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File Nos. 333- , 811-
As filed with the Securities and Exchange Commission on August 18, 1998
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. __ [ ]
and
Registration Statement Under the Investment Company Act of 1940 [X]
Amendment No. ____ [ ]
(Check appropriate box or boxes)
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TIAA-CREF LIFE 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 Life 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. 20004-2415
Approximate Date of Proposed Public Offering:
As soon as practicable after effectiveness of the Registration Statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
SHALL DETERMINE.
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PROSPECTUS
DATED _________, 1999
TIAA-CREF LIFE FUNDS
STOCK INDEX FUND
This prospectus contains important information about the TIAA-CREF Life
Funds, mutual funds available only through the purchase of a variable annuity or
other variable insurance contract issued by TIAA-CREF Life Insurance Company
(TIAA-CREF Life). Please read this prospectus, along with the prospectus
describing the contract, before investing and keep both prospectuses for future
reference.
The TIAA-CREF Life Funds currently offers the investment portfolio
(fund) listed below.
The STOCK INDEX FUND seeks to increase the value of your investment
over the long-term by investing in a diversified portfolio of common
stocks selected to track the overall U.S. stock market, as represented
by a broad stock market index.
TIAA-CREF Life Insurance Company and the TIAA-CREF Life Funds are part
of the TIAA-CREF group of companies.
These securities have not been approved or disapproved by the Securities and
Exchange Commission nor has the Commission passed upon the accuracy or adequacy
of this prospectus. Any representation to the contrary is a criminal offense.
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TABLE OF CONTENTS
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The Stock Index Fund -- In Brief..................................................................................3
Investment Objective and Principal Investment Strategies..........................................................4
Investment Objective............................................................................4
Principal Investment Strategies.................................................................4
The Russell 3000 Index..........................................................................5
Other Investments...............................................................................5
Fund Management...................................................................................................6
Related Fund Performance Information..............................................................................6
Pricing of Fund Shares............................................................................................7
Offering, Purchasing and Redeeming Shares.........................................................................7
Dividends, Distributions and Taxes................................................................................8
Financial Highlights Information..................................................................................8
General Matters...................................................................................................9
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This prospectus outlines the terms of the fund. It doesn't constitute an
offering in any jurisdiction where such an offering can't lawfully be made. No
dealer, salesman, or anyone else is authorized to give any information or to
make any representation in connection with this offering other than those
contained in this prospectus. If anyone does offer you such information or
representations, you shouldn't rely on them.
An investment in the Fund is not a deposit of the TIAA-CREF Trust
Company, FSB, and is not insured or guaranteed by the Federal Deposit Insurance
Corporation (FDIC) or any other government agency.
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The TIAA-CREF Life Funds are mutual funds available only to separate
accounts of TIAA-CREF Life Insurance Company (TIAA-CREF Life) to fund individual
variable annuity or other variable insurance contracts (the contract). This
prospectus describes the Stock Index Fund, the only investment portfolio (fund)
currently offered by the TIAA-CREF Life Funds. Throughout this prospectus, "we"
and "our" refer to the TIAA-CREF Life Funds or the Stock Index Fund. "You" and
"your" means any contractowner or any prospective contractowner.
THE STOCK INDEX FUND - IN BRIEF
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Stock Index Fund seeks to increase the value of your investment
over the long-term by investing in a diversified portfolio of common stocks
selected to track the overall U.S. stock market, as represented by a broad stock
market index.
WHAT ARE THE FUND'S PRINCIPAL INVESTMENT STRATEGIES?
The Stock Index Fund attempts to track the U.S. stock market as a whole
by investing substantially all of its assets in stocks included in the Russell
3000(R) index, an index consisting of the 3,000 largest publicly-traded U.S.
corporations. The fund doesn't try to match the Russell 3000 precisely by
holding all 3,000 stocks. Rather, we use sampling to try to emulate the index's
overall investment characteristics. The portfolio won't be managed in the
traditional sense of picking individual securities based on economic, financial,
and market analysis, which means that a company may remain in the portfolio even
if it performs poorly. We will, however, use certain techniques to attempt to
slightly outperform the Russell 3000.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
The Stock Index Fund's returns will fluctuate, so you could lose money
on your investment. Normally, we expect that when the overall U.S. stock market
is rising, the fund's value will rise, and when the stock market is falling, the
fund's value will fall. Stock values will rise and fall in response to changes
in overall market and economic conditions, and the financial condition of
individual companies. Stocks in general are subject to the following types of
risks:
- Market risk -- price volatility due to changing conditions in the
financial markets and, in some cases, changes in overall interest
rates.
- Financial risk -- the possibility that a company's current earnings
will fall or that overall financial soundness will decline, reducing
the stock's value.
We also can't guarantee that the fund will be able to match the returns
of the Russell 3000 or the stock market in general.
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HOW HAS THE FUND PERFORMED?
Because the fund has been operating only for a short time, we have not
included past performance information for the fund. For a discussion of the
performance of the TIAA Stock Index Account, an investment company managed by
the same adviser as the fund, see the "Related Fund Performance Information"
section of this prospectus.
INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
This section describes the Stock Index Fund's investment objective and
the principal investment policies and techniques it uses to accomplish its
objective. For a complete listing of the fund's policies and restrictions, see
the SAI.
INVESTMENT OBJECTIVE
The Stock Index Fund seeks to increase the value of your investment
over the long-term by investing in a diversified portfolio of common stocks
selected to track the overall U.S. stock market, as represented by a broad stock
market index. There's no guarantee that the fund will meet this investment
objective.
We can change the fund's investment objective without a shareholder
vote, although we'll notify you of any change if it is material.
PRINCIPAL INVESTMENT STRATEGIES
The fund attempts to track the U.S. stock market as a whole by
investing substantially all of its assets in stocks included in the Russell 3000
Index(R) (See "The Russell 3000 Index," below). The fund doesn't try to match
the Russell 3000 precisely by holding all 3,000 stocks. Rather, we use sampling
to try to emulate the index's overall investment characteristics. The portfolio
won't be managed in the traditional sense of picking individual securities based
on economic, financial, and market analysis. This means that a company can
remain in the portfolio even if it performs poorly, unless the company is
removed from the Russell 3000. We will, however, use proprietary quantitative
scoring and trading techniques to attempt to slightly outperform the Russell
3000.
We expect that in periods when the overall U.S. stock market is rising,
the fund's net asset value will also rise, while in market declines, the fund's
net asset value will likewise decline. We won't match the index precisely.
However, we expect the fund to closely track the index. To ensure this, a
correlation coefficient will be calculated daily using the fund's returns from
the most recent 30 trading days and the index's returns for the same period. We
expect the correlation coefficient usually to be above 0.99 and, in any case,
never to fall below 0.98. If it approaches 0.98, we'll rebalance the
portfolio--a process which involves realigning portfolio weights and/or adding
more stocks to the fund's portfolio. Since the index's returns aren't reduced by
operating or investment expenses, the fund may not be able to match the index
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because of the costs of buying and selling stocks and other expenses. However,
we expect expenses to be low compared to an actively managed stock portfolio.
THE RUSSELL 3000 INDEX
The Russell 3000 is an index of the 3,000 largest publicly traded U.S.
corporations, based on the value of their outstanding stock. According to the
Frank Russell Company, Russell 3000 companies account for about 98% of the total
market capitalization of the publicly-traded U.S. equity market. The market
capitalization of individual companies in the Russell 3000 ranged from $20
million to $240.14 billion, with an average of $3.42 billion as of December 31,
1997.
The Frank Russell Company includes stocks in the index solely on their
market capitalization and weights them by relative market value. The Frank
Russell Company can change stocks and their weightings in the index. We'll
adjust the fund's portfolio to reflect the changes as appropriate.
The Russell 3000 is a trademark and service mark of the Frank Russell
Company. The fund isn't promoted, endorsed, sponsored or sold by and isn't
affiliated with the Frank Russell Company. A stock's presence in the Russell
3000 doesn't mean that the Frank Russell Company believes that it's an
attractive investment. The Frank Russell Company isn't responsible for any
literature about the fund and makes no representations or warranties about its
content.
Using the Russell 3000 as the measure of the U.S. equity market isn't a
fundamental investment policy, so we can substitute other indices without
shareholder approval. We'll notify you, however, before making any change in the
target index.
OTHER INVESTMENTS
The fund can hold other investments in seeking to achieve its
investment objective. These include:
- investments whose return depends on stock market prices, such
as stock index futures contracts, stock options and options
(puts and calls) on futures contracts, and debt securities
whose prices or interest rates are linked to the return of a
recognized stock market index;
- investments with equity characteristics, such as bonds
convertible into common stock, warrants, preferred stock, and
depository receipts for such securities; and
- short-term debt securities and other money market instruments,
including those denominated in foreign currencies, for cash
management purposes; and
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- options, futures contracts, options on futures, and other
financial contracts. The fund will make these types of
investments for cash management or hedging purposes, rather
than for speculation.
For more information about these and other permitted fund investments and their
risks, see the SAI.
FUND MANAGEMENT
Teachers Advisors, Inc. (Advisors) manages the Stock Index Fund's
assets, under the supervision of the Board of Trustees of TIAA-CREF Life Funds,
and is a wholly-owned indirect subsidiary of Teachers Insurance and Annuity
Association of America (TIAA). Advisors is registered with the Securities and
Exchange Commission (SEC) under the Investment Advisers Act of 1940. The
personnel of Advisors who manage the fund also manage the investments of TIAA
Separate Account VA-1 and TIAA-CREF Mutual Funds and, through an affiliated
investment adviser, TIAA-CREF Investment Management, LLC, the investment
accounts of the College Retirement Equities Fund (CREF).
Under its investment management agreement with TIAA-CREF Life Funds,
Advisors is entitled to an annual fee of 0.30% of the average daily net assets
of the Stock Index Fund for managing that fund. Advisors has voluntarily agreed
to waive a portion of its fee, so that the current investment advisory charge is
0.07% of fund's average daily net assets.
Advisors duties include conducting research, recommending investments,
and placing orders to buy and sell securities. Advisors is also responsible for
providing or obtaining at its own expense the services necessary to operate the
TIAA-CREF Life Funds on a day-to-day basis. These include custodial,
administrative, portfolio accounting, dividend disbursing, auditing, and
ordinary legal services.
RELATED FUND PERFORMANCE INFORMATION
The following table contains information about the historical
performance of the TIAA Separate Account VA-1 Stock Index Account (the "TIAA
Stock Index Account"), an existing stock index portfolio managed by Advisors, as
of __________, 1998. The TIAA Stock Index Account is not a mutual fund; rather
it funds a variable annuity contract. It has an investment objective, policies,
strategies and risks substantially the same as those of the TIAA-CREF Life
Funds' Stock Index Fund. The data is provided to illustrate the experience of
Advisors' personnel in managing a substantially similar investment portfolio. It
doesn't represent the performance of the Stock Index Fund described in this
prospectus.
These investment results are unaudited. They aren't intended to predict
or suggest the returns that either the Stock Index Fund or TIAA Stock Index
Account might experience in the future. The results are net of investment
management and other operating expenses (including separate account charges) for
the TIAA Stock Index Account. While the investment management
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expense charges are the same for both companies, no separate account charges are
deducted at the fund level for the Stock Index Fund, although comparable charges
will be deducted at the contract level.
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TIAA Stock Index Account Average Annual Rates of Cumulative Rates of
Total Return Total Return
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1 year
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3 years
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Since inception (11/1/94)
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PRICING OF FUND SHARES
We determine the net asset value (NAV) per share (share price) of a
fund when trading closes on the New York Stock Exchange (usually 4 p.m.) on each
day the exchange is open. We compute the fund's NAV by dividing the value of a
fund's assets, less its liabilities, by the number of outstanding shares of that
fund.
Except as noted below, we 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 Life Funds' Board of Trustees. We also may use fair value in certain
other circumstances. For more information, see the SAI.
OFFERING, PURCHASING AND REDEEMING SHARES
Shares of the Stock Index Fund are not sold directly to you, but rather
are sold in a continuous offering to TIAA-CREF Life separate accounts to fund
variable annuity or other insurance contracts. Your premiums under the contracts
are placed in the appropriate investment account of the separate account, and
the assets of the investment account are invested in the shares of the Stock
Index Fund. The separate account purchases and redeems shares of the fund for
net asset value without sales or redemption charges.
For each day on which the fund's net asset value is calculated, the
separate account transmits to the fund any orders to purchase or redeem shares
of the fund based on the purchase payments, redemption requests, death benefits,
contract charges, and transfer requests from contractowners and beneficiaries
that have been processed on that day. The separate account
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purchases and redeems shares of the fund at the fund's net asset value per share
calculated as of that same day.
For more information about investing in the fund, see the prospectus
describing the contract, which can be obtained by calling us toll-free at [800
842-2733, extension 5509].
DIVIDENDS, DISTRIBUTIONS AND TAXES
The tax status of your investment in the fund depends upon your
contract. For a complete discussion of the tax status of your contract, please
refer to the prospectus describing the contract.
Shares in the Stock Index Fund may only be held through a variable
annuity or other variable insurance contract. Under current tax law, any
dividend or capital gains distributions from the fund will be exempt from
current taxation if left to accumulate within your variable contract.
Withdrawals from your contract may be taxed as ordinary income. You may also be
subject to a 10% penalty tax if a withdrawal is made before age 59 1/2.
The fund expects to declare and distribute to its shareholders (i.e.,
separate accounts) substantially all of its net investment income and net
realized capital gains. Normally, the fund will distribute dividends and capital
gains annually. In addition, the fund may occasionally be required to make
supplemental dividend or capital gains distributions at some other time during
the year.
All dividend and capital gains distributions from a fund will be
automatically reinvested by the separate account in additional shares of the
fund.
The fund intends to qualify for taxation as a "regulated investment
company" under the Internal Revenue Code so that it will not be subject to
federal income tax to the extent its income is distributed to shareholders. In
addition, the fund intends to qualify under the Internal Revenue Code with
respect to the diversification requirements related to the tax-deferred status
of insurance company separate accounts.
FINANCIAL HIGHLIGHTS INFORMATION
Because the fund has limited operating history, no financial highlights
information is included in this prospectus. The [balance sheet][financial
statements] for the fund [is] [are] in the SAI, which is available free upon
request.
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GENERAL MATTERS
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. Each share (including fractional
shares) is entitled to one vote for each dollar of net asset value represented
by that share on all matters to which shareholders are entitled to vote. You
should refer to the SAI, as well as the separate prospectus describing your
contract and the separate account, which accompanies this prospectus, for more
information on your voting rights.
YEAR 2000 ISSUES
Many computer software systems in use today cannot recognize the year
2000 and may revert to 1900 or some other date because of the way in which dates
were encoded and calculated. The TIAA-CREF Life Funds could be adversely
affected if its computer systems or those of its external service providers do
not properly process and calculate date-related information and data on and
after January 1, 2000. TIAA-CREF Life Funds, along with Advisors, have been
actively working on necessary changes to its computer systems to prepare for the
Year 2000 and have also obtained reasonable assurances from our service
providers that they are taking comparable steps for their computer systems.
However, the steps we are taking do not guarantee complete success or eliminate
the possibility that interaction with outside computer systems may have an
adverse impact on the TIAA-CREF Life Funds.
ELECTRONIC PROSPECTUSES
If you received this or the contract prospectus electronically and
would like a paper copies, please call [800 842-2733, extension 5509], and we
will send paper copies to you.
HOUSEHOLDING
To lower costs and eliminate duplicate documents sent to your home, we
may, if the SEC allows, begin mailing only one copy of this and the contract
prospectus, prospectus supplements, annual and semi-annual reports, or any other
required documents, to your household, even if more than one participant lives
there. If you would prefer to continue receiving your own copy of any of these
documents, you may call us toll-free at 800 842-2733, extension 5509, or write
us.
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[back cover]
IF YOU HAVE ANY QUESTIONS ABOUT THE TIAA-CREF LIFE FUND'S STOCK INDEX FUND OR
THE VARIABLE CONTRACT, PLEASE CALL US AT 800 [223-1200].
