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File Nos. 333-76651, 811-9301
As filed with the Securities and Exchange Commission on June 24, 1999
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. _2_ [X]
Post-Effective Amendment No. ___ [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. _2_ [X]
(Check appropriate box or boxes.)
-----------------------------------
TIAA-CREF Institutional Mutual Funds
(Exact Name of Registrant as Specified in Charter)
730 Third Avenue
New York, New York 10017-3206
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (800) 842-2733
Peter C. Clapman, Esq.
TIAA-CREF Institutional Mutual Funds
730 Third Avenue
New York, New York 10017-3206
(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:
July 1, 1999
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a),
may determine.
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PROSPECTUS, DATED JULY 1, 1999
TIAA-CREF Institutional Mutual Funds
Institutional International Equity Fund
Institutional Growth Equity Fund
Institutional Growth and Income Fund
Institutional Equity Index Fund
Institutional Social Choice Equity Fund
Institutional Bond Fund
Institutional Money Market Fund
Each investment portfolio, or "Fund," currently offers a single class of shares,
which is described in this prospectus. The shares are only available for
purchase by certain intermediaries affiliated with TIAA-CREF ("TIAA-CREF
Intermediaries") or other persons, such as state-sponsored tuition savings
plans, who have entered into a contract with a TIAA-CREF Intermediary that
enables them to purchase shares of the Funds.
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 OF CONTENTS
<TABLE>
<S> <C>
SUMMARY INFORMATION...............................................................1
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS..............................1
Dual Investment Management Strategy(SM).........................1
General Risks of Investing in the Funds.........................1
Institutional International Equity Fund.........................2
Institutional Growth Equity Fund................................3
Institutional Growth and Income Fund............................4
Institutional Equity Index Fund.................................5
Institutional Social Choice Equity Fund.........................5
Institutional Bond Fund.........................................6
Institutional Money Market Fund.................................7
PAST PERFORMANCE.........................................................7
FEES AND EXPENSES........................................................7
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS.......................................9
EQUITY FUNDS USING THE DUAL INVESTMENT MANAGEMENT STRATEGY(SM)...........9
Institutional International Equity Fund........................10
Institutional Growth Equity Fund...............................11
Institutional Growth and Income Fund...........................12
OTHER EQUITY FUNDS......................................................12
Institutional Equity Index Fund................................12
Institutional Social Choice Equity Fund........................13
ADDITIONAL INVESTMENT STRATEGIES FOR THE EQUITY FUNDS...................14
THE FIXED-INCOME FUNDS..................................................15
Institutional Bond Fund........................................15
Institutional Money Market Fund................................17
RISKS OF INVESTING IN ANY OF THE FUNDS..................................18
General Investment Risks.......................................18
Year 2000 Risks................................................19
MANAGEMENT OF THE FUNDS.................................................19
The Funds' Investment Adviser..................................19
Prior Performance of Investment Adviser........................20
Fund Managers..................................................22
Service Providers..............................................23
CALCULATING SHARE PRICE..........................................................23
DIVIDENDS AND DISTRIBUTIONS......................................................24
TAXES............................................................................25
YOUR ACCOUNT: BUYING, SELLING OR EXCHANGING SHARES..............................26
</TABLE>
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<TABLE>
<S> <C>
ELIGIBLE INVESTORS......................................................26
PURCHASE OF FUND SHARES.................................................27
Purchases by Eligible Investors................................27
Investing through the Trust Company............................27
Points to Remember for All Purchases...........................27
In-Kind Purchases of Shares....................................28
HOW TO REDEEM SHARES....................................................28
Redemptions by Eligible Investors..............................28
Redeeming Shares through the Trust Company.....................29
In-Kind Redemptions of Shares..................................29
HOW TO EXCHANGE SHARES..................................................29
Exchanges by Eligible Investors................................29
Making Exchanges through the Trust Company.....................29
OTHER INVESTOR INFORMATION..............................................30
FINANCIAL HIGHLIGHTS.............................................................30
</TABLE>
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SUMMARY INFORMATION
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
TIAA-CREF Institutional Mutual Funds consists of seven different Funds:
Institutional International Equity Fund
Institutional Growth Equity Fund
Institutional Growth and Income Fund
Institutional Equity Index Fund
Institutional Social Choice Equity Fund
Institutional Bond Fund
Institutional Money Market Fund
DUAL INVESTMENT MANAGEMENT STRATEGY(SM)
Three of the Funds (the Institutional International Equity Fund, the
Institutional Growth Equity Fund, and the Institutional Growth and Income Fund)
use TIAA-CREF's Dual Investment Management Strategy(SM). Each of these Funds has
a "stock selection" and an "enhanced index" segment.
- - The stock selection segment holds a relatively small number of stocks
that the Fund manager believes offer superior returns. These stocks are
chosen using fundamental analysis.
- - The enhanced index segment seeks to outperform the Fund's benchmark
index while limiting the possibility of significantly underperforming
the benchmark. The Fund manager 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 Fund manager has certain flexibilities, using the Dual Investment Management
Strategy, to allocate amounts between the stock selection segment and the
enhanced index segment, based upon investment opportunities that the Fund
manager determines to be available at any particular time. This approach enables
the Funds to stay fully invested even when the Fund manager cannot find
sufficient investment opportunities for the stock selection segment.
The Institutional Equity Index Fund, the Institutional Social Choice
Equity Fund, the Institutional Bond Fund, and the Institutional Money Market
Fund do not use the Dual Investment Management Strategy. See their descriptions
below.
GENERAL RISKS OF INVESTING IN THE FUNDS
The Funds are subject to the following general risks:
- - Market Risk -- Stock and bond prices in general can decline over short
or
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extended periods as a result of political or economic events.
- - Interest Rate Risk -- Bond or stock prices may decline if interest
rates change.
- - 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.
Special risks associated with particular Funds are discussed in the
following Fund summaries. The use of a particular benchmark index by a Fund is
not a fundamental policy and can be changed.
An investment in TIAA-CREF Institutional Mutual 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. An investor can lose money in any of
the Funds, or the Funds could underperform other investments.
INSTITUTIONAL 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
INVESTMENT primarily foreign equity investments, using the Dual
STRATEGIES Investment Management 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 rowth, 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, Australia, Far East) Index.
SPECIAL Changes in currency exchange rates, the possible imposition
INVESTMENT of market controls or currency exchange controls, lower
RISKS 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
WANT TO above-average long-term returns, who understand the
INVEST advantages of diversification across international markets
and are willing to tolerate the greater risks of
international investing.
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INSTITUTIONAL 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
INVESTMENT areas of the economy and companies with distinctive products
STRATEGIES or 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 percent 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
INVESTMENT of smaller, lesser-known companies whose stock prices may
RISKS fluctuate more than those of larger companies. This means
the Fund will probably be more volatile than the overall
stock market. With foreign investments, changes in currency
exchange rates, the possible imposition of market controls
or currency exchange controls, lower liquidity and higher
volatility in some foreign markets and/or political, social
or diplomatic events could reduce the value of the Fund's
investments.
WHO MAY The Fund may be appropriate for investors who are looking
WANT TO for long-term capital appreciation, but who are willing to
INVEST tolerate fluctuations in value.
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INSTITUTIONAL GROWTH AND 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
INVESTMENT common stocks selected for their investment potential, using
STRATEGIES the Dual Investment Management Strategy. For its stock
selection segment, the Fund manager 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
percent of its assets in foreign securities. Normally, at
least 80 percent 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 at times
INVESTMENT significantly underperform other stocks during periods of
RISKS rapid market appreciation. Changes in currency exchange
rates, the possible imposition of market controls or
currency exchange controls, lower liquidity and higher
volatility in some foreign markets and/or political, social
or diplomatic events could reduce the value of the Fund's
foreign investments.
WHO MAY The Fund may be appropriate for investors who want capital
WANT TO appreciation and current income but who also can accept the
INVEST risk of market fluctuations.
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INSTITUTIONAL EQUITY 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
INVESTMENT and invests in stocks in the Russell 3000(R) Index. The Fund
STRATEGIES uses a 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.
RISKS Thus 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
WANT TO that tracks the return of a broad U.S. equity market index.
INVEST
INSTITUTIONAL SOCIAL CHOICE EQUITY FUND
INVESTMENT The Fund seeks a favorable long-term rate of return that
OBJECTIVE tracks 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
INVESTMENT stocks. The Fund attempts to track the return of the U.S.
STRATEGIES stock market as 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
INVESTMENT Fund may not be able to take advantage of the same
RISKS opportunities or 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
INVEST companies that engage in certain activities.
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INSTITUTIONAL BOND FUND
INVESTMENT The Fund seeks a favorable long-term return, primarily
OBJECTIVE through high current income consistent with preserving
capital.
PRINCIPAL The Fund invests primarily in a broad range of debt
INVESTMENT securities. The majority of the Fund's portfolio is invested
STRATEGIES in U.S. Treasury and Agency securities, corporate bonds, and
mortgage-backed or other asset-backed securities. The Fund
holds mainly investment grade securities rated in the top
four credit categories by Moody's or Standard & Poor's. The
Fund is managed to track the duration of the benchmark index
for the Fund, the Lehman Brothers Aggregate Bond Index.
(Duration is a measurement of the change in the value of a
bond portfolio in response to a change in interest rates.)
The Fund will overweight or underweight individual
securities or sectors depending on where we find
undervalued, overlooked or misunderstood issues that offer
the potential for superior returns compared to the Lehman
index. The Fund may also invest in non-investment grade
securities (also called "high-yield" or "junk" bonds) or
privately placed (non-registered) securities.
SPECIAL The Fund is subject to interest rate risk -- that is, prices
INVESTMENT of bonds held by the Fund may decline if interest rates
RISKS rise. For example, if interest rates rise by 1%, the market
value of a portfolio with a duration of 5 years would
decline by approximately 5%. Investments in mortgage-backed
securities are subject to prepayment or extension risk. This
is the possibility that a change in interest rates would
cause the underlying mortgages to be paid off sooner or
later than expected. If unanticipated prepayments occur as a
result of a declining interest rate environment, the Fund
would have to reinvest the amounts that had been invested in
the mortgage-backed securities, possibly at a lower rate of
return. If unanticipated extensions occur as a result of a
rising interest rate environment, the Fund may not have
sufficient cash available for reinvestment when expected.
High-yield securities involve higher risks than investment
grade bonds.
WHO MAY The Fund may be appropriate for those who want to invest in
WANT TO a general bond fund with a slightly higher level of risk
INVEST than a traditional bond fund.
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INSTITUTIONAL MONEY MARKET FUND
INVESTMENT The Fund seeks high current income consistent with
OBJECTIVE maintaining liquidity and preserving capital.
PRINCIPAL The Fund invests primarily in high-quality short-term money
INVESTMENT market instruments. It limits its investments to securities
STRATEGIES that present minimal credit risk and are rated in the
highest rating categories for short-term instruments. The
benchmark index for the Fund is the IBC Money Fund
All-Taxable Average.
SPECIAL The Fund is subject to current income volatility -- that is,
INVESTMENT the income received by the Fund may decrease as a result of
RISKS a decline in interest rates.
WHO MAY The Fund may be suitable for conservative investors who are
WANT TO looking for a high degree of principal stability and
INVEST liquidity, and are willing to accept returns that may be
lower than those offered by longer-term fixed-income
investments.
An investment in the Institutional Money Market Fund, like the other Funds, is
not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. Although the Institutional Money Market Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund.
PAST PERFORMANCE
No performance data for TIAA-CREF Institutional Mutual Funds is
included in this prospectus because none of the Funds has been in operation for
one full calendar year.
Performance information for other registered investment companies
managed by the investment advisory personnel who manage TIAA-CREF Institutional
Mutual Funds is provided on page 20 of this prospectus.
FEES AND EXPENSES
The following table describes the fees and expenses that you pay if you
buy and hold shares of the Funds.
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<TABLE>
<S> <C>
SHAREHOLDER FEES (deducted directly from gross amount of transaction)
- ---------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases (percentage of offering price) 0%
Maximum Deferred Sales Charge 0%
Maximum Sales Charge Imposed on Reinvested Dividends and Other Distributions 0%
Redemption Fee 0%
Exchange Fee 0%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
- ----------------------------------------------------------
Total Fee Waiver
Manage- Other Annual Fund and/or Expense
ment Expenses Operating Reimburse- Net
Fees (1) Expenses ment (2,3) Expenses
---------- ---------- ----------- -------------- --------
<S> <C> <C> <C> <C> <C>
Institutional International Equity Fund 0.27% 0.28% 0.55% 0.26% 0.29%
Institutional Growth Equity Fund 0.23% 0.23% 0.46% 0.24% 0.22%
Institutional Growth and Income Fund 0.23% 0.23% 0.46% 0.24% 0.22%
Institutional Equity Index Fund 0.18% 0.23% 0.41% 0.24% 0.17%
Institutional Social Choice Equity Fund 0.19% 0.23% 0.42% 0.24% 0.18%
Institutional Bond Fund 0.18% 0.23% 0.41% 0.22% 0.19%
Institutional Money Market Fund 0.15% 0.23% 0.38% 0.22% 0.16%
</TABLE>
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(1) "Other Expenses" is based on estimated amounts for the current fiscal year.
(2) Teachers Advisors, Inc. ("Advisors"), the investment manager for the
Funds, has agreed to waive a portion of the Management Fees equal to, on
an annual basis: 0.09% of the average daily net assets of the
Institutional International Equity Fund; 0.07% of the average daily net
assets of each of the Institutional Growth Equity Fund, the Institutional
Growth and Income Fund, the Institutional Equity Index Fund, and the
Institutional Social Choice Equity Fund; and 0.05% of the average daily
net assets of each of the Institutional Bond Fund and the Institutional
Money Market Fund. This waiver is contractual and will remain in effect
until July 1, 2002.
(3) Advisors has agreed to reimburse the Institutional International Equity
Fund so that Other Expenses, which do not include investment management
fee expenses, do not exceed, on an annual basis, 0.11% of its average
daily net assets and to reimburse each of the other Funds so that
Other Expenses do not exceed, on an annual basis, 0.06% of its average
daily net assets. This reimbursement agreement is contractual and will
remain in effect until July 1, 2002.
EXAMPLE
This example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in a Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5 percent return
each year and that the Funds' operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs
would be:
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<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
<S> <C> <C>
Institutional International Equity Fund $30 $93
Institutional Growth Equity Fund $23 $71
Institutional Growth and Income Fund $23 $71
Institutional Equity Index Fund $17 $55
Institutional Social Choice Equity Fund $18 $58
Institutional Bond Fund $19 $61
Institutional Money Market Fund $16 $52
</TABLE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
Each of the individual investment portfolios, or Funds, described below
has its own investment objective. The following describes each Fund's investment
objective, the principal investment strategies and techniques each Fund uses to
accomplish its objective, and the principal types of securities each Fund
purchases. These policies and techniques are not fundamental and may be changed
by our Board of Trustees without shareholder approval. However, we'll notify you
of any significant changes. For a complete listing of the Funds' policies and
restrictions, see the Statement of Additional Information ("SAI").
There is no guarantee that any Fund will meet its investment objective.
EQUITY FUNDS USING THE DUAL INVESTMENT MANAGEMENT STRATEGY(SM)
The Institutional International Equity Fund, the Institutional Growth
Equity Fund, and the Institutional Growth and Income Fund use TIAA-CREF's Dual
Investment Management Strategy(SM), which works like this:
Each of these three equity 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 manager shifts money between them in
response to investment opportunities.
The stock selection segment holds a relatively small number of stocks
that the Fund manager believes offer superior returns. The managers of these
equity Funds will usually use fundamental analysis to select individual stocks
or sectors for investment in the stock selection segment. Each equity Fund's
stock selection segment is described further below.
Money that is not invested in an equity 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
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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 manager cannot find sufficient investment
opportunities for the stock selection segment.
The benchmarks for each Fund's enhanced index segment currently are as
follows:
<TABLE>
<CAPTION>
Fund Benchmark
- ---- ---------
<S> <C>
Institutional International Equity Fund MSCI EAFE(R) (Europe, Australia, Far East) Index
Institutional Growth Equity Fund Russell 3000(R) Growth Index
Institutional Growth and Income Fund S&P 500(R) Index
</TABLE>
Using these indices is not a fundamental policy of TIAA-CREF Institutional
Mutual Funds, so we can substitute other indices without shareholder approval.
We'll notify you before we make such a change.
INSTITUTIONAL INTERNATIONAL EQUITY FUND
The INSTITUTIONAL 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 percent 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 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:
- sustainable growth
- focused management with successful track records
- unique and easy-to-understand franchises (brands)
- undervalued stock prices based on current earnings, assets,
and long-term growth prospects
- consistent generation of free cash flow
SPECIAL INVESTMENT RISKS: The Fund is subject to the general investment
risks described on page 18. In addition, investing in securities traded on
foreign exchanges or in foreign markets can involve risks beyond those of
domestic investing. These include: (1) changes in currency exchange rates; (2)
possible imposition of market controls or currency exchange controls; (3)
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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.
INSTITUTIONAL GROWTH EQUITY FUND
The INSTITUTIONAL 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 percent 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.
The Institutional Growth Equity Fund can buy foreign securities and
other instruments if we believe they have superior investment potential.
Depending on investment opportunities, the Fund may have from 0 to 40 percent of
its assets in foreign securities. The securities will be those traded on foreign
exchanges or in other foreign markets and may be denominated in foreign
currencies or other units of account.
SPECIAL INVESTMENT RISKS: The Fund is subject to the general investment
risks described on page 18. 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
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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 Institutional Growth Equity Fund
will probably be more volatile than the overall stock market, and it could
significantly outperform or underperform the stock market during any particular
period.
The Fund's foreign holdings are subject to the risks of foreign
investments. These include, among others: changes in currency exchange rates;
possible imposition of market controls or currency exchange controls; possible
imposition of withholding taxes on dividends and interest; and possible seizure,
expropriation, or nationalization of assets.
INSTITUTIONAL GROWTH AND INCOME FUND
The INSTITUTIONAL GROWTH AND 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 percent 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 percent of its assets in foreign securities.
SPECIAL INVESTMENT RISKS: The Fund is subject to the general
investments risks described on page 18.
The Fund's foreign holdings are subject to the risks of foreign
investments. These include, among others: changes in currency exchange rates;
possible imposition of market controls or currency exchange controls; possible
imposition of withholding taxes on dividends and interest; and possible seizure,
expropriation, or nationalization of assets.
OTHER EQUITY FUNDS
INSTITUTIONAL EQUITY INDEX FUND
The INSTITUTIONAL EQUITY 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.
12
<PAGE> 17
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.
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 $2 million to $333 billion with an average of
$72 billion as of December 31, 1998. 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.
INSTITUTIONAL SOCIAL CHOICE EQUITY FUND
The INSTITUTIONAL 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
13
<PAGE> 18
invests only in companies that do not:
- - engage in activities that result or are likely to result in significant
damage to the natural environment;
- - have a significant portion of its business in weapons manufacturing;
- - produce and market alcoholic beverages or tobacco products;
- - produce nuclear energy; or
- - 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 consistently with such principals and in
compliance with the Fair Employment Act of 1989 (Northern Ireland).
For the first three criteria, we assess the issuer 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 actitivity 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 Corporate Governance and Social Responsibility Committee of our
Board of Trustees provides guidance in deciding whether investments meet the
social criteria. It uses information from independent organizations such as the
Investor Responsibility Research Center, Inc. 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 Committee on Corporate Governance and
Social Responsibility. 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 FOR THE EQUITY FUNDS
While the equity Funds invest primarily in common stocks, each equity
Fund can also invest, to a limited extent, in other equity securities such as
preferred stock, convertible securities, and warrants. Each equity Fund can also
hold short-term debt securities of the same type as those held by the
Institutional Money Market Fund (see page 17) and other kinds of short-term
instruments. These help the Funds maintain liquidity, use cash balances
effectively, and take advantage of attractive investment opportunities. The
equity Funds can also hold fixed-income securities they acquire because of
mergers, recapitalizations, or otherwise.
14
<PAGE> 19
Similarly, each equity 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
equity Funds can also enter into forward currency contracts, and buy or sell
options and futures on foreign currencies.
The equity 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.
THE FIXED-INCOME FUNDS
INSTITUTIONAL BOND FUND
The INSTITUTIONAL BOND FUND seeks a favorable long-term return,
primarily through high current income consistent with preserving capital.
Normally, at least 80 percent of the Fund's assets will be invested in bonds.
The Fund's portfolio is invested primarily in a broad range of debt
securities. The majority is invested in U.S. Treasury and Agency securities,
corporate bonds, and mortgage-backed or other asset-backed securities. The
Fund's holdings are mainly investment grade securities rated in the top four
credit categories by Moody's or Standard & Poor's, or that we determine are of
comparable quality. The Fund is managed to track the duration of the benchmark
index for the Fund, the Lehman Brothers Aggregate Bond Index. (Duration is a
measurement of the change in the value of a bond portfolio in response to a
change in interest rates.) The Fund will overweight or underweight individual
securities or sectors, as compared to their weight in the Lehman index,
depending on where we find undervalued, overlooked or misunderstood issues that
offer the potential for superior investment returns compared to the Lehman
index. The Fund can make foreign investments, but we don't expect them to exceed
15 percent of the Fund's assets. The Fund can also invest in money market
instruments.
The Fund may also invest in securities with special features in an
effort to enhance its total return. This category of the Fund's portfolio will
primarily consist of privately placed securities (including "Rule 144A" private
placements) or non-investment grade securities (also called "high-yield" or
"junk" bonds, which are rated Ba1 or lower by Moody's or BB+ or lower by
Standard & Poor's). The Fund will not invest more than 25 percent of its assets
in privately placed and high-yield securities.
The Institutional Bond Fund's investments in mortgage-backed securities
can include pass-through securities sold by private, governmental and
government-related organizations and collateralized mortgage obligations
("CMOs"). Mortgage pass-through securities are created when mortgages are pooled
together and interests in the pool are sold to investors. The cash flow from the
underlying mortgages is "passed through" to investors in periodic principal and
interest payments. CMOs are obligations that are fully collateralized directly
or indirectly by a pool of mortgages from which payments of principal and
interest are dedicated to the payment of
15
<PAGE> 20
principal and interest by the CMOs.
The Fund may use an investment strategy called "mortgage rolls," in
which we "roll over" an investment in a mortgage-backed security before its
settlement date for a similar security with a later settlement date. The Fund
may also engage in duration-neutral relative value trading, a strategy in which
we buy and sell government bonds of identical credit quality but different
maturity dates in an attempt to take advantage of spread differentials along the
yield curve. These strategies are both designed to enhance the Fund's returns,
but they do increase the Fund's portfolio turnover rate. However, we don't
expect these strategies to significantly raise the Fund's capital gains.
To some extent, and not as a principal strategy, the Fund may also
invest in interest-only and principal-only mortgage-backed securities. These
instruments have unique characteristics and are more sensitive to prepayment and
extension risks than traditional mortgage-backed securities. Similarly, the Fund
may also buy and sell options, futures contracts, and options on futures. We
intend to use options and futures primarily as a hedging technique or for cash
management. To manage currency risk, the Fund can also enter into forward
currency contracts, and buy or sell options and futures on foreign currencies.
The Fund can also buy and sell swaps and options on swaps, so long as these are
consistent with the Fund's investment objective and restrictions.
SPECIAL INVESTMENT RISKS: The Fund is subject to interest rate risk --
that is, prices of portfolio securities held by the Fund may decline if interest
rates rise. For example, if interest rates decline by 1%, the market value of a
portfolio with a duration of 5 years would rise by approximately 5%. Conversely,
if interest rates rise by 1%, the market value of the portfolio would decline by
approximately 5%. The duration of the Lehman Brothers Aggregate Bond Index as of
May 31, 1999 was 4.86 years. By keeping the duration of the Fund close to the
duration of Lehman index, the returns due to changes in interest rates should be
similar between the Fund and the index.
Non-investment-grade securities are usually called "high-yield" or
"junk" bonds. These lower-rated bonds offer higher returns but also entail
higher risks. Their issuers may be less creditworthy or have a higher risk of
becoming insolvent. Small changes in the issuer's creditworthiness can have more
impact on the price of lower-rated bonds than would comparable changes for
investment-grade bonds (those rated Baa or higher by Moody's or rated BBB or
higher by S&P). Lower-rated bonds can also be harder to value or sell, and their
prices can be more volatile than the prices of higher-quality securities.
The above risks of holding high-yield bonds can also apply to the lower
levels of "investment grade" bonds (for example, Moody's Baa and S&P's BBB).
Also, securities originally rated "investment grade" are sometimes downgraded
later on, should a ratings agency like Moody's or S&P believe the issuer's
business outlook or creditworthiness has deteriorated. A downgraded security
already held in the Fund's portfolio may or may not be sold, depending on our
analysis of the issuer's financial prospects. We don't rely exclusively on
ratings agencies when making investment decisions because they may not alone be
an accurate measure of the risk of lower-rated bonds. Instead, we also do our
own credit analysis, paying particular
16
<PAGE> 21
attention to economic trends and other market events.
The Fund can also invest in privately placed debt securities. One risk
of investing in private placements is that they may be difficult to sell for
their fair market value.
The Fund's investments in mortgage-backed securities are subject to
prepayment or extension risk, which is the possibility that a change in interest
rates may cause the underlying mortgages to be paid off sooner or later than
expected. If unanticipated prepayment occurs as a result of a declining interest
rate environment, the Fund would then have to reinvest the amounts that had been
invested in the mortgage-backed securities, possibly at a lower rate of return.
If unanticipated extension occurs as a result of a rising interest rate
environment, the Fund may not have sufficient cash available for reinvestment
when expected.
INSTITUTIONAL MONEY MARKET FUND
The INSTITUTIONAL MONEY MARKET FUND seeks high current income to the
extent consistent with maintaining liquidity and preserving capital.
We seek to maintain a stable net asset value of $1.00 per share of the
Institutional Money Market Fund by investing in assets that present minimal
credit risk, maintaining an average weighted maturity of 90 days or less, and
investing all of the Fund's assets in dollar-denominated securities or other
instruments maturing in 397 days or less. We can't assure you that we will be
able to maintain a stable net asset value of $1.00 per share for this Fund.
The Fund will invest primarily in:
(1) commercial paper (short-term "IOUs" issued by corporations and
others) or variable-rate, floating-rate, or variable-amount
securities of domestic or foreign companies;
(2) obligations of commercial banks, savings banks, savings and
loan associations, and foreign banks whose latest annual
financial statements show more than $1 billion in assets.
These include certificates of deposit, time deposits, bankers'
acceptances, and other short-term debt;
(3) securities issued by or whose principal and interest are
guaranteed by the U.S. government or one of its agencies or
instrumentalities;
(4) other debt obligations with a remaining maturity of 397 days
or less issued by domestic or foreign companies;
(5) repurchase agreements involving securities issued or
guaranteed by the U.S. government or one of its agencies or
instrumentalities, or involving certificates of deposit,
commercial paper, or bankers' acceptances;
(6) participation interests in loans banks have made to the
issuers of (1) and (4) above
17
<PAGE> 22
(these may be considered illiquid);
(7) asset-backed securities issued by domestic corporations or
trusts;
(8) obligations issued or guaranteed by foreign governments or
their political subdivisions, agencies, or instrumentalities;
and
(9) obligations of international organizations (and related
government agencies) designated or supported by the U.S. or
foreign government agencies to promote economic development or
international banking.
The Institutional Money Market Fund will only purchase money market
instruments that at the time of purchase are "First Tier Securities", that is
rated within the highest category by at least two nationally recognized
statistical rating organizations ("NRSROs"), or rated within the highest
category by one NRSRO if it is the only NRSRO to have issued a rating for the
security, or unrated securities of comparable quality. The Fund can also invest
up to 30 percent of its assets in money-market and debt instruments of foreign
issuers denominated in U.S. dollars.
The above list of investments is not exclusive and the Fund may make
other investments consistent with its investment objective and policies.
SPECIAL INVESTMENT RISKS: The Fund is subject to the risk of current
income volatility -- that is, the income the Fund receives may fall as a result
of a decline in interest rates. To a lesser extent, the Fund is also subject to
the general risks described below.
RISKS OF INVESTING IN ANY OF THE FUNDS
GENERAL INVESTMENT RISKS
To varying degrees, the Funds are all subject to several general types
of risks.
(1) One is market risk -- stock and bond price volatility due to
changing conditions in the financial markets.
(2) Another is interest rate risk -- the risk that a bond's or
stock's value will decline if interest rates change. For
example, a rise in interest rates usually causes the market
value of fixed-rate securities to go down.
(3) Another kind of risk is company risk. For stocks and bonds, it
comes from the possibility that current earnings will fall or
that overall financial soundness will decline, reducing the
security's value. In addition, for bonds and other debt
securities, company risk comes from the possibility the issuer
won't be able to pay principal and interest when due.
18
<PAGE> 23
YEAR 2000 RISKS
Many services provided to the Funds and their shareholders depend on
the smooth functioning of computer systems. Many computer systems now in use
can't distinguish the year 2000 from the year 1900 because dates have been
encoded using only the last two digits of the year.
Like other mutual funds, financial and business organizations, and
individuals around the world, TIAA-CREF Institutional Mutual Funds could be
adversely affected if the computer systems it relies on do not properly process
and calculate information and data involving dates from and after January 1,
2000. These computer systems include those used by its investment adviser and
other service providers. Together, TIAA-CREF Institutional Mutual Funds and its
investment adviser are taking steps that we believe are reasonably designed to
address issues involving the Year 2000 for the computer systems we use. We are
also seeking reasonable assurances that our service providers are taking
comparable steps. However, currently we can't assure you that these steps will
be sufficient to avoid any adverse impact on the Funds.
If the computer systems the Funds rely on do fail or produce faulty
data, there could be delays in processing transactions, or we may temporarily be
unable to engage in normal business activities. Also, a Fund's performance could
be affected if a systems failure at a company or government entity, either in
the U.S. or abroad (where Year 2000 compliance may be less prevalent), affects
the price of securities that the Fund owns.
The Fund managers consider Year 2000 readiness when selecting
investments. However, there is no guarantee that the information (including Year
2000 readiness) a Fund manager receives about a company is completely accurate.
As a result, a Fund's performance could suffer if a company in which the Fund is
invested has not satisfactorily addressed Year 2000 issues.
MANAGEMENT OF THE FUNDS
THE FUNDS' INVESTMENT ADVISER
Teachers Advisors, Inc. ("Advisors") manages the assets of TIAA-CREF
Institutional Mutual Funds, under the supervision of the Funds' Board of
Trustees (the "Board"). Advisors is an indirect wholly-owned subsidiary of
Teachers Insurance and Annuity Association of America ("TIAA"). It is registered
as an investment adviser with the U.S. Securities and Exchange Commission under
the Investment Advisers Act of 1940. Advisors also manages the investments of
TIAA Separate Account VA-1, the TIAA-CREF Life Funds, the TIAA-CREF Mutual
Funds, and the investment portfolio of New York State's College Choice Tuition
Savings Plan. Through an affiliated investment adviser, TIAA-CREF Investment
Management, LLC ("Investment Management"), the personnel of Advisors also manage
the investment accounts of the College Retirement Equities Fund ("CREF"). As of
March 31,1999, Advisors and Investment Management together had $__._ billion of
registered investment company assets under management. Advisors is located at
730 Third Avenue, New York, NY 10017.
19
<PAGE> 24
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 Funds, including custodians, fund
administrators, and transfer agents.
Under the terms of an Investment Management Agreement between TIAA-CREF
Institutional Mutual Funds and Advisors, Advisors is entitled to an annual fee
of 0.27%, 0.23%, 0.23%, 0.18%, 0.19%, 0.18%, and 0.15% of the average daily net
assets of the Institutional International Equity Fund, the Institutional Growth
Equity Fund, the Institutional Growth and Income Fund, the Institutional Equity
Index Fund, the Institutional Social Choice Equity Fund, the Institutional Bond
Fund, and the Institutional Money Market Fund, respectively. Advisors has agreed
to waive a portion of its investment management fee equal to, on an annual
basis: 0.09% of the average daily net assets of the Institutional International
Equity Fund; 0.07% of the average daily net assets of each of the Institutional
Growth Equity Fund, the Institutional Growth and Income Fund, the Institutional
Equity Index Fund, and the Institutional Social Choice Equity Fund; and 0.05% of
the average daily net assets of each of the Institutional Bond Fund and the
Institutional Money Market Fund. This waiver is contractual and will remain in
effect until July 1, 2002.
PRIOR PERFORMANCE OF INVESTMENT ADVISER
Please do not confuse the Funds with other registered investment
company portfolios using very similar or nearly identical names that are offered
by TIAA-CREF Mutual Funds, by CREF, by a separate account of TIAA, or by a
mutual fund dedicated to a separate account of TIAA-CREF Life Insurance Company
(a wholly-owned subsidiary of TIAA). However, the investment objectives and
policies of certain Funds are very similar to the investment objectives and
policies of other registered investment company portfolios that are managed by
Advisors or Investment Management. Nevertheless, the investment performance of
the Funds may be lower, or higher, than the investment results of such other
portfolios. We do not promise that the investment results of any of the Funds
will be comparable to the investment results of any other mutual fund, CREF
account, or separate account portfolio, even if the other portfolio uses a very
similar name, is managed by the same investment advisory personnel, and has the
same investment objective and policies as the applicable Fund.
