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. 4 [X]
and
Registration Statement Under the Investment Company Act of 1940 [X]
Amendment No. 6 [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 pursuant to
paragraph (b)
[ ] 60 days after filing pursuant to paragraph
(a)(1)
[ ] 75 days after filing pursuant to paragraph
(a)(2)
[X] On April 1, 1999 pursuant to paragraph (b)
[ ] On (date) pursuant to paragraph (a)(1)
[ ] On (date) pursuant to 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.
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Prospectus, dated April 1, 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.
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TABLE OF CONTENTS
SUMMARY INFORMATION
Investment Objectives,
Strategies and Risks 3
Past Performance 8
Fees and Expenses 11
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
The Equity Funds 13
The Dual Investment
Management Strategy 13
The International Equity Fund 14
The Growth Equity Fund 15
The Growth & Income Fund 16
The Managed Allocation Fund 16
The Bond Plus Fund 18
The Money Market Fund 20
General Investment Risks 21
Year 2000 Risks 21
TIAA-CREF MUTUAL FUNDS'
Management 22
Fund Managers 23
CALCULATING SHARE PRICE 25
DIVIDENDS AND DISTRIBUTIONS 26
TAXES 26
YOUR ACCOUNT: BUYING, SELLING OR
EXCHANGING SHARES 28
Types of Accounts 28
How to Open an Account and Make
Subsequent Investments 28
How to Redeem Shares 30
How to Exchange Shares 32
Other Investor Information 34
ELECTRONIC PROSPECTUSES 35
FINANCIAL HIGHLIGHTS 36
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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.
o Current Income Volatility - Current income from an investment may fall as a
result of overall interest rate changes.
Investments in the funds are not deposits of the TIAA-CREF Trust Company FSB and
aren't insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC)
or any other government agency.
Special risks associated with particular funds are discussed in the following
fund summaries:
THE EQUITY FUNDS
THE DUAL INVESTMENT MANAGEMENT STRATEGY: The Equity Funds use TIAA-CREF's Dual
Investment Management Strategy. Each fund has a "Stock Selection" and an
"Enhanced Index" subportfolio. The Stock Selection subportfolio holds a
relatively small number of stocks that the fund manager believes offer superior
returns. These stocks are chosen using fundamental analysis. The rest of the
fund is invested in the Enhanced Index subportfolio, which seeks to outperform
each fund's benchmark index, while limiting the possibility of underperforming
the benchmark. This approach enables the funds to stay fully invested even when
the fund manager cannot find many undervalued investment opportunities for the
Stock Selection portfolio.
INTERNATIONAL EQUITY FUND
INVESTMENT OBJECTIVE: The fund seeks favorable long-term returns, mainly through
capital appreciation.
BENCHMARK INDEX: Morgan Stanley EAFE (Europe Australia Far East) Index.
PRINCIPAL INVESTMENT STRATEGIES: The fund invests in a broadly diversified
portfolio of primarily foreign equity investments. For the Stock Selection
subportfolio, the fund manager selects individual stocks, and lets the fund's
country and regional asset allocation evolve from its stock selection. The fund
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looks for companies that meet a number of criteria including sustainable growth,
consistent cash flow and attractive stock prices based on current earnings,
assets and long-term growth prospects.
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.
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.
BENCHMARK INDEX: Russell 3000(R) Growth Index (Russell 3000 is a trademark and a
service mark of the Frank Russell Company).
PRINCIPAL INVESTMENT STRATEGIES: The fund invests in stocks of companies in new
and emerging areas of the economy and companies with distinctive products or
promising market conditions. For its Stock Selection subportfolio, 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. It can invest in companies to benefit from prospective
acquisitions, reorganizations, or corporate restructurings or other special
situations. Foreign investments can be up to 40% of the portfolio.
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. 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 foreign investments.
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.
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GROWTH & INCOME FUND
INVESTMENT OBJECTIVE: The fund seeks a favorable long-term return through
capital appreciation and investment income.
BENCHMARK INDEX: S&P 500 Composite Stock Index.
PRINCIPAL INVESTMENT STRATEGIES: The fund invests in a broadly diversified
portfolio of common stocks selected for their investment potential. For its
Stock Selection subportfolio, the fund looks primarily for stocks of larger,
well-established, mature growth companies, which we believe are fairly priced,
show the potential to grow faster than the rest of the market, and offer a
growing stream of dividend income. The fund may also invest in a few rapidly
growing smaller companies and may have up to 20% of assets in foreign
securities.
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 foreign investments.
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. Usually, the fund will invest approximately 60 percent
of its assets in the Growth & Income, International Equity and Growth Equity
Funds and approximately 40 percent in the Bond PLUS Fund. As a result, the fund
holds a mix of domestic stocks of companies of all sizes, foreign stocks, and
bonds. When changes in financial and economic conditions affect the relative
attractiveness of the markets in which those underlying funds are invested, we
will adjust these percentages up and down by up to 15 percent. For example, we
would increase the fund's holdings in the Bond PLUS Fund whenever we believe the
equity markets will decline, or reduce the fund's holdings in the International
Equity Fund when we believe foreign markets are unusually volatile.
SPECIAL INVESTMENT RISKS: The fund shares the risks of the funds it invests in.
For its investments in the International Equity fund, it is subject to the
special risks of foreign investing. The fund's investments in the Growth Equity
Fund are subject to the risk that stocks of smaller, lesser-known companies
whose stock prices may fluctuate more
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than those of larger companies. For the fund's investments in the Bond PLUS
Fund, it is subject to the risks of investments in non-investment grade
securities (also called "high-yield" or "junk" bonds) and in mortgage-backed
securities. Because the Managed Allocation Fund 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.
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's portfolio is divided into two
segments. The first segment, which makes up at least 75 percent of the fund, is
invested primarily in a broad range of the debt securities in the Lehman
Brothers Aggregate Bond Index. The majority of this segment is invested in U.S.
Treasury and Agency securities, corporate bonds and mortgage-backed securities.
The fund holds mainly high-quality securities rated in the top four credit
categories by Moody's or Standard & Poor's. The fund will overweight or
underweight individual securities or sectors as compared to their weight in the
Lehman Index depending on where we find undervalued, overlooked or misunderstood
issues that we believe offer the potential for superior returns. The fund's
second segment seeks enhanced returns through investments 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: In addition to general interest rate risk for
fixed-income securities, investments in mortgage-backed securities are subject
to prepayment risk. This is the possibility that a change in interest rates
causes the holders of the underlying mortgages to 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. 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. Illiquid securities may be difficult to sell
for their fair market value.
