File Nos. 333-21821, 811-08055
As filed with the Securities and Exchange Commission on , 1999
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
Registration Statement Under the Securities Act of 1933 |X|
Pre-Effective Amendment No. __ |_|
Post-Effective Amendment No. 3 |X|
and
Registration Statement Under the Investment Company Act of 1940 |X|
Amendment No. 5 |X|
(Check appropriate box or boxes.)
-----------------------------------
TIAA-CREF Mutual Funds
730 Third Avenue
New York, New York 10017
(800) 842-2733
(Registrant's Exact Name, Address and Telephone Number)
Peter C. Clapman, Esq.
TIAA-CREF Mutual Funds
730 Third Avenue
New York, New York 10017
(Name and Address of Agent for Service)
Copy to:
Steven B. Boehm, Esq.
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D. C. 20004-2404
Approximate Date of Proposed Public Offering:
As soon as practicable after effectiveness of the Registration Statement.
It is proposed that this filing will become effective (check appropriate box):
|_| Immediately upon filing |_| On (date) pursuant to
pursuant to paragraph (b) paragraph (b)
|_| 60 days after filing pursuant |X| On April 1, 1999 pursuant
to paragraph (a)(1) to paragraph (a)(1)
|_| 75 days after filing pursuant to |_| On (date) pursuant to
paragraph (a)(2) paragraph (a)(2) of rule 485
If appropriate, check the following box:
|_| This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities being registered:
shares of an open-end management investment company.
<PAGE>
Prospectus, dated , 1999
TIAA-CREF Mutual Funds
International Equity Fund
Growth Equity Fund
Growth & Income Fund
Managed Allocation Fund
Bond Plus Fund
Money Market Fund
The Securities and Exchange Commission has not approved or disapproved these
funds' shares or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
<PAGE>
Table of Contents
Summary Information...........................................................
Investment Objectives, Strategies and Risks.............................
Past Performance........................................................
Fees and Expenses.......................................................
Investment Objectives, Policies and Strategies................................
The Equity Funds........................................................
The International Equity Fund.....................................
The Growth Equity Fund............................................
The Growth & Income Fund..........................................
Other Investments and Investment Techniques-Equity Funds................
The Managed Allocation Fund.............................................
The Bond Plus Fund......................................................
The Money Market Fund...................................................
Investment Practices and Risk Considerations..................................
Foreign Investments.....................................................
Currency Transactions...................................................
Illiquid Securities.....................................................
Non-Investment Grade Bonds..............................................
Repurchase Agreements...................................................
Mortgage-Backed Securities..............................................
TIAA-CREF Mutual Funds' Management............................................
Fund Managers...........................................................
Determining the Price of Fund Shares..........................................
Dividends and Distributions...................................................
Taxes ........................................................................
Shareholder Services..........................................................
Who can Open an Account.................................................
Types of Accounts.......................................................
How to Buy Shares.......................................................
How to Redeem Shares....................................................
How to Exchange Shares..................................................
Other Investor Information..............................................
Financial Highlights..........................................................
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SUMMARY INFORMATION
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS.
TIAA-CREF Mutual Funds has six investment portfolios. An investor can lose
money in any of these funds, or the funds could underperform other investments.
The funds are subject to the following general risks:
o Market Risk - Stock prices in general can decline over short or extended
periods as a result of political or economic events.
o Company Risk - A company's current earnings can fall or its overall
financial soundness may decline. As a result, the price of its stock may
go down, or it may not be able to pay principal and interest on its bonds
when due.
o Interest Rate Risk - Bond prices may fall as interest rates rise and vice
versa.
Special risks associated with particular funds are discussed in the
following fund summaries:
International Equity Fund
Investment Objective The Fund seeks favorable long-term returns, mainly
through capital appreciation.
Principal Investment
Strategies The Fund invests in a broadly diversified
portfolio of primarily foreign equity investments.
The Fund will have at least 80 percent of its
total assets invested in securities of issuers
located in at least three countries other than the
U.S. The Fund allocates investments to particular
countries or regions based on our evaluation of
various factors, such as the relative
attractiveness of particular markets.
Special Investment
Risks Changes in currency exchange rates, the possible
imposition of market controls or currency exchange
controls, lower liquidity and higher volatility in
some foreign markets and/or political, social or
diplomatic events could reduce the value of the
fund's investments.
Who may want to invest The Fund may be appropriate for investors who seek
above-average long-term returns, who understand
the advantages of diversification across
international markets and are willing to tolerate
the greater risks of international investing.
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Growth Equity Fund
Investment Objective The Fund seeks a favorable long-term return,
mainly through capital appreciation, primarily
from a diversified portfolio of common stocks that
present the opportunity for exceptional growth.
Principal Investment
Strategies The Fund will invest at least 80 percent of its
total assets in growth stocks. This includes the
stocks of companies in new and emerging areas of
the economy and companies with distinctive
products or promising market conditions. The Fund
looks for companies that we believe have the
potential for strong earnings or sales growth, or
that appear to be undervalued based on current
earnings, assets or growth prospects.
Special Investment
Risks The Fund may sometimes hold a significant amount
of stocks of smaller, lesser-known companies whose
stock prices may fluctuate more than those of
larger companies. Also, stocks of companies
involved in reorganizations and other special
situations can often involve more risk than
ordinary securities. This means the Fund will
probably be more volatile than the overall stock
market, and could significantly outperform or
underperform the market.
Who may want to invest The Fund may be appropriate for investors who are
looking for long-term capital appreciation and a
hedge against inflation, but who are willing to
tolerate fluctuations in value.
3
<PAGE>
Growth & Income Fund
Investment Objective The Fund seeks a favorable long-term return
through capital appreciation and investment
income.
Principal Investment
Strategies The Fund invests in a broadly diversified
portfolio of common stocks. Normally, the Fund
intends to invest at least 80 percent of its
assets in income-producing equity securities
selected for their investment potential. The Fund
may also invest in foreign securities.
Who may want to invest The Fund may be appropriate for investors who want
capital appreciation and current income but who
also can accept the risk of market fluctuations.
Managed Allocation Fund
Investment Objective The Fund seeks a return that reflects the broad
investment performance of the financial markets
through capital appreciation and investment
income.
Principal Investment
Strategies The Fund invests in the TIAA-CREF Mutual Funds'
other investment funds. Under normal conditions,
the Fund will invest approximately 60 percent of
its assets in the Growth and Income, International
Equity and Growth Equity Funds and approximately
40 percent in the Bond Plus Fund. Depending upon
our analysis of market, economic, and financial
conditions, these percentages may fluctuate up and
down by up to 15 percent.
Special Investment
Risks The Fund shares the risks of the funds it invests
in. Because it invests in the securities of a
limited number of other mutual funds, it is
considered "nondiversified" for purposes of the
1940 Act. However, the funds in which the Managed
Allocation Fund invests are themselves considered
diversified investment companies.
Who may want to invest The Fund may be appropriate for investors who
prefer to have their asset allocation decisions
made by professional money managers. The fund is
suitable for investors with time horizons of at
least five years and who seek broad
diversification.
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Bond Plus Fund
Investment Objective The Fund seeks a favorable long-term return,
primarily through high current income consistent
with preserving capital.
Principal Investment
Strategies The Fund invests at least 80 percent of its assets
in bonds. At least 75 percent of the Fund will be
invested primarily in a broad range of debt
securities, such as U.S. Treasury and Agency
securities, corporate bonds, mortgage-backed
securities and money market instruments. The
Fund's other assets may be invested in illiquid
securities (such as "Rule 144a" private
placements) or non-investment grade securities,
but investments in illiquid securities won't be
more than 15 percent of the Fund's assets.
Special Investment
Risks Non-investment grade securities (also called
"high-yield" or "junk" bonds) offer higher returns
but also involve higher risks than investment
grade bonds. Their issuers may be less
creditworthy and/or have a higher risk of becoming
insolvent.
Who may want to invest The Fund may be appropriate for more conservative
investors who want to invest in a general bond
fund that has the potential for a higher yield and
a slightly higher level of risk than traditional
bond funds.
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Money Market Fund
Investment Objective The Fund seeks high current income consistent with
maintaining liquidity and preserving capital.
Principal Investment
Strategies The Fund invests primarily in high quality
short-term money market instruments. It limits its
investments to securities that present minimal
credit risk and are rated in the highest rating
categories for short-term instruments.
Who may want to invest The Fund may be suitable for conservative
investors who are looking for a high degree of
principal stability and liquidity, and are willing
to accept returns that are lower than those
offered by longer-term investments.
An investment in the Money Market Fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the Money Market Fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the Fund.
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PAST PERFORMANCE
The bar charts and performance table shown below help illustrate some of
the risks of investing in the funds, and how investment performance varies. They
show each Fund's returns over the 1998 calendar year and since their September
2, 1997 inception, and how those returns compare to those of broad-based
securities market indexes. How the Funds have performed in the past is not
necessarily an indication of how they will perform in the future.
[Insert bar charts for each fund showing average annual total return for 1998
and since inception, with actual return numbers under each bar.]
International Equity Fund.
[bar chart]
Since inception, the highest return for a quarter was , for the quarter
ending , and the lowest return for a quarter was , for the quarter
ending .
Growth Equity Fund.
[bar chart]
Since inception, the highest return for a quarter was , for the quarter
ending , and the lowest return for a quarter was , for the quarter
ending .
Growth & Income Fund.
[bar chart]
Since inception, the highest return for a quarter was , for the quarter
ending , and the lowest return for a quarter was , for the quarter
ending .
Managed Allocation Fund.
[bar chart]
Since inception, the highest return for a quarter was , for the quarter
ending , and the lowest return for a quarter was , for the quarter
ending .
Bond Plus Fund.
[bar chart]
Since inception, the highest return for a quarter was , for the quarter
ending , and the lowest return for a quarter was , for the quarter
ending .
Money Market Fund.
[bar chart]
Since inception, the highest return for a quarter was , for the quarter
ending , and the lowest return for a quarter was , for the quarter
ending .
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Average Annual Total Returns
All Funds
<TABLE>
<CAPTION>
Since inception
One year (September 2, 1997 to
(January 1, 1998 to December 31, 1998) December 31, 1998)
<S> <C> <C>
The International Equity Fund
Morgan Stanley Capital International Europe,
Australia and Far East Index
The Growth Equity Fund
Russell 3000(R) Growth Index
The Growth & Income Fund
S&P 500 Stock Index
The Managed Allocation Fund
Morgan Stanley Capital International Europe,
Australia and Far East Index
S&P 500 Stock Index
Lehman Brothers Aggregate Bond Index
Composite Index (12% Morgan Stanley
EAFE, 48% S&P 500 Stock Index and 40%
Lehman Brothers Aggregate Bond Index)
The Bond Plus Fund
Lehman Brothers Aggregate Bond Index
The Money Market Fund
IBC Money Fund Report - All Taxable Average
</TABLE>
For the Money Market Fund's most current 7-day yield, please call us at 800
223-1200.
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FEES AND EXPENSES
This table describes the fees and expenses that you pay if you buy and
hold shares of the Funds.
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ............................0%
Maximum Deferred Sales Charge.........................................0%
Maximum Sales Charge Imposed on
Reinvested Dividends............................................0%
Redemption Fee ......................................................0%
Exchange Fee .........................................................0%
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
<TABLE>
<CAPTION>
Management Other Expenses Total Fund Fee Net
Fee Operating Expenses Waiver(1) Current
Fees
<S> <C> <C> <C> <C> <C>
The International 0.99% 0 0.99% 0.50% 0.49%
Equity Fund
The Growth Equity 0.95% 0 0.95% 0.50% 0.40%
Fund
The Growth & Income 0.93% 0 0.93% 0.50% 0.43%
Fund
The Managed 0.00% 0 0.00% 0.00% 0.00%
Allocation Fund(2)
The Bond Plus Fund 0.80% 0 0.80% 0.50% 0.30%
The Money Market
Fund 0.79% 0 0.79% 0.50% 0.29%
</TABLE>
(1) Teachers Advisors, Inc. ("Advisors"), the investment advisor for the
Funds, has agreed to waive a portion of its fee for managing each Fund (other
than the Managed Allocation Fund, which doesn't pay a management fee). This
waiver is contractual and will remain in effect until July 1, 2000.
(2) Teachers Advisors does not receive a management fee for its services
to the Managed Allocation Fund. However, shareholders in the Managed Allocation
Fund will indirectly bear their pro rata share of the fees and expenses incurred
by the funds in which the Managed Allocation Fund invests.
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Example
This example is intended to help you compare the cost of investing in the
Funds with the cost of investing in other mutual funds.
This Example assumes that you invest $10,000 in a fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5 percent return
each year and that the funds' operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
1 3 5 10
Year Years Years Years
International Equity Fund $50 $158 $275 $617
Growth Equity Fund $46 $145 $253 $568
Growth & Income Fund $44 $138 $242 $544
Managed Allocation Fund (1) $0 $ 0 $0 $0
Bond Plus Fund $31 $97 $169 $382
Money Market Fund $30 $ 94 $164 $370
(1) The Managed Allocation Fund itself has no expense charges. However,
shareholders in the Managed Allocation Fund will indirectly bear their pro rata
share of the fees and expenses incurred by the funds in which the Managed
Allocation Fund invests.
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INVESTMENT OBJECTIVES, POLICIES AND STRATEGIES
Each of the individual investment portfolios described below is a separate
series of the TIAA-CREF Mutual Funds, with its own distinct investment
objective. The following describes each fund's investment objective, the
principal investment strategies and techniques each fund uses to accomplish its
objective, and the principal types of securities each fund plans to purchase.
These policies and techniques are not fundamental and may be changed by the
Board of Trustees without shareholder approval. However, we'll notify you of any
significant changes. For a complete listing of the funds' policies and
restrictions, see the Statement of Additional Information.
There's no guarantee that any fund will meet its investment objective.
The Equity Funds
The Dual Investment Management Strategy(SM)
The equity funds use TIAA-CREF's Dual Investment Management Strategy,
which works like this:
Each equity fund has two separate sub-portfolios called the "Stock
Selection" sub-portfolio and the "Enhanced Index" sub-portfolio. The relative
sizes of these two segments vary as the fund manager shifts money between them
in response to investment opportunities.
The Stock Selection sub-portfolio holds a relatively small number of
stocks that the fund manager believes offer superior returns. The managers of
the equity funds will usually use fundamental analysis to select individual
stocks or sectors for investment in the Stock Selection sub-portfolio.
Money that is not invested in an equity fund's Stock-Selection
sub-portfolio goes to its Enhanced Index segment. Here the goal is two-fold: 1)
to outperform each fund's benchmark index and (2) to limit the possibility of
significantly underperforming that benchmark. The funds' managers attempt to
outperform the benchmark indexes by over- or under-weighting many stocks in the
index by small amounts, based on proprietary stock scoring models. In other
words, a fund will hold more or less of some stocks than does its benchmark
index. The managers attempt to control the risk of underperforming the
benchmarks by maintaining the same overall financial characteristics (such as
volatility, dividend yield and industry weights) as the benchmarks. The
benchmarks for each fund's Enhanced Index sub-portfolio currently are as
follows:
Growth & Income S&P 500 Composite Stock Index
International Equity Morgan Stanley EAFE (Europe Australia Far East)
Index
Growth Equity Russell 3000(R) Growth Index (Russell 3000
is a trademark and a service mark of the Frank
Russell Company)
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Using these indexes is not a fundamental policy of the TIAA-CREF Mutual Funds,
so we can substitute other indexes without shareholder approval. We'll notify
you before we make such a change.
The International Equity Fund
The International Equity Fund seeks a favorable long-term return, mainly
through capital appreciation from a broadly diversified portfolio that consists
primarily of foreign equity investments.
The fund intends to have at least 80 percent of its assets invested in
securities of issuers located in at least three countries other than the U.S.
The fund allocates investments to particular countries or regions based on our
evaluation of various factors, such as the relative attractiveness of particular
markets.
Investing in securities traded on foreign exchanges or in foreign markets
can involve risks beyond those of domestic investing. These include: 1) changes
in currency exchange rates; 2) possible imposition of market controls or
currency exchange controls; 3) possible imposition of withholding taxes on
dividends and interest; 4) possible seizure, expropriation, or nationalization
of assets; 5) more limited foreign financial information or difficulty in
interpreting it because of foreign regulations and accounting standards; 6) the
lower liquidity and higher volatility in some foreign markets; 7) the impact of
political, social, or diplomatic events; 8) the difficulty of evaluating some
foreign economic trends; or 9) the possibility that a foreign government could
restrict an issuer from paying principal and interest to investors outside the
country. Brokerage commissions and transaction costs are often higher for
foreign investments, and it may be harder to use foreign laws and courts to
enforce financial or legal obligations.
The risks noted above often increase in countries with emerging markets.
For example, these countries may have more unstable governments than developed
countries, and their economies may be based on only a few industries. Because
their securities markets may be very small, share prices may be volatile. In
addition, foreign investors are subject to a variety of special restrictions in
many emerging countries.
When investing in foreign securities, the fund can use currency
transactions to protect themselves against future exchange rate uncertainties
and to take advantage of exchange rate disparities between countries. The fund
can enter into forward currency contracts; buy or sell options and futures on
foreign currencies; and buy securities indexed to foreign currencies. These
transactions are either on a spot (i.e., cash) basis at prevailing rates, or
else through forward contracts to buy or sell currencies at a set price on a
stipulated date in the future. Forward currency contracts are usually with large
commercial banks that participate in the interbank market. The fund can also use
currency financial futures and options and can hold part of their assets in bank
deposits denominated in foreign currency. If foreign currency assets are
converted to U.S. dollars, changes in exchange rates and exchange control
regulations may increase or reduce their value .
Foreign currency transactions seek to reduce a fund's exposure to a
decline in the value of
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investments denominated in foreign currencies; they may also let us "lock in"
exchange rates when buying or selling foreign securities. These transactions
involve special risks. For example, they may limit potential gains from
increases in a currency's value. We don't intend to speculate in foreign
currency exchange transactions or forward currency contracts.
The other TIAA-CREF Mutual Funds may also make foreign investments and
enter into foreign currency transactions, but less frequently than the
International Equity Fund does. The risks described above also apply to foreign
investments and currency transactions of the other funds.
The Growth Equity Fund
The Growth Equity Fund seeks a favorable long-term return, mainly through
capital appreciation, primarily from a diversified portfolio of common stocks
that present the opportunity for exceptional growth.
Normally, the fund will invest at least 80 percent of its total assets in
the equity securities of companies that have the potential for capital
appreciation. The fund can invest in companies of all sizes, including companies
in new and emerging areas of the economy and companies with distinctive products
or promising market conditions. We choose individual investments based on a
company's prospects under current or forecasted economic, financial and market
conditions, looking for companies we believe have the potential for strong
earnings or sales growth, or that appear to be undervalued based on current
earnings, assets, or growth prospects.
The fund can also invest in large, well-known, established companies,
particularly when we believe they have new or innovative products, services, or
processes that enhance future earnings prospects. The fund can also invest in
companies in order to benefit from prospective acquisitions, reorganizations, or
corporate restructurings or other special situations.
The Growth Equity Fund can buy foreign securities and other instruments if
we believe they have superior investment potential. Depending on investment
opportunities, the fund may have from 0 to 40 percent of its assets in foreign
securities. The securities will be those traded on foreign exchanges or in other
foreign markets and may be denominated in foreign currencies or other units of
account. For more information about the risks of foreign investments, see page
12 .