TIAA-CREF Institutional Mutual Funds commenced operations on June 14,
1999, and each Fund has a limited performance record. However, the investment
objective, policies, strategies, and risks of each of the Funds (except the
Institutional Social Choice Equity Fund) is substantially similar to one or more
other registered investment company portfolios managed by Advisors or Investment
Management. The performance of these other portfolios may be relevant to
prospective investors in TIAA-CREF Institutional Mutual Funds.
The charts below show historical performance for: the International
Equity Fund, the Growth Equity Fund, the Growth & Income Fund, the Bond Plus
Fund, and the Money Market Fund of TIAA-CREF Mutual Funds (managed by Advisors);
the Stock Index Account of TIAA Separate Account VA-1 (managed by Advisors); the
Stock Index Fund of TIAA-CREF Life Funds (managed by Advisors); and the Growth
Account, the Equity Index Account, and the Money Market Account of CREF (managed
by the same personnel in their capacities with
20
<PAGE> 25
Investment Management). The data are provided to illustrate the experience of
Advisors' personnel in managing investment portfolios substantially similar to
the Institutional International Equity Fund, the Institutional Growth Equity
Fund, the Institutional Growth and Income Fund, the Institutional Equity Index
Fund, the Institutional Bond Fund, and the Institutional Money Market Fund of
TIAA-CREF Institutional Mutual Funds. (Because CREF's Social Choice Account is a
balanced portfolio with both debt and equity components, there exists no
investment portfolio managed by Advisors' personnel that is substantially
similar to the Institutional Social Choice Equity Fund.) 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 historical performance information presented is not intended to
predict or suggest the returns that the corresponding Fund of TIAA-CREF
Institutional Mutual Funds might experience. The results are net of investment
management and other operating expenses of the portfolios. After taking into
account the contractual fee waiver and expense reimbursement arrangement, each
Fund of TIAA-CREF Institutional Mutual Funds has lower total annual operating
expenses than the corresponding portfolios of the TIAA-CREF Mutual Funds,
TIAA-CREF Life Funds (a mutual fund portfolio offered solely to a separate
account of TIAA-CREF Life Insurance Company), TIAA Separate Account VA-1 (a
variable annuity managed account offered solely to TIAA), and CREF (variable
annuity managed accounts) during the periods illustrated.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL 1 year ended 5 years ended 10 years ended Inception to Inception of
RETURN Period: Mar. 31, 1999 Mar. 31, 1999 Mar. 31, 1999 Mar. 31, 1999 Account/Fund
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Accounts/Funds similar to: INSTITUTIONAL INTERNATIONAL EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------------
International Equity Fund
of TIAA-CREF Mutual Funds 7.36% N/A N/A 12.35% Sept. 2, 1997
- -----------------------------------------------------------------------------------------------------------------------------
MSCI EAFE Index 6.06% N/A N/A 11.81% Sept. 2, 1997
- -----------------------------------------------------------------------------------------------------------------------------
Accounts/Funds similar to: INSTITUTIONAL GROWTH EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------------
Growth Equity Fund
of TIAA-CREF Mutual Funds 24.82% N/A N/A 32.12% Sept. 2, 1997
- -----------------------------------------------------------------------------------------------------------------------------
Russell 3000 Growth Index 24.35% N/A N/A 29.85% Sept. 2, 1997
- -----------------------------------------------------------------------------------------------------------------------------
Growth Account of CREF 21.34% N/A N/A 26.40% Apr. 29, 1994
- -----------------------------------------------------------------------------------------------------------------------------
Russell 3000 Growth Index 24.35% N/A N/A 27.18% Apr. 29, 1994
- -----------------------------------------------------------------------------------------------------------------------------
Accounts/Funds similar to: INSTITUTIONAL GROWTH AND INCOME FUND
- -----------------------------------------------------------------------------------------------------------------------------
Growth & Income Fund
of TIAA-CREF Mutual Funds 20.81% N/A N/A 29.39% Sept 2, 1997
- -----------------------------------------------------------------------------------------------------------------------------
S&P 500 Index 18.46% N/A N/A 27.36% Sept. 2, 1997
- -----------------------------------------------------------------------------------------------------------------------------
Accounts/Funds similar to: INSTITUTIONAL BOND FUND
- -----------------------------------------------------------------------------------------------------------------------------
Bond Plus Fund
of TIAA-CREF Mutual Funds 6.36% N/A N/A 8.20% Sept. 2, 1997
- -----------------------------------------------------------------------------------------------------------------------------
Lehman Aggregate Bond Index 6.49% N/A N/A 8.04% Sept. 2, 1997
- -----------------------------------------------------------------------------------------------------------------------------
Bond Market Account of CREF 6.04% 7.34% N/A 8.35% Mar. 1, 1990
- -----------------------------------------------------------------------------------------------------------------------------
Lehman Aggregate Bond Index 6.49% 7.79% N/A 8.64% Mar. 1, 1990
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 26
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL 1 year ended 5 years ended 10 years ended Inception to Inception of
RETURN Period: Mar. 31, 1999 Mar. 31, 1999 Mar. 31, 1999 Mar. 31, 1999 Account/Fund
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Accounts/Funds similar to: INSTITUTIONAL EQUITY INDEX FUND
- -----------------------------------------------------------------------------------------------------------------------------
Stock Index Fund
of TIAA-CREF Life Funds N/A N/A N/A 3.92% Jan. 4, 1999
- -----------------------------------------------------------------------------------------------------------------------------
Russell 3000 Index 13.54% N/A N/A 3.39% Jan. 4, 1999
- -----------------------------------------------------------------------------------------------------------------------------
Stock Index Account
of TIAA Separate Account VA-1 12.85% N/A N/A 25.32% Nov. 1, 1994
- -----------------------------------------------------------------------------------------------------------------------------
Russell 3000 Index 13.54% N/A N/A 26.53% Nov. 1, 1994
- -----------------------------------------------------------------------------------------------------------------------------
Equity Index Account of CREF 13.60% N/A N/A 23.94% Apr. 29, 1994
- -----------------------------------------------------------------------------------------------------------------------------
Russell 3000 Index 13.54% N/A N/A 24.28% Apr. 29, 1994
- -----------------------------------------------------------------------------------------------------------------------------
Accounts/Funds similar to: INSTITUTIONAL MONEY MARKET FUND
- -----------------------------------------------------------------------------------------------------------------------------
Money Market Fund
of TIAA-CREF Mutual Funds 5.27% N/A N/A 5.38% Sept. 2, 1997
- -----------------------------------------------------------------------------------------------------------------------------
IBC Money Fund All-Taxable Avg. 4.86% N/A N/A 4.98% Sept. 2, 1997
- -----------------------------------------------------------------------------------------------------------------------------
Money Market Account of CREF 5.25% 5.13% 5.55% 5.78% Apr. 1, 1988
- -----------------------------------------------------------------------------------------------------------------------------
IBC Money Fund All-Taxable Avg. 4.86% 4.95% 5.15% 5.38% Apr. 1, 1988
- -----------------------------------------------------------------------------------------------------------------------------
As of Mar. 30, 1999: 7-Day Yield 7-Day Effective Yield
- -----------------------------------------------------------------------------------------------------------------------------
Money Market Fund
of TIAA-CREF Mutual Funds 4.68% 4.79%
- -----------------------------------------------------------------------------------------------------------------------------
Money Market Account of CREF 4.62% 4.72%
- -----------------------------------------------------------------------------------------------------------------------------
IBC Money Fund All-Taxable Avg. 4.35% 4.44%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
FUND MANAGERS
The Institutional International Equity Fund is managed by Chris
Semenuk, Director-Global Portfolio Management for Advisors. He is also one of
three co-managers of the CREF Global Equities Account and is also responsible
for managing TIAA-CREF Mutual Funds' International Equity Fund. From 1995 to
1997, he was responsible for company research and analysis for the CREF Global
Equities Account. Previously he was a senior securities analyst for the CREF
Stock Account. Mr. Semenuk joined TIAA-CREF in 1993.
The Institutional Growth Equity Fund is managed by Advisors' growth
portfolio management group, whose members are jointly responsible for the
day-to-day management of the Fund.
The Institutional Growth and Income Fund is managed by Carlton N.
Martin, Managing Director-Global Research for Advisors. He has also been one of
three co-managers of the CREF Global Equities Account since 1998 and manages
TIAA-CREF Mutual Funds' Growth & Income Fund. Prior to 1998, he was responsible
for investments in the chemical, paper and forest products as well as the
environmental, engineering and construction industries for certain CREF
Accounts. Mr. Martin joined TIAA-CREF in 1980.
22
<PAGE> 27
The Institutional Equity Index Fund and the Institutional Social Choice
Equity Fund are managed by Advisors' quantitative portfolio management group,
whose members are jointly responsible for the day-to-day management of the
Funds.
The Institutional Bond Fund is managed by Elizabeth D. Black, Managing
Director-Portfolio Management for Advisors. Ms. Black has also been responsible
for managing the investments in CREF's Bond Market Account and the bond portion
of CREF's Social Choice Account since 1996, and TIAA-CREF Mutual Funds' Bond
Plus Fund since 1997. Prior to 1996, she was sector manager of TIAA's
mortgage-backed securities group. Ms. Black joined TIAA-CREF in 1987.
The Institutional Money Market Fund is managed by Steven Traum,
Managing Director-Money Markets and Inflation Linked Bond for Advisors. Mr.
Traum has also been responsible for managing the investments of the CREF Money
Market Account since 1988, the CREF Inflation Linked Bond Account since 1997,
and TIAA-CREF Mutual Funds' Money Market Fund since 1997. He also manages the
cash components of the other TIAA-CREF Institutional Mutual Funds, the other
TIAA-CREF Mutual Funds and the CREF accounts. Mr. Traum joined TIAA-CREF in
1983.
SERVICE PROVIDERS
TIAA-CREF Institutional Mutual Funds may rely on affiliated or
unaffiliated persons for services related to record keeping and other
shareholder services (e.g., unaffiliated transfer agents maintaining individual
account records for omnibus accounts in certain circumstances), may compensate
such service providers, and may reflect these payments as an administrative
expense of the applicable class of shares.
CALCULATING SHARE PRICE
We determine the net asset value ("NAV") per share, or share price, of
a Fund on each day the New York Stock Exchange is open for business. We do this
when trading closes on all U.S. national exchanges where securities or other
investments of a Fund are principally traded. We will not price Fund shares on
days that the New York Stock Exchange is closed. We compute a Fund's NAV by
dividing the value of the Fund's assets, less its liabilities, by the number of
outstanding shares of that Fund.
We usually use market quotations or independent pricing services to
value securities and other instruments held by the Funds, except the
Institutional Money Market Fund. 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
Institutional Mutual Funds' Board of Trustees. We may also use fair value if
events that have a significant effect on the value of an investment (as
determined in our sole discretion) occur between the time when its price is
determined and the time a Fund's net asset value is calculated.
To calculate the Institutional Money Market Fund's net asset value per
share, we value its
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portfolio securities at their amortized cost. This valuation method does not
take into account unrealized gains or losses on the Fund's portfolio securities.
Amortized cost valuation involves first valuing a security at cost, and
thereafter assuming an amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the security's market
value. While this method provides certainty in valuation, there may be times
when the value of a security, as determined by amortized cost, may be higher or
lower than the price the Institutional Money Market Fund would receive if it
sold the security.
DIVIDENDS AND DISTRIBUTIONS
Each Fund expects to declare and distribute to shareholders
substantially all of its net investment income and net realized capital gains,
if any. The amount distributed will vary according to the income received from
securities held by the Fund and capital gains realized from the sale of
securities. The following table shows how often we plan to pay dividends on each
Fund:
<TABLE>
<CAPTION>
Fund Dividend Paid
---- -------------
<S> <C>
Institutional International Equity Fund Annually
Institutional Growth Equity Fund Annually
Institutional Growth and Income Fund Quarterly
Institutional Equity Index Fund Annually
Institutional Social Choice Equity Fund Annually
Institutional Bond Fund Monthly
Institutional Money Market Fund Monthly
</TABLE>
Although we pay dividends monthly from the Institutional Money Market
Fund, these dividends are calculated and declared daily.
We intend to pay net capital gains from Funds that have them once a
year.
You can elect from among the following distribution options:
1. REINVESTMENT OPTION, SAME FUND. We'll automatically reinvest your dividend
and capital gain distributions in additional shares of the Fund. Unless you
elect otherwise, this will be your distribution option.
2. INCOME-EARNED OPTION. We'll automatically reinvest your capital gain
distributions, but you will be sent a check for each dividend distribution.
3. CAPITAL GAINS OPTION. We'll automatically reinvest your dividend
distributions, but you will be sent a check for each capital gain distribution.
4. CASH OPTION. We'll send a check for your dividend and each capital gain
distribution.
We make distributions for each Fund on a per share basis to the
shareholders of record on
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<PAGE> 29
the Fund's distribution date. We do this regardless of how long the shares have
been held. That means if you buy shares just before or on a record date, you
will pay the full price for the shares and then you may receive a portion of the
price back as a taxable distribution. (See the discussion of "buying a dividend"
below.) Cash distribution checks will be mailed within seven days of the
distribution date.
TAXES
As with any investment, you should consider how your investment in any
Fund will be taxed.
Taxes on distributions. Unless you are tax-exempt or hold Fund shares
in a tax-deferred account, you must pay federal income tax, and possibly also
state or local taxes, on distributions each year. Your distributions are taxable
when they are paid, whether you take them in cash or reinvest them. However,
distributions declared in October, November or December and paid in January are
taxable as if they were paid on December 31 of the prior year.
For federal tax purposes, income and short-term capital gain
distributions from a Fund are taxed as ordinary income; long-term capital gain
distributions are taxed as long-term capital gains. Every January, we will send
you and the IRS a statement showing the taxable distributions paid to you in the
previous year from each Fund. Long-term capital gain distributions may be taxed
at a maximum federal rate of 20 percent to individual investors (or at 10
percent to individual investors who are in the 15 percent tax bracket).
Taxes on transactions. Redemptions, including exchanges to other Funds,
are also subject to capital gains tax or capital loss deductions. A capital gain
or loss is the difference between the cost of your shares and the price you
receive when you sell them.
Whenever you sell shares of a Fund, we will send you a confirmation
statement showing how many shares you sold and at what price. However, you or
your tax preparer must determine whether this sale resulted in a capital gain or
loss and the amount of tax to be paid on any gain. Be sure to keep your regular
account statements; the information they contain will be essential in
calculating the amount of your capital gains or losses.
Backup withholding. If you fail to provide a correct taxpayer
identification number or fail to certify that it is correct, we are required by
law to withhold 31% of all the taxable distributions and redemption proceeds
paid from your account. We are also required to begin backup withholding if
instructed by the IRS to do so.
"Buying a dividend." If you buy shares just before a Fund deducts a
distribution from its net asset value, you will pay the full price for the
shares and then receive a portion of the price back in the form of a taxable
distribution. This is referred to as "buying a dividend." For example, assume
you bought shares of a Fund for $10.00 per share the day before the Fund paid a
$0.25 dividend. After the dividend was paid, each share would be worth $9.75,
and you would have to include the $0.25 dividend in your gross income for tax
purposes.
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<PAGE> 30
Effect of foreign taxes. Foreign governments may impose taxes on a Fund
and its investments and these taxes generally will reduce such Fund's
distributions. If a Fund qualifies to pass through a credit for such taxes paid
and elects to do so, an offsetting tax credit or deduction may be available to
you. If so, your tax statement will show more taxable income than was actually
distributed by the Fund, but will also show the amount of the available
offsetting credit or deduction.
Other restrictions. There are tax requirements that all mutual funds
must follow in order to avoid federal taxation. In its effort to adhere to these
requirements, a Fund may have to limit its investment in some types of
instruments.
Special considerations for certain institutional investors. If you are
a corporate investor, a portion of the dividends from net investment income paid
by the Institutional Growth Equity Fund, the Institutional Growth and Income
Fund, the Institutional Equity Index Fund, and the Institutional Social Choice
Equity Fund will generally qualify for the corporate dividends-received
deduction. However, the portion of the dividends that qualify depends on the
aggregate qualifying dividend income received by each Fund from domestic (U.S.)
sources. Certain holding period and debt financing restrictions may apply to
corporate investors seeking to claim the deduction. We expect that little or
none of the distributions paid by the Institutional International Equity Fund,
the Institutional Bond Fund, and the Institutional Money Market Fund will
qualify for the corporate dividends-received deduction.
YOUR ACCOUNT: BUYING, SELLING OR EXCHANGING SHARES
ELIGIBLE INVESTORS
Shares of TIAA-CREF Institutional Mutual Funds are only available for
purchase by certain intermediaries affiliated with TIAA-CREF ("TIAA-CREF
Intermediaries"), such as TIAA-CREF Trust Company, FSB (the "Trust Company"), or
other persons, such as state-sponsored tuition savings plans, who have entered
into a contract with a TIAA-CREF Intermediary that enables them to purchase
shares of the Funds. Collectively with TIAA-CREF Intermediaries, these
contractually eligible investors are referred to as "Eligible Investors" in the
rest of this prospectus.
In the future, TIAA-CREF Institutional Mutual Funds may offer
additional classes of shares (with different shareholder servicing,
distribution, administrative, or other fees and expenses) for some or all of its
Funds. For example, we may introduce another class of shares to be sold directly
to investors who do not have a specific contractual relationship with a
TIAA-CREF Intermediary.
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<PAGE> 31
PURCHASE OF FUND SHARES
There is no minimum investment requirement for Eligible Investors. All
purchases must be in U.S. dollars.
We consider all requests for purchases to be received when they are
received in "good order" (see page 30).
There may be circumstances when we will not permit Eligible Investors
to invest in one or more of the Funds. We reserve the right to suspend or
terminate the offering of shares by one or more Funds. We also reserve the right
to reject any specific purchase request.
PURCHASES BY ELIGIBLE INVESTORS
Only Eligible Investors may invest in the Funds. All other prospective
investors should contact their TIAA-CREF Intermediary for applicable purchase
requirements.
To purchase shares, an Eligible Investor should instruct its bank to
wire money to State Street Bank and Trust Company, ABA Number ____________, DDA
Number ____________. Specify on the wire: (1) TIAA-CREF Institutional Mutual
Funds; (2) account registration (names of registered owners), address and Social
Security Number(s) or Taxpayer Identification Number; (3) whether the investment
is for a new or existing account (provide Fund account number if existing); and
(4) the Fund or Funds in which you want to invest, and amount to be invested in
each.
INVESTING THROUGH THE TRUST COMPANY
Clients of the Trust Company may invest in TIAA-CREF Institutional
Mutual Funds only through the Trust Company, which is an Eligible Investor and
serves as the TIAA-CREF Intermediary for its clients. Contact the Trust Company
regarding how investments in Fund shares are held for your benefit. In addition
to the fees and expenses deducted by the Funds, you may be charged a fee by the
Trust Company for the services it provides you.
POINTS TO REMEMBER FOR ALL PURCHASES
- - Each investment by an Eligible Investor in TIAA-CREF Institutional
Mutual Funds must be for a specified dollar amount. We can't accept
purchase requests specifying a certain price, date, or number of
shares; we'll return these investments.
- - If you invest in TIAA-CREF Institutional Mutual Funds through an
Eligible Investor, the Eligible Investor may charge you a fee in
connection with your investment (in addition to the fees and expenses
deducted by the Funds). Contact the Eligible Investor to learn whether
there are any other conditions, such as a minimum investment
requirement, on your transactions. In addition, Eligible Investors that
are not themselves affiliated with TIAA-CREF may be charged a fee by
their TIAA-CREF Intermediary (in addition to the fees and expenses
deducted by the Funds).
27
<PAGE> 32
If we do not receive good funds through wire transfer, we will treat
this as a redemption of the shares purchased when your wire transfer
is received. You will be responsible for any resulting loss incurred
by any of the Funds. If you are already a shareholder, we can redeem
shares from any of your account(s) as reimbursement for all losses.
We also reserve the right to restrict you from making future purchases
in any of the Funds.
IN-KIND PURCHASES OF SHARES
Advisors, at its sole discretion, may permit an Eligible Investor to
purchase shares with investment securities (instead of cash), if: (1) Advisors
believes the securities are appropriate investments for the particular Fund; (2)
the securities offered to the Fund are not subject to any restrictions upon
their sale by the Fund under the Securities Act of 1933, or otherwise; and (3)
the securities are permissible holdings under the Fund's investment
restrictions. If the Fund accepts the securities, the Eligible Investor's
account will be credited with Fund shares equal in net asset value to the market
value of the securities received. Eligible Investors interested in making
in-kind purchases should contact their TIAA-CREF Intermediary.
HOW TO REDEEM SHARES
REDEMPTIONS BY ELIGIBLE INVESTORS
Eligible Investors can redeem (sell) their Fund shares at any time. If
your shares were purchased through an Eligible Investor, contact the Eligible
Investor for applicable redemption requirements. Shares purchased through an
Eligible Investor must be redeemed by the Eligible Investor. For further
information, contact your TIAA-CREF Intermediary.
We will only accept redemption requests that specify a dollar amount or
number of shares to be redeemed. All other requests, including those specifying
a certain price or date, will be returned.
We accept redemption orders through a telephone request made by calling
___________.
Usually, we send redemption proceeds to the Eligible Investor on the
second business day after we receive a redemption request, but not later than
seven days afterwards, assuming the request is in good order (see page 30). If a
redemption is requested shortly after a recent purchase by check, the redemption
proceeds may not be paid until payment for the purchase is collected. This can
take up to ten days.
We can postpone payment if (a) the New York Stock Exchange is closed
for other than usual weekends or holidays, or trading on the New York Stock
Exchange is restricted; (b) an emergency exists as defined by the SEC, or the
SEC requires that trading be restricted; or (c) the SEC permits a delay for the
protection of investors.
We send redemption proceeds to the Eligible Investor at the address or
bank account of
28
<PAGE> 33
record. If proceeds are to be sent elsewhere, we will require a letter of
instruction from the Eligible Investor with a signature guarantee. We can send
the redemption proceeds by check to the address of record or by wire transfer.
REDEEMING SHARES THROUGH THE TRUST COMPANY
If you purchased shares through the Trust Company, it is responsible
for making any redemption proceeds available to you. In addition, the Trust
Company may impose its own restrictions on your ability to redeem shares. Please
contact the Trust Company directly for more information.
IN-KIND REDEMPTIONS OF SHARES
Large redemptions by any Eligible Investor that exceed $250,000 or 1%
of a Fund's assets during any 90-day period may be considered detrimental to the
Fund's existing shareholders. Therefore, at its sole discretion, the Fund may
require that you take a "distribution in kind" upon redemption and may give you
portfolio securities instead of cash. The securities you receive in this manner
will need to be sold through a broker, and you may therefore incur transaction
costs when you sell them.
HOW TO EXCHANGE SHARES
EXCHANGES BY ELIGIBLE INVESTORS
Eligible Investors can exchange shares in a Fund for shares of any
other Fund at any time. (An exchange is a simultaneous redemption of shares in
one Fund and a purchase of shares in another Fund.) If you hold shares through a
TIAA-CREF Intermediary or other Eligible Investor, contact the Eligible Investor
for applicable exchange requirements. Exchanges between accounts can be made
only if the accounts are registered in the same name(s), address and Social
Security or Tax Identification Number. An exchange is considered a sale of
securities, and therefore is a taxable event.
We reserve the right, at our sole discretion, to reject any exchange
request and to modify, suspend, or terminate the exchange privilege at any time.
Eligible Investors can make an exchange through a telephone request by
calling ___________. Once made, an exchange request cannot be modified or
canceled.
MAKING EXCHANGES THROUGH THE TRUST COMPANY
If you purchased shares through the Trust Company, it is responsible
for making any exchanges on your behalf. In addition, the Trust Company may
impose its own restrictions on your ability to make exchanges. Please contact
the Trust Company directly for more information.
29
<PAGE> 34
OTHER INVESTOR INFORMATION
Good Order. Requests for transactions by Eligible Investors will not be
processed until they are received in good order by our transfer agent, Boston
Financial Data Services. "Good order" means that an Eligible Investor's
transaction request includes its Fund account number, the amount of the
transaction (in dollars or shares), signatures of all account owners exactly as
registered on the account, and any other supporting legal documentation that may
be required.
Share Price. The share price we use for transactions will be the NAV
per share next calculated after Boston Financial Data Services receives an
Eligible Investor's request in good order. If an Eligible Investor purchases or
redeems shares anytime before the New York Stock Exchange closes (usually 4:00
p.m. Eastern Time), the transaction price will be the NAV per share for that
day. If an Eligible Investor makes a purchase or redemption request after the
New York Stock Exchange closes, the transaction price will be the NAV per share
for the next business day. If you purchased shares through an Eligible Investor,
the Eligible Investor (including the Trust Company) may require you to
communicate to it any purchase, redemption, or exchange request before a
specified deadline earlier than 4:00 p.m. in order to receive that day's NAV per
share as the transaction price.
Tax Identification Number. Each Eligible Investor must provide its
Taxpayer Identification Number (which, for most individuals, is your Social
Security Number) to us and indicate whether or not it is subject to back-up
withholding. If an Eligible Investor doesn't furnish its Taxpayer Identification
Number, redemptions and exchanges of shares, as well as dividends and capital
gains distributions, will be subject to back-up tax withholding.
Signature Guarantee. For some transaction requests by an Eligible
Investor, we may require a letter of instruction from the Eligible Investor with
a signature guarantee. This requirement is designed to protect you and the
TIAA-CREF Institutional Mutual Funds from fraud, and to comply with rules on
stock transfers.
Transferring Shares. An Eligible Investor may transfer ownership of its
shares to another person or organization that also qualifies as an Eligible
Investor or may change the name on its account by sending us written
instructions. All registered owners of the account must sign the request and
provide signature guarantees.
FINANCIAL HIGHLIGHTS
Because the Funds have limited operating history, no financial
highlights information is included in this prospectus. Financial statements for
each Fund are in the SAI, which is available free upon request.
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<PAGE> 35
[BACK COVER]
FOR MORE INFORMATION ABOUT TIAA-CREF INSTITUTIONAL MUTUAL FUNDS
The following documents contain more information about the Funds and
are available free upon request:
STATEMENT OF ADDITIONAL INFORMATION ("SAI"). The SAI contains more information
about all aspects of the Funds. A current SAI has been filed with the U.S.
Securities and Exchange Commission ("SEC") and is incorporated in this
prospectus by reference.
ANNUAL AND SEMI-ANNUAL REPORTS. The Funds' annual and semi-annual reports
provide additional information about the Funds' investments. The first annual
report, to be available in November 1999, will contain a discussion of the
market conditions and investment strategies that significantly affected each
Fund's performance during the preceding fiscal year.
REQUESTING DOCUMENTS. You can request a copy of the SAI or these reports, or
contact us for any other purpose, in any of the following ways:
By telephone: Call 800 ____-______
In writing: TIAA-CREF Institutional Mutual Funds
P.O. Box 4674
New York, NY 10164
Information about TIAA-CREF Institutional Mutual 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.
<PAGE> 36
TIAA-CREF INSTITUTIONAL MUTUAL FUNDS
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information ("SAI") contains additional
information that you should consider before investing in TIAA-CREF Institutional
Mutual Funds (the "Trust"). It is not a prospectus and should be read carefully
in conjunction with the Trust's prospectus dated July 1, 1999 (the
"Prospectus"), which may be obtained by writing us at TIAA-CREF Institutional
Mutual Funds, P.O. Box 4674, New York, NY 10164 or by calling 800 223-1200.
Terms used in the Prospectus are incorporated in this SAI.
The date of this SAI is July 1, 1999.
<PAGE> 37
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INVESTMENT OBJECTIVES, POLICIES, AND RESTRICTIONS...............................................1
Fundamental Policies...................................................................1
Investment Policies and Risk Considerations............................................2
MANAGEMENT OF TIAA-CREF INSTITUTIONAL MUTUAL FUNDS.............................................14
Trustees and Officers of TIAA-CREF Institutional Mutual Funds.........................14
Trustee and Officer Compensation......................................................17
PRINCIPAL HOLDERS OF SECURITIES................................................................18
INVESTMENT ADVISORY AND OTHER SERVICES.........................................................18
ABOUT TIAA-CREF INSTITUTIONAL MUTUAL FUNDS AND THE SHARES......................................19
Indemnification of Shareholders.......................................................19
Indemnification of Trustees...........................................................20
Limitation of Fund Liability..........................................................20
Shareholder Meetings and Voting Rights................................................20
Additional Funds or Classes...........................................................21
Dividends and Distributions...........................................................21
PRICING OF SHARES..............................................................................21
Investments for Which Market Quotations Are Readily Available.........................21
Foreign Investments...................................................................22
Debt Securities.......................................................................22
Special Valuation Procedures for the Institutional Money Market Fund..................22
Options and Futures...................................................................23
Investments for Which Market Quotations Are Not Readily Available.....................24
TAX STATUS.....................................................................................24
BROKERAGE ALLOCATION...........................................................................26
UNDERWRITERS...................................................................................27
CALCULATION OF PERFORMANCE DATA................................................................27
Total Return Calculations.............................................................27
Yield Calculations....................................................................28
Performance Comparisons...............................................................30
Illustrating Compounding..............................................................30
Net Asset Value.......................................................................30
Moving Averages.......................................................................31
VOTING RIGHTS..................................................................................31
</TABLE>
- ii -
<PAGE> 38
<TABLE>
<S> <C>
LEGAL MATTERS..................................................................................31
EXPERTS........................................................................................31
ADDITIONAL CONSIDERATIONS......................................................................31
FINANCIAL STATEMENTS...........................................................................32
</TABLE>
- iii -
<PAGE> 39
INVESTMENT OBJECTIVES, POLICIES, AND RESTRICTIONS
The following discussion of investment policies and restrictions
supplements the Prospectus descriptions of the investment objective and
principal investment strategies of each of the Trust's seven separate investment
portfolios or funds ("Funds"). Under the Investment Company Act of 1940, as
amended (the "1940 Act"), any fundamental policy of a registered investment
company may not be changed without the vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of that series. However, each
Fund's investment objective, policies and principal investment strategies
described in the Prospectus, as well as the investment restrictions contained in
"Investment Policies and Risk Considerations" below, are not fundamental and
therefore may be changed by the Trust's board of trustees (the "Board of
Trustees" or the "Board") at any time. Each Fund will be "diversified" within
the meaning of the 1940 Act.
Unless stated otherwise, each of the following investment policies and
risk considerations apply to each Fund.
FUNDAMENTAL POLICIES
The following restrictions are fundamental policies of each Fund:
1. The Fund will not issue senior securities except as permitted
by law.
2. The Fund will not borrow money, except: (a) each Fund may
purchase securities on margin, as described in restriction 7
below; and (b) from banks (only in amounts not in excess of
33 1/3 percent of the market value of that Fund's assets at
the time of borrowing), and, from other sources, for temporary
purposes (only in amounts not exceeding 5 percent, or such
greater amount as may be permitted by law, of that 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 purchase real estate or mortgages directly.
5. The Fund will not purchase commodities or commodities
contracts, except to the extent futures are purchased as
described herein.
6. The Fund will not lend any security or make any other loan if,
as a result, more than 33 1/3 percent of its total assets
would be lent to other parties, but this limit does not apply
to repurchase agreements.
7. The Fund will not purchase any security on margin except that
the Fund may obtain such short-term credit as may be necessary
for the clearance of purchases and sales of portfolio
securities.
- 1 -
<PAGE> 40
8. The Fund will not, with respect to at least 75 percent of the
value of its total assets, invest more than 5 percent of its
total assets in the securities of any one issuer, other than
securities issued or guaranteed by the United States
Government, its agencies or instrumentalities, or hold more
than 10 percent of the outstanding voting securities of any
one issuer.
The following restriction is a fundamental policy of each Fund other
than the Institutional Money Market Fund.
9. The Fund will not invest in an industry if after giving effect
to that investment that Fund's holding in that industry would
exceed 25 percent of its total assets.
The following restriction is a fundamental policy of the Institutional
Money Market Fund:
10. The Fund may invest more than 25 percent of its assets in
obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities; the Fund will not otherwise
invest in an industry if after giving effect to that
investment the Fund's holding in that industry would exceed 25
percent of its total assets.
INVESTMENT POLICIES AND RISK CONSIDERATIONS
The following restrictions are non-fundamental policies of each Fund.
These restrictions may be changed without the approval of the shareholders in
the affected Fund.
Non-Equity Investments of the Equity Funds. The equity Funds can, in
addition to stocks, hold other types of securities with equity characteristics,
such as convertible bonds, preferred stock, warrants and depository receipts or
rights. Pending more permanent investments or to use cash balances effectively,
these Funds can hold the same types of money market instruments the
Institutional Money Market Fund invests in (see Prospectus, page __), as well as
other short-term instruments. These other instruments are the same type of
instruments the Institutional Money Market Fund holds, but they have longer
maturities than the instruments allowed in the Institutional Money Market Fund,
or else don't meet the requirements for "First Tier Securities" (see Prospectus,
page __).