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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.
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 help illustrate some of the risks of
investing in the funds, and how investment performance varies. The bar charts
show each fund's performance in 1998, and below the chart we note each fund's
best and worst returns for a calendar quarter since the funds' inception on
September 2, 1997. The performance table shows each fund's returns over the 1998
calendar year and since 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.
INTERNATIONAL EQUITY FUND.
[The following table represents a chart in the printed piece.]
International Equity Fund ............. 19.27
Since inception, the highest return for a quarter was 21.86%, for the quarter
ended December 31, 1998, and the lowest return for a quarter was -16.06%, for
the quarter ended September 30, 1998.
GROWTH EQUITY FUND.
[The following table represents a chart in the printed piece.]
Growth Equity Fund ....................... 35.97
Since inception, the highest return for a quarter was 28.36%, for the quarter
ended December 31, 1998, and the lowest return for a quarter was -12.27%, for
the quarter ended September 30, 1998.
GROWTH & INCOME FUND.
[The following table represents a chart in the printed piece.]
Growth & Income Fund ....................... 30.51
Since inception, the highest return for a quarter was 22.99%, for the quarter
ended December 31, 1998, and the lowest return for a quarter was -10.98%, for
the quarter ended September 30, 1998.
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MANAGED ALLOCATION FUND.
[The following table represents a chart in the printed piece.]
1998
Managed Allocation Fund ......................... 21.24
Since inception, the highest return for a quarter was 14.01%, for the quarter
ended December 31, 1998, and the lowest return for a quarter was -5.69%, for the
quarter ended September 30, 1998.
BOND PLUS FUND.
[The following table represents a chart in the printed piece.]
Bond Plus Fund ................................ 8.94
Since inception, the highest return for a quarter was 4.46%, for the quarter
ended September 30, 1998, and the lowest return for a quarter was 0.14%, for the
quarter ended December 31, 1998.
MONEY MARKET FUND.
[The following table represents a chart in the printed piece.]
Money Market Fund ....................... 5.45
Since inception, the highest return for a quarter was 1.38%, for the quarter
ended December 31, 1997, and the lowest return for a quarter was 1.28%, for the
quarter ended December 31, 1998.
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AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
One year Since inception
(January 1, 1998 to (September 2, 1997 to
December 31, 1998) December 31, 1998)
<S> <C> <C>
The International Equity Fund 19.27% 12.17%
Morgan Stanley Capital International EAFE
(Europe, Australia and Far East) Index 20.00% 12.37%
The Growth Equity Fund 35.97% 33.63%
Russell 3000(R)Growth Index 35.02% 30.67%
The Growth & Income Fund 30.51% 29.74%
S&P 500 Stock Index 28.58% 28.41%
The Managed Allocation Fund 21.24% 20.21%
Morgan Stanley Capital International EAFE
20.00% 12.37%
S&P 500 Stock Index 28.58% 28.41%
Lehman Brothers Aggregate Bond Index 8.69% 10.00%
Composite Index (12% Morgan Stanley EAFE,
48% S&P 500 Stock Index and
40% Lehman Brothers Aggregate Bond Index) 19.59% 19.24%
The Bond PLUS Fund 8.94% 10.23%
Lehman Brothers Aggregate Bond Index 8.69% 10.00%
The Money Market Fund 5.45% 5.47%
IBC Money Fund Report - All Taxable Average 5.04% 5.11%
</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>
TOTAL FUND NET
MANAGEMENT OTHER OPERATING FEE CURRENT
FEE EXPENSES EXPENSES WAIVER(1) FEES
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
The International Equity Fund 0.99% 0 0.99% 0.50% 0.49%
- --------------------------------------------------------------------------------------------
The Growth Equity Fund 0.95% 0 0.95% 0.50% 0.45%
- --------------------------------------------------------------------------------------------
The Growth & Income Fund 0.93% 0 0.93% 0.50% 0.43%
- --------------------------------------------------------------------------------------------
The Managed Allocation Fund(2) 0.89% 0 0.89% 0.50% 0.39%
- --------------------------------------------------------------------------------------------
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. The
expenses in the table are based on a typical asset mix for the Managed
Allocation Fund: 24% Growth Equity Fund, 24% Growth & Income Fund, 12%
International Equity Fund and 40% Bond PLUS Fund.
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EXAMPLE
This example is intended to help you compare the cost of investing in the
TIAA-CREF Mutual 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. A portion of the investment
management fee has been waived through July 1, 2000. The example reflects the
expiration of the waiver at that time. Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 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) $40 $207 $418 $1,026
- --------------------------------------------------------------------------------
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. The expenses in the table are based on a
typical asset mix for the Managed Allocation Fund: 24% Growth Equity Fund,
24% Growth & Income Fund, 12% International Equity Fund and 40% Bond PLUS
Fund.
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INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
Each of the funds 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 (SAI).
There's no guarantee that any fund will meet its investment objective.
THE EQUITY FUNDS
THE DUAL INVESTMENT MANAGEMENT STRATEGYSM
The equity funds use TIAA-CREF's Dual Investment Management Strategy, which
works like this:
Each equity fund has two separate subportfolios called the "Stock Selection"
subportfolio and the "Enhanced Index" subportfolio. The relative sizes of these
two segments vary as the fund manager shifts money between them in response to
investment opportunities.
The Stock Selection subportfolio 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 subportfolio. Each equity fund's
stock selection subportfolio is described further below.
Money that is not invested in an equity fund's Stock Selection subportfolio 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 equity 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 Dual Investment Strategy enables the funds to stay invested even when the
fund manager cannot find many undervalued investment opportunities for the Stock
Selection portfolio.
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The benchmarks for each fund's Enhanced Index subportfolio 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
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 always have at
least 80% of its assets in securities of companies located in at least three
different countries, other than the United States.
For the Stock Selection subportfolio, we select individual stocks, and let the
fund's country and regional asset allocation evolve from that stock selection.
We do, however, regularly monitor the fund's sector and country exposure in
order to control risk.
