory services. TIAA, at its discretion, can increase or decrease the separate account charge. The separate account charge is guaranteed not to exceed 2.50% per year of net assets. The separate account charge as of the effective date of this contract is [0.75%] per year of the Real Estate Account's average net assets. - -------------------------------------------------------------------------------- 1024 - REA Page 3 TIAA REA LS Ed 10-95 |
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Beneficiary Designation. Because your contract doesn't have a guaranteed period, no beneficiary designation is applicable.
[If there is no guaranteed period the rest of the page will not appear]
Beneficiary Designation. You've named the following beneficiary(ies), effective as of your contract's date of issue. If both you and the second annuitant die before the end of your contract's guaranteed period, your beneficiary(ies) are entitled to receive continuing unit- annuity payments until the end of the guaranteed period, or to take their commuted value in one sum unless otherwise specified below. See section for more information.
PRIMARY BENEFICIARY(IES)
NAME RELATIONSHIP TO YOU SOCIAL SECURITY NUMBER
[Jim Doe Son 000-00-0000]
[Jane Doe Daughter 000-00-0000]
CONTINGENT BENEFICIARY(IES)
NAME RELATIONSHIP TO YOU SOCIAL SECURITY NUMBER
[The following provision will appear if the annuitant does not want a beneficiary to be able to choose a lump sum.] No Commuted Values: No beneficiary can elect a commuted value under this contract. [The following provision will appear if the beneficiary must receive a lump sum - - generally for an estate or institution as beneficiary.] Automatic Commuted Value: Each beneficiary under this contract will receive his or her share of the commuted value of any unit-annuity payments remaining due on the death of the survivor of the annuitant and the second annuitant. - -------------------------------------------------------------------------------- 1024 - REA Page 5 TIAA REA LS Ed 10-95 |
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(this page will not appear if there is no guaranteed period)
Additional Provisions
It is understood and agreed that if you designate a testamentary trustee or an inter vivos trustee as beneficiary:
(A) TIAA will not be obliged to inquire into the terms of any will or of any trust affecting this contract or its death benefits and will not be charged with knowledge of terms thereof.
(B) If benefits become payable to a testamentary trustee and:
(I) the will is not presented for probate within 90 days following the date of the last surviving annuitant's death;
(II) the will has been presented for probate within the aforesaid 90 days and no qualified trustee makes claim for the benefits within nine months after the last surviving annuitant's death; or
(III) if evidence satisfactory to TIAA is furnished TIAA within such nine-month period that no trustee can qualify to receive the benefits,
payment will be made to the successor beneficiary(ies) you designated on page 5, if any such beneficiary(ies) are designated and survive the last surviving annuitant; otherwise to the executors or administrators of the estate of the last surviving annuitant.
(C) If benefits become payable to an inter vivos trustee and:
(I) the trust agreement is not in effect;
(II) no trustee can qualify to receive the benefits; or
(III) the qualified trustee is not willing to accept the
benefits,
payment will be made to the successor beneficiary(ies) you designated
on page 5, if any such beneficiary(ies) are designated and survive the
last surviving annuitant; otherwise to the executors or administrators
of the estate of the last surviving annuitant.
(D) Payment to and receipt by a trustee, successor beneficiary, executor,
or administrator, as provided for in (B) or (C) above, will fully
discharge TIAA from all liability to the extent of such payment. TIAA
will have no obligations as to the application of funds so paid. TIAA
will, in all dealings with a trustee, executor or administrator,
including but not limited to any consent, release or waiver of
interest, be fully protected against the claims or demands of any other
person or persons.
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PART B: The Real Estate Account
1. Real Estate Account. The Real Estate Account is a Separate Account of TIAA. Its investment objective is a favorable rate of return over the long term primarily through rental income and capital appreciation of real estate investments owned by the Account. The Real Estate Account holds mainly income-producing real estate properties and other real estate-related investments. The annual charge for the Real Estate Account will never exceed 2.50% of the Account's average net assets.
2. Separate Account. All considerations credited to the Real Estate Account become part of a separate account. The Real Estate Account is designated as VA-2 and was established by TIAA in accordance with New York law to provide benefits under this contract and other similar contracts. The assets and liabilities of separate account VA-2 are segregated from the assets and liabilities of the general account.
3. General Account. The general account consists of all of TIAA's assets other than those in separate accounts.
4. Insulation of Separate Account. TIAA owns the assets in separate account VA-2. To the extent permitted by law, the assets of the separate account will not be charged with liabilities arising out of any other business TIAA may conduct. All income, gains and losses, whether or not realized, of the separate account will be credited to or charged against only that Account without regard to TIAA's other income, gains or losses.
5. Business Day. A business day is any day that the New York Stock Exchange is open for trading. A business day ends at 4:00 p.m. Eastern time, or when trading closes on the New York Stock Exchange, if earlier.
6. Valuation Day. A valuation day is any business day, as well as the last calendar day of each month. A Valuation Period is the time from the end of a valuation day to the end of the next valuation day.
7. Net Investment Factor. The net investment factor for the Real Estate Account for a valuation period is based on the amount of accrued real estate net operating income, dividends, interest and other income accrued during the current period, a deduction of expense charges, and both realized and unrealized capital gains and losses incurred during the current period. The precise formula for the net investment factor is A divided by B, as follows:
A: The value of the Real Estate Account's net assets at
the end of the current valuation period, less any
premiums received during the current period.
B: The value of the Real Estate Account's net assets at
the end of the previous valuation period, plus the
net effect of transactions (e.g.
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transfers, benefit payments) made by the start of the
current valuation period.
PART C: When Unit-Annuity Payments Are Made
8. First Payment. This contract is effective as of the date of issue shown
on page 3, if both you and the second annuitant are then alive. Your
unit-annuity payments will begin as of the date of first payment shown
on page 3.
9. Guaranteed Period. A guaranteed period is the period of time for which
unit-annuity payments under your contract will continue regardless of
whether you or the second annuitant are alive. It begins on the
contract's date of issue. The guaranteed period you've chosen, if any,
appears on page 3.
10. Final Payment. The final unit-annuity payment under this contract will
be the last one due on or before the later of the date of your death or
the date of the second annuitant's death, unless both you and the
second annuitant die before the end of a guaranteed period. In that
case unit-annuity payments will continue to your beneficiary(ies), and
the final payment will be the last one due on or before the end of the
guaranteed period. Unit-annuity payments to a beneficiary will stop if
he or she takes the commuted value of the remaining unit-annuity
payments in one sum.
11. Frequency of Payment. The frequency of unit-annuity payments, as of
your contract's date of issue, appears on page 3. You (or after your
death, the second annuitant, or your beneficiary(ies), if both you and
the second annuitant have died) can ask to change the frequency of
payments -- the choices are annually, semi-annually, quarterly, or
monthly. However, TIAA can decline changes that result in fewer
unit-annuity payments per year. TIAA can also decline any change that
would result in unit-annuity payments of less than $25.
PART D: To Whom Unit-Annuity Payments Are Made
12. Payments Made to Annuitant. We'll make unit-annuity payments to you for
as long as you live. After you've died we'll make unit-annuity payments
to the second annuitant for as long as he or she survives you.
13. Payments Made to Beneficiaries. If both you and the second annuitant
die before the end of a guaranteed period, we'll make unit-annuity
payments to your beneficiary(ies) until the guaranteed period ends. Or
in place of continuing unit-annuity payments, beneficiaries can take
the commuted (discounted) value of the remaining unit-annuity payments
in one sum (unless noted otherwise on page 5) . If both you and the
second annuitant die before the end of a guaranteed period but have
outlived all your beneficiaries, we'll pay the commuted value of any
remaining unit- annuity payments to your estate. If both you and the
second annuitant die and a
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beneficiary subsequently dies before the end of a guaranteed period,
we'll pay the commuted value of any remaining unit-annuity payments due
to him or her to the surviving person or persons named to receive it.
If no one has been named or no one so named is then living, the
commuted value will go to such beneficiary's estate.
14. Naming Beneficiaries. You can name two kinds or "classes" of
beneficiaries, primary and contingent, which set the order of payment.
If a class contains more than one person, any payments still
outstanding at your death will go in equal shares to the then living
persons in the class, unless you've explicitly provided otherwise. For
example, if you name your spouse as primary beneficiary and "my
children" as contingent beneficiaries, your spouse would get any
payments remaining if both you and the second annuitant die before the
end of a guaranteed period. But if your spouse had died before you and
the second annuitant had both died, then your surviving children would
receive equal shares of your unit-annuity's remaining payments.
You can use the terms "children" or "my children" to name
either primary or contingent beneficiaries. Unless you specify
otherwise, we'll interpret this to mean all children born of all your
marriages, as well as any children legally adopted by you. The term
"children" also has the same inclusive meaning if you use it to name
the children of your spouse, your child, your brother or your sister as
your beneficiaries.
The beneficiaries you named as of your annuity contract's date
of issue appear on page 5. Unless you've made your beneficiary
designation irrevocable, you, or after your death the second annuitant,
can change, add, or delete beneficiaries as explained in section 22.
15. Proof of Survival. TIAA reserves the right to require satisfactory
proof that anyone you've named to receive payments under your
unit-annuity contract is alive on the date each payment is due. If we
don't receive such proof after we've requested it in writing, we can
withhold payments entirely until it has been provided.
16. Commuted Values. The commuted value of your unit-annuity is an amount
paid at once instead of as a series of payments. The option of taking
the commuted value of future unit-annuity payments is available only to
your beneficiary after your death and the death of the second
annuitant. We calculate the commuted value of a unit-annuity as of the
end of a valuation day as the present value, on the basis of interest
at the effective annual rate of 4%, of the unit-annuity payments due
for the remainder of the guaranteed period. The dollar values used for
the payments in the calculation assume that the annuity unit value will
remain at the current level.
PART E: How Are Unit-Annuity Payment Amounts Determined
17. Unit-Annuity. A Real Estate Account unit-annuity is a series of
payments based on a number of annuity units whose value changes based
on the investment performance of the Real Estate Account. The actual
mortality and expense experience of the Real Estate Account will not
reduce the amount payable per annuity unit.
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18. Annuity Units. The annuity unit is the basic unit of payment for a Real
Estate Account unit-annuity. As of your contract's date of issue, the
number of annuity units payable in each unit-annuity payment to you, to
the second annuitant after your death, or to the beneficiary after both
you and the second annuitant have died is shown on page 3.
19. Amount of Unit-Annuity Payments. The dollar amount of each unit-annuity
payment will be based on the number of annuity units payable under your
contract. The initial amount of your unit-annuity payments, as shown on
page 3, is equal to the number of annuity units payable under your
contract, as of its date of issue, multiplied by the annuity unit value
calculated as of the day before the date of issue. Thereafter, the
amount payable per annuity unit will be redetermined each year. Each
May 1, the unit- annuity payment amount will be reset to equal the
number of annuity units payable under your contract multiplied by the
annuity unit value calculated as of the preceding March 31. The amount
payable per annuity unit will then remain at that level through the
following April 30.
20. Annuity Unit Values. The Real Estate Account's annuity unit value as of
the end of each month will be determined by multiplying the annuity
unit value at the end of the previous month by the Real Estate
Account's net investment factor for the month, and dividing the result
by the value of $1.00 accumulated with interest over the month at an
effective annual rate of 4%. The resulting value is then further
adjusted to account for the difference between the unit-annuity
payments the Real Estate Account will actually make the next day, and
the unit-annuity payments that would have been made if all unit-annuity
payments were based on the current annuity unit value.
PART F: General Provisions
21. Payments Based on Incorrect Data. If any information about your age or
any other factor that we use to determine the amount of your payments
turns out to be incorrect, we'll recalculate your payments as
necessary. TIAA will make up for any underpayments as soon as we've
recalculated based on accurate information; overpayments will be
charged against payments due after the correction is made. Any
corrections to be paid or charged will include interest compounded at
an effective annual rate of 6 percent.
22. Procedure for Elections and Changes. You, the second annuitant after
your death, (or the beneficiary(ies) after both you and the second
annuitant have died) have to make any choices or changes available
under your contract in a form acceptable to TIAA at our home office in
New York, NY. If you, or the second annuitant after your death (or your
beneficiary(ies) if you've both died) send us a notice changing your
beneficiary or other persons named to receive payments, it will take
effect as of the date it was signed even if you (or other signer)
should then die before the notice actually reaches TIAA. Any other
notice will take effect as of the date TIAA receives it. If TIAA takes
any action in good faith before receiving the notice, we won't be
subject to liability even if our acts were contrary to what you told us
in the notice.
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23. Ownership. You own this contract. If the second annuitant survives you,
he or she becomes the owner of the contract at your death. The owner
can, during his or her lifetime, exercise every right given by it
without the consent of any other person, to the extent permitted by
law.
24. No Assignment. Neither you nor any other person may assign, pledge, or
transfer ownership of this contract or any benefits under its terms.
Any such action will be void and of no effect.
25. No Loans. You can't use this contract to secure a loan.
26. Endorsements and Amendments. Any endorsement or amendment of this
contract or waiver of any of its provisions will be valid only if in
writing and signed by an Executive Officer or Registrar of TIAA.
27. Service of Process upon TIAA. We'll accept service of process in
actions or suits against us on this contract in any court of competent
jurisdiction in the United States or Puerto Rico provided the process
is properly made. We'll also accept process sent to us by registered
mail if the plaintiff is a resident of the state, district, territory,
or province in which the action or suit is brought. This section
doesn't waive any of our rights, including the right to remove such
action or suit to another court.
28. Protection Against Claims of Creditors. Your benefits and rights, and
those of any other person under your contract, are exempt from the
claims of creditors or legal process to the fullest extent permitted by
law.
29. Payment to an Estate, Trustee, etc. TIAA reserves the right to pay in
one sum the commuted value of any unit-annuity payments due an estate,
corporation, partnership, trustee or other entity not a natural person.
TIAA won't be responsible for the acts or neglects of any executor,
trustee, guardian, or other third party receiving payments under your
contract.
30. Deletion of the Real Estate Account. TIAA reserves the right to stop
providing unit- annuities in the Real Estate Account. If the Real
Estate Account stops providing unit- annuities, any remaining
unit-annuity payments due under this contract must be converted to a
TIAA fixed-dollar annuity or to a CREF unit-annuity. The conversion
must be to a Last-Survivor Life annuity or unit-annuity with the same
first annuitant, second annuitant, remaining guaranteed period (if any)
and ratio of annuity payments or annuity units payable while the first
annuitant is alive to those payable after the first annuitant has died.
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31. Correspondence and Requests for Benefits. TIAA deems notices, applications, forms, or requests for benefits as received only when they reach our home office. Please send any questions about your contract or TIAA products and services to:
TIAA
730 Third Avenue
New York, NY 10017-3206
Page 12 1024 - REA
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Teachers Insurance and Annuity Association
730 Third Avenue, New York, N.Y. 10017
Telephone: 800-842-2733
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Real Estate Account Accumulation Unit Deposit Contract
Contract Issue Date Maturity Date
Number Mo. Day Yr. Mo. Day Yr.
[Y000000-R 10 02 1995 03 01 2005]
Annuitant [DOE, JANE M]
Accumulation
Units on Deposit
At Issue [100.00]
This is a contract between you, as its owner and annuitant, and Teachers Insurance and Annuity Association of America (TIAA). The main features of your contract are described here. The next pages detail the rights and obligations the contract establishes for both you and TIAA.
PLEASE READ YOUR CONTRACT. IT IS IMPORTANT.
GENERAL DESCRIPTION
Under this contract, TIAA will provide a payment to you on the maturity
date, if you are then living. If you die before the maturity date payment will
be made to your beneficiary.
The amount payable will be the value of your accumulation units as of
the date of payment. The amount of dollars payable per accumulation unit will
change with the changes in the value of the Real Estate Account's investments.
Neither earnings nor the value of your invested principal in the Real Estate
Account are guaranteed, and the value of the units you own may at any time be
more or less than their value as of the issue date.
