File Nos. 333-61759, 811-08961
As filed with the Securities and Exchange Commission on January 14, 2000
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. [ ]
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Post-Effective Amendment No. 2 [X]
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and
Registration Statement Under the Investment Company Act of 1940 [X]
Amendment No. 4 [X]
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(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.
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on April 1, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[x] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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April 1, 2000
Prospectus
TIAA-CREF LIFE FUNDS
Growth Equity Fund
Growth & Income Fund
International Equity Fund
Stock Index Fund
Social Choice Equity Fund
[TIAA-CREF
LOGO]
This prospectus contains important information about the TIAA-CREF Life Funds,
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 Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
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<TABLE>
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TABLE OF CONTENTS
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SUMMARY INFORMATION........................................................................................... - 3 -
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS.......................................................... - 3 -
Dual Investment Management Strategy(SM)..................................................... - 3 -
General Risks of Investing in the Funds..................................................... - 3 -
Growth Equity Fund.......................................................................... - 4 -
Growth & Income Fund........................................................................ - 5 -
International Equity Fund................................................................... - 6 -
Stock Index Fund............................................................................ - 7 -
Social Choice Equity Fund................................................................... - 7 -
PAST PERFORMANCE..................................................................................... - 8 -
MORE INFORMATION ABOUT THE FUNDS.............................................................................. - 8 -
FUNDS USING THE DUAL INVESTMENT MANAGEMENT STRATEGY(SM).............................................. - 8 -
Growth Equity Fund.......................................................................... - 9 -
Growth & Income Fund....................................................................... - 10 -
International Equity Fund.................................................................. - 10 -
OTHER FUNDS......................................................................................... - 11 -
Stock Index Fund........................................................................... - 11 -
Social Choice Equity Fund.................................................................. - 12 -
ADDITIONAL INVESTMENT STRATEGIES.................................................................... - 13 -
FUND MANAGEMENT.............................................................................................. - 14 -
Prior Performance of Investment Adviser.................................................... - 14 -
PRICING OF FUND SHARES....................................................................................... - 16 -
OFFERING, PURCHASING AND REDEEMING SHARES.................................................................... - 16 -
DIVIDENDS, DISTRIBUTIONS AND TAXES........................................................................... - 17 -
GENERAL MATTERS.............................................................................................. - 18 -
Voting Rights.............................................................................. - 18 -
Electronic Prospectuses.................................................................... - 18 -
Householding............................................................................... - 18 -
FINANCIAL HIGHLIGHTS......................................................................................... - 18 -
</TABLE>
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SUMMARY INFORMATION
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
TIAA-CREF Life Funds consists of five different investment portfolios
(funds):
Growth Equity Fund
Growth & Income Fund
International Equity Fund
Stock Index Fund
Social Choice Equity Fund
Dual Investment Management Strategy(SM)
Three of the funds (the Growth Equity Fund, the Growth & Income Fund, and
the International Equity Fund) use TIAA-CREF's Dual Investment Management
Strategy(sm), with each having a "stock selection" and an "enhanced index"
segment.
o The stock selection segment holds a relatively small number of stocks that
the fund management team believes offer superior returns. These stocks are
chosen using fundamental analysis.
o The enhanced index segment seeks to outperform the fund's benchmark index
while limiting the possibility of significantly underperforming the
benchmark. The fund management team attempts to outperform the benchmark
index by over- or under- weighting many stocks in the index by small
amounts, based on proprietary scoring models.
The Dual Investment Management Strategy gives fund managers the flexibility
to allocate amounts between the two segments, based on the investment
opportunities that the fund management team determines to be available at a
particular time. This approach enables the funds to stay fully invested even
when the fund management team can't find sufficient investment opportunities for
the stock selection segment.
General Risks of Investing in the Funds
You can lose money in any of these funds, or the funds could underperform
other investments. In particular, the funds are subject to the following general
risks:
o Market Risk -- Stock and bond prices in general can decline over short or
extended periods as a result of political or economic events.
o Interest Rate Risk -- Bond or stock prices may decline or a fund's income
may fall if interest rates change.
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o Company Risk -- A company's current earnings can fall or its overall
financial soundness may decline. As a result, the price of its securities
may go down, or the company may not be able to pay principal and interest
on its bonds when due.
o Foreign Investment Risk -- The value of a fund's foreign investments could
be reduced by, among other things, changes in currency exchange rates, the
possible imposition of market controls or currency exchange controls, lower
liquidity and higher volatility in some foreign markets and/or political,
social or diplomatic events.
Special additional risks associated with particular funds are discussed in
the following fund summaries and elsewhere in this prospectus.
An investment in TIAA-CREF Life Funds is not a deposit of any bank and is
not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.
Growth Equity Fund
Investment The fund seeks a favorable long-term return, mainly through
objective capital appreciation, primarily from a diversified portfolio of
common stocks that present the opportunity for exceptional
growth.
Principal The fund invests in stocks of companies in new and emerging areas
investment of the economy and companies with distinctive products or
strategies promising market conditions, using the Dual Investment Management
Strategy. For its stock selection segment, the fund looks
primarily for companies that we believe have the potential for
strong earnings or sales growth, or that appear to be undervalued
based on current earnings, assets or growth prospects. It can
also invest in companies to benefit from prospective
acquisitions, reorganizations, or corporate restructurings or
other special situations. Foreign investments may range from 0%
to 40% of the fund's portfolio. The benchmark index for the fund
is the Russell 3000(R) Growth Index. (Russell 3000 is a trademark
and a service mark of the Frank Russell Company.)
Special The fund may sometimes hold a significant amount of stocks of
investment smaller, lesser-known companies whose stock prices may fluctuate
risks more than those of larger companies. This means the fund will
probably be more volatile than the overall stock market.
Who may The fund may be appropriate for investors who are looking for
want to long-term capital appreciation, but who are willing to tolerate
invest fluctuations in value. The risk of investing in the fund relative
to the potential rewards is moderate to high.
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Growth & Income Fund
Investment The fund seeks a favorable long-term return through capital
objective appreciation and investment income.
Principal The fund invests in a broadly diversified portfolio of common
investment stocks selected for their investment potential, using the Dual
strategies Investment Management Strategy. For its stock selection segment,
the fund management team looks primarily for stocks of larger,
well-established, mature growth companies that we believe are
attractively priced, show the potential to grow faster than the
rest of the market, and offer a growing stream of dividend
income. The fund may also invest in rapidly growing smaller
companies and may have up to 20% of its assets in foreign
securities. Normally, at least 80% of the fund's assets will be
income- producing equity securities selected for their investment
potential. The benchmark index for the fund is the Standard &
Poor's 500 ("S&P 500") Index.
Special Stocks paying relatively high dividends may significantly
investment underperform other stocks during periods of rapid market
risks appreciation.
Who may The fund may be appropriate for investors who want capital
want to appreciation and income-producing investments but who also can
invest accept the risk of market fluctuations. The risk of investing in
the fund relative to its potential rewards is moderate.
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International Equity Fund
Investment The fund seeks favorable long-term returns, mainly through
objective capital appreciation.
Principal The fund invests in a broadly diversified portfolio of primarily
investment foreign equity investments, using the Dual Investment Management
strategies Strategy. For the fund's stock selection segment, we concentrate
on individual stocks rather than on geographic regions, sectors,
or industries. We look for companies of all sizes that have
certain characteristics such as sustainable growth, consistent
cash flow and attractive stock prices based on current earnings,
assets and long-term growth prospects. The benchmark index for
the fund is the Morgan Stanley Capital International ("MSCI")
EAFE(R) (Europe, Australasia, Far East) Index.
Special Foreign investment risk is the most important risk of investing
investment in this fund. Changes in currency exchange rates, the possible
risks imposition of market controls, currency exchange controls, or
foreign taxes, lower liquidity and higher volatility in some
foreign markets and/or political, social or diplomatic events
could reduce the value of the fund's investments. These risks may
be even more pronounced for the fund's investments in emerging
market countries.
Who may The fund may be appropriate for investors who seek above-average
want to long-term returns, understand the advantages of diversification
invest across international markets and are willing to tolerate the
greater risks of international investing. The risk of investing
in the fund relative to the potential rewards is moderate to
high.
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Stock Index Fund
Investment The fund seeks a favorable long-term rate of return from a
objective diversified portfolio selected to track the overall market for
common stocks publicly traded in the U.S., as represented by a
broad stock market index.
Principal The fund is designed to track U.S. equity markets as a whole and
investment invests in stocks in the Russell 3000(R) Index. The fund uses a
strategies sampling approach to create a portfolio that closely matches the
overall investment characteristics (for example, yield and
industry weight) of the index without actually investing in all
3,000 stocks in the index.
Special While the fund attempts to closely track the Russell 3000(R)
investment Index, it does not invest in all 3,000 stocks in the index. Thus
risks there is no guarantee that the performance of the fund will match
that of the index.
Who may The fund may be appropriate for investors who seek a fund that
want to tracks the return of a broad U.S. equity market index. The risk
invest of investing in the fund relative to its potential rewards is
moderate.
Social Choice Equity Fund
Investment The fund seeks a favorable long-term rate of return that tracks
objective the investment performance of the U.S. stock market while giving
special consideration to certain social criteria.
Principal The fund invests primarily in a diversified set of common stocks.
investment The fund attempts to track the return of the U.S. stock market as
strategies represented by the S&P 500 Index, while investing only in
companies whose activities are consistent with the fund's social
criteria. It does this primarily by investing in S&P 500
companies that are not excluded by the fund's social criteria, so
that the fund's portfolio approaches the overall investment
characteristics (e.g., yield and industry weight) of the S&P 500.
Special Because its social criteria exclude some investments, this fund
investment may not be able to take advantage of the same opportunities or
risks market trends as do the funds that don't use such criteria.
Who may The fund may be appropriate for investors who seek an equity
want to investment that is generally broad-based but excludes companies
invest that engage in certain activities. The risk of investing in the
fund relative to its potential rewards is moderate.