The fund looks for companies with
o sustainable growth
o focused management with successful track records
o unique and easy to understand franchises (brands)
o undervalued stock prices based on current earnings, assets, and long-term
growth prospects
o consistent generation of free cash flow
INVESTMENT RISKS: The fund is subject to the general investment risks described
on page 21. In addition, 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
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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. The fund's exposure to emerging markets is currently
limited to those investments that the Enhanced Index subportfolio uses to
replicate the emerging markets which are part of the Morgan Stanley EAFE Index.
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
have at least 80% of total assets in equity securities that have the potential
for capital appreciation.
The fund's Stock Selection subportfolio 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
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other foreign markets and may be denomi- nated in foreign currencies or other
units of account.
INVESTMENT RISKS: The fund is subject to the general investment risks described
on page 21. In addition, there are special risks to investing in growth stocks.
The fund 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. The fund's foreign holdings are
subject to the risks of foreign investments described for the International
Equity Fund on pages 14 and 15.
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, at least 80% of the fund's portfolio will
be in income-producing equity securities selected for their investment
potential.
The fund has a broadly diversified portfolio of common stocks. The fund's Stock
Selection subportfolio concentrates on individual companies rather than sectors
or industries. The fund looks for stocks of larger, well-established, mature
growth companies, which we believe are fairly priced, show the potential to grow
faster than the rest of the market, and offer a growing stream of dividend
income. In particular, we look for companies ranked first, second or third in
their industries, with premium product lines. We also look for companies with
shareholder-oriented management dedicated to creating shareholder value. The
fund may also invest in rapidly growing smaller companies. It can have up to 20%
of assets in foreign securities.
INVESTMENT RISKS. The fund is subject to the general investment risks described
on page 21. Its foreign holdings are subject to the risks of foreign investments
described for the International Equity Fund on pages 14 and 15.
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
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investments in TIAA-CREF Mutual Funds' other investment funds, each of which is
described in this prospectus.
Normally, about 60 percent of the Managed Allocation Fund's assets will be in
shares of the Growth & Income, International Equity and Growth Equity Funds, and
about 40 percent will be in shares of the Bond PLUS Fund. As a result, the
fund's returns reflect investments in a mix of domestic stocks of companies of
all sizes, foreign equities, and a variety of fixed income instruments. To
maintain an appropriate allocation, we monitor the foreign and domestic equity
markets, as well as overall financial and economic conditions. If the relative
attractiveness of the markets in which the underlying funds are invested
changes, we can adjust the percentage investments in the underlying funds up and
down by up to 15 percent. The fund might sometimes be even more heavily weighted
toward equities or fixed income, if we believe market conditions warrant it. For
example, we would increase the fund's holdings in the Bond PLUS Fund in periods
where we believe the equity markets will decline, or reduce the fund's holdings
in the International Equity Fund when we believe foreign markets are unusually
volatile.
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. We can't guarantee that this
strategy will be successful.
INVESTMENT RISKS: The Managed Allocation Fund shares the risks of the funds it
invests in. For more about these risks, see the "Investment Risks" sections of
the International Equity, Growth Equity, and Bond PLUS Funds as well as the
general investment risks described on page 21.
Because the Managed Allocation Fund 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 their fiduciary
duties to each fund. The Board believes it has
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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.
The fund's portfolio is divided into two segments. The first segment, which
makes up at least 75 percent of the fund, is invested primarily in a broad range
of the debt securities in the Lehman Brothers Aggregate Bond Index. The majority
of this segment is invested in U.S. Treasury and Agency securities, corporate
bonds and mortgage-backed securities. The fund's holdings are mainly
high-quality securities rated in the top four credit categories by Moody's or
Standard & Poor's, or that we determine are of comparable quality. The fund will
overweight or underweight individual securities or sectors as compared to their
weight in the Lehman Index depending on where we find undervalued, overlooked or
misunderstood issues that we believe offer the potential for superior returns
compared to the Lehman Index. This segment can make foreign investments, but we
don't expect them to exceed 15 percent of the fund's assets. The fund can also
invest in money market instruments.
The other segment of the fund is invested in securities with special features in
an effort to improve the fund's total return. This segment primarily will be
invested in 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
percent of the fund's assets, but if market conditions warrant it could grow as
large as 25 percent. However, investments in illiquid securities will never be
more than 15 percent of the fund's assets.
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
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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, and interest-only
mortgage-backed securities are more sensitive to prepayment risk than
traditional mortgage-backed securities. Prepayment risk is described below in
the Investment Risks section.
The fund may use a trading technique called "mortgage rolls," in which we "roll
over" an investment in a mortgage-backed security before its settlement date in
exchange for a similar security with a later settlement date. The fund may also
engage in duration-neutral relative value trading, a technique in which we buy
and sell government bonds of identical credit quality but different maturity
dates in an attempt to take advantage of spread differentials along the yield
curve. These techniques are both designed to enhance the fund's returns, but
they do increase the fund's portfolio turnover rate. However, we don't expect
these techniques to significantly raise the fund's capital gains. There are no
commissions on purchases and sales of fixed income securities, so increased
trading will not raise the fund's expenses.
INVESTMENT RISKS. 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 would comparable changes
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. Also,
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 the Bond
PLUS 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 economic trends and other market events.
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The fund can hold illiquid securities. The risk of investing in illiquid
securities is that they may be difficult to sell for their fair market value.
The fund's investments in mortgage-backed securities are subject to prepayment
risk, which is the possibility that a change in inter- est rates causes the
holders of the underlying mortgages to pay off their mortgage loans sooner than
expected. If that happened, 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 dollar-denominated 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;
(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;
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(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.
INVESTMENT RISKS. The fund is subject to the general investment risks described
below.
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,
investments can be subject to current income volatility, which is 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 year.
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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 it relies on do not properly process and calculate information
and data involving dates from and after January 1, 2000. These computer systems
include those used by Teachers Advisors, Inc., the Funds' investment managers,
and other service providers. Teachers Advisors and TIAA-CREF Mutual Funds 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.
If the systems the funds rely on do fail or produce faulty data, there could be
delays in processing transactions, or we may temporarily be unable to engage in
normal business activities. Also, a fund's performance could be affected if a
systems failure at a company or government entity, either in the U.S. or abroad
(where Year 2000 compliance may be less prevalent), affects the price of
securities that the fund owns.
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
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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. He is also one of three co-managers of
the CREF Global Equities Account. He has managed the Fund since its inception.
From 1995 to 1997, he was responsible for company research and analysis for the
CREF Global Equities Account. Previously he was a senior securities analyst for
the CREF Stock Account. Mr Semenuk joined TIAA-CREF in 1993.