The fund may involve special risks not present with our other funds. It
may at times hold a significant amount of stocks of smaller, lesser-known
companies. Their stock prices may fluctuate more than those of larger companies
because smaller companies may depend on narrow product lines, have limited track
records, lack depth of management, or have thinly-traded securities. Also,
stocks of companies involved in reorganizations and other special situations can
often involve more risk than ordinary securities. Accordingly, the Growth Equity
Fund will probably be more volatile than the overall stock market, and it could
significantly outperform or underperform the stock market during any particular
period.
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The Growth & Income Fund
The Growth & Income Fund seeks a favorable long-term return through
capital appreciation and investment income, primarily from a broadly diversified
portfolio of common stocks.
Normally, the fund will invest at least 80 percent of its total assets in
income-producing equity securities selected for their investment potential.
The fund may invest up to 20 percent of its total assets in foreign
securities. For more about the risks of foreign investments, see page 12.
The Managed Allocation Fund
The Managed Allocation Fund seeks favorable returns that reflect the broad
investment performance of the financial markets through capital appreciation and
investment income. The Managed Allocation Fund will pursue this goal primarily
through investments in TIAA-CREF Mutual Funds' other investment funds.
Normally, about 60 percent of the Managed Allocation Fund's assets will be
in shares of the Growth and Income, International Equity and Growth Equity
Funds, and about 40 percent will be in shares of the Bond Plus Fund. These
percentages may fluctuate up and down by as much as 15 percent, depending on our
analysis of market, economic and financial conditions. The fund might sometimes
be even more heavily weighted toward equities or fixed income, if we believe
market conditions warrant it.
For flexibility in meeting redemptions, expenses, and the timing of new
investments, and as a short-term defense during periods of unusual volatility,
the fund can also invest in government securities (as defined in the Investment
Company Act of 1940 (the "1940 Act")), short-term paper, or shares of the Money
Market Fund. For temporary defensive purposes, the Managed Allocation Fund may
invest without limitation in such securities.
The Managed Allocation Fund shares the risks of the funds it invests in.
Because it invests in the securities of a limited number of other mutual funds,
it is considered "nondiversified" for purposes of the 1940 Act. Sometimes
nondiversified funds have special risks. However, the funds in which the Managed
Allocation Fund invests are themselves considered diversified investment
companies.
It is possible that the interests of the Managed Allocation Fund could
diverge from the interests of one or more of the funds in which it invests
(underlying funds). That could create a conflict of interest between the Managed
Allocation Fund and its underlying funds, in which case it could be difficult
for the TIAA-CREF Mutual Funds Board of Trustees and officers to fulfill
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their fiduciary duties to each fund. The Board believes it has structured each
fund to avoid these concerns. However, it is still possible that sometimes
proper action for the Managed Allocation Fund could hurt the interests of any
underlying fund, or vice versa. If that happens, Teachers Advisors and the Board
and officers of TIAA-CREF Mutual Funds will carefully analyze the situation and
take all steps they believe reasonable to minimize and, where possible,
eliminate the potential conflict. Teachers Advisors and the TIAA-CREF Mutual
Funds' Board and officers will in any case closely and continuously monitor each
fund's investments to avoid these concerns as much as possible.
The Bond Plus Fund
The Bond Plus Fund seeks a favorable long-term return, primarily through
high current income consistent with preserving capital. Normally, at least 80
percent of the fund's assets will be invested in bonds.
We divide the fund's portfolio into two segments. The first segment, which
makes up at least 75 percent of the fund's assets, is invested primarily in a
broad range of debt securities, such as U.S. Treasury and Agency securities,
corporate bonds, mortgage-backed securities, and money market instruments. This
segment can make foreign investments, but we don't expect them to exceed 15
percent of the fund's assets.
The fund's other segment is invested in securities with special features
in an effort to improve the fund's total return. These primarily will be
illiquid securities (such as "Rule 144a" private placements) or non-investment
grade securities (those rated Ba1 or lower by Moody's or BB+ or lower by
Standard & Poor's). Currently this part of the Fund has less than 5% of the
Fund's assets, but if market conditions warrant it could grow as large as 25%.
However, investments in illiquid securities will not be more than 15 percent of
the fund's assets. The risk of investing in illiquid securities is that it may
be difficult to sell these investments for their fair market value.
Non-investment grade securities are usually called "high-yield" or "junk"
bonds. Lower-rated bonds offer higher returns but also entail higher risks.
Their issuers may be less creditworthy or have a higher risk of becoming
insolvent. Small changes in the issuer's creditworthiness can have more impact
on the price of lower-rated bonds than comparable changes would for investment
grade bonds. Lower-rated bonds can also be harder to value or sell, and their
prices can be more volatile than the prices of higher-quality securities.
Bear in mind that all these risks can also apply to the lower levels of
"investment grade" securities, for example, Moody's Baa and S&P's BBB. Moreover,
securities originally rated "investment grade" are sometimes downgraded later
on, should a ratings service believe the issuer's business outlook or
creditworthiness has deteriorated. If that happens to a security in a fund, it
may or may not be sold, depending on our analysis of the issuer's prospects.
However, the fund won't purchase below-investment-grade securities if that would
increase their amount in the portfolio above our current investment target. We
don't rely exclusively on credit ratings when making investment decisions
because they may not alone be an accurate measure of the risk of lower-rated
bonds. Instead, we also do our own credit analysis, paying particular attention
to
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economic trends and other market events.
The Bond Plus Fund's investments in mortgage-backed securities can include
pass-through securities sold by private, governmental and government-related
organizations and collateralized mortgage obligations (CMOs). Mortgage
pass-through securities are formed when mortgages are pooled together and
interests in the pool are sold to investors. The cash flow from the underlying
mortgages is "passed through" to investors in periodic principal and interest
payments. CMOs are obligations fully collateralized directly or indirectly by a
pool of mortgages on which payments of principal and interest are dedicated to
payment of principal and interest on the CMOs.
The fund can also invest in interest-only and principal-only
mortgage-backed securities. These instruments have unique characteristics,
including often a higher prepayment risk than traditional mortgage-backed
securities. Prepayment risk is the possibility that a change in interest rates
causes the holders of the underlying mortgages pay off their mortgage loans
sooner than expected. If that happens, the fund would have to reinvest the
amounts that had been invested in the mortgage-backed securities, possibly at a
lower rate of return.
The Money Market Fund
The Money Market Fund seeks high current income to the extent consistent
with maintaining liquidity and preserving capital.
We seek to maintain a stable net asset value of $1.00 per share of the
Money Market Fund by investing in assets that present minimal credit risk,
maintaining an average weighted maturity of 90 days or less, and investing all
of the fund's assets in securities or other instruments maturing in 397 days or
less. We can't assure you that we will be able to maintain a stable net asset
value of $1.00 per share for this fund.
The fund will invest primarily in:
(1) Commercial paper (short-term "IOUs" issued by corporations and
others) or variable-rate, floating-rate, or variable-amount
securities of domestic or foreign companies;
(2) Obligations of commercial banks, savings banks, savings and loan
associations, and foreign banks whose latest annual financial
statements show more than $1 billion in assets. These include
certificates of deposit, time deposits, bankers' acceptances, and
other short-term debt;
(3) Securities issued by or whose principal and interest are guaranteed
by the U.S. government or one of its agencies or instrumentalities;
(4) Other debt obligations with a remaining maturity of 397 days or less
issued by domestic or foreign companies;
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(5) Repurchase agreements involving securities issued or guaranteed by
the U.S. government or one of its agencies or instrumentalities, or
involving certificates of deposit, commercial paper, or bankers'
acceptances;
(6) Participation interests in loans banks have made to the issuers of
(1) and (4) above (these may be considered illiquid);
(7) Asset-backed securities issued by domestic corporations or trusts;
(8) Obligations issued or guaranteed by foreign governments or their
political subdivisions, agencies, or instrumentalities; and
(9) Obligations of international organizations (and related government
agencies) designated or supported by the U.S. or foreign government
agencies to promote economic development or international banking.
The Money Market Fund will only purchase money market instruments that at
the time of purchase are "First Tier Securities", that is rated within the
highest category by at least two nationally recognized statistical rating
organizations (NRSROs), or rated within the highest category by one NRSRO if it
is the only NRSRO to have issued a rating for the security, or unrated
securities of comparable quality. The fund can also invest up to 30 percent of
its assets in money-market and debt instruments of foreign issuers denominated
in U.S. dollars.
The above list of investments is not exclusive and the fund may make other
investments consistent with its investment objective and policies.
General Investment Risks
To varying degrees, the funds are all subject to several general types of
risks. One is market risk -- stock price volatility due to changing conditions
in the financial markets. Another is interest rate risk, the risk that a debt
instrument's value will decline if interest rates change. A rise in interest
rates usually causes the market value of fixed-rate securities to go down, while
a rate decline usually results in an increase in the market values of those
securities. Another kind of risk is company risk. For stocks or other equity
securities, it comes from the possibility that current earnings will fall or
that overall financial soundness will decline, reducing the security's value.
For bonds and other debt securities, company risk comes from the possibility the
issuer won't be able to pay principal and interest when due. Finally, current
income volatility means how much and how quickly overall interest rate changes
affect current income from an investment.
Year 2000 Risks
Many services provided to the funds and their shareholders depend on the
smooth functioning of computer systems. Many computer systems now in use can't
distinguish the year 2000 from the year 1900 because dates have been encoded
using only the last two digits of the
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year. Like other mutual funds, financial and business organizations, and
individuals around the world, TIAA-CREF Mutual Funds could be adversely affected
if the computer systems used by Teachers Advisors, Inc., the Funds' investment
managers, and other service providers do not properly process and calculate
information and data involving dates from and after January 1, 2000. Teachers
Advisors and the Fund are taking steps that we believe are reasonably designed
to address issues involving the Year 2000 for the computer systems we use. We
are also seeking reasonable assurances that our service providers are taking
comparable steps. However, currently we can't assure you that these steps will
be sufficient to avoid any adverse impact on the Funds.
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TIAA-CREF Mutual Funds' Management
Teachers Advisors manages the assets of the TIAA-CREF Mutual Funds , under
the supervision of the Funds' Board of Trustees (the Board). Teachers Advisors
is a wholly-owned indirect subsidiary of Teachers Insurance and Annuity
Association of America (TIAA). It is registered as an investment adviser with
the Securities and Exchange Commission under the Investment Advisers Act of
1940. Teachers Advisors also manages the investments of TIAA Separate Account
VA-1, the TIAA-CREF Life Funds and the investment portfolio of New York State's
College Choice Tuition Savings Plan. Through an affiliated investment adviser,
TIAA-CREF Investment Management, LLC, the personnel of Teachers Advisors also
manage the investment accounts of the College Retirement Equities Fund. Teachers
Advisors is located at 730 Third Avenue, New York, NY 10017.
Teachers Advisors' duties include conducting research, recommending
investments, and placing orders to buy and sell securities. Teachers Advisors is
also responsible for providing, or obtaining at its own expense, the services
needed for the day-to-day operation of each fund. These include distribution,
custodial, administrative, transfer agency, portfolio accounting, dividend
disbursing, auditing, and ordinary legal services. Teachers Advisors also acts
as liaison among the various service providers to the funds, including
custodians, portfolio accounting agents, portfolio managers, and transfer
agents.
Under the terms of an Investment Management Agreement between TIAA-CREF
Mutual Funds and Teachers Advisors, Teachers Advisors is entitled to an annual
fee of 0.99%, 0.95%, 0.93%, 0.80% and 0.79% of the average daily net assets of
the International Equity Fund, the Growth Equity Fund, the Growth & Income Fund,
the Bond Plus Fund and the Money Market Fund, respectively. It receives no fee
for managing the Managed Allocation Fund. Teachers Advisors currently has
voluntarily waived its right to receive that portion of its fee equal to 0.50%
of the average daily net assets of each fund (other than the Managed Allocation
Fund). This waiver is guaranteed to remain in effect until July 1, 2000.
Fund Managers
The International Equity Fund is managed by Chris Semenuk, Director-Global
Portfolio Management, Teachers Advisors. Mr. Semenuk joined TIAA-CREF in 1993.
He is also one of three co-managers of the CREF Global Equities Account.
Previously, he was responsible for company research and analysis for the CREF
Global Equities Account.
The Growth Equity Fund is managed by Jeffrey Siegel, Managing Director,
Teachers Advisors. Mr. Siegel joined TIAA-CREF in 1988. Mr. Siegel is also
responsible for managing the investments of the CREF Growth Account. Previously,
he managed the CREF Global Equities Account.
The Growth & Income Fund is managed by Carlton N. Martin, Managing
Director-Global Research, Teachers Advisors. Mr. Martin joined TIAA-CREF in
1980. He is also one of three co-managers of the CREF Global Equities Account.
Previously, he was responsible for
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investments in the chemical, paper and forest products as well as the
environmental, engineering and construction industries for certain CREF
Accounts.
The Managed Allocation Fund is managed by James G. Fleischmann and Edward
Gryzybowski. Mr. Fleischmann, Senior Managing Director-Global Research, Teachers
Advisors, joined TIAA-CREF in 1994 and is also responsible for global equity
research for the CREF Accounts. Before joining TIAA-CREF, Mr. Fleischmann was a
Director of Salomon Brothers, Inc., and co-portfolio manager of Salomon Brothers
Hybrid Convertible Fund, Salomon Brothers Investors Fund and Salomon Brothers
Fund. Mr. Gryzybowski, Managing Director, Teachers Advisors, joined TIAA-CREF in
1987. Mr. Gryzybowski also has supervisory responsibility over investments in
CREF's Bond Market, Money Market and Inflation Linked Bond Accounts.
The Bond Plus Fund is managed by Elizabeth D. Black, Director, Portfolio
Management, Teachers Advisors. Ms. Black joined TIAA-CREF in 1987. Ms. Black is
also responsible for managing the investments in CREF's Bond Market Account.
The Money Market Fund is managed by Steven Traum, Managing Director, Money
Markets and Inflation Linked Bond , Teachers Advisors. Mr. Traum joined
TIAA-CREF in 1983. Mr. Traum is also responsible for managing the investments of
the CREF Money Market and Inflation Linked Bond Accounts. He also manages the
cash components of the other TIAA-CREF Mutual Funds and CREF Accounts.
CALCULATING SHARE PRICE
We determine the net asset value (NAV) per share, or share price, of a
fund on each day the New York Stock Exchange is open for business. We do this
when trading closes on all U.S. national exchanges where securities or other
investments of a fund are principally traded. We will not price fund shares on
days that the New York Stock Exchange is closed. We compute a fund's NAV by
dividing the value of the fund's assets, less its liabilities, by the number of
outstanding shares of that fund.
We usually use market quotations or independent pricing services to value
securities and other instruments. If market quotations or independent pricing
services aren't readily available, we'll use a security's "fair value", as
determined in good faith by or under the direction of the TIAA-CREF Mutual
Funds' Board of Trustees. We may also use fair value if events that have a
significant effect on the value of a domestic investment (as determined in our
sole discretion) occur between the time when its price is determined and the
time a fund's net asset value is calculated.
To calculate the Money Market Fund's net asset value per share, we value
its portfolio securities at their amortized cost. This valuation method does not
take into account unrealized gains or losses on the Fund's portfolio securities.
Amortized cost valuation involves first valuing a security at cost, and
thereafter assuming an amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the security's market
value. While this method provides certainty in valuation, there may be times
when the value of a security, as determined by amortized cost, may be higher or
lower than the price the Money Market Fund would receive if it sold the
security.
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The NAV per share of the Managed Allocation Fund will be based on the NAV
per share of each of the underlying funds in which it invests. Therefore,
although we will determine the net asset value per share of the Managed
Allocation Fund as described above, we cannot price the Managed Allocation
Fund's shares until we determine net asset value per share of the underlying r
funds.
DIVIDENDS AND DISTRIBUTIONS
Each fund expects to declare and distribute to shareholders substantially
all of its net investment income and net realized capital gains, if any. The
amount distributed will vary according to the income received from securities
held by the fund and capital gains realized from the sale of securities. The
following table shows how often we pay dividends on each fund:
Fund Dividend Paid
- ---- -------------
The International Equity Fund Annually
The Growth Equity Fund Annually
The Growth & Income Fund Quarterly
The Managed Allocation Fund Quarterly
The Bond Plus Fund Monthly
The Money Market Fund Monthly
Although we pay dividends monthly from the Money Market Fund, these
dividends are calculated and declared daily.
We pay capital gains from all funds once a year.
You can elect from among the following distribution options:
1. Reinvestment Option, Same Fund. We'll automatically reinvest your dividend
and capital gain distributions in additional shares of the fund. Unless you
elect otherwise, this will be your distribution option.
2. Reinvestment Option, Different Fund. We'll automatically reinvest your
dividend and capital gain distributions in additional shares of another fund in
which you already hold shares.
3. Income-Earned Option. We'll automatically reinvest your capital gain
distributions, but you will be sent a check for each dividend distribution.
4. Capital Gains Option. We'll automatically reinvest your dividend
distributions, but you will be sent a check for each capital gain distribution.
5. Cash Option. We'll send a check for your dividend and each capital gain
distribution.
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We make distributions for each fund on a per share basis to the
shareholders of record on the fund's distribution date. We do this regardless of
how long the shares have been held. That means if you buy shares just before or
on a record date, you will pay the full price for the shares and then you may
receive a portion of the price back as a taxable distribution. Cash distribution
checks will be mailed within seven days.
Taxes
As with any investment, you should consider how your investment in any
fund will be taxed.
IRA accounts
Taxes on distributions. You must pay federal income tax, and possibly also
state or local taxes, on distributions. Your distributions are taxable when they
are paid, whether you take them in cash or reinvest them. However, distributions
declared in October, November or December and paid in January are taxable as if
they were paid on December 31 of the prior year.
For federal tax purposes, income and short-term capital gain distributions
from a fund are taxed as ordinary income; long-term capital gain distributions
are taxed as long-term capital gains. Every January, we will send you and the
IRS a statement showing the taxable distributions paid to you in the previous
year. Capital gains may be taxed at one of several different rates. We expect to
designate each year the portions of the TIAA-CREF Mutual Funds' capital gain
distributions that are taxable at these different rates.
Taxes on transactions. Redemptions -- including exchanges to other funds
- -- are also subject to capital gains tax. A capital gain or loss is the
difference between the cost of your shares and the price you receive when you
sell them.
Whenever you sell shares of a fund, we will send you a confirmation
statement showing how many shares you sold and at what price. However, you or
your tax preparer must determine whether this sale resulted in a capital gain or
loss and the amount of tax to be paid on any gain. Be sure to keep your regular
account statements; the information they contain will be essential in
calculating the amount of your capital gains or losses.
"Buying a dividend." If you buy shares just before a fund deducts a
distribution from its net asset value, you will pay the full price for the
shares and then receive a portion of the price back in the form of a taxable
distribution. This is referred to as "buying a dividend." For example, assume
you bought shares of a fund for $10.00 per share the day before the fund paid a
$0.25 dividend. After the dividend was paid, each share would be worth $9.75,
and you would have to include the $0.25 dividend in your gross income for tax
purposes.
Effect of foreign taxes. Foreign governments may impose taxes on a fund
and its investments and these taxes generally will reduce such fund's
distributions. If a fund qualifies to pass through a credit for such taxes paid,
an offsetting tax credit or deduction may be available to you. If so, your tax
statement will show more taxable income than were actually distributed by the
fund, but will also show the amount of the available offsetting credit or
deduction.