More information about TIAA-CREF Life Funds can be found in the Statement of
Additional Information (SAI) for the funds dated _________, 1999. When
available, the TIAA-CREF Life Funds will also provide more information about its
investments in its annual and semi-annual reports to shareholders. You can get
copies of the SAI and annual and semi-annual reports without charge by calling
[800-223-1200] or writing us at TIAA-CREF Life Funds, 730 Third Avenue, New
York, New York 10017-3206. The SAI is "incorporated by reference" into this
prospectus - - that means it's legally part of the prospectus.
Information about TIAA-CREF Life 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, DC 20549-6009.
_________, 1999
SEC File Nos. 333- , 811-
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STATEMENT OF ADDITIONAL INFORMATION
TIAA-CREF LIFE FUNDS
STOCK INDEX FUND
This Statement of Additional Information (SAI) is not a prospectus,
although it should be read carefully in conjunction with the TIAA-CREF Life
Funds' prospectus dated _________, 1999 (the prospectus). A copy of the
prospectus may be obtained by writing us at TIAA-CREF Life Funds, 730 Third
Avenue, New York, New York 10017-3206 or by calling [800 842-2733, extension
5509]. Terms used in the prospectus are incorporated in this SAI.
The date of this SAI is _________, 1999.
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TABLE OF CONTENTS
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Investment Policies, Strategies and Restrictions.................................
Management of the Fund...........................................................
Control Persons..................................................................
Investment Advisory and Other Services...........................................
Fund History and Description of the Fund.........................................
Valuation of Assets..............................................................
Brokerage Allocation.............................................................
Performance Information..........................................................
Tax Status.......................................................................
Underwriters.....................................................................
Legal Matters....................................................................
Experts..........................................................................
Financial Statements.............................................................
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For purposes of this SAI, the term "fund" shall refer to the TIAA-CREF
Life Funds' Stock Index Fund.
INVESTMENT POLICIES, STRATEGIES AND RESTRICTIONS
The following information is intended to supplement the description of
the investment objective and policies of the fund in the prospectus. Under the
Investment Company Act of 1940, as amended (the 1940 Act), any of the fund's
fundamental policies may not be changed without the vote of a majority of the
fund's outstanding voting securities (as defined in the 1940 Act). The
non-fundamental investment restrictions contained in "Non-Principal Investment
Strategies and Risk Considerations" below, may be changed by the TIAA-CREF Life
Funds' Board of Trustees at any time.
Fundamental Policies
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The following restrictions are fundamental policies of the fund:
1. The fund will not issue senior securities except as SEC
regulations permit;
2. The fund will not borrow money, except: (a) it may purchase
securities on margin, as described in restriction 9 below; and
(b) from banks (only in amounts not in excess of 33-1/3% of
the market value of the fund's assets at the time of
borrowing), and, from other sources, for temporary purposes
(only in amounts not exceeding 5% of the fund's total assets
taken at market value at the time of borrowing);
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, with respect to at least 75% of the value
of its total assets, invest more than 5% 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;
5. The fund will not invest in an industry if after giving effect
to that investment the fund's holding in that industry would
exceed 25% of its total assets; however, this restriction does
not apply to investments in obligations issued or guaranteed
by the United States Government, its agencies or
instrumentalities;
6. The fund will not purchase real estate or mortgages directly;
7. The fund will not purchase commodities or commodities
contracts, except to the extent financial contracts (such as
futures) are purchased as described herein;
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8. The fund will not make loans, except: (a) that the fund may
make loans of portfolio securities not exceeding 33-1/3% 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 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; (d)
participation interests in loans, and similar investments, may
be purchased; or (e) through an interfund loan program with
affiliated investment companies, to the extent permitted by
applicable SEC regulations; and
9. 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).
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage beyond the specified limit resulting
from a change of values of portfolio securities will not be considered a
violation.
Non-Principal Investment Strategies and Risks
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General
Besides equities, the fund can hold stock index futures contracts,
options (puts and calls) on futures contracts, and debt securities whose prices
or interest rates are linked to the return of a recognized stock market index,
or swap arrangements where the return is linked to a recognized stock market
index. The fund would make such investments in order to seek to match the total
return of Russell 3000. However, they might not track the return of the Russell
3000 in all cases and can involve additional credit risks. Investing in options
or futures contracts and entering into equity swaps involve special risks. These
are discussed below. Such investing by the fund is subject to any necessary
regulatory approvals.
The fund can hold other types of securities with equity
characteristics, such as bonds convertible into common stock, warrants,
preferred stock, and depository receipts for such securities. In addition, the
fund can hold fixed-income securities that it acquires because of mergers,
recapitalizations, or otherwise. For liquidity, the fund can also invest in
short-term debt securities and other money market instruments, including those
denominated in foreign currencies.
The fund can invest in options and futures, as well as newly developed
financial instruments, such as equity swaps and equity-linked fixed-income
securities, so long as these are consistent with its investment objective and
regulatory requirements.
These investments and other fund investment strategies are discussed in
detail below.
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Options and Futures
The fund can buy and sell options (puts and calls) and futures to the
extent permitted by the New York State Insurance Department, the SEC, and the
Commodity Futures Trading Commission ("CFTC"). We do not intend 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.
Options and futures transactions may increase the fund's transaction
costs and portfolio turnover rate and will be initiated only when consistent
with its investment objectives.
Options. Option-related activities could include: (1) the sale 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 the 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 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.
The 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 at any time 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 at any time during the option period. The buying
of a covered put contract limits the downside exposure for
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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.
The 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 the 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 such calls
can be used in anticipation of, or in, a general market or market sector decline
that may adversely affect the market value of the fund's portfolio of
securities. To the extent that the 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 the futures on groups of securities, is a possible lack of liquidity.
This will be a major consideration before the 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.
Futures. To the extent permitted by applicable regulatory authorities,
the 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 the 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,
- 4 -
<PAGE> 18
of the securities or instrument underlying the contract. By purchasing a futures
contract -- assuming a "long" position -- the 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 the fund usually
will be liquidated in this manner, the 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 the
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, the 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, the 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, the 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 the 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% 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
- 5 -
<PAGE> 19
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 the fund has purchased a stock index futures contract
and the price of the underlying stock index has risen, that position will have
increased in value, and the fund will receive from the broker a variation margin
payment equal to that increase in value. Conversely, where the 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.
The 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 the 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 the 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 the 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 the
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
- 6 -
<PAGE> 20
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
arid the portion of the portfolio being hedged, even a correct forecast of
general market trends by Teachers Advisors, Inc. ("Advisors"), the investment
advisor for the fund, still may not result in a successful hedging transaction
over a very short time period.
The fund may also use futures contracts and options on futures
contracts to manage its cash flow more effectively. To the extent that the 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% 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%).
Firm Commitment Agreements and Purchase of "When-Issued" Securities
The fund can enter into firm commitment agreements for the purchase of
securities on a specified future date. We expect that these transactions will be
relatively infrequent. When the 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 "Segregated Accounts," below.
Securities Lending
Subject to investment restriction 8(a) (relating to loans of portfolio
securities) set forth above, the fund may lend its securities to brokers and
dealers that are not affiliated with TIAA-CREF Life Insurance Company, 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, the 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%] 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% of the market value of the loaned securities), as
reviewed daily. By lending its securities, the 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
- 7 -
<PAGE> 21
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.
Illiquid Securities
The fund can invest up to 15 percent of its assets in investments that
may not be readily marketable. It may be difficult to sell these investments for
their fair market value.
Repurchase Agreements
Repurchase agreements are one of several short-term vehicles the fund
can use to manage cash balances effectively. In a repurchase agreement, we buy
an underlying debt instrument on condition that the seller agrees to buy it back
at a fixed time (usually a relatively short period) and price. The period from
purchase to repurchase is usually no more than a week and never more than a
year. 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 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. The 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
- 8 -
<PAGE> 22
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
The 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.
By entering into a swap transaction, the fund may be able to protect
the value of a portion of its portfolio against declines in market value. The
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. The 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 the fund receives from the
counterparty to the swap transaction will exceed the return it swaps to that
party.
While the 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
the fund will succeed when pursuing its contractual remedies. To minimize the
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 the 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 the 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 "Illiquid Securities" above.
To the extent that there is an imperfect correlation between the return
the 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
- 9 -
<PAGE> 23
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 the fund incurs an obligation to make
payments in the future, the 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 obligations as may be permitted by law.
Investment Companies
The fund can invest up to 10 percent of its assets in other investment
companies.
Borrowing
The fund can borrow money from banks (no more than 33-1/3 percent of
the market value of its assets at the time of borrowing), rather than through
the sale of portfolio securities, when such borrowing appears more attractive
for the fund. It can also borrow money from other sources temporarily (no more
than 5 percent of the total market value of its assets at the time of
borrowing). See "Fundamental Policies" above.
Other Investment Techniques and Opportunities
The 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.
Portfolio Turnover
- ------------------
The transactions the fund engages in are reflected in its portfolio
turnover rate. The rate of portfolio turnover is calculated by dividing the
lesser of the amount of purchases or sales of portfolio securities during the
fiscal year by the monthly average of the value of the fund's portfolio
securities (excluding from the computation all securities, including options,
with maturities at the time of acquisition of one year or less). A high rate of
portfolio turnover generally involves correspondingly greater brokerage
commission expenses, which must be borne directly by the fund and ultimately by
the fund's shareholders. However, because portfolio turnover is not a limiting
factor in determining whether or not to sell portfolio securities, a particular
investment may be sold at any time, if investment judgment or account operations
make a sale advisable.
- 10 -
<PAGE> 24
The fund does not have a fixed policy on portfolio turnover although,
because a higher portfolio turnover rate will increase brokerage costs, Advisors
will carefully weigh the added costs of short term investment against the gains
anticipated from such transactions.
MANAGEMENT OF THE FUND
The Board
- ---------
A Board of Trustees (the Board) oversees the TIAA-CREF Life Funds'
business affairs and is responsible for major decisions about its investment
objective and policies. The Board delegates the day-to-day management of the
fund to Advisors and its officers (see below). The Board meets periodically to
review the fund's activities, contractual arrangements with companies that
provide services to the fund, and the performance of the investment portfolio.
[THE FOLLOWING IS TENTATIVE; TRUSTEES AND OFFICERS TO BE
DETERMINED]
Trustees and Officers of the TIAA-CREF Life Funds
- -------------------------------------------------
<TABLE>
<CAPTION>
POSITION(S) HELD
NAME AND ADDRESS* AGE WITH REGISTRANT PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ---------------- --- ---------------- -------------------------------------------
<S> <C> <C> <C>
Laurence W. Franz 58 Trustee Vice President, Business and Finance, and
Canisius College Treasurer, Canisius College
2001 Main Street
Buffalo, New York 14208
Jeanmarie C. Grisi 39 Trustee Treasurer, Carnegie Corporation of New York
Carnegie Corporation of New York
437 Madison Avenue
New York, New York 10022
Richard M. Norman 53 Trustee Vice President for Administration and
Rutgers University Associate Treasurer, Rutgers, The State
Old Queens Building, Room 101 University of New Jersey
Somerset-George Street
New Brunswick, New Jersey 08903
Thomas G. Walsh** 56 Chairman of the President, Teachers Personal Investors
Board and Services, Inc. ("TPIS"), since February 1994,
President and Executive Vice President, TIAA and
CREF
John M. McCormack 54 Trustee and Executive Vice President, TIAA and CREF,
Executive Vice since November 1983 and President, TIAA-
President CREF Enterprises, since June 1998
</TABLE>
- 11 -
<PAGE> 25
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Richard L. Gibbs 51 Executive Vice Executive Vice President, TIAA, CREF,
President TIAA-CREF Investment Management, LLC
("Investment Management") and TIAA-CREF
Individual & Institutional Services, Inc.
("Services"), since 1993
Peter C. Clapman 62 Senior Vice Senior Vice President and Chief Counsel,
President, Investments, TIAA and CREF
Secretary and
Chief Counsel,
Investments
Richard J. Adamski 56 Vice President Vice President and Treasurer, Investment
and Treasurer Management and Services, since January 1992
and TPIS, since 1994, and Vice President and
Treasurer, TIAA and CREF
</TABLE>
- ------------------------
* The address for all officers of the TIAA-CREF Life Funds is 730 Third Avenue,
New York, New York 10017-3206.
** This Trustee is or may be an "interested person" within the meaning of the
Investment Company Act of 1940.
Compensation of Trustees
- ------------------------
Trustees who are not active officers of Teachers Insurance and Annuity
Association (TIAA) each receive $[ ] per year, plus $[ ] for each meeting of
the Board of Trustees attended. Trustees who are active officers of TIAA do not
receive any additional compensation for their services as Trustees. (See
"Advisors and TIAA" below). The following table sets forth the compensation paid
by the TIAA-CREF Life Funds to Trustees for the year ended December 31, 1997:
[THE FOLLOWING WILL BE COMPLETED BY AMENDMENT]
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Aggregate Estimated
Compensation Pension or Retirement Annual Total
NAME OF PERSON, From TIAA-CREF Benefits Accrued As Benefits Upon Compensation From
POSITION Life Funds Part of Fund Expenses Retirement Fund Complex**
-------- ---------- --------------------- ---------- --------------
<S> <C> <C> <C> <C>
Laurence W. Franz, $[ ] $-0- $-0- $[ ]
Trustee
Jeanmarie C. Grisi, $-0-* $-0- $-0-* $-0-
Trustee
Richard M. Norman, $[ ] $-0- $-0- $[ ]
Trustee
</TABLE>
* Ms. Grisi has declined to accept compensation for her services.
** For purposes of this information, the Fund Complex consists of the TIAA-CREF
Life Funds and TIAA Separate Account VA-1.
- 12 -
<PAGE> 26
CONTROL PERSONS
Teachers Insurance and Annuity Association (TIAA), as the contributor
of the initial capital for the fund, owned 100% of the shares of the fund as of
December 31, 1998.
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Advisory Services
- ----------------------------
As explained in the prospectus, investment advisory services and
related services for the TIAA-CREF Life Funds are provided by personnel of
Advisors, which is registered under the Investment Advisers Act of 1940.
Advisors manages the investment and reinvestment of the assets of the TIAA-CREF
Life Funds, subject to the direction and control of the TIAA-CREF Life Funds'
Board of Trustees. Advisers' will perform all research, make recommendations,
and place orders for the purchase and sale of securities. Advisors also provides
for portfolio accounting, custodial, and related services for the assets of the
TIAA-CREF Life Funds.
As described in the prospectus, the investment management agreement
between Advisors and the TIAA-CREF Life Funds provides for payment of an
investment advisory fee of 0.30% of assets annually for managing the Stock Index
Fund. Currently, with Advisors waiving a portion of that fee, a daily deduction
from the net assets of the Stock Index Fund is made at an annual rate of 0.07%
for expenses related to the management of the assets of the Stock Index Fund.
For the year ended December 31, 1998, the TIAA-CREF Life Funds paid
investment advisory fees of $___________. These fees reflect the waiver by
Advisors of $____________ of its investment advisory fee.
Advisors and TIAA
- -----------------
Advisors is a wholly-owned indirect subsidiary of TIAA. The main
offices of both TIAA and Advisors are at 730 Third Avenue, New York, New York
10017-3206. TIAA is a stock life insurance company, organized under the laws of
New York State. It was founded on March 4, 1918, by the Carnegie Foundation for
the Advancement of Teaching. TIAA is the companion organization of the College
Retirement Equities Fund (CREF), the first company in the United States to issue
a variable annuity. Together, TIAA and CREF form the principal retirement system
for the nation's education and research communities and the largest retirement
system in the world, based on assets under management. TIAA-CREF serves
approximately two million people at about 8,050 institutions. As of June 30,
1998, TIAA's assets were approximately $93 billion; the combined assets for TIAA
and CREF totalled approximately $213 billion (although CREF doesn't stand behind
TIAA's guarantees).