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PAST PERFORMANCE
The following bar chart and table help illustrate the risks of investing in
the Stock Index Fund and how investment performance varies. (Since the other
funds are new, their performance is not presented here.) The bar chart shows the
Stock Index Fund's performance since it was first available publicly on January
4, 1999, and below the chart we note the Stock Index Fund's best and worst
returns for a calendar quarter since January 4, 1999. The performance table
shows the fund's returns, and how those returns compare to those of broad-based
securities market indexes. Keep in mind that the fund's past performance does
not indicate how it will perform in the future.
[bar chart]
%
Since January 4, 1999, the highest return for a quarter was ___ %, for the
quarter ended _____________, and the lowest return for a quarter was __ %, for
the quarter ended _________.
No performance data for the other funds of the TIAA-CREF Life Funds is
included in this prospectus because none of those funds have been in operation
for one full calendar year. Performance information for other funds managed by
the investment advisory personnel who manage TIAA-CREF Life Funds is provided on
page 14 of this prospectus.
MORE INFORMATION ABOUT THE FUNDS
This section provides more information about each fund's investment
objective, the principal investment strategies and techniques each fund uses to
accomplish its objective, and the principal types of securities each fund
purchases. These policies and techniques are not fundamental and may be changed
by TIAA-CREF Life Funds' board of trustees without shareholder approval.
However, we'll notify you of any significant changes. For a complete listing of
the funds' policies and restrictions, see the Statement of Additional
Information ("SAI").
We can't guarantee that any fund will meet its investment objective.
FUNDS USING THE DUAL INVESTMENT MANAGEMENT STRATEGY(sm)
The Growth Equity Fund, the Growth & Income Fund, and the International
Equity Fund use TIAA-CREF's Dual Investment Management Strategy(sm), which works
like this:
Each of these three funds has two separate segments called the "stock
selection" segment and the "enhanced index" segment. The relative sizes of these
two segments vary as the fund management team shifts money between them in
response to investment opportunities.
The stock selection segment holds a relatively small number of stocks that
the fund management team believes offer superior returns. The managers of these
equity funds will usually
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use fundamental analysis to select individual stocks or sectors for investment
in the stock selection segment. Each fund's stock selection segment is described
further below.
Money that is not invested in a fund's stock selection segment goes to its
enhanced index segment. Here the goal is two-fold: (1) to outperform each fund's
benchmark index and (2) to limit the possibility of significantly
underperforming that benchmark. The funds' managers attempt to outperform the
benchmark indexes by over- or under-weighting many stocks in the index by small
amounts, based on proprietary stock scoring models. In other words, a fund will
hold more or less of some stocks than does its benchmark index. The managers
attempt to control the risk of underperforming the benchmarks by maintaining the
same overall financial characteristics (such as volatility, dividend yield and
industry weights) as the benchmarks.
The Dual Investment Management Strategy enables the funds to stay fully
invested even when the fund management team can't find sufficient investment
opportunities for the stock selection segment.
The benchmarks for each fund's enhanced index segment currently are as
follows:
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Fund Benchmark
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Growth Equity Fund Russell 3000(R) Growth Index
Growth & Income Fund S&P 500(R) Index
International Equity Fund MSCI EAFE(R) (Europe, Australasia, Far East) Index
</TABLE>
Using these benchmarks is not a fundamental policy of any of the TIAA-CREF Life
Funds, so we can substitute other benchmark indices without shareholder
approval. We'll notify you before we make such a change.
Growth Equity Fund
The Growth Equity Fund seeks a favorable long-term return, mainly through
capital appreciation, primarily from a diversified portfolio of common stocks
that present the opportunity for exceptional growth. Normally, the fund will
have at least 80% of its assets in equity securities that have the potential for
capital appreciation.
The fund uses the Dual Investment Management Strategy. The fund's stock
selection segment can invest in companies of all sizes, including companies in
new and emerging areas of the economy and companies with distinctive products or
promising market conditions. We choose individual investments based on a
company's prospects under current or forecasted economic, financial and market
conditions, looking for companies we believe have the potential for strong
earnings or sales growth, or that appear to be undervalued based on current
earnings, assets, or growth prospects.
The fund can also invest in large, well-known, established companies,
particularly when we believe they have new or innovative products, services, or
processes that enhance future earnings prospects. The fund can also invest in
companies in order to benefit from prospective acquisitions, reorganizations, or
corporate restructurings or other special situations.
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The Growth Equity Fund can buy foreign securities and other instruments if
we believe they have superior investment potential. Depending on investment
opportunities, the fund may have from 0% to 40% of its assets in foreign
securities. The securities will be those traded on foreign exchanges or in other
foreign markets and may be denominated in foreign currencies or other units of
account.
Special Investment Risks: The fund is subject to the general investment
risks described on page 3, including the risks of foreign investments. In
addition, there are special risks to investing in growth stocks. The fund may at
times hold a significant amount of stocks of smaller, lesser-known companies.
Their stock prices may fluctuate more than those of larger companies because
smaller companies may depend on narrow product lines, have limited track
records, lack depth of management, or have thinly-traded securities. Also,
stocks of companies involved in reorganizations and other special situations can
often involve more risk than ordinary securities. Accordingly, the Growth Equity
Fund will probably be more volatile than the overall stock market, and it could
significantly outperform or underperform the stock market during any particular
period.
Growth & Income Fund
The Growth & Income Fund seeks a favorable long-term return through capital
appreciation and investment income, primarily from a broadly diversified
portfolio of common stocks. Normally, at least 80% of the fund's assets will be
income-producing equity securities selected for their investment potential.
The fund invests in a broadly diversified portfolio of common stocks, using
the Dual Investment Management Strategy. The fund's stock selection segment
concentrates on individual companies rather than sectors or industries. We look
for stocks of larger, well-established companies that we believe are
attractively priced, show the potential to grow faster than the rest of the
market, and offer a growing stream of dividend income. In particular, we look
for companies that are leaders in their industries. We also look for companies
with shareholder-oriented managements dedicated to creating shareholder value.
The fund may also invest in rapidly growing smaller companies. It can have up to
20% of its assets in foreign securities.
Special Investment Risks: The fund is subject to the general investments
risks described on page 3, including the risks of foreign investments. In
addition, stocks paying relatively high dividends may at times significantly
underperform other stocks during periods of rapid market appreciation.
International Equity Fund
The International Equity Fund seeks a favorable long-term return, mainly
through capital appreciation from a broadly diversified portfolio that consists
primarily of foreign equity investments. The fund intends to always have at
least 80% of its assets in equity securities of companies located in at least
three different countries, other than the United States.
The fund uses the Dual Investment Management Strategy. The fund may invest
in companies of all sizes. For the fund's stock selection segment, we
concentrate on individual
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stocks rather than on geographic regions, sectors, or industries. We do,
however, regularly monitor the fund's sector and country exposure in order to
control risk.
In particular, we look for companies of all sizes that have certain
characteristics, such as:
o sustainable growth
o focused management with successful track records
o unique and easy-to-understand franchises (brands)
o undervalued stock prices based on current earnings, assets, and
long-term growth prospects
o consistent generation of free cash flow
Special Investment Risks: The fund is subject to the general investment
risks described on page 3, especially the risks of foreign investments. In
particular, investing in securities traded on foreign exchanges or in foreign
markets can involve risks beyond those of domestic investing. These include: (1)
changes in currency exchange rates; (2) possible imposition of market controls
or currency exchange controls; (3) possible imposition of withholding taxes on
dividends and interest; (4) possible seizure, expropriation, or nationalization
of assets; (5) more limited foreign financial information or difficulty in
interpreting it because of foreign regulations and accounting standards; (6) the
lower liquidity and higher volatility in some foreign markets; (7) the impact of
political, social, or diplomatic events; (8) the difficulty of evaluating some
foreign economic trends; or (9) the possibility that a foreign government could
restrict an issuer from paying principal and interest to investors outside the
country. Brokerage commissions and transaction costs are often higher for
foreign investments, and it may be harder to use foreign laws and courts to
enforce financial or legal obligations.
The risks noted above often increase in countries with emerging markets.
For example, these countries may have more unstable governments than developed
countries, and their economies may be based on only a few industries. Because
their securities markets may be very small, share prices may be volatile. In
addition, foreign investors are subject to a variety of special restrictions in
many emerging countries. The fund will focus its investments primarily in those
countries which are included in the MSCI EAFE Index.
OTHER FUNDS
Stock Index Fund
The Stock Index Fund seeks a favorable long-term rate of return from a
diversified portfolio selected to track the overall market for common stocks
publicly traded in the U.S., as represented by the Russell 3000(R), a broad
market index.
Although the fund invests in stocks in the Russell 3000 Index, it doesn't
invest in all 3,000 stocks in the index. Rather, we use a sampling approach to
create a portfolio that closely matches the overall investment characteristics
(for example, yield and industry weight) of the index. This means that a company
can remain in the fund even if it performs poorly, unless the company is removed
from the Russell 3000.
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Using the Russell 3000 Index isn't fundamental to the fund's investment
objective and policies. We can change the index used in this fund at any time
and will notify you if we do so.
The fund can also invest in securities and other instruments, such as
futures, whose return depends on stock market prices. We select these
instruments to attempt to match the total return of the Russell 3000 but may not
always do so.
The Russell 3000 Index is an unmanaged index of stocks of the 3,000 largest
publicly traded U.S. companies, based on market capitalization. Russell 3000
companies represent about 98% of the total market capitalization of the publicly
traded U.S. equity market. The market capitalization of the individual companies
in the index ranged from $ to $ with an average of $ as of December 31, 1999.