Prior to the maturity date you can (unless otherwise indicated on page
5) choose to withdraw some or all of your accumulation units. You may also
transfer some or all of your accumulation units to your CREF Accumulation Unit
Deposit Certificate.
On or before the maturity date you can apply the value of some or all
of your accumulation units to the purchase of any form of pay-out annuity then
available for the payment of death benefits from TIAA or CREF.
This contract cannot be assigned to anyone else and you can't use it as
collateral for a loan.
If you have any questions about this contract or Chairman and need help to
resolve a problem, you can contact Chief Executive Officer us at the address or
phone number above.
(Signature of John H. Biggs)
(Specimen Stamped)
Chairman and
Chief Executive Oficer
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INDEX OF PROVISIONS
Section
Accumulation.................................................................. 8
Accumulation Unit Value....................................................... 9
Assignment - No provision for.................................................18
Beneficiaries ................................................................14
Business Day.................................................................. 5
Claims of Creditors - Protection against......................................22
Compliance with Laws and Regulations .........................................25
Consideration.............................................................Page 3
Correspondence and Requests for Benefits......................................26
Deletion of the Real Estate Account...........................................24
Endorsements and Amendments...................................................20
General Account............................................................... 3
Loans - No provision for .....................................................19
Net Investment Factor......................................................... 7
Number of Accumulation Units..................................................10
Ownership.....................................................................17
Payment at Maturity or Death..................................................11
Payment to an Estate, Trustee, etc. ..........................................23
Procedure for Elections and Changes...........................................16
Proof of Survival ............................................................15
Real Estate Account........................................................... 1
Separate Account
-- defined.................................................................. 2
-- Charge...............................................................Page 3
-- Insulation of............................................................ 4
Service of Process upon TIAA..................................................21
Valuation Day or Valuation Period............................................. 6
Withdrawals Applied to Purchase Annuity Benefits..............................13
Withdrawals and Transfers to Your CREF Audo Certificate.......................12
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PART A: Annuitant Data
Contract Date of Issue Maturity Date Number Mo. Day Yr. Mo. Day Yr.
[Y000000-R 10 02 1995 03 01 2005]
Date of Birth Mo. Day Yr.
Annuitant [DOE, JANE M] [10 31 1927]
Annuitant's Social Security Number: [000-00-0000]
ACCUMULATION
UNITS
ON DEPOSIT
AT ISSUE [100.00]
Consideration. TIAA has issued this contract in exchange for proceeds of
[$10,000] from your accumulating ("pay-in") annuity under [TIAA contract number
x-xxxxxxx-x]. This fulfills all obligations under that contract for the amount
converted. TIAA has accepted the consideration for your contract at its home
office in New York, New York.
Separate Account Charge. The separate account charge covers mortality and expense risk, liquidity risk and administrative and investment advisory services. TIAA, at its discretion, can increase or decrease the separate account charge. The separate account charge is guaranteed not to exceed 2.50% per year of net assets. The separate account charge as of the effective date of this contract is [0.75%] per year of the Real Estate Account's average net assets. - -------------------------------------------------------------------------------- 1029 - REA Page 3 TIAA REA AUDO Ed. 10-95 |
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PRIMARY BENEFICIARY(IES)
NAME RELATIONSHIP TO YOU SOCIAL SECURITY NUMBER
[John Doe Husband 000-00-0000]
CONTINGENT BENEFICIARY(IES)
NAME RELATIONSHIP TO YOU SOCIAL SECURITY NUMBER
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Additional Provisions
It is understood and agreed that if you designate a testamentary trustee or an inter vivos trustee as beneficiary:
(A) TIAA will not be obliged to inquire into the terms of any will or of any trust affecting this contract or its death benefits and will not be charged with knowledge of terms thereof.
(B) If benefits become payable to a testamentary trustee and:
(I) the will is not presented for probate within 90 days following the date of your death;
(II) the will has been presented for probate within the aforesaid 90 days and no qualified trustee makes claim for the benefits within nine months after your death; or
(III) if evidence satisfactory to TIAA is furnished TIAA within such nine-month period that no trustee can qualify to receive the benefits,
payment will be made to the successor beneficiary(ies) you designated on page 5, if any such beneficiary(ies) are designated and survive you; otherwise to the executors or administrators of your estate.
(C) If benefits become payable to an inter vivos trustee and:
(I) the trust agreement is not in effect;
(II) no trustee can qualify to receive the benefits; or
(III) the qualified trustee is not willing to accept the
benefits,
payment will be made to the successor beneficiary(ies) you designated
on page 5, if any such beneficiary(ies) are designated and survive you;
otherwise to the executors or administrators of your estate.
(D) Payment to, and receipt by, a trustee, successor beneficiary, executor,
or administrator, as provided for in (B) or (C) above, will fully
discharge TIAA from all liability to the extent of such payment. TIAA
will have no obligations as to the application of funds so paid. TIAA
will, in all dealings with a trustee, executor or administrator,
including but not limited to any consent, release or waiver of
interest, be fully protected against the claims or demands of any other
person or persons.
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PART B: The Real Estate Account
1. Real Estate Account. The Real Estate Account is a Separate Account of TIAA. Its investment objective is a favorable rate of return over the long term primarily through rental income and capital appreciation of real estate investments owned by the Account. The Real Estate Account holds mainly income-producing real estate properties and other real estate-related investments. The annual charge for the Real Estate Account will never exceed 2.50% of the Account's average net assets.
2. Separate Account. All considerations credited to the Real Estate Account become part of a separate account. The Real Estate Account is designated as VA-2 and was established by TIAA in accordance with New York law to provide benefits under this contract and other similar contracts. The assets and liabilities of separate account VA-2 are segregated from the assets and liabilities of the general account.
3. General Account. The general account consists of all of TIAA's assets other than those in separate accounts.
4. Insulation of Separate Account. TIAA owns the assets in separate account VA-2. To the extent permitted by law, the assets of the separate account will not be charged with liabilities arising out of any other business TIAA may conduct. All income, gains and losses, whether or not realized, of the separate account will be credited to or charged against only that Account without regard to TIAA's other income, gains or losses.
5. Business Day. A business day is any day that the New York Stock Exchange is open for trading. A business day ends at 4:00 p.m. Eastern time, or, if earlier, the time trading on the New York Stock Exchange closes for that day.
6. Valuation Day. A valuation day is any business day, as well as the last calendar day of each month. A Valuation Period is the time from the end of a valuation day to the end of the next valuation day.
7. Net Investment Factor. The net investment factor for the Real Estate Account for a valuation period is based on the amount of accrued real estate net operating income, dividends, interest and other income accrued during the current period, a deduction of expense charges, and both realized and unrealized capital gains and losses incurred during the current period. The precise formula for the net investment factor is A divided by B, as follows:
A: The value of the Real Estate Account's net assets at the end of
the current valuation period, less any premiums received during
the current period.
B: The value of the Real Estate Account's net assets at the end of
the previous valuation period, plus the net effect of transactions
(e.g. transfers, benefit payments) made by the start of the
current valuation period.
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PART C: Accumulation Units and Values
8. Accumulation. Your accumulation is equal to the number of accumulation units on deposit under your contract multiplied by the value of one accumulation unit. Real Estate Account accumulations are variable and are not guaranteed. They may increase or decrease depending on investment results.
9. Accumulation Unit Value. The value of one accumulation unit is calculated
at the end of each valuation day. The value of an accumulation unit is
equal to the previous day's value multiplied by the net investment factor
for the Real Estate Account.
10. Number of Accumulation Units. The number of accumulation units on deposit
at issue are shown on Page 3. Any transfer from CREF to the Real Estate
Account will buy a number of accumulation units equal to the amount of the
transfer divided by the value of one accumulation unit as of the end of
the business day in which the transfer is credited. The number of
accumulation units on deposit under your contract will be decreased by the
application of any accumulation units to any benefits or transfers. Such
transactions will decrease the number of accumulation units on deposit
under your contract by an amount equal to the dollar value of the
transaction divided by the value of one accumulation unit as of the end of
the valuation day on which the transaction becomes effective.
PART D: Benefits
11. Payment at Maturity or Death. If you are living on the maturity date, a
one-sum payment will be made to you. If you die before that date, a
one-sum payment will be made as a death benefit to the beneficiary or, if
no beneficiary is then living, to your estate. The dollar amount of the
one-sum payment will be the value of your accumulation. A payment of the
death benefit will be made after TIAA receives satisfactory proof of your
death. Payments are subject to any method of payment agreement or the
provisions of any beneficiary designation in effect under this contract.
12. Transfers to Your CREF AUDO Certificate and Withdrawals. You can, at any
time before the maturity date, transfer some or all of your Real Estate
Account accumulation units to purchase accumulation units in a CREF
account, at their then current value, under a CREF Accumulation Unit
Deposit Certificate issued to you. If the right of withdrawal is not
restricted on Page 5, you can, at any time before the maturity date,
withdraw some or all of your Real Estate Account accumulation units.
If you choose to make a transfer to a CREF account or a withdrawal,
the minimum amount you can transfer or withdraw is $1,000, or your entire
Real Estate Account accumulation if it is less than $1,000. In addition, a
partial transfer or withdrawal may be denied if the amount would cause the
value of the remaining accumulation units on deposit under this contract
to fall below $5,000.
A transfer or a withdrawal will be effective, and TIAA will determine
all values, as of the business day in which TIAA receives your request for
a transfer or withdrawal in an acceptable form. You can choose to defer the
effective date of the transfer or withdrawal until any valuation day
following the date on which we receive your request and prior to the
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maturity date. TIAA will determine all values as of the end of such
effective date. You cannot revoke a request for a transfer or withdrawal
after its effective date.
TIAA reserves the right to limit transfers from the Real Estate
Account to not more than one in a calendar quarter.
13. Transfers Applied to Purchase Annuity Benefits. You can, at any time
before the maturity date and subject to federal tax law, apply the value
of some or all of your accumulation units to the purchase of any form of
pay-out annuity then available for the payment of death benefits from TIAA
or CREF. The minimum amount you can apply is $10,000, or your entire Real
Estate Account accumulation if it is less than $10,000. If, however, a
TIAA Interest Payment contract is to be purchased with the amount applied,
the transfer must be at least $5,000. Any such amount applied to a TIAA
fixed-dollar pay-out annuity contract will purchase benefits at the same
rates as new premiums to a Retirement Annuity contract are then receiving.
The TIAA contract or CREF certificate purchased will give you the same
rights as any person then applying for a similar TIAA contract or CREF
certificate.
Federal pension law may restrict the options available to you from
TIAA or CREF. TIAA reserves the right to limit such transfers to not more
than one in a calendar quarter. In addition, a partial transfer may be
denied if the amount would cause the value of the remaining accumulation
units on deposit under this contract to fall below $5,000.
A transfer will be effective, and TIAA will determine all values, as
of the last day of the month in which TIAA receives your request for a
transfer in an acceptable form. You can choose to defer the effective date
of the transfer until the last day of any future month and prior to the
maturity date. TIAA will determine all values as of the end of such
effective date. You cannot revoke a request for a transfer after its
effective date.
PART E: General Provisions
14. Beneficiaries. Beneficiaries are persons you name, in a form satisfactory
to TIAA, to receive any payments remaining due at your death. You can name
two kinds or "classes" of beneficiaries, primary and contingent, which set
the order of payment. If a class contains more than one person, any
payments still outstanding at your death will go in equal shares to the
then living persons in the class, unless you've explicitly provided
otherwise. For example, if you name your spouse as primary beneficiary and
"my children" as contingent beneficiaries, your spouse would get the death
benefit if you die before the maturity date. But if your spouse had died
before you, then your surviving children would receive equal shares of the
death benefit.
You can use the terms "children" or "my children" to name either
primary or contingent beneficiaries. Unless you specify otherwise, we'll
interpret this to mean all children born of all your marriages, as well as
any children legally adopted by you. The term "children" also has the same
inclusive meaning if you use it to name the children of your spouse, your
child, your brother or your sister as your beneficiaries.
The beneficiaries you named as of your contract's date of issue appear
on page 5. Unless you've made your beneficiary designation irrevocable,
you can change, add, or delete beneficiaries as explained in section 16.
15. Proof of Survival. TIAA reserves the right to require satisfactory proof
that anyone you've named to receive benefits under the terms of your
contract is alive on the date any payment
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is due. If we don't receive such proof after we've requested it in
writing, we can withhold payments entirely until it has been provided.
16. Procedure for Elections and Changes. You (or the beneficiary(ies) after
you've died) have to make any choice or changes available under your
contract in a form acceptable to TIAA at our home office in New York, NY.
If you (or your beneficiary(ies) if you've died) send us a notice changing
your beneficiary or other persons named to receive payments, it will take
effect as of the date it was signed even if you (or other signer) should
then die before the notice actually reaches TIAA. Any other notice will
take effect as of the date TIAA receives it. If TIAA takes any action in
good faith before receiving your notice, we won't be subject to liability
even if our acts were contrary to what you told us in the notice.
17. Ownership. You own this contract. During your lifetime you can exercise
every right given by it without the consent of any other person, to the
extent permitted by law.
18. No Assignment. Neither you nor any other person may assign, pledge, or
transfer ownership of this contract or any benefits under its terms. Any
such action will be void and of no effect.
19. No Loans. You can't use this contract to secure a loan.
20. Endorsements and Amendments. Any endorsement or amendment of this contract
or waiver of any of its provisions will be valid only if in writing and
signed by an Executive Officer or Registrar of TIAA
21. Service of Process upon TIAA. We'll accept service of process in actions
or suits against us on this contract in any court of competent
jurisdiction in the United States or Puerto Rico provided the process is
properly made. We'll also accept process sent to us by registered mail if
the plaintiff is a resident of the state, district, territory, or province
in which the action or suit is brought. This section doesn't waive any of
our rights, including the right to remove such action or suit to another
court.
22. Protection Against Claims of Creditors. Your benefits and rights under
your contract are exempt from the claims of creditors or legal process to
the fullest extent permitted by law.
23. Payment to an Estate, Trustee, etc. TIAA won't be responsible for the acts
or neglects of any executor, trustee, guardian, or other third party
receiving payments under your contract.
24. Deletion of the Real Estate Account. TIAA reserves the right to delete the
Real Estate Account. If you own accumulation units in the Real Estate
Account and it is deleted, you must withdraw or transfer them as described
in parts D.
25. Compliance with Laws and Regulations. TIAA will administer this contract
to comply with all laws and regulations pertaining to the terms and
conditions of this certificate. If the rights provided under this contract
are restricted by any applicable law or regulation, the restrictions of
such law or regulation will prevail.
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26. Correspondence and Requests for Benefits. TIAA deems notices, applications, forms, or requests for benefits as received only when they reach our home office. Please send any questions about your contract or TIAA products and services to:
TIAA
730 Third Avenue
New York, NY 10017.
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Page 1 of 7
TEACHERS INSURANCE AND ANNUITY ASSOCIATION
730 Third Avenue, New York, N.Y. 10017-3206
Telephone: 800-842-2733
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Endorsement to Your TIAA Minimum Distribution Annuity Contract
Effective Date: [October 2, 1995]
This document, called an "endorsement," changes some of the provisions of your TIAA Minimum Distribution Annuity Contract and becomes part of it. It does not take away any of the rights established under your current contract. It is important that you read the endorsement, and attach it to your current contract.
In addition to the fixed-dollar Traditional Annuity previously provided under your Minimum Distribution Annuity Contract, TIAA now offers you the option of accumulating funds in the Real Estate Account. The Real Estate Account is a separate account of TIAA and is available as of the effective date of this endorsement. Its investment objective is a favorable rate of return over the long term primarily through rental income and capital appreciation of real estate investments owned by the Account. The Real Estate Account holds mainly income-producing real estate properties and other real estate-related investments. The annual charge for the Real Estate Account will never exceed 2.50% of the Account's average net assets.
From now on, unless we indicate otherwise, any references in your contract to your TIAA "Accumulation" should be understood to mean the total amount you have in the Traditional Annuity and the Real Estate Account combined. When we are referring to one or the other, we will specify it as your "Traditional Annuity Accumulation" or your "Real Estate Account Accumulation".
