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File Nos. 333-76651, 811-9301
As filed with the Securities and Exchange Commission on June 11, 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. _1_ [X]
Post-Effective Amendment No. ___ [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. _1_ [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 . . . . . . . . . . . . . . . . . . . 13
Institutional Equity Index Fund . . . . . . . . . . 13
Institutional Social Choice Equity Fund . . . . . . 14
ADDITIONAL INVESTMENT STRATEGIES FOR THE EQUITY FUNDS . 15
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 . . . . . . . . . . . . . . . . 26
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 . . . . 30
OTHER INVESTOR INFORMATION . . . . . . . . . . . . . . . 30
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
iii
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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 rest of the Fund is invested in its enhanced index segment,
which seeks to outperform the Fund's benchmark index while limiting the
possibility of significantly underperforming the benchmark. 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
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.
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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
OBJECTIVE through capital appreciation.
PRINCIPAL The Fund invests in a broadly diversified portfolio
INVESTMENT of primarily foreign equity investments, using the
STRATEGIES Dual 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
growth, consistent cash flow and attractive stock
prices based on current earnings, assets and long-
term growth prospects. The benchmark index for the
Fund is the Morgan Stanley Capital International
("MSCI") EAFE(R) (Europe, Australia, Far East) Index.
SPECIAL Changes in currency exchange rates, the possible
INVESTMENT imposition of market controls or currency exchange
RISKS 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. 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
OBJECTIVE through 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
INVESTMENT emerging areas of the economy and companies with
STRATEGIES distinctive products 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
INVESTMENT stocks of smaller, lesser-known companies whose stock
RISKS prices may 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
WANT TO looking for long-term capital appreciation, but who
INVEST are willing to tolerate fluctuations in value.
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INSTITUTIONAL GROWTH AND INCOME FUND
INVESTMENT The Fund seeks a favorable long-term return through
OBJECTIVE capital appreciation and investment income.
PRINCIPAL The Fund invests in a broadly diversified portfolio
INVESTMENT of common stocks selected for their investment
STRATEGIES potential, using 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
RISKS periods of 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
WANT TO capital appreciation and current income but who also
INVEST can accept the risk of market fluctuations.
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INSTITUTIONAL EQUITY INDEX FUND
INVESTMENT The Fund seeks a favorable long-term rate of return
OBJECTIVE from a 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
INVESTMENT a whole and invests in stocks in the Russell 3000(R)
STRATEGIES Index. The Fund uses a sampling approach to create a
portfolio that closely matches the overall investment
characteristics of the Index.
SPECIAL While the Fund attempts to closely track the Russell
INVESTMENT 3000(R) Index, it does not invest in all 3,000 stocks
RISKS in the index. 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
WANT TO fund that tracks the return of a broad U.S. equity
INVEST market index.
INSTITUTIONAL SOCIAL CHOICE EQUITY FUND
INVESTMENT The Fund seeks a favorable long-term rate of return
OBJECTIVE that reflects 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
INVESTMENT common stocks. The Fund attempts to track the return
STRATEGIES of the U.S. 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.
SPECIAL Because its social criteria exclude some investments,
INVESTMENT this Fund may not be able to take advantage of the
RISKS same 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
WANT TO equity investment that is generally broad-based but
INVEST excludes companies that engage in certain activities.
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INSTITUTIONAL BOND FUND
INVESTMENT The Fund seeks a favorable long-term return,
OBJECTIVE primarily 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
STRATEGIES invested 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. 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,
INVESTMENT prices of bonds held by the Fund may decline if
RISKS interest rates rise. 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
WANT TO invest in a general bond fund with a slightly higher
INVEST level of risk 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
INVESTMENT money market instruments. It limits its investments
STRATEGIES to securities 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 --
INVESTMENT that is, the income received by the Fund may decrease
RISKS as a result of a decline in interest rates.
WHO MAY The Fund may be suitable for conservative investors
WANT TO who are looking for a high degree of principal
INVEST stability and 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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SHAREHOLDER FEES (deducted directly from gross amount of transaction)
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases (percentage 0%
of offering price)
Maximum Deferred Sales Charge 0%
Maximum Sales Charge Imposed on Reinvested Dividends 0%
and Other Distributions
Redemption Fee 0%
Exchange Fee 0%
</TABLE>
ANNUAL FUND OPERATING EXPENSES (deducted from Fund Assets)
<TABLE>
<CAPTION>
BEFORE WAIVER OR REIMBURSEMENT Investment Other Gross
Management Expenses (1) Total Fund
Fee (before (before Expense Operating
Fee Waiver) Reimbursement) Expenses
----------- ------------- --------
<S> <C> <C> <C>
Institutional International Equity Fund 0.__% 0.__% 0.__%
Institutional Growth Equity Fund 0.__% 0.__% 0.__%
Institutional Growth and Income Fund 0.__% 0.__% 0.__%
Institutional Equity Index Fund 0.__% 0.__% 0.__%
Institutional Social Choice Equity Fund 0.__% 0.__% 0.__%
Institutional Bond Fund 0.__% 0.__% 0.__%
Institutional Money Market Fund 0.__% 0.__% 0.__%
</TABLE>
<TABLE>
<CAPTION>
AFTER WAIVER AND REIMBURSEMENT Investment Other Net
Management Expenses (3) Total Fund
Fee(2) (after (after Expense Operating
Fee Waiver) Reimbursement) Expenses
----------- ------------- --------
<S> <C> <C> <C>
Institutional International Equity Fund 0.__% 0.__% 0.__%
Institutional Growth Equity Fund 0.__% 0.__% 0.__%
Institutional Growth and Income Fund 0.__% 0.__% 0.__%
Institutional Equity Index Fund 0.__% 0.__% 0.__%
Institutional Social Choice Equity Fund 0.__% 0.__% 0.__%
Institutional Bond Fund 0.__% 0.__% 0.__%
Institutional Money Market Fund 0.__% 0.__% 0.__%
</TABLE>
- -------------------------
(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 its investment management fee for
managing each Fund. This waiver is contractual and will remain in effect
until July 1, 2002.
(3) Advisors has agreed to reimburse the Funds so that non-investment
management expenses of the Funds do not exceed, on an annual basis, 0.__%
of the average daily net assets of each of the Funds, with the exception
of the Institutional International Equity Fund, where Advisors has agreed
to reimburse the Fund so that its non-
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investment management expenses do not exceed, on an annual basis, 0.__% 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:
<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
<S> <C> <C>
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 $___ $___
</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"
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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
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.
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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)
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
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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 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
12
<PAGE> 17
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.
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.
13
<PAGE> 18
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 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 second and third 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.
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.
14
<PAGE> 19
ADDITIONAL INVESTMENT STRATEGIES FOR THE EQUITY FUNDS
In addition to the principal types of securities identified in the
individual Fund descriptions above, each equity Fund can 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.
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.
FUND STRATEGY: 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.
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
15
<PAGE> 20
placed and high-yield securities.
FUND INVESTMENTS: 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 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, 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. In addition, 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.
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
16
<PAGE> 21
when making investment decisions because they may not alone be an accurate
measure of the risk of lower-rated bonds. Instead, we also do our own credit
analysis, paying particular attention to economic trends and other market
events.