The Frank Russell Company determines the composition of the index based only on
market capitalization and can change its composition at any time. The Russell
3000 Index is not a mutual fund and you cannot invest directly in the index.
Special Investment Risks: While the fund attempts to closely track the
Russell 3000 Index and changes are made to its holdings to reflect changes in
the index, the fund does not invest in all 3,000 stocks in the index. Thus,
there is no guarantee that the performance of the fund will match that of the
index. Also, because the index's returns aren't reduced by investment and other
operating expenses, the fund's ability to match the index will be adversely
affected by the costs of buying and selling stocks as well as other expenses.
The stock prices of smaller, lesser-known companies, which make up a small
portion of the index, may fluctuate more than those of larger companies because
smaller companies may depend on narrow product lines, have limited track
records, lack depth of management, or have thinly-traded securities.
Social Choice Equity Fund
The Social Choice Equity Fund seeks a favorable long-term rate of return
that reflects the investment performance of the U.S. stock market while giving
special consideration to certain social criteria. Normally, at least 80% of the
fund's assets will be invested in common stocks.
The fund attempts to track the return of the U.S. stock market as
represented by the Standard & Poor's 500 Index. It does this primarily by
investing in S&P 500 companies that are not excluded by the fund's social
criteria, so that the fund's portfolio approaches the overall investment
characteristics (e.g., yield and industry weight) of the S&P 500.
The social criteria the fund takes into consideration are non-fundamental
investment policies. They can change without the approval of the fund's
shareholders. Currently, the fund invests only in companies that do not:
o engage in activities that result or are likely to result in significant
damage to the natural environment;
o have a significant portion of its business in weapons manufacturing;
o produce and market alcoholic beverages or tobacco products;
o produce nuclear energy; or
o have operations in Northern Ireland and have not adopted the MacBride
Principles (a fair employment code for U.S. firms operating in Northern
Ireland) or have not operated
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consistently with such principles and in compliance with the Fair
Employment Act of 1989 (Northern Ireland).
For the first three criteria, we examine the company to decide whether the
activity is a "significant" part of its business -- basing our decision on, for
example, how large a part of a company's operation the activity involves or how
much revenue it brings in. In determining whether a particular activity is
significant to a company, we do not rely on strict objective criteria, but
rather make judgments based on the facts and circumstances pertaining to the
company.
The TIAA-CREF Life Funds board of trustees receives guidance from Teachers
Advisors, Inc. (Advisors), the fund investment adviser, in deciding whether
investments meet the social criteria. Advisors uses information from independent
organizations such as the Investor Responsibility Research Center, Inc., as well
as from information compiled by the affiliated TIAA-CREF Corporate Governance
and Social Responsibility Committees. We'll do our best to make sure the fund's
investments meet the social criteria, but we can't guarantee that every holding
will always do so. Even if an investment is not excluded by the social criteria,
we have the option of excluding it if we decide it is not suitable.
The fund isn't restricted from investing in any securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities. The fund
can also invest in securities issued by other countries or their agencies and
instrumentalities, as approved by the TIAA-CREF Life Funds' board of trustees.
The fund can also invest up to 15% of its assets in foreign securities.
Special Investment Risks: Because its social criteria exclude some
investments, this fund may not be able to take advantage of the same
opportunities or market trends as do the funds that don't use such criteria.
ADDITIONAL INVESTMENT STRATEGIES
While the funds invest primarily in common stocks, each fund can also
invest, to a limited extent, in other equity securities such as preferred stock,
convertible securities, and warrants. Each fund can also hold short-term debt
securities and other money market or short-term instruments, including those
denominated in foreign currencies. These help the funds maintain liquidity, use
cash balances effectively, and take advantage of attractive investment
opportunities. The funds can also hold fixed-income securities they acquire
because of mergers, recapitalizations, or otherwise.
Similarly, each fund may also buy and sell options, futures contracts, and
options on futures. We intend to use options and futures primarily for hedging
or for cash management. To manage currency risk, the funds can also enter into
forward currency contracts, and buy or sell options and futures on foreign
currencies.
The funds can also invest in newly developed financial instruments, such as
equity swaps (including arrangements where the return is linked to a stock
market index) and equity-linked fixed-income securities, so long as these are
consistent with a fund's investment objective and restrictions.
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FUND MANAGEMENT
Teachers Advisors, Inc. (Advisors) manages the TIAA-CREF Life Funds'
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, TIAA-CREF Mutual Funds, and TIAA-CREF Institutional
Mutual Funds, and, through an affiliated investment adviser, TIAA-CREF
Investment Management, LLC (Investment Management), the investment accounts of
the College Retirement Equities Fund (CREF). Advisors is located at 730 Third
Avenue, New York, New York 10017.
Under its investment management agreement with TIAA-CREF Life Funds,
Advisors is entitled to an annual fee based on a percentage of the average daily
net assets of each fund. Advisors has voluntarily agreed to waive a portion of
its management fee for each fund. The waivers are contractual and will remain in
effect until April 1, 2003. The management fees with and without the waivers are
as follows:
<TABLE>
<CAPTION>
Current Management
Fees (with waiver) Without Waiver
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<S> <C> <C>
Growth Equity Fund 0.19% 0.26%
Growth & Income Fund 0.17% 0.24%
International Equity Fund 0.19% 0.28%
Stock Index Fund 0.07% 0.30%
Social Choice Equity Fund 0.12% 0.19%
</TABLE>
Advisors also has agreed to reimburse the Growth Equity Fund, Growth &
Income Fund, and the Social Choice Equity Fund for those funds' other expenses
(i.e., other than management fees) that exceed, on an annual basis, 0.06% of the
fund's average daily net assets, and to reimburse the International Equity Fund
for that fund's other expenses that exceed, on an annual basis, 0.10% of the
fund's average daily net assets. This reimbursement agreement is contractual and
will remain in effect until April 1, 2003.
Advisors' duties include conducting research, recommending investments, and
placing orders to buy and sell securities. Advisors also acts as liaison among
the various service providers to the TIAA-CREF Life Funds, including custodians,
and fund administrators. For the Stock Index Fund only, Advisors is directly
responsible for providing or obtaining at its own expense all services necessary
to operate the fund on a daily basis, including custody and fund administration.
The funds are managed by Advisors through specialized portfolio management
teams whose members are jointly responsible for the day-to-day management of the
funds.
Prior Performance of Investment Adviser
The TIAA-CREF Life Funds have a limited performance record. To illustrate
the experience of Advisors' personnel in managing investment portfolios
comparable to the TIAA-CREF Life Funds, we are providing you, in the charts
below, with historical performance for
- 14 -
<PAGE>
portfolios managed by the same advisory personnel that manage the TIAA-CREF Life
Funds, with investment objectives, policies, strategies and risks that are
substantially the same as those of the TIAA-CREF Life Funds. The performance of
an appropriate broad-based securities market index, adjusted to reflect the
reinvestment of dividends on securities in the index, is also presented for each
fund. The portfolios presented are:
o the TIAA-CREF Mutual Funds' Growth Equity Fund, Growth & Income Fund, and
International Equity Fund, mutual funds managed by Advisors;
o the TIAA-CREF Institutional Mutual Funds' Growth Equity Fund, Growth & Income
Fund, International Equity Fund, mutual funds managed by Advisors;
o the Stock Index Account of TIAA Separate Account VA-1, a variable annuity
managed account managed by Advisors; and
o the Growth Account and Equity Index Account of CREF, variable annuity managed
accounts managed by the same personnel as Advisors in their capacities with
Investment Management.
(Note that there is no seasoned investment portfolio managed by Advisors'
personnel that is substantially similar to the Social Choice Equity Fund.)
The historical performance information presented doesn't represent the
performance of the similarly-named funds described in this prospectus, nor is
the information intended to predict or suggest the returns that the
corresponding fund of TIAA-CREF Life Funds might experience. Please do not
confuse the funds with the other portfolios using very similar or nearly
identical names. The results are net of investment management and other
operating expenses of the portfolios, including any applicable waivers and
expense reimbursements. For the most part, the expenses currently charged on the
TIAA-CREF Life Funds (net of waivers and expense reimbursements), together with
any separate account charges deducted on the contract level, are similar to or
in some cases lower than those of the portfolios presented.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Inception of
AVERAGE ANNUAL TOTAL 1 year ended 5 years ended 10 years ended Inception to Account/
RETURN Period: Dec. 31, 1999 Dec. 31, 1999 Dec. 31, 1999 Dec. 31, 1999 Fund
======================================================================================================================
<S> <C> <C> <C> <C> <C>
Accounts/Funds similar to: Growth Equity Fund
- ----------------------------------------------------------------------------------------------------------------------
Growth Equity Fund
of TIAA-CREF Mutual Funds _____% N/A N/A _____% Sept. 2, 1997
- ----------------------------------------------------------------------------------------------------------------------
Russell 3000 Growth Index _____% N/A N/A _____% Sept. 2, 1997
- ----------------------------------------------------------------------------------------------------------------------
Growth Account of CREF _____% ______% N/A _____% Apr. 29, 1994
- ----------------------------------------------------------------------------------------------------------------------
Russell 3000 Growth Index _____% ______% N/A _____% Apr. 29, 1994
======================================================================================================================
Accounts/Funds similar to: Growth & Income Fund
- ----------------------------------------------------------------------------------------------------------------------
Growth & Income Fund
of TIAA-CREF Mutual Funds _____% N/A N/A _____% Sept 2, 1997
- ----------------------------------------------------------------------------------------------------------------------
S&P 500 Index _____% N/A N/A _____% Sept. 2, 1997
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
- 15 -
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Inception of
AVERAGE ANNUAL TOTAL 1 year ended 5 years ended 10 years ended Inception to Account/
RETURN Period: Dec. 31, 1999 Dec. 31, 1999 Dec. 31, 1999 Dec. 31, 1999 Fund
======================================================================================================================
<S> <C> <C> <C> <C> <C>
Accounts/Funds similar to: International Equity Fund
- ----------------------------------------------------------------------------------------------------------------------
International Equity Fund
of TIAA-CREF Mutual Funds _____% N/A N/A _____% Sept. 2, 1997
- ----------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index _____% N/A N/A _____% Sept. 2, 1997
======================================================================================================================
Accounts/Funds similar to: Stock Index Fund
- ----------------------------------------------------------------------------------------------------------------------
Stock Index Account
of TIAA Separate Account VA-1 _____% N/A N/A _____% Nov. 1, 1994
- ----------------------------------------------------------------------------------------------------------------------
Russell 3000 Index _____% N/A N/A _____% Nov. 1, 1994
- ----------------------------------------------------------------------------------------------------------------------
Equity Index Account of CREF _____% _____% N/A _____% Apr. 29, 1994
- ----------------------------------------------------------------------------------------------------------------------
Russell 3000 Index _____% _____% N/A _____% Apr. 29, 1994
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
PRICING OF FUND SHARES
We determine the net asset value (NAV) per share (share price) of a fund on
each day the New York Stock Exchange is open for business, when trading closes
on all U.S. national exchanges where securities or other investments of the fund
are principally traded. We will not price fund shares on days that the New York
Stock Exchange is closed. 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 if events
materially affecting the value of an 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.