The Growth Equity Fund is managed by Jeffrey Siegel, Managing Director, Teachers
Advisors.He has managed the fund since October 1997 Mr. Siegel is also
responsible for managing the investments of the CREF Growth Account. From 1992
to 1997, he was manager of CREF Global Equities Account. Mr. Siegel joined
TIAA-CREF in 1988.
The Growth & Income Fund is managed by Carlton N. Martin, Managing
Director-Global Research, Teachers Advisors.He has managed the fund since its
inception. He has also been one of three co-managers of the CREF Global Equities
Account since 1998. Prior to 1998, he was responsible for investments in the
chemical, paper and forest products as well as the environmental, engineering
and construction industries for certain CREF accounts. Mr. Martin joined
TIAA-CREF in 1980.
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 has since then been responsible for
global equity research for the CREF accounts. He has been a manager of the Fund
since its inception. 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.
He has been a manager of the Fund since July 1998. Mr. Gryzybowski also has
supervisory responsibility over investments in CREF's Bond Market, Money Market
and Inflation Linked Bond
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Accounts since 1998. Previously, he was responsible for TIAA's public market
mortgage and asset-backed portfolios.
The Bond PLUS Fund is managed by Elizabeth D. Black, Director, Portfolio
Management, Teachers Advisors. She has managed the Fund since its inception.
Ms. Black has also been responsible for managing the investments in CREF's Bond
Market Account and the bond portion of CREF's Social Choice Account since 1997.
Prior to 1997, she was sector manager of TIAA's mortgage-backed securities
group. Ms. Black joined TIAA-CREF in 1987.
The Money Market Fund is managed by Steven Traum, Managing Director, Money
Markets and Inflation Linked Bond, Teachers Advisors. He has managed the fund
since its inception. Mr. Traum is also responsible for managing the investments
of the CREF Money Market (since 1988) and Inflation Linked Bond Accounts (since
1997). He manages the cash components of the other TIAA-CREF Mutual Funds and
the CREF Accounts. Mr. Traum joined TIAA-CREF in 1983.
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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 an 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.
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 funds.
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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.
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.
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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, depending on how
long a fund held the securities it sold. 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 was 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 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 consultants 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 34.) 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
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
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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.
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 IRA 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.
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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
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 34). 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.
30
<PAGE>
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 34).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 have already
written 24 checks in one year.
31
<PAGE>
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 of 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 least $25, and an exchange to a new fund must be at least
$250.
32
<PAGE>
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 canceled.
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.
33
<PAGE>
o An exchange is considered a sale of securities, and therefore is taxable.
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. An intermediary could also require you to place an order
before 4 p.m. to get the NAV per share for that day.
MINIMUM ACCOUNT SIZE. Due to the relatively high cost of maintaining smaller
accounts, we reserve the right to redeem shares in any account if, as the result
of redemptions, the value of that account drops below $100. You will be allowed
at least 60 days, after written notice, to make an additional investment to
bring your account value up to at least the specified minimum before the
redemption is processed.
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
34
<PAGE>
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,
all states except Georgia, Louisiana, New York, North Carolina and Vermont allow
transfer on death. Transfer on death is also currently unavailable in the
District of Columbia.
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.
35
<PAGE>
FINANCIAL HIGHLIGHTS
The Financial Highlights table is intended to help you understand the funds'
financial performance since they began operations on July 17, 1997. Certain
information reflects financial results for a single share of a fund. The total
returns in the table show the rates that an investor would have earned on an
investment in a fund (assuming reinvestment of all dividends and distributions).
The information has been audited by Ernst & Young, LLP, independent auditors.
Their report appears in TIAA-CREF Mutual Funds' Annual Report, which contains
additional information about the funds. It is available without charge upon
request.
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH EQUITY
EQUITY FUND FUND
===============================================================================================================
SELECTED PER SHARE DATA JULY 17, 1997 JULY 17, 1997
(COMMENCE- (COMMENCE-
YEAR MENT OF YEAR MENT OF
ENDED OPERATIONS ENDED OPERATIONS
DEC. 31, TO DEC. 31, DEC. 31, TO DEC. 31,
1998 1997(1) 1998 1997(1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $8.92 $10.00 $10.12 $10.00
- ---------------------------------------------------------------------------------------------------------------
Gain (loss) from investment operations:
Net investment income 0.09 0.07 0.03 0.06
Net realized and unrealized gain (loss)
on investments 1.63 (1.07) 3.61 0.28
- ---------------------------------------------------------------------------------------------------------------
Total gain (loss) from investment
operations 1.72 (1.00) 3.64 0.34
- ---------------------------------------------------------------------------------------------------------------
Less distributions from:
Net Investment Income (0.08) (0.07) (0.03) (0.06)
In excess of net investment income (0.02) (0.01) -- --
Net realized gains -- -- (0.08) (0.16)
- ---------------------------------------------------------------------------------------------------------------
Total distributions (0.10) (0.08) (0.11) (0.22)
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.54 $8.92 $13.65 $10.12
- ---------------------------------------------------------------------------------------------------------------
TOTAL RETURN 19.27% (10.09)% 35.97% 3.44%
RATIOS AND SUPPLEMENTAL DATA
Net assets at end of period (in thousands) $118,555 $47,758 $296,362 $64,487
Ratio of expenses to average net assets
before expense waiver 0.99% 0.46% 0.95% 0.44%
Ratio of expenses to average net assets
after expense waiver 0.49% 0.23% 0.45% 0.21%
Ratio of net investment income
to average net assets 1.23% 0.56% 0.37% 0.68%
Portfolio turnover rate 27.20% 4.56% 49.91% 29.44%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The percentages shown for this period are not annualized.