You can allocate any future considerations to either the Traditional Annuity or the Real Estate Account as described in this endorsement. When you apply a consideration to your Real Estate Account Accumulation, you'll purchase a number of Accumulation Units representing a share in the Real Estate Account's investment portfolio. You can transfer or withdraw some or all of your Real Estate Account Accumulation subject to the limitations described in this endorsement.
Your Traditional Annuity Accumulation will continue to be credited with a guaranteed interest rate and any Additional Amounts declared by the TIAA Board of Trustees. The earnings on your Real Estate Account Accumulation, if any, will vary depending on investment results. Neither earnings nor the value of your invested principal in the Real Estate Account are guaranteed, and the value of the units you own may at any time be more or less than you paid for them.
If you have any questions about this contract or Chairman and need help to resolve a problem, you can contact Chief Executive Officer us at the address or phone number above.
(Signature of John H. Biggs)
(Specimen Stamped)
Chairman and
Chief Executive Officer
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INDEX OF IMPORTANT TERMS AND PROVISIONS
Page
Accumulation
Real Estate Account..................................................E5
Traditional Annuity..................................................E3
Accumulation Unit
Number of............................................................E5
Definition...........................................................E5
Additional Amounts............................................................E4
Annual Payments - Allocation of...............................................E6
Business Day..................................................................E3
Companion CREF Certificate....................................................E4
Compliance With Laws and Regulations..........................................E7
Considerations
Allocation of........................................................E4
Definition...........................................................E4
General Account...............................................................E3
Interest......................................................................E4
Lump-sum Benefits.............................................................E6
Net Investment Factor.........................................................E5
Separate Account
Charge...............................................................E5
Definition...........................................................E3
Deletion of..........................................................E7
Insulation of........................................................E7
Surrender Charge..............................................................E6
Tax Deferred Annuity Plan.....................................................E3
Transfers.....................................................................E7
Valuation Day and Valuation Period............................................E3
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The term Accumulation is replaced with the following two terms:
Your Accumulation is equal to the sum of your Traditional Annuity Accumulation and your Real Estate Account Accumulation. Your Traditional Annuity Accumulation is guaranteed to earn interest at the rates described in your contract. Your Real Estate Account Accumulation is not guaranteed and you bear its investment risk. Your Accumulation will provide the benefits described in your contract.
Your Traditional Annuity Accumulation is the sum of:
A) all considerations allocated to the Traditional Annuity
under your contract; plus
B) interest credited to the Traditional Annuity under the
terms of your contract; plus
C) any Additional Amounts credited to the Traditional Annuity
under your contract; plus
D) any Transfers of funds from the Real Estate Account
credited to the Traditional Annuity under your contract;
less
E) any Initial and Annual Payments; less
F) any charges for expenses and contingencies; less
G) the amount of any Lump-sum Benefits paid from the
Traditional Annuity, plus any Surrender Charge.
The following Terms Used in This Contract are added:
The General Account consists of all of TIAA's assets other than those in
separate accounts.
Separate Account. All considerations credited to the Real Estate Account
become part of a Separate Account. The Real Estate Account is designated
as "VA-2" and was established by TIAA in accordance with New York law to
provide benefits under this and other contracts. The assets and
liabilities of Separate Account VA-2 are segregated from the assets and
liabilities of the General Account.
A Business Day is any day that the New York Stock Exchange is open for
trading. A Business Day ends at 4:00 P.M. Eastern time, or when trading
closes on the New York Stock Exchange, if earlier.
A Valuation Day is any business day, as well as the last calendar day of
each month. A Valuation Period is the time from the end of a valuation
day to the end of the next valuation day.
A Tax Deferred Annuity Plan is an employee benefit plan established by
your Employer under IRC Section 403(b), under which you may make salary
reduction contributions to an annuity contract.
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The term Additional Amounts is replaced with the following:
Additional Amounts. TIAA may credit Additional Amounts to the Traditional Annuity under your contract. TIAA does not guarantee that there will be Additional Amounts. TIAA will determine at least annually if Additional Amounts will be credited.
Any Additional Amounts credited to your Traditional Annuity Accumulation will buy benefits for you based on the Rate Schedule in effect on the day the Additional Amounts are credited. Additional Amounts may also be paid with any Traditional Annuity benefits payable to you or your beneficiary.
Any Additional Amounts will be credited under a schedule of Additional Amount rates declared by TIAA. For a Traditional Annuity Accumulation in force as of the effective date of such a schedule, the Additional Amount rates will not be modified for a period of twelve months following the schedule's effective date. For any considerations, any Additional Amounts, and any transfers applied to the Traditional Annuity during the twelve-month period described in the preceding sentence, TIAA may declare Additional Amounts at rates which remain in effect through the end of such twelve-month period. Thereafter, any Additional Amount rates declared for such considerations, Additional Amounts and transfers will remain in effect for periods of twelve months or more.
The term Interest is replaced with the following:
Interest will be credited to your Traditional Annuity Accumulation at
the effective annual rate shown on page 3 of your contract. All
considerations, any Additional Amounts, and any transfers applied to
your Traditional Annuity Accumulation are credited interest from the day
they are received. Transfers from CREF or the Real Estate Account are
received by the Traditional Annuity on the day following the day the
funds are transferred from CREF or the Real Estate Account.
The term Companion CREF Certificate is added to Part B:
Companion CREF Certificate. Your Companion CREF Certificate is the CREF
Minimum Distribution Annuity Certificate issued to you, if any, on the
same date with the same annuitant, calculation beneficiary, and
calculation methods as this contract.
The Considerations provision is replaced with the following two provisions:
Considerations. Considerations are all amounts paid to purchase benefits
under this contract. Considerations must be transferred directly from a
TIAA Supplemental Retirement Annuity Contract, a TIAA Group Supplemental
Retirement Annuity Certificate, a TIAA Rollover Individual Retirement
Annuity Contract, or from your Companion CREF Certificate. TIAA will
accept considerations at any time while this contract is in force.
Allocation of Considerations. You can allocate a consideration to either
the Traditional Annuity or the Real Estate Account. If you allocate
considerations to the Traditional Annuity they increase your Traditional
Annuity Accumulation. If you allocate considerations to the Real Estate
Account they purchase accumulation units in the Real Estate Account. You
may change your allocation at any time. TIAA will allocate
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considerations according to the most recent valid instructions we have received from you in an acceptable form.
A Tax Deferred Annuity Plan may limit your right to allocate to the Real Estate Account any considerations that arose from a TIAA or CREF Group Supplemental Retirement Annuity Certificate. TIAA may stop accepting considerations to the Real Estate Account at any time.
Part B-2: Real Estate Account Accumulations and Units is added to your contract:
PART B-2: REAL ESTATE ACCOUNT ACCUMULATIONS AND UNITS
Accumulation Unit. The value of one Accumulation Unit is calculated at the end of each Valuation Day. The value of an Accumulation Unit is equal to the previous day's value multiplied by the Net Investment Factor for the Real Estate Account.
Your Real Estate Account Accumulation is equal to the number of Accumulation Units you own multiplied by the value of one Accumulation Unit. Real Estate Account Accumulations are variable and are not guaranteed. They may increase or decrease depending on investment results.
Net Investment Factor. The net investment factor for the Real Estate Account for a valuation period is based on the amount of accrued real estate net operating income, dividends, interest and other income accrued during the current period, a deduction of expense charges, and both realized and unrealized capital gains and losses incurred during the current period. The precise formula for the net investment factor is A divided by B, as follows:
A: The value of the Real Estate Account's net assets at the
end of the current valuation period, less any
considerations received during the current period.
B: The value of the Real Estate Account's net assets at the
end of the previous valuation period, plus the net effect
of transactions (e.g. transfers, benefit payments) made at
the start of the current valuation period.
The Separate Account Charge covers mortality and expense risk, liquidity risk,
and administrative and investment advisory services. TIAA, at its discretion,
can increase or decrease the Separate Account Charge. The Separate Account
Charge is guaranteed not to exceed 2.50% per year of net assets. The Separate
Account Charge as of the effective date of this endorsement will be [0.75%] per
year of the Real Estate Account's average net assets.
Number of Accumulation Units. Each consideration allocated to the Real Estate
Account on your behalf buys a number of Accumulation Units equal to the amount
of the consideration divided by the value of one Accumulation Unit as of the end
of the Business Day in which the consideration is credited. The number of
Accumulation Units under your contract will be decreased by the application of
Accumulation Units to the Annual Payment or to any other benefits or transfers
paid from the Real Estate Account Accumulation under your contract. Such
transactions will decrease the number of Accumulation Units under your contract
by an amount
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equal to the dollar value of the transaction divided by the value of one Accumulation Unit as of the end of the Valuation Day on which the transaction becomes effective.
A provision on Allocation of Annual Payments is added:
Allocation of Annual Payments. Your Accumulation will be reduced by the amount of each Annual Payment. You may tell us how to allocate the reduction between your Traditional Annuity Accumulation and your Real Estate Account Accumulation. This allocation may be in any whole number percentage of the Annual Payment. You may change your allocation from time to time as described in the Procedure for Elections and Changes provision of your contract. If we do not have a valid allocation or if the value of either of the accumulations under your contract is not sufficient to cover the allocated portion of the Annual Payment, your Traditional Annuity Accumulation and your Real Estate Account Accumulation will be reduced on a pro rata basis.
The Lump-sum Benefit provision is replaced with the following:
Lump-sum Benefits. You can choose to withdraw as a Lump-sum Benefit all of your Traditional Annuity Accumulation or all of your Real Estate Account Accumulation or any part of either not less than $1,000. If you withdraw your entire Accumulation all of our obligations under this contract will be fulfilled.
If you are married and some or all of your Accumulation is subject to ERISA, your right to receive a Lump-sum Benefit is subject to the rights of your spouse as described in your contract.
If you choose the Lump-sum Benefit from your Traditional Annuity Accumulation we will pay the amount chosen less any applicable Surrender Charge. Payment of a Lump-sum Benefit reduces the accumulation from which it is paid by the amount chosen. No surrender charge applies to any Lump-sum Benefit from your Real Estate Accumulation. TIAA will determine all values as of the end of the Business Day on which we receive, in an acceptable form:
A) your request for a Lump-sum Benefit; and
B) if your Accumulation is subject to the ERISA requirements described in your contract, a Waiver of Spouse's Rights, or proof that you aren't married.
You can choose to defer the effective date of the Lump-sum Benefit until any Valuation Day following the date on which we receive the above requirements. TIAA will determine all values as of the end of such effective date. You cannot revoke a request for a Lump-sum Benefit after its effective date.
TIAA may defer the payment of a Lump-sum Benefit from your Traditional Annuity for up to six months.
The Surrender Charge provision is replaced with the following:
Surrender Charge. If you choose to receive a Lump-sum Benefit or to
transfer from your Traditional Annuity Accumulation, the amount paid
will be equal to the amount chosen less a Surrender Charge. The
Surrender Charge rate is shown on page 3 of your contract.
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No Surrender Charge will apply to any Lump-sum Benefit or
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transfer paid from the Real Estate Account.
A provision on Transfers is added:
Transfers. You may at any time choose to transfer between your Traditional Annuity Accumulation and your Real Estate Account Accumulation. In addition, you can choose to transfer all of your Traditional Annuity Accumulation or all of your Real Estate Account Accumulation or a portion of either to your Companion CREF Certificate. Your right to transfer to the Real Estate Account, any part of your Accumulation attributable to premiums remitted to a TIAA or CREF Group Supplemental Retirement Annuity Contract, may be limited by the Tax Deferred Annuity Plan.
If you choose to make a transfer, the minimum amount you can transfer is $1,000, or an entire accumulation if it is less than $1,000. A transfer reduces the accumulation from which it is paid by the amount chosen. If you transfer from your Traditional Annuity Accumulation we will transfer the amount chosen less any applicable Surrender Charge. No Surrender Charge applies to any transfer from the Real Estate Account. If you transfer your entire Accumulation to CREF all of our obligations under this contract will be fulfilled.
A transfer will be effective, and TIAA will determine all values, as of the business day in which TIAA receives your request for a transfer in an acceptable form. You can choose to defer the effective date of the transfer until any Valuation Day following the date on which we receive your request. TIAA will determine all values as of the end of such effective date. You cannot revoke a request for a transfer after its effective date.
The following General Provisions are added:
Deletion of the Real Estate Account. TIAA reserves the right to delete the Real Estate Account. If you own Accumulation Units in the Real Estate Account and it is deleted, you must transfer them to CREF or to your Traditional Annuity Accumulation.
Insulation of Separate Account. TIAA owns the assets in Separate Account VA-2. To the extent permitted by law, the assets of the Separate Account will not be charged with liabilities arising out of any other business TIAA may conduct. All income, gains and losses, whether or not realized, of the Separate Account will be credited to or charged against only that Account without regard to TIAA's other income, gains or losses.
The first paragraph of the Compliance with Laws and Regulations provision is replaced with the following:
TIAA will administer your contract to comply with the restrictions of
all laws and regulations pertaining to the terms and conditions of your
contract. You cannot elect any benefit or exercise any right under your
contract if the election of that benefit or exercise of that right is
prohibited under an applicable state or federal law or regulation.
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TEACHERS INSURANCE AND ANNUITY ASSOCIATION
730 Third Avenue, New York, N.Y. 10017-3206
Telephone: 800-842-2733
Endorsement to Your TIAA Minimum Distribution Annuity Contract
Effective Date: [October 2, 1995]
This document, called an "endorsement," changes some of the provisions
of your TIAA Minimum Distribution Annuity Contract and becomes part of it. It
does not take away any of the rights established under your current contract. It
is important that you read the endorsement, and attach it to your current
contract.
In addition to the fixed-dollar Traditional Annuity previously provided
under your Minimum Distribution Annuity Contract, TIAA now offers you the option
of accumulating funds in the Real Estate Account. The Real Estate Account is a
separate account of TIAA and is available as of the effective date of this
endorsement. Its investment objective is a favorable rate of return over the
long term primarily through rental income and capital appreciation of real
estate investments owned by the Account. The Real Estate Account holds mainly
income-producing real estate properties and other real estate-related
investments. The annual charge for the Real Estate Account will never exceed
2.50% of the Account's average net assets.
From now on, unless we indicate otherwise, any references in your
contract to your TIAA "Accumulation" should be understood to mean the total
amount you have in the Traditional Annuity and the Real Estate Account combined.
When we are referring to one or the other, we will specify it as your
"Traditional Annuity Accumulation" or your "Real Estate Account Accumulation".
You can allocate any future considerations to either the Traditional
Annuity or the Real Estate Account as described in this endorsement. When you
apply a consideration to your Real Estate Account Accumulation, you'll purchase
a number of Accumulation Units representing a share in the Real Estate Account's
investment portfolio. You can transfer or withdraw some or all of your Real
Estate Account Accumulation subject to the limitations described in this
endorsement.
Your Traditional Annuity Accumulation will continue to be credited with
a guaranteed interest rate and any Additional Amounts declared by the TIAA Board
of Trustees. The earnings on your Real Estate Account Accumulation, if any, will
vary depending on investment results. Neither earnings nor the value of your
invested principal in the Real Estate Account are guaranteed, and the value of
the units you own may at any time be more or less than you paid for them.
If you have any questions about this contract or Chairman and need help to
resolve a problem, you can contact Chief Executive Officer us at the address or
phone number above.