There are tax requirements that all mutual funds must follow in order to
avoid federal
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taxation. In its effort to adhere to these requirements, a fund may have to
limit its investment in some types of instruments.
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YOUR ACCOUNT: BUYING, SELLING OR EXCHANGING SHARES
Types of Accounts
o Individual accounts (for one person) or joint accounts (more than
one person)
o Trust accounts (other than foreign trust accounts).
o Accounts for a minor child under the Uniform Gift to Minors Act
(UGMA) or Uniform Transfer to Minors Act (UTMA).
o Traditional IRAs and Roth IRAs. These accounts let you shelter
investment income from federal income tax while saving for
retirement.
o Education IRAs. This account lets you shelter investment income from
federal income tax while saving to pay qualified higher education
expenses of a designated beneficiary.
o Corporate/institutional accounts.
For more information about opening an IRA or corporate/institutional account,
please call us.
How To Open an Account and Make Subsequent Investments
To open an account, send us a completed application with your initial
investment. If you want an application, or if you have any questions or need
help completing the application, call one of our Counselors at 800 223-1200. You
can also download and print the application from our website,
www.tiaa-cref.org/mfunds.
The minimum initial investment is $250 per fund (or $25 if you establish
an Automatic Investment Plan). Subsequent investments must be for at least $25.
All purchases must be in U.S. dollars and checks must be drawn on U.S. banks.
We consider all requests for purchases, checks, and other forms of
payments to be received when they are received in "good order". (See page .) We
won't accept third party checks for over $10,000.
To open an account by mail Send your check, made payable to TIAA-CREF
Mutual Funds, and/or application to:
First Class Mail: The TIAA-CREF Mutual Funds
c/o State Street Bank
P.O. Box 8009
Boston, MA 02266-8009
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Overnight Mail: The TIAA-CREF Mutual Funds
c/o State Street Bank
6 Brooks Drive
Braintree, MA 02184-3839
To open an account by wire Send us your application by mail, then call us
to confirm that your account has been established . Instruct your bank to wire
money to
State Street Bank
ABA Number 011000028
DDA Number 99052771
Specify on the wire:
o The TIAA-CREF Mutual Funds
o Account registration (names of registered owners), address and
Social Security Number(s) or Taxpayer Identification Number
o Indicate if this is for a new or existing account (provide
fund account number if existing)
o The fund or funds in which you want to invest, and amount per
fund to be invested
You can purchase additional shares in any of the following ways:
By Mail Send a check to either of the addresses listed above with an
investment coupon from a previous confirmation statement. If you don't have an
investment coupon, use a separate piece of paper to give us your name, address,
fund account number, and the fund or funds you want to invest in and the amount
to be invested in each fund.
By Automatic Investment Plan You can make subsequent investments
automatically by electing this service on your initial application or later upon
request.
By electing this option you authorize us to take regular, automatic
withdrawals from your bank. To begin this service, send us a voided check or
savings account investment slip. It will take us about 10 days from the time we
receive it to set up your automatic investment plan. You can make automatic
investments semi-monthly (on the 1st and 15th of each month or on the next
following business day if those days are not business days), monthly or
quarterly (on the 1st or 15th of the month). Investments must be for at least
$25 per account.
You can change the date or amount of your investment, or terminate the
Automatic Investment Plan, at any time by letter or by telephone. The change
will take effect approximately 5 business days after we receive your request.
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By Telephone Call 800 223-1200. You can make electronic withdrawals from
your designated bank account to buy additional TIAA-CREF Mutual Funds shares
over the telephone. There is a $100,000 limit on these purchases. Telephone
requests can't be modified or cancelled.
All shareholders automatically have the right to buy shares by telephone,
except for Education RA accounts. If you don't want the telephone purchase
option, you can indicate this on the application or call us at 800 223-1200 any
time after opening your account.
Over the Internet with TIAA-CREF's Inter/ACT system, you can make
electronic withdrawals from your designated bank account to buy additional
shares over the Internet. There is a $100,000 limit on these purchases.
Inter/ACT can be accessed through TIAA-CREF's homepage at www.tiaa-cref.org.
Before you can use Inter/ACT, you must enter your personally selected
Personal Identification Number (PIN) and social security number. Inter/ACT will
lead you through the transaction process, and we will use reasonable procedures
to confirm that the instructions given are genuine. All transactions over
Inter/ACT are recorded electronically. If you don't have a personally selected
PIN, call us to get one.
By wire To buy additional shares by wire, follow the instructions above
for opening an account by wire. (You do not have to send us an application
again.)
Points to remember for all purchases:
o Your investment must be for a specified dollar amount. We can't accept
purchase requests specifying a certain price, date, or number of shares;
we'll return these investments.
o We reserve the right to reject any application or investment. There may be
circumstances when we will not accept new investments in one or more of
the funds.
o If you have a securities dealer (including a mutual fund "supermarket"),
bank, or other financial institution handle your transactions, they may
charge you a fee. Contact them to find out if they impose any other
conditions, such as a higher minimum investment requirement, on your
transaction.
o If your purchase check does not clear or payment on it is stopped, or if
we do not receive good funds through electronic funds transfer, we will
treat this as a redemption of the shares purchased when your check or
electronic funds were received. You will be responsible for any resulting
loss incurred by any of the funds or Teachers Advisors. If you are already
a shareholder, we can redeem shares from any of your account(s) as
reimbursement for all losses. We also reserve the right to restrict you
from making future purchases in any of the funds. There is a $15 fee for
all returned items, including checks and electronic funds transfers.
How to Redeem Shares
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You can redeem (sell) your shares at any time. Redemptions must be for at
least $250 or the balance of your investment in a fund, if less.
Usually, we send your redemption proceeds to you on the second business
day after we receive your request, but not later than seven days afterwards,
assuming the request is in good order (see page ). If you request a redemption
shortly after a recent check or automatic investment plan purchase, your
redemption proceeds won't be paid until payment for the purchase is collected.
This can take up to ten days.
We send redemption proceeds to the shareholder of record at his/her
address or bank of record. If proceeds are to be sent to someone else, a
different address, or a different bank, we will require a letter of instruction
with signature guarantee (see page ).We can send your redemption proceeds in
several different ways: by check to the address of record; by electronic
transfer to your bank; or by wire transfer (minimum of $5,000). Before calling,
read "Points to Remember When Redeeming," below.
We can postpone payment if (a) the New York Stock Exchange is closed for
other than usual weekends or holidays, or trading on the New York Stock Exchange
is restricted; (b) an emergency exists as defined by the SEC, or the SEC
requires that trading be restricted; or (c) the SEC permits a delay for the
protection of investors.
You can redeem shares in any of the following ways:
By Mail Send your written request to either of the addresses listed in the
"How to Open an Account and Make Subsequent Investments" section. Requests must
include: account number, transaction amount (in dollars or shares), signatures
of all owners exactly as registered on the account, signature guarantees (if
required), and any other required supporting legal documentation. Once mailed to
us, your redemption request is irrevocable and cannot be modified or canceled.
By Telephone Call 800 223-1200 to redeem shares in amounts under $50,000.
Once made, your telephone request cannot be modified or canceled. Telephone
redemptions are not available for IRA accounts.
All shareholders have the telephone redemption option automatically. If
you do not want to be able to redeem by telephone, indicate this on your
application or call us any time after opening your account.
By Check If you've elected the Money Market Fund's checkwriting privilege,
you can make redemptions from the Money Market Fund by check. All registered
account owners must sign a signature card before the privilege can be exercised.
You can establish checkwriting on your account when you apply or later upon
request.
For joint accounts, we require only the signature of any one owner on a
check. You can write as many checks as you want, as long as each check is for at
least $250. We reserve the right to charge a $10 fee if you write a check for
less than $250; if there are insufficient Money Market Fund shares in your
account to cover the amount of the check; or for each check you write if you
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have already written 24 checks in one year.
You can't write a check to close your TIAA-CREF Money Market Fund account
because the value of the fund changes daily as dividends are accrued. If you
write a check to redeem shares from the Money Market Fund shortly after you have
sent us a check to purchase Money Market Fund shares, we may refuse payment on
your redemption check if your purchase check has not yet cleared and your Money
Market Fund Account does not otherwise have a sufficient balance to support the
redemption check.
By Systematic Redemption Plan You can elect this feature only from funds
with balances of at least $5,000. We'll automatically redeem enough shares in a
particular fund each month or quarter (on the 1st or 15th of the month or on the
following business day if those days are not business days) to provide you with
a check or electronic transfer to your bank. You must specify the dollar amount
(minimum $250) of the redemption and from which fund you want to redeem shares.
If you want to set up a systematic redemption plan, contact us and we'll
send you the necessary forms. All owners of an account must sign the systematic
redemption plan request. Similarly, all owners must sign any request to increase
the amount or frequency of the systematic redemptions or a request for payments
to be sent to an address other than the address of record.
A signature guarantee is required for this address change.
We can terminate the systematic redemption plan option at any time,
although we will notify you if we do. You can terminate the plan or reduce the
amount or frequency of the redemptions by writing or calling us. Requests to
establish, terminate, or change the amount or frequency of redemptions will
become effective within 5 days after we receive your instructions.
Points To Remember When Redeeming.
o We can't accept redemption requests specifying a certain price or date;
these requests will be returned.
o If you request a redemption by telephone within 30 days of changing your
address, or if you would like the proceeds sent to someone else, you must
send us your request in writing with a signature guarantee.
o For redemptions for more than $250,000, we reserve the right to give you
marketable securities instead of cash.
How To Exchange Shares
You can exchange shares in a fund for shares of any other fund at any
time. An exchange is a sale of shares from one fund and a purchase of shares in
another fund.
The minimum investment amounts that apply to purchases also apply to
exchanges. In other words, for any account, an exchange to a fund in which you
already own shares must be at
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least $25, and an exchange to a new fund must be at least $250.
Exchanges between accounts can be made only if the accounts are registered
in the same name(s), address and Social Security or Tax Identification Number.
You can make exchanges in any of the following ways:
By Mail Send a letter of instruction to either of the addresses in the
"How to Open an Account and Make Subsequent Investments" section. The letter
must include your name, address, and the funds and/or accounts you want to
exchange between.
By Telephone Call 800 223-1200. Once made, your telephone request cannot
be modified or canceled.
Over the Internet. You can exchange shares using TIAA-CREF's Inter/ACT
system, which can be accessed through TIAA-CREF's homepage at www.tiaa-cref.org.
Once made, your Inter/ACT transaction cannot be modified or cancelled.
By Systematic Exchange You can elect this feature only if the balance of
the fund from which you are transferring shares is at least $5000. We
automatically redeem shares from a specified fund and purchase shares in another
fund each month or quarter (on the 1st or 15th of the month or on the following
business day if those days are not business days). You must specify the dollar
amount and the funds involved in the exchange. An exchange to a fund in which
you already own shares must be for at least $25, and an exchange to a new fund
must be for at least $250.
If you want to set up a systematic exchange, you can contact us and we
will send you the necessary forms. All owners of an account must sign the
systematic exchange request. Similarly, all account owners must sign any request
to increase the amount or frequency of systematic exchanges. You can terminate
the plan or change the amount or frequency of the exchanges by writing or
calling us. Requests to establish, terminate, or change the amount or frequency
of exchanges will become effective within 5 days after we receive your
instructions.
Points To Remember When Exchanging
o Make sure you understand the investment objective of the fund you exchange
shares into. The exchange option is not designed to allow you to time the
market. It gives you a convenient way to adjust the balance of your
account so that it more closely matches your overall investment objectives
and risk tolerance level.
o To maintain low expense ratios and avoid disrupting the management of each
fund's portfolio, we reserve the right to suspend the exchange privilege
if you have made more than 12 exchanges within a 12-month period. We also
reserve the right to reject any exchange request and to modify or
terminate the exchange option at any time.
o An exchange is considered a sale of securities, and therefore is taxable.
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Other Investor Information
Good Order Your initial application and later requests for transactions
will not be processed until they are received in good order by our transfer
agent, Boston Financial Data Services. Good order means that your application is
properly completed or your transaction request includes your fund account
number, the amount of the transaction (in dollars or shares), signatures of all
owners exactly as registered on the account, and any other supporting legal
documentation that may be required.
Share Price If you buy shares from us directly, the share price we use
will be the NAV per share next calculated after Boston Financial Data Services
receives your application or request in good order. If you buy shares through an
intermediary, such as a securities dealer (including a mutual fund
"supermarket"), bank or investment adviser, the share price we use will be the
NAV per share next calculated after the intermediary accepts the order. If this
occurs before the New York Stock Exchange closes (usually 4:00 p.m., Eastern
Standard Time) your price will be the NAV per share for that day. If it's after
the New York Stock Exchange closes, your price will be the NAV per share for the
next business day.
Tax Identification Number You must give us your taxpayer identification
number (which, for most individuals, is your social security number) and tell us
whether or not you are subject to back-up withholding for prior under-reporting.
If you don't furnish your taxpayer identification number, redemptions or
exchanges of shares, as well as dividends and capital gains distributions, will
be subject to federal (and in a few cases state) tax withholding.
Changing Your Address To change the address on your account, please call
us or send us a written notification signed by all registered owners of your
account.
Signature Guarantee For some transaction requests (for example, when
you're redeeming shares within 30 days of changing your address, bank or bank
account or adding certain new services, such as checkwriting, to an existing
account), we require a signature guarantee of each owner of record of an
account. This requirement is designed to protect you and the TIAA-CREF Mutual
Funds from fraud, and to comply with rules on stock transfers. You can get a
signature guarantee from a bank or trust company, savings bank, savings and loan
association, or a member of a national stock exchange. A notary public can't
provide a signature guarantee. For more information about when a signature
guarantee is required, please contact us.
Transferring Shares You can transfer ownership of your account to another
person or organization or change the name on your account by sending us written
instructions. All registered owners of the account must sign the request and
provide signature guarantees. When you change the name on an account, shares in
that account are transferred to a new account.
Transfer On Death If you live in certain states, you can designate one or
more persons (beneficiaries) to whom your TIAA-CREF Mutual Funds shares can be
transferred upon death. You can set up your account with a Transfer On Death
(TOD) registration upon request. (Call us to get the necessary forms.) A TOD
registration avoids probate if the beneficiary(ies) survives all shareholders.
You maintain total control over your account during your lifetime. Currently
these states are: Alabama, Alaska, Arizona, Arkansas, California. Colorado,
Delaware, Florida, Idaho,
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Illinois, Indiana, Kansas, Kentucky, Maine, Maryland, Michigan, Minnesota,
Missouri, Montana, Nebraska, New Jersey, New Mexico, North Dakota, Ohio,
Oklahoma, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Utah, Virginia,
Washington, West Virginia, Wisconsin and Wyoming.
Telephone and Inter/ACT Transactions. The funds aren't liable for losses
from unauthorized telephone and Inter/ACT transactions so long as we follow
reasonable procedures designed to verify the identity of the person effecting
the transaction. We therefore take the following precautions to ensure your
instructions are genuine: we require the use of personal identification numbers,
codes, and other procedures designed to reasonably confirm that instructions
given by telephone or through Inter/ACT are genuine. We also tape record
telephone instructions and provide written confirmations. We accept all
telephone instructions we reasonably believe are genuine and accurate. However,
you should verify the accuracy of your confirmation statements immediately after
you receive them.
If you do not want to be able to effect transactions over the telephone,
call us for instructions.
Electronic Prospectuses
If you received this prospectus electronically and would like a paper
copy, please contact us and we will send one to you.
Financial Highlights
The Financial Highlights presented below show the financial performance of
the funds for the period from July 17, 1997 (when the funds began operations) to
December 31, 1997, and for the year ended December 31, 1998. They have been
audited by Ernst & Young, LLP, independent auditors. Their report appears in
TIAA-CREF Mutual Funds' Annual Report. The Annual Report contains additional
information about the funds. It is available without charge upon request.
31
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
TIAA-CREF MUTUAL FUNDS
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------------
International Growth Growth &
Equity Equity Income
Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA Year July 17, Year Ended July 17, Year Ended July 17,
Ended 1997 (date December 1997 (date December 1997 (date
December operations 31, 1998 operations 31, 1998 operations
31, 1998 began) to began) to began) to
December December December
31, 1997 31, 1997 31, 1997.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses)
from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations
- ------------------------------------------------------------------------------------------------------------------------------------
Excess distributions from:
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (losses)
from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets after
expense reductions
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
====================================================================================================================================
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Managed Allocation Bond Money
Fund Plus Market
Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA Year Ended July 17, Year Ended July 17, Year July 17,
December 1997 (date December 1997 (date Ended 1997 (date
31, 1998 operations 31, 1998 operations December operations
began) to began) to 31, 1998 began) to
December December December
31, 1997. 31, 1997. 31, 1997.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses)
from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment
operations
- ------------------------------------------------------------------------------------------------------------------------------------
Excess distributions from:
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (losses)
from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets after
expense reductions
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate
====================================================================================================================================
</TABLE>
32 & 33
<PAGE>
[BACK COVER]
For more information about TIAA-CREF Mutual Funds
The following documents contain more information about the funds and are
available free upon request:
Statement of Additional Information (SAI). The SAI contains more information
about all aspects of the funds. A current SAI has been filed with the Securities
and Exchange Commission and is incorporated in this prospectus by reference.
Annual and Semi-Annual Reports. The funds' annual and semi-annual reports
provide additional information about the funds' investments. The annual report
for the fiscal year ended December 31, 1998 contains a discussion of the market
conditions and investment strategies that significantly affected each fund's
performance during the last fiscal year.
Requesting Documents. You can request a copy of the SAI or these reports, or
contact us for any other purpose, in any of the following ways:
By telephone: Call 800 223-1200
In writing: TIAA-CREF Mutual Funds
c/o State Street Bank
P.O. Box 8009
Boston, MA 02266-8009
Over the Internet: www.tiaa-cref.org/mfunds.
Information about TIAA-CREF Mutual Funds (including the SAI) can be reviewed and
copied at the Securities and Exchange Commission's (SEC) public reference room
(1-800-SEC-0339) in Washington, D.C. The information is also available through
the SEC's internet website at www.sec.gov. Copies of the information can also be
obtained, upon payment of a duplicating fee, by writing the SEC's Public
Reference Section, Washington, D.C. 20549-6009.
To lower costs and eliminate duplicate documents sent to your home, we may, if
the SEC allows, begin mailing only one copy of the TIAA-CREF Mutual Funds
prospectus, prospectus supplements, annual and semi-annual reports, or any other
required documents, to your household, even if more than one shareholder lives
there. If you would prefer to continue receiving your own copy of any of these
documents, you may call us toll-free at 800 223-1200 or write us.
34
<PAGE>
Statement of Additional Information
This Statement of Additional Information (SAI) tells you about investing
in the TIAA-CREF Mutual Funds and contains information that you should consider
before investing. It is not a prospectus, although it should be read carefully
in conjunction with the TIAA-CREF Mutual Funds' prospectus dated April 1, 1999
(the Prospectus), which may be obtained by writing us at TIAA-CREF Mutual Funds,
c/o State Street Bank, PO Box 9081, Boston, MA 02266 or by calling 800 223-1200.
Terms used in the Prospectus are incorporated in this Statement.
The date of this SAI is , 1999.
<PAGE>
Table of Contents
Investment Objectives, Policies, and Restrictions.......................
Fundamental Restrictions..........................................
Investment Policies and Risk Considerations.......................
Portfolio Turnover................................................
Management of the TIAA-CREF Mutual Funds................................