<TABLE>
<CAPTION>
GROWTH & INCOME MANAGED
FUND ALLOCATION FUND
===============================================================================================================
SELECTED PER SHARE DATA JULY 17, 1997 JULY 17, 1997
(COMMENCE- (COMMENCE-
YEAR MENT OF YEAR MENT OF
ENDED OPERATIONS ENDED OPERATIONS
DEC. 31, TO DEC. 31, DEC. 31, TO DEC. 31,
1998 1997(1) 1998 1997(1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.32 $10.00 $10.01 $10.00
- ---------------------------------------------------------------------------------------------------------------
Gain (loss) from investment operations:
Net investment income 0.10 0.07 0.34 0.23
Net realized and unrealized gain (loss)
on investments 3.04 0.32 1.76 0.01
- ---------------------------------------------------------------------------------------------------------------
Total gain (loss) from investment
operations 3.14 0.39 2.10 0.24
- ---------------------------------------------------------------------------------------------------------------
Less distributions from:
Net Investment Income (0.10) (0.07) (0.32) (0.23)
In excess of net investment income -- -- -- --
Net realized gains (0.03) -- -- --
- ---------------------------------------------------------------------------------------------------------------
Total distributions (0.13) (0.07) (0.32) (0.23)
- ---------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.33 $10.32 $11.79 $10.01
- ---------------------------------------------------------------------------------------------------------------
TOTAL RETURN 30.51% 3.96% 21.24% 2.44%
RATIOS AND SUPPLEMENTAL DATA
Net assets at end of period (in thousands) $232,625 $61,822 $162,867 $59,087
Ratio of expenses to average net assets
before expense waiver 0.93% 0.43% 0.00% 0.00%
Ratio of expenses to average net assets
after expense waiver 0.43% 0.20% 0.00% 0.00%
Ratio of net investment income
to average net assets 0.97% 0.76% 2.80% 2.46%
Portfolio turnover rate 71.49% 1.46% 4.78% 0.00%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The percentages shown for this period are not annualized.
36
<PAGE>
<TABLE>
<CAPTION>
BOND PLUS MONEY MARKET
FUND FUND
===============================================================================================================
SELECTED PER SHARE DATA JULY 17, 1997 JULY 17, 1997
(COMMENCE- (COMMENCE-
YEAR MENT OF YEAR MENT OF
ENDED OPERATIONS ENDED OPERATIONS
DEC. 31, TO DEC. 31, DEC. 31, TO DEC. 31,
1998 1997(1) 1998 1997(1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.09 $10.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------
Gain (loss) from investment operations:
Net investment income 0.56 0.27 0.05 0.02
Net realized and unrealized gain (loss)
on investments 0.32 0.20
- ---------------------------------------------------------------------------------------------------------------
Total gain (loss) from investment
operations 0.88 0.47 0.05 0.02
Less distributions from:
NET INVESTMENT INCOME (0.56) (0.27) (0.05) (0.02)
In excess of net investment income -- -- -- --
Net realized gains (0.11) (0.11) -- --
- ---------------------------------------------------------------------------------------------------------------
Total distributions (0.67) (0.38) (0.05) (0.02)
Net asset value, end of period $10.30 $10.09 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------
TOTAL RETURN 8.94% 4.79% 5.45% 2.51%
RATIOS AND SUPPLEMENTAL DATA
Net assets at end of period (in thousands) $155,034 $58,403 $225,187 $63,605
Ratio of expenses to average net assets
before expense waiver 0.80% 0.37% 0.79% 0.36%
Ratio of expenses to average net assets
after expense waiver 0.30% 0.14% 0.29% 0.13%
Ratio of net investment income
to average net assets 5.66% 2.72% 5.28% 2.49%
Portfolio turnover rate 531.92% 143.61% N/A N/A
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The percentages shown for this period are not annualized.
37
<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.
811-08055
<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 April 1, 1999.
<PAGE>
TABLE OF CONTENTS
INVESTMENT OBJECTIVES, POLICIES, AND RESTRICTIONS ......................... 2
Fundamental Policies ................................................... 2
Investment Policies and Risk Considerations ............................ 3
MANAGEMENT OF THE TIAA-CREF MUTUAL FUNDS .................................. 10
Trustees and Officers of the TIAA-CREF Mutual Funds .................... 10
Trustee Compensation ................................................... 13
PRINCIPAL HOLDERS OF SECURITIES ........................................... 14
INVESTMENT ADVISORY AND OTHER SERVICES .................................... 14
ABOUT THE TIAA-CREF MUTUAL FUNDS AND THE SHARES ........................... 15
Indemnification of Shareholders ........................................ 15
Indemnification of Trustees ............................................ 15
Limitation of Fund Liability ........................................... 15
Shareholder Meetings and Voting Rights ................................. 15
Additional Portfolios .................................................. 15
Dividends and Distributions ............................................ 16
PRICING OF SHARES ......................................................... 16
Investments for Which Market Quotations Are
Readily Available .................................................... 16
Foreign Investments .................................................... 16
Debt Securities ........................................................ 16
Special Valuation Procedures for the
Money Market Fund .................................................... 16
Options and Futures .................................................... 17
Investments for Which Market Quotations Are Not
Readily Available .................................................... 17
TAX STATUS ................................................................ 17
BROKERAGE ALLOCATION ...................................................... 18
Underwriters ........................................................... 19
CALCULATION OF PERFORMANCE DATA ........................................... 20
Total Return Calculations .............................................. 20
Yield Calculations ..................................................... 20
Total Return ........................................................... 21
Performance Comparisons ................................................ 21
Illustrating Compounding ............................................... 22
Net Asset Value ........................................................ 22
Moving Averages ........................................................ 22
VOTING RIGHTS ............................................................. 22
LEGAL MATTERS ............................................................. 22
EXPERTS ................................................................... 22
ADDITIONAL CONSIDERATIONS ................................................. 22
FINANCIAL STATEMENTS ...................................................... 23
1
<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;
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; and
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.
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.
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.
2
<PAGE>
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.
These investments will be similar to those in the first segment of the Bond Plus
Fund. 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 20), 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 21).
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 18). 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.
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 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
antici-
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pation 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 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.
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
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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 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.
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."
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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 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, 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.
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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.
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 move-
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ments). Such cross-hedges are 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 Europe in the global economy. As
a result, a great deal of interest and activity has been generated aimed at
understanding and benefitting 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.
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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 gains 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.
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.
9
<PAGE>
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 (*).
<TABLE>
<CAPTION>
TRUSTEES AGE PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ------- --- ----------------------------------
<S> <C> <C>
Robert H. Atwell 68 President Emeritus, American Counsel
447 Bird Key Drive on Education and senior consultant for
Sarasota, FL 34236 A.T. Kearney, since November 1996.
Previously, President, American
Counsel on Education.
Elizabeth E. Bailey (1) 60 John C. Hower Professor of Public Policy and Management,
The Wharton School The Wharton School of the University of Pennsylvania.