When market conditions warrant, the equity Funds can invest directly in
debt securities similar to those the Institutional Bond Fund may invest in (see
Prospectus, page __). The equity Funds can also hold debt securities that they
acquire because of mergers, recapitalizations or otherwise.
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
- 2 -
<PAGE> 41
fluctuations in net asset value in response to market changes.
Illiquid Securities. Each Fund can invest up to 15 percent of its
assets (10 percent for the Institutional Money Market Fund) in investments that
may not be readily marketable. It may be difficult to sell these investments for
their fair market value.
Preferred Stock. The Funds can invest in preferred stock consistent
with their investment objectives.
Options and Futures. Each of the Funds may engage in options and
futures strategies to the extent permitted by the SEC and Commodity Futures
Trading Commission ("CFTC"). We do not intend for any Fund to use options and
futures strategies in a speculative manner but rather we would use them
primarily as hedging techniques or for cash management purposes.
Option-related activities could include: (1) selling of covered call
option contracts, and the purchase of call option contracts for the purpose of a
closing purchase transaction; (2) buying covered put option contracts, and
selling put option contracts to close out a position acquired through the
purchase of such options; and (3) selling call option contracts or buying put
option contracts on groups of securities and on futures on groups of securities
and buying similar call option contracts or selling put option contracts to
close out a position acquired through a sale of such options. This list of
options-related activities is not intended to be exclusive, and each Fund may
engage in other types of options transactions consistent with its investment
objective and policies and applicable law.
A call option is a short-term contract (generally for nine months or
less) which gives the purchaser of the option the right to purchase the
underlying security at a fixed exercise price at any time (American style) or at
a set time (European style) prior to the expiration of the option regardless of
the market price of the security during the option period. As consideration for
the call option, the purchaser pays the seller a premium, which the seller
retains whether or not the option is exercised. The seller of a call option has
the obligation, upon the exercise of the option by the purchaser, to sell the
underlying security at the exercise price at any time during the option period.
Selling a call option would benefit the seller if, over the option period, the
underlying security declines in value or does not appreciate above the aggregate
of the exercise price and the premium. However, the seller risks an "opportunity
loss" of profits if the underlying security appreciates above the aggregate
value of the exercise price and the premium.
A Fund may close out a position acquired through selling a call option
by buying a call option on the same security with the same exercise price and
expiration date as the call option that it had previously sold on that security.
Depending on the premium for the call option purchased by the Fund, the Fund
will realize a profit or loss on the transaction.
A put option is a similar short-term contract that gives the purchaser
of the option the right to sell the underlying security at a fixed exercise
price prior to the expiration of the option regardless of the market price of
the security during the option period. As consideration for the put option, the
purchaser pays the seller a premium, which the seller retains whether or not the
option is exercised. The seller of a put option has the obligation, upon the
exercise of the option
- 3 -
<PAGE> 42
by the purchaser, to purchase the underlying security at the exercise price
during the option period. The buying of a covered put contract limits the
downside exposure for the investment in the underlying security to the
combination of the exercise price less the premium paid. The risk of purchasing
a put is that the market price of the underlying stock prevailing on the
expiration date may be above the option's exercise price. In that case the
option would expire worthless and the entire premium would be lost.
A Fund may close out a position acquired through buying a put option by
selling a put option on the same security with the same exercise price and
expiration date as the put option which it had previously bought on the
security. Depending on the premium of the put option sold by the Fund, the Fund
would realize a profit or loss on the transaction.
In addition to options (both calls and puts) on individual securities,
there are also options on groups of securities, such as the Standard & Poor's
100 Index traded on the Chicago Board Options Exchange. There are also options
on futures of groups of securities such as the Standard & Poor's 500 Stock Index
and the New York Stock Exchange Composite Index. The selling of calls can be
used in anticipation of, or in, a general market or market sector decline that
may adversely affect the market value of a Fund's portfolio of securities. To
the extent that a Fund's portfolio of securities changes in value in correlation
with a given stock index, the sale of call options on the futures of that index
would substantially reduce the risk to the portfolio of a market decline, and,
by so doing, provides an alternative to the liquidation of securities positions
in the portfolio with resultant transaction costs. A risk in all options,
particularly the relatively new options on groups of securities and on futures
on groups of securities, is a possible lack of liquidity. This will be a major
consideration before a Fund deals in any option.
There is another risk in connection with selling a call option on a
group of securities or on the futures of groups of securities. This arises
because of the imperfect correlation between movements in the price of the call
option on a particular group of securities and the price of the underlying
securities held in the portfolio. Unlike a covered call on an individual
security, where a large movement on the upside for the call option will be
offset by a similar move on the underlying stock, a move in the price of a call
option on a group of securities may not be offset by a similar move in the price
of securities held due to the difference in the composition of the particular
group and the portfolio itself.
To the extent permitted by applicable regulatory authorities, each Fund
may purchase and sell futures contracts on securities or other instruments, or
on groups or indexes of securities or other instruments. The purpose of hedging
techniques using financial futures is to protect the principal value of a Fund
against adverse changes in the market value of securities or instruments in its
portfolio, and to obtain better returns on future investments than actually may
be available at the future time. Since these are hedging techniques, the 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
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month, of the securities or instrument underlying the contract. By purchasing a
futures contract -- assuming a "long" position -- a Fund legally will obligate
itself to accept the future delivery of the underlying security or instrument
and pay the agreed price. By selling a futures contract -- assuming a "short"
position -- it legally will obligate itself to make the future delivery of the
security or instrument against payment of the agreed price.
Positions taken in the futures markets are not normally held to
maturity, but are instead liquidated through offsetting transactions which may
result in a profit or a loss. While futures positions taken by a Fund usually
will be liquidated in this manner, a Fund may instead make or take delivery of
the underlying securities or instruments whenever it appears economically
advantageous to the Fund to do so. A clearing corporation associated with the
exchange on which futures are traded assumes responsibility for closing out
positions and guarantees that the sale and purchase obligations will be
performed with regard to all positions that remain open at the termination of
the contract.
A stock index futures contract, unlike a contract on a specific
security, does not provide for the physical delivery of securities, but merely
provides for profits and losses resulting from changes in the market value of
the contract to be credited or debited at the close of each trading day to the
respective accounts of the parties to the contract. On the contract's expiration
date, a final cash settlement occurs and the futures positions are closed out.
Changes in the market value of a particular stock index futures contract reflect
changes in the specified index of equity securities on which the future is
based.
Stock index futures may be used to hedge the equity investments of each
Fund with regard to market (systematic) risk (involving the market's assessment
of overall economic prospects), as distinguished from stock specific risk
(involving the market's evaluation of the merits of the issuer of a particular
security). By establishing an appropriate "short" position in stock index
futures, a Fund may seek to protect the value of its securities portfolio
against an overall decline in the market for equity securities. Alternatively,
in anticipation of a generally rising market, a Fund can seek to avoid losing
the benefit of apparently low current prices by establishing a "long" position
in stock index futures and later liquidating that position as particular equity
securities are in fact acquired. To the extent that these hedging strategies are
successful, a Fund will be affected to a lesser degree by adverse overall market
price movements, unrelated to the merits of specific portfolio equity
securities, than would otherwise be the case.
Unlike the purchase or sale of a security, no price is paid or received
by a Fund upon the purchase or sale of a futures contract. Initially, the Fund
will be required to deposit in a custodial account an amount of cash, United
States Treasury securities, or other permissible assets equal to approximately 5
percent of the contract amount. This amount is known as "initial margin." The
nature of initial margin in futures transactions is different from that of
margin in security transactions in that futures contract margin does not involve
the borrowing of funds by the customer to finance the transactions. Rather, the
initial margin is in the nature of a performance bond or good faith deposit on
the contract which is returned to the Fund upon termination of the futures
contract assuming all contractual obligations have been satisfied. Subsequent
payments to and from the broker, called "variation margin," will be made on a
daily basis as the price of the underlying stock index fluctuates making the
long and short positions in the futures
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<PAGE> 44
contract more or less valuable, a process known as "marking to the market." For
example, when a Fund has purchased a stock index futures contract and the price
of the underlying stock index has risen, that position will have increased in
value, and the Fund will receive from the broker a variation margin payment
equal to that increase in value. Conversely, where a Fund has purchased a stock
index futures contract and the price of the underlying stock index has declined,
the position would be less valuable and the Fund would be required to make a
variation margin payment to the broker. At any time prior to expiration of the
futures contract, the Fund may elect to close the position by taking an opposite
position which will operate to terminate the Fund's position in the futures
contract. A final determination of variation margin is then made, additional
cash is required to be paid by or released to the Fund, and the Fund realizes a
loss or a gain.
There are several risks in connection with the use of a futures
contract as a hedging device. One risk arises because of the imperfect
correlation between movements in the prices of the futures contracts and
movements in the securities or instruments which are the subject of the hedge.
Each Fund will attempt to reduce this risk by engaging in futures transactions,
to the extent possible, where, in our judgment, there is a significant
correlation between changes in the prices of the futures contracts and the
prices of each Fund's portfolio securities or instruments sought to be hedged.
Successful use of futures contracts for hedging purposes also is
subject to the user's ability to predict correctly movements in the direction of
the market. For example, it is possible that, where a Fund has sold futures to
hedge its portfolio against declines in the market, the index on which the
futures are written may advance and the values of securities or instruments held
in the Fund's portfolio may decline. If this occurred, the Fund would lose money
on the futures and also experience a decline in value in its portfolio
investments. However, we believe that over time the value of a Fund's portfolio
will tend to move in the same direction as the market indices which are intended
to correlate to the price movements of the portfolio securities or instruments
sought to be hedged. It also is possible that, for example, if a Fund has hedged
against the possibility of the decline in the market adversely affecting stocks
held in its portfolio and stock prices increased instead, the Fund will lose
part or all of the benefit of increased value of those stocks that it has hedged
because it will have offsetting losses in its futures positions. In addition, in
such situations, if the Fund has insufficient cash, it may have to sell
securities or instruments to meet daily variation margin requirements. Such
sales may be, but will not necessarily be, at increased prices which reflect the
rising market. The Fund may have to sell securities or instruments at a time
when it may be disadvantageous to do so.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures
contracts and the portion of the portfolio being hedged, the prices of futures
contracts may not correlate perfectly with movements in the underlying security
or instrument due to certain market distortions. First, all transactions in the
futures market are subject to margin deposit and maintenance requirements.
Rather than meeting additional margin deposit requirements, investors may close
futures contracts through offsetting transactions which could distort the normal
relationship between the index and futures markets. Second, the margin
requirements in the futures market are less onerous than margin requirements in
the securities market, and as a result the futures market may attract more
speculators than the
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<PAGE> 45
securities market does. Increased participation by speculators in the futures
market also may cause temporary price distortions. Due to the possibility of
price distortion in the futures market and also because of the imperfect
correlation between movements in the futures contracts and the portion of the
portfolio being hedged, even a correct forecast of general market trends by
Teachers Advisors, Inc. ("Advisors"), the investment adviser for TIAA-CREF
Institutional Mutual Funds, still may not result in a successful hedging
transaction over a very short time period.
Each Fund may also use futures contracts and options on futures
contracts to manage its cash flow more effectively. To the extent that a Fund
enters into non-hedging positions, it will do so only in accordance with certain
CFTC exemptive provisions. Thus, pursuant to CFTC Rule 4.5, the aggregate
initial margin and premiums required to establish non-hedging positions in
commodity futures or commodity options contracts may not exceed 5 percent of the
liquidation value of the Fund's portfolio, after-taking into account unrealized
profits and unrealized losses on any such contracts it has entered into
(provided that the in-the-money amount of an option that is in-the-money when
purchased may be excluded in computing such 5 percent).
Options and futures transactions may increase a Fund's transaction
costs and portfolio turnover rate and will be initiated only when consistent
with its investment objectives.
Investment Companies. Each Fund can invest up to 5 percent of its
assets in any single investment company and up to 10 percent of its assets in
all other investment companies in the aggregate. However, no Fund can hold more
than 3 percent of the total outstanding voting stock of any single investment
company.
Firm Commitment Agreements and Purchase of "When-Issued" Securities.
Each Fund can enter into firm commitment agreements for the purchase of
securities on a specified future date. When a Fund enters into a firm commitment
agreement, liability for the purchase price -- and the rights and risks of
ownership of the securities -- accrues to the Fund at the time it becomes
obligated to purchase such securities, although delivery and payment occur at a
later date. Accordingly, if the market price of the security should decline, the
effect of the agreement would be to obligate the Fund to purchase the security
at a price above the current market price on the date of delivery and payment.
During the time the Fund is obligated to purchase such securities, it will be
required to segregate assets. See below, "Segregated Accounts."
Pass-Through Securities. The Funds may invest in mortgage pass-through
securities such as GNMA certificates or FNMA and FHLMC mortgage-backed
obligations, or modified pass-through securities such as collateralized mortgage
obligations issued by various financial institutions. In connection with these
investments, early repayment of principal arising from prepayments of principal
on the underlying mortgage loans due to the sale of the underlying property, the
refinancing of the loan, or foreclosure may expose a Fund to a lower rate of
return upon reinvestment of the principal. Prepayment rates vary widely and may
be affected by changes in market interest rates. In periods of falling interest
rates, the rate of prepayment tends to increase, thereby shortening the actual
average life of the mortgage-related security. Conversely, when interest rates
are rising, the rate of prepayment tends to decrease, thereby
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<PAGE> 46
lengthening the actual average life of the mortgage-related security.
Accordingly, it is not possible to accurately predict the average life of a
particular pool. Reinvestment of prepayments may occur at higher or lower rates
than the original yield on the certificates. Therefore, the actual maturity and
realized yield on pass-through or modified pass-through mortgage-related
securities will vary based upon the prepayment experience of the underlying pool
of mortgages. For purposes of calculating the average life of the assets of the
relevant Fund, the maturity of each of these securities will be the average life
of such securities based on the most recent or estimated annual prepayment rate.
Lending of Securities. Subject to investment policy 6 on page 1
(relating to loans of portfolio securities), each Fund may lend its securities
to brokers and dealers that are not affiliated with Teachers Insurance and
Annuity Association of America ("TIAA"), are registered with the SEC and are
members of the NASD, and also to certain other financial institutions. All loans
will be fully collateralized. In connection with the lending of its securities,
a Fund will receive as collateral cash, securities issued or guaranteed by the
United States Government (i.e., Treasury securities), or other collateral
permitted by applicable law, which at all times while the loan is outstanding
will be maintained in amounts equal to at least 102 percent of the current
market value of the loaned securities, or such lesser percentage as may be
permitted by the Securities and Exchange Commission ("SEC") (not to fall below
100 percent of the market value of the loaned securities), as reviewed daily. By
lending its securities, a Fund will receive amounts equal to the interest or
dividends paid on the securities loaned and in addition will expect to receive a
portion of the income generated by the short-term investment of cash received as
collateral or, alternatively, where securities or a letter of credit are used as
collateral, a lending fee paid directly to the Fund by the borrower of the
securities. Such loans will be terminable by the Fund at any time and will not
be made to affiliates of TIAA. The Fund may terminate a loan of securities in
order to regain record ownership of, and to exercise beneficial rights related
to, the loaned securities, including but not necessarily limited to voting or
subscription rights, and may, in the exercise of its fiduciary duties, terminate
a loan in the event that a vote of holders of those securities is required on a
material matter. The Fund may pay reasonable fees to persons unaffiliated with
the Fund for services or for arranging such loans. Loans of securities will be
made only to firms deemed creditworthy. As with any extension of credit,
however, there are risks of delay in recovering the loaned securities, should
the borrower of securities default, become the subject of bankruptcy
proceedings, or otherwise be unable to fulfill its obligations or fail
financially.
Repurchase Agreements. Repurchase agreements have the characteristics
of loans, and will be fully collateralized (either with physical securities or
evidence of book entry transfer to the account of the custodian bank) at all
times. During the term of the repurchase agreement, the Fund entering into the
agreement retains the security subject to the repurchase agreement as collateral
securing the seller's repurchase obligation, continually monitors the market
value of the security subject to the agreement, and requires the Fund's seller
to deposit with the Fund additional collateral equal to any amount by which the
market value of the security subject to the repurchase agreement falls below the
resale amount provided under the repurchase agreement. Each Fund will enter into
repurchase agreements only with member banks of the Federal Reserve System, and
with primary government securities dealers or other domestic or foreign
broker-dealers whose creditworthiness has been reviewed and found satisfactory
by Advisors
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<PAGE> 47
and who have, therefore, been determined to present minimal credit risk.
Securities underlying repurchase agreements will be limited to
certificates of deposit, commercial paper, bankers' acceptances, or obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities, in which the Fund entering into the agreement may otherwise
invest.
If a seller of a repurchase agreement defaults and does not repurchase
the security subject to the agreement, the Fund entering into the agreement
would look to the collateral security underlying the seller's repurchase
agreement, including the securities subject to the repurchase agreement, for
satisfaction of the seller's obligation to the Fund; in such event the Fund
might incur disposition costs in liquidating the collateral and might suffer a
loss if the value of the collateral declines. In addition, if bankruptcy
proceedings are instituted against a seller of a repurchase agreement,
realization upon the collateral may be delayed or limited.
Swap Transactions. Each Fund may, to the extent permitted by the SEC,
enter into privately negotiated "swap" transactions with other financial
institutions in order to take advantage of investment opportunities generally
not available in public markets. In general, these transactions involve
"swapping" a return based on certain securities, instruments, or financial
indices with another party, such as a commercial bank, in exchange for a return
based on different securities, instruments, or financial indices.
By entering into a swap transaction, a Fund may be able to protect the
value of a portion of its portfolio against declines in market value. Each Fund
may also enter into swap transactions to facilitate implementation of allocation
strategies between different market segments or countries or to take advantage
of market opportunities which may arise from time to time. A Fund may be able to
enhance its overall performance if the return offered by the other party to the
swap transaction exceeds the return swapped by the Fund. However, there can be
no assurance that the return a Fund receives from the counterparty to the swap
transaction will exceed the return it swaps to that party.
While a Fund will only enter into swap transactions with counterparties
it considers creditworthy (and will monitor the creditworthiness of parties with
which it enters into swap transactions), a risk inherent in swap transactions is
that the other party to the transaction may default on its obligations under the
swap agreement. If the other party to the swap transaction defaults on its
obligations, the Fund entering into the agreement would be limited to the
agreement's contractual remedies. There can be no assurance that a Fund will
succeed when pursuing its contractual remedies. To minimize a Fund's exposure in
the event of default, it will usually enter into swap transactions on a net
basis (i.e., the parties to the transaction will net the payments payable to
each other before such payments are made). When a Fund enters into swap
transactions on a net basis, the net amount of the excess, if any, of the Fund's
obligations over its entitlements with respect to each such swap agreement will
be accrued on a daily basis and an amount of liquid assets having an aggregate
market value at least equal to the accrued excess will be segregated by the
Fund's custodian. To the extent a Fund enters into swap transactions other than
on a net basis, the amount segregated will be the full amount of the Fund's
obligations, if any, with respect to each such swap agreement, accrued on a
daily basis. See "Segregated
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<PAGE> 48
Accounts," below.
Swap agreements may be considered illiquid by the SEC staff and subject
to the limitations on illiquid investments.
To the extent that there is an imperfect correlation between the return
a Fund is obligated to swap and the securities or instruments representing such
return, the value of the swap transaction may be adversely affected. No Fund
therefore will enter into a swap transaction unless it owns or has the right to
acquire the securities or instruments representative of the return it is
obligated to swap with the counterparty to the swap transaction. It is not the
intention of any Fund to engage in swap transactions in a speculative manner but
rather primarily to hedge or manage the risks associated with assets held in, or
to facilitate the implementation of portfolio strategies of purchasing and
selling assets for, the Fund.
Segregated Accounts. In connection with when-issued securities, firm
commitment and certain other transactions in which a Fund incurs an obligation
to make payments in the future, a Fund may be required to segregate assets with
its custodian bank in amounts sufficient to settle the transaction. To the
extent required, such segregated assets can consist of liquid assets, including
equity or other securities, or other instruments such as cash, United States
Government securities or other securities as may be permitted by law.
Currency Transactions. The value of a Fund's assets as measured in
United States dollars may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations, and the Fund
may incur costs in connection with conversions between various currencies. To
minimize the impact of such factors on net asset values, the Fund may engage in
foreign currency transactions in connection with their investments in foreign
securities. The Funds will not speculate in foreign currency exchange, and will
enter into foreign currency transactions only to "hedge" the currency risk
associated with investing in foreign securities. Although such transactions tend
to minimize the risk of loss due to a decline in the value of the hedged
currency, they also may limit any potential gain which might result should the
value of such currency increase.
The Funds will conduct their currency exchange transactions either on a
spot (i.e., cash) basis at the rate prevailing in the currency exchange market,
or through forward contracts to purchase or sell foreign currencies. A forward
currency contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are entered into with large commercial banks or other currency
traders who are participants in the interbank market.
By entering into a forward contract for the purchase or sale of foreign
currency involved in underlying security transactions, a Fund is able to protect
itself against possible loss between trade and settlement dates for that
purchase or sale resulting from an adverse change in the relationship between
the U.S. dollar and such foreign currency. This practice is sometimes referred
to as "transaction hedging." In addition, when it appears that a particular
foreign currency may suffer a substantial decline against the U.S. dollar, a
Fund may enter into a forward
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<PAGE> 49
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.
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
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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 at the national level. Uncertainties with regard to balancing
of monetary policy against national fiscal and other political issues and their
extensive ramifications represent important risk considerations for investors in
these countries.
Investment in the Pacific Basin. The economies of the Pacific Basin vary widely
in their stages of economic development. Some (such as Japan, Australia,
Singapore, and Hong Kong) are considered advanced by Western standards; others
(such as Thailand, Indonesia, and Malaysia) are considered "emerging" -- rapidly
shifting from natural resource- and agriculture-based systems to more
technologically advanced systems oriented toward manufacturing and services. The
major reform of China's economy and polity continues to be an important stimulus
to economic growth internally, and, through trade, across the region.
Intra-regional trade has become increasingly important to a number of these
economies. Japan, the second largest economy in the world, is the dominant
economy in the Pacific Basin, with one of the highest per capita incomes in the
world. Its extensive trade relationships also contribute to expectations for
regional and global economic growth. Economic growth has historically been
relatively strong in the region, but recent economic turmoil among the emerging
economies, and unmitigated recessionary impulses in Japan, in the recent past
have raised important questions with regard to prospective longer-term outcomes.
Potential policy miscalculations or other events could pose important risks to
equity investors in any of these economies.
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Investment in Canada. Canada, a country rich in natural resources and a leading
industrial country of the world, is by far the most important trading partner of
the United States. The U.S. and Canada have entered into the U.S.-Canada Free
Trade Agreement which, over a 10-year period from 1989, will remove trade
barriers affecting all important sectors of each country's economy. In addition,
the U.S., Canada, and Mexico have established the North American Free Trade
Agreement ("NAFTA"), which is expected to significantly benefit the economies of
each of the countries through the more rational allocation of resources and
production over the region. Uncertainty regarding the longer-run political
structure of Canada is an added risk to investors, along with weak commodity
prices.
Investment in Latin America. Latin America (including Mexico and Central
America) has a population of approximately 455 million and is rich in natural
resources. Important gains in the manufacturing sector have developed in several
of the major countries in the region. A number of countries in the region have
taken steps to reduce impediments to trade, most notably through the NAFTA
agreement between the U.S., Canada and Mexico and the Mercosur agreement between
Argentina, Brazil, Paraguay and Uruguay, with Chile as an associate member.
Restrictions on international capital flows, intermittent problems with capital
flight, and some potential difficulties in the repayment of external debt,
however, remain important concerns in the region -- exacerbating the risks in
these equity markets. As a result Latin American equity markets have been
extremely volatile. Efforts to restructure these economies through privatization
and fiscal and monetary reform have been met with some success, with gains in
output growth and slowing rates of inflation. These efforts may result in
attractive investment opportunities. However, recent events have shown that
large shifts in sentiment in markets elsewhere on the globe may very quickly
reverberate among these markets, adding greater risk to already volatile
markets. There can be no assurance that attempted reforms will ultimately be
successful or will bring about results investors would regard as favorable.
Other Regions. There are developments in other regions and countries around the
world which could lead to additional investment opportunities. We will monitor
these developments and may invest when appropriate.
Depository Receipts. The equity Funds can invest in American, European
and Global Depository Receipts ("ADRs," "EDRs" and "GDRs"). They are
alternatives to the purchase of the underlying securities in their national
markets and currencies. Although their prices are quoted in U.S. dollars, they
don't eliminate all the risks of foreign investing.
ADRs represent the right to receive securities of foreign issuers
deposited in a domestic bank or a foreign correspondent bank. To the extent that
a Fund acquires ADRs through banks which do not have a contractual relationship
with the foreign issuer of the security underlying the ADR to issue and service
such ADRs, there may be an increased possibility that the Fund would not become
aware of and be able to respond to corporate actions such as stock splits or
rights offerings involving the foreign issuer in a timely manner. In addition,
the lack of information may result in inefficiencies in the valuation of such
instruments. However, by investing in ADRs rather than directly in the stock of
foreign issuers, a Fund will avoid currency risks during the settlement period
for either purchases or sales. In general, there is a large, liquid market in
the U.S. for ADRs quoted on a national securities exchange or the NASD's
national
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<PAGE> 52
market system. The information available for ADRs is subject to the accounting,
auditing and financial reporting standards of the domestic market or exchange on
which they are traded, which standards are more uniform and more exacting than
those to which many foreign issuers may be subject.
EDRs and GDRs are receipts evidencing an arrangement with a non-U.S.
bank similar to that for ADRs and are designed for use in non-U.S. securities
markets. EDRs and GDRs are not necessarily quoted in the same currency as the
underlying security.
Other Investment Techniques and Opportunities. Each Fund may take
certain actions with respect to merger proposals, tender offers, conversion of
equity-related securities and other investment opportunities with the objective
of enhancing the portfolio's overall return, regardless of how these actions may
affect the weight of the particular securities in the Fund's portfolio.
Industry Concentrations. None of the Funds will concentrate more than
25 percent of its total assets in any one industry.
MANAGEMENT OF TIAA-CREF INSTITUTIONAL MUTUAL FUNDS
TRUSTEES AND OFFICERS OF TIAA-CREF INSTITUTIONAL MUTUAL FUNDS
Trustees who are "interested persons" within the meaning of the 1940
Act are indicated by an asterisk (*).
<TABLE>
<CAPTION>
TRUSTEE AGE PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ------- --- -----------------------------------------
<S> <C> <C>
Robert H. Atwell 68 President Emeritus, American Counsel on Education and
447 Bird Key Drive senior consultant for A.T. Kearney, since November
Sarasota, FL 34236 1996. Previously, President, American Counsel on
Education.
Elizabeth E. Bailey 60 John C. Hower Professor of Public Policy and
The Wharton School Management, The Wharton School of the University of
University of Pennsylvania Pennsylvania.
Suite 3100
Steinberg-Dietrich Hall
Philadelphia, PA 19104-6372
John H. Biggs* (3) 62 Chairman, Chief Executive Officer, and President,
TIAA-CREF College Retirement Equities Fund ("CREF") and TIAA,
730 Third Avenue since 1997. Previously, Chairman and Chief Executive
New York, NY 10017-3206 Officer, CREF and TIAA.
</TABLE>
- 14 -
<PAGE> 53
<TABLE>
<CAPTION>
TRUSTEE AGE PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ------- --- -----------------------------------------
<S> <C> <C>
Joyce A. Fecske (1) 52 Vice President Emerita, DePaul University, since
4800 South Karlov Avenue 1994. Formerly, Vice President for Human Resources,
Chicago, IL 60632 DePaul University.
Edes P. Gilbert 67 Consultant, Independent Education Services, since
Independent Education Services 1998. Formerly, Head, The Spence School.
49 East 78th Street
New York, NY 10021
Stuart Tse Kong Ho (3) 63 Chairman and President, Capital Investment of Hawaii,
Capital Investment of Hawaii, Inc. Inc.; Chairman, Gannett Pacific Corporation.
Suite 1700
733 Bishop Street
Honolulu, HI 96813
Nancy L. Jacob (2) 56 President and Managing Principal, Windermere
Windermere Investment Associates Investment Associates, since January 1997.
121 S.W. Morrison Street Previously, Chairman and Chief Executive Officer, CTC
Portland, OR 97204 Consulting, Inc. and Managing Director, Capital Trust
Company.
Marjorie Fine Knowles 59 Professor of Law, Georgia State University College of
College of Law Law.
Georgia State University
University Plaza
Atlanta, GA 30303-3092
Martin L. Leibowitz* (3) 62 Vice Chairman and Chief Investment Officer, CREF and
TIAA-CREF TIAA, since 1995. President, TIAA-CREF Investment
730 Third Avenue Management, Inc. (Investment Management), and
New York, NY 10017-3206 President, Teachers Advisors, Inc. (Advisors).
Executive Vice President, CREF and TIAA from June 1995
to November 1995. Formerly, managing
director-director of research and a member of the
executive committee, Salomon Brothers, Inc.
Jay O. Light (2) 57 Professor of Business Administration and Senior
Harvard Business School Associate Dean for Planning and Development, Harvard
Morgan Hall 489 University Graduate School of Business Administration.
Soldiers Field
Boston, MA 02163
</TABLE>
- 15 -
<PAGE> 54
<TABLE>
<CAPTION>
TRUSTEE AGE PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ------- --- -----------------------------------------
<S> <C> <C>
Bevis Longstreth (2) 65 Of Counsel, Debevoise & Plimpton, since 1998.
Debevoise & Plimpton Formerly, Partner, Debevoise & Plimpton. Adjunct
875 Third Avenue Professor of Law, Columbia University.
New York, NY 10022
Robert M. Lovell, Jr. (2) 68 Founding Partner, First Quadrant L.P. Formerly,
First Quadrant L.P. Chairman and Chief Executive Officer, First Quadrant
100 Campus Drive Corp. (Investment Management Firm).
P.O. Box 939
Florham Park, NJ 07932
Stephen A. Ross (2) 55 Franco Modigliani Professor of Finance and Economics,
Sloan School of Management Sloan School of Management, Massachusetts Institute of
Massachusetts Institute of Technology Technology, since 1998. Co-Chairman, Roll & Ross
77 Massachusetts Avenue Asset Management Corp.
Cambridge, MA 02139
Eugene C. Sit (3) 60 Chairman, Chief Executive and Chief Investment
Sit Investment Associates, Inc. Executive Officer, Sit Investment Associates, Inc. and
4600 Norwest Center Sit/Kim International Investment Associates, Inc.
90 South Seventh Street
Minneapolis, MN 55402
Maceo K. Sloan (2) 49 Chairman, President, and Chief Executive Officer,
NCM Capital Management Group, Inc. Sloan Financial Group, Inc., and NCM Capital
Suite 400 Management Group, Inc.
103 West Main Street
Durham, NC 27701-3638
David K. Storrs (2) 54 President and Chief Executive Officer, Alternative
Alternative Investment Group, LLC Investment Group, L.L.C., since August 1996. Adviser
65 South Gate Lane to the President, The Common Fund, since January
Southport, CT 06490 1996. Formerly, President and Chief Executive
Officer, The Common Fund.
Robert W. Vishny (3) 40 Eric J. Gleacher Professor of Finance, University of
Graduate School of Business Chicago Graduate School of Business. Founding
University of Chicago Partner, LSV Asset Management.
1101 East 58th Street
Chicago, IL 60637
</TABLE>
- -----------------------
(1) Member of the Executive Committee. The Executive Committee is responsible
for day to day oversight of the Funds' operation.
(2) Member of the Finance Committee. The Finance Committee oversees the
investments of TIAA-CREF Institutional Mutual Funds.
- 16 -
<PAGE> 55
(3) Member of the Executive and Finance Committees.
<TABLE>
<CAPTION>
POSITION WITH
OFFICER* AGE REGISTRANT PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- -------- --- -------------- -----------------------------------------
<S> <C> <C> <C>
John J. McCormack 54 President Executive Vice President, TIAA and
CREF, since November 1983, and President,
TIAA-CREF Enterprises, since June 1998.
Scott C. Evans 39 Executive Executive Vice President, TIAA and CREF, Advisors and
Vice President Investment Management, since September 1997.
Previously, Managing Director, TIAA, CREF, Advisors and
Investment Management from March 1997 to September
1997. Previously Second Vice President, TIAA and CREF,
Advisors and Investment Management.
Executive Executive Vice President, TIAA and CREF, since March
Richard L. Gibbs 52 Vice President 1993. Executive Vice President, Advisors, Investment
Management, Teachers Personal Investors Services, Inc.
("TPIS") and TIAA-CREF Individual & Institutional
Services, Inc. ("Services").
E. Laverne Jones 50 Secretary Vice President, and Corporate Secretary, TIAA and CREF,
since August 1998. Previously, Senior Counsel, TIAA
and CREF.
Richard J. Adamski 57 Vice President and Vice President and Treasurer, TIAA and CREF, Investment
Treasurer Management, Advisors, TPIS and Services.