Trustees and Officers of the TIAA-CREF Mutual Funds...............
Compensation of Trustees..........................................
Trustee and Officer Compensation..................................
Control Persons.........................................................
Investment Advisory and Other Services..................................
About the TIAA-CREF Mutual Funds and the Shares.........................
Indemnification of Shareholders...................................
Indemnification of Trustees.......................................
Limitation of TIAA-CREF Mutual Funds Liability....................
Shareholder Meetings and Voting Rights............................
Additional Portfolios.............................................
Dividends and Distributions.......................................
Pricing of Shares.......................................................
Investments for Which Market Quotations Are Readily Available.....
Foreign Investments...............................................
Debt Securities...................................................
Options and Futures...............................................
Investments for Which Market Quotations Are Not Readily Available.
Special Valuation Procedures for the Money Market Fund............
Tax Status..............................................................
Brokerage Allocation....................................................
Underwriters............................................................
Calculation of Performance Data.........................................
Total Return Calculations.........................................
Yield Calculations................................................
Total Return......................................................
Performance Comparisons...........................................
Illustrating Compounding..........................................
Net Asset Value...................................................
Moving Averages...................................................
<PAGE>
Voting Rights...........................................................
Legal Matters...........................................................
Experts.................................................................
Additional Considerations...............................................
Financial Statements....................................................
3
<PAGE>
Investment Objectives, Policies, and Restrictions
The following information is intended to supplement the descriptions of
the investment objective of each of the six investment funds in the TIAA-CREF
Mutual Funds' Prospectus. Under the Investment Company Act of 1940 (the 1940
Act), any fundamental policy of a fund may not be changed without the vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
that fund. However, the funds' investment objectives, policies and strategies
described in the prospectus, as well as the investment restrictions contained in
"Investment Policies and Risk Considerations" below, may be changed by the
TIAA-CREF Mutual Funds' Board of Trustees at any time. Each investment fund
other than the Managed Allocation Fund will operate as a "diversified company"
within the meaning of the 1940 Act.
Unless stated otherwise, each of the following investment policies and
risk considerations apply to each fund.
Fundamental Policies
The following restrictions are fundamental policies of each fund:
1. The fund will not issue senior securities except as SEC regulations
permit;
2. The fund will not borrow money, except: (a) each fund may purchase
securities on margin, as described in restriction 7 below; and (b)
from banks (only in amounts not in excess of 33 1/3 percent of the
market value of that fund's assets at the time of borrowing), and,
from other sources, for temporary purposes (only in amounts not
exceeding 5 percent of that fund's total assets taken at market
value at the time of borrowing). Money may be temporarily obtained
through bank borrowing, rather than through the sale of portfolio
securities, when such borrowing appears more attractive for a fund;
3. The fund will not underwrite the securities of other companies,
except to the extent that it may be deemed an underwriter in
connection with the disposition of securities from its portfolio;
4. The fund will not purchase real estate or mortgages directly;
5. The fund will not purchase commodities or commodities contracts,
except to the extent futures are purchased as described herein;
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<PAGE>
6. The fund will not make loans, except: (a) that a fund may make loans
of portfolio securities not exceeding 33 1/3 percent of the value of
its total assets, which are collateralized by either cash, United
States Government securities, or other means permitted by applicable
law, equal to at least 100 percent of the market value of the loaned
securities, as reviewed daily; (b) loans through entry into
repurchase agreements; (c) privately-placed debt securities may be
purchased; or (d) participation interests in loans, and similar
investments, may be purchased;
7. The fund will not purchase any security on margin except that the
fund may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities); and
The following restriction is a fundamental policy of each fund other than
the Managed Allocation Fund:
8. The fund will not, with respect to at least 75 percent of the value
of its total assets, invest more than 5 percent of its total assets
in the securities of any one issuer, other than securities issued or
guaranteed by the United States Government, its agencies or
instrumentalities, or hold more than 10 percent of the outstanding
voting securities of any one issuer.
The following restriction is a fundamental policy of each fund other than
the Managed Allocation Fund and the Money Market Fund.
9. The fund will not invest in an industry if after giving effect to
that investment that fund's holding in that industry would exceed 25
percent of its total assets.
The following restriction is a fundamental policy of the Money Market
Fund:
10. The fund may invest more than 25 percent of its assets in
obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities; the fund will not otherwise invest in
an industry if after giving effect to that investment the fund's
holding in that industry would exceed 25 percent of its total
assets.
The following restrictions are fundamental policies of the Managed
Allocation Fund:
11. The Managed Allocation Fund will not invest in securities other than
securities of other registered investment companies or registered
unit investment trusts that are part of the TIAA-CREF Mutual Funds,
government securities, or short-term securities.
2
<PAGE>
12. The Managed Allocation Fund will concentrate in the mutual fund
industry. Accordingly, it may invest up to 100 percent of its assets
in securities issued by mutual funds and other investment companies.
The following restrictions are non-fundamental policies of the funds.
These restrictions may be changed without the approval of the shareholders in
the affected fund.
No fund other than the Managed Allocation Fund will:
1. Invest more than 5 percent of its assets in the securities of any
single investment company or more than 10 percent of its assets in
the securities of other investment companies in the aggregate; or
2. Hold more than 3 percent of the total outstanding voting stock of
any single investment company.
Investment Policies and Risk Considerations
Non-equity Investments of the Equity Funds. The equity funds can, in
addition to stocks, hold other types of securities with equity characteristics,
such as convertible bonds, preferred stock, warrants and depository receipts or
rights. Pending more permanent investments or to use cash balances effectively,
these funds can hold the same types of money market instruments the Money Market
Fund invests in (see prospectus, page ), as well as other short-term
instruments. These other instruments are the same type of instruments the Money
Market Fund holds, but they have longer maturities than the instruments allowed
in the Money Market Fund, or else don't meet the requirements for "First Tier
Securities" (see Prospectus, page __).
When market conditions warrant, the equity funds can invest directly in
debt securities similar to those in the first segment of the Bond Plus Fund (see
prospectus page). The equity funds can also hold debt securities that they
acquire because of mergers, recapitalizations or otherwise.
Borrowing. If a fund borrows money, it could leverage its portfolio by
keeping securities it might otherwise have had to sell. Leveraging exposes a
fund to special risks, including greater fluctuations in net asset value in
response to market changes.
Illiquid Securities. Each fund can invest up to 15 percent of its assets
(10 percent for the Money Market Fund) in investments that may not be readily
marketable. It may be difficult to sell these investments for their fair market
value.
3
<PAGE>
Preferred Stock. The funds can invest in preferred stock consistent with
their investment objectives.
Options and Futures. Each of the funds may engage in options and futures
strategies to the extent permitted by the SEC and Commodity Futures Trading
Commission ("CFTC"). We do not intend for any fund to use options and futures
strategies in a speculative manner but rather we would use them primarily as
hedging techniques or for cash management purposes.
Although the Managed Allocation Fund cannot directly invest in options and
futures, it may, through investments in other funds, indirectly make such
investments.
Option-related activities could include: (1) selling of covered call
option contracts, and the purchase of call option contracts for the purpose of a
closing purchase transaction; (2) buying covered put option contracts, and
selling put option contracts to close out a position acquired through the
purchase of such options; and (3) selling call option contracts or buying put
option contracts on groups of securities and on futures on groups of securities
and buying similar call option contracts or selling put option contracts to
close out a position acquired through a sale of such options. This list of
options-related activities is not intended to be exclusive, and each fund may
engage in other types of options transactions consistent with its investment
objective and policies and applicable law.
A call option is a short-term contract (generally for nine months or less)
which gives the purchaser of the option the right to purchase the underlying
security at a fixed exercise price at any time (American style) or at a set time
(European style) prior to the expiration of the option regardless of the market
price of the security during the option period. As consideration for the call
option, the purchaser pays the seller a premium, which the seller retains
whether or not the option is exercised. The seller of a call option has the
obligation, upon the exercise of the option by the purchaser, to sell the
underlying security at the exercise price at any time during the option period.
Selling a call option would benefit the seller if, over the option period, the
underlying security declines in value or does not appreciate above the aggregate
of the exercise price and the premium. However, the seller risks an "opportunity
loss" of profits if the underlying security appreciates above the aggregate
value of the exercise price and the premium.
A fund may close out a position acquired through selling a call option by
buying a call option on the same security with the same exercise price and
expiration date as the call option that it had previously sold on that security.
Depending on the premium for the call option purchased by the fund, the fund
will realize a profit or loss on the transaction.
A put option is a similar short-term contract that gives the purchaser of
the option the right to sell the underlying security at a fixed exercise price
prior to the expiration of the option regardless of the market price of the
security during the option period. As
4
<PAGE>
consideration for the put option the purchaser pays the seller a premium, which
the seller retains whether or not the option is exercised. The seller of a put
option has the obligation, upon the exercise of the option by the purchaser, to
purchase the underlying security at the exercise price during the option period.
The buying of a covered put contract limits the downside exposure for the
investment in the underlying security to the combination of the exercise price
less the premium paid. The risk of purchasing a put is that the market price of
the underlying stock prevailing on the expiration date may be above the option's
exercise price. In that case the option would expire worthless and the entire
premium would be lost.
A fund may close out a position acquired through buying a put option by
selling a put option on the same security with the same exercise price and
expiration date as the put option which it had previously bought on the
security. Depending on the premium of the put option sold by the fund, the fund
would realize a profit or loss on the transaction.
In addition to options (both calls and puts) on individual securities,
there are also options on groups of securities, such as the Standard & Poor's
100 Index traded on the Chicago Board Options Exchange. There are also options
on futures of groups of securities such as the Standard & Poor's 500 Stock Index
and the New York Stock Exchange Composite Index. The selling of calls can be
used in anticipation of, or in, a general market or market sector decline that
may adversely affect the market value of a fund's portfolio of securities. To
the extent that a fund's portfolio of securities changes in value in correlation
with a given stock index, the sale of call options on the futures of that index
would substantially reduce the risk to the portfolio of a market decline, and,
by so doing, provides an alternative to the liquidation of securities positions
in the portfolio with resultant transaction costs. A risk in all options,
particularly the relatively new options on groups of securities and on futures
on groups of securities, is a possible lack of liquidity. This will be a major
consideration before a fund deals in any option.
There is another risk in connection with selling a call option on a group
of securities or on the futures of groups of securities. This arises because of
the imperfect correlation between movements in the price of the call option on a
particular group of securities and the price of the underlying securities held
in the portfolio. Unlike a covered call on an individual security, where a large
movement on the upside for the call option will be offset by a similar move on
the underlying stock, a move in the price of a call option on a group of
securities may not be offset by a similar move in the price of securities held
due to the difference in the composition of the particular group and the
portfolio itself.
To the extent permitted by applicable regulatory authorities, each fund
may purchase and sell futures contracts on securities or other instruments, or
on groups or indexes of securities or other instruments. The purpose of hedging
techniques using financial futures is to protect the principal value of a fund
against adverse changes in the market value of securities or instruments in its
portfolio, and to obtain better returns on future investments than actually may
be available at the future time. Since these are hedging techniques, the
5
<PAGE>
gains or losses on the futures contract normally will be offset by losses or
gains respectively on the hedged investment. Futures contracts also may be
offset prior to the future date by executing an opposite futures contract
transaction.
A futures contract on an investment is a binding contractual commitment
which, if held to maturity, will result in an obligation to make or accept
delivery, during a particular future month, of the securities or instrument
underlying the contract. By purchasing a futures contract -- assuming a "long"
position -- a fund legally will obligate itself to accept the future delivery of
the underlying security or instrument and pay the agreed price. By selling a
futures contract -- assuming a "short" position -- it legally will obligate
itself to make the future delivery of the security or instrument against payment
of the agreed price.
Positions taken in the futures markets are not normally held to maturity,
but are instead liquidated through offsetting transactions which may result in a
profit or a loss. While futures positions taken by a fund usually will be
liquidated in this manner, a fund may instead make or take delivery of the
underlying securities or instruments whenever it appears economically
advantageous to the fund to do so. A clearing corporation associated with the
exchange on which futures are traded assumes responsibility for closing out
positions and guarantees that the sale and purchase obligations will be
performed with regard to all positions that remain open at the termination of
the contract.
A stock index futures contract, unlike a contract on a specific security,
does not provide for the physical delivery of securities, but merely provides
for profits and losses resulting from changes in the market value of the
contract to be credited or debited at the close of each trading day to the
respective accounts of the parties to the contract. On the contract's expiration
date, a final cash settlement occurs and the futures positions are closed out.
Changes in the market value of a particular stock index futures contract reflect
changes in the specified index of equity securities on which the future is
based.
Stock index futures may be used to hedge the equity investments of each
fund with regard to market (systematic) risk (involving the market's assessment
of overall economic prospects), as distinguished from stock specific risk
(involving the market's evaluation of the merits of the issuer of a particular
security). By establishing an appropriate "short" position in stock index
futures, a fund may seek to protect the value of its securities portfolio
against an overall decline in the market for equity securities. Alternatively,
in anticipation of a generally rising market, a fund can seek to avoid losing
the benefit of apparently low current prices by establishing a "long" position
in stock index futures and later liquidating that position as particular equity
securities are in fact acquired. To the extent that these hedging strategies are
successful, a fund will be affected to a lesser degree by adverse overall market
price movements, unrelated to the merits of specific portfolio equity
securities, than would otherwise be the case.
6
<PAGE>
Unlike the purchase or sale of a security, no price is paid or received by
a fund upon the purchase or sale of a futures contract. Initially, the fund will
be required to deposit in a custodial account an amount of cash, United States
Treasury securities, or other permissible assets equal to approximately 5
percent of the contract amount. This amount is known as "initial margin." The
nature of initial margin in futures transactions is different from that of
margin in security transactions in that futures contract margin does not involve
the borrowing of funds by the customer to finance the transactions. Rather, the
initial margin is in the nature of a performance bond or good faith deposit on
the contract which is returned to the fund upon termination of the futures
contract assuming all contractual obligations have been satisfied. Subsequent
payments to and from the broker, called "variation margin," will be made on a
daily basis as the price of the underlying stock index fluctuates making the
long and short positions in the futures contract more or less valuable, a
process known as "marking to the market." For example, when a fund has purchased
a stock index futures contract and the price of the underlying stock index has
risen, that position will have increased in value, and the fund will receive
from the broker a variation margin payment equal to that increase in value.
Conversely, where a fund has purchased a stock index futures contract and the
price of the underlying stock index has declined, the position would be less
valuable and the fund would be required to make a variation margin payment to
the broker. At any time prior to expiration of the futures contract, the fund
may elect to close the position by taking an opposite position which will
operate to terminate the fund's position in the futures contract. A final
determination of variation margin is then made, additional cash is required to
be paid by or released to the fund, and the fund realizes a loss or a gain.
There are several risks in connection with the use of a futures contract
as a hedging device. One risk arises because of the imperfect correlation
between movements in the prices of the futures contracts and movements in the
securities or instruments which are the subject of the hedge. Each fund will
attempt to reduce this risk by engaging in futures transactions, to the extent
possible, where, in our judgment, there is a significant correlation between
changes in the prices of the futures contracts and the prices of each fund's
portfolio securities or instruments sought to be hedged.
Successful use of futures contracts for hedging purposes also is subject
to the user's ability to predict correctly movements in the direction of the
market. For example, it is possible that, where a fund has sold futures to hedge
its portfolio against declines in the market, the index on which the futures are
written may advance and the values of securities or instruments held in the
fund's portfolio may decline. If this occurred, the fund would lose money on the
futures and also experience a decline in value in its portfolio investments.
However, we believe that over time the value of a fund's portfolio will tend to
move in the same direction as the market indices which are intended to correlate
to the price movements of the portfolio securities or instruments sought to be
hedged. It also is possible that, for example, if a fund has hedged against the
possibility of the decline in the market adversely affecting stocks held in its
portfolio and stock prices increased instead, the fund will lose part or all of
the benefit of increased value of those stocks that it has hedged because it
will have
7
<PAGE>
offsetting losses in its futures positions. In addition, in such situations, if
the fund has insufficient cash, it may have to sell securities or instruments to
meet daily variation margin requirements. Such sales may be, but will not
necessarily be, at increased prices which reflect the rising market. The fund
may have to sell securities or instruments at a time when it may be
disadvantageous to do so.
In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between movements in the futures contracts and the
portion of the portfolio being hedged, the prices of futures contracts may not
correlate perfectly with movements in the underlying security or instrument due
to certain market distortions. First, all transactions in the futures market are
subject to margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through offsetting transactions which could distort the normal relationship
between the index and futures markets. Second, the margin requirements in the
futures market are less onerous than margin requirements in the securities
market, and as a result the futures market may attract more speculators than the
securities market does. Increased participation by speculators in the futures
market also may cause temporary price distortions. Due to the possibility of
price distortion in the futures market and also because of the imperfect
correlation between movements in the futures contracts and the portion of the
portfolio being hedged, even a correct forecast of general market trends by
Teachers Advisors, Inc. ("Advisors"), the investment advisor for TIAA-CREF
Mutual Funds, still may not result in a successful hedging transaction over a
very short time period.
Each fund may also use futures contracts and options on futures contracts
to manage its cash flow more effectively. To the extent that a fund enters into
non-hedging positions, it will do so only in accordance with certain CFTC
exemptive provisions. Thus, pursuant to CFTC Rule 4.5, the aggregate initial
margin and premiums required to establish non-hedging positions in commodity
futures or commodity options contracts may not exceed 5 percent of the
liquidation value of the fund's portfolio, after-taking into account unrealized
profits and unrealized losses on any such contracts it has entered into
(provided that the in-the-money amount of an option that is in-the-money when
purchased may be excluded in computing such 5 percent).
Options and futures transactions may increase a fund's transaction costs
and portfolio turnover rate and will be initiated only when consistent with its
investment objectives.
Investment Companies. Each fund other than the Managed Allocation Fund can
invest up to 5 percent of its assets in any single investment company and up to
10 percent of its assets in all other investment companies in the aggregate.
However, no fund other than the Managed Allocation Fund can hold more than 3
percent of the total outstanding voting stock of any single investment company.
The Managed Allocation Fund, however, can invest all of its assets in the
securities of the other funds that are part of the TIAA-CREF Mutual Funds.
8
<PAGE>
Firm Commitment Agreements and Purchase of "When-Issued" Securities. Each
fund can enter into firm commitment agreements for the purchase of securities on
a specified future date. When a fund enters into a firm commitment agreement,
liability for the purchase price -- and the rights and risks of ownership of the
securities -- accrues to the fund at the time it becomes obligated to purchase
such securities, although delivery and payment occur at a later date.
Accordingly, if the market price of the security should decline, the effect of
the agreement would be to obligate the fund to purchase the security at a price
above the current market price on the date of delivery and payment. During the
time the fund is obligated to purchase such securities, it will be required to
segregate assets. See below, "Segregated Accounts."
Pass-Through Securities. The funds may invest in mortgage pass-through
securities such as GNMA certificates or FNMA and FHLMC mortgage-backed
obligations, or modified pass-through securities such as collateralized mortgage
obligations issued by various financial institutions. In connection with these
investments, early repayment of principal arising from prepayments of principal
on the underlying mortgage loans due to the sale of the underlying property, the
refinancing of the loan, or foreclosure may expose a fund to a lower rate of
return upon reinvestment of the principal. Prepayment rates vary widely and may
be affected by changes in market interest rates. In periods of falling interest
rates, the rate of prepayment tends to increase, thereby shortening the actual
average life of the mortgage-related security. Conversely, when interest rates
are rising, the rate of prepayment tends to decrease, thereby lengthening the
actual average life of the mortgage-related security. Accordingly, it is not
possible to accurately predict the average life of a particular pool.