OFFERING, PURCHASING AND REDEEMING SHARES
Shares of the TIAA-CREF Life Funds 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 TIAA-CREF
Life Funds. The separate account purchases and redeems shares of the appropriate
fund for net asset value without sales or redemption charges.
For each day on which the TIAA-CREF Life Funds' 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
- 16 -
<PAGE>
transfer requests from contractowners and beneficiaries that have been processed
on that day. The separate account purchases and redeems shares of a fund at the
fund's net asset value per share calculated as of that same day.
For more information about investing in the TIAA-CREF Life Funds, 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 depends upon your variable insurance
contract. For a complete discussion of the tax status of your contract, please
refer to the prospectus describing the contract.
Shares in the funds 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 funds expect to declare and distribute to its shareholders (i.e., any
separate accounts) substantially all of their net investment income and net
realized capital gains. Normally, each of the funds will distribute dividends
and capital gains annually. In addition, each 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.
Each 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 and net capital gains are
distributed to shareholders. In addition, the funds intend to qualify under the
Internal Revenue Code with respect to the diversification requirements related
to the tax-deferred status of insurance company separate accounts.
- 17 -
<PAGE>
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.
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
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.
FINANCIAL HIGHLIGHTS
Presented below is a financial highlights table for the Stock Index Fund.
Since the other funds have limited operating history, we have not included
financial highlights here for them, although financial statements for those
funds are in the SAI, which is available free upon request.
The following financial highlights table is intended to help you understand
the Stock Index Fund's financial performance since it began operations. Certain
information reflect financial results for a single fund share. Total returns for
each period include the reinvestment of all dividends and distributions. The
information has been derived from the financial statements audited by Ernst &
Young LLP, independent auditors, whose report - along with the Stock Index
Fund's financial statements - is included in the TIAA-CREF Life Funds' most
recent annual report. It is available without charge upon request.
[TO BE FILED BY AMENDMENT]
- 18 -
<PAGE>
[back cover]
For more information about TIAA-CREF Life Funds
The following documents contain more information about the funds and are
available free upon request:
Statement of Additional Information ("SAI"). The SAI contains more information
about all aspects of the funds. A current SAI has been filed with the U.S.
Securities and Exchange Commission ("SEC") and is incorporated in this
prospectus by reference.
Annual and Semi-Annual Reports. The TIAA-CREF Life Funds' annual and semi-annual
reports provide additional information about the funds' investments. In the
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected each fund's performance during
the last fiscal year.
Requesting Documents. You can request a copy of the SAI or these reports without
charge in any of the following ways:
By telephone: Call 800-842-2733, extension 5509
In writing: TIAA-CREF Life Funds
730 Third Avenue
New York, NY 10017-3206
Information about TIAA-CREF Life Funds (including the SAI) can be reviewed and
copied at the SEC's public reference room (1-800-SEC-0339) in Washington, D.C.
The reports and other information are also available through the SEC's internet
website at www.sec.gov. Copies of the information can also be obtained, upon
payment of a duplicating fee, by writing the SEC's Public Reference Section,
Washington, D.C. 20549-6009.
If you have any questions about the TIAA-CREF Life Funds or your variable
contract, please call us at 800 223-1200.
April 1, 2000
SEC File Nos. 333-61759, 811-08961
- 19 -
<PAGE>
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 April 1, 2000 (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 April 1, 2000.
[TIAA
CREF
Logo]
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Investment Policies, Strategies and Restrictions................................................................ B-3
Management of the Fund......................................................................................... B-17
Principal Holders of Securities................................................................................ B-18
Investment Advisory and Other Services......................................................................... B-19
Fund History and Description of the Fund....................................................................... B-20
Valuation of Assets............................................................................................ B-21
Brokerage Allocation........................................................................................... B-23
Performance Information........................................................................................ B-24
Tax Status..................................................................................................... B-28
Underwriters................................................................................................... B-29
Legal Matters.................................................................................................. B-29
Experts ...................................................................................................... B-29
Financial Statements........................................................................................... B-29
Index to Audited Financial Statements..............................................................................
</TABLE>
B- 2
<PAGE>
INVESTMENT POLICIES, STRATEGIES AND RESTRICTIONS
The following information is intended to supplement the description of the
investment objective and policies of each fund in the prospectus. Under the
Investment Company Act of 1940, as amended (the 1940 Act), a 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
The following restrictions are fundamental policies of each fund:
1. The fund will not issue senior securities except as SEC regulations
permit;
2. The fund will not borrow money, except: (a) 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%, or such greater
amount as may be permitted by law, 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; and
8. 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).
B- 3
<PAGE>
The following restriction is a fundamental policy of each fund (other than
the Stock Index Fund):
9. The fund will not lend any security or make any other loan if, as a
result, more than 33-1/3% of its total assets would be lent to other
parties, but this limit does not apply to repurchase agreements.
The following restriction is a fundamental policy of the Stock Index Fund:
10. 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.
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
General
The funds, in addition to stocks, 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. These securities
are generally subject to the same types of market and financial risks that are
described in the prospectus.
When market conditions warrant, the funds can hold debt securities,
including those that it acquires because of mergers, recapitalizations, or
otherwise. For liquidity, the funds can also invest in short-term debt
securities and other money-market instruments, including those denominated in
foreign currencies. Fixed-income securities, including short-term debt
securities and other money market instruments, are subject to interest rate
risks and financial risks. Interest rate risks are the risks that the
instrument's value will decline if interest rates change. A rise in interest
rates usually causes the market value of fixed-rate securities to go down, while
rate deductions usually result in a market value increase. Financial risks come
from the possibility the issuer won't be able to pay principal and interest when
due.
The funds also 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.
B- 4
<PAGE>
These investments and other fund investment strategies are discussed in
detail below.
Options and Futures
The funds 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 a 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 funds 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 funds 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 a 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
B- 5
<PAGE>
limits the downside exposure for the investment in the underlying security to
the combination of the exercise price less the premium paid. The risk of
purchasing a put is that the market price of the underlying stock prevailing on
the expiration date may be above the option's exercise price. In that case the
option would expire worthless and the entire premium would be lost.
The funds 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 a 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 a fund's portfolio of securities.
To the extent that a fund's portfolio of securities changes in value in
correlation with a given stock index, the sale of call options on the futures of
that index would substantially reduce the risk to the portfolio of a market
decline, and, by so doing, provides an alternative to the liquidation of
securities positions in the portfolio with resultant transaction costs. A risk
in all options, particularly the relatively new options on groups of securities
and on 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
funds 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, of the securities or instrument
underlying the contract. By purchasing a futures
B- 6
<PAGE>
contract -- assuming a "long" position -- a fund legally will obligate itself to
accept the future delivery of the underlying security or instrument and pay the
agreed price. By selling a futures contract -- assuming a "short" position -- it
legally will obligate itself to make the future delivery of the security or
instrument against payment of the agreed price.
Positions taken in the futures markets are not normally held to maturity,
but are instead liquidated through offsetting transactions which may result in a
profit or a loss. While futures positions taken by the funds usually will be
liquidated in this manner, the funds may instead make or take delivery of the
underlying securities or instruments whenever it appears economically
advantageous to a 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
funds 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 funds 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 funds 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 funds 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 funds upon the purchase or sale of a futures contract. Initially, the funds
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 a fund upon termination of the futures
contract assuming all contractual obligations have been satisfied. Subsequent
payments to and from the broker, called "variation margin," will be made on a
daily basis as the price of the underlying stock index fluctuates making the
long and short positions in the futures contract more or less valuable, a
process known as "marking to the
B- 7
<PAGE>
market." For example, when a fund has purchased a stock index futures contract
and the price of the underlying stock index has risen, that position will have
increased in value, and the fund will receive from the broker a variation margin
payment equal to that increase in value. Conversely, where a fund has purchased
a stock index futures contract and the price of the underlying stock index has
declined, the position would be less valuable and the fund would be required to
make a variation margin payment to the broker. At any time prior to expiration
of the futures contract, a 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 funds 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 a fund has sold futures to hedge
its portfolio against declines in the market, the index on which the futures are
written may advance and the values of securities or instruments held in the
fund's portfolio may decline. If this occurred, the fund would lose money on the
futures and also experience a decline in value in its portfolio investments.
However, we believe that over time the value of a fund's portfolio will tend to
move in the same direction as the market indices which are intended to correlate
to the price movements of the portfolio securities or instruments sought to be
hedged. It also is possible that, for example, if a fund has hedged against the
possibility of the decline in the market adversely affecting stocks held in its
portfolio and stock prices increased instead, the fund will lose part or all of
the benefit of increased value of those stocks that it has hedged because it
will have offsetting losses in its futures positions. In addition, in such
situations, if a fund has insufficient cash, it may have to sell securities or
instruments to meet daily variation margin requirements. Such sales may be, but
will not necessarily be, at increased prices which reflect the rising market.