</TABLE>
- -----------------------
* The address for all officers of TIAA-CREF Institutional Mutual Funds is
730 Third Avenue, New York, NY 10017-3206.
TRUSTEE AND OFFICER COMPENSATION
The following table shows the estimated compensation to be received by
each non-officer Trustee from the Funds and the TIAA-CREF fund complex for
TIAA-CREF Institutional Mutual Funds' partial fiscal year ending September 30,
1999. The Funds' officers receive no compensation from any fund in the TIAA-CREF
fund complex. The TIAA-CREF fund complex consists of: College Retirement
Equities Fund, TIAA Separate Account VA-1, TIAA-CREF Life Funds, TIAA-CREF
Mutual Funds and TIAA-CREF Institutional Mutual Funds, each a registered
investment company.
TIAA-CREF Institutional Mutual Funds has long-term performance deferred
compensation plan for non-employee Trustees. Under this unfunded plan, annual
contributions
- 17 -
<PAGE> 56
equal to half the amount of the basic annual Trustee stipend are allocated to
notional CREF and TIAA accounts, in predetermined percentages. Benefits will be
paid in a lump sum after the Trustee leaves the Board. Pursuant to a separate
deferred compensation plan, non-employee Trustees also have the option to defer
payment of their basic stipend and allocate it to notional TIAA and CREF
accounts chosen by the individual Trustee. Benefits under that plan are also
paid in a lump sum after the Trustee leaves the Board.
<TABLE>
<CAPTION>
COMPENSATION
OF TRUSTEES(1)
LONG TERM
PERFORMANCE
DEFERRED
AGGREGATE COMPENSATION TOTAL COMPENSATION
COMPENSATION CONTRIBUTION FROM TIAA-CREF
NAME FROM THE FUND AS PART OF EXPENSES FUND COMPLEX
- ---- ------------- ---------------------- ------------------
<S> <C> <C> <C>
Robert H. Atwell $ 1,527 $6 $16,500
Elizabeth E. Bailey $ 1,522 $6 $13,875
Joyce A. Fecske $ 1,522 $6 $13,875
Edes P. Gilbert $ 1,527 $6 $16,500
Stuart Tse Kong Ho $ 1,519 $6 $12,375
Nancy L. Jacob $ 1,524 $6 $15,000
Marjorie Fine Knowles $ 1,522 $6 $13,875
Jay O. Light $ 1,519 $6 $12,375
Bevis Longstreth $ 1,522 $6 $13,875
Robert M. Lovell, Jr. $ 1,522 $6 $13,875
Stephen A. Ross $ 1,525 $6 $15,375
Eugene C. Sit $ 1,519 $6 $12,375
Maceo K. Sloan $ 1,522 $6 $13,875
David K. Storrs $ 1,522 $6 $13,875
Robert W. Vishny $ 1,525 $6 $15,375
</TABLE>
- -----------------------
(1) Estimated payments for the partial fiscal year ending September 30, 1999.
PRINCIPAL HOLDERS OF SECURITIES
TIAA, as the contributor of the initial capital for each of the Funds,
owned 100% of the shares of each Fund as of June 30, 1999.
INVESTMENT ADVISORY AND OTHER SERVICES
As explained in the Prospectus, investment advisory and related
services for each of the Funds are provided by personnel of Teachers Advisors,
Inc. ("Advisors"). Advisors manages the investment and reinvestment of the
assets of each Fund, subject to the direction and control of the Finance
Committee of the Board of Trustees. As the prospectus describes, Advisors has
agreed to waive a portion of its fee for managing each Fund.
- 18 -
<PAGE> 57
Employees of Advisors and members of their households are limited in
trading for their own accounts. Certain transactions must be reported and
approved, and duplicates of all confirmation statements and other account
reports must be sent to a special compliance unit.
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.
State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, MA 02209 acts as custodian for TIAA-CREF Institutional Mutual
Funds.
Ernst & Young LLP, 787 Seventh Avenue, New York, NY 10019, serves as
independent auditors of TIAA-CREF Institutional Mutual Funds.
In addition to serving as custodian of the Funds' portfolio securities,
State Street provides the Funds with limited administrative services, including
preparation of each Fund's federal, state and local tax returns, preparation of
each Fund's financial information, and certain other administrative services.
State Street also acts as the transfer and dividend paying agent for the Funds.
Teachers Insurance and Annuity Association of America ("TIAA") holds
all of the shares of TIAA-CREF Enterprises, Inc., which in turn holds all the
shares of Advisors and of Teachers Personal Investors Services, Inc., the
principal underwriter for TIAA-CREF Institutional Mutual Funds.
ABOUT TIAA-CREF INSTITUTIONAL MUTUAL FUNDS AND THE SHARES
TIAA-CREF Institutional Mutual Funds, was organized as a Delaware
business trust on April 15, 1999. A copy of TIAA-CREF Institutional Mutual
Funds' Certificate of Trust, dated April 15, 1999, as amended, is on file with
the Office of the Secretary of State of the State of Delaware. As a Delaware
business trust, TIAA-CREF Institutional Mutual Funds' operations are governed by
its Declaration of Trust dated April 15, 1999, as amended (the "Declaration").
Upon the initial purchase of shares of beneficial interest in TIAA-CREF
Institutional Mutual Funds, each shareholder agrees to be bound by the
Declaration, as amended from time to time.
INDEMNIFICATION OF SHAREHOLDERS
Generally, Delaware business trust shareholders are not personally
liable for obligations of the Delaware business trust under Delaware law. The
Delaware Business Trust Act ("DBTA") provides that a shareholder of a Delaware
business trust shall be entitled to the same limitation of liability extended to
shareholders of private for-profit corporations. TIAA-CREF Institutional Mutual
Funds' Declaration expressly provides that TIAA-CREF Institutional Mutual Funds
has been organized under the DBTA and that the Declaration is to be governed by
and interpreted in accordance with Delaware law. It is nevertheless possible
that a Delaware business trust, such as TIAA-CREF Institutional Mutual Funds,
might become a party to an
- 19 -
<PAGE> 58
action in another state whose courts refuse to apply Delaware law, in which case
TIAA-CREF Institutional Mutual Funds' shareholders could possibly be subject to
personal liability.
To guard against this risk, the Declaration (i) contains an express
disclaimer of shareholder liability for acts or obligations of TIAA-CREF
Institutional Mutual Funds and provides that notice of such disclaimer may be
given in each agreement, obligation and instrument entered into or executed by
TIAA-CREF Institutional Mutual Funds or its Trustees, (ii) provides for the
indemnification out of Trust property of any shareholders held personally liable
for any obligations of TIAA-CREF Institutional Mutual Funds or any series of
TIAA-CREF Institutional Mutual Funds, and (iii) provides that TIAA-CREF
Institutional Mutual Funds shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of TIAA-CREF
Institutional Mutual Funds and satisfy any judgment thereon. Thus, the risk of a
Trust shareholder incurring financial loss beyond his or her investment because
of shareholder liability is limited to circumstances in which all of the
following factors are present: (1) a court refuses to apply Delaware law; (2)
the liability arose under tort law or, if not, no contractual limitation of
liability was in effect; and (3) TIAA-CREF Institutional Mutual Funds itself
would be unable to meet its obligations. In the light of DBTA, the nature of
TIAA-CREF Institutional Mutual Funds' business, and the nature of its assets,
the risk of personal liability to a TIAA-CREF Institutional Mutual Funds
shareholder is remote.
INDEMNIFICATION OF TRUSTEES
The Declaration further provides that TIAA-CREF Institutional Mutual
Funds shall indemnify each of its Trustees and officers against liabilities and
expenses reasonably incurred by them, in connection with, or arising out of, any
action, suit or proceeding, threatened against or otherwise involving such
Trustee or officer, directly or indirectly, by reason of being or having been a
Trustee or officer of TIAA-CREF Institutional Mutual Funds. The Declaration does
not authorize TIAA-CREF Institutional Mutual Funds to indemnify any Trustee or
officer against any liability to which he or she would otherwise be subject by
reason of or for willful misfeasance, bad faith, gross negligence or reckless
disregard of such person's duties.
LIMITATION OF FUND LIABILITY
All persons dealing with a Fund must look solely to the property of
that particular Fund for the enforcement of any claims against that Fund, as
neither the Trustees, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of a Fund or TIAA-CREF
Institutional Mutual Funds. No Fund is liable for the obligations of any other
Fund. Since the Funds use a combined Prospectus, however, it is possible that
one Fund might become liable for a misstatement or omission in the Prospectus
regarding another Fund with which its disclosure is combined. The Trustees have
considered this factor in approving the use of the combined Prospectus.
SHAREHOLDER MEETINGS AND VOTING RIGHTS
Under the Declaration, TIAA-CREF Institutional Mutual Funds is not
required to hold annual meetings to elect Trustees or for other purposes. It is
not anticipated that TIAA-CREF
- 20 -
<PAGE> 59
Institutional Mutual Funds will hold shareholders' meetings unless required by
law or the Declaration. TIAA-CREF Institutional Mutual Funds will be required to
hold a meeting to elect Trustees to fill any existing vacancies on the Board if,
at any time, fewer than a majority of the Trustees holding office were elected
by the shareholders of TIAA-CREF Institutional Mutual Funds.
Shares of TIAA-CREF Institutional Mutual Funds do not entitle their
holders to cumulative voting rights, so that the holders of more than 50 percent
of the net asset value represented by the outstanding shares of TIAA-CREF
Institutional Mutual Funds may elect all of the Trustees, in which case the
holders of the remaining shares would not be able to elect any Trustees.
Shareholders are entitled to one vote for each dollar of net asset value (number
of shares held times the net asset value of the applicable Fund).
ADDITIONAL FUNDS OR CLASSES
Pursuant to the Declaration, the Trustees may establish additional
Funds (technically "series" of shares) or "classes" of shares in TIAA-CREF
Institutional Mutual Funds without shareholder approval. The establishment of
additional Funds or classes would not affect the interests of current
shareholders in the existing eight Funds. As of the date of this SAI, the
Trustees do not have any plan to establish another Fund or class.
DIVIDENDS AND DISTRIBUTIONS
Each share of a Fund is entitled to such dividends and distributions
out of the income earned on the assets belonging to that Fund as are declared in
the discretion of the Trustees. In the event of the liquidation or dissolution
of TIAA-CREF Institutional Mutual Funds as a whole or any individual Fund,
shares of the affected Fund are entitled to receive their proportionate share of
the assets which are attributable to such shares and which are available for
distribution as the Trustees in their sole discretion may determine.
Shareholders are not entitled to any preemptive, conversion, or subscription
rights. All shares, when issued, will be fully paid and non-assessable.
PRICING OF SHARES
The assets of the Funds are valued as of the close of each valuation
day in the following manner:
INVESTMENTS FOR WHICH MARKET QUOTATIONS ARE READILY AVAILABLE
Investments for which market quotations are readily available are
valued at the market value of such investments, determined as follows:
Equity securities listed or traded on a national market or exchange are
valued based on their sale price on such market or exchange at the close of
business (usually 4:00 p.m. Eastern Time) on the date of valuation, or at the
mean of the closing bid and asked prices if no sale is
- 21 -
<PAGE> 60
reported. Such an equity security may also be valued at fair value as determined
in good faith by the Finance Committee of the Board of Trustees if events
materially affecting its value occur between the time its price is determined
and the time a Fund's net asset value is calculated.
FOREIGN INVESTMENTS
Investments traded on a foreign exchange or in foreign markets are
valued at the closing values of such securities as of the date of valuation
under the generally accepted valuation method in the country where traded,
converted to U.S. dollars at the prevailing rates of exchange on the date of
valuation. Since the trading of investments on a foreign exchange or in foreign
markets is normally completed before the end of a valuation day, such valuation
does not take place contemporaneously with the determination of the valuation of
certain other investments held by the Fund. If events materially affecting the
value of foreign investments occur between the time their share price is
determined and the time when a Fund's net asset value is calculated, such
investments will be valued at fair value as determined in good faith by the
Finance Committee of the Board and in accordance with the responsibilities of
the Board as a whole.
DEBT SECURITIES
Debt securities (including money market instruments) for which market
quotations are readily available are valued based on the most recent bid price
or the equivalent quoted yield for such securities (or those of comparable
maturity, quality and type). Values for money market instruments (other than
those in the Institutional Money Market Fund) with maturities of one year or
less will be obtained from either one or more of the major market makers or
derived from a pricing matrix that has various types of money market instruments
along one axis and maturities, ranging from overnight to one year, along the
other. This information is derived from one or more financial information
services. For securities with maturities longer than one year, these values will
be derived utilizing an independent pricing service when such prices are
believed to reflect the fair value of these securities. We use an independent
pricing service to value securities with maturities longer than one year, except
when we believe prices don't accurately reflect the security's fair value.
SPECIAL VALUATION PROCEDURES FOR THE INSTITUTIONAL MONEY MARKET FUND
For the Institutional Money Market Fund, all of its assets are valued
on the basis of amortized cost in an effort to maintain a constant net asset
value per share of $1.00. The Board has determined that such valuation is in the
best interests of the Fund and its shareholders. Under the amortized cost method
of valuation, securities are valued at cost on the date of their acquisition,
and thereafter a constant accretion of any discount or amortization of any
premium to maturity is assumed. While this method provides certainty in
valuation, it may result in periods in which value as determined by amortized
cost is higher or lower than the price the Fund would receive if it sold the
security. During such periods, the quoted yield to investors may differ somewhat
from that obtained by a similar fund which uses available market quotations to
value all of its securities.
The Board has established procedures reasonably designed, taking into
account current
- 22 -
<PAGE> 61
market conditions and the Institutional Money Market Fund's investment
objective, to stabilize the net asset value per share for purposes of sales and
redemptions at $1.00. These procedures include review by the Board, at such
intervals as it deems appropriate, to determine the extent, if any, to which the
net asset value per share calculated by using available market quotations
deviates by more than 1/2 of one percent from $1.00 per share. In the event such
deviation should exceed 1/2 of one percent, the Board will promptly consider
initiating corrective action. If the Board believes that the extent of any
deviation from a $1.00 amortized cost price per share may result in material
dilution or other unfair results to new or existing shareholders, it will take
such steps as it considers appropriate to eliminate or reduce these consequences
to the extent reasonably practicable. Such steps may include: (1) selling
securities prior to maturity; (2) shortening the average maturity of the Fund;
(3) withholding or reducing dividends; or (4) utilizing a net asset value per
share determined from available market quotations. Even if these steps were
taken, the Institutional Money Market Fund's net asset value might still
decline.
OPTIONS AND FUTURES
Portfolio investments underlying options are valued as described above.
Stock options written by a Fund are valued at the last quoted sale price, or at
the closing bid price if no sale is reported for the day of valuation as
determined on the principal exchange on which the option is traded. The value of
a Fund's net assets will be increased or decreased by the difference between the
premiums received on written options and the costs of liquidating such positions
measured by the closing price of the options on the date of valuation.
For example, when a Fund writes a call option, the amount of the
premium is included in the Fund's assets and an equal amount is included in its
liabilities. The liability thereafter is adjusted to the current market value of
the call. Thus, if the current market value of the call exceeds the premium
received, the excess would be unrealized depreciation; conversely, if the
premium exceeds the current market value, such excess would be unrealized
appreciation. If a call expires or if the Fund enters into a closing purchase
transaction, it realizes a gain (or a loss if the cost of the transaction
exceeds the premium received when the call was written) without regard to any
unrealized appreciation or depreciation in the underlying securities, and the
liability related to such call is extinguished. If a call is exercised, the Fund
realizes a gain or loss from the sale of the underlying securities and the
proceeds of the sale increased by the premium originally received.
A premium paid on the purchase of a put will be deducted from a Fund's
assets and an equal amount will be included as an investment and subsequently
adjusted to the current market value of the put. For example, if the current
market value of the put exceeds the premium paid, the excess would be unrealized
appreciation; conversely, if the premium exceeds the current market value, such
excess would be unrealized depreciation.
Stock and bond index futures, and options thereon, which are traded on
commodities exchanges, are valued at their last sale prices as of the close of
such commodities exchanges.
- 23 -
<PAGE> 62
INVESTMENTS FOR WHICH MARKET QUOTATIONS ARE NOT READILY AVAILABLE
Portfolio securities or other assets for which market quotations are
not readily available will be valued at fair value, as determined in good faith
under the direction of the Trustees.
TAX STATUS
Although TIAA-CREF Institutional Mutual Funds is organized as a
Delaware business trust, neither TIAA-CREF Institutional Mutual Funds nor its
individual Funds will be subject to any corporate excise or franchise tax in the
State of Delaware, nor will they be liable for Delaware income taxes provided
that each Fund qualifies as a regulated investment company for federal income
tax purposes and satisfies certain income source requirements of Delaware law.
If each Fund so qualifies and distributes all of its income and capital gains,
it will also be exempt from applicable New York State taxes and the New York
City general corporation tax, except for small minimum taxes.
Each Fund intends to qualify as a "regulated investment company"
("RIC") under Subchapter M of the Code. In general, to qualify as a RIC: (a) at
least 90 percent of the gross income of a Fund for the taxable year must be
derived from dividends, interest, payments with respect to loans of securities,
gains from the sale or other disposition of securities or foreign currency, or
other income derived with respect to its business of investing in securities;
(b) a Fund must distribute to its shareholders 90 percent of its ordinary income
and net short-term capital gains (undistributed net income may be subject to tax
at the Fund level); and (c) a Fund must diversify its assets so that, at the
close of each quarter of its taxable year, (i) at least 50 percent of the fair
market value of its total (gross) assets is comprised of cash, cash items, U.S.
Government securities, securities of other regulated investment companies and
other securities limited in respect of any one issuer to no more than 5 percent
of the fair market value of the Fund's total assets and 10 percent of the
outstanding voting securities of such issuer and (ii) no more than 25 percent of
the fair market value of its total assets is invested in the securities of any
one issuer (other than U.S. Government securities and securities of other
regulated investment companies) or of two or more issuers controlled by the Fund
and engaged in the same, similar, or related trades or businesses.
If, in any taxable year, a Fund should not qualify as a RIC under the
Code: (1) that Fund would be taxed at normal corporate rates on the entire
amount of its taxable income without deduction for dividends or other
distributions to its shareholders, and (2) that Fund's distributions to the
extent made out of that Fund's current or accumulated earnings and profits would
be taxable to its shareholders (other than tax-exempt shareholders and
shareholders in tax deferred accounts) as ordinary dividends (regardless of
whether they would otherwise have been considered capital gains dividends), and
may qualify for the deduction for dividends received by corporations.
Each Fund must declare and distribute dividends equal to at least 98
percent of its ordinary income (as of the twelve months ended December 31) and
at least 98 percent of its capital gain net income (as of the twelve months
ended October 31), in order to avoid a federal
- 24 -
<PAGE> 63
excise tax. Each Fund intends to make the required distributions, but they
cannot guarantee that they will do so. Dividends attributable to a Fund's
ordinary income and capital gains distributions are taxable as such to
shareholders in the year in which they are received except dividends declared in
October, November or December and paid in January, which dividends are treated
as paid on the prior December 31.
A distribution of net capital gains reflects a Fund's excess of net
long-term capital gains over its net short-term capital losses. Each Fund will
designate income dividends and must designate distributions of net capital gains
and must notify shareholders of these designations within sixty days after the
close of the Fund's taxable year.
Foreign currency gains and losses are generally taxable as ordinary
income. If the net effect of these transactions is a gain, the dividend paid by
the Fund will be increased; if the result is a loss, the income dividend paid by
the Fund will be decreased.
At the time of purchase, each Fund's net asset value may reflect
undistributed income or net capital gains. A subsequent distribution to
shareholders of such amounts, although constituting a return of their
investment, would be taxable either as dividends or capital gain distributions.
For federal income tax purposes, each Fund is permitted to carry forward its net
realized capital losses, if any, for eight years, and realize net capital gains
up to the amount of such losses without being required to pay taxes on, or
distribute such gains. If a shareholder held shares for six months or less and
during that period received a distribution taxable to such shareholder as a long
term capital gain, any loss realized on the sale of such shares during the six
month period would be a long term loss to the extent of such distribution.
Income received by any Fund from sources within various foreign
countries may be subject to foreign income taxes withheld at the source. Under
the Code, if more than 50 percent of the value of a Fund's total assets at the
close of its taxable year consists of securities issued by foreign corporations,
the Fund (e.g., the Institutional International Equity Fund) may file an
election with the Internal Revenue Service to "pass through" to the Fund's
shareholders the amount of any foreign income taxes paid by the Fund. Pursuant
to this election, shareholders will be required to: (i) include in gross income,
even though not actually received, their respective pro rata share of foreign
taxes paid by the Fund; (ii) treat their pro rata share of foreign taxes as paid
by them; and (iii) either deduct their pro rata share of foreign taxes in
computing their taxable income, or use it as a foreign tax credit against U.S.
income taxes (but not both). No deduction for foreign taxes may be claimed by a
shareholder who does not itemize deductions.
Each shareholder will be notified within 60 days after the close of
each taxable year of a Fund, if that Fund will "pass through" qualifying foreign
taxes paid for that year, and, if so, the amount of each shareholder's pro rata
share (by country) of (i) the foreign taxes paid, and (ii) the Fund's gross
income from foreign sources. Of course, shareholders who are not liable for
federal income taxes, such as retirement plans qualified under Section 401 of
the Code, will not be able to utilize any such "pass through" of foreign tax
credits.
Each Fund is required by federal law to withhold 31 percent of
reportable payments
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(which may include income dividends, capital gains distributions, and share
redemption proceeds) paid to shareholders who have not complied with IRS
regulations. In order to avoid this back-up withholding requirement, a
shareholder must certify to the Fund on the application form or on a separate
Internal Revenue Service W-9 Form, that the shareholder's Social Security Number
or Taxpayer Identification Number is correct and that the shareholder is not
currently subject to back-up withholding or is exempt from back-up withholding.
The foregoing discussion does not address the special tax rules
applicable to certain classes of investors. For example, each shareholder who is
not a U.S. person should consider the U.S. and foreign tax consequences of
ownership of shares of the Funds, including the possibility that such a
shareholder may be subject to a U.S. withholding tax at a rate of 30 percent (or
at a lower rate under an applicable income tax treaty) on Fund distributions
treated as ordinary dividends.
This discussion of the tax treatment of the Funds and their
distributions is based on the federal, Delaware and New York tax laws in effect
as of the date of this SAI. Shareholders should consult their tax advisors to
determine the tax treatment of an investment by him or her in any Fund,
including state and local taxes.
BROKERAGE ALLOCATION
Advisors is responsible for decisions to buy and sell securities for
the Funds as well as for selecting brokers and, where applicable negotiating the
amount of the commission rate paid. It is the intention of Advisors to place
brokerage orders with the objective of obtaining the best execution, which
includes such factors as best price, research and available data. When
purchasing or selling securities traded on the over-the-counter market, Advisors
generally will execute the transactions with a broker engaged in making a market
for such securities. When Advisors deems the purchase or sale of a security to
be in the best interests of a Fund, its personnel may, consistent with their
fiduciary obligations, decide either to buy or to sell a particular security for
the Fund at the same time as for other funds it may be managing, or that may be
managed by its affiliate, TIAA-CREF Investment Management, Inc. ("Investment
Management"), another investment adviser subsidiary of TIAA. In that event,
allocation of the securities purchased or sold, as well as the expenses incurred
in the transaction, will be made in an equitable manner.
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
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lower commissions may be available from brokers not providing such services.
Advisors follows guidelines established by the Board for the placing of orders
with the brokers providing such services.
Research or service obtained for one Fund may be used by Advisors in
managing the other Funds. In such circumstances, the expenses incurred will be
allocated equitably consistent with Advisors' fiduciary duty to the other Funds.
Research or services obtained for TIAA-CREF Institutional Mutual Funds
may be used by personnel of Advisors in managing other investment company
accounts, or by Investment Management for the CREF accounts. In such
circumstances, the expenses incurred will be allocated in an equitable manner
consistent with the fiduciary obligations of personnel of Advisors to TIAA-CREF
Institutional Mutual Funds.
UNDERWRITERS
Teachers Personal Investors Services, Inc. ("TPIS") may be considered
the "principal underwriter" for TIAA-CREF Institutional Mutual Funds. Shares of
TIAA-CREF Institutional Mutual Funds are offered on a continuous basis with no
sales load. Pursuant to a Distribution Agreement with TIAA-CREF Institutional
Mutual Funds, TPIS has the right to distribute shares of TIAA-CREF Institutional
Mutual Funds for the two-year period beginning June 1, 1999, and thereafter from
year to year subject to approval by the Funds' Board of Trustees. TPIS may enter
into Selling Agreements with one or more broker-dealers, which may or may not be
affiliated with TPIS, to provide distribution-related services to TIAA-CREF
Institutional Mutual Funds.
CALCULATION OF PERFORMANCE DATA
We may quote a Fund's performance in various ways. All performance
information in advertising is historical and is not intended to indicate future
returns. A Fund's share price, yield, and total return fluctuate in response to
market conditions and other factors, and the value of Fund shares when redeemed
may be more or less than their original cost.
TOTAL RETURN CALCULATIONS
Total returns quoted in advertising reflect all aspects of a Fund's
returns, including the effect of reinvesting dividends and capital gain
distributions, and any change in the Fund's net asset value ("NAV") over a
stated period. Average annual returns are calculated by determining the growth
or decline in value of a hypothetical historical investment in a Fund over a
stated period, and then calculating the annually compounded percentage rate that
would have produced the same result if the rate of growth or decline in value
had been constant over the period according to the following formula:
n
P (1 + T) = ERV
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where: P = the hypothetical initial payment
T = average annual total return
n = number of years in the period
ERV = ending redeemable value of the
hypothetical payment made at the beginning
of the one-, five-, or 10-year period at the
end of the one-, five-, or 10-year period
(or fractional portion thereof).
For example, a cumulative return of 100 percent over ten years would produce an
average annual return of 7.18 percent, which is the steady annual rate that
would equal 100 percent growth on a compounded basis in ten years. While average
annual returns are a convenient means of comparing investment alternatives,
investors should realize that a Fund's performance is not constant over time,
but changes from year to year, and that average annual returns represent
averaged figures as opposed to the actual year-to-year performance of the Fund.
In addition to average annual returns, we may quote a Fund's unaveraged
or cumulative total returns reflecting the actual change in value of an
investment over a stated period. Average annual and cumulative total returns may
be quoted as a percentage or as a dollar amount, and may be calculated for a
single investment, a series of investments, or a series of redemptions, over any
time period. Total returns may be broken down into their components of income
and capital (including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions to total
return. Total returns may be quoted on a before or after tax basis. Total
returns, yields, and other performance information may be quoted numerically or
in a table, graph, or similar illustration.
YIELD CALCULATIONS
All Funds other than the Institutional Money Market Fund. Yields are
computed by dividing the Fund's net investment income for a given 30-day or
one-month period, by the average number of Fund shares, dividing this figure by
the Fund's NAV at the end of the period, and annualizing the result (assuming
compounding of income) in order to arrive at an annual percentage rate. Income
is calculated for purposes of yield quotations in accordance with standardized
methods applicable to all stock and bond funds. In general, interest income is
reduced with respect to bonds trading at a premium over their par value by
subtracting a portion of the premium from income on a daily basis, and is
increased with respect to bonds trading at a discount by adding a portion of the
discount to daily income. For a Fund's investments denominated in foreign
currencies, income and expenses are calculated first in their respective
currencies, and are then converted to U.S. dollars, either when they are
actually converted or at the end of the 30-day or one-month period, whichever is
earlier. Income is adjusted to reflect gains and losses from principal
repayments received by the Fund with respect to mortgage-related securities and
other asset-backed securities. Other capital gains and losses generally are
excluded from the calculation as are gains and losses currently from exchange
rate fluctuations.
Income calculated for the purposes of calculating a Fund's yield
differs from income as determined for other accounting purposes. Because of the
different accounting methods used, and because of the compounding of income
assumed in yield calculations, a Fund's yield may
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not equal its distribution rate, the income paid to your account, or the income
reported in a Fund's financial statements.
Yield information may be useful in reviewing a Fund's performance and
in providing a basis for comparison with other investment alternatives. However,
a Fund's yield fluctuates, unlike investments that pay a fixed interest rate
over a stated period of time. When comparing investment alternatives, investors
should also note the quality and maturity of the portfolio securities of
respective investment companies they have chosen to consider. Investors should
also recognize that in periods of declining interest rates a Fund's yield will
tend to be somewhat higher than prevailing market rates, and in periods of
rising interest rates a Fund's yield will tend to be somewhat lower. Also, when
interest rates are falling, the inflow of net new money to a Fund from the
continuous sale of its shares will likely be invested in instruments producing
lower yields than the balance of the Fund's holdings, thereby reducing the
Fund's current yield. In periods of rising interest rates, the opposite can be
expected to occur.
The Institutional Money Market Fund. Yield quotations for the
Institutional Money Market Fund, including yield quotations based upon the
seven-day period ended on the date of calculation, may also be made available.
These yield quotations are based on a hypothetical pre-existing account with a
balance of one share. In arriving at any such yield quotations, the net change
during the period in the value of that hypothetical account is first determined.
Such net change includes net investment income attributable to portfolio
securities but excludes realized gains and losses from the sale of securities
and unrealized appreciation and depreciation and income other than investment
income (which are included in the calculation of Net Asset Value). For this
purpose, net investment income includes accrued interest on portfolio
securities, plus or minus amortized premiums or purchase discount (including
original issue discount), less all accrued expenses. Such net change is then
divided by the value of that hypothetical account at the beginning of the period
to obtain the base period return, and then the base period return is multiplied
by 365/7 to annualize the current yield figure which is carried to at least the
nearest hundredth of one percent.
The effective yield of the Institutional Money Market Fund for the same
seven-day period may also be disclosed. The effective yield is obtained by
adjusting the current yield to give effect to the compounding nature of the
Fund's investments, and is calculated by the use of the following formula:
365/7
Effective Yield = (Base Period Return + 1) - 1
The Institutional Money Market Fund's yield fluctuates, unlike many
bank deposits or other investments which pay a fixed yield for a stated period
of time. The annualization of one period's income is not necessarily indicative
of future actual yields. Actual yields will depend on such variables as
portfolio quality, average portfolio maturity, the type of instruments held in
the portfolio, changes in interest rates on money market instruments, portfolio
expenses, and other factors.
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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., (13) the Morgan Stanley Capital International ("MSCI") global
market indices, including the EAFE(R) (Europe, Australasia, Far East) Index, the
EAFE+Canada Index and the International Perspective Index, (14) Lehman Brothers
Aggregate Bond Index, and (15) IBC Money Fund Report Average. We may also
discuss ratings or rankings received from these entities, accompanied in some
cases by an explanation of those ratings or rankings, when applicable. In
addition, advertisements may discuss the performance of the indices listed
above.
The performance of each of the Funds also may be compared to other
indices or averages that measure performance of a pertinent group of securities.
Shareholders should keep in mind that the composition of the investments in the
reported averages will not be identical to that of the Fund and that certain
formula calculations (e.g., yield) may differ from index to index. In addition,
there can be no assurance that any of the Funds will continue its performance as
compared to such indices.
We may also advertise ratings or rankings the Funds receive from
various rating services and organizations, including but not limited to any
organization listed above.
ILLUSTRATING COMPOUNDING
We may illustrate in advertisements, sales literature and reports to
shareholders the effects of compounding of earnings on an investment in a Fund.
We may do this using a hypothetical investment earning a specified rate of
return. To illustrate the effects of compounding, we would show how the total
return from an investment of the same dollar amount, earning the same or a
different rate of return, varies depending on when the investment was made.
NET ASSET VALUE
Charts and graphs using a Fund's NAVs, adjusted NAVs, and benchmark
indices may be used to exhibit performance. An adjusted NAV includes any
distributions paid by the Fund (i.e., assuming reinvestment) and reflects all
elements of its return. Unless otherwise indicated, a Fund's adjusted NAVs are
not adjusted for sales charges, if any. Currently there are no sales charges.
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<PAGE> 69
MOVING AVERAGES
We may illustrate a Fund's performance using moving averages. A
long-term moving average is the average of each week's adjusted closing NAV for
a specified period. A short-term moving average is the average of each day's
adjusted closing NAV for a specified period. "Moving Average Activity
Indicators" combine adjusted closing NAVs from the last business day of each
week with moving averages for a specified period to produce indicators showing
when an NAV has crossed, stayed above, or stayed below its moving average.
VOTING RIGHTS
We don't plan to hold annual shareholder meetings. However, we may hold
special meetings to elect trustees, change fundamental policies, approve a
management agreement, or for other purposes. We will mail proxy materials to
shareholders for these meetings, and we encourage shareholders who can't attend
to vote by proxy. The number of votes you have on any matter submitted to
shareholders depends on the dollar value of your investment in the Funds.
LEGAL MATTERS
All matters of applicable state law pertaining to the Funds have been
passed upon by Charles H. Stamm, Executive Vice President and General Counsel of
TIAA and CREF. Legal matters relating to the federal securities laws have been
passed upon by Sutherland Asbill & Brennan LLP of Washington, D.C.
EXPERTS
The financial statements in this Statement of Additional Information
have been audited by Ernst & Young LLP, independent auditors, as stated in their
report appearing herein and have been so included in reliance upon the report of
such firm given upon its authority as experts in accounting and auditing.