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;
17
<PAGE> 22
(6) participation interests in loans banks have made to the issuers of
(1) and (4) above (these may be considered illiquid);
(7) asset-backed securities issued by domestic corporations or trusts;
(8) obligations issued or guaranteed by foreign governments or their
political subdivisions, agencies, or instrumentalities; and
(9) obligations of international organizations (and related government
agencies) designated or supported by the U.S. or foreign government
agencies to promote economic development or international banking.
The 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.__%, 0.__%, 0._%, 0.__%, 0.__%, 0.__% and 0.__% 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 the portion of its investment management fee equal to, on an
annual basis: 0.__% of the average daily net assets of each of the
Institutional Money Market Fund and the Institutional Bond Fund; 0.__% 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.__% of the average daily net
assets of the Institutional International Equity 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 1 year ended 5 years ended 10 years ended Inception to Date of
TOTAL RETURN Period: Mar. 31, 1999 Mar. 31, 1999 Mar. 31, 1999 Mar. 31, 1999 Inception
============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL INTERNATIONAL EQUITY FUND
- ------------------------------------------------------------------------------------------------------------
TIAA-CREF International 7.36% N/A N/A 12.35% Sept. 2, 1997
Mutual Funds Equity Fund
- ------------------------------------------------------------------------------------------------------------
Morgan Stanley EAFE Index 6.06% N/A N/A 11.81% Sept. 2, 1997
Capital Internat'l
============================================================================================================
INSTITUTIONAL GROWTH EQUITY FUND
- ------------------------------------------------------------------------------------------------------------
TIAA-CREF Growth Equity 24.82% N/A N/A 32.12% Sept. 2, 1997
Mutual Funds Fund
- ------------------------------------------------------------------------------------------------------------
CREF Growth 21.34% N/A N/A 26.40% Apr. 29, 1994
Account
- ------------------------------------------------------------------------------------------------------------
Frank Russell Russell 3000 24.35% N/A N/A 29.85% Sept. 2, 1997
Company Growth Index 24.35% 27.18% Apr. 29, 1994
============================================================================================================
INSTITUTIONAL GROWTH AND INCOME FUND
- ------------------------------------------------------------------------------------------------------------
TIAA-CREF Growth & 20.81% N/A N/A 29.39% Sept 2, 1997
Mutual Funds Income Fund
- ------------------------------------------------------------------------------------------------------------
Standard S&P 500 Index 18.46% N/A N/A 27.36% Sept. 2, 1997
& Poor's
============================================================================================================
INSTITUTIONAL BOND FUND
- ------------------------------------------------------------------------------------------------------------
TIAA-CREF Bond Plus 6.36% N/A N/A 8.20% Sept. 2, 1997
Mutual Funds Fund
- ------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 26
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL 1 year ended 5 years ended 10 years ended Inception to Date of
TOTAL RETURN Period: Mar. 31, 1999 Mar. 31, 1999 Mar. 31, 1999 Mar. 31, 1999 Inception
============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
CREF Bond Market 6.04% 7.34% N/A 8.35% Mar. 1, 1990
Account
- ------------------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate 6.49% N/A N/A 8.04% Sept. 2, 1997
Bond Index 6.49% 7.79% 8.64% Mar. 1, 1990
============================================================================================================
INSTITUTIONAL EQUITY INDEX FUND
- ------------------------------------------------------------------------------------------------------------
TIAA-CREF Stock Index N/A N/A N/A 3.92% Jan. 4, 1999
Life Funds Fund
- ------------------------------------------------------------------------------------------------------------
TIAA Stock 12.85% N/A N/A 25.32% Nov. 1, 1994
Separate Index
Account Account
VA-1
- ------------------------------------------------------------------------------------------------------------
CREF Equity 13.60% N/A N/A 23.94% Apr. 29, 1994
Index
Account
- ------------------------------------------------------------------------------------------------------------
Frank Russell 13.54% N/A N/A 3.39% Jan. 4, 1999
Russell 3000 13.54% 26.53% Nov. 1, 1994
Company Index 13.54% 24.28% Apr. 29, 1994
============================================================================================================
INSTITUTIONAL MONEY MARKET FUND
- ------------------------------------------------------------------------------------------------------------
TIAA-CREF Money 5.27% N/A N/A 5.38% Sept. 2, 1997
Mutual Market
Funds Fund
- ------------------------------------------------------------------------------------------------------------
CREF Money 5.25% 5.13% 5.55% 5.78% Apr. 1, 1988
Market
Account
- ------------------------------------------------------------------------------------------------------------
IBC Money 4.86% N/A N/A 4.98% Sept. 2, 1997
Fund 4.86% 4.95% 5.15% 5.38% Apr. 1, 1988
All-
Taxable
Average
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
As of Mar. 30, 1999: 7-Day Yield 7-Day Effective Yield
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TIAA-CREF Money 4.68% 4.79%
Mutual Market
Funds Fund
- ------------------------------------------------------------------------------------------------------------
CREF Money 4.62% 4.72%
Market
Account
- ------------------------------------------------------------------------------------------------------------
IBC Money 4.35% 4.44%
Fund
All-
Taxable
Average
- ------------------------------------------------------------------------------------------------------------
</TABLE>
FUND MANAGERS
The Institutional International Equity Fund is managed by Advisors'
international portfolio management group, whose members are jointly responsible
for the day-to-day management of the Fund.
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 Advisors' growth
and income
22
<PAGE> 27
portfolio management group, whose members are jointly responsible for the
day-to-day management of the Fund.
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 Advisors' bond portfolio
management group, whose members are jointly responsible for the day-to-day
management of the Fund.
The Institutional Money Market Fund is managed by Advisors' money market
portfolio management group, whose members are jointly responsible for the
day-to-day management of the Fund.
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 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
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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 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.
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<PAGE> 29
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.
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
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<PAGE> 30
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.
PURCHASE OF FUND SHARES
There is no minimum investment requirement for Eligible Investors. All
purchases must be in U.S. dollars and checks must be drawn on U.S. banks.
We consider all requests for purchases, checks, and other forms of
payments to be received when they are received in "good order" (see page 30).
We won't accept third-party checks.
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<PAGE> 31
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
Eligible Investors may invest in the Funds in any of the following ways.
All other prospective investors should contact their TIAA-CREF Intermediary for
applicable purchase requirements.
To purchase shares by mail, an Eligible Investor should make its check
payable to TIAA-CREF Institutional Mutual Funds. Send the check by First Class
Mail to TIAA-CREF Institutional Mutual Funds, c/o State Street Bank and Trust
Company, P.O. Box ____, Boston, MA 02266-____, or by overnight delivery to
TIAA-CREF Institutional Mutual Funds, c/o State Street Bank and Trust Company,
66 Brooks Drive, Braintree, MA 02184-3839.
To purchase shares by wire, 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
- - As an Eligible Investor, if your purchase check does not clear or payment
on it is stopped, or if we do not receive good funds through wire
transfer, we will treat this as a redemption of the shares purchased when
your check or wire transfer was 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 either through a written request delivered to
one of the addresses listed in "Purchases by Eligible Investors" (page 27) or
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
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<PAGE> 33
SEC permits a delay for the protection of investors.