- 13 -
<PAGE> 27
TIAA holds all of the shares of TIAA Holdings, Inc., which in turn
holds all the shares of Advisors, TIAA-CREF Life Insurance Company, and Teachers
Personal Investors Services, Inc., the principal underwriter for the TIAA-CREF
Life Funds and the TIAA-CREF Life Insurance Company variable annuity contracts
funded by the TIAA-CREF Life Funds. TIAA also holds all the shares of TIAA-CREF
Investment Management, LLC ("Investment Management"). Investment Management
provides investment advisory services to the College Retirement Equities Fund,
TIAA's companion organization. All of the foregoing are affiliates of the
TIAA-CREF Life Funds and Advisors.
Custodian
- ---------
The custodian for the assets of the fund is Bankers Trust Company 16
Wall Street, New York, New York 10015.
Administrative Services
- -----------------------
Teachers Advisors has retained State Street Bank & Trust Company
("State Street") to provide the TIAA-CREF Life Funds with certain administrative
services, including preparation of each fund's federal, state and local tax
returns, preparation of fund financial information, and various other
administrative services. [Advisors, not the TIAA-CREF Life Funds, has agreed to
pay State Street a fee for such services.] State Street is located at 225
Franklin Street, Boston, Massachusetts 02209.
Auditors
- --------
The financial statements of TIAA-CREF Life Funds are audited by Ernst &
Young LLP.
FUND HISTORY AND DESCRIPTION OF THE FUND
TIAA-CREF Life Funds is a Delaware business trust organized on August
13, 1998, and is registered with the U.S. Securities and Exchange Commission
(SEC) as a diversified "open-end" management investment company. It currently
has only one investment portfolio, the Stock Index Fund (fund). As a Delaware
business trust, the fund's operations are governed by its Declaration of Trust
dated August 13, 1998 (the Declaration). A copy of the fund's Certificate of
Trust, dated August 13, 1998, is on file with the Office of the Secretary of
State of the State of Delaware.
Shareholders Meetings and Voting Rights
- ---------------------------------------
Under the Declaration, the TIAA-CREF Life Funds are not required to
hold annual meetings to elect Trustees or for other purposes, and therefore, we
do not anticipate that the fund will hold shareholders' meetings unless required
by law. The TIAA-CREF Life Funds will be required to hold a meeting to elect
Trustees to fill any existing vacancies on the
- 14 -
<PAGE> 28
Board if, at any time, fewer than a majority of the Trustees have been elected
by the shareholders of the TIAA-CREF Life Funds.
With regard to matters for which the Investment Company Act of 1940
requires a shareholder vote, the separate account which issues the variable
contracts funded by the TIAA-CREF Life Funds (the Separate Account), as the
legal owner of the TIAA-CREF Life Funds shares, typically votes fund shares in
accordance with instructions received from contractowners (or annuitants or
beneficiaries thereunder) having a voting interest in the Separate Account.
Shares held by the Separate Account for which no instructions are received are
generally voted by the Separate Account for or against any proposition, or in
abstention, in the same proportion as the shares for which instructions have
been received. You should refer to the separate prospectus, which accompanies
this prospectus, describing your contract and the Separate Account, for more
information on your voting rights.
Shares
- ------
The fund is authorized to issue an unlimited number of shares of
beneficial interest in the fund, all without par value. Shares are divided into
and may be issued in a designated series representing beneficial interests in
one of the fund's investment portfolios. There is currently one series of shares
and one investment portfolio.
Each share of a series issued and outstanding is entitled to
participate equally in dividends and distributions declared by such series and,
upon liquidation or dissolution, in net assets allocated to such series
remaining after satisfaction of outstanding liabilities. The shares of each
series, when issued, will be fully paid and non-assessable and have no
preemptive or conversion rights.
Each share (including fractional shares) is entitled to one vote for
each dollar of net asset value represented by the share on all matters to which
the holder of that share is entitled to vote. The shares do not have cumulative
voting rights.
Teachers Insurance and Annuity Association of America (TIAA) provided
the initial capital for the fund by purchasing $[ ] of shares in the
Stock Index Fund. Such shares were acquired for investment and can only be
disposed of by redemption.
Additional Portfolios
- ---------------------
The TIAA-CREF Life Funds currently consists of a single investment
portfolio, or fund. Pursuant to the Declaration, the Trustees may establish
additional investment funds (technically "series" of shares).
VALUATION OF ASSETS
The assets of the TIAA-CREF Life Funds are valued as of the close of
each valuation day in the following manner:
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<PAGE> 29
Equity Securities
- -----------------
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 the New York Stock Exchange or
the American Stock Exchange are valued based on their last sale price on such
exchange on the date of valuation, or at the mean of the closing bid and asked
prices if no sale is reported. Equity securities which are listed or traded on
any other exchange are valued in a comparable manner on the principal exchange
where traded.
Equity securities traded in the United States over-the-counter market
are valued based on the last sale price on the date of valuation for NASDAQ
National Market System securities, or at the mean of the closing bid and asked
prices if no sale is reported. Other U.S. over-the-counter equity securities are
valued at the mean of the closing bid and asked prices.
Equity securities traded in the United States may be valued at fair
value as determined in good faith under the direction of the Board of Trustees
if events materially effecting the value of a domestic investment (as determined
in our sole discretion) occur between the time when its price is determined and
the time the fund's net asset value is calculated.
Money Market Instruments
- ------------------------
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 will be obtained either from one or more of
the major market makers or from one or more of the financial information
services for the securities to be valued.
Options
- -------
Portfolio investments underlying options are valued as described above.
Stock options written by the 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
the fund's net assets will be increased or decreased by the difference between
the premiums received on writing options and the costs of liquidating such
positions measured by the closing price of the options on the date of valuation.
For example, when the 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
- 16 -
<PAGE> 30
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 the
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 Board of Trustees.
BROKERAGE ALLOCATION
Advisors is responsible for decisions to buy and sell securities for
the fund 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 the 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 TIAA Separate Account VA-1, TIAA-CREF Mutual
Funds or any other investment account that it may be managing, or at the same
time as for a CREF account or other account that it may also be managing on
behalf of Investment Management, the other investment adviser affiliated with
TIAA. In that event, allocation of the securities purchased or sold, as well as
the expenses incurred in the transaction, will be made in an equitable manner.
Domestic brokerage commissions are negotiated, as there are no standard
rates. All brokerage firms provide the service of execution of the order made;
some brokerage firms also provide research and statistical data, and research
reports on particular companies and industries are customarily provided by
brokerage firms to large investors. In negotiating commissions, consideration is
given by Advisors to the quality of execution provided and to the use and value
of the data. The valuation of such data may be judged with reference to a
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<PAGE> 31
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.
Research or services obtained for the fund 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 fund.
PERFORMANCE INFORMATION
From time to time, we will advertise the total return and average
annual total return of the fund. Total return is computed on a per share basis
and assumes the reinvestment of dividends and distributions. Total return
generally is expressed as a percentage rate which is calculated by combining the
income and principal changes for a specified period and dividing by the net
asset value per share at the beginning of the period. Advertisements may include
the percentage rate of total return or may include the value of a hypothetical
investment at the end of the period, which assumes the application of the
percentage rate of total return.
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment in the fund was purchased with an
initial payment of $1,000 and that the investment was redeemed at the end of a
stated period of time, after giving effect to the reinvestment of dividends and
distributions during the period. The return is expressed as a percentage rate
which, if applied on a compounded annual basis, would result in the redeemable
value of the investment at the end of the period. Advertisements of the fund's
performance will include the fund's average annual total return for one-, five-
and ten-year periods (and occasionally other periods as well).
All performance figures are based on past investment results. They
aren't a guarantee that the fund will perform equally or similarly in the
future. Write or call us for current performance figures for the fund.
Calculation of Performance Data
- -------------------------------
We may quote the fund's performance in various ways. All performance
information in advertising is historical and is not intended to indicate future
returns. The 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.
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<PAGE> 32
Total Return Calculations
- -------------------------
Total returns quoted in advertising reflect all aspects of the 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 the 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
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
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).
</TABLE>
For example, a cumulative return of 100% over ten years would produce an average
annual return of 7.18%, which is the steady annual rate that would equal 100%
growth on a compounded basis in ten years. While average annual returns are a
convenient means of comparing investment alternatives, investors should realize
that the 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 the 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.
Performance Comparisons
- -----------------------
Performance information for the fund 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) Frank Russell Co. Inc.
indices, (2) the S&P 500, (3) the Dow Jones Industrial Average ("DJIA"), (4)
Lipper Analytical Services, Inc. Mutual Fund Performance
- 19 -
<PAGE> 33
Analysis Reports and the Lipper General Equity Funds Average, (5) Money Magazine
Fund Watch, (6) Business Week's Mutual Fund Scoreboard, (7) SEI Funds Evaluation
Services Equity Fund Report, (8) CDA Mutual Funds Performance Review and CDA
Growth Mutual Fund Performance Index, (9) Value Line Composite Average
(geometric), (10) Wilshire Associates indices, (11) the Consumer Price Index,
published by the U.S. Bureau of Labor Statistics (measurement of inflation),
(12) Morningstar, Inc., and (13) VARDS. 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 the fund also may be compared to other indices or
averages that measure performance of a pertinent group of securities. You 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 fund receives from
various rating services and organizations, including but not limited to any
organization listed above.
The fund is not promoted, sponsored, endorsed, or sold by, nor
affiliated with, Frank Russell Company. Frank Russell Company is not responsible
for and has not reviewed the fund literature or publications and makes no
representation or warranty, express or implied, as to their accuracy,
completeness, or otherwise. Frank Russell Company reserves the right, at any
time and without notice, to change or terminate the Russell 3000 Index. Frank
Russell Company has no obligation to take the needs of the fund or the separate
account contractowners into consideration in determining the index. Frank
Russell Company's publication of the Russell 3000 Index in no way suggests or
implies an opinion by Frank Russell Company as to the attractiveness or
appropriateness of investment in any or all of the securities upon which the
Index is based. Frank Russell Company makes no representation, warranty, or
guarantee as to the accuracy, completeness or reliability of the Index or any
data included in the Index. Frank Russell Company makes no representation or
warranty regarding the use, or the results of use, of the Index or any
securities comprising the Index.
FRANK RUSSELL MAKES NO EXPRESS OR IMPLIED WARRANTIES OF ANY KIND OR NATURE,
INCLUDING WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY OR OF FITNESS FOR A
PARTICULAR PURPOSE WITH RESPECT TO THE INDEX OR ANY DATA OR SECURITIES INCLUDED
THEREIN.
Illustrating Compounding, Tax Deferral, and Expense Deductions
- --------------------------------------------------------------
We may illustrate in advertisements, sales literature, and reports to
contractowners or annuitants the effects of tax deferral and/or compounding of
earnings on an investment in the TIAA-CREF Life Funds. 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 different
- 20 -
<PAGE> 34
interest rate, varies depending on when the investment was made. To illustrate
the effects of tax deferral, we will show how the total return from an
investment of the same dollar amount, earning the same or different interest
rates, for individuals in the same tax bracket, would vary between tax-deferred
and taxable investments.
We may also illustrate in advertisements, sales literature, and reports
to contractowners or annuitants the effect of an investment fund's expenses on
total return over time. We may do this using a hypothetical investment earning a
specified rate of return. We would show how the total return, net of expenses,
from an investment of the same dollar amount in funds with the same investment
results but different expense deductions varies increasingly over time. In the
alternative, we would show the difference in the dollar amount of total expense
charges paid over time by an investor in two or more different funds that have
the same annual total return but different asset-based expense charges. We may
also compare the TIAA-CREF Life Funds' expense charges to those of other
investment products.
Net Asset Value
- ---------------
Charts and graphs using the 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.
Moving Averages
- ---------------
We may illustrate the 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.
TAX STATUS
Although the TIAA-CREF Life Funds are organized as a Delaware business
trust, neither the TIAA-CREF Life Funds nor the fund will be subject to any
corporate excise or franchise tax in the State of Delaware, nor will it be
liable for Delaware income taxes provided that the fund and any additional fund
added qualifies as a "regulated investment company" ("RIC") for federal income
tax purposes and satisfies certain income source requirements of Delaware law.
If the fund or any additional fund so qualifies and distributes all of its
income and capital gains, it will also be exempt from the New York State
franchise tax and the New York City general corporation tax, except for small
minimum taxes.
The fund intends to qualify as a RIC under Subchapter M of the Code. In
general, to qualify as a RIC: (a) at least 90% of the gross income of the fund
for the taxable year must
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<PAGE> 35
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) the
fund must distribute to its shareholders 90% of its ordinary income and net
short-term capital gains. Moreover, undistributed net income may be subject to
tax at the RIC level; and (c) the fund must diversify its assets so that, at the
close of each quarter of its taxable year, (i) at least 50% 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% of the
fair market value of the fund's total assets and 10% of the outstanding voting
securities of such issuer and (ii) no more than 25% 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, the fund should not qualify as a RIC under the
Code: (1) the 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) the fund's distributions to the extent made out of the
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.
The fund must declare and distribute dividends equal to at least 98% of
its ordinary income (as of the twelve months ended December 31) and
distributions of at least 98% of its net capital gains (as of the twelve months
ended October 31), in order to avoid a federal excise tax. The fund intends to
make the required distributions, but they cannot guarantee that they will do so.
Dividends attributable to the funds'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. Dividends in the latter category are treated as paid on December 31.
A distribution of net capital gains reflects the fund's excess of net
long-term gains over its net short-term losses. The 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.
At the time of a share purchase, the 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, the 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
- 22 -
<PAGE> 36
sale of such shares during the six month period would be a long term loss to the
extent of such distribution.
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. Shareholders should consult their tax advisers to
determine the tax treatment of an investment by him or her in any fund.
UNDERWRITERS
The shares of the TIAA-CREF Life Funds are offered continuously by
Teachers Personal Investors Services, Inc. (TPIS), which is registered with the
SEC as a broker-dealer and is a member of the NASD. TPIS may be considered the
"principal underwriter" for the shares of the fund. No commissions are paid in
connection with the distribution of the shares of the TIAA-CREF Life Funds.
LEGAL MATTERS
All matters of applicable state law 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, D.C.
EXPERTS
The financial statements of the TIAA-CREF Life Funds included 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 their authority
as experts in accounting and auditing.
OTHER INFORMATION
This Statement of Additional Information and the Prospectus for the
fund do not contain all the information set forth in the registration statement
and exhibits relating thereto (including the Declaration of Trust), which the
fund has filed with the SEC, to which reference is hereby made.
FINANCIAL STATEMENTS
[TO BE FILED BY AMENDMENT]
- 23 -
<PAGE> 37
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Declaration of Trust
(b) N/A
(c) N/A
(d) Investment advisory contract*
(e) [Underwriting agreement between Registrant and TPIS*]
(f) [Bonus or Profit Sharing Contracts*]
(g) Custodian agreement*
(h) (1) Contracts with State Street Bank*
(2) Participation Agreement with TIAA-CREF Life Separate
Account VA-1*
(i) Opinion and Consent of Charles H. Stamm, Esq.*
(j) (1) Consent of Sutherland, Asbill & Brennan LLP*
(2) Consent of Ernst & Young LLP*
(k) N/A
(l) Seed Money Agreement*
(m) N/A
(n) Financial Data Schedule*
(o) N/A
----------
* To be filed by amendment.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Teachers Insurance and Annuity Association (TIAA)
College Retirement Equities Fund
- 1 -
<PAGE> 38
The following companies are subsidiaries of Teachers Insurance and
Annuity Association (TIAA) and are included in the consolidated financial
statements of TIAA:
AIC Properties, Inc.
BT Properties, Inc.
Chesapeake Investors, Inc.
College Credit Trust
Country Commons Doylestown Trust
Country Commons Joint Venture Trust
DAN Properties, 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 Indiana Three, Inc.
JV Maryland One, Inc.
JV Michigan One, Inc.
JV Michigan Two, Inc.
JV Michigan Three, Inc.
JV Minnesota One, Inc.
JV Missouri One, Inc.
JV North Carolina One, Inc.
JV Virginia One, Inc.