ADDITIONAL CONSIDERATIONS
TIAA-CREF Institutional Mutual Funds is part of the TIAA-CREF family of
companies. TIAA, founded in 1918, is a non-profit stock life insurance company.
Its companion organization, CREF, founded in 1952, is a non-profit corporation
registered with the Securities and Exchange Commission as an investment company.
Together, through the issuance of fixed and variable annuity contracts, TIAA and
CREF form the principal retirement system for the nation's education and
research communities and the largest retirement system in the United States
based on assets under management.
Investors should also consider TIAA-CREF Institutional Mutual Funds'
expense charges
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<PAGE> 70
as compared to the expenses of other mutual funds. TIAA-CREF Institutional
Mutual Funds' expense charges are currently among the lowest in the industry.
When deciding how to invest in mutual funds, it's important for
investors to determine their investment goals so they can choose the mutual
fund(s) whose objective closely matches it. They should also determine their
time horizon (i.e., the period of time they plan to keep money invested in the
fund). Time horizon affects how much risk an investor may be willing to take.
Risk tolerance in turn affects asset allocation decisions. For example, an
aggressive investor who is willing to accept a high level of risk in return for
potentially greater returns over the long term, probably would invest more
heavily in equity funds. To preserve the current value of an investment and
avoid losses of principal, an investor might invest more heavily in non-equity
funds.
FINANCIAL STATEMENTS
Financial statements for each Fund appear on the following pages.
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PART C: OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Declaration of Trust, dated as of April 15, 1999 1/
(b) Registrant has adopted no bylaws.
(c) The relevant portions of Registrant's certificate of trust and
declaration of trust are incorporated herein by reference to Exhibits
(a)(1) and (2) above.
(d) Investment Management Agreement by and between Registrant and Teachers
Advisors, Inc. ("Advisors"), dated as of June 1, 1999 2/
(e) (1) Distribution Agreement by and between Registrant and Teachers
Personal Investors Services, Inc. ("TPIS"), dated as of June 1,
1999 2/
(2) Selling Agreement by and between TPIS and TIAA-CREF Individual
& Institutional Services, Inc., dated as of June 1, 1999 *
(f) Trustees' Long-Term Performance Deferred Compensation Plan, dated as of
__________ ___, 1999 **
(g) Custodian Agreement by and between Registrant and State Street Bank and
Trust Company ("State Street"), dated as of June 11, 1999
(including schedule of remuneration) *
(h) (1) Administration Agreement by and between Registrant and State
Street, dated as of __________ ___, 1999 *
(2) Transfer Agency Agreement by and between Registrant and State
Street, dated as of __________ ___, 1999 *
(i) Opinion and Consent of Charles H. Stamm, Esq. **
(j) (1) Consent of Sutherland Asbill & Brennan LLP **
(2) Consent of Ernst & Young LLP **
(k) No required financial statements have been omitted from item 22 in Part
B of this registration statement.
(l) Seed Money Agreement by and between Registrant and Teachers Insurance
and Annuity Association of America, dated as of June 1, 1999 *
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(m) No plan has been entered into by Registrant under Rule 12b-1.
(n) Financial Data Schedules **
(o) No plan has been entered into by Registrant under Rule 18f-3.
- ---------------------------
1/ Incorporated herein by reference to the initial registration statement on
Form N-1A (File No. 333-76651) as filed with the Commission on April 20,
1999.
2/ Incorporated herein by reference to Pre-Effective Amendment No. 1 to the
registration statement on Form N-1A (File No. 333-76651) as filed with the
Commission on June 11, 1999.
* Filed herewith.
** To be filed by amendment.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
As the ultimate parent (holding indirectly 100% of the voting
securities of Advisors, investment adviser of Registrant, 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 (pursuant to the Seed Money Agreement), TIAA controls
Registrant. Therefore, persons directly or indirectly controlled by TIAA may be
deemed to be under common control with Registrant.
AIC Properties, Inc. MN Properties, Inc.
BT Properties, Inc. M.O.A. Enterprises, Inc.
College Credit Trust ND Properties, Inc.
DAN Properties, Inc. OWP Hawaii, LLC
ETC Repackaging, Inc. Savannah Teachers Properties, Inc.
Illinois Teachers Properties, LLC T114 Properties, Inc.
JV California Two, Inc. T-Investment Properties Corp.
JV California Three, Inc. T-Land Corp.
JV Florida One, Inc. T-Las Colinas Towers Corp.
JV Florida Four, Inc. TCT Holdings, Inc.
JV Georgia One, Inc. Teachers Advisors, Inc.
JV Maryland One, Inc. Teachers Boca Properties II, Inc.
JV Michigan One, Inc. Teachers Pennsylvania Realty, Inc.
JV Michigan Two, Inc. Teachers Personal Investors Services, Inc.
JV Michigan Three, Inc. Teachers Properties, Inc.
JV Minnesota One, Inc. Teachers REA, LLC
JV North Carolina One, Inc. Teachers REA II, Inc.
JWL Properties, Inc. Teachers REA II, LLC
Liberty Place Retail, Inc. Teachers REA III, LLC
Macallister Holdings, Inc. Teachers Realty Corporation
Minnesota Teachers Realty Corp. TEO-NP, LLC
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<TABLE>
<S> <C>
Tethys Slu, Inc. TIAA-Fund Equities, Inc.
TIAA Realty, Inc. TPI Housing, Inc.
TIAA Timberlands I, LLC Washington Teachers Properties II, Inc.
TIAA-CREF Enterprises, Inc. WRC Properties, Inc.
TIAA-CREF Individual & Institutional 730 Properties, Inc.
Services, Inc. 730 Cal Hotel Properties I, Inc.
TIAA-CREF Investment Management, LLC 730 Cal Hotel Properties II, Inc.
TIAA-CREF Life Insurance Company 730 Penn. Hotel Properties I, Inc.
TIAA-CREF Tuition Financing, Inc. 485 Properties, LLC
TIAA-CREF Trust Company, FSB
</TABLE>
Subsidiaries of Teachers Properties, Inc.:
Rouse-Teachers Holding Company
Rouse-Teachers Land Holdings, Inc.
1) All subsidiaries are Delaware corporations except as follows:
A) Pennsylvania non-stock, non-profit corporations:
Liberty Place Retail, Inc.
Teachers Pennsylvania Realty, Inc.
Teachers Realty Corporation
B) Minnesota Teachers Realty Corporation is a Minnesota
corporation.
C) College Credit Trust, a New York Trust
2) All subsidiaries are 100% owned directly by TIAA, except as follows:
A) TIAA-CREF Enterprises, Inc. owns 100% of the stock of Teachers
Advisors, Inc., Teachers Personal Investors Services, Inc.,
TIAA-CREF Life Insurance Company, TIAA-CREF Tuition Financing,
Inc. and TCT Holdings, Inc.
B) TIAA-CREF Trust Company, FSB is 100% owned by TCT Holdings, Inc.
C) T-Investment Properties Corp. and T-Land Corp. are 100% owned
by Macallister Holdings, Inc.
D) TPI Housing, Inc. is 100% owned by Teachers Properties, Inc.
E) 730 Properties, Inc. owns 100% of the stock of 730 Cal Hotel
Properties I, Inc., 730 Cal Hotel Properties II, Inc. and 730
Penn. Hotel Properties I, Inc.
3) All subsidiaries have as their sole purpose the ownership of
investments which could, pursuant to New York State Insurance Law, be
owned by TIAA itself, except the following:
A) TIAA-CREF Life Insurance Company is a New York State insurance
subsidiary of TIAA, whose stock is owned by TIAA-CREF
Enterprises, Inc.
B) TIAA Realty, Inc. is an investment subsidiary with minority
stockholders and owns commercial real estate.
C) TIAA-CREF Trust Company, FSB is a federally chartered savings
bank.
D) Teachers Advisors, Inc. provides investment advice for the
Registrant.
E) Teachers Personal Investors Services, Inc. provides
broker-dealer services for the Registrant and TIAA Separate
Account VA-1.
F) TIAA-CREF Investment Management, LLC, provides investment
advice for College Retirement Equities Fund.
G) TIAA-CREF Individual & Institutional Services, Inc., which
provides broker-
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dealer and administrative services for College Retirement
Equities Fund.
H) TCT Holdings, Inc., holds the stock of TIAA-CREF Trust
Company, FSB.
ITEM 25. INDEMNIFICATION
As a Delaware business trust, Registrant's operations are governed by
its Declaration of Trust dated as of April 15, 1999 (the "Declaration").
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 expressly provides
that it has been organized under the DBTA and that the Declaration 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 (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 Registrant's property of any shareholders held personally
liable for any obligations of Registrant or any series of Registrant; and (iii)
provides that Registrant shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of Registrant and satisfy
any judgment thereon. Thus, the risk of a shareholder incurring financial loss
beyond his or her investment because of shareholder liability is limited to
circumstances in which all of the following factors are present: (i) a court
refuses to apply Delaware law; (ii) the liability arose under tort law or, if
not, no contractual limitation of liability was in effect; and (iii) Registrant
itself would be unable to meet its obligations. In the light of Delaware law,
the nature of Registrant's business and the nature of its assets, the risk of
personal liability to a shareholder is remote.
The Declaration 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 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
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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 Life Funds, TIAA-CREF 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.
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 UNDERWRITERS
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.
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ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules promulgated thereunder will be
maintained at the Registrant's home office, 730 Third Avenue, New York, NY
10017-3206, at other offices of the Registrant located at 750 Third Avenue and
485 Lexington Avenue, both in New York, NY 10017-3206, and at the offices of the
Registrant's custodian, State Street Bank and Trust Company, 225 Franklin
Street, Boston, MA 02110. In addition, certain duplicated records are maintained
at Pierce Leahy Archives, 64 Leone Lane, Chester, NY 10918.
ITEM 29. MANAGEMENT SERVICES
State Street will provide certain management-related services to the
Registrant pursuant to a Custodian Agreement between the Registrant, State
Street and Teachers Advisors, Inc. ("Advisors"), the investment adviser of the
Registrant. Under the Custodian Agreement, State Street will, among other
things, act as custodian of the assets of the portfolios of the Registrant, keep
the Registrant's books of account and compute the net asset value per share of
the outstanding shares of each of the Registrant's portfolios. These services
will be rendered pursuant to instructions received by State Street from Advisors
or the Registrant in the ordinary course of business.
ITEM 30. UNDERTAKINGS
Because registrant does not intend to raise its initial capital under
Section 14(a)(3) of the 1940 Act, no undertaking is required.
C - 6
<PAGE> 77
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, TIAA-CREF Institutional Mutual
Funds, has duly caused this registration statement to be signed on its behalf by
the undersigned, duly authorized, in the City of New York, and State of New
York, on the 24th day of June, 1999.
TIAA-CREF INSTITUTIONAL MUTUAL FUNDS
/s/ Peter C. Clapman
By:
-----------------------------------
Name: Peter C. Clapman
Title: Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Signature Title Date
- --------- ----- ----
/s/ John J. McCormack
- ----------------------------------- President June 24, 1999
John J. McCormack (Principal Executive Officer)
/s/ Scott C. Evans
- ----------------------------------- Executive Vice President June 24, 1999
Scott C. Evans (Principal Financial Officer)
/s/ Richard L. Gibbs
- ----------------------------------- Executive Vice President June 24, 1999
Richard L. Gibbs (Principal Accounting Officer)
</TABLE>
<PAGE> 78
<TABLE>
<S> <C> <C> <C>
Signature of Trustee Date Signature of Trustee Date
- -------------------- ---- -------------------- ----
/s/ Robert H. Atwell /s/ Bevis Longstreth
6/24/99 6/24/99
- ----------------------------------- -----------------------------------
Robert H. Atwell Bevis Longstreth
/s/ Elizabeth E. Bailey /s/ Robert M Lovell, Jr.
6/24/99 6/24/99
- ----------------------------------- -----------------------------------
Elizabeth E. Bailey Robert M. Lovell, Jr.
/s/ Joyce A. Fescke /s/ Stephen A. Ross
6/24/99 6/24/99
- ----------------------------------- -----------------------------------
Joyce A. Fescke Stephen A. Ross
/s/ Edes P. Gilbert /s/ Eugene C. Sit
6/24/99 6/24/99
- ----------------------------------- -----------------------------------
Edes P. Gilbert Eugene C. Sit
/s/ Stuart Tse Kong Ho /s/ Maceo K. Sloan
6/24/99 6/24/99
- ----------------------------------- -----------------------------------
Stuart Tse Kong Ho Maceo K. Sloan
/s/ David K. Storrs
6/24/99
- ----------------------------------- -----------------------------------
Nancy L. Jacob David K. Storrs
/s/ Marjorie Fine Knowles /s/ Robert W. Vishny
6/24/99 6/24/99
- ----------------------------------- -----------------------------------
Marjorie Fine Knowles Robert W. Vishny
/s/ Jay O. Light
6/24/99
- -----------------------------------
Jay O. Light
</TABLE>
<PAGE> 79
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Name
- ----------- ------------
<S> <C>
(e)(2) Selling Agreement by and between TPIS and TIAA-CREF Individual
& Institutional Services, Inc., dated as of June 1, 1999
(g) Custodian Agreement by and between Registrant and State Street
Bank and Trust Company ("State Street"), dated as
of June 11, 1999 (including schedule of remuneration)
(h)(1) Administration Agreement by and between Registrant and State
Street, dated as of __________ ___, 1999
(h)(2) Transfer Agency Agreement by and between Registrant and State
Street, dated as of __________ ___, 1999
(l) Seed Money Agreement by and between Registrant and Teachers
Insurance and Annuity Association of America, dated as
of June 1, 1999
</TABLE>
<PAGE> 1
SELLING AGREEMENT
FOR THE CONTRACTS FUNDED BY
TIAA SEPARATE ACCOUNT VA-1
THIS AGREEMENT made this 31st day of May, 1995, by and between Teachers
Personal Investors Services, Inc. ("TPIS"), a Delaware corporation, and
TIAA-CREF Individual & Institutional Services, Inc. ("T-C Services"), a Delaware
nonprofit corporation.
WITNESSETH:
WHEREAS, TPIS has entered into an agreement with Teachers Insurance and
Annuity Association of America ("TIAA") and TIAA Separate Account VA-1 (the
"Separate Account"), pursuant to which it serves as the distributor of the
Teachers Personal Annuity, an individual flexible premium deferred annuity
funded by the Separate Account (the "Contracts"); and
WHEREAS, TPIS proposes to have T-C Services sell, and T-C Services is
willing to sell, the Contracts; and
WHEREAS, each of TPIS and T-C Services is registered as a broker-dealer
under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and each
is a member of the National Association of Securities Dealers, Inc. ("NASD").
NOW, THEREFORE, TPIS and T-C Services hereby mutually agree as follows:
1. Appointment of T-C Services
(a) TPIS hereby appoints T-C Services to distribute the Contracts,
subject to the requirements of the Securities Act of 1933 (the "1933 Act"), the
1934 Act and the Investment Company Act of 1940 (the "1940 Act") during the term
of this Agreement.
<PAGE> 2
T-C Services agrees to distribute the Contracts and to advise owners of
Contracts in connection therewith, in each case subject to the direction of and
any limitation imposed by TPIS.
(b) To the extent necessary to offer the Contracts, T-C Services
shall be duly registered or otherwise qualified under the securities laws of any
state or other jurisdiction. The sales representatives of T-C Services shall be
duly and appropriately licensed, registered or otherwise qualified for the sale
of such Contracts under the federal securities laws, any applicable state
insurance laws and securities laws of each state or other jurisdiction in which
such Contracts may lawfully be sold and in which T-C Services is licensed or
otherwise authorized to sell the Contracts. T-C Services shall be responsible
for the training, supervision and control of its registered representatives for
the purpose of the NASD Rules of Fair Practice and federal and state securities
law requirements applicable in connection with the offering and sale of the
Contracts.
(c) T-C Services agrees to offer the Contracts for sale in accordance
with the then-current prospectus and statement of additional information ("SAI")
therefor filed with the Securities and Exchange Commission (the "Commission").
(d) TPIS shall be responsible for furnishing T-C Services with copies
of all prospectuses, SAIs, financial statements and other documents which T-C
Services reasonably requires for use in connection with the distribution of the
2
<PAGE> 3
Contracts. T-C Services will be entitled to rely on all documentation and
information furnished to it by TPIS.
2. Books and Records
(a) T-C Services shall cause to be maintained and preserved all
required books of account and related financial records as are required by the
1934 Act, the NASD and any other applicable laws and regulations in connection
with its distribution of the Contracts. All such books and records maintained by
or on behalf of T-C Services shall be maintained and preserved in conformity
with the requirements of Rules 17a-3 and 17a-4 under the 1934 Act or the
corresponding provisions of any future federal securities laws or regulations,
to the extent that such requirements are applicable to the Contracts operations.
Such books and records shall be at all times subject to inspection by the
Commission in accordance with Section 17(a) of the 1934 Act.
(b) T-C Services shall have the responsibility for maintaining the
records of sales representatives licensed, registered and otherwise qualified to
sell the Contracts.
3. Reports
T-C Services shall cause TIAA and/or the Separate Account to be
furnished with such reports as either or both may reasonably request for the
purpose of meeting reporting and recordkeeping requirements under the insurance
laws of the State of New York and any other applicable states or jurisdictions.
4. Staff, Facilities, and Services
3
<PAGE> 4
T-C Services shall be responsible for the maintenance of staff,
facilities and services necessary to meet its obligations hereunder in
connection with the distribution of the Contracts.
5. Expenses and Reimbursement
(a) T-C Services shall be responsible for all expenses relating to
its activities in connection with the distribution of the Contracts pursuant to
the terms of this Agreement.
(b) TPIS shall reimburse T-C Services for those expenses T-C Services
incurs solely in connection with its distribution of the Contracts pursuant to
this Agreement. Reimbursement shall be made quarterly by means of a single
payment made within 30 days following the end of each quarter. These expenses
include, but not limited to expenses incurred in connection with T-C Services'
registration as a broker or dealer or in the registration or qualification of
its officers, trustees or representatives under federal and state securities
laws.
6. Non-Exclusivity
TPIS understands and agrees that the services to be provided by T-C
Services hereunder are not to be deemed exclusive and T-C Services is free to
act as distributor of other variable insurance products or investment company
shares issued by TIAA, the College Retirement Equities Fund, or any entity
affiliated therewith. T-C Services shall, for all purposes herein, be deemed to
be an independent contractor and shall, unless otherwise provided and
authorized, have no authority to act for or represent TPIS in any way or
otherwise be deemed an agent of
4
<PAGE> 5
TPIS other than in furtherance of its duties and responsibilities as set forth
in this Agreement.
7. Liability
T-C Services will not be liable for any error of judgment or mistake of
law or for any loss suffered by TPIS in connection with the matters to which
this Agreement relates. Nothing herein contained shall be construed to protect
T-C Services against any liability resulting from the willful misfeasance, bad
faith, or gross negligence of T-C Services in the performance of its obligations
and duties, or from reckless disregard of its obligations and duties under this
Agreement or by virtue of violation of any applicable law.
8. Regulation
(a) This Agreement shall be subject to the provisions of the 1940
Act, the 1934 Act and the rules, regulations and rulings thereunder, and of the
NASD, as in effect from time to time, including such exemptions and other relief
as the Commission, its staff, or the NASD may grant, and the terms hereof shall
be interpreted and construed in accordance therewith.
(b) T-C Services shall submit to all regulatory and administrative
bodies having jurisdiction over the present and future operations of the
Separate Account, any information, reports or other material which any such body
by reason of this Agreement may request or require pursuant to applicable laws
or regulations. Without limiting the generality of the foregoing,
5
<PAGE> 6
T-C Services shall furnish the SEC, the State of New York Secretary of State
and/or the Superintendent of Insurance with any information or reports which the
SEC, the Secretary of State and/or the Superintendent of Insurance may request
in order to ascertain whether the operations of the Separate Account are being
conducted in a manner consistent with applicable laws or regulations.
9. Investigation and Proceedings
(a) TPIS and T-C Services agree to cooperate fully in any insurance
or securities regulatory inspection, inquiry, investigation, or proceeding or
any judicial proceeding with respect to TIAA, the Separate Account, TPIS or T-C
Services, their affiliates and their representatives to the extent that such
inspection, inquiry, investigation or proceeding is in connection with the
Contracts distributed under this Agreement.
(b) In the case of a customer complaint, T-C Services and TPIS will
cooperate in investigating such complaint and shall arrive at a mutually
satisfactory response.
10. Duration and Termination of the Agreement
(a) This Agreement shall become effective with respect to the
Contracts as of July 1, 1995 and shall continue in effect indefinitely.
(b) This Agreement may be terminated, without the payment of any
penalty, by T-C Services or TPIS on sixty days' written notice to the other
parties. This Agreement shall automatically terminate in the event of its
assignment. Without
6
<PAGE> 7
limiting the generality of the foregoing, the term "assigned" shall not include
any transactions exempted from Section 15 (b) (2) of the 1940 Act. Upon
termination of this Agreement, all authorizations, rights and obligations shall
cease except the obligation to settle accounts hereunder and the agreements
contained in paragraph 9 hereunder.
11. Definitions
The terms "Assignment", "interested person", and "majority of the
outstanding shares", when used in this Agreement, shall have the respective
meanings specified under the 1940 Act and rules thereunder.
12. Further Actions
Each party agrees to perform such further acts and execute such further
documents as are necessary to effectuate the purposes hereof.
13. Governing Law
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York, as at the time in effect, and
the applicable provisions of the 1940 Act and rules thereunder or other federal
laws and regulations which may be applicable. To the extent that the applicable
law of the State of New York, or any of the provisions herein, conflict with the
applicable provisions of the 1940 Act and rules thereunder or other federal laws
and regulations which may be applicable, the latter shall control.
14. Counterparts
7
<PAGE> 8
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which shall be deemed one
instrument.
15. Notices
All notices and other communications provided for hereunder shall be in
writing and shall be delivered by hand or mailed first class, postage prepaid,
addressed as follows:
(a) If to TPIS
Teachers Personal Investors Services, Inc.
730 Third Avenue
New York, New York 10017-3206
Attention: Ronald P. McPhee
(b) If to T-C Services
TIAA-CREF Individual & Institutional Services, Inc.
730 Third Avenue
New York, New York 10017-3206
Attention: John McCormack
or to such other address as T-C Services or TPIS shall designate by written
notice to the others.
16. Miscellaneous
Captions in this Agreement are included for convenience or reference only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
In WITNESS WHEREOF, TPIS and T-C Services have caused this Agreement to
be executed in their names and on their behalf by and through their duly
authorized officers on the day and year
8
<PAGE> 9
first above written.
TEACHERS PERSONAL INVESTORS SERVICES, INC.
/s/ THOMAS G. WALSH Attest: /s/ LISA SNOW
---------------------------------- -------------------
Title: President Title: Assistant Secretary
----------------------------- ------------------
TIAA-CREF INDIVIDUAL & INSTITUTIONAL SERVICES, INC.
By: /s/ JOHN J. McCORMACK Attest: /s/ LISA SNOW
-------------------------------- -----------------
Title: President Title: Assistant Secretary
----------------------------- ------------------
9
<PAGE> 10
AMENDMENT TO THE SELLING AGREEMENT
FOR THE
CONTRACTS FUNDED BY
TIAA SEPARATE ACCOUNT VA-1, TIAA-CREF LIFE SEPARATE ACCOUNT VA-1
AND THE SHARES ISSUED BY TIAA-CREF MUTUAL FUNDS
Amendment to the Selling Agreement for the Contracts Funded by the TIAA
Separate Account VA-1 dated May 31, 1995, by and between Teachers Personal
Investors Services, Inc. ("TPIS") and TIAA-CREF Individual & Institutional
Services, Inc. ("T-C Services") as amended November 30, 1998. T-C Services and
TPIS mutually agree that upon execution of this Amendment, the Agreement shall
be amended as set forth below:
1. The title of the Agreement is hereby amended to read as follows:
"Selling Agreement for the Contracts Funded by the TIAA Separate Account
VA-1, TIAA-CREF Life Separate Account VA-1 and the Shares Issued by
TIAA-CREF Mutual Funds and TIAA-CREF Institutional Mutual Funds.
2. The first Whereas clause is hereby amended to read as follows:
"WHEREAS, TPIS has entered into agreements with the Teachers Insurance
and Annuity Association of America ("TIAA"), TIAA Separate Account VA-1
("VA-1"), TIAA-CREF Mutual Funds (the "Retail Fund"), TIAA-CREF
Institutional Mutual Funds (the "Institutional Fund"), and TIAA-CREF Life
Insurance Company, for itself and on behalf of TIAA-CREF Life Separate
Account VA-1 ("TIAA-CREF Life VA-1"), pursuant to which it serves as the
principal underwriter of the variable annuity Contracts (the "Contracts")
issued by VA-1 and TIAA-CREF Life VA-1 and the shares issued by the
Retail Fund and Institutional Fund (the "Shares").
IN WITNESS WHEREOF, T-C Services and TPIS have caused this Amendment to
the Agreement to be executed in their names and on their behalf as of this
day of 1st day of June, 1999 by and through their duly authorized officers.
TIAA-CREF INDIVIDUAL & INSTITUTIONAL SERVICES, INC.
/s/ LISA SNOW Attest: /s/ STEWART P. GREENE
--------------------------- ------------------------
Title: Vice President, Chief Title: Senior Counsel and
Counsel Corporate Law Assistant Secretary
and Secretary
TEACHERS PERSONAL INVESTORS SERVICES, INC.
By: /s/ THOMAS G. WALSH Attest: /s/ STEWART P. GREENE
------------------------- ----------------------
Title: President Title: Senior Counsel and
Assistant Secretary
<PAGE> 1
CUSTODIAN CONTRACT
Between
TIAA-CREF INSTITUTIONAL MUTUAL FUNDS,
and
STATE STREET BANK AND TRUST COMPANY
<PAGE> 2
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held By
It.....................................................................1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United States.................2
2.1 Holding Securities...............................................2
2.2 Delivery of Securities...........................................2
2.3 Registration of Securities.......................................4
2.4 Bank Accounts....................................................4
2.5 Availability of Federal Funds....................................4
2.6 Collection of Income and Dividends...............................4
2.7 Payment of Fund Monies...........................................5
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased..................................6
2.9 Appointment of Agents............................................6
2.10 Deposit of Fund Assets in U.S. Securities System.................6
2.11 Fund Assets Held in the Custodian's Direct
Paper System.....................................................7
2.12 Segregated Account...............................................8
2.13 Ownership Certificates for Tax Purposes..........................8
2.14 Proxies..........................................................8
2.15 Communications Relating to Portfolio Securities..................9
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States.............................9
3.1 Appointment of Foreign Sub-Custodians............................9
3.2 Assets to be Held................................................9
3.3 Foreign Securities Systems.......................................9
3.4 Holding Securities...............................................9
3.5 Agreements with Foreign Banking Institutions....................10
3.6 Access of Independent Accountants of the Fund...................10
3.7 Reports by Custodian............................................10
3.8 Transactions in Foreign Custody Account.........................10
3.9 Liability of Foreign Sub-Custodians.............................11
3.10 Liability of Custodian..........................................11
3.11 Monitoring Responsibilities.....................................12
3.12 Branches of U.S. Banks..........................................12
3.13 Tax Law.........................................................12
3.14 Proxies.........................................................12
4. Payments for Sales or Repurchase or Redemptions
of Shares of the Fund.................................................13
<PAGE> 3
5. Proper Instructions...................................................13
6. Actions Permitted Without Express Authority...........................14
7. Evidence of Authority.................................................14
8. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income.........................14
9. Records...............................................................15
10. Opinion of Fund's Independent Accountants.............................15
11. Reports to Fund by Independent Public Accountants.....................15
12. Compensation of Custodian.............................................15
13. Responsibility of Custodian, Indemnification..........................15
13.1 Standard of Care................................................15
13.2 Liability of Custodian for Actions of Other Persons.............17
13.3 Indemnification.................................................18
13.4 Fund's Right to Proceed.........................................19
14. Effective Period, Termination and Assignment..........................20
15. Successor Custodian...................................................21
16. Amendments............................................................21
17. Interpretive and Additional Provisions................................21
18. Additional Funds......................................................22
19. Massachusetts Law to Apply............................................22
20. Prior Contracts.......................................................22
21. Reproduction of Documents.............................................22
22. Shareholder Communications............................................23
23. No Liability of Shareholders..........................................23
<PAGE> 4
CUSTODIAN CONTRACT
This Contract between TIAA-CREF Institutional Mutual Funds, a business
trust organized and existing under the laws of Delaware, having its principal
place of business at 730 Third Avenue, New York, New York 10017-3206 hereinafter
called the "Fund" and State Street Bank and Trust Company, a Massachusetts trust
company, having its principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets;
WHEREAS, the Fund intends to initially offer shares in seven series, the
Institutional International Equity Fund, Institutional Growth Equity Fund,
Institutional Growth and Income Fund, Institutional Equity Index Fund,
Institutional Social Choice Equity Fund, Institutional Bond Fund and
Institutional Money Market Fund (such series together with all other series
subsequently established by the Fund and made subject to this Contract in
accordance with Article 18, being herein referred to as the "Portfolio(s)"); and
WHEREAS, the Fund desires to appoint the Custodian as custodian on
behalf of each of its Portfolios in accordance with the provisions of the
Investment Company Act of 1940, as amended (the "1940 Act"), and the rules and
regulations thereunder, under the terms and conditions set forth in this
Contract, and the Custodian has agreed so to act as custodian.
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund, including securities which the Fund, on behalf of
the applicable Portfolio desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Fund's governing
documents. The Fund on behalf of the Portfolio(s) agrees to deliver to the
Custodian all securities and cash of the Portfolios, and all payments of income,
payments of principal or capital distributions received by it with respect to
all securities owned by the Portfolio(s) from time to time, and the cash
consideration received by it for such new or treasury shares of capital stock of
the Fund representing interests in the Portfolios, ("Shares") as may be issued
or sold from time to time. The Custodian shall be responsible for all
securities, cash and other property owned or held by the fund which is received
by the Custodian in accordance with the provisions of Article 13. The Custodian
shall not be responsible for any property of a Portfolio held or received by the
Portfolio and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall on behalf of the applicable Portfolio(s) from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Trustees of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have not more or less responsibility to the Fund on account of any actions or
omissions of any sub-custodian so employed than any sub-custodian has to the
Custodian, and further provided that the Custodian shall not release the sub-
<PAGE> 5
custodian from any responsibility or liability unless mutually agreed upon by
the parties in writing. The Custodian may employ as sub-custodian for the Fund's
foreign securities on behalf of the applicable Portfolio(s) the foreign banking
institutions and foreign securities depositories designated in Schedule A hereto
but only in accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held By the
Custodian in the United States.
2.1 Holding Securities. The Custodian shall hold and physically segregate for
the account of each Portfolio all non-cash property, to be held by it in
the United States including all domestic securities owned by such
Portfolio, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities depository or
in a book-entry system authorized by the U.S. Department of the Treasury
and certain federal agencies (each, a "U.S. Securities System") and (b)
commercial paper of an issuer for which State Street Bank and Trust
Company acts as issuing and paying agent ("Direct Paper") which is
deposited and/or maintained in the Direct Paper System of the Custodian
(the "Direct Paper System") pursuant to Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver domestic
securities owned by a Portfolio held by the Custodian or in a U.S.
Securities System account of the Custodian or in the Custodian's Direct
Paper book entry system account ("Direct Paper System Account") only upon
receipt of Proper Instructions from the Fund on behalf of the applicable
Portfolio, which may be continuing instructions when deemed appropriate by
the parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Portfolio;
3) In the case of a sale effected through a U.S. Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other similar
offers for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer into the name
of the Portfolio or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.9 or into the name or nominee name of any
sub-custodian appointed pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other evidence
representing the same aggregate face amount or
6
<PAGE> 6
number of units; provided that, in any such case, the new securities
are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the Portfolio,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom; provided
that in any such case, the Custodian shall have no responsibility or
liability for any loss arising from the delivery of such securities
prior to receiving payment for such securities except as may arise
from the Custodian's failure to act in accordance with its duties as
set forth in Section 13;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the securities of the issuer of such securities, or pursuant to
provisions for conversion contained in such securities, or pursuant
to any deposit agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the surrender
thereof in the exercise of such warrants, rights or similar
securities or the surrender of interim receipts or temporary
securities for definitive securities; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
10) For delivery in connection with any loans of securities made by the
Portfolio, but only against receipt of adequate collateral as agreed
upon from time to time by the Custodian and the Fund on behalf of
the Portfolio, which may be in the form of cash or obligations
issued by the United States government, its agencies or
instrumentalities or such other property as mutually agreed upon by
the parties.