University of Pennsylvania
Suite 3100
Steinberg-Dietrich Hall
Philadelphia, PA 19104-6372
John H. Biggs (3) 62 Chairman, Chief Executive Officer, and President, CREF and
TIAA-CREF TIAA, since 1997. Previously, Chairman and Chief Executive
730 Third Avenue Officer, CREF and TIAA.
New York, NY 10017
Joyce A. Fecske (1) 52 Vice President Emerita, DePaul University, since 1994.
4800 South Karlov Avenue Formerly, Vice President for Human Resources, DePaul
Chicago, IL 60632 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 Investment of Hawaii, Inc.;
Capital Investment of Hawaii, Inc. Chairman, Gannett Pacific Corporation.
Suite 1700
733 Bishop Street
Honolulu, HI 96813
Nancy L. Jacob (2) 56 President and Managing Partner, Windermere Investment
Windermere Investment Associates Associates, since January 1997. Previously, Chairman and
121 S.W. Morrison Street Chief Executive Officer, CTC Consulting, Inc. and Managing
Portland, OR 97204 Director, Capital Trust Company.
Marjorie Fine Knowles 59 Professor of Law, Georgia State University College of Law.
College of Law
Georgia State University
University Plaza
Atlanta, GA 30303-3092
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
TRUSTEES AGE PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ------- --- ----------------------------------
<S> <C> <C>
Martin L. Leibowitz (3) 62 Vice Chairman and Chief Investment Officer, CREF and TIAA,
TIAA-CREF since 1995. President, TIAA-CREF Investment Management, Inc.
730 Third Avenue (Investment Management), and President, Teachers Advisors, Inc.
New York, NY 10017 (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 University
Harvard Business School Graduate School of Business Administration.
Morgan Hall 489
Soldiers Field
Boston, MA 02163
Bevis Longstreth (2) 65 Of Counsel, Debevoise & Plimpton, since 1998. Formerly,
Debevoise & Plimpton Partner, Debevoise & Plimpton. Adjunct Professor of Law,
875 Third Avenue Columbia University.
New York, NY 10022
Robert M. Lovell, Jr. (2) 68 Founding Partner, First Quadrant L.P. Formerly, Chairman and
First Quadrant L.P. Chief Executive Officer, First Quadrant Corp. (Investment
100 Campus Drive Management Firm).
P.O. Box 939
Florham Park, NJ 07932
Stephen A. Ross (2) 55 Franco Modigliani Professor of Finance and Management,
Sloan School of Management Sloan School of Management, Massachusetts Institute of
Massachusetts Institute of Technology Technology, since 1998. Co-Chairman, Roll & Ross Asset
77 Massachusetts Avenue Management Corp.
Cambridge, MA 02139
Eugene C. Sit (3) 60 Chairman, Chief Executive and Chief Investment Executive
Sit Investment Associates, Inc. Officer, Sit Investment Associates, Inc. and Sit/Kim
4600 Norwest Center International Investment Associates, Inc.
90 South Seventh Street
Minneapolis, MN 55402
Maceo K. Sloan (2) 49 Chairman, President, and Chief Executive Officer, Sloan
NCM Capital Management Group, Inc. Financial Group, Inc., and NCM Capital Management Group, Inc.
Suite 400
103 West Main Street
Durham, NC 27701-3638
David K. Storrs (2) 54 President and Chief Executive Officer, Alternative Investment
Alternative Investment Group, LLC Group, L.L.C., since August 1996. Adviser to the President,
65 South Gate Lane The Common Fund, since January 1996. Formerly, President and
Southport, CT 06490 Chief Executive Officer, The Common Fund.
Robert W. Vishny (3) 39 Eric J. Gleacher Professor of Finance, University of Chicago
Graduate School of Business Graduate School of Business. Founding Partner, LSV Asset
University of Chicago Management.
1101 East 58th Street
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.
11
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH
OFFICERS* AGE REGISTRANT PRINCIPAL OCCUPATION(S) DURING PAST 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 CREF,
Vice President 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 CREF,
Vice President since March 1993. Executive Vice President,
Advisors, Investment Management, TPIS and
TIAA-CREF Individual & Institutional Services, Inc.
("Services").
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 CREF,
and Treasurer 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.
12
<PAGE>
TRUSTEE 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 ("CREF"), TIAA Separate Account VA-1, 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 annuity accounts, in predetermined percentages. Benefits will
normally 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 normally paid in a lump sum after the trustee leaves the board.
<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> <C>
Robert H. Atwell ....................... $300 $77 $49,000
Elizabeth E. Bailey .................... $286 $69 $52,000
Gary P. Brinson ........................ $240 $78 $38,500
Joyce A. Fecske ........................ $292 $74 $49,000
Edes P. Gilbert ........................ $247 $67 $46,000
Stuart Tse Kong Ho ..................... $254 $74 $43,000
Nancy L. Jacob ......................... $226 $71 $40,000
Marjorie Fine Knowles .................. $278(2) $71 $49,000
Jay O. Light ........................... $251 $78 $40,000
Bevis Longstreth ....................... $255 $74 $43,000
Robert M. Lovell, Jr. .................. $263(2) $71 $46,000
Stephen A. Ross ........................ $255(2) $77 $41,500
Eugene C. Sit .......................... $294 $75 $49,000
Maceo K. Sloan ......................... $263 $71 $46,000
David K. Storrs ........................ $270 $71 $47,500
Robert W. Vishny ....................... $281 $74 $47,500
</TABLE>
(1) INCLUDES EARNINGS, IF ANY, ON AMOUNTS CONTRIBUTED.
(2) THIS COMPENSATION, OR A PORTION OF IT, WAS NOT ACTUALLY PAID BASED ON THE
TRUSTEE'S ELECTION TO DEFER RECEIPT OF PAYMENT IN ACCORDANCE WITH THE
PROVISIONS OF A DEFERRED COMPENSATION PLAN FOR NON-OFFICER TRUSTEES.
13
<PAGE>
PRINCIPAL HOLDERS OF SECURITIES
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 12, 1999:
International Equity 37.07%
Growth Equity 13.85%
Growth & Income 16.94%
Bond Plus 20.09%
Money Market 18.49%
Managed Allocation 33.64%
As of March 23, 1999, Miter & Co. owned 17.9% of the shares of the International
Equity Fund.