JV Virginia Two, Inc.
JV Virginia Three, Inc.
JWL Properties, Inc.
Liberty Place Retail, Inc.
Macallister Holdings, Inc.
Mass. Norwood Properties, Inc.
Minnesota Teachers Realty Corp.
MN Properties, Inc.
M.O.A. Enterprises, Inc.
MRC Properties, Inc.
ND Properties, Inc.
Reserve Management, Inc.
Rouse-Teachers Properties, Inc.
Savannah Teachers 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, Inc.
Teachers REA II, LLC
Teachers Realty Corporation
TED-NP, LLC
Tethys Slu, Inc.
TIAA-CREF Individual & Institutional Services, Inc.
TIAA-CREF Investment Management, LLC
TIAA-CREF Life Insurance Company
TIAA-Fund Equities, Inc.
TIAA Holdings, Inc.
TIAA Realty, Inc.
TPI Housing, Inc.
Washington Teachers Properties I, Inc.
Washington Teachers Properties II, Inc.
Windermere Goshen Trust
Windermere Place Joint Venture Trust
WRC Properties, Inc.
730 Properties, Inc.
730 Cal Hotel Properties I, Inc.
730 Cal Hotel Properties II, Inc.
730 Georgia Hotel Properties I, Inc.
730 Mass. Holding I, Inc.
730 Mass. Hotel Properties I, Inc.
730 Minn. Holding I, Inc.
730 Minn. Hotel Properties I, Inc.
730 MO Hotel Properties I, Inc.
730 Penn. Hotel Properties I, Inc.
TEO-NP, LLC
TIAA-CREF Investment Management, LLC
485 Properties, LLC
- 2 -
<PAGE> 39
(1) All subsidiaries of TIAA are Delaware corporations except as
follows:
A) Teachers Realty Corporation and Liberty Place Retail,
Inc. are Pennsylvania corporations.
B) Minnesota Teachers Realty Corporation is a Minnesota
corporation.
C) All Trusts are Pennsylvania business trusts.
D) TIAA-CREF Life Insurance Company is a New York
Corporation.
(2) All subsidiaries are 100%-owned directly by TIAA, except as
follows:
A) TCT Holdings, Inc., Teachers Personal Investors
Services, Inc., Teachers Advisors, Inc., Macallister
Holdings, Inc. and TIAA-CREF Life Insurance Company
are 100%-owned by TIAA Holdings, Inc.
B) TIAA-CREF Trust Company, FSB is 100% owned by TCT
Holdings, Inc.
C) M.O.A. Enterprises, Inc., Teachers Properties, Inc.,
730 Properties, Inc., T-Investment Properties Corp.
and T-Land Corp. are 100% owned by Macallister
Holdings, Inc.
D) Chesapeake Investors, Inc. is 95%-owned by Teachers
Properties, Inc. and 5%-owned by The Rouse Company.
Rouse-Teachers Properties, Inc. is 100%-owned by
Chesapeake Investors, Inc.
E) TPI Housing, Inc. is 100%-owned by Teachers
Properties, Inc.
F) 730 Cal Hotel Properties I, Inc., 730 Cal Hotel
Properties II, Inc., 730 Georgia Hotel Properties I,
Inc., 730 Mass Holding I, Inc., 730 Minn. Holding I,
Inc., 730 MO Hotel Properties I, Inc., 730 Penn Hotel
Properties I, Inc. are 100%-owned by 730 Properties,
Inc.
G) 730 Minn. Hotel Properties I, Inc. is 100% owned by
730 Minn. Holding I, Inc.
H) 730 Mass. Hotel Properties I, Inc. is 100% owned by
730 Mass. Holding 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:
- 3 -
<PAGE> 40
A) Teachers Advisors, Inc., which provides investment
advice for the Registrant.
B) Teachers Personal Investors Services, Inc., which
provides broker-dealer services for the Registrant.
C) TIAA-CREF Investment Management, LLC, which provides
investment advice for College Retirement Equities
Fund.
D) TIAA-CREF Individual & Institutional Services, Inc.,
which provides broker-dealer and administrative
services for College Retirement Equities Fund.
E) Reserve Management, Inc., which is intended to be
used by TIAA as a vehicle for short-term borrowing.
F) TCT Holdings, Inc., which is a unitary thrift holding
company, was formed for the sole purpose of holding
stock of a federal chartered savings bank.
G) TIAA-CREF Life Insurance Company, which is a
subsidiary life insurance company of TIAA, is
licensed under the State of New York to market
certain life insurance products not currently offered
by TIAA.
H) TIAA-CREF Trust Company, FSB which is a federal
chartered savings bank.
ITEM 25. INDEMNIFICATION
As a Delaware business trust, Registrant's operations are governed by
its Declaration of Trust dated August 13, 1998 (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
- 4 -
<PAGE> 41
obligations of Registrant and provides that notice of such 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
Teachers Advisors, Inc. (Advisors) also provides investment management
service to TIAA-CREF Mutual Funds and 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.
- 5 -
<PAGE> 42
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.
ITEM 27. PRINCIPAL UNDERWRITER
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.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Net Underwriting Compensation on
Name of Discounts and Redemption and Brokerage Other
Principal Commissions Repurchase Commissions Compensation
Underwriter
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Teachers N/A N/A N/A [to be completed]
Personal
Investor
Services, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ITEM 28. LOCATION OF TIAA-CREF LIFE 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, Bankers Trust Company, 16 Wall Street, New York, New
York 10015. 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 an agreement between the Registrant, State Street and
Advisors, the investment advisor to the Registrant. Under the agreement, State
Street will, among other things, 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 portfolio. These services will be rendered pursuant to instructions
received by State Street from Advisors or the Registrant in the ordinary course
of business.
- 6 -
<PAGE> 43
ITEM 30. UNDERTAKINGS
Registrant undertakes to file an amendment to the registration
statement with certified financial statements showing the initial capital
received before accepting subscriptions from more than 25 persons if TIAA-CREF
Life Fund raises its initial capital pursuant to Section 14(a)(3) of the
Investment Company Act of 1940.
- 7 -
<PAGE> 44
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Registrant, TIAA-CREF Life Funds, 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 18th day of August, 1998.
TIAA-CREF LIFE FUNDS
By: /s/ Peter C. Clapman
-------------------
Name: Peter C. Clapman
Title: 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.
/s/ Peter C. Clapman Date: August 18, 1998
- ------------------------
Name: Peter C. Clapman
Title: Trustee, President
/s/ Lisa Snow Date: August 18, 1998
- ------------------------
Name: Lisa Snow
Title: Trustee, Secretary
<PAGE> 45
EXHIBIT INDEX
Exhibit Number Description
(1) Declaration of Trust
<PAGE> 1
DECLARATION OF TRUST
OF
TIAA-CREF LIFE FUNDS
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 1
Name and Definitions.....................................................................................1
1.1. Name...............................................................................................1
1.2. Definitions........................................................................................1
ARTICLE 2
Nature and Purpose of Trust..............................................................................2
2.1. Nature of Trust....................................................................................2
2.2. Purpose of Trust...................................................................................3
2.3. Interpretation of Declaration of Trust.............................................................3
2.3.1. Governing Instrument....................................................................3
2.3.2. No Waiver of Compliance with Applicable Law.............................................3
2.3.3. Power of the Trustees Generally.........................................................3
ARTICLE 3
Registered Agent; Offices................................................................................3
3.1. Registered Agent...................................................................................3
ARTICLE 4
Shares of Beneficial Interest............................................................................3
4.1. Shares of Beneficial Interest......................................................................3
4.2. Number of Authorized Shares........................................................................4
4.3. Ownership and Certification of Shares..............................................................4
4.4. Status of Shares...................................................................................4
4.4.1. Fully Paid and Non-Assessable...........................................................4
4.4.2. Personal Property.......................................................................4
4.4.3. Party to Declaration of Trust...........................................................4
4.4.4. Death of Shareholder....................................................................4
4.4.5. Title to Trust; Right to Accounting.....................................................4
4.5. Determination of Shareholders......................................................................4
4.6. Shares Held by Trust...............................................................................5
4.7. Shares Held by Persons Related to Trust............................................................5
4.8. Preemptive and Appraisal Rights....................................................................5
4.9. Series and Classes of Shares.......................................................................5
4.9.1. Generally...............................................................................5
4.9.2. Establishment and Designation...........................................................5
4.9.3. Conversion Rights.......................................................................6
4.9.4. Separate and Distinct Nature............................................................6
4.9.5. Rights and Preferences of Series........................................................6
4.9.5.1. Assets and Liabilities "Belonging" to a Series...............................6
</TABLE>
ii
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
4.9.5.2. Treatment of Particular Items................................................7
4.9.5.3. Limitation on Interseries Liabilities........................................7
4.9.5.4. Dividends....................................................................7
4.9.5.5. Redemption by Shareholder....................................................7
4.9.5.6. Redemption by Trust..........................................................8
4.9.5.7. Prevention of Personal Holding Company Status................................8
4.9.5.8. Net Asset Value..............................................................8
4.9.5.9. Maintenance of Stable Net Asset Value........................................8
4.9.5.10. Transfer of Shares..........................................................9
4.9.5.11. Equality of Shares..........................................................9
4.9.5.12. Fractional Shares...........................................................9
4.9.6. Rights and Preferences of Classes.......................................................9
ARTICLE 5
Trustees................................................................................................10
5.1. Management of the Trust...........................................................................10
5.2. Qualification.....................................................................................10
5.3. Number............................................................................................10
5.4. Term and Election.................................................................................10
5.5. Composition of the Board of Trustees..............................................................11
5.6. Resignation and Retirement........................................................................11
5.7. Removal...........................................................................................11
5.8. Vacancies.........................................................................................11
5.9. Ownership of Assets of the Trust..................................................................11
5.10. Powers...........................................................................................12
5.10.1. By-Laws...............................................................................12
5.10.2. Officers, Agents, and Employees.......................................................12
5.10.3. Committees............................................................................12
5.10.3.1. Generally..................................................................12
5.10.3.2. Executive Committee........................................................12
5.10.4. Advisers, Administrators, Depositories, and Custodians................................13
5.10.5. Compensation..........................................................................13
5.10.6. Delegation of Authority...............................................................13
5.10.7. Suspension of Sales...................................................................13
5.11. Certain Additional Powers........................................................................13
5.11.1. Investments...........................................................................13
5.11.2. Disposition of Assets.................................................................13
5.11.3. Ownership.............................................................................14
5.11.4. Subscription..........................................................................14
5.11.5. Payment of Expenses...................................................................14
5.11.6. Form of Holding.......................................................................14
5.11.7. Reorganization, Consolidation, or Merger..............................................14
5.11.8. Compromise............................................................................14
</TABLE>
iii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
5.11.9. Partnerships..........................................................................14
5.11.10. Borrowing............................................................................14
5.11.11. Guarantees...........................................................................15
5.11.12. Insurance............................................................................15
5.11.13. Pensions.............................................................................15
5.12. Meetings and Vote of Trustees....................................................................15
5.12.1. Regular Meetings......................................................................15
5.12.2. Special Meetings......................................................................15
5.12.3. Telephonic Meetings...................................................................15
5.12.4. Quorum................................................................................16
5.12.5. Required Vote.........................................................................16
5.12.6. Consent in Lieu of a Meeting..........................................................16
ARTICLE 6
Service Providers.......................................................................................16
6.1. Investment Adviser................................................................................16
6.2. Underwriter and Transfer Agent....................................................................16
6.3. Custodians........................................................................................16
6.4. Administrator.....................................................................................17
6.5. Other Contracts...................................................................................17
6.6. Parties to Contracts..............................................................................17
ARTICLE 7
Shareholders' Voting Powers and Meetings................................................................17
7.1. Voting Powers.....................................................................................17
7.1.2. Separate Voting by Series and Class....................................................18
7.1.3. Number of Votes........................................................................18
7.1.4. Cumulative Voting......................................................................18
7.1.5. Voting of Shares; Proxies..............................................................18
7.1.6. Actions Prior to the Issuance of Shares................................................18
7.2. Meetings of Shareholders..........................................................................19
7.2.1. Annual or Regular Meetings.............................................................19
7.2.2. Special Meetings.......................................................................19
7.2.3. Notice of Meetings.....................................................................19
7.2.4. Call of Meetings.......................................................................19
7.3. Record Dates......................................................................................19
7.4. Quorum............................................................................................19
7.5. Required Vote.....................................................................................20
7.6. Adjournments......................................................................................20
7.7. Actions by Written Consent........................................................................20
7.8. Inspection of Records.............................................................................20
7.9. Additional Provisions.............................................................................20
</TABLE>
iv
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 8
Limitation of Liability and Indemnification.............................................................20
8.1. General Provisions................................................................................20
8.1.1. General Limitation of Liability........................................................20
8.1.2. Notice of Limited Liability............................................................21
8.1.3. Liability Limited to Assets of the Trust...............................................21
8.2. Liability of Trustees.............................................................................21
8.2.1. Liability for Own Actions..............................................................21
8.2.2. Liability for Actions of Others........................................................21
8.2.3. Advice of Experts and Reports of Others................................................21
8.2.4. Bond...................................................................................22
8.2.5. Declaration of Trust Governs Issues of Liability.......................................22
8.3. Liability of Third Persons Dealing with Trustees..................................................22
8.4. Liability of Shareholders.........................................................................22
8.4.1. Limitation of Liability................................................................22
8.4.2. Indemnification of Shareholders........................................................22
8.5. Indemnification...................................................................................23
8.5.1. Indemnification of Covered Persons.....................................................23
8.5.2. Exceptions.............................................................................23
8.5.3. Rights of Indemnification..............................................................23
8.5.4. Expenses of Indemnification............................................................24
8.5.5. Certain Defined Terms Relating to Indemnification......................................24
ARTICLE 9
Termination or Reorganization...........................................................................24
9.1. Termination of Trust or Series....................................................................24
9.1.1. Termination............................................................................25
9.1.2. Distribution of Assets.................................................................25
9.1.3. Certificate of Cancellation............................................................25
9.2. Reorganization....................................................................................25
9.3. Merger or Consolidation...........................................................................25
9.3.1. Authority to Merge or Consolidate......................................................25
9.3.2. No Shareholder Approval Required.......................................................26
9.3.3. Subsequent Amendments..................................................................26
9.4.4. Certificate of Merger or Consolidation.................................................26
ARTICLE 10.......................................................................................................26
Amendments..............................................................................................26
10.1. Generally........................................................................................26
10.2. Certificate of Amendment.........................................................................26
10.3. Prohibited Retrospective Amendments..............................................................26
</TABLE>
v
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 11
Miscellaneous Provisions................................................................................27
11.1. Certified Copies.................................................................................27
11.2. Certain Internal References......................................................................27
11.3. Headings.........................................................................................27
11.4. Resolution of Ambiguities........................................................................27
11.5. Signatures.......................................................................................27
11.6. Governing Law....................................................................................27
11.7. Severability.....................................................................................28
</TABLE>
vi
<PAGE> 7
DECLARATION OF TRUST
OF
TIAA-CREF LIFE FUNDS
This DECLARATION OF TRUST is made as of this day, August 13, 1998, by
the Trustees hereunder.
WHEREAS, the Trustees desire to establish a trust for the purpose of
carrying on the business of an open-end management investment company; and
WHEREAS, in furtherance of such purpose, the Trustees and any successor
Trustees elected in accordance with Article 5 hereof are acquiring and may
hereafter acquire assets which they will hold and manage as trustees of a
Delaware business trust in accordance with the provisions hereinafter set forth;
and
WHEREAS, this Trust is authorized to issue its shares of beneficial
interest in one or more separate series and classes of series, in accordance
with the provisions set forth in this Declaration of Trust;
NOW, THEREFORE, the Trustees hereby declare that they will hold in
trust all cash, securities, and other assets which they may from time to time
acquire in any manner as Trustees hereunder, and that they will manage and
dispose of the same upon the following terms and conditions for the benefit of
the holders of shares of beneficial interest in this Trust as hereinafter set
forth.