We send redemption proceeds to the Eligible Investor at the address or
bank account of record. If proceeds are to be sent elsewhere, we will require
a letter of instruction from the Eligible Investor with signature guarantee
(see page 30). 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 letter or instruction
delivered to one of the addresses listed in "Purchases by Eligible Investors"
(page 27) or through a telephone request by calling _______________. The
letter must include the Eligible Investor's name, address and the Funds the
Eligible Investor wants to exchange between. Once made, an exchange request
cannot be modified or canceled.
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<PAGE> 34
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.
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 signature guarantee of the Eligible Investor. 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.
30
<PAGE> 35
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.
31
<PAGE> 36
[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 2000, 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
c/o State Street Bank and Trust Company
P.O. Box _____
Boston, MA 02266-____
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.
Investment Company Act File No. 811-9301
<PAGE> 37
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, c/o
State Street Bank and Trust Company, P.O. Box 9081, Boston, MA 02266 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> 38
<TABLE>
<CAPTION>
TABLE OF CONTENTS
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> 39
<TABLE>
<S> <C>
LEGAL MATTERS..........................................................................................................31
EXPERTS................................................................................................................31
ADDITIONAL CONSIDERATIONS..............................................................................................31
FINANCIAL STATEMENTS...................................................................................................32
</TABLE>
- iii -
<PAGE> 40
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.
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<PAGE> 41
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
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<PAGE> 42
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
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<PAGE> 43
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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<PAGE> 44
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> 45
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> 46
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> 47
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> 48
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> 49
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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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> 53
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
447 Bird Key Drive on Education and senior consultant for A.T.
Sarasota, FL 34236 Kearney, since November 1996. Previously,
President, American Counsel on Education.
Elizabeth E. Bailey 60 John C. Hower Professor of Public Policy and
The Wharton School Management, The Wharton School of the
University of Pennsylvania University of Pennsylvania.
Suite 3100
Steinberg-Dietrich Hall
Philadelphia, PA 19104-6372
John H. Biggs* (3)
TIAA-CREF 62 Chairman, Chief Executive Officer, and
730 Third Avenue President, College Retirement Equities Fund
New York, NY 10017-3206 ("CREF") and TIAA, since 1997. Previously,
Chairman and Chief Executive Officer, CREF
and TIAA.
</TABLE>
- 14 -
<PAGE> 54
<TABLE>
<CAPTION>
TRUSTEE AGE PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ------- --- -----------------------------------------
<S> <C> <C>
Joyce A. Fecske (1) 52 Vice President Emerita, DePaul University,
4800 South Karlov Avenue since 1994. Formerly, Vice President for
Chicago, IL 60632 Human Resources, DePaul University.
Edes P. Gilbert 67 Consultant, Independent Education Services,
Idnependent Education Services since 1998. Formerly, Head, The Spence
49 East 78th Street School.
New York, NY 10021
Stuart Tse Kong Ho (3) 63 Chairman and President, Capital Investment
Capital Investment of Hawaii, Inc. of Hawaii, Inc.; Chairman, Gannett Pacific
Suite 1700 Corporation.
733 Bishop Street
Honolulu, HI 96813
Nancy L. Jacob (2) 56 President and Managing Principal,
Windermere Investment Associates Windermere Investment Associates, since
121 S.W. Morrison Street January 1997. Previously, Chairman and
Portland, OR 97204 Chief Executive Officer, CTC Consulting,
Inc. and Managing Director, Capital Trust
Company.
Marjorie Fine Knowles 59 Professor of Law, Georgia State University
College of Law College of Law.
Georgia State University
University Plaza
Atlanta, GA 30303-3092
Martin L. Leibowitz* (3) 62 Vice Chairman and Chief Investment Officer,
TIAA-CREF CREF and TIAA, since 1995. President,
730 Third Avenue TIAA-CREF Investment Management, Inc.
New York, NY 10017-3206 (Investment Management), and President,
Teachers Advisors, Inc. (Advisors).
Executive Vice President, CREF and TIAA
from June 1995 to November 1995.
Formerly, managing director-director of
research and a member of the executive
committee, Salomon Brothers, Inc.
Jay O. Light (2) 57 Professor of Business Administration and
Harvard Business School Senior Associate Dean for Planning and
Morgan Hall 489 Development, Harvard University Graduate
Soldiers Field School of Business Administration.
Boston, MA 02163
</TABLE>
- 15 -
<PAGE> 55
<TABLE>
<CAPTION>
TRUSTEE AGE PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
- ------- --- -----------------------------------------
<S> <C> <C>
Bevis Longstreth (2) 65 Of Counsel, Debevoise & Plimpton, since
Debevoise & Plimpton 1998. Formerly, Partner, Debevoise &
875 Third Avenue Plimpton. Adjunct Professor of Law,
New York, NY 10022 Columbia University.
Robert M. Lovell, Jr. (2) 68 Founding Partner, First Quadrant L.P.
First Quadrant L.P. Formerly, Chairman and Chief Executive
100 Campus Drive Officer, First Quadrant Corp. (Investment
P.O. Box 939 Management Firm).
Florham Park, NJ 07932
Stephen A. Ross (2) 55 Franco Modigliani Professor of Finance and
Sloan School of Management Economics, Sloan School of Management,
Massachusetts Institute of Technology Massachusetts Institute of Technology, since
77 Massachusetts Avenue 1998. Co-Chairman, Roll & Ross Asset
Cambridge, MA 02139 Management Corp.
Eugene C. Sit (3) 60 Chairman, Chief Executive and Chief
Sit Investment Associates, Inc. Investment Executive Officer, Sit Investment
4600 Norwest Center Associates, Inc. and Sit/Kim International
90 South Seventh Street Investment Associates, Inc.
Minneapolis, MN 55402
Maceo K. Sloan (2) 49 Chairman, President, and Chief Executive
NCM Capital Management Group, Inc. Officer, Sloan Financial Group, Inc., and
Suite 400 NCM Capital Management Group, Inc.
103 West Main Street
Durham, NC 27701-3638
David K. Storrs (2) 54 President and Chief Executive Officer,
Alternative Investment Group, LLC Alternative Investment Group, L.L.C., since
65 South Gate Lane August 1996. Adviser to the President, The
Southport, CT 06490 Common Fund, since January 1996.
Formerly, President and Chief Executive
Officer, The Common Fund.
Robert W. Vishny (3) 40 Eric J. Gleacher Professor of Finance,
Graduate School of Business University of Chicago Graduate School of
University of Chicago Business. Founding Partner, LSV Asset
1101 East 58th Street Management.
Chicago, IL 60637
</TABLE>
- --------------------------------
(1) Member of the Executive Committee. The Executive Committee is responsible
for day to day oversight of the Funds' operation.
(2) Member of the Finance Committee. The Finance Committee oversees the
investments of TIAA-CREF Institutional Mutual Funds.
- 16 -
<PAGE> 56
(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,
Vice President Advisors and Investment Management, since
September 1997. Previously, Managing
Director, TIAA, CREF, Advisors and
Investment Management from March 1997 to
September 1997. Previously Second Vice
President, TIAA and CREF, Advisors and
Investment Management.