The fund may have to sell securities or instruments at a time when it may be
disadvantageous to do so.
In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between movements in the futures contracts and the
portion of the portfolio being hedged, the prices of futures contracts may not
correlate perfectly with movements in the underlying security or instrument due
to certain market distortions. First, all transactions in the futures market are
subject to margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through offsetting transactions which could distort the normal relationship
between the index and futures markets. Second, the margin requirements in the
futures market are less onerous than margin requirements in the securities
market, and as a result the futures market may attract more speculators than the
securities market does. Increased participation by speculators in the
B- 8
<PAGE>
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 Advisors, the investment advisor for each of the funds, still may not
result in a successful hedging transaction over a very short time period.
The funds may also use futures contracts and options on futures contracts
to manage its cash flow more effectively. To the extent that the funds 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 funds 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 a fund enters into a firm commitment agreement,
liability for the purchase price -- and the rights and risks of ownership of the
securities -- accrues to the fund at the time it becomes obligated to purchase
such securities, although delivery and payment occur at a later date.
Accordingly, if the market price of the security should decline, the effect of
the agreement would be to obligate the fund to purchase the security at a price
above the current market price on the date of delivery and payment. During the
time a fund is obligated to purchase such securities, it will be required to
segregate assets. See "Segregated Accounts," below.
Securities Lending
Subject to the funds' fundamental investment policies relating to loans of
portfolio securities set forth above, the funds 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 funds will
receive amounts equal to the interest or dividends paid on the securities loaned
and in addition will expect to receive a portion of the income generated by the
short-term investment of cash received as collateral or, alternatively, where
securities or a letter of credit are used as collateral, a lending fee paid
directly to the fund by the borrower of the securities. Such loans will be
terminable by the fund at any time and will not be made to affiliates of TIAA.
The funds may terminate a loan of securities in order to regain record ownership
of, and to exercise beneficial rights related to,
B- 9
<PAGE>
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 funds 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, or in
liquidating collateral, should the borrower of securities default, become the
subject of bankruptcy proceedings, or otherwise be unable to fulfill its
obligations or fail financially.
Borrowing and Lending Among Affiliates
At some time in the future, the funds may establish a facility for
borrowing and lending money among themselves as well as with TIAA or other
registered investment companies managed by Advisors or Investment Management.
If a fund borrows money, it could leverage its portfolio by keeping
securities it might otherwise have had to sell. Leveraging exposes a fund to
special risks, including greater fluctuations in net asset value in response to
market changes.
Preferred Stock
The funds can invest in preferred stock consistent with their investment
objectives.
Illiquid Securities
The funds can invest up to 15% of their 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 funds 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, a 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 funds 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.
B- 10
<PAGE>
Securities underlying repurchase agreements will be limited to certificates
of deposit, commercial paper, bankers' acceptances, or obligations issued or
guaranteed by the United States Government or its agencies or instrumentalities,
in which the fund entering into the agreement may otherwise invest.
If a seller of a repurchase agreement defaults and does not repurchase the
security subject to the agreement, the fund entering into the agreement would
look to the collateral security underlying the seller's repurchase agreement,
including the securities subject to the repurchase agreement, for satisfaction
of the seller's obligation to the fund; in such event the fund might incur
disposition costs in liquidating the collateral and might suffer a loss if the
value of the collateral declines. In addition, if bankruptcy proceedings are
instituted against a seller of a repurchase agreement, realization upon the
collateral may be delayed or limited.
Swap Transactions
The funds 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 funds may be able to protect the
value of a portion of its portfolio against declines in market value. The funds
may also enter into swap transactions to facilitate implementation of allocation
strategies between different market segments or countries or to take advantage
of market opportunities which may arise from time to time. A fund may be able to
enhance its overall performance if the return offered by the other party to the
swap transaction exceeds the return swapped by the fund. However, there can be
no assurance that the return the fund receives from the counterparty to the swap
transaction will exceed the return it swaps to that party.
While the funds will only enter into swap transactions with counterparties
considered 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 a fund's exposure in
the event of default, it will usually enter into swap transactions on a net
basis (i.e., the parties to the transaction will net the payments payable to
each other before such payments are made). When a fund enters into swap
transactions on a net basis, the net amount of the excess, if any, of the fund's
obligations over its entitlements with respect to each such swap agreement will
be accrued on a daily basis and an amount of liquid assets having an aggregate
market value at least equal to the accrued excess will be segregated by the
fund's custodian. To the extent a fund enters into swap transactions other than
on a net basis, the amount segregated will be the full amount of the fund's
obligations, if any, with respect to each such swap agreement, accrued on a
daily basis. See "Segregated Accounts," below.
B- 11
<PAGE>
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 a fund's
obligation to its counterparty under the swap and the return on related assets
in its portfolio, the swap transaction may increase a fund's financial risk. No
fund therefore will enter into a swap transaction unless it owns or has the
right to acquire the securities or instruments representative of the return it
is obligated to swap with the counterparty to the swap transaction. It is not
the intention of any fund to engage in swap transactions in a speculative manner
but rather primarily to hedge or manage the risks associated with assets held
in, or to facilitate the implementation of portfolio strategies of purchasing
and selling assets for, the fund.
Segregated Accounts
In connection with when-issued securities, firm commitment agreements, and
certain other transactions in which any of the funds incur an obligation to make
payments in the future, the fund involved 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
Each fund can invest up to 10% of its assets in other investment companies.
Borrowing
Each fund can borrow money from banks (no more than 33-1/3% 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.
Each can also borrow money from other sources temporarily (no more than 5% of
the total market value of its assets at the time of borrowing), when, for
example, the fund needs to meet liquidity requirements caused by greater than
anticipated redemptions. See "Fundamental Policies" above.
Currency Transactions
The value of a fund's assets as measured in United States dollars may be
affected favorably or unfavorably by changes in foreign currency exchange rates
and exchange control regulations, and the fund may incur costs in connection
with conversions between various currencies. To minimize the impact of such
factors on net asset values, the fund may engage in foreign currency
transactions in connection with their investments in foreign securities. The
funds will not speculate in foreign currency exchange, and will enter into
foreign currency transactions only to "hedge" the currency risk associated with
investing in foreign securities. Although such transactions tend to minimize the
risk of loss due to a decline in the value of the hedged currency, they also may
limit any potential gain which might result should the value of such currency
increase.
B- 12
<PAGE>
The funds will conduct their currency exchange transactions either on a
spot (i.e., cash) basis at the rate prevailing in the currency exchange market,
or through forward contracts to purchase or sell foreign currencies. A forward
currency contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are entered into with large commercial banks or other currency
traders who are participants in the interbank market.
By entering into a forward contract for the purchase or sale of foreign
currency involved in underlying security transactions, a fund is able to protect
itself against possible loss between trade and settlement dates for that
purchase or sale resulting from an adverse change in the relationship between
the U.S. dollar and such foreign currency. This practice is sometimes referred
to as "transaction hedging." In addition, when it appears that a particular
foreign currency may suffer a substantial decline against the U.S. dollar, a
fund may enter into a forward contract to sell an amount of foreign currency
approximating the value of some or all of its portfolio securities denominated
in such foreign currency. This practice is sometimes referred to as "portfolio
hedging." Similarly, when it appears that the U.S. dollar may suffer a
substantial decline against a foreign currency, a fund may enter into a forward
contract to buy that foreign currency for a fixed dollar amount.
The funds may also hedge their foreign currency exchange rate risk by
engaging in currency financial futures, options and "cross-hedge" transactions.
In "cross-hedge" transactions, a fund holding securities denominated in one
foreign currency will enter into a forward currency contract to buy or sell a
different foreign currency (one that generally tracks the currency being hedged
with regard to price movements). Such cross-hedges are expected to help protect
a fund against an increase or decrease in the value of the U.S. dollar against
certain foreign currencies.
The funds may hold a portion of their respective assets in bank deposits
denominated in foreign currencies, so as to facilitate investment in foreign
securities as well as protect against currency fluctuations and the need to
convert such assets into U.S. dollars (thereby also reducing transaction costs).
To the extent these monies are converted back into U.S. dollars, the value of
the assets so maintained will be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations.
The forecasting of short-term currency market movement is extremely
difficult and whether a short-term hedging strategy will be successful is highly
uncertain. Moreover, it is impossible to forecast with absolute precision the
market value of portfolio securities at the expiration of a foreign currency
forward contract. Accordingly, a fund may be required to buy or sell additional
currency on the spot market (and bear the expense of such transaction) if its
predictions regarding the movement of foreign currency or securities markets
prove inaccurate. In addition, the use of cross-hedging transactions may involve
special risks, and may leave a fund in a less advantageous position than if such
a hedge had not been established. Because foreign currency forward contracts are
privately negotiated transactions, there can be no assurance that a fund will
have flexibility to roll-over the foreign currency forward contract upon its
expiration if it desires to do so. Additionally, there can be no assurance that
the other party to the contract will perform its obligations thereunder.
B- 13
<PAGE>
There is no express limitation on the percentage of a fund's assets that
may be committed to foreign currency exchange contracts. A fund will not enter
into foreign currency forward contracts or maintain a net exposure in such
contracts where that fund would be obligated to deliver an amount of foreign
currency in excess of the value of that fund's portfolio securities or other
assets denominated in that currency or, in the case of a cross-hedge
transaction, denominated in a currency or currencies that fund's investment
adviser believes will correlate closely to the currency's price movements. The
funds generally will not enter into forward contracts with terms longer than one
year.
Foreign Investments
As described more fully in the prospectus, certain funds may invest in
foreign securities, including those in emerging markets. In addition to the
general risk factors discussed in the Prospectus, there are a number of country-
or region-specific risks and other considerations that may affect these
investments.