ARTICLE 1
NAME AND DEFINITIONS
SECTION 1.1. NAME. This Trust shall be known as the "TIAA-CREF LIFE
FUNDS" and the Trustees shall conduct the business of the Trust under that name
or any other name or names as they may from time to time determine.
SECTION 1.2. DEFINITIONS. Whenever used herein, unless otherwise
required by the context or specifically provided below:
(a) The "Trust" shall mean the Delaware business trust established by
this Declaration of Trust, as amended from time to time;
(b) "Trustee" and "Trustees" shall mean each signatory to this
Declaration of Trust so long as such signatory shall continue in office in
accordance with the terms hereof, and all other individuals who at the time in
question have been duly elected or appointed and qualified in accordance with
Article 5 hereof and are then in office;
<PAGE> 8
(c) "Shares" shall mean the shares of beneficial interest in the Trust
described in Article 4 hereof and shall include fractional and whole Shares;
(d) "Shareholder" shall mean a beneficial owner of Shares, except that
with regard to Shares owned by insurance company separate accounts or trusts
established in connection with employee benefit plans, "Shareholder" shall mean
the separate account or trust;
(e) The "1940 Act" refers to the Investment Company Act of 1940 (and
any successor statute) and the rules and regulations thereunder, all as amended
from time to time;
(f) "Person," "Interested Person," and "Principal Underwriter" shall
have the meanings given them in the 1940 Act;
(g) "Commission" shall mean the United States Securities and Exchange
Commission (or any successor agency thereto);
(h) "Declaration of Trust" or "Declaration" shall mean this Declaration
of Trust as amended or restated from time to time;
(i) "By-Laws" shall mean the By-Laws of the Trust, if any, as amended
from time to time;
(j) "Series" shall mean any of the separate series of Shares
established and designated under or in accordance with the provisions of Article
4 and to which the Trustees have allocated assets and liabilities of the Trust
in accordance with Article 4;
(k) "DBTA" refers to the Delaware Business Trust Act, Chapter 38 of
Title 12 of the Delaware Code (and any successor statute), as amended from time
to time; and
(l) "Code" refers to the Internal Revenue Code of 1986 (and any
successor statute) and the rules and regulations thereunder, all as amended from
time to time.
ARTICLE 2
NATURE AND PURPOSE OF TRUST
SECTION 2.1. NATURE OF TRUST. The Trust is a business trust of the type
referred to in the DBTA. The Trustees shall file a certificate of trust in
accordance with Sections 3810-3812 of the DBTA. The Trust is not intended to be,
shall not be deemed to be, and shall not be treated as, a general or a limited
partnership, joint venture, corporation or joint stock company, nor shall the
Trustees or Shareholders or any of them for any purpose be deemed to be, or be
treated in any way whatsoever as though they were, liable or responsible
hereunder as partners or joint venturers.
2
<PAGE> 9
SECTION 2.2. PURPOSE OF TRUST. The purpose of the Trust is to engage
in, operate and carry on the business of an open-end management investment
company and to do any and all acts or things as are necessary, convenient,
appropriate, incidental or customary in connection therewith.
SECTION 2.3. INTERPRETATION OF DECLARATION OF TRUST.
SECTION 2.3.1. GOVERNING INSTRUMENT. This Declaration of Trust
shall be the governing instrument of the Trust and shall be governed by and
construed according to the laws of the State of Delaware.
SECTION 2.3.2. NO WAIVER OF COMPLIANCE WITH APPLICABLE LAW. No
provision of this Declaration shall be effective if it is deemed to require a
waiver of compliance with any provision of the Securities Act of 1933, as
amended, or the 1940 Act, or of any valid rule, regulation or order of the
Commission thereunder.
SECTION 2.3.3. POWER OF THE TRUSTEES GENERALLY. Except as
otherwise set forth herein, the Trustees may exercise all powers of trustees
under the DBTA on behalf of the Trust.
ARTICLE 3
REGISTERED AGENT; OFFICES
SECTION 3.1. REGISTERED AGENT. The name of the registered agent of the
Trust is The Corporation Trust Company and the registered agent's business
address in Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801.
SECTION 3.2. OFFICES. The Trust shall maintain an office within the
State of Delaware which shall be identical to the business office of the
registered agent of the Trust as set forth in Section 3.1. The Trustees may, at
any time, establish branch or subordinate offices at any place or places where
the Trust intends to do business.
ARTICLE 4
SHARES OF BENEFICIAL INTEREST
SECTION 4.1. SHARES OF BENEFICIAL INTEREST. The beneficial interests in
the Trust shall be divided into Shares, all without par value. The Trustees
shall have the authority from time to time to divide the Shares into two (2) or
more separate and distinct series of Shares ("Series") as provided in Section
4.9 of this Article 4, and to divide each such Series of Shares into two (2) or
more classes of Shares ("Classes").
3
<PAGE> 10
SECTION 4.2. NUMBER OF AUTHORIZED SHARES. The Trustees are authorized
to issue an unlimited number of Shares. The Trustees may issue Shares for such
consideration and on such terms as they may determine (or for no consideration
if pursuant to a Share dividend or split), all without action or approval of the
Shareholders.
SECTION 4.3. OWNERSHIP AND CERTIFICATION OF SHARES. The Secretary of
the Trust, or the Trust's transfer or similar agent, shall record the ownership
and transfer of Shares of each Series and Class separately on the record books
of the Trust. The record books of the Trust, as kept by the Secretary of the
Trust or any transfer or similar agent, shall contain the name and address of
and the number of Shares held by each Shareholder, and such record books shall
be conclusive as to who are the holders of Shares and as to the number of Shares
held from time to time by such Shareholders. No certificates certifying the
ownership of Shares shall be issued except as the Trustees may otherwise
determine from time to time. The Trustees may make such rules as they consider
appropriate for the issuance of share certificates, transfer of Shares, and
similar matters for the Trust or any Series.
SECTION 4.4. STATUS OF SHARES.
SECTION 4.4.1. FULLY PAID AND NON-ASSESSABLE. All Shares when
issued on the terms determined by the Trustees shall be fully paid and
non-assessable.
SECTION 4.4.2. PERSONAL PROPERTY. Shares shall be deemed to be
personal property giving only the rights provided in this Declaration of Trust.
SECTION 4.4.3. PARTY TO DECLARATION OF TRUST. Every Person by
virtue of having become registered as a Shareholder shall be held to have
expressly assented and agreed to the terms of this Declaration of Trust and to
have become a party thereto.
SECTION 4.4.4. DEATH OF SHAREHOLDER. The death of a
Shareholder during the continuance of the Trust shall not operate to terminate
the Trust nor entitle the representative of any deceased Shareholder to an
accounting or to take any action in court or elsewhere against the Trust or the
Trustees. The representative shall be entitled to the same rights as the
decedent under this Trust.
SECTION 4.4.5. TITLE TO TRUST; RIGHT TO ACCOUNTING. Ownership
of Shares shall not entitle the Shareholder to any title in or to the whole or
any part of the Trust property or right to call for a partition or division of
the same or for an accounting.
SECTION 4.5. DETERMINATION OF SHAREHOLDERS. The Trustees may from time
to time close the transfer books or establish record dates and times for the
purposes of determining the Shareholders entitled to be treated as such, to the
extent provided or referred to in Section 7.3.
4
<PAGE> 11
SECTION 4.6. SHARES HELD BY TRUST. The Trustees may hold as treasury
shares, reissue for such consideration and on such terms as they may determine,
or cancel, at their discretion from time to time, any Shares of any Series or
Class reacquired by the Trust.
SECTION 4.7. SHARES HELD BY PERSONS RELATED TO TRUST. Any Trustee,
officer or other agent of the Trust, and any organization in which any such
person is interested may acquire, own, hold and dispose of Shares of the Trust
to the same extent as if such person were not a Trustee, officer or other agent
of the Trust; and the Trust may issue and sell or cause to be issued and sold
and may purchase Shares from any such person or any such organization subject
only to the general limitations, restrictions or other provisions applicable to
the sale or purchase of such Shares generally.
SECTION 4.8. PREEMPTIVE AND APPRAISAL RIGHTS. Shareholders shall not,
as Shareholders, have any right to acquire, purchase or subscribe for any Shares
or other securities of the Trust which it may hereafter issue or sell, other
than such right, if any, as the Trustees in their discretion may determine.
Shareholders shall have no appraisal rights with respect to their Shares and,
except as otherwise determined by resolution of the Trustees in their sole
discretion, shall have no exchange or conversion rights with respect to their
Shares. No action may be brought by a Shareholder on behalf of the Trust unless
Shareholders owning no less than a majority of the then outstanding Shares, or
Series or Class thereof, join in the bringing of such action. A Shareholder
shall not be entitled to participate in a derivative or class action lawsuit on
behalf of any other Series or any other Class on behalf of the Shareholders in
any other Series or any other Class of the Trust than the Series or Class owned
by such Shareholder.
SECTION 4.9. SERIES AND CLASSES OF SHARES.
SECTION 4.9.1. GENERALLY. In addition to the Series and Class
established and designated in Section 4.9.2, the Shares of the Trust shall be
divided into one or more separate and distinct Series or Classes of a Series as
the Trustees shall from time to time establish and designate.
SECTION 4.9.2. ESTABLISHMENT AND DESIGNATION. The Trustees
shall have exclusive power without the requirement of Shareholder approval to
establish and designate separate and distinct Series of Shares and with respect
to any Series of Shares, to establish and designate separate and distinct
Classes of Shares. The establishment and designation of any Series (in addition
to those established and designated in this Section below) or Class shall be
effective upon the execution by a majority of the Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of the Shares of such Series or Class, or as otherwise provided in
such instrument. Each such instrument shall have
5
<PAGE> 12
the status of an amendment to this Declaration of Trust. Without limiting the
authority of the Trustees to establish and designate any further Series or
Classes, the Trustees hereby establish and designate the following initial
Series, the Shares of which shall all be of one Class:
Stock Index Fund.
SECTION 4.9.3. CONVERSION RIGHTS. Subject to compliance with
the requirements of the 1940 Act, the Trustees shall have the authority to
provide that holders of Shares of any Series or Class within a Series shall have
the right to convert such Shares into Shares of one or more other Series or
Classes in accordance with such requirements and procedures as may be
established by the Trustees.
SECTION 4.9.4. SEPARATE AND DISTINCT NATURE. Each Series,
including without limitation Series specifically established in Section 4.9.2,
shall be separate and distinct from any other Series and shall maintain separate
and distinct records on the books of the Trust, and the assets belonging to any
such Series shall be held and accounted for separately from the assets of the
Trust or any other Series.
SECTION 4.9.5. RIGHTS AND PREFERENCES OF SERIES. The Trustees
shall have exclusive power without the requirement of Shareholder approval to
fix and determine the relative rights and preferences as between the Shares of
the separate Series. The initial Series and any further Series that may from
time to time be established and designated by the Trustees shall (unless the
Trustees otherwise determine with respect to some further Series at the time of
establishing and designating the same) have relative rights and preferences as
set forth in this Section 4.9.5.
SECTION 4.9.5.1. ASSETS AND LIABILITIES "BELONGING"
TO A SERIES. All consideration received by the Trust for the issue or sale of
Shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be held
and accounted for separately from the other assets of the Trust and of every
other Series and may be referred to herein as "assets belonging to" that Series.
The assets belonging to a particular Series shall belong to that Series for all
purposes, and to no other Series, subject only to the rights of creditors of
that Series. Such consideration, assets, income, earnings, profits, and proceeds
thereof, including any proceeds derived from the sale, exchange or liquidation
of such assets, and any funds or payments which are not readily identifiable as
belonging to any particular Series (collectively "General Items"), the Trustees
shall allocate to and among any one or more of the Series in such manner and on
such basis as they, in their sole discretion, deem fair and equitable. Any
General Items so allocated to a particular Series shall belong to that Series.
Each such allocation by the Trustees shall be conclusive and binding upon all
Shareholders for all purposes. The assets belonging to each particular Series
shall be charged with the liabilities
6
<PAGE> 13
in respect of that Series and all expenses, costs, charges and reserves
attributable to that Series, and any general liabilities, expenses, costs,
charges or reserves of the Trust which are not readily identifiable as belonging
to any particular Series shall be allocated and charged by the Trustees to and
among any one or more of the Series established and designated from time to time
in such manner and on such basis as the Trustees in their sole discretion deem
fair and equitable. Each allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon all Shareholders
for all purposes.
SECTION 4.9.5.2. TREATMENT OF PARTICULAR ITEMS. The
Trustees shall have full discretion, to the extent consistent with the 1940 Act
and consistent with generally accepted accounting principles, to determine which
items shall be treated as income and which items as capital; and each such
determination and allocation shall be conclusive and binding upon the
Shareholders.
SECTION 4.9.5.3. LIMITATION ON INTERSERIES
LIABILITIES. Subject to the right of the Trustees in their discretion to
allocate general liabilities, expenses, costs, charges or reserves as provided
in Section 4.9.5.1, the debts, liabilities, obligations and expenses incurred,
contracted for or otherwise existing with respect to a particular Series shall
be enforceable against the assets of such Series only, and not against the
assets of any other Series. Notice of this limitation on liabilities between and
among Series shall be set forth in the certificate of trust of the Trust
(whether originally or by amendment) as filed or to be filed in the Office of
the Secretary of State of the State of Delaware pursuant to the DBTA, and upon
the giving of such notice in the certificate of trust, the statutory provisions
of Section 3804 of the DBTA relating to limitations on liabilities between and
among series (and the statutory effect under Section 3804 of setting forth such
notice in the certificate of trust) shall become applicable to the Trust and
each Series.
SECTION 4.9.5.4. DIVIDENDS. Dividends and capital
gains distributions on Shares of a particular Series may be paid with such
frequency, in such form, and in such amount as the Trustees may determine by
resolution adopted from time to time, or pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine. All dividends and distributions on Shares of a particular Series
shall be distributed pro rata to the holders of Shares of that Series in
proportion to the number of Shares of that Series held by such holders at the
date and time of record established for the payment of such dividends or
distributions. Such dividends and distributions may be paid in cash, property or
additional Shares of that Series, or a combination thereof, as determined by the
Trustees or pursuant to any program that the Trustees may have in effect at the
time for the election by each Shareholder of the form in which dividends or
distributions are to be paid to that Shareholder. Any such dividend or
distribution paid in Shares shall be paid at the net asset value thereof as
determined in accordance with Section 4.9.5.8.
SECTION 4.9.5.5. REDEMPTION BY SHAREHOLDER. Each
Shareholder shall have the right at such times as may be permitted by the Trust
and as otherwise required by the
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1940 Act to require the Trust to redeem all or any part of such Shareholder's
Shares of a Series at a redemption price per Share equal to the net asset value
per Share of such Series next determined in accordance with Section 4.9.5.8
after the Shares are properly tendered for redemption, less any charge which may
be imposed by the Trust in connection with such redemption as may be established
by the Trustees in their sole discretion and as described in the Trust's then
current prospectus. Payment of the redemption price shall be in cash; provided,
however, that the Trust may, subject to the requirements of the 1940 Act, make
payment wholly or partly in securities or other assets belonging to the Series
of which the Shares being redeemed are part at the value of such securities or
assets used in such determination of net asset value. Notwithstanding the
foregoing, the Trust may postpone payment of the redemption price and may
suspend the right of the holders of Shares of any Series to require the Trust to
redeem Shares of that Series during any period or at any time when and to the
extent permissible under any applicable provision of the 1940 Act.
SECTION 4.9.5.6. REDEMPTION BY TRUST. The Trustees
may cause the Trust to redeem at net asset value the Shares of any Series held
by a Shareholder upon such conditions as may from time to time be determined by
the Trustees. Upon redemption of Shares pursuant to this Section 4.9.5.6, the
Trust shall promptly cause payment of the full redemption price to be made to
such Shareholder for Shares so redeemed.
SECTION 4.9.5.7. PREVENTION OF PERSONAL HOLDING
COMPANY STATUS. The Trust may reject any purchase order, refuse to transfer any
Shares, and compel the redemption of Shares if, in its opinion, any such
rejection, refusal, or redemption would prevent the Trust from becoming a
personal holding company as defined by the Code.