Richard L. Gibbs 52 Executive Executive Vice President, TIAA and CREF,
Vice President since March 1993. Executive Vice President,
Advisors, Investment Management, 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 Vice President and Treasurer, TIAA and
and Treasurer CREF, Investment 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> 57
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 LONG TERM
OF TRUSTEES(1) PERFORMANCE
DEFERRED
AGGREGATE COMPENSATION TOTAL COMPENSATION
COMPENSATION CONTRIBUTION FROM TIAA-CREF
NAME FROM THE FUND AS PART OF EXPENSES(2) FUND COMPLEX
- ---- ------------- ---------------------- ------------------
<S> <C> <C> <C>
Robert H. Atwell $ $ $
Elizabeth E. Bailey $ $ $
Joyce A. Fecske $ $ $
Edes P. Gilbert $ $ $
Stuart Tse Kong Ho $ $ $
Nancy L. Jacob $ $ $
Marjorie Fine Knowles $ $ $
Jay O. Light $ $ $
Bevis Longstreth $ $ $
Robert M. Lovell, Jr. $ $ $
Stephen A. Ross $ $ $
Eugene C. Sit $ $ $
Maceo K. Sloan $ $ $
David K. Storrs $ $ $
Robert W. Vishny $ $ $
</TABLE>
- ------------------------------
(1) Estimated payments for the partial fiscal year ending September 30, 1999.
(2) Includes earnings, if any, on amounts contributed.
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> 58
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> 59
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> 60
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> 61
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> 62
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> 63
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> 64
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:
P (1 + T)n = 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:
Effective Yield = (Base Period Return + 1)365/7 - 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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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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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*
(e) (1) Distribution Agreement by and between Registrant and Teachers
Personal Investors Services, Inc. ("TPIS"), dated as of
June 1, 1999*
(2) Selling Agreement by and between TPIS and TIAA-CREF Individual &
Institutional Services, Inc., dated as of __________ ___, 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 __________ ___, 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 _________ ___, 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.
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(1/) Incorporated herein by reference to the initial registration on Form N-1A
(File No. 333-76651) as filed with the Commission on April 20, 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. OWP Hawaii, LLC
BT Properties, Inc. Savannah Teachers Properties, Inc.
College Credit Trust T114 Properties, Inc.
DAN Properties, Inc. T-Investment Properties Corp.
ETC Repackaging, Inc. T-Land Corp.
Illinois Teachers Properties, LLC T-Las Colinas Towers Corp.
JV California Two, Inc. TCT Holdings, Inc.
JV California Three, Inc. Teachers Advisors, Inc.
JV Florida One, Inc. Teachers Boca Properties II, Inc.
JV Florida Four, Inc. Teachers Pennsylvania Realty, Inc.
JV Georgia One, Inc. Teachers Personal Investors Services, Inc.
JV Maryland One, Inc. Teachers Properties, Inc.
JV Michigan One, Inc. Teachers REA, LLC
JV Michigan Two, Inc. Teachers REA II, Inc.
JV Michigan Three, Inc. Teachers REA II, LLC
JV Minnesota One, Inc. Teachers REA III, LLC
JV North Carolina One, Inc. Teachers Realty Corporation
JWL Properties, Inc. TEO-NP, LLC
Liberty Place Retail, Inc. Tethys Slu, Inc.
Macallister Holdings, Inc. TIAA Realty, Inc.
Minnesota Teachers Realty Corp. TIAA Timberlands I, LLC
MN Properties, Inc. TIAA-CREF Enterprises, Inc.
M.O.A. Enterprises, Inc. TIAA-CREF Individual & Institutional
ND Properties, Inc. Services, Inc.
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TIAA-CREF Investment Management, LLC WRC Properties, Inc.
TIAA-CREF Life Insurance Company 730 Properties, Inc.
TIAA-CREF Tuition Financing, Inc. 730 Cal Hotel Properties I, Inc.
TIAA-CREF Trust Company, FSB 730 Cal Hotel Properties II, Inc.
TIAA-Fund Equities, Inc. 730 Penn. Hotel Properties I, Inc.
TPI Housing, Inc. 485 Properties, LLC
Washington Teachers Properties II, Inc.
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-dealer and administrative services for College
Retirement Equities Fund.
H) TCT Holdings, Inc., holds the stock of TIAA-CREF Trust Company,
FSB.
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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 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
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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.
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
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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.
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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 10th 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>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ John J. McCormack
- -------------------------- President June 10, 1999
John J. McCormack (Principal Executive Officer)
/s/ Scott C. Evans
- -------------------------- Executive Vice President June 10, 1999
Scott C. Evans (Principal Financial Officer)
/s/ Richard L. Gibbs
- -------------------------- Executive Vice President June 10, 1999
Richard L. Gibbs (Principal Accounting Officer)
</TABLE>
<PAGE> 79
<TABLE>
<CAPTION>
Signature of Trustee Date Signature of Trustee Date
- -------------------- ---- -------------------- ----
<S> <C> <C> <C>
/s/ Robert H. Atwell /s/ Bevis Longstreth
- ------------------------------- 6/10/99 ------------------------------- 6/10/99
Robert H. Atwell Bevis Longstreth
/s/ Elizabeth E. Bailey /s/ Robert M Lovell, Jr.
- ------------------------------- 6/10/99 ------------------------------- 6/10/99
Elizabeth E. Bailey Robert M. Lovell, Jr.
/s/ Joyce A. Fescke /s/ Stephen A. Ross
- ------------------------------- 6/10/99 ------------------------------- 6/10/99
Joyce A. Fescke Stephen A. Ross
/s/ Edes P. Gilbert /s/ Eugene C. Sit
- ------------------------------- 6/10/99 ------------------------------- 6/10/99
Edes P. Gilbert Eugene C. Sit
/s/ Stuart Tse Kong Ho /s/ Maceo K. Sloan
- ------------------------------- 6/10/99 ------------------------------- 6/10/99
Stuart Tse Kong Ho Maceo K. Sloan
/s/ David K. Storrs
- ------------------------------- ------- ------------------------------- 6/10/99
Nancy L. Jacob David K. Storrs
/s/ Marjorie Fine Knowles /s/ Robert W. Vishny
- ------------------------------- 6/10/99 ------------------------------- 6/10/99
Marjorie Fine Knowles Robert W. Vishny
/s/ Jay O. Light
- ------------------------------- 6/10/99
Jay O. Light
</TABLE>
<PAGE> 80
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Name
- ----------- ------------
<S> <C>
(d) Investment Management Agreement by and between Registrant and Teachers
Advisors, Inc. ("Advisors"), dated as of June 1, 1999
(e)(1) Distribution Agreement by and between Registrant and Teachers Personal
Investors Services, Inc. ("TPIS"), dated as of June 1, 1999
</TABLE>
<PAGE> 1
INVESTMENT MANAGEMENT AGREEMENT
FOR TIAA-CREF INSTITUTIONAL MUTUAL FUNDS
THIS AGREEMENT is made this First day of June, 1999, by and between
TIAA-CREF Institutional Mutual Funds (the "Fund"), a Delaware business trust,
and Teachers Advisors, Inc. ("Advisors"), a Delaware corporation.