(Signature of John H. Biggs)
(Specimen stamped)
Chairman and
Chief Executive Officer
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INDEX OF IMPORTANT TERMS AND PROVISIONS
Page
Accumulation
Real Estate Account..................................................E5
Traditional Annuity..................................................E3
Accumulation Unit
Number of............................................................E5
Definition...........................................................E5
Additional Amounts............................................................E4
Annual Payments - Allocation of...............................................E6
Business Day..................................................................E3
Companion CREF Certificate....................................................E4
Compliance With Laws and Regulations..........................................E7
Considerations
Allocation of........................................................E4
Definition...........................................................E4
Funding Vehicle...............................................................E3
General Account...............................................................E3
Interest......................................................................E4
Net Investment Factor.........................................................E5
Retirement Plan...............................................................E3
Separate Account
Charge...............................................................E5
Definition...........................................................E3
Deletion of..........................................................E7
Insulation of........................................................E7
Spouse's Rights
Additions to.........................................................E7
Definition...........................................................E4
Transfers.....................................................................E6
Valuation Day and Valuation Period............................................E3
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Endorsement to Your TIAA
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The term Accumulation is replaced with the following:
Your Accumulation is equal to the sum of your Traditional Annuity Accumulation and your Real Estate Account Accumulation. Your Traditional Annuity Accumulation is guaranteed to earn interest at the rates described in your contract. Your Real Estate Account Accumulation is not guaranteed and you bear its investment risk. Your Accumulation will provide the benefits described in your contract.
Your Traditional Annuity Accumulation is the sum of:
A) all considerations allocated to the Traditional Annuity under your contract; plus
B) interest credited to the Traditional Annuity under the terms of your contract; plus
C) any Additional Amounts credited to the Traditional Annuity under your contract; plus
D) any Transfers of funds from the Real Estate Account credited to the Traditional Annuity under your contract; less
E) any Initial and Annual Payments; less
F) any charges for expenses and contingencies.
The following Terms Used in This Contract are added:
The General Account consists of all of TIAA's assets other than those in separate accounts.
Separate Account. All considerations credited to the Real Estate Account become part of a Separate Account. The Real Estate Account is designated as "VA-2" and was established by TIAA in accordance with New York law to provide benefits under this and other contracts. The assets and liabilities of Separate Account VA-2 are segregated from the assets and liabilities of the General Account.
A Business Day is any day that the New York Stock Exchange is open for trading. A Business Day ends at 4:00 P.M. Eastern time, or when trading closes on the New York Stock Exchange, if earlier.
A Valuation Day is any business day, as well as the last calendar day of each month. A Valuation Period is the time from the end of a valuation day to the end of the next valuation day.
A Retirement Plan is an employer's plan, qualifying under IRC Section
401(a), 403(a), or 403(b) for providing retirement benefits for
employees.
A Funding Vehicle is an annuity or an investment fund established to
provide retirement benefits from monies remitted under a Retirement
Plan.
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The term Additional Amounts is replaced with the following:
Additional Amounts. TIAA may credit Additional Amounts to the Traditional Annuity under your contract. TIAA does not guarantee that there will be Additional Amounts. TIAA will determine at least annually if Additional Amounts will be credited.
Any Additional Amounts credited to your Traditional Annuity Accumulation will buy benefits for you based on the Rate Schedule in effect on the day the Additional Amounts are credited. Additional Amounts may also be paid with any Traditional Annuity benefits payable to you or your beneficiary.
Any Additional Amounts will be credited under a schedule of Additional Amount rates declared by TIAA. For a Traditional Annuity Accumulation in force as of the effective date of such a schedule, the Additional Amount rates will not be modified for a period of twelve months following the schedule's effective date. For any considerations, any Additional Amounts, and any transfers applied to the Traditional Annuity during the twelve-month period described in the preceding sentence, TIAA may declare Additional Amounts at rates which remain in effect through the end of such twelve-month period. Thereafter, any Additional Amount rates declared for such considerations, Additional Amounts and transfers will remain in effect for periods of twelve months or more.
The term Interest is replaced with the following:
Interest will be credited to your Traditional Annuity Accumulation at the effective annual rate shown on page 3 of your contract. All considerations, any Additional Amounts, and any transfers applied to your Traditional Annuity Accumulation are credited interest from the day they are received. Transfers from CREF or the Real Estate Account are received by the Traditional Annuity on the day following the day the funds are transferred from CREF or the Real Estate Account.
The term Spouse's Rights is replaced with the following:
Spouse's Rights. If your Accumulation is subject to ERISA, your spouse
may have rights to a Survivor Retirement Benefit, as explained in Part F
of your contract. Your spouse's right to this benefit may limit your
choice of annuity benefit, beneficiary, or Transfer.
The term Companion CREF Certificate is added to Part B:
Companion CREF Certificate. Your Companion CREF Certificate is the
non-cashable CREF Minimum Distribution Annuity Certificate, if any,
issued to you on the same date with the same annuitant, calculation
beneficiary, and calculation methods as this contract.
The Considerations provision is replaced with the following two provisions:
Considerations. Considerations are all amounts paid to purchase benefits
under this contract. Considerations must be transferred directly from
another TIAA contract or certificate or from your Companion CREF
Certificate. TIAA will accept considerations at any time while this
contract is in force.
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Endorsement to Your TIAA
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Allocation of Considerations. You can allocate any consideration to either the Traditional Annuity or the Real Estate Account. If you allocate considerations to the Traditional Annuity they increase your Traditional Annuity Accumulation. If you allocate considerations to the Real Estate Account they purchase accumulation units in the Real Estate Account. You may change your allocation at any time. TIAA will allocate considerations according to the most recent valid instructions we have received from you in an acceptable form.
A Retirement Plan may limit your right to allocate considerations to the Real Estate Account. TIAA may stop accepting considerations to the Real Estate Account at any time.
Part B-2: Real Estate Account Accumulations and Units is added to your contract:
PART B-2: REAL ESTATE ACCOUNT ACCUMULATIONS AND UNITS
Accumulation Unit. The value of one Accumulation Unit is calculated at the end of each Valuation Day. The value of an Accumulation Unit is equal to the previous day's value multiplied by the Net Investment Factor for the Real Estate Account.
Your Real Estate Account Accumulation is equal to the number of Accumulation Units you own multiplied by the value of one Accumulation Unit. Real Estate Account Accumulations are variable and are not guaranteed. They may increase or decrease depending on investment results.
Net Investment Factor. The net investment factor for the Real Estate Account for a valuation period is based on the amount of accrued real estate net operating income, dividends, interest and other income accrued during the current period, a deduction of expense charges, and both realized and unrealized capital gains and losses incurred during the current period. The precise formula for the net investment factor is A divided by B, as follows:
A: The value of the Real Estate Account's net assets at the
end of the current valuation period, less any
considerations received during the current period.
B: The value of the Real Estate Account's net assets at the
end of the previous valuation period, plus the net effect
of transactions (e.g. transfers, benefit payments) made at
the start of the current valuation period.
The Separate Account Charge covers mortality and expense risk, liquidity risk,
and administrative and investment advisory services. TIAA, at its discretion,
can increase or decrease the Separate Account Charge. The Separate Account
Charge is guaranteed not to exceed 2.50% per year of net assets. The Separate
Account Charge as of the effective date of this endorsement will be [0.75%] per
year of the Real Estate Account's average net assets.
Number of Accumulation Units. Each consideration allocated to the Real Estate
Account on your behalf buys a number of Accumulation Units equal to the amount
of the consideration divided by the value of one Accumulation Unit as of the end
of the Business Day in which the consideration is credited. The number of
Accumulation Units under your contract will be
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Minimum Distribution Annuity Contract Page 6 of 7
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decreased by the application of Accumulation Units to the Annual Payment or to
any other benefits or transfers paid from the Real Estate Account Accumulation
under your contract. Such transactions will decrease the number of Accumulation
Units under your contract by an amount equal to the dollar value of the
transaction divided by the value of one Accumulation Unit as of the end of the
Valuation Day on which the transaction becomes effective.
A provision on Allocation of Annual Payments is added:
Allocation of Annual Payments. Your Accumulation will be reduced by the
amount of each Annual Payment. You may tell us how to allocate the
reduction between your Traditional Annuity Accumulation and your Real
Estate Account Accumulation. This allocation may be in any whole number
percentage of the Annual Payment. You may change your allocation from
time to time as described in the Procedure for Elections and Changes
provision of your contract. If we do not have a valid allocation or if
the value of either of the accumulations under your contract is not
sufficient to cover the allocated portion of the Annual Payment, your
Traditional Annuity Accumulation and your Real Estate Account
Accumulation will be reduced on a pro rata basis.
A provision on Transfers is added:
Transfers. You can, on or before the commencement of annuity payments,
transfer some or all of your Real Estate Account Accumulation Units: (a)
to your Companion CREF Certificate, (b) to your TIAA Traditional Annuity
Accumulation, (c) to provide a cash withdrawal, or (d) to a Funding
Vehicle not offered by TIAA or CREF. Any transfer to CREF is subject to
the terms of your CREF certificate and CREF's Rules of the Fund.
For Real Estate Account Accumulation Units purchased by premiums
remitted under a Retirement Plan, the plan may limit your right to a
cash withdrawal or to transfer to a Funding Vehicle not offered by TIAA
or CREF.
If you are married and your Real Estate Account Accumulation is
subject to ERISA, your right to receive a cash withdrawal is subject to
the rights of your spouse as described in your contract.
If you choose to transfer from your Real Estate Account
Accumulation, the minimum amount you may transfer is $1,000, or the
entire Real Estate Account Accumulation eligible for transfer, if it is
less than $1,000. TIAA will determine all values as of the end of the
Business Day on which we receive, in an acceptable form:
A) your request for a transfer; and
B) verification of your eligibility for a cash withdrawal or
transfer to a Funding Vehicle not offered by TIAA or CREF
for those Real Estate Account Accumulation Units purchased
by premiums remitted on your behalf under a Retirement
Plan; and
C) if your Real Estate Account Accumulation is subject to the
ERISA requirements described in the Spouse's Rights to
Benefits provision of your contract, a Waiver of Spouse's
Rights or proof that you aren't married.
You can choose to defer the effective date of the transfer until
any Valuation Day following the date on which we receive the above
requirements. TIAA will determine all
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values as of the end of such effective date. You can not revoke a request for a transfer after its effective date.
The following is added to the Spouse's Rights to Benefits provision:
If your Real Estate Account Accumulation is subject to the provisions of the IRC and ERISA as described in this section, your spouse must consent to a waiver of his or her right to survivor benefits before you can choose:
A) a Real Estate Account Transfer to provide a cash withdrawal; or
B) to the extent required by law, a transfer to a Funding Vehicle not offered by TIAA or CREF.
The following General Provisions are added:
Deletion of the Real Estate Account. TIAA reserves the right to delete the Real Estate Account. If you own Accumulation Units in the Real Estate Account and it is deleted, you must transfer them to CREF or to your Traditional Annuity Accumulation.
Insulation of Separate Account. TIAA owns the assets in Separate Account VA-2. To the extent permitted by law, the assets of the Separate Account will not be charged with liabilities arising out of any other business TIAA may conduct. All income, gains and losses, whether or not realized, of the Separate Account will be credited to or charged against only that Account without regard to TIAA's other income, gains or losses.
The first paragraph of the Compliance with Laws and Regulations provision is replaced with the following:
TIAA will administer your contract to comply with the restrictions of
all laws and regulations pertaining to the terms and conditions of your
contract. You cannot elect any benefit or exercise any right under your
contract if the election of that benefit or exercise of that right is
prohibited under an applicable state or federal law or regulation.
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Teacher Insurance and Annuity Association 730 Third Avenue New York, New York 10017-3206 212 490-9000
April 24, 1996
Board of Trustees of
Teachers Insurance and Annuity Association
730 Third Avenue
New York, New York 10017-3206
Ladies and Gentlemen:
This opinion is furnished in connection with Post-Effective Amendment No. 2 to the Registration Statement on Form S-1 (File No. 33-92990) (the "Amendment") of the TIAA Real Estate Account (the "Account") being filed with the Securities and Exchange Commission under the Securities Act of 1933. Interests in the Account are offered through endorsements to certain individual, group and tax-deferred annuity contracts and through income-paying contracts (collectively, the "Contracts") issued by Teachers Insurance and Annuity Association of America ("TIAA").
I have examined the Charter, Bylaws and other corporate records of TIAA, including TIAA's Plan of Operations for Separate Account Business, and other organizational records of the Account, and the relevant statutes and regulations of the State of New York. On the basis of such examination, it is my opinion that:
1. TIAA is a nonprofit life insurance company duly organized and validly existing under the laws of the State of New York.
2. The Account is a "separate account" of TIAA within the meaning of Section 4240 of the New York Insurance Law, duly established by a resolution of TIAA's Board of Trustees and validly existing under the laws of the State of New York.
3. The Contracts have been duly authorized by TIAA and, when issued as contemplated by the Registration Statement, constitute legal, validly issued and binding obligations of TIAA enforceable in accordance with their terms.
April 24, 1996
I hereby consent to the use of this opinion as an exhibit to the Amendment, and to the reference to my name under the heading "Legal Matters" in the Amendment.
Sincerely,
/s/ Charles H. Stamm Charles H. Stamm Executive Vice President and General Counsel |
TEACHER INSURANCE AND ANNUITY ASSOCIATION
730 Third Avenue
New York, New York 10017-3206
(212) 490-9000
June 9, 1995
Institutional Property Consultants, Inc.
4330 La Jolla Village Drive, Suite 310
San Diego, California 92122
RE: Teachers Insurance and Annuity Association of America Real Estate Separate Account; ERISA Independent Fiduciary
Dear Sirs:
This letter sets forth the terms and conditions under which Teachers Insurance and Annuity Association of America (the "Company") offers to appoint Institutional Property Consultants, Inc. ("IPC") to serve as the Independent Fiduciary, as defined below, under the Employee Retirement Income Security Act of 1974, as amended ("ERISA") for a new real estate pooled separate account (the "Account") designed primarily for investment by participants in defined contribution plans qualified under (section sign) 401(a) and (section sign) 403(a) of the Internal Revenue Code of 1986, as amended, ("Code"), Code (section sign) 403(b) plans, and certain individual retirement annuities under (section sign) 408 of the Code.
1. Background
On December 22, 1994 the Company filed an application (the "Application") with the Department of Labor ("DOL") for exemption from certain potential prohibited transactions under (section sign) 406 of ERISA and (section sign) 4975 of the Code with respect to certain transactions or classes of transactions involving the establishment and subsequent administration by the Company of the Account. Among other features, the Account offers a stand-by liquidity mechanism under which units of interest in the Account ("Units") may be purchased or sold by the Company. The Application contemplates that various
Institutional Property Consultants, Inc. Page 2 June 9, 1995
aspects of the Account's operation will be subject to the oversight of an independent fiduciary ("Independent Fiduciary") which will be a business organization with substantial real estate investment experience and which will be familiar with the responsibilities of a fiduciary with respect to benefit plans under ERISA. The Independent Fiduciary will act for the exclusive benefit of the plan participants who elect to participate in the Account.
As of this date, the Application has yet to be approved by the DOL, although on the basis of discussions to date with the representatives of the DOL, the Company has no reason to believe that an exemption with respect to the Account will not be issued in due course. However, prior to the final disposition of the Application by the DOL, the Company intends to appoint an Independent Fiduciary who will undertake responsibility for such activities and such classes of transactions as are described in the Application, pages 16-33, and for such other matters as the Company may from time to time request. Included in the Application are descriptions of the responsibilities of the Independent Fiduciary. The proposed valuation procedures and rules for the Account are described in the Application and in Exhibit A to this Agreement.
2. Compensation
Compensation for services rendered by IPC pursuant to this Agreement shall be paid from the Account in the amounts and in accordance with the terms and conditions set forth in Schedule 1 attached hereto.
3. Duties and Responsibilities of the Company
The Company is an investment manager, as defined in Section 3(38) of ERISA, with respect to the Account, and shall be primarily responsible, as a fiduciary under ERISA, for all aspects of the establishment and administration of the Account. The Company alone shall be responsible for making determinations with respect to the acquisition and disposition of properties by the Account and for all other aspects of the investment of Account assets, subject to the duties and responsibilities of IPC specifically set forth in the Application and paragraph 4 hereof.