Investment in Europe. The total European market (consisting of the European
Union, the European Free Trade Association and Eastern European countries)
contains over 450 million consumers, a market larger than either the United
States or Japan. European businesses compete both intra-regionally and globally
in a wide range of industries, and recent political and economic changes
throughout Europe are likely further to expand the role of Europe in the global
economy. As a result, a great deal of interest and activity has been generated
aimed at understanding and benefiting from the "new" Europe that may result. The
incipient aspects of major developments in Europe as well as other
considerations means that there can be no guarantee that outcomes will be as
anticipated or will have results that investors would regard as favorable.
The European Union. The European Union ("EU") consists of Austria, Belgium,
Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
Netherlands, Portugal, Spain, Sweden, and the United Kingdom (the "EU Nations"),
with a total population exceeding 370 million. The EU Nations have undertaken to
establish, among themselves, a single market that is largely free of internal
barriers and hindrances to the free movement of goods, persons, services and
capital. Although it is difficult to predict when this goal will be fully
realized, macro- and micro-economic adjustments already in train are indicative
of significant increases in efficiency and the ability of the EU Nations to
compete globally by simplifying product distribution networks, promoting
economies of scale, and increasing labor mobility, among other effects. The
establishment of the eleven-country European Monetary Union, a subset of the
European Union countries, with its own central bank, the European Central Bank;
its own currency, the Euro; and a single interest rate structure, represents a
new economic entity, the Euro-area. While authority for monetary policy thus
shifts from national hands to an independent supranational body, sovereignty
elsewhere remains largely at the national level. Uncertainties with regard to
balancing of monetary policy against national fiscal and other political issues
and their extensive ramifications represent important risk considerations for
investors in these countries.
Investment in the Pacific Basin. The economies of the Pacific Basin vary
widely in their stages of economic development. Some (such as Japan, Australia,
Singapore, and Hong Kong) are considered advanced by Western standards; others
(such as Thailand, Indonesia, and
B- 14
<PAGE>
Malaysia) are considered "emerging" -- rapidly shifting from natural resource-
and agriculture-based systems to more technologically advanced systems oriented
toward manufacturing and services. The major reform of China's economy and
polity continues to be an important influence on economic growth internally,
and, through trade, across the region. Intra-regional trade has become
increasingly important to a number of these economies. Japan, the second largest
economy in the world, is the dominant economy in the Pacific Basin, with one of
the highest per capita incomes in the world. Its extensive trade relationships
also contribute to expectations for regional and global economic growth.
Economic growth has historically been relatively strong in the region, but
recent economic turmoil among the emerging economies, and unmitigated
recessionary impulses in Japan, in the recent past have raised important
questions with regard to prospective longer-term outcomes. Potential policy
miscalculations or other events could pose important risks to equity investors
in any of these economies.
Investment in Canada. Canada, a country rich in natural resources and a
leading industrial country of the world, is by far the most important trading
partner of the United States. The U.S., Canada, and Mexico have established the
North American Free Trade Agreement ("NAFTA"), which is expected to
significantly benefit the economies of each of the countries through the more
rational allocation of resources and production over the region. Uncertainty
regarding the longer-run political structure of Canada is an added risk to
investors, along with highly volatile commodity prices.
Investment in Latin America. Latin America (including Mexico and Central
America) has a population of approximately 455 million and is rich in natural
resources. Important gains in the manufacturing sector have developed in several
of the major countries in the region. A number of countries in the region have
taken steps to reduce impediments to trade, most notably through the NAFTA
agreement between the U.S., Canada and Mexico and the Mercosur agreement between
Argentina, Brazil, Paraguay and Uruguay, with Chile as an associate member.
Restrictions on international capital flows, intermittent problems with capital
flight, and some potential difficulties in the repayment of external debt,
however, remain important concerns in the region -- exacerbating the risks in
these equity markets. As a result Latin American equity markets have been
extremely volatile. Efforts to restructure these economies through privatization
and fiscal and monetary reform have met with some success, with gains in output
growth and slowing rates of inflation. These efforts may result in attractive
investment opportunities. However, recent events have shown that large shifts in
sentiment in markets elsewhere on the globe may very quickly reverberate among
these markets, adding greater risk to already volatile markets. There can be no
assurance that attempted reforms will ultimately be successful or will bring
about results investors would regard as favorable.
Other Regions. There are developments in other regions and countries around
the world which could lead to additional investment opportunities. We will
monitor these developments and may invest when appropriate.
Depository Receipts. The funds can invest in American, European and Global
Depository Receipts ("ADRs," "EDRs" and "GDRs"). They are alternatives to the
purchase of the underlying securities in their national markets and currencies.
Although their prices are quoted in U.S. dollars, they don't eliminate all the
risks of foreign investing.
B- 15
<PAGE>
ADRs represent the right to receive securities of foreign issuers deposited
in a domestic bank or a foreign correspondent bank. To the extent that a fund
acquires ADRs through banks which do not have a contractual relationship with
the foreign issuer of the security underlying the ADR to issue and service such
ADRs, there may be an increased possibility that the fund would not become aware
of and be able to respond to corporate actions such as stock splits or rights
offerings involving the foreign issuer in a timely manner. In addition, the lack
of information may result in inefficiencies in the valuation of such
instruments. However, by investing in ADRs rather than directly in the stock of
foreign issuers, a fund will avoid currency risks during the settlement period
for either purchases or sales. In general, there is a large, liquid market in
the U.S. for ADRs quoted on a national securities exchange or the NASD's
national market system. The information available for ADRs is subject to the
accounting, auditing and financial reporting standards of the domestic market or
exchange on which they are traded, which standards are more uniform and more
exacting than those to which many foreign issuers may be subject.
EDRs and GDRs are receipts evidencing an arrangement with a non-U.S. bank
similar to that for ADRs and are designed for use in non-U.S. securities
markets. EDRs and GDRs are not necessarily quoted in the same currency as the
underlying security.
Other Investment Techniques and Opportunities
The funds 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. It is not our policy to select investments
based primarily on the possibility of one or more of these investment techniques
and opportunities being presented.
Portfolio Turnover
The transactions a 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.
The funds do not have fixed policies 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.
B- 16
<PAGE>
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.
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 60 Trustee Vice President, Business and Finance, and
Canisius College Treasurer, Canisius College
2001 Main Street
Buffalo, New York 14208
Jeanmarie C. Grisi 41 Trustee Senior Manager, Pension Adminstration,
Carnegie Corporation of New York Lucent Technologies Inc.; formerly, Treasurer,
437 Madison Avenue Carnegie Corporation of New York
New York, New York 10022
Richard M. Norman 55 Trustee Vice President for Finance and Business
Rutgers University Services and Treasurer, Miami University;
Old Queens Building, Room 101 formerly, Vice President for Administration
Somerset-George Street and Associate Treasurer, Rutgers, The State
New Brunswick, New Jersey 08903 University of New Jersey
Thomas G. Walsh** 58 Chairman of the President, Teachers Personal Investors
Board and Services, Inc. ("TPIS"), since February 1994,
President and Executive Vice President, TIAA and CREF
John J. McCormack** 55 Trustee and Executive Vice President, TIAA and CREF,
Executive Vice since November 1983 and President, TIAA-
President CREF Enterprises, Inc. , since June 1998
Richard L. Gibbs 53 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 64 Senior Vice Senior Vice President and Chief Counsel,
President, Investments, TIAA and CREF
Secretary and
Chief Counsel,
Investments
Richard J. Adamski 58 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>
- -----
B- 17
<PAGE>
* 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 a total of $5,000 per year, plus $1,000 for each
meeting of the board of trustees attended, for their service to both the
TIAA-CREF Life Funds and TIAA Separate Account VA-1 (the "Fund Complex").
Compensation is allocated between the companies in the Fund Complex based on
assets. 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 to the TIAA-CREF Life
Funds' trustees for the year ended December 31, 1999:
<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- $
Trustee
Richard M. Norman, $ $-0- $-0- $
Trustee
</TABLE>
- -----
* For purposes of this information, the Fund Complex consists of the College
Retirement Equities Fund, TIAA-CREF Mutual Funds, TIAA-CREF Institutional Mutual
Funds, TIAA-CREF Life Funds and TIAA Separate Account VA-1.
PRINCIPAL HOLDERS OF SECURITIES
Teachers Insurance and Annuity Association (TIAA), as the contributor of
the initial capital for each of the funds, owned the following percentages of
the shares of each fund as of March , 2000:
Growth Equity ___%
Growth & Income ___%
International Equity ___%
Stock Index ___%
Social Choice Equity ___%
The TIAA-CREF Life Separate Account VA-1, funding the Personal Annuity
Select contracts, owns the balance of the outstanding shares.
B- 18
<PAGE>
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. Advisors' 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
Stock Index Fund.
Advisory fees are payable monthly to Advisors. They are calculated as a
percentage of the average value of the net assets each day for each fund, and
are accrued daily proportionately at 1/365th (1/366th in a leap year) of the
rates set forth in the prospectus. For 1999, the total dollar amount of
investment management expenses for the Stock Index Fund attributable to advisory
fees, before and after Advisors' waiver of a portion of its fees, was __________
gross expenses, ________ waived expenses and ____________ net expenses.
Personal Trading Policy. Personnel of Advisors and members of their
households are limited in trading for their own accounts. Certain transactions
they make must be reported and approved, and duplicates of all confirmation
statements and other account reports must be sent to a special compliance unit.
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 2.1 million people. As of December 31, 1999, TIAA's assets were
approximately $___ billion; the combined assets for TIAA and CREF totalled
approximately $___ billion.
TIAA owns all of the shares of TIAA-CREF Enterprises, Inc., which in turn
owns 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.
B- 19
<PAGE>
Custodian
Under the terms of a contract with the TIAA-CREF Life Funds and Advisors,
State Street Bank & Trust Company ("State Street"), 225 Franklin Street, Boston,
MA 02209 acts as custodian for the TIAA-CREF Life Funds. While the TIAA-CREF
Life Funds generally pays State Street for its services, Advisors has agreed to
pay State Street for the services to the Stock Index Fund.