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and currently consists of seven series (known as the Institutional Bond Fund,
Institutional Equity Index Fund, Institutional Growth and Income Fund,
Institutional Growth Equity Fund, Institutional International Equity Fund,
Institutional Money Market Fund and Institutional Social Choice Equity Fund
(the "Current Funds")), and may consist of additional series or classes in the
future (collectively, with the Current Funds, the "Funds");
WHEREAS, Advisors is engaged principally in the business of rendering
investment management services and is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended (the "Advisers Act");
WHEREAS, the Fund desires to retain Advisors to render investment
management services to the Fund, in the manner and on the terms and conditions
set forth in this Agreement;
WHEREAS, Advisors is willing to provide investment management services
to the Fund in the manner and on the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Fund and Advisors hereby agree as follows:
1. Appointment.
The Fund hereby appoints Advisors to act as the Fund's investment
manager for the periods and on the terms set forth herein. Advisors hereby
accepts the appointment as investment manager, and agrees, subject to the
supervision of the board of trustees of the Fund (the "Board"), to furnish the
services and assume the obligations set forth in this Agreement for the
compensation provided for herein.
2. Services as Investment Manager.
(a) Generally.
(i) As the Fund's investment manager, Advisors
shall be subject to: (1) the restrictions of the Declaration of Trust of the
Fund, as amended from time to time; (2) the provisions of the 1940 Act and the
Advisers Act; (3) the statements relating to the Funds' investment objectives,
investment policies and investment restrictions as set forth in the currently
<PAGE> 2
effective (and as amended from time to time) registration statement of the Fund
(the "registration statement") under the Securities Act of 1933, as amended
(the "1933 Act") and the 1940 Act; and (4) any applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code").
(ii) Advisors shall, for all purposes herein, be
deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Fund or a
Fund in any way or otherwise be deemed an agent of the Fund or a Fund.
(iii) Advisors shall, for purposes of this
Agreement, have and exercise full investment discretion and authority to act as
agent for the Fund in buying, selling or otherwise disposing of or managing the
Fund's investments, directly or through sub-advisers, subject to supervision by
the Board.
(b) Investment Advisory Services.
(i) Advisors shall provide the Fund with such
investment research, advice and supervision as the Fund may from time to time
consider necessary for the proper management of the assets of each Fund, shall
furnish continuously an investment program for each Fund, shall determine which
securities or other investments shall be purchased, sold or exchanged and what
portions of each Fund shall be held in the various securities or other
investments or cash, and shall take such steps as are necessary to implement an
overall investment plan for each Fund, including providing or obtaining such
services as may be necessary in managing, acquiring or disposing of securities,
cash or other investments.
(ii) The Fund has furnished or will furnish
Advisors with copies of the Fund's registration statement and Declaration of
Trust, as currently in effect and agrees during the continuance of this
Agreement to furnish Advisors with copies of any amendments or supplements
thereto before or at the time the amendments or supplements become effective.
Advisors will be entitled to rely on all documents furnished by the Fund.
(iii) Advisors shall take, on behalf of each Fund,
all actions which it deems necessary to implement the investment policies of
such Fund, and in particular, to place all orders for the purchase or sale of
portfolio investments for the account of each Fund with brokers, dealers,
futures commission merchants or banks selected by Advisors. Advisors also is
authorized as the agent of the Fund to give instructions to any Service
Provider serving as custodian of the Fund as to deliveries of securities and
payments of cash for the account of each Fund. In selecting brokers or dealers
and placing purchase and sale orders with respect to assets of a Fund, Advisors
is directed at all times to seek to obtain best execution and price within the
policy guidelines determined by the Board and set forth in the current
registration statement. Subject to this requirement and the provisions of the
1940 Act, the Advisers Act, the Securities Exchange Act of 1934, as amended
(the "1934 Act"), and other applicable provisions of law, Advisors may select
brokers or dealers that are affiliated with Advisors or the Fund.
-2-
<PAGE> 3
(iv) In addition to seeking the best price and
execution, Advisors may also take into consideration research and statistical
information, wire, quotation and other services provided by brokers and dealers
to Advisors. Advisors is also authorized to effect individual securities
transactions at commission rates in excess of the minimum commission rates
available, if Advisors determines in good faith that such amount of commission
is reasonable in relation to the value of the brokerage, research and other
services provided by such broker or dealer, viewed in terms of either that
particular transaction or Advisors' overall responsibilities with respect to
each Fund. The policies with respect to brokerage allocation, determined from
time to time by the Board are those disclosed in the currently effective
registration statement. The execution of such transactions shall not be deemed
to represent an unlawful act or breach of any duty created by this Agreement or
otherwise. Advisors will periodically evaluate the statistical data, research
and other investment services provided to it by brokers and dealers. Such
services may be used by Advisors in connection with the performance of its
obligations under this Agreement or in connection with other advisory or
investment operations including using such information in managing its own
accounts.
(v) As part of carrying out its obligations to
manage the investment and reinvestment of the assets of each Fund consistent
with the requirements under the 1940 Act, Advisors shall:
(1) Perform research and obtain and analyze
pertinent economic, statistical, and
financial data relevant to the investment
policies of each Fund as set forth in the
Fund's registration statement;
(2) Consult with the Board and furnish to the
Board recommendations with respect to an
overall investment strategy for each Fund for
approval, modification, or rejection by the
Board;
(3) Seek out and implement specific investment
opportunities, consistent with any investment
strategies approved by the Board;
(4) Take such steps as are necessary to implement
any overall investment strategies approved by
the Board for each Fund, including making and
carrying out day-to-day decisions to acquire
or dispose of permissible investments,
managing investments and any other property
of the Fund, and providing or obtaining such
services as may be necessary in managing,
acquiring or disposing of investments;
(5) Regularly report to the Board with respect to
the implementation of any approved overall
investment strategy and any other activities
in connection with management of the assets
of each Fund;
-3-
<PAGE> 4
(6) Maintain all required accounts, records,
memoranda, instructions or authorizations
relating to the acquisition or disposition of
investments for each Fund and the Fund;
(7) Furnish any personnel, office space,
equipment and other facilities necessary for
the operation of each Fund as contemplated in
this Agreement;
(8) Provide the Fund with such accounting or
other data concerning the Fund's investment
activities as shall be necessary or required
to prepare and to file all periodic financial
reports or other documents required to be
filed with the Securities and Exchange
Commission and any other regulatory entity;
(9) Assist in determining each business day the
net asset value of the shares of each Fund in
accordance with applicable law; and
(10) Enter into any written investment advisory or
investment sub-advisory contract with another
affiliated or unaffiliated party, subject to
any approvals required by Section 15 of the
1940 Act, pursuant to which such party will
carry out some or all of Advisors'
responsibilities (as specified in such
investment advisory or investment
sub-advisory contract) listed above.
(c) General Management Services. In connection with its
general management services, Advisors shall assist in managing or supervising
all aspects of the Fund's operations, including those services provided to the
Fund directly by the Fund's custodian, transfer agent and fund administrator.
Advisors' general management services shall include:
(1) Supervising the performance of custodians,
transfer agents, fund administrators, and
other persons in any capacity deemed to be
necessary to the Fund's operations;
(2) Monitoring the calculation of the net asset
value of each Fund at such times and in such
manner as specified in the Fund's current
registration statement and at such other
times upon which the parties hereto may from
time to time agree;
(3) Monitoring the portfolio accounting services
to maintain the portfolio accounting records
for each Fund;
(4) Supervising the preparation of all federal,
state, and local tax returns and reports
relating to each Fund;
-4-
<PAGE> 5
(5) Preparing and making filings of, or
supervising the preparation and filing of,
the Fund's proxy materials, registration
statements and post-effective amendments
thereto, semi-annual and annual reports, Rule
24f-2 notices, and other required documents
with the Securities and Exchange Commission
and other federal and state authorities as
may be required by applicable law;
(6) Preparing and filing or supervising the
preparation and filing of notices to qualify
the Fund's shares to be offered in such
states;
(7) Maintaining such books and records of the
Fund as may be required by applicable law, or
supervising the maintenance by third parties
of such books and records;
(8) Rendering to the Fund's Board such reports
respecting the Fund as the Board may
reasonably request; and
(9) Making available its officers to the Fund's
Board for consultation and discussions
regarding the management of the Fund.