Institutional Property Consultants, Inc. Page 3 June 9, 1995
4. Duties and Responsibilities of IPC
A. IPC's duties and responsibilities under this Agreement shall be those set forth in the Application and as described below:
(1) IPC will review and approve the valuation of the Account and of the properties held in the Account as outlined on pages 24-27 of the Application and as more specifically described in Valuation Procedures and Rules which shall be adopted for the Account by the Company and which shall be subject to the approval of IPC. (A copy of the current draft of the valuation procedures and rules for the Account is attached as Exhibit A.)
(2) IPC will approve the appointment of all independent appraisers retained by the Company to perform periodic valuations of Account properties. For this purpose, the Company will forward to IPC information provided to the Company with respect to the background, education and experience of each such independent appraiser.
(3) IPC may require an appraisal in addition to those conducted by an independent appraiser appointed as provided in clause (2) above, when it believes that the characteristics of a particular property have changed materially or with respect to any property where it deems an additional appraisal to be necessary or appropriate in order to assure a correct Account valuation. IPC will perform such reviews of Account properties as it may determine to be necessary or desirable in establishing the necessity of such additional appraisals. IPC shall have the authority to designate independent appraisers to be hired by the Company to perform any such additional appraisals, but the Company hereby reserves the right to disapprove any such selection. Accordingly, IPC shall notify the Company at least fourteen (14) days prior to the anticipated hiring of any appraiser not previously approved by the Company. Any such appraiser will be deemed approved by the Company if the Company fails to object within fourteen (14) days of receipt of the aforesaid notice and the Company will, thereupon, hire such appraiser. The Company may in its sole discretion withdraw its approval
Institutional Property Consultants, Inc. Page 4 June 9, 1995
of an appraiser at any time prior to hiring such appraiser for future appraisals by giving a notice of withdrawal of its approval.
(4) IPC shall review purchases and sales of Units by Account participants and the Company to assure that correct Account values are applied. IPC shall also review the fixed repayment schedule applicable to the redemption of Seed Money Units during the Start Up Period, as defined in the Application, as approved by the New York Insurance Department. With respect to the foregoing, IPC may rely upon the truth, completeness and correctness of information provided to it by the Company or by the independent auditor designated by the Company with respect to the Account.
(5) After (and, if necessary, during) the Start Up Period, as defined in the Application, IPC will determine with the Company the appropriate "trigger" guidelines relating to the level of the Company's ongoing ownership of Liquidity Units in the Account, as defined in the Application, and the manner in which any reduction of the Company's participation in excess of such guidelines is to be effected as contemplated under the Application. If IPC and the Company agree that asset sales may be required in order to reduce the Company's ownership of Units in the Account, IPC will participate in the planning of any such program of sales, including the selection of the properties to be sold and the guidelines to be followed in making such sales.
(6) In the event of the termination of the Account as described on pages 27-29 of the Application, IPC will approve the sale of Account properties and supervise Account operation during the Wind Down Period (as defined in the Application). Such period will commence with the Company's notice to Account participants of its termination of the Account and will end on the date that no Units are held by any Participant (and, if applicable, Participating Plans), as defined in the Application.
(7) IPC will review and approve the investment
Institutional Property Consultants, Inc. Page 5 June 9, 1995
guidelines established by the Company for the Account and will monitor the conformity of all property acquisitions and sales with the requirements of such guidelines.
(8) With respect to any other transaction or matter involving the Account that is submitted to IPC by the Company, IPC will review said transaction or matter in order to determine whether it is fair to the Account and in the Account's best interests.
B. In the event that the Company or the DOL or any other governmental agency requires or requests IPC to perform additional functions reasonably related to the type of review described herein, or to undertake duties with respect to the Account beyond those specifically enumerated herein, these additional duties and functions shall be deemed to be included among the duties of IPC under this Agreement, provided that:
(1) The Company requests IPC to perform such activity in writing; and
(2) IPC and the Company determine the nature and amount of any additional compensation that may be appropriate with respect to such additional duties. If IPC and the Company are not able to agree upon the nature and amount of any additional compensation, IPC and the Company hereby agree to submit any disputed issues to arbitration and to be bound by the results thereof; provided, however, that IPC shall nevertheless perform the additional duties described above during the time required for a final determination to be made with respect to the nature and/or amount of any additional compensation that it may receive.
C. IPC will meet with the Company on a quarterly basis to review the activities of the Account and the actions that IPC has taken under this Agreement. IPC will submit to the Company a summary report from time to time as it may deem necessary or appropriate, but no less frequently than annually. Such report shall be a written report that summarizes and explains all actions and activities that IPC has undertaken since the submission of the last such report or the commencement of its terms, except those actions and activities that IPC in its judgment deems to be not material. All or
Institutional Property Consultants, Inc. Page 6 June 9, 1995
any part of any such report may, after consultation with IPC, be provided by the Company to any Account participant or to the DOL or any other governmental agency. IPC shall maintain appropriate records of its actions and activities under this Agreement and will allow the Company to review such records during normal business hours upon reasonable prior request by the Company, and the Company, after consultation with IPC, may provide the results of any such review to the DOL or to any other governmental agency.
D. IPC may make all reasonable inquiries, consult with whomever it reasonably deems necessary, do all acts that are reasonably necessary to the performance of its duties, and review such Company documents as are reasonably appropriate for carrying out its responsibilities under this Agreement. All work to be performed pursuant to this paragraph 5, may be performed during normal business hours at the Company's Home Office, 730 Third Avenue, New York, New York 10017 or such other place as may be reasonably designated by IPC, including IPC's offices.
5. Representations
IPC represents and agrees that:
A. IPC has at least five years of experience with respect to commercial real estate investments.
B. The gross income which is received by IPC (or any partnership or corporation of which IPC is a 10 percent or more partner or shareholder) from the Company and its affiliates (as defined in any proposed exemption issued with respect to the Account) for any fiscal year ending during the term of this Agreement shall not exceed 5 percent of its annual gross income from all sources for the preceding fiscal year. Such income limitation will include services rendered to the Account as the Independent Fiduciary under any prohibited transaction exemption granted by the DOL. IPC will provide, on an annual basis, a report to the Company of the gross income it receives from the Company as a percentage of the gross income received during the preceding fiscal year.
C. IPC shall not (i) acquire any property from, sell any
Institutional Property Consultants, Inc. Page 7 June 9, 1995
property to or borrow any funds from, the Company or any of its affiliates during the period for which it serves as an Independent Fiduciary under this Agreement and for a period of six months thereafter, or (ii) negotiate any such transaction described in (i) during the period that IPC serves as the Independent Fiduciary.
D. In the event that the DOL requires additional representations by IPC, it is agreed that IPC will make any such reasonably required representations that are true in fact.
6. Independent Status
As the Independent Fiduciary, IPC shall not be an agent of the Company. In keeping with this status, IPC shall be free to control its method of fulfilling its responsibilities within the framework of its obligations to the Participants and their beneficiaries (and, if applicable, Participating Plans), as defined in the Application, and to the Company.
7. Fiduciary Standards/Confidentiality
Notwithstanding any other provision of this Agreement, it is understood that IPC will act as a fiduciary, as defined in ERISA, with respect to the Participants and their beneficiaries (and, if applicable, Participating Plans) that invest in the Account, and that IPC will perform its duties under this Agreement for the exclusive benefit of such Participants, their beneficiaries and Participating Plans and in conformity with the legal requirements imposed upon it by ERISA.
It is understood that IPC will not unnecessarily engage in any activity in connection with this appointment that is adverse to the interest of the Company. IPC may provide similar independent fiduciary services with respect to other benefit plans subject to ERISA; provided that IPC does not use or disclose in such relationships confidential information obtained by it in the course of providing services under this Agreement.
Upon termination of this Agreement, IPC will disclose to the Company all material in its possession that has been
Institutional Property Consultants, Inc. Page 8 June 9, 1995
released to it by the Company or produced pursuant to this Agreement. Such material may be retained by IPC if it deems such retention to be necessary to protect its interests or the interests of the Participants and their beneficiaries (and, if applicable, Participating Plans) that have invested in the Account. If IPC retains any such material, it shall promptly notify the Company in writing of such action. The aforesaid notice shall include an itemized list of all retained documents and other materials. Upon receipt of the aforesaid notice, or at any time thereafter, the Company may at its option, require that IPC deliver all such retained material to the person who succeeds to its position as Independent Fiduciary. However, IPC may retain any materials that it deems necessary to protect its interests, provided that copies of said materials are furnished to either the Company or IPC's successor as Independent Fiduciary, upon request. IPC will not at any time during the term of this Agreement or thereafter disclose any of the Company's trade secrets, confidential business methods, or any other confidential information which it may have acquired during its service as Independent fiduciary under this Agreement.
8. Personnel
IPC agrees that, without limiting its responsibilities under this Agreement or under ERISA, primary responsibility for the performance of the services contemplated under this Agreement shall be assigned to Barbara R. Cambon and that it will use its best efforts to assure that Barbara R. Cambon continues to act in such capacity during the term of this Agreement. In the event that Barbara R. Cambon does not, for any reason, continue to serve in such capacity, IPC agrees that it will assign primary responsibility for the duties contemplated under this Agreement to a senior employee of similar experience and ability.
9. Effective Date/Termination/Notice
A. This Agreement shall become effective on the date of receipt by the Company of a copy of this Agreement that has been executed by IPC and by an authorized officer of the Company.
B. IPC's appointment shall commence on the date this Agreement becomes effective for a five year term, and
Institutional Property Consultants, Inc. Page 9 June 9, 1995
shall be renewable by the Company, from time to time and without limitation on the number of renewals, for additional three (3) year terms. Upon expiration of IPC's appointment without renewal this Agreement shall terminate. IPC may terminate this Agreement at any time but must give at least 180 days prior written notice to the Company. The Company may terminate this Agreement and IPC's appointment prior to the expiration of the term of its appointment if: (1) a special subcommittee of the Company's Mortgage Committee, after an annual revue, decides to terminate the Agreement upon 180 days prior written notice; or (2) if the Company determines that IPC has breached any representation set forth in paragraph 5 or that IPC has failed to carry out its responsibilities under this Agreement in an effective manner, or is unable to do so. The Company may terminate this agreement if it determines that a merger or restructuring of IPC with or into another entity may cause a conflict of interest that shall impair IPC's ability to carry out its responsibilities under this Agreement in an effective manner. The Company may terminate this Agreement at any time prior to the date on which Units are acquired by a Participant (or, if applicable, Participating Plan). In the event that IPC's term shall terminate as described in this paragraph 9B, IPC shall be compensated only for services performed by it prior to the date of such termination.
C. Unless otherwise expressly provided herein, any notice, demand or request under this Agreement shall be deemed to have been properly given and served by depositing the same in the United States mail, addressed as provided herein, postpaid and registered or certified with return receipt requested. Any such notice, demand or request shall be effective upon being deposited in the United States mail. However, the time period in which a response or action to any such notice, demand or request must be given or taken shall commence to run from the date of receipt on the return receipt of the notice, demand or request by the addressee thereof. Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given shall be deemed to be receipt of the notice, demand or request. Notice to the Company shall be addressed to Joan H. Fallon, Director, Teachers Insurance and Annuity Association of America, 730 Third Avenue, New York, New York, 10017-3206, with a copy to
Institutional Property Consultants, Inc. Page 10 June 9, 1995
Jeanne Cullinan Ray, Vice President and Chief Counsel, Teachers Insurance and Annuity Association of America, 730 Third Avenue, New York, New York, 10017-3206, (or such other person or persons as the Company may designate). Notice to IPC shall be addressed to Barbara R. Cambon, Institutional Property Consultants, Inc., 4330 La Jolla Village Drive, Suite 310, San Diego, California 92122.
10. Indemnification and Insurance
A. Subject to the limitations in clause C of this paragraph 10, IPC shall be indemnified and saved harmless by the Account from and against any and all claims of liability arising in connection with the exercise of its duties and responsibilities to the Account by reason of any act or omission, including all expenses reasonably incurred in the defense of such act or omission, unless (1) it shall be established by final judgement of a court of competent jurisdiction that such act or omission involved a violation of the duties imposed by Part 4 of Title I of ERISA on the part of IPC or (2) in the event of a settlement or other disposition of such claim involving the Account, it is determined by written opinion of independent counsel acceptable to both parties that such act or omission involved a violation of the duties imposed by Part 4 of Title I of ERISA on the part of IPC.
B. Subject to the limitation in clause C of this paragraph 10, the Account shall pay expenses (including reasonable attorneys' fees and disbursements), judgments, fines and amounts paid in settlement incurred by IPC in connection with any of the proceedings described above, in advance of the final disposition of such proceedings, provided that (1) IPC shall repay such advances to the Account, plus reasonable interest, if it is established by a final judgment of a court of competent jurisdiction, or by written opinion of independent counsel under the circumstances described in section A above, that IPC violated its duties under Part 4 of Title I of ERISA, and (2) IPC shall, in the discretion and upon the request of the Company, provide a bond or make other appropriate arrangements for repayment of advances. Notwithstanding the foregoing, no such advances shall be made in connection with any claim against IPC that
Institutional Property Consultants, Inc. Page 11 June 9, 1995
is made by the Account or the Company, provided that upon the final disposition of such claim, the expenses (including reasonable attorneys' fees and disbursements), judgments, fines and amounts paid in settlement incurred by IPC shall be reimbursed by the Account to the extent provided above.
C. The indemnification provided under clauses A and B of this paragraph 10 shall apply only to claims and expenses not actually covered by insurance. IPC agrees to maintain professional liability coverage that includes coverage for its responsibilities under this Agreement, with limits of at least $1 million, throughout the term of this Agreement.
11. Entire Agreement
This letter contains the entire agreement between the parties. However, where the text of this Agreement contains express reference to the Application, or specific paragraphs of the Application, it is the intention of the parties that the Application be incorporated in this Agreement for the purpose of construing the meaning of such express references. This Agreement may not be changed orally or by conduct but only by agreement in writing signed by both parties.
12. No Waiver
Failure to insist upon strict compliance with any of the terms, covenants, or conditions of this Agreement shall not be deemed a waiver of such term, covenant, or condition, nor shall any waiver or relinquishment of any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times.
13. Severability
The invalidity or unenforceability of any provision of this Agreement shall in no way affect the validity or enforceability of any other provision.
Institutional Property Consultants, Inc. Page 12 June 9, 1995
14. Choice of Law
This Agreement and performance hereunder is subject to ERISA. However, to the extent that this Agreement and performance hereunder is not governed by ERISA or other applicable federal law, the laws of the State of New York shall apply. The choice of law embodied in this paragraph 15 shall be effective irrespective of the jurisdiction in which any suit, action or proceeding may be instituted.
Please signify your acceptance by signing below and returning a copy of this letter to the Company.
Sincerely,
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By /s/ Joan H. Fallon
-----------------------
Joan H. Fallon
|
Accepted:
Institutional Property Consultants, Inc.
By: /s/ Barbara R. Cambon Date: June 9, 1995
------------------------ -------------
Barbara R. Cambon
|
SCHEDULE 1
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
FIDUCIARY COMPENSATION SCHEDULE
FOR REAL ESTATE SEPARATE ACCOUNT
The annual fee payable to IPC shall be $100,000 per year plus its reasonable direct out-of-pocket expenses. The annual fee shall be paid quarterly, on first business day of each quarter, in advance, with the first quarterly payment due on July 3, 1995. Direct out-of-pocket expenses shall be reimbursed as incurred and shall be limited to reasonable travel-related expenses, including transportation, hotels, and meals incurred in the performance of IPC's duties. IPC shall, however, bear the cost of all operating and administrative expenses relating to the performance of its obligations and duties under this Agreement.
EXHIBIT A
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
VALUATION PROCEDURES AND RULES
FOR REAL ESTATE ACCOUNT
This outline summarizes the basic elements of the valuation procedures and rules for the Account.
Basic Principles
1. The valuation of equity real estate holdings is not an exact science; it requires appraisals which are independent estimates of market value.
A. Sales are the best measure of the value of equity real estate holdings, but since they don't occur frequently, appraisals are generally believed to be the best estimate of value at a given point in time.