Reinvestment of prepayments may occur at higher or lower rates than the original
yield on the certificates. Therefore, the actual maturity and realized yield on
pass-through or modified pass-through mortgage-related securities will vary
based upon the prepayment experience of the underlying pool of mortgages. For
purposes of calculating the average life of the assets of the relevant fund, the
maturity of each of these securities will be the average life of such securities
based on the most recent or estimated annual prepayment rate.
Lending of Securities. Subject to investment restriction 6(a) on page 2
(relating to loans of portfolio securities), each fund may lend its securities
to brokers and dealers that are not affiliated with TIAA, are registered with
the SEC and are members of the NASD, and also to certain other financial
institutions. All loans will be fully collateralized. In connection with the
lending of its securities, a fund will receive as collateral cash, securities
issued or guaranteed by the United States Government (i.e., Treasury
securities), or other collateral permitted by applicable law, which at all times
while the loan is outstanding will be maintained in amounts equal to at least
102 percent of the current market value of the loaned securities, or such lesser
percentage as may be permitted by the Securities and Exchange Commission (SEC)
(not to fall below 100 percent of the market value of the loaned securities), as
reviewed daily. By lending its securities, a fund will receive amounts equal to
the interest or dividends paid on the securities loaned and in addition will
expect to receive a portion of the income generated by the short-term investment
of cash received as
9
<PAGE>
collateral or, alternatively, where securities or a letter of credit are used as
collateral, a lending fee paid directly to the fund by the borrower of the
securities. Such loans will be terminable by the fund at any time and will not
be made to affiliates of TIAA. The fund may terminate a loan of securities in
order to regain record ownership of, and to exercise beneficial rights related
to, the loaned securities, including but not necessarily limited to voting or
subscription rights, and may, in the exercise of its fiduciary duties, terminate
a loan in the event that a vote of holders of those securities is required on a
material matter. The fund may pay reasonable fees to persons unaffiliated with
the fund for services or for arranging such loans. Loans of securities will be
made only to firms deemed creditworthy. As with any extension of credit,
however, there are risks of delay in recovering the loaned securities, should
the borrower of securities default, become the subject of bankruptcy
proceedings, or otherwise be unable to fulfill its obligations or fail
financially.
Repurchase Agreements. Repurchase agreements have the characteristics of
loans, and will be fully collateralized (either with physical securities or
evidence of book entry transfer to the account of the custodian bank) at all
times. During the term of the repurchase agreement, the fund entering into the
agreement retains the security subject to the repurchase agreement as collateral
securing the seller's repurchase obligation, continually monitors the market
value of the security subject to the agreement, and requires the fund's seller
to deposit with the fund additional collateral equal to any amount by which the
market value of the security subject to the repurchase agreement falls below the
resale amount provided under the repurchase agreement. Each fund will enter into
repurchase agreements only with member banks of the Federal Reserve System, and
with primary dealers in United States Government securities or their
wholly-owned subsidiaries whose creditworthiness has been reviewed and found
satisfactory by Advisors and who have, therefore, been determined to present
minimal credit risk.
Securities underlying repurchase agreements will be limited to
certificates of deposit, commercial paper, bankers' acceptances, or obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities, in which the fund entering into the agreement may otherwise
invest.
If a seller of a repurchase agreement defaults and does not repurchase the
security subject to the agreement, the fund entering into the agreement would
look to the collateral security underlying the seller's repurchase agreement,
including the securities subject to the repurchase agreement, for satisfaction
of the seller's obligation to the fund; in such event the fund might incur
disposition costs in liquidating the collateral and might suffer a loss if the
value of the collateral declines. In addition, if bankruptcy proceedings are
instituted against a seller of a repurchase agreement, realization upon the
collateral may be delayed or limited.
Swap Transactions. Each fund may, to the extent permitted by the SEC,
enter into privately negotiated "swap" transactions with other financial
institutions in order to take advantage of investment opportunities generally
not available in public markets. In general,
10
<PAGE>
these transactions involve "swapping" a return based on certain securities,
instruments, or financial indices with another party, such as a commercial bank,
in exchange for a return based on different securities, instruments, or
financial indices.
By entering into a swap transaction, a fund may be able to protect the
value of a portion of its portfolio against declines in market value. Each fund
may also enter into swap transactions to facilitate implementation of allocation
strategies between different market segments or countries or to take advantage
of market opportunities which may arise from time to time. A fund may be able to
enhance its overall performance if the return offered by the other party to the
swap transaction exceeds the return swapped by the fund. However, there can be
no assurance that the return a fund receives from the counterparty to the swap
transaction will exceed the return it swaps to that party.
While a fund will only enter into swap transactions with counterparties it
considers creditworthy (and will monitor the creditworthiness of parties with
which it enters into swap transactions), a risk inherent in swap transactions is
that the other party to the transaction may default on its obligations under the
swap agreement. If the other party to the swap transaction defaults on its
obligations, the fund entering into the agreement would be limited to the
agreement's contractual remedies. There can be no assurance that a fund will
succeed when pursuing its contractual remedies. To minimize a fund's exposure in
the event of default, it will usually enter into swap transactions on a net
basis (i.e., the parties to the transaction will net the payments payable to
each other before such payments are made). When a fund enters into swap
transactions on a net basis, the net amount of the excess, if any, of the fund's
obligations over its entitlements with respect to each such swap agreement will
be accrued on a daily basis and an amount of liquid assets having an aggregate
market value at least equal to the accrued excess will be segregated by the
fund's custodian. To the extent a fund enters into swap transactions other than
on a net basis, the amount segregated will be the full amount of the fund's
obligations, if any, with respect to each such swap agreement, accrued on a
daily basis. See "Segregated Accounts," below.
Swap agreements may be considered illiquid by the SEC staff and subject to
the limitations on illiquid investments. See the Prospectus for more
information.
To the extent that there is an imperfect correlation between the return a
fund is obligated to swap and the securities or instruments representing such
return, the value of the swap transaction may be adversely affected. No fund
therefore will enter into a swap transaction unless it owns or has the right to
acquire the securities or instruments representative of the return it is
obligated to swap with the counterparty to the swap transaction. It is not the
intention of any fund to engage in swap transactions in a speculative manner but
rather primarily to hedge or manage the risks associated with assets held in, or
to facilitate the implementation of portfolio strategies of purchasing and
selling assets for, the fund.
11
<PAGE>
Segregated Accounts. In connection with when-issued securities, firm
commitment agreements, and certain other transactions in which a fund incurs an
obligation to make payments in the future, a fund may be required to segregate
assets with its custodian bank in amounts sufficient to settle the transaction.
To the extent required, such segregated assets can consist of liquid assets,
including equity or other securities, or other instruments such as cash, United
States Government securities or other securities as may be permitted by law.
Currency Transactions. The value of a fund's assets as measured in United
States dollars may be affected favorably or unfavorably by changes in foreign
currency exchange rates and exchange control regulations, and the fund may incur
costs in connection with conversions between various currencies. To minimize the
impact of such factors on net asset values, the fund may engage in foreign
currency transactions in connection with their investments in foreign
securities. The funds will not speculate in foreign currency exchange, and will
enter into foreign currency transactions only to "hedge" the currency risk
associated with investing in foreign securities. Although such transactions tend
to minimize the risk of loss due to a decline in the value of the hedged
currency, they also may limit any potential gain which might result should the
value of such currency increase.
The funds will conduct their currency exchange transactions either on a
spot (i.e., cash) basis at the rate prevailing in the currency exchange market,
or through forward contracts to purchase or sell foreign currencies. A forward
currency contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are entered into with large commercial banks or other currency
traders who are participants in the interbank market.
By entering into a forward contract for the purchase or sale of foreign
currency involved in underlying security transactions, a fund is able to protect
itself against possible loss between trade and settlement dates for that
purchase or sale resulting from an adverse change in the relationship between
the U.S. dollar and such foreign currency. This practice is sometimes referred
to as "transaction hedging." In addition, when it appears that a particular
foreign currency may suffer a substantial decline against the U.S. dollar, a
fund may enter into a forward contract to sell an amount of foreign currency
approximating the value of some or all of its portfolio securities denominated
in such foreign currency. This practice is sometimes referred to as "portfolio
hedging." Similarly, when it appears that the U.S. dollar may suffer a
substantial decline against a foreign currency, a fund may enter into a forward
contract to buy that foreign currency for a fixed dollar amount.
The funds may also hedge their foreign currency exchange rate risk by
engaging in currency financial futures, options and "cross-hedge" transactions.
In "cross-hedge" transactions, a fund holding securities denominated in one
foreign currency will enter into a forward currency contract to buy or sell a
different foreign currency (one that generally tracks the currency being hedged
with regard to price movements). Such cross-hedges are
12
<PAGE>
expected to help protect a fund against an increase or decrease in the value of
the U.S. dollar against certain foreign currencies.
The funds may hold a portion of their respective assets in bank deposits
denominated in foreign currencies, so as to facilitate investment in foreign
securities as well as protect against currency fluctuations and the need to
convert such assets into U.S. dollars (thereby also reducing transaction costs).
To the extent these monies are converted back into U.S. dollars, the value of
the assets so maintained will be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations.
The forecasting of short-term currency market movement is extremely
difficult and whether a short-term hedging strategy will be successful is highly
uncertain. Moreover, it is impossible to forecast with absolute precision the
market value of portfolio securities at the expiration of a foreign currency
forward contract. Accordingly, a fund may be required to buy or sell additional
currency on the spot market (and bear the expense of such transaction) if its
predictions regarding the movement of foreign currency or securities markets
prove inaccurate. In addition, the use of cross-hedging transactions may involve
special risks, and may leave a fund in a less advantageous position than if such
a hedge had not been established. Because foreign currency forward contracts are
privately negotiated transactions, there can be no assurance that a fund will
have flexibility to roll-over the foreign currency forward contract upon its
expiration if it desires to do so. Additionally, there can be no assurance that
the other party to the contract will perform its obligations thereunder.
There is no express limitation on the percentage of a fund's assets that
may be committed to foreign currency exchange contracts. A fund will not enter
into foreign currency forward contracts or maintain a net exposure in such
contracts where that fund would be obligated to deliver an amount of foreign
currency in excess of the value of that fund's portfolio securities or other
assets denominated in that currency or, in the case of a cross-hedge
transaction, denominated in a currency or currencies that fund's investment
adviser believes will correlate closely to the currency's price movements. The
funds generally will not enter into forward contracts with terms longer than one
year.
Foreign Investments As described more fully in the Prospectus, certain funds may
invest in foreign securities, including those in emerging markets. In addition
to the general risk factors discussed in the Prospectus, there are a number of
country-or region-specific risks and other considerations that may affect these
investments.
Investment in Europe. The total European market (consisting of the European
Union, the European Free Trade Association and Eastern European countries)
contains over 450 million consumers, a market larger than either the United
States or Japan. European business compete both intra-regionally and globally in
a wide range of industries, and recent political and economic changes throughout
Europe are likely further to expand the role of
13
<PAGE>
Europe in the global economy. As a result, a great deal of interest and activity
has been generated aimed at understanding and benefiting from the "new" Europe
that may result. The incipient aspects of major developments in Europe as well
as other considerations means that there can be no guarantee that outcomes will
be as anticipated or will have results that investors would regard as favorable.
The European Union. The European Union ("EU") consists of Austria,
Belgium,Denmark, Finland,France,Germany,Greece,Ireland, Italy, Luxembourg,
Netherlands, Portugal, Spain, Sweden, and the United Kingdom (the "EU Nations"),
with a total population exceeding 370 million. The EU Nations have undertaken to
establish, among themselves, a single market that is largely free of internal
barriers and hindrances to the free movement of goods, persons, services and
capital. Although it is difficult to predict when this goal will be fully
realized, macro and micro-economic adjustments already in train are indicative
of significant increases in efficiency and the ability of the EU Nations to
compete globally by simplifying product distribution networks, promoting
economies of scale, and increasing labor mobility, among other effects. The
establishment of the eleven country European Monetary Union, a subset of the
European Union countries, with its own central bank, the European Central Bank;
and its own currency, the Euro; and a single interest rate structure represents
a new economic entity, the Euro-area. While authority for monetary policy thus
shifts from national hands to an independent supranational body, sovereignty
elsewhere remains at the national level. Uncertainties with regard to balancing
of monetary policy against national fiscal and other political issues and their
extensive ramifications represent important risk considerations for investors in
these countries.
Investment in the Pacific Basin. The economies of the Pacific Basin vary widely
in their stages of economic development. Some (such as Japan, Australia,
Singapore, and Hong Kong) are considered advanced by Western standards; others
(such as Thailand, Indonesia, and Malaysia are considered "emerging" -- rapidly
shifting from natural resource and agriculture based systems to more
technologically advanced systems oriented toward manufacturing and services. The
major reform of China's economy and polity continues to be an important stimulus
to economic growth internally, and, through trade, across the region.
Intra-regional trade has become increasingly important to a number of these
economies. Japan, the second largest economy in the world, is the dominant
economy in the Pacific Basin, with one of the highest per capita incomes in the
world. Its extensive trade relationships also contribute to expectations for
regional and global economic growth. Economic growth has historically been
relatively strong in the region, but recent economic turmoil among the emerging
economies, and unmitigated recessionary impulses in Japan in the recent past
have raised important questions with regard to prospective longer-term outcomes.
Potential policy miscalculations or other events could pose important risks to
equity investors in any of these economies.
14
<PAGE>
Investment in Canada. Canada, a country rich in natural resources and a leading
industrial country of the world, is by far the most important trading partner of
the United States. The U.S. and Canada have entered into the U.S.-Canada Free
Trade Agreement which, over a 10-year period from 1989, will remove trade
barriers affecting all important sectors of each country's economy. In addition,
the U.S., Canada, and Mexico have established the North American Free Trade
Agreement ("NAFTA"), which is expected to+ significantly benefit the economies
of each of the countries through the more rational allocation of resources and
production over the region. Uncertainty regarding the longer - run political
structure of Canada is an added risk to investors, along with weak commodity
prices.
Investment in Latin America. Latin America (including Mexico and Central
America) has a population of approximately 455 million and is rich in natural
resources. Important gains in the manufacturing sector have developed in several
of the major countries in the region. A number of countries in the region have
taken steps to reduce impediments to trade, most notably through the NAFTA
agreement, between the U.S., Canada and Mexico and the Mercosur agreement
between Argentina, Brazil, Paraguay and Uruguay, with Chile as an associate
member. Restrictions on international capital flows, intermittent problems with
capital flight, and some potential difficulties in the repayment of external
debt, however, remain important concerns in the region -- exacerbating the risks
in these equity markets. As a result Latin American equity markets have been
extremely volatile. Efforts to restructure these economies through
privatization, and fiscal and monetary reform have been met with some success
with ga1ins in output growth, and slowing rates of inflation. These efforts may
result in attractive investment opportunities. However, recent events have shown
that large shifts in sentiment in markets elsewhere on the globe may very
quickly reverberate among these markets, adding greater risk to already volatile
markets. There can be no assurance that attempted reforms will ultimately be
successful or will bring about results investors would regard as favorable.
Other Regions There are developments in other regions and countries around the
world which could lead to additional investment opportunities. We will monitor
these developments and may invest when appropriate.
Depository Receipts. The equity funds can invest in American, European and
Global Depository Receipts (ADRs, EDRs and GDRs). They are alternatives to the
purchase of the underlying securities in their national markets and currencies.
Although their prices are quoted in U.S. dollars, they don't eliminate all the
risks of foreign investing.
- ----------
1
15
<PAGE>
ADRs represent the right to receive securities of foreign issuers
deposited in a domestic bank or a foreign correspondent bank. To the extent that
a fund acquires ADRs through banks which do not have a contractual relationship
with the foreign issuer of the security underlying the ADR to issue and service
such ADRs, there may be an increased possibility that the fund would not become
aware of and be able to respond to corporate actions such as stock splits or
rights offerings involving the foreign issuer in a timely manner. In addition,
the lack of information may result in inefficiencies in the valuation of such
instruments. However, by investing in ADRs rather than directly in the stock of
foreign issuers, a Fund will avoid currency risks during the settlement period
for either purchases or sales. In general, there is a large, liquid market in
the U.S. for ADRs quoted on a national securities exchange or the NASD's
national market system. The information available for ADRs is subject to the
accounting, auditing and financial reporting standards of the domestic market or
exchange on which they are traded, which standards are more uniform and more
exacting than those to which many foreign issuers may be subject.
EDRs and GDRs are receipts evidencing an arrangement with a non-U.S. bank
similar to that for ADRs and are designed for use in non-U.S. securities
markets. EDRs and GDRs are not necessarily quoted in the same currency as the
underlying security.
Other Investment Techniques and Opportunities. Each fund may take certain
actions with respect to merger proposals, tender offers, conversion of
equity-related securities and other investment opportunities with the objective
of enhancing the portfolio's overall return, regardless of how these actions may
affect the weight of the particular securities in the fund's portfolio.
Industry Concentrations. Because of its investment objective and policies,
the Managed Allocation Fund will concentrate more than 25 percent of its assets
in the mutual fund industry. However, none of the funds in which the Managed
Allocation Fund can invest will concentrate more than 25 percent of its total
assets in any one industry.
Management of the TIAA-CREF Mutual Funds
Trustees and Officers of the TIAA-CREF Mutual Funds
Trustees who are "interested persons" within the definition set forth in
the Investment Company Act of 1940, as amended, are indicated by an asterisk
(*).
16
<PAGE>
<TABLE>
<CAPTION>
Principal Occupations During Past 5
Trustees Age Years
- -------- --- -----
<S> <C> <C>
Robert H. Atwell 68 President Emeritus, American Counsel on
447 Bird Key Drive Education and senior consultant for A.T.
Sarasota, FL 34236 Kearney, since November 1996.
Previously, President, American Counsel
on Education.
Elizabeth E. Bailey 60 John C. Hower Professor of Public Policy
The Wharton School and Management, The Wharton School of
University of Pennsylvania the University of Pennsylvania.
Suite 3100
Steinberg-Dietrich Hall
Philadelphia, PA 19104-6372
John H. Biggs (3) 62 Chairman, Chief Executive Officer, and
TIAA-CREF President, CREF and TIAA, since 1997.
730 Third Avenue Previously, Chairman and Chief
New York, NY 10017 Executive Officer, CREF and TIAA.
Joyce A. Fecske (1) 52 Vice President Emerita, DePaul
4800 South Karlov Avenue University, since 1994. Formerly, Vice
Chicago, IL 60632 President for Human Resources, DePaul
University.
Edes P. Gilbert 67 Consultant, Independent Education
Independent Education Services Services, since 1998. Formerly, Head,
49 East 78th Street The Spence School.
New York, NY 10021
Stuart Tse Kong Ho (3) 63 Chairman and President, Capital
Capital Investment of Hawaii, Inc. Investment of Hawaii, Inc.; Chairman,
Suite 1700 Gannett Pacific Corporation.
733 Bishop Street
Honolulu, HI 96813
Nancy L. Jacob (2) 56 President and Managing Partner,
Windermere Investment Associates Windermere Investment Associates, since
121 S.W. Morrison Street January 1997. Previously, Chairman and
Portland, OR 97204 Chief Executive Officer, CTC Consulting,
Inc. and Managing Director, Capital
Trust Company.