Administrative Services
The TIAA-CREF Life Funds and Advisors has retained 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. While the
TIAA-CREF Life Funds generally pays State Street for its services, Advisors has
agreed to pay State Street for the services to the Stock Index Fund.
Auditors
The financial statements of TIAA-CREF Life Funds are audited by Ernst &
Young LLP. The principal business address of Ernst & Young LLP is 787 Seventh
Avenue, New York, New York 10019.
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 five
investment portfolios (funds). As a Delaware business trust, the fund's
operations are governed by its Declaration of Trust dated August 13, 1998, as
amended (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 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, 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
B- 20
<PAGE>
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 five series of shares and five
investment portfolios.
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.
Additional Portfolios
The TIAA-CREF Life Funds currently consists of five investment portfolios,
or funds. 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:
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 a national market or exchange are
valued based on their sale price on such market or exchange at the close of
business (usually 4:00 p.m. eastern time) on the date of valuation, or at the
mean of the closing bid and asked prices if no sale is reported. Such an equity
security may also be valued at fair value as determined in good faith under the
direction of the the board of trustees if events materially affecting its value
occur between the time its price is determined and the time a fund's net asset
value is calculated.
B- 21
<PAGE>
Foreign Investments
Investments traded on a foreign exchange or in foreign markets are valued
at the closing values of such securities as of the date of valuation under the
generally accepted valuation method in the country where traded, converted to
U.S. dollars at the prevailing rates of exchange on the date of valuation. Since
the trading of investments on a foreign exchange or in foreign markets is
normally completed before the end of a valuation day, such valuation does not
take place contemporaneously with the determination of the valuation of certain
other investments held by the fund. If events materially affecting the value of
foreign investments occur between the time their share price is determined and
the time when a fund's net asset value is calculated, such investments will be
valued at fair value as determined in good faith by the board of trustees.
Debt Securities (including money market instruments)
Debt securities (including money market instruments) for which market
quotations are readily available are valued based on the most recent bid price
or the equivalent quoted yield for such securities (or those of comparable
maturity, quality and type). Values for money market instruments with maturities
of one year or less will be obtained from either one or more of the major market
makers or derived from a pricing matrix that has various types of money market
instruments along one axis and maturities, ranging from overnight to one year,
along the other. This information is derived from one or more financial
information services. For securities with maturities longer than one year, these
values will be derived utilizing an independent pricing service when such prices
are believed to reflect the fair value of these securities. We use an
independent pricing service to value securities with maturities longer than one
year, except when we believe prices don't accurately reflect the security's fair
value.
Options
Portfolio investments underlying options are valued as described above.
Stock options written by a fund are valued at the last quoted sale price, or at
the closing bid price if no sale is reported for the day of valuation as
determined on the principal exchange on which the option is traded. The value of
a fund's net assets will be increased or decreased by the difference between the
premiums received on 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 a fund writes a call option, the amount of the premium is
included in the fund's assets and an equal amount is included in its
liabilities. The liability thereafter is adjusted to the current market value of
the call. Thus, if the current market value of the call exceeds the premium
received, the excess would be unrealized depreciation; conversely, if the
premium exceeds the current market value, such excess would be unrealized
appreciation. If a call expires or if a fund enters into a closing purchase
transaction it realizes a gain (or a loss if the cost of the transaction exceeds
the premium received when the call was written) without regard to any unrealized
appreciation or depreciation in the underlying securities, and the liability
related to such call is extinguished. If a call is exercised, a 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.
B- 22
<PAGE>
A premium paid on the purchase of a put will be deducted from a fund's
assets and an equal amount will be included as an investment and subsequently
adjusted to the current market value of the put. For example, if the current
market value of the put exceeds the premium paid, the excess would be unrealized
appreciation; conversely, if the premium exceeds the current market value, such
excess would be unrealized depreciation.
Stock and bond index futures, and options thereon, which are traded on
commodities exchanges, are valued at their last sale prices as of the close of
such commodities exchanges.
Investments for Which Market Quotations Are Not Readily Available
Portfolio securities or other assets for which market quotations are not
readily available will be valued at fair value as determined in good faith under
the direction of the 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, TIAA-CREF Institutional 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
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.
B- 23
<PAGE>
Research or services obtained for one fund may be used by personnel of
Advisors in managing the other funds or 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 each of the funds.
The aggregate amount of brokerage commissions paid by the Stock Index Fund
during 1999 was $___________.
During 1999, the Stock Index Fund acquired securities of certain of the
regular brokers or dealers or their parents. These Entities and the value of the
Stock Index Fund's aggregate holdings in the securities of those entities are
set forth below:
Regular Broker or Dealer based on brokerage commissions paid:
Broker Parent Holdings (US$)
- ------ ------ --------------
Regular Broker or Dealer based on entities acting as principal:
Broker Parent Holdings (US$)
- ------ ------ --------------
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.
B- 24
<PAGE>
Calculation of Performance Data
We may quote a fund's performance in various ways. All performance
information in advertising is historical and is not intended to indicate future
returns. A fund's share price, yield, and total return fluctuate in response to
market conditions and other factors, and the value of fund shares when redeemed
may be more or less than their original cost. Performance of the funds will be
presented net of any separate account fees and charges.
Total Return Calculations
Total returns quoted in advertising reflect all aspects of a fund's
returns, including the effect of reinvesting dividends and capital gain
distributions, and any change in the fund's NAV over a stated period. Average
annual returns are calculated by determining the growth or decline in value of a
hypothetical historical investment in 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:
n
P (1 + T) = ERV
where: P = the hypothetical initial payment
T = average annual total return
n = number of years in the period
ERV = ending redeemable value of the hypothetical payment
made at the beginning of the one-, five-, or 10-year
period at the end of the one-, five-, or 10-year
period (or fractional portion thereof).
For example, a cumulative return of 100% 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 a fund's unaveraged or
cumulative total returns reflecting the actual change in value of an investment
over a stated period. Average annual and cumulative total returns may be quoted
as a percentage or as a dollar amount, and may be calculated for a single
investment, a series of investments, or a series of redemptions, over any time
period. Total returns may be broken down into their components of income and
capital (including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions to total
return. Total returns may be quoted on a before or after tax basis. Total
returns, yields, and other performance information may be quoted numerically or
in a table, graph, or similar illustration.
B- 25
<PAGE>
Performance Returns
Set forth below is the calculation of the Stock Index Fund's performance,
which reflects all expense deductions from fund assets, applied to a
hypothetical investment of $1,000 in that fund. Because they are new, we have
not included the returns of the other funds.
<TABLE>
<CAPTION>
Period Cumulative Total Return
- ------ -----------------------
<S> <C>
Since inception ______%
(January 4, 1999 to
December 31, 1999)
</TABLE>
Performance Comparisons
Performance information for the funds, may be compared in advertisements,
sales literature, and reports to shareholders, to the performance information
reported by other investments and to various indices and averages. Such
comparisons may be made with, but are not limited to (1) the S&P 500, (2) the
Dow Jones Industrial Average ("DJIA"), (3) Lipper Analytical Services, Inc.
Mutual Fund Performance Analysis Reports and the Lipper General Equity Funds
Average, (4) Money Magazine Fund Watch, (5) Business Week's Mutual Fund
Scoreboard, (6) SEI Funds Evaluation Services Equity Fund Report, (7) CDA Mutual
Funds Performance Review and CDA Growth Mutual Fund Performance Index, (8) Value
Line Composite Average (geometric), (9) Wilshire Associates indices, (10) Frank
Russell Co. Inc. indices, (11) the Consumer Price Index, published by the U.S.
Bureau of Labor Statistics (measurement of inflation), (12) Morningstar, Inc.,
and (13) the Global Market indices created by Morgan Stanley, Inc., including
the Europe, Australasia, Far East (EAFE) Index, the EAFE+Canada Index and the
International Perspective Index. We may also discuss ratings or rankings
received from these entities, accompanied in some cases by an explanation of
those ratings or rankings, when applicable. In addition, advertisements may
discuss the performance of the indices listed above.
The performance of each of the funds also may be compared to other indices
or averages that measure performance of a pertinent group of securities.
Shareholders should keep in mind that the composition of the investments in the
reported averages will not be identical to that of the fund and that certain
formula calculations (e.g., yield) may differ from index to index. In addition,
there can be no assurance that any of the funds will continue its performance as
compared to such indices.
We may also advertise ratings or rankings the funds receive from various
rating services and organizations, including but not limited to any organization
listed above.
The Stock Index 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
B- 26
<PAGE>
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 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 a fund's NAVs, adjusted NAVs, and benchmark indices
may be used to exhibit performance. An adjusted NAV includes any distributions
paid by the fund and reflects all elements of its return.
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.
B- 27
<PAGE>
TAX STATUS
Although the TIAA-CREF Life Funds are organized as a Delaware business
trust, neither the TIAA-CREF Life Funds nor any of the funds will be subject to
any corporate excise or franchise tax in the State of Delaware, nor will they be
liable for Delaware income taxes provided that each fund qualifies as a
"regulated investment company" ("RIC") for federal income tax purposes and
satisfies certain income source requirements of Delaware law. If the funds so
qualify and distribute all of their income and capital gains, they will also be
exempt from the New York State franchise tax and the New York City general
corporation tax, except for small minimum taxes.
Each 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 be derived from dividends, interest, payments with
respect to loans of securities, gains from the sale or other disposition of
securities or foreign currencies, 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
(undistributed net income may be subject to tax at the fund 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 a fund fails to qualify as a RIC, the fund will be subject to federal
and possibly state and local corporate taxes on its taxable income and gains
(without any deduction for its distributions to its shareholders) and
distributions to its shareholders will constitute ordinary income to the extent
of the fund's available earnings and profits. Owners of a variable annuity or
other variable insurance contracts invested in the fund might be taxed currently
on the investment earnings under their contracts and thereby lose the benefit of
tax deferral. This could also happen if the fund fails to comply with the
diversification requirements required of insurance company separate accounts
under the Code.