B. Independent appraisals are expensive, and a balance is required between the accuracy of the estimate of value and the cost to the Account of additional appraisals.
2. The Account's valuation procedures and rules are under the direct supervision of an Independent Fiduciary and operate within guidelines and limits established by the Independent Fiduciary.
Valuation Procedures for the Account
1. Independent Fiduciary. The valuation of Account properties is conducted under the supervision of the Independent Fiduciary.
A. The valuation procedures and rules will be approved by the Independent Fiduciary. They cannot be changed without the consent of the Independent Fiduciary.
B. The rules will limit the extent to which a property's value can change without the prior approval of the Independent Fiduciary.
C. The Independent Fiduciary may require a new independent appraisal of any property at any time.
2. Initial Valuation. The initial value of each property will be the price at which it is acquired (including all expenses relating to purchase, such as acquisition fees, legal fees and expenses, and other closing costs).
3. Scheduled Valuations.
A. Independent Appraisals. Each property will be valued by an independent appraiser at least once per year.
(i) The appraisal cycle will be set up so that properties will be independently appraised in as even a pattern as practical over the course of a calendar year. This will be done by assigning to each property, at the time it is purchased, the month in which its independent appraisal will occur each year.
(ii) The independent appraisers selected by TIAA must be approved by the Independent Fiduciary.
(iii) The following would be among the factors generally considered in the annual appraisal:
- description and condition of the property
- regional and local market conditions
- current and projected occupancy levels
- highest and best use of the property
- cost approach
- sales comparison approach
- income approach including discounted cash flow analysis
B. Quarterly Updates. TIAA's staff will update the independent appraisals on a quarterly basis.
(i) Appraisal assumption (e.g. discount rates and rates of inflation) will be reviewed and revised as necessary.
(ii) Occupancy levels, cash flow, etc. will be reviewed as well as regional and local market conditions.
C. Accruals. The Accumulation, Seed and Liquidity Unit Values of the Account may change by a daily accrual of projected income and expenses during a given month. The Annuity Unit values of the Account may change on the last calendar day of each month by the accrual of projected income and expenses for that month.
4. Special Adjustments. The value of a given property could be adjusted at any time to reflect any immediate or significant changes in value.
5. Limits and Supervision
A. The Independent Fiduciary receives quarterly valuation reports from TIAA which, in addition to their involvement, detail Account activity. The format of these reports will be developed with the Independent Fiduciary. The Fiduciary will, therefore, be familiar with Account properties.
B. Daily accruals of income and expenses, as well as incremental adjustments in property value (from quarterly updates), will be reported to the Independent Fiduciary as they are included in the Unit value calculation.
C. Material changes in value (as described in D. below) and all independent appraisals will be approved by the Fiduciary prior to inclusion in a Unit Value calculation.
D. TIAA cannot, without the prior approval of the Independent Fiduciary, change the values of one or more properties if such changes would exceed the following limits:
(i) The adjustment would result in a 6 percent increase or decrease in the value of a given property since the last independent appraisal of that property;
(ii) The adjustments would result in a greater than 2 percent change in the value of the Account since the prior monthly valuation date; or
(iii) The adjustments would result in a greater than 4 percent change in the value of the Account within any quarter.
In addition, the Independent Fiduciary will approve any adjustments made within the first three months after the receipt of the annual appraisal performed by an independent qualified appraiser.
TEACHER INSURANCE AND ANNUITY ASSOCIATION
730 Third Avenue
New York, New York 10017-3206
(212) 490-9000
October 5, 1995
Institutional Property Consultants, Inc.
4330 La Jolla Village Drive
San Diego, California 92122
Re: Teachers Insurance and Annuity Association of America Real Estate Separate Account; ERISA Independent Fiduciary
Dear Sirs:
This letter supplements the June 9, 1995 letter setting forth the terms and conditions under which Teachers Insurance and Annuity Association of America (the "Company") appointed Institutional Property Consultants, Inc. ("IPC") to serve as an Independent Fiduciary under the Employee Retirement Income Security Act of 1974 ("ERISA") for its Real Estate Account ("Account").
Section 4A. of the June 9, 1995 letter setting forth the duties and responsibilities of IPC is amended by the addition of new subparagraph (9) to read as follows:
(9) IPC will review and approve in advance any exercise of discretion by the Company to accelerate the fixed repayment schedule applicable to the redemption of Seed Money Units and will only give its approval upon determining that it would be to the benefit of the Account's participants to do so.
Sincerely,
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By: /s/ Joan H. Fallon
----------------------
Joan H. Fallon
Accepted:
|
INSTITUTIONAL PROPERTY CONSULTANTS, INC.
By: /s/ Barbara R. Cambon Date: October 5, 1995
------------------------- -----------------
Barbara R. Cambon
|
CUSTODIAL SERVICES AGREEMENT
AGREEMENT dated as of June 1, 1995 between MORGAN GUARANTY TRUST COMPANY
OF NEW YORK ("Bank") and TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
("TIAA") on behalf of the TIAA Real Estate Account (the "Real Estate Account")
also known as TIAA Separate Account VA-2.
WHEREAS, the parties desire to arrange for the custody of certain assets of TIAA by the Bank;
NOW THEREFORE, in consideration of the mutual agreement made herein, the Bank and TIAA agree as follows:
1. Establishment of Accounts
a. Bank agrees to open and maintain custodial account(s) ("Custody Account(s)") on behalf of the Real Estate Account or such other portfolios or accounts as the parties may from time to time agree to include within the scope of this Agreement, for any and all bonds, equities, and any other securities or other property received by Bank for the account of the Real Estate Account.
b. Bank also hereby agrees to establish and maintain one or more deposit accounts ("Deposit Accounts") for all cash (including cash proceeds from the sale of such securities and similar investments and cash monies whether in United States or foreign denominated currencies, hereinafter termed "Cash") received by Bank for the Real Estate Account. Such accounts will be in the name of the Real Estate Account or in the name of Bank or Bank's branches or a Foreign Custodian, on behalf of the Real Estate Account.
It is hereby agreed that all securities, Cash, or other property now or hereinafter held by Bank hereunder are held for the Real Estate Account and are to be maintained and disposed of by Bank only for the Real Estate Account in accordance with the terms and conditions set forth in this Agreement.
2. Location of Assets
a. Securities, cash and other property are permitted to be held by
(1) Bank at any of its offices wherever located;
(2) domestic securities depositories
("Securities Depositories")
selected by Bank with the approval of TIAA on behalf the Real Estate Account;
(3) foreign securities depositories or clearing agencies ("Foreign Depository") selected by Bank with the approval of TIAA on behalf of the Real Estate Account as described in Section 9 of this Agreement; and
(4) foreign banking institutions ("Foreign Banks") selected by Bank with the approval of TIAA on behalf of the Real Estate Account as described in Section 9 of this Agreement.
b. Such entities described in (2), (3) and (4), above, shall be deemed to be Sub-Custodians of Bank, and all securities, Cash and other property held by such entities shall, unless otherwise specifically agreed to in writing by Bank and TIAA, be considered for all purposes of this Agreement as being held directly by Bank and subject to the terms of this Agreement.
c. For purposes of this Agreement, a Securities Depository or Foreign Depository shall mean a system for the handling of securities of any particular class or series of any particular issuer deposited therein which may be treated as a part of a fungible bulk and may be transferred by bookkeeping entry without physical delivery of such securities. With respect to a Securities Depository, such entity shall be a clearing agency registered with the Securities and Exchange Commission ("Commission") under Section 17A of the Securities Exchange Act of 1934 ("Exchange Act"), which acts as a securities depository, or the book-entry system authorized by the U.S. Department of the Treasury and certain federal agencies in accordance with applicable Federal Reserve Board and Commission rules and regulations. With respect to a Foreign Depository, such entity shall satisfy the requirements of Rule 17f-5 under the Investment Company Act of 1940 ("1940 Act").
d. For purposes of this Agreement a Foreign Bank is a foreign banking institution satisfying Rule 17f-5 under the 1940 Act and appointed by Bank as provided in Section 9 of this Agreement.
3. Bank's Duties
a. Bank will be responsible for the safekeeping, handling, servicing and disposition of all securities, cash or other property of the Real Estate Account held by it hereunder including, without limitation, any and all of the Real Estate Account's Cash held by or received by Bank in the name of the Real Estate Account, Bank's name, or that of Foreign Banks.
b. Bank agrees to be liable and to indemnify and hold TIAA harmless for any and all liability for loss or damage to TIAA with respect to any such securities, Cash and other property, if such liability, loss or damage results from any negligence, misfeasance or misconduct on the part of Bank, its officers or employees, its branches or its affiliates. Bank shall have no liability for any consequential damages occasioned by delay in receipt of notice by Bank or by a Foreign Sub-Custodian of any payment, redemption, proceeding or other transaction regarding, or of any rights exercisable by the Real Estate Account in connection with any securities, Cash or other property with respect to which Bank has agreed to take action.
c. Notwithstanding the foregoing, Bank further agrees that it will at all times give the securities or other property held by it hereunder the same care as it gives its own property.
d. It is understood and agreed that Bank is not under any duty to supervise the investment of, or to advise or make any recommendation to TIAA with respect to, the purchase or sale of any securities or other property.
e. In connection with Bank's responsibilities hereunder, it has advised TIAA that it currently has in force, for its own protection, Bankers Blanket Bond Insurance, and it is Bank's intention to continue to maintain such insurance in substantially the same form and amount. TIAA understands that such policies would apply to losses under this Agreement. Bank agrees to give TIAA written notice of any reduction in the amount, or material change in the form of such insurance, at least once a year upon request.
f. Bank shall have responsibility as a bailee for hire under the law of the State of New York with respect to any Foreign Depository or Foreign Custodian acting as a Sub-Custodian of Bank. Without limiting the generality of the foregoing, Bank will hold TIAA harmless from and indemnify it against any loss that occurs as a result of the negligence, misfeasance or misconduct of Bank, its officers or employees, and any Foreign Depository or Foreign Bank acting as Foreign Sub-Custodian of Bank.
4. Receipt and Disbursement of Cash
a. Bank shall hold in Deposit Accounts, subject to the provisions hereof, all Cash received by it from or for the Real Estate Account. All Cash held by Bank hereunder shall be subject to withdrawal and deposit by Bank from time to time on behalf of the Real Estate Account for the purpose of consummating the purchases or sales, as the case may be, of designated securities, solely upon Bank's receipt of express directions in the form of Authorized Instructions in accordance with the provisions of Section 20. Such directions shall include, but are not limited to:
(1) the execution and delivery of foreign currency contracts on behalf of the Real Estate Account;
(2) the debiting or crediting of currency accounts (United States or foreign) of the Real Estate Account held by Bank, pursuant to this Agreement as of settlement date or such other date as specified in such instructions;
(3) the purchase of securities, options on securities, futures contracts, options on futures contracts, or other property for the Real Estate Account but only (i) upon the delivery of such securities or other property or evidence of title for such options on securities, futures contracts or options on futures contracts to Bank, registered in the name of the Real Estate Account or of the nominee of Bank referred to in Section 10 hereof or in proper form
for transfer; (ii) in the case of repurchase agreements for securities entered into between TIAA on behalf of the Real Estate Account and the Bank, or another bank, or a broker-dealer which is a member of the National Association of Securities Dealers ("NASD") against delivery of the securities either in certificate form or through an entry crediting Bank's account at the Federal Reserve Bank with such securities or against delivery of the receipt evidencing purchase by the Real Estate Account of securities owned by Bank, another bank or a broker dealer along with written evidence of the agreement by Bank, another bank or a broker dealer to repurchase such securities from the Real Estate Account; or (iii) in the case of a purchase affected through a Securities Depository in accordance with the provisions of Section 7 hereof.
(4) the payment of interest, taxes (if any), management or supervisory fees or operating expenses (including, without limitation thereto, fees for legal, accounting and auditing services) (if any);
(5) payments in connection with the conversion, exchange or surrender of securities owned or subscribed to by the Real Estate Account held by or to be delivered to Bank; or
(6) other corporate purposes.
b. Bank is hereby authorized to endorse and collect all checks, drafts or other orders for the payment of money received by it for the account of the Real Estate Account.
5. Holding Securities
Bank shall hold in a separate Custody Account for the Real Estate Account, and physically segregated at all times from those of any other persons, firms or corporations, or any other of TIAA's Accounts, pursuant to the provisions hereof, all securities and other property to be held by it for the Real Estate Account, except those held in a Securities Depository as described in Section 7 of this Agreement or a Foreign SubCustodian as described in Section 9 of this Agreement. All such securities are to be held or disposed of by Bank for, and subject at all times to the instructions of TIAA pursuant to the terms of this Agreement. Bank shall have no power or authority to assign, hypothecate, pledge or otherwise dispose of any such securities and investments, except pursuant to the Authorized Instructions of TIAA on behalf of the Real Estate Account and only as set forth in Section 19 of this Agreement.
6. Receipt and Delivery of Securities
From time to time TIAA on behalf of the Real Estate Account will instruct Bank to receive or deliver securities through Authorized Instructions as set forth in Section 20. Such instructions may be continuing if agreed to by the parties.
a. In accordance with this Agreement, notwithstanding such instructions that relate to settlement date entries, Bank agrees to receive such securities against payment or exchange as directed in any Authorized Instructions and debit cash held in a Deposit Account on behalf of the Real Estate Account only against satisfactory delivery of securities.
b. In accordance with this Agreement, notwithstanding instructions that relate to settlement date entries, Bank agrees to transfer, exchange, or deliver securities held by it hereunder including, but not limited to, the following:
(1) for sales of such securities for the Real Estate Account upon receipt by Bank of payment therefor;
(2) when such securities are called, redeemed or retired or otherwise become payable;
(3) for examination by any broker selling any securities located in the U.S. in accordance with "U.S. street delivery" custom, provided that in any such case, Bank shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may result from Bank's negligence, misfeasance, or misconduct;
(4) in exchange for or upon conversion into other securities alone or other securities and cash whether pursuant to any plan or merger, consolidation, reorganization, recapitalization or readjustment, or otherwise;
(5) upon conversion of such securities pursuant to their terms into other securities;
(6) upon exercise of subscription, purchase or other similar rights represented by such securities;
(7) for the purpose of exchanging interim receipts or temporary securities for definitive securities;
(8) upon receipt of payment in connection with any repurchase agreement related to such securities entered into by the Real Estate Account;
(9) for delivery in connection with any loans of securities made by the Real Estate Account, in accordance with the provisions of Section 12 herein;
(10) for other purely ministerial exchanges; or
(11) for other corporate purposes.
As to any deliveries made by you pursuant to Items (2), (4), (5),
(6), (7) and (10), securities or cash receivable in exchange therefor shall be
deliverable to Bank.
c. Actual delivery of securities is to be made by Bank on the contractual settlement date only upon express instructions to such effect, provided that:
(1) the securities are on deposit in a Custody Account for the Real Estate Account; and (2) the delivery instructions are received by Bank in timely fashion.
d. In addition, Bank will withdraw and deliver securities "Free of Payment" as directed in any such written instructions as set forth in paragraph b of Section 20 herein.
e. Except as specifically otherwise stated in this Agreement, in any and every case where payment for purchase of securities for the account of the Real Estate Account is made by the Bank in advance of receipt of the securities purchased in the absence of specific written instructions from TIAA on behalf of the Real Estate Account to so pay in advance, Bank shall be liable for any loss to TIAA for such securities to the same extent as if the securities had been received by Bank.
f. Bank shall promptly furnish the Real Estate Account with advices or notices of any receipts or deliveries of securities.
g. Bank will not be responsible for any act or omission, or for the insolvency of any broker or agent selected by Bank to effect a transaction for the account of the Real Estate Account; provided, however, Bank is not negligent in the selection of such broker or agent.