Marjorie Fine Knowles 59 Professor of Law, Georgia State
College of Law University College of Law.
Georgia State University
University Plaza
Atlanta, GA 30303-3092
</TABLE>
17
<PAGE>
<TABLE>
<S> <C> <C>
Martin L. Leibowitz (3) 62 Vice Chairman and Chief Investment
TIAA-CREF Officer, CREF and TIAA, since 1995.
730 Third Avenue President, TIAA-CREF Investment
New York, NY 10017 Management, Inc. (Investment
Management), and President, Teachers
Advisors, Inc. (Advisors). Executive
Vice President, CREF and TIAA from
June 1995 to November 1995. Formerly,
managing director-director of research
and a member of the executive
committee, Salomon Brothers, Inc.
Jay O. Light (2) 57 Professor of Business Administration,
Harvard Business School Harvard University Graduate School of
Morgan Hall 489 Business Administration.
Soldiers Field
Boston, MA 02163
Bevis Longstreth (2) 65 Of Counsel, Debevoise & Plimpton, since
Debevoise & Plimpton 1998. Formerly, Partner, Debevoise &
875 Third Avenue Plimpton. Adjunct Professor of Law,
New York, NY 10022 Columbia University.
Robert M. Lovell, Jr. (2) 68 Founding Partner, First Quadrant L.P.
First Quadrant L.P. Formerly, Chairman and Chief Executive
100 Campus Drive Officer, First Quadrant Corp. (Investment
P.O. Box 939 Management Firm).
Florham Park, NJ 07932
Stephen A. Ross (2) 55 Franco Modigliani Professor of Finance
Sloan School of Management and Management, Sloan School of
Massachusetts Institute of Technology Management, Massachusetts Institute of
77 Massachusetts Avenue Technology, since 1998. Co-Chairman,
Cambridge, MA 02139 Roll & Ross Asset Management Corp.
Eugene C. Sit (3) 60 Chairman, Chief Executive and Chief
Sit Investment Associates, Inc. Investment Executive Officer, Sit
4600 Norwest Center Investment Associates, Inc. and Sit/Kim
90 South Seventh Street International Investment Associates, Inc.
Minneapolis, MN 55402
Maceo K. Sloan (2) 49 Chairman, President, and Chief Executive
NCM Capital Management Group, Inc. Officer, Sloan Financial Group, Inc., and
Suite 400 NCM Capital Management Group, Inc.
103 West Main Street
Durham, NC 27701-3638
</TABLE>
18
<PAGE>
<TABLE>
<S> <C> <C>
David K. Storrs (2) 54 President and Chief Executive Officer,
Alternative Investment Group, LLC Alternative Investment Group, L.L.C.,
65 South Gate Lane since August 1996. Adviser to the
Southport, CT 06490 President, The Common Fund, since
January 1996. Formerly, President and
Chief Executive Officer, The Common
Fund.
Robert W. Vishny (3) 39 Eric J. Gleacher Professor of Finance,
Graduate School of Business University of Chicago Graduate School of
University of Chicago Business. Founding Partner, LSV Asset
1101 East 58th Street Management.
Chicago, IL 60637
</TABLE>
- ----------
(1) Member of the Executive Committee. The Executive Committee is responsible
for day to day oversight of the Funds' operation.
(2) Member of the Finance Committee. The Finance Committee oversees the
investments of the TIAA-CREF Mutual Funds.
(3) Member of the Executive and Finance Committees.
<TABLE>
<CAPTION>
Position with Principal Occupation(s) During Past
Officers* Age Registrant 5 Years
- --------- --- ---------- -------
<S> <C> <C> <C>
Thomas G. Walsh 55 President Executive Vice President, TIAA and
CREF, and President, Teachers
Personal Investors Services, Inc.
("TPIS").
Scott C. Evans 39 Executive Executive Vice President, TIAA and
Vice President CREF, Advisors and Investment
Management, since
September 1997.
Previously, Managing
Director, TIAA, CREF,
Advisors and Investment
Management from March
1997 to September 1997.
Previously Second Vice
President, TIAA and CREF,
Advisors and Investment
Management.
Richard L. Gibbs 52 Executive Executive Vice President, TIAA and
Vice President CREF, since March 1993. Executive
Vice President, Advisors, Investment
Management, TPIS and TIAA-CREF
Individual & Institutional Services,
Inc. ("Services").
</TABLE>
19
<PAGE>
<TABLE>
<S> <C> <C> <C>
E. Laverne Jones 50 Secretary Vice President, and Corporate
Secretary, TIAA and CREF,
since August 1998.
Previously, Senior
Counsel, TIAA and CREF.
Richard J. Adamski 57 Vice President Vice President and Treasurer, TIAA
and Treasurer and CREF, Investment Management,
Advisors, TPIS and Services.
</TABLE>
- ----------
* The address for all Officers of the TIAA-CREF Mutual Funds is 730 Third
Avenue, New York, NY 10017-3206.
Trustee and Officer Compensation
The following table shows the compensation received from the Funds and the
TIAA-CREF fund complex for each non-officer Trustee for the year ended December
31, 1998. The Funds' officers receive no compensation from any fund in the
TIAA-CREF Fund complex. The TIAA-CREF complex consists of: College Retirement
Equities Fund, TIAA Separate Account VA-1, the TIAA-CREF Life Funds and
TIAA-CREF Mutual Funds, each a registered investment company.
TIAA-CREF Mutual Funds has long-term performance deferred compensation
plan for non-employee trustees. Under this unfunded plan, annual contributions
equal to half the amount of the basic annual trustee stipend are allocated to
notional CREF and TIAA accounts, in predetermined percentages. Benefits will be
paid in a lump sum after the trustee leaves the board. Pursuant to a separate
deferred compensation plan, non-employee trustees also have the option to defer
payment of their basic stipend and allocate it to notional TIAA and CREF
accounts chosen by the individual trustee. Benefits under that plan are also
paid in a lump sum after the trustee leaves the board.
20
<PAGE>
<TABLE>
<CAPTION>
Long Term Performance
Aggregate Deferred Compensation Total Compensation
Compensation Contribution from TIAA-CREF
Name from the Fund As Part of Expenses(1) complex
- ---- ------------- ---------------------- ------------------
<S> <C> <C>
Robert H. Atwell $ $
Elizabeth E. Bailey $ $
Gary P. Brinson $ $
Joyce A. Fecske $ $
Edes P. Gilbert $ $
Stuart Tse Kong Ho $ $
Nancy L. Jacob $ $
Marjorie Fine Knowles $ $
Jay O. Light $ $
Bevis Longstreth $ $
Robert M. Lovell, Jr. $ $
Stephen A. Ross $ $
Eugene C. Sit $ $
Maceo K. Sloan $ $
David K. Storrs $ $
Robert W. Vishny $ $
</TABLE>
- ----------
(1) Includes earnings, if any, on amounts contributed.
Control Persons
TIAA, as the contributor of the initial capital for each of the funds,
owned the following percentages of the shares of each fund as of March , 1999:
International Equity %
Growth Equity %
Growth & Income %
Bond Plus %
Money Market %
Managed Allocation %
21
<PAGE>
Investment Advisory and Other Services
As explained in the Prospectus, investment advisory and related services
for each of the funds are provided by personnel of Teachers Advisors, Inc.
(Advisors). Advisors manages the investment and reinvestment of the assets of
each fund, subject to the direction and control of the Finance Committee of the
Board of Trustees. As the prospectus describes, Advisors has agreed to waive a
portion of its fee for managing each fund.
Personal Trading Policy. Anyone at Teachers Advisors who has direct
responsibility and authority for making investment decisions for TIAA-CREF
Mutual Funds is restricted from trading for his or her own account. The
restriction also applies to members of their households. They must send
duplicate confirmation statements and other brokerage account reports to a
special compliance unit, and their transactions must be approved.
Advisory fees are payable monthly to Advisors. They are calculated as a
percentage of the average value of the net assets each day for each Fund, and
are accrued daily proportionately at 1/365th (1/366th in a leap year) of the
rates set forth in the Prospectus. During 1998, the total dollar amount of
expenses for each Fund, before and after the waiver, attributable to advisory
fees were as follows (there are no investment advisory fees payable for the
Managed Allocation Account):
Gross Waived Net
----- ------ ---
International Equity Fund $ $ $
Growth Equity Fund $ $ $
Growth & Income Fund $ $ $
Bond Plus Fund $ $ $
Money Market Fund $ $ $
Pursuant to the terms of a contract with Advisors, State Street Bank, 225
Franklin Street, Boston, MA 02209 acts as custodian for the TIAA-CREF Mutual
Funds. Advisors has agreed to pay State Street for these services.
Ernst & Young, LLP, 787 7th Avenue, New York, NY 10019, serve as
independent auditors of the TIAA-CREF Mutual Funds.
Advisors has retained State Street Bank & Trust Company ("State Street")
to provide the funds with certain administrative services, including preparation
of each fund's federal, state and local tax returns, preparation of each fund's
financial information, and various other administrative services. State Street
also acts as the transfer and dividend paying agent for the funds. Advisors, not
the TIAA-CREF Mutual Funds, has agreed to pay State Street a fee for such
services. State Street is located at 225 Franklin Street, Boston, MA 02209.
22
<PAGE>
Teachers Insurance and Annuity Association of America (TIAA) holds all of
the shares of TIAA Holdings, Inc., which in turn holds all the shares of
Advisors and of Teachers Personal Investors Services, Inc., the principal
underwriter for the TIAA-CREF Mutual Funds. TIAA also holds all the shares of
TIAA-CREF Individual & Institutional Services, Inc. ("Services") and TIAA-CREF
Investment Management, LLC ("Investment Management"). Services acts as the
principal underwriter, and Investment Management provides investment advisory
services, to the College Retirement Equities Fund, a companion organization to
TIAA. All of the foregoing are affiliates of the TIAA-CREF Mutual Funds and
Advisors.
About the TIAA-CREF Mutual Funds and the Shares
As a Delaware business trust, the TIAA-CREF Mutual Funds' operations are
governed by its Declaration of Trust dated January 13, 1997, as amended (the
Declaration). A copy of the TIAA-CREF Mutual Funds' Certificate of Trust, dated
January 15, 1997, as amended, is on file with the Office of the Secretary of
State of the State of Delaware. Upon the initial purchase of shares of
beneficial interest in the TIAA-CREF Mutual Funds each shareholder agrees to be
bound by the Declaration, as amended from time to time.
Indemnification of Shareholders
Generally, Delaware business trust shareholders are not personally liable
for obligations of the Delaware business trust under Delaware law. The Delaware
Business Trust Act (DBTA) provides that a shareholder of a Delaware business
trust shall be entitled to the same limitation of liability extended to
shareholders of private for-profit corporations. The TIAA-CREF Mutual Funds'
Declaration expressly provides that the TIAA-CREF Mutual Funds has been
organized under the DBTA and that the Declaration is to be governed by and
interpreted in accordance with Delaware law. It is nevertheless possible that a
Delaware business trust, such as the TIAA-CREF Mutual Funds, might become a
party to an action in another state whose courts refuse to apply Delaware law,
in which case the TIAA-CREF Mutual Funds' shareholders could possibly be subject
to personal liability.
To guard against this risk, the Declaration (i) contains an express
disclaimer of shareholder liability for acts or obligations of the TIAA-CREF
Mutual Funds and provides that notice of such disclaimer may be given in each
agreement, obligation and instrument entered into or executed by the TIAA-CREF
Mutual Funds or its Trustees, (ii) provides for the indemnification out of Trust
property of any shareholders held personally liable for any obligations of the
TIAA-CREF Mutual Funds or any series of the TIAA-CREF Mutual Funds, and (iii)
provides that the TIAA-CREF Mutual Funds shall, upon request, assume the defense
of any claim made against any shareholder for any act or obligation of the
TIAA-CREF Mutual Funds and satisfy any judgment thereon. Thus, the risk of a
Trust
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shareholder incurring financial loss beyond his or her investment because of
shareholder liability is limited to circumstances in which all of the following
factors are present: (1) a court refuses to apply Delaware law; (2) the
liability arose under tort law or, if not, no contractual limitation of
liability was in effect; and (3) the TIAA-CREF Mutual Funds itself would be
unable to meet its obligations. In the light of DBTA, the nature of the
TIAA-CREF Mutual Funds' business, and the nature of its assets, the risk of
personal liability to a TIAA-CREF Mutual Funds shareholder is remote.
Indemnification of Trustees
The Declaration further provides that the TIAA-CREF Mutual Funds shall
indemnify each of its Trustees and officers against liabilities and expenses
reasonably incurred by them, in connection with, or arising out of, any action,
suit or proceeding, threatened against or otherwise involving such Trustee or
officer, directly or indirectly, by reason of being or having been a Trustee or
officer of the TIAA-CREF Mutual Funds. The Declaration does not authorize the
TIAA-CREF Mutual Funds to indemnify any Trustee or officer against any liability
to which he or she would otherwise be subject by reason of or for willful
misfeasance, bad faith, gross negligence or reckless disregard of such person's
duties.
Limitation of Fund Liability
All persons dealing with an investment fund must look solely to the
property of that particular fund for the enforcement of any claims against that
fund, as neither the Trustees, officers, agents or shareholders assume any
personal liability for obligations entered into on behalf of a fund or the
TIAA-CREF Mutual Fund. No investment fund is liable for the obligations of any
other investment fund. Since the funds use a combined Prospectus, however, it is
possible that one fund might become liable for a misstatement or omission in the
Prospectus regarding another fund with which its disclosure is combined. The
Trustees have considered this factor in approving the use of the combined
Prospectus.
Shareholder Meetings and Voting Rights
Under the Declaration, the TIAA-CREF Mutual Funds are not required to hold
annual meetings to elect Trustees or for other purposes. It is not anticipated
that the TIAA-CREF Mutual Funds will hold shareholders' meetings unless required
by law or the Declaration. The TIAA-CREF Mutual Funds will be required to hold a
meeting to elect Trustees to fill any existing vacancies on the Board if, at any
time, fewer than a majority of the Trustees have been elected by the
shareholders of the TIAA-CREF Mutual Funds.
Shares of the TIAA-CREF Mutual Funds do not entitle their holders to
cumulative voting rights, so that the holders of more than 50 percent of the net
asset value represented
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by the outstanding shares of the TIAA-CREF Mutual Funds may elect all of the
Trustees, in which case the holders of the remaining shares would not be able to
elect any Trustees. As determined by the Trustees, shareholders are entitled to
one vote for each dollar of net asset value (number of shares held times the net
asset value of the applicable fund).
Additional Portfolios
Pursuant to the Declaration, the Trustees may establish additional
investment portfolios (technically "series" of shares) in the TIAA-CREF Mutual
Funds. The establishment of additional investment funds would not affect the
interests of current shareholders in the existing six funds. As of the date of
this SAI, the Trustees do not have any plan to establish another fund.
Dividends and Distributions
Each share of a fund is entitled to such dividends and distributions out
of the income earned on the assets belonging to that fund as are declared in the
discretion of the Trustees. In the event of the liquidation or dissolution of
the TIAA-CREF Mutual Funds as a whole or any individual investment fund, shares
of the affected fund are entitled to receive their proportionate share of the
assets which are attributable to such shares and which are available for
distribution as the Trustees in their sole discretion may determine.
Shareholders are not entitled to any preemptive, conversion, or subscription
rights. All shares, when issued, will be fully paid and non-assessable.
Pricing of Shares
The assets of the funds are valued as of the close of each valuation day
in the following manner:
Investments for Which Market Quotations Are Readily Available
Investments for which market quotations are readily available are valued
at the market value of such investments, determined as follows:
Equity securities listed or traded on a national market or exchange are
valued based on their sale price on such market or exchange at the close of
business (usually 4:00 p.m.) on the date of valuation, or at the mean of the
closing bid and asked prices if no sale is reported. Such an equity security may
also be valued at fair value as determined in good faith by the Finance
Committee of the Board of Trustees if events materially affecting its
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value occur between the time its price is determined and the time a Fund's net
asset value is calculated.
Foreign Investments
Investments traded on a foreign exchange or in foreign markets are valued
at the closing values of such securities as of the date of valuation under the
generally accepted valuation method in the country where traded, converted to
U.S. dollars at the prevailing rates of exchange on the date of valuation. Since
the trading of investments on a foreign exchange or in foreign markets is
normally completed before the end of a valuation day, such valuation does not
take place contemporaneously with the determination of the valuation of certain
other investments held by the fund. If events materially affecting the value of
foreign investments occur between the time their share price is determined and
the time when a fund's net asset value is calculated, such investments will be
valued at fair value as determined in good faith by the Finance Committee of the
Board and in accordance with the responsibilities of the Board as a whole.
Debt Securities
Debt securities (including money market instruments) for which market
quotations are readily available are valued based on the most recent bid price
or the equivalent quoted yield for such securities (or those of comparable
maturity, quality and type). Values for money market instruments (other than
those in the Money Market Fund) with maturities of one year or less will be
obtained from either one or more of the major market makers or derived from a
pricing matrix that has various types of money market instruments along one axis
and maturities, ranging from overnight to one year, along the other. This
information is derived from one or more financial information services. For
securities with maturities longer than one year, these values will be derived
utilizing an independent pricing service when such prices are believed to
reflect the fair value of these securities. We use an independent pricing
service to value securities with maturities longer than one year, except when we
believe prices don't accurately reflect the security's fair value.
Special Valuation Procedures for the Money Market Fund
For the Money Market Fund, all of its assets are valued on the basis of
amortized cost in an effort to maintain a constant net asset value per share of
$1.00. The Board has determined that such valuation is in the best interests of
the fund and its shareholders. Under the amortized cost method of valuation,
securities are valued at cost on the date of their acquisition, and thereafter a
constant accretion of any discount or amortization of any premium to maturity is
assumed. While this method provides certainty in valuation, it may result in
periods in which value as determined by amortized cost is higher or lower than
the price the fund would receive if it sold the security. During such periods,
the quoted yield to
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investors may differ somewhat from that obtained by a similar fund which uses
available market quotations to value all of its securities.
The Board has established procedures reasonably designed, taking into
account current market conditions and the Money Market Funds' investment
objective, to stabilize the net asset value per share for purposes of sales and
redemptions at $1.00. These procedures include review by the Board, at such
intervals as it deems appropriate, to determine the extent, if any, to which the
net asset value per share calculated by using available market quotations
deviates by more than 1/2 of 1 percent from $1.00 per share. In the event such
deviation should exceed 1/2 of 1 percent, the Board will promptly consider
initiating corrective action. If the Board believes that the extent of any
deviation from a $1.00 amortized cost price per share may result in material
dilution or other unfair results to new or existing shareholders, it will take
such steps as it considers appropriate to eliminate or reduce these consequences
to the extent reasonably practicable. Such steps may include: (1) selling
securities prior to maturity; (2) shortening the average maturity of the fund;
(3) withholding or reducing dividends; or (4) utilizing a net asset value per
share determined from available market quotations. Even if these steps were
taken, the Money Market Fund's net asset value might still decline.
Options and Futures
Portfolio investments underlying options are valued as described above.
Stock options written by a fund are valued at the last quoted sale price, or at
the closing bid price if no sale is reported for the day of valuation as
determined on the principal exchange on which the option is traded. The value of
a fund's net assets will be increased or decreased by the difference between the
premiums received on written options and the costs of liquidating such positions
measured by the closing price of the options on the date of valuation.