SECTION 4.9.5.8. NET ASSET VALUE. The net asset value
per Share of any Series shall be determined in accordance with the methods and
procedures established by the Trustees from time to time and, to the extent
required by applicable law, as disclosed in the then current prospectus or
statement of additional information for the Series.
SECTION 4.9.5.9. MAINTENANCE OF STABLE NET ASSET
VALUE. The Trustees may determine to maintain the net asset value per Share of
any Series at a designated constant dollar amount and in connection therewith
may adopt procedures not inconsistent with the 1940 Act for the continuing
declarations of income attributable to that Series as dividends payable in
additional Shares of that Series at the designated constant dollar amount and
for the handling of any losses attributable to that Series. Such procedures may
provide that in the event of any loss each Shareholder shall be deemed to have
contributed to the capital of the Trust attributable to that Series his or her
pro rata portion of the total number of Shares required to be canceled in order
to permit the net asset value per Share of that Series to be maintained, after
reflecting such loss, at the designated constant dollar amount. Each Shareholder
of the Trust shall be deemed to have agreed, by his investment in any Series
with respect to which the Trustees shall have adopted any such procedure, to
make the contribution referred to in the preceding sentence in the event of any
such loss. The Trustees may delegate
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any of their powers and duties under this Section 4.9.5.9 with respect to
appraisal of assets and liabilities in the determination of net asset value or
with respect to a suspension of the determination of net asset value to an
officer or officers or agent or agents of the Trust designated from time to time
by the Trustees.
SECTION 4.9.5.10. TRANSFER OF SHARES. Except to the
extent that transferability is limited by applicable law or such procedures as
may be developed from time to time by the Trustees or the appropriate officers
of the Trust, Shares shall be transferable on the records of the Trust only by
the record holder thereof or by his agent thereunto duly authorized in writing,
upon delivery to the Trustees or the Trust's transfer agent of a duly executed
instrument of transfer, together with a Share certificate, if one is
outstanding, and such evidence of the genuineness of each such execution and
authorization and of such other matters as may be required by the Trustees. Upon
such delivery the transfer shall be recorded on the register of the Trust.
SECTION 4.9.5.11. EQUALITY OF SHARES. All Shares of
each particular Series shall represent an equal proportionate interest in the
assets belonging to that Series (subject to the liabilities belonging to that
Series), and each Share of any particular Series shall be equal in this respect
to each other Share of that Series. This Section 4.9.5.11. Shall not restrict
any distributions otherwise permissible under this Declaration of Trust with
respect to any Classes within a Series.
SECTION 4.9.5.12. FRACTIONAL SHARES. Any fractional
Share of any Series, if any such fractional Share is outstanding, shall carry
proportionately all the rights and obligations of a whole Share of that Series,
including rights and obligations with respect to voting, receipt of dividends
and distributions, redemption of Shares, and liquidation of the Trust or any
Series.
SECTION 4.9.6. RIGHTS AND PREFERENCES OF CLASSES. The
Trustees shall have exclusive power without the requirement of Shareholder
approval to fix and determine the relative rights and preferences as between the
separate Classes within any Series. The initial Class and any further Classes
that may from time to time be established and designated by the Trustees shall
(unless the Trustees otherwise determine with respect to some further Class at
the time of establishing and designating the same) have relative rights and
preferences as set forth in this Section 4.9.6. If a Series is divided into
multiple Classes, the Classes may be invested with one or more other Classes in
the common investment portfolio comprising the Series. Notwithstanding the
provisions of Section 4.9.5, if two or more Classes are invested in a common
investment portfolio, the shares of each such Class shall be subject to the
following preferences, conversion and other rights, voting powers, restrictions,
conditions of redemption, and, if there are other Classes invested in a
different investment portfolio comprising a different Series, shall also be
subject to the provisions of Section 4.9.5 at the Series level as if the Classes
invested in the common investment portfolio were one Class:
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(a) The income and expenses of the Series shall be allocated among the
Classes comprising the Series in such manner as may be determined by the
Trustees in accordance with applicable law;
(b) As more fully set forth in this Section 4.9.6, the liabilities and
expenses of the Classes comprising the Series shall be determined separately
from those of each other and, accordingly, the net asset values, the dividends
and distributions payable to Shareholders, and the amounts distributable in the
event of liquidation of the Trust or termination of a Series to Shareholders may
vary within the classes comprising the Series. Except for these differences and
certain other differences set forth in this Section 4.9.6 or elsewhere in this
Declaration of Trust, the Classes comprising a Series shall have the same
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption; and
(c) The dividends and distributions of investment income and capital
gains with respect to the Classes comprising a Series shall be in such amounts
as may be declared from time to time by the Trustees, and such dividends and
distributions may vary among the Classes comprising the Series to reflect
differing allocations of the expenses and liabilities of the Trust among the
Classes and any resultant differences between the net asset values per Share of
the Classes, to such extent and for such purposes as the Trustees may deem
appropriate. The allocation of investment income, capital gains, expenses, and
liabilities of the Trust among the Classes comprising a Series shall be
determined by the Trustees in a manner that is consistent with applicable law.
ARTICLE 5
TRUSTEES
SECTION 5.1. MANAGEMENT OF THE TRUST. The business and affairs of the
Trust shall be managed by the Trustees, and they shall have all powers necessary
and desirable to carry out that responsibility, including those specifically set
forth in Sections 5.10 and 5.11 herein.
SECTION 5.2. QUALIFICATION. Each Trustee shall be a natural person. A
Trustee need not be a Shareholder, a citizen of the United States, or a resident
of the State of Delaware.
SECTION 5.3. NUMBER. By the vote or consent of a majority of the
Trustees then in office, the Trustees may fix the number of Trustees at a number
not less than two (2) nor more than twenty-five (25). No decrease in the number
of Trustees shall have the effect of removing any Trustee from office prior to
the expiration of his or her term, but the number of Trustees may be decreased
in conjunction with the removal of a Trustee pursuant to Section 5.7.
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SECTION 5.4. TERM AND ELECTION. Each Trustee shall hold office until
the next meeting of Shareholders called for the purpose of considering the
election or re-election of such Trustee or of a successor to such Trustee, and
until his or her successor is elected and qualified, and any Trustee who is
appointed by the Trustees in the interim to fill a vacancy as provided hereunder
shall have the same remaining term as that of his or her predecessor, if any, or
such term as the Trustees may determine.
SECTION 5.5. COMPOSITION OF THE BOARD OF TRUSTEES. No election or
appointment of any Trustee shall take effect if such election or appointment
would cause the number of Trustees who are Interested Persons to exceed the
number permitted by Section 10 of the 1940 Act.
SECTION 5.6. RESIGNATION AND RETIREMENT. Any Trustee may resign or
retire as a Trustee (without need for prior or subsequent accounting) by an
instrument in writing signed by such Trustee and delivered or mailed to the
Chairman, if any, the President, or the Secretary of the Trust. Such resignation
or retirement shall be effective upon such delivery, or at a later date
according to the terms of the instrument.
SECTION 5.7. REMOVAL. Any Trustee may be removed with or without cause
at any time: (1) by written instrument signed by two-thirds (2/3) of the number
of Trustees in office prior to such removal, specifying the date upon which such
removal shall become effective, or (2) by the affirmative vote of Shareholders
holding not less than two-thirds (2/3) of Shares outstanding, cast in person or
by proxy at any meeting called for that purpose.
SECTION 5.8. VACANCIES. Any vacancy or anticipated vacancy resulting
for any reason, including without limitation the death, resignation, retirement,
removal, or incapacity of any of the Trustees, or resulting from an increase in
the number of Trustees may (but need not unless required by the 1940 Act) be
filled by a majority of the Trustees then in office, subject to the provisions
of Section 16 of the 1940 Act, through the appointment in writing of such other
person as such remaining Trustees in their discretion shall determine. The
appointment shall be effective upon the written acceptance of the person named
therein to serve as a Trustee and agreement by such person to be bound by the
provisions of this Declaration of Trust, except that any such appointment in
anticipation of a vacancy occurring by reason of the resignation, retirement, or
increase in number of Trustees to be effective at a later date shall become
effective only at or after the effective date of such resignation, retirement,
or increase in number of Trustees.
SECTION 5.9. OWNERSHIP OF ASSETS OF THE TRUST. The assets of the Trust
shall be held separate and apart from any assets now or hereafter held in any
capacity other than as Trustee hereunder by the Trustees or any successor
Trustees. Legal title to all the Trust property shall be vested in the Trust as
a separate legal entity under the DBTA, except that the Trustees shall have the
power to cause legal title to any Trust property to be held by or in the name of
one or more of the Trustees or in the name of any other Person on behalf of the
Trust on such terms
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as the Trustees may determine. In the event that title to any part of the Trust
property is vested in one or more Trustees, the right, title and interest of the
Trustees in the Trust property shall vest automatically in each person who may
hereafter become a Trustee upon his or her due election and qualification. Upon
the resignation, removal or death of a Trustee he or she shall automatically
cease to have any right, title or interest in any of the Trust property, and the
right, title and interest of such Trustee in the Trust property shall vest
automatically in the remaining Trustees. To the extent permitted by law, such
vesting and cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered. No Shareholder shall be deemed to
have a severable ownership in any individual asset of the Trust or any right of
partition or possession thereof.
SECTION 5.10. POWERS. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to carry out
that responsibility and the purpose of the Trust including, but not limited to,
those enumerated in this Section 5.10.
SECTION 5.10.1. BY-LAWS. The Trustees may adopt By-Laws not
inconsistent with this Declaration of Trust providing for the conduct of the
business and affairs of the Trust and may amend and repeal them to the extent
that such By-Laws do not reserve that right to the Shareholders.
SECTION 5.10.2. OFFICERS, AGENTS, AND EMPLOYEES. The Trustees
may, as they consider appropriate, elect and remove officers and appoint and
terminate agents and consultants and hire and terminate employees, any one or
more of the foregoing of whom may be a Trustee, and may provide for the
compensation of all of the foregoing.
SECTION 5.10.3. COMMITTEES.
SECTION 5.10.3.1. GENERALLY. The Trustees, by a vote
of a majority of the Trustees then in office, may elect from their number, an
Audit Committee, Executive Committee, Nominating Committee, or any other
committee and may delegate thereto some or all of their powers except those
which by law, by this Declaration of Trust, or by the By-Laws may not be
delegated. Except as the Trustees may otherwise determine, any such committee
may make rules for the conduct of its business, but unless otherwise provided by
the Trustees or in such rules, its business shall be conducted so far as
possible in the same manner as is provided by this Declaration of Trust or the
By-Laws of the Trust for the Trustees themselves. All members of such committees
shall hold such offices at the pleasure of the Trustees. The Trustees may
abolish any committee at any time. Any committee to which the Trustees delegate
any of their powers or duties shall keep records of its meetings and shall
report its actions to the Trustees. The Trustees shall have power to rescind any
action of any committee, but no such rescission shall have retroactive effect.
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SECTION 5.10.3.2. EXECUTIVE COMMITTEE. The Executive
Committee, if there shall be one, shall have all of the powers and authority of
the Trustees that may lawfully be exercised by an executive committee, except
the power to: (i) declare dividends or distributions on Shares; (ii) issue
Shares; (iii) recommend to the Shareholders any action which requires the
Shareholders' approval; or (iv) approve any merger, reorganization, or share
exchange which does not require Shareholder approval. Notwithstanding the
foregoing, the Trustees may limit the powers and authority of the Executive
Committee at any time.
SECTION 5.10.4. ADVISERS, ADMINISTRATORS, DEPOSITORIES, AND
CUSTODIANS. The Trustees may, in accordance with Article 6, employ one or more
advisers, administrators, depositories, custodians, and other persons and may
authorize any depository or custodian to employ subcustodians or agents and to
deposit all or any part of such assets in a system or systems for the central
handling of securities and debt instruments, retain transfer, dividend,
accounting or Shareholder servicing agents or any of the foregoing, provide for
the distribution of Shares by the Trust through one or more distributors,
principal underwriters or otherwise, and set record dates or times for the
determination of Shareholders.
SECTION 5.10.5. COMPENSATION. The Trustees may compensate or
provide for the compensation of the Trustees, officers, advisers,
administrators, custodians, other agents, consultants and employees of the Trust
or the Trustees on such terms as they deem appropriate.
SECTION 5.10.6. DELEGATION OF AUTHORITY. In general, the
Trustees may delegate to any officer of the Trust, to any committee of the
Trustees and to any employee, adviser, administrator, distributor, depository,
custodian, transfer and dividend disbursing agent, or any other agent or
consultant of the Trust such authority, powers, functions and duties as they
consider desirable or appropriate for the conduct of the business and affairs of
the Trust, including without implied limitation, the power and authority to act
in the name of the Trust and of the Trustees, to sign documents and to act as
attorney-in-fact for the Trustees.
SECTION 5.10.7. SUSPENSION OF SALES. The Trustees shall have
the authority to suspend or terminate the sales of Shares of any Series or Class
at any time or for such periods as the Trustees may from time to time decide.
SECTION 5.11. CERTAIN ADDITIONAL POWERS. Without limiting the
foregoing and to the extent not inconsistent with the 1940 Act, other applicable
law, and the fundamental policies and limitations of the applicable Series or
Class, the Trustees shall have power and authority for and on behalf of the
Trust and each separate Series or Class as enumerated in this Section 5.11.
SECTION 5.11.1. INVESTMENTS. The Trustees shall have the power
to invest and reinvest cash and other property, and to hold cash or other
property uninvested without in any
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event being bound or limited by any present or future law or custom in regard to
investments by trustees.
SECTION 5.11.2. DISPOSITION OF ASSETS. The Trustees shall have
the power to sell, exchange, lend, pledge, mortgage, hypothecate, write options
on and lease any or all of the assets of the Trust.
SECTION 5.11.3. OWNERSHIP. The Trustees shall have the power
to vote, give assent, or exercise any rights of ownership with respect to
securities or other property; and to execute and deliver proxies or powers of
attorney to such person or persons as the Trustees shall deem proper, granting
to such person or persons such power and discretion with relation to securities
or other property as the Trustees shall deem proper.
SECTION 5.11.4. SUBSCRIPTION. The Trustees shall have the
power to exercise powers and rights of subscription or otherwise which in any
manner arise out of ownership of securities.
SECTION 5.11.5. PAYMENT OF EXPENSES. The Trustees shall have
the power to pay or cause to be paid all expenses, fees, charges, taxes and
liabilities incurred or arising in connection with the Trust or any Series or
Class thereof, or in connection with the management thereof, including, but not
limited to, the Trustees' compensation and such expenses and charges for the
Trust's officers, employees, investment advisers, administrator, distributor,
principal underwriter, auditor, counsel, depository, custodian, transfer agent,
dividend disbursing agent, accounting agent, shareholder servicing agent, and
such other agents, consultants, and independent contractors and such other
expenses and charges as the Trustees may deem necessary or proper to incur.
SECTION 5.11.6. FORM OF HOLDING. The Trustees shall have the
power to hold any securities or other property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in the name
of the Trustees or of the Trust or of any Series or in the name of a custodian,
subcustodian or other depositary or a nominee or nominees or otherwise.
SECTION 5.11.7. REORGANIZATION, CONSOLIDATION, OR MERGER. The
Trustees shall have the power to consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer, any
security of which is or was held in the Trust, and to consent to any contract,
lease, mortgage, purchase or sale of property by such corporation or issuer, and
to pay calls or subscriptions with respect to any security held in the Trust.
SECTION 5.11.8. COMPROMISE. The Trustees shall have the power
to arbitrate or otherwise adjust claims in favor of or against the Trust, any
Series, or Class on any matter in controversy, including but not limited to
claims for taxes.
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SECTION 5.11.9. PARTNERSHIPS. The Trustees shall have the
power to enter into joint ventures, general or limited partnerships and any
other combinations or associations.