7. Deposit of the Real Estate Account Assets in a Securities Depository
Bank may deposit and maintain securities owned by the Real Estate Account in a Securities Depository subject to the following provisions:
a. Bank may keep the Real Estate Account's securities in a Securities Depository provided that such securities are represented in an account of Bank ("Bank's Account") in Securities Depository which shall not include any assets of Bank other than assets held as a fiduciary, custodian or otherwise for customers;
b. The records of Bank will identify those securities of the Real Estate Account held in a Securities Depository as being held in book-entry form on behalf of the Real Estate Account;
c. Bank shall pay for securities purchased for the account of the Real Estate Account upon (i) receipt of advice from the Securities Depository that such securities have been transferred to Bank's Account, and (ii) the making of an entry on the records of Bank to reflect such payment and transfer for the account of the Real Estate Account. Bank shall transfer securities sold for the account of the Real Estate Account upon (i) receipt of advice from the Securities Depository that payment for such securities has been transferred to Bank's Account, and (ii) the making of an entry on the records of Bank to reflect such transfer and payment for the account of the Real Estate Account.
d. Anything to the contrary in this Agreement notwithstanding, Bank shall be liable to TIAA for the benefit of the Real Estate Account for any loss or damage to the Real Estate Account resulting from use of any Securities Depository by reason of any negligence, misfeasance or misconduct of Bank or any of its agents or of any of the employees of such Depository or Bank or from failure of Bank or any such agent to enforce effectively such rights as it may have against a Securities Depository; at the election of TIAA on behalf of the Real Estate Account, it shall be entitled to be subrogated to the rights of Bank with respect to any claim against a Securities Depository or any other person which Bank may have as a consequence of any such loss or damage if and to the extent that the Real Estate Account has not been made whole for any such loss or damage.
8. Segregated Account
Bank shall upon receipt of Authorized Instructions from the Real Estate Account establish and maintain a segregated account or accounts for and on behalf of the Real Estate Account, into which account or accounts may be transferred Cash and/or securities, including securities maintained by Bank in a Securities Depository pursuant to Section 7 hereof: (a) in accordance with the provisions of any agreement among TIAA on behalf of the Real Estate Account, Bank and a broker-dealer registered under the Exchange Act and a member of the NASD (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or the Commodity Futures Trading Commission or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Real Estate Account; (b) for purposes of segregating cash or government securities in connection with options purchased, sold or written by the Real Estate Account or commodity futures contracts or options thereon purchased or sold by the Real Estate Account; and (c) for other corporate purposes, but only, in the case of clause, upon receipt of Authorized Instructions from TIAA on behalf of the Real Estate Account.
9. Duties of the Bank with Respect to Property of the Real Estate Account Held Outside of the United States
a. The Real Estate Account hereby authorizes and instructs Bank to employ as Sub-Custodians for the Real Estate Account's securities and other assets maintained outside the United States the Foreign Banks and Foreign Depositories designated on a separate
document (together "Foreign Sub-Custodians"). Upon receipt of Authorized Instructions, Bank and TIAA on behalf of the Real Estate Account may agree to designate additional Foreign SubCustodians. Upon receipt of Authorized Instructions, TIAA on behalf of the Real Estate Account may instruct Bank to cease to utilize any one or more Foreign SubCustodians on behalf of the Real Estate Account.
b. Except as may otherwise be agreed upon in writing by Bank and TIAA on behalf of the Real Estate Account, assets of the Real Estate Account shall be maintained in Foreign Depositories only through arrangements implemented by Bank or by Foreign Banks serving as Sub-Custodians on behalf of the Real Estate Account in accordance with the terms hereof.
c. The Bank agrees that with respect to each Foreign SubCustodian
(i) the assets of the Real Estate Account will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of the Foreign
Sub-Custodian or its creditors or agents, except a claim of payment for their
safe custody or administration; (ii) beneficial ownership of the assets of the
Real Estate Account will be freely transferable without the payment of money or
value other than for custody or administration; (iii) adequate records will be
maintained identifying the assets as belonging to the Real Estate Account; (iv)
officers of or auditors employed by, or other representatives of Bank, including
to the extent permitted under applicable law the independent public accountants
for the Real Estate Account, will be given access to the books and records of
the Foreign Sub-Custodian relating to its actions under its agreement with Bank;
(v) assets of the Real Estate Account held by the Foreign Bank will be subject
only to the instructions of Bank; and (vi) assets of the Real Estate Account
held by a Foreign Depository will be subject only to the instructions of Bank or
Foreign Bank.
d. With respect to assets maintained in a Foreign Depository, except as otherwise required by such Foreign Depository or other applicable regulations, Bank shall pay for securities purchased for the account of the Real Estate Account upon (i) receipt of advice from the Foreign Depository that such securities have been transferred to Bank's Account and (ii) the making of an entry on the records of Bank to reflect such payment and transfer for the account of the Real Estate Account. Bank shall transfer securities sold for the account of the Real Estate Account upon (i) receipt of advice from the Foreign Depository that payment for such securities had been transferred to Bank's Account, and (ii) the making of any entry on the records of Bank to reflect such transfer and payment for the account of the Real Estate Account.
e. Until Bank receives Authorized Instructions to the contrary, Bank will and will instruct each Foreign Sub-Custodian to take such steps as may reasonably be necessary to secure or otherwise prevent the loss of rights relating to any securities, Cash or other property; provided that it shall be understood that the monitoring of investment data provided by a recognized international investment data service by Bank will be deemed to fulfill Bank's obligation under this Section 9.e.
f. Bank shall identify on its books as belonging to the Real Estate Account the securities, Cash or other property held by each Foreign Sub-Custodian.
g. Bank will supply to TIAA on behalf of the Real Estate Account from time to time, as mutually agreed upon, statements in respect of the securities and other assets held by Foreign Sub-Custodians, including but not limited to an identification of entities having possession of the Real Estate Account's securities and other assets and advises or notifications of any transfers of securities to or from each Custody Account maintained by a Foreign Bank for Bank on behalf of the Real Estate Account indicating, as to securities acquired for the Real Estate Account, the identity of the entity having physical possession of such securities. Bank shall furnish at least annually to the Real Estate Account all relevant information necessary to enable the Real Estate Account to evaluate the Foreign SubCustodians employed by Bank. Such information shall be similar in kind and scope to that furnished to the Real Estate Account in connection with the initial approval of this agreement.
h. In addition, Bank will promptly inform TIAA on behalf of the Real Estate Account in the event that Bank learns of a material adverse change in the financial condition of a Foreign Sub-Custodian or any material loss of the assets of the Real Estate Account or is notified by such Foreign Sub-Custodian that there appears to be a substantial likelihood that its shareholders' equity will decline below $200 million (U.S. dollars or the equivalent thereof) or that its shareholders' equity has declined below $200 million (in each case computed in accordance with generally accepted U.S. accounting principles).
i. Anything to the contrary in this Agreement notwithstanding, Bank shall be liable to TIAA on behalf of the Real Estate Account for any loss or damage to the Real Estate Account resulting from use of any Foreign Sub-Custodian by reason of any negligence, misfeasance or misconduct of Bank or any of its agents or of any of the employees of such Sub- Custodian or Bank or from failure of Bank or any such agent to enforce effectively such rights as it may have against a Foreign Sub-Custodian; at the election of the the Real Estate Account, it shall be entitled to be subrogated to the rights of Bank with respect to any claim against a Foreign Sub-Custodian or any other person which Bank may have as a consequence of any such loss or damage if and to the extent that the Real Estate Account has not been made whole for any such loss or damage.
j. Notwithstanding any provision of this Agreement to the contrary, settlement and payment for securities received for the account of the Real Estate Account and delivery of securities maintained for the account of the Real Estate Account may be effected in accordance with the customary established securities trading or securities processing practices and procedures in the jurisdiction or market in which the transaction occurs, including, without limitation, delivering securities to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) against a receipt with the expectation of receiving later payment for such securities from such purchaser or dealer.
10. Income
a. Income on securities and cash held by Bank hereunder will be credited automatically to a Deposit Account or Custody Account in accordance with the schedule provided by the Bank, subject to local market practice. Principal received in connection with securities which mature or are redeemed shall be credited to a Deposit Account or a Custody Account on the date such principal is received. All collections of income or principal paid or distributed with respect to any securities, Cash or other property shall be made at the risk of the Real Estate Account, provided however, that Bank takes reasonable steps to collect such income or principal and there is no negligence, misfeasance or misconduct on the part of Bank.
b. Unless instructed otherwise, collections of income in foreign currency are to be converted into United States dollars, and in effecting such conversion Bank may use such methods or agencies as it may see fit including its own facilities at prevailing rates. All risk and expense incident to such collection of income regardless of the particular currency or currencies involved is for the account of the undersigned, and Bank shall have no responsibility for fluctuations in exchange rates affecting such conversion.
c. Unless and until Bank receives written instructions to the contrary, it shall:
(1) present for payment all coupons and other income items held by it for the account of the Real Estate Account which call for payment upon presentation and hold the cash received by it upon such payment for the appropriate account;
(2) collect interest and cash dividends received, with notice to TIAA on behalf of the Real Estate Account;
(3) hold for the Real Estate Account all stock dividends, rights and similar securities issued with respect to any securities held by Bank hereunder, and with respect to stock dividends, it is hereby authorized to sell any fractional interest and to credit the Deposit Account with the proceeds thereof; and
(4) with respect to any dividend reinvestment plan in which the Real Estate Account participates, and as to which Bank has been so notified, it agrees to acquire and hold hereunder the appropriate number of shares issuable under such plan in lieu of the cash dividend.
d. Any dividends or interest automatically credited to the Deposit Accounts which are not subsequently collected by Bank from the corporation making such payment will be reimbursed to Bank and Bank may debit the Deposit Accounts for this purpose.
11. Registration
Securities which are eligible for deposit in Securities Depositories or Foreign Depositories may be maintained in Bank's Account with such Depositories. Subject to the aforesaid provision, Bank will register all securities (except such as are in bearer form) in the name of its nominee or the nominee of the Securities Depository or Foreign Depository, unless alternate registration instructions are furnished by TIAA. Bank will retain and have available at all times for inspection by regulatory authorities evidence that its nominee is registered as required by the laws and regulations of the United States and the State of New York, as appropriate. All such agents shall be appointed in conformance with Section 21. TIAA on behalf of the Real Estate Account agrees to hold such nominee harmless from any liability as a holder of record of such securities and will have the same responsibility as if the securities were registered in the name of the Real Estate Account. The foregoing shall not relieve Bank of its responsibilities or liabilities hereunder.
12. Provisions Relating to Securities Lending
a. From time to time TIAA on behalf of the Real Estate Account shall designate in an Authorized Instruction securities held by Bank in its Custodial Account to be loaned to specified borrowers ("Borrowers"). Such securities shall be termed the "Loaned Securities". This Section shall apply to and shall be controlling solely with respect to such Loaned Securities and lending services relating thereto. Loaned Securities which are returned by the Borrower to Bank shall upon receipt thereof constitute securities and property held by Bank to which the provisions of this Agreement shall be applicable unless otherwise provided herein.
b. From time to time TIAA on behalf of the Real Estate Account will provide Bank with Authorized Instructions regarding the delivery or return of Loaned Securities. In this connection, Bank is authorized and directed, all in accordance with such instructions to promptly:
(1) Deliver the Loaned Securities to the Borrower for the Real Estate Account, against receipt by Bank of collateral in respect of such Loaned Securities (the "Collateral"), in the form and amount specified in such instructions. Bank shall promptly place the specified Collateral in a Deposit or Custody Account and promptly notify TIAA on behalf of the Real Estate Account of such transaction.
(2) Receive Loaned Securities being returned by Borrower in the form and amount specified in the Authorized Instructions. Upon satisfactory delivery of such Loaned Securities, Bank shall debit the defined Collateral from TIAA Deposit Account in accordance with such instructions and pay or redeliver the specified Collateral to Borrower and promptly notify TIAA on behalf of the Real Estate Account of such transaction.
(3) Release to Borrower any excess Collateral or receive Collateral from Borrower as specified in instructions issued by TIAA on behalf of the Real Estate Account. Bank shall promptly transmit the specified Collateral to be released, or accept delivery and transmit Collateral received to a Deposit Account, as the case may be, and notify TIAA on behalf of the Real Estate Account of such transmittal or receipt. Bank shall debit or credit the defined Collateral from the Deposit Account, as appropriate.
c. Where Bank has received Authorized Instructions from TIAA indicating that TIAA has previously received adequate Collateral covering contemplated loans, Bank is authorized to deliver Loaned Securities "Free of Payment" upon express direction from TIAA with respect to designated Loaned Securities. A list of authorized Borrowers who are eligible to receive such Loaned Securities will be signed by any two Authorized Officers, with the title of Chairman, President, Executive Vice President and Treasurer, or by any one of these officers together with any TIAA officers with the title of Senior Vice President or Vice President, in accordance with paragraph b. of Section 20.
d. TIAA on behalf of the Real Estate Account shall also provide Bank with written instructions regarding Loaned Securities for which TIAA has previously received adequate Collateral and their delivery "Free of Payment" to designated Borrowers in accordance with paragraph c. hereof or the return of Loaned Securities. Bank shall be authorized, in accordance with such written instructions, to:
(1) Deliver the Loaned Securities, "Free of Payment" to the listed Borrower, and
(2) Receive Loaned Securities specified in our instructions. Bank shall promptly advise TIAA on behalf of the Real Estate Account of the completion of any such specified transaction.
e. Bank agrees to receive from the Borrower any income, dividends,
and/or distributions made by the issuer with respect to the Loaned Securities,
and to credit the Deposit Account or Custody Account when such amounts and
properties are received from the Borrower in accordance with the provisions of
Section 10.
f. Bank shall be responsible for the Collateral and Loaned Securities in its possession and for the handling and servicing of such property in accordance with written instructions. Bank is hereby designated to acquire possession of Collateral on behalf of the Real Estate Account and to act as bailee or financial intermediary (as defined in the Uniform Commercial Code of the State of New York, as amended the "UCC"), as the case may be, to enable TIAA on behalf of the Real Estate Account to perfect and maintain perfection of a security interest in such Collateral, pursuant to the provisions of the UCC or other applicable laws, as amended from time to time. It is understood that Bank shall not be responsible for obtaining or perfecting TIAA's security interest in the Collateral other than in accordance with the preceding sentence and the instructions regarding delivery and receipt, and shall not be responsible to advise
TIAA of the steps necessary to obtain or perfect such interest or for effecting any statutory filing, unless mutually agreed upon at such time. Under no circumstances and in no event shall Bank have or be charged with any responsibility or liability for (i) the creditworthiness or continued creditworthiness of any Borrower, (ii) the adequacy or value of any Collateral in connection with any loan of securities, (iii) the failure of the Borrower to pay any income, dividend and/or distribution made by the issuer on the Loaned Securities, or (iv) any act taken by it in accordance with the direction of the Real Estate Account, or omitted by it in the absence of such direction.
g. Bank shall report as assets of its Custody Account property which is Loaned Securities that have previously been delivered to Borrowers and hence are not in Bank's possession. Bank shall have no responsibility or liability whatsoever with respect to such Loaned Securities and shall perform no services with respect thereto, except as specifically set forth herein.
h. Bank shall provide to TIAA a Report of Assets Held which shall include all Loaned Securities (whether or not such securities are in the possession of Borrowers) designated in such report to indicate that the same is reported on a memorandum entry basis or on such other basis as shall be mutually agreed upon. Bank shall also provide to TIAA all information and data specified in paragraphs a., b., c. and d. of Section 15, and such further information concerning the Loaned Securities and Collateral, so that TIAA may properly account for and segregate such property. Bank shall furnish TIAA with all such other reports and information as TIAA shall reasonably request. Bank shall furnish TIAA with all reports and information pursuant to this Section within a reasonable time after request.
13. Voting and Other Action
No person may vote (other than pursuant to Authorized Instructions) any securities held by Bank hereunder. Bank will promptly transmit to TIAA, or direct to be transmitted to TIAA on behalf of the Real Estate Account, all notices, proxies and proxy soliciting materials with respect to securities held by it hereunder, which proxies will be executed by the registered holder thereof if registered otherwise than in the name of TIAA or the Real Estate Account, but without indicating the manner in which such proxies are to be voted.