Nothing in this Agreement shall be deemed to diminish the
obligations of any agent of the Fund or other person not a party to this
Agreement which is obligated to provide services to the Fund.
3. Allocation of Charges and Expenses.
(a) Advisors. Advisors assumes the expense of and shall
pay for maintaining the staff and personnel necessary to perform its
obligations under this Agreement, including the fees payable to any investment
adviser or sub-adviser engaged pursuant to Section 2(b)(v)(10) of this
Agreement, and shall at its own expense provide the office space, equipment and
facilities that it is obligated to provide under this Agreement, and shall pay
all compensation of officers of the Fund and all trustees of the Fund who are
affiliated persons of Advisors, except as otherwise specified in this
Agreement.
(b) Fund. The Fund shall bear all of the Fund's expenses
including, but not limited to: compensation of Advisors under this Agreement,
custodian fees; transfer agent fees; pricing costs (including the daily
calculation of net asset value); fund accounting fees; outside counsel legal
fees; expenses of shareholders' and/or trustees' meetings; cost of printing and
mailing shareholder reports and proxy statements; costs of printing and mailing
registration statements and updated prospectuses to current shareholders; costs
in connection with the registration or qualification of the Fund's shares with
federal and state securities authorities and the continued qualification of the
Fund's shares for sale; expenses of all audits by the Fund's independent
accountants, costs of filing reports with regulatory bodies; costs of the
maintenance
-5-
<PAGE> 6
of the Fund's fidelity bond required by Section 17(g) of the 1940 Act, or other
insurance premiums; the fees of any trade association of which the Fund is a
member; fees and expenses of trustees who are not "interested persons" (as such
term is defined in the 1940 Act) of the Fund (the "disinterested trustees");
brokerage commissions, dealer markups and other expenses incurred in the
acquisition or disposition of any securities or other investments; costs,
including the interest expense, of borrowing money; taxes; and extraordinary
expenses (including extraordinary litigation expenses and extraordinary
consulting expenses).
4. Compensation of Advisors.
(a) For the services rendered, the facilities furnished
and expenses assumed by Advisors, the Fund shall pay to Advisors at the end of
each calendar month a fee calculated as a percentage of the average value of
the net assets each day for each Fund during that month at the following annual
rates:
<TABLE>
<S> <C>
Institutional Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . 0.18%
Institutional Equity Index Fund . . . . . . . . . . . . . . . . . . . . . 0.18%
Institutional Growth and Income Fund . . . . . . . . . . . . . . . . . . . 0.23%
Institutional Growth Equity Fund . . . . . . . . . . . . . . . . . . . . . 0.23%
Institutional International Equity Fund . . . . . . . . . . . . . . . . . 0.27%
Institutional Money Market Fund . . . . . . . . . . . . . . . . . . . . . 0.15%
Institutional Social Choice Equity Fund . . . . . . . . . . . . . . . . . 0.19%
</TABLE>
(b) Advisors's fee shall be accrued daily proportionately
at 1/365th (1/366th for a leap year) of the applicable annual rate set forth
above. For the purpose of accruing compensation, the net assets of each Fund
shall be determined in the manner and on the dates set forth in the Declaration
of Trust or the current registration statement of the Fund and, on days on
which the net assets are not so determined, the net asset value computation to
be used shall be as determined on the immediately preceding day on which the
net assets were determined.
(c) In the event of termination of this Agreement, all
compensation due through the date of termination will be calculated on a
pro-rated basis through the date of termination and paid within fifteen
business days of the date of termination.
(d) During any period when the determination of net asset
value is suspended, the net asset value of a Fund as of the last business day
prior to such suspension shall for this
-6-
<PAGE> 7
purpose be deemed to be the net asset value at the close of each succeeding
business day until it is again determined.
5. Limitation of Liability of Advisors. Advisors shall not be
liable for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission in the management of the Fund,
except for (i) willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard of its obligations
and duties hereunder, and (ii) to the extent specified in section 36(b) of the
1940 Act concerning loss resulting from a breach of fiduciary duty with respect
to the receipt of compensation.
6. Activities of Advisors.
(a) The services of Advisors are not deemed to be
exclusive, and Advisors is free to render services to others, so long as
Advisors's services under this Agreement are not impaired. It is understood
that trustees, officers, employees and shareholders of the Fund are or may
become interested persons of Advisors, as directors, officers, employees and
shareholders or otherwise, and that directors, officers, employees and
shareholders of Advisors are or may become similarly interested persons of the
Fund, and that Advisors may become interested in the Fund as a shareholder or
otherwise.
(b) It is agreed that Advisors may use any supplemental
investment research obtained for the benefit of the Fund in providing
investment advice to its other investment advisory accounts. Advisors or its
affiliates may use such information in managing their own accounts.
Conversely, such supplemental information obtained by the placement of business
for Advisors or other entities advised by Advisors will be considered by and
may be useful to Advisors in carrying out its obligations to the Fund.
(c) Nothing in this Agreement shall preclude the
aggregation of orders for the sale or purchase of securities or other
investments by two or more Funds of the Fund or by the Fund and other mutual
funds, separate accounts, or other accounts (collectively, "Advisory Clients")
managed by Advisors, provided that:
(i) Advisors' actions with respect to the
aggregation of orders for multiple Advisory Clients, including the Fund, are
consistent with the then-current positions in this regard taken by the
Securities and Exchange Commission or its staff through releases, "no-action"
letters, or otherwise; and
(ii) Advisors' policies with respect to the
aggregation of orders for multiple Advisory Clients have been previously
submitted and approved by the Board of Trustees of the Fund.
Neither Advisors, nor any of its directors, officers, or personnel, nor any
person, firm, or corporation controlling, controlled by, or under common
control with it shall act as a principal
-7-
<PAGE> 8
or receive any commission as agent in connection with the purchase or sale of
assets for a Fund, except as may be permitted under applicable law.
7. Books and Records.
(a) Advisors hereby undertakes and agrees to maintain, in
the form and for the period required by Rule 31a-2 and Rule 2a-7 under the 1940
Act, all records relating to the Fund's investments that are required to be
maintained by the Fund pursuant to the requirements of Rule 31a-1 and Rule 2a-7
of the 1940 Act.
(b) Advisors agrees that all books and records which it
maintains for the Fund are the property of the Fund and further agrees to
surrender promptly to the Fund any such books, records or information upon the
Fund's request. All such books and records shall be made available, within
five business days of a written request, to the Fund's accountants or auditors
during regular business hours at Advisors's offices. The Fund or its
authorized representative shall have the right to copy any records in the
possession of Advisors that pertain to the Fund. Such books, records,
information or reports shall be made available to properly authorized
government representatives consistent with state and federal law and/or
regulations. In the event of the termination of this Agreement, all such
books, records or other information shall be returned to the Fund free from any
claim or assertion of rights by Advisors.