SECTION 5.11.10. BORROWING. The Trustees shall have the power
to borrow funds and to mortgage and pledge the assets of the Trust or any Series
or any part thereof to secure obligations arising in connection with such
borrowing, consistent with the provisions of the 1940 Act.
SECTION 5.11.11. GUARANTEES. The Trustees shall have the power
to endorse or guarantee the payment of any notes or other obligations of any
person; to make contracts of guaranty or suretyship, or otherwise assume
liability for payment thereof; and to mortgage and pledge the Trust property (or
Series property) or any part thereof to secure any of or all such obligations.
SECTION 5.11.12. INSURANCE. The Trustees shall have the power
to purchase and pay for entirely out of Trust property such insurance as they
may deem necessary or appropriate for the conduct of the business, including,
without limitation, insurance policies insuring the assets of the Trust and
payment of distributions and principal on its portfolio investments, and
insurance policies insuring the Shareholders, Trustees, officers, employees,
agents, consultants, investment advisers, managers, administrators,
distributors, principal underwriters, or independent contractors, or any thereof
(or any person connected therewith), of the Trust individually against all
claims and liabilities of every nature arising by reason of holding, being or
having held any such office or position, or by reason of any action alleged to
have been taken or omitted by any such person in any such capacity, including
any action taken or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify such person against
such liability.
SECTION 5.11.13. PENSIONS. The Trustees shall have the power
to pay pensions for faithful service, as deemed appropriate by the Trustees, and
to adopt, establish and carry out pension, profit-sharing, share bonus, share
purchase, savings, thrift and other retirement, incentive and benefit plans,
including the purchasing of life insurance and annuity contracts as a means of
providing such retirement and other benefits, for any or all of the Trustees,
officers, employees and agents of the Trust.
SECTION 5.12. MEETINGS AND VOTE OF TRUSTEES.
SECTION 5.12.1. REGULAR MEETINGS. The Trustees from time to
time may provide for the holding of regular meetings of the Trustees and fix
their time and place.
SECTION 5.12.2. SPECIAL MEETINGS. Special meetings of the
Trustees may be called by the President of the Trust on twenty-four (24) hours
notice to each Trustee, either personally, by mail, by telegram, or by facsimile
transmission. Special meetings shall be called by the President or Secretary in
like manner and on like notice on the written request of
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a majority of the Trustees then in office or a majority of the members of any
executive (or comparable) committee of the Trustees.
SECTION 5.12.3. TELEPHONIC MEETINGS. Trustees may participate
in a meeting of the Trustees by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time. Except to the extent that the 1940
Act has been interpreted otherwise, participation by such means shall constitute
presence in person at the meeting.
SECTION 5.12.4. QUORUM. A majority of the Trustees then in
office being present in person or by proxy shall constitute a quorum.
SECTION 5.12.5. REQUIRED VOTE. Except as otherwise provided by
the 1940 Act or other applicable law, this Declaration of Trust, or the By-Laws,
any action to be taken by the Trustees on behalf of the Trust or any Series or
Class may be taken by a majority of the Trustees present at a meeting of
Trustees at which a quorum is present.
SECTION 5.12.6. CONSENT IN LIEU OF A MEETING. Except as
otherwise provided by the 1940 Act or other applicable law, the Trustees may, by
unanimous written consent of the Trustees then in office, take any action which
may have been taken at a meeting of the Trustees or any committee thereof.
ARTICLE 6
SERVICE PROVIDERS
SECTION 6.1. INVESTMENT ADVISER. The Trust may enter into written
contracts with one or more persons to act as investment adviser or investment
subadviser to each of the Series, and as such, to perform such functions as the
Trustees may deem reasonable and proper, including, without limitation,
investment advisory, management, research, valuation of assets, clerical and
administrative functions, under such terms and conditions, and for such
compensation, as the Trustees may in their discretion deem advisable.
SECTION 6.2. UNDERWRITER AND TRANSFER AGENT. The Trust may enter into
written contracts with one or more persons to act as principal underwriter or
underwriter or distributor whereby the Trust may either agree to sell Shares to
the other party or parties to the contract or appoint such other party or
parties its sales agent or agents for such Shares and with such other provisions
as the Trustees may deem reasonable and proper, and the Trustees may in their
discretion from time to time enter into transfer agency, dividend disbursement,
and/or shareholder service contract(s), in each case with such terms and
conditions, and providing for such compensation, as the Trustees may in their
discretion deem advisable.
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SECTION 6.3. CUSTODIANS. The Trust may enter into written contracts
with one or more persons to act as custodian to perform such functions as the
Trustees may deem reasonable and proper, under such terms and conditions, and
for such compensation, as the Trustees may in their discretion deem advisable.
Each such custodian shall be a bank or trust company having an aggregate
capital, surplus, and undivided profits of at least one million dollars
($1,000,000).
SECTION 6.4. ADMINISTRATOR. The Trust may enter into written contracts
with one or more persons to act as an administrator to perform such functions,
including accounting functions, as the Trustees may deem reasonable and proper,
under such terms and conditions, and for such compensation, as the Trustees may
in their discretion deem advisable.
SECTION 6.5. OTHER CONTRACTS. The Trust may enter into such other
written contracts as the Trustees deem necessary and desirable, including
contracts with one or more persons for the coordination or supervision of
persons providing services to the Trust under one or more of the contracts
described in Sections 6.1, 6.2, 6.3 and 6.4.
SECTION 6.6. PARTIES TO CONTRACTS. Any contract of the character
described in Sections 6.1, 6.2, 6.3, and 6.4 or in Article 8 hereof may be
entered into with any corporation, firm, partnership, trust or association,
including, without limitation, the investment adviser, any investment
subadviser, or any affiliated person of the investment adviser or investment
subadviser, although one or more of the Trustees or officers of the Trust may be
an officer, director, trustee, shareholder, or member of such other party to the
contract, or may otherwise be interested in such contract, and no such contract
shall be invalidated or rendered voidable by reason of the existence of any such
relationship, nor shall any person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or be accountable for any profit realized directly or
indirectly therefrom; provided, however, that the contract when entered into was
not inconsistent with the provisions of this Article 6, Article 8, or the
By-Laws. The same person (including a firm, corporation, partnership, trust or
association) may provide more than one of the services identified in this
Article 6.
ARTICLE 7
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 7.1. VOTING POWERS. The Shareholders shall have power to vote
only with respect to matters expressly enumerated in Section 7.1.1, with respect
to such additional matters relating to the Trust as may be required by the 1940
Act, this Declaration of Trust, the By-Laws, any registration of the Trust with
the Commission or any state, or as the Trustees may otherwise deem necessary or
desirable.
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SECTION 7.1.1. MATTERS REQUIRING SHAREHOLDERS ACTION. Action
by the Shareholders shall be required as to the following matters:
(a) The election or removal of Trustees as provided in Sections 5.4 and
5.7;
(b) The approval to a contract with a third party provider of services
as to which Shareholder approval is required by the 1940 Act;
(c) The termination or reorganization of the Trust to the extent and as
provided in Sections 9.1 and 9.2;
(d) The amendment of this Declaration of Trust to the extent and as may
be provided by this Declaration of Trust or applicable law; and
(e) Any court action, proceeding or claim brought or maintained
derivatively or as a class action on behalf of the Trust, any Series or Class
thereof or the Shareholders of the Trust; provided, however, that a shareholder
of a particular Series or Class shall not be entitled to vote upon a derivative
or class action on behalf of any other Series or Class or shareholder of any
other Series or Class.
SECTION 7.1.2. SEPARATE VOTING BY SERIES AND CLASS. On any
matter submitted to a vote of the Shareholders, all Shares shall be voted
separately by individual Series, except: (i) when required by the 1940 Act,
Shares shall be voted in the aggregate and not by individual Series or Class;
and (ii) when the Trustees have determined that the matter affects the interests
of more than one Series, then the Shareholders of all such Series shall be
entitled to vote thereon. The Trustees may also determine that a matter affects
only the interests of one or more Classes within a Series, in which case any
such matter shall only be voted on by such Class or Classes.
SECTION 7.1.3. NUMBER OF VOTES. On any matter submitted to a
vote of the Shareholders, each Shareholder shall be entitled to one vote for
each dollar of net asset value standing in such Shareholder's name on the books
of each Series and Class in which such Shareholder owns Shares which are
entitled to vote on the matter.
SECTION 7.1.4. CUMULATIVE VOTING. There shall be no cumulative
voting in the election of Trustees.
SECTION 7.1.5. VOTING OF SHARES; PROXIES. Votes may be cast in
person or by proxy. A proxy with respect to Shares held in the name of two or
more persons shall be valid if executed by any one of them unless at or prior to
exercise of the proxy the Trust receives a specific written notice to the
contrary from any one of them. A proxy purporting to be executed by or on behalf
of a Shareholder shall be deemed valid unless challenged at or prior to its
exercise, and the burden of proving the invalidity of a proxy shall rest on the
challenger.
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No proxy shall be valid more than eleven months after its date, unless it
provides for a longer period.
SECTION 7.1.6. ACTIONS PRIOR TO THE ISSUANCE OF SHARES. Until
Shares are issued, the Trustees may exercise all rights of Shareholders and may
take any action required by law, this Declaration of Trust or the By-Laws to be
taken by Shareholders.
SECTION 7.2. MEETINGS OF SHAREHOLDERS.
SECTION 7.2.1. ANNUAL OR REGULAR MEETINGS. No annual or
regular meetings of Shareholders are required to be held.
SECTION 7.2.2. SPECIAL MEETINGS. Special meetings of
Shareholders may be called by the President of the Trust or the Trustees from
time to time for the purpose of taking action upon any matter requiring the vote
or authority of the Shareholders as herein provided or upon any other matter
upon which Shareholder approval is deemed by the Trustees to be necessary or
desirable. A special meeting shall be called by the Secretary of the Trust upon
(i) the request of a majority of the Trustees then in office, or (ii) as may be
required under the 1940 Act.
SECTION 7.2.3. NOTICE OF MEETINGS. Written notice of any
meeting of Shareholders shall be given or caused to be given by the Trustees by
mailing or transmitting such notice not less than ten (10) nor more than ninety
(90) days before such meeting, postage prepaid, stating the time, place and
purpose of the meeting, to each Shareholder at the Shareholder's address as it
appears on the records of the Trust.
SECTION 7.2.4. CALL OF MEETINGS. The Trustees shall promptly
call and give notice of a meeting of Shareholders for the purpose of voting upon
removal of any Trustee of the Trust when requested to do so in writing by
Shareholders holding not less than ten percent (10%) of the Shares of the Trust
then outstanding. For all other matters, the Trustees shall call or give notice
of a meeting within thirty (30) days after written application by Shareholders
entitled to cast at least ten percent (10%) of all of the votes entitled to be
cast on the matter requesting a meeting be called.
SECTION 7.3. RECORD DATES. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to participate in any dividend or distribution, or
for the purpose of any other action, the Trustees may from time to time close
the transfer books for such period, not exceeding thirty (30) days (except at or
in connection with the termination of the Trust), as the Trustees may determine;
or without closing the transfer books the Trustees may fix a date and time not
more than one hundred twenty (120) days prior to the date of any meeting of
Shareholders or other action as the date and time of record for the
determination of Shareholders entitled to vote at such meeting or any
adjournment thereof or to be treated as Shareholders of record for purposes of
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such other action. Any Shareholder who was a Shareholder at the date and time so
fixed shall be entitled to vote at such meeting or any adjournment thereof or to
be treated as a Shareholder of record for purposes of such other action, even
though such Shareholder has since that date and time disposed of its Shares, and
no Shareholder becoming such after that date and time shall be so entitled to
vote at such meeting or any adjournment thereof or to be treated as a
Shareholder of record for purposes of such other action.
SECTION 7.4. QUORUM. Except as otherwise required by the 1940 Act or
other applicable law, this Declaration of Trust, or the By-Laws, one-tenth
(1/10) of the Shares entitled to vote in person or by proxy shall be a quorum as
to any particular matter; provided, however, that any lesser number shall be
sufficient for matters upon which the Shareholders vote at any meeting called in
accordance with Section 7.6. Any matter upon which the Shareholders vote shall
be approved by a majority of the votes cast on such matter at a meeting of the
Shareholders at which a quorum is present, except that Trustees shall be elected
by a plurality of the votes cast at such a meeting.
SECTION 7.5. REQUIRED VOTE. Notwithstanding any provision of the law
requiring the authorization of any matter by a greater proportion, any matter
upon which the Shareholders vote shall be approved by the affirmative vote of a
majority of the votes cast on such matter at a meeting of the shareholders at
which a quorum is present, except that Trustees shall be elected by the
affirmative vote of a plurality of the votes cast at such a meeting.
SECTION 7.6. ADJOURNMENTS. Adjourned meetings may be held within a
reasonable time after the date set for the original meeting without the
necessity of further notice.
SECTION 7.7. ACTIONS BY WRITTEN CONSENT. Except as otherwise required
by the 1940 Act or other applicable law, this Declaration of Trust, or the
By-Laws, any action taken by Shareholders may be taken without a meeting if
Shareholders entitled to cast at least a majority of all of the votes entitled
to be cast on the matter (or such larger proportion thereof as shall be required
by the 1940 Act or by any express provision of this Declaration of Trust or the
By-Laws) consent to the action in writing and such written consents are filed
with the records of the meetings of Shareholders. Such consent shall be treated
for all purposes as a vote taken at a meeting of Shareholders.
SECTION 7.8. INSPECTION OF RECORDS. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is required for
stockholders of a Delaware business corporation under the Delaware General
Corporation Law.
SECTION 7.9. ADDITIONAL PROVISIONS. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
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ARTICLE 8
LIMITATION OF LIABILITY AND INDEMNIFICATION
SECTION 8.1. GENERAL PROVISIONS.
SECTION 8.1.1. GENERAL LIMITATION OF LIABILITY. No personal
liability for any debt or obligation of the Trust shall attach to any Trustee of
the Trust. Without limiting the foregoing, a Trustee shall not be responsible
for or liable in any event for any neglect or wrongdoing of any officer, agent,
employee, investment adviser, subadviser, principal underwriter or custodian of
the Trust, nor shall any Trustee be responsible or liable for the act or
omission of any other Trustee. Every note, bond, contract, instrument,
certificate, Share or undertaking and every other act or thing whatsoever
executed or done by or on behalf of the Trust or the Trustees or any Trustee in
connection with the Trust shall be conclusively deemed to have been executed or
done only in or with respect to their or his or her capacity as Trustees or
Trustee and neither such Trustees or Trustee nor the Shareholders shall be
personally liable thereon.
SECTION 8.1.2. NOTICE OF LIMITED LIABILITY. Every note, bond,
contract, instrument, certificate or undertaking made or issued by the Trustees
or by any officers or officer shall recite that the same was executed or made by
or on behalf of the Trust by them as Trustees or Trustee or as officers or
officer and not individually and that the obligations of such instrument are not
binding upon any of them or the Shareholders individually but are binding only
upon the assets and property of the Trust or belonging to a Series thereof, and
may contain such further recitals as they or he may deem appropriate, but the
omission thereof shall not operate to bind any Trustees or Trustee or officers
or officer or Shareholders or Shareholder individually.
SECTION 8.1.3. LIABILITY LIMITED TO ASSETS OF THE TRUST. All
persons extending credit to, contracting with or having any claim against the
Trust shall look only to the assets of the Trust or belonging to a Series
thereof, as appropriate, for payment under such credit, contract or claim, and
neither the Shareholders nor the Trustees nor any of the Trust's officers,
employees or agents, whether past, present or future, shall be personally liable
therefor.
SECTION 8.2. LIABILITY OF TRUSTEES. The exercise by the Trustees of
their powers and discretion hereunder shall be binding upon the Trust, the
Shareholders, and any other person dealing with the Trust. The liability of the
Trustees, however, shall be limited by this Section 8.2.
SECTION 8.2.1. LIABILITY FOR OWN ACTIONS. A Trustee shall be
liable to the Trust or the Shareholders only for his own willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in the
conduct of the office of Trustee, and for nothing else, and shall not be liable
for errors of judgment or mistakes of fact or law.