Bank will promptly transmit to TIAA all written information (including, without limitation, pendency of calls and maturities of securities and expirations of rights in connection therewith) received by it from the issuers of securities or other property held by it hereunder. With respect to tender or exchange offers, Bank will promptly transmit to TIAA all written information received by it from issuers of the securities or other property whose tender or exchange is sought and from the party (or his agents) making the tender or exchange offer.
14. Fees and Expenses
Bank will be compensated for the services rendered under this Agreement and reimbursed for out-of-pocket expenses through arrangements negotiated between TIAA on behalf of the Real Estate Account and Bank from time to time.
TIAA acknowledges its responsibility as a principal for all of its obligations to Bank arising under or in connection with this Agreement.
15. Records, Affidavits and Reports
With respect to the securities and other property held by Bank hereunder, Bank agrees:
a. To maintain records sufficient to verify information TIAA is required to report in Schedule D of the Annual Statement Blank of the Insurance Department of the State of New York ("Insurance Department") as amended from time to time, which records will consist of a list of such securities showing a complete description of each issue, including the number of shares and par value of securities so held at the end of such month and such other information as may be required by such report or any other report required by the Insurance Department;
b. To maintain records regarding transactions and related activities described in Sections 4, 5, 6, 7, 8, 9, 10, 11 and 12 sufficient to verify the accuracy of regular monthly and other reports and income received on such securities and other property;
c. To maintain records sufficient to verify information relating to Cash held by Bank, including but not limited to (i) the purchase of foreign currency contracts, (ii) the maintenance of foreign currency accounts on behalf of the Real Estate Account in the possession and custody of Bank, its branches or other entities located outside the United States, and (iii) any reports submitted to the Real Estate Account relating to its Cash;
d. To furnish the Real Estate Account with the appropriate affidavit(s) in the form of Exhibit A, attached hereto or in such other form as may be submitted to Bank by the Real Estate Account from time to time which is acceptable to the Insurance Department or any other state or federal governmental agency having jurisdiction over TIAA, in order for the securities and other property referred to in such affidavit(s) to be recognized as admitted assets of TIAA and in order for TIAA to comply with any other requirements of such Department or agencies;
e. To furnish the Real Estate Account with any report obtained by Bank on a Securities Depository's or Foreign Sub-Custodians system of internal accounting control; and to furnish the Real Estate Account with such reports on Bank's system of internal accounting control as the Real Estate Account may reasonably require;
f. To furnish all such other reports and information as shall be reasonably requested by TIAA on behalf of the Real Estate Account relating to all property held by Bank on the Real Estate Account's behalf pursuant to the terms of this Agreement; and
g. That all such information, records, reports, and affidavits maintained or held by Bank pursuant to this Section remain the property of the Real Estate Account and copies of all such information will be surrendered to the Real Estate Account within a reasonable time after request therefor.
h. The specific records, reports and affidavits required in a. through g. above shall be set forth in a separate document which may be modified from time to time by agreement of the parties to this Agreement.
16. Reconciliation of Statements or Advices
TIAA agrees that it will reconcile statements and advices sent by mail or electronic media and that all such statements and advices will be considered final [sixty] days from the date of dispatch unless TIAA has notified Bank orally or in writing regarding any questions or problems.
17. Access
a. During the course of Bank's regular banking hours, any duly authorized officer, employee or agent of TIAA, any independent accountants selected by TIAA, any member of the Insurance Department, and any representative or designee of other governmental agencies having jurisdiction over TIAA, shall be entitled to examine, on Bank's premises, securities and records of all securities, Cash and other property held by Bank, its branches, or other entities hereunder and its books and records pertaining to its actions under this Agreement, but only upon furnishing Bank with one day notice of such examination signed by a duly authorized officer of TIAA. Bank's books and records used in connection with TIAA's indirect participation in a depository or other entities, to the extent that they relate to depository, custodial or other services rendered to TIAA by Bank, pursuant to this Agreement, shall at all times during Bank's regular business hours to be open to inspection by duly authorized employees or agents of TIAA, or governmental agencies having jurisdiction over TIAA, but only upon furnishing Bank with one day's notice to that effect as specified in the preceding sentence.
b. Upon receiving a request from TIAA, Bank agrees that it will take such steps as are within its power to enable any of the aforementioned officers, accountants, employees, agents and members of TIAA, the Insurance Department, or other governmental agencies having jurisdiction over TIAA, to inspect and examine securities and other property of TIAA and books and records of such property not located on Bank's premises, which property and records are held on TIAA's behalf by its branches or other entities pursuant to this Agreement.
18. Exemption from Income Tax
a. TIAA is exempt from the payment of United States income tax. Upon receipt of documentation evidencing the Real Estate Account's tax exempt status, Bank is hereby authorized and empowered as TIAA's agent to sign in its name any certificate of ownership or other certificate which is or may be required by any regulations of the Internal Revenue Service, the laws of any state, or other authority of the United States. Bank is also instructed to, whenever possible, arrange for the Real Estate Account to receive its exemption from withholding tax at the source of payment, and to automatically reclaim on behalf of the Real Estate Account the amount of any withholding tax that is recoverable by the Real Estate Account.
b. To enable Bank properly to execute the certificate described in
a. above, TIAA hereby certifies that TIAA is a corporation duly organized and
existing under the laws of the State of New York, having its principal place of
business in the City of New York. TIAA Employer Identification No. is
13-1624203N.
19. Amendments
No amendment or change to this Agreement shall be authorized by TIAA on behalf of the Real Estate Account without the written consent signed by an officer with the title of either Chairman or President and any officer with the title of Executive Vice President or Treasurer and accepted in writing by any Vice President or Managing Director of Bank.
20. Authorization
a. Except as otherwise provided for in this Agreement, written instructions by TIAA hereunder shall be signed by any two of its Authorized Officers specified in a separate list for this purpose which will be furnished to Bank from time to time signed by the Treasurer or any Associate or Assistant Treasurer and by the Secretary or any Assistant Secretary as certified under the corporate seal of TIAA. Such instructions are referred to herein as "Authorized Instructions". Upon receipt of written instructions pursuant to paragraph b., below accompanied by a detailed description of procedures approved by such instructions, Authorized Instructions may include communications effected directly between electro-mechanical or electronic devices provided that TIAA and Bank are satisfied that such procedures afford adequate safeguards for the Real Estate Account's assets.
b. Where expressly provided for in Sections 12.c. and 20.a. herein or in connection with the delivery of securities or other property "Free of Payment," written instructions shall be acted upon only if received in writing manually signed by any two of such Authorized Officers with the title Chairman, President, Executive Vice President, or Treasurer, or by any one of those officers together with any TIAA officer with the title Senior Vice President or Vice President.
c. Bank shall not be liable for any action taken in good faith upon Authorized Instructions or upon written instructions pursuant to b., above, and may rely on such documents that it in good faith believes to be validly executed.
21. Appointment of Agents
The Bank may at any time or times in its discretion appoint (and may at any time remove) any other bank or trust company which is itself qualified under applicable law to act as a custodian, as its agent to carry out such of the provisions of this Agreement as the Bank may from time to time direct; provided, however, that the appointment of any agent shall not relieve the Bank of its responsibilities or liabilities hereunder.
22. Notices
a. Official receipts and advices of all types relating to the securities, cash or other property held by Bank hereunder will be prepared by Bank, in duplicate, and forwarded to the particular divisions of TIAA on behalf of the Real Estate Account indicated in a separate listing which the Treasurer will furnish to Bank from time to time.
b. Written notices hereunder shall be hand-delivered or mailed first class, addressed, if to Bank, at 60 Wall Street New York, New York 10015, or if to TIAA on behalf of the Real Estate Account, at 730 Third Avenue, New York, New York 10017, Attention: Treasurer. Written notice of (i) termination of this Agreement, (ii) termination of Bank's participation in DTC or any other securities depository, (iii) changes in Bank's designation of any of its branches or Sub-Custodians having custody of any of TIAA's assets under this Agreement, or (iv) changes in Bank's insurance coverage, shall be sent by hand or by first-class mail; provided, however, that any such notice pursuant hereto shall not constitute approval by the Real Estate Account of any such termination, change or designation nor shall such notice relieve Bank of its responsibilities hereunder.
c. Any notice so addressed, hand delivered and mailed shall be deemed to be given on whichever of the following dates shall first occur: (i) the date of actual receipt thereof, (ii) the fifth day next following the date mailed, or (iii) if the substance thereof is communicated by hand delivery or certified mail, the date so delivered or mailed.
23. Termination or Assignment
This Agreement may be terminated by either party on sixty days' written notice sent by certified mail. Upon any termination of this Agreement, pending appointment of a successor to Bank or a decision of TIAA on behalf of the Real Estate Account to dissolve or to function without a custodian of its cash, securities or other property, Bank shall deliver Cash, securities or other property to a bank or trust company selected by TIAA on behalf of the Real Estate Account having an aggregate capital, surplus and undivided profits, as shown by its last published report of not less than twenty-five million dollars ($25,000,000) as a custodian for
TIAA to be held under terms similar to those of this Agreement; provided, however, that Bank shall not be required to make any such delivery or payment until full payment shall have been made by TIAA on behalf of the Real Estate Account of all liabilities constituting a charge on or against the properties then held by Bank or on or against it, and until full payment shall have been made to Bank of all fees, compensation, costs and expenses, subject to the provisions of Section 14 of this Agreement. This Agreement may not be assigned by Bank without the consent of TIAA on behalf of the Real Estate Account, authorized or approved by a resolution of TIAA's trustees.
23. Effect of Headings
The Section headings herein are for convenience only and shall not affect the construction thereof.
24. Governing Law
This Agreement shall be governed by and construed in accordance with the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have duly executed this Custodial Services Agreement as of the date first written above.
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA ON BEHALF OF
THE REAL ESTATE ACCOUNT
BY: /s/ John H. Biggs
-----------------
John H. Biggs
Chairman and Chief Executive Officer
BY: /s/ Richard J. Adamski
-----------------
Richard J. Adamski
Vice President and Treasurer
|
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
BY: /s/ Susan E. Chanko
-------------------
Vice President
BY: /s/ Patrick Colle
-------------------
Vice President
|
EXHIBIT A
CUSTODIAN AFFIDAVIT
STATE OF }
} SS:
COUNTY OF }
______________________________________, being duly sworn deposes and says that he is ______________________________________ of________________________________ _____________________________, a corporation organized under and pursuant to the laws of the ___________________________ with the principal place of business at ____________________.
That his duties involve the supervision of securities in custody of said _____________________________ and records relating thereto.
That said ________________ has in custody certain securities for the account of Teachers Insurance and Annuity Association of America, a corporation organized under and pursuant to the laws of the State of New York with its principal place of business at 730 Third Avenue, New York, New York 10017.
That the schedule hereto attached is a true and complete statement of all securities which were held in custody by said _____ for the account of said insurance company as of the close of business on _____________; that the schedule sets forth the names of registered holders and, if no such name is shown, the security is in bearer form; and that unless otherwise indicated, the next-maturing and all subsequent coupons are either attached to coupon bonds or are in the process of collection.
That each and every name other than that of the company in which such securities are registered is that of a nominee of said _____________________.
That to the best of his knowledge and belief the said securities were held for the said insurance company free of all liens, claims, or encumbrances whatsoever, and were not held as security for any loan, except ______________.
Subscribed and sworn to
before me this day
of 19 _____________________________ (L.S.)
Sutherland, Asbill & Brennan 1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
Tel: (202) 383-0100 Steven B. Boehm Fax: (202) 637-3593 Direct Line (202) 383-0176
April 25, 1996
Teachers Insurance and Annuity Association of America
730 Third Avenue
New York, New York 10017-3206
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal Matters" in the Prospectus filed as a part of Post-Effective Amendment No. 2 to the above-captioned registration statement on Form S-1. In giving this consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933.
Sincerely,
SUTHERLAND, ASBILL & BRENNAN
By: /s/ Steven B. Boehm -------------------------- Steven B. Boehm |
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 2 on Form S-1 to Registration Statement No. 33-92990 of our report dated March 8, 1996 relating to the TIAA Real Estate Account, our report dated March 8, 1996 relating to The Greens at Metrowest Apartments and Brixworth-Atlanta Apartments, our report dated April 12, 1996 relating to The Millbrook Collection and the Lynnwood Collection Retail Centers, appearing in the Prospectus, which is a part of this Registration Statement and our report dated March 8, 1996 relating to the financial statement schedule--Schedule III--Real Estate Owned, appearing elsewhere in this Registration Statement. We also consent to the incorporation by reference into this Registration Statement of our report dated March 12, 1996 relating to Teachers Insurance and Annuity Association of America.
We also consent to the reference to us under the heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
New York, New York
April 26, 1996
| ARTICLE 6 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| CIK: 0000946155 |
| NAME: TIAA REAL ESTATE ACCOUNT |
| PERIOD TYPE | YEAR |
| FISCAL YEAR END | DEC 31 1995 |
| PERIOD START | JUL 03 1995 |
| PERIOD END | DEC 31 1995 |
| INVESTMENTS AT COST | 117,962,496 |
| INVESTMENTS AT VALUE | 117,982,234 |
| RECEIVABLES | 23,150,000 |
| ASSETS OTHER | 1,648,400 |
| OTHER ITEMS ASSETS | 396,787 |
| TOTAL ASSETS | 143,177,421 |
| PAYABLE FOR SECURITIES | 22,788,035 |
| SENIOR LONG TERM DEBT | 0 |
| OTHER ITEMS LIABILITIES | 131,041 |
| TOTAL LIABILITIES | 22,919,076 |
| SENIOR EQUITY | 0 |
| PAID IN CAPITAL COMMON | 0 |
| SHARES COMMON STOCK | 1,172,498 |
| SHARES COMMON PRIOR | 0 |
| ACCUMULATED NII CURRENT | 0 |
| OVERDISTRIBUTION NII | 0 |
| ACCUMULATED NET GAINS | 0 |
| OVERDISTRIBUTION GAINS | 0 |
| ACCUM APPREC OR DEPREC | 0 |
| NET ASSETS | 120,258,345 |
| DIVIDEND INCOME | 8,671 |
| INTEREST INCOME | 2,820,229 |
| OTHER INCOME | 121,930 |
| EXPENSES NET | 310,433 |
| NET INVESTMENT INCOME | 2,640,397 |
| REALIZED GAINS CURRENT | 15,865 |
| APPREC INCREASE CURRENT | 19,738 |
| NET CHANGE FROM OPS | 2,676,000 |
| EQUALIZATION | 0 |
| DISTRIBUTIONS OF INCOME | 0 |
| DISTRIBUTIONS OF GAINS | 0 |
| DISTRIBUTIONS OTHER | 0 |
| NUMBER OF SHARES SOLD | 1,172,498 |
| NUMBER OF SHARES REDEEMED | 0 |
| SHARES REINVESTED | 0 |
| NET CHANGE IN ASSETS | 120,258,345 |
| ACCUMULATED NII PRIOR | 0 |
| ACCUMULATED GAINS PRIOR | 0 |
| OVERDISTRIB NII PRIOR | 0 |
| OVERDIST NET GAINS PRIOR | 0 |
| GROSS ADVISORY FEES | 228,136 |
| INTEREST EXPENSE | 0 |
| GROSS EXPENSE | 311,038 |
| AVERAGE NET ASSETS | 105,219,935 |
| PER SHARE NAV BEGIN | 100.000 |
| PER SHARE NII | 2.535 |
| PER SHARE GAIN APPREC | 0.031 |
| PER SHARE DIVIDEND | 0 |
| PER SHARE DISTRIBUTIONS | 0 |
| RETURNS OF CAPITAL | 0 |
| PER SHARE NAV END | 102.566 |
| EXPENSE RATIO | .003 |
| AVG DEBT OUTSTANDING | 0 |
| AVG DEBT PER SHARE | 0 |