For example, when a fund writes a call option, the amount of the premium
is included in the fund's assets and an equal amount is included in its
liabilities. The liability thereafter is adjusted to the current market value of
the call. Thus, if the current market value of the call exceeds the premium
received, the excess would be unrealized depreciation; conversely, if the
premium exceeds the current market value, such excess would be unrealized
appreciation. If a call expires or if the fund enters into a closing purchase
transaction it realizes a gain (or a loss if the cost of the transaction exceeds
the premium received when the call was written) without regard to any unrealized
appreciation or depreciation in the underlying securities, and the liability
related to such call is extinguished. If a call is exercised, the fund realizes
a gain or loss from the sale of the underlying securities and the proceeds of
the sale increased by the premium originally received.
A premium paid on the purchase of a put will be deducted from a fund's
assets and an equal amount will be included as an investment and subsequently
adjusted to the current market value of the put. For example, if the current
market value of the put exceeds the
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premium paid, the excess would be unrealized appreciation; conversely, if the
premium exceeds the current market value, such excess would be unrealized
depreciation.
Stock and bond index futures, and options thereon, which are traded on
commodities exchanges, are valued at their last sale prices as of the close of
such commodities exchanges.
Investments for Which Market Quotations Are Not Readily Available
Portfolio securities or other assets for which market quotations are not
readily available will be valued at fair value, as determined in good faith
under the direction of the Trustees.
Tax Status
Although the TIAA-CREF Mutual Funds is organized as a Delaware business
trust, neither the TIAA-CREF Mutual Funds nor the funds will be subject to any
corporate excise or franchise tax in the State of Delaware, nor will they be
liable for Delaware income taxes provided that each fund qualifies as a
regulated investment company for federal income tax purposes and satisfies
certain income source requirements of Delaware law. If each fund so qualifies
and distributes all of its income and capital gains, it will also be exempt from
applicable New York State taxes and the New York City general corporation tax,
except for small minimum taxes.
Each fund qualifies as a "regulated investment company" ("RIC") under
Subchapter M of the Code. In general, to qualify as a RIC: (a) at least 90
percent of the gross income of a fund for the taxable year must be derived from
dividends, interest, payments with respect to loans of securities, gains from
the sale or other disposition of securities, or other income derived with
respect to its business of investing in securities; (b) a fund must distribute
to its shareholders 90 percent of its ordinary income and net short-term capital
gains (undistributed net income may be subject to tax at the level); and (c) a
fund must diversify its assets so that, at the close of each quarter of its
taxable year, (i) at least 50 percent of the fair market value of its total
(gross) assets is comprised of cash, cash items, U.S. Government securities,
securities of other regulated investment companies and other securities limited
in respect of any one issuer to no more than 5 percent of the fair market value
of the fund's total assets and 10 percent of the outstanding voting securities
of such issuer and (ii) no more than 25 percent of the fair market value of its
total assets is invested in the securities of any one issuer (other than U.S.
Government securities and securities of other regulated investment companies) or
of two or more issuers controlled by the fund and engaged in the same, similar,
or related trades or businesses.
If, in any taxable year, a fund should not qualify as a RIC under the
Code: (1) that fund would be taxed at normal corporate rates on the entire
amount of its taxable income
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without deduction for dividends or other distributions to its shareholders, and
(2) that fund's distributions to the extent made out of that fund's current or
accumulated earnings and profits would be taxable to its shareholders (other
than shareholders in tax deferred accounts) as ordinary dividends (regardless of
whether they would otherwise have been considered capital gains dividends), and
may qualify for the deduction for dividends received by corporations.
Each fund must declare and distribute dividends equal to at least 98
percent of its ordinary income (as of the twelve months ended December 31) and
at least 98 percent of its net capital gains (as of the twelve months ended
October 31), in order to avoid a federal excise tax. Each fund intends to make
the required distributions, but they cannot guarantee that they will do so.
Dividends attributable to a fund's ordinary income and capital gains
distributions are taxable as such to shareholders in the year in which they are
received except dividends declared in October, November or December and paid in
January, which dividends are treated as paid on the prior December 31.
A distribution of net capital gains reflects a fund's excess of net
long-term gains over its net short-term losses. Each fund must designate income
dividends and distributions of net capital gains and must notify shareholders of
these designations within sixty days after the close of the fund's taxable year.
Foreign currency gains and losses are taxable as ordinary income. If the
net effect of these transactions is a gain, the dividend paid by the fund will
be increased; if the result is a loss, the income dividend paid by the fund will
be decreased. Adjustments to reflect these gains and losses will be made
throughout each fund's taxable year.
At the time of purchase, each fund's net asset value may reflect
undistributed income or net capital gains. A subsequent distribution to
shareholders of such amounts, although constituting a return of their
investment, would be taxable either as dividends or capital gain distributions.
For federal income tax purposes, each fund is permitted to carry forward its net
realized capital losses, if any, for eight years, and realize net capital gains
up to the amount of such losses without being required to pay taxes on, or
distribute such gains. If a shareholder held shares for six months or less and
during that period received a distribution taxable to such shareholder as a long
term capital gain, any loss realized on the sale of such shares during the six
month period would be a long term loss to the extent of such distribution.
Income received by any fund from sources within various foreign countries
may be subject to foreign income taxes withheld at the source. Under the Code,
if more than 50 percent of the value of a fund's total assets at the close of
its taxable year consists of securities issued by foreign corporations, the fund
may file an election with the Internal Revenue Service to "pass through" to the
fund's shareholders the amount of any foreign income taxes paid by the fund.
Pursuant to this election, shareholders will be required to: (i) include in
gross income, even though not actually received, their respective pro rata share
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of foreign taxes paid by the fund; (ii) treat their pro rata share of foreign
taxes as paid by them; and (iii) either deduct their pro rata share of foreign
taxes in computing their taxable income, or use it as a foreign tax credit
against U.S. income taxes (but not both). No deduction for foreign taxes may be
claimed by a shareholder who does not itemize deductions.
Each shareholder will be notified within 60 days after the close of each
taxable year of a fund, if that fund will "pass through" foreign taxes paid for
that year, and, if so, the amount of each shareholder's pro rata share (by
country) of (i) the foreign taxes paid, and (ii) the fund's gross income from
foreign sources. Of course, shareholders who are not liable for federal income
taxes, such as retirement plans qualified under Section 401 of the Code, will
not be affected by any such "pass through" of foreign tax credits.
Each fund is required by federal law to withhold 31 percent of reportable
payments (which may include income dividends, capital gains distributions, and
share redemption proceeds) paid to shareholders who have not complied with IRS
regulations. In order to avoid this back-up withholding requirement, a
shareholder must certify to the fund on the application form or on a separate
Internal Revenue Service W-9 Form, that the shareholder's social security number
or taxpayer identification number is correct and that the shareholder is not
currently subject to back-up withholding or is exempt from back-up withholding.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors. For example, each shareholder who is not a U.S.
person should consider the U.S. and foreign tax consequences of ownership of
shares of the funds, including the possibility that such a shareholder may be
subject to a U.S. withholding tax at a rate of 30 percent (or at a lower rate
under an applicable income tax treaty) on fund distributions treated as ordinary
dividends.
IRA accounts are subject to special tax treatment. Federal income tax on
earnings is deferred, and there are restrictions on the amounts that can be
contributed each year. Investors in these accounts may also have to pay a
penalty for withdrawals prior to age 59 1/2.
This discussion of the tax treatment of the funds and their distributions
is based on the federal, Delaware and New York tax laws in effect as of the date
of this SAI. For a discussion of recent changes in the tax laws, see the
Prospectus. Shareholders should consult their tax advisers to determine the tax
treatment of an investment by him or her in any fund, including state and local
taxes.
Brokerage Allocation
Advisors is responsible for decisions to buy and sell securities for the
funds as well as for selecting brokers and, where applicable negotiating the
amount of the commission rate
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paid. It is the intention of Advisors to place brokerage orders with the
objective of obtaining the best execution, which includes such factors as best
price, research and available data. When purchasing or selling securities traded
on the over-the-counter market, Advisors generally will execute the transactions
with a broker engaged in making a market for such securities. When Advisors
deems the purchase or sale of a security to be in the best interests of a fund,
its personnel may, consistent with their fiduciary obligations, decide either to
buy or to sell a particular security for the fund at the same time as for other
funds it may be managing, or that may be managed by its affiliate, TIAA-CREF
Investment Management, Inc. ("Investment Management"), another investment
adviser subsidiary of TIAA. In that event, allocation of the securities
purchased or sold, as well as the expenses incurred in the transaction, will be
made in an equitable manner.
Domestic brokerage commissions are negotiated, as there are no standard
rates. All brokerage firms provide the service of execution of the order made;
some brokerage firms also provide research and statistical data, and research
reports on particular companies and industries are customarily provided by
brokerage firms to large investors. In negotiating commissions, consideration is
given by Advisors to the quality of execution provided and to the use and value
of the data. The valuation of such data may be judged with reference to a
particular order or, alternatively, may be judged in terms of its value to the
overall management of the portfolio.
Advisors will place orders with brokers providing useful research and
statistical data services if reasonable commissions can be negotiated for the
total services furnished even though lower commissions may be available from
brokers not providing such services. Advisors follows guidelines established by
the Board for the placing of orders with the brokers providing such services.
In 1998, the aggregate amount of brokerage commissions paid by the
[International Equity, Growth Equity and Growth & Income Funds] as a result of
such allocations was $ , $ , and $
, respectively. Research or service obtained for one Fund may be used by
Advisors in managing the other Funds. In such circumstances, the expenses
incurred will be allocated equitably consistent with Advisors' fiduciary duty to
the other Funds.
Research or services obtained for the TIAA-CREF Mutual Funds may be used
by personnel of Advisors in managing other investment company accounts, or the
CREF accounts for Investment Management. In such circumstances, the expenses
incurred will be allocated in an equitable manner consistent with the fiduciary
obligations of personnel of Advisors to the TIAA-CREF Mutual Funds.
The aggregate amount of brokerage commissions paid by the Funds during
1998 was as follows:
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Fund Commissions
---- -----------
Growth & Income $
International Equity $
Growth Equity $
The aggregate amount of brokerage commissions paid by the Funds during 1998 was
as follows:
Fund Commissions
---- -----------
Growth & Income $
International Equity $
Growth Equity $
During 1998, certain of the Funds acquired securities of certain of the
regular brokers or dealers or their parents. These entities and the value of a
Fund's aggregate holdings in the securities of those entities are set forth
below:
1. Regular Broker or Dealer Based on Brokerage Commissions Paid
Account Broker Parent Holdings (US$)
------- ------ ------ --------------
Growth & Income
International
Equity
Growth Equity
2. Regular Broker or Dealer Based on Entities Acting as Principal
Account Broker Parent Holdings (US$)
------- ------ ------ --------------
Growth & Income
International
Equity
Growth Equity
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Underwriters
Teachers Personal Investors Services, Inc. (TPIS) may be considered the
"principal underwriter" for the TIAA-CREF Mutual Funds. Shares of the TIAA-CREF
Mutual Funds are offered on a continuous basis with no sales load. Pursuant to a
Distribution Agreement with the TIAA-CREF Mutual Funds, TPIS has the right to
distribute shares of the TIAA-CREF Mutual Funds for the two year period
beginning July 1, 1997, and thereafter from year to year subject to approval by
the Funds' Board of Trustees. Under a Distribution Compensation Agreement
between TPIS and Advisors, Advisors has agreed to pay TPIS monthly for
distribution of Fund shares an amount equal to .40 percent of the aggregate
amount of purchase payments for shares of the Funds during each month. TPIS was
paid $ and $ for its services to the Funds in 1998 and 1997, respectively. TPIS
receives no other compensation for its activities as distributor of TIAA-CREF
Mutual Fund shares. TPIS may enter into Selling Agreements with one or more
broker-dealers which may or may not be affiliated with TPIS to provide
distribution related services to the TIAA-CREF Mutual Funds.
Calculation of Performance Data
We may quote a fund's performance in various ways. All performance
information in advertising is historical and is not intended to indicate future
returns. A fund's share price, yield, and total return fluctuate in response to
market conditions and other factors, and the value of fund shares when redeemed
may be more or less than their original cost.
Total Return Calculations
Total returns quoted in advertising reflect all aspects of a fund's
returns, including the effect of reinvesting dividends and capital gain
distributions, and any change in the fund's NAV over a stated period. Average
annual returns are calculated by determining the growth or decline in value of a
hypothetical historical investment in a fund over a stated period, and then
calculating the annually compounded percentage rate that would have produced the
same result if the rate of growth or decline in value had been constant over the
period according to the following formula:
P (1 + T)^n = ERV
where: P = the hypothetical initial payment
T = average annual total return
n = number of years in the period
ERV = ending redeemable value of the hypothetical
payment made at the beginning of the one-, five-,
or 10-year period at the end of the one-, five-,
or 10-year period (or fractional portion thereof).
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For example, a cumulative return of 100 percent over ten years would produce an
average annual return of 7.18 percent, which is the steady annual rate that
would equal 100 percent growth on a compounded basis in ten years. While average
annual returns are a convenient means of comparing investment alternatives,
investors should realize that a fund's performance is not constant over time,
but changes from year to year, and that average annual returns represent
averaged figures as opposed to the actual year-to-year performance of the fund.
In addition to average annual returns, we may quote a fund's unaveraged or
cumulative total returns reflecting the actual change in value of an investment
over a stated period. Average annual and cumulative total returns may be quoted
as a percentage or as a dollar amount, and may be calculated for a single
investment, a series of investments, or a series of redemptions, over any time
period. Total returns may be broken down into their components of income and
capital (including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions to total
return. Total returns may be quoted on a before or after tax basis. Total
returns, yields, and other performance information may be quoted numerically or
in a table, graph, or similar illustration.
Yield Calculations
All Funds other than the Money Market Fund. Yields are computed by
dividing the fund's net investment income for a given 30-day or one month
period, by the average number of fund shares, dividing this figure by the fund's
NAV at the end of the period, and annualizing the result (assuming compounding
of income) in order to arrive at an annual percentage rate. Income is calculated
for purposes of yield quotations in accordance with standardized methods
applicable to all stock and bond funds. In general, interest income is reduced
with respect to bonds trading at a premium over their par value by subtracting a
portion of the premium from income on a daily basis, and is increased with
respect to bonds trading at a discount by adding a portion of the discount to
daily income. For a fund's investments denominated in foreign currencies, income
and expenses are calculated first in their respective currencies, and are then
converted to U.S. dollars, either when they are actually converted or at the end
of the 30-day or one month period, whichever is earlier. Income is adjusted to
reflect gains and losses from principal repayments received by the fund with
respect to mortgage-related securities and other asset-backed securities. Other
capital gains and losses generally are excluded from the calculation as are
gains and losses currently from exchange rate fluctuations.
Income calculated for the purposes of calculating a fund's yield differs
from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding of income
assumed in yield calculations, a fund's yield may not equal its distribution
rate, the income paid to your account, or the income reported in a fund's
financial statements.
Yield information may be useful in reviewing a fund's performance and in
providing a basis for comparison with other investment alternatives. However, a
fund's yield fluctuates,
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unlike investments that pay a fixed interest rate over a stated period of time.
When comparing investment alternatives, investors should also note the quality
and maturity of the portfolio securities of respective investment companies they
have chosen to consider. Investors should also recognize that in periods of
declining interest rates a fund's yield will tend to be somewhat higher than
prevailing market rates, and in periods of rising interest rates a fund's yield
will tend to be somewhat lower. Also, when interest rates are falling, the
inflow of net new money to a fund from the continuous sale of its shares will
likely be invested in instruments producing lower yields than the balance of the
fund's holdings, thereby reducing the fund's current yield. In periods of rising
interest rates, the opposite can be expected to occur.
Yield Information for the Money Market Fund Yield quotations for the Money
Market Fund, including yield quotations based upon the seven-day period ended on
the date of calculation, may also be made available. These yield quotations are
based on a hypothetical pre-existing account with a balance of one share. In
arriving at any such yield quotations, the net change during the period in the
value of that hypothetical account is first determined. Such net change includes
net investment income attributable to portfolio securities but excludes realized
gains and losses from the sale of securities and unrealized appreciation and
depreciation and income other than investment income (which are included in the
calculation of Net Asset Value). For this purpose, net investment income
includes accrued interest on portfolio securities, plus or minus amortized
premiums or purchase discount (including original issue discount), less all
accrued expenses. Such net change is then divided by the value of that
hypothetical account at the beginning of the period to obtain the base period
return, and then the base period return is multiplied by 365/7 to annualize the
current yield figure which is carried to at least the nearest hundredth of one
percent.
The effective yield of the Money Market Fund for the same seven-day period may
also be disclosed. The effective yield is obtained by adjusting the current
yield to give effect to the compounding nature of the Fund's investments, and is
calculated by the use of the following formula:
Effective Yield = (Base Period Return + 1)^(365/7) - 1
The Money Market Fund's yield fluctuates, unlike many bank deposits or other
investments which pay a fixed yield for a stated period of time. The
annualization of one period's income is not necessarily indicative of future
actual yields. Actual yields will depend on such variables as portfolio quality,
average portfolio maturity, the type of instruments held in the portfolio,
changes in interest rates on money market instruments, portfolio expenses, and
other factors.
Total Return
Set forth below is total return information for the Funds, which reflects all
expense deductions from Fund assets, applied to a hypothetical investment of
$1,000 in each Fund:
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International Equity Fund
Period Average Annual Return
- ------ ---------------------
1 Year (January 1, 1998 to %
December 31, 1998)
Since inception %
(September 2, 1997 to
December 31, 1998)
Growth Equity Fund
Period Average Annual Return
- ------ ---------------------
1 Year (January 1, 1998 to %
December 31, 1998)
Since inception %
(September 2, 1997 to
December 31, 1998)
Growth & Income Fund
Period Average Annual Return
- ------ ---------------------
1 Year (January 1, 1998 to %
December 31, 1998)
Since inception %
(September 2, 1997 to
December 31, 1998)
Managed Allocation Fund
Period Average Annual Return
- ------ ---------------------
1 Year (January 1, 1998 to %
December 31, 1998)
36
<PAGE>
Since inception %
(September 2, 1997 to
December 31, 1998)
Bond Plus Fund
Period Average Annual Return
- ------ ---------------------
1 Year (October 1, 1998 to %
December 31, 1998)
Since inception %
(September 2, 1997 to
December 31, 1998)
Money Market Fund
Period Average Annual Return
- ------ ---------------------
1 Year (October 1, 1998 to %
December 31, 1998)
Since inception %
(September 2, 1997 to
December 31, 1998)
Performance Comparisons
Performance information for the funds, may be compared in advertisements,
sales literature, and reports to Shareholders, to the performance information
reported by other investments and to various indices and averages. Such
comparisons may be made with, but are not limited to (1) the S&P 500, (2) the
Dow Jones Industrial Average ("DJIA"), (3) Lipper Analytical Services, Inc.
Mutual Fund Performance Analysis Reports and the Lipper General Equity Funds
Average, (4) Money Magazine Fund Watch, (5) Business Week's Mutual Fund
Scoreboard, (6) SEI Funds Evaluation Services Equity Fund Report, (7) CDA Mutual
Funds Performance Review and CDA Growth Mutual Fund Performance Index, (8) Value
Line Composite Average (geometric), (9) Wilshire Associates indices, (10) Frank
Russell Co. Inc. indices, (11) the Consumer Price Index, published by the U.S.