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SECTION 8.2.2. LIABILITY FOR ACTIONS OF OTHERS. The Trustees
shall not be responsible or liable in any event for any neglect or wrongdoing of
any officer, agent, employee, consultant, adviser, administrative distributor,
principal underwriter, custodian, transfer agent, dividend disbursing agent,
Shareholder servicing agent, or accounting agent of the Trust, nor shall any
Trustee be responsible for any act or omission of any other Trustee.
SECTION 8.2.3. ADVICE OF EXPERTS AND REPORTS OF OTHERS. The
Trustees may take advice of counsel or other experts with respect to the meaning
and operation of this Declaration of Trust and their duties as Trustees
hereunder, and shall be under no liability for any act or omission in accordance
with such advice or for failing to follow such advice. In discharging their
duties, the Trustees, when acting in good faith, shall be entitled to rely upon
the books of account of the Trust and upon written reports made to the Trustees
by any officer appointed by them, any independent public accountant and (with
respect to the subject matter of the contract involved) any officer, partner or
responsible employee of any other party to any contract entered into hereunder.
SECTION 8.2.4. BOND. The Trustees shall not be required to
give any bond as such, nor any surety if a bond is required.
SECTION 8.2.5. DECLARATION OF TRUST GOVERNS ISSUES OF
LIABILITY. The provisions of this Declaration of Trust, to the extent that they
restrict the duties and liabilities of the Trustees otherwise existing at law or
in equity, are agreed by the Shareholders and all other Persons bound by this
Declaration of Trust to replace such other duties and liabilities of the
Trustees.
SECTION 8.3. LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES.
No person dealing with the Trustees shall be bound to make any inquiry
concerning the validity of any transaction made or to be made by the Trustees or
to see to the application of any payments made or property transferred to the
Trust or upon its order.
SECTION 8.4. LIABILITY OF SHAREHOLDERS. Without limiting the
provisions of this Section 8.4 or the DBTA, the Shareholders shall be entitled
to the same limitation of personal liability extended to stockholders of private
corporations organized for profit under the General Corporation Law of the State
of Delaware.
SECTION 8.4.1. LIMITATION OF LIABILITY. No personal liability
for any debt or obligation of the Trust shall attach to any Shareholder or
former Shareholder of the Trust, and neither the Trustees, nor any officer,
employee or agent of the Trust shall have any power to bind any Shareholder
personally or to call upon any Shareholder for the payment of any sum of money
or assessment whatsoever other than such as the Shareholder may at any time
personally agree to pay by way of subscription for any Shares or otherwise.
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SECTION 8.4.2. INDEMNIFICATION OF SHAREHOLDERS. In case any
Shareholder or former Shareholder of the Trust shall be held to be personally
liable solely by reason of being or having been a Shareholder and not because of
such Shareholder's acts or omissions or for some other reason, the Shareholder
or former Shareholder (or, in the case of a natural person, his or her heirs,
executors, administrators or other legal representatives or, in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled out of the assets of the Trust to be held harmless from and indemnified
against all loss and expense arising from such liability; provided, however,
there shall be no liability or obligation of the Trust arising hereunder to
reimburse any Shareholder for taxes paid by reason of such Shareholder's
ownership of any Shares or for losses suffered by reason of any changes in value
of any Trust assets. The Trust shall, upon request by the Shareholder or former
Shareholder, assume the defense of any claim made against the Shareholder for
any act or obligation of the Trust and satisfy any judgment thereon.
SECTION 8.5. INDEMNIFICATION.
SECTION 8.5.1. INDEMNIFICATION OF COVERED PERSONS. Subject to
the exceptions and limitations contained in Section 8.5.2, every person who is,
or has been, a Trustee, officer, employee or agent of the Trust, including
persons who serve at the request of the Trust as directors, trustees, officers,
employees or agents of another organization in which the Trust has an interest
as a shareholder, creditor or otherwise (hereinafter referred to as a "Covered
Person"), shall be indemnified by the Trust to the fullest extent permitted by
law against liability and against all expenses reasonably incurred or paid by
him in connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been such a
Trustee, director, officer, employee or agent and against amounts paid or
incurred by him in settlement thereof.
SECTION 8.5.2. EXCEPTIONS. No indemnification shall be
provided hereunder to a Covered Person:
(a) For any liability to the Trust or its Shareholders arising out of a
final adjudication by the court or other body before which the proceeding was
brought that the Covered Person engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office;
(b) With respect to any matter as to which the Covered Person shall
have been finally adjudicated not to have acted in good faith in the reasonable
belief that his or her action was in the best interests of the Trust; or
(c) In the event of a settlement or other disposition not involving a
final adjudication (as provided in paragraph (a) or (b) of this Section 8.5.2)
and resulting in a payment by a Covered Person, unless there has been either a
determination that such Covered Person did not engage in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
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involved in the conduct of his office by the court or other body approving the
settlement or other disposition, or a reasonable determination, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that he or she did not engage in such conduct, such determination being made by:
(i) a vote of a majority of the Disinterested Trustees (as such term is defined
in Section 8.5.5) acting on the matter (provided that a majority of
Disinterested Trustees then in office act on the matter); or (ii) a written
opinion of independent legal counsel.
SECTION 8.5.3. RIGHTS OF INDEMNIFICATION. The rights of
indemnification herein provided may be insured against by policies maintained by
the Trust, and shall be severable, shall not affect any other rights to which
any Covered Person may now or hereafter be entitled, shall continue as to a
person who has ceased to be a Covered Person, and shall inure to the benefit of
the heirs, executors and administrators of such a person. Nothing contained
herein shall affect any rights to indemnification to which Trust personnel other
than Covered Persons may be entitled by contract or otherwise under law.
SECTION 8.5.4. EXPENSES OF INDEMNIFICATION. Expenses of
preparation and presentation of a defense to any claim, action, suit or
proceeding subject to a claim for indemnification under this Section 8.5 shall
be advanced by the Trust prior to final disposition thereof upon receipt of an
undertaking by or on behalf of the recipient to repay such amount if it is
ultimately determined that he or she is not entitled to indemnification under
this Section 8.5, provided that either:
(a) Such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against losses arising out of
any such advances; or
(b) A majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act on
the matter) or independent legal counsel in a written opinion shall determine,
based upon a review of the readily available facts (as opposed to the facts
available upon a full trial), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
SECTION 8.5.5. CERTAIN DEFINED TERMS RELATING TO
INDEMNIFICATION. As used in this Section 8.5, the following words shall have the
meanings set forth below:
(a) A "Disinterested Trustee" is one (i) who is not an Interested
Person of the Trust (including anyone, as such Disinterested Trustee, who has
been exempted from being an Interested Person by any rule, regulation or order
of the Commission), and (ii) against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or has been pending;
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(b) "Claim," "action," "suit" or "proceeding" shall apply to all
claims, actions, suits, proceedings (civil, criminal, administrative or other,
including appeals), actual or threatened; and
(c) "Liability" and "expenses" shall include without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties
and other liabilities.
ARTICLE 9
TERMINATION OR REORGANIZATION
SECTION 9.1. TERMINATION OF TRUST OR SERIES. Unless terminated as
provided herein, the Trust and each Series designated and established pursuant
to this Declaration of Trust shall continue without limitation of time.
SECTION 9.1.1. TERMINATION. Subject to approval by the
affected Shareholders, the Trust, any Series, or any Class (and the
establishment and designation thereof) may be terminated by an instrument
executed by a majority of the Trustees then in office; provided, however, that
no approval of affected Shareholders is necessary if a majority of the trustees
then in office determines that the continuation of the Trust, Series, or Class
is not in the best interests of the Trust, such Series, such Class, or the
affected Shareholders as a result of factors or events adversely affecting the
ability of the Trust, Series, or Class to conduct its business and operations in
an economically viable manner.
SECTION 9.1.2. DISTRIBUTION OF ASSETS. Upon termination of the
Trust or any Series or Class, after paying or otherwise providing for all
charges, taxes, expenses and liabilities, whether due or accrued or anticipated,
as may be determined by the Trustees, the Trust shall, in accordance with such
procedures as the Trustees consider appropriate, reduce the remaining assets of
the Trust to distributable form in cash or other securities, or any combination
thereof, and distribute the proceeds to the affected Shareholders in the manner
set forth by resolution of the Trustees. To the extent permitted by the 1940 Act
or other applicable law, the Trustees may require affected Shareholders to
receive Shares of any remaining Series or Class in lieu of such proceeds.
SECTION 9.1.3. CERTIFICATE OF CANCELLATION. Upon termination
of the Trust, the Trustees shall file a certificate of cancellation in
accordance with Section 3810 of the DBTA.
SECTION 9.2. REORGANIZATION. The Trustees may sell, convey, merge and
transfer the assets of the Trust, or the assets belonging to any one or more
Series, to another trust, partnership, association or corporation organized
under the laws of any state of the United States, or to the Trust to be held as
assets belonging to another Series of the Trust, in exchange for cash, shares or
other securities (including, in the case of a transfer to another Series of the
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Trust, Shares corresponding to such other Series) with such transfer either (i)
being made subject to, or with the assumption by the transferee of, the
liabilities belonging to each Series the assets of which are so transferred, or
(ii) not being made subject to, or not with the assumption of, such liabilities.
Following such transfer, the Trustees shall distribute such cash, Shares or
other securities (giving due effect to the assets and liabilities belonging to
and any other differences among the various Series the assets belonging to which
have so been transferred) among the Shareholders of the Series corresponding to
the Series the assets belonging to which have been so transferred. If all of the
assets of the Trust have been so transferred, the Trust shall be terminated.
SECTION 9.3. MERGER OR CONSOLIDATION.
SECTION 9.3.1. AUTHORITY TO MERGE OR CONSOLIDATE. The Trust,
or any one or more Series, may, either as the successor, survivor, or
non-survivor, (i) consolidate with one or more other trusts, partnerships,
associations or corporations organized under the laws of the State of Delaware
or any other state of the United States to form a new consolidated trust,
partnership, association or corporation under the laws of the State of Delaware
or any other sate of the United States, or have one or more such trusts,
partnerships, associations or corporations merged into it, any such
consolidation or merger to be upon such terms and conditions as are specified in
an agreement and plan of reorganization entered into by the Trust, or one or
more Series as the case may be, in connection therewith. The terms "merge" or
"merger" as used herein shall also include the purchase or acquisition of any
assets of any other trust, partnership, association or corporation which is an
investment company organized under the laws of the State of Delaware or any
other state of the United States.
SECTION 9.3.2. NO SHAREHOLDER APPROVAL REQUIRED. Any such
consolidation or merger shall not require the vote of the Shareholders affected
thereby, unless such vote is required by the 1940 Act or other applicable laws,
or unless such merger or consolidation would result in an amendment of this
Declaration of Trust which would otherwise require the approval of such
Shareholders.
SECTION 9.3.3. SUBSEQUENT AMENDMENTS. In accordance with
Section 3815(f) of DBTA, an agreement of merger or consolidation may effect any
amendment to this Declaration of Trust or the By-Laws or effect the adoption of
a new declaration of trust or By-Laws of the Trust if the Trust is the surviving
or resulting business trust.
SECTION 9.4.4. CERTIFICATE OF MERGER OR CONSOLIDATION. Upon
completion of the merger or consolidation, the Trustees shall file a certificate
of merger or consolidation in accordance with Section 3810 of the DBTA.
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ARTICLE 10
AMENDMENTS
SECTION 10.1. GENERALLY. Except as otherwise specifically provided
herein or as required by the 1940 Act or other applicable law, this Declaration
of Trust may be amended at any time by an instrument in writing signed by a
majority of the Trustees then in office.
SECTION 10.2. CERTIFICATE OF AMENDMENT. In the event any of the
amendment to this Declaration of Trust which affects the certificate of trust
filed by the Trust in accordance with Section 2.1, the Trustees shall file a
certificate of amendment in accordance with Section 3810 of the DBTA.
SECTION 10.3. PROHIBITED RETROSPECTIVE AMENDMENTS. No amendment of this
Declaration of Trust or repeal of any of its provisions shall limit or eliminate
the limitation of liability provided to Trustees and officers hereunder with
respect to any act or omission occurring prior to such amendment or repeal.
ARTICLE 11
MISCELLANEOUS PROVISIONS
SECTION 11.1. CERTIFIED COPIES. The original or a copy of this
Declaration of Trust and of each amendment hereto shall be kept in the office of
the Trust where it may be inspected by any Shareholder. Anyone dealing with the
Trust may rely on a certificate by an officer or Trustee of the Trust as to
whether or not any such amendments have been made and as to any matters in
connection with the Trust hereunder, and with the same effect as if it were the
original, may rely on a copy certified by an officer or Trustee of the Trust to
be a copy of this Declaration of Trust or of any such amendments.
SECTION 11.2. CERTAIN INTERNAL REFERENCES. In this Declaration of Trust
or in any such amendment, references to this Declaration of Trust, and all
expressions like "herein," "hereof" and "hereunder," shall be deemed to refer to
this Declaration of Trust as a whole and as amended or affected by any such
amendment.
SECTION 11.3. HEADINGS. Headings are placed herein for convenience of
reference only, and in case of any conflict, the text of this instrument, rather
than the headings, shall control. This instrument may be executed in any number
of counterparts, each of which shall be deemed an original.
SECTION 11.4. RESOLUTION OF AMBIGUITIES. The Trustees may construe any
of the provisions of this Declaration insofar as the same may appear to be
ambiguous or inconsistent with any other provisions hereof, and any such
construction hereof by the Trustees in good
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faith shall be conclusive as to the meaning to be given to such provisions. In
construing this Declaration, the presumption shall be in favor of a grant of
power to the Trustees.
SECTION 11.5. SIGNATURES. To the extent permitted by applicable law,
any instrument signed pursuant to a validly executed power of attorney shall be
deemed to have been signed by the Trustee or officer executing the power of
attorney.
SECTION 11.6. GOVERNING LAW. This Declaration of Trust is executed and
delivered with reference to DBTA and the laws of the State of Delaware by all of
the Trustees whose signatures appear below, and the rights of all parties and
the validity and construction of every provision hereof shall be subject to and
construed according to DBTA and the laws of the State of Delaware (unless and to
the extent otherwise provided for and/or preempted by the 1940 Act or other
applicable federal securities laws); provided, however, that there shall not be
applicable to the Trust, the Trustees, or this Declaration of Trust (a) the
provisions of Section 3540 of Title 12 of the Delaware Code or (b) any
provisions of the laws (statutory or common) of the State of Delaware (other
than the DBTA) pertaining to trusts which are inconsistent with the rights,
duties, powers, limitations or liabilities of the Trustees set forth or
referenced in this Declaration of Trust. All references to sections of the DBTA
or the 1940 Act, or any rules or regulations thereunder, refer to such sections,
rules, or regulations in effect as of the date of this Declaration of Trust, or
any successor sections, rules, or regulations thereto.
SECTION 11.7. SEVERABILITY. The provisions of this Declaration of Trust
are severable, and if the Trustees shall determine, with the advice of counsel,
that any of such provision is in conflict with the 1940 Act, the DBTA, or with
other applicable laws and regulations, the conflicting provision shall be deemed
never to have constituted a part of this Declaration of Trust; provided,
however, that such determination shall not affect any of the remaining
provisions of this Declaration of Trust or render invalid or improper any action
taken or omitted prior to such determination. If any provision of this
Declaration of Trust shall be held invalid or unenforceable in any jurisdiction,
such invalidity or unenforceability shall attach only to such provision in such
jurisdiction and shall not in any manner affect such provision in any other
jurisdiction or any other provision of this Declaration of Trust in any
jurisdiction.
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IN WITNESS WHEREOF, the undersigned, being the Trustees of the Trust,
have executed this Declaration of Trust as of the date first written above.
/s/ Peter C. Clapman
--------------------------
Peter C. Clapman, Trustee
/s/ Lisa Snow
--------------------------
Lisa Snow, Trustee
29