11) For delivery as security in connection with any borrowings by the
Fund on behalf of the Portfolio requiring a pledge of assets by the
Fund on behalf of the Portfolio, but only against receipt of amounts
borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Securities Exchange Act of 1934
(the "Exchange Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian, and a
Futures Commission Merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity Futures
Trading Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in
connection with transactions by the Portfolio
7
<PAGE> 7
of the Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to the
holders of shares in connection with distributions in kind, as may
be described from time to time in the currently effective prospectus
and statement of additional information of the Fund, related to the
Portfolio ("Prospectus"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and
15) For any other corporate purpose, but only upon receipt of, Proper
Instructions from the Fund on behalf of the applicable Portfolio.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, unless the Fund has authorized in
writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as the
Portfolio, or in the name or nominee name of any agent appointed pursuant
to Section 2.9 or in the name or nominee name of any sub-custodian
appointed pursuant to Article 1. All securities accepted by the Custodian
on behalf of the Portfolio under the terms of this Contract shall be in
"street name" or other good delivery form. If, however, the Fund directs
the Custodian to maintain securities in "street name", the Custodian shall
utilize its best efforts only to timely collect income due the Fund on
such securities and to notify the Fund on a best efforts basis only of
relevant corporate actions including, without limitation, pendency of
calls, maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio of
the Fund, subject only to draft or order by the Custodian acting pursuant
to the terms of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for the
account of the Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian for a
Portfolio may be deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust companies as
it may in its discretion deem necessary or desirable; provided, however,
that every such bank or trust company shall be qualified to act as a
custodian under the Investment Company Act of 1940 and that each such bank
or trust company and the funds to be deposited with each such bank or
trust company shall on behalf of each applicable Portfolio be approved by
vote of a majority of the Board of Trustees of the Fund. Such funds shall
be deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund on
behalf of each applicable Portfolio and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions from the Fund on behalf of
a Portfolio, make federal funds available to such Portfolio as of
specified times agreed upon from time to time by the Fund and the
Custodian in the amount of
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checks received in payment for Shares of such Portfolio which are
deposited into the Portfolio's account.
2.6 Collection of Income and Dividends. Subject to the provisions of Section
2.3, the Custodian shall collect on a timely basis all income and other
payments with respect to registered domestic securities held hereunder to
which each Portfolio shall be entitled either by law or pursuant to custom
in the securities business, and shall collect on a timely basis all income
and other payments with respect to bearer domestic securities if, on the
date of payment by the issuer, such securities are held by the Custodian
or its agent thereof and shall credit such income, as collected, to such
Portfolio's custodian account. Without limiting the generality of the
foregoing, the Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when they become due
and shall collect interest when due on securities held hereunder. Income
due each Portfolio on securities loaned pursuant to the provisions of
Section 2.2 (10) shall be the responsibility of the Fund. Unless otherwise
agreed to in writing, the Custodian will have no duty or responsibility in
connection therewith, other than to provide the Fund with such information
or data as may be necessary to assist the Fund in arranging for the timely
delivery to the Custodian of the income to which the Portfolio is properly
entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the Fund
on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian shall
pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures contracts
or options on futures contracts for the account of the Portfolio but
only (a) against the delivery of such securities or evidence of
title to such options, futures contracts or options on futures
contracts to the Custodian (or any bank, banking firm or trust
company doing business in the United States or abroad which is
qualified under the Investment Company Act of 1940, as amended, to
act as a custodian and has been designated by the Custodian as its
agent for this purpose) registered in the name of the Portfolio or
in the name of a nominee of the Custodian referred to in Section 2.3
hereof or in proper form for transfer; (b) in the case of a purchase
effected through a U.S. Securities System, in accordance with the
conditions set forth in Section 2.10 hereof; (c) in the case of a
purchase involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.11; (d) in the case of repurchase
agreements entered into between the Fund on behalf of the Portfolio
and the Custodian, or another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's
account at the Federal Reserve Bank with such securities or (ii)
against delivery of the receipt evidencing purchase by the Portfolio
of securities owned by the Custodian along with written evidence of
the agreement by the Custodian to repurchase such securities from
the Portfolio or (e) for transfer to a time deposit account of the
Fund in any bank, whether domestic or foreign; such transfer may be
effected prior to receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions from the Fund as
defined in Article 5;
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2) In connection with conversion, exchange or surrender of securities
owned by the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Portfolio
as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments for
the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating expenses of
the Fund whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio declared
pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For repayment of a loan upon redelivery of pledged securities and
upon surrender of the loan note(s), if any, evidencing the loan;
8) For any other corporate purpose, but only upon receipt of Proper
Instructions from the Fund on behalf of the Portfolio.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and every
case where payment for purchase of domestic securities for the account of
a Portfolio is made by the Custodian in advance of receipt of the
securities purchased in the absence of specific written instructions from
the Fund on behalf of such Portfolio to so pay in advance, the Custodian
shall be absolutely liable to the Fund for such securities to the same
extent as if the securities had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, to act as a custodian, as its agent to carry out such of
the provisions of this Article 2 as the Custodian may from time to time
direct; provided, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities hereunder.
2.10 Deposit of Fund Assets in U.S. Securities Systems. The Custodian may
deposit and/or maintain securities owned by a Portfolio in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively
referred to herein as "U.S. Securities System" in accordance with
applicable Federal Reserve Board and Securities and Exchange Commission
rules and regulations, if any, and subject to the following provisions:
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<PAGE> 10
1) The Custodian may keep securities of the Portfolio in a U.S.
Securities System provided that such securities are represented in
an account ("Account") of the Custodian in the U.S. Securities
System which shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System shall
identify by book-entry those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the account of
the Portfolio upon (i) receipt of advice from the U.S. Securities
System that such securities have been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the Portfolio.
The Custodian shall transfer securities sold for the account of the
Portfolio upon (i) receipt of advice from the U.S. Securities System
that payment for such securities has been transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account of
the Portfolio. Copies of all advices from the U.S. Securities System
of transfers of securities for the account of the Portfolio shall
identify the Portfolio, be maintained for the Portfolio by the
Custodian and be provided to the Fund at its request. Upon request,
the Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio in the form of a written advice or notice and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transactions in the U.S.
Securities System for the account of the Portfolio.
4) The Custodian shall provide the Fund for the Portfolio with any
report obtained by the Custodian on the U.S. Securities System's
accounting system, internal accounting control and procedures for
safeguarding securities deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting from use
of the U.S. Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents or
of any of its or their employees or from failure of the Custodian or
any such agent to enforce effectively such rights as it may have
against the U.S. Securities System; at the election of the Fund, it
shall be entitled to be subrogated to the rights of the Custodian
with respect to any claim against the U.S. Securities System or any
other person which the Custodian may have as a consequence of any
such loss or damage if and to the extent that the Portfolio has not
been made whole for any such loss or damage.
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2.11 Fund Assets Held in the Custodian's Direct Paper System. The Custodian may
deposit and/or maintain securities owned by a Portfolio in the Direct
Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions from the Fund
on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct
Paper System only if such securities are represented in an account
("Account") of the Custodian in the Direct Paper System which shall
not include any assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the account of
the Portfolio upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to the
account of the Portfolio. The Custodian shall transfer securities
sold for the account of the Portfolio upon the making of an entry on
the records of the Custodian to reflect such transfer and receipt of
payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio, in the form of a written advice or notice, of Direct
Paper on the next business day following such transfer and shall
furnish to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transaction in the U.S.
Securities System for the account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio with
any report on its system of internal accounting control as the Fund
may reasonably request from time to time.
2.12 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on behalf
of each such Portfolio, into which account or accounts may be transferred
cash and/or securities, including securities maintained in an account by
the Custodian pursuant to Section 2.10 hereof, (i) in accordance with the
provisions of any agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by
the Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the
Portfolio or
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commodity futures contracts or options thereon purchased or sold by the
Portfolio, (iii) for the purposes of compliance by the Portfolio with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of segregated accounts by registered
investment companies and (iv) for other corporate purposes, upon receipt
of Proper Instructions from the Fund on behalf of the applicable
Portfolio.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
2.14 Proxies. The Custodian shall, with respect to the domestic securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of
the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.15 Communications Relating to Portfolio Securities. Subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to the Fund for each
Portfolio all written information (including, without limitation, pendency
of calls and maturities of domestic securities and expirations of rights
in connection therewith and notices of exercise of call and put options
written by the Fund on behalf of the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian
from issuers of the securities being held for the Portfolio. With respect
to tender or exchange offers, the Custodian shall transmit promptly to the
Portfolio all written information received by the Custodian from issuers
of the securities whose tender or exchange is sought and from the party
(or his agents) making the tender or exchange offer. If the Portfolio
desires to take action with respect to any tender offer, exchange offer or
any other similar transaction, the Portfolio shall notify the Custodian to
take such action prior to the time agreed to by the Custodian and the
Fund.
3. Duties of the Custodian with Respect to Property of the Fund Held
Outside of the United States
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Portfolio's
securities, cash and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-custodians"). Upon receipt
of "Proper Instructions", as defined in Article 5 of this Contract,
together with a certified resolution of the Fund's Board of Trustees, the
Custodian and the Fund may agree to amend Schedule A hereto from time to
time to designate additional foreign banking institutions and foreign
securities depositories to act as sub-custodian. Upon receipt of Proper
Instructions, the Fund may instruct the Custodian to cease the employment
of any one or more such sub-custodians for maintaining custody of the
Portfolio's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the
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custody of the foreign sub-custodians to: (a) "foreign securities", as
defined in Rule 17f-5 under the Investment Company Act of 1940, (b) cash
and cash equivalents in such amounts as the Fund may determine; and (c)
other assets as are mutually agreed by the parties. The Custodian shall
identify on its books as belonging to the Fund, the foreign securities,
cash and other assets of the Fund held by each foreign sub-custodian.
3.3 Foreign Securities Systems. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of the Portfolios shall be
maintained in a clearing agency which acts as a securities depository or
in a book-entry system for the central handling of securities located
outside of the United States (each a "Foreign Securities System") only
through arrangements implemented by the foreign banking institutions
serving as sub-custodians pursuant to the terms hereof (Foreign Securities
Systems and U.S. Securities Systems are collectively referred to herein as
the "Securities Systems"). Where possible, such arrangements shall include
entry into agreements containing the provisions set forth in Section 3.5
hereof.
3.4 Holding Securities. The Custodian may hold securities and other non-cash
property for all of its customers, including the Fund, with a foreign
sub-custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, provided however, that (i) the
records of the Custodian with respect to securities and other non-cash
property of the Fund which are maintained in such account shall identify
by book-entry those securities and other non-cash property belonging to
the Fund and (ii) the Custodian shall require that securities and other
non-cash property so held by the foreign sub-custodian be held separately
from any assets of the foreign sub-custodian or of others.
3.5 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall provide that: (a) the assets of each
Portfolio will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution or
its creditors or agent, except a claim of payment for their safe custody
or administration; (b) beneficial ownership for the assets of each
Portfolio will be freely transferable without the payment of money or
value other than for custody or administration; (c) adequate records will
be maintained identifying the assets as belonging to each applicable
Portfolio; (d) officers of or auditors employed by, or other
representatives of the Custodian, including to the extent permitted under
applicable law the independent public accountants for the Fund, will be
given access to the books and records of the foreign banking institution
relating to its actions under its agreement with the Custodian; and (e)
assets of the Portfolios held by the foreign sub-custodian will be subject
only to the instructions of the Custodian or its agents.
3.6 Access of Independent Accountants of the Fund. Upon request of the Fund,
the Custodian will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of
any foreign banking institution employed as a foreign sub-custodian
insofar as such books and records relate to the performance of such
foreign banking institution under its agreement with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to the Fund from time to
time, as mutually
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<PAGE> 14
agreed upon, statements in respect of the securities, cash and other
assets of the Portfolio(s) held by foreign sub-custodians, including but
not limited to an identification of entities having possession of the
Portfolio(s) securities, cash and other assets and advices or
notifications of any transfers of securities to or from each custodial
account maintained by a foreign banking institution for the Custodian on
behalf of each applicable Portfolio indicating, as to securities acquired
for a Portfolio, the identity of the entity having physical possession of
such securities.
3.8 Transactions in Foreign Custody Account. (a) Except as otherwise provided
in paragraph (b) of this Section 3.8, the provision of Sections 2.2 and
2.7 of this Contract shall apply, mutatis mutandis to the foreign
securities of the Fund held outside the United States by foreign
sub-custodians.
(b) In the case of the purchase of securities, the settlement of
which occurs outside of the United States of America: (i) the Custodian
may make payment therefor and receive delivery of such securities in
accordance with local custom and practice generally accepted by
Institutional Clients (as hereinafter defined) in the country in which the
settlement occurs, but in all events subject to the standard of care set
forth in Section 13 hereof; (ii) in the case of the purchase of securities
in which, in accordance with standard industry custom and practice
generally accepted by Institutional Clients with respect to such
securities, the receipt of such securities and the payment therefor take
place in different countries, the Custodian may receive delivery of such
securities and make payment therefor in accordance with standard industry
custom and practice for such securities generally accepted by
Institutional Clients, but in all events subject to the standard of Care
set forth in Section 13 hereof.
In the case of the sale of securities, the settlement of which
occurs outside of the United States of America: (i) such securities shall
be delivered and paid for in accordance with local custom and practice
generally accepted by Institutional Clients in the country in which the
settlement occurs, but in all events subject to the standard of care set
forth in Section 13 hereof; (ii) in the case of the sale of securities in
which, in accordance with standard industry custom and practice generally
accepted by Institutional Clients with respect to such securities, the
delivery of such securities and receipt of payment therefor take place in
different countries, the Custodian may deliver such securities and receive
payment therefor in accordance with standard industry custom and practice
for such securities generally accepted by Institutional Clients, but in
all events subject to the standard of care set forth in Section 13 hereof;
and (iii) in the case of securities held in physical form, such securities
shall be delivered and paid for in accordance with "street delivery
custom" to a broker or its clearing agent, against delivery to the
Custodian of a receipt for such securities, prompt collection of the
payment for, or the return of, such securities by the broker or its
clearing agent, and provided further that the Custodian shall not be
responsible for the selection of or the failure or inability to perform of
such broker or its clearing agent.
For purposes of this Contract , an "Institutional Client" shall mean
a major commercial bank, corporation, insurance company or substantially
similar institution, which, as a substantial part of its business
operations, purchases or sells securities and makes use of custodial
services.
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(c) Securities maintained in the custody of a foreign sub-custodian
may be maintained in the name of such entity's nominee to the same extent
as set forth in Section 2.3 of this Contract, and the Fund agrees to hold
any such nominee harmless from any liability as a holder of record of such
securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to which the
Custodian employs a foreign banking institution as a foreign
sub-custodian, other than a branch or subsidiary of the Custodian, shall
require the institution to exercise reasonable care in the performance of
its duties and to indemnify, and hold harmless, the Custodian and each
Fund from and against any loss, damage, cost, expense, liability or claim
arising out of or in connection with the institution's performance of such
obligations. At the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claims
against a foreign banking institution as a consequence of any such loss,
damage, cost, expense, liability or claim if and to the extent that the
Fund has not been made whole for any such loss, damage, cost, expense,
liability or claim. A foreign sub-custodian which is a branch or
subsidiary of the Custodian shall be held to the standard of care set
forth in Section 13 for the Custodian.
3.10 Liability of Custodian. Except as provided in paragraph 3.9 hereof with
respect to a branch or subsidiary of the Custodian, the Custodian shall be
liable for the acts or omissions of a foreign banking institution to the
same extent as set forth with respect to sub-custodians generally in this
Contract and, regardless of whether assets are maintained in the custody
of a foreign banking institution, a foreign securities depository or a
branch of a U.S. bank as contemplated by paragraph 3.13 hereof, the
Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from nationalization, expropriation, currency
restrictions, or acts of war or terrorism or any loss where the
sub-custodian has otherwise exercised reasonable care. Notwithstanding the
foregoing provisions of this paragraph 3.10, in delegating custody duties
to State Street London Ltd., or other branches or subsidiaries of the
Custodian, the Custodian shall not be relieved of any responsibility to
the Fund for any loss due to such delegation, except such loss as may
result from (a) political risk (including, but not limited to, exchange
control restrictions, confiscation, expropriation, nationalization,
insurrection, civil strife or armed hostilities) or (b) other losses
(excluding a bankruptcy or insolvency of State Street London Ltd. not
caused by political risk) due to Acts of God, nuclear incident or other
losses under circumstances where the Custodian and State Street London
Ltd. have exercised the standard of care set forth in Article 13 hereof.
3.11 Monitoring Responsibilities. The Custodian shall furnish annually to the
Fund, during the month of June, or such other periods as the parties may
agree, information concerning the foreign sub-custodians employed by the
Custodian. Such information shall be similar in kind and scope to that
furnished to the Fund in connection with the initial approval of this
Contract. In addition, the Custodian will promptly inform the Fund in the
event that the Custodian learns of a material adverse change in the
financial condition of a foreign sub-custodian or any material loss of the
assets of the Fund or in the case of any foreign sub-custodian not the
subject of an exemptive order from the Securities and Exchange Commission
is notified by such foreign sub-custodian that there appears to be a
substantial likelihood that its shareholders' equity will not meet the
requirements of
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<PAGE> 16
Rule 17f-5 under the Investment Company Act of 1940 for custodians of an
investment company.
3.12 Branches of U.S. Banks. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of the
Portfolios assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act of 1940 meeting the qualification set forth in
Section 26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by paragraph 1 of this Contract. (b) Cash
held for each Portfolio of the Fund in the United Kingdom shall be
maintained in an interest bearing account established for the Fund with
the Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.
3.13 Tax Law. The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of the United States of America or
any state or political subdivision thereof. It shall be the responsibility
of the Fund to notify the Custodian of the obligations imposed on the Fund
or the Custodian as custodian of the Fund by the tax law of jurisdictions
other than those mentioned in the above sentence, including responsibility
for withholding and other taxes, assessments or other governmental
charges, certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax law shall be to
use reasonable efforts to assist the Fund with respect to any claim for
exemption or refund under the tax law of jurisdictions for which the Fund
has provided such information.
3.14 Proxies. The Custodian will generally, with respect to foreign securities
held under this Article 3, use best efforts accepted by Institutional
Clients to facilitate the exercise of voting and other shareholder proxy
rights, subject always to the laws, regulations and practical constraints
that may obtain in the jurisdiction where such securities are issued. The
Fund acknowledges that local conditions may have the effect of severely
limiting the ability of the Fund to exercise shareholder rights.
4. Payments for Sales or Repurchases or Redemptions of Shares of the Fund
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent of the Fund and deposit into the account of the appropriate
Portfolio such payments as are received for Shares of that Portfolio issued or
sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such Portfolio and the Transfer Agent
of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Articles of Incorporation and any applicable votes of the
Board of Trustees of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares of a Portfolio, the Custodian is
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<PAGE> 17
authorized upon receipt of instructions from the Transfer Agent to wire funds to
or through a commercial bank designated by the redeeming shareholders. In
connection with the redemption or repurchase of Shares of the Fund, the
Custodian shall honor checks drawn on the Custodian by a holder of Shares, which
checks have been furnished by the Fund to the holder of Shares, when presented
to the Custodian in accordance with such procedures and controls as are mutually
agreed upon from time to time between the Fund and the Custodian.
5. Proper Instructions
Proper Instructions as used throughout this Contract means (a) with
respect to the purchase and sale of short-term debt securities with a maturity
of less than one year when value is exchanged, written instructions from the
Fund by any one individual authorized by the Board of Trustees and specified in
a separate list for this purpose which will be furnished to the Custodian from
time to time signed by the treasurer or any associate treasurer or any assistant
treasurer and by the secretary or any assistant secretary as certified under the
corporate seal of the Fund (an "Authorized Person"); (b) with respect to other
transaction, written instructions from the Fund signed by any two Authorized
Persons ; and (c) notwithstanding (a) and (b) above of this Article 5, with
respect to "Free of Payment" deliveries, a writing manually signed by any two
Authorized Persons who are officers of the Fund with the title Chairman,
President, Executive Vice President, or Treasurer. Upon receipt of a writing
manually signed by any two Authorized Persons who are officers of the Fund with
the title Chairman, President, Executive Vice President, or Treasurer
accompanied by a detailed description of procedures approved by such writing,
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Fund and the
Custodian are satisfied that such procedures afford adequate safeguards for the
Fund's assets. Oral instructions will be considered Proper Instructions if the
Custodian reasonably believes them to have been given by a person authorized to
give such instructions with respect to the transaction involved. The Fund shall
cause all oral instructions to be confirmed in writing. For purposes of this
Section, Proper Instructions shall include instructions received by the
Custodian pursuant to any three-party agreement which requires a segregated
asset account in accordance with Section 2.12.
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6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this
Contract, provided that all such payments shall be accounted for to
the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Portfolio except as
otherwise directed by the Board of Trustees of the Fund.
7. Evidence of Authority
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a certified copy of a vote of the Board of
Trustees of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Trustees pursuant to the Declaration of Trust as described in
such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and
Calculation of Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Trustees of the Fund to keep the
books of account of each Portfolio and/or compute the net asset value per share
of the outstanding shares of each Portfolio or, unless otherwise directed in
writing to do so by the Fund on behalf of the Portfolio, shall itself keep such
books of account and/or compute such net asset value per share. Until otherwise
directed in writing, the Custodian shall also calculate daily the net income of
the Portfolio as described in the Fund's currently effective prospectus related
to such Portfolio and shall advise the Fund and the Transfer Agent daily of the
total amounts of such net income and, if instructed in writing by an officer of
the Fund to do so, shall advise the Transfer Agent periodically of the division
of such net income among its various components. The calculations of the net
asset value per share and the daily income of each Portfolio shall be made in
accordance with and at the time or times described from time to time in the
Fund's currently effective prospectus related to such Portfolio and in
accordance with the procedures agreed to in writing between the Fund and the
Custodian and shall at all times comply with the standard of care set forth in
Section 13 hereof.
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9. Records
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the Investment Company Act
of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Fund and shall
at all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation of securities
owned by each Portfolio and held by the Custodian and shall, when requested to
do so by the Fund and for such compensation as shall be agreed upon between the
Fund and the Custodian, include certificate numbers in such tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year to
year favorable opinions from the Fund's independent accountants with respect to
its activities hereunder in connection with the preparation of the Fund's Form
N-1A, and Form N-SAR or other annual reports to the Securities and Exchange
Commission and with respect to any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, on behalf of each of the Portfolios
at such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian under this Contract;
such reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon in writing from time to time
between the Fund on behalf of each applicable Portfolio and the Custodian.
13. Responsibility of Custodian, Indemnification
13.1 Standard of Care
1) General Standard of Care. The Custodian shall exercise reasonable
care and diligence in carrying out all of its duties and obligations
under this Contract, and shall be liable to the Fund on behalf of
the applicable Portfolio(s), for all loss, damage and expense
suffered or
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<PAGE> 20
incurred by such Portfolio resulting from the failure of the
Custodian to exercise such reasonable care and diligence.
2) Actions Prohibited by Applicable Law, etc. Except as may arise from
the Custodian's own negligence, misfeasance or willful misconduct or
the negligence, misfeasance or willful misconduct of a domestic
sub-custodian or foreign banking institution acting as foreign
sub-custodian or agent, the Custodian shall be without liability to
the Fund for any loss, liability, claim or expense resulting from or
caused by: (i) any provision of any present or future law or
regulation or order of the United States of America, or any state
thereof, or of any foreign country, or political subdivision thereof
or of any court of competent jurisdiction; (ii) any act of God or
war or other similar circumstance beyond the control of the
Custodian, including, without limitation, nationalization or
expropriation, imposition of currency controls or restrictions, the
interruption, suspension or restriction of trading on or the closure
of any securities market, power or other mechanical or technological
failures or interruptions, computer viruses or communications
disruptions, acts of terrorism, riots, revolutions or work
stoppages; (iii) errors by the Fund or its investment advisor in
their instructions to the Custodian provided such instructions have
been in accordance with this Contract; (iv) the insolvency of or
acts or omissions by a Securities System; (v) any delay or failure
of any broker or agent selected by the Fund, or an intermediary or
agent of such broker, or any central bank or other commercially
prevalent payment or clearing system outside of the United States to
deliver to the Custodian's sub-custodian or agent securities
purchased or in the remittance or payment made in connection with
securities sold provided that the subcustodians or agents have acted
in accordance with the terms of this contract; (vi) any delay or
failure of any company, corporation, or other body in charge of
registering or transferring securities in the name of the Custodian,
the Fund, the Custodian's sub-custodians, nominees or agents or any
consequential losses arising out of such delay or failure to
transfer such securities including non-receipt of bonus, dividends
and rights and other accretions or benefits; (vii) delays or
inability to perform its duties due to any disorder in market
infrastructure with respect to any particular security or Securities
System. In no event shall the Custodian be liable for indirect,
special or consequential damages.
3) Reliance on Instruments, etc. So long as and to the extent that it
is in the exercise of reasonable care, the Custodian shall not be
responsible for the title, validity or genuineness of any property
or evidence of title thereto received by it or delivered by it
pursuant to this Contract and shall be held harmless in acting upon
any notice, request, consent, certificate or other instrument
reasonably believed by it to be genuine and to be signed by the
proper party or parties, including any futures commission merchant
acting pursuant to the terms of a three-party futures or options
agreement.
4) Mitigation by Custodian. Upon the occurrence of any event which
causes or may cause any loss, damage or expense to any Portfolio (i)
the Custodian shall, (ii) the Custodian shall cause State Street
London Ltd. to and (iii) the Custodian shall use all reasonable
efforts to cause any applicable Subcustodian (other than State
Street London Ltd.)
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<PAGE> 21
appointed to hold assets in the U.S. or Foreign banking
institutions acting as a foreign subcustodian to, use all
reasonable efforts and take all reasonable steps under the
circumstances to mitigate the efforts of such event and to avoid
continuing harm to the Fund and the Portfolios.
5) Advice of Counsel. The Custodian shall be entitled to rely on and
act upon advice of counsel (who may be counsel for the Fund) on all
matters and shall be without liability for any action reasonably
taken or omitted in good faith pursuant to such advice; provided,
however, with respect to the performance of any action or omission
of any action upon such advice, the Custodian shall be required to
conform to the standard of care set forth herein.
6) Expenses of Fund. In addition to the liability of the Custodian
under this Section 13, the Custodian shall be liable to the Fund and
each applicable Portfolio for all reasonable out-of-pocket costs and
expenses incurred by the Fund in connection with any claim by the
Fund against the Custodian arising from the obligations of the
Custodian hereunder, including, without limitation, all reasonable
attorneys' fees and expenses incurred by the Fund in asserting any
such claim, and out-of-pocket expenses incurred by the Fund in
connection with any lawsuits or proceedings relating to such claim;
provided, that the Fund has recovered from the Custodian for such
claim.
13.2 Liability of Custodian for Actions of Other Persons
1) Subcustodians located in the United States and Foreign banking
institutions acting as foreign subcustodians. The Custodian shall be
liable for the actions or omissions of any subcustodian located in
the United States or any foreign banking institution acting as a
foreign subcustodian to the same extent as if such action or
omission were performed by the Custodian itself taking into account
standards applicable to custodians in the relevant market.
2) Securities System. Notwithstanding the provisions of Section 13 to
the contrary, the Custodian shall not be liable to the Fund or any
applicable Portfolio for any loss, damage or expense suffered or
incurred by the Fund or any of its Portfolios resulting from the use
by the Custodian or a subcustodian located in the United States or
foreign banking institution acting as a foreign subcustodian, of a
Securities System including, without limitation, the insolvency of a
Securities System, unless such loss, damage or expense is caused by,
or results from, the negligence, misfeasance or misconduct of the
Custodian or a subcustodian located in the United States or foreign
banking institution acting as a foreign subcustodian; provided,
however, that in the event of any such loss, damage or expense, the
Custodian shall take all reasonable steps to enforce such rights as
it or a subcustodian located in the United States or foreign banking
institution acting as a foreign subcustodian may have against the
Securities System to protect the interests of the Fund and the
Portfolios.
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3) Reimbursement of Expenses. The Fund agrees to reimburse the
Custodian for all reasonable out-of-pocket expenses incurred by the
Custodian on behalf of such Fund in connection with the fulfillment
of its obligations under this Section 13; provided, however, that
such reimbursement shall not apply to expenses occasioned by or
resulting from the negligence, misfeasance or misconduct of the
Custodian.
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13.3 Indemnification
1) Indemnification Obligations. Subject to the limitations set forth in
this Agreement, the Fund hereby indemnifies and holds harmless the
Custodian and its nominees from all loss, damage and expense
(including reasonable attorneys' fees) suffered or incurred by the
Custodian or its nominees caused by or arising from actions taken or
omitted by the Custodian on behalf of the Fund in the performance of
its duties and obligations under this Contract; provided, however,
that such indemnity shall not apply to loss, damage and expense
arising from the negligence, misfeasance or misconduct of the
Custodian or its nominee. In addition, the Fund hereby indemnifies
the Custodian, any subcustodian, Securities System, or their
respective nominees against any liability incurred by reason of
taxes assessed to such person, or other loss, damage or expenses
incurred by such person, resulting from the fact that securities and
other property of such Fund's Portfolios are registered in the name
of such person; provided, however, that in no event shall such
indemnification be applicable to income, franchise or similar taxes
which may be imposed or assessed against any person. Furthermore, if
the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment
of money or which action may, in the opinion of the Custodian,
result in the Custodian or its nominee assigned to the Fund or the
Portfolio being liable for the payment of money or incurring
liability of some other form, the Fund on behalf of the Portfolio,
as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but
not limited to securities settlements, foreign exchange contracts
and assumed settlement) or in the event that the Custodian or its
nominees shall incur or be assessed any taxes, charges, expenses or
assessments in connection with the performance of this Contract or
from any actions taken or omitted by the Custodian or its nominees
on behalf of the Fund in the performance of its duties under this
Contract, except such as may arise from its or its nominee's own
negligent action, negligent failure to act, misfeasance or willful
misconduct, any property at any time held for the account of the
applicable Portfolio shall be security therefor and should the Fund
fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of such
Portfolio's assets to the extent necessary to obtain reimbursement.
2) Notice of Litigation, Right to Prosecute, etc. If a person seeking
indemnification pursuant to Section 13.3(1) hereof fails to promptly
notify the Fund in writing of the commencement of any litigation or
any proceeding brought against such person (a "Proceeding"), the
Fund shall not be liable for indemnification under this Contract
with respect to such Proceeding to the extent that the Fund's
ability to defend is prejudiced by such failure.
With respect to claims in a Proceeding for which indemnity by the
Fund may be sought, the Fund shall be entitled to participate at its
own expense in the defense, or, if it so elects,
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<PAGE> 24
to assume the control of the defense of any Proceeding. In the
event the Fund elects to assume the control of the defense of any
Proceeding, the persons seeking indemnification pursuant to
Section 13.3(1) hereof involved in such Proceeding may retain
additional counsel for purposes of the Proceeding but shall bear
all fees and expenses of such retention of such counsel, unless
(i) the Fund shall have specifically authorized the retention of
such counsel, or (ii) if the Fund and such indemnified persons
agree that the retention of such counsel is required as a result
of a conflict of interest. If the Fund assumes control of any
Proceeding hereunder, the Fund shall keep the persons seeking
indemnification pursuant to Section 13.3(1) hereof notified of the
progress of such Proceeding and, upon request, consult with such
persons and their counsel concerning such Proceeding. The Fund
will, upon request by the persons seeking indemnification pursuant
to Section 13.3(1) hereof, either pay in the first instance or
reimburse such persons for any expenses subject to indemnity
hereunder.
The Fund shall not settle or compromise any Proceeding without the
prior written consent of each person seeking indemnification
pursuant to Section 13.3(1) hereof involved in such Proceeding,
which consent shall not be unreasonably upheld, unless (i) such
settlement or compromise involves no admission of guilt, wrongdoing,
or misconduct by any such person, (ii) such settlement or compromise
does not impose any obligations or restrictions on any such person
other than obligations to pay money that are subject to the
indemnity under this Contract, and (iii) the Fund shall have paid,
or made arrangements satisfactory to such person for payment of, all
amounts payable by each such person in connection with such
settlement.
Except as part of a settlement or compromise by the Fund in
accordance with the provisions of the immediately preceding
paragraph, no person seeking indemnification pursuant to Section
13.3(1) hereof may consent to the entry of any judgment or settle
any Proceeding subject to indemnity hereunder without providing the
Fund with at least 15 days prior written notice of any such judgment
or settlement and without the prior written consent of the Fund,
which consent will not be reasonably withheld (to the extent such
Proceeding relates to such person).
Each person seeking indemnification pursuant to Section 13.3(1)
hereof shall submit written evidence to the Fund with respect to any
cost or expense for which such person is seeking indemnification in
such form and detail as the Fund may reasonably request.