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 1997 and 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):
<TABLE>
<CAPTION>
GROSS WAIVED NET
----------------------- ------------------- --------------------
1997 1998 1997 1998 1997 1998
<S> <C> <C> <C> <C> <C> <C>
International Equity Fund $215,768 $ 784,003 $108,974 $395,961 $106,794 $388,042
Growth Equity Fund $229,041 $1,511,154 $120,548 $795,344 $108,493 $715,810
Growth & Income Fund $222,604 $1,302,642 $119,679 $700,345 $102,925 $602,297
Bond PLUS Fund $190,656 $ 836,888 $119,160 $523,055 $ 71,496 $313,833
Money Market Fund $191,153 $1,044,565 $120,983 $661,117 $ 70,170 $383,448
</TABLE>
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, serves 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.
Teachers Insurance and Annuity Association of America (TIAA), an insurance
company, 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.
14
<PAGE>
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
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 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.
15
<PAGE>
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,
shareholders of the affected fund are entitled to receive their proportionate
share of the assets which are attributable to their 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 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 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 deter-
16
<PAGE>
mined 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 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 fund 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 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 ending December 31) and at least 98
percent of its net capital gains (as of the twelve months ending 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
divi-
17
<PAGE>
dends 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
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 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 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.
18
<PAGE>
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 $179,866, $191,941, and $203,403, 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 1997 was
as follows:
FUND COMMISSIONS
- ---- -----------
Growth & Income $ 8,614
International Equity $229,055
Growth Equity $ 13,817
The aggregate amount of brokerage commissions paid by the Funds during 1998 was
as follows:
FUND COMMISSIONS
- ---- -----------
Growth & Income $203,003
International Equity $179,866
Growth Equity $191,941
During 1998, certain of the Funds acquired securities of certain of the regular
brokers or dealers or their parents. These entities and the value of a Fund's
aggregate holdings in the securities of those entities are set forth below:
Regular Broker or Dealer Based on Brokerage Commissions Paid:
<TABLE>
<CAPTION>
FUND BROKER PARENT HOLDINGS (US$)
- ---- ------ ------ --------------
<S> <C> <C>
International Equity HSBC HSBC Holdings $587,050.99
Nomura Nomura Securities $174,650.35
</TABLE>
Regular Broker or Dealer based on entities acting as principal:
<TABLE>
<CAPTION>
FUND BROKER PARENT HOLDINGS (US$)
- ---- ------ ------ --------------
<S> <C> <C>
Growth & Income Chase Securities, Inc. Chase Manhattan Corp. 1,020,937.50
Lehman Brothers, Inc. Lehman Brothers Holdings, Inc. 114,562.50
Morgan (J.P.) Securities Corp. Morgan (J.P.) & Co., Inc. 367,718.75
Morgan Stanley & Co., Inc. Morgan Stanley, Dean Witter & Co. 857,680.00
Salomon Smith Barney Inc. Citigroup, Inc. 2,405,997.00
International Equity Credit Suisse First Boston Credit Suisse Group 391,341.12
Money Market Morgan Stanley Co. Morgan Stanley, Dean Witter & Co. 4,390,433.83
Morgan (JP) Securities Morgan (J.P.) &Co., Inc. 4,123,431.15
Goldman Sachs Goldman Sachs Group LP 4,000,478.04
Merrill Lynch Merrill Lynch &Co., Inc. 1,000,000.00
Bond PLUS Salomon Smith Barney, Inc. Citigroup, Inc. 3,035,760.00
</TABLE>
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 aggre-
19
<PAGE>
gate amount of purchase payments for shares of the Funds during each month. TPIS
was paid $3,081,010 and $406,602 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. Currently, TPIS has entered into a Selling Agreement with TIAA-CREF
Individual & Institutional Services ("Services") that permits Services to
distribute the shares of the Mutual Funds on a limited basis.
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).
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, 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
20
<PAGE>
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:
INTERNATIONAL EQUITY FUND
PERIOD AVERAGE ANNUAL RETURN
- ------ --------------------
1 Year (January 1, 1998 to 19.27%
December 31, 1998)
Since inception
(September 2, 1997 to 12.17%
December 31, 1998)
GROWTH EQUITY FUND
PERIOD AVERAGE ANNUAL RETURN
- ------ --------------------
1 Year (January 1, 1998 to 35.97%
December 31, 1998)
Since inception
(September 2, 1997 to 33.63%
December 31, 1998)
GROWTH & INCOME FUND
PERIOD AVERAGE ANNUAL RETURN
- ------ --------------------
1 Year (January 1, 1998 to 30.51%
December 31, 1998)
Since inception
(September 2, 1997 to 29.74%
December 31, 1998)
MANAGED ALLOCATION FUND
PERIOD AVERAGE ANNUAL RETURN
- ------ --------------------
1 Year (January 1, 1998 to 21.24%
December 31, 1998)
Since inception
(September 2, 1997 to 20.21%
December 31, 1998)
BOND PLUS FUND
PERIOD AVERAGE ANNUAL RETURN
- ------ --------------------
1 Year (January 1, 1998 to 8.94%
December 31, 1998)
Since inception
(September 2, 1997 to 10.23%
December 31, 1998)
MONEY MARKET FUND
PERIOD AVERAGE ANNUAL RETURN
- ------ --------------------
1 Year (January 1, 1998 to 5.45%
December 31, 1998)
Since inception
(September 2, 1997 to 5.47%
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
21
<PAGE>
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
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
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.
22
<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.
23
<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 16 through 63 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 February 26, 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).
**Filed herewith.
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.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
<PAGE>
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 between the Registrant, State Street
and Teachers Advisors, Inc. ("Advisors"), the investment advisor to the
Registrant. Under
<PAGE>
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 day 30th of March , 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
Thomas G. Walsh (Principal Executive Officer) 3/30/99
/s/ Scott C. Evans
- -------------------- Executive Vice President 3/30/99
Scott C. Evans (Principal Financial Officer)
/s/ Richard L. Gibbs
- -------------------- Executive Vice President 3/30/99
Richard L. Gibbs (Principal Accounting Officer)
<PAGE>
SIGNATURE OF TRUSTEE DATE SIGNATURE OF TRUSTEE DATE
- -------------------- ---- -------------------- ----
/S/ Robert H. Atwell 3/26/99 /S/ Bevis Longstreth 3/26/99
- ------------------------- ---------------------------
Robert H. Atwell Bevis Longstreth
/S/ Elizabeth E. Bailey 3/26/99 /S/ Robert M. Lovell, Jr. 3/26/99
- ------------------------- ---------------------------
Elizabeth E. Bailey Robert M. Lovell, Jr.