Each 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 capital gain net income (as of the twelve
months ended October 31), in order to avoid a federal excise tax. Each fund
intends to make the required distributions, but they cannot guarantee that they
will do so. Dividends attributable to each fund's ordinary income and capital
gains distributions are taxable as such to shareholders in the year in which
they are received except dividends declared in October, November or December and
paid in January. Dividends in the latter category are treated as paid on
December 31.
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. Contractowners should consult their tax advisers to determine the
tax treatment of their investment.
B- 28
<PAGE>
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. The principal
business address of TPIS is 730 Third Avenue, New York, New York 10017.
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
TIAA-CREF Life Funds 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
The audited financial statements of the each of the funds of the TIAA-CREF
Life Funds, other than the Stock Index Fund, follow. The audited financial
statements of the Stock Index Fund are incorporated herein by reference to the
TIAA-CREF Life Funds' Annual Report for the year ended December 31, 1999, which
has been filed with the Securities and Exchange Commission, and provided to
separate account contractowners. We will furnish you, without charge, another
copy of the Annual Report upon request.
[SEED MONEY FINANCIAL STATEMENTS, ALONG WITH INDEX, TO BE FILED
BY AMENDMENT]
B- 29
<PAGE>
PART C
- ------
OTHER INFORMATION
Item 23. Exhibits
(a) Amended and Restated Declaration of Trust *
(b) N/A
(c) N/A
(d) Investment advisory contract **
(e) Participation/Distribution Agreement between Registrant,
TIAA-CREF Life Insurance Company and TPIS *
(f) N/A
(g) Custodian agreement **
(h) (1) Administration Agreement with State Street **
(2) Participation/Distribution Agreement (see Exhibit (e)
above)
(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 Agreements **
(m) N/A
(n) N/A
- -------------------
* - Filed on December 9, 1998 as an exhibit to Pre-Effective Amendment No. 1
to this Registration Statement.
** - To be filed by amendment
C- 1
<PAGE>
Item 24. Persons Controlled by or Under Common Control With Registrant
As the ultimate parent (holding indirectly 100% of the voting securities of
Advisors, investment adviser of Registrant, Teachers Insurance and Annuity
Association (TIAA) may be deemed to control Registrant (although Registrant does
not concede such control). As the beneficial owner of more than 25% of the
voting securities of one or more series of Registrant's shares, TIAA controls
Registrant. Therefore, persons directly or indirectly controlled by TIAA may be
deemed to be under common control with Registrant.
The following companies are subsidiaries of TIAA and are included in the
consolidated financial statements of TIAA. All TIAA subsidiary companies are
Delaware corporations, except as indicated. All Trusts are Pennsylvania business
trusts.
AIC Properties, Inc. Teachers Advisors, Inc.
BT Properties, Inc. Teachers Boca Properties II, Inc.
College Credit Trust Teachers Pennsylvania Realty, Inc.
DAN Properties, Inc. Teachers Personal Investors Services, Inc.
ETC Repackaging, Inc. Teachers Properties, Inc.
Illinois Teachers Properties, LLC Teachers REA, LLC
JV California Two, Inc. Teachers REA II, Inc.
JV California Three, Inc. Teachers REA II, LLC
JV Florida One, Inc. Teachers REA III, LLC
JV Florida Four, Inc. Teachers Realty Corporation
JV Georgia One, Inc. TEO-NP, LLC
JV Maryland One, Inc. Tethys Slu, Inc.
JV Michigan One, Inc. TIAA Realty, Inc.
JV Michigan Two, Inc. TIAA Timberlands I, LLC
JV Michigan Three, Inc. TIAA-CREF Enterprises, Inc.
JV Minnesota One, Inc. TIAA-CREF Individual & Institutional
JV North Carolina One, Inc. Services, Inc.
JWL Properties, Inc. TIAA-CREF Investment Management, LLC
Liberty Place Retail, Inc. TIAA-CREF Life Insurance Company
Macallister Holdings, Inc. TIAA-CREF Tuition Financing, Inc.
Minnesota Teachers Realty Corp. TIAA-CREF Trust Company, FSB
MN Properties, Inc. TIAA-Fund Equities, Inc.
M.O.A. Enterprises, Inc. TPI Housing, Inc.
ND Properties, Inc. Washington Teachers Properties II, Inc.
OWP Hawaii, LLC WRC Properties, Inc.
Savannah Teachers Properties, Inc. 730 Properties, Inc.
T114 Properties, Inc. 730 Cal Hotel Properties I, Inc.
T-Investment Properties Corp. 730 Cal Hotel Properties II, Inc.
T-Land Corp. 730 Penn. Hotel Properties I, Inc.
T-Las Colinas Towers Corp. 485 Properties, LLC
TCT Holdings, Inc.
C- 2
<PAGE>
Subsidiaries of Teachers Properties, Inc.:
Rouse-Teachers Holding Company
Rouse-Teachers Land Holdings, Inc.
1) All subsidiaries are Delaware corporations except as follows:
A) Pennsylvania non-stock, non-profit corporations:
Liberty Place Retail, Inc.
Teachers Pennsylvania Realty, Inc.
Teachers Realty Corporation
B) Minnesota Teachers Realty Corporation is a Minnesota corporation.
C) College Credit Trust, a New York Trust
D) TIAA-CREF Life Insurance Company is a New York Corporation
E) TIAA-CREF Trust Company, FSB is a Federal Savings Bank
2) All subsidiaries are 100% owned directly by TIAA, except as follows:
A) TIAA-CREF Enterprises, Inc. owns 100% of the stock of Teachers
Advisors, Inc., Teachers Personal Investors Services, Inc., TIAA-CREF
Life Insurance Company, TIAA-CREF Tuition Financing, Inc. and TCT
Holdings, Inc.
B) TIAA-CREF Trust Company, FSB is 100% owned by TCT Holdings, Inc.
C) T-Investment Properties Corp. and T-Land Corp. are 100% owned by
Macallister Holdings, Inc.
D) TPI Housing, Inc. is 100% owned by Teachers Properties, Inc.
E) 730 Properties, Inc. owns 100% of the stock of 730 Cal Hotel
Properties I, Inc., 730 Cal Hotel Properties II, Inc. and 730 Penn.
Hotel Properties I, Inc.
Item 25. Indemnification
As a Delaware business trust, Registrant's operations are governed by its
Declaration of Trust dated August 13, 1998, as amended (the Declaration of
Trust). Generally, Delaware business trust shareholders are not personally
liable for obligations of the Delaware business trust under Delaware law. The
Delaware Business Trust Act (the DBTA) provides that a shareholder of a trust
shall be entitled to the same limitation of liability extended to shareholders
of private for-profit Delaware corporations. Registrant's Declaration of Trust
expressly provides that it has been organized under the DBTA and that the
Declaration of Trust is to be governed by Delaware law. It is nevertheless
possible that a Delaware business trust, such as Registrant, might become a
party to an action in another state whose courts refuse to apply Delaware law,
in which case Registrant's shareholders could be subject to personal liability.
To protect Registrant's shareholders against the risk of personal
liability, the Declaration of Trust: (i) contains an express disclaimer of
shareholder liability for acts or obligations of Registrant and provides that
notice of such 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
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shareholder incurring financial loss beyond his or her investment because of
shareholder liability is limited to circumstances in which all of the following
factors are present: (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
services to TIAA-CREF Mutual Funds, TIAA-CREF Institutional Mutual Funds, and
TIAA Separate Account VA-1. The trustees of Advisors are John H. Biggs, Martin
L. Leibowitz, and Charles H. Stamm. Other officers of Advisors are Richard J.
Adamski and Richard L. Gibbs. All officers of Advisors are also officers of
TIAA-CREF Investment Management, LLC ("Investment Management"), and are
employees of TIAA.
Mr. Biggs is also a trustee of TIAA, College Retirement Equities Fund
(CREF), TIAA- CREF Individual & Institutional Services, Inc. (Services), a
manager of Investment Management, and a director of Teachers Personal Investor
Services, Inc. (TPIS). He is Chief Executive Officer of TIAA and CREF. Mr. Biggs
is also a director of: Ralston Purina Company, Checkerboard Square, St. Louis,
MO 63164; and The Boeing Company, 7755 East Marginal Way South, Seattle, WA
98108.
Mr. Leibowitz is a trustee of TIAA and CREF and a manager of Investment
Management. He is Vice Chairman and Chief Investment Officer of TIAA and CREF.
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<PAGE>
Mr. Stamm is a trustee of Services, a manager of Investment Management, and
a director of TPIS. He is General Counsel of TIAA and CREF.
Mr. Adamski is Treasurer of Services and TPIS.
Mr. Gibbs is Executive Vice President of Services and TPIS.
The principal business address of TIAA, CREF, Services, Investment
Management, 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.
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.
Item 30. Undertakings
Not applicable.
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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 14th day of January, 2000.
TIAA-CREF LIFE FUNDS
By: /s/ Thomas G. Walsh
--------------------------
Name: Thomas G. Walsh
Title: Chairman of the Board
and President
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Thomas G. Walsh Chairman of the Board and January 14, 2000
- ---------------------------- President (Principal
Thomas G. Walsh Executive Officer) and
Trustee
/s/ Richard L. Gibbs Executive Vice President January 14, 2000
- ---------------------------- (Principal Financial and
Richard L. Gibbs Accounting Officer)
</TABLE>
<PAGE>
Signature of Trustee Date
- -------------------- ----
/s/ John J. McCormack 1/14/00
- -----------------------------------
John J. McCormack
/s/ Laurence W. Franz 1/14/00
- ------------------------------------
Laurence W. Franz
/s/ Jeanmarie C. Grisi 1/14/00
- --------------------------------------
Jeanmarie C. Grisi
/s/ Richard M. Norman 1/14/00
- -----------------------------------
Richard M. Norman