(c) Advisors further agrees that it will not disclose or
use any records or information obtained pursuant to this Agreement in any
manner whatsoever except as authorized in this Agreement and that it will keep
confidential any information obtained pursuant to this Agreement and disclose
such information only if the Fund has authorized such disclosure, or if such
disclosure is required by federal or state regulatory authorities.
8. Duration and Termination of this Agreement.
(a) This Agreement shall not become effective unless and
until it is approved by the Board, including a majority of trustees who are not
parties to this Agreement or interested persons of any such party, and by the
vote of a majority of the outstanding voting shares of each Fund. This
Agreement shall come into full force and effect on the date which it is so
approved, provided that it shall not become effective as to any subsequently
created Fund until it has been approved by the Board specifically for such
Fund. As to each Fund, the Agreement shall continue in effect for two years
from the date on which it becomes effective and shall thereafter continue in
effect from year to year so long as such continuance is specifically approved
for such Fund at least annually by: (i) the Board, or by the vote of a majority
of the outstanding voting shares of such Fund; and (ii) a majority of those
trustees who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
-8-
<PAGE> 9
(b) This Agreement may be terminated at any time as to
any Fund or to all Funds, without the payment of any penalty, by the Board or
by vote of a majority of the outstanding voting shares of the applicable Fund,
or by Advisors, on 60 days written notice to the other party. If this
Agreement is terminated only with respect to one or more, but less than all, of
the Funds, or if a different adviser is appointed with respect to a new Fund,
the Agreement shall remain in effect with respect to the remaining Fund(s).
(c) This Agreement shall automatically terminate in the
event of its assignment.
9. Amendments of this Agreement. This Agreement may be amended
as to each Fund by the parties only if such amendment is specifically approved
by (i) the vote of a majority of outstanding voting shares of such Fund, and
(ii) a majority of those trustees who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval.
10. Definitions of Certain Terms. The terms "assignment,"
"affiliated person," "interested person," and "majority of the outstanding
voting shares" when used in this Agreement, shall have the respective meanings
specified in the 1940 Act.
11. Governing Law. This Agreement shall be construed in
accordance with laws of the State of New York, and applicable provisions of the
1940 Act, the Advisers Act, and the 1934 Act.
12. Severability. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
13. Counterparts. 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.
14. 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:
-9-
<PAGE> 10
(a) If to the Fund -
TIAA-CREF Institutional Mutual Funds
730 Third Avenue
New York, New York 10017-3206
Attention: John J. McCormack, Jr.
(b) If to Advisors -
Teachers Advisors, Inc.
730 Third Avenue
New York, New York 10017-3206
Attention: Scott Evans
or to such other address as the Fund or Advisors shall designate by written
notice to the other.
15. 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, the Fund and Advisors 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 first above written.
TIAA-CREF INSTITUTIONAL MUTUAL FUNDS
By: /s/ John J. McCormack, Jr. Attest: /s/ Ilana R. Marcus
Title: President Title: Assistant Secretary
TEACHERS ADVISORS, INC.
By: /s/ Scott C. Evans Attest: /s/ Ilana R. Marcus
Title: Executive Vice President Title: Senior Counsel
-10-
<PAGE> 1
DISTRIBUTION AGREEMENT
FOR TIAA-CREF INSTITUTIONAL MUTUAL FUNDS
THIS AGREEMENT is made this First day of June, 1999, by and
between TIAA-CREF Institutional Mutual Funds (the "Fund"), a Delaware business
trust, and Teachers Personal Investor Services, Inc. ("TPIS"), a Delaware
corporation.
WHEREAS, the Fund is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and currently consists of seven series (known as the Institutional
Bond Fund, Institutional Equity Index Fund, Institutional Growth and Income
Fund, Institutional Growth Equity Fund, Institutional International Equity
Fund, Institutional Social Choice Equity Fund and the Institutional Market
Fund,), and may consist of additional series or classes in the future;
WHEREAS, TPIS is engaged principally in the business of
distributing variable insurance products and investment company shares, and is
registered as a broker-dealer under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and is a member of the National Association of
Securities Dealers, Inc. ("NASD");
WHEREAS, the Fund has registered its shares of beneficial
interest (the "Shares") under the Securities Act of 1933, as amended (the "1933
Act"); and
WHEREAS, the Fund desires to retain TPIS to distribute the Shares
and TPIS is willing to distribute the Shares in the manner and on the terms set
forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Fund and TPIS hereby agree as follows:
1. Distribution of the Shares.
(a) Right to Sell Shares. The Fund hereby grants to TPIS
the right, subject to the requirements of the 1933 Act, the 1934 Act, and the
1940 Act, and the terms set forth herein, to distribute the Shares during the
term of this Agreement. The rights granted to TPIS shall be nonexclusive in
that the Fund reserves the right to sell its Shares to investors pursuant to
applications received and accepted by the Fund or its transfer agent. Further,
the Fund reserves the right to issue Shares in connection with the merger or
consolidation of any other investment company, trust or personal holding
company with the Fund or the Fund's acquisition by the purchase or otherwise,
of all or substantially all of the assets of an investment company, trust or
personal holding company. Any right granted to TPIS to accept orders for
Shares, or to make sales on behalf of the Fund or to purchase Shares for
resale, will not apply to Shares issued in connection with the merger or
consolidation of any other investment company with the Fund or its acquisition
by purchase or otherwise, of all or substantially all of the assets of any
investment company, trust or personal holding company, or substantially all of
the outstanding shares or interests of any such entity, and such right shall
<PAGE> 2
not apply to Shares that may be offered by the Fund to shareholders by virtue
of their being shareholders of the Fund.
TPIS is hereby authorized to enter into written sales or service
agreements, on such terms and conditions as TPIS may determine are not
inconsistent with this Agreement, with broker- dealers that are registered as
such under the 1934 Act and are members of the NASD and agree to participate in
the distribution of the Shares.
(b) Registration; Compliance with NASD. To the extent
necessary to offer and sell the Shares, TPIS shall be duly registered or
otherwise qualified under the securities laws of any state or other
jurisdiction in which such Shares may lawfully be sold and in which TPIS is
licensed or otherwise authorized to sell the Shares. TPIS 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
Shares. In this connection, TPIS shall retain written supervisory procedures in
compliance with Conduct Rule 3010 of the NASD Rules of the Association.
(c) Fund Documents. TPIS agrees to offer the Shares 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"). The Fund shall furnish TPIS with copies of all
prospectuses, SAIs, financial statements and other documents which TPIS
reasonably requires for use in connection with the distribution of the Shares.
TPIS will be entitled to rely on all documentation and information furnished to
it by the Fund's management.
(d) Offering Price. All Shares sold by TPIS pursuant to
this Agreement shall be sold at the net asset value per share, as determined in
the manner provided in the Fund's Declaration of Trust in effect at the time of
such determination (and as reflected in the Fund's then-current prospectus),
next determined after the order is accepted by TPIS.