/S/ Joyce A. Fescke 3/26/99 /S/ Stephen A. Ross 3/26/99
- ------------------------- ---------------------------
Joyce A. Fescke Stephen A. Ross
/S/ Edes P. Gilbert 3/26/99 /S/ Eugene C. Sit 3/26/99
- ------------------------- ---------------------------
Edes P. Gilbert Eugene C. Sit
/S/ Stuart Tse Kong Ho 3/26/99 /S/ Maceo K. Sloan 3/26/99
- ------------------------- ---------------------------
Stuart Tse Kong Ho Maceo K. Sloan
/S/ David K. Storrs 3/26/99
- ------------------------- ---------------------------
Nancy L. Jacob David K. Storrs
/S/ Marjorie Fine Knowles 3/26/99 /S/ Robert W. Vishny 3/26/99
- ------------------------- ---------------------------
Marjorie Fine Knowles Robert W. Vishny
/S/ Jay O. Light 3/26/99
---------------------------
Jay O. Light
<PAGE>
EXHIBIT INDEX
(e) (2) Selling agreement, as amended, between TPIS and
TIAA-CREF Individual & Institutional Services,
Inc.
(i) Opinion and Consent of Charles Stamm, Esq.
(j) (1) Consent of Sutherland, Asbill & Brennan, L.L.P.
(2) Consent of Ernst & Young LLP
<PAGE>
(n) Financial Data Schedules
AMENDMENT TO THE SELLING AGREEMENT
FOR THE
CONTRACTS FUNDED BY
TIAA SEPARATE ACCOUNT VA-1 AND THE SHARES
ISSUED BY THE TIAA-CREF MUTUAL FUNDS
Amendment to the Selling Agreement for the Contracts Funded by
the TIAA Separate Account VA-1 dated May 31, 1995, by and between Teachers
Personal Investors Services, Inc. ("TPIS") and TIAA-CREF Individual &
Institutional Services, Inc. ("T-C Services") as amended June 30, 1997. T-C
Services and TPIS mutually agree that upon execution of this Amendment, the
Agreement shall be amended as set forth below:
1.The title of the Agreement is hereby amended to read as follows:
"Selling Agreement for the Contracts Funded by the TIAA
Separate Account VA-1, TIAA-CREF Life Separate Account VA-1
and the Shares Issued by TIAA-CREF Mutual Funds.
2. The first Whereas clause is hereby amended to read as follows:
"WHEREAS, TPIS has entered into agreements with the Teachers
Insurance and Annuity Association of America ("TIAA"), TIAA
Separate Account VA-1 ("VA-1"), TIAA-CREF Mutual Funds (the
"Fund"), and TIAA-CREF Life Insurance Company, for itself and
on behalf of TIAA-CREF Life Separate Account VA-1 ("TIAA-CREF
Life VA-1"), pursuant to which it serves as the principal
underwriter of the variable annuity Contracts (the
"Contracts") issued by VA-1 and TIAA-CREF Life VA-1 and the
shares issued by the Fund (the "Shares").
IN WITNESS WHEREOF, T-C Services and TPIS have caused this
Amendment to the Agreement to be executed in their names and on their behalf as
of this day of November, 1998 by and through their duly authorized officers.
TIAA-CREF INDIVIDUAL & INSTITUTIONAL SERVICES, INC.
By: Attest:
Lisa Snow Title:
Vice President, Chief
Counsel and Secretary
TEACHERS PERSONAL INVESTORS SERVICES, INC.
By: Attest:
Thomas G. Walsh Title:
President
| TIAA-CREF MUTUAL FUNDS CHARLES H. STAMM
TIAA-CREF | 730 Third Avenue EXECUTIVE VICE PRESIDENT AND
[LOGO] | New York, NY 10017-3206 GENERAL COUNSEL
| 212 490-9000 (212) 916-4700
March 29, 1999
The Board of Trustees
TIAA-CREF Mutual Funds
730 Third Avenue
New York, New York 10017-3206
Ladies and Gentlemen:
This opinion is furnished in connection with the filing of
post-effective amendment No. 4 to the Registration Statement (File Nos.
333-21821 and 811-08055) on Form N-1A for the TIAA-CREF Mutual Funds. The
Registration Statement covers an indefinite amount of securities in the form of
shares of beneficial interest in the TIAA-CREF Mutual Funds (the "Shares").
I have examined the Declaration of Trust, By-laws and other corporate
records of the TIAA-CREF Mutual Funds, and the relevant statutes and regulations
of the State of Delaware. On the basis of such examination, it is my opinion
that:
1. The TIAA-CREF Mutual Funds is a business trust duly organized and
validly existing under the laws of the State of Delaware.
2. The Shares have been duly authorized and, when issued as
contemplated by the Registration Statement, will be validly issued, fully-paid
and non-assessable.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement, and to the reference to my name under the heading "Legal
Matters" in the Statement of Additional Information.
Sincerely,
/s/ Charles H. Stamm
--------------------
Charles H. Stamm
Executive Vice President
and General Counsel
SUTHERLAND, ASBILL & BRENNAN, L.L.P.
ATLANTA o AUSTIN o NEW YORK o WASHINGTON
1275 PENNSYLVANIA AVENUE, N.W. TEL: (202) 383-0100
WASHINGTON, D.C. 20004-2404 FAX: (202) 637-3593
STEVEN B. BOEHM
DIRECT LINE: (202) 383-0176
Internet: [email protected]
March 25, 1999
The Board of Trustees
TIAA-CREF Mutual Funds
730 Third Avenue
New York, NY 10017-3206
RE: TIAA-CREF Mutual Funds
(File Nos. 333-21821 and 811-08055)
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Matters" in the statement of additional information filed as a part of the
above-referenced registration statement on Form N-1A for the TIAA-CREF Mutual
Funds. In giving this consent, we do not admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933.
Sincerely,
/s/Steven B. Boehm
---------------------
Steven B. Boehm
SBB/mh
cc: Laura Bramson, Esq./TIAA-CREF
Enclosure
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Experts" and to the use of our report dated February 5, 1999,
which is incorporated by reference in this Registration Statement (Form N-1A
333-21821) of TIAA-CREF Mutual Funds.
/s/ERNST & YOUNG LLP
----------------------
ERNST & YOUNG LLP
New York, New York
March 24, 1999
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