13.4 Fund's Right to Proceed.
Notwithstanding anything to the contrary contained herein, the Fund
shall have, at its election upon reasonable notice to the Custodian,
the right to enforce, to the extent permitted by any applicable
agreement and applicable law, the Custodian's right against any
subcustodians, Securities System, or other person for loss, damage
or expense caused the Fund by such subcustodian, Securities System,
or other person, and shall be entitled to enforce the rights of the
Custodian with respect to any claim against such subcustodian,
Securities System, or other person, which the Custodian may have as
a consequence of any such loss, damage or expense, if and to the
extent that
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<PAGE> 25
the Fund has not been made whole for any such loss or damage. If
the Custodian makes the Fund whole for any such loss or damage,
the Custodian shall retain the ability to enforce its rights
directly against such subcustodian, Securities System or other
person. Upon the Fund's election to enforce any rights of the
Custodian under this Section 13.4, the Fund shall reasonably
prosecute all actions and proceedings directly relating to the
rights of the Custodian in respect of the loss, damage or expense
incurred by the Fund; provided that, so long as the Fund has
acknowledged in writing its obligation to indemnify fully the
Custodian under Section 13.3 hereof with respect to such claim,
the Fund shall retain the right to settle, compromise and/or
terminate any action or proceeding in respect of the loss, damage
or expense incurred by the Fund without the Custodian's consent
and provided further, that if the Fund has not made an
acknowledgment of its obligation to indemnify, the Fund shall not
settle, compromise or terminate any such action or proceeding
without the written consent of the Custodian. The Custodian agrees
to cooperate with the Fund and take all actions reasonably
requested by such Fund in connection with the Fund's enforcement
of any rights of the Custodian. The Fund agrees to reimburse the
Custodian for all reasonable out-of-pocket expenses incurred by
the Custodian on behalf of the Fund in connection with the
fulfillment of its obligations under this Section 13.4; provided,
however, that such reimbursement shall not apply to expenses
occasioned by or resulting from the negligence, misfeasance or
misconduct of the Custodian.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
14. Effective Period, Termination and Assignment
This Contract shall become effective as of its execution and shall
continue in full force and effect until terminated by either party by an
instrument in writing, hand delivered or sent by certified mail, such
termination to take effect not sooner than sixty (60) days after the date of
such delivery or mailing; provided, however that the Custodian shall not with
respect to a Portfolio act under Section 2.10 hereof in the absence of receipt
of an initial certificate of the Secretary or an Assistant Secretary that the
Board of Trustees of the Fund has approved the initial use of a particular
Securities System by such Portfolio, as required by Rule 17f-4 under the
Investment Company Act of 1940, as amended and that the Custodian shall not with
respect to a Portfolio act under Section 2.11 hereof in the absence of receipt
of an initial certificate of the Secretary or an Assistant Secretary that the
Board of Trustees has approved the initial use of the Direct Paper System by
such Portfolio; provided further, however, that the Fund shall not amend or
terminate this Contract in contravention of any applicable federal or state
regulations, or any provision of the Articles of Incorporation, and further
provided, that the Fund on behalf of one or more of the Portfolios may at any
time by action of its Board of Trustees (i) substitute another bank or trust
company for the Custodian by giving notice as described above to the Custodian,
or (ii) immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the
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<PAGE> 26
Custodian such compensation as may be due as of the date of such termination and
shall likewise reimburse the Custodian for its costs, expenses and
disbursements.
This Contract may not be assigned by either party without the consent of
the other party, which consent in the case of the Fund shall be authorized or
approved by a resolution of the Board of Trustees of the Fund.
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<PAGE> 27
15. Successor Custodian
If a successor custodian for the Fund, of one or more of the Portfolios
shall be appointed by the Board of Trustees of the Fund, the Custodian shall,
upon termination, deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer, all securities of each
applicable Portfolio then held by it hereunder and shall transfer to an account
of the successor custodian all of the securities of each such Portfolio held in
a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in
like manner, upon receipt of a certified copy of a vote of the Board of Trustees
of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian on behalf of each applicable Portfolio and all
instruments held by the Custodian relative thereto and all other property held
by it under this Contract on behalf of each applicable Portfolio and to transfer
to an account of such successor custodian all of the securities of each such
Portfolio held in any Securities System. Thereafter, such bank or trust company
shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. Amendments
This Contract may be amended at any time by mutual agreement of the
parties hereto; provided that no amendment or change to this Contract shall be
authorized by the Fund on behalf of its Accounts without the written consent
signed by an officer with the title of either Chairman, Vice Chairman or
President and any officer with the title of Executive Vice President or
Treasurer and accepted in writing by any Vice President or Managing Director of
the Custodian.
17. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
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<PAGE> 28
Contract. Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the Declaration of Trust of the Fund. No
interpretive or additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Contract.
18. Additional Funds
In the event that the Fund establishes one or more series of Shares in
addition to Institutional International Equity Fund, Institutional Growth Equity
Fund, Institutional Growth and Income Fund, Institutional Equity Index Fund,
Institutional Social Choice Equity Fund, Institutional Bond Fund and
Institutional Money Market Fund with respect to which it desires to have the
Custodian render services as custodian under the terms hereof, it shall so
notify the Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Shares shall become a Portfolio hereunder.
19. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
20. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund on behalf of each of the Portfolios and the Custodian
relating to the custody of the Fund's assets.
21. Reproduction of Documents
This Contract and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
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22. Shareholder Communications
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether the Fund authorizes
the Custodian to provide the Fund's name, address, and share position to
requesting companies whose stock the Fund owns. If the Fund tells the Custodian
"no", the Custodian will not provide this information to requesting companies.
If the Fund tells the Custodian "yes" or do not check either "yes" or "no"
below, the Custodian is required by the rule to treat the Fund as consenting to
disclosure of this information for all securities owned by the Fund or any funds
or accounts established by the Fund. For the Fund's protection, the Rule
prohibits the requesting company from using the Fund's name and address for any
purpose other than corporate communications. Please indicate below whether the
Fund consent or object by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name, address,
and share positions.
NO [X] The Custodian is not authorized to release the Fund's name,
address, and share positions.
23. No Liability of Shareholders.
This Contract is executed by the Trustees of the Fund, not individually,
but rather in their capacity as Trustees under the Declaration of Trust made
April 15, 1999, as amended. None of the shareholders of the Fund, Trustees,
officers, employees, or agents of the Fund shall be personally bound or liable
under this Contract, nor shall resort be had to their private property for the
satisfaction of any obligation or claim hereunder but only to the property of
the Fund, and if the obligation or claim relates to the property held by the
Fund for the benefit of one or more but fewer than all Funds, then only to the
property held for the benefit of the affected Fund.
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SIGNATURE PAGE
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the eleventh, day of June, 1999.
ATTEST: TIAA-CREF INSTITUTIONAL MUTUAL FUNDS
/s/ STEWART P. GREENE By: /s/ JOHN J. McCORMACK
- ----------------------- ----------------------------------
Name: Stewart P. Greene Name: John J. McCormack
Title: Senior Counsel and Title: President, Duly Authorized
Assistant Secretary
ATTEST
/s/ STEWART P. GREENE By: /s/ RICHARD J. ADAMSKI
- ----------------------- ----------------------------------
Name: Stewart P. Greene Name: Richard J. Adamski
Title: Senior Counsel and Title: Vice President & Treasurer, Duly
Assistant Secretary Authorized
ATTEST: STATE STREET BANK AND TRUST COMPANY
/s/ STEPHANIE L. POSTER By: /s/ RONALD E. LOGUE
- --------------------- ----------------------------------
Stephanie L. Poster Ronald E. Logue, Vice Chairman, Duly Authorized
Vice President
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ADMINISTRATION AGREEMENT
Agreement dated as of _____________ by and between State Street Bank and
Trust Company, a Massachusetts trust company (the "Administrator"), and
TIAA-CREF Institutional Mutual Funds (the "Fund").
WHEREAS, the Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund desires to retain the Administrator to furnish certain
administrative services to the Fund on its behalf, and the Administrator is
willing to furnish such services, on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
1. APPOINTMENT OF ADMINISTRATOR
The Fund hereby appoints the Administrator to act as administrator with
respect to the Fund for purposes of providing certain administrative services
for the period and on the terms set forth in this Agreement. The Administrator
accepts such appointment and agrees to render the services stated herein.
The Fund will initially consist of the portfolios (each an "Investment
Fund") listed in Schedule A to this Agreement. In the event that the Fund
establishes one or more additional Investment Funds with respect to which the
Fund wishes to retain the Administrator to act as administrator hereunder, the
Fund shall notify the Administrator in writing and such Investment Fund shall
become subject to the provisions of this Agreement to the same extent as the
existing Investment Funds, except with respect to compensation as otherwise
provided in the Fee Schedule.
2. DELIVERY OF DOCUMENTS
The Fund will promptly deliver to the Administrator copies of each of the
following documents and all future amendments and supplements, if any:
a. The Fund's Declaration of Trust;
b. The Fund's registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and the 1940 Act and the Fund's
Prospectus(es) and Statement(s) of Additional Information relating
to all Investment Funds and all amendments and supplements thereto
as in effect from time to time;
c. Certified copies of the resolutions of either the Board of
Trustees of the Fund
<PAGE> 2
(the "Board") approving (1) the Fund entering into this Agreement
and (2) certain individuals on behalf of the Fund to (a) give
instructions to the Administrator pursuant to this Agreement and
(b) sign checks and pay expenses;
d. A copy of the investment management agreement between the Fund and
its investment adviser; and
e. Such other certificates, documents or opinions which the
Administrator may, in its reasonable discretion, deem necessary or
appropriate in the proper performance of its duties.
3. REPRESENTATION, WARRANTIES AND COVENANTS OF THE ADMINISTRATOR
The Administrator represents, warrants and covenants to TIAA that:
a. The Administrator is a trust company duly organized, validly
existing and in good standing under the laws of the Commonwealth
of Massachusetts.
b. The Administrator has the corporate power and authority to carry
on its business in the Commonwealth of Massachusetts as it is
currently conducted.
c. The Administrator has the legal right and power and has taken all
requisite corporate action necessary to authorize its execution,
delivery and performance of this Agreement.
d. No consent, approval or action of, or filing with or notice to,
any governmental or regulatory authority or any other person is
required on the part of the Administrator in connection with the
execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby.
e. No legal or administrative proceedings have been instituted or, to
the knowledge of the Administrator, threatened against the
Administrator that would impair the Administrator's ability to
perform its duties and obligations under this Agreement.
f. The Administrator's execution, delivery and performance of this
Agreement shall not cause a material breach or materially conflict
with any other agreement or obligation of the Administrator or any
law or regulation applicable to it.
g. The Administrator has and will continue to have access to, and
will take the commercially reasonable steps necessary to ensure
appropriate maintenance of,
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<PAGE> 3
the necessary facilities, equipment and personnel to perform its
duties and obligations under this Agreement
4. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Administrator that:
a. It has the corporate power and authority under applicable laws and
by its charter and by-laws to enter into and perform this
Agreement.
b. All requisite proceedings have been taken to authorize it to enter
into and perform this Agreement.
c. The Fund is a business trust, duly organized and existing and in
good standing under the laws of the State of Delaware.
d. The Fund is an investment company properly registered under the
1940 Act.
e. A registration statement under the 1933 Act and the 1940 Act has
been filed by the Fund and will be effective prior to the initial
offering of the Fund's shares to the public and will remain
effective while the Fund's shares are offered to the public.
f. No legal or administrative proceedings have been instituted or
threatened which would impair the Fund's ability to perform its
duties and obligations under this Agreement.
g. Its entrance into this Agreement shall not cause a material breach
or be in material conflict with any other agreement or obligation
of the Fund or any law or regulation applicable to it.
h. As of the date of this Agreement, the Fund is authorized to issue
shares of beneficial interest, and it will initially offer shares,
in the authorized amounts as set forth in Schedule A to this
Agreement.
5. ADMINISTRATION SERVICES
The Administrator shall provide the following services, in each case,
subject to the control and direction of the Fund and the review and comment by
the Fund's independent accountants and legal counsel and in accordance with
procedures which may be established from time to time between the Fund and the
Administrator:
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a. Oversee the determination and publication of the Fund's net asset
value in accordance with the Fund's policy as adopted from time to
time by the Board;
b. Oversee the maintenance by the Fund's custodian of certain books
and records of the Fund as required under Rule 31a-1(b) of the
1940 Act;
c. Prepare the Fund's federal, state and local income and excise tax
returns for review by the Fund's independent accountants and
officers and filing by a Fund officer or representative;
d. Review calculation and appropriateness, submit for approval by
officers of the Fund and arrange for payment of the Fund's
expenses;
e. Prepare for review and approval by officers of the Fund financial
information for the Fund's semi-annual and annual reports, proxy
statements and other communications required or otherwise to be
sent to Fund shareholders, and consult with Advisors regarding
arrangements for the printing and dissemination of such reports
and communications to shareholders;
f. Prepare for review by officers of and legal counsel for the Fund:
(1) the Fund's periodic financial reports required to be filed
with the U.S. Securities and Exchange Commission ("SEC") on Form
N-SAR and file thereafter; and (2) financial information required
by Form N-1A and such other reports, forms or filings as may be
mutually agreed upon;
g. Prepare and distribute reports to officers of the Fund relating to
the business and affairs of the Fund as may be mutually agreed
upon;
h. Make such reports and recommendations to the Board concerning the
performance and fees of the Fund's custodian and transfer and
dividend disbursing agent ("Transfer Agent") as the Board may
reasonably request or deems appropriate;
i. Oversee and review calculations of fees paid to and any
out-of-pocket expenses charged by the Fund's custodian and
Transfer Agent;
j. Consult with the Fund's officers, independent accountants, legal
counsel, custodian and Transfer Agent in establishing the
accounting policies of the Fund;
k. Provide periodic testing of portfolios as may be mutually agreed
upon, to assist the Fund's investment manager in complying with
Internal Revenue Code mandatory qualification requirements, the
requirements of the 1940 Act and Fund prospectus limitations,
prepare and disseminate to the officers of the Fund
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<PAGE> 5
reports providing the results of such testing, prepare and
distribute to officers of the Fund for review, reports determining
the amount, if any, of the Fund's required annual distribution to
shareholders and prepare and disseminate to the officers of the
Fund such other reports as may be agreed upon from time to time
and as are set forth in Schedule B to this Agreement. Details of
the scope of the services provided by the Administrator hereunder
shall be documented in the Fund Profile as agreed to by the Fund
and the Administrator from time to time;
Subject to review and comment by the Fund's legal counsel:
l. Make Board presentations where appropriate;
m. Prepare for review by officers of the Fund and file or assist in
filing thereafter Rule 24f-2 notices with the SEC; and
n. Assist the Fund in the handling of routine regulatory examinations
and work closely with the Fund's legal counsel in response to any
non-routine regulatory matters.
The Administrator shall provide the office facilities and the personnel
required by it to perform the services contemplated herein.
6. FEES; EXPENSES; EXPENSE REIMBURSEMENT
The Administrator shall receive from the Fund such compensation for the
Administrator's services provided pursuant to this Agreement as may be mutually
agreed to by the parties from time to time in a separate fee schedule (the "Fee
Schedule").
The Fund agrees to promptly reimburse the Administrator for any equipment
and supplies specially ordered by the Administrator upon the Fund's written
request or approval and for any other expenses not contemplated by this
Agreement that the Administrator may incur on the Fund's behalf at the Fund's
written request or approval.
The Administrator will bear all expenses that are incurred in the
performance of its duties under this Agreement and not specifically assumed by
the Fund. Except as noted herein, expenses to be borne by the Fund are: cost of
services of the Fund's independent accountants and outside legal and tax counsel
(including such counsel's review of the Fund's registration statement, proxy
materials, federal and state tax qualification as a regulated investment company
and other reports and materials prepared by the Administrator under this
Agreement); cost of any services contracted for by the Fund directly from
parties other than the Administrator; cost of trading operations and brokerage
fees, commissions and transfer taxes in connection with the purchase and sale of
securities for the Fund; investment management fees; taxes, insurance premiums
and other fees and expenses applicable to the Fund's operation; costs incidental
to any meetings of the Fund's shareholders including, but not limited to, legal
and accounting
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<PAGE> 6
fees, proxy filing fees and the costs of preparation, printing and mailing of
any proxy materials; costs incidental to Board meetings; the salary and expenses
of any officer or employee of the Fund; costs incidental to the preparation,
filing, printing and distribution of the Fund's registration statements and any
amendments thereto and shareholder reports; cost of typesetting and printing of
prospectuses; cost of preparation and filing of the Fund's tax returns, Forms
N-1A and N-SAR, and all notices, registrations and amendments associated with
applicable federal and state tax and securities laws; all applicable
registration fees and filing fees required under federal and state securities
laws; and fidelity bond and directors' and officers' liability insurance.
The Administrator is authorized to and may employ or associate with such
person or persons as the Administrator may deem desirable to assist it in
performing its duties under this Agreement; provided, however, that the
compensation of such person or persons shall be paid by the Administrator and
that the Administrator shall be as fully responsible to the Fund for the acts or
omissions of any such person or persons as it is for its own acts or omissions.
7. INSTRUCTIONS AND ADVICE
At any time, the Administrator may apply to authorized officers of the
Fund for instructions and may consult with in-house legal counsel for the Fund
or the independent accountants for the Fund or at its own cost may consult with
its own legal counsel, with respect to any matter arising in connection with the
services to be performed by the Administrator under this Agreement. The
Administrator shall not be liable, and shall be indemnified by the Fund, for any
action taken or omitted by it in good faith and with reasonable care and without
negligence in reliance upon any such instructions or advice or upon any paper or
document reasonably believed by it to be genuine and to have been signed by the
proper person or persons; provided however, with respect to the performance of
any action or omission of any action upon such legal advice by its own counsel,
the Administrator shall be required to conform to the standard of care set forth
herein and further provided that the Administrator shall follow the advice of
the Fund's in-house legal counsel in instances where the advice of the Fund's
in-house legal counsel and the Administrator's legal counsel differ. The
Administrator shall not be held to have notice of any change of authority of any
person until receipt of written notice thereof from the Fund. Nothing in this
paragraph shall be construed as imposing upon the Administrator any obligation
to seek such instructions or advice, or to act in accordance with such advice
when received.
8. STANDARD OF CARE, LIMITATION OF LIABILITY AND INDEMNIFICATION
The Administrator shall exercise reasonable care and diligence in
carrying out the provisions of this Agreement. The Administrator shall be
responsible for the performance of only such duties as are set forth in this
Agreement and, except as otherwise provided under Section 6, shall have no
responsibility for the actions or activities of any other party, including other
service providers. The Administrator shall have no liability for any error of
judgment or mistake of law or for any loss or damage resulting from the
performance of or failure to perform its duties hereunder unless caused by or
resulting from the negligence, willful misconduct or bad faith of the
Administrator, its officers, employees or others provided under Section 6. The
Administrator shall not be liable for any special,
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<PAGE> 7
indirect, incidental, or consequential damages of any kind whatsoever
(including, without limitation, attorneys' fees) under any provision of this
Agreement or for any such damages arising out of any act or failure to act
hereunder. In any event, for any liability or loss suffered by the Fund
including, but not limited to, any liability relating to qualification of the
Fund as a regulated investment company or any liability relating to the Fund's
compliance with any federal or state tax or securities statute, regulation or
ruling, the Administrator's liability under this Agreement shall be limited to
its total annual compensation earned by and fees paid to the Administrator
hereunder during the twelve months preceding the date of the agreement of
settlement of the claim or date of entry of final judgment, provided that in the
event that such compensation is less than two million dollars and liabilities or
losses suffered by the Fund exceed such compensation, the Administrator shall be
liable for up to two million dollars of such liabilities or losses, and further
provided that in the event that both such compensation and liabilities or losses
exceed ten million dollars, the Administrator's liability hereunder shall be
limited to ten million dollars.
The Administrator shall not be responsible or liable for any failure or
delay in performance of its obligations under this Agreement caused by acts of
God, by equipment or transmission failure reasonably beyond its control or by
other circumstances reasonably beyond its control, except to the extent that the
Administrator shall have failed to use its best efforts to undertake
commercially reasonable efforts to minimize the likelihood of occurrence of such
circumstances or to mitigate any loss or damage caused to the Fund by such
circumstances.
The Fund shall indemnify and hold the Administrator harmless from all
loss, cost, damage and expense, including reasonable fees and expenses for
counsel, incurred by the Administrator resulting from any claim, demand, action
or suit in connection with the Administrator's acceptance of this Agreement, any
action or omission by the Administrator in the performance of its duties
hereunder, or as a result of acting upon any instructions reasonably believed by
it to have been duly authorized by authorized officers of the Fund, provided
that this indemnification shall not apply to actions or omissions of the
Administrator, its officers or employees in cases of its or their own
negligence, willful misconduct or bad faith.
The Fund will be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense of any suit brought to
enforce any liability subject to the indemnification provided above. In the
event the Fund elects to assume the defense of any such suit and retain counsel,
the Administrator or any of its affiliated persons, named as defendant or
defendants in the suit, may retain additional counsel but shall bear the fees
and expenses of such counsel unless (i) the Fund shall have specifically
authorized the retaining of such counsel or (ii) the Fund and the Administrator
agree that the retention of such counsel is required as a result of a conflict
of interest. The Administrator shall not settle any action, suit, claim or
demand which indemnity may be sought hereunder without the prior written
approval of the Fund, which approval shall not be unreasonably withheld.
In addition to the liability of the Administrator under this Section 8,
the Administrator shall also be liable to the Fund for all reasonable
out-of-pocket costs and expenses incurred by the Fund in connection with any
claim by the Fund against the Administrator arising from the obligations of the
Administrator hereunder, including, without limitation, all reasonable
attorneys' fees and expenses
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<PAGE> 8
incurred by the Fund in asserting any such claim, and out-of-pocket expenses
incurred by the Fund in connection with any lawsuits or proceedings relating to
such claim, provided that the Fund has recovered from the Administrator for such
claim.
The indemnification provisions contained herein shall survive the
termination of this Agreement.
9. CONFIDENTIALITY
The Administrator agrees that, except as otherwise required by law or in
connection with any required disclosure to a banking or other regulatory
authority, it will keep confidential all records and information in its
possession relating to the Fund or its shareholders or shareholder accounts and
will not disclose the same to any person except at the request or with the
written consent of the Fund. The Administrator further agrees that it shall use
such records and information solely for the purposes authorized in this
Agreement.
10. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS; RECORDS
Without derogating any of the Administrator's responsibilities under this
Agreement, the Fund assumes full responsibility for complying with all
securities, tax, commodities and other laws, rules and regulations applicable to
the Fund. In performing all services under this Agreement, the Administrator
shall act in conformity with the Fund's Declaration of Trust and any amendments
thereto, Board authorizations and determinations and the fundamental policies of
the Fund as reflected in the Fund's registration statement.
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
Administrator agrees that all records which it maintains for the Fund shall at
all times remain the property of the Fund, shall be readily accessible during
normal business hours, and shall be promptly surrendered upon the termination of
the Agreement or otherwise on written request. The Administrator further agrees
that all records which it maintains for the Fund pursuant to Rule 31a-1 under
the 1940 Act will be preserved for the periods prescribed by Rule 31a-2 under
the 1940 Act unless any such records are earlier surrendered as provided above.
Records shall be surrendered in usable machine-readable form or such other
formats as reasonably requested by the Fund.
11. SERVICES NOT EXCLUSIVE
The services of the Administrator to the Fund are not to be deemed
exclusive, and the Administrator shall be free to render similar services to
others; provided however that the Administrator shall equitably allocate its
resources in supplying services to the Fund and others. The Administrator shall
be deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized by the Fund from time to time, have no authority
to act or represent the Fund in any way or otherwise be deemed an agent of the
Fund.
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<PAGE> 9
12. INSPECTION AND AUDITS
The Administrator shall permit the Fund's representatives, during the
term of this Agreement, upon reasonable prior notice, to conduct periodic
inspections of any properties, documents, books, reports workpapers and other
records of the Fund in the possession of the Administrator relating to any
service, product or work provided to the Fund by the Administrator in connection
with this Agreement.
The Administrator agrees to provide reasonable notice to the Fund of any
meeting between the Administrator and the Fund's independent accountants and to
allow representatives of the Fund to attend any such meeting.
The Administrator agrees to furnish to the Fund annual reports under SAS
70 prepared by an independent auditing firm.
13. NOTIFICATION OF CONTACTS BY REGULATORS
The Administrator shall promptly notify the Fund of any and all legal
notices received by or served on the Administrator with respect to the Fund. The
Administrator shall promptly notify the Fund of all other contacts received by
the Administrator from any regulatory department or agency or other governmental
authority purporting to regulate the Fund and not the Administrator, regarding
the Administrator's duties and activities under this Agreement. The
Administrator will cooperate with the Fund's representatives in responding to
these contacts, with the Fund responsible for the costs and expenses thereof.
14. TERM, TERMINATION AND AMENDMENT
This Agreement shall become effective as of the date first written above.
The Agreement shall remain in effect for a period of three (3) years from the
effective date provided, however, that: (i) either party may terminate this
Agreement without prejudice to any other remedy it may have, upon the material
breach of this Agreement provided, however, that the non-breaching party shall
have given the breaching party written notice of such breach and that the
breaching party cannot or shall not have cured to the reasonable satisfaction of
the non-breaching party any such breach within thirty (30) days of such notice;
and (ii) the Administrator shall have the right to terminate this Agreement upon
the termination by the Fund of the Custodian Contract between the Administrator
and the Fund dated June 11, 1999 within the first three years of effectiveness
of the Custodian Contract. Termination shall become effective in 120 days after
the end of the 30 day cure period in the case of (i) above and concurrently with
effective termination of the Custodian Contract in the case of (ii) above. This
Agreement shall automatically continue in effect after such three period unless
terminated by the Fund on ninety (90) days' prior written notice to the
Administrator, or by the Administrator on one hundred eighty (180) days' prior
written notice to the Fund, with such termination to be effective at the time
specified in the written notice. Termination of this Agreement with respect to
any given Investment Fund shall in no way affect the continued validity of this
Agreement with respect to any other Investment Fund. Administrator shall, at
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the Fund's expense, transfer all records maintained by the Administrator under
this Agreement and shall cooperate in the transfer of its duties and
responsibilities under this Agreement. This Agreement may be modified or amended
from time to time by mutual written agreement of the parties hereto.
15. YEAR 2000
The Administrator will take reasonable steps to ensure that its products
(and those of its third-party suppliers) reflect the available state of the art
technology to offer products that are Year 2000 compliant, including, but not
limited to, century recognition of dates, calculations that correctly compute
same century and multi-century formulas and date values, and interface values
that reflect the date issues arising between now and the next one hundred years.
If any changes are required, the Administrator will make the changes to its
products at no cost to the Fund and in a commercially reasonable time frame and
will require third-party suppliers to do likewise.
16. NOTICES
Any notice or other communication authorized or required by this
Agreement to be given to either party shall be in writing and deemed to have
been given when delivered in person or by confirmed facsimile, or posted by
certified mail, return receipt requested, to the following address (or such
other address as a party may specify by written notice to the other): if to the
Fund: TIAA-CREF Institutional Mutual Funds, 730 Third Avenue, New York, New York
10017, Attn: TIAA-CREF Institutional Mutual Funds Product Manager, with a copy
to General Counsel, fax: (212) 916-6230; if to the Administrator: State Street
Bank and Trust Company, 2 Avenue de Lafayette, Boston MA 02111-1724, Attn:
Mutual Funds Legal Division, fax: (617) 662-3805.
17. NON-ASSIGNABILITY
This Agreement shall not be assigned by either party hereto without the
prior consent in writing of the other party.
18. SUCCESSORS
This Agreement shall be binding on and shall inure to the benefit of the
Fund and the Administrator and their respective permitted assigns.
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19. ENTIRE AGREEMENT
This Agreement contains the entire understanding between the parties
hereto with respect to the subject matter hereof and supersedes all previous
representations, warranties or commitments regarding the services to be
performed hereunder whether oral or in writing.
20. WAIVER
The failure of a party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver nor shall it
deprive such party of the right thereafter to insist upon strict adherence to
that term or any term of this Agreement. Any waiver must be in writing signed by
the waiving party.
21. SEVERABILITY
If any provision of this Agreement is invalid or unenforceable, the
balance of the Agreement shall remain in effect, and if any provision is
inapplicable to any person or circumstance it shall nevertheless remain
applicable to all other persons and circumstances.
22. GOVERNING LAW
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the State of New York.
23. REPRODUCTION OF DOCUMENTS
This Agreement and all schedules, exhibits, attachments and amendments
hereto may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties hereto
all/each agree that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
24. LIMITATION OF LIABILITY OF TRUSTEES AND SHAREHOLDERS
The parties agree that the obligations of the Fund under the Agreement
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Fund personally, but bind only the trust property of
the Fund. The execution and delivery of this Agreement have been authorized by
the Trustees of the Fund and signed by an officer of the Fund, acting as such,
and neither such authorization nor such execution and delivery shall be deemed
to have been made by any of them individually or to impose any liability on any
of them personally, but shall bind only the trust property of the Fund.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the date first written above.
TIAA-CREF INSTITUTIONAL MUTUAL FUNDS
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
STATE STREET BANK AND TRUST COMPANY
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
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<PAGE> 13
ADMINISTRATION AGREEMENT
TIAA-CREF LIFE FUNDS
SCHEDULE A
LISTING OF INVESTMENT FUNDS AND AUTHORIZED SHARES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
VM1P Institutional International Equity Fund Unlimited number of shares of all
Investment Funds
- -----------------------------------------------------------------------------------------------------
<S> <C>
VM1Q Institutional Growth Equity Fund
- -----------------------------------------------------------------------------------------------------
VM1R Institutional Growth and Income Fund
- -----------------------------------------------------------------------------------------------------
VM1S Institutional Equity Index Fund
- -----------------------------------------------------------------------------------------------------
VM1U Institutional Social Choice Equity Fund
- -----------------------------------------------------------------------------------------------------
VM1V Institutional Bond Fund
- -----------------------------------------------------------------------------------------------------
VM1W Institutional Money Market Fund
- -----------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 14
SCHEDULE B
TIAA-CREF
LISTING OF REPORTS PREPARED BY
STATE STREET FUND ADMINISTRATION DEPARTMENT
<TABLE>
<CAPTION>
REPORT NAME FREQUENCY
- ----------- ---------
<S> <C>
Reports on Compliance with SEC and IRS
Restrictions in accordance with the Fund Profile Monthly or more frequently, if
requested and agreed to by the parties.
Annual and Semi-Annual Financial Statements Bi-Annually
Form N-SAR Bi-Annually
24f-2 Filing Report Annually
Form 1099 Misc. Annually
Form 1096 Annually
Form 1042 and 1042S Annually
Form 1902-AP Annually
Form 1902-b Annually
Form 8613 Annually
Form 2758 As needed
Form 1120 RIC Annually
Form 7004 As needed
Sec. 852(b)(3)(C) Notification As needed
State and local income and excise tax filings As needed
</TABLE>
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<PAGE> 1
TRANSFER AGENCY AND SERVICE AGREEMENT
BETWEEN
TIAA-CREF INSTITUTIONAL MUTUAL FUNDS
AND
BOSTON FINANCIAL DATA SERVICES, INC.
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
1. Terms of Appointment: Duties of BFDS .........................................1
2. Provision by BFDS of Computer Software and Hardware ..........................4
3. Fees and Expenses ............................................................6
4. Representations and Warranties of BFDS .......................................7
5. Representations and Warranties of the Fund ...................................7
6. Year 2000 ....................................................................8
7. Data Access and Proprietary Information ......................................8
8. Indemnification ..............................................................9
9. Standard of Care ............................................................10
10. Covenants of the Fund and BFDS ..............................................11
11. Termination of Agreement ....................................................13
12. Additional Funds ............................................................14
13. Assignment ..................................................................14
14. Amendment ...................................................................14
15. New York Law to Apply .......................................................14
16. Force Majeure ...............................................................14
17. Consequential Damages .......................................................14
18. Merger of Agreement .........................................................15
19. Counterparts ................................................................15
20. Notices .....................................................................15
</TABLE>
<PAGE> 3
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of ________________, 1999, by and between TIAA-CREF
Institutional Mutual Funds (the "Fund") and Boston Financial Data Services,
Inc., a Massachusetts corporation having its principal office and place of
business at 225 Franklin Street, Boston, Massachusetts 02110 ("BFDS").
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets;
WHEREAS, the Fund intends to initially offer shares in seven series, the Growth
and Income Series, Money Market Series, Growth Equity Series, International
Equity Series, Bond Series, Equity Index Series, Social Choice Equity Series,
(each such series, together with all other series subsequently established by
the Fund and made subject to this Agreement in accordance with Article 11, being
herein referred to as a "Portfolio", and collectively as the "Portfolios");
WHEREAS, the Fund and the Portfolios desires to appoint BFDS as the Fund's
transfer agent, dividend disbursing agent, and agent in connection with certain
other activities, and BFDS desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. TERMS OF APPOINTMENT: DUTIES OF BFDS
1.1 Subject to the terms and conditions set forth in this Agreement, the Fund
and its Portfolios hereby employs and appoints BFDS to act as, and BFDS
agrees to act as transfer agent for the Fund's authorized and issued
shares of beneficial interest ("Shares"), dividend disbursing agent, and
agent in connection with any accumulation, open account or similar plans
provided to shareholders of each of the respective Portfolios of the Fund
("Shareholders") and set out in the currently effective prospectus and
statement of additional information ("prospectus") of the Fund on behalf
of the applicable Portfolio, including without limitation any periodic
investment plan or periodic withdrawal program.