Bureau of Labor Statistics (measurement of inflation), (12) Morningstar, Inc.,
and (13) the Global Market indices created
37
<PAGE>
by Morgan Stanley, Inc., including the Europe, Australia, Far East (EAFE) Index,
the EAFE+Canada Index and the International Perspective Index. We may also
discuss ratings or rankings received from these entities, accompanied in some
cases by an explanation of those ratings or rankings, when applicable. In
addition, advertisements may discuss the performance of the indices listed
above.
The performance of each of the funds also may be compared to other indices
or averages that measure performance of a pertinent group of securities.
Shareholders should keep in mind that the composition of the investments in the
reported averages will not be identical to that of the fund and that certain
formula calculations (e.g., yield) may differ from index to index. In addition,
there can be no assurance that any of the funds will continue its performance as
compared to such indices.
We may also advertise ratings or rankings the funds receive from various
rating services and organizations, including but not limited to any organization
listed above.
Illustrating Compounding
We may illustrate in advertisements, sales literature and reports to
shareholders the effects of compounding of earnings on an investment in a fund.
We may do this using a hypothetical investment earning a specified rate of
return. To illustrate the effects of compounding, we would show how the total
return from an investment of the same dollar amount, earning the same or a
different rate of return, varies depending on when the investment was made.
Net Asset Value
Charts and graphs using a fund's NAVs, adjusted NAVs, and benchmark
indices may be used to exhibit performance. An adjusted NAV includes any
distributions paid by the fund and reflects all elements of its return. Unless
otherwise indicated, a fund's adjusted NAVs are not adjusted for sales charges,
if any. Currently there are no sales charges.
Moving Averages
We may illustrate a fund's performance using moving averages. A long-term
moving average is the average of each week's adjusted closing NAV for a
specified period. A short-term moving average is the average of each day's
adjusted closing NAV for a specified period. "Moving Average Activity
Indicators" combine adjusted closing NAVs from the last business day of each
week with moving averages for a specified period to produce indicators showing
when an NAV has crossed, stayed above, or stayed below its moving average.
Voting Rights
38
<PAGE>
We don't plan to hold annual shareholder meetings. However, we may hold
special meetings to elect trustees, change fundamental policies, approve a
management agreement, or for other purposes. We will mail proxy materials to
shareholders for these meetings, and we encourage shareholders who can't attend
to vote by proxy. The number of votes you have on any matter submitted to
shareholders depends on the dollar value of your investment in the funds.
Legal Matters
All matters of applicable state law pertaining to the Funds have been
passed upon by Charles H. Stamm, Executive Vice President and General Counsel of
TIAA and CREF. Legal matters relating to the federal securities laws have been
passed upon by Sutherland, Asbill & Brennan LLP, Washington, DC.
Experts
The financial statements incorporated by reference in this Statement of
Additional Information have been audited by Ernst & Young LLP, independent
auditors, as stated in their report appearing herein and have been so included
in reliance upon the report of such firm given upon its authority as experts in
accounting and auditing.
Additional Considerations
The TIAA-CREF Mutual Funds are part of the TIAA-CREF family of companies. TIAA
founded in 1918, is a non-profit stock life insurance company. Its companion
organization, CREF, founded in 1952, is a non-profit corporation registered with
the Securities and Exchange Commission as an investment company. Together,
through the issuance of fixed and variable annuity contracts, TIAA and CREF form
the principal retirement system for the nation's education and research
communities and the largest retirement system in the United States based on
assets under management.
Prospective investors in TIAA-CREF Mutual Funds who have accumulations in
TIAA and CREF retirement annuities (RAs) and supplemental retirement annuities
(SRAs), or in the Teachers Personal Annuity (PA) should carefully consider how
TIAA-CREF Mutual Funds fit into their investment portfolio. The tax treatment is
considerably different from the RA, SRA and PA. For example, RAs and SRAs accept
before-tax contributions, and any earnings from them are not taxed until
withdrawn or taken as income. RAs, SRAs, and the PA all have restrictions on
withdrawals before age 59-1/2, including tax penalties. TIAA-CREF Mutual Funds
don't have such restrictions, which means they can be used to invest for a wide
variety of goals in addition to retirement (unless they are being used to Fund
an IRA account). However, annuities offer the option of lifetime income on
retirement, which mutual funds do not.
39
<PAGE>
Investors should also consider the TIAA-CREF Mutual Funds' expense charges
as compared to the expenses of other mutual funds. The TIAA-CREF Mutual Funds'
expense charges are currently among the lowest in the industry, according to
Morningstar Principia, which tracks mutual fund expense charges.
When deciding how to invest in mutual funds, it's important for investors
to determine their investment goals so they can choose the mutual fund(s) whose
objective closely matches it. They should also determine their time horizon,
i.e. the period of time they plan to keep money invested in the fund. Time
horizon affects how much risk an investor may be willing to take. Risk tolerance
in turn affects asset allocation decisions. For example, an aggressive investor
who is willing to accept a high level of risk in return for potentially greater
returns over the long term, probably would invest more heavily in equity funds.
To preserve the current value of an investment and avoid losses of principal, an
investor might invest more heavily in non-equity funds.
Financial Statements
The audited financial statements of the TIAA-CREF Mutual Funds are incorporated
herein by reference to the Funds' Annual Report for the year ended December 31,
1998, which has been filed with the Securities and Exchange Commission and
provided to all shareholders. We will furnish you, without charge, another copy
of the Annual Report on request.
40
<PAGE>
PART C
OTHER INFORMATION
Item 22. Financial Statements
a) Financial Statements (for each Fund)
The audited financial statements and statements of investments of the
TIAA-CREF Mutual Funds for the year ended December 31, 1998 are incorporated
into Part B of the Registration Statement by reference to pages through of
the Funds' Annual Report to Shareholders, filed with the Securities and Exchange
Commission on Form N-30D pursuant to Rule 30d-1 under the Investment Company Act
of 1940 on __________, 1999.
Item 23. Exhibits
(a) Declaration of Trust, as amended*
(b) Bylaws*
(c) N/A
(d) Investment Management Agreement between Registrant and Teachers
Advisors, Inc.*
(e) (1) Distribution agreement between Registrant and Teachers
Personal Investors Services, Inc.*
(2) Selling agreement, as amended, between TPIS and TIAA-CREF
Individual & Institutional Services, Inc.**
(f) N/A
(g) Custodian Agreement between the Registrant, Teachers Advisors and
State Street Bank and Trust*
(h) (1) Administration Agreement between State Street Bank and
Trust and Teachers Advisors*
(2) Transfer Agency Agreement between State Street Bank and Trust
and Teachers Advisors*
(i) Opinion and Consent of Charles Stamm, Esq.**
(j) (1) Consent of Sutherland, Asbill & Brennan, L.L.P.**
(2) Consent of Ernst & Young LLP**
(k) N/A
<PAGE>
(l) Seed Money Agreement between TIAA and TIAA-CREF Mutual Funds*
(m) N/A
(n) Financial Data Schedules**
(o) N/A
- ----------
* Previously filed as an exhibit to Pre-Effective Amendment No. 1 to the Funds'
Registration Statement, filed on August 5, 1997 (File No. 333-21821).
** To be filed by amendment.
Item 24. Persons Controlled by or Under Common Control With Registrant
The following companies are subsidiaries of TIAA and are included in
the consolidated financial statements of TIAA:
Teachers Insurance and Annuity Association
College Retirement Equities Fund
AIC Properties, Inc.
BT Properties, Inc.
College Credit Trust
DAN Properties, Inc.
ETC Repackaging, Inc.
Illinois Teachers Properties, LLC
JV California Two, Inc.
JV California Three, Inc.
JV Florida One, Inc.
JV Florida Four, Inc.
JV Georgia One, Inc.
JV Maryland One, Inc.
JV Michigan One, Inc.
JV Michigan Two, Inc.
JV Michigan Three, Inc.
JV Minnesota One, Inc.
JV North Carolina One, Inc.
JWL Properties, Inc.
Liberty Place Retail, Inc.
Macallister Holdings, Inc.
Minnesota Teachers Realty Corp.
MN Properties, Inc.
M.O.A. Enterprises, Inc.
ND Properties, Inc.
OWP Hawaii, LLC
Savannah Teachers Properties, Inc.
T114 Properties, Inc.
T-Investment Properties Corp.
T-Land Corp.
T-Las Colinas Towers Corp.
TCT Holdings, Inc.
Teachers Advisors, Inc.
Teachers Boca Properties II, Inc.
Teachers Pennsylvania Realty, Inc.
Teachers Personal Investors
Services, Inc.
Teachers Properties, Inc.
Teachers REA, LLC
Teachers REA II, Inc.
Teachers REA II, LLC
<PAGE>
Teachers REA III, LLC
Teachers Realty Corporation
TEO-NP, LLC
Tethys Slu, Inc.
TIAA Realty, Inc.
TIAA Timberlands I, LLC
TIAA-CREF Enterprises, Inc.
TIAA-CREF Individual & Institutional Services, Inc.
TIAA-CREF Investment Management, LLC
TIAA-CREF Life Insurance Company
TIAA-CREF Tuition Financing, Inc.
TIAA-CREF Trust Company, FSB
TIAA-Fund Equities, Inc.
TPI Housing, Inc.
Washington Teachers Properties II, Inc.
WRC Properties, Inc.
730 Properties, Inc.
730 Cal Hotel Properties I, Inc.
730 Cal Hotel Properties II, Inc.
730 Penn. Hotel Properties I, Inc.
485 Properties, LLC
Subsidiaries of Teachers Properties, Inc.:
Rouse-Teachers Holding Company
Rouse-Teachers Land Holdings, Inc.
1) All subsidiaries are Delaware corporations except as follows:
A) Pennsylvania non-stock, non-profit corporations: Liberty Place
Retail, Inc. Teachers Pennsylvania Realty, Inc. Teachers Realty
Corporation
B) Minnesota Teachers Realty Corporation is a Minnesota corporation.
C) College Credit Trust, a New York Trust
2) All subsidiaries are 100% owned directly by TIAA, except as follows:
A) TIAA-CREF Enterprises, Inc. owns 100% of the stock of Teachers
Advisors, Inc., Teachers Personal Investors Services, Inc.,
TIAA-CREF Life Insurance Company, TIAA-CREF Tuition Financing, Inc.
and TCT Holdings, Inc.
B) TIAA-CREF Trust Company, FSB is 100% owned by TCT Holdings, Inc.
C) T-Investment Properties Corp. and T-Land Corp. are 100% owned by
Macallister Holdings, Inc.
D) TPI Housing, Inc. is 100% owned by Teachers Properties, Inc.
<PAGE>
E) 730 Properties, Inc. owns 100% of the stock of 730 Cal Hotel
Properties I, Inc., 730 Cal Hotel Properties II, Inc. and 730 Penn.
Hotel Properties I, Inc.
3) All subsidiaries have as their sole purpose the ownership of investments
which could, pursuant to New York State Insurance Law, be owned by TIAA itself,
except the following:
A) TIAA-CREF Life Insurance Company is a New York State insurance
subsidiary of TIAA, whose stock is owned by TIAA Holdings, Inc.
B) TIAA Realty, Inc. is an investment subsidiary with minority
stockholders and owns commercial real estate.
C) TIAA-CREF Trust Company, FSB is a federally chartered savings bank.
D) Teachers Advisors, Inc. provides investment advice for the
Registrant.
E) Teachers Personal Investors Services, Inc. provides broker-dealer
services for the Registrant and TIAA Separate Account VA-1.
F) TIAA-CREF Investment Management, LLC, provides investment advice for
College Retirement Equities Fund.
G) TIAA-CREF Individual & Institutional Services, Inc., which provides
broker-dealer and administrative services for College Retirement
Equities Fund.
H) TCT Holdings, Inc., holds the stock of TIAA-CREF Trust Company, FSB.
Item 25. Indemnification
As a Delaware business trust, Registrant's operations are governed by its
Declaration of Trust dated January 15, 1997 (the Declaration of Trust).
Generally, Delaware business trust shareholders are not personally liable for
obligations of the Delaware business trust under Delaware law. The Delaware
Business Trust Act (the DBTA) provides that a shareholder of a trust shall be
entitled to the same limitation of liability extended to shareholders of private
for-profit Delaware corporations. Registrant's Declaration of Trust expressly
provides that it has been organized under the DBTA and that the Declaration of
Trust is to be governed by Delaware law. It is nevertheless possible that a
Delaware business trust, such as Registrant, might become a party to an action
in another state whose courts refuse to apply Delaware law, in which case
Registrant's shareholders could be subject to personal liability.
To protect Registrant's shareholders against the risk of personal
liability, the Declaration of Trust: (I) contains an express disclaimer of
shareholder liability for acts or obligations of Registrant and provides that
notice of such
<PAGE>
disclaimer may be given in each agreement, obligation and instrument entered
into or executed by Registrant or its Trustees; (ii) provides for the
indemnification out of Trust property of any shareholders held personally liable
for any obligations of Registrant or any series of Registrant; and (iii)
provides that Registrant shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of Registrant and satisfy
any judgment thereon. Thus, the risk of a shareholder incurring financial loss
beyond his or her investment because of shareholder liability is limited to
circumstances in which all of the following factors are present: (I) a court
refuses to apply Delaware law; (ii) the liability arose under tort law or, if
not, no contractual limitation of liability was in effect; and (iii) Registrant
itself would be unable to meet its obligations. In the light of Delaware law,
the nature of Registrant's business and the nature of its assets, the risk of
personal liability to a shareholder is remote.
The Declaration of Trust further provides that Registrant shall indemnify
each of its Trustees and officers against liabilities and expenses reasonably
incurred by them, in connection with, or arising out of, any action, suit or
proceeding, threatened against or otherwise involving such Trustee or officer,
directly or indirectly, by reason of being or having been a Trustee or officer
of Registrant. The Declaration of Trust does not authorize Registrant to
indemnify any Trustee or officer against any liability to which he or she would
otherwise be subject by reason of or for willful misfeasance, bad faith, gross
negligence or reckless disregard of such person's duties.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to Trustees, officers and controlling persons, or
otherwise, Registrant has been advised that in the opinion of the Commission
such indemnification may be against public policy as expressed in the Act and
may be, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant of expenses
incurred or paid by a Trustee, officer or controlling person of Registrant in
the successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person in connection with the securities being
registered, Registrant 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 the Act and will be governed by the final adjudication of
such issue.
<PAGE>
Item 26. Business and Other Connections of Investment Adviser
Teachers Advisors, Inc. (Advisors) also provides investment management
service to TIAA Separate Account VA-1. All officers of Advisors are also
officers of TIAA-CREF Investment Management, LLC (Investment Management) and are
employees of TIAA. John Biggs is also a trustee of TIAA, CREF, TIAA-CREF
Individual & Institutional Services, Inc. ("Services") and Investment
Management, and a director of Teachers Personal Investor Services, Inc.
("TPIS"). He is Chief Executive Officer of TIAA and CREF. Martin L. Leibowitz is
a trustee of TIAA, CREF and Investment Management. He is Vice Chairman and Chief
Investment Officer of CREF and TIAA. Charles Stamm is a trustee of Investment
Management and Services, and a director of TPIS. He is General Counsel of CREF
and TIAA. Richard Adamski is also Treasurer of TPIS and Services. Richard Gibbs
is also Executive Vice President of TPIS and Services. The principal business
address of Investment Management, Services and TPIS is 730 Third Avenue, New
York, NY 10017-3206.
Mr. Biggs is also a director of Ralston Purina Company, Checkerboard Square, St.
Louis, Missouri 63164; and The Boeing Company, 7755 East Marginal Way South,
Seattle, WA 98108.
Item 27. Principal Underwriters
Teachers Personal Investors Services, Inc. ("TPIS") may be considered the
principal underwriter for the Registrant. The officers of TPIS and their
positions and offices with TPIS and the Registrant are listed in Schedule A of
Form BD as currently on file with the Commission (File No. 8-47051), the text of
which is hereby incorporated by reference.
Item 28. Location of TIAA-CREF Mutual Funds Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules promulgated thereunder will be
maintained at the Registrant's home office, 730 Third Avenue, New York NY
10017-3206, at other offices of the Registrant located at 750 Third Avenue and
485 Lexington Avenue, both in New York, NY 10017-3206, and at the offices of the
Registrant's custodian, State Street Bank and Trust Company, 225 Franklin
Street, Boston, MA 02110. In addition, certain duplicated records are maintained
at Pierce Leahy Archives, 64 Leone Lane, Chester, NY 10918.
Item 29. Management Services
State Street Bank and Trust Company, a Massachusetts trust company ("State
Street") will provide certain management-related services to the Registrant
pursuant to a Custodian Contract
<PAGE>
between the Registrant, State Street and Teachers Advisors, Inc. ("Advisors"),
the investment advisor to the Registrant. Under the Custodian Contract, State
Street will, among other things, act as custodian of the assets of the
portfolios of the Registrant, keep the Registrant's books of account and compute
the net asset value per share of the outstanding shares of each of the
Registrant's portfolios. These services will be rendered pursuant to
instructions received by State Street from Advisors or the Registrant in the
ordinary course of business.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Registrant, TIAA-CREF Mutual Funds, certifies
that it meets the requirements of Securities Act Rule 485(b) for effectiveness
of this registration statement and has duly caused this registration statement
to be signed on its behalf by the undersigned, thereto duly authorized, in the
City of New York, and state of New York, on the 26th day of January, 1999.
TIAA-CREF MUTUAL FUNDS
By: /s/ Peter C. Clapman
------------------------
Name: Peter C. Clapman
Title: Senior Vice President
Pursuant to the Securities Act of 1933, this registration statement has
been signed below by the following persons in the capacities and on the dates
indicated.
Signature Title Date
- --------- ----- ----
/s/ Thomas G. Walsh President 1/26/99
- ------------------------- (Principal Executive Officer)
Thomas G. Walsh
/s/ Scott C. Evans Executive Vice President 1/26/99
- ------------------------- (Principal Financial Officer)
Scott C. Evans
/s/ Richard L. Gibbs Executive Vice President 1/26/99
- ------------------------- (Principal Accounting Officer)
Richard L. Gibbs
<PAGE>
SIGNATURE OF TRUSTEE DATE SIGNATURE OF TRUSTEE DATE
- -------------------- ---- -------------------- ----
/s/ Robert H. Atwell 1/26/99 /s/ Bevis Longstreth 1/26/99
- ------------------------- -------------------------
Robert H. Atwell Bevis Longstreth
/s/ Elizabeth E. Bailey 1/26/99 /s/ Robert M. Lovell, Jr. 1/26/99
- ------------------------- -------------------------
Elizabeth E. Bailey Robert M. Lovell, Jr.
/s/ Joyce A. Fescke 1/26/99
- ------------------------- -------------------------
Joyce A. Fescke Stephen A. Ross
/s/ Edes P. Gilbert 1/26/99 /s/ Eugene C. Sit 1/26/99
- ------------------------- -------------------------
Edes P. Gilbert Eugene C. Sit
/s/ Stuart Tse Kong Ho 1/26/99 /s/ Maceo K. Sloan 1/26/99
- ------------------------- -------------------------
Stuart Tse Kong Ho Maceo K. Sloan
/s/ Nancy L. Jacob 1/26/99 /s/ David K. Storrs 1/26/99
- ------------------------- -------------------------
Nancy L. Jacob David K. Storrs
/s/ Marjorie Fine Knowles 1/26/99 /s/ Robert W. Vishny 1/26/99
- ------------------------- -------------------------
Marjorie Fine Knowles Robert W. Vishny
/s/ Jay O. Light 1/26/99
-------------------------
Jay O. Light