(e) Suspension of Sales. If and whenever the determination
of net asset value is suspended and until such suspension is terminated, no
further orders for Shares shall be accepted by TPIS except unconditional orders
placed with TPIS before it had knowledge of the suspension. In addition, the
Fund reserves the right to suspend sales and TPIS's authority to accept orders
for Shares on behalf of the Fund if, in the judgment of the Board of Trustees
of the Fund (the "Board"), it is in the best interests of the Fund to do so,
such suspension to continue for such period as may be determined by the Board;
and in that event, no orders to purchase Shares shall be processed or accepted
by TPIS on behalf of the Fund while such suspension remains in effect except
for Shares necessary to cover unconditional orders accepted by TPIS before it
had knowledge of the suspension, unless otherwise directed by the Board.
2
<PAGE> 3
2. Books and Records
(a) The Fund and TPIS shall cause to be maintained and
preserved all books of account and related financial records as are required by
the 1934 Act, the NASD, and any other applicable laws and regulations. All the
books and records maintained by the Fund (on behalf of TPIS), or by any person
on behalf of the Fund, in connection with the offer and sale of the Shares
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. All such books and records
shall be maintained and held by the Fund or by any person on behalf of the Fund
on behalf of and as agent for TPIS, whose property they are and shall remain.
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) TPIS shall have the responsibility for maintaining the
records of sales representatives licensed, registered and otherwise qualified
to sell the Shares.
3. Reports. TPIS shall cause the Fund to be furnished with
such reports as either or both may reasonably request for the purpose of
meeting reporting and record keeping requirements under the laws of the State
of New York and any other applicable states or jurisdictions.
4. Expenses.
(a) TPIS shall be responsible for all expenses relating to
the distribution of the Shares, including but not limited to:
(i) the costs and expenses of providing the necessary
facilities, personnel, office equipment and supplies, telephone service, and
other utility service necessary to carry out its obligations hereunder;
(ii) charges and expenses of outside legal counsel
retained with respect to activities related to the distribution of the Shares;
(iii) the costs and expenses of printing and delivery
of definitive prospectuses and statements of additional information and any
supplements thereto for prospective purchasers;
(iv) expenses incurred in connection with TPIS's
registration as a broker or dealer or in the registration or qualification of
its officers, directors or representatives under federal and state securities
laws;
(v) the costs of promotional, sales and advertising
material; and
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(vi) any other expenses incurred by TPIS or its
representatives in connection with performing the obligations of TPIS under
this Agreement.
5. Non-Exclusivity; Authorized Representations.
(a) The Fund agrees that the services to be provided by
TPIS hereunder are not to be deemed exclusive and TPIS is free to act as
distributor of other variable insurance products or investment company shares
issued by the Fund or any entity affiliated therewith. TPIS shall, for all
purposes herein, be deemed to be an independent contractor and shall, unless
otherwise provided or authorized, have no authority to act for or represent the
Fund in any way or otherwise be deemed an agent of the Fund other than in
furtherance of its duties and responsibilities as set forth in this Agreement.
(b) The Fund is not authorized by TPIS to give, on behalf
of TPIS, any information or to make any representations other than the
information and representations contained in a registration statement or
prospectus filed with the Commission under the 1933 Act and/or the 1940 Act
covering Shares, as such registration statement and prospectus may be amended
or supplemented from time to time. TPIS is not authorized by the Fund to give
on behalf of the Fund any information or to make any representations in
connection with the sale of Shares other than the information and
representations contained in a registration statement or prospectus filed with
the Commission under the 1933 Act and/or the 1940 Act covering Shares, as such
registration statement and prospectus may be amended or supplemented from time
to time, or contained in shareholder reports or other material that may be
prepared by or on behalf of the Fund for TPIS's use. This shall not be
construed to prevent TPIS from preparing and distributing tombstone
advertisements and sales literature or other material as it may deem
appropriate. No person other than TPIS is authorized to act as principal
underwriter (as such term is defined in the 1940 Act) for the Fund.
6. Liability. TPIS will not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which this Agreement relates. Nothing herein contained
shall be construed to protect TPIS against any liability resulting from the
willful misfeasance, bad faith, or gross negligence of TPIS 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.
7. Regulation.
(a) This Agreement shall be subject to the provisions of
the 1940 Act, the 1934 Act and the rules, regulation, 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
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therewith. Without limiting the generality of the foregoing, the term
"assigned" shall not include any transactions exempted from Section 15(b)(2) of
the 1940 Act.
(b) TPIS shall submit to all regulatory and administrative
bodies having jurisdiction over the present and future operations of the Fund,
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, TPIS shall
furnish the Commission and/or the Secretary of State for the State of New York
with any information or reports which the Commission and/or the Secretary of
State may request in order to ascertain whether the operations of the Fund are
being conducted in a manner consistent with applicable laws or regulations.
8. Investigation and Proceedings.
(a) The Fund and TPIS agree to cooperate fully in any
regulatory inspection, inquiry, investigation, or proceeding or any judicial
proceeding with respect to the Fund or TPIS, their affiliates and their
representatives to the extent that such inspection, inquiry, investigation or
proceeding is in connection with the Shares distributed under this Agreement.
(b) In the case of a customer complaint, the Fund and TPIS
will cooperate in investigating such complaint and shall arrive at a mutually
satisfactory response.
9. Duration and Termination of the Agreement.
(a) This Agreement shall become effective with respect to
the Shares as of the date first written above. It shall become effective as to
any subsequently offered Shares when it has been approved by the Board
(including a majority of members thereof who are not parties to this Agreement
nor interested persons of any such parties) specifically for such Shares.
"Subsequently offered Shares" means Shares issued subsequent to the initial
effective date of this Agreement.
(b) This Agreement shall continue in effect for two years
from the date of its execution and thereafter from year to year, but only so
long as such continuance is specifically approved at least annually by (i) the
Board, or by the vote of a majority of the outstanding voting shares of the
Fund, and (ii) a vote of a majority of those members of the Board who are not
parties to this Agreement nor interested persons of any such parties, cast in
person at a meeting called for the purpose of voting on such approval.
(c) This Agreement may be terminated, without the payment
of any penalty, by the Fund or TPIS on sixty days' written notice to the other
party. This Agreement shall automatically terminate in the event of its
assignment.
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(d) 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 8 hereunder.
10. Definitions. The terms "assignment," "interested person,"
and "majority of the outstanding voting shares," when used in this Agreement,
shall have the respective meanings specified under the 1940 Act and rules
thereunder.
11. Further Actions. Each party agrees to perform such further
acts and execute such further documents as are necessary to effectuate the
purposes hereof.
12. 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.
13. Counterparts. 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.
14. 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 the Fund -
TIAA-CREF Institutional Mutual Funds
730 Third Avenue
New York, New York 10017-3206
Attention: John J. McCormack, Jr.
(b) If to TPIS -
Teachers Personal Investors Services, Inc.
730 Third Avenue
New York, New York 10017-3206
Attention: Thomas Walsh
or to such other address as the Fund or TPIS shall designate by written notice
to the other.
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15. 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, the Fund and TPIS have caused this Agreement
to be executed in their names and on their behalf by and through their duly
authorized officer on the day and year first above written.
TIAA-CREF INSTITUTIONAL MUTUAL FUNDS
By: /s/ John J. McCormack, Jr. Attest: /s/ Ilana R. Marcus
Title: President Title: Assistant Secretary
TEACHERS PERSONAL INVESTORS SERVICES, INC.
By: /s/ Thomas G. Walsh Attest: /s/ Ilana R. Marcus
Title: President Title: Senior Counsel
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