1.2 BFDS agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and each of the Portfolios, as
applicable and BFDS, BFDS shall:
(i) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation
thereof to the custodian of the Fund authorized by the
Trustees of the Fund pursuant to the Declaration of Trust
of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number
of Shares and
<PAGE> 4
hold such Shares in the appropriate Shareholder account(s);
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation
thereof to the Custodian;
(iv) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay
over or cause to be paid over in the appropriate manner
such monies as instructed by the redeeming Shareholder(s);
(v) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and
distributions declared by the Fund on behalf of the
applicable Portfolio;
(vii) Provide, on behalf of the Fund, timely, accurate and
factual responses to Shareholder inquiries received over
the phone, by mail, by facsimile, or by other electronic
means. Also, maintain copies of written correspondence
received, and produce, deliver, and maintain copies of
correspondence generated in response to such inquiries;
(viii) Maintain records of account for and advise the Fund and its
Shareholders as to items (i) through (vii) and;
(ix) Record the issuance of Shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total
number of Shares of the Fund which are authorized, based
upon data provided to it by the Fund, and issued and
outstanding. BFDS shall also provide the Fund on a regular
basis with the total number of Shares which are authorized
and issued and outstanding and shall have no obligation,
when recording the issuance of Shares, to monitor the
issuance of such Shares or to take cognizance of any laws
relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Fund.
(b) In addition to and neither in lieu nor in contravention of the
services set forth in the above paragraph (a), BFDS shall: (i)
perform the customary services of a transfer agent, dividend
disbursing agent, and, as relevant, agent in connection with
accumulation, open-account or similar plans (including without
limitation any periodic investment plan or periodic withdrawal
program), including but not limited to: maintaining all
Shareholder accounts, preparing Shareholder meeting lists, mailing
and tabulating proxies, mailing Shareholder reports and
prospectuses to current Shareholders, withholding, depositing and
reporting taxes on U.S. resident and non-resident alien accounts,
preparing, filing and issuing U.S. Treasury Department and IRS
Forms 1099 and other appropriate forms required
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<PAGE> 5
with respect to dividends and distributions by federal authorities
for all Shareholders and maintaining appropriate records in
compliance with all applicable regulatory requirements, preparing
and mailing confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares and other
confirmable transactions in Shareholder accounts, preparing and
mailing activity statements for Shareholders, and providing
Shareholder account information; and (ii) provide a system which
will enable the Fund and/or its designee to monitor the total
number of Fund Shares sold in each State. Such system shall
include the generation and delivery to the Fund and/or its
designee of a daily report detailing the sale of Fund Shares for
the previous day in each of the States Fund Shares are sold.
(c) In connection with state tax reporting services to be provided by
BFDS pursuant to this Agreement, BFDS and the Fund shall mutually
agree on state tax reporting obligations on an annual or other
mutually agreeable periodic basis.
(d) In addition, the Fund and/or its designee shall: (i) identify to
BFDS in writing those transactions and assets to be treated as
exempt from blue sky reporting for each State; and (ii) verify the
establishment of transactions for each State on the system prior
to activation and thereafter monitor the daily activity for each
State. The responsibility of BFDS for the Fund's blue sky
registration status is solely limited to the initial establishment
of transactions and the reporting of such transactions as provided
above.
(e) Procedures as to who shall provide certain of these services in
this Section 1 may be established from time to time by agreement
between the Fund and each Portfolio and BFDS per the attached
service responsibility schedule. BFDS may at times perform only a
portion of these services and the Fund or its agent may perform
these services on the Fund's behalf.
(f) BFDS shall provide additional services on behalf of the Fund
(i.e., services pertaining to escheatments, garnishment orders,
bankruptcy and divorce proceedings, IRS or State tax authority tax
levies and summonses and all matters relating to the foregoing)
which may be agreed upon in writing between the Fund and BFDS.
(g) BFDS represents that:
(i) It is in compliance with applicable money laundering and
currency transaction reporting laws, regulations, and
government guidance including suspicious activity reporting
and recordkeeping requirements, and has adequate policies,
procedures and internal controls to ensure compliance;
(ii) It monitors transactions to identify unacceptable forms of
payment (as defined in the Fund's current prospectus, as
amended from time to time)
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<PAGE> 6
and reportable and suspicious transactions and reports to
the appropriate authorities reportable and suspicious
transactions;
(iii) It is in compliance with applicable federal laws and U.S.
Treasury Office of Foreign Assets Control ("OFAC")
regulations, government guidance, and blocking and
notification requirements, including, but not limited to,
executive orders issued by the President of the United
States (collectively referred to as "OFAC laws"), and has
adequate policies, procedures and internal controls to
ensure compliance as it pertains to embargoed and
sanctioned countries and nationals, citizens and/or
residents thereof and their financial transactions; and
(iv) It will identify all (i) new accounts and (ii) accounts
effecting registration changes in financial transactions
against OFAC laws and OFAC lists identifying specially
designated terrorists, nationals, narcotic traffickers,
governments and persons.
(h) BFDS shall provide trained customer transaction processing staff
who will process Shareholder transaction requests. BFDS
understands and agree that such staff will be considered to be
dedicated to providing services primarily to the Fund, but may,
from time to time, during periods of exceptional business volume,
be utilized to provide services to one or another of BFDS' other
clients.
2. PROVISION BY BFDS OF COMPUTER SOFTWARE AND HARDWARE
2.1 BFDS will provide computer software and hardware, or arrange for it to be
provided, and provide for the maintenance of such software and hardware,
for the purposes of performing its duties as described herein,
specifically including, but not limited to establishing electronic
interfaces with the Fund as necessary to provide daily file transfers
from BFDS to the Fund and vice-versa. Specifically, but not by way of
limitation, BFDS will make available to the Fund and each Portfolio the
following systems:
a. DST TA/2000 System and its peripheral applications
b. DST AWD and AWD/View Manager Systems
c. DST Investor System
d. DST CSW/ISW
2.2 BFDS will insure that on-line environments are available each business
day between the hours of 7:00 a.m. and 8:00 p.m. Eastern Standard Time.
2.3 BFDS will provide the Fund with full documentation of all computer
software and hardware to be utilized for the purposes of administering
its duties as described herein, including but without limitation,
applications, interfaces, database structures, hardware architecture and
communication links etc.
4
<PAGE> 7
2.4 BFDS will notify the Fund, in writing, at least sixty (60) days in
advance of the implementation of any and all changes to software and
hardware that will materially affect the administration of its duties
and/or the interfaces established with the Fund. Further, BFDS will plan
and execute, to the reasonable satisfaction of the Fund, appropriate
levels of unit and acceptance testing of any such changes before
implementing them into the production environment(s) utilized to meet its
responsibilities to the Fund as described herein.
2.5 BFDS agrees to take all reasonable steps necessary to remedy production
problems with the operation of the software and hardware, including but
without limitation, those related to programming errors and operating
environment malfunctions; until such problems have been remedied as
mutually agreed to by the Fund and BFDS.
2.6 BFDS will maintain commercially reasonable security protocols for all
software and hardware utilized in meeting its administrative duties as
described herein; including but without limitation, those related to
applications, data centers, systems, networks, telecommunication links,
tape management facilities, and virus control mechanisms. BFDS, upon its
knowledge of any material violation of the established security
protocols, shall notify, by telephone, the Fund's or its designee's
Manager of Technical Services, within twenty-four (24) hours following
the discovery of said violation(s). Further, BFDS will comply, within one
(1) business day, with any request from the Fund for a security lock out
of any Officer of the Fund.
2.7 BFDS will provide for back-up of the computer software and hardware,
maintain the Fund's data files in a manner so as to minimize risk of
damage or loss and will provide for daily back-up of those data files.
BFDS will maintain a comprehensive disaster recovery plan and will
maintain back-up processing facilities, and will provide for transition
to such back-up processing sites in the event that computer software or
hardware downtime at BFDS' offices, or those of its subcontractors
exceeds twenty-four (24) consecutive hours.
2.8 BFDS agrees to provide the Fund with a copy of its Disaster Recovery Plan
upon the request of the Fund. BFDS will test its Disaster Recovery Plan
at least once per calendar year at a time mutually agreeable with the
Fund and a Fund representative shall have the right to be present at such
test. BFDS further agrees to annually provide the Fund with copies of its
audited SAS 70 report.
2.9 BFDS further agrees to provide connectivity for on-line access,
transmissions of data files, and all other functions as described herein
to the Fund in New York City, New York, White Plains, New York, Denver,
Colorado, the Fund's back-up site in Sterling Forest, NY and such
additional sites to be mutually agreed upon by the parties . In the event
that the Fund must invoke their own disaster recovery plans, BFDS agrees
to work with them to make alternative site access available for use
within a forty-eight hour time period from the time of a disaster
declaration by the Fund and to reasonably accommodate daily processing
outside of a regular business day in the event of an emergency situation
incurred by the Fund.
5
<PAGE> 8
2.10 As part of the Fund's implementation plan for the service to be rendered
under this Agreement, BFDS will provide for training on all systems that
are proprietary to BFDS and that will be utilized by the Fund in
connection with this Agreement. Such training will take place at the
Fund's New York offices at times agreed to by the parties. Similarly,
BFDS will provide training required as a result of administrative,
systems or operating changes initiated by BFDS. However, training
requested by the Fund for new employees of it designee, or for changes
initiated by the Fund, will be provided on a schedule and in a location
mutually agreed to in writing by the parties and BFDS' costs related to
such subsequent training shall be billed to the Fund as an out-of-pocket
expense.
2.11 BFDS will ensure that technical support services from DST Systems, Inc.
("DST") are available to the Fund 24 hours a day each day of the year.
BFDS technical support staff will be made available each business day
between the hours of 7:00 a.m. and 11:00 p.m. Eastern Standard Time. BFDS
will provide a list of contact staff and phone numbers, including those
of unit/shift managers at BFDS and DST, to the Fund or its designee.
2.12 BFDS will conduct batch processing of all Shareholder transactions each
business day. Transactions received by 4:00 p.m. Eastern Time will be
applied to the current business day. BFDS will ensure that batch
processing files are available for electronic transmission to the Fund
between the hours of 3:00 a.m. and no later than 5:00 a.m. Eastern Time
each day. BFDS will ensure monitoring of batch on-line transmissions and
will immediately notify the Fund's Production Processing staff in the
event that production/transmission problems occur or when batch
transmission windows are anticipated to be exceeded.
2.13 BFDS will provide the Fund with three (3) AWD/CSW compatible workstations
for its use. The parties shall mutually agree upon any provision by BFDS
of any additional connectivity and workstations requested by the Fund and
any additional charges resulting therefrom. Each workstation will be
configured to be fully compatible with BFDS/DST applications.
2.14 Upon request, BFDS will provide the Fund with connectivity to all
appropriate computer or other systems for use by the Fund in servicing
Shareholders at locations designated by the Fund in a mutually agreeable
system configuration.
3. FEES AND EXPENSES
3.1 For the services rendered by BFDS pursuant to this Agreement, the Fund
agrees to compensate BFDS by paying the fees set out in the fee schedule
attached hereto. Such fees and out-of-pocket expenses referenced under
Section 3.2 below may be changed from time to time subject to mutual
written agreement between the Fund and BFDS.
3.2 In addition to the fees referenced under Section 3.1 above, the Fund
agrees to reimburse BFDS for reasonable out-of-pocket expenses as
reflected in the fee schedule attached hereto.
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<PAGE> 9
3.3 The Fund agrees to pay all fees and reimbursable expenses within thirty
(30) days following the receipt of the monthly billing notice. Upon the
termination of this Agreement before the end of any month, the fee for
the part of the month before such termination shall be prorated according
to the proportion which such part bears to the full monthly period and
shall be payable within thirty (30) days following the receipt of the
billing notice.
4. REPRESENTATIONS AND WARRANTIES OF BFDS
BFDS represents and warrants to the Fund that:
4.1 It is a corporation duly organized and existing and in good standing
under the laws of The Commonwealth of Massachusetts;
4.2 It is duly registered as a transfer agent pursuant to Section 17A(c)(2)
of the Securities Exchange Act of 1934, as amended ("Section 17A(c)(2)");
4.3 It is duly qualified to carry on its business in The Commonwealth of
Massachusetts;
4.4 It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform this Agreement;
4.5 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement;
4.6 It has and will continue to have access to, and will take the
commercially reasonable steps necessary to ensure appropriate maintenance
of, the necessary facilities, equipment and personnel to perform its
duties and obligations under this Agreement; and
4.7 It will comply with all applicable regulatory requirements.
5. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to BFDS that:
5.1 The Fund is a business trust organized and existing and in good standing
under the laws of the State of Delaware;
5.2 The Fund is empowered under applicable laws and by its Declaration of
Trust to receive services pursuant to this Agreement;
5.3 The Fund has performed all requisite corporate proceedings to receive
services pursuant to this Agreement;
5.4 The Fund is an open-end and diversified management investment company
registered
7
<PAGE> 10
under the Investment Company Act of 1940, as amended; and
5.5 A registration statement under the Securities Act of 1933, as amended, on
behalf of each of the Portfolios will be effective upon or prior to the
initial offering of the Fund's Shares to the public and will remain
effective while the Fund's Shares are offered to the public, and
appropriate State securities law filings have been or will be made and
will continue to be made, with respect to all Shares of the Fund being
offered for sale;
6. YEAR 2000
BFDS will take reasonable steps to ensure that its products (and those of
its third-party suppliers) reflect the available state of the art
technology to offer products that are Year 2000 compliant, including, but
not limited to, century recognition of dates, calculations that correctly
compute same century and multi century formulas and date values, and
interface values that reflect the date issues arising between now and the
next one-hundred years, and if any changes are required, BFDS will make
the changes to its products at no cost to the Fund and in a commercially
reasonable time frame and will require third-party suppliers to do
likewise.
7. DATA ACCESS AND PROPRIETARY INFORMATION
7.1 The Fund acknowledges that the data bases, computer programs, screen
formats, report formats, interactive design techniques, and documentation
manuals furnished to the Fund by BFDS as part of the Fund's ability to
access certain Fund-related data ("Customer Data") maintained by BFDS on
data bases under the control and ownership of BFDS ("Data Access
Services") constitute copyrighted, trade secret, or other proprietary
information (collectively, "Proprietary Information") of substantial
value to BFDS or other third party. In no event shall Proprietary
Information be deemed Customer Data. The Fund agrees to treat all
Proprietary Information as proprietary to BFDS and further agrees that it
shall not divulge to any person or organization except as may be provided
hereunder. Without limiting the foregoing, the Fund agrees for itself and
its employees and agents:
(a) to access Customer Data solely from locations as may be designated
in writing by BFDS and agreed to by the Fund and solely in
accordance with BFDS' applicable user documentation;
(b) to refrain from copying or duplicating in any way the Proprietary
Information;
(c) to refrain from obtaining unauthorized access to any portion of
the Proprietary Information, and if such access is inadvertently
obtained, to inform in a timely manner of such fact and dispose of
such information in accordance with BFDS' instructions;
(d) to refrain from causing or allowing the data acquired hereunder
from being
8
<PAGE> 11
retransmitted to any other computer facility or other location,
except with the prior written consent of BFDS;
(e) that the Fund shall have access only to those authorized
transactions agreed upon by the parties; and
(f) to honor all reasonable written requests made by BFDS to protect
at BFDS' expense the rights of BFDS in Proprietary Information at
common law, under federal copyright law and under other federal or
State law.
Each party shall take reasonable efforts to advise its employees of their
obligations pursuant to this Section 7. The obligations of this Section
shall survive any earlier termination of this Agreement.
7.2 If the transactions available to the Fund include the ability to
originate electronic instructions to BFDS in order to (i) effect the
transfer or movement of cash or Shares or (ii) transmit Shareholder
information or other information, then in such event BFDS shall be
entitled to rely on the validity and authenticity of such instruction
without undertaking any further inquiry as long as such instruction is
undertaken in conformity with security procedures established by the Fund
and BFDS from time to time.
8. INDEMNIFICATION
8.1 BFDS shall not be responsible for, and the Fund shall indemnify and hold
BFDS harmless from any and all losses, damages, costs, charges,
reasonable counsel fees, payments, expenses and liability arising out of
or attributable to:
(a) All actions of BFDS or its agents or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are
taken in good faith and with reasonable care and without
negligence or willful misconduct;
(b) The Fund's lack of good faith, negligence or willful misconduct
which arise out of the breach of any representation or warranty of
the Fund hereunder;
(c) The reliance on or use by BFDS or its agents or subcontractors of
information, records, documents or services which (i) are received
by BFDS or its agents or subcontractors, and (ii) have been
prepared, maintained or performed by the Fund or any other person
or firm on behalf of the Fund; and
(d) The reliance on, or the carrying out by BFDS or its agents or
subcontractors of any written instructions or request of the Fund
and the applicable Portfolio.
8.2 At any time BFDS may apply to an authorized officer of the Fund for
instructions, or may consult with the Fund's in-house legal counsel or
may at its own expense consult with its own legal counsel with respect to
any matter arising in connection with the services to be
9
<PAGE> 12
performed by BFDS under this Agreement, and BFDS and its agents or
subcontractors shall not be liable and shall be indemnified by the Fund
for any action taken or omitted by it in good faith and with reasonable
care and without negligence in reliance upon such instructions from an
authorized officer of the Fund or the opinion of the Fund's in-house
counsel or BFDS' legal counsel, provided however, with respect to the
performance of any action or omission of any action upon such legal
advice by BFDS' legal counsel, BFDS shall be required to conform to the
standard of care set forth herein and further provided that BFDS shall
follow the advice of the Fund's in-house legal counsel in any and all
instances where the advice of the Fund's in-house legal counsel and BFDS'
legal counsel differ. BFDS, its agents and subcontractors shall be
protected and indemnified in acting in good faith and with reasonable
care and without negligence upon any paper or document furnished by or on
behalf of the Fund, reasonably believed to be genuine and to have been
signed by duly authorized person or persons, or upon any instruction,
information, data, records or documents provided to BFDS or its agents or
subcontractors by machine readable input, telex, CRT data entry or other
similar means authorized by the Fund, and shall not be held to have
notice of any change of authority of any person, until receipt of written
notice thereof from the Fund or its designee.
8.3 In order that the indemnification provisions contained in this Section 8
shall apply, upon the assertion of a suit for which the Fund may be
required to indemnify BFDS, BFDS shall promptly notify the Fund of such
assertion, and shall keep the Fund advised with respect to all
developments concerning such suit. The Fund will be entitled to
participate at its own expense in the defense, or, if it so elects, to
assume the defense of any suit brought to enforce any liability subject
to the indemnification provided above. In the event the Fund elects to
assume the defense of any such suit and retain counsel, BFDS or any of
its affiliated persons, named as defendant or defendants in the suit, may
retain additional counsel but shall bear the fees and expenses of such
counsel unless the Fund shall have specifically authorized in writing the
retaining of such counsel. BFDS shall not settle any action, suit, claim,
or demand, for which indemnity may be sought hereunder without the prior
written approval of the Fund, which approval shall not be unreasonably
withheld. The indemnification provisions contained herein shall survive
the termination of this Agreement.
9. STANDARD OF CARE
9.1 BFDS shall at all times act in good faith and with reasonable care and
agrees to use its best efforts to insure the accuracy of all services
performed under this Agreement, but assumes no responsibility and shall
not be liable for loss or damage due to errors unless said errors are
caused by its negligence, bad faith, or willful misconduct or that of its
employees, agents, or subcontractors.
9.2 In addition to the liability of BFDS under this Section 9, BFDS shall
also be liable to the Fund for all reasonable out-of-pocket costs and
expenses incurred by the Fund in connection with any claim by the Fund
against BFDS, its agents or subcontractors arising from the obligations
of BFDS hereunder, including, without limitation, all reasonable
10
<PAGE> 13
attorneys' fees and expenses incurred by the Fund in asserting any such
claim, and out-of-pocket expenses incurred by the Fund in connection with
any lawsuits or proceedings relating to such claim, provided that the
Fund has recovered from BFDS for such claim.
10. COVENANTS OF THE FUND AND BFDS
10.1 The Fund shall promptly furnish to BFDS the following:
(a) A certified copy of the resolution of the Board of Trustees of the
Fund approving this Agreement; and
(b) A copy of the Declaration of Trust of the Fund and all amendments
thereto.
10.2 BFDS hereby agrees to establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of check forms and
facsimile signature imprinting devices, if any; and for the preparation
or use, and for keeping account of such forms and devices.
10.3 BFDS shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable provided that
it is in compliance with all applicable regulatory requirements and it is
consistent with prevailing industry standards for transfer agents. To the
extent required by Section 31 of the Investment Company Act of 1940, as
amended, and the rules thereunder, BFDS agrees that all such records
prepared or maintained by BFDS relating to the services to be performed
by BFDS hereunder are the property of the Fund and will be preserved,
maintained and make available in accordance with such Section and Rules,
and will be surrendered promptly to the Fund on and in accordance with
its their request. The Fund may, at any time and from time to time,
reasonably request copies of such records and BFDS will provide same.
10.4 BFDS and the Fund agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily
disclosed to any other person, except as may be required by law.
10.5 BFDS shaft maintain reasonable safeguards for maintaining any Shareholder
records which are furnished by or on behalf of the Fund to BFDS in the
form of computer tapes, data transmissions or any other medium. BFDS
shall not, at any time, use such records or any information contained
therein for any purpose other than as specifically authorized by this
Agreement, or in writing by the Fund. No such record or any part thereof
shall be disclosed or provided to any other person, except as
specifically authorized by this Agreement, or upon the prior written
consent of an authorized officer of the Fund or as otherwise required by
law.
10.6 BFDS shall maintain reasonable safeguards for maintaining in confidence
any and all documentation and information obtained in connection with
this Agreement furnished to it
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<PAGE> 14
by or on behalf of the Fund or by any Shareholder or related to the Fund
or any Shareholder, and all records created from that documentation and
information (collectively, the "Mutual Fund Information"). BFDS shall not
make use of or disclose the Mutual Fund Information nor authorize its use
or disclose the same to any person or entity, other than the Fund, except
as specifically authorized by this Agreement, or upon the prior written
consent of an authorized officer of the Fund or as otherwise required by
law. Copies of such documentation and information shall remain the
property of the Fund. Upon termination of the Agreement or otherwise
requested by the Fund, such documentation and information furnished to
BFDS by the Fund or a Shareholder shall be promptly returned to the Fund,
or BFDS will certify to the Fund that all such information has been
destroyed.
10.7 BFDS shall promptly notify an authorized officer of the Fund in writing
of any and all legal actions received by or served on BFDS and shall use
its best efforts to promptly notify the Fund of all contacts and/or
correspondence received by BFDS from any regulatory department or agency
or other governmental authority purporting to regulate the Fund and not
BFDS, regarding BFDS' duties and activities performed in connection with
this Agreement, and will cooperate with the Fund in responding to these
contacts and any necessary correspondence.
10.8 BFDS shall permit the Fund, during the term of this Agreement, through
any person(s) designated by the Fund, at such reasonable times during
normal business hours and as often as the Fund may reasonably deem
appropriate but not so often as to place unreasonable burden on BFDS,
within ten (10) business day's prior written notice to an Authorized
Officer of BFDS, to conduct an inspection. As a matter of clarification,
the Fund acknowledges and agrees that no such inspection shall include
any visits, inspections, examinations, audits, or verification of any of
the properties, documents, books, reports, work papers and other records
belonging to, or in the possession of BFDS, involving any service,
product or work BFDS does or possess other than those relating directly
to this Agreement and the service performed by BFDS in connection
therewith.
10.9 BFDS will provide the Fund with copies of audit reports filed with
governmental authorities.
10.10 BFDS will provide the Fund with copies of all policies and procedure
manuals utilized by any and all of BFDS' operating units performing
duties related to BFDS' responsibilities to the fund as described herein.
10.11 In case of any requests or demands for the inspection of the Shareholder
records of the Fund, that arise from persons other than authorized
officers of the Fund, BFDS will immediately notify the Fund and secure
instructions from an authorized officer of the Fund as to such
inspection.
10.12 With respect to BFDS' performance of the services as outlined herein,
BFDS agrees to work in concert with the Fund to establish and document
performance measurement
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<PAGE> 15
standards for such services. BFDS and the Fund shall mutually agree as to
the frequency, type, and format of reports which document BFDS's
performance relative to those standards. These standards may be modified
from time to time. subject to mutual written agreement between the Fund
and BFDS.
10.13 Notwithstanding the restrictions on confidentiality in Section 10 herein,
when required by law BFDS will disclose Shareholder records (e.g.,
subpoena for divorce) and Fund records (e.g., SEC inspection powers). The
Fund and BFDS will agree on procedures regarding such mandatory
disclosure and BFDS will make every reasonable effort to notify the Fund
of requests for such information by the SEC or any other federal or State
securities regulatory agencies prior to the release of such records.
11. TERMINATION OF AGREEMENT
11.1 This Agreement shall become effective as of the date first written above.
The Agreement shall remain in effect for a period of 3 years from the
effective date provided, however, that either party may terninate this
Agreement without prejudice to any other remedy it may have, upon the
material breach of this Agreement provided, however, that the
non-breaching party shall have given the breaching party written notice
of such breach and that the breaching party cannot or shall not have
cured to the reasonable satisfaction of the non-breaching party any such
breach within 30 days of such notice. Termination shall become effective
120 days after the end of the 30 day cure period. A material breach of
this Agreement will include, without limitation, the failure by BFDS to
conform to the performance measurements standards, which standards shall
be mutually agreed to in writing by BFDS and the Fund within 45 days of
the date of this Agreement and when mutually agreed to made a part of
this Agreement by schedule. The parties agree that the failure to agree
upon such standards within such 45 day period will enable either party to
terminate this Agreement upon written notice to the other party, subject
to the notice periods that are described herein that would otherwise
apply to a termination of this Agreement. The parties further understand
and agree that the party causing a "recurring problem" as such term is
defined in the standards shall not be entitled to the aforementioned
right to cure within 30 days. This Agreement shall automatically continue
in effect after such three year period unless terminated by the Fund on
ninety (90) days' prior written notice to BFDS or by BFDS on one hundred
eighty (180) days' prior written notice to the Fund, with such
termination to be effective at the time specified in the written notice.
11.2 Should the Fund exercise its right to terminate, all reasonable
out-of-pocket expenses associated with the movement of records and
material will be borne by the Fund on behalf of the applicable
Portfolio(s).
11.3 If this Agreement is terminated, both parties will act in good faith to
cooperate in an orderly transition.
12. ADDITIONAL FUNDS
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<PAGE> 16
12.1 In the event that the Fund establishes one or more series of Shares in
addition to those described in the preamble of this Agreement with
respect to which the Fund desires to have BFDS render services as
transfer agent for such series of Fund Shares under the terms hereof, the
Fund shall so notify BFDS in writing, and such series of Shares shall
become a Portfolio hereunder.
13. ASSIGNMENT
13.1 Except as provided in Section 13.3 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
13.2 The Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted assigns.
13.3 BFDS may, without further consent on the part of the Fund, subcontract
for the performance hereof with (i) a BFDS subsidiary duly registered as
a transfer agent pursuant to Section 17A(c)(2) or (ii) a BFDS affiliate
duly registered as a transfer agent under 17A(c)(2); provided, however,
that BFDS shall be as fully responsible to the Fund for the acts and
omissions of any subcontractor or agent as it is for its own acts and
omissions.
14. AMENDMENT
This Agreement may be amended or modified by a written agreement executed
by both parties.
15. NEW YORK LAW TO APPLY
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the State of New York.
16. FORCE MAJEURE
BFDS shall not be liable for any damages to the Fund resulting from BFDS'
failure to perform under this Agreement or for the loss of all or part of
any records or proprietary information of the Fund maintained or
preserved by it pursuant to this Agreement or for any delays or errors
occurring because of acts of God, equipment or transmission failure, or
damage reasonably beyond its control except to the extent that BFDS shall
have failed to undertake commercially reasonable efforts to minimize the
likelihood of occurrence of such circumstances or to mitigate any loss or
damage caused to the Fund by such circumstances.
17. CONSEQUENTIAL DAMAGES
Neither party to this Agreement shall be liable to the other party for
consequential
14
<PAGE> 17
damages under any provision of this Agreement or for any consequential
damages arising out of any act or failure to act hereunder.
18. MERGER OF AGREEMENT
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
19. COUNTERPARTS
This Agreement may be executed by the parties hereto on any number of
counterparts, and all of said counterparts taken together shall be deemed
to constitute one and the same instrument.
20. NOTICES
Any notice or other instrument in writing authorized or required by this
Agreement to be given to the Fund shall be sufficiently given if
addressed to the Fund and mailed by registered or certified mail or
delivered to it or delivery refused therefore, at its offices at:
TIAA-CREF Institutional Mutual Funds
730 Third Avenue
New York, NY 10017
Attention: TIAA-CREF Institutional Mutual Funds Product Manager
cc: Lisa Snow, Esq.
Law Dept., 9th Floor
TIAA-CREF
730 Third Avenue
New York, NY 10017
or at such other place as the Fund may from time to time designate in
writing.
Any notice or other instrument in writing authorized or required by this
Agreement to be given to BFDS shall be sufficiently given if addressed to
BFDS and mailed by registered or certified mail or delivered to it or
delivery refused therefor, at its offices at:
President
Boston Data Financial Services, Inc.
2 Heritage Drive
Quincy, MA 02021
or at such other place as BFDS may from time to time designate in
writing.
15
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
TIAA-CREF INSTITUTIONAL MUTUAL
FUNDS
BY:
-----------------------------
ATTEST:
- ---------------------
BOSTON FINANCIAL DATA SERVICES, INC.
BY:
----------------------------
ATTEST:
- ---------------------
16
<PAGE> 19
BFDS FUND SERVICE RESPONSIBILITIES*
<TABLE>
<CAPTION>
Service Performed Responsibility
----------------- --------------
BFDS Fund
---- ----
<S> <C>
1. Receives orders for the purchase
of Shares. X
2. Issue Shares and hold Shares in
Shareholders accounts. X
3. Receive redemption requests. X
4. Pay over monies to redeeming
Shareholders. X
5. Effect transfers of Shares. X
6. Prepare and transmit dividends
and distributions. X
7. Maintain records of account. X
8. Maintain and keep a current and
account control book for the Fund and
each series thereof X
9. Mail and tabulate proxies. X
10. Mail Shareholder reports. X
11. Mail prospectuses to current
Shareholders. X
12. Withhold, deposit and report taxes
on U.S. resident and non-resident
alien accounts. X
13. Prepare and file and issue U.S. Treasury
Department, IRS and other forms. X
14. Prepare and mail account and
confirmation statement for
Shareholders. X
15. Provide Shareholder account
information. X
16. Blue sky reporting. X
17. Reporting of abandoned property and other
Services pursuant to Section 1.2 (f) X
18. Reporting of transactions in compliance with
money laundering, currency transactions and
OFAC laws and regulations pursuant to
Section 1.2(g) X
19. Provide customer transaction processing staff
pursuant to Section 1.2 (h) to process
Shareholder transaction requests. X
</TABLE>
* Such services are more full described in Section 1.2 (a), (b), (c), (e), (f),
(g) and (h) of the Agreement.
17
<PAGE> 20
TIAA-CREF INSTITUTIONAL MUTUAL FUNDS
BY:
--------------------------
ATTEST:
- -----------------------
BOSTON FINANCIAL DATA SERVICES, INC.
BY:
-------------------------
ATTEST:
- ------------------------
18
<PAGE> 1
SEED MONEY AGREEMENT
SEED MONEY AGREEMENT (the "Agreement") made as of this 1st day of June,
1999 by and between Teachers Insurance and Annuity Association of America
("TIAA"), a nonprofit corporation existing under the laws of the State of New
York, and TIAA-CREF Institutional Mutual Funds ("Mutual Fund"), a Delaware
Business Trust.
1. TIAA hereby agrees to invest in the Mutual Fund the sum of
$175,000,000 on June 14th or as soon thereafter as practicable.
2. In consideration for such investment and without deduction of any
charges, the Mutual Fund shall credit TIAA with such shares, of which TIAA shall
be the owner, in each Series of the Mutual Fund in such amounts as shall be
mutually agreed upon. Such shares will share pro rata in the investment
performance of each Series and shall be subject to the same valuation procedures
and the same periodic deductions as are other shares in that Series. The value
of such shares in each series other than the Money Market Fund on the day the
initial investment is made shall be $10.00. The value of a share in the Money
Market Fund shall be $1.00.
3. TIAA represents that the shares acquired under this Agreement are
being, and will be, acquired for investment (and not with a view to distribution
or resale to the public) and can be disposed of only by redemption.
4. Shares acquired under this Agreement will be held by TIAA for its own
account until redeemed by TIAA. Amounts will be redeemed at prices equal to the
respective net asset value of shares of the applicable series of the Mutual Fund
next determined after the Mutual Fund receives TIAA's proper notice of
redemption.
<PAGE> 2
5. TIAA may purchase, and the Mutual Fund may issue, additional shares as
the parties may agree.
6. This Agreement will be construed and enforced in accordance with and
governed by the provisions of the Investment Company Act of 1940 and the laws of
the State of New York.
TEACHERS INSURANCE AND
ANNUITY ASSOCIATION OF AMERICA
By /s/ JOHN A. SOMERS
-----------------------------
Executive Vice President
TIAA-CREF INSTITUTIONAL
MUTUAL FUNDS
By /s/ JOHN J. McCORMACK
-----------------------------